– By Esha Sharma
Appellate Body crisis
The news about WTO Appellate Body in crisis surfaced recently which has now become the cause of concern for many countries, particularly countries of the developing world. This situation came when the United States refused to appoint new members to the Appellate Body upon the retirement of the old members. All the seven members retired on December 11th, 2019 rendering the Appellate body non-functional and since then it has not been revived.
About WTO’s Dispute Settlement Body
The World Trade Organization came as a successor to the General Agreement on Trade and Tariffs (GATT) of 1947 as a multilateral Trading organization. The responsibilities that rest upon WTO includes to regulate trade at the international level, as well as make provisions and rules regarding the conduct of trade between its member states. Besides all these, the most remarkable role that WTO has is to resolve the trade disputes that arise between the member countries and ensure compliance to the provision of free and fair trade provisions enshrined in the WTO agreement. Under this, the two parties involved in a dispute can approach the Dispute Settlement Body of WTO and appeal for setting up a panel to look into the issue. The panel takes its stipulated time of 9 months and releases a report. The parties are required to either adopt the report or appeal against it. If any party decides to appeal against it then the Appellate Body’s role comes into play. It analyzes the law and legal issues formulated by the panel and at the end of 90 days it prepares a report which is ‘binding’ on the parties and has to be ‘unconditionally accepted’. Subsequently, the implementation of the recommendations has to be done within 15 months. Moreover, there is also a provision for Appellate Review with regard to only legal laws and issues.
The dispute settlement mechanism of WTO has proved to be more effective and organized than what was there at the time of GATT. It has a more judicial approach and moreover every stage of the dispute settlement procedure has a proscribed time limit which has to strictly adhered to. All these characteristics distinguishes WTO from GATT and has benefitted international trade as well as trading partners.
The US criticism
Firstly, the US raised objections on the reappointment of Mr. Seung Wha Chang for a second four-year term. The reason stated was that the reports in which Mr. Seung has participated are not in accordance with the role that is being assigned to the Appellate Body. Upon US’s objection the idea of Mr. Seung’s reappointment was dropped out even when the other members were not in favor of this. After this, a replacement for Mr. Seung was appointed.
As the trump administration came to power in 2016, the US stance on WTO began getting more hostile. In 2017, two vacancies arose in the appellate body. One was on 30th June and the other on 11th December and with these came up discussion on whether there should be a single process or independent process for filling up both the vacancies. Similarly, a third vacancy came up with the resignation of a member on 31st August 2017. At the meeting to fill up all the three vacancies, the US maintained its opposition to appoint new members as well as began pointing out other criticisms of the Appellate Body. Now the US saw faults into the working of the Appellate body. In the US trade Policy Agenda 2018, it is mentioned that the US noticed that the Appellate Body had been reviewing facts that are mentioned in the panel report when it is only allowed to review the legal and law related matters and that the Body is maintaining a system of precedents which is against the working procedure of the appellate Body. The US also pointed out that there have been many instances when the 90 days duration has been breached. Apart from all these issues, it was insisted by the US side that there has been Judicial overreach by the Appellate Authority in that it has made obligations outside the purview of the WTO agreement and has reviewed the domestic laws of many of its members.
The US has blocked all the appointments citing the above-mentioned concerns. However, members have continuously tried to cooperate with the US and put forth several proposals to resolve the issue but the US refused all the suggestions and continued to block new appointments. Finally on 10th December,2019 the Appellate Body lost the minimum quorum of 3 members required for it to function and this way it became completely non-functional.
The dispute settlement can still be initiated up to the panel report but appeals against the panel report will not be processed as the Appellate body has collapsed. The situation has reverted back to the days of GATT where negotiations played crucial part in resolving trade disputes and there was no binding obligation. Powerful nations in this scenario can suppress the interests of the less powerful economies.
The WTO dispute settlement mechanism has lost all of its relevance as with the collapse of the appellate body there is also a collapse of rules-based trading system. In a sense, this move of the US threatens the entire international trading order as well as the interests of many countries and has clearly picturized the US as a hegemonic power.
The Challenge ahead
To ensure smooth and unhindered trade across the globe, the dispute settlement body of the WTO needs to be restored to its prior position. This issue is of paramount importance today and requires collective efforts from all the member states of WTO.
With the change in American leadership in the 2020 elections, the world has gained new hopes have risen that the pivotal role of the Appellate Body will be realized by the US and it is expected to make new appointments to the WTO soon. The revival of the Appellate Body is crucial for the proper functioning of WTO and for it to gain prominence in the coming years.
References
https://voxeu.org/article/wto-dispute-settlement-and-appellate-body-crisis
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