WTO and EU agree stopgap measure for appeals system

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The World Trade Organisation's Appellate Body will rise again - for now.

A temporary mechanism has been agreed upon that will allow appeals and trade disputes to be brought before the World Trade Organisation (WTO) once more.

The European Union, China and 15 other WTO member states announced the measure last Friday (March 27th 2020) after a period of much turmoil for the governing body.

The problems had mostly arisen because of the US's disapproval of the Appellate Body system, which acts as a supreme court for international trade. The Trump administration had been blocking new appointments for judges for the past two years in protest against what it deemed unfair treatment by the WTO, particularly China's status within the world economy as a developing country.

The last chance wears out

Last December, the terms of two of the three remaining Appellate Body judges came to an end, leaving only one in service and breaching the WTO's own charter that requires at least three to remain on long-term appointment.

It also meant the Appellate Body was unable to issue rulings and address the disputes that may arise between member nations.

Despite other countries trying repeatedly to begin a new selection procedure for the Appellate Body, the US declined to approve this and also recently rejected an extension of the terms of the existing judges.

At the time, the WTO said it would be able to continue to work on the four disputes that were already pending and had had their early hearings. However, the other nine appeals that had been pending were being forced to grind to a halt, effectively in limbo while those involved waited to see what would happen.

Various nations around the world voiced their disapproval, with a particularly strong response coming from China's ambassador to the WTO Zhang Xiangchen. He said he would be wearing a funereal black tie to mark the blow against the multilateral trading system.

While this was perhaps especially dramatic, the other member countries did express concern that the Geneva-based organisation's inability to police trade would lead to a long line of unresolved disputes - which could tempt the nations involved in them to break the rules at a time when they could not be issued penalties for doing so.

However, WTO director-general Roberto Azevedo did tell BBC News he was optimistic that a resolution could be reached and that the Appellate Body could be fixed with "significant changes", although it may take a few months.

A new (temporary) solution

Now, it seems he was as good as his word, as it has been revealed that a temporary fix has been established. As part of this, a new pool of ten arbitrators will be set up within the next three months, with three of them available to hear any given appeal.

The European Commission said the WTO's two-step dispute resolution system would be preserved until a more permanent solution to the Appellate Body issue can be found.

It also said the EU had been "a leading force in the process to establish this contingency measure".

EU Trade Commissioner Phil Hogan explained that restoring the WTO's appeals function had been a key priority.

"This is a stop-gap measure to reflect the temporary paralysis of the WTO's appeal function for trade disputes. This agreement bears testimony to the conviction held by the EU and many other countries that in times of crisis working together is the best option," he added.

The countries that have signed up to the new system alongside the EU bloc are: Australia, Brazil, Chile, China, Colombia, Costa Rica, Guatemala, Hong Kong, Mexico, New Zealand, Singapore, Switzerland and Uruguay.

Mr Hogan has publicly said that other nations are also more than welcome to join in. Interestingly though, South Korea and Panama are not yet involved, despite having apparently voiced their support for a new deal just weeks ago.

Before this announcement, the EU had joined forces with Norway and Canada to form a different stopgap trade body in order to resolve disputes.

It remains to be seen what will happen to the Appellate Body going forward and how long this temporary measure will last. But the willingness of so many countries to cooperate and form a new system can surely only be a positive thing - and it may prompt the US to renege on its reluctance to work towards a goal for the greater good.