China, US, EU the key players in trade court

THE NUMBER of trade disputes is growing, and as more countries knock at the door of the World Trade Organisation’s Dispute Settlement Body (DSB),

WTO Director-General Roberto Azevedo has promised to allocate more resources to work with the DSB’s legal team . . .

CHINA, the United States and the European Union are involved in the greatest number of disputes filed with the Geneva-based World Trade Organisation (WTO) as complainants and defendants. Since 2002 – a year after it joined the WTO — Beijing has filed 13 complaints and has had to defend its trade policies in 33 cases filed by trading partners. India has also been fairly active.

Most active is the United States.

Over the years, Washington has been an active user of the WTO’s Dispute Settlement Body (DSB), involving a wide range of countries and products. A WTO source says the US initiates most cases, but it is also the target of many complaints. “They have defended themselves on 124 cases. In some instances there could be three or five countries complaining against the same US measures,” says the source.

It is common for one member to initiate action against another member, but other members with an interest in a particular product or issue may join as third parties.

A case in point is an ongoing claim against Australia, which is fielding complaints over a decision of the previous Labor Government to implement plain packaging of tobacco products. Five tobacco-producing countries — Cuba, Honduras, the Dominican Republican, Ukraine and Indonesia — are the principal complainants.

In each of these cases, 33 other countries, including Singapore, China and the US, have joined the complainants as third parties, citing infringement of intellectual property rights and the introduction of technical barriers to trade.

The WTO source says countries lodging complaints across the trade spectrum are equally split between developed and developing nations. “The developed countries also lodge disputes against each other. And developing countries take action against other developing countries as well,” she says.

Russia, which acceded to the WTO only in 2012 — after 18 years of protracted negotiations — has had no honeymoon when it comes to disputes. It is already facing three separate cases— over cars, tariff treatment and pork.

The WTO does not believe that the current number of complaints represents a temporary surge in trade disputes. The workload of the DSB is on an upward trajectory, stretching its small staff to an absolute limit.

It is an irony, really, when WTO members appear to turn their backs on the multilateral sys

tem — witness the tortuous efforts to conclude current multilateral trade negotiations in the Doha Development Agenda. Instead, they are increasingly opting for regional agreements.

Yet they have stepped up use of the DSB to resolve trade frictions.

Speaking to the WTO’s DSB last September, the WTO Director-General, Roberto Azevedo, said: “If we shut the doors today, the dispute panels and the Appellate Body would have enough work to keep them and their Secretariat staff busy for the next two years. But, of course, the doors will not be shut — new requests will keep coming in.”

Azevedo said researchers had found that, in the first 16 years of the DSB, the WTO handled disputes covering at least US$1 trillion in trade flows. He noted that it had been suggested that the ever-increasing number of regional trade agreements (RTAs) might pose a challenge, but this had not proved to be the case. 

Azevedo added that most dispute settlement mechanisms provided for in RTAs are rarely used. In fact, some have never been used. Yet one in every five WTO disputes involves parties who are also parties to RTAs.

He promised to allocate more resources to work with the DSB legal team, which assists the panels and is made up of individuals not working for the WTO. These include former Ambassadors, expert practitioners, academics and former Government ministers.

A source told ATI: “All our decisions are complied with. WTO members, including the US and the EU, trust the system. This reflects the success of the DSB.”

Not only do nations abide by panel decisions. To ensure that they win the technical or legal arguments, they also increasingly throw more 

resources into their defence.
Companies which are usually behind these

cases now bring out top legal teams, even though lawyers are not welcome in the actual panel sessions. This is a tradition inherited from GATT (forerunner of the WTO) when countries settled disputes through their diplomats.

A source told ATI in Geneva that it all started with the famous “banana” cases, when a small banana-producing country, St Lucia, a third party in a dispute between the US and the EU, employed a lawyer to assist in its case.

“The EC and US objected to the presence of a private lawyer,” says the source. “Then we went to the appellate hearing, and the panel allowed the lawyer to be present on condition that he observe the confidentiality of what transpired in the room.” Both the EU and the US still do not permit private lawyers to attend WTO panel sessions.

The banana case was no ordinary battle — it was fought over two decades. Banana exporters in Africa, the Caribbean and Pacific countries lined up behind the EU on one side and the Latin American countries (where US multinationals – Dole and Chiquita – have huge plantations) behind the US on the other.

The case was finally settled in 2012, prompting the then-Head of the WTO, Pascal Lamy, to call it a “truly historic moment”. The EU and 10 Latin American countries signed an agreement to end eight separate WTO cases over bananas.

“In some sensitive cases, you would see the private lawyers standing outside the room because they had been hired by private companies involved with the case,” says the source.

She explains that, essentially, trade disputes are inter-governmental problems. “But, in reality, behind any dispute you have the private sector. Some disputes involve huge multinational companies, such as Boeing and Airbus. It doesn’t matter who is involved — in all instances much is at stake.”

The source says that in any anti-dumping case there are companies involved in pushing their Government to act against the other Government which is imposing antidumping duties. Similarly, private companies are behind subsidy cases and these companies hire their own lawyers to watch over their interests. 

In an attempt to create a level playing field, so to speak, the rich WTO member countries have donated to the establishment of a law firm known as the Advisory Centre on WTO Laws (ACWL), located outside the WTO in the United Nations precinct of Geneva.

LDCs can call on ACWL for free legal advice and interpretation of WTO laws. Its lawyers also advise countries, when drawing up new legislation, to ensure conformity with the WTO laws.

“The centre also briefs Governments from developing countries on how to look out for problems. There may not be enough communication between the industry and the Government, and the industry may not really know what WTO laws are, so the Governments are being trained in how to co-operate and inform the industries — and, when there is a dispute, how to co-ordinate to be more effective.”

A number of disputes are political in nature.

It has sometimes been suggested that the number of disputes is correlated to the breakdown in Doha negotiations — that countries resort to disputes because they cannot make headway in trade agreement negotiations, so they use the DSB to adjudicate.

Perhaps in all seriousness, rather than jest, WTO Head, Roberto Azevedo, said of the DSB: “We thought we had built a sailboat, but now we have discovered that what we have on our hands is an ocean liner. And of course, an ocean liner requires more resources, more fuel and a bigger crew. So we will need to consider what resources we are prepared to provide if we want to stay afloat.”