1. U.S. & WTO -- Trade Litigation & Global Governance (1995-2015)
[Overview & Actual Practice 1995 – 2005]
Stuart S. Malawer, J.D. Ph.D.
Distinguished Professor of Law & International Trade,
George Mason University.
(2015)

2. Introduction & Some Questions.
Basics of the WTO.
Basics of the DSU.
Practice: 1995 – 2005.
Observations & Research Note.
(2015)

3. I. Introduction & Some Questions.
(2015)

4. What has been the Experience of the WTO / DSU Litigation Process over 15 Years?
Main Question: What has been the U.S’s experience in WTO litigation in light of its initial expectations & concerns?
Impact on U.S. sovereignty.
Developing a rule-based system that would enhance trade.
Question Two: Expectations / concerns & experience of other states?
To restrict U.S. unilateral action
Fear DSU used against them.
U.S. wouldn’t observe decisions.
(2015)

5. Additional Issues :
Issues decided by the DSU?
Role of consultations?
Compliance / Sanctions.
Lessons from the 15+-Year history (1995 – 2010)?
Experience in light of expectations.
For the U.S., other states, trading system.
Method: Not a review of jurisprudence, but of actual practice. (Recent statistical studies.)
(2015)

6. WTO Litigation in the News.
W.T.O. Rules U.S. Subsidies for Boeing Unfair
New York Times (April 1, 2011)
(2015)

7. (2015)

8. (2015)

9. (2015)

10. Significance of the WTO.
“No review of the achievements of the WTO would be complete without mentioning the Dispute Settlement system, in many ways the central pillar of the multilateral trading system and the WTO’s most individual contribution to the stability of the global economy.”
…… Renato Ruggiero, WTO Director-General, April 17, 1997.
(2015)

11. Questions to Consider. (2015)
In 1995, what was established by the WTO & other Uruguay Round agreements? What has been the actual experience in light of the expectations at that time?
What is the relation of the DSU (adjudicating trade rules) with the negotiation process of the WTO (rule making) in establishing a rule-based trading system?
What are the basic provisions of the DSU?
Do adverse decisions override domestic law? Issue of sovereignty.
What has been the actual practice of the panels and AB? (What can be learned from the panel & AB decisions?)
What has the U.S. record been before the DSU? Record of other countries?
What about the newer cases –“ U.S. - China Trade Offensive”?
What about “retaliation” and “sanctions” and the U.S. compliance with adverse actions?
What observations can be made at this time?
Role of negotiations or litigation in global trade relations?
What about the balance between the two sides of the WTO from 1995 to 2011?
Use of DSU by other states? EU? India? China? LDC’s?
What are the benefits of litigation & legalization of the trading system for global governance of international economic relations generally? Any downside?
(2015)

12. Additional Questions. Use of the system by the United States?
“Litigation” lessons (probability of success)?
Use of the system by countries generally?
Use of the system by member countries:
Legal implications for the global trade system & those countries?
Significance of consultations?
“Rule development” for trade system v. “individual case settlement”?
What other data to look at in the future?
Pending Cases (active panels and appeals)
Settled Cases (consultations / inactive panels)
What is the issue of legalization or negotiation in the DSU? Transparency or secrecy (traditional Diplomacy)?
Any new changes under President Obama?
(2015)

13. II. Basics of the WTO.
(2015)

14. ACCOMPLISHMENTS OF THE URUGUAY ROUND.
Establishment of a permanent trade institution (WTO).
WTO to negotiate trade rules & to apply them. (Global trade to be a rule-based system – not governed by power.)
Providing the WTO with a firm legal basis & detailed constituent rules. (Cured the GATT “legal defects.”)
Integrated package of substantive rules.
Further defined traditional trade issues: dumping, export subsidies, agriculture, procurement.
For example, list of prohibited subsidies.
Extended general GATT principles and disciplines to newer trade & transactional areas: investments, intellectual property, services & scientific concerns.
Greater institutional development: dispute resolution system.
Compulsory & binding dispute resolution in a transnational setting.
(2015)

