Private Parties and the WTO Dispute Settlement Procedure

Copyright © 2004 Garret Wilson

for Professor Herwig Hofmann

0802-856-01 International Economic Regulation: Law and Policy, University of San Francisco School of Law

5 October 2004

When protesters in Seattle recently interrupted what meant to be the beginning of a new round of trade liberalization talks, the people in the streets send a strong message: private individuals care about the actions of the World Trade Organization. Whether these particular individuals wanted a say in WTO decision-making, or simply wanted to shut down the WTO altogether, is a legitimate question. Regardless of the answer, however, it begs another legitimate question: should private individuals have a say in the legal and policy decisions of the new world-wide organization governing international trade?

To answer this question, yet several others will first have to be addressed. What are "private parties" in the context of the WTO? On what rights of these parties might the WTO infringe, and what methods do these parties already have in the world trade regime to make their voices heard? Lastly, what would be the consequences, both to world trade and to the World Trade Organization, of opening up the WTO decision-making procedure to other parties?

Whose Party is This?

The World Trade Organization is a world-wide organization governing international trade, founded in 1994 after the end of the what is referred to as the "Uruguay Round" of trade talks. Before this point, various countries had signed an agreement called the General Agreement on Tariffs and Trade (GATT); the activity surrounding this agreement had long since started to resemble that of an actual entity, and the formation of the WTO made that official.

The "signing parties" of the GATT and the subsequent "members" of the WTO are states—individual countries in the so-called Westphalian system of states. The WTO imposes obligations on these members; allows these members to cry "foul," and provides ways that these states can amend and enhance the organizational framework and rules. A "private party," then, would be any party which is not a member of the WTO.

Perhaps the most obvious example of a non-member is an individual human, even though that person may reside in a country that is a WTO member. Other examples might be corporations, which in many countries have a separate legal identity that virtually equates to a person for many intents and purposes under the law. Non-governmental organizations, usually organized as corporations, are other examples. While a state that is not a WTO member could be considered "private" in this context, this discussion will for the sake of simplicity consider private actors to be non-state entities.

Which Rights?

This small list of actors have several rights that might be touched by WTO activities. Corporations spring to mind first, because the WTO creates rules about the trade between states, but the actual actors doing the trading are by far corporations, not the states themselves. If the WTO prohibits dumping (in WTO lingo, the selling of products abroad lower than they are being sold in the domestic market), for example, corporation GivvitAweigh's right to sell a product at whatever price it chooses will be affected.

From one philosophical standpoint, an argument could be made that the WTO does not actually alter the corporation's rights—the state does. The member state has the option whether to enact the policies of the WTO, and it may rationally choose not to do so and bear the penalties. In this view, law is seen as simply the creation of a relationship between actions and consequences, and any infringement on rights spring from the discretion of the state. In a more common view, however, the WTO's laws have normative semantics, and are directly responsible for burdens placed upon individual corporations, although executed by the hand of the state.

Nongovernmental organizations have stakes in WTO decisions as well. In the infamous WTO Shrimp-Turtle case, the United States issued regulations requiring other countries dealing in shrimp to comply with US-approved guidelines when shrimp-fishing to prevent the deaths of endangered sea turtles. The outcome of the case would determine whether the US regulations were WTO-compliant and consequently whether they could be left in place. The non-governmental organizations Center for Marine Conservation ("CMC") and Center for International Environmental Law ("CIEL") attempted to participate in the case, as they had an interest in the lives of the sea turtles that were affected by the presence or absence of these restrictions.

Lastly, individual citizens may be affected by the WTO. A US steel-worker in a midwestern state may lose his/her job because of competition from the foreign market, if the WTO requires the US to lower trade barriers to imported steel. Depending on the scientific validity of their claims, individuals may be affected by consuming certain meat products from abroad that the WTO would not allow the country to ban—such was the issue in the Meat Hormones case, in which the European Union tried to ban means produced using certain hormones, and the United States attempted to declare such actions as illegal under the WTO.

What Can be Done?

The WTO is comprised of states, and non-members have no direct access to the WTO's decision-making process. In fact, the WTO's dispute-settlement process is private, and outside parties have no knowledge of the global actions going on behind closed doors (DSU Article 14). But although only member states and not private parties have a place around the WTO table, private parties have several means for influencing what takes place in the WTO kitchen.

The first, traditional argument is that private individuals can influence the WTO through the member state of which they are citizens. If the member state is democratic, individuals can elect a government sympathetic to their wishes, and this government can control its representatives guiding the decisions made at the WTO. In today's world, however, even those countries most true to democracy in a literal sense have a hierarchical system of governance that dampers any direct affect between citizens and global decision-making. After so many levels of indirection, with elections based upon not only trade but a virtually endless parade of issues, the connection between an individual's desires and the WTO's direction seems increasingly remote.

