Elizabeth Morgan | WTO: dispute settlement crisis
Dispute settlement is one of the most important functions of the World Trade Organization (WTO) that establishes global trade rules. It facilitates the rule of law by enabling members to resolve their disputes in an international legal system. Dispute settlement was considered a WTO success as, since 1995, more than 500 disputes have been initiated and 350 rulings delivered.
The dispute settlement mechanism (DSM) is contained in the Understanding on Rules and Procedures Governing the Settlement of Disputes, commonly known as the Dispute Settlement Understanding (DSU). The mechanism enables members to engage in dispute settlement procedures, including consultations, mediation, conciliation and good offices. If there is no resolution, a panel is requested and established.
Following delivery of the panel report with its rulings, mmbers have resort to a standing appeals body comprising seven legal experts serving four-year terms with the possibility of re-election once. The member losing the case is required to take corrective measures. If this is not done in a specified time frame, the member can be authorised to take retaliatory measures. The DSU also makes provision for arbitration. The Dispute Settlement Body (DSB) monitors the process.
Reports indicate that between 1995 and 2018, the USA has been the most active complainant, winning more than 90 per cent of cases it initiates. It loses about 80 per cent of cases brought against it by other members. In wins and losses, other members’ results mirror that of the US in percentages. Yet, President Donald Trump makes the claim that the USA is greatly disadvantaged in WTO dispute settlement. The Trump administration thus has refused to support the appointment of members of the Appellate Body, pushing the mechanism to the brink of an operational crisis in the midst of trade disputes with China and other members.
The DSU was adopted in 1994 at the end of the GATT Uruguay Round supported by the USA and others to make dispute settlement more effective. A review was required by 1998.
Disadvantages to CARICOM Members
Regarding cases involving CARICOM members, the USA, from 1996, supported Latin American countries in successfully challenging the European Commission’s (EC) banana regime from which Caribbean countries, members of the African, Caribbean and Pacific (ACP) Group of States, benefited. The ACP countries were third parties in this case. The EC’s sugar regime was later also successfully challenged by Australia, Brazil and Thailand, and again ACP beneficiaries were third parties.
Only one CARICOM member has been a party to a WTO dispute. That was Antigua and Barbuda versus the USA in its gambling case, 2003-2007. The ruling favoured Antigua and Barbuda, but to date this dispute has not been settled.
While the US complains about disadvantages in the DSM, the severely disadvantaged members are small, trade-dependent, developing countries that find it difficult to use the mechanism. It is costly and time-consuming, requiring technical and legal expertise. Small members also cannot retaliate against the large, powerful trading nations. They do not proceed with complaints because of their complexity and concern about the political and commercial consequences. Opportunities for Caribbean nationals to serve as panellists are limited. Two Jamaicans have served.
Regarding DSU review, at the 2001 4th WTO Ministerial Conference, it was agreed that this mandated review for further improvement would continue up to 2003. With no progress, it was further extended without a specific end date. Jamaica and other CARICOM members have been participating in this process. There has been no real will among key Members to make progress.
Yet, the Trump administration is now acting unilaterally to paralyse the DSM. This development is another stimulus to WTO reform discussions.
The DSU/DSM need to be reviewed and reformed as originally mandated. But the reform should extend to enabling the small developing members to effectively utilise the mechanism ensuring that beneficiaries are not only large traders.