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Use of the WTO Trade Dispute Settlement Mechanism By The Latin American Countries – Dispelling Myths And Breaking Down Barriers

Working paper by Torres, Raúl/WTO, 2012

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The WTO's Dispute Settlement Mechanism (DSM) has been hailed as a fundamental aspect of the Multilateral Trading System for developing countries. At the same time developing countries face many challenges to ensure their effective participation in the mechanism. This paper presents statistical evidence of how Latin-American countries have been very active in their use of the DSM, especially when their use of the mechanism is compared to their participation in world trade. This paper also analyses why, to a large extent, Latin American countries have overcome the challenges of participating in the DSM; and have done so by coming up with innovative and creative solutions, without deviating from the guidelines established by WTO rules.



Staff Working Paper ERSD-2012-03 Date: February 2012







World Trade Organization
Economic Research and Statistics Division










USE OF THE WTO TRADE DISPUTE SETTLEMENT MECHANISM
BY THE LATIN AMERICAN COUNTRIES - DISPELLING


MYTHS AND BREAKING DOWN BARRIERS







RAÚL A. TORRES
WTO



Manuscript date: February 2012

















Disclaimer: This is a working paper, and hence it represents research in progress. This paper
represents the opinions of the author, and is the product of professional research. It is not meant to
represent the position or opinions of the WTO or its Members, nor the official position of any staff
members. Any errors are the fault of the author. Copies of working papers can be requested from the
divisional secretariat by writing to: Economic Research and Statistics Division, World Trade
Organization, Rue de Lausanne 154, CH 1211 Geneva 21, Switzerland. Please request papers by
number and title.

















USE OF THE WTO TRADE DISPUTE SETTLEMENT MECHANISM
BY THE LATIN AMERICAN COUNTRIES - DISPELLING


MYTHS AND BREAKING DOWN BARRIERS







RAÚL A. TORRES *


WTO DEVELOPMENT DIVISION





Abstract: The WTO's Dispute Settlement Mechanism (DSM) has been hailed as a fundamental
aspect of the Multilateral Trading System for developing countries. At the same time developing
countries face many challenges to ensure their effective participation in the mechanism. This paper
presents statistical evidence of how Latin-American countries have been very active in their use of the
DSM, especially when their use of the mechanism is compared to their participation in world trade.
This paper also analyses why, to a large extent, Latin American countries have overcome the
challenges of participating in the DSM; and have done so by coming up with innovative and creative
solutions, without deviating from the guidelines established by WTO rules.






JEL Classification: F13, F51, F53, K33, K41, K42

Keywords: Dispute settlement, Latin-America, participation, challenges, litigation, retaliation,
consultations, negotiations, panel.






* The author is a Counsellor in the Development Division of the WTO Secretariat. The views


expressed in this article are those of the author and do not represent, in any way, the official views of the WTO
Secretariat or its Members. The author wishes to thank Joscelyn Magdelaine, Antonia Diakantoni, Julie Pain
and Roberta Piermartini for their valuable input into the statistical analysis part of this article. Acknowledgment
is also due to Gabrielle Marceau, Jorge Castro and Hunter Nottage for their comments and insights. However,
any mistakes are exclusively attributable to the author.




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A. INTRODUCTION


One of the Uruguay Round's greatest achievements was to ensure that the decisions of the
Dispute Settlement Body (DSB) are binding on all Member countries and adopted in accordance with
the principle of negative consensus. Indeed, we have moved from a series of ad hoc arbitral decisions
under the GATT to a functional legal framework in which precedent is created and practices are
consistent, and which can rely on a body of decisions that is without equal in international law.

The Dispute Settlement Mechanism (DSM) is particularly important for the
developing countries because in a rules-based system it is not the country with the most economic
clout that imposes its will on the others, but the country with the soundest legal arguments that will
eventually prevail. Consequently, the Dispute Settlement Mechanism contributes to levelling the
playing field, particularly for the economically and politically weakest countries. This means that the
small countries can confront the big countries on an equal footing, as in the cases involving Ecuador
and the European Union, or Antigua and Barbuda against the United States, or Costa Rica against the
United States or even between developed countries, as in the case of New Zealand against Australia.

While the Dispute Settlement Mechanism provides the developing countries with an
opportunity to seek remedies for their grievances, it also presents an enormous challenge, that of
ensuring their effective participation. Since the establishment of the WTO Dispute Settlement
Mechanism, we have seen a significant increase in developing country participation in comparison to
GATT dispute settlement. The countries of Latin America, in particular, have become highly active
participants in the DSM, and the purpose of this article is to examine their participation. We shall
begin by analysing their use of the DSM in the light of their level of international trade activity, and
then comment on the different challenges faced by developing countries participating in the DSM and
the experience of the countries in the region with regard to those challenges.1

B. STATISTICAL ANALYSIS


As a starting point for analysis, it is important to look at the statistics on the use of the
WTO Dispute Settlement Mechanism in its 16 years of operation. For the purpose of this analysis, we
shall use the statistics compiled and maintained by the WTO Legal Affairs Division.2 In analysing the
use of the DSM, the figure on which we should focus is the number of requests for consultations. As
we saw earlier, the act that formally initiates a dispute settlement procedure in the WTO is the request
for consultations. To date in the WTO, 425 requests for consultations have been accepted. It should
be emphasized, however, that seven of those requests were submitted by multiple complainants. For
the purposes of this study, in cases where requests involve multiple complainants, each one of them
will be considered to have submitted an individual request, and this brings the total number of
requests for consultations to 453, as is shown in Chart 1. It can be seen from the same chart that the
DSB has established 185 panels for 231 disputes3; those 185 panels gave rise to a total of 91 appeals.4
The chart also reveals that peak DSM activity was achieved soon after the establishment of the
system, and that with the passage of years, DSM activity has gradually declined. It is also shown that
the economic crisis considered to have begun in mid-2008 has had virtually no impact on the number
of disputes initiated by Members, despite predictions to the effect that the protectionist pressures


1 For those readers unfamiliar with the WTO and its DSM I have provided an overview of the
functioning of WTO's Dispute Settlement Mechanism in Appendix A to this article. This overview may prove
useful in understanding the different stages of a WTO dispute settlement process and the terminology used in
this article.


2 Statistics may be viewed at: http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm.
3 In some cases several requests for consultations have been consolidated under a single panel, so that


the number of consultations that have gone on to the litigation stage exceeds the actual number of panels that
have been established to date.


4 These figures do not include appeals against panel reports under Article 21.5 of the DSU. Likewise,
three individual panels were combined with three other panels dealing with similar measures at the appeal stage,
resulting in three appeals.




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exacerbated by the crisis would result in the adoption of measures that would be challenged at
multilateral level, causing an explosion in the number of WTO disputes.


1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Consultations 28 51 50 41 34 42 24 37 26 19 12 20 13 19 14 17 6
Panels 5 11 15 13 20 11 15 11 19 7 8 12 11 3 10 6 8
Disputes covered 9 11 22 15 23 12 16 18 25 7 8 14 14 5 13 7 12
Appeals 0 4 6 8 9 11 5 6 5 5 11 3 2 8 1 3 4


0


10


20


30


40


50


60


Chart 1: Consultations, Panels and Appeals




Looking at the breakdown of consultations, 258 requests were made by developed countries
and 194 by developing countries, resulting in a total of 57 per cent of consultations requested by
developed countries and 43 per cent by developing countries. An analysis of the trends in these
figures, as set out in Chart 2, shows that developing countries have increased their participation in the
DSM, and that 2007 was the last year in which more consultations were requested by developed
countries.

Chart 3 shows the other side of the coin, that is, the position occupied by developing countries
as respondents. In this case, it is clear that the most challenges have been directed at
developed countries in WTO dispute settlement proceedings. Indeed, the measures imposed by
developed countries have been disputed 247 times, while the corresponding figure for the
developing countries is 178. This gives a breakdown of 58 per cent for developed countries and
42 per cent for developing countries. However, an analysis of the trend in these figures appears to
point to a rising proportion of cases against developing countries in recent years.





