Will the US Undermine the World Trade Organization?

Following the Berlin Wall's fall, the United States drove the creation of the World Trade Organization and its tribunal, the Appellate Body. The tribunal rose quickly to prominence for its clarification of WTO rules and its resolution of trade disputes. It became heralded for legitimizing the WTO rules-based system to a broader global community by showing deference to national public policy, including through integrating public international law regarding the environment, public health, and human and animal rights. But now the US is threatening to undermine its independence and effectiveness, raising consternation in Geneva and the international trade community.

The initiative began when the Office of the United States Trade Representative publicly lambasted and refused to support the reappointment of US member of the Appellate Body Jennifer Hillman, supposedly for failing to defend US perspectives. Hillman was a former Commissioner of the US International Trade Commission, former General Counsel of the USTR, and now teaches at Georgetown. The USTR continued when it blocked consensus for the selection of James Gathii to the Appellate Body. Gathii, a chaired professor at Loyola University Law School in Chicago, would have been the first and only black, sub-Saharan African member of the Appellate Body during its twenty-year history.

Now, the USTR has taken its most extreme step to date by proclaiming that it will block the reappointment of the South Korean judge Seung Wha Chang. (Appellate Body members are elected for a four-year term, renewable once). The reason given is not because Mr. Chang demonstrated a lack of judicial competence or independence. On the contrary, Mr. Chang is a former national judge who has a doctorate from Harvard Law School and is the endowed Nomura Visiting Professor of International Financial Systems there. Rather, the USTR opposes judge Wha Chang because he participated in decisions against the United States. Now South Korea plans to retaliate by threatening to block the replacement candidate for another Appellate Body member. The Appellate Body would then be reduced to five from seven, catalyzing a legitimacy crisis.

What incensed the USTR will sound, to most, unbelievably technical and mundane -- the Appellate Body's findings regarding the practice of "zeroing" in antidumping calculations, in which only low home-state prices (but not high ones) are set at zero. This averaging methodology biases the calculation so that dumping is found where there is none, or antidumping duties become higher than they otherwise would be. The Appellate Body found that it is not a "fair comparison;" the USTR charges the Appellate Body with overreaching.

I agree with the Appellate Body interpretation, but even if I didn't, one sometimes wins and sometimes loses before a tribunal. The US, in fact, has brought far more cases than any other WTO member, and it has won far more than it has lost. The US actively uses the WTO dispute settlement system to enforce rules on others, but that will become implausible if the US destroys the system's credibility.

The USTR opposition to Mr. Chang's reappointment aims to compromise the tribunal's judicial independence. But that is central to the rule of law. The words "independent" and "independence" appear seven times in the Code of Conduct for WTO dispute settlement officials, and the Code's "Governing Principle" begins: "Each person covered by these Rules shall be independent and impartial." Other countries, including China, are taking note.

USTR's hubris could be explained if this were Putin's Russia. Or perhaps Trump's America. But the Obama administration? Has this fallen outside the President's radar?

It is a high-risk strategy for an administration that professes to be internationalist. The core reason for building a global trade regime is to create a third party institution that helps manage conflicts that could ultimately endanger international welfare, peace, and security. The WTO was successful in helping countries manage the Great Recession of 2008 by curtailing beggar-thy-neighbor, trade protectionist responses that could spiral out of control, as they did during the 1930s. It was the experience of the 1930s that led US leaders like Cordell Hull to call for the creation of a rules-based multilateral trade institution which came into being after WWII.

The United States has a history of building and undermining international institutions. Following the horrors of WWI, an isolationist US Senate refused to ratify the Versailles Treaty, which drastically impaired the new Permanent Court of International Justice. Then, after the horrors of WWII, the Roosevelt administration spurred the creation of the United Nations and the International Court of Justice. Later, in the 1980s, the Reagan administration withdrew from recognizing the ICJ's administration when the ICJ decided against it in the Nicaragua case, undermining that body.

It takes decades to create international institutions, often built out of tragedy. They can be undone overnight. With the Transpacific Partnership uncertain, will President Obama's legacy on trade be destroying the WTO?