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INTRODUCTION

Assessment of the effectiveness of the World Trade Organisation (WTO) system in changing the behaviour of governments of trading nations is complicated by the need to address two separate yet co-informative issues. Firstly; the extent to which “‘constitutionalising’ discretionary foreign policy powers”[1] changes the political calculus of individual governments, and secondly; the degree to which the WTO agreements actually seek to change government behaviour. In considering these questions I defend the view that the WTO system aims not simply at the reestablishment of political equilibrium but rather the complete realisation of trade commitments. The integration of WTO rules into domestic law, I suggest, represents an effective further realisation of this objective.

The structure of this argument is in three parts. As a preparatory exercise, I outline how the Global Agreement on Tariffs and Trade 1994 (GATT) undertakings aim to cure “government failure”[2] through imposing a constitutional structure which restricts discretion with respect to trade powers. Secondly, I consider the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) and whether the “[p]roliferation of rules and the associated “legalisation” of dispute settlement have… been paired with a strong enough enforcement mechanism.”[3] As part of this process I assess the apparent shortcomings of the DSU against the “liability rule,”[4] a discussion which reveals the unescapable importance of the domestic politics of trading nations. In the third and final section of the essay, I invoke the foregoing analysis to argue for the enforcement of WTO and GATT commitments through domestic courts as a practical and achievable way of enforcing trade commitments.

CONSTITUTIONALISING INTERNATIONAL TRADE

(a) The domestic political economy of trade restrictions

It is an accepted platitude that the principle of comparative advantage, applied to the situation of trading nations, demonstrates that the economic welfare of nations is maximised when no trade restricting measures are in place.[5] Public choice theory explains the empirical tendency for governments to favour protectionist measures, however, by reference to the transfers of economic wealth to domestic producers that occur upon adoption of trade deliberalising instruments.[6]

Under free trade conditions the increase in economic welfare accrues largely to consumers. Restrictive trade instruments, by contrast, transfer varying amounts of this economic benefit to producers who sell in the domestic market and impose deadweight losses upon consumers.[7] Crucially, however, the discretion governments exercise with respect to trade powers[8] means that trade policy is determined not by economic welfare but according to political efficacy.

In this respect consumers suffer three key disadvantages when attempting to influence trade policy in favour of their economic interests. Firstly, the diffusion of potential benefits over the entire consumer body means that individual consumers suffer only low per capita loss, thus limiting their motivation to influence government trade policy. Secondly, consumers generally have little access to information regarding trade policy.[9] Thirdly, the costs of mobilising significant numbers of consumers into politically effective lobbies frequently outstrip the potential benefits available.[10]

In each of these respects, however, domestic producers enjoy a relative advantage; not only do the transfers of wealth caused by trade restrictions accrue to them at a higher per capita rate, their professional involvement with existing trade restrictions and organisational resources mean that they are able to lobby effectively for protectionist measures.[11] Given this discrepancy between the size and concentration of economic impact, the political attractiveness of the four key trade instruments is the inverse of their ranking in terms of economic welfare.[12] As such, the domestic political economy preferences the four main trade instruments in the following way; voluntary export restrains, quantitative import restrictions, qualitative import restrictions, then domestic production subsidies.[13]

(b) The community of trading nations

Thus power oriented rent seeking supports both trade protectionism and the preservation of the discretionary trade policy powers that make it possible.[14] Taking these domestic considerations as a point of departure, consider how the existence of a community of trading nations influences the dynamics of trade policy. The “trading nations dilemma”[15] – an appropriation of the familiar “prisoners dilemma” cooperation game to international trade – suggests that the “rational outcome”[16] for trading nations is reciprocal protectionism; the most economically inefficient possibility.[17]

However, trading nations can improve on the rational outcome if reciprocal liberalisation can be achieved.[18] Ordinarily, an agreement for trade liberalisation will be achieved where exporters benefitting from liberalisation are prepared to pay higher rates to secure access than import-competing producers in the other nation are willing to pay to keep the market protected.[19] If this occurs reciprocally, then for each nation the political support gained from domestic exporters acts as a counterweight against the loss of political support from domestic producers who sell in the local market. Moreover, such an outcome makes the widest exploitation of comparative advantage, thus eliminating the deadweight losses to consumers and each nation as a whole.

