On July 25, Canada and the European Union announced a deal that will ensure their trade disputes can still go through an appeals process at the World Trade Organisation (WTO). In making this agreement, the two countries hope to sidestep a US block on the WTO, which many fear could incapacitate the court and plunge its appeals process into crisis.
The WTO’s Appellate Body deals with all trade dispute settlements. However, under President Donald Trump, the US has placed a block on all new appointments to the Appellate Body. As a result, the appeals committee is down from seven members to three.
Under President Donald Trump, the US has placed a block on all new appointments to the Appellate Body
Even more worryingly, two of the remaining members will see their terms expire in December. Once this happens, there will effectively be no appeals process, meaning all trade disputes brought to the WTO could go unresolved. This is likely to exacerbate international tensions and slow trade growth.
Under the new agreement, if either Canada or the EU launches a trade dispute against the other, the case can still be appealed and settled in a final ruling regardless of the state of the Appellate Body. This is possible because of the WTO’s arbitration rules, which allow for the creation of a substitute Appellate Body, with former WTO judges hearing their cases.
It is expected that the EU and Canada will seek to make similar arrangements with other WTO members such as China, India and Brazil.
The Trump administration has taken a tough stance against the WTO. Because the organisation is able to override US domestic rulings, Trump insists that it poses a threat to national sovereignty. The US has said it will not resume appointments until its concerns are addressed.
Critics have accused the US of holding the WTO to ransom. The friction and uncertainty resulting from unresolved disputes can have a detrimental impact on global trade. While the Canada-EU agreement is an effective temporary solution, most WTO countries will not be satisfied until the organisation is back in full working order.