Info Service on WTO and Trade Issues (Nov18/19)
30 November 2018
Third World Network
China, India, EU join hands to salvage WTO's Appellate Body
Published in SUNS #8805 dated 28 November 2018
Geneva, 27 Nov (D. Ravi Kanth) - China, India, and the European Union
have joined hands to salvage the World Trade Organization's Appellate
Body (AB) from its mortal crisis caused unilaterally by the United
States for pursuing its "America First" trade policies,
trade envoys told SUNS.
The three countries have issued two separate initiatives in which
they called for filling the four vacancies on the Appellate Body on
a war footing, and for amending several provisions of the Dispute
Settlement Understanding (DSU) for addressing the US concerns.
The US, which seems determined to end the life of the Appellate Body
by December 2019, citing extraneous grounds, has repeatedly blocked
a proposal from more than 70 countries for launching an expeditious
selection process for filling the vacancies at the AB. The US has
vociferously inveighed against the AB for the delay in issuing rulings
within 90 days as per the DSU provisions, and for allegedly overstepping
the DSU mandate in several rulings.
Effectively, the US seems opposed to the impartial and independent
functioning of the AB, said a trade envoy, who asked not to be quoted.
The AB has already been reduced to three members from seven members
due to repeated blocking of the selection process by the US.
From December 2019, the AB will be reduced to a single member when
two more members -- Ujal Singh Bhatia of India and Thomas Graham of
the US -- retire at the end of their second four-year terms. Subsequently,
the AB will become dysfunctional with just one member remaining.
Against this backdrop, China, India, and the EU formed an unusual
alliance for addressing these two issues - i.e. filling of four vacancies
at the AB along with addressing some of the US concerns, and safeguarding
the independent functioning of the AB.
Both these initiatives will come up for consideration at the WTO's
General Council meeting on 11 December.
In the first initiative (WT/GC/W/752) issued on 26 November, China,
India, and the EU along with nine other countries such as Canada,
Norway, New Zealand, Switzerland, Australia, Korea, Iceland, Singapore,
and Mexico stated unambiguously the "successful contribution
of the dispute settlement system to the security and predictability
of the multilateral trading system."
Given "the essential role of the Appellate Body within the system
that serves to preserve the rights and obligations of Members under
the covered agreements , and to clarify the existing provisions of
those agreements without adding to or diminishing the rights and obligations
provided therein," the sponsors called on all members, particularly
the US, "to fill the vacancies on the Appellate Body and to amend
certain provisions of the Understanding on Rules and Procedures Governing
the Settlement of Disputes (DSU)."
The proposed amendments to the DSU include (a) "transitional
rules for outgoing Appellate Body members", (b) "the issue
of 90 days", (c) "the meaning of municipal law as an issue
of fact", (d) "findings unnecessary for the resolution of
the dispute," and (e) "the issue of precedent."
The US has repeatedly maintained that "the Appellate Body does
not have the authority to deem someone who is not an Appellate Body
member to be a member."
Incidentally, in some favourable rulings that endorsed the US actions,
the US remained silent even though an outgoing AB member was part
of the appellate proceedings.
In several rulings, an outgoing Appellate Body member, after the second
four-year term, continued to engage in the appellate proceedings because
of having been associated with the dispute when it was launched.
To address this specific concern of the US, the proponents proposed
"that a transitional rule for outgoing Appellate Body members
is adopted by the WTO Membership itself through an amendment of the
The amendment to the DSU "would provide that an outgoing Appellate
Body member shall complete the disposition of a pending appeal in
which a hearing has already taken place during that member's term."
Another major charge levied against the AB by the US involves the
AB's failure to adhere to the 90-day limit and its decision to extend
the proceedings without informing the members.
For addressing the 90-day rule, the proponents called for amending
the rule in Article 17.5 of the DSU "by providing an enhanced
consultation and transparency obligation for the Appellate Body. Article
17.5, [as proposed to be amended], would provide for the possibility
for the parties to agree to the exceeding of the 90-day timeframe.
In practice, the Appellate Body would need to consult with the parties
early in appellate proceedings - or before the appeal is filed - if
it estimates that the report will be circulated outside 90 days."
"If there is no agreement of the parties on the exceeding of
this timeframe," the proponents suggested that "there could
be a mechanism pursuant to which the procedure or working arrangements
for the particular appeal could be adapted to ensure the meeting of
the 90-day timeframe. For example, the Appellate Body could propose
to the parties to voluntarily focus the scope of the appeal, set an
indicative page limit on the parties' submissions or it could take
appropriate measures to reduce the length of its report. This could
also include the publication of the report in the language of the
appeal only, for the purposes of meeting the 90-day timeframe (the
translation to the other WTO languages and formal circulation and
adoption would come later)."
