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Flawed WTO Arbitration remains better option, despite US view

The new United States Trade Representative, Mr Robert Lighthizer, made his first appearance at a Ministerial meeting of the World Trade Organisation (WTO) in Argentina on December 10.

Mr Lighthizer’s remarks provoke serious consideration of the usefulness of the WTO for small countries, particularly when he questions whether the “current litigation structure (of the WTO) makes sense”.   

After 14 years of trying unsuccessfully to get the office of the USTR, through the administrations of Bush, Obama and Trump, to honour an award made by the litigation structure of the WTO, the small nation of Antigua and Barbuda, has good reason to join Mr Lighthizer in questioning it.  But for different reasons.

Let me declare at the outset that I have been involved in Antigua and Barbuda’s case at the WTO against the US from the outset.  I began the negotiations with the office of the USTR in 2003 and, subsequently, as Ambassador to the Organisation, I led the Antigua and Barbuda team at the first Arbitration panel established by the WTO to adjudicate the dispute.   Since 2015, I have again been engaged in dealing with the office of the USTR in this matter.

In March 2004, the panel found that the United States had violated its commitments under the General Agreement on Trade in Services (GATS) when it adopted laws making the export of gaming services into the US, via the Internet, illegal.  At that time, Antigua and Barbuda was a leading nation in the provision of Internet gaming services.  The industry brought significant revenues into the economy, directly and indirectly, and provided good-paying jobs to Antigua and Barbuda’s computer-literate young people.

The US domestic law, which violated the country’s binding international obligations under the GATS, hurt Antigua and Barbuda by the deprivation of revenues and employment arising from its trade in services with the US.  In 2007, following appeals by the US against the 2004 decision, another arbitration panel confirmed the damage done to the Antigua and Barbuda economy, and set it at US$21 million a year.

The figure in damages, at the 2004 level, is now in excess of US$210 million.  Over the entire 13-year period, and through three administrations in both countries, Antigua and Barbuda has tried to negotiate with the US – the world’s richest and most powerful nation to reach a settlement.   Negotiation has proved to be impossible.  The USTR made two offers to Antigua and Barbuda to settle the matter that each did not total US$2 million.  Naturally, Antigua and Barbuda has rejected the offers and tried to engage the office of the USTR in meaningful discussions to reach an amicable settlement that would encourage Antigua and Barbuda not to implement the award given to it by the WTO.   That award permits Antigua and Barbuda to sell US intellectual property without paying fees or royalties up to US$21 million a year until the US complies with the ruling either to re-open its market to Antigua and Barbuda for internet gaming or to make compensation.

It is against this background that Mr Lighthizer’s questioning of the “current litigation structure” has some resonance with me.  After 13 years, Antigua and Barbuda has not been able to reap the benefits of taking the US to WTO arbitration.   The US has simply ignored the WTO structure, and the WTO has no enforcement machinery to make it comply.  Further, the office of the USTR has stated that “it would not be in Antigua and Barbuda’s interest to implement the WTO award” of selling US intellectual property without paying royalties or fees.

On the face of it, the WTO litigation structure has failed Antigua and Barbuda, a small economy of US$1.4 billion in contract to the US with an economy of US$20 trillion.

But, the alternative proposed by Mr Lighthizer is even worse.  He told the WTO Ministerial meeting in Argentina that “the WTO is losing its essential focus on negotiation and becoming a litigation-centered organization”.  “Too often”, he said, “members seem to believe they can gain concessions through lawsuits that they could never get at the negotiating table”.  Well, he is perfectly correct about that.   And, the Antigua and Barbuda experience proves the case.

Before Antigua and Barbuda went to the WTO with this matter in 2003, consultations were sought with the US.  The negotiations were perfunctory at best and ended with the office of the USTR declaring that Antigua and Barbuda could never win at the WTO and challenging us to do so.   As it turned out, Antigua and Barbuda did win in 2004 and at two subsequent appeals. 

In an effort not to implement the WTO award of selling US intellectual property without paying royalties, Antigua and Barbuda agreed to go to the negotiating table.  But, the USTR will not negotiate.  Having made two derisory offers that successive Antigua and Barbuda governments have declined, the office of the USTR has shown no inclination to negotiate a fair settlement, and, instead, has told Antigua and Barbuda that “it would not be in its interest to implement the WTO award”.

Because of the Antigua and Barbuda case, the US is the only country in the world that is non-WTO compliant.  Yet it is currently using the very litigation structure it criticizes to pursue cases against countries, including China.

In these circumstances, for small countries the WTO litigation structure, as imperfect as it may be, is much better than trying to negotiate with a behemoth.   The use of legal adjudication gains better results than bilateral negotiations with powerful nations.

Mr Lighthizer does have the power to change all that.  Antigua and Barbuda is willing to help. 

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