The International Trade Law Review: World Trade Organization
The World Trade Organization (WTO) provides for a comprehensive set of rules that reflects a carefully negotiated balance of rights and obligations of WTO Members. While WTO Members must honour their multilateral trade commitments, WTO rules also recognise the right of each WTO Member to pursue non-trade-related public policy objectives and to adopt trade-restrictive measures in the pursuit of certain of these objectives. In the area of trade in goods, this balance is primarily reflected in the general and security exceptions laid down respectively in Articles XX and XXI of the General Agreement on Tariffs and Trade 1994 (the GATT 1994).
The WTO agreements also contain a comprehensive set of rules related to the use of trade remedies, which allow WTO Members to counter unfair trade practices adopted by other members or to impose temporary import restrictions to shield a domestic industry from a sudden surge in imports. Apart from the general provisions contained in the GATT 1994 (Articles VI, XVI and XIX), three specific agreements, namely the Anti-Dumping Agreement (the AD Agreement),2 the Agreement on Subsidies and Countervailing Measures (the SCM Agreement) and the Agreement on Safeguards, addressing respectively the imposition of anti-dumping, anti-subsidy and safeguards measures, were adopted during the Uruguay Round. WTO Members wishing to apply these trade defence instruments must ensure that their domestic legislation is 'as such' consistent with the relevant WTO rules. They must equally make sure that each instance of application of such legislation complies with the applicable WTO provisions. Since the establishment of the WTO in 1995, disputes relating to trade remedies constitute over half of all disputes initiated.3
Section II of this chapter discusses some of the key developments of WTO jurisprudence in the past year. Those developments include the panel rulings in relation to mutually agreed solutions, the interpretation of the public morals exception, the use of facts available in countervailing duty (CVD) and anti-dumping investigations, and the use of regional benchmarks and zeroing for subsidy calculation under the SCM Agreement. Section III addresses the impact of covid-19 on WTO dispute settlement proceedings as well as the Appellate Body impasse, the Multi-party Interim Appeal-Arbitration Arrangement (MPIA) and the use of alternative means of dispute resolution. Section IV concludes by providing the likely practical and systemic implications of the clarifications brought about by the outcomes of the disputes discussed in Section II.
II SIGNIFICANT LEGAL DEVELOPMENTS
i US – Tariff Measures (DS543): settlement of the matter outside the WTO and concerns over unfair competition as a public moral objective
On 15 September 2020, the WTO circulated the panel report in US – Tariff Measures (DS543).4 This dispute concerns China's challenge of the two sets of additional ad valorem duties adopted by the United States (US) in 2018 on products imported from China pursuant to Section 301 of the Trade Act of 1974 to address China's use of 'coercion and subterfuge to steal or otherwise improperly acquire intellectual property, trade secrets, technology, and confidential business information from U.S. companies with the aim of advantaging Chinese companies and achieving China's industrial policy goals'.5
China argued that these duties violated Articles I:1 and II:1(a) and (b) of the GATT 1994.6 In response, the US claimed that there was no legal basis for the panel to issue findings because the parties had reached a settlement of the matter outside the WTO system within the meaning of Article 12.7 of the Dispute Settlement Understanding (DSU).7 In this regard, the US was referring to the 'ongoing' bilateral negotiations between the US and China, which by February 2020 had resulted in the adoption of an Economic and Trade Agreement (the Phase One Agreement).8 The US also claimed that in any case the contested duties were necessary to protect public morals under Article XX(a) of the GATT 1994 since they were adopted to '“obtain the elimination” of conduct that violates U.S. standards of right and wrong, namely China's unfair trade acts, policies and practices'.9
Settlement of the matter outside the WTO
The panel rejected the US's defence concerning the lack of a legal basis for the panel to issue findings because the parties had allegedly reached 'their own solution'10 under Article 12.7 of the DSU. The panel noted that the standard of Article 12.7 of the DSU should be whether the parties have developed a 'mutually satisfactory' solution and not simply a 'solution' that one party considers to be satisfactory.11 Furthermore, the panel disagreed with the US position, which implied that a solution within the meaning of Article 12.7 of the DSU could exist even if the bilateral negotiations in which the parties have engaged did not yield any result, and the issue remained unresolved.12 The panel stressed that for a 'mutually agreed solution' to exist, there should be a solution, meaning that 'the problem is solved and does not exist anymore' and the parties share the assessment that they have reached a solution.13
In this regard, China claimed that the parties had not developed a mutually agreed solution and that the matter brought by China to the WTO dispute settlement remained unresolved. In particular, China argued that the Phase One Agreement did not address the measures at issue as the contested duties were still in effect and it had not agreed to any process or other solution that would constrain the panel from issuing findings and recommendations.14
The panel found that since China had never agreed to terminate the dispute or that the matter was, or should be, resolved 'outside the WTO', but rather maintained that the matter remained unresolved, one party to the dispute clearly did not share the view that a 'mutually satisfactory solution' had been developed.15 As such, the panel concluded that there had been no mutually agreed solution 'that would deprive China of its right to adjudication and entitlement to recommendations and rulings by the Panel'.16
In coming to that conclusion, the panel underlined that the bilateral negotiations taking place between China and the US appeared to be in parallel to the dispute settlement proceedings at hand17 and stressed that such negotiations between parties are 'encouraged by the DSU' but should not be 'interpreted in a manner that results in denying the complainant's entitlement to findings of the Panel'.18
This ruling thus makes clear that bilateral negotiations between WTO Members that take place outside the framework of the WTO are not an alternative to the WTO's dispute settlement process, unless both parties agree that such negotiations have led to a mutually satisfactory solution.
