[WTO Case Review Series No.41] Canada – Tariff Quota Allocation for Dairy Products (CDA-USA-2021-31-01) ― Interpretative Standard and Use of Judicial Economy in FTA State-to-State DS ―

This is the second decision involving the State-to-State DS under USMCA (effective from 2020), whose use has been more frequent compared to during the NAFTA era. As the suspension of the functioning of the WTO Appellate Body draws on, WTO Members may need to consider using FTA DS more actively to ensure the enforcement of international trade rules, and this case may contribute to examining the possibility of using FTA DS. It should be noted that this case can be handled in FTA DS only as it is a dispute about FTA-unique rules on tariff quotas under the FTA.

The panel conducted the interpretation of the text of the relevant provision in an elaborate manner and had broadly recourse to the supplemental means, including policy background, similar provisions in the past in other agreements, and communications during the negotiation, in accordance with the Vienna Convention on the Law of Treaties. As the text of disputed provision itself was explicit, those detailed examinations of text and supplemental means may be meaningful in allowing the state that lost the case to accept the findings. Also, the panel used judicial economy in a broad manner. Consequently, the decision itself was unable to achieve a satisfactory settlement of the dispute considering that the second panel request was made only about a year after the decision. One possible reasonable approach for FTA DS may be to set a baseline for rapidly proceeding with piecemeal decisions, by thinking that it suffices to re-raise the matter in the FTA DS when necessary, making use of procedural provisions weighing on the promptness. However, it is necessary to provide leeway for undertaking necessary procedures so that fundamental issues can be examined sufficiently even in complex matters. Also, as a suggestion for restoring the WTO DS, WTO Members may be able to try various ideas from the available FTA DS regimes and provide feedback in the form of meaningful procedures and perspectives that could improve the WTO DS.