DOHA Round


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DOHA Round

  1. 1. INTRODUCTION The World Trade Organization (WTO) is the only international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. WTO previously known as General Agreement on Tariffs and Trade (GATT) established in 1947 as a forum to reduce trade barriers. WTO replaced GATT in 1995 as legal and institutional foundation of multilateral trade relations. It is designed to strengthen the trade rules by providing a stronger set of institutions for resolving disputes and enforcing agreements. The dispute resolution process aimed at enforcing participants‟ adherence to WTO agreements. FUNCTIONS OF WTO The WTO is a new international organization set up as a permanent body. It is designed to play the role of a protection in the spheres of trade in goods, trade in services, foreign investment, intellectual property rights, and others. Article III has set out the following five functions of WTO: The WTO shall facilitate the implementation, administration and operation and further the objectives of this Agreement and of the Multilateral Trade Agreements, and shall also provide the frame work for the implementation, administration and operation of the plurilateral Trade Agreements. The WTO shall provide the forum for negotiations among its members concerning their multilateral trade relations. The WTO shall administer the Understanding on Rules and Procedures Governing the Settlement of Disputes.
  2. 2. The WTO shall administer Trade Policy Review Mechanism. Trade Policy Review Mechanism is to strengthen observance of WTO commitments and promote trade liberalization by providing all member countries with current and objective information about the trade policies and practices of each member individually and by establishing a forum within which members can question one another‟s policies and practices in a non- confrontational manner. WTO shall cooperate, as appropriate, with the international Monetary Fund (IMF) and with the International Bank for Reconstruction and Development (IBRD) and its affiliated agencies. OBJECTIVES OF WTO The objectives of WTO are to implement the new world trade system as visualized in the Agreement, to promote World Trade in a manner that benefits every country, and to ensure that developing countries secure a better balance in the sharing of the advantages resulting from the expansion of international trade corresponding to their developmental needs. Besides that, it is also help to enhance competitiveness among all trading partners so as to benefit consumers and help in global integration and this will increase the level of production and productivity with a view to ensuring level of employment in the world.
  3. 3. BASIS PRINCIPLE OF WTO NON-DISCRIMINATION Non discrimination has two major components which are the most-favored-nation (MFN) rule and the national treatment principle. The MFN rule requires that a product made in one member country be treated no less favorably than good that originates in any other country. MFN helps enforce multilateral rules by raising the costs to a country of defecting from the trade regime to which it committed itself in an earlier multilateral trade negotiation. If a country desires to raise trade barriers, it must apply the changed regime to all WTO members. This increase the political cost of backsliding on trade policy because importers will objects (Bernard, 2004). Lastly, MFN reduces negotiating costs which once a negotiation has been concluded with a country. National treatment requires that foreign goods once they have satisfied whatever border measures are applied, be treated no less favorably, in terms of internal (indirect) taxation than like or directly competitive domestically produced goods (Art III, GATT ). While, the goods of foreign origin circulating in the country must be subject to taxes, charges, and regulations that are „no less favorable‟ than those that apply to similar goods of domestic origin (Bernard, 2004). National treatment ensures that liberalization commitment are not offset through the imposition of domestic taxes and similar measures. The requirement that foreign products be treated no less favorably than competing domestically produced products gives foreign suppliers greater certainly regarding the regulatory environment in which they must operate. It is also irrelevant whether a policy hurts an exporter.
  4. 4. RECIPROCITY As stated in the Oxford English Dictionary, reciprocity is a mutual or correspondent concession of advantages or privileges, as forming a basis for the commercial relations between two countries. Reciprocity is a fundamental element of the negotiating process. It reflects both a desire to limit the scope for free-riding that may arise because of the MFN rule and desire to obtain „payment‟ for trade liberalization in the form of better access to foreign markets. For a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available liberalization (Bernard, 2004). BINDING AND ENFORCEABLE COMMITMENTS The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceiling bindings": a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures. If a country perceives that actions taken by another government have the effect of nullifying or impairing negotiated market access commitments or the disciplines of the WTO, it may bring this situation to the attention of the government involved and ask that the policy be changed. If satisfaction is not obtained, the complaining country may invoke WTO dispute settlement procedures, which involve the establishment of panels of impartial experts charged with determining whether a contested measure violates the WTO.
