Abstract
The suspension of concession or other obligation, a.k.a. retaliation, is the last resort of remedy available under WTO, and defines the overall achievement of WTO dispute resolution mechanism. Unfortunately, the practice over the last decade drew much criticisms and requests of improvements. One of the major issues is that the retaliation under WTO is not serious enough to encourage WTO Members acting in accordance with the WTO treaty obligations and DSB recommendations. Moreover, the Member states suffering from nullification or impairment caused by illegal acts are usually not possessing with the ability to put the retaliatory measure into practice. To the contrary, some Member states criticize the arbitrators for being arbitrary in their decision of retaliation cases. Among the different criticisms, this article tries to examine and analyze in the approaches other than International Trade Law regime itself. This article tries to apply the efficient breach theory to see if the retaliation mechanism meets the economic efficiency. The gist of efficient breach theory is that a legal system should induce maximum welfare of the society. If breach is an economic efficient choice, the legal system should allow the party to breach his obligation without paying punitive penalty, and the premium could therefore being generated. This article claims that the economic efficiency should be an important criterion in judging the WTO dispute resolution mechanism. This article reflects the studies of the current WTO dispute resolution mechanism, opinions of the WTO law scholars, and the actual practice of the DSB in several DSU 22.6 arbitration cases. Based on the studies, this article tries to explain whether the approaches applied by the arbitrators consist with the requirement of economic efficiency. The preliminary result of the studies shows that the WTO dispute resolution mechanism is consistent with the efficient breach theory. The remedy available under WTO prevents a sanction with punitive nature by restricting the principle of equivalency and appropriateness. However, the model chosen by the arbitrators to determine the level of retaliation somehow shows a tendency of arbitrariness. This article also wishes to induce more input on the studies the economic analysis of the WTO system.