President Trump has argued that the WTO rules against the United States 90 percent of the time. Bob Woodward responded that the United States actually wins 85 percent of the cases that it brings at the WTO. Who is right? Both are right to some degree. The United States is sued more often than any other WTO member. Since it was set up in 1995, members have filed 150 complaints targeting U.S. policies 78 percent more than there have been against the European Union and more than triple those against China.
Dan Ikenson, director of Cato's Center for Trade Policy Studies, reviewed WTO trade disputes for a twenty year period. He found that the U.S. prevailed in 90 percent of cases that it brought against other countries. However, he also found that "When the United States is a respondent it has lost on 89 percent of adjudicated issues."
The WTO Needs to Be Reformed
The World Trade Organization sounds like a real international organization, but it is not. The WTO operates in secret, by hand-picked delegates from around the world. Cases are determined by "judges" selected for one case even if they have conflicts of interest. WTO decisions make a mockery of U.S. and European laws designed to protect the health of consumers and the environment. The WTO is unfair, unethical and undemocratic and needs to be overhauled.
The United States passed three laws in recent years that the WTO has ruled violated principles of free trade. One is the Country of Origin Labeling Act (COOL) that requires all grocery stores in the United States to label the country of origin of fresh vegetables, fruit, chicken, beef, pork and seafood. The purpose of the law (and in the interests of full disclosure, I worked on writing the law and lobbied for seven years for its passage) was to inform consumers where products came from so that they could make informed decisions. If there were contaminated raspberries in Guatemala, consumers could avoid them. If mad-cow disease was found in Canadian cows, consumers could avoid Canadian beef.
Another American law that ran afoul of the WTO was the Dolphin Safe Tuna Act. This law was passed to allow tuna fisherman to use a "Dolphin-Safe" label on its cans of tuna fish so that consumers could, if they so desired, purchase tuna fished in a more humane manner. Nothing in this law was designed to harm fisherman from other countries. The labeling by fisherman was voluntary, but those using the Dolphin-Safe label had to meet strict standards.
The World Trade Organization has four critical flaws:
- The WTO does not have a Permanent Judiciary;
- The WTO does not have Conflict of Interest or Ethical Rules;
- WTO Panels Operate in Secrecy; and
- WTO Panels Do Not Allow for Participation by Corporations and Non-Profit Organizations.
The most pressing matter is that the WTO should develop a permanent independent court system to decide disputes with judges who have tenure, not ad hoc appointees for one case. The creation of a permanent court system will give the WTO more credibility and respect.
Susan Esserman, former general counsel to the U.S. Trade Representative and Robert Howse, law professor at the University of Michigan wrote that the WTO should create a permanent judiciary:
The manner in which the WTO's panelists are chosen also needs to change. At present, selection is ad hoc and often not based on expertise in trade law. As long as that remains the norm, the Appellate Body will continue to revise extensively the rulings of the lower panels, all but ensuring that the Appellate Body continues to be accused of inappropriate activism. "Reliance on a professional corps of panelists also might help prevent rulings that disregard international law and WTO precedent. "The WTO on Trial," Foreign Affairs Magazine, January/February 2003, Vol. 82, Num. 1.
I propose that the highest appellate body, the WTO Supreme Court, should have nine members, like the U.S. Supreme Court. The judges should be confirmed for a fixed term by a majority of the nations in the WTO. This will give the judiciary independence.
The WTO Supreme Court could then create lower courts to hear trade disputes. Lower court judges should be appointed by the Supreme Court.
The WTO does not have Conflict of Interest or Ethical Rules
WTO rules should prohibit judges with conflicts of interest from ruling in a case that involves their interest. As mentioned above Mexico and Canada filed complaints with the WTO challenging the U.S. Country of Origin Labeling Act. The WTO panel ruled against the United States finding that COOL was a non-tariff trade barrier. One of the "judges" on the case was an attorney from Mexico who had represented Mexico in trade disputes. This obvious conflict of interest weakens respect for the World Trade Organization. No court in the United States would allow a partisan to be a judge in a case involving his or her interests.
WTO Courts Should Be Open to the Public and
Allow Participation by Interested Parties
WTO proceedings are now secret. This is repugnant to those living in free and open societies. No members of the press or outside parties are allowed to watch or listen to court proceedings. WTO proceedings should not be secret, they should be open to the public as courts are in most advanced democracies.
In WTO proceedings, non-profit organizations and corporations are not allowed to participate even if the case involves the organization. In the European Court of Justice, non-governmental organizations can intervene in cases before the court. Similarly, in all states of the United States, there is a provision for intervention by non-parties.
President Trump is right that the WTO is often unfair. The world does need an independent arbiter of the rules of trade. But we should reform the WTO to make it work more fairly rather than abolish it.