Fifteen additional countries, including China, have signed on to create an interim mechanism for resolving global trade disputes that will be modelled on the agreement Canada and the European Union first struck in December.
The move by Canada and the EU to create an alternate forum for settling trade gripes came after the United Stated paralyzed the World Trade Organization’s top trade court, or appellate body, by freezing the appointment of new judges.
Norway was the first country to sign onto the Canada-EU deal, which preserves the WTO’s two-step dispute system until the Appellate Body becomes operational again.
Today’s announcement from Davos, adds Australia, Brazil, Chile, China, Colombia, Costa Rica, Guatemala, South Korea, Mexico, New Zealand, Panama, Singapore, Switzerland and Uruguay. The addition of China to the arrangement is particularly important for Canada, which lost a key forum for settling trade issues with the economic superpower when the Appellate Body was paralyzed. Trade relations between Ottawa and Beijing have been rocky since China blocked all purchases of Canadian canola after the arrest of Huawei senior executive Meng Wanzhou in Vancouver, on a U.S. extradition request.
“In order to attract investment into Canada and help our businesses access the global market, we need a system that is transparent, predictable, and makes it easy to do business. That is why we are leading the way on modernizing the WTO,” said Mary Ng, Minister of Small Business, Export Promotion and International Trade.
The United States has spent two years blocking the appointment of new judges to the WTO’s appellate body or top court, a practice that disabled the court in December, when it was left without the minimum of three members needed to hear cases.
In response, Ottawa and the EU signed an interim dispute mechanism last year that kicked in immediately when the WTO’s forum ceased to operate. Since then, the two countries have been working to bring other nations on board, lest the world be left without a “global trade referee.”
The loss of the Appellate Body raised concerns that countries would act in bad faith, exercising their right to file appeals even as the forum for hearing them ground to a halt. This practice of “appealing into the void” would throw cases into limbo so they never reach the point where a country is authorized by the WTO to retaliate.