Assessment of the World Trade Organization's Dispute Settlement Mechanism for Developing Countries

+ Agrees with the Panel's conclusion in paragraphs 7.102 and 8.1(a) of the Panel Report that Chile's tariff is inconsistent with Article 4.2 of the Agreement on Agriculture;

The Appellate Body report recommended that the DSB request Chile to bring its policies and regulations, as concluded in its Report and the Panel Report, into conformity with the Agreement on Agriculture.

At its meeting on 23 October 2002, the DSB adopted the Panel Report and the Appellate Body Report.

Enforcement of judgment:

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At the DSB meeting of 11 November 2002, Chile stated that it intended to comply with the recommendations and rulings of the DSB. At the end of the meeting, Chile sought consultations with Argentina with a view to reaching a mutually satisfactory solution to the dispute. Chile further stated that it needed a reasonable period of time to bring its measures into conformity with the recommendations and rulings of the DSB. On 6 December 2002, Chile informed the DSB that, to date, Chile and Argentina had been unable to agree on a reasonable period of time and that Chile therefore proposed that the determination of a reasonable period of time be made by arbitration. Pursuant to Article 21.3(c) of the DSU, on 16 December 2002, Argentina and Chile notified the DSB that they had agreed to postpone the deadline for finalization of the arbitration award, which must be completed within 90 days from the date of appointment of the arbitrator (instead of 90 days from the date of adoption of the recommendations and rulings of the Panel and the Appellate Body by the DSB). On 16 December 2002, Argentina and Chile requested Mr. John Lockhart, a member of the Appellate Body, to serve as arbitrator pursuant to Article 21.3(c) of the DSU. On 17 December 2002, Mr. John Lockhart accepted the appointment as arbitrator.

On 17 March 2003, the arbitrator rendered its award. The arbitrator concluded that the "reasonable period" for Chile to implement the DSB's ruling in this dispute was 14 months (23 December 2003).

At the meeting on 2 October 2003, Chile announced that on 25 December 2003, law 19.897 on the establishment of a new tariff was adopted, replacing law 18.525. The new law will enter into force on 16 December 2003, before the end of the reasonable period for Chile. Argentina raised questions about the details of the new law. Chile requested Argentina to submit its questions in writing.

At the DSB meeting of 7 November 2003, Chile stated that law 19,897 was scheduled to enter into force on 16 December 2003, before the end of the reasonable period of time for Chile. With this new law, Chile had complied with the recommendations and rulings of the DSB (the new law retains most of the basic elements of the old law). Chile expressed its desire to receive comments on the new tariff schedule. Argentina further stated that, given the close relationship between Argentina and Chile, it remained open to exploring the possibilities of reaching a mutually satisfactory solution to the dispute.

At the DSB meeting of 1 December 2003, Chile stated that it had adopted certain measures to comply with the recommendations of the DSB as set out above. Argentina reiterated its view that the measures taken by Chile to comply with those recommendations had not been implemented in this case because the tariff rates had been maintained. Brazil stated that it also considered that the measures taken by Chile remained inconsistent with the provisions of the Agreement on Agriculture.

On 24 December 2003, Argentina and Chile notified the DSB that they had agreed to the procedures under Articles 21 and 22 of the DSU.

At the DSB meeting of 23 January 2004, Chile and Argentina agreed on the procedures under Articles 21.5 and 22 of the DSU.

* Honduras sues Dominican Republic over measures affecting domestic tobacco imports and sales - DS302

This is a dispute involving Honduras against the Dominican Republic over certain measures affecting the importation and sale of tobacco in the country.

This is also a new request and was also requested in Honduras' appeal of 28 August 2003 (WT/DS 300/1).

Content and dispute resolution process:

On October 8, 2003, Honduras requested consultations with the Dominican Republic. According to Honduras, the Dominican Republic had committed the following acts:

- Using special regulations and administrative procedures to determine the value of imported cigarettes for the purpose of applying selective consumption tax (in some cases considering the price of imported cigarettes equal to the price of similar, closest products on the domestic market), and did not provide clear and appropriate criteria for pricing imported cigarettes.

- Failure to publish central bank surveys when these surveys should be used as a basis for tobacco pricing for selective excise taxation.

