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TWN
Info Service on WTO and Trade Issues (Apr23/14) Geneva, 25 Apr (D. Ravi Kanth) — The United States appears determined to reduce the World Trade Organization’s two-tier dispute settlement system to a single-tier body based on the principle of “might is right”, if members allow Washington to persist with its apparently radical proposals in the run-up to the 13th ministerial conference (MC13), to be held in Abu Dhabi in February 2024, said people familiar with the ongoing discussions at the WTO on reforming the dispute settlement system. In a confidential document containing a matrix of proposals, reviewed by the SUNS, the US proposals lay the ground for a radical overhaul of the dispute settlement system (DSS), suggesting that there may be no more Appellate Body that was created as part of the Uruguay Round’s Final Act, which established the WTO in 1995. This appears to be part one of the US proposals that include various drastic changes in the composition of the panels among other issues. PARALYSIS OF APPELLATE BODY It is public knowledge that the WTO’s dispute settlement system remains derailed due to the systemic paralysis of the Appellate Body brought about by the US, the world’s largest trading member. Trade ministers at the WTO’s 12th ministerial conference (MC12) held in Geneva last June mandated members “to conduct discussions with the view to having a fully and well-functioning dispute settlement system accessible to all Members by 2024”. For the past few months, Guatemala’s deputy trade envoy Mr Marco Tulio Molina Tejeda has been conducting an informal process in which the US, the European Union, Japan, Canada, Korea, Australia, China, Hong Kong (China), India, Pakistan, the African Group, Brazil, and some members of the Caribbean group among others are apparently taking an active part, according to people who spoke to the SUNS. An initial glance at the proposals tabled by the US during these informal discussions seems to have raised several concerns among members like the EU, China, India, Australia, New Zealand, Indonesia, the African Group, and Pakistan among others, said people familiar with the discussions. The US seems to have succeeded in totally stymying the Appellate Body despite repeated requests from more than 125 countries for reviving the Appellate Body by appointing its seven members as soon as possible to enable them to continue with the core function of adjudication, said people, who asked not to be quoted. Washington seems to be in no mood to give up its “my way or the highway” approach. From the comments made by members on the US proposals, it appears that things are not progressing well, said people, who preferred not to be identified. THE US PROPOSALS The initial set of US proposals provides some insights into how the US wants to reform the dispute settlement system (DSS). To start with, on the issue of panel composition and expertise, the US says that members have expressed interest in ensuring that an adjudicator has the appropriate experience and level of expertise and maintaining the integrity of the system over time. Maintaining an updated indicative list may advance these interests, it added. In identifying its concerns, challenge, or improvement to the system, the US says: “One way to help address these interests/concerns would be to refresh the indicative list through a dedicated process, to include improved categorization of panelists and functionality of the list (i.e., searchable).” In response to the US proposal, it is observed by members in the document that “the proposed solution would [be] one way to improve the mechanisms through which panel selection processes are carried out.” On a second proposal by the US, which also deals with the issue of panel composition and expertise, the US says that its interests include ensuring that an adjudicator has the appropriate experience and level of expertise, ensuring high-quality decision-making by an adjudicator, not support staff, and maintaining the integrity of the system over time. In the same breath, the US says that it is apparently concerned that the existing code of conduct does not provide sufficient clarity on Members’ expectations for the independence and impartiality of panelists and the (WTO) Secretariat. The US argues that “one way to help address these interests/concerns would be to strengthen the code of conduct for the panelists and (WTO) Secretariat, including to strengthen the concepts of independence and impartiality.” “The proposed solution” by the US “would be one way to ensure that members have confidence in the independence and impartiality of the system”, members apparently observed. Further, the solution offered by the US would help meet “our interest in a system that ensures that an adjudicator has the appropriate experience and level of expertise, ensures high-quality decision-making by an adjudicator, not support staff, and maintains the integrity of the system over time,” participants in the discussions seem to have observed. The third proposal by the US, which appears to have generated some serious comments, is on “no expansion of rights or obligations; consistency.” The underlying rationale of the third proposal by the US is that members’ interests include defining the role of an adjudicator as helping Members resolve disputes, defining what an adjudicator should or should not address to assist in resolving the dispute, defining what an adjudicator should give the parties to assist in resolving the dispute, maintaining the integrity of the system over time, having a system that respects the roles of the negotiating and monitoring functions of the WTO, maintaining policy space for Members where they