American Military University World Trade Organization Discussion

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In your view does the current World Trade Organization  (WTO) dispute resolution system equalize "power" among the WTO members?  Is there a better way?  Please give examples of cases that demonstrate your argument..

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10 things the WTO can do. https://www.wto.org/english/thewto_e/whatis_e/10thi_e/10thi00_e.htm Is the WTO Dispute Settlement System Fair? https://www.cfr.org/article/wto-dispute-settlement-system-fair Sandford, Iain, and Maree TanKiang. 2011. "Resolving and defusing trade disputes: the potential for creativity in the Australia-European Union relationship." (attached) Grimmett, Jeanne J. 2010. "Dispute Settlement in the World Trade Organization: An Overview" (attached) Bown, Chad and Cara Reynolds. 2015. “Trade flows and trade disputes.” (attached) Walters, Jeffrey. 2011. "Power in WTO Dispute Settlement." Journal of Third World Studies 28, no. 1: 169-183. (attached) Trade Disputes INTRODUCTION This week's lesson centers on trade disputes within the context of the World Trade Organization (WTO). Our focus this week is on the rules established by the dispute settlement mechanisms of the WTO. However, as practitioners of international negotiation, you're more likely to run into a private commercial dispute. The reading below explains the nature and types of dispute settlement procedures available for individuals, corporations, and governments. The readings include Sandford and TanKing's "Resolving and Defusing Trade Disputes" (2011), a journal article about trade disputes in general. The Grimmett (2011) and Walters (2011) articles are about the WTO specifically. The Vaillant 2014 article focuses on the EUMercosur negotiations. World Trade Organization and Polarity How the WTO Works: To understand how disputes are organized under the World Trade Organization (WTO), check out their subject catalog of ongoing disputes. Also take a look at the interactive map of where most of the disputes occur throughout the world, noting the bright red color within the industrialized states. Although we're focusing on trade disputes, it's important to remember that trade negotiations are by nature multi-party - including a combination of governments, corporations, small business, associations, and individuals in any dispute. Johan Galtung underscores the principles of multipolarity. As international relations scholars, we have the benefit of drawing from our own discipline to understand how negotiations in trade agreements are structured. Galtung explains a framework of six civilizations and how their approach to conflict impacts their agreements. Dispute Settlements “A dispute arises when a member government believes another member government is violating an agreement or a commitment that it has made in the WTO. The authors of these agreements are the member governments themselves – the agreements are the outcome of negotiations among members. Ultimate responsibility for settling disputes also lies with member governments, through the Dispute Settlement body” (WTO 2016). Good Offices is a term used in public and private international law. The term means low-key actions by a third party in an effort to bring parties in a dispute toward a dialogue or negotiation. There may be informal consultations to help these efforts – offers of transportation, security, locations for meetings, or factfinding (US Institute of Peace 2016). Remembering our ascending scale of conflict resolution techniques, good offices is a relatively more passive role than a mediator or conciliator. An example would be the government of Switzerland offering to hold talks on the Iran nuclear negotiations in 2015. Private corporations may also avail of good offices from other corporations or countries. SOUTH AFRICA DS500: Provisional Anti-Dumping Duties on Portland Cement from Pakistan https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds500_e.htm Complainant: Pakistan CHINA DS501: Tax Measure Concerning Certain Domestically Produced Aircraft https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds501_e.htm Complainant: USA COLOMBIA DS502: Measure Concerning Imported Spirits https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds502_e.htm Complainant: EU Advantages of Arbitration Work in Trade Disputes Many private and commercial contracts include arbitration clauses in order to avoid lengthy court proceedings. Benefits of arbitration that we have discussed in Week 4 include an impartial third-party to settle the dispute; an agreement that is enforceable in a court of law; confidentiality of the proceedings; expertise of the arbitrator; and limited discovery (OSEC 2016). In addition, arbitration is less expensive than litigation, is faster less adversarial. With arbitration, parties who have an ongoing relationship are less threatened as both can bring their dispute to the arbitrator without sacrificing their long-term relationship. REASONS TO ARBITRATE IN TRADE DISPUTES • • • • • • • • Impartiality Enforceability Confidentiality Expertise of the arbitrator on the issue Limited discovery Expense Brevity Impact on long-term relationships Rule-oriented Approach to Dispute Resolution Disputes, as we have seen, may be settled through a number of methods in the international environment. We've focused on negotiations to this point, but in trade disputes, the United States takes a more rule-based approach rather than a strict negotiations approach. Rachel Brewster argues it's a little odd that the United States would prefer rule-based negotiations. "Power has its privileges, and one is the ability to control international negotiations. Powerful states are advantaged by negotiation-based approaches . . . because they have the resources to resolve individual disputes on favorable terms" (Brewster 2006, 251). But in designing the WTO, the United States pushed for a trade court "over the resistance of other major industrialized governments" (Brewster 2006, 251). The United States has been both a winner and loser in rule-based negotiations at the WTO in the past twenty years. "It has successfully challenged European Union restrictions on American imports but failed in a challenge to the structure of the photographic film market in Japan. In addition, the United States has lost several cases concerning its own laws, including complaints against its tax system and environmental regulations" (Brewster 2006, 251-52). Under the old system of the General Agreement on Tariffs and Trade (GATT), set up after World War II with the Bretton Woods System, a panel system developed by default because there was no dispute resolution system (Brewster 2006, 254). The overall impact in the way disputes are handled under the WTO means two things for the United States: temporary violations are easier because the contracting parties agree to avoid retaliation and the issue can be resolved in the trade court. But permanent violations are more costly because sanctions are a certain outcome (Brewster 2006, 259). Consider the case of the United States and Brazil in the "cotton wars" - one of the first test cases of the new rules-based approach. Listen to the C-SPAN episode after the WTO announced its ruling against the United States in 2004 (25 min.). Conclusion The World Trade Organization settles international trade disputes, which could involve a number of governments or other organizations. Many agreements include arbitration clauses, which provide a number of benefits, such as confidentiality, impartiality, or expertise of the arbitrator. Additionally, the WTO aims to settle disputes fairly. For instance, the US established a rule-based rather than negotiation-based dispute resolution method in an effort to level the advantages of powerful states. Cornell University ILR School DigitalCommons@ILR Federal Publications Key Workplace Documents 4-8-2010 Dispute Settlement in the World Trade Organization (WTO): An Overview Jeanne J. Grimmett Congressional Research Service Follow this and additional works at: https://digitalcommons.ilr.cornell.edu/key_workplace Thank you for downloading an article from DigitalCommons@ILR. Support this valuable resource today! This Article is brought to you for free and open access by the Key Workplace Documents at DigitalCommons@ILR. It has been accepted for inclusion in Federal Publications by an authorized administrator of DigitalCommons@ILR. For more information, please contact catherwood-dig@cornell.edu. If you have a disability and are having trouble accessing information on this website or need materials in an alternate format, contact web-accessibility@cornell.edu for assistance. Dispute Settlement in the World Trade Organization (WTO): An Overview Abstract [Excerpt] Dispute settlement in the World Trade Organization (WTO) is carried out under the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). In effect since January 1995, the DSU provides for consultations between disputing parties, panels and appeals, and possible retaliation if a defending party fails to comply with a WTO decision by an established deadline. Automatic establishment of panels, adoption of panel and appellate reports, and authorization of requests to retaliate, along with deadlines and improved multilateral oversight of compliance, are aimed at producing a more expeditious and effective system than had existed under the General Agreement on Tariffs and Trade (GATT). To date, 405 complaints have been filed, approximately half involving the United States as complainant or defendant. Expressing dissatisfaction with WTO dispute settlement results in the trade remedy area, Congress, in the Trade Act of 2002, directed the executive branch to address dispute settlement in WTO negotiations. WTO Members have been negotiating DSU revisions in the currently stalled Doha Development Round of trade negotiations but no final agreement on the DSU has been reached. Use of the DSU has revealed procedural gaps, particularly affecting the compliance phase of a dispute. These include a failure to coordinate procedures for requesting retaliation with procedures for tasking a WTO panel with determining whether a defending Member has complied in a case and the absence of a procedure for withdrawing trade sanctions imposed by a complaining Member where the defending Member believes it has fulfilled its WTO obligations. As a result, disputing Members have entered into bilateral agreements permitting retaliation and compliance panel processes to progress on an agreed schedule and have initiated new dispute proceedings aimed at removing retaliatory measures. Where a U.S. law or regulation is at issue in a WTO case, the adoption by the WTO of a panel or Appellate Body report finding that the measure violates a WTO agreement does not give the report direct legal effect in this country; thus federal law is not affected until Congress or the executive branch, as the case may be, takes action to remove the offending measure. Where a restrictive foreign trade practice is at issue, Section 301 of the Trade Act of 1974 provides a mechanism by which the United States Trade Representative (USTR) may challenge the measure in a WTO dispute settlement proceeding and authorizes the USTR to take retaliatory action if the defending Member has not complied with the resulting WTO decision. Although Section 301 was challenged in the WTO on the ground that it requires the USTR to act unilaterally in WTO-related trade disputes in violation of DSU provisions requiring resort to multilateral WTO dispute settlement, the United States was ultimately found not to be in violation of its DSU obligations. H.R. 496 (Rangel) would create an Office of the Congressional Trade Enforcer that would, inter alia, investigate restrictive foreign trade practices in light of WTO obligations and call on the USTR to pursue WTO cases where alleged violations are found; express congressional dissatisfaction with WTO decisions; and restrict implementation of a revised methodology for calculating dumping margins adopted by the Commerce Department in 2007 in response to adverse WTO decisions. S. 363 (Snowe) would grant the U.S. Court of