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EU Leads Effort to Create Alternate Trade Court as U.S. Prepares for WTO Reform Talks

Monday, January 27, 2020
Sandler, Travis & Rosenberg Trade Report

Left without a functioning method for resolving trade disputes at the World Trade Organization after the Appellate Body ceased to function in December 2019, more than a dozen WTO members announced Jan. 24 their own interim appeal arrangement. The move comes amid signals that the Trump administration is ready to discuss WTO reform, which could ultimately allow the Appellate Body to resume operations.

After the terms of two of its judges expired in December, and in light of the continuing blockage of new appointments by the U.S., the WTO Appellate Body was left unable to hear appeals of cases decided by Dispute Settlement Body panels. As a result, a number of ongoing disputes involving tariffs and other trade restrictions around the world, including the U.S. Section 232 tariffs on steel and aluminum, currently lack a path toward final resolution.

In response, 17 WTO members said they will work expeditiously to establish a multi-party interim arrangement (permissible under WTO rules) that would allow for appeals of WTO panel reports. European Union Trade Commissioner Phil Hogan said this arrangement “will guarantee that the participating WTO members continue to have access to a binding, impartial and high-quality dispute settlement system.”

The interim arrangement would only remain in place until the Appellate Body becomes fully operational again. Australia, Brazil, Canada, China, Chile, Colombia, Costa Rica, the European Union, Guatemala, Korea, Mexico, New Zealand, Norway, Panama, Singapore, Switzerland, and Uruguay intend to participate, but other WTO members will be able to join as well.

In the meantime, President Trump has invited WTO Director-General Roberto Azevedo to Washington, D.C., to discuss WTO reform. Several U.S. administrations have been critical of the WTO for a number of perceived shortcomings in its dispute settlement and negotiation functions, and Azevedo acknowledged that the WTO needs to be “updated” in order to “deliver and perform its role in today’s global economy.” However, neither Trump nor Azevedo offered any details on what the forthcoming talks might cover.

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