However, whilst the iterative nature of international trade helps improve on the rational outcome, the inability to ensure reciprocity makes this “best case scenario” largely unsustainable.[20] As Petersman notes; “a system of rules is required to transform the self-interested utility-maximisation by individuals and governments, and the resultant ubiquity of ‘market failures’ and ‘government failures’, into mutually beneficial cooperation.”[21]

(c) GATT as constitutional restraint

The WTO addresses unsustainability by “constitutionalising”[22] trade via the GATT rules which bind the use of foreign affairs powers, inhibiting governments who would otherwise become beholden to organised interest groups. Most pertinently, the GATT outlines a legal ranking of trade instruments which reflects their economic rather than political attractiveness,[23] and requires that negotiated trade concessions be distributed on a “most favoured nation”[24] basis. Moreover, as a trade agreement which can only be entered into as a “single undertaking”[25] the GATT ensures reciprocity of concessions and limits the free rider effect.[26] In this way it imposes constitutional boundaries which escape the rational outcome of the trading nations dilemma; the “institutions and decision-making powers of the WTO reflect the goal of inducing countries to take a broader ‘systemic view’ of their ‘general interests’ and to avoid mutually harmful, non-cooperative behaviour.”[27]

Furthermore, the adoption of the WTO system catalyses decisive changes within domestic polities which help prevent member states from defecting from their agreed concessions. Consider, as Schwartz and Sykes do,[28] how entry into a trade agreement affects the domestic costs of GATT violations. Upon the establishment of a trade agreement such as the GATT the domestic costs of violations increase relative to the domestic benefits of protectionism.[29] Not only will the political clout of import competing producers have decreased as a result of having fallen below the competitive level established efficient foreign competitors,[30] the likely integration of imported products into domestic production processes will cause resistance to new protectionist measures to grow.[31] In this manner, “once a trade liberalising agreement is reached and implemented, the balance of political power may shift importantly and immediately against those who were previously the beneficiaries of protection.”[32]

ENFORCEMENT BY COMPLIANCE OR COMPENSATION?

However, where these constraints are inadequate, does the WTO effectively induce violating states to bring WTO-inconsistent measures back into compliance? This section seeks to answer these questions by assessing the impact of the DSU as a juridical mechanism for affected member states to seek the withdrawal of WTO-inconsistent trade measures. In doing so it considers both the impact and objectives of potential enforcement measures.

(a) The Understanding on Dispute Settlement

The DSU provides for the establishment of an arbitration panel[33] empowered to recommend to the Dispute Settlement Body (DSB) that violating nations bring infringing measures into compliance with their WTO commitments.[34] Save a unamimous vote against its adoption, this report is then adopted by the DSB.[35] In the event that the infringing measures are not brought into compliance after a “reasonable period of time,”[36] the complainant may negotiate with the respondent for compensatory trade concessions as compensation for the damage caused by the violation.[37] If the violation is still not cured, the complainant may request DSB permission to “suspend concessions or other obligations under the covered agreements,”[38] provided the retaliation is substantially equivalent to the level of nullification or impairment suffered by the complainant.[39] Once again, in the absence of unanimous opposition the DSB will grant permission automatically.[40] Whilst the compulsory jurisdiction and near automaticity of this process signal a shifting conception of the WTO from a contractual “package of bilateral equilibria”[41] to a public law rule-based system,[42] it is less clear that the DSU provides sufficient political incentives for governments of respondent states to withdraw measures that violate their WTO commitments.

(b) The unattractiveness of compensatory concessions.

Consider first the unfortunate systemic preference for the retaliatory withdrawal of concessions over the granting of compensatory concessions. Although compensatory measures are conducive to the broad goal of liberalisation,[43] there are barriers to the implementation of compensatory concessions on the sides of both complainant and respondent states. Taking complainant states to begin with, the “most favoured nation” rule[44] means that the welfare benefit of increased access to the respondent’s market accrues to exporter interests throughout the whole WTO membership – not just in the complainant state.[45] Without the prospect of an increase in exporter support proportionate to the loss of support from domestic producers, the complainant has little incentive to pursue compensatory concessions. Turning to respondent states, the need for respondent to make concessions voluntarily[46] makes it difficult to secure concessions which are genuinely unattractive to the respondent state.[47]

