TWN Info Service on WTO and Trade Issues (Dec18/10)
18 December 2018
Third World Network

US reveals its intentions to permanently paralyse the AB
Published in SUNS #8817  dated 14 December 2018

Geneva, 13 Dec (D. Ravi Kanth) - After failing to provide any "options" for addressing its specific concerns about the functioning of the World Trade Organization's Appellate Body (AB), the highest adjudicative body for addressing global trade disputes, the United States on Wednesday unwittingly revealed its intentions to permanently paralyse the AB, trade envoys told SUNS.

At the WTO's year-end General Council meeting, two countries - India and China - pointedly asked the US trade envoy Ambassador Dennis Shea to provide "options" for the specific issues it had raised about the functioning of the AB, especially the AB's failure to adhere to the 90-day limit for issuing findings or overstepping the core provisions of the Dispute Settlement Understanding (DSU), according to trade envoys, who asked not to be identified.

At the meeting, the US simply rejected a proposal from India, China, and the European Union, saying that the proposal from the "trilateral" will make the AB "even less accountable."

The US trade envoy spoke briefly about Washington's core concerns about the AB and how it strayed away from adhering to the rules established in 1995.

Ambassador Shea said the proposal by the "trilateral" - India, China, and the EU - intends "to change the rules to authorize and accommodate the very approaches that would make the AB even less accountable."

The US had made it very clear the AB members must follow the rules that were agreed to in 1995, he added.

But the US did not provide any "option" for addressing its specific concerns, said several trade envoys, who asked not to be quoted.

India said the "existential crisis" facing the AB is its gravest concern. " We believe that an independent, two-stage dispute settlement system is imperative for the fair enforcement of the rules of international trade," India maintained.

"The impending paralysis and possible disappearance of the Appellate Body will be a fatal blow to the credibility of the WTO," India's trade envoy Ambassador J S Deepak argued.

"Without a system of enforcement of existing rules, the appetite for making new rules or for reforms would be poor," he maintained.

"Therefore, an expeditious resolution of the Appellate Body crisis needs to be at the top of the agenda in the coming weeks and months," he emphasized.

In the WTO, the normal practice is that any "Member" who has specific concern on any issue will offer possible options on how to address it, Ambassador Deepak pointed out.

"However, we find ourselves in the unique position where the Member [the US] who has issues with the functioning of the Appellate Body has failed to put forth a single proposal to address their oft-repeated concerns," India said.

India thanked the EU for taking the initiative to provide "concrete" textual proposals to address "the concerns that have been raised by the United Stat s in the US President's Trade Policy Agenda of 2018."

India, which is a co-sponsor of the two proposals circulated by the EU, said the underlying goal of the two proposals is "to unblock the appointments to the AB by tackling the procedural concerns raised by the United States."

"Once the appointments to the AB have been unblocked, WTO Members would engage in discussions on the complex substantive issue of "rule-making" by WTO panels and the AB," India maintained, arguing that it would support a "calibrated approach."

India said the three proponents had made an honest attempt to come up with a concrete proposal to address the concerns articulated by the US.

It called for building trust "amongst the Membership in these difficult times" by engaging on these proposals "without putting any pre-conditions or linking these to other areas of the WTO's functioning."

Intervening twice during the GC meeting, China's trade envoy Ambassador Dr Zhang Xiangchen said "the United States views that some suggestions by EU, China and India will make the Appellate Body even less accountable."

"Could the United States give a response to the proposal regarding which of its concerns have been addressed and which are not?," Ambassador Dr Xiangchen asked.

"Does the United States have specific suggestions on how to address those remaining concerns?" China asked.

"If not, is it the intention of the United States to sit back and wait for the paralysis of the Appellate Body," Ambassador Dr Xiangchen pointedly asked.

The US trade envoy, who remained mum to the specific questions raised by India and China, merely said the US would like to engage in the deep discussions with other Members on this issue.

During the press briefing after the meeting, SUNS asked the WTO's spokesperson Keith Rockwell to clarify whether the US is seeking a "payment" to resolve the crisis it had created at the AB.

Rockwell replied that he was not in a position to address the question and that it should be directly addressed to the US.

Even though the GC chair Ambassador Junichi Ihara of Japan informed members that he would hold open-ended informal meetings to break the logjam at the AB, the US has not budged from its intransigent position to let the AB remain permanently paralysed, said several trade envoys who asked not to be quoted .

