TWN Info Service on WTO and Trade Issues (Nov19/14)
26 November 2019
Third World Network

Azevedo faces existential crisis over WTO budget, AB impasse
Published in SUNS #9025 dated 22 November 2019

Geneva, 21 Nov (D. Ravi Kanth) – The World Trade Organization director-general Roberto Azevedo is facing an existential crisis due to the blockage of the biennial budget for 2020 and 2021, and the impasse over the appointment of new members to the Appellate Body created by the United States, trade envoys told the SUNS.

Last week, Azevedo had called on the US Trade Representative Ambassador Robert Lighthizer in Washington DC to discuss the two issues – the blockage on the WTO budget as well as the AB crisis.

Apparently, the meeting with the USTR did not go well, said a person familiar with the discussions.

After his meeting with Ambassador Lighthizer, the DG spoke to his directors about his discussions and presented an upbeat assessment about the likely resolution of the budget crisis.

But, it was not clear whether there is credible progress during his discussions with Ambassador Lighthizer or whether the DG is merely putting a spin, the source said.

The DG is worried as to what the US would do on both the AB crisis and the budget, said a trade envoy, who asked not to be quoted.

A clear picture on what the US intends to do would become clear at the Dispute Settlement Body meeting on Friday (22 November), and later at the WTO’s budget committee meeting on 27 November, the trade envoy said.

The US has blocked the budget, including the remuneration for the AB members for the first time, citing that the AB members were paid much more than their normal remuneration, the envoy said.

Until now, the US had never criticized the remuneration for the AB members, but now it has added this issue as well to the litany of charges levelled against the AB’s functioning, the envoy said.

The US had also criticized the manner in which trust funds were being raised and used by the director-general, the envoy suggested.

The US has little control over the trust funds because other WTO members such as China, Japan, members of the European Union, Norway, Australia, Canada, and New Zealand among others contribute to the trust funds, the envoy said.

On the AB crisis, the chair for the Dispute Settlement Body, Ambassador David Walker of New Zealand, is expected to make a statement on Friday on how to proceed with the pending AB cases after 11 December 2019, said another envoy who asked not to be quoted.

Ambassador Walker held meetings with key trade envoys and the three members of the Appellate Body – Ujal Singh Bhatia (India), Thomas Graham (US), and Hong Zhao (China) – about the rollover of cases under Rule 15 of the Working Procedures for Appellate Review, the envoy said.

While Bhatia and Graham will complete their second four-year terms before 11 December, Hong Zhao will conclude her term on 30 November 2020.

There are doubts whether Graham intends to participate in the AB appeals, said a trade envoy from a developed country.

Apparently, the US had not indicated what it intends to do on rolling over the AB cases, or whether it would sink the AB adjudication process, the envoy said.

“The question is whether they (the US) are going to sink it or not, or whether Walker will say that he will proceed ahead with the cases that do not involve the US,” the envoy suggested.

There are about six cases that involve the US and another six cases in which the US is not a party either as a complainant or defendant, the envoy said.

Among the six appeals before the AB that do not involve the US include a EU-Russia dispute, the Philippines- Thailand case, Colombia-Panama case, and a Japan-India dispute, the envoy said.

In case the US blocks the roll-over process, then, it is not clear what would happen at the AB, the envoy said.

“In a sense, if two parties want their case to be decided then the US should not have any say in those cases,” the envoy said.

Aside from the DSB meeting, the bigger worry for Azevedo is what the US would do at the budget committee meeting on 27 November, the envoy added.

The budget committee meeting which ought to have taken place on 22 November is being postponed to give more time to the US and other countries for finding solutions on the various concerns raised about the voluntary contribution trust funds and lack of consistent governance, the envoy suggested.

There are unconfirmed reports that the US might agree to pass the budget at the 27 November meeting, but could attach several strings on the outlay for the AB, the envoy said.

The US had blocked the revised budget proposal for $180 million during 2020 and 2021, submitted by the director-general, due to alleged irregularities in the use of funds for the Appellate Body, voluntary contribution trust funds, and lack of consistent governance (see SUNS #9019 dated 14 November 2019).

At a meeting of the WTO’s budget committee on 12 November, the US had said that it cannot approve the director-general Azevedo’s revised budget proposal for the years 2020 and 2021 on several grounds.

The specific concerns raised by the US about the budget proposal include the outlay for the Appellate Body for the next two years, the use of trust funds for non-mandated issues in a non-transparent manner, and the lack of horizontal coordination among the WTO bodies, including the controversial travel expenditure incurred by the senior WTO officials for attending meetings on non-mandated issues outside Geneva, said a trade official, who asked not to be quoted.

In sum, Azevedo faces an existential crisis over the AB and the budget for the next two years because the “elephant in the room” – the US – is not giving any clear indication, the envoy said.

The US had consistently praised Azevedo for his efforts to accomplish outcomes that are close to Washington’s priorities, but on the WTO’s budget, he is yet to secure the approval from Washington, the envoy said.