(c) Countermeasures: The case for compensation

Retaliatory countermeasures, in as much as they increase protectionism by suspending trade concessions,[48] are not only in the economic interests of neither party,[49] but are constrained by the requirement for equivalence[50] between countermeasures and the loss of trade suffered by the complainant.[51] A proportional response, the argument goes, gives no incentive for respondent states to cure their violations.[52] Thus retaliatory action under the DSU seems to approximate the cessation remedy of international law, though no any remedy analogous to reparations.[53] Furthermore, assessing equivalence with reference to gross trade value is unlikely to produce an equivalent impact on economic welfare in each of the party states.[54]

On this basis the DSU might be understood as creating a liability rule designed to permit breach where it would be efficient.[55] Acknowledging that trade agreements are entered into under conditions of incomplete certainty,[56] the liability rule recognizes that circumstances may arise where it is possible to achieve “efficient breach.”[57] On this view, by recognising that the benefits of defecting from an agreement may sometimes outweigh those of complying the DSU uses compensatory concessions and countermeasures to remedy the loss incurred by the complainant state; thus encouraging efficient breach whilst deterring inefficient breach.[58] Indeed, the distinct lack of coercive penalties[59] and punitive measures[60] is consistent with the liability rule. The resultant ability for nations to deviate from their initial concessions suggests they have the option of pursuing efficient breach.[61]

On this construction of the DSU, its most crucial function is to regulate the efficiency of breach by providing for “a price set by an arbitrator who has examined carefully the question of what sanctions are “substantially equivalent” to the harm done by the violation.”[62] In this way the sanctions of the DSU are therefore recast as “a response not so much to the undercompliance with substantive obligations that arises absent those sanctions, but to the danger of excessive unilateral sanctions that exists in the absence of centralised oversight regarding the magnitude of sanctions.”[63]

(d) Political balance without economic benefit

Thus the liability rule casts the equivalence requirement in an efficiency-inducing role. However, even if we overlook the fact that the liability rule provides no solution to the inherent inaccuracy of calculation,[64] it is nonetheless fatally constrained by its focus on political rather than economic benefits to member states. In taking the view that “the only true binding WTO obligation is to maintain the balance of concessions,”[65] the liability rule condones the use of deliberalisation in the name of politically expediency without due regard for economic efficiency.[66]

Consider the redistribution of economic welfare under a retaliation scenario. In withdrawing concessions the retaliating state exchanges an economic welfare loss from the products it will not be importing for the political benefits of restricting access to its markets.[67] Crucially, however, the export industry denied access by the initial infringement reaps no windfall from this protection, whilst the export industry burdened by countermeasures had not been benefitting from in the breach.[68] As such, the only “equivalence” which is realised is that in political support for the member state governments, who “restore in a negative way the symmetry of the initial positions.”[69] Since, by contrast, the economic benefits and burdens accrue inequitably within domestic polities, retaliation is able to restore governments’ aggregate political support but not the economic benefits of free trade enjoyed by particular citizens. The liability rule’s characterisation of retaliation as a compensatory measure is therefore blind to the locus of the initial economic loss.

Analysis of the liability rule thus reveals that its exhortation that “the WTO enforcement regime need[s] to be understood… as a balance of negotiated concessions, not primarily as a set of legal rules”[70] is so economically disastrous that it ought to be abandoned. Concomitantly, its conflation of political welfare and economic welfare reveals a debilitating pathology in international trade law which treats the existence of an agreement as more important than the performance of obligations.[71] Thus the liability rule fails to comport well with the increasingly legalised and juridical character of the WTO.[72]

(e) Compliance: A domestic analysis

It might appear that we are in a double bind in trying to understand the role of countermeasures in the DSU; the equivalence requirement seems to hinder compliance, yet the liability rule countenances redistributive inequality and welfare diminishing deliberalisation. Ironically, the liability rule’s myopic concentration on governments at the expense of citizens suggests a solution by highlighting the need to examine compliance problems at the level of domestic politics.

