The Political Economy of International Trade Law: Essays in Honor of Robert E. Hudec

By Daniel L. M. Kennedy; James D. Southwick | Go to book overview

20
Should the teeth be pulled?
An analysis of WTO sanctions*
STEVE CHARNOVITZ

The most salient feature of the World Trade Organization (WTO) dispute settlement system is the possibility of authorizing a trade sanction against ascofflaw member government. Yet this feature is a mixed blessing. On the one hand, it fortifies WTO rules and promotes respect for them. On the other hand, it undermines the principle of free trade and provokes “sanction-envy” in other international organizations. Undoubtedly, the implanting of “teeth” by the WTO negotiators was one of the key achievements of the Uruguay Round, and a very significant step in the evolution of international economic law. But after six years of experience, WTO observers are beginning to consider whether recourse to damaging trade measures was a good idea.1 This essay provides an analytical framework for rethinking WTO trade sanctions.

To be sure, the WTO Agreement does not employ the word “sanction. ” What the Dispute Settlement Understanding (DSU) of 1994 says in Article 22 is that if a government fails to bring a measure found to be inconsistent with a WTO rule into compliance, it shall enter into negotiations with the government invoking dispute settlement, and if no mutually acceptable compensation is agreed, the plain tiff government may seek authorization from the WTO Dispute Settlement Body (DSB) “to suspend the application to the Member concerned of concessions or other obligations under the covered agreements. ” 2 This language is based on a similar provision in the General Agreement on Tariffs and Trade (GATT) of 1947. It provided that the CONTRACTING PARTIES may give a ruling in a complaint regarding the failure of a party to carry out its obligations. If the CONTRACTING PARTIES

____________________
*
The views expressed are those of the author only. Thanks to Joost Pauwelyn, Kal Raustiala, and J. David Richardson for their helpful comments. Support for this research was provided by the Ford Foundation through the Global Environment & Trade Study.
1
Edward Alden, Gloom Descends Over Former Supporters of the WTO's Procedure for Disputes, Fin. Times, Dec. 6, 2000, at 8 (discussing unhappiness with WTO trade sanctions); Transatlantic Business Dialogue, Cincinnati Recommendations, Nov. 16–18, 2000, at 37 (urging governments to rethink the present system of WTO sanctions); Paul Magnusson, Take a Break, Trade Bullies, Bus. Week, Nov.6, 2000, at 100.
2
Understanding on Rules and Procedures Governing the Settlement of Disputes [herein after DSU], Art. 22, in Agreement Establishing the World Trade Organization, April 15, 1994, Annex 2, available in World Trade Organization, The Legal Texts. The Results of the Uruguay Round of Multilateral Trade Negotiations (1999). All other WTO Agreements cited here are also in this WTO volume.

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