TWN Info Service on WTO and Trade Issues (Jun16/17)
27 June 2016
Third World Network

US "undercutting" Members' "trust" in WTO by AB veto
Published in SUNS #8268 dated 23 June 2016

Geneva, 22 Jun (D. Ravi Kanth) - Many developing and a few industrialized countries on Wednesday (22 June) charged the United States with "undercutting" Members' "trust" in the rules-based World Trade Organization system by blocking the reappointment of the former sitting member Mr Seung Wha Chang from Korea to the Appellate Body (AB) on dangerous and unjustifiable grounds, several legal officials told the SUNS.

Fourteen countries - Brazil, Canada, the European Union, Guatemala, India, Indonesia, Israel, Korea, Mexico, Morocco, Sri Lanka, Switzerland, Thailand and Vietnam - said that "the reasons provided by a Member [the United States] for disagreeing with the reappointment [of Mr Chang] are undercutting a basic premise that the rules-based WTO system is built upon: "the trust of Members"."

At a regular WTO Dispute Settlement Body (DSB) meeting on Wednesday (22 June), the 14 countries expressed "grave concerns that linking reappointment of an AB Member with rulings in specific cases is tantamount to interfering with the Appellate Body's deliberations and thus risks undermining its impartiality and independence."

In the face of worldwide censure of the US decision to block the reappointment of Mr Chang and the US statements and explanations for its action - at the DSB, in interviews and remarks to media including a letter to the Financial Times - the signatories to the joint statement said "singling out one AB Member for criticisms directed at the Appellate Body reports is unjustifiable; the reports are those of the "Appellate Body" and not of an individual (member of the) AB."

Concurring with the concerns expressed by the sitting and living former AB members, the 14 countries said the US actions "risk creating a dangerous precedent and should not be repeated."

"We are mindful of growing concerns over the possibility of a prolonged vacancy of the Appellate Body," they said, while reaffirming their "trust and confidence in the Appellate Body."

Chakravarthi Raghavan, Editor-Emeritus of the SUNS, adds that while the 14 countries, in their strongly worded remarks at the DSB, hope to put the affair behind with perhaps some assurance by the US, it is clear that the damage to the AB has been done, not merely to the "Trust of Members", but among the public of WTO member-countries that will hereafter look at all future rulings as to whether it is influenced by the US action and desire not to cause US discomfort.

Given the reach of WTO rulings into legitimate domestic autonomy of economic governance in various countries, such a feeling will make it more and more difficult for governments of Member nations to give effect to the dispute rulings.

As such, before any filling up of vacancies or dispute settlement actions, the WTO members (uninfluenced by the officials of the secretariat) have to agree, at a minimum, on one of two courses: decide by "authoritative interpretation" that reappointment for a second term of a sitting member, except for some specified and agreed reasons such as grave misconduct or illness of the member, will be automatic. This, at least initially, may be the easier and quicker route.

Or, alternatively, as suggested by Brazil and some others at an earlier DSB meeting in May (when the US veto and explanations were advanced), the term of an AB member should be set as a single non-renewable one, and the duration increased and set.

This last may need an amendment to the WTO and its DSU, and would need ratification by all Members - a difficult, lengthy and cumbersome process. (See Chakravarthi Raghavan's comments in SUNS #8255, #8258 and #8259).

Any attempt to pretend that the Trust of WTO members can be restored by any reassurance that the US veto will not be repeated will carry no conviction to the outside world.