TWN Info Service on WTO and Trade Issues (May16/19)
27 May 2016
Third World Network

Isolated US, still vetoes Chang reappointment to AB
Published in SUNS #8246 dated 24 May 2016

Geneva, 23 May (D. Ravi Kanth) -- The United States on Monday (23 May) stood completely isolated at the World Trade Organization for its belligerent opposition to the reappointment of Mr Seung Wha Chang from Korea to the Appellate Body for a second term of four years.

The US, however, remained adamant and succeeded in vetoing Mr Chang's reappointment, despite a vociferous demand from several countries - the European Union, Switzerland, Korea, Brazil, India, Egypt, and Nigeria among others - for a second term to Mr Chang, participants present at a Dispute Settlement Body meeting told the SUNS.

The developed and developing countries denounced the aggressive opposition from the United States for the reappointment of Mr Chang on the grounds that he had deviated from the covered agreements of the GATT/ WTO jurisprudence.

In an extraordinary war of nerves between the US on the one side, and the rest of the membership on the other, at the Dispute Settlement Body meeting, countries from the North and the South delivered a stinging rebuke to the US for its aggressive "my way or highway" stance to block the reappointment of Mr Chang on baseless grounds.

"Though the US stood completely isolated from its partners, it remained defiant by attacking the Appellate Body members for issuing the letter and overstepping their boundaries," a developing country participant told the SUNS.

To cover up its aggressive stance at the DSB, the US issued an elaborate statement as to why Mr Chang cannot be reappointed. The US said Washington does not consider Mr Chang's service reflects the role assigned to the AB members.

The Korean Appellate Body member's failure to adhere to rules in several cases has undermined the WTO's Dispute Settlement Body system, the US argued.

The reappointment to the DSB, according to the US, is not automatic and members' consensus is needed for granting a second term.

The US exhorted members not to take their responsibility lightly in considering the reappointment.

Washington stuck to the line that the panels and the AB cannot add to or diminish rights and obligations, participants said.

The AB's role, including Mr Chang's positions, in delivering the adjudicative approach lacked substance and raised "systemic" concerns, the US maintained.

The US went on to cite four cases in which Mr Chang was either a presiding member or part of the three-member Division.

The four cases are:

(i) DS453 - Panama's dispute against Argentina on allegedly restrictive measures imposed by Buenos Aires on goods and services. The AB presided by Mr Chang struck down the earlier panel ruling and issued obiter dicta pronouncements. The US said the AB is not an academic body, nor can it make law.

(ii) DS 430 - the US dispute against India on allegedly restrictive measures imposed by New Delhi on the American agricultural products.

The US said the AB's ruling contained lengthy discussions that was irrelevant to the points raised by the two sides. The US argued that the AB engaged in abstract discussions.

(iii) DS 437 - China's dispute against the US countervailing duties in which the AB delivered a major ruling in favor of Beijing.

The US said the AB adopted an approach that involved new standards instead of considering evidence and arguments. The US complained that the AB cannot make a case on its own and behave like an independent investigator.

(iv) DS 449 - China's dispute against the US for allegedly illegal anti-dumping and countervailing duties imposed by the US Commerce Department. The US said that the AB reviewed domestic law which is not in its domain.

WTO adjudicators, according to the US, overstepped their mandate and contributed complexity to the workload.

The AB invariably ignored the evidence and became a playground for views which are not responsible, the US suggested.

The US indicated that trust in the AB cannot be built in the vacuum. The US emphasized the importance of maintaining trust by holding the AB members accountable. It argued that the reappointment is not automatic, emphasizing that the DSB's role cannot be reduced.

The US described the AB letter (please see SUNS #8244 dated 20 May 2016) as "unfortunate." By sending the letter directly to members, the AB is setting a precedent and seeking to act outside its role, the US charged, according to participants.

But the US broadside against Mr Chang and the Appellate Body failed to garner any support from its traditional allies or developing countries.

Korea issued the strongest statement yet on how the arbitrary position adopted by one member undermined "trust" in the AB and nearly hollowed out its "independent and impartial authority."

A senior European Union trade official told the SUNS that the US' decision to block the reappointment has "politicized" the AB.

It would have chilling effects on the independent and impartial functioning of the AB, the official said, while asking not be to quoted.

In its statement, Korea said the US decision to block Mr Chang's reappointment is "very inappropriate" and raises "serious systemic concerns as well."

Korea asked how can an Appellate Body member be singled out for criticisms when the reports are written by the three-member division.

As the AB members confirmed in their letter to the DSB chair on 18 May, "an AB decision cannot be attributed to any particular member, because it is the decision of the ‘Appellate Body'" Korea said.

The US opposition, according to Korea, "is an attempt to use reappointment as a tool to rein in AB members for decisions they make on the bench."

"Its message is loud and clear: If AB Members make decisions that do not conform to US perspectives, they are not going to be reappointed," Korea maintained.

Effectively, if the US message "is allowed to prevail, it would seriously undermine the independence and integrity of the Appellate Body," Korea maintained.

"First-term AB members may have to reflect more on how their rulings will be viewed by major Members rather than on the merits of the cases," Korea argued.

"Linking reappointment with decisions made in specific disputes will create a dangerous precedent that other WTO Members may be tempted to follow," Korea warned.

Korea agreed with the letter of AB members which had said: "[W]e are concerned about the tying of an Appellate Body reappointment to interpretations in specific cases, and even doing so publicly. The dispute settlement system depends upon WTO Members trusting the independence and impartiality of Appellate Body Members. Linking the reappointment of a Member to specific cases could affect that trust."

