World Trade Organization Panel Research Articles

Unilateral Sanctions under International Law and Effectiveness of Blocking

INTRODUCTION. This article discusses modern international legal concept of unilateral sanctions. The authors contribute to the emerging discussion on the qualifying of unilateral sanctions under international law.MATERIALS AND METHODS. In this study we took into account the works of both Russian and foreign scholars in the field of international economic law, as well as analyzed documents and materials of international organizations (United Nations (UN), World Trade Organization (WTO) and others) in order to assess the compatibility of unilateral sanctions with international law. General scientific methods of cognition (analysis, synthesis, induction, and deduction), special legal methods (formal-legal, technical-legal, method of legal analogy) and comparative legal method were used in the presented research.RESEARCH RESULTS. Presented analysis has shown that widely used term “unilateral sanctions” leads to abusive and inappropriate use of international legal term. Analysis of compatibility of unilateral sanctions with other types of coercive measures such as countermeasures, UN Security Council sanctions, retortions, reprisals have shown that unilateral sanctions do not fall under the meaning of all mentioned measures. In addition, unilateral sanctions should not be justified under the WTO security exceptions. The use of extraterritorial unilateral sanctions contradicts one of the fundamental principles of international law – principle of non-interference in internal affairs. Existing blocking unilateral sanctions mechanisms are not efficient enough to compensate negative effect posed by unilateral sanctions.DISCUSSION AND CONCLUSIONS. Authors concluded that unilateral sanctions in most of the cases do not satisfy cumulative criteria of legitimate countermeasure. Unilateral sanctions are not equivalent to the United Nation Security Council sanctions, as there are no “checks and balances” in the decision-making process in the form of determining the degree of threat to peace and security and taking into account humanitarian exceptions. Although there is some correlation between unilateral sanctions and retortions or reprisals, retortions and reprisals posses criteria of legality and proportionality, while, unilateral sanctions are introduced at the state’s discretion without any standard. Furthermore, the authors argue that to avoid abusive use of the WTO security exceptions WTO panels have to rely on the well-balanced approach used by the Panel in Russia – Transit case. This approach shows that the context of security exception should be understood as encompassing only military and closely related to military issues and does not cover political, economic, cultural or any other interests and relations. Existing blocking mechanisms of unilateral sanctions require separate qualification under international law including compatibility with the legitimate countermeasures.

The (surprise) return of development policy space in the multilateral trading system: what the WTO Appellate Body blockage means for the developmental state

Since the establishment of the World Trade Organization (WTO) – which led to a dramatic expansion in the scope of global trade rules and made those rules legally binding on states – scholars have highlighted the constraints it has imposed on development policy space. By prohibiting many of the standard tools of the developmental state, the WTO’s rules have been seen as ‘kicking away the ladder’ for developing countries, preventing them from using the trade and industrial policies needed to catch up with more advanced economies. However, since 2019, the US has disabled the WTO’s enforcement mechanism by blocking judicial appointments to the Appellate Body. As a result, this article shows the trade and development landscape has now changed fundamentally: WTO rules – once a powerful constraint on development policy space – are no longer legally enforceable. The article analyzes two recent landmark disputes – Indonesian nickel export restrictions and Indian export subsidies provided through special economic zones – in which developing countries have successfully blocked WTO panel rulings that would force them to repeal developmentalist policies. Ironically, given that the US was originally the dominant force behind the WTO’s anti-developmentalist rules and its binding dispute settlement system, one important consequence of the US Appellate Body blockage has been the re-emergence of development policy space in the multilateral trading system.

