WTO faces crisis over disputes settlement

The appellate branch of the WTO’s Dispute Settlement Body had been a target of US criticism before President Donald Trump took office. (Reuters/File)
Updated 08 December 2019

WTO faces crisis over disputes settlement

  • Trump’s trade team has both extended that policy and escalated the fight

GENEVA: The World Trade Organization’s capacity to settle international disputes, a core function throughout the body’s 25-year history, is on the brink of collapse following relentless US opposition.

The appellate branch of the WTO’s Dispute Settlement Body (DSB), sometimes dubbed the supreme court of world trade, was a target of US criticism before President Donald Trump took office.

His predecessor Barack Obama’s administration began a policy of blocking the appointment of appeals judges over concerns that their rulings violated American interests.

Trump’s trade team has both extended that policy and escalated the fight.

Barring a shock breakthrough in the coming days, the court will cease functioning on Wednesday.

The WTO appellate branch normally counts seven judges but has just three left — the minimum required to hear an appeal. Two more judges are due to retire on Tuesday.

WTO Director General Roberto Azevedo warned on Friday that the organization was facing a stark choice.

“You could restore the impartial, effective, efficient two-step review that most members say they want,” he said.

“Alternatively, your choices could open the door to more uncertainty, unconstrained unilateral retaliation — and less investment, less growth, and less job creation.” Various reform proposals have secured broad support.

But according to EU trade commissioner Cecilia Malmstrom, there can no solution without US buy-in because the WTO works on consensus.

“This is a dispute between the 163 members of the WTO and the US,” she told the European Parliament last month.

US WTO envoy Dennis Shea argued on Friday that Washington had “engaged constructively over the past year” to resolve the crisis, but would not relent until its concerns were fixed.

“This is not an academic question; we will not be able to move forward until we are confident we have addressed the underlying problems and have found real solutions to prevent their recurrence,” he told a WTO meeting.

US concerns regarding the WTO appeals court include allegations of judicial overreach, delays in rendering decisions and bloated judges’ salaries.

But top American trade officials have also insisted that the US Constitution does not permit a foreign court to supersede an American one — and that WTO appellate judges assert such superiority in international trade law.

Washington reportedly threatened to block the WTO’s 2020 budget over the dispute, raising the prospect of a Jan. 1 shutdown.

The US ultimately backed a provisional budget compromise on Thursday but it included substantial appellate body cuts.

“There is no question the Trump administration has killed the appellate body,” said Edward Alden, a trade expert at the Council of Foreign Relations think tank. “That was its intention, and it has succeeded.”

The appellate body’s demise will place international trade disputes in legal limbo.

Countries will still be able to file grievances and dispute panels can issue rulings, but nations unhappy with those rulings can simply delay enforcement by filing an appeal to a non-functioning court.

The EU, Canada and others have reaffirmed their commitment to a two-step dispute process, arguing that the right of appeal is essential in any legal system.

Brussels and Ottawa have agreed to set up a temporary appellate process, which mirrors the WTO court, and would handle any bilateral disputes that arise during the impasse. Norway has joined that accord.

Leading WTO members also say they are open to wider reform.

“We have made clear that we are fully committed to tackling the root causes of the discontent around the existing system,” the EU ambassador to the WTO Aguiar Machado told AFP.

Another Western diplomat who requested anonymity told AFP the EU was willing to tackle concerns about the court’s “excesses” but said the US must first agree to begin recruiting new judges — a non-starter for Washington.

Some have suggested that a solution might have to wait until after next year’s presidential election in the US.

In the meantime, the WTO has been left diminished.

Since its founding in 1995, the organization has been tasked with promoting liberal international trade through a rules-based system backed by a dispute settlement process.

Trade promotion has faltered as the body has struggled to agree any major new deals and Alden of the Council on Foreign Relations predicted: “There will never be another big, liberalising trade round.”

Certainly, court-backed rule enforcement appears certain to suffer a heavy blow next week.