International Trade exclusive jurisdiction to review de novo certain USTR determinations under Section 301 of the Trade Act of 1974, which may in some cases involve the initiation and conduct of WTO disputes, and would amend various Section 301 authorities themselves. S. 1466 (Stabenow) and S. 1982 (Brown) would establish mechanisms under the Trade Act of 1974 requiring the USTR to identify particularly harmful foreign trade practices and, where appropriate, to initiate WTO cases to remedy these practices. Keywords World Trade Organization, WTO, dispute settlement, legislation, negotiation, public policy, trade, commerce, globalism Comments Suggested Citation Grimmett, J. J. (2010). Dispute settlement in the World Trade Organization (WTO): An overview. Washington, DC: Congressional Research Service. http://digitalcommons.ilr.cornell.edu/key_workplace/723 This article is available at DigitalCommons@ILR: https://digitalcommons.ilr.cornell.edu/key_workplace/723 Dispute Settlement in the World Trade Organization (WTO): An Overview Jeanne J. Grimmett Legislative Attorney April 8, 2010 Congressional Research Service 7-5700 www.crs.gov RS20088 CRS Report for Congress Prepared for Members and Committees of Congress Dispute Settlement in the World Trade Organization (WTO): An Overview Summary Dispute settlement in the World Trade Organization (WTO) is carried out under the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). In effect since January 1995, the DSU provides for consultations between disputing parties, panels and appeals, and possible retaliation if a defending party fails to comply with a WTO decision by an established deadline. Automatic establishment of panels, adoption of panel and appellate reports, and authorization of requests to retaliate, along with deadlines and improved multilateral oversight of compliance, are aimed at producing a more expeditious and effective system than had existed under the General Agreement on Tariffs and Trade (GATT). To date, 405 complaints have been filed, approximately half involving the United States as complainant or defendant. Expressing dissatisfaction with WTO dispute settlement results in the trade remedy area, Congress, in the Trade Act of 2002, directed the executive branch to address dispute settlement in WTO negotiations. WTO Members have been negotiating DSU revisions in the currently stalled Doha Development Round of trade negotiations but no final agreement on the DSU has been reached. Use of the DSU has revealed procedural gaps, particularly affecting the compliance phase of a dispute. These include a failure to coordinate procedures for requesting retaliation with procedures for tasking a WTO panel with determining whether a defending Member has complied in a case and the absence of a procedure for withdrawing trade sanctions imposed by a complaining Member where the defending Member believes it has fulfilled its WTO obligations. As a result, disputing Members have entered into bilateral agreements permitting retaliation and compliance panel processes to progress on an agreed schedule and have initiated new dispute proceedings aimed at removing retaliatory measures. Where a U.S. law or regulation is at issue in a WTO case, the adoption by the WTO of a panel or Appellate Body report finding that the measure violates a WTO agreement does not give the report direct legal effect in this country; thus federal law is not affected until Congress or the executive branch, as the case may be, takes action to remove the offending measure. Where a restrictive foreign trade practice is at issue, Section 301 of the Trade Act of 1974 provides a mechanism by which the United States Trade Representative (USTR) may challenge the measure in a WTO dispute settlement proceeding and authorizes the USTR to take retaliatory action if the defending Member has not complied with the resulting WTO decision. Although Section 301 was challenged in the WTO on the ground that it requires the USTR to act unilaterally in WTO-related trade disputes in violation of DSU provisions requiring resort to multilateral WTO dispute settlement, the United States was ultimately found not to be in violation of its DSU obligations. H.R. 496 (Rangel) would create an Office of the Congressional Trade Enforcer that would, inter alia, investigate restrictive foreign trade practices in light of WTO obligations and call on the USTR to pursue WTO cases where alleged violations are found; express congressional dissatisfaction with WTO decisions; and restrict implementation of a revised methodology for calculating dumping margins adopted by the Commerce Department in 2007 in response to adverse WTO decisions. S. 363 (Snowe) would grant the U.S. Court of International Trade exclusive jurisdiction to review de novo certain USTR determinations under Section 301 of the Trade Act of 1974, which may in some cases involve the initiation and conduct of WTO disputes, and would amend various Section 301 authorities themselves. S. 1466 (Stabenow) and S. 1982 (Brown) would establish mechanisms under the Trade Act of 1974 requiring the USTR to identify particularly harmful foreign trade practices and, where appropriate, to initiate WTO cases to remedy these practices. Congressional Research Service Dispute Settlement in the World Trade Organization (WTO): An Overview Contents Background ................................................................................................................................1 WTO Dispute Settlement Understanding .....................................................................................1 Steps in a WTO Dispute..............................................................................................................3 Consultations (Article 4) .......................................................................................................3 Establishing a Dispute Panel (Articles 6, 8) ...........................................................................3 Panel Proceedings (Articles 12, 15, Appendix 3) ...................................................................4 Adoption of Panel Reports/Appellate Review (Articles 16, 17, 20)........................................4 Implementation of Panel and Appellate Body Reports (Article 21) ........................................5 Compliance Panels (Article 21.5) ..........................................................................................5 Compensation and Suspension of Concessions (Article 22) ...................................................5 Use of Multilateral Dispute Settlement Procedures ......................................................................7 Compliance Issues ......................................................................................................................7 “Sequencing” ........................................................................................................................7 Removal of Retaliatory Measures..........................................................................................7 WTO Dispute Settlement and U.S. Law ......................................................................................9 Legal Effect of WTO Decisions.............................................................................................9 Section 301 of the Trade Act ............................................................................................... 10 th 111 Congress Legislation ........................................................................................................ 12 Contacts Author Contact Information ...................................................................................................... 12 Congressional Research Service Dispute Settlement in the World Trade Organization (WTO): An Overview Background From its inception in 1947, the General Agreement on Tariffs and Trade (GATT), signed by the United States and ultimately by a total of 128 countries, provided for consultations and dispute resolution, allowing a GATT Party to invoke GATT dispute settlement articles if it believes that another Party’s measure, whether violative of the GATT or not, caused it trade injury. Because the GATT did not set out a dispute procedure with great specificity, GATT Parties developed a more detailed process including ad hoc panels and other practices. The procedure was perceived to have certain deficiencies, however, among them a lack of deadlines, a consensus decision-making process that allowed a GATT Party against whom a dispute was filed to block the establishment of a dispute panel and the adoption of a panel report by the GATT Parties as a whole, and laxity in surveillance and implementation of panel reports even when reports were adopted and had the status of an official GATT decision. Congress made reform of the GATT dispute process a principal U.S. goal in the GATT Uruguay Round of Multilateral Trade Negotiations, begun in 1986 and concluded in 1994 with the signing of the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement). The WTO Agreement requires any country that wishes to be a WTO Member to accept all of the multilateral trade agreements negotiated during the Round, including the General Agreement on Tariffs and Trade 1994, an updated version of the GATT adopted in 1947, as well as the Understanding on Rules and Procedures Governing the Settlement of Disputes, applicable to disputes arising under virtually all WTO agreements. The Uruguay Round package of agreements not only carries forward original GATT obligations, such as according goods of other parties nondiscriminatory treatment, not placing tariffs on goods that exceed negotiated or “bound” rates, generally refraining from imposing quantitative restrictions such as quotas and embargoes on imports and exports, and avoiding injurious subsidies, but also expands on these obligations in new agreements such as the Agreement on Agriculture, the Agreement on the Application of Sanitary and Phytosanitary Measures, the Agreement on Antidumping, and the Agreement on Subsidies and Countervailing Measures. Congress approved and implemented the WTO Agreement and the other agreements negotiated in the Uruguay Round in the Uruguay Round Agreement Act, P.L. 103-465. The agreements entered into force on January 1, 1995. WTO Dispute Settlement Understanding The Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) continues past GATT dispute practice, but also contains features aimed at strengthening the prior system. 