Mexico notified the WTO Secretariat on 15 October 2012 of a request for consultations with China concerning several measures allegedly taken by China to support the production and exports of clothing and textile products. It said it had requested consultations because China appears to maintain a wide variety of measures that support producers and exporters of apparel and textile products, both directly and indirectly. It added that these measures appear to involve both prohibited and actionable subsidies that are inconsistent with China’s obligations under the Subsidies and Countervailing Measures Agreement, GATT 1994, the Agreement on Agriculture, and China’s Accession Protocol.
What is a request for consultations? The request for consultations formally initiates a dispute in the WTO. Consultations give the parties an opportunity to discuss the matter and to find a satisfactory solution without proceeding further with litigation. After 60 days, if consultations have failed to resolve the dispute, the complainant may request adjudication by a panel.
The preferred objective of the dispute settlement understanding (DSU) is for the Members concerned to settle the dispute between themselves in a manner that is consistent with the WTO Agreement (Article 3.7 of the DSU). Accordingly, bilateral consultations between the parties are the first stage of formal dispute settlement (Article 4 of the DSU). They give the parties an opportunity to discuss the matter and to find a satisfactory solution without resorting to litigation (Article 4.5 of the DSU). Only after such mandatory consultations have failed to produce a satisfactory solution within 60 days may the complainant request adjudication by a panel (Article 4.7 of the DSU). Even when consultations have failed to resolve the dispute, it always remains possible for the parties to find a mutually agreed solution at any later stage of the proceedings.
A majority of disputes so far in the (WTO) have not proceeded beyond consultations, either because a satisfactory settlement was found, or because the complainant decided for other reasons not to pursue the matter further. This shows that consultations are often an effective means of dispute resolution in the WTO and that the instruments of adjudication and enforcement in the dispute settlement system are by no means always necessary.
Together with good offices, conciliation and mediation, consultations are the key non-judicial/diplomatic feature of the dispute settlement system of the WTO. Consultations also allow the parties to clarify the facts of the matter and the claims of the complainant, possibly dispelling misunderstandings as to the actual nature of the measure at issue. In this sense, consultations serve either to lay the foundation for a settlement or for further proceedings under the DSU.