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76.00%
48.72%


58.00%
75.61%


56.67%
41.18%


47.83%
78.38%


61.54%
68.42%


41.67%
55.00%


53.85%
52.63%


50.00%
35.29%


50.00%
58.12%


24.00%
51.28%


42.00%
24.39%


43.33%
58.82%


52.17%
21.62%


38.46%
31.58%


58.33%
45.00%


46.15%
47.37%


50.00%
64.71%


50.00%
41.88%


1995


1997


1999


2001


2003


2005


2007


2009


2011


Chart 3: Breakdown by level of development
of the respondent


Participación desarrollados Participación en desarrollo



Based on an analysis of individual Members' use of the system, it is no surprise to find that


the United States and the European Union are the Members that have initiated the largest number of
disputes in the WTO, having submitted 97 and 84 requests for consultations, respectively. They stand
far ahead of Canada, Brazil and Mexico, which have made 33, 25 and 21 requests for consultations,
respectively. Table 1 gives a more complete overview of the participation of Latin American
countries in the DSM, including their participation as third parties to disputes. As is illustrated by the


Participation of developed countries Participation of developing countries




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table, all the countries in the region have taken part in the DSM in one way or another. However,
Bolivia, Cuba and Paraguay have only participated as third parties in any proceedings, never as
complainants or respondents.

Table 1: Participation of Latin American countries in the DSM


Member Complainant Respondent Third party
Brazil 25 14 64
Mexico 21 14 55
Argentina 15 17 31
Chile 10 13 26
Guatemala 8 2 20
Honduras 7 0 16
Colombia 5 3 29
Costa Rica 5 0 15
Panama 5 1 6
Ecuador 3 3 14
Peru 3 4 10
El Salvador 1 0 12
Nicaragua 1 2 10
Uruguay 1 1 5
Venezuela 1 2 16
Bolivia 0 0 1
Cuba 0 0 13
Dominican Republic 0 7 4
Paraguay 0 0 15
TOTAL 111 83 194



For purposes of comparison, it is important to look at the statistics for other WTO Members
which have also had a high rate of participation in the DSM. As can be seen from Table 2, the
United States is the country that has had the most recourse to the DSM, followed by the
European Union. Compared with other developing countries, we see that the Latin American
countries have been fairly active in their use of the DSM. India and China, for example, the two other
main emerging countries together with Brazil, have used the mechanism 19 and eight times,
respectively. Another noteworthy point is the high level of participation by Latin American countries
as third parties in disputes. As will be seen below, this is a very significant indicator, since third party
participation is one of the best ways of gaining familiarity with and expertise in
WTO dispute proceedings.

Table 2: 14 Main users of the DSM


Member Complainant Respondent Third party
United States 97 113 86
European Union 84 70 104
Canada 33 16 71
Brazil 25 14 64
Mexico 21 14 55
India 19 20 67
Argentina 15 17 31
Korea 15 14 58




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Japan 14 15 106
Thailand 13 3 48
Chile 10 13 26
China 8 21 78
Guatemala 8 2 20
Australia 7 10 59



However, these absolute figures do not tell us much about Members' true level of
participation relative to their share of world trade. It is normally to be expected that the more trade a
Member conducts, the greater the likelihood of its exports encountering barriers that must be removed
by use of the dispute settlement mechanism. In an attempt to answer the question as to whether the
countries of the region are making sufficient use of the DSM in accordance with its importance to
world trade, I have carried out a series of descriptive statistical studies which have yielded some
interesting results. First of all, I should like to make it clear that the analysis which follows does not
seek to explain why a country has used the DSM to a greater or lesser degree. Secondly, I am aware
that a descriptive analysis based on such restricted variables is of limited value compared with the
more complex econometric models of the kind used by Joseph François, Henrik Horn and
Niklas Kaunitz in their study entitled "Trading Profiles and Developing Country Participation in the
WTO Dispute Settlement System".5 As I have explained, the methodology used in relatively simple.
Table 3 three sets out my weighted DSM utilization index, based on each individual country's share of
world goods and services exports. To establish the index, I first calculated the percentage share of
each country in the total number of requests for consultations, from the inception of the WTO to the
present day. Next, using statistics from the WTO database on trade volumes, I calculated each
country's average share of total exports by Members for the period 1995-2009.6 I then divided the
first of these two percentage figures by the second in order to obtain a weighted rate of participation
in the DSM. Taking the unit (or one) as the baseline point of equilibrium, any result above one means
that the country is over-represented in the number of WTO disputes, given its level of trade. On the
other hand, any index below one means that the country has not initiated as many disputes as might be
expected in the light of its share of global exports.

Table 3: Participation of Latin American countries in the DSM weighted by share of total exports


Member Consultations requested
Percentage of


disputes per year
Average share of


exports Participation rate


Honduras 7 1.55 0.04 37.45
Guatemala 8 1.77 0.05 34.78
Nicaragua 1 0.22 0.01 15.38
Costa Rica 5 1.10 0.09 12.76
Panama 5 1.10 0.10 10.96
Argentina 15 3.31 0.41 8.02
Ecuador 3 0.66 0.09 7.59
Chile 10 2.21 0.35 6.28
Brazil 25 5.52 0.97 5.71
El Salvador 1 0.22 0.04 5.57
Colombia 5 1.10 0.20 5.42



5 Joseph François, Henrik Horn and Niklas Kaunitz (2008) "Trading Profiles and Developing Country


Participation in the WTO Dispute Settlement System", ICTSD Issue Paper No. 6.
6 I used statistics up to 2009 because those for 2010 are not yet available. I acknowledge that there is a


lack of congruence between the periods covered by the statistics on participation in the DSM and those on share
of world trade. However, I do not think that this handicaps the analysis, since any variation in the rates
obtaining from one year to the next is small and what concerns me above all is to observe the average overall
share of world trade attributable to a Member over an extended period of time.




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Peru 3 0.66 0.14 4.77
Uruguay 1 0.22 0.05 4.58
Mexico 21 4.64 1.91 2.43
Venezuela 1 0.22 0.39 0.56



The results obtained from the analysis are highly interesting. In the first place, it is found that
Honduras and Guatemala have a rate of participation in the DSM that is much higher than their share
of total Members' exports. In horse racing jargon, it could be said that these countries have moved up
in class. The only country in the region that has clearly lagged behind in its use of the DSM, given its
level of exports, is Venezuela, despite the fact that - to use another horse racing metaphor - it came
out of the starting gate strongly, having been the first country to succeed in establishing a panel under
the WTO dispute settlement system. Mexico is another interesting case: despite being the
main exporter in the region and despite having requested a total of 21 consultations, its level of
participation in the DSM is fairly low. For purposes of comparison, I have included in Appendix B
a table showing all the Members that have requested consultations. It should be noted that the data on
participation in disputes do not exactly coincide with those given in Table 3, since I deemed it
necessary in the Appendix B Table to adjust the weighting of participation in disputes on the basis of
the length of WTO membership. I did not consider this correction to be necessary in the case of the
Latin American countries, since all of them are either original Members or acceded to the WTO at a
date very close to its establishment.

One of the limitations of the methodology applied before is that it does not yield results for
those countries which have not initiated disputes up to the present time. Four countries in the region
are in this position, namely, Bolivia, Cuba, Paraguay and the Dominican Republic. For these
countries, I carried out a hypothetical exercise, arbitrarily assigning a dispute to each of them in order
to apply the methodology described above. The result of this exercise enables me to ascertain
whether these four countries, which have never initiated a dispute, might have been expected, given
their level of exports, to initiate at least one dispute. The results are set forth in Table 4.

Table 4: Hypothetical exercise for countries that have not requested consultations


Member
Consultations


requested
(hypothetical)


Percentage of
disputes per year


Average share of
exports


Rate of
participation


Bolivia 1 0.22 0.02 9.06
Paraguay 1 0.22 0.05 4.89
Cuba 1 0.22 0.06 3.53
Dominican Republic 1 0.22 0.09 2.36



The results show that, given their level of exports, it is only natural that Bolivia, Cuba,
Paraguay and the Dominican Republic have not initiated any WTO dispute settlement proceedings. It
should, however, be pointed out that there is a considerable difference between the position of the
Dominican Republic and that of Bolivia which has a much smaller share of world trade.

