Canada has been a member of the World Trade Organization (WTO) since its founding in 1995, and is a strong proponent of the multilateral trading system, with the WTO at its core. Creating opportunities for Canadian workers and businesses through WTO participation is a central part of our trade strategy.
The WTO’s Appellate Body (AB) is part of the organization’s system for resolving trade disputes among member states. It consists of a body of up to seven members, appointed by the WTO’s Dispute Settlement Body (DSB). Members are appointed for four year terms, and a minimum of three members are required to hear cases.
There are currently three members appointed to the AB, and the terms for two of them are set to expire on December 10th. The United States has blocked the appointment of new members. The US has articulated several longstanding concerns with the AB and DSB more broadly, such as the length of time cases take to be resolved, and what the US perceives as judges’ overly broad interpretation of trade rules. Should the US continue to block appointments, the AB would effectively be prevented from hearing new cases, which would create great uncertainty in the world trading system.
Canada is sympathetic to the frustrations expressed by the US, along with the need for more broad reforms within the WTO in general. However, we cannot lose sight of the benefits we gain by having a functional WTO undergirded by binding dispute settlement. The system provides stability and predictability to member nations and businesses, and helps avoid a ‘law of the jungle’ environment where members engage in tit-for-tat retaliation, through tariffs and other measures which decrease trade. In fact, through the DSB, the US actually has a perfect record – 20-0 – in disputes against the member it has been most critical of: China. These wins have resulted in real changes in Chinese trade practices over the years, including amendments to unfair import charges, the removal of value added taxes, and favourable changes to the US in the areas of copyright and licensing.
What steps is Canada taking to address US concerns, and to push for more comprehensive WTO reform?
First, a permanent resolution to the AB impasse is a priority for Canada. In the meantime,
Canada and the EU announced on July 25th their intention to use an interim appeal arbitration procedure, with former AB members as arbitrators. This is permissible under article 25 of the Dispute Settlement Understanding (DSU), enabling Members to resort to arbitration as a form of dispute settlement, and could remain in place until the problem of appellate-appointments is resolved.
Second, Canada is leading a bottom-up process with like-minded WTO members, dubbed the Ottawa Group, on how we can achieve realistic and pragmatic WTO reforms over the short, medium and long term. The group consists of Canada, Australia, New Zealand, EU, Japan, Brazil, Kenya, Switzerland, Singapore, South Korea, Norway, Mexico and Chile. The group focuses on three main themes:
- Actions to improve the efficiency and effectiveness of the WTO
- Safeguarding and strengthening the dispute-settlement system
- Reinvigorating the WTO’s negotiating function.
Starting in October 2018, three meetings at the Ministerial level have thus far been held. A broad range of topics have been covered, from improving the day to day operations of committees, to reinvigorating the negotiating function of the WTO, to supporting discussions between experts and negotiators in industries like fisheries.
Third, Canada is also engaged on efforts to reform the key transparency function of the WTO. This includes co-sponsoring the U.S.-EU-Japan joint proposal for enhancing transparency and strengthening notification requirements under the WTO Agreements. This proposal conveys the importance of transparency, particularly in meeting notification requirements, which is a critical crosscutting issue where progress may be made in improving the institutional effectiveness of the WTO.
Through all of these efforts, Canada will continue to play a constructive and pro-active role in WTO reform. It is Canada’s hope that the US will also continue to advance concrete proposals for WTO reform where needed, including with respect to the AB system. The Organization remains not only the best forum for achieving broadly based trade liberalization, but also a key component of the rules-based international order that Canada will continue to advocate for around the world.