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TWN Info Service on WTO and Trade Issues (Oct17/02)
9 October 2017
Third World Network

       
US again blocks AB selection process from going forward
Published in SUNS #8545 dated 4 October 2017


Geneva, 3 Oct (Kanaga Raja) - The United States has once again said it is not in a position to agree to launch the process for the selection of new Appellate Body (AB) members to replace those members whose terms have either expired or will expire soon until its concerns over the continued service of former AB members are addressed.

This came about during the discussion on Appellate Body matters at the meeting of the WTO Dispute Settlement Body (DSB) on 29 September.

The US concerns relate to the issuance of rulings by persons whose terms as AB members had expired, as well as its longstanding concerns regarding the "critical necessity" of the DSB asserting the authority assigned to it under the Dispute Settlement Understanding (DSU). (See SUNS #8536 dated 21 September 2017).

The two AB members in question whose second four-year terms have expired or are expiring soon are Mr Ricardo Ramirez-Hernandez and Mr Peter Van den Bossche.

The second term of Mr Ramirez-Hernandez had already expired on 30 June. He is however continuing his work on the two ongoing appeals in which he is involved.

The second term of Mr Van den Bossche will expire on 11 December 2017.

The situation has been further compounded by the sudden departure of AB member Mr Hyun Chong Kim of South Korea who tendered his resignation (with immediate effect) on 1 August prior to his appointment as a minister in the Korean government.

According to trade officials, the Appellate Body will thus soon be down to four members from its regular seven- member complement.

The European Union and a group of Latin American countries have tabled revised proposals in which they have proposed that the DSB agree to launch the selection processes to replace Mr Ramirez-Hernandez, Mr Kim and Mr Van den Bossche.

The EU proposal has set a deadline of 27 October 2017 for Members to submit nominations of candidates and for the DSB to take a decision to appoint the three new AB members as soon as possible, and at the latest at its regular meeting scheduled for 22 November 2017.

The proposal by the Latin American countries (Argentina, Brazil, Colombia, Chile, Guatemala, Mexico and Peru) has set a deadline of 29 October 2017 for Members to submit their nominations of candidates and for the DSB to take a decision to appoint the new AB members no later than at the regular meeting scheduled for February 2018.

According to trade officials, a large number of members expressed concern about the continued delay in launching the selection process for new AB members.

The Chair of the DSB, Ambassador Junichi Ihara of Japan, noted that an informal meeting of the DSB took place on 15 September to discuss the concerns raised by the US regarding DSB oversight of Appellate Body matters.

[At that meeting, a large number of WTO members had made clear to the US that no linkage should be made between its concerns regarding the Appellate Body and the launching of the selection process for new AB members. See SUNS #8536 dated 21 September 2017.]

According to trade officials, the DSB Chair noted that the US said it was not in a position to start the selection process until its concerns were addressed but that many WTO members expressed concerns linking discussions on the US concerns with the launch of the selection process and that some members wanted the US to provide more details about its concerns and proposals for addressing them.

Consultations will continue in order find a way forward, he said, adding that more concrete and creative ideas were needed to resolve the impasse.

The Chair underscored that filling the vacancies was urgent. The AB was currently reviewing 7 appeals with three more appeals expected to be filed by the end of the year.

In its statement, the US, referring to the informal meeting of 15 September, said that while it appreciated the willingness to engage, many of the interventions by delegations were focused on process issues.

"Of course, that is a Member's prerogative. But as a result we do not have a clear vision of the views of many delegations on the specific concerns we have raised. What was clear in our informal DSB meeting is that we did not hear any fundamental disagreements that the two concerns we raised are important and worthy of the DSB's consideration."

As is clear from the previous item (in reference to the fatty alcohol dispute), the issuance of a report on appeal that does not adhere to the requirements set out in the DSU raises yet more concerns.

For the United States, the issues are clear. Under the DSU, the DSB has a responsibility to decide whether a person who has ceased to be a member of the Appellate Body should continue serving.

If the DSB agrees that such a person should continue to serve on an appeal, it would be the DSB's responsibility to provide an appropriate legal basis to permit this to occur.

And as stated at last month's DSB meeting, the United States would welcome Mr. Ramirez's continued service on two pending appeals with appropriate action by the DSB, it said.

"We therefore reiterate our willingness to meet with any interested delegation to discuss the concerns raised and to develop appropriate solutions."

As for the two proposals tabled by the EU and the group of Latin American countries, the US said it was not in a position to support the proposed decisions.

"In the US view, we cannot be considering launching a selection process to fill a vacancy if the person to be replaced continues to serve and decide appeals. We first would need appropriate action on the part of the DSB," it said.