15. New Aspects Replacing Older Defects.
The WTO created an integrated system replacing the ad hoc GATT approach.
For the first time a permanent international institution was created with a firm legal foundation.
A new system of compulsory and binding dispute resolution was established with sanctions.
The dispute resolution system is as important as the trade negotiation mission of the WTO – two halves – rule-making & rule implementation.
The creation of a rule-based system with meaningful rule implementation & enforcement was central to U.S. foreign policy of relying on multilateral institutions in the new era of globalization and the reliance upon a U.S.- style legal / litigation approach to supplement traditional diplomacy.
(2015)

16. Two Basic Principles of the WTO.
Global Trade Law: U.S. Legislation
Two Basic Principles of the WTO.
Most Favored Nation Principle.
National Treatment Principle.
Both principles based on the principle of non-discrimination (as to different imports and domestic products).
(2015)

17. URUGUAY AGREEMENTS as ‘Executive Agreements’
Annex 1C (Intellectual Property Rights / TRIPS)
Annex 2 (Dispute Resolution / DSU)
Plurilateral: Gov’t Proc.
WTO (Constituent)
Annex 1A (Goods)
GATT 1994
TRIMS
A/D
CVD
Safeguards
Agriculture
SPS
Annex 1B (Services / GATS)
Newer: Telecom, Fin. Service
These agreements were
concluded pursuant to
“fast track” authority and
then implemented by
the URIAA.
(2015)

18. Trade Issues Negotiated at Uruguay Round.
Traditional Issues. (Expanded).
Goods.
Agriculture.
A/D.
CVD.
Safeguards.
Newer Issues.
Services.
Intellectual Property.
Institutional.
WTO.
DSU.
Singapore (1996).
Financial Services.
Telecom.
Inform. Technology.
Issues NOT Included.
Environment, Labor, Investment, Competition.
(2015)

19. Doha Trade Round. “Doha Ministerial Declaration.” (Nov. 14, 2001).
List issues as to “expanded negotiating agenda” and “other activities.”
To determine whether the Singapore issues were to be part of further negotiations.
Separate declaration on drug patents & compulsory licensing for production in LDC’s.
“Decision on Pharmaceutical Patents.” (August 30, 2003).
Follows the Doha declaration on “compulsory licensing” as a public health exception to TRIPS and allows for export to other LDC’s.
“July 31, 2004 Package”-- After Cancun Ministerial 2003.
Agriculture& cotton.
Domestic support, export subsidies, S&D treatment, market access.
S & D treatment principle.
No inclusion of “Singapore Issues” – (Investment, Competition & Government Procurement).
Hong Kong Ministerial – inconclusive, but kept round alive. (2005).
Trade round suspended July 2006 by WTO Director-General Lamy.
Expiration of TPA / Fast Track in 2007 complicates trade negotiations.
Doha concluded by a weak ‘Bali.” (2013)
(2015)

20. Ministerial Meetings under WTO.
Singapore (1996).
Geneva (1998).
Seattle (1999).
Doha (2001).
Cancun (2003).
Hong Kong (2005).
Geneva (2009).
Bali (2012).
(2015)

21. TRADE AGREEMENTS: Delegation of Authority, Implementation, “Fast Track (TPA).”
Congressional
Authority
Congress has ‘exclusive authority’ over foreign trade
Delegation of Authority (1979 / 1988 Trade Acts). Sets negotiating objectives. “Fast Track / TPA.”
President Concludes
Trade Agreement
Concludes WTO & Multilateral Agreements as international obligations.
Legislation implements trade agreements (URIAA) as domestic law.
Creates domestic law obligations & approves agreements
Implementing
Legislation
Domestic law
ABC
Corp
XYZ
Corp
(2015)

22. Dual Nature of Trade Agreements (International & National) & Federal-State Relations.
Trade Agreement (WTO)
U.S. EU
International Obligation
Note on WTO & States.
WTO obligations apply to states.
Problem is that state law may violate WTO obligations and create liability for the U.S.
Federal authority is limited to consulting – may bring an action under implementing legislation.
Implementing Legislation.
Federal
Domestic Law.
State
Corp. X
in U.S.
(2015)

