/China among 15 countries to create new trade appeals system based on Canada-EU deal

China among 15 countries to create new trade appeals system based on Canada-EU deal

Fifteen additional countries, including China, have signed on to create an interim mechanism for resolving global trade disputes that will be modelled on an agreement Canada and the European Union first struck in December.

The move by Canada and the EU to create an alternate forum for handling trade gripes came after the United States paralyzed the World Trade Organization’s top trade court, or appellate body, by blocking the appointment of new judges.

Norway was the first country to join the nascent arrangement, which preserves the WTO’s two-step dispute system until the appellate body becomes operational again.

Friday’s announcement from the World Economic Forum in Davos adds Australia, Brazil, Chile, Colombia, Costa Rica, Guatemala, South Korea, Mexico, New Zealand, Panama, Singapore, Switzerland, China and Uruguay.

“We are very pleased we’ve been able to find consensus among such a diverse group of WTO members,” International Trade Minister Mary Ng said in an interview from Davos. “I think this is a big step in the right direction to build on the progress we’ve made with the EU.”

The United States has spent two years blocking the appointment of new judges to the WTO appellate body; in December, the body was left without the minimum of three members needed to hear cases.

Though WTO panels continue to issue decisions on trade disputes, the loss of the appellate body prompted concerns that countries would act in bad faith, exercising their right to file appeals even as the forum for hearing them ground to a halt. This practice of “appealing into the void” would throw cases into limbo.

In response, Ottawa and the EU signed an interim appeals mechanism that kicked in immediately when the WTO’s forum ceased to operate in December. Since then, the two countries have been working to bring other nations on board, lest the world be left without a global trade referee.

“This is important for Canada because we are a relatively small trading nation that often has to go up against the big guys like the United States and China,” said Nicolas Lamp, a law professor at Queen’s University and former dispute settlement lawyer with the WTO in Geneva. “The WTO has been the main avenue for Canada to do that and this means its decisions will remain viable.”

China’s involvement in the interim mechanism is particularly significant for Canada, which is currently pursuing a WTO complaint against Beijing stemming from its decision to block all purchases of Canadian canola. That decision is widely viewed as retaliation for the arrest of Huawei senior executive Meng Wanzhou in Vancouver.

Under the interim mechanism announced Friday, countries agree to appeal any WTO panel reports to a binding arbitration panel — essentially preventing China from stymying the case by “appealing into the void.”

“This shows that China is not opportunistically taking advantage of the fact that the U.S. is trying to destroy the system,” Lamp said. “It is sending a message that for the time being, it is committed to preserving a rules-based trading system and the rule of law over the rule of the jungle. It also shows how isolated the U.S. is becoming among major trading nations.”

China is not opportunistically taking advantage of the fact that the U.S. is trying to destroy the system

Nicolas Lamp, law professor at Queen’s University

The interim system announced Friday will be based on Article 25 of the WTO Dispute Settlement Understanding and will only be in place until the organization’s appellate body is fully operational again. Its decisions will be both binding and impartial, EU trade Commissioner Phil Hogan said in a separate statement.

Ng said the countries had committed to finalizing the joint arrangement as soon as possible.

“That’s a high priority and for all of the countries that have signed on, our officials have been directed to work immediately on putting this together,” she said.

Ng said the countries remained committed to discussing WTO reform with the U.S., which has accused the appellate body of overreaching its mandate and treating American concerns unfairly while failing to address adverse trade practices by China. Canada is already leading the Ottawa Group, a collection of 13 like-minded nations committed to resolving the appellate body impasse at the organization.

“It’s been no small task but this interim arrangement is open to any WTO member willing to join it,” said Ng, who hosted a Thursday evening meeting of the Ottawa Group in Davos. “Our first priority remains finding a permanent solution to the appellate body impasse. I think it’s important the president is raising these issues and we’re looking forward to discussing WTO reform with the U.S.”

Upon leaving Davos Wednesday, Trump said a WTO delegation would be in Washington next week.

“We’re going to do something that I think will be very dramatic,” he said, without adding any further detail.

Financial Post

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