Question: How Does the WTO Resolve Trade Disputes?
Answer: Any member can file a complaint with the World Trade Organization against another member they believe is dumping, unfairly subsidizing or violating any other trade agreement. If the WTO decides the case is valid, it has the authority to levy sanctions on the offending country.
The staff will then investigate to see if a violation of any multilateral agreements has taken place. Normally, staff try to settle disputes through consultations. For example, as of December 2013, 471 dispute cases had been filed, but only about a third needed to be reviewed by a panel before being resolved. Most of them were settled “out of court” or are still in the consultation process. For a detailed description of every case filed, see Chronological List of Dispute Cases.
Not surprisingly, the U.S. has been either a complainant or defendant in about half the WTO disputes. The Office of the United States Trade Representative (USTR) represents the U.S. in these cases.
The benefit of the WTO process is it prevents the damaging consequences of trade protectionism. That's when countries retaliate against offending country's dumping, tariffs or subsidies by doing the same or worse. This creates a downward spiral which hurts both countries' economic growth. Trade protectionism helped extend the Great Depression, where global trade fell by 25%.
Formal Dispute Timetable
A typical dispute process takes a year if there's no appeal, and 15 months if the defendant appeals. About half the decisions are appealed. The resolution can be shortened if perishable goods are involved. On the other hand, some disputes have been ongoing since 1995. Here are the steps and timetable in a normal dispute resolution case. (Source: WTO, Settling Disputes)
|Steps||Length of Time|
|Consultations: Initial complaint filed. WTO Director tries to mediate a resolution.||60 days|
|Review panel set up. Both sides submit their cases in writing.||45 days|
|Panel reports to disputing parties.||Six months|
|Panel reports to all members.||3 weeks|
|Report adopted by dispute settlement body if no appeals.||60 days|
|Settlement body adopts appeals report.||30 days|
|If found guilty, defendant states its intention to comply.||30 days|
|If defendant doesn't comply, it must compensate plaintiff.||20 days|
|If it doesn't, plaintiff can ask WTO to impose trade sanctions.||30 days|
Article updated December 27, 2013
- What Is the World Trade Organization?
- Why Is WTO Membership So Important?
- How Does a Country Become a WTO Member?
- How Does the WTO Resolve Trade Disputes?
- What Is the Doha Round of Trade Talks?
- Why Is the Doha Round of Trade Talks So Important?