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U.S. blocks inclusion of Venezuelan request for panel on U.S. sanctions at WTO, Dispute Settlement Body meeting of March 26, 2021 postponed

The monthly regular meeting of the WTO Dispute Settlement Body was scheduled for March 26, 2021. The proposed agenda was circulated earlier and contained as item 4, “United States – Measures Relating to Trade in Goods and Services, A. Request for the Establishment of a Panel by Venezuela (WT/DS54/2/Rev.1)”. See Dispute Settlement Body, 26 March 2021, Proposed Agenda, WT/DSB/W/679 (24 March 2021). For background, the Venezuelan request for a panel is embedded below.

WTDS574-2R1

The United States objected to the inclusion of agenda item 4. USTR released a short statement on March 26. “The United States will reject any effort by Maduro to misuse the WTO to attack U.S. sanctions aimed at restoring human rights and democracy to Venezuela. The United States exercised its rights as a WTO Member to object to this illegitimate panel request because representatives of the Maduro regime do not speak on behalf of the Venezuelan people.” See USTR, Statement from USTR Spokesperson Adam Hodge on U.S. Action to Prevent Maduro Regime’s Attempt to Undermine U.S. Sanctions, March 26, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/march/statement-ustr-spokesperson-adam-hodge-us-action-prevent-maduro-regimes-attempt-undermine-us.

Venezuela did not agree to withdraw its request for a panel from the agenda with the result that Dispute Settlement Body meetings cannot proceed until there is a resolution. See Blomberg, U.S. Disrupts WTO Dispute Meeting Over Venezuela Sanctions Fight, March 26, 2021, https://www.bloomberg.com/news/articles/2021-03-26/u-s-disrupts-wto-dispute-meeting-over-venezuela-sanctions-fight (“The meeting ended prematurely after Venezuela refused Washington’s demand that the WTO remove Venezuela’s dispute request from the meeting agenda, according to the official attending the meeting. The impasse means that the WTO can’t hold any regular dispute settlement meetings unless and until the U.S. or Venezuela back down.”); Inside U.S. Trade’s World Trade Online, WTO: DSB meeting postponed over U.S. objection to Venezuela panel request, March 26, 2021, https://insidetrade.com/daily-news/wto-dsb-meeting-postponed-over-us-objection-venezuela-panel-request; Reuters, U.S. blocks Venezuela bid to seek WTO review of sanctions, March 26, 2021, https://www.reuters.com/article/us-trade-wto-usa-venezuela/u-s-blocks-venezuela-bid-to-seek-wto-review-of-sanctions-idUSKBN2BI1ZT (“Were the United States and other members to allow representatives of the illegitimate Maduro regime to exercise rights at the WTO on behalf of Venezuela, it would be tantamount to recognizing the Maduro regime itself,” the official said. “This would be contrary to the Biden-Harris administration’s firm policy supporting the people of Venezuela.”).

Background

The Maduro government in Venezuela is viewed as illegitimate by the United States and dozens of other governments based on the 2013 election. The U.S. has recognized Juan Guaido as the interim President and has imposed a series of sanctions on Venezuela and the Maduro government. While the sanctions were imposed during the Trump Administration, no changes have yet occurred in the Biden Administration. A 2020 write-up from the State Department describes the problems and justifications for the sanctions. See U.S. Department of State, U.S. Relations With Venezuela, Bilateral Relations Fact Sheet, Bureau of Western Hemisphere Affairs, July 6, 2020, https://www.state.gov/u-s-relations-with-venezuela/. Much of the fact sheet is copied below.

U.S.-VENEZUELA RELATIONS

“The United States recognizes Interim President Juan Guaido and considers the Venezuelan National Assembly, which he currently leads, to be the only legitimate federal institution, according to the Venezuelan Constitution. Nearly sixty other countries have joined in this recognition.