The panel also rejected the US's argument that the additional duties imposed on imports from China were justified under Article XX(a) of the GATT 1994 on the grounds that the US did not provide 'an explanation that demonstrates how the imposition of additional duties on the selected imported products contributes to the achievement' of its invoked public morals goal and thus the measures did not meet the 'necessity' requirement under Article XX(a).19 However, the panel did accept that the concept of public morals within the meaning of Article XX(a) of the GATT 1994 could cover economic concerns such as the standards of right and wrong, including norms against 'unfair competition', invoked by the US.20
The parties disagreed as to whether Article XX(a) could encompass economic concerns such as unfair competition. China argued that Article XX does not cover interests in the realm of trade liberalisation and that Article XX(a) is limited to non-economic interests.21 The US disagreed.22 The panel began by explaining that WTO Members are afforded 'a certain degree of deference in defining the scope of public morals with respect to the values prevailing in their society'.23 It then addressed first, whether Article XX of the GATT 1994 could pertain to economic interests and concerns, and second, whether the term 'public morals' could encompass economic concerns, and particularly those related to unfair competition. The panel quickly affirmed the conclusion on the first point that several paragraphs in Article XX of the GATT 1994 refer to the protection of interests involving directly, or indirectly, 'a clear economic dimension'.24 The panel then outlined that 'public moral objectives may frequently have inseparable economic aspects' and that 'a measure may be found to pursue a public morals objective even if it has economic aspects'.25 As such, it did not consider it a stretch to rule that public morals could cover economic concerns such as those of 'fair competition and fair play'26 invoked by the US since the US had pointed to several domestic legal instruments that reflect prevailing US 'standards of right and wrong' and outlawed some of the Chinese practices documented in the Section 301 Report such as economic espionage or misappropriation of trade secrets.27 In essence, this means that – following the panel's approach – any standard of right and wrong could now be considered as public morals as long as this standard is reflected in a member's domestic legislation.
The panel then assessed the necessity of the US measures and, as part of this assessment, considered whether the additional US duties contributed to protecting its invoked public morals. The panel noted that the US and China disagreed over how a sufficient nexus between the public morals objective and the chosen measures should be demonstrated.28 In the US's view, '[a] measure may be necessary to protect public morals without being limited to a product that itself offends public morals'.29 In China's view, Article XX(a) of the GATT 1994 could not be interpreted as allowing measures that target 'non-morally offensive products'.30 The panel did not engage with the parties on the distinction between 'morally tainted' and other imports. It noted instead that, even if the measures did not have to apply only to products considered to embody 'morally offensive conduct', the US would still have to demonstrate that the duties were 'apt to contribute to protecting public morals concerns'.31 It was on this final element alone that the panel concluded that the US failed to justify its measures. In particular, the panel found it 'unclear how the United States associated China's sectoral industrial policies with specific products within certain economic sectors that benefit from China's policies and practices considered to violate the public morals invoked by the United States.'32 Thus, the panel concluded that the US failed to establish a sufficient nexus between the additional duties and the pursuance of its public morals objective so that the additional duties could not be found to be necessary to protect public morals under Article XX(a) of the GATT 1994.33
The panel's decision regarding whether the parties to a dispute have reached their own solution under Article 12.7 of the DSU is a welcome development ensuring that a WTO Member's right to have a dispute adjudicated by a panel34 is respected. In contrast, the panel's entertainment of the idea that purely economic interests, such as concerns over unfair competition, could be justified on public morals grounds if they are reflected in a member's domestic legislation raises systemic concerns. While 'public morals objectives may frequently have inseparable economic aspects',35 the panel's interpretation significantly broadens the notion of public morals generally understood as standards of right and wrong based on social, cultural, ethical and religious values.36 Furthermore, the invocation of domestic legislation as embodying moral values may lead to the internationalisation of otherwise strictly domestic norms.37 This could open the door to public morals being used as a catch-all type of justification under Article XX of the GATT 1994.38
ii US – Facts Available (DS539): further guidance on the use of facts available in anti-dumping and CVD investigations
On 21 January 2021, the WTO circulated the panel report in US – Facts Available (DS539),39 a case dealing with the use of facts available by the US authorities in various anti-dumping and CVD investigations.
