Assessing the impact of WTO and regional dispute resolution mechanisms on the world trading system

Introduction The General Agreement on Tariffs and Trade (GATT) 1947 created a bare-bones process for third-party resolution of disputes over the interpretation and application of GATT obligations, modified and expanded over the following decades. Five years later, the initial parties to what is now the European Union (EU) created the Court of Justice of the European Union (CJEU), with jurisdiction over a range of trade and nontrade disputes. For four decades, the evolving GATT panel process with its hybrid judicial/diplomatic approach and the European Court of Justice's (ECJ) judicial approach were the only effective third-party trade dispute settlement mechanisms available to disputants who were parties to one or both agreements. It was only in 1995, when the Agreements Establishing the World Trade Organization and the WTO's Dispute Settlement Understanding (DSU) became effective that what is in retrospect the most successful trade dispute settlement mechanism (probably the most effective international dispute settlement mechanism of any kind) was created and implemented. As such many of the newer free trade agreement (FTA) mechanisms have patterned themselves after the DSU system, while others, particularly in Africa, are patterned after the CJEU. While third-party dispute settlement mechanisms were incorporated into some regional trade agreements (RTAs) beginning in the 1980s, with few exceptions they were of little practical value, usually because they were not mandatory; they required both disputing parties to agree to submit the case to arbitration after the dispute had arisen, or required a political body to approve arbitration requests. Efforts to implement mandatory trade dispute settlement mechanisms have had relatively little success in Asia, Africa, and Latin America from that time until the present. The Andean Group and Mercosur mechanisms have each addressed a handful of cases but their effectiveness in dealing with trade disputes generally has been modest. ASEAN remains committed to the “ASEAN Way,” a diplomatic approach without mandatory arbitration or compliance. The relatively recent FTA among the ASEAN (Association of Southeast Asian Nations) members, Australia, and New Zealand (AANZ) is one of the first Asian regional agreements with relatively effective (at least on paper) dispute settlement mechanisms.