EU member states reached an agreement on the sidelines of the World Economic Forum with 16 World Trade Organisation members, including China, to establish an ad-hoc appeal body and overcome the US blockage of the global trade-dispute settlement system.
“The multiparty appeal arbitration arrangement will guarantee that the participating WTO members continue to have access to a binding, impartial and high-quality dispute settlement system among them,” EU’s Trade Commission Phil Hogan said in a statement following the announcement in Davos on Friday (24 January).
The deal was stamped by ministers of Australia, Brazil, Canada, Chile, China, Colombia, Costa Rica, European Union, Guatemala, Republic of Korea, Mexico, New Zealand, Norway, Panama, Singapore, Switzerland and Uruguay, plus the European Union countries.
The WTO appellate body has been crippled ever since December last year. The US has been blocking for months appointments of the seven members to the settlement framework, who ultimately make decisions over disputes between countries, amid allegations that it systematically exceeded its authority.
The EU set in motion a plan to establish an ad-hoc solution to ensure a dispute settlement is in place while the appellate body is unfunctional. Canada followed suit and the alternative arrangement has been gaining support ever since.
China’s decision to join is an important landmark given that Beijing is one of the countries with more open disputes.
The short joint statement said: “We will work towards putting in place contingency measures that would allow for appeals of WTO panel reports in disputes among ourselves, in the form of a multi-party interim appeal arrangement.”
Commissioner Hogan underlined that “this statement testifies to the high importance that the EU and the participating WTO members attach to retaining a two-step dispute settlement process in WTO trade matters”.
The agreement is an ad-hoc solution by nature and will therefore only be in force “until a reformed WTO Appellate Body becomes fully operational,” the countries backing the motion clarified.
In the joint statement, the ministers said they had “also taken proper note of the recent engagement of [US] President Trump on WTO reform,” while the EU’s trade chief efforts would continue “to seek a lasting solution to the Appellate Body impasse, including through necessary reforms and improvements”.
The reforms would go beyond the dispute settlement mechanism and would address WTO’s functions as a trade rule-maker and sheriff of its members’ trade policies and practices as well.
Hogan admitted back in December that “in order to shore up the rules-based system, we need a global referee that enables members once more to negotiate new rules between them, and allows for a new and better balance of rights and obligations between countries, taking into account the economic emergence of many developing countries”.
[Edited by Zoran Radosavljevic]