- Applying competitive conditions to imported cigarettes that are not favorable compared to those applied to domestic cigarettes through requiring the affixing of stamps to cigarette packs on the territory of the Dominican Republic.

- Create administrative burdens and administrative costs that hinder tobacco imports by requiring tobacco importers to store their goods in warehouses.

- Add a transit tax to stabilize the economy of 2% of the CIF value of imported goods.

- Add a foreign exchange fee of 4.75% of the value of imported goods

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Honduras considers these measures by the Dominican Republic to be contrary to the

Articles II.1(b), III.2, III.4, X.1, X.3(a), XI.1, and XV.4 of GATT 1994.

On 23 October 2003, Guatemala and Nicaragua requested to join the consultations. On 28 October 2003, the Dominican Republic accepted both requests.

On 8 December 2003, Honduras requested the establishment of a panel. At its meeting on 19 December 2003, the DSB deferred the establishment of a panel. Further to a second request by Honduras, the DSB established a panel at its meeting on 9 January 2004. China, Chile, the EC and the United States reserved their third-party rights to the dispute. On 19 January 2004, Guatemala, Nicaragua and El Salvador reserved their third-party rights.

On 17 February 2004, the Panel was composed. On 23 August 2004, the Chairman of the Panel informed the DSB that the Panel expected to complete its work before October 2004. On 26 November 2004, the Panel circulated its Report to Members.

Report of the Panel and the Appellate Body:

The Panel's report found that:

- The Dominican Republic's imposition of additional transit fees and foreign exchange fees is inconsistent with Article II.1(b) of GATT 1994. Foreign exchange fees are unjustified under Article XV.9(a) of GATT 1994;

- The Dominican Republic's requirement for labeling of cigarettes is inconsistent with Article III.4 of GATT 1994;

- Honduras has failed to demonstrate that the Dominican Republic's requirement that tobacco importers place their goods in warehouses violates Article X.1 or Article III.4 of GATT 1994; and

- Prior to the policy revision in January 2004, the Dominican Republic levied a selective excise duty on imported cigarettes in a manner inconsistent with Article III.2 and Article X of GATT 1994.

The Panel also recommended that the Dominican Republic bring its measures (i.e. foreign exchange fees, transit charges and cigarette stamping requirements) into conformity with WTO rules.

On 24 January 2005, the Dominican Republic notified its intention to appeal certain issues of legal interpretation of the Panel. On 7 February

In 2005, Honduras also notified its intention to appeal certain issues of law and legality raised by the Panel.

On 22 March 2005, the Chairman of the Appellate Body informed the DSB that it would not be possible to circulate its report within 60 days due to the time required to complete and translate the report, and that it expected to circulate the report to WTO members no later than 25 April 2005.

On 25 April 2005, the Appellate Body circulated its Report to Members. The Appellate Body agreed with three of the Panel's findings but reversed some of the Panel's findings on legal issues. The Appellate Body found that:

- The Dominican Republic's requirement to label cigarettes is inconsistent with the exception of Article 20(d) of GATT 1994.

- Requiring importers to place goods in warehouses in the Dominican Republic is a violation of Article III.4 of GATT 1994.

At its meeting on 19 May 2005, the DSB adopted the Panel Report and the Appellate Body Report.

From the above dispute settlement practices, it can be seen that the WTO dispute settlement mechanism has brought about positive and beneficial changes for developing countries. In a system based on the rule of law, developing and underdeveloped countries, which are in a weaker position than developed countries, have a better chance of protecting their interests than in a system regulated by power. That is why more and more developing countries are applying the WTO dispute settlement mechanism as plaintiffs, the most active of which are countries such as Brazil, Mexico, and Thailand. However, it must be admitted that, despite occupying the majority in the WTO, the interests of developing countries have not yet achieved the desired results, they are still the countries with the most complaints under the WTO mechanism. The issue of concern is whether the WTO dispute settlement mechanism can ensure the interests of developing countries or not? In theory,

The WTO mechanism is a significant improvement over the GATT, but not all developing countries have the financial resources and skilled experts to pursue these costly lawsuits. This is a difficult issue, requiring developing countries that are and will be members of the WTO to study carefully when applying this mechanism.

