Enforcement and Countermeasures under the WTO

Enforcement and Countermeasures under the WTO

A research paper submitted in partial fulfilment of the course International Trade Law for the requirement of
degree of B.B.A., LL. B. (Hons.) for the Academic Session 2020-21

Researched &Submitted: Accession and Supervision:

Amisha Prakash Dr. P. Parvateeshwara Rao
B.B.A. LL.B. (Hons.) Faculty: International Trade Law
3rd Year, 6th Semester
Roll no. 2005

CHANAKYA NATIONAL LAW UNIVERSITY,

PATNA

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Enforcement and Countermeasures under the WTO

ACKNOWLEDGEMENT

Writing a project is one of the most significant academic challenges, I have ever faced. Though this project
has been presented by me but there are many people who remained in veil, who gave their all support and
helped me to complete this project.
First of all I am very grateful to my subject teacher Dr. P. Pravateeshwara Rao the kind support and help
of whom the completion of the project was a herculean task for me. He donated his valuable time from his
busy schedule to help me to complete this project and suggested me from where and how to collect data .I
am very thankful to the librarian who provided me several books on this topic which proved beneficial in
completing this project.
I acknowledge my friends who gave their valuable and meticulous advice which was very useful and could
not be ignored in writing the project.
Last but not the least, I am very much thankful to my parents and family, who always stand aside me and
helped me a lot in accessing all sorts of resources.
I thank all of them!

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Enforcement and Countermeasures under the WTO

DECLARATION BY THE CANDIDATE

I hereby declare that the work reported in the B.B.A., LL.B. (Hons.) Project Report entitles “Enforcement
and Countermeasures under the WTO” Submitted at Chanakya National Law University; Patna is an
authentic record of my work carried out under the supervision of Dr.P.Parvateeshwra Rao. I have not
submitted this work elsewhere for any other degree or diploma. I am fully responsible for the contents of my
Project Report.

(Signature of the Candidate)

Amisha Prakash
Chanakya National Law University, Patna

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Enforcement and Countermeasures under the WTO

Contents
1. Introduction....................................................................................................................................................5

1.1 Research Methodology............................................................................................................................7

1.2 Research Questions..................................................................................................................................7

1.3 Aims & Objectives...................................................................................................................................7

1.4 Hypothesis................................................................................................................................................7

2. The Global Order...........................................................................................................................................8

2.1 The Functions of the WTO......................................................................................................................9

3. Basic principles on which the WTO operates..............................................................................................11

4. WTO-specific dispute resolution.................................................................................................................14

4.1 Analysis..................................................................................................................................................16

5. Conclusion and Suggestion..........................................................................................................................22

Bibliography.....................................................................................................................................................23

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Enforcement and Countermeasures under the WTO

1. Introduction

The World Trade Organisation [WTO] is a universalist, multilateral trade organisation. The Marrakesh
Agreement establishing the WTO came into force on 1st January, 19951. It is a standalone agreement – it
influences other multilateral agreements, but does not get influenced by them. The GATT 1947 was replaced
by GATT 1994, under which basic principles of trade in goods were enumerated.
 The WTO was founded on the principles of Marrakesh Agreement, a treaty having 16 articles.
 It is the legal and institutional foundation of the multilateral trading system, and has a legal personality
of its own.
 It provides the principle contractual obligations determining how governments frame and implement
domestic trade legislations and regulations.
 It contains a set of disciplines that affect the ability of governments to impose trade restrictions and had
helped to support the steady expansion of international trade.
 It is the platform on which trade relations among countries evolve through collective debate, negotiation
and adjudication.
 It enshrines a set of principles concerning non-discrimination:
– Most Favoured Nation (MFN), which is a misnomer and propounds non-discrimination between
countries.
– National Treatment (NT), which propounds non-discrimination between your own goods, IPRs and
services.
 Other principles propounded by the WTO include transparency, fair trade, free trade, general exceptions,
regional trade agreements (RTA) and special and differential treatment (SDT).
 The WTO talks not only about trade expansion but also trade restrictions. These are known as trade
exigencies, or trade emergencies. These are of 3 types:
a. Anti-dumping2.
– Dumping is not done by countries, it is done by companies or enterprises located in foreign
countries. It refers to the selling of products in the foreign market at a price below the cost of
production to eliminate competition. Dumping Margin = Normal Value – Export Price.
– These countries are allowed to impose anti-dumping duties.
– Article VI of the GATT 1994 which is popularly known as the ‘anti-dumping agreement’.

