In the latest issue of Trade, Law & Development, Claus Zimmerman argues that WTO dispute settlement gets things just right in terms of the level of enforceability:
It emerges from the analysis provided in this article, that although the WTO’s dispute settlement mechanism has not been designed to encourage efficient breach, the existing system accommodates, de facto, at least temporary noncompliance. The current design of the WTO’s dispute settlement mechanism, by operating temporarily as a system of ‘breach and pay’, fulfils a crucial role as a systemic safety valve for rare scenarios where WTO members find it impossible to comply with the DSB’s recommendations and rulings within the ‘reasonable period of time’ as determined according to Article 21.3 of the DSU. The review of the existing avenues for both intra- and extra-contractual flexibility provided in this article, analysed in the light of the excellent compliance record of the WTO’s dispute settlement mechanism, supports the conclusion that the WTO legal framework provides WTO Members with just enough flexibility, both within the boundaries of the existing bargain and beyond them, to ensure that sovereign states remain willing to surrender large parts of their freedom of action in trade matters by adhering to the WTO in the first place and to participate in future rounds of trade liberalization.
In light of the above, and for both the legal and economic reasons discussed throughout this article, one can only conclude that several standard suggestions encountered in the existing literature are misguided. Most importantly, any calls for equipping the WTO’s dispute settlement process with tougher sanctions, in order to force WTO Members who are found to be in breach into immediate compliance, may be perfectly consistent with the legal nature of dispute settlement reports as binding international obligations. However, they entirely overlook that the seemingly weak enforcement mechanism of WTO dispute settlement, with its de facto accommodation of temporary ‘breach and pay’, serves as a valuable systemic safety valve. At the same time, reform proposals aimed at overcoming the dual inefficiency of ‘damages’ assessment in WTO dispute settlement in order for the system to encourage only efficient breach suffer from two main shortcomings. On the one hand, they underestimate the importance of a good compliance record for the willingness of WTO members to participate in future rounds of trade liberalization. On the other hand, they disregard the fact that under the existing legal framework, persistent non-compliance with WTO dispute settlement reports cannot seal a permanent shift of entitlements, since under the rules of the DSU, WTO law is best analysed as being protected by a property rule and not by a liability rule.
At least with respect to the features discussed herein, the current design of the DSU appears to accommodate, in a very balanced manner, both a certain amount of extra-contractual flexibility and a high degree of legal certainty for both WTO Members and private persons who are clearly the ones to benefit most from an increasing liberalization of world trade.
I tend to agree with this assessment. There's a fine line when establishing rules of this sort, and I think the DSU is pretty much where it should be.
