The recent deal (settlement) between the United States and Brazil to end the long-standing cotton dispute has stirred up (old) controversy in the nature of WTO remedies, and more broadly the nature of the WTO itself: is the WTO a mere “contract” or something more than that, say, a “legal system” or even “trade constitution”?
According to an official announcement, the U.S. government seems to lean toward the former position. The U.S. Secretary of Agriculture Tom Vilsack said that “through this negotiated solution, the United States and Brazil can finally put this dispute behind us.” Gary Clyde Hufbauer from the Peterson Institute seems to agree to this view. Hufbauer observed that “money damages, paid in this way, are much fairer, and do not destroy the benefits of international commerce, unlike concentrated retaliation against firms that had nothing to do with the original dispute.”
However, Daniel Ikenson from the Cato Institute begged to differ. Ikenson argued that “settlements like these may appease the primary governments involved in the dispute, but they leave unresolved the original sins, which impose a lot of collateral damage on a variety of interests. In that regard, settlements are failures.” Alan Beattie from the Financial Times offered a harsher criticism. Beattie opined that
This case should be brought up whenever officials from the US trade representative’s office orate piously about the rule of law and free trade. The US in this matter has proven to be a selfish, craven malefactor that prefers to buy its way out of legal obligations than to confront a tiny, cosseted elite bloated with taxpayer cash. The settlement undermines the ability of poorer emerging market countries to benefit from the multilateral trading system. It is a profoundly retrograde step.
Indeed, this controversy over the nature of WTO remedies dates back to the genesis of the WTO. Some might recall the famous debate between Judith Bello and John Jackson in the Nineties. While Judith Bello predicated her view of elective remedies (such as paying damages) on the very notion of sovereignty, John Jackson adamantly opposed buying out violations. Later on, law and economics scholars espoused the former view under the banner of “efficient breach.” The ostensible remedial primacy of performance (compliance) over compensation under the WTO DSU did not stop this controversy. Article 22.1 of DSU provides that “neither compensation nor the suspension of concessions or other obligations is preferred to full implementation of a recommendation to bring a measure into conformity with the covered agreements.”
Are we going to see more of this kind of settlement in the future?
