Photo: Reuters
Photo: Reuters

EU, India and China ‘new trilateral’ at WTO, says US

US unilaterally blocks proposal for filling four vacancies at WTO's Appellate Body

Geneva: The US on Wednesday called the European Union (EU), India, and China the new “trilateral" at the World Trade Organization (WTO) as it rejected a proposal from the three sponsors for salvaging the highest court for global trade disputes from becoming dysfunctional in the next 12 months, saying Washington’s concerns about the functioning of the court remain unaddressed, according to people familiar with the development.

The US has unilaterally blocked a proposal for filling four vacancies at WTO’s Appellate Body (AB) for the past two years, saying the AB breached its mandate by going beyond the dispute settlement understanding in its rulings. The US said the AB had failed to adhere to the 90-day limit for issuing rulings and passed judgements on issues that were not part of its mandate.

The AB has been reduced to three members from seven due to the US blocking the selection process. From December 2019, the AB will be reduced to a single member when two more members—Ujal Singh Bhatia of India and Thomas Graham of the US—retire at the end of their second term.

To address the US’ concerns, India joined the EU, China, Canada, Norway, New Zealand, Switzerland, Australia, Korea, Iceland, Singapore and Mexico, to issue a joint proposal on 26 November calling for filling “the vacancies on the Appellate Body and to amend certain provisions of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU)."

The 12 sponsors proposed a “transitional rule for outgoing Appellate Body members" by amending the provisions of the dispute settlement understanding. “The DSU would provide that an outgoing Appellate Body member shall complete the disposition of a pending appeal in which a hearing has already taken place during that member’s term," according to the amendment proposed by the sponsors.

A second proposal by the EU and China and India on 26 November called for enhancing “the independence of the Appellate Body and its members, which is needed in view of the experience of recent years." The EU, India and China called for providing “for one single but longer (6-8 years) term for Appellate Body members." “The objective is to enhance the independence of the Appellate Body and its members, which is needed in view of the experience of recent years," the three signatories had argued.

At the crucial year-end General Council meeting on Wednesday, US trade envoy Dennis Shea rejected the proposal from India, China and the EU, arguing it will make the AB “even less accountable." Shea said the proposal by the “trilateral" aims “to change the rules to authorize and accommodate the very approaches that would make the AB even less accountable."

The US, he said, made it very clear the Appellate Body member follow the rules that were agreed to in 1995.

India said the “existential crisis" facing the AB is its gravest concern. “We believe that an independent, two-stage dispute settlement system is imperative for the fair enforcement of the rules of international trade," India maintained.

“The impending paralysis and possible disappearance of the Appellate Body will be a fatal blow to the credibility of the WTO," Indian envoy J.S. Deepak argued. “ Without a system of enforcement of existing rules, the appetite for making new rules or for reforms would be poor," India cautioned. Deepak said there should be no linkage for addressing the AB crisis with other reforms being proposed by some members.

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