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MODULE III

DISPUTE SETTLEMENT PROCEDURE

One of the unique features of the WTO is its

provision relating to dispute settlement

mechanism . In fact the power to settle trade

disputes is what is the difference between the

WTO and GATT .

When a member files a complaint against

another , the dispute settlement body of theWTO steps in immediately .

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Decisions have to be taken in less than 1 year 9months if the case is urgent , 15 months if thecase is appealed . The dispute settlement systemof WTO is faster and automatic and the decisions

cannot be ignored or blocked by members . Offending countries must realign their trade

policies according to the WTO guidelines or sufferfinancial penalties and even trade sanctions .

Because of its ability to penalize offendingmember nations ,the WTO dispute settlement isthe backbone of the global trading system.

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The costs of dispute settlement proceedingsare disproportionately heavy for developingcountries.

In general , developing countries do not enjoya neutral playing field. Although the disputesettlement procedure is not biased againstany party in a dispute , developing countriesare less well equipped to participate in theprocess they have fewer people with

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Necessary training , they are less experienced

and as noted above , they face resource

constraint.

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Dispute Settlement in the WTO:

Overview

Overall aim:

to secure compliance

with the Agreements

Quasi-judicial Nature

Secured access

Detailed procedures

Automaticity in the

proceedings

Deadlines

Possible appeal

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Dispute Settlement in the WTO

Scope

An integrated

system:

Applies to all the

multilateral

agreements

A single set of rules forall disputes

Only a few specific rules

in some agreements

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Main players

Dispute Settlement Body (DSB)

Panel and Appellate Body Parties: WTO Members

WTO Secretariat

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Relationship of players

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Panel

Appellate Body

Ministerial Conference

Dispute Settlement Body

(General Council)

Request for Panel

by WTO Member

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Main Procedures

Implementation

Appelate Body

Panel

Consultations

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60 days

9 months

90 days

15 months

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Consultations: the request

Indicates reasons for the request:

identification of

the measures

legal basis for complaint

Notified to DSB and circulated to

all Members

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Consultations: function

to accord sympathetic consideration to andaccord adequate opportunity for consultation

confidential, only between the Members

concerned

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Consultations: third parties

But, in some instances, other Members can requestto be joined in the consultations Article 4.11 DSU

substantial trade interest

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Consultations: if not successful

If consultations fail to resolve the matter within 60 days

from receipt of request.. Or if no response or no entering into consultations

. A request for establishment of a panel can be made

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Establishment of panels

Request for establishment: must identify the specific measures at issue and provide a brief

summary of the legal basis of the problem sufficient to present

the problem clearly

Establishment at the latest at the second DSB meeting at which the request is

made; decided by negative consensus

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Dispute Settlement in the WTO:Terms of reference and composition of panels

Terms of reference:(Article 7 DSU)

Standard, or

Special terms of

reference

Panel Composition:(Article 8 DSU)

well-qualified government

and/or non-governmental

individuals

Secretariat proposals

indicative list of panelists

nomination by DG

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Dispute Settlement in the WTO:Panels: how they function

Functions of the Panel

a panel should make an objective assessment of thematter before it, including an objective assessment of the

facts of the case and the applicability of and conformitywith the relevant covered agreements

Functions of the dispute settlement system to preserve the rights and obligations of Members under the

covered agreements, and to clarify the existing provisions of thoseagreements in accordance with customary rules of interpretation of

public international law Art. 3.2 DSU

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Panel Procedures: main steps

Oral hearings (usually 2), on basis of writtensubmissions

Descriptive part of report issued to parties

Interim review based on draft report

Final report issued to parties

Final report circulated to all Members

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Dispute Settlement in the WTO:Panel Procedures: other sources of input

Third parties have make presentations

need substantial interest (Article 10 DSU)

Panels may seek

factual information from any relevant source(Article 13 DSU)

scientific or technical advice from an Expert

review group (Appendix 4 DSU)

Requirement of confidentiality (Article 14 DSU)

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Dispute Settlement in the WTO:Panel Procedures: duration

As a general rule, 9 months from establishment of

panel to consideration of report for adoption (if no

appeal)

12 months where report is appealed

(Article 20 DSU)

