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The WTO resolves disputes unfairly behind closed doors.

What's wrong with the WTO?
The WTO resolves disputes unfairly behind closed doors.

The WTO dispute-resolution process is secretive, biased and exclusive, concentrating power in the hands of international-trade insiders. It does not include procedural safeguards or due process protections, yet it exerts tremendous coercive power over member countries.
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Opinions

"Environmental and labor concerns can provide a convenient additional excuse for raising trade barriers."

—Kym Anderson, economist who served on the WTO dispute-settlement panel for the U.S.-E.U. banana case

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"The WTO today is less than a multilateral trading system and it is also more than a multilateral trading system—and that is its problem."

"It is less than a multilateral trading system because there are many big chunks of international trade that don't come under the WTO. For example, commodity prices. To a normal developing country that is often the number-one trade issue. And you know what has happened. Commodity prices have collapsed. The rich countries have grown rich at the expense of the poor..."

"On the other hand, the WTO is more than a multilateral trading system. It has accumulated issues that are non-trade and not in its mandate. An example—the prime example—is TRIPs. This is not a liberalization device, it's a protectionist device..."

"Why is this happening? One reason is that the WTO has an enforcement mechanism. That's why they have chosen it as the vehicle."

—Martin Khor, Director, Third World Network, Malaysia

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"The heart of the WTO … is not its delegates, but its dispute resolution system. With the establishment of the WTO, corporations now have a place to complain to when they want trade barriers—or domestic regulations that limit their freedom to buy and sell—overturned. … [T]he resolution process violates most democratic notions of due process and openness. Cases are heard before a tribunal of 'trade experts,' generally lawyers, who, under WTO rules, are required to make their ruling with a presumption in favor of free trade. The WTO puts the burden squarely on governments to justify any restriction of what it considers the natural order of things. There are no amicus briefs (statements of legal opinion filed with a court by outside parties), no observers, and no public record of the deliberations."

—Ellen Frank, Dollars and Sense magazine, U.S.

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"As was evident in Seattle, the public has legitimate concerns with the work of the WTO and deserves to be part of the trade policy-making process. Currently the international process is almost entirely closed to public scrutiny or participation. The first steps toward a more transparent WTO are:
1. opening the dispute settlement and appellate body proceedings to public observation;
2. NGO participation in discussions of environment-related issues by other WTO decision-making forums, such as the SPS Committee, the TBT Committee, the TRIPS Council, the Agriculture Committee, the Committee on Trade and Environment, and relevant negotiating groups; and
3. the development of a consultative process between the WTO, NGOs, member governments and businesses."

—Center for International Environmental Law, U.S.

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"After an in-depth analysis of the decisions reached by WTO dispute resolution panels, this book concludes that no democratically achieved environmental, health, food safety or environmental law challenged at the WTO has ever been upheld. All have been declared barriers to trade."

—Lori Wallach & Michelle Sforza, Public Citizen Global Trade Watch, U.S.

[Note: Since the publication of their book and the failure of the Seattle Ministerial, a WTO dispute-settlement panel ruled against Canada in favor of French regulations banning asbestos. See Asbestos Case.]

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"[Rubens] Ricupero[, secretary-general of United Nations Conference on Trade and Development,] … echoed the commentaries frequently heard in negotiating circles about the expanding authority of the WTO's dispute settlement system, which includes special panels and the Appellate Body. Today, it is often more fruitful to utilise dispute settlement proceedings to gain access to markets than to rely on multilateral negotiations, said the Brazilian diplomat."

—Gustavo Capdevila, Inter Press Service

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"Carlos Correa, a jurist and expert on intellectual property rights, criticised the WTO dispute settlement panels and the Appellate Body for the power they have assumed. Correa, who serves as trade adviser to several developing nations, called for the rigorous examination of the resolutions handed down by the WTO panels, which had not only declared their own jurisdiction over assessing and interpreting the provisions of trade treaties, but also proclaimed their right to interpret the laws of individual nations. The specific case Correa cited had been initiated by the US against India for applying a provision of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The WTO ruled in favour of the US."