“The United States works with Interim President Juan Guaido and his team on a number of areas of mutual concern, including humanitarian and migration issues, health issues, security, anti-narcotrafficking initiatives, and reestablishment of the rule of law. The United States proposed a Democratic Transition Framework in 2020 as a guide to help Venezuelan society achieve a peaceful, democratic transition. Venezuela’s previous presidents, the late Hugo Chavez (1999-2013) and Nicolas Maduro (2013-2019), defined themselves in large part through their opposition to the United States, regularly criticizing and sowing disinformation about the U.S. government, its policies, and its relations with Latin America. Maduro, who was not reelected via free and fair elections, clings to power through the use of force. His policies are marked by authoritarianism, intolerance for dissent, and violent and systematic repression of human rights and fundamental freedoms – including the use of torture, arbitrary detentions, extrajudicial killings, and the holding of more than 400 prisoners of conscience. Maduro has been sanctioned by the Office of Foreign Assets Control, and in 2020 the Department of Justice charged him with offenses related to narco-terrorism and drug trafficking The U.S. Department of State’s Bureau of International Narcotics and Law Enforcement (INL) posted a $15-million reward for information to bring him to justice. The Maduro regime’s irresponsible intervention in the economy has facilitated widespread corruption and stoked hyperinflation leading to negative economic growth and a humanitarian crisis, including food, energy, and water shortages, in a country with the world’s largest proven oil reserves.

“U.S. Assistance to Venezuela

“Through its assistance to the legitimate Guaido Interim Government and democratic organizations within and outside Venezuela, the United States supports the protection of human rights, the promotion of civil society, the strengthening of democratic institutions, and transparency and accountability in the country. From Fiscal Year (FY) 2014 to 2019, the United States has committed approximately $58.6million in bilateral democracy assistance to Venezuela. Assistance to Venezuela is subject to a number of restrictions, including those under Section 706(1) of the Foreign Relations Authorization Act, Fiscal Year 2003 (P.L. 107-228) (the so-called Drug Majors restriction), the Trafficking Victims Protection Act, and restrictions contained in the annual appropriations laws

“Since 2005, the President has determined annually that Venezuela, and more recently the illegitimate Maduro regime, has “failed demonstrably” to adhere to its drug control obligations under international counternarcotics agreements. The President has issued a national interest waiver to enable certain assistance programs vital to the national interests of the United States, such as human rights and civil society programs, to continue.

“Pursuant to Section 40A of the AECA, since 2006 the Department of State has determined annually that Venezuela was “not cooperating fully” with U.S. counterterrorism efforts. Under this provision, defense articles and services may not be sold or licensed for export to Venezuela during the relevant fiscal year.

“U.S. Assistance in Response to the Venezuela Regional Crisis

“The United States is answering Interim President Guaido’s call to help the people of Venezuela cope with severe food, water, energy, and medicine shortages. Since FY 2017, the United States has provided more than $856 million in assistance to support the response to the crisis inside Venezuela and the region, which includes $611 million in humanitarian assistance and $245 million in economic and development assistance. The United States is the single largest donor to the combat the crisis, and supports sixteen countries hosting Venezuelan refugees. USG-provided humanitarian assistance addresses critical life-saving needs, including food and nutrition, water, sanitation, hygiene and health, and temporary shelter. Our development assistance is helping countries throughout Latin America and the Caribbean meet longer term needs, such as education deficits, caused by the man-made regional crisis.

“Bilateral Economic Relations

“Before the United States suspended diplomatic operations in Venezuela, the United States was Venezuela’s largest trading partner. Bilateral trade in goods between both countries reached $3.2 billion in 2019. U.S. goods exports to Venezuela totaled $1.2 billion in 2019. U.S. imports from Venezuela totaled $1.9 billion. U.S. exports to Venezuela have historically included petroleum and refined petroleum products, machinery, organic chemicals, and agricultural products. Crude oil dominated U.S. imports from Venezuela, which was one of the top five suppliers of foreign oil to the United States. In early 2019, imports of Venezuelan crude oil averaged roughly 500,000 barrels per day, but sanctions imposed by the United States have now cut this to zero. Previously, U.S. foreign direct investment in Venezuela was concentrated largely in the petroleum sector, but sanctions, coupled with the poor business environment, have significantly reduced these investment.

