World Trade Organization Litigation Research Articles

Challenged in Geneva: WTO Litigation Experience and the Design of Preferential Trade Agreements

AbstractWhat explains the design of international institutions? Existing research has largely neglected how experience in cooperation in one set of international institutions impacts on design choices made by states in other globally-oriented institutions. We contribute to this evolving debate by analyzing spillovers in experience in international trade. We argue that countries' track record of interaction in multilateral trade disputes affects the design of their preferential trade agreements (PTAs). If a country participates in a complaint against a prospective PTA partner at the World Trade Organization (WTO), the challenge in Geneva alerts the defendant's import-competing industries with respect to potential challenges under the planned PTA. As a result, these industries exert pressure on their government to preserve leeway under the future treaty, leading to increased flexibility and a lower level of enforcement in the PTA. We find support for our hypotheses in an empirical analysis of 347 PTAs concluded post 1990.

Institutional Origins of the US–China Trade War: The Concurrence of America's Limited Legal Leverage and China's Overproduction

This paper examines why the United States and China could not accommodate their trade disputes within the framework of the World Trade Organization (WTO), which now escalated into a rhetorical and retaliatory tariff war. The existing literature, which assumes the dominance of US institutional power in the WTO litigation process, has not anticipated the administration's current gambit that has ignited a trade war with China. Specifically, many liberal‐minded pundits and public alike were puzzled by the United States imposing self‐destructive tariff measures against the WTO rules, despite the WTO still remains as an effective tool and resource for America's trade policies. Against such a backdrop, this paper claims that the concurrence of America's limited legal leverage in the WTO and China's domestic industrial structure that induces overproduction substantially explains the puzzle. To support this central claim, the paper conducts a comparative case analysis of US–China disputes in two industrial domains: steelmaking and renewable energy, including solar photovoltaic (PV) power and wind power. Despite contrasting domestic industrial structures and sectoral characteristics, the case study shows a similar pattern present in China's successful legal maneuvers and US strategic failures. Furthermore, the study also reveals the structural causes of overproduction beyond the Chinese central authority's managerial capacity.

A Crisis or an Opportunity? The Trade War between the US and China in the Solar PV Sector

Since early 2018, the US – China ‘trade war’ has increased tariffs on a wide range of Chinese products, including solar panels. The tension between the US and China in solar sector, if left unchecked, will not only harm the bilateral relationship between the two trade powers but also impede climate change mitigation as higher costs will slow down the deployment of solar products. The article begins by tracing the rapid development of the solar energy sector in China, before reviewing US trade measures to counteract the increased imports and protect its domestic industry. The article then proceeds to examine the World Trade Organization (WTO) rules, finding that China is likely to prevail in the dispute on claims made under the General Agreement on Tariffs and Trade and the Agreement on Safeguards. However, while WTO litigation may be a necessary step it is not sufficient. China must also take the opportunity to solve deeply-rooted problems in its solar industry, namely solar overcapacity and heavy reliance on export markets in a limited number of countries that render Chinese solar manufacturing susceptible to trade restrictions imposed by other countries. Addressing these issues will not only remove a major irritant to the US and other trading partners but would also solidify the position of the industry within the country. The article recommends two options for China: first, explore domestic market potential for solar energy so as to absorb manufacturing capacity. The key here lies in progressively scaling up domestic solar consumption, which is essential in promoting China’s solar development in a healthy and sustainable manner. Second, strengthen ties with countries along the Belt and Road Initiative (BRI) in solar trade and investment. Exporting Chinese solar technologies and building solar power infrastructure in BRI countries not only alleviates China’s over-dependence on a limited number of advanced economies’ markets but also contributes to ‘greening’ the BRI and global climate change mitigation.

Reconciling Regulatory Space with External Accountability through WTO Adjudication – Trade, Environment and Development

AbstractThis article argues in favour of broadening the trade and environment debate in the World Trade Organization (WTO) to include a developmental perspective. WTO litigation involving environmental regulation touches upon the issue of global justice and the power asymmetries structurally embedded in the global economy. The recognition of the WTO as a legitimate global institution, therefore, depends on its ability to reconcile the respect for the right to regulate with the need to give due regard to the interests and concerns of foreign constituencies affected by domestic regulation. By imposing other-regarding obligations, WTO law can act as a mechanism of external accountability of powerful states vis-à-vis affected foreigners, especially where asymmetric relations and different stages of economic development are involved. The article applies this framework to analyze the legal reasoning of the Appellate Body in theUS-Tuna IIdispute between the US and Mexico – a dispute illustrating the complex intertwinement between economic, environmental and developmental issues. It concludes that the use of the concepts of ‘even-handedness’ and ‘calibration’ under Article 2.1 of the Technical Barriers to Trade Agreement and Article XX of the General Agreement on Tariffs and Trade did not enable the Appellate Body to strike an adequate balance between the right to regulate and external accountability. While in the original report the Appellate Body used ‘even-handedness’ to impose only a minimal level of external accountability on the US, in the compliance report, the Appellate Body has gone too far by failing to defer to the US risk assessment amidst scientific controversy and uncertainty.

