Katherine Tai on WTO Dispute Settlement Reform

Back in November, former U.S. Trade Rep. Katherine Tai spoke on a panel at Harvard (I just stumbled on the video recently). Towards the end, she responded as follows to a question about the Appellate Body appointments crisis (1:08:32 of the video):

On the Appellate Body, ... if you talk to USTRs and WTO ambassadors going back even through the Obama, Clinton and Bush years – maybe not Clinton, because the WTO had just come into effect – I think that you might be surprised by the uniformity of perspective that there was an increasing problem in the dispute settlement system, and that over time, the Appellate Body did a number of things that really eroded its credibility and political legitimacy for Americans, that go to a lot of the remedy cases, but are not limited to the remedy cases. I would say one of the important cases was the big CVD case that the Chinese brought against us on our countervail, and that resulted in the public body decision. I think that that was ultimately ... the Appellate Body demonstrating that not only was the WTO ineffective in disciplining China within the norms of WTO rules, it was actually going to start taking away tools that the United States and other market based economies had, limited tools, to try to counterbalance that.

More broadly than that, something that I also really have to take a moment to correct the record about is, I offered a full throated endorsement of the WTO, of the need for a dispute settlement system at the WTO that would work better, that could be accessed by all WTO members, and that would actually serve the interests of all Members. At the end of the day, when you look at who uses WTO dispute settlement, it's a small subset of Members. Most Members do not feel like they really have access to it. It's not because they don't have disputes with other Members. It's because there are high barriers to entry.

I offered a full throated reform effort based on interest-based negotiations, something that was created here, at the Harvard program on negotiation, the William Ury, Roger Fisher, you know, if you bring good communication skills to negotiations, you can get out of these distributive, kind of ... bargaining negotiations that happen typically in bazaars over how much you're going to pay for something, right? And you can bring in new dimensions of creativity to resolve negotiations.

We actually had a very robust process going all the way up until MC13. There was a New York Times article that was written about the very singularly talented Guatemalan – I think he was a deputy perm rep – who was facilitating those negotiations. That process ran out of steam after he was removed from that role, and when I think that the progress was starting to scare some of the WTO Members that we might actually be seeing some concrete resolution on the horizon.

So the WTO should have a dispute settlement system. It should work for everybody. It should not supplant the negotiation functions, and it should address the really long standing and deep seated concerns that the Americans have expressed, but also concerns that other parties have expressed. And we did offer a process, and I hope that I live to see WTO Members go back to the process and pick it up again.

Because I'll share one story with you. At MC13, we were standing in line for lunch, and one of my lawyers in Geneva, we were waiting for, I think we were, we had trays to pick up lunch from a kind of a cafeteria. And one of the interpreters from Geneva, right, now in Abu Dhabi for the Ministerial Conference, leaned over and asked my legal advisor in Geneva, "Do you think that the dispute settlement process will continue?" He said, "Well, I certainly hope so." And she said, "Well, I have to tell you, we hope so too. It is the one negotiation that the interpreters look forward to, because it is the one place where delegates don't just sit there reading the same talking points to each other. We actually see people talking to each other, listening to each other, and we are tracking the evolution of the conversation." Frankly, I wish that more people would know about the process that we started, because I think that there are seeds for a complete overhaul for the WTO that are in that particular exercise.

It's interesting to hear her perspective on this. Was the progress really "starting to scare some of the WTO members, that we might actually be seeing some concrete resolution on the horizon"? I'm curious how negotiators from other governments would say they saw things.

In terms of the approach the U.S. took to these negotiations, back in April 2024 Tai explained the "interest-based" negotiation concept in some detail, noting that they were starting "with the question of what is the interest that you want as a WTO Member served by a dispute settlement system." While everyone does have interests, and in that sense "interest-based" negotiations may have some value, the situation here was that the U.S. objected so strongly to the Appellate Body that it blocked appointments. This was the crisis that everyone was dealing with. In that context, I think what is needed – and despite the current dismal state of things, could still be useful from a future U.S. administration – is a specific proposal on what version of appellate review in WTO dispute settlement, if any, would be acceptable to the U.S. Some possibilities are:

• No appellate review for anyone
• An optional appeals process that the U.S. or others could opt out of or in to, in general or in specific cases
• An appellate review process that is more ad hoc and less institutional
• A standard for appellate review that gives more deference to panels

Until we get clear answers to the question of what a future U.S. administration wants to see here, I'm not sure WTO dispute settlement reform can make it to the finish line, although of course the conversations along the way will provide plenty of material to talk about here on this blog.