Abstract
Trade is vital for the growth and stability of a nation’s economy, and it extends beyond a country’s borders. Sometimes, the trading process moves smoothly, while at other times, multiple disputes arise between nations on their counterparts’ trading practices. The WTO works at the helm of international trade conflicts, resolving them to achieve successful and peaceful trading between countries. Moreover, the organization’s trading process is undertaken under a stipulated rule of law with set deadlines. Many cases depict the WTO’s dispute settlement mechanism, such as the Canada-Brazil aircraft dispute, the United States/Asian sea turtle and shrimp dispute, the European Union/United States beef hormones dispute, and the United States steel tariff dispute. The WTO ensures that nations in conflict come to an agreement that resolves the disputes and promotes practical and transparent trading practices.
Introduction
Conflicts often arise when two parties are involved in any process, including trading transactions. Countries participate in trading processes with each other, and conflicts may arise, highlighting the importance of the World Trade Organization (WTO). The organization has resolved multiple international trading conflicts over the years, which could have escalated if the Body did not exist. The WTO has over a hundred and fifty countries members, highlighting its significance in ensuring peaceful and profitable global trade practices. Trade involves multiple components, such as tariffs, trade agreements, quotas, and restrictions. The WTO ensures dispute resolution and its contribution has been depicted by multiple successful cases, such as the United States/Asian sea turtle and shrimp dispute. This paper analyses the WTO dispute settlement mechanism under the lens of resolved disputes between various nations.
Discussion
2.1 WTO Overview
Understanding the WTO setup provides a basis for clarity on its dispute settlement mechanism and the process involved. The Body was formed in January 1995 as an intergovernmental or international organization, facilitating and organizing international trade, and is currently headed by Ngozi Okonjo-Iweala as its Director General (WTO, n.d-a). The WTO was formed in alignment with the Marrakesh Agreement made in 1994 on trade practices, replacing the standing international trade regulations depicted by the 1948 General Agreement on Tariffs and Trade (GATT). It operates from its Geneva headquarters in Switzerland. Currently, the Body comprises more than one hundred and sixty countries, with many nations seeking to join the organization. Most of the organization’s members are United Nations member states, with other members from the European Union, Taiwan, Hong Kong, and Macao. The member states represent more than ninety-five percent of global trade, and peaceful trading practices between the nations are essential in uplifting economies. Member states enjoy multiple benefits facilitated by the organization, such as reducing tariffs and other trade barriers and resolving disputes, as will be discussed in the paper (WTO, n.d-a). Therefore, the WTO is essential in facilitating open trade practices for worldwide benefit.
2.1.1Joining the WTO
The WTO’s members are the only ones eligible to get their disputes resolved by the organization. An overview of the accession process helps understand how the member states achieve the organization’s involvement in their dispute settlement processes. The process of joining the organization is stipulated by the Marrakesh Agreement, Article XII (Georgetown Law, 2023). Membership is extended beyond sovereign states to other territories with transparent external economic practices. Interested organization members scrutinize applications and negotiate accession terms with the applicant. The overall authority, which is the organization’s Ministerial Conference, approves the membership applications. However, the application and approval process depends on the applicant’s development levels and trade practices. One of the major documents a new member state should have is the Protocol of Accession, stipulating the services and goods schedule tariffs and market access commitments (Georgetown Law, 2023). Once a state becomes a member of the WTO, it becomes eligible to have its disputes negotiated and resolved through the organization’s help.
2.2 WTO’s Dispute Settlement Mechanism Process
Dispute settlement is WTO’s fundamental contribution to the global economy’s stability. Many disputes would escalate if the WTO were not the multilateral trading system’s pillar since a rules-based system would be ineffective. However, the organization’s dispute settlement mechanism underscores other rules of law, achieving the trading system’s predictability and security (WTO, n.d-b). The settlement mechanism is aligned with defined rules and deadlines for case completions. A panel makes the first rulings of the WTO, and the rulings are presented to the organization’s full membership for rejection or endorsement. Appeals are allowed in case of a rejection based on stipulated points of law. The WTO does not prioritize passing judgment but settling disputes through negotiations and consultations. However, some cases take longer to complete the panel process despite stipulated deadlines and rules. Sometimes, cases are settled out of court or stagnate in the consultation phase, some from when the WTO was established (WTO, n.d-b). However, the WTO has made amendments to streamline its dispute resolution processes.
