International Economic Law and Policy Blog

The AB Appointments Crisis: The DSB Discussion

The minutes of the DSB meeting discussing the last round of AB appointments, involving Taiwan's objections, are now available:  http://www.worldtradelaw.net/dsbminutes/m242.pdf  See Item 1 of the agenda.

The Zeroing (DS344) Appeal

Recalling Sungjoon's much commented on post here on the panel report in U.S. - Stainless Steel (Mexico), this is from the U.S. oral statement in the appeal of that report:

5. The zeroing reports represent a long-running dispute between the Appellate Body and panels – composed primarily of trade remedy experts – about the meaning of key provisions of the Antidumping Agreement. In their submissions, Mexico and several third parties have flayed the Panel for not adopting the Appellate Body’s findings in the various zeroing cases. While engaging in legal histrionics has dramatic value, the reality is that the Appellate Body recognized long ago in Japan – Alcoholic Beverages II that GATT and WTO reports are “not binding except with respect to resolving the particular dispute between the parties.” The Appellate Body has also indicated that panels are required only to “take into account” prior rulings on matters in issue. Here, the Panel carefully analyzed the Appellate Body’s reasoning in expanding a zeroing prohibition beyond average-to-average comparisons in investigations, and found that it could not agree. A reading of the Panel’s report will show that it responded in detail to each of the various rationales that have been put forward by the Appellate Body in its zeroing decisions. The Panel’s report reflects a sincere disagreement with the Appellate Body’s reasoning, not a lack of respect.

6. All of us want a strong WTO dispute settlement system that commands widespread respect and adherence. But no legal system can afford an unthinking adherence to precedent. Even in our common law system with its principle of stare decisis, the courts can and do reverse earlier rulings if they are convinced that a mistake was made. A legal system that cannot fix mistakes will lose credibility and eventually fall apart. Therefore, we urge the Appellate Body to approach this dispute with an open mind, and not to be cowed by emotional predictions by some of our friends that the world as we know it will end if some aspect of an earlier ruling is ever reconsidered. In view of the number of expert panelists that have disagreed with the Appellate Body’s previous findings on zeroing, and the criticism by respected academics of the Appellate Body’s zeroing rationales, it is simply not realistic or credible for our Mexican, Japanese, and European friends to try to shout down legitimate principled disagreement about whether the Antidumping Agreement and GATT 1994 Article VI contain a clear, broad-based prohibition on zeroing in all contexts.

The U.S. appellee's submission is here.  I couldn't find the other participant's/third participants' submissions online to get the other side of the story.

This whole case must have been a delicate one for the U.S. lawyers, who had to say things like this to the Appellate Body:  "The Appellate Body’s Interpretation of the Term "Margin of Dumping” Is at Odds with WTO/GATT Practice and the Ordinary Meaning of the Term."

Could a WTO Panel Reject the Appellate Body's Rulings?

Despite the well-established AB case law invalidating zeroing, a recent panel in U.S. – Stainless Steel explicitly rejected the AB’s established anti-zeroing position, in particular that expressed in U.S. – Zeroing (EC) and U.S. – Zeroing (Japan), both of which addressed the same issue as the panel faced, i.e., a “simple zeroing” in the administrative (periodic) review. (paras. 7. 106, 7. 115) The panel acknowledged that the AB “de facto expects” the panel to follow adopted AB reports “to the extent that the legal issues are similar.” (para. 7.105) However, it emphasized that panels “are not, strictly speaking, bound by previous Appellate Body or panel decisions that have addressed the same issue.” (para. 7.107) Interestingly, it found support for its position in Article 19.2 of the Dispute Settlement Understanding (DSU) which prohibits the panel and the AB from “adding or diminishing” WTO members’ rights and obligations. (para. 7.107) It also viewed that its reversal of the AB’s position in this issue is in pursuit of its obligation of an “objective examination” under Article 11 of the DSU.