1
https://www.trade.gov/trade-guide-marrakesh-agreement-establishing-wto
2
https://www.investopedia.com/terms/a/anti-dumping-duty.asp
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– Article II of Anti-Dumping Agreement of the WTO talks about the calculation of the dumping
margin.
– The Customs Tariff Act, 1975 ensured that India’s anti-dumping law was in conformity with
the WTO’s anti-dumping law.
b. Against Subsidisation3. A subsidy is a financial contribution by the government, public body or
any entity which has been entrusted to do the same by the government, leading to certain benefit. It
must be specific in nature. Regulation of subsidies is done by the Agreement on Subsidies and
Countervailing Measures. If any country provides subsidy and exports to another country, the other
country can impose countervailing duty.
c. Safeguarding measures4. If there is an excess of imports, safeguard duty can be imposed by the
country.
 The WTO is a member-driven organisation. All the decisions are taken by the members. Members
ensure effective functioning of the WTO, and its laws are made on the basis of collective acceptance.
 Article XXIII of the Dispute Settlement Understanding [DSU] does not use the term ‘compulsory
jurisdiction’, but conveys the same.

3
https://unctad.org/system/files/official-document/edmmisc232add15_en.pdf
4
https://tulli.fi/en/businesses/import/anti-dumping-and-countervailing-duties
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1.1 Research Methodology

The research is done using various primary and secondary resources of data. The method of research is
doctrinal. Some International Trade Law textbooks and authors writing are used in purpose of doing
research. Also, secondary source of data was also put in use in research.

1.2 Research Questions

 What is the process ofWTO’s dispute settlement rules regarding noncompliance?

 What are the two purposes namely rebalancing and sanction?
 What are the alternative procedures that the WTO might employ to promote national compliance
with trade rules?

1.3 Aims & Objectives

This paper seeks to provide practical measures for addressing disputes relating to trade policies and
measures, with a particular emphasis on the use of the WTO dispute settlement process for that purpose.
This is because the WTO dispute settlement processes essentially serve as a framework for finding objective
settlements based on internationally agreed-upon principles, preventing trade conflicts between countries
from taking longer than expected or being a political problem.

1.4 Hypothesis

 WTO has the authority to settle the entire trade dispute through enforcement mechanism and
countermeasures.

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2. The Global Order

Multilateralism is the first experiment of the Global Order. It is a set of principles governing economic rules
in a uniform manner. It originated in the 1940s, and was expanded in the 1960s. Starting with the UNCTAD,
developing countries were desirous of having their voices heard on a global scale. In the 1960s, the
developing and least developed countries made a demand for a new economic order, demanding reforms in
the UN, GATT, World Bank and the IMF. From the 1970s, the demand was that new regulations be formed
to take into account these developing countries. Improper functioning of the WTO, and curtailment of
protectionism by the WTO are problems that come within world disorder. The unpredictability of world
events, and disturbances in the world order also constitutes world disorder.
 The preamble of the WTO, records the intention of the states to develop it as an integrated, more viable
and durable, multilateral trading system. It ensures continuity with change. It talks about the GATT
provisions as well, and it is not a complete break. The same system continues, but with some change.
The GATT provisions, here, can be seen to be acquis, i.e., guidelines. The Preamble prevails over
contrasting objective.
 The objectives of the WTO, are broadly as follows5:
(a) To raise the standard of living.
(b) To ensure full employment.
(c) To ensure large and steady-growing volume of real income.
(d) Expansion of production of trading goods and services.
(e) To ensure optimal use of the world’s resources in accordance with the objectives of sustainable
development.
(f) To protect and preserve the environment.
(g) To ensure reduction of tariffs and non-tariff barriers to trade.
(h) To eliminate discriminatory treatment in international trade relations.
(i) To take positive steps to ensure that developing countries and least-developed countries (LDCs)
secure a share in the growth of international trade.

5
https://www.wto.org/english/thewto_e/whatis_e/tif_e/org3_e.htm
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2.1 The Functions of the WTO

Article III of the Marrakesh Agreement lists the functions of the WTO, which have broadly, been
summarised as follows:
(i) Facilitation, implementation, administration and operation of the WTO Agreement 6: This entails
facilitation of the covered agreements as well. The idea is that there should not be any vacuum, because
various rights and obligations are secured in these covered (annexed) agreements.
(ii) A negotiating forum: WTO is a forum organisation; it is dynamic in nature. Trade liberalisation will be
done in two areas – in-built agenda, and inclusion of new issues. WTO is a platform for negotiation 7.
The existing law covered under the WTO may be discussed, as may any new issues that arise. If the
countries agree, the new issues will be discussed further and subsequently incorporated within a treaty.
(iii) Operationalisation of the DSU (Annexure II): This is the only function of the WTO which is
autonomous to the members. The DSU is the crown jewel of the WTO. The WTO’s adjudicatory
jurisdiction is compulsory. All WTO members have to follow all the rules pertaining to the dispute
resolution process: Article 23 of the DSU states that the members “shall abide by “ the rules and
procedures of the Understanding. This implies that the mechanism is compulsory and resort will not be
had to the WTO.
(iv)Trade policy review mechanism: auditing and surveillance by an external agency (Annex III). Best
four or first four countries submit their report in 2 years, the next sixteen in 4 years and the rest in 6
years. This is because the policies of countries having more share will have greater implications for
world trade. Thus, they are required to submit their reports quicker. They have to implement the rules in
their domestic legislations. If not implemented, then the laws have no meaning. The WTO doesn’t exist
merely for positive morality. Rather, it facilitates implementation.
(v) Coherence with other multilateral organisations:
 No organisation can work in isolation; for effective global governance there must be multiple
forums.
 Although the WTO is the paramount institution regarding international trade, all the issues pertaiing
to trade are not covered by it. Proliferation of international agencies took place in the 1960s –
WIPO, ILO, UNCTAD, New Economic Order, etc. arose and got strengthened in this period. The
pressure to regulate international trade thus increased. After the Kennedy Round, the issues to be