The WTO Panel's Approach to the Precautionary Principle in the EC Biotech Case: What Implications for the WTO and International Environmental Law?

The debate on Genetically Modified Organisms (GMOs) is of particular interest to developing countries including Uganda. In the purview of the intersection between Trade and Environment at the World Trade Organization (WTO), the debate has manifested in consideration of the question of the applicability of the Precautionary Principle. This paper analyses the WTO panel’s decision in the EC Biotech case. The main intention is to illustrate that the precautionary principle is an important principle in international environmental law, notwithstanding the fact that it is surrounded by a lot of controversy. States apply this principle to protect their citizens and not even WTO litigation can prevent them from doing that. The principle is vital and its application should be strengthened rather than relegated to some redundant, illogical conception of paranoid environmentalists by the WTO and other international dispute resolution mechanisms. Through its analysis of the EC Biotech case, the paper shows that some aspects of the principle do need clarity and some suggestions are made in that regard. But sometimes, like in the WTO cases, the principle is either not well appreciated or easily confused with the principle of prevention. This paper also shows that the WTO has deliberately adopted a mundane approach to discussing the principle’s status and its implications for WTO dispute settlement as well as international environmental law and international law in general. This approach is deplorable and a waste of time. Instead, the WTO and other dispute resolution mechanisms should work towards a convergence on how to refine and apply the principle in tandem with other non-environmental obligations.

Smoke screen? The globalization of production, transnational lobbying and the international political economy of plain tobacco packaging

ABSTRACTIn 2012, Australia became the first country in the world to introduce plain tobacco packaging in an effort to reduce tobacco consumption. This move was vehemently opposed by the tobacco industry, which challenged it on several levels: nationally, bilaterally and multilaterally at the World Trade Organization (WTO). The political behaviour of the tobacco companies in this case is puzzling both in terms of scale, operating at multiple levels at the same time, and in terms of the countries mobilized in their defence. WTO litigation is typically the result of multinational enterprises (MNEs) lobbying their own government, but here third countries were mobilized. Lobbying in third country contexts, with the objective of accessing multilateral dispute settlement systems, has been little studied. We thus know very little about the driving factors behind such activities, how target governments are selected and what lobbying strategies are used. This article draws on emerging research on transnational lobbying and a case study of the plain packaging case to explore these issues in detail and, by doing so, aims to further our theoretical understanding of the political economy of international trade in the context of increasing regime complexity and globalization of production. In addition, the article sheds new light on advocacy in the context of disputes about cross-border challenges to domestic regulation.

The World Trade Organization's Dispute Settlement Understanding: Are All (Un)Equal?

The World Trade Organization (WTO) is one of the most visible and contested institutions within the global economic governance architecture. Both proponents and opponents of trade liberalization regularly voice discontent with the institution’s functioning and its effect on the economies of its members. Of particular interest is the WTO Dispute Settlement Understanding (DSU), often described as the organization’s flagship body. The WTO DSU helps parties to settle disputes related to the interpretation and enforcement of the provisions drafted and agreed upon over several trade negotiation rounds. This paper presents a game-theoretic approach to analyze whether the WTO DSU ensures equal access and outcomes to all parties who are part of a trade dispute. It particularly addresses the costs of litigation. The paper argues that due to these issues, developing countries will not reap equal benefits from the usage of the WTO DSU as their developed counterparts. Developing countries will, due to a relative higher cost of WTO litigation, be worse off, both as a plaintiff and as a defendant. They will file less complaints and settle for less beneficial outcomes. We also find that bilateral settlement is a very important feature in the WTO DSU.