In this dispute Korea challenged 'as applied' the US Department of Commerce's (USDOC) use of facts available in four anti-dumping and two CVD investigations, alleging a violation of the US's obligations under the AD and SCM Agreements. Korea presented claims with respect to both the USDOC's decision to resort to facts available as well as its choice of replacement facts. In addition, Korea made an 'as such' challenge against an unwritten measure consisting of the USDOC's automatic reliance on 'adverse facts available' in case of non-cooperation.
Use of facts available
Article 6.8 of the AD Agreement allows the investigating authorities to rely on 'facts available' to reach their determinations in case they lack necessary information due to an interested party's failure or refusal to provide such information within a reasonable period or when an interested party significantly impedes the investigation. The specific rules for the use of facts available are set out in Annex II to the AD Agreement. In the context of the SCM Agreement, the use of facts available is governed by Article 12.7, which mirrors Article 6.8 of the AD Agreement.
In US – Facts Available, the panel clarified the obligations of the investigating authorities with respect to the use of facts available under the AD and SCM Agreements.
In particular, the panel rejected Korea's argument that the investigating authority must always undertake a comparative evaluation of the available information to select 'best information' available that would replace the missing 'necessary' information. The panel considered that while the investigating authority is required to select 'reasonable replacements' for such information, this will not always involve a comparative evaluation.40
The panel further explained that the requirement for the investigating authority to specify in detail the information required from interested parties and the manner in which that information should be structured, under Paragraph 1 of Annex II of the AD Agreement, imply that the investigating authority must engage with, and address, the difficulties that may be raised by the interested parties and provide them with additional guidance.41 The panel also confirmed that an investigating authority cannot fault an interested party for failing to provide 'necessary' information if that information was not requested in accordance with Paragraph 1 of Annex II.42
The panel also stressed that non-cooperation by an interested party cannot alone constitute the sole basis for the selection of replacement facts and does not justify the use of adverse information without a proper analysis of all information that is before the investigating authority.43 The panel thereby confirmed that resorting to facts available cannot be used to punish an interested party for its failure to cooperate.
The panel further clarified that the non-respect of the deadlines set by an investigating authority for the purpose of an investigation does not by itself justify the recourse to facts available based on a party's failure to provide necessary information within a reasonable period. With respect to Article 12.7 of the SCM Agreement, the panel clarified that although the investigating authority can impose time limits for the parties to provide the requested information, the mere fact that information is provided after the expiry of such time limits does not on its own establish that the information was provided later than a 'reasonable period'. Thus, late submission of information alone does not justify recourse to facts available.44 Similarly, in the context of the AD Agreement, the panel found that the time limits of an investigation cannot be used to deprive an interested party of the opportunity to provide further explanations within the meaning of Paragraph 6 of Annex II.45
'As such' challenge and proving the existence of an unwritten measure
Korea challenged 'as such' the use of adverse facts available (AFA) by the USDOC arguing that the measure is a 'rule or norm of general and prospective application' or, in the alternative, constitutes 'ongoing conduct'.46 In essence, Korea argued that whenever the USDOC determines that an interested party has failed to cooperate to the best of its abilities, it automatically resorts to the use of AFA.