The panel followed the same line of reasoning that was employed in the two previous panels (U.S. – Zeroing (EC) and U.S. – Zeroing (Japan)) but ultimately rejected by the AB in both cases, although it emphasized that its analysis was “not simply an unthinking repetition of these past panel decisions.” (para. 7.115) The fundamental difference between the panel and the AB on this issue centers on how to define “dumping” or “dumping margins” under the Antidumping Agreement and GATT Article VI. According to the AB, dumping and dumping margins must be defined in terms of the “product as a whole” under investigation. Therefore, all intermediate, individual calculations (normal value minus export price) as to various sub-product categories must be “aggregated” to obtain the final dumping margin. (paras. 7.113, 7.117) In stark contrast, the panel viewed that dumping and dumping margin could be defined in terms of “a particular export sale” and that antidumping authorities need “not necessarily require an examination of different export sales at an aggregate level.” (para. 7.117) The panel viewed that the AB’s interpretation was not based on a “solid textual basis” and that it should adopt a “permissible interpretation” which accommodates a certain type of zeroing (simple zeroing) in this case. (para. 7.119)

The panel’s unusual behavior raises many interesting legal questions. As it admitted itself, the AB expects panels to follow its jurisprudence, even in the absence of formal binding force. More importantly, such jurisprudence creates “legitimate expectations” among WTO members. (para. 7.103) It seems controversial whether a panel could reject the AB’s established case law on the same issues in the presence of Article 3.2 of the DSU which underscores the “stability and predictability” of the multilateral trading system. As a practical matter, it is likely that the complainant in this case (Mexico) will appeal the panel ruling, in which situation the AB is likely to reject the panel ruling and adhere to its previous position. However, if Mexico chose not to appeal and the panel decision was adopted, two conflicting case laws would co-exist in this area.

Postscript on the Appellate Body Appointments

What Chinese Appellate Body appointee Zhang Yuejiao had to say:

"I will do my best with unwavering impartiality," Zhang said Thursday. She will take her seat in June in the seven-member Appellate Body, which issues final rulings in trade disputes.

"You can rest assured that I will do justice to the post," she said.

Appellate Body Members Appointed

According to a WTO press release (as also mentioned by Jalal Alavi in the comments), the four new Appellate Body Members have been appointed:

The WTO Dispute Settlement Body appointed today (27 November 2007) the following four new members to the seven-member Appellate Body: Ms Lilia R. Bautista of the Philippines and Ms Jennifer Hillman of the United States for four years commencing on 11 December 2007; and Mr Shotaro Oshima of Japan and Ms Yuejiao Zhang of China for four years commencing on 1 June 2008.

The WTO, of course, has nothing to say about how the situation was resolved.  Here are brief articles on the matter by AFP and Reuters.

MORE:

From something called "Taiwan Headlines":

Taiwan will stop blocking the appointment of a Chinese lawyer as a judge on the World Trade Organization (WTO)'s Appellate Body, Taiwan's representative to the WTO Lin Yi-fu confirmed Tuesday.

Lin told the Central News Agency (CNA) that an agreement has been achieved in the latest round of negotiations held between Taiwan delegates and high-ranking WTO officials.

...

During the interview, Lin did not reveal further details of the agreement, but assured that the DSB meeting "will proceed smoothly."

...

Lin, for his part, also told the CNA that Taiwan delegates have never directly spoke to their Chinese counterparts over the dispute, and that Gosper has never mentioned whether he has ever talked to the Chinese delegates.

Jacob Katz Cogan of the International Law Reporter notes:

It's unclear whether, in exchange for withdrawing its opposition, Taiwan has received some assurances from other WTO members regarding, for example, future appointments of Taiwanese nationals to WTO committees.

Here is the first report I've seen from Xinhua on the issue.  No mention of the Taiwanese objections.

Progress on the Appellate Body Appointments

From one news reports:

Taiwan may back away from its boycott of the placing of a Chinese judge on the World Trade Organization's top legal panel if the island is assured of fair treatment, a Taiwanese official said Sunday.

And another:

Taiwan on Sunday set a condition for ending its boycott of the first Chinese judge at the World Trade Organization (WTO): she must promise fair treatment of Taiwan.

