Role of the World Trade Organisation in Resolving International Trade Dispute

Contributor: Ifediora Obiora Chisom

Introduction

The World Trade Organization (WTO) plays a critical role in resolving international trade disputes through its dispute settlement mechanism, which is designed to ensure that trade flows smoothly and predictably.^[1] When member states face disagreements over the interpretation or application of WTO agreements, they can bring their disputes to the WTO for resolution.^[2] The process involves consultations, adjudication by panels, and the possibility of appeal to the Appellate Body.^[3] By providing a structured and legalistic approach to dispute resolution, the WTO helps maintain fairness and stability in global trade relations, ensuring that countries adhere to agreed-upon rules while addressing grievances in a timely and efficient manner.^[4]

This work will focus on the history of the WTO, and the important functions it performs in ensuring the smooth running of international trade. Also, the relevance of the WTO in solving international disputes shall be pinpointed in this work.

Brief History of the World Trade Organization

The World Trade Organization (WTO) is an intergovernmental organization which regulates international trade. ^[5] The WTO officially commenced on 1^st January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948.^[6] Notably, the Marrakesh Agreement, as embodied in the Marrakesh Declaration (hereinafter referred to as the Declaration), was an agreement executed in Marrakesh, Morocco, by 123 nations on 15 April 1994, signifying the conclusion of the eight-year Uruguay Round (a series of international trade negotiations that took place under GATT), which formally came into existence on 1 January 1995.^[7] It also established the World Trade Organization.^[8]

It is within the scope of the WTO to provide a common institutional framework for the conduct of trade relations among its Members in matters related to the agreements and associated legal instruments included in the Annexes to the Agreement.^[9] Thus, this simply means that the WTO provides a common framework for managing trade relations between member countries, based on agreements in its annexes. It ensures that trade policies are transparent, predictable, and fair by regulating international trade, resolving disputes, and enforcing agreements.

Importantly, the WTO has key functions that will ensure smooth and predictable international trade. Thus, it is pertinent to look at these functions.

Functions of the WTO^[10]

The WTO facilitates the implementation, administration, and operation of, and advances the objectives set forth in the Agreement and the Multilateral Trade Agreements. Additionally, it provides the framework for the implementation, administration, and operation of the Plurilateral Trade Agreements.

1. The WTO serves as a forum for negotiations among its Members regarding multilateral trade relations under the agreements in the Annexes. It also provides a forum for further negotiations and a framework for implementing the outcomes of such negotiations, as determined by the Ministerial Conference.
2. The WTO shall administer the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) in Annex 2 ( which is the Understanding on Rules and Procedures Governing the Settlement of Disputes) to the Agreement.
3. The WTO administers the Trade Policy Review Mechanism provided for in Annex 3 (which is the Trade Policy Review Mechanism) to the Agreement.
4. For the purpose of fostering greater coherence in global economic policy-making, the WTO collaborates, as deemed appropriate, with the International Monetary Fund and the International Bank for Reconstruction and Development, along with its associated agencies.

The WTO and Settlement of International Trade Disputes

Resolving trade disputes is one of the core activities of 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; or when one country adopts a trade policy measure or takes some action that one or more fellow WTO members consider to be breaking the WTO agreements. ^[11] Ideally, disputes are resolved through negotiations.^[12] Where this is not feasible, WTO Members may request the formation of a panel to resolve the dispute.^[13] The panel shall issue a report, which may subsequently be appealed to the WTO’s Appellate Body on points of law.^[14]

The stages in the settlement of international trade disputes can be found in Annex 2 of the WTO Agreement, which is referred to as the Understanding of Rules and Procedures Governing the Settlement of Disputes 1995 and commonly known as the Dispute Settlement Understanding (DSU).^[15] The DSU establishes the Dispute Settlement Body (DSB), which will oversee the application of the Understanding.^[16] The salient provisions of the DSU on the settlement of international trade disputes shall be considered below.

1. Consultation – It is worthy of note, that before proceeding with any further action, the disputing countries must engage in discussions to attempt to resolve their differences amicably.^[17] Where a request for consultations is made under a covered agreement, the Member receiving the request shall, unless otherwise agreed, reply within 10 days of receipt and enter into consultations in good faith within no more than 30 days of receipt, aiming for a mutually satisfactory solution.^[18] If the Member fails to respond within 10 days or to enter into consultations within 30 days, or another agreed period, the requesting Member may directly request the establishment of a panel.^[19]

Pointedly, all requests for consultations shall be notified to the DSB and the relevant Councils and Committees by the Member who requests consultations.^[20]

1. Establishment of Panel – Where the complaining party requests it, a panel must be set up at the next DSB meeting after the request is first listed on the DSB’s agenda, unless the DSB unanimously agrees at that meeting not to establish a panel.^[21] The request for the establishment of a panel shall be in writing. It shall state whether consultations were held, identify the specific measures in question, and provide a brief summary of the legal basis of the complaint sufficient to present the issue clearly.^[22]

Panels shall be composed of three panellists unless the parties to the dispute agree, within 10 days from the establishment of the panel, to a panel composed of five panellists,^[23] and citizens of Members whose governments are parties to the dispute shall not serve on a panel concerned with that dispute, unless the parties to the dispute agree otherwise.^[24]

The general function of a panel is to assist the DSB in discharging its functions. This requires a panel to make an objective assessment of the matter before it, including the relevant facts, the applicability of the Uruguay Round agreements, and the measure’s conformity with those agreements.^[25]