“Hyperinflation, state intervention in the economy including expropriations, macroeconomic distortions, physical insecurity, corruption, violations of labor rights, and a volatile regulatory framework make Venezuela an extremely challenging climate for U.S. and multinational companies. A complex foreign exchange system, capital controls, and the lack of dollars, coupled with increasing sanctions from the United States and other countries, have prevented firms from repatriating their earnings out of Venezuela and importing industrial inputs and finished goods into Venezuela. Lack of access to dollars, price controls, and rigid labor regulations have compelled many U.S. and multinational firms to reduce or shut down their Venezuelan operations.

“Since 2017, the United States has made over 300 Venezuelan-related designations, pursuant to various Executive Orders (E.O.), including under the International Emergency Economic Powers Act, and the Foreign Narcotics Kingpin Designation Act. Designations include former President

“Maduro and those involved in public corruption and undermining democracy under E.O. 13692 (Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela) issued by the President in March 2015 and E.O. 13850 (Blocking Property of Additional Persons Contributing to the Situation in Venezuela) issued by the President in November 2018, each as amended. Since 2017, the Department of Treasury has designated two individuals for involvement in narcotrafficking under the Kingpin Act, including former Vice President (and nominal Minister of Oil) Tareck El Aissami.

“Additionally, E.O. 13850, in conjunction with determinations made by the Secretary of the Treasury, authorizes sanctions against persons determined to be operating in the gold, oil, financial, and defense and security sectors of the Venezuelan economy and was the basis for the January 2019 designation of Venezuelan national oil company Petreoleos de Venezuela, S.A. (PdVSA). The Central Bank of Venezuela is also designated under E.O. 13850.

“On August 5, 2019, the President signed E.O. 13884 which blocks all property and interests in property of the Government of Venezuela that are in the United States or that are within the possession or control of any United States person. In conjunction with E.O. 13884, Treasury also issued or , including those that authorize, among other things, transactions with Guaido and the National Assembly, activities for the official business of certain international organizations, and activities NGOs undertake to support humanitarian projects to meet basic human needs in Venezuela.

“For additional information about the Venezuela sanctions program, please visit the Treasury Department’s Office of Foreign Assets Control (OFAC) website.

“On March 26, 2020, the Department of Justice charged former President Maduro and 14 other current and former Venezuelan officials, including his vice president for the economy, his Minister of Defense, and the Chief Supreme Court Justice with offenses related to narco-terrorism, corruption, and drug trafficking, and other criminal charges.

“Venezuela’s Membership in International Organizations

“Venezuela and the United States belong to a number of the same international organizations, including the United Nations, Organization of American States, International Atomic Energy Agency, International Civil Aviation Organization, International Monetary Fund, Interpol, World Bank, World Trade Organization and Inter-American Development Bank (IDB).

“Venezuela is a founding member of the Organization of the Petroleum Exporting Countries (OPEC), the Bolivarian Alliance for the Peoples of Our America (ALBA), the Community of Latin American and Caribbean States (CELAC), and PetroCaribe. Venezuela is also a member of the Non-Aligned Movement, , the G-15, the G-24, and the G-77. On August 5, 2017 Venezuela was indefinitely suspended from Southern Common Market (Mercosur).

“With the recognition of Juan Guaido as interim President by 57 countries, Venezuela’s participation or representation in some of these organizations has come under debate.

