TWN Info Service on WTO and Trade Issues (Nov17/25)
30 November 2017
Third World Network

US rejects proposal by 52 WTO members on AB selection
Published in SUNS #8583 dated 27 November 2017

Geneva, 24 Nov (Kanaga Raja) - The United States has again blocked efforts to launch the process for filling three vacancies at the Appellate Body of the World Trade Organization.

At the meeting of the WTO's Dispute Settlement Body (DSB) on Wednesday (22 November), the United States rejected a new proposal tabled by some 52 members calling for the simultaneous launch of the selection processes to fill three vacancies at the seven-member Appellate Body (AB).

Appeals on issues of WTO law are decided at the AB by a three-member division of the AB, with members chosen at random.

An AB member from a nation, party to the dispute, usually does not sit on the division bench hearing the appeal.

With the US blocking the filling up of vacancies, effectively, it will become impossible for the AB to hear and dispose of appeals.

According to trade officials, the US told the DSB meeting that it was not in a position to agree to the proposal, and that it will continue to oppose the launch of the selection process until its concerns over the continued service of former AB members are addressed.

[Though the US has been giving as the reason for its objection to launch of the selection process, the continued service of former AB members to complete work on appeals they had been hearing while they were members, in actual fact the US is aggrieved that the AB has not been accepting the US arguments and positions, particularly in appeals involving anti-dumping agreement rules, and the US resort to "zeroing" in judging imports from competitors as involving "dumping". The US position appears to be "my way or the highway". SUNS]

This continuing impasse over the appointment of new Appellate Body members came during the discussions under the agenda item of Appellate Body matters.

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 ongoing appeal that he had been hearing as a member of the division bench, and where the appeals process has not concluded and rulings have to be handed down at the end.

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

Another vacancy pertains to Mr Hyun Chong Kim of South Korea who had tendered his resignation (with immediate effect) on 1 August, before taking up his appointment as a minister in the Korean government.

According to trade officials, by the middle of December, the Appellate Body will be down to four members from its regular complement of seven.

A proposal on AB appointments was tabled at the DSB meeting by Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, the European Union (28 member states), Guatemala, Honduras, Hong Kong (China), Mexico, Nicaragua, Norway, Pakistan, Peru, the Russian Federation, Singapore, Switzerland, Chinese Taipei, Turkey, Uruguay and Viet Nam.

The proposal (WT/DSB/W/609) states as follows:

"Given the urgency and importance of filling the vacancies in the Appellate Body, in compliance with the DSU and so that it can carry on its functions properly, Argentina; Brazil; Chile; Colombia; Costa Rica; Ecuador; El Salvador; the European Union; Guatemala; Honduras; Hong Kong, China; Mexico; Nicaragua; Norway; Pakistan; Peru; the Russian Federation; Singapore; Switzerland; the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu; Turkey; Uruguay and Viet Nam propose that, at its meeting on 22 November 2017, the DSB take a decision with regard to the following four elements:

"(1) to launch one selection process to replace Mr. Ricardo Ramirez Hernandez, whose second four-year term of office expired on 30 June 2017, to launch another selection process to replace Mr. Hyun Chong Kim, who resigned from the Appellate Body as of 1 August 2017, and to launch a third selection process to replace Mr. Peter Van den Bossche, whose second four-year term of office will expire on 11 December 2017;

"(2) to establish a Selection Committee, consistent with the procedures set out in document WT/DSB/1 and with previous selection processes, composed of the Director-General and the 2017 Chairpersons of the General Council, the Goods Council, the Services Council, the TRIPS Council and the DSB, to be Chaired by the DSB Chair;

"(3) to set a deadline of 22 December 2017 at 6 pm for Members to submit nominations of candidates; and

"(4) to request the Selection Committee to carry out its work in order to make recommendations to the DSB as soon as possible so that the DSB can take a decision to appoint three new Appellate Body members as soon as possible."

The Chair of the DSB, Ambassador Junichi Ihara of Japan, reported on efforts to resolve the impasse over the launch of the AB selection processes.

According to trade officials, the Chair said that informal consultations continue in order to find a way forward. These talks are taking place at different levels, both political and technical.

The Chair however reported that it seemed to him that a sense of mutual trust has yet to develop.

Members need concrete ideas to provide viable solutions to the issues they face, he said, noting that informal exploratory discussions were taking place on a technical level.

Ambassador Ihara encouraged members to continue with these discussions.

Mexico, in presenting the joint proposal on AB appointments, announced that Korea has expressed its intention to co-sponsor the proposal.

Mexico, on behalf of these 52 members, stated that the joint proposal reflects the increased concern of many Members with the current situation that is seriously affecting the workings of the Appellate Body and of the dispute settlement system more generally, to the detriment of this Organisation and against the best interest of its Members.

It is the WTO Members' responsibility to safeguard and preserve the Appellate Body, the dispute settlement system and the multilateral trading system.

"We cannot remain passive in the present circumstances," said Mexico.

It noted that this is the seventh consecutive time that a draft proposal on the procedures to carry out the selection process for the AB members has been submitted to the DSB.

This draft seeks to fill the two vacancies already open, as well as the vacancy that will arise within some weeks.

According to Mexico, the proposal contains four elements:

(i) to start three selection processes: one to replace Mr Ricardo Ramirez-Hernandez, whose second term expired on 30 June; another to fill the vacancy that occurred with the resignation of Mr Hyun Chong Kim with effect from 1 August; and a third to replace Mr Peter Van den Bossche, whose second term will expire on 11 December;

(ii) to establish a Selection Committee;

(iii) to set 22 December as the deadline for the submission of candidacies; and

(iv) to request that the Selection Committee issue its recommendation no later than the regular meeting of the DSB in March 2018.

