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Congressional Research Service
Informing the legislitive debate sinco 1914
Updated May 23, 2023
Dispute Settlement in the WTO and U.S. Trade Agreements
Since the 1980s, Congress has consistently declared that a
principal trade negotiating objective of the United States is
the establishment and use of effective, expeditious, and
reciprocal dispute settlement (DS) mechanisms to enforce
commitments in U.S. trade agreements, including free trade
agreements (FTAs) and the World Trade Organization
(WTO). Congress sets principal negotiating objectives for
dispute settlement and the enforcement of trade agreements
within Trade Promotion Authority (TPA) legislation. In the
most recent TPA (Title I, P.L. 114-26), which expired in
2021, Congress declared the U.S. objective to seek
provisions in trade agreements providing for resolution of
disputes between governments under those trade
agreements in an effective, timely, transparent, equitable,
and reasoned manner. The U.S. Trade Representative
(USTR) leads monitoring of compliance with U.S trade
agreements, and pursues enforcement through bilateral
engagement, DS procedures, and other trade policy tools.
The most recent U.S. FTA, the 2020 U.S.-Mexico-Canada
Agreement (USMCA) made various changes to past FTA
DS procedures and created new mechanisms. The Biden
Administration is not pursuing new comprehensive FTAs,
and instead is negotiating targeted initiatives that cover
some trade issues. It is unclear what potential obligations
may be subject to enforcement, however, which some
Members of Congress have raised as a concern. While DS
has been a longstanding U.S. trade negotiating objective,
the WTO system has also become controversial for U.S.
policymakers, in large part due to adverse dispute panel
decisions against the United States, particularly over the use
of trade remedies. Some Members have urged the
Administration to work with WTO members toward
reforms that improve the speed and predictability of
dispute settlement (see e.g., H.Res. 382, 117th Congress).
Dkspute Settlement at the WTO
The WTO was established in 1995 after the Uruguay Round
of negotiations among members of the 1947 General
Agreement on Tariffs and Trade (GATT)-the WTO's
predecessor. The WTO administers a system of agreements,
covering goods trade, services trade, and rules on
intellectual property rights, among other issues. The WTO
Dispute Settlement Understanding (DSU) provides a forum
to settle disputes regarding the various WTO commitments.
The establishment of the WTO's DSU was in response to
U.S. and other GATT member concerns who viewed
GATT's DS mechanism as ineffective because there were
no fixed timetables and a disputing party could block
decisions, which often led to unresolved disputes. Congress,
in defining U.S. aims for the Uruguay Round, wanted 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 (P.L. 100-418). Observers credited the
DSU for strengthening the DS system by imposing stricter
deadlines, and making it easier to establish panels, adopt
panel reports, and authorize retaliation for noncompliance.
The DSU commits members to take disputes to adjudication
under its rules and procedures rather than make unilateral
determinations of violations and impose penalties. As a first
step, the DSU encourages settlement of disputes through
consultations. If a dispute is unresolved within 60 days of a
request for consultations, or if a party denies a request, the
complaining party may request establishment of a panel. A
panel is composed of three well-qualified government
and/or non-governmental individuals from third party
members not party to the dispute. If members cannot agree
on panelists, the WTO Director-General is to select them.
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
Dispute panels hear cases and are to issue their reports to
the disputing parties, and then to all WTO members, within
nine months. Third parties may join the proceedings if they
have a substantial interest. 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 blocked the
process to appoint new AB panelists, which led to the body
ceasing to function in 2019. The U.S. action was motivated
by various concerns about WTO DS, including decades-
long concerns with perceived judicial overreach in panel
decisions. It was also an attempt to prompt WTO members
to consider reforms. Panels can continue to hear cases, but
those that are appealed may remain unresolved and cannot
be enforced through the WTO. The European Union and
some WTO members put into effect an appeal arbitration
arrangement under Art. 25 DSU to hear their own cases.
See CRS Report R46852, The World Trade Organization's
(WTO's) Appellate Body: Key Disputes and Controversies.
Once DSU proceedings are completed, the final reports are
presented for adoption by the Dispute Settlement Body
(DSB), a plenary committee of the WTO. If a violation is
found, the member must bring the offending measure into
conformity with WTO obligations. It may voluntarily
change its practice and the parties may negotiate a
reasonable timeframe for implementation. If the
respondent does not bring its measure into conformity, or
its action is not acceptable to the complainant, the parties
may negotiate compensation. The complaining party may
also request that the DSB authorize retaliation, e.g.,
withdrawal of tariff concessions. While specific timetables
apply, delays often occur. To date, more than 600 WTO](ViewImageLocal?handle=hein.crs/govelso0001&div=1&collection=&method=preview&ext=.png&size=3)
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