Taking disputes to their logical end - Seeking retaliation in WTO disputes

This piece on "retaliation" in trade disputes in the WTO is found in the VoxEU. The piece talks about a pattern of how countries have sought compliance of WTO decisions. It also indicates the various types, strategies and means of seeking retaliation which includes cross retaliation to more commonly used retaliation methods.

"The purpose of this investigation was to identify key trends in the WTO dispute settlement system, in particular in the design of retaliation requests. Practice has demonstrated that additional effort is also put into the implementation of these measures once they are authorised. Nonetheless, the original retaliation request – the first opportunity for an offended member country to induce compensation or compliance – is an important tool, and analysing it helps understand countries’ behaviour and goals when pursuing WTO disputes."

It only shows that at times merely initiating a dispute and getting a decision is not the end of the game in WTO disputes. I had earlier blogged about cross retaliation here. Compliance and seeking retaliation is the next big battle.

India and dispute settlement

A regular follower of Trade Law and Development Journal, here is the latest issue on India and the international economic system. 

A piece on India's engagement with the WTO dispute settlement system by James Nedumpara caught my attention. Highlighting India's experience with the dispute settlement system so far, its engagement with challenges faced thereof, the author does conclude that India would have to sustain the capacity already built:

"India’s challenge in the future will be to sustain the capacity already built. Trade disputes are cyclical and it may require positive intervention on the part of the government to foster and nourish trade-related capacity. This article has highlighted the need to establish better channels of communication between the government and industry. Furthermore, a bottom-up approach to stakeholder participation will be feasible only if the government encourages private sector and educational institutions to take greater interest in international trade issues. A large number of trade-related governmental institutions and adjudicatory bodies in India are yet to achieve a desired level of sophistication in WTO matters. Equipping these agencies with the necessary understanding of WTO matters will be crucial for India’s chances of playing a leading role in WTO dispute settlement." 

The WTO dispute process involves the State as the primary actor. However, the interests are largely those of private businesses and sectors, both small and large. To find that partnership model of India's State capacity, legal brilliance and private sector participation will decide the success of India at the WTO dispute settlement process.

To comply or not to comply is the question

An interesting debate in the comments section  in the IELP blog on next steps in the Cloves Cigarette case (DS406 ) got me thinking. It brings us to the question of what constitutes "compliance" in WTO law and what do countries do when they feel WTO decisions in their favour are not being complied with? It also raises issues about the effectiveness of the dispute settlement process and how "hard" WTO law actually is.

The issue in question here was whether Indonesia has taken the right step in seeking authorisation  for retaliation against the US under Article 22.2 DSU for non-compliance without taking recourse to Article 21.5 DSU which essentially states:

"Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel. The panel shall circulate its report within 90 days after the date of referral of the matter to it.  When the panel considers that it cannot provide its report within this time frame, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report."

While we await further legal clarity on the point of the right legal recourse of seeking suspension of concessions via vis establishment of another panel to decide whether there was compliance, my attention was drawn to Article 22.6, 22.7 and 22.8 of the DSU.

"6.The DSB shall keep under surveillance the implementation of adopted recommendations or rulings.  The issue of implementation of the recommendations or rulings may be raised at the DSB by any Member at any time following their adoption.  Unless the DSB decides otherwise, the issue of implementation of the recommendations or rulings shall be placed on the agenda of the DSB meeting after six months following the date of establishment of the reasonable period of time pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue is resolved.  At least 10 days prior to each such DSB meeting, the Member concerned shall provide the DSB with a status report in writing of its progress in the implementation of the recommendations or rulings.

7.         If the matter is one which has been raised by a developing country Member, the DSB shall consider what further action it might take which would be appropriate to the circumstances.

8.         If 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." 

Another avenue is to raise the issue at the DSB "at any time following their adoption"(adoption of the ruling). Developing countries have been given some special rights. Has this avenue been significantly used by the developing world? Has it borne fruit and served its intended purpose of assisting developing countries in getting rulings complied with. Any studies or analysis on the use of this provision? Or is it just on paper?

Compliance of WTO rulings is a very critical issue in legitmizing the role of the multilateral institution as well as the dispute settlement process. While legalese and complexity will prevail when one goes into the details of cases, non-compliance overall undoubtedly impacts credibility of the predictability of multilateral rules. Ofcourse, what constitutes non-compliance is again a matter of incessant debate!

Dispute settlement and developing countries - How does one engage?