1 The DSU provides for integrated dispute settlement under which the same rules apply to 1 The text of the DSU, panel and Appellate Body reports, and information on the WTO dispute process are available at http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm. WTO disputes are listed and summarized by the WTO Secretariat in its “Update of WTO Dispute Settlement Cases,” available at the WTO website, above. Information on WTO disputes involving the United States, including the text of U.S. written submissions to WTO panels, may be found at the USTR website, at http://www.ustr.gov/trade-topics/enforcement. For the status of current cases in which the United States has been successfully challenged, see CRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases, by Jeanne J. Grimmett. Congressional Research Service 1 Dispute Settlement in the World Trade Organization (WTO): An Overview disputes under virtually all WTO agreements, subject to any special or additional rules in an individual agreement. The WTO Dispute Settlement Body (DSB), created under the DSU and consisting of representatives of all WTO Members, administers WTO dispute settlement proceedings. While the DSB ordinarily operates by consensus (i.e., without objection), the DSU reverses past consensus practice at fundamental stages of the process. Thus, unless it decides by consensus not to do so, the DSB will establish panels; adopt panel and appellate reports; and, where WTO rulings have not been implemented and if requested by a prevailing party, authorize the party to impose a retaliatory measure. The DSU also sets forth deadlines for various stages of the proceedings and improves multilateral monitoring of the implementation of adopted rulings. Given that panel reports would otherwise be adopted automatically, WTO Members have a right to appeal a panel report on legal issues. The DSU creates a standing Appellate Body to carry out this added appellate function. The Appellate Body has seven members, three of whom serve on any one case. Dispute settlement under the WTO is primarily Member-driven, that is, it is up to the parties to a dispute to decide whether or not to take particular actions available to them, e.g., to request a panel if consultations fail, to request authorization to impose countermeasures against a noncomplying member, or to impose such measures even if the DSB has authorized them. As stated in Article 3.7 of the DSU, the preferred outcome of a dispute is “a solution mutually acceptable to the parties and consistent with the covered agreements.” Absent this, the primary objective of the process is withdrawal of a violative measure, with compensation and retaliation being avenues of last resort. As of the date of this report, 405 complaints have been filed under the DSU, with approximately one-half of these resulting in the establishment of a panel. In some of these proceedings, however, the panel process was discontinued due to a settlement of the dispute or for other reasons. To date, 131 original panel reports have been publicly circulated. Some panels have also issued an additional report or reports under Article 21.5 of the DSU determining whether the defending Member complied in a particular dispute. About two-thirds of the original panel reports were appealed. Approximately one-half of the 405 WTO complaints involve the United States as complaining party or defendant. The United States Trade Representative (USTR) manages U.S. participation and is the chief representative of the United States in the WTO, including in WTO disputes.2 The DSU was scrutinized by WTO Members under a Uruguay Round Declaration, which called for completion of a review within four years after the WTO Agreement entered into force (i.e., by January 1999). Members did not agree on any revisions in the initial review and continued to negotiate on dispute settlement issues during the current WTO Doha Development Round of multilateral trade negotiations, doing so on a separate track permitting an agreement to be adopted apart from any overall Doha Round accord. In 2008, the chairman of the dispute settlement negotiations prepared a consolidated draft legal text based mainly on Member proposals, which Members agreed to use in their negotiations.3 The United States has proposed 2 Trade Act of 1974, P.L. 93-618, § 141(c)(1)(C),(D), 19 U.S.C. § 2171(c)(1)(C),(D). See also Uruguay Round Agreements Act, P.L. 103-465, §§ 123, 127, 129, 19 U.S.C. § 3533, 3537, 3538. 3 Special Session of the Dispute Settlement Body, Report by the Chairman to the Trade Negotiations Committee, (continued...) Congressional Research Service 2 Dispute Settlement in the World Trade Organization (WTO): An Overview such revisions as greater Member control over the process, guidelines for WTO adjudicative bodies, and increased transparency, e.g., open meetings and timely access to submissions and final reports.4 Other Member proposals include, inter alia, a permanent roster of panelists, enabling the Appellate Body to remand decisions to panels for further proceedings, rules for sequencing and the termination of retaliatory measures (see below), tightened time frames, enhanced third-party rights, and special treatment for developing country disputants.5 Steps in a WTO Dispute Following are the stages in a DSU proceeding, with the applicable DSU articles for each: Consultations (Article 4) The DSU permits a WTO Member to consult with another Member regarding “measures affecting the operation of any covered agreement taken within the territory” of the latter. If a WTO Member requests consultations with another Member under a WTO agreement, the latter Member must enter into consultations with the former within 30 days.6 If the dispute is not resolved within 60 days, the complaining party may request a panel. The complainant may request a panel before this period ends if the other Member has failed to enter into consultations or if the disputants agree that consultations have been unsuccessful. Establishing a Dispute Panel (Articles 6, 8) A panel request, which must be made in writing, must “identify the specific measures at issue and provide a brief summary of the legal basis for the complaint sufficient to present the problem clearly” (Art. 6.2). Under GATT and now WTO dispute settlement practice, a Member may challenge a measure of another Member “as such,” “as applied,” or both. 7 An “as such” claim challenges the measure independent of its application in a specific situation and, as described by (...continued) TN/DS/23 (December 5, 2008). 4 See, e.g., WTO documents TN/DS/W/79 (July 13, 2005), TN/DS/W/82 (Oct. 24, 2005), TN/DS/W/82/Add.1 (Oct. 25, 2005), as corrected, and TN/DSW/86 (Apr. 21, 2006). See also documents posted on the USTR website, at http://www.ustr.gov/trade-topics/enforcement/us-proposals-wto-dispute-settlement-understanding-negotiations. 5 For further information on proposals, see Institute of International Economic Law, DSU Review, at http://www.law.georgetown.edu/iiel/research/projects/dsureview/synopsis.html. 6 Once the WTO is notified that a request for consultations has been made, the dispute will be assigned a number. Disputes are numbered in chronological order. The prefix WT/DS, followed by the assigned number, is then used to designate WTO documents issued in connection with the dispute. For example, the pending dispute between the United States and China, China—Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audio Entertainment Products is DS363, with the U.S. request for consultations sent to China on August 10, 2007, numbered WT/DS363/1, and the WTO Appellate Body report issued on December 21, 2009, numbered WT/DS363/AB/R. 7 Appellate Body Report, United States—Anti-dumping Act of 1916, paras. 60-61, WT/DS136/AB/R, WT/DS162/AB/R (Aug. 28, 2000). Congressional Research Service 3 Dispute Settlement in the World Trade Organization (WTO): An Overview the WTO Appellate Body, seeks to prevent the defending Member from engaging in identified conduct before the fact.8 If a panel is requested, the DSB must establish it at the second DSB meeting at which the request appears as an agenda item, unless it decides by consensus not to do so. Thus, while a defending Member may block the establishment of a panel the first time the complaining Member makes its request at a DSB meeting, the panel will be established, virtually automatically, the second time such a request is placed on the DSB’s agenda. While DSB ordinarily meets once a month, the complaining Member may request that the DSB convene for the sole purpose of considering the panel request. Any such meeting must be held within 15 days after the complaining Member requests that the meeting be held. The panel is ordinarily composed of three persons. The WTO Secretariat proposes the names of panelists to the disputing parties, who may not oppose them except for “compelling reasons” (Art. 8.6). If there is no agreement on panelists within 20 days from the date that the panel is established, either disputing party may request the WTO Director-General to appoint the panel members. Panel Proceedings (Articles 12, 15, Appendix 3) After considering written and oral arguments, the panel issues the descriptive part of its report (facts and argument) to the disputing parties. After considering any comments, the panel submits this portion along with its findings and conclusions to the disputants as an interim report. Following a review period, a final report is issued to the disputing parties and later circulated to all WTO Members. A panel must generally provide its final report to disputants within six months after the panel is composed, but may take longer if needed; extensions are usual in complex cases. The period from panel establishment to circulation of a panel report to WTO Members should not exceed nine months. In practice, panels have been found to take more than 13 months on average to publicly circulate reports.9 Adoption of Panel Reports/Appellate Review (Articles 16, 17, 20) Within 60 days after a panel report is circulated to WTO Members, the report is to be adopted at a DSB meeting unless a disputing party appeals it or the DSB decides by consensus not to adopt it. Within 60 days of being notified of an appeal (extendable to 90 days), the Appellate Body (AB) must issue a report that upholds, reverses, or modifies the panel report. The AB report is to be 8 Appellate Body Report, United States—Sunset Review of Anti-Dumping Measures on Oil Country Tubular Goods from Argentina, para. 172, WT/DS268/AB/R (Nov. 29, 2004). The Appellate Body further described “as such” claims as follows: By definition, an “as such” claim challenges laws, regulations, or other instruments of a Member that have general and prospective application, asserting that a Member’s conduct—not only in a particular instance that has occurred, but in future situations as well—will necessarily be inconsistent with that Member’s WTO obligations. In essence, complaining parties bringing “as such” challenges seek to prevent Members ex ante from engaging in certain conduct. The implications of such challenges are obviously more far-reaching than “as applied” claims. 9 See, e.g., Henrik Horn & Petros C. Mavroidis, The WTO Dispute Settlement System 1995-2006: Some descriptive statistics, at 28-29 (Mar. 14, 2008), at http://siteresources.worldbank.org/INTRES/Resources/469232-1107449512766/ DescriptiveStatistics_031408.pdf. Congressional Research Service 4 Dispute Settlement in the World Trade Organization (WTO): An Overview adopted by the DSB, and unconditionally accepted by the disputing parties, unless the DSB decides by consensus not to adopt it within 30 days after circulation to Members. The period of time from the date the panel is established to the date the DSB considers the panel report for adoption is not to exceed nine months (12 months where the report is appealed) unless otherwise agreed by the disputing parties. Implementation of Panel and Appellate Body Reports (Article 21) In the event that the WTO decision finds the defending Member has violated an obligation under a WTO agreement, the Member must inform the DSB of its implementation plans within 30 days after the panel report and any AB report are adopted. If it is “impracticable” for the Member to comply immediately, the Member will have a “reasonable period of time” to do so. The Member is expected to implement the WTO decision fully by the end of this period and to act consistently with the decision after the period expires. 10 Compliance may be achieved by withdrawing the WTO-inconsistent measure or, alternatively, by issuing a revised measure that modifies or replaces it.11 Under the DSU, the “reasonable period of time” is: (1) that proposed by the Member and approved by the DSB; (2) absent approval, the period mutually agreed by the disputants within 45 days after the report or reports are adopted by the DSB; or (3) failing agreement, the period determined by binding arbitration. Arbitration is to be completed within 90 days after adoption of the reports. To aid the arbitrator in determining the length of the compliance period, the DSU provides a non-binding guideline of 15 months from the date of adoption. Arbitrated compliance periods have ranged from six months to 15 months and one week. The DSU envisions that a maximum 18 months will elapse from the date a panel is established until the reasonable period of time is determined. Compliance Panels (Article 21.5) Where there is disagreement as to whether a Member has complied—i.e., whether a compliance measure exists, or whether a measure that has been taken is consistent with the WTO decision in the case—either disputing party may request that a compliance panel be convened under Article 21.5. A compliance panel is expected to issue its report within 90 days after the dispute is referred to it, but it may extend this time period if needed. Compliance panel reports may be appealed to the WTO Appellate Body and both reports are subject to adoption by the DSB. 12 Compensation and Suspension of Concessions (Article 22) If the defending Member fails to comply with the WTO decision within the established compliance period, the prevailing Member may request that the defending Member negotiate a compensation agreement. If such a request is made and agreement is not reached within 20 days 10 E.g., Report of the Appellate Body, United States—Measures Relating to Zeroing and Sunset Reviews, Recourse to Article 21.5 of the DSU by Japan, paras. 