Causes – Milan’s part

● Political Issues
Some provisions of The Dispute Settlement Understanding (DSU) are outdated and they do not
comply with the current US International trading policy. Also, some other developed countries
expressed concerns on current function of the WTO dispute settlement system, particularly with the
judicial activism of the Appelate Body.

 US expressed its discontent by blocking of new appointments to the AB.

 US administration
 Blocking of new appointments to the AB
 Putting pressure on other WTO member states to accept a reform
 Constraining the judicial activism of the Appellate Body

The major reasons for blocking appellate body appointments root back to the dissatisfaction of
US with the way the body had been functioning for the last decade or so. The causes of US
discontent include both procedural (technical) and systematic concerns. One of the procedural
concerns for instance includes some Appellate Body members deciding appeals after the
expiration of their 4-year term. Another is an unwritten tradition of the quasi-automatic
reappointment of an Appellate Body member for a second term. US has challenged this practice
several times since 2011 in many ways, one of which was blocking the reappointment of its own
nominee, Jennifer Hillman. A systematic concern at the core of the current crisis relates to the
alleged “judicial overreach”. The basis of this criticism lies in Articles 3.2 and 19.2 of the DSU
that obligate the Appellate Body to refrain from creating or abolishing rights and obligations of
WTO members (in line with the member-driven approach embedded in all WTO mechanisms).
However, the instances of allegations of the Appellate Body having overstepped its authority that
was supposed to be limited to correcting legal errors in panel reports are not few. From US-
FSC to Zeroing, there are enough case laws to legitimize these concerns.
● Political Issues
In contrast, technical issues that raise US objections are more susceptible to resolution.
The United States has tried to address some of these concerns through negotiations and has
tabled several proposals to amend the DSU. But no DSU amendments have been adopted, largely
because of the cumbersome consensus requirement (Marrakesh Agreement Article X.8).
 US discontent - Blocking of new appointments to the AB
Now we have only three members instead of 7, which is the number
according to the
 Zeroing in antidumping investigations
“The WTO rules do not prohibit ‘zeroing’,” said Ambassador Lighthizer.
“The United States never agreed to any such rule in the WTO
negotiations, and never would. WTO Appellate Body reports to the
contrary are wrong, and reflect overreaching by that body. The United
States commends this panel for doing its own interpretive analysis, and for
having the courage to stand up to the undue pressure that the Appellate
Body has been putting on panels for many years. Appellate Body reports
are not binding precedent, and where the Appellate Body’s reasoning is
erroneous and unpersuasive, a WTO panel has an obligation not to follow
such flawed reasoning.”
US Canada dispute. The DSB and Appellate Body differently interpret the
zeroing method.
o Treatment of Chines state – owned enterprises
● Procedural Issues
- Expiration of four-year term

For example, some Appellate Body members have decided appeals after the expiration of
their four-year term, without explicit authorization from the DSB. Rule 15 of the AB
Working Procedures allows an Appellate Body member to complete his/her work on the ongoing
appeal subject to approval by the Appellate Body and upon notification to the DSB. Rule 15 was
adopted without approval from the DSB. The United States charges that Rule 15 infringes on the
right of the DSB to decide on the appointment or reappointment of the Appellate Body member
in question.27 This rule could be amended at the insistence of the DSB, but the fact that no
action has been taken arouses US suspicions that WTO members are not serious about resolving
other more important issues.
- Resignation without providing the 90-day notice
In addition, the United States has expressed concern about the resignation of Hyun Chong Kim
on August 1, 2017, without providing the 90-day notice required by Rule 14(2) of the AB
Working Procedures. In such cases, it is for the DSB, and not the Appellate Body, to decide the
conse quences. The United States maintained that Kim should have been replaced by another
member of the Appellate Body for the dispute on which he was working. Instead, the chair of the
Appellate Body simply informed the DSB about Kim’s resignation and the Appellate Body report in
the EU– Fatty Alcohol (DS442) dispute was adopted even though it was circulated to WTO members
only after the resignation.

- Quasi-automatic reappointment of an Appellate Body member for a second four-year

Finally, the United States has also challenged an unwritten tradition of the quasi-automatic
reappointment of
an Appellate Body member for a second four-year term. It has challenged this practice several times
since 2011, when it blocked the reappointment of its own nominee, Jennifer Hillman.28 On that
occasion, the US delegation refrained from explaining its position. Later, with respect to SeungWha
Chang of South Korea, the United States stated that it did not support Chang’s reappointment
because decisions of the Appellate Body, with Chang’s participation in the “division,” went far
beyond the scope of the appeal, contrary to the WTO’s own procedural rules.29

 Workload
 AB proceedings > 90 days – AB Cannot resolve the proceedings within 90 days. They go
beyond that period.

● Systemic Issues
“Overreaching” interpretations

Appellate Body decisions are final and cannot be challenged, except by consensus of the DSB. No
challenges have thus succeeded. The Appellate Body was created to correct legal errors by
panels—not to manufacture new rights and obligations of WTO members. The Appellate Body
serves as a check on WTO panels, but the United States complains that there is no effective check
on Appellate Body decisions.30 The impact of “overreaching” Appellate Body decisions is
exacerbated by a tradition of stare decisis, which has emerged from WTO case law.31 As a result,
panels depart from previous decisions of the Appellate Body on the same legal issues only in rare
instances.32

 Obiter dicta in Appellate Body reports