World Trade Organizations Dispute Settlement Mechanism - Thesis Example

Thesis: World Trade Organization- Dispute Settlement Mechanism The dispute settlement mechanism controls the trade conflicts between different member’s countries and due to unequal distribution of influence between the developing and developed countries in multilateral trade negotiations and the changing of power relations over time. This thesis analyzes and explains how the develop countries have more power in World Trade Organization’s Dispute Settlement Mechanism and are influencing the developing countries. The WTO Dispute Settlement Mechanism should secure the ‘rule of law’ within international trade and provide all members with opportunities to exercise their rights equally under multilateral trade agreements. But, even after ten years, there still are many countries which haven’t have the option to initiate a dispute. The system has been critically analyzed and the solutions have been proposed that DSM should break the monarchy and fear of developed countries and secure the developing. Thesis Question: Does the WTO dispute settlement mechanism serve the interests of the developed countries at the expense of the developing?  Justification: a. is this a topical discussion internationally, in the academic literature or in policy circles?  An international organization, the World Trade Organization (WTO) was designed to supervise and liberalize international was came into being on 1 January 1995. It is the descendant of GATT the General Agreement on Tariffs and Trade, which was formed in 1947, and continued to operate for almost five decades as a de facto international organization. Most of the academic literature, even in its more critical versions, tends to share this basic assumption with the designers of the DSM. The DSM is conceptualized as a legal system where the same rules apply to countries on an equal basis, and where cases are judged according to their merits. This principle is incarnated in the AB, which has developed a case law with this emphasis. A final set of observations from this literature focuses on biases and inequalities within and between institutions managing trade, including the WTO in general and the DSM in particular (Busch and Reinhardt, 2003; Shaffer, 2003). Here, the main problem identified is that the DSM (and the WTO) has become too technically complex and demanding for most developing countries to use effectively in the absence of adequate assistance. Originally, this is the observation that there is too much law and too little politics in the system. The implicit biases of systems of trade rules, including the DSM, in favor of powerful countries – reinforced through the dominance of judicial forms of rule-making – have been noted by some contributors to the literature (for example, Busch and Reinhardt, 2001). Initial studies of developing country participation in WTO dispute settlement found that they were unable to use the system effectively to settle cases, although they had expected levels of success when cases went before panels and the Appellate Body.161 This suggested that there was a need for more training and assistance to developing countries to enable them to handle the initial stages of dispute settlement more effectively. More recent experience suggests that at least the major developing countries – and quite a few Latin American countries in general – have become more effective in using dispute settlement overall, including in using it to obtain early settlements. The establishment of the Advisory Centre on WTO Law and the dispute settlement training activities of the WTO Secretariat and others should help ensure that developing countries continue to made progress on this front (Busch and Reinhardt, 2001). b. What theories, insights or policy measures does the literature on this topic offer?  Most of the research which is conducted in the economics community focuses on the theoretical implications of dispute settlement mechanism within the WTO. Trade theorists, still, have lately begun to address the questions of institutional design as well as the benefits of multilateralism and the dispute settlement mechanism. A model is found which the WTO dispute settlement system allows a third-party involvement in gathering and multilateral enforcement mechanisms (Maggi, 1999). In short, the WTO is trying to extend the domain of trade negotiations beyond strict bilateral dimensions, also yielding positive benefits in terms of lucidity and reputational effects for offending countries created by revealing related details about the complaint. Whereas, when they find sanctions official by the Dispute Settlement Body (DSB) reduce trade policy cooperation relative to an environment without the DSB. Although these findings seem rather negative, the game-theoretic model used ignores completely the assembling information and aggregating preferences to function the mechanism (Ludema, 2000). It is also observed that the principles of the General Agreement on Tariffs and Trade (GATT), which underlie the WTO system, assist governments in their effort to implement efficient trade agreements through reciprocity and nondiscrimination (Bagwell and Staiger, 1999). Moreover