WTO Retaliation Rules in Subsidy-Related Cases: What Can We Learn from the US-Upland Cotton Arbitration?

Abstract

Retaliation serves as the remedy of last resort in the WTO Dispute Settlement System. In subsidy-related cases, retaliation becomes an option for an injured Member when the offending Member fails to withdraw the prohibited or actionable subsidy, or fails to remove the adverse effect of the actionable subsidy within the required time. This article provides an in-depth overview of retaliation in subsidy-related cases and advocates that 'inducing compliance' should be the goal of retaliation in WTO dispute settlement. To achieve this, the article analyses two main factors relating to the retaliation rules in subsidy-related cases, namely, the determination of the level of retaliation and the principles and procedures for retaliation and cross-retaliation. It also examines how the WTO arbitrators apply the rules in real-case scenarios, using the case of US-Upland Cotton as an example. In the process, the US-Upland Cotton (Article 22.6-US) arbitration decision is shown to have introduced six major developments to the WTO dispute settlement system.