The analysis conducted in Tables 3 and 4 leads to the conclusion that, at least as far as
Latin America is concerned, it is not true to say that the developing countries do not participate
sufficiently in the dispute settlement mechanism. Let us now look at the other side of the coin, with
the Latin American countries as respondents in the DSM. To that end, we shall use a methodology
similar to the one applied earlier, but in this case the comparator will be WTO Members' share of
imports of goods and services. It was shown in Table 1 that the countries of the region that have had
the most proceedings brought against them under the DSM are Argentina, with 17 requests for
consultations, followed by Brazil and Mexico, with 14 requests for consultations each. However, if




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the number of requests for consultations is weighted by the level of imports, we find that the overall
situation changes somewhat, as is shown in Table 5.

Table 5: Participation of Latin American countries as respondents in the DSM


Member Requests for consultations
Percentage of


disputes per year
Average share of


imports
Rate of


participation
Nicaragua 2 0.47 0.03 17.36
Dominican Republic 7 1.65 0.11 14.83
Argentina 17 4.00 0.37 10.76
Chile 13 3.06 0.31 9.84
Ecuador 3 0.71 0.09 7.70
Peru 4 0.94 0.14 6.60
Guatemala 2 0.47 0.08 5.94
Uruguay 1 0.24 0.05 4.76
Brazil 14 3.29 0.95 3.46
Colombia 3 0.71 0.23 3.13
Panama 1 0.24 0.10 2.26
Venezuela 2 0.47 0.27 1.74
Mexico 14 3.29 2.00 1.64



We see in this case that, although only two disputes have been initiated against Nicaragua, it
is the country that has been subject to the most challenges in the region, relative to its level of imports.
The Dominican Republic has likewise been subject to a high level of requests for consultations
compared with its level of imports.7 Venezuela and Mexico again close out the table, having been
subject to a relatively low level of requests for consultations compared with their level of imports.
However, since all the indices for the countries in the region are above the unit rate, it may be
concluded that all countries have received more requests for consultations than might be expected in
the light of their share of world imports.

The six countries of the region that have received no requests for consultations are Costa
Rica, Cuba, El Salvador, Paraguay, Bolivia and Honduras. For these countries I propose a similar
exercise to the one carried out for countries that have requested no consultations in the WTO. I have
assigned a request for consultations to each of these countries for purposes of comparison with their
share of world imports. In this case, the exercise would provide an answer to the question as to
whether it is normal for these countries not to have received a request for consultations, given their
level of imports.



7 It is important to clarify that, in the case of the Dominican Republic, four of the consultations


requested related to a single safeguard measure imposed on polypropylene bags and tubular fabric. Four
countries in the region, El Salvador, Honduras, Guatemala and Costa Rica, requested consultations with the
Dominican Republic. The matter is currently being considered by a single panel dealing with the four disputes.




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Table 6: Hypothetical exercise for countries that have received no requests for consultations


Member Requests for consultations
Percentage of


disputes per year
Average share of


imports
Rate of


participation
Bolivia 1 0.24 0.03 8.62
Paraguay 1 0.24 0.05 4.75
Honduras 1 0.24 0.05 4.35
El Salvador 1 0.24 0.07 3.61
Cuba 1 0.24 0.07 3.49
Costa Rica 1 0.24 0.09 2.59



As all the results for rates of participation are above the unit level, it may be concluded that,
in the light of the level of imports, it is normal for the countries in Table 6 not to have received
requests for consultations. It should, however, be pointed out that those countries that are closer to
unit could more logically be expected to have received requests for consultations in the WTO, given
their greater share of world imports.

Following a statistical analysis, it can be concluded that the participation of Latin American
countries in the DSM, as both complainants and respondents, is in many cases above what might be
expected to be their share of world trade. This suggests that the Latin American countries have
largely succeeded in overcoming what are generally perceived as obstacles to developing country
participation in the DSM. These obstacles are analysed in the next section of this study.

C. ANALYSIS OF THE OBSTACLES TO DEVELOPING COUNTRY PARTICIPATION IN THE DSM


This section has three objectives: first, to identify from the existing literature the real or
perceived obstacles to developing country participation in the DSM; second, to examine whether,
with particular emphasis on the situation of the Latin American countries, those obstacles are still
restricting countries' capacity to benefit from the DSM; third, to ascertain what kind of proposals
have been put forward in the context of the Dispute Settlement Understanding (DSU) review
negotiations to help developing countries overcome these obstacles. On the third point, it should be
noted that, although the DSU review negotiations do not form part of the Doha Round single
undertaking, it is in fact difficult to conceive of a conclusion to the negotiations in that area unless a
partial result at least is achieved in the negotiating topics of the Round.

Regarding the first objective, the article by Hunter Nottage entitled "Developing Countries in
the WTO Dispute Settlement System" is a particularly useful guide to the real or perceived obstacles.8
In that article, and in other relevant literature, six obstacles are identified: lack of expertise in
WTO law; identification and communication of trade barriers to the government; fear of political or
economic pressure on the part of respondent Members; duration of proceedings; commitments
covering part of developing country trade that are not enforceable in the WTO; and inability to
enforce DSB recommendations.

1. Lack of expertise or capacity to litigate in the WTO


The first obstacle concerns the lack of expertise or capacity for WTO litigation. Owing to the
complexity of the procedure and the possibility of it having to encompass various stages, initiating a
WTO dispute is a costly exercise in terms of both time and money. For the United States and the
European Union, given the number of cases in which they are involved as complainants and
respondents, the development of domestic legal expertise to engage in WTO litigation is a worthwhile
investment. Even so, both countries frequently recruit external advisors to support them in the most



8 Hunter Nottage (2009) "Developing Countries in the WTO Dispute Settlement System",


GEG Working Paper 2009/47.




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complex disputes. The development of such domestic expertise would probably not be very profitable
for developing countries, including those most active in the DSM, given the great difficulty of
predicting the number of cases that may arise in a specific period.

In order to remedy this lack of domestic expertise, most developing countries find themselves
obliged to hire external counsel. Most of the law firms with experience of WTO litigation are
international firms which follow their customary practise of charging by the hour for their services.
This practice also creates a high level of uncertainty about the amount to be paid at the end of the
process. Various commentators have estimated that the costs of initiating a dispute of
medium complexity in the WTO, involving a sequence of consultations and panel and
appeal proceedings, are in the region of US$500,000.9 These are fairly large amounts for the limited
budgets of the countries in the region. Although the industry or producers concerned may help to
cover these costs to a greater or lesser extent, it is clear that the industries of the region do not handle
the same revenue volumes as industries in developed countries. In some cases, it is practically
impossible to envisage how certain sectors made up of mostly small and medium-sized enterprises
could achieve the level of organization necessary to help cover the cost of a WTO dispute.

Two instruments are currently available for the purpose of somewhat alleviating this lack of
capacity on the part of developing countries. The first is the rule under Article 27.2 of the DSU which
provides that the WTO Secretariat may make experts available to developing countries to provide
"legal advice and assistance in respect of dispute settlement", however, the fact that this same rule
requires that the Secretariat expert should maintain his impartiality considerably limits the scope of
the assistance which may be provided. This means that the assistance to be provided will not be very
effective in dealing with the problem of lack of capacity.