it is portrayed the dispute settlement procedure as a mechanism for reducing rigidity and increasing stability in trade policy. Moreover, a wider variety of countries are willing to sign an agreement through a dispute settlement procedure than without (Rosendorff 2000). Finally, the WTO dispute settlement system can assure against this risk by maintaining market access once it has won, thus encouraging developing countries to embark on an open trade development strategy. Obviously this will affect the developing countries face substantial hurdles in using WTO dispute settlement (Hoekman and Mavroidis, 2000). In short, the effectiveness of WTO dispute settlement derives more from these intangibles than from trade sanctions, which are rare, and which could never have been a credible factor in the dozens of cases in which wealthy defendants have approved to inferior complainants. This perspective is giving the emphasis on retaliation at the WTO is actually misplaced. Though it is also true that larger countries can more credibly threaten to retaliate, threats of retaliation are not the key to the system. Other requirements of the WTO are “to make legal complaints without retaliation quite a bit more effective than they were” was under GATT. The incapability of poorer countries to retaliate is a problem, but it is a separate problem; it has nothing to do with the service of the dispute settlement procedure for a developing country complainant (Hudec. 2002, p. 84). c. What does the most recent academic literature suggest about your topic? The recent academic literature shows the major outcomes of the Uruguay Round, the WTO Dispute Settlement Understanding (DSU) is regarded as one of the central pillars of today’s multilateral trading regime. It is expected that this new rule-oriented dispute settlement mechanism (DSM) can replace the GATT’s power-based dispute resolution system, thus can bring more equality and protection to developing countries. Some researches support this claim. In the DSM of the WTO, there is no strong evidence of a bias against developing countries either as complainants or respondents (Holmes, Rollo and Young, 2003). In other words, the new DSM enhances equality between developing member countries and developed ones. However, there are also suspicious voices questioning whether the DSM can be really impartial. The fact that developing countries usually find themselves in a weaker position in the WTO compared with industrialized members may indicate that the DSM needs to contribute more efforts to improving the equality status of developing countries. Through the empirical research, it is concluded that the DSU procedure is biased against developing countries (Besson and Mehdi, 2004),). While three primary challenges are, that equality which developing countries have to face in the new DSM, including lack of legal expertise, constrained financial resources and political and economic pressures (Shaffer, 2006). While is also argued that the WTO inherits all of the asymmetries that arise when there are substantial differences in bargaining power, since it rests on decentralized enforcement of international obligations (Hoekman and Mavroidis, 2001). As shown in a recent study (Busch and Reinhardt 2003), this is not just a work of art of differences in economic size. Rather, while the system is clearly working for all complainants, it is working better for those with the know-how and savvy to take maximum advantage of the legal opportunities the system affords. d. How does your complement or differ from this literature?  Initially, when the WTO came in to being, it was unpredictable to observe the current situation of these outcomes. Even though the rules of Dispute settlement mechanism does not have any law, which is biased for any member country who wants to submit any complaints. But there is a fear in developing country while filing against the develop country because they might loose trade in retaliation. The question arises that despite their lack of a credible threat to retaliate, why have these developing countries succeeded in making effective use of WTO dispute settlement? The recent literature review does compliment the research question by stating different cases it can be proved that the WTO dispute settlement mechanism serve the interests of the developed countries at the expense of the developing. The reason is that these complainants, like their wealthier equivalent, have benefited from the fact that defendants concern about the normative criticism that goes along with a legal overpowering, but not the direct retaliation threats. It means that defendants preferred to avoid founded in “noncompliant” because such a label may damage their prospects of gaining compliance which is not possible if they file as complainants. In this way, defendant governments may choose the integrity of the multilateral trade regime over the outcome of a single case; it means that poor complainants can use legal victories at the WTO to weigh up in on the domestic political debates over free trade within defendant countries, as they look to gain market access. Methodology: The approach to find out the conclusion it will be inductive. THEORIES: The research question