Trade flows and trade disputes

This paper introduces a new data set and establishes a set of basic facts and patterns regarding the trade that countries fight about under World Trade Organization (WTO) dispute settlement. The paper characterizes the scope of products, as well as the levels of and changes to the trade values, market shares, volumes, and prices for those goods that eventually become subject to WTO litigation. The first result is striking heterogeneity in the level of market access at stake across disputes: for example, 14 percent of cases over disputed import products feature bilateral trade that is less than $1 million per year and another 15 percent feature bilateral trade that is more than $1 billion per year. Nevertheless, some strong patterns emerge from a more detailed examination of the data. Both high- and low-income complainants tend to suffer important losses in foreign market access in the products that ultimately become subject to dispute. Furthermore, although the respondent's imposition of an allegedly WTO-inconsistent policy is associated with reductions, on average, in trade values, volumes, and exporter-received prices, there is some evidence of differences in the size of these changes across the different types of policies under dispute and the potential exporter country litigants. Finally, these different types of policies under dispute can have dissimilar trade effects for the complainant relative to other (non-complainant) exporters of the disputed product and this is likely to affect the litigation allegiance of third countries.

Stare Decisis in the WTO: Myth, Dream, or a Siren’s Song?

Building on the tools of the economic analysis of law, we will try to solve the riddle of precedents in the World Trade Organization (WTO). In the first part of the article, it will be shown how the traditional economic models used to advocate the efficiency of stare decisis do not capture its distinguishing traits due to oversimplification. Second, it will be argued that a de jure regime of stare decisis is ill suited to the peculiar nature of WTO's litigation. More precisely, the action of interest groups and the intricacies characterizing the legislative process of the WTO create incentives that are drastically different from private litigation.

Are Asian WTO Members Using the WTO DSU 'Effectively'?

Compared to the USA, the European Union, Brazil, and Mexico, Asian World Trade Organization (WTO) members initiate fewer disputes relative to their respective stakes in global trade. They are also more likely to manifest a preference for negotiated settlements as respondents. Some have suggested that this is due to an ‘Asian culture of non-litigiousness’. This article seeks to explore this explanation as well as the fit of other explanations. We find that none of these explanations alone satisfactorily explain the current situation. We offer instead a combination of some alternative explanations by looking at the capacity to engage in WTO litigation, the domestic legal vetting processes for trade measures, industry sophistication and Asian production networks.

Just Trade and Foreign Policy: A Case Study of the Legal Permissibility and Political Feasibility of Ceasing Trade with Israeli Settlements in Occupied Territories

This study treats settlement boycotts as a question on legal trade and foreign policy. On the legal side, it concludes that ceasing trade with Israeli settlements is not only permitted before the World Trade Organization (WTO) but also obliged under public international law in general. It is found that GATT does not apply to settlements and that Israel cannot refer successfully to the WTO courts to rebuke settlement boycotts. However, in case a WTO panel would decide differently, settlement boycotts would still be permitted in WTO litigation using specific exceptions in WTO law. On the foreign policy side, this study investigates the political feasibility in the United States and European Union of trade embargoes toward Israeli settlements in occupied territories. It starts off with the construction of a dynamic conceptual and theoretical framework in which seven variables that determine political feasibility are set out: legal, economic, diplomatic, political culture, civil society, perceived gravity of the breach and knowledge, and level of leadership. This framework is subsequently applied to the United States and Europe. Findings are that there is currently not sufficient political feasibility to enact trade measures toward settlements. In the US, this is mainly due to diplomatic ties and leadership by a powerful lobby. In the EU, this is because of its history, lack of leadership and strong position of certain member states.

Low-income developing countries and WTO litigation: Why wake up the sleeping dog?

ABSTRACT The World Trade Organization (WTO) is one of the most judicialized dispute settlement systems in international politics. While a general appreciation has developed that the system has worked quite well, research has not paid sufficient attention to the weakest actors in the system. This paper addresses the puzzle of missing cases of least-developed countries initiating WTO dispute settlement procedures. It challenges the existing literature on developing countries in WTO dispute settlement which predominantly focuses on legal capacity and economic interests. The paper provides an argument that the small universe of ‘actionable cases’, the option of free riding and the assessment of the perceived opportunity costs related to other foreign policy priorities better explain the absence of cases. In addition (and somewhat counterintuitively), we argue that the absence of cases is not necessarily bad news and shows how the weakest actors can use the dispute settlement system in a ‘lighter version’ or in indirect ways. The argument is empirically assessed by conducting a case study on four West African cotton-producing countries (C4) and their involvement in dispute settlement.

