Order Code RS20088
Updated January 29, 2007
Dispute Settlement in the World Trade
Organization: An Overview
Jeanne J. Grimmett
Legislative Attorney
American Law Division
Summary
Dispute resolution in the World Trade Organization (WTO) is carried out under the
WTO Dispute Settlement Understanding (DSU), whose rules and procedures apply to
virtually all WTO agreements. The DSU provides for consultations between disputing
parties, panels and appeals, and possible compensation or retaliation if a defending party
does not comply with an adverse WTO decision by a given date. Automatic
establishment of panels, adoption of reports, and authorization of requests to retaliate,
along with deadlines and improved multilateral surveillance and enforcement of WTO
obligations, are aimed at producing a more expeditious and effective system than had
existed under the GATT. To date, 357 WTO complaints have been filed, slightly more
than half involving the United States as a complaining party or defendant. Expressing
dissatisfaction with WTO dispute settlement results in the trade remedy area, Congress
directed the executive branch to address dispute settlement issues in WTO negotiations
in P.L. 107-210, its grant of trade promotion authority to the President; the authority
expires June 30, 2007, and may thus be reconsidered in the 110th Congress. Although
WTO Members have been negotiating DSU revisions in the WTO Doha Round, a draft
agreement has not yet resulted. S. 364 (Rockefeller), introduced January 23, 2007,
would provide for private party participation in WTO disputes, establish a process for
domestic review of WTO decisions, require congressional approval of administrative
actions proposed to comply with adverse WTO reports, and rescind certain
administrative actions that have already gone into effect. This report will be updated.
Background. From its inception, the General Agreement on Tariffs and Trade
(GATT) has provided for consultations and dispute resolution among GATT Contracting
Parties, allowing a party to invoke GATT dispute articles if it believes that another’s
measure, whether violative of the GATT or not, has caused it trade injury. Because the
GATT does not set out a dispute procedure with great specificity, GATT Parties over time
developed a more detailed process including ad hoc panels and other practices. The
procedure was perceived to have certain deficiencies, however, among them a lack of
deadlines, the use of consensus decision-making (thus allowing a Party to block the
establishment of panels and adoption of panel reports), and laxity in surveillance and

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implementation of dispute settlement results. Congress made reform of the GATT dispute
process a principal U.S. goal in the Uruguay Round of Multilateral Trade Negotiations.
WTO Dispute Settlement Understanding. The Uruguay Round Understanding
on Rules and Procedures Governing the Settlement of Disputes (DSU), which went into
effect January 1, 1995, continues past GATT dispute practice, but also contains several
features aimed at strengthening the prior system.1 A Dispute Settlement Body (DSB),
consisting of representatives of all WTO Members, administers dispute proceedings.
While the DSB ordinarily operates by consensus (i.e., without formal objection of any
Member present), the DSU reverses past consensus practice at fundamental stages of the
process. Thus, unless it decides by consensus not to do so, the DSB is to establish panels;
adopt panel and appellate reports; and, where WTO rulings have not been implemented
and if requested by a prevailing party, authorize the party to impose a retaliatory measure.
The DSU also sets forth deadlines for various stages of the proceedings and improves
multilateral monitoring of the implementation of adopted rulings. Given that panel reports
are to be adopted automatically, WTO Members have a right to appeal a panel report on
issues of law. The DSU created a standing Appellate Body to carry out this new appellate
function; the Body has seven members, three of whom serve on any one case.
The DSU provides for integrated dispute settlement under which the same rules
apply to disputes under virtually all WTO agreements unless an agreement provides
otherwise. If a dispute reaches the retaliatory stage, this approach allows a Member to
impose a countermeasure in a sector or under an agreement other than the one at issue.
The preferred outcome of the dispute mechanism is “a solution mutually acceptable to the
parties and consistent with the covered agreements”; absent this, the primary objective of
the process is withdrawal of a violative measure, with compensation and retaliation being
avenues of last resort. To date, 357 complaints have been filed under the DSU; slightly
more than half involve the United States as complaining party or defendant. The United
States Trade Representative (USTR) represents the United States in WTO disputes.