can be examined theoretically from several international political economic angles, including the traditional approaches of realism, liberalism, constructivism and Marxism, focusing on the interests of states in terms of economic power and material power within the international trading regime and the multilateral trade negotiations. These approaches, though with different emphasis and context, mainly explain the current structure of the international trading regime and are suited to describe less on the changing of and within the regime. Stephen Krasner a realist explored the change in the international trading regime in his. His emphasis as a realist is on power and control, but not on economics at the expense of politics, which is clearly seen through his statement that developing countries want power and control as much as wealth (Krasner, 1985, 3). This theoretical approach as a way to answer the research question is therefore very relevant since it has a realist foundation, concerned with the states' vulnerabilities and threats, when it comes to the general approach to international trading regimes, but with the focus on explaining the related changes seen through the perspective of the influence of the developing countries. Another alternative theoretical approach is found in social theory, which takes a totally different angle when explaining the behavior and interests of states in the international trading regime, focusing directly on the process through which identities and interests are formed and changed. This constructivist approach seen in Jane Ford's “A Social Theory of the WTO” from 2003 is therefore a clear contrast to the realist perspective seen in Krasner, since she recognizes the interests of states do not exist independently of interaction (Ford, 2003, 15). The constructivist theory explains how the re-thinking and changing of trading rules, roles and behavior of the developing countries creates a collective identity as multilateral trader and participant instead of protectionist and opponent. This leads to the change in the distribution of influence and power in the international trading regime. The constructivist explanation thereby emphasizes regime change as a social process and thus has an advantage in explaining how the developing countries have gained influence. While the Marxism theory of Economics is the site of human exploitation and class inequality. It is a zero-sum game. Agree with mercantilists that politics and economics are intertwined: both reject the liberal view of an economic sphere operating under its own laws. Marxists put economics first and politics second (contrary to mercantilists).The capitalist economy is based on two antagonist social classless; the bourgeoisie (owners of the means of production) and the proletariat (owns its labour power which it sells to the bourgeioisie). Exploitation occurs: labor puts in more work than it gets back in pay. The surplus value is appropriated by the bourgeoisie. Capitalism was not necessarily negative: it was necessary for the destruction of feudalism; and to allow labor to sell itself freely; it paved the way for the socialist revolution. The Marxist view is materialistic, the core activity in any society concerns the way in which human beings produce their means of existence. Economic production is the basis of all human activity. The Economic basis consists of production (the technical level of production) and relations of production (the social system which determines control of the means of production). Taken together they form a specific mode of production. The bourgeoisie, which controls the means of production, also dominates the political realm. It lastly concludes that economics dominates politics. In his classic book, Global Political Economy (1987), Robert Gilpin outlines the origins and contemporary issues in the field of economics. He distinguishes between neo-classical economics and political economy (PE), before discussing political economy at the international level (IPE). He defines PE as the interaction of the market and powerful actors such as states, multinational firms and international institutions. He contends that the state continues to be the most important actor in international affairs, but it is not the only actor. (Gilpin. pp.17-28) Whereas in neo-classical economics the objective is to impart how markets function, the goals and values being of secondary importance, in PE the purpose of PE matters: the choices we make are a political matter and not simply the maximization of scarce resources. (Gilpin. p. 24) There are other theories as well which will be discussed in the detailed essay but I will emphasis on realism, constructivism and Marxism to prove my stance. I will be doing comparative analysis of these theories. There are many academic literature review which is getting published and a lot of researches are there which discuss the interest of develop countries through Dispute settlement mechanism. Initially there were views that DSM is fair with every member country but now the views are changing. Let me give you latest literature review example. The fact that developing countries usually find themselves in a weaker position in the WTO compared