An impressive dispute settlement system...

Updated: Jan 26 2005, 05:30am hrs
The most significant achievement of the World Trade Organisation (WTO) in its first decade has been the successful operation of its dispute settlement system. There have been 324 consultation requests, involving 229 distinct disputes. Initially, the main user was the US; later, the EU was the principal complainant. However, in the last few years, developing countries have been the most frequent complainants.

The results produced by the dispute settlement system to date are impressive. Of the 181 disputes that started with a consultation request prior to July 1, 2002, there are 107 that either did not result in an adopted panel report or are not now pending before an active panel. In all, 64 of these disputes, or roughly 60%, were settled. All but four of the remaining 43 appear to have been dropped either because the complainant lost interest or, more commonly, because the challenged measure expired. Thus, it appears that most disputes are settled or become moot because the measure complained ceases to exist or the complainants freely choose not to pursue the case. There do not appear to be many, if any, requests that are simply forgotten or that are not pursued because of power imbalances or otherwise.

What about the 74 remaining disputes where panels were established and have reported or are actively working As of December 31, 2004, five of those 74 cases are pending, where no report has been issued or the reasonable period of time for implementation has not expired. Of the remaining 69, where reports have been adopted, the complainant lost in 10 of them, such that no implementation was required. Of the 59 other disputes, there has been implementation in 49. That leaves 10 disputes, where there has been no implementation or a disagreement between the parties over implementation.

That suggests a successful implementation rate of 83% certainly quite impressive for state-to-state dispute settlement. Indeed, it is a better record than that of the International Court of Justice, but it must be admitted that of all of the goals of dispute settlement, the WTO is weakest on promptness. Another problem is the position of developing countries. While they have made frequent use of the system, many find the costs involved to be prohibitive.

In short, the WTO dispute settlement system appears to be a quite effective mechanism through which its members are able to raise disputed trade issues and resolve them either amicably or through formal panel/appellate body proceedings. But one should not overstate the success of the system.

In recent years, there has been a growing problem of US non-compliance with adverse WTO decisions. Indeed, most of the pending cases of non-implementation fall within this category. While the US administrations under Clinton and Bush have always taken action sufficient to implement WTO reports, the US Congress has been very slow to revise US statutes when implementation requires such a change.

Indeed, Congress recently passed legislation to implement two WTO decisions. It is, of course, crucial for the US, and the EC for that matter, to implement adverse WTO decisions. If they do not, other WTO members may start to drag their feet on implementation as well.

Finally, a few words on Indias experience. As a complainant, roughly one-half of Indias cases have involved challenges to measures restricting Indian textile and clothing exports. Other Indian challenges have involved steel, shrimp and rice. In terms of the types of measures that India has challenged, over one-half of them have been trade remedy measures, especially those against textiles (five cases) and steel products (two cases).

In terms of respondent countries, Indias main targets have been the US (six cases) and the EC (five cases), which have, in turn, been the main complainants against India. India has scored some major victories. Its successful challenge early in the WTOs existence to US use of safeguards under the Textiles Agreement seems to have restrained such use. As regards anti-dumping rules, India scored a big victory in the EC bed linen case. With the exception of the US Textiles Origin case, India has generally had success in its affirmative use of dispute settlement.

In assessing Indias experience as a respondent, it is instructive to note that the EC has been the main complainant against India, followed by the US. The main target of the EC and the US has been Indias wide range of import and export controls. The US successfully attacked the justification for many of the import controls in the BOP case and, subsequent to that case, the EC has had at least partial success in consultations targeting various specific Indian restrictions on imports and exports.

The particularly difficult case for India to implement was the patents case, which required it to establish a so-called mail-box procedure so that pharmaceutical companies could preserve their patent priority on products that should become patentable in 2005. The procedure itself was not so controversial the idea that pharmaceuticals would eventually be patentable was. Overall, I think that the record shows that India has been able to make rather effective use of the WTO dispute settlement system to pursue issues that matter to it that affect important export sectors. At the same time, it has not been all that much constrained by its losses in the system.

The writer is Edwin M Adams professor of law, University of Illinois College of Law, and director, WTO legal affairs division, 1995-1999