Copyright 2000 Federal News Service, Inc.
Federal News Service
March 30, 2000, Thursday
SECTION: PREPARED TESTIMONY
LENGTH: 7864 words
HEADLINE:
PREPARED STATEMENT OF PETER LICHTENBAUM PARTNER, STEPTOE & JOHNSON LLP
LIAISON TO THE WTO SECRETARIAT ON BEHALF OF THE SECTION OF INTERNATIONAL LAW AND
PRACTICE AMERICAN BAR ASSOCIATION
BEFORE THE
HOUSE WAYS AND MEANS COMMITTEE
SUBJECT - HEARING
ON THE FUTURE OF THE WORLD TRADE ORGANIZATION
BODY:
The views expressed herein are presented on behalf of the Section of
International Law and Practice (SILP) of the American Bar Association (ABA).
They have not been approved by the House of Delegates of the American Bar
Association and, accordingly, should not be construed as representing the policy
of the American Bar Association.
Summary
The ABA/SILP urges the
Congress to reject a Resolution rescinding Congressional approval of the Uruguay
Round agreements, for the following reasons:
** The application of the
rule of law to international economic relations strongly serves the U.S.
national interest. As an embodiment of the rule of law approach, the WTO helps
establish and oversee the implementation and operation of rules that promote an
open trading regime for goods and services. The vigorous enforcement of these
rules under the Dispute Settlement Understanding ensures that they bind states
to commitments made during the Uruguay Round. This development of the rule of
law in international trade provides the security and predictability in
commercial relations needed for U.S. consumers, producers, and exporters to
flourish. ** The WTO provides the institutional forum for the greater
liberalization of rules restricting commerce among nations. Many of those
restrictions now cover areas (such as services and other intangibles) in which
the United States has a comparative advantage and which form the foundation for
the modern U.S. economy. The United States has far fewer trade barriers than
many, if not all, of its trading partners. The future economic growth and
development of the U.S. economy depends greatly on the access to foreign markets
by U.S. producers not only of goods, but also of services and intellectual
property. As the institution that already exists to address such issues, the WTO
promotes U.S. national interests.
** Despite some high profile disputes
where the U.S. position did not prevail, overall the WTO dispute settlement
system has served and can reasonably be expected to serve U.S. interests. The
WTO dispute settlement system has enabled the United States to obtain
significant market access for U.S. exporters in a timely manner.
** The
general success of the WTO in serving U.S. interests does not blind the ABA/SILP
to the institution's imperfections. The ABA/SILP urges the United States to lead
reform in the following principal areas: (1) strengthening the implementation
provisions of the Dispute Settlement Understanding to promote greater compliance
with WTO obligations; (2) enhancing transparency in dispute settlement and
decision-making processes; and (3) ensuring that the entire WTO
membership is adequately reflected in WTO decision-making processes.
** On balance, despite the institution's imperfections, U.S. membership
in the WTO has advanced and continues to advance U.S. interests far more than
would withdrawal from the organization. The reforms identified by the ABA/SILP
would strengthen the WTO and thereby serve to promote U.S. interests more
effectively.
VI. International Trade and the Rule of Law
The
establishment of the World Trade Organization at the end of the Uruguay Round
and the incorporation into the multilateral trading regime of several new
agreements and areas of liberalization has highlighted the importance of a
properly-functioning international trading order. The liberal trading system
begun by GATT and then strengthened by the WTO has contributed to the current
economic growth experienced in the United States and to the growth and
development of nations around the world. Recently, a dialogue has ensued on how
we can seek to promote our trading interests while recalling that the U.S.
national interest includes far more than simply trade policy. The following
testimony discusses the role of the WTO's dispute settlement mechanism and
institutional machinery in promoting U.S. national interests. It is the view of
the ABA/SILP that Congress should maintain its support for U.S. participation in
the WTO.
Any assessment of the costs and benefits of WTO
membership for the national interest is, by its nature, complex and
multi-faceted, requiring an analysis not only of the economic issues involved,
but also those of the environment, labor, consumer, and other aspects of civil
society. In this testimony, the ABA/SILP does not address the full range of
factors that will necessarily be part of the final evaluation of the U.S.
interest in WTO participation. Rather, the ABA/SILP today offers its views on
areas where it has particular expertise, continuing the work undertaken by the
ABA and the ABA/SILP in recent years regarding the promotion of the rule of law
in international commercial relations. Specifically, the ABA/SILP offers its
views on dispute settlement and institutional issues in the WTO.
