August 6, 2018 5:31PM

How to Solve the WTO Judicial Crisis

The World Trade Organization is facing an existential crisis because of bullying by President Trump. That crisis can only be resolved if the United States and the 163 other members of the World Trade Organization negotiate a solution to what is most motivating these actions: American angst over the global rules for imposing anti-dumping and other trade remedies against unfair trade practices.

Central to Trump’s assault on the longstanding liberal international order in trade is his threat to grind the settlement of international trade disputes to a halt in the WTO. He is doing this by blocking the appointment and reappointment of the WTO judges whose rulings help resolve the trade disputes. U.S. intransigence may soon reduce the WTO Appellate Body from its full roster of seven judges down to the minimum of three needed to decide an appeal.

If the U.S. continues this strategy, the appellate court will be left with only three judges in September, and only one judge by December 2019—not enough to hear an appeal. Already slowed by the current shortage of judges, the rule-based dispute settlement system that has resolved more than 500 international trade disputes since its creation in 1995, and that has prevented an untold number of additional disputes, could come then to a standstill. 

The impasse over judicial appointments in the WTO is ostensibly about what U.S. officials see as the supposed straying of WTO appellate judges from the strict bounds of their instructions into forbidden legal terrain in some of their rulings. Overlooked in the U.S. is the inconvenient fact that there are 163 other WTO members that have not professed to observe a pattern of judicial “over-reaching.”

Actually, the blockade is driven by the decades-long frustration of some within the U.S. with their failure to negotiate WTO rules that would assure the U.S. virtually unlimited latitude in imposing anti-dumping duties and other trade remedies on imported goods, and that would mandate that WTO judges largely defer in their rulings on such remedies to U.S. decisionmakers.  

Trump and his trade collaborators see America as possessing the sovereign right to impose anti-dumping tariffs and other remedies to alleged unfair trade practices with a domestic discretion akin to international legal impunity. This is not a new view—American industries challenged by foreign competitors and American protectionists representing those industries in the trade bar have long abused U.S. trade remedies to keep foreign competition out of the domestic market. Now they also hold power in the Trump Administration.

But other countries hold a different view. For decades, other countries, like American consumers and many American producers reliant on imports, have been repeatedly victimized by U.S. administrative agencies under the sway of protectionist interests. These agencies tend to rig U.S. domestic trade rules against foreign producers and then apply those rules in ways that discriminate against foreign goods under the legal pretense of fighting trade unfairness. This has happened for decades already with steel imports.

These protectionists forget that there is just one set of WTO trade remedy rules for all WTO members – not one set of rules for Americans and another set of rules for everyone else. Given this, do we want other countries to be able to use their own trade remedies laws to treat our exports the same way we treat theirs? And why should other countries eliminate their own trade abuses if we refuse to eliminate ours?

Since the establishment of the WTO in 1995, the main constraint on the unchecked use by the U.S. of trade remedies has been the WTO rules the U.S. helped negotiate and place in the WTO treaty – rules that have been consistently upheld by the Appellate Body. While the U.S. has (despite what Trump tells us) won about 86 percent of the cases it has brought against other countries before the WTO, it has lost about 75 percent of the cases other countries have brought against the U.S. (which is better than the global average of 84 percent).

Most of these losses have been in politically sensitive disputes over U.S. anti-dumping and other trade remedies. And many of them have been over repeated challenges to the same US trade actions because the U.S. has either refused to comply fully with adverse WTO rulings or has only pretended to comply.

In dumping in particular, the U.S. prefers to retain practices that find dumping where it does not exist and magnify the extent of dumping – and thus maximize the amount of anti-dumping duties – where dumping does exist. (In trade jargon, this is called “zeroing.” The U.S. has lost a long series of “zeroing” disputes.)

Fueling the U.S. foot-dragging is the belief that it has not gotten the extent of legal deference from WTO judges it thought it had secured in the WTO rules for applying anti-dumping duties. Americans who favor the unfettered use of anti-dumping measures feel they have been cheated.

Their legal problem is this:

A sentence the U.S. succeeded in putting in the WTO anti-dumping rules provides that if one of those rules “admits of more than one permissible interpretation,” then WTO judges must defer to the domestic decision “if it rests upon one of those permissible interpretations.” But the previous sentence, on which the U.S. also agreed, instructs the WTO judges to interpret the anti-dumping rules “in accordance with customary rules of interpretation of public international law.” And the use of those interpretative rules always results in a judicial finding of one ordinary meaning for international rules – never two.

Thus, the Appellate Body, in doing its job by following the rules of treaty interpretation it has been instructed by the WTO members to use in the WTO treaty, has never found that an anti-dumping rule “admits of more than one permissible interpretation,” and so it has never given the U.S. the extent of deference that it desires and still believes—wrongly—it negotiated.

Other WTO members are uncertain about how best to react to President Trump’s bullying on judicial appointments. In response, they must not yield to his intimidation by curtailing the jurisdiction of WTO judges by, in effect, allowing the U.S. to be the judge and the jury in its own cases. Instead, they should embrace a proposal that has already been made by the European Union. In exchange for an end to the U.S. blockade of WTO judicial appointments and U.S. agreement to WTO reforms that reinforce the indispensable independence and impartiality of WTO judges while also strengthening the whole WTO dispute settlement system, the 163 other WTO members should agree to negotiate anew on the true core of U.S. concern – the rules on dumping.

This does not mean acquiescing to the arrogant American ambition of having the international legal discretion to do whatever it chooses in applying trade remedies, while expecting other countries to do exactly as the U.S. wishes. It does mean resuming anti-dumping negotiations on the degree of deference owed to domestic authorities – and this time reaching an agreed solution in more precise wording of the anti-dumping rules in the WTO treaty – wording that has consistency and clarity.