The World Trade Organisation’s capacity to settle international disputes, a core function throughout the body’s 25-year history, is on the brink of collapse following relentless US opposition.
The appellate branch of the WTO’s Dispute Settlement Body (DSB), sometimes dubbed the supreme court of world trade, was a target of US criticism before president Donald Trump took office.
His predecessor Barack Obama’s administration began a policy of blocking the appointment of appeals judges over concerns that their rulings violated American interests.
Trump’s trade team has both extended that policy and escalated the fight.
Barring a shock breakthrough in the coming days, the court will cease functioning on Wednesday.
The WTO appellate branch normally counts seven judges but has just three left — the minimum required to hear an appeal. Two more judges are due to retire on Tuesday.
WTO director general Roberto Azevedo warned on Friday that the organisation was facing a stark choice.
‘You could restore the impartial, effective, efficient two-step review that most members say they want,’ he said.
‘Alternatively, your choices could open the door to more uncertainty, unconstrained unilateral retaliation — and less investment, less growth, and less job creation.’
Various reform proposals have secured broad support.
But according to EU trade commissioner Cecilia Malmstrom, there can no solution without US buy-in because the WTO works on consensus.
‘This is a dispute between the 163 members of the WTO and the US,’ she told the European parliament last month.
US WTO envoy Dennis Shea argued on Friday that Washington had ‘engaged constructively over the past year’ to resolve the crisis, but would not relent until its concerns were fixed.
‘This is not an academic question; we will not be able to move forward until we are confident we have addressed the underlying problems and have found real solutions to prevent their recurrence,’ he told a WTO meeting.
US concerns regarding the WTO appeals court include allegations of judicial overreach, delays in rendering decisions and bloated judges’ salaries.
But top American trade officials have also insisted that the US constitution does not permit a foreign court to supersede an American one — and that WTO appellate judges assert such superiority in international trade law.
Washington reportedly threatened to block the WTO’s 2020 budget over the dispute, raising the prospect of a January 1 shutdown.
The US ultimately backed a provisional budget compromise on Thursday but it included substantial appellate body cuts.
‘There is no question the Trump administration has killed the appellate body,’ said Edward Alden, a trade expert at the Council of Foreign Relations think-tank.
‘That was its intention, and it has succeeded.’
The appellate body’s demise will place international trade disputes in legal limbo.
Countries will still be able to file grievances and dispute panels can issue rulings, but nations unhappy with those rulings can simply delay enforcement by filing an appeal to a non-functioning court.
The European Union, Canada and others have reaffirmed their commitment to a two-step dispute process, arguing that the right of appeal is essential in any legal system.
Brussels and Ottawa have agreed to set up a temporary appellate process, which mirrors the WTO court, and would handle any bilateral disputes that arise during the impasse. Norway has joined that accord.
Leading WTO members also say they are open to wider reform.
‘We have made clear that we are fully committed to tackling the root causes of the discontent around the existing system,’ the EU ambassador to the WTO Aguiar Machado told AFP.
Another Western diplomat who requested anonymity told AFP the European Union was willing to tackle concerns about the court’s ‘excesses’ but said the US must first agree to begin recruiting new judges — a non-starter for Washington.
Some have suggested that a solution might have to wait until after next year’s presidential election in the United States.
In the meantime, the WTO has been left diminished.
Since its founding in 1995, the organisation has been tasked with promoting liberal international trade through a rules-based system backed by a dispute settlement process.
Trade promotion has faltered as the body has struggled to agree any major new deals and Alden of the Council on Foreign Relations predicted: ‘There will never be another big, liberalising trade round.’
Certainly, court-backed rule enforcement appears certain to suffer a heavy blow next week.
‘The WTO needs both its legs, litigation and negotiation’ said Elvire Fabry of Jacques Delors Institute.
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