At the outset of its analysis, the panel noted that based on Korea's description of the measure, the latter consisted of several interlinked aspects and that each had to be demonstrated for the alleged unwritten measure to exist. More specifically, the first aspect, which served as the trigger for the WTO-inconsistent action, was a finding of non-cooperation made by the USDOC. The subsequent aspects concerned the consequences of that finding and comprised the USDOC adopting 'adverse inferences' and selecting AFA without establishing that (1) such inferences can reasonably be drawn in light of the 'degree of cooperation' received, and (2) such facts are the 'best information available' in the particular circumstances.47
Interestingly, the panel rejected Korea's reliance on the findings made in previous WTO disputes dealing with the USDOC's anti-dumping and CVD determinations. The panel stressed the differences between those previous disputes and the 'as such' claim advanced by Korea and explained that its findings on the existence of an unwritten measure cannot be based on certain general observations made by panels and the Appellate Body in prior WTO disputes.48
To demonstrate the existence of the challenged unwritten measure Korea relied on different types of evidence, including provisions of US domestic law, the USDOC Anti-Dumping Manual, US domestic court rulings and USDOC determinations. The panel rejected all of Korea's arguments and found that it had failed to demonstrate the existence of the measure with the precise content alleged by it. With respect to the provisions of US domestic law, the panel found that they provided certain discretion to the USDOC but did not show how frequently that discretion was exercised in a WTO-inconsistent manner.49 The panel further found that nothing in the USDOC Anti-Dumping Manual required the selection of adverse facts based solely on a finding of non-cooperation.50 Likewise, the panel considered that a quote from court rulings provided by Korea was not sufficient to demonstrate the precise content of the alleged unwritten measure.51 Finally, the panel held that given the limited information provided by Korea in the database of 319 determinations in various USDOC investigations, it was not able to establish whether the USDOC selected adverse facts based solely on its finding of non-cooperation.52
When addressing Korea's alternative claim against the ongoing conduct, the panel first noted the difference between the measure challenged by Korea and the types of ongoing conduct challenged in previous disputes.53 Given the characteristics of the measure at issue, the panel considered that it was properly characterised as a 'rule or a norm' and not as a form of ongoing conduct.54 In that regard the panel observed that the measures challenged as ongoing conduct in previous disputes, while having prospective character, were not of general application and instead were 'limited to certain finite or determinate number of (connected) proceedings or instances'.55 In contrast, the measure challenged by Korea was not limited to particular circumstances but was very broad in scope and related to the USDOC's conduct in general and in the future.56 In any case, since the arguments and evidence presented by Korea to establish the precise content of the ongoing conduct were the same as those presented in the context of the 'rule or a norm', the panel decided to reject Korea's claim for the same reasons.57
The panel report in US – Facts Available provides important clarifications on the use of facts available in anti-dumping and CVD investigations. It confirms that the investigating authority may not lightly ignore the information effectively provided by interested parties and that, when resorting to facts available, it must examine all information at its disposal and select information that constitutes a reasonable replacement for the missing information necessary for making its determinations.
Furthermore, the panel's findings relating to Korea's 'as such' claims confirm that what needs to be demonstrated to prove the existence of an unwritten measure depends, to a large extent, on the manner in which that measure has been described by the complainant. These findings also show that establishing the existence of an unwritten measure is a particularly demanding exercise.
iii US – Softwood Lumber VII (DS533): the use of regional benchmarks and zeroing in benefit calculations
On 24 August 2020, a panel report in US – Softwood Lumber VII was circulated to the parties.58 This case is part of the long-standing bilateral US–Canada lumber dispute dating back to 1982. For decades, the US has applied some form of trade restrictions, ranging from anti-dumping and countervailing duties (challenged by Canada under both the North American Free Trade Agreement and the WTO rules) to voluntary restraints pursuant to bilateral softwood lumber agreements, on imports of lumber from Canada. In 2015, the Trump administration did not renew the 2006 softwood lumber agreement, pursuant to which the US had lifted anti-dumping and anti-subsidy duties on softwood lumber from Canada. As a result, after a one-year transitional period pursuant to that agreement, the US authorities re-imposed countervailing duties on imports of softwood lumber from Canada. Canada challenged the legality of those duties at the WTO.
The panel report offers clarifications on the interpretation of several provisions of the SCM Agreement. This subsection focuses on two questions addressed by the panel report, which will be relevant for the future practice of national CVD investigations: (1) the use of regional markets to determine the benchmark pursuant to Article 14(d) of the SCM Agreement; and (2) the use of zeroing in subsidy calculations pursuant to Article 14 of the SCM Agreement.
The use of regional markets to determine a benchmark under Article 14(d) of the SCM Agreement
Article 14(d) of the SCM Agreement sets out guidelines for calculating the amount of subsidy in cases where a government grants a financial contribution by providing goods or services or purchasing goods. It provides that a benefit is conferred where the provision of goods or services is made for less than adequate remuneration or the purchase of goods is made for more than adequate remuneration. What constitutes an adequate remuneration is to be determined in relation to prevailing market conditions for the good or service in question in the country of provision or purchase, which include price, quality, availability, marketability, transportation and other conditions of purchase or sale.