153-158, WT/DS322/AB/RW (Aug. 18, 2009). 11 Id. para. 154. 12 As of the date of this report, there have been 29 compliance panel proceedings, 13 of which involved the United States. Nineteen of the 29 panel reports were appealed, including 11 appeals by the United States. Congressional Research Service 5 Dispute Settlement in the World Trade Organization (WTO): An Overview after the compliance deadline expires, or if negotiations have not been requested, the prevailing Member may request authorization from the DSB to retaliate, i.e., suspend concessions or obligations owed the non-complying Member under a WTO agreement. Generally, a Member should first try to suspend concessions or obligations in the same trade sector as the one at issue in the dispute (Art. 22.3(a)). If this is “not practicable or effective,” the Member may then seek to suspend concessions in another sector under the same WTO agreement (Art. 22.3(b)). If, however, suspending concessions in other sectors under the same agreement is not “practicable or effective” and “the circumstances are serious enough,” the Member may seek to suspend concessions or obligations under another WTO agreement, or “cross-retaliate” (Art. 22.3(c)). Retaliation most often involves the suspension of GATT tariff concessions, i.e., the imposition of tariff surcharges, on selected products from the non-complying Member. In some cases, however, the non-compliant Member may not be a major exporter of goods to the prevailing Member or some or all of the goods that are exported are considered to be critical to the prevailing Member’s economy. In such case, if firms of the non-compliant Member are active service providers or exercise significant intellectual property rights in the prevailing Member’s territory, the prevailing Member may seek to suspend market access obligations under the General Agreement on Trade in Services (GATS) or obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (Agreement on TRIPS). The DSB is to grant a retaliation request within 30 days after the compliance deadline expires unless it decides by consensus not to do so, or the defending Member requests that the retaliation proposal be arbitrated. Depending on the contents of the proposal, the defending Member may object to the level of the proposed retaliation, i.e., that it is not equivalent to the level of trade injury in the dispute, claim that DSU principles and procedures for requesting cross-retaliation have not been followed, or both.13 Once requested, arbitration is automatic and is to be completed within 60 days after the compliance period ends. An arbitral decision is considered final. After the arbitral decision is issued, the prevailing party may request that the DSB approve its proposal, subject to any modification by the arbitrator. The prevailing Member is not required to request authorization, however, nor is the Member required to do so by a given date if it chooses to pursue such a request. If imposed, retaliation is permitted to remain in effect only until the offending measure is removed or the disputing parties otherwise resolve the dispute. 13 See Decision by the Arbitrator, United States—Subsidies on Upland Cotton, Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 4.21 of the SCM Agreement, paras. 5.10-5.236, WT/DS267/ARB/1 (Aug. 31, 2009), for a recent arbitral analysis of a request to cross-retaliate. In response to U.S. non-compliance in Brazil’s challenge of U.S. cotton subsidies, Brazil sought authorization to suspend concessions under the Agreement on Trade-Related Aspects of Intellectual Property Right and the General Agreement on Trade in Services, arguing, as required under the DSU, that suspending concessions on goods alone was not “practicable or effective” and that the circumstances in the case were “serious enough” to permit it to do so. The arbitrator ultimately allowed Brazil to crossretaliate, but required that a variable annual threshold tied to the level of U.S. imports into Brazil be exceeded before Brazil could exercise this option. Congressional Research Service 6 Dispute Settlement in the World Trade Organization (WTO): An Overview Use of Multilateral Dispute Settlement Procedures Article 23 of the DSU requires that WTO Members invoke DSU procedures in disputes involving WTO agreements and that they act in accordance with the DSU (i.e., not unilaterally) when determining if another Member has violated a WTO agreement, determining a date by which the Member must comply with a WTO decision, and taking any retaliatory action against a noncomplying Member. Whether U.S. trade remedy law, specifically Section 301 of the Trade Act of 1974, requires the United States to act in violation of Section 23 of the DSU was at issue in an early WTO case, United States—Sections 301-310 of the Trade Act of 1974, discussed below. Compliance Issues “Sequencing” Although many WTO rulings have been satisfactorily implemented, difficult cases have tested DSU implementation articles, highlighting deficiencies in the system and prompting suggestions for reform. For example, gaps in the DSU have resulted in the problem of “sequencing,” which first manifested itself in 1998-1999 during the compliance phase of the successful U.S. challenge of the European Union’s banana import regime. Article 22 allows a prevailing party to request authorization to retaliate within 30 days after a compliance period ends, while Article 21.5 provides that disagreements over the existence or adequacy of compliance measures are to be decided using WTO dispute procedures, including resort to panels. A compliance panel’s report is due within 90 days after the dispute is referred to it and may be appealed. The DSU does not integrate an Article 21.5 procedure into the 30-day Article 22 deadline, nor does it expressly state how compliance is to be determined so that a prevailing party may pursue action under Article 22. Absent the adoption of multilateral rules on the matter, disputing parties have entered into ad hoc procedural agreements in individual disputes. Removal of Retaliatory Measures The DSU is also silent on how authorized retaliation is to be terminated in the event a defending Member believes that it has complied in a dispute. This issue has been the subject of United States - Continued Suspension of Obligations in the EC—Hormones Dispute (DS320), a dispute initiated by the European Union (EU)14 against the United States in 2004 for continuing to maintain increased, i.e., 100% ad valorem, tariffs on EU goods first imposed in 1999 in retaliation for the EU’s failure to comply with the adverse WTO ruling on the EU’s ban on hormone-treated beef. The EU also initiated a separate case against Canada on the same basis.15 The Appellate 14 As of December 1, 2009, “European Union” replaced “European Communities” as the official name of this WTO Member. The terms European Communities and EC still appear in older WTO materials, including panel and Appellate Body reports, bilateral procedural agreements in particular disputes, and communications to the WTO Dispute Settlement Body. Except for references to any such older WTO documents or other governmental materials using this name, this report uses “European Union” or the acronym “EU” in the report text or notes regardless of the time period being discussed. For further information, see European Union or Communities?, at http://www.wto.org/english/ thewto_e/countries_e/european_union_or_communities_popup.htm. 15 Canada—Continued Suspension of Obligations in the EC-Hormones Dispute, WT/DS321. Congressional Research Service 7 Dispute Settlement in the World Trade Organization (WTO): An Overview Body and modified panel reports in the underlying beef hormone case, EC -Hormones,16 found that an EU ban on imports of meat and meat products from cattle produced from six specific growth-promotion hormones violated the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement); the reports were adopted by the WTO in February 1998. Claiming that a 2003 European Union Directive rendered it WTO-compliant, the EU argued that the defending Members, by maintaining their increased tariffs on EU products, were violating the following WTO obligations: (1) the GATT most-favored-nation article; (2) the GATT prohibition on tariff surcharges; and (3) various DSU provisions, including Article 23, which requires WTO Members to invoke WTO dispute settlement for disputes arising under WTO agreements and precludes certain unilateral actions in trade disputes, and Article 22.8, which permits sanctions to be imposed only until the defending Member’s WTO-inconsistent measures have been removed or the dispute is mutually resolved. In separate panel reports issued March 31, 2008, the WTO panel found that the EU was maintaining bans on certain hormones without a sufficient scientific basis in violation of the SPS Agreement, and that United States and Canada had breached Article 23 requirements to resort to WTO dispute settlement and to refrain from unilateral actions by (1) not initiating a WTO proceeding to resolve the EU compliance issue and (2) determining unilaterally that the EU was still in violation of the EC - Hormones decision. The panel also found, however, that to the extent that the challenged EU measure had not been removed, the United States and Canada had not violated Article 22.8, which requires that sanctions be removed once the offending measure is withdrawn.17 The panel noted that it had functioned similarly to a compliance panel for the sole purpose of determining whether Article 22.8 was violated and, because it did not have jurisdiction to make a definitive determination in this regard, it suggested that the United States and Canada initiate a compliance panel proceeding against the EU under Article 21.5 in order to comply with their DSU obligations and to promptly resolve the dispute. The Appellate Body, in separate reports issued October 16, 2008, reversed the panel’s findings that the U.S. and Canada were in breach of the DSU as well as the panel’s findings that the EU was still in violation of the SPS Agreement. 18 Because the Appellate Body could not complete the analysis needed to determine whether the contested EU measure had been withdrawn, however, it recommended that the parties initiate an Article 21.5 compliance panel proceeding to resolve their disagreement as to whether the EU is in compliance with the EC—Hormones decision and thus whether the U.S. and Canadian countermeasures have a legal basis. The AB and modified panel reports were adopted November 14, 2008. 16 European Communities—Measures Concerning Meat and Meat Products (Hormones), WT/DS26 (complaint by United States); European Communities—Measures Affecting Livestock and Meat (Hormones), WT/DS48 (complaint by Canada). 17 Panel Report, United States - Continued Suspension of Obligations in the EC—Hormones Dispute, WT/DS320/R (Mar. 31, 2008); Panel Report, Canada - Continued Suspension of Obligations in the EC—Hormones Dispute, WT/DS321/R (Mar. 31, 2008). At the request of the disputing parties, panel proceedings in the case were opened to the public via closed-circuit TV broadcast at the WTO, this being the first time that public access was permitted in a WTO dispute settlement proceeding. Disputing parties have also agreed to public access of this type in several subsequent disputes. 