22 Sep 2019 - by A4ID-IT-Support

How Can Lawyers Help Developing Countries Ensure that Increased Trade Benefits All?

Based on the assumption that trade is an engine for economic growth and development, SDG 17 calls for a deeper integration of developing countries into global trade. But is the multilateral trading system really favourable to developing countries? And how can the law and lawyers help developing countries defend their interests to ensure that increased trade benefits all fairly?

James is one of the speakers of our 2019 Law & Development Training Programme. He will be delivering a session on ‘Global Trade, the WTO and Dispute Settlement’ during the 3rd module on ‘Financing Development’ (2 March 2019). You can register for individual modules. Click here for details!

It hardly needs to be said that trade is one of the key controversies of our day. Every day we can read the latest news concerning Brexit and what it will mean for our future trade relations. The importance given to trade in this debate reflects the wider importance it has within the global economy and in economic development. Indeed, the WTO is said to be “central to achieving” the UN’s SDGs.

A crucial element of the World Trade Organization (WTO) and a key reason for its central role in fostering economic development is its robust dispute settlement system. As trade has become ever more complex, it has moved away from being based in diplomacy toward ever greater reliance on legal process. The agreement of the WTO’s Dispute Settlement Understanding (DSU) in 1995 brought multilateral trade relations under the oversight of a supranational court of arbitration. 

It was expected that the biggest beneficiaries of this increasing legalism within trade relations would be the world’s weaker states, which it was felt would avoid the disadvantages they face in political processes vis-à-vis more powerful states. Everyone is, so the saying goes, equal before the law. In practice however, some of the biggest critics of the DSU have been those weaker, developing countries. These countries have found that the design of the DSU makes it harder for developing countries to use it. Furthermore, most WTO rules were effectively negotiated between the most powerful states (typically the US and EU) largely in their own interest and are consequently biased against the interests of developing countries. For developing countries, greater legalisation of unequal rules is not necessarily a benefit. 

Nonetheless, for all its faults the DSU provides a crucial means for developing countries to hold the most powerful states to account for their trade policies. There have been some spectacular examples of the US and EU losing cases against, at times, some of the smallest WTO members. Perhaps the most notable was in 2003 when Antigua and Barbuda, with a population of just 100,000, successfully took on the United States over its ban on internet gambling. While this victory was in many regards remarkable and demonstrated the possibilities that the Dispute Settlement Mechanism (DSM) offers to holding the most powerful to account, this has to be tempered with the fact that the US ultimately refused to comply with the ruling and opted instead merely to pay compensation.

Lawyers working in a variety of organisations have helped to facilitate the DSM’s use by developing countries. Most notably, the Advisory Centre for WTO Law has helped to overcome the lack of legal expertise in most developing countries, providing training, assistance with ensuring the conformity of domestic laws with WTO rules and even representation within dispute settlement system. This is done on a highly subsidised or pro bono basis. Elsewhere, private law firms have been instrumental in assisting the preparation of legal cases challenging policies that damage the interests of the global poor, such as the Brazil-US cotton case in which Brazil challenged US cotton subsidy programmes. 

Today the WTO’s dispute settlement system is under threat of being rendered inoperable by the Trump administration, which has blocked the appointment of new people to the Appellate Body — the highest court within the WTO system. The Appellate Body should have seven members but is now down to just three. WTO rules require a panel of three Appellate Body judges to assess any case, with any member barred from ruling on disputes that involve their own country of origin. In this way the Trump administration has all but seized up the DSM and threatens its very future. If that is allowed to happen it would stand as another blow to the fragile ability of global institutions to address global poverty. 

 

Dr. James Scott

Senior Lecturer in Political Economy, King’s College London

*The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of A4ID

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