WTO: Dispute Reform Dead in the Water

The World Trade Organization is unlikely to achieve a reform outcome during the 13th ministerial conference commencing in Abu Dhabi on February 26, our correspondent writes. People familiar with the developments have expressed this expectation.

In accordance with paragraph four of the Outcome Document of MC 12, which took place in Geneva in June 2022, trade ministers acknowledged the challenges and concerns related to the dispute settlement system, including those concerning the Appellate Body.

They recognized the importance and urgency of addressing these issues and committed to conducting discussions with the aim of establishing a fully functional dispute settlement system accessible to all Members by 2024.

However, the current status of these discussions remains uncertain due to the United States' position, which favors continued deliberations without hastening towards an outcome that might overlook certain members' needs or impose constraints hindering constructive dialogue.

The United States initiated the dispute settlement reform discussions in December 2019, after incapacitating the Appellate Body. They emphasize that difficult issues persist, including concerns of developing country members and least developed countries (LDCs), as well as substantive areas where 'judicial' overreach has impacted the functioning of the WTO and altered Members' rights and obligations.

While some developing countries frequently employ dispute settlement to safeguard their rights, others in the Global South are less inclined to utilize the dispute settlement system.

Notably, the United States remains opposed to reinstating the Appellate Body, in contrast to a majority of developing and industrialized countries seeking its prompt reactivation.

In a seemingly targeted remark aimed at developing countries advocating for policy flexibility in pursuing development-oriented policies, the United States suggests that a reformed dispute settlement system should address erroneous interpretations on issues such as essential security, regulatory space, remedies for unfair trade, and other systemic matters.

Conversely, China places a high priority on restoring a fully functional dispute settlement mechanism accessible to all members by 2024. They express optimism about achieving an outcome on DSS reform at MC13.

Several industrialized countries also urge intensified discussions on the fundamental issue of the appeal review mechanism, which plays a crucial role in determining the WTO's enforcement function.

The meeting reveals divergent views on what should constitute an outcome at MC13. While some believe that the text produced by facilitator Marco Molina from Guatemala could serve as the basis for agreement, several developing countries oppose this idea.

Certain members express skepticism about formalizing the discussions, as they fear it might undermine the positive momentum. On the other hand, several developing countries, including South Africa, India, Indonesia, Pakistan, Thailand, Türkiye, Malaysia, and China, call for prioritizing the formalization of DSS discussions.

It is important to note that some members argue that the text negotiated by the facilitator should not be considered the sole basis for formal negotiations but rather one of several inputs.

Regarding formalization, DSB Chair Ambassador Petter Ølberg of Norway reports that members differ in their understanding of the process, timing, purpose, and leadership involved. There is no consensus on this matter at this time.

The facilitator's report indicates that DS reform discussions are taking place on two separate tracks: one focusing on revising the draft consolidated text and the other on discussing the appeal/review mechanism. Notably, the chair's fifth revised text does not incorporate any language pertaining to the appeal/review mechanism.