TWN Info Service on WTO and Trade Issues (May18/09)
14 May 2018
Third World Network

US under fire at GC over AB blockage, unilateral actions
Published in SUNS #8679 dated 14 May 2018

Geneva, 9 May (Kanaga Raja) - The United States came under widespread criticism from both developing and developed countries at a meeting of the WTO's General Council on 8 May over its continued blockage of appointments to fill vacancies in the WTO's Appellate Body as well as its recent unilateral actions under both Section 232 and Section 301 of its trade laws.

The criticism of US actions came during discussions on three separate items that had been put on the agenda of the General Council (GC) meeting at the request of China.

These items are: Selection of new Appellate Body members; United States - Section 232 investigations and measures on steel and aluminium products; and United States - Investigations and Measures under Section 301 of the Trade Act of 1974.

On the selection of new Appellate Body members, many countries made clear that no linkage should be made between the concerns raised by the US on procedural issues and the launch of selection processes to fill three current vacancies on the seven-member Appellate Body.

They also warned that the ongoing impasse over this issue at the WTO is undermining the multilateral trading system.

Many countries also expressed concerns over the unilateral nature of US act ions under Section 232 of the Trade Expansion Act of 1962 imposing additional du ties on imports of steel and aluminium products (purportedly on national security grounds) as well as the US Section 301 investigations over China's intellectual property policy regime (see separate story).

Summarising the discussions on these three agenda items at a press briefing on 8 May, WTO spokesman Keith Rockwell characterized the General Council meeting as being "extraordinary in its intensity", and said that many members who do not normally take the floor had views on these issues.

"Despite the intensity of this discussion," he said, "I think this was a discussion that we had to have. We had to have this discussion here and it was a very good thing that it took place in the General Council. It showed that this is a p lace where these concerns can be raised and it showed as well the importance of having all of these members stating their views on this."

"It was quite unusual to see these two very prominent members [the US and China] really laying it all on the line in terms of what they think," said Rockwell, in reference to the discussions on the US Section 301 measures.

On the agenda item of selection of new Appellate Body members, China (represented by Ambassador Zhang Xiangchen) explained why it was putting three items on the agenda of the General Council meeting.

According to participants at the GC meeting, China said that the WTO is going through grave challenges and the rationale for adding these three items on the agenda is simple.

Twenty-three years after the WTO was established, it is going through unparalleled challenges, it said.

We need to discuss how to respond to "unilateral and protectionist measures ", it said, noting that at the end of the Uruguay Round, the GATT gave way to the WTO and the reason for that agreement was that people were concerned about unilateral actions and protectionism.

One of the most important elements of that Uruguay Round deal was the agreement on the settlement of disputes, and this was the means for which t o deal with actions. This became the bedrock of the system.

According to China, what is now very dangerous is that the United States is challenging the fundamental principles of the WTO and its dispute settlement system.

With its action under Section 232 and the $50 billion (in additional tariff s) that the US is threatening to levy on China with respect to its Section 301 case, the US is further undermining the WTO, China said.

The WTO is confronting three hard blows and we are ready to discuss this with all members today, China added.

We expect that all members should defend the system as appropriate, China underlined. Collectively we can improve on our organisation but unilateral and protectionist measures are damaging the WTO and international trade, it said.

China pointed out that the dispute settlement system is the crown jewel and it is losing its brilliance.

Since 1995, there have been several hundred disputes that have been settled and it is one of the most successful systems for settling disputes in history, China argued.

The Appellate Body has an important role to play but today, only four of the seven Appellate Body members are in place.

Without the dispute settlement system, the WTO would find its effectiveness reduced, it said.

China said that it would like to see the system strengthened so that we could effectively control unilateral and protectionist measures.

It noted that the US has concerns about the system, and the US has certainly a right to raise matters that they find difficult to accept, but decisions an d discussions should be held here.

China said it is ready to discuss this in the WTO, but it cannot discuss these issues if there is a linkage between discussion of these issues and the selection process for Appellate Body members.

China charged that the US is abusing the decision-making process of consensus.

The European Union said it very much regrets what is happening to the Dispute Settlement Body.

The EU said it has been signing onto a variety of different proposals (for filling the vacancies on the Appellate Body). It asserted that the WTO members have a shared responsibility to resolve this issue as soon as possible.

The EU pointed to Article 17 (on Appellate Review) of the Dispute Settlement Understanding (DSU). It also noted that the US has problems with Rule 15 (of the Working Procedures for Appellate Review).

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

The EU emphasised that it does not want a linkage to be made between Rule 1 5 and the AB appointments. It sees no reason for blocking the appointment process at the Appellate Body.

The EU is ready to discuss and try and find appropriate solutions.

Mexico said that the current situation at the Appellate Body is unprecedented. It noted that seven of ten cases in the WTO go to the Appellate Body.

Eighty members of the organisation have used the Appellate Body. There are eight cases under appeal and another five this year that are likely to be appealed.

Mexico said that if Ambassador Servansing, whose (first) term at the Appellate Body expires this September, is not reappointed, things will get even worse.

This is particularly alarming given the serious trade tensions that we are now experiencing, Mexico pointed out.

Cambodia expressed support for China's statement, and said we need to fill the vacancies on the Appellate Body quickly.

Zimbabwe said that the subliminal message being received is why should we negotiate rules if existing rules may not be adjudicated.

For a rules-based organisation, this is indeed a perilous road to take, it added.

The Russian Federation said it had serious concerns, and that the Sword of Damocles is now hanging over the dispute settlement system.

