The World Trade Organization is losing its ability to police cheaters and dissidents.
The United States has refused to appoint judges that sit on disputes-settling panels that rule on complaints about countries breaking the terms of the world trade agreements they have signed.
Without judges, there can’t be panels. Without panels, the WTO can’t settle disputes. And so countries can snub the rules with impugnity, which is exactly what United States President Donald Trump has done with tariffs on steel and aluminum, and then the countries, including Canada, that have hit back with tariffs.
Normally these tariffs would trigger a complaint and a disputes-settling panel would be set up and decide.
And only after a country loses can the aggrieved country apply measures to punish the perpetrator, usually in the form of retaliatory tariffs.
So what will happen if the WTO discipline collapses?
Nobody is sure, but nobody but Trump seems to welcome any of the likely outcomes.
Reuters News Agency reports from Geneva that the WTO partners seem helpless in the face of the U.S. defiance.
The European Union has made proposals to reform the way the judges work, but U.S. Ambassador Dennis Shea poured cold water on several of them on Thursday, saying appeals judges had “strayed” from what was agreed when the WTO was set up in 1995.
One diplomat from a large developing country said on Friday the United States regretted setting up the appeals system and it was not putting forward any ideas to reform it.
“We have no leverage,” he said. “The other side is flexing its muscles.”
“Moral suasion is all that is left,” said a Geneva-based trade lawyer, Reuters reported.
Another trade lawyer and former negotiator for a U.S. ally said various alternatives being put forward were “band-aids.”
“I don’t think there’s anything right now that the other (WTO) members can do. And I don’t think that any of these other band-aid solutions amount to anything,” he said.
A trade lawyer and former staffer on the Appellate Body’s secretariat said the United States was using hard leverage in many areas of trade, with its tariff war and regional trade agreements as well as at the WTO.
It’s against this backdrop that Canada bargained hard during the NAFTA negotiations to retain Chapter 11, a disputes-settling system.
Trading away less than four per cent of the dairy market and some of the poultry markets seems picayune in the context of the WTO developments.
