|An Analysis of Retaliation Under the WTO|
|At an ICRIER seminar held on March 25, 2004, Prof. Robert Z. Lawrence, Albert L. Williams Professor of Trade and Investment at the John F. Kennedy School of Government at Harvard University presented a study on the economics of retaliatory measures permitted in the WTO for dispute resolution in cases in which the member complained against is unable to comply with the recommendations of the Disputes Settlement Body. In his view it would be preferable if in such cases there was a provision for compensation through liberalisation in areas of interest to the complaining party. Compensation as a substitute for retaliation is already provided for in the Dispute Settlement Understanding. The new proposal made by Prof. Lawrence was that such compensation would be available from a list of compensatory measures already agreed by each member in advance.
During the discussions that followed the view was expressed that the existing system did not envisage that retaliation would be permanent. The aim was not to square the accounts. Although the implementation of retaliatory measures resulted in contraction of trade and diminution of world welfare, its ultimate objective was to put pressure on the WTO member concerned to withdraw the offending measures. Members generally used those measurers for retaliation that had the maximum potential to put political pressure for compliance. The alternative proposed by Prof. Lawrence would deprive the complaining party of the possibility of applying pressure by retaliating where it hurt most. The seminar was chaired by Dr. Arvind Virmani, Director & Chief Executive, ICRIER.