Operation of consultations, deterrence, and mediation

This Article will discuss the World Trade Organization consultation process, its intended role in the WTO dispute settlement mechanism, and the extent to which various WTO Members have successfully resolved disputes at the consultation stage during the first five years of the WTO's existence. It will then address Members' proposals for changes to the consultation process.

I. THE WTO CONSULTATION PROCESS

The WTO dispute settlement process starts when a WTO-Member government formally requests WTO consultations with another Member. Frequently, formal WTO consultations follow unsuccessful efforts to resolve a dispute through normal bilateral diplomatic efforts. The consultation request must be in writing, identify the measures of the other Member that are being challenged, and provide "an indication of the legal basis for the complaint" (i.e., the provisions of one or more of the substantive WTO agreements that the Member has allegedly violated).1

A Member must submit the request to the Dispute Settlement Body (DSB) and to the relevant substantive WTO Councils and Committees to inform all Members of the dispute.2 Many WTO consultations involve only the complaining and responding Members. However, the DSU permits complaints by multiple Members, and there are procedures by which third parties with a "substantial trade interest" in the dispute can seek to participate.

The responding Member must respond to a request for consultations within ten days and must agree to begin consulting within thirty days.4 If the consultations fail to produce a mutually satisfactory resolution within sixty days of the submission of the request (or a shorter period where the two parties mutually agree that the consultations have failed), the complaining Member may, at any time thereafter, either request establishment of a dispute settlement panel, or use the flexible arbitration procedures of the DSU.5

By mutual agreement, the parties also may seek to resolve their differences through "good offices," conciliation, or mediation.6 To date, few Members have resorted to these alternative dispute resolution mechanisms, and no disputes have been resolved as a result of their use.

II. INTENDED ROLE OF CONSULTATION, GOOD OFFICES, CONCILIATION, AND MEDIATION

The DSU describes the dispute settlement system as " [A] central element in providing security and predictability to the multilateral trading system."7 It adds that "prompt settlement" of disputes is "essential to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligations of Members."8

The drafters of the DSU viewed consultations (and good offices, conciliation, and mediation) as much more than mere formalities and way stations to resolution of the dispute by a panel or the WTO Appellate Body. Indeed, "[a] solution mutually acceptable to the parties to a dispute and consistent with the covered agreements is clearly to be preferred."9 Moreover, "[i]t is understood that requests for conciliation . . . should not be intended or considered as contentious acts and that, if a dispute arises, all Members will engage in these procedures in good faith in an effort to resolve the dispute."10

With regard to consultations, "Members affirm their resolve to strengthen and improve the effectiveness of the consultation procedures employed by Members."11 Further, "before resorting to further action under this Understanding, Members should attempt to obtain satisfactory adjustment of the matter."12

In addition to consultations, resort to which is mandatory, the DSU provides for voluntary use of three other mechanisms long available in international disputes.ls In "good offices," a third party (in this case the WTO Director-General) provides a means by which the disputing parties may communicate with each other. In conciliation, an impartial third party undertakes an independent investigation and suggests a solution to the dispute. In mediation, an impartial third party acts to bring about a resolution of the dispute. The purpose of these three mechanisms is to "assist Members to settle a dispute."14 The mechanisms may be requested (and terminated) at any time during a dispute, even when a panel proceeding is in progress.15

It is thus clear that the drafters of the WTO sought to promote and enhance the resolution of disputes without the need for the intercession of a Panel or the Appellate Body. The next section of this paper will assess the extent to which this goal has been achieved.

III. THE EXPERIENCE OF THE FIRST FIVE YEARS

As of mid-December, there have been 185 requests for consultations.16 Seventy-eight of these complaints have, thus far, been resolved (107 are still under way-32 before Panels or the Appellate Body and 75 in consultations.) 17 Of the seventy-eight, thirty seven complaints have been resolved by adoption of Panel and Appellate Body reports. Forty-one (fifty three percent) have been resolved without resort to the Panel process.

Forty of these forty-one will be analyzed in greater detail.l$ Thirty complaints have been resolved by bilateral settlements,l9 three by withdrawal of the contested measure,20 and seven by withdrawal of the request for establishment of a panel or other provable abandonment.21

In seventeen complaints, both parties were developed countries. Both parties were developing countries in five complaints and, in nineteen complaints, one of the parties was a developed country and the other was a developing country. 22

Developed countries have filed thirty-one complaints and been respondents twenty three times. Developing countries have filed eleven complaints and been respondents seventeen times.