18 Appellate Body Report, United States—Continued Suspension of Obligations in the EC—Hormones Dispute, WT/DS320/AB/R (Oct. 16, 2008); Appellate Body Report, Canada—Continued Suspension of Obligations in the EC— Hormones Dispute, WT/DS321/AB/R (Oct. 16, 2008). Congressional Research Service 8 Dispute Settlement in the World Trade Organization (WTO): An Overview The EU requested consultations under Article 21.5 in December 2008,19 but the proceeding involving the United States has been suspended under a bilateral agreement. In a May 2009 memorandum of understanding (MOU) intended to resolve the underlying beef hormone dispute, the United States and the EU agreed, inter alia, that the EU will expand market access for exports of U.S. beef in three phases. In the first phase, the United States may maintain retaliatory tariffs currently applied to EU products and will not impose the new duties that it announced in January 2009 under its “carousel” retaliation provision (see below). The two parties also agreed that they will suspend WTO litigation, i.e., not request a compliance panel, for the first 18 months of the agreement.20 The USTR delayed the imposition of the additional duties on new items until September 19, 2009, and officially terminated these duties as of this date.21 As a result of these actions, the duties were never imposed. WTO Dispute Settlement and U.S. Law Legal Effect of WTO Decisions The adoption by the WTO Dispute Settlement Body of a panel or Appellate Body report finding that a U.S. law, regulation, or practice violates a WTO agreement does not give the report direct legal effect in this country. Thus, federal law is not affected until Congress or the executive branch, as the case may be, changes the law or administrative measure at issue. 22 Procedures for executive branch compliance with adverse decisions are set out in §§ 123(g) and 129 of the Uruguay Round Agreements Act, P.L. 103-465, 19 U.S.C. §§ 3533(g), 3538. Only the federal government may bring suit against a state or locality to declare a state or local law invalid because of inconsistency with a WTO agreement; private remedies based on WTO obligations are also precluded.23 Federal courts have held that WTO panel and Appellate Body reports are not binding on the judiciary24 and have treated determinations involving “whether, when, and how” to 19 Press Release, European Commission, EU requests WTO consultations concerning WTO-compliance of its restrictions on hormone-treated beef and WTO inconsistency of continued US and Canadian trade sanctions (Dec. 22, 2008), at http://ec.europa.eu/trade/issues/respectrules/dispute/pr221208_en.htm. 20 Press Release, Office of the USTR, USTR Announces Agreement with European Union in Beef Hormones Dispute (updated June 22, 2009), at http://www.ustr.gov/about-us/press-office/press-releases/2009/may/ustr-announcesagreement-european-union-beef-hormones-; European Commission, Memorandum on Beef Hormones dispute signed with the United States (May 14, 2009), at http://ec.europa.eu/trade/issues/respectrules/dispute/memo140509_en.htm. 21 At the time of the May 2009 agreement, some products had been removed from the list of covered items pursuant to the USTR’s January 2009 announcement. While the Office of the USTR ultimately delayed the effective date of the additional duties on new products until September 19, 2009, the removal of items announced in January became effective as of March 23, 2009. Implementation of the U.S.-EC Beef Hormones Memorandum of Understanding, 74 Fed. Reg. 40864 (Aug. 13, 2009). The United States officially terminated the additional duties on new items on September 19, 2009, leaving in place the additional duties on the reduced list of products that had been in force since March 23, 2009. Implementation of the U.S.-EC Beef Hormones Memorandum of Understanding, 74 Fed. Reg. 48808 (Sept. 24, 2009). 22 See Uruguay Round Agreements Act Statement of Administrative Action, H.Doc. 103-316, vol. 1, at 1032-33. Uruguay Round implementing legislation states that “[n]o provision of any of the Uruguay Round Agreements, nor the application of any such provision to any person or circumstance, that is inconsistent with any law of the United States shall have effect.” Uruguay Round Agreements Act (URAA), P.L. 103-465, § 102(a)(1); see also H.Rept. 103-826, Pt. I, at 25. 23 URAA, P.L. 103-465, § 102(b), (c). 24 E.g., Corus Staal BV v. Department of Commerce, 395 F.3d 1343 (Fed. Cir. 2005), cert. denied, 126 S.Ct. 1023 (2006); see generally CRS Report RS22154, World Trade Organization (WTO) Decisions and Their Effect in U.S. Law, (continued...) Congressional Research Service 9 Dispute Settlement in the World Trade Organization (WTO): An Overview comply with a WTO decision as falling within the province of the executive rather than the judicial branch.25 Section 301 of the Trade Act Sections 301-310 of the Trade Act of 1974 (referred to collectively as Section 301), 19 U.S.C. §§ 2411 et seq., provide a mechanism for private parties to petition the United States Trade Representative (USTR) to take action regarding harmful foreign trade practices. If the USTR decides to initiate an investigation, whether by petition or the USTR’s own motion, regarding a foreign measure that allegedly violates a WTO agreement, the USTR must invoke the WTO dispute process to seek resolution of the problem. Section 301 authorizes the USTR to impose retaliatory measures to remedy an uncorrected foreign practice, some of which may involve suspending a WTO obligation (e.g., imposing a tariff increase on a product in excess of the rate negotiated in the WTO or the “bound” rate). The USTR may terminate a Section 301 case if the dispute is settled, but, under § 306 of the act, the USTR must monitor foreign compliance and may take further retaliatory action if compliance measures are unsatisfactory. If the USTR has taken action against the goods of another country for its failure to comply with a WTO decision, § 306(b)(2)(B)-(F), of the Trade Act, 19 U.S.C. § 2416(b)(2)(B)-(F), directs the USTR periodically to revise the list of imported products subject to retaliation, unless the USTR finds that implementation of WTO obligations is imminent or the USTR and the petitioner agree that revision is unnecessary. This authority to rotate the products subject to retaliatory action is often referred to as “carousel retaliation.” The European Union filed a WTO complaint challenging the statutory provision shortly after its enactment in 2000, alleging that the statute mandates unilateral action and the taking of retaliatory action other than that which had been authorized by the WTO in violation of the DSU.26 Because the United States had not invoked the provision, the EU refrained from seeking a panel in the case. In December 2008, however, the United States exercised “carousel” authorities to propose modifications to the list of EU products subject to the WTO-authorized tariff surcharges that it had originally imposed in EC—Hormones, discussed earlier. A final modified list was published in January 2009.27 Originally applicable to all covered goods entering the United States on or (...continued) by Jeanne J. Grimmett. 25 Koyo Seiko Co. v. United States, 551 F.3d 1286, 1291 (Fed. Cir. 2008). 26 Request for Consultations by the European Communities, United States—Section 306 of the Trade Act of 1974 and Amendments Thereto, WT/DS200/1 (June 13, 2000). 27 Modification of Action Taken in Connection with WTO Dispute Settlement Proceedings on the European Communities’ Ban on Imports of U.S. Beef and Beef Products, 74 Fed. Reg. 4265 (Jan. 23, 2009). The continued imposition of the beef hormone sanctions as applicable to toasted bread products from Spain has been successfully challenged in the U.S. Court of International Trade, the specialized federal trade court located in New York City, on the ground that the sanctions expired by operation of law in late July 2007. Gilda Industries, Inc. v. United States, 625 F.Supp.2d 1377 (Ct. Int’l Trade 2009). Section 307(c)(1) of the Trade Act of 1974, 19 U.S.C. § 2417(c)(1), provides that if “a particular action” has been taken by the USTR under Section 301 during any four-year period, e.g. the imposition of increased tariffs on the products of a foreign country, and neither the petitioner in the Section 301 case nor any representative of the domestic industry which benefits from the action has submitted to the USTR during the last 60 days of the four-year period a written request for the continuation of the action, the action is to terminate at the end of the four-year period. It was alleged in the case that the operative four-year period for the beef hormone sanctions began at the end of July 2003 and that no (continued...) Congressional Research Service 10 Dispute Settlement in the World Trade Organization (WTO): An Overview after March 23, 2009, the revisions include removal of some products from the original list of covered products, the addition of new products to the list, modified coverage with regard to certain EU member states, and an increase to 300% ad valorem of duties on one product, Roquefort cheese. The EU announced on January 15, 2009, that it had decided to “start preparations” to pursue WTO dispute settlement regarding the carousel statute, stating that it “breaches the WTO requirement of equivalence between the damage caused by the sanction or ban and the retaliation proposed.”28 As noted above, under an MOU with the EU aimed at settling the beef hormone dispute, the United States has agreed not to impose the announced tariff increases on new items and officially terminated these additional duties as of September 19, 2009.29 The EU filed a broader challenge to Section 301 in 1998 based on various obligations in Article 23 of the DSU, which, as noted earlier, precludes certain unilateral actions in trade disputes involving WTO agreements. Section 301 may generally be used consistently with the DSU, though some U.S. trading partners have complained that the statute allows unilateral action and forces negotiations through its threat of sanctions. The WTO panel found that the language of § 304, which requires the USTR to determine the legality of a foreign practice by a given date, is prima facie inconsistent with Article 23 because in some cases it mandates a USTR determination—and statutorily reserves a right for the USTR to determine that a practice is WTOinconsistent—before DSU procedures are completed. 30 The panel also found, however, that the serious threat of violative determinations and consequently the prima facie inconsistency was removed because of U.S. undertakings, as set forth in the Uruguay Round Statement of Administrative Action (H.Doc. 103-316), a document submitted to Congress along with the Uruguay Round agreements, and U.S. undertakings made before the panel, that the USTR would use its statutory discretion to implement Section 301 in conformity with WTO obligations. Moreover, the panel could not find that the DSU was violated by § 306 of the Trade Act of 1974, which directs USTR to make a determination as to imposing retaliatory measures by a given date, given differing good faith interpretations of the “sequencing” ambiguities in the DSU. The panel report, which was not appealed, was adopted in January 2000. (...continued) request was made to continue the sanctions during the final 60 days of this period. The court found that the retaliatory measures terminated by operation of law on July 29, 2007, absent a timely petitioner or industry request, neither of which had occurred. The court ordered the U.S. Department of Customs and Border Protection to refund to the plaintiff all retaliatory duties collected on its imported products between July 29, 2007, and March 23, 2009, the date these items were officially removed from the list of goods subject to the increased tariffs. The United States has since appealed this decision to the U.S. Court of Appeals for the Federal Circuit. Gilda Industries v. United States, appeal docketed, No. 2009-1492 (Fed. Cir. Aug. 10, 2009). See generally U.S. Faces Flood of Lawsuits after CIT Orders Refund of Duties, INSIDE U.S. TRADE, Aug. 21, 2009, at 1. 28 Press Release, European Commission, EU Prepares WTO action over US trade sanction law (Jan. 15, 2009), at http://ec.europa.eu/trade/issues/respectrules/dispute/pr150109_en.htm. Article 22.4 of the DSU provides that “the level of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of the nullification or impairment.” The “carousel” issue has also been raised by the EC in Doha Round dispute settlement negotiations. Dispute Settlement Body, Special Session, Contribution of the European Communities and Its Member States to the Improvement of the WTO Dispute Settlement Understanding, at 6, TN/DS/W/1 (Mar. 13, 2002). 