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Between “Member-Driven Governance” and “Judicialization”: Constitutional and Judicial Dilemmas in the World Trading System

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The Appellate Body of the WTO and Its Reform

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Abstract

The power-oriented GATT/WTO traditions of member-driven governance risk undermining the dispute settlement system of the WTO, its judicial administration of justice and rule of law. US trade policies, the “Brexit”, and non-democratic rulers challenge multilateral treaties and judicial systems by populist protectionism prioritizing “bilateral deals”. This contribution uses the example of the illegal US blockage of the WTO Appellate Body system for explaining why the “republican imperative” of protecting public goods (res publica) requires respect for democratic governance, rule of law and judicial remedies (Part 1 of this chapter). WTO law limits power politics by judicial remedies and by administrative majority decisions for filling vacancies in WTO institutions (like the Appellate Body) if consensus is arbitrarily vetoed (Part 2 of this chapter). Such administrative decisions and judicial clarifications of WTO rules preventing illegal de facto amendments of WTO institutions legitimize member-driven governance by protecting rule of law as approved by parliaments when they authorized ratification of the WTO Agreement and delegated limited powers for implementing, clarifying and reforming—rather than destroying—WTO rules for the benefit of citizens, their equal rights and social welfare (Part 3 of this chapter). The hegemonic abuses of trade policy powers indicate the political limits of “judicialization” of international economic law and the need for systemic, “ordo-liberal” reforms of the WTO in order to avoid disintegration of the world trading system (Part 4 of this chapter).

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Notes

  1. 1.

    Petersmann (2017).

  2. 2.

    Cf. Tushnet (2018), Rosas and Armati (2018).

  3. 3.

    On the often neglected, multilevel nature of the WTO dispute settlement system, see Petersmann (1997, p. 233 ff).

  4. 4.

    Cf. Petersmann, supra note 1, at p. 174 ff.; Besson and Marti (2009).

  5. 5.

    On the neglect by most textbooks on international economic law (IEL) to clarify the “principles of justice” underlying IEL, see Petersmann (2012), Chaps. II and III. On Chinese challenges of human rights, see Petersmann (2018a).

  6. 6.

    Cf. Stoll (2018), Cho and Kurtz (2018).

  7. 7.

    Cf. Stoll; Cho and Kurtz, supra note 6; Petersmann (2018e) and supra note 1, at p. 165 ff.; Van den Bossche, In: de Baere and Wolters (2015).

  8. 8.

    On the “Congressional Trade Priorities and Accountability Act” of June 2015 (H.R. 2146) and related US trade legislation, see VanGrasstek (2019).

  9. 9.

    Cf. Trachtman (2017). US Presidents have, however, claimed inherent foreign policy powers to withdraw from international agreements.

  10. 10.

    Cf. Shaffer et al. (2017), refuting television statements by US President Trump (“The WTO … was set up for the benefit of everybody but us. They have taken advantage of this country like you wouldn’t believe… As an example, we lose the lawsuits, almost all of the lawsuits in the WTO … Because we have fewer judges than other countries. It’s set up as you can’t win. In other words, the panels are set up so that we don’t have majorities. It was set up for the benefit of taking advantage of the United States”) as “fake news”.

  11. 11.

    For references to various speeches by USTR Lighthizer, see Slobodian (2018a), Bacchus (2018a), Petersmann (2018b).

  12. 12.

    Statement by J. Hillman; cf. also Dunoff and Pollack (2017, pp. 225, 267 ff).

  13. 13.

    Cf. Kuijper (2018). Rule 15 authorizes the AB to permit its outgoing members to complete the disposition of pending appeals similar to the working procedures for many other international courts.

  14. 14.

