Dispute Resolution in WTO

Introduction:
The World Trade Organization (WTO)is the only global international organization dealing with the rules of trade between nations. The
main objective of WTO is to help trade flow smoothly, freely, fairly and predictably. It has many roles consisting trade agreement
administration, acting as a forum for trade negotiations, trade dispute resolution, national trade policy review and help developing
countries in trade policy issues.
History:
WTO, came into place in 1995 under Marrakesh agreement. WTO is
the successor to the General Agreement on Tariffs and Trade
(GATT) established in the wake of the Second World War. So, while
the WTO is 22 years old, the trading system that was officially set
up under GATT is well over 50 years old.
Dispute settlement at WTO:
Dispute settlement is one of the main pillars of the international
trading system. Any member country of the WTO can use the
multilateral system of setting dispute If any member country of the
WTO is violating trade rules. This system follows Disputes
Settlement Understanding DSU. Dispute Settlement body (DSB) is
the part of the WTO which is responsible for adjudication of
disputes.
The Dispute Settlement Process:
A dispute can be settled in two ways after the complaint has
already been filed:
Figure 1Structure of WTO 1. The parties may find a mutually agreeable solution
2. Adjudication and implementation of the panel and
Appellate body reports which become binding upon the parties in question, once adopted by DSB
The following are the stages of dispute settlement:
First stage: Consultation between the parties (takes up to 60 days)
Second stage: Forming of the panel (45 days). The Dispute Settlement Body (DSB) is solely responsible for forming a panel of experts to
consider a particular case. The body also has the right to accept or reject the findings by the panel about the case. The panels report is
given to the disputing parties within 6 months. This deadline is shortened to 3 months in case of perishable goods
Looking at the stages of the working of panel:
Both parties present their case in writing before the first hearing
The parties announce that they have a clash of interest and make cases during the first hearing
The parties can give written rebuttals during the second meeting
The panel may seek expert consultation in case of technical issues
The panel submits the first descriptive report with facts for the two parties to agree upon. This report does not contain any inference
or judgement. Parties have two weeks to comment on the same.
Panel submits the interim report with all the findings and conclusions giving parties one week to review the same
Final report is submitted by the panel to both the sides three weeks later. If a trade rule is broken, the panel in reports suggests how it
can be made to conform to WTO rules.
If the DSB accepts the report, it becomes a ruling within 60 days. Both sides can appeal the report. The appeals are heard by three
members of the seven member Appellate Body which can uphold, modify or reverse panels findings and recommendations
Dispute Resolution Rules:
The WTOs procedure underscores the rule of law, and it makes the trading system more secure and predictable
The system is based on clearly-defined rules, with timetables for completing a case
First rulings are made by a panel and endorsed (or rejected) by the WTOs full membership
Appeals based on points of law are possible
However, the point is not to pass judgement. The priority is to settle disputes, through consultations if possible. By January 2008, only
about 136 of the nearly 369 cases had reached the full panel process. Most of the rest have either been notified as settled out of court
or remain in a prolonged consultation phase some since 1995.
Changes in the rules: GATT v/s WTO
 No fixed timetables under GATT; Under Uruguay round- greater discipline for timelines, with flexible deadlines set in various stages,
can also be accelerated
Under GATT, ruling could only be adopted by consensus; now they are automatically adopted unless there is a consensus to reject a
ruling
Consultation and mediation are always possible at any stage of the dispute.
After the case gets decided
No actual punishment; A remedy is offered. The goal is for countries to comply with the ruling
If the country fails to comply with the recommendations within a reasonable period of time, a mutually agreed compensation is
decided
If compensation cannot be agreed upon, controlled retaliation is allowed

WTO dispute resolution process: Critique

Nations & their trade relations
It has been argued that only the strongest nations have been able to argue their cases effectively in the WTO forum. Statistics and study
has shown that majority of the cases filed by USA and EU have ended in a favorable decision for them. The major reason for developing
and poor nations not being able to push their cases much has been the expensive and resource intensive (legal & political capacity)
nature of the dispute settlement process. The developing nations and their firms fear trade and political reprisal.
Overlooks Non-economic concerns
The cases put forth in WTO are led by industries and firms and hence driven mostly by economic and business concerns. Thus, non-
economic concerns like environmental, consumer safety, human rights and cultural & other values often are ignored. Due to the dearth
of non-trade and non-economic concerns being raised in the forum, WTO has not been involved in definitive judgements. Thus, though
WTO has dealt with non-trade concerns its capacity in this sphere is fairly limited.
Institutional Issues
Panelists often lack the competence to handle the case they are presented
No process in place to guard against personal bias of the panelists
Transparency through checks via public scrutiny is missing

Case Study
1. Brazil HIV AIDS drugs Case
It has been observed that less developed countries have always been marginalized in WTO rulings by wealthy nations. But the case of
HIV drugs which were patented in USA but sold in generic from in Brazil had a strikingly opposite outcome. USA filed a case in WTO
against the use of generic forms in Brazil which were permitted by its government. Brazil rebutted with the argument of proving
affordable care with generics and got support from community at large. Ultimately USA withdrew its application and a settlement was
reached out of court under which Brazil agreed to give a 10 day notice to USA for any local manufacture of patented drug.
2. Indonesia Automobile Case
Indonesia introduced a new automotive policy under which the domestic indutries cars/car parts had lower taxes compared to
substitutable foreign brands. Countries like USA, Japan and EU approached WTO with an appeal against the tax discrimination. WTO
identified this as a case of WTO agreement violation. In its ruling, WTO instructed Indonesia to do away with differential taxes to provide
a level playing field for all manufacturers. Finally the recommendations of WTO were implemented with new automotive policy in 1999.

Reference:
[1] https://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm
[2] https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c6s1p1_e.htm
[3] https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c3s1p1_e.htm
[4] https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c1s2p1_e.htm
APPENDIX