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WTO Disputes Settlement: A Chinese Approach

Consultations within WTO Dispute Settlement: A Chinese Perspective by Qi Zhang;

WTO Disputes Settlement:A Chinese Approach

Consultations within WTO Dispute Settlement: A Chinese Perspective

by Qi Zhang; Peter Lang Publishing, 2006; pp 344, $ 65.95.

ATUL KAUSHIK

O
ne of the main grievances against the disputes settlement provisions of the General Agreement on Tariffs and Trade (GATT) was that the procedures had no teeth; the more powerful trading partners amongst the GATT members got away with violations of GATT provisions. The coming into force of the World Trade Organisation (WTO) and the Disputes Settlement Understanding (DSU) in 1995 was intended to remove these grievances. The adoption of panel and appellate body reports as well as retaliation in case of non-compliance became subject to reverse consensus and, therefore, automatic. Of the 397 complaints resulting so far in 133 panel reports and 81 appellate body reports, only one report was not adopted and that too in very peculiar circumstances.1 Has this change in procedures removed these grievances? Has disputes settlement in the WTO become power-neutral? Has compliance been improved? These are some of the questions on which reams of literature have been written, particularly on the completion of 10 years of WTO.2

This book entitled Consultations within WTO Dispute Settlement provides a fresh perspective to the first stage of the disputes settlement procedure in WTO, i e, consultations. Under the dispute settlement procedure, it is mandatory for the disputing parties to consult before seeking establishment of a panel. Qi Zhang considers consultation as a diplomatic exercise intended to resolve disputes, in contrast with panel and appellate body procedures that constitute the legal exercise. What is fresh in the book is particularly the Chinese perspective in undertaking an analysis of the value of this stage of the procedures. She deftly combines the negotiation theories of the western scholars like Zartman and Saner with the Confucian theory of negotiations by Sun Tsu.

Disputes Settlement Understanding

Part One of Qi Zhang’s book contains an elaborate survey of important definitions and concepts relevant before and during consultations as well as a variety of consultation practices in international law, including related case studies from beyond the WTO. She also briefly explores the concepts of “duty to consult” and “good faith in consultations” to add to the importance of

Economic and Political Weekly October 6, 2007 diplomatic efforts for resolving disputes. This part is largely useful to explain to the reader the context in which consultations as established in the DSU crystallised from a broader and deeper canvas into the more legalistic form contained in the dispute settlement procedures. The Chinese perspective on civil law, over-regulation in international trade and stratagems adopted by negotiators in war and disputes alike in China provide the reader with a fair idea of the reason why a Chinese disputant would like to settle disputes through negotiations rather than western adversarial approaches of dispute settlement that are practised in international trade today. There is no wonder, therefore, that while China has already faced eight complaints in the WTO, half of them in the current year, it has made only one complaint itself. Compare this with India’s participation in the WTO procedures in 17 cases as complainant and 19 as respondent already, and one realises how much India has been influenced by the western system of settling disputes.

Importance of Consultations

A brief history of dispute settlement in GATT leading up to the emergence of DSU follows in Part Two of the book. It emphasises, using statistics from WTO cases, the importance of consultations. Although this part provides a good historical perspective, it would be difficult to agree that the material provided by the author evidences an assumed shift from diplomacy to legitimacy. A closer scrutiny of the resolution of disputes during the consultation phase may bring out that it may not have been that the dispute was resolved due to consultations, but that the incentive to take the matter forward to the panel stage waned for a variety of reasons, not necessarly related to withdrawal of the impugned measure or the notification of a mutually agreed solution.

The real value of the book is in Part Three. It begins by an elaborate survey of a number of WTO member delegates participating in disputes settlement in Geneva. As expected, there is a range of views necessarily divergent depending upon the background of the market and political economy they represent and their individual understanding of the value of dispute settlement in general and consultations in particular. It then takes the reader through various types of consultations and exceptions to complete consultations. Coming from a developing country, the author, perhaps naturally, considers the high cost involved and the necessity of professional legal expertise as the biggest barriers during the dispute settlement procedures. Naturally again, she concludes that the consultation procedures for them seem more realistic, being a low cost option.

