WTO dispute settlement mechanism under threat

Attempts are currently underway to downgrade the World Trade Organization (WTO)’s dispute settlement mechanism into a “non-binding” system to placate concerns raised by the US, in what could be a body blow to the multilateral trading system, said trade envoys familiar with the development.

As trade ministers congregate on Monday in New Delhi to address the “systemic challenges” facing the dispute settlement arm of the WTO, it remains to be seen whether the meeting can issue a clarion call to preserve the “binding” dispute settlement mechanism that is reckoned as the “jewel” in WTO’s crown, said an African trade envoy, who asked not to be named.

WTO director general Roberto Azevedo is going to call on Prime Minister Narendra Modi before the start of the ministerial meeting.

The WTO, after the washout in the ministerial meetings last year due to the uncompromising stance of the US, is struggling for legitimacy, especially with countries increasingly assuming a more conservative stance towards global trade.

In a sharp remark, one trade envoy, who did not want to be identified, said, “After killing the Doha Development Round trade negotiations and giving up on development, concerted attempts are being made now to water down the dispute settlement system to an extent that would be acceptable to the one major member.”

On 8 March, Azevedo and the chair of the General Council, ambassador Junichi Ihara, held a closed-door green room meeting with some 20 countries to discuss the impasse at the dispute settlement body, as the US has repeatedly blocked an expeditious selection process to fill three vacancies at the highest adjudication entity for trade disputes, the Appellate Body.

During the meeting, trade envoys from the European Union, Brazil and several other countries said categorically that the US must explain the reasons for blocking the selection process. They insisted on preserving the binding dispute settlement body system for global trade disputes, emphasizing that they will oppose any attempt to go back to the GATT (General Agreement on Tariffs and Trade) 1947 system, under which the loser had to agree before a ruling could be adopted.

Failure to resolve the impasse could render the Appellate Body defunct by December 2019.

Trade envoys claim that the director general proposed an alternative system that would take on board the concerns raised by the US.

“The tenor of the whole green room meeting is after giving up on Doha (negotiations) and ‘development’, it is time to give up on the binding dispute settlement system, as demanded by the US,” said a trade envoy from an industrialized country, who asked not to be identified.

The US trade representative, ambassador Robert Lighthizer, had said unambiguously that Washington wants to go back to the old GATT practice of negotiating rulings. “There are number of areas (where) there is a broad agreement that the WTO dispute settlement system is deficient,” Lighthizer told the Center for Strategic and International Studies in Washington DC on 21 September.

“Before 1995 (when the WTO was established), there was a system then in the GATT (wherein) you would negotiate after a ruling was issued,” he said.

Attacking the WTO and its dispute settlement body, President Donald Trump on 26 February said “The WTO is a catastrophe… the World Trade Organization makes it almost impossible for us to do good business. We lose the cases, we don’t have the judges. We have a minority of judges.”

Against the backdrop of the aggressive posturing by the US, the trade envoys fear that the director general is implicitly, by backing a new proposal, ignoring the stand of WTO members including India.livemint

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