World Trade Organization (WTO) will never be the same after today

World Trade Organization (WTO) will never be the same after today

December 11, 2019

Two-and-a-half years ago the U.S. triggered a chain of events that would forever change the way the World Trade Organization works.

The plan, largely the brainchild of Trade Representative Robert Lighthizer, was simple. Wield the WTO’s consensus principle (which requires all 164 members to agree on any decision) against the organization in order to block all new appointments to the appellate body — a seven-seat panel that handles the appeals of WTO rulings — and eventually neuter it.

Lighthizer argued that the move was necessary to reform the WTO dispute settlement system, which nations have used to gain concessions through lawsuits that they could never get at the negotiating table.

“Relying solely on the WTO litigation has its flaws,” he told senators in March. “You can be winning cases for years and years and years and not getting real outcomes.”

But as the U.S. continued to press its case to declaw the appellate body, it became increasingly clear that the strategy aligned well with the administration’s broader agenda. Lighthizer and others planned to use the sharpest tools in America’s trade kit against China, South Korea, Canada, Mexico and Japan — and the WTO’s dispute settlement mechanism was standing in the way.

Today, the WTO is a weaker bulwark against the U.S. tide of unilateralism.

The appellate body is paralyzed, short-handed and thus unable to rule on new cases. Given that two-thirds of WTO disputes are appealed, it leaves a chilling consequence: Countries may feel unprotected from President Donald Trump’s “America First” trade salvos.

Even China, which few observers would hold up as a model citizen in the global trading system, mourned the WTO’s Washington-induced coma.

“It’s unfortunate that the WTO appellate body has become another victim of U.S. unilateralism and protectionism,” Foreign Ministry spokeswoman Hua Chunying said Wednesday in Beijing. “This is no doubt the most severe blow to the multilateral trading system since its establishment.”

Yet out of the appellate body’s ashes a new dispute settlement model is developing that could soon change the way governments respond to rogue actors. On Friday in Geneva, the European Union will host a gathering of key trade delegates from major nations like China, Brazil and Japan to discuss ‘Plan B.’

In the coming months they will seek to develop a broad appeal-arbitration agreement that essentially replicates the core function of the WTO appellate body. While there are more questions than answers about how this new dispute settlement model would work - the message is clear: Nations are not going to sit idly by as the U.S. dismantles the global economy’s high court in an effort to fix it.

This has been excerpted from an article from the American Journal of Transportation (AJOT).

Source: American Journal of Transportation (AJOT)


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