The DSU was scrutinized by Members under a Uruguay Round Declaration, which
called for completion of a review within four years after the WTO Agreement entered into
force (i.e., by January 1999). Members did not agree on any revisions in the initial review
and continued to negotiate on dispute settlement issues during the Doha Round, doing so
on a separate track permitting an agreement to be adopted apart from any overall Doha
Round accord. The talks were suspended with the overall suspension of the Round in
1 The text of the DSU, panel and Appellate Body reports, and information on the WTO dispute
process is available at [http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm]. WTO
disputes are listed and summarized by the WTO Secretariat in its “Update of WTO Dispute
Settlement Cases,” available at the WTO website, above. A summary of U.S. dispute settlement
activity is provided by the Office of the United States Trade Representative (USTR) in its
“Snapshot of WTO Cases Involving the United States,” at [http://www.ustr.gov] (search under
Trade Agreements, Monitoring and Enforcement). U.S. written submissions to WTO dispute
panels are also available at the USTR website. For statistical information on cases involving the
United States, see CRS Report RS21763, WTO Dispute Settlement: Stages and Pending U.S.
Activity Before the Dispute Settlement Body
, by Todd B. Tatelman. For the status of current
cases in which the United States has been successfully challenged, see CRS Report RL32014,
WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases, by Jeanne J. Grimmett.

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July 2006 but have apparently been able to resume.2 The United States has proposed
greater Member control over the dispute settlement process, guidelines for WTO
adjudicative bodies, and increased transparency (e.g., through open meetings and timely
access to submissions and final reports).3 WTO Members have also submitted proposals
for, inter alia, a permanent roster of panelists, Appellate Body remand of decisions to
panels, sequencing requests for retaliation with requests for compliance panels (see
below), the termination of retaliatory measures (see below), tightened time frames,
enhanced third-party rights, and special treatment for developing country disputants.4
Steps in a WTO Dispute Proceeding
Consultations (Art. 4). If a WTO Member requests consultations with another
Member under a WTO agreement, the latter must generally respond within 10 days and
enter into consultations within 30 days. If the dispute is not resolved within 60 days after
receipt of the request to consult, the complaining party may request a panel. The
complainant may request a panel earlier if the defending Member has failed to enter into
consultations or if the disputants agree that consultations have been unsuccessful.
Establishing a Dispute Panel (Arts. 6, 8). If a panel is requested, the DSB
must establish it at the second DSB meeting at which the request appears as an agenda
item, unless it decides by consensus not to do so. The panel is generally composed of
three persons. The Secretariat proposes the names of panelists to the disputants, who may
not oppose them except for “compelling reasons.” If there is no agreement on panelists
within 20 days from the date the panel is established, either disputing party may request
the WTO Director-General to appoint the panelists.
Panel Proceedings (Arts. 12, 15). After considering written and oral
arguments, the panel issues the descriptive part of its report (facts and argument) to the
disputing parties. After considering any comments, the panel submits this portion along
with its findings and conclusions to the disputants as an interim report. Absent further
comments, the interim report is considered to be the final report and is circulated
promptly to WTO Members. A panel must generally circulate its report to the disputants
within six months after the panel is composed, but may take longer if needed. The period
from panel establishment to circulation of the report to all Members should not exceed
nine months. In practice, panels have increasingly failed to meet the six-month deadline.5
2 See WTO General Council, Annual Report (2006), at 5, WT/GC/110 (Dec. 22, 2006).
3 See, e.g., WTO documents TN/DS/W/79 (July 13, 2005), TN/DS/W/82 (Oct. 24, 2005),
TN/DS/W/82/Add.1 (Oct. 25, 2005), as corrected, TN/DS/W/82/Add.2 (Mar. 17, 2006), and
TN/DSW/86 (Apr. 21, 2006).
4 For further information on proposals, see Institute of International Economic Law, DSU Review,
at [http://www.law.georgetown.edu/iiel/research/projects/dsureview/synopsis.html] and
International Centre for Trade and Sustainable Development, Review of the Dispute Settlement
Understanding
, Doha Round Briefing Series, Nov. 2005, at [http://www.ictsd.org/pubs/
dohabriefings/index.htm].
5 See European Commission, “DSB Special Session: Non-paper on Panel Composition,”
December 9, 2003, Ref. 575/03, at 5, at [http://trade-info.cec.eu.int/doclib/html/115445.htm].

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Adoption of Panel Reports/Appellate Review (Arts. 16, 17, 20). Within
60 days after a panel report is circulated to WTO Members, the report is to be adopted at
a DSB meeting unless a disputing party appeals it or the DSB decides by consensus not
to adopt it. Within 60 days of being notified of an appeal (extendable to 90 days), the
Appellate Body (AB) must issue a report that upholds, reverses, or modifies the panel
report. The AB report is to be adopted by the DSB, and unconditionally accepted by the
disputing parties, unless the DSB decides by consensus not to adopt it within 30 days after
circulation to Members. The period of time from the date the panel is established to the
date the DSB considers the panel report for adoption is not to exceed nine months (12
months where the report is appealed) unless otherwise agreed by the disputing parties.
