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PREFACEThe WTO is playing a novel role in regional trade ralations. Access to a multi lateral dispute settlement system is helping to scrutinize and anchor the more lax regional disciplines. Pressure through exposure can help countries, particularly third world countries that are unable or unwilling to reltaliate to obtain more favourable results than in bilateral or regional instances. In fact, it is highly considerable whether poorly developed countries have either chance or challenges in the WTO dispute settlement system. In order to clearly analyse this statement, I choose the first question of semester assigment that is “What are the opportunities and challenges of developing country members in the WTO dispute settlement system?”.CONTENTI. Introduction to the structure of the WTO Dispute Settlement system and the devoloping countries1. Definition of the WTO dispute settlementBlack’s Law Dictionary circumscribes “dispute” as “a conflict or controversy, esp. one that has given rise to a particular lawsuit.” . The Permanent Court of International Justice (PCIJ) and the International Court of Justice (ICJ) have addressed the issue of the existence of a dispute in several cases. Disputes in the WTO are essentially about broken promises. By this, a dispute arises when one country adopts a trade policy measure or takes some action that one or more fellowWTO members considers to be breaking the WTO agreements, or to be a failure to live up to obligations. 2. Definition of the developing countries in WTOThe explanation of the developing countries is diverse as different international organizations apply different standards. The United Nations maintains a list of the world’s least developed countries, and it also divides the globe into developing and developed regions, although not countries. The World Bank maintains slightly different categories of low, middle, and highincome. The International Monetary Fund has its own hybrid system of classification.For its part, the WTO has no classification system. Instead, countries declare their status and, consequently, their eligibility for the trade benefits accorded to developing countries. They often do so à la carte , claiming developing country status for certain agreements but not others. In line with this, WTO dispute
PREFACE The WTO is playing a novel role in regional trade ralations Access to a multi lateral dispute settlement system is helping to scrutinize and anchor the more lax regional disciplines Pressure through exposure can help countries, particularly third world countries that are unable or unwilling to reltaliate to obtain more favourable results than in bilateral or regional instances In fact, it is highly considerable whether poorly developed countries have either chance or challenges in the WTO dispute settlement system In order to clearly analyse this statement, I choose the first question of semester assigment that is “What are the opportunities and challenges of developing country members in the WTO dispute settlement system?” CONTENT I Introduction to the structure of the WTO Dispute Settlement system and the devoloping countries Definition of the WTO dispute settlement Black’s Law Dictionary circumscribes “dispute” as “a conflict or controversy, esp one that has given rise to a particular lawsuit.”1 The Permanent Court of International Justice (PCIJ) and the International Court of Justice (ICJ) have addressed the issue of the existence of a dispute in several cases Disputes in the WTO are essentially about broken promises By this, a dispute arises when one country adopts a trade policy measure or takes some action that one or more fellow-WTO members considers to be breaking the WTO agreements, or to be a failure to live up to obligations Definition of the developing countries in WTO The explanation of the developing countries is diverse as different international organizations apply different standards The United Nations maintains a list of the world’s least developed countries, and it also divides the globe into developing and developed regions, although not countries The World Bank maintains slightly different categories of low, middle, and high-income The International Monetary Fund has its own hybrid system of classification For its part, the WTO has no classification system Instead, countries declare their status and, consequently, their eligibility for the trade benefits accorded to developing countries They often so la carte2, claiming developing country status for certain agreements but not others In line with this, WTO dispute B A Garner (ed.), Black’s Law Dictionary (1999) See Gregory Shaffer, “The Challenges of WTO Law; Strategies for Developing Country Adaptation,” World Trade Review settlement data – for example, in WT/DS/OV documents, are based on an arbitrary split: most OECD members (Korea, Mexico and Turkey are excluded) are in the first group: developed countries; while all the rest are considered as developing countries A group of least developed members (based on the UN list) is also recognized3 Introduction to the structure of the WTO Dispute Settlement system A WTO dispute proceeds through three main stages: consultation; formal litigation; and, if necessary, implementation All disputes start with a request for consultations, in which the member government bringing the case to the WTO (the complainant) sets out its objections to the trade measure(s) of another member government (the defendant) The two sides are then required to consult for 60 days with the goal of negotiating a mutually satisfactory solution to the dispute If consultations not result in a mutually satisfactory solution, the complainant can request a panel proceeding, marking the start of the formal litigation stage Panels are comprised of three to five persons with a background