Comments and Discussion
[The Role and Effectiveness of the WTO Dispute Settlement Mechanism]
Robert E. Hudec: Professor Jackson's paper starts with a description of the WTO dispute settlement procedure, as set forth in the WTO's Dispute Settlement Understanding (DSU). The objective characteristics of procedure are discussed in considerable detail for the benefit of those not familiar with WTO dispute settlement, as are the reforms that distinguish the WTO procedure from the GATT dispute settlement procedure that preceded it. In this, the paper provides a most useful introduction to the subject.
The paper then goes on to respond to the question posed by the conference organizers--Does the WTO Dispute Settlement Mechanism work? To most lawyers, and, for that matter, to most WTO observers, the standard of performance indicated by the word work would have roughly the same two elements as the standard applied to national courts in domestic legal systems. One would expect, first, that legal claims brought before the WTO's tribunals would be decided objectively according to the applicable law, and, second, that those legal judgments would be enforced and obeyed.
Without getting into extensive detail, Professor Jackson's answer is that, so far, the new WTO dispute settlement procedure has worked rather well. The new Appellate Body, which is the final and deciding voice of the new system, has managed to earn the respect of the WTO community by rendering objective, sensible, and legally supportable rulings. In addition, Jackson notes, the existence of the Appellate Body has already introduced a notable legal dimension into the way WTO diplomats approach problems.
As for enforcement, the prevailing attitude among WTO governments appears to be one of satisfaction with the system as a whole, although the actual data are not as pretty as one might hope. The most encouraging datum [End Page 220] is that, in all adopted legal rulings to date, the losing party has said that it would comply with the ruling. The actual performance by losing parties, however, has so far fallen considerably short of that standard. Jackson's paper presents some preliminary data on the twenty completed cases so far--cases in which the time for compliance has expired. In two cases, a failure to comply has reached the point of causing trade retaliation by one or more of the complainants, although in both cases the parties say they continue to work toward eventual compliance. In four other cases, the compliance tendered by the losing party has been found inadequate, and the compliance in a fifth case is currently being adjudicated. Looking ahead to the cases already in the pipeline, there is reason to believe that the WTO's caseload will continue to present a significant number of enforcement problems. 1
The fact that about one-third of the final rulings made so far have encountered compliance problems could be viewed as a worrisome number, particularly in comparison with the performance standards of domestic legal systems. On the other hand, these compliance problems are not particularly surprising when one considers the difficulty that governments often have in reversing measures that, by definition, represent significant political support. These early problems demonstrate that the new WTO dispute settlement system has not worked a miraculous conversion of political attitudes in national capitals. They demonstrate that, on some occasions, WTO governments will still have to work very hard, and with considerable patience, to bring governments to observe their obligations. And, indeed, they also remind us that on some occasions the dispute settlement system will fail altogether to achieve meaningful compliance.
Notwithstanding these limitations, WTO governments have found reason to be satisfied with the results so far. Governments are clearly committing themselves to comply, governments are clearly working harder than before to comply, and in many cases governments have managed to comply in the face of political opposition that would have blocked compliance in the days of GATT. With patience, most of these compliance problems are likely to be worked out so that they produce a satisfactory result. Although the system clearly does not work as well as a mature domestic legal system, under the [End Page 221] lower standards that must be applied in a world of imperfect international institutions, the new WTO procedure has so far worked up to realistic expectations.
In the latter half of his paper, Professor Jackson examines some of the problems that the WTO dispute settlement procedure will confront in the near future and that will influence its success or failure in coming years, focusing primarily on "constitutional" problems that have emerged as a consequence of the new dispute settlement procedure.
The list of "constitutional" problems is diverse. It includes practical problems caused by the increased legalism of the new procedure, such as the resource problem for poorer countries due to the expense and professional skills needed to cope with its technical complexity. The list also includes the broader resource problem created by the significant increase in the volume of litigation under the new procedure, a volume that appears ready to grow even further as newer areas of legal discipline such as trade-related aspects of intellectual property and trade in services come into play. It includes a large number of technical legal problems that require fixing, either gaps or inconsistencies in the new Uruguay Round agreements or similar lacunae in the new dispute settlement procedures themselves. At the most general level, it includes a growing public criticism of the new procedure as antidemocratic, because it is not transparent and does not allow for participation by nongovernmental interests. Jackson calls attention to these problems, but he does not discuss them in any detail.
