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Analysis: Trump's bonfire of the treaties sweeps towards the WTO

Reuters  |  GENEVA 

By Tom Miles

GENEVA (Reuters) - Donald has the in a chokehold, and the has made clear what he wants: no more judicial rulings that interpret WTO rules to Washington's disadvantage.

has effectively engineered a crisis in the WTO's system of settling global disputes by vetoing all appointments of judges to its appeals chamber.

True to the president's style, his to the Geneva-fbased body, Dennis Shea, is unapologetic about shrinking the supreme court of world trade to a size where it will struggle to function.

"The is not content to be complacent about this institution," Shea told fellow WTO this month.

"And the leadership that the will bring to the WTO in the coming months and years will consequently involve a good deal of straight talk and a willingness to be disruptive, where necessary, in the interest of contributing to a stronger, more effective, and more politically sustainable organisation."

has proved willing to risk a global trade war in combating any treaties and practices he regards as unfairly disadvantaging U.S. companies and workers, imposing tariffs on and aluminium imports globally because of overproduction blamed on

Since its creation in 1995, governments have gone to the WTO for adjudication on international trade disputes. Although rulings can be appealed, decisions made judges sitting on its Appellate Body are final, and ultimately sanctions can be used against transgressors.

The rules are far from perfect or complete, and the failure to update them after decades of negotiating stalemate has obliged WTO judges to interpret them for a changing world.

This has incurred Trump's wrath. "We lose the cases, we don't have the judges," he said in February, describing the WTO as "a catastrophe".

Trade experts dispute this, saying all countries that go to the WTO have a broadly similar rate of winning and losing. While one sits on the Appellate Body, most of the WTO's 164 members have no there, the experts note.

Trump's veto is reducing what is supposed to be the seven-strong Appellate Body as members' terms expire. By September four seats will be vacant, leaving three judges, the number required to hear each appeal. If one needs to recuse themselves for any legal reason, the system will break down.

Since 1995, the WTO has handled more than 500 disputes and its membership has expanded to cover around 95 percent of world trade, which has more than tripled to around $18 trillion per year in goods alone.


The sees a need to rein in unaccountable judges who overstep their authority. Others, however, see a systemic threat and a desire to return to pre-WTO days when countries settled disputes by negotiation - with the more powerful party usually winning, regardless of the merits of the case - rather than under internationally-agreed rules.

This year Trump has caused an international outcry with the metals tariffs and a $150 billion tariff threat against for allegedly stealing U.S. intellectual property.

Both moves risk legal entanglement at the WTO.

But disabling the Appellate Body would not simply mean a "time-warp" to an era without judges, according to Instead, disputes would go into limbo if the losing side appealed. And with little prospect of enforcing the rules, there would be little point in negotiating new ones.

"The paralysis of the Appellate Body would cast a long and deep shadow on the continued operation of the multilateral trading system as a whole," Singh Bhatia said.

Eight appeals had been filed since the start of 2017 and more are expected, he said, including a dispute over Australian tobacco control rules which is widely seen as a test case for global health policy.

Shea acknowledged the WTO's rule book had "substantial value" and had generally contributed to global economic stability. "But something has gone terribly wrong," he said.

"The Appellate Body not only has rewritten our agreements to impose new substantive rules we members never negotiated or agreed, but has also been ignoring or rewriting the rules governing the dispute settlement system, expanding its own capacity to write and impose new rules."

A rift opened up when the WTO faulted U.S. methodology for assessing "dumping", or unfairly priced goods. The consequences for the U.S. ability to tackle what Trump has called "robbing us blind" were huge.

The United States itself also stands accused of rewriting the rules in a dispute brought by over Washington's refusal to treat China as a "market economy".

"Is the WTO really a rules-based organisation, or just a club where powerful traditional members can bend the rules?" China asked in a dispute hearing this week.

Although Trump has a pattern of withdrawing from deals he dislikes - such as on curbing climate change and - many WTO diplomats say they remain optimistic that Shea will make proposals to keep the dispute system intact.

Sixty-six WTO members have backed a petition calling for the United States to drop its appointments veto, but there is no agreement on how to avoid the collapse of dispute settlement.

Some countries are discussing using alternative arbitration methods, or having a dispute system which excludes the United States, lawyers and diplomats say.

But U.S. ally is unwilling to join the petition. said WTO members should refrain from disputes which are "essentially political".

rejects a dispute system without the United States. "In my view there should not be plan B," Ihara said. "We have only plan A and we need more collective efforts to find a solution."

(Reporting by Tom Miles; editing by David Stamp)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, May 18 2018. 18:05 IST