American Trade Law in a Post-WTO Appellate Body World

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Jack Capizzi:  Welcome to today’s Federalist Society virtual event. This afternoon, May 8, 2023, we are discussing “American Trade Law in a Post-WTO Appellate Body World.” My name is Jack Capizzi, and I’m an Assistant Director of Practice Groups here at The Federalist Society. As always, please note that all expressions of opinion are those of the experts on today’s call.

      After our speakers have given their remarks, we will turn to you, the audience, for questions that you might have. If you have a question at any time during today’s program, please type it into the Q&A feature at the bottom of your screen, and we will handle the questions as we can towards the end of today’s program.

      With that, allow me to introduce our moderator, Trevor Jones. Trevor is a law student at Harvard Law School. Additionally, he is a student liaison for The Federalist Society’s International and National Security Law Practice Group Executive Committee. With that, thank you all for being with us. Trevor, over to you.

Trevor Jones:  Thanks Jack, and welcome to everyone joining us here today. I think we’re going to have an exciting panel to talk about a very pressing issue: the WTO Appellate Body, its status, and how its lack of functioning impacts American trade law. And we’ve got two great panelists with us today. I’m going to give them a brief introduction, then I’m going to go into about 30–40 minutes of directed Q&A, but if, at any time -- as Jack said, please drop a question into the Q&A box below, and if it lines up with the questions I’m asking, I’ll ask it. Otherwise, I’ll ask it at the end.

      So with that, our two panelists today are David Ross and Jamieson Greer. David is a partner at WillmerHale’s International Trade Group, and prior to that, he worked at USTR, litigating cases before the WTO Appellate Body and was a staffer on the Senate Finance Committee, which oversees U.S. trade law. And Jamieson is a partner at King and Spalding in their International Trade Group, and prior to that, he was the Chief of Staff for Ambassador Robert Lighthizer at USTR from 2017–2020, I believe.

      So with that, I’m going to open it up for some questions. And David, to get us started—as I mentioned—you used to litigate in front of the WTO Appellate Body, and I was wondering if you could give those in the audience who don’t really know how the Appellate Body functions a brief overview of how the dispute resolution process works at the WTO or used to work.

David Ross:  Sure. Thanks, Trevor. So just to step back to the beginning of a case under the WTO -- if a country has an issue with another country’s measure under one of the trade agreements, they can request consultations. If the consultations don’t resolve the issue, which they often don’t, then the complainant can ask for a panel. Panels are created. Typically, three trade experts will hear the case—its briefing, oral argument, responses to questions, and whatnot—at which point, then, the panel will issue findings on whatever the legal issues are in that dispute.

      The losing party then has the right to appeal the adverse findings to the Appellate Body, which often would happen. Whereas panels are ad hoc trade experts, the Appellate Body was a standing set of Appellate Body members, and you would hear -- you would hear the case in front of, typically, three Appellate Body members. It’s really akin to—as you would expect—appellate advocacy. There’s no discovery or anything like that. The proceeding is supposed to be limited just to legal findings—although the Appellate Body sometimes strayed from that—and then the Appellate Body would issue its decision, which then the losing party could decide whether or not to implement. So that’s basically how it happened, but again, briefing, oral argument, decision, and then decision what to do.

Trevor Jones:  Muted myself. In your experience litigating before them, how did you find them? How did you find their interpretation of the treaties? Maybe talk about some of the cases you brought and your opinions of the Appellate Body from those cases.

David Ross:  Sure. Well, so early on, I think the Appellate Body, they were really quite strong, and they had -- some of the early opinions were pretty well reasoned. They were relatively short—to the point. They did focus just on the legal issues, which is what they’re supposed to do under the terms of the Dispute Settlement Understanding. Over time, that changed. I think that the Appellate Body started to have a more expansive view of their role, and maybe it started to spring into some things that they shouldn’t have—at least in the views of the United States and some other countries.

