The Dispute Settlement Crisis in the World Trade Organization: Causes and Cures



Tetyana Payosova, Gary Clyde Hufbauer and Jeffrey J. Schott | Peterson Institute for International Economics

The World Trade Organization (WTO) has long been considered an effective institution because of its enforceable dispute resolution procedures. Its process calls for ad hoc panels to issue rulings on disputes over member country compliance with their WTO rights and obligations, subject to review by a standing Appellate Body composed of seven “judges” (technically members). Decisions by the Appellate Body are final and binding, and generally respected by disputing parties. Since its inception in 1995, the WTO dispute settlement mechanism has resolved an impressive number of trade disputes and has earned a reputation as the “crown jewel” of the global trading system.

Today, however, the dispute settlement mechanism is in crisis. WTO members have failed to negotiate updates to the rulebook, including rules on dispute settlement itself. As a result, the WTO Appellate Body increasingly is asked to render decisions on ambiguous or incomplete WTO rules. Its interpretations of such provisions have provoked charges by the United States and others that binding Appellate Body rulings, which establish precedents for future cases, effectively circumvent the prerogative of member countries to revise the WTO rulebook and thus undercut the national sovereignty of WTO members. For the past few years, US officials have blocked appointments of Appellate Body members to force WTO members to negotiate new rules that address USconcerns and limit the scope for judicial overreach…


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