World Trade Organisation and Legalization

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"The WTO is now a debating society with a Supreme Court". Has the legalization of the WTO weakened its diplomacy-based negotiating mechanism?

With the creation of the World Trade Organization (WTO), dispute settlement has moved to the centre stage of the multilateral trading order. Hence, in this essay I will consider the effects of the new Dispute Settlement Mechanism (DSM) on trade relations. At first, I will illustrate how the DSM operates and how it is different from dispute settlement under the General Agreement on Tariffs and Trade (GATT). Secondly, I will underline the relative success of the new DSM but also point to some emerging problems and weaknesses inherent in a highly legalized DSM. I will conclude that the DSM has weakened the WTO’s diplomacy-based negotiating mechanism as the emphasis of dispute settlement has markedly shifted from political bargaining to legal proceedings. Yet, I will contend that the description of the WTO as a “debating society” is inadequate since member states are explicitly creating and enforcing trade rules rather then just debating over them. Moreover, to portray the new DSM as a “Supreme Court” seems implausible since on the one hand, it represents an ad-hoc two-tier system and not a full time court; on the other, it still supports and favours out-of-court settlements at almost any stage of the legal process.
The goal of establishing a more effective DSM during the Uruguay Round negotiations was to foster the creation of a “rule-oriented system” that gives guidance in the way of predictable and generally stable rules to all participants of the multilateral world trading system (Article 3.2 of the DSU ). Although international trade is understood in the WTO as the flow of goods and services between members, it is typically not conducted by states, but rather by private economic actors. These market participants need stability and predictability in the government laws, rules and regulations applying to their commercial activity, especially when they conduct trade on the basis of long-term transactions. Hence, the DSU aims to provide a fast, efficient, dependable and rule-oriented system to resolve disputes about the application of the provisions of the WTO agreement. An interesting facet of the cases brought so far to the DSM is the much higher amount of participation by developing countries. They have brought a number of the cases themselves, even against some of the big industrial trading entities (Thailand vs. US in December 2004 or Korea vs.

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