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United States Continues to Block New Appellate Body Members for the World Trade Organization, Risking the Collapse of the Appellate Process

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With only three remaining members of what is supposed to be a seven-member body, the World Trade Organization's (WTO) Appellate Body may soon cease to function. Since 2016, the United States has blocked the reappointment of Appellate Body members and rejected over a dozen proposals to launch selection processes that could fill the remaining vacancies. As a lead reason for these blocks, the United States has cited concerns about the practice whereby members whose terms have expired continue to serve on appeals to which they were previously appointed. On December 10, 2019, the terms of two Appellate Body members will expire, leaving only one member remaining. Because the WTO's dispute settlement process requires three Appellate Body members for each appeal, WTO members will be unable to make any new appeals by this year's end unless a solution emerges to the current impasse.

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1 Lasting from 1986 to 1994, the Uruguay Round of Negotiations established the current dispute resolution system. World Trade Organization, Understanding the WTO: Basics: The Uruguay Round, at https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact5_e.htm. After consultation attempts and a request by the complaining party, the Dispute Settlement Body (DSB) selects a panel to issue a report including factual findings and legal conclusions. Dispute Settlement Rules: Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, Arts. 4, 6, 7, 11, 12, Apr. 15, 1994, 1869 UNTS 401, 33 ILM 1226 [hereinafter DSU]. The panel's final report is circulated to all WTO members and, unless appealed or rejected by consensus, becomes the DSB's final ruling or recommendation. Id. Art. 16.

2 DSU, supra note 1, Art. 17(1)–(2). The DSU provides that the Appellate Body should be comprised of “persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally.” Id. Art. 17(3).

3 WTO Agreement: Marrakesh Agreement Establishing the World Trade Organization, Arts. IV(2)–(3), IX(1), n. 1, Apr. 15, 1994, 1867 UNTS 154, 33 ILM 1144 [hereinafter WTO Agreement]; DSU, supra note 1, Arts. 2(4), 17(2).

4 DSU, supra note 1, Arts. 17(6), 17(13). Specifically, appellate proceedings “shall not exceed 60 days from the date a party to the dispute formally notifies its decision to appeal to the date the Appellate Body circulates its report.” Id. Art. 17(5). If the Appellate Body is unable to circulate a report within sixty days, it must “inform the DSB in writing of the reasons for the delay” and “[i]n no case shall the proceedings exceed 90 days.” Id. Unless the DSB “decides by consensus not to adopt the Appellate Body report within 30 days following its circulation to the Members,” it adopts the report, and the parties to the dispute must accept the Appellate Body's holdings. Id. Art. 17(14).

5 See DSU, supra note 1, Art. 16. In a drafted reform proposal, the European Union expressed concern that without a functioning Appellate Body, “any party to the dispute may attempt to block the adoption of panel rulings (by appealing it) … .” Council of the European Union, Note for the Attention of the Trade Policy Committee: WTO – EU's Proposals on WTO Modernisation, at 14, WK 8329/2018 INIT (July 5, 2018), available at http://src.bna.com/Aoe [https://perma.cc/CQ4S-3N2N] [hereinafter Drafted EU Proposal].

6 These two members are Ujal Singh Bhatia (India) and Thomas R. Graham (United States). World Trade Organization, Dispute Settlement Members: Appellate Body Members, at https://www.wto.org/english/tratop_e/dispu_e/ab_members_descrp_e.htm [https://perma.cc/5CVE-J2H5]. Their terms will end on December 10, 2019, leaving only Hong Zhao (China) remaining until his first term ends on November 30, 2020. Id. It remains to be seen whether Graham will continue to participate in appeals that were pending prior to the end of his term. Should he not do so, then the Appellate Body would be without a quorum for those appeals as well as for new ones. See Simon Lester, Clarifying Tom Graham's Status on the Appellate Body, Int'l Econ. L. & Pol'y Blog (Sept. 23, 2019), at https://ielp.worldtradelaw.net/2019/09/clarifying-tom-grahams-status-on-the-appellate-body.html (reporting that Graham had made a “neutral statement about being undecided on how to approach cases after the expiration of his term”).

