Joost Pauwelyn on Politics and Law in the World Trading System

Joost has a new paper for the Hinrich Foundation that, he says, applies the framework of his 2005 Transformation of World Trade piece to "today's moribund WTO." His Hinrich Foundation paper is called "A framework for WTO reform: Less law and more politics."

There's a lot in there, and I'm not going to comment on all of it, but I wanted to react to a couple things in the "Less law" section. Joost says the following:

Here is what I wrote 20 years ago, with some updates in light of the present situation:

1. Revive the “logic” and legal flexibilities in the original GATT

“What kept the GATT together was not so much an abstract respect for legal rules, but rather the political and economic need to keep intact a negotiated balance of tariff concessions … No strong enforcement mechanism to keep this balance afloat was needed … This balance was … kept because of the threat of reciprocal withdrawals of concessions in case a country would not meet its end of the bargain. This was the secret of the GATT’s early success … Its objective was to settle trade problems, not to create or clarify trade law”.10

All the more so in today’s context, where the new normal is to “appeal into the void”, a revived dispute system should focus on settling disputes and maintaining a balance of concessions, not abstract rule compliance and the further development of “trade law”. Quick decisions — a matter of months, not years as is currently the case — on whether the balance is upset, caused by breach or non-violation, and authorizations to suspend “equivalent” concessions are more important than consistency and getting things 100% “correct”. From this perspective, a two-tiered system with an Appellate Body is not a “must have”.

GATT flexibilities ranging from exceptions and trade remedies to unilateral tariff and schedule modifications under both GATT and the General Agreement on Trade in Services (GATS) and non-violation complaints must be dusted off and revivified. Panels and especially the Appellate Body may have seen it as their task to gradually reduce these “exit options” in pursuit of free trade ideology. However, “[r]ather than being birth defects that need to be cured through gradual legalization, these flexibility and exit options … must be clarified and maintained”.11 They remain “crucial preconditions for trade deals to stick”.12

2. “Resisting the temptation of ever more legalization”

Resist “the temptation of ever more legalization, including the temptation of judicial activism and a strict rule of precedent.”13

My first comment here is that shorter time frames for disputes are good. Joost says "in a matter of months," which leaves things a bit open as to what exactly he has in mind. I might shoot for 6-9 months from panel composition to issuance of the report. This, of course, is close to what is in DSU Article 12.8, which states: "... the period in which the panel shall conduct its examination, from the date that the composition and terms of reference of the panel have been agreed upon until the date the final report is issued to the parties to the dispute, shall, as a general rule, not exceed six months." So, the time frame I suggested is similar to what was set out by the DSU drafters, and I think it could be achieved today if panels and parties made some adjustments to how disputes are handled. My sense is that the simpler cases could probably be done in 6 months or a little less; some of the AD/CVD or SPS cases, on the other hand, might be tougher to do as quickly, and 9 months is a bit more realistic. (For additional time savings, I would also suggest getting rid of the interim review stage).

Speaking of AD/CVD, I agree with Joost that flexibility on trade remedies is necessary. However, I would say a couple things here. First, regardless of any WTO DS rulings that people might find objectionable, AD/CVD is widely used today (see, e.g., the U.S. Commerce Department page that keeps track of U.S. AD/CVD orders). In practice, there is already a good deal of flexibility here. Second, what might be best on trade remedies is to loosen the rules on safeguards so that we could shift away from using AD/CVDs and towards using safeguards. This might cool down some of the trade tensions that arise from AD/CVDs, which are seen by many as involving abusive practices.

Also on flexibility, Joost mentions the exceptions. I don't know what exactly he has in mind here, but I am in favor of injecting some more flexibility into the public policy exceptions, which I think have been interpreted in too strict a manner at times.

Those were some areas of agreement, but here are a couple places where I'm a bit skeptical. Joost says he wants a lesser role for precedent. I think we need to rely on precedent at least to some degree, though, in order to know what the obligations mean. Taking non-discrimination as an example, there have always been, and still are, competing conceptions of how intent and effect should play a role in the analysis. If governments, businesses, and civil society don't know what the law of non-discrimination is, it's difficult to have any certainty as to what is permitted and what is not. Joost says the Appellate Body is not a "must have," and maybe that's true, but if there is no Appellate Body you run the risk of competing interpretations by panels that leave everyone confused about what the non-discrimination obligation requires. An obvious alternative is to have an Article IX:2 interpretation from the Members to clarify things, which would be great but seems like it would be difficult to obtain.

Finally, with regard to dusting off non-violation complaints, I want to associate myself with the famous quote of the South African delegate during the original GATT negotiations:

I would like to say, Mr. Chairman, that of all the vague and woolly punitive provisions that one could make, this seems to me to hold the prize place. It appears to me that what it says is this: In this wide world of sin there are certain sins which we have not yet discovered and which after long examination we cannot define; but there being such sins, we will provide some sort of punishment for them if we find out what they are and if we find anybody committing them. When it comes to that, we shall describe them as sins only when the Organization considers that they are not venial offences, but serious crimes; but we do not know under what circumstances the Organization might consider them to be serious. Nonetheless, seeing that there are such sins, and in spite of the fact that we do not know what they are, and in spite of the fact that we do not know under what circumstances we are going to apply any punishment to them, we shall still provide a sort of vague and general "sword of Damocles", if such a thing is possible, to hang over the head of all the people who may possibly commit this sin.

Then we come to what is the only definite thing in the whole Article: that is, the type of punishment which can be visited upon these offenders. It seems to me, Mr. Chairman, that this is something like Pirandello's play, "Six Characters in Search of an Author", only it is rather the other way round. Here it is one punishment in search of six sins!

Should we open fully the can of worms that is the non-violation remedy? Would that increase flexibilities, or would it actually reduce them?