SPECIAL FEATURE: When China Joins: The Power of WTO Dispute Resolution

The present WTO dispute settlement process under the DSU provides that the jurisdiction over trade-related disputes by the DSB shall be exclusive, mandatory and binding upon all WTO members.4 This is consistent with the WTO Agreement, GATT '94, TRIPs (Trade Related Agreement on Intellectual Property), GATS (General Agreement on Trade in Services) and the Plurilateral Trade Agreements enumerated in its appendices and the DSU itself5.

The underlying fundamental principles of the DSU call for good faith negotiations between WTO members to resolve disputes before requesting the establishment of a panel of the DSB,6 as well as post-determination withdrawal of offending practices rather than compensation or punitive measures.7 In fact, under the DSU, compensation by an offending country is voluntary even in the event of non-compliance with panel or Appellate Body determinations.8

Moreover, suspension of concessions or of other obligations under the various agreements against the offending WTO member is considered a last resort and may only be authorized by the DSB.9

The DSU rules prohibit counter-complaints against the aggrieved WTO member by the accused member over 'distinct matters'10 and they also impose definite time limits on key phases of the WTO dispute settlement process. For example:

a) consultations (must commence within 30 days of request);11

b) request for establishment of a panel (10 days after request for consultations without reply or 30 days thereafter if adverse party does not consult or 60 days thereafter if consultations fail);12

c) circulation of panel reports (within 6 months from date of composition 'as a general rule', three months if urgent, up to 9 months if panel requests);13

d) circulation of Appellate Body report (normally within 60 days, but no more than 90 days, from notification of appeal of panel report)14; and

e) removal of offending practices ('within a reasonable time', but generally not to exceed more than 15 months after DSB's adoption of panel or Appellate Body report).15

The foundation of the present day DSU consists of the provisions of Articles XXII and XXIII of the GATT '94, which were carried over from GATT '47.16 Article XXII provides for negotiations between 'contracting parties' of the GATT 'with respect to any matter affecting the operation of this Agreement'. It also includes a reference of the matter to the contracting parties (now the DSB, which is really the WTO General Council in its dispute settlement role) for a resolution if negotiations fail.

Article XXIII provides that a WTO member may seek dispute settlement with another member when a benefit under GATT is impaired or nullified or the attainment of an objective under GATT is being impeded by:

a) failure of another member to carry out an obligation under GATT;

b) the application of a measure by the WTO member (whether or not GATT-compliant);

c) or the existence or any other situation.17

It is interesting to note, however, that the DSU provides that, in the event of a 'non-violation' measure, there is no obligation to withdraw it on the part of the offending WTO member, but rather that there be 'a mutually satisfactory adjustment'.18

A DISPUTE RESOLUTION MECHANISM WITH TEETH

Of course, the most distinguishing feature of WTO dispute settlement under the DSU, in contrast to the old GATT '47 regime, is that an offending nation may no longer 'block' the establishment of a panel, nor a finding and/or determination of a dispute panel. Under the old GATT system, the veto power over dispute settlement had a undermining effect on potential complaints. In contrast, under the so-called 'negative consensus rule' of the DSU, the adoption of a panel or appellate report by the DSB is virtually automatic, as it may not be blocked or overruled except by a consensus (read: all) of the WTO members present at a meeting of the DSB.19

Under the DSU, moreover, the DSB has significant surveillance powers to monitor and insure compliance with panel and Appellate Body determinations and recommendations on the part of the recalcitrant WTO member. The ultimate sanction is suspension of concessions or other obligations by the complainant vis-a-vis the respondent, with DSB permission.20

Therefore the existing WTO dispute settlement system has teeth and an offending member may not escape either its jurisdiction or the effect and/or sanctions of DSB determinations, short of the very drastic step of withdrawal from the WTO.
Under such a system, of course, trade disputes between WTO members have become greatly de-politicized. There is also strong evidence that developing countries are less inhibited in lodging complaints against their larger trading partners than under the GATT '47 dispute settlement regime.21

In fact, there are a number of instances under the rules of the DSU whereby developing nations receive special treatment, usually, although by no means only, related to the extension of time limits for various phases of a dispute settlement.

DEVELOPING COUNTRY ADVANTAGES

Some sectors of the PRC economy can be viewed as those of a developed country but some as that of a developing country. It is safe to assume that under appropriate circumstances the PRC will demand the advantages offered to a developing nation WTO member in certain (if not all) dispute settlements. Accordingly, a brief look at the DSU provisions relating to developing nation WTO members provides a preview of the procedural issues that will probably be raised in future WTO dispute resolution involving China after its accession.

The DSU's Article 3, which sets forth the General Principles for WTO dispute settlement, permits a developing country WTO member bringing a complaint against a developed country WTO member to invoke the provisions of the GATT '47 Decision of April 5 1966. This is an alternative to certain provisions of the DSU related to the process for consultations, good offices, conciliation and mediation, the establishment of panels and panel procedures.22

The primary effect of a developing country WTO member choosing the procedures under the GATT 1966 Decision would be that, after negotiations fail with a developed nation trading partner, the developing country could then request to use the good offices of the WTO Director-General to help settle the dispute.23

If ensuing negotiations involving the office of the Director-General prove fruitless after a period of 60 days, the matter would then be referred to a panel. The panel would be required to circulate its report within as little as 60 days thereafter,24 a substantially shorter time than the normal six months under the DSU.25

The DSU's philosophy of sensitivity to, and accommodation of, the needs of developing country WTO members involved in trade disputes extends from the initial negotiations of the parties through to the surveillance of compliance with the panel or Appellate Body decision resolving the dispute.

The DSU requires that other WTO members 'should give special attention to the particular problems and interests of developing country Members' during consultations over a dispute, prior to the appointment of a DSB panel.26 Moreover, the normal DSU time limits for dispute settlement consultations involving developing nation WTO members can be extended.27

Once a DSB panel has been established for a dispute involving a developing country WTO member as a respondent, the panel must give 'sufficient time' to prepare and present its argument.28 In other words developing countries have additional time.

Developing nations may also request that a legal expert from the WTO Secretariat provide it with assistance.29 If the dispute
is between a developing country WTO member and a developed nation member, the developing country member may ask that at least one member of the DSB panel is from a developing country.30

In a panel report relating to a dispute involving one or more developing country WTO members, the panel must:

'explicitly indicate the form in which account has been taken of relevant provisions on differential and more favourable