Not Trading With the Enemy: The Case of Computer Chips

Drawing on the analysis of international trade law and the research on the regulation of the semiconductor industry in key players, the United States of America (US), the Netherlands, and Japan, this paper explores under which conditions export controls are compatible with the international trade law framework. To this end, it focuses on the scope of national security exceptions under the agreements of the World Trade Organization (WTO) and examines to which extent export controls on the semiconductor industry can be justified under such exceptions. It discusses the direction in which the current practice and jurisprudence of WTO panels are heading and the possible effects of governments’ ‘decoupling’ strategies toward China on shaping international trade law. This paper suggests that governments might have difficulties justifying their imminent cybersecurity and geo-economic concerns under existing security exceptions and that they should consider either clarifying the scope of such exceptions or changing the approach to dealing with national security issues under the WTO framework. Export controls, computer chips, semiconductors, WTO law, decoupling with China, security exception, geopolitical rivalry

Research on the Retaliation System in the WTO's Dispute Settlement Mechanism

When conducting trade activities, due to the needs of countries' national interests or due to the general international context, it is inevitable that some acts will be used to disrupt the balance of world trade transactions, thus causing conflicts between two or more nations. If a dispute arises under the framework of the World Trade Organization (WTO) agreement, one party will be deemed to be in breach of the WTO agreement, and the injured party will resort to the WTO Dispute Settlement Body(DSB), and if the "losing party" does not fulfill the agreement, then the "winning party" will request the WTO Dispute Settlement Body to retaliate against it. If the "losing party" does not fulfill the agreement, then the "winning party" will request the DSB to authorize retaliation against it, to stop the behavior of the defaulting party and get certain compensation. Therefore, the retaliation system of the WTO dispute settlement mechanism is of great significance to maintaining the international economic order. The establishment of this system is of great practical significance for resolving disputes between disputing parties and achieving the rebalancing of the international economic order. However, along with the continuous occurrence of various dispute cases, and in the increasingly frequent use of the WTO panel members, member states and academics have gradually recognized certain shortcomings of the retaliation system, resulting in this system for certain violations of the agreement, often helpless. In this regard, all countries have improved the retaliation system under the WTO dispute settlement mechanism from their own or overall interests. This paper discusses the shortcomings of the retaliation system in the WTO dispute settlement mechanism and then makes some suggestions on how to modify and improve it.

Turkey–Pharmaceuticals: The First WTO Arbitration for Appellate Review

On 25 July 2022, the World Trade Organization (WTO) issued an arbitration award under Article 25 of the Dispute Settlement Understanding (DSU) on the appeal from the Panel Report in Turkey–Pharmaceuticals. This is the first use of the DSU Article 25 arbitration proceedings for the review of a WTO panel decision. As such, the case is highly significant in that it demonstrates how this alternative dispute settlement method can be successfully utilized to fulfil the function of appellate review after the Appellate Body (AB) became paralysed. Moreover, this innovative use of Article 25 arbitration may suggest a long-term solution in the reform of WTO dispute settlement. With respect to substantive legal issues, this case is also noteworthy, for it dealt with the question of public health and WTO law, a particularly sensitive topic in the post-pandemic era. This essay provides a critical review of the findings of the Panel and the Arbitrators on the substantive issues, while appraising the systemic significance of this first appeal arbitration. WTO Dispute Settlement, DSU Article 25 Arbitration, WTO Reform, Appellate Review, GATT Article XX(b), public health, localization measure

THE IMPLICATIONS OF THE WTO TOBACCO PLAIN PACKAGING DISPUTES FOR PUBLIC HEALTH MEASURES

AbstractAustralia became the first country to introduce standardised or plain packaging laws for tobacco products in 2011. However, they immediately came under direct and indirect challenge from the tobacco industry in various domestic and international fora, including at the World Trade Organization (WTO). The WTO-consistency of Australia's measures was not settled until June 2020, when the Appellate Body upheld two WTO panels’ earlier findings that Australia had acted consistently with its obligations under certain WTO agreements. This article critically analyses the Appellate Body's key findings and their implications for implementing other public health measures. It is shown that these implications are multifaceted, have political, practical and legal dimensions and are likely to reach beyond the WTO dispute resolution system's bounds into other international trade and investment law contexts.

EU-Ukraine Arbitration: Will WTO Law Become More Deferential Outside the WTO?