Large corporations, which have already been illustrated as been the principal agents in the trade game, do however lend some weight in the government. The larger a corporation, not does it have more at stake and consequently more incentive to influence government opinion, but it also has more resources with which to lobby and persuade government officials. If another country forsakes its WTO responsibilities, for instance, a corporation may request that its government enter the WTO's dispute settlement process, and with enough resources, may very well be successful.

Certain member countries, such as the United States with Section 301 of the 1974 Trade Act, has created provisions for private parties to bring WTO matters to the government's attention. Section 301 gives standing for requesting the US Trade Representative to look into alleged WTO violations, even though those citizens have no standing to request judicial review into the ultimate decisions of these investigations. (See also the EU's Trade Barriers Regulation, EC Reg 3286/94.)

Once a dispute is under way, following the WTO's dispute settlement procedure set forth in the "Understanding on Rules and Procedures Governing the Settlement of Disputes" (DSU), private parties have more options that are spelled out by the WTO and applicable regardless of the member states involved. The WTO's founding document, the Marrakesh Agreement, allows for "appropriate arrangements for consultation and cooperation with non-governmental organizations concerned with matters related to those of the WTO" (Marrakesh Agreement, Article V(2)). As a more general statement of principle, the WTO has issued guidelines on relations with NGOs, "recognizing] the role NGOs can play to increase the awareness of the public," and that the WTO will make derestricted documents available on the Internet." (WT/L/162 of 18 July 1996).

In the WTO's dispute resolution process, a Panel is formed after consultation between disputing parties fail, which issues a ruling which can be appealed to an Appellate Body. In the aforementioned Shrimp-Turtle case, the Appellate Body addressed whether the DSU hearings could consider friend-of-the-court briefs submitted by NGOs CMC and CIEL. The Appellate body found that accepting non-requested information from nongovernmental sources is compatible with the DSU's mandate for fact-finding. The Panel has discretion, though, on how much stock it places in the veracity of such submissions, and these amici.

Overall private access to the WTO is scarce and informal, and its effectiveness turns many times on the size of the player—exactly the type of discrepancies that law is theoretically supposed to ban from the game of justice. In a literal sense, WTO provisions for private participation are inadequate for allowing private parties with real needs to play a role in the rulemaking that directly affects their way of life.

What if it were Otherwise?

Such "rights" as have been discussed here in a broad sense cut both ways. The WTO and its predecessor the GATT were founded on the principle of trade liberalization to improve world living conditions through the famous Ricardian principle of specialization. In other words, the WTO seeks to promote freedom to do business without constraints, on the assumption that the economic effects will help everyone (or at least produce so-called "Pareto improvements" which would allow everyone to be better off if the gains of a concession are redistributed).

In this light, if a steel-worker could directly enforce what that worker saw as a "right" not to reduce a tariff on foreign steel, this would infringe on the "rights" of other consumers to purchase automobiles at lower prices. Similarly, if the WTO were to rule that imports of hormone-laden beef with could not be banned without solid scientific evidence of its harm, an individual's right not to eat that beef would not be directly extinguished. (An individual might have a right to the information regarding whether any particular beef contained hormones, but that is a separate issue.) Allowing individuals a large say in the WTO rule-setting and dispute-settlement process, then could have the possibility of impeding the process towards greater freedom, more efficient economies, and the rights of individuals around the world for a higher standard of living.

Allowing private parties some input in WTO proceedings should not sink any free-trade ships, however (Seattle aside), and the limited means with which non-member parties currently can make their voices heard are probably not pulling the world economy towards any cliff above a sea of protectionism. Anti-WTO criticism in many cases is based upon misinformation and a fundamental ignorance of how the international economy works. Private proceedings, information-hiding, and blinder-wearing can hardly help to improve the public's competence in the issues surrounding global trade.

Private party participation moreover is a reflection of the networked relationships exhibited by global trade rules and globalization in general. Through non-state actors, international organizations, and unrestricted flows of information, global governance especially in the realm of international trade is increasingly beginning to resemble the "new medievalism" Hedley Bull predicted decades ago in his seminal work, The Anarchical Society.

While such interwoven responsibilities and sovereignties can cause some confusion, it can also bring stability—a central impetus of the WTO and the other Bretton Woods organizations. Pursuing trade liberalization and its economic benefits while maintaining stability and acceptance requires the right combination of both hierarchical trend-setting and multi-level influence. At this stage in the process of globalization, it doesn't seem that the WTO has mixed too much private participation into its recipe.