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Jean-Pierre Chauffour and Jean-Christophe Maur
and move on, or the disputes will poison bilateral relations, reduce the benefits from the PTA, and perhaps even lead to the demise of the agreement. Dispute settlement is also essential to ensure that the promises set forth in a PTA are kept. By participating in a PTA with strong dispute settlement provisions, a government signals its level of commitment to private and public interests at home and abroad. Even if no disputes are anticipated, enforcement provisions in a PTA reinforce the governments’ precommitments, make their promises more credible, and signal that the PTA is a sound platform for investment that will create jobs and economic growth. Solid dispute settlement is even more important in North-South (or South-South) PTAs with asymmetrical power relations. Recently concluded PTAs in Latin America, Europe, and Asia demonstrate to a striking extent that as PTA obligations deepen, become more complex, and provide more value, PTA partners seek more certainty than purely diplomatic dispute settlement can provide. The WTO-type ad hoc panel model is an often-used option, but some PTAs employ a standing tribunal instead. A tribunal may involve more fixed investment in infrastructure than ad hoc panels, but its permanence may make it available to take on more functions for the integration process. Thinking ahead toward coexistence and even multilateralization of PTA networks, however, it may be easier to mesh ad hoc panel systems than court-based systems. In doing so, one should be aware that even an ad hoc system involves many procedural choices: • Should the PTA limit panels to determining whether a PTA government has violated PTA law? Some PTAs follow the General Agreement on Tariffs and Trade (GATT) by making provision for disputes about government measures that do not violate the rules but still frustrate reasonably expected PTA benefits. • Should the PTA provide that all of its obligations are subject to dispute settlement? Some do, whereas others exclude particular areas (for instance, soft law or competition law). • How should the PTA deal with overlap between PTA obligations and those of the WTO or other PTAs? In practice, most give the complaining party the right to ask for consultations in either or both forums, but they prohibit a second panel process after a panel has been requested in one forum. The parties to a PTA will also need to consider how they want dispute settlement to operate. Institutions are a threshold question: if negotiators want greater consistency and predictability in panel decisions, the support of a secretariat
will be helpful, but it will require an up-front investment. The details of panel procedures can be left to be agreed later, although negotiators can set key parameters in advance. Various approaches exist for dividing the expenses of disputes, handling translation and documentation issues, and regulating presentation of evidence and arguments. PTAs with dispute settlement experience have sought (like the WTO negotiators) some way to ensure sound and consistent panel decisions: almost all ad hoc panel systems allow the parties to comment on panel reports in draft form, and two PTAs have committed to appellate mechanisms. Then there is the question of participation in the process. Who are the decision makers? Every PTA has a process for selecting members of panels or standing tribunals and ensuring their impartiality. Who (other than the governments) may provide input into this process? Every government that engages in dispute settlement relies on its private sector to identify problems, to provide relevant factual information, and to identify commercial priorities. Will the PTA permit panels to consider input from civil society in general? Must submissions and hearings be open to the public? Finally, it is important to have some mechanism for determining whether government measures breach PTA obligations—but formal dispute settlement is not always the quickest way to resolve a measure that is causing a commercial problem. The committees and other institutions created by a PTA provide a practical setting for addressing and resolving such issues. Some PTAs go further and build in a role for mediation, conciliation, or other rule-agnostic practical settlement methods. The benefits of such mediation are sure to exceed its costs. The final, and unavoidable, problem is compliance. Unless a PTA’s dispute settlement instruments can (like the European Court of Justice) impose fines on members for noncompliance, PTAs’ leverage to obtain compliance consists of authorizing withdrawal of PTA benefits or exercising moral suasion. To the extent that a PTA’s preference margin is low relative to MFN benefits in the WTO, a PTA member may have much more leverage litigating in the WTO, if it can. Indeed, the record of experience with PTA disputes shows that except in the Southern Cone Common Market (Mercosur), where MFN tariffs are high, many PTA parties have chosen to turn to the WTO. References De Melo, Jaime, and Arvind Panagariya, eds. 1996. New Dimensions in Regional Integration. Cambridge, U.K.: Cambridge University Press. Schiff, Maurice, and L. Alan Winters. 2003. Regional Integration and Development. Washington, DC: World Bank. World Bank. 2000. Trade Blocs. Washington, DC: World Bank.