Because of its power of final judgment on international trade disputes, the Appellate Body of WTO is also called the "Supreme Court" of international trade.
In the past two years, the United States has repeatedly abused the one vote veto mechanism of the WTO and unilaterally obstructed the appellate body from selecting new members. By the 11th of this month, the "Supreme Court" will be unable to accept new cases because only the last "judge" is left. It will encounter the first "suspension" crisis in the past 25 years since the establishment of the WTO.
The United States has used the veto power 29 times in two years
At the regular meeting of the WTO dispute settlement body held on November 22, Mexico, on behalf of the 117 members of the WTO, once again proposed to start the new judge selection process of the appellate body to fill the currently vacant and soon to be vacant judges' seats. In response, the United States did not support the proposal to start the selection of new judges because the "institutional" issues previously raised by the United States had not been resolved.
This is the 29th time in the past two years that WTO members have put forward similar proposals, and it is also the 29th time that the United States has used a veto to block them. After this veto, the appellate body was in the final position of "suspension" at the end of the year.
The appellate body has seven permanent seats. The term of office of the elected judges is four years, and they can be reappointed for another term. The selection process of judges follows the principle of consensus among WTO members, that is, the principle of "one vote veto", that is, only when all 164 members agree, can the selection process proceed smoothly.
Since the new U.S. government took office in 2017, the U.S. has, on the grounds of so-called "ultra vires ruling", "trial overdue", judges "overdue service" and many other issues, linked the decision of the appeals body with selection, frequently used one vote veto, unilaterally opposed the launching of the selection process for new judges, resulting in the reduction of the number of judges in office.
Due to the frequent obstruction of the United States, there are only three judges left in the appellate body, two of whom are about to end their terms of office. As of 11 this month, only one judge will remain in the appellate body. According to the WTO, three judges are required to jointly hear and decide any trade dispute case. Therefore, at that time, the appellate body will be unable to accept any new cases due to the insufficient number of judges, and fall into a "suspended" state.
"Jungle law" replaces multilateral rules
Many WTO members are concerned about the impact of the "suspension" of the Appellate Body on the international economic and trade order.
At the meeting on November 22, the representative of Norway warned that "winter is coming" for international trade. The Chinese representative stressed that "the crisis of the appellate body is the crisis of the rule-based multilateral trading system". Without a functioning appellate body, the "safe and predictable" international trade environment enjoyed by members over the past 20 years will disappear, and the whole system will "sail to unknown waters".
WTO Appellate Body is an important part of WTO dispute settlement mechanism. As the "Supreme Court" of international trade, the appellate body not only has the final judgment right to international trade disputes, but also has the enforcement power.
WTO may authorize trade retaliation against members who refuse to implement the Appellate Body's decision. Therefore, WTO is called the international organization with "teeth".
Once the Appellate Body "stops", the WTO will only be able to issue "preliminary determination" reports without enforcement force, so its ability to restrain members to abide by international trade rules will be greatly weakened.
WTO director general Alessandro Azevedo warned that if the global trade rules are not effectively implemented, the world economy will return to the era of "jungle law". Simon Leicester, an expert at the Cato Institute, a us think tank, also warned that we would "move from a rule-based (International Trade) system to a power oriented system".
Limited role of temporary alternatives
Many WTO members have proposed solutions to the so-called "institutional" problem of the Appellate Body put forward by the United States.
In November last year, China, the EU and other members submitted a joint proposal on the reform of the appellate body to the WTO, responding to the questions raised by the United States one by one and giving a constructive reform plan. Subsequently, Canada and Japan also proposed reform programs.
The United States ignored these reforms, repeatedly stressed the problems and refused to discuss solutions.
In the face of the "suspension" crisis of the appellate body, some WTO members put forward temporary alternatives. The EU, Canada and Norway said they would start the "Interim appeal arbitration" procedure during the "suspension" period of the appellate body.
Specifically, in the case of the absence of members of the appellate body, the director general of WTO shall select "arbitrators" from the outgoing judges of the appellate body to review the disputed "preliminary Award" report. The arbitration report issued by the arbitrators shall have the same effect as the report of the appellate body, equivalent to "final judgment".
Of course, this alternative is limited to use between the EU, Canada and Norway, and cannot be extended to cases related to other WTO members.
In addition, some trade experts suggest that both parties to the dispute can negotiate and accept the "preliminary Award" report as the final decision, so as to avoid the dispute settlement falling into the "pending" situation.
In any case, these alternatives can only alleviate the problems brought by the "suspension" of the appellate body to the settlement of international trade disputes in the short term. How to continue to ensure the consistency and predictability of WTO rules, and how to continue to safeguard the multilateral trade system based on rules, will be a long-term issue for WTO members.

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