Reforming the Dispute Settlement Mechanism of WTO: Challenges and Prospects

Abstract

The WTO dispute settlement (DS) mechanism provides an enforceable means for members to resolve disputes over WTO commitments and obligations. The WTO has processed more than 600 disputes, and the significant traders, including the EU, China and the United States, have been active users of the system. Many WTO members consider the DS mechanism an important milestone, and an enforceable DS process was a priority negotiating objective for the United States, the EU and others in the Uruguay Round negotiations. But recently, some members, most notably the United States, asserted that it has procedural shortcomings and has exceeded its mandate in deciding certain cases. It is argued that WTO needs to negotiate new rules and adopt reforms to continue its role as the foundation of the trading system. Members have been unable to reach a consensus for a new comprehensive agreement on trade liberalisation and rules to date. While global supply chains and technology have transformed global trade and investment, WTO rules have not kept up with the pace of change. Many countries have turned to negotiate free trade agreements outside the WTO and plurilateral agreements involving subsets of WTO members. Further, the US Administration’s actions to unilaterally raise tariffs under U.S. trade laws and to impede the functioning of the DS system have further undermined the WTO’s credibility. In this perspective, the reforms of the DS are one component of the WTO reforms, including future negotiations. This paper attempts to address the key areas of reform and challenges thereof in the WTO to improve the working of the DS system.

Keywords: WTO, Dispute Settlement, International Trade, Multilateralism