The first dispute brought by the EU under its bilateral trade agreements, Ukraine – Export Restrictions on Wood, was in many respects a typical World Trade Organization (WTO) case. A panel of three arbitrators, including two prominent and highly experienced WTO adjudicators, was to rule on consistency of the respondent’s export bans with Articles XI and XX of the General Agreement on Tariffs and Trade, incorporated by reference into the EUUkraine Association Agreement. The latter, moreover, explicitly requires that arbitrators rely on the WTO jurisprudence – which they, technically, did. Yet, the arbitration panel appears to have shown more deference to the respondent than any WTO panel ever has (or would). By contrasting the reasoning of the arbitration panel with that of WTO panels deciding similar issues, the article questions whether WTO law may take a more deferential path outside the WTO. WTO law, GATT, Article XX(b), EU-Ukraine Association Agreement, wood export ban, dispute settlement, judicial deference

Appellate Body Crisis at the World Trade Organization: View from India

There has been a crisis prevailing at the Appellate Body of the World Trade Organization (WTO) since December 2019. The United States’ (US) refusal to allow the appointment of members to the WTO’s Appellate Body has disturbed the functioning of the entire WTO dispute settlement process. In order to mitigate the effects of this, the European Union (EU) has proposed a multi-party interim appeal arbitration agreement (MPIA) which has been joined by over twenty other WTO members. In the absence of rules-based dispute settlement, countries will most probably resort to bilateral negotiations. This will be prejudicial to the interests of developing countries that have consistently been disadvantaged during bilateral negotiations and fared better in proceedings with third-party adjudication. Though India has expressed concerns about the Appellate Body crisis, it has not joined the MPIA and has stated that it does not intend to do so either. This article explains why India would benefit from joining the MPIA especially given the disputes it has pending before WTO Panels. Joining the MPIA will help India avoid unilateral sanctions at the first instance and increase the likelihood of compliance by other WTO members that are a part of the MPIA. WTO, Appellate Body, India, dispute settlement, multilateralism, United States, European Union

A Lauterpachtian Affair: Security Exceptions as ‘Self-Judging Obligations’ in the Case Law of the International Court of Justice and Beyond

Abstract Although Sir Hersch Lauterpacht never dealt with security exceptions during his time at the International Court of Justice (ICJ), his entire body of work formed the intellectual premise for the approach of the Court towards security exceptions and the way in which the ICJ manoeuvers in the larger debate on the relationship between law, politics and the proper discharge of the judicial function. The Lauterpachtian approach is understood as a particular attitude towards the judicial function in which the Court serves as an instrument for the protection of peace, as a guardian of the coherence and unity of the international legal system and as a driving force for the development of international law. However, in some other important elements of its reasoning, the Court seems to remain more Lauterpachtian in spirit than in letter. Despite these inconsistencies, the Court arguably exerted significant (albeit somehow uneven) influence over World Trade Organization panels and investment tribunals.

Separating the Political from the Economic: The Russia–Traffic in Transit Panel Report

AbstractThis paper reviews the World Trade Organization (WTO) Panel Report Russia – Measures Concerning Traffic in Transit of April 2019. It constitutes the first attempt to disentangle the legal and political aspects related to the invoked essential security interests from the economic considerations underlying the measures imposed on the transit through Russia of goods exported from Ukraine to the Republic of Kazakhstan and Kyrgyzstan. One the one hand, the panel's interpretation of Article XXI of the GATT denies Members unilateral determination over security exceptions. It further enables a pathway for future WTO panels to review possible abuses of security exceptions – a growing concern due to the rising complexity of transnational economic relations. On the other hand, our economic analysis suggests a stricter assessment of Russia's transit restrictions was necessary. In particular, it argues that the panel adopted a circular assessment when considering the plausibility of whether Russia implemented its measures for the protection of its essential security interests at a time of emergency in international relations. Ultimately, although the panel's focus on finding a diplomatic and legal path forward failed economic scrutiny a legal assessment argues that the panel's findings fit the legal design of Article XXI:b of the GATT.

