Developing countries have a range of economic problems that hinder their possibilities to develop and prosper. One of the aims of World Trade Organization has always been nurturing the economies of different nations around the world. Therefore, developing countries fall under the scope of its activities. Presently, 164 countries are acting members of WTO, however, according to some researchers, not all of them participate in facilitation of international trade equally. One of the most troubling issues is the fact that many trade deals such as export and import affairs are not always regulated appropriately. For settling issues of improper or unfair trade issues, WTO has a special sub-structure that is called dispute settlement body (DSB). It acts as an independent arbiter that ensures that the sides of international trade agreements honor their part of the agreement and in cases of failing to do so, DSB resolves the matter by involving other countries in the process of the argument as parts of WTO secretariat, experts or arbitrators. This design is envisioned to help bring objectivity into the process of trade matters’ resolution and aid other countries to guide and support their fellow-members to foster mutual respect and promote fair trade.
Despite such honorable goal is often pronounced, there are some internal and external issues that undermine the capacity of DSB to fulfill its obligations as a regulator in a way that is fair to every member-nation. Kristin Bohl (2009), for instance, argues that developing countries often experience issues of unfair treatment origin in regard to DSB that question the mere place of those countries in WTO. A research by Torres has also revealed WTO DSB issues connected to limited access of emerging economics to its resources. Given that fact, this research has been dedicated to explore this topic.
Discussion of the Topic
WTO as an international organization emerged in 1995 as a result of a joint meeting held in Marrakesh (VanGrasstek, 2013). It has replaced the former international agency (General Agreement on Tariffs and Trade or GATT) that since 1948 carried on similar obligations. The new global regulator became a successor to the previous one with the text of the GATT agreement imbued with the present WTO founding documents. The reason for the reform was, among other ones, the need for the extended scope and broader cooperation in the sphere of trade. GATT focused primarily on negotiating concessions and eliminating barriers in the international trade. Initially, the GATT was formed by 23 countries and as more nations volunteered to sign the agreement, it became obvious that there is a need for a larger organization (VanGrasstek, 2013). The range of issues the successor was tasked with to resolve also grew. It now involves not only the promotion of the international trade cooperation but also establishing transparent international trading rules for individual countries and makes sure that others follow them. WTO also works in tandem with other non-governmental organizations and media to facilitate the process of negotiation and ensure good coverage.
One of the key WTO structures that play the key role in enforcing its policies is the dispute settlement body. It was created as a part of WTO during the Uruguay round or eighth in September 1982, which marked the emergence of the organization itself. It has also become the most controversial aspect of the activities performed by WTO. Lately, the DSB’s capacity as an international conflict manager has been seriously questioned by researchers, countries, and major global political forces such as European Union.
The tensions has began to mount since 2001 with the official Doha Development Round (DDR), the agenda of which focused negotiation on trade barriers between developed and undeveloped countries. The main point of the argument consisted in the presence of governmental protectorate in this sphere exercised by the US and some other developed countries, which the developing ones considered as major violation of the WTO agreements (VanGrasstek, 2013). One of the most important principles of the WTO membership includes non-discrimination that means that states should conduct trading operations imposing the same rules for each player in the market with no special treatment shown to the goods produced domestically. As of December 2017, the issue is still unresolved.
This event outlines the flaw of the dispute settlement mechanism (DSM) that does not provide the developing countries the opportunity for a fair deal since the developed countries account for larger portions of the market, and it seems like their interests are far more protected than those of Brazil, India, China and other emerging economies. The solutions have to be found for granting them the access to the DSB and enabling them to use that mechanism to successfully protect their interests in demand of fair market situation. The topicality of this issue is the prime reason why the research has targeted this topic.
