U.S. Trade Representative Katherine Tai gave a speech on WTO issues in Geneva today at the Graduate Institute's Geneva Trade Platform. Here is the section on WTO dispute settlement:
Over the past quarter century, WTO members have discovered that they can get around the hard part of diplomacy and negotiation by securing new rules through litigation.
Dispute settlement was never intended to supplant negotiations. The reform of these two core WTO functions is intimately linked.
The objective of the dispute settlement system is to facilitate mutually agreed solutions between Members. Over time, “dispute settlement” has become synonymous with litigation – litigation that is prolonged, expensive, and contentious.
Consider the history of this system.
It started as a quasi-diplomatic, quasi-legal proceeding for presenting arguments over differing interpretations of WTO rules. A typical panel or Appellate Body report in the early days was 20 or 30 pages. Twenty years later, reports for some of the largest cases have exceeded 1,000 pages. They symbolize what the system has become: unwieldy and bureaucratic.
The United States is familiar with large and bitterly fought WTO cases. Earlier this year, we negotiated frameworks with the European Union and the United Kingdom to settle the Large Civil Aircraft cases that started in 2004.
We invoked and exhausted every procedure available. And along the way, we created strains and pressures that distorted the development of the dispute settlement system.
With the benefit of hindsight, we can now ask: is a system that requires 16 years to find a solution “fully functioning?”
This process is so complicated and expensive that it is out of reach for many – perhaps the majority – of Members.
Reforming dispute settlement is not about restoring the Appellate Body for its own sake, or going back to the way it used to be.
It is about revitalizing the agency of Members to secure acceptable resolutions.A functioning dispute settlement system, however structured, would provide confidence that the system is fair. Members would be more motivated to negotiate new rules.
Let me address a couple of her points. Starting with the length of the reports, let's take a look at the earliest Appellate Body reports and the last Appellate Body reports in terms of the page length of the reasoning sections:
First 5 AB reports page length:
US - Shirts and Blouses: 9 pages
Brazil - Coconut: 12 pages
US - Underwear: 12 pages
Japan - Alcohol: 24 pages
US - Gasoline: 19 pages
Last 5 AB reports page length:
Australia - Plain Packaging: 204 pages
US - Supercalendered Paper: 25 pages
Russia - Railway Equipment: 71 pages
Ukraine - Ammonium Nitrate: 42 pages
Korea - Pneumatic Valves: 132 pages
These were rough calculations based on a quick glance, so feel free to check my math! But the figures should be approximately accurate. Clearly, Appellate Body reports got longer as the years went on. There are a number of possibilities for why that happened, including the following:
- Some of the difference has to do with the WTO Members themselves, of course. What kinds of issues, and how many issues, did they raise on appeal? Clearly, the appropriate scope of appeals expanded in the minds of the Members over the years.
- As the jurisprudence grew in volume, the AB had more past cases to cite to, and that added to the length. (I remember working on early SCM Agreement cases, and the provisions had never been interpreted before, which made it possible to keep things relatively short.)
- The Appellate Body itself may have seen its role as more expansive, and that led it to try to provide more clarity, which of course took up more pages.
In addition, it is true that 16 years to resolve a case is quite long, but it's worth noting that this is not the norm for these cases. If a case is complex enough that it is likely to take 5 years or more to litigate, it may be worth considering whether it is even worth bringing.
In the Q & A, two issues (one from me) related to WTO dispute settlement came up. The first question was about bringing the Appellate Body back, and the second was about making the panel process faster and more effective:
Question: So we've received a number of questions asking whether the US plans to move on the Appellate Body, on the conditions required to end the ban on new Appellate Body judges, justices. And so that was one strand of questions. And then a related question from Simon Lester, I think is, moving away from the Appellate Body, you worked on panels here in Geneva, ... and you mentioned that some of these cases take a long time and aren't working, so he was wondering if there is anything you can suggest, anything you saw to make panels work faster and work better in the US estimation.
Tai: So it's two questions. The first one specifically on the Appellate Body, the second one a little bit broader about the dispute settlement system and how to make it more efficient.
So on the first question, let me just say this. It is my hope that, as part of this reform effort, we can bring a different energy to our negotiations, and instead of my slapping down a full on proposal that I've dialed up to about 250, because I know that over the course of working through 164 members, ... it's going to get moved quite a bit from where we're starting. Instead of starting out that way, what I would like to do is start with the conversations, the talking to and the listening to each other, in terms of how the dispute settlement system, the whole thing, can serve the interests of Members better. And I've given you some examples in the speech today in terms of where the dispute settlement system has fallen flat in our estimation, but I can also point you to, and I don't think anybody wants me to do this, ... reams of documentation, papers, statements that the United States has made over the course of 15 years and three different administrations where we were saying to the Members of the WTO, we have concerns with the way the dispute settlement system is functioning, and we think that there needs to be a course correction, and frankly I think that over the course of those 15 years, not enough members listened. And so I want to take that lesson in this moment of reform to say, if you will listen to us, we will listen to you, and let's start the reform process from there.
So, with respect to the panel question, the only thing I would add there is that the panel process does take a while. It's very laborious, it can be quite expensive, if you've got outside lawyers working for you. And I think that the issue is not how to make it faster, but how to create more opportunities for the Members to come together and be incentivized to solve the problem, because in every dispute settlement case, when you play it out to the end, you've gone through every appeal and you've gone to the arbitration for your suspension of concessions. The point is not to punish each other. The point at the end of all of this is to create the conditions for the two Members to come together to find an accommodation, because we are all WTO members. And so, if there are ways that we can incentivize those political moments of conversation sooner, I think that that would be a worthy goal.
On the part about the Appellate Body, my comment here, and I'm sure I've said this before on this blog, is the following. I've read the U.S. criticisms of WTO dispute settlement and the Appellate Body over the years, and I understand the various issues the U.S. has concerns about. What I don't understand, though, is what the U.S. wants to see instead. For example, what should the scope of the appeals process be? Should there be DSU Article 11 appeals, and if so what should they look like? What should the GATT Article III non-discrimination standard be? The U.S. has criticized all of these areas and others, but it has not offered up much in the way of proposals. I'd really like to see some concrete proposals here, which could serve as the basis for a discussion. Tai seemed reluctant to put forward a "full on proposal," but I'm not sure there is any other way to move forward. Without this, I think it's likely we'll end up with the MPIA coming into operation as the appeals mechanism for those who want to use it. I do welcome the conversations, and maybe something can come out of them. However, based on what has been made public (I don't know what has been said in private), I have very little idea of what the U.S. vision for appellate review and broader dispute settlement reform is, and I think it's a big problem what we don't have a sense of this.
In terms of my question on the panel process, what I would say is that I completely agree that we should make settlement a priority, but from what I can see, the existing rules already do this. It's really up to the Members whether they want to settle, and sometimes they are able to do so. It's worth noting that most WTO complaints don't go through the whole litigation process. But sometimes Members just can't agree, and when they don't, we end up in litigation. Where that's the situation, there are important issues related to how the litigation process works that are worth improving on. (And I would note that the option for litigation may be particularly important for smaller and developing countries that have less leverage in settlement negotiations).
