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Why compensation cannot replace trade retaliation in the WTO Dispute Settlement Understanding


Throughout the course of the DSU Review, Members and commentators alike have proposed numerous modifications to the WTO DSU covering a wide range of areas. One area which has received quite a bit of attention is that of retaliatory measures in the implementation phase of the dispute settlement process. This article does not attempt to recap the debate over the appropriateness of trade retaliation or even to discuss all potential amendments targeting this issue. It does, however, identify some of the key criticisms of trade retaliation before analyzing and evaluating the worthiness of trade and/or financial compensation as an alternative. The article finds that neither trade nor financial compensation will do much to resolve the prominent criticisms of trade retaliation while also finding both options would add several uncertainties to the system and, far from increasing compliance with the rulings and recommendations of the DSB, could in fact increase the instances of non-compliance.

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The author thanks James Hartigan, Jiangyu Wang, Lorand Bartels, Simon Lester, Michael Hahn, Colin Picker and the WTR anonymous referee for their helpful comments. This article is based on a more comprehensive assessment of trade retaliation in the WTO DSU which will be published as ‘Retaliatory Trade Measures in the WTO Dispute Settlement Understanding: Are There Really Alternatives?’ in James Hartigan (ed.) Trade Disputes and the Dispute Settlement Understanding of the WTO: An Interdisciplinary Assessment (Elsevier/Emerald Ltd., forthcoming 2009).

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