WTO disputes have been a recurring theme of this blog. The dispute settlement mechanism is considered as the crown jewel of the WTO system bringing credibility, predictability and certainty to the system with focus on a rule-based resolution of disputes rather the a power-based system.

A dispute in the WTO can only be brought forth by a member government. The State is the only party before a dispute resolution process even though the interests of private businesses are impacted. For example, in the case of the Airbus and Boeing case at the WTO though the affected parties are large, private aircraft manufacturers, the parties to the dispute are the European Union and the U.S.

Disputes at the WTO require sufficient preparation, competence and thorough groundwork before it is launched. An ICTSD paper titled "Where do WTO cases come from?" highlights the importance of preparation and assessment of cases in the context of the complexity and sensitivity of the issue involved.

"In short, undertaking a WTO dispute requires a significant commitment of nearly full time personnel, which can be a real challenge for WTO Member governments. Some governments, such as the US and EU participate in so many disputes that they can rationally hire a very large staff of in-house WTO litigators, but even these two countries struggle when local industry does not contribute legal support for a case. A comprehensive and detailed assessment of a case done early on in the process somewhat alleviates the work during the very busy litigation proceedings."

The paper notes that loss or impact on market access is one of the primary reasons for WTO litigation by member countries, usually on behalf of their private business interests. WTO litigation is all about preparation and competence involved of experts preparing the case.Many countries engage outside counsel for their cases. Private industry is also expected to contribute to the expenses of the case. Brazil, amongst developing countries, has been at the forefront of engaging with the dispute settlement system to further its national agenda.

"An example of a mechanism in a developing country that is in part similar to USTR’s cooperation with outside counsel but very different with respect to the funding and accessibility of WTO litigation is Brazil. A small office of highly sophisticated WTO experts in the Foreign Ministry, many with experience in Brazil’s mission to the WTO in Geneva, manages the cases. However, cases are usually brought only if the local industry agrees to pay for outside counsel to help.The outside counsel may provide research and submission drafting support but the office in Itamaraty remains in charge. The difference between both models of litigation management became clearly visible in the Brazilian Cotton Case, where unlike the Brazilian counterpart, the US cotton industry did not pay for a large legal support effort. Consequently, USTR was outnumbered by the Brazilian officials as well as US lawyers and US academics all working on the side of Brazil.The US might have lost the case even with more resources, the example underlines the ability of some developing countries to use the WTO dispute settlement process on an equal (or better) footing with larger WTO Members."

The paper discusses the considerations involved in a legal and economic assessment of WTO disputes before they are initiated. It gives a detailed account of the need for expertise, assessment and recommends how disputes must be handled by member countries, especially developing countries, at the dispute settlement process at the WTO. It stresses on pre-litigation legal, economic and strategic assessment of disputes before initiation of a trade dispute at the WTO. The importance of creating in-house WTO expertise is often cited as a pre-requisite to a succesful engagement with the multilateral trading system. The paper, inter alia recommends:

"Create in-house WTO expertise. Most, although not all, developing countries have a mission in Geneva with people assigned to the WTO. Monitoring the daily functioning of the WTO, with its numerous committee meetings, as well as observing litigation as a third party, should be part of the mission’s responsibility. And equally important, delegates who have served in those roles in Geneva should remain involved with WTO issues when they are posted back home. Often, there are bureaucratic obstacles – such as if the mission is part of the foreign ministry – to keeping people on WTO assignments, but a conscious attempt should be made to track people who have served in the mission to the WTO and recapture them from time to time in their career so the expertise is not lost. In addition, many developing countries have students in programs such as the World Trade Institute at the University of Berne or at universities such as Georgetown University Law Center, Columbia Law, National University of Singapore, Cambridge and Geneva and many others. Many of those students would be very valuable as interns in a country’s mission to the WTO in Geneva, or working in related offices in the capitols. Efforts could be made to seek those people out, or at least welcome them when they apply."

How many developing and underdeveloped countries can undertake this exercise of competency building? While facing WTO disputes against developed countries one is confronted with highly qualified legal experts from law firms with years of experience. How does a developing country counter this? Countries increasingly rely on the same set of international law firms to fight their cases. This is one of the dealings with the issue. Another way is to systematically develop internal expertise, engage legal academics within the country and ensure that a local talent pool is nurtured and developed with sufficient expertise to assist the government in WTO cases.This would require long term strategic planning and involvement of a large number of stakeholders. It is, perhaps, the only way to engage with the multilateral legal system.

