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WTO Dispute Settlement: Can We Go Back Again?

  • Rachel Brewster (a1)
Extract

The world's twenty-year experiment with a rule-based international trading order is most likely ending. Trade wars are raging again for the first time in two decades as World Trade Organization (WTO) members unilaterally impose and counterimpose sanctions. In Geneva, the WTO Appellate Body, whose existence is essential to the functioning of the WTO Dispute Settlement Understanding (DSU), is on a trajectory to shut down in December 2020. For all the fireworks, however, many commentators retain an optimism that the recent events will be a passing phase and that the world will return to a more law-oriented trading system after the present crisis.

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This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
References
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1 For an overview of the various sanctions and counter-sanctions, see Chad Bown & Melina Kolb, Trump's Trade War: An Up-To-Date Guide, Peterson Inst. for Int'l Econ. (Sept. 24, 2018).

2 Even under the current rule-based system, economic power is still relevant at the WTO. Both countries’ willingness to bring cases and their ability to bear economic sanctions will depend on their market size. Nonetheless, compared to the pre-WTO General Agreement on Tariff and Trade system, the dispute settlement system is more rule-based because it relies on legal argument, not market power, to resolve trade disputes. See generally John H. Jackson, The World Trading System (2d ed. 1997).

3 In previous work, I have referred to this as the difference between breaching trade rules (first order rules) and violating WTO enforcement rules (second order rules). It is possible to breach trade rules but still remain within the WTO's enforcement framework. See Rachel Brewster, Pricing Compliance: When Formal Remedies Displace Reputational Sanctions, 54 Harv. Int'l L.J. 259, 300–01 (2013).

4 This principle is embodied in Article 23 of the DSU, committing member countries to multilateral adjudication of disputes. See Understanding on Rules and Procedures Governing the Settlement of Disputes art. 23, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401 [hereinafter DSU]. While the DSU has a number of rules and procedures, this rule is part of the fundamental bargain of the WTO system—that the United States would forgo unilateral sanctioning and accept multilateral adjudication of trade disputes if the system were legally binding and capable of authorizing retaliation. See Panel Report, United States—Sections 301–310 of the Trade Act of 1974, WT/DS152/R (adopted Feb. 28, 2000) (describing how Art. 23 of the DSU is a core principle of the WTO dispute settlement system).

5 The DSU permits arbitration outside of the WTO system if both parties agree. See DSU, supra note 4, art. 25. Parties are also encouraged to settle claims without WTO adjudication. Id., art. 3(7).

6 See Charan Devereaux et al., 2 Case Studies in US Trade Negotiation: Resolving Disputes 51, 72–73 (2006).

7 See Panel Report, Japan—Measures Affecting Consumer Photographic Film and Paper, WT/DS44/R (adopted Apr. 23, 1998).

8 Paul B. Stephan, Sheriff or Prisoner? The United States and the World Trade Organization, 1 Chi. J. Int'l L. 49, 57–58 (2000).

9 The European Union continued to contest whether its ban was a breach of the Sanitary and Phytosanitary Measures Agreement. Appellate Body Report, United States—Continued Suspension of Obligations in the EC—Hormones Dispute, WT/DS320/AB/R (adopted Oct. 16, 2008).

10 Randy Schnepf, Status of the WTO Brazil-U.S. Cotton Case 3–4 (Congressional Research Service, Feb. 11, 2014).

12 See Chad P. Bown et al., Trump and China Formalize Tariffs on $260 Billion of Imports and Look Ahead to Next Phase, Peterson Inst. for Int'l Econ. (Sept. 20, 2018).

13 See Bown & Kolb, supra note 1.

14 Id. Like the United States, China has filed a case but did not wait for WTO adjudication to counterretaliate.

15 Jennifer A. Hillman, Trump Tariffs Threaten National Security, N.Y. Times (June 1, 2018).

16 The Dispute Settlement Body adopts Appellate Body reports by reverse consensus: the report is adopted unless there is a consensus against adoption. This has never happened in practice. Instead of going through the DSU process, WTO members could alternatively agree to arbitration or to waive appeals on an ad hoc basis, but respondent states are unlikely to accept these alternatives.

17 See Trade Talks, America May Be Doing Away with Dispute Settlement, Episode 60 (Oct. 28, 2018).

18 Rachel Brewster, The Trump Administration and the Future of Trade Agreements, 44 Yale J. Int'l L. Online (Nov. 25, 2018).

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