7 The U.S. decision to block reappointments or initial appointments is not unprecedented. For a discussion about two blocks the United States made in 2011 and 2014, see Kristina Daugirdas & Julian Davis Mortenson, Contemporary Practice of the United States, 110 AJIL 573, 576 (2016).

8 Statement by the United States at the Meeting of the WTO Dispute Settlement Body, at 1 (May 23, 2016), available at https://www.wto.org/english/news_e/news16_e/us_statment_dsbmay16_e.pdf [https://perma.cc/ML7M-8T9X]. For more detailed information about the United States’ 2016 decision to block Chang's reappointment to the WTO Appellate Body, see generally Daugirdas & Mortenson, supra note 7.

9 Proposal by Argentina, Brazil, Chile, et al., Appellate Body Appointments, WTO Doc. WT/DSB/W/609, at https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=243206,241536,240077&CurrentCatalogueIdIndex=2&FullTextHash=371857150&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True [https://perma.cc/WRK7-CVJM]; World Trade Organization Press Release, WTO Sets Up Panel to Review UAE Measures on Goods, Services, IP Rights (Nov. 22, 2017), at https://www.wto.org/english/news_e/news17_e/dsb_22nov17_e.htm [https://perma.cc/8NLG-P4QZ].

10 Statements by the United States at the Meeting of the WTO Dispute Settlement Body, at 13 (Nov. 22, 2017), available at https://geneva.usmission.gov/wp-content/uploads/sites/290/Nov22.DSB_.pdf [https://perma.cc/E6KB-CH9F] [hereinafter November 2017 U.S. Statement].

11 Appellate Body, Working Procedures for Appellate Review, WTO Doc. WT/AB/WP/6 (Aug. 16, 2010). The rules as they existed at the time of this writing can be found permanently here: https://perma.cc/A7GH-L3EX.

12 The DSU provides that “[w]orking procedures shall be drawn up by the Appellate Body in consultation with the Chairman of the DSB and the Director-General, and communicated to the Members for their information.” DSU, supra note 1, Art. 17(9). For an articulation of the U.S. position on this issue, see Office of the U.S. Trade Representative, 2018 Trade Policy Agenda and 2017 Annual Report of the President of the United States on the Trade Agreements Program, at 25–26 (2018), available at https://ustr.gov/sites/default/files/files/Press/Reports/2018/AR/2018%20Annual%20Report%20FINAL.PDF [https://perma.cc/TZP9-SJFC].

13 DSU, supra note 1, Art. 17(2).

14 November 2017 U.S. Statement, supra note 10, at 13.

15 Proposal by Argentina, Australia, Brazil, et al., Appellate Body Appointments, WTO Doc. WT/DSB/W/609/Rev.1 (Jan. 11, 2018), at https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=243206,241536,240077&CurrentCatalogueIdIndex=1&FullTextHash=371857150&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True [https://perma.cc/DE3G-MNH5]; Proposal by Argentina, Australia, Bolivia, et al., Appellate Body Appointments, WTO Doc. WT/DSB/W/609/Rev.2 (Feb. 15, 2018), at https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=243206,241536,240077&CurrentCatalogueIdIndex=0&FullTextHash=371857150&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True [https://perma.cc/G2GP-Q2AG]; Proposal by Argentina, Australia, Bolivia, et al., Appellate Body Appointments, WTO Doc. WT/DSB/W/609/Rev.3 (Apr. 16, 2018), at https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=255590,254971,253363,252364,251578,250293,249527,248090,245255,244608&CurrentCatalogueIdIndex=9&FullTextHash=371857150&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True [https://perma.cc/G72H-RUV8]; Proposal by Argentina, Australia, Bolivia, et al., Appellate Body Appointments, WTO Doc. WT/DSB/W/609/Rev.4 (May 17, 2018), at https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=255590,254971,253363,252364,251578,250293,249527,248090,245255,244608&CurrentCatalogueIdIndex=8&FullTextHash=371857150&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True [https://perma.cc/QEC7-XN3Z].

16 Statements by the United States at the Meeting of the WTO Dispute Settlement Body, at 23 (May 28, 2018), available at https://geneva.usmission.gov/wp-content/uploads/sites/290/May28.DSB_.Stmt_.as-deliv.fin_.public.Rev_.pdf [https://perma.cc/7Z2P-PUSY].

