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A Reset of the World Trade Organization's Appellate Body

Reforming the WTO

This three-part solution to get the World Trade Organization’s Appellate Body back on track comes from a longer article written by Jennifer A. Hillman,  Senior Fellow for Trade and International Political Economy, Council on Foreign Relations.

The article in full can be found here.

Jennifer A. Hillman is currently a Professor of Practice at the Georgetown Law Center. Georgetown’s Institute of International Economic Law (IIEL) is a partner in the AIG Global Trade Series.

Three-Part Solution

To get the Appellate Body back on track, three reforms are needed.

Adopt the Walker principles. New Zealand’s Ambassador and Permanent Representative to the WTO David Walker was appointed in February to “seek workable and agreeable solutions to improve the functioning of the Appellate Body.” On November 28, 2019, he set forth specific principles designed to address the six U.S. concerns. The principles require the Appellate Body to make its decisions in ninety days and for Appellate Body members to leave promptly at the end of a second term of office, to treat facts as facts (not subject to appeal), to respect the more deferential standard of review for antidumping investigations, to address only issues raised by parties and only to the extent necessary to resolving the dispute at hand so that its opinions are not advisory, to take previous Appellate Body or panel reports into account only to the extent they are relevant and not as precedent, and to ensure that its rulings do not add to the obligations or take away any rights of the parties as contained in the WTO rules. Collectively, the Walker principles are designed to make the Appellate Body more efficient by shortening its time frames and its reports while doing what the United States has demanded—return to the rules as written in 1995. If adopted with unreserved acknowledgement by the European Union and other skeptics, it would demonstrate widespread member agreement that the Appellate Body has a limited mandate to resolve only legal questions raised on appeal in strict accordance with WTO rules.

Establish an oversight committee and audit to ensure compliance. To build trust that the Appellate Body will adhere to the Walker principles, the WTO should convene an oversight committee at least once a year and when requested. The oversight committee could be made up of the chairs of the lead WTO committees—its General Council, Council for Trade in Goods, Council for Trade in Services, Council for Trade-Related Aspects of Intellectual Property Rights, and the Dispute Settlement Body, with the chair of the Dispute Settlement Body appointing four additional independent trade-law experts to the committee to ensure a proper representation of expertise. The committee’s sole task should be to assess whether the Appellate Body has adhered to the Walker principles, either over the course of a given year or, when asked, in an individual case.

The WTO should convene an oversight committee

Limit the service of members of the Appellate Body Secretariat to no longer than eight years—the maximum length of time of an Appellate Body member. The root cause of many U.S. concerns rests not just with the Appellate Body members themselves, but with its Secretariat—particularly the lawyers who work for the Appellate Body as a whole. Over time, the Secretariat has gained experience and expertise that often is greater than that of the Appellate Body members, who serve on a part-time basis for a maximum of eight years. Secretariat lawyers, on the other hand, devote all of their time over many years to working on appeals and are steeped in (and potentially wedded to) past decisions. Adopting a mobility principle would allow staff rotations throughout other WTO offices, bring new perspectives to appeals, reduce the tendency to treat past decisions as precedent, and help restore an appropriate balance of power between the Appellate Body members and the Secretariat staff. It would also send a strong signal of an end to business as usual. 

A Fair Solution

These three reforms would make the Appellate Body more efficient while addressing U.S. concerns. For the United States, it is critical that the Appellate Body respect the current language of the WTO’s Dispute Settlement Understanding. The Walker principles require just that. But the United States needs assurance that the mindset of the Appellate Body has been changed and that, this time around, the rules will be respected. The creation of an oversight process ensures that the Appellate Body will be judged on its consistency with the Walker principles, while injecting an additional measure of political oversight over the functioning of the Appellate Body. Staff rotation brings fresh thinking along with a renewed focus on completing appeals in accordance with the needs of WTO members.

These changes ought to satisfy the United States while not undermining the rest of the world’s desire for a fair and effective system. If more is needed, tweaks to the Walker principles should be sought. By its response to these reforms, the Trump administration will signal to the world whether it wants to fix the WTO’s dispute settlement system or not. Time is of the essence. By the time the WTO ministers meet in June 2020, a package of reforms needs to be in place or the turn away from a binding rules-based system may be irrevocable.

U.S. concerns about the Appellate Body did not begin with President Trump and they will not end when he leaves office

Critics will say that this shake-up is not necessary, that the world should simply wait until President Trump leaves office. However, U.S. concerns about the Appellate Body did not begin with President Trump and they will not end when he leaves office. In the interim years, many mini–trade wars could break out over each unsettled dispute, or countries could move on to less-desirable alternatives that do not include the United States. There would be little incentive for a new president to bring the United States back into a system still perceived to be flawed.

By paralyzing the Appellate Body, the United States has garnered the attention of the world. If this was done as a genuine effort to restore the Appellate Body to the more limited role envisioned in 1995, now is the time for the United States to clearly outline the precise steps that it wants taken to allow a revised Appellate Body to function. Failure to do so risks branding the United States’ concerns as illegitimate and an attempt to destroy not just the Appellate Body, but the WTO itself, and with it the worldwide trading system.

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