Giorgio Sacerdoti sent along the following letter he wrote in response to the Lighthizer WSJ op-ed from last month:
Letter to the Editor, Wall Street Journal
Milan, 29 August 2020
Dear Mr Lemmer,
It was refreshing for all those who believe in the advantages of a multilateral rule-based trading system to read in USTR Robert Lighthizer’s Op-Ed published by the WSJ on 20 August a defense of multilateralism and equal treatment for all trading nations in accordance with the most-favored-nation standard enshrined in the WTO. Especially since in recent years the US has preferred to resort to bilateral deals, at times obtained under the threat by the US to resort to unilateral restrictive measures against imports of dubious WTO-consistency.
The lack of any meaningful new multilateral agreements at the WTO in the last 20 years cannot however be attributed to the case law of the Appellate Body that, according to Mr. Lighthizer, would incentivize countries to resort to litigation rather than negotiate. Adjudication of cases involving contentious rules cannot be a substitute to negotiating new provisions or amendments to existing rules, including when a country considers that the Appellate Body’s interpretation does not correspond to what it believes had been agreed in original negotiations (such as the US in respect of its unique “zeroing” practice in anti-dumping investigations).
Contrary to Mr. Lighthizer’s opinion, the Appellate Body has more than once revised in favor of the US first-level panels’ decisions, such as in the “Gambling” case, where the panel had found a host of US domestic regulations contrary to the GATS while the Appellate Body, on appeal by the US against Antigua, limited the conflict to a minor instance. Same in the well-known “Shrimps-Turtle” case.
Similarly, Mr.Lighthizer’s proposal to “rethink totally” the WTO’s dispute settlement system, replacing "the current two-tier system with a single stage akin to commercial arbitration”, with recourse to a kind of ad hoc appeal panel ”to allow the WTO membership to set aside erroneous panel opinions in exceptional cases” would leave traders and member countries worst off. The current consistency of interpretation, inherent to a continuous case-law from a professional unanimously selected standing appellate body, would get lost. Differential treatment of the same issue in different cases by different panels (say once between China and the EU and next time by a different panel between the US and India) would become possible. Exactly to avoid these shortcomings, that would belie the equal treatment principle advocated by Mr. Lighthizer, the panel system of the GATT was completed with an appellate review stage as an integral feature of the WTO in the Uruguay Round negotiations finalized in 1994.
Countries are of course free to resort to conciliation and alternative compensation to settle their trade disputes instead of pursuing litigation. This is already provided under the current rules and could be incentivized. The US itself has resorted successfully to these solutions: in the Hormones case to negotiate market openings for its beef export to the EU. Similarly to resolve a dispute with Indonesia, when the US offered additional access for its products into the US market, instead of readmitting clove-flavored cigarettes in the US in compliance with the unfavorable outcome of the dispute.
Sincerely yours
Prof. Giorgio Sacerdoti
Emeritus professor of International Trade Law, Bocconi University, Milan, Italy
Former member of the WTO Appellate Body (2001-2009), chairman (2006-2007)
