US presses case to weaken trade referee
WTO under fire from Trump administration
Sixteen years ago, a brash trade lawyer named Robert Lighthizer was nominated to represent the U.S. at the World Trade Organization’s appellate body, which officiates disputes that affect billions of dollars in commerce every year.
WTO members, however, chose a different candidate. And now Lighthizer, as the U.S. Trade Representative, is arguing that the very dispute settlement system he nearly became a part of either needs to be drastically reformed or dismantled.
The arc of Lighthizer’s relationship with the WTO is hurtling toward a potentially dramatic inflection point. The pressure he and the Trump administration are applying on the WTO may, in just a few weeks, render the Geneva-based arbiter of trade inoperative.
The Trump administration, which previously threatened to block the WTO’s 2020 budget, offered members a proposal this week that would allow it to continue operating, but would hamstring the WTO’s appellate body.
The U.S. said it would back the WTO’s $197.6 million budget for 2020 with the condition that no more than $100,300 be paid to appellate body members, an 87% reduction from the full budget allotment, and spending by the body’s operating fund also be limited to $100,300, a 95% reduction.
The Trump administration argues that the organization’s compensation structure creates an incentive for appellate members, who can make more than $300,891 a year, to string out cases to boost pay.
While all WTO decisions are made by consensus, the U.S. has an important say in funding matters because it contributes more money than any other single country to the annual budget — $22.8 million in 2019, according to WTO data.
WTO members plan to consider the U.S. proposal during a Nov. 27 meeting of the
WTO budget, finance and administration committee in Geneva. If approved, the U.S. proposal would avert a possible WTO shutdown on Jan. 1.
Spokesmen from the WTOand the office of the U.S. Trade Representative declined to comment.
The move comes on top of a hold the U.S. has placed on new appointments to the WTO’s appellate body, which won’t be able to rule on new cases next month, in effect suspending its most important function.
Washington said that the appellate body, which is a panel that upholds, modifies, or reverses WTO rulings, has overstepped its mandate and threatens American sovereignty.
The possibility of a WTO shutdown was serious enough that WTO Director-General Roberto Azevedo on Nov. 13 sent a message to the WTO’s 646 employees to tell them not to be concerned about their job security.
“There’s no need to change things at this time,” Azevedo told Bloomberg in an interview. “But we are following it closely.”
Despite Azevedo’s public optimism, WTO officials were said to be considering contingency plans — such as budget cuts to the organization’s nonessential functions for the first half of 2020.
The WTO has a surplus of $48.2 million from its previous budget, which could keep the WTO’s lights on in Geneva until April 2020 if the U.S. budget proposal does not pass this week.
The push to retool the judicial panel is led by Lighthizer, who previously complained that “too often members seem to believe they can gain concessions through lawsuits that they could never get at the negotiating table.” Lighthizer argues that appellate body members have strayed from their original mandate, which justifies the current block on new members.
The seven-person panel, already down to the minimum of three required to sign off on cases, will cease to function after two more members end their terms at midnight on Dec. 10.
While WTO members can still bring disputes to the trade body and receive an initial ruling, any party to the dispute could appeal that ruling into legal limbo.