World Trade Organization (WTO) members are actively considering reform proposals aimed at addressing concerns raised by the United States, with some calling this effort the "last chance" to rejuvenate the WTO's capacity to resolve trade disputes effectively.
The draft reform proposals, revealed exclusively to Reuters, represent a significant endeavor to mend the WTO's beleaguered dispute settlement system, which has been in disarray since December 2019. At that time, the United States, advocating for substantial reforms, disrupted the Appellate Body by blocking the appointment of judges. Consequently, while countries can still lodge complaints with a lower body, disputes that are not resolved there have been left in a legal limbo, with around 30 pending appeals.
These reform discussions are critical, and member nations are working diligently to reach a resolution by early 2024. The proposals cover various aspects, including the introduction of time limits for dispute resolution and the creation of a mechanism allowing countries to provide feedback on rulings with which they disagree. Notably, the reforms have not yet addressed the pivotal issue of whether the Appellate Body, the WTO's top court, will be reinstated, a matter considered crucial to rebuilding confidence in global trade rules.
Marco Molina, Deputy Permanent Representative of Guatemala to the WTO and the coordinator of the talks, emphasized the urgency of the situation, stating, "For many reasons, I'm convinced this is the last chance to restore the system." He added that if a proposal is not reached by the upcoming ministerial conference in Abu Dhabi in February 2024, there may not be another opportunity for some time.
Several delegates have expressed the need for swift progress, as the U.S. presidential election scheduled for November 2024 could potentially impact the U.S. commitment to WTO reform, given the prominence of trade as a contentious issue among voters.
The draft document, dated October 2 and marked as "confidential," outlines proposals aimed at addressing U.S. criticisms of the 28-year-old trade body, such as concerns of judicial overreach and inefficiency. It includes a new mechanism to allow countries to review and provide feedback on legal interpretations of trade rulings to inform future judgments.
Additionally, the proposals seek to encourage and streamline the informal resolution of disputes, which is currently an underutilized option. They also aim to establish tighter deadlines for resolving disputes, with standard cases requiring nine months and complex ones needing a year. Some WTO disputes have notoriously taken several years or even over a decade to reach resolution.
It's important to note that any new WTO rules must receive consensus approval from all 164 members. Both the United States and WTO Director-General Ngozi Okonjo-Iweala have expressed their support for the ongoing negotiations.
However, a significant hurdle remains as there is no agreement yet on the structure of any future appeals chamber, with this section of the text described as a "work in progress." Without a functioning appeals chamber, any potential agreement would lack practical significance, akin to having a car without an engine.
As the negotiations continue, the international community eagerly awaits a resolution that could reinvigorate the WTO's dispute settlement system, promoting fair and efficient trade practices worldwide.