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WTO trade disputes settlement system and handling transatlantic and transpacific disputes
Section 8. Political science
Huseynova Sevda Elbrus, Azerbaijan Tourism Institute, postgraduate student, the Faculty of International Relations and Global Development
E-mail: sevda_adu@yahoo.com
WTO trade disputes settlement system and handling transatlantic and transpacific disputes
Abstract: Dispute settlement is the central pillar of the multilateral trading system, and the WTO’s unique contribution to the stability of the global economy. Without a means of settling disputes, the rules-based system would be less effective because the rules could not be enforced. The WTO dispute settlement system is based on clearly-defined rules, with timetables for completing a case. This article describes how WTO dispute settlement mechanism is working and as well as WTO role on solving transatlantic and transpacific trade conflicts. It also provides an overview to the short history of the transatlantic and transpacific trade conflicts.
Keywords: World Trade Organization, transatlantic conflicts, transpacific conflicts, Dispute Settlement Body, Dispute Settlement Understanding
Slogan of the World Trade Organization’s dispute settlement mechanism — “The priority is to settle disputes, not to pass judgement” — can be heard quite frequently. This is not occasionally. Since its very beginning of operations, some observers were arguing that GATT/WTO is implementing political and economic will of super power states and such opinions were undermining values of WTO -democracy, equitable, fast, effective and mutually acceptable. First of all, it would be worth to review WTO dispute settlement mechanism in order to understand how it works to implement afore mentioned values into practice.
Dispute settlement is the central pillar of the multilateral trading system, and the WTO’s unique contribution to the stability of the global economy. Without a means of settling disputes, the rules-based system would be less effective because the rules could not be enforced. The WTO dispute settlement system is based on clearly-defined rules, with timetables for completing a case. By January 2008, only about 136 of the 369 cases had reached the full panel process. Most of the rest have either been notified as settled out of court or remain in a prolonged consultation phase — even some since 1995 [1, 1].
Disputes arise when one country adopts or implement a trade policy measure or takes some actions that one or more WTO members considers to be breaking the WTO agreements or to be a failure to live up
to obligations. Thus, the case is brought to WTO to be solved. procedure for settling disputes existed under the old GATT, but it had no fixed timetables, rulings were easier to block, and many cases dragged on for a long time inconclusively. The Uruguay Round agreement introduced a more structured procedure for solving such disputes. It introduced greater discipline for the length of time a case should take to be settled, with flexible deadlines set in various stages of the procedure. If a case runs its full course to a first ruling, it should not normally take more than about one year — 15 months if the case is appealed. The agreed time limits are flexible, and if the case is considered urgent (e. g. ifperishable goods are involved), it is accelerated as much as possible.
The Uruguay Round agreement also made it impossible for the country losing a case to block the adoption of the ruling. Under the previous GATT procedure, rulings could only be adopted by consensus, meaning that a single objection could block the ruling. Now, rulings are automatically adopted unless there is a consensus to reject a ruling — any country wanting to block a ruling has to persuade all other WTO members (including its adversary in the case) to share its view. Although much of the procedure does resemble a court or tribunal, the preferred solution is for the countries concerned to discuss their problems and settle the dispute by themselves.
Settling disputes is the responsibility of the Dispute Settlement Body (the General Council), which consists
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of all WTO members. The Dispute Settlement Body has the sole authority to establish panels" of experts to consider the case, and to accept or reject the panels’ findings or the results of an appeal. It monitors the implementation of the rulings and recommendations, and has the power to authorize retaliation when a country does not comply with a ruling. Panels are like tribunals. But unlike in a normal tribunal, the panelists are usually chosen in consultation with the countries in dispute.
Disputes are reviewed in two stages:
First stage: consultation (up to 60 days). Before taking any other actions the countries in dispute have to talk to each other to see if they can settle their differences by themselves. If that fails, they can also ask the WTO director-general to mediate or try to help in any other way.
Second stage: the panel (up to 45 days for a panel to be appointed, plus 6 months for the panel to conclude). If consultations fail, the complaining country can ask for a panel to be appointed. The country “in the dock” can block the creation of a panel once, but when the Dispute Settlement Body meets for a second time, the appointment can no longer be blocked (unless there is a consensus against appointing the panel) [2, 233].
Panel is helping the Dispute Settlement Body make rulings or recommendations. But because the panel’s report can only be rejected by consensus in the Dispute Settlement Body, its conclusions are difficult to overturn. The panel results should normally be presented to the parties to the dispute within six months. In cases of urgency, including those concerning perishable goods, this period is shortened to three months. Both parties can appeal the panel decision [2, 248].
One of the impact of WTO dispute settlement system and advantage of this system is that, it doesn’t immediately decides on sanction to be issued to one of the complaining parties. It calls the parties to comply with the WTO mutual agreements and procedures and change their incompliant (if decides so) trade policy to be complaint.
Not all WTO members bring complaints to the Dispute Settlement Body, or are complained against in that body. Fully 44 members of the WTO, or close to 1/3 of the total membership, did not participate in a dispute settlement case in any capacity from 1995 to 2012 [3, 36]. Another 35 members participated exclusively as third parties in at least one dispute settlement case in which they were neither a complainant nor a respondent. In some instances, they did so because of an identifiable national interest in the matter, and in
some instances because they followed the advice of the WTO Secretariat that it is good to participate as a third party so as to get some practical experience in how disputes are conducted. China, for example, was a third party in 92 cases through 2012, a step it took in part to provide training for its officials. In sum, precisely half of the 158 total members had either little or no experience in the DSU [4, 302].