17 Statements by the United States at the Meeting of the WTO Dispute Settlement Body, at 38 (Aug. 27, 2018), available at https://geneva.usmission.gov/wp-content/uploads/sites/290/Aug27.DSB_.Stmt_.as-delivered.fin_.public.pdf [https://perma.cc/C6MC-PYBX] [hereinafter August 2018 U.S. Statement]; Proposal by Argentina, Australia, Bolivia, et al., Appellate Body Appointments, WTO Doc. WT/DSB/W/609/Rev.5 (Sept. 13, 2018), at https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=255590,254971,253363,252364,251578,250293,249527,248090,245255,244608&CurrentCatalogueIdIndex=7&FullTextHash=371857150&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True [https://perma.cc/RGX7-NVQ8].

18 August 2018 U.S. Statement, supra note 17, at 38.

19 Id.

20 Id. at 37. Following the U.S. announcement, Trump told news reporters that if the WTO did not “shape up,” he would withdraw the United States from the WTO. John Micklethwait, Margaret Talev & Jennifer Jacobs, Trump Threatens to Pull U.S. Out of WTO if It Doesn't “Shape Up, Bloomberg (Aug. 31, 2018), at https://www.bloomberg.com/news/articles/2018-08-30/trump-says-he-will-pull-u-s-out-of-wto-if-they-don-t-shape-up. Trump recently threatened to leave the WTO again during a visit to Pennsylvania. White House Press Release, Remarks by President Trump on American Energy and Manufacturing | Monaca, PA (Aug. 13, 2019), at https://www.whitehouse.gov/briefings-statements/remarks-president-trump-american-energy-manufacturing-monaco-pa/ [https://perma.cc/7H5R-DUHU] (“We were losing all our cases in the World Trade Organization. Almost every case, we were — lost, lost, lost. They thought we were stupid… . We will leave, if we have to. And all of the sudden, we're winning a lot of cases.”). The U.S. congressional act implementing the WTO's Uruguay Round of Agreements provides that “[t]he approval of the Congress … of the WTO Agreement shall cease to be effective if, and only if, a joint resolution … is enacted into law … .” 19 U.S.C.A. § 3535(b)(1). The implementing legislation further specifies that such a joint resolution will employ the following text: “That the Congress withdraws its approval, provided under section 101(a) of the Uruguay Round Agreements Act, of the WTO Agreement as defined in section 2(9) of that Act.” Id. § 3535(c)(1).

21 Communication from the European Union, China, Canada, India, Norway, New Zealand, Switzerland, Australia, Republic of Korea, Iceland, Singapore and Mexico to the General Council, WTO Doc. WT/GC/W/752 (Nov. 26, 2018), available at https://trade.ec.europa.eu/doclib/docs/2018/november/tradoc_157514.pdf [https://perma.cc/VP6L-GDAZ] [hereinafter December 2018 Reform Proposal]. This proposal was an adaptation of one originally drafted in mid-2018. Drafted EU Proposal, supra note 5.

22 December 2018 Reform Proposal, supra note 21, at 1.

23 Id. at 1–3.

24 European Comm'n Press Release, WTO Reform: EU Proposes Way Forward on the Functioning of the Appellate Body (Nov. 26, 2018), at https://europa.eu/rapid/press-release_IP-18-6529_en.htm [https://perma.cc/F65E-PEB9].

25 Statements by the United States at the Meeting of the WTO Dispute Settlement Body, at 44 (Dec. 18, 2018), available at https://geneva.usmission.gov/wp-content/uploads/sites/290/Dec18.DSB_.Stmt_.as-deliv.fin_.public.pdf [https://perma.cc/Q4HS-RWF6]. In this statement, the United States also provided an extensive legal analysis for why it believes the Appellate Body engages in a “misguided” practice when it uses reports as precedents “absent cogent reasons.” Id. at 10–35.

28 Statements by the United States at the Meeting of the WTO Dispute Settlement Body, at 30 (Aug. 15, 2019), available at https://geneva.usmission.gov/wp-content/uploads/sites/290/Aug15.DSB_.Stmt_.as-deliv.fin_.public.pdf [https://perma.cc/2KGG-J7YL].

