TWN Info Service on WTO and Trade Issues (Sept17/14)
25 September 2017
Third World Network

US told to de-link its AB concerns from selection process
Published in SUNS #8536 dated 21 September 2017

Geneva, 20 Sep (Kanaga Raja) - A large number of WTO Members have made clear to the United States that no linkage should be made between its concerns regarding the WTO Appellate Body (AB) and the launching of the selection process for new AB members.

According to trade officials, this came out at an informal meeting of the WTO Dispute Settlement Body (DSB) on 15 September. The meeting had been convened by the DSB Chair, Ambassador Junichi Ihara of Japan, to discuss the concerns raised by the US, as well as other WTO members at a formal meeting of the DSB on 31 August.

The US concerns relate to the issuance of rulings by persons whose terms as AB members had expired, as well as its longstanding concerns regarding the "critical necessity" of the DSB asserting the authority assigned to it under the Dispute Settlement Understanding (DSU).

[According to US media reports, in remarks on Monday (18 September) in Washington DC at the Center for Strategic and International Studies, the US Trade Representative Ambassador Robert Lighthizer voiced the Administration's unhappiness with the WTO's dispute settlement process, pointing to numerous cases where he claimed dispute panels have overstepped their jurisdictions. He claimed that there were a number of issues on which there was "pretty broad agreement" that the WTO Dispute Settlement Understanding (DSU) is "deficient," such as transparency issues and issues with the staff.

[Even more, he said, there have been a lot of cases in anti-dumping and countervailing duties where the decisions have been "really indefensible." He cited as an example, the AB ruling in February 2000 holding the US Foreign Sales Corporations Tax as WTO-illegal, in a dispute brought by the European Union (DS108). Lighthizer claimed that the rulings had really diminished what the US had bargained for or had imposed obligations that the US did not believe it had agreed to. SUNS]

According to trade officials, at the informal meeting on 15 September, most of the 30-plus delegations who took the floor said they were prepared to discuss the US concerns, but stressed that the issue should not be linked to the appointment of new AB members.

Many members pointed out that if the current stalemate over the filling of the vacancies in the AB continues, it would pose a serious threat to the WTO's dispute settlement system and risked undermining one of the central pillars of the multilateral trading system.

Earlier last week, the DSB Chair had informed that he was convening an informal meeting on 15 September afternoon to discuss the concerns raised at the last formal meeting of the DSB on 31 August regarding the launching of the selection process for new AB members (see SUNS #8530 dated 13 September 2017).

At the DSB meeting on 31 August, the continued impasse over the launching of the process for the selection of new AB members to replace the two AB members whose terms have either expired, or will expire soon deepened, with the United States saying it was not in a position to agree to launch the process until its concerns over the continued service of former AB members are addressed.

The two AB members in question whose second four-year terms have expired or are expiring soon are Mr Ricardo Ramirez-Hernandez and Mr Peter Van den Bossche.

The second term of Mr Ramirez-Hernandez had already expired on 30 June. He is however continuing his work on the two ongoing appeals in which he is involved.

The second term of Mr Van den Bossche will expire on 11 December 2017.

The situation has been further compounded by the sudden departure of AB member Mr Hyun Chong Kim of South Korea who tendered his resignation (with immediate effect) on 1 August prior to his appointment as a minister in the Korean government.

The US had told the DSB meeting on 31 August that in its view, simply moving forward with filling vacancies risks perpetuating and leaving unaddressed the concerns it believes require the urgent attention of the DSB.

"We consider that the first priority is for the DSB to discuss and decide how to deal with reports being issued by persons who are no longer members of the Appellate Body. Members should consider how resolution of those issues might affect a selection process. An informal DSB meeting would be a good place to start," it had said.

As Members are aware, the United States has a number of longstanding concerns frequently expressed in the DSB regarding the "critical necessity" of the DSB asserting the authority assigned to it under the DSU, the US maintained.

The US had said that until these concerns were addressed, it would not be in a position to support the launch of the selection process(es) to replace Mr. Kim, Mr. Ramirez-Hernandez and Mr Van den Bossche (see SUNS #8526 dated 5 September 2017).

According to trade officials, at the informal DSB meeting on 15 September, the United States largely repeated the statement that it had made at the DSB meeting on 31 August (see SUNS #8526 dated 5 September 2017).

The US said it was concerned that only one of the three AB members examining the appeal filed by the EU in DS442, EU - Anti-dumping Duties on Fatty Alcohol from Indonesia, was still a member of the AB when the AB report was circulated on 5 September, even though WTO rules require three members to review an appeal (the other two were Mr. Kim and Mr. Ramirez-Hernandez).

According to the US, it was the responsibility of the DSB, and not the Appellate Body, to decide whether to allow Mr Ramirez-Hernandez to continue working on outstanding appeals and to administer the WTO's dispute settlement system.

