week 3 Flashcards
How does the WTO dispute resolution system work?
The WTO has one of the most active international dispute settlement mechanisms in the world. It is a State-to-State dispute settlement system.
The World Trade Organization (WTO) dispute settlement system is a crucial mechanism for resolving trade conflicts between member countries. It provides a rules-based process for resolving trade disputes between member nations and aims to ensure that trade agreements are respected and enforced in an orderly manner.
What types of disputes are handled by the WTO?
A dispute arises when a member government believes another member government is violating an agreement or a commitment that it has made in the WTO. Although many of these disputes are of a technical nature, others are politically sensitive and have received extensive media attention.
Why is the WTO dispute settlement system important?
This system serves to preserve the rights and obligations of Members under the covered agreements and to clarify the existing provisions of those agreements.
Can you give examples of WTO disputes that received media attention?
EC-Hormones – A dispute on the European ban of meat from cattle treated with growth hormones.
US-Shrimps – A dispute on the US ban on shrimp caught in nets that lead to the incidental killing of turtles.
China Raw Materials – A dispute regarding China’s export restrictions on natural resources essential in the production of high technology.
Australia – Tobacco Packaging – A dispute regarding Australia’s regulation requiring tobacco products to be packaged in an unattractive standard.
What are the key steps in the WTO dispute resolution process?
Consultation: Countries first attempt to resolve disputes through consultation.
Panel Formation: If consultations fail, a dispute panel is formed.
Panel Ruling: The panel issues a ruling based on WTO agreements.
Appeals: Either party can appeal to the Appellate Body.
Implementation: The losing party must implement the rulings or face possible trade sanctions.
What challenges does the WTO dispute settlement system face?
Since December 2019, the WTO’s Appellate Body has been effectively paralyzed due to the United States blocking new appointments of judges. This has created a significant crisis in the dispute settlement system, as appeals cannot be completed.
What challenges do developing countries face in WTO disputes?
The lack of knowledge and experience in WTO Law may form an important barrier to the use of this system.
Are there special rules for developing countries in WTO dispute settlement?
The DSU contains special rules for these members – e.g., for developing countries as respondents, the time period for consultations may be extended.
What is the role of dispute settlement in the WTO?
Dispute settlement is the central pillar of the multilateral trading system and the WTO’s unique contribution to the stability of the global economy.
Is the WTO system completely new?
The WTO system is not entirely new; it is based on almost fifty years of experience in resolving trade disputes under GATT 1947. This system, based on Articles XXII and XXIII of GATT 1947, was initially quite successful but had no fixed timetables, rulings were easier to block, and many cases dragged on for a long time without a conclusion.
Why was the WTO dispute settlement system improved?
The consensus decision-making requirement of the GATT made the system largely ineffective. That’s why the Uruguay Round agreement introduced a more structured process with clearly defined stages in the procedure.
What changes did the Uruguay Round bring to the WTO dispute settlement system?
The Uruguay Round agreement made the WTO dispute settlement process more organized with clear stages. It emphasized that resolving disputes quickly is important for the WTO to work well.
The agreement also made it impossible for the losing country to block the ruling. The new system requires that rulings are automatically accepted unless all countries agree to reject them. If a country wants to block a ruling, it must convince every other country to agree.
What key reforms were introduced in the WTO dispute settlement system?
The Uruguay Round agreement introduced strict time frames and the possibility of appellate review, ensuring a more efficient and reliable dispute resolution process.
What does it mean that the WTO dispute settlement system is compulsory, exclusive, and contentious?
Compulsory: WTO members have no choice but to accept the system’s jurisdiction when another WTO member brings a dispute.
Exclusive: The jurisdiction of the WTO dispute settlement system is exclusive.
Contentious: WTO law requires that dispute settlement is used only in the context of specific disputes, with no advisory opinions allowed.
Who has access to the WTO dispute settlement system?
Access to WTO dispute settlement is limited to WTO members.
How can a non-member or outside party indirectly participate in a WTO dispute?
This subject could have indirect access to the WTO dispute settlement system through the submission of Amicus Curiae briefs (friends of the court briefs) to panels or the Appellate Body.
What is an Amicus Curiae in the context of WTO dispute settlement?
