9:15 AM Sep 26, 1995

EC, US STILL HOLDING UP WTO APPELLATE BODY

Geneva 26 Sep (Chakravarthi Raghavan) -- Nine months since the WTO came into being, the stalemate over the composition of the Standing Appellate Body of the World Trade Organization's Dispute Settlement system appears to be still unresolved, and the Chairman of the Dispute Settlement Body (DSB) is expected to seek further time at the meeting of the DSB Wednesday.

The seven member Standing Appellate Body, is to hear appeals on law from panel rulings in disputes between WTO members. Its rulings, like that of the panels, are almost automatically binding, since they can be set aside only by consensus decision of the DSB.

Before and after Marrakesh, during the preparatory process for the entry into force of the WTO, the US and the EU made much of nominations on the basis of merit, without any consideration for regional representation etc. And they also suggested some very strict standards of behaviour for panellists and Appellate Body members.

But in practice, they have interpreted it to mean their right to have adequate regional representation for their own regions -- North America and Europe and the bending of standards of behaviour.

The selection process for the Appellate Body's composition and establishment is in the hands of the Chairmen of the WTO General Council, the DSB, the Councils on Goods, Trips and Services and the WTO Director-General Renato Ruggiero.

After inviting nominations, and interviewing over 30 candidates/applicants, this group is still unable to come up with their recommendation for seven names to be approved by the DSB.

The WTO has so far refused to make public to the media the candidates who applied, their qualifications, who nominated them and other particulars. Several WTO members have said that while they have the list of the 'candidates' and their qualifications, they don't have particulars of who has nominated whom.

The United States originally started off with a demand for two US nationals to be on the Appellate Body. The EU countered with its own demand for two Europeans.

The tortuous process of 'consultations' that has been going for months appears to have got mixed up with the processes for selection and appointment of secretariat officials to head the WTO's legal division, the crucial department which influences and guides the rulings of panels. and the secretariat of the Appellate Body.

At one stage, there was a suggestion that the filling up of these two posts should be 'traded' for US yielding its insistence for two Americans on the appellate body or atleast one American and one Canadian.

But this was rejected by those in the selection process.

The two secretariat posts, meanwhile, have been filled up: a US national is to head the WTO's legal division and a Canadian is to head the secretariat of the Appellate Body.

Those involved in the process say that there is no link or connection and that the selection for the two posts has been made on merits on the basis of applications and written and viva voce examination.

Neverthless several of the WTO delegations, who don't want to be identified, say that as in other WTO processes, in practice here too there has been a link of sorts, though not officially or formally.

Since the filling up of these two posts, some WTO delegations say the US has been backing off on its demand for two members of the Appellate body to be drawn from US and/or Canada, but is said to be still having some hidden conditionalities of sorts and that these relate to the right of nationals of a country on the Appellate Body being able to sit on the three-member panel of the Appellate Body to hear cases, even if one of the parties in the case is their own country.

But the EU so far has not apparently resiled from its stand and, referring to the two secretariat posts having been filled up by nationals from the US and Canada, is arguing for balance -- one EU and one non-EU member on the Appellate Body.

The selection process by consensus appears to have become a process of achieving consensus by exhaustion when one of the parties engaged in the consultation process would blink and give way.

It is possible that in practice, the two secretariat officials will function independently, overcoming the hubris of their national legal and trading and economic systems, rules and practices which are at variance with the free trade theories and ideologies. And nationals of a country serving on the Appellate Body may possess the integrity and honesty to judge against their own countries.

However, facts are one thing, and appearances are quite another and appearances are what count when it comes to issues of credibility and confidence. That is why most domestic judicial systems of countries professing and practising democracy, and based on rule of law, pay as much attention to appearance.

There are delegations who say in private that, given the fact that the US and the EU to a great extent (and Japan and Canada to a lesser extent), are involved in almost all trade disputes as plaintiffs or defendants, it would have been much wiser and better if nationals of all these countries had been excluded from consideration or appointment to the Appellate Body or to the key secretariat posts involved.

At the moment, the WTO leaders and the two majors, or the quad as a whole, looking at the trading system in terms of their overwhelming weight and share and economic interests, may shrug off the views of others or even, like the EU at its trade policy review, very sincerely speak of need to take political realities into account -- which means their views have to prevail, rules or no rules.

In the WTO's actual functioning over the last several months, there is a growing feeling in the South (within governments and among the public) that whatever its claims, the WTO system has neither established a rule of law in international trade (as claimed by then GATT Director-General Peter Sutherland in his speech to the Davos Symposium in February 1994 nor is it a rule-based system dealing equally with the small and the mighty, but essentially a system based on power of the majors.

All these, in the short- and the long-run, will increase the problems of the WTO and its credibility to the outside -- not merely to the delegations and representatives here of WTO member governments, but to the public at large in the South, the legislatures and their governments, even if the latter are not as frank and forthright as Malaysia's Prime Minister Mahathir has been recently.