The World Trade Organization (WTO) is currently experiencing a crisis in its dispute settlement mechanism. The crisis arises from the struggle to fill vacancies within its Appellate Body, which adjudicates on appeals in trade disputes. In light of the situation, over 20 developing nations gathered in New Delhi from May 13th-14th, 2019 to explore solutions aimed at preserving the functionality of the WTO’s dispute resolution system and prevent further deterioration due to the appointment deadlock.
The Structure and Function of WTO’s Appellate Body
Established in 1995, the Appellate Body of the WTO is essentially made up of seven members who oversee the appeals against judgments passed in trade-related disputes submitted by WTO members. Whenever there’s a dispute about measures that seemingly contravene a WTO agreement or obligation, aggrieved countries can approach the Appellate Body for a review of the panel’s report, specifically on points of law. This exercise does not involve re-examining existing evidence, but rather reviewing legal interpretations. The Body has the power to maintain, adjust, or overturn the legal verdicts of the panel that initially heard the dispute. Till date, the Appellate Body has issued 152 reports, all of which, once embraced by the WTO’s dispute settlement body, are binding and final.
Challenges Facing WTO’s Appellate Body
In recent years, the Appellate Body’s membership has vastly reduced, going from seven to just three members. This diminishing numbers can largely be attributed to the United States’ continuously blocking new appointments and reappointments. The US holds a belief that the WTO harbors biases against it. The situation is expected to worsen in December 2019 when two more members complete their tenures, leaving only one person in the Body. The absence of sufficient members will make the Body irrelevant since a minimum of three people are necessary to preside over an appeal. The already understaffed appeals body has had difficulty adhering to its three-month timeframe for appeals in recent years. A backlog of cases has also hindered it from commencing proceedings in appeals filed over the past year.
India’s Engagement in WTO Disputes
India, so far, has directly participated in 54 disputes and had involvement in 158 as a third party. In February 2019, the Body stated its incapacity to staff an appeal in a dispute between Japan and India regarding certain safeguard measures that India implemented on imports of iron and steel products.
Implications for Global Trade
| Dispute | Number of Cases |
|---|---|
| Direct participation | 54 |
| Third-party involvement | 158 |
The Appellate Body’s incapacity to review new applications is already fostering considerable uncertainty around the WTO’s dispute settlement process. Countries might be forced to implement panel rulings even when they suspect grave errors have occurred. This circumstance can lead to countries declining to comply with the panel’s order if they lack an avenue for appeal, potentially initiating arbitration proceedings by the affected party in the dispute. India, particularly impacted by this situation, is facing an increase in dispute cases, predominantly about agricultural products. The weakening of the WTO framework, combined with escalating trade tension between the US and China, could undo over two decades of efforts to fend off protectionism in global trade.
Prospects for Resolution
New appointments to the Appellate Body are typically made via consensus among WTO members. However, there’s also a provision for voting in the absence of consensus. A group of 17 least developed and developing nations, inclusive of India, have pledged collaboration to resolve the deadlock at the Appellate Body. They can suggest or back a proposal and attempt to secure new memberships on the Appellate Body by majority voting. This may serve as a last resort as countries fear retaliatory unilateral measures by the US if they are seen to directly oppose its veto.
