Résumé
There is nearly unanimous consent among WTO practitioners and scholars that the remedy of tariff compensation is legally superior, economically more efficient and socially more beneficial than retaliatory suspension of tariff concessions (tariff retaliation). This article argues in favour of a revitalization of tariff compensation. However, under the current regime compensation is a thoroughly unattractive policy instrument for decision makers having to temporarily opt out of a WTO Agreement in reaction to domestic shocks. Hence, tariff compensation is vastly underused. We examine reasons for the relative unattractiveness of this policy instrument and propose a substantial reform agenda of the WTO agreements and the dispute settlement system, so as to make compensation a policy tool of choice for trade policymakers.
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The Case for Tariff Compensation in Wto Dispute Settlement
"Consult before you legislate Negotiate before you litigate Compensate before you retaliate And comply - at any rate."
PASCAL LAMY (then EU Commissioner for Trade) "Hymn to Compliance".11 IntroductionIn this paper we are concerned with systemic issues of the enforcement mechanisms pursuant a trade dispute in the WTO, with flaws of the Organization's dispute settlement body (DSB), and with avenues of institutional reform.2 More precisely, we are examining the relationship between and hierarchy of the two core DSB enforcement tools (termed "remedies", "countermeasures" or "punishments"3) at hand, namely tariff compensation and retaliatory suspension of tariff concessions (retaliation). Our aim is to encourage use and application of tariff compensation as the remedy of choice for policymakers.In the recent past there have been some propositions by policymakers, lawyers and economists to stimulate the use of tariff compensation in the realm of the WTO. Most prominently, LAWRENCE (2003) brought forth the idea of multilaterally negotiated compensation commitment schedules, where WTO Members pre-commit to liberalizing certain sectors should they lose a trade dispute. Others have pondered about making compensation mandatory and automatic,4 or replacing tariff compensation with monetary fees.5 While these proposals to establish compensation as the enforcement mechanism of choice are laudable, we submit that we find the efforts wanting in at least one fundamental aspect: The authors tend to look at the issue of compensation in isolation. That is, proposals do not address the question of how to make compensation more attractive to trade-policymakers. Alternatively, some proposals maintain that by dictating a certain compensatory response, policymakers will oblige instantaneously. To our mind, the isolated look at the remedy of compensation is profoundly myopic. We contend that any proposal aiming to bolster tariff compensation is largely futile as long as we don't know just why compensation is so unattractive to policymakers and what the existing (and apparently more attractive) alternatives are. Standard welfareeconomics may tell us that the enactment of tariff compensation is by far more desirable than the remedy of retaliation. However, the revitalization of tariff compensation as the remedy of choice cannot be achieved by indulging into normative assertions on the conceptual welfarist superiority of this remedy over retaliation. We need to understand the reasons why tariff compensation is hardly ever offered by the losing party of a trade dispute and which political and economic factors induce recalcitrant offenders to instead favor embracing retaliatory measures against their own exporters.6 Therefore we will shift our view away from normative overtones (that merely assert what the "first-best" WTO enforcement mechanism ought to look like). Instead, we will take an under-researched route and conduct a positive analysis of WTO dispute settlement as it stands today, in order to come up with systemically viable reform proposals. It seems clear to us that every reform proposal must consist of (i) strategies to discourage inefficient and unfair alternatives to tariff compensation, while at the same time (ii) making it more attractive to policymakers to offer compensation in return for damage inflicted on trade partners.Chapter 2 will introduce the legal procedures of enforcement as they are laid down in the DSU. Although we submit there that there is a strong legal and economic case to be made in favor of tariff compensation as the preferred WTO remedy, the reality of enforcement exactly counters those normative precepts: Contemporary WTO practice is severely biased in favor of retaliation. In chapter 3 we take a political-economic stance in order to assess why the factual realities of WTO enforcement...Voir le contenu complet de ce document
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