The Kingdom of Saudi Arabia has joined WTO in 2005. Since then, it has not been an active participant of DSB as either third party, appellant or defendant. KSA is a state with one of the richest countries in the world measured by GDP per capita and a huge potential influence due to its possession of large oil reserves. KSA is argued to have the capacity to use its economic power to its advantage (Salamah, 2016). Saudi Arabia has not yet taken side in the above-mentioned dispute and its capacity as a third party or mediator is what also fascinating to research. Additionally, literary sources do not appear to focus Saudi Arabia’s involvement in the process of dispute settlement, which provides yet another reason to research into it.
As it was outlined above, the research focuses on the problems of the developed countries with the access to WTO dispute settlement mechanisms. The urgent need to find the solution to this problem and the extent to which Saudi Arabia could facilitate the process are the main research points. The hypothesis is, therefore, as follows: Saudi Arabia can influence other countries in WTO to address the problem of developing countries’ access to the WTO DSM.
The hypothesis is tested through systematic review. The research used topic-specific academic sources to research into the problem. The sources were found through Google Scholar search engine. The search incorporated using key words such as “WTO dispute settlement,” “developing countries,” “access,” “Saudi Arabia,” “KSA”. In various combinations, the search by the keywords produced from 15,000 to 312,000 results. The preliminary search identified 17 articles, books and reports the topics of which seemed relevant to the stated research hypothesis. Through basic empiric analysis, the author of the research picked 8 sources that contained valuable information on the topic.
For acquiring general understanding of the topic, the book by VanGrasstek was used. The author narrates about the history and main changes and challenges WTO has encountered along the road to the present day (VanGrasstek, 2013). The author did an outstanding job of pinpointing the milestones of the organizations’ development together with outlining in what direction the organization needs to develop presently to address its pressing issues. As one of these problems, he mentions low representation of emerging economies in the process of WTO dispute settlement. According to VanGrasstek (2013), presently, less than 19% of all applications are filed by developing countries. Unfortunately, the author only proclaims the need for resolution and does not try to propose one.
Persson (2007) has produced an article where he elaborately and in detailed fashion describes the process of dispute settlement in WTO. The author in particular argues for extensive implementation of articles 21.5 and 22 of the Dispute Settlement Understanding, which provide the means for a party considered the violator to pay tribute to the offended. It may seem radical and practically inapplicable but the solutions still inspire future discussion.
The most comprehensive and well-round work where the problem of insufficient access to dispute settlement among developing countries has been discussed is the article by Bohl. She states that fact-finding is paramount for resolving and building an argument on access to dispute settlement. The positive feature of this article is that it points out the possible solutions for the problem in multiple domains such as establishing the link between government support and the industry, fostering the political will and courage, and so on (Bohl, 2009). The author also mentions the high cost of litigation as one of the primary concerns for the developing countries as legal expenses are an effective detergent when it comes to using WTO dispute settling mechanism (Bohl, 2009).
Another work that scrutinizes the relationships of WTO countries under DSB is the scientific paper by Torres. He underlines the binding nature of the body’s decisions which offer a certain protection (Torres, 2012). Despite its design to assist the emerging economies, the some of the rules are not followed willingly by the prospering countries (Torres, 2012). In addition, the disputes of emerging economies with developed ones historically were successful if the claim was exclusively strong and undeniable. In more complicated issues, developed nations seem to prevail, which sets an evident disparity (Torres, 2012).
Mohamad (2013) offers another insight into how the DSB functions. According to his analysis, it becomes evident that it is the structural composition of the body that hinders the capacity of the developing countries to defend its freedoms with the help of DSB. Specifically, the negative consensus contributes to this immensely as it allows only one member, usually the most influential one on panel (Mohamad, 2013). Mohamad (2013) also mentions that articles 4.10, 12.10, 8.10, 21.8 of the Dispute Settlement Understanding (DSU) advocate for a special status of the developing countries that give them preferences.
Abbott (2007) offers an insight into why the participation of the emerging economies has been so insignificant as compared to developed ones. He argues that the main reasons for that concern the inner politics and structure of power in these countries. Abbott (2007) gives a special treatment to calculating the exact numbers that tell the accurate story of the participatory behaviors of the developing countries. They are structured in a way that out of a third of total complaints are filed by them and the 90% of that number is generated by three countries, namely, Brazil, India, and Mexico.