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Dispute Settlement in the WTO:Appellate Review

Appeals limited to issues

of law and legal

interpretations developed

by the panel

Appeal only open to

parties to the dispute

Appellate Body

7 members

members to have

recognized authority andexpertise in international

trade law

members unaffiliated with

any government

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Dispute Settlement in the WTO:Appellate Review: report and adoption

Report of the Appellate Body:

may uphold, modify or reverse the legal

findings and conclusions of the panel (Art.17.12 DSU)

Adoption of Appellate Body report: by

reverse consensus within 30 days of

circulation to Members

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Dispute Settlement in the WTO:Implementation

Member must bring the

measures into conformity

with its WTO obligations

(Article 19 DSU)

Member must inform DSB

of its intentions in for

implementation of the

recommendations

(Article 1 DSU)

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If there is a findingof violation:

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Dispute Settlement in the WTO:Implementation: reasonable period of time

Determination of reasonable period of

time for implementation:

proposed by Member, and approved by DSB, or

mutually agreed by the parties, or

determined through arbitration:

guideline for the arbitrator: 15 months from the date ofadoption (Article 21.3 DSU)

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Dispute Settlement in the WTO:Implementation: surveillance

Surveillance by the DSB

Status reports on implementation

Temporary measures If Member fails to bring measure into

conformity within reasonable period of

time, possibility

compensation or

suspension of concessions (retaliation)

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Implementation

Compensation:

(Article 22 DSU)

Voluntary Negotiated

Compatible with WTO Agreements

If no compensation agreed within 20 days

after expiry of reasonable period of time.

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The major provisions of the final act relate to

agriculture , sanitary measures , helping least

developed countries , clothing , TRIPS, GATS

and anti dumping measures .

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AGRICULTURE

The agreement related to agriculture is made upof several elements which seek to reform trade inagriculture and provide the basis for marketoriented policies , thereby improving economiccooperation for importing and exportingcountries alike. It establishes new rules andcommitments in market access, domestic support

and export competition and includes provisionsthat encourage the use of less trade distortingdomestic policies to maintain the rural economy.

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It also allows action to be taken to ease

adjustment burdens and provides some

flexibility in the implementation of the

commitment. Specific concerns for developingcountries are addressed including those of net

food importing developing countries and less

developed economies.

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HEALTH AND SAFETY MEASURES

The agreement on the application of sanitary

and Phytosanitary measures concerns the

application of food safety and animal and

plant health regulations. It recognizesgovernment rights to take sanitary and

phytosanitary measures but stipulates that

they must be based on science

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should be applied only to extend necessary to

protect human , animal or plant life or health

and should not arbitrarily or unjustifiablydiscriminate among members where identical

or similar conditions prevail.

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HELPING LEAST DEVELOPED AND

FOOD IMPORTING COUNTRIES

It is recognized that during the reform

programme , least developed and net

importing developing countries may

experience negative effects with regard togiving food supplies on reasonable terms and

conditions. Such countries need assistance .

Therefore a special ministerial decision callsfor appropriate mechanisms related to the

availability of food and the provision of basic

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Foodstuffs in full grant form aid for

agricultural development . It also refers to the

possibility of assistance from the IMF and

world bank with respect to the short term

financing of commercial food imports . The

committee on agriculture holds responsibilityto monitor the follow up to the decision .

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TEXTILES AND CLOTHING

The objective of this agreement is to secure

the integration of textiles and the clothing

sector where much of the trade is currently

subject to bilateral quota negotiations underthe multi - fibre agreement ( MFA ) into the

main stream of WTO . The integration ,

however , shall take place in stages .

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All MFA restrictions in force on 31st

december1994 would be carried over into theFinal Act and maintained until such time as

the restrictions are removed or the products

integrated into WTO .

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TRIPS ( TRADE RELATED

INTELLECTUAL PROPERTY RIGHTS )

The WTO Agreement on TRIPS recognizes that

widely varying standards in the protection and

enforcement of intellectual property rights

and the lack of multilateral disciplines dealing

with international trade in counterfeit goods

have been a growing source of tension ininternational economic relations .

