The World Trade Organization (WTO) Appellate Body is about to expire, driven to oblivion by a U.S. decision to block the appointment of new judges. In December, terms of two of the three remaining members of the seven-member tribunal will end, causing the Appellate Body to go dormant due to lack of a quorum. At this time of acrimony and strife in international trade, demise of the Appellate Body would create still one more threat to the future of the global trading system.
In some ways, this imbroglio seems so improbable. America was an architect of trade liberalization, championing the founding of the General Agreement on Tariffs and Trade shortly after World War II. Eight successful rounds of GATT negotiations greatly reduced tariffs worldwide. In response, global merchandise exports have risen from only $54 billion in 1948 to almost $20 trillion in 2018, an inflation-adjusted increase of 35 times.
The United States has prospered as trade has expanded. Despite having less than 5 percent of the world’s population, our country produces almost a quarter of global output – U.S. GDP reached $20.5 trillion in 2018. Real value added by manufacturers — $2.16 trillion in 2018 – has never been larger. Employment is at a record high of over 157 million people. Unemployment at 3.5 percent hasn’t been lower in 50 years. Other factors also contribute to this strong performance. Nonetheless, casual observation would suggest that engaging with the global economy has been very good for the United States and for American workers.
The WTO dispute settlement system is worth saving. It has adjudicated hundreds of cases between member countries, including more than 120 brought by the United States against trade-distorting measures of other nations. Although not perfect, the dispute settlement system has led to meaningful reductions in unfair practices and has helped to strengthen the rules-based international trading system. Since the United States is the world’s largest trading nation, it has been one of the major beneficiaries of the WTO process.
The Trump administration has identified several shortcomings with respect to the Appellate Body’s procedures and decision making. It has been unwilling to engage in negotiations on specific issues until other countries acknowledge that the Appellate Body has strayed from its original mandate and are prepared to discuss the reasons why. Ensuring this doesn’t happen again likely would require new enforcement measures that would satisfy the United States. Under these circumstances, the Trump administration has chosen not to offer a plan of its own.
It’s time for that to change. Recently, Americans for Prosperity joined other free trade organizations in a letter urging the president to lead reform efforts by developing and presenting to WTO members a reform proposal that meets U.S. objectives.
U.S. leverage to reform the Appellate Body has grown as other nations have become more anxious about the pending collapse of the WTO’s dispute settlement mechanism. But leverage is likely to decrease substantially in December, once the Appellate Body no longer is in operation. Other countries already are working on possible alternate methods for resolving disputes – approaches over which America would have no influence.
The administration should strike while the iron is hot, capitalizing on its leverage by stating publicly that its goal is not to kill the Appellate Body, but to reform it. This would be a clear signal that the dispute settlement system should be maintained, as long as other countries are willing to negotiate meaningful reforms.
The United States would serve its own best interests by presenting a reform proposal as quickly as possible, and by stating that adoption of those measures would lead to expeditious approvals of new Appellate Body members. Such an initiative likely would be well received by other WTO members, thus opening the door to constructive negotiations.
By acting now, President Trump and his team could lead a process of constructive change. Doing so would strengthen the global trading system and boost worldwide business confidence. Vibrant international trade creates opportunities for the thousands of American companies and millions of workers that earn all or part of their livelihoods from the global economy.
There is no time to waste. Let’s save the WTO Appellate Body — and the global economy, too.
Dan Pearson, a former chairman of the U.S. International Trade Commission, is a trade policy fellow at Americans for Prosperity.