What are the opportunities and challenges of developing country members in the WTO dispute settlement system

PREFACE
The WTO is playing a novel role in regional trade ralations. Access to a
multi lateral dispute settlement system is helping to scrutinize and anchor the
more lax regional disciplines. Pressure through exposure can help countries,
particularly third world countries that are unable or unwilling to reltaliate to
obtain more favourable results than in bilateral or regional instances. In fact, it is
highly considerable whether poorly developed countries have either chance or
challenges in the WTO dispute settlement system. In order to clearly analyse
this statement, I choose the first question of semester assigment that is “What
are the opportunities and challenges of developing country members in the
WTO dispute settlement system?”.

CONTENT
I. Introduction to the structure of the WTO Dispute Settlement system and
the devoloping countries
1. Definition of the WTO dispute settlement
Black’s Law Dictionary circumscribes “dispute” as “a conflict or controversy,
esp. one that has given rise to a particular lawsuit.”1.
The Permanent Court of International Justice (PCIJ) and the International Court
of Justice (ICJ) have addressed the issue of the existence of a dispute in several
cases.
Disputes in the WTO are essentially about broken promises. By this, a dispute
arises when one country adopts a trade policy measure or takes some action that
one or more fellow-WTO members considers to be breaking the WTO
agreements, or to be a failure to live up to obligations.
2. Definition of the developing countries in WTO
The explanation of the developing countries is diverse as different international
organizations apply different standards. The United Nations maintains a list of
the world’s least developed countries, and it also divides the globe into
developing and developed regions, although not countries. The World Bank
maintains slightly different categories of low, middle, and high-income. The

International Monetary Fund has its own hybrid system of classification.
For its part, the WTO has no classification system. Instead, countries declare
their status and, consequently, their eligibility for the trade benefits accorded to
developing countries. They often do so à la carte2, claiming developing country
status for certain agreements but not others. In line with this, WTO dispute
1 B. A. Garner (ed.), Black’s Law Dictionary (1999).
2 See Gregory Shaffer, “The Challenges of WTO Law; Strategies for Developing Country Adaptation,” World
Trade Review.


settlement data – for example, in WT/DS/OV documents, are based on an
arbitrary split: most OECD members (Korea, Mexico and Turkey are excluded)
are in the first group: developed countries; while all the rest are considered as
developing countries. A group of least developed members (based on the UN
list) is also recognized3.
3. Introduction to the structure of the WTO Dispute Settlement system
A WTO dispute proceeds through three main stages: consultation; formal
litigation; and, if necessary, implementation. All disputes start with a request for
consultations, in which the member government bringing the case to the WTO
(the complainant) sets out its objections to the trade measure(s) of another
member government (the defendant). The two sides are then required to consult
for 60 days with the goal of negotiating a mutually satisfactory solution to the
dispute.
If consultations do not result in a mutually satisfactory solution, the complainant
can request a panel proceeding, marking the start of the formal litigation stage.
Panels are comprised of three to five persons with a background in trade law,
agreed to by the parties on a case-by-case basis 4. There are typically two rounds
of testimony, including from other countries (third parties) that notify the WTO
of a “substantial” interest in the case. The panel then circulates an “interim
report,” offering both sides an opportunity to comment and seek clarification.

The complainant and defendant can still negotiate a settlement at this point. If
not, the panel issues its final report, which is then adopted by the WTO, unless
one of two things happens. First, the two sides can agree not to adopt the panel
report for whatever reason, although to date this has not happened. Second, one
or both sides (but not third parties) can appeal the panel’s report, which happens
frequently (i.e., in 73% of panel rulings).
The Appellate Body (AB) handles these appeals. Unlike panels, the AB is a
standing body of jurists5 which is designed to ensure greater consistency across
its rulings. The AB is tasked with hearing testimony from the parties, and any
third parties, on how the panel may have erred in its legal reasoning. The AB
can uphold or overturn the panel in whole or in part, and its decision is final. If
this verdict favors the defendant, the case typically ends. If this verdict, instead,
favors the complainant, the dispute may proceed to the implementation stage.
When a defendant is ruled against, the panel and (or) AB calls for it to bring its
measures into accordance with its WTO obligations. If the complainant feels
that the defendant has not taken appropriate steps, it can subsequently request a
3 Roderick Abbott, “Are Developing Countries Deterred from Using the WTO Dispute Settlement System?”,
ECIPE WORKING PAPER, No. 01/2007, page 6.
4 Hoekman, Bernard M., and Petros C. Mavroidis (2000), “WTO Dispute Settlement, Transparency, and
Surveillance”, World Economy 23(4), pp. 527-542
5 Marc L. Busch and Eric Reinhardt, The WTO Dispute Settlement Mechanism and Developing Countries: The
WTO Dispute Settlement, Published by Sida 2004, page 3.