A significant portion of the paper is devoted to one other, overarching constitutional problem that has major implications for both dispute settlement and other areas of WTO governance: the WTO's process of political decision-making. In other judicial systems such as those of the United States and Europe, the courts of last resort are very powerful, but there is usually a legislature that has the power to overrule them when they reach decisions that are politically unacceptable to the community at large. Such overruling powers are not used very often, but they play an important role in checking the power of the courts and maintaining a basic rapport between the law and the political community it serves.
On paper, the member governments of the WTO have a similar power to overrule legal rulings. The WTO governments can agree to amend the rules of the trade agreements being interpreted by the dispute settlement tribunals, either through a formal amendment process or by renegotiating the entire agreement. They also have the power to reach "decisions" affecting smaller issues, such as the administrative problems that currently trouble the new dispute [End Page 222] settlement procedure. But, as Jackson explains, the exercise of these powers is constrained by strict voting requirements, and even further, in the case of the DSU itself, by a requirement that changes and other decisions must be made by consensus. As a practical matter, it will be extremely hard for WTO governments to make these changes and decisions, except in larger trade negotiations where many issues are on the table simultaneously--a situation that will not arise more than once every fifteen years or so, and maybe even less often. To the extent that the WTO is unable to legislate corrections to unwise or unwanted legal rulings, it will place ever greater strain on the political viability of its dispute settlement machinery.
Professor Jackson discusses the problems of WTO decisionmaking in some detail and considers several suggestions for resolving, or at least ameliorating, the problem. Jackson's suggestions are constructive and would appeal to most WTO members under normal conditions. Thus they could provide a way forward if the right sort of political will is present. Their utility will be limited, however, if the current problems of WTO decisionmaking involve somewhat deeper divisions between WTO members, particularly divisions between developed and developing countries. I devote the rest of my remarks to examining the nature of the current problem and the likely effects of Jackson's suggestions for dealing with it.
In my view, the central constraint on WTO decisionmaking of any kind is not the super-majority voting requirements contained in the WTO charter but the aversion of the largest WTO members to voting of any kind. In practice, decisionmaking in the WTO, like GATT before it, operates almost exclusively by consensus. Proposals to resolve an issue by taking a vote are very rare, and when they are made they are greeted with what is almost blood-chilling horror: "Anything, anything, but please, please, no votes." The reason, of course, is the possibility of the larger countries being outvoted by the more numerous developing countries. The World Bank and the International Monetary Fund can vote because votes are weighted by economic importance. But the WTO, and GATT before it, have always followed the rule of one-country, one-vote.
The larger WTO governments have an object lesson of what happens when issues of international economic policy are decided by majority voting. The object lesson is the United Nations Conference on Trade and Development (UNCTAD). UNCTAD was created in 1964 as a developing country alternative to GATT. At least up to 1990 or so, UNCTAD's history has been a long series of issues decided by voting, usually with a margin of something like [End Page 223] 112-6 with 15 abstentions. The majority normally voted in support of demands that developed countries alter their policies in favor of developing countries. The problem was not that developed countries were coerced into giving more than they wanted; , rather, the problem was that the entire process was a waste of time, because developed countries had made it clear from the outset that they would not obey mandates created in this way. According to the large countries, the same results can be expected from voting in the WTO. While UNCTAD-type voting in the WTO might cause some discomfort in the short run, because the WTO has a more rigorous legal structure than UNCTAD, in the long run the consequence of voting in the WTO would be to destroy the utility of that organization.
