Trade may regress to an era of power politics, warns India

Many countries, including India, have said that they remain anguished over the eclipsing of the World Trade Organization’s (WTO) Appellate Body, the highest adjudicating arm of the dispute settlement system for resolving global trade disputes, by the United States (US).

 “The cynical strangulation of the Appellate Body and the attack on the principles of non-discrimination and special and differential treatment,”  have cast a pall of hopelessness on the WTO, India’s trade envoy Ambassador J S Deepak warned on Friday (6 December).

At an informal trade negotiations committee meeting, Deepak delivered the strongest statement yet, by saying that “with 4 days to go before curtains come down on the WTO Appellate Body, it is clear that the binding, two-stage, independent dispute settlement mechanism that gave teeth and credibility to rule-based multilateral trading system is well and truly dead.”

Without naming the US, which repeatedly blocked efforts to break the impasse at the AB, India stated: “It is also distressing to note that every effort of almost the whole WTO membership has been rebuffed.”

As many as 163 countries at the WTO are considering accepting a package of reforms to improve the functioning of the Appellate Body, but the US is not prepared to lift its blockage to fill the six vacancies at the Appellate Body that will become dysfunctional on December 11.

One judge to remain

The highest court for global trade disputes will be reduced to one judge instead of the mandatory requirement of three judges.

“This will undo one of the biggest achievements of the Uruguay Round and trade will rapidly regress to an era of power politics,” India warned, suggesting that while New Delhi agrees that the WTO’s dispute settlement system does require improvement, “we believe that the systematic assault on its very existence is neither appropriate nor was uncessary.”

“This kind of brinkmanship apparently originating in pique and prejudice rather than in a desire to reform is leading to a total breakdown of trust within the WTO, and will have a debilitating effect on other pillars as well,” said India.

Many countries concurred with India’s position about the eclipsing of the WTO’s Appellate Body. “The biggest risk is that powerful countries may exert pressure to make smaller members to implement panel rulings,” said South Africa’s trade envoy, Ambassador Xolelwa Mlumbi-Peter, urging members to continue efforts to address the impasse and restore an independent, impartial two-stage system that served members well.

“Next week, the Appellate body will not be able to hear new cases due to the continued impasse over the selection process,” said China’s trade envoy, Ambassador Zhang Xiangchen.

“To make matters worse, the budget has been used as a leverage to further stifle the system which brings more uncertainties to solve the AB and also could cause a new systemic challenge to this organisation,” the Chinese envoy maintained.

The European Union stated, “not only the discontinuation of the Appellate Body’s work has become an evident prospect, but attempts to obstruct the functioning of this organisation through the budget discussion shattered Members’ confidence in the WTO.” The US, however, remained unrepentant in the face of mounting criticism. “We have asked repeatedly, if the words of the DSU are already clear, then why have the practices of the Appellate body strayed so far?”

“This is not an academic question; we will not be able to move forward until we are confident we have addressed the underlying problems and have found real solution to prevent their recurrence,” said the US’ deputy trade representative, Ambassador Dennis Shea.

WTO chief hopeful

The WTO’s chief, Roberto Azevedo, acknowledged that the AB will be left only with one member next week.

“Paralysis of the AB does not mean an end of the trading system,” said Azevedo, suggesting that the existing rules will apply and the dispute settlement panels will continue.

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