The Appellate Body is close to collapse because we only have four members, and as we get closer the situation will become even more difficult, it added.

Russia also stressed that it does not want a linkage between discussions of the US concerns and appointments to the Appellate Body.

Honduras, on behalf of the informal group of developing countries except Israel, said it seeks a prompt solution to this issue.

It wants to see proposals coming out and it should be addressed in a normal way independent of the AB selection process.

Uganda said that the rules are in place for all members. Are some members above the rules, it asked.

Japan said that it is concerned about the situation in the Appellate Body. It does not deny that this is worthy of being taken up in the General Council.

However, under the terms of the WTO agreement, it is the responsibility of the DSB and not the General Council.

Japan said that it has made its case very clear (on the situation in the Appellate Body). It is the responsibility of the entire membership to make progress t o find a solution to ensure the proper functioning of the dispute settlement system.

Bolivia raised the question as to why the joint proposal from 65 WTO member s (on the launch of the selection processes to fill the three current vacancies on the Appellate Body as soon as possible) has not been accepted. It pointed out that it has been blocked by one member.

Tanzania also expressed concern, saying that it did not think that the AB appointment process should be held hostage.

Qatar also expressed concerns, saying that the WTO members have the responsibility to safeguard the Appellate Body and the system as well.

Benin said the work of the WTO and the credibility of the multilateral trading system hinges on its ability to deal with disputes, and all members, large and small, must continue to support the dispute settlement system.

Guinea said that the dispute settlement system and the multilateral trading system more generally are of great importance to developing countries. The dispute settlement system is a fundamental pillar of the WTO.

Turkey said that it is one of the co-sponsors of the proposal on the AB appointment process. It has been going on for one year now and it would like to see this issue resolved.

Norway said that it is in the essential interest of Norway that this be fix ed. Expressing deep concern, it said that it is open and willing to discuss the grievances with the system, including the Appellate Body, but it does not w ant this issue to drag on and cause further concern and damage to the system itself.

Hong Kong-China also expressed deep concern.

Brazil pointed out that this has been a matter of concern since 2017. It is heading for a serious crisis because we are close to the risk of paralysis. This deadlock is undermining the rules-based multilateral trading system.

It warned that the rights of members are being nullified and impaired under the DSU. It noted that 65 members have co-sponsored a proposal to address this issue.

Brazil said it is ready to sit down with any member but it does not find linkages acceptable.

Venezuela said that unilateral measures by the US and the ongoing blockage of the Appellate Body process are undermining the multilateral trading system.

Canada said that while it understands that the US has concerns, it does not want this to be linked to the AB selection process.

Pakistan expressed deep concern, while Maldives supported the issues that China had raised. It does not want to see the dispute settlement system rendered ineffective.

Switzerland said that dispute settlement system is a key element of what the WTO does and it encouraged members to overcome the impasse in the Appellate Bod y as soon as possible.

Australia had serious concerns, saying that all present and future Appellate Body positions must be filled without delay.

It has heard that the US has concerns. It is for all members to try and fin d a solution. With goodwill and hard work, a solution can be found. Australia i s willing to explore ways forward in a solution-based approach.

Myanmar said it is concerned about the unilateral and protectionist measures, while Liberia expressed support for China's statement.

Ecuador said what is happening now runs contrary to the Dispute Settlement Understanding.

It said there should be no linkage between the AB appointment process with the procedural issues. These should be discussed independently.

Kazakhstan said that it took a very long time (almost two decades) for the country to enter into the WTO, and now that it is a member, they are facing a system in crisis.

According to participants at the meeting, India said that it is extremely concerned. It is unhappy with the rise in unilateral actions, and that makes the dispute settlement system even more important to them.

India is also concerned that it would be a serious blow if the dispute settlement system were to lapse into ineffectiveness.

It urged all members to find a solution to the impasse. It does not want a linkage either between concerns of a procedural nature and the AB selection process.

Sri Lanka said that the DSB is one of the key pillars of the house. It is the responsibility for all of us to find a solution.

Guatemala said that most members have expressed a willingness to sit down and discuss concerns but we have not had a serious discussion yet on this issue. We need to move from expressions of concern to a more solution-oriented approach, it said.

Korea expressed concurrence, while Egypt expressed deep concerns. It is worried about the threat to the proper functioning of the WTO's dispute settlement system.

According to participants at the meeting, the United States (represented by Ambassador Dennis Shea) said it took note of the concerns expressed and loo ked forward to explaining the concerns that the US has.

The US said it is worried that the credibility of the WTO will be threatened by the process of dispute settlement that has been ongoing for some time.

Ambassador Shea said that this is something that has been mentioned by the US for many years, and not something that is new with the Trump administration.

The US maintained that the way in which the Appellate Body is working, they are re-writing agreements and putting in place rules that have not been agreed by members.

They are putting in jeopardy the dispute settlement system. They are guilty of rule-breaking and rule-making, it claimed.

The Appellate Body never reaches its target of 90 days to deliver its reports, said the US.

Mentioning its concerns about Rule 15, the US said the AB on their own have decided who can be a member and for how long. They have expanded their role in terms of what the DSU says their role should be.

There are now many people in the WTO who believe their objectives can be more easily obtained through litigation than through the hard work of negotiation, it claimed.

The US wants to improve existing rules and it wants to see new rules in the WTO but they have to be rules that are agreed by the members.

The US does not plan to see a continuation of the existing dysfunction through complacency. The US said it is ready to work with others who share their concerns on how to make the WTO better.