In the underlying investigation, the USDOC used stumpage prices in Nova Scotia as a benchmark to determine the adequacy of remuneration for Crown stumpage in Alberta, Ontario, Quebec and New Brunswick, and log prices in Washington State in the US as a benchmark to determine the adequacy of remuneration for Crown stumpage in British Columbia. The USDOC initially considered using certain prices within the five Canadian regions as benchmarks but ultimately rejected them on the basis that they were distorted by government intervention and instead relied on the mentioned 'out-of-market' benchmark (in Nova Scotia and Washington State).59 Canada challenged the USDOC approach and argued that, in light of the evidence on record, to determine the appropriate stumpage benchmark the USDOC should have selected 'in-market' benchmarks from within the relevant 'regional markets' in each of the five Canadian regions.60
The panel noted that Article 14(d) does not expressly mention regional markets; however, because that provision requires that the selected benchmark relates to the 'prevailing market conditions' for the government-provided goods in question, those conditions might be limited to a particular region.61 The panel held that:
[w]here the record shows that the prevailing market conditions for the government-provided goods span, and are limited to, a particular geographic area, say a specific region within the country of provision, the benchmark price must reflect the prevailing market conditions in that region, because it is those prevailing market conditions that constitute the prevailing market conditions for the transactions concerning the government-provided good being investigated.62
Those regional prices would be at least the starting point of the investigating authority's benefit analysis.63 The panel thus disagreed with the US's argument that 'it suffices for purposes of Article 14(d) to pick a benchmark from anywhere in the country of provision, as long as that benchmark is a private, market-determined price for a good that is the same as the government-provided good'.64 The panel concluded that Article 14(d) permits an investigating authority to rely on market-determined prices from anywhere in the country in certain circumstances, but not in all situations, in particular not when the prevailing market conditions for the relevant good varied in different regions within the country of provision.65 The panel found that in that case, the evidence placed before the USDOC in the underlying investigation 'would have given an objective and unbiased authority pause, and prompted it to investigate whether the prevailing market conditions for stumpage were indeed distinct across the regions in question'.66 This means that the USDOC would need to have provided a reasoned explanation if it did not consider that, in view of the evidence, the prevailing market conditions in the regions in question were similar before it could turn to using benchmarks external to each region at hand in its benefit determination.67
The use of zeroing in benefit determination pursuant to Article 14(d) of the SCM Agreement
The panel also dealt with the question of whether the USDOC violated Article 14(d) by setting certain comparison results to zero in its benefit determination for provision of stumpage in certain Canadian provinces.68
To calculate the benefit, the USDOC compared individual purchases of Crown-origin standing timber in New Brunswick to a monthly average of certain private transactions in Nova Scotia. When that transaction-specific price in New Brunswick was higher than the corresponding monthly average in Nova Scotia, the USDOC set the benefit amount to zero.69 In the case of British Columbia, the USDOC determined the annual average price for Crown timber purchased by investigated producers (classifying purchases based on timbermark and species) and compared those average prices with the annual average species-specific benchmark prices in Washington State interior. When that annual average price in British Columbia was higher than the annual average in Washington State, the USDOC similarly set the benefit conferred to zero.70 The USDOC then summed up all remaining benefits to determine an overall benefit. Canada argued that the USDOC erred by setting-to-zero any negative comparison results71, thereby making the benefit assessment less related to the prevailing market conditions.
First, the panel agreed with Canada that the reference to 'any method used' in the chapeau of Article 14, read with the guidelines in Article 14(d), requires that all aspects of the methodology applied by an investigating authority in determining the adequacy of remuneration must relate to the prevailing market conditions for the good in question. Considering that 'the good . . . in question' refers to the government-provided good, the panel further noted that Article 14(d) instructs an investigating authority to be mindful not only of the prevailing market conditions for private transactions from which the benefit is derived but also of the conditions under which the government-provided good was supplied.72
Second, the panel also held that, in light of the facts of this particular case, the USDOC's setting-to-zero of negative comparison results was inconsistent with Article 14(d). In the case of New Brunswick, this was because the USDOC's method captured as a benefit any difference between the examined transaction price and the average benchmark price, including the differences attributable to variation in prevailing market conditions.73 The panel explained that the USDOC ought to have adopted a methodology addressing the asymmetry, which is inherent to comparison of individual transactions to average benchmarks, in particular taking into consideration that timber prices vary significantly depending on a number of factors such as location of timber or distance of the timber stand from the sawmill.74 In the case of British Columbia, the panel arrived at similar conclusions.75
Finally, the panel concluded that while Article 14(d) does not contain a general obligation for an investigating authority 'to aggregate all comparison results, positive as well as negative', aggregation of all comparison results may be necessary in specific circumstances to satisfy the requirements of Article 14(d).76 In this case, 'an aggregation of all comparison results without zeroing would have achieved a result that reflects average market conditions on either side of the comparison'.77
The panel in US – Softwood Lumber VII provided important clarifications on the selection of market-determined prices in situations where the prevailing market conditions are regional rather than country-wide. The selection of the wrong benchmark would taint the rest of the determination, making the ultimate findings of an investigating authority susceptible to challenge at the WTO. The panel also clarified that the zeroing of certain comparison results for the purpose of subsidy calculation, in particular circumstances, may render the determination inconsistent with Article 14(d) of the SCM Agreement.