An Amicus Curiae is a person or organization that is not involved in a legal case but is allowed to help the court by providing useful information or expertise about the case. The court decides whether to accept this help. In other places, it’s called an interventor.
timeline for settling a dispute in the WTO
60 days: Consultations, mediation, and other preliminary steps.
45 days: Panel set up and panelists appointed.
6 months: Final panel report is sent to the parties involved.
3 weeks: Final panel report is sent to WTO members.
60 days: Dispute Settlement Body adopts the report (if there is no appeal).
Total time (without appeal): 1 year.
If there is an appeal:
60-90 days: Appeals report.
30 days: Dispute Settlement Body adopts the appeals report.
Total time (with appeal): 1 year 3 months.
What is the Dispute Settlement Body (DSB) in the WTO?
The Dispute Settlement Body is composed of representatives of all WTO Members. The DSB controls the whole process.
What powers does the Dispute Settlement Body have?
The DSB can:
Set up expert panels to review the case and decide whether to accept or reject their findings or the results of an appeal.
Make sure the rulings and recommendations are followed.
Allow countries to take retaliatory measures, like suspending trade benefits, if a country doesn’t follow a ruling.
How does the Dispute Settlement Body make decisions?
The DSB system of voting is reverse consensus.
What is the principle of confidentiality in WTO dispute settlement?
WTO dispute settlement proceedings are confidential. This confidentiality applies to submissions made to panels and the Appellate Body. However, this lack of transparency has been criticized by some members and civil society.
What is the first step in the WTO dispute settlement procedure?
The first step in the WTO dispute settlement procedure is consultation. The system strongly encourages countries to resolve disputes through consultations or negotiations. If this fails, the parties can ask the WTO Director-General to mediate. Consultations are confidential, and no public records are made, meaning that the panel cannot use the documents from the consultations. If no solution is reached, the dispute may then be brought before a WTO dispute settlement panel.
What happens if consultations fail in the WTO dispute settlement process?
If consultations are unsuccessful, the complainant can request the establishment of a panel. Panels are ad hoc bodies created by the Dispute Settlement Body (DSB) through reverse consensus at the request of the complainant. These panels are composed of three qualified individuals who serve in their individual capacities, and their work is focused on resolving a specific dispute. They must remain independent, impartial, and avoid any conflicts of interest. Panel proceedings often involve complex factual, technical, or scientific issues.
What is the role of the Appellate Body of WTO in the dispute settlement process?
Either side could appeal a panel’s ruling
The Appellate Body of the World Trade Organization (WTO) is a standing group of seven experts who handle appeals from dispute reports. Each appeal is reviewed by three members from this group. These members are respected figures in law and international trade and serve four-year terms.
The Appellate Body can uphold, modify, or reverse the legal findings from the initial panel’s report. Appeals can only focus on legal issues and interpretations, not facts or evidence.
Based in Geneva, the WTO Appellate Body is often seen as the ‘Supreme Court’ of World Trade.
What is the crisis facing the WTO Appellate Body?
The WTO Appellate Body is facing its biggest crisis in 23 years because the US has been blocking the appointment and reappointment of its members.
By 2019, it could no longer function because the mandates of two of its three remaining members (out of seven) had expired.
This crisis could have serious effects on the global trading system.
Why has the US been blocking appointments to the WTO Appellate Body?
The US has been blocking appointments to the WTO Appellate Body for several reasons.
Appellate bodies deal with sensitive issues that are not always clearly addressed in existing WTO law. There have been accusations of judicial overreach, especially on matters like the environment.
Additionally, President Biden continued Trump’s freeze on new appointments.
US officials have often avoided directly addressing the issue, instead emphasizing the broader need for WTO reform.
What is the Multiparty Interim Appeal Arbitration?
The Multiparty Interim Appeal Arbitration (MPIA) was created in March 2020 by the EU and 15 other WTO members as a temporary solution while the WTO Appellate Body is not working.
It follows WTO appeal rules and allows members to voluntarily settle disputes. This keeps the dispute resolution system running despite the Appellate Body crisis.
How are WTO dispute rulings enforced?
Once a ruling is made by the panel or Appellate Body, the responding member doesn’t go directly to jail. Instead, they must quickly bring their measures into line with WTO law and offer compensation for the breach.
If no satisfactory compensation is agreed within 20 days, the complaining country can ask the Dispute Settlement Body (DSB) for permission to retaliate by suspending concessions or other obligations.
