TWN Info Service on WTO and Trade Issues (Dec18/11)
18 December 2018
Third World Network

GC Chair to launch informal process to address AB crisis
Published in SUNS #8817 dated 14 December 2018

Geneva, 13 Dec (Kanaga Raja) - The Chair of the General Council of the World Trade Organization (WTO), at a meeting on Wednesday, announced his intention to launch an informal process to open discussions on the next steps for resolving the current crisis in the Appellate Body (AB).

The United States has been repeatedly blocking at the Dispute Settlement Body (DSB) the consensus to launch the selection processes to fill four current vacancies on the seven-member Appellate Body.

Two proposals have been tabled at the General Council (GC) meeting over the AB appointments.

According to Keith Rockwell, the WTO spokesperson speaking at a media briefing on Wednesday, GC chair Ambassador Junichi Ihara of Japan said that although views differ in terms of the functioning of the Appellate Body and on the proposals that were put forward, there is a general view that the matter needs to be addressed very urgently and that more focused discussion is needed.

All members expressed interest in these deeper discussions and a willingness to engage in the process going forward.

However, Rockwell said, what form this process will take at this stage is not known.

Two proposals were tabled under the agenda item on Appellate Body appointments -- amendments to the Dispute Settlement Understanding.

The first is a proposal from the European Union, China, Canada, India, Norway, New Zealand, Switzerland, Australia, Republic of Korea, Iceland, Singapore, Mexico, Costa Rica and Montenegro (WT/GC/W/752/Rev.2).

In their proposal, the proponents were deeply concerned that the enduring absence of consensus in the Dispute Settlement Body to fill the vacancies on the Appellate Body risks undermining the viability of the WTO dispute settlement system.

The proponents acknowledged the successful contribution of the dispute settlement system to the security and predictability of the multilateral trading system.

They recognised the essential role of the Appellate Body within the system that serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements without adding to or diminishing the rights and obligations provided therein.

At the same time, they acknowledged that concerns have been raised about the functioning of the dispute settlement system and are ready to work on solutions, while preserving the essential features of the system and of its Appellate Body.

To this end, the proponents called on all Members to fill the vacancies on the Appellate Body and to amend certain provisions of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).

The proposed amendments aim at improving the DSU while addressing the concerns that have been raised on these issues, they said.

The proposed amendments relate to transitional rules for outgoing Appellate Body members; the issue of 90 days (for an AB report on appeal); the meaning of municipal law as an issue of fact; findings unnecessary for the resolution of the dispute; and the issue of precedent.

The second proposal was tabled by the European Union, China, India and Montenegro (WT/GC/W/753/Rev.1)

In their proposal, the proponents said that they are mindful of the shared responsibility of all Members for the proper functioning of the WTO dispute settlement system that is essential to a multilateral trading system based on rules.

They acknowledged that concerns have been raised about the functioning of the dispute settlement system and are ready to work on solutions on the basis of the proposal to amend certain provisions of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) attached to document WT/GC/W/752.

At the same time, in order to achieve balance and taking into account the experience with the application of the DSU to date, they considered that these amendments should be accompanied by the amendments set out in the Annex (to their proposal).

These additional amendments aim at strengthening the independence and impartiality of the Appellate Body, improving efficiency so as to enable it to meet the required timeframes, and ensuring an orderly transition as well as an orderly launch of selection procedures, they said.

The proposed additional amendments relate to independence of Appellate Body members; efficiency and capacity to deliver; transitional rules for outgoing Appellate Body members; and the launch of the Appellate Body selection process.

According to trade officials, Members were largely supportive of the proposals, saying that the process needed to be open and transparent.

Members expressed deep concern about the crisis in the AB, underlining that the dispute settlement system is a critical pillar of the WTO and its activities.

Many said absent a functioning dispute settlement system, it would be very difficult to engage in negotiations aimed at new rules or reform, and that the existing rules themselves will be on shakier ground because we would not have means of enforcing rules without a fully functioning dispute settlement system.

