How can the WTO facilitate negotiation between disputing WTO Members? DSU Article 5 offers all disputing WTO Members flexible dispute processes via good offices, conciliation, or mediation. Such proceedings may begin at any time (see fn 59), end at any time, precede formal dispute proceedings, and continue while a panel process proceeds or come after that. Members may turn to the Director General (DG) to consider the ‘informal non-legal advice’ for diagnosing disputes and coming to a ‘mutually agreed solution.’ Such a process differs from the formal arbitration provided for in Article 25 DSU. Processes under DSU Article 5 are confidential between the disputing parties – without third-party participation. However, there is nothing to prevent the inclusion of specialists or consultants to aid the disputing parties.
Whether a losing party in a formal panel process may invoke DSU Article 5 after the panel circulates its report remains to be determined. In particular, the DSU does not address whether a losing party may appeal a report to a non-functioning appellate mechanism and simultaneously offer the winning party the opportunity for negotiated rebalancing. The panel found the US security measures unjustified under GATT Article XXI in reports for the United States – Certain Measures on Steel and Aluminium Products (DS556 – Switzerland and DS552 – Norway). On 26 January 2023, the United States notified the DSB of its decision to appeal to the (non-existent) Appellate Body certain issues of law in the reports. At the close of these notification letters, the US gave Norway and Switzerland (members that did not undertake unilateral rebalancing) some options:
The United States is willing to confer with Switzerland on the way forward in this dispute. The parties may consider engaging in good offices, conciliation, or mediation pursuant to DSU Article 5. Switzerland may also consider a non-violation complaint pursuant to Article XXIII:1(b) of the GATT 1994 as described in DSU Article 26.1
While the US preference for members to consider non-violation complaints on security issues is well-known, this is the first time I have seen the US offer Article 5 as an option in these circumstances.
What to make of this choice? First, it sends a message to members that for the US, DSU Article 25 or the MPIA is not a viable alternative – whether for all disputes or just those engaging economic security remains to be seen. The US could have proposed arbitration to discuss the level of nullification or impairment caused by their security measures and chose not to. I suppose there remains the potential for such arbitration after a successful non-violation complaint.
Second, a confidential process is the only way for the US to consider trade-offs from its security measures. I am sympathetic to this point – there is no other way when USTR authors public statements that ‘the WTO has no authority to second-guess the ability of a WTO Member to respond to a wide-range of threats to its security.’ Agreeing to informal dispute settlement does not explicitly go against the US position that it cannot cede decision-making authority to a WTO panel.
Nevertheless, closed, informal negotiation flattens the systemic consequences of the US actions. Arguably, compulsory dispute settlement accomplishes more than resolving a discrete dispute between parties. Beginning with the GATT legal order is a community-built system whereby third parties attend and offer interpretations on questions of law. The US proposal takes the law out of it. It makes the process one about power.
Third, is this informal effort purely performative? Informal processes may support dispute resolution, but it seems less effective when one of the disputing parties responds to losses in WTO dispute settlement in a partial way (at best) or rejects it entirely (at worst). In these cases, the US lost and notified Norway and Switzerland that it refused to adopt these panel reports. However, because neither member undertook unilateral rebalancing, the US may consider confidential procedures to negotiate rebalancing. A good faith showing may require injecting some transparency. One idea is Lester & Zhu’s (2018) proposals for notification requirements of various stages of the internal, otherwise confidential, deliberation.
We are still determining what happens next. Some may argue that this is a practical, diplomatic solution that can enable Norway and Switzerland to offset the harm created by the US security measures. Some may argue this is about unchecked power – that whether the US was right or wrong in its legal arguments, it must accept the panels’ rulings once it submits to formal dispute settlement. There is already a process for remedies that the US must follow once it has engaged in formal dispute settlement.
Ultimately, I remain sceptical about the future of DSU Article 5, but it may be an essential tool for governments if they choose to use it. The aftermath of the steel and aluminium tariffs shows several legal and fuzzy ways exist to complete negotiation. For example, the EU, Japan, and the UK negotiated tariff rate quotas to manage the US security measures; Canada and Mexico negotiated USMCA. Members must decide whether they care more about potential abuses of the GATT/WTO security exceptions or keeping the US engaged in trade multilateralism. WTO members need a better procedure for managing economic security. The question is, can members reform with one hand while holding up the system with the other hand?
