Special and Differential Treatment of Developing Countries Under the Wto

SPECIAL AND DIFFERENTIAL TREATMENT OF DEVELOPINGCOUNTRIES UNDER THE WTO DISPUTE SETTLEMENT SYSTEM

REMARKS BYFRIEDER ROESSLER*

* Executive Director, Advisory Centre on WTO Law. The views expressed in this paper

are the personal views of the author.

Special and Differential Treatment of Developing Countries under the WTO Dispute Settlement System

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Developing countries have not been able to reap fully the benefits of the disputesettlement procedures of the GATT and the WTO. Professor Hudec, who prepared adetailed statistical analysis of all GATT dispute settlement cases between 1948 and 1989,concluded:

The quantitative analysis of individual country performancemakes it pretty clear that the GATT dispute settlementsystem is, at the margin, more responsive to the interests ofthe strong than to the interests of the weak. The evidencefor this hypothesis occurs in all phases of performance – inthe rates of success as complainants, in the rates ofnoncompliance as defendants, in the quality of theoutcomes achieved, and in the extent to whichcomplainants are able to carry complaints forward to adecision. Perhaps the most important finding in this regardis the very substantial difference in the rates of withdrawalbefore a ruling is made, suggesting that the weakercountries encounter significantly greater barriers at theoutset of the process.1

The rule-based dispute settlement system of the WTO promised moreeven-handed results. However, some empirical studies of its operation suggest that thedeveloping countries face also difficulties in asserting their rights under the new system.Thus, Busch and Reinhardt conclude from a statistical analysis of the operation of theDSU during the first five years that developing countries encountered even greaterdifficulties in bringing complaints under the WTO than under the GATT. Theirexplanation for this phenomenon is:

By adding 26'000 pages of new treaty text, not to mention arapidly burgeoning case law; by imposing several newstages of legal activity per dispute, such as appeals,compliance reviews and compensation arbitration; byjudicialising proceedings and thus putting a premium onsophisticated legal argumentation as opposed to informal

1 Robert E. Hudec, Enforcing International Trade Law: The Evolution of the Modern GATT Legal

System, Butterworth Legal Publishers, page 353.


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negotiation; and by adding a potential of two years to thedefendants’ legally permissible delays in complying withadverse rulings, the WTO reforms have raised the hurdlesfacing [developing countries] contemplating litigation.2

The various proposals that have been made to strengthen the provisions of theDSU that accord special and differential treatment to developing countries are thereforereactions to serious problems that developing countries have encountered. However, willthey contribute to the resolution of these problems or would other approaches be moreeffective?

To answer this question, I would like to distinguish between two categories ofDSU provisions that deal with developing-country concerns.

The first category consists of the DSU provisions that state how generally-applicable principles should be implemented in cases involving developing countries.The right of developing countries to request that at least one panelist come from adeveloping country (Article 8.10) can be seen as a specific application of the generalprinciple that panel members should be selected with a view to ensuring a "sufficientlydiverse background and a wide spectrum of experience" (Article 8.2). The duty of apanel to indicate explicitly in its report how it took into account provisions on special anddifferential treatment in a covered agreement invoked by a developing country(Article 12.11) is nothing but a specific application of the general obligation of panels topresent in their reports an objective assessment of the matter before them (Article 11).

These provisions, though specifically addressing developing countries’ concerns,can for this reason not be regarded as according any treatment to them that is differentthan the treatment accorded to developed countries. On the contrary, they are designed toensure that developed and developing countries are treated equally. These provisionshave worked in practice: in almost all cases in which a developing country was involved,at least one of the panelists has come from a developing country and panels haveconsistently explained in their findings how they took into account the relevant specialand differential treatment provisions.

2 Marc L Busch and Eric Reinhardt, Testing International Trade Law: Empirical Studies of

GATT/WTO Dispute Settlement (Paper presented at the University of Minnesota Law School Conference onthe Political Economy of International Trade Law, 15 – 16 September 2000)


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The second category of DSU provisions concerning developing countries consistsof the provisions that set out criteria and procedures applicable exclusively to developingcountries. One such provision is Article 3.12, according to which developing countriesare given the right to request in disputes brought against developed countries the resort tothe good offices of the Director-General and the application of expedited panelprocedures in accordance with a decision adopted by the CONTRACTING PARTIES tothe GATT 1947 in 1966. Under the GATT 1947, developing countries resorted to thegood offices procedures six times;3 however, none resorted to the expedited panelprocedures. The developing countries nevertheless insisted that the right to resort to theseprocedures be reaffirmed in the 1979 Understanding on Notification, Consultation,Dispute Settlement and Surveillance,4 in the 1989 Improvements to the GATT DisputeSettlement Rules and Procedures5 and in the DSU. No developing country has invokedso far the 1966 procedures in a dispute under the DSU.

