Why AU Should Negoitate for Open and Transparent Dispute Settlement in Its Free Trade Agreements

25/08/2008 12:00 - 1303 total view

Bryan Mercurio and Rebecca Laforgia

State-to-state dispute settlement mechanisms are included in all bilateral free trade agreements (‘FTAs’). A large percentage of these mechanisms are very closely modelled on the World Trade Organization’s dispute settlement system, in which dispute settlement procedures remain largely insulated from public scrutiny. In this sense, the WTO model of dispute settlement is a ‘closed’ model. By contrast, some countries, such as the United States, endorse an ‘open’ model of dispute settlement that promotes transparency and non-governmental involvement in trade disputes. Australia is presently negotiating FTAs with the Association of Southeast Asian Nations, China, Malaysia and the United Arab Emirates, but has yet to formulate a policy on the important issue of whether to favour open or closed dispute settlement — it endorses the closed model in its FTA with Singapore, while endorsing the open model in its FTA with the US. This commentary argues that Australia should, as a matter of policy, negotiate for an open model of dispute settlement in its future FTAs. Firstly, even though the WTO relies on a closed model of dispute settlement, WTO Appellate Body interpretations have slowly changed the nature of the system to embrace greater openness, and recent WTO activities indicate that amendments will further open the system in the near future. Secondly, the ‘open’ model of dispute settlement is consistent with both Australia’s foreign policy and its national interest. Even if ASEAN and other potential FTA partners oppose the open model, that barrier does not appear to be insurmountable: Singapore, a leading member of ASEAN, has recently endorsed the open model in its FTA with the US, indicating that it does not have an intractable objection to public proceedings or non-governmental involvement. Other ASEAN states may also be willing to consider an open model and to discuss the issue in their dealings with Australia. If they are not, it is still in Australia’s policy interests to promote, even if only symbolically, a commitment to democratic and open dispute settlement systems in all of its FTAs.