A
fundamental goal of the ABA is to promote the rule of law in international
affairs. The ABA has undertaken a wide range of activities to support the rule
of law, including through technical legal assistance such as the Central and
Eastern European Law Initiative (CEELI), programs on topics such as
anti-corruption efforts, and public advocacy. In the international trade
context, such work includes a 1994 ABA resolution endorsing the WTO Dispute
Settlement Understanding and the Agreement Establishing the World Trade
Organization; a 1998 ABA resolution encouraging the right to counsel of all WTO
Members in dispute resolution proceedings; and the representation of the
ABA/SILP as a non-governmental organization at the WTO's Seattle Ministerial
meeting. The application of the rule of law to international trade, first
embodied multilaterally in the GATT and now in the WTO, has been and continues
to be highly successful in promoting security and predictability in commerce
between nations. Such commercial security and predictability, benefiting U.S.
producers and consumers, clearly promotes U.S. national interests.
Dispute settlement is the cornerstone for an effective multilateral
trading regime; it is essential to promoting the rule of law in our commercial
relations. The dispute settlement mechanism in the WTO has been proven effective
in its first five years, resolving many trade conflicts while establishing a
solid foundation of jurisprudence that promotes stability in our trading
relations. The system has been generally supportive of U.S. trading interests,
as witnessed by extensive U.S. participation in and reliance on the system for
upholding the legal commitments made by Member states in the Uruguay Round. In
our analysis of the WTO dispute settlement system, however, we note that despite
its successes, there remain, in particular, four areas that warrant
consideration of reform: (1) Adequate implementation of panel decisions; (2)
Access to the dispute settlement machinery for developing countries; (3) Greater
transparency in the dispute resolution process; and (4) Procedural changes in
the Panel system and Appellate Body.
The WTO has provided the basic
institutional structure to facilitate the maintenance and the further
development of an open trading system.
As a new institution, however,
the WTO faces the challenge in the future of continuing its success in
liberalizing global trade while moving toward greater inclusion and
transparency. To truly take root and have credibility, the WTO must ensure that
its operations are open to examination and understanding by the general public.
In addition, the entire WTO membership, in particular
developing countries, must be adequately reflected in the institution's
decision-making processes. These reforms will strengthen the WTO's legitimacy
and enable it to more effectively promote open trade. This is very much in the
U.S. national interest.
VII. WTO Dispute Settlement
In
establishing a multilateral trading order based on clearly- identified rules
agreed to beforehand by participating states, the mechanism to resolve
differences regarding those rules is as crucial to the success of the trading
system as the substantive rules themselves. A strong dispute settlement system
enhances the legitimacy of the trading regime by reaffirming the application of
the rule of law to all member states without requiring that each state rely
solely on bilateral diplomacy to seek withdrawal of noncompliant measures. WTO
dispute decisions not only address the measures in question in the specific
dispute, but also fill gaps and thereby provide greater clarity for stable
trading relations among all WTO members. Thus, the WTO's Dispute Settlement
Understanding (DSU) system enhances the predictability of access to other
markets, access for which members negotiated through a careful balancing of
national interests. By preserving this balance of interests, the DSU complements
the WTO's substantive provisions. Strong dispute settlement procedures in the
WTO are important in order to maintain open markets for exporters as the U.S.
economy becomes more highly oriented toward exports as a contributor to economic
growth. Furthermore, as more substantive disciplines have been negotiated under
the auspices of the WTO, in areas such as services and intellectual property,
the WTO dispute settlement system serves the broadening base of the U.S.
economy.
A. The DSU: A Continuing Success
Prior to the Uruguay
Round negotiations, the GATT and its companion Codes provided a relatively
narrow range of trade disciplines, and many countries were not subject to these
disciplines. In addition, GATT's dispute settlement system was sometimes
ineffective. A single country, including the losing party in a dispute, could
block adoption of an adverse panel decision, thereby preventing an effective
resolution of a GATT violation. Moreover, even where a report was adopted, there
was no effective process to achieve compliance.
Recognizing that the WTO
would remain credible only if it was supported by a strong, rule-based dispute
settlement system, the Uruguay Round negotiators established a prompt, effective
mechanism for resolving international trade disputes. Although not perfect, the
new system is widely and justly considered as successful. The reverse- consensus
procedure established in response to previous GATT practice of losing states'
blocking adverse panel findings has resulted in definitive pronouncements on the
validity of challenged measures under states' WTO obligations. Losing parties
can no longer frustrate the process at that stage.
The process proceeds
with defined time limits at each stage, a characteristic strongly promoted by
the United States during the Uruguay Round negotiations. Although many cases
have extended beyond the nine-month time limit provided in the DSU, over
two-thirds were completed within one year. The average time of eleven months for
the resolution of each WTO case compares favorably to the previous GATT average
of fourteen months.
