Restoring the World Trade Organization’s crown jewel (GS Paper 2, International Organisation)
Context:
- In June 2022, the member-countries of the World Trade Organization (WTO) including India, reached out for resurrecting the WTO’s dispute settlement system (DSS), also called WTO’s ‘crown jewel’, by 2024.
Issue with DSS:
- Established in 1995, the World Trade Organization’s (WTO) Dispute Settlement System (DSS) is used to resolve trade-related disputes between WTO member states.
- It has received over 500 complaints since its inception, and utilises both political negotiation and adjudication for dispute resolution.
- Today the DSS faces an unprecedented crisis due to US obstruction, which may render the system effectively dysfunctional by late 2019.
- DSS is non-functional because the United States, single-handedly, has blocked the appointment of its members.
The ‘precedent’ problem:
- The U.S. reproaches the appellate body for judicial overreach and exceeding its assigned institutional mandate. Thus it argues that till the time the appellate body’s role is defined precisely, it cannot be resurrected.
Concerns raised by U.S.
- One major problem that the U.S. identifies is that the appellate body, contrary to the text of the WTO’s dispute settlement understanding (DSU), has been creating binding precedents through its decisions.
- The WTO’s DSU also makes this clear in Article 3.2 by stating that the appellate body rulings can neither add nor diminish the rights and obligations of WTO member-countries.
- It is incumbent on the appellate body to ensure that there is consistency in the interpretation and application of the WTO agreements without creating a binding precedent.
What DSS has to say?
- It has clarified that a departure can be made from the previous rulings and reasoning if there are “cogent reasons”.
- The argument that the appellate body is following a system of precedent in the sense it is followed in the common law system is tantamount to vastly overstating the case. Moreover, the appellate body is not the only international court that follows its previous decisions.
- Other international courts such as the International Court of Justice and the International Tribunal for the Law of the Sea also follow past decisions unless there are valid reasons not to do so.
- At any rate, it has been proposed that the WTO member-countries can adopt a statement that the appellate body rulings do not create precedents. However, it will not satisfy the U.S.
De-judicialisation of trade multilateralism:
- The larger game plan of the U.S. seems to be the de-judicialisation of trade multilateralism as we know it. The WTO was created in a world with the neoliberal consensus that emerged after the Cold War and the collapse of communism.
- In a neoliberal economic system, the ‘invisible hand’ of market competition should be complemented by the ‘visible hand’ of the law. The WTO became this ‘visible hand’ of the law to regulate global trade.
- This period saw not only the legalisation of international relations but also its judicialisation (the expansion of international courts and tribunals that dominate decision-making in place of national actors).
- This, arguably, erodes the sovereignty of nations as they lose control over critical decision-making.
How it will benefit US?
- De-judicialisation is the reverse phenomenon where countries weaken international courts to take back decision-making power.
- Given the emerging geo-economic challenges posed by a rising China, the U.S. wants to exercise full power over its trade policies, throwing off the shackles of the appellate body’s judicial review.
- This de-judicialisation should not be confused with exerting political oversight over the appellate body to improve its working. While US has identified multiple problems with the DSS, it has seldom offered constructive suggestions.
Way Forward:
- One option that other countries have is to elect the appellate body members by resorting to voting at the WTO’s General Council meeting.
