The Closure of the WTO Appellate Body: The End of World Trade As We Know It?

by Pankhuri Prasad
Staff Writer

Is the world coming to an end? Hopefully not. But it could be the end of world trade as we have known it for the past two decades. During a course I took in the winter of 2018, my International Economics and Politics professor mentioned how the World Trade Organization (WTO) may face a severe crisis in the near future. At the time, the likelihood of such a crisis seemed low and distant. However, with the end of 2019 looming near, international trade is quickly heading into uncharted waters as the Appellate Body of the organization is facing extinction. The World Trade Organization (WTO) can be understood as the only global organization mediating nations by establishing the international rules of trade. At its core, the WTO is held up by the many multilateral agreements that are signed and negotiated by a majority of the world’s trading nations. The WTO is unique from other major international organizations because it yields effective enforcement through its dispute settlement mechanism. The dispute settlement mechanism, as the name suggests, is a system of solving disputes that may arise when one country or a group of countries believe that another country’s trade policies could be considered as a violation of WTO policies and principles. If the dispute cannot be settled through negotiations, an impartial panel of experts issue a ruling on the matter. 

The Appellate Body essentially acts as a supreme court and hears appeals about rulings issued by panels. This translates into a strong enforcement mechanism because the ruling goes into effect unless all WTO members vote unanimously to block the ruling. The defendant must then end the offending policy or pay compensation to the complainant. If no agreement can be reached on compensation, the injured party is authorized to impose retaliatory tariffs. Thus, this system differentiates the WTO from other international organizations because it imposes real economic consequences for flouting rules. 

As mentioned before, the Appellate Body may shut down at the end of this year. How did this happen? The answer is complicated. The immediate reason is that the United States vetoed the appointment of judges to such body. On December tenth of this year, two of the three remaining members will retire. Without them, the body will not be in quorum and will be forced to stop operations. The body typically consists of seven people but needs a minimum of three judges to hear cases and issue rulings. It is important to note that WTO panels will still be functional, but there will be no finality on issues since appeals to these decisions will be impossible.  

Why has the United States blocked appointments of judges? They have a long-standing list of complaints and criticisms of the WTO. Most importantly, the United States believes the Appellate Body has strayed away from its original mandate of a body that simply clarified existing rules. Instead, in many cases the system has been accused of “judicial activism”—taking decisions that are not grounded in preexisting rules of the organization. The reason for this is that the original rules of the WTO have seen almost no revision since the organization was created twenty-four years ago. Negotiations on new rules have been slow. The last round of negotiations started in 2001 and ended in failure in 2015. Other than asserting that the body is overly deliberative, the United States also believes the dispute mechanism process simply takes too much time. The 2019 Annual Report presented by the body showed that the average trade dispute takes about three and a half years, in total, before it is settled. 

How are other countries reacting to this? Canada and the European Union have agreed on a “shadow Appellate Body” that will operate similar to the current body. The United States expressed concern that other WTO members, including the European Union, are not as concerned about how the body has overstepped its jurisdiction. Although the Trump administration has been more assertive about the issue than other administrations, America’s grievances with the organization go back to President Obama’s term when his administration blocked the appointment of judges in 2016. 

The possibility of resolution seems low when there is disagreement among members on whether a problem exists or not with the dispute settlement mechanism itself. Furthermore, the United States has not signaled that it would be willing to lead reforms that might save the Appellate Body. Any leverage the White House might have will be substantially lowered once the body ceases to function in December. In fact, quite the opposite direction, as they are going from leading reform to threatening to block the passing of the international organization’s budget. 

Photograph of the second WTO Ministerial Conference which was held in Geneva, Switzerland in May of 1998.

What will this mean for world trade? Some have argued that dispute settlements should proceed as usual, only without America’s involvement, but that comes at the risk of ostracizing the system’s most frequent user. Disputes will still be decided by the panels. Without an appeals system however, the decisions could be used by countries to pressure trade rivals. Without a functional appeals system, international trade disputes could evolve into tit-for-tat tariff wars. Countries may feel emboldened to flout trade laws. 

There is no question that the WTO needs structural reform, but the United States will not lead this reform unless other countries concede that the international organization has overstepped its jurisdiction. This is yet another example of the country’s decreasing appreciation of international organizations. Earlier this year, the United Nations declared a cash crisis, partly due to lack of funding from its largest contributor, the United States. The question remains whether the economic hegemon sees these global regimes as worth saving. Do they see the WTO as vital to strengthening the global trading system and thus the American economy? The verdict is out. Meanwhile, what is certain is that global trade is entering a period of unprecedented uncertainties. 

Photos courtesy of:

Chutter Snap

World Trade Organization

Old Alternatives: The Return of Nationalism to German Politics

By Marc Camanag
Staff Writer

Six years after a seemingly innocuous entrance into the political sphere, the right-wing Alternative for Germany (AfD) has grown into a nationalist powerhouse that holds the third-largest share in the country’s federal parliament. Echoing similar movements across Europe, the AfD’s platform has tapped into deep-rooted, populist fears to launch itself on a trajectory that no party has ever pulled off in such short time. As the first far-right party to set foot in the Bundestag in nearly sixty years, the AfD raises the question: Why has nationalism returned to German politics, and why now? 