What the failure of the liability rule suggests is that the impact of countermeasures is better assessed in relation to its impact on interest groups within the infringing state. Recall that the political support governments accrue through trade liberalisation is a function not just of gross trade value but also of the financial, organisational and informational resources of the affected industry sector.[73] Consequently, if retaliation aligns consumers in the complainant state with exporter interest groups in the respondent state who more powerful than those benefitting from the infringement, compliance is a realistic expectation.[74]

On this analysis, the ability of retaliatory action to induce the withdrawal of WTO-incompatible measures is predicated on the possibility of targeting powerful interest groups in the violating state:[75] “[T]he political logic that makes retaliation effective depends on inflicting sufficient damage on the most politically powerful export groups in the scofflaw state to induce them to lobby their governments to withdraw the offending trade-inconsistent measure.”[76] Furthermore, the retaliating state’s motivation to retaliate to protect local export groups seems assured by the unlikelihood the benefits of protectionism would accrue to any single protectionist group.[77]

This examination of the domestic impact of retaliation provides a renewed basis for asserting that “a countermeasure is ‘appropriate’ inter alia if it effectively induces compliance”[78] and that retaliation is not so much “a setback for the entire system”[79] as a genuinely compliance-inducing temporary measure. However, there is no reason to presume that complainants will always target powerful lobbies in the respondent state effectively. It is to this possibility that I turn in the final section of this paper.

WTO COMPLIANCE THROUGH DOMESTIC ENFORCEMENT

It should be clear by now that countermeasures operate to enliven the DSU’s “preference”[80] for compliance.[81] What is not clear, though, is that the litigating member state will always be able to effectively target powerful export groups in the respondent nation. This section suggests that the implementation of WTO commitments into the domestic law of member states may be the logical extension of the compliance-inducing mechanisms already contained in the DSU.

Certain commentators point out that even if WTO commitments are viewed as “binding legal obligations,”[82] as suggested by Jackson,[83] barriers to enforcement will still exist.[84] The most fundamental of these barriers seem to arise where the complainant is relatively powerless in relation to the respondent state.[85] In these circumstances, the litigating state risks counter-retaliation outside the ambit of the WTO as well as the possibility that its retaliatory measures may not even have any discernable impact upon the violator.[86] I would add to these concerns that the structure of their trade relations may not allow the complainant to effectively target a powerful export group in the respondent state.

I submit that the implementation of WTO commitments into domestic law would largely address these concerns by diminishing the threshold for effective retaliation. Domestic implementation of WTO rules would enable private citizens to bring claims against their own governments, the result of which would be the withdrawal of the WTO inconsistent measure. There are two ways in which this might occur. Firstly, disadvantaged consumers might bring an action against the government upon the initial imposition of the infringing measure. This, however, seems extremely unlikely given consumers’ low per capita exposure and lack of organisational resources.

The more likely mechanism by which domestic actions will be brought is in response to countermeasures imposed by another member state. As already discussed, retaliatory withdrawals of trade concessions are effective where they effectively target powerful interest groups in the respondent state. Consequently, successful countermeasures are those that impose losses on exporters which outstrip the cost of influencing government trade policy. If exporter interest groups could bring litigation in domestic courts, the costs imposed by countermeasures need only outweigh the cost of bringing litigation, thus lowering the threshold requirements for effective mobilisation of exporter groups.Consequently, domestic enforcement of WTO commitments – operating in conjunction with current retaliatory enforcement mechanisms – offers the possibility of inducing greater compliance by WTO member states.

CONCLUSION

What emerges from the preceding discussion is that proper assessment of the WTO system must give due regard to the interests which dominate domestic polities. Not only do politics at the domestic level define the government failure that results in the absence of multilateral system of trade concessions, they also illuminate various ways in which compliance is induced and may possibly be strengthened. In articulating the significance of these domestic concerns I have drawn a line between, firstly, the impact of entering into the WTO system, secondly, the availability of targeted retaliatory measures, and thirdly, the attractiveness of implementing WTO commitments into domestic law. As such I have argued for the domestic implementation of WTO commitments on the basis that they strengthen and define a set of compliance mechanisms already present in the WTO. Whilst by no means is the case for domestic implementation fully developed, this certainly suggests a promising basis for exploring it as a means of assuring that trade disputes are not “stranded against the wall of noncompliance.”[87]

