Article: Going Beyond Stereotypes: Participation of Developing Countries in WTO Dispute Settlement, 4(1) Trade, L. & Dev. 45 (2012) [available here]
Authors: Jan Bohanes & Fernanda Garza
Comment by Henry Gao
The participation of developing countries in WTO dispute settlement system is a topic of great importance in theory as well as in practice. In terms of the practical importance, studying the past experiences of developing countries’ participation can help to understand the patterns of performance, identify the problems in the existing system, and discover possible strategies to improve their participation. At the same time, the topic is also of great theoretical value, as such study can shed light into fundamental issues which are often dismissed as being too academic to be relevant, including, for example, the desirability of a highly legalistic approach to dispute settlement, the ultimate aim of the WTO dispute settlement system, and the exact nature of the remedies provided under the system, etc.
Since the establishment of the WTO, a rich and ever-growing literature on the topic has been developed by lawyers, economists, and international relations scholars. While most of the existing literature tends to agree that the developing countries have been under-represented in the WTO dispute settlement system, they disagree in their diagnoses of the reasons for such deficiency and prescriptions for solving the problem. In this regard, the paper by Bohanes and Garza is a timely piece, because it not only provided one of the most extensive summaries of the existing literature, but also did a great job busting many of the stereotypical theories on the alleged constraints facing developing countries.
Drawing from their rich experience in WTO litigation, Bohanes and Garza argued convincingly that many of the factors actually played a much smaller role than what people commonly believe. To start with, they pointed out that the claim of underrepresentation of developing countries in WTO litigation itself is a myth, because countries with bigger share in the global economy tend to be more frequent participants in WTO disputes, and this is true for both developed and developing countries alike. Of course, they acknowledged that the correlation is far from perfect, but the link is strong enough to shatter the oft-repeated stereotype that developing countries are underrepresented as a group.
Next, the authors considered the commonly-cited constraints facing the developing countries. Some of these are internal, such as the lack of legal capacity, problems in domestic trade governance, insufficient retaliatory power, cultural factor, etc. Others are external problems, such as the complexity of WTO litigation, the interference of preferential arrangements, and the fear of political retaliations. After an extensive and enthralling discussion, the authors concluded that, in general, the impacts of external constraints have been overly exaggerated. Instead, problems in domestic governance are the main barriers preventing developing countries from effectively using the WTO dispute settlement system.
Overall, I find the authors’ analyses in each topic not only comprehensive by discussing every major study on the subject from law, economics and political economy scholars, but also full of insights on even the most nuanced subjects. To start with, I was greatly impressed by the in-depth analysis on the different methodologies for classifying developing countries at the beginning of the paper. This is something lacking in many current studies, which just discuss the participation of developing countries as if they were a homogenous group without noting the many nuanced differences between different country groupings as the authors have done. Also, when evaluating the proposal for a trust fund on dispute settlement, the authors noted 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. Reflecting the deep grounding of the authors in trade policy formulation, this word of caution is a sobering call to those who are advocating more WTO litigations as an end in itself rather than as part of the broader trade policy framework. Similarly, when discussing why developing countries should choose the ACWL rather than law firms in their WTO disputes, the authors noted that, as the second-most frequent complainant in the WTO, the ACWL has a vast institutional experience, an advantage unmatched by any private law firm. Again, unless one has sufficient experience in handling real WTO disputes, it would be hard to appreciate the importance of institutional experience. Another example is the discussion on political pressure, where instead of relying on anecdotal evidence like most other studies have done, the authors used the GDP size as a proxy to the political powers of the countries and found that actually more than two-third of the developing country cases were brought against countries with larger GDP and therefore politically more powerful countries. This is a good example of the many innovative approaches adopted in the article and reflects the ingenuity of the authors in combining doctrinal analyses with empirical studies. I also thoroughly enjoyed the refreshing discussions on the impact of preferential arrangements, where the authors shrewdly noted that, while the tariff concessions under such agreements might not be enforceable in WTO proceedings, the non-tariff barriers such as TBT, SPS, or domestic tax measures remain fully subject to WTO law and potential dispute settlement process. I think this is a point that has been missed out in most of the discussions on preferential arrangements so far and should be kept in mind by everyone who’s interested in the topic.
