[Post updated on August 27 to incorporate comments by Amb. Tudor Ulianovschi of Moldova made at the WITA webinar on August 26. The post was previously updated on August 11 to incorporate comments by Minister Yoo Myung-hee of Korea at the WITA webinar that morning]
With less than a month to go before the last phase of the selection process begins for the next Director-General of the World Trade Organization, the eight candidates have engaged in large numbers of meetings (in person or virtually) with Missions in Geneva, with trade officials in capitals and have done outreach to the media and have participated in webinars put on by various organizations. These meetings and outreach are part of Phase 2 of the selection process where candidates make themselves known to the WTO Members. This phase ends on September 7.
All candidates are understandably guarded on specifics about many issues, all recognizing the WTO is a member driven organization. Similarly, with sharp divisions within the WTO membership, candidates are also careful not to express support for any of the major Members as a general rule. At the same time, all candidates have been asked about current pressing issues before the WTO and the topic of overall WTO reform.
Today’s post looks at how candidates have positioned themselves on one such issue — the impasse over the functioning of the Appellate Body.
Presentations to the General Council and Later Press Conferences
During the three days of meetings of the General Council in mid-July, each candidate was able to provide a statement of his/her vision for the WTO, answer questions posed by WTO Members and also had a thirty minute press conference. In a prior post, I had summarized the prepared statements and the press conferences. See July 19, 2020, The eight candidates for WTO Director-General meet the General Council – recap of prepared statements and press conferences, https://currentthoughtsontrade.com/2020/07/19/the-eight-candidates-for-wto-director-general-meet-the-general-council-recap-of-prepared-statements-and-press-conferences/. In addition to prepared statements and press conferences after meeting with the General Council, I am also including selected comments made by the candidates during webinars held by the Washington International Trade Association (WITA) and the Asia Society Policy Institute (ASPI) with six of the candidates (through August 6; a seventh is scheduled for August 11).
On the topic of the Appellate Body, the eight candidates had the following public comments:
Dr. Jesus Seade Kuri (Mexico):
From his prepared statement to the General Council, Dr. Seade made it clear that a top priority for him if selected as the next Director-General would be to get the Appellate Body refunctioning, something he would work to see happened in the first 100 days he was Director-General: “It is also necessary to give back to the dispute settlement mechanism its strength and certainty.” (Google translation from Spanish) “Within the first hundred days: I will work closely with members in seeking to * * * ii. restore the second instance of the dispute settlement system.” (Google translation from French).
In the press conference, Dr. Seade was asked how he would address the Appellate Body impasse. My notes on his answer are as follows:
On the question of the Appellate Body impasse, Dr. Seade noted that none of the Members were denouncing any provision within the Dispute Settlement Understanding. Rather concerns had been voiced on how DSU provisions had been applied. Dr. Seade believes that what is missing is the way to operationalize the role of the Dispute Settlement Body (all WTO Members sitting as the DSB) which is organizationally above the Appellate Body but for which there are currently no procedures for communications from the DSB to the Appellate Body to address issues generally (vs. in specific disputes). Such procedures were needed. He also had other ideas for how to resolve the impasse that he was interested in reviewing with Members to see if there could be movement. On the question of the interim arbitration arrangement, Dr. Seade thought a temporary arrangement made sense as it provided Members a second stage to dispute settlement as provided in the DSU. Key is finding a solution to the impasse so the two-tier dispute settlement system is restored for all.
