Info Service on WTO and Trade Issues (Nov18/05)
7 November 2018
Third World Network
Dedicated process to begin addressing AB crisis
Published in SUNS #8788 dated 5 November 2018
Geneva, 2 Nov (D. Ravi Kanth) - Trade envoys from select countries
on Wednesday gave their approval for initiating a dedicated process
on a "non-negotiating framework" at the World Trade Organization
(WTO) General Council for addressing the current crisis caused by
the United States at the Appellate Body (AB), which has now been reduced
to three members, trade envoys told SUNS.
At an urgently convened "green room" meeting attended by
several trade envoys on Wednesday, the WTO Director-General Roberto
Azevedo informed the participants about starting a dedicated process
for discussing the proposals raised by several members - the European
Union, Canada, and Honduras among others - for addressing the current
crisis at the AB, including reforms to the Dispute Settlement Understanding
Close on the heels of the just-concluded Ottawa ministerial meeting
on 25 October, the DG suggested that issues involving DSU reform could
be addressed at the General Council (GC) on a sustained basis, said
several trade envoys who asked not to be identified.
The DG urged the participants at the green room meeting to come up
with proposals in addition to those proposals that were circulated
by some members.
He suggested that the EU will soon circulate a non-paper to start
the discussions at the GC meeting in December, trade envoys said.
Azevedo said that he had held discussions with the US on the DSU reforms
but did not divulge what the US Trade Representative Ambassador Robert
Lighthizer or his deputies had conveyed until now, according to the
trade envoys present at the meeting.
The US deputy trade representative and envoy to the WTO, Ambassador
Dennis Shea, who took part in the meeting, insisted that his country
would discuss issues concerning reforms of the dispute settlement
system only on the basis of a "non-negotiating framework",
without committing what the US plans to do, said trade envoys present
at the meeting.
Ambassador Shea said it had already listed several concerns about
the functioning of the Appellate Body, the highest adjudicating arm
for resolving global trade disputes.
Significantly, the US has only raised concerns about the functioning
of the AB and how the AB members went beyond their mandate until now,
while blocking proposals for launching an expeditious selection process
for filling the four vacancies at the AB.
"The US, however, did not offer any concrete suggestions or proposals
for addressing the DSU reform," said a trade envoy from an industrialized
"So far, we only heard about the US concerns on the AB but not
what it wants in terms of concrete changes at the AB or in the DSU,"
the envoy added.
"Nobody knows whether the US will allow the resurrection of the
AB that will become ineffectual and dysfunctional from December 2019,
when the AB will be reduced to one member," said another trade
envoy, who asked not to be quoted.
"Besides, the US insistence on having discussions for DSU reforms
on the basis of a non-negotiating framework is somewhat puzzling,"
the trade envoy said.
At a closed-door meeting convened by the WTO DG Azevedo on Wednesday,
trade envoys from more than two dozen countries agreed, for the first
time, to start a dedicated process on a stand-alone basis at the General
Council for discussing proposals that would address reforms of the
dispute settlement system, including the solutions for breaking the
logjam at the Appellate Body.
The DG's decision to hold the green room meeting all of a sudden after
the Ottawa informal ministerial meeting in which he took part cast
serious doubts about the integrity of the process that will be taken
up at the GC meetings for the next several months.
"Perhaps the dedicated, stand-alone discussions on DSU reforms
is a red herring for carrying out the proposed reforms in two areas
- negotiating function and the enhanced role for the WTO Secretariat
- stealthily at the WTO's 12th ministerial conference," said
another trade envoy, who asked not to be quoted.
"While the discussions on the DSU reform will go on endlessly,
the other two sides of reforms - the negotiating function and the
WTO Secretariat - could be sewed up by the time trade ministers congregate
at Astana, Kazakhstan, in June 2020," the envoy maintained.