WTO disputes are settled according to internationally agreed rules, which are effective, equitable, and mutually acceptable. Most WTO disputes arise from broken promises or when other WTO members accuse their counterparts of violating the set trade rules (WTO, n.d-b). For instance, a nation may adopt a policy one or more members may consider contrary to the WTO agreement. On the other hand, a member may fail to fulfill a WTO obligation, forcing the organization to resolve the conflicts. Settling disputes was based on the GATT agreement. However, the GATT agreement had loopholes, such as the lack of fixed timetables, multiple stagnated cases, and easy-to-block rules. However, the Uruguay Round agreement provided a structured process with defined procedure stages. Therefore, the agreement enhanced the discipline of settling cases within a reasonable period, reducing the prior stagnation of cases. If a case completes a process to the first ruling stage, it takes approximately a year to be resolved or fifteen months if appealed. Time limits are flexible and accelerated if a dispute needs to be resolved urgently, such as a dispute regarding perishable products (WTO, n.d-b). WTO dispute settlement mechanisms are mostly based on the Dispute Settlement Understanding (DSU) Articles and the Subsidies and Countervailing Measures (SCM) agreement. Ultimately, world trade is expanding rapidly, and conflicts are possible, but having an organization that can resolve disputes on internationally agreed regulations simplifies the settlement process.
2.2.1 Dispute Settlement Mechanism Stages
Two fundamental stages are involved in WTO’s dispute settlement process. Dispute settlement is the Dispute Settlement Body’s responsibility, consisting of WTO members. The settlement body establishes a panel of experts to spearhead the proceedings and accept or reject the outcomes of a case or its appeal. Additionally, the Body monitors the recommendations and rulings implementation and holds the authority to order retaliation if a ruling is not adhered to by a country (WTO, n.d-b). Analyzing the details of every stage provides clarity on the WTO dispute settlement mechanism.
Stage one: Consultations
The first dispute settlement stage primarily involves consultations. Countries in dispute consult with each other to establish their capability to settle the conflict by themselves. Once the disputing countries establish that resolving a dispute is beyond their capability, they may ask the organization’s director general to act as a mediator for a fast resolution. The consultation period takes approximately sixty days. If the dispute is unresolved, stage two of the settlement process is implemented (WTO, n.d-b).
Stage Two: Panels
The second stage involves appointing a panel. Panels resemble tribunals but are chosen in agreement with the conflicting parties’ wishes. However, if the disputing parties disagree on a panel, the WTO’s head appoints the panel. Panels consist of experts from different countries who examine the presented facts and arguments and determine a conclusion. WTO panels are independent and do not conform to any government’s instructions (WTO, n.d-b). Therefore, a panel’s conclusion has reduced the likeliness of bias due to its independent nature.
A panel appointment may take up to forty-five days and is appointed by the WTO once consultations fail. The offended country asks for a panel appointment, but the nation in the dock has the power to block the appointment initially. However, on the second meeting of the Dispute Settlement Body, appointments can only be blocked through a consensus against the panel appointment. Panels assist the Dispute Settlement Body in making recommendations or rulings, and their report is denied or approved by the Body. Moreover, panels’ decisions are based on cited agreements. The final report is given to the conflicting countries within six months, except in urgent cases when a report is handed to the parties within three months (WTO, 2017; WTO, n.d-b). A panel works in several stages before making recommendations or a ruling.
Process one: Submission of Cases
The disputing countries submit the case in writing, explaining their issues to the panel. Submitting the cases in writing is mandatory before the panel sits for the first hearing. The process helps the panel understand the case details (WTO, n.d-b).
