Can the US dismember the WTO appellate body?

It is often said that the US is abandoning the field of international play to China, but this claim is ridiculous. By late this autumn, for example, China’s appointee, Hong Zhao, will be the only appellate judge left in the World Trade Organization (WTO), because US president Donald Trump is vetoing all new appointments as the members of its appellate body gradually retire. As of December 12 2019, the WTO appellate body will lack a quorum, meaning the supreme court of world trade will essentially be closed for new business.

“At first, the international community couldn’t believe what Trump was doing,” says former appellate body chair James Bacchus. “Now, it’s widely recognised that he’s perfectly content to put the world trade system in legal deep freeze.”

The US has always had procedural nits to pick with the WTO, but now it won’t even engage with a Brazilian proposal that addresses all of its structural complaints. At the end of the day, Mr Bacchus believes, Mr Trump’s America is driven by the belief that it can win more trade fights through bullying. “Evidently,” he says, “the president believes in the rule of power rather than the rule of law.”

Life preserver

Happily, the EU and Canada have modelled a clever way to unfreeze the world trade system. On July 25 2019, they agreed to resolve all mutual trade disputes through a process of arbitration that will mimic an appellate body appeal, rooted in Article 25 of the WTO’s Dispute Settlement Understanding.

“This is a way of keeping the appellate body on life support until rationality returns,” says former WTO appeals judge Jennifer Hillman. “The EU and Canada are among those stepping into the void as the US abdicates international leadership, and they deserve to be commended.”

Having said that, Ms Hillman sees flaws in the scheme. The US would remain outside the system – but it might then feel less pressure to restore the appellate body. Parties would need to opt in case by case, and they would lack a proper enforcement mechanism. Most troubling, any nation unhappy with an initial WTO ruling could choose to block the outcome by simply filing a notice of appeal to the appellate body. Then they could argue that they are not bound by the result, because they were deprived of their right to appeal.

Mini wars

Consider the challenge mounted by 30 nations against the US invoking “national security” to justify steel duties. The US is nearly sure to lose, as an April panel found that the existence of an international relations emergency is justiciable and objectively determinable. On such a hot-button issue, Ms Hillman suspects Mr Trump will lodge a notice of appeal in order to block the outcome. But if other nations also scorn the norm of restraint, then “WTO disputes may turn into mini trade wars,” she says. “A sword will always be hanging over the process.”

So will rationality return? “I hope and believe so,” says Ms Hillman. “There are many in the business community and Congress who don’t like the fact that the US is single-handedly taking down a legal system that the other 163 countries in the WTO desperately want.”

In any event, the rule of power is a fool’s game. Mr Trump “is vastly overestimating the amount of economic and other leverage the US has, or will have in future years,” says Mr Bacchus. “It is overwhelmingly in the interests of the US to strengthen the rule of law in international trade. The way to achieve this is to support the appellate body, which is the glue that holds the system together.”