Secondly, there is the Advisory Centre on WTO Law (ACWL) which was established in 2001
to provide legal support to developing countries in their WTO activities, mainly, but not limited to,
dispute settlement. The ACWL provides dispute settlement services at rates much lower than those of
private law firms, and it also applies a cost ceiling. To qualify for these services,
developing countries must be members of the ACWL and pay a single contribution calculated on the
basis of their share of world trade. ACWL services are invoiced by the hour, at a rate which varies in
accordance with the member's category. However, as was mentioned earlier, the total amount of the
service is limited to CHF 276,696 for category A members, CHF 207,522 for category B and
CHF 138,348 for category C. The ACWL currently has 14 Latin American members: Colombia,
Uruguay and Venezuela in category B; and Bolivia, Costa Rica, Dominican Republic, Ecuador,
El Salvador, Guatemala, Honduras, Nicaragua, Panama and Peru in category C. In cases where a
conflict of interest prevents the ACWL from providing its services, for example when both the
respondent and the complainant are members of the ACWL, the dispute may be referred to a
private law firm which will apply the same rates for its services as the ACWL. In regional terms,
Latin America has the most members on the ACWL, and it is perhaps no coincidence that it is one of
the most active regions in the DSU framework.

In the context of the DSU review negotiations, some proposals have been made for addressing
the lack of resources as a barrier to DSM access. A number of developing countries have proposed
the creation of a Dispute Settlement Fund for developing countries. It has also been proposed to
introduce a system of payment of litigation costs for developing countries that prevail in a dispute.10
The proponents (supporters) of these two proposals have recently pooled their efforts and suggest that
the payment of litigation costs should only be agreed in cases where access to the Dispute Settlement
Fund is not possible. The only Latin American country included in the groups making these



9 See Nottage, in the article cited above, and also H. Nordström and G. Shaffer (2007), "Access to


Justice in the World Trade Organization: A Case for a Small Claims Procedure", ICTSD Dispute Settlement
and Legal Aspects of International Trade Issue Paper No. 2.


10 Report by the Chairman of the Special Session of the DSB to the Trade Negotiations Committee
(TNC), 21 April 2011, TN/D/25, page A-40.




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proposals11 is Cuba. It would appear that the other Latin American countries are on the whole
satisfied with the ACWL as a means of addressing DSU access. It is true that the relationship
between the proposed Dispute Settlement Fund and the ACWL is one of the topics identified as
needing clarification in the discussions on this proposal.

Another negotiating topic that can be seen as serving to increase dispute settlement capacity
in developing countries concerns the improvement of third party rights. In this connection, it is
considered that an increase in third party participation at all stages of the DSM strengthens the
possibility of using that means to acquire experience and legal expertise in the WTO. It is not
surprising that three Latin American countries, Argentina, Brazil and Mexico, form part of the
original group of proponents of improved third party rights. As was pointed out earlier, the
Latin American countries have participated actively as third parties in the DSU.

In conclusion, the lack of WTO litigation capacity has been addressed in various ways and, in
the case of the Latin American countries at least, would appear to have been overcome to different
degrees. It is, however, perceived by many developing countries as a major obstacle to DSM access,
as is shown by a number of recent studies based on surveys.12

2. Identification and communication of trade barriers to the government


A frequently heard refrain in the WTO runs: "It is not governments that engage in trade, but
the private sector". There is no denying the truth of this statement, as no one is better placed to
identify the existence of a trade barrier than the aggrieved exporter. However, only governments can
activate the DSM in the WTO. The problem, then, concerns how to ensure that the government is
made aware of the measure constituting a trade barrier and is able to assess whether it is in violation
of WTO agreements. In the developed countries, there are formal mechanisms enabling exporters to
draw their authorities' attention to the existence of another country's measure hindering access to its
market. The authorities will then carry out an investigation to determine whether the measure in
question is in violation of the commitments undertaken by the country imposing the measure, and
whether it has had an adverse impact on trade. The two classic examples of this type of mechanism
are: Section 301 of the Trade Act of 1974 in the United States and the European Union's Trade
Barriers Regulation.

The Latin American countries do not possess this type of formal mechanism. That having
been said, it is important to comment on the experience of Brazil which has invested considerable
resources and restructured its institutions to meet the challenges of full participation in the WTO.
Brazil's mechanism for enabling the private sector to inform the Government of measures obstructing
trade is an informal but nonetheless effective one. The mechanism is based on the interaction
between three bodies: the Chamber of Foreign Trade (CAMEX), the Conselho Consultivo do Sector
Privado (Private Sector Consultative Council) (Conex) and the Coordenação-Geral de Contenciosos
(General Dispute Settlement Unit) (CGC) in the Ministry of Foreign Affairs (MRE). CAMEX is an
inter-ministerial advisory body which coordinates and formulates Brazil's foreign trade policy. The
interface between CAMEX and the private sector is conducted through the 20 representatives of
Conex participating in its work. Any exporters faced with a trade barrier may draw it to the attention
of the CGC. If the CGC considers that a claim before the WTO could be successful, the MRE may
submit the matter to CAMEX. Once the positions of the various public and private actors have been
heard within CAMEX, it will decide whether the possibly WTO-inconsistent measures are to be
referred to the CGC which will initiate proceedings in the WTO.13 If the CGC brings the case before



11 In the case of the Dispute Settlement Fund the proponent is the African Group, and in the case of the


payment of litigation costs, the proponents are India, Pakistan, Cuba, Egypt and Malaysia.
12 See Marc L. Busch, Eric Reinhardt and Gregory Shaffer (2009), "Does legal capacity matter? A


survey of WTO Members", World Trade Review, 8:4, pages 559-577.
13 Welber Barral (2007), "Solução de Controvérsias na Organização Mundial do Comércio", Brasilia,


pp. 40-41.




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the WTO, the private sector remains fully involved and provides effective support to the Government
in developing legal arguments and providing factual evidence.14

Given that solutions to this problem should for the most part be sought within the domestic
regulatory framework, there are currently no proposals for addressing it directly in the WTO
negotiations. It should also be pointed out that the ACWL has helped to relieve the problem
somewhat through its method of operation. For ACWL members - as for all LDC members or
observers in the WTO - legal opinions outside a dispute settlement procedure are issued free of
charge. Thus, the most important requirement for the private sector of an ACWL member country is
to identify the trade barrier and communicate it to the government through its mission in Geneva. The
Geneva Mission, for its part, will then request the ACWL to issue a legal opinion on the position of
the measure in the WTO legal framework and the appropriateness of initiating dispute settlement
proceedings. At the same time, one should not disregard the participation of civil society in the
identification of trade barriers and the development of arguments which may lead to WTO dispute
settlement proceedings. Various NGOs such as Oxfam, the International Centre for Trade and
Sustainable Development (ICTSD), Ideas Centre and regional organizations have developed the
capacity to analyse situations in the light of the rules contained in the agreements and to advise
developing countries on WTO activities, including the DSM.

The identification and communication of trade barriers to the government continues to be a
genuine problem for most countries in the region. However, informal institutional mechanisms of the
kind in place in Brazil can do much to ease its negative effects. Brazil's experience shows the
importance of opening channels of communication between the private sector and governments in
order to promote full participation in the multilateral trading system and in the DSM in particular.

3. Fear of political or economic pressures on the part of respondent Members


Another obstacle frequently cited by developing countries is the fear of political and
economic reprisals on the part of respondent countries, especially if they have a higher level of
development and are major trading partners or aid donors. This fear of reprisals appears to have been
overcome some time ago in the countries of the region. Indeed, since they first started instituting
proceedings, the Latin American countries have shown little reticence in challenging the
large countries. For example, the first cases involving the region included the dispute between
Venezuela and the United States over gasoline, Costa Rica against the United States on underwear;
and Ecuador, Guatemala, Honduras and Mexico against the European Union in the bananas case. It is
true that the countries of the region are much less dependent on aid provided by the developed
countries than are the African countries. However, it is important in any case to note that the attitude
of countries involved in WTO proceedings has always been fairly mature and requests for
consultations have never been considered a hostile act warranting any type of reprisals.

It is again interesting to analyse the actions of Brazil which has used the DSM not only
tactically for the defence of specific exports, but also strategically to support its negotiating positions.
One example of this is the famous cotton case against United States agricultural subsidies. It is no
secret that the original subject of the dispute was soya, not cotton, soya being a product in which
Brazil has an enormous export interest, while its interest in cotton is not so strong. However, Brazil's
main objective was not limited to defending its cotton or soya exports. Rather, it was concerned
mainly with attacking US agricultural subsidies which are a central issue in the Doha Round
negotiations. At the end of the 1990s, following the Asian financial crisis, the prices of many
commodities plummeted. This forced a number of countries to adopt producer support measures.



