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TWN
Info Service on WTO and Trade Issues (Jul23/04) New Delhi, 6 Jul (D. Ravi Kanth) — The United States on 5 July spelled out its “objectives” for a “reformed dispute settlement system”, including banning discussions on issues pertaining to national security interests during the adjudication of trade disputes. The US proposal of “objectives” appears to be a move to “weaponize” trade-restrictive measures/sanctions against countries with whom Washington seems to be having rather “frosty” trade and political relations, said people familiar with the negotiations. Surprisingly, the US “objectives” remain silent on preserving the existing two-tier dispute settlement system, with the Appellate Body as the final adjudicating arm of the World Trade Organization’s enforcement function. Recently, the US apparently faced “rough weather” over its ideas/proposals for the reform of the WTO’s dispute settlement system, as many members rebuffed Washington’s ideas/proposals on appellate review and sunset provisions amongst others in the ongoing informal discussions being conducted by a facilitator. Against this backdrop, the US says that it intends “to lead in all areas where we can contribute, including on dispute settlement reform, but achieving fundamental reform can only happen through a collective, Member- driven process.” It says that Washington is “determined to pursue an interest-based, inclusive process that brings in all WTO Members as we work towards fundamental reform.” It adds that Washington will “work towards producing a system that reinforces the principles of fairness, equity, and sovereignty that underlie support for the multilateral trading system.” Instead of focusing on the central role accorded to a two-tier dispute settlement system to oversee the enforcement function of the WTO, the US says that “the dispute settlement system should preserve the policy space in WTO rules for Members to address their critical societal interests and support rather than undermine the WTO’s role as a forum for discussion and negotiation to help Members address new challenges.” The reform of the WTO’s dispute settlement system was mandated by trade ministers at the WTO’s 12th ministerial conference (MC12) last June. In paragraph four of the Outcome Document (WT/MIN(22)/24) issued at MC12, 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.” Yet, the battle over the reform of the WTO’s dispute settlement system seems to be increasingly becoming one between the US on the one side, and the rest of the membership, on the other, said several negotiators familiar with the ongoing informal discussions. The US says that the “success of dispute settlement reform efforts depends on understanding each other’s interests in dispute settlement”, instead of adjudicating on disputes as set out in the existing Dispute Settlement Understanding (DSU), said negotiators. Although the US acknowledges the “contributions of all Members” in driving these discussions with the assistance of a capable facilitator, it says that “no Member dictates the terms of reform.” Washington says that it has “shared a number of ideas on dispute settlement reform in the informal discussions, with an open mind to different ways of achieving the interests that we and other Members have identified.” However, the ideas shared by the US on dispute settlement reform seem to have been opposed by many members during the informal discussions, said negotiators familiar with the discussions. The US maintains that it will “support the work of the facilitator (Mr Marcos Molina, the deputy trade envoy of Guatemala) and will not disclose information that may undermine the constructive nature of the discussions so far.” Recently, the US complained about a write-up in this publication that informed members outside the informal discussions about the state of play in the negotiations as well as the growing opposition to the US ideas, said negotiators, who preferred not to be quoted. According to the US in its proposal of “objectives”, “a well functioning dispute settlement system supports all WTO Members in the resolution of their disputes in an efficient and transparent manner, and in doing so limits the needless complexity and interpretive overreach that has characterized dispute settlement in recent years.” THE US “OBJECTIVES” While claiming that it is not advancing specific negotiating proposals at this time, the US says its “objectives” are intended to contribute to constructive discussions among Members. It listed the following “positive contributions of a reformed dispute settlement system.” They include: 1. FACILITATING THE RESOLUTION OF TRADE DISPUTES: The US complained that “the use of dispute settlement to create new rules has contributed to the atrophy of the monitoring and deliberative functions of the WTO.” Therefore, it says that it would “support a system in which dispute settlement remains focused on assisting Members in resolution of their disputes, and preserves the roles of the monitoring and deliberative functions of the WTO.” 2. MAINTAINING EXISTING COMMITMENTS AND RULES AS AGREED: The US says that “WTO dispute settlement cannot be a means to change the commitments and rules of the WTO agreements without the consent of all Members.” It adds that, “We support a system that respects the rules, including the policy space left to Members, as agreed by Members.” 