Dr. Boniface Chimpango, 02 September 2020.
As the campaign for the top most position in international trade – the Director General of the World Trade Organisation (WTO) – rolls on, two candidates have emerged as favourites. They are both women and African. Kenya’s Amina Mohamed and Nigeria’s Ngozi Okonjo-Iweala are said to be the favourites to be appointed WTO director-general after incumbent Roberto Azevêdo steps down in September. This has generated excitement as either way history is in the making – there is a high likelihood that the next director-general of the WTO will be a woman and from Africa.
The two candidates have marketed themselves as having a personalised and distinguished vision for the multilateral trading system under the auspices of the WTO. The two candidates have presented themselves as a good fit for the job based on their distinct career track records and professional pedigrees. Amina Mohamed is former Cabinet Secretary for Foreign Affairs of Kenya and has also served as the country’s ambassador to the WTO. In 2015 she played host to the WTO’s Ministerial Conference that was held in Nairobi, Kenya. She has since described herself as a ‘plug-and-play candidate’[1] who is ‘ready to get to work and hit the ground running’[2]. Ngozi Okonjo-Iweala is a renowned economist who has previously served as Nigerian Finance Minister and managing director of the World Bank. She is currently chairperson for Gavi, an international alliance to develop and deliver vaccines. She has described herself as having the ‘qualification and leadership characteristics’[3] required for the job and ‘a proven track record in carrying out successful reforms both at the World Bank and as Finance Minister in Nigeria’[4].
While the two candidates have divergent professional pedigrees and experiences, which may inform divergent diagnoses of the current challenges facing the multilateral trading system and ultimately their vision and direction of the WTO, the two candidates seem to have convergent views on dealing with the current impasse in the WTO’s dispute settlement system that has been sparked by the United States’ refusal to appoint judges to the WTO’s Appellate Body (AB) resulting in a complete stalemate of the operations of the AB. The US has criticised the AB of judicial over-reach in its interpretation of the WTO covered agreements. In its Report on the Appellate Body of the World Trade Organisation the United States Trade Representative (USTR), summarised the US’ criticism of the AB as follows:
“…the Appellate Body has repeatedly failed to apply the rules of the WTO agreements in a manner that adheres to the text of those agreements, as negotiated and agreed by WTO Members. The Appellate Body has strayed far from the limited role that WTO Members assigned to it, ignoring the text of the WTO agreements. Through this persistent overreaching, the Appellate Body has increased its own power and seized from sovereign nations and other WTO Members authority that it was not provided”[5].
When asked about her views on the US concerns about the WTO appellate body, Amina Mohamed, said she feels the criticism is fair and real[6]. She stated that:
“The feeling in Geneva among very many members is that they [the appellate body] went outside the mandate that was granted to them…We need to make sure… that the appellate body members understand that is the only mandate that they can have, that they cannot add to or diminish the rights of parties. Those rights were negotiated by member states.”[7]
On her part, Ngozi Okonko-Iweala expressed similar sentiments and remarked that ‘most people agree that they [the US] have a point-that there may have been instances where the appellate body may have acted beyond the covered agreements that members reached.’[8]
The views of these two leading candidates give us a sneak peek of what may be the direction of reform of the WTO dispute settlement system under the new WTO administration. So will the WTO cave in to the US pressure on the mandate of the WTO dispute settlement system to interpret WTO covered agreements? And is there any merit in the US criticism of the WTO appellate body, in the first place?
The concerns of the US in relation to the decisions of the WTO AB should be taken with some degree of circumspection. The US being one of the top trading countries in the world, is inevitably a frequent user of the WTO dispute settlement system. Since the reorganisation of the dispute settlement system under the DSU Agreement[9] the US has appeared before the AB either as a claimant or a respondent on several occasions. While the AB has decided against the US in some disputes, it has also determined some disputes in favour of the US. Would it therefore be the case that the US is just playing sore loser with regard to those disputes that did not go in its favour? That cannot be far-fetched. In fact, some WTO members view claims of overreach as ‘sour grapes over U.S. losses in specific cases’[10]. Further, the US has in recent years lost appetite for the idea of multilateralism and has been drifting towards unilateralism. The US’ changing taste for international cooperation manifested in its dealings with different international agencies including the United Nations and World Health Organisation. The US’ fight against WTO dispute settlement system may, therefore, just be a proxy for its fight against everything multilateralism.