14 For a more thorough discussion on the operation of foreign trade institutions in Brazil see: Daniel


Arbix (2009) "Contenciosos Brasileiros na Organização Mundial do Comércio (OMC): Pauta Comercial,
Política e Instituições, Contexto Internacional", Vol. 30, No. 3, set/dez 2008; and Gregory Shaffer, Michelle
Ratton and Babara Rosenberg (2010), "Winning at the WTO: the development of a trade policy community
within Brazil", in "Dispute Settlement at the WTO", Cambridge University Press.




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The United States adopted the 2002 Farm Act which provided, inter alia, for the payment of
emergency subsidies, triggered when prices fell below a certain level. These were known as
"counter-cyclical payments". These subsidies, which exceeded WTO bound levels, had a
negative impact on agricultural prices in the world market, including soya and cotton prices.
However, at the time when Brazil was preparing to raise the subject in the WTO, the price of soya
began to rise, causing a decline in the subsidies paid to US producers. As a result, Brazil focused its
attention on another product, cotton, despite its not being as important an export product as soya. In
seeking to win the cotton case, Brazil substantially increased its political influence in the
WTO negotiations, so much so that it is today one of the main actors at the WTO, together with the
United States, the European Union, India, and China.

Judging by the experience of the Latin American countries in the DSM, the possibility of
economic or political retaliation would appear to be a perceived rather than a real obstacle. In any
event, it is difficult to assess in the absence of information on the content of bilateral consultations,
meetings and contacts, which remain confidential.

4. Duration of the proceedings


The length of proceedings is one of those topics on which developing countries tend to be
ambivalent. On the one hand, several developing countries complain that the proceedings provided
for in the DSU are very lengthy and do not offer an expeditious solution to the problems encountered
by exporters. At the same time, many developing countries argue that their lack of litigation capacity
necessarily lengthens each stage of the process. Article 3.3 of the DSU recognises the systemic
importance of the prompt and effective settlement of a dispute. The time periods provided for in the
DSU are fairly short compared with other international and domestic judicial procedures. If the
different time frames provided for in the DSU are added together, it will be seen that a
dispute settlement procedure should normally cover a period of about 15 months from the request for
consultations to the report of the Appellate Body. To this should be added ten months, which is the
average duration of the "reasonable period of time" for the implementation of recommendations.15
In other words, in order to achieve satisfaction, i.e. a remedy against a WTO-inconsistent measure, a
complainant has to wait for at least a little more than two years, not counting the possibility of
compliance proceedings under Article 21.5 of the DSU, which could add a couple of years more.

The average length of proceedings up to now has exceeded the periods provided for in the
DSU, especially during the panel stage. In my experience, there are two situations that contribute to
the lengthening of the periods provided for in the DSU. First, there are situations where, especially in
legally and politically complex cases, the parties suspend the proceedings and seek to achieve a
negotiated settlement, which, as we noted earlier, is always preferable. The second situation is one
where either the panel or one or more of the parties work in different official languages, requiring
more time for the translation of documents. The second situation is fairly common in cases involving
Latin American countries, given their preference for working in Spanish. In fact there have been
cases where, although both parties are Spanish-speaking, the responding party has insisted on
including English-speaking experts on the panel as a means of lengthening the proceedings by adding
time for translation.

In the DSU review negotiations, a number of proposals have been made to reduce the length
of proceedings. First of all, it is proposed to reduce to 30 days, instead of the current 60 days, the
minimum consultation period before a panel can be requested, provided that the 60-day period can be
maintained when the respondent is a developing country.16 It remains, however, to be determined
whether the 60-day period is to be maintained only when the complainant is a developed country or
also when the complainant is a developing country.


15 See http://www.worldtradelaw.net/dsc/database/implementaverage.asp.
16 Report by the Chairman of the Special Session of the Dispute Settlement Body to the Trade


Negotiations Committee (TNC), 21 April 2011, TN/DS/25, page A-39.




- 14 -





Another proposal for shortening time frames at different stages of the dispute settlement
procedure concerns the establishment of the panel. Currently, as was explained above, the
establishment of a panel usually requires two meetings of the DSB, since the responding party may
refuse its establishment at the first meeting at which it is requested. The proposal under discussion in
the negotiations is to establish the panel at the first DSB meeting at which the request is considered.
As in the previous case, consideration is being given to the possibility of offering flexibilities if the
respondent is a developing country.17

Regarding the time frames for the presentation of parties' submissions, several developing
countries have asked to be given additional time at this stage.18 It has also been proposed that, when
determining the reasonable period of time for implementation under Article 21.3(c) of the DSU, the
arbitrators should take into account the particular situation of developing countries.19

The problem of the time required to obtain satisfaction under WTO procedures is
compounded by the fact that the remedies provided for are only prospective. This means that the
injury that may be caused to the exporter continues during the proceedings and it is not possible, even
if the case is won, for the DSB to order the payment of indemnification or compensation for the injury
caused. This is an area in which, despite the existence of consensus in academic circles on the need
for improvement, no proposals have been made to tackle the problem head-on.

How big an obstacle the length of DSM proceedings will be depends on the prism through
which it is viewed: for the complainant the proceedings are very lengthy to allow for a timely and
satisfactory outcome; and for the respondent they are too short to allow for the preparation of a good
defence. That is why it is difficult to reach a conclusion as to whether it is a real or a perceived
problem. In any event, the Latin American countries have again found creative solutions that
contribute to easing the problem. One example is the use by Colombia of the good offices of the
Director-General in the bananas case.

The understandings signed between the European Union and Ecuador20, and between the
European Union and the United States21, together with the waiver from Article I of the GATT agreed
in Doha22, were meant to end the long-standing dispute on bananas by 1 January 2006. However, the
new banana import regime adopted by the European Union in 2005 - 2006 was deemed by Colombia
to be still inconsistent with WTO rules. Consequently, in March 2007 Colombia again requested
consultations with the European Union.23,24 The major new development in this case was that, in case
the consultations proved unsuccessful, Colombia invoked Article 3.12 of the DSU and a decision of
5 April 196625, which provide for the use of the good offices of the Director-General. The reason
given for relying on this alternative dispute settlement procedure is that it could result in the more
rapid settlement of a matter that had been the subject of long-running proceedings at the WTO.



17 Ibid.
18 Ibid.
19 Ibid, page A-41.
20 Contained in the document entitled "European Communities - Regime for the Importation, Sale and


Distribution of Bananas, Understanding on Bananas between Ecuador and the European Communities",
WT/DS27/60, G/C/W/274.


21 Contained in the document entitled "European Communities - Regime for the Importation, Sale and
Distribution of Bananas, Communication from the United States". WT/DS27/59, G/C/W/270.


22 Contained in the document entitled "European Communities - The ACP-EC Partnership Agreement,
Decision of 14 November 2001," WT/MIN(01)/15.


23 European Communities - Regime for the Importation of Bananas - Request for Consultations by
Colombia, WT/DS361/1, G/L/818, 26 March 2007.


24 Shortly afterwards, Panama also requested consultations with the European Union on the banana
import regime, on the basis of arguments similar to those used by Colombia. European Communities - Regime
for the Importation of Bananas, Request for Consultations by Panama, WT/DS364/1, G/L/822, 27 June 2007.


25 BISD 14S/18-20.




- 15 -





In fact, when the consultations failed, the matter was referred to the Director-General on
2 November 2007.26 In their communications with the Director-General the parties to the dispute
expressed their strong preference for a negotiated settlement rather than judicial proceedings. The
good offices of the Director-General were conducted in the form of a number of formal and informal
meetings between the parties and with the Director-General. On a parallel track, the Director General
also held meetings in which third parties were involved, including other MFN banana exporters,
banana producers from the ACP countries and other producers and importers. In July 2009, the
Director-General circulated a draft agreement in an effort to facilitate a settlement. On
15 December 2009, the parties finally achieved a settlement which resulted in two agreements
between the European Union and the Latin American banana exporters, and between the
European Union and the United States. The agreement with the Latin American countries, known as
the "Geneva Agreement on Trade in Bananas,"27 was communicated to the General Council, which
took note of it at its meeting on 17 and 18 December 2009.

