Person:

Wu, Mark

The World Trade Organization (WTO) is held out as an exemplar of an effectively functioning international “court.” Yet, a puzzle remains unexplained: in WTO litigation, a respondent found to have enacted an illegal trade policy measure needs only to remedy the illegality. So long as it does, the WTO lacks the authority to order retrospective remedies to be paid to the complainant for past harm. The remedies loophole provides countries with a “free pass” for temporary breach. Why do more countries not take advantage of this pass more frequently? How is it that the WTO manages to function effectively in spite of its imperfect remedies?

This Article suggests that the key to understanding the answer to this puzzle lies in the importance of power asymmetries in a WTO system that is dynamic and evolving. It identifies a series of policy instruments available to a powerful country whenever its trading partner is tempted to undertake a temporary breach that harms the powerful state’s interests. These instruments create additional costs that offset the benefit of any temporary breach, thereby effectively deterring most, albeit not all, temporary breaches. In addition, the established powers share a collective interest in maintaining the WTO system’s stability. This also causes them to exercise collective self-restraint in their own exercise of temporary breaches.

The answer to this puzzle is of more than just academic importance. It also sheds important light on the future of the international trade regime. As geopolitical power shifts and trade among developing countries increases, particular countries may find it more tempting to engage in temporary breaches under certain circumstances. This Article examines the nature of these emergent conflicts and discusses its implications for the future of the global trading regime.

Over the past decade, China and India have rapidly increased their use of antidumping laws, the world’s most dominant form of trade protectionism, against their trading partners. Yet, this behavior has triggered little concern in the United States and Europe. Why? Two leading theories suggest that the recent spike in Indian and Chinese antidumping measures is temporary. Moreover, the balance of benefits under existing international legal rules continues to favor American and European producers. As a result, the United States and European Union have viewed attempts to reform global antidumping laws as against their interests.

This Article challenges this conventional wisdom. It argues that India and China’s antidumping regimes pose a larger long-term threat to the global trade regime than is commonly believed. Through novel empirical tests of the two leading theories, I demonstrate why China and India’s recent increase in antidumping protectionism is not temporary and not destined to level off. Instead, as more industries discover the benefits of antidumping laws and as China takes a more aggressive retaliatory stance against its trading partners, both countries’ use of antidumping sanctions will likely continue to increase. To guard against this increased protectionism, this Article argues that World Trade Organization members should reverse their opposition to reforming global antidumping rules and instead enact proposals that place greater restrictions on antidumping laws. It highlights why the present moment is an opportune time for reform, but notes that the window for reform is likely to close as China and India acquire increased economic strength.

This article examines the relationship between antidumping duties and strategic industrial policy. We argue that the dynamic between the two instruments is more complex and elaborate than that offered by the conventional account. We use the recent China–X-Ray Equipment dispute as a case study to show that linkage between the two instruments may not be the consequence of a government-led policy but instead a result of firm-driven responses to an industrial policy. This in turn may lead to antidumping tit-for-tat behavior between WTO members. We also analyze how WTO litigation serves as a means to alter the payoff and discuss the implications and unresolved questions that remain following the China–X-Ray Equipment ruling by the WTO.

In January 2014, the WTO broke the longstanding impasse in trade negotiations over environmental goods. It abandoned a decade-long effort to reach an agreement as part of a comprehensive Doha Round package. Instead, the WTO declared that it would commence new negotiations for a standalone plurilateral agreement. While a quarter of the WTO membership has expressed their intention to participate in these negotiations, very few developing countries have done so. This Article examines the question of why this is the case. The conventional belief is that developing countries have export interests at stake in environmental goods, but are avoiding the talks because of competing desires to preserve high tariff rates to protect domestic industries and/or to express their dissatisfaction with the current mode of negotiations. This Article proposes an alternative interest-based explanation: Most developing countries stand to gain very little from the talks, as they are currently structured. More important than the countervailing forces emphasized by the conventional explanation is the simple fact that developing countries, other than China, simply do not have sufficient interests at stake to join the negotiations. Drawing on original analyses of recent trade flows in environmental goods from various developing countries, the Article highlights the following: First, very few developing countries have much at stake in terms of exports. Second, among those that do export, many already have reaped significant tariff benefits through negotiations in other fora. Third, developing countries can achieve remaining objectives through free riding. Finally, the predominance of intra-developing country trade minimizes gains from a treaty dominated by advanced economies. Together, these explanations account for why most developing countries have little to gain – contrary to the conventional belief that many have interests at stake. For those who may find the lack of developing country participation to be troubling, this Article explores several potential options to entice more developing countries to join the negotiations. Overall, the Article suggests that the key to increasing the participation of developing countries will be to expand the scope of the negotiations beyond what is currently on offer, to include other environmental goods, services, and/or non-tariff barriers.