in trade law, agreed to by the parties on a case-by-case basis There are typically two rounds of testimony, including from other countries (third parties) that notify the WTO of a “substantial” interest in the case The panel then circulates an “interim report,” offering both sides an opportunity to comment and seek clarification The complainant and defendant can still negotiate a settlement at this point If not, the panel issues its final report, which is then adopted by the WTO, unless one of two things happens First, the two sides can agree not to adopt the panel report for whatever reason, although to date this has not happened Second, one or both sides (but not third parties) can appeal the panel’s report, which happens frequently (i.e., in 73% of panel rulings) The Appellate Body (AB) handles these appeals Unlike panels, the AB is a standing body of jurists5 which is designed to ensure greater consistency across its rulings The AB is tasked with hearing testimony from the parties, and any third parties, on how the panel may have erred in its legal reasoning The AB can uphold or overturn the panel in whole or in part, and its decision is final If this verdict favors the defendant, the case typically ends If this verdict, instead, favors the complainant, the dispute may proceed to the implementation stage When a defendant is ruled against, the panel and (or) AB calls for it to bring its measures into accordance with its WTO obligations If the complainant feels that the defendant has not taken appropriate steps, it can subsequently request a Roderick Abbott, “Are Developing Countries Deterred from Using the WTO Dispute Settlement System?”, ECIPE WORKING PAPER, No 01/2007, page Hoekman, Bernard M., and Petros C Mavroidis (2000), “WTO Dispute Settlement, Transparency, and Surveillance”, World Economy 23(4), pp 527-542 Marc L Busch and Eric Reinhardt, The WTO Dispute Settlement Mechanism and Developing Countries: The WTO Dispute Settlement, Published by Sida 2004, page “compliance” panel This panel, which is often comprised of the original panel members, must determine whether the defendant’s efforts have, in fact, brought its measure(s) into compliance If not – a judgment the defendant can appeal to the AB – the complainant can request a second panel to set the level at which it can “retaliate” against the defendant This typically involves imposing tariffs on the defendant’s exports It is essential to note two things about retaliation First, requests for authorization to retaliate are rare Indeed, complainants have asked for authorization to retaliate in just seven of the hundreds of cases handled by the WTO Second, it is up to the complainant, and not the WTO, to follow through on this authorization to retaliate, and this is rarer still II Developing countries in WTO dispute settlement - pros and cons The World Trade Organization (WTO) dispute settlement mechanism can be critical for developing countries seeking to defend their trade rights and development interests But to utilize these pros, the third countries must be overcome obstacles I will show which the opportunities and challenges of developing country members have in the WTO dispute settlement system Three developing countries major challenges for participating in the WTO Dispute settlement system From my perspective, three major challenges that developing countries face if they are to make use of the WTO dispute settlement system: (i) lack of legal expertise in WTO law; (ii) lack of financial resources, including for the hiring of outside legal counsel; and (iii) fear of political and economic pressure from the developed countries such as United States, EC that induces them to abandon justified legal claims7 Firstly, most developing countries only have one or a handful of lawyers to address WTO matters, few or no lawyers in the private sector knowledgeable of WTO law, and few or no firms or trade associations having regular contact with state officials on trade matters8 Moreover, WTO law–as opposed to traditional “public international law”–is not even taught in many countries, so that they are dependent on foreign education to develop local talent Even worse, most developing country officials must work in a foreign language in WTO judicial proceedings within this “Anglophone organization”10 Thais, Malays and Marc L Busch and Eric Reinhardt, The WTO Dispute Settlement Mechanism and Developing Countries: The WTO Dispute Settlement, Published by Sida 2004, page See more at Gregory Shaffer, How to make the WTO dispute settlement system work for developing countries: some proactive developing country strategies, ICTSD Resource Paper No on March 2003, page 26 To give just one example, the Philippines had only one lawyer working on WTO matters, with no assistance from the Philippine private bar Interview with Philippine official, in Geneva, Switz (Sept 2002) Confirmed in interviews with developing country representatives in Geneva, Switz (Sept 2002) 10 Although English, French and Spanish are the three official languages of the WTO, English predominates French and Spanish-speaking countries are at a disadvantage linguistically Interview with the representative of an international organization that works with least developed organizations from Francophone Africa, in Geneva, Switz (June 20, 2002) Indonesians, to give just three examples, are asked to master the legal nuances of multiple three-hundred page WTO judicial decisions, often with limited legal training, and to so in a foreign tongue As noted earlier, in many cases, the cost of developing internal legal expertise is not cost-effective, so that the Doha Round’s emphasis on “capacity building” may offer only a hollow hope Secondly, developing countries not have enough strong fund to pay for costeffective legal assistance to help identify, pursue and defend their WTO