i The impact of covid-19 on WTO dispute settlement proceedings
Travel restrictions and limitations on in-person meetings as a result of the covid-19 pandemic have had a significant impact on dispute settlement proceedings as they rendered physical meetings between panels and the parties impossible. To adapt to this new situation and to prevent excessive delays in the conduct of disputes, panels have been revising their working procedures to provide for alternative arrangements such as virtual meetings using video conferencing technology. Some panels opted for 'double-briefing', meaning that two sets of written submissions were exchanged before the meeting, or they decided to hold only one meeting instead of two. While these types of solutions allow the disputes to progress in a timely manner, they also have some drawbacks.
Article 12.1 of the DSU recognises that panels have a certain discretion in deciding on the working procedures applicable in a given dispute, after consulting with the parties. In addition, Article 12.2 of the DSU provides that panel procedures should provide sufficient flexibility so as to ensure high-quality panel reports, while not unduly delaying the panel process. These provisions can be seen as the basis for the panels' decisions to replace in-person meetings with virtual meetings.
The experience so far shows that virtual meetings differ from conventional in-person meetings and pose a number of practical challenges. The main purpose of the panels' meetings with the parties is to allow for an interactive discussion and an exchange of questions and answers to assist the panels in their understanding of the parties' claims and arguments. Such interactive discussions, however, are mostly absent in the context of virtual meetings. The limitations imposed by the virtual format of the meetings often result in panels limiting their questions to the parties to those written questions shared prior to the meetings while the parties just read out the prepared responses to the advance questions received from the panel. Considering that the panellists are not physically present in one room, their ability to consult effectively among each other and ask follow-up questions is limited. Similarly, for the parties, virtual meetings present challenges for ensuring coordination within their delegations, often comprising delegates from their Geneva mission and delegates in the capital. This means that active participation in a discussion during a virtual meeting is not the same as in the case of an in-person meeting. Additional difficulties affecting both the panellists and the parties relate to the risk of technical problems and the need to reconcile the time differences due to the panellists and the parties joining the meeting remotely from different locations.
Since virtual meetings will likely be maintained until it is possible to hold in-person meetings again, it is crucial that such meetings are effective and preserve the due process rights of the parties. For a virtual meeting to serve its purpose, it needs to enable and encourage an active exchange between the panel and the parties. This could be achieved by providing some written questions in advance as long as those questions are combined with additional follow-up questions asked by panels directly during the meetings, which was common practice before the pandemic. It is also advisable to allow the virtual meeting to be paused to enable internal coordination and consultation within a party's delegation and among the panellists.
Successful organisation of virtual meetings could pave the way for holding hybrid meetings in the future, allowing some delegates to join from their capitals instead of travelling to Geneva. This solution could be particularly beneficial for developing-country WTO Members with budgetary limitations.
ii The Appellate Body impasse, the MPIA and the alternative means of dispute resolution
Despite repeated proposals on behalf of over 120 WTO Members to launch the selection process of the Appellate Body members, as at July 2021, the impasse of the Appellate Body remains unresolved owing to lack of political engagement by the US.78
The MPIA, agreed upon by some WTO Members as a temporary replacement for the Appellate Body, has been in effect since 30 April 2020 and became operational on 31 July 2020 with the appointment of the 10 MPIA arbitrators.79 The MPIA appeals will be heard by three arbitrators selected from that pool of arbitrators.
While the MPIA is open to all WTO Members, only 25 have currently joined the MPIA.80 Some of the frequent users of the WTO dispute settlement system, including the US, India, Indonesia, Japan, Korea and Turkey, are currently not participating in the MPIA. In only four pending disputes,81 and in one dispute where the panel report was issued since December 2019,82 are both parties participating in the MPIA. Considering that both parties to a WTO dispute must participate in the MPIA or agree ad hoc for the MPIA rules to apply, so far, no dispute has been appealed under the MPIA rules.
