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Congressional Research Service
~ Informing the legislative debate since 1914
0
Updated February 1, 2021
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.
Dispute Settlement at the WTO
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 promoting trade
liberalization, including rules for trade in goods, 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.
How it Works
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.
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
https://crsreport
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. Until recently,
decisions could be appealed to the Appellate Body (AB), a
standing body of seven jurists serving four-year terms, who
were unaffiliated with any government, and had expertise in
international trade law. Since 2016, the United States has
vetoed the appointment of new AB panelists, as a way to
show displeasure over certain practices of the body. On
December 10, 2019, the terms of two remaining jurists
expired, leaving the AB without a quorum to hear new
cases. Dispute panels can continue to hear cases, but
appealed cases remain in limbo, and, if appealed, panel
decisions cannot be enforced. In addition, some WTO
members have developed a work-around outside the WTO
to hear appeals amongst themselves.
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, 600 cases have been
filed at the DSB, with the United States a direct party to
280 cases (Table 1). (For more information, see, CRS
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