“On April 26, 2017, Maduro announced Venezuela would withdraw from the Organization of American States (OAS), a process that requires two years. This decision was reversed by Interim President Guaido and the National Assembly. On January 10, 2019, the OAS Permanent Council voted not to recognize the second term of former President Nicolas Maduro and on April 9, 2019 the OAS Permanent Council approved a resolution to accept interim President Guaido’s nominee Gustavo Tarre as Venezuela’s representative to the Permanent Council on April 9.

“The interim Guaido government is also an active member of the Lima Group, an important group of likeminded nations founded in 2017 to facilitate regional coordination in the pursuit of a democratic resolution to the Venezuela crisis.

“On March 15, 2019, the IDB approved a resolution recognizing Guaido’s representative, Ricardo Hausmann. The current representative is Alejandro Plaz.

“Bilateral Representation

“On March 12, 2019, the United States suspended embassy operations in Caracas. The United States maintains formal diplomatic relations with Venezuela and the Guaido interim government through its accredited Ambassador to the United States.

“On August 28, 2019, the Department of State announced the opening of the Venezuela Affairs Unit (VAU). The VAU is the interim diplomatic office of the U.S. Government to Venezuela, located at the U.S. Embassy in Bogota, Colombia. It continues the U.S. mission to the legitimate Government of Venezuela and to the Venezuelan people.”

While the Biden Administration is reviewing its approach to Venezuela and some in the Democratic party have questioned the sanction program in terms of effectiveness, the sanctions remain in place as of March 28, 2021. See, e.g., White House Briefing Room, Background Press Call by Senior Administration Officials on Venezuela, March 08, 2021,https://www.whitehouse.gov/briefing-room/press-briefings/2021/03/08/background-press-call-by-senior-administration-officials-on-venezuela/; PBS News Hour, Democrats pressure Biden to review U.S. sanctions on Venezuela, March 23, 2021, https://www.pbs.org/newshour/politics/democrats-pressure-biden-to-review-u-s-sanctions-on-venezuela.

WTO history of the dispute

Venezuela requested consultations with the United States in late December 2018. See UNITED STATES – MEASURES RELATING TO TRADE IN GOODS AND SERVICES, REQUEST FOR CONSULTATIONS BY VENEZUELA (28 December 2018), WT/DS574/1, G/L/1289, S/L/420, 8 January 2019.

The United States refused the request for consultations. Venezuela requested a panel on 14 March 2019. See UNITED STATES – MEASURES RELATING TO TRADE IN GOODS AND SERVICES REQUEST FOR THE ESTABLISHMENT OF A PANEL BY VENEZUELA, WT/DS574/2, 15 March 2019.

The request was included in the draft agenda for the DSB meeting of March 26, 2019. See Dispute Settlement Body, 26 March 2019, Proposed Agenda, WT/DSB/W/641, 22 March 2019 (agenda item 6, “UNITED STATES – MEASURES RELATING TO TRADE IN GOODS AND SERVICES, A. REQUEST FOR THE ESTABLISHMENT OF A PANEL BY VENEZUELA (WT/DS574/2)”).

The U.S. objected to the inclusion of the Venezuelan request on the agenda. No DSB meeting was held on March 26, 2019. Venezuela agreed to withdraw its request, and the DSB meeting was rescheduled for April 26, 2019. See Dispute Settlement Body, 26 April 2019, Proposed Agenda, WT/DSB/W/643, 24 April 2019.

The minutes of the April 26, 2019 DSB meeting included the following statement ahead of the adoption of the agenda.

