The EU announced a new "open, sustainable and assertive EU trade policy" today. The press release is here; a Q & A is here; the main communication from the Commission is here. The most interesting details seem to be in this Annex. In this post, I'm going to focus on what they say about WTO dispute settlement. There is a section entitled "Restoring a fully functioning WTO dispute settlement system with a reformed Appellate Body." Let's go through the text piece by piece.
First up, there's this:
Binding dispute settlement is not only critical to protect the interests of WTO members against measures that limit market access rights. It also provides the stability for companies to be able to invest and export in the knowledge that rules will be respected and that there are remedies in case of breach. It protects big and small WTO members alike against unilateral actions and prevents trade disputes escalating into political conflicts. While certain aspects of the Appellate Body’s operation and jurisprudence have been criticised, it is also important to recognise that the Appellate Body has greatly enhanced legitimacy and predictability of the dispute settlement system, including through its careful attention to the protection of the right of WTO members to regulate for health, environmental or other legitimate policy objectives.
This part shouldn't be too controversial. I think most people agree that the AB's legal standards under GATT Article XX and similar provisions created more policy space than what some GATT/WTO panels had offered.
Next:
The most urgent of WTO reforms is finding an agreed basis to restore a functioning dispute settlement system and to proceed to the appointment of the members of the Appellate Body. This task should be addressed as a priority and not be linked to the others aspects of WTO reform. In the absence of a functioning dispute settlement system, it is difficult to see what could be the motivation for countries to modernise and fill gaps in the rules.
I agree that the AB crisis should not be linked to other WTO reform issues. If it is, there is a good chance none of it will be resolved.
Now we get to some more concrete ideas:
The United States has raised a number of valid concerns about certain adjudicative approaches of the Appellate Body as well as about specific rulings in certain cases. The European Union agrees that adjudicators should exercise judicial economy and are not bound by “precedent” but should take into account previous rulings to the extent they find them relevant in the dispute they have before them. In the WTO dispute settlement system, the panels are the triers of fact, and the role of the Appellate Body should be strictly limited to addressing legal issues raised on appeal to the extent this is necessary to resolve a dispute. The independence of panels and of the Appellate Body is essential so that cases are decided exclusively on their merits. This is compatible with a strengthening of accountability to Members as regards the fulfilment of its duties. Mandatory timelines should be strictly respected both at the Panel and Appellate Body stage of disputes – justice delayed is justice denied – and appropriate measures should be adopted in order to make this possible. The European Union therefore agrees that a meaningful reform is needed. Such reform should maintain the negative consensus rule, the independence of the Appellate Body and the central role of dispute settlement in providing security and predictability to the multilateral trading system.
Here I see a politically useful public acknowledgement that the U.S. has "valid concerns." The point about exercising judicial economy suggests that the AB sometimes has said more than it should; and an explicit statement that adjudicators are not "not bound by 'precedent' but should take into account previous rulings to the extent they find them relevant in the dispute they have before them" is useful, in order to make clear that everyone is on the same page about the role of past cases. And the statement that "the role of the Appellate Body should be strictly limited to addressing legal issues raised on appeal" perhaps opens the door to changes in how factual issues are treated on appeal.
I really liked this part: "Mandatory timelines should be strictly respected both at the Panel and Appellate Body stage of disputes – justice delayed is justice denied – and appropriate measures should be adopted in order to make this possible." I'm not going to complain too much that they borrowed my line, and instead I'll just recommend looking at these suggestions for tightening up the DS timelines.
Finally, there was this:
In particular, while many of the issues above are reflected in principles developed in the Informal Process on matters related to the functioning of the Appellate Body led by the Chairman of the Dispute Settlement Body, the EU is open to consider how to give them a stronger legal formulation, as well as to consider additional improvements. An early signal by the United States of their readiness to enter into good faith negotiations to find a multilateral agreement on dispute settlement reforms would greatly enhance confidence and should enable reaching an agreement to restore binding dispute settlement and a functioning Appellate Body.
This is a useful statement that the EU is willing to go beyond the Walker Principles. It also indicates that, having offered up these positive statements, it would like to see the U.S. reciprocate with something positive now ("An early signal by the United States of their readiness to enter into good faith negotiations to find a multilateral agreement on dispute settlement reforms would greatly enhance confidence"). The ball seems to be in the court of the new USTR trade policy team now. Let's see what they do with it.
