After he won office, President Joe Biden pitched his foreign policy agenda as a return to form: defending and strengthening the rules-based international order. But, since taking office, his administration has picked up where its predecessor left off — undermining one of the most important institutions in international trade law, the World Trade Organization (WTO).
For over two decades, the WTO enabled States to take one another to court over violations of trade law. But, in 2017, the United States, under the Trump administration, unilaterally hamstrung the WTO’s binding dispute system by blocking appointments to its highest “court,” the Appellate Body. By December 2019, the body dropped below its three-person quorum, which effectively means it cannot hear appeals. Today, all seven Appellate Body seats are empty. Without an Appellate Body, States can abuse the WTO’s dispute system by appealing decisions “into the void,” leaving them in limbo and unenforceable.
Despite the blockade threatening both domestic businesses and the stability of international trade, it enjoys bipartisan support. And, though initiated by the hyper-protectionist Trump administration, the attack on the WTO has continued, and arguably intensified, under the Biden administration despite promises to recommit to the organization and its goal of restoring dispute settlement this year. Just last month, the U.S. Trade Representative blocked a 73rd attempt at initiating the Appellate Body selection process – a proposal co-sponsored by 130 Members. While the Biden White House criticized the Trump administration’s harsh rhetoric, it nonetheless maintains the same fundamental stance: Appellate Body overreach undermines the WTO’s fairness, intended function, and legitimacy and that, simply put, the United States loses disputes too often. The United States now insists that general reforms to the admittedly flawed WTO system generally must come before resuscitating its dispute system.
Still, the prescribed cure is decidedly worse than the WTO’s disease. Some, not all, of the U.S.’s criticisms are shared by fellow WTO Members, but the blockade alienates allies like the United Kingdom and European Union countries. By betraying the international trading system for which it wrote the rulebook, the United States is letting its leadership role slip away for little to no reason.
Last week, negotiations at the WTO’s 13th Ministerial Conference spilled into extensive overtime. The conference – which was scheduled to run from Feb. 26-29 in Abu Dhabi, the capital of the United Arab Emirates – faced deadlock, threatening the package of agreements on fisheries, e-commerce, and agriculture expected from the meeting and ultimately thwarted major reforms.
Despite these roadblocks, talks hinted at long-awaited progress towards the acute and potentially existential crisis of dispute reform and a lifting of the Appellate Body blockade.
The Biden administration approached the conference with a “pragmatic” plan – to use the conference to build momentum towards reform. However, reports of progress proved optimistic. While WTO Members had originally hoped for a reform deal by the conference, the United States ruled out an agreement before the meeting even began. Ultimately, the ministerial only produced redundant commitment to continued negotiation and the oft-touted goal of restoring dispute settlement this year.
Biden’s trade team is laudably engaging in multilateral cooperation on WTO progress and reform, but its persistent blockade and lofty prerequisite demands for reviving the dispute system are a detriment to free trade.
If the United States. stays its course, its fear of losing its leadership position over rules-based international trade will become a self-fulfilling prophecy. Therefore, the Biden administration should cut its losses, abandon the blockade, and restore the Appellate Body as a first step to WTO reform and a badly-needed showing of good faith.
The World Trade Organization
The WTO represents 164 Member countries, which account for more than 98 percent of global trade. It serves as both a structured forum where Members negotiate new trade agreements and as an organization that governs disputes over and enforcement of a network of existing treaties.
The original and most prominent, the General Agreement on Tariffs and Trade (GATT), was negotiated after World War II based on a U.S. proposal for an international organization that would negotiate and enforce trade law. The dispute settlement system – another U.S.-led project – was created alongside the WTO proper in the 1990s.
Member States can submit disputes to panels of experts assembled by the Dispute Settlement Body, which consists of representatives from each Member country. These independent reviewers assess whether a Member government’s trade policies violate WTO obligations. Panels issue reports detailing their decisions. If a Member breaks a rule, they must bring their trade policies into compliance and compensate the winning party. If a Member fails to comply within a reasonable time, injured Members can institute countermeasures, like hiked tariffs, to induce compliance.
Members who are unhappy with a panel’s outcome can appeal to the Appellate Body. Seven individuals are appointed by consensus of the Dispute Settlement Body and serve staggered four-year terms. Their decisions are final and binding – if, of course, the Appellate Body is properly up and running.
The Appellate Body Blockade
Despite its contributions to global trade, the WTO has its fair share of problems. Two months after implementing the blockade, the U.S. Trade Representative issued a “Report on the Appellate Body” explaining the WTO dispute system’s many perceived shortcomings.