FROM AFP:

Taiwan's government said Sunday it would stop boycotting the appointment of a Chinese judge to the World Trade Organisation's top court if its fears of possible bias by the Asian giant were addressed.

"As long as our concerns are clarified, we could cease the boycott," Phoebe Yeh, Taiwan's foreign ministry spokeswoman, told AFP.

Appellate Body Update

A little news about the Appellate Body situation:

Taiwan's decision to block the appointment of a Chinese judge to the World Trade Organisation's top court threatens an institutional crisis, a key official warned.

...

'I'm extremely concerned that if the situation persists much longer we will have a crisis in this organisation,' Bruce Gosper, chairman of the WTO's Dispute Settlement Body (DSB), told journalists.

Taiwan's objection meant Monday's meeting of the DSB was indefinitely postponed, leaving pending complaints on US agricultural subsidies and Chinese intellectual property restrictions in limbo.

...

Gosper said he was planning to hold further talks with Taiwan and other parties in a bid to resolve the dispute.

More details, from Reuters:

WTO members other than Taiwan were unanimous at a meeting on Friday that the nomination of appeal judges should be kept on the agenda, ambassadors said.

And from the AP (through the IHT):

U.S. Ambassador Peter Allgeier, one of about 30 speakers Friday to urge Taiwan to drop its demands, said WTO rules already ensure impartiality and that the situation was becoming "very urgent." China, the EU, Japan and others made similar statements.

From Asia-Pacific News:

Taiwan stood up to some 30 countries to oppose the appointment of Chinese lawyer Zhang Yuejiao, the Central News Agency (CNA) said in dispatch from Geneva.

...

... Taiwan argued that it had recently conferred with Gosper and WTO Director-General Pascal Lamy to find a solution. The consultations should continue and Taipei's objective was to ensure the credibility of WTO's Appellate Body.

IN THE comments, Henry Gao says:  "According to some Chinese news source here, Taiwan has agreed to approve the appointment on a conditional basis after consulting with the Quad Members."  He also points to an exhange on his blog related to some of these issues:  http://wtoandchina.blogspot.com/2007/11/first-chinese-in-wto-appellate-body.html   

Appellate Body Appointments Blocked

Diplomatic maneuvering of some sort:

Taiwan on Monday blocked a World Trade Organization meeting that would have appointed new judges to the WTO appeals body, including the first Chinese member.

Chinese attorney Yuejiao Zhang appeared set for nomination to the seven-member panel until Taiwan made the rare move of forcing an adjournment of the monthly meeting of the dispute settlement body, trade officials said.

Taiwan, which is excluded from most international organizations because of Chinese opposition, has seldom flexed its muscles in the WTO, which makes all decisions by consensus.

It joined the body in early 2002, just after China, which has claimed sovereignty over the island since the nationalist government left the mainland in 1949 during China's civil war. Under Beijing's insistence, the WTO admitted "Chinese Taipei" as a tariff territory, rather than a sovereign state.

Taiwan did not mention Zhang by name or say why it wanted to defer the discussion. The WTO confirmed in a statement that the meeting was adjourned because of a Taiwanese objection on the appointment of judges, but did not elaborate.

I'm not sure what the ultimate goal is.

ADDED:  Maybe this 2005 story offers a partial explanation:

Beijing is pressuring the WTO to downgrade the name of Taiwan's mission in the directory, which contains contact details, such as phone numbers, of WTO member states' missions in Geneva.

...

China wants the WTO Secretariat to replace "permanent mission" with "office of permanent representative" in the directory, according to a Taiwanese official, who requested anonymity.

MORE DETAILS:  From an Asian news source:

Taiwan on Monday objected to the proposed appointment of a Chinese judge to the World Trade Organisation's top court, citing the possibility of bias.

"We have deep concerns on the question of impartiality and qualification of one of the recommended candidates," the Taiwanese delegation said in a statement.

...

Taiwan said in its statement that "we will not agree to the adoption of (the) agenda until our concerns have been addressed" but stressed its willingness to hold further discussions.

MORE from Reuters.

AND I suppose this, from September of this year, is another part of the explanation:

The United Nations has once again blocked Taiwan's quest for membership of the world body, despite a huge high-profile campaign by the island.

