Is this the end of multilateralism?

| Updated on November 28, 2019 Published on November 28, 2019

By forcing WTO’s appellate body to shut shop, the US has escalated its trade war to the WTO

The World Trade Organisation is facing the prospect of death by a thousand cuts. The WTO’s most important arm for resolving global trade disputes — the Appellate Body (AB) — will become dysfunctional from December 11, when the number of judges on the panel falls below the mandatory minimum. The AB delivered binding rulings in hundreds of trade disputes over the past 25 years. Members of the trade body were subjected to biting trade sanctions if they failed to comply with its rulings.

The US played a major role in establishing this binding dispute resolution mechanism at the end of the Uruguay Round of trade negotiations, that led to the creation of the WTO in 1995. Earlier, trade disputes were decided by GATT (General Agreement on Tariffs and Trade) panels that lacked the power to enforce implementation. The US also remained a major beneficiary of the rulings passed by the highest court for trade issues. Washington succeeded in enforcing strong intellectual property enforcement rules and the removal of quantitative restrictions in India due to rulings passed by the AB. The US also lost several major trade disputes with India, the European Union, China, Brazil, Mexico and Canada in trade disputes involving anti-dumping measures, countervailing duties, and safeguard duties among others. The AB had invariably found several measures adopted by the US, particularly the provisions in the anti-dumping investigations based on zeroing methodology and countervailing measures, to be inconsistent with the existing WTO rules. These adverse rulings were not acceptable to the US, which wanted its way or the highway. Attempts to change the rules through negotiations such as the Doha Development Agenda (DDA) trade talks that began in 2001 were never concluded due to fierce opposition from the US. The US pulled the plug for completing the DDA talks due to opposition from its powerful lobbies that saw international rules as a threat for their trade-distorting farm subsidies and anti-dumping provisions.

Little wonder that the US launched a sustained war against the adverse rulings issued by the AB, accusing the judges for not adhering to the dispute settlement understanding (DSU). A trade version of “shock and awe” was adopted at the WTO with the blocking of a second term for a serving AB member from South Korea in 2016. Subsequently, it blocked the selection process for filling the vacancies at the highest court for the past two years. Washington has not showed any signs of lifting its opposition despite members making a concerted effort to address its concerns. It also placed wrenching conditions in the use of funds for AB members in pending trade disputes. Consequently, India’s two appeals against Japan and the US respectively, and one major appeal launched by the US against India’s dispute on the illegal American local content requirements and subsidies used for its renewable sector, would go into limbo. Effectively, the Trump administration has struck the death knell for multilateralism.

Published on November 28, 2019
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