Kazzi (2015) has devoted her research mainly to problems and challenges of developing nations in the structure of WTO dispute settlement. As a positive item, he mentions that generally, WTO members acknowledge the problem of underrepresentation and low access of developing countries to dispute settlement mechanisms in their current state (Kazzi, 2015). The researcher names the costs of litigation a prominent measure that could alleviate this issue. Another possible solution is raising the level of expertise of those countries who by one reason or another do not participate in dispute settlement.
Discussion of the Study
Having reviewed the literary sources that focus on the problems of WTO dispute settlement mechanisms and the place of developing countries as its users, this research divides the gathered information into following sections: discussion of the roots of the problem, structural issues of DSM relevant to developing countries problem, internal issues of developing countries, and possible measures of conflict resolution.
Roots of the Problem
Internal issues of developing countries
The sources do not agree on the origins of the issue of developing countries having limited access to DSM. There are also consideration of non-existence of the problem. For instance, Bohl (2009), for the sake of objectivity considers the possible lack of interest as a true cause for many developing countries’ non-participation. Indeed, many developing countries such as South Africa, Trinidad and Tobago, and Nicaragua usually have little to export to other nations, which creates virtually no ground for dispute. In contrast, Brazil, India, and China, who are known for their booming markets, exercise their rights and privileges more often. Thus, the former countries have 0 to 1 dispute applications while the latter amount to 61 complaints total, which constitutes about 30% of all applications (Abbott, 2007).
Additionally, the researchers mention the lack of expertise in international law practices. Absence of qualified experts in the field of international relationships seems to be a valid reason why developing countries might abstain from using the WTO dispute settlement option. Without such knowledge, the chances for success can be very limited despite any preferences the DSU provides for emerging economies. The lack of funds to cover the financially burdening legal counsels, hearings has also been named as one of the reasons for non-participation. Financial issues is a known problem of most of emerging economies, however, it does not seem to be that much troubling in light of the recent DSU developments outlined by Mohamad (2013). Particularly, under the DSU, the length of the dispute is limited, which saves the resources for long arbitration. Additionally, the compensation might be awarded to the applicant if their claim happens to be satisfied. However, the need to hire a third-party legal counselor, whose services range from 4 to 30 thousand dollars could make a difference. In addition, as Bohl (2009) states, the only chance a developing country wins the argument is by providing solid undeniable facts that could be costly to uncover.
Abbott (2007) also claims that fear of sanctions and political pressure can also be one the reasons why developing countries tend to avoid applying to DSB. Developing countries often have little or no influence on the international political arena due to their low impact on global economy and often low military power. Therefore, this might be one of the reasons why they opt to settle their disputes directly with the second party.
Another potential cause for low participation could be that all the trading disputes are being managed bilaterally without the mediation of WTO (Grando, 2009). It is not that hard to imagine that the agreements are honored by both trading parties and should any complications arise, the countries including the developing ones will try to settle the issue peacefully without resorting to ultimate measures such as DSM. WTO dispute settlement has been devised for cases when the parties cannot reach consensus, and the fact that not many complaints are filed could also speak to the fact that the countries in most cases manage to reach mutual agreement on trading matters. Despite economic status of the country, the view of DSM as a final measure is probably shared both by developing and developed countries alike.
Assessing the possible impact of Saudi Arabia on the internal issues of other countries and its capacity to change their mind on participation in DSM is hard due to the absence of reliable qualitative or quantitative data on the matter. Logically, Saudi Arabia’s influence on the matters of another state is limited to a kind advice. For instance, Nicaragua for all its 22 years of membership in WTO has never issued a single claim due to the fact that the country does not produce and export that many goods and, consequently, does not have many trade partners with whom it could have potential conflict issues. There is no practical way that Saudi Arabia could alleviate the issue accept for pouring financial aid into the development of Nicaragua, which does not seem to be a solid investment and does not guarantee that the country will engage in WTO disputes.
