Resolving trade disputes is one of the World Trade Organization’s (WTO) main tasks. Since its inception in 1995, some 595 disputes have tested the WTO’s Understanding on Rules and Procedures Governing the Settlement of Disputes, also known as the DSU. For 20 years, the DSU and its Appellate Body continued to operate as they did in 1995, even though concerns were raised about the need to modernize, and reforms were proposed but never adopted.
In 2017, this negotiating paralysis led the United States to start blocking the appointments of new Appellate Body members. Members failed to reach consensus on new appointments, and as a result, there was only one member left in office by December 11, 2019. This effectively suspended the work of the Appellate Body.
This video explains how the DSU functions, and what proposals could be considered to modernize the dispute settlement function of the WTO and end the on-going paralysis.
Resolving trade disputes is one of the main tasks of the World Trade Organization, or WTO. Since its inception in 1995, some 595 disputes have tested the WTO’s Understanding on Rules and Procedures Governing the Settlement of Disputes, also known as the DSU.
Over 350 rulings have been made by ad hoc panels appointed specifically to hear each case. If neither party appeals, the Dispute Settlement Body, which includes all WTO members, is obliged to adopt the panel report, unless there is consensus against its adoption.
An appeal of a panel’s ruling is heard by three members — called a division — of the WTO’s Appellate Body, a standing body of seven trade experts with four-year terms. The division can uphold, modify or reverse the findings of a panel.
For 20 years, the Appellate Body and the DSU continued to operate as they did in 1995, even though concerns were raised periodically about the need to modernize and reforms were proposed but never adopted.
It was this negotiating paralysis that led the United States in 2017 to start blocking the appointments of new Appellate Body members. This failure to join consensus on appointments resulted in there being only one member left in office by December 11, 2019, effectively suspending the work of the Appellate Body.
Although most WTO members oppose the US tactics, many do agree that change is needed. Proposals for reform include improving the quality of first instance panel decision-making to reduce the need for appeals; limiting access to appeals and providing additional guidance to the Appellate Body; increasing representation of women in all aspects of dispute settlement; improving transparency, enhancing rights for third parties and streamlining procedures.
With the Appellate Body paralysis continuing, the more than two-decade long conversation about how to modernize the WTO dispute settlement system has suddenly become urgent, which might be just what’s needed to spur reform. What does a modernized WTO look like? Learn more at cigionline.org/wto