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TWN
Info Service on WTO and Trade Issues (Jun23/07) Geneva, 9 Jun (D. Ravi Kanth) — Several countries on 8 June apparently rebuffed a proposal from the United States on Appellate Review in the ongoing discussions at the World Trade Organization on the reform of the WTO’s dispute settlement system, in what is being seen as the US move to practically eliminate the Appellate Body, said people familiar with the development. At an informal discussion chaired by the facilitator, Mr Marcos Molina of Guatemala, on 8 June, several countries including China, the European Union, Canada, Australia, India, Pakistan, and South Africa appear to have opposed the US proposal on Appellate Review, said participants familiar with the discussion. During the plenary meeting, the facilitator apparently tried hard to see if the members could make progress on the US proposal during an entire working day (two sessions of three hours each), but his attempts were proved to be in vain, said people, who took part in the meeting. The facilitator, who is chairing the informal discussions, has been tasked to address the reform of the dispute settlement system under the mandate provided by trade ministers in paragraph four of the Outcome Document that was agreed upon at the WTO’s 12th ministerial conference (MC12) in June last year. As per paragraph four of the MC12 Outcome Document (WT/MIN(22)/24), trade ministers acknowledged “the challenges and concerns with respect to the dispute settlement system including those related to the Appellate Body, recognize the importance and urgency of addressing those challenges and concerns, and commit to conduct discussions with the view to having a fully and well-functioning dispute settlement system accessible to all Members by 2024.” The US has been largely responsible for making the Appellate Body dysfunctional after Washington repeatedly blocked the selection process for the appointment of members to the highest adjudicating body at the WTO since December 2019. It has effectively paralyzed the two-tier dispute settlement system since then. Against this backdrop, the US introduced a rather strong proposal on Appellate Review that seemed to suggest “a body without any teeth”, said negotiators familiar with the discussions. US PROPOSAL ON APPELLATE REVIEW As previously reported in the SUNS, the facilitator included the US proposal on Appellate Review in his so- called “yellow table” of proposals that are supposed to be more refined for further discussions. According to the “yellow table”, the US proposal on Appellate Review starts with “Selection of Adjudicators” under which the US sought an “amendment to Article 17.2 [of the Dispute Settlement Understanding pertaining to Appellate Review] to expedite the appointment of the Appellate Body” members and also a “Mechanism agreed by the Parties.” As per Article 17.2 of the Dispute Settlement Understanding (DSU), “the DSB (Dispute Settlement Body) shall appoint persons to serve on the Appellate Body for a four-year term, and each person may be reappointed once. However, the terms of three of the seven persons appointed immediately after the entry into force of the WTO Agreement shall expire at the end of two years, to be determined by lot. Vacancies shall be filled as they arise. A person appointed to replace a person whose term of office has not expired shall hold office for the remainder of the predecessor’s term.” Similarly, under the “scope of appeal/review mechanism” in the facilitator’s “yellow table”, the US proposed that the new Appellate Body would agree on the following conditions:
The proposed options include: “Option [1] features currently in the DSU and has broad support, Option 2, to consider a standard (of review) that provides the ability for appeal adjudicators to review issues of law covered in the panel report and legal interpretations developed by the panel, consistently [with] interests expressed by Members.” Significantly, the US proposal allegedly attenuated the current review of Procedures for Appellate Review in Article 17.9 of the DSU, said a negotiator, who took part in the proceedings. Paragraphs 17.9 to 17.13 of the Procedures for Appellate Review state as follows: “17.9. Working procedures shall be drawn up by the Appellate Body in consultation with the Chairman of the DSB and the Director-General, and communicated to the Members for their information. 17.10. The proceedings of the Appellate Body shall be confidential. The reports of the Appellate Body shall be drafted without the presence of the parties to the dispute and in the light of the information provided and the statements made. 17.11. Opinions expressed in the Appellate Body report by individuals serving on the Appellate Body shall be anonymous. 17.12. The Appellate Body shall address each of the issues raised in accordance with paragraph 6 during the appellate proceeding. 