What Saudi Arabia could influence here is fear of political pressure. Since KSA is a wealthy state with weighty opinion on the international scale due to its oil reserves, it could offer its protection to countries that fear the repressions against other countries. However, this ‘protection’ could be limited, when the dispute is between South Africa and the US. Since Saudi Arabia is a strategically partner of the US, it would be hardly in KSA’s power to safeguard South Africa from economic or political sanctions coming from the US.
The most effective way Saudi Arabia can help developing nations is through providing adequate legal counsel. KSA has a variety of legal schools and the abundance of professionals including ones that specialize in international law. Should there be a need in such services, Saudi Arabia could provide them to developing countries, building their confidence in WTO DSM and leading others by example.
Structural issues of DSM relevant to developing countries problem
As mentioned by Mohammad (2013), DSU provides protectorate over developing countries aiding them in maximizing the impact and simplifying the procedure of alleviating their trade disputes through WTO. Article 4.10 DSU, for instance, calls upon WTO members to give account for interests and problems of developing members. Article 12.10 DSU states the right of developing countries for an extended consultation period. Article 21.8 DSU states that DSB needs to consider an impact that their decision can produce on the economy of the developing country (Mohamad, 2013).
In spite of that, these articles are a sort of recommendation or a guideline and non-binding in nature, which does not have an effect on developing countries. Substantiative rule is also claimed to be biased against developing countries since the power is concentrated in the hands of wealthier nations (Mohamad, 2013). Despite the recent attempts to mitigate the cost of legal procedures by shortening the term of case processing, the litigation still costs extremely high for developing countries, especially if they have to hire an external legal advisor. Mohamad (2013) argues that even India having extensive trade partnerships faces difficulties in managing the expenses of legal counseling, not mentioning less successful countries such as Nigeria. Also, presently, there is no WTO policy that describes the essence of admissible evidence, and its sufficiency, which is why it has been challenging for developing countries to make a solid case.
The Doha Round mentioned in the first part of the research illustrates the insufficiency of authority or organizational power in the hands of developing countries to maintain the compliance of each member state to even those rules that the WTO documents proclaim as central and obligatory to all participants. Even though there exists an Article 21.8, and general principle of non-discrimination, the US continues to uphold its policy for protecting the domestic agricultural producers. That is given that fact that many developing countries are still rural and up to 75% of the population is occupied in agricultural sector, and such policies obstruct the free trade and thus, hinder the opportunities of developing countries for expansion and economic growth. The DSB has absolutely no effect on the matter and the talks are continuing even though 16 years have passed, no solution has been produced. This marks the most significant flaw of WTO DSM as a regulator. It appears to be biased against the developing nations serving mostly to protect the interests of the key players on the market. All of these flaws combined seem to prevent emerging economies from participating in dispute settlement.
When the Saudi Arabia is concerned, its role here can also be seen as missionary. As an acting member of WTO and a solid force in OPEC, KSA may use the opportunity to promote the more active inclusion of developing countries in the process of dispute settlement from its position of power. However, vast oil reserves do not guarantee the respect and regard for the words of ambassadors, which indicates the need for a skilled and informed advocacy. Secondly, KSA may rally other countries to vote for making the articles that protect the rights of developing countries binding in order they had real effect on the participation of the latter in DSM.
Possible Measures of Conflict Resolution
Bohl (2009) argues that one of the measures that could significantly enhance the capacity of developing countries to participate in WTO dispute settlement is to introduce an agency that would help countries find evidence and simplify the procedure of a defense together with partly unburdening the emerging economies of excessive costs. It is also paramount to separate it from decision-making board that falls under the influence of dominant political figures. An amendment to the DSU that covers a well-round explanation of evidence and establishes a firm procedure as for its production, admission and sufficiency would become another milestone that forms the ground for fair dispute settlement environment before DSB. It is vital that such addition to the DSU is binding in nature to eliminate the flaws the previous articles that proclaim the care for developing countries’ interests and contribute very little to the cause.