Survey of Chinese Disputes

An interesting survey of disputes of China, with its trading partners before and after China became a member of WTO, gives an interesting insight. Though the book predates a majority of the complaints against China in recent months, it provides an insight into the Chinese perspective on focus areas during dispute settlement. It is interesting to note that the author does not belabour the legal issues or inconsistencies with WTO provisions involved, but on diplomatic overtures of the parties. Naturally, she hopes that the unique Chinese legal culture would contribute to dispute settlement in the WTO, though she also seeks a push by China for an improvement of the rule of law.

The author considers disputes which go beyond the consultation stage but do not result in a panel report as a continuum of the consultation stage. She is right in the sense that where a dispute is resolved without the adoption of panel and appellate body reports and the implementation of recommendations of the WTO Dispute Settlement Body (DSB), it necessarily gets resolved due to the ongoing consultations between the disputing parties parallel with the dispute settlement procedures. Given that, the “win” rate of complaints in the WTO disputes is 87 per cent, complainants are able to persuade defendants to continue to consult at all stages of the procedures in order to arrive at mutually agreed solutions that are politically more palatable than compliance with DSB recommendations. The author skilfully uses “the shadow of the law” concept coined by Bush and Reinhardt to emphasise the importance of consultations in the dispute settlement procedure as an incentive to settle.

The author identifies 26 disputes which went beyond the consultation stage and yet resulted in a solution without the need for a panel report. She analyses each of them in great detail and concludes that solutions to the disputes arose either due to decisions in the domestic courts or other parallel disputes in the WTO or due to a tit for tat approach. An interesting statistic culled out by her is that dispute resolution through consultations takes from three to 18 months. This is interesting, given the fact that disputes that go through the panel and appellate body process take between 18 months and three years on average. She concludes from her elaborate analysis that even though the dispute procedures from GATT to WTO shifted from power orientation to rule orientation, govern ments still use diplomacy freely to settle disputes.

Conclusion

There is scant literature on benefits to developing countries of dispute settlement or any of its stages. This work of Qi Zhang is a welcome addition. It is more welcome for WTO members of the east who may consider the use of consultations more ably to resolve their disputes, aligning such resolution with their philosophy of using diplomacy rather than litigation to resolve disputes, and save costs including by avoiding hiring costly Geneva based lawyers. Although the book is not written in the best of Queen’s English, which is natural as the author does not come from an English-speaking country, the statistics, the survey, and to some extent the analysis, would be a useful tool to any country, particularly a developing country or a less developed country (LDC), to think afresh about using consultations under the disputes settlement procedures to their trade advantage.

India has participated in 36 cases as a party and even more cases as a third party to WTO dispute settlement. Of the decided cases, India’s score is level: it has lost half of them and won the other half. It has won all but one case as complainant and lost all as a defendant. There is, however, scant literature analysing the benefits that India may have derived from participation in the WTO disputes settlement. This book should spur such literature from India so that our diplomats are able to benefit from this analysis in making their choices and their approaches to dispute settlement.

EPW

Email: atulkaushik@yahoo.com

Notes

1 The numbers here include panel and appellate

body reports circulated under Article 21.5 of

the DSU, the so-called compliance panels.

The exception referred to is a panel report

circulated in the EC-Bananas case (WT/DS27/

RW/EEC) which was never placed before the

DSB for adoption. It was a peculiar case as

the respondents never participated in the

panel proceedings resulting in an ex parte

report which the complainant, European Com

mission, never proposed for adoption. 2 See, for example, The WTO at Ten, Giorgio

Sacerdoti, Alan Yanovich and Jan Bohanes

(eds), Cambridge University Press, 2006.

Economic and Political Weekly October 6, 2007

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