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TWN Info Service
on WTO and Trade Issues (Apr22/24) Geneva, 28 Apr (D. Ravi Kanth) – The United States has again blocked a proposal from 123 WTO members that called for urgently kick-starting the selection process to fill seven vacancies at the Appellate Body, the highest adjudicating arm of the two-tier dispute settlement system, which was made dysfunctional by Washington in December 2019. At a meeting of the WTO Dispute Settlement Body (DSB) on 27 April, Mexico, on behalf of the large number of members, reiterated their proposal, for the 53rd time, on filling these vacancies in order to restore the Appellate Body (AB), so as to ensure the continued operation of the enforcement function of the WTO, said people familiar with the development. The ongoing dysfunctional state of the AB, after Washington blocked a draft General Council (GC) decision on the functioning of the AB in December 2019, has seriously affected the two-tier dispute settlement system against the interests of the members, Mexico emphasized at the DSB meeting. "KICKING THE CAN DOWN THE ROAD" In her first appearance at the DSB meeting as the US trade envoy, Ambassador Maria Pagan said that Washington "values the work of Members in the DSB, and I look forward to supporting you, as Chair, in this important body." Ambassador Pagan, who had participated in DSB proceedings in the past, maintained that "members are aware of the longstanding US concerns with WTO dispute settlement." However, she did not shed any light on what precisely are the US concerns about the functioning of the AB. However, she went on to say that "those concerns remain unaddressed, and the United States does not support the proposed decision." Ambassador Pagan's statement, posted on the website of the US mission to the WTO on 27 April, suggests that Washington supports the WTO's reform of the DSB. She said "like Ambassador Tai (the US Trade Representative), I have personally participated in various dispute settlement proceedings, and I can appreciate the benefits of a system that effectively meets the needs of Members." She claimed that the "WTO dispute settlement currently fails in this regard – for many years it has not met the needs of Members, including the United States, for example, due to its complexity, delays, lack of transparency, and interpretive overreach." Surprisingly, the issues raised by Ambassador Pagan had been addressed in a draft GC decision (WT/GC/W/791) dated 28 November 2019 (see below). Barring the US, all other members gave their approval to that GC decision in December 2019. So, it appears to be factually incorrect for the US trade envoy to suggest that these issues – complexity of WTO dispute settlement, delays, lack of transparency, and interpretive overreach – were not addressed. In her statement at the DSB, Ambassador Pagan said that "we know well that many Members share the US concerns with the functioning of the system and its negative impact on the WTO's negotiating and monitoring functions." It remains unclear as to who are these "many Members" that the US trade envoy referred to that supported the US concerns, as she did not name these members. The US trade envoy, without offering any concrete evidence, said that this fact underscores the importance of understanding better the interests of all Members, and not just "what does the United States want". In effect, she seems to be shifting the problem to the members as though it is the members' problem. The fact that 123 members have sought to kick-start the selection process to fill the seven vacancies at the AB only goes to suggest that the members themselves do not seem to have any problems with the AB, said people familiar with the process. According to the US trade envoy, "a true reform discussion should aim to ensure that WTO dispute settlement reflects the real interests of Members, and not prejudge what a reformed system would look like." So far, the US has not tabled any concrete proposal as to what are its precise concerns about the AB. Yet, it continues to maintain ad infinitum that Washington's concerns are not being addressed, said people familiar with the DSB reform discussions. "My delegation has been, and will continue to be, hard at work meeting with Members to better understand the interests of all Members," said the US trade envoy at the DSB meeting. Ambassador Pagan asserted that "this important first step provides us with the greatest chance of achieving durable, lasting reform. That is the goal of the United States and we are prepared for continued and deepened engagement with Members on that basis." Effectively, the US statement appears to have reflected that Washington is in no mood at this juncture to restore the AB, said a trade envoy, who asked not to be quoted. "It has merely kicked the can down the road," the envoy said. In response to Ambassador Pagan's statement, apparently more than 20 members, including the European Union, Nigeria on behalf of the African Group, and St Vincent and the Grenadines on behalf of the Organization of Eastern Caribbean States, reiterated the importance of the WTO's two-tiered dispute settlement system, said a trade official, who preferred not to be quoted. These members argued that the continued impasse over the AB was causing both commercial harm to members and "systemic" harm to the 164-member intergovernmental, rules-based, and member-driven organization, the trade official said. In its intervention, China said it supports the statement delivered by Mexico on behalf of the 123 co-sponsors of the joint proposal. Referring to its previous statements, China reiterated its "firm commitment to an independent and impartial two-tier dispute settlement system." China argued that "the paralysis of the Appellate Body has posed serious challenges to the multilateral trading system, and more and more cases have been appealed into the void." "This severe and unsustainable situation not only deprives members' right to defend their interests, but also jeopardizes the security and predictability of this rules-based organization," China said. It welcomed the positive momentum that has emerged from the recent activities, and called upon all members "to engage