6
https://www.tradefacilitation.org/global-alliance-publications/the-trade-facilitation-agreement-a-simple-guide/
7
https://english.bdi.eu/article/news/wto-the-multilateral-trade-order-in-danger/
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governed by the GATT increased. After the Uruguay Round, the need for coherence was
increasingly felt.
 The Declaration of the Contributions of the WTO to Achieve Greater Coherence in Global
Economic Policy-Making was adopted at the time of conclusion of the Uruguay Round. The aims of
this Declaration are:
– Improving global policy-making.
– Interlinking different aspects of economic policy.
– Consistent and mutually supportive policies.
– Pursue and develop cooperation.
– Respecting the mandates of other members.
– Respecting the autonomy in the decision-making process of each institution.
 The aim of coherence was brought to the fore by the 1996 Declaration. Under the GATT, only two
organisations were referred – the IMF and the UNO. However, under the WTO, the Food and
Agriculture Organisation, the United Nations, the International Labour Organisation, the
International Plant Protection Convention, the OECD, the UNCTAD, the United Nations
Environment Programme, the World Bank, the World Customs Organisation, the World Health
Organisation, the World Organisation for Animal Health, and the World Intellectual Property
Organisation have been mentioned.
 Article III:5 (cooperation with the IMF and the IBRD for greater coherence in economic policy-
making) and Article V (relations with other organisations) of the Marrakesh Agreement talks about
the WTO having relationships and agreements to have greater coherence in international trade law.
 International and monetary policies not being in coherence with each other is indicative of a very
half-hearted attempt at uniformity.
(vi)Technical assistance to developing countries: Peter Van den Bossche states that this function is
implicit in the WTO, but it was made explicit in Doha Development Round of 20018.

8
Ibid para 1
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3. Basic principles on which the WTO operates

(j) The principle of non-discrimination, has two elements:

 The most favoured nation (MFN) principle, which entails treating all members equally at the border.
This provision applies under the Article I of GATT, Article II of GATTS, and Article IV of TRIPS.
9

 National treatment principle, which entails treating foreigners and locals equally. Once the goods
have been taxed at the border, domestically-produced goods and imported goods will be treated
equally10. This has been provided for under Article III of GATT, Article II of GATTS and Article IV
of TRIPS. Article III of GATT is a general clause. Even though the Appellate body accepts this is
general in nature, a specific prohibition in 3(2) and (4) has no value11.
1. Market access:
 It works on the principle of “tariff only please”. This means that countries are only allowed to place
tariffs – the quantity aspect will not be regulated. Access to markets of all countries are available to
market players, as under Article II of GATT 1994. In agriculture, the problem of continued
tariffication exists, since agriculture has not been fully integrated with the WTO as yet 12. Services
schedules are prepared by all member states because GATTS is a work-in-progress kind of
arrangement.
 There are rules concerning customs valuation – Article VII of GATT 1994 and the implementation
of Article VII of GATT 1994. This agreement provides a set of valuation methods and every
country is required to follow those methods only.
 There are also rules concerning quantitative restrictions (QRs) for market access. The WTO
regulating provision for this is Article XI of GATT 1994. The exceptional circumstances in which
QRs can apply are: One is a BOP restriction, and critical food shortage. Tariff rate quota (TRQ) is
permitted only for agriculture.
 Rules concerning non-tariff barriers. Increase of tariffs leads to an atmosphere of protectionism, and
act as tariff barriers. Since the WTO prohibits you from raising tariffs, countries resort to NTBs.
Some NTBs are as follows:

9
https://www.meti.go.jp/english/report/downloadfiles/gCT0212e.pdf
10
https://www.investopedia.com/terms/n/nationaltreatment.asp
11
ibid
12
https://www.lowyinstitute.org/publications/world-trade-organization-optimistic-pre-mortem-hopes-resurrection
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a. Import licensing. The procedure for import licensing should be clear, and should be the same
for all. It is regulated by Article VIII of the GATT and the Agreement on Import Licensing
Procedure.
b. Free shipment inspection, which entails further checks on imports. This should be non-
discriminatory.
c. Rules of origin, refer to the source of the product. It is regulated by Article IX of the GATT
1994 and the Agreement on Rules of Origin.
d. Agreement on Technical Barriers to Trade (TBTs). Regulations on the manufacture of any
product should be non-discriminatory in nature.
e. Sanitary and phytosanitary measures. Refer to human , animal and plant-life measures.
f. Investment measures. It is regulated by the TRIMS, the aim of which is to reduce trade
distortions.
g. Government procurement is a plurilateral agreement. Plurilateral agreements regulate minor
issues at the WTO. The aim of GPA agreement is to open procurement sector for competition.
2. Transparency and Justiciability:
 Transparency. The main aim is security and predictability. The relevant provision is Article X of the
GATT 1994. It is also regulated by the TPRM mechanism, which ensures transparency
subsequently, when the nation is a WTO member. All rules, regulations, administrative procedures
must be published and notified to the WTO.
 Justiciability.
a. Articles XXII and XXIII of GATT 1994 and the Understanding on Rules and Procedure
Governing the Settlement of Disputes (DSU) regulate justiciability. Articles XXII and XXIII
are the starting point for the DSU.
b. Because of this justiciability, John H Jackson had branded the DSU as the ‘crown jewel’ of the
WTO13. As per Article III:2 of the DSU, the DSU is the central pillar for bringing security and
justiciability to the multilateral trading system. It also entails a positive integration of all the
covered agreements.
c. Special provisions for dispute resolution are also there in all covered agreements, which will
prevail in case of conflict with the DSU. For instance – there is a provision under the ASCM,
under which consultations must be undertaken within 30 days, but the period is 60 days under
the WTO. Thus, the ASCM provision will prevail.
3. Protection against unfair trade:

13
https://cadmus.eui.eu/bitstream/handle/1814/47045/LAW_2017_11.pdf?sequence=1
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If a country implements any such measures, which injure importing countries domestically, action can be
taken. The countries can submit an application to the DGTR (Director-General for Trade Remedies), who
can investigate and take action. This is principle is understood in terms of ‘trade contingencies’. Dumping is
considered to be international application of predatory pricing. In order to protect domestic industries, two
duties are permitted over and above customs duty.
 Anti-dumping. More than 2% dumping is prohibited. Less than that is considered to be ‘de minimis’
dumping. Customs duty + injury margin = anti-dumping duty. AD duty is imposed against
companies, and not countries.
 Anti-subsidisation. If a countries provides subsidies to a particular sector, the importing country is
permitted to impose anti-subsidisation duty, i.e., countervailing duty. CV duty is imposed against
countries, and not companies.
 Safeguards duty. All of a sudden, so many goods have come into my country. Imposed against all
existing members of the WTO, on MFN basis.
4. Trade and Competing Interests and Values:
 Competing non-economic interests and values. Article XX of GATT 1994 and Article XIV of
GATTS. Article XX is nothing but social charter.
 Competing economic interests and values. Article XIX of GATT and the Agreement on Safeguards.

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4. WTO-specific dispute resolution

A WTO-specific dispute resolution scheme is used to apply WTO laws. One of the cornerstones of the
Marrakesh Agreement is the Understanding on Rules and Procedures Governing the Settlement of Disputes,
or DSU14. Ad hoc three- or potentially five-member committees and a standing Appellate Body make up the
quasi-judicial leg of this conflict resolution process, to which all WTO members have immediate recourse. 15
They write papers on a disagreement that contain their conclusions and advice. These findings are appealed
to and must be accepted by the WTO's dispute resolution body (DSB), a one-member-one-vote political
entity, in order to achieve legal status. The DSU's adoption ushered in a legal movement. Unlike the GATT,
going from one stage to the next in the process no longer necessitates the consent of all WTO participants. If
there is a majority against it, the formation of a jury, the approval of panel and Appellate Body papers, and
the authority to retaliate all happen immediately.16

The DSU modified the GATT's positive consensus rule to a negative consensus rule. As a result, the World
Trade Organization's (WTO) dispute resolution process is not only mandatory, but also almost automatic.
This creativity is to be commended. It provides for the pursuit of politically contentious cases, and it protects
the poorer WTO members who were historically unable or unable to muster a majority in favour of their
grievances. If a violation of WTO rules is discovered, the DSB advises the member to "pull the measure into
conformity" with the WTO arrangement that was broken. In most situations, "withdrawal" of the related
measure is required. Furthermore, the panel and the Appellate Body have the power to "suggest directions in
which the Member involved should enforce the suggestion."

