2013

Trade with Korea and Canada: 5. Resolving Trade Disputes

All relationships will eventually face difficulties sooner or later. Even the ones that looks flawless outside inevitably suffers from conflicts – it may simply that they have ways to identify and address the difficulty internally. For example, the fact that I don’t protest my wife’s decisions simply indicates that I have found ways to deal with them on my own (mainly involving beer).

Korea-Canada relationship is no different, I would imagine. Two countries are much different in their histories and backgrounds, and for that reason, each country must have a world-view that has been shaped by such different circumstances. When these differences exist (which always and inevitably exist when dealing with at least two individuals), the litmus test of the relationship (in my opinion) is not the differences in themselves, but rather the determination to resolve the issue in a mutually satisfactory manner and the ways two countries adopt to implement such determination.

Korea-Canada relationship in trade is not all pink also. The topics that I have discussed previously, – national treatment, most favoured national treatment, tariff reduction and an access to the government procurement business – are some of the highlights of the positive relationship, but the relationship surely has its difficulties. And it is in the resolution of these issues where two countries have again demonstrated their respect for the rules and willingness to move forward, as opposed to dwell in the disagreements.

As members of the WTO, Korea and Canada resolve a large number of trade issues according to the treaty rules, called Dispute Settlement Understanding (“DSU”). An important aspect of the DSU is the fact that it necessitates the parties in dispute to come together. This aspect makes the countries to pause an impulse to react and hear out the other side. In addition, the issues are often fully investigated before the countries respond to the perceived issues.

The first step in addressing the trade dispute is a consultation (DSU Article 6.2). When a dispute is not mutually resolved by consultation, the DSU provides a mean to resolve the dispute before a panel of impartial experts (DSU Article 6.3). This process is adjudicative in nature, meaning that views of one party will necessarily be favoured. For the party whose views are not favoured, the DSU provides a mean to appeal the panel decision to the WTO’s Appellate Body (DSU Article 6.5). Much like the appeals court in many countries, the Appellate Body acts as a safeguard to the panel so that there is always an extra pair of eyes looking into the matter.

The decisions of the Appellate Body are final. It is also effectively binding, because the decision is adopted unless every WTO members decides not to adopt it (DSU Article 6.6) – and I can personally assure that at least one member will disagree to not adopt the decision.

The Panel or Appellate Body decisions call out the “loosing” member to comply with the rules. What it means in a plain language is that the “loosing” member need not pay money or send anyone to the prison as in domestic courts. What the “loosing” member needs to do is to fix its system (often its own laws or rules) so that it does not violate the trade rules. This “fix”, or compliance, must take place immediately. However, if the immediate compliance is not possible, the “loosing” member may seek for a “reasonable period of time” for compliance (DSU Article 21.3). When the compliance is said to be done by the “loosing” member, the “winning” member can further adjudicate whether the compliance measure in fact has taken place (DSU Article 21.5). Finally, when the compliance is not done, the “winning” member may be entitled to either monetary compensation (DSU Article 6.9) or retaliation (DSU Article 6.10).  The retaliation is a powerful tool because it is a lawful way of suspending the benefits of the rights under the WTO against the “loosing” member.

The implication of the DSU is that Korea or Canada cannot simply ignore each other and act unilaterally when the dispute has arisen. It is “civil” in a sense, because the resolution mechanism requires the countries to consider the other party’s views. In other words, even in the face of difficulties, the members are bound to be respectful to each other and to the rules to which they have previously agreed. It may be a more expensive medicine than the six-pack, but surely is better in terms of respectful-ness.

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