The WTO's dispute settlement system-or, more accurately, America's dispute with that system-was the topic at the Global Business Dialogue's last event for 2017. The title of the event was
Disputed Court: A Look at the Challenges To (and From) The WTO Dispute Settlement System.
John Magnus, the founder and president of TradeWins LLC was the first speaker. As today's featured quote suggests, he talked a lot about "gap filling" by WTO panels and especially by the Appellate Body of the WTO. Briefly, the phrase refers to the idea that those who adjudicate WTO disputes-the panelists who hear cases initially and the members of the Appellate Body who hear them on appeal - have the authority to fill in, with their rulings, areas which they see as inadequately addressed by the General Agreement on Tariffs and Trade and related WTO agreements.
Here is a bit more from the section with today's featured quote, though this was neither the beginning nor the end of the story as Mr. Magnus told it.
Okay, finally to the Appellate Body. Better late than never. It's a lightning rod. Right now, it's a lightning rod. Why? Well, for one thing it owns a lot of the most adventuresome decisions faulting U.S. measures. For another, it unapologetically claims to have gap filling authority. This claim, which the Appellate Body and its members base on the Vienna Convention on the Law of Treaties and on certain cross-references to the Vienna Convention in the WTO agreements has exactly zero public acceptance in the United States.
And the WTO's most articulate champions and defenders in this country don't defend it even in private. And, of course, the absence of gap filling authority was an important part of the basis on which the U.S. Congress agreed to implement the Uruguay Round results.
An audio recording of Mr. Magnus's presentation on December 20 is available on the GBD website, and there is a link below to a transcript as well. We encourage you to consult one or the other. Here we will simply mention three other related elements from Mr. Magnus's presentation.
The first is that the whole notion of gap filling runs counter to America's long established and well-known techniques for dealing with trade agreements. In the United States, such agreements are not self-enforcing treaties. Rather, U.S. compliance with trade agreements is achieved through implementing legislation, such as the Uruguay Round Agreements Act of December 1994, which provided for U.S. recognition of the WTO and compliance with the provisions of the Uruguay Round Agreement.
Mr. Magnus explained the situation this way:
[W]e do our implementation up front. ... During the period between when an agreement is signed and when it enters into force, we do an implementing bill. The implementing bill contains, by our lights, everything that is needed to ensure that with time we comply with the agreements that we have taken on. And when an implementing bill goes to the Congress, it goes bearing a certification from the Executive Branch, saying this is all we need to do.
So later on, when that piece of legislative work is bullet ridden, it seems wrong if indeed we have done what we needed to do and then later on decisions come out and say, "Well, you forgot this and you forgot that and you left this in your law when you needed to repeal it," and so forth and so on. Then it naturally, very naturally, feels like it's not based on enforcement of obligations but [on] expansion and creation of obligations.
Personalities, of course, also play a role. Understandably, those who work at the WTO have a pro-WTO bias, and that may be part of the problem. Again Mr. Magnus:
This is a group of people who make their living, either working for, or in jobs that only exist because of, the WTO. They believe in multilateralism and the contribution that it's made to economic welfare. They believe in the WTO enterprise. They want to see it become more important over time. They want it to have the biggest possible footprint, and they want to see the coverage of its rules be as comprehensive as possible. Fair enough.
How does that become a pro-complainant bias? Well, it doesn't take much imagination. The folks involved in this system have a negative view, an instinctively negative view, of the idea of gaps within which members can do what they please. It's distressing to them that there might not be a WTO rule or obligations on a particular point, especially if the behavior that's being complained of is behavior that they find to be distasteful in some way. And so
they are prepared to strain to find a rule to apply to such behavior. By finding obligations which they can enforce, they can expand the franchise of the WTO itself.
This pulls them away from the default rule that, what sovereign states have not promised to refrain from doing they cannot be faulted for doing.
Finally, there is the issue of America's technique for expressing its displeasure over these developments-namely the blocking of appointments and re-appointments of Appellate Body members. Mr. Magnus address this issue head on in closing. He said:
I am not here to defend the specific tactics of the Trump Administration on restocking the Appellate Body. So far, those tactics are not producing noticeable results or reforms.
I do believe the underlying grievance is legitimate, and I am glad to see the U.S. Government elevating that grievance forcefully at long last. And I would just close by noting that the U.S. Government is doing so within the rules by declining to join in a consensus, where the WTO's rules require consensus. There are other tactics the United States Government could use and might use that would be more fairly characterized as lawless. Hopefully, solutions will be found and systemic changes put in place that will make anything like that unnecessary.