This improvement is particularly impressive when one
considers the dramatic increase in the number of disputes brought to the WTO
when compared with states' reliance on GATT dispute settlement: since the entry
into force of the WTO Agreements, the WTO has successfully resolved thirty-seven
cases through its arbitral panels, and forty-one cases have been successfully
settled under the auspices of WTO consultations. Therefore, the first five years
of WTO practice have witnessed the successful resolution of more disputes than
under the entire 47-year GATT regime.
Given the virtually-automatic
adoption of panel reports, because of the reverse-consensus rule, the Appellate
Body has proven particularly critical to the success of WTO dispute settlement
as the higher judicial body to which decisions of WTO panels are appealed. In
the twenty-six cases decided by the Appellate Body since 1995, it has shown
ample willingness to correct the legal interpretations of panels.
Both
WTO panels and the Appellate Body have faced a larger caseload than expected.
States have increasingly invoked the WTO dispute settlement system since the
institution's establishment. Whereas there were only five active disputes in
1995, there are now 26 active disputes. As noted earlier, the number of cases
decided in the WTO already exceeds the number of GATT cases decided from 1947 to
1994. Twenty-six of thirty-two panel decisions have been appealed. In addition,
pre-Uruguay Round GATT disputes involved issues under only one trade agreement.
Today, in contrast, two-thirds of the disputes involve more than one WTO
agreement. Moreover, because of the DSU's time limits, the increased number of
more complex disputes must be processed more quickly.
Despite the heavy,
and increasing, number of disputes, their increasing complexity and the
shortened time limits, WTO budget and personnel allocations relating to dispute
settlement have not increased commensurately. Notwithstanding the five-fold
increase in the number of active disputes since 1995, the WTO's dispute
settlement budget has increased only incrementally and there is only one
additional attorney (a total of six) in the Legal Division. (1) The WTO
Secretariat, USTR, other governments' trade officials, and neutral observers are
convinced that the system is stretched to capacity. (2) For the system to remain
credible and effective, budget and staffing allocated to it need to be
increased. As the world's largest commercial power (and the traditional leader
of worldwide support for improved and enforceable trade disciplines), the United
States should take a leadership role in efforts to ensure that WTO Members agree
to provide sufficient budgetary and staffing allocations for all activities
related to the WTO dispute settlement process and that all Members pay their
assigned annual contributions fully and promptly.
Even given this strain
on the system's resources, both the lower panels and the Appellate Body have
received widespread support from government officials and neutral commentators
for the high quality of WTO decisions. The broad recognition of the quality of
WTO decisions provides the organization with added legitimacy, as even parties
that do not succeed in their cases can generally accept the reasoning of panels
as fair and unbiased.
Furthermore, this enhanced legitimacy, supported
by the high quality of WTO decisions, encourages compliance by the losing party
in a WTO dispute. When a dispute settlement panel (or the Appellate Body in the
case of an appeal) rules that a Member's law, regulation or practice violates
one or more of the WTO's substantive provisions, the decision automatically is
adopted (absent a consensus to the contrary). If the losing party does not alter
its law, regulation or practice to conform to the ruling within a designated
period, retaliation in the form of trade counter-measures will be authorized
(unless the parties agree upon appropriate compensation). If a panel's decision
is unbiased and well-reasoned, a losing party may be more likely to bring its
measures into conformity with its WTO obligations. This willingness to comply
with a panel's findings is revealed in the record of compliance under the WTO
thus far, which shows that in only two cases -- the Bananas and Hormones
disputes -- has the losing party remained non-compliant and failed to remedy its
illegal measures.
Given the generally successful performance of the
Dispute Settlement Understanding so far, it is not surprising that the United
States has made effective use of WTO dispute settlement to advance its national
interests. Assessing the achievements of the DSU specifically in terms of cases
involving the United States, however, requires an examination of two further
questions. First, have the cases successfully brought by the United States under
the DSU generated meaningful commercial results? Second, in the cases brought
against the United States, have WTO panels, in their interpretation of WTO
commitments, expanded U.S.
obligations beyond those accepted during the
Uruguay Round negotiations? (3)
With regard to the twenty-two complaints
brought by the United States and acted upon at the WTO, twenty were resolved
favorably for the United States, either through a mutually acceptable settlement
or a decision by a Panel or the Appellate Body. Many of these cases are reported
to have resulted in significant commercial gains. As a recent example, the U.S.
obtained a commitment from India to remove a wide range of import bans and
licensing requirements on a large number of agricultural, textile and consumer
products, following a WTO ruling that India's balance of payments restrictions
were inconsistent with its obligations.
