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Monday, May 23, 2011

Dispute Settlement in the World Trade Organization (WTO): An Overview

Jeanne J. Grimmett
Legislative Attorney

The World Trade Organization (WTO) Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) provides a means for WTO Members to resolve disputes arising under WTO agreements. WTO Members must first attempt to settle their dispute through consultations, but if these fail the Member initiating the dispute may request that a panel examine and report on its complaint. The DSU provides for Appellate Body (AB) review of panel reports, panels to determine if a defending Member has complied with an adverse WTO decision by the established deadline in a case, and possible retaliation if the defending Member has failed to do so. Automatic establishment of panels, adoption of panel and appellate reports, and authorization of a Member’s request 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, 424 complaints have been filed under the DSU, approximately one-half resulting in panels. Nearly one-half of the 424 complaints involve the United States as a complainant or defendant. The Office of the United States Trade Representative (USTR) represents the United States in WTO disputes.

Use of the DSU has revealed procedural gaps, particularly in the compliance phase of a dispute. These include a failure to coordinate DSU procedures for requesting retaliation with procedures for requesting a compliance panel and the absence of a specific procedure aimed at the removal of trade sanctions in the event the defending Member believes it has fulfilled its WTO obligations in a case. To overcome these gaps, disputing Members have entered into bilateral agreements permitting retaliation and compliance panel procedures to advance in sequence and have initiated new dispute proceedings seeking the removal of retaliatory measures believed to have outlived their legal foundation. Expressing dissatisfaction with WTO dispute settlement results involving U.S. trade remedies, 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.

Section 301 of the Trade Act of 1974 provides a mechanism for the USTR, either by petition of an “interested party” or on its own accord, to address restrictive foreign trade practices through the initiation of a WTO dispute and authorizes the USTR to take retaliatory action in the event the defending WTO Member has not complied with the resulting WTO decision. While the European Union challenged Section 301 in the WTO on the ground that it requires the USTR to act unilaterally in WTO-related disputes in violation of DSU requirements, the United States was ultimately found to be in compliance with its DSU obligations. Where a U.S. law or regulation is at issue in a WTO case, the WTO’s adoption of a panel and, if appealed, AB report finding that the U.S. measure violates a WTO agreement does not give the WTO decision 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.

S. 239 (Klobuchar), the Innovate America Act, would, inter alia, authorize to be appropriated to the USTR $2 million for each of FY2011, FY2012, and FY2013 for the purpose of initiating any proceeding to resolve a dispute relating to market access barriers with WTO member countries. S. 708 (Brown, Ohio) would establish mechanisms under the Trade Act of 1974 to require the USTR annually to identify particularly harmful foreign trade practices and, where appropriate, to initiate WTO dispute settlement proceedings to remedy these practices.

Date of Report: May 12, 2011
Number of Pages: 17
Order Number: RS20088
Price: $29.95

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