Article: Going Beyond Stereotypes: Participation of Developing Countries in WTO Dispute Settlement, 4(1) Trade, L. & Dev. 45 (2012) [available here]
Authors' Reply (Jan Bohanes & Fernanda Garza)
We sincerely thank Prof. Gao for both his positive and critical comments. As one of the leading Chinese international trade academics, Prof. Gao is uniquely placed to comment on the subject at hand and on our paper. We thank him for taking the time to read our paper and sharing his insights with us.
Before reacting to Prof. Gao’s critical remarks – the chief purpose of this reply – we wish to address one of his positive comments. Referring to our comments on the proposed trust fund (pp. 76 – 79 of our paper), Prof. Gao characterizes our analysis as suggesting that “even if the fund could encourage developing countries to bring more cases, this might not necessarily be a good thing as many such cases might be better left un-litigated due to their low commercial value.”
We wish to clarify that we do not advocate that developing countries abstain from initiating disputes because of low commercial value. Quite the contrary – the key message of our paper is that developing countries should be enabled to bring any dispute that they consider useful. In so doing, they should not be constrained by factors that any legal community would deem inequitable, such as lack of resources (see p. 50 of our paper).
Instead, our argument is that, even for small countries there may be an absolute cut-off point in commercial value below which a government, as an empirical matter, will typically not press ahead with a WTO challenge. This appears to hold even if a strictly monetary cost-benefit analysis of trade value and litigation costs were positive. Given the fact that the average value of ACWL-assisted developing country complaints is appreciably above the ACWL’s (very low) maximum fees, defraying these low fees is quite unlikely to unleash previously bottled-up developing country complaints. As our article emphasizes, reimbursing at least some developing countries’ litigation costs is a most honorable idea, assuming that the numerous and very significant practical challenges can be addressed. However, given the likely marginal (if any) dispute-promoting impact of such a fund, developing countries should not spend precious political capital on this project. Making use of the already existing tremendous resource that is the ACWL is an incomparably better strategy.
But now to Prof. Gao’s critical remarks, all of which address very pertinent topics. First, Prof. Gao is absolutely right that countries like Brazil, India and China differ from the majority of developing countries, their (economic) size being one of the most obvious factors. We acknowledge this point repeatedly throughout our article. It is also true that these countries’ higher level of WTO litigation activity, as well as their greater financial and human resources, provide opportunities for building an “international trade community” that smaller developing countries may not enjoy. In fact, the entire point of our introductory “quantitative” section is that the divide in WTO dispute settlement runs, to a large extent, between large and small countries.
At the same time, we would emphatically disagree that the experience of these countries holds no lessons for other (including smaller) developing countries. Brazil brought 9 complaints during the 46 years of its GATT membership, but has brought 26 in less than 17 years of the WTO. That is a very noteworthy 8-fold increase on a per-year basis. The drivers of this extraordinary increase in litigation capacity and willingness cannot be irrelevant when analyzing the experience of other developing countries - at the very least that of other large developing countries, e.g. Argentina, Mexico, India, Indonesia or Pakistan, or even newly acceded Russia. Similarly, we fail to see why the many institutional changes observable in Brazil and so eloquently described e.g. by Prof. Shaffer in his exhaustive case study (e.g. better intra-governmental coordination and improved inter-agency decision-making procedures) should not be replicable also in much smaller economies, at least to some extent. As yet another example, emulating China’s systematic use of third party participation as, inter alia, a capacity-building tool is also not impeded by smaller economic size.
Prof. Gao next queries why we did not use the Horn, Johannesson and Mavroidis classification of developing countries. We referred to these and other scholars’ work as evidence of the growing recognition that “developing countries” in the WTO are too heterogeneous to be meaningfully aggregated into one single group. Although we then analyze some constraints common to a large proportion of developing countries, we also emphasize that each country will require a highly individually tailored set of measures so as to optimize its WTO participation. It is quite possible that some constraints are more prevalent within some of the country sub-categories defined by Horn, Johannesson and Mavroidis; in fact, we understand that analysis on thisquestion is already being undertaken and will no doubt enrich the debate. We considered it beyond the scope of our article to engage in such analysis. In any event, from the perspective of an individual developing country – as mentioned by Prof. Gao – whose policy makers may wish to develop an action plan for optimizing their country’s WTO participation, even an analysis that uses the disaggregated Horn, Johannesson and Mavroidis framework will not replace the need for an individualized assessment of a country’s particular circumstances.
With respect to Professors Nordstroem’s and Shaffer’s small claims procedure, we remain unpersuaded by Prof. Gao’s argument. His analogy with the distinction between an appealed or unappealed panel ruling strikes as inapposite. That minor distinction nowhere mirrors the contrast that would arise between a well-established, politically accepted standard DSU process, and a newly created alternative “small claims” procedural track that, by its explicit design, would truncate the legal and factual analysis as well as the underlying procedural steps. In the messy and vicious domestic political arena, protectionist interest groups and their clever legal counsel would no doubt seek to characterize this as a “second rate” procedure in which legal arguments were not properly vetted and evidence not properly considered. This would be especially the case if a “small claims” procedure were used against the objection of the defendant. We also do not entirely understand the comment that some countries may not be seeking to enhance their bargaining positions. In fact, every WTO complainant hopes for prompt and complete compliance, and such compliance is intrinsically linked to the political acceptability of an adverse ruling in the defendant Member. Developing countries’ aversion to using special procedures, an aversion driven by the concern not to detract from the political legitimacy and impact of a ruling, has been noted for instance by observers as knowledgeable and experienced as Dr. Frieder Roessler.