If majority voting is not possible, then governments can govern themselves only by consensus. That was the formula in GATT. From the point of view of developed countries, GATT operated rather successfully under a consensus decisionmaking formula. (To be sure, "success," from a developed country viewpoint, means that developed countries get their way on most important issues.) 2 The last big head-to-head confrontation between developed and developing countries occurred over the developed country proposal to bring intellectual property and trade in services under the purview of GATT. As was usually the result in GATT, a deal conforming to the objectives of the developed countries was eventually struck.
The question on everyone's mind now is whether the formation of the WTO has somehow destroyed whatever it was that made the GATT consensus decisionmaking "work"--at least, from a developed country point of view. There is some reason to believe that such consensus decisionmaking has already been, and will continue to be, more difficult under the WTO than it was before. The greater legal formality of the WTO may have some influence in this direction. The secret of getting one's way under a regime of consensus decisionmaking is the ability to make joining consensus a better answer than the other alternatives. In GATT, there was always the risk that the larger countries would forge ahead on their own, stonewalling adverse dispute settlement decisions if it came to that. In the WTO, it is likely that large governments will feel more constrained to follow dispute settlement decisions, partly because such decisions will automatically be "legally binding," and partly because the larger governments have made a greater political commitment to their own constituents [End Page 224] to provide an effective dispute settlement system. Thus the greater "legality" of the WTO may invite the smaller countries to stick to their guns longer and more forcefully.
I would mention another important factor that has changed with the WTO. In GATT, the deference of smaller countries to developed country wishes was always induced in part by a tacit understanding that, if developed countries get their way, they would not insist on developing country obedience to the rules. Most developing country markets were still protected by balance-of-payments trade restrictions, and few developing country tariffs were bound. This tacit deal was undone by the Uruguay Round trade agreements. For the first time in GATT history, the Uruguay Round negotiations made a genuinely serious effort to subject developing countries to effective GATT-WTO legal discipline. The reason for seeking this new legal discipline was the perception by developed countries that many "emerging" developing country markets offered significant commercial opportunities, particularly if legal commitments could be obtained, opening trade in services and protecting intellectual property rights.
As a result of agreeing to this new legal discipline, developing countries in the WTO consider that they are entitled to a greater say in what happens, because they have in fact paid for the privilege. And as a result of the new commercial opportunities offered by these new legal commitments, the developing country demands for participation have significantly greater economic clout behind them. This should not have come as a surprise.
A third, rather obvious factor must also be mentioned. Consensus is not possible, of course, unless the larger countries agree among themselves on what they want. Some of the WTO's early difficulties in reaching decisions can be traced to the fact that the developed countries themselves were at odds. It is not clear whether the divisions between developed countries in these early days of the WTO were mere happenstance, or whether more fundamental divisions are developing--for example, a greater tendency to resist U.S. leadership now that the cold war seems to be over. In trying to understand any situation of impasse, it would be wise to start by looking at how well the WTO's political leaders are leading.
Professor Jackson's paper considers two possible solutions to a possible impasse in consensus decisionmaking: (1) the more aggressive use of the dispute settlement process to resolve differences between governments, and (2) the development of restraints upon the use of veto powers by individual governments. Jackson also mentions briefly a third possibility--the use of [End Page 225] "plurilateral" agreements under which like-minded governments can create new rules or procedures between themselves, without including dissenting governments. I would like to comment on each of these three possibilities.
(1) Dispute settlement powers can be employed to deal with a decisionmaking impasse only where the desired answer can plausibly be claimed to be already contained in one of the WTO agreements. Gaps in an agreement can be filled by reference to the meaning and purpose of the rest of the agreement. Conflicting provisions can be reconciled by interpretation. Ill-advised provisions in WTO agreements can be effectively repealed by extremely narrow construction. The appeal of such aggressive, "activist" legal decisions is easy to see, for such decisions can give answers--often viable and widely supported answers--without the need to overcome what may be a small minority's resistance. The dangers are equally obvious, however. Given the already considerable government skepticism about surrendering sovereignty to such a new international tribunal, decisions that appear to exercise quasi-legislative powers never granted to that tribunal could prove fatal to its very existence. Professor Jackson warns against these dangers and indicates that the Appellate Body seems to be well aware of them at this time.
