Zero Sum Trade: The Future of the World Trade Organisation - Ethan Teo

The Appellate Body of the World Trade Organisation (‘WTO’) exists as one of two levels in the WTO’s Dispute Settlement System. The WTO has used this system to adjudicate between parties in international trade disputes. The Appellate Body hears appeals from the lower panels, and typically consists of seven members (Rathore & Bajpai, 2020). In December 2019, the Trump administration refused to appoint new members to the recently vacated seats of members who had reached the end of their terms, leaving the body with a single member and crippling its capacity to hear appeals.



Sources of International Trade Law


The application of international law is fundamentally different from that of domestic law; while there are courts to adjudicate in matters between states, their jurisdiction is critically dependent upon the consent of States, thus they lack what can be described as a compulsory jurisdiction of the kind possessed by national courts (Greenwood, 2008).

Article 38(1) of the Statute of the International Court of Justice (‘ICJ’) lists the following as sources of international law: treaties and conventions; custom; general principles of law; and judicial decisions and teachings. Of these, international trade law concerns itself most with the treaty.

The General Agreement on Tariffs and Trade 1947 (‘GATT’) was born out of the desire of developed nations to reverse the mistakes of economic isolationism which plagued the pre-war years. Subsequently, the Marrakesh Agreement of 1994 established the WTO, a body committed to overseeing international trade.



The WTO and Dispute Resolution


The WTO provides a dispute resolution mechanism for trade disputes involving member states found to be in contravention of the aforementioned principles. This involves consultation between the parties, adjudication by a panel, or punitive countermeasures should they be required. The process is managed by the organisation’s Dispute Settlement Body (‘DSB’).

The first step in the WTO’s dispute resolution process is facilitating consultation between the parties. During the first decade of the WTO’s existence, only 136 of the 369 cases reached the full panel process (World Trade Organisation, 2021). Most were settled out of court or remained in a prolonged consultation phase. If consultation was not successful, the case then fell to be heard by an initial panel, with the opportunity to appeal to the Appellate Body on a point of law.

It is largely accepted that dispute resolution is an crucial asset of the WTO; the large number of cases in which parties invoked the dispute settlement system in the first eight and a half years of the WTO is already significantly greater than the number of disputes brought under the GATT 1947 during a period of nearly 50 years (World Trade Organisation, 2004). The reports of the panels and the Appellate Body serve to clarify the rights and obligations covered in prior agreements in their capacity as neutral bodies of adjudication.

However, the economic isolationism of the pre-war years appears to have been forgotten by history. In recent years, the WTO’s dispute resolution arm has been crippled by protectionist policy from the Trump administration.



Challenges To The DSB


The United States paralyzed the WTO appellate body by blocking appointments to the seven-person panel for more than two years, rendering it unable to issue judgements on new cases due to a lack of members (Baschuk, 2020). The government of the United States had alleged, amongst other things, that the Appellate Body had overstepped its jurisdiction by creating law and was indulging in ‘judicial activism’ (Rathore & Bajpai, 2020) and thus refused to appoint new members to the panel.

This author contends that it is precisely the role of the Appellate Body to serve as a non-jurisdictional court for the resolution of international trade disputes. The decisions of this court, while certainly not binding on domestic courts, contribute towards the body of jurisprudence which guides the Appellate Body. It is the function of an entity such as the Appellate Body, which hears appeals on points of law, to interpret the sources of international trade law. In doing so, the Body may be guided by the judgment in an earlier matter. It is submitted that the allegation that the Appellate Body was in some manner being ‘unfair’ has not been properly substantiated, and conveniently used as a guise to propagate an ongoing trade war.



The Future of the WTO and International Trade


Though the Biden administration has signalled its commitment to reinstating the appellate body, no definitive action has been taken thus far. In March 2021, Dr Ngozi Okonjo-Iweala became the new director-general of the WTO, head of an organisation dealing with unprecedented challenges: increased protectionism in the form of non-tariff barriers, rise in regional trade agreements as opposed to international ones, and the crippled dispute resolution mechanism discussed above (International Institute for Strategic Studies, 2021).

There is some cause for optimism in the field of international trade. Despite a resurgence of protectionism, the coronavirus pandemic has resulted in a decrease in trade restrictions, especially amongst essential goods and medical products. This is consistent with national interests (Whamond, 2021). However, it remains to be seen whether the interdependence realised as a result of the pandemic will translate into long-lasting cooperation in an era where governments find themselves constrained by popular sentiment.

International trade and cooperation between nations will continue to endure in the long run. The question is, what role will the WTO play in the new order? Institutions have been a mainstay of the post-war economic and political system, from the United Nations to the World Health Organisation. Institutions serve a useful role as facilitators of cooperation between great powers. However, the fact that both China and the United States are working out their differences beyond the institutional framework suited for that end says a lot about the challenges that the WTO faces (Whammond, 2021).

The WTO was a solution to the isolationism and protectionism of the pre-war years. It will have to adapt itself to counter a growing sense of redundancy in an era of communication and peace where adjudicatory institutions are no longer necessitated.



 

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