The entire process of good offices lasted a little longer than two years, that is to say, a period
similar to what would have been taken by a panel together with a related appeal procedure. However,
the achievement of a negotiated settlement to a dispute obviates the need for the entire process of
compliance with DSB recommendations, making it much more efficient.

5. Commitments covering part of developing country trade are not enforceable in the


WTO


One of the topics covered by Hunter Nottage in his article, which I consider particularly
pertinent, concerns the fact that a high proportion of developing country trade with developed
countries is conducted under preferential rules that are not covered by the WTO DSM.28 Likewise, a
good deal of intra-regional trade in Latin America, and increasingly with the United States, is
conducted under regional agreements which have their own dispute settlement mechanisms. Only the
DSM permits enforcement of obligations undertaken in the WTO framework, that is, those contained
in the WTO agreements and in the schedules of concessions on goods and services of each Member.
Unilateral preferences, whether they are covered by waivers or by the WTO Enabling Clause, are not
enforceable commitments under the DSM.

Various countries in the region benefit from preferential access to developed country markets
under the Generalized System of Preferences (GSP). Some countries are also eligible for benefits
under the Andean Trade Preferences Act (ATPA). That is the situation regarding unilateral
preferences. In addition, there are a number of free trade agreements with the United States and the
European Union, under which the countries of the region are bound by commitments that are not
enforceable through the DSM. Examples include the North American Free Trade
Agreement (NAFTA), the Dominican Republic - Central America Free Trade
Agreement (DR-CAFTA), bilateral free trade agreements between the United States, Chile and Peru
(and possibly Colombia in the near future), and the European Union agreements with CARIFORUM,
Chile and Mexico. This means that there is a fairly large flow of trade under these preferential
arrangements.

A developed country may decide to exclude certain products from its GSP list, to raise the
preferential tariff, to impose quantitative restrictions on preferential imports or to apply stricter rules
of origin. Although these measures could seriously affect the trade of developing countries, the latter
are not entitled to use the DSM to bring about changes in the measure that would guarantee the
continuity of market access. This situation obviously constitutes an important constraint on the use
that can be made of the DSM by developing countries.


26 On 14 December 2007 in the case of Panama.
27 WT/L/784.
28 Nottage (2009), op. cit.




- 16 -





One possible explanation for the relatively low participation of Mexico in the
WTO mechanism29 is the fact that a large proportion of its exports are directed to the United States.30
Since NAFTA has its own dispute settlement mechanisms, which even include WTO-specific topics,
such as anti-dumping, it is possible for most of the disputes that could be generated between Mexico
and the United States to be handled within NAFTA and not reach the WTO.31 The existence of
effective alternative forums for the settlement of disputes with major trading partners may relieve
some of the pressure on the WTO DSM.

6. Inability to enforce DSB recommendations


One of the obstacles that has received the most attention in academic circles and discussions
within the WTO has been the alleged inability of developing countries to enforce compliance with
DSB recommendations. As was explained earlier, the main tool provided by the DSU for a
complaining Member to ensure that the losing respondent complies with the recommendations
contained in the panel report and brings its measure into conformity is through the suspension of
equivalent measures, better known as retaliation or reprisals. However, when there is a substantial
difference in size between the economy of the developing country and that of the losing country, the
effectiveness of retaliation as an instrument of pressure to enforce compliance is questionable.

In his article, Hunter Nottage provides a good summary of the theoretical shortcomings of the
WTO retaliation rules as a means to enforce compliance when there is an asymmetry in the market
size of the developing country and the non-complying Member. First, sanctions imposed by a
developing country with a small domestic market are unlikely to impose sufficient economic or
political losses within larger non-complying Members to generate the requisite pressure to induce
compliance. Second, the suspension of concessions, which in many cases means the raising of trade
barriers such as tariffs, may be more detrimental to the Member that raises them than to the Member
against which they are raised. In his view, however, these theoretical shortcomings do not undermine
the value of the dispute settlement system for developing countries as practice demonstrates high rates
of compliance even when there the complainant is a small or developing country.32

Indeed, the record of compliance with DSB recommendations under the WTO DSM is fairly
good. Since the establishment of the WTO, there have been only 19 arbitral decisions under Article
22.6 of the DSU establishing the level of suspension of concessions, and 17 authorizations by the
DSB for measures of retaliation.33 The countries of the region, including the English-speaking
Caribbean, have been involved in six of the nine cases - counted in terms of the number of
WTO-inconsistent measures - in which retaliation has been authorized. It is worth taking a more
detailed look at three of these cases, which have received fairly wide press coverage. The first case in
which a Latin American country was placed in the situation of requesting authorization for the
imposition of retaliatory measures was the dispute between Ecuador and the European Union
concerning bananas. Antigua and Barbuda was also placed in this situation in the Internet gambling
case against the United States. Finally, Brazil also sought to apply retaliatory measures in the cotton
case against the United States. What these three cases have in common is not so much that they pitted
developing against developed countries, but that all three concerned trade measures or regimes of high



29 See Table 3 above.
30 The magazine The Economist reports that in 2000 89 per cent of Mexico's exports went to the


United States, although this figure may have dropped to 78 per cent this year. The Economist, Making the
desert bloom, 27 August-2 September 2011.


31 Even so, 10 of the 21 consultations requested by Mexico under the WTO DSM were against the
United States, this shows that on some issues the WTO's DSM may offer some advantages over NAFTA's.


32 Nottage (2009), op. cit.
33 It should be pointed out that these 19 cases relate to only nine separate measures. For example, the


"Byrd Amendment" of the United States was the subject of eight authorizations for retaliation, one for each of
the complaining countries. This gives an actual total of ten cases in which such measures were authorized.




- 17 -




political sensitivity which are supported by a large - or at least politically influential - proportion of
stakeholders in the countries applying them.

In my view, therefore, the lack of compliance with DSB recommendations is a reflection not
so much of the parties involved in the dispute but of the nature of the dispute itself. I would argue
that, in the three above-mentioned cases, the effectiveness of retaliation did not influence the decision
of the losing Member as to whether or not to comply with the recommendations. To substantiate this
point, I propose analysing the eventual outcome of these disputes. In the banana case involving
Ecuador, after many years of negotiation an agreement was reached between the
Latin American producers and the European Union. The agreement became possible only after the
European Union made substantial progress in the negotiations with the ACP countries on the
signature of Economic Partnership Agreements (EPAs). The EPAs constitute a radical change in
trade relations between the European countries and their former colonies, transforming previously
unilateral preferences into reciprocal preferences. In the case of Antigua and Barbuda, the
United States ultimately used the flexibilities provided in the General Agreement on Trade in
Services (GATS) to renegotiate and modify its commitments. At no time did the United States
envisage changing its policy of not authorizing its citizens to engage in Internet gambling, this being a
highly sensitive topic which also has a bearing on the relationship between the states and the
Federal Government, as set forth in the Constitution. I strongly suspect that in the Internet gambling
case the outcome of the dispute would have been the same even if you had a coalition of the largest
traders in the WTO bring the case against the United States. The high political cost of changing US
laws and regulations on gambling outweighed the relatively low cost of renegotiating a commitment
under the GATS.

The cotton case involving Brazil also deserves more detailed consideration. In August 2009,
arbitral awards were issued authorizing Brazil to take retaliatory measures calculated on the basis of a
formula yielding an annual amount that varies according to the amount of the subsidies granted by the
United States. The arbitrators also agreed that Brazil could make use of "cross-retaliation", that is,
suspend concessions under other agreements, including in particular the GATS and the Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS), when the annual amount authorized
for retaliatory measures exceeded a certain level.