The story of dispute settlement at the World Trade Organization (WTO) is, in large part, the story of the transatlantic relationship between the United States (US) and European Community (EC). According to WTO, the US and EC together accounted for fully 38 per cent of global merchandise trade in 2000, more than the ten next largest trading economies combined [5, 22]. Thus it’s not surprising that disputes between US and EU is not passing away without impacting global trade and this was quite obvious during the Doha Round. Indeed, it is widely argued that Uruguay Round reforms have dramatically increased the WTO’s capacity to resolve disputes, compared to the practices under the General Agreement on Tariffs and Trade (GATT) [6, 45].
From the other side, apparent success in resolving US-EC disputes since 1995 is due largely to the expansion of the WTO’s scope in new areas, notably intellectual property (IP) and traded services. Some experts think that main success of the WTO dispute settlement system was lying on the “how it managed to solve high importance cases”. Even there is kind of a classification of disputes as low, medium and high importance cases. Low importance cases are considered the ones that could have impact on trade in the amount of 50 million dollars, whereas, high importance cases are those that could impact trade in the amount of 150 million dollars. 25 out of 32 transatlantic disputes (between EU and USA) were considered to be high importance cases [7, 184].
Vast majority of the complaints brought to WTO/DSB was from the Quad (Canada, the European Union, Japan and the United States) [8, 86]. Here the logic of a tit-for-tat approach is compelling. If member A brings a complaint against member B, there is a fair chance that member B will respond in kind [9]. It’s not surprising that EU raised 32 complaints against US, and similarly the same number of complaints was raised against EU by US. If in between 1995-2000 these parties were raising complaint every two month, during 2007-2012 this reduced to once in 2 years only. From the other hand, these two
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WTO trade disputes settlement system and handling transatlantic and transpacific disputes
transatlantic parties took part in 80-85 % of all cases reviewed at the WTO [10, 249].
Another interesting point is that, there was observed a trend of increasing transpacific disputes in comparison with translatlantic ones. In 2004 US presenting its first complaint against China. Till that 17.2 % of total disputes brought to WTO DSB were transatlantic disputes and after 2004, share of transpacific disputes raised up to 11.4 % of total disputes [10, 255].
Some experts consider that China after becoming a member of WTO tried to take the role of USA and kind of explored US tactic. Trying more efficiently benefit from the WTO Dispute Settlement system, China presented 8 complaints against US and the latter “paid of" by presenting 12 complaints against China. Adoption of “currency manipulation" bill in 2011 by US was considered by China as an attack to it and thus China started to “solve its disputes” as well as out of WTO framework [11,1].
Trade disputes filed on the American side of the Pacific often follow the US government’s legislative calendar. In September 2009, for example, the Obama Administration slapped tariffs on tires. China launched an investigation into alleged dumping and government subsidies for U. S.-made auto parts and chicken. A year later, the US approved trade sanctions against China for allegedly manipulating the value of the yuan. US also asked a WTO board to investigate China’s decision to penalize U. S. auto parts and chicken exporters.
Indeed, China tries to maintain a relatively balanced trade account with more than 90 percent of its trading
partners, suggesting U. S. trade deficits with China are rooted in the U. S. economic structure and its decision to restrict advanced technology exports to China.
China expects WTO to amend the way it handles trade disputes. In 2010, WTO panel ruled US government’s imposition of countervailing and anti-dumping duties on the same products amounted to a “double remedy” and should be revoked for being inconsistent with WTO member obligations [11].
To the conclusion, transatlantic economic relations increasingly develop transatlantic partnership market. At the same time, tension on some trade issues still exists between US and European Union. Due to the globalization and expansion of the multilateral trade, agenda ofWTO Dispute Settlement Body is being “enriched” with new dispute cases, also those of transpacific along with transatlantic. This was also related to the increasing role of China in the world economy.
WTO Dispute Settlement System — established by the GATT period and improved/reformed after Uruguay Raund — becomes an effective environment of the member states to solve their disputes out of the court, through the negotiations and peer discussions. From the other side, there is still some opinions about the efficiency of this system as some experts argue that WTO is “indirectly supporting and exposing” political and economic will of the super power states.
From the other hand, we can see how member states are willing to benefit from WTO dispute settlement system for solving their disputes in order not to tension the relations and thus, supporting maintenance of stability in world trade.
References:
1. Ernst-Ulrich Petersmann and Mark A. Pollack/Transatlantic Economic Disputes: The EU, The US and The WTO. - Oxford Press. - p. 465.
2. Horn H. & Mavroidis P. C. Economic and Legal Aspects of the Most-Favored-Nation Clause. European Journal of Political Economy. - 2001., - 17 (2), - p. 233-279.
3. WTO Annual Report 2013.
4. Shoyer A. W. The First Three Years of WTO Dispute Settlement: Observations and Suggestions. Journal of International Economic Law. - 1998., - 1, - p. 277-302.
5. WTO 2001, - 22.
6. Hudec R. E. Enforcing International Trade Law: The Evolution of the Modern GATT Legal System. - 1993.
7. Reinhardt E. Adjudication without Enforcement in GATT Disputes. Journal of Conflict Resolution. - 2001., -45 (2) - p. 174-195.
8. World Trade Organization, Annual Report, - 2013.
9. [Electronic resource]. - http://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm
10. Craig Van Grasstek. The History and Future of the World Trade Organization. WTO publications - 2013. - p. 249.
11. Yu Hairong. Wider, Hotter US - China disputes over trade. -[Electronic resource]. - http://english.caixin. com/2011-11-28/100332085.html
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