EU leaders to call for strengthening of trade sanction toolbox

WTO headquarters in Geneva, Switzerland, 09 December 2019, during the opening of the World Trade Organization (WTO) General Council. [EPA-EFE/SALVATORE DI NOLFI]

EU leaders will urge co-legislators in the European Parliament and the Council of the EU to examine “as a matter of priority” the possibility to sanction countries breaching trade rules and blocking the dispute settlement process, according to the latest version of the summit conclusions seen by EURACTIV.

The multilateral trade system was seriously jeopardised this week, after the World Trade Organisation’s dispute resolution system was crippled by the US.

Washington has blocked from 2017 the nomination of new members of the appellate body, a key pillar of the WTO. As of Tuesday midnight (10 December), the appellate body lacks a minimum of three members to be able to hear cases.

As a result, WTO’s remedies decisions benefiting the EU could fall into the void if third countries appeal the decisions.

EU to strengthen trade sanctions as WTO paralysis starts

As the international system for settling trade disputes is set to become crippled on Tuesday (10 December), Europe will in the coming days propose ways to bolster its sanction toolbox against countries that adopt ilegal trade measures and block the renewal of WTO’s appellate body.

For that reason, the Commission will propose on Thursday (12 December) the possibility to impose tariffs and pass other sanctions against countries that are breaching the WTO rules and sending cases into the limbo.

This is an example of the “new assertiveness of the EU” in trade, a senior EU official explained.

The proposal will come as an amendment to the EU’s enforcement regulation, already included in the priorities of the new Trade Commissioner Phil Hogan, who will present the proposal to reporters on Thursday morning.

“I will make sure that we strengthen further Europe’s ability to protect itself from unfair trade practices and that the EU disposes of the right tools to assertively defend its rights,” Hogan said in his written replies to the European Parliament before taking over as trade commissioner.

Leaders will discuss the crisis affecting the WTOlate on Thursday.

“The European Council reiterates its full support for the global rules-based international order and notes with concern the paralysis of the WTO’s mechanism for settling disputes,” reads the latest draft of summit conclusions.

The EU leaders will urge the Parliament and the Council – two EU institutions with legislative powers – to “examine as a matter of priority” the changes proposed to the EU’s enforcement legislation to better protect the European interests.

WTO in 'critical situation', EU warns

EU member states discussed on Tuesday (1 October) how to address the “critical situation” of the World Trade Organisation, as the US continues to block the renovation of its appellate body, key for the functioning of the institution.

At the same time, EU heads of state and government are expected to support the interim solution the Commission has put forward to WTO partners to keep the dispute settlement process functional.

The Commission has proposed an ad-hoc dispute settlement mechanism to work while the appellate body remains blocked, with similar rules and procedures.

To date, only Norway and Canada have decided to join Europe’s ad-hoc mechanism. However, China’s ambassador to the WTO, Zhang Xiangchen, told Bloomberg News that his country is working to support the EU’s appeal-arbitration model.

Other countries including Australia, Argentina, Brazil, Chile, Japan, and Turkey could also be interested in joining the mechanism.

[Edited by Zoran Radosavljevic]

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