Following a round of consultations and internal hearings, in March 2010 Brazil announced its
planned package of retaliatory measures, including tariff increases on 102 imports from the
United States, which would enter into force within 30 days. Brazil also announced plans to suspend
the protection of United States intellectual property rights. At the beginning of April, Brazil notified
the WTO that it would delay the entry into force of the measures because it had entered into
negotiations with the United States to resolve the dispute.

A short time later, the parties adopted a Memorandum of Understanding (MOU). In
exchange for Brazil's undertaking not to impose retaliatory measures, the United States agreed: (i) to
make certain (unspecified) changes in the operation of its Export Credit Guarantee Programme; and
(ii) to establish an annual fund of US$147 million to finance technical assistance and build capacity in
Brazil's cotton sector, pending approval by the United States of its next Farm Bill or the achievement
of a mutually agreed solution to the dispute with Brazil. The MOU also provides that the Fund may
also be used for "activities related to international cooperation in the cotton sector in sub-Saharan
Africa, in MERCOSUR member and associate member countries, in Haiti, or in any other developing
country as the parties may agree". The United States also undertakes to reassess certain sanitary
measures affecting imports of meat from Brazil. A Framework Agreement containing certain
parameters for discussion on the programmes of domestic support and export financing was also
notified to the WTO in August 2010. It includes a clarification to the effect that it does not constitute
a mutually agreed settlement of the dispute.

In this case, it is noted that the retaliatory measures had a much more definite effect mainly
because of the threat of measures that would authorize the Brazilian pharmaceutical industry to




- 18 -




produce copies of drugs patented by United States firms without having to pay royalties. Even so,
however, compliance with the Panel's recommendations was not secured; if anything, what was
achieved was a solution not provided for in the DSU. This experience, together with the high number
of cases in which there has been compliance with panel recommendations, shows: firstly, that in most
cases Members tend to comply with DSB recommendations without considering the possibility of
suffering retaliation; and secondly, that there is a minority of cases in which the political cost of
compliance is so high that the country prefers to endure retaliation or to find an alternative
arrangement.

As was pointed out earlier, the issue of compliance with recommendations has received a
good deal of attention in the context of the negotiations. There are currently two proposals designed
primarily to improve the position of developing countries in cases where recourse to retaliation is
necessary. The first provides for a collective requirement of compliance with recommendations in
cases where the respondents are developing countries. The second provides that, in cases where the
complainant is a developing country, it may automatically have recourse to retaliation without having
to give specific justification as to why same-sector or same-agreement retaliation is not practicable or
effective34,35 Another proposal under discussion concerns the possibility of obtaining compensation
and suspension of concessions or other obligations in order to cover nullification or impairment of
benefits suffered during the reasonable period of time.36 A further proposal has recently been
circulated informally by Cuba, which provides for administrative measures against those Members
that have not complied with DSB recommendations, of a nature similar to the measures taken against
Members that do not pay their contributions to the WTO budget. Such measures could even extend to
the suspension of Members' decision-making rights in the DSB.

In conclusion, the impossibility of enforcing compliance with WTO recommendations is a
largely theoretical obstacle, as has been demonstrated in practice by the high level of compliance
manifested up to now in the DSM. Nevertheless, the theoretical reasons for this obstacle have a
solid basis and there is only a small step between theory and practice in this case. For this reason, it is
necessary to remain vigilant and to continue the work undertaken in the negotiations with a view to
limiting the theoretical reasons that could give rise to this obstacle.37

D. CONCLUSION


As is clear from the statistical analysis, the rate of participation in the DSM by
Latin American countries has been higher than that of other developing countries and higher, too, than
their relative weight in world trade. The countries of the region have also found ways to overcome
the commonly identified obstacles and impediments to developing countries' participation in the
DSM. Brazil in particular has successfully used dispute settlement to support its negotiating
positions. This nevertheless required a major effort in terms of training and institutional reform to
meet these challenges. In order to maximize the benefits of participation in the DSM, it is necessary
to develop internal mechanisms that enable the private sector to inform the government of the
trade barriers it encounters, with a view to assessing whether WTO proceedings are advisable.
Attention should also be paid to export flows to developed trading partners, especially those that enter
the countries concerned on a preferential basis. Ideally, bound MFN tariffs should be increasingly
brought into line, as far as possible, with preferential tariffs, so as to achieve de facto elimination of
preferences. This would ensure a higher degree of predictability in trade with developed countries,



34 Report by the Chairman of the Special Session of the DSB to the Trade Negotiations


Committee (TNC), 21 April 2011, TN/DS/25, page A-43.
35 The first proposal was originally made by the African Group, and the second proposal is made by


India, Pakistan, Cuba, Egypt and Malaysia.
36 Ibid. It is important to note that since the beginning of the negotiations, Mexico has been very active


in the discussions on compliance with recommendations.
37 Hunter Nottage, in the article cited above, reaches a similar conclusion.




- 19 -




but has the disadvantage of levelling expert competition with the other counties not benefiting from
the preference.

An important truth demonstrated in this article is that the Latin American countries are not
just unquestioning followers of trends in the use of the DSM. On the contrary, the countries of the
region are at the forefront in finding solutions and devising creative arguments, without ever deviating
from the guidelines established by WTO rules. This enables Latin America to make full use of the
tools offered by the multilateral trading system to defend their export markets, which are of crucial
importance in their efforts to achieve development through economic growth.




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APPENDIX A


OVERVIEW OF THE WTOS DISPUTE SETTLEMENT MECHANISM


All dispute settlement proceedings at the WTO begin with an initial phase involving
consultations, as stipulated in Articles XXII and XXIII of the GATT 1994 and Article 4 of the DSU.
This reflects the wish of Members to begin by exhausting the avenue of negotiation as a means of
resolving a dispute before resorting to adjudication by a third party, namely the panel. Consultations
also enable parties to the dispute to familiarize themselves with the facts and the legal arguments used
by both sides, because the request for consultations has to identify the measure at issue and the rules
that are considered to have been violated. A negotiated solution remains possible throughout the
process, even once the panel has been established or once the panel report has been issued. Parties
may also have recourse to the good offices of the Director-General or to mediation at any time during
the dispute.

If the consultations fail to settle the problem within 60 days of the request for consultations,
the requesting party may ask the DSB to establish a panel. A request for the establishment of a panel
may also be made if the consultations have not been entered into within a period of 30 days after
receipt of the request for consultations or if ten days have elapsed without a response from the party to
which the request for consultations was addressed. The DSB must establish the panel no later than
the second time that the request appears on the agenda of a DSB meeting. Since a DSB meeting may
be especially convened within 15 days following the request for the establishment of a panel, unless
the requesting party agrees otherwise, the period of consultations should not exceed 90 days. They
may in fact be of indefinite duration as long as the parties agree that it is still possible to find a
negotiated settlement to the dispute, and they could involve several meetings.

Once the DSB has decided to establish a panel, the process enters one of the most critical
stages which will have an impact on the proceedings as a whole and their result: namely the selection
of the persons composing the panel. The three panellists are chosen either by the parties on the basis
of names put forward by the WTO Secretariat, or if there is no agreement on the panellists within
20 days after the establishment of the panel, the responding party may ask that the selection be made
by the Director-General, who shall do so within ten days. Unless the parties to the dispute agree on
the terms of reference of the panel within a period of 20 days, the standard terms of reference set forth
in Article 7.1 of the DSU shall be applied. It is important to note that the terms of reference of the
panel include the examination of the obligations of parties under the WTO Agreements, but not
international obligations that may have been assumed by the parties under other treaties. No
obligation assumed outside the scope of the WTO Agreements supersedes the obligations assumed
under those Agreements.

Each panel adopts its own rules of procedure based on the DSU and the timetable for the
proceedings, after having consulted the parties. Panel procedures consist of the presentation of
written submissions by the parties and the holding of meetings with the panel. The first step in the
panel procedure is the presentation of the initial written submission by the complaining parties. Two
to three weeks later, the responding party presents its first written submission. The panel has to hold
at least two meetings with the parties; the first of these occurs one to two weeks after receipt of the
first written submissions. The panel is also required to meet the third parties if there are any, and the
latter are requested to present their submissions during that first meeting.

