The Remedy Gap: Institutional Design, Retaliation, and Trade Law Enforcement

One of the major innovations of the World Trade Organization's ("WTO") Dispute Settlement Understanding ("DSU") is the regulation of sanctions in response to violations of trade law. The DSU requires governments to receive multilateral approval before suspending trade concessions and limits the extent of retaliation to prospective damages. In addition, the DSU permits governments to impose only conditional sanctions: sanctions for violations that continue after the dispute resolution process is complete. This enforcement regime creates a remedy gap: governments cannot respond, even to obvious breaches, until the end of the dispute resolution process (and then only to the extent of prospective damages). This gap might not be particularly important if the dispute resolution process were short. In practice, however, the WTO dispute resolution process has proven increasingly time consuming. This Article explores the growth of delays in the WTO dispute resolution process and the increasing significance of the remedy gap. It highlights how the DSU system essentially provides respondent states with an option to violate trade rules for several years without facing trade retaliation. The remedy gap also has counterproductive effects on settlement negotiations: the system gives respondent states few reasons to settle before the end of dispute resolution unless the states are compensated for doing so. Finally, this system may lead frustrated complaining states to subvert the DSU regime by acting outside of the legal framework. This Article discusses several solutions to the remedy gap, most notably creating a procedure where WTO panels can issue preliminary injunctions.