Business

This body resolves trade disputes vital to cities like Miami. It’s being gutted

The Maersk Shanghai — 1,063 feet long and 159 feet wide, or roughly equivalent to the length of three football fields — at the bustling Port of Miami.
The Maersk Shanghai — 1,063 feet long and 159 feet wide, or roughly equivalent to the length of three football fields — at the bustling Port of Miami. cguerrero@elNuevoHerald.com/file photo

The Trump administration is quietly choking a vital global body that serves as the final arbiter of international trade disputes.

Since taking office in January 2017, the Trump administration has effectively blocked all appointments to a seven-member appellate court in Geneva, created as part of the World Trade Organization.

The appellate court has the final say on trade disputes between countries, and its decisions have bearing on the livelihood of trade-dependent cities such as Miami.

The Appellate Body, as it’s officially known, is now down to four members. It will reach three — its legal bare minimum to function — on Sept. 30. What comes after that is unknown territory.

“Trump does not have the authority to withdraw from the WTO. What I think they are doing is trying to kill the WTO through the backdoor,” said Jennifer Hillman, who was nominated to the Appellate Body by President George W. Bush and served from 2007 to 2012.

If a current member needs to be recused, or falls ill, the panel that began operating in 1995, as an upgrade to a trading system launched in 1948 after World War II, would stop dead in its tracks.

“The whole dispute-resolution system of the WTO would come to a halt,” Ujal Singh Bhatia, current chairman of the pared-down appeals body, warned in an interview with McClatchy from Geneva.

Membership on the Appellate Body reflects the broad regions of the world. The member whose term expires in September comes from the African nation of Mauritius, Bhatia is from India and there are current representatives from China and the United States.

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The Seaboard Ocean waits to be loaded for a trip to the Eastern Caribbean from PortMiami. C.M. Guerrero cmguerrero@ElNuevoHerald.com/file photo

“The legitimacy of the Appellate Body is a function of the diversity of its composition. The fact that we represent all parts of the world is important for its credibility,” said Bhatia. “It can’t but have an effect on our legitimacy.”

When operating with seven members, the appellate judges are assigned randomly to complaints. That benefit disappears when the number falls to three and everyone knows who the three judges are hearing an appeal.

The Trump administration didn’t even have an ambassador to the WTO for 14 months. Dennis Shea finally won Senate approval in March, giving the Office of the U.S. Trade Representative a presence again in Geneva.

Asked about allegations that it seeks to marginalize the global trade body, the agency said in a statement that it “declines comment at this time.”

The WTO, which came into force in 1995, has 164 member countries. Appellate Body judges serve four-year terms, which can be renewed for a second term.

When countries disagree on a trade matter, they first seek consultations through the WTO. If they can’t settle their differences, they can request the dispute be heard by a panel and its decision can be challenged before the Appellate Body.

The idea behind the process was to end the disruptive tit-for-tat trade wars like the one that is unfolding after the Trump administration slapped foreign steel and aluminum with tariffs earlier this year and was met with retaliation by the European Union and China.

Between 1995 and the end of 2017 there were 535 disputes brought to the WTO, resulting in 308 panels created. Some disputes were settled and only 235 of these cases resulted in a final panel report. And 156 of those reports were challenged before the Appellate Body.

The United States has been the biggest winner under the WTO dispute-resolution system, under which it has brought 122 complaints and been the subject of 147 complaints. President Donald Trump ironically acknowledged as much in the Economic Report of the President, released in February.

On page 251 of the 568-page Economic Report, the Trump administration cited a study showing the United States winning disputes it brought at a rate higher than the average, and losing disputes as the accused less often than the world average.

“The rules Trump is complaining about were written in no small part by Americans,” said James Bacchus, who as a Democratic congressman from Florida helped write the legislation to have the United States join the WTO. “This is a source of amusement to the rest of the world, since they believe with much more reason that trade rules and the WTO are something we made them do.”

Bacchus went on to become one of the founding judges on the WTO’s Appellate Body after leaving Congress, and thinks system has been beneficial for the state and the nation.

The WTO and its rules-based approach matters for Florida, he said, whether it is citrus products shipping from Central Florida or consumer goods moving through the bustling Port of Miami to Latin America and the Caribbean.

“It will have more impact on Florida, and all other states, if it leads to the unraveling of the world trading system,” said Bacchus, who was disappointed by the absence of concern voiced by GOP leaders. “We have spent more than 70 years building a rules-based world trading system, and now our representatives in Washington are simply rolling over and playing dead.”

This story has been updated to correct Bacchus’ party affiliation. He was a Democratic congressman.

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