By Axel Sontgerath
On November 26, the European Commission released a press statement calling for “concrete changes” to break the current deadlock in the World Trade Organization (WTO) Appellate Body. The statement announced that the proposal would be presented at the meeting of the WTO General Council on December 12.
The EU has stated its support for the dispute settlement system of the WTO, saying it is key to the security and predictability of the multilateral trading system. It also sends a warning message that the whole system is at risk if this proper system of enforcement no longer works effectively.
Commissioner Cecilia Malmström used the statement to give a warning of the approaching structural breakdown that could occur. Should the reforms not go through, she stated that “the appellate body function of the WTO dispute settlement system is moving toward a cliff’s edge. Without this core function of the WTO, the world would lose a system that has ensured stability in global trade for decades.”
The EU expressed interest in modernizing the WTO with the proposed amendments. These include the timeliness of appeal proceedings, clarifying that legal issues subject to appeal by the Appellate Body do not include the domestic legislation, indicating that the Appellate Body should only address issues necessary to resolve the dispute, and introducing annual meetings between WTO members and the Appellate Body to openly discuss systemic issues in jurisprudence.
The EU wants to reinforce independence and impartiality to improve efficiency, which includes more Appellate Body members, longer terms for them, the automatic replacement of vacant posts, and orderly transition amongst outgoing members.
Malmström stresses that all WTO members should accept this proposal as quickly as possible, stating that the deadlock will lead to a “looming crisis.”
This proposal for reform on dispute settlements at the WTO is put forth in hopes of overcoming U.S. objections that have thrown the WTO into crisis, KFGO reports. There has been no immediate reaction from the U.S. at this time, with China, India, and others agreeing to these proposals and deciding to move forward on joint negotiations.
Through blocking appointments and threatening a U.S. withdrawal, U.S. President Donald Trump has brought the WTO to the current snapping point it finds itself in. KFGO reports that trade diplomats are taking Trump’s threats seriously because America has already withdrawn from a series of international agreements.
President Trump’s behavior towards the WTO stems from his international trade agenda, which demands a “fair deal” for America. U.S. Ambassador to the WTO Dennis Shea has repeatedly criticized the WTO, saying it overstepped its authority and broke its own rules.
Shea has continuously blocked the appointment process and demanded that the Appellate Body consistently follow WTO policy. This blocking of appointments has begun to cut down the number of active judges, with the bare minimum of three, currently serving. Starting from December 2019 there will be only one, rendering the issue of final appeal rulings to be impossible.
Shea stated in October that he could not support the EU’s ideas on reforming the Appellate Body, although EU officials have stated that there is no clear U.S. position as of now. “We now expect the United States to do their part, to engage with these formal proposals that are aimed at squarely addressing their concerns. This must then lead to unblocking the Appellate Body appointments,” an EU official said in KFGO’s report.
According to an opinion piece for the Global Times, Chinese leaders have repeatedly stated that they want to maintain the original WTO framework, which has not been changed since 1994. The EU has made it clear to China that it must make some concessions in negotiations on WTO reform, or risk an American exit from the system.
The Global Times stated that China should take initiative to offer its own proposals for WTO reforms in order to protect its interests, and that it must also be prepared to bargain with other parties, as they would surely be the target of the reforms.
According to the same report from the Global Times, China should not let U.S. unilateralism and protectionism take the stage and disrupt multilateral trade. With the G20 summit on the horizon, the international community awaits an American response to these reforms and developments in Chinese negotiations.