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With this end in view , the agreement

addresses the applicability of basic GATT

principles and those of relevant intellectualproperty agreements , the provision of

adequate intellectual property rights , the

provision of effective enforcement measures

for those rights , multilateral dispute

settlement and transitional implementation

arrangements.

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The TRIPS contain of three parts

1. Sets out the provisions and principles

2. Addresses different kinds of IPR

3. Concerns enforcement.

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TRIMS ( TRADE RELATED

INVESTMENT MEASURES )

Multinational Firms are aware of the many

restrictions on their investments in foreign

countries . TRIMS are those restrictions a

country places on foreign investment that

adversely affect trade in goods and services ..

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WTO members entered the agreement on

TRIMS as a part of the Uruguay Round

agreements.

The agreement does not set broad rules for

investors in a member country . It simply

prohibits law or regulations that conditions a

countrys rights to import foreign goods on

the volume of goods exported .

Also prohibited are laws that condition thereceipt of foreign exchange on the countrys

foreign exchange revenues .

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GATS ( GENERAL AGREEMENT ON

TRADE IN SERVICES )

The GATS , negotiated during the Uruguay

Round is the first step of multilaterally agreedand legally enforceable rules and disciplines

ever negotiated to cover international trade in

services .

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The agreement contains three elements

1. A framework of general rules and disciplines

2. Annexes addressing special conditionsrelating to individual sectors ( the sectors

covered are : movement of natural persons ,

financial services , telecommunications andair transport services )

3. and national schedules of market access

commitments .A council for Trade in Services oversees the

operation of the agreement

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AGREEMENT ON SUBSIDIES AND

COUNTERVAILING MEASURES

( SCM )

SCM is the outcome of negotiations during

Uruguay Round . Under the GATT agreement

subsidies may be dealt within two days .

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Firstly , a WTO member country may appeal to

the WTO for dispute resolution . The WTO

may recommend that the subsidy may bediscontinued , its harmful effects be

eliminated or a countermeasure may be taken

by the importing country.

Secondly , an importing country may initiate

its own administrative proceedings , similar to

anti dumping measures , to impose a

countervailing duty on the subsidized

products in order to eliminate their unfair

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A countervailing duty is a special tariff , in

addition to the normal import tariff , levied on

imports of subsidized goods in an amountequal to the amount of the counter viable

subsidy . A countervailing duty may be

brought at the same time as the WTO dispute

settlement action.

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DUMPING

In Importing , Dumping is the unfair trade

practice of selling products in a foreign for less

than the price charged for the same or

comparable goods in the producers homemarket . It is a form of price discrimination

that causes injury to domestic competitors

through artificially low prices against whichdomestic producers cannot compete at

profitable level.

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Anti dumping laws are used more frequently

than any other type of trade law in the US and

EU.

Developing countries , such as Mexico, Brazil

,Argentina , India and Korea , also have

antidumping codes .

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THE WTO ANTIDUMPING

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THE WTO ANTIDUMPING

AGREEMENT

The GATT provisions on dumping are found in

GATT 1994 Article VI and in the 1994 WTO

antidumping Agreement . The 1994

agreement provides complex rules fordetermining when dumping has occurred and

for resolving dumping disputes .

Every WTO member country is expected tosee that its national anti dumping laws comply

with the WTO rules .

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The WTO agreement provides that dumping

occurs when foreign goods are imported for

sale at a price less than that charged for

comparable goods in the exporting orproducing country . Anti dumping duties may

be imposed only when the dumping threatens

or causes material injury to domesticindustry producing like products . The

agreement requires that an importing country

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resort to anti dumping duties only after

conducting a formal investigation to

determine both the amount of the dumping

and the extend of material injury.

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What is Dumping

A product is said to be dumped when itsexport price is less than its normal value of alike product in the domestic market in theexporting country.

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NORMAL VALUE

The price in the exporters domestic market,

or

The price charged by the exporter in another

country, or

Production costs plus other expenses and

normal profit margins.

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Dumping must cause material injury in the

importing market .

