The policy of blocking the appointment of judges to the WTO Appellate Body (AB) pursued by President Trump’s administration is leading to an operational paralysis of the AB starting on Wednesday 11 December. Drastically reduced from seven judges to two, it is no longer able to carry out its duties.
After months of warnings about the risk of paralysis of the WTO’s two-tier dispute settlement system, members failed to identify a solution that would allow the lifting of Washington’s veto on new judicial appointments.
According to Trade Commissioner Phil Hogan, “this is a critical moment for multilateralism and for the global trading system”. In a 10 December statement, he deplored the loss of a dispute settlement system, “an independent guarantor - for large and small economies alike - that the WTO’s rules are applied impartially”.
Different visions
Meanwhile in the EU, from Brussels to Paris, from MEPs to European companies, all seem to deplore this situation, with the causes of American anger against this organisation going back several years.
According to Jennifer Hillman of the Georgetown Law Centre and former AB judge, this failure is based on a misunderstanding between ‘Common law’ countries - such as the United States - and civil law countries - such as those of the EU. For the former, WTO law must be applied on a case-by-case basis, according to the ‘contract’ between the WTO and each of its members. Europeans, on the other hand, see the dispute settlement mechanism as a court that can develop its own jurisprudence.
Washington has repeatedly opposed the AB’s overly broad interpretation of the texts.
What happens next?
As the AB can no longer rule on new disputes, there is a great risk that States will take control of resolving their trade disputes by applying unilateral retaliatory measures to each other in turn.
The EU has therefore provided several safety nets to avoid falling victim to the looming tariff war - particularly in the case of Airbus (see EUROPE 12385/3). These solutions are also included in the draft conclusions of the European Council of 12 and 13 December.
First, the EU hopes to sign agreements with several WTO members to establish a provisional appeals system (see EUROPE 12271/16), as well as with Canada and Norway. Secondly, it wants to revise its rules implementing the WTO rules (n. 654/2014), thus allowing it to sanction any State that places obstacles in the way of the WTO dispute settlement mechanism (see EUROPE 12385/3). Finally, the EU intends to co-manage a broader reform of the WTO “to reflect the changing [global] environment to remain relevant and operational”, in accordance with Mr Hogan’s terms (see EUROPE 12374/3).
However, no reform will be possible at the WTO - let alone at its heart, its dispute settlement system - without the involvement of the United States. But Washington has been and remains very enigmatic about what it now expects from the multilateral organisation.
See the draft summit conclusions: http://bit.ly/38tqK4C (Original version in French by Hermine Donceel)