1. Interim Review Stage – After reviewing the rebuttal submissions and oral arguments, the panel will prepare a draft report that summarizes the facts and arguments of the case and the draft will be sent to the parties involved in the dispute. The parties will then have a set amount of time, determined by the panel, to provide their written feedback on the draft.^[26]

After the deadline for receiving comments from the disputing parties, the panel will issue an interim report. This report will include a summary of the facts, the panel’s findings, and conclusions.^[27] The parties will have another opportunity, within a timeframe set by the panel, to request a review of specific parts of the interim report. If requested, the panel will hold another meeting to discuss these issues. If no comments are made within the given time, the interim report will automatically become the final report and will be shared with the WTO Members.^[28]

1. Adoption of Panel Reports – After the panel makes its findings, the DSB must adopt all panel reports within 60 days after they are issued unless one of the parties to the dispute notifies the DSB that it will appeal the decision or the DSB decides by consensus to reject the report.^[29]
2. Appeals – Either side can appeal a panel’s ruling. Appeals have to be based on points of law such as legal interpretation. They cannot re-examine existing evidence or examine new issues. A standing Appellate Body shall be established by the DSB. The Appellate Body shall hear appeals from panel cases.^[30] It shall be composed of seven persons, three of whom shall serve on any one case.^[31]

The appeal can uphold, modify or reverse the panel’s legal findings and conclusions. Normally appeals should not last more than 60 days, with an absolute maximum of 90 days.^[32] The Dispute Settlement Body has to accept or reject the appeals report within 30 days and rejection is only possible by consensus.^[33]

The role of the WTO in the settlement of international trade disputes cannot be overemphasized. One notable case that was settled by the WTO is India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products (India-QRs).^[34] The case was brought by the United States against India in 1997. The case centred on India’s import restrictions on various products, including agricultural, textile, and industrial items. India maintained these restrictions as part of its balance-of-payments measures, claiming that they were necessary to safeguard its financial stability. The United States challenged these restrictions, arguing that they violated India’s obligations under the General Agreement on Tariffs and Trade (GATT) 1994. The WTO Dispute Settlement Body eventually ruled against India, determining that the restrictions were not justified under GATT’s balance-of-payments provisions.

Conclusion

The WTO plays a vital role in the settlement of international trade disputes by providing a structured, rules-based system that promotes transparency, fairness, and predictability. Through the DSB, the WTO ensures that member states can resolve trade conflicts based on mutually agreed rules rather than resorting to unilateral actions or trade wars, which could destabilize the global economy. The system provides trust among trading nations by applying the principles of non-discrimination, reciprocity, and enforcement of international obligations.

SNIPPET: The World Trade Organization (WTO) plays a critical role in resolving international trade disputes through its dispute settlement mechanism, which is designed to ensure that trade flows smoothly and predictably

1. World Trade Organisation, ‘The WTO’, <https://www.wto.org/english/thewto_e/thewto_e.htm> accessed 18^th October, 2024. ↑
2. World Trade Organization, ‘Understanding the WTO: Settling Disputes ‘, <https://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm> accessed 18^th October, 2024. ↑
3. Ibid. ↑
4. World Trade Organization, ‘The WTO’ in Brief’, <https://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr_e.htm> accessed 20^th October, 2024. ↑
5. Wikipedia, ‘History of the World Trade Organization’, <https://en.wikipedia.org/wiki/History_of_the_World_Trade_Organization#:~:text=The%20World%20Trade%20Organization%20(WTO,)%2C%20which%20commenced%20in%201948.> accessed 18^th October, 2024. ↑
6. Ibid. ↑
7. Wikipedia, ‘Marrakesh Agreement’, <https://en.wikipedia.org/wiki/Marrakesh_Agreement> accessed 18^th October, 2024. ↑
8. Marrakesh Declaration 1994, Article I. ↑
9. Ibid, Art II. ↑
10. Ibid, Art III. ↑
11. World Trade Organization, ‘Dispute Settlement’, <https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm> accessed 20^th October, 2024. ↑
12. ‘WTO Dispute Settlement’, <https://policy.trade.ec.europa.eu/enforcement-and-protection/dispute-settlement/wto-dispute-settlement_en#:~:text=Ideally%20disputes%20are%20resolved%20through,Body%20on%20questions%20of%20law.> accessed 20^th October, 2024. ↑
13. Ibid. ↑
14. Ibid. ↑
15. World Trade Organization, ‘Introduction to the WTO Dispute Settlement System’, <https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c1s2p1_e.htm> accessed 20^th October, 2024. ↑
16. DSU 1995, Art 2. ↑
17. Ibid, Art 4 para 2. ↑
18. Ibid, Art 4 para 3. ↑
19. Ibid. ↑
20. DSU 1995, Art 4 para 4. ↑
21. Ibid, Art 6 para 1. ↑
22. Ibid, Art 6 para 2. ↑
23. Ibid, Art 8, para 5. ↑
24. Ibid, Art 8, para 3. ↑
25. Ibid, Art 11. ↑
26. Ibid, Art 15 para 1. ↑
27. Ibid, Art 15 para 2. ↑
28. Ibid. ↑
29. DSU 1995, Art 16. ↑
30. Ibid, Art 17 para 1. ↑
31. Ibid. ↑
32. World Trade Organization, ‘A Unique Contribution’, <https://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm> accessed 20^th October, 2024. ↑
33. Ibid. ↑
34. WT/DS90, 1999. ↑