  5. 5. TRANSPARENCY The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports through the Trade Policy Review Mechanism. The external surveillance also fosters transparency, both for citizens of the countries concerned and for trading partners. It reduces the scope for countries to circumvent their obligations, thereby reducing uncertainty regarding the prevailing policy stance. Transparency has a number of important benefits. It reduces the pressure on the dispute settlement system, as measures can be discussed in the appropriate WTO body. Frequently, such discussions can address perceptions by a member that a specific policy violates the WTO, many potential disputes are defused in informal meetings in Geneva. Transparency is also vital for ensuring “ownership” of the WTO as an institution if citizens do not know what the organization does, its legitimacy will be eroded. The trade policy reviews are a unique source of information that can be used by civil society to assess the implications of the overall trade policies that are pursued by their governments. From an economic perspective, transparency can also help reduce uncertainty related to trade policy. Such uncertainty is associated with lower investment and growth rates and with a shift in resources toward non tradable, (Francois 1997).
  6. 6. SAFETY VALVES In specific circumstances, governments are able to restrict trade. The WTO‟s agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health. There are three types of provisions in this connection: (a) articles allowing for the use of trade measures to attain noneconomic objectives; (b) articles aimed at ensuring “fair competition”; and (c) provisions permitting intervention in trade for economic reasons. Category (a) includes provisions allowing for policies to protect public health or national security and to protect industries that are seriously injured by competition from imports. The underlying idea in the latter case is that governments should have the right to step in when competition becomes so vigorous as to injure domestic competitors. Although it is not explicitly mentioned in the relevant WTO agreement, the underlying rationale for intervention is that such competition causes political and social problems associated with the need for the industry to adjust to changed circumstances. Measures in category (b) include the right to impose countervailing duties on imports that have been subsidized and antidumping duties on imports that have been dumped (sold at a price below that charged in the home market). Finally, under category (c) there are provisions allowing actions to be taken in case of serious balance of payments difficulties or if a government desires to support an infant industry.
  7. 7. THE STAGE OF DISPUTE SETTLEMENT OF WTO J.G Merrills defined dispute as a specific disagreement concerning a matter of fact, law or policy in which a claim or assertion of one party is met with a refusal, counter claim or denial by another. The WTO dispute settlement system is regulated by the WTO Understanding on Rules and Procedures Governing the settlement of Dispute (Dispute Settlement Understanding). The first stage of formal dispute settlement is consultation and it gives opportunity to the parties of dispute to resolve the conflict through informal negotiation. The request for the consultation should be submit to the other party in writing and address all the issues and reasons to the request. The request should be notified to the other party in conformity with Article 19. The complaining members also should notify the Dispute Settlement Body about the request for consultation. In order to facilitate and smooth the consultation process, the parties should provide sufficient notice and information regarding the matter. The consultations should be confidential. The respondent should reply to the request within ten days after the date of its receipt. If the respondents are fails to responds or fails to find a solution that can satisfy all the parties to dispute within 60 days, they can request to the Dispute Settlement Body to establish panel. So that, this problem can be refer to the expert for their recommendation. The parties also may undertake good offices, conciliation, or mediation procedures. This is the procedure whereas the third party will involve in the dispute. The mediation process is occurring when the third party express his opinion by which he plays an evaluative role. While, in conciliation process, the third party plays a role as a facilitative where he will not advice the party based on his opinion. According to Rahmat and Azahari (2004), mediation is the process whereby the third party will involve in the dispute settlement process. Usually this method can be considered more effective in finding solution as compare a direct negotiation between the dispute parties. Mediator may
  8. 8. conduct a separate and private negotiation with each party to the dispute and attempt to use his goodwill with both parties to ensure that some form of resolution to the problem will be reach. (Chuah, March 2009). Article 1 of the Regulations on the Procedure of International Conciliation adopted by the Institute of International Law has defined conciliation as: “a method for the settlement of international disputes of any nature according to which a commission set up by the Parties, either on a permanent basis or an ad hoc basis to deal with a dispute, proceeds to the impartial examination of a dispute an attempts to define the terms of a settlement susceptible of being accepted by them or of affording the Parties with a view to its settlement, such aid as they may have requested.” According to Chuah, conciliation should provide the parties with the better understanding of their opponent‟s case and an objective appraisal of the merits of their own case. In this procedure, all conciliation commissions play a same function that is to investigate the dispute and propose a solution to settle the dispute. Rahmat and Azahari state that conciliation involves the procedure of submitting a given dispute to an already established commission or a single conciliator for the purpose of examining all facets of the dispute and suggesting a solution to the parties concerned. It should be noted that the recommendation made is not binding on the parties. The other method that the party can apply is good office. Good office is a procedure whereas one or more country or international body participate in the dispute with the aim to solve the dispute peaceful. It will provide assistance in establishing contact or beginning direct negotiation between the dispute parties. The application of the good offices must be distinguish from the mediation as it will not binding the dispute parties but it tend to provide advice to the parties. If the dispute is regarding to the perishable agricultural goods, the members must enter into consultations within a period of 10 days after receipts the request. If the consultation is fails within 20 days, the complaining party may request for the establishment of panel.