It is Argentina's turn now

Argentina had requested for consultations with the EU and US in 3 cases regarding importation of lemons, beef and biodiesel. I have blogged about the rising tensions between Argentina and its trading partners here. Now it seems that the consultations have not borne fruit and reports of Argentina deciding to file a WTO complaint in this regard. The three disputes where the request for consultation were made are DS 443, DS 447 and DS 448. News reports of Argentina going ahead with the complaints are found here and here.

Argentina has been criticized for putting up protectionist measures about which I have blogged here.Panama recently filed a dispute (DS 453/1) against Argentina at the dispute settlement  body. These cases seem to be in retaliation to those allegations.I have done a detailed piece about the possible WTO violations in the case of biodiesel here.

We again see the WTO dispute settlement mechanism playing out as a forum for resolution of disputes without being seen as causing a "trade war" or "imbroglio". Argentina has been active in the WTO dispute settlement process being a complainant in 20 cases beginning in 1996. 

Things are heating up at the dispute settlement forum with more countries seeking trade remedies and taking on their trading partners. News of EU contemplating a WTO complaint against the new member Russia is the topic of my next post. Good news for a rule based resolution of disputes?

Managing Trade Disputes - A workshop

Attended a very informative and engaging workshop on Managing Trade Disputes in the context of developing countries organized by ACWL, Centre for WTO Studies and ICTSD yesterday. The discussion focused on the strategies developing countries need to adopt to more effectively engage in the dispute settlement mechanism of the WTO. Varied opinions and enlightening discussion followed. A lot of interesting aspects of the DSU were discussed.

Thought provoking interventions by Miguel Mendoza, Marie Wilkie, Ambassador Narayanan, Cherise Valles, Fernando Pierola, Mukesh Bhatnagar, Valerie Hughes, Siddartha Rajagopal, Moushmi Joshi, Anthony Abad, Won-Mog Choi, Manab Majumdar, Vinita Johnson, Shashank Priya and Shailja Singh.

Gratitude to Abhijit Das for having given me an opportunity to participate.

Compliance in Boeing - A legal quagmire

I had blogged here about the recourse to Article 21.5 of the DSU by the EU against the U.S. in relation to the issue of compliance in the Boeing dispute here. More submissions dated 12th October by the EU here.

 The gist of the legal claim is here:

"28. The European Union considers that, after the end of the implementation period, the United States maintains a series of subsidies, within the meaning of Article 1.1 of the SCM Agreement through each of the measures listed in Section I, above. Each of those measures provides a financial contribution within the meaning of Article 1.1(a)(1), as detailed further in Section I, and confers a "benefit" within the meaning of Article 1.1(b) by providing the financial contribution on terms more favourable than would be available on the commercial market. Those subsidies are specific, within the meaning of Articles 1.2 and 2 of the SCM Agreement, as detailed further in Section I. 

29. Those specific subsidies presently benefit the development, production and sale of Boeing’s 737NG, 737 Max, 747, 767, 777 and 787 families of LCA, as well as any other future derivatives of these LCA families, including of the 777. Collectively, and under the conditions of competition present in the LCA markets, the subsidies listed in items I.A to G cause present adverse effects, in the form of serious prejudice, and threat thereof, to EU interests, inconsistently with Articles 5(c), 6.3(a), 6.3(b) and 6.3(c), including Articles 6.4 and 6.5, of the SCM Agreement. The effects of those subsidies adversely impact sales, market shares and prices of Airbus’ A320, A320neo, A330, A350XWB and A380 families of LCA. Specifically, the subsidies cause present serious prejudice, or threat thereof, to EU interests, in the form of: (i) displacement and impedance of EU imports into the United States, within the meaning of Article 6.3(a) of the SCM Agreement; (ii) displacement and impedance of EU exports to other third country markets, within the meaning of Article 6.3(b) of the SCM Agreement (including on the basis of Article 6.4 of the SCM Agreement); and, (iii) significant price undercutting, price suppression, price depression, and lost sales, within the meaning of Article 6.3(c) of the SCM Agreement (including on the basis of Article 6.5 of the SCM Agreement).  

30. In addition, the subsidies provided through the measures listed in items I.A to G are contingent, in law or in fact, on actual or anticipated export performance, and accordingly, are inconsistent with Articles 3.1(a) (including footnote 4) and 3.2 of the SCM Agreement. 

