Bully capitalism versus the Appellate Body

In an US election year, then President Obama as represented by the United States Trade Representative (USTR) began a risky precedent. That 2016, the US blocked the reappointment of Appellate Body jurist Seung Wha Chang. Chang was up for a reappointment as the norm is that the jurists serve for four year terms that can be renewed once. The US complained that Chang was responsible for the Appellate Body violating the principle of non ultra petita, resulting in judicial overreach by addressing issues and arguments beyond the scope of the appeal. This resulted in an unprecedented letter by all thirteen former Appellate Body Members to the Dispute Settlement Body warning that “there must be no opening whatsoever to the prospect of political interference in what must remain impartial legal judgements in the WTO’s rule- based system of adjudication”. [6]

That narrative of judicial overreach or what others would say, judicial activism, is part of the theater that the US has been peddling, saying the Appellate Body has been overreaching on purpose to be duly unfair to the US. As the USTR states, “Specifically, the Appellate Body has added to U.S. obligations and diminished U.S. rights by failing to comply with WTO rules, addressing issues it has no authority to address, taking actions it has no authority to take, and interpreting WTO agreements in ways not envisioned by the WTO Members who entered into those agreements. This persistent overreaching is plainly contrary to the Appellate Body’s limited mandate, as set out in WTO rules.”[7] While all countries who have lost cases may have arguments against the jurists, it has been the US who has been front and center playing the aggrieved, even though they have a high win-loss rate compared to other countries. Furthermore, there always has been an American sitting in the Appellate Body.

This narrative of the aggrieved was taken to a whole new level by then US President Trump who, true to his style of bully capitalism just would not budge on any of the new appointments to the Appellate Body until it reached the state that it is in now, jurist-less. As of a recent count, December 2021, the US had unilaterally blocked 49 times, the selection of any appointees to the Appellate Body.

It was clear during the term of President Trump that this was their way of being uncooperative because of some imagined conspiracy that the WTO, particularly the dispute settlement process and the Appellate Body were biased against the US. It is important to note that trade justice activists had always pointed out that the free trade rules imposed by the WTO seemed to only apply to the poorer countries and somehow have loopholes for the richer countries such as the US. A concrete example of that would be the implementation of the Agreement on Agriculture (AoA). Through certain loopholes called boxes, the US and EU have been able to continue providing subsidies to their large farmers and agribusiness while the smaller producer countries such as those in the G33, have had to fight tooth and nail to get a paltry “peace clause” so that they may help their poor farmers and starving constituents. (A peace clause refers to allowing the G33 countries to “break the rules” of the AoA in order to address their countries’ food crises with the assurance that the other WTO Members will not use the rule breaking as basis for filing complaints with the DSB)

Now that the USTR is under the current US President Biden, one would think the vacant Appellate Body would be one of the urgent issues they would address. It seems that some countries, not only the US though, are seeing this as an opportunity to use this presumably as a bargaining chip to push for some of their agenda or perhaps their chance to change the DSM. “WTO reforms” is on the agenda for the 12th WTO Ministerial Conference along with the discussion on vaccines and Trade Related Intellectual Property Rights, fisheries, agriculture and some other items. It is not clear what these “WTO reforms” will be, but it involves the “reform” of the DSM.

As stated in the WTO General Council (2021) “MC12: Shaping the Package Agenda” JOB/GC/261:
“WTO reform: The establishment of a WTO Working Group on the WTO reform is required. The group shall be vested with the authority to discuss issues of relevance to the WTO reform with a focus on improvements of the negotiating, monitoring and dispute settlement functions of the WTO, as well as institutional improvements in its functioning. The group will discuss these matters in an open, transparent and inclusive manner striving for multilateral outcomes, including with a view to establish formal WTO 2030 Vision by the next MC. The General Council shall regularly review the progress of these discussions. This could be reflected in the [Ministerial Decision] [Joint Ministerial Statement] on the WTO reform.” [8]