A key UN committee has rejected a proposal from Taiwan's allies to put its bid on the agenda of the general assembly, meeting now in New York.

China, which claims Taiwan as a province, is adamantly opposed to UN membership for the island.

AND from Radio Taiwan International:

Vice Economics Affairs Minister Hsieh Fadah said on Tuesday that the move was meant to protect Taiwan's rights and interests.

The WTO was on the verge of approving the Chinese lawyer on Monday. He would have become a judge for the WTO's appellate body, which has the final say in the WTO's dispute settlement system. According to Hsieh, this is the first time that a WTO appellate judge appointment has been blocked in this way.

The foreign ministry also said on Tuesday that the move was justified...that's considering China's continued suppression of Taiwan in the international community.

CHINA is not pleased with all of this, obviously:

Chinese Foreign Ministry spokesman Liu Jianchao indicated that the Chinese administration still wanted to see the appointment approved.

"I'm sure that the relevant members of the WTO will be able to appropriately resolve this issue through consultations," he told a regular news conference.

But Mr Liu also suggested that China was not happy, leaving open the possibility of greater tensions with Taiwan over the move.

...

"If someone wants to exploit the occurrence of problems such as this in international organisations - in the WTO - to achieve political ends, we are resolutely opposed," Mr Liu said.

THIS is not much of an update, but it's something at least:

The DSB is not expected to meet on the Appellate Body appointment issue until after all the concerns expressed by member states are clarified or addressed, Hsieh added.

FROM a China Ministry of Foreign Affairs press conference:

Q: In the discussion among WTO members on candidates for its Appellate Body yesterday, representatives from Taiwan expressed their concern that the judge recommended by the Chinese mainland might not be fair in handling trade cases involving Taiwan. Do you have any comment?

A: This is an issue involving personnel arrangements within the WTO. We believe that it will be properly solved through negotiations among relevant WTO members. You can refer to the Ministry of Commerce which is in charge of the WTO issues. I'd like to emphasize that we are firmly opposed to any attempts to bring up this kind of issue in international organizations out of political motives.

TAIWAN says this is not a reprisal:

Taiwan's opposition to the appointment of a Chinese lawyer as an appellate judge of the World Trade Organization (WTO) is by no means retaliatory, but a justified and reasonable action, a trade official said Wednesday.

The official, who spoke on condition of anonymity, made the remarks in response to a foreign wire service report that China once blocked a Taiwanese expert from joining the WTO Committee on Subsidies and Countervailing Measures, so Taiwan disputed the appointment of Zhang Yuejiao as a judge on the Appellate Body, which has a final say in the world trade regulatory organization's dispute settlement system.

According to the official, China indeed refused to accept the accession of Lo Chang-fa, a Taiwanese expert in international trade laws, to an expert panel under the Committee on Subsidies and Countervailing Measures in 2005, but Taiwan's objection to Zhang's appointment was unrelated with that matter.

Appellate Body Bios

Following-up on Joost's post below, here are some fairly recent bios of the four new AB Members:

Lilia Bautista (Philippines)

Jennifer Hillman (US)

Shotaro Oshima (Japan)

Zhang Yuejiao (China)

New Appellate Body Members

Wednesday's recommendations by the AB selection committee leaked on "WTO Reporter" http://www.bna.com/products/corplaw/wtor.htm.

Here are the reported results:

Janow (US) and Tanaguchi (Japan) to be replaced by Hillman (US) and Bautista (Philippines) in December, 2007

Abi-Saab (Egypt) and Ganesan (India) to be replaced by Zhang Yuejiao (China) and Oshima (Japan) in June, 2008

So far, the recommendations by the selection committee have always been approved by WTO members.