The written replies shall be submitted two to three weeks after the first meeting with the
panel, which shall schedule a second meeting two to four weeks after receiving the written replies.
The panel shall subsequently draw up and circulate to the parties to the dispute a draft "descriptive
part" of the report.

Each report is divided into two main sections: the "descriptive part" setting out the arguments
of fact and of law put forward by the parties, as well as the description of the facts of the case, and the




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"findings" in which the panel decides on the merits of the arguments put forward and makes its
recommendation. The recommendation in most cases will be limited to requesting the DSB to call on
the offending country to bring its measure into conformity with the agreements. The parties have two
weeks to make comments on the draft descriptive part. After this first partial review of the report, the
panel has between two and four weeks to submit an "interim report" to the parties; this interim report
will become final if none of the parties requests that it be reconsidered.

The interim review stage gives the parties to the dispute the opportunity to make comments
on specific aspects of the interim report; such comments must be dealt with in the final report. The
total duration of the interim review is one month and one week. Once the final panel report has been
prepared, it is submitted to the parties to the dispute, and three weeks later circulated to the Members
of the DSB. The total period between establishment of the Panel and its report to Members must not
exceed nine months.

Following circulation of the report, it is adopted by the DSB within a maximum of 60 days,
unless one of the parties notifies its decision to appeal or the DSB decides not to adopt the report. The
mechanism for adoption is one of the most significant changes compared with the previous
WTO dispute settlement system. The adoption of the panel's report is based on the principle of
negative consensus, that is to say that the report will be adopted unless there is a consensus among
Members against its adoption. In this way, the possibility for the losing party in the dispute to block
adoption of the report is eliminated. The same adoption mechanism is also used when an
Appellate Body (AB) report is adopted, in which case, both the latter report and the panel report as
amended by the AB report are adopted simultaneously.

The appellate review is a remedy available only to the parties to the dispute and may not be
requested by a third party. Once the intention to appeal has been notified to the DSB, the appellant
has ten days to submit its statement of appeal to the AB. The statement shall contain the grounds of
the appeal, specifying the errors on points of law contained in the final report of the panel and the
arguments and supporting arguments. The appellee may, five days after receipt of the statement of
appeal, present a submission rebutting the claims made by the appellant. At the same time, other
parties to the case have 15 days from the date of the announcement of the appeal, to appeal in turn the
decision of the panel and to submit their statement of appeal to the AB; the same right is available to
the appellee, which may have an interest in appealing other matters not raised in the original appeal.

As in most civil law systems of judicial review, the appeal must be limited to questions of
law; the establishment of the facts in the dispute is thus reserved to the panel. There may be some
question as to the value of the somewhat artificial transfer of a domestic civil law concept to the
international legal sphere. This is particularly relevant in the context of an international trade dispute
in which it is difficult to distinguish questions of fact from questions of law, owing to the dual nature
of an inconsistent measure as a fact giving rise to the dispute and, at the same time, as a reflection of a
legal interpretation of the content of the agreements.

The working procedures for the appellate review also provide for the participation of
third parties which must also have participated in the previous stage of the proceedings. Provision is
likewise made for an oral hearing of the parties five days after receipt of the letter of opposition. The
final report of the Appellate Body should normally be circulated 60 days after the notice of appeal
but, unlike in the case of the panel reports, there is no procedure enabling the parties to take
cognizance of and comment on the report. The AB report must be adopted 30 days after its
circulation, on the basis of the same principle of negative consensus used by the DSB:

Once the panel report or AB report has been adopted, the implementation phase of the
recommendations is initiated, if the panel has found that the measure challenged is inconsistent with
the obligations laid down in the agreements. The mechanism for determining the "reasonable period
of time" for implementation of the recommendation is an inherently complex one. The "reasonable
period of time" may be:




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(i) A period of time proposed by the aggrieved party and approved by consensus by the
DSB;


(ii) a period mutually agreed by the parties; or
(iii) a period decided by an arbitrator.

In every case, the interpretation made under Article 21.3 of the DSU has been that the reasonable
period of time must be no longer than 15 months from the adoption of the report.

In the majority of the cases the Member found to be in breach of its WTO obligations would
have made efforts to bring the aggrieving measure into conformity, including by adopting new
measure, prior to the expiry of the reasonable period of time. If the Member that has prevailed in the
dispute still is of the view that the changes to the aggrieving measure, or the measure that replaced it,
are still in breach of WTO obligations it may request the establishment of a panel under Article 21.5
of the DSU to rule on whether the Member found to be in breach has implemented the DSB
recommendations. If the losing party is found to still be in breach of its obligations or has failed
comply with the recommendations within the reasonable period of time, the aggrieved party may
request compensation or, if this is not granted, suspend concessions to the recalcitrant party. Any
countervailing or retaliatory measure has trade restrictive effects, and for that reason, in the
WTO framework, such measures are temporary and have the objective of promoting implementation
of the recommendation contained in the final report. The WTO mechanism for the suspension of
concessions has also been automated and the aggrieved party will be authorized to take retaliatory
measures unless there is a consensus to the contrary. The most interesting aspect of the current
system is that a suspension of concessions is not limited to the sector or agreement concerned by the
offending measure. Indeed, Article 22.3 of the DSU establishes a hierarchy of authorized retaliatory
measures in the same sector, in another sector under the same agreement, or under another agreement.
Such "cross-retaliation" may be invoked in cases where the aggrieved party does not deem it
sufficient or effective to suspend concessions in the same sector or another sector successively, and
considers that the circumstances are serious enough. The sectors and level of the suspension of the
concessions is determined by the complaining party. However, if the Member who has been found in
violation believes that the level of retaliation exceeds the level of nullification and impairment, or that
cross retaliation was not correctly applied it may refer the issue to arbitration under Article 22.6 of the
DSU.




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APPENDIX B



Table 7: Member's participation as complainants in the DSM weighted by their share of total
exports


Member Consultations


Weighted
participation


in disputes per
year


Average share of
exports


Rate of
participation


Antigua and Barbuda 1 0.21 0.01 39.43
Honduras 7 1.48 0.04 35.81
Guatemala 8 1.69 0.05 33.26
Moldova 1 0.34 0.01 28.23
Nicaragua 1 0.21 0.01 14.70
Costa Rica 5 1.06 0.09 12.20
Panama 5 1.06 0.10 10.48
Argentina 15 3.17 0.41 7.67
Ecuador 3 0.63 0.09 7.25
Ukraine 2 2.25 0.32 6.95
Chile 10 2.11 0.35 6.01
New Zealand 7 1.48 0.25 5.93
Brazil 25 5.28 0.97 5.46
El Salvador 1 0.21 0.04 5.33
Colombia 5 1.06 0.20 5.18
Peru 3 0.63 0.14 4.56
Pakistan 3 0.63 0.14 4.51
Uruguay 1 0.21 0.05 4.38
India 19 4.01 1.02 3.92
Viet Nam 1 0.84 0.26 3.31
Sri Lanka 1 0.21 0.07 2.94
Bangladesh 1 0.21 0.08 2.57
Philippines 5 1.06 0.41 2.56
Thailand 13 2.74 1.08 2.55
Mexico 21 4.43 1.91 2.32
United States 97 20.47 10.16 2.01
Hungary 5 1.06 0.52 2.01
Canada 33 6.96 3.57 1.95
Australia 7 1.48 1.14 1.30
Indonesia 5 1.06 0.84 1.26
Korea 15 3.17 2.62 1.21
Norway 4 0.84 1.02 0.83
Chinese Taipei 3 1.13 1.92 0.59
China 8 3.00 5.21 0.58
Turkey 2 0.42 0.78 0.54
Venezuela 1 0.21 0.39 0.54




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Member Consultations


Weighted
participation


in disputes per
year


Average share of
exports


Rate of
participation


Switzerland 4 0.84 1.74 0.49
Japan 14 2.95 6.08 0.49
European Union 84 17.73 41.71 0.43
Malaysia 1 0.21 1.34 0.16
Singapore 1 0.21 2.36 0.09
Hong Kong, China 1 0.21 3.02 0.07



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