Document Type

Article

Publication Date

2019

Keywords

WTO, international trade law, dispute settlement, appellate body, retaliation, trade war, tariffs

Abstract

The world's twenty-year experiment with a rule-based international trading order is most likely ending. Trade wars are raging again for the first time in two decades as World Trade Organization (WTO) members unilaterally impose and counterimpose sanctions. In Geneva, the WTO Appellate Body, whose existence is essential to the functioning of the WTO Dispute Settlement Understanding (DSU), is on a trajectory to shut down in December 2020. For all the fireworks, however, many commentators retain an optimism that the recent events will be a passing phase and that the world will return to a more law-oriented trading system after the present crisis.

This essay is less sanguine and argues that recent events may have damaged the WTO irreparably. The present departure from enforcement norms is potentially devastating because it goes to the heart of what has provided the WTO with such influence in global economic affairs: the willingness of member countries to accept the WTO legal system as a binding constraint on state action, even when costly domestically. Having abandoned the DSU framework, will countries once again view the WTO rule-based system as mandatory? Or will the WTO become more like other global institutions whose ability to constrain member countries is modest, notwithstanding hard treaty obligations?

To illustrate why returning to a rule-of-law system will be so difficult, this essay describes the WTO enforcement norms and highlights why they are significant to WTO success. It then explains how the current American administration has violated these norms and how other WTO member countries have followed suit in response, leading to widespread disregard for the DSU framework. Finally, it analyzes how the precedent of opting out of the DSU framework may have changed actors’ beliefs about whether abiding by the DSU is obligatory and beneficial in the long-term. Once these beliefs have shifted, the political costs of returning to a rule-based system rise, and the likelihood of further violations increases. In short, a world of more power-based bargaining may be returning, and the value of the WTO to all countries will be greatly diminished.

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Library of Congress Subject Headings

Foreign trade regulation, International commercial arbitration, World Trade Organization, Dispute resolution (Law)

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