The WTO DSM – The dangerous link of Doha stalemate and environmental pressure

Will WTO dispute settlement be impacted by continued non-progression in the multilateral trade negotiations? Could the environmental tensions we see add to such effects?

The Dispute Settlement Mechanism (DSM) is undeniably one of the core functions of
the WTO and perhaps even its most lauded feature. The question of whether or not anything will be taken away from this function with a continuously non-progressing Doha Round is therefore a relevant one, as it goes to the heart of the functioning of the organization.

Generally, the sentiment seems to be that even a failed Doha Round would not in a direct or immediate manner lessen the credibility or the functioning of the DSM. Both the stability of the body of case law as well as WTO Members recognition of its utility seem rather strongly indicative of no such negative effects ensuing, at least not in any immediate fashion. However, the effect on the DSM from a failed Doha Round is not something so simple as to be a non-issue. The important point, which may sound like heresy to the purist lawyer, is that the DSM should not be considered as functioning in a vacuum, complete unto itself. Though it seems evident that few Members have serious quarrels with the mechanism as such, this would only be reassuring it from potential political fallout if the mechanism could be considered as being isolated from the political part of the WTO.

If one is of the opinion, like me, that the DSM may not be immune to political considerations, then any direct impact on the mechanism as such resulting from a more general loss of credibility from a dead Doha may be a red herring. Rather, the future threat to the functioning of the mechanism in the case of a failed Doha may in such a case be more likely to come from forcing certain members closer to the point where they feel compelled to recalculate the benefit of subjecting themselves to decisions that to them represent an unacceptably negative power shift, while being certain that little potential exists for any simultaneous WTO political negotiations yielding ‘offsets’ to this loss in the power dynamic.

This may be considered a political risk more so than a legal one, but if one accepts the above mentioned distinction then such separation may ultimately be impossible. In national politics it is not uncommon for the judiciary to pick up some of the ‘slack’, or at the very least continue to function, when the legislative branch is deadlocked. In the WTO such a situation may represent a double-edged sword where, on the one hand, it speaks to the stability of the system by ensuring its continued functioning in the legal sense but, on the other hand, may also find itself having to shoulder heavier burdens with clearer political undertones than what may be considered comfortable to carry. Put simply, if spill-overs do occur from a political breakdown of the Doha, with contentious issues and areas finding themselves increasingly on the benches of trade judges rather than on negotiating tables, then a failed Doha may indeed impact the DSM by more or less forcing it to take political factors into account in their legal decision-making to avoid results that would be patently unacceptable to certain members. The strong negatives that could ensue from a failure of the Appellate Body to conduct a successful ‘balancing act’ of this sort would not be a vote of confidence on the legal function of the DSM as such, but rather a non-legal political calculation of benefit that has started to yield negative results due to the forced hand of judicial manoeuvring in the WTO DSM.

The burden of carrying out these balancing acts would likely increase at least slightly
for the Appellate Body in the case of a failed Doha. Not necessarily just because of increased conflicts with regards to what is currently in the Doha package being taken away, but perhaps primarily due to the loss of potential and time during which an already existing pressure resulting from political non-progression finds itself unchecked and set to slowly increase for an even longer period. Regardless of how legally robust one holds the DSM to be currently, time is not on the Appellate Body’s side when it comes to political non-progression. Seen from this fundamental perspective, exactly where extra points of pressure requiring further balancing acts by the Appellate Body come to be located is ultimately not the issue. The fundamental issue is that the mechanism is steadily put in a more precarious position the longer it needs to shoulder the burdens of lacking political progress. The successful conclusion of Doha is from this perspective an important balancing force from which the DSM would be able to function with more certainty and less fearfulness of overreaching.

This of course leads one to the grand question: Why are we in this precarious stalemate that may or may not have these consequences for the DSM? Here we enter the realm of power and politics but, again, if one accepts that ultimately the DSM does not function in a vacuum, such a discussion is unavoidable. There may be an element of power shifting between WTO members that has evolved over time, influencing the actions of the Appellate Body. Most seem to agree that there indeed seems to be a greater degree of activism by the Appellate Body in recent times as compared to its earliest decisions. The reason for this is subject to debate, but it is perhaps not implausible that the power dynamic of the WTO was heavily skewed toward a few major players during the early years, as opposed to the more dispersed power landscape we see today. A more activist approach taken in recent times may thus not be the manifestation of increased confidence or security in the body of legal decisions, but rather (or also) be simply a reflection that whatever the Appellate Body decides in recent times will lead to one of many major players being upset. Faced with such a modern bind, it may actually afford the Appellate Body more freedom to focus on reaching the right decision than what they might have dared during the early days. The flipside is that focusing on the ‘right’ decision also often is one and the same with increasing the degree of activism when the dispersed power landscape effectively blocks political progression.