This retaliation is temporary and aims to encourage compliance, and it should, in principle, be in the same sector as the dispute.
European Commission - Hormones
In the European Communities—Measures concerning Meat and Meat Products (Hormones) case, the WTO Appellate Body had to balance free trade with national sovereignty for health protection.
This case is the most important one decided under the SPS Agreement, which regulates how WTO members can apply food safety and animal and plant health measures
What were the facts and background of the WTO dispute over the European Communities’ hormone ban?
The European Communities banned the use of certain hormones in farm animals and the sale of meat containing these hormones. They also prohibited the import of meat with artificial beef growth hormones, which were approved in the United States.
WTO rules allow such bans, but only if there is valid scientific evidence showing it is necessary for health and safety. Canada and the United States challenged this ban and took the European Union to the WTO Dispute Settlement Body, filing complaints against the ban.
What was the WTO Panel’s decision in the European Communities hormone ban case?
The European Communities argued that its import ban on hormone-treated meat was based on the precautionary principle and was in line with the SPS Agreement, which allows restrictions on health and safety grounds if supported by scientific analysis.
The core of the dispute was that risk analysis cannot provide absolute certainty about health risks. While the US and Canada claimed hormone-treated beef was safe, the EU argued it was not.
In 1997, the WTO Panel rejected the EU’s argument, ruling that the EU measure did not comply with the SPS Agreement.
What was the WTO Appellate Body’s decision in the EU hormone ban case?
The EU appealed the 1997 WTO Panel ruling, and in 1998, the WTO Appellate Body reversed most of the findings.
The Appellate Body upheld the ruling that the EU’s import ban did not meet the requirement of being based on a relevant risk assessment for human health. It stated that restrictive measures could be allowed with scientific certainty, but the precautionary principle could not override the SPS Agreement.
In response, the EU ordered a new risk assessment on hormone residues in beef and updated its regulations, adopting Directive 2003/74/EC, to comply with WTO obligations.
US Shrimp case
In 1994, the WTO addressed concerns about the impact of shrimp imports on turtles. The US–Shrimp case was the first dispute under the WTO that involved balancing international trade regulations with environmental protection. The case highlighted the complex relationship between these two areas.
What were the facts behind the US Shrimp case?
In 1987, the United States passed regulations requiring shrimp trawl vessels to use turtle excluder devices (TEDs) to prevent sea turtles from being caught during shrimp fishing. This was because certain sea turtle species were endangered.
In 1989, the regulations were expanded, making it a requirement for all shrimp, regardless of origin, to be harvested in a way that did not harm sea turtles.
Foreign shrimp could only be imported into the US if it met the same standards for protecting sea turtles. Countries had to implement regulations similar to those of the US to be eligible to export shrimp to the US.
What was the claim in the US Shrimp case?
India, Malaysia, Pakistan, and Thailand filed a formal dispute at the WTO after being denied import certificates for shrimp that did not meet the US requirements. They argued that the US violated Article XI of the GATT, which prohibits quantitative restrictions on imports.
The US defended its regulations, stating they were applied non-discriminatorily and aimed at protecting endangered sea turtles. The US also argued that even if the regulations violated Article XI, they were justified under Article XX of the GATT, which allows exceptions for certain health and environmental measures.
Seven WTO members joined the case as third parties, and both the Panel and Appellate Body received various amicus curiae briefs.
What were the findings of the WTO panel in the US Shrimp case?
In May 1998, the WTO panel ruled that the US import ban on shrimp was inconsistent with Article XI of the GATT and could not be justified under Article XX of the GATT.
In October 1998, the Appellate Body confirmed the panel’s overall finding but changed its reasoning. It determined that the US measure, although potentially justified under Article XX (g) for environmental protection, failed to meet the requirements of the chapeau of Article XX, which ensures fairness and due process. Therefore, the US measure was not justified under Article XX GATT.
What were the key outcomes of the US–Shrimp case?
The US–Shrimp case showed that unilateral environmental measures by a WTO member are not automatically against GATT rules. Countries can require others to follow certain policies if the measure is justified under Article XX of the GATT.
However, the Appellate Body stated that these measures must be fair, consider other countries’ conditions, and seek a multilateral solution before acting unilaterally. The US failed to meet these requirements but later adjusted its rules and worked to reach a global agreement for sea turtle protection.
