23 January 2020

How the WTO dispute settlement system could settle its own tensions

After more than twenty years of operation, the WTO dispute settlement system, despite all its contributions to the rule-based international trade regime, is not free from internal problems. In his PhD thesis, Hsien Wu finds that the source of these internal conflicts consists of a gap between the original contract – the Dispute Settlement Understanding, which placed the system under the collective control of the WTO membership – and subsequent practices, which put it under the lead of the judicial body or powerful WTO members. He then proposes a number of solutions to restore the collective control of the WTO membership. Interview.

What made you study the internal tensions of the WTO dispute settlement system?

This is a topic that flows from a revelation. Many experts I knew talked of the WTO dispute settlement system as a “court”, where there are “judges” issuing rulings based on WTO law. For a long time, I believed in such a view. But after further study, I began to realise that the WTO does not operate under such a setting. This brought my attention to the problems that might arise from such misconceptions, which guided me to look into conflicts that arose in the dispute settlement system.

Can you describe your main research questions and the methodology you use to approach them?

My thesis recognises from the meeting records that there are observable internal tensions between WTO members and between WTO members and the judicial body (consisting of panels, the Appellate Body, and Secretariat officials that provide service to the dispute settlement process according to the Dispute Settlement Understanding – DSU). The main questions are: What are the sources of these tensions and how can they be resolved? 

The methodology involves the comparison between the “original contract” and “subsequent practices”, where the source of instability can be identified through researching which actors are mandated to oversee the operation of the system in the “original contract”, and which actors are guiding subsequent practices. For this purpose, the thesis develops three narratives as a basis for designating which actors are in control:

  1. “Members Driven” narrative: control is collectively exercised by all WTO members;
  2. “Judicial Body Driven” narrative: the judicial body controls the operation of the system;
  3. “Member Driven” narrative: the system is controlled by a powerful WTO member.

The identification of any narrative deviation in subsequent practices would warrant further analysis on how they lead to tensions within the dispute settlement system. Finally, the insights gained from the above approach would also provide guidance on viable means of resolution. 

What are your major findings?

The major finding of my thesis is that there are observable gaps in the narratives. Simply put, the DSU is designed to give control to WTO members, whereby they are expected to collectively address outstanding issues and new developments arising from the system’s daily operation. However, the “Members Driven” narrative did not guide the development of subsequent practices. First, subsequent practices introduced and developed by the judicial body via panel and Appellate Body reports show a lack of collective response from the WTO membership to controversial developments, thus giving an impression that the judicial body is engaged in rule development without the consent of WTO members. Second, there are also instances where powerful WTO members block decision-making despite majority or supermajority support from the WTO membership, undermining the building of consensus. 

On this basis, the thesis proposes a number of solutions: restore effective decision-making by WTO members, ensure that the WTO membership maintains effective control over other actors, designate the WTO Secretariat as the organ that ensures WTO members share a common understanding regarding their role under the system, and position the judicial body as an advisor to WTO members when exercising its mandate as a third party adjudicator.

Can you give an example of an internal tension and how your thesis’s findings might help solve it?

There is the current impasse regarding the Appellate Body member appointment since the United States has blocked the appointment of new Appellate Body members. Addressing the internal tension that has accumulated within the dispute settlement system would restore trust in the judicial body as a faithful administrator of dispute settlement between the parties to the dispute, not as a lawmaker that is beyond the control of WTO members. Indeed, my research reveals that WTO members are not carrying out their role and mandate as allocated to them under the DSU. Their inability to address controversies arising from subsequent practices not only shows that the intended internal dynamic between the actors cannot be fully realised, it also leaves capacity gaps that must be filled by other actors – in this case by the judicial body. 

What are your life-after-the-PhD projects?

I am looking forward to possible opportunities either to serve as a professor in a university or serve in a diplomatic mission. But irrespective of my future occupation, I would like to build up on the thesis and conduct further researches into theories and practices on international dispute settlement procedure. 

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Hsien Wu defended his PhD thesis in International Law in September 2019. Professor Thomas Schultz presided the committee, which included Professor Joost Pauwelyn, thesis director, and Professor Chang-fa Lo from the College of Law, National Taiwan University.

Full citation of the PhD thesis:
Wu, Hsien. “WTO Dispute Settlement as A ‘Members Driven’ System: Resolving Internal Tension in an Age of Divergence between Original Contract and Subsequent Practice.” PhD thesis, Graduate Institute of International and Development Studies, Geneva, 2019.

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Edited by Nathalie Tanner, Research Office.
Banner picture: excerpt from a picture by Bernsten/