Implementation of Panel and Appellate Body Reports (Art. 21). Thirty
days after the panel and any AB reports are adopted, the Member must inform the DSB
how it will implement the WTO ruling. If it is “impracticable” to comply immediately,
the Member will have a “reasonable period of time” to do so. The period will be: (1) that
proposed by the Member and approved by the DSB; (2) absent approval, the period
mutually agreed by the disputing parties within 45 days after the date of adoption of the
report or reports; or (3) failing agreement, the period determined by binding arbitration.
Arbitration is to be completed within 90 days after the reports are adopted. To aid the
arbitrator in determining a compliance period, the DSU provides a non-binding guideline
of 15 months from the date of adoption; awards have ranged from six months to 15
months, one week. The DSU envisions a time period of no more than 18 months from
the date a panel is established until the reasonable period of time is established. Where
there is disagreement as to whether a Member has complied in a case, a panel may be
convened to resolve the dispute (Article 21.5); the compliance panel has 90 days to issue
its report, which may be appealed.
Compensation and Suspension of Concessions (Art. 22). If defending
party fails to comply with the WTO recommendations and rulings within the compliance
period, the party must, upon request, enter into negotiations with the prevailing party on
a compensation agreement within 20 days after the expiration of this period; if
negotiations fail, the prevailing party may request authorization from the DSB to retaliate.
If requested, the DSB is to grant the authorization within 30 days after the compliance
period expires unless it decides by consensus not to do so. The defending Member may
request arbitration on the level of retaliation or whether the prevailing Member has
followed DSU rules in formulating a proposal for cross-retaliation; the arbitration is to
be completed within 60 days after the compliance period expires. Once a retaliatory
measure is imposed, it may remain in effect only until the violative measure is removed
or the disputing parties otherwise resolve the dispute.
Compliance Issues. While many WTO rulings have been satisfactorily
implemented, difficult cases have tested the implementation articles of the DSU,
highlighting some deficiencies in the system and prompting suggestions for reform. For
example, gaps in the DSU have resulted in the problem of “sequencing,” an issue that first
manifested itself in 1998-1999 during the compliance phase of the United States’
successful challenge of the European Union’s banana import regime. Article 22 of the
DSU allows a prevailing party to request authorization to retaliate within 30 days after a
compliance period ends if the defending party has not complied. Article 21.5 provides
that disagreements over the existence or adequacy of compliance measures are to be
decided using WTO dispute procedures, “including whenever possible resort to the

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original panel”; the compliance panel’s report is due within 90 days and may be appealed.
The DSU does not integrate an Article 21.5 panel procedure into Article 22 processes, nor
does it expressly state how compliance is to be determined so that a prevailing party may
pursue action under Article 22. Absent the adoption of multilateral rules on the matter,
disputing parties have been filling the gap with ad hoc bilateral procedural agreements in
individual disputes.
The DSU is also silent on procedures for terminating authorized retaliation in the
event the Member subject to the retaliation maintains that it has complied with its WTO
obligations, a gap that has given rise to a question whether the prevailing or defending
party in a dispute must initiate WTO proceedings to determine if and when sanctions
should be removed. The issue has been raised in a pending dispute brought by the
European Communities (EC) against the United States and Canada for continuing to
maintain increased tariffs on EC goods imposed in 1999 for the EC’s failure to comply
with an adverse WTO decision regarding the European Union ban on hormone-treated
meat. The EC, claiming that a 2003 EU Directive on the subject renders it WTO-
compliant, is arguing that the two Members, in continuing to apply sanctions, are
violating the GATT most-favored-nation obligation, the GATT prohibition on imposing
tariffs in excess of bound rates, and various DSU provisions including those precluding
certain unilateral actions in trade disputes.6 The panel has not yet issued its report.
WTO Dispute Settlement and U.S. Law. Adoption of panel and appellate
reports finding that a U.S. measure violates a WTO agreement does not give the reports
direct legal effect in this country. Thus, federal law would not be affected until Congress
or the Executive Branch, as the case may be, changed the law or administrative measure
at issue.7 Procedures for Executive Branch compliance with adverse WTO decisions are
set out in §§ 123 and 129 of the Uruguay Round Agreements Act (URAA). Only the
federal government may bring suit against a state or locality to declare its law invalid
because of inconsistency with a WTO agreement; private remedies based on WTO
obligations are also precluded by statute (URAA, § 102(b),(c)).
Sections 301-310 of the Trade Act of 1974 (Section 301), 19 U.S.C. §§ 2411 et seq.,
provide a means for private parties to petition the USTR to take action regarding harmful
foreign trade practices. If the USTR decides to initiate an investigation, whether by
6 See Request for the Establishment of a Panel by the European Communities, United States -
Continued Suspension of Obligations in the EC-Hormones Dispute
, WT/DS320/6 (Jan. 14, 2005).
