Inequality in international trade? Developing countries and institutional change in WTO dispute settlement

Abstract

The dispute settlement mechanism of the World Trade Organization (WTO) is a controversial exercise in legalization at the international level, with direct implications for inequality between developed and developing countries. Conventional wisdom suggests that moves to establish binding, third-party arbitration in international law generally favor smaller, less powerful states. Nevertheless, many of the most pointed criticisms of the new WTO system and the most radical reform proposals have come from developing countries, its presumed beneficiaries. To unravel this paradox, I examine the role of the Appellate Body, which has become the principal engine of institutional change in the WTO system. Like all quasi-judicial actors, the Appellate Body has a certain level of delegated authority, especially over procedural issues. Despite objections from WTO members, the Appellate Body has brought about several significant procedural reforms. It has broadened the access of third parties in appellate proceedings; opened the door toamicus curiaesubmissions by private individuals and organizations; and endorsed the representation of governments by private counsel. In all three moves, the Appellate Body–whose legitimacy remains contested–generates information about the political context and potential consequences of its rulings. Its institutional interests, however, at times conflict with those of developing countries in the WTO, as these decisions on balance threaten to exacerbate existing inequalities, at least in the short term.