      I mean, I don’t know how much detail you want me to go into but -- for example—and Jamieson could talk about this—U.S. Chair put out a report during the Trump administration talking about the ways in which the Appellate Body had in the [inaudible 5:01] exceeded the terms of their mandate. And they had case studies that spanned, really, about 20 years, and some of the things that the report highlighted were things that related to my cases, which had taken place in the early 2000s. So the issues that we had seen early on continued and multiplied over the years.

      So just to give one very small concrete example—and then I could go on to more detail if you wanted to—I litigated the U.S. safeguard on lamb, which was a case that we had put a safeguard measure in under Section 201 of the trade law, and Australia and New Zealand challenged that determination. And it’s interesting -- I had started my career at the Commerce Department. I had litigated there for four years before U.S. courts. I’d then gone to the private sector for a couple of years, and I’d never lost an issue in my first six years of practice. And then, when we got to the WTO in the lamb case, I lost every single issue, both at the panel level and at the Appellate Body. I would have been better off if I hadn’t even put a brief in almost.

      But just to give one example, there was this issue where they determined -- the Appellate Body determined that the U.S. had fallen short because we hadn’t made a finding of unforeseen developments, and that was something that we didn’t think was required. But to take a step further, not only did they say that we had to have made a finding of unforeseen developments, they said we had to make that finding in a written report that we were required to publish at the time of the safeguard. Now, I challenge you to look through the WTO Safeguards Agreement and find anything in them that says that you have to have a written report setting out your findings at the time that you put the safeguard in place. That’s just contrary, in our view, to the way that the process is supposed to work. But nonetheless, they said that that was required. That’s just a very teeny example, but there were many more examples we could go into if you wanted us to.

Trevor Jones:  Yeah. Perfect. No. That’s great. I just thought a good -- to layout a good example of some of the kind of case law that was coming out of the Appellate Body. And Jamieson, as David mentioned, you -- obviously, you helped write that report at USTR or oversaw it. And prior to even being at USTR, you were active in the trade law world. What was your perspective on the Appellate Body coming into the Trump administration?

Jamieson Greer:  Sure. Happy to discuss that. So prior to going into the administration, like David, litigated trade cases. In my case, I was at Skadden, and I was doing a lot of trade remedy litigation. You may have heard of antidumping/countervailing duty cases. That’s what this is. Right? These are cases where, if you’re a U.S. domestic producer, you’re going to the appropriate U.S. agencies—Commerce Department, the International Trade Commission—and you’re alleging that foreign producers of a product—whether it’s steel, aluminum, or some consumer good, agricultural good—whatever it might be, that it’s being sold in the United States at less than fair value or that it’s being subsidized, and sometimes, less than fair value, it can mean being sold below its cost of production.

      And so, in that situation, the Commerce Department will measure -- it will quantify the amount of dumping or subsidization and essentially assign a tariff right to that. Right? If you’re dumping by 20 percent, 20 percent remedial tariff rate to level out the market because there’s been a distortion in the market. And then, on the other hand, you’re proceeding before the International Trade Commission to show that the domestic industry has actually been injured because if there’s no injury from the unfair trade, then the law doesn’t permit any kind of action. Right? So you have to show that there’s unfair trade and that there’s injury. And in that case, you can get an order where there would be -- that remedial tariff placed on imports of those goods from those countries, and it can be very specific to certain producers and that kind of thing.

      And so, that was the kind of law that I was engaged in, and I’m talking about that because many of the WTO cases affected these trade remedy laws. That’s not all. It affected our tax laws. It affected safeguards, like David was talking about. It affected a lot of things, but it did have a big effect on our antidumping/countervailing duty laws. And so, that was my perspective coming into the administration.

      I mean, one of the big things—and, again, I’ll just give an example—is that the WTO -- it took upon itself, through a series of findings by the Appellate Body, to essentially outlaw a methodology -- a calculation methodology, called zeroing. I won’t go too far into the details. David is probably thinking, “Jamieson, don’t do this. Don’t subject everyone to this.” But in short, when commerce is finding a dumping margin, they just -- historically, they would just issue a margin that assessed the amount of dumping that was going on. Opponents to dumping in other countries came, and they said, “Well, you actually need to -- you, Commerce Department, you have to offset all of this dumping with all of the good sales that we’re making. So we understand we robbed your grocery store, but sometimes we came, and we paid you for those groceries,” so it’s all a wash. Right?

