Geneva Growing 'Frustrated' With US Approach to WTO Dispute Settlement Body, Trade Expert Says

Geneva is growing increasingly frustrated with the United States’ approach to the looming deadline of the dissolution of the World Trade Organization’s dispute settlement body, a former member of the body said. Although there are ways for the U.S. and WTO members to ensure the appellate body continues to operate, trade experts said they are skeptical much will get done before the Dec. 10 deadline, throwing the international rules-based trading system into question.

“It will be the law of the jungle,” Jennifer Hillman, senior fellow at the Council on Foreign Relations and former member of the appellate body, said during a Nov. 21 Washington International Trade Association event. “Fundamentally what you're creating is chaos."

The WTO’s dispute settlement body will cease to function in December if the U.S. does not stop blocking appointments (see 1910230054). While the U.S. has been clear about its issues with the appellate body -- at times submitting to the WTO 20-page statements outlining their concerns -- WTO members and staffers are irritated that the U.S. has done little to offer a solution, Hillman said.

“There is tremendous frustration in Geneva,” she said. “The United States has not engaged at all in what do we do to actually fix the problem.” Instead, the U.S. has asked that members first denounce the existing issues with the dispute settlement system, such as its arbitrary rulings, and demand they determine how the issues began, Hillman said.

Hillman argued that the U.S.’s demands should not impact efforts to find a solution. “What difference does it make?” she said. “Even if you have an answer … why does that change the outcome of the fact that you want it fixed?”

While Canada has “sympathy for the U.S. position,” it does not agree with the U.S.’s tactics, said Marvin Hildebrand, a Canadian economic minister based in the Canada Embassy to the U.S. “We call on the U.S. to engage more and to be more specific in terms of their concerns and also the way forward in terms of the things that need to change,” he said during the panel discussion. Canada is willing to discuss how the appellate body “erred,” Hildebrand said, but said the WTO first needs to make sure it has a functioning dispute settlement system. “We would disagree with the view that the right thing to do at this time is to let the [appellate body] fall into dysfunction,” he said.

The dissolution of the WTO appellate body could have broader consequences on world trade remedies and negotiations, Hillman said. Without an international dispute settlement system, the European Union, for example, might be more willing to use retaliatory tariffs to strike back on what it considers unfair trade practices, Hillman said, including against the U.S. “I think the perception is if there is not a rules-based system at the WTO," the EU will make sure they "are as equally armed as the United States is to engage in unilateral tit-for-tat behavior,” she said.

Bruce Hirsh, founder of Tailwind Global Strategies and former assistant U.S. trade representative for Japan, Korea and APEC, said there are “very little prospects” of finding a solution before the December deadline. Perhaps the U.S. and the WTO should be thinking about a solution post-deadline, he said. “After Dec. 11, because we’re inevitably going to be in that situation, the question is how quickly should the U.S be engaging?” Hirsh said. “There really is the risk that the longer things last, the more the situation becomes the new normal.”