In the end, the degree of restraint exercised by dispute settlement tribunals will depend on the effectiveness of other alternative solutions. If it turns out that there is no other way of coping with the WTO's apparent tendency toward decisionmaking impasse, governments will almost certainly ask dispute settlement tribunals to take a more "activist" approach, for want of any better answer. Faced with the pressures of such a situation, the Appellate Body could well conclude on occasion that an "activist" answer is better than no answer at all. 3 One cannot exclude a more aggressive employment of dispute settlement decisions until one knows the actual circumstances in question. [End Page 226]
(2) Turning to other ways of overcoming the rigidities of consensus decisionmaking, Professor Jackson suggests that governments might try to arrive at an understanding, similar to understandings that were reached during some periods in the European Community's history, that would limit the use of the veto power to cases that meet certain conditions. The main condition would be that the issue must involve a "vital interest" of the country blocking consensus. In order to qualify for such veto restraint, the decision itself would have to meet certain other conditions: It must be consistent with the norms of the WTO, and it must be supported by a significant number of WTO members. On a somewhat different plane, Jackson suggests that some decisions might gain some greater degree of insulation from veto if they are first subjected to objective review by a small group of neutral experts.
To my knowledge, a similar sort of understanding was operative in ordinary GATT affairs during the years before the WTO. In particular, there was quite strong community pressure against blocking actions, or other kinds of interference, from countries that had no immediate interest in a problem. Such rules-of-the-game would probably receive general assent today as well. The problem today, however, is that these rules are not likely to be observed by governments that want to have a more active role in decisionmaking, and particularly a role that ensures that their own concerns will be met at the same time. Vital interest or not, governments seeking to play such a greater role will be prepared to "link" their approval of some decisions to approval of other, perhaps unrelated decisions of interest to themselves. As long as governments are willing to employ such a "linkage" strategy, a "vital interest" requirement will not be observed. One must first change the fundamentals underlying the use of a "linkage" strategy.
Professor Jackson's suggestion that proposed decisions could gather broader support by being reviewed by a group of neutral experts is to my knowledge an original one. Anyone with any knowledge of the original GATT dispute settlement system will appreciate the considerable power of normative judgments made by objective experts. In fact, the entire enforcement power of GATT's more primitive dispute settlement system lay in the force of such normative judgments, because there were no other sanctions behind it. The trick, of course, is to get the resisting minority to agree to such review in the first [End Page 227] place. GATT dispute settlement itself never became a force until complainants acquired a right to have their claims adjudicated by a neutral panel of experts. The same would probably be true here. Assuming such objective review proceedings could not be performed without a consensus decision authorizing them, it is hard to see how they would ever be authorized. A minority strongly resisting the decision would be unlikely to agree to weaken its position by accepting such a review procedure.
There is one compulsory procedure that could be used to achieve such expert review, although it is probably not the review procedure Professor Jackson has in mind. GATT Article XXIII, which is still the basis of WTO dispute settlement, contains a seldom-used subsection--subsection 1(c)--authorizing complaints about "situations." A "situation" is something different from a "measure" taken by one or more governments. It is simply a set of circumstances, caused by other forces, that is producing adverse effects upon the "benefits" governments expect to achieve from their membership in GATT or the WTO. It could be a worldwide depression, or financial crisis. But it could also be the lack of legal discipline in an area of international economic affairs. The original idea behind Article XXIII:1(c) was that such "situations" might justify an adjustment of legal obligations. It was believed that it would be better to have an objective appraisal of that "situation" before trying to deal with it. As originally conceived, the "situation" complaint would have led to a nonbinding recommendation about what should be done to remedy the "situation," with the possibility that the GATT contracting parties could decide, by consensus decision, to release governments from obligations as a way of dealing with it. That is still the type of outcome that would likely be produced today, because Article 26.2 of the WTO's Dispute Settlement Understanding retains the nonbinding character of "situation" rulings. In this commentator's view, the "situation" complaints of GATT Article XXIII:1(c) could be used to obtain expert review of almost any "problem" in WTO law today, and of various proposals to deal with it. 4 [End Page 228]
