The WTO Dispute Settlement Mechanism in Cases Involving "Law as Such" with a Focus on U.S. Cases

WTO dispute settlement procedures have been praised for their effectiveness, but recently there have been significant examples of Members failing to observe, or delaying implementation of, rulings and recommendations issued by the Dispute Settlement Bodies to rectify violations of the WTO Agreement. This issue has arisen particularly in cases where the U.S. has been challenged its "law as such" violations, in other words cases claiming that a country's domestic law or regulation in itself constitutes a violation of the WTO Agreement. These cases include those won by Japan against the U.S., and this implementation problem is becoming a pressing trade policy issue. Given special-interest politics and the "sectionalism" of the compartmentalized committee system in the U.S. Congress, it is desirable that procedures to ensure compliance be structured to encourage the Congress to promptly implement rulings by the Dispute Settlement Body (DSB).



However, the current DSU (Dispute Settlement Understanding) and its operation in cases involving "law as such" are not necessarily conducive to this goal. First, when a reasonable period of time (RPT) for compliance is determined, the complained party is allowed a broad degree of discretion in selecting the measure to comply with the recommendation, and there is no guarantee of the shortest possible RPT enabling appropriate implementation. Second, while financial compensation imposes a broad-based fiscal burden on the concerned citizens of the complained party, continuation of the violation benefits special interest groups and circumvents pressure to comply with the DSB ruling. Third, under existing practice, the level of nullification or impairment for determining suspensions of concessions (countermeasures) is calculated on the basis of actual trade loss created by the violation in question, excluding the chilling effects on trade. In the few examples where the rules on contravention of the WTO agreement have been applied, the suspension of concessions allowed has not been sufficient to cover this loss.



It would be possible to partially resolve some of these issues by making some changes to the interpretation or application of the existing rules, but the agreement needs to be amended, particularly regarding the calculation of the level of suspension of concessions. However, this issue has not been dealt with adequately in the proposals submitted to the DSU negotiations in the Doha Round.