Nevertheless, as we hint in the paper, there are also strong practical questions surrounding the proposed small claims procedure. In any event, the fact that the small claims procedure has not been a significant part of the DSU review debate among Members suggests that developing countries are not persuaded that it holds much promise for them. By way of conclusion, we hasten to add that Profs. Nordstroem and Shaffer are undoubtedly among the most influential commentators and idea-generators for optimizing the WTO dispute settlement system for developing countries. Our work builds on, owes a great deal to, their scholarship, making us the proverbial dwarves sitting on giants’ shoulders. However, with respect to their small claims procedure proposal, we respectfully disagree, for the reasons stated above.
With respect to Prof. Gao’s point on retaliation, our article expressly acknowledges and discusses his very point. We explicitly state that retaliation can impact on the domestic bargaining process that underlies a WTO Member’s ultimate choice between compliance and non-compliance. Our contention – with respect to which we are not certain whether Prof. Gao agrees or disagrees – is that this domestic bargaining process will typically point towards compliance, even without the added “nudge” resulting from retaliation.
Finally, we turn to Prof. Gao’s comment on our treatment of “culture” as factor. We emphasize that by culture we referred to a set of domestic deeply engrained and persistent domestic socio-normative patterns, as distinct from other factors shaping a government’s international behavior and the government’s related “attitudes” (such as foreign policy strategy, knowledge and experience of the WTO system, etc.) An example of such deeply embedded cultural patterns would be the much-described Confucian emphasis on amicable dispute resolution as opposed to litigation.
We accept that our discussion of this factor could have been more elaborate. The brevity of our analysis simply betrays our skepticism that this factor can explain WTO dispute initiation patterns. We certainly recognize the tremendous cultural differences that exist across WTO Members’ societies. We would welcome a rigorous scholarly discussion of this topic, but we are only aware of occasional brief and somewhat speculative references in the existing literature on WTO dispute settlement.
In our view, asserting a direct link between general societal attitudes to litigation, and a government’s WTO dispute initiation patterns, entails, at the very least, two distinct assumptions. The first assumption is that domestic (individual or corporate) “cultural” attitude towards litigation – attitude that, however, may be also heavily driven by the financial and other incentives or disincentives that a domestic legal system holds for potential plaintiffs -- creates a corresponding “attitude” of an entire governmental machinery and in its decision-making in international economic relations. The second implied assumption is that cultural preferences hold very powerful sway within the complex politico-economic-legal calculus underlying a government’s choices as a participant in the WTO system. E.g. we would have to assume that diffuse cultural preferences for non-litigious dispute settlement can repeatedly prevail over tangible commercial interests of powerful domestic constituencies that would militate in favour of litigation; or that such cultural preferences will repeatedly trump strategic imperatives dictated by factors such as a country’s relative size and power vis-à-vis its geopolitical and economic competitors.
Both assumptions, while not impossible, strike us intuitively as rather questionable and certainly in sore need of a rigorous examination. Moreover, one can easily come up with counter-examples that suggest the absence of a link between domestic “culture” and WTO litigation. Confucian and allegedly litigation-averse China has developed into the sixth largest complainant in the WTO since 2001. The United States, a very litigious society domestically, harbors a deep suspicion of international tribunals outside the WTO system. Moreover, governmental litigation behavior can experience profound and rapid changes that would appear incompatible with the notion of persistent and deeply embedded social norms and values. For instance, Argentina – which Prof. Gao rightly points out is a relatively frequent complainant in the WTO arena – on our count filed only 3 disputes during 28 years of its GATT membership. However, after important changes in internal governance during the 1990s, it rose to become the 7th largest WTO complainant with 18 disputes filed in less than 17 WTO years. (On a yearly basis, this is an increase by a factor of almost 10.) Similarly, Chile filed only 5 disputes during almost 50 years of GATT era, but has brought 10 disputes in the WTO, more than quintupling its per-year count and achieving rank 11 as complainant. We have already mentioned Brazil’s rise to one of the key litigants under the WTO.
So either culture has very limited, if any, influence, or this influence can be eclipsed by other factors with relative ease. And this is exactly what we assert in our paper. But our lengthy response to his critique actually demonstrates that Prof. Gao is very right. We indeed could and should have explained our views on the “culture” factor in more detail.
We thank Prof. Gao again for taking the time to read our article, for his insightful critique and his praise. We also thank the hard-working, enthusiastic and patient editorial team of the Trade, Law and Development Journal, as well as the WorldTradeLaw.net team for organizing this exciting symposium and for making possible this valuable academic exercise. We hope that our paper will be of use and of interest to those who, undeterred by its length and its many footnotes, will take the time to read it. And we hope that even readers who do not agree with all of our conclusions will find it worthwhile and thought-provoking. The topic certainly deserves a continued dedicated debate and we look forward to it.