EU looks to strengthen trade laws following WTO impasse
The European Commission presented a legislative proposal last week to allow the EU to enforce international trade rules where the WTO is no longer able to deliver binding dispute settlement decisions.
The main proposal is to amend an enforcement regulation that currently permits the Commission to act on the Union's behalf on trade matters. This can be used as a basis for the EU to impose countermeasures after it has won a dispute settlement proceeding in the WTO or under a bilateral EU trade agreement.
Under current rules related to disputes under multilateral trade law, the EU is able to adopt countermeasures only at the end of a dispute settlement procedure, having received an authorisation from the WTO.
However, the binding WTO Dispute Settlement system, consisting of a panel phase and an appeal phase, ceased to function from 11 December, with WTO members failing to agree to appoint new members to the WTO Appellate Body.
This means that a WTO member could, in the future, escape from a binding ruling, and hence the authorisation to adopt countermeasures against it, by simply appealing a panel report.
The proposed amendment will permit the Commission to trigger countermeasures in situations where a partner prevents the dispute from reaching the point where such authorisation could be granted.
With the world's largest trade network, the EU executive says it must also ensure effectiveness in the enforcement of its rights under bilateral and regional trade agreements.
With the increased focus on enforcement, the number of bilateral disputes brought by the EU may rise and the EU must be able to respond resolutely in cases where trade partners hinder dispute settlement resolution, for instance by blocking the composition of panels. In a dispute related to rules agreed under a bilateral agreement, the proposed amendments will allow the EU to take countermeasures also in a situation if a partner blocs the appointment of the members of a panel.
Countermeasures are seen as a recognised instrument under international law and have the objective to induce compliance with international obligations. They can take the form of increased customs duties, quantitative restrictions or public procurement restrictions. International law foresees that where adjudicative dispute settlement procedures exist, these must be followed, but also recognises that where one party blocks effective dispute settlement, countermeasures are permitted. Accordingly, the Commission says this proposal is “entirely in line with public international law”.
To further increase the focus on compliance and enforcement of the EU's trade agreements, a “chief Trade Enforcement officer” will be appointed in early 2020.
The EU proposal will now be subject to a normal legislative procedure, involving a decision by the European Parliament and the Council. However, the Commission is looking to conclude the process by mid-2020.