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Making WTO Dispute Settlement Work for African Countries: An Evaluation of Current Proposals for Reforming the DSU

Lorand Bartels

Abstract

Most African countries are WTO Members, and yet to date none has been a complainant in dispute settlement proceedings. One possible reason is that the WTO enforcement regime is not well suited to smaller complainants whose imports from a larger defendant represent only a small share of that defendant’s total exports. Because retaliation rights must be “equivalent” to damage caused, retaliation may not be sufficient to induce the defendant to comply with its obligations. As a result, there may be a chilling effect on smaller countries commencing trade disputes. This article analyses current proposals within the context of the WTO DSU Review that address this problem. It also compares the WTO enforcement regime to general international law on the proportionality of countermeasures and suggests ways to soften the “equivalence” requirement.

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  1. This paper draws on research conducted for the Commonwealth Secretariat.

  2. 1

    Of the cases involving Egypt as respondent, one was abandoned (WT/DS205), two were settled (WT/DS305 and WT/DS327) and one proceeded to a panel report (WT/DS211).

  3. 2

    Jan Bohanes and Fernanda Garza, Going Beyond Stereotypes: Participation of Developing Countries in WTO Dispute Settlement, 4 Journal of Trade, Law and Development 45 (2012); cf. Hunter Nottage, David versus Goliath: An Evaluation of the Participation of Commonwealth Small States and Least-Developed Countries in WTO Dispute Settlement and an Analysis of the Constraints They Face, Commonwealth Secretariat Paper (November 2012) (on file with author).

  4. 3

    Valentine Rugwabiza, Africa Should Trade More with Africa to Secure Future Growth, available at: <http://www.wto.org/english/news_e/news12_e/ddg_12apr12_e.htm>, accessed 21 August 2013.

  5. 4

    Hunter Nottage, “Trade and Development”, in Daniel Bethlehem et al. (eds), The Oxford Handbook of International Trade Law (Oxford: Oxford University Press, 2009), pp. 498-500.

  6. 5

    Bohanes and Garza, above at n 2, 109.

  7. 6

    Studies, including quantitative studies, on WTO Member participation in WTO dispute settlement include Joseph Conti, Between Law and Diplomacy: The Social Contexts of Disputing at the World Trade Organization (Stanford, CA: Stanford University Press, 2011), Ch 5; Marc Froese, Do Developed Countries “Lawyer up” Faster Than Developing Countries? Evaluating the Speed and Momentum of Trade Litigation at the World Trade Organization, 45 Journal of World Trade 1237 (2011).

  8. 7

    See e.g. Gregory Shaffer, “Developing Country Use of the WTO Dispute Settlement System: Why It Matters, the Barriers Posed”, in James Hartigan (ed.), Trade Disputes and the Dispute Settlement Understanding of the WTO: An Interdisciplinary Assessment (Bingley: Emerald, 2009); Kristina Mitchell, Developing Country Success in WTO Disputes, 47 Journal of World Trade 77 (2013) and Ka Zeng, Legal Capacity and Developing Country Performance in the Panel Stage of the WTO Dispute Settlement System, 47 Journal of World Trade 187 (2013).

  9. 8

    Nottage, above at n 2, Bohanes and Garza, above at n 2.

  10. 9

    Nottage, Ibid.

  11. 10

    Nottage, Ibid.

  12. 11

    Claire Delpeuch, African Cotton Markets at Crossroads: Will the Price Spike Turn into a New Kick-Start?, World Bank Policy Research Working Paper 5847 (October 2011), p. 6.

  13. 12

    WTO Dispute Settlement Body, Special Session – Report by the Chairman, JOB(08)/81, 18 July 2008, (“Chairman’s Text”), reproduced in WTO Dispute Settlement Body, Special Session – Report by the Chairman, TN/DS/25, 21 April 2011, Appendix A. This text has been accepted by members of the negotiating group as the basis for future discussion: WTO Dispute Settlement Body, Special Session – Report by the Chairman, TN/DS/23, 5 December 2008, para 2.

  14. 13

    Admittedly, there is another view, according to which the WTO dispute settlement system should encourage so-called “efficient breach”. The relevant “efficiency” for these purposes could be seen in economic terms as the welfare of the party adopting the measure, both the welfare of affected parties and global welfare. Some also see the relevant “efficiency” as that of the trade negotiators, which is an arch-realist position. For this view, see Alan Sykes, “The Dispute Settlement System: Ensuring Compliance?” in Amrita Narlikar, Martin Daunton and Robert Stern (eds), The Oxford Handbook on the World Trade Organization (Oxford: Oxford University Press, 2012), pp. 570-572.