According to trade officials, the European Union and Mexico - speaking for itself as well as Argentina, Brazil, Colombia, Chile, Guatemala, Mexico and Peru - noted that their respective proposals for launching the process(es) were now more or less aligned.

Both now agree that the selection process for all three vacancies should be launched simultaneously and that replacements should be found quickly.

According to trade officials, many WTO members said that they were seriously concerned about the continued impasse over the start of the selection process and the impact this would have on the Appellate Body and the dispute settlement system in general; that addressing US concerns and launching the selection process should not be linked but rather put on separate tracks; and/or that they were prepared to accept either of the proposals put forward by the EU and the Latin American group for starting the process.

These included Canada, Singapore (for ASEAN), the Dominican Republic (for the informal group of developing countries), Australia, Norway, China, Japan, Switzerland, Hong Kong-China, New Zealand, Turkey, Venezuela, Chinese Taipei, Korea, Russia, Ecuador, Guatemala, Chile (for itself and the GRULAC group), Costa Rica, Peru, Uruguay, Honduras and El Salvador.

Several members including the Dominican Republic and Ecuador said Article 17 of the DSU mandates that the Appellate Body vacancies should be filled as they arise and that the DSB Chair should therefore make the decision to start the process.

According to trade officials, the DSB chair said he would continue to make himself available for consultations.

He encouraged delegations to have more conversations among themselves so that members can come up with more concrete ideas for moving forward.

PROCEDURAL CONCERNS OF THE US AND "POSITIVE CONSENSUS"

The US highlighted its procedural concerns when speaking under the agenda item of EU anti-dumping measures on imports of certain fatty alcohols from Indonesia.

The US had raised with Members at the last meeting of the DSB important systemic questions regarding the Division hearing this appeal, it said.

The United States noted that Mr. Kim was no longer an Appellate Body member as of August 1, and the report in this dispute was not circulated until September 5 - more than one month later.

Members have been informed that Mr. Kim "signed" the report on July 31, one day before resigning and becoming Korea's Trade Minister.

(Trade officials said the delay in circulation was due to translation problems into other WTO languages.)

But what is relevant under DSU Article 17.5 is when the report is circulated, not when it is signed.

"In these circumstances, we do not understand why Mr. Kim was not simply replaced on the Division, so as to permit a current Appellate Body member, fulfilling all the requirements of Article 17, to complete the appeal."

As WTO Members also well know, the term of Mr. Ramirez, another member of the Division hearing this appeal, expired on June 30. The DSB has taken no action to permit him to continue to serve as an Appellate Body member.

Therefore, Mr. Ramirez too would appear not to have been an Appellate Body member on the date of circulation of this report, the US maintained.

In these circumstances, the report has not been provided and circulated on behalf of three Appellate Body members, as required under DSU Articles 17.1 and 17.5. And because the report has not been issued consistent with the requirements of Article 17, it cannot be an "Appellate Body report" subject to the adoption procedures reflected in Article 17.14.

Rather, the DSB would consider the report's adoption subject to the positive consensus rule applicable to DSB decisions, pursuant to DSU Article 2.4 and WTO Agreement Article IX:1, note 3, it said.

"Given the serious concerns the United States has described with respect to the Division's statements regarding Article 19.1 of the DSU, we do not endorse the findings set out in the Division's report. Nor can we support an Appellate Body member's continuation of service without authorization by the DSB."

"However, we understand the parties to the dispute to support adoption of the reports of the panel and the Division in this dispute."

As DSU Article 3.7 makes clear, "[t]he aim of the dispute settlement mechanism is to secure a positive solution to a dispute."

And it would appear that the parties consider that adoption of these reports would help them achieve that aim.

The US further noted that the situations with Mr. Kim and Mr. Ramirez only arose late into the appellate proceedings.

In these "particular and exceptional circumstances", therefore, the United States would be willing to join a consensus to adopt the reports proposed for adoption today, that is, the report contained in WT/DS442/AB/R & ADD.1 and the report contained in WT/DS442/R & ADD.1, as modified by the first report.

According to trade officials, the EU, Canada, Brazil and Japan disagreed with the US legal interpretation of the DSU procedures.

The EU said it was confused as to what the US thought it was agreeing to adopt today. It said it would leave that discussion for later.

Canada said it disagreed with any suggestion that the service of Mr Kim and Mr Ramirez-Hernandez on this appeal undermines the reverse consensus rule in DSU Article 17.14.

The reverse consensus rule is one of the greatest achievements of the Uruguay Round. For its part, it considers that the reverse consensus rule is applicable in this case, said Canada.

The US again said that it does not consider the report circulated on September 5, 2017, to be an "Appellate Body report" subject to the adoption procedures reflected in Article 17.14 of the DSU.

 


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