Interpretation of WTO covered agreement is a clear mandate of the WTO dispute settlement system through its panel and AB decisions. Under Article 3.2 of the DSU Agreement, one of the functions of the WTO dispute settlement system is to clarify the existing provisions of the covered agreements. This role is very crucial because many provisions of the covered agreements are said to be ‘shrouded in ambiguity’ and therefore, require clarification in particular dispute settlement proceedings.
The truth is that the US’ accusation of judicial over-reach against the WTO dispute settlement system has little justification if any. Firstly, it should be noted that the DSU Agreement itself has internal safeguards against judicial activism by WTO panels and the AB. Article 3.2 of the DSU, third sentence, provides that:
“Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements”.
This is further reinforced by the provisions of Article 19.2 of the DSU Agreement, which states as follows:
“In accordance with paragraph 2 of Article 3, in their findings and recommendations, the panel and Appellate Body cannot add to or diminish the rights and obligations provided in the covered agreements”.
The combined effect of Articles 3.2 and 19.2 of the DSU Agreement is that WTO panels and the AB must interpret WTO covered agreements by clarifying what WTO intended to accomplish through those agreements without adding to or diminishing the rights and obligations of the members. The WTO judges themselves are well aware of the scope of their mandate as it was explained in the AB decision in the case of US – Stainless Steel (Mexico) (2008) where it stated as follows:
“Clarification, as envisaged in Article 3.2 of the DSU, elucidates the scope and meaning of the provisions of the covered agreements in accordance with customary rules of interpretation of public international law. While the application of a provision may be regarded as confined to the context in which it takes place, the relevance of clarification contained in adopted Appellate Body reports is not limited to the application of a particular provision in a specific case…”
Secondly, Article IX:2 of the WTO Agreement makes it clear that it is the exclusive competence of the Ministerial Conference and the General Council to adopt ‘authoritative’ interpretations of the provisions of the WTO Agreement and the Multilateral Trade Agreements. And Article 3.9 of the DSU Agreement stipulates that the provisions of the DSU Agreement are without prejudice to the rights of Members to seek such ‘authoritative’ interpretation. In line with these provisions, every decision of a WTO panel or AB has to be adopted by the WTO General Council sitting as the Dispute Settlement Body (DSB) using ‘reverse consensus’ method, which requires that the DSB must approve the decision unless there is a consensus against it[11].
This was confirmed in the case of US – Certain EC Products (2001), where the AB held that:
‘Determining what the rules and procedures of the DSU ought to be is not our responsibility nor the responsibility of panels; it is clearly the responsibility solely of the Members of the WTO’. [Emphasis provided].
In the case of Chile – Alcoholic Beverages (2000), Chile argued before the Appellate Body that the panel had acted inconsistently with Articles 3.2 and 19.2 of the DSU as it had added to the rights and obligations of Members. The Appellate Body found, however that:
[w]e have difficulty in envisaging circumstances in which a panel could add to the rights and obligations of a Member of the WTO if its conclusions reflected a correct interpretation and application of provisions of the covered agreements.
Given the inherent safeguards against judicial overreach that the DSU agreement has, the US criticism of the WTO Dispute Settlement System is without merit. Therefore, the in-coming WTO Director-General will be well advised to engage the US with a negotiating position that is backed by both the facts and the law.
[1] See, Barbara Moen, Kenya’s WTO front-runner says she’s the ‘plug-and-play’ choice, The Polico, 8th June 2020. https://www.politico.eu/article/kenyas-wto-front-runner-says-shes-the-plug-and-play-choice-amina-mohamed/
[2] Ibid.
[3] Ngozi Okonjo-Iweala, Press briefing at the WTO, 15 July 2020. https://www.youtube.com/watch?v=XZcVUPaMbnA
[4] Ngozi Okonjo-Iweala, Statement to WTO General Council, 15 July 2020. https://www.wto.org/english/thewto_e/dg_e/dgsel20_e/stat_nga_e.pdf
[5]The United States Trade Representative, Report on the Appellate Body of the World Trade Organisation Feb. 2020, https://ustr.gov/sites/default/files/Report_on_the_Appellate_Body_of_the_World_Trade_Organization.pdf p. 1
[6] Alan Beattie, Leading WTO candidates back US bid for dispute system reforms, Financial Times, 4 August 2020. https://www.ft.com/content/f4830e2b-df7b-474a-8104-6336992ca193
[7] Ibid.
[8] Ibid.
[9] Understanding on Rules and Procedures Governing the Settlement of Disputes
[10]See, Jennifer Anne Hillman, ‘A Reset of the World Trade Organization’s Appellate Body’, Council on Foreign Relations, 14 January 2020.
[11] Article 6.1 of the DSU
CROSS BORDER TRADE LAW 