In another recent case, the U.S.
obtained a ruling that an Australian automotive leather exporter was required to
repay an illegal export subsidy. (4) At the same time, commercial results have
not been satisfactory in certain cases, due to insufficient implementation of
WTO panels' findings in these cases. Specifically, this remains a concern in the
Bananas and Hormones cases against the EU, discussed further below.
For
cases decided against the United States, there is a very important concern that
in construing the WTO obligations, panels should not impose upon the United
States international commitments to which the U.S. Government never acceded
during the Uruguay Round. Some believe that certain of the cases successfully
brought against the United States indicate that panels may define U.S.
commitments more broadly than the U.S. Government expected at the time of the
Uruguay Round agreements. The jury is still out on the extent to which this
concern will be a recurrent problem. On balance, the overall dispute settlement
results for the United States reveal a dispute resolution system based on fair
and generally well-reasoned judicial opinions, performing at least as well as
was expected five years ago, if not better.
Finally, the interests of
the United States and indeed the entire trading system are served by the
confidence of the Members in the WTO dispute settlement system, reflected in the
volume of cases brought before WTO panels. As trade disputes are increasingly
aired and resolved in a manner not before possible under the old GATT system,
the rule of law becomes more firmly entrenched in the liberal trading order,
thereby securing the open markets necessary for sustained U.S. and world
economic growth.
B. The DSU: Prospects for Improvement
The
success of the Dispute Settlement Understanding does not and should not belie
the significant areas for reform that warrant further consideration based on the
first five years of experience. Areas in which the ABA/SILP urges consideration
of reform fall into the following four categories: (1) Securing adequate
implementation of panel decisions; (2) Promoting greater transparency in dispute
resolution procedures; (3) Altering the ad hoc system of Panels and the lack of
remand authority for the Appellate Body; and (4) Ensuring developing countries
effective access to the WTO dispute settlement mechanism.
1.
Implementation
As previously noted, states found to have measures in
violation of their WTO obligations have generally complied with panel and
Appellate Body decisions and brought their laws and practices into conformity
with their international legal obligations. The two stark exceptions to this
practice remain the European Union's intransigence in the Bananas and Hormones
cases. Although these cases are only two of the thirty so far decided under the
WTO, they represent significant challenges to the rule of law established under
the DSU. The European Union, a leading trading power, has not implemented the
findings issued by WTO panels and the Appellate Body. Rather than negotiating a
WTO-consistent resolution with the United States, the European Union has opted,
instead, to accept U.S. suspension of concessions. (5) Because the amount of
compensation or suspension of concessions is equivalent to the level of harm
suffered by the challenging party, the DSU establishes no particular incentive
to comply. In the absence of any tangible incentives, a violating state may be
ambivalent among the options of compliance, providing compensation, and
accepting a suspension of concessions.
However, consideration also must
be given to the consequences to the United States of adverse decisions. The
adverse ruling on the WTO- compatibility of the US tax law allowing the creation
and use of Foreign Sales Corporations (FSCs) is an example. U.S. national
interests may mean that the United States needs to retain the sovereign right to
decide that it cannot or will not comply with a WTO panel decision.
One
suggestion for addressing these incentive difficulties, at least in the
short-run, involves the adoption of an interpretation or an amendment that would
clarify and strengthen the preference for implementation in DSU Article 22.
However, such proposals must be carefully assessed to ensure a balance between
strengthening compliance and preserving necessary U.S. sovereignty.
2.
Transparency
The United States has long encouraged greater transparency
in dispute settlement proceedings, a position the ABA/SILP supports as one
promoting higher quality decision-making, increasing support and participation
of a larger group of stakeholders, and reflective of a process more consistent
with democratic principles. Furthermore, greater transparency, particularly in
dispute resolution, strengthens the credibility of the system, thereby enhancing
compliance and support for the rule of law. In the context of dispute
settlement, proposals for enhanced transparency focus on increased opportunities
for NGO involvement, as observers and amici, and on greater distribution of
relevant dispute resolution materials, including Members' submissions.
The United States has urged, and the ABA/SILP supports, dispute
settlement proceedings that are open to observers from non-party Member
countries as well as civil society. Opening the doors of these meetings,
particularly to representatives outside the trade community, is essential to
validate the judicial decision-making process by which many states' laws and
practices are held to be consistent or inconsistent with the WTO Agreements.
Denying access to civil society only fosters continued mistrust and skepticism
among groups whose support is essential to regain a trade consensus at the
international level. Furthermore, input from these groups may be important to
the dispute settlement process as the WTO inevitably addresses conflicts arising
from domestic regulation, such as areas of environmental protection and health
and safety. It is precisely at these edges of its competence that the WTO,
understandably, is subject to most criticism. Therefore, by opening itself to a
broader spectrum of views, decisions in these cases would be legitimated by
larger segments of society. In this regard the ABA/SILP encourages the U.S.
invitation for panels and the Appellate Body to actively seek and accept amicus
submissions from NGOs.