Types of Injury

Material injury to a domestic industry,

Threat of material injury to a domestic

industry,

Material retardation of the establishment

of a domestic industry

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Measures for Remedial Action

Imposition of anti dumping duties

Countervailing duties

Safeguard measures

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Implications

Only an Industry or Country and not a

Company can call for an anti-dumping

investigation

Time consuming work to gather

information and prove dumping

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Costly as in most cases the matter will be

referred to Industrial courts

Difficult to recover losses during the

process of proving Dumping

Pre or Post introduction of dumping duties

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IMPORTS , CUSTOMS AND TARIFF

The WTO agreements which are the outcome

of 1986-1994 Uruguay Round of multilateral

trade negotiations introduce disciplines of a

wider range of trade issues and testify to awider and deeper commitment to trade

liberlisation . The scope of these agreements

extends beyond the traditional trade issues ,which primarily addressed the reduction of

tarrifs and quota as barriers against trade in

goods at country borders.57

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A wide range of non tariff barriers to trade is

now the subject of a number of multilateral

and legally binding WTO agreements . Theseagreements deal with technical and

bureaucratic measures or legal issues that

could involve hindrances to trade be used asinstruments for restrictive and discriminatory

trade policies.

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They include agreements on Technical Barriers

to Trade , Sanitary and phytosanitary

measures , Import Licensing Procedures ,Rules of Origin , Customs Valuation , Pre

shipment Inspection , Anti Dumping , Subsides

and Countervailing Measures , Safeguards andTrade related investment measures.

These treaties after the Uruguay Round , they

have acquired Multilateral status i.e. they

became binding on all members .

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TECHNICAL BARRIER TO

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TECHNICAL BARRIER TO

TRADE Establishment of WTO - Dismantling of

barriers for free flow of trade

Creation of global market with equal access to

all countries Quality, health & safety & environmental

issues gaining importance

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TBT Agreement - Objectives

Allows members to apply standards, technical

regulations, conformity assessment procedures

for

protection of human safety or health (sockets,seat belts, labelling cigarettes)

Protection of animal & plant life or health

(pollution, extinct eg turtle extruder device)Protection of environment (level of vehicle

emissions)

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Prevention of deceptive practices (labelling, size)

Other objectives (quality-size of fruits & vegs, tech

harmonization-telecom)

However need to ensure that these do not

create obstacles to international trade

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Scope

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Scope

Applies to all products including industrial & agri

products, both voluntary standards & technical

regulations(standards to which compliance

mandatory)

Covers

Product characteristics

Process & production methods(PPM) that have an

effect on product characteristicsTerminology & symbols

Packaging & labelling requirements

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Avoidance of unnecessary obstacles to trade

Non-discrimination & national treatment Harmonization

Equivalence of technical regulations

Mutual recognition & conformity assessmentprocedures

Transparency

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Non discrimination & national

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Non-discrimination & national

treatment Most Favoured Nation Basis should apply

on a MFN basis to imports from all sources

National Treatment Principle shall notextend to imported products treatment less

favourable than that extended to domestically

produced products

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Harmonization

Why harmonizeBenefits to producer can cater to needs of all countries

leading to productions of scale eg cars, mobiles, TV sets,etc

Benefits to consumers wide choice, spare parts, etc

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H i ti & TBT t d d /t h

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Harmonization & TBT- standards/techregulations/CA procedures to be consistentwith or based on international standardsunless their use ineffective or inappropriateto fulfill objective

Technical regulations in accordance with

International standards are presumed not tocreate unnecessary obstacles to trade

participate actively in work of ISO/other

international bodies

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Mutual Recognition of Conformity

Assessment

CA procedures are those used to determine

that requirements met. Include sampling,inspection, testing, evaluation, verification ofconformity, accreditation, etc.

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Transparency

Notificationsall proposed, new and changed measures are to be

notified by members to the TBT Committee of WTOSecretariat,

to be provided to members, translated versions ifrequested, & any deviations from international standards

give sufficient notice to allow for adapting to these reqts.

If technical regulation differs from international standards,need to also take into account comments of exporter

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Technical assistance

provided to developing countries in the area of

setting up NSBs, participation in intstandardization, preparing technical regulations,setting up regulatory bodies for CA activities,methods of CA, etc

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i l & iff i l

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Special & Differential Treatment

more favourable treatment to be provided to

developing countriestake into account their special developmental,

financial & trade needs when developing techregulations, standards and CA procedures so that

no unnecessary obstacles created to exports fromdeveloping countries.