Establishing the firm connection between private and public sector is another measure that could boost the accessibility of emerging economies to the DSM (Bohl, 2009). A productive dialog between business and government increases the chances of successful advocacy for the interests of the former at the international arena. However, there is not much any foreign power could do to implement those changes except for the country leaders themselves. Other countries and Saudi Arabia could only advice and advocate for effective exchange of information, collaboration and other.
An establishment of a faster procedure for small claims, as Bohl (2009) suggests, would tremendously lower the costs for case processing expanding the accessibility of DSM to emerging economies. However, a faster procedure might still be biased and of low quality, which does not further the idea of using DSM among developing nations. Therefore, such measure needs to be implemented parallel to establishment of clear procedures and binding documents explaining evidence as suggested above.
Report on Findings
In summary, the problems of developing countries regarding their access to WTO dispute settlement come from a variety of potential sources. It has been found that domestic sources include poor expertise in the international law and the added costs that result from having to hire a third-party counselor. The overall shortage of money among developing economies is also recognized as a factor that diminishes the desire to opt for DSM. The fear of sanctions from economically stronger opponents also seems to contribute to the problem. It can also be proposed that because of the fact that bilateral settlement of the dispute can be used, and the fact that the situations when the resolution cannot be achieved are rare, the need for DSM is small. Finally, developing countries apart from China, India, Brazil, and certain other nations do not have vast volumes of trade to begin with.
Structural issues include a non-binding nature of many articles in DSU, which does not essentially change the status of developing countries and only proclaims the need for consideration of their interests. Substantive rule and the absence of real decision-making power often mark the lack of interest in DSM because without hard evidence there is practically no chance of winning. From this situation stems the fact that DSU does not provide an explanation of what evidence is and how to handle it.
The possible solutions that can help involve developing nations more actively in WTO dispute settlement include reworking certain articles that would cement the rights of emerging countries, simplify and abate the price of procedures while retaining objectivity. In addition, the governments need to strengthen ties with local businesses in order to perceive mutual interest and be able to defend it better before DSB.
The role of Saudi Arabia in the process of alleviation of the issue is mostly viewed as advisory. Using its position and authority, KSA might advocate for provision of the above mentioned structural flaws in the WTO and its DSM. Regarding domestic issues, Saudi Arabia’s powers are limited here only to make a neighborly advice or provide specialists for legal counselling.
The study’s main limitation is the absence of hard evidence or academic sources that focus the role of KSA in WTO as an advocate or policy changer. Another limitation is the low amount and the relative outdatedness of certain sources. The inability to see beyond the political decisions that are made behind the ‘closed doors.’ Also limits the assumption that the US are the sole leader and has been treating developing nations unfairly because of their own interest.
In conclusion, the initial hypothesis has been partially disproved. Saudi Arabia possesses certain power to help the developing countries use DSM to their benefit, but there are many variables that do not lie within the reach of KSA. However, Saudi diplomats and legal counselors could help a lot by performing good in the next Rounds. As of now, there remains much to be done in the field of improving DSU and DSM in order to make them fair and accessible to all countries regardless of their economic status. Solutions outlined in the resent paper could definitely help achieve that goal.
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Bohl, K. (2009). Problems of developing country access to WTO Dispute settlement. Chicago-Kent Journal of International and Comparative Law, 9(1), 131-197.
Grando, M. T. (2009). Evidence, proof, and fact-finding in WTO dispute settlement. Oxford, UK: Oxford University Press.
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Mohamad, R. (2013). Developing countries and the WTO dispute settlement mechanism: An examination of the underutilized crown jewel. AALCO Journal of International Law, 2(1), 1-16.
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VanGrasstek, C. (2013). The history and future of the World Trade Organization. Geneva, Switzerland: The World Trade Organization.