      And so, I mean, it seems silly to excuse bad behavior with the occasional good behavior. And in fact, the WTO Agreements did not include this. Part of the reason why the United States was willing to agree to the WTO Agreements was because they purportedly—at least according to U.S. negotiators—actually accounted for U.S. antidumping countervailing duty law—largely in the same state in which it was at the time. And so, it was very jarring for U.S. industry to find out several years later that, actually, this methodology that had been going on for years and, presumably, had been incorporated into the WTO agreements, was now being overruled by the Appellate Body, which, of course, results in less protection for domestic industries that are suffering from unfairly traded imports—not just imports, generally, but unfairly traded ones. And so this was the context for me, going into the Administration. 

Trevor Jones:  Perfect. And could you, maybe, explain for the audience the exact mechanism by which the Trump administration paralyzed the Appellate Body—what they did to do that and how that impacted the process that David laid out in the beginning?

Jamieson Greer:  Sure. Yeah. No, I’m happy to do that. So the Appellate Body is full of members. Right? It has seven members. It’s a standing body, and those members have terms that expire, and they’re replaced through consensus at the World Trade Organization—that’s how it operates. And so everyone has to agree to start the process for replacing a member, and then they all have to agree to the member. Now, before the Trump administration ever got into office, the Obama administration actually refused to see the member. They refused to join the consensus on a certain member of the Appellate Body. So it wasn’t the first time that had been done, however, when the administration came in, as David noted, we had a huge amount of problems with the WTO.

      He and I have been talking about specific cases and bad rulings and that kind -- and there were plenty of those to go around. Right? But on top of that, there were other issues. And you can actually go on USTR’s website, and you can see, starting in 2017 all the way through the end, a series of public statements—not just the report David referenced, but public statements—pointing out all the ways that the Appellate Body had gone way far off course compared to what was agreed in the WTO Agreements, whether it included the length of reports, exceeding the 90-day limit on the timing of it, reaching issues of fact -- reviewing issues of fact that they’re not allowed to, making advisory opinions on issues that are outside the terms of reference of the dispute, and then issues with the members themselves.

      I mean, there was a member from China who, up until we pointed it out, showed on her bio that she was part of a think tank that was run by the Chinese government. You’re not supposed to be affiliated with the government of the country where you are -- that you’re representing. There were issues about compensation and the per diem and all these budgetary issues. So there were just a variety of issues, and over the course of our time there, we put out a lot of papers on this.

Trevor Jones:  Yeah. Well, I guess, David, you were in the private sector when the Appellate Body goes dark, so to speak. I think that was December 2019, when they no longer had a quorum to start appellate panels anymore. How did you see that impacting private practice in the trade field in D.C. and clients?

David Ross:  The principal impact that we’ve seen in the private sector and for clients is that there just aren’t very many cases in the Appellate anymore. I think there’s a perception that you can’t push a case through the WTO anymore because if you win at the panel stage, the losing party appeals to the Appellate Body, there’s no Appellate Body to hear it, and so you’re effectively what they call, “appealing it to the void.” And the case goes off, can’t get formally decided, and so the winning party can’t then get a final decision. And then, if the losing party refuses to implement, the winning party can’t get WTO authorization to impose countermeasures.

      So there’s just a kind of paralysis or, at least, a perception of paralysis. And between that and, I think, other -- and Jamieson actually could maybe talk to this. There’s just been a real slow down, at least in the United States, filing cases at all. I don’t know if it’s solely because of WTO or not, but I don’t think the U.S. has filed an offensive case since 2017 or ’18. And so, there’s just not much litigation going on. And so, people are looking elsewhere for instruments to challenge unfair foreign trade practices—Section 301 of the Trade Act of ’74 being an example. Another area that Jamieson can talk to because it was really the Lighthizer USTR that brought that tool back into use. And so you’re seeing that. You’re seeing more, just AD/CVD -- but it’s a real slowdown in WTO litigation worldwide.

