A look at cases on the Dispute Settlement Mechanism (DSM) of the WTO over time

Countries initiate disputes against others for violating WTO rules.

A product of the Uruguay round, the Dispute Settlement Understanding (DSU) was the crown jewel of the multilateral trade system. If members do not abide by its rules they face retaliation, its rules are therefore extremely precise, and members have agreed to delegate authority to the Dispute Settlement Panel, the Appellate Body, and lastly to the Dispute Settlement Body.

“Through the DSU, the WTO has acquired teeth; its rules can be enforced with an automaticity, and with consequences that were quite alien to the GATT.”

Amrita Narlikar, The World Trade Organization: A Very Short Introduction

Other institutions of global economic governance envied its powerful and binding Dispute Settlement Mechanism. Today, the World Trade Organization (WTO) it sees itself constrained from fully fulfilling its mandate. This is a brief explainer of this system with special emphasis on the blockage of the Appellate Body by USA and the consequences unfolding thus.

Dispute Settlement Mechanism Flowchart

• Note: The following visualization was made with data scraped from the continuously updating WTO website. The continual actualization of the website might create small inaccuracies or inconsistencies in the dates. The data’s general trends are nevertheless correct. Data last retrieved on January 10th, 2024.

DSM Process:

Consultations: The first step in the dispute settlement process involves consultations between the parties involved in a trade dispute. Any member country can initiate a dispute by requesting consultations with another other country or countries. During this phase, the parties are encouraged to resolve the dispute through dialogue and negotiation. The graph demonstrates the importance of informal processes; one can see a significant number of disputes settled before the parties recur to WTO authority. Some disputes are settled without parties reporting back to the WTO or the status not being reflected on the data. This makes for the ‘IN CONSULTATION’ status to also contain old disputes most likely now settled.

Establishment of a Dispute Panel: If consultations fail to resolve the dispute within a specified timeframe (usually 60 days), the complaining party can request the establishment of a dispute settlement panel. The panel is composed of independent experts with expertise in trade law and related fields. Given a complete consensus of the parties is needed to prevent the establishment of the panel, the Dispute Settlement Body (DSB) almost always approves it. As the panel is being established, parties do not stop negotiating. This results in some disputes being settled at any point during the process. The ‘ONGOING’ status is reserved for disputes where at least a panel has been requested meaning parties have failed to settle the issue through negotiations.

Panel Proceedings: The panel investigates the matter and hears arguments from both sides. It reviews evidence, listens to presentations, and examines legal arguments presented by the parties. The panel then issues an interim report which circulates among the parties giving them an opportunity to submit comments and provide additional information. The panel then issues a final report outlining its findings and conclusions. The report includes recommendations on whether the challenged measures violate WTO agreements and, if so, what actions the offending country should take to bring its measures into compliance. The report is almost always adopted by the DSB given only one-party endorsement is needed to do so.

Adoption or Appeal: If a party (country) disagrees with the findings of the panel, it can appeal the decision to the WTO's Appellate Body. Importantly, the disagreements must be on the panel’s legal interpretation not on any existing evidence. The AB is composed of seven four-year term recognized specialists in international trade and law. In December of 2019, the term of two judges expired and the USA has been blocking the appointment of new ones since. Click on the different options to filter the disputes according to the US blockage of the AB.

Implementation and Compliance: Once a panel report is adopted or an appellate ruling is issued, a losing party has an allowed time to implement these changes. If the winning party to a dispute deems the losing party has not brought its measures into compliance with WTO rules, it can request so. If the losing party fails to comply with the DSB decision, the winning party can seek authorization from the DSB to take retaliatory measures, such as imposing tariffs or other trade restrictions. This process is represented in the graph by the small nodes in the middle right of the graph. These small flows culminate in the AB finding either compliance or non-compliance.

Lastly, panels might be suspended for a maximum of 12 months at the request of the complainant. This is usually done in the hope that parties can achieve a mutually agreed solution. When this suspension lasts more than 12 months and the disputes have not been settled, they need to start all over again. (Article 12.12)

Regardless of the complexity or the number of members involved in each dispute, the WTO assigns an ‘ID’ to each and counts as ‘one’. If it pertains to the same matter, the AB will consider several disputes at the same time during the panel proceedings but not when on request for retaliation. This causes some disputes having similar rulings and dates and others having multiple dates within a single stage. For simplicity, only the first dates in each stage are considered.