    Understanding on Rules and Procedures Governing the Settlement of Dispute art. 17.2, 15 Apr 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401. The text of Article 17:2 (“The DSB shall”…), numerous other DSU provisions (like Article 3:10) and the customary law requirement of interpreting treaty rights and obligations in good faith make clear that obligations addressed to the DSB entail legal good faith obligations for each DSB member. According to the AB jurisprudence, an “abusive exercise by a Member of its own treaty right … results in the breach of the treaty rights of the other Members and, as well, a violation of the treaty obligation of the Member so acting”. See Appellate Body Report, United States—Import Prohibition of certain shrimp and shrimp products, para 158, WT/DS58/AB/R (12 Oct 1998) [hereinafter US-Shrimp Appellate Body Report].

  15. 15.

    Cf. Hillman (2018), (listing the concerns expressed by the US in DSB meetings since 2017).

  16. 16.

    On the legal inconsistency of this US criticism, see Gao (2018), Sacerdoti (2018).

  17. 17.

    The President’s Trade Policy Agenda (2019).

  18. 18.

    E.g. of Article 3:2 DSU regarding treatment of AB case-law as precedent absent “cogent reasons”; Article 17:5 DSU regarding the 90 days deadline; Article 17:6 regarding “issues of law” and legal qualifications of facts; Article 17:12 DSU regarding obiter dicta.

  19. 19.

    E.g. elaboration of AB Working Procedures as prescribed in Article 17:9 DSU; judicial “administration of justice” in applying the incomplete DSU rules to disputes over political disagreements on WTO rules.

  20. 20.

    See below section III.2.

  21. 21.

    DSB meeting of 21 November 2018 (summary reported on the WTO website). US Ambassador Shea’s claim (e.g. during the WTO Public Forum session 111 on 4 October 2018) that the US does not recognize a “judicial function” of the AB, illustrates that the US claim of “AB over-reach” rests on very subjective DSU interpretations which are not shared by most AB and DSB members, just as the related US claim that one WTO member’s rights or obligations may be clarified by a Panel without regard to the AB’s clarification (“precedent”) of the same rights or obligations in previous WTO disputes. The different “institutional choice” perspectives (e.g. legal interpretations by political vs judicial institutions) affect the “cognitive dimension” of legal interpretations—a fact, which is often overlooked in the criticism of WTO dispute settlement findings by diplomats and economists.

  22. 22.

    Cf. Kuijper, supra note 13, at pp. 6–7.

  23. 23.

    On the longstanding reluctance of the US to limit US foreign policy powers by submitting to international courts, see Romano (2009).

  24. 24.

    Cf. Article 31.3(c) of the Vienna Convention on the Law of Treaties (VCLT), which is widely recognized as codifying customary rules of international treaty interpretation, and the specification of applicable, universally recognized “principles of justice” in the Preamble of the VCLT; on this “systemic interpretation” of WTO rules in WTO dispute settlement practices, see Cook (2015).

  25. 25.

    WTO AB members have persistently characterized the AB as a (quasi)judicial institution, for instance in their annual AB Reports and academic publications (e.g. by WTO AB members. Bacchus (2018b) and Van den Bossche, in Baere and Wouters, supra note 7, pp. 176–202). The Handbook on the WTO Dispute Settlement System prepared by the WTO legal services (CUP 2004) describes WTO panels and the AB as “quasi-judicial bodies, in a way tribunals, in charge of adjudicating disputes” (e.g. p. 21).

  26. 26.

    See Bacchus, supra note 11.

  27. 27.

    Politi (2018): “For Mr Lighthizer, as well as Peter Navarro, the chief trade hawk in the White House, the goal is not only to disentangle the US from its Chinese supply chains, and to shift production back home, but to do the same with the rest of America’s traditional trading partners as well”.

  28. 28.

    Cf. United States—Certain Measures on Steel and Aluminium Products, WT/DS544 (5 Apr 2018); United States—Certain Measures on Steel and Aluminium Products, WT/DS547 (18 May 2018); United States—Certain Measures on Steel and Aluminium Products, WT/DS548 (1 June 2018); United States—Certain Measures on Steel and Aluminium Products, WT/DS550 (1 June 2018); United States—Certain Measures on Steel and Aluminium Products, WT/DS551 (5 June 2018); United States—Certain Measures on Steel and Aluminium Products, WT/DS552 (12 June 2018); United States—Certain Measures on Steel and Aluminium Products, WT/DS554 (29 June 2018); United States—Certain Measures on Steel and Aluminium Products, WT/DS556 (9 July 2018). All these complaints convincingly challenge the US claim that “economic security” is part of “national security” and justifies violating all WTO rules without WTO jurisdiction for reviewing such unilateral invocations of Article XXI GATT in WTO dispute settlement proceedings aimed at protecting the non-discrimination and reciprocity obligations of WTO law (e.g. Articles XIX, XXVIII GATT).

