In the Journal of World Trade, ANU’s Peter Drahos warns that PTAs may undermine the WTO’s dispute settlement regime:

Typically, an FTA will contain a chapter on dispute settlement that establishes committees and detailed procedures for handling disputes between the parties to the agreement. The growing number of these agreements is creating, in effect, a web of bilateral trade dispute resolution fora. The purpose of this article is to draw attention to this bilateral web and in particular to focus on the role that the United States is playing in its construction…

The capacity of a strong State to choose, as it were, its legal battleground has important implications for weaker States, especially in those cases where the stronger State shifts the contest out of the multilateral setting of the WTO…

The effect of creating a web of bilateral dispute resolution fora will be to give the United States and the EU more opportunities to play for rules. If, as Palmeter and Mavroidis suggest, the DSU was the most important achievement of the Uruguay Round, then perhaps the current proliferation of FTAs represents something of a crossroads for the DSU. By constituting many possible trade courts, the United States and the EU are creating a system in which their respective influential domestic trade interests will lobby them to go to the trade court in which those interests are most likely to obtain satisfaction.

How much such a system will help to improve trade liberalization that leads to real economic gains is an open question. In the case of intellectual property rights we have seen that there is a real danger that dispute mechanisms will be used to enforce rent-seeking bargains. More generally, such a system of many trade courts may simply push the trade regime in the direction of a disorderly mixture of confusing obligations, rule uncertainty and prolonged litigation patterns, a system in which the MFN principle really does assume a ghostly interstitial presence.

Full pdf.

If Drahos is right, then the World Trade Organization needs to assert its authority and propose an appropriate framework for the evolution of bilateral dispute settlement mechanisms, lest the multilateral system be dangerously compromised.