The United States is right to object to some of the WTO’s structural issues. For instance, soon after the dispute system launched, the Appellate Body, originally expected to handle infrequent, narrow reviews, was inundated with work. Naturally, this caused frequent violations of the “ninety-day rule,” which mandates a three month time limit for the Appellate Body to make decisions – one of the U.S.’s many gripes. Further, the Appellate Body frequently did overstep its black-letter authority by reconsidering facts on appeal when only authorized to review questions of law.
The United States also criticizes institutional issues beyond dispute settlement, such as the WTO allowing Members to self-identify as “developing” States and avail themselves of preferential treatment – a practice that some Members with high-income, industrialized economies, like China, India, and Singapore, controversially use to their advantage.
Some complaints, however, are far more subjective, such as the U.S.’s frequent objections to Appellate Body interpretations of a treaty provision distinct from whatever interpretation Washington deems “correct.”
For instance, both the Trump and Biden administrations rejected WTO panels’ interpretations of the GATT’s “security exceptions” provisions, which permit Members to take any action they “consider[] necessary for the protection of [their] essential security interests.” The United States argues the WTO should never second-guess a Member State’s claims regarding national security, no matter how implausible or provably false. In 2022, the United States lost a dispute in which it claimed impermissibly high tariff rates on imported steel and aluminum were essential for national security reasons.
The United States is almost entirely alone in this view, and the EU succinctly describes the U.S. position as advocating for “the end of a rules–based multilateral trading system.” And, although the WTO dispute mechanism consistently finds that the security exceptions are not “incantation that shields a challenged measure from all scrutiny,” the United States is relentless in its insistence otherwise and, as recently as January, cited the issue as one of the main reasons for refusing any and all attempts at restoring the Appellate Body as it was previously structured.
Ultimately, these critiques built to a crescendo: the institution of the blockade in 2017. By thwarting the consensus required to appoint new Appellate Body members, the United States functionally exercises a unilateral veto over the Body’s existence.
A Misguided Bipartisan Attack on International Trade
The WTO is imperfect, but the United States has jumped to a drastic response with far-reaching effects. The blockade places the rules-based system of trade that Washington spent over seven decades building and nurturing in jeopardy. Worse, gutting the Appellate Body harms U.S. interests in international trade and hastens the fall from its leadership position in the global economy.
WTO Members are capitalizing on the moment by appealing “into the void” as decisions wait for Appellate Body reviews that may never come, rendering them unenforceable. This American-made loophole allows countries like China to wriggle out of losing disputes. The United States. itself abuses the system it broke: after losing two disputes involving the security exceptions in December 2023, it appealed the decisions into the void, refusing to abide by their outcomes.
Without the WTO’s “crown jewel,” trade restrictions proliferate and threaten feedback loops of retaliatory, increasingly draconian policies. For a self-proclaimed proponent of free trade, maintaining this state of affairs makes little sense.
The United States could have leveraged the blockade to start reform negotiations, but inaction squandered that opportunity. That leverage was undermined when 16 Members, led by the EU, implemented a stopgap: the Multi-Party Interim Arbitration Arrangement. Through this arrangement, parties can opt to arbitrate appeals outside the WTO while the Appellate Body is paralyzed.
Still, the United States maintains its blockade and, rather than leading by example, calls on allies to come to the table with proposals. Though Washington engages in consultations on reform, it has no clear plan for a refurbished dispute system. Rather, Deputy U.S. Trade Representative María Pagán asserts that the goal “is not to restore the Appellate Body or go back to the way things were” and that a one-tier system can be “perfectly sound.”
Some countries share the U.S.’s critiques. Others, alongside Washington insiders, see the blockade as petty retribution for lost disputes and a loosening grip on the reins of international trade and hegemony. Regardless, the United States’ near-abandonment of its brainchild is a detriment to its reputation as an economic leader. At best, it appears as though the United States has thrown its hands up in frustration instead of fixing the flawed organization it ushered into existence. At worst, Washington comes off as a bad-faith actor burning the system down so it does not have to play by the rules.
The Biden administration is failing to convince the world of its commitment to revitalizing the WTO. While reform is needed, continuing the Appellate Body blockade will only wreak further havoc on U.S. interests, the global economy, and the international rule of law. Given the fraught negotiations and breaking of rank that plagued the WTO’s 13th Ministerial Conference last week, additional buy-in and direction from the United States is sorely needed.
Rather than batting down the sure-to-come 74th attempt to initiate a selection process for new Appellate Body members, the Biden administration should come to the table and join the overwhelming consensus to signal faith in the organization and reestablish a measure of U.S. soft power and leadership in global trade.