But that’s how diplomacy generally works.
Diplomats set the conditions for national success by building relationships, nibbling around the edges of conflict, and reaching obscure agreements with allies, associates, and sometimes even adversaries, to preserve a system of rules and laws that is consistent with Canadian national interests.
The July 31, 2020 supplement to Canada’s 2016 Statement on a Mechanism for Developing, Documenting and Sharing Practices and Procedures in the Conduct of WTO Disputes – now endorsed by Australia, Benin, Brazil, China, Chile, Colombia, Costa Rica, Ecuador, the EU, Guatemala, Hong Kong, Iceland, Mexico, Montenegro, New Zealand, Nicaragua, Norway, Pakistan, Singapore, Switzerland, Ukraine, and Uruguay – has effectively prevented the World Trade Organization (WTO) from imploding, for the time being.
Let me explain.
According to its website, the World Trade Organization “is the only global international organization dealing with the rules of trade between nations… The goal is to ensure that trade flows as smoothly, predictably and freely as possible.”
When a member-state believes that international trade law has been violated by another country, it can appeal to a three-person WTO arbitration panel.
If either state-party is unsatisfied with the ruling, they can then appeal to the seven-member WTO Appellate Body, which makes a final, binding decision.
Appellate Body judges are appointed by WTO member-states for four years. They can be re-appointed once.
(For an accessible summary of all of this, take a look at this great article in the Washington Post’s Monkey Cage).
The WTO’s arbitration system began to break down in 2011 under the Obama administration. Washington’s disappointment with an American judge led it to block her re-appointment.
The move was disturbing, but not critical, as Washington appointed another judge in her place, and life at the WTO continued.
But when the Office of the US Trade Representative blocked a non-American judge in 2013-14, things got more complicated. For all intents and purposes, America had exercised a veto over a WTO Appellate Body appointment.
True, every member-state has always had such power, but the unwritten rules of diplomacy had dictated that no one would use it (based on the assumption that only qualified judges would be nominated through an apolitical process).
The Trump administration – which seems to believe that every international organization is unfair to the United States – has since used that same veto power to block every recent potential appointment to the Appellate Body in an effort to choke the WTO out of existence.
WTO rules indicate that the board cannot function with fewer than three active judges. In December 2019, Washington’s ongoing veto left it with just one.
Canadian governments have long understood that Canada benefits when its trade disputes are resolved through transparent legal processes. The alternative, “might is right,” will never be ideal for a country of less than 38 million in a world of almost 8 billion.
And while Ottawa has acknowledged the WTO’s many flaws, it has rightly privileged reform over annihilation.
In response to Washington’s actions, Global Affairs Canada established the Ottawa Group, a coalition of 12 countries plus the European Union that pledged to devise proposals for reform.
In the midst of these broader negotiations, in July 2019, Canada and the EU finalized their own, pre-emptive, interim bilateral solution.
Essentially, they set up a private appeals board to settle disputes between them in the case that the WTO Appellate Body could no longer function.
The success of the Canada-EU agreement appears to be linked to the Ottawa Group's recent break-through.
The 17 signatories to the July 31st supplement have established a Multi-Party Interim Appeal Arbitration Arrangement – comprised of a pool of 10 arbitrators – to replace the Appellate Body until its minimum membership is restored.
The solution is hardly perfect – for one, Japan has yet to sign on – but it does preserve a broad, international commitment to a rules-based order.
It is a prime example of Canadian diplomacy at its best:
Hard work, relationship-building, careful negotiation, and compromise have bought the WTO and the international community some time.
Hopefully, this interim measure will hold until Washington rediscovers that it, too, is best-served by the rules-based international order that it so carefully designed 75 years ago.
When I have questions about international trade, I contact the University of Lethbridge’s Christopher Kukucha. For the history of the WTO’s predecessor organization, the General Agreement on Tariffs and Trade, check out Western University’s Francine McKenzie’s book, GATT and Global Order in the Postwar Era.
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