Some interesting consequences:

1. China has its first AB member
2. Three of the four newcomers are women, meaning that 3 out of 7 AB members will be female, a record in the AB's short history
3. Although 3 of the 4 retiring AB members were academics (Janow, Tanaguchi and Abi-Saab), none of their replacements are (the only remaining professors on the AB will soon be: Sacerdoti and Baptista; all 4 new AB members were previously in government, two of them are former ambassadors)
4. Japan keeps its seat (confirming that there are 3 de facto reserved seats on the AB: US, EC and Japan)
5. Egypt will not have an AB member for the first time in AB history
6. The Philippines re-gain their seat (originally occupied by Feliciano) and India loses its seat (not replaced by the Pakistani candidate)
7. Africa falls from two (Egypt, South Africa) to one AB member (South Africa)
8. The AB still awaits its first black member (Benin's candidate was not selected)

WTO Appellate Body Selection

I have heard that the WTO is now in the process of selecting two new Appellate Body members to replace Mr. Taniguchi and Ms. Janow later this year.  I have also heard rumors about the US government's nominees but could not find anything on it on the USTR webpage.  I have also heard rumors about nominees from China and from South Korea.  Yet when I looked on the WTO website on the Appellate Body page, I saw the list of current members, but no information about the ongoing selection process.  Has anyone been able to find  information on the WTO website regarding who the current nominees are?  It would be troubling to think that  something as important as Appellate Body selection is being done without basic transparency.  I would like to see a page with all of the nominees listed with photos and their bios.  Is the WTO going to inform the public about the new members of the Appellate Body only AFTER they have been selected?  I would hope that the WTO wants the public to know who the candidates are so that individuals, companies, and NGOs could pass on their views to the selection committee and the governments that comprise the DSB.   I noticed that Director-General Lamy gave a speech at Georgetown Law Center on October 22 stressing the need for "active transparency."  I for one would like to see more active transparency inside the WTO.

More Appellate Body Nominations

Over at the International Law Reporter blog, Jacob Katz Cogan reports that:

China also submitted two nominations: Zhang Yuejiao (a law professor and former government official who was also nominated for an earlier opening) and Zhang Yuqing (an attorney and former government official). Japan has nominated Shotaro Oshima, its former ambassador and permanent representative to the international organizations in Geneva.

Here's an article about the Oshima nomination with a little background.

ADDED:

Some background on each of them:

Zhang Yuejiao

Zhang Yuqing

Shotaro Oshima (and also here)

Appellate Body Nominations

In a previous post, I mentioned that the following AB members will be stepping down soon:

• Merit Janow, United States (December 10, 2007)
• Yasuhei Taniguchi, Japan (December 10, 2007)
• Georges Abi-Saab, Egypt (May 31, 2008)
• A.V. Ganesan, India (May 31, 2008)

The WTO now reports the following about nominations for replacements:

The DSB chair announced that nominations to fill the four positions in the Appellate Body had been received from Pakistan, China, the Philippines, Japan, Korea and Benin. The deadline to propose candidates expired on 31 August 2007.

I'm a little suprised by the absence of a U.S. nomination.  Am I missing something here?  Is the U.S. giving up on a position this time around?

UPDATE:  I'm not sure what the quoted passage means exactly, but as I understand it from other sources, the U.S. did in fact nominate some candidates.

UPDATE II:  In the comments, David Palmeter mentions the two U.S. nominees: Jane Bradley (http://www.law.georgetown.edu/curriculum/tab_faculty.cfm?Status=Faculty&Detail=1956) and Jennifer Hillman (an old bio: http://www.usitc.gov/ext_relations/about_itc/hillman.htm).

Appellate Body Turnover

According to the summary of the latest DSB meeting:

The DSB agreed on the process for selecting Appellate Body members to replace four current members whose terms of office expire in December 2007 and May 2008.

...

The DSB set a deadline of 31 August 2007 for members to nominate candidates to the Selection Committee which will, in turn, make its recommendation to the DSB by no later than 5 November 2007 to enable the DSB to take a decision at its meeting on 19 November 2007

The four to be replaced are:

• Merit Janow, United States (December 10, 2007)
• Yasuhei Taniguchi, Japan (December 10, 2007)
• Georges Abi-Saab, Egypt (May 31, 2008)
• A.V. Ganesan, India (May 31, 2008)

The politics of these things make it difficult to predict where (geographically) the new Appellate Body Members will come from.