7 PM | Ironing out the wrinkles in trade disputes adjudication | 23rd December 2019

Context:WTO’s appellate body is no longer functional.

More in news:

• WTO’s appellate body becomes dysfunctional from 10^th December.

World Trade Organization (WTO):

• The World Trade Organization came into being in 1995. One of the youngest of the international organizations, the WTO is the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War.
• The system was developed through a series of trade negotiations, or rounds, held under the GATT. The first rounds dealt mainly with tariff reductions but later negotiations included other areas such as anti-dumping and non-tariff measures. The 1986-94 round – the Uruguay Round – led to the WTO’s creation.
• The negotiations did not end there. In 1997, an agreement was reached on telecommunications services, with 69 governments agreeing to wide-ranging liberalization measures that went beyond those agreed in the Uruguay Round.
• In 2000, new talks started on agriculture and services. These were incorporated into a broader work programme, the Doha Development Agenda, launched at the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001.
• The new work programme included negotiations and other work on non- agricultural tariffs, trade and the environment, WTO rules on anti-dumping and subsidies, trade facilitation, transparency in government procurement, intellectual property and a range of issues raised by developing economies as difficulties they face in implementing WTO agreements.
• A revised Government Procurement Agreement – adopted at the WTO’s 8th Ministerial Conference in 2011 – expanded the coverage of the original agreement by an estimated US$ 100 billion a year.
• At the 9th Ministerial Conference in Bali in 2013, WTO members struck the Agreement on Trade Facilitation, which aims to reduce border delays by slashing red tape.
• The expansion of the Information Technology Agreement – concluded at the 10th Ministerial Conference in Nairobi in 2015 – eliminated tariffs on an additional 200 IT products valued at over US$ 1.3 trillion per year. Another outcome of the Conference was a decision to abolish agricultural export subsidies, fulfilling one of the key targets of the UN Sustainable Development Goal on “Zero hunger”.
• Most recently, an amendment to the WTO’s Intellectual Property Agreement entered into force in 2017, easing poor economies’ access to affordable medicines. The same year saw the Trade Facilitation Agreement enter into force.

Functions:

• The WTO’s overriding objective is to help trade flow smoothly, freely and predictably. It does this by:
• administering trade agreements
• acting as a forum for trade negotiations
• settling trade disputes
• reviewing national trade policies
• building the trade capacity of developing economies
• cooperating with other international organizations

Appellate Body:

• The Appellate Body was established in 1995 under Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).
• It is a standing body of seven persons that hears appeals from reports issued by panels in disputes brought by WTO Members.
• The Appellate Body can uphold, modify or reverse the legal findings and conclusions of a panel.
• Appellate Body Reports once adopted by the Dispute Settlement Body (DSB), must be accepted by the parties to the dispute.
• The Appellate Body has its seat in Geneva, Switzerland.

What has happened?

• The US has stalled appointments of members in the appellate body of WTO’s dispute settlement system.
• On 11 December 2019, there was only one active Appellate Body  member left. This makes the appeals process of the WTO dysfunctional, given that a minimum of three Appellate Body members are needed to consider an appeal of a panel report. 

Views of other WTO members:

Many WTO Members have also made clear that they regard a dysfunctional Appellate Body as a serious problem for the trading system.

• One reason is that, depending on how WTO Members interpret the text of the Dispute Settlement Understanding, panel reports may no longer be adopted automatically if disputing parties appeal panel findings to an Appellate body that is in limbo, thereby leaving the matter unresolved. 
• The main fear is that without the appellate Body the WTO dispute settlement system will lose much of its predictability, and may eventually collapse. This in turn has potentially serious consequences for future rule-making efforts in the WTO, as the value of negotiated outcomes depends on the ability of signatories to enforce them. 

Alternative pathways taken:

• Several states have adopted ad hoc solutions. States such as Indonesia and Vietnam have, through a no appeal pact, agreed in advance not to appeal the ruling of the panel in the dispute between them, effectively waiving their right of appeal.
• The European Union (EU), Norway and Canada have agreed on an interim appeal system for resolving any disputes through arbitration using Article 25 of the dispute settlement understanding in a process mirroring that of the Appellate Body with former Appellate Body members appointed as arbitrators.
• The EU has even threatened to launch countermeasures under general international law for countries that lose at the panel stage but refuse recourse to the interim appeal system under Article 25 of the dispute settlement understanding and instead appeal the report “in limbo” with a view to avoid the adoption of the report altogether. 

Conclusion:

• The fall of the WTO Appellate Body represents a turbulent period in the history of trade disputes adjudication, it by no means spells the end of the WTO.
• It presents an opportunity to the members to rethink and “iron out some of the creases” with the present system. 

Source:https://www.thehindu.com/opinion/op-ed/ironing-out-the-wrinkles-in-trade-disputes-adjudication/article30374429.ece