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Updated December 6, 2019
Dispute Settlement in the WTO and U.S. Trade Agreements
The United States traditionally has championed the use of
effective and reciprocal dispute settlement (DS)
mechanisms to enforce commitments in the World Trade
Organization (WTO) and in U.S. free trade agreements
(FTAs). While effective and enforceable DS has been a
long-standing U.S. trade negotiating objective, its use has
become controversial following some adverse decisions,
particularly with regard to U.S. trade remedy law.
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The WTO was established in 1995 after eight years of trade
negotiations in the Uruguay Round among members of the
General Agreement on Tariffs and Trade (GATT)-the
predecessor to the WTO during 1947-1994. The WTO
administers a system of agreements on trade liberalization
and rules in goods (including tariff and non-tariff barriers),
services, and intellectual property rights. Through its
Dispute Settlement Understanding (DSU), the WTO
provides an enforceable means to settle disputes regarding
obligations under these agreements.
Under the GATT, dispute settlement was largely viewed as
ineffective because there were no fixed timetables and
decisions could be blocked by a disputing party, which
frequently led to no resolution of disputes. In defining U.S.
aims for the Uruguay Round, Congress sought to achieve
major reform in the GATT dispute settlement system in the
following U.S. trade negotiating objective:
to ensure that such mechanisms within the GATT
and GATT agreements provide for more effective
and expeditious resolution of disputes and enable
better enforcement of United States rights. -
Omnibus Trade and Competitiveness Act of 1988,
(P.L. 100-418).
The DSU was credited with strengthening the DS system by
imposing stricter deadlines and making it easier to establish
panels, adopt panel reports (DS decisions), and to authorize
retaliation for noncompliance. It also reversed the GATT
process for adopting a panel report by providing that a
report can be blocked only by consent of all members.
The DSU established the process for the settlement of
disputes for the WTO system of agreements. It commits
members to take disputes to adjudication under DSU rules
and procedures rather than make unilateral determinations
of violations and impose penalties. As a first step, the DSU
encourages the settlement of disputes through consultations
and requires a party to enter into consultation with a
requesting party within 30 days of receipt of the request.
establishment of a panel. The DSU sets the procedures for
choosing panel members and establishes a panel's terms of
reference. A panel typically is composed of three well-
qualified government and/or non-governmental individuals
from third party members not a party to the dispute, as
recommended to the parties by the WTO Secretariat. If
members cannot agree on panelists, they are chosen by the
WTO Director-General.
Dispute panels hear cases and issue reports to disputing
parties and then to all WTO members within nine months of
a panel's establishment. Third parties may join if they have
a substantial interest in the proceedings. Decisions may
be appealed to the Appellate Body (AB), a standing body of
seven persons serving four-year terms, who are unaffiliated
with any government, and have expertise in international
trade law. An appeal is limited to issues of law and legal
interpretation and must be completed within 90 days.
However, this timetable is rarely adhered to.
WTO DS Core Objectives
[The DS system] serves to preserve the rights and
obligations of Members under the covered
agreements, and to clarify the existing provisions of
those agreements in accordance with customary rules
of interpretation of public international law.
Recommendations and rulings of the DSB cannot add
to or diminish the rights and obligations provided in
the covered agreements. Art. 3.2 DSU
Once DSU proceedings are completed, the reports are
presented for adoption by the Dispute Settlement Body
(DSB). If a violation is found, the member must bring the
offending measure into conformity with WTO obligations.
It may choose to change its practice and the parties may
negotiate a reasonable timeframe for implementation. If the
respondent does not bring its measure into conformity in a
reasonable period of time, or its responsive action is not
acceptable to the complaining member, the parties may
negotiate compensation. Alternatively, the complaining
member may request that the DSB authorize retaliation
through the withdrawal of tariff concessions or other
suspension of WTO benefits equivalent to the effect of the
offending practice. Procedures set specific timetables,
although delays often occur. To date, 592 cases have been
filed at the DSB, excluding cases that were subsequently
consolidated. As of December 2019, the United States was
a direct party to 279 cases (Table 1). (For more
information, see, CRS Report R45417, World Trade
Organization: Overview and Future Direction, coordinated
by Cathleen D. Cimino-Isaacs).
If a dispute cannot be resolved within 60 days of a request
for consultations, or if a party denies a request for
consultation, the complaining party may request the
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