WTO members have committed to making use of the WTO dispute settlement mechanism instead of taking unilateral measures in trade disputes. The Dispute Settlement Body (DSB) is the primary authority in this area. The dispute resolution process begins with a consultation phase. If the parties do not find a solution within 60 days, the complainant can request that a panel be appointed to carry out a legal assessment of the case. The parties then have an opportunity to appeal to the Appellate Body. If WTO rules have been broken, the losing party in the dispute is ordered to bring its practices into compliance with WTO law. The WTO member can decide for itself whether to abolish the practice or make adjustments. The complainant can request permission to retaliate only if the respondent to the complaint does not comply. The WTO dispute settlement mechanism is an efficient means of achieving compliance with the rules of international trade. It also has an equalising effect: even small countries can win cases against major trade powers in the dispute resolution process.
The WTO provides a platform for members to discuss their trade-related concerns and differences. Dispute resolution forms a central element of this process.
Importance for Switzerland
A rules-based trading system is highly significant for a small country like Switzerland. While Switzerland has never had to defend itself in a dispute settlement procedure, it has already made two complaints (in 2002 and 2018), both of which concerned the US imposing countervailing duties on steel and aluminium.
Switzerland is participating as a third party in a current case between the EU and the US in the agriculture sector. The dispute centres on countervailing and anti-dumping duties on Spanish olives (DS 577 US – Ripe Olives from Spain). As a third party, Switzerland does not have to take an official position, but receives privileged access to information concerning the dispute. Although the focus remains largely on the subsidy agreement, there could be discussion of issues relevant to agricultural policy.
Efforts to reform the multilateral trading system have focused on dispute settlement for some time now. The US has been persistently blocking the appointment of new members to the Appellate Body. The Body has not been operational since December 2019 for this reason, which is preventing it from hearing new appeals. Switzerland has worked with other WTO members to draw up a provisional multi-party agreement that provides for an appeal procedure by means of arbitration. Currently, a total of 21 WTO members participate in this mechanism. The arrangement is based on existing WTO rules, and it will remain in force among the participants only until the Appellate Body becomes fully operational again. The Federal Council decided on 3 April 2020 that Switzerland should join the agreement.
Overview of significant agricultural disputes:
This dispute between the US and China centres on China's market price support for producers of wheat, rice and maize. The US challenged how China calculated market price support. The panel confirmed the US view that total production should be used to calculate the level of market price support, not only the fraction of production that actually benefited from market price support. China had therefore underreported its market support for these products during the years in question. Correct calculations of the value of market price support show that China violated its WTO obligations in the relevant years. China did not appeal, so the country now has until the end of June 2020 to implement the ruling.
In this dispute with the EU, Canada and Norway criticised the EU's import ban on seal products. Although this dispute does not concern the Agriculture Agreement, the decision has some significance for agriculture because the panel explicitly recognises that animal welfare is a priority in the EU. However, the EU still lost the case: the scheme provided for certain exemptions for seal products originating in the EU and selected third countries, but the measure was found to be arbitrary and thus trade distorting because these exemptions could not be justified.
This dispute between Argentina and Chile concerns Chile's tariff system for wheat, wheat flour, sugar and edible vegetable oils. Chile's price band system calculated the tariff rate of each delivery in such a way that it could compensate for fluctuations in the world market price. The panel and the Appellate Body ruled in favour of Argentina and considered the price band system to be a form of variable import levy, which is prohibited under the Agriculture Agreement.
The US requested a panel to review export subsidies allegedly granted by Canada on dairy products, as well as Canada's administration of the tariff rate quota on milk. The US claimed that the Canadian export subsidies were distorting markets for dairy products and negatively affecting US sales of dairy products, which would have put Canada in violation of several agreements. The panel upheld the US view. After a long period implementing the decision, Canada and the US informed the DSB that they had reached an amicable solution.
The US called for a panel to be convened against Türkiye on its restrictions on imports of rice from the US. The US criticised that an import licence would be required to import rice into Türkiye, but Türkiye does not grant such licences for the import of rice at the bound rate of duty. The panel found this to be a violation of WTO rules and, in particular, that the domestic purchase requirement constituted a violation of national treatment. In 2008, Türkiye informed the DSB that it had implemented its recommendations.
Canada and the US requested that a panel be convened due to the import ban on hormone-treated meat introduced by the EU. WTO law (SPS Agreement) allows members to apply sanitary and phytosanitary standards that are stricter than international standards, but only if they can present valid scientific evidence that the ban is a necessary measure to protect public health. The Appellate Body found in particular a violation of WTO law, as the EU had not made an adequate risk assessment of the products. The WTO authorised the US to impose countervailing duties when the EU maintained the import ban following this decision. Years of bilateral discussions followed, with the parties reaching an agreement in 2018 whereby the EU grants an additional import quota for meat that has not been treated with hormones.
The US joined Ecuador, Guatemala, Honduras and Mexico in calling for a panel to be convened against the EU's banana import regime. EU import regulations granted different import conditions based on the bananas' country of origin: bananas from ACP countries benefited from duty-free market access within a fixed quota volume, while bananas from other countries within the quota ere subject to a tariff. The panel and the Appellate Body both found that this import regime violated the WTO's fundamental principle of non-discrimination.
Last modification 04.01.2023
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