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Article 22 of WTO dispute settlement as found in Annex 2 of the WTO Agreement deals with compensation and the suspension of concessions.

I'm wondering what kind of retaliation this entails. The article talks about "Compensation and the suspension of concessions or other obligations". But it's hard to put that into context.

This question spurred from a comment Sjoerd made (I'm quoting an excerpt) in the context of a hypothetical Northern Ireland border dispute at the WTO by China:

if China complains, all WTO can do is to grant China permission to apply a retaliation tariff on UK and/or EU goods

This seems very mild. Given the talk about WTO rules, PM Johnson has cited article 24 GATT to have continued free trade while a new agreement is negotiated.

Other countries (Argentina, Brazil, Canada, New Zealand, Thailand, the United States, and Uruguay), however, have already stated in a letter to the EU and UK missions to the WTO and UN, respectively, that:

The modification of these TRQ access arrangements cannot credibly be achieved through a technical rectification. None of these arrangements should be modified without our agreement. In this context, we expect a high degree of transparency through the sharing of relevant information and data. In the case of substantial changes affecting the balance of concessions, the whole membership of the organisation may take interest. A bilateral understanding between the United Kingdom and the remaining 27 Member States would not be sufficient in this regard, nor would a technical rectification be acceptable.

My question is to what extent other WTO members can punish the UK and EU (in this example, but I'm asking in general) through the aforementioned article 22 in case they lose a WTO dispute.

  • 1
    I've edited my comment into my answer here: politics.stackexchange.com/a/43350/8912 so the comment might be deleted at some point in time. But I don't mind if you keep the current quote, as it clearly captures my current understanding. I'm looking forward to the answers. – Sjoerd Jul 31 '19 at 4:02
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    I've found this answer, which also touches upon WTO but doesn't seem to be a duplicate: politics.stackexchange.com/a/6499/8912 : (Quote) "Interestingly, the “sanction” is not a fine that would be paid to [WTO] itself but the right for a country to punish another one by suspending the agreement and imposing extra duties on the first country's products." (end quote) And it links to Wikipedia: en.wikipedia.org/wiki/… – Sjoerd Jul 31 '19 at 4:13
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The "Annex 2" you mention is more broadly known as the DSU. Article 22 of that is basically the last-resort measure to enforce a WTO arbitration.

If, within 20 days after the expiry of the reasonable period of time, the parties have not agreed on satisfactory compensation, the complainant may ask the DSB for permission to impose trade sanctions against the respondent that has failed to implement. Technically, this is called “suspending concessions or other obligations under the covered agreements” (Article 22.2 of the DSU).

Concessions are, for example, tariff reduction commitments which (WTO) Members have made in multilateral trade negotiations and are bound under Article II of GATT 1994. These bound concessions are just one form of WTO obligations. “Obligations” is the generic term in Article 22 (concessions or other obligations) used in this Guide for the sake of brevity (even though the most typical form practised so far is the suspension of concessions through the imposition of tariff surcharges). Suspending WTO obligations in relation to another Member requires a previous authorization of the DSB. The complainant is thus allowed to impose countermeasures that would otherwise be inconsistent with the WTO Agreement, in response to a violation or to non-violation nullification or impairment. This is informally also called “retaliation” or “sanctions”. Such suspension of obligations takes place on a discriminatory basis only against the Member that failed to implement.

Retaliation is the final and most serious consequence a non-implementing Member faces in the WTO dispute settlement system (Article 3.7 of the DSU). Although retaliation requires prior approval by the DSB, the countermeasures are applied selectively by one Member against another.

I think there are no "statutory" (meaning treaty) limits on the size of the "fine" that the WTO DSB can impose. It all depends on the case at hand and the size of the losses claimed in the complaint. There are no "punitive damages" in the WTO dispute resolution model.

To date, the largest "fine", i.e. retaliation that the WTO DSB has approved is in the Airbus case, of $7.5B, in October this year. At that point the previous record was $4.04B way back in 2002; I think that was in the US-EU banana dispute.

As for your other questions, see also the broader question here on sanctions that a WTO member may impose unilaterally. But there are cases in which a country can unilaterally retaliate against another under WTO rules, without waiting for prior DSB approval. I'm not sure what the largest sanction of the latter kind was. But a unilateral US tariffs on China in 2012 came pretty close to the Airbus case, at $7.3B as the Chinese side evaluated their losses:

China went to the WTO in 2012 to challenge U.S. anti-subsidy tariffs, known as countervailing duties, on Chinese exports that Beijing valued at $7.3 billion at the time.

The duties were imposed as the result of 17 investigations begun by the U.S. Department of Commerce between 2007 and 2012.

Apparently the Chinese claim was later reduced to $3.6B by DSB (on Nov 1 this year), making it the 3rd largest. I'm haven't followed all the case details as to how that happened. It seems not uncommon for countries to overstate their losses in the complaint(s); in the Airbus case the US claimed over $20 billion initially, although these were subsidies etc., rather than tariffs, as far I can tell.

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