Global trade court may come to standstill within months

Liam Fox

Global trade’s supreme court is all but certain to grind to a halt within months, senior officials are privately conceding in Geneva, as Britain vows to help to save the system from collapse.

Ambassadors say that the World Trade Organisation is “under tremendous stress” amid efforts to pull its appellate body back from the brink of paralysis. Fears continue to mount over the rules-based order, with the United States and China locked in an escalating trade war. Liam Fox, Britain’s international trade secretary, warned last week that the organisation could spiral into “an existential crisis” without “urgent and drastic action”.

The WTO, which is based in Switzerland and within which the UK will become an independent member after leaving the EU, was set up in 1995 as a hub for trade negotiations and disputes. It has 164 members.

Storm clouds have gathered since President Trump’s inauguration in 2017. Regular modernisation vows have yet to progress into a reform process and Mr Trump has threatened to withdraw the United States, the largest economy, if the WTO fails to “shape up”.

The US has also persisted with a sustained campaign to block the appointment and reappointment of judges to the WTO’s appellate body, which usually has seven judges and requires three to consider a case. It only has three left and two will complete their terms on December 10. Mr Trump’s officials claim that the appellate body has overstepped its authority and meddled in American law but its proponents, who argue it is the “crown jewel” of the WTO, maintain it has issued fair rulings.

Officials racing to satisfy American concerns and find consensus to prevent the court from shutting down fear that failure risks depriving the world’s smallest economies of an impartial arbitrator. “It might be OK for the heavyweight members to bash each other about,” one ambassador said. “But what about the rest of us?”

Stuart Harbinson, a former official who worked at the WTO for more than a decade, predicted “very serious but not fatal” consequences. “The lack of an effective appeals mechanism would strengthen the hands of the big players who would be able to use their muscle bilaterally to ‘settle’ disputes to their satisfaction,” he said.

Peter Van den Bossche, a Belgian former appellate body judge, suggested in his farewell speech last month that America “may welcome” its failure. He questioned “whether any reform of the current system, short of its virtual elimination, will satisfy the United States”, adding: “History will not judge kindly those responsible for the collapse of the WTO dispute settlement system.”

Mr Van den Bossche, 60, expressed hope that WTO members could find a way forward after 2021, when Mr Trump would leave the White House if he were to fail to be re-elected. Senior US officials, however, say that many Democrats share their concerns.

Britain could play a “very constructive role” from its post-Brexit independent seat at the WTO, depending on its approach, Mr Harbinson said. “If it comes in with a saviour mentality and a doctrinaire free trade mission it will get nowhere.”

The EU has put forward proposals for a proxy court — an effective sticking plaster, where nations could appeal against cases should the appellate body falter — but WTO officials continue to persevere without this. A source closely involved in talks to avoid the shutdown said that they echoed Jean Monnet. “I am not an optimist,” the late French economist said. “I am determined.”