31. Moreover, the subsidy measures listed in items I.A to G are contingent, in law or in fact, on the use of domestic over imported goods, such that they are, accordingly, inconsistent with Articles 3.1(b) and 3.2 of the SCM Agreement.  

32. Through those same measures listed in items I.A to G above, the United States accords treatment less favourable to imported products than that accorded to like products of US origin, in law or in fact, inconsistently with Articles III:4 of the GATT 1994, and maintains internal quantitative regulations that require, directly or indirectly, that specified amounts or proportions of products be supplied from domestic sources, in law or in fact, inconsistent with Article III:5 of the GATT 1994. Moreover, the United States otherwise applies such regulations in a manner contrary to the principles set forth in paragraph 1 of Article III, including the principle that such laws, regulations and requirements and internal quantitative regulations should not be applied to imported or domestic products so as to afford protection to domestic production. 

Both the disputes (Airbus and Boeing) offer an opportunity for rich juriprudential churning in the area of subsidies under the WTO. It also highlights the complexity of claims, the intertwining of fact and law as well as the extent to which domestic policy is impacted by international law. From local city measures to national subsidy policy, the entire gamut of subsidy measures have been challenged by the EU. This dispute also tests the efficacy of the dispute settlement mechanism. WIll the U.S. comply with the Appellate Body order? What constitutes compliance? If nothing else, the complex quagmire of legalese is an international lawyers goldmine.

Joseph Stiglitz proposes a "Right to Trade"

Joseph Stiglitz  recently spoke about a radical concept of the "Right to Trade" for developing countries that are impacted by the change in trade policies of the developed world.Calling for a change in the multilateral trading rules to incorporate such a concept, it essentially implies that the Right to Trade would be a tool in the hands of the developing world to take advantage of trade to work for the poor.UNCTAD reported it here.

The Commonwealth Secretariat summarized the concept here:

"As part of a pro-development multilateral liberalisation agenda, Prof Stiglitz said it is imperative to install alternative mechanisms to rebalance the global trading system and make trade work for the poor. He proposes that members of the WTO should adopt a general Right to Trade policy operating within the dispute settlement body. 

Under such a mechanism, developing countries would be able to bring an action against any developed country and access remedies. 

“A developing country (or countries) bringing successful actions under the Right to Trade could access a range of remedies, including elimination or change to the offending policy as a result of mediation, bilateral sanctions, and compensation from a multilateral Aid for Trade fund,” he said. 

“Under this arrangement, developing countries should be able to club together to impose joint sanctions where they have been affected by actions of policies of a developed country.”

The proposal works as follows:

"Under such a mechanism, developing countries would be able to bring an action against any advanced country where 3 conditions are met:       

 - a specific group of poor people within a developing country can be identified as being significantly and directly affected by a   specific trade or trade-related policy of an advanced country.        

 - the effect of the policy acts to materially impede the economic development of those poor people.    

    - the impediment operates by restricting the ability of the people to trade, or gain the benefits of trade." 

What implications does this have for the DSM of the WTO? It presupposes that developing countries need special rights under the multilateral system to ensure that trade is beneficial to it's people. It is definitely a radical thought considering that "national" treatment is the underlying philosophy of the WTO as well as the principle that the same rules apply to both the developing and developed worlds. What would constitute "developing" countries n this context? An emerging economy like China too fits this bill. How would the developed economies react to this proposal? He also stated that the Aid for Trade program of the WTO had not worked to the fullest extent possible and that a Global Trade Facility, a fund to be managed in the hands of UNCTAD must ensure that the developing countries are adequately compensated. Another example of the friction between the WTO and UNCTAD? I have written about the UNCTAD-WTO relationship here. Further, how would the proposed arrangement actually work? Would it be as a result of the dispute settlement decisions where developed countries measures are found to be restrictive? What about protectionist measures by developing countries? What about developing countries disputes inter se?

A strikingly out of the box proposal but as suggested by many delegates at the Commonwealth meeting - "the proposals were "radical", "progressive", "mischievous" and "interesting but risky". They added that more work needed to be done to tease out details of how these would work and be enforced."

Time for a radical change? With the Doha round in an impasse, it is difficult to visualize this radical agenda being accepted by the WTO members, by consensus.

Domestic challenge to the WTO in the U.S.

