The most salient feature of the World Trade Organization (WTO) dispute settlement system is the possibility of authorizing a trade sanction against a scofflaw member government. Yet this feature is a mixed blessing. On the one hand, it fortifies WTO rules and promotes respect for them. On the other hand, it undermines the principle of free trade and provokes “sanction-envy” in other international organizations. Undoubtedly, the implanting of “teeth” by the WTO negotiators was one of the key achievements of the Uruguay Round, and a very significant step in the evolution of international economic law. But after six years of experience, WTO observers are beginning to consider whether recourse to damaging trade measures was a good idea. This essay provides an analytical framework for rethinking WTO trade sanctions.

To be sure, the WTO Agreement does not employ the word “sanction.” What the Dispute Settlement Understanding (DSU) of 1994 says in Article 22 is that if a government fails to bring a measure found to be inconsistent with a WTO rule into compliance, it shall enter into negotiations with the government invoking dispute settlement, and if no mutually acceptable compensation is agreed, the plaintiff government may seek authorization from the WTO Dispute Settlement Body (DSB) “to suspend the application to the Member concerned of concessions or other obligations under the covered agreements.” This language is based on a similar provision in the General Agreement on Tariffs and Trade (GATT) of 1947.