constructively in the solution-based consultation with a view to breaking the selection impasses and restoring a fully functioning dispute settlement system at the earliest date, which we believe is in the interest of the entire membership." Furthermore, China expressed disappointment with the US for failing to "implement the adopted rulings and recommendations after more than three years of the expiry of the reasonable period of time." In a hard-hitting second intervention at the DSB meeting, Mexico, on behalf of the 123 members, said that "the fact that a member may have concerns about certain aspects of the functioning of the Appellate Body cannot serve as a pretext to impair and disrupt the work of the DSB and dispute settlement in general, and that there was no legal justification for the current blocking of the selection process, which is causing concrete nullification and impairment of rights for many members." Russia, which came under criticism at the meeting for its violation of the sovereignty and territorial integrity of Ukraine, said it supported the launch of the selection process for the appointment of new Appellate Body members. Russia criticized the members for bringing political issues into the DSB agenda. Norway said that it is encouraged by the US statement made by Ambassador Pagan, the trade official said. At a time when the US appears to be exhorting the members on the proposed WTO reforms, including on "plurilateralizing" the WTO for negotiating on the new non-mandated issues, Washington's continued blocking of the attempts to restore the AB seems to have eroded its credibility, said people, who asked not to be quoted. DRAFT GC DECISION ON AB In November 2019, after working for almost a year, then GC chair, Ambassador David Walker from New Zealand, proposed a draft decision, which was supported by the members except the US. The draft decision is as follows: "Transitional rules for outgoing Appellate Body members 1. Only WTO Members may appoint members of the Appellate Body. 2. The Dispute Settlement Body (the "DSB") has the explicit authority, and responsibility, to determine membership of the Appellate Body and is obligated to fill vacancies as they arise. 3. To assist Members in discharging this responsibility, the selection process to replace outgoing Appellate Body members shall be automatically launched 180 days before the expiry of their term in office. Such selection process shall follow past practice. 4. If a vacancy arises before the regular expiry of an Appellate Body member's mandate, or as a result of any other situation, the Chair of the DSB shall immediately launch the selection process with a view to filling that vacancy as soon as possible. 5. Appellate Body members nearing the end of their terms may be assigned to a new division up until 60 days before the expiry of their term. 6. An Appellate Body member so assigned may complete an appeal process in which the oral hearing has been held prior to the normal expiry of their term. 90 Days 7. Consistent with Article 17.5 of the DSU, the Appellate Body is obligated to issue its report no later than 90 days from the date a party to the dispute notifies its intention to appeal. 8. In cases of unusual complexity or periods of numerous appeals, the parties may agree with the Appellate Body to extend the time-frame for issuance of the Appellate Body report beyond 90 days. Any such agreement will be notified to the DSB by the parties and the Chair of the Appellate Body. Scope of Appeal 9. Article 17.6 of the DSU restricts matters that can be raised on appeal to issues of law covered in the relevant panel report and legal interpretations developed by that panel. 10. The "meaning of municipal law" is to be treated as a matter of fact and therefore is not subject to appeal. 11. The DSU does not permit the Appellate Body to engage in a "de novo" review or to "complete the analysis" of the facts of a dispute. 12. Consistent with Article 17.6 of the DSU, it is incumbent upon Members engaged in appellate proceedings to refrain from advancing extensive and unnecessary arguments in an attempt to have factual findings overturned on appeal, under DSU Article 11, in a de facto "de novo review". Advisory Opinions 13. Issues that have not been raised by either party may not be ruled or decided upon by the Appellate Body. 14. Consistent with Article 3.4 of the DSU, the Appellate Body shall address issues raised by parties in accordance with DSU Article 17.6 only to the extent necessary to assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements in order to resolve the dispute. Precedent 15. Precedent is not created through WTO dispute settlement proceedings. 16. Consistency and predictability in the interpretation of rights and obligations under the covered agreements is of significant value to Members. 17. 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. "Overreach" 18. As provided in Articles 3.2 and 19.2 of the DSU, findings and recommendations of Panels and the Appellate Body and recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements. 19. Panels and the Appellate Body shall interpret provisions of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 in accordance with Article 17.6(ii) of that Agreement. Regular dialogue between the DSB and the Appellate Body 20. The DSB, in consultation with the Appellate Body, will establish a mechanism for regular dialogue between WTO Members and the Appellate Body where Members can express their views on issues, including in relation to implementation of this Decision, in a manner unrelated to the adoption of particular reports. 21. Such a mechanism will be in the form of an informal meeting, at least once a year, hosted by the Chair of the DSB. 22. To safeguard the independence and impartiality of the Appellate Body, clear ground rules will be provided to ensure that at no point should there be any discussion of ongoing disputes or any member of the Appellate Body." In conclusion, it seems safe to say that the US may never agree to the restoration of the AB and in all likelihood would like to go back to the GATT dispute settlement process where the major members can block adverse rulings.
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