The DSB's guidelines and decisions must be implemented as soon as possible. If immediate compliance is
"impracticable," the losing side is given a "fair amount of time" to comply, which is decided either by
consent or formal arbitration. The defaulting member can provide "compensation" if enforcement is not
accomplished within the time period stated. Furthermore, it is commonly believed that compensation would
be given not only to the winning team, but to all WTO participants. 17 Compensation, rather than being
monetary, means the losing side eliminating trade restrictions, such as tariff concessions or changes in
import quotas. As a result, compensation arrangements help to support free trade values. Nonetheless, since
the winning party must consent not only to be paid, but also to the sum, reimbursement is an unusual
14
http://www.oas.org/es/sla/ddi/docs/publicaciones_digital_XXIII_curso_derecho_internacional_1996_Jonathan_T_Fried.pdf
15
EC-Bananas (WTO Doc. WT/DS27/RW/ECU and WT/DS27/RW/EEC)
16
Australia-Salmon (WTO Doc. WT/DS18/14)

17
Australia-Subsidies Provided to Producers and Exporters of Automotive Leather (WTO Doc. WT/DS126/8)
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occurrence. If no satisfactory compensation can be reached, the winning member can ask the DSB for
permission to take countermeasures (in WTO speak, "to cancel concessions or other duties under the
protected agreements").

The DSB's approval of the countermeasures is almost automatic; it can only be denied if there is a majority
against them. Countermeasures under the DSU must be "equivalent to the degree of nullification or
disability" incurred by the measure considered to be in violation. In the WTO, countermeasures are only
taken on a bilateral basis. They should only be taken from members who were the complainants, not by third
parties or, a fortiori, by members who were not interested in the conflict. 18 Retaliation, as opposed to
restitution, entails the winning member raising trade barriers against the losing member, which is contrary to
free trade standards. For the purpose of ensuring compliance, three additional resources are available. Next,
the DSB holds a close watch on the implementation process, which is a potent political motivation to
cooperate.' Second, if there is a disagreement about whether or not enforcement happened, the initial jury
will be convened to make a judgement.' Third, where the parties cannot agree on the extent of
countermeasures or any relevant issues, the matter is referred to arbitration.19

To compare the first and last objectives of compliance in the WTO—usually, the termination of the
contradictory measure—to the standard international law solutions of "cessation" and "reparation," the first
and last objectives of compliance in the WTO—can be seen as the equivalent to the international law duty of
cessation of unlawful behavior. With a few cases, however, GATT recommendations and rulings, as well as
WTO rulings, have not allowed a member who has broken GATT/WTO rules to render reparations for past
harm.' So long, only prospective relief—in the best-case scenario, an imminent termination of the
contradictory measure after the implementation of DSB guidelines and rulings—has been available by
remedies. More probable, and purely within legal bounds, the measure would be repealed only after the "fair
span of time" has expired. If the "reasonable duration of time" is not revoked, "reparation" is given in the
form of restitution for loss, but usually only from the date of the "reasonable period of time's" expiration.
Member-to-member countermeasures may be used where compensation cannot be agreed upon. The WTO
membership as a whole actually has no collective remedies or penalties.20

18
Brazil-Export Financing Programme for Aircraft (WTO Doc. WT/DS46/13).
19
Canada-Measures Affecting the Export of Civilian Aircraft (WTO Doc. WT/DS70/9).
20
Case on United States-Import Prohibition of Certain Shrimp and Shrimp Products, WTO Doc. WT/DS58/16 (Jan.12, 2000)
(complaint by Malaysia).
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4.1 Analysis

The prevalence of practical WTO laws, combined with a quasi-automatic, rules-based dispute resolution
system, resulted in an exponentially increasing number of cases, particularly politically important ones,
being taken to the WTO. The DSU's apparent performance is a tribute to the current system's ambitious
goals. Regrettably, it seems that the proliferation of laws and the subsequent "legalization" of dispute
21
resolution have not been followed by a rigorous compliance process. As a result, while many GATT
disputes did not or may not have reached an agreement for referral to a tribunal and approval of the panel's
report, many of these disputes have now been effectively taken to the WTO but stranded against the
noncompliance wall. This compliance issue may be due in part to the transition from a power-based to a
rules-based regime, which left the realm of solutions relatively unaffected. 22 The WTO's "legalisation" of
conflicts essentially ends approximately where noncompliance begins. The revival of economic and political
influence as factors in ensuring conformity can be manageable for members disputing a case at arm's length
—in reality, mainly the former members. In such situations, countermeasures may be successful in
eventually inducing conformity.

When a weaker member is met with noncompliance by a disproportionately stronger member, the
reactivation of power politics—which is at stake in compensation agreements and the subsequent imposition
of countermeasures—could render compliance exceedingly challenging to obtain. Such negotiations
effectively expose and sustain the inevitability of economic and political inequalities within WTO
representatives (as equal as they may be in the eye of the law). Wouldn't it be difficult, if not impossible, for
Burkina Faso or Estonia to take countermeasures against, say, the United States or the European
Community, in practise? Difficult because retaliation could lead to counterretaliation in non-WTO-related
areas like development aid, and counterproductive because blocking Burkina Faso's or Estonia's markets
from much-needed US or EU imports would primarily harm the former, not the latter.

Aside from the drawbacks of bilateral state-to-state countermeasures, the WTO implementation system lacks
a remedy for reparation, at least in the common sense of monetary liability for losses23. Through comparison,
if the International Court of Justice [ICJ] delivers a decision ruling that a state has violated an international
law regulation, the state found in violation will be responsible for two things: first, halting the breach if it is
occurring, and second, rendering reparation. In this respect, the WTO falls short of the ICJ.