17.13 The Appellate Body may uphold, modify or reverse the legal findings and conclusions of the panel.” US PROPOSAL CHALLENGED At the meeting, several members including China, the EU, Canada, Australia, India, Pakistan, and South Africa raised sharp concerns over the US proposal, said another participant, who asked not to be identified. Some of them apparently disapproved of the US proposal on grounds that it would make the Appellate Body ineffectual, as it would severely circumscribe the Appellate Review, said the participant, who asked not to be identified. In short, the apparently exasperated facilitator concluded the meeting by saying that it is no use discussing when we cannot conclude on this issue. He apparently ended the meeting “in a huff,” said negotiators, who asked not to be quoted. PUSH-BACK AGAINST US PROPOSAL ON SUNSET PROVISION Earlier, as reported in SUNS #9795 dated 2 June 2023, several countries apparently pushed back against the controversial options proposed by the US in the ongoing informal consultations for reforming the WTO’s dispute settlement system, particularly on the “sunset provision” tabled by the United Kingdom and supported by the US, said people familiar with the discussions. The facilitator overseeing the informal consultations on reforming the WTO’s dispute settlement system (DSS) has issued a confidential “yellow table” of proposals, options, and observations in the ongoing informal DSS reform consultations. The facilitator, Mr Molina of Guatemala, suggested that the “yellow table” of proposals in cluster three contains more refined and elaborated proposed solutions for the issues identified by members. The facilitator’s “yellow table” in cluster three includes several proposals. It includes: (1) alternative dispute resolution mechanisms; (2) streamlined panel process; (3) accessibility; (4) accountability; and (5) focus on what is necessary to resolve the dispute. Among the five, the proposal on sunset provision under “accountability” seems to have raised considerable push-back from members. The sunset provision proposed by the United Kingdom, which is strongly supported by the US, appears to be the most divisive one. The UK introduced the proposal with the interests here pivoting around maintaining the integrity of the system, so the system does not shift from its original purpose. Apparently, it includes two sets of proposals: (1) a mechanism to review the DSS including reforms in order to monitor it on a systemic basis, and (2) it calls for adjudicative provisions to come to an end by (X) number of years. The proposal on “sunset provision in which the adjudicative provisions of the dispute settlement mechanism would sunset after “X” years unless members agree by consensus to extend” appears to have raised several observations. The observations made by the facilitator on the sunset provision include:
At the meeting, the US is understood to have said that the idea of a sunset review is interesting, suggesting that there could be certain divergences, as all would like to agree on something that would help avoid the abuse of the system. But several members such as Russia, South Africa, Canada, Pakistan, the EU, Australia, Norway, India, Thailand, Japan, and China apparently expressed opposition to the sunset provision for terminating the adjudication process after “X” number of years. Russia said that it cannot support the sunset provision proposal, while South Africa maintained its opposition on the ground that the provision will not help in creating accountability. Instead, it will create more uncertainty and slowly kill the DSU, South Africa appears to have observed, according to negotiators who took part in the consultations. Canada seems to have said it is not in favour of the sunset clause, while Pakistan indicated its opposition to the provision. Pakistan also said that the provision will bring unwanted political disadvantages to the process and disfavour the developing and least-developed countries. The EU apparently said that it strongly objects to the sunset provision, a stand shared by Australia, said negotiators who took part in the meeting. India asked the proponents to explain the intention and purpose of the sunset clause proposal as, according to India, it will put the system at risk instead of strengthening it. India said the US could better elaborate on the sunset clause in more detail. Japan apparently said the sunset clause is like offering a veto to all members, while China opposed the proposal somewhat vehemently, said negotiators, who asked not to be quoted. China also said that the sunset provision is a dangerous idea. In response to the sharp criticisms of the sunset provision, the US apparently defended the proposal by adding additional language, suggesting that “THE PURPOSE IS TO PROVIDE MEMBERS THE ABILITY TO UNDERTAKE A MEANINGFUL CHECK ON THE SYSTEM ADHERENCE TO THE AGREED RULES AND FUNDAMENTAL REFORMS,” said negotiators, who asked not to be identified. +
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