The Research Of The Compensation In The WTO Dispute Settlement Mechanism

The inherent defects and the lack of accountability make compensation a remedy rarely resorted to in the WTO dispute settlement mechanism. This paper explores the limitations and new trends of compensation by analyzing cases related, including "," Japan——Taxes on Alcoholic Beverages ","US——110(5) Copyrights Act)"and" US——Upland Cotton". We go deep into the functional defects caused by the characteristics of compensation, and we also elaborate the pros and cons of reforms proposed by WTO members and scholars.The concept of compensation appeared for the first time in The Dispute Settlement Understanding (known as DSU) reached in1979. Unlike general sense of compensation in international law, the compensation in WTO with its unique characteristics lead to difficulties in implementing. In regard to the principle of temporary, compensation cannot substitute the implementation of the WTO rulings, and the obligation still exists. Supposing the situations occur in many cases, it would be detrimental to the integrity of the WTO system. Besides according to the DSU the most-favored-nation treatment (known as MFN) should be provided for non-parties, thus the losing party would bear the compensation greater than that dedicated to the prevailing party, which greatly reduces the applicability of compensation. Furthermore, there are also third-party issues. It is the side effects arising in the application of non-discrimination treatment in compensation.Monetary compensation is the most controversial approach in the reform approaches to compensation. Monetary compensation and non-compensation have the essential differences. Monetary compensation can partly offset competitive advantages obtained by the profitable industry of the respondent party, thereby it may impede the respondent party to take illegal measures to obtain competitive advantages for the like industry of complaining party But in the case of monetary compensation, if the respondent party of small countries lose the action, small country can not fulfill the obligation to compensate. Retrospective compensation is also put forward by scholars, on how to calculate the lost volume of trade in compensation...