Thread by @hhesterm

A quick thread on the WTO Appellate Body - hopefully readable for non trade geeks.
You might have seen it in the news: the WTO is in crisis. What is it all about? (Thread)

The WTO does several things: it serves as a negotiation hub for trade liberalisation, a forum for exchange on trade AND it settles disputes about the WTO agreements between WTO members /2

Now the WTO negotiation function has slowed to a rather gentle pace given the WTO has 164 members that do not always agree. To put it gently. /3 wto.org/english/thewto…

Countries do still successfully discuss trade at the WTO (and resolve a lot of issues without many people noticing), but for a while now the dispute settlement function in the WTO was the most prominent. How does the WTO settle disputes? /4

Roughly speaking: it settles disputes on WTO law between WTO members (i.e. with few exceptions states) - no standing for companies or individuals. States first attempt to settle the dispute through consultations. If that fails, a member can ask for a panel to be set up /5

A panel with three panelists is set up for the dispute. The panel issues a report which needs to pass the Dispute Settlement Body (on which all WTO Members sit) to become the ruling on the case. Passing the DSB is not difficult though: it takes a consensus to reject a report. /6

Now a party to the dispute that’s unhappy with the report can appeal the report to the Appellate Body. That’s a standing body with 7 individuals as members, 3 of which decide on the appeal. Much like a panel the AB will issue a report... /7

Now that report again has to pass the DSB, which is easy, as it takes a consensus of WTO members to block it. Puhhh. So, to simplify: parties cannot settle? Panel of 3 panelists will rule, appeal is possible, goes to appellate body. /8

Have I lost you? No? Still with me? Good. Now it would have been easy to explain this for laymen in the following term: The WTO settles disputes in two instances, panels, set up for each case with ad hoc panelists, and a Court of Appeals. But that’s the problem /9

Besides a long list of complaints the US voiced and that other Members were willing to address one of the main issues is that the US insists that the appellate body is not a court and is acting too much like one. /10

Now to what extent that is true and to what extent you can prevent it is in dispute as much as who is at fault. What is clear is that the US has been blocking all appointments to the Appellate Body. So as terms of members expired, it shrank. There’s 3 left. /11

In December the term of two more runs out. And remember: it takes three to decide a case. So in December, the Appellate Body will stop working. All calls on the US to stop appointing new members failed. /12

A facilitator (David Walker, NZ) was appointed and came up with proposals. But that did not convince the US docs.wto.org/dol2fe/Pages/S…

So what will happen when the Appellate Body disappears? Distinguish two items: appeals that are already pending and those that aren’t. /14

For pending appeals rule 15 of the working procedures of the AB (attached) says that once the case is assigned, a member of the appellate body whose term expires can basically continue with that case

(quick note: ironically my rule 15 tweet was tweet 15 in the thread). But there’s a problem: rule 15 is one of the things the US complains about. Because this is not in the treaty, it is in the working procedures of the AB. And one of the three members left is the US member. /16

The US member has (according to reports) made it clear that he might not rule under rule 15 (I’ll leave out the details here...) which would mean the currently 14 pending appeals are also under risk. Here’s a list /17 wto.org/english/tratop…

Now as to the ones filed in the future: there won’t be an appeal. In practice this means the losing side of a panel report can appeal into nirvana. The panel report does not become effective. /18

So dispute settlement will continue to exist. But it will be without appeal. And the losing side can make a report go away. Curiously, this resembles dispute settlement before the WTO under the GATT. /19

Under the GATT a panel report needed to be adopted by Members by consensus, so the losing side could block it. This was changed under the WTO to a rule of reverse consensus, so that Members could only block the report by consensus /20

Thus, in a strange way, we might be going back to how disputes were settled under GATT. Less legally. More diplomatically. A country that hates a rule can free itself. /21

Some have suspected that that is at least what Trumps point-man for trade Lighthizer wanted all along. But things have now got worse: the US is threatening to not pay into the WTO budget. /22

That threatens the existence of the organisation. The US pays 11.38% of the budget. More than any other country. Even thought it is significantly less than the EU28 combined which pay 33.6% (numbers for 2018) /23 wto.org/english/thewto…

The only thing that’s certain at the moment is this: expect a bumpy ride. /24

I trust @GenevaTradeLaw will note where and if I have gone of the rails and been to partial. I didn’t mean to so I’m happy to be called to...