The Case for Tradable Remedies in WTO Dispute Settlement

Kyle Bagwell, Stanford University Department of Economics
Petros C. Mavroidis, Columbia Law School
Robert W. Staiger, Stanford University


It has been almost two years since the process leading to the reform of the Dispute Settlement Understanding (DSU) was initiated. The Ministerial Conference in Doha provided the legal mandate (§30) to do so. Negotiations started in early March 2002 and were supposed to be concluded by end of May 2003. This has not been the case. The situation is quite ambivalent from a purely legal perspective right now: negotiators seem to take the view (WTO Doc. TN/DS/9 of 6 June 2003) that although the deadline for concluding negotiations has lapsed, they still have the mandate to continue negotiating, which is what they have been doing ever since. The negotiations so far reveal convergence on some issues and divergence on others. The proposals with a "high level of support" have been reflected in a document (WTO Doc. TN/DS/9 of 6 June 2003) and those that could not gather momentum are, at least for the time being, kept aside (although, technically, they are still on the negotiating table since it is up to the country proposing them to introduce them at some stage). In this paper we essentially focus on one proposal of the latter kind, the Mexican proposal to allow WTO Members to trade their rights for retaliation. This proposal is definitely the most ambitious and innovative proposal (judging by the pace of institutional reforms throughout the history of dispute settlement in the GATT/WTO) ever submitted in this context. At the same time, it is a meritorious proposal and deserves to be discussed in a comprehensive manner. This paper aims to offer arguments in this perspective.