Another DSU provision applicable exclusively to developing countries is Article21.2, according to which particular attention should be given to matters affecting theinterests of developing countries in the procedures designed to ensure the implementationof recommendations and rulings. This provision was invoked by Argentina and Chile inarbitration procedures on the length of the reasonable period time for the implementationof DSB recommendations and rulings. The arbitrator recognised that this provision,though cast in general terms, "is not simply to be disregarded" because "it is in the DSU".However, in both cases he declined to apply it on the ground that Argentina and Chilehad not been very specific about how their interests as developing countries actually bearupon the duration of the implementation period.6 In Indonesia – Automobile Industry, thearbitrator used Article 21.2 as the legal basis for an extension of the implementationperiod by six months.7 This appears to have been the only practical impact of thisprovision so far. Other provisions according developing countries procedural

3 Good offices under the 1966 Decision were invoked in 6 instances and, at least in one (involvingIndia and Japan), led to a mutually agreed solution; see, WTO, Guide to GATT Law and Practice, Volume2, page 765.

4 BISD 26S/210.5 BISD 36S/61 and WTO, Guide to GATT Law and Practice, Volume 2, pages 764-765.6 Arbitration under Article 21.3(c) of the DSU, Chile – Taxes on Alcoholic Beverages,

WT/DS887/15-WT/DS110/14, para. 45 and Arbitration under Article 21.3(c) of the DSU, Argentina –

Measures Affecting the Export of Bovine Hides and the Import of Finished Leather, WT/DS155/10, para.51.

7 Arbitration under Article 21.3(c) of the DSU, Indonesia – Certain Measures Affecting the

Automobile Industry, WT/DS54/15- WT/DS55/14- WT/DS59/13- WT/DS64/12, para. 24.


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privileges are Articles 21.7 and 21.8, according to which the DSB shall take into accountthe interests of developing countries in its task of surveying the implementation ofrecommendations and rulings. The DSB has never applied these provisions and wasnever requested to do so.

This brief review of the operation of the DSU provisions on special anddifferential treatment permits the following conclusions: The provisions that are designedto ensure that a generally applicable principle is also applied to developing countries havebeen effective. However, there is a reluctance of developing countries to invoke the DSUprovisions according them special privileges and of the judicial organs to give effect tothose provisions. My personal experience is that developing countries wish to face inlegal proceedings developed countries as equals and are therefore hesitant to invokeprocedural privileges that their opponents do not enjoy. Moreover, they also fear that theapplication of procedural provisions biased in their favour may detract from thelegitimacy of the result of the procedures and hence reduce the normative force of therulings they are seeking.

There is for these reasons a certain divergence between what developing countriessought in negotiations on new dispute settlement rules and what they subsequently didwhen they were engaged in a proceeding under those rules. In the negotiations, theytended to seek procedural privileges; in dispute settlement practice, their aim was tosecure formal equality. There is therefore the distinct risk that, in the DSU review,developing countries will use their diplomatic resources to obtain privileges that they willsubsequently not invoke.

An alternative way to achieve equality between developed and developingcountries in WTO dispute settlement is to accord developing countries the assistance theyneed to defend their rights as effectively as developed countries. Pursuant to Article 27.2of the DSU, the WTO Secretariat is to provide legal advice and assistance in respect ofdispute settlement to any developing country Member that so request. However, theexperts of the WTO Secretariat "shall assist the developing country Member in a mannerensuring the continued impartiality of the Secretariat". This makes it impossible for theexperts of the Secretariat to act as an advocate for one Member in a legal proceedingagainst another and they have in practice not done so.

Developing countries have therefore no option but to turn for legal assistance inWTO proceedings to sources outside the WTO. There is an increasing number of lawfirms able to give legal advice on WTO law, in particular in the field of trade remedies.


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However, the cost of such advice is prohibitive for many developing countries. InJuly 2001 the Advisory Centre on WTO Law was therefore created as anintergovernmental organisation independent from the WTO, to provide advice andtraining on WTO law to developing countries and countries with economies intransition.8 In an informal paper distributed recently by the Africa Group in the WTO, itis recognised that the provisions on special and differential treatment in the DSU have“not fully and coherently addressed the core difficulties developing country Membersface in seeking to use the WTO dispute settlement system”. In the view of the AfricaGroup, “the difficulties relate to lack of shortage of human and financial resources”. Ittherefore proposes that the activities of the Advisory Centre be supplemented by theestablishment of a permanent fund financed by the WTO membership to help developingcountries overcome the institutional and human constraint they face in using the complexDSU procedures.9

To conclude: Developing countries have difficulties reaping the benefits of theWTO dispute settlement system. Experience shows that these difficulties cannot beovercome through the grant of procedural privileges. The application of proceduralprovisions discriminating in favour of one party to a legal proceeding detracts from thelegitimacy of the results of that proceeding. The developing countries have thereforerarely invoked such provisions in the DSU and the judicial organs have been reluctant toapply them. The basic aim should therefore be to put developing countries in the positionto effectively defend their rights in a system in which essentially same procedures applyto all parties. Special and differential treatment in the field of WTO dispute settlementshould for these reasons take primarily the form of privileged access to legal expertise.

8 For more information on the Advisory Centre on WTO Law se the website www.acwl.ch.9 Paper entitled “Negotiations on the Dispute settlement Understanding: Proposal of the Africa

Group in the WTO”, distributed in September 2002.

Special and Differential Treatment of Developing Countries Under the Wto

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