rights In theory, without considering the cost of fact-finding specifically, the general cost of litigation in front of the WTO is already high, and more so if a private law firm is hired In some estimations, private law firms can charge anywhere from $250 to $1,000 per hour in fees, leading to total fees anywhere between $100,000 to over $1,000,00011 These figures, however, probably represent rather conservative estimates, even for a relatively simple case12 Finally, if a developing country government fears that by bringing a dispute to the WTO it will jeopardize the stability of its trading relationships, it is unlikely the government will move forward In theory, the same might be said of any country, developed and developing As the Doha Development Round has demonstrated, disagreements over international trade policy ignite heated debate13 The trade relationships formed can be delicate, and countries may want to avoid setting off the frail balance through disruptive contests with little gain in the end When one country depends on another for a crucial trade relationship, sometimes that factor outweighs any rights they may seek to enforce at the WTO Furthermore, even if a country brings a case to the WTO and wins, there is no guarantee it will produce beneficial trade results14 The opportunities of developing country members in the WTO dispute settlement system With these obstacles in mind, it might seem that developing countries stand to benefit little from WTO dispute settlement But this is far from true Poorer complainants have filed and won concessions from large industrialized states in a wide variety of disputes, with millions of dollars at stake These cases have involved exports of underwear (Costa Rica v US), shrimp (Thailand and Pakistan v US), wool shirts (India v US), gasoline (Venezuela and Brazil v 11 These fee estimates are based on calculations using hour estimates from the ACWL Billing Policy and Time Budget for 2007 (Decision 2007/7 Adopted by the Management Board on Nov 19, 2007) The ACWL time budget contemplates that a complicated case (including recourse to Article 21.3, 21.5, and 22.6 proceedings) requires a maximum of 1,452 hours The $100,000 to $1,000,000 range of fees is an estimate of cost given prevailing private law firm rates 12 Håkan Nordström, The Cost of WTO litigation, legal aid and small claim procedures (June 1, 2015) (Stockholm: Swedish National Board of Trade (Global Trade Department) 13 See, e.g., Guardian.com, Mandelson: US greed http://www.guardian.co.uk/business/2006/jul/30/usnews.development caused the Doha collapse, 14 For further discussion of this topic, see Marco Bronckers & Naboth van den Broek, Financial Compensation in the WTO: Improving the Remedies of WTO Dispute Settlement, J INT’L ECON L 101 (2015) US), sardines (Peru v European Communities) and poultry (Brazil v European Communities), among other products These complainants, like their wealthier counterparts, have benefited from the fact that defendants worry about the normative condemnation that goes along with a legal defeat, rather than threats of direct retaliation per se In other words, defendants prefer to avoid being found “noncompliant” 15 because such a label may damage their prospects of gaining compliance when they, in turn, file as complainants In this way, defendant governments may value the integrity of the multilateral trade regime over the outcome of a single case This means that poor complainants can use legal victories at the WTO to weigh in on the domestic political debates over free trade within defendant countries, as they look to gain market access In short, the effectiveness of WTO dispute settlement derives more from these intangibles than from trade sanctions, which are rare, and which could never have been a credible factor in the dozens of cases in which wealthy defendants have conceded to poor complainants Viewed from this perspective, the emphasis on retaliation at the WTO is misplaced While it is true that larger countries can more credibly threaten to retaliate, threats of retaliation are not the key to the system As Robert Hudec explained, other provisions of the WTO dispute are “make legal complaints without retaliation quite a bit more effective than they were” He further observed that the inability of poor countries to retaliate “is a problem, but it is a separate problem that has nothing to with the utility of the dispute settlement procedure for a developing country complainant.”16 CONCLUSION The WTO, as a multilateral trade body, has done well and the DSB, as a quasi-judicial mechanism, has also worked reasonably well and contributed to the strengthening of the WTO rule-based regime Smaller and poorer countries also need to examine strategies for mobilizing legal resources that not involve a change in dispute settlement rules They need to so since the WTO legal system will likely not be significantly changed and, in any case, lies outside of their control except through their use of it 15 Shaffer, Gregory and Victor Mosoti (2002), “EC Sardines: A New Model for Collaboration in Dispute Settlement?”, Bridges (7) October, pp 15– 22 16 Hudec, Robert E (2002), “The Adequacy of WTO Dispute Settlement Remedies”, in Bernard Hoekman, Aaditya Mattoo ... brings a case to the WTO and wins, there is no guarantee it will produce beneficial trade results14 The opportunities of developing country members in the WTO dispute settlement system With these... utilize these pros, the third countries must be overcome obstacles I will show which the opportunities and challenges of developing country members have in the WTO dispute settlement system Three developing. .. in WTO judicial proceedings within this “Anglophone organization”10 Thais, Malays and Marc L Busch and Eric Reinhardt, The WTO Dispute Settlement Mechanism and Developing Countries: The WTO Dispute