29 DSU, supra note 1, Art. 17(2) (emphasis added).

30 World Trade Organization Press Release, Members Consider Thai Request for Panel to Rule on Turkish Air Conditioner Duties (Feb. 25, 2019), at https://www.wto.org/english/news_e/news19_e/dsb_25feb19_e.htm [https://perma.cc/AQW5-HV8V]. Argentina, Brazil, Colombia, Chile, Guatemala, Mexico, and Peru also presented Article 17(2)’s “shall” language regarding the Appellate Body selection process in late 2017. Communication from Argentina, Brazil, et al., Proposal Regarding the Appellate Body Selection Process, WTO Doc. WT/DSB/W/596/Rev.5 (Oct. 12, 2017), available at https://www.ip-watch.org/weblog/wp-content/uploads/2017/10/Proposal-Appellate-Body-Selection-Process-Ar-Bz-Col-Chil-Guat-Mex-Peru.pdf [https://perma.cc/4F5A-8GVY].

31 Statements by the United States at the Meeting of the WTO Dispute Settlement Body, at 13–14 (Feb. 25, 2019), available at https://geneva.usmission.gov/wp-content/uploads/sites/290/Feb25.DSB_.Stmt_.as-deliv.fin_.public.pdf [https://perma.cc/W4JF-Z4TN] (formatting omitted).

32 U.S. Mission to International Organizations in Geneva, Statements Delivered by Ambassador Dennis Shea – WTO General Council Meeting (July 23, 2019), at https://geneva.usmission.gov/2019/07/23/statements-delivered-by-ambassador-dennis-shea-wto-general-council-meeting-july-23-2019 [https://perma.cc/YZ5F-XR8Y].

33 World Trade Organization Press Release, Farewell Speech of Appellate Body Member Peter Van den Bossche (May 28, 2019), at https://www.wto.org/english/tratop_e/dispu_e/farwellspeech_peter_van_den_bossche_e.htm [https://perma.cc/3RA7-TT7K].

34 Jennifer Hillman, Three Approaches to Fixing the World Trade Organization's Appellate Body: The Good, the Bad and the Ugly?, Inst. Int'l Econ. L., at 8–9 (2018), available at https://www.law.georgetown.edu/wp-content/uploads/2018/12/Hillman-Good-Bad-Ugly-Fix-to-WTO-AB.pdf. Article 25 states that “[e]xpeditious 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.” DSU, supra note 1, Art. 25(1). But “resort to arbitration shall be subject to mutual agreement of the parties” making it an unequal replacement to the WTO's current dispute settlement mechanism. Id. Art. 25(2); Hillman, supra note 34, at 9.

35 Ernst-Ulrich Petersmann, Petersmann on “How Should WTO Members Respond to the WTO Appellate Body Crisis?, Int'l Econ. L. & Pol'y Blog (Dec. 13, 2018), at https://worldtradelaw.typepad.com/ielpblog/2018/12/ulli-petersmann-on-how-should-wto-members-respond-to-the-wto-appellate-body-crisis.html.

36 See Simon Lester, What Does the U.S. Want to See Happen with Appellate Body Reform?, Int'l Econ. L. & Pol'y Blog (July 23, 2019), at https://ielp.worldtradelaw.net/2019/07/what-does-the-us-want-to-happen-with-appellate-body-reform.html (questioning whether the United States is hoping for the Appellate Body to change its behavior on its own or for the DSB to pass amendments to the Dispute Settlement Understanding which would force the Appellate Body to change).

37 Trump's 2019 Trade Agenda was unenlightening. Office of the U.S. Trade Representative, 2019 Trade Policy Agenda and 2018 Annual Report of the President of the United States on the Trade Agreements Program, at 149 (2019), available at https://ustr.gov/sites/default/files/2019_Trade_Policy_Agenda_and_2018_Annual_Report.pdf [https://perma.cc/TT4N-BS4Y] (“The United States will continue to raise its systemic concerns with Appellate Body overreaching and press for WTO Members to take responsibility to ensure the WTO dispute settlement system operates as intended and agreed in the DSU… . Participants will continue to consider reform proposals in 2019.”).

