2019 forecast: WTO reform and the Appellate Body

Without US economic power backing it, the WTO could become a toothless tiger.

In the year ahead, do not expect the Trump administration to change course on its ongoing blockade of the World Trade Organization’s Appellate Body. The US is the defendant in a series of trade disputes owing to President Trump’s preference for protectionist trade policies. Such disputes are typically resolved by the WTO’s Appellate Body, a panel of judges that has helped maintain global trade relations for decades. But faced with defeat over its new tariff regime, the current US government has opted for spoiler tactics by vetoing the appointment of new judges as the compulsory tenures of current panel members expire.

Should this continue until the December 2019 term expiration of two judges, the body will lack the minimum number of judges to make legal rulings and cease to function. This poses an existential threat to the existing trading order.

While there have been efforts by WTO members to reform the organisation and the body, spearheaded by US allies, the Trump administration has remained steadfast in its criticisms that the WTO too often rules against it in trade disputes. Trump has gone so far as to threaten to withdraw from the WTO entirely, a proposal that could either lead to the organisation’s collapse or enable other powers such as China to adapt the rules to their interests.

With trade tensions between the US and China continuing to build and Washington’s commitment to the multilateral trading system wavering, 2019 will likely bring about increasing pressure on the two nations to settle their trade disputes and to commit to broadly-supported WTO reform proposals.