  29. 29.

    E.g. in view of the very small amount of US production of steel and aluminum “for the purpose of supplying a military establishment” in terms of GATT Article XXI(b).

  30. 30.

    See Petersmann, supra note 3 and Petersmann (2018c, p. 179 ff).

  31. 31.

    Cf. Luce (2018).

  32. 32.

    Cf. Petersmann, supra note 1.

  33. 33.

    Procedures for the Appointment of Directors, WT/L/509 (20 Jan 2003).

  34. 34.

    Marrakesh Agreement Establishing the World Trade Organization art. IX:1, 15 Apr 1994, 1867 U.N.T.S.154 [hereinafter WTO agreement]. “The WTO shall continue the practice of decision-making by consensus followed under GATT 1947. Except as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting” … “Decisions of the Ministerial Conference and the General Council shall be taken by a majority of the votes cast, unless otherwise provided in this Agreement or in the Multilateral Trade Agreements”. The “exceptions” for consensus-based decision-making by the DSB (e.g. pursuant to Articles 2.4, 16.4, 17.14 DSU) do not prevent the Ministerial Conference or General Council from meeting collective WTO legal obligations by voting if “a decision cannot be arrived at by consensus” in the DSB due to illegal blocking of consensus in the DSB.

  35. 35.

    Note 3 to Article IX:1 WTO (“Decisions by the General Council when convened as the Dispute Settlement Body shall be taken only in accordance with the provisions of paragraph 4 of Article 2 of the Dispute Settlement Understanding”) is no legal obstacle to majority decisions by the WTO Ministerial Conference or by the General Council deliberately not convening as DSB in order to meet the collective duties of WTO members to comply with Article 17 DSU. Such convening of the WTO General Council in order to overcome disagreements in the DSB has been practiced already in the past, for instance when WTO Members wanted to censure the AB for its handling of amicus curiae briefs (cf. General Council, Minutes of Meeting—Held in the Centre William Rappard on 22 November 2000, WT/GC/M/60 (23 Jan 2001); Kuijper, supra note 13, at p. 10).

  36. 36.

    See Communication from the European Union, China, Canada, India, Norway, New Zealand, Switzerland, Australia, Republic of Korea, Iceland, Singapore and Mexico to the General Council, WT/GC/W/752 (26 Nov 2018).

  37. 37.

    Cf. Communication from the European Union, China and India to the General Council, WT/GC/W/753 (26 Nov 2018).

  38. 38.

    As explained above in section 2.2.

  39. 39.

    See WTO Agreement, supra note 34 and related text.

  40. 40.

    See Procedures for the Appointment of Directors, supra note 33. The text of Article IX:1 confirms that the same “exception” must be applied to illegal blocking of the appointment of AB members.

  41. 41.

    WTO Agreement, supra note 34, art. XVI:3 provides: “In the event of a conflict between a provision of this Agreement and a provision of any of the Multilateral Trade Agreements, the provisions of this Agreement shall prevail to the extent of the conflict.” If the US should claim that Article 2:4 DSU (“Where the rules and procedures of this Understanding provide for the DSB to take a decision, it shall do so by consensus”) protects a veto-power of the US for indefinitely blocking the filling of AB vacancies (and, thereby, de facto amending the DSU), the “authoritative interpretation” could clarify that— according to its Article XVI:3—the legal duties under Article IX:1 of the WTO Agreement must prevail and require overcoming any “conflicting interpretations” of WTO rules so as to prevent illegal abuses of veto-powers and protect the collective WTO obligations of maintaining the AB as legally prescribed in Article 17 DSU. WTO members have no legal and democratic mandate to amend the DSU de facto by rendering the exercise of AB jurisdiction impossible.

