FTA Law in WTO Dispute Settlement: Peru-Additional Duty and the Fragmentation of Trade Law
40 Pages Posted: 1 Sep 2016 Last revised: 2 May 2017
Date Written: August 31, 2016
There is a serious imbalance between the sclerosis of the political system of the World Trade Organization (WTO) and the automatic adoption of WTO Appellate Body judicial reports. The question is whether the WTO Appellate Body will recognize bilateral political agreements (such as under Free Trade Agreements, FTAs) that modify WTO obligations between two parties. In addressing this question, the Appellate Body decision in Peru-Additional Duty on Imports of Certain Agricultural Products is important. The decision addressed the availability of defenses under FTAs in WTO disputes, as well as under public international law generally. Combining economic and doctrinal analysis, we first critically assess the decision. We then set forth a series of judicial and political choices for addressing the interaction of WTO and FTA rules going forward. In particular, we contend that clear modifications of WTO commitments under an FTA should be recognized by WTO panels as a defense, but subject to the FTA itself complying with WTO requirements under GATT Article XXIV. The case study is important not only for trade specialists, but generally for policymakers and scholars of global governance in a world of fragmented international treaties.
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