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US shuts down WTO appeals court

By Charlotte Ricca

Critics call world trade without rules a ‘severe blow’

Global commerce will be left to fight its own battles, as the World Trade Organisation (WTO) looks set to lose its powers to intervene in trade wars.

The WTO’s Appellate Body acts as the supreme court for international trade. At least three judges are needed to oversee trade disputes, but two of them retire today (10 December).

The problem is, there are no successors as the Trump administration has blocked the appointment of new judges since it came into power in 2017. This means the Appellate cannot continue and world trade will lose a vital independent arbiter.

From here on, major trade disputes, such as the on-going US conflict with China, will be left to scrap it out.

There are currently 14 appeals cases filed at the WTO, including the EU’s appeal on compliance by Airbus over alleged subsidies. The European Union and the US have been battling over government subsidies to European planemaker Airbus and its US rival Boeing for 15 years, in what is the world’s largest corporate trade dispute.

Former top trade adviser to the US president, Steve Vaughn, said many disputes would now be settled by negotiations.

However, EU ambassador to the WTO, Joao Aguiar Machado, warned that world trade without rules would see the current system “slipping into power-based economic relationships”.

China’s ambassador to the WTO, Zhang Xiangchen, has also expressed his concern, saying he was marking the occasion by wearing a black tie he usually saves for funerals. Letting the “lights go out’’ at the appellate body, is “no doubt the most severe blow to the multilateral trading system since its establishment”.

Ironically it was the US who helped set up the appellate body in 1995, in order to transform the ad-hoc General Agreement on Tariffs and Trade into a formal organisation that had the power to settle trade disputes.

But under the Trump administration, the US now favours a “law of the jungle” approach to trading. Critics fear this could see countries using tariffs and other sanctions to limit imports, which in turn will discourage trade.

FURTHER READING: Bezos blames Trump for ‘screwing Amazon’ out of $10bn Pentagon contract

FURTHER READING: Chinese industrial commodities sink as US tariff war continues

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