Crisis at the WTO and the Future of Trade Dispute Resolution

The future of international trade rests on the future of trade dispute resolution, argued the Jeffrey and Bettysue Hughes Professor of Law Rachel Brewster, Ph.D. yesterday, Oct. 18 at a congressional briefing on Capitol Hill. In detailing the World Trade Organization’s dispute settlement structure, Brewster honed in on the mechanism American trade policy specialists once cared about more than any other: the Appellate Body.

To a room full of congressional staff whose work involves trade issues, Brewster laid out the growing crisis of the WTO. The seven-member Appellate Body is down to thee current members (sometimes casually referred to as ‘judges’) and the United States is blocking the appointment or re-appointment of all new members until reforms are made to the body. However, the United States has yet to lay out the specifics of those demands.

By Dec. 2019, the Appellate body will be unable to hear any cases and will halt all international trade dispute hearings.

Brewster detailed the current debate around WTO appellate body structure. Some policymakers within the Trump administration have mentioned discomfort with the WTO’s Rule 15, or how the Appellate Body makes decisions along a timeline. They have also mentioned concern that the Appellate Body is deciding issues of law that are not strictly necessary to resolving cases at hand.

Some experts outside the administration argue that stonewalling the renewal of the Appellate Body is part of a greater strategy to move away from transparent, rules-based trade practices in favor of using market power to settle trade disputes.

The United States is the country that first wanted a trade dispute settlement body. This WTO pseudo-court, argued Brewster, gives legitimacy to American international trade law and allows for a clear, accessible rules-based international system that mirrors many aspects of U.S. appellate court practice. The original Uruguay Round treaty of 1995 that created the WTO also allowed for transparent, timely and decisive ends to trade disputes that would otherwise drag on indefinitely, argued Brewster.

Without the WTO’s Appellate Body, international trade disputes would return to the pre-1995 General Agreement on Tariffs and Trade (GATT) status quo. Previously, states bounced differing interpretations of international trade law back and forth – sometimes for years –in the hopes of negotiating a resolution.

A dysfunctional WTO also creates uncertainty for businesses trying to navigate international landscapes and might enable other countries to act against free market interests. Arguments in favor of keeping some form of the Appellate Body focus not just on the fact that the United States wins a majority of cases it brings (87%), but also on the implications of writing transparent rules for how countries interact with each other.