with industrialized members which indicates that the DSM needs to contribute more efforts to improving the equality status of developing countries. Through the realistic research it was concluded that the DSU procedure is unfair against developing countries (Benson and Mehdi, 2004) Sources: There is many sources available online and journals and books in the library which are really helpful. Recent news stories have been read to see the role of dispute settlement in the developing countries. There is many researches which have been done on the role of Dispute settlement in many countries but I have many resources which are primary like journals, statements from non governmental institutions etc. and while studying theories there were many secondary approaches which were also used in other journals. i. What sources are available on this topic?  The available sources are journals, articles, encyclopedia, statements, books, theories, notes, news and websites. ii. Are there enough sources for your research topic?  There is much reading material available online which more than enough for the research study. There are primary and secondary resources I have used to collect the data. But I am mainly emphasizing on the secondary resources as I am not able to get hold of primary resources. c. How do the sources support your arguments?  The sources are complimenting my research and making my argument strong. There is a history attached to it and the sources are proving the hypothesis correct. d. You must discuss and cite at least 3 new academic articles from refereed/peer reviewed journals.  Three journals which have helped me a lot are. 1. Christensen. K.H. 2005. The Influence of the Developing Countries in the Multilateral Trade Negotiations of the WTO Doha Round. 10th October 2008. http://theses.lub.lu.se/archive/2006/01/08/1136738123-10112-101/Katja_Christensen_STV_WTO_Doha_Rounds.pdf. 2. Reinhardt. E and Busch. M.L. The WTO Dispute Settlement Mechanism and Developing Countries. 2004. 11th October 2008. http://userwww.service.emory.edu/~erein/research/SIDA.pdf 3. Bagwell and Staiger. 1999. An economic theory of GATT. An American Economic Review. 12th October 2008. www.ssc.wisc.edu/econ/archive/wp9815.pdf. Bibliography: - Bagwell and Staiger. 1999. An economic theory of GATT. An American Economic Review. 12th October 2008. www.ssc.wisc.edu/econ/archive/wp9815.pdf. - Busch, Marc L., and Eric Reinhardt (2002), “Testing International Trade Law: Empirical Studies of GATT/WTO Dispute Settlement”, in Daniel M. Kennedy and James D. Southwick (eds.), The Political Economy of International Trade Law: Essays in Honor of Robert Hudec, Cambridge University Press, NY and Cambridge. - David Ricardo, Principles of Political Economy and Taxation (1817; 3rd edn. 1821); Marc Blaug, Economic Theory in Retrospect, 3rd edn. (Cambridge and New York: Cambridge University Press, 1978). - Ford, Jane, 2003. A Social Theory of the WTO. Trading Cultures. Hampshire and New York: Palgrave Macmillan. - Hoekman, Bernard M., and Petros C. Mavroidis (2000), “WTO Dispute Settlement, Transparency, and Surveillance”, World Economy 23(4), pp. 527-542. - Hoekman, Bernard M. and Will Martin, ed. Developing Countries and the WTO: A Pro-active Agenda. Malden: Blackwell Publishers Ltd., 2001. - Holmes, Peter, Jim Rollo and Alasdair R. Young. “Emerging Trends in WTO Dispute Settlement: Back to the GATT?” World Bank Policy Research Working Paper 3133, September 2003 - Hudec, Robert E (2002), “The Adequacy of WTO Dispute Settlement Remedies”, in Bernard Hoekman, Aaditya Mattoo and Philip English (eds.), Development, Trade, and the WTO, World Bank, Washington, DC. - Krasner, Stephen, 1985. Structural Conflict. The Third World Against Global Liberalism. Berkeley, Los Angeles and London: University of California Press. - Ludema, Rodney D., ‘Optimal International Trade Agreements and Dispute Settlement Procedures,’ European Journal of Political Economy, July 2000. - Maggi, Giovanni, ‘The Role of Multilateral Institutions in International Trade Cooperation,’ American Economic Review, Vol. 89, No. 1, 1999. - Mavroidis, P. C.; Cottier, T.; Davey, W. J.; Fox, E. M.; Horlick, G. N.; Komuro, N. and Rosenthal, D. E. (1998) ‘Is the WTO Dispute Settlement Mechanism Responsive to the Needs of the Traders? Would a System of Direct Action by Private Parties Yield Better Results? Panel Discussion’, Journal of World Trade 32 (2): 147-65. - Shaffer, Gregory and Victor Mosoti (2002), “EC Sardines: A New Model for Collaboration in Dispute Settlement?”, Bridges 6 (7) October, pp. 15– 22. - Shaffer, Gregory. “The Challenges of WTO Law: Strategies for Developing Country Adaptation.” World Trade Review 5, no.2 (2006): 177-198. - Reinhardt. E and Busch. M.L. The WTO Dispute Settlement Mechanism and Developing Countries. 2004. 11th October 2008. http://userwww.service.emory.edu/~erein/research/SIDA.pdf. - Gilpin. R. Global Political Economy: Understanding the International Economic Order. 1987. Princeton University Press (February 20, 2001). - Keynes. J.M, Moggridge D.E. The Collected Writings of John Maynard Keynes. Royal Economic Society, Royal Economic Society (Great Britain). Published by MacMillan for the Royal Economic Society, 1987 Read More