Developing countries have articulated concern
regarding the involvement of NGOs in the WTO dispute resolution process. Based
on a perception that NGOs in developed countries are far more organized and
active than those in developing countries, concerns have been raised that
developed-country NGOs will have a disproportionate influence on Panels. This
bias in favor of developed-country NGOs, it is believed, would favor the
interests of the developed world in dispute settlement, at the expense of
decisions favorable to the developing world. This argument presumes, however,
that these highly organized NGOs share the beliefs and interests of their home
governments, and that therefore, increased NGO involvement would raise the
volume of developed-world voices heard by panelists. The United States, in
pressing the case for greater NGO access, should address this argument and note
that this coinciding of interests between developed-world NGOs and their home
governments is not necessarily the case. In fact, many NGOs in the developed
world are likely to have shared concerns with NGOs and governments in the
developing world.
In addition to pushing for civil society access into
the halls of WTO dispute resolution, the United States is also seeking, rightly,
to expand the flow of information from inside the WTO to the rest of the world.
In particular, there should be immediate public release of all submissions to
Panels, with the exception of business confidential information. Nonconfidential
versions of business confidential information should be required to be made
public at the time the submission is filed. An additional benefit of releasing
submissions would be shorter, more accessible Panel reports. Much of the bulk in
Panel reports now stems from the need to detail every argument made by every
interested party to a dispute. Public release of government submissions
mitigates the need for such detailed descriptions of parties' arguments in the
Panel decisions themselves. Understandably, this requirement of immediate
release of submitted documents may pose administrative difficulties,
particularly in document-intensive cases, such as Japan - Film. Such logistical
difficulties, however, are not insurmountable and are only minor inconveniences
when compared to the benefit of information and education provided by public
release of documents.
3. Panel and Appellate Body
There have
been additional suggestions to strengthen the quality of the current dispute
resolution system. The ABA/SILP believes they deserve serious consideration in
future discussions about the DSU.
For example, many observers have
considered whether the Appellate Body should have authority to remand
proceedings to the original panel. Currently the Appellate Body has authority
only to "uphold, modify or reverse the legal findings and conclusions of the
panel.
" This issue has arisen because in some cases the panel has not
made a factual finding on an issue that later, in the opinion of the Appellate
Body, is necessary to resolve the dispute. It is arguably improper for the
Appellate Body to make factual findings in such situations, because DSU Article
17 limits appeals to issues of law and legal interpretations developed by the
panel. For instance, the lack of necessary panel findings or any remand
procedure meant that the United States was unable to obtain a WTO ruling in the
case it brought against the EU over classification of certain computer
equipment. Remands would allow factual issues to be resolved by the panel, which
should have greater expertise in the facts of the dispute. However, remands
almost certainly would lengthen disputes beyond the time deadline currently
provided for DSU proceedings.
Another proposal for reform, suggested by
the EU, would establish a standing body of 15 to 24 professional panelists, with
three panelists serving on each case, to replace the case-by-case selection of
panelists under the current system. This proposal might address the difficulties
in forming high-quality panels and finding panelists to whom the parties do not
object, factors which to date have been a significant cause of delay in the
establishment of Panels. Further, the proposal might enable panelists to devote
greater time to individual cases and increase their familiarity with WTO
jurisprudence. A related issue is consideration of the appropriate criteria to
be applied in selecting panelists (whether or not the EU proposal is adopted),
in particular whether judicial experience should be a significant factor, given
the increasing importance of legal reasoning in WTO panel decisions compared to
the earlier GATT model of conciliation and mediation.
One concern
regarding this proposal is whether establishing a standing body of panelists
would inappropriately limit the ability to appoint panelists with particular
expertise relevant to a particular dispute. Environmental organizations, for
instance, may argue that this proposal could "lock in" what in their view has
been a pro-trade orientation of panelists (relative to other values such as
protecting the environment) and preclude the WTO from drawing on panelists with
different perspectives. Another concern (and a significant one) is that a
Standing Body would increase the WTO's budget, and thus Members' contributions,
significantly.
The United States traditionally has been the leading
voice for a prompt, efficient WTO dispute settlement mechanism. Since the United
States is the world's major commercial power, a credible WTO dispute settlement
system - one that is rule-based, objective and whose decisions are respected and
implemented - is very much in the U.S. national interest. As noted earlier, the
U.S. is the principal user of the dispute settlement process, and it has
achieved very favorable results through the DSU in most of the cases it has
filed. As U.S. businesses (and thus, our economy more generally) continue to
look to foreign markets for opportunities to provide goods and services, there
will be an increased national benefit in ensuring that all countries are abiding
by their WTO commitments. An effectively functioning DSU will be an important
tool for the U.S. government in securing economic prosperity for the country.
