The appellate body of the World Trade Organization (WTO), considered the supreme court for international trade, lost its ability to rule on new dispute cases at midnight Tuesday.
The panel, whose decisions affect billions of dollars in global trade, is supposed to have seven judges. But their ranks have dwindled because the United States — under the past three presidents — has blocked replacements to protest the way the WTO does business.
A minimum of three judges is needed to issue rulings and the terms of two of the last three judges ended at midnight Tuesday.
This will deal a major blow to the global trading system, critics say, arguing that the situation risked creating a system of trade relations based on power rather than binding international rules.
'A crisis we've never seen before'
Countries could then use tariffs or be tempted to implement protectionist measures, without having to worry about the prospect of sanctions if they breach WTO rules. Such rising protectionism could create business uncertainty and discourage trade and investment.
"This is probably the beginning of the end of the WTO as we know it," Holger Schmieding, the chief economist at Berenberg Bank in London, told DW. "The game can go on without an umpire. But we know from experience that a game without an umpire will eventually hit trouble."
"This is a crisis that we've never seen before and it needs to be resolved urgently," Klemens Kober, a trade expert at the Association of German Chambers of Industry and Commerce (DIHK) in Brussels, told DW.
WTO future in jeopardy
The loss of the ability to adjudicate in trade disputes also threatens the future of the WTO. It coincides with difficulties for the WTO in its other major role, opening markets. The WTO club, consisting of 164 members, has not produced any international accord since abandoning the "Doha Round" negotiations in 2015.
US President Donald Trump and Trade Representative Robert Lighthizer are sharp critics of the WTO. They argue that the body constrains Washington's ability to counter unfair trading practices by China and other countries.
Other countries have complained about the WTO's system for settling trade disputes. Critics say that cases take too long to resolve, that the panel often overreaches in its rulings and that the Geneva-based agency is ill-equipped to deal with the challenge posed by the Chinese economy's unconventional blend of capitalism and state control.
Many observers believe the WTO faces a pivotal moment in mid-2020 when its trade ministers gather in a drive to push through a multinational deal — on cutting fishing subsidies. "We are in a crisis moment for our global trading system," said US Congresswoman Stephanie Murphy, a Democrat who sits on a trade subcommittee. "As of tomorrow, the court will cease to exist."
The loss of a global trade court of final appeal could prove "really dangerous for American businesses," Murphy said.
sri/msh (AP, Reuters, AFP)