The proponents made it clear "that those changes do not affect
the existing rules on the validity or the adoption of late reports."
Commenting on the "meaning of municipal law as an issue of fact,"
which the US had raised in the disputes involving the AB review of
"panel findings as to the meaning of domestic legislation,"
the proponents proposed to "clarify, for greater certainty, that
issues of law covered in the panel report and legal interpretations
developed by the panel, in the meaning of Article 17.6 of the DSU,
while they include the legal characterization of the measures at issue
under the WTO rules, and the panel's objective assessment according
to Article 11 of the DSU, they do not include the meaning itself of
the municipal measures."
On another major complaint of the US against the AB, namely, on "findings
unnecessary for the resolution of the dispute" or the AB's tendency
"to make findings on issues not necessary to resolve a dispute,"
the proponents proposed "to amend Article 17.12 of the DSU to
provide that the Appellate Body shall address each of the issues raised
on appeal by the parties to the dispute to the
exent this is necessary for the resolution of the dispute."
The proponents claimed that the above amendment of Article 17.12 of
the DSU "indirectly" would also address the concern related
to the timelines of appellate proceedings (the issue of 90 days).
Lastly, on the US concern over the AB's "approach to treat its
own reports effectively as precedent that panels are to follow absent
cogent reasons", the proponents suggested holding annual meetings
between the AB and the WTO members (in the DSB) "where Members
could express their views in a manner unrelated to the adoption of
particular reports (as laid down currently in Article 17.14 of the
The proponents argued that an annual interaction between the AB and
the WTO members "would provide an additional "channel of
communication" where concerns with regard to some Appellate Body
approaches, systemic issues or trends in the jurisprudence could be
The proponents indicated that "adequate transparency and ground
rules for such meetings would need to be put in place, in order to
avoid undue pressure on Appellate Body members."
In the second initiative for strengthening "the independence
and impartiality of the Appellate Body, improving efficiency so as
to enable it to meet the required timeframes, and ensuring an orderly
transition as well as an orderly launch of selection procedures,"
China, India and the EU called for (i) "independence of Appellate
Body members," (ii) "efficiency and capacity to deliver,"
(iii) "transitional rules for outgoing AB members," and
(iv) "the launch of the Appellate Body selection process."
For ensuring the independence of AB members, China, India, and the
EU proposed to "provide for one single but longer (6-8 years)
term for Appellate Body members."
The underlying objective, according to the three proponents, is "to
enhance the independence of the Appellate Body and its members, which
is needed in view of the experience of recent years."
As regards improving "efficiency and capacity to deliver"
along with the proposed amendment on the 90-day rule, the three proponents
proposed the following elements:
A. Increasing the number of Appellate Body members from 7 to 9. This
would improve the efficiency and internal organization of the Appellate
Body while also improving the geographical balance on the Appellate
Body after numerous accessions to the WTO since 1995.
B. Providing that the membership of the Appellate Body is the exclusive
occupation of Appellate Body members (currently, pursuant to the DSB
decision WT/DSB/1, it is a part-time job). This would be accompanied
by appropriate changes in the employment conditions. This would not
preclude Appellate Body members from academic or scientific activities,
consistent with the nature of their functions.
C. As an accompanying measure - not requiring an amendment of the
DSU (cf. Article 17.7 of the DSU) - an expansion of the resources
of the Appellate Body Secretariat, providing the administrative and
legal support to the Appellate Body, would also be considered in order
to facilitate the prompt circulation of Appellate Body reports while
safeguarding the quality of the reports. In line with the general
recruitment policy of the WTO, the objective should be to attract
and retain staff members offering the highest standards of efficiency,
competence, and integrity while ensuring the broadest possible diversification,
reflecting that of the membership in the WTO.
On the issue of transitional rules for outgoing AB members, the three
proponents said "in order to ensure an orderly transition between
the outgoing and new Appellate Body members, the outgoing Appellate
Body members should continue discharging their duties until their
places have been filled but not longer than for a period of two years
following the expiry of the term of office."
Lastly, on the launch of the Appellate Body selection process, the
three proponents clarified that the "selection process to replace
outgoing Appellate Body members shall be automatically launched no
later than X [e.g.6] months before the expiry of their term of office."
The proponents have placed the ball in the US court but the chances
of the US engaging in amending the DSU provisions as proposed by the
proponents are close to zero, said a trade envoy, who asked not to
Despite the joint initiative, it is highly unlikely that the US will
accept the amendments as it seems determined to end the life of the
AB by December 2019.
The US Trade Representative Ambassador Robert Lighthizer had publicly
stated that the US would prefer to go back to the pre-1995 GATT (General
Agreement on Tariffs and Trade) phase so that it can negotiate the
rulings of a panel, instead of implementing the AB rulings.