The United States had clocked the appointment of judges to the World Trade Organization’s top court on Monday. From Tuesday onwards, the WTO can no longer be the ultimate arbiter in international trade disputes.
For two years, the Trump administration has been obstructing appointments to the seven-member Appellate Body that rules on trade disputes, arguing that the court is overreaching.
The tribunal needs a minimum of three judges to function and the terms of two of the three remaining members expire on Tuesday.
US ambassador to the WTO, Dennis Shea, stated on Monday that the United States did not support the proposal to start filling Appellate Body positions.
The WTO is now facing its biggest crisis in its 25-year history. WTO members can still file grievances, but there can be no enforcement of a ruling if any state files an appeal.
The Donald Trump administration has taken issue with the WTO tribunal because it has refused to quickly rule in favour of Washington during the unfolding Sino-American trade dispute. The US disputes the WTO’s method of calculating whether China is dumping cheap goods onto foreign markets.
The WTO has even failed to force China, India and South Korea — and seven other G-20 countries — to accept that they are now advanced or developed countries. Still classed as developing nations, they still benefit from favourable trade rules that other members say give them an unfair advantage.
At the same time, France and other EU member states are likely to open cases against Washington over punitive tariffs imposed as retaliation to the so-called “Google tax” on digital behemoths.
WTO director-general Roberto Azevedo said on Monday that the organisation would seek to maintain its “well-functioning, impartial and binding dispute settlement system.”
“This is no doubt the most severe blow to the multilateral trading system since its establishment,” China’s trade ambassador Zhang Xiangchen said,
“The actions of one member will deprive other members of their right to a binding and two-step dispute settlement system, even though this right is specifically envisaged in the WTO contract,” the European Union’s ambassador João Aguiar Machado said.
Washington is threatening to escalate the standoff with the Geneva-based organisation, blocking the 2020 budget.