The one thing Biden must do if he’s serious about reforming the WTO

If you’re looking for some summer reading, consider a study by the Congressional Research Service titled “The World Trade Organization’s (WTO’s) Appellate Body: Key Disputes and Controversies.” It might not be beach material, but it’s timely, because there’s a WTO ministerial meeting this fall, and the fate of the appellate body (AB) will feature prominently. If the U.S. wants to get serious about WTO reform, this study can help reframe the conversation.

The U.S. has long expressed bipartisan concerns about how the AB does its job. Some cut deeper than others. The study surveys these complaints, which range from the timeliness of AB rulings to questions about their precedential value. The Obama administration “blocked” a few appointments to the AB, but the Trump administration escalated things, bringing the institution to its knees by the end of 2019. The Biden administration seems to be in no rush to reverse this, or propose any reforms. This presents an obstacle to re-engaging with America’s allies, many of which have joined a temporary work-around while they wait for the U.S. to unblock the AB.

What’s at stake?  

The WTO has a two-tier judicial system for settling disputes among countries. An ad hoc panel hears the case first, but its ruling can be appealed to the AB, which has the last word. The AB is kept busy, as almost 70 percent of panel rulings are appealed. By correcting errors in the panel’s legal interpretations, the AB clarifies the rules and makes trade more predictable, which in turn leads to greater commerce.

So, what’s the problem? The U.S. has never doubted that more predictable trade is in the country’s best interest. It is. Rather, the question being asked is whether predictability is had at the expense of getting things right. The U.S. dislikes several AB verdicts, and fears these verdicts have “locked in” the wrong answer because they’re treated as if they were precedent. They’re not, as the WTO is at pains to concede. So again, what’s the problem?

The U.S. complaint is really about judicial activism, not precedent. As the study says, it’s impossible to imagine that past rulings wouldn’t influence future ones, with or without an AB. What the U.S. doesn’t want is for the AB to “legislate from the bench.” In other words, verdicts shouldn’t make new law. But is this really happening?

The WTO actually prohibits judicial activism but lacks a mechanism to deal with charges of overreach. The U.S. could push for one. Elsewhere, I sketch what a mechanism might look like. But make no mistake, it wouldn’t get much use. The U.S. has alleged overreach in only a handful of cases. The study talks up the most famous of these over an antidumping methodology called “zeroing.”

The study’s main takeaway on precedent is that there’s a balance to be struck between pursuing predictability, and correcting errors or fitting “new interpretations to suit new factual situations.” I’d add this: Not all rulings that select from among several different “right answers” are evidence of judicial activism.

I know what you’re thinking. This is minutiae. It’s not going to win political support at a time when digging out from COVID-19, securing supply chains and grappling with China’s market-distorting practices dominate headlines in the run-up to the ministerial. Yes, but nothing good will happen in November unless Biden gets serious about AB reform. 

Of course, some, and perhaps even many, would cheer a failed meeting. But the fall-out would reach well beyond Geneva. Remember, key chapters of U.S. free trade deals “incorporate” WTO text, and thus rely on WTO case law. If the AB can’t reclaim its voice, crucial pieces of the U.S.-Mexico-Canada Agreement and other U.S. free trade deals will pay the price. 

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service, Georgetown University. Follow him on Twitter @marclbusch.