WITA had a webinar with Dr. Seade on July 7. https://www.wita.org/event-videos/conversation-with-wto-dg-candidate-seade/. During the webinar, Dr. Seade addressed the need to get the Appellate Body functioning again. In pointing out why he would be the right person to be the next Director-General, Dr. Seade reviewed the importance of bringing to the table a knowledge of the underlying Uruguay Round negotiations and the purpose of the provisions in the agreements. He asked “Why is the U.S. frustrated with the Appellate Body?” It is because of the history of the negotiations and what was actually agreed to. Dr. Seade also viewed restoring the dispute settlement system as important to address problems other Members are having with China (in addition to negotiations on issues like industrial subsidies). He stated that the U.S. points about problems with the Appellate Body are good. The U.S. is not challenging the Dispute Settlement Understanding (“DSU”), but rather is arguing that the provisions of the DSU are not being respected by the Appellate Body. Thus, the problem is with the application of the DSU not the terms of the DSU as such. Dr. Seade believes that it is possible to find solutions that all Members can live with. He noted that the Appellate Body issue reflects different views of the DSU by the EU and the U.S.
Dr. Ngozi Okonjo-Iweala (Nigeria):
From her prepared statement, Dr. Ngozi Okonjo-Iweala had relatively short statements about the Appellate Body: “A refreshed WTO must find solutions to the stalemate over dispute settlement. It is clear that a rules-based system without a forum in which a breach of the rules can be effectively arbitrated loses credibility over time.” “I would also prioritize updating the rulebook, unlocking the dispute settlement system, working on transparency and notification, enhancing the work of regular bodies, and strengthen the Secretariat.”
While Dr. Ngozi Okonjo-Iweala was asked many questions at the press conference, none dealt with the Appellate Body.
WITA had a webinar with Dr. Ngozi Okonjo-Iweala on July 21. https://www.wita.org/event-videos/conversation-with-wto-dg-candidate-dr-ngozi-okonjo-iweala/
Dr. Ngozi Okonjo-Iweala noted that addressing the Appellate Body impasse was a priority for the next Ministerial and repeated her view that a WTO without effective dispute settlement would lose its legitimacy over time.
In response to a question on how she would restore dispute settlement, Dr. Ngozi Okonjo-Iweala noted that there is a common desire among WTO Members to have the dispute settlement system work and function. The question is how. There is a common belief that the panel process has been working well, so that places the focus on the Appellate Body. To address the various issues that have been raised by the United States, the WTO has the work product of the Walker process (note: Amb. Walker (NZ) was a facilitator to the General Council in 2019 to see if he could work with Members to find a solution to issues raised by the U.S.). Some of the proposals made by Amb. Walker can be used to move the process forward. The U.S. is seeking to go back to what the existing Dispute Settlement Understanding requires — 90 days for decisions, not creating rights or obligations (“overreach”), Appellate Body members working on appeals after their terms have expired, etc. We should take them up one at a time and find solutions that work. Can Members agree that appeals should be resolved in 90 days? Very likely. Can Members agree that the Appellate Body is limited to reviewing issues of law and not reviewing fact finding by panels? Very likely.
Mr. Abdel-Hamid Mamdouh (Egypt):
Mr. Mamdouh in his prepared statement reviewed the challenge to the WTO from the imbalance resulting from growing importance of dispute settlement while the negotiating function has been reduced in effectiveness:
“In my view, over the past quarter of a century, the WTO has suffered from a chronic imbalance across all its vital functions. That is, dispute settlement, negotiation, and the transparency/deliberative functions
“In any legal system, there needs to be a balance between the ‘legislative’ and the ‘judicial’ functions. For the WTO, these are the negotiating and the dispute settlement functions. While dispute settlement gained strength due to the inherent automaticity of procedures, the negotiating function has broken down. This created an unsustainable imbalance.” (Page 3)
During the press conference, Mr. Mamdouh was asked about how to bring the Appellate Body back. My notes on his answer are as follows:
Asked what he would do to revive the Appellate Body, Mr. Mamdouh responded that he would build off of the work already done. Most logical and productive first step is to build on that work and see what else is needed. And there is a need to look deeper into causes which he believes are rooted in differences in legal and regulatory systems. Mr. Mamdouh has not heard any suggestions that rules within the Dispute Settlement Understanding need to be changed. He concluded by saying that the size of the problem needs to be put into perspective and one needs to remember that on this issue, the WTO Members are not starting from zero.