“compliance” panel. This panel, which is often comprised of the original panel
members, must determine whether the defendant’s efforts have, in fact, brought
its measure(s) into compliance. If not – a judgment the defendant can appeal to
the AB – the complainant can request a second panel to set the level at which it
can “retaliate” against the defendant. This typically involves imposing tariffs on
the defendant’s exports. It is essential to note two things about retaliation 6. First,

requests for authorization to retaliate are rare. Indeed, complainants have asked
for authorization to retaliate in just seven of the hundreds of cases handled by
the WTO. Second, it is up to the complainant, and not the WTO, to follow
through on this authorization to retaliate, and this is rarer still.
II. Developing countries in WTO dispute settlement - pros and cons
The World Trade Organization (WTO) dispute settlement mechanism can be
critical for developing countries seeking to defend their trade rights and
development interests. But to utilize these pros, the third countries must be
overcome obstacles. I will show which the opportunities and challenges of
developing country members have in the WTO dispute settlement system.
1. Three developing countries major challenges for participating in the
WTO Dispute settlement system
From my perspective, three major challenges that developing countries face if
they are to make use of the WTO dispute settlement system: (i) lack of legal
expertise in WTO law; (ii) lack of financial resources, including for the hiring of
outside legal counsel; and (iii) fear of political and economic pressure from the
developed countries such as United States, EC that induces them to abandon
justified legal claims7.
Firstly, most developing countries only have one or a handful of lawyers to
address WTO matters, few or no lawyers in the private sector knowledgeable of
WTO law, and few or no firms or trade associations having regular contact with
state officials on trade matters8. Moreover, WTO law–as opposed to traditional
“public international law”–is not even taught in many countries, so that they are
dependent on foreign education to develop local talent 9. Even worse, most
developing country officials must work in a foreign language in WTO judicial
proceedings within this “Anglophone organization”10. Thais, Malays and
6 Marc L. Busch and Eric Reinhardt, The WTO Dispute Settlement Mechanism and Developing Countries: The
WTO Dispute Settlement, Published by Sida 2004, page 4.
7 See more at Gregory Shaffer, How to make the WTO dispute settlement system work for developing countries:
some proactive developing country strategies, ICTSD Resource Paper No. 5 on March 2003, page 26.

8 To give just one example, the Philippines had only one lawyer working on WTO matters, with no assistance
from the Philippine private bar. Interview with Philippine official, in Geneva, Switz. (Sept. 2002).
9 Confirmed in interviews with developing country representatives in Geneva, Switz. (Sept. 2002).
10 Although English, French and Spanish are the three official languages of the WTO, English predominates.
French and Spanish-speaking countries are at a disadvantage linguistically. Interview with the representative of
an international organization that works with least developed organizations from Francophone Africa, in
Geneva, Switz. (June 20, 2002).


Indonesians, to give just three examples, are asked to master the legal nuances
of multiple three-hundred page WTO judicial decisions, often with limited legal
training, and to do so in a foreign tongue. As noted earlier, in many cases, the
cost of developing internal legal expertise is not cost-effective, so that the Doha
Round’s emphasis on “capacity building” may offer only a hollow hope.
Secondly, developing countries do not have enough strong fund to pay for costeffective legal assistance to help identify, pursue and defend their WTO rights.
In theory, without considering the cost of fact-finding specifically, the general
cost of litigation in front of the WTO is already high, and more so if a private
law firm is hired. In some estimations, private law firms can charge anywhere
from $250 to $1,000 per hour in fees, leading to total fees anywhere between
$100,000 to over $1,000,00011. These figures, however, probably represent
rather conservative estimates, even for a relatively simple case12.
Finally, if a developing country government fears that by bringing a dispute to
the WTO it will jeopardize the stability of its trading relationships, it is unlikely
the government will move forward. In theory, the same might be said of any
country, developed and developing. As the Doha Development Round has
demonstrated, disagreements over international trade policy ignite heated
debate13. The trade relationships formed can be delicate, and countries may want
to avoid setting off the frail balance through disruptive contests with little gain
in the end. When one country depends on another for a crucial trade
relationship, sometimes that factor outweighs any rights they may seek to

