The Calculation and Design of Trade Retaliation in Context: What Is the Goal of Suspending WTO Obligations?
The Law, Economics and Politics of Retaliation in WTO Dispute Settlement, Chad P. Bown & Joost Pauwelyn, CUP, 2010
39 Pages Posted: 4 Jan 2019
Date Written: January 1, 2010
When the WTO permits, or a WTO member engages in, trade retaliation in response to continued non-compliance, what is it trying, or can it legitimately hope, to achieve?
This chapter attempts to clarify the goal(s) of WTO suspension from both an historical, descriptive perspective (what has been and currently is the goal of GATT/WTO suspension?) and a prescriptive, normative point of view (ideally, what should be the goal of WTO suspension?). This will be done mainly for the calculation (or quantity) aspects of trade retaliation, but will have repercussions also on questions of design (or quality).
This chapter concludes that the goal of multilaterally controlled GATT/ WTO suspension has historically been, and remains to this day, murky and confused (ranging from simple rebalancing of concessions to punishment). Yet, if anything, there has been a gradual evolution from ‘compensation’ (or simple rebalancing) to ‘sanction’ (or rule compliance). Hence, instead of one goal, there seem to be multiple and sometimes overlapping goals. Since retaliation for continued non-compliance is, in practice, the only formal remedy provided for by the system (compensation for past harm is not awarded), all possible cures seem to be expected from it.
From a normative perspective, however, the argument will be made that this flexibility in the goals pursued by trade suspension, when carefully calibrated, can be a good thing. Although certain perceived goals (such as full compensation of all victims or outright punishment) cannot possibly be met with the current purely prospective ‘equivalent retaliation’ instrument, the case will be made that different types of legal entitlements should be matched with different types of protection and enforcement goals (referred to as liability rules, property rules and inalienability).
Rather than one fixed goal of WTO suspension, there are (and should be) several possible goals. Put differently, optimal protection of WTO entitlements implies variable protection of WTO entitlements.
Keywords: WTO, dispute settlement, retaliation, suspension, trade sanctions, enforcement
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