This case cleared up the uncertainty about the legality of unilateral trade measures and their extraterritorial impact, which had been unclear from earlier rulings on the US tuna ban.
What was the issue in the WTO dispute between the United States and China regarding raw materials?
The United States raised concerns with China in 2009 about its restrictions on exporting several raw materials, including rare earths, tungsten, and molybdenum. These materials are essential for products like wind turbines, flat screens, and industrial batteries. China controls most of the global supply of rare earths and tungsten, making these restrictions significant for international markets. The export limits included quotas, duties, and other requirements that affected global trade.
What impact do China’s export restrictions on raw materials have on global industries?
China’s export restrictions on raw materials significantly affect global trade, raising prices and limiting availability for industries worldwide. These restrictions give a competitive edge to Chinese industries by allowing them to purchase raw materials at lower prices. Non-Chinese buyers often pay double the price for the same materials. For industries like wind turbine manufacturing and LCD displays, materials like rare earths can account for over 50% of production costs, making the price difference a major competitive disadvantage for companies outside of China.
What were the key steps in the WTO proceedings regarding China’s export restrictions on raw materials?
The United States identified 32 measures through which China allegedly imposes export restrictions and argued these violated Articles VIII, X, and XI of the GATT 1994. The US also noted additional unpublished restrictions.
On 2 July 2009, the European Communities requested to join the consultations, followed by Canada, Mexico, and Turkey on 6 July 2009. On 4 November 2009, the US formally requested the establishment of a WTO panel, but on 19 November 2009, the Dispute Settlement Body (DSB) deferred the panel’s creation.
What are the key reasons why the dispute over China’s export restrictions on raw materials is so sensitive?
The dispute is sensitive for three main reasons:
Economic and strategic importance: The materials, especially rare earths, are crucial for high-tech industries, military applications, and green technologies.
Environmental balance: There’s a need to balance mining and trade of these materials while also protecting the environment and ensuring sustainable development, as outlined in the WTO’s founding agreement.
WTO obligations: There is difficulty in defining the relationship between the WTO’s rules and the obligation to eliminate export duties, creating a complex legal issue.
What were the key findings in the WTO ruling regarding China’s export restrictions on raw materials?
The Panel Report found that China violated various WTO provisions through its export restrictions (duties and quotas). The Appellate Body confirmed the Panel’s main findings, agreeing that China’s export restrictions breached its WTO commitments and could not be justified under WTO law. The Appellate Body made some modifications, but these did not change the conclusion that China’s measures violated WTO rules.
Why are critical raw materials (CRMs) important for global economies and industries?
A secure supply of critical raw materials (CRMs) is essential for the stability of entire economic value chains. These materials have a wide range of commercial and military applications, extending beyond just renewable energies. They are crucial in products like mobile phones, computer hard drives, electric vehicle batteries, and also precision-guided missiles and high-tech ammunition.
How does China dominate the global supply chain of critical raw materials?
China is the world’s largest producer of lithium batteries for electric mobility, and it commands a 60% share of the global electric vehicle (EV) market. By strategically dominating the mining, metallurgy, and material science sectors – often referred to as the “three Ms” – China has gained control over much of the world’s clean-tech supply chains.
What challenges do the European Union and the United States face in terms of critical raw materials?
In contrast to China, the European Union and the United States are heavily dependent on imports of CRMs from abroad, relying on international commodity markets and access to foreign mines. Currently, China supplies 98% of the EU’s rare earth elements (REEs) and around 60% of its CRMs. This makes both regions vulnerable, especially during times of geopolitical tension, as China can leverage its natural resources in such situations.
How do climate protection policies and the global energy transition impact the demand for critical raw materials (CRMs)?
In 2017, a World Bank study explicitly warned that the global energy transition and climate protection policies would demand significantly greater use of CRMs than previously forecasted.
What are the key challenges in the extraction, processing, and recycling of critical raw materials (CRMs)?
Although there are generally no severe geological shortages of CRMs, challenges arise due to instability in producing countries, restrictive environmental regulations, poor governance, and resource nationalism. These factors are expected to further intensify global demand and access to a stable supply of CRMs in the coming decades.
What factors are contributing to the high costs of critical raw materials (CRMs) in the U.S. and the EU compared to China?
