WTO dispute settlement and China as a litigant

The WTO has an internal dispute settlement system that has been described as the 'jewel in the crown' of the WTO. Many of the currently existing WTO rules on trade in goods already existed before the WTO entered into force in 1995, in the context of the GATT (which dates back to 1947). The rule of law, however, was much less prominently present in the GATT, where a country which lost a dispute settlement procedure could prevent such a ruling from becoming binding by simply voting against it. This option was removed when the WTO entered into force. The WTO incorporates a legal enforcement system with real teeth and this is one of the main reasons why the WTO has become a much more prominent international organization than the GATT ever was.

The dispute settlement system is used frequently. Since the WTO came into effect in 1995, 259 official complaints have been filed (figures up to date to May 2002). It is important to note that these are all disputes between countries. The WTO dispute settlement system is only open to countries , not for private parties (although these will often ask their country of origin to start a procedure on their behalf and support their government in doing that). This frequent use of the dispute settlement system and a number of acrimonious disputes between the EU and the US have triggered criticism that the WTO is too much focused on litigation and that the EU and the US could eventually undermine the WTO by taking too many disputes to WTO dispute settlement rather than finding a mutually satisfactory solution.

It is important to put some of this criticism of WTO dispute settlement in a proper context. The WTO comprises a very large body of complex rules and 144 member countries. In this context divergent opinions are unavoidable and it is a strength of the WTO, not a weakness, that there is a neutral arbitrator that can decide the precise meaning of a text in a specific case. If that were not possible, the parties to the dispute would simply stand by their own interpretation and the practical effect of the agreements would remain limited (as is so often the case in international cooperation). Without the WTO, trade disputes would still exist without an effective way of resolution. Indeed, some of the disputes between the EU and the US (Bananas, Beef- Hormones and the FSC dispute) are considerably older than the WTO and it is only through WTO litigation that some real progress has been made.

A much more legitimate question is how China, which has no Western style litigation tradition, will function in such a context. Most observers seem to agree that it will be impossible for China to maintain a perfect implementation record and that disputes over the correct implementation of China's WTO obligations are inevitable. The question is how the other WTO members will react to this. There appears to be scope for a genuine avalanche of procedures against China as a number of trade disputes have already emerged (for the EU and the US only this includes the measures against European 'mad cow' cosmetics and American GMOs, the management of Tariff Rate Quotas, and restrictions in insurance, express delivery services and retail distribution services, ie supermarkets). However, at least the EU and the US seem to adopt the position that it would be counterproductive to make intensive use of dispute settlement vis- -vis China and, at least in the initial stage, will only do this as a measure of last resort. On the other hand, this position will be influenced by the behaviour of China as a complainant in dispute settlement procedures. If China makes intensive use of dispute settlement the EU and the US will become less reluctant to use it against China. (In this context, we have already noted that China has recently started a procedure against the US in relation to the US safeguard measures on steel .)