On a few rare occasions, I find myself in slight disagreement with the authors. For example, I am troubled by the inclusion of giant countries like Brazil, India and China (BIC) in the discussion of developing countries’ participation in general. As big traders and frequent litigants, their experiences are hardly representative of that of typical developing countries and including them in the study only distorts the overall picture. Moreover, as average developing countries lack the enormous economic powers and widespread trade interests of BIC countries, it is doubtful that the successful examples of BIC really offer something useful to the other developing countries. For example, given their limited resources, most developing countries would not be able to emulate the examples of China and Brazil in building up the capacities in academia, law firms and government. Of course, I am not saying that the authors fail to recognize the BIC problem. Quite the contrary, they have correctly pointed out, at the beginning of the article, that “grouping all developing countries into one single category… papers over great differences”. Later, they also noted that the top 5 and 10 developing country complainants accounts for 50% and 75% of all developing country complaints, respectively. Moreover, they are not only aware of the problem, but also well cognizant of the possible solutions. For instance, they cited several ways to “differentiate between subsets of developing countries to make analyses more meaningful”. They also did a case study on South Africa to illustrate the common problems facing average developing countries. Indeed, had the authors followed their own advice and adopted either the categorization proposed by Horn, Johannesson and Mavroidis, or the one used by the ACWL in their membership classification, their analyses would have been more relevant and useful to average developing countries. It is puzzling that the authors mentioned these methods without discussing how they might be useful in the current study. Similarly, I remain unpersuaded by the authors’ dismissal of the proposal by Nordström and Shaffer to establish a “small claims procedure”. According to the authors, “it is doubtful that developing WTO members would see benefit in rulings from a procedure that would run the risk of being branded, by interest groups within the respondent member, a ‘second-class’ process, thereby undermining its political persuasiveness”. In my view, domestic interests groups rarely distinguish between Panel and Appellate Body decisions in criticizing WTO cases. Both are just WTO rulings to them and I doubt the rulings of a WTO small claims tribunal will receive different treatment, for better or for worse. Also, while I agree that some WTO Members might want to use certain WTO rulings to enhance their political bargaining position, I doubt this is true of all cases in the WTO. For some WTO Members, especially smaller ones, they might not be interested in establishing favorable WTO jurisprudence on controversial issues at all, either because the issue is well-settled with clear precedents, or because they just want to solve the problem at hand.
In addition, there are a few other issues which the authors could have taken a closer look. For example, in discussing the impact of retaliation on compliance, the authors argued that compliance mainly depends on getting sufficient domestic political support, which retaliation provides little help. However, if used well, retaliation or the threat of it could well mobilize domestic interest groups and realign their positions to increase the possibility of compliance. Interestingly, the authors seemed to acknowledge this point by mentioning the US “carousel retaliation” example in the EU - Bananas III dispute. Another well-known example is the proposed EU retaliation list in the US – Steel Safeguards case, which affects several key states in US presidential election by strategically choosing products such as Harley-Davidson motorcycle (Wisconsin), textiles (Carolinas) and citrus products (Florida), which prompted quick compliance by the US. Similarly, I find the authors’ discussion of cultural factors to be too cursory. According to the authors, while cultural traditions might play a role in deciding whether to use the WTO dispute settlement at all, it fades into the background once a country gains experience in the dispute settlement system. However, if this were indeed the case, we wouldn’t see Latin American countries such as Argentina and Chile joining the club of the most active litigants, notwithstanding their low total GDP and shares in global trade. Instead, they would have to switch places with a few Asian countries, especially Indonesia and Malaysia.
Notwithstanding the tiny blemishes mentioned above, I regard the paper as one of those rare pieces which combines deep academic rigor with rich practical insights. In my humble view, this is a must-read for WTO scholars and practitioners alike. In particular, I would highly recommend it for trade officials from developing countries. If they can all follow the highly topical and practical suggestions in the paper, especially those regarding domestic governance issues, it wouldn’t be long before we see the emergence of a new landscape in WTO dispute settlement.