The Search for New Leadership at the WTO: The Saga of the DG Appointment Politics and Dispute Settlement Procedure
Introduction
Since the beginning of the US-China trade war, there have been multiple criticisms of the World Trade Organization (“WTO”) by its members. This has led to an obstruction in the functioning of the WTO as an institution. The majority of the WTO members have raised concerns regarding the paralysis of the Appellate Body (“AB”), a part of the WTO Dispute Settlement Body (the crown jewel of the WTO) (“DSB”) due to the lack of the required number of judges in the AB. Apart from this, the current Director General’s announcement about his resignation, which is effective from 31 August,[i] is a matter of serious concern. Against this background, this short piece focuses on the impact of the resignation of the DG. It highlights the political shortcomings vis-a-vis the nomination of the DG, which if not made within the required time, would affect the functioning of the DSB of the WTO.
Procedure for the Appointment of the DG: Controversies and Conflicts
The DG is the spiritual leader and ‘honest broker’ of the WTO.[ii] He heads the WTO Secretariat and chairs the Trade Negotiations Committee.[iii] The DG is assisted by four Deputy DGs, who are appointed by the DG in consultation with the WTO Members. Under Article VI:2 of the Marrakesh Agreement establishing WTO (“Marrakesh Agreement”), the appointment of the DG is done by the Ministerial Conference (“MC”) through consensus over voting.[iv] The “Procedure for the Appointment of the Directors-General” (“2002 Procedure”)[v] in 2002 by the General Council (“GC”) was a result of the bruised experiences of the past appointment process in 1998-1999.
The appointment of the DG is a lengthy process requiring nine months. It has also always been a contentious process. For instance, in 1998-1999, during Renato Ruggiero’s replacement by a new DG, the deadline for the appointment of the new DG was missed twice.[1] Originally, there were four contesting candidates for the position,[vi] which later came down to two between Thailand’s Supachai and New Zealand’s Moore. The US objected to Supachai’s nomination in light of his ineffective bureaucracy in Thai policy-making during the Asian economic crisis.[vii] Despite the ‘no- veto- no-vote’ policy, Supachai’s supporters appealed for a vote because they considered him to be a representative of the developing countries. This was again opposed by the US. Finally, Moore and Supachai had to agree to a term-sharing.[viii] This observation points towards the conclusion that decision making by consensus has been used by major powers in the past to assert their dominance in the institutional process of the WTO System.[ix]
The schedule for the DG appointment process has been postponed from 31 August 2020 to 7 November 2020. However, Mr. Azevêdo’s resignation is effective from 31 August 2020. In the presence of factors such as US’s move to block the appointment of the AB judges, the US-China trade war, and the US senator Josh Hawley’s proposal of resolution to withdraw from the WTO in May 2020,[x] it is unlikely that the US would consent to the appointment of the new DG.[xi]
Apart from the US and China conundrum, another important aspect that has impacted and delayed the DG selection process is regional representation. After the appointment of South American Azevêdo as DG, only North America, Africa and Middle East regions have not had representatives as the DG yet. The African continent has contended that it is their turn now and this view has gained some popularity in the background of the emerging critical issues as an African DG is likely to be neutral. However, the current three nominations from the African countries may also lead to a blockage in the achievement of consensus on one particular African candidate due to the deadlock posed by African countries.[xii] The nominees from Saudi Arabia (due to Saudi Arabia’s strained relations with Qatar),[xiii] and Liam Fox (due to UK’s withdrawal from the EU) may find it difficult to gather consensus too.[xiv] Since the establishment of the WTO, the chair of the DG has rotated between the representatives from developed and developing countries alternatively and it is being argued that this time it is the turn of the developed countries.