  9. 9. In case of failure of consultation, the matter is refers to a panel of experts for their recommendation. This stage requires up to 45 days for a panel to be appointed and plus 6 months for the panel to conclude. Panel‟s final report will be given to the parties in dispute within 6 months. This procedure gives the respondents an opportunity to defend themselves because it may disagree with the complainant on either the facts or correct interpretation of obligation or benefits under the WTO agreements. The adjudicative stage of dispute settlement is intended to resolve a legal dispute, and both parties must accept any rulings as binding. A request for the establishment of a panel must be made in writing and is addressed to the Chairman of the Dispute Settlement Body (DSB). The request for establishment of a panel must be filled at least 11 days in advance. The responding member can still block the panel‟s establishment in the first DSB meeting in which the request is made. In the second DSB meeting where the request is made, however, the panel will be established unless the DSB decides by consensus not to establish the panel. It usually takes time around one month later, but the complainant can also request a special meeting of the DSB within 15 days of the request, which at least 10 days advance notice of the meeting is given. Before the first hearing, each side in the dispute presents its case in writing to the panel. In accordance with the panel‟s calendar, the substantive panel process may start with an exchange of submission between the parties on any preliminary issue raised by the respondent. If they are no such preliminary issues, the parties start by exchanging a first set of written submission normally the complainant is the first to file its submission, to which the respondent replies in it first submission. The parties‟ written submission clarifies the facts of the case and contains legal arguments, which offer relies substantially on prior jurisprudence of panels and the Appellate Body.
  10. 10. After the exchange of the first written submissions the panel convents a first oral hearing, called the first substantive meeting. This meeting takes place at WTO headquarters in Geneva and is similar to an oral hearing before a court but the setting is more informal. This oral hearing is private and only the parties and third parties to the dispute, the panellists, the secretariat staff, supporting the panel, and the interpreters are entitled to attend this meeting. This meeting is record on tape and the parties present their views orally, mostly based on a prepared statement also distributed in writing to the panel and the other parties. The parties are invited to respond to question which are usually distributed in written form. It discussed in the oral hearing. The questions are invited from the panel and from the other parties to describe all the legal and factual issues. At the end of their first substantive meeting, usually the parties request to submit written answers to the panel‟s and the other parties‟ questions although it have already been discussed orally. After the panel report submitted to the parties and if there are an objection with the panel conclusion they can appeal the report. The report must be appeal before the Dispute Body Settlement adopts it and it will be refer to the Appellate Body. Only the parties to disputes are allowed to appeal and third party may only participate in the appeal which known as “third participant” Appeals are limited to legal question and have to be based on points of law. They only can address the issues that are cover in the panel report and legal interpretations developed by the panel. They cannot re-analyze the existing evidences or try to rise up new issues. It is important to distinguish legal and fact in order to define the scope of the appellate review. Nevertheless, most of the complex questions that regularly arise in disputes are the mixed questions of facts and law. It also can be refer to the question that only can be answered based on both factual and legal assessment.