The first years of dispute settlement under the WTO show promise; the United
States should now exercise its leadership to pursue those reforms that would
strengthen the DSU and thereby promote U.S. interests in a trading order
governed by a fair and open set of rules.
4. Access for Developing
Countries
Promoting the effective participation of developing countries
in WTO dispute resolution would be consistent with the U.S. government's
traditional role in promoting the rule of law in international trade.
Furthermore, this issue is relevant to Congress' assessment of the WTO because
developing countries' inability to make full use of the DSU undermines the
legitimacy of the DSU and the world trading system and may frustrate efforts to
amicably settle disputes. Therefore, the ABA/SILP believes that it is important
for WTO Members to identify and implement a strategy to enable developing
countries to participate fully in the DSU.
Effective implementation of
successful WTO cases may be meaningless for developing countries if they are
deterred from using the dispute resolution system to their advantage. The
current statistics suggest, at the very least, a strong possibility of relative
underutilization of the WTO dispute settlement mechanism by the developing
world: less than one-third of all complaints brought under WTO auspices are
raised by developing countries. The limited human and financial resources of
developing countries, combined with the limitations inherent in existing WTO
technical assistance to these countries, currently prevent these countries from
making full use of the DSU.
One proposal that the ABA recommended in
1998 was to assure countries the right to counsel of their choice. The presence
of private attorneys in what has been viewed as government-to-government
proceedings has raised concerns about the ability of the organization to
preserve the confidential and diplomatic nature of dispute resolution meetings.
Such concerns, whatever their validity, do not necessarily argue against the
ability of states to be represented by attorneys of their own choosing. Rather,
the appropriate response to such concerns is to develop guidelines to address
the practice of private lawyers in such traditionally diplomatic settings as
international trade dispute resolution, as the ABA has suggested. The WTO,
through rulings of the Appellate Body and a dispute resolution panel, has
already accepted this right to counsel of one's choosing in Bananas and
Indonesia - Autos, respectively. Nevertheless, the ABA/SILP encourages the clear
articulation and development of rules of conduct to govern these legal
representatives in their representation of governments in WTO dispute
settlement.
While important, the right to private counsel may be beyond
the financial resources of some of the least developed Members of the WTO,
thereby requiring that alternative avenues be examined to assist developing
states in their legal representation before the WTO. (6) One means of
guaranteeing access to the dispute settlement system for developing countries is
the Advisory Centre on WTO Law, recently established by a group of developed and
developing countries. The Centre, created independently from the WTO in order to
safeguard the neutrality of the WTO Secretariat, is envisioned as providing
legal advice on WTO law and support in legal proceedings to developing country
Members.
A proposal has also been made, by the EU and Venezuela, to
establish a separate "independent unit" within the WTO Secretariat to assist
developing countries in the dispute settlement process. Under the proposal,
however, the unit would not represent WTO Members in panel proceedings, but only
in the pre-panel stages. This limitation raises serious questions about whether
the proposal would adequately address the constraints on developing country
participation in the DSU, since panel proceedings are the most
resource-intensive phase of the proceeding. Moreover, to the extent that the
unit is providing case- specific advice on the strengths and weaknesses of
particular arguments, the proposal appears to risk jeopardizing the neutrality
of the WTO Secretariat that is guaranteed by DSU Article 27.2.
These
initiatives reflect the underlying need for enhancing the ability of developing
countries to participate in the dispute settlement mechanism. Because the
support of developing countries for WTO dispute settlement is a crucial element
in their support for the WTO as an institution, the ABA/SILP believes that it is
important for the United States to work with other WTO Members to address
seriously and promptly additional ways to enhance the ability of developing
countries to participate in WTO dispute settlement.
VIII. The WTO as an
Institution: Not Broken, But Needing Reform
The WTO is currently
confronting problems that result from its own success in attracting members and
broadening its scope, problems that are especially difficult to manage for a new
institution. The ABA/SILP believes that these problems require the United States
to take an active leadership role in working toward a solution acceptable to all
parties, as opposed to withdrawing from the WTO.
A. Establishment of a
Multilateral Trade Institution
At the outset, it is important to
appreciate that the WTO is a new institution. The GATT, which was developed as
part of the postwar international financial architecture with the World Bank and
the IMF, established the first set of multilateral rules governing international
trade relations. The GATT was only to form part of the Havana Charter, which
created what was to become the International Trade Organization (ITO), which
would have addressed, among other topics, tariffs, private restraints on trade,
and monetary issues. The International Trade Organization, however, failed to be
established.
