In what may be the last official statement by the Trump administration on the Appellate Body, Ambassador Shea offered these comments at the December 18 DSB meeting. I have some responses to his comments. I will do this in three parts, quoting him and then responding.
First up, he said this:
Over the past three years, we have engaged in many discussions with Members – on a bilateral basis, in small groups, and in large settings. After three years of effort, what have we learned?
• First, we have learned that the Appellate Body thinks it did no wrong. We know this because, despite U.S. action on appointments under both the Obama Administration and the Trump Administration, the Appellate Body did not change its approach. In fact, it expanded and deepened its WTO-inconsistent practices and interpretations. This reflects an institution that came to view itself as more important than the rules – and the Members – that created it.
• We have learned that the Appellate Body turned out to be less expert than panelists in adjudicating disputes under the DSU. We know this because the United States catalogued numerous substantive interpretive errors by the Appellate Body. In most cases, a panel reached a correct interpretation, and the Appellate Body got it wrong. And so, while some Members may think the Appellate Body did a better job than panels – we think the record shows the opposite: panels generally respected WTO rules, and the Appellate Body far too often did not.
• We have learned that some Members think the Appellate Body did no wrong. This is regrettable because we have not heard any convincing defense of the Appellate Body’s errors in interpreting the DSU or substantive WTO rules. The ongoing denial by some of any AB errors reflects, in part, a fundamental divide among Members on the proper role of the Appellate Body in the WTO and the global trading system more generally.
• We have learned that some other Members may think the Appellate Body did wrong, but are content to maintain the status quo. We do not understand how a Membership that proclaims its support for a rules-based trading system can nonetheless accept persistent rule-breaking by its dispute settlement system. This unwillingness on the part of some Members may unfortunately reflect a Membership incapable of holding WTO institutions, including the Appellate Body, accountable. Experience shows, however, that without accountability, there can be no reform.
• And we have learned that some reform-minded Members think the Appellate Body did commit serious errors, and bravely see a need for real, fundamental reform – reform so that the WTO dispute settlement system supports the WTO as a venue for discussion and negotiation between Members, rather than undermining the WTO and converting it into a mere litigation forum.
Let's take these one by one.
With regard to the idea that "the Appellate Body thinks it did no wrong" because it did not change in reaction to U.S. actions, the U.S. reference to "the Appellate Body" here could mean all of the Appellate Body Members, or some of them, or the Secretariat staff. I'm not sure exactly what they have in mind. Regardless, I can imagine that the Appellate Body, whichever part of it Shea is thinking of, was wary of appearing to cave in to the very public U.S. pressure on appointments. Doing so would not have been appreciated by many other WTO Members and could have undermined the credibility of the Appellate Body and of the dispute settlement system more broadly (and it could have led to other governments trying to take a similar approach when they had concerns about the Appellate Body).
In addition, it seems to me that a big problem with the U.S. approach has been the lack of clarity and lack of focus. Which specific issues were of most importance to the U.S., and what exactly did the U.S. want changed? I can imagine that some people who worked on these issues will say that they explained it all very clearly. For whatever it's worth, though, I'll just note that I had trouble following it for many of the issues the U.S. raised. In my view, what USTR should do now is decide what issues they are most concerned about and make the case to everyone else -- other governments, business groups, civil society, etc. -- as to why their view should prevail. To take some examples, what specific standard would USTR like to see for DSU Article 11 appeals? How should the special standard of review under AD Agreement Article 17.6(ii) operate in practice? What should the scope of GATT Article III:4 be? I think these debates are all winnable for the U.S., but there has to be a clear position, and then a concerted effort to convince everyone. In some cases, the wins can come quickly, but for others it may take more time (e.g. engaging in scholarship, attending conferences, etc.).
