TWN Info Service on WTO and Trade Issues (Oct19/07)
10 October 2019
Third World Network

“Convergence” claimed on addressing US concerns over AB

Published in SUNS #8992 dated 8 October 2019

Geneva, 7 Oct (D. Ravi Kanth) – The facilitator tasked to resolve the deadlock over the appointment of members to the vacancies in the World Trade Organization’s Appellate Body (AB) has suggested that there is “convergence” on the language for addressing the concerns raised by the United States, trade envoys told the SUNS.

However, said trade envoys who asked not to be identified, the proposed changes as indicated by the facilitator, Ambassador David Walker of New Zealand, could undermine the “independence” and “the adjudicating functions” of the Appellate Body.

At an informal WTO General Council (GC) meeting on Friday (4 October), Ambassador Walker, who is also the chair for the Dispute Settlement Body, presented a report about his ongoing consultations with key members at various levels.

The consultations included Room E meetings with some 30 countries at the WTO as well as bilateral meetings with several countries.

Ambassador Walker said the proposed changes will be incorporated in a draft General Council decision that would be placed for consideration of members on 15 October.

As compared to the earlier report circulated by the facilitator on 25 July (Job/GC/220), the latest report issued on Friday further tightened the language on several issues, said a trade envoy, who asked not to be quoted.

The facilitator has suggested the following changes:

1. In “Transitional rules for outgoing Appellate Body members”, Ambassador Walker indicated that “only WTO members” have the power to appoint the AB member, as compared to the earlier report in which it was proposed that “the DSB” has the explicit authority, and responsibility, to determine membership of the Appellate Body.

Other elements of the Transitional rules for outgoing Appellate Body members as proposed in his report on 25 July remain largely the same.

The elements include automatic launching of the selection process to replace outgoing Appellate Body members within 180 days, and assigning a new division of work up until 60 days for an outgoing AB member.

2. 90-day rule: Consistent with Article 17.5 of the DSU [Dispute Settlement Understanding], an Appellate Body report is “obligated” to be issued instead of “needs” to be issued no later than 90 days from the date a party to the dispute notified its intention to appeal.

3. Advisory opinions: Issues that have not been raised by either party “may” not be ruled on instead of “should” not be ruled on as in the previous report.

4. On prior precedent, the Panels and the Appellate Body should take Panel/Appellate Body reports into account “only” to the extent they find them relevant in the dispute before them.

Apparently, Ambassador Walker did not suggest any changes on issues concerning “municipal law” and on “over-reach” in his earlier report, said a trade envoy from a developed country, who asked not to be quoted.

On the issue of precedent, Ambassador Walker had earlier indicated convergence on issues such as: “precedent is not created through WTO dispute settlement proceedings,” “consistency and predictability in the interpretation of rights and obligations under the covered agreements is of significant value to Members,” and “Panels and the Appellate Body should take previous Panel/Appellate Body reports into account to the extent they find them relevant in the dispute they have before them.”

Canada is understood to have raised serious concerns about the language on “prior precedents” as proposed by the facilitator because of its recent trade dispute with the United States in which one of the members of the panel – Mr Guillermo Valles Galmes of Uruguay, who was earlier the chair of the Doha Rules negotiating body – ruled that zeroing is permissible under the WTO rules, the trade envoy said.

The changes suggested by the facilitator in his latest report were apparently shared with the US prior to their announcement at the informal GC meeting on Friday, said another trade envoy, who asked not to be quoted.

It remains to be seen what the US will say on the facilitator’s latest report at the GC meeting on 15 October.

If the US continues to maintain that members have finally acknowledged that the AB had breached various provisions of the Dispute Settlement Understanding (DSU) in its functioning, and demands further inquiry into the root causes as to how the AB had reached this situation, then, one can expect that the AB will fade away from 11 December 2019 for at least one or two years, the envoy said.

When it finally comes back to the negotiating table on the future of the AB, the US could use the current changes in the language as the basis for further negotiations, the envoy said.

In effect, the US is getting substantial changes in the DSU without having to pay for any amendments, the envoy lamented.

“Ultimately, the facilitator is only paving the way for undermining the “independence” and the “adjudicating functions” of the AB,” the envoy maintained.

[According to the WTO treaty, some of the changes proposed in the DSU would need explicit consensus of the membership to be adopted. A few others may need, after due notice, an “authoritative interpretation” by a specified three-fourth’s majority of the membership at a Ministerial Conference (MC) or in between meetings of the MC at the General Council. In some cases, it may need an amendment to the WTO treaty and/or the DSU.

[Trade experts also note that if by early December, the problem is not solved, and the AB becomes dysfunctional for lack of quorum, the DSU and its rules for appeal, and abatement of panel rulings and their adoption by negative consensus, pending disposal of appeal (the moment notice of appeal is given), will still be in play. See Chakravarthi Raghavan (2019), “The WTO and its Existential Crisis”, Trade and Development Series, No. 43, Third World Network, Penang. SUNS]