Free Trade vis-à-vis Morality: Revisiting the Public-Morals Exception Clause in the World Trade Organization

The most sanctified obligation of the World Trade Organization (WTO) is the promotion and facilitation of international trade and liberalisation of the world economy. Although WTO members are committed to the WTO principle of free flow of goods and services among its members, the WTO permits its members to retain certain regulatory powers under its system to impose trade-restrictive measures based on certain exceptions, like, among other things, public morality under Article XX(a) of the General Agreement on Tariffs and Trade (GATT, 1994). Nevertheless, the question remains: what is public morality for a WTO member, and how far may this clause be invoked in defence of adopting trade-restrictive measures? Recently, the WTO panel on the US tariff case revived the long-standing debate on international trade versus public morality. Is a WTO member free to choose any trade-restrictive measure under the cloak of public morality? Then, what mechanism has the WTO panel/AB (Appellate Body) envisaged to check WTO members from adopting any trade-restrictive measure based on public morals? This article tries to answer these questions by analysing previous WTO disputes related to trade and morality. Against this background, this article looks back at the history of the public-morals exception clause, revisits previous WTO case laws on the public-morals exception and tries to ascertain the precise meaning of public morality—how the WTO Dispute Settlement Body (DSB) checks and balances two conflicting principles, that is, the right to regulate and the principle of free trade—and whether WTO has successfully developed a coherent jurisprudential approach to deal with contradictory interests, that is, trade versus morality. JEL Codes: F, F1, F13

Restrictions on Trade in Telecommunications: WTO’s Cybersecurity Conundrum

This article examines the role of the World Trade Organization (WTO) in balancing the nexus among a rule-based multilateral trade system, national security, and cybersecurity. It presents a historical account of restrictions placed on the telecommunications trade over national security concerns and focuses on the significant political risks thereof for the WTO if these restrictions are challenged at its dispute settlement system. An analysis based on the WTO Panel rulings in ‘Russia – Traffic in Transit’ and ‘Saudi Arabia – Protection of IPRs’ is revealing in this context. It shows that, despite the obvious cybersecurity concerns, the invocation of the national security exception is not straightforward. The turn to power politics and regionalism highlights the significance of multilateral organizations that provide a more inclusive structure to reflect and protect the interests of all their members, not just those that hold positions of power and control. As long as the stalemate at organizations such as the United Nations (UN) and the International Telecommunication Union (ITU) continues, despite the need for a more legitimate, inclusive multilateral framework, the expectation of a ruling on trade-related aspects of cybersecurity will place an unnecessary burden on the WTO dispute settlement system. Cybersecurity, World Trade Organization, National Security Exception, Telecommunications, Multilateralism, Regionalism, Geopolitics

WTO Litigation and SEZs: Determining the Scope of Exceptional Trade Unilateralism

ABSTRACT The incentives available to enterprises located in special economic zones can be classified into three broad categories, namely, (i) fiscal incentives in the nature of tax incentives and exemption of duties, (ii) non-fiscal incentives in the form of infrastructural and developmental facilities, and (iii) regulatory incentives covering lenient and flexible compliance requirements. The fiscal incentives in special economic zones are, to an extent, regulated by the law of the World Trade Organization although direct challenges of special economic zone policies have been very few or non-existent. The absence of legal challenges led to a number of World Trade Organization members pursuing unilateral trade policies within their special economic zones. However, the recent World Trade Organization Panel findings in India—Export Related Measures appear to highlight the thin margin for trade unilateralism especially in relation to fiscal incentives in special economic zones. In the above context, this article examines the permissible limits of trade unilateralism, in the context of special economic zones, by providing a fresh understanding of the disciplines under international trade law and the available jurisprudence. It focuses, in particular, on the precise contours of permissible trade unilateralism exercised by World Trade Organization members when granting fiscal incentives. In doing so, this article also examines the concept of exception as a manifestation of unilateralism in International Economic Law.

Countermeasures under the Agreement on Subsidies and Countervailing Measures: Between the Aircraft Manufacturing Industry and Society

Countermeasures under World Trade Organization (WTO) law are separated into two categories, remedies and a method to induce compliance after another defaulting state fails to adhere to WTO's panel recommendation. This article will focus on the second category. The term ‘countermeasures’ specifically refers to an act of suspension of concessions or other obligations. One case of granted countermeasures is DS316, a case between the United States of America (US) and the European Union (EU). The issue of this case is the subsidies granted by the EU for Airbus, an aircraft manufacturer based in Europe which consists of four European nations, which resulted in Boeing's market loss. The US then requested countermeasures authorisation by the WTO. Countermeasures are related to the principle of proportionality both under public international law and WTO law. Additionally, countermeasures can lead to a more complex situation since it affects the human rights of the private actors of international trade as a part of society. This article explains the implementation of both the countermeasures and the proportionality principle, and analyses the precedents of cases and the countermeasures granted by the WTO as well as the effects of the granted countermeasures to society as it creates barriers for all the international trade actors.