The US, which has consistently blocked repeated attempts by a large
majority of countries for launching an expeditious selection process
for filling four vacancies at the AB, said it had already listed several
concerns about the functioning of the AB, such as the AB's failure
to meet the 90-day limit for issuing rulings and the AB's rulings
that went beyond the mandate among others, according to trade envoys
who asked not to be quoted.
The US has raised various concerns about the AB at the DSB meetings
over the past several months.
According to the Washington Trade Daily of 2 November, the US concerns
* AB interpretations that significantly restrict the ability of members
to counteract trade-distorting subsidies provided through state-owned
* Creation of a new category of prohibited subsidies that was neither
negotiated nor agreed by WTO members;
* Ignoring the 90-day deadline for completing the appeals;
* Disregarding the requirement in the DSU to provide within 60 days
an estimate of the period within which it will submit its report;
* Continued service by persons who are no longer AB members;
* Failure to follow rules that prohibit non-AB members from deciding
* Issuing advisory opinions on issues not necessary to resolve a dispute.
The United States has been increasingly concerned by the tendency
of WTO reports to make findings unnecessary to resolve a dispute or
on issues not presented in the dispute. The purpose of the dispute
settlement system is not to produce reports or to "make law,"
but rather to help members resolve trade disputes among them;
* The AB's approach to reviewing facts. Article 17.6 of the DSU limits
an appeal to "issues of law covered in the panel report and legal
interpretations developed by the panel." Yet the Appellate Body
has consistently reviewed panel fact-finding under different legal
standards, and has reached conclusions that are not based on panel
factual findings or undisputed facts.
* The United States has also noted with concern the Appellate Body's
review of the meaning of the member's domestic law that is being challenged.
In a WTO dispute, the key fact to be proven is what a member's challenged
measure does (or means), and the law to be interpreted and applied
are the provisions of the WTO agreements. But the Appellate Body consistently
asserts that it can review the meaning of a member's domestic measure
as a matter of law rather than acknowledging that it is a matter of
fact and thus not a subject for Appellate Body review;
* Without basis in the DSU, the AB has asserted that its reports effectively
serve as a precedent and that panels are to follow prior AB reports
absent "cogent reasons. ... This is not consistent with
At the closed-door meeting, South Africa sought a clear roadmap and
timetable for addressing the grave crisis affecting the functioning
of the Dispute Settlement Body, particularly the AB that is now reduced
to three members.
Unless the AB crisis is resolved, it is meaningless to discuss or
talk about new issues, South Africa suggested.
South Africa also posed a question whether any amendments to the provisions
in the DSU will need prior parliamentary approval, according to trade
envoys present at the meeting.
The EU said that it will suggest clear ideas for the discussion while
China welcomed the proposed discussions, including the EU's non-paper.
In conclusion, the developing and poorest countries must remain cautious
about the dedicated discussions on DSU reform which could be a Penelope
ruse to intensify discussions on the negotiating side for launching
plurilateral discussions and enhancing the role of the WTO Secretariat,
trade envoys said.
[In 1994 at Marrakesh, in setting up the integrated dispute settlement
system at the WTO (the DSU as part of the WTO treaty), the ministerial
meeting agreed that the DSU needs to be reviewed in the light of its
working, and this must be taken up within four years from entry into
force of the WTO Agreement.
[This issue was on the agenda of the WTO's Seattle ministerial, but
that meeting ended in failure or rather got aborted, as a result of
some deliberate staged demonstrations by the Clinton administration
that however lost control over the demonstrations.
[Since then the review of the DSU has been on the WTO agenda, reiterated
at Doha in 2001, but separated from the Doha single undertaking. However,
the reforms, even modest proposals from developing countries (such
as requiring any Secretariat brief to a panel to be made available
to parties for comment), were blocked by the US, EU and their camp
followers. The Secretariat from behind played an important role in
blocking any review. It is thus ironical that the DG and the Secretariat
are now pushing this issue. See also "The World Trade Organisation
and its Dispute Settlement System: Tilting the balance against the
South" by Chakravarthi Raghavan, TWN Trade & Development
Series No. 9. - SUNS]