Though compensation, as one of the two temporary remedies offered by the World Trade Organization (WTO), is preferred over retaliation, it is less used because of some constraints. Compared with the compensation agreements reached in early cases, the compensation agreements entered into in US-Section 110(5) Copyright Act, EC-Hormones, US-Upland Cotton and China-Publications have made some developments to counteract those constraints. Such developments challenged systematic aspects of the current compensation mechanism, i.e., the application of MFN provisions, the temporary nature of compensation, and at the same time, embodied institutional innovations, i.e., introduction of monetary compensation, recourse to Article 25 on arbitration to determine the level of compensation. Compensation agreements reached in those cases have relieved or solved the deadlock of the compliance problems in sensitive disputes and shed some light on the reform of the compensation mechanism. Members should not wait for the successful conclusion of the Doha Round negotiations, but ought to fully utilize the existing WTO mechanisms to improve the efficiency of the compensation mechanism.
Journal of World Trade