Main Objectives Of The Dispute Settlement System - Free Essay Example

One of the main objectives of the Dispute Settlement System of the WTO is to provide security and predictability of the multilateral trading system which operates under considerable complex and uncertain economic conditions. A member of the WTO is legally bound to perform its treaty obligation for the effective and efficient functioning of the multilateral trading system that designed to ensure higher welfare gain if all the members comply with the principle of trade liberalization which is also the core element of the WTO. Nevertheless, as with the conventional game theory approach there is always incentives for one to violate, to maximize individual gain if others comply. Moreover all the governments have to deal with a complex set of overlapping interests as well as often unfavorable pressure groups within its constituency. A member found to be in violation of its WTO obligations, after the injured member(s) took the case to the DSU panel; the remedial measure would be either compensation or suspension of concession which is substantially equivalent to the level of violation or nullification or impairment (DSU Article 22). The loosing violator get reasonable time to withdraw its WTO inconsistent measures; if it failed or refused to do so, the injured party allowed to apply the sanctions only equivalent to the ongoing violation. Now the debate is whether these compensatory natures of the curative rules of the Dispute Settlement system of the WTO really designed to ensure enforcement of the members obligation to conform to the rules or simply leaving the parties (surely rich and powerful actors) buy out the violation, if they willing to do so. WTO Dispute Settlement System -a promoter of efficient breach Schwartz and Skyes (2002:293-305) have explained that WTO dispute settlement provisions are deliberately designed to enable members to renegotiate and modify their treaty obligations through compensation or withdrawal of concessions and thus adjust to the complex and unanticipated economic environment. They argued that the WTO provisions do not comply with the enforcement goal of economic theory of contract remedies that compliance yield greater benefits; rather encourage efficient breach another goal of the contract remedies. According to their view, this notion of the WTO rules perfectly resembles liability rule approach and the DSU provisions are not mainly intended to deter violation but to allow the loosing defendant to buy out the violation at a price mutually agreed or set by an arbitrator. They cited the EC-Hormones case in support of their opinion that by declining punitive sanctions the arbitrators admitted this compensatory nature of DSU sanctions. They suggested that pu nitive sanctions could solve the compliance problem. WTO Dispute Settlement System -a protector of states sovereignty On the other hand, John Jackson (2004:109-125) differed that neither renegotiation of compensation nor efficient breach is fundamental to the WTO DSU operational procedures; although he admitted that those provisions might be used for the settlement of certain disputes. He applied all the three methods of treaty interpretation of customary international law and Vienna Convention on the law of Treaties 1969 and argued that the text of the DSU convincingly upholds the goal of security and predictability and primarily aimed at compliance; suspension of concessions is a fallback measure only. He opined that International Law works quite differently in comparison to the private contract laws while recognized the relative inefficiency of International Law regime in terms of enforcement. Jackson ruled out the buy out theory pointing it as totally contradictory with the basic principle of security and predictability and claimed that it could instigate the exit of the small and developing c ountries from the system. On the notion of greater penalty for non compliance he reminded the basic principle of sovereignty of states that could be undermined by any penalizing approaches of a International Judicial body. Liability Law-vs.-Property Law This debate between liability-law and property-law continues for the last 10 years and has a considerable importance in the functioning of the WTO and more precisely in the DSU operational procedures. However, both sides portrayed a partial picture of the DSU system from quite different perspectives. While Jackson overemphasized on the textual interpretation of the treaty based on Pacta sunt servanda and overlooked the power politics behind the system. Schwartz and Skyes overstressed on the enforcement and compliance issues from private contract law perspective and ignored the principle of sovereignty of states. Both the schools of thought have unique advantages and limitations and empirically well supported by a number of WTO disputes. As they analyzed two different aspects of the WTO dispute settlement mechanism, they could be complementary to each other to design a more appropriate and effective remedial system. Taking a particular position in the debate If I have been asked to take one side of the debate I will go with Jackson arguments. Yes conventional wisdom holds that property rule which requires a punitive level of suspension of concessions could ensure greater compliance. But according to economic theory trade sanction normally results in welfare losses. So a punitive sanction which is higher then the violation and which persist indefinitely will result in greater welfare losses. As the fundamental goal of the multilateral trading system is to ensure economic welfare, one should not advocate any shorts of enforcement mechanism that ultimately reduces global welfare. Again the buy out option to encourage efficient breach should not be practiced as it undermines the credibility and fairness of any judicial system. Though it is evident that in certain disputes the loosing violators refused to withdraw inconsistent treaty measures and thus ignored to comply with the Appellate Body report and preferred suspension of concessions w hich signals their willingness to buy out the violation. But governments require policy space in their trade policy instruments to satisfy large number of interest groups in their constituencies. Nonetheless, nobody can underestimate the principle of sovereignty of states in their decision making process. Especially when a school of thought already claimed that [T]he WTO suffers from an imbalance between the efficient judicial and its ineffective political branches (Tijmes-Lhl, 2009:417-437). This group of scholars argued that the expansive law making nature of the WTO dispute settlement system undermining its legislative decision making process which is an explicit threat to the sovereignty of the member states. This could be even more costly if the members become more reluctant in making further commitment which is somehow explicit in the current deadlock in Doha round. Recommendations An effective solution to the problem would be designing a balanced mechanism which guarantee more compliance and enforcement and thereby ensure more security and predictability in one hand, and uphold the sovereignty and equality of member states on the other. For this one can think of a system that provides more balance in the existing market access entitlement and also includes other types of entitlements such as intellectual property rights, environment etc.(Guzman, 2010) and thus reform the WTO dispute settlement system to a more result oriented and better functioning Judicial body.