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Brussels builds alliance to bypass US block on WTO judges

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Via Financial Times

Brussels has scored a success in its bid to prevent Washington from snarling up the World Trade Organization’s dispute-settlement system, forging an alliance with 16 countries to work around a US block on judicial appointments.

The EU signed a joint pact on Friday with countries including China, South Korea, and Brazil to put in place a temporary system that will stand in for the WTO’s appellate body. The tribunal has been suspended since the end of last year because of the US veto.

Washington has longstanding gripes against the appellate body — the WTO’s final arbitrator of disputes — which it accuses of judicial over-reach and meddling with national laws.

The US block on the appointment of new judges meant that in December the tribunal was left without the minimum number it needed to function.

The joint declaration marks a big advance for the EU, which has led international efforts to put temporary arrangements in place. It vastly expands the coalition of countries it has assembled beyond early adherents Canada and Norway.

The move “testifies to the high importance that the EU and the participating WTO members attach to retaining a two-step dispute settlement process”, said Phil Hogan, the EU trade commissioner. “This remains a contingency measure needed because of the paralysis of the WTO appellate body.”

The tribunal’s paralysis has heightened the crisis at the WTO, which has been undermined by the inability of its rule book to cope with China’s model of state-sponsored capitalism and US president Donald Trump’s use of punitive tariffs against trade rivals.

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Brussels and the US agree that the organisation is in need of deep reform, and have worked together to draft new rules that would restrain Beijing’s use of industrial subsidies, but they have failed to come to any understanding on the appellate body.

The signatories of Friday’s joint declaration committed to put in place “contingency measures that would allow for appeals of WTO panel reports in disputes among ourselves, in the form of a multi-party interim appeal arrangement”.

Participating countries include New Zealand, Chile, Mexico, Singapore and Uruguay.

There are also noticeable absentees from among the WTO’s big powers, chief among them Japan and Russia — a sign that concerns about the appellate body extend beyond the US.

“We will continue our efforts to seek a lasting solution to the appellate body impasse, including through necessary reforms and improvements,” Mr Hogan said.

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