  11. 11. In the case of appeal, the three members are selected from a pool of seven members of Appellate Body to hear appeal and assess the soundness of the panel report‟s legal reasoning and procedure. The selection of the three members is based on the rotation among themselves and taking into account the principles of random selection but regardless of national origin. The Members are individuals with the recognized authority and expertise in international trade law and not associate with any government. Among the selected three Appellate Members, one of them will be appoint as presiding member of the division that will monitor the overall conduct of the appellate proceeding, leads the oral hearing and meeting related to the appeal. They also responsible to coordinates the drafting of the Appellate Body report. The Appellate Body may uphold, modify or reverse the legal findings and conclusions of the panel. In many cases, the Appellate Body will partly modify the panel‟s legal findings and conclusions as they may agrees with the panel‟s final conclusion but not necessarily with the panel‟ reasoning. If the Appellate Body agrees with both, it will uphold the panel‟s findings and conclusions. If not, it will reverse it. The appellate review proceedings must be completed within 60 days and not more than 90 days from the date when the notice of appeal was filed. The Appellate Body must inform to the Dispute Settlement Body and give reasons of delay if they take more than 60 days to review the procedure. They also must notice the Dispute Settlement Body the estimate of the time until circulation of the report. Dispute Settlement Body must make decision whether to accept or reject the appeal report within 30 days. If the Dispute Settlement Boy decides to accept the appeal, the parties will apply the result of appeal ruling. If not, they have to use the original ruling. The last stage in the dispute settlement process is surveillance or supervision of the implementation. According to Tatelman and Brougher (Nov 7, 2006), the final report of an
  12. 12. arbitral panel shall bind the parties to dispute and shall not be subjected to appeal. The member will be given 30 days to inform the Dispute Settlement Body as to how the finding of the report will be implemented after the adoption of either the final panel or appellate report. The country will be give a reasonable period of time for implementation as it cannot be achieved quickly. If the defending party requires more time to comply with the final report of the arbitral panel, or fail to comply with the WTO decision within the established compliance period, which is between 8 and 15 months, it may inform to the complaining party. So that, they will enter into negotiations to agrees on the acceptable compensation for this additional period until it comes into compliance with the final report. If this negotiates fails and agreement is not reached within 20 days after the compliances deadline expires, the prevailing members may request authorization from Dispute Settlement Body to retaliate.
  13. 13. TUNA-DOLPHIN CASE The United States banned the importation of tuna from Mexico due to the incidental kill of dolphins caused by the “perse seine” nets. Mexico appealed the case to the General Agreement on Tariffs and Trade (GATT). GATT stated that United States could not ban tuna imports from Mexico because it had not explored other less-trade restrictive ways of achieving the same environmental objective. The panel found that one country could not impose its standards on another country to protect a renewable resource outside its own territory. The panel also found that the United States labeling of “dolphin-safe” did not conform to GATT standards. The Dolphin Protection Consumer Information Act stated that producers, importers, exporters, distributors or sellers of tuna products could not include a “dolphin-safe” label if tuna were harvested in a harmful manner. Opinion: Based on this case, United States should not label “dolphin-safe” which do not rely on GATT rules. The panel found that tuna fishers trapped dolphins in their netting which may injure or killing many. As stated by the Dolphin Protection Consumer Information Act, the producers, importers, exporters, distributors or sellers of tuna products could not include “dolphin-safe” label if the fishers use harmful manner to caught tuna. Many people found this manner is unethical since the dolphins are considered among the most highly intelligent species on Earth. This impractical manner will harm the dolphin species.
