Saturday, August 4, 2012

Developing countries and compliance in WTO disputes - Some thoughts

Normally, one tends to focus on WTO disputes in terms of the issues they raise, developed -developing country relations as well as the political economy of the dispute. Seldom is detailed analysis done after the Panel or Appellate Body provide their decisions. What happens to compliance? How are the decisions implemented? What is the efficacy of the implementation of WTO disputes and what bearing does it have on implementation of international law? What special lessons does the study of compliance in WTO disputes have for developed-developing country dynamics at the WTO?

Sonia Rolland has a brilliant, detailed piece on development status of members at WTO disputes and what implications it has for implementation and compliance of the decision? Does it make it easier for developing countries to ensure compliance from developed countries? Does the WTO provide for such preferential treatment? Does one view developing countries more favourably as compared to a respondent developed country in terms of the need, speed and nature of compliance?

In her article "Considering Development in the Implementation of Panel and Appellate Body reports" Sonia Rolland makes a detailed analysis of Article 21 and 22 of the DSU and the impact it has for developing countries. Article 21 of the DSU, as suggested by the author has three specific clauses that pertains to a "development" preference:
"The Article includes three clauses regarding developing members: 

-Article 21.2 specifies that “[p]articular attention should be paid to matters affecting the interests of developing country Members with respect to measures which have been subject to dispute settlement”

- Article 21.7 provides that “[i]f the matter is one which has been raised by a developing country Member, the DSB shall consider what further action itmight take which would be appropriate to the circumstances” and

- Article 21.8 states that “[i]f the case is one brought by a developing country Member, in considering what appropriate action might be taken,the DSB shall take into account not only the trade coverage of measures complained of, but also their impact on the economy of developing country Members concerned.”
The article, however, after making a detailed analysis of Panel and Appellate Body decisions comes to the conclusion that "development" considerations are not paramount in deciding on implementation issues and though there are guiding principles in the provisions the Panels and Appellate Bodies have been rather "neutral" in their interpretation. Discussing the proposals of various developing countries during both the Uruguay and Doha rounds for a re-look at compliance of WTO decisions and developing country needs, the author raises pertinent questions about developing countries and their participation at DSM:
"The effect of the shift to a rule-based system is generally thought to have leveled the playing field for weaker members in terms of the accessibility of adjudication and their ability to win disputes. While it has been assumed that the reinforced procedures of the DSU would benefit developing country litigants, both the qualitative and quantitative data regarding developing country participation (and even more so the virtual absence of LDC participation as a main party in disputes)132 suggest a more complex story. With respect to implementation, the rule-based framework’s impact on developing members’ ability to gain compliance from more powerful members is equivocal. While some large developing members have been successful at obtaining compliance from powerful members (see Brazil’s success against the US in the Upland Cotton dispute), smaller developing members remain at a serious disadvantage. With some exceptions, such as Antigua in the Gambling dispute, weaker members have not often taken on more powerful members (developed or developing) in part because they realize that the retaliatory system of Article 22 may not be of much use to them.

Perhaps equally noteworthy is the virtual absence of developed country submissions on compliance procedures, both during the Uruguay Round and the Doha Round. Yet the reality of WTO disputes is that they have involved mostly developed countries–though the trend is rapidly shifting in favour of developed/developing country disputes and disputes between developing countries. In fact, trade asymmetries and the limitations they pose to effective retaliation affects small developed countries as well as developing countries.Submissions, however, generally propose to differentiate implementation recourses along the lines of the developed and developing members, rather than on macroeconomic criteria such as a ratio of the size of the economies of the country in disputes. Another approach would be to give all members access to the full range of implementation mechanisms (individual, third party and collective retaliation, for example) and to let the economic conditions of the disputants in specific cases determine which mechanism would be the most effective."
While the present report card of compliance and implementation issues vis a vis developing country concerns is not very positive, the author suggests a number of measures that could take into account the "development concern" during compliance:
"Nonetheless, a number of alternative avenues exist to reinforce the DSU’s effectiveness for developing countries with respect to compliance and retaliation, even in the absence of any textual reform. First, a more coherent and concerted practice by arbitrators, Panelists and the AB could lead to the emergence of new standards of interpretation. For instance, provisions urging members to “take into account” the developmental conditions of some members may be read as due diligence or best efforts obligations rather than be ignored altogether or treated as merely hortatory language. Second, decisions by the DSB, or WTO members acting as the General Council, could also be used to implement an interpretative framework that could be more cognizant of the needs of developing members. Third, increased resources and technical assistance could support both a shorter litigation calendar and faster compliance by developing country members. While trade asymmetries are certainly an economic problem hindering small developing countries from obtaining compliance from more powerful members, it is one that can be mitigated in part by legal and institutional intervention."
What should the theoretical framework be in the context of developing country disputes? Also "developing countries" is not a monolithic homogeneous unit. It has countries of varying trading power, influence and capacity. Also, I was trying to contextualize this article, albeit in a very preliminary manner, with recent decisions of the Panel and Appellate Body of the WTO. The Tuna case, Cloves Cigarettes case, COOL case as well as Export of raw material case all have developing countries pitted against developed countries. While the first three have the developed country with Mexico, Indonesia and Mexico as respondents, the fourth case has China as the defendant and a developed country (United States) as the complainant. What thrust should the "developing" country context play in ensuring compliance by the respondents in this case? Compliance should increasingly reflect the rule based nature of the DSU rather than trading power or politico-economic realities of countries. Will we see innovative interpretations of "compliance" that would make the decisions ineffectual? Will the developing countries involved have the legal capacity to take on the developed country in establishing the right way of implementation? On a different note, is the developing country-developed country dichotomy irrelevant for compliance? Will we see some lessons for compliance in the way these decisions are complied  (or not complied?) with?


Steve Craven said...

There have long been confusion and inflated expectations concerning developing countries in dispute settlement. To begin with, there is no scope for special treatment in the cases themselves; either a country has violated the rules or they haven't. So, special treatment comes down to applying the DS findings. And practical politics intervene.

The WTO has no enforcement mechanism - because that is the way the members want it. Sure, the DS process can result in authorized retaliation, but the intent is to achieve change short of that. Sometimes countries find that in their interest, sometimes they don't. And size does matter. It's not a developed vs. developing thing, but big vs. small in terms of trading impact. A small trader simply cannot threaten as much retaliation as a big one. So we resort to moral suasion to get countries to comply with DS rulings. Sometimes they surprise us and do it!

There can be special treatment in terms of helping developing countries prepare for DS cases. Developing countries generally cannot muster the staffs of international trade lawyers that developed countries have access to. Perhaps the WTO secretariat could do more in this regard, employing a staff of lawyers and trade policy specialists to assist developing countries in preparing their cases. Curiously, we are seeing some of this today with major tobacco companies apparently helping to finance the cases initiated by Ukraine and Honduras against Australia.

Srikar said...

Thanks for the comments, Steve. A rule based system loses it's prominence if con tries based on their trading might can determine the end result of a dispute. If compliance becomes subject to power diplomacy it sure is a challenge to the DSM. I do agree with you about the inflated expectations regarding developing countries, it is absolutely essential for them to be prepared to engage with the multilarernsystem. It is a quagmire of complex rules and one can drown easily in them. Building local legal capacity ais one way of doing it. ACWL does help in this regard. However, when local capacity is lacking or inadequate, you might have the curious case of multinational interests taking over a national cause ... a la Ukraine and Honduras.