U.S. Blocks Korean Judge From WTO Appellate Body

International Trade Daily™ provides rapid, reliable notification of the most significant developments affecting U.S. trade and international business policy, as well as the policies of major U.S....

By Bryce Baschuk

May 23 — The U.S. won't support the reappointment of Seung Wha Chang of South Korea to the World Trade Organization (WTO) appellate body, a U.S. official said at a meeting in Geneva.

“We do not consider that his service reflects the role assigned to the appellate body by WTO members in the WTO agreements,” Deputy U.S. Permanent Representative Chris Wilson told members of the WTO dispute settlement body (DSB) May 23. “Any failure to follow scrupulously the role we members have assigned through these agreements undermines the integrity of, and support for, the WTO dispute settlement system.”

The U.S. opposition comes during a precarious time for the WTO dispute settlement system, which is overburdened by a heavy workload of complex dispute cases and a growing shortage of senior dispute settlement judges.

More than two-dozen WTO members—including Brazil, the European Union, Japan, and South Korea—commented on the U.S. decision and many said it posed a serious threat to the independence and impartiality of the appellate body.

Unless the U.S. withdraws its opposition, Chang's term will end on May 31 and open a second vacancy on the seven-member panel.

Allegations

The U.S. said it was troubled by four recent panel decisions that Chang was involved in because they “raised systemic concerns about the disregard for the proper role of the appellate body and the WTO dispute settlement system.”

The U.S. cited articles of the WTO Dispute Settlement Understanding (DSU), which say DSB rulings cannot “add or diminish the rights and obligations provided in the covered agreements” and explain that the role of the appellate body is to “secure a positive solution to a dispute.”

The work of the WTO appellate body is a key component of the WTO's dispute settlement system because it has the power to uphold, modify or reverse the legal findings of a DSB panel, and parties to the dispute must accept the appellate decisions as final.

Chang's Participation in Decisions

The U.S. pointed to a recent ruling regarding a financial services dispute between Argentina and Panama, in which the U.S. said a majority of the panel's report isn't related to the argument being considered. The report also included interpretations that “served no purpose in resolving the dispute,” the U.S. said.

In the second ruling regarding a U.S. dispute over India's import ban on U.S. poultry products—Wilson said the appellate decision addressed a matter that hadn't been raised on appeal and engaged in a “lengthy abstract discussion” of an unrelated aspect of the WTO Sanitary and Phytosanitary Agreement.

In the third ruling, which focused on U.S. duties on Chinese imports, Wilson said the appellate body's view of dispute settlement “departs markedly from that set out in the DSU and reflected in numerous prior reports.”

In the fourth ruling—which upheld China's allegations about U.S. duties on non-market economies—the appellate panel “took a very problematic and erroneous approach” that risks turning the DSB into “one that would substitute the judgment of WTO adjudicators for that of a member's domestic legal system as to what is lawful under that member's domestic law,” Wilson said.

The U.S. delegation said it did not oppose Chang's reappointment because of the results of the aforementioned cases—whether or not the U.S. agreed with those rulings.

It is noteworthy that the appellate body is preparing to consider a U.S. appeal of a recent DSB decision regarding imports of residential washing machines from Chang's native country of Korea (76 ITD, 4/20/16).

Chang's Role Questioned

The U.S. said it was certain that Chang was responsible for the panel's pattern of overreach, although each of the appellate rulings were issued as a single document collectively authored by three appellate body members.

The U.S. said Chang's performance at the various oral hearings in these cases and his focus on issues that were not considered under the appeal indicated that he was responsible for the offending views.

Last week, six other WTO appellate body members chastised the U.S. for singling out Chang and said linking the reappointment of one member to specific cases could undermine the trust and impartiality of the appellate body members, according to a letter sent to the DSB Chairman Xavier Carim of South Africa.

The U.S. described the appellate body letter as “unfortunate” and said it served as another example in which appellate body members are “acting outside the role assigned to them.”

Korea ‘Extremely Disappointed.’

The South Korean delegation urged the U.S. to withdraw its opposition and said blocking Chang's reappointment was “inappropriate” and raised “serious and systemic concerns.”

“This opposition is, to put it bluntly, an attempt to use reappointment as a tool to rein in appellate body members for decisions they make on the bench,” the Korean delegation said. “It's message is loud and clear: ‘if appellate body members make decisions that do not conform to U.S. perspectives, they are not going to be reappointed.’ ”

“If the U.S. position is allowed to prevail, it would seriously undermine the independence and integrity of the appellate body,” Korea said. “It will also create a dangerous precedent that other WTO members would be tempted to follow.”

Extraordinary, Exceptional, Unprecedented

The EU said the U.S. position created a “very serious” situation that may set a negative precedent for the appellate body reappointment process. Reappointment of WTO appellate body members should be “more or less automatic” if a member is able to serve a second term, the EU said.

The Japanese delegation said the U.S. position was “extraordinary, exceptional in nature and has no precedent,” according to its written statement. “Any act by a WTO member of this nature and magnitude must be exercised with extreme caution.”

The Brazilian delegation said the justifications outlined by the U.S. “are very far from what would be considered acceptable reasons” and suggested members look at possibly amending the DSU.

To contact the reporter on this story: Bryce Baschuk in Geneva at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton jashton@bna.com

For More Information

Text of the ruling on a financial services dispute between Argentina and Panama is available at https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds453_e.htm.

Text of the ruling on a U.S. dispute over India's import ban on U.S. poultry products is available at https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds430_e.htm

Text of the ruling regarding U.S. duties on Chinese imports is available at https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds437_e.htm.

Text of the ruling upholding China's allegations about U.S. duties on nonmarket economies is available at https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds449_e.htm.