WITA had a webinar with Mr. Mamdouh on June 23. https://www.wita.org/event-videos/conversation-candidate-hamid-mamdouh/. There were no specific questions asked on dispute settlement, but Mr. Mamdouh provided some introductory thoughts on the genesis of the crisis in the WTO. He noted that the WTO has been suffering from a chronic imbalance between the negotiating function and the dispute settlement function. He indicated that the negotiating function has underperformed miserably. Dispute settlement system, being automatic adoption at the end of disputes absent a negative consensus has grown in importance and hence has created imbalance. Mr. Mamdouh views that there is a critical need to reboot the negotiating function to help restore better balance.
Amb. Tudor Ulianovschi (Moldova):
Amb. Ulianovschi, in his prepared statement, had reform of the Appellate Body as a top priority for the incoming Director-General:
“Dispute Settlement
“The reform of the dispute settlement mechanism and particularly the reform of the Appellate Body will be one of the main priorities for the next Director General. This process needs to be open, inclusive and constructive. We need to find a way for all members to accept a two-step binding independent Dispute Settlement system.
“I believe that the issues and concerns were clarified by the members already and now they have to be addressed.
“I am aware of the on-going consultations on this important matter among the Members. In my opinion, there is a general common understanding on fundamentals of the DSU, which is already a good start.
“The least a DG can do is to facilitate discussions among Members to agree together on how to move forward and eventually agree on a roadmap and mechanisms – ‘agree on how to agree’ on this sensitive but crucial issue and devise a process of further engagement to reach an acceptable solution.”
During the press conference following his appearance before the General Council, Amb. Ulianovschi was asked several questions about the Appellate Body impasse. Below are my notes on Amb. Ulianovschi’s answers.
There were several questions on the Appellate Body including how Mr. Ulianovschi would reactivate the Appellate Body and whether reform of the dispute settlement system should be broader than getting the Appellate Body back functioning. Mr. Ulianovschi indicated that on the provisions of the Dispute Settlement Understanding, all Members agree on the provisions as written. With the application of the DSU by the AB, there are concerns raised by the U.S. and others. The Director-General can provide a process to help Member’s discuss. Solutions to the concerns raised need to be found, but the parameters of the solutions need to be found by members themselves. In his view, the Director-General’s role is to help Members identify how to move forward on the Appellate Body impasse with resolution by the next Ministerial Conference. On the question of breadth of action on the dispute settlement system, Mr. Ulianovschi stated that Members are not looking for a complete redrafting of the Dispute Settlement Understanding. What is needed is a targeted approach to address issues raised by certain members on the operation of the Appellate Body.
WITA held a webinar with Amb. Tudor Ulianovschi on August 26, 2020. https://www.wita.org/event-videos/conversation-with-tudor-ulianovschi/. Amb. Ulianovschi referenced the impasse on the Appellate Body (dispute settlement system) both in his opening statement at the webinar and in answer to a number of questions. My notes on his statements are provided below.
In his opening statement, Amb. Ulianovschi noted that as a member driven organization, the WTO needs Members to negotiate to move forward. He believes that a diplomatically active Director-General can help the WTO move forward, and he can help address lack of trust which he believes is largely psychological primarily based on unfinished business but also on the dispute settlement impasse on the operation of the Appellate Body, Special and differential treatment and other issues.
Q: How important is it to have a reform agenda, and how can you convince the major Members to agree on a common agenda?
A: Amb. Ulianovschi stated that reform is absolutely necessary. In his view, cosmetic reform is not sufficient, a fact made clear by major Members. Amb. Ulianovschi believes that political experience and dialogue by the Director-General will be key to get those who have put forward proposals to get into a discussion that is inclusive and transparent. There are a large number of issues that are affecting the environment at the WTO. For example, the current situation between the U.S. and China is affecting the system. Also the impasse on dispute settlement and the concerns raised by the United States and the EU position on an interim arbitration agreementwith MPIA. He sees a positive signal that major players are putting forward proposals; this should be starting point for discussions. He would invite those who have put forward proposals to start discussions. The process will require political will, and members will need to agree on how to proceed). Amb. Ulianovschi believes he can get Members to that point. On dispute settlement, Members have the paper from Amb. Walker which can be used to move forward. Will have to see how deep reforms will be.
