It Was Naive To Think the WTO Would Emerge from Trump’s Storm Unscathed

The U.S. has abandoned the Paris climate agreement, UNESCO, and the U.N. Human Rights Council, and the list goes on.

The year was 1995, and Brazil was impacted by a U.S. protectionist measure. What did Brazil do? It initiated proceedings in the World Trade Organization court. The U.S. lost the dispute on first degree allegations and appealed the decision.

On appeal, the decision was upheld. What did the U.S. do? If you thought they cursed the judge, left the field or simply ignored the result, you would be wrong.

The U.S. changed its legislation to implement the WTO ruling, eliminated the protectionist measure and began to import Brazilian gasoline again. With this dispute, Brazil (along with Venezuela) was the first country to engage what was then the newly-created WTO Appellate Body. It won. Against the U.S.

As of Dec. 10, the Appellate Body of the WTO will no longer hear new disputes.

The U.S. has been systematically blocking the appointment of new judges by preventing the replacement of those whose terms in office expire. With fewer than three members, the board can no longer function.

Americans’ discomfort with the body became apparent under Barack Obama’s administration between 2009 and 2017, but Donald Trump’s management brought it to its knees.

From now on, the lower court will continue to function normally, but it only takes one party deciding to appeal for the dispute to enter into limbo.

Obviously the system was not perfect. Other countries would also like to see reform. However, until the Trump administration, no one had considered throwing the judge off the court in order to change the rules of the game.

It would be naive to think that the WTO would emerge unscathed from the storm unleashed on the world by Trump. The U.S. has abandoned the Paris climate agreement and the nuclear pact with Iran, left UNESCO, left the U.N. Human Rights Council, and the list goes on. It is remarkable that the U.S. has not already left the WTO.

Several countries have been exploring creative, though imperfect, solutions to the crisis. The European Union has proposed a kind of an Appellate Body B while the impasse persists. The idea is to create a parallel mechanism for judging appeals, with the participation of former members of the “court.”

The solution would be applicable only for the countries concerned, but it would be valuable if supported by other key players.

The question is whether the Americans will finally pass the bill, whether they will indicate exactly what changes they want to make to the WTO, or if it will become clear that the goal truly was to end the Appellate Body.

Lest anyone says so, this is not the end of the WTO. This is not even the end of the dispute settlement system. A reasonable number of disputes end in the lower court, and it continues to work. And the WTO does more than settle disputes.

For nearly 25 years, the dispute settlement system, with an Appellate Body, has made history in international trade, helping to ensure that the rules agreed to are enforced.

It is practically a miracle of international law that the system has been working relatively well up to now.

Dismantling it has consequences, including for Brazil, which has won important victories for Embraer and for the cotton, sugar, meat and other sectors.

For the Brazilian steel industry, the target of American protectionism, it has become more difficult to even file a complaint.

2019 will be a dark chapter in the history of using the law to settle international disputes.