'You Don't Miss Your Water 'Til Your River Runs Dry': Regulating Industrial Supply Shortages after 'China-Raw Materials'

Global industrial production depends on stable access to raw inputs. Food price volatility has emerged as a major concern for Group of Twenty Finance Ministers and Central Bank Governors (G20), while we are hearing new calls for bringing global disciplines to resource cartels like the Organization of the Petroleum Exporting Countries (OPEC). Supply chains that make up globalized production recently demonstrated their potential fragility when Chinese sovereign intervention threatened to bring Japan’s high-tech manufacturing to its knees by cutting off its supplies. These wide-ranging issues are now being addressed under the umbrella of trade regulation. As a result, we are witnessing a shift from the old trade regulatory model of the past six decades - where trade negotiators focused on import barriers and reciprocal concessions and export restrictions were justified typically on grounds of national security and foreign policy - towards the realization of an increasing need to tighten global rules on export restrictions. Although commodity and resource prices are at least partly market-driven, sovereign intervention has finally emerged as a clear concern. The Obama Administration’s first suit brought before the World Trade Organization (WTO) concerned Chinese export restrictions on nine commodities, including magnesium, coke, yellow phosphorus, and zinc, and resulted in victory. Yet real General Agreement on Tariffs and Trade (GATT) disciplines on export price measures, quotas and other conditions have been sparse. We argue in this article that, aside from clear disciplines and a fairly developed body of jurisprudence on export quotas, trade lawyers would be hard pressed to show any “real” form of global regulation. At the same time, a new global regulatory pattern is emerging in place of the old. This regulatory pattern is being driven by global events, WTO litigation behavior, as well as new diplomatic and treaty initiatives. One of the more important shifts, as the recent “China Raw Materials” litigation referred to earlier shows, is the shift away from framing export restrictions as a national security issue, a characterization which had ensured that disciplines remained relatively underdeveloped during the Cold War era. During the litigation, China refrained from invoking the national security card, so familiar to trade lawyers in the field. The case also gives us a glimpse of the shape of future global regulation, as China undertook (as part of its accession obligations) additional requirements beyond the usual GATT-WTO rules. The ruling has also clarified the sheltering scope of the conservation clause under GATT Article XX, which sovereigns are increasingly likely to invoke in their interventions in export supplies. China’s and Asia’s rising demand for energy and raw materials, industrial rivalry, and growing demand for adequate food supplies means that the WTO is heading into uncharted waters. As free trade has become more widely accepted, the problem has become less about how even more free trade can be achieved, and more about how the demand for commodities which free trade has helped to facilitate can actually be met. The old national security-based understanding, which we had applied to export controls and restrictions, and its accompanying discourse, must now cede to the present-day realities of an unprecedented process of economic globalization. This article takes stock of existing GATT-WTO regulation, a comprehensive review of relevant GATT-WTO jurisprudence, a comparative survey of alternative regional solutions in North America and Europe, and a first look at newly emerging global regulatory approaches.

Checking RTA Compatibility with Global Trade Rules: WTO Litigation Practice and Implications from the Transparency Mechanism for RTAs

With the adoption of a new transparency mechanism for Regional Trade Agreements (RTAs) highlighting a crucial shift from 'examination' of RTAs to their 'consideration', the World Trade Organization (WTO) dispute settlement mechanism remains the only available channel for checking RTA consistency. In practice, however, the WTO adjudicatory bodies have been reluctant to deal with this issue. This may be explained with the (1) complexity of the WTO compatibility test and (2) the lack of clarity in the WTO substantive provisions concerning regional trade. The first hurdle could be overcome with the panel's approach in US - Line Pipe supplemented by an in-depth analysis of only problematic aspects of the RTA identified by the complainant. As for the second constraint, WTO members should put more effort to complete the pending work on the clarification of 'systemic issues' or, failing that, use their exclusive power to adopt authoritative interpretations or encourage the dispute settlement bodies to fully utilize their interpretative authority under the Dispute Settlement Understanding (DSU). In addition to the 'consideration' approach, the links between notification and litigation and between the Secretariat's factual presentations and dispute settlement also have some legal implications for WTO litigation involving RTA issues.