"The crisis of the Appellate Body has lasted for more than a year without any silver lining," said China's trade envoy, suggesting "the individual WTO Member [the US] flagged its concerns over the appellate process, but provided no concrete suggestions or solutions."

"If this issue remains unresolved, the Appellate Body will cease to function after next year," said Ambassador Dr Xiangchen, suggesting that "the selection of Appellate Body Members has become an imminent crisis facing the WTO and needs to be resolved at the earliest time."

Citing the ancient Chinese philosopher Mencius who said, "laws alone cannot carry themselves into practice," Ambassador Dr Xiangchen said "the dispute settlement mechanism is the core pillar of the WTO."

"As India just said, [the] joint proposal marks a beginning rather than the end or the final result," the Chinese envoy said, urging the Chairman of the General Council to "actively host the discussions and consultations after this meeting, so that the discussion momentum could be maintained through certain appropriate mechanism."

In his second intervention after the US statement, Ambassador Dr Xiangchen said he "felt a little disappointed and confused, though not surprised."

China raised several questions in response to the US statement. Ambassador Dr Xiangchen asked whether it is proper to expect "the 90-day deadline for the appellate review" when "cases have become more and more complex, case materials therefore also surged."

"In early years, cases, such as United States Gasoline (DS2), a small carton suffices for all case related materials" but "that is no longer the same situation," he said.

"Nowadays, we probably need dozens of cartons to pile relevant materials for almost every case" and "this is the reality that Appellate Body cannot finish its work on time," Ambassador Dr Xiangchen pointed out.

"Given the United States' position to oppose the increase of resources, what should we do?," the Chinese envoy asked pointedly.

"We are struggling to find a way, for example, in the future when we select Appellate Body members, may we look for those who are able to read ten lines at a glance or can we ask the Appellate Body members to work 16 hours, sleep 5 hours and eat for 3 hours per day?," Ambassador Xiangchen sought to know from his American counterpart.

On the issue of the AB's "over-reach," China said it wants "the Appellate Body to stay in line with its mandate, rather than expanding its adjudications," but "members do not have consensus over criteria to determine whether the over-reach occurs."

Commenting on the issue of precedent, the Chinese envoy said "when the Appellate Body made adjudications in previous disputes, I don't know why these judgments cannot be used as reference?"

He asked why members "should waste time and resources to redo the analysis of the already analysed legal issues?"

"It also runs against the judicial economy principle, which directly conflicts with the positions of the United States to enhance the efficiency of dispute settlement," the Chinese envoy maintained.

At the General Council meeting, a large majority of industrialized, developing and least-developed countries rallied around the EU's two proposals, saying they offer a way forward for breaking the impasse in the AB crisis.

The EU said while the co-sponsors acknowledge the concerns raised about the AB, it is important "to fill the vacancies and amend certain provisions of the DSU [dispute settlement understanding]."

The EU elaborated on the proposed five amendments to the DSU.

The EU's proposal which was co-sponsored by China, Canada, India, Norway, New Zealand, Switzerland, Australia, Korea, Iceland, Singapore, Mexico, Costa Rica, and Montenegro, has suggested the following amendments:

i. a transitional rule for ensuring that an outgoing AB member is allowed to continue with the approval of the members,

ii. enhanced consultations for extending the 90-day time limit for the findings by the AB,

iii. issues of law covered in the panel report and legal interpretations developed by the panel, in the meaning of Article 17.6 of the DSU, do not itself include the meaning of the municipal measures,

iv. the AB shall address each of the issues raised on appeal by the parties to the dispute to the extent this is necessary for the resolution of the dispute, and

v. to address AB's approach to treat its own reports effectively as precedent that panels are to follow absent "cogent reasons," annual meetings would be held between the AB and WTO members to discuss systemic issues or trends in the jurisprudence.

The EU said "in view of the urgency of the matter, and in order to allow for the AB appointments to be taken swiftly, the co-sponsors propose that these amendments be adopted by the General Council as soon as possible."

The EU also explained the second proposal along with China and India to increase the number of AB members to nine and a longer term between 6 to eight years, allowing outgoing AB members to discharge their duties until their places have been filled, and launching an automatic selection process in advance of the expiry of the term of office of the outgoing member.

In conclusion, it is clear as daylight that the US is unlikely to address the impasse it had unilaterally created for ensuring the permanent paralysis of the WTO 's AB. The US stance on the AB should serve as an eye-opener to developing and poorest countries that without resolving the AB crisis, grand rule-making reforms are being foisted on them, several trade envoys told SUNS.