TWN Info Service on WTO and Trade Issues (Jul19/26)
23 July 2019
Third World Network

Facilitator on AB crisis reports on consultations

Published in SUNS #8951 dated 22 July 2019

Geneva, 19 Jul (D. Ravi Kanth) – The facilitator for addressing the impasse at the World Trade Organization’s Appellate Body (AB), in an attempt to appease the United States, claimed on Thursday (18 July) that there is a “certain degree of convergence” among members on several issues, trade envoys told the SUNS.

For the past two years, the US has blocked the selection process for filling vacancies at the AB, criticizing the WTO’s highest adjudicating body for failing to adhere to various provisions in the Dispute Settlement Understanding (DSU).

In response to the US actions and criticisms against the AB, the WTO’s General Council appointed Ambassador David Walker of New Zealand as a facilitator to address the concerns raised by the US.

Over these two years, several members, including the European Union, China, and India, among others have presented textual proposals for addressing the concerns raised about the functioning of the AB, while also ensuring the independent and impartial work of the adjudicating body.

Japan, Australia, and Brazil among others have proposed fundamental changes in the DSU as per the US demands.

The US, however, has remained totally silent, without offering any solutions or proposals of its own to address its concerns.

At an informal meeting convened by the WTO General Council Chair Ambassador Sunanta Kangvalkulkij of Thailand on 18 July, the facilitator Ambassador David Walker offered his broad conclusions based on his consultations with members since end-February.

According to trade envoys present at the meeting, the facilitator claimed that there was “constructive exchange of views” during his consultations at various levels.

Ambassador Walker acknowledged that there are differences of views on various issues concerning the functioning of the AB.

Acknowledging those differences of views and as tasked by the GC chair and members, the facilitator said: “I tend to identity some areas of issue, on my own responsibility, [where there is a] certain degree of convergence.”

The issues identified by Ambassador Walker, where he claimed there is certain convergence among members, are as follows:

* On the issue of transitional rules for the outgoing AB members, the DSB has the explicit authority and responsibility to determine the membership of the AB.

* To assist members in discharging this responsibility, the selection process to replace the outgoing AB members shall be automatically launched 180 days (six months) before the expiry of their term in office. Such a selection process shall follow past practice.

* If a vacancy arises before the regular expiry of the term of an AB member or due to any other situation/ circumstance, the chair of the AB shall immediately launch the selection process with a view to filling that vacancy as soon as possible.

* AB members nearing the end of their terms may be assigned to a new division up until 60 days before the expiry of their term. AB members, so assigned, may complete their process in which the oral hearing has been held prior to the expiry of their term.

* On the issue of 90 days (the US has constantly accused the AB of having failed to issue its reports/rulings within 90 days as per Article 17.5 of the DSU), the facilitator said the AB needs to issue its report no later than 90 days from the date of appeal.

* In cases of unusual complexity and periods of numerous appeals, the parties to the dispute may agree with the AB to extend the time period beyond 90 days.

* Any such agreement shall be notified to the DSB by the parties and to the chair of the AB.

* On the issue of the municipal law, the meaning of municipal law has to be treated as a matter of fact and therefore, not subject to appeal.

* The DSU does not permit the AB to engage in a de novo review or to complete the analysis of the facts of the dispute.

* Consistent with Article 17.6 of the DSU, it is incumbent upon members engaged in the Appellate proceedings to refrain from advancing extensive and unnecessary arguments in an attempt to effect findings overturned in the appeal under DSU Article 11.

* As regards advisory opinions offered by the AB in several trade disputes, issues that have not been raised by either party should not be ruled or decided upon by the AB.

* Consistent with Article 3.4 of the DSU, the AB shall address issues raised by the parties in accordance with Article 17.6 of the DSU only to the extent necessary to resolve the dispute.

[This would require the AB to disregard Art. 17.12 which says: “The Appellate Body shall address each of the issues raised in accordance with paragraph 6 (DSU Art. 17.6) during the appellate proceedings.” SUNS]

* On the issue of precedent (the US has constantly charged the AB for creating precedents in its rulings that added to or diminished members’ rights and obligations), the facilitator said precedent is not created through the WTO dispute settlement proceedings. Consistency and predictability in the interpretation of the rights and obligations under the covered agreements is of significant value to members.

* Panels and the AB should take previous panel and AB reports into account to the extent that they find them relevant in the dispute they have before them.

* As regards the issue of coverage, as provided in Article 3.2 and 19.2 of the DSU, findings and recommendations of the panels and the AB, and recommendations of the DSB, cannot add to or diminish the rights and obligations provided in the covered agreements.

* Panels and the AB shall interpret provisions of the Agreement on Implementation of Article 6 of the GATT 1994 in accordance with Article 17.6 of the Anti-dumping Agreement (application of standard review).

* On the issue of regular dialogue with the AB, the DSB shall, in consultations with the AB, establish a mechanism for regular dialogue. Such mechanism shall remain an informal dialogue between members and the AB’s members.

* To safeguard the independence and the impartiality of the AB, fair ground rules may be provided to ensure at no point should there be any discussion of the ongoing disputes or any member of the AB.

Several trade envoys said the chair based his conclusions largely on a proposal tabled by Japan and Australia (see SUNS #8894 dated 25 April 2019) while ignoring the suggestions offered by the European Union, China, and India (see SUNS #8805 dated 28 November 2018).

During the informal meeting, several countries including South Africa, Jamaica, and Japan said there are still fundamental differences on the points of convergence that the facilitator mentioned in his report.

South Africa said a two-track approach is needed in which the functional issues such as the selection process for filling vacancies must be addressed immediately, while taking up the substantive issues in the second phase.

South Africa said developing countries have their specific concerns about launching a trade dispute at the WTO because of the costs entailed in the process, according to trade envoys present at the meeting.

According to another trade envoy from an industrialized country, who asked not to be quoted, the US may use the facilitator’s report as a starting point to demand more.

The US is not interested in finding any solution to the crisis at the AB and Washington seems determined to make the AB dysfunctional after 11 December 2019, when the AB would be reduced to one member, the envoy said.

The US has charged the AB with failing to issue rulings within the 90-day period. Washington said the AB had strayed into areas that were not part of the dispute. Effectively, the US maintained that the AB has “overreached” in its findings in trade disputes.

The US maintained that there is “no binding precedent” in the WTO absent specific agreement by members. The US lampooned the AB for its allegedly erroneous interpretation of the municipal law in various trade disputes. The US attacked the AB for showing a tendency to make findings on issues beyond those necessary to resolve a dispute.

Many members severely criticized the US last year for holding the selection process to fill vacancies at the AB as a hostage to bring about fundamental changes in the functioning of the AB, without any ministerial or General Council mandate, said a trade envoy, who asked not to be quoted.

“That narrative is now changed by the facilitator, suggesting that the changes in the AB’s functioning are sought by WTO members instead of one member, the US”, the envoy said.

“Members are compelled to offer concessions to the US for free without any payment,” the envoy added.

The “positive thing” about the facilitator’s report is that the selection process for filling vacancies can be started six months before the end of the term of an AB member, the envoy said.

But there is no guarantee that the US will accept any demand for launching the selection process at the AB now, the envoy said.

The US has remained conspicuously silent during the chair’s meetings while shifting the burden of reforming the AB to members, the envoy said.

“We have reached a situation where the US is now let off the hook while the burden of the AB reform is shifted to members,” the envoy said.