Discord between U.S. and other World Trade Organization members including the EU and China appears set to paralyze the group’s top court
BRUSSELS—A stalemate between the U.S. and other members of the World Trade Organization, including the European Union and China, stands to cripple the organization’s top court, threatening the global body’s survival.
On Wednesday the court, called the Appellate Body, will no longer have enough judges to rule on big trade disputes between countries.
At stake are international rules negotiated over five decades by the U.S. and Europe to boost global trade. The WTO, established in 1995, is the most significant outcome of that effort, helping to head off damaging cycles of tariffs and retaliation between countries. Now it’s stuck.
Efforts to modernize WTO rules for challenges such as China’s market-distorting state capitalism have repeatedly failed. Talks among its 164 members to regulate e-commerce and other new arenas have stalled for years. And a trans-Atlantic dispute over operations of its top court has sparked the split now threatening the organization’s core.
“The WTO is in crisis,” said Cecilia Malmstrom, who last month ended her term as EU trade commissioner. “If nothing happens, it will become irrelevant.”
Cecilia Malmstrom, until recently the EU trade commissioner, says the WTO risks becoming irrelevant.PHOTO: CHRISTOPHE MORIN/BLOOMBERG NEWS
The WTO’s ability to police global trade rests on the seven-judge Appellate Body, which reviews arbitration rulings. When countries appeal those rulings, three judges examine each case. The Appellate Body already has four vacancies and two current members’ terms end on Tuesday. That will leave it with one judge, precluding WTO appeals and enforcement.
A U.S. block on new appointments triggered the current crisis. Consecutive U.S. administrations have complained of Appellate Body overreach. Two years ago U.S. Trade Representative Robert Lighthizer moved to discipline the court or bring it down.
Legal Battleground The U.S. and the European Union are the top litigators in a WTO dispute-settlement mechanism that is on the verge of collapse. Disputes by membersSource: WTO
“Without a functioning Appellate Body, the whole system is sailing into… uncharted water,” a Chinese diplomat said at a WTO gathering on Nov. 22. That would “further tilt the balance in favor of [major] powers.”
Mr. Trump said recently he is “very tentative on the WTO.” He has repeatedly attacked it for being unfair to the U.S. and threatened to quit if the organization doesn’t “shape up.” U.S. officials say the global trade watchdog has strayed from its purpose to liberalize and protect markets.
The U.S. administration’s stance on the WTO is consistent with its hostile position toward international trade pacts, which officials say sap U.S. negotiating power. Mr. Trump has pursued unilateral actions with China and other major trading partners. He exited a trans-Pacific trade deal negotiated by the Obama administration and has imposed steel and aluminum tariffs against allies, which have been challenged at the WTO as illegal.
“I’m not excluding the fact that on December 11 champagne corks will pop at the USTR building in Washington,” an EU diplomat said, referring to the day after the Appellate Body loses two more judges.
Europeans want to preserve the WTO. The EU has proposed creating an interim court, based on WTO rules and voluntary participation, to replicate Appellate Body functions and issue binding decisions. Canada and Norway have signed on. China, Russia and other countries are assessing the plan, which represents a snub to the U.S., which opposes the move.
Stopgap measures could prolong some of the WTO’s ability to settle disputes. But preserving WTO power as the ultimate trade enforcer would require resolving fundamental disagreements over the Appellate Body. There, the U.S. and the EU remain far apart.
Europeans favor a global trade court while Washington prefers ad-hoc arbitration for each dispute. EU officials say the Appellate Body has cemented international rules. U.S. officials say the body has aggrandized itself, seizing powers more akin to a court than its original role as a rules enforcer. They say it has missed deadlines, set precedents and undertook lengthy reviews it wasn’t designed to do.
Dennis Shea, right, the U.S. envoy to the WTO, speaking with a Chinese diplomat.PHOTO: DENIS BALIBOUSE/REUTERS
“It simply will not work to paper over the problems,” said U.S. envoy to the WTO Dennis Shea in October.
The divide is also playing out in a personal fight at the WTO’s otherwise tranquil headquarters on Lake Geneva in Switzerland.
When the Appellate Body ruled against the U.S. in a dispute with China in July, one member wrote a rare and scathing dissent. The decision was “incoherent” and “unduly complicated,” the judge said. The opinion is anonymous but trade officials in Geneva widely believe it was penned by Thomas Graham, a U.S. judge on the body whose term ends Tuesday.
