With trade meeting on hold, the US needs to get serious about WTO reform

The 12th Ministerial Conference (MC12) of the World Trade Organization (WTO) is now on hold. Concerns about a new strain of COVID-19 detected in South Africa led the WTO to pause this meeting of trade ministers, not least because of the travel restrictions imposed by Geneva.

More time may turn out to be a blessing. The WTO needs wins. A fisheries deal could put wind back in the WTO’s sails. But in reality, nothing shy of the US getting serious about WTO reform will save the institution. This means, first and foremost, explaining the conditions under which the U.S. would unblock the Appellate Body (AB). 

United States Trade Representative Katherine Tai says the U.S. will not submit a proposal. Rather, she wants a conversation with other countries about how the AB isn’t working. This is a mistake. By not explaining what it will take to unblock the AB, the U.S. is sowing confusion in the global economy. It’s easy to say that an institution that took effect in 1995 needs updating. Yes, but does the U.S. see the AB as redeemable or not? At times, Tai says it is. But then again, she hints that she likes the idea of designing a new dispute settlement system. It’s time for the U.S. to reveal its cards. This alone would boost confidence in the WTO. 

What Tai has made clear to other countries is that there is bipartisan concern in the U.S. about AB overreach. True enough. The complaint has long been that the AB fills in legal gaps by legislating from the bench, rather than letting countries do this in negotiations. Further, the U.S. says the fruits of judicial activism are then locked in through the WTO’s de facto precedent.

Importantly, the WTO already prohibits judicial activism. It says that rulings cannot “add to” obligations or “diminish” rights. Is judicial activism separable from precedent? Or a function of it? The U.S. needs to hint at an answer. At a minimum, Tai should explain what a dispute looks like without precedent, but with the “guidance” of case law that the U.S. says it likes. 

Angels on the head of a pin, right? Yes, but the political sell is enforcement. The truth is that the U.S. needs a functioning AB more than most countries. Why? Because it helps countries that the U.S. sues to better explain to domestic constituents why they have to comply. Sure, the losing country will always protest a loss. But an AB ruling brings greater legal clarity, shows the process has been exhausted and sharpens negotiations before things escalate to the point that the complainant retaliates.

Would the WTO still work without a functioning AB? Yes, its predecessor, the General Agreement on Tariffs and Trade (GATT), lacked an appeals court, but did yeoman’s work. But we can’t go back to the future. In the first few years of the WTO, the new agreements, like the one on intellectual property, were already defying past patterns of dispute settlement. Tai likes to point out that GATT’s less legalistic system delivered a lot of mutually agreed solutions. That’s true, but the WTO’s new agreements, which are much more complicated than the GATT, can’t be un-invented, even if the AB is. 

Moreover, if timelines and flexibility are key, countries can already use arbitration as an alternative to dispute settlement at the WTO. They don’t, even though, ironically, the heads of the AB’s legal secretariat have routinely called on countries to give arbitration a chance. 

If the U.S. price for unblocking the AB is a mechanism exclusively for trade remedies, like antidumping duties, then Tai should say so. Whatever the merits of one, having a conversation about it would be better than the current strategy of keeping mum.

Lastly, the U.S. is undermining the U.S.-Mexico-Canada Agreement (USMCA) by not coming clean on what it wants in terms of AB reform. That’s because its chapter on technical barriers to trade, which covers 90 percent of U.S. exports, incorporates WTO text and the case law that goes along with it. This means that, for its best chapter to work, USMCA is as much in need of a functioning AB as the WTO.

When trade ministers finally do get together for MC12, they’ll be looking for the WTO to rack up a win. A fisheries deal, or extending the moratorium on e-commerce taxes, could do the trick. But nothing would constitute more of a win for the WTO than for Tai to pen a proposal on AB reform.

Tai likes to say that this shouldn’t be about “restoring the Appellate Body for its own sake, or going back to the way it used to be.” Sure, but as the one and only country blocking the AB, this silent treatment is unbecoming of the United States. 

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.