(Mr Ramirez-Hernandez is currently working on two appeals.)

According to trade officials, the reactions from WTO members ranged as follows: no linkage should be made between the US concerns and the stalled selection process; the AB acted correctly in allowing Mr Ramirez-Hernandez to continue working on appeals; there is no issue concerning the departure of Mr Kim on 1 August; the continued delay in the launching of the selection process for new AB members violates WTO rules, and that the current impasse threatens to undermine the WTO; and that in order to address its concerns, the US needs to put forward concrete proposals in this regard.

According to trade officials, Argentina, the Dominican Republic (speaking for the Informal Group of developing countries), Chile (speaking for the Latin American and Caribbean Group - GRULAC), the European Union, Canada, China, Norway, Ecuador, Israel, Singapore, New Zealand, Japan, Brazil, Turkey, Colombia, Hong Kong-China, Guatemala and Costa Rica said that the start of the selection process for the AB appointments and the review of the US concerns should not be linked and should be placed on separate tracks.

Panama, Venezuela, El Salvador, Nicaragua and Honduras expressed support for the statements made by the Informal Group of developing countries and GRULAC.

Mexico, Japan, Indonesia and Korea said that the AB was within its rights to allow Mr. Ramirez-Hernandez to continue hearing appeals that he was assigned to in line with Rule 15 of the AB's Working Procedures for Appellate Review.

China, Korea and Mexico pointed out that the AB has applied Rule 15 a number of times in the past without any protest from members.

The EU noted that in one case (DS456, India - Certain Measures Relating to Solar Cells and Solar Modules), the US had allowed a judge to continue reviewing the appeal even though his term as AB member had expired.

As regards the departure of Mr. Kim, the EU, Indonesia and China pointed out that Mr. Kim and the other two AB members working on DS442 (the fatty alcohol dispute) had signed off on the ruling on 31 July, one day before Mr. Kim tendered his resignation. (Owing to translation, the report was however circulated on 5 September).

The EU and Indonesia, the parties in that dispute, said that they had no issue with Mr Kim's departure since no changes were made after the AB report was signed, and that they would both support formal adoption of the ruling at an upcoming DSB meeting.

According to trade officials, even though it described Kim's situation as "exceptional", Japan however expressed some concerns about how to address a similar situation in the future where there is a need to make a change after a ruling is signed.

The US has contended that an appeal proceeding is concluded only when the Appellate Body circulates its report to members.

Argentina, Chile (for the GRULAC), Mexico, Colombia and Costa Rica underlined that WTO members were obliged by Article 17.2 of the WTO's Dispute Settlement Understanding (DSU) to fill AB vacancies "as they arise."

Peru suggested that WTO members might want to consider "legal tools" to force the start of the selection process(es).

The EU, Mexico, Peru, Australia, Brazil and Guatemala said that the discussion would be difficult or impossible to move forward unless the US puts forward concrete proposals that clearly state how WTO members could address the concerns that it has raised.

According to trade officials, the GRULAC, the Informal Group of developing countries, Norway, Israel, Egypt, Uruguay, El Salvador, and Nicaragua pointed out that the current stalemate over the filling of vacancies in the AB, if it continues, poses a serious threat to the WTO's dispute settlement system and risked undermining one of the central pillars of the multilateral trading system.

In response, the United States maintained that it was notable that no WTO member that took the floor raised any fundamental objections to the concerns raised by the US or said that these concerns were not worthy of consideration by the DSB.

It acknowledged that it did not come to the meeting with any proposals, but said that it was important to hear the views of other members and have a more comprehensive sense of initial positions.

The US said that the DSB could now do two things: either nothing, and be confronted with a more confusing and difficult situation in the future, or take action and manage the dispute settlement system as mandated by the DSU.

According to the US, this was not the first time a member had raised issue with the continued service of a judge on an appeal review even though his/her term had expired. Even if this issue had not been raised recently, the Kim situation had brought it into sharper relief, it said.

The discussion today was useful and members should continue discussing these problems and whether they should take action to address them, the US added.

According to trade officials, the DSB Chair noted the willingness of WTO members to engage in discussions on these systemic issues, and also the concerns with linking resolution of these issues to the AB selection process.

Members should continue the dialogue among themselves, he said, adding that he would continue to consult with delegations in order to find common ground.

[Since the informal discussions on 15 September, the EU and a group of South American countries (Argentina, Brazil, Colombia, Chile, Guatemala, Mexico and Peru) have reportedly put forward proposals for filling the three AB vacancies. In separate proposals, the EU and seven South American countries have suggested simultaneous launch of processes for filling in the three vacancies, following similar procedures used in the past. These will come up for discussion at the regular meeting of the DSB towards the end of September. The US could block the proposals at that time by denying consensus. SUNS]