According to a report that cited insider sources, these “WTO reforms” agenda item is a possible controversy as it supposedly presents proposals such as changing the consensus decision making of the WTO and also reportedly the ability for countries to self-designate as a developing country and avail of special and differential treatment. [9] It is quite difficult to imagine that these proposals would have widespread support, especially because when the small producer countries asked for a few changes to the Agreement on Agriculture in order to update it to meet the changing times, prices and realities that were not present when the AoA was written. That proposal was shut down in negotiations and the rationale being that these changes meant going back to the rule book and make those adjustments. It was made excruciatingly clear that even if this meant denying governments to help its starving constituents and small farmers, no one was to touch the legal texts. To then turn around now and make proposals in the name of “reforms” to items such as decision-making processes and the dispute settlement understanding, reeks of double standard. If adjusting the AoA to support the right to food did not even seem to be a possibility WTO rules-wise, then why do these issues of consensus building rather than voting, the way the DSM works, and other legal texts of the WTO can be changed?

The supposed proposal on changing the decision- making process in the WTO from consensus to voting is one that is highly controversial and quite impossible to imagine happening. Aside from it being written into the legal texts of the WTO, the process for changing this requires the full consensus of all the WTO Members, agreeing that the decision-making process be changed to voting. It also opens the door to vote buying, for example, promising concessions in return for votes, and all other problematic issues that come with deciding by vote. The spirit of the consensus building to reach a decision was to ensure that all countries whether developed, developing or the Least Developed, would be able to equally participate in the discussion and that a decision cannot be forced to move forward without everyone’s consensus.

Insider reports have also pointed out that the key proposed “reform” that should be looked into is the ability for countries to self-designate their status as a developing country. This supposed “reform” has a particularly obvious target, especially if it is supposedly coming from the US and the EU: which is China, who, with its massive economy, is still self-designated as a developing country and therefore enjoys the exemptions and special treatment afforded to developing countries. To those unfamiliar with the WTO, in the supposed spirit of fairness and a level playing field, rules are implemented fully or with exemptions depending on the status of the Member country. For example, developed countries are expected to implement trade rules fully (loopholes though still exist, that allows them to get away with not following some WTO rules for their own interests), then developing countries have lee ways, longer time periods to implement certain rules and have special and differential treatment, then the Least Developed Countries (LDCs) are exempt from most anything and are expected to be assisted by the developed countries and given duty free and quota free and market access privileges. If the insider reports are accurate that this proposed “reform” is only targeting China, then it may possibly gain support from other countries if the trade-off is that the US stops blocking nominations to the Appellate Body and paves the way for the Dispute Settlement Mechanism to fully function once again. There is already a growing list of cases that could not be settled in the current hacked process of the dispute settlement and those countries would probably be more than happy to have a functioning Appellate Body again.

Current Notified Appeals

This refers to current cases in which notifications of appeal have been made. As indicated in the opening paragraphs, at the current time the Appellate Body is unable to review any of these notified appeals given the ongoing vacancies.