  42. 42.

    On the problems of using Article 25 DSU as a bilaterally agreed substitute for AB review of WTO panel reports (such as non-adoption of the panel and arbitration reports by the DSB) see the analysis by former US congressman and former AB chairman (Bacchus 2018b; Anderson et al. 2017).

  43. 43.

    Cf. Rawls (1993, p. 231 ff).

  44. 44.

    Cf. Petersmann (2015, p. 208 ff).

  45. 45.

    Cf. Van den Bossche and Zdouc (2017, e.g. p. 60 ff., p. 560 ff., p.710 ff).

  46. 46.

    Such “positive consensus” has so far never emerged in WTO dispute settlement practices.

  47. 47.

    Examples include (1) protectionist abuses of trade remedy rules; (2) excessive, unilateral interpretations of “national security’ in US trade laws (e.g. Section 232); (3) hegemonic recourse to “aggressive unilateralism” (e.g. Section 301); (4) disregard for the customary rules of treaty interpretation in favor of alleged historical intentions of US negotiators; (5) politicization of appointments of judges; (6) political interferences into third party adjudication disregarding the democratically defined separation of executive and judicial powers (e.g. of the AB); (7) abusive “blocking” of the nomination of judges; or (8) of the adoption of impartial dispute settlement rulings; and (9) non-implementation of legally binding dispute settlement rulings. The less US governments succeed in limiting such “domestic governance failures”, the more “populist protectionists’ inside the US (e.g. US steel lobbies and their former advocates like R. Lighthizer) call for adjusting WTO rules to US protectionism, as illustrated by the long-standing US calls for using Article 17.6 Antidumping Agreement as a legal restraint on WTO review of trade remedy measures (Article 17.6(ii) was inserted into the Antidumping Agreement at the request of the US in late 1993 in the US hope of incorporating the “Chevron doctrine” of US constitutional law—prescribing judicial deference vis-à-vis regulatory agencies controlled by the US Congress—into WTO law). On the threat posed by President Trump’s trade mercantilism for democracy in the US and the WTO trading system see Petersmann (2018d).

  48. 48.

    Cf. The President’s Trade Policy Agenda, supra note 17, at p. 4.

  49. 49.

    For a discussion of the ordo-liberal “Geneva school of law and economics”, its influence on the design of the WTO Agreement, and its comparison with other schools of “law and economics”, see Slobodian (2018b, at p. 7 ff., p. 183 ff., p. 208 ff., p. 260 ff.), who describes the WTO as “the paradigmatic product of Geneva School neoliberalism” (p. 25), and the “creation of the WTO (as) a crowning victory of the neoliberal project of finding an extra-economic enforcer for the world economy in the twentieth century” (p. 23). See also my review of this book and of its inadequate distinction between Anglo-Saxon neo-liberalism and European ordo-liberalism in: 21(4) J Int Econ Law (2018d). On using the ordo-liberal principles of competition policy, social policy, rule-of-law and democratic constitutionalism for reducing the systemic conflicts in the WTO, see Petersmann (2019).

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  1. European University Institute, Florence, Italy

    Ernst-Ulrich Petersmann

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  1. Constitutional Court of Taiwan, ROC, Taipei, Taiwan

    Chang-fa Lo

  2. Chuo Gakuin University, Tokyo, Japan

    Junji Nakagawa

  3. School of Law, National Chiao Tung University, Hsinchu, Taiwan

    Tsai-fang Chen

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Petersmann, EU. (2020). Between “Member-Driven Governance” and “Judicialization”: Constitutional and Judicial Dilemmas in the World Trading System. In: Lo, Cf., Nakagawa, J., Chen, Tf. (eds) The Appellate Body of the WTO and Its Reform. Springer, Singapore. https://doi.org/10.1007/978-981-15-0255-2_2

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