have not clearly undertaken a commitment to govern their activities, and maintaining the prerogative of Members to agree to new commitments where they have not clearly undertaken a commitment to govern their action. Despite members’ agreement that WTO reports are not precedent and should have no precedential effect, the US said “we are concerned that, over time, WTO reports have become de facto precedential, including through legal standards for precedent developed by adjudicators.” The proposed solution to the third issue, according to the US, is that “one way to help address interests/concerns would be to correct erroneous interpretations in the past, including interpretations in past dispute settlement reports, including interpretations concerning the essential security exception (which the US recently rejected in a panel ruling in favour of China), trade remedies (including public body and benchmarks) and others identified by the United States or other members.” Apparently, questions were raised on the third US proposal, namely, “Would this “correction of erroneous interpretations” result in retrospective correction of rights or obligations as well? Or is it to only establish a guideline for adjudication in the future, in which case this is more like a reiteration of sorts for the idea of a review by WG (Working Group)/committee”. The EU and Indonesia seem to have raised the same queries, according to people familiar with the discussions. In to-and-fro questions about the third US proposal, Washington is understood to have said, “That’s not our intent.” It apparently suggested that it is not “re-opening any specific disputes, but wherever there is an erroneous decision, there shall be an option to re-correct it, and let’s not let wrong decisions just sit in the system unaddressed. (National security interpretations are very serious issues and members shall have autonomy there). Plus, this right now is a cess identifying our issues and problems, solutions can follow in due time,” said people, who asked not to be quoted. Hong Kong (China) seems to have observed that the word “erroneous” is very subjective and that it could open “a Pandora’s box”. It asked how the US believes it is not going to be retrospective. India apparently sought to know whether the US sees this as a continuous review or a one-time exercise. Russia appears to have cautioned that if the third US proposal is approved, potentially every case has erroneous interpretations, at least in the eyes of the losing member. Russia also warned that this proposal by the US doesn’t contribute to the mandate of reviving the Dispute Settlement Body by February 2024, said people familiar with the discussions. Brazil apparently asked whether the US proposal is tantamount to establishing a mechanism that is different from Article 9.1 of the Marrakesh Agreement or is it an authoritative interpretation invoking Article 9.2 on a closed list of cases. Article 9.1 of the Marrakesh Agreement on decision-making states: “The WTO shall continue the practice of decision-making by consensus followed under GATT 1947. Except as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting. At meetings of the Ministerial Conference and the General Council, each Member of the WTO shall have one vote. Where the European Communities exercise their right to vote, they shall have a number of votes equal to the number of their member States which are Members of the WTO. Decisions of the Ministerial Conference and the General Council shall be taken by a majority of the votes cast unless otherwise provided in this Agreement or in the relevant Multilateral Trade Agreement.” Article 9.2 states: “The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements. In the case of an interpretation of a Multilateral Trade Agreement in Annex 1, they shall exercise their authority on the basis of a recommendation by the Council overseeing the functioning of that Agreement. The decision to adopt an interpretation shall be taken by a three-fourths majority of the Members. This paragraph shall not be used in a manner that would undermine the amendment provisions in Article X.” In response to the above queries, the US apparently suggested that this is not a precondition to go for Article 9.2 of the Marrakesh Agreement but that is one way where any member can propose to re-negotiate something. The US also suggested that it does not envision a panel doing this but it is a member-driven process. Nigeria is understood to have said the US is flexible and does not want it to be retrospective. China asked what is the difference between this proposal and the Article 9.2 model of authoritative interpretation. India apparently said that “the devil is in the details”, and asked the US to come up with more details so a solid stance may be developed by all members. New Delhi also sought to know how one sees the Appellate Body shaping up and the outcomes of the entire package. India said these are two important things that will finally enable a member to comment on this proposal. The Guatemalan facilitator is understood to have said that India is right, suggesting that members shall work with more details. Mr Marco also said we need to decide if a decision or interpretation can be thought of as erroneous. There are several other issues that the US raised in its proposals including the appeal/review mechanism and WTO Secretariat support among others. From the ongoing discussions, it appears that reaching a credible outcome on the reform of the dispute settlement system by February 2024 seems difficult, as many members apparently have serious reservations about the US proposals, said people who asked not to be quoted. +
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