It has been a week since the suspension of the Appellate Body of the World Trade Organization (WTO), and there is still no sign of when it will be restarted. In the short term, the suspension of the Appellate Body did not have serious consequences for global trade, but if the body fails to resume normal operations, trade between countries may re-enter the era of the “rule of the jungle” where the weak can eat the weak.
On December 10, the World Trade Organization (WTO) announced that member states had not reached an agreement on the reform of the Appellate Body. The Appellate Body has officially entered a state of suspension and cannot review new dispute decisions. This is an important part of the dispute settlement mechanism established at the same time as the WTO. After 25 years of smooth operation, it encountered the problem of survival for the first time.
What is the WTO Appellate Body? What is the reason behind its suspension? What will be the consequences of the shutdown?
WTO dispute settlement mechanism
According to the official statement of the World Trade Organization, "the disputes of WTO members are essentially breach of contract." Therefore, the WTO members all agree that if they believe that other members violate the trade rules, they will use the dispute settlement mechanism to solve the problem, rather than unilaterally act. This means that all member states must follow established procedures and respect judgments.
follows the principle of "fair, fast, effective, and mutually acceptable". The current dispute settlement mechanism has three levels, including mutual consultation, expert group intervention, and writing related reports and giving opinions. If one or both of the two countries in dispute do not recognize the expert panel report, the final decision will be made by the Appellate Body. As part of the WTO dispute settlement mechanism, the Appellate Body has the power to "final adjudication" on trade disputes, so it is called the "Supreme Court" of World Trade. There are seven permanent members of the Appellate Body. The term of and is four years and can be renewed.
According to the "Working Procedures for Appeal Trial of the Permanent Appellate Body of the World Trade Organization", the members of the Appellate Body are nominated by representatives of WTO member states. Then, the Director-General, the Chairman of the Dispute Settlement Body, the Chairman of the General Council , , the Council for Trade in Goods, the Chairman of the Council for Trade in Services and the Intellectual Property Council jointly formed a selection committee for interviews. Interviews and inquiries. Finally, after all members reached a consensus at the meeting of all members of the dispute settlement body, the proposed personnel were determined and formally appointed.
Any trade dispute case must be jointly heard by three members of the Appellate Body to make a decision. Before December 10, there were only three members of the Appellate Body, including Bhatia from India, Graham from the United States, and Zhao Hong from China. The first two will serve as until December 11. That is, the only members of the Appellate Body are Zhao Hong from China. Zhao Hong was appointed as the new "judge" of the Appellate Body in 2016 and is the second Chinese to be elected to the body after Zhang Yuejiao.
Because the United States does not recognize the current mechanism, the selection of new members has been unable to proceed. From December 11, there is only one judge left in the WTO Appellate Body, unable to accept any cases. At present, there are 15 cases in the WTO that have filed appeals. Except for the 4 cases where hearings have been held, the remaining 11 cases cannot be completed.
The United States' claims
The United States has a long history of dissatisfaction with the Appellate Body. Dennis Shea, the permanent representative of the United States to the World Trade Organization, has repeatedly expressed the United States' views on improving the existing mechanism at the meeting of the WTO.
At a meeting in October this year, Shay made it clear: "Some WTO members believe that the Appellate Body is an independent "International Court of Justice", and its members are like "judges." They inherently have rules-making Power, rather than the key review stipulated in the rules. The reason may be that some members of the Appellate Body regard themselves as "appeal judges", he is a member of the "World Trade Court", and the "World Trade Court" is a WTO dispute The “core” of the settlement system, not a component of it. This broad vision of the Appellate Body is not reflected in the dispute settlement mechanism, and it has not been approved by the United States.”
Shea also cited multiple issues of the Appellate Body. Reasonable reasons include "the dispute settlement mechanism gives the appellate body up to 90 days to make a final decision, but the appellate body often fails to comply with it."Safety and predictability are justified to justify the practical reasons. The proposed wording in the draft decision does not solve this problem.” In addition, Shay also expressed concern about the remuneration of members of the Appellate Body. "We strive to make member states better understand the salary structure and consider the possible consequences of this structure. We believe that a system that provides compensation for violating the rules of the dispute settlement mechanism and extending the appeal period is inconsistent with the goal of quickly resolving disputes in the rules. "
Shay also emphasized the need to re-examine the status of developing countries. He believes that there is currently no unified measurement standard for developing countries, which makes some members who claim to be developing countries enjoy differential and special treatment, which harms the interests of other members. Of course, Shay has criticized China more than once, including thinking that almost all of China’s current indicators are inconsistent with the status of a developing country, such as the second largest GDP in the world, second only to the United States; commodity exports account for a high global share. 13%, and it has become the world’s largest commodity exporter for 10 consecutive years.
China’s attitude
After the WTO appellate body reform plan was not passed, Zhang Xiangchen, China’s ambassador to the WTO, gave a speech. Zhang Xiangchen believes that since the establishment of the WTO 25 years ago, disputes The settlement mechanism has played an important role. The expert panel and the appellate body have made rulings on more than 200 disputes, most of which have been resolved smoothly. Bananas, cotton, airplanes, beef, trade remedies, gambling cases, etc., have successfully resolved disputes. Recorded in the annals of history.
Zhang Xiaochen emphasized that the existence of the Appellate Body is of great significance to the normal operation of the world trade order. "What is the value of the Appellate Body? To those who admire multilateralism, it is extremely valuable; to those who believe in the laws of the jungle, it is worthless. For the world trade order, the paralysis of the Appellate Body may bring irreparable damage and unpredictable consequences.
Zhang Xiangchen also refuted Xie Yi's dissatisfaction. "The disagreement between Ambassador Shea and I is not whether the WTO rules should be revised, but fundamentally I do not accept the set of logic that the United States has been trying to establish, that is, the source of the current tension in international trade relations is the so-called China’s The market economy system and distorted industrial subsidy policies must further target the formulation of multilateral rules to restrain China." The future direction of
"The situation of the Appellate Body does not mean that WTO rule-based dispute settlement (mechanism) End. Members will continue to resolve WTO disputes through consultations and dispute settlement expert groups, and will also use other mechanisms permitted by the WTO agreement, such as arbitration or the Director-General’s good offices, to resolve disputes and review awards." After failing, the Director-General Robert Azevedo was not as desperate as most people believed.
But for the future, Azevedo did not give more answers. The European Union, Canada and Norway are prepared to use "interim appeal arbitration" as an alternative option. However, most WTO members have not yet expressed their views on this plan, and the future scope of application of the plan among WTO members is not yet known. Zhang Xiangchen also believes: “Before the appellate body resumes its operation, although the nature of arbitration and appeal hearings are different, after all, the two-tier dispute settlement mechanism can be maintained." In June 2020, the World Trade Organization will hold its first session in Kazakhstan. The 12th Ministerial Conference . Perhaps at that time, the parties will have the opportunity to truly reach an agreement on resolving the issue of the Appellate Body.
