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ICTSD Programme on Dispute Settlement and Legal Aspects of International Trade, Issue Paper No. 8, April 2009

This paper addresses a World Trade Organization (WTO) dispute settlement remedy commonly known as 'cross-retaliation', and specifically the mechanism by which a WTO Member can suspend concessions in the field of trade-related intellectual property rights (TRIPS) to redress an injury suffered with respect to trade in goods or services. A WTO Member enforces compliance with a ruling by the Dispute Settlement Body (DSB) by suspending trade concessions enjoyed by the non-compliant Member. This might involve raising tariffs on products imported from the non-compliant Member. Economically powerful WTO Members are not likely to be harmed by the suspension of trade concessions in goods or services by substantially less powerful Members. The trade impact will be too small to 'induce compliance' and, equally important, the types of suspension that may be used in the fields of goods and services may cause economic harm to the less powerful Members using them. The WTO dispute settlement process strongly favors economically powerful countries, leaving most developing and least developed Members with few options for inducing compliance. Attention is increasingly being focused on the possibility for developing Members to suspend concessions relating to intellectual property rights (IPRs) as a means of inducing compliance by developed Members. Cross-retaliation is expressly contemplated by the WTO Dispute Settlement Understanding (DSU). WTO arbitrators have so far approved TRIPS cross-retaliation on two occasions: in favor of Ecuador (against the European Communities (EC)) and Antigua (against the United States (US)). Constructing and implementing a cross-retaliation program involving IPRs raises a substantial number of complex legal questions. The DSU establishes principles and procedures that must be respected. The various forms of IPR – copyright, patent, trademark, etc. – serve different social and industrial policy functions and have their own unique characteristics. There are multilateral and bilateral agreements and rules outside the WTO context that may influence the shaping of a cross-retaliation program. National constitutions and rules relating to property rights need to be addressed. This paper anticipates many legal questions raised by cross-retaliation in TRIPS and seeks to provide answers to them. It analyses the cross-cutting issues raised by external commitments and national IPRs-related rules, and looks at each major forms of IPR to suggest practical approaches to suspending (or not suspending) those forms. One of the difficult challenges less powerful WTO Members face in seeking to implement cross-retaliation in TRIPS is political pressure from industry groups as well as the governments of more powerful Members. While exporters of goods have not persuaded international media outlets that the suspension of tariff concessions is 'piracy of trade rights', IP-dependent industry groups use sophisticated and expensive propaganda campaigns that result in media portrayal of IPR suspension as 'piracy' and 'theft'. WTO Members must be prepared to deal with industry-induced media pressure.