Home ›› 04 Feb 2022 ›› Editorial
Resolving trade disputes is one of the core activities of the World Trade Organisation. A trade dispute arises when a member government believes that another government is violating an agreement or a commitment that it has made in the WTO. The WTO has one of the most active international dispute settlement mechanisms in the world. For a multilateral trading system to function properly and without friction, it is not enough to have an agreed set of rules. The rules have to be supplemented by other rules, giving countries the right of redress when infringements occur and for settling their differences and disputes. Developing a strong multilateral dispute settlement mechanism which would remove some of the weaknesses of the earlier GATT system, was thus one of the most critical objectives of the Uruguay Round talks. A central objective of the WTO Dispute settlement system is to provide security and predictability to the multilateral trading system (Article 3.2 of the DSU). If the complaint prevails, the desired outcome is to secure the withdrawal of the measure found to be inconsistent with the WTO Agreement.
The WTO Agreement provides for a common system of rules and procedures applicable to disputes arising under any of its legal instruments. The main responsibility for administering these rules and procedures lies with the General Council, which acts as the Dispute Settlement Body (DSB).
One of the important principles which these procedures lay down is that a dispute should be brought to DSB by government of a member country for settlement only after efforts to settle it through consultation on a bilateral basis have failed. In this respect a trade dispute had to be settled through bilateral consultation. An example outlined is for the readers to view. Bangladesh faced a trade dispute with a neighbouring country with regards to export of battery for automobiles or other uses. An anti- dumping duty was imposed on the product of Bangladesh. Bilateral negotiations at different levels failed to resolve the dispute. However, when the dispute was taken to WTO DSB, for settlement, consultation took place and the complaint was withdrawn. At present Bangladesh faces a similar problem with jute and jute goods export to the neighbouring country and faces countervailing duties on its exports of jute and jute goods.
The procedures provide that in order to reach mutually acceptable solutions, the two parties may request the Director General or any other person to use his or her good offices to conciliate and mediate between them. Only when consultations or efforts at conciliation have not produced the desired results within 60 days may the complaining party request DSB formally to commence the dispute settlement mechanism by establishing a panel to examine the complaint. (The procedures recognise that the parties may in certain cases by mutual consent agree to refer the dispute to arbitration. However, they provide that, in such cases, the award shall be binding on the parties and that it should be reported to DSB). In order to expedite the settlement of disputes and to ensure that the establishment of a panel is not delayed by the country against which a complaint is made, the procedures require DSB to establish the panel, when requested be the complaining country, unless there is a consensus against the establishment of such a panel.
A panel normally consists of three persons, unless parties to the dispute agree that it should have five persons. The names of the persons to be appointed to the panel are proposed by the WTO Secretariat from the list maintained by the governmental and non- governmental experts. The persons in the list are well qualified senior officials of member countries, members of their delegations to WTO, senior officials who have worked in the secretariat and persons who have taught international trade law or policy. The panels are required to submit to DSB within a period of six to nine months reports containing their recommendations after making an objective assessment of the facts of the case and of the conformity of the measures complained about with the relevant provisions of the legal instruments.
The establishment of an Appellate Body, a kind of court of appeal is a new addition to the dispute settlement system. The body consists of seven persons of recognised authority, with expertise in law, international trade and the subjects covered by the various agreements. They should be unaffiliated to any government. Of the seven, only three persons will be called to serve in any one case. The appeal can be made by any one of the parties to the dispute. The report of the appellate board, which will be confined to issues of law in the panel report and the legal interpretations developed by it, has to be submitted to DSB within a period of 60 to 90 days.
The report of the panel or of the appellate body, where one of the parties has appealed against the panel’s report, is submitted to DSB for appropriate recommendations, decisions and rulings. In order to ensure prompt settlement of disputes, it is provided that the period “from the date of the establishment of the panel by the DSB” and the date “when it considers the panel or appellate report” should not exceed nine months when panel report is not appealed and 12 months when it is appealed.
The procedures visualize that the reports of the panels may be implemented by the parties in the three ways as discussed below.
First, the procedures emphasize that the party which is in breach of obligations must promptly comply with the recommendations of the panel or the appellate body. If it is not possible for the party to implement the recommendations immediately, DSB may on request grant it a reasonable time for implementation.
Second, where the party which is in breach does not comply within a reasonable time, the party that has invoked the dispute settlement procedure may request for compensation. Alternatively, the party in breach of the obligations may itself offer to pay compensation.
Third, where the party in breach fails to comply and refuses to provide compensation, the aggrieved party may request DSB to authorize it to take retaliatory action by suspending concessions or other obligations under the agreements that would hurt the trade of the former country. In simple language this means that, where the party is instance in breach of its obligations under GATT or under one of its associate agreements, the aggrieved party may be authorised by DSB to raise tariffs on products which it imports from the party in breach, the trade in such products should be approximately equal to that affected by the measures complained about.
The rules provide that such retaliatory actions shall be authorized by DSB as far as possible in the same sectors of GATT, GATS, or the Agreement on TRIPS to which the panel or appellate body has found violation. However, where it considers that this is not possible, it can authorize retaliation under other sectors of the same agreement. Only in rare cases or as a last resort can DSB authorize retaliation across agreements. The provision of compensation and authorization by DSB of retaliatory measures are, however, temporary measures. The ultimate solution is for the country which is in breach of the obligation to implement the recommendations. The rules require DSB to keep such cases under review to secure their full implementation.
There are three main stages to the WTO Dispute Settlement process (i) consultation between the parties; (ii)adjudication by the Panel and if applicable by the Appellate Body; (iii) implementation of the rulings, which includes the possibility of counter measures in the event of failure by the losing party. In this regard the following procedures are to be followed to resolve a dispute:- Consultation-initial complaint filed, Review Panel Set up, Panel reports to disputing parties , Panel reports to all members, Report adopted by DSB in no appeals, Appeals, Settlement body adopts appeal report, if found guilty, the defendant state its intention to comply.
While the Dispute Settlement Agreement is in operation, a few pertinent questions arise. To make those questions simple to understand we try to elaborate those. For example a question is often asked about whether the dispute settlement is effective or not? The answer is if one compares with the previous dispute settlement system of GATT-1947, the current system has been far more effective. Moreover, it is a quasi-judicial body which enables it to handle more difficult cases. Latest dispute brought to DSB on 20-01-2022 was by the Russian Federation concerning the exportation of wood products (complaint lodged by European Union). Another recent case brought to DSB by Brazil regarding measures regrding import of poultry meat from Brazil by European Union. Had the DSU been not effective the developed countries would not have sought redress from DSB.
Another question often asks is “are WTO decisions binding?” The Appellate Body provides binding decisions on the members in the disputes. So far WTO members have almost always adopted the Appellate Body’s rulings.
There is a rumour that WTO’s Appellate Body’s existence is in crisis. Actually WTO’s Dispute Settlement function is at risk or risk of collapsing due to non-cooperation of some members. For nearly two years US has blocked the appointment of judges to the WTO’s Appellate Body, due to complaints over judicial activism and concerns over US sovereignty.
WTO’s dispute settlement system is one of the most active international dispute settlement mechanisms the world. Over the years DSB has settled over 350 disputes. Stakeholders are exploring possible of ways and means of reducing the costs of DSU. However, any approach should be consistent with the existing rules.
The writer is former Director General of Export Promotion Bureau. He can be contacted at [email protected]
