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The WTO Appellate Body at 30: Exploring the Limits of WTO Dispute Settlement in the Next Decade

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The WTO Appellate Body at 30: Exploring the Limits of WTO Dispute Settlement in the Next Decade TheE15Initiative STRENGTHENING THE GLOBAL TRADE AND INVESTMENT SYSTEM FOR SUSTAINABLE DEVELOPMENT The WTO Appellate Body at 30: Exploring the Limits of WTO Dispute Settlement in the Next Decade May 2016 Alan Wolff E15 Conversations on the Global Trade and Investment Architecture Think Piece ACKNOWLEDGMENTS Published by International Centre for Trade and Sustainable Development (ICTSD) 7 Chemin de Balexert, 1219 Geneva, Switzerland Tel: +41 22 917 8492 – E-mail: [email protected] – Website: www.ictsd.org Publisher and Chief Executive: Ricardo Meléndez-Ortiz World Economic Forum 91-93 route de la Capite, 1223 Cologny/Geneva, Switzerland Tel: +41 22 869 1212 – E-mail: [email protected] – Website: www.weforum.org Co-Publisher and Managing Director: Richard Samans Acknowledgments This paper has been produced under the E15Initiative (E15). Implemented jointly by the International Centre for Trade and Sustainable Development (ICTSD) and the World Economic Forum, the E15 was established to convene world-class experts and institutions to generate strategic analysis and recommendations for government, business, and civil society geared towards strengthening the global trade and investment system for sustainable development. For more information on the E15, please visit www.e15initiative.org/ Alan Wm. Wolff is Senior Counsel at Dentons LLP. Note from the author: Bruce Wilson, former WTO Director of Legal Affairs and Rufus Yerxa, former WTO Deputy Director General, co-editors of the Key Issues in WTO Dispute Settlement: The First Ten Years; as well as Amy Porges, a source of great experience and wisdom on WTO dispute settlement and a drafter of the Analytical Index to the GATT, were good enough to read over a draft of this paper and give me their reactions and suggestions. I take full responsibility for the ideas expressed in this paper, including any errors in law, fact or judgment. With the support of: And ICTSD’s Core and Thematic Donors: Citation: Wolff, Alan. The WTO Appellate Body at 30: Exploring the Limits of WTO Dispute Settlement in the Next Decade. E15Initiative. Geneva: International Centre for Trade and Sustainable Development (ICTSD) and World Economic Forum, 2016. www.e15initiative.org/ The views expressed in this publication are those of the author and should not be attributed to the ICTSD, World Economic Forum, or the funding institutions. Copyright ©ICTSD and World Economic Forum 2016. Readers are encouraged to quote this material for educational and non-profit purposes, provided the source is acknowledged. This work is licensed under the Creative Commons Attribution-Non-commercial- No-Derivative Works 3.0 License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-nc-nd/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. ISSN 2313-3805 ABSTRACT This paper explores how far the WTO dispute settlement can take the organization as it faces the third decade since its establishment in 1995. As the capacity of the WTO to resolve trade problems is increasingly reliant on dispute settlement, since the negotiating function of the WTO continues to experience a member-induced coma, the author seeks to determine to what extent the void can successfully be filled by the current Dispute Settlement Understanding (DSU) and whether there might be room for innovation. The paper conducts a thought experiment to delve into what types of matters the WTO dispute settlement might deal with over the next ten years, in a rapidly evolving global trade environment, and evaluates how well equipped the Appellate Body (AB) is to address them alongside regional and plurilateral trade agreements. CONTENTS Introduction 1 Cases that fit clearly within the text of the WTO agreements 2 Where the rules clearly apply 2 Where WTO jurisdiction on its face exists, but WTO member interest in bringing a claim appears to be absent 4 Cases invoving novel circumstances to which the current rules might logically be applied or extended 6 Beyond the current WTO rules 11 Disputes settled elsewhere 17 Conclusion 19 III ABBREVIATIONS AND ACRONYMS AB Appellate Body AD anti-dumping DSB Dispute Settlement Body DSU Dispute Settlement Understanding EU European Union FTAs free trade agreements GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade MFN most-favored-nation PPMs process and production methods RTAs regional trade agreements SME small- and medium-sized enterprise SOE state-owned enterprise TBT Technical Barriers to Trade TiSA Trade in Services Agreement TPP Trans-Pacific Partnership TTIP Transatlantic Trade and Investment Partnership US United States WTO World Trade Organization IV re-shaped global trade through revolutions in transportation, information flows, and communications. A digital economy exists both woven through, as