WTO Dispute Settlement and Industrial Policy

Brief
Date period
10 April 2015

Implemented jointly by ICTSD and the World Economic Forum, the E15Initiative convenes world-class experts and institutions to generate strategic analysis and recommendations for government, business and civil society geared towards strengthening the global trade and investment system for sustainable development. The Expert Group on Industrial Policy is co-convened with the National School of Development at Peking University.

Taking a detailed look at the World Trade Organization (WTO) dispute settlement mechanism in relation to the space it provides for Member countries’ industrial policies, this paper examines whether and how existing decisions of WTO panels and the Appellate Body have affected, or expanded, the policy space for Members to pursue industrial policies under WTO law. It also looks into how such policy space could be further expanded through WTO panel and Appellate Body decisions.

First, the paper presents general conceptual reflections on how WTO dispute settlement can influence the policy space available to WTO Members to adopt industrial policy measures. These conceptual reflections address the role of WTO panels and the Appellate Body in general; the nature and categorization of WTO legal provisions applicable to trade in goods; and the interpretation of categories of rules most likely to impact the policy space of WTO Members. Second, the paper discusses two cases in which the Appellate Body interpreted certain WTO provisions in a manner that arguably creates more policy space for industrial policy measures than alternative interpretative approaches would have permitted. Third, it considers other potential examples of how WTO dispute settlement decisions could create or enlarge policy space under other WTO legal provisions with respect to industrial policy measures.

The paper points to a number of examples of how existing or potential interpretations and findings of WTO adjudicatory bodies may impact on the policy space of WTO Members to implement industrial policy measures. The many examples demonstrate that WTO dispute settlement can, at the margin and in some instances, affect the policy space available for Members to pursue industrial policy objectives. The dispute settlement bodies may also, through their interpretation and application of the law, influence the willingness of potential claimants to bring challenges before the WTO. However, it bears repeating that the ability of dispute settlement decisions to impact WTO Members’ policy space for industrial policy is strictly circumscribed by the existing treaty rules that WTO panels and the Appellate Body have to take as a given.