IV. ASSESSMENT

The WTO has been quite successful in resolving disputes without resorting to a Panel. As noted previously, fifty three percent of the seventy-ight complaints resolved to date have been so resolved. A broad distribution of countries has reached mutually satisfactory settlements. No one category of dispute-developed v. developed Member, developed v. developing Member, developing v. developed Member, or developing v developing Member-appears to have. a markedly different rate of settlement. Although the United States settles slightly fewer disputes than the average (forty four percent of the thirty nine complaints in which it was involved, eleven as complainant,23 and six as respondent,24 compared to the average of fifty three percent), the variation is less significant than many would have guessed.

Thus, the DSU drafters' goal of encouraging and promoting mutually satisfactory resolution of disputes without the necessity of recourse to a Panel has been quite successful. However, certain problems are perceived with the process, and during the DSU Review, held from mid-1998 through autumn 1999, several Members made proposals for change.

V PROPOSED CHANGES TO CONSULTATION PROCEDURES

During the DSU Review, Egypt, Guatemala, India, and Venezuela, joined by Japan, said that the WTO's dispute settlement mechanism, including its consultation process, failed to provide adequate access to developing countries. They cited resource constraints and expense as the primary problems.25

When one compares complaints by developed countries (105) to complaints by developing countries (32), this concern would appear to have some merit. Several proposals to alleviate this problem have been made, including the creation of an Advisory Centre for WTO Law.26 Careful study and appropriate revisions are important because the credibility of the system will suffer if developing countries become increasingly concerned that the WTO dispute settlement system is not practically available to them when they seek to assert their WTO rights.

Hungary and Japan have proposed strengthening the DSU's mechanisms to secure mutually acceptable solutions.27 The specifics include: (1) requiring at least two consultation meetings; (2) describing in the panel request efforts made to resolve the dispute; (3) requiring the panel to consult with the parties to facilitate a mutually satisfactory solution; and (4) requiring a meeting to explore settlement after receipt of the panel's Interim Report. Of these, the first makes good sense and is a practical means of further enhancing the WTO's goal of promoting settlements. The second suggestion is of questionable value; in and of itself it does not promote settlement. The third and fourth suggestions are' not likely to result in a marked increase in settlements (since parties generally "dig in" once a panel is formed). However, they merit consideration because they do seek to promote settlement.

The United States has suggested shortening the consultation process and allocating the (unspecified) saved time to (unspecified) stages in the panel process.28 This proposal runs directly counter to the concerns of Hungary and Japan that consultations should not be treated merely as a "procedural formality."29 The objective of promoting settlement cannot be achieved by shortening the consultation stage.

The remainder of the suggested changes to the consultation process do not address ways of promoting settlement. Rather, they cover technical modifications to the consultation process. They include Guatemala's proposal to permit consultations on prospective measures,30 Hong Kong's proposal to enhance notifications of mutually agreed solutions,31 Hong Kong's proposal to change the standard for permissive joinder to consultations (from "substantial trade interest" to "substantial interest"),32 Japan's proposal to preclude arbitrary refusal of requests to join consultations,ss Japan's proposal to clarify that a panel request cannot be placed on the agenda for a Dispute Settlement Body meeting until expiry of the 60-day consultation period,34 and Japan's proposal to require that all legal claims cited in a panel request must have been raised during the consultations.35

VI. CONCLUSION

The consultation process has fulfilled the DSU drafters' goal of enhancing and promoting resolution of disputes without recourse to panels. With the exception of the developing countries' concerns about access to the process, the other proposals for change, other than that of the United States to shorten the consultation period, are merely tinkering. They do not envision radical changes to the process.

The developing countries' concerns about access to the system are fundamental and deserve serious exploration. Although developing countries are using the WTO dispute settlement system more than they used the GATT system, it is worrisome that they feel that resource and monetary constraints preclude their full use of the system. As long as they feel that way, the long term credibility of the WTO is at risk. The system will survive and flourish only if all (or at least a vast majority) of its Members feel that they have the ability to adequately protect their WTO rights.

1. Understanding on Rules and Procedures Governing the Settlement of Disputes, Apr. 15, 1994, art. 4.4, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, in RESULTS OF THE URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS 1 (1994) 404, 408 (1994), 33 I.L.M. 1226, 1228 [hereinafter DSU].

2. See id.

3. See id. arts. 4.11, 9, at 409, 412, 33 LL.M. at 1228, 1232. Both consulting parties must agree to third party participation. The DSU does not define "substantial trade interest" and does not provide for review of denied requests. As a result, there have been arbitrary refusals to permit participation by countries that objectively seem to have a "substantial trade interest."

