The Dispute Settlement Mechanism of the WTO: A Brief History and an Evaluation from Economic, Contractarian, and Legal Perspectives

Abstract

Any rule-based system has to include a mechanism for the enforcement of its rules and a means for settlement of disputes about alleged violation of rules. The General Agreement on Tariffs and Trade (GATT), concluded in 1947 and its successor the World Trade Organization (WTO) that subsumed it in 1995, embody rules governing the global trading system as specified in various agreements that their members have entered into over time. Naturally, both had a dispute settlement mechanism (DSM). It was a primarily political one in the GATT and was transformed into a largely legalistic one in the multilateral agreement that established the WTO. This paper reviews the history and evaluation of the two DSMs and examines their efficiency based on appropriate criteria. It views them from three alternative and overlapping perspectives: political-diplomatic, legal-economic and social. It concludes with a discussion of the unresolved problems in the operation of WTO's DSM and the prospects of resolving them in the ongoing Doha Round of multilateral trade negotiations.