The Myth of 'Rebalancing' Retaliation in WTO Dispute Settlement Practice

47 Pages Posted: 29 Feb 2008 Last revised: 7 Aug 2010

Date Written: August 6, 2010

Abstract

It is generally assumed that trade retaliation under the WTO performs some kind of `rebalancing` by allowing the injured Member to suspend `concessions and obligations` vis-à-vis the violating Member of a level equivalent to the level of `nullification and impairment` suffered by the injured Member. This article argues that this perception is misguided. The article first questions if a sensible comparator exists with which equivalence for purposes of `rebalancing` could be evaluated. It then argues that WTO arbitration decisions do not even succeed in their limited goal of providing for retaliation that will affect trade in the same amount as the WTO-inconsistent measure at issue. One reason is the use of an asymmetric and underspecified trade effects comparator. The other reason is very significant miscalculation of the trade effects of the violation, as shown by detailed legal-economic analysis of all relevant arbitration decisions. The decisions concerning countermeasures against prohibited export subsidies do not make any attempt at `rebalancing` in the first place. The article considers political explanations of arbitration decisions. It concludes with some suggestions for improvement.

Suggested Citation

Spamann, Holger, The Myth of 'Rebalancing' Retaliation in WTO Dispute Settlement Practice (August 6, 2010). Journal of International Economic Law, Vol. 9, No. 1, pp. 31-79, March 2006. Available at SSRN: https://ssrn.com/abstract=915605

Holger Spamann (Contact Author)

Harvard Law School ( email )

Cambridge, MA 02138
United States

ECGI ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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