4. See id. art. 4.3, at 408, 33 LL.M. at 1228. All time periods specified in the DSU can be extended by mutual agreement of the parties. See id. art. 4.3, at 408, 33 LL.M. at 1228. In cases of "urgency", including those involving perishable goods, shorter time limits apply See id. art. 4.8, at 408, 33 LL.M. at 1229.

5. See id. arts. 4.7, 25, at 408, 427, 33 LL.M. at 1229, 1242. To date, no member has invoked the WTO's arbitration procedures in lieu of panel proceedings.

6. See id. art. 5, at 409, 33 I.L.M. at 1230. 7. See id. art 3.2, at 405, 33 I.L.M. at 1227. 8. See id. art 3.3, at 406,33 I.L.M. at 1227. 9. See id. art. 3.7, at 406, 33 I.L.M. at 1227. 10. See id. art. 3.10, at 407, 33 I.L.M. at 1228.

11. See id. art. 4.1, at 407, 38 LL.M. at 1228. 12. See id. art. 4.5, at 407, 33 LL.M. at 1229. 13. See id. art. 5, at 409, 33 LL.M. at 1230. 14. See id. art. 5.6, at 410, 33 LL.M. at 1230.

15. See id. arts. 5.3, 5.5, at 409-10, 33 LL.M. at 1230.

16. See WTO Secretariat, Overview of the Stateof-play of WTO Disputes (last modified Nov. 26, 1999) . The numbers differ from those in the Overview's summary block because the numbers in this paper are based on the status of complaints rather than the number of panel reports; in many cases one report covers multiple complaints. See a/soYoung Duk Park & Barbara Eggers, WTO Dispute Settlement 1995-99: A Statistical Analysis, 3J. INT'L EcoN. L. 194 (2000).

17. It is very likely that some of these consultations are inactive. However, if the WTO has not been notified of termination, one cannot tell.

18. In one instance, a complaint was "settled" by the filing of a superseding complaint (European Communities-Regime for the Importation, Sale and Distribution of Bananas, WT/DSl6 and European Communities-Regime for the Importation, Sale and Distribution of Bananas, WT/DS27).

19. See Malaysia-Prohibition of Imports of Polyethylene, WT/DSl; Korea-Measures Concerning the Shelf-Life of Products, WT/DSS; United States-Imposition of Import Duties on Automobiles from Japan, WT/DS6; European Communities-Trade Description of Scallops, WT/DS7; European Communities-Trade Description of Scallops, WT/ DS12; European Communities-Trade Description of Scallops, WT/DS14; Japan-Measures Affecting the Purchase of Telecommunications Equipment, WT/DS15; Poland-Import for Automobiles, WT/DS19; Korea-Measures Concerning the Bottled Water, WT/DS20;Japan-Measures Concerning Sound Recordings, WT/DS28; Hungary-Export Subsidies in Respect of Agricultural Products, WT/DS35; Pakistan-Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS36; Portugal-Patent Protection Under the Industrial Property Act, WT/DS37; Korea-Laws, Regulations and Practices in the Telecommunications Procurement Sector, WT/DS40;Japan-Measures Concerning Sound Recordings, WT/DS42; Turkey-Taxation of Foreign Film Revenues, WT/DS43; United States-Anti-Dumping Investigation Regarding Imports of Fresh or Chilled Tomatoes from Mexico, WT/DS49; Australia-Textile, Clothing and Footwear Import Credit Scheme, WT/DS57; European Communities-Measures Affecting Butter Products, WT/DS72; Japan-Procurement of a Navigation Satellite, WT/DS73; Philippines-Measures Affecting Pork and Poultry, WT/DS74; United States-Measures Affecting Textiles and Apparel Products, WT/DS85; Sweden-Measures Affecting the Enforcement of Intellectual Property Rights, WT/DS86; India-Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS91; India-Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS92; India-Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS93; India-Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS94; India-Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS96; Philippines-Measures Affecting Pork and Poultry, WT/DS102; Australia-Anti-Dumping Measures on Imports of Coated Woodfree Paper Sheets, WT/DS1 19. For details, see WTO Secretariat, supra note 16.

20. Sa Venezuela-Anti-dumping Investigation in Respect of Imports of Certain Oil Country Tubular Goods (OCTG), WT/DS23; United States-Measures Affecting Imports of Women's and Girls' Wool Coats, WT/DS32; United States-Tariff Increases on Products From the European Communities, WT/DS89.