23. III. Basics of the DSU.
(2015)

24. The WTO & DSU.
The WTO Agreement is the constituent agreement & one of a group of agreements resulting from the Uruguay Round of Trade Negotiations ( ).
The WTO became effective on Jan. 1, 1995.
DSU is annexed to the WTO Agreement.
In the U.S. the URIAA (1994) implemented the Uruguay Round of Agreements.
(2015)

25. U.S. Concerns at Time of Implementation.
Generally, transfer of “sovereignty” to the WTO?
Specifically, as to the authority of the DSU to override U.S. law.
Issue of “transparency” (confidentiality / procedural rules) concerning the process.
How would the system develop -- for or against U.S. interests?
(2015)

26. Additional Concerns
Would the U.S. be able to avoid implementation? Would
other countries?
Would other countries use the DSU? Against the U.S.?
Would the new system in fact encourage greater global trade, investment and business and perhaps ultimately freer markets and freer societies?
Note:
Countries were concerned about U.S. Use of the
DSU and its implementation of decisions?
Primary purpose for the U.S. was to create a litigation-based system to enforce global trade rules & the primary purpose of other countries was to restrict the use of unilateral trade sanctions by the U.S. (to multilateralize sanction) -- Both achieved their aims.
(2015)

27. The Dispute Resolution System
Four Historic Accomplishments:
Compulsory
Binding
Integrated
Sanctions
(2015)

28. Aims of the DSU (Article 3).
To provide security and predictability to the multilateral trading system.
That a prompt settlement of disputes is essential.
To secure a positive solution to a dispute. (Negotiated solution is preferable to litigated decisions.)
Once a violation is determined the aim is to secure the withdrawal of the offending measure.
Compensation is to be resorted to only if the withdrawal of the measure is impracticable.
As a last resort, have suspension of concessions or other obligations (“Retaliation”).
(2015)

29. DSU Articles Article 19 – (Panel & AB Recommendations) Article (Surveillance of Implementation) Article (Suspension of Concessions)
Article Recommendation is to “bring the measure into conformity” with the WTO agreement.
Article Prompt compliance is essential. The panel reviews a disagreement over consistency of compliance measures taken and keeps under surveillance implementing actions. 
 Parties need to inform of intentions to comply with DSB.
Arbitration as to “reasonable period.” Art. 21(3).
“Consistency of compliance” – original panel. Art. 21(5).
Article Full implementation is preferred. Sanctions (withdrawal of concessions) may be authorized.
Authorization for sanctions to DSB.
Arbitration (by panel) for amount of sanctions. Art. 22(6).
(2015)

30. Basic Procedures. First stage is consultations.
Upon failure of consultations panels are established by the Dispute Settlement Body (DSB) (General Council).
Panels have detailed rules of procedures providing for “descriptive sections,” interim reports, and final reports.
If appealed the Appellate Body (AB) reviews the panel report.
Issues of law covered by the panel
Legal interpretations developed by the panel.
The DSB automatically adopts the reports of the panels and the Appellate Body unless there is a “consensus” (unanimity) against its adoption. (Concept of automaticity.)
DSB keeps surveillance of implementation.
(2015)

31. Basic Characteristics of Procedures.
Three member panels and Appellate Body.
Panels are selected from a roster and the AB members are permanent (but not full time).
Quasi-Judicial
Panel members chosen by parties if have agreement
Rebuttal arguments
Experts
Third Parties
No jury / No examination of other party
AB members not selected by parties
Substantial confidentiality and secrecy of proceedings provided. (This has come under attack by those wanting more transparency and a greater role for civil society – NGOs.)
(2015)

32. Two Methods for Private Sector to Attack Foreign Restrictions & Two Methods of Litigation Before the WTO.
# 1 Industry Action in Domestic Agencies
# 2 Direct WTO Action by a Country
# 1 EU
# 2
U.S. EU
U.S.
Market Access Restriction
Market Access Restriction
Unilateral Remedy after domestic agency determination e.g., A/D or CVD …
# 1 -- WTO action by a member against unilateral trade remedy.
# Direct WTO action against national restriction.
Another option for the private sector – It can lobby the USTR to bring a direct action against a perceived foreign market restriction.
If the WTO determines a violation it then may authorize sanctions.
This is the basic WTO approach – sanctions only allowed via a multilateral determination via the dispute resolution system.
The WTO allows unilateral trade remedies against a perceived foreign restrictions if pursuant to domestic agency determinations.
This is one exceptional instance that allows unilateral restrictions.
The private sector has this as one option – filing a domestic agency case -- with the ITC, ITA or USTR.
The foreign country can then attack the agency determination in the WTO. This is a supranational review of a national determination.
(2015)

