TWN Info Service on WTO and Trade Issues (Jul19/30)
26 July 2019
Third World Network

US criticized for “shifting goalposts” in AB crisis

Published in SUNS #8954 dated 25 July 2019

Geneva, 24 Jul (D. Ravi Kanth) – Several members of the World Trade Organization criticized the United States on Tuesday (23 July) for its stonewalling tactics and shifting the goalposts for improving the functioning of the Appellate Body (AB), trade envoys told the SUNS.

During a discussion at the WTO’s General Council on the report submitted by the facilitator for addressing the impasse at the AB, the US trade envoy Ambassador Dennis Shea delivered a long statement on the pros and cons of the report of the facilitator, Ambassador David Walker of New Zealand, that suggested areas of convergence as well as areas where members continued to have differences on the concerns raised by the US (see SUNS #8951 dated 22 July 2019).

Ambassador Shea claimed that the US has endeavoured to “foster a dialogue so that we as WTO members have a shared understanding of the rules” on the role of the AB.

Although the US has not submitted any proposals or solutions to the problems it had identified in the functioning of the AB, he claimed that the US had constructively participated in all the meetings concerning the functioning of the AB.

The US trade envoy said members have now acknowledged that “the AB has consistently breached and continues to breach the clear rules of the DSU.”

While it would have been desirable to recognize these breaches by the AB now, it would have been beneficial if it had been recognized some time ago when the AB departed from the provisions of the Dispute Settlement Understanding (DSU).

The US welcomed some of the proposals that called for amendments to address the need to submit reports by the AB within 90 days, the concerns on municipal law, the issue of precedent, and concerns about “overreach” among others (proposals submitted by Japan, Australia, and Brazil).

“At the same time we question some of the proposals which fail to recognize any breach by the AB and would even change the rules to empower the AB and would diminish its accountability (proposals by the European Union, China, and India),” the US trade envoy said.

“Given that some members appear prepared to condone the continued rule-breaking by the AB, it is not surprising that the facilitator’s report reflects only limited progress,” Ambassador Shea said.

He said while the DSU text is clear about the functioning of the AB, the highest adjudicating body has repeatedly ignored the DSU text. He said some members have not focussed on how the AB strayed from the DSU.

The US envoy expressed dismay that “one, or perhaps a few, WTO members have indicated they do not share the concerns of the US that the Appellate Body has deviated from the DSU text.”

Without naming the EU, China, India, and several other countries, the US trade envoy said “these Members have not, however, adequately or persuasively explained how they could read the plain DSU text differently.”

Ambassador Shea went on to ask “how have we come to this point where the Appellate Body, a body established by Members to serve the Members, is disregarding the clear rules that were set by those same Members.”

“In other words, Members need to engage in a deeper discussion of why the Appellate Body has felt free to depart from what Members agreed to,” he said.

The US trade envoy said that “engagement is a two-way street … (and) without further engagement from WTO Members on the cause of the problem, there is no reason to believe that simply adopting new or additional language, in whatever form, will be effective in addressing the concerns that the United States and other members have raised.”

Barring the praise about the US statement by Japan, Australia, and a few other members, many countries voiced sharp concerns about the US statement, said a trade envoy, who asked not to be quoted.

Without naming the US, India said “the important thing to see is whether the Member [the US] blocking the appointments to the Appellate Body has any new comments or reactions to the report.”

Despite tabling 12 proposals for addressing “the concerns raised by the member blocking the appointments, we are no closer to a solution than we were at the beginning of the year,” India said.

“The focus should remain on solution-oriented approaches that explore ways in which the concerns with the functioning of the Appellate Body can be addressed in a manner that accommodates the interests of the entire membership and preserves the essential features of the system,” India said.

The Indian envoy to the WTO, Ambassador J S Deepak, said, “most WTO members do not want international trade without rules, or to be more precise, international trade where the rules are whatever the strongest party to a dispute says the rules are.”

He warned that despite sustained efforts by WTO members to preserve an effective rules-based dispute settlement system, time is running out for saving the AB from permanent paralysis.

“We hope to see real engagement from the United States,” Ambassador Deepak emphasized.

According to a trade envoy from a developed country, who asked not to be quoted, the US statement on the facilitator’s report raised the bar further after securing fundamental concessions from the facilitator which are bound to weaken the AB.

The US now wants members to go back to the issue of how the AB departed from the rules, instead of offering concrete answers to improve the functioning of the AB.

“Clearly, the US is shifting the goalposts” by demanding a harmonized understanding on the breaches created by the AB, the envoy suggested.

In its first intervention, China welcomed the facilitator’s report and the specific suggestions made by Ambassador Walker on his own judgement aiming to seek the convergence of members.

China’s trade envoy Ambassador Zhang Xiangchen, in his second intervention, said “blocking the selection process of the Appellate Body by the United States cannot be justified by any reason.”

Despite efforts by members to break the deadlock for starting the selection process, members did not get any positive response from the United States, the Chinese envoy said.

Ambassador Zhang welcomed the US statement on the facilitator’s report, saying that “we heard some substantive comments by the United States on specific issues.”

“We view it as a kind of improvement,” the Chinese envoy said, adding, “however, that is not enough – what we need most is specific suggestions and counter-proposals.”

“The informal process is not a one-way traffic that one member raises questions while others compete to answer,” Ambassador Zhang maintained.

In short, the US seems determined not to offer any concrete solutions for ensuring that the AB remains functional after 11 December 2019, when it would be reduced to one member, several trade envoys told the SUNS.