21. See European Communities-Duties on Imports of Cereals, WT/DS9; European Communities-Duties on Imports of Grains, WT/DS13; European Communities-Duties on Imports of Rice, WT/DS17; United States-The Cuban Liberty and Democratic Solidarity Act, WT/DS38; United States-Imposition of Anti-Dumping Duties on Imports of Colour Television Receivers from Korea, WT/DS89; Australia-Subsidies Provided to Producers and Exporters of Automotive Leather, WT/DS106; Argentina-safeguard Measures on Imports of Footwear, WT/DS123.

22. The total is 41 because in one complaint, Hungary-Export Subsidies in Respect of Agricultural Products, WT/DS35, both developed and developing countries challenged a developing country's measure.

23. See Korea-Measures Concerning the Shelf Life of Products, WT/DSS; European Communities-Duties on Import of Grain, WT/DS13; Japan-Measures Concerning Sound Recordings, WT/DS28; Hungary-Export Subsidies in Respect of Agricultural Products, WT/DS35; Pakistan-Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS36; Turkey-Taxation of Foreign Film Revenues WT/DS43; Portugal-Patent Protection Under the Industrial Property Act, WT/DS37; Philippines-Measures Affecting Pork and Poultry, WT/DS74; Sweden-Measures Affecting the Enforcement of Intellectual Property Rights, WT/DS86; Philippines-Measures Affecting Pork and Poultry, WT/DS102; Australia-Subsidies Provided to Producers and Exporters of Automotive Leather, WT/DSI06.

24. See United States-Imposition of Import Duties on Automobiles from Japan Under Sections 301 and 304 of the Trade Act of 1974, WT/DS6; United States-Measures Affecting Imports of Women's and Girl's Wool Coats, W/DS32; United States-the Cuban Liberty and Democratic Solidarity Act, WT/DS38; United States-Tariff Increases on Products from the European Communities, WT/DS39; United States-Measures Affecting Textiles and Apparel Products, WT/DS85; United States-Imposition of Anti-Dumping Duties on Imports of Colour Television Receivers from Korea, WT/DS89.

25. See Special and Differential Treatment For Developing Countries in the Multilateral Trading System, WT/GC/W/109, WT/COMTD/W/49 (Nov 5, 1998) (communication from Egypt); Proposal by Guatemala Regarding the Review of the Understanding on Rules and Procedures Governing the Settlement of D&(tes (Oct. 26, 1998) (on file with Law and Policy in International Business) [hereinafter Proposal by Guatemala]; Non-Paper by Venezuela: Comments on the Review of the Dispute Settlement Mechanism (Feb. 28, 1998) (on file with Law and Policy in International Business); Review of the Dispute Settlement Understanding: Discussion Paper by India (undated) (on file with Law and Policy in International Business); The Review of the Dispute Settlement Understanding: Informal Suggestions with Respect to the Issues to be Considered for Evaluation and Review, by the Government of Japan, DSU/2 (May 29, 1998) (on file with Law and Policy in International Business) [hereinafter Informal Suggestions by Japan].

26. The Centre would be independent from the WTO in order to safeguard the neutrality of the WTO Secretariat. The Centre's sponsoring countries envision that it would sponsor seminars and internships and also would provide legal advice on WTO law and support in legal proceedings to developing country members. The Centre would assist in the defense of WTO cases and would pursue complaints based on their legal merits. The countries that proposed the Centre were Bangladesh; Colombia; Hong Kong; the Netherlands; Norway; The Philippines; South Africa; Tanzania; Turkey; United Kingdom; and Venezuela. A copy of the proposal for the Centre is available at .

27. See Non Paper by Hungary: Comments on the Review of the Dispute Settlement Mechanism, para. 1 (Sept. 18, 1998) (on file with Law and Policy in International Business); Informal Suggestions by Japan, supra note 25, para. 20.

28. See Preliminary Views of the United States Regarding Review of the DSU, para. 6 (Oct. 29, 1998) (on file with Law and Policy in International Business). 29. See Informal Suggestions by Japan, supra note 25, paras. 6-7. 30. See Proposal by Guatemala, supra note 25, at 1. 31. See Review of Dispute Settlement Understanding: Informal Suggesstions by Hong Kong, China of Issues to Be Taken Up in the Review, DSU/4, at 1 (undated)( on file with Law and Policy in International Business). 32. Id, at 1-2 33. See Informal Suggestions By Japan, supra note 25, paras. 11-12. 34. See id. para. 9. 35. See id. paras. 7,16.

G. CHRISTOPHER PARLIN*

* Counsel, Winthrop, Stimson, Putnam & Roberts; Washington, D.C.

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