(CN) – The World Trade Organization, the international arbiter of trade disputes, entered a deep crisis Tuesday after the Trump administration blocked the appointment of new appellate judges, a move that threatens to bring new uncertainty and chaos to global trade.
By Wednesday, the WTO's seven-judge appellate body will be without enough judges to hold a quorum after the United States blocked new judges from taking their seats. The terms of two of the remaining three judges expire at midnight Tuesday and there is little prospect of a last-minute deal, experts said.
In effect, this means member states will no longer be able to appeal rulings by the WTO's dispute settlement panels, and experts say this will severely undermine the WTO and potentially lead to an escalation in trade tensions and trade barriers.
“The world's trade referee will no longer be able to function as of tomorrow,” Aydin Yildirim, a political economist at the World Trade Institute at the University of Bern in Switzerland, said in a telephone interview Tuesday with Courthouse News.
He said there is concern that the WTO will be crippled without its appellate body.
“Some argue that it will bring down the institution,” he said. “It will no longer be taken seriously.”
Blocking the appointments escalates a long-running U.S. campaign to force the WTO to agree to American positions on how to calculate anti-dumping duties, among other issues.
The WTO was largely a creation of the U.S. in 1995, but the American government has turned against the WTO because of rulings against U.S. interests. The U.S. also argues that the WTO's appellate chamber has become a rules-making body that it was not meant to be.
“This has been quite a long time in the pipeline,” Dirk De Bièvre, a political scientist and trade policy expert at the University of Antwerp, said in a telephone interview.
Since taking office in 2017, President Donald Trump has taken aim at the WTO, a Geneva-based trade body with 164 members. He has claimed that the WTO has treated the U.S. unfairly. In truth, the U.S. has used the WTO to its benefit and won many disputes. Most recently, the U.S. won a case against European aircraft manufacturer Airbus.
De Bièvre said the U.S., though, is unhappy with WTO rulings that have found an American practice known as “zeroing” to inflate duties unlawful.
“This was a grudge that had been there for a very long time,” De Bièvre said. “It is a way to inflate and construct huge anti-dumping margins, which is blatant protectionism.”
He said the American steel industry has vehemently opposed the WTO's rulings against this practice. Trump built his electoral success on pledges to support American steel and U.S. Trade Representative Robert Lighthizer is a former steel industry lawyer.
De Bièvre said the U.S. has taken issue with the WTO's appellate body because it also has begun to expansively interpret trade law and introduce the idea of precedence. American trade lawyers and policymakers argue this is overreach.
However, De Bièvre did not see blocking the appellate body as fatal to the WTO.
“Does it kill the WTO? Not at all,” he said. He called pronouncements about the end of the WTO “overstatements.”