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Conference examines World Trade Organization dilemma


WASHINGTON, D.C. — The World Trade Organization (WTO) may face some changes in the near future as a result of the Trump administration’s refusal to nominate anyone new to the appellate board.

The dispute settlement mechanism of the WTO has been used to make decisions on global issues for more than 25 years. The process put in place was meant to be a guide as the organization became better organized and issues might arise, but those changes weren’t made, said Evan Rogerson, adjunct senior fellow with the S. Rajaratnam School of International Studies at Nanyang Technological University in Singapore.

The system setup is good architecture. It improved market access, set up a system for dispute settlement, and determined trade-distorting guidelines. Some of the framework was radical at the time.

“It was meant as a first step, but we haven’t really moved beyond that,” he said.

The discussion about the WTO was part of a recent Farm Foundation conference “Agricultural Trade in a Time of Uncertainty.” Speakers included representatives of the WTO, USDA Under Secretary of Trade Ted McKinney and Ambassador Gregg Doud, economic and trade experts from around the world, and farmers.

In addition to an in-depth discussion about the WTO, sanitary and phytosanitary measures were discussed, as were the importance of science-based decision making and trade tensions with a number of U.S. trading partners.

One of the areas of WTO contention is determining what is a “developed” versus “developing” country in WTO parlance. Countries that are developing have more exemptions and less strict quotas than developed countries. Countries are deciding for themselves if they're developing or developed, Rogerson said.

“The emerging countries are using (the guidelines) in a manner it was not foreseen 30 years ago,” he said. In some areas of the economy, it is giving self-defined developing countries an edge over developed markets.

The way the system is set up, there are no compromises defining a developing country. A country either is developing or it is not, he said, and it is difficult to change the rules in the WTO.

If a country challenges another country, a panel of three experts from neither country reviews the information and makes a ruling, said Chad Bown, Reginald Jones Senior Fellow with the Peterson Institute for International Economics in Washington, D.C.

The decision the panel reaches can be appealed by any involved country. The case would then be reviewed by the appellate board members. The board is supposed to have seven members from various countries, but when President Donald Trump took office two years ago, nominees to fill those positions were rejected, so now the board has three members.

Bown said each case needs to have three members to make any rulings. Representatives from countries involved in dispute settlements are suppose to recuse themselves. Right now, one member on the WTO board is from China and one is from the U.S. Since neither can recuse themselves without leaving the board below the quorum needed to vote, all three members are voting on all issues, which slows the process.

Bown said in December, the board will officially be down to one member. As a result, any new appeals would sit in limbo.

But, since the policy in place allows members to remain active on any case they start working on before the end of their term, the work of the board will not end in December, he explained. There is a backlog of cases, as lawyers try to use paperwork to slow the process and delay any final rulings.

As a result, countries do have time to come up with other possible solutions. Some countries have already announced they would accept the judgment of the three-person panel as final; other countries have made no comment, including China and the United States.

Any potential WTO case between the two countries could end up in limbo. The decision last month made in favor of the U.S. against China’s tariff rate quotas would be an example of a dispute that might enter the appeals limbo. The decision was that China was not importing agreed-upon amounts of wheat and while the U.S. started the complaint, other countries joined in.

In a statement released by U.S. Trade Representative Robert Lighthizer and USDA Secretary Sonny Perdue about the decision, if China had been purchasing the amount of corn, wheat, and rice they were required to buy, the country would have imported $3.5 billion more of those three commodities in 2015.

Bown said the Trump administration is delaying the appellate body. The issues that have been brought forward as “needing to be addressed” are not new. “We might question the Trump administration for creating the crisis, but these are longstanding issues,” he said.

He said one of the issues is determining the role of the appellate body. Is the purpose to negotiate contract terms, as the U.S. historically sees it? The board members look at the contract between countries, decides if a dispute breaks the contract, and makes a ruling. The European Union, however, historically views the board as a court, interpreting the text when a case is presented and deciding how the language should be applied in the future.

While the U.S. historically wins WTO cases, the difference in views has caused conflict. Bown said many of the cases brought against the U.S. that it has lost are regarding anti-dumping language. The U.S. loses a case, makes no changes, and another country brings the issue forward again.