33. Flow Chart of Litigation Stage (Merits).
Dispute Settlement Body
Appellate Body
Panels
Consultation
(2015)

34. Impact of Litigation. Binding only on the parties to the litigation.
Benefits to Trading System.
Non-party (third-party) takes advantage of removal of trade restriction by the losing party.
Non-party (third party) may remove own national restriction – once the trade rule is clarified by the decision.
Further benefits other states.
(2015)

35. Post-Litigation Stage (Implementation / Enforcement).
Arts. 21 – 23 (DSU)
Removal of offending measure.
Stage # 2 --
Surveillance / Compliance Review
(implementation).
Sanctions.
Implementation.
Final DSB action --after panel/AB decision.
Stage # 1 -- Litigation Stage.
(2015)

36. Sanctions & Compliance.
Authorization of Sanctions.
Removal of Sanction.
Winning state to remove sanctions when it determines implementation is sufficient.
WTO authorizes winning party to impose sanctions when have non-compliance – WTO determines compliance.
But if winning states fails to remove sanctions, losing state to return to WTO and ask for compliance determination.
(2015)

37. Time Periods for the Full Litigation Process.
These approximate periods for each stage of a dispute settlement procedure are target figures — the agreement is flexible. In addition, the countries can settle their dispute themselves at any stage. Totals are also approximate.
60 days
Consultations, mediation, etc
45 days
Panel set up and panelists appointed
6 months
Final panel report to parties
3 weeks
Final panel report to WTO members
Dispute Settlement Body adopts report (if no appeal)
Total = 1 year
(without appeal)
60-90 days
Appeals report
30 days
Dispute Settlement Body adopts appeals report
Total = 1y 3m
(with appeal)
Time Periods for the Full Litigation Process.
(2015)

38. (2015)
Source: WTO (2005).

39. Implementation / Sanctions.
Decisions to be implemented by bringing the offending “measure into conformity with that agreement.” Art. 19
Losing Party may “buy its way out.” (Maybe not)
Implementation of recommendation is preferred. Art. 21
WTO determines if there is an inconsistency between implementing measures and ruling (original panel). Art. 21
Arbitrator may decide “reasonable period of compliance.”
However, compensation or suspension of concessions may be authorized (“retaliation & cross-sector retaliation / cross-agreement”) by the DSB. Art. 22
Arbitrator may decide if “suspension” is equivalent to “nullification” (amount of sanctions).
Sanctions are primarily tariff surcharges for winning party.
Enforcement -- as of only 7 (8) sanctions authorized (Beef, Bananas, FSC, Canadian Aircraft) (Against U.S. – FSC, Byrd).
(2015)

40. (2015)

41. IV. Practice:
(2015)

42. For summary chart of cases Click here (1995-2005)
For NYLJ article (2004) on earlier data Click here
(2015)

43. Malawer, “U.S. & WTO – 10 Yr. Review.” (Summer 2005). (Click here.)
Total Cases – 62
Complainant – 26
Respondent -- 36
Malawer, “U.S. & WTO – 10 Yr. Review.” (Summer 2005). (Click here.)
(2015)

44. (2015)

45. 22 consultations resolved favorably.
(2015)

46. 14 consultations resolved.
(2015)

47. (2015)

48. (2015)

49. Source: "Update of WTO Dispute Settlement Cases (WTO: Oct. 14, 2004).
Litigation does not include Art. 21.5
Consultation includes mutually agreed solutions Art. 3.6, inactive & active panels.
(2015)

50. Some cases jointly filed: Total 315 complaints, 309 cases.
(2015)

51. Total 195.
(2015)

52. * Joint DC/LDC against DC – 6 cases.
Total 114.
(2015)

