• SHARE

On its face, the battle over the reappointment of a judge to the World Trade Organization’s appellate board is an obscure, technical controversy that would hardly ripple across Lake Geneva. In fact, however, the United States’ opposition to a second term for Chang Seung-wha threatens potentially fatal consequences for the world trade body.

The WTO has served as the central mechanism for setting and enforcing global trade rules since its establishment in 1995. It has provided the primary venue for international trade negotiations since it superseded the General Agreement on Tariffs and Trade, although it has limited success in this regard. In 2001, WTO members launched the Doha Development Round of trade talks, which have labored since then without conclusion. Most governments consider the Doha talks to be dead and only fear of the consequences prevents official recognition of its failure.

Despite frustrations over its role as convener of global trade talks, the WTO is applauded for its role in ensuring that trade deals are enforced and that disputes between members are resolved in ways that reinforce the global trade order. Some call the dispute settlement mechanism the WTO’s “golden jewels.”

While members are encouraged to work out their disputes in consultations, failure to reach a satisfactory resolution results in the convening of a three-member panel chosen by the WTO secretariat on an ad hoc basis. After that panel has ruled, a party can appeal to the Appellate Body. Each appeal is heard by three members of the permanent seven-member Appellate Body. Its rulings are final. Those seven members are trade experts from WTO member economies and are elected for four-year terms. The U.S. is objecting to a second term for Chang, a South Korean judge.

Detailing its opposition to Chang’s reappointment, the U.S. identified four instances where Chang pushed the appeals panel to overstep its authority. (While Appellate Body rulings are issued by the entire panel, the U.S. believes Chang is responsible for the overreach.) The U.S. was a party to three of those cases, but Washington insists that its objection is not a reflection of who won or lost, but how he decides. Those decisions, said a U.S. representative, “raised systemic concerns about the disregard for the proper role of the Appellate Body and the WTO dispute settlement system.”

The U.S. noted that, according to the WTO Dispute Settlement Understanding (DSU), appellate rulings cannot “add or diminish the rights and obligations provided in the covered agreements” and the role of the Appellate Body is to “secure a positive solution to a dispute.” Yet, in one case that involved a financial services dispute between Argentina and Panama, the U.S. said that a majority of the panel’s report was not related to the argument being considered. In a second case, which concerned India’s import ban on U.S. poultry products, the appeals board decision addressed an issue that was not raised on appeal and engaged in a “lengthy abstract discussion” of an unrelated aspect of the WTO Sanitary and Phytosanitary Agreement. The third case involved U.S. duties on Chinese imports, and the Appellate Body’s reasoning about dispute settlement said the U.S. constituted a marked departure from the DSU. The fourth ruling also involved the U.S. and China, and it “took a very problematic and erroneous approach” that risks turning the dispute settlement body into “one that would substitute the judgment of WTO adjudicators for that of a member’s domestic legal system as to what is lawful under that member’s domestic law.”

Some consider the U.S. complaint an attempt to “play the referees” and influence future decisions in its favor. Unfortunately, that is no benign temptation and threatens the legitimacy and integrity of the entire dispute settlement process. Other WTO members — Japan, South Korea and the European Union among them — took issue with the U.S. complaint, arguing that the objections pose an existential threat to the WTO by undermining the independence of the appellate review process. Japan’s delegation complained that the U.S. position was “extraordinary, exceptional in nature and has no precedent,” and warned that “any act by a WTO member of this nature and magnitude must be exercised with extreme caution.”

By all accounts this is the wrong time to pick this fight. First, U.S. opposition was voiced shortly before Chang’s term was to expire, providing little time to find a solution. The dispute mechanism is stretched already and lacking one judge will increase the strain. Second, given the prospect of a fight this year over China’s claim to “market economy status,” which would limit the tools that the U.S. has to fight alleged dumping of Chinese imports, any move that undermines the WTO’s legitimacy is problematic. Finally, the growing hostility to trade deals evident in the U.S. this election season makes complaints about WTO fairness especially dangerous. If the WTO loses the support of one of the most important backers of the international trade system — and its greatest beneficiary — then that system is truly under threat.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.

SUBSCRIBE NOW