Because the US does not nominate any judges of the World Trade Organization (WTO) Appeals Tribunal, the dispute settlement of the World Trade Organization is incapacitated today. RolfJ. Langhammer is a trading expert and for many years was vice president of the Institute for the World Economy. Here he makes proposals for the reform of the WTO.
December 10, 2019 is a defining day in the history of the World Trade Organization. Today, the mandate of two members of the Appellate Court is over - and the USA is blocking the appointment of new members. So there is only one active member. The regular membership is seven, the minimum number three.
From now on, the WTO lacks the opportunity to exercise its most important right: it can publicly designate one Member State as a contract infringer, after two instances, and give the other party the right to take clear retaliatory action.
Is the WTO lenient towards China?
That it has come this far is not surprising. For years, even before the presidency of Donald Trump, the US accuses the appellate of a politicization, mandate overrun and a discriminatory case law - which is not easy to dismiss from the perspective of many economists. For example, how the US reacts to dumping prices - by calculating anti-dumping margins (so-called zeroing ); a species that is regularly rejected by the dispute mediators. Or the critics' criticism that the US takes defensive measures to protect domestic producers, safeguards against abrupt increases in imports. And there is the alleged leniency of the WTO towards Chinese state-owned companies in international markets.
Economists acknowledge that arbitrator decisions are less economic than legal arguments. In addition, some of the mediator's methods are intransparent and qualitatively not up to date. This would make it difficult for governments to predict settlement outcomes and prevent WTO decisions through bilateral consultations in advance.
This criticism of the judicial rulings of the WTO is justified. Independent of this, however, the Trump government puts the multilateral order in a stressful mode. She praises the WTO decisions when they use them, as in the recent Airbus decision against the EU. It is also wrong for Donald Trump to complain that the US would lose all the lawsuits filed against it. Like other countries, the US is winning lawsuits it represents and losing lawsuits against them. This is the normal everyday life within the WTO.
The provisional end of the appeal is not the end of dispute resolution. There are a number of ways to use the so-called good offices of the WTO, ie their various mediation services, and to settle disputes bilaterally. In the case of the Airbus Boeing dispute over illegal subsidies, this is required anyway.
Poorer countries shy away from the high costs
But of course there is an urgent need for action - which the US does not deny. The mandate of both instances of dispute settlement dates back to the early 1990s. Technological developments, the changed design of markets, the provision of services, including digital services, and the question of whether fairness in trade should be measured by standards or more by market outcomes, should be considered in a reform.
The WTO expert should also be made available to all members and not just the litigants of the two instances in dispute settlement matters. This would increase the acceptability of mediation, especially in poorer countries, which shy away from the call because they can not afford the high costs of legal assistance. Candidates for these top jobs should also be checked for adequate qualifications by an independent expert panel and not be ordered on an ad hoc basis, but chosen from a pool of qualified professionals. This would counteract the politicization of instances by nationality. And last but not least, the two appeals courts should have the right to consult experts on specific issues with the help of a budget, as, for example, in Germany, the Council of Experts can also assess macroeconomic development.
The reform of the dispute settlement will take. It must not fail because of the USA's current blockade attitude. The faster as many members as possible work after 25 years of WTO proposals, the more likely it is that these reforms will also appeal to legitimate US casualties. A reform in which the US is involved is always in the interest of the WTO.