The Biden administration’s approach to international negotiations marks a step change in US trade policy. But despite a change in tone towards the World Trade Organization (WTO), there is little indication that the US will prioritise tackling key issues plaguing the global trade body.
On February 5, two weeks after his inauguration, President Joe Biden marked the US’ return to multilateralism by lifting opposition to the appointment of Nigeria’s Ngozi Okonjo-Iweala as the new director general of the WTO.
Breaking this impasse, in place since October when the Office of the US Trade Representative (USTR) – then led by Robert Lighthizer – threw its support behind Korean Trade Minister Yoo Myung-hee instead, was a major step.
“Without the recent swift action by the Biden-Harris administration to join the consensus of the membership on my candidacy, we would not be here today,” said Okonjo-Iweala recently. “I am grateful to the US for the prompt action and strong expression of support.”
With a director general in place, all eyes turned to the monthly WTO dispute settlement body meeting on February 22, with hopes high that the Biden administration would take the lead in reversing the Trump administration-imposed logjam there.
“The WTO no longer guarantees access to a binding, two-tier, independent and impartial resolution of trade disputes. This is in clear breach of the WTO agreements,” said the EU in a statement at the meeting.
The WTO’s appellate body has been without the quorum necessary to hear appeals since the Trump administration, insisting that that it had outstepped its mandate, blocked the appointment of new nominees in December 2019 – effectively cutting off its ability to resolve international trade disputes.
“As we have said so many times, WTO members have a shared responsibility to resolve this issue as soon as possible, and to fill the outstanding vacancies as required by Article 17.2 of the dispute settlement understanding,” the EU statement said. “The EU renews its call on all WTO members to engage in a constructive discussion so that the vacancies can be filled as soon as possible.”
Much to the chagrin of onlookers, the US’ response was negative. In response to a slate of proposed appellate body appointments, the US said in a statement that it was “not in a position” to support the decision, adding: “The United States continues to have systemic concerns with the appellate body. As members know, the United States has raised and explained its systemic concerns for more than 16 years and across multiple US administrations.”
Speaking to GTR, Andrew Shoyer, partner at law firm Sidley Austin, says: “The interregnum without a functioning appellate body is clearly perceived as a tremendous hole in the WTO, however I don’t believe – as maybe the European Commission was hoping – that this administration as a sort of peace offering will join consensus on the seven members of the appellate body, get the appellate body up and running, and then negotiate solutions on these other concerns about dispute settlement.”
The lawyer, who spent seven years at the USTR, serving most recently as legal adviser in the US Mission to the WTO in Geneva, was the principal negotiator for the US of the rules implementing the WTO dispute settlement understanding and has briefed and argued numerous WTO cases before dispute settlement panels and the WTO appellate body.
“I think this administration wants to engage in a serious negotiation to address reforms and dispute settlement, and we won’t see consensus on the appellate body until we get those reforms done,” he adds.
Reason for optimism?
Although a full return to a pre-Trump trade policy now seems unlikely, the Biden administration is seen as being willing to return the US to its historic leadership role in WTO matters.
“There is very much a reason for hope that this administration will want to re-engage seriously and that we will see real progress,” says Shoyer. “The real progress for the US economy would be made in rebuilding and moving multilateral commitments forward. The dispute settlement mechanism is an important piece of that, but I don’t see it as a burning issue for the US right now in light of the administration’s priority on climate policy. Getting the director general in place is enough probably to serve those needs right now.”
Katherine Tai, Biden’s pick for the USTR, will likely be at least somewhat less combative than her predecessor, who was particularly perturbed by what he characterised as a series of unfair appellate body rulings against the US.
“No one’s really missed [the appellate body] at all,” Lighthizer said at the Milken Institute’s 2020 Asia Summit in December last year. “It’s like there’s this mythology out there that it is needed.”
However, in her confirmation hearing, held last week, Tai showed little sign of moving away from the Trump-era stance on the dispute settlement mechanism.
“Over the years, the appellate body has overstepped its authority and erred in interpreting WTO agreements in a number of cases, to the detriment of the United States and other WTO members,” she said, in response to a question on the reforms she believes are necessary to ensure the appellate body operates as intended. “In addition, the appellate body has failed to follow existing rules created to ensure that disputes are resolved in a timely manner. Reforms are needed to ensure that the underlying causes of such problems do not resurface and that the appellate body does not diminish the rights and obligations of WTO members.”
Nonetheless, Tai does appear to intend to take a more conciliatory approach. “Katherine is very measured,” says Shoyer. “She has seen the limitations of enforcement in the WTO when she led USTR’s China enforcement office.”
At her confirmation hearing, she said that she will work in a “practical and constructive” manner to re-engage with “like-minded partners” as well as collaborating closely with Okonjo-Iweala.
Upon her appointment – which still requires Senate confirmation – Tai will have a tough job ahead of her in tackling the myriad challenges miring the relationship between the world’s largest trading nation and the world’s only multilateral trade body. While the US’ much-feted return to multilateralism under the Biden administration gathers pace, the WTO’s dysfunctional dispute settlement mechanism might take longer to recover.