Korea emphasized: "For an adjudicator to be truly independent, he or she must have assurance that his or her decisions, made in good conscience, will not result in what is effectively removal from office."

"The US opposition contravenes this most fundamental judicial principle," Korea argued.

Further, the hidden and subtle aspect of the US' opposition to Mr Chang's reappointment is that "the AB rulings Professor Chang was involved with went beyond the boundary of the AB mandate, which is to adjudicate appeals and clarify existing provisions of the covered agreements without adding to or diminishing the rights and obligations provided in those agreements."

While the request for ensuring "that the AB remain within the boundary of its mandate is seemingly legitimate," it is pertinent to argue "that some AB decisions were not consistent with the AB mandate and oppose reappointment of an AB member who participated in those decisions on that basis conceals one important fact," Korea said.

Given the differing views among WTO Members on the role and jurisdiction of the Appellate Body, it is difficult or impossible to argue "where the boundary of the AB mandate exactly lies," Korea pointed.

"The right way of addressing this situation is to continue the efforts to build a consensus through discussions among the Members," Korea maintained.

Instead, the United States chose to impose "its own perspective on other WTO Members, as well as on the Appellate Body, by replacing an AB member who they believe has a different view," Korea maintained.

"This approach is of course misguided," Korea said, arguing that "in the absence of an agreement on the clear boundary of AB mandate, replacing AB members will not eliminate differences in views regarding the consistency of specific AB decisions with its mandate."

Korea suggested an alternative to overcome this ugly situation. It proposed that [WTO] Members launch a discussion devoted to the question of the boundary of Appellate Body review with the goal of finding a common understanding.

"We believe that this is the right way to address the concerns of many Members, including the United States, while maintaining the integrity and independence of the Appellate Body," Korea maintained.

Instead of settling for an "immediate fix that will in the end cause harm," Korea said it is important to adopt an appropriate way "that does not ignore the systemic concerns that we expect will be voiced almost in unison today."

Regardless of the good intentions of the US, Korea said it cannot "find justification in the US opposition to reappoint Professor Chang."

"This is why we would like to urge the United States to reconsider and withdraw its opposition," Korea appealed.

"Our first priority is to restore an environment where the sitting and incoming Appellate Body Members can do their jobs properly without looking over their shoulders," Korea concluded.

In similar vein, India said "a successful dispute settlement mechanism is grounded on an independent and impartial Appellate Body."

The process of reappointment and the basis for opposition to the reappointment, according to India, will "undoubtedly have serious consequences on the independent functioning of the Appellate Body."

India said the issue is not whether the reappointment is automatic but on what "grounds reappointment is opposed." The alleged reasons cited by the US, according to India, are "troubling."

India questioned the underlying rationale and said "attributing a particular adjudicative approach to a particular Member of a Division is unfathomable."

India said the AB functions and hears appeals as a whole as per Rule 3 (a) of the Working Procedures for Appellate Review.

Significantly, "if a question is raised on the legal approach of a particular Appellate Body member in a Division hearing an appeal, does it imply that all other Members of that Division are also responsible for that allegedly erroneous approach?" India asked.

Clearly, this line of reasoning deployed by the US "has serious implications for the working of the Appellate Body itself," India suggested.

As per Rule 4 (1) of Working procedures, according to India, the AB functions as "Collegium" for ensuring "consistency and coherence in decision-making, and to draw on the individual and collective expertise of the members."

"Therefore, opposing the reappointment of an Appellate Body Member on an approach or legal interpretation followed allegedly by one Member constitutes a serious questioning of the functioning of the Appellate Body as a whole," India maintained.

Arguably, the opposition "to the reappointment on the basis of the reasons/approach provided in particular disputes signifies, in our view, a critical threat to an independent, neutral and impartial Appellate Body," India emphasized.

"Suffice it to say that opposition to reappointment on the basis of positions, legal interpretations and approaches Appellate Body takes in specific cases strikes at the very basis of an independent, rule-based judicial body," India maintained.

India said the AB draws its mandate from the DSU regardless of the diametrically opposing positions adopted by members on whether the mandates have been properly adhered to.

But if the differing views of members become the ground for denying the reappointment, "then this is a slippery slope that we are entering," India argued.

"What are the contours and limits of the reasons to oppose a reappointment?" India asked.

"For example, could a developing country Member, in another context, oppose the reappointment of a particular member on the basis that that Appellate Body member's interpretation has consistently not been in accordance with the flexibilities and circumstances of developing countries that the DSU and covered agreements provide?," India sought to know.

"If they become reasons for opposing reappointment, it is a very serious existential question for the functioning of an impartial and independent dispute settlement mechanism," India warned.

India said the underlying message of the US action to block the reappointment of Mr Chang is loud and clear.

"By making the adjudicative approach as the basis for reappointment is essentially providing a strong signal that Appellate Body Members who do not follow a particular approach or an adjudicative viewpoint, or who do not share the views of particular members in the way they need to approach the covered agreements, may not be considered for reappointment," India concluded.

In crux, "this could, in the long run, have a chilling effect on the way Appellate Body members decide appeals and undermines the system itself."

India said it supports Korea and other members in expressing support for the reappointment of Mr Chang to the Appellate Body.

Despite its complete isolation, the US succeeded in vetoing Mr Chang's reappointment on Monday. The moot issue is whether the developing countries can veto the US actions which are diametrically opposed to their developmental concerns, trade diplomats said. +