WTO’s Appellate Body To Get Crippled If US Follows Through On Its Threat

A long standing threat by the United States of cripple the system for settling disputes of the World Trade Organization is being carried out by Washington this week which also threatens to throw off track the entire system of governance of international trade.

After a veto is power is exercised by the US which will block appointment of new judges to replace two whose terms of office are expiring at the WTO’s Appellate Body, the global trade dispute resolution body will virtually become dysfunctional because the Appellate Body is one that adjudicates on contested rulings over disputes between member countries.

One of the major allegations of the US has been that the Appellate Body oversteps and creates law rather than interpreting WTO agreements, according to the current US Trade Representative Robert Lighthizer who has had his tiffs with the WTO as a career lawyer for the US steel industry. It is almost certain that the WTO ambassadors from the organization’s 164 member countries will not be able to convince the US not to exercise its veto rights when the WTO ambassadors meet in Geneva later this week, say trade officials.

A legal recourse in the eventuality of the freezing of the WTO system is set to be proposed by the European Union which will allow the WTO to impose trade sanctions against countries in the attempts by the EU to create a temporary alternative to the WTO’s Appellate Body. If the EU proposal goes through, it would clear the way for the trade and economic block to impose tariffs on imports made to the EU from such countries that could try to take cases straight to the WTO for litigation and ask to be decided by an Appellate Body that would no longer be functional.

Other countries had not seriously tried to improve the dispute settlement process, said Dennis Shea, the U.S. representative to the WTO, to other ambassadors in Geneva last Friday.

“The United States has … articulate[d] our longstanding concerns with the functioning of the Appellate Body,” Shea said. “We have yet to see the same level of engagement from other members.”

Another tactic used by the US to prevent the WYO system from functioning is stalling budget allocations for the Appellate Body.

However even without a functional Appellate Body, the WTO would be able to negotiate new agreements but any new cases that are put up for resolution with the Appellate Body will be left unresolved.

The creation of the Appellate Body happened with the creation of the WTO in 1995.  Appeals from dispute panels are heard by a panel of three judges who are selected from a total of seven available judged – all of whom have fixed-term offices. Of a member country is found to have violated the WTO laws, the Appellate Body has the power to authorize trade sanctions. The Appellate Body and the WTO dispute settlement has settled some of the most contentious modern day trade disputes such as the Chinese state support for Chinese companies and the tussle between the EU and the US over allegations of subsidies to airplane makers Airbus and Boeing respectively.

(Adapted from LATimes.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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