29 See supra note 21 and accompanying text. 30 Panel Report, United States—Sections 301-310 of the Trade Act of 1974, WT/DS152/R (Dec. 22, 1999). Congressional Research Service 11 Dispute Settlement in the World Trade Organization (WTO): An Overview 111th Congress Legislation Legislation introduced in the 111th Congress generally reflects congressional concerns that the executive branch has not challenged restrictive foreign trade practices in the WTO to a sufficient degree and that, where WTO decisions have been adverse to the United States, the executive branch has too readily used existing statutory authorities to comply with these decisions, particularly where U.S. trade remedies are involved. A particular concern has been U.S. compliance with WTO decisions faulting the use of “zeroing,” a practice employed by the Department of Commerce in antidumping proceedings to determine the applicable dumping margin, i.e., the amount by which the price of an import when sold in the United States falls below the fair value of the product, generally the price in the exporting country. The amount of antidumping duties finally imposed on an imported product is based on this margin. “Zeroing” is a practice under which sales above fair value are disregarded or given a “zero” value, thus allowing the dumping margin to be determined solely on the basis of less than fair value sales and, as alleged by some, improperly inflating the dumping margin. The Commerce Department abandoned the use of “zeroing” in original antidumping investigations in early 2007, but has not yet responded to WTO decisions rejecting U.S. use of the practice in later stages of U.S. antidumping proceedings. H.R. 496 (Rangel) would create an Office of the Congressional Trade Enforcer (CTE), which, inter alia, would investigate restrictive foreign trade practices in light of WTO obligations and call on the United States Trade Representative (USTR) to initiate WTO dispute proceedings where the CTE finds that practices violate such obligations; express congressional dissatisfaction with WTO dispute settlement decisions finding that the U.S. practice of “zeroing” violates the WTO Antidumping Agreement and with decisions of the WTO Appellate Body generally; and place restrictions on the Department of Commerce in implementing the revised zeroing practice that it adopted in 2007 in response to adverse WTO decisions. S. 363 (Snowe) would give the U.S. Court of International Trade, the specialized federal trade court based in New York City, exclusive jurisdiction to review de novo certain USTR determinations under Section 301 of the Trade Act of 1974, including in some cases determinations that may involve the initiation and conduct of WTO disputes, and would amend various Section 301 authorities themselves. S. 1466 (Stabenow) and S. 1982 (Brown) would establish mechanisms under the Trade Act of 1974 requiring the USTR to identify particularly harmful foreign trade practices and, where appropriate, to initiate WTO cases to remedy these practices. Author Contact Information Jeanne J. Grimmett Legislative Attorney jgrimmett@crs.loc.gov, 7-5046 Congressional Research Service 12 POWER IN WTO DISPUTE SETTLEMENT Walters, Jeffrey Journal of Third World Studies; Spring 2011; 28, 1; ProQuest Central pg. 169 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Australian Journal of International Affairs Vol. 65, No. 4, pp. 469487, August 2011 Resolving and defusing trade disputes: the potential for creativity in the AustraliaEuropean Union relationship IAIN SANDFORD AND MAREE TANKIANG* Disagreements are a natural and inevitable part of any substantial relationship. This is particularly true in the area of international trade, where national interests and the domestic commercial objectives with which they are closely aligned often come into conflict with the interests of trading partners. Because disagreements are inevitable, trade agreements usually provide a framework for resolution of disputes. However, the typical dispute settlement framework established in trade agreements seldom captures the imagination of the business community. Indeed, public international law frameworks for trade dispute settlement tend not to be used for anything other than disputes of the largest magnitude or where there is a deep political issue that is otherwise insoluble. This article argues that such an approach to the crafting of dispute clauses in trade agreements is a missed opportunity. It suggests that, in the context of the relationship between Australia and the European Union, there is potential to develop a range of different approaches to address problems in an effective and accessible manner. Keywords: disputes; European Union; trade Introduction Disagreements are a natural and inevitable part of any substantial relationship. This is particularly true in international trade, where national interests and the domestic commercial objectives with which they are aligned often come into conflict with the interests of trading partners. Because disagreements are inevitable, trade agreements usually provide a framework for resolution of disputes. However, the typical dispute settlement framework established in *Iain Sandford is Director of the International Trade Group at Minter Ellison Lawyers, Canberra, and Adjunct Professor of Law at the University of Canberra. He has worked on a range of international and commercial disputes, including as a panellist in World Trade Organization dispute proceedings. Maree TanKiang is a corporate lawyer, specialising in intellectual property law. Maree recently joined the Commonwealth Scientific and Industrial Research Organisation (CSIRO) as in-house legal counsel. ISSN 1035-7718 print/ISSN 1465-332X online/11/040469-19 # 2011 Australian Institute of International Affairs DOI: 10.1080/10357718.2011.584857 470 Iain Sandford and Maree TanKiang trade agreements seldom captures the imagination of the business community. Indeed, such frameworks tend not to be used for anything other than disputes of the largest magnitude or where there is an otherwise insoluble political issue. This article argues that the typical approach to crafting dispute clauses in trade agreements misses an important opportunity. It suggests that, in the context of the relationship between Australia and the European Union (EU), there is potential to develop a range of different approaches to address problems in an effective and accessible manner. The analysis is divided into three parts. In the first part, we describe the ‘default’ approach to dispute resolution clauses in trade agreements. We also highlight some impediments created by this approach for the effective resolution of international trade disputes. The next part reviews examples of international dispute settlement frameworks in trade agreements that, in different ways, address some or all of these problems. In the final section, we apply principles and lessons from these examples to possible frameworks for disputes that may arise in the context of EUAustralia trade. We briefly consider quarantine issues. Further, as a case study, we refer to a recent Federal Court trademark case as an example where an innovative approach to dispute resolution could provide a useful option compared with existing mechanisms. We suggest there are lessons from the innovative approaches adopted in other contexts that could be applied to supplement existing frameworks for dealing with AustraliaEU disputes. Problems with the default approach to dispute settlement clauses in trade agreements Dispute settlement systems reflect the nature of intergovernmental trade agreements Trade agreements are instruments of countries’ foreign policies and are, for that reason, inherently political undertakings. They are about the way governments relate to each other over time. Accordingly, they often have non-economic objectives*for example, the trade agreement at the heart of the EU is perhaps the world’s most successful example of using economic integration to drive geopolitical goals around peace and security. But trade agreements are also about international commerce. Commercial agreements inevitably deal with private interests and the dealings of private parties. Although governments negotiate trade deals and private parties are not formally parties, such agreements have important impacts for the opportunities enjoyed and challenges faced by commercial actors. From the point of view of private interests in the domestic economy, trade agreements can create opportunities or benefits for importers and consumers by reducing the impact of government measures that act as barriers to entry for foreign suppliers of goods or services. At the same time, trade agreements focus on creating opportunities for export-oriented industries by reducing foreign Resolving and defusing trade disputes 471 trade barriers. Governments’ economic objectives in trade agreements usually include promoting beneficial economic integration, and, where trade barriers (i.e. governmental measures) represent the most important barriers to market entry, their removal results in greater economic integration over time. This dual political/governmental and economic/commercial character means it is a mistake to analyse trade agreements only by reference to how they deal with trade and economic issues. The dual character permeates not only the commitments and rules agreed in such treaties, but also the systems the partners create to manage the relationship embodied in the agreement, such as the dispute settlement framework. The availability of an outlet for disagreements is important, both from the political/governmental as well as the economic/commercial points of view. From the political side, it allows disputes to be quarantined from other aspects of the relationship. A dispute settlement system that allows each side to have its say, that is free from perception of bias, and that has a track record of being reasonable and fair also has the benefit of rendering an outcome that can more easily be seen as a politically ‘legitimate’ resolution of the dispute, even if one side wins and the other loses.1 The ‘default’ approach to dispute settlement clauses in trade agreements But intergovernmental political interest in disputes also means that governments are generally keen to ensure that the governments themselves*as opposed to any private domestic interests*address disagreements. Accordingly, most intergovernmental dispute frameworks establish an obligation to ‘consult’ to resolve the dispute on a bilateral negotiated basis. At the same time, however, the commercial impact of trade measures means that the private parties usually want an outcome that actually has commercial meaning for them. A commercially meaningful outcome to a trade dispute may include eventual withdrawal (or upholding) of an impugned trade measure, but it will usually also include timely resolution, compensation for losses and certainty of outcome. The practical economic interests of private stakeholders mean that private sector groups may sometimes wish themselves to challenge measures that they perceive to be inconsistent with the deal agreed to. Even where they have no direct right of access, private stakeholders like to be able to see what is going on and be able to have their say in an appropriate form. As has been observed elsewhere, international dispute resolution systems that do not have these kinds of characteristics tend to suffer from a deficit of ‘external’ legitimacy.2 In response to the demand for commercially legitimate resolutions to disputes involving trade measures, governments will usually allow their measures to be tested in domestic courts, although there are factors that mean this may not be a realistic option. For example, in a common law system like Australia, the sovereign parliament may validly enact domestic laws that are inconsistent with treaty obligations, or a domestic court may adopt a deferential standard of 472 Iain Sandford and Maree TanKiang administrative review when looking at trade measures such as