well as independent from, INTRODUCTION trade in goods and services. Global value chains have changed the way that the global economy functions. Geopolitical and ecological concerns also shape trade flows. A central question for the third decade of the WTO is: How While these factors existed to a certain extent twenty years effective can the WTO be for future controversies when the ago, they were certainly not as pronounced when the WTO legislative part of the organization, the negotiating function was founded as they are now. Some were not acknowledged of the WTO, is in a member-induced coma, and reliance and perhaps a number of them could not even be foreseen. at the WTO to resolve trade problems must be placed As a result they were not all dealt with in the Uruguay substantially on dispute settlement? Of course there are Round. The world economy was much more globalized in pressure relief valves – plurilateral agreements, either in the 1994 than it was in 1947 when the GATT was negotiated, but WTO or negotiated in proximity to it, and regional trade the world has moved on over the last two decades and, to a agreements. But these are not by any means answers for serious degree, the WTO has not. every trade controversy. As a result, the Appellate Body (AB) may in fact see more novel cases being brought before it. While the role of dispute settlement through the Appellate Body is vitally important today, it will increasingly face The purpose of this paper is to perform a thought experiment jurisdictional limits. National laws may have their ambit – to try to take a look back from the future, from a time ten stretched by judges (although this practice is the subject of years from now, at the matters WTO dispute settlement domestic debate) but, at the level of the member states’ might have had brought to it during this next decade. This own governments, there is the corrective in the form of other is not intended as an endorsement of the AB launching itself branches of government as well as a constitution that sets in directions not foreseen by the negotiators . This paper is the framework for national governance. The WTO, absent about hypothetical cases, and does not seek to offer advice negotiations, is notionally a fixed international contract. as to what the Appellate Body should do. The problems cited GATT Article XXIII, nullification and impairment, may provide are real. Many of them may not be brought into the WTO a broader avenue for remedying shortcomings in the trading for dispute settlement. In the event that an issue is carried system’s rules. But here too there are limits. The WTO’s forward, in a number of cases, judicial restraint might well members will at some point not tolerate a situation in which prevent the Appellate Body from providing answers. And that the WTO becomes in essence a kritarchy – a rule by judges3. may actually be the best response. So the question is posed, where can WTO dispute settlement be effective for emerging issues? What are the limits beyond Were there a white marble edifice on the shores of Lake which it loses its legitimacy? Geneva housing just the WTO Appellate Body, over the front entrance one would probably find inscribed the motto William Howard Taft, Chief Justice of the United States pacta sunt servanda – “agreements must be kept”. When Supreme Court, wrote a century ago: those agreements are international contracts that cannot as a practical matter be amended; to what extent can According to the view and theory of one who does not they evolve? By agreement of the WTO members, WTO understand the practical administration of justice, dispute settlement “cannot add to or diminish the rights judges should interpret the exact intention of those and obligations provided in the covered agreements.” What who established the constitution, or who enacted the will happen as, increasingly, the WTO agreements age and legislation, and should apply the common law exactly as it subjects arise that were neither contemplated nor previously came to them. But frequently new conditions arise which resolved by the signatories? The appropriate answer for any those who were responsible for the written law could not judiciary, especially an international one, is to defer to the legislative body to create new rules. Regrettably, recent history has demonstrated through the fate of the Doha 1 AB cases on zeroing have often been criticized because the Antidumping Round Development Agenda that broad consensus among Agreement did not resolve the zeroing issue, but the AB interpreted other all the members is practically non-existent. The Trade AD Agreement provisions to rule that zeroing is impermissible. Facilitation Agreement, worthy as it is, is limited in effect, 2 WTO Dispute Settlement Understanding (DSU), Article 3.2. and is still awaiting two-thirds of the signatories to ratify it. It marks the current bounds of possible agreement among 3 Of course there had to be a Greek term for this state of affairs.
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