 

TABLE OF CASES

Brazil – Export Financing Programme for Aircraft, Recourse to Arbitration by Brazil under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, Decision by the Arbitrators, WTO doc. WT/DS46/ARB (Aug. 28, 2000)

Japan – Taxes on Alcoholic Beverages, WTO Doc. WT/DS10/19 (Jan. 12, 1998)

 

TABLE OF WTO DOCUMENTS

Global Agreement on Tariffs and Trade 1994

Understanding on Rules and Procedures Governing the Settlement of Disputes

 

BIBLIOGRAPHY

Abbott, Kenneth W., “The Trading Nation’s Dilemma: The Functions of the Law of International Trade” in Harvard International Law Journal. 26(2). 1985. pp. 501-532.

Anderson, Kym, “Peculiarities of Retaliation in WTO Dispute Settlement” in World Trade Review. 1(2). 2002. pp. 123-134.

Bello, Judith H., “The WTO Dispute Settlement Understanding: Less is More” in American Journal of International Law. vol. 90. 1996. pp.416-418.

Grossman, G. & Helpman, E., “Protection for Sale” in American Economic Review. 84(4). 1994. pp. 833-850.

Jackson, John H., “The WTO Dispute Settlement Understanding Misunderstandings on the Nature of Legal Obligation” in American Journal of International Law. vol. 91. 1997. pp. 60-64.

Nzlibe, Jide, “The Case against Reforming the WTO Enforcement Mechanism” in University of Illinois Law Review. 2008. p. 319.

Palmeter, David & Stanimar, Alexandrov, ““Inducing compliance” in WTO dispute settlement” in The Political Economy of International Trade Law: Essays in Honour of Robert E Hudec. Cambridge University Press. 2002. pp 646-666.

Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO: Rules Rules and Rules – Toward a More Collective Approach” in American Journal of International Law. vol. 94. 2000. pp. 335-347.

Petersmann, Ernst-Ulrich, “The Transformation of the World Trading System through the 1994 Agreement Establishing the World Trade Organization” in EJIL. 1995. pp. 61-221.

Petersmann, Ernst-Ulrich, “Why Rational Choice Theory Requires a Multilevel Constitutional Approach to International economic Law” in University of Illinois Law Review. vol. 1. 2008. pp. 359-382.

Roessler, Frieder. “The Constitutional Function of the Multilateral Trade Order” in Hilf & Petersmann, National Constitution and International Economic Law. Kluwer: Deventer. 1993. pp 53-62 .

Roessler, Frieder, “The Scope, Limits and function of the GATT Legal System” in World Economy. 8(3). 1985. pp. 287-298.

Schwartz, Warren F. & Sykes, Alan O., “The Economic Structure of Renegotiation and Dispute Resolution in the WTO/GATT System” in Journal of Legal Studies. 31(1). 2002. pp S179-S204.

Sykes, Alan O., “Mandatory Retaliation for Breach of Trade Agreements: Some Thoughts on the Strategic Design of Section 301” in B.U. International Law Journal. vol. 8. 1990. p. 301.

Sykes, Alan O., “The Remedy for Breach of Obligations under the WTO Dispute Settlement Understanding: Damages or Specific Performance?” in Bronckers, Marco & Quick, Reinhard (eds.), New Directions in International Economic Law: Essays in Honour of John H Jackson. Kluwer International: The Hague. 2000. pp 345-357.

Williams, Brett G., “Political Decision-Making within States about the Principal Policy Instruments”, chapter 7 in Brett G. Williams, The Importance of Disciplining the Choice of Policy Instrument to the Effectiveness of the GATT in Disciplining Agricultural Trade Policies. Unpublished PhD thesis: University of Adelaide. 2000.

 


[1] Petersmann, Ernst-Ulrich, “The Transformation of the World Trading System through the 1994 Agreement Establishing the World Trade Organization” in EJIL. 1995. p.170.

[2] Id at 171.

[3] Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO: Rules Rules and Rules – Toward a More Collective Approach” in American Journal of International Law. vol. 94. 2000. p. 338.

[4] Schwartz, Warren F. & Sykes, Alan O., “The Economic Structure of Renegotiation and Dispute Resolution in the WTO/GATT System” in Journal of Legal Studies. 31(1). 2002. p. 4.