dumping or quarantine decisions. Of course, where international trade agreements are fully implemented into domestic law, domestic courts can provide the best remedy because domestic judicial decisions are legally binding and enforceable. An excellent example in the Australian context is the Project Blue Sky litigation in which New Zealand broadcast media makers were able to invalidate an Australia media content standard that gave more favourable treatment to domestic over New Zealand content providers.3 Recognising the need for an outlet for disputes, most modern trade agreements will have a dispute settlement framework built in. In the context of EUAustralia relations, the relevant mechanism is the World Trade Organization’s (WTO’s) ‘Understanding on Rules and Procedures Governing the Settlement of Disputes’4 (the Dispute Settlement Understanding or DSU), which provides for consultations, review of measures by a panel, and appeal on points of law to a standing Appellate Body. The system in the DSU has been emulated in other agreements and has become something of a ‘default’ model for dispute settlement systems in trade agreements (see, for example, Chapter 17 of the AustraliaASEAN [Association of Southeast Asian Nations]New Zealand Free Trade Agreement*Australia’s most recently concluded such agreement). Four resolution problems The default system has a number of features. These include that it is a government-to-government process. Although, as described above, private commercial interests will often bear the commercial brunt of governmental measures affecting trade, under the default model only governments are empowered to challenge those measures. A government generally will only do that where the point of principle raised is of significant importance to it*either because the trade affected is valuable or strategically important; the problem is egregious and obvious; or the problem has proven insoluble through other means. The default model is also an elaborate process, involving the appointment of an ad hoc panel and a lengthy process of adjudication. In addition, the decision of the panel is not itself binding but usually merely forms the basis of recommendations as to how to resolve the dispute. In the WTO, for example, panel reports must be adopted by the Dispute Settlement Body. A further issue under WTO dispute settlement system and free trade agreement (FTA) frameworks is a perception by commercial parties that the system lacks enforceability. There are some opportunities for self-help enforcement through a process of trade retaliation. However, trade retaliation carries the principal drawback of necessarily reducing the benefits of a trade agreement for the country imposing the retaliatory measures. Furthermore, such measures can prejudice domestic interests that had nothing to do with the original dispute, as is illustrated in several European Court of Justice cases, such as the FIAMM Resolving and defusing trade disputes 473 case, where European companies sought compensation from the European Commission for harm caused as a result of US retaliatory measures imposed due to European non-compliance with the WTO bananas cases.5 At the end of the day, there is no automatic method to obtain compensation for harm caused by illegal measures. Effectively, there is no remedy for private interests affected other than looking forward to the prospective withdrawal of an offending measure. These features create in the default model at least four problems, which means that it fails to be an appropriate outlet for the resolution of many disputes. These resolution problems may be summarised as follows: . Dispute settlement under the default approach tends to take a long time to resolve disputes (we call this the ‘speed problem’). . Dispute settlement within government-to-government frameworks under trade agreements tends to be reserved for matters of high political importance or tremendous economic value (we call this the ‘threshold problem’). . Certain stakeholders*particularly in the private sector*effectively have little opportunity to use these systems to address the problems they may encounter with governmental measures affecting their trade (we call this the ‘access problem’). . Remedies are prospective and do not compensate affected interests for harm caused by wrongful acts or omissions. There is no injunction to prevent harm being continued*even to the point where members are given a ‘reasonable period of time’ to rectify measures found to be inconsistent with WTO obligations (we call this the ‘enforcement problem’). This is not to say that the WTO system and FTA dispute systems which are modelled on it are not suitable for their purpose. It is just that their purpose is limited to resolving the biggest and toughest international trade disputes in a manner that is legitimate for the government stakeholders in the WTO system. It does not try to resolve the many smaller (but still commercially significant) problems that play out in a trade relationship from year to year. Alternative approaches to dispute resolution It would not be correct to suggest that the standard government-to-government dispute resolution system and recourse to domestic courts are the only dispute resolution mechanisms offered by modern trade agreements to address governmental measures that appear to violate trade commitments or rules. Although government-to-government resolution is the default setting, there are a number of examples of alternative approaches to dispute resolution in trade agreements. In this section, we review the architecture of, and experience with, a selection of some of the alternative models from the WTO’s DSU, FTAs, private law and investment practice. 474 Iain Sandford and Maree TanKiang WTO: Article 5 and Article 25 of the DSU In addition to its well-known system of consultations, establishment of a panel and appeal to the standing Appellate Body, the WTO DSU also provides for two alternative dispute resolution models*namely, ‘good offices, conciliation and mediation’ (good offices) and ad hoc arbitration. Good offices are contemplated by Article 5. The process is voluntary, confidential and without prejudice to the rights of parties in any further proceedings under the DSU. The system involves facilitated resolution of disputes, although little formal detail guides how the process is to work. The Director General of the WTO made a standing offer as to the availability of his good offices to resolve disputes in 2001 (WTO 2001). Although this offer has never been taken up, there has been one case in which a process of mediation via the office of the Director General addressed an issue relating to preferences for tuna arising between Thailand, the Philippines and the European communities. In that matter, the parties agreed they were not in a dispute as such.6 Nonetheless, the use of good offices appears to have allowed the parties to reach a satisfactory reconciliation of their differing views.7 The details of that resolution formally remain confidential, although a case study on this matter has been published (Xuto 2005). Arbitration is provided for by Article 25 of the DSU.8 Article 25.1 sets forth that: ‘Expeditious arbitration within the WTO as an alternative means of dispute settlement can facilitate the solution of certain disputes that concern issues that are clearly defined by both parties’. The parties are given full control over the process, with the only formal requirements imposed by the DSU relating to notification of the Dispute Settlement Body and that the award is binding. Other members are entitled to join arbitrations, if the parties agree. A key element of the Article 25 framework is that ‘Articles 21 and 22 of [the DSU] shall apply mutatis mutandis to arbitration awards’. This means the Dispute Settlement Body is charged with monitoring implementation and that the DSU’s provisions on compliance review and enforcement apply to the outcomes of Article 25 arbitrations. Since the arbitration is governed by the DSU, this process also has the advantage that the WTO Secretariat will also lend administrative assistance and arbitrators’ costs are borne by the organisation rather than the parties. Perhaps surprisingly, Article 25 arbitration has not caught on in the WTO. The single example of its use, however, illustrates some of its potential. United States*Section 110(5) of the US Copyright Act was a dispute that had been addressed by a panel. The Section 110 measure had been found to be inconsistent with US obligations. The evident intention of the United States ultimately was to comply, although it was not possible to amend the relevant legislative measures within the period of time determined for implementation. This being the case, Article 22.2 of the DSU required the parties to negotiate with a view to developing mutually acceptable compensation. The initial Resolving and defusing trade disputes 475 question in such discussions, however, is always: What value? Rather than going through the usual process*under which the European communities would request the right to retaliate, the United States would object to the amount and the matter would be referred to arbitration under Article 22.6*the parties themselves resolved to use a special Article 25 arbitrator, with terms of reference effectively the same as for an arbitrator appointed under the provision of Article 22.6 of the DSU. The arbitrator issued its award to the effect that the level of nullification or impairment was a little over t1.2 million per annum, leading the United States to establish a fund in that order to compensate affected European right holders. The alternative dispute resolution options of good offices and arbitration would appear, in the abstract at least, to have potential to solve the threshold problem. This is particularly the case where the non-take-up of the dispute problem arises because the state involved is otherwise disinclined to engage in dispute resolution activity because the cost or commitment required to pursuing a case outweighs the interests concerned. Good offices or the ability to shape a streamlined arbitral procedure designed to limit complexity, the need for specialised counsel and other elements contributing to cost would seem to be a potential remedy. The fact that these procedures can be kept low key and reasonably confidential means that relatively low-level disputes could be dealt with in this way. North American Free Trade Agreement: Chapter 19 The North American Free Trade Agreement (NAFTA)9 and the CanadaUnited States Free Trade Agreement (CUSFTA)10 on which it was based, contain several distinct forms of dispute settlement. Perhaps the most innovative (and by far the most utilised) is Chapter 19, which provides for a system of binational panels to review anti-dumping or countervailing duty (AD/CVD) decisions. Chapter 19 essentially gives a foreign private party affected by an AD/CVD decision the opportunity to elect to have an appeal heard not by the domestic court of the country adopting measures, but instead by a panel of trade experts drawn from both its own country and that of the importing country. It is an innovative hybrid of public international and domestic law: the existence of the process and the displacement of domestic courts’ jurisdiction is mandated by the treaty, but the process itself applies the substantive and procedural law of the importing country. Review is accordingly conducted as if the binational panel were a domestic court. The panel must, in particular, apply the standard of review that would be applied by a domestic court. Panels may affirm or reject (in whole or in part) an administrative decision in an AD/CVD case. If a decision is rejected, the matter is remanded to the domestic investigating authority for reconsideration. There is no appeal to the domestic courts from the decision of a binational panel, although there is a limited right for the government of an affected NAFTA party 476 Iain Sandford and Maree TanKiang to seek review of a binational panel decision through an Extraordinary Challenge Committee (ECC). Chapter 19 has been well used. Under CUSFTA, there were 49 cases and 3 ECCs. Under NAFTA, at the date of writing in October 