WTO Dispute Settlement
The dispute settlement system is one of the cornerstones of the system of WTO rules. Not only does it provide members with some assurance that other members will respect the agreements they have signed, but jurisprudence created by the dispute process plays an important part in clarifying the meaning of the different WTO agreements. There have been a number of high-profile disputes concerning agricultural products, which have had, or are likely to have, significant repercussions for the way the EU can provide support to its farmers.
The Dispute Settlement Process
The dispute settlement process is governed by the rules of the Dispute Settlement Understanding (DSU). If a country A believes that another country B has violated some provisions of one of the WTO agreements, and that this has adverse effects on A, the country A can defend its interests through a well-defined procedure.
The DSU emphasises that the first step in a dispute procedure must be consultations, which is often an efficient way of solving many disagreements. If consultations fail, a party may request the establishment of a panel of independent experts, to adjudicate whether there is a violation of the agreement.
Panel reports are automatically adopted by the WTO membership, unless there is a consensus not to adopt the report or one or more of the parties decides to appeal the panel's findings to the Appellate Body. This appellate review is limited to issues of law covered in the panel report and legal interpretations developed by the panel. This means that, de facto, the Appellate Body's report is the place where most WTO jurisprudence is built. The Appellate Body's findings must be accepted by the WTO membership, unless there is a consensus not to do so.
Where a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, the member concerned must bring the measure into conformity with its WTO obligations. In the very few cases where a member has not done so within a reasonable period of time, the complaining member can request authorisation from the WTO to impose sanctions, e.g. to impose additional tariffs on the other member’s exports, proportional to the damage which it has suffered. This is what happened in one famous case, the EU-US dispute on hormone treated beef.
Agricultural cases under the DSU
A number of important cases have been brought under the Agriculture Agreement or related agreements, which have important implications for EU agricultural policy reform. These include the complaint by Brazil, Australia and Thailand against aspects of the EU sugar regime, as well as the challenge by Brazil against the US cotton regime.
These cases have clarified what the rules in the Agreement on Agriculture actually mean in important areas. For example, the panel in the US cotton case found that US export credit guarantees were an export subsidy within the meaning of the Agreement and the net expenditure on these programmes should be included as part of US expenditure on export subsidies. Also in the cotton case, the panel found that certain payments to US farmers which the US government had assumed to be decoupled and production neutral and so covered under the Green Box, were not in fact eligible for the Green Box. This was because, if a farmer grew fruits or vegetables on his land, the payment would be withdrawn. These decisions have helped to shape the design of the EU Single Farm Payment.
The sugar case was important for confirming an earlier decision by a panel in the Canadian Dairy case that two-price schemes (the practice of selling a limited volume of a commodity on the domestic market at a high price, and selling exports abroad at a lower price) were illegal under GATT because they amounted to cross-subsidisation of exports.
An important issue is whether dispute panels are doing more than simply interpreting the Agreement negotiators signed in 1994. Both of these cases made decisions which defendant countries felt they had not signed up to when the Uruguay Round was signed. The US never expected, and clearly never intended, that export credit guarantees would be treated as an export subsidy. Whether or not panels are activist in reaching their conclusions, an outcome of the dispute settlement process is to emphasise the importance of the written texts of agreements. Constructive ambiguity in drafting agreements, long a prized diplomatic skill, will increasingly store up future trouble. Concluding trade agreements is likely to be more difficult as a result, while many countries may be tempted to win in litigation what they failed to win in negotiation.
WTO Website – Dispute Settlement Gateway
This page is a gateway to material on disputes in general, and how they are handled in the WTO and its Dispute Settlement Body, new negotiations on the dispute settlement understanding and individual dispute cases
WTO Website – Understanding on Rules and Procedure Governing the Settlement of Disputes
The text of the Dispute Settlement Understanding
Alavi, A., African Countries and the WTO’s Dispute Settlement Mechanism (PDF), 2007
The WTO Dispute Settlement Mechanism was designed to secure the ‘rule of law’ within international trade and provide all members with opportunities to exercise their rights under multilateral trade agreements. But, after ten years, no sub-Saharan African country has yet used the option to initiate a dispute. This article examines what prevents the WTO African Group from using the system and critically reviews the solutions they have proposed to remedy this. It concludes by discussing how this reflects broader problems concerning African participation in WTO.
McMahon, J., Trade Policy Reform through Litigation (PDF), Eurochoices, 2007
Article looks at two aspects of the CAP that could be subject to litigation, the Single Farm payment and export subsidies for processed agricultural products.
Tim Josling, Longyue Zhao, Jeronimo Carcelen and Kaush Arha, Implications of WTO Litigation for the WTO Agricultural Negotiations (PDF), IPC Issue Brief, International Food and Agricultural Policy Trade Council, 2006
A thorough analysis of the implications of litigation as a way of altering the agricultural policies of trading partners.
Swedish International Development Agency, The WTO Dispute Settlement Mechanism and Developing Countries (PDF), 2004
Trade brief that describes how WTO dispute settlement works, the prospective benefits and hurdles to effective use of the regime by developing countries and some potential direction for technical assistance and capacity building, focusing on WTO dispute settlement, in particular