3. PRESERVING AND PROMOTING FAIRNESS IN THE TRADING SYSTEM: The US again reiterated its complaint that “WTO dispute settlement adjudicators have interpreted commitments and rules in ways that undermine core values, such as the ability of Members to protect their workers and businesses from non-market economic distortions, to promote democracy and human rights, or to protect human health or the environment.” It says that it would “support a system that enables rather than undermines Members’ ability to promote and defend their values so that the trading system is a force for good.” 4. RESPECTING THE ESSENTIAL SECURITY INTERESTS OF MEMBERS: The US says that “WTO dispute settlement cannot be a forum for debating and deciding on the essential security interests of Members.” Washington says that it would “support a system that respects the right of Members to determine what action is necessary to protect their essential security interests.” 5. UTILIZING ALL AVAILABLE TOOLS TO RESOLVE DISPUTES: The US again complained that “WTO dispute settlement has become synonymous with litigation, leading to increased judicialization of the system.” It wants a “system that maximizes the tools available under the DSU to assist WTO Members in resolving trade disputes.” 6. REDUCING COSTS TO ENABLE WIDER ACCESS TO DISPUTE RESOLUTION: The US says that “WTO dispute settlement is prohibitively expensive for most WTO Members, failing to deliver a system for resolving trade disputes that can be effectively utilized by all Members.” It wants to support “a system that makes the dispute settlement system accessible and affordable for all Members, in particular capacity constrained Members.” 7. RESOLVING DISPUTES EFFICIENTLY: The US complained that “WTO dispute settlement proceedings routinely drag on for years, failing to deliver an effective solution for governments and stakeholders.” It wants “a more streamlined, efficient form of dispute resolution.” 8. PROMOTING TRANSPARENCY OF THE SYSTEM: The US claimed that “WTO dispute settlement has nothing to hide from the public,” and therefore, called for a “system that can be better understood and accessed by Members who are not directly involved in the dispute and the public.” 9. BUILDING TRUST IN THE SYSTEM AND ITS RESULTS: The US argued that “WTO dispute settlement adjudication must produce results that have credibility and legitimacy among Member governments and their stakeholders.” The WTO is an intergovernmental organization and stakeholders in the countries are represented by their government, it pointed out. It called for “a system that delivers quality, consistent, and efficient adjudication through the fair application of treaty interpretation according to the terms of the agreements as agreed by Members while leaving to Members to further develop their commitments and rules through negotiation.” 10. SAFEGUARDING THE INTEGRITY OF THE DISPUTE SETTLEMENT SYSTEM: As in previous instances, the US again complained that “WTO dispute settlement departed over time from the system envisioned and agreed to by Members in the DSU.” It called for “a system that provides opportunities for meaningful assessment of all participants in the system and mechanisms for ongoing improvement to ensure the system continues to deliver for Members.” The US “objectives” for a reformed dispute settlement system seem like a “red herring” in which the US does not want a proper two-tier dispute settlement system where issues are decided on their legal and compliance merits, said several negotiators, who asked not to be quoted. Recently, at an informal discussion on 8 June chaired by the facilitator, Mr Marcos Molina of Guatemala, several countries including China, the European Union, Canada, Australia, India, Pakistan, and South Africa apparently opposed the US proposal on Appellate Review, said participants familiar with the discussion. As reported in the SUNS, 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 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. When referring to the two-tier dispute settlement system, a deeper conversation also needs to be had on the implications that a departure from the two-tier system will have on the Marrakesh Agreement and its subsequent amendment procedures, said a former negotiator, who is closely following the negotiations on dispute settlement reform. The former negotiator said: “Proponents of WTO reform are seeking one fundamental change to the current legal architecture in the WTO i.e., to change the practice of consensus under Article IX.1 on decision-making for two main purposes. The first is to seek a system overhaul to formally bring in new issues for negotiations without requiring the consensus of the whole membership. The second is to eliminate the requirement for consensus under Article X.8 on amendments. “The premise of the latter objective is to amend the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) because it mandates the Dispute Settlement Body (DSB) to establish a standing Appellate Body to hear appeals from panel cases according to Article 17. It lays out the composition of the Appellate Body and the procedures for Appellate Review. Since the DSU is classified as an Annex 2 agreement according to the Marrakesh Agreement, any amendment to the DSU under Article X.8 shall be made by consensus.” +
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