21
https://collections.unu.edu/eserv/UNU:2470/pdf9280811290.pdf
22
WTO Appellate Body, United States-Standards for Reformulated and Conventional Gasoline, WTO Doc. WT/DS2/AB/R.
23
https://www.peacepalacelibrary.nl/ebooks/files/Charnovitz_Last-Resort.pdf
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In another regard, the WTO—particularly the DSU's comprehensive compliance provisions—is a step ahead
of the ICJ and other international enforcement structures, and has one of the most established enforcement
regimes in international law. This competitive edge isn't just a function of DSUs having mandatory authority
and a practically automated procedure. While the ICJ calls for cessation, whether indirectly or expressly, its
efforts usually stop there. There is no question that the state in violation has a moral duty to avoid the
wrongdoing, but the International Court of Justice has no process to impose this so-called secondary legal
obligation. The ICJ's rules do not anticipate or discuss the issue of what to do in the event of noncompliance.
28 As a consequence, wrongful behavior often persists, or the ruling state can want to take unilateral
countermeasures without being subjected to more scrutiny (contrary to DSU countermeasures, which are
multilaterally approved and monitored). In this regard, the WTO's forward-thinking approach to
enforcement—not only of primary WTO laws, but also of secondary WTO rules—can be seen as a
significant advance in international law.24

The mandate provided to WTO committees and the Appellate Body to not only determine whether or not a
violation happened, but also to make recommendations on how to put policies into line with WTO rules—a
valuable mechanism that can be used more often—is the same. 25 To recap, rather than merely ignoring the
issue of noncompliance through enacting regulations, the WTO enforcement system tackles it head-on and
aims to compel compliance via a sequence of comprehensive procedures. Despite the fact that the protocols
should be improved and could benefit the powerful, the WTO's compliance regime is a unique and
significant step forward in the international arena.

The WTO compliance regime's shortcomings and capabilities must be considered and viewed in terms of the
original GATT system, which was structured as a balance of mutual concessions rather than a collection of
legislative guidelines. The WTO, like the GATT, is not a treaty that can be ratified simply by accepting it. A
state or autonomous customs jurisdiction would not immediately become a WTO member by signing a slew
of WTO agreements. To join the WTO club, you must pay an extra "entry fee." This "entry fee" is made up
of a set of trade concessions that must be given to current WTO members, such as tariff reductions, market-
access commitments for foreign services, and so on.26

These compromises are in addition to the WTO agreements' multilateral commitments. Established members
must consider these concessions as matching the concessions they would offer to the newcomer by WTO
24
United States-The Cuban Liberty and Democratic Solidarity Act, WTO Doc. Series WT/DS38.
25
32 Judith H. Bello, The WTO Dispute Settlement Understanding: Less is More, 90 AJIL 416, 417 (1996).
26
Guatemala-Anti-Dumping Investigation RegardingPortland Cementfrom Mexico, WTO. Doc. WT/DS60/R, paras. 8.1-8.6 (June
19, 1998).
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membership before membership is given. As a result, a delicately negotiated balance not only of rights and
commitments clearly enshrined in WTO negotiations, but also of trade compromises traded at entry and over
a succession of subsequent trade rounds, lies at the center of a member-member partnership.

As a consequence, rather than addressing violations of international law commitments, the WTO's and
GATT's conflict resolution systems rely on "nullification or deprivation" of benefits. Similarly, the WTO's
last resort remedy is to "suspend concessions or other obligations." In other words, what is actionable under
the WTO is the disrupting of the agreed balance of benefits, which involves rights, responsibilities, and
additional trade concessions, rather than the violation of obligations. This strategy closely resembles that of
the GATT, in which there were essentially two remedies of roughly equivalent worth for restoring the
agreed profit balance—much as there are two approaches to equalise unbalanced scales. If the challenged
party lifts the upsetting, trade-restricting act—that is, some weight is removed from one side of the scales—
or the challenged party enacts its own trade restraint by repealing an earlier trade concession—that is, some
weight is applied to the other side of the scales. However, the resulting enforcement regime was both lenient
and rigid, which was rather paradoxical. On the one hand, the scheme was lenient: the conventional
implications of a violation of an international law obligation—in legal terms, cessation and reparation, and
in political terms, shunning—were prevented. The scheme, on the other hand, was exceptionally strict:
parties were held "responsible" not only for violations of GATT commitments, but also for "nullification or
disability" caused by actions that did not interfere with any particular provision—so-called "non-violation
nullification or impairment.27"

