On Global Trade & Investment
Published Three Times a Week (with occasional bonus quotes) by
The Global Business Dialogue, Inc.
Washington, DC 20006
|
|
THURSDAY, OCTOBER 1, 2020
Click HERE for Tuesday’s WTO quote from Thomas Graham.
|
|
THE WTO APPELLATE BODY, AN APPEAL FOR REFORM
“I believe the reform of the WTO needs to start with getting its dispute settlement system back on track.”
Jennifer A. Hillman
July 29, 2020
|
|
As noted in our last entry, the Senate Finance Committee held a hearing on the WTO at the end of July. The title of that session was “WTO Reform: Making Global Rules Work for Global Challenges,” and Jennifer Hillman was the first witness. Whoever made the decision to have Ms. Hillman lead off made a wise choice. At the top of the list of challenges facing the World Trade Organization is what to do about the dispute settlement system now that the apex of that system, the Appellate Body, is no longer working. Whether or not one agrees with her recommendations, her exposition of the issue, including her description of the Appellate Body, was the right way to begin the discussion.
Herself a former member of the WTO Appellate Body, Ms. Hillman is today Senior Fellow for Trade and International Political Economy at the Council on Foreign Relations as well as a professor at Georgetown University Law Center. Her prepared statement for the Finance Committee’s hearing on July 29 includes the following description of the composition and functioning of the WTO Appellate Body:
The Appellate Body is composed of seven people, with a minimum of three required to rule on an appeal. Each member serves a four-year term and can be reappointed once. The members serve on a part-time basis and are aided in their work by an increasingly powerful staff of full-time lawyers in its Secretariat.
The United States was the strongest proponent of creating an Appellate Body. Since the WTO rules provide for a nearly automatic adoption of panel reports, the United States sought a process to overturn any erroneous panel decisions before they became binding obligations. While appeals were expected to be rare and limited to narrow questions of law, access to the Appellate Body was considered essential both to ensure that countries could challenge decisions by ad hoc panels that they believed were wrongly made and to bring a measure of consistency across disputes over similar legal texts.
The WTO dispute settlement system succeeded initially. An increasing number of WTO members used it. Compliance with its decisions, while not perfect, was considered good. For its part, the United States filed more complaints than any other country, prevailing in 91 percent of these cases. However, the expectations that appeals would be rare and narrow proved to be wrong. Nearly 70 percent of panel reports have been appealed and the average appeal can raise a dozen or more claims, many of them going far beyond narrow legal questions.
In brief, it would seem that the Appellate Body had, in effect become the final arbiter in the lion’s share of WTO disputes. And, for several years now, that has been a problem for the United States. Among other things, the U.S. has argued a) that the Appellate Body has exceeded its mandate in key areas, notably in the treatment of U.S. trade remedy laws, and b) that it has failed to follow the rules set out for its operation in the Dispute Settlement Understanding, i.e., its own rules.
Ms. Hillman does not dismiss either of those charges, but for her the solution is to reform the Appellate Body and put it back in service as quickly as possible. As we listened to her, it seemed to us she was saying: 1) the world needs the WTO, 2) the WTO needs a functioning dispute settlement system, and 3) the United States needs those things as well. She pointed out, for example, that the U.S. has won many more cases than it has lost in the WTO and further that those successes opened the door to significant new exports for U.S. producers.
As for a pathway to reform, Ms. Hillman gave credit to David Walker, New Zealand’s ambassador to the WTO, who had been asked to work with members on suggestions for reforming of the Appellate Body and who, last fall, produced a paper with a series of recommendations. That said, Ms. Hillman took note of the U.S. critiques of some of Ambassador Walker’s suggestions and made reference as well to other proposals, including those put forward in a recent paper by the National Foreign Trade Council.
|
|
We do not have Ms. Hillman’s intimate knowledge of the working of the WTO, including the Appellate Body. Still, from our more distant vantage point, we are inclined to favor the other side of the argument with respect to some of Ambassador Walker’s recommendations. Separately, the argument that U.S. is a net winner from the WTO dispute settlement process is a strong one, but for us it is not compelling.
Reaffirming the Rules. On the first of these, a single example should suffice. The WTO rules governing the operation of the Appellate Body state explicitly that appeals should be completed within 90 days. In his proposal for reform, Ambassador Walker proposed language reaffirming this provision. The Walker proposed reforms have been endorsed by a number of WTO members but notably not by the United States. When they were discussed at a WTO General Council meeting on December 9, 2019, the U.S. ambassador to the WTO, Amb. Dennis Shea, highlighted some of the difficulties, including the issue of the oft-violated 90-day rule. In his words:
Regarding the 90-day deadline for Appellate Body reports, the DSU text is already clear, and yet the Appellate Body has failed to respect it. What reason would there be to think this language would ensure a different result?
More Wins Than Losses. The argument that the U.S. wins more WTO cases than it loses merits more than a little reflection. Leaving aside for now the question of whether or not the Appellate Body is a court, one can accept that a system that gets things mostly right deserves some deference. On the other hand, good behavior doesn’t wipe out bad. So, if “getting it right” merely means that in certain kinds of cases U.S. arguments have aligned with the biases of the court, taking the wins and keeping quiet about the losses may not be the best approach. That is especially true if one is convinced, as U.S. administrations of both parties have been, that the losses have too often been due to the twofold coincidence of U.S. arguments not aligning with biases of the Appellate Body and the Appellate Body not feeling bound by the agreements that created it.
So, when it comes to win-loss assessments, we think Lyle Lovett got it right: you don’t get much credit for your good deeds. Or, as he said in song:
One bad move can turn your world upside down
It's such a shame 'cause you've been so good up to now
|
|
Hillman at Senate Finance is a link to the text of Jennifer Hillman’s submission to the Senate Finance Committee for her testimony before the Committee on July 29, 2020. This was the source for today’s featured quote.
The NFTC Paper is a link to the press release that the National Foreign Trade Council issued in June on its paper for reform of the WTO Appellate Body.
Up To Now will take you to the lyrics to Lyle Lovett’s song “You’ve been so good up to now.” Here is the first stanza:
You don’t have to live a life of sin
You don't have to break the law
And break the law again
You can make just one mistake
And it can take you to your grave, honey
One bad move can turn your world upside down
It's such a shame 'cause you've been so good up to now
The Hearing takes you to the page on the website of the Senate Finance Committee that is devoted to the hearing on WTO reform which the committee held on July 29. This includes links to all of the written statements submitted and to a full video recording of the event.
|
|
TO GET THE TTALK QUOTES IN YOUR INBOX
Or Other GBD Notices, click below.
|
|
©2020 The Global Business Dialogue, Inc.
1717 Pennsylvania Ave., NW, Suite 1025
Washington, DC 20006
R. K. Morris, Editor
Joanne Thornton, Associate Editor
|
|
|
|
|
|
|
