In a period where “trade wars” and the Appellate Body (AB) deadlock are getting most of the airtime, an April 1 proposal by nine WTO Members, including the EU and the US, but also Argentina and Costa Rica, to “strengthen notification requirements under WTO agreements” is both refreshing and intriguing (the proposal is a revision of an earlier document submitted by a smaller group on 1 November 2018).
The “chronic low level of compliance” with WTO notification requirements (preambular para. 2) is not news. Transparency and notifications are an important, and increasingly indispensable, first step to gauge compliance with substantive WTO commitments (think, for example, of subsidies). They also build, or may be able to re-build, trust between WTO Members.
But how does one enforce a notification obligation under a WTO dispute settlement mechanism that (i) is purely bilateral (state-to-state), (ii) is taking increasing amounts of time (on average, 18 instead of the mandated 9 months for panels, over 120 days instead of the mandated 90 days for the AB) and (iii) whose remedy, at the end of the day, is purely prospective (“please notify moving forward”) and (iv) backed-up with countermeasures capped to the (hard to prove) trade effects of a failure to notify?
I have written elsewhere about some of the limits of today’s “legalized” (over-legalized?), “win or lose” WTO dispute settlement system: crowding-out of settlements, concentration on a small sub-set of cases (mainly trade remedies) and an even smaller sub-set of WTO members (20 countries represent 85% of main-party participation), exploding timeframes and length/complexity of reports, increased number of compliance proceedings and (as a result?) an overall reduction in new cases filed.
In this context, the April 1 proposal offers an intriguing alternative, moving away from formal dispute settlement (although it remains available, also for notification failures) and setting up something more akin to a compliance regime as is common under, for example, environmental treaties.
Three features stand out in this proposal:
- Establishing non-compliance: Notification “failure” is identified, not by dispute panels, but automatically, based on the required (and variable) timeframes. Importantly, also the Trade Policy Review mechanism (para. 4) and the SPS and TBT Committees (footnote 1) are given a role. Members are also encouraged to provide “counter notifications” (para. 5).
- Administrative measures: Failure to notify, within prescribed time periods, automatically leads to “administrative measures” (para. 11) ranging from a bar on chairing WTO bodies to a “charge” to be paid into the WTO budget (money that should then be used for technical assistance with notifications). Additional “naming and shaming” measures are added after one year. No panel, AB, DSB or arbitrator is involved.
- Focus on capacity building and learning: All WTO Members can request Secretariat assistance and even ask the Secretariat to do notifications on its behalf (para. 9). Developing country Members lacking capacity and who requested assistance are not subject to “administrative measures” (para. 10). A Working Group is tasked to “consider both systemic and specific improvements that can help Members to improve compliance with notification obligations” (para. 2).
Rather than assuming that countries (willingly) breach a WTO commitment in order to gain a trade advantage (and that a legal finding of breach backed-up by trade sanctions is what is needed to induce compliance), compliance regimes acknowledge that, in some cases, breach can be involuntary, due to lack of information or capacity. If that is the case, rather than “litigate and sanction”, “disclose and assist” may, indeed, be a quicker and more efficient route to compliance.
New ideas and approaches are needed to assist Members in (swiftly) settling trade disputes (so as to avoid escalating “trade wars”) and (cost-effectively) improving compliance records (so as to restore trust and fuel negotiations rather than litigation). This proposal, as narrowly focused as it is on notifications, is a good start. It illustrates that Members, including the US, have not given up on the WTO (yet).