  15. 14

    Statistics on WTO dispute settlement are available at <www.worldtradelaw.net>. This is consistent with the results reported in Bruce Wilson, Compliance by WTO Members with Adverse WTO Dispute Settlement Rulings: The Record to Date, 10 Journal of International Economic Law 397 (2007) and Bill Davey, The WTO Dispute Settlement System: The First Ten Years, 8 Journal of International Economic Law 17 (2005), at 47 (counting 83% compliance).

  16. 15

    Along with collective retaliation (discussed below), such demands date from the 1960s: Robert Hudec, The GATT Legal System and World Trade Diplomacy (New York: Praeger, 1975), p. vii.

  17. 16

    US – Section 110(5) was settled by a one-off payment of $3.3 million made to an EU performing rights society: WTO Dispute Settlement Body, Notification of a Mutually Satisfactory Temporary Arrangement, WT/DS160/23, 23 June 2003. The second such arrangement was in US – Upland Cotton, WT/DS267, on which see below at n 17.

  18. 17

    WTO Arbitrators Decision, US – Upland Cotton (Article 22.6 DSU and Article 4.1 SCM – US), WT/DS267/ARB/1, 31 August 2009, para 6.5(a) and WTO Arbitrators Decision, US – Upland Cotton (Article 22.6 DSU and Article 7.10 SCM – US), WT/DS267/ARB/2, 31 August 2009, para 6.5(a).

  19. 18

    Pursuant to a temporary Framework Agreement for a Mutually Agreed Solution to the Cotton Dispute in the World Trade Organization (WT/DS267) signed in August 2010 (<http://www.ustr.gov/webfm_send/1996>), the US agreed to pay an annual sum of $147.3 million (the amount of awarded retaliation in WTO Arbitrators Decision, US – Upland Cotton, WT/DS267/ARB/2, ibid.) to a newly established “Brazil Cotton Institute”, among other things: see ICTSD, “Brazil, US Strike ‘Framework’ Deal in Cotton Dispute”, 14(23) Bridges Weekly 1 (2010), at 1. Brazil has announced that 10% of the Brazil Cotton Institute’s income was earmarked for international cooperation projects in the cotton sector: WTO General Council, Minutes of Meeting on 11 December 2012, WT/GC/M/141, para 3.6.

  20. 19

    Anon, Kind Amendment Successfully Cuts Taxpayer-funded Brazilian Cotton Subsidies, Press Release, 16 June 2011, available at: <http://kind.house.gov/index.cfm?sectionid=52&itemid=809>. In fact, discussions on reforms to the framework agreement are still ongoing.

  21. 20

    Marco Bronckers and Naboth van den Broek, Financial Compensation in the WTO: Improving the Remedies of WTO Dispute Settlement, 8 Journal of International Economic Law 101 (2005), 119. Financial compensation also avoids the damage that retaliatory trade restrictions causes to innocent third party private “bystanders”: Marco Bronckers and Freya Baetens, Reconsidering Financial Remedies in WTO Dispute Settlement, 16 Journal of International Law 281 (2013), 300-1.

  22. 21

    The proposal does not address the question of assessment, interest and various other details that have been discussed in the literature. See, e.g. Jordan Shepherd et al., Effective Compliance in the DSU: The Mechanics of Monetary Compensation as a Form of Reparation, Trade and Investment Law Clinic Papers, Graduate Institute (Geneva, 2012).

  23. 22

    ACP Group, Finding the Key to the Cotton Issue at the WTO Cannot Wait!, Press Release, 17 January 2011, available at: <http://www.acp.int/es/content/finding-key-cotton-issue-wto-cannot-wait>.

  24. 23

    Bernard O’Connor and Margareta Djordjevic, Practical Aspects of Monetary Compensation: The US – Copyright Case, 8 Journal of International Economic Law 127 (2005), 130 n 17.

  25. 24

    For a sanguine view, see Bronckers and Baetens, above at n 19, 303-4.

  26. 25

    Articles on State Responsibility, annexed to UNGA res 56/83, UN Doc A/RES/56/83, 12 December 2001.

