Developing Countries and the WTO Dispute Settlement Understanding

Author: Ioannis Oikonomou

I. Introduction

Dispute Settlement was a highly controversial issue under the General Agreement on Tariffs and Trade (GATT) regime and caused a great deal of complaint, especially among developing countries. This dispute settlement system was, allegedly, power-based[1], thus preventing developing countries from successfully defending their interests within the GATT Forum. Among the most important sources of criticism was the lack of deadlines for the consultation process[2], the need for consensus for the approval of the panels’ decisions and the different procedural and substantive regimes provided by the GATT and Tokyo negotiation rounds, leading to extended “norm and forum shopping”[3]. The signing of the Final Act, establishing World Trade Organization (WTO), and the annexed thereto Dispute Settlement Understanding (DSU) modified the dispute settlement system, as it incorporated a more “rule-oriented” approach[4]. On the one side, the DSU confirmed some of the GATT procedures. On the other side, the DSU included some innovations, the most important of which were the introduction of tight time-limits for consultation and the creation of a single, unified regime of dispute settlement, concerning the whole GATT/WTO system and the quasi-automatic acceptance of the panels’ decisions by the newly founded Dispute Settlement Body (unless consensus for the opposite is reached by the parties). These innovations were aimed at addressing the above indicated deficiencies and enhancing developing countries’ position in WTO Dispute Settlement System[5].

II. WTO Dispute Settlement Understanding and Developing Countries

The DSU and its more legalistic approach towards Dispute Settlement were expected, by most countries taking part in the Uruguay negotiations round, to be beneficial for developing countries[6] and to motivate them to participate in the WTO legal procedures. In order to assess its success, we have to focus on some specific aspects of the DSU. First of all, we have to look at the Appellate Body (AB), which was an institution established during the Uruguay rounds, in order to deal with the appeals of states against the panel reports. The quasi-automatic adoption of its reports (which is implemented with regard to panel reports as well) is the most important feature of this organ. Its explicit (art 17.9) authorization to enact its own procedural rules and its obligation to express its opinion on any legal question brought before it by the parties, render it a powerful institution, as it issues in most cases the last decision on legal matters within the DSU[7]. Secondly, we have to consider the level of participation of the states as third parties in bilateral disputes, as stated in the DSU. States are allowed to take part in the proceedings under the general condition of having a “substantial trade interest”[8]. But this right is much more limited in the proceedings before the panels (participation is possible only in certain stages of the process), compared to the proceedings before the AB[9]. However, the majority of developing countries doesn’t seem to embrace this right and has been reluctant to appear before the AB as third parties to a dispute[10]. It seems that the lack of resources contributes significantly to this situation, although it has been suggested that the frequency of participation in the disputes brought before the AB should be in accordance with the countries’ share in the global trading system. It is, therefore, implied that we should, absolutely, expect that developing countries participate more rarely than the developed ones and it shouldn’t be a cause for concern[11]. Furthermore, we have to consider the impact on developing countries of the amicus curiae briefs, which have been submitted by non-state actors to the AB in some specific cases. In the well-known “Import Prohibition on Certain Shrimps and Shrimp Products”, brought before the DSB by four countries against the United States, the AB interpreted article 13 DSU in a very broad way, by stating that the panels are free to evaluate amicus curiae briefs sent to it by non-state actors[12]. The applicants criticized this approach, calling for a narrow interpretation, which would exclude this type of evidence[13]. The majority of developing countries still argues, that the amicus curiae briefs from western-based non-state actors is really unlikely to influence the panels in a way which will be positive for them. However, the relatively small number of cases determined substantially by amicus curiae briefs doesn’t allow us to be absolutely certain about their influence in the proceedings[14]. Last but not least, we need to have a closer look at the issue of the representation of states by private counsels. From the entry into force of the DSU, developing countries were discouraged by the fact that their financial means did not allow them to participate more actively in the judicial proceedings[15]. WTO’s decision to assign two specialized attorneys with the task to consult developing countries proved to be just inadequate to tackle this problem[16]. As a result, the AB went even further, by allowing the presence of a private counsel for the state of Saint Lucia, during the famous “Regime for the Importation, Sale and Distribution of Bananas” case, even during the proceedings. Its reasoning for overturning the panel’s decision (which had initially denied this request), was that every state needs to be represented by a qualified counsel[17]. In that context, we should also mention the initiative of some European countries to found (and assume a great part of the funding) of the Advisory Centre on WTO Law, which is aimed at providing legal support to developing countries[18]. This is considered to be an important step, which could significantly improve the position of developing countries within the WTO system. Moving away from the AB’s judgments, we can refer to the current retaliation system. This system is seldom used by developing countries, as the potential disadvantages outweigh the advantages, renderinag such actions unsustainable for the developing country in the long term[19]. Some developing countries are pushing for such reforms in the retaliation regime, which will enable them to exercise their right more often, without being faced with huge economic losses[20].

