Economy

US cuts funds for WTO Appellate Body drastically

D Ravi Kanth Geneva | Updated on November 27, 2019 Published on November 27, 2019

Roberto Azevedo, Director-General of WTO   -  REUTERS

Funds for Appellate Body cut drastically

The US has created a “new normal” at the World Trade Organization’s highest court for resolving global trade disputes. Washington imposed wrenching conditions on the use of funds for Appellate Body (AB) members that would require the WTO Secretariat to spend only CHF 1,00,000 ($1,00,240), down from CHF 7,91,000 ( $7,93,056) to adjudicate a trade dispute, trade envoys said.

The new normal has been finalised after the US had blocked the WTO’s biennial budget for 2020 and 2021 due to alleged irregularities in the expenses incurred for AB members and the trust funds provided by member countries. It will be placed for approval before the WTO’s budget committee meeting today.

Moreover, the arrangement worked out between the US and the WTO Director-General Roberto Azevedo and the Deputy Director-General Karl Brauner will place 10 appeals that are pending before the Appellate Body, said a trade envoy, under the condition of anonymity.

As part of the new arrangement, the three remaining Appellate Body members — Ujal Singh Bhatia, Thomas Graham, and Hong Zhao — will receive a fee of CHF 1,00,000 ($1,00,240) next year for completing work in the dispute between The Dominican Republic and Honduras against Australia. “This is the biggest trade dispute in the WTO’s history and with CHF 1,00,000 you cannot compete this case,” the analyst said.

While Bhatia and Graham will complete their second term on December 10, Hong Zhao has her tenure till November 30, 2020.

The US also introduced stringent conditions for the use of funds from the Appellate Body’s operating fund that would be replenished with CHF 2 million ($ 2.01 million). However, “the authority of the Secretariat” to spend from it would be limited to CHF 1,00,000 ($1,00,240).

In short, the US has now a veto power to decide when to revive the AB from the AB operating fund of $2 million, said a trade envoy.

According to the “elements” of the new arrangement shared by the WTO secretariat with members on Tuesday, it is stated unambiguously that “expenditure against the budget lines in the budget of the Appellate Body and its Secretariat, allocated to Appellate Body member fees and the Appellate Body operating Fund, would each have a temporary limit of CHF 1,00,000 , until CBFA (Committee on Budget, Finance, and Administration) members decide otherwise. The budget for the Appellate Body Fees would remain at CHF 7,91,000 and the Appellate Body Operating Fund would be replenished with CHF 2 million.”

India, which has three pending cases before the Appellate Body, need not have to worry for an adverse ruling anytime soon, as these wrenching conditions sought by the US will make the highest court dysfunctional from December 11, said a legal analyst, under the condition of anonymity.

New Delhi has recently appealed against a panel ruling that struck down India’s export promotion programmes on grounds that they constituted prohibited export subsidies. India has also appealed a panel ruling against its allegedly flawed interpretation of the India’s safeguard duties on Japanese steel products.

In a third appeal involving India, the US had challenged a panel ruling before the AB involving the subsidies and local content requirements that it had provided for its renewable energy producers. India had raised the dispute against the allegedly illegal measures adopted by the US in the renewable sector.

Published on November 27, 2019
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