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Institutions, Consultations &

Dispute Settlement

Committee on TBT established having

representatives from each members meet 2-3times a year, for discussing operation of

Agreement or furtherance of objectives

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Consultations & settlement of disputes shall

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Consultations & settlement of disputes shall

be under auspices of Dispute Settlement Body

of WTO. However a provision for technicalexpert groups to assist in issues of technical

nature has been provided

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Key Features for Preparation,

adoption & Application of

Technical Regulations

Most Favoured Nation Basis should apply

on a MFN basis to imports from all sources

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National Treatment Principle shall notextend to imported products treatment less

favourable than that extended to domesticallyproduced products

Least Trade Restrictive should not be

formulated & applied in a manner so as tocause any unnecessary obstacle to trade notmore trade restrictive than needed to fulfillegitimate objectives (prevent deceptivepractices, protection of human, animal orplant life or health, or environment).

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Other Key Features

Information

An enquiry point to be set up

answer all reasonable enquiries

provide documents on technical regulations,standards & CA procedures;

any agreements to be notified to secretariat

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Technical assistance is provided to developing

countries in the area of setting up NSBs,

participation in international standardization,

preparing technical regulations, setting up

regulatory bodies for CA activities, methods of

CA, etc

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Amongst the agreements on non Tariff barriers ,

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Amongst the agreements on non Tariff barriers ,

Technical Barriers to Trade , sanitary and

phytosanitary measures , Import licensing

procedures , Rules of origin , Valuation of

goods at customs , Pre Shipment Inspection

are related to harmonization of trade

regulations while the others , Anti Dumping ,Subsidies and countervailing measures ,

Safeguards and trade related investment

measures are viewed as related to tradecompetition policies ( market access) .

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NTB may create problems that can be as

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NTB may create problems that can be as

serious as the actual tariff and duty rates

charged at country borders . Thus, it is not

surprising that the overall objective of these

Agreements is to prevent obstacles and

reduce uncertainties facing the trading

community . They seek to ensure transparencyof laws , regulations and practices regarding

various rules of trade and ultimately , to

harmonise these rules to facilitateinternational trade.

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This would forcefully entail fundamental trade

reform measures to be taken by these

countries to accommodate and secure theircommitments to the new system . Perhaps the

most important outcome is that the range of

measures previously viewed as falling withinthe scope of national policy has now been

brought under multilateral discipline and

linked to the rights and obligations governing

international trade and market access.

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C S O O

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CUSTOM VALUATION

Customs duties can be either specific or ad

valorem. On the other hand , Ad valorem

duties are based on the value of goods . In this

system , determining the value of a good or, inother words , customs valuation becomes

important .

Customs valuation is a set of customsprocedures used to determine the customs

value of imported goods for the purpose

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Of determining the actual incidence of duty.

For importers , the process of estimating the

value of a product at customs may createproblems that can be as serious as the actual

duty rate charged .

It should be noted that application of thecustoms valuation Agreement should go hand

in hand with customs reform and

modernization . While the latter is not anecessary condition for the former , it

certainly would contribute to more effective

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Outcome However customs reform involves

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Outcome. However , customs reform involves

considerable financial and human resources ,

which are often out of reach of manydeveloping member countries .

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WTO - World Trade Organization

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g

In the WTO there are three areas of work ongovernment procurement: the plurilateral

Agreement on Government Procurement, the

Working Group on Transparency inGovernment Procurement, and the Working

Party on GATS Rules (services).

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Agreement on Government

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Agreement on Government

Procurement

The WTO Agreement on Government

Procurement (AGP) is the primary plurilateral

instrument guaranteeing access for Canadian

suppliers to the government procurement

markets in the United States, the European

Union, Japan, South Korea and otherimportant markets

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Whil WTO l il l

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While most WTO agreements are multilateral

and include all WTO members, the AGP is a

plurilateral agreement because not all WTOmembers participate in the AGP. The current

list of AGP members is available here. In

addition, several WTO members, includingChina and Jordan, are pursuing accession to

the Agreement

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wto - dsb

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