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The Potential Rise of Trade Remedies and the WTO Dispute Settlement System

The Potential Rise of Trade Remedies and the WTO Dispute Settlement System COLUMN ­ WTO ´ Fernando Pierola* In his note of 18 February 2010, Chad Bown notes a rise in the imposition of anti-dumping, countervailing and safeguard measures. Bown shows that the number of trade remedies imposed in the last quarter of 2009 has increased in 35.7% as compared to the same period in 2008. Overall, the number of measures in 2009 is 29.5% higher than the total number in 2008.1 It appears that such an increase respond to the increase in the initiation of trade remedies investigations following the 2008 economic crisis. It is not unusual that a global economic crisis gives rise to domestic pressures for the taking of protectionist measures. A crisis affects vital economic factors of an industry such as sales, production, capacity utilization and productivity; unemployment is also likely to rise. If these effects are combined with the prospects of foreign competition, in particular from countries that have not been that badly affected by the crisis, it is understandable that the industry may feel threatened and decides to seek protection either through subsidies or other type of trade policy devices. Certainly, trade remedies are the most common devices to counter import competition as they have been envisaged precisely to address domestic industry's concerns. One of the multiple `by-products' of trade remedies protection, however, is the potential increase of trade disputes. The WTO dispute settlement system has already witnessed this phenomenon after the 1997 financial crisis, which led to a surge of trade remedies actions and subsequent challenges before the WTO. The system has been successful in providing solutions in many respects. However, it also has its limitations. For instance, it is unclear whether it can help Members to resolve trade remedies disputes at their earliest stage, that is, when the adoption of the measures is still under consideration. A WTO panel can only be established after a measure has been put in place. However, there Notes * 1 is uncertainty as to whether consultations may be requested prior to the adoption of a measure, and so far, WTO Members have preferred not to take the risk. The uncertainty forecloses the opportunity of seeking a more effective and less costly solution when the problematic measure is not yet a fait accompli. In addition, the system is well equipped to provide legal solutions and to determine who has a right and an obligation. However, it provides minimal tools to help the parties seek a reconciliation of their real interests and the exploration of innovative solutions that may create further wealth. Alternative dispute settlement means other than traditional panel adjudication are available only upon the consent of the parties, and given the structure of the system in terms of remedies, a respondent may not necessarily have the best incentives to explore a mutually acceptable solution with the complainant. However, the recent example of the settlement reached in the EC ­ Bananas dispute shows the enormous potential for good offices, mediation, conciliation and other means alternative to traditional adjudication. Furthermore, the scope of remedies that the system can provide is limited. Remedies are only prospective in nature, following the adoption of the panel or the Appellate Body report. Except for specific circumstances, the system does not contemplate relief for past wrongdoings. Given the actual length of proceedings up to implementation ­ between two and two and a half years ­ this lack of retrospective remedies affects the expectations that business may have on the system; it makes the dispute settlement process interesting mainly to growing industries facing a long-term maturity horizon or to businesses that otherwise need to defend their position in an importing market. Moreover, another limitation of the system is that it does not provide concrete remedies for the breach of WTO law. The sole obligation arising from a decision Counsel at the Advisory Centre on WTO Law, Geneva, Switzerland. The opinions expressed in this note are those of the author in his personal capacity. C. Bown, `Antidumping, Safeguards, and Protectionism During the Crisis: Two New Insights from 4th Quarter 2009', , last visited 1 Apr. 2010. Global Trade and Customs Journal, Volume 5, Issue 6 ! 2010 Kluwer Law International. finding that a measure is WTO-inconsistent is that the respondent must bring its measure into conformity with WTO law. However, the specific means of implementation are left to the discretion of the implementing Member. In the field of trade remedies, this flexibility has introduced a good deal of uncertainty, and experience has shown that implementing Members have found ways to continue maintaining the measures while `re-doing' certain aspects of the investigation. There are multiple proposals for the reform of the WTO dispute settlement system. They are still subject to negotiations, and, in practice, WTO Members are running DSU negotiations in parallel to those of the Doha Round. WTO Members must be aware, however, that the system requires adjustments in order to address the demands for more responsive solutions, more so in the light of a likely increase of trade remedies disputes. Global Trade and Customs Journal, Volume 5, Issue 6 ! 2010 Kluwer Law International. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Global Trade and Customs Journal Kluwer Law International