III. Was the DSU successful? What can still be done?

All the above mentioned aspects of the DSU shall be taken into account in order to evaluate the DSU’s success with regard to the developing countries. The first conclusion is that the shift from the power-based system (prevailing under GATT) to the more rule-based approach (under WTO) constitutes a promising step, potentially beneficial to the developing countries. The official numbers show that the number of disputes brought before the DSB since the entry into force of the WTO is already bigger than the number of disputes brought under GATT (in a period of time of about 50 years) and that developing countries were complainants in more than one third of the disputes[21]. However, we shouldn’t disregard the fact that the inequalities are still there, with the only difference being that legal capacities (which require wealth) are currently more important than political influence. This implies that it will require a considerable amount of time until we ensure equal terms, as it is obvious that political influence and wealth are possessed by the same countries, which will, therefore, continue to have an unfair advantage. In my opinion, the substantive protection granted by the DSU is sufficient, as the DSU includes provisions for Special and Differential Treatment, which guarantee a more lenient approach towards the developing countries in all stages of the procedure and in the implementation stage. Nevertheless, WTO and the developed countries must aim at making participation in these procedures a more attractive choice. If they are strongly committed to that multilateral trade system, then they must try to enforce a level playing field between all states, by providing legal assistance in all stages, prior and during the legal proceedings, make efforts to shorten legal proceedings, which cause significant harm to developing countries, make sure that the development countries’ rights (e.g. retaliation) will be enforced collectively and effectively and, of course, consider any other reforms depending on the changing circumstances. In that way we can, truly, motivate the developing countries to commit to the DSU, use it for the settlement of their disputes and, thus, come closer to a universally accepted system and viable in the long term.

---

[1] Amin Alavi, African Countries and the WTO’s Dispute Settlement Mechanism, Development Policy Review, 2007, 25(1): 25-42, p.27.

[2] Ibid., p.26.

[3] J.G. Merrills, International Dispute Settlement, pp.196-197 (2011).

[4] Marc L. Busch and Eric Reinhardt, Developing Countries and General Agreement on Tariffs and Trade/World Trade Organization Dispute Settlement, Journal of World Trade 37(4): 719-735, 2003, p.721.

[5] Merrills, pp.196-197.

[6] James Smith, Inequality in international trade? Developing countries and institutional change in WTO Dispute Settlement, Review of International Political Economy 11(3): 542-573, p.545-546.

[7] Ibid., pp.549-552.

[8] Ibid., p.552.

[9] Ibid., pp.552-553.

[10] Ibid., p.553.

[11] Ibid., p.553, 554, 561.

[12] Ibid., p.562-563.

[13] Id..

[14] Ibid., p.564-565.

[15] Ibid., p.565.

[16] Id..

[17] Ibid., p.566.

[18] Ibid., p.567.

[19] Alavi, p.34.

[20] Id..

[21] http://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c11s1p1_e.htm