—Gustavo Capdevila, Inter Press Service
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Dispute-settlement cases in the World Trade Organization are heard by small panels of "trade experts" appointed from among a small coterie of trade officials and lawyers. In many cases, they have little or no expertise in the non-legal issues in question, particularly environmental, scientific or social concerns. Most are ideologically predisposed to oppose public-interest regulations and to support unrestricted commerce. Despite this built-in bias, the process includes no safeguards against conflict of interest on the part of the judges.

Implicit in WTO treaties themselves are strong presumptions in favor of "free" trade that must be followed in rulings. They push the burden onto national governments to justify any public protections that have even a minimal effect on trade, rendering them guilty until proven innocent. The process and records of WTO dispute-settlement bodies are closed. They allow no input—such as amicus briefs—from interested non-governmental organizations (unless NGOs can convince a government to submit them) and no unofficial observers. They produce no public record of deliberations, only a final ruling.

The WTO dispute-settlement process reverses by 180 degrees that of the pre-Uruguay Round General Agreement on Tariffs and Trade (GATT), the WTO's predecessor. Before, dispute panel reports could be adopted only by consensus of all GATT parties, including the country ruled against. This allowed countries to block rulings against their domestic regulations, although this was rarely done. In this way, the old GATT provided the basic safeguards of national sovereignty previously typical of most international agreements.

The WTO turns this approach upside-down by requiring a consensus of all member countries to overturn any dispute-settlement ruling, thus eliminating national sovereignty protections. In its place, WTO dispute-settlement bodies assume binding power to strike down democratically adopted national laws protecting the public or the environment, when it finds that these conflict with trade regulations.

Challenger countries have won the great majority of WTO disputes. And many developing nations do not have the resources to mount or defend a case before the WTO. Because of the prohibitive costs of defense, poorer countries are more susceptible to even threats of challenges to their laws by wealthier countries.

Compared with the International Court of Justice (World Court) and other similar international judicial bodies, the WTO dispute-settlement process lacks legitimacy because of its built-in bias, lack of due-process protections, exclusivity and closed proceedings. Yet its coercive force multiplies the effects of all the other injustices built into the WTO.

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Legal Basis

These regulations are enforced by the World Trade Organization.

Understanding on Rules and Procedures Governing the Settlement of Disputes

See Dispute Settlement Understanding page.

Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of Disputes

See Dispute Settlement Understanding page.

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Cases & Controversies

  • Partisan dispute-settlement panelist in U.S.-E.U. banana case
    Economist Kym Anderson, a widely published critic of the use of trade rules to foster environmental or labor objectives, served on the WTO dispute-settlement panel for the U.S.-E.U. banana case [WT/DS27/15, 7 January 1998]. Yet the banana case involved precisely the intersection of trade and labor issues: preferences given by Europe to small Caribbean banana producers to encourage family farms over plantation-style banana production by U.S. agribusinesses in Latin America. Such corporations have long been criticized for abusive labor conditions and undermining of local democracies, even giving coinage to the term "banana republic."
    See Chiquita Banana Case.
  • Conflict of interest for panelist in dispute over U.S. policy towards Cuba
    Arthur Dunkel, former director of GATT, was appointed in 1996 by the WTO as one of the panelists to judge a challenge by the European Union to the U.S. Helms-Burton Act. This law imposes sanctions on foreign companies with investments in former U.S. assets expropriated by Cuba after its 1959 revolution. At that time Dunkel also served on the board of directors of Nestle, S.A. and chaired of the Commission on International Trade and Investment Policy of the International Chamber of Commerce (ICC). Nestle has done business in Cuba since 1930 and the ICC commission strongly and publicly opposed Helms-Burton. The U.S. Trade Representative claimed two years after the WTO appointment that it had been unaware of Dunkel's role in the ICC.
    —See "Arthur Dunkel Serves As Chairman of Body Critical of the Law He Was to Consider As WTO Panelist." Public Citizen Global Trade Watch, May 19, 1998.
    http://www.citizen.org/trade/wto/Dispute/articles.cfm?ID=5570
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Resources

Non-governmental

Governmental

Official WTO Web site

By Peter Costantini ~ Seattle ~ November 2001
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