  27. 26

    Proportionality in this context is treated differently from proportionality in other contexts, in which the reference point is the injury suffered rather than the purpose of the measure, which should be inducing compliance.

  28. 27

    Articles on State Responsibility, above at n 25.

  29. 28

    Anon, “Argos Panoptes”, Theoi Project, available at: <http://www.theoi.com/Gigante/GiganteArgosPanoptes.html> (undated).

  30. 29

    WTO Arbitrators Decision, EC – Bananas III (US) (Article 22.6–EC), WT/DS27/ARB, 9 April 1999, para 6.3.

  31. 30

    WTO Arbitrators Decision, US – 1916 Act (EC) (Article 22.6–US), WT/DS136/ARB, 24 February 2004, para 5.32.

  32. 31

    Articles 4.10 and 4.11 of the Agreement on Subsidies and Countervailing Measures; although see also Article 9.4 of the same agreement, where in the case of certain now-expired non-actionable subsidies, in certain circumstances an affected WTO Member was able to impose “appropriate countermeasures commensurate with the nature and degree of the effects determined to exist”.

  33. 32

    WTO Arbitrators Decision, Brazil – Aircraft (Article 22.6–Brazil), WT/DS46/ARB, 28 August 2000, paras 3.57-3.60.

  34. 33

    Arbitration, Case Concerning the Air Services Agreement of 27 March 1946 (US/France), XVIII RIAA 417, 9 December 1978, para 83.

  35. 34

    This is noted by Robert Howse and Robert Staiger, United States – Anti-Dumping Act of 1916 (Original Complaint by the European Communities) – Recourse to Arbitration by the United States under 22.6 of the DSU, WT/DS136/ARB, 24 February 2004 – A Legal and Economic Analysis, 4 World Trade Review 295 (2005), 297-298.

  36. 35

    WTO Dispute Settlement Body, EC and Certain Member States – Large Civil Aircraft (Recourse to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU by the United States), WT/DS316/18, 12 December 2011; WTO Dispute Settlement Body, US – Large Civil Aircraft (Second Complaint) (Recourse to Article 22.2 of the DSU, and Articles 4.10 and 7.9 of the SCM Agreement, by the European Union), WT/DS353/17, 2 October 2012.

  37. 36

    WTO Arbitrators Decision, EC – Bananas III (Ecuador) (Article 22.6–EC), WT/DS27/ARB/ECU, 24 March 2000, paras 86.

  38. 37

    WTO Dispute Settlement Body, US – Gambling – Recourse by Antigua and Barbuda to Article 22.2 of the DSU, WT/DS285/22, 22 June 2007, para 3.

  39. 38

    WTO Arbitrators Decision, US – Gambling (Article 22.6–US), WT/DS285/ARB, 21 December 2007, para 6.1.

  40. 39

    WTO Dispute Settlement Body, Minutes of Meeting on 28 January 2013, WT/DSB/M/328, 22 March 2013, para 6.12, authorizing the request set out in WTO Dispute Settlement Body, US – Gambling (Recourse by Antigua and Barbuda to Article 22.7), WT/DS285/25, 13 December 2012.

  41. 40

    “Pirate Bay and Antigua Explore Launch of Authorized ‘Pirate Site’”, TorrentFreak, 3 May 2013, available at: <http://torrentfreak.com/pirate-bay-and-antigua-explore-launch-of-authorized-pirate-site-130503/>.

  42. 41

    Doug Palmer, “US warns Antigua against ‘government-authorized piracy’”, Reuters, 28 January 2013, available at: <http://www.reuters.com/article/2013/01/28/us-usa-antigua-piracy-idUSBRE90R12G20130128>.

  43. 42

    There are various other problems with cross-retaliation. It can lead to a loss of investment in these areas. Moreover, not respecting intellectual property rights may also violate other international obligations, such as those contained in bilateral investment treaties, regional trade agreements and international World Intellectual Property Organization (WIPO) obligations. There was an interesting debate on this some years ago. A WIPO official stated that a suspension of TRIPS obligations as a result of WTO cross-retaliation could violate WIPO obligations with respect to copyright and was promptly contradicted by the WIPO spokesperson: see “As Antigua Considers Cross-Retaliation against US, WIPO Official Creates Stir” (12)(2) Bridges Weekly Trade New Digest, 23 January 2008, available at: <http://ictsd.org/i/news/bridgesweekly/6612/>. It may be that a WTO Member complainant would be estopped from bringing a claim, as some have argued (as reported, Ibid), but this would not apply to an individual complainant.