Over the years, the GATT, which was intended only as a
short-term provisional stop-gap until the ITO was implemented, did develop
institutional characteristics and became a de facto institution, albeit without
legal personality and the supporting structures inherent in an international
organization. Nevertheless, states came to rely on the quasi-institutional
character of GATT despite the fact that it was not a true international
institution. The stresses placed upon the system by states' reliance on this
quasi-institution were highlighted during the Uruguay Round. If new subject
areas were to be handled under the trade regime and if trade disputes were to be
resolved in a satisfactory manner, states recognized the need for an
institutional umbrella.
With this understanding, the Members established
the WTO as the first true institution to oversee the trading relations of its
Member states. Thus, although the WTO is often understood as a successor to the
GATT regime, it is, in fact, a new organization developed for the cooperation of
states in reducing trade barriers and managing interstate trading relations.
The success of the multilateral trading system that the WTO now
oversees, particularly from the perspective of the rule of law, should not be
overlooked. The GATT's original purpose of restraining and eventually
eliminating protectionism has been significantly achieved through a consistent
reduction in trade barriers in the postwar era. The GATT trading system also
revealed a dynamic flexibility in its ability to address the increasingly
creative protectionism of states as they responded to the fall in tariff
barriers with an increase in non-tariff barriers. This flexibility is a
cornerstone of the WTO, as an institution that continues to serve the
liberalization of trade in goods while moving to address the numerous trade
barriers in other sectors, such as services and intellectual property, that are
increasingly crucial to the U.S. economy. The United States retains a
significant interest in pursuing in the WTO forum the progressive elimination of
present obstacles to trade, whether in goods, services, or intellectual
property.
The ability of the WTO to adapt to the changing needs of its
Members counsels in favor of addressing the institution's imperfections within
the framework already established by the Uruguay Round. As previously noted, the
WTO is a nascent institution. It is therefore not surprising that despite its
successes in maintaining the benefits of an open trading regime while holding
states to their commitments made in the WTO Agreements, the WTO faces growing
pains and institutional difficulties.
B. Need for Institutional Reforms
Although it has only been five years since the inception of the WTO, the
institution has been, in effect, a victim of its own success from its birth.
Instead of merely assuming the GATT (covering tariffs and non-tariff barriers)
under its institutional aegis, the WTO faced at its founding a dramatic increase
in the scope of its expected competences: the organization included
trade-related areas that had never been subject to multilateral disciplines and
whose very relationship to trade had never been tested in an institutional
setting. (7) The Uruguay Round also saw a proliferation of new Member states
that had not before been members of GATT, such that the WTO was founded with 128
Members, a long way from the founding 22 nations of GATT. The growth of the
membership has continued, now totaling 135 states, with 31 more states in line
to become Members after accession negotiations. The rapid expansion of subjects
within the WTO's purview and the universality of its membership has greatly
increased the importance of the organization's work.
With these changes,
the WTO will need to create new and refined procedures as the years bring
experience to bear upon the institution's organizational dynamics. The ABA/SILP
highlights the urgent need for enhanced transparency in WTO operations and
greater inclusion of developing countries in WTO decision-making processes.
There is a need for increased transparency both externally (vis- -vis
the general public) and internally (vis- -vis the WTO
membership). The need for external transparency stems from the
obligations of the WTO to remain accountable to citizens. This accountability is
particularly necessary as the organization extends beyond the reach of "pure
trade" issues to those national measures that, while they affect trade, may
fundamentally be non-trade-related in purpose. By addressing such measures, the
WTO has become important to many domestic constituencies in the United States
and elsewhere. Enabling these groups to access information regarding WTO
decision making is necessary to build a consensus regarding the relationship
between trade interests and other regulatory goals. Since the success of any
multilateral trading regime depends on the continued support of citizens in
Member states, the WTO must seek to provide greater information regarding its
decision-making processes.
Internal transparency, that is, the adoption
of processes that are open to all Members, focuses on the need to ensure that
all Member states are able to participate effectively in the organization
processes. Specifically, although decisions are formally taken by consensus,
many developing countries argue that numerous "backroom" agreements are made in
small, informal closed-door meetings. Many developing countries are unsatisfied
with the current processes. The perceived exclusion of developing countries and
the potential estrangement of these states from the WTO directly threatens U.S.
interests in the development of a liberal trading order. If developing countries
are isolated from WTO processes, and they continue to view themselves
effectively removed from procedures that decide their own rights and
obligations, their support for the multilateral trading regime could decline.