Q: If you are the next Director-General, what would be your priorities for the 2021 Ministerial Conference and how would you define success?
A: In Amb. Ulianovschi’s view, the next Ministerial must show some results. He believes the top priority would be completing the ongoing negotiations on fisheries subsidies, which is important to fulfill U.N. Sustainable Development Goal 14.6. He believes that the Members are close to getting language agreed to. Completing the fisheries subsidies agreement Is just the first step, but it is an important one. On the current impasse on the Appellate Body (and hence the lack of a second-tier dispute settlement stage), Amb. Ulianovschi doesn’t see a clear cut resolution of the reform needed by the next Ministerial but rather hopes the Members will have a road map of how to proceed by the Ministerial.
Q: On dispute settlement, it is becoming quite clear that the divergences are growing between the Trump Administration and some of our trading partners. Many Members have shared the view that there have been problems with the Appellate Body engaging in overreach in certain situations. The recent Op Ed in the Wall Street Journal by USTR Lighthizer suggests that Amb. Lighthizer is looking to eliminate the Appellate Body and change the system so that panels’ role is limited to helping resove specific disputes between Members, more like commercial arbitration, without broader effect of the decisions. Is it realistic to go back to a system without an Appellate Body?
A: Amb. Ulianovschi responded that understand the U.S. concerns at the WTO on the Appellate Body both procedural (e.g., decisions within 90 days; Appellate Body members not involved in appeals after their four year term expires) and substantive (e.g., overreaching). He recognizes that the U.S. concerns are shared by other members of the organization. Amb. Ulianovschi believes that this is the moment to put forward different opinions on both problems and how to proceed, but all issues have to be negotiated. The role of the Director-General is to put Members together to permit Members to present the details of their proposals. In Amb. Ulianovschi’s view, the Recent Op Ed by Amb. Lighthizer is another idea put forward to find a solution to the ongoing problem at the WTO. He has talked with all of the major Members on how to deal with the broader issue of Appellate Body reform. The Director-General is there to encourage members to put forward proposals but also to use his/her good offices to encourage discussions. Having said that, Amb. Ulianovschi noted that some Members have undertaken different initiatives under Rule 25 of the Dispute Settlement Understanding, such as MPIA, to provide a second-tier of review. These initiatives are interim efforts. Such actions don’t have to distract the Members from the main task of finding a common understanding on the purpose of the dispute settlement understanding or on a sustainable solution. So the WTO Members have to identify the consensual solution and how we can ensure a compliance mechanism so that the system works as intended and agreed to. This should be a top priority of the next Director-General.
H.E. Yoo Myung-hee (Republic of Korea):
In her prepared statement, Minister Yoo includes one paragraph on the Appellate Body impasse:
“Another urgent, pressing issue is restoring the dispute settlement system. We need a stable and fully-functioning dispute settlement system which would effectively contribute to the prompt and satisfactory resolution of the disputes. I will act as an honest broker to facilitate constructive discussions to find an effective and permanent solution.”
During the press conference, Minister Yoo was asked two questions about dispute settlement, one dealing with resolving the impasse on the Appellate Body and the other on the Multi-Party Interim Arbitration Agreement. My notes of Minister Yoo’s responses to these questions follows:
On the issue of The Appellate Bidy impasse, Minister Yoo was asked how she would solve the impasse. She indicated that Members have very divergent views on the role of the Appellate Body. All members understand the need for a two-tier dispute settlement system. If selected as the next Director-General, Minister Yoo would accelerate members’ consultations to resolve the issue.
