Insiders Expect Appellate Body Hiatus to Last Beyond 2020

The last American to serve on the World Trade Organization's Appellate Body, Tom Graham, told the Georgetown Law International Trade Update conference that the body “is not coming back any time soon.” Graham, who largely agrees with the U.S. critique of Appellate Body overreach, added, “The new I have come to ... is that it's better this way.” Graham was the most prominent, but far from the only speaker at the March 5-6 conference to say that neither the Europeans nor the Americans are ready to have a meeting of the minds on how to reform the appellate function of the rules-based trading order.

Graham, who spent eight years on the Appellate Body, said the Appellate Body and its Secretariat had a sense of infallibility, which he summed up as: “It's right because we say it.” He said they also aimed to create a body of jurisprudence to stave off future disputes, which is not on the mandate of the Appellate Body. And, he said, there was an over-reliance on precedent, which he said, “baked in mistakes.” Graham said that gap filling by the Appellate Body has made future negotiations more difficult, if not impossible, since negotiators like to leave constructive ambiguity in text when they cannot reach agreement.

Council on Foreign Relations' Jennifer Hillman, also an Appellate Body member from the U.S., spoke in a later panel. While she has been critical of the U.S. resistance to laying out solutions -- something Graham said was a natural outcome of other countries' refusal to address complaints outside those of process -- she agreed that there is been an over-judicialization of the system.

“Appeals were supposed to be rare,” Hillman said, but 70% of cases are appealed.

Hillman also agreed with Graham that there are problems with how the Secretariat staff interacts with the Appellate Body appointees. The body members are part-time and have shorter tenure than the professional staff. “The Secretariat at the Appellate Body has become too domineering,” she said, and is extremely wedded to precedent.

Hillman has suggestions for how to satisfy American complaints that go beyond the 90-day time limit for reports and Appellate Body members staying past their terms to complete cases. She believes professional staff should rotate at the WTO, and said that if Appellate Body professional staff spent time at Legal Issues, where they would serve the panelists, they might be less inclined to recommend that panels' findings be routinely overturned.

She said there should be an annual audit of how the Appellate Body is functioning, which will give members more oversight, and should address American concerns that the Appellate Body reforms that have been suggested will not be honored. The U.S. says the original text governing the Appellate Body has not been honored, so it doesn't have confidence things will be different if it is reconstituted.

Panelists also talked about how WTO decisions might change now that there is no Appellate Body. Robert McDougall, senior legal counsel for Global Affairs Canada, said he didn't think appealing into the void would be the most common outcome, as some have feared. (McDougall was giving his personal views, not speaking for the Canadian government). He said it's not the get-out-of-jail-free card some think it is, and he thinks many panels won't be appealed, or the two parties will reach a settlement, either through arbitration or through bilateral negotiation. This would be more like how things operated under the General Agreement on Tariffs and Trade (GATT), and he said it could lead to more pragmatic solutions.

Jesse Kreier, retired acting director of the WTO rules division, said panels may feel they have more room since there won't be ironclad Appellate Body approaches that would undo their work. He said this could change the outcome of cases challenging U.S. antidumping methodology -- like zeroing -- among other issues.

He also noted that some panel and Appellate Body rulings that came out in 2019 hint at a pathway for tackling the problem of how narrowly WTO has interpreted what a “public body” is. The U.S. -- and others -- argue that a too-narrow definition of public body makes it more difficult to counter non-market subsidies.

He noted that in several antidumping cases, the WTO jurists said that instructions on how investigators into antidumping should “normally” rely on companies' own data about the cost of their inputs doesn't mean they always have to use those records when there is evidence those inputs are subsidized by the government, and those subsidies mean the input costs producers below the cost to produce those inputs in a market context. He said that leaves open the door to using AD law to tackle subsidies.