Asked by SUNS to confirm that the US has basically rejected the EU, China and India proposal on the issue of impartial and independent functioning of the AB as well as the first proposal on AB vacancies, Rockwell said that the US wanted more accountability and that the EU, China and India proposal did not address its concerns.

The proponents say their proposal is to enhance the impartiality and independence of the AB but the US does not believe this to be the case. It did not think this would enhance the accountability of the AB but instead would go in the other direction, he said.

On the AB vacancies, Rockwell said the objective is to fill these vacancies as soon as possible. The membership, save one (the US), was very clear that filling these vacancies was of the utmost urgency and importance.

"How exactly we will go about doing that, well that's an open question but the (GC) chair will get in touch with the membership as early as tomorrow (Thursday) and begin a process of consultations and discussions next week."

"On the basis of those discussions, he will inform the wider membership of what he has heard and he will offer some suggestions on the way forward, with those broader discussions in this informal process to commence as soon as possible in the new year," said Rockwell.

According to Rockwell, the launch of the informal process today and the stated intention of the Chair, and the membership being on board, is positive. "Of course, the proof of the pudding is always in the eating," he said.

The WTO spokesman was also asked by SUNS to comment on the fact that the US today has materially rejected the two proposals that have overwhelming support particularly on the issue of filling the vacancies on the AB, and t hat there is no material change in the US blockage of AB appointments.

Rockwell said that the US has not agreed to re-commence the AB selection process. They have said that this is linked to its broader concerns specifically about the Appellate Body.

Many other governments said that there should not be this linkage, and that there could be a parallel process of discussion.

He said that he did not hear any delegation say that they did not think that concerns raised by the US should not be acknowledged but they said that there should not be a linkage between these discussions about reform and the AB selection process.

"So as of now the news is not that the selection process is re-commencing, it's that the informal process for addressing the concerns of all of the members, whether it be the selection process or about the AB process and its procedures. That's where we are."

Asked again whether this would mean that others will have to "pay" a price to address the US concerns and that price is that unless they accommodate the changes that the US is asking for, it will not agree to filling the AB vacancies, Rockwell said, "you will have to ask them."


Under the agenda item of AB appointments, the EU introduced both the proposals (W/752) and (W/753).

Singapore supported proposal W/752, saying that there is need to move forward to fill the AB vacancies without delay. The process of any reform and filling of AB vacancies should be done separately and in parallel, and as soon as possible.

Montenegro said the dispute settlement mechanism is one of the most successful functions of the organisation. It supported the EU proposal as a means of improving the functioning of the Appellate Body.

Norway said a well functioning dispute settlement system is absolutely fundamental and essential. It voiced deep concerns, saying that the AB vacancies should be filled expeditiously.

Australia aligned itself with the proposal W/752, saying that the situation has been made graver by the fact that case-loads have been going up while the number of AB jurists has been going down.

New Zealand said that it is aware of the concerns about AB over-reach and it is open to discuss the solution-based approach proposed by the chair.

India said that the appetite for negotiating new rules absent an enforcement system in the DSB will be poor.

The WTO members with concerns normally advance proposals to address these concerns but now we are not seeing that from the member that has expressed these concerns, it said. (See separate story).

China expressed support for proposals W/752 and W/753, saying that the joint proposals are a response aimed at addressing the US concerns while strengthening the impartiality and independence of the AB.

The dispute settlement mechanism is a core pillar of the WTO and there needs to be a process in which all WTO members can engage. This needs to happen as soon as possible, it said. (See separate story.)

Switzerland said that the fact that this issue is being taken up in the General Council is illustrative of the urgency of the situation. It expressed regret that the AB vacancies have not been filled.

Mexico, in supporting proposal W/752, said that the dispute settlement system is in a serious situation. We are facing a Gordian knot, it said.

The AB is a cornerstone and it functions well with seven members. But now after more than 18 months of discussions, we have still not gotten to a solution, it said.

Canada urged the immediate launch of a process to unblock the AB selection process.

Antigua and Barbuda said that it also has other concerns, highlighting in this context, the compliance with panel rulings. It specifically referred to dispute DS855 against the US on online gambling.