As a result of the impasse of the Appellate Body, eight out of 10 panel reports issued since December 2019 were appealed into the void by either respondents or both parties, meaning that, as a matter of law, there are no binding findings on the WTO consistency of the measures at issue or recommendations on bringing WTO-inconsistent measures into compliance.83
Some members have opted for alternative solutions to the MPIA. In particular, Thailand and the Philippines have agreed to pursue 'facilitator-assisted discussions' to resolve outstanding issues in Thailand – Cigarettes (Philippines) (DS371).84 In DS371, Thailand appealed the compliance panel reports in the first and second compliance proceedings on 9 January 2019 and 9 September 2019 respectively, however the appellate review could not be completed on time before the Appellate Body became inoperative. On 12 February 2020, the Philippines requested the authority to suspend concessions under Article 22.2 of the DSU. Subsequently, the Philippines and Thailand exchanged views on how the outstanding issues in relation to Article 21.5 appeals and Article 22 procedures could be resolved. To deepen the process of bilateral consultations, they agreed to seek the additional assistance of a facilitator, Ambassador George Mina, the Permanent Representative of Australia to the WTO. The facilitator-assisted discussions, by the nature of the procedures, resemble mediation envisaged in Article 5 of the DSU; however, they were agreed on an ad hoc basis without relying on any particular provision of the DSU. While the outcome of facilitator-assisted discussions is still outstanding, it sets an interesting precedent for the use of alternative means to resolve a dispute at the compliance stage.
The clarifications brought about by the panels and the Appellate Body in the disputes discussed in Section II are likely to have important practical and systemic implications.
First, the panel decision in US – Tariff Measures provides useful guidance regarding what constitutes a mutually satisfactory solution to a dispute under Article 12.7 of the DSU. However, the panel's acceptance that purely economic interests could be justified on public morals grounds is worrisome as it could open the door to public morals being used as a catch-all justification under Article XX of the GATT 1994.
Second, the panel in US – Facts Available clarified the obligations of the investigating authority when resorting to facts available in anti-dumping and CVD investigations. The panel's findings also confirm that the threshold for demonstrating the existence of an unwritten measure is relatively high and provide an interesting take on what measures can be challenged as ongoing conduct.
Third, the panel in US – Softwood Lumber VII provided important clarifications on the selection of market-determined prices in situations where the prevailing market conditions are regional rather than country-wide, and on the use of zeroing in benefit determinations pursuant to Article 14(d) of the SCM Agreement.
Finally, the covid-19 pandemic has forced WTO panels to adopt alternative arrangements for handling disputes without the possibility of holding in-person meetings with the parties and with third parties. While the switch to virtual meetings allowed the ongoing disputes to proceed without undue delay, the virtual format of these meetings poses some practical challenges and, so far, has received mixed feedback from WTO Members. However, if the possibility of holding hybrid meetings is kept open once the pandemic is over, it may offer certain benefits by allowing broader participation of delegates from the capitals and reducing travel-related costs.
As at July 2021, the impasse of the Appellate Body remains unresolved owing to the lack of political engagement by the US. Six out of nine panel reports issued since December 2019 were appealed into the void either by respondents or by both parties. The MPIA became operational in July 2020; however, so far, no dispute has been appealed under the MPIA rules. At the same time, the facilitator-assisted discussions agreed upon between Thailand and the Philippines set an interesting precedent for the use of alternative means to resolve a dispute at the compliance stage.
1 Philippe De Baere is the managing partner at Van Bael & Bellis. This chapter was written with the help of Tetyana Payosova, Joanna Redelbach and Victor Crochet.
2 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994.
3 According to data provided on the WTO website, 307 out of 600 disputes initiated between 1995 and May 2021 involved claims under the AD Agreement, the SCM Agreement or the Agreement on Safeguards.
4 Panel Report, United States — Tariff Measures on Certain Goods from China, WT/DS543/R and Add.1, circulated to WTO Members on 15 September 2020 (hereafter Panel Report, US – Tariff Measures).
5 id., at Para. 7.128.
6 id., at Para. 3.1.
7 id., at Para. 3.3.
8 id., at Para. 7.5; Economic and Trade Agreement Between the Government of the United States of America and the Government of the People's Republic of China, signed on 15 January 2020, entered into force on 14 February 2020.
9 id., at Paras. 3.3 and 7.113.
10 id., at Para. 7.10.
11 id., at Para. 7.12. See also, Panel Reports, India – Autos, Para. 7.113; US – Shrimp (Ecuador), Para. 7.1; and US – Zeroing (Korea), Para. 7.14.
12 Panel Report, US – Tariff Measures, Para. 7.12.
13 id., Paras. 7.12 and 7.13.
