US Challenges WTO Dispute Resolution Mechanism

US Challenges WTO Dispute Resolution Mechanism

Comments were delivered on the first day of the World Trade Organization’s two-day biennial trade policy review of the US. The European Union’s ambassador to the World Trade Organization, Marc Vanheukelen, said on Monday that he had hoped US President Donald Trump’s protectionist promises on the campaign would end before he entered the White House. 

The US has triggered a global trade war that’s ensnared adversaries such as China as well as friends like the EU, according to Bloomberg Tuesday. Since April, the US has announced three rounds of tariffs on as much as US$250 billion of imports from China, which has retaliated in kind.

This regular transparency exercise focuses on the major trends in US trade between 2015 and 2017 and provides WTO members with the ability to exert peer pressure on future policy.

This threat to the dispute settlement system comes just when the US needs it most, said the New York Times also Tuesday. Without it, America will have no mechanism to hold China accountable for its persistent theft of intellectual property, its rampant use of subsidies or its cybersecurity breaches. And the United States will have no forum in which to defend the interests of American businesses when China insists on transfers of critical technology as the price for approvals for joint venture licenses or other permits to do business in China.

At a meeting of the WTO’s General Council in mid-December, the European Union and 11 nations, including China, Canada, Mexico, and South Korea, proposed changes to the body’s dispute settlement system in response to American complaints. They hoped the amendments would convince the United States to allow vacancies on the appellate panel to be filled.

New York Times

Instead, the United States rejected all the changes while refusing to put forward proposals of its own, and it has blocked the reappointments of appellate judges. The WTO has historically operated through consensus, with any single country able to veto proposed changes. So the court is down to its bare minimum of three out of seven members to form a quorum. When two of those members’ terms expire next year, the court will no longer be able to rule on any appeal.

The US is blocking new appointees to the seven-member WTO appellate body, which will be thrown into paralysis in December 2019 because there won’t be enough judges to issue rulings.

That creates the risk of turning every WTO dispute into a mini-trade war. Rather than waiting for the impasse over the judges to be resolved, countries will take trade disputes into their own hands, engaging in retaliation and counter-retaliation that could escalate indefinitely. It also signals a desire by the Trump administration to return to an unsustainable might-makes-right system.

The US is risking the WTO’s gains by “using tariffs as a central plank of its new trade policy, and in suggesting that trade wars can have winners,” European Union’s ambassador to the World Trade Organization, Marc Vanheukelen said.

Bloomberg

Vanheukelen criticized the US block on WTO appellate body members and said the EU disagreed with the US claim that the WTO’s “activist judges impose their own policy and institutional preferences on members.”

The US is blocking new appointees to the seven-member WTO appellate body, which will be thrown into paralysis in December 2019 because there won’t be enough judges to issue rulings.

Trade and trade disputes should take place under predictable and clear rules that can be fairly enforced, opined the New York Times. The world has such a system with the WTO, and we should not allow it to be destroyed. History shows that the alternative is resolution of trade wars through much more destructive means.

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