Information about the organization

2 The WTO can ... settle disputes and reduce trade tensions

More trade, more traded goods and services and more trading countries — they bring benefits but they can also increase the potential for friction. The WTO’s system deals with these in two ways.

One is by talking: countries negotiate rules that are acceptable to all.

The other is by settling disputes about whether countries are playing by those agreed rules.

The WTO can ...

...cut living costs and raise living standards
...settle disputes and reduce trade tensions
...stimulate economic growth and employment
...cut the cost of doing business internationally
...encourage good governance
...help countries develop
...give the weak a stronger voice
...support the environment and health
...contribute to peace and stability
...be effective without hitting the headlines

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Closer relationships have huge benefits but they can also bring friction: more trade increases the possibility of disputes. In the past, such disputes have erupted into serious conflict. But today, international trade tension is reduced because countries can turn to organizations, in particular the WTO, to settle their trade disputes.

Before World War II, there was no forum for global trade negotiations, and no legal procedure for settling disputes.

After the war, the world’s community of trading nations negotiated trade rules which are now entrusted to the WTO. Settling their differences by talking and by agreeing on rules is vital for reducing tension.

Those rules also include an obligation for members to bring their disputes to the WTO and not to act unilaterally.

Dispute settlement is sometimes described as the jewel in the WTO’s crown. It’s the central pillar of the multilateral trading system, and the WTO’s unique contribution to the stability of the global economy.

WTO dispute settlement focuses countries’ attention on the rules. Once a verdict has been announced, countries concentrate on complying with the rules, and perhaps later renegotiating them — rather than declaring war on each other.

Well over 400 disputes have been brought to the WTO since it was set up in 1995. Without a means of tackling these constructively and harmoniously, some could have spiralled into more serious political conflict.

The fact that the disputes are based on WTO agreements means that there is a clear basis for judging who is right or wrong. Once the judgement has been made, the agreements provide the focus for any further actions that need to be taken.

The increasing number of disputes brought to the WTO does not reflect increasing tension in the world. Rather, it reflects the closer economic ties throughout the world, the WTO’s expanding membership and the fact that countries have faith in the system to solve their differences.

Sometimes the exchanges between the countries in conflict can be acrimonious, but they always aim to conform to the agreements and commitments that they themselves negotiated.

... were brought to the WTO from 1995 to 2011.

Less than half resulted in the establishment of dispute panels. A large number were resolved through discussions between the parties and never reached the panel stage.

More than 90% of rulings have been complied with by the responding countries, less than 4% resulted in sanctions by the complaining countries.

The average time taken in panel proceedings is 10 months. In other international organizations or even national courts, the time taken can be two to five years.

 

Developing countries are more active in WTO disputes

The annual number of disputes has declined overall. Developing countries are active, reflecting their increasing participation in trade. However, their share of disputes — either in initiating complaints or being complained against — has fluctuated over the years.

 


Sources: WTO dispute settlement data; Raúl A. Torres,“Use of the WTO Trade Dispute Settlement Mechanism by the
Latin American Countries — dispelling myths and breaking down barriers”, WTO Staff Working Paper ERSD-2012-03, February 2012.