Alan Wolff served as a Deputy Director-General at the World Trade Organization until the end of March this year. He is now a Distinguished Visiting Fellow at the Peterson Institute of International Economics. While at the WTO, DDG Wolff was a frequent speaker to Members and groups on various aspects of the WTO, its importance to bettering lives and promoting peace and the need for reform to remain relevant. I have covered some of former DDG Wolff’s statements in prior posts. See, e.g., March 6, 2021, WTO’s four Deputy Directors-General tenure reportedly concludes at the end of March 2021 — thanks for an outstanding job, https://currentthoughtsontrade.com/2021/03/06/wtos-four-deputy-directors-general-tenure-reportedly-concludes-at-the-end-of-march-2021-thanks-for-an-outstanding-job/ (DDG Wolff gave 142 speeches between October 2017 and March 6, 2021); December 8, 2020, Trade for Peace Week at the WTO – a positive look at how trade can and should contribute to global peace and stability, https://currentthoughtsontrade.com/2020/12/08/trade-for-peace-week-at-the-wto-a-positive-look-at-how-trade-can-and-should-contribute-to-global-peace-and-stability/; November 22, 2020, DDG Wolff’s comments to G20 on immediate challenges for trade to address economic rebound from the pandemic and for WTO reform, https://currentthoughtsontrade.com/2020/11/22/ddg-wolffs-comments-to-g20-on-immediate-challenges-for-trade-to-address-economic-rebound-from-the-pandemic-and-for-wto-reform/; November 10, 2020, The values of the WTO – do Members and the final Director-General candidates endorse all of them?, https://currentthoughtsontrade.com/2020/11/10/the-values-of-the-wto-do-members-and-the-final-director-general-candidates-endorse-all-of-them/.
On April 29, 2021, the Peterson Institute of International Economics presented an hour virtual program with Mr. Wolff during which he presented his thoughts on “Saving the WTO, A Roadmap to the Future” and answered questions. Mr. Wolff provided a paper, and a slide deck (which he went through during his presentation). Links to the virtual meeting, his paper and his slide deck can be found here: PIIE Virtual Event, The Future of the WTO, April 29, 2021, Chttps://www.piie.com/events/future-wto; Alan Wm. Wolff, Saving the WTO, A Roadmap to the Future of the World Trade Organization, April 29, 2021, https://www.piie.com/sites/default/files/documents/wolff-4-29-2021speech.pdf; Alan Wm. Wolff, presentation slides, Saving the WTO, A Rodmap to the Future, April 29, 2021, https://www.piie.com/sites/default/files/documents/wolff-4-29-2021ppt.pdf.
Mr. Wolff’s paper, slide deck, and presentation reflect his thinking on the importance of the World Trade Organization, the challenges that need to be addressed to get to a future of continued importance for the WTO and reforms that will be required in the structure and operation of the organization. For those with an interest in the multilateral trading system and the challenges defining the current mix of global trade needs, Mr. Wolff’s materials are an important resource and will undoubtedly spark a lot of discussion in Geneva, in capitals and among those caring about a viable trading system. While there are practical aspects of his paper, the paper in total is aspirational. While there are many questions about whether the elements of the roadmap laid out are achievable and while there are some potential missing links or sequencing issues that may prevent forward movement on some items, Mr. Wolff’s vision of what could be is worth careful evaluation.
Mr. Wolff reviews that the WTO governs more than three quarters of world trade, is the basis for the hundreds of free trade agreements and has all Members stating that the system serves their interests. Negotiations, transparency/ implementation and dispute settlement are the core elements. For fragile and conflict-affected countries, membership supports achieving peace through improving opportunities for citizens. Since the late 1940s, the GATT and now the WTO have seen huge increases in trade with billions of lives improved as a result.
While the value of the WTO is encapsulated in the above aspects, there are obviously many problems that plague the current functioning of the WTO. Some are discussed in Mr. Wolff’s paper — e.g., mistrust, limited success of negotiating function, lack of full transparency, breakdown of the dispute settlement system, and changing economic profile of Members and hence obligations Members should assume.
There are eight current major challenges that Mr. Wolff identifies as needing to be addressed to get to the future (slides 8 and 9):
“1. Dealing with the trade aspects of fighting the pandemic.
“2. Using trade to boost the economic recover, with special attention to developing countries.
