• The Good: Opportunities Exist If Egyptian Business Better ...

Egypt National Dialogue on WTO Dispute Settlement
Cairo, Egypt, 15-16 April 2007
Organised by AmCham and ICTSD
Dr. Arthur E. Appleton1 offered a non-technical viewpoint on the advantages and
disadvantages of the WTO Dispute Settlement Mechanism (DSM) for the Egyptian
business community, using Sergio Leone’s theme of “The Good, the Bad, and the Ugly”
to characterize various aspects of the WTO DSM.
The Good: Opportunities Exist If Egyptian Business Better
Understands the WTO
Dr. Appleton began his presentation by asserting that the business community in most
countries does not understand how the WTO functions. The business community usually
only understands certain areas of trade law and trade policy, and it frequently ignores
many important aspects of the WTO agreements. Businesses tend to focus primarily on
tariff issues and are often unaware of the full scope of the covered agreements, including
such issues as regulatory discrimination (TBT & SPS problems), tax discrimination,
customs issues, services issues, intellectual property rules, anti-dumping, safeguard
measures, and illegal subsidies. He submitted that that in order for a business to persuade
a government to file a claim on its behalf, business must understand the scope of the
agreements and whether there has been nullification or impairment of WTO rights. This
is frequently difficult given the business community’s limited knowledge of the WTO
agreements.
Dr. Appleton noted that when lobbying a government to file a complaint, one must
understand that the WTO agreements may have two uses: to act as a forum for trade
liberalization and to act as a means to protect domestic business interests. Hence, he
believes Egypt can use the WTO as a sword and as a shield – to open foreign markets and
protect domestic markets. Thus he asserted that the business and legal community in
Egypt need to receive basic WTO training so they know when they have trade law issues.
He also believes that Chambers of Commerce, trade associations, universities,
international organisations, training organisations and law firms can play an important
role in raising public awareness by organising training sessions.
Dr. Appleton believes that Egypt’s business community can benefit from the DSU’s legal
structure for various reasons. One of those reasons is the legal predictability and precise
time limits that the DSM offers. Dr. Appleton noted however that the process is still not
fast enough to satisfy all business interests. For example, he mentioned that the time
needed to complete a successful litigation is too long to save a time-sensitive shipment
(e.g., fashion, the latest high technology fad or many agricultural products). Although the
DSU offers a rule-based system under which all Members are in principle equal, Dr.
Appleton believes that some Members are more equal than others; meaning that the
system, to some extent, is still dominated by the most powerful trading countries such as
the United States, the European Communities (the largest trading bloc) and Japan.
However, he believes Egypt can still have a very important influence on the WTO system
as a result of the excellent diplomats it sends to Geneva.
1
Arthur E. Appleton is an attorney with Appleton Luff – International Lawyers (www.appletonluff.com).
 Egypt National Dialogue on WTO Dispute Settlement
Cairo, Egypt, 15-16 April 2007
Organised by AmCham and ICTSD
Dr. Appleton then cited several important points for the businesses in Egypt to consider.
First, he noted that the system is State-to-State; meaning that it is government-to-
government or Member-to-Member. In order for a business to have its interests
represented in the DSM, it will have to pursue these interests through a government. He
affirmed that the biggest problem in certain developed and developing countries is that
businesses often find it difficult to express their interests to government. Here, he
believes, is where the American Chamber of Commerce, and other business
organisations, can play a very important role.
The Bad: Risks Exist if Business is Not Prepared
Dr. Appleton affirmed that as in most of the developed world transnational companies
and government officials follow trade law issues closely – and that governments are often
ready and willing to protect trade interests. This can place developing countries, and
developing country business interests, at a comparative disadvantage. For example, the
United States and the European Communities are the most frequent complainants in DSM
proceedings, and they have many officials that follow trade disputes closely. Hence he
believes that Egypt has to develop its legal talent; the capability of Egypt’s already strong
government agencies should be increased even more, as should the resources allocated to
these agencies by the Egyptian government. In many countries government agencies lack
skilled professionals, in particular legal professionals, and the business community is
forced to hire foreign lawyers to monitor trade issues on their behalf.
Pursuing a complaint in the WTO dispute settlement system can cost governments
millions of dollars. Dr. Appleton believes that the lack of resources may limit the
developing country involvement in DSU proceedings. In many Member countries, the
affected industry or trade association often helps to pay the legal bills. While foreign
legal services are often very good, the costs can be high. The preferable solution is to
train government officials and domestic attorneys to handle WTO matters so that
domestic capabilities and talent are strengthened.
Another problem facing businesses in developing countries is their lack of participation
in WTO negotiations. In the developed world, the business community usually follow
WT negotiations and day-to-day WTO activities very closely. He affirmed that Egyptian
businesses should not only look at the DSM, but also at the WTO negotiations in general
and should convey their interests to government officials during these negotiations.