Process Two: First Hearing
The first hearing occurs after the case submission. Countries interested in the dispute, the responding country, and the offended nation can state their cases (WTO, n.d-b).
Process Three: Rebuttals
The involved nations present written rebuttals and oral arguments. The rebuttals and arguments are submitted during the second hearing, assisting the panel in deciding on the matter in conflict. Rebuttals are essential in countering presented arguments or evidence provided by the country or countries a nation conflicts with (WTO, n.d-b).
Process Four: Inclusion of Experts
Experts provide the appointed panel with scientific or technical advice required during the proceedings. The appointed experts provide an advisory report for the panel and enhance the accuracy of the pane’s final findings (WTO, n.d-b).
Process Five: First Draft
The first draft is composed of both arguments and facts of the case and is served to the conflicting parties. Once the parties receive the draft, they are expected to comment on the issues within two weeks (WTO, n.d-b). However, the first draft has no conclusions.
Process Six: Interim Report
An interim or decision report highlights the possible panel report’s outcome. The report is handed to the conflicting parties depicting the panel’s findings and outcomes, and the parties are given approximately a week to seek a review per DSU’s Article 12.7. Panelists can also express their opinions separately in the report but anonymously in alignment with the DSU’s Article 14.3 (WTO, 2017).
Process Seven: Interim Review
A review assists in reconsidering the findings and conclusions highlighted in the panel report. It may require additional meetings between the panel and the disputing parties in alignment with the DSU’s Article 15. The review takes a maximum of two weeks, and the panel’s decision often goes unchallenged and unchanged (WTO, 2017).
Process Eight: Final Report
The conflicting parties are served with the panel’s final report, which is submitted to the WTO members three weeks later. Suppose the panel decides that the accused country committed an offense. In that case, it recommends measures to align the offending party with the WTO regulations in alignment with the first and second sentences of the DSU’s Article 19.1. Moreover, the DSU’s Article 26.1 (b) highlights the importance of the offending party making adjustments that satisfy both parties, such as trade opportunities compensation. In the case of a prohibited subsidy, according to the SCM agreement regulations, the member in conflict with the agreement is required to withdraw the subsidy immediately, and a withdrawal period is stipulated per the SCM’s Article 4.7 agreement (WTO, 2017).
Process Nine: Making the Report a Ruling
The panel’s final report becomes a ruling within sixty days and is often supported by the Dispute Settlement Body. However, the report may be rejected through a consensus, and the parties involved may appeal the ruling. Suppose a report is accepted and becomes a ruling. In that case, the offending party is expected to depict its willingness to comply in the next Dispute Settlement Body meeting, held thirty days after the report’s adoption. However, if the recommendations prove impractical, the party facing the complaint may request more time, and the process may include negotiations with the offended party. Additionally, the offended party may retaliate with the Dispute Settlement Body’s permission to force its counterpart to comply. The retaliation should be within the dispute sector to achieve results and may include actions such as import blockage or raising tariffs (WTO, n.d-b).
2.2.2 Appeals
Appeals occur in the case of a contended ruling. One or both parties may differ with the ruling and seek an appeal. However, appeals must align with legal aspects and refrain from evaluating new issues or evidence in alignment with DSB’s Rules 20 to 24 of Working Procedures. An Appellate Body’s three members handle an appeal. The Dispute Settlement Body’s Appellate team comprises seven members with four-year terms and must have substantial experience in international trade and law matters. The appeal may reverse, modify, or uphold the panel’s conclusions. Appeals take between sixty and ninety days. Appeals are subject to rejection or approval by the Dispute Settlement Body through a consensus and within thirty days (WTO, n.d-c). Ultimately, unresolved cases remain on the Dispute Settlement Body’s agenda until a solution is found.
2.3 Examples of Cases Handled through the WTO Dispute Settlement Mechanism
Highlighting examples of cases that have undergone the WTO dispute settlement mechanism provides real-case scenarios of the process discussed.