CHAPTER 3

ASSESSMENT OF THE WORLD TRADE ORGANIZATION'S DISPUTE SETTLEMENT MECHANISM FOR

DEVELOPING COUNTRIES - EXPERIENCES FOR VIETNAM

3.1. ASSESSMENT OF THE WORLD TRADE ORGANIZATION'S DISPUTE SETTLEMENT MECHANISM FOR DEVELOPING COUNTRIES

The development process from GATT to the birth of WTO has marked a revolutionary development of international trade relations. The revolution is also shown in the replacement of an ad hoc dispute settlement mechanism of GATT with a permanent dispute settlement mechanism of WTO with the birth of Dispute Settlement Body (DSB), Permanent Appellate Body and more effective dispute settlement process. This mechanism has brought a new breath of air to the multilateral trade regime, especially the confidence of member countries in that the regulations in WTO will be implemented and any violations will be adjusted through the application of the organization's dispute settlement regulations.

The WTO's dispute settlement mechanism is demonstrated first of all not only by the massiveness of the DSU, a separate Annex in the WTO on alternative dispute settlement

for the 2 articles in GATT 47, but also in the scope of application of this mechanism (not only limited to the field of trade in goods but also expanded to the fields of trade in services, intellectual property, investment...). The procedural order in the dispute settlement process of the WTO also contributes to enhancing the value of the fairness of the mechanism in settling disputes between member countries.

Two North American researchers, Bush and Reinhrdt, classified GATT and WTO cases from 1980 to 2000 according to whether the defendant had to make full, partial, or no concessions. They found that the ability of developing countries to force defendants to make full concessions increased from 36% to 50% during this period, and partial concessions increased from 19% to 23%. This suggests that the WTO dispute settlement mechanism is more effective than the GATT, at least for countries with the resources to use it.

As a revolutionary development of the WTO, the WTO dispute settlement mechanism has been demonstrating its role in resolving world trade disputes. Within the scope of this thesis, I would like to evaluate the advantages of the WTO dispute settlement mechanism compared to the GATT mechanism, and at the same time, through the practice of resolving trade disputes, one side of which is a developing country, I also point out the limitations of this mechanism.

3.1.1. Advantages of the WTO dispute settlement mechanism

The advantages of the WTO dispute settlement mechanism are shown first through the progress of this mechanism compared to the GATT mechanism, and also through the actual effectiveness of dispute settlement in recent times. The advantages are shown in the following contents:

- The most prominent advantage in the WTO dispute settlement mechanism is the provision on the automatic principle in establishing the Panel, through the Report of the Panel or the Appellate Body.

Unlike the GATT provision that requires the consent of all members (including the disputing member) to establish a panel, the DSU provides that

The Panel is automatically established when the request of the complaining country meets the prescribed conditions, unless all Member States agree not to establish a Panel, i.e. unanimously oppose the establishment of a Panel. Since then, Panels are established in most disputes because the Member State complained against has no opportunity to prevent or delay the establishment of a Panel. In adopting the Panel or Appellate Body Report,

The DSU provides that if no member country appeals, the Panel Report will be automatically adopted within 60 days from the date of its circulation to the WTO members, unless all member countries unanimously vote not to adopt it. The Appellate Body Report will also be automatically adopted within 30 days from the date of its circulation to the WTO members, unless all member countries unanimously vote not to adopt it. This principle of automatic adoption is also known as the “unanimous veto” principle.

The principle of "unanimously vetoing" in the WTO dispute settlement mechanism when adopting the report of the Panel of Judges and the Appellate Body is a turning point, an advancement of the WTO dispute settlement mechanism. According to this principle, no WTO member country can prevent the adoption of the report of the Panel of Judges and the Appellate Body. If the violating member country wants the report not to be adopted, it must convince all member countries, including the violated member country, to agree not to adopt it, which is almost impossible. After the final report is adopted, the violating member country must accept and implement the recommendations and rulings of the DSB. The reversal of the consensus principle has led to fundamental changes in the dispute settlement mechanism, the WTO dispute settlement procedure has become more flexible and less dependent on political pressure from any country, especially the big countries, at the same time making the dispute settlement more effective, building trust among member countries in the fairness of the multilateral trading system.

- Institutionally, the WTO has established a dispute settlement body, the DSB. The DSB is essentially a General Council convened to resolve disputes.

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