2010, there have been well over 120 cases and 3 further ECCs. Chapter 19 has a limited ambit, relating only to AD/CVD matters. It is a complex process, closely akin to litigation in the domestic courts. As such, there remains a threshold issue for invoking the process, such that the affected exporter must be sufficiently affected by the AD/CVD measures as to be prepared to expend substantial resources on a legal case. Chapter 19 cases also fail to address the speed problem. However, Chapter 19 avoids the need for affected industries to escalate the problem to their government in order to initiate a case, meaning there is no inherent need for political consideration of the merits of taking action. Stakeholders have a right of action for themselves, thereby addressing access issues. Furthermore, by acting in the place of a domestic court, rulings are enforceable in the same manner as the decisions of a domestic court. They do not require ‘implementation’ by national authorities in the manner of other international trade rulings, such as the findings of a WTO panel. As such, the process is potentially powerful in resolving disputes.11 AustraliaUnited States Free Trade Agreement and Pharmaceutical Benefits Advisory Committee review Under the AustraliaUnited States Free Trade Agreement (AUSFTA),12 Australia was required to establish a review mechanism whereby the sponsor of a drug (usually the drug manufacturer) could request an independent review of Pharmaceutical Benefits Advisory Committee (PBAC) decisions not to list their drug on the Pharmaceutical Benefit Scheme (PBS), which subsidises the consumer cost of listed medicines (see Annex 2-C of the AUSFTA and associated Exchange of Letters). From July 2006, the review process was also made available when the PBAC had not recommended the extension of a listing of a PBS-listed drug for an additional indication (Medicare Australia 2006). The review system was established under Australian law as required by the treaty. In line with its commitments, Australia established a panel of experts from a number of disciplines, including clinical pharmacology, epidemiology and health economics. An independent reviewer is appointed under the mechanism to review applications from drug companies. The reviewer considers the information made available to the PBAC by the applicant, as well as details of recommendations of the PBAC, and reports of PBAC subcommittees (ibid.). No new information is provided to the reviewer and the reviewer submits his or her findings and comments to the PBAC. The PBAC then re-evaluates its initial decision, in light of the reviewer’s findings, and may change its initial recommendation to the relevant Minister. The independent reviewer has no power to overrule PBAC recommendations (DoHA 2006). The Minister examines the PBAC recommendations and uses his or her discretion to determine Resolving and defusing trade disputes 477 whether to list a particular drug on the PBS per the process set out under Section 85 of the National Health Act 1953 (Cth). Since the independent review process was established in 2006, there have been two independent reviews of PBAC decisions. In each case, the review was undertaken and considered by the PBAC within eight months of the PBAC’s original recommendation not to list. The PBAC review mechanism deals effectively with both the threshold and access problems by giving affected interests a direct right of access to a dispute resolution (review) forum. It deals with a politically charged issue in a very lowkey way, meaning that government intervention and politicisation of the issue is minimised. The cost of applications in proportion to the cost of a listing application in general is understood to be fairly low. The main drawback of the PBAC review mechanism from a ‘dispute resolution’ point of view is the absence of any mechanism to address the ‘enforcement problem’. Reviews may make recommendations only; these may or may not change the approach the PBAC takes when re-evaluating an application; and the ultimate decision is at the discretion of the Minister. The extent of this drawback has not been tested in practice. In both reviews that have been undertaken, the reviewer did not recommend that the PBAC reconsider its original decision and the PBAC found that the review provided no new basis to reconsider its previous recommendation. Uniform Domain-Name Dispute-Resolution Policy Sometimes, trade agreements will co-opt dispute settlement frameworks to address cross-border issues that might arise in the context of the partners’ trade relations. An example is the reference in Article 17.3 (‘Domain Names on the Internet’) of the AUSFTA’s chapter on ‘Intellectual Property Rights’ to the Uniform Domain-Name Dispute-Resolution Policy (UDRP), which provides: In order to address trademark cyber-piracy, each Party shall require that the management of its country-code top-level domain (‘ccTLD’) provide an appropriate procedure for the settlement of disputes, based on the principles established in the Uniform Domain-Name Dispute-Resolution Policy. The Internet Corporation for Assigned Names and Numbers (ICANN) is the organisation responsible for domain names and Internet Protocol addresses. ICANN is established under the California Nonprofit Public Benefit Corporation Law for charitable and public purposes, and is therefore a creature of US municipal statute. Increasing commercial use of the Internet led to a problem of ‘cybersquatting’, whereby recognisable brands were registered by persons unaffiliated with the business operated by the brand or the intellectual property right holder. In the mid to late 1990s, it was considered that the problem of cybersquatting required urgent attention, and governments perceived drawbacks both with 478 Iain Sandford and Maree TanKiang treaty-based and ad hoc national approaches to resolving the issue. Following recommendations from the World Intellectual Property Organization (WIPO), ICANN created the UDRP, which is now automatically adopted by the individual registrars who register domain names on the Internet. The policy provides for any person to submit a dispute under the UDRP to an accredited dispute resolution centre such as the WIPO Arbitration and Mediation Center, which, at the end of 2001 (the latest figures cited), accounted for roughly 60 percent of activity under the UDRP.13 Pursuant to clause 4(a) of the policy, claims may be made where it is alleged: (i) the domain name registered by the domain name registrant is identical or confusingly similar to a trademark or service mark in which the complainant (the person or entity bringing the complaint) has rights; and (ii) the domain name registrant has no rights or legitimate interests in respect of the domain name in question; and (iii) the domain name has been registered and is being used in bad faith. The administrative panel considering the issue may decide in favour of the registrant (in which case nothing happens), it may decide the registration should be cancelled or it may rule that the registration should be transferred to the applicant. Where cancellation or transfer is ordered, the registrar will take this action unless notified of a court challenge to the decision. As international dispute resolution procedures go, the process is extremely simple, cheap and effective. It does not attempt to displace the jurisdiction of domestic courts, but is overwhelmingly preferred to litigation, as WIPO details on its website.14 The UDRP is frequently used. Recent WIPO figures indicate that its Arbitration and Mediation Center had administered more than 16,000 cases since December 1999 (WIPO 2009b). There were 2329 cases in 2008 alone (WIPO 2009a). It is open to anyone with an issue; does not rely on intervention by states; is low key, cheap and relatively speedy; and the results are implemented*thereby addressing the speed, threshold, access and enforcement problems identified in other forms of trade dispute resolution. Investorstate dispute settlement frameworks under investment agreements (and FTA investment chapters) Many bilateral investment agreements and FTA investment chapters, as well as the multilateral Energy Charter Treaty, provide for investors to initiate arbitration proceedings against a government for certain measures affecting the investor’s investment. The nature of investorstate dispute settlement (ISDS) under treaties differs from international commercial arbitration in that the investor itself is not privy to the agreement to arbitrate. Instead, the investor benefits from a standing offer from the host government made in favour of all investors sufficiently connected with the treaty partner. Resolving and defusing trade disputes 479 Australia’s network of investment agreements numbers roughly 20 bilateral investment treaties (BITs), as well as FTAs with Singapore, Thailand and Chile, and the AustraliaASEANNew Zealand agreement. Australia is also a signatory to the Energy Charter Treaty, although this agreement has never entered into force for Australia. EU member states have substantial networks of BITs, particularly with developing country and economy-in-transition partners. ISDS rules extend the reach of international arbitration to matters falling under public international law*namely, the treatment of investments covered by investment treaties. Importantly, they provide direct access to the private parties whose interests have been affected. They also provide for the same framework of remedies that is available in the context of private international arbitrations* namely, recognition and enforcement of awards by the domestic courts. In Australia, dispute settlement rules are embodied in the International Arbitration Act 1974 (Cth), which gives effect to the requirements of both the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty-fourth meeting (New York Convention), and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, signed by Australia on 24 March 1975 (the ICSID Convention). Although, internationally, investment treaty arbitrations are relatively common (with an average of about 30 known disputes initiated around the world in each of the last five years)15 there is no history of such disputes involving Australia as a respondent, and there are no publicly known cases in which Australian investors have availed themselves of ISDS rights. A key drawback of ISDS is a perception that it raises issues of a sensitive political nature. For that reason, anecdotal evidence is that investors hesitate to invoke the process for fear of alienating a host government*ISDS is seen as something of a last resort. ISDS is also regularly criticised by those who consider it could be abused as a tool for ‘chilling’ regulation in pursuit of legitimate government objectives. This has carried through into a reluctance from some governments to endorse ISDS, particularly following the experience in Canada with early disputes under NAFTA’s investorstate rules (Chapter 11) challenging provincial government measures that were ostensibly adopted on environmental grounds. Thus, although ISDS addresses the ‘access’ and ‘enforcement’ problems, the sensitive issues it raises cause particular issues around the ‘threshold’ problem. As with other elaborate international dispute settlement regimes, ISDS also fails to yield speedy results...
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Running head: WORLD TRADE ORGANIZATION

World Trade Organization
Institution Affiliation
Date

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WORLD TRADE ORGANIZATION

2

World Trade Organization
From a personal perspective, the current World Trade Organization (WTO) system of
addressing trade conflicts does not equalize power among its members. According to research,
there are disputes and misrepresentations of what the World Trade Organization dispute panel is
all about (Bown and Reynolds, 2014, pg. 174). The system has become a default model for
resolving trade disagreements, which is unsuitable for most disputes. One of the issues of the
WTO model is that it creates access problems, which results in ...

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Duke University

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