Trevor Jones:  Yeah. I guess, Jamieson, to follow up on that -- I guess, now that we’re not -- there’s no functioning Appellate Body, so we’re not bringing disputes there. When a trade partner does something that violates a trade agreement, what are the options available to the president—to the U.S. trade representative—to take action, if not to go to the WTO?

Jamieson Greer:  Sure. And I’m also realizing I didn’t really squarely answer your last question to me, which is -- I talked about the problems, but we stopped appointing -- we stopped agreeing to appoint Appellate Body members, just to be absolutely clear for the audience. Obama started it; we continued it; and the Biden administration has continued it. It’s been supported by Senator Wyden and Senator Crapo and Senator Grassley before Senator Crapo. So this is something that’s widely recognized as an issue. And so what do you do, right? What do you do in the absence of the WTO? I think it is important, as well, to level set about what happened before, when we would say, “Oh, well, before there was enforcement. We could go to the WTO.”

      To David’s point, it may be that, early on, things were more effective, but I mean, when we were at USTR, we were still dealing with some disputes that were 10, 12, 13, 14 years old without resolution: Boeing Airbus, beef hormones—and, notably, those were with the EU, who’s supposed to be sympatico with international trade rules. We had issues with China on films and the films we could have in the market. I mean, just -- so when we say there was really good enforcement beforehand with the WTO, I mean, I don’t agree with that proposition. And so the idea that, “Oh, well, what do we do now?” -- the question kind of presumes that before, it was a really effective thing when, in reality, it couldn’t capture a lot of Chinese non-market activities.

      Anyway. So in the absence of a demonstrated ability of the WTO to not be very effective with respect to U.S. policy, what do you do in its absence? Section 301 is something David referred to. That’s Section 301 of the Trade Act of 1974. It gives the president authority to delegate it to USTR to investigate unfair or discriminatory trade practices that burden U.S. business—U.S. commerce—unreasonably. And coming out of that investigation, if we find violations that there are trade practices by foreign governments who have policies and practices that meet those standards, then there are two things you can do.

      If you have a policy or practice that falls underneath a trade agreement that has a dispute settlement procedure, you have to go that way. The legislation, as revised, requires you to go that way. If there are policies and practices that aren’t captured under a trade agreement with the dispute settlement system, then you can do other things, and it gives pretty broad remit to the administration—to the president—to be able to impose tariffs, impose quotas, assess fees on services, otherwise restrict market access.

      And so, when we did the section -- we alleged -- we did an investigation under 301 in the Trump administration. We found that China had been engaged in policies and procedures on forced technology transfer for many years. We found a harm—very conservative harm—of 50 billion dollars annually. The harms that we found -- there were a variety of different ways of forced tech transfer. One of these, having to do with discriminatory licensing, fell underneath the TRIPS Agreement, which is the WTO Agreement on trade-related aspects of intellectual property. And so we brought a case with respect to that, but with respect to a lot of the other things that were going on—cyber hacking, trade-secret theft, other types of things—that was not actionable under TRIPS, and so we went with domestic U.S. authority under Section 301 to impose tariffs.

      And then there are other things that can be done. David referred to Section 201, which has always been something. Right? Antidumping/Countervailing Duty Laws, that’s always been there. Those are things that are nominally authorized by the WTO, despite their adverse rulings against some of those things. We have Section 232, which is a national security-based tool. It’s not really a trade tool. It’s a national security that has big trade effects. So there are certainly other things that the president can do to enforce trade laws with respect to other countries, even without the WTO.

Trevor Jones:  Yeah. And so, I guess -- here’s an interesting question. I know part of USMCA—which you were on the team helping to negotiate—had a dispute resolution process. Could you maybe talk about how that was different from the WTO Appellate Body? Because I have to imagine you guys, having seen how badly the dispute resolution process in the Appellate Body went, designed something that you thought might be workable. And could you maybe explain what that is and how that operates?

