The WTO also relays disputes between Member States on trade issues. When one country`s government accuses another country`s government of violating world trade rules, a WTO panel settles the dispute. (The panel`s judgment may be appealed to an appellate body.) If the WTO finds that the government of a Member State has not complied with the agreements it has signed, the member is obliged to change its policy and bring it in line with the rules. If the member finds it politically impossible to change his policy, he can offer compensation to other countries in the form of lower obstacles to other goods. If it decides not to do so, other countries may obtain WTO authorization to impose higher tariffs (i.e. «retaliation») on products originating in the Member State concerned because they have not complied. Critics of bilateral and regional approaches to trade liberalization have many additional arguments. They propose that these approaches undermine and supplant the MULTILATERAL approach of the WTO, which must be favoured for global use on a non-discriminatory basis, rather than supporting and complementing it. Therefore, the long-term outcome of bilateralism could be a deterioration of the global trading system into competing and discriminatory regional trading blocs, which could lead to additional complexity that complicates the flow of goods between countries. In addition, the reform of issues such as agricultural export subsidies cannot be effectively addressed at the bilateral or regional level. The United States is a party to many free trade agreements around the world. Let us assume, for example, that Japan sells bicycles for $50, that Mexico sells them for $60, and that they both expect a $20 dollar in the United States.
If tariffs on Mexican products are removed, U.S. consumers will transfer their purchases of Japanese bicycles to Mexican bicycles. The result is that Americans will buy from a more expensive source, and the U.S. government does not receive customs revenue. Consumers save $10 per bike, but the government loses $20. Economists have shown that when a country enters such a «trade» customs union, the cost of trade diversion can outweigh the benefits of enhanced trade with other members of the customs union. The result is that the customs union could degrade the country. The advantage of these bilateral or regional agreements is to promote stronger trade between the parties to the agreement. They can also accelerate global trade liberalization when multilateral negotiations find themselves in trouble.