WTO dispute settlement system in ‘crisis’

Trade analysts cite massive caseload, lack of review mechanism and Trump administration block of new appointments.    The World Trade Organization Appellate Body (AB) for dispute settlement has several problems, including a massive caseload that has resulted in slow adjudications and the lack of a review mechanism, according to trade analysts, who said clear goals for the panel and its dwindling number of members should be defined.
   “The United States is going to have to spell out not only its concerns but what it believes the solutions are, and there needs to be engagement from those who disagree so that we can reach a common ground,” Bruce Hirsh, founder of trade consulting firm Tailwind Global Strategies, said during a Washington International Trade Association event on Friday.
   “Is the system in a crisis? Yes,” continued Hirsh, a former chief counsel for dispute settlement at the Office of the U.S. Trade Representative. “Was it still generating excellent results that were of value to every participant in the system? Absolutely. And to the extent that there’s not a resolution out of the current situation, it’d be a real shame if those were lost.”
   Citing complaints about AB members overstaying their terms to work on ongoing rulings, the Trump administration has blocked the appointment of new members since last summer, leaving three current gaps on the seven-position panel.
   The lack of engagement by other countries on the issue in response to the United States’ aggressive tactics is compounding the problem, Hirsh said. But he added that last month’s swearing in of Dennis Shea as deputy U.S. trade representative and ambassador to the WTO should provide the opportunity for higher-level dialogues on AB issues in Geneva.
   The WTO Dispute Settlement Understanding states that the AB cannot add to or diminish the rights of any WTO member and that the purpose of the WTO Dispute Settlement Body, including the AB, is to clarify existing WTO rules, Georgetown Law Center professor Jennifer Hillman said during the Washington International Trade Association event.
   The ultimate obligation of the AB in proceedings is to clarify whether a lower-level dispute panel properly interprets WTO rules in the cases it considers.
   “That’s where a lot of the pushing and the shoving is going on in Geneva right now, where there is a difference of agreement between whether or not something creates a right or obligation that wasn’t there, as opposed to just … analyzing and interpreting text, which is … one of the missions of the dispute settlement system,” said Hillman, a former WTO AB member.
   There is no way to challenge AB decisions other than through the WTO’s negotiation framework, which leaves WTO members with little leverage to challenge AB decisions they consider unfair, attorney Terry Stewart of Stewart and Stewart said during the event.
   “At some point, you start to look for, ‘What is my leverage point?’ to get people to sit down and deal with these issues,” he said. “I think that’s where we’re at, and I believe that as a result, until these issues are resolved, we can simply count the days until we get down to three members and then two members in the WTO Appellate Body.”
   Hillman said the WTO General Council, which is comprised of all members, can overrule AB decisions that are out of step with the intent of the dispute understanding, but that provision never has been used and probably never will be.
   There’s a significant risk that a long continuance of the United States’ AB blockage will compel other countries to act aggressively on trade issues as U.S. actions could be viewed as jeopardizing to the rules-based world trading system, Hillman said.
   Other countries so far have hesitated to engage the United States on its AB length-of-service concerns out of fear that the U.S. is raising the specific issue as a “red herring,” and once the issue is resolved, will raise other AB concerns amid the blockage of appointments, she said.
   “It’s the harder issues that are going to require real dialogue,” Hirsh said. “It’s certainly my hope that as we see what appears to be a stalemate in Geneva, that the U.S. is hopefully engaging with different partners as to the types of solutions … that might be possible, if not through amendment [of WTO rules], then through some sort of indication, a signal, from the members to the Appellate Body, [of] the approaches that they should be taking.”