EU member states discussed on Tuesday (1 October) how to address the “critical situation” of the World Trade Organisation, as the US continues to block the renovation of its appellate body, key for the functioning of the institution.
The EU-US trade relationship and WTO reform was discussed at length during the working lunch of EU trade ministers.
The WTO’s appellate body will stop functioning on 10 December, unless two new candidates are appointed to reach the necessary three-member threshold.
But the US has blocked European efforts to renovate the body.
The panel is essential for the WTO to enforce multilateral agreements and settle disputes.
The WTO’s “critical situation” was central to the Trade Council’s discussion, said Finnish minister of Development and Trade, Ville Skinnari, whose country is holding the EU’s rotating presidency.
But the EU member states are determined to “defend and reform the multilateral trading system,” he added.
“The situation is worrying”, agreed outgoing Trade Commissioner Cecilia Malmström. She added that the EU is “totally united” to try to find a solution, but that it doesn’t look “very optimistic” at this stage.
“It might be so that, in mid-December, the appellate body ceases to function,” she warned.
The EU has reached an agreement with Canada and is trying to convince other like-minded partners to adopt an interim panel with similar functions.
The EU’s efforts to renovate the appellate body, and to modernise the WTO as a whole, came against the backdrop of the long-running tariff dispute between Brussels and Washington which is expected to worsen.
The WTO is expected to announce in the next few hours the volume of tariffs that the US can impose on EU exporters, in response to the subsidies given by the European governments to Airbus. The duties are expected to impact around $8 billion worth of goods.
The European side has been trying to reach a negotiated solution with the US Administration, given that the EU is expected to obtain similar compensatory rights over the financial aid given by Washington to Boeing.
However, US President Donald Trump has refused the European offer, which included scrapping the subsidies given to the aviation sector.
Malmström said that she still has not “giving up the hope” that both countries can engage and avoid the punitive sanctions. “Retaliation is damaging for both sides,” she remarked.
But if the US decides to approve the tariffs, as she expects, the EU is “ready” to react with a “firm response”.
The EU’s compensatory tariffs over Boeing would not come into force until early next year. In the meantime, Malmström said that the bloc is considering “all options” under the WTO rules.
One of the ideas would be to refer to old cases where the US continues to be non-compliant with WTO rulings to impose tariffs.
The latest chapter of the 15-year long Airbus-Boeing dispute comes amid European efforts to build a “positive agenda” with the Trump administration that could restore the Transatlantic ties.
But little progress has been made since July 2018 on eliminating industrial tariffs or the regulatory cooperation proposed for some fields.
The main obstacle continues to be the US’s demand to include agriculture in the trade talks.
After years of litigation at the WTO, the end of the Airbus-Boeing saga came at an “unfortunate moment”, admitted Malmström.
The EU is also trying to engage with the US and Japan to modernise the WTO, in particular, to come up with new rules to tackle industrial subsidies and the forced transfer of technology.
It is a shared concern with Washington, as both players want to address China’s unfair commercial practices.
Malmström said that “a lot good progress” was made in the case of industrial subsidies by the negotiators, and that she expected to share the results with other WTO members soon.
In regards to the forced transfer of technology, she explained that it is “a little bit trickier” and that “more time” will be needed.