Bringing this into perspective a bit, perhaps it is easy to take for granted just how far
we have come with regards to the multilateral trading system. The staggering amount of
liberalization that has occurred under the aegis of the WTO must surely be considered one of the true success stories of multilateralism during the 20th century. But perhaps we are also starting to reach the point of having come as far as we currently can with single undertaking type multilateralism and its foundation of generalized circumstances, with the future instead lying in progress that is more tailored to specifics and recognition of a less tidy political power dynamic.

In such a world, the WTO as a multilateral institution could play a crucial role as a stabilizer that makes sure the successes of the organization are kept while hopefully also affording sufficient room for progress outside its frame. Put simply, to have the WTO as the ‘marble floor’ that avoids deep protectionism beyond its set points while the ‘ceiling’ is being built elsewhere where more adaptation and fluidity is possible. Here I must for full disclosure also say that Prof. Joost Pauwelyn helped me greatly in seeing this dynamic.

If we indeed are moving toward such circumstances, the focus of the WTO might become less as a forum to negotiate reductions and more of one that prevents deep swings of protectionism. Of course, the WTO as a potential negotiating forum would not go away and in widely agreed problem areas such as subsidies, anti-dumping and fisheries we might still even see a strong enough momentum to see multilateral progress of some kind, while overall evolution becomes driven more from attunement to the specific policy environment of each member and outside the WTO frame.

In such a scenario, there is however a rather precarious time of transition to be dealt with,
especially for the WTO and its DSM. For it to play such a ‘marble floor’ role, it is important
that it also keeps firm political backing for not only its rules, but also their application in the
DSM. If the Appellate Body finds itself forced to further restrict interpretation space in the very incomplete contract of the WTO, the discord between judicial evolution and the amount of politics backing up that legalization may become problematic given enough time.

Cases that can be relevant to climate change have already seeped into the DSM. The fear
of the environmental movement that continued multilateral non-progression would lead to
climate relevant issues being decided (and restricted) by trade judges in the WTO is nothing new, but there is a distinct extra layer of palpability to it at the moment. The ‘Shrimp/Turtle’ case was widely recognized as a watershed case for the ability of the WTO to handle environmental issues in a reasoned fashion, and with it died a lot of the fervour of the environmental movement that came after the ‘Tuna/Dolphin’ case.

Though it currently would seem unlikely, it is far from impossible to imagine that such fervour could reignite with one or several careless decisions. From a more structural standpoint, an interesting question is whether these ‘environmental’ cases are likely to build up a pressure that bring us closer to destabilizing the balancing act of the Appellate Body. Most likely, the Appellate Body will continue to focus on simple solutions to hard problems in contentious areas to keep sovereignty, political backing and member discretion as intact as possible.

Still, if one subscribes to the notion that time may not be the Appellate Body’s friend at the moment with regards to the alleviating of pressure, it is tempting to ask the question how far one can go in gracefully ducking hard choices in the name of systemic integrity.

In the next post, i’ll explore how the much discussed “move towards regionalism” might come to affect trade and environment issues. Thanks for reading. 

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2 Responses to The WTO DSM – The dangerous link of Doha stalemate and environmental pressure

  1. Srikar says:

    Brilliant piece. It highlights the “legal” nature of the DSM as against the “political economy” of the multilateral trade negotiations. While one would like to believe that a strengthened DSM is a positive for a “rule-based” multilateral trading system with “legality” overpowering “political might”, one needs to be cautious about ignoring the political economy of trade as manifested in trade negotiations.

    • Johan Westberg says:

      Indeed. People are quick to make hard divides here. But ultimately all is one with these matters. The decisions of the DSM reverberates through the political economy just as it reverberates through what is put in front of the DSM.

      Thank you for your kind words on the piece.