International Trade Lawyers - More fun in 2013!

Reuters reported recently that the WTO is bracing itself for the surge in trade disputes in its dispute settlement mechanism. 2013 is going to see an increase in trade disputes.

"A surge in trade disputes has forced the World Trade organization to reallocate staff to cope with a flood of litigation in the pipeline for 2013, according to diplomats and documents at the global trade body in Geneva. 

The WTO's 157 members have launched 26 trade disputes so far in 2012, the most since 2003 and three times more than the eight new complaints filed in 2011. 

According to an internal WTO document seen by Reuters, the WTO decided to reallocate staff to the disputes team to deal with the increasing number and complexity of legal cases."

The increase in trade disputes points out to a number of conclusions:

1. The faith WTO members repose int he rule-based dispute settlement process - the "crown jewel" of the WTO system. This reliance is also causing a strain on the system with the WTO apparently having to reallocate staff to meet the growing dispute count.

2.Negotiations are moving at a slow pace with Doha tottering. Political negotiations and judicial dispute resolution are two facets of the multilateral institution. If one fails to progress, the other is burdened with the responsibility of tackling many of the issues international trade faces. Hence, experts argue that the dispute settlement mechanism is facing the heat due to the failed Doha round. There has to be a safety valve somewhere. Whether it addresses the new reality of trade, including global supply chains and RTAs is another issue.

3. Countries are increasingly using the dispute settlement process as part of an overall national strategy to engage with the multilateral system. They do not view it just as a judicial process. National policies are defended here and policies of other countries that impact market access of a country's products are challenged here. A trade dispute is no longer viewed as a trade war. It is increasingly being used as a tool in the overall trade policy strategy of a country engaging in the multilateral system.

Legal capacity, technical expertise and a diverse team of lawyers, trade policy analysts and economists need to come together in handling a dispute. Some disputes are extremely complex matters involving the use of econometric models and trade statistics. Also, some of these disputes (like the Canadian FiT case, Airbus-Boeing Subsidies case) are going to have a lasting impact on the renewable energy sector.

Overall, 2013 is going to be fun for International Trade Lawyers worldwide.

Trade war redefined

Increasingly, signs of "protectionist measures" are seen in trade policy across the world. Experts have attributed this to a rising protectionist wave that could severely challenge the multilateral system. With the Doha round in an impasse, policies that do raise barriers to trade cause tremendous friction between trading partners.

This friction is reflected in two kinds of action - first, a tit for tat protectionist measure which leads to more protectionism in the ecosystem and second, a tit for tat WTO litigation. While the former increases the chances of protectionism, the latter tends to ease the situation with a claim for bringing down the barriers.

Simon Lester has this succinct piece in the Cato blog where he discusses the "new kind of trade war" - litigation at the WTO. We have seen that recently in the context of Argentina.

"Complaints at the WTO do not always lead to a finding of violation of trade rules, of course.  The rules are complex and every case must be evaluated on its own merits.  But nevertheless, the notion that, in the current version of a trade war, challenges to trade restrictions will be met with challenges to other trade restrictions is a vast improvement over the old-style trade war.  With trade negotiations progressing so slowly these days, we should be happy if trade litigation can bring about some degree of liberalization. 

It is worth noting that there are potential pitfalls.  The WTO litigation system could be overwhelmed with cases; and in the search for cases to bring in response, countries might choose to file somewhat frivolous cases that might not otherwise have been brought.  But despite such concerns, a shift away from the old-style trade war is of great benefit to the world trading system and to the cause of free trade."

Whether the WTO can handle a floodgate of such requests is open to debate. It would test the capabilities of the "crown jewel" of the international trading system. However, the more pertinent issue is, how would countries deal with this deluge? It would call for enhancing legal capacity, cross sectoral analysis with multi-stakeholder teams and a national strategy to succeed at the WTO.