In light of these possible contentions and considering the politics and procedure behind the appointment of DG, the idea that the new DG will be appointed before 7 November 2020 seems farfetched and unfeasible. The delay in the appointment of the DG may lead to a delay in the preparation for the 2021 Kazakhstan Ministerial Conference. It cannot be ignored that this is a chance for the revival of the WTO but simultaneously also a very good opportunity for the US to take forward its reform proposals. It becomes difficult to predict the action that the US may take considering its criticisms of the WTO as an institution as well as the benefit it may get out of the expedited appointment procedure.
Acting or Interim DG
Under Paragraph 23 of 2002 Procedures, the appointment of the Acting DG from amongst the Deputy DGs is done by the GC, which also as per Article IX:1, requires consensus. Due to the past practices of the rotation of chair of the DG, and current inactivity regarding the appointment of the Deputy DG as an Acting DG, it is unlikely that the WTO Members will be able to reach a consensus on the appointment of an Acting DG as well. It is pertinent to note that the four Deputy DGs are Yonov Frederick Agah (Nigeria), Karl Brauner (Germany), Alan Wolff (US) and Yi Xiaozhun (China). It is plausible that both China and the US will lobby for their own candidates and the General Council will be left in a split again. This absence of consensus will result in a delay in the appointment of the Acting DG, bringing the functioning of the WTO to a halt. Moreover, if the members are divided at the stage of appointment of Acting DG, the larger process of appointment of a DG will further get impacted.
DG’s Role in Panel Appointment and the Surrounding Politics
The WTO DSB has been a rare example of an effective mechanism to resolve very specific trade-related disputes between sovereign States.[xv] Recently, the appellate stage of the DSB has come to a halt because of the hindrance by the US in the appointment of the AB members.
Due to the vacancy in DG’s position, the panel stage of the dispute settlement process will get affected as well. The selection of the panelists is done through an agreement between the members to select three to five panelists from the roster maintained by the Secretariat.[xvi] In case, there is no agreement between the members- under Article 8.7 of the Agreement on Dispute Settlement Undertaking (“DSU”), at the request of either party, the DG, in consultation with the chairman of the DSB and the chairman of the relevant council or committee, may determine the composition of the panel by appointing the panelists whom “the DG considers most appropriate”. Additionally, Article 22.6 requires the arbitrators in retaliation proceedings to be appointed by the DG only. In reality, Article 8.7 has been used in every other dispute in the last three years by majority of the WTO Members. Amidst the alarming rate of disagreement amongst the members in the selection of the panel, the DG has acquired much importance in the panel selection process. Since 2017, approximately 34 disputes are still either at a consultation stage or the panel has been established but not composed yet. Additionally, in such a situation where WTO Members are adopting protectionist trade policies, if post-August 2020, a dispute arises where Articles 8.7 or 22.6 are invoked, there will be no DG or Acting DG to make appointments for the composition of the Panel. Consequently, the dispute settlement process at the panel stage will also come to a halt. Therefore, the DG plays a vital role under Article 8.7 and 22.6 and in the absence of a DG, the WTO will be prevented from assessing whether its members are adopting WTO-consistent policies.
Conclusion
The politicization around the position of DG and its appointment process is based on the premise that members want a leader to further their interests. This political interest in the position imposes a constraint on the appointed DG to fully perform the functions attached to its role. While Mr. Azevêdo has cited his resignation as a ‘personal decision’, the lack of his political decisiveness has been actively criticized. This recent experience points towards the fact that political inclination is a deciding factor in the appointment of the DG. The controversies surrounding the appointment often lead to a delay in the appointment and given the current position regarding consensus at the WTO, this delay seems inevitable.
While it is being considered that it is the turn of the African continent to have a DG from their region, developed countries including the US and EU have strong reasons to instead push for a more favourable DG and will object to a DG whose interest does not align with theirs. During this tussle between the countries, achieving consensus for the appointment of an Acting DG also looks uncertain. If the office of the DG remains vacant, the procedure for panel composition at the dispute settlement process of WTO may also get affected, paralyzing the functioning of the WTO altogether.
In the ups and downs that WTO has been through in the last decade, the appointment of a new DG brings with it the hope of revival and an economic upheaval, which in the backdrop of the COVID-19 outbreak and its effect on international trade, is the urgent need of the moment.
