GATT-ification of the World Trade Organization

This ongoing situation is largely attributed to the United States blocking the appointment of new AB members, a stance that has persisted across multiple administrations, including those of Barack Obama, Donald Trump, and Joe Biden.

The WTO’s Foundational Promise (1995)

• Origins and Vision:
  • Established in 1995, transitioning from GATT (1948-1994) to a rule-based system.
  • Introduced comprehensive trade rules for goods, services, and intellectual property.
  • Two-tier dispute settlement system with an appellate function, compulsory jurisdiction, and effective retaliation mechanisms.
• Neoliberal Influence:
  • Reflects the rise of neoliberal ideology in the 1990s.
  • Scholars viewed the WTO as a constitutional project, prioritizing international law over international politics.
  • Described as the “thickening of legality” in trade by Celso Lafer, former WTO dispute settlement chairman.

The Unravelling of the WTO System

• China’s Role:
  • Joined the WTO in 2001, supported by the U.S., expecting China to adopt free-market principles and abandon state-led industrial policies.
  • This expectation did not materialize, and the U.S. believes China exploited the WTO system to its advantage.
• S. Reaction:
  • The U.S. views the WTO as an impediment to addressing China’s challenge.
  • The Trump administration imposed a 25% tariff on Chinese products in 2018 in violation of WTO rules.
  • Trump’s promises of additional tariffs suggest a return to protectionist policies.

Current Challenges

• Operational Inefficiency: While WTO panels continue to operate and resolve disputes at the first stage, appeals to the non-functional AB have rendered these decisions ineffective.
• Political Dynamics: The anticipated return of a protectionist Trump administration could further complicate matters for the WTO and its dispute resolution mechanisms.
• Lack of Resolution Mechanisms: Since 2019, cases appealed to the AB remain unresolved, creating a “legal void” where winning parties cannot enforce their rights under WTO law.

Attempts at Reform

• Multi-Party Interim Appeal Arbitration Arrangement (MPIA): In response to the AB’s paralysis, some WTO members established the MPIA in 2020 as a temporary solution.
  • However, it has only settled one case over 4 years and has seen limited participation.
• Molina Process: Following commitments made at the 12th Ministerial Conference (MC12) in June 2022, discussions have been ongoing to reform the entire dispute settlement system by 2024.
  • The U.S. has actively participated in these discussions under Marco Tulio Molina’s facilitation.

Future Outlook

Despite efforts to reform and revitalize the dispute settlement system by 2024:

• The effectiveness of these reforms remains uncertain due to unresolved issues surrounding the AB.
• There is a growing sentiment among international lawyers that rather than a crisis, there is a regime change occurring within international trade relations—moving away from legally binding commitments back towards more diplomatic negotiations reminiscent of the GATT era.

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