[5] Williams, Brett G., “Political Decision-Making within States about the Principal Policy Instruments”, chapter 7 in Brett G. Williams, The Importance of Disciplining the Choice of Policy Instrument to the Effectiveness of the GATT in Disciplining Agricultural Trade Policies. Unpublished PhD thesis: University of Adelaide. 2000. p.141.

[6] Id at 147-149.

[7] Roessler, Frieder. “The Constitutional Function of the Multilateral Trade Order” in Hilf & Petersmann, National Constitution and International Economic Law. Kluwer: Deventer. 1993. pp 54-56.

[8] Petersmann, Ernst-Ulrich, “The Transformation of the World Trading System”. p.170.

[9] Williams, Brett G., “Political Decision-Making within States”. p.151-153.

[10] Id at 151-153.

[11] Id at153-154.

[12] Roessler, Frieder. “The Constitutional Function of the Multilateral Trade Order”. pp 59.

[13] Ibid.

[14] Petersmann, Ernst-Ulrich, “The Transformation of the World Trading System”. p.176.

[15] Abbott, Kenneth W., “The Trading Nation’s Dilemma: The Functions of the Law of International Trade” in Harvard International Law Journal. 26(2). 1985. p. 525.

[16] Sykes, Alan O., “Mandatory Retaliation for Breach of Trade Agreements: Some Thoughts on the Strategic Design of Section 301” in B.U. International Law Journal. vol. 8. 1990. p. 309.

[17] Roessler, Frieder. “The Constitutional Function of the Multilateral Trade Order”. pp 54-56.

[18] Sykes, Alan O., “Mandatory Retaliation for Breach of Trade Agreements”. p. 309.

[19] Schwartz, Warren F. & Sykes, Alan O., “The Economic Structure”. p. 18.

[20] Sykes, Alan O., “Mandatory Retaliation for Breach of Trade Agreements”. p. 307.

[21] Petersmann, Ernst-Ulrich, “The Transformation of the World Trading System”. p.171.

[22] Id at 170.

[23] Roessler, Frieder. “The Constitutional Function of the Multilateral Trade Order”. pp 59.

[24] GATT Art. 1

[25] Petersmann, Ernst-Ulrich, “The Transformation of the World Trading System”. p.191.

[26] Ibid. Furthermore, the termination of previous GATT assists in generating support for the WTO system in that it removes the availability of any broadly substitutable trade agreements (Id at 192).

[27] Id at 193.

[28] Schwartz, Warren F. & Sykes, Alan O., “The Economic Structure”. pp. 16-24.

[29] Id at 18.

[30] Ibid.

[31] Id at 19.

[32] Id at 20.

[33] DSU Art. 6.1.

[34] Id at Art. 19.1.

[35] Id at Art. 16.4.

[36] Id at Art. 21.3.

[37] Id at Art. 22.1.

[38] Id at Arts. 19.1, 22.6.

[39] Id at Art. 21.4.

[40] Id at Arts. 19.1, 22.6.

[41] Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO”. p. 340.

[42] Id at 338.

[43] Id at 337.

[44] Japan – Taxes on Alcoholic Beverages, WTO Doc. WT/DS10/19 (Jan. 12, 1998).

[45] Anderson, Kym, “Peculiarities of Retaliation in WTO Dispute Settlement”. p. 5.

[47] Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO”. p. 337.

[48] Ibid.

[49] Id at 343.

[50] DSU Art. 22.7.

[51] Anderson, Kym, “Peculiarities of Retaliation in WTO Dispute Settlement”. pp. 7-8.

[52] Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO”. p. 344, Anderson, Kym, “Peculiarities of Retaliation in WTO Dispute Settlement”. p. 9.

[53] Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO”. p. 337, Anderson, Kym, “Peculiarities of Retaliation in WTO Dispute Settlement”. p. 10.

[54] Anderson, Kym, “Peculiarities of Retaliation in WTO Dispute Settlement”. pp. 7-8.

[55] Schwartz, Warren F. & Sykes, Alan O., “The Economic Structure”. p. 4.

[56] “[P]arties to trade agreements, like the parties to private contracts, enter the bargain under conditions of uncertainty” (Id at 6).

