Warren Maruyama

The importance of addressing “overreach” in reforming the WTO Appellate Body

I have written a number of posts in the last eighteen months looking at the problems of the Appellate Body and the inadequacy of reform proposals put forward by WTO Members. Most importantly there can be no acceptable solution for the United States without addressing the concern over the WTO Appellate Body creating rights and obligations that Members have not agreed to. In the U.S., this is often referred to as “overreach”. In my view, addressing “overreach” requires changes both going forward and correction of overreach that has occurred in the past. My suggested approach can be found in my post of July 12, 2020 with a background note on “overreach contained in my post of November 12, 2019. Some of my prior posts on the WTO Dispute Settlement system include the following: March 11, 2021:  “No Quick Fixes for WTO Dispute Settlement Reform” — a skeptical view by the former Deputy USTR of the EU’s willingness to address core U.S. concerns, https://currentthoughtsontrade.com/2021/03/11/no-quick-fixes-for-wto-dispute-settlement-reform-a-skeptical-view-by-the-former-deputy-ustr-of-the-eus-willingness-to-address-core-u-s-concerns/; February 18, 2021:  The European Commission’s 18 February 2021 Trade Policy Review paper and Annex — WTO reform and much more proposed, https://currentthoughtsontrade.com/2021/02/18/the-european-commissions-18-february-2021-trade-policy-review-paper-wto-reform-and-much-more-proposed/; January 29, 2021:  WTO Panel report on UNITED STATES – ANTI-DUMPING AND COUNTERVAILING DUTIES ON CERTAIN PRODUCTS AND THE USE OF FACTS AVAILABLE should be appealed by the United States, https://currentthoughtsontrade.com/2021/01/29/wto-panel-report-on-united-states-anti-dumping-and-countervailing-duties-on-certain-products-and-the-use-of-facts-available-should-be-appealed-by-the-united-states/; October 1, 2020:  Thoughts on the Geneva Trade Week session entitled “WTO Dispute Settlement – Where Do We Stand?”, https://currentthoughtsontrade.com/2020/10/01/thoughts-on-the-geneva-trade-week-session-entitled-wto-dispute-settlement-where-do-we-stand/; August 29, 2020:  WTO Dispute Settlement Body meeting of August 28, 2020 – how disputes are being handled in the absence of reform of the Appellate Body, https://currentthoughtsontrade.com/2020/08/29/wto-dispute-settlement-body-meeting-of-july-28-2020-how-disputes-are-being-handled-in-the-absence-of-reform-of-the-appellate-body/; August 9, 2020:  USTR Lighthizer on WTO dispute settlement – answers to Congressional questions from June 17 hearings, https://currentthoughtsontrade.com/2020/08/09/ustr-lighthizer-on-wto-dispute-settlement-answers-to-congressional-questions-from-june-17-hearings/; July 12, 2020:  WTO Appellate Body reform – revisiting thoughts on how to address U.S. concerns, https://currentthoughtsontrade.com/2020/07/12/wtos-appellate-body-reform-revisiting-thoughts-on-how-to-address-u-s-concerns/; July 2, 2020:  WTO Dispute Settlement – how to handle allegations that an Appellate Body member is affiliated with a government and hence not properly an Appellate Body member, https://currentthoughtsontrade.com/2020/07/02/wto-dispute-settlement-how-to-handle-allegations-that-an-appellate-body-member-is-affiliated-with-a-government-and-hence-not-properly-an-appellate-body-member/; March 28, 2020: March 27, 2020 Agreement on Interim Arbitration Process by EU and 15 other WTO Members to Handle Appeals While Appellate Body is Not Operational, https://currentthoughtsontrade.com/2020/03/28/march-27-2020-agreement-on-interim-arbitration-process-by-eu-and-15-other-wto-members-to-handle-appeals-while-appellate-body-is-not-operational/; March 7, 2020: Impasse on the WTO Appellate Body – Any Progress Likely by the 12th Ministerial?, https://currentthoughtsontrade.com/2020/03/07/impasse-on-the-wto-appellate-body-any-progress-likely-by-the-12th-ministerial/; February 14, 2020: USTR’s Report on the WTO Appellate Body – An Impressive Critique of the Appellate Body’s Deviation from Its Proper Role, https://currentthoughtsontrade.com/2020/02/14/ustrs-report-on-the-wto-appellate-body-an-impressive-critique-of-the-appellate-bodys-deviation-from-its-proper-role/; January 30, 2020: WTO Appellate Body Impasse – How and Why, https://currentthoughtsontrade.com/2020/01/30/wto-appellate-body-impasse-how-and-why/; December 7, 2019: The WTO Dispute Settlement System – Closing Out 2019 and Implications for 2020, https://currentthoughtsontrade.com/2019/12/07/the-wto-dispute-settlement-system-closing-out-2019-and-implications-for-2020/; November 24, 2019: With the WTO Appellate Body Becoming Dysfunctional on December 11, What Happens to Pending Appeals and Other Open Issues?, https://currentthoughtsontrade.com/2019/11/24/with-the-wto-appellate-body-becoming-dysfunctional-on-december-11-what-happens-to-pending-appeals-and-other-open-issues/; November 17, 2019: The WTO budget and the Appellate Body – Potential Fireworks at the end of 2019, https://currentthoughtsontrade.com/2019/11/17/the-wto-budget-and-the-appellate-body-potential-fireworks-at-the-end-of-2019/; November 12, 2019: Background Materials on WTO Appellate Body Reform Challenges – The Critical Issue of “Overreach”, https://currentthoughtsontrade.com/2019/11/12/background-materials-on-wto-appellate-body-reform-challenges-the-critical-issue-of-overreach/; November 4, 2019: WTO’s Appellate Body Reform – The Draft General Council Decision on Functioning of the Appellate Body, https://currentthoughtsontrade.com/2019/11/04/wtos-appellate-body-reform-the-draft-general-council-decision-on-functioning-of-the-appellate-body/; November 1, 2019: The October 28, 2019 WTO Dispute Settlement Body Meeting – Another Systemic Problem Flagged by the United States, https://currentthoughtsontrade.com/2019/11/01/the-october-28-2019-wto-dispute-settlement-body-meeting-another-systemic-problem-flagged-by-the-united-states/; October 9, 2019: The World Trade Organization in Crisis – the Last Two Months of the Appellate Body Absent Reform Is Just One Example, https://currentthoughtsontrade.com/2019/10/09/the-world-trade-organization-in-crisis-the-last-two-months-of-the-appellate-body-absent-reform-is-just-one-example/.

