| From reviewing chronological development of the dispute settlement mechanism by international community, this manuscript initially reviews the development of the ADR and compares the current mechanism of the WTO’s disputes settlement system with the GATT. This manuscript addresses the operation of the dispute settlement mechanism of the WTO; the implications of the mechanism to disputes arising between China and Taiwan. This manuscript also analyses a trade dispute case brought by Taiwan towel industry against China’s counterparty to Ministry of Economic Affairs demonstrates the dilemma which apply the WTO’s dispute resolution mechanism under the political tension between Taiwan and China. Further, recommendations for implementing the DSU on trade disputes between Taiwan and China will be submitted subsequently to avoid unnecessary pitfalls. |