By Alex Lawson

Law360 (September 28, 2020, 5:48 PM EDT) -- In Law360's latest look at the World Trade Organization's Dispute Settlement Body, 14 countries say Geneva must do more to adapt its legal proceedings to the challenges of the COVID-19 pandemic, while the U.S. continues to spar with China and Canada over farm and lumber subsidies.

COVID-19 Adjustments Sought

Monday's DSB session saw Australia deliver a statement on behalf of a 14-country group that said the WTO must provide more flexibility for litigating disputes remotely during the coronavirus pandemic.

A global patchwork of travel and immigration restrictions has made it difficult for panelists adjudicating WTO cases to travel to Geneva for their work, and Australia said the WTO should be getting creative to avoid further burdens on the already-taxed dispute settlement system.

"During 2020, we have witnessed governments, private sector organizations, and domestic and international adjudicative bodies throughout the world adapt their usual ways of working to continue operating in these difficult conditions," Australia said. "We must ensure the WTO dispute settlement system does the same in order to remain functional and relevant."

Australia and the other countries backing the statement said that panelists in all cases should consult with the parties to reach "flexible, alternative arrangements to ensure disputes proceedings can continue to progress in a timely manner."

The European Union echoed many of Australia's positions and said it was encouraged by a number of panels' recent decisions to hold virtual hearings.

"COVID-19 should not indefinitely paralyze the WTO dispute settlement system because it is considered that in-person hearings should not be held for public health reasons or due to related travel restrictions," the EU said.

US-Canada Lumber Fight Goes 'Into the Void'

Ahead of the meeting, the Trump administration announced that it was appealing an August decision that faulted its countervailing duties on softwood lumber. But because the WTO's Appellate Body has been shuttered after the U.S. blocked new judges from filling vacant seats, the case will remain in limbo for the foreseeable future.

The U.S. has refused to seat new members of the Appellate Body, asserting that the appeals panel has overstepped its authority and encroached on U.S. sovereignty. Unable to hear new cases, the Appellate Body has laid dormant since December. But several WTO cases have been appealed, lying in wait until enough judges can be seated to hear them.

Such appeals made "into the void" prevent the lower panel's decision from taking effect, which has been a point of frustration for numerous members. At Monday's meeting, Canada said the U.S. appeal was particularly egregious since it was the U.S. that was most directly responsible for shutting down the Appellate Body in the first place.

"By appealing this panel report to an Appellate Body that it made nonfunctional through its blockage of AB member appointments, the United States is compounding the unfair treatment accorded to Canadian softwood lumber producers," Canada said. "An appeal, in the current circumstances, has the effect of denying Canada its right … to prompt settlement of the dispute."

The EU and China took the floor with statements supporting Canada's criticism of the U.S. in the case.

For its part, the U.S. said the panel in the lumber case "erroneously interpreted and applied numerous provisions" of the WTO's subsidy agreement. The delegation said it remains open to discussions with Canada to resolve the dispute bilaterally and bristled at the assertion that it was looking to game a defunct WTO legal system.

"The suggestion that the United States has appealed simply to delay this dispute settlement proceeding is utterly without foundation," the U.S. said. 

China, US Squabble Over Farm Subsidies

Elsewhere at the meeting, China and the U.S. remained at odds over China's efforts to comply with a WTO decision that ruled its wheat and rice subsidies illegal. The U.S. has said China missed a deadline to withdraw or alter its subsidies, teeing up retaliatory tariffs on roughly $1.3 billion worth of Chinese goods.

On Monday, China secured the right to have a new panel assess whether it has complied with the initial ruling in the case. While the U.S. has paused its retaliation bid, Beijing nevertheless chided the Trump administration for escalating the dispute.

"We are concerned about the systemic implication of the United States' approach in this dispute which would open the door to the abuse of the dispute settlement system," the Chinese delegation said at the meeting. "Moreover, the United States continues to fail to specify on what basis China's implementation falls short of the full compliance."

Appeals Still Stuck in Mud

As has been the norm in the DSB for the past two years, more than 120 members advanced a proposal to begin filling the vacant seats on the Appellate Body, only to be blocked by the U.S. delegation, which reiterated its long-standing concerns about the Appellate Body's purported shortcomings.

A number of delegations have resorted to setting up an interim arbitration system that will hear WTO appeals until the Appellate Body gets back on its feet. But even that system's backers acknowledge it is only temporary and that the priority must be restoring the WTO's legal wing to full strength.

"The critical mass of WTO members behind this proposal is a clear testimony to the importance that we all accord to a fully functioning Appellate Body as an integral part of the dispute settlement system," Canada said Monday, referring to the proposal to nominate and seat new appeals judges.

As it has done for the past two years, the U.S. refused to budge.

"As the United States has explained repeatedly, the fundamental problem is that the Appellate Body has not respected the current, clear language of the [Dispute Settlement Understanding]," the U.S. said. "Members cannot find meaningful solutions to this problem without understanding how we arrived at this point. Without an accurate diagnosis, we cannot assess the likely effectiveness of any potential solution."

--Editing by Aaron Pelc.

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