The World Trade Organization’s (WTO’s) dispute settlement mechanism is going through a “crisis”: the body is struggling to appoint new members to its understaffed Appellate Body that hears appeals in trade. Unless the issue is resolved, the body could become defunct, and countries locked in international trade disputes will be left with no forum for recourse.
Over 20 developing countries met in New Delhi last week to discuss ways to prevent the WTO’s dispute resolution system from collapsing due to the logjam in these appointments.
What is the WTO’s Appellate Body, and why is it important?
The Appellate Body, set up in 1995, is a standing committee of seven members that presides over appeals against judgments passed in trade-related disputes brought by WTO members.
With over 500 international disputes brought to the WTO and over 350 rulings issued since 1995, the organisation’s dispute settlement mechanism is one of the most active in the world, and the Appellate Body is the highest authority in these matters.
What is the present state of the body?
Over the last two years, the membership of the body has dwindled to just three persons instead of the required seven. This is because the United States, which believes the WTO is biased against it, has been blocking appointments of new members and reappointments of some members who have completed their four-year tenures. Two members will complete their tenures in December this year, leaving the body with just one member.
At least three people are required to preside over an appeal, and if new members are not appointed to replace the two retiring ones, the body will cease to be relevant. Between 1995 and 2014, around 68% of the 201 panel reports adopted were appealed.
While the US is directly involved in more disputes than other WTO member countries, several countries—including India—enter disputes as third parties.
India has so far been a direct participant in 54 disputes, and has been involved in 158 as a third party.
And what is the way forward from here on?
While new appointments to the Appellate Body are usually made by a consensus of WTO members, there is a provision for voting where a consensus is not possible.
The group of 17 least developed and developing countries, including India, that have committed to working together to end the impasse at the Appellate Body can submit or support a proposal to this effect, and try to get new members on the Appellate Body by a majority vote.