Can the WTO’s dispute settlement panel bear its increasing load of contentious cases?

Alan Beattie voices concern:

WTO panels comprise three from a roster of part-time panellists that includes trade officials, diplomats and academics. Some, oddly, are moonlighting from day jobs as national ambassadors to the WTO, meaning they are negotiating over trade deals one day and ruling on their meaning the next. They do not have to be lawyers, though there is a separate appellate body whose members must have legal expertise. Panels rely heavily on advice from the WTO’s small secretariat to interpret legal questions.

It is hard completely to dismiss the contention that law affecting thousands of businesses, millions of workers and billions of dollars is being determined by panels of part-time amateurs making it up as they go along.

Peter Gallagher is happier:

Governments are to blame for every one of the legal entanglements that Mr Beattie mentions… The WTO’s appellate body now interprets trade agreements in precisely the same way as every other treaty using standards of jurisprudence that citizens – even lawyers – everywhere demand in municipal courts. Governments that accept the WTO agreements must, as a consequence, now say what they mean and do as they say they will do. Is this a bad thing?

In case you haven’t already learned so from another trade blog, Daniel Ikenson and Robert Lighthizer are debating the fairness of the WTO’s dispute settlement system at the CFR’s website.

Former Director-General of the GATT and WTO Peter Sutherland spoke yesterday about challenges to the multilateral trading system. A few highlights amongst Mr. Sutherland’s comments:

– He believes that TPA renewal under the Democratic Congress is unlikely, but an outline of a Doha round agreement must be on the table within two months for reauthorization to have any chance.
– Doha failure will accelerate bilateralism in trade, which has historically resulted in trade deals that benefit rich countries and harm poor countries.
– Bilateralism is useless to multinational corporations with supply chains spanning many countries.
– One source of Doha’s trouble is the ill-conceived launch as a “development round” with unrealistic expectations. The WTO is not a development institution, and although its mission is to create a favorable and open global trading system that is conducive to development, “trade deals can’t deliver development.” Trade liberalization favors those who trade – the rich countries.
– In regards to the WTO’s ability to do research and advocate on behalf of global trade: “The WTO’s staff is one-quarter of the World Wildlife Fund’s.”
– “Neither the outcome nor the path to it has been satisfactory.” Sutherland echoed the message of the 2005 WTO report he chaired, criticizing the Doha round approach of announcing formulaic headline goals attenuated by numerous details and caveats. He characterized the Uruguay Round as involving more pragmatic give-and-take. Sutherland defended the “green room” sessions as a means of hammering out a consensus amongst key players who could serve as “honest brokers,” arguing that LDCs’ interests largely align with those participating in the green room.
– Similarly, Sutherland emphasized the importance of senior-level negotiators doing the heavy lifting. He noted that when he became Director-General, the Uruguay Round had already suffered two near-catastrophic ministerial meetings, and that the deal was completed six months later without a ministerial meeting. Marrakesh was a coming out party.
– Sutherland also noted that trade preferences can drive countries to specialize in commodity exports in which they don’t have a comparative advantage. His example was Caribbean nations growing bananas thanks to the EU’s ACP preferences, despite Central America’s productive superiority.

During the Q&A, I asked Mr. Sutherland to identify the forces he thinks were responsible for the Uruguay Round’s successful completion. I noted that competing interpretations of that negotiating history motivate current strategies for Doha:

Some in Washington claim the strategy helped break a deadlock in the Uruguay round after the EU balked at opening its protected agricultural market. They say by threatening to turn Apec from a loose grouping of Pacific Rim economies into a rival trade bloc, the US forced the EU back to the bargaining table.
Others, however, think such claims exaggerated. Not only have Apec’s efforts to free regional trade achieved little but, they argue, the EU softened its position on farm trade in the Uruguay round only because mounting costs made reform of its common agricultural policy unavoidable.

Sutherland acknowledged that both of those forces may have played some role (EU internal politics more than the threat of APEC), but argued that individual people matter far more in the actual negotiations. He characterized the APEC narrative as “ex post facto theorizing” rather than a compelling explanation.

Sutherland’s story emphasized the role of particular negotiators and national leaders in building a consensus and hammering out controversies. Particularly amusing was a tale of fervent discussions at 2am in the green room shortly before the completion of the round, in which negotiators debated whether the word “unfair” carried appropriate legal import to be included in a paragraph on anti-dumping. The next morning, shortly before Sutherland was due to announce the round completed, the Japanese representative informed him that the ministry of foreign affairs and MITI disagreed about the text. The ensuing brinksmanship (as narrated by Sutherland) was quite entertaining (in retrospect), and thank goodness it worked out for the best, as Japan raised no objection when Sutherland gaveled the round to a close.



Sutherland’s story of the Uruguay Round’s completion was both amusing and insightful. I hope he someday puts it into print.

I’ll be reading this pdf during one of my flights today:

In a new ECIPE paper, Roderick Abbott presents new analysis on the participation of developing countries in WTOs dispute settlement mechanism. Abbott finds that around 80-90 developing countries have had no dispute participation at all and discusses the reasons for that passive attitude. Abbott concludes that there seems to be little in the WTO system in itself that needs correcting; it is rather problems of internal governance in developing countries, and a choice in favour of a bilateral approach, that explains their relative absence in dispute settlement.

