As Trump Shuts Down WTO Appeals Court, China Lines Up Behind’s EU Move to Replicate It Without the US

Nice job in isolating itself and giving Europeans and the Chinese something to work on together

China is in preliminary talks to support the European Union’s backup plan for settling international trade disputes as President Donald Trump’s administration gets closer to scuttling the World Trade Organization’s role in refereeing cross-border commerce.

On Tuesday, China’s Ambassador to the WTO Zhang Xiangchen told Bloomberg News that Beijing is actively working to support the EU’s vision of an appeal-arbitration model, which essentially replicates the work of the WTO’s soon-to-be defunct appellate body.

Until now, only Canada and Norway have endorsed the EU’s plan.

“This is not the best option” but “this is an interim solution that can help countries to deal with their disputes,” Zhang said in the interview.

While the conversations are still preliminary, the plan has drawn serious interest from various other WTO members such as Australia, Argentina, Brazil, Chile, Japan and Turkey, according to officials familiar with the matter.

“There has been a gradual support for this as a very unfortunate Plan B,” former appellate body member James Bacchus told Bloomberg in an interview. “Now it seems to be the best option, given all the lousy options we have left.”

The Trump administration’s decision to block new appointments to the WTO appellate body will effectively paralyze it on Dec. 11. The panel has the final say in trade rulings that can affect billions of dollars in commerce. That’s forced governments to select among four options for settling disagreements:

  • Option 1: Wage trade wars with tit-for-tat tariffs and other beggar-thy-neighbor trade policies
  • Option 2: File a claim at the WTO with the knowledge that the losing party may appeal it into legal limbo
  • Option 3: Launch a dispute with an understanding that neither party will appeal the WTO’s dispute ruling
  • Option 4: Engage in an appeal-arbitration system that replicates the work of the WTO appellate body

The U.S. administration has shown a preference for using option one — unilateral tariffs instead of waiting years for a WTO dispute settlement award. Just last month Trump announced by Twitter that he would impose fresh tariffs on Argentina and Brazil’s steel and aluminum exports for what he alleged to be currency manipulation.

Trade officials concede that the second option is basically a waste of time and money and the third option isn’t much better because there’s little incentive for a defending nation to participate if they know they’re going to lose.

Which is why a growing number of WTO members — except for the U.S. — are beginning to take a hard look at the appeal-arbitration approach.

The model is rooted on an existing WTO rule — Article 25 of the Dispute Settlement Understanding — that permits nations to agree to a voluntary form of arbitration to settle their disputes.

Under the EU’s appeal-arbitration approach, the WTO Director-General can select a panel of previously vetted former appellate body members who apply the same procedures of the appellate body to reach a final judgment.

As a practical matter, WTO members who sign on to such an approach will basically undergo the same process as the appellate body.

“If enough other countries sign up to the EU proposal, it could work as a stop-gap measure that would temporarily allow the WTO to arbitrate disputes between the other 163 members,” said Chad Bown, a senior fellow at the Washington-based Peterson Institute for International Economics.

EU’s Toolkit

“But there are downsides,” Bown said. “The biggest is obviously that the U.S. is unlikely to sign up, so it will not work to solve any disputes that countries have with America.”

But the EU has a plan for that, too.

The EU is due as soon as this week to move toward strengthening its trade-policy arsenal by allowing for penalties against nations that undermine WTO rulings by appealing them into a legal void.

The plan has high-profile backing from European Commission President Ursula von der Leyen, who instructed European Trade Commissioner Phil Hogan to bolster the EU’s toolkit in the area of international commerce.

In September, von der Leyen urged Hogan to upgrade the EU’s enforcement regulation “to allow us to use sanctions when others adopt illegal measures and simultaneously block the WTO dispute settlement process.”

Source: Bloomberg

How Trump shut down the court:

Starting two years ago the US administration began blocking appointments, and now Trump has run out the clock as the now paralyzed WTO’s Appellate Body over that period declined from seven judges to three, and with two more terms expiring Tuesday, only one judge remains, thus without the ability to issue a binding ruling. [Three are needed for a quorum.] 

  1. Garry Compton says

    Trump, Obama, Bush – all hired to do the dirty work of the Deep State – and well paid – None of them care about America – they all have been Neutered , Bought off, – none are worth the price of a bullet. Trump is street wise NY, mafia all the way – connected – and anything is for sale. . Obama – a woose, would be a pimp or drug dealer selling his kids on the South side if he didn’t have any connections. Bush – he’d be out jackin off in Daddy’s barn as he paint the face of a horse in water colors, drinking in the local saloon at night – down right dumb. Foreign policy or Foreign Trade – Forget it – None of them had a clue and if they did – it didn’t count – they were all neutered.

  2. BillA says

    why would any nation wish to negotiate anything with the lying US ?

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