Canada, Europe make deal to work around blocked World Trade Organization

OTTAWA — Canada and the European Union have agreed on a plan to set up a substitute appeals body for trade disputes between them, they announced Thursday.

They are working around the United States’ refusal to allow new appointments to a panel that already exists at the World Trade Organization: the WTO’s Appellate Body is down to three members from its normal seven, and two of the remaining members’ terms expire in December.

The U.S. has been blocking new appointments in an effort to force other reforms at the trade organization, which President Donald Trump has said was set up to benefit everybody except the U.S. and which he’s threatened to pull out of altogether.

The trade organization has in recent months enlisted New Zealand’s trade ambassador to broker a solution. At a meeting this week of the WTO’s general council, Ambassador David Walker was asked to continue consulting with WTO delegations on the “format and vehicle for the next stage” of his work, after a summer break.

In the meantime, the clock is ticking toward December.

At a Canada-EU leaders’ summit in Montreal last week, Prime Minister Justin Trudeau and International Trade Minister Jim Carr discussed the contingency plan with European Council President Donald Tusk and Cecilia Malmstrom, the EU trade commissioner. The new “interim arrangement” announced Thursday is the result.

“The EU and Canada share a resolve for rapid and concerted action to address long-standing and unprecedented challenges facing the multilateral trading system, and will continue to work with all WTO members on ideas and potential solutions that seek to modernize and strengthen the WTO,” says a joint statement from Canada and the EU that makes no direct mention of the U.S.

Both say they’d rather get the WTO back in working condition but, if they can’t, this deal will give them an alternative that works more or less the same way. If the WTO’s appeals body can’t handle trade disputes, Canada and European countries have agreed to take their appeals to three-member panels made up of people who used to sit on the Appellate Body.

The WTO and its dispute panels are meant to be an alternative to tit-for-tat trade battles — they can take a dispute to arbitration and agree to live with the results.

Canada has been involved in dozens of disputes arbitrated by the WTO in its 24 years, including filing complaints about bans on products made from seals and defending actions against Canada favouring its domestic wine through their liquor-selling rules.

Canada has been leading an effort involving about a dozen like-minded countries, minus the U.S. and China, to reform WTO, and the fate of the Appellate Body has been its top priority.