  • 24 December 2021:  Notification of Appeal by India in DS581: India — Measures Concerning Sugar and Sugarcane (Guatemala) (WT/DS581/11)
  • 24 December 2021:  Notification of Appeal by India in DS580: India — Measures Concerning Sugar and Sugarcane (Australia) (WT/DS580/10)
  • 24 December 2021:  Notification of Appeal by India in DS579: India — Measures Concerning Sugar and Sugarcane (Brazil) (WT/DS579/10)
  • 16 September 2021:  Notification of Appeal by China in DS562: United States — Safeguard Measure on Imports of Crystalline Silicon Photovoltaic Products(WT/DS562/12)
  • 28 July 2021:  Notification of Appeal by Morocco in DS578: Morocco — Definitive Anti-Dumping Measures on School Exercise Books from Tunisia (WT/DS578/5)
  • 19 March 2021:  Notification of Appeal by the United States in DS539: United States — Anti-Dumping and Countervailing Duties on Certain Products and the Use of Facts Available (WT/DS539/9)
  • 22 February 2021:  Notification of Appeal by Pakistan in DS538: Pakistan — Anti-Dumping Measures on Biaxially Oriented Polypropylene Film from the United Arab Emirates (WT/DS538/5)
  • 22 January 2021:  Notification of Appeal by Korea in DS553: Korea — Sunset Review of Anti-Dumping Duties on Stainless Steel Bars (WT/DS553/6)
  • 17 December 2020:  Notification of Appeal by Indonesia in DS484: Indonesia — Measures Concerning the Importation of Chicken Meat and Chicken Products (Article 21.5 — Brazil) (WT/DS484/25)
  • 26 October 2020:  Notification of Appeal by United States in DS543: United States — Tariff Measures on Certain Goods from China (WT/DS543/10)
  •  28 September 2020: Notification of Appeal by United States in DS533: United States — Countervailing Measures on Softwood Lumber from Canada(WT/DS533/5)
  •  28 August 2020:  Notification of Appeal  by the European Union in  DS494: European Union — Cost Adjustment Methodologies and Certain Anti-Dumping Measures on Imports from Russia (Second Complaint) (WT/DS494/7
  •  28 July 2020: Notification of Appeal by Saudi Arabia in DS567: Saudi Arabia — Measures Concerning the Protection of Intellectual Property Rights (WT/DS567/7
  •  18 December 2019: Notification of Appeal by the United States in DS436: United States — Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India (Article 21.5 — India) (WT/DS436/21)
  • 6 December 2019: Notification of Appeal by the European Union in DS316: EC and certain member States — Large Civil Aircraft (Article 21.5 — EU) (WT/DS316/43)
  • 19 November 2019: Notification of Appeal by India in DS541: India — Export Measures (WT/DS541/7)
  • 9 September 2019: Notification of Appeal by Thailand in DS371: Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines (Article 21.5 — Philippines II) (WT/DS371/30)
  • 15 August 2019: Notification of Appeal by the United States in DS510: United States — Certain Measures Relating to the Renewable Energy Sector (WT/DS510/5)
  • 4 June 2019: Notification of Appeal by Canada in DS534: United States — Anti-Dumping Measures Applying Differential Pricing Methodology to Softwood Lumber from Canada (WT/DS534/5)
  • 25 January 2019: Notification of Appeal by the United States in DS523: United States — Countervailing Duty Measures on Certain Pipe and Tube Products from Turkey (WT/DS523/5)
  • 9 January 2019: Notification of Appeal by Thailand in DS371: Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines (Article 21.5 — Philippines)(WT/DS371/27)
  • 14 December 2018: Notification of Appeal by India in DS518: India — Certain Measures on Imports of Iron and Steel Products (WT/DS518/8)
  • 20 November 2018: Notification of Appeal by Panama in DS461: Colombia — Measures Relating to the Importation of Textiles, Apparel and Footwear (Article 21.5 — Colombia)(Article 21.5 — Panama) (WT/DS461/28)
  • 21 September 2018: Notification of Appeal by the European Union in DS476: European Union and its member States — Certain measures Relating to the Energy Sector (WT/DS476/6)

Appellate Body https://www.wto.org/english/tratop_e/dispu_e/appellate_body_e.htm#fnt-1

[5] Dispute settlement activity — some figures https://www.wto.org/english/tratop_e/dispu_e/dispustats_e.htm
[6] Nivedita Sen (2018) “The Appellate Body in Crisis” Graduate Institute of International and Development Studies in Geneva https://www.linklaters.com/en/insights/blogs/tradelinks/the-appellate-body-in-crisis
[7] United States Trade Representative Office (2020) “Report on the Appellate Body of the World Trade Organization” United States Trade Representative Office https://ustr.gov/sites/default/files/enforcement/DS/USTR.Appellate.Body.Rpt.Feb2020.pdf

[8] WTO General Council (2021) “MC12: Shaping the Package Agenda” JOB/GC/261 Geneva

[9] Kanth, D.Ravi (2021) “EU & Brazil proposal on WTO reforms – a “monster” in the making” TWN Info Service on WTO and Trade Issues.https://www.twn.my/title2/wto.info/2021/ti211115.htm