“Prior to the adoption of the Agenda, the representative of the Bolivarian Republic of Venezuela said that his delegation wished to make a short statement for the record to the effect that Venezuela was not asking to modify the proposed Agenda of the present meeting to request an inclusion of an item. However, Venezuela wished to reserve its right to do so at any future DSB meeting. Subsequently, Japan said that it wished to include on the proposed Agenda an item under “Other Business” regarding its communication contained in Job/DSB/3. The Agenda was adopted as amended. Following the adoption of the Agenda, the representative of Peru, speaking on behalf of Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Honduras, Panama and Paraguay said that the members of the Lima Group supported the functioning of the DSB at the present meeting.
However, their Governments wished to indicate that they did not recognize the legitimacy of Nicolás Maduro’s regime nor that of its representatives. The representative of Venezuela said that the DSB was not the appropriate forum to discuss this matter. The representative of the Russian Federation said that her country supported the legitimate government of Nicolás Maduro and underlined that the WTO was not the appropriate international forum vested with the authority to discuss issues raised by the members of the Lima Group.” Dispute Settlement Body, 26 April 2019, MINUTES OF MEETING HELD, WT/DSB/M/428
25 June 2019, page 1.

March 26, 2021 DSB Meeting

Thus, based on the history of U.S. concerns with the Maduro government in Venezuela, it was hardly surprising that the United States would block inclusion of the request for a panel from the agenda this past Friday. Press accounts report that Peru, Brazil and Colombia supported the U.S. position and that the Russian Federation and Cuba supported Venezuela. See, e.g., Reuters, U.S. blocks Venezuela bid to seek WTO review of sanctions, March 26, 2021, https://www.reuters.com/article/us-trade-wto-usa-venezuela/u-s-blocks-venezuela-bid-to-seek-wto-review-of-sanctions-idUSKBN2BI1ZT.

The EU made a statement at the truncated meeting which is copied below. See Permanent Mission of the European Union to the World Trade Organization (WTO), EU Statement at the Regular meeting of the Dispute Settlement Body (DSB), 26 March 2021, https://eeas.europa.eu/delegations/world-trade-organization-wto/95717/eu-statement-regular-meeting-dispute-settlement-body-dsb-26-march-2021_en.

ADOPTION OF THE AGENDA:

“If the EU understands correctly, the US is not ready to accept this panel request by Venezuela as being valid, as it was submitted by a government which the US no longer recognises as the legitimate government representing Venezuela.

“In fact, in this case, the EU would have expected the US to rely on the security exceptions in Article XXI of the GATT and Article XIVbis of the GATS for justifying any departures from basic GATT and GATS provisions that may lie in the measures taken against Venezuela. 

Indeed, we note that the United States measures at issue appear justified by the security exceptions, so the challenge at issue cannot in any event succeed.

“All this being said, the EU has to react for systemic reasons and express its concern at the prospect of the DSB being prevented from holding its meeting on all items of today’s agenda simply because that agenda is not adopted. 

“There is a longstanding and widely recognised principle that DSB agendas cannot be blocked to the extent that they include items governed by negative consensus. This includes first panel requests (governed by consensus), since they are a necessary pre-condition to a second panel request. This principle is of utmost importance because the binding nature of WTO dispute settlement rests on it. 

“That said, the EU expects this meeting to be suspended now, as a result of the US objection to the agenda adoption. This should allow the Chairperson and the WTO Members most involved to consult in search of a solution. The EU hopes that these efforts will rapidly yield a solution, so that this meeting can continue and the DSB discharge the important duties with which it is entrusted.”

Conclusion

Friday’s events at the Dispute Settlement Body meeting were not surprising once the request for a panel had been filed by Venezuela. What is surprising is the Maduro government’s effort to re-raise a matter that had no possibility of being considered in light of the well understood U.S. position (a position agreed to by many WTO Members).

WTO Members have historically shown an inability to evaluate disputes they pursue from the vantage point of whether the result desired is at all politically possible for the Member whose action is being challenged. Yet pursuing disputes that cannot be resolved through the dispute settlement system is a disservice to the WTO and to the proper functioning of the Dispute Settlement Body. The Maduro government dispute with the United States first and foremost is a question of the legitimacy of the Maduro government and its refusal to transfer power to the interim President. No WTO dispute will help resolve the underlying dispute. Besides the question raised by the United States (blocking requests from entities which are not the true representatives of the people), getting rid of the request properly reflects the political realities of the underlying dispute.