Eight months into Donald Trump’s presidency, the rules-based system of global trade remains intact. Threats to impose broad tariffs have come to nothing. Some ominous investigations into whether imports into America are a national-security threat are on hold. Trump looks less like a hard man than like a boy crying wolf.
All the same, supporters of the World Trade Organization, the guardian of that rules-based system, are worried. Other dangers are lurking. There is more than one way to undermine an institution.
The WTO is meant to be a forum for reaching deals and resolving disputes. All 164 members must agree to new rules, however, and agreement largely has been elusive. If members do not like today’s rules, as interpreted by judges, they have little prospect of negotiating better ones. That puts pressure on the WTO’s judicial function, the part that has been working fairly well.
Trouble is brewing at the WTO’s court of appeals. It is meant to have seven serving judges, but has only five now and by the end of the year will have only four. The Americans refuse to start the process of filling the spots, citing systemic concerns. What seemed an arcane procedural quarrel has become what some call a crisis.
This tension comes at a bad time. In recent years the number of disputes has risen both in number and in complexity. The court already is dealing with a backlog of cases, which are supposed to take two months. One appeal from the European Union, relating to Airbus, an aircraft manufacturer, is almost a year old.
By the end of 2019, the terms of two more judges will expire, leaving only two. Three are needed to rule on any individual case. If the gaps are not filled, the system risks collapse.
In theory the Americans object to two procedural irregularities, including the way the most-recently-departed judges left. However, according to Brendan McGivern, a lawyer in Geneva, neither is a “show-stopping” problem.
Indeed, on September 18 Robert Lighthizer, America’s usually tight-lipped trade representative, outlined a bigger agenda. To a Washington room packed with foreign-policy wonks, he complained that decisions from WTO judges had “diminished” what America had bargained for and imposed obligations it had not agreed to when it joined the WTO.
These are long-standing and uniquely American concerns. Panels at the WTO repeatedly have ruled that the way the United States calculates defensive duties on imports breaks the rules. Lighthizer sees this as undermining America’s ability to protect itself from unfair trade. Many in Washington accuse the WTO’s lawyers of overstepping their mandate, filling in any gaps where the original rules are silent.
In effect, then, the American administration seems to be using the judicial appointments to hold the WTO hostage. Oddly, though, it has been vague about what it wants.
Lighthizer’s past offers clues. According to The Wall Street Journal, when he advised presidential candidate Bob Dole in 1996, he recommended that a panel of American judges should review any findings against America, which would threaten to quit the WTO after three duds. This week Lighthizer spoke fondly of the system that preceded the WTO, under which members could block panel rulings.
Bullying the appellate body into ruling in favor of America would undermine its usefulness. If members no longer think that they will get a fair hearing, they are more likely to take matters into their own hands. McGivern worries that an American fix to the perceived problem of judicial overreach could undermine the rules-based system by tampering with the independence of the appellate body.
© 2017 Economist Newspaper Ltd., London (September 23). All rights reserved. Reprinted with permission.
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