The WTO legal structure is basically a bundle of bilateral equilibria, according to the "old" but well-
established line of reasoning. It is focused on a largely bilateral interpretation of the WTO's legal structure
and dispute resolution mechanism. To put it another way, a WTO member can be punished if it upsets a
predetermined balance with another member, not if it breaks multilaterally agreed rules in force for the good
of all WTO members and their economic operators. In terms of national law, this old school of thinking
considers the relationship between WTO members as strictly contractual and comes within the domain of
private law. When public goods are at stake, the WTO judicial structure is not considered to be an agency
embedded in public law. This is the context in which all debate of WTO enforcement must be framed. If one
adopts the old GATT viewpoint and applies it to the WTO, the new counter-measures and compliance
system can be justified as a necessary component of maintaining primarily bilateral equilibria. Nonetheless,
with the introduction of the WTO—its procedural sophistication, quasi-judicial conflict resolution

27
https://unctad.org/system/files/official-document/ditcclp20082_en.pdf
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mechanism, and, in particular, significant extension into new areas that specifically concern individuals—it
might be time to step on from the concept of the GATT/WTO as a bundle of bilateral government balances.
Isn't it past time to reintroduce the WTO as a genuine multilateral body that offers legal regulations as public
goods that deserve mutual compliance for the benefit of governments and businesses? There are two moves
to take in this direction: To begin with, WTO rules can and should be regarded as standard international
legal commitments arising from public international law. Second, rather than being exclusively bilateral, the
implementation of WTO laws can and should be regarded as a joint endeavor.

WTO regulations and DSB guidelines should be regarded as legally binding commitments. That is, if the
DSB considers an infringement of WTO rules, the member in question should be found to be in violation of
its international commitments, and the member should be obliged to avoid the violation by taking the
incompatible measure into compliance with WTO rules. 28 This strategy is consistent with the DSU's clear
statement that compensation and retaliation are just "temporary steps" that cannot be favored over complete
enforcement. The method is also compatible with the WTO's very first study, in which the Appellate Body
claimed clearly that the WTO legal structure is no longer to be regarded as a self-contained dictatorship, as
others see the GATT. "This direction [in DSU Article 3.2] represents a measure of understanding that the
[GATT] is not to be interpreted in therapeutic isolation from public international law," the Appellate Body
said, referring to DSU Article 3.2, which calls for WTO requirements to be explained "in compliance with
traditional principles of interpretation of public international law."
True, the DSU must be treated as lex specialis, and it can—and does—deviate from general international
law in many areas. If there is some doubt in the DSU on whether a violation of WTO rules triggers the
secondary duty of cessation, residual foreign law rules should be invoked. These laws make it clear that if
wrongful conduct is discovered, the state in question must put an end to it. The DSU, in turn, specifies the
methods by which the dominant WTO participant may achieve fulfilment of the secondary legal duty of
cessation.29
The aim of the DSU should be to eliminate WTO-wrongful actions in search of public benefits insofar as
WTO laws are understood as international legal commitments to the benefit of all participants and economic
players in domestic and global markets. The principle of opposing a WTO-inconsistent measure as helpful to
the group membership has already made an impact. The Appellate Body determined in EC-Bananas that the
United States could bring a lawsuit under GATT considering the fact that it produces relatively little bananas
and has not yet exported any. The Appellate Body determined that no legal interest is needed to bring a
28
Robert Hudec, Broadening the Scope of Remedies in WTO Dispute Settlement, presentation at University of Amsterdam
conference on Improving WTO Dispute Settlement Procedures: Issues and Lessons from the Practice of Other International
Courts and Tribunals (May 6-7, 1999).
29
Piet Eeckhout, The Domestic Legal Status of the WTO Agreement: Interconnecting Legal Systems, 199.
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lawsuit under the DSU. "With the increased interdependence of the global economy. Participants have a
stronger interest in upholding WTO rules than in the past, so any divergence from the agreed balancing of
rights and responsibilities is more likely than ever to impact them, directly or indirectly," it said, quoting
from the panel study. The EC-Bananas decision has the curious side effect of encouraging a member to win
a case all the way to the Appellate Body without having a tangible trade stake in the WTO-incompatible
measure. However, if the member were to face noncompliance, it would be powerless to demand restitution
or, arguably, retribution; retaliation is directly related to "nullification and deprivation" of advantages, i.e.,
trade consequences. This situation exemplifies the increasing controversy within the WTO legal framework
between the security of bilateral contractual balances and the compliance of multilateral laws. One way to
alleviate this conflict is to make WTO remedies—not only the legal standing to pursue a case—more
collaborative in nature. Reimbursement, for example, now has the multilateral character, and it is commonly
accepted that compensation is to be given not just to the victorious side, but to all WTO members, as noted
earlier. Collective countermeasures may also be enforced. In this sense, it will be useful to rethink not just
the real impact of DSU countermeasures and how they are measured, but also the concept of who is
permitted to retaliate and the form that retaliation may take. It's worth remembering that DSU
countermeasures are essentially trade controls that a winning member will enforce on products from a losing
member.

