Financial Compensation in the WTO: Improving the Remedies of WTO Dispute Settlement

The current system of remedies in the WTO provides Members with a choice between trade compensation or retaliation. There is a problem in that trade compensation is only possible with the consent of the non-complying country and thus often remains theoretical, while retaliation has the disadvantage of requiring the complaining Member to "shoot itself in the foot" by restricting imports and thus hurting its own industrial users, importers and consumers. Such retaliatory restrictions also hurt innocent bystanders abroad: private parties who are not involved in a dispute lose their export markets. As importantly, the current system does not provide for effective reparation of damages suffered by the WTO Member and private parties concerned. These problems are even more urgent for developing countries. Many of them cannot effectively retaliate. Introducing financial compensation could be a solution. Financial compensation does not restrict trade, helps to compensate injured Members and industries, and avoids hurting innocent bystanders.