Jamieson Greer:  Sure. Well, the old NAFTA, it had a dispute settlement process, too. However, it also made it very easy for one party to block the formation of a panel, and so that dispute settlement procedure, under the old NAFTA, became a dead letter. Okay? In fact, what ended up happening is after a couple of cases that became very political, and everyone blocked the panels, the parties just stopped using NAFTA to dispute settlement, and they would just take those disputes to the WTO instead. So we didn’t want it -- so with USMCA, we made that practice impossible. Right? You can’t block a panel anymore, so the panels proceed. And we’ve hadn’t -- and to David’s point, there hasn’t been a lot of WTO cases from the U.S., but there have been USMCA cases from all sides, and they were designed to move quickly—they were designed to move rapidly.

      There’s a lot of traditional dispute settlement aspects related to it. I think, ultimately, my own view is very realist, is that if you have some trade -- if you have some policy or practice in your home country and you believe it’s essential to your economic well-being—or whatever you want to call it—you may not comply with that ruling. I mean, ideally, you comply most of the time, and then if there’s something that becomes an issue, you want to negotiate a resolution.

      I think maybe what I would say -- what’s the difference with USMCA versus WTO is we really wanted to drive negotiated solutions and provided lots of opportunities for consultations and that kind of thing, which, of course, exist in other contexts, too. But the ideal resolution for trade disputes is a negotiated outcome and not litigation—trying to get some outcome that was never agreed to in the original agreement.

Trevor Jones:  Yeah.  And I guess, for David or Jamieson—either of you. Have you been following the European alternative—I believe, MPIA? How is that developing as an alternative to the Appellate Body? How is it different, and is it a viable alternative?

Jamieson Greer:  Sure. Happy to hear David’s thoughts on this, too. So the MPIA as an alternative, it’s like a coalition of the willing. Right? It’s folks, WTO members, who really love the Appellate Body and want to have an appellate level of review for a variety of reasons. And just to step back one step. Another reason why, in the Trump administration, we weren’t huge fans of the Appellate Body, it’s just kind of structural. It’s like, if you’re the largest player on the block and you’re trying to pursue what you believe is in your national interest or your economic policies that have been established by a democratic congress, why should that be subject to some Appellate Body’s overreaching rulings? Why should that even be the case?

      Now, if you’re on the other side, and you’re a smaller country or you’re Peru or you’re New Zealand or somebody like that, you want to be able to bell the cat. And who’s the cat? It’s not just China. It’s not just the EU. It’s the United States. Right? Anyway, and so a lot of these countries said, “Well, we really want to have an Appellate Body or some level of review because it gives us a second bite at the apple and that kind of thing.” And you know what? That’s fine. If other countries want to do that and agree with each other to do it, that’s fine.

      There’s been a -- I think there’s been a case come out, a farmer-related issue between, I think, Turkey and the EU. You can correct me, David, if I’m wrong. And okay. If they want to do that and have that separator review, if they feel like that gives them some resolution, they can do -- and to me, that’s great. Right? If they want to proceed on those lines and have that extra view, that’s their sovereign right to do it. I won’t complain about that. Whether it makes sense for us to do it -- I don’t think it makes sense. Right? If we wanted to have an extra layer of review, we’d just start staffing up the Appellate Body again. 

David Ross:  I guess, I would just add to that. First of all, yeah, for those who are willing to embrace that system, it’s all consensual, and I’m sure it’ll work just fine for them. The WTO, as a whole, the rules are consent-based. I mean, there’s no WTO army. They can’t force you to do anything. And so, as long as countries are willing to accept the findings, then they should go ahead and use the system. I should say that, for my own position, I actually believe in a WTO dispute-settlement system. I generally had good experiences before the panels. As I said, I thought the Appellate Body in the early years was a constructive force and basically helped.

