The European Union intends to improve its trade defence by announcing, on Thursday 12 December, plans to review its regulation on the application and enforcement of international trade rules (n. 614/2014).
“The absence of an effective dispute settlement mechanism creates a significant gap in EU legislation” and “endangers the EU’s interests”, Trade Commissioner Phil Hogan told the press, referring to the paralysis of the World Trade Organization’s (WTO) Appellate Body (see EUROPE 12387/23).
“It is unacceptable that the EU cannot enforce its rights through adjudication”, he said.
The EU therefore wants to empower itself - and kill two birds with one stone.
Above all, the Commission wants to compensate for the blocking of the AB at the WTO.
In addition, in line with its commitments in this regard, it wants to add teeth in order to better implement its bilateral free trade agreements (see EUROPE 12298/24, 12293/14, 12300/12).
However, the Commission refuses to betray its multilateral commitments here: it is acting in a way that is “consistent with international law”, according to a European source.
Overcoming blockage at the WTO
With a truncated dispute settlement system now that the AB is paralysed by the lack of new judges, members of the multilateral organisation could be tempted to evade their binding decisions by simply appealing a panel’s report.
The Commission is discussing a defence strategy in three movements. First, it must work to unblock the AB. However, if this line of defence remains ineffective, the EU, which continues to urge its WTO partners to agree on interim arbitration mechanisms (see EUROPE 12271/16), would use this second solution. Finally, in the event of refusal by a third country, the EU would set up its third “line of defence” by using the revised enforcement regulation.
It would only be used for “offensive” cases initiated by the EU at the WTO and where judges in the first stage of dispute resolution (WTO panel) agree with European arguments.
The Commission could therefore sanction - in fact more quickly than it could through the AB - any State that does not comply with its obligations under this arbitration.
Better enforcement at the bilateral level
The Commission is considering using this regulation in cases where its trading partner prevents adjudicative dispute resolution under the agreement.
In both cases, it undertakes to apply a level of penalties proportional to the damage suffered by the EU.
To date, this regulation has remained underutilised. However, it was used as a legal basis to react to tariff sanctions imposed by Washington on imports of steel and aluminium. The Commission is not ruling out the possibility of using it in the context of the Boeing dispute with the United States, which should be concluded in the first half of 2020 (see EUROPE 12238/1).
The EU Council and the European Parliament will now have to consider this proposal, which the Heads of State and Government, in their conclusions, want to see made a matter of priority. The Commission expects its adoption before the end of June 2020.
To consult the proposal: https://bit.ly/2PfaVXt (Original version in French by Hermine Donceel)