US ransoming WTO reform to EU concession shows its true intent

The 13th Ministerial Conference of the World Trade Organization was held in Abu Dhabi, the United Arab Emirates, from Feb 26 to March 2, with ministers from across the world attending to review the functioning of the multilateral trading system and discuss the future of the trade body, which has been put in jeopardy as a result of the United States paralyzing its dispute settlement mechanism.

Washington claims the body was overreaching its authority by effectively making new trade rules through litigation. Specifically, it claims that the Appellate Body has added to US obligations and diminished US rights by “addressing issues it has no authority to address, taking actions it has no authority to take”. In response, the US has aggressively reshaped its trade policy, making expansive use of claims of the “unfair trade practices” of other economies and alleged national security threats to justify its ramping up of tariffs and quotas.

The lack of an Appellate Body has left trade disputes worth billions of dollars unresolved, and restoring its function has become a pressing issue. At present, countries can still file complaints to a lower body, but if they do not accept its findings, the case ends up in limbo, as has been the fate of 30 unresolved appeals.

But even though Maria Pagan, the US’ chief of mission to the WTO, claimed in January 2023 that Washington is “very committed” to WTO reform, with its goal being a fully functioning dispute settlement system by 2024. Its deeds have not matched her words.

In Abu Dhabi on Feb 28, US Trade Representative Katherine Tai ruled out an agreement being reached at the conference on a package of reforms to address the way the WTO adjudicates trade disputes. Despite the convergence among members on improving some aspects of the dispute settlement system “energizing” the membership to “think big” about broader WTO reforms to meet 21st century trade challenges, and the negotiations on the issue showing some progress, Tai said that talks would continue on “much harder issues” after the conference ended.

Her remarks subsequent to the conference make clear that for the US this amounts to holding WTO reform to ransom. Even though “Biden administration officials familiar with the conversation” were reported as saying Tai did not mean it to be a threat, Tai warned her G7 counterparts that if the European Union reopened a WTO case over a Trump-era steel and aluminum dispute, it would risk sinking their efforts of reforming and reviving the WTO’s dispute settlement system.

By saying that the US would calibrate its cooperation with the EU based on the bloc’s position on WTO reform, Tai has made clear that for the US, it is its way or the highway as far as the WTO reform goes. For the US, a trade dispute should only advance beyond the first nonbinding judgment to the legally-binding Appellate Body stage if both the plaintiff and the defendant agree to move ahead — it should be evident why it is proposing that. Likewise, it wants countries to be able to decide for themselves when they can invoke a national security exception. Again, it should be obvious why.

That is the US stance, and it is saying no to any other proposals.

The EU, along with China and other WTO members, stresses that the normal and effective operation of the dispute settlement mechanism is crucial for maintaining the stability, authority and effectiveness of the multilateral trading system, and for upholding the rules-based world trade order. So far, more than 70 reform ideas have been put forward for discussion. China on its part will continue to support efforts to restore the operation of the WTO’s Appellate Body and firmly uphold the rules-based multilateral trading system. No matter how difficult or insurmountable the issues may seem, all WTO members must refrain from putting personal or national trade interests ahead of attempts to come up with a viable solution to get the trade organization fit for purpose.