The Appellate Body (AB) is enshrined in Article 17 of GATT 1994 and the WTO Dispute Settlement Understanding (DSU) contained therein. Since mid-December 2019, the AB has been unable to rule. As a result, the WTO can no longer issue final judgments. Particularly in a time of increasing protectionism and corona-induced weakness of the global economy, the inability to resolve trade disputes is a major burden on world trade.

Multilateral Dispute Settlement

After more than 25 years of practice, the criticism of the WTO’s dispute settlement mechanism is justified on some points. The EU is therefore committed to reforming the WTO in order to keep the multilateral trading system operational.

In addition, the EU belongs to the founding members of the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). This is to be used until the WTO Appellate Body is operational again. The MPIA initially applies to the EU and 15 other countries (Australia, Brazil, Canada, Chile, China, Chinese Taipei, Colombia, Costa Rica, European Union, Guatemala, Hong Kong, Mexico, New Zealand, Norway, Switzerland, Singapore, and Uruguay ) but is open to all interested states. The MPIA came into force at the end of April 2020.

Extending the EU’s Trade Policy Scope

Furthermore, in December 2019, the European Commission submitted a proposal to amend Enforcement Regulation 654/2014 to the European Parliament and the Council of the European Union. This regulation defines the measures the EU can take in case of violations of the international trading order. For example, it stipulates that tariff preferences may be withdrawn in case of violations of international trade law and that new and higher tariffs may be imposed “to restore the balance of concessions”. In order to ensure the EU’s ability to act even without final jurisdiction by the WTO, the Commission has proposed a series of amendments to the Enforcement Regulation:

• In the future, the EU should be allowed to initiate trade policy measures even when a WTO appeal is not possible and the other party is not prepared to accept voluntary arbitration.
• In the event of a refusal by the opposing party to engage in voluntary arbitration, the European Union should no longer be constrained by its tariffs bound at the WTO.
• The effects of these changes must be reviewed by the beginning of March 2025 at the latest. In the meantime, the Commission is to propose new measures to enforce the Union’s trade interests.

Enforcing Discipline on International Markets

German industry welcomes the European Commission’s strong commitment to reforming the WTO and to an independent and binding dispute settlement system.

• Rules need to be enforceable. An escalation of trade disputes can only be avoided if orderly procedures for rule enforcement are in place.
• When trading partners block agreed rules and independent arbitration procedures, the EU must be able to respond in accordance with multilateral rules and principles.
• The interests of the Union must be considered. Protectionism should be avoided at home and abroad.
• German industry supports the European Commission’s proposed amendment to the Enforcement Regulation.