WTO Dispute Settlement System

The amended European Union enforcement regulation — hypocrisy or a reasonable move?

The amended EU enforcement regulation took effect on February 13, 2021. The amendment was pursued within the EU following the collapse of the Appellate Body at the WTO and is designed to give the EU the ability to impose retaliation whenever it perceives it has won some part of a panel proceeding at the WTO but the other party has filed an appeal where the Appellate Body is not functioning. The amended regulation also permits such action against trading partners under other agreements where dispute settlement is blocked or there is no dispute settlement. The announcement by the European Commission is embedded below and is followed by the amended regulation..

Strong_EU_trade_enforcement_rules_enter_into_force_-1-1

CELEX_32021R0167_EN_TXT

The EU presents itself as simply ensuring that it receives the benefits of the agreements it is a party to. The challenge of disputes at the WTO being appealed to a non-functioning WTO Appellate Body is a real one as reviewed in a prior post and as can be seen from the WTO webcite. See January 14, 2021, First dispute settlement cases of 2021 at the WTO — Costa Rica requests consultations with Panama for various restrictions on agricultural products viewed as violating SPS obligations and more; EU requests establishment of a panel to address its concerns with Indonesia’s export restrictions on inputs for stainless steel, https://currentthoughtsontrade.com/2021/01/14/first-dispute-settlement-cases-of-2021-at-the-wto-costa-rica-requests-consultations-with-panama-for-various-restrictions-on-agricultural-products-viewed-as-violating-sps-obligations-and-more-eu-re/; WTO, Dispute Settlement, Appellate Body, https://www.wto.org/english/tratop_e/dispu_e/appellate_body_e.htm. The following cases have been appealed to the WTO Appellate Body but are not currently being heard because of the lack of any Appellate Body members:

Current Notified Appeals 

  • 22 January 2021:  Notification of Appeal by Korea in DS553: Korea — Sunset Review of Anti-Dumping Duties on Stainless Steel Bars (WT/DS553/6)
     
  • 17 December 2020:  Notification of Appeal by Indonesia in DS484: Indonesia — Measures Concerning the Importation of Chicken Meat and Chicken Products (Article 21.5 — Brazil) (WT/DS484/25)
     
  • 26 October 2020:  Notification of Appeal by United States in DS543: United States — Tariff Measures on Certain Goods from China (WT/DS543/10)
     
  •  28 September 2020: Notification of Appeal by United States in DS533: United States — Countervailing Measures on Softwood Lumber from Canada (WT/DS533/5)
     
  •  28 August 2020:  Notification of Appeal  by the European Union in  DS494: European Union — Cost Adjustment Methodologies and Certain Anti-Dumping Measures on Imports from Russia (Second Complaint) (WT/DS494/7)
     
  •  28 July 2020: Notification of Appeal by Saudi Arabia in DS567: Saudi Arabia — Measures Concerning the Protection of Intellectual Property Rights (WT/DS567/7)
     
  •  18 December 2019: Notification of Appeal by the United States in DS436: United States — Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India (Article 21.5 — India) (WT/DS436/21)
     
  • 6 December 2019: Notification of Appeal by the European Union in DS316: EC and certain member States — Large Civil Aircraft (Article 21.5 — EU) (WT/DS316/43)
     
  • 19 November 2019: Notification of Appeal by India in DS541: India — Export Measures (WT/DS541/7)
     
  • 9 September 2019: Notification of Appeal by Thailand in DS371: Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines (Article 21.5 — Philippines II) (WT/DS371/30)
     
  • 15 August 2019: Notification of Appeal by the United States in DS510: United States — Certain Measures Relating to the Renewable Energy Sector (WT/DS510/5)
     
  • 4 June 2019: Notification of Appeal by Canada in DS534: United States — Anti-Dumping Measures Applying Differential Pricing Methodology to Softwood Lumber from Canada (WT/DS534/5)
     
  • 25 January 2019: Notification of Appeal by the United States in DS523: United States — Countervailing Duty Measures on Certain Pipe and Tube Products from Turkey (WT/DS523/5)
     
  • 9 January 2019: Notification of Appeal by Thailand in DS371: Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines (Article 21.5 — Philippines) (WT/DS371/27)
     
  • 14 December 2018: Notification of Appeal by India in DS518: India — Certain Measures on Imports of Iron and Steel Products (WT/DS518/8)
     
  • 20 November 2018: Notification of Appeal by Panama in DS461: Colombia — Measures Relating to the Importation of Textiles, Apparel and Footwear (Article 21.5 — Colombia)(Article 21.5 — Panama) (WT/DS461/28)
     
  • 21 September 2018: Notification of Appeal by the European Union in DS476: European Union and its member States — Certain measures Relating to the Energy Sector (WT/DS476/6)

Hypocrisy or a reasonable measure

The action of the European Union can be viewed as “reasonable” as an effort to maintain a right to binding dispute settlement. However, the unilateral action by the EU obviously invites mirror actions by trading partners which could quickly spiral out of control.

Moreover, the amended regulation looks only at actions by trading partners and fails to recognize similar actions by the EU that are identical to those they are objecting to by others. In fact, three of the seventeen cases listed above where appeals have been filed but are not presently being heard were filed by the European Union including two when the Appellate Body had either ceased to have at least three members and hence could not handle the appeal or was just four days from that situation. As there are many ways to resolve a dispute besides taking an appeal, what is the justification for the EU filing appeals into the void where they are on the losing side of a dispute at the panel report stage but complaining about trading partners doing the same? Is the EU position not hypocritical?

In addition, the dispute settlement system of the WTO is premised on Members awaiting a final dispute settlement decision and providing a trading partner a reasonable period of time to come into compliance before retaliation is permitted (and is then limited by arbitration if, as is almost always the case, the party seeking retaliation puts forward retaliation far out of line with actual harm — e.g., EU’s $12 billion requested retaliation on Boeing dispute compared to $4 billion authorized (WT/DSB353/ARB, 13 October 2020)). But the EU has at least in one case opted to retaliate before a panel case had been completed (EU challenge of US Section 232 national security action on steel and aluminum). The U.S. has not retaliated against the unilateral EU retaliatory action but rather pursued consultations and panel proceedings at the WTO. See WT.DS559: European Union — Additional Duties on Certain Products from the United States, https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds559_e.htm. Retaliating by creating a self-serving description of the action of a trading partner (safeguard vs. national security) is hardly faithful adherence to the obligations the EU has undertaken with trading partners in the WTO. Is the amended enforcement regulation in light of such flouting of agreed obligations not a sign of hypocrisy by the EU?

Reform of the WTO Dispute Settlement System, particularly the Appellate Body, is a high priority for Members and for the incoming Director-General. As reviewed in a prior post, the EU is finally making sounds like it will address U.S. concerns about overreaching by the Appellate Body (exceeding its limited mandate). Hopefully, the Biden Administration will be working within the WTO for meaningful reform of the Appellate Body to limit the Appellate Body to its originally envisioned limited role. The EU amended regulation will not contribute to an early resolution of the impasse and could make resolution more difficult depending on how it is used.