“Free trade saves lives” is what I was recently reading on Twitter. And, yes, trading masks or ventilators in times of coronavirus can do exactly that.
Plenty of trade commentators (here and here) have lamented the export restrictions recently imposed on medical gear, which may do the opposite.
Jennifer Hillman has added how reducing tariffs on pharmaceuticals, and allowing for subsidies to quickly find a vaccine and cure, would complement what she calls a “smart trade approach to fighting COVID-19”. The WTO itself has stepped in with a website to offer some transparency on virus response measures taken by countries across the globe.
Yet, no one has even mentioned the WTO’s dispute settlement system as something that could potentially assist countries in dealing with the crisis, for example, to obtain a ruling on what subsidy, export or trade restriction is within the rules, or to prevent an escalation of beggar-thy-neighbour policies.
And you cannot blame them.
Why so?
Timing …
Although panel proceedings were supposed to take only 6 months (maximum 9) and appeals 60 (maximum 90) days, the reality today is a multiple of that. The DSU provides for expedited procedures “in cases of urgency” (cutting timeframes in half, see Arts. 4.8/9 and 12.8/9), but these have never been used. And it is hard to imagine how these timeframes (3 months to complete a panel!) could be achieved following today’s “foot-dragging practices” of panels, the AB and (perhaps most importantly) disputing parties.
Think of it: the US emergency measures to address imports of steel and aluminum on (alleged) national security grounds were taken on 23 March 2018. On 5 April 2018 (13 days later), China requested WTO consultations. But today two years have passed and the panel is still pending. The panel recently announced that its final report would be issued to the parties in fall 2020 which means that (with translation) a public panel report circulated to Members can, at best, be expected by the end of 2020 …
DSU Art. 12.9 states that “in no case should the period from the establishment of the panel to the circulation of the report to the Members exceed nine months”. In reality, in DS544 (and this case is no exception) it will take not 9 months but at least 24 months … (and we are not even speaking yet of appeals, implementation periods, compliance and retaliation proceedings that may follow).
As I discussed elsewhere (here and here), the system has favored comprehensiveness, detail and the search for “correctness” and “consistency” over speed, efficiency and timely resolution of specific trade disputes.
A re-calibration is needed.
The main goal of WTO dispute settlement is to find a positive settlement of the dispute and avoid escalating retaliation. As Alan Sykes put it in 2002, the DSU was set up to "cap" and "limit" retaliation, rather than "increase the penalty for violations". It is there to detect "defection" (breach) so as to trigger an obligation of compliance or (in the absence thereof) a right to rebalance. Past harm is never compensated and retaliation (rebalancing) is only permitted when authorized at the end of a proceeding.
More than in other enforcement systems, this makes time of the essence. If it takes 3 years (panel plus appeal) to even get a signal of “breach or no breach”, the rules lose their credibility and the deal its value. The system is then useful only for claimants with deep pockets (and defendants interested in foot-dragging), long-term systemic disputes or disputes of really high commercial value targeting specific firms (e.g. certain trade remedy cases). Indeed, according to one metric, while "in the first five years of the WTO, on average every $85 billion of intra-G20 trade triggered a WTO dispute; now, it takes over half a trillion dollars" ...
Where it takes 3 years to get an outcome (and another 2 or 3 to obtain a formal right to rebalance) the system fails in de-escalating trade disputes and avoiding trade wars (as we saw in 2018-2019) or, today, is not even thought of as potentially useful for dealing with a pandemic where trade, and keeping trade restrictions in check, can save lives.
Timeframes and delays -- which, in turn, may be linked to how adjudicators and parties view the system and their mandates -- are the real rot in the system.