The Law, Economics and Politics of Retaliation in WTO Dispute Settlement

Introduction

This contribution addresses a WTO dispute settlement remedy commonly known as “cross-retaliation,” and specifically the mechanism by which a WTO member suspends concessions in the field of trade-related intellectual property rights (TRIPS) to redress an injury suffered with respect to trade in goods or services.

A WTO member enforces compliance with a ruling by the Dispute Settlement Body (DSB) by suspending trade concessions enjoyed by the non-compliant member. This might involve raising tariffs on products imported from the non-compliant member. Economically powerful WTO members are not likely to be harmed by suspension of trade concessions in goods or services by substantially less powerful members. The trade impact will be too small to “induce compliance” and, equally important, the types of suspension that may be used in the fields of goods and services may cause economic harm to the less powerful members using them. The WTO dispute settlement process strongly favors economically powerful countries, leaving most developing and least developed members with few options for inducing compliance.

Attention is increasingly focusing on the possibility of developing members suspending concessions relating to intellectual property rights (IPRs) as a means to induce compliance by developed members. Cross-retaliation is expressly contemplated by the WTO Dispute Settlement Understanding (DSU). WTO arbitrators have so far approved TRIPS cross-retaliation on two occasions; in favor of Ecuador (against the EC) and Antigua (against the United States). Constructing and implementing a cross-retaliation program involving IPRs raises a substantial number of complex legal questions. The DSU establishes principles and procedures that must be respected.