Canada, EU Agree to Sidestep Trump’s Impasse on WTO Disputes

(Bloomberg) --

Canada and the European Union agreed to set up an alternate channel for settling trade disputes, sidestepping an international deadlock created by the Trump administration.

Canada is the first country to back the EU’s effort to replicate the tools of the World Trade Organization’s appellate body, which is expected to run aground by December because the U.S. is blocking appointments of new panel members required for a quorum.

The U.S. under President Donald Trump is strangling the WTO’s ability to resolve disputes among its 164 members, saying the appeals panel members have strayed from their mandate. That threatens to paralyze the world’s final forum for adjudicating global trade rules.

The EU plan would create an alternate arbitration process that would continue the “essential principles and features” of the appellate body, according to the agreement announced Thursday. It’s envisaged as a stopgap measure to be used until the U.S. resolves the impasse.

EU Trade Commissioner Cecilia Malmstrom has said the appeals panel will probably collapse in December “at least temporarily,” leading to a free-for-all.

“If you have no rules, everyone can do what they want and that would be really, really bad, not least for the smaller and developing countries,” she said in Paris in July.

While the EU and Canada have few commercially meaningful disputes, the accord is intended to provide political support behind a legal template that other countries could join.

The goal is to replicate the tools of the appellate panel, which has the final say in upholding, modifying or reversing WTO rulings, which often affect some of the world’s biggest companies and billions of dollars in commerce.

U.S. business groups are also beginning to speak up as well.

Americans for Prosperity, an advocacy group funded by billionaire Charles Koch, warned that the Trump administration’s aggressive approach to the appellate body could unravel the WTO and “impose massive risks not only on the global economy, but on ours as well.”

The Geneva-based WTO says its members have the right to pursue such an alternate approach.

“They are trying to replicate as much as they can what the appellate body offers,” WTO spokesman Keith Rockwell told reporters this week. “Senior EU officials have said they do not believe this to be a superior method of appeal but as an interim measure until we can get this situation sorted out.”

To contact the reporter on this story: Bryce Baschuk in Geneva at bbaschuk2@bloomberg.net

To contact the editors responsible for this story: Richard Bravo at rbravo5@bloomberg.net, Tony Czuczka

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