WTO Trade Disputes

The World Trade Organization settles international trade disputes with a multi-step process outlined in the Dispute Settlement Understanding (DSU) agreed to by member nations in 1994. The process includes various stages of consultation between the member nations, the formation of an ad hoc Dispute Settlement Panel, examination of the member nations and third parties by the panel, the issuance of a report, and, if necessary, authorized compensatory or retaliatory measures.

Insofar as the purpose of WTO trade law is to preserve the rights of WTO member nations and to provide predictability and uniformity to the resolution of WTO trade disputes, the dispute settlement mechanism of the World Trade Organization could reasonably be said to serve its purpose. Of course, there are examples of disputes between member nations that have not been satisfactorily resolved by the WTO.

WTO decisions are enforced by consensus. The WTO itself holds no leverage over the member nations and relies on its members to enforce sanctions, retaliatory measures, and compensatory measures. Unlike some agencies, whose bureaucracies can threaten to withhold credit to an offending nation, WTO trade law is entirely consensus-based.

The World Trade Organization hears allegations of violations of its trade agreements via its Dispute Settlement Body. Decisions of and reports by the DSB must be enforced by member nations, who have previously agreed to the DIspute Settlement Understanding which requires a multilateral approach to dispute resolution. The WTO has no authority or leverage to unilaterally impose resolutions of international trade disputes.

The WTO dispute process begins with a consultation period, during which the affected member nations engage in negotiation and mediation. If consultation is unsuccessful, each party is examined by an ad hoc dispute resolution panel made up of three or five members. The panel prepares a report and provides it to the involved parties. The unsuccessful party submits an implementation report to the panel. If implementation is unsatisfactory, the successful party may be authorized to take retaliatory measures.

A trade dispute can refer to a wide variety of situations, from a full-scale “customs war” or “trade war” to a less intense conflict about the alleged violation of a trade agreement, custom, or rule by one of a country’s trading partners. International trade disputes often involve allegations of dumping or abusive national subsidy practices.

The dispute settlement mechanism is a crucial part of WTO trade law. When an international trade dispute occurs, the World Trade Organization encourages consultation between the affected parties to resolve the dispute. When no resolution is forthcoming, the World Trade Organization convenes an ad hoc dispute settlement panel to examine each of the parties and any involved third parties. The panel prepares a report, the recommendations of which must be implemented by the unsuccessful party.

Trade disputes can be handled in a variety of ways. The majority are dealt with by way of informal and formal negotiations between nations. Those that require further adjudication often go before the Dispute Settlements Body at the World Trade Organization. International trade disputes that require this level of formal resolution move through different levels of consultation, litigation, and adjudication.