“3. Making the recovery greener.
“4. Assuring that carbon border adjustment measures are based on cooperation and do not become a source of conflict.
“5. Forestalling fragmentation of the digital economy.
“6. Putting into place binding dispute settlement that is accepted as legitimate by all litigants.
“7. Making the trading system visibly more positive for workers.
“8. Reforming the WTO as an institution.”
Dispute Settlement discussion
There are many specific proposals for actions that are suggested to be taken under each of the topics. Each section of the paper is worth careful review. For purposes of this post, because I have written extensively on dispute settlement, I look at the section of Mr. Wolff’s paper dealing with dispute settlement (pages 14-18). Mr. Wolff’s discussion is copied below.
“• The primary feature that distinguishes the WTO from most other international organizations is the fact that the commitments contained in its agreements are enforceable. Putting into place binding dispute settlement accepted as legitimate by all litigants is essential to restore enforceability.
“There being no Appellate Body (AB) at present, major litigants, including the U.S. and the EU, have used a procedural trick to prevent a dispute settlement panel finding from becoming final. This is informally known as “appealing into the void”. Proceedings are paused indefinitely while the losing party at the panel stage appeals to a body that does not exist except on paper.
“The blocking of appointments is the sole result of one Member, the United States, being dissatisfied with what the Appellate Body was doing and not doing, mostly rendering trade remedies less effective and in some instances totally ineffective. While killing off the Appellate Body was largely a matter of one Member acting against the will of 163 others, there has been a growing recognition that only a serious negotiation is going to resolve the matter. Importantly, an increasing number of Members now concede that the former system had serious imperfections, so that change is necessary.
“There is a far wider and deeper importance to the dispute settlement issue than correcting quasi-judicial overreach, or under-performance. The premise on which the United States entered into its agreements liberalizing trade was that industries and workers suffering harm from facing a more open domestic market or from unfair foreign competition would have a remedy within agreed limits. The erosion of trade remedies — their increasing unavailability and increasing ineffectiveness when available — caused a fundamental imbalance as compared with the deal that the United States thought that it had negotiated. In part it is due to this imbalance that a belief has grown in some quarters that the WTO serves capital rather than labor.
“It is the widely held view in the United States, in the Senate, House and Executive Branch, that the Appellate Body sowed the seeds of its own destruction. Domestic experience in the United States with its own Supreme Court is instructive. The Court itself becomes threatened if it becomes politically tone-deaf. This occurred with respect to
New Deal legislation during the 1930s, and it was, observers feel, threatened again during more recent times with the attempted judicial repeal of Obamacare. In the United States, the constitutional system has checks and balances preventing a rule by judges (gouvernance des juges as the problem was known when it was a central cause of the French revolution). In the WTO, there has been neither a legislative nor an executive function available to review and change any outcomes that emerged from the Appellate Body. Kritarchy, rule by judges, is a form or governance that is unsustainable, and that is what occurred, at least with respect to trade remedies. This is unsupportable for an organization consisting of Members prizing sovereignty over their own trade.
“The solution to the WTO dispute settlement problem lies in creating accountability to the Members. This should not take a form that interferes with the independence of its decision-making nor the binding nature of decisions. I support, as do almost all and perhaps ultimately all Members, a binding, independent, two-tier (panel and appellate stage) WTO dispute settlement system. As it may be impossible to create a relevant legislative function which would provide systemic checks and balances, much of the cure of necessity will have to lie in how a new Appellate Body (NAB) is structured.
“The European Union created a multiparty interim arrangement (MPIA). Although not a complete solution in itself, it can provide some ideas for moving forward with changes in the structure of the appellate body and how it functions. The process conducted by then Dispute Settlement Body Chair Ambassador David Walker also yielded elements of a
potential solution. The following suggestions could be considered:
“• Expand the number of Appellate Body members. The EU suggested a roster of 10 for its MPIA (only three serving on any one case) but this number could be expanded to provide greater diversity of representation both in terms of geography and skill sets — including relevant trade remedy experience, as antidumping and subsidies are complex matters.
“• Provide explicitly for a role of the WTO secretariat to seek to narrow differences and make the process more about settling a particular dispute than on seeking to make law.
“• Seek to uphold the primary importance of trade agreements by directing appellate panels to look at negotiating history to discern the intent of the parties.
