I wanted to elaborate on a point I made in my post from last week, where I discussed U.S. Trade Representative Katherine Tai's response to my question about ways to improve the WTO panel process. As a reminder, here's what she was asked and how she replied:
Question: ... And then a related question from Simon Lester, I think is, moving away from the Appellate Body, you worked on panels here in Geneva, ... and you mentioned that some of these cases take a long time and aren't working, so he was wondering if there is anything you can suggest, anything you saw to make panels work faster and work better in the US estimation.
Tai: ...
So, with respect to the panel question, the only thing I would add there is that the panel process does take a while. It's very laborious, it can be quite expensive, if you've got outside lawyers working for you. And I think that the issue is not how to make it faster, but how to create more opportunities for the Members to come together and be incentivized to solve the problem, because in every dispute settlement case, when you play it out to the end, you've gone through every appeal and you've gone to the arbitration for your suspension of concessions. The point is not to punish each other. The point at the end of all of this is to create the conditions for the two Members to come together to find an accommodation, because we are all WTO members. And so, if there are ways that we can incentivize those political moments of conversation sooner, I think that that would be a worthy goal.
And here was my blog comment in response:
In terms of my question on the panel process, what I would say is that I completely agree that we should make settlement a priority, but from what I can see, the existing rules already do this. It's really up to the Members whether they want to settle, and sometimes they are able to do so. It's worth noting that most WTO complaints don't go through the whole litigation process. But sometimes Members just can't agree, and when they don't, we end up in litigation. Where that's the situation, there are important issues related to how the litigation process works that are worth improving on. (And I would note that the option for litigation may be particularly important for smaller and developing countries that have less leverage in settlement negotiations).
As I said, settlements are great, and governments should always be thinking of them as the best option. What worries me, though, is that if we don't have a litigation process that works when settlements can't be achieved, we will shift away from a system that emphasizes rules and towards one that gives primacy to power, and that leaves us worse off overall (although some countries might think they benefit from a power-based system).
To be clear, the trading system will always have some mix of power and rules, so this is not an all or nothing proposition. But my question here is, does the Biden administration want to to shift a bit away from rules and towards power?
I hinted at this issue when I said, "[a]nd I would note that the option for litigation may be particularly important for smaller and developing countries that have less leverage in settlement negotiations." To elaborate a bit, what I meant here is that with the economic power imbalances that exist among different countries, a functioning international trade litigation system that relies on rules can give at least a little more leverage to smaller and developing countries when they raise concerns with larger powers. In particular, the moral force of a neutral ruling, combined with a monitoring system, can help them fight against the bad behavior of more powerful countries. In this way, the existence of rules helps to moderate the role of power.
My concern is that the Biden administration might prefer a more power-based system because it thinks the U.S., as the leading economic power, will get better outcomes under such a system. I don't know if it actually could get better outcomes, especially over the long-term, but my sense is that there are some people who think it could. To take an obvious example, I think that's what the Trump administration believed, and that's where it wanted the system to go. Instead of filing WTO or FTA complaints, the U.S. would just use access to its large domestic market as a way to extract concessions from trading partners. GSP reviews would be one way to do this, but there are plenty of other avenues as well.
Tai's response makes me worry that the Biden administration sees things in a similar way: Rulings by international trade courts are to be avoided, and instead U.S. economic leverage will be the primary basis for inducing changes in foreign government policies.
Now, maybe I'm overstating the importance of one response to one question. And a counterpoint to my concern is the Biden administration's willingness to pursue a USMCA complaint. However, in WTO dispute settlement, there aren't many signs yet that the Biden administration wants to preserve the rule of law. I can see how the Appellate Body crisis is a political challenge for the administration. But in terms of the basics of WTO dispute settlement, there are constructive things that could be done in the meantime to signal general support for a process that relies on rules.
