World Trade Organisation

13 November 2019

OK, so the World Trade Organisation may not seem very relevant to our everyday lives, but stay with me.

We are told that a no-deal Brexit would be on WTO terms.  Indeed, should Boris win an actual majority in this election, it will include many Conservative MPs who would actually favour a no-deal Brexit, and so on WTO terms, rather than even contemplate extending the one-year transition period his agreement allows for negotiation of a bi-lateral agreement with the EU.

But unless something seismic happens, then the WTO will cease to be a functioning organisation on 10th December - in just one month's time.

How can this be?  Well, it's long been the stance of the USA that the WTO Appellate Body overreaches itself and introduces new provisions into the international agreements over which it adjudicates.  It would say it does this to make sense of often ambiguous provisions in those agreements, just as the American Supreme Court does in connection with the US constitution.  Preventing this from happening, even if the members of the WTO all agreed with the American position, is actually extremely difficult.

But leaving aside the rights and wrongs of this argument, the US has for some time now had a policy of blocking the appointment of Judges to the WTO's Appellate Body. On 10th December, two of the last three judges standing will come to the end of their terms of appointment; the Appellate Body will cease to be quorate and so will be unable to rule on appeals.  The standard WTO process calls for ad hoc panels to issue rulings on disputes over member country compliance with their WTO rights and obligations. These are though subject to review by the Appellate Body.  Decisions by the Appellate Body are final and binding, and generally respected by disputing parties. 

Post December 10th this year, even though there will be no Appellate Body competent to hear them, appeals will still be able to be made against panel rulings.  And while the appeal remains 'undecided' the dispute between the countries involved will remain on ice, with no enforcement action being permitted under WTO rules in connection with the panel's decision.  So then the WTO will become a zombie organisation, requiring reference of disputes between its members to its disputes resolution procedure, but in fact unable to resolve them.

That sounds like a recipe for the resumption of trade wars, with, yes you've guessed it, the biggest countries winning!  A good time to be leaving one of the largest trade blocs, the EU.  I don't think I've heard Boris or the ERG mention this.  I wonder why?

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Paul Buckingham

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