  44. 43

    WTO Dispute Settlement Body, DSU Negotiations – Special and Differential Treatment for Developing Countries – Proposals on DSU by Cuba, Honduras, India, Indonesia, Malaysia, Pakistan, Sri Lanka, Tanzania and Zimbabwe, TN/DS/W/19, 9 October 2002.

  45. 44

    WTO Dispute Settlement Body, Informal Meeting of the DSB Special Session, 8 June 2012–Chairman’s Remarks: Summary of Recent Work (Week of 4 June 2012), JOB/DS/10, 15 June 2012, para 69.

  46. 45

    WTO Dispute Settlement Body, Informal Meeting of the DSB Special Session, 30 September 2011–Chairman’s Remarks: Summary of Recent Work (Week of 26 September 2011), JOB/DS/4, 26 October 2011, para 38.

  47. 46

    WTO Dispute Settlement Body, TN/DS/25, 21 April 2011, above at n 12, B-24.

  48. 47

    The notion of collective countermeasures is longstanding and has been exhaustively discussed in the academic literature. See, e.g. Reto Malacrida, Towards Sounder and Fairer WTO Retaliation: Suggestions for Possible Additional Procedural Rules Governing Members’ Preparation and Adoption of Retaliatory Measures, 42 Journal of World Trade 3 (2008).

  49. 48

    Bronckers and van den Broek, above at n 19, 107.

  50. 49

    WTO Arbitrators Decision, WT/DS27/ARB, above at n 25.

  51. 50

    One of the most commonly discussed methods of allocating the right is to hold an auction. There is research suggesting that, economically, this makes sense. Kyle Bagwell, Petros C Mavroidis and Robert W Staiger, “The Case for Tradeable Remedies in the WTO”, in Simon Evenett and Bernard Hoekman (eds), Economic Development and Multilateral Trade Cooperation (Washington, DC: Palgrave/McMillan and World Bank, 2005), pp. 56-76 and Kyle Bagwell, Petros C Mavroidis and Robert W Staiger, Auctioning Countermeasures in the WTO, 73 Journal of International Economics 309 (2007).

  52. 51

    WTO Dispute Settlement Body, DSU Negotiations – Proposal by Mexico, TN/DS/W/23, 4 November 2002.

  53. 52

    WTO Dispute Settlement Body, Minutes of Meeting Held on 13–15 November 2002, TN/DS/M/6, 31 March 2003, para 18 (Chile), para 33 (Argentina), para 39 (Canada), para 42 (Norway), para 46 (Peru), para 48 (Pakistan), para 50 (Cuba), para 52 (Poland), para 55 (Hong Kong), para 57 (EU), para 58 (Malaysia), para 63 (Philippines).

  54. 53

    WTO Dispute Settlement Body, TN/DS/25, 21 April 2011, above at n 12; WTO Dispute Settlement Body, JOB/DS/10, 15 June 2012, above at n 39, para 70.

  55. 54

    WTO Dispute Settlement Body, JOB/DS/10, 15 June 2012, above at n 39, para 64.

  56. 55

    Ibid, paras 72-74.

  57. 56

    GATT Secretariat, Measures to Deal with Members in Category IV of the Administrative Arrangements on Arrears, GATT Docs PC/7, L/7578, 13 December 1994.

  58. 57

    See Simon Schropp, “The Equivalence Standard under Article 22.4 of the DSU: A ‘Tariffic’ Misunderstanding?”, in Chad Bown and Joost Pauwelyn (eds), The Law, Economics and Politics of Retaliation in WTO Dispute Settlement (Cambridge: Cambridge University Press, 2010) and other contributions to that volume.

  59. 58

    Ibid.

  60. 59

    See above at n 28.

  61. 60

    Articles on State Responsibility, above at n 25.

  62. 61

    James Flett, “Multiple Panel Proceedings, Relative ‘Equivalence’ and Tradable Retaliation Rights: A ‘Travel-Pass’ for Developing Countries in Dispute Settlement?”, unpublished and undated (copy on file with author), at 4.

Published Online: 2013-08-30

©2013 by Walter de Gruyter Berlin / Boston