EU hopes to overcome US opposition to WTO ‘court’ as key summit nears

Ahead of a key summit of members of the World Trade Organisation (WTO) in Abu Dhabi at the end of February, the EU hopes to reform the organisation’s “dispute settlement mechanism”, a court-like institution paralysed by the USA.

The WTO’s 13th Ministerial Conference (MC 13), considered the organisation’s last chance for reform before a potential re-election of former US President Donald Trump, will take place in the capital of the United Arab Emirates from 26 to 29 February 2024.

The EU, an advocate of free trade principles and multilateral cooperation, is keen on saving the WTO’s relevance. For that, it hopes to resolve a paralysis of the organisation’s highest decision instance, the so-called “appellate body”, which has been non-functional since 2019 as the USA is blocking the appointment of new judges.

“The EU has a fundamental interest in a strong and reformed WTO, which can effectively respond to the trade challenges and issues of the 21st century,” Valdis Dombrovskis, vice president of the European Commission in charge of trade policy, told reporters on Tuesday (23 January). 

“The existing WTO rules, which still govern the majority of global trade, are our best guardrail against global economic fragmentation,” he added. 

Over the last few years, large economic blocs, particularly China and the US, have increasingly used subsidies and protectionist rules to favour domestic industries, concerning economists considering the global division of labour as crucial to economic growth.

“It’s necessary to stop further erosion of trade rules,” Dombrovskis said, adding that “we would expect [the ministerial conference] to deliver on the dispute settlement reform, or at the very least, bring us closer to that objective and offer a clear perspective for finding a solution”.

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75% of global trade still governed by WTO

Still today, 75% of global trade follows the rules set by the WTO, which includes trade between the EU and third countries with whom the EU does not have a free trade agreement, such as the US, China, Brazil and India.

However, if there is an alleged breach of rules, countries can only object in what is called a “panel”, the first step of the dispute settlement system, but cannot appeal to the decision taken by the panel, as the appellate body, normally the potential second step, is not working.

“As you know as well, multilateralism is under pressure. Indeed, some are calling it into question altogether,” Belgian foreign minister Hadja Lahbib (MR/Renew Europe) told journalists.

“So it’s so crucial for actors such as the European Union to do everything possible to really maximise the chances of success of such a ministerial conference,” Lahbib said about the WTO’s Abu Dhabi meeting.

For that purpose, Belgium had invited the WTO’s secretary general, Ngozi Okonjo-Iweala, to an informal meeting of ministers in charge of trade policy from all EU countries in Brussels on Monday and Tuesday.

“We repeated our strong commitments in favour of the WTO,” Lahbib said.

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USA block reform process

But the biggest hurdle to reform the WTO’s dispute settlement system is the US, said Claudia Schmucker, head of the Centre for Geopolitics at the German Council on Foreign Relations (DGAP), a think-tank that advises the German government.

“Because the WTO is being declared dead again and again in the current geo-economic environment, people are saying it has to deliver something otherwise it will become irrelevant at some point,” Schmucker told Euractiv.

“At [the last ministerial conference in 2022], states agreed to decide on the future of the Appellate Body by 2024,” she said, adding that “it was always thought that this ministerial conference in 2024 would be the critical point to make it happen”.

“The problem is the US,” she said, noting their fundamental opposition to an international dispute settlement system that can create case law at the WTO level. She added that many in the US would also complain that past Appellate Body decisions had favoured China.

In the run-up to the summit, US officials would begin to manage expectations by stressing that “all of 2024” could still be used to reach an agreement, Schmucker said. However, with the chances of the re-election of former President Donald Trump, an advocate of WTO-breaking trade barriers such as unilateral tariffs, WTO supporters are hoping for a deal before November.

If Trump is elected, “probably nothing will be possible any more,” Schmucker said.

“To be honest, we don’t expect any major agreement, but we hope so,” Schmucker said. “That’s why there is this urgency at the moment because we hope the Americans will move a little.

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