EU Proposes New WTO Reform to Safeguard Dispute Settlement Body

(Bloomberg) -- The European Union unveiled a new proposal that seeks to stave off paralysis of the World Trade Organization’s dispute settlement system by unblocking the appointment of its appellate body members, according to a statement Monday.

• The proposal has the backing of Australia, Canada, China, Iceland, India, Korea, Mexico, New Zealand, Norway, Singapore and Switzerland.
• “The appellate body function of the WTO dispute settlement system is moving towards a cliff’s edge,” EU trade chief Cecilia Malmstrom said in the statement. “Without this core function of the WTO, the world would lose a system that has ensured stability in global trade for decades.”
• The proposal will be presented at the WTO’s General Council on Dec. 12.
• For more than a year the Trump administration has blocked appointments to the appellate body, which has the final say in upholding, modifying or reversing rulings that often affect some of the world’s biggest companies and billions of dollars in commerce.
• If the U.S. continues its hold, the body will be paralyzed in late 2019 because it won’t have the three panelists required to sign off on rulings

Key Insights

• The EU paper is important because it aims to shift the WTO’s nascent reform discussions toward negotiations on a concrete text.
• The proposal won’t advance until the U.S. and the rest of the WTO’s 164 members agree to amend the WTO dispute settlement understanding, which is considered to be a significant undertaking.
• The proposal is unlikely to gain the backing of the U.S., which has criticized the appellate body for overstepping its mandate with aggressive interpretations of WTO rules.

Main Provisions

• Creates new rules for outgoing appellate body members, defining when they can stay on to complete ongoing proceedings.
• Ensures that appeal proceedings are completed in the 90-day timeframe set out by the WTO.
• Introduces annual meetings between WTO members and the appellate body.
• In a separate but complementary proposal, the EU suggested reinforcing the appellate body’s “independence and impartiality to improve its efficiency” by:
  • Adding two new appellate body members to the 7-member panel, give them full-time jobs and give the appellate body additional administrative and legal support
  • Modifying the term limit for appellate body members from two four-year terms to a single six- or eight-year term
  • Creating an automatic selection process to replace outgoing appellate body members months ahead of the expiration of their terms

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

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Richard Bravo

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