On the interim arbitration mechanism adopted by the EU, China and about 20 other Members, Korea is not a party. Does Minister Yoo have any concerns that the interim arrangement (MPIA) might become permanent? Minister Yoo responded that the MPIA was being used by some Members to overcome the current vacuum with the Appellate Body being shut down. The key for the WTO is to focus on finding a permanent solution, and she would do that if selected as the next Director-General.
WITA had a webinar with H.E. Yoo scheduled on August 11,https://www.wita.org/event-videos/candidate-h-e-yoo-myung-hee/. My summary of Minister Yoo’s comments on dispute settlement follow.
from her opening comments: Restoring dispute settlement system is an urgent need.
Questions asked on Dispute settlement – do you share assessment of US and others that there have been problems of overreach by AB? Secondly, there are procedural flaws that need to be addressed? What can a DG do about it?
Minister Yoo’s response: Clearing impasse on the Appellate Body is a top priority. The WTO needs a prompt resolution to restore the two-tier dispute settlement system. There are divergent views of the proper role of the Appellate Body. Some countries, like the United States, have said the Appellate Body has gone too far — overreaching by creating or diminishing rights and obligations of Members. However, some members say that the Appellate Body has been working to clarify of the provisions of Agreements to provide stability to the multilateral trading system. So there are competing views of what the role of the Appellate Body is supposed to be. The Walker process has put forward certain ideas. Still the gap is very wide between the two views. If we look at three pillars of WTO (negotiations, notifications, dispute settlement), over the first 25 years of the WTO, there have been no major agreements from negotiations other than Trade Facilitiation Agreement. This failure of the negotiating function to work has put much strain on the dispute settlement system. Members are resorting to dispute settlement to address issues not handled by negotiations. So, lacking periodic updates through negotiations, it is easy for the Appellate Body to engage in creating obligations to fill gaps. So Minister Yoo agrees to some extent with US (and others) about of overreach. The question for the WTO and the incoming Director-General is how to move forward to find solutions acceptable to all. There have been very divergent views within the WTO for a long time. If Minister Yoo becomes the Director-General, she would try to increase communication with missions in Geneva and ministers in capital. Need some political involvement to resolve the impasse. Minister Yoo would also look at some ideas floated by academia as well to see if those views might provide different approaches that would be of interest of Members. Several examples would include strengthening qualifications of AB members and what role of Appellate Body Secretariat should be, etc. I would encourage Members to engage in open, transparent and inclusive discussions on these issues.
Minister Yoo wanted to highlight importance of revitalizing negotiating function. If there is a more active negotiating functions, Members would be able to address needs to update and clarify agreements which should be done by Members and not the dispute settlment system.
H.E. Amina C. Mohamed (Kenya):
Minister Mohamed in her prepared statement reviewed the need for a functioning dispute settlement system:
“The WTO’s dispute settlement function is key to the credibility and effectiveness of the rules. We need to find a way through its problems to make it once again an instrument that all Members can use with confidence.”
During the press conference, Minister Mohamed was asked about the Appellate Body impasse. My notes on her response are as follows:
On the issue of how to remove the impasse on the Appellate Body, Minister Mohamed indicated that Members need to consult and negotiate. The WTO needs members to find solutions to permit the second-tier of dispute settlement to be restored. A Director-General DG can offer technical assistance and process to help Members find the solutions.
WITA had a webinar with H.E. Mohamed on August 6. https://www.wita.org/event-videos/ambassador-amina-mohamed/. Minister Mohamed had a number of comments about the Appellate Body impasse.
Restoring the Appellate Body is an important priority for the incoming Director-General.
The WTO dispute settlement process is key to the credibility and effectiveness of the WTO. Members have been working for some time on finding solutions. Minister Mohamed takes seriously US concerns about the operation of the Appellate Body. If she becomes Director-General, she will use her skills at building consensus to help Members find solutions. Finding solutions is important so that the WTO Members can get back to a dispute settlement system that all can use.