Mexico said that the proponents are flexible in the determination of the deadlines for the selection process.

It again urged all Members to support this proposal; otherwise, "we may risk facing a crisis of far-reaching consequences in 2018."

In its statement, the US said: "We are not in a position to support the proposed decision."

Mr. Ramirez continues to serve on an appeal, despite ceasing to be a member of the Appellate Body nearly 5 months ago, it argued.

In the US view, "we cannot consider a decision launching a selection process when a person to be replaced continues to serve and decide appeals after the expiry of their term."

As noted in past meetings, said the US, the DSB has a responsibility under the DSU (Dispute Settlement Understanding) to decide whether a person whose term of appointment has expired should continue serving.

The US considers that Members need to discuss and resolve that issue first before moving on to the issue of replacing such a person.

As also noted previously, the US said that it would welcome Mr. Ramirez's continued service on the remaining appeal to which he was assigned prior to June 30.

"In fact, we do not understand any Member to object to his service on this appeal. In that circumstance, it should not be difficult for the DSB to take up its responsibility to adopt an appropriate decision."

The US told the DSB meeting that it has continued to convene meetings to discuss this issue informally with a number of delegations.

"This outreach has been productive in that we believe we have heard a general recognition that the DSB has the authority to set the term of an AB member under DSU Article 17.2; it follows that the DSB has a responsibility to decide whether a person should continue serving beyond that term."

"We have also heard agreement from several delegations that Rule 15 raises difficult legal questions that the DSB should address," said the US.

[Rule 15 of the working procedures for appellate review states: "A person who ceases to be a Member of the Appellate Body may, with the authorization of the Appellate Body and upon notification to the DSB, complete the disposition of any appeal to which that person was assigned while a Member, and that person shall, for that purpose only, be deemed to continue to be a Member of the Appellate Body."]

"In the course of our engagement, we have not heard delegations reject the importance of the issue we have brought to the DSB's attention. To the contrary, we have heard a willingness of delegations to work together on this issue to find a way forward," the US added.

The US said that it therefore "will continue our efforts and our discussions with Members and with the Chair to seek a solution on this important issue."

According to trade officials, nearly two dozen Members then took the floor, reiterating their concerns about the continued impasse over the AB selection process and the impact it could have on the WTO's dispute settlement system, as well as the credibility of the organization as a whole.

Many Members emphasised that there should be no linkage made between discussing the US concerns and launching the selection process.

In this context, several Members called on the US to show flexibility.

Several Members pointed out that the issue of AB appointments has now been on the agenda of the DSB since February and that the impasse would continue until at least 22 January next year, when the DSB holds its next regular meeting.

The Members that took the floor included Canada, the EU, Norway, Korea, Chile (for the GRULAC group of Latin American/Caribbean countries), Chinese Taipei, New Zealand, Australia, Singapore, Switzerland, Brazil, Indonesia, the Philippines, China, Venezuela, Hong Kong (China), Guatemala, Uruguay, and Japan.

Nigeria took the floor on behalf of the African Group and expressed the group's concern about the impasse.

According to trade officials, Indonesia said that it would like to welcome and express its support for Members' effort to resolve the issue of the appointment of the Appellate Body Members, as enshrined in document WT/ DSB/W/609.

It noted that the WTO is currently facing a condition where Members failed to reach consensus on how to select the successors of Appellate Body members whose tenure has been and will be shortly concluded.

It also took note of a certain Member's concern on the reports issued by former Members of the Appellate Body.

Indonesia believes that the WTO DSB has been trusted to resolve trade disputes between Members since its establishment.

It has also been widely believed to be the essential element to sustain the centrality of this organisation.

However, Indonesia also believes that the present situation would put the WTO DSB's work into jeopardy and should be addressed in a serious manner.

In regard to the selection process, Indonesia said that it is of the view that any systemic concern raised by certain member should not be linked to the decision on how to fill the vacancy in the Appellate Body which, according to Article 17 of the DSU, shall be filled as they arise.

Hence, the completion of the selection process should be reached immediately in order to keep the DSB's work moving forward, it said.

Japan said that it is unfortunate that the DSB is not in a position to launch the selection processes today.

This is especially so because appointing a Member of the Appellate Body is one of the important functions entrusted to the DSB under the DSU.

On the so-called "Rule 15" issue raised by the US, Japan said that this issue involves the institutional question of which WTO organ is held responsible for ensuring the legal status of a person serving on the Appellate Body during its transition.

This is an important question, which must be addressed by the DSB as the sole WTO organ established to administer the DSU.

In considering this question, WTO Members may also want to examine how best the transitional rule should operate under the current circumstances facing the dispute settlement system today, said Japan.

More generally, it is the responsibility of the DSB to ensure the proper functioning of the dispute settlement system, including the Appellate Body, during the transition in a manner consistent with the DSU.

According to Japan, all Members must exercise flexibility and act in a constructive manner so that the DSB properly discharges this responsibility.

Canada said that it agrees that it is time to start a process or processes to select new Appellate Body members for the two current vacancies and the third vacant position that will become available next month.

Canada considers that it is in every Member's interest to maintain and nurture the WTO's effective and impartial dispute resolution mechanism, of which the Appellate Body is a key component.

That mechanism is a central element of our robust rules-based multilateral trading system, which has provided security and predictability since its creation, it said, adding that to remain robust, our system - and in particular our dispute resolution mechanism - needs the continued support of every Member.

Like other Members, Canada said, it is disappointed that the United States has linked the start of the Appellate Body selection processes to the resolution of certain procedural concerns it has shared with us.

"However, we remain committed to working with other interested Members - including the United States - with a view to finding a way to address those concerns so as to allow the selection processes to start and be completed as soon as possible," said Canada.