The dispute resolution process of the World Trade Organization (“WTO”) has been on life support since 2019 when the Trump administration blocked the appointment of appellate members, shutting down the appellate process in the WTO’s dispute resolution system. This has not meant the end of the WTO as an international organization, however, as member states have found alternative avenues to resolve disputes and continue reaching agreements notwithstanding the state of the dispute resolution system. This article will first give an overview of the history of the WTO and the objections of the United States towards the dispute resolution system. The article will then explain how other member states have dealt with a dysfunctional Appellate Body (“AB”). Finally, this article will explore the future of the WTO.
Since 1995, the WTO has been responsible for the creation of a rule-based trade system which seeks to lower trade barriers around the world and ensure that member states abide by agreed-upon rules. The WTO boasts 164 members accounting for 98% of global trade. The organization has struck a variety of treaties aiming to lower trade barriers, from the original General Agreement on Tariffs and Trade, which dealt only on the trade of physical goods, to agreements on the regulation of Intellectual Property. In order to enforce these agreements, the WTO established the Dispute Settlement Body (“DSB”) under the authority of the Understanding on Rules and Procedures Governing the Settlement of Disputes and Article 19 of the Marrakesh Agreement, the founding document of the WTO. A member state can bring a complaint to the DSB when they think another member has violated the terms of one of the treaties. Once a party brings a dispute, the DSB establishes a panel to interpret the terms of the treaty in question. The panel then issues a binding ruling with an option of appeal to the AB. Once the panel (or the AB in case of appeal) has made a determination that a member state’s law violates the terms of an agreement, the DSB will oversee the compliance of the recommendation. If a member fails to comply with the recommendation after a reasonable period of time, then the provision which the party has violated may be suspended against them; they would no longer get the benefit of the trading rule which they had violated. Until 2019, this system worked well, however, both the Trump and Biden Administrations both refused to appoint AB members, citing judicial overreach and interference with national security, respectively. The Administrations’ objections to the appointment of any member was fatal to the WTO, as the organization operates on a consensus basis – every member must agree to major decisions, including the nomination of AB members. So, because the United States did not consent to the appointment of AB members, this meant that the nomination system ground to a halt, leaving the AB without members, thus leaving disputes unresolved, and the DSB in crisis.
Despite the United States’ block (notably, the effort comes from both major political parties) of AB nominations, other WTO members have utilized alternative dispute resolution mechanisms available to them under Article 25 of the Marrakesh Agreement. Article 25 states that “expeditious arbitration within the WTO as an alternative means of dispute settlement can facilitate the solution of certain disputes that concern issues that are clearly defined by both parties.” Twenty-five members have taken advantage of this language so far and have formed the Multi-Party Interim Appeal Arbitration Arrangement (“MPIA”), which bypasses the hamstrung AB to resolve disputes. Under the MPIA, members still submit their disputes to a DSB panel, and if dissatisfied, they may subject themselves to the MPIA process of a three-arbitrator panel. However, this must be invoked on a case-by-case basis and only parties who are party to the MPIA may utilize this process — although any WTO member may join the MPIA. Members who are not part of MPIA and disagree with a panel determination may still technically appeal their decision to the AB, like the United States did when a panel ruled against its steel and aluminum tariffs on December 9, 2022. But because there are not enough AB members to hear a case, and because the United States is not a party to the MPIA, the Biden administration sent the steel and aluminum tariff case into an “appellate void,” ensuring that there will be no final resolution to this case. The appellate void also ensures that if a party is not satisfied with the outcome of a panel decision, they can appeal the decision to the non-existent AB to avoid the consequences of an adverse outcome. While the MPIA has provided a forum for the rule based system of the WTO to continue, it is not a permanent fix as only a fraction of members have signed on to the alternative arbitration and there seems to be little appetite by the United States to allow the AB to return to regular order.
Although the dispute settlement system of the WTO is at an impasse, that has not stopped members from continuing to reach consensus on new deals which keep the WTO a functioning international institution. In June of 2022, members agreed to a package of agreements — the first time consensus has been reached on new agreements since 2013 — including a measure making it easier for developing countries to gain access to COVID-19 vaccines, an agreement to limit fishery subsidies, and a continuation of an agreement which bans the imposition of duties on digitally transmitted products. Both the COVID vaccine-waiver and fishery subsidy agreement show how the WTO has adapted to the challenges of the twenty-first century. The institution has taken seriously the fact that trade agreements most impact developing countries by specifically focusing on them in their agreements and ensuring safeguards for members. By reaching an agreement banning fishery subsidies, the WTO has also shown competence in the field of sustainability by agreeing to ban those subsidies which distort trade and are damaging to the environment. Through these agreements, the WTO, through its members, continues to operate.
The future of the WTO may depend on the willingness of member states to be flexible. While the attack on the dispute resolution system may have seemed like a fatal blow to the WTO, member states showed that even as some countries are questioning the role of international trade, there exists a subset of member-states willing to find creative solutions. Although there are doubts about the viability of the WTO in the twenty-first century, if the WTO can continue to meet the goals laid out in the Marrakesh Agreement to “provide the forum for negotiations” for its members to create “reciprocal and mutually advantageous” agreements which seek to increase its members’ “trade and economic endeavor” and maintain its function as a venue for resolving trade disputes, the institution will continue to have a role in the international sphere. The development of the MPIA and the reaching of new trade agreements illustrate how the WTO is adapting to changing world circumstances while still reaching its institutional goals.
Author Biography: Esteban Munoz Calle is a Senior Moderator of the International Law Society’s International Law and Policy Brief (ILPB) and a J.D. candidate at The George Washington University Law School. He has a Bachelor of Arts in Political Science and International Relations from Gonzaga University.
Editor: Alexander Goodrich, ILPB Deputy Moderator-in-Chief & GW Law J.D. Candidate, 2024.