It is very important to go beyond the question of the AB to try and ensure that small and vulnerable countries would be able to gain a satisfactory outcome when they win a case, it said.

Thailand expressed concern that the AB is down to only three members.

Argentina, on behalf of Brazil, Chile, Colombia, Mexico, Paraguay and Uruguay, reaffirmed its support for the rules-based multilateral trading system with the WTO at its centre.

Vanuatu, on behalf of the LDCs, said while they are not big users of the dispute settlement system, for systemic reasons, it is essential that this system be preserved.

Brazil said it is open to improvements provided the essential functions are preserved. There is need to work on filling the vacancies and on reform as well. On DSU reform, it said we will not be able to reform something if we allow it to perish.

The US said that the proposal that has been put forward with respect to its concerns (W/752) is an indication that the concerns that the US has been raising for years are supported by others.

It maintained that the AB has strayed from the rules negotiated for it by WTO members and many members share this view.

But on a close reading, it said that these proposals do not address the concerns that WTO members have raised.

These propose to change the rules whereas the concern should be that we have been deviating from the rules, it said. The AB must follow the rules agreed by members in 1995, it added. (See separate story).

Hong Kong-China said that members count on the dispute settlement system and if it grinds to a halt, then the whole system will be affected.

Tanzania said that we must address the problem before the dispute settlement system is rendered dysfunctional.

Japan said that the proposals are a good starting point for the discussion.

Pakistan said that an independent and effective dispute settlement system is essential.

Chad said that it wants the process to be inclusive and transparent. The WTO desperately needs both the negotiating and dispute settlement functions.

South Africa said that the dispute settlement mechanism is one that is absolutely essential and without this, not only existing rules but any future negotiations on rules or reforms would be redundant.

Indonesia said that without the AB, it does not see any meaningful role for new agreements that cannot be enforced.

China asked if the US would be ready to engage in deeper discussions (see separate story).

The US said that it has been discussing these issues in the DSB for quite some time. On the 90-day deadline, it said that beginning in 2011, the AB stopped notifying that there would be breach of the 90-day deadline. Since mid-2014 , not a single ruling has been brought in under 90 days. And since that time, the average length of appeals is approximately 160 days.

The EU said that what it heard was broad support for many of the concrete proposals. It noted that all members have spoken of the need to engage in deep discussion on the basis of concrete proposals.

Meanwhile, under a separate agenda item, a proposal on adjudicative bodies - adding to or diminishing rights or obligations under the WTO Agreement, was tabled by Australia, Singapore and Costa Rica (WT/GC/W/754/ Rev.1).

In their proposal, the proponents recognized the central importance of a properly functioning dispute settlement system in the multilateral rules-based trading system, which serves to preserve the rights and obligations of Members under the WTO Agreement and ensures that rules are enforceable.

"We value the WTO dispute settlement system and wish to ensure it continues to serve all WTO Members."

They emphasized the collective responsibility of all Members to ensure the proper functioning of the WTO dispute settlement system, including the Appellate Body. They acknowledged that for a number of years concerns have been raised by Members about the functioning of the WTO dispute settlement system.

In this regard, they welcomed any proposals addressing such concerns, including the communication to the General Council in WT/GC/W/752 from a number of Members.

They also noted those specific concerns raised regarding panels and the Appellate Body adding to or diminishing rights or obligations under the WTO Agreement .

"We recognize the importance of covering these specific concerns in future discussions on ways to safeguard and strengthen the WTO dispute settlement system and ensure its proper functioning."

In this light, the proponents proposed the immediate initiation of a solution-focused process allowing for targeted discussions between interested Members on dispute settlement issues, including the specific concerns described above.

Australia, Singapore, Canada, Switzerland, and Costa Rica endorsed the proposal.

The US said that it welcomes this proposal. It shows the depth of concern about the AB as such.

The US said it has been expressing these concerns about the impact of AB rulings and rights and obligations in the areas of subsidies, anti-dumping and countervailing duties, and standards under technical barriers to trade.

It welcomed further discussion on proposals with respect to the AB including more in-depth discussion.