DP3578 Peculiarities of Retaliation in WTO Dispute Settlement

Author(s): Kym Anderson
Publication Date: October 2002
Keyword(s): compensation, dispute settlement, retaliation, WTO
JEL(s): F13, K33, K42, Q17
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3578

The dispute resolution procedures of the World Trade Organization allow sanctions to be imposed when a country is unwilling to bring a WTO-inconsistent trade measure into conformity. Apart from the fact that the procedure for triggering the retaliation process has ambiguities that need to be removed, the retaliation itself has some undesirable economic features. This Paper looks at why compensation is not preferred to retaliation and then examines five economic features of the temporary trade retaliation that WTO may permit under certain conditions. Both efficiency and equity concerns are raised. The Paper concludes with some suggestions for reforming this part of WTO dispute resolution during the review of the Dispute Settlement Understanding that is due to be completed by May 2003.