The crisis the WTO faces arises from a procedural aspect of the establishment of the Appellate Body (‘AB’), which has made its functioning impossible. Art. 17(1) of the Dispute Settlement Understanding (‘DSU’) states that the AB established by the Dispute Settlement Body (‘DSB’) shall consist of a total of seven members among which three shall be served on any single case.[1] The crisis arises when Art.17(1) of the DSU is read along with Art. 17(3) of the DSU.[2] When read together, it can be concluded that the potential members of the AB need acceptances from all existing members of the WTO in order to be appointed.

The USA has taken this opportunity to express its dissent with the conduct of the WTO,[3] as it feels that the AB takes extra-judicial decisions and interpreted various treaties to reach decisions beyond the scope that was agreed upon by the treaty negotiators. [4] These are largely due to vital misunderstanding during the negotiation of the WTO Agreements. One example could be the levying of tariff on goods dumped by one country on another at a lower rate. The US made it clear that these dumping duty (US customary trading laws) would be recognized by the WTO in the Marrakesh Agreements.[5] However, the AB has time and again ruled that certain countervailing duties the US has imposed on dumping countries to be illegal.[6] This is one such situation that has aggrieved the US. One such example is US-1916 Act, where the AB held that US cannot take specific actions against the dumping nation in the forms of penalities and criminal proceedings.[7]

The present crisis has been manufactured by the US to voice its dissent on the actions taken by the AB on its various cases. By vetoing of potential candidates to the AB, the US has created the present crisis at the WTO. In the beginning of 2019, there were three AB members; two have since retired and the last remaining member’s term will conclude in November 2020. However, due to Art.17(1) of the DSU prescribing the minimum number of members, the remaining AB member is not empowered to adjudicate upon any appeals.

There exist certain solutions that can counter this problem. One would include a mutual agreement between the various WTO members to establish another arbitration panel, with the same rules and regulations as the AB. This can be a specific group of nations at the WTO, a large majority or could also include all the nations except the US (in a manner creating a new agreement omitting the US). While this could temporarily resolve the issue, it would not revive the AB. However, certain nations and one political union have already implemented multilateral agreements, the likes of EU, Norway and Canada.[8]

Another potential measure that could be adopted temporarily for a few selected cases is the continuation of the outgoing AB members. This is enshrined in Rule. 15 of the working procedures of appellate review, and it permits the outgoing members of the AB to adjudge the appeals that they had set in motion even if it means after the expiry of their term.[9] At present, this measure, however, appears to be a failure due to the dissent raised by the American member Thomas Graham, who is not willing to work post the expiry of his term.[10] It can be concluded that at this juncture the most viable method to dispose off appeals is to have an arbitration proceeding on a multilateral basis between the disputing nations. This is a dispute resolution method recognized by the WTO in emergency cases such as the present one.[11]

A more permanent method for dispute resolution would be the creation of new bilateral or multilateral treaties between the nations.[12] These treaties could have, in them, methods of dispute resolution which completely cut off WTO measures for dispute settlement. This would lead to effective trading between two or more nations. This would also ensure that the AB is not required in the process, effectively sidelining the WTO. In my opinion, the members that are seeking this form of redressal should keep one thing in mind – if all the nations were to adopt separate trade agreements, then the uniformity that the WTO had initially established would be destroyed. Trading would prove to be an administrative nightmare if one country decides to trade with another outside its trade agreement. This is because the standards of certain principles vary from one nation to another; for instance, one nation might give better trading treatment to a developing nation than another nation.

The members of the WTO need to understand the AB’s significance in unifying trade and its role in making trading simpler. There is truly only one way to go ahead with resolving this issue, and that is to reassess the functioning of the WTO and come up with a better standard of functioning for the AB unanimously. The members need to renegotiate the agreements based on the concerns raised by the USA and accordingly rectify the issue. Cutting out the WTO would lead international trade into a confused new world; it is vital that the issues be addressed and the AB resurrected.

[1] Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 1867 U.N.T.S. 154, Annex-2, Dispute Settlement Understanding, Art.17.

[2] Id.

[3] Nivedita Sen, The Appellate Body in Crisis, Linklaters, available at: https://www.linklaters.com/en/insights/blogs/tradelinks/the-appellate-body-in-crisis, (Last visited on: 15^th March, 2020).

[4] Deadlock at the WTO Appellate Body: No Consensual Way Out in Sight, Insight, Publications, Baker McKenzie, 10 December 2019, available at: https://www.bakermckenzie.com/en/insight/publications/2019/12/deadlock-at-wto-appellate-body, (Last visited on: 15^th March, 2020).

[5] KEITH JOHNSON, How Trump May Finally Kill the WTO, December 9, 2019 foreignpolicy.com, available at: https://foreignpolicy.com/2019/12/09/trump-may-kill-wto-finally-appellate-body-world-trade-organization/, (Last visited on: 31^st March, 2020).

[6] Id; Appellate Body Report, US – 1916 Act, ¶ 137, WT/DS136/ABR.

[7] Appellate Body Report, US – 1916 Act, ¶ 137, WT/DS136/ABR.

[8] Supra, Note 5.

[9] Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 1867 U.N.T.S. 154, Other dispute settlement texts, Working Procedures for Appellate Review (2010), Rule. 15.

[10] Supra, Note 5.

[11] Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 1867 U.N.T.S. 154, Annex-2, Dispute Settlement Understanding, Art.25.1.

[12] Markus Wagner & Lisa Toohey, Key trade rules will become unenforceable from midnight. Australia should be worried, December 10, 2019, The Conversation, available at: https://theconversation.com/key-trade-rules-will-become-unenforceable-from-midnight-australia-should-be-worried-126768, (Last visited on: 18^th March, 2020).

ABOUT THE AUTHOR

Jacob Abraham

Jacob Abraham is a second-year student at West Bengal National University of Juridical Sciences (WBNUJS), Kolkata. He is passionate about International Trade Law and has participated in the John H. Jackson Moot Court Competition (formerly ELSA) in his first year and placed as a quarterfinalist at the final oral round held in Geneva, Switzerland. He does research and write on topics under WTO Laws pertaining to Agreement on Safeguards and The General Agreement on Trade in Services (GATS).