The IELP blog has referred to a domestic challenge to the COOL decision of the WTO in a local U.S. Court here. News of it is found here.The complaint has called into question, inter alia, WTO's authority to override U.S. law. The sovereignty debate is back again. Domestic policy making is continuously challenged under the multilateral trading system. Is every decision of the WTO (panel or Appellate Body) which goes against a country's law a setback to a country's sovereignty? the complaint, inter alia, sought for a declaration that the WTO has no authority to override U.S. law and that its decision concerning the Country of Origin Labeling Act is void in the United States and throughout the world.

An interesting point about "conflict of interest" of the Appellate Body members is also raised in the complaint. It reads:

"22. The WTO Appellate Panel Members were Ujal Singh Bhatia, Ricardo Ramírez- Hernández and Peter Van den Bossche. 

23. Mr. Bhatia was formerly India’s Representative to the WTO. Mr. Bhatia is not a lawyer.

24. Although Ricardo Ramírez-Hernández is a lawyer, he is a Mexican national who has represented Mexico in trade matters. He has an obvious conflict of interest since Mexico was a party to the case, and he should have been disqualified as an appellate jurist. 

 25. Panel member Peter Van den Bossche is from Belgium. Mr. Van de Bossche is a lawyer." 

The conflict of interest pertained specifically to the Mexican member on the Appellate Body. This was echoed by a comment to the post in the IELP blog.

The DSU provisions relating to the Appellate Body are laid out in Article 17. Article 17(3) of the DSU referrers to the composition and states:

"3.The Appellate Body shall comprise persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally.  They shall be unaffiliated with any government.  The Appellate Body membership shall be broadly representative of membership in the WTO.  All persons serving on the Appellate Body shall be available at all times and on short notice, and shall stay abreast of dispute settlement activities and other relevant activities of the WTO.  They shall not participate in the consideration of any disputes that would create a direct or indirect conflict of interest."

A distinction between Panel members and Appellate Body members, in terms of composition, needs to be highlighted. This has a bearing not he conflict of interest argument. In the case of Panel members, there is a bar for citizens from countries that are parties to the dispute from being a part of the Panel, unless agreed to by the disputing parties (which is very unlikely). This is found in Article 8(3) of the DSU which states:

"3.Citizens of Members whose governments are parties to the dispute or third parties as defined in paragraph 2 of Article 10 shall not serve on a panel concerned with that dispute, unless the parties to the dispute agree otherwise."

This specific bar is not provided for in the Appellate Body composition since there is a difference between the nature of the panel and Appellate body composition. This would also imply, by implication, that the bar of citizens of disputing parties is not applicable to Appellate Bodies. Thus, there could be a situation where a U.S. citizen is sitting as a member of an Appellate Body in a dispute pertaining to the united States. After all, the Appellate Body members are unaffiliated to any government. The conflict of interest provision in Article 17(3) would pertain more specifically to issues that the judge has dealt with in his or her previous assignments that are related to the case at hand rather than the nationality.

Anyway, for now let us assume that Simon Lester's proposition that the complaint may be just not be too serious.

Asian economies and WTO

The Asian Development Bank recently brought out a report titled "Asian Economic Integrator Monitor" which analyses, inter alia, regional co-operation and integration in the Asian context. Business Beyond the Reef has commented on the report recently.

Two aspects dealt in the report caught my attention:

1. The trade/GDP ratio in Asian countries has gradually increased over the years. This signifies integration into an interconnected world economy as well as increased reliance on the external, globalised world as compared to a domestic, inward looking policy.

                                   Table 5: Trade/GDP Ratio by Region and Subregion (%)

                                                                                            1990     2000     2010       2011

Asia                                                                                      30.1       40.4     54.1        57.3

East Asia                                                                               26.7       34.1     51.1       52.8

People's Republic of China                                                    29.9       39.6     50.2       49.9

Southeast Asia                                                                       89.4      130.8   107.2     116.1

ASEAN-4                                                                                62.9      103.7      78.1     86.0

BCLMV                                                                                   75.3       84.4    110.1    130.8

Singapore                                                                              293.1    289.3     292.3    299.4

Central Asia                                                                             -          62.8       52.4      59.7

South Asia                                                                              16.0      23.0     36.7       44.0

India                                                                                       12.9      19.5     35.9       44.2

The Pacific and Oceania                                                          28.3      37.3     36.3       37.8

European Union                                                                         –         57.6      62.5      67.2

North America                                                                          18.4     25.6      27.4      29.9