Minister Mohamed was Chair of the Dispute Settlement Body in 2004. She made sure that there was continuous flow of information from the Dispute Settlement Body to the Appellate Body. She had lunch with the Appellate Body quarterly. Issues she had been raising back in 2004 as of concern to Members remain unresolved today.
WTO Members designed a system that was complete from negotiations to dispute settlement. In Minister Mohamed’s view the system was designed really well. Now there is a gap in the system with the inoperability of the Appellate Body. The WTO needs to fill the gap quickly. Absent a resolution, some Members will comie up with an interim system (MPIA). Thus, Minister Mohamed believes the WTO needs to deal with the issues raised by the United States urgently. She agrees with some of the issues raised by the U.S. Many of those same concerns were around in 2004 when she chaired the Dispute Settlement Body. In her quarterly meetings with the Appellate Body, Minister Mohamed told the Appellate Body members that they had a specific mandate laid out by Members in the Dispute Settlement Understanding. It was not the role of the Appellate Body to add to or diminish the mandate. Minister Mohamed believes that Members need to see where the Appellate Body veered off of the mandate. She believes that the new Director-General should look at te Walker process (note: Amb. Walker (NZ), as facilitator to the General Council in 2019 had met with Members to see if solutions to the U.S. concerns could be found) and see how to move forward. But it is critical for the WTO to resolve the issues raised by the U.S. to permit the Appellate Body to resume.
H.E. Mohammad Mazaid Al-Tuwaijri (Saudi Arabia):
In his prepared statement, Minister Al-Tuwaijri referenced the challenges in the dispute settlement system but did not identify any specific approach to addressing Appellate Body reform if selected as the next Director-General other than his overall approach reviewed in the statement on all issues. Several quotes from his prepared statement follow:
“As you all know, the WTO has three main functions for monitoring trade issues, settling disputes, and negotiations, which include improvements to existing rules, new rules and market access.”
“We also need to recognize the consequences for the WTO of over-performance in litigation, while neglecting the negotiating and monitoring functions. A system out of balance cannot move forward.”
During the press conference, Minister Al-Tuwaijri was asked what his plan was to address U.S. concerns with the Appellate Body. My notes on his response are provided below.
On the Appellate Body, what is your plan to addressing U.S. concerns and do you plan to get it back functioning? Minister Al-Tuwaijri’s approach is the same as reviewed elsewhere. Determine what is the root cause of AB not functioning. He believes it is because negotiations are not functioning well. Therefore, he wants to get the negotiating process to improve and to gain data to improve the system. For example, he believes it is important to be able to quantify the effect of delay of even one month in resolution of disputes.
WITA did a webinar with Minister Al-Tuwaijri on August 5. https://www.wita.org/event-videos/director-general-candidate-he-mohammed-al-tuwaijri/.
Minister Al-Tuwaijri provided some comments in his opening statement and responded to a question on the dispute settlement system.
The structure of the organization is not functioning – negotiations, dispute settlement, notifications. Key is what type of change is needed to help organization be fit for the 21st century.
Minister Al-Tuwaijri believes the correct analysis for any issue is: what is the problem, what needs to be done, consult with the Members for possible solutions.
Does Dispute Settlement reform need to be taken up as a condition precedent to broader WTO reform?
In Minister Al-Tuwaijri’s view, the role the Director-General can play is resolving the impasse on the Appellate Body is somewhat limited. Can the Director-General help with a procedural question? Yes. Is there an interpretation issue that the Director-General may be able to assist in resolving? Yes. In 2019, the General Council had Amb. Walker, acting as a facilitator, work with Members to see if solutions could be found to the issues raised by the U.S. So that work product is available. The EU has also pursued a multi-party interim arbitration agreement to help at least some Members handle a second stage dispute process while the Appellate Body is not functioning. Despite these efforts, there is the question why resolution of the impasse is not happening. Minister Al-Tuwaijri believes that the answer goes back to his core point, the WTO must fix its negotiating function. If Members want to change the rules on the operation of the Appellate Body, that is for the Members to decide. As Director-General, Minister Al-Tuwaijri would encourage Members to think differently about the impasse and the options for finding solutions.