14 id., Para. 7.6.
15 id., at Para. 7.14.
16 id., at Para. 7.22.
17 id., at Paras. 7.16 and 7.17.
18 id., at Para. 7.17.
19 id., at Para. 7.238.
20 id., at Para. 7.140.
21 id., at Para. 7.133.
22 id., at Para. 7.134.
23 id., at Para. 7.131.
24 id., at Para. 7.136.
25 id., at Para. 7.137.
26 id., at Para. 7.128.
27 id., at Paras. 7.127 and 7.138.
28 id., at Para. 7.177.
31 id., at Para. 7.179.
32 id., at Para. 7.194.
33 id., at Paras. 7.229 to 7.231 and 7.236 to 7.238.
34 Appellate Body Report, Mexico – Taxes on Soft Drinks, Para. 52.
35 Panel Report, US – Tariff Measures, Para. 7.137.
36 id., Para. 7.116 and the case law cited.
37 id., Para. 7.138.
38 Panel Report, US – Tariff Measures, Para. 7.139.
39 Panel Report, United States – Anti-Dumping and Countervailing Duties on Certain Products and the Use of Facts Available, WT/DS539/R and Add.1, circulated to WTO Members 21 January 2021 [appealed by the United States on 19 March 2021].
40 Panel Report, US – Facts Available, Para. 7.47.
41 id., at Para. 7.83.
42 id., at Para. 7.223.
43 id., at Paras. 7.184 and 7.185.
44 id., at Para. 7.351.
45 id., at Para. 7.511.
46 id., at Para. 7.605.
47 id., at Paras. 7.613 to 7.619.
48 id., at Para. 7.633.
49 id., at Paras. 7.653 and 7.654.
50 id., at Para. 7.656.
51 id., at Para. 7.659.
52 id., at Para. 7.673.
53 id., at Paras. 7.705 to 7.709.
54 id., at Paras. 7.709 and 7.714.
55 id., at Para. 7.708.
56 id., at Paras. 7.709 and 7.713.
57 id., at Paras. 7.710 and 7.714.
58 Panel Report, United States – Countervailing Measures on Softwood Lumber from Canada, WT/DS533/R and Add.1, circulated to WTO Members 24 August 2020 [appealed by the United States 28 September 2020].
59 id., at Paras. 7.9 and 7.16.
60 id., at Paras. 7.10 and 7.17.
61 id., at Paras. 7.20 to 7.29.
62 id., at Para. 7.30.
64 id., at Para. 7.24.
65 id., at Para. 7.25.
66 id., at Para. 7.40.
67 id., at Para. 7.43.
68 id., at Paras. 7.572 to 7.583.
69 id., at Para. 7.555.
70 id., at Para. 7.556.
71 id., at Paras. 7.572 and 7.576.
72 id., at Para. 7.574.
73 id., at Paras. 7.573 and 7.575.
74 id., at Para. 7.573.
75 id., at Para. 7.577.
76 id., at Para. 7.584.
77 id., at Para. 7.573.
78 See, for instance, WTO Dispute Settlement Body, Minutes of Meeting of 22 February 2021, WT/DSB/M/449, 24 March 2021, pp. 11–15.
79 Multi-party Interim Appeal Arbitration Arrangement pursuant to Article 25 of the DSU, JOB/DSB/1/Add.12/Suppl.5, 31 July 2021.
80 In addition to the original participating members, Benin, Ecuador, Macao, Montenegro, Nicaragua and Peru have endorsed the MPIA. The original MPIA participating members are Australia, Brazil, Canada, China, Chile, Colombia, Costa Rica, the European Union, Guatemala, Hong Kong, Iceland, Mexico, New Zealand, Norway, Pakistan, Singapore, Switzerland, Ukraine and Uruguay.
81 These are DS589, DS591, DS596 and DS598.
82 The parties in DS537 reached a mutually agreed solution towards the end of the panel proceedings.
83 Appeal into the void happened in DS484 (compliance proceedings), DS494, DS533, DS538, DS539, DS543, DS553 and DS567. In addition, in DS476, DS510, DS518, DS523, DS534 and DS541, appeals are pending because they could not be completed by the Appellate Body by 11 December 2019, when it became inoperative. The panel report in DS529 has been adopted by the Dispute Settlement Body (DSB).
84 Thailand – Customs and Fiscal Measures on Cigarettes from Philippines, Communication from the chairperson of the DSB concerning the 'Understanding between the Philippines and Thailand to pursue facilitator-assisted discussions aimed at progressing and resolving outstanding issues in regard to DS371', WT/DS371/44, 21 December 2020.