The EU Ban on Seal Products: Some Customs and WTO Open Questions

The recent adoption by the EU of a regulation as to the ban of seal products has left unsolved a number of legal issues; namely, in the areas of (1) EU customs law and (2) the WTO law. As to the EU customs law, for example, the regulation lacks provisions as to the administration of the customs procedures. For example, the transit regime is undefined in the regulation. Thus, the legitimacy of the transit of seal products is still uncertain and open to several interpretations by national authorities. The way transit as to the seal products regime will be managed, this will inevitably affect other sectors of trade. In addition, the regulation lacks as well clear rules for the implementation of a harmonized custom penalty regime. How this is implemented will determine whether it is consistent with the general principles of EU law. These and other legal issues will affect directly or ‘de relato’ a great number of trading sectors, which are involved in the seal products trade, because as changes are made to create harmony with EU law, other sectors will inevitably be affected. Further, with reference to the World Trade Organization (WTO) law, in late 2009, Canada and Norway have brought a complaint against the regulation, claiming the inconsistency of the latter in the light of the WTO law. The pending litigation, which is mainly about environmental issues, may reach a new striking interpretation of several WTO principles, for example, as to the general exemption under Article XX(b) of the General Agreement on Tariffs and Trade (GATT) 1994 and, in general, as to Article XX of the GATT 1994. Indeed, in the previous few case laws involving animals health issue, such as US-Shrimp, such general exemption under Article XX(b) was not analysed by the Appellate Body. Therefore, this seal product litigation could instead push WTO jurisprudence ahead on the interpretation of Article XX(b) and the consistency of the measures in the light of the chapeau of Article XX of the GATT 1994. It goes without saying that the interpretation that the WTO judicature will possibly make over these issues will constitute a case law, which will be invoked in many future WTO litigation.

A Sword and a Shield: South Korea's Strategic Use of World Trade Organization Litigation

The World Trade Organization (WTO) has since its inception in 1995 produced a cohort of 108 “fully litigated” trade cases. Quantitative and qualitative analysis of this cohort of cases reveal that South Korea ranks first among all Asia Pacific nations in appearances as complainant. Similarly, Korea ranks first among the 13 most litigious WTO members in the relative frequency with which it converts WTO Consultation Requests to formal litigation. Furthermore, its litigation history reflects a strategy to employ the formal WTO litigation venue in the service of two key exports: steel and semiconductors. Through this strategy, Korea has challenged U.S. safeguard measures on steel and defended its own putative subsidization of semiconductor manufacturers from countervailing duties imposed by the United States, European Union, and Japan.

Does Legal Capacity Matter? Explaining Patterns of Protectionism in the Shadow of WTO Litigation

Does legal capacity matter in the World Trade Organization (WTO)? The conventional wisdom is that the right perseveres over might under the WTO's more legalistic dispute settlement system. Yet, others stress that members can only take advantage of the rule of law if they have the resources to protect their rights through litigation. Despite all the interest in this topic, there is virtually no empirical evidence about how legal capacity affects patterns of litigation and import protection. Using an original survey of WTO delegations, we construct a novel index of legal capacity, and include this in a study of 1321 antidumping (AD) investigations between 1995 and 2005 by 17 WTO Members against firms located in 33 countries. We hypothesize that Members with more legal capacity are more likely to challenge AD suits brought against them at the WTO, and less likely to be named in AD petitions in the first place. The results strongly bear out our expectations; legal capacity matters.

The Political Economy of Litigation and Settlement at the WTO

In 1995, following the Uruguay Round of trade talks, the World Trade Organization (WTO) came into being. Included in the infrastructure of the WTO was the Dispute Settlement Understanding (DSU), a mandatory dispute resolution system. From its inception in 1995 through July 2002, the DSU handled 262 cases and affected the content of international trade obligations. Despite its central role in the trading system, however, we are only just beginning to understand how the DSU affects state behavior and litigation patterns. Of particular note, we do not have a coherent model of litigation and settlement at the WTO that can explain why some cases settle while others do not. This paper provides such a model. In the domestic context, models of litigation and settlement turn on informational asymmetries. At the WTO, however, the informational assumptions required to explain the observed pattern of settlement are unrealistic, so an alternative approach must be explored. The relevant costs and benefits for a state involved in WTO litigation are political in nature. As such, benefits enjoyed by one party are unlikely to equal the costs borne by the other. This is true of both the impact of a panel ruling, and the impact of the delay that is built into the WTO system. Both of these factors affect the payoffs received by a state's political leaders. This paper show how these asymmetric political payoffs affect the pool of cases that proceeds to a panel. Of the 82 cases that have generated a panel ruling, 90% have resulted in a complainant win. Combining this remarkably high win rate with the theory developed in this article allows us to draw inferences about the political costs and benefits facing states as they decide whether to settle or proceed to a panel.