This dispute has also been notable because, as requested by the disputing parties, panel
proceedings in the case were open to the public through broadcast on closed-circuit television at
the WTO. See WTO opens panel proceeding to public for the first time, WTO news item, Sept.
12, 2005; WTO opens “hormone” panel proceedings to public, WTO news item, Sept. 27, 2006,
at [http://www.wto.org/english/news_e/news_e.htm].
7 See Uruguay Round Agreements Act (URAA) Statement of Administrative Action, H.Doc. 103-
316, vol. 1, at 1032-33. Implementing legislation states that “[n]o provision of any of the
Uruguay Round Agreements, nor the application of any such provision to any person or
circumstance, that is inconsistent with any law of the United States shall have effect.” URAA,
§ 102(a)(1); see also H.Rept. 103-826, Pt. I, at 25. Note that federal courts have held that WTO
reports are not binding on the judiciary. E.g., Corus Staal BV v. Department of Commerce, 395
F.3d 1343 (Fed. Cir. 2005), cert. denied, 126 S.Ct. 1023 (2006); see generally CRS Report
RS22154, WTO Decisions and Their Effect in U.S. Law, by Jeanne J. Grimmett.

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petition or on its own motion, regarding an allegedly WTO-inconsistent measure, he or
she must invoke the WTO dispute process to seek resolution of the problem. The USTR
may impose retaliatory measures to remedy an uncorrected foreign practice, some of
which may involve suspending a WTO obligation (e.g., a tariff increase in excess of
negotiated rates). The USTR may terminate a Section 301 case if the dispute is settled,
but under § 306 of the Act must monitor foreign compliance and may take further
retaliatory action if compliance measures are unsatisfactory. A “carousel” provision
added to § 306 in 2000 directs the USTR periodically to revise the list of imports subject
to retaliation unless the USTR finds that implementation of WTO obligations is imminent
or the USTR and the petitioner agree that revision is unnecessary.
Article 23 of the DSU requires WTO Members to use DSU procedures in disputes
involving WTO agreements and to act in accord with the DSU when determining if a
violation has occurred, determining a compliance period, and taking any retaliatory action.
Section 301 may be generally be used consistently with the DSU, though some U.S.
trading partners continued to complain that the statute allows unilateral action and forces
negotiations through its threat of sanctions. The EC challenged Section 301 in the WTO
in 1998, with the dispute panel finding that the language of § 304, which requires the
USTR to determine the legality of a foreign practice by a given date, is prima facie
inconsistent with Article 23 because in some cases it mandates a determination and
statutorily reserves the right for the determination to be one of inconsistency with WTO
obligations before the exhaustion of DSU procedures. The panel also found, however,
that the serious threat of violative determinations and consequently the prima facie
inconsistency was removed because of U.S. undertakings, as set forth in the Uruguay
Round Statement of Administrative Action (H.Doc. 103-316) and made before the panel,
that the USTR would use its statutory discretion to implement Section 301 in conformity
with WTO obligations. Moreover, the panel could not find that the DSU was violated by
§ 306, which directs USTR to make a determination as to imposing retaliatory measures
by a given date, given differing good faith interpretations of the “sequencing” ambiguities
in the DSU. See Panel Report, United States — Sections 301-310 of the Trade Act of
1974
, WT/DS152/R (Dec. 22, 1999) (adopted Jan. 27, 2000). The EC has also challenged
the “carousel” statute described above, but the case remains in consultations
(WT/DS200). The issue has also been raised in Doha dispute settlement negotiations.
110th Congress Legislation. Expressing dissatisfaction with WTO dispute
settlement results in the trade remedy area, Congress directed the executive branch to
address dispute settlement issues in WTO negotiations in P.L. 107-210, which granted
trade promotion authority to the President. Dispute settlement issues may possibly arise
in connection with any legislative reauthorization of the authority, which expires June 30,
2007.
S. 364 (Rockefeller), introduced January 23, 2007, would provide for private party
participation in WTO disputes, establish a process for domestic review of WTO decisions,
require congressional approval through an expedited legislative procedure of any
administrative modification or final rule proposed to comply with an adverse WTO report,
require the USTR after any adverse dispute finding to work within the WTO to seek
clarification of U.S. WTO obligations under the agreement at issue and under certain
circumstances prohibit the executive branch from modifying an administrative measure
in order to comply with the adverse decision, and rescind certain administrative
compliance actions that have already gone into effect.