WTO’s dispute solving system comes of age

During the first years of the General Agreement on Trade and Tariffs (GATT), trade diplomats saw themselves as ministers of an exclusive, esoteric code. To a large extent, they were.

The original GATT rules applied to a small group of countries and those rules were not always easy to understand by the uninitiated. As famously quoted by John Jackson, Senator Millikin — then chairman of the US Senate Finance Committee — said in 1951 that ‘‘Anyone who reads GATT is likely to have his sanity impaired’’.

Many of the GATT diplomats at the time had been personally involved in drafting the rules, so they had strong convictions about how they should be understood.

When trade disputes arose, the emphasis was not on passing legal judgement on whether a measure violated GATT rules, but rather on finding politically-acceptable solutions.

To ensure that outcome, disputes were referred to working parties comprising the countries directly involved. A working party report could be approved only by consensus, including with the acceptance of all parties to the dispute.

The approach was expedient and may have served well the GATT contracting parties for the initial years.

But it soon became insufficient. New contracting parties joined the GATT and new diplomats replaced the original negotiators.

It was not always possible to rely on the personal experience of trade diplomats to explain the sometimes rather obscure legal passages that their predecessors had crafted.

More importantly, for the GATT to serve its fullest potential as a framework to promote trade and investment, it was important that the rules were applied in a transparent and predictable manner.

This did not necessarily coincide perfectly with endeavouring to find a solution that was diplomatically acceptable to all parties.

And so came about Eric Wyndham White’s initiative in the mid-1950s to refer trade disputes to panels of experts, instead of the traditional working parties.

From then on, panels would not include the parties involved in the dispute and panelists would be tasked with issuing objective and neutral rulings. The transition from working parties to panels may have seemed an insignificant technical step for the system, but it represented one giant leap in legal and political terms.

The evolution did not stop there, of course. Over the following decades, GATT contracting parties continued to introduce changes in procedures, moving to a dispute settlement system increasingly based on rules.

Most significant, however, were the bold changes that members introduced at the end of the Uruguay Round, when they adopted the Dispute Settlement Understanding. As a result, WTO members enjoy one of the most successful systems for dispute settlement on the international plane, one that has proved to be extremely robust and efficient.

In the 17 years since 1995, members have brought 439 trade disputes to the WTO. Many of these disputes have been solved by direct consultations between the parties.