The Rt Hon Dr. Liam Fox MP (United Kingdom):
Dr. Fox’s prepared statement talked about many topics, including WTO reform, but did not speak specifically about the impasse on the Appellate Body or needed reforms to permit reactivating the second stage of dispute settlement.
During the press conference, Dr. Fox was asked about how he would address U.S. concerns with the WTO. My notes on his response are provided below:
A question was asked of how Dr. Fox would address the broad concerns of U.S. with the WTO. Dr. Fox noted that the U.S. has some very specific concerns with the WTO, particularly with regards to the Appellate Body. Dr. Fox stated that the WTO has the Appellate Body because countries felt panels in GATT disputes went too wide. The Appellate Body was set up with a limited mandate. He is aware that there are different views of the role of Appellate Body and whether it has engaged in mission creep or handled incomplete texts by filling them out. If WTO Members are able to get back to a more narrow definition of the function of the Appellate Body, there may be some concept of precedent being set. Dr. Fox asks the question, does everyone want the AB to be functioning properly or not. If not, the multilateral trading system is under threat as obligations can’t be enforced. Believe there is room for compromise.
WITA had a webinar with Dr. Fox on July 30, 2020. https://www.wita.org/event-videos/conversation-with-dr-liam-fox/. His comments on dispute settlement from the webinar are summarized below.
A rules-based system must have a functioning dispute settlement system, a top priority for the incoming Director-General. To have a rules-based system without a functioning dispute settlement system is nonsensical. For many countries, the dispute settlement system is the value added that membership in the WTO brings.
All members need to focus on adhering to the rules that they have already agreed to. The WTO needs an effective dispute settlement system for that. The WTO needs all Members to adhere to all rules they have signed up for and not decide that some rules don’t apply to them.
Questions asked of Dr. Fox: There have been some problems with the Appellate Body overreaching. Do you agree we need a more realistic approach by Appellate Body where there is ambiguous language in an agreement? How would you resolve the impasse on the Appellate Body?
Resolution of the Appellate Body impasse is the most urgent task facing the incoming Director-General. Dispute Settlement is the value-added to many Members of joining the WTO. Many members view the Appellate Body as having gone beyond the Dispute Settlement Understanding. Moreover, the excessive length of time to render an appeal decision undermines the system by itself — Members violating their obligations can get a three-year free ride. The WTO needs to tighten up the parameters and limit the areas that the Appellate Body examines. While the Appellate Body can’t create binding precedent, the need for consistency supports the ability to review how issues have been handled in other cases. Thus, looking at prior disputes makes sense, but the Appellate Body can’t create law through the process.
On any negotiation there are technical, political and timing issues. WTO Members are not going to see any concessions from the U.S. before the presidential election. It may be possible for the U.S. to make compromises, but the timing of major political events affects the ability to do so.
Conclusion
One of the major current challenges for the WTO and its Members is finding solutions to the impasse on the Appellate Body. The eight candidates for the Director-General post have all expressed views on the importance of resolving the issue and where in the hierarchy of issues to be addressed by an incoming Director-General the impasse is found. Presumably, most Members will be carefully considering each candidate’s views and suggested approach on all key issues, including resolving the Appellate Body impasse.
The fundamental disconnect between the EU (which has been reluctant to recognize any deviation from the Dispute Settlement Understanding by the Appellate Body) and the United States (which has focused on the limited role of the Appellate Body as laid out in the Dispute Settlement Understanding) remains. The role of honest broker and consensus builder that the incoming Director-General will assume later this year will be tested by the gulf in positions of two of the WTO’s major Members.