38 Statements by the United States at the Meeting of the WTO Dispute Settlement Body, at 30–31 (July 22, 2019), available at https://geneva.usmission.gov/wp-content/uploads/sites/290/Jul22.DSB_.Stmt_.as-deliv.fin_.public.pdf [https://perma.cc/28GE-PJSC] (formatting omitted). Some member states have agreed with certain U.S. positions regarding the Appellate Body. For example, China agreed with the United States that “the Appellate Body should only address the issues appealed by the parties to the dispute and refrain from making findings on the issues that neither party appealed but said concerns about this should not be used to block the launch of the Appellate Body selection process.” World Trade Organization Press Release, Panels Established to Examine Pakistani Duties on Film, Korean Duties on Steel (Oct. 29, 2018), at https://www.wto.org/english/news_e/news18_e/dsb_29oct18_e.htm. More broadly, member states have expressed “their willingness to discuss the US concerns” with the condition that “the resolution of those concerns [] not be linked to the launching of the selection process.” World Trade Organization Press Release, Qatar Seeks WTO Panel Review of UAE Measures on Goods, Services, IP Rights (Oct. 23, 2017), at https://www.wto.org/english/news_e/news17_e/dsb_23oct17_e.htm.

39 White House Press Release, Statement from the Press Secretary (July 31, 2019), at https://www.whitehouse.gov/briefings-statements/statement-press-secretary-71 [https://perma.cc/5CFC-SMFE].

40 Donald J. Trump (@realDonaldTrump), Twitter (Aug. 1, 2019, 10:26 AM), at https://twitter.com/realDonaldTrump/status/1156979446877962243 [https://perma.cc/3CS4-M6EY]. Trump's tweet had announced that all goods would have an additional 10% tariff starting on September 1, 2019, id.; however, the U.S. Trade Representative recently announced that the additional tariff would be delayed for certain articles such as “cell phones, laptop computers, video game consoles … .” U.S. Trade Representative Press Release, USTR Announces Next Steps on Proposed 10 Percent Tariff on Imports from China (Aug. 13, 2019), at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/august/ustr-announces-next-steps-proposed# [https://perma.cc/KC82-4Y5M]. For a longer discussion about the tariffs already imposed on China, see Galbraith, Jean, Contemporary Practice of the United States, 112 AJIL 751, 751–53 (2018).

41 Donald J. Trump, (@realDonaldTrump), Twitter (Aug. 23, 2019, 2:00 PM), at https://twitter.com/realDonaldTrump/status/1165005929831702529 [https://perma.cc/R9BF-ZYAU]; Alan Rappeport & Keith Bradsher, Trump Says He Will Raise Existing Tariffs on Chinese Goods to 30%, N.Y. Times (Aug. 23, 2019), at https://nyti.ms/30oNQEV. Trump later announced that these tariffs would be delayed by several weeks, amid the continuation of trade negotiations between the United States and China. Ana Swanson, Trump Delays Planned Tariff Increase in “Gesture of Good Will” to China, N.Y. Times (Sept. 11, 2019), at https://www.nytimes.com/2019/09/11/us/politics/trump-counterfeit-drugs-china.html.

42 Donald J. Trump, Remarks on the Signing of a European Union-United States Trade Agreement, 2019 Daily Comp. Pres. Doc. No. 532, at 1 (Aug. 2).

43 Donald J. Trump, Remarks in an Exchange with Reporters Prior to Departure for Bedminster, New Jersey, 2019 Daily Comp. Pres. Doc. No. 533, at 7 (Aug. 2).

44 Am. Inst. for Int'l Steel, Inc. v. United States, 376 F. Supp. 3d 1335 (Ct. Int'l Trade 2019). For legal analysis of this issue, see Scott R. Anderson & Kathleen Claussen, The Legal Authority Behind Trump's New Tariffs on Mexico, Lawfare (June 3, 2019), at https://www.lawfareblog.com/legal-authority-behind-trumps-new-tariffs-mexico.

United States Continues to Block New Appellate Body Members for the World Trade Organization, Risking the Collapse of the Appellate Process

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