Upon the Appellate Body having being paralyzed, the European Commission has promptly moved to secure its trade interests by arming itself with the retaliatory power, also creating the position of “Chief Trade Enforcement Officer.” The Commission’s proposal is reminiscent of Nicolas Lamp’s earlier post on the threat of unilateral retaliation to keep the WTO dispute settlement system alive.
As far as the WTO is concerned, the proposal allows the Commission to impose penalty tariffs on a WTO member that lost at a panel stage but refuses to comply with the appellate arbitration mechanism under DSU Article 25 and instead appeal “into the void” to prevent the panel report from being adopted. Interestingly, the Commission justifies (pdf) such unilateral retaliation as a “countermeasure” under the “Draft Articles on Responsibility of States for Internationally Wrongful Acts.” This is what the Commission argues in this regard:
[W]here the responsible party fails to cooperate in good faith in the dispute settlement procedures, thereby preventing the injured party from completing such procedures, the possibility to resort to countermeasures in accordance with the requirements of general public international law necessarily revives. The International Law Commission notes that the revival of that possibility arises when one Party “fails to implement the dispute settlement procedures in good faith” or “where a State party fails to cooperate in the establishment of the relevant tribunal”.
Would this kind of “threat” from a big trading bloc induce other WTO members into buying the proposed appellate arbitration mechanism? What about the United States? Obviously, a retaliatory measure may invite another one, and that’s what a trade war is all about.