Can the Appellate Body Be Saved?

The ‘Walker Paper’ represents a commendable effort to find middle-ground on the World Trade Organization (WTO) Appellate Body, but does not address the US concerns about the Appellate Body’s overreaching in antidumping, countervailing duty, and General Agreement on Tariffs and Trade (GATT) Article XIX ‘escape clause’ disputes, and instead seizes on a series of half-hearted fixes to the long list of concerns in US Trade Representative’s (USTR’s) ‘Report on the Appellate Body of the World Trade Organization’. US concerns about overreaching date back to the Bush 43 and Obama Administrations and are rooted in the Appellate Body’s ‘zeroing’ line of cases. The concerns rest on the conviction of US trade officials who participated in the Uruguay Round negotiations and later served in the Bush 43, Obama, and Trump Administrations, that there was never a WTO agreement to abolish ‘zeroing’. This view was shared by the WTO Secretariat and WTO Panels and underpinned the contentious, decade-long impasse between USTR, the WTO Secretariat, and WTO Panels on the one hand, and the Appellate Body and Appellate Body Secretariat on the other. While the Appellate Body’s overreaching has multiple sources, one is its dismissive approach to negotiating history under Article 32 of the Vienna Convention, and obsessive reliance on the Oxford English Dictionary as a main source of meaning in interpreting the WTO Agreements. Had the Appellate Body taken a more respectful look at the Uruguay Round negotiating history, it would have found no support for efforts to read a broad prohibition on zeroing into terms that dated back to the Kennedy Round Antidumping Agreement, Tokyo Round Antidumping Code, and GATT 1947. The Appellate Body’s overreaching also appears to stem from hubris, as some Appellate Body Members have sought to make their mark on international jurisprudence or serve as saviours of the WTO system. While some in Geneva are clearly hoping the US concerns will disappear once the Biden Administration takes office, these concerns predated Ambassador Lighthizer by over a decade and are shared by both Republicans and Democratic Members of Congress. Accordingly, even if the new Administration were to seize on some variant of the Walker paper as an excuse to placate US allies and trading partners, it’s unlikely to offer a lasting solution, since the same problems will likely recur without serious systemic and structural reforms. World Trade Organization, WTO, Appellate Body, Dispute Settlement Understanding, Dispute Settlement, Antidumping Agreement, Zeroing

WTO Panel Rules Against U.S. Claim that Tariffs on Chinese Goods Are Justified as Necessary to Protect “Public Morals”

On September 15, 2020, a World Trade Organization (WTO) panel ruled that certain tariffs the United States imposed on Chinese products violated Articles I (most-favored-nation) and II (tariff bindings) of the General Agreement on Tariffs and Trade (GATT). The panel rejected the U.S. attempt to invoke a “public morals” defense pursuant to GATT Article XX, holding that although countries receive substantial deference in defining “public morals,” the United States failed to prove that the tariffs were necessary to achieve its stated public morals objective.

Separating the Political from the Economic: The Russia-Traffic in Transit Panel Report

This paper reviews the World Trade Organization (WTO) Panel Report “Russia-Measures Concerning Traffic in Transit” of April 2019. It constitutes the first attempt to disentangle the legal and political aspects related to the invoked essential security interests from the economic considerations underlying the measures imposed on the transit through Russia of goods exported from Ukraine to the Republic of Kazakhstan and Kyrgyzstan. One the one hand, the Panel’s analytical framework for the interpretation of Article XXI of the GATT denied Members unilateral determination over the security exceptions. It further enables future WTO panels a pathway for reviewing possible abuses of the security exceptions, a growing concern with the rising complexity of transnational economic relations. On the other hand, our economic analysis suggests a stricter assessment of Russia’s transit restrictions was necessary to satisfy this framework. In particular, the economic analysis argues the Panel adopted a circular assessment when considering the plausibility of whether Russia implemented its measures for the protection of its essential security interests in time of emergency in international relations. Ultimately, the Panel's attention to finding a diplomatic and legal path forward failed economic scrutiny; still, a legal assessment argues that the Panel's findings fit the legal design of Article XXI:b of the GATT.

