The Slow Killing of the World Trade Organization

The Slow Killing of the World Trade Organization
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Nov. 17, 2017

Co-authored by Manfred Elsig and Mark Pollack

The Trump administration threatens to end the world’s trade court, the Appellate Body (AB) of the World Trade Organization (WTO), by blocking the appointment of new AB judges. In doing so, it risks destroying the rules-based trading system that the U.S. constructed after the end of the Cold War.

The U.S. cites two reasons for its actions. First, it contends that the AB has been activist, creating law through legal rulings that impose new obligations on the U.S.. Second, it objects to the long-standing practice of AB members continuing to serve on cases after their term ends.

As to the first complaint, judicial activism is in the eye of the beholder, and is a perennial issue regarding courts. The Obama Administration earlier blocked the reappointment of a single judge, the South Korean member, whom it accused of judicial activism.

The Trump Administration, however, has gone dramatically farther. It is blocking the process to identify nominees for three open positions, which will paralyze the seven-member body. It justifies this induced paralysis by questioning the legitimacy of the WTO and its dispute settlement system.

The WTO, World Trade Organization, was set up for the benefit for everybody but us. They have taken advantage of this country like you wouldn’t believe.… As an example, we lose the lawsuits, almost all of the lawsuits in the WTO…. Because we have fewer judges than other countries. It’s set up as you can’t win. In other words, the panels are set up so that we don’t have majorities. It was set up for the benefit of taking advantage of the United States.

To the rest of the WTO membership, this statement is ludicrous, but alarming. First, only the U.S. and European Union have always had a national on the AB, unlike any other members. Far from being discriminated against in this regard, the U.S. is one of two privileged members when it comes to naming AB members.

Second, there is no evidence that either WTO dispute settlement panels or the Appellate Body are biased against the U.S. When it comes to actual claims, the U.S. “win” rate is better than that of all other major users of the system. The U.S. wins roughly 78% of its claims as a complainant before WTO panels (compared to 69% for the rest of the membership) and 36% as a respondent (compared to 25% for the rest). Before the Appellate Body, the U.S. is successful in having panel decisions overruled in 35% of all cases (compared to 30% of members’ appeals against the U.S.). The U.S. wins some and loses some, but there is no evidence to support the President’s claims that WTO dispute settlement is stacked against the U.S.

The second argument—that AB members should cease working on cases after their term expires— may seem defensible at first impression. Yet, there are strong counter-arguments against it, based on law, practice, and policy.

First, the Working Procedures of the WTO Appellate Body, created in 1996, provide for the practice: “A person who ceases to be a Member of the Appellate Body may, with the authorization of the Appellate Body and upon notification to the DSB, complete the disposition of any appeal to which that person was assigned while a Member.” This procedure is normal for judges with fixed terms, as reflected in the Rules of the International Court of Justice (Article 33), as well as those of the United States own International Trade Commission (Section 1330 of the U.S. Tariff Act).

Second, this is longstanding WTO practice, and occurs regularly in the years when there is AB turnover. In total, AB members have completed work on panels in fourteen cases after their terms expired. If normal timelines are kept, the extension is for a matter of days or weeks.

Third, there is a reason for the practice. The WTO Dispute Settlement Understanding provides that AB members shall complete appeals in 60 days “as a general rule,” and “in no case shall proceedings exceed 90 days.” The timelines are tight, much tighter than for other courts, and it was the U.S. that insisted on them. If an AB process has already started, there is simply no time for a new judge to step in.

In short, the AB practice is neither irregular, nor new, nor unfounded. It has been in operation for over twenty years, with no complaint from the US or other members.

But now the United States is endangering the entire dispute-settlement system by blocking the process for the replacement of AB members. There will be only four members (out of seven) left in December, and only three later next year.

The tactic for blocking the appointment of judges to kill an international court has been used only once before. Zimbabwe’s President Robert Mugabe used the tactic against the Tribunal for the 15-member Southern African Development Community after a ruling against one of his land seizures. As Alter, Gathii and Helfer write, “by refusing to agree to renew or reappoint the judges—acts that required the consent of all member states—Mugabe ensured that the Tribunal would eventually cease to function even if its legal mandate remained intact.” That Tribunal remains suspended to this day.

Although the U.S. is completely isolated on the AB issue, angering its allies, there is little the WTO membership can do because decisions under the WTO Dispute Settlement Understanding (DSU) must be taken “by consensus.” By taking a page from Mugabe’s playbook, the Trump administration risks paralyzing or shutting down the WTO’s dispute settlement system. Possibly with it will go a rules-based international trading system. The result could be tit-for-tat reprisals, and possibly trade wars.

Gregory Shaffer is Chancellor’s Professor at the School of Law at University of California of Irvine.

Manfred Elsig is Professor of international relations and deputy managing director of the World Trade Institute at the University of Bern in Switzerland.

Mark Pollack is Professor of political science and law and Director of Global Studies at Temple University.

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