Continue reading “Old Alternatives: The Return of Nationalism to German Politics”

A WINTER STORM IS COMING

A WINTER STORM IS COMING photo Screen Shot 2015-10-24 at 11.41.33 PM_zps2r5slxjg.png

By Anjleena Sahni
Staff Writer

In recent years, the global climate has been an increasingly dominant topic of conversation. As floods, typhoons, and hurricanes plague nations around the world, a close watch has been kept on any abnormal weather patterns. One of these observed patterns is El Niño, a centuries old phenomenon characterized by a warming of the surface layers in the equatorial Pacific Ocean. Generally, El Niño is known as the warming of waters along the Pacific equator. According to the National Oceanic and Atmospheric Administration (NOAA), El Niño occurs about every two to seven years, developing from April through June and manifesting in December through February. During El Niño, the physical relationships between trade winds, currents, and oceanic/atmospheric temperature break from their regular patterns, wreaking havoc on the biosphere and weather conditions around the world (“The TAO Project…”). I will explain what causes El Niño, and how this inexplicable phenomenon affects different parts of the globe.

The normal pattern of Pacific trade winds are to blow from east to west, dragging warm surface water westward with them. Just east of Indonesia, the warm surface waters form a deep pool. In a process known as upwelling, colder waters containing essential nutrients rise to the surface, nourishing organisms that would otherwise not survive. However for unknown reasons, the trade winds occasionally relax, or even reverse direction. In response, the warm surface waters from the pool formed east of Indonesia begin to shift eastward (“NOAA/PMEL/TAO…”). These warm surface waters essentially act as a cap, preventing the nutrient rich cold water from upwelling. Phytoplankton, the foundation of the marine food chain, starve, along with dependent fish and mammals higher up on the food chain (“What is El Niño…”).

The most recent forecast, put forth by Colombia University’s International Research Institute for Climate and Society (IRI), confirms, “All atmospheric variables strongly support the El Niño pattern, including weakened trade winds and excess rainfall in the east-central tropical Pacific” (“2015 October Quick Look”). The consensus of prediction models is that strong El Niño conditions will continue through the season, with peak temperatures in January or February. Currently, this year’s El Niño is forecasted to be on par with the El Niño of 1997, the strongest on record. The general prediction, based on patterns of the past, is that North and South America will experience more precipitation and possible storm-like conditions, while East Africa, Australia, and Indonesia face drought (“NOAA/PMEL/TAO…”).

The significance of El Niño lies with its wide reaching global effects; the disruption of local weather patterns have profound consequences around the world, often affecting the most vulnerable groups. In 1982, 25% of the adult fur seal and sea lion populations along the coast of Peru starved to death. All of the pups in both populations died, and fish populations were similarly affected. In the western Pacific, changes in sea level exposed the upper layers of many coral reefs in surrounding islands, allowing air to erode and destroy them (“NOAA/PMEL/TAO…”). Economic impacts are equally critical. The El Niño of 1982-83 is estimated by the NOAA to have caused about 8 billion dollars in damages due to floods, severe storms, droughts, and fires around the world. In the same year, wildfires killed an estimated 75 people and burned 2,500 houses in Australia alone. Countries with fewer resources to cope with the climate conditions, such as nearby Papua New Guinea, are affected even more drastically (“ (“‘Super’ El Niño…”). Largely rural areas in Africa and Central America, already suffering from problematic climate conditions and persistent drought, face aggravated circumstances with the predicted “super” El Niño. In the worst-case scenario, drought and starvation could become push factors, driving people out of their countries in search of refuge(“‘Super’ El Niño…”). With the current migration crises in Europe and the Middle East, additional thousands of displaced migrants would cause pandemonium, exacerbating the precarious political and economic situations in each region. It is impossible to make an exact prediction, but this year’s event could potentially bring drought, typhoons, landslides, or any number of the weather conditions that have been observed in the past. Although its effects are unpredictable, the patterns of the past indicate that this year’s “super” El Niño could have some serious ramifications worldwide, both ecologically and economically.

Works Cited

“2015 October Quick Look.” International Research Institute for Climate and Society. 15 Oct.       2015. Web. 24 Oct. 2015.

“NOAA/PMEL/TAO: The El Niño Story.” NOAA/PMEL/TAO: The El Niño Story. Web. 24 Oct.  2015.

“‘Super’ El Niño Looks Set to Ruin the Lives of Many of the World’s Most Vulnerable People |    VICE News.” VICE News RSS. VICE News. Web. 24 Oct. 2015.

“The TAO Project: Definitions of El Nino.” The TAO Project: Definitions of El Nino. Web. 24      Oct. 2015.

“What Is El Nino? Fact Sheet: Feature Articles.” What Is El Nino? Fact Sheet: Feature Articles.    Web. 24 Oct. 2015.

https://news.vice.com/article/super-el-nio-looks-set-to-ruin-the-lives-of-many-of-the-worlds-most-vulnerable-people

http://earthobservatory.nasa.gov/Features/ElNino/

http://iri.columbia.edu/our-expertise/climate/forecasts/enso/current/

http://www.pmel.noaa.gov/tao/elnino/el-nino-story.html

http://www.pmel.noaa.gov/tao/proj_over/ensodefs.html

Image by NASA Goddard Space Flight Center