The Potential Rise of Trade Remedies and the WTO Dispute Settlement System

Global Trade and Customs Journal , Volume 5 (6) – Jun 1, 2010

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Kluwer Law International
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Copyright © Kluwer Law International
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1569-755X
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Abstract

COLUMN ­ WTO ´ Fernando Pierola* In his note of 18 February 2010, Chad Bown notes a rise in the imposition of anti-dumping, countervailing and safeguard measures. Bown shows that the number of trade remedies imposed in the last quarter of 2009 has increased in 35.7% as compared to the same period in 2008. Overall, the number of measures in 2009 is 29.5% higher than the total number in 2008.1 It appears that such an increase respond to the increase in the initiation of trade remedies investigations following the 2008 economic crisis. It is not unusual that a global economic crisis gives rise to domestic pressures for the taking of protectionist measures. A crisis affects vital economic factors of an industry such as sales, production, capacity utilization and productivity; unemployment is also likely to rise. If these effects are combined with the prospects of foreign competition, in particular from countries that have not been that badly affected by the crisis, it is understandable that the industry may feel threatened and decides to seek protection either through subsidies or other type of trade policy devices. Certainly, trade remedies are the most common devices to counter import competition as they have been envisaged precisely to address domestic industry's concerns. One of the multiple `by-products' of trade remedies protection, however, is the potential increase of trade disputes. The WTO dispute settlement system has already witnessed this phenomenon after the 1997 financial crisis, which led to a surge of trade remedies actions and subsequent challenges before the WTO. The system has been successful in providing solutions in many respects. However, it also has its limitations. For instance, it is unclear whether it can help Members to resolve trade remedies disputes at their earliest stage, that is, when the adoption of the measures is still under consideration. A WTO panel can only be established after a measure has been put in place. However, there Notes * 1 is uncertainty as to whether consultations may be requested prior to the adoption of a measure, and so far, WTO Members have preferred not to take the risk. The uncertainty forecloses the opportunity of seeking a more effective and less costly solution when the problematic measure is not yet a fait accompli. In addition, the system is well equipped to provide legal solutions and to determine who has a right and an obligation. However, it provides minimal tools to help the parties seek a reconciliation of their real interests and the exploration of innovative solutions that may create further wealth. Alternative dispute settlement means other than traditional panel adjudication are available only upon the consent of the parties, and given the structure of the system in terms of remedies, a respondent may not necessarily have the best incentives to explore a mutually acceptable solution with the complainant. However, the recent example of the settlement reached in the EC ­ Bananas dispute shows the enormous potential for good offices, mediation, conciliation and other means alternative to traditional adjudication. Furthermore, the scope of remedies that the system can provide is limited. Remedies are only prospective in nature, following the adoption of the panel or the Appellate Body report. Except for specific circumstances, the system does not contemplate relief for past wrongdoings. Given the actual length of proceedings up to implementation ­ between two and two and a half years ­ this lack of retrospective remedies affects the expectations that business may have on the system; it makes the dispute settlement process interesting mainly to growing industries facing a long-term maturity horizon or to businesses that otherwise need to defend their position in an importing market. Moreover, another limitation of the system is that it does not provide concrete remedies for the breach of WTO law. The sole obligation arising from a decision Counsel at the Advisory Centre on WTO Law, Geneva, Switzerland. The opinions expressed in this note are those of the author in his personal capacity. C. Bown, `Antidumping, Safeguards, and Protectionism During the Crisis: Two New Insights from 4th Quarter 2009', , last visited 1 Apr. 2010. Global Trade and Customs Journal, Volume 5, Issue 6 ! 2010 Kluwer Law International. finding that a measure is WTO-inconsistent is that the respondent must bring its measure into conformity with WTO law. However, the specific means of implementation are left to the discretion of the implementing Member. In the field of trade remedies, this flexibility has introduced a good deal of uncertainty, and experience has shown that implementing Members have found ways to continue maintaining the measures while `re-doing' certain aspects of the investigation. There are multiple proposals for the reform of the WTO dispute settlement system. They are still subject to negotiations, and, in practice, WTO Members are running DSU negotiations in parallel to those of the Doha Round. WTO Members must be aware, however, that the system requires adjustments in order to address the demands for more responsive solutions, more so in the light of a likely increase of trade remedies disputes. Global Trade and Customs Journal, Volume 5, Issue 6 ! 2010 Kluwer Law International.

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Global Trade and Customs JournalKluwer Law International

Published: Jun 1, 2010

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