As to the suggestion that "the Appellate Body turned out to be less expert than panelists," I think that is often the case on trade remedy disputes. Panelists who have worked at national trade remedy agencies probably know more than most Appellate Body Members about these issues; and the Rules Division staff are real experts on these issues as well. The problem with panels, though, is that they just have too many issues to deal with (both factual and legal) in each case. The Appellate Body can do a deeper dive on the small number of points that get appealed, and sometimes that allows it to do a better job on those particular issues. That's not to say they always will do a better job, but when reading the reports in these cases, the different nature of the panel and appellate processes becomes apparent. Because of time constraints, the panel simply has to breeze through certain issues, whereas the Appellate Body can take the time to go in depth. Of course, if the issue is just how to get trade remedy experts to work on appeals in those cases, there are ways to do that, and the U.S. could propose something along these lines.
Beyond trade remedies, when the Trump administration says, "In most cases, a panel reached a correct interpretation, and the Appellate Body got it wrong," I can't see how they reach that conclusion. There are plenty of disputes out there where the U.S. preferred the Appellate Body report to the panel report (e.g. Shrimp/Turtle). I know they have a bunch of Appellate Body reports they don't like, but this assertion seems like a stretch.
Finally, did some WTO Members "think the Appellate Body did no wrong"? That's kind of hard to believe. I can imagine that other Members disagreed with specific U.S. criticisms, but I would guess that everyone thinks the Appellate Body got something wrong at some point. On the other hand, did some Members "think the Appellate Body did wrong, but are content to maintain the status quo"? That is very believable. When you evaluate the Appellate Body's contributions as a whole, most people within the system probably think we are better off with the Appellate Body than without, even if there were mistakes here and there. The question is the degree of wrong. I see plenty of wrong with the Appellate Body, but likely not more than a system without the Appellate Body.
Next up, the "why" question:
There is the question that everyone here knows well – the “why” question. Some Members may be tired of hearing it, and we could similarly tire of having to ask it – but the question is too important to the future of the WTO to ignore it.
• Despite best efforts by the United States to push the conversation forward, we have heard very little from other Members on their views of how we arrived to this situation – where the Appellate Body had ignored the clear limits placed on it under the DSU and rewrote the substantive rules set out in the WTO agreements.
• In meeting after meeting, we posed this question to the Members. We explained why the “why question” was so important. But most Members did not want to undertake this critical, reflective exercise.
• In the absence of engagement from Members, we offered several potential explanations based on conversations and on our own reflections. For example, we noted:
o One cause could be the ongoing challenges facing the WTO negotiating function and its oversight function, leading to unchecked “institutional creep” by the Appellate Body.
o Another cause could be that some WTO Members believe that the Appellate Body is an independent “international court” and its members are like “judges” who have more authority to make rules than the focused review provided in the DSU.
o Relatedly, some Appellate Body members viewed themselves as “appellate judges” serving on a “World Trade Court” that is the “centerpiece” of the WTO dispute settlement system. Of course, such an expansive vision of the Appellate Body is not reflected in the DSU.
o Finally, we also noted that the compensation arrangements for AB members rewarded their delays and staying on beyond the end of their terms, and we learned that there was very little transparency and accountability for the compensation claimed.
With regard to the relationship between the WTO negotiating function and the dispute settlement function (which came up in the first quoted part from Shea in this post as well), I am deeply skeptical of the Trump administration's arguments here. As I understand it, their view seems to be that governments have been unwilling to negotiate because they could more easily litigate and get what they wanted that way, without having to offer concessions. That shifted the WTO from a negotiating forum to a litigation forum, with the U.S. paying the price as it lost cases brought against it.
I think this view completely mischaracterizes the reasons for the failure of WTO negotiations in recent years. As I see it, the main reason for this failure is the unwillingness of certain governments to make concessions. People often point to countries such as India and Brazil, and that's fair. But I would also point at the U.S., the EU, and Japan. The developed countries may look at the current set of rules and say, we have made the biggest commitments (e.g. on bound tariff levels), and now it's time for the developing countries to do more. It's up to them to make concessions. But the developing countries look at issues like IP protection (e.g. long copyright and patent terms) and think, we gave way too much already, and now it's time to rebalance things towards us. And I think the developing countries have a point here. As I see it, the result of all this is, until all major trading countries are willing to give something, the negotiations are going to mostly remain stalled. Negotiators can always find something to talk about, and maybe they can sign some small deals here and there, but any big new liberalizing deals are going to require everyone to do something that makes them a bit uncomfortable, and I don't see that happening.
