Brazil--Aircraft: Qualitative and temporal aspects of "withdrawal" under SCM article 4.7

Law and Policy in International Business, Summer 2002 by Krmpotic, Ivan

A. Traditional Approaches to Compliance

The problem with inducing compliance at the international level has its roots in the long history of relations between states. At the most basic theoretical level, states relate to each other as equal sovereigns. The consequence of such a system is the absence of an overarching power capable of inducing compliance through coercion. The nature of the international system is, therefore, essentially anarchic in a de jure sense, even though students of international relations or history may attempt to identify a hegemonic or multi-polar structure in a de facto sense.85 Therefore, the question of remedies was considered to be outside the scope of international law86 as proper enforcement and compliance was the prerogative of the individual state.

The emphasis on sovereignty within the international arena is borne out more clearly by the International Law Commission's (ILC)87 Draft Articles on State Responsibility. The task of assigning responsibility to states was a delicate one, and the results of the ILC's work illustrate the pains taken to avoid controversy. This effort is most clearly shown by the emphasis that the ILC placed on a state's obligation to cease engaging in wrongful conduct rather than tasking states with an obligation to make reparations.88

illegality is found to exist and into the future.92 In other words, "the obligation mandates an end to injurious behavior, nothing more."93

The practice of favoring cessation over other remedies was followed closely by panels under GATT. As stated by one commentator, the legal regime of GATT was "ill-suited to providing material restitution" to aggrieved parties.94 Panels under the GATT regime were very likely sensitive to the fact that the GATT was only meant to be an interim document towards the creation of an international trading organization.95 Although the GATT organization functioned very well given the circumstances of its origin, the GATT panels remained deferential to concerns about making demands to governments regarding their fiscal practices. While panels would recommend a nullification or removal of the cause of injury, the pronouncement would not necessarily reach the consequences of the illegal measures.96 "In this sense a recommendation of conformity fulfilled the international law obligation of cessation. . . . It did not, however, fulfill the further obligation of reparation."97 The cautious stance of the GATT panelists reflected a desire to allow states to address their conflicts in an "atmosphere of conciliation."98 At the same time, the ambiguity of requesting a nation to bring its measure "into conformity" with a recommendation gave the parties sufficient leeway to adhere to recommendations without jeopardizing their own policies to a great extent and thus allowing for a further development of international trading norms.99

B. Subsidies Practice Under the WTO: "Withdrawal" Versus "Bring into Conformity"

action comes at a time when the WTO subsidy code has become increasingly potent. The Uruguay Round negotiations resulted in the replacement of the Tokyo Round Subsidies Code with a new code containing significant revisions, the SCM Agreement. Under the SCM Agreement, the term "subsidy" was defined for the first time, and the prohibition on "export subsidies" was extended to all goods without exception.101 Increasingly the mere halting of future illegal activity was being supplemented by a compliance standard that amounted to a serious "withdrawal" of subsidies.