Indonesia hails ‘historic’ $22.9bn mega-investment deal with UAE

Updated 17 January 2020

Indonesia hails ‘historic’ $22.9bn mega-investment deal with UAE

  • Leaders agree initial $6.8bn projects plan, including initiative to build a replica of Abu Dhabi grand mosque in Java

JAKARTA: Indonesia’s business community on Thursday welcomed the UAE’s pledge to pump tens of billions of dollars into a wide range of key sector projects.

President Joko Widodo and his entourage secured an overall $22.9 billion deal during an official two-day visit to Abu Dhabi earlier this week covering the fields of energy, logistics, port construction, mining, and agriculture.

It was also revealed that the delegation brokered a UAE commitment to assist in establishing an Indonesian sovereign wealth fund.

At a bilateral meeting, the Indonesian leader and the Crown Prince of Abu Dhabi Sheikh Mohammed bin Zayed Al-Nahyan witnessed the signing of 11 business accords between the two countries. Indonesia’s Minister for Foreign Affairs Retno Marsudi said the UAE had committed to investing $6.8 billion out of the total agreed spending package into the initiatives.

Luhut Pandjaitan, Indonesia’s chief minister for maritime affairs and investment, described the UAE’s pledges as possibly being “the biggest deals in Indonesia’s history, secured with the UAE within only six months,” referring to the crown prince’s visit to Indonesia last July.

While most lauded the deal, some Indonesian business leaders remained cautious over the long-term prospects for the projects.

Fachry Thaib, head of the Middle East Committee and OIC at the Indonesian Chamber of Commerce, said the schemes could trigger a wide-ranging domino effect through job creation and other business ventures.

“The government needs to have a strong lobbying team that can follow up these deals and push them into investment realizations. We have had such commitments from other Gulf countries, but there was no further lobbying and the pledges were hardly realized,” he told Arab News.

Zaini Alawi, a businessman who exports and imports between Indonesia and the Middle East, said: “It would set a good precedent to attract other Gulf countries to invest here if Indonesia shows it could aptly manage these investment deals.”

Director for Middle East affairs at Indonesia’s Foreign Ministry, Achmad Rizal Purnama, told Arab News that the $6.8 billion commitment from the UAE was only the first phase of a long-term program.

Widodo and the crown prince also witnessed the signing of five government cooperation agreements in health, agriculture, Islamic affairs, and counterterrorism.

Indonesian Minister of Religious Affairs Fachrul Razi said one of the main aspects of the cooperation agreement would be the promotion of religious moderation and raising awareness of the dangers of extremism.

FASTFACT

The UAE has pledged to assist in establishing an Indonesian sovereign wealth fund.

Noting that the UAE had pledged to fund the construction of a replica of the Abu Dhabi grand mosque in Solo, the president’s hometown in Java, the minister pointed out that the grant was part of a commitment by the two countries to establish a mosque that welcomed all people and served a pivotal role in promoting the middle path of Islam.

Riza Widyarsa, a Middle East expert at the University of Indonesia, told Arab News that the cooperation deal could help more Indonesians to understand that not all countries in the Middle East observed conservative Islam. “They are also very active in countering religious extremism and radicalism,” he said.

In addition to the multi-billion-dollar projects, Purnama said Indonesia had also secured the UAE’s commitment to assist in establishing an Indonesian sovereign wealth fund into which the UAE, the US International Development Finance Corporation, and Japan’s SoftBank would inject funding.

And according to Pandjaitan, the UAE had pledged to be “the biggest contributor” to the fund.

The fund would be used to finance Indonesia’s ambitious infrastructure development projects and the construction of its proposed new capital in East Kalimantan, a relocation that has been estimated to cost $33 billion and of which Indonesia could only afford 19 percent.

He said all parties involved would meet in Tokyo soon to set up the structure of the fund and to finalize the plan, which the government expected to launch by mid-2020, a year after the crown prince proposed the idea to Widodo.

“This could be the first time that big capitalists work together in a single project,” Pandjaitan added.