China Programme • Volume 11 • Number 41 • 28th November 2007

Taiwan Drops Opposition To Chinese Appellate Body Judge, Unblocking Wto Dispute System

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Taiwan on 27 November dropped its opposition to the appointment of a Chinese lawyer to the WTO appellate body, paving the way for her and three other judges to be appointed to the global trade arbiter’s highest court. The move unblocked the operation of the WTO dispute settlement system, after the row over attorney Zhang Yuejiao had briefly threatened to escalate into a "crisis."

"After candid and sincere negotiations with ranking WTO officials, we have been guaranteed that the WTO’s rules are able to maintain the body’s impartiality in resolving disputes," a spokesperson from the Taiwanese foreign ministry told Agence France Presse in Taipei the following day. "We have got our concerns across. So, we stopped boycotting the appointment."

At a meeting of the WTO Dispute Settlement Body on 19 November, Taiwan had expressed concerns about the "impartiality and qualification" of one of the four nominees to the Appellate Body, albeit without specifically naming the Chinese candidate. To prevent Zhang from being approved, Taiwan vetoed the adoption of the DSB’s agenda. Although Taiwan was alone in its objections, it was able to do so because WTO decision-making requires the consent of all Members.

This procedural manoeuvre not only prevented the ratification of the three other nominees, it also prevented Members from proceeding to other issues, such as requests for the creation of dispute panels in pending cases. The dispute settlement mechanism is one of the cornerstones of the WTO, and its potential paralysis led DSB Chair Ambassador Bruce Gosper (Australia) last week to warn of a "crisis in the organisation" if the situation endured much longer, reports Reuters.

Following meetings with trade diplomats and senior WTO officials, Taiwan now appears to have received the assurances it sought earlier this week that the Chinese judge, and WTO dispute settlement in general, would remain impartial. WTO Director-General Pascal Lamy sent the Taiwanese government a letter stressing that the global trade arbiter’s judges were required to be independent of government influence. "I think that assurance … may have been important in getting this thing resolved," WTO spokesperson Keith Rockwell said.

At the DSB meeting on 27 November, Chinese WTO Ambassador Sun Zhenyu expressed gratitude for the "tremendous efforts" made to ensure that the dispute settlement mechanism resumed functioning, according to Bloomberg.

China regards Taiwan as a renegade province and does not recognise its government. The two have been split since a civil war in 1949.

Zhang, the first Chinese judge to sit on the 7-member Appellate Body, is a law professor at Shantou University in Guangdong province, and served as chief legal counsel to the Chinese government during its accession to the WTO. She will start her four-year term on 1 June 2008, as will fellow new appointee Shotaro Oshima of Japan. Lilia Bautista from the Philippines and the US’ Jennifer Hillman will start their terms on 11 December.

Panel in US-China copyrighted goods dispute

With the resumption of standard proceedings, a dispute panel will be created to rule on Washington’s allegations that Beijing is maintaining illegal import and distribution barriers against books, music, movies, and other copyrighted goods. China blocked the US’ first request for a panel in August, but WTO rules prevented it from doing so a second time (see BRIDGES Weekly, 5 September 2007)

US blocks Canada, Brazil panel request

At the same meeting, the US blocked requests from both Canada (WT/DS357/12) and Brazil (WT/DS365/13) for the creation of dispute panels to examine their largely identical complaints that Washington has paid out trade-distorting farm subsidies in excess of its WTO spending limits in many of the years since 1999.

Canada claims that "when trade-distorting domestic support is properly accounted for under the WTO Agreement on Agriculture, the United States exceeded its WTO commitment in 1999, 2000, 2001, 2002, 2004 and 2005."

The US in October notified the WTO that its farm subsidy levels from 2001 to 2005 had remained within its commitments, but Canada and Brazil believe that some payments were improperly classified as non-trade-distorting and counted in a category not subject to spending caps (see related article, this issue).

US WTO Ambassador Peter Allgeier said that the requests would "distract attention from the essential task before us of completing the Doha Development Round negotiations." He also said that some of the measures targeted by both Brazil and Canada had ceased to exist.

Canadian officials have openly acknowledged that their case aims to reinforce pressure on Washington to cut trade-distorting farm subsidies, both as part of the Doha Round negotiations and as the US Congress writes a new farm bill mapping out future spending.

Ottawa had already sought the creation of a panel in the dispute in June (see BRIDGES Weekly, 13 June 2007, http://www.ictsd.org/weekly/07-06-13/wtoinbrief.htm). However, a panel was not automatically created because Ottawa decided to withdraw its June request and submit a new, slightly different one to the recent meeting.

The principal difference between the June request and the current one is that the latter does not challenge US export credit guarantees. Michael O’Shaughnessy, a spokesperson for the Canadian trade ministry, explained that Ottawa was "no longer pursuing this issue given that it has effectively been decided in another WTO dispute settlement proceeding between Brazil and the United States." He was referring to an October ruling confirming that certain US export credit guarantees did not comply with its WTO obligations (see BRIDGES Weekly, 17 October 2007).

O’Shaughnessy said that Canada’s withdrawal of its initial call for a dispute panel "has allowed us to better align our request with Brazil’s request, which was filed simultaneously."

The Canadian government expects that its complaint and Brazil’s will ultimately be heard by a single panel.

"Government seeks WTO pledge," TAIPEI TIMES, 26 November 2007; "WTO averts crisis as Taiwan accepts Chinese judge," REUTERS, 27 November 2007; "Taipei shows muscle in WTO," CHINA POST (Taiwan), November 28, 2007; "WTO Names 4 to Court as Taiwan Drops Objection to Chinese Judge," BLOOMBERG, 28 November 2007; "Taiwan says WTO allays concerns over Chinese judge," AGENCE FRANCE PRESSE, 28 November 2007.