I just noticed that the Antigua Offshore Gaming Association has a website for its WTO case against US antigambling laws. Maybe it will have more impact than if the island of 70,000 sanctioned the United States for noncompliance, though that’s not saying much.

Russia:

A Moscow-based Web site that the U.S. Commerce Department has branded as the world’s highest- volume online seller of pirated music announced plans Tuesday to release hundreds of thousands of albums free… The U.S. trade representative, Susan Schwab, has warned that continued operation of the site signals a lack of respect for intellectual property law that could jeopardize Russia’s long-sought entry into the World Trade Organization. [IHT]

Vietnam:

The World Trade Organization is expected to approve Vietnam’s entry into the world trade body in early November, ending more than 10 years of tough negotiations, state media reported Monday.

Can the WTO rule on biotechnology issues like genetically modified foods without experiencing “mission creep” and becoming a judge of scientific debates? Ross Korves, who says that three decisions released at the end of last month “are critical for the WTO in establishing a rules-based system for handling trade disputes on biotech crops,” suggests that the WTO pulled it off:

The WTO panel made clear in its ruling that it was not the panel’s task to determine whether biotech crops are generally safe or if they were “like” their conventional counterparts. They also did not consider whether the EU’s product-by-product procedures for considering the safety of biotech crops were appropriate or judge the conclusions reached by various EU scientific committees as part of the approval process. The panel did seek advice from six scientific experts who submitted hundreds of pages of materials and spent two days with the panel and representatives of the two sides.

The WTO is not a standards setting body for biotech crops or any other products. That is left to groups like Codex. It also does not try to second guess the fine points of science and risk assessment. It focuses on how member countries follow the rules as set out in WTO agreements.

As trade talks increasingly concern non-tariff barriers, it’s important that the WTO be able to address their abuse without becoming a global regulatory agency. Korves’ article suggests that it is successfully doing so.

Adopting the 1:3:2 framework, Brad DeLong argues that the existing international economic institutional framework is likely to last:

The current neoliberal rules of engagement make it difficult for the rich post-industrial core to succumb to protectionist and nativist pressures that would slow growth for the three billion significantly. And the current neoliberal rules of engagement give the largely-kleptocratic rulers of the two billion nice lives as well.

I just stumbled across an article by Kerry Chase of Tufts that describes what he calls the “mysterious origins” of GATT Article XXIV. It appeared in World Trade Review in March 2006. The abstract:

The GATT treaty’s loophole for free trade areas in Article XXIV has puzzled and deceived prominent scholars, who trace its postwar origins to US aspirations to promote European integration and efforts to persuade developing countries to endorse the Havana Charter. Drawing from archival records, this article shows that in fact US policymakers crafted the controversial provisions of Article XXIV to accommodate a trade treaty they had secretly reached with Canada. As a result, the free trade area exemption was embedded in the GATT-WTO regime, even though neither the Havana Charter nor the US-Canada free trade agreement was ever ratified.

Intriguing. Anyone familiar with this claim?

[The author’s book on the political economy of trading blocs also looks interesting.]
[Table 1 summarizes what Ben discussed here. The WTO has not adopted a single report on FTAs or CUs.]

The Doha round is likely to stall out by the end of the summer. In that light, this FT piece by Alan Beattie from last summer is relevant:

The Doha round of multilateral liberalisation talks is behind schedule and in trouble. Prospects for trade seem bleak.

But are they? In practice, according to many trade officials, experts and practitioners, the World Trade Organisation system has so far done a good job of holding protectionist sentiment in check. Some warn that the system will start to give way, or at least that further liberalisation is in jeopardy. Yet, in spite of the stress induced by rapid change in the global economy, there is little sign that the gains from previous advances are being lost.

The bare statistics do not support the idea that a wave of protectionism has swept over the global economy. There has been no rise in the use of “anti-dumping” or “safeguards” actions – emergency limits used by countries to prevent surges in imports. The most recent figures from the WTO, for the second half of last year, showed new anti-dumping actions falling to 103 from 135 a year earlier.

Experts attribute much of the gap between protectionist rhetoric and (generally) laisser-faire practice to the rules of WTO agreements and particularly the judgments of its disputes settlements mechanism, involving three-person panels sitting in Geneva…

Peter Mandelson… believes in the power of global trade rules. “The barriers against protectionism we have put in place over the past decade are strong enough to stand immense pressures and indeed ratchet up liberalisation.”…

Given the slowness of the negotiations so far, it would be a brave observer who bet on rapid progress. But at a time when the world economy is coping with stalling jobs growth in some of the richest nations, colossal global current account imbalances and the emergence of China as a fearsomely huge and efficient competitor across a range of industries, the freedom to trade – so painfully achieved over previous decades – has yet to receive a serious challenge.

Will the WTO’s institutional credibility hold up when there are no ongoing negotiations to futher liberalize trade? Or should we expect backsliding in the wake of Doha’s failure?