TWN Info Service on WTO and Trade Issues (Apr18/15)
24 April 2018
Third World Network

Attempts under way to bury the AB appeal process
Published in SUNS #8667 dated 23 April 2018

Geneva, 20 Apr (D. Ravi Kanth) - Attempts are under way to quietly bury the World Trade Organization's Appellate Body (AB) that provides "predictability" and "certainty" to its binding rulings, and shift to the panel process in which the Secretariat, in servicing the panels, plays an influential role in shaping the findings, according to trade envoys familiar with the development.

As the United States continues to block the selection process for filling three vacancies at the Appellate Body, despite repeated calls by a large majority of countries for an expeditious selection process, the Appellate Body will face another critical test soon when the second term for Shree Baboo Chekitan Servansing comes up for a toss, said an envoy who asked not to be identified.

"In case, Shree Baboo Chekitan Servansing decides not to stake a claim for a second term due to the ongoing stalemate that the US will create hurdles as it did for the selection process for three other candidates, then the AB will be further crippled," the envoy suggested.

Also, WTO director-general Roberto Azevedo might not be in favour of Shree Servansing staking a claim for a second term, the envoy suggested.

Nevertheless, it remains to be seen whether the Mauritius government which is close to the US in Africa will be able to convince Washington to adopt a favourable stand to ensure a second term for its former trade envoy Shree Servansing, the envoy suggested.

According to another trade envoy, who asked not to be identified, the WTO director-general would prefer to revert to a panel process to satisfy the U S and do away with the Appellate Body once and for all.

In a panel-driven dispute settlement process, the WTO Secretariat, tasked with servicing a panel, will be able to play an influential role both in constituting a panel as well as in its subsequent findings, the envoy suggested.

Instead of persuading the US to give up its obstructionist stance and bring an end to the crisis at the AB, the director-general wants to hold consultations with the US on its specific concerns.

At the recent informal ministerial meeting in New Delhi on 19 March, a large number of trade ministers had unambiguously demanded the continuation of an impartial and independent Appellate Body.

Trade ministers had severely criticized attempts of the director-general and some major industrialized countries to consider "alternatives", instead of resolving the current AB crisis, the envoy said.

"The proposed alternatives for the DSB did not get much traction during the meeting as many ministers wanted to adhere to the rulings of the judicial body than negotiated outcomes as under GATT 1947," South Africa's trade minister Rob Davies told SUNS on 20 March.

"There is a sharp concern over the non-appointment of AB members," he said, suggesting that there has to be an urgent resolution.

At the New Delhi meeting, the US trade envoy Ambassador Dennis Shea said that the AB failed to comply with important markers for its effective functioning.

Ambassador Shea said the AB failed to meet the 90-day limit for issuing rulings as it is required under the rules.

The deputy USTR said the AB continues to issue rulings in which two members had already retired.

Ambassador Shea argued that some AB reports went far beyond their mandate f or resolving trade disputes.

Ahead of the New Delhi meeting, Azevedo along with the General Council Chai r Ambassador Junichi Ihara of Japan held a meeting to discuss an alternative dispute settlement system at the WTO akin to the one that prevailed under 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.

Prior to the binding dispute settlement rulings issued by panels and the Appellate Body since 1995, the GATT 1947 system required rulings/awards by the panels to be adopted by consensus of the contracting parties after the panel handed d own their rulings.

[This enabled some of the powerful trading parties to block adoption of rulings that went against their stand. In fact, at that time it was the US that was the aggrieved party, as the European Economic Community (the entity that functioned under the old GATT) blocked adoption of panel rulings in two disputes raise d by the US on agriculture subsidies.

[The EEC had blocked adoption of panel rulings on what became known as the Italian pasta dispute and the French wheat flour dispute. In both instances, the EEC had enabled preferential treatment to the producers if they used the costlier wheat from European countries, rather than cheaper imported US wheat. The U S, in both instances, had successfully challenged the subsidy involved in the inputs to the French flour mills and Italian pasta makers.

[At the time of the finalizing at official level in 1993 of the Uruguay Round agreements, including the dispute settlement understanding, it was the US that brought up and insisted on the application of "negative consensus" rule at every stage of panel proceedings. In agreeing to this, the EU got an Appellate Body process instituted to hear and dispose off, on issues of law, appeals against a panel finding. SUNS]

At the Green Room meeting held in March, the WTO director-general had suggested that instead of 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 who asked not to be quoted.

Azevedo suggested to trade envoys present at the Green Room meeting that 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 (see SUNS #8645 dated 20 March 2018).

Meanwhile, more than 60 World Trade Organization members have called for adopting an expeditious process for filling three vacancies at the AB.

The large majority of members will issue their proposal for the umpteenth time at the 27 April meeting of the DSB.

The United States is blocking any appointment process until members agree to take up its concerns on the functioning of the AB.

Among the countries pressing the issue are Argentina, Australia, Bolivia, Brazil, Canada, Chile, China, Colombia, Costa Rica, the Dominican Republic, Ecuador , El Salvador, the European Union, Guatemala, Honduras, Hong Kong-China, India, Indonesia, Israel, Kazakhstan, South Korea, Mexico, New Zealand, Nicaragua, Norway, Pakistan, Panama, Paraguay, Peru, Russia, Singapore, Switzerland, Chinese Taipei, Turkey, Ukraine, Uruguay and Vietnam.

In their latest proposal issued on 17 April, the sponsors seeking the expeditious process maintained that "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, the delegations referred to above, propose that, at its meeting, the DSB takes a decision with regard to the following:

(1) to launch: (i) one selection process to replace Mr. Ricardo Ramirez Hernandez, whose second four-year term of office expired on 30 June 2017; ( ii) a second selection process to replace Mr. Hyun Chong Kim, who resigned from the Appellate Body as of 1 August 2017; and (iii) a third selection process to replace Mr. Peter Van den Bossche, whose second four-year term of office expired 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 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 a 30-day period after the date of its decision, 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 within 60 days after the deadline for submitting nominations of candidates, so that the DSB can take a decision to appoint three new Appellate Body members as soon as possible."

But the chances of breaking the impasse at the AB seem bleak given the US positions.

Ultimately, the WTO might be inching closer to the dispute panel process, according to envoys who asked not to be identified.