Restoring the World Trade Organization's crown jewel

Editorial of the Day: Restoring the World Trade Organization’s crown jewel (The Hindu)

The article is discussing the state of the World Trade Organization's (WTO) dispute settlement system (DSS) and the challenges it faces.

Table of Contents

Context: The article is discussing the state of the World Trade Organization’s (WTO) dispute settlement system (DSS) and the challenges it faces. In June 2022, member countries of the WTO, with India playing a significant role, reached an agreement to revive the DSS, which had been paralyzed since 2019. The main issue plaguing the DSS is the non-functionality of its appellate body, which hears appeals from WTO panels. The United States has single-handedly blocked the appointment of new members to the appellate body, rendering it ineffective. The article highlights the concern that the resurrection of the DSS by 2024 might face difficulties due to the United States’ hostility towards the WTO’s dispute settlement mechanism. Overall, the article focuses on the importance of revitalising the WTO’s DSS and the challenges it encounters, particularly in light of the United States’ opposition.

Background

Understanding the WTO Dispute Resolution Mechanism

The WTO dispute resolution mechanism is an essential tool for resolving trade-related disputes between member countries.
It allows for the peaceful settlement of disputes and ensures that countries comply with their obligations under WTO agreements.

The WTO Dispute Resolution Mechanism: The WTO dispute resolution mechanism has two main ways to settle a dispute, namely

Mutual agreement
Adjudication.

Filing case:

According to WTO rules, a WTO member or members can file a case in the Geneva-based multilateral body if they feel that a particular trade measure is against the norms of the WTO.

The process:

It involves three stages, namely consultations, adjudication by panels and the Appellate Body, and the implementation of the ruling.
Bilateral consultation is the first step to resolve a dispute.
- If both the sides are not able to resolve the matter through consultation, either of them can approach for the establishment of a dispute settlement panel.
If the parties fail to reach a solution, the dispute is referred to a panel. The panel will review the case and issue a report.
- If either party is not satisfied with the decision, they can appeal to the Appellate Body.
- The panel’s ruling or report can be challenged at the World Trade Organization’s appellate body.

Decoding the Editorial

History of Events:

The member countries of the World Trade Organization (WTO) reached a significant agreement in June 2022, with India playing a crucial role, during the Geneva ministerial conference.
This agreement aimed to revive the WTO’s dispute settlement system (DSS), which has been inactive since 2019.
- The DSS is considered a valuable asset of the WTO.
The problem lies specifically with the appellate body, which is the second tier of the DSS responsible for hearing appeals from WTO panels.
- The appellate body is currently non-functional because the United States has blocked the appointment of its members, essentially paralysing its operations.
- In the past, the appellate body had played a vital role in upholding international law by holding powerful countries like the U.S. and the European Union accountable for violating international trade rules.
However, the success of the appellate body has turned the U.S. into a vocal critic of the system.
It seems unlikely that the DSS will be fully operational by 2024. This raises concerns about the future of the dispute settlement mechanism within the WTO, given the United States’ opposition and its impact on trade multilateralism.

US’s Views on WTO Appellate Body:

The United States argues that the appellate body has engaged in judicial overreach and exceeded its mandate by creating binding precedents through its decisions.
In international law, there is no rule of stare decisis or binding precedent.
This is also made clear in Article 3.2 of the WTO’s dispute settlement understanding (DSU), which states that appellate body rulings cannot add or diminish the rights and obligations of WTO member countries.

Appellate’s View:

However, the DSU also recognizes the importance of the dispute settlement system in providing security and predictability to the multilateral trading system.
The appellate body has aimed to strike a balance by ensuring consistency in interpreting and applying WTO agreements without creating binding precedents. It encourages reliance on previous interpretations, particularly when dealing with similar issues.
However, it has also clarified that a departure from previous rulings is possible if there are “cogent reasons” for doing so.
Other international courts, such as the International Court of Justice and the International Tribunal for the Law of the Sea, also consider past decisions unless there are valid reasons not to do so.

Some suggest that WTO member countries could adopt a statement explicitly stating that appellate body rulings do not create precedents. However, the United States remains unsatisfied with this proposal.

De-judicialization of Trade Multilateralism:

The article suggests that the United States is pursuing a strategy of de-judicialization in the realm of trade multilateralism.

In the past, the World Trade Organization (WTO) was established in a world where the neoliberal consensus was prevalent, following the Cold War and the collapse of communism.
During this period, there was a belief that the “invisible hand” of market competition should be complemented by the “visible hand” of the law.
The WTO was seen as the institution embodying this visible hand of the law, regulating global trade.
This era witnessed the legalisation of international relations, with states accepting precise international law standards to judge their behaviour and delegating the power to judge to international courts.
This process is referred to as judicialization, where international courts and tribunals gained significant influence in decision-making, often surpassing the role of national actors.
However, this expansion of judicial power has raised concerns about the erosion of national sovereignty, as countries relinquish control over critical decision-making to international bodies.

De-judicialization:

It is defined as the opposite phenomenon.
It involves countries weakening international courts to reclaim decision-making power.
- For Instance, the United States seeks to exercise full control over its trade policies, particularly in light of the growing geo-economic challenges posed by China.
- Consequently, the U.S. aims to shed the constraints imposed by the WTO’s appellate body’s judicial review.
The article emphasizes that de-judicialization should not be confused with exerting political oversight to improve the functioning of the appellate body.
While the U.S. has identified various problems with the WTO’s dispute settlement system (DSS), it has not consistently offered constructive suggestions for improvement.

Beyond the Editorial

Measures to Improve WTO Dispute Resolution Mechanism:

Reforming the Appellate Body: The Appellate Body has faced several challenges, including a lack of members due to the US opposition to judges’ appointments. The WTO can consider reforming the Appellate Body to ensure its effectiveness and legitimacy.
Strengthening the Panel Process: The panel process can be strengthened by reducing the time taken for panel appointments, ensuring the availability of resources and expertise, and improving the transparency of the process.
Encouraging Mutual Agreement: The WTO can encourage its members to find a mutually agreed solution during the consultations stage, which can prevent disputes from escalating and save time and resources.
Improving Implementation: The implementation stage of the dispute resolution process is crucial in ensuring compliance with the ruling. The WTO can work with its members to improve implementation and ensure that parties comply with their obligations.