Order Code RS20088
Updated August 7, 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
rules and procedures of the WTO Dispute Settlement Understanding (DSU). 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 an established deadline. Automatic establishment of panels, adoption of
reports, and authorization of requests to retaliate, along with deadlines and improved
multilateral surveillance of Member compliance, are aimed at producing a more
expeditious and effective system than had existed under the GATT. To date, 366
complaints have been filed under the DSU; slightly more than half involve the United
States as a complainant or defendant. Expressing dissatisfaction with WTO dispute
settlement results in the trade remedy area, Congress, in the Trade Act of 2002 (P.L.
107-210), directed the executive branch to address dispute settlement in WTO
negotiations. Although WTO Members have been negotiating DSU revisions in the
WTO Doha Round, a draft agreement has not yet resulted. S. 364 (Rockefeller) and
H.R. 708 (English) would establish a congressional advisory committee to review WTO
decisions and provide for private party participation in WTO disputes. S. 364 would
also require congressional approval of administrative actions taken to comply with
WTO decisions and rescind certain administrative actions that have gone into effect.
H.R 1278 (Camp) and S. 445 (Stabenow) would create a Trade Enforcement Officer
intended in part to assist the United States Trade Representative (USTR) in undertaking
WTO disputes. S. 460 (Snowe) would allow judicial review of certain USTR
determinations under Section 301 of the Trade Act of 1974, which may in some cases
involve the initiation and conduct of WTO disputes. S. 1919 (Baucus) would, inter alia,
create a Chief Trade Enforcement Officer, establish a WTO Dispute Settlement Review
Commission, and require a report from the Commission before an administrative change
to comply with a WTO decision could take 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

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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
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 Understanding on Rules and
Procedures Governing the Settlement of Disputes (DSU), negotiated during the Uruguay
Round and effective as of January 1, 1995, continues past GATT dispute practice, but also
contains 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 objection),
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, under certain circumstances,
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, 366 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
1 The text of the DSU, panel and Appellate Body reports, and information on the WTO dispute
process are 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. Information on WTO disputes
involving the United States, including the text of U.S. written submissions to WTO panels, may
be found at the USTR website, at [http://www.ustr.gov/Trade_Agreements/Monitoring_
Enforcement/Section_Index.html]. 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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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
July 2006 but have since resumed.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 to panels, sequencing (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. Following are the stages in a DSU 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 public circulation of the report should not exceed nine
months. In practice, panels have increasingly failed to meet the six-month deadline (see,
e.g., European Commission, “DSB Special Session: Non-paper on Panel Composition,”
Dec. 9, 2003, Ref. 575/03, at 5, at [http://trade-info.cec.eu.int/doclib/html/115445.htm]).
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
2 For a recent status review, see WTO document TN/DS/20 (July 26, 2007).
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, 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].

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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). In the
event of an adverse decision, the defending Member must inform the DSB of its
implementation plans within 30 days after the panel and any AB reports are adopted. 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 disputants within 45 days
after the report or reports are adopted; or (3) failing agreement, the period determined by
binding arbitration. Arbitration is to be completed within 90 days after adoption of the
reports. To aid the arbitrator, the DSU provides a non-binding guideline of 15 months
from the date of adoption; awards have ranged from 6 months to 15 months and one
week. The DSU envisions a maximum of 18 months from the date a panel is established
until the reasonable period of time is determined. Where there is disagreement as to
whether a Member has complied, a compliance panel may be convened (Art. 21.5).
Compensation and Suspension of Concessions (Art. 22). If the defending
party fails to comply with the WTO decision within the established period, the prevailing
party may request that the defending party negotiate a compensation agreement. If
agreement is not reached within 20 days after the compliance deadline expires, or where
negotiations have not been requested, the prevailing party may request authorization from
the DSB to retaliate. The DSB is to grant any such request within 30 days after the
compliance deadline expires unless it decides by consensus not to do so, or the defending
Member requests that the retaliation proposal be arbitrated (most often, on the ground that
it exceeds the level of trade injury in the dispute). Arbitration is to be completed within
60 days after the compliance period ends; once a decision is issued, the prevailing party
may request that the DSB approve its proposal, subject to any modification by the
arbitrator. If imposed, retaliation may remain in effect only until the offending 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,” which first
manifested itself in 1998-1999 during the compliance phase of the successful U.S.
challenge of the European Union’s (EU’s) banana import regime. As noted earlier,
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 original panel”; a 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 the 30-day
Article 22 deadline, 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

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rules on the matter, disputing parties have entered into ad hoc procedural agreements in
individual disputes.
The DSU is also silent on procedures for terminating authorized retaliation in the
event the Member subject to sanctions maintains that it has complied with its WTO
obligations. This gap 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 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 failure to comply with a WTO ruling
regarding the EU’s ban on hormone-treated meat. The EC, claiming that a 2003 EU
Directive on the subject renders it WTO-compliant, is arguing that the United States and
Canada, 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. A panel report is expected to be publicly circulated later in 2007.5
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.6 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
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
5 See generally 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). An interim panel report was reportedly submitted to the disputing parties in late July
2007. WTO Ruling Said to Aid U.S., Canada in Beef-Hormone Disputes with Europe, 24 Int’l
Trade Rep. (BNA) 1112 (Aug. 2, 2007). The dispute has also been notable because, as requested
by the disputing parties, panel proceedings for the first time were made open to the public via
closed-circuit TV broadcast at the WTO.
6 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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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. S. 364 (Rockefeller) and H.R. 708 (English) would
establish a Congressional Advisory Commission on WTO Dispute Settlement to review
WTO decisions in light of enumerated criteria and provide for private party participation
in WTO disputes. S. 364 would also require congressional approval under an expedited
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 decision, and rescind certain
administrative compliance actions currently in effect. H.R. 1278 (Camp) and S. 445
(Stabenow) would create a Trade Enforcement Officer in the Office of the USTR intended
in part to assist the USTR in undertaking WTO disputes. S. 460 (Snowe) would allow
judicial review of certain USTR determinations under Section 301 of the Trade Act,
which may in some cases involve the initiation and conduct of WTO disputes, along with
making other amendments to the statute. S. 1919 (Baucus) would, inter alia, create a
Chief Trade Enforcement Officer in the USTR, establish a WTO Dispute Settlement
Review Commission to evaluate WTO decisions under statutory norms, and prohibit a
domestic regulatory modification taken to comply with an adverse WTO decision from
taking effect unless and until Congress receives the Commission’s report on the WTO
decision involved. To date, no action has been taken on any of these bills.

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