World                                                                                       31.1     40.2      48.0       51.9

2. Role of Asian countries in the dispute settlement process of the WTO

"Some 31 economies in Asia have acceded to the WTO. Asia has also been an active participant in WTO processes. For example, the region has been active in pursuing cases involving anti-dumping and countervailing duties (Table 18). But multilateral cooperation goes beyond the design and use of existing measures. International law often progresses through adjudication, particularly since the Doha Round has stalled. Middle- and high-income Asian economies have been active participants in dispute settlement since the WTO was established in 1995 (Table 19). In addition, Asian nationals have served as panelists to disputes, and several Asian representatives sit on the Appellate Body,which hears appeals from panel cases and cannot be overridden."

Is the increased participation of Asian countries in the WTO DSU a sign of a strategic engagement in the WTO or an ad hoc response to disputes that have an impact on economic interests? Do Asian countries have a development agenda that they consciously pursue at the adjudication body of the WTO? It would be interesting to study the comparative journeys of Asian countries in their pursuit at the WTO DSM in order to achieve their domestic interests. Are there lessons they can learn from each other that can be a ground for developing country co-operation? While national interests ultimately should guide WTO engagement, is there scope for a wider partnership in the WTO of the Asian economies? Do trade realities and converging interests mandate such an eventuality or are the interests too diverse and conflicting to achieve such a partnership? 

Compliance at the WTO - rule based or power based?

It is often emphasised that less developed countries, especially countries in Africa and some developing countries cannot actively engage in the DSU due to variety of factors including legal capacity, costs and lack of long term strategic planning.

Another issue that is central to the DSU is compliance. How do countries comply with decisions of the Panel and Appellate Bodies? What is the record of compliance at the WTO? Since it is a rule based system, not dependent on power diplomacy, do the records show that countries both developed and developing/less developed countries comply in a similar manner? What motivates compliance in international trade law? Is the fear of non-compliance strong enough to ensure compliance?

Petros Mavroidis in a brief note brings out the various challenges to compliance at the WTO. In his briefing paper titled "On Compliance in the WTO Enforcement Amongst Unequal Disputants" he tends to argue that the compliance record at the WTO is not very positive and developing countriea are at a disadvantaged position due to a variety of factors. The realities of trade and unequal trading relations influences compliance to a decision rather than the letter of the law per se.

"The intensity of inducement to comply is a function of the credibility of the threat: it is one thing for the EU to be excluded from the Ecuadorian market and yet quite another from Ecuador to be excluded from the EU market in terms of the impact on the Ecuadorian market. As noted before compliance can be induced on grounds unrelated to WTO because the  ‘big’ guys have more ‘persuasive’ power in that they have more weapons to use when they decide to retaliate which increases their retaliatory power as Bernheim and Whinston (1990) demonstrated in their study on enforcement under the competition law regime."

Thus a country which is has a much more diversified export portfolio and is a stronger trading power would be able to resist the threat of non-compliance than a smaller trading power. The reality of international business takes over rather than the power of the law. Compliance is viewed as another negotiating tool rather than a mandate of law.

Mavroidis makes an interesting point on the ability of developing countries to detect violations of WTO obligations by other countries.

" WTO Members possess unequal capacities to detect deviations which is especially true because of the absence of centralised enforcement as present in the EU. Whilst the powerful nations may rely on a highly diversified export portfolio and the presence of trade diplomacy all around the world, the weaker nations are required to rely on the Trade Policy Review Mechanism (TPRM) which offers scattered information on a periodic basis and the notification system which is based on the incentives which support disclosure. Only the member countries which possess better detecting capabilities and more sophisticated administrations are in a better position to act quickly once they identify a deviation, quickly reducing the period of impunity for the deviators."

Thus, compliance depends on the bargaining asymmetries of the parties involved. the DSU is a forum where unequal trading powers are governed by "equal" trading rules. The record of compliance is an interesting aspect of international law, politics and trading relations. In the context of compliance in the Cloves Cigarettes case where the United States and Indonesia are involved, I had raised the issue of compliance here. One would have to go beyond the boundaries of a dispute and the decisions to unravel the motivations and ultimate decision to comply with a Panel or Appellate Body decision. This throws open questions of how "rule based" the system. Does it take us back to the power realities of international trade? Is compliance ultimately dependent on a country's trading power and influence rather than actual non-compliance of international law? If so, how true is to say that the rule based system overrides a power based system at the WTO?