enforce at the WTO. Furthermore, even if a country brings a case to the WTO
and wins, there is no guarantee it will produce beneficial trade results14.
2. The opportunities of developing country members in the WTO dispute
settlement system
With these obstacles in mind, it might seem that developing countries stand to
benefit little from WTO dispute settlement. But this is far from true. Poorer
complainants have filed and won concessions from large industrialized states in
a wide variety of disputes, with millions of dollars at stake. These cases have
involved exports of underwear (Costa Rica v. US), shrimp (Thailand and
Pakistan v. US), wool shirts (India v. US), gasoline (Venezuela and Brazil v.
11 These fee estimates are based on calculations using hour estimates from the ACWL Billing Policy and Time
Budget for 2007 (Decision 2007/7 Adopted by the Management Board on Nov. 19, 2007). The ACWL time
budget contemplates that a complicated case (including recourse to Article 21.3, 21.5, and 22.6 proceedings)
requires a maximum of 1,452 hours. The $100,000 to $1,000,000 range of fees is an estimate of cost given
prevailing private law firm rates.
12 Håkan Nordström, The Cost of WTO litigation, legal aid and small claim procedures (June 1, 2015)
(Stockholm: Swedish National Board of Trade (Global Trade Department)
13
See,
e.g.,
Guardian.com,
Mandelson:
US
greed
/>
caused

the

Doha

collapse,

14 For further discussion of this topic, see Marco Bronckers & Naboth van den Broek, Financial Compensation
in the WTO: Improving the Remedies of WTO Dispute Settlement, 8 J. INT’L ECON. L. 101 (2015)


US), sardines (Peru v. European Communities) and poultry (Brazil v. European
Communities), among other products.
These complainants, like their wealthier counterparts, have benefited from the
fact that defendants worry about the normative condemnation that goes along
with a legal defeat, rather than threats of direct retaliation per se. In other words,
defendants prefer to avoid being found “noncompliant” 15 because such a label
may damage their prospects of gaining compliance when they, in turn, file as
complainants. In this way, defendant governments may value the integrity of the
multilateral trade regime over the outcome of a single case. This means that poor
complainants can use legal victories at the WTO to weigh in on the domestic
political debates over free trade within defendant countries, as they look to gain
market access. In short, the effectiveness of WTO dispute settlement derives
more from these intangibles than from trade sanctions, which are rare, and
which could never have been a credible factor in the dozens of cases in which
wealthy defendants have conceded to poor complainants.
Viewed from this perspective, the emphasis on retaliation at the WTO is
misplaced. While it is true that larger countries can more credibly threaten to
retaliate, threats of retaliation are not the key to the system. As Robert Hudec
explained, other provisions of the WTO dispute are “make legal complaints
without retaliation quite a bit more effective than they were”. He further
observed that the inability of poor countries to retaliate “is a problem, but it is a
separate problem that has nothing to do with the utility of the dispute settlement
procedure for a developing country complainant.”16.

CONCLUSION
The WTO, as a multilateral trade body, has done well and the DSB, as a
quasi-judicial mechanism, has also worked reasonably well and contributed to
the strengthening of the WTO rule-based regime. Smaller and poorer countries
also need to examine strategies for mobilizing legal resources that do not
involve a change in dispute settlement rules. They need to do so since the WTO
legal system will likely not be significantly changed and, in any case, lies
outside of their control except through their use of it.

15 Shaffer, Gregory and Victor Mosoti (2002), “EC Sardines: A New Model for Collaboration in Dispute
Settlement?”, Bridges 6 (7) October, pp. 15– 22
16 Hudec, Robert E (2002), “The Adequacy of WTO Dispute Settlement Remedies”, in Bernard Hoekman,
Aaditya Mattoo