[57] Ibid.

[58] Ibid.

[59] Sykes, Alan O., “The Remedy for Breach of Obligations under the WTO Dispute Settlement Understanding: Damages or Specific Performance?” in Bronckers, Marco & Quick, Reinhard (eds.), New Directions in International Economic Law: Essays in Honour of John H Jackson. Kluwer International: The Hague. 2000. pp. 351-352.

[60] Schwartz, Warren F. & Sykes, Alan O., “The Economic Structure”. p. 3.

[61] Id at 3. Moreover, this is consistent with the panel’s comment in EC-Bananas that “there is nothing in [the relevant provisions of the DSU] that could be read as justification for countermeasures of a punitive nature” (Id at 12).

[62] Id at 26.

[63] Id at 29.

[64] Id at 4.

[65] Bello, Judith H., “The WTO Dispute Settlement Understanding: Less is More” in American Journal of International Law. vol. 90. 1996. p. 418.

[66] Palmeter, David & Stanimar, Alexandrov, ““Inducing compliance” in WTO dispute settlement” in The Political Economy of International Trade Law: Essays in Honour of Robert E Hudec. Cambridge University Press. 2002. p. 665.

[67] Anderson, Kym, “Peculiarities of Retaliation in WTO Dispute Settlement”. p. 8.

[68] Id at 10.

[69] Palmeter, David & Stanimar, Alexandrov, ““Inducing compliance” in WTO dispute settlement”. p. 656.

[70] Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO”. p. 339.

[71] “Contract and international law, as Professor Dam points out, ‘are more concerned with assuring that commitments made are carried out than with promoting the making of agreements in the first place’” (Palmeter, David & Stanimar, Alexandrov, ““Inducing compliance” in WTO dispute settlement”. p. 664).

[72] Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO”. pp. 341-2.

[73] Williams, Brett G., “Political Decision-Making within States”. p.153-154.

[74] Nzlibe, Jide, “The Case against Reforming the WTO Enforcement Mechanism” in University of Illinois Law Review. 2008. pp. 331-2.

[75] Id at 333.

[76] Ibid.

[77] “The prospect that any single protectionist group in the complaining state might benefit from spoils of WTO litigation is so remote that we should not expect any such group to invest a significant amount of resources in lobbying for retaliation benefits” (Id at 335).

[78] Brazil – Export Financing Programme for Aircraft, Recourse to Arbitration by Brazil under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, Decision by the Arbitrators, WTO doc. WT/DS46/ARB, para. 3.47 (Aug. 28, 2000) (original emphasis).

[79] Palmeter, David & Stanimar, Alexandrov, ““Inducing compliance” in WTO dispute settlement”. p. 665.

[80] DSU Art. 22.1.

[81] This preference is acknowledged by opponents of the strict compliance attitude (Schwartz, Warren F. & Sykes, Alan O., “The Economic Structure”. p. 14)

[82] Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO”. pp. 341-2.

[83] Jackson, John H., “The WTO Dispute Settlement Understanding Misunderstandings on the Nature of Legal Obligation” in American Journal of International Law. vol. 91. 1997. p. 63.

[84] Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO”. pp. 335-347, Anderson, Kym, “Peculiarities of Retaliation in WTO Dispute Settlement”. pp. 123-134.

[85] Other barriers include that the costs of litigating under the DSU (Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO”. p. 345) and the evidentiary burden of establishing a WTO-consistent counterfactual with inadequate information (Anderson, Kym, “Peculiarities of Retaliation in WTO Dispute Settlement”. p. 11) pose significant disincentives to potential litigators. In as much as these costs disproportionately affect less developed countries (LDCs) (Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO”. p. 345 – though note that LDCs do not necessarily contain the majority of the world’s poor (Nzlibe, Jide, “The Case against Reforming the WTO Enforcement Mechanism”. p. 353)), they impose a structural disadvantage to a not insubstantial number of member states. Although relevant to the ability of aggrieved member states to bring claims under the DSU, this section focuses on the effectiveness of the domestic implementation of WTO commitments in addressing the problems relating to power differentials between member states.

[86] Paulwelyn, Joost, “Enforcement and Countermeasures in the WTO”. pp. 338,345.

[87] Id at 338.


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