They imply the aforementioned rebalancing of the scales, a compromise that should have been final and
definite under the GATT. However, closer analysis shows that DSU counter-measures are the epitome of
mercantilism. Protecting the business, it is believed, would result in gains, mitigate the "nullification or
impairment" incurred by the measure found to be WTO contradictory, and compel the losing member to
eliminate the inconsistency. It's worth mentioning the irony that a global organization advocating for trade
liberalization portrays trade protectionism—countermeasures—as providing a sort of favor or gain that can
neutralize the impact of unfair trade sanctions enforced by others and even compel their removal.
Nonetheless, as the arbitrators in EC-Bananas admitted, "the cessation of concessions is not in any [party's]
economic interest."30

Another concern with the new DSU countermeasures regime is that they can only be enforced by the
complaining party who won the dispute, not by other WTO members.31 As a result, a member who wins a
WTO litigation resolution would pay not just the expense of court action, but also the cost of commercially
inefficient countermeasures. If any sort of joint intervention was feasible by or through the DSB, this
30
Robert Hudec, Enforcing International Trade Law.
31
https://www.iatp.org/sites/default/files/Remedies_in_the_WTO_Dispute_Settlement_System_.htm
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expense could be made multilateral. In that case, the WTO as an entity, rather than a sole member, will try to
implement WTO laws. Even if the member did not bring the lawsuit, any member may be authorized to
suspend concessions equal to the harm it has sustained. Aside from the unsuccessful termination of market-
access concessions, the DSB may also halt the enforcement of other WTO commitments. It may, for
example, suspend one or more WTO rules or agreements (such as the DSU or the TRIPS Agreement58) that
favour the losing member, and establish commitments owed to all WTO members, not only the winning
member. (Contrary to existing DSU law, countermeasures may require the termination of "concessions or
other obligations.") Poorer members who win a conflict but are unable to take member-to-member
countermeasures can be able to obtain a successful settlement by joint enforcement. Furthermore, in such a
strategy, these poorer members may benefit from cases brought and won by members with greater wealth.

To ensure that the sector or industry that is harmed by a WTO-incompatible measure receives compensation,
the losing member could be forced to pay an amount equal to the damage 32. Such monetary compensation
does not need to function retroactively, that is, to compensate for past injury, as per GATT/WTO
experience. Not only would monetary incentives be more cost-effective than both suspending concessions
and removing trade restrictions in largely unrelated markets, but it would also be easier to monitor64 and
more open to poorer WTO participants. Finally, although the GATT/WTO legal framework currently only
provides prospective remedies rather than remedies to repair past harm (as previously mentioned66), new
attention should be given to the idea of providing WTO members the solution that is so evident in general
international law: reparation, including reparation for past damage.33

Techniques could be used to restrict the extent and timing of such reparations (for example, not before
January 1, 1995, the WTO's entry into force date) (for example, by requiring a strict causal link between the
WTO inconsistency and the damage for which reparation is claimed) As previously mentioned, the WTO
legal framework is special in that it puts a heavy emphasis on termination and the implications of failure, a
possible solution that is seldom discussed in general international law. 34 Complementing this one-of-a-
kindness with some form of reparation would not only put WTO law closer to public international law, but it
would also improve the predictability and consistency of the multilateral trading mechanism significantly.
Nothing in the existing rules or any of the WTO cases that have been settled so far expressly forbids
reparation for previous misconduct. The problem has not been resolved in the few situations where it has
been presented.
32
https://www.researchgate.net/publication/46543153_Why_Compensation_Cannot_Replace_Trade_Retaliation_in_the_WTO_Di
spute_Settlement_Understanding
33
John Jackson, World Trade and the Law of GATT.
34
https://core.ac.uk/download/pdf/40030338.pdf
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Enforcement and Countermeasures under the WTO

5. Conclusion and Suggestion

Acceptance to many of these recommendations to reinforce the WTO compliance process and the redress it
provides—for example, ex tunc reparation for violations of WTO law—is also a long way off, based on
current political realities.35 It would be reckless to take these significant steps without first engaging in
thorough consultation; doing so could jeopardise the WTO's political credibility and integrity in general, as
well as the legitimacy of its dispute settlement judgments in particular. Nonetheless, one of legal research's
priorities is to ready the ground for reform. More analysis is required to analyse and compare the various
choices available at the intersection of the WTO and general international law. It would become increasingly
difficult to defend both the absence of such conventional solutions, such as reparation, and the lack of a
more appropriate mechanism to compel compliance until WTO rules are recognised as international legal
responsibilities that influence individuals and warrant collective implementation for the greater benefit. The
GATT/WTO has a long tradition of law enforcement: "The task of establishing a legal code where none
previously existed can only be done gradually and incrementally. Over time, the theories and structures that
make a legal system "successful" must grind their way through the political attitudes of the population—in
this case, the society of governments."

35
http://www.ejil.org/pdfs/11/4/554.pdf

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Enforcement and Countermeasures under the WTO

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 Hudec, Robert. 1993. Enforcing International Trade Law: THE EVOLUTION OF THE MODERN
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