TWN Info Service on WTO and Trade Issues (Mar18/12)
20 March 2018
Third World Network

Azevedo moots "back to old GATT" on dispute settlement
Published in SUNS #8645 dated 20 march 2018

New Delhi, 19 Mar (D. Ravi Kanth) - The World Trade Organization director-general Roberto Azevedo has begun efforts to set the ground for an alternative dispute settlement system at the WTO akin to the GATT (General Agreement on Tariffs and Trade) 1947 framework as suggested by the United States Trade Representative Ambassador Robert Lighthizer several months ago, trade envoys told SUNS.

Trade envoys are gathering here for a mini-ministerial that India has convened.

The dispute settlement system based on the GATT 1947 required rulings/awards by the panels to be negotiated among the parties as it was a non-binding mechanism.

[Until the 1988 mid-term review Ministerial meeting of the Uruguay Round (UR), all decisions, from the stage of reference to a dispute panel to the adoption of the recommendations of the panel, required positive consensus, thus enabling one or another party to a dispute, even an intending intervener, to block the process at any stage by denying consensus.

[After the then European Community had blocked adoption of rulings in what became known as the Italian pasta dispute and the French wheat flour dispute (over the EC providing subsidies to pasta producers and flour mills using wheat grown within the EC, as against cheaper imported US wheat), the US had become frustrated, and this was one of the unlisted issues under the rubric of "Functioning of the GATT system" that was part of the Punta del Este mandate for the UR negotiations in goods.

[At Montreal, on the suggestion of the then GATT Director-General Arthur Dunkel, there was agreement that the dispute process should be unblocked, and allowed to go forward automatically from the stage of panel reference until the panel rulings/recommendations were handed down. The adoption alone was left for adoption by consensus.

[It was in 1993, at the final stages of conclusion of the UR accords at official level, that at the instance of the US, the current WTO's integrated dispute settlement system was adopted as a part of the UR Single Undertaking. And the US initially had no problems, but welcomed it, when the Appellate Body (AB) stretched the UR's Single Undertaking to the DSU rulings, and these went against developing countries, like India, Indonesia etc. It was only when AB rulings went against the US over anti-dumping issues that the grievance has arisen! SUNS]

Effectively, the US demands now would amount to a fundamental departure from the existing system wherein rulings issued by the Appellate Body are final and need to be implemented without any change.

As trade ministers congregate for an informal summit today in New Delhi, one of the main issues on the agenda is how to overcome "the systemic challenges" facing the "dispute settlement arm" of the WTO.

Ahead of the New Delhi meeting, the WTO director-general along with the new chair for the General Council Ambassador Junichi Ihara of Japan held a closed-door "green room" meeting with trade envoys from 20 countries, according to several trade envoys who asked not to be quoted.

During the meeting, Azevedo has apparently suggested that, rather than pushing the US hard to continue negotiations on how to de-block the current impasse for selecting three new members to the Appellate Body, members must consider the blockage as given and act accordingly, said a trade envoy from an industrialized country, who asked not to be quoted.

Azevedo, according to the trade envoy, suggested they have to work on the assumption that the blockage at the AB is given and work accordingly on an alternative dispute settlement system that is not as strict and binding as the current mechanism.

The tenor of the green room meeting, according to another trade envoy from a developing country, is that "having given up on Doha and development, now members must give up on the binding dispute settlement system when it is most needed."

But it is premature to discuss suggestions made by Azevedo even before the Appellate Body becomes completely defunct in December 2019 when two more members -- Thomas R Graham and Ujal Singh Bhatia -- complete their second terms, the envoy said.

After December 2019, the AB's members will fall below three and the AB will not be able to issue any rulings.

Against the backdrop of three vacancies that remain unfilled because of the US opposition, another major test comes in April when the Dispute Settlement Body (DSB) will have to consider a second term for Shree Baboo Chekitan Servansing - who will soon complete his first term.

Mr Servansing wants to continue for the second term which has become the normal practice at the WTO over the years, the envoy said.

But Azevedo wants to consider new alternatives one and a half years before the AB becomes fully defunct, the envoy said.

Azevedo's ideas are "surprisingly similar" to what the US Trade Representative Ambassador Robert Lighthizer had said over the last one year, the envoy maintained.

The DG's argument that members have to think in terms of new alternatives because the US is not prepared to resolve the impasse is dangerous, said another trade envoy.

"The DG is basically ending up with something that Lighthizer wants and it really means that we go back to the old non-binding dispute settlement system," the envoy maintained.

"Azevedo's ideas would imply that we go back to the non-binding system after giving up on the Doha and MFN," the envoy maintained.

The USTR spoke against the binding dispute settlement system several times last year.

"On the [WTO's] dispute settlement system, I would answer in two parts," said Ambassador Lighthizer on 21 September while speaking at the Center for Strategic and International Studies in Washington DC.

"There are number of areas [where] there is a broad agreement that the WTO dispute settlement system is deficient," said Ambassador Lighthizer.

"There is the transparency issue, there are issues with the staff, whole lot of areas we have a problem with [the dispute settlement system]," Ambassador Lighthizer said.

"Beyond that the US sees there are examples that the dispute settlement system has diminished over the years," he argued.

The USTR suggested that what the US had bargained for and the obligations it undertook, are different from the rulings issued by the Appellate Body.

"We believe that there have been lot of cases in the trade remedy laws where the decisions [of the Appellate Body] are indefensible," he said, suggesting that "many of the people there [at the AB] have free trade orientations, and we have tax laws that are struck down and we have other provisions where the WTO has taken the position that they are going to strike down something that should not happen instead of looking down the GATT agreement as a contract."

Ambassador Lighthizer said that "the DSU has evolved in a way that it creates new obligations and it does not provide benefits to us both in procedural way and we have to worry about the DSU and it is a fundamental part of the WTO."

"We are objecting to the [dispute settlement] process because we don't agree with it as in many cases [as] the Appellate Body has approached [the disputes]," he said.

"Before 1995, there was a system then in the GATT and then you would negotiate after a ruling was issued," he suggested.

In short, Azevedo is now on a mission to achieve his two goals during the next one and a half years before the WTO's twelfth ministerial meeting.

The two goals include plurilateralisation of the WTO and replacing a binding Dispute Settlement Body with a non-binding dispute settlement system, according to the envoy.