53. V. Observations & Research Note.
(2015)

54. Observations Concerning the Panel / AB System
Complainants win in the panels & Respondents lose in the DSU.
Major areas of conflict have included traditional restrictions regarding agriculture, textile and goods involving trade remedy issues (A/D, subsidies and escape clause) as well as newer ones involving scientific testing and scientific evidence relating to trade measures taken for non-trade reasons.
Diverse countries have participated in these cases (India, Japan, EC, Venezuela, Mexico, Brazil) including developing countries.
U.S. has won many cases, has increasingly become a Respondent, but has increasingly won cases.
U.S. continues to rely upon it and threaten newer actions, (especially against , China.
Countries have been satisfied (they continue to file other cases).
Wide range of trade issues raised.
Many more cases are filed than go through the full litigation process –more are settled than litigated.
The U.S. has filed many new cases against China and China has become active as a complainant.
Obama’s approach to China litigation?
(2015)

55. Observations ………….
The U.S. and the EC are the biggest respondents. Also the leading appellants. Japan, Korea, Brazil and India often respondents.
Subject (agreements) of many disputes involve goods, dumping, subsidies and safeguards. (Newer issues of public health as a trade issue and necessary scientific standards also raised.)
Parties have implemented most decisions including sanction decisions. Sanction issues still exist – as to when there is compliance and when and how they are to be lifted.
Sanctions authorized but states have complied
Brazil and Canada have not imposed authorized sanctions concerning their regional aircraft disputes.
Canada had threatened U.S. sanctions in Lumber cases.
Even when sanctions are authorized they are not imposed.
Over 400 cases filed only 9 sanctions authorized.
Developing countries continue to be aggressive in the use of the DSU (for example, Brazil in the cotton case against the U.S. and sugar case against the EU, and E-Gambling case by Antigua) --- largest to smallest LDC.
(2015)

56. Observations ……… Numerous countries have won and lost cases.
Arbitration used to help decide amount of sanctions & reasonable period for compliance (as to compliance conformity to the original panel).
Countries continue to use the system broadly.
General satisfaction, many more issues than the old Gatt system, much strengthened dispute system.
System restricts unilateral actions.
It’s beginning to look like a real court system. Cases are won and lost. Countries complain, decisions are appealed, however, more cases are filed and decisions are implemented.
Countries decide as a matter of policy to bring or not to bring matters to the DSU. May decide to request sanctions or not implement when authorized. (Litigation discretion).
A particular case (a trade dispute) is only a part of trade policy generally and trade policy is still only a part of a broader foreign and national security policies .
(2015)

57. Observations ………
But clearer rules concerning implementation are required (to confront unilateral actions) and additional consideration of procedural matters also required. Some discussion of “over-reaching.”
This is the situation even though countries to the DSU have vastly different national cultures and different legal systems.
There is the recognition that in order to facilitate global trade, global trade rules that also apply within states, need to be adjudicated by a third-party.
While a decision only applies to the actual parties, all states benefit when the decision is implemented. (Technically not precedent.)
This clarifies rules & leads to greater acceptance of them & other states may further change their own rules.
(2015)

58. Observations …………...
Trade rules are being adjudicated by the major trading countries as well as newer ones as to major trading issues.
What is emerging is a rule-based & multilateral system with rules being enforced. Precisely what was envisioned by the U.S. at Uruguay – as the architecture for the trading system.
In the post-war era trade relations has become a critical aspect of foreign policy and international relations – “the transformational power of trade.”
The American vision is that a rule-based system governing trade will provide a linkage to domestic civil society and global peace.
The WTO is central to trade relations today and the DSU is at its core. The DSU is expanding as is the definition of trade to include newer areas.
The WTO and its DSU are central to trade relations, the essence of international relations today. They provide the principal global institutions for governance in the 21st Century. The first time having a compulsory and binding multilateral trade dispute mechanism.
(2015)

59. Future Research Note.
“Consultations” is a fruitful area for investigation. (Most cases are settled at this stage.)
The WTO periodically compiles studies concerning total cases brought (not just decided) including consultations in term of complainants and respondents.
This raises the issue of “settlements” and not rule adjudication as the principal objective of the DSU.
(2015)