WTO - US Steps Up with DSB Proposal

The United States outlined its ambitions last week for a "revamped dispute resolution system" within the World Trade Organization (WTO). One of the key tenets includes prohibiting discussions on national security matters during the arbitration process.

The US proposal, however, left out any reference to maintaining the current two-tiered system for dispute resolution that includes an Appellate Body as the final arbiter in the WTO's enforcement operations.

Washington's reform suggestions have recently met with considerable pushback, as several WTO members rejected its notions about appellate review and sunset provisions among other topics, during an ongoing facilitator-led informal conversation.

Despite these challenges, the United States confirmed its intent to take a leading role in all areas of potential contribution, including dispute settlement reform. It emphasized, however, that profound reform could only be achieved through a collective process driven by WTO members.

In lieu of placing emphasis on the pivotal role the two-tiered dispute resolution system plays in the WTO's enforcement role, the US proposed that the resolution system should leave room within WTO rules for members to manage their crucial societal interests.

Reform of the Dispute Settlement System was mandated by trade ministers during the WTO’s 12th ministerial conference in June 2022.

However, some have characterized the reform discussion as increasingly a one-on-one contest between Washington and the rest of the WTO membership, according to several negotiators privy to the informal talks.

Although facing significant opposition to its reform proposals during informal discussions, the US continues to support the facilitator's work and emphasizes that no single member can dictate reform terms.

The United States has listed several positive contributions that a reformed dispute resolution system could bring about, including facilitating dispute resolution, preserving existing commitments and rules, maintaining fairness in the trading system, and respecting members' security interests, among others.

However, Washington's aims for a revamped dispute resolution system appear to dodge the need for a proper two-tiered system where issues are decided based on their legal and compliance merits rather than national security interests, as observed by several negotiators.

Washington's suggestion for Appellate Review was met with resistance from multiple countries including China, the European Union, Canada, Australia, India, Pakistan, and South Africa in recent informal discussions.

The United States, since December 2019, has been frequently blocking the selection process for the appointment of members to the highest adjudicating body at the WTO, effectively stagnating the two-tier dispute settlement system. Its recent proposal on Appellate Review suggests a weakened authority, according to negotiators familiar with the discussions.

A former negotiator highlighted the need for a thorough discussion on the implications of moving away from the two-tier system on the Marrakesh Agreement and its subsequent amendment procedures.