Importantly, the negotiations being stuck has nothing to do with the ability to litigate. Yes, at the margins, governments can bring cases against the U.S. and win some minor victories. And the U.S. can do the same against other governments (although the Trump administration didn't make much use of this ability). But issues related to litigation are not the cause of any negotiating failures.
As for words like "court" and "judges," I generally try to avoid those, and on this blog there is no need to use them. But when you try to talk to the public about these issues -- like writing op-eds or giving presentations to non-law students -- it becomes clear pretty quickly that if you say "Appellate Body" or "Appellate Body Members," no one knows what you are talking about. So, yes, language like "court" and "judges" is used from time to time, but for the most part I think it is pretty innocuous. My view of the Appellate Body's role is that its mandate should be more limited than it has been (e.g., a reduced scope for the issues that can be appealed), but I don't see any way around the fact that it is acting like a "court," regardless of all the various nuances of its role. Sometimes I say "quasi-judicial" to be as precise as possible, but in some settings that just confuses people.
In terms of how particular Appellate Body Members see this issue, I guess it would be interesting to ask them. Some have written about their role. But with regard to the ones I have worked with and talked to, in terms of the substance, it didn't seem to me that they saw their role as particularly expansive. They had to come up with reasoning and conclusions in cases brought before them, but they weren't looking for ways to expand the role of the Appellate Body. (And for what it's worth on a topic that is perhaps related, my own concerns about an overly expansive role for the WTO and for the dispute settlement system arise from the broad scope of rules pushed by some governments and the broad interpretations these governments have put forward in cases where they invoked those rules. Any "sovereignty" and "policy space" issues are mainly the result of what governments have put into trade agreements, although there are some problematic interpretations as well.)
Finally, Shea pointed to some views put forward by former Appellate Body Member Tom Graham:
Besides these, we also heard from a former member of the Appellate Body, Mr. Graham, who was willing to speak out candidly on these issues. He put forward a number of reasons “why” the Appellate Body erred and was unwilling to correct those errors – and these remarks deserve attention from all WTO Members. Among his observations on why the Appellate Body behaved as it did:
o (1) A “prevailing ethos” to act like a court, and not be accountable to WTO Members,
o (2) the degree of control by Appellate Body staff,
o (3) an over-emphasis on “collegiality” that created “peer pressure to conform”,
o (4) an “excessive striving for consensus” that “led to excessively long and unclear compromise reports” and “encouraged over-reach, gap filling, and advisory opinions”,
o (5) “a sense of infallibility and of entitlement, to stretch the words of agreed texts, and to stretch decisions beyond merely resolving a particular dispute, so as to create a body of jurisprudence”, and, finally,
o an “undue adherence to precedent”, “not only as to outcomes, but also as to reasoning, definitions, and obiter dicta”, which “made it more important to know the past” than to “openly consider[] whether the past should be reconsidered.”
It's still a relatively small number of people who have been Appellate Body Members or who have worked in the Appellate Body Secretariat, and I always find it useful to get the take of other people who have seen things from the inside. It's interesting to compare the eras. Based on what I saw when I was there, I have opinions on some of the points he makes, but I'll have to think more about what to say about any of this. All of the issues raised here are real ones: the nature of the institution; accountability to WTO Members; role of the Secretariat; importance of collegiality; over-reach and related issues; and the role of precedent. The U.S. has put them on the table for discussion, and a resolution of the Appellate Body crisis will have to deal with at least some of them. The Trump administration made its views clear, at least in the sense that it was clearly opposed to the status quo. Soon we'll see what the Biden administration thinks of all this. I can imagine that they would make proposals to deal with some of the issues noted above, as well as others. But we'll see how things go.
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