      At the end of the day, what is this? Really, it’s like mediating disagreements between countries, at the end of which there are some agreed findings you can decide whether or not to adhere to. It’s a way of resolving those disputes, but where they lose track, again, is when they start creating obligations. And so, just to circle back to something that Jamieson was agreeing to—or talking about earlier—the whole issue of zeroing. Jamieson represents domestic companies. He hated zeroing. I was at USTR defending zeroing, so, of course, I hated the findings on zeroing. If you had somebody here today who defended for companies, primarily in AD/CVD cases, they would say zeroing is an abomination. It’s terrible, and it’s distortive, and it’s totally wrong. But --

Jamieson Greer:  But they would be wrong, David. [Crosstalk]

David Ross:  Well, whether they’re right or wrong --

Jamieson Greer:  Yeah. No. I know.

David Ross:    -- the key point is that the basic understanding in the WTO agreements is that when countries agree to rules, they’re agreeing to limit their sovereignty, in certain respects, with respect to the issues that are addressed in those agreements. But if the issues aren’t addressed in the agreements, then they have not consented to be bound by rules, and they’ve retained the right to do whatever they want. And zeroing, like a written report of unforeseen developments -- you can read the AD Agreement from start to finish, and you’re not going to find any discussion of zeroing. And nor would you because some of the primary negotiators of the WTO AD Agreement were the United States and the EU, both of which use zeroing. And so, the idea that they would have gotten rid of zeroing was unlikely to start with, but the idea that they would’ve gotten rid of it without saying so in agreement is just ridiculous.

      And so, in zeroing—like, I think, many issues we saw with the Appellate Body—the perception that we had was that the Appellate Body had a very negative view of trade remedy laws, the AD agreement, the Countervailing Duty Law, the Safeguard Law. They had places they wanted to get to, and then they looked for some hook in the agreement that they could find to anchor an argument for why that thing wasn’t allowed, and then they worked backwards. And zeroing is an example of that. There’s a line in the text that says, “You shall make a fair comparison.” And the Appellate Body said, “Well, their comparison [inaudible 27:07] not fair and therefore it’s not allowed.

      Quite a surprise to the negotiators, including one of the early zeroing decisions, there was a dissent by a panelist. The panelist wasn’t identified, but we all knew that it was one of the -- it was the EU panelist—the EU national panelist—who had been one of the negotiators of the AD Agreement because he worked for the EU at a dumping authority, and they got the Commission, and he knew that there wasn’t any interest in getting rid of zeroing, and he knew that that wasn’t what that provision was meant to do. But he was overruled by the secretary -- by the Appellate Body, and there you are.

      And we said, at the time, in our statements to the dispute settlement body, that this kind of thing is corrosive because it is creating obligations the countries didn’t agree to, and if it continues, you’re going to see a collapse in support among those governments who are on the losing side for the Appellate Body. And that’s just what happened. And as Jamieson said, they had a lot of concerns in 2017, but the concerns went all the way back to when I was there. And you could ask any USTR lawyer over the last 20 years who’s litigated in Geneva, and they’ll all say the same thing because we saw it again and again and again. 

Trevor Jones:  Yeah. No. Thank you. And, I guess, turning towards the moving forward phase of my questions, it seems like, in the years since we’ve blocked the Appellate Body nominations, we’ve doubled down on policies that, if there was a functioning Appellate Body, would be struck down, to the extent the Appellate Body was clearly constricting American law on stuff like taxes—as Jamieson mentioned—on trade policy, with things like zeroing—which, I guess, not law but regulatory practice. But also things like the Bird Amendment. American law was very much constricted by the rulings of the Appellate Body. But now, without them, it seems like with things like the IRA’s clean energy tax credits—which seem to be a pretty clear violation of national treatment principles in the WTO Treaty—the CHIPS Act—which is certainly an actionable subsidy under the SCM Agreement—all of these things point towards -- if we were to even re-set up an Appellate Body, it seems like -- am I right in saying that the U.S. government would not agree, most likely, to restarting the Appellate Body without a wholesale rewriting of a lot of provisions of the WTO Treaty? Or do you think there’s a world where it comes back without actually addressing the underlying Treaty problems?

