Background Materials on WTO Appellate Body Reform Challenges — The Critical Issue of “Overreach”

I have written over the years many articles on the concerns certain WTO dispute settlement reports have raised for WTO Members that panels and the Appellate Body were creating obligations not contained in the various WTO agreements. One of the early cases where the issue was raised was U.S. – Wool Shirts and Blouses, DS33, where Costa Rica claimed that “The observations of the panel and the Appellate Body had diverged
from past practice and had modified the balance of rights and obligations which they claimed to be seeking to protect.” (WT/DSB/M/33, p. 12 (June 25, 1997)). That was only two and a half years after the WTO came into existence and was more than twenty-two years ago.

Dozens of WTO Members have raised concerns over the years. In past publications or presentations, I have cataloged a number of the disputes. An early U.S. complaint occurred in US – FSC, DS108, in 2000, nineteen years ago. During 1995-2019, the U.S. has identified problems of overreach and other issues in cases the U.S. has won at the WTO, lost at the WTO or where it has been a third party. Indeed, Congress was concerned enough about the issue of WTO dispute settlement overreach (creating obligations or diminishing rights) that it required a report on how to address the situation within the WTO as part of the Trade Act of 2002 (19 U.S.C. 3805(b)(3) – some seventeen years ago. As stated in the Congressional findings to that Act, “support for continued trade expansion requires that dispute settlement procedures under international trade agreements not add to or diminish the rights and obligations provided in such agreements.” 19 U.S.C. 3801(b)(3). The crisis in the WTO on dispute settlement flows from a host of issues, but none is more important or long standing than the failure of the WTO Membership to correct the problem of panel and Appellate Body overreach. Unfortunately, the proposal contained in the Draft General Council Decision on Functioning of the Appellate Body, basically to simply restate what Articles 3.2 and 19.2 of the Dispute Settlement Understanding have said since the start of the WTO is a non-starter for the U.S. See my post of November 4.

A paper (“The Broken Multilateral Trade Dispute System”) prepared for a program at the Asia Society Policy Institute on February 7, 2018 is attached and provides additional background on a number of the U.S. concerns. While the paper looks at disputes through 2017, the problems of overreach and the other issues raised by the United States have continued to the present time.