04 June 2020
A world crisis requires a global response. COVID-19 has brought squarely into focus the role of international organisations in supporting trade, co-ordinating responses (both at a health and economic level) and facilitating the flow of information across borders in a time of crisis.
The World Trade Organisation (WTO) is no exception, issuing over the past months information notes and other media highlighting its role in supporting international trade. This role includes the resolution of disputes between trading nations.
In article published on 20 May 2020, the ABC questioned the timeliness of the WTO dispute processes in a discussion reporting on the tariffs imposed by China on Australian grown barley.
The ABC suggested that ‘[s]eeking redress through the WTO can be a long and protracted process, as the sugar industry has found’. This suggestion was made in the context of the ongoing enquiries into India’s measures concerning sugar and sugarcane, enquiries which commenced after the request by Brazil for consultation in February 2019.
In the light of the ABC’s report and recent WTO publications, this article examines the role of the WTO, looks at steps taken by member countries to address impediments in the dispute settlement process and reports on the response of the WTO to the coronavirus pandemic.
The WTO describes itself as:
”[…] the only global international organisation dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to ensure that trade flows as smoothly, predicably and freely as possible.”
Amongst other things, the WTO administers WTO trade agreements and handles trade disputes.
The dispute resolution process provided by the WTO was established to enable WTO members to seek an independent determination of disagreements with other WTO members. As the WTO explains:
”A dispute arises when one country adopts a trade policy measure or takes some action that one or more fellow-WTO members considers to be breaking the WTO agreements, or to be a failure to live up to obligations. A group of countries can declare that they have an interest in the case and enjoy some rights.”
The WTO dispute resolution process is not an expedited process. As is the case with many international institutions and bodies, the WTO must move carefully and in a manner which respects cultural diversity and politics.
The current dispute resolution process is embodied in the Understanding on Rules and Procedures Governing the Settlement of Disputes (Annex 3 to the Uruguay Round Agreement) (DSU). It involves consultation and/or mediation, panel enquiries and reporting, and, until December 2019, an appeal process.
The DSU reinforces the importance of dispute resolution, describing it as “a central element in providing security and predictability to the multilateral trading system” and noting that the ”aim of the dispute resolution mechanism is to secure a positive solution to a dispute with a solution mutually acceptable to the parties”’ as the preferred option.
Each WTO member undertakes, through the DSU, to “accord sympathetic consideration to, and afford adequate opportunity for, consultation regarding any representations made by another Member”. The DSU specifically encourages ‘good offices’, mediation and conciliation.
If a dispute is not resolved through the confidential consultation process, a party may request the establishment of a panel. There are special arrangements for cases of urgency.
The DSU sets out the terms of reference for all established panels and also mandates how each panel is to be composed. It provides that “[p]anel members should be selected with a view to ensuring the independence of the members, a sufficiently diverse background and a wide spectrum of experience”.
There are procedures spelled out in the DSU for dealing with multiple complainants and third parties. A WTO member with a “substantial interest in a matter before a panel” must have an opportunity to be heard and to make written submissions.
The DSU also provides ‘Working Procedures’ for panels, noting that procedures adopted by the panel should provide “sufficient flexibility so as to ensure high-quality panel reports, while not unduly delaying the panel process”. The deliberations of each panel are confidential. The final step is the adoption by the Dispute Settlement Body of the report.
What are the appeal procedures?
Until 2019, an appeal was available to the Appellate Body of the WTO’s Dispute Settlement Panel. However, the appointment of new judges to that body has been blocked since 2019 and, following the expiry of the terms of former members of the Appellate Body, the Appellate Body can no longer function.
In response to this, 20 members of the WTO (including Australia) announced in March 2020 the establishment of a Multi-party Interim Appeal Arbitration Arrangement (MPIA). In promoting the MPIA in a press release on 15 April 2020, the Council of the European Union observed that:
“The MPIA will enable the participating members to benefit from a binding resolution of trade disputes and have the right to an independent and impartial appeal review of panel reports …”’.
A Ministerial Statement made on 27 March 2020 in relation to the MPIA and published on the European’s Commission included the following:
”We believe that such WTO dispute settlement system is of the utmost importance for a rules-based trading system.”