Jamieson Greer:  Well, that’s the question. Right? A lot of this depends on -- it’s kind of a multilayered question because you have some folks who, at this point, will concede -- maybe have been wholehearted supporters of the WTO system, wholehearted supporters of the DSU [inaudible 29:53]understanding, wholehearted supporters of the Appellate Body, but even they have come to say something like, “Well, I agree that we should make sure that the Appellate Body should be hitting its deadlines, and they should stay within the confines of the terms of reference of the dispute, and people shouldn’t stay over their terms, which they did for years.” You can find people like that. But ultimately, a lot of those folks would disagree. And you can go look on the internet right now. There are dozens of articles out there saying, “The IRA’s terrible. It violates all these things. Buy America rules are terrible, etc.” So it depends where you sit. Right?

      So for me—I’ll just be really candid—I think a lot of the WTO rules, maybe, are not helpful to the United States. And then the fact that so many countries always want an excuse or to get out of the rules, that suggests that maybe there’s value in being more pragmatic. Right? I mean, I think if you have a super libertarian view of trade, where you think that any kind of protection of domestic industry should be removed and is a moral evil, then, of course, you’re going to want the Appellate Body to come back, come back in force and be really strong.

      If you’re someone like me who’s toward the other end of the spectrum, you would think, “Well, I don’t want an Appellate Body, first of all, because some of the rules, I think, are not helpful, and the Appellate Body itself is damaging.” That being said, I do think there’s a role for dispute settlement. But, again, a negotiated answer’s the best. A dispute settlement panel that’s non-binding can come down and give a lot of helpful guidance to countries and also give some rhetorical weight to the opponents of the measure. If an Appellate Body were to come back, and they said, “Well, it’s just going to be advisory, too, then maybe that’s something I could get on board with. I think there would -- it’s hard to imagine a situation -- I don’t know if the other countries would be willing to negotiate certain changes to the WTO Agreements in order to get an Appellate Body. I mean, I just don’t think that they would do that. I mean, the EU really wants an Appellate Body. They’re very bureaucratic, and they love this stuff. 

      I remember when I was in the administration, I had a meeting once with my counterpart in the European Union. And when you go to these meetings, everyone has a list of things they’re going to touch on, and on my list was -- no, it wasn’t my list. On her list was, “I want these guys to get started appointing Appellate Body members again.” And so she gave me her spiel, and I said, “Well, you have to admit that these members are not following the rules that the member -- the Appellate Body members are not following the rules that the WTO members set out for them, whether it was overstaying their terms, issuing rulings late, going beyond their authority in making rulings, doing advisory opinions on things that weren’t even raised.”

      I went through these points, and I said, “Don’t you think that’s non-democratic?” And she kind of shrugged and said, “Well, I mean, that’s the system that’s developed, and we should support it.” It was like, “This is crazy.” Whether you’re a Democrat or a Republican in the United States, we’re all small d Democrats and small d Republicans, and we should want people in positions of power to be held accountable. And so, I just think that -- can you get to a spot where we’re tying -- staffing up the Appellate Body to renegotiating commitments in the World Trade Organization that allow for more protectionism? I mean, I guess, conceptually, that could happen, but I think, in reality, it’s not going to go anywhere.

Trevor Jones:  Yeah. I guess what I was trying to get at with the question was more of like, “Is there a world where either party in the United States Republican Party, which cares about stuff like the CHIPS Act—I would say a bulk of it—and then 232 tariffs, which were also recently ruled by a dispute panel to be in violation of the WTO, and then the Democratic Party, which cares a lot about the IRA and its clean energy provisions -- is there a world where either of them would get behind restarting up an Appellate Body that would certainly start ruling these things illegal?

Jamieson Greer:  I mean -- and I’ll let David comment, too, because I’m talking a bunch. But to me, it’s almost less about party and more about—I won’t say class but, kind of—where you are in each party. Because on the democratic side, I’m sure there are people right now in the White House who, if you said, “Hey, let’s restart the Appellate Body. It’ll make the Europeans really happy.” They would just drop everything and say, “Oh, yeah. Let’s do it. Whatever the Europeans ask, we’ll do it.” But thankfully, we have the USTR that’s more levelheaded about it.