(3) Professor Jackson's mention of "plurilateral agreements"--the conclusion of separate agreements between only those governments that agree with the substance of the agreement--introduces another way of dealing with a breakdown of consensus decisionmaking. The present WTO agreement has only two plurilateral agreements currently in force--concerning government procurement and aircraft--both of which are of interest only to a limited number of countries who do not really want disinterested countries to clutter up their business. In 1979, however, a larger group of plurilateral agreements was adopted at the end of the Tokyo Round--the antidumping code, the subsidies (and countervailing measures) code, the standards code, the customs valuation code, the code on import licensing, and then the procurement and aircraft codes. 5
As Professor Jackson points out, the 1979 codes were a response to a decisionmaking impasse like the one that appears to be developing today. The larger governments wanted to establish new legal disciplines over several kinds of nontariff barriers but believed it would be impossible to secure the votes needed to make such codes a formal part of GATT. Despite negative reviews during the Uruguay Round negotiations ten years later, the 1979 codes were a quite successful answer to a serious problem of decisionmaking impasse. The codes succeeded in signing up enough important players to meet political demands for reciprocity. That accomplished, they created new rules and new dispute settlement procedures that became part of GATT's everyday institutional life, so that it was only a matter of time before adherence to them became a condition of membership. If the success of the 1979 codes could be repeated, they could be a quite effective alternative to the impasse in consensus decisionmaking.
Things would not be that easy in the WTO, however. The success of the 1979 codes depended to a considerable degree on strong-arming by the larger [End Page 229] countries that would be more difficult to pull off in today's WTO. In order to obtain the signatures of some of the more important developing countries, the United States announced that nonsignatories would not be accorded the new and more expansive legal rights created by these agreements--a flat violation of GATT's "unconditional" most favored nation (MFN) obligation. Although India did contest the MFN violation and won for itself a promise of equal treatment, for most other developing countries the arm-twisting worked, aided perhaps by the then prevalent assumption that these new obligations would not be enforced to the letter upon developing countries. Similarly, the leading developed countries (being the principal financial supporters of GATT) managed to put through a decision that all the codes would be administered by the GATT secretariat and be integrated into its daily business.
Today in the WTO, threatened denial of MFN treatment would likely be met with a dispute settlement claim and would probably not succeed in twisting individual arms to sign. Moreover, as Jackson notes, Article X:9 of the WTO agreement provides that a consensus decision is required to bring a plurilateral agreement into the WTO institutional structure, meaning that no new agreement could be administered by the WTO without such a vote. 6 While governments that are not willing to sign a plurilateral agreement would not necessarily, for that reason alone, veto the plurilateral agreement's acceptance into the WTO, governments could use that veto power as a second weapon to resist the kind of strong-arming that took place in 1979.
If the new political setting of the WTO proves too hostile for plurilateral agreements of any importance, a possible response will be plurilateral agreements outside the WTO. One model might be the investment code of the Organization for Economic Cooperation and Development (OECD).The example may seem a poor one in view of the recent failure to negotiate such a code in the OECD and the expressed desire of some governments to bring the subject into the WTO so that, they say, a broader range of national interests can be involved in the negotiations. If WTO decisionmaking encounters serious and sustained impasse, however, the OECD option could well become a workable alternative.
To summarize, Professor Jackson's paper lays out a sensible and responsible approach to the problem of decisionmaking impasse--in each case identifying the sort of policies and understandings one would wish to propose [End Page 230] first as a way of constructing a more workable decisionmaking procedure. It is a good program, one calculated to appeal to the interest of a broad cross section of the WTO membership, which is always where one should start. At the same time, one must be aware that more fundamental changes in GATT-WTO practice may be afoot, and thus the very strong possibility that this broad-based approach to effective decisionmaking may prove wanting. It is not too early, therefore, to start thinking about what happens if it does not.
