[Ip-health] Elsig, Pollack and Shaffer in The Washington Post: Trump is fighting an open war on trade. His stealth war on trade may be even more important

Thiru Balasubramaniam thiru at keionline.org
Wed Sep 27 21:57:49 PDT 2017


Monkey Cage

Trump is fighting an open war on trade. His stealth war on trade may be
even more important.

By Manfred Elsig, Mark Pollack and Gregory Shaffer September 27 at 7:00 AM

The future of the world trading system is at stake thanks to an impasse in
Geneva over the appointment of members of the Appellate Body (AB) of the
World Trade Organization (WTO). The Trump administration has been waging a
behind-the-scenes campaign against the WTO’s dispute settlement system. It
is holding hostage the selection of new members to the AB, which functions
as the WTO’s de facto court of appeals, unless unspecified U.S. demands are

This U.S.-made crisis threatens to undo the multilateral rules-based
trading system that the U.S. created after the Cold War and replace it with
a return to aggressive power politics unchecked by the rule of law. Here’s
what you need to know.

The U.S. is waging a quiet war against WTO Dispute Settlement

As a candidate for President, Trump made no secret of his contempt for
prior U.S. trade policies and trade agreements. People pay more attention
to Trump’s frequent and intemperate outbursts against preferential trade
agreements, such as NAFTA. Yet outside the public eye, the Trump
administration has been mounting a high-stakes attack on the WTO’s judicial
process. If it succeeds, the consequences for the world trade system will
be grim.

In a little-noticed policy change issued in March, the administration
announced that it might seek to deal with trade disputes outside the WTO
system, and possibly defy WTO rulings that it does not like. More
ominously, the U.S. recently has refused to approve the start of the
selection process for new AB members. It is threatening to hollow out the
AB unless the U.S. gets its way on changes to the WTO dispute settlement
system that it has yet to specify. This is like what would happen if half
the U.S. federal appellate judge positions were empty, and the senators
from a single big state such as  Texas blocked all new appointments until
the Senate passed rule changes ensuring that Texas had an edge in future

The U.S. has been unhappy with WTO rulings in the past

Previous administrations have also been unhappy with WTO Appellate Body
decisions, which repeatedly slapped down U.S. anti-dumping policies that it
found unfairly protected import-competing sectors, such as steel. This has
led to unhappiness with particular AB members because of decisions against
U.S. measures. First, the U.S. decided not to reappoint two Americans after
their first four-year terms. Then, after continued U.S. attacks on AB
decisions regarding U.S. import relief laws, the U.S. for the first time
blocked the reappointment of a non-U. S. member, Seung Wha Chang of South
Korea, in 2016, on the grounds of judicial activism in rulings against the

This was a first in WTO history and raised howls of protest from other
member states and from former AB members, who accused the U.S. of
endangering the independence of the WTO judiciary. Chang’s seat sat empty
for several months until late November 2016, when, after the U.S. election,
the Obama administration agreed to the appointment of two new members, from
South Korea and China, to fill the vacancies. Ironically, the U.S. actually
has a higher win rate than any other major user of the WTO system, but
winning some and losing some in judicial processes is apparently not

The Trump administration is pushing things much further

The Trump administration appears to want to intimidate and even paralyze
the WTO Appellate Body. It suggests that it wants to change the rules over
whether former AB members can continue to serve after their term expires on
cases to which they were appointed during their term. The current European
member Peter van den Bossche, for example, recently was selected (by random
draw) to be on a new appeals panel pitting the U.S. (defending Boeing)
against the European Union (defending Airbus) regarding aircraft subsidies.
The U.S. says it intends to hold up any new appointments pending a
satisfactory agreement on this question. The U.S. demands go against the
explicit AB working procedures, which allow this kind of continuity. What
particularly troubles the WTO membership is that the U.S. refuses to
approve the launching of the selection process of new AB members until this
issue is resolved, without the U.S. proposing what should be done.

The U.S. is in a strong position to shut down the AB, because the AB is
already down from its allotted number of seven members to five, and will be
down to four soon, and to three in less than a year. The Latin American
seat has been vacant since July, and the E.U. seat will become vacant in
December. Now, the South Korean member suddenly resigned his seat effective
Aug. 1, to return home as South Korea’s new trade minister. This means
there will be only four out of seven AB members in December — and
potentially three when the African seat opens next September.

Unless new AB members are appointed, the Appellate Body will face severe
delays. If the AB dips down to two members, it could not formally operate,
since each case requires at least three sitting judges. But even a court
with fourth or five judges will find it hard to manage its caseload, and
face legitimacy problems, because decisions will be taken by only a few
judges from a few countries with particular legal traditions (such as the
U.S. and China). This could lead — in an extreme scenario — to the
crumbling of the WTO dispute settlement system.

This could threaten the entire system of rules-based trade.

The U.S. could use this crisis to effectively eliminate the AB, the “crown
jewel” of the WTO dispute settlement system, and possibly the WTO itself.
Given world history, it is remarkable that the U.S. and China, and the E.U.
and Russia, today resolve their trade disputes through agreed rules applied
by an independent body, minimizing the risk that disagreements would
seriously undermine trade. That is now in jeopardy.

Robert E. Lighthizer, the current United States Trade Representative
(USTR), recently reminisced about the days of the GATT — before the WTO’s
formation — when a party could unilaterally block the adoption of a
decision it did not like. He suggests that the Trump administration may
wish to deploy the AB crisis to force a return to a more politicized
dispute settlement system.

Indeed, the U.S. was able to use its economic power to exploit weaknesses
in the GATT dispute settlement mechanism in the lead-up to the creation of
the WTO. However, two critical things have changed. First, the U.S. is not
as economically powerful as it once was, given the rise of China and other
emerging economies. Second, unlike the GATT, the WTO contains rules on
services liberalization, intellectual property protection and the use of
health measures to block imports, which are important to U.S. businesses.
If the U.S. defies the WTO and acts unilaterally, other countries will
retaliate against it and U.S. stakeholders will suffer.

The edifice of the rules-based international trading system has stood for
decades, but international courts and the rule of law are fragile, and
there is no guarantee that they will stand up to a sustained assault.

Manfred Elsig is professor of international relations and deputy managing
director of the World Trade Institute at the University of Bern in
Mark Pollack is professor of political science and law and Director of
Global Studies at Temple University.
Gregory Shaffer is Chancellor’s Professor at the School of Law at
University of California of Irvine.

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org

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