In late 2019 and the first half of 2020, the National Foreign Trade Council released two papers it commissioned that were written by a former USTR attorney with extensive experience in WTO dispute settlement matters, Bruce Hirsch, on Appellate Body reform. See Bruce Hirsch, Resolving the WTO Appellate Body Crisis (Vol. 1), Proposals on Overreach, December 2019, https://www.nftc.org/default/trade/WTO/Resolving%20the%20WTO%20Appellate%20Body%20Crisis_Proposals%20on%20Overreach.pdf; Bruce Hirsch, Resolving the WTO Appellate Body Crisis (Vol. 2), Proposals on Precedent, Appellate Body Secretariat and the Role of Adjudicators, June 2020, https://www.nftc.org/default/Trade%20Policy/WTO_Issues/Resolving%20the%20WTO%20AB%20Crisis%20vol2%2006042020.pdf. The first of the two papers dealt with the topic of overreach though did not address correcting past overreach situations. The NFTC press release summarized the proposals for change on the overreach issue as follows:

“The paper includes six key proposals:

“1. Enforce the 90-day timeframe for appeals;

“2. Prohibit advisory opinions, and further elaborate the circumstances constituting advisory opinions;

“3. Clarify that DSU Article 3.2 does not justify expanding or narrowing the reach of WTO provisions or filling gaps in WTO coverage;

“4. Clarify that customary rules of interpretation of public international law do not justify gap-filling and expanding or narrowing the reach of WTO provisions;

“5. Affirm that Article 17.6(ii) of the Antidumping Agreement must be given meaning, by clarifying that the provision reflects the principle just described, that WTO adjudicators may not expand or narrow the meaning of broad provisions and general terms; and

“6. Direct the Appellate Body to reject party arguments that expand or narrow the reach of agreement provisions or fill gaps in agreements.”

This year, a former USTR General Counsel, Warren Maruyama had an article published in the Journal of World Trade that again stressed the importance of addressing overreach to be able to resolve the Appellate Body impasse. See Maruyama, Warren H., “Can the Appellate Body Be Saved?”, Journal of World Trade 55, no. 2 (2021, 197-230. Mr. Maruyama notes that the problem of overreach for the United States is most pronounced in the trade remedy sphere and that there have been concerns for two decades or more flowing in large part from the Appellate Body’s creation of obligations on “zeroing”. As Mr. Maruyama states, “The concerns rest on the conviction of U.S. trade officials who participated in the Uruguay Round negotiations and later served in the Bush 43, Obama, and Trump Administrations, that there was never a WTO agreement to abolish ‘zeroing’.” Id at 197. Mr. Maruyama reviews the Uruguay Round antidumping negotiations and GATT disputes on similar language in the Tokyo Round Code to that relied upon by the Appellate Body to support his thesis that many countries knew about “zeroing” (treating sales that were not dumped as having a “0” dumping amount) during the Uruguay Round, and that efforts to have language added to the Agreement to address the issue were rejected. Id at 202-210.

Mr. Maruyama then proceeds to look at the challenges to addressing overreach and has a number of useful proposals — clarifying the standard of review for the Appellate Body, not review finding of facts under DSU Art. 11, giving meaning to ADA Article 17.6(ii) in terms of deference to administering authorities in constructions where more than one meaning is possible, examining negotiating history and ending gap filling. Id at 214 – 225. He also proposes reforming the Appellate Body appointment process (moving away from academics to individuals with WTO negotiating experience), making Appellate Body positions full time, providing a mechanism to disapprove an AB decision where a significant number of Members object, and by modifying the structure and operation of the Appellate Body Secretariat to have Secretariat personnel hired by each AB member to help the AB member during his/her time on the Appellate Body. Id at 226-228.

The importance of Mr. Maruyama’s article lies in his focus on the critical importance of solving the overreach problem if the WTO is to regain a two-tier dispute settlement system. His is another voice providing a clear signal that overreach is the most important issue to be solved and that the Walker paper from late 2019 didn’t really address this core U.S. concern.

As I have written before, addressing overreach requires both fixing the operation of the system going forward and rebalancing rights and obligations by correcting for the overreach decisions Members have flagged to the DSB in the past. The addressing of overreach is of importance to both political parties in the United States and has been on the radar of current and past Administration since at least 2002.

Because restoration of a two-tier dispute settlement system is viewed as important by many Members, it is time for WTO Members to in fact recognize the problems of past decisions and work for meaningful solutions both of the system going forward and to ensure a restoration of the balance and rights and obligations agreed to by Members during the Uruguay Round.