2.3.1 The Canada-Brazil Aircraft Dispute
The dispute between Canada and Brazil was complex and took almost four years to resolve fully. Brazil was the complainant, and Canada was the respondent (WTO, 2021). Several member countries were interested in participating in the proceedings, including the United States, Japan, Singapore, China, the Russian Federation, and the European Union. Brazil accused Canada of violating several SCM Articles, highlighting the country’s possible violation of subsidies and countervailing agreements. Brazil requested consultations on February 8, 2017. However, the consultations failed, leading to the request to form a panel in August of the same year. The panel was established on September 29, 2017, and Composed on February 6, 2018. The panel’s formation was complex and lengthy due to the disagreement between the two parties on the right panel. As a result, Brazil requested the Director-General to form a panel to listen to the case. The case went through the dispute settlement process under the stipulated DSU rules, but the panel suspended its activities severally due to the Covid-19 pandemic (WTO, 2021). As mentioned earlier, not all cases undergo the full settlement process, and Canada and Brazil were one of them.
Brazil and Canada settled out of court, while the panel’s work was still suspended due to the pandemic. The two conflicting parties informed the DSB of their intention to work through arbitration in alignment with DSU’s Article 25 on May 20, 2020. Eventually, the two parties settled their dispute mutually on February 18, 2021. The case confirms that some cases cannot be resolved through the first stage of consultations, but a panel provides the platform for peaceful negotiations and mutual understanding (WTO, 2021). However, not all cases reach the final stages and choose to settle out of court, such as Canada and Brazil.
2.3.2 The Asian-United States Sea Turtle and Shrimp Dispute
The case went through the whole dispute mechanism process, including the appellate procedures. The complainants were from several Asian countries: India, Thailand, Malaysia, and Pakistan, while the United States was the respondent. Several countries acted as third parties, including Guatemala, Canada, and Australia. The United States was accused of violating several GATT 1994 Articles by banning the complainants from exporting shrimp products to the country. The complainants submitted a panel request on January 9, 1997, and it was granted on February 25, 1997. After the due panel process, the panel circulated a report on May 15, 1998, which was adopted on November 6, 1998 (WTO, n.d-d). However, the United highlighted discomfort with the panel’s findings and appealed.
The Appellate Body circulated its report to the members on October 12, 1998, reversing the panel’s findings. However, the Body stated that the United States had violated certain aspects of Article XX. The DSB adopted the panel and Appellate Body’s report in November 1998. The United States failed to comply with the recommendation to allow the importation of the products, leading to the formation of a compliance panel on November 8, 2000. Ultimately, the compliance panel ordered the United States to comply with certain GATT 1994 Article XX aspects. However, the panel stated that the United States was not guilty of all the charges, a verdict Malaysia contested but lost. Article 21.5 of the DSU panel and Appellate reports was circulated in June and October 2001, respectively, and adopted in November 21, 2001 (WTO, n.d-d). The case is a perfect example of a full WTO dispute settlement mechanism.
2.3.3 Cases Settled in the First Stage
Several cases have been resolved in the first stage of consultation, confirming that WTO member states can resolve matters within themselves. Some of the cases include; the Chile-Peru tax treatment on specific imported products, the Norway- United States safeguard measures on some steel products, and the Brazil-United States Florida Excise Tax, among many others. The complainants requested for consultations and the matters were resolved in the consultation phase (WTO, n.d-e). Ultimately, how cases are resolved depends on their complexity and conflicting members’ ability to understand each other.
Conclusion
The WTO is vital in resolving international trade disputes transparently and independently. Two major stages are involved in WTO’s dispute mechanism system, with one being a consultation between the conflicting parties and the other through a panel formation. However, if the decisions are not satisfactory, an appeal is made and handled by an Appellate Body. All decisions are made based on the DSU and SCM agreements mutually agreed on by member states. Ultimately, the handling of cases is dependent on the issues at hand and the members’ needs in order to achieve a satisfactory and mutually beneficial decision.
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