The World Trade Organization (WTO) is set to lose its system for resolving disputes between members, with huge implications for global trade and how deals are mediated in the future.
Described by former director general Pascal Lammy as the WTO’s “crown jewels”, the Appellate Body has been likened to a Supreme Court for global trade.
Yet despite its role as the final appeals forum for international disputes, it is set to close its doors tomorrow after the United States blocked the appointment of two new judges to sit on its seven-person panel.
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“Perhaps the biggest issue is that the US accuses the WTO dispute system of ‘judicial overreach’ - essentially that it interprets the WTO rules in a way that creates new obligations for WTO members”, reports the BBC.
One area that particularly grates in Washington is dumping, when a foreign supplier sells goods abroad more cheaply than at home. The US has even threatened to close down the WTO altogether by blocking its budget, although it has rowed back from that threat.
At a time when US president Donald Trump is in a damaging trade battle with China, and after Trump just days ago threatened France with 100% wine tariffs in retaliation for President Macron’s new digital tax, “the 164-member body is losing its ultimate referee on international trade at the worst possible time”, says the Daily Telegraph.
The Guardian reports that “unless Donald Trump backs off at the last minute and agrees to a peace plan, Washington’s protracted battle to safeguard US sovereignty will lead to the neutering of the WTO’s ability to police global trade”.
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This would plunge the Geneva-based organisation “into the biggest crisis in its 25-year history”, says the paper, leading to “a backlog of unresolved disputes and mak[ing] it easier for countries to break WTO trade rules without facing penalties”.
“Moreover, this could have uncomfortable implications for the UK, particularly if it leaves the EU without a trade deal at the end of 2020, as promised by the Conservative Party’s election manifesto”, says the Telegraph.
The newspaper adds that “if the UK were to take a dispute with the EU to the WTO, it has no recourse to appeal an unfavourable panel decision”.
“The UK is choosing a particularly difficult time to extricate itself from its regional trading bloc and try to seek out its own path in this global trading system, which is fraying at the edges”, says Sam Lowe, a trade expert at the Centre for European Reform.
Marianne Schneider-Petsinger, an international trade expert and fellow at Chatham House, was more blunt. “In an environment where the WTO dispute settlement system isn’t fully functioning, it's going to be much more difficult and uncertain to enforce the UK’s rights”, said Schneider-Petsinger.
“Is it really wise for the UK to use the WTO as its key platform in a world where the WTO is under threat?”