  14. 14. SHRIMP-TURTLE CASE Five species of sea turtles are protected under the 1973 Endangered Species Act (ESA) and the Convention on International Trade in Endangered Species (CITES): the hawksbill, green, leatherback, Kemp's rid ley and loggerhead (see HAWKSBIL and GREEN cases). Large numbers of dead turtles washing ashore on beaches because great concern among environmental groups. After studying the problem of shrimping methods affecting sea turtles for ten years, the National Marine Fisheries Service (NMFS) concluded that "drowning in shrimp trawls is considered the greatest threat [to the turtles' survival. NMFS estimates that over 11,000 turtles drown in [U.S.] trawl nets each year. To combat this problem, the NMFS developed the turtle excluder device, commonly known as the TED. TEDs are simply a cage-like structure that fits in the neck of a trawl net, preventing turtles and large fish from being caught. Since the turtle cannot pass through the cage, it is forced upward through an escape hatch. Studies by the NMFS on shrimp boats found the device to be 97 percent effective, only reducing shrimp catch by 2 percent. In order to promote conservation of the turtles, Congress passed a Federal law in 1987 which was later amended on December 1, 1992. The NMFS intensified the regulations by requiring "that most shrimpers operating in offshore waters, use the devices immediately, and those using smaller boats in offshore and in-shore will have to use them within two years." To complement these measures to protect sea turtles, Congress passed Public Law 101-162 on November 21, 1989. Section 609 requires the ban of shrimp from nations that do not take precautionary measures to protect the sea turtles. The Secretary of State must inform the countries of U.S. law (and international law, the CITES treaty) protecting the turtles and negotiate treaties encouraging similar shrimping practices.
  15. 15. The law provides that the country must "receive certification that it has met specific conservation requirements" if it is to continue exporting shrimp to the United States. On May 1, 1991 it became illegal to import shrimp from a country without certification. Certification requires proof that a country has adopted "a regulatory program comparable to the US program or...that the fishing environment in its waters does not pose a threat to sea turtles." Implementation of TEDs is encouraged by May, 1994 "the nations affected by this law must require the use of TEDs on all shrimp vessels, or their exports of shrimp to the US will be embargoed." The Earth Island Institute filed a suit on February 24, 1992 against the Secretaries of State and Commerce. They argued that "the defendants failed to certify that all shrimp harvesting nations have regulatory programs and incidental taking rates of endangered sea turtles comparable to those in the US." In specific, Earth Island claims that India, Indonesia, Thailand, Japan, Mexico, Malaysia, South Korea and Brazil, who are the largest shrimp exporters to the United States, are among the dozens of countries "whose fishing fleets...kill more than 150,000 turtles a year." Earth Island also argues that the State Department is required by law to negotiate treaties with those countries and encourage the use of TEDs for conservation. The effectiveness of the law is undermined when only Caribbean and Atlantic countries must abide by the regulation. Due to the nature of the dispute and the impact of the US law on developing countries, the case is characterized by a three-way tension between trade, environment and development. Most writings on the topic have been published from the environmental perspective, as the ShrimpTurtle dispute represents a focal point for calls from non-governmental organizations to reform the GATT/WTO dispute settlement system. The issue is still topical; the Appellate Body Report is due in late September/early October 1998 and tensions are running high. Little analytical commentary has been published thus far, although much more is to be expected in the coming
  16. 16. year. As a result, only eight articles are provided here; even so, some may lack objectivity. This list should be read in conjunction with that of the GATT Tuna-Dolphin Dispute As in the tuna-dolphin conflict, in the end while the U.S lost the legal case, the developing country complainants may be prompted to upgrade their environment regulation. In the end, foreign shrimpers wishing to export shrimp to the U.S market will likely be forced to use TEDs. Opinion: Regarding to this case, the dispute came to the conclusion to be not totally effective when there are certain unfairness occurs between members of WTO. It is not surprisingly when the experts all confirmed that the sea turtle were endangered and they did also did not conquer on the most appropriate conversation method for complainants to utilize and in particular, whether the means mandated by the United State‟s regulation was necessary or appropriate. There are also discrimination on the use of TEDs where the U.S discriminated among WTO members by applying different “phase-in” periods during which they must require shrimp trawlers to use TEDs. Whereas countries in the Carribean/western Antlantic region permitted a three phase-in period, the rest of the world was granted “only four months.” Clearly, the United States negotiated seriously with some, but not with other Members (including the appellees), that export shrimp to the United States. The effect is plainly discriminatory and, in our view, unjustifiable.