Similarly, the established procedures for arriving at decisions also should be
reformed to ensure inclusion of all Members.
The dissatisfaction of
developing states with the Seattle Ministerial brought to the foreground the
importance of the negotiation process. The WTO Agreements do not specify the
means by which negotiating rounds are to be conducted, resulting in an ad hoc
system that creates a tendency for large trading powers to agree on most basic
elements of agreement among themselves. The absence of developing countries from
initial discussions, however, prevents their participation during much of the
crucial agenda-setting stage, at which point fundamental questions are, in
effect, resolved without open debate. Understandably, the WTO faces the
difficult prospect of attempting to secure universal agreement to a series of
highly complicated texts among 135 Members; the demands of efficiency require
that negotiations not include the full participation of each Member at every
step of the negotiations. Nevertheless, there is a need to strike an appropriate
balance between efficiency and the effective participation of countries that
will be expected to assume commitments. Any agreement without the full and
informed participation of the WTO membership will lack the
legitimacy necessary to secure good faith implementation of WTO obligations and
will weaken the long-term stability of the WTO as an institution. This is not in
the U.S. national interest.
As a new institution, the WTO was created to
build on the GATT trading regime and incorporate the new disciplines negotiated
during the Uruguay Round. Coinciding with these new substantive disciplines was
the dramatic increase in the number of states whose interests would need to be
reflected in the organization's institutional structure. These two developments
posed particular challenges for a new institution. In the first five years of
its experience, the WTO has experienced the consequences of its own success in
increasing its scope and thereby raising the importance of its work to segments
of society beyond the trade community. The organization is simultaneously
accommodating an ever-increasing membership with many states anticipating future
participation. Despite the success of the WTO in fulfilling its objective of
ensuring that states adhere to their international legal obligations for the
benefits of global commercial relations, it faces challenges in the areas of
transparency and decision-making processes. The ABA/SILP encourages the United
States to take this opportunity to lead the WTO membership to
pursue reforms necessary to strengthen the institution.
IX. Conclusion
The WTO continues after its first five years to serve U.S. interests by
promoting the rule of law in international trade relations and providing the
forum to facilitate ongoing trade liberalization measures. As a result it
continues the GATT tradition of securing a stable, predictable environment for
open trade. However, the WTO goes beyond the mere establishment of rules for an
open multilateral trading system. In providing for efficient, binding,
high-quality dispute resolution, and in functioning as the institutional
backdrop for the series of trade-opening measures including and beyond trade in
goods, the WTO promotes U.S. interests far more successfully than the previous
GATT regime. Unsurprisingly, the WTO is not perfect. There are valid concerns
about it as it begins its next five years and attempts to commence the first
round to be launched under its auspices. These concerns are best addressed,
however, within the framework of the system established five years ago. The
United States can best promote its interests by reaffirming its commitment to
the WTO while assuming a leadership role in the resolution of those concerns.
1. At present, in disputes involving anti-dumping, safeguards and
subsidies lawyers from the WTO's Rules Division also participate, thus
mitigating slightly the resource burden.
2. See, e.g., 1999 Trade Policy
Agenda and 1988 Annual Report of the President of the United States on the Trade
Agreements Program, at 33- 34.
3. The ABA/SILP notes that the WTO also
permits a state's interests to be represented even when the state itself is not
a party to the specific dispute. The United States has made particular use of
this third-party mechanism to ensure that legal interpretations important to the
United States are adequately briefed.
4. Examples of other cases in
which the U.S. has obtained significant commercial results are available on the
U.S. Trade Representative's website, http://www.ustr.gov.
5. The Bananas
case reflects an additional concern regarding the implementation of dispute
settlement panels' decisions: What happens when a measure, revised to
accommodate a WTO panel decision, is claimed to still be in violation of a
state's WTO obligations? Must the successful challenging state recommence
dispute settlement proceedings to challenge the modified law, or may the state
suspend concessions once the Panel finds the state is caused harm by that law?
This query remained at the heart of the controversy between the EU and the
United States in the implementation of the Bananas decision. The WTO panel
finally settled the issue in favor of the United States, finding that another
dispute settlement panel would not be required before the United States was
permitted to suspend concessions. Nevertheless, further textual clarification on
the interrelationship between Articles 21.5 and 22 is crucial to ensure the
implementation of panel findings in future controversies.
6. The
ABA/SILP recognizes greater attention must also be paid to longer-term
strategies, that is, to the development of indigenous capacity in developing
states to participate effectively in DSU proceedings.
7. These comments
express no position on the desirability of including within or excluding from
the WTO any particular trade discipline or subject matter area.
END
LOAD-DATE: March 31, 2000