Mining projects and plants in the U.S. and the EU face rocketing investment needs, budget overruns, delays, missed production targets, and insufficient commercial profitability. These projects also compete against low, subsidized Chinese prices, leading to higher costs for goods made from CRMs sourced in North America or Europe. For example, rare earth magnets in the U.S. are about 50 percent more expensive than their Chinese counterparts.
How does China’s control over rare earth processing technology affect American and European reprocessing initiatives?
Even new reprocessing initiatives by American or European companies depend on Chinese technology, to which Beijing can restrict access. For example, last year, China banned exports of rare earth processing technology, limiting the ability of these initiatives to function without Chinese resources.
Why is the WTO’s decision on Australia’s plain packaging tobacco measures important to public health experts?
The World Trade Organization’s decision on Australia’s plain packaging tobacco measures is of great interest to public health experts who view comprehensive measures that include regulation of tobacco packaging as an effective way to meet important public health objectives, such as reducing smoking, especially by teens.
What is the background of Australia’s tobacco plain packaging legislation?
Australia’s tobacco plain packaging legislation came into full effect on 1 December 2012. The legislation prohibits logos, brand imagery, colours, and promotional text other than brand and product names in a standard colour, position, font style, and size appearing on tobacco packaging. Tobacco plain packaging forms part of a comprehensive range of tobacco control measures to reduce the rate of smoking in Australia and is an investment in the long-term health of Australians.
What are the key elements of Australia’s Plain Packaging Measures for tobacco, and how do they aim to reduce smoking?
The Plain Packaging Measures directed that brand images, display logos, and promotional text be removed from cigarette packages, doing away with the use of attractive colors, eye-catching designs, and engaging characters on tobacco packages that public health experts argued made smoking more appealing and attracted new customers, especially teens. Australia applied plain packaging in conjunction with graphic health warnings (GHWs). The Plain Packaging Measures formed part of Australia’s comprehensive tobacco control scheme, which included taxation measures and educational campaigns.
Which countries requested consultations with Australia on its tobacco plain packaging measure, and when?
Consultations with Australia in relation to Australia’s tobacco plain packaging measure were requested by Ukraine (on 13 March 2012), Honduras (on 4 April 2012), Dominican Republic (on 18 July 2012), Cuba (on 3 May 2013), and Indonesia (on 20 September 2013). Consultations were held with Ukraine on 12 April 2012, Honduras on 1 May 2012, Dominican Republic on 27 September 2012, Cuba on 13 June 2013, and Indonesia on 20 October 2013.
What was the timeline for the WTO dispute settlement over Australia’s tobacco plain packaging measure?
The WTO dispute settlement process regarding Australia’s tobacco plain packaging measure began with five countries—Ukraine, Honduras, Indonesia, the Dominican Republic, and Cuba—requesting consultations and dispute panels. A total of 41 WTO Members expressed interest in joining the disputes as third parties. The WTO Director-General appointed the same panelists for all five disputes, and the panel proceedings were harmonized to be heard together. In May 2015, Ukraine requested to suspend its dispute proceedings in search of a mutually agreed solution. However, as Ukraine took no further action for over 12 months, the authority for its proceedings lapsed.
What was the Panel’s decision on Australia’s tobacco plain packaging measure, and what were the subsequent appeals?
The Panel rejected all of the complainants’ claims that Australia’s measure is inconsistent with WTO rules. The Panel confirmed Australia’s tobacco plain packaging measure is making a meaningful contribution to improving public health. Honduras (on 19 July 2018) and the Dominican Republic (on 23 August 2018) appealed certain aspects of the Panel’s findings to the Appellate Body. Neither Indonesia nor Cuba filed appeals, and the reports in respect of their disputes were adopted by the WTO Dispute Settlement Body on 27 August 2018. On 2 October 2018, Australia filed its submission (and executive summary) responding to the appeal claims brought by Honduras and the Dominican Republic.
What was the outcome of the constitutional challenges to Australia’s tobacco plain packaging legislation?
Two challenges to Australia’s tobacco plain packaging law were heard by the High Court in April 2012. On 15 August 2012, the Court ruled that the law was not against the Constitution. In October 2012, the Court explained that, by a 6-1 majority, there was no acquisition of property that would require compensation under the Constitution.