  17. 17. BANANA CASE In 1993, the European Union (EU) introduced a single import policy that imposed quotas, duties and import licensing on banana imports into EU countries. This new policy prompted Guatemala, Honduras, Mexico, Ecuador and US to complaint to the WTO because the system was unfair discriminated against them. The US companies had lost 50% of their banana distributing business and reduced the companies‟ access to EU market and violated WTO agreements. The panel found the policy favored domestic producers in France, Spain and producers in Carribbean countries. The EU do not comply with the WTO rulling, so in April 1999, the WTO approved imposition of 100% tariffs of EU imports into the US. Opinion: The functions of WTO are to implement administer and carry out the WTO Agreement, to provide a forum for ongoing multilateral trade negotiations, to administer dispute settlement and serve as a tribunal for resolving disputes, and to review member countries‟ performance on trade liberalization, trade policies and practices of member states. As in the Banana case, the EU cannot imply imposed a policy without get the permission from the WTO first and without following the WTO agreement. The countries in the EU can make the complaint to the WTO for their rights.
  18. 18. CURRENT ISSUES US FAILS TO MEET ITS OBLIGATION IN THE WTO BOEING CASE Regarding to the issue, United States (US) has not rely on obligations to comply with a World Trade Organization (WTO) by ruling on illegal subsidies which is “Boeing case” called by European Union (EU). The European Commission decided to challenge the US non-compliance at the WTO. US gave the compliance notice to EU in the WTO Dispute Settlement Case 353 (“Boeing Case”) on 24 September 2012. The EU reviewed the measures presented by the US to assess if these were sufficient to comply with WTO rules as the US claimed. EU gave quick review which suggested that US has neither withdrawn the illegal subsidies granted to Boeing nor removed their adverse effects although EU has lack of information. EU shows evidence that US could have actually granted more illegal subsidies to Boeing in the meantime. EU challenged US non-compliance in the WTO Boeing ruling. EU requested US to enter into consultation regarding on the notification made on 24 September 2012. “We had expected that the US would have finally complied in good faith with its international commitments and would have abided by the WTO rulings that clearly condemned US subsidies to Boeing” said EU Trade Commissioner Karel De Gucht. “We are disappointed that this does not seem to be the case. So, the US leaves us with no other choice but to insist on proper compliance before the World Trade Organization. We are confident that this process will finally lead to a level playing field in the aircraft sector.” It was concluded that both parties between EU and US have 15 days to enter into consultations to resolve any disagreement under a procedural “sequencing agreement”. Thereafter, the EU has the right to establish a panel to review the issue of US compliance.
  19. 19. WTO EFFECTIVENESS IN RESOLVING THE EUROPIAN UNION-UNITED STATES (EU-US) TRADE CONFLICT The rationale behind the Dispute Settlement Understanding (DSU) of the WTO is to provide Members with a clear legal framework for solving disputes which may arise in the course of implementing WTO agreements. Clearly, agreed solutions between Members are the most desirable way of solving disputes. However, if this is not possible, Members can ask for panels and (possibly) appeal procedures where the WTO, by interpreting the rules, solves the dispute. If a Member does not comply with WTO recommendations on bringing its practice in line with WTO rules, then trade compensation or sanctions, for example in the form of duty increases or suspension of WTO obligations may follow. One of the major strategic challenges facing the transatlantic trade relationship is the ability to regulate such risk areas as the environment whilst maintaining important trade flows. Much scholarship has emphasized formal US-EU trade disputes when considering the treatment of risk. Two cases involving the US and EU are Bananas and Hormone. While arguably now resolved, at least as to Bananas, took many years to solve after expiration of the reasonable period of time and did result in retaliatory sanctions. The US and the EU have been frequent users of the WTO dispute settlement system, especially against each other. Of the 281, 11 consultations requests to date, 52 have involved US-EU disputes with 26 complaints brought by the US and 26 brought by the EU. Interestingly, the US and EU were more active in requesting consultations in the early days of the WTO of the 52 cases, 37 cases were initiated in the 19961999 period which about nine per year, with only 11 cases being initiated in the year of 2000 to 2002.
  20. 20. The WTO system has worked adequately in the US-EU context. The overall number of disputes seems to have declined and the recent focus is largely on US trade remedies for steel. Those cases will probably eventually be resolved if only through expiration of the challenged measures.