Restoring the World Trade Organisation's 'Crown Jewel'

Restoring the World Trade Organisation's 'Crown Jewel'
Posted on 11-07-2023

Restoring the World Trade Organisation's 'Crown Jewel'

At the Geneva Ministerial Conference in June 2022, member countries of the World Trade Organization (WTO) achieved a significant deal, thanks in large part to India's vital role, which helped uphold faith in trade multilateralism. One crucial aspect of the conference was the revival of the WTO's dispute settlement system (DSS), often referred to as the organization's 'crown jewel,' with the goal of restoring its functionality by 2024.

The WTO, established on January 1, 1995, as a replacement for the General Agreement on Tariffs and Trade (GATT) of 1948, is an international institution responsible for overseeing the rules governing global trade among nations. With 164 member countries (including Liberia and Afghanistan, the most recent members joining in July 2016) and 25 observer countries and governments, the WTO performs various essential functions. These include administering trade agreements, serving as a forum for trade negotiations, handling trade disputes, monitoring national trade policies, providing technical assistance and training for developing countries, and cooperating with other international organizations.

The highest authority within the WTO is the Ministerial Conference, composed of all member states, which typically convenes every two years to make decisions based on consensus. The organization's daily work is carried out by three bodies with the same membership but different terms of reference: the General Council, the Dispute Settlement Body (DSB), and the Trade Policy Review Body.

The DSB, operating under the General Council's authority, is responsible for resolving disputes between WTO members. It has the power to establish dispute settlement panels, whose recommendations, along with possible reports from the Appellate Body, are reviewed by the DSB to reach a decision. Only the DSB holds the authority to make final determinations, while the panels and the Appellate Body can only offer recommendations.

The Appellate Body, the second tier of the WTO's DSS, played a crucial role between 1995 and 2019 in upholding the international rule of law by holding powerful countries such as the United States and the European Union accountable for breaches of international law. The Appellate Body's impartiality in assessing and deciding cases involving countries of varying sizes is a testament to its non-discriminatory approach.

However, the Appellate Body has faced a major setback since 2019, when the United States single-handedly blocked the appointment of new members. The U.S., once a supporter of the Appellate Body, has become its harshest critic. The U.S. has raised concerns about judicial overreach, arguing that the Appellate Body exceeded its institutional mandate. It insists that the Appellate Body's role must be precisely defined before any resurrection can take place. Another concern raised by the U.S. is the creation of binding precedents by the Appellate Body, which it claims goes against the WTO's dispute settlement understanding (DSU).

Contrary to the U.S.'s concerns, the Appellate Body has consistently sought to strike a balance in its decisions. It is well-established that international law does not adhere to the rule of precedent, a principle clearly stated in the WTO's DSU. The Appellate Body adheres to this principle by ensuring its rulings do not add or diminish the rights and obligations of WTO member countries. While consistency in the interpretation and application of WTO agreements is essential for providing security and predictability to the multilateral trading system, the Appellate Body aims to achieve this without creating binding precedents. It encourages WTO panels to rely on previous interpretations when dealing with similar issues, while also allowing for departures from past rulings and reasoning if "cogent reasons" exist. It's worth noting that the Appellate Body is not the only international court that follows its previous decisions; other courts, such as the International Court of Justice and the International Tribunal for the Law of the Sea, do the same unless valid reasons dictate otherwise.

The U.S.'s concerns about the Appellate Body's functioning are part of a broader plan known as the "de-judicialization" of trade multilateralism. In the post-Cold War era, when the neoliberal consensus prevailed, the WTO was established to regulate global trade as the "visible hand" of the law alongside the "invisible hand" of market competition. However, de-judicialization aims to weaken international courts, allowing countries to reclaim decision-making power. With the rise of China and the emerging geo-economic challenges it poses, the U.S. desires full autonomy over its trade policies, free from the constraints of the Appellate Body's judicial review.

Various prospective solutions have been proposed to address these issues. One option is for WTO member countries to adopt a statement clarifying that Appellate Body rulings do not create binding precedents. Another possibility is to resort to voting during the WTO's General Council meetings to elect Appellate Body members, ensuring a more democratic process.

In conclusion, although trade multilateralism may have fallen out of fashion, it remains a crucial component for developing countries like India. While the U.S. has raised several concerns about the WTO's dispute settlement system, it has failed to offer any viable solutions. It is therefore incumbent upon other countries to find ways to reform the WTO, as negotiating with the U.S. alone to revive the Appellate Body is futile.

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