      At the same time, on the Republican Party, I think you have a lot of folks who are supportive of big business. They want to make sure that folks are able to export and, rightly so, want to take care of trade barriers in other countries. There’s nothing wrong with that. But then you have folks who -- maybe they’re more populist or they’re in the rust belt—poor industrial area—where they would say, “Listen. I’m a Republican, but no way do I want a World Trade Organization continuing to restrict U.S. government policy. If we need to do a subsidy, if we need to protect, if we need to tariff, we have to do it, otherwise, we’re going to lose all these middle-class jobs that are critical to the fabric of our society and our defense industrial base.” So it’s not -- I don’t think it’s an R and D thing. I think it’s who in each party is going to be running trade policy because, in each party, you’ll have proponents either way.

David Ross:  I would say that just in terms of the United States, as Jamieson said, yes, there are parts of the U.S. political system who would support bringing the WTO back, the Appellate Body back. I think the USTR, prior to Ambassador Lighthizer, probably would’ve supported finding a way to do that. But the bigger point, I think, of Jamieson’s is just whether that’s politically realistic is not the question. And really, principally, because, at the end of the day, WTO rules are adopted by consensus, and so all WTO members have to agree to changes to the rules, and I would suspect that any changes that the U.S. would want to make, for example, to get more directly at what China’s been doing, China wouldn’t agree to. Any changes to the national security provisions, to address some that United States has been doing in recent years, other countries aren’t going to want to do, and so that’s going to be the real challenge. I mean, unless they come up with some kind of least-common-denominator set of things that would allow it to get going again, I think it’s unlikely. And it just seems to be hard to get there.

Trevor Jones:  Yeah. Well, thank you both. I’m going to start turning to the Q&A for the audience, so if you have any questions, please drop them in. We’ve got a couple questions here. One on MPIA, which we got into, in terms of -- but I just -- the second part of the question is, “Is there a viable long-term solution or replacement for the Appellate Body?

David Ross:  One thing that I’ve been arguing to our colleagues at USTR is that you don’t really need the Appellate Body to use WTO rules. If you look at the statute, as Jamieson said -- under the Section 301 statute, for example, it says that if there’s an issue that is inconsistent with a trade agreement, you have to go to the WTO and litigate the issue. It definitely says that, but it doesn’t say you have to litigate it all the way through the Appellate Body before you can then take action against the other country if they don’t implement any findings against them.

      So in my view, you could go -- the USTR could take an issue to the WTO, have a panel review the issue, have the panel issue its findings, and then, at that point, if the U.S. wins the case, tell the other country, “You need to come into compliance, or we’re going to use Section 301 to put trade sanctions in place,” and then negotiate the issue out that way. So the same process, but just without the Appellate Body stage. I think that is legal under existing law and could be done. It’s not something that the USTR has done thus far, but I could see that, which would be more similar to what the system was back under the old GATT system, where it requires, at the end of the day, voluntary compliance, but it could be done. 

      Now if you did take that step and put sanctions in place, they’re not going to be WTO-authorized countermeasures, and so that’s going to be WTO illegal, in a sense. But again, WTO dispute settlement, at the end of the day, is more about a means to come to a mutually satisfactory outcome. Tariffs aren’t the objective, normally.

Jamieson Greer:  Yeah, and I agree with that, and I think that David’s thought is intriguing. Behind all of this and all of this discussion is where is the political will, right? I mean, we talked earlier about, “Well, we’re not doing WTO cases now. What do you do in the absence of that?” To me, that’s a similar question as to what do we do going forward? In some senses, it matters less the vehicle in which we do it and more the fact that we do it.

      So, like in the Trump administration, we used WTO -- we brought WTO cases—not very many, again, because we didn’t think they were timely or super effective or even that we’d necessarily get a fair hearing. But we used some. But we relied heavily, as we discussed, on these domestic enforcement measures. Now, we’re in a situation where WTO cases aren’t being brought, and there’s not a lot of enforcement otherwise. Okay? So the administration could still be using Section 301 for other measures or practices and different things like that, but they’re not. Right?

      And listen, it’s easy for me to sit here and play armchair quarterback. