16/08/2019 - International Relations | GS II

IAS Parliament 5 years

KEY POINTS

· For more than two years, the US has obdurately opposed the appointment of persons to fill vacancies in the seven-member Appellate Body (AB) of the WTO. As a result, the strength of the AB has already been reduced to three.

· In this context, the EU and Canada have jointly indicated their intention to resort to arbitration under Article 25 of the Dispute Settlement Understanding (DSU), and set up an interim arbitration procedure.

· This procedure will be followed in disputes involving the two WTO members if the AB is unable to hear appeals due to an insufficient number of members.

· A distinctive feature of the Agreement is a finely balanced structure for dispute settlement, with an enforcement machinery to ensure observance of rules.

· The rules provide for procedures to deal with disagreements on the reasonable period and on whether there has been compliance.

· In case of reluctance or refusal to implement, the affected member may seek enforcement by requesting the DSB to authorise retaliatory measures.

· The DSB may allow retaliation in the same sector (goods, services or intellectual property rights) or even authorise cross-retaliation, but it must be at the same level as the measure complained against.

· The process of enforcement is, thus, controlled multilaterally to ensure fairness of treatment towards all concerned.

· The absence of a functioning AB will not only deny the affected member two levels of adjudication on its complaint, but even the single level of adjudication will become unviable.

· The inability of the AB to hear appeals will create a void in WTO’s dispute settlement machinery, changing it fundamentally.

· The EU-Canada proposal is aimed at redressing this aforementioned deficiency. The suggestion is to set up an alternative mechanism that will replicate the existing system in the WTO for carrying out hearings after the panel stage.

· For India, the appeals process being in abeyance does not mean that it will escape the consequences if it were to lose in any of the disputes raised against it.

· It means that India will be vulnerable to arbitrary retaliatory measures as the complainants will not be under the restraint of measures authorised by the DSB, and may be inclined to take action in accordance with their own interpretation of the rules.