Dr. Appleton affirmed that Egyptian business cannot “bank on” the DSU because the
DSU does not offer financial compensation to the winning party. He also noted that even
if Egypt prevailed in a dispute, pursuant to WTO rules, Egyptian business would receive
no financial compensation for damages suffered as a result of a Member’s breach of
WTO rules.
 Egypt National Dialogue on WTO Dispute Settlement
Cairo, Egypt, 15-16 April 2007
Organised by AmCham and ICTSD
The Ugly: WTO Pitfalls
Since the DSU process is largely State-to-State, Dr. Appleton submitted that businesses
only have “access” to the WTO if a member government provides an avenue for access.
He believes that bilateral or international diplomatic concerns often prevent a complaint
from reaching the WTO’s Dispute Settlement Body (DSB) and could prevent businesses
from having their problems heard in Geneva. Businesses need to consider the political
climate since governments do not view disputes merely as cases, but also in terms of how
they may affect diplomatic and trade relations with other Members. It is often a matter of
how the business community presents its concerns to government. Most trade disputes
are resolved between governments bilaterally. Often the business community can interest
a government in a problem – particularly if they can convince government that there is a
reasonable chance that the dispute will be resolved bilaterally before it reaches the WTO,
or in consultations that follow. He remarked that only a few cases are brought to the DSB
every year and that business should not expect the WTO to resolve all of Egypt’s
international trade problems.
In dealing with a complaint, Dr. Appleton explained that businesses often hire private
lawyers and that this can be expensive. He explained that even though the process is
State-to-State, businesses in developing countries often pay the legal bills and work
closely with their governments. To get around the high cost of legal services, he advised
negotiating with counsel (many law firms want to enter the field and sell their services at
lower rates), or encouraging government to contact the Advisory Centre on WTO Law
which offers good and less expensive services for member governments, as well as
training programmes for government officials from member countries.
Dr. Appleton affirmed that the DSM process is slow by business standards, but is fast by
international legal standards. He then turned to another problem with the DSM – the time
it takes to produce quality written submissions. He remarked that from a business
perspective, the WTO DSU process is time-consuming and demands many corporate
resources – in the form of cooperation with counsel to put together or defend a case. In-
house counsel, financial officers etc. must work with counsel to assemble evidence,
prepare consultations and draft legal submissions. Inter-agency cooperation is necessary
at the government level since different ministries are often involved. Most importantly,
cooperation between Cairo and the Geneva Mission is also necessary.
Dr. Appleton believes that the WTO DSM provides a means to pressure foreign
governments to abide by the WTO agreements. Yet, he affirmed that some governments
can still afford to ignore DSB decisions when compliance would be too politically
difficult. He went on to observe that complainants in the DSM have won approximately
85% of their cases and that it is usually easy to guess the results before the Appellate
Body has ruled. Another observation he made is that multinational companies frequently
find a WTO Member that will act on their behalf to pressure other WTO Members.
 Egypt National Dialogue on WTO Dispute Settlement
Cairo, Egypt, 15-16 April 2007
Organised by AmCham and ICTSD
Egyptian business interests, and the business interests of any other Member can be
challenged from almost anywhere in the world.
Dr. Appleton also raised questions concerning the transparency of the DSM process since
most meetings are open only to government officials and closed to the public, media, and
NGO’s. He did however observe that businessmen and attorneys can appear in DSU
proceedings if accredited to a Member’s delegation. He also noted that certain documents
remain “restricted” from public view. His final remark was that the trade field is very
technical. And that WTO panel and Appellate Body reports are often difficult for laymen
to read.
In conclusion, Dr. Appleton affirmed that the DSU cannot solve all international trade
problems facing the Egyptian business community, but it can help. Both the United States
and the European Communities (the two most important players in the WTO) recently
lost significant agricultural disputes (concerning cotton and sugar respectively) and that
this is having a positive effect on the political climate for developing countries and on the
Doha Round negotiations. He also mentioned that Egypt has always had a very strong
and respected diplomatic delegation in Geneva. He believes that the Egyptian delegation
could become an even better partner for Egyptian business, provided that the business
community is prepared to work within the diplomatic constraints of the WTO, and
provided that the government is willing to increase its support for Egyptian business at
the international level.
Dr. Appleton finished his presentation by reiterating that many opportunities exist for
Egyptian business as a result of the WTO agreements, and businesses must prepare
themselves to take advantage of them. Although the DSM is very important to the world
trading system, Dr. Appleton believes that the broader package of WTO rights and
obligations are even more important for Egypt. He suggested that the Egyptian business
community should look beyond the DSM and seek to benefit from all that the WTO has
to offer, including trade liberalisation, transparency, protection of infant industries behind
tariff and non-tariff barriers, and the potential the WTO offers to level the playing field
between the business interests in both developed and developing countries.