Path Forward on WTO Appellate Body Reform Possible, Experts Say

The U.S. and the European Union should be able to “come to a convergence” on seven planks of reform of the appellate body at the World Trade Organization, said Ignacio Garcia Bercero, European Union Visiting Fellow, Oxford University and a chief negotiator at the European Commission. Garcia Bercero, who noted he was not speaking on behalf of the European Commission, was a panelist on a WTO Reform webinar hosted by the Washington International Trade Association July 23.

“It is very clear there will be no way of finding a way forward on this issue unless the United States and European Union can find a common understanding,” he said, adding that such an understanding should be possible. He then summarized major points in a paper he wrote on WTO reform. He said he thinks leaders on both continents will agree that both panels and appellate panels should decide only the issues “strictly necessary to find a resolution to a dispute,” a value he called judicial economy. He said they could agree that appellate panels should judge facts only when the panel made an “egregious error.”

He said that Europe and the U.S. should be able to agree that “there's no such thing as stare decisis in the WTO system.” In other words, if a country brings up an issue in a case, the appellate body cannot dismiss the argument because a previous appellate panel ruled against that argument. He said that the EU and the U.S. could agree that the panels' decisions need to be more timely, at both the original level and the appellate level. He said he expects they could agree on a restructuring of the professional staff of the appellate body, which would include term limits.

Finally, he addressed the U.S. concern that setting out guardrails could be useless, because the appellate body did not respect the rules that are part of the WTO charter. He said with a “near-death experience,” he thinks the appellate body would be more careful in the future, but there was also the possibility of adding a legal structure to the WTO charter that says nothing can add to members' obligations, or diminish them.

The idea that the WTO has impinged on U.S. ability to use trade remedies is core to the U.S. complaint.

Garcia Bercero said that if the EU and U.S. agree, it “won’t be hard to get everyone else to follow.”

Bruce Hirsh, founder of Tailwind Global Strategies and another WITA panelist, said the gap in trust between the U.S. and the EU is one of the greatest hurdles to bringing back the appellate body. He said there's a lot of skepticism in Washington about whether the EU “is really committed to true reform,” and that many in Geneva don't believe the U.S. is serious about getting its appellate body concerns resolved.

He said Garcia Bercero's paper was extremely useful in this regard, but if it were formally adopted by the European Commission, that would be even better.

Former Appellate Body member Jennifer Hillman, who also spoke during the webinar, was heartened by Garcia Bercero's presentation: “To me it sounds like we are quite close to a substantive package that could be done.” But she said those in Geneva who think the U.S. doesn't really want a solution are right for now, since the U.S. trade representative testified in Congress that he doesn't “have any compulsion” for the appellate body to be reinstated (see 2006170008). Given that, she questioned whether a solution could be found before the next WTO ministerial meeting in June 2021. “That is going to depend to some degree on the election,” she said.

Garcia Bercero suggested that if the appellate body impasse were solved, then the countries could move on to negotiations on changing rules at the WTO to better address industrial subsidies.

Warren Maruyama, a Hogan Lovells partner and former USTR general counsel, said he thinks a solution is still years away, and he doesn't see any way of accomplishing it outside a global negotiating round. He said that as a result of the appellate body clamping down on antidumping and countervailing duty practices -- which he called a political safety valve for trade -- “they've gotten themselves in a horrible fix.”

Retired trade attorney Terry Stewart agreed that it can't be done by June 2021, and predicted it would take at least three years. He said while it's good that Garcia Bercero's paper recognized that judicial overreach is a significant problem, he thinks the U.S. will not agree to a prospective solution. They will want fixes to some decisions that affected their trade remedies.

Garcia Bercero said he knows people want to reopen some of those cases, but they can't all be tackled right now. He thinks the top priority should be correcting the WTO definition of a “public body,” and “if it is not corrected, it very much limits the effectiveness of the countervailing duty” law, he said.

But he defended his argument that the appellate body needs to come first, and then more ambitious negotiations. “Without [binding] dispute settlement, it’s going to be increasingly difficult to convince countries to respect the rules,” he said. He believes that the EU and the U.S. are going to end up in tit-for-tat trade measures while the appellate body is defunct.