It is perhaps no coincidence that announcements of the MPIA emerged as the world was grappling with international supply chain disruption caused by restrictions imposed to contain COVID-19.
Whilst the MPIA was not an initiative of the WTO, the fact that 20 members of the WTO have worked together to develop this interim process demonstrates the relevance those members place on the ongoing role of the WTO, even more so in times of uncertainty and predicted recession.
Arbitration of WTO disputes
Arbitration is an alternative to the panel procedure referred to above. The DSU acknowledges this, providing in Article 25, that:
“Expeditious arbitration within the WTO as an alternative means of dispute settlement can facilitate the solution of certain disputes that concern issues that are clearly defined by both parties.”
However, arbitration is subject to the parties’ agreement, including the procedures to be followed. Joinder of WTO members who are not party to the relevant arbitration agreement is also subject to the agreement of the parties. For this reason, a dispute which is likely to involve third parties will usually be resolved through the procedures in the DSU where third parties with a ‘substantial interest’ have a right to be heard.
WTO response to COVID-19
The WTO has shown in its recent publications that it is acutely aware of the role it might play in a post COVID-19 world. Since COVID-19 was declared a pandemic by the World Health Organisation on 11 March 2020, the WTO has published a series of reports focussed on the impact of the crisis on international trade.
On 7 April 2020, the WTO published an information note on ‘Transparency – Why it Matters at Times of Crisis’, observing that “WTO Agreements promote international transparency in trade measures via formal, publicly available notifications of all laws and regulations affecting trade”.
The information note highlighted the rapid introduction of regulations of governments around the world to deal with the pandemic, including tariffs, import restrictions and import/export procedures, all of which have the potential to disrupt supply chains, concluding that ”[t]ransparency is precisely about allowing access to this information and more”.
On 5 May 2019, the General Council of the WTO published a joint ministerial statement at the request of the delegation of Switzerland. In this statement, which focussed specifically on the impact of the pandemic and on the importance of “well-functioning supply chains”, the Ministers committed to, amongst other things, finding a “lasting solution to the situation relating to the WTO Appellate Body” and observed:
“A predicable, transparent, non-discriminatory and open global trading system will be essential for broad-based, sustainable economic recovery. We, therefore, strongly reaffirm our support for the rules-based multilateral trading system and the central role of the WTO. We will continue to act in a manner consistent with our WTO rights and obligations. We will refrain from raising new unjustified barriers to investment or to trade in goods and services.”
Finally, in a recent virtual discussion, Mr Alan Wm Wolff, the Deputy Director General of the WTO, spoke of the current and future challenges to the WTO in supporting the multilateral trading system.
Speaking of the predictions of a second wave of the virus, the Deputy Director General emphasised the need for collective actions and proposed ways in which the WTO might support its members and contribute to economic sustainability. And, in a frank assessment of the WTO, he suggested that “[w]ere the WTO members to join together to meet the trade challenges of the coronavirus and the desperately needed economic recovery, most public criticisms of the WTO” would likely disappear.
These statements by the Deputy Director General foreshadow action, possible reform and an increase in initiatives from the WTO as the world deals with, and emerges from, the current crisis. They reflect, amongst others, the call from the Chair of the Export Council of Australia, Ms Dianne Tipping, for a ‘recalibration’ of the WTO and “a structure more suited for today’s trade agenda”.
As the ICC Secretary General and former CEO of Corrs Chambers Westgarth, Mr John Denton AO, observed, when hosting a recent online meeting with over 70 senior business leaders from around the world, “[m]aintaining a functioning trade system is vital to protect lives and livelihoods through the COVID-19 crisis. We … need to move from talk to action on WTO reform so that it can once again live up to its founding promise of liberalising trade, opening up markets and enabling fair competition.”
This level of attention from world organisations, the recognition from within the WTO itself of the challenges it faces, and the global reach of COVID-19 on economic trade together suggest that the WTO will play an increasingly visible and effective role during, and post, the COVID-19 pandemic.
This publication is part of our insight series COVID-19: Navigating the implications for business in Australia and beyond. To get notified by email when new COVID-19 insights are released, please subscribe for updates here.
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.