[i] ‘DG Azevêdo announces he will step down on 31 August’(WTO, 14 May 2020) <https://www.wto.org/english/news_e/news20_e/dgra_14may20_e.htm> (accessed 9 Aug. 2020).
[ii] WTO, ‘Statement by Luiz Felipe de Seixas Corrêa’ (WTO, 26 Jan. 2005) <https://www.wto.org/english/thewto_e/dg_e/stat_seixas_correa_e.htm> (accessed 9 Aug. 2020).
[iii] Chakravarthi Raghavan, ‘WTO endorses TNC principles and practices and negotiating structures’ (Third World Network) <https://www.twn.my/title/twe272a.htm> (accessed 9 Aug. 2020).
[iv] Article IX, Marrakesh Agreement Establishing the World Trade Organization 1994, Apr. 15 1994, 1867 UNTS 3, 1868 UNTS 3, 1869 UNTS 3.
[v] Procedures for the Appointment of Directors-General, WT/L/509.
[vi] ‘Leadership Selection in the Major Multilaterals’ 64 <https://www.piie.com/publications/chapters_preview/339/3iie3357.pdf> (accessed 9 Aug. 2020) .
[vii] Ibid, 67.
[viii] Raghavan (n iii).
[ix] Amrita Narlikar ‘The politics of participation: Decision-making processes and developing countries in the world trade organization’ 91(364) (2002) Commonwealth Journals of International Affairs 171-185.
[x] Keith Johnson, ‘U.S. Effort to Depart WTO Gathers Momentum’ (FirstPost, 27 May 2020) <https://foreignpolicy.com/2020/05/27/world-trade-organization-united-states-departure-china/> (accessed 9 Aug. 2020).
[xi] Steve Charnovitz, ‘Searching for the Next Leader of the WTO’ (International Economic Law and Policy Blog, 19 May 2020) <https://ielp.worldtradelaw.net/2020/05/searching-for-the-next-leader-of-the-wto.html> (accessed 9 Jul. 2020)
[xii] Jakob Hanke Vela, Barbara Moens & Simon Marks, ‘Africa eyes the world’s top trade job — but spars over its candidate’ (Politico, 6 Aug. 2020)<https://www.politico.com/news/2020/06/08/world-trade-organization-ngozi-okonjo-iweala-306960> (accessed 9 Aug. 2020)
[xiii] Bill Bostock, ‘Here’s how the locked-down Saudi Arabia-Qatar border became one of the tensest places on earth, sparking outrageous plans to build a 37-mile-long canal and turn Qatar into an island’ (Business Insider, 1 Aug. 2019) <https://www.businessinsider.in/politics/heres-how-the-locked-down-saudi-arabia-qatar-border-became-one-of-the-tensest-places-on-earth-sparking-outrageous-plans-to-build-a-37-mile-long-canal-and-turn-qatar-into-an-island/articleshow/70481239.cms> (accessed 9 Aug. 2020).
[xiv] Benjamin Fox, ‘UK WTO nominee plays down Brexit row’ (Euractiv, 18 Jul. 2020) <https://www.euractiv.com/section/uk-europe/news/uk-wto-nominee-plays-down-brexit-row/> (accessed 9 Aug. 2020).
[xv] Christian Bluth, Andreas Esche and Bernard Hoekman, ‘Revitalizing Multilateral Governance at the World Trade Organization’ (G20 Insights, 1 Sept. 2020) <https://www.g20-insights.org/policy_briefs/revitalizing-multilateral-governance-at-the-world-trade-organization-executive-brief-based-on-the-report-of-the-high-level-board-of-experts-on-the-future-of-global-trade-governance/> (accessed 9 Aug. 2020).
[xvi] Article 8.4, Understanding on the Rules and Procedures Governing the Settlement of Disputes, 1869 UNTS 401 33 ILM 1226 (1994)