Donald Davis: Answering the question that John Jackson's paper addresses--Does the WTO Dispute Settlement Mechanism work?--presumes that we know what the Dispute Settlement Mechanism (DSM) is supposed to do. On one level, we may think of its aim as providing an objective forum in which claimants may enforce obligations contracted to by countries in the various GATT and WTO rounds. Thus it is a first line of defense in enforcing commitments for trade liberalization. But the DSM must also play a systemic role in preserving an international consensus for a liberal trading order. One important element in maintaining consensus is the boundary that is drawn between national prerogatives and international obligations. What we see is that the move from GATT to WTO has radically altered who gets to draw that line. And this--even apart from the substance of where the line is drawn--may matter for preserving the consensus for liberal trade.
There is no question what the major change in the DSM has been in moving from GATT to the WTO. Under GATT, adoption of a panel report required acquiescence of the losing party. As a judicial system, there are obvious defects when the judgment enters into force only when the loser agrees. On its face, this might appear to be a farce. Indeed, one might wonder why anyone would bother to raise a dispute under such a system or negotiate concessions when enforcement of agreements relies on a violating party's assent.
Yet agreements were concluded and disputes were argued. What this points to is that, in spite of its evident defects and weaknesses, the previous form of the DSM neither prevented agreements nor led countries to conclude that the dispute settlement process was useless. What it did was emphasize the importance of mediation and negotiation in reaching settlements, with the panels serving as a forum for airing and assessing evidence. The force of the panels was persuasion, rather than compulsion. The decisive shift of the new Dispute Settlement Understanding is that decisions of the panels are adopted virtually automatically, unless appealed, and that the decisions of the Appellate Body are binding on members. [End Page 231]
It is worth pondering for a moment the formal power of the WTO Appellate Body. One fact that we know is that in general equilibrium any action or policy of national authorities may affect international trade flows. If a WTO member believes that another member's policy impairs its enjoyment of prior concessions, it can bring this charge before a panel. Critics may ask: "What elements of national policy are immune from intervention by the Appellate Body and its binding rulings?" One need be neither Jesse Helms nor Ralph Nader to be concerned about the implied issues of impinged sovereignty. In practice, Professor Jackson notes, the Appellate Body has been aware of the responsibility that comes with its exceptional domain and binding rulings and has acted with even greater discretion than was typical of at least some GATT panels. The question remains whether it is wise to place such sweeping formal power in the hands of a small group of part-time jurists in Geneva.
There are, however, some clear upsides to the present approach. Moving toward a rule- or judicial-based system may provide countries and private enterprise with a greater degree of predictability and fairness in the outcomes. The insidious temptation to renege even on small obligations without cause is removed. But also lost is the opportunity for governments to block consensus on issues they consider of national importance or that may roil domestic politics. Given that such exceptions may, in the balance, help to preserve a consensus for the liberal trade regime, this also signals a danger under the new regime. Signs of these conflicts appear in the Bananas and Beef Hormones cases.
A concern raised by Professor Jackson relates to the obligations of a country in the face of an adverse ruling. Is the country obliged to perform, to offer compensation directly for the losses, or simply to acquiesce to "compensatory" retaliation? He argues that small countries may get little relief from such a system if they are left only to withdraw concessions. Although he does not couch it in these terms, this logic would be confirmed by the conventional optimal tariff formulas. The bound tariffs of the largest WTO members are almost certainly lower than their unilaterally optimal tariff level. Hence for them, raising tariffs secures some real compensation. The presumption is reversed in the case of small countries, whose bound tariffs would lie above the conventional optimal tariff of zero. Withdrawal of concessions does punish, but it punishes both the transgressing country and its victim. This inhibits aggressive enforcement of the rights of smaller countries.
On the whole, Professor Jackson views the development of the new dispute settlement process as a positive development for the world trading system. I am inclined to agree. But I am also inclined to believe that greater attention [End Page 232] should be focused on the powers and domain of the Appellate Body. When the powers of the DSM were minimal, a little laxness about what topics fell in its purview caused no great harm. Now that the DSM is quite potent, a more thorough review and definition of the types of policies that it can consider as impairing trade rights would seem to be in order. The dilemmas raised by dispute settlement in the WTO are real. One would hope that experience with a WTO that respects the limits of its power will calm those who fear abuse of that power relative to national prerogatives.