Neo-Liberal, State-Capitalist and Ordo-Liberal Conceptions of World Trade: The Rise and Fall of the WTO Dispute Settlement System

This contribution begins with an overview of the historical evolution of international trade leading to, today, five competing conceptions of international economic regulation (section I). The more some areas of trade regulation (like trade remedies, subsidies, internet services, intellectual property rights, appellate review) became dominated by business-driven, neo-liberal interest-group politics (section II), or are circumvented by non-transparent practices of state-capitalism and state-owned enterprises (section III), the less successful have the ‘regulatory functions’ of the World Trade Organization (WTO) become. From the entry into force of the WTO Agreement in 1995 up to 2020, the more than 420 WTO panel, appellate and arbitration findings – similar to the, by now, more than 1,020 publicly known investor-state arbitration (ISA) cases and related national court decisions (e.g. enforcing ISA awards) – protected higher degrees of transnational rule-of-law in worldwide trade and investment relations than in any previous period (section IV). Compared with rule-of-law among the 30 member states of the European Economic Area, however, ordo-liberal European economic constitutionalism has limited market failures, governance failures and rule-of-law deficits through more comprehensive judicial remedies and ‘constitutional methods’ than in neo-liberal and state-capitalist economies (section V). Since 2017, the hegemonic US assault on the WTO legal and dispute settlement system has disrupted WTO appellate review by re-introducing power politics (section VI). Similar to the criticism of neoliberal ‘investor biases’ in commercial ISA, some WTO Appellate Body judges from the USA revealed political biases in support of neo-liberal, US trade policies (section VII). Justice, democratic constitutionalism and rule-of-law require protecting impartial WTO third-party adjudication as a precondition for rules-based, multilevel governance protecting global public goods like ‘sustainable development’, climate change mitigation, poverty reduction and public health for the benefit of citizens and their human rights, yet with due respect for legitimately diverse ‘constitutional pluralism’ (section VIII).

National Security Exception in the General Agreement on Tariffs and Trade (GATT) and India–Pakistan Trade

India and Pakistan, two nuclear-armed South Asian neighbours who have shared a turbulent relationship for last seventy years, recently came close to almost fighting a war with each other. The recent terror attack in Pulwama in Kashmir by a terror group based in Pakistan, led India to revoke Pakistan’s most favoured nation (MFN) status under the World Trade Organization (WTO) by imposing 200%tariff rates on all Pakistani imports. This decision was followed by a limited military confrontation between the two countries. Such unilateral increase in the customs tariff rates violate India’s MFN obligation towards Pakistan. This article discusses whether India can justify this measure under Article XXI of GATT – the national security exception. The paper, in light of the scholarly commentary and the recent WTO Panel’s decision in the Russia – Transit case, discusses the key concepts of Article XXI and applies them to the India–Pakistan situation. The paper finds that while a situation of international emergency did exist between the two countries, the Indian measure cannot be justified under Article XXI of GATT. India, Pakistan, National Security, Article XXI, GATT

Panel: Dispute Settlement System of the World Trade Organization (WTO)

This entry in the Max Planck Encyclopedia of International Procedural Law, titled Panel: Dispute Settlement System of the World Trade Organization (WTO), comprehensively covers all aspects of dispute settlement before WTO panels, as well as panel proceedings within the overall WTO dispute settlement system. This includes informal and formal consultations; the establishment and composition of panels; the sequence of proceedings; access for non-disputing parties; and the role of of the WTO Secretariat. The article also covers various elements of the panel process, including terms of reference, the standard of review, the applicable rules of interpretation, questions of evidence, the use of experts, the confidentiality of panel proceedings, panel expenses, and impartiality. It finally touches on how developing countries participate in the panel process and what the consequences are of the WTO's Appellate Body suspension.