Developing Countries: Protect WTO Dispute Settlement

However, its use appears to have stalled as more countries have opted either to settle their disputes bilaterally or even to suspend them.

Developing countries, such as India , have been critical of the interim arrangement. They have argued that it sidesteps their right to appeal under WTO rules. They want the standing Appellate Body to be reinstated.

Among the most controversial proposals for reform is an idea tabled by the US. It proposes a dispute settlement system with an “opt-out” clause for countries that only wish to accept the jurisdiction of the Appellate Body on a case-by-case basis. This is similar to the International Court of Justice : countries choose to“opt in” and be subject to the jurisdiction of the court.

A fully functioning dispute settlement mechanism with an appellate tribunal is indispensable for creating a just and equitable global economy. The US proposals for an opt-out system of dispute resolution would allow countries to disregard unfavourable decisions of the appellate tribunal.

This is problematic for several reasons.

First, it would weaken the WTO's credibility and effectiveness by making the current crisis permanent. It contributes to a move towards bilateral dispute settlement, exemplified by the US-India deal to end six of their ongoing WTO disputes. This signals a worrying departure from multilateralism , a recent trend which risks sidelining the most vulnerable developing countries even more.

Second, being allowed to sidestep rulings would further marginalize developing countries, undermining the WTO's mission to foster equal competitive conditions. It risks leaving less economically developed countries unable to challenge trade rule violations and seek remedies against unfair trade practices.

A couple of cases illustrate the dangers of a system where powerful countries ignore rulings without fear of repercussions.

• One such case is the long-running bananas dispute between the European Community and some developing countries in Latin America. They Latin Americans successfully challenged the European Community's banana import rules, claiming they were discriminatory and violated the most favored nation principle. The principle states that countries cannot generally discriminate between their trading partners . The European Community vetoed two panel reports, leading to a lengthy legal battle. The process was complicated by the General Agreement on Tariffs and Trade's requirement for decisions based on consensus, which drained the limited resources of the developing countries involved.
• Another case is a notorious US-Gambling dispute , over“measures affecting the cross-border supply of gambling and betting services,” where the US was found to have violated WTO rules. Antigua and Barbuda were granted permission to retaliate, but the Appellate Body's recommendations have still not been upheld. For small island nations like Antigua and Barbuda, the cost of this litigation has been far-reaching, harming their economies. Meanwhile, the US, insisting that its laws comply, has not faced any significant or negative economic consequences from either the dispute itself or the outright American non-compliance with the outcome.

The third reason an opt-out approach is problematic is that it could allow economically stronger members to sidestep rulings, exacerbating power imbalances. Such a trend jeopardizes the economic development prospects of poorer countries by affecting long-term investment and trade decisions.

Most African countries have rarely used the WTO's dispute process. But addressing the reasons for this may enable them to engage with the system in future.

A functioning dispute settlement system would resonate with the WTO's broader vision of fairness, equality and sovereignty in global trade.

To achieve this, developing countries must:

• reject the opt-out model;
• call for greater support, including technical assistance and capacity-building, to ensure effective participation in the dispute settlement process; and
• collaborate with each other and with developed countries to strengthen their collective voice in reform discussions.

Adopting a unified stance and getting commitment among all members to compulsory jurisdiction is the only way the WTO can remain a cornerstone of the international trade system.

Franziska Sucker is an associate professor at the University of the Witwatersrand and Clair Gammage is a professor of international commercial law at the University of Exeter

This article is republished from The Conversation under a Creative Commons license. Read the original article .

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