General Discussion. Several participants made the point that the dispute settlement process should be judged by its ability to increase the volume of trade. Richard Baldwin noted that from an economic perspective the interesting questions are whether the dispute settlement mechanism encourages good behavior on the part of countries and whether it helps to implement existing commitments. He emphasized that the troubles of the WTO have little to do with the participation of developing countries; rather, they originate from conflicts between the United States and the European Union, particularly in agriculture. Paula Stern asked about how consultation (in advance of setting up panels) had worked in the past. Gary Horlick argued that the earlier GATT dispute settlement mechanism had worked well but that it had an exceedingly poor reputation. The question is whether, in nonexpert circles, the WTO dispute resolution process is casting the organization as an entity that is unable to resolve a dispute over, say, bananas between two countries that hardly even grow bananas. He suggested that the poor reputation of the GATT/WTO arises from a handful of cases that have not been effectively rebutted in public.
Bert van Barlingen asked whether it would be a good idea to strengthen the compensation option so as to avoid the risk of retaliation--for example, by allowing the complainant to select the areas in which compensation would be granted. He pointed out the danger of using the dispute settlement system to enforce rules that a majority of the population may oppose (as is arguably the case with respect to beef hormones or genetically altered food). He noted that the U.S. government's approach to the biotechnology issue, for example, is fundamentally different from its treatment of the beef hormones controversy for the simple reason that the government learned from its mistakes. With regard to implementation, van Barlingen argued that, as Robert Hudec explained, neither the U.S. Congress nor the European Union would accept or implement a legal obligation imposed unilaterally without advice and consent. If one accepts the traditional line that the WTO's objective is to create [End Page 233] mutual advantages on the basis of reciprocal elimination of trade barriers, then the question of implementation recedes in importance. Compensation can take its place, and in some instances (the beef hormones dispute, for example) the European Union may well be willing to provide compensation in excess of the trade in question. But domestic politics and the influence of the private sector in domestic policy prevents countries from making compromises and accepting redress for one perceived trade imbalance in exchange for "losing" another.
Susan Collins was struck by the statement in John Jackson's presentation that WTO panelists (and the Appellate Body as well) do not consider themselves to be judicial activists. She asked whether this might not in fact be one of the system's roadblocks and noted that many observers outside GATT and the WTO have expressed disappointment at the tame positions of the organizations' juridical bodies. Claude Barfield took issue with van Barlingen, arguing that one could not establish a rule-based system and then allow countries to evade the system by using the compensation route. Having it both ways, he said, would destroy the entire system. Barfield expressed concern about the imbalance between the very inefficient legislative process and the very efficient judicial process in the WTO. With cases likely to arise regarding trade in services or the exceedingly difficult issues associated with trade-related aspects of intellectual property, WTO panels and the Appellate Body will be creating law in areas in which they may not be technically competent. Shang-Jin Wei asked about the possibility of charging user fees to decrease the case load or making the losing party pay for the expenses associated with litigation.
In response to the discussion, John Jackson expressed some uneasiness about the argument that the WTO's mandate is to increase trade. He argued that the issue, rather, is how to design appropriate international institutions in the context of a globalized economy and emphasized the need for mechanisms that can balance trade liberalization and economic efficiency with other worthwhile goals. He expressed doubt as to whether the WTO system can or should focus exclusively on trade liberalization and cited the findings in the 1998 Shrimp-Turtle dispute as probably the most important constitutional case in this jurisprudence. 1
On the question about compliance versus compensation, Jackson thought that van Barlingen's point was intriguing and had some merit. While conceding [End Page 234] that implementation is in a sense different from the question of rule orientation, he was still uneasy about it, noting that emphasizing the compensation route rather than rule implementation can weaken the system's rigor. On the other hand, he said, permitting a country that prevailed in a complaint to set payment compensation (as an alternative to retaliatory measures)--even to the extent of double or treble damages--was an interesting strategy which might have some effect in promoting compliance.
Notes For Robert E. Hudec
1. At this writing, the two most prominent clouds on the horizon are the questions of U.S. compliance with the rulings in the Shrimp-Turtle and the Foreign Sales Corporations cases. United States--Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS 58/AB/R (November 6, 1998); United States--Tax Treatment for "Foreign Sales Corporations," WT/DS 108/R (February 20, 2000) (Appellate Body Report).
2. To say the same thing in more neutral terms, it could also be said that GATT decisionmaking was "successful" in that GATT was in fact able to carry out its declared mission of trade liberalization. 3. If one were looking for a concrete example of the kind of case likely to arise in this scenario, a good example would be the celebrated 1992 Tuna/Dolphin decision, GATT B.I.S.D. (39th Supp., 1993), p. 155. The central issue in that case was whether the GATT's general prohibition of trade restrictions extended to U.S. trade restrictions for the "environmental" purposes of protecting dolphins. The relevant legal provisions were not clear, and in that case the conservative answer would have been to say that, in the absence of a clear obligation, governments remain free to do what they want. At that time, most GATT governments, including the European Community, believed that the U.S. action was contrary to the understandings underlying reciprocal GATT trade obligations. Governments were also concerned that a decision allowing the United States to do this would open the door to many other kinds of harmful restrictions, especially since it appeared that, then as now, GATT would never be able to agree on negotiated restraints on such conduct. The panel that decided the case (this was before the WTO and its Appellate Body) apparently shared these concerns. It had to make creative use of the rather spare legal materials before it in order to justify a legal prohibition against the restriction. While GATT governments themselves unanimously endorsed the decision, the ruling was greeted with very strong public criticism, and eventually the WTO retreated from the Tuna/Dolphin ruling. Despite the troubled outcome of the Tuna/Dolphin case, answers like this will again appear attractive when similar situations arise in the future. 4. It might be objected that the procedure of Article XXII:1(c) is too "legal" for the political purpose Jackson has in mind. For example, it might be objected that the typical sort of panelist chosen for dispute settlement panels would not have the kind of broad policy expertise needed to render credible judgments about such "situation" issues. Another objection might be that the Appellate Body's legal expertise would be unsuitable for reviewing such judgments. In fact, neither of these problems will occur. "Situation" complaints will be sui generis. In all likelihood, the complaint will not even need to be directed against a particular country or countries as defendants. Rather, individual countries would have a right to participate, in support or in opposition to the requested nullification and impairment ruling, in a status somewhere between "parties" and "third parties," on terms that would have to be decided by the panel if not agreed beforehand by the Dispute Settlement Body. Since there would likely be too many "parties" to come to an agreement on proposed panelists, the members of the panel would probably have to be appointed by the director-general in consultation with all the parties. Since a "situation" case could be quite far removed from traditional Article XXIII litigation over specific government measures, the director-general would have sufficient flexibility in the choice of panelists to be able to choose the right sort of neutral experts. As for the Appellate Body, the answer is that DSU Article 26.2 deprives the Appellate Body of jurisdiction over Article XXIII:1(c) cases. The DSU ceases to apply to XXIII:1(c) complaints after the issuance of the panel report. Consensus is thus required for adoption. Actually, adoption would be irrelevant for the political purposes Jackson has in mind. The experts' report would have whatever political effect it is going to have, whether or not adopted.
5. The text of the 1979 codes appears in the GATT's published documents series, B.I.S.D. (26th Supp., 1980), pp. 8-88.
6. Some negotiators recall that the consensus requirement was inspired by opposition to a trade-restricting plurilateral agreement on steel products being proposed during the Uruguay Round.
Note For General Discussion
1. The WTO panel found the United States Shrimp-Turtle Law (Section 609 of Pub. L. 101-162, restricting imports of shrimp harvested with equipment that harms endangered species of sea turtles) to be inconsistent with U.S. obligations under the WTO agreement.