THE TTALK QUOTES


On Global Trade & Investment
Published Three Times a Week By:
The Global Business Dialogue, Inc.
Washington, DC  Tel: 202-559-9316
No. 80 of 2019
FRIDAY, DECEMBER 20, 20219

Click HERE for Boris Johnson's pre-election quote
from December 11.
THE DG's DIFFICULT BALANCE

 "The Appellate Body situation does not mean the end of rules-based dispute settlement at the WTO."

Roberto Azevedo
December 10, 2019

Editor’s Note : This has been one hell of a week in American politics – and not only in trade. Trade is our knitting though, and, for the most part we’ll stick to it, both here and in future entries. And the big trade news of this week was yesterday’s (December 19) House vote on USMCA – approved by a margin of 385-41.  We haven’t seen bipartisan support like that for trade in years, and we know we shall be returning to USMCA again and again between now and the Senate vote on it. This afternoon, however, our focus is Geneva and the WTO, where things are not the same now as they were a month ago.

CONTEXT
December 10 marked more than one milestone for the World Trade Organization. The day saw the end of the last General Council meeting for 2019. It was also the final day in the terms of two of the then-three remaining members of the WTO Appellate Body.  Roberto Azevêdo, the WTO Director-General, took note of both developments in a press conference that afternoon. At full strength, the Appellate Body has seven members. It needs three for a quorum. Now that it is down to just one, “the Appellate Body will no longer be able to review new dispute rulings,”  Mr. Azevêdo said. It will, however, be able to conclude its work on those appeals that are already in progress. 

Frequently referred to as a crisis, this development is a consequence of the Trump administration’s decision not to approve new Appellate Body members, not at least until America’s long-standing concerns with the functioning of the Appellate Body have been addressed.  Understandably, the Appellate Body situation was the first topic Mr. Azevêdo spoke to in his opening statement on the 10th. Here is more of what he said:

DG Azevedo:
You will have heard that members could not achieve consensus on a draft decision to reform the Appellate Body that was submitted by the facilitator, David Walker, Ambassador Walker [of New Zealand]. As of tomorrow, the Appellate Body will no longer be able to review new dispute rulings. And in this context, I think it's important to emphasize that WTO rules will remain in force, and members, for the most part, will continue to apply the WTO rulebook out of economic self-interest, commitment to legal principle, and, of course, the desire to preserve sound relations with our trading partners. The Appellate Body situation does not mean the end of rules-based dispute settlement at the WTO.

Members will continue to resolve WTO disputes through consultations, panels, and they will also use other mechanisms envisaged in the WTO agreements to resolve disputes and review rulings such as arbitration or the good offices of the DG. I am myself starting intensive consultations with members to determine what more we need to put on the table in our search for a permanent solution on second-step review. And my consultations will start right away.
COMMENT
A week later in Washington, on the same day that it approved the USMCA legislation, December 17, the House Committee on Ways and Means passed a resolution on the WTO. This was House Resolution 746, offered by Rep. Ron Kind (Democrat of Wisconsin) and cosponsored by, among others,  Rep. David Schweikert (Republican of Arizona). On the one hand, the resolution reaffirms the value the House attaches to the WTO. On the other, it calls for reforms. These include fixing the problems in the Appellate Body, most notably that tribunal’s tendency to overreach its mandate. They also include curbing the ability of major economies like China to claim special privileges as “developing countries.”

These are old issues.  They are not likely to be resolved soon, and each is likely to get a lot more ink from the experts in the months ahead. Our question today, however, is more procedural than substantive, but it is a big one. The next big biannual meeting is now just six months away. This will be the WTO’s 12 Ministerial Conference, MC12, which will be held in Nur-Sultan (formerly Astana), Kazakhstan, from June 8-11, 2020.  Is there a plan to deal with the “crisis in the WTO” then?  Logically, it would seem to be the appropriate occasion for addressing such an important issue. Yet that doesn’t appear to be the plan, and that too is understandable.

If you watch the video of Director-General Azevêdo on December 10, the determination in the final phrase of “my consultations will begin right away ” is unmistakable. Doubtless, the Director-General would like to have the Appellate Body issue wrapped up before the Kazakhstan meeting – or at the least to have a process in place that will keep it from dominating that event, marring it with failure, or both. 

Certain problems, however, are like mountain snow: they cut their own paths as the water makes its way to the sea. As Mr. Azevêdo noted, members are finding their own solutions to the problems. Some of those he mentioned. Others are still being developed, and all have yet to be truly tested. 

Yesterday, December 19, Terry Stewart highlighted one such initiative in his Thoughts on Trade blog.  This is a proposal from the European Commission. The problem it is meant to solve is sometimes referred to as “an appeal into the void.” The phrase refers to those situations in which a country facing an adverse panel report from the WTO – i.e. the first ruling in a WTO case – appeals that decision to the now non-functioning Appellate Body, thereby indefinitely deferring a final decision. 

Mr. Stewart explains the EU’s proposal this way:

The EU has put forward a proposal that would authorize the EU to retaliate whenever a dispute where the EU has received what it views as a favorable ruling is appealed by the other party during the period when any such appeal cannot be considered by the Appellate Body . 

Needless to say, this is not a proposal for changing the WTO. It is proposal for amending EU regulations. Even without knowing the ultimate fate of this particular proposal, it is all too easy to imagine the current “crisis” morphing into a patchwork quilt of responses that redefines WTO dispute settlement. The good news there is that the membership as a whole will have been spared the agony of having to come to a clear collective decision on the issue. That is also the bad news.
SOURCES & LINKS
An Azevêdo Press Conference takes to video recording of the Director General December 10 press conference. This was the source for today’s featured quote.

A House Resolution is a link to the Library of Congress page with details of this resolution on the WTO, H. Res. 746.

An EU Proposal takes you to the EU document reference in the Comment Section above.

From Thoughts on Trade is the Terence Stewart blog of December 19, which focuses on this issue.  

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