Mr. Graham didn’t respond to a request for comment.
The U.S. also slammed the judgment for undermining WTO rules against Chinese subsidies.
For Appellate Body Director Werner Zdouc, the WTO’s dispute-settlement system is to global trade what the Supreme Court is to U.S. law, according to current and former trade officials. Under his leadership, critics said, the body disregarded dispute-settlement rules designed to prevent countries from circumventing WTO regulations.
Through WTO spokesman Keith Rockwell, Mr. Zdouc declined to comment.
Few options remain to save the Appellate Body. Mr. Graham and Appellate Body Chair Ujal Singh Bhatia, whose term also expires Tuesday, could theoretically stay on to hear ongoing appeals. But Mr. Graham has said he wouldn’t extend his tenure unless Mr. Zdouc is removed, allowing an Appellate Body overhaul.
Appellate Body reform has broad support but WTO members differ on its direction, Mr. Rockwell said. The EU and other WTO members over the past year have offered proposals to revamp the Appellate Body and address U.S. concerns. Washington has said the WTO should follow existing rules.
In a move to further constrain the appellate body, the U.S. also briefly blocked its budget recently. Washington finally agreed to limited resources for next year only, funding Mr. Zdouc’s department at about 7% of its biennial budget of about $3 million. That’s enough to extend Messrs. Graham and Bhatia’s terms until about March, enabling them to issue rulings on three ongoing appeals. After that, China’s Hong Zhao would be left alone until her term ends in November, with at least 10 appeals awaiting review, many more in the pipeline and no new colleagues.
Western powers now risk splitting over global trade, with the U.S. acting unilaterally and the EU rallying some partners to preserve a broken WTO system. China could be left to build its own global links, largely freed from Western rules.
“The problems of the WTO go far beyond any [Appellate Body] crisis,” said Clete Willems, a former Trump administration trade official currently with the law firm Akin Gump. Citing lengthy WTO litigations and Chinese trade practices, he said, “The question is do we have a system that is fit for purpose, given where we are on world trade.”
A friend and former CAC Board Member, Susan Rush, has served many years on hospice and palliative care teams. She has also worked closely with Contemplative Outreach, an organization founded by Thomas Keating and others to renew the Christian contemplative tradition by teaching Centering Prayer. She reflects on the gift of this practice, which she says is key to spiritual resilience:
A wise person once said, “Find a spiritual practice and do it as if your life depends on it.” In my case, that practice is Centering Prayer. Centering Prayer is a prayer of intention, a prayer of consent, a prayer of surrender. It is a prayer that allows us to touch the Divine Ground of our Being, a prayer that helps us see our true self and get a glimpse of the Love that lives within us and in all creation. It is a prayer for living and a prayer for dying.
One comes to the practice of Centering Prayer with only one intention—to consent to God’s presence and action within. Because of that intention, commitment to the contemplative journey through a daily practice of Centering Prayer involves more than just setting aside time to pray; it also means opening ourselves up to a conversion of our will and total transformation.
When we first start Centering most of us are amazed at how busy our minds are. The silence we long for eludes us. We can’t hear God. But as we continue to practice—time and time again letting our thoughts go and returning ever so gently to our intention—we realize that this is all an Ultimate Mystery and requires a graced trust. With committed practice, gradually we are able to embrace the Divine Dwelling within us. There is a knowing, a conviction, that we are with God.
If we stay faithful to the practice, our false self begins to be dismantled and we live more and more from our center, from that Divine Ground of Being, from our true self. We are transformed. As the beloved Thomas Keating, who spent his life conceptualizing and teaching this prayer form, wrote, “By consenting to God’s creation, to our basic goodness as human beings, and to letting go of what we love in this world, we are brought to the final surrender, which is to allow the false self to die and the true self to emerge. The true self might be described as our participation in the divine life manifesting in our uniqueness.” . . . [2]
I once heard a patient say that her dying process was an “ego-ectomy.” The contemplative life through the practice of Centering Prayer can be an ego-ectomy, too. We come closer to our dying every day of our living, so let us live our lives to the fullest, for God’s sake. Let us do our spiritual practice as if our lives depended on it—because they do. Let us welcome our ego-ectomy through the dismantling of the false self now—in life—in order to experience each day as a sacred gift.