“• Have strict time limits for appellate review to discourage a de novo examination of the issues at hand.
“• Place emphasis on streamlining written presentations as well as limits on length of decisions to focus on the essential elements needed to settle a dispute.
“• The rules should provide that only issues raised by the parties can be addressed on review.
“• Where the WTO agreements do not cover a specific issue, the matter should be referred to the Members to resolve through rulemaking.
“• Double down on the emphasis that the appellate review is not to expand obligations or limit rights and is to give due deference to domestic decision making where trade remedies are the subject of review.
“• The appellate body should not act as a collegial body on particular cases — appellate panels should be independent of each other.
“• It is necessary to try to provide a suitable oversight role for the Dispute Settlement Body (DSB) which is currently no more than a rubber stamp for appellate decisions.
“Another major problem with WTO dispute settlement is that it takes far too long to get to a result, often taking several years. This is unacceptable in the eyes of ministers of WTO Member countries bringing a case and industries seeking to benefit from it. Strict time limits must be adhered to. Justice delayed can easily become justice denied.
“As for process, I would suggest that the trilateral partners, the EU, the U.S, and Japan, begin working on a solution. The three are used to working with each other. The EU and the U.S. have been the furthest apart on the AB issue, with Japan somewhat in the middle. In parallel, a small working group of friends of the DSB chair or General Council chair, could be constituted to consider ways forward. The trilateral would feed suggestions into the working group, and both could report to the Membership as a whole in the DSB. At this stage a meeting of the whole membership in the name of inclusiveness, would not be productive. Inclusion in a null result is not meaningful inclusion.”
As Mr. Wolff’s paper correctly notes, there have not been effective checks and balance on the Appellate Body which is not supportable over time as it results in obligations not from negotiations but from decisions of the Appellate Body. His suggestions address a number of concerns raised by the U.S., including overreach problems through clarifying what expanding rights and obligations means (e.g., no gap filling), providing deference to administering authorities in trade remedy cases (giving meaning to ADA Art. 17.6(ii), limit issues reviewed to those raised by parties, strict time limits, etc.
Missing from Mr. Wolff’s analysis is the concern raised by the Trump Administration that because economies such as the Chinese economy don’t conform to market-economy principles, the current dispute settlement system doesn’t permit addressing distortions created by such economic systems and permits such economies to block efforts to address such distortions by trading partners under their domestic law. Mr. Wolff while serving as a Deputy Director-General at the WTO reviewed his belief that the WTO system was premised on convergence of economic systems versus the coexistence of different economic systems. He repeated that view during the virtual event on April 29th and in his paper but noted that a number of WTO Members do not support that view. In a consensus based system, those opposed to convergence can block clarification of the need to converge. Mr. Wolff’s paper doesn’t review whether dispute settlement reform can occur without solving that underlying issue (either through achieving convergence or by adopting new rules to achieve more acceptable balance). Indeed, his paper suggests that “Part of the answer to distrust in the area of trade will be putting into place more effective and timely dispute settlement as a means for trade agreement enforcement.” (page 22)
Also missing from Mr. Wolff’s analysis is the need to curb review of factual findings of panels by the Appellate Body (the DSU Article 11 issue) and the need to address rebalancing of rights and obligations to correct for past overreach situations.
Mr. Wolff’s paper and presentation correctly claim that the WTO must be more engaged and respond to the existing challenges through action. While acknowledging the mistrust and problems with the current structure and operation of the WTO, his remarks present a vision of a better functioning global trade system that responds to the needs of its Members, is capable of addressing a changing world through improved transparency, cooperation, updated rules, a revised dispute settlement system and a Secretariat that is able to present ideas for action, independently monitor compliance and more.
For skeptics, it will be easy to point to not only mistrust, but vastly different perspectives by Members on the role of the WTO and the focus of future activities, the current consensus system and its use by many to thwart movement, and the increased activity of Members outside of the WTO to support the view that Mr. Wolff’s vision, however interesting, has no chance of succeeding.
Mr. Wolff quotes President Theodore Roosevelt in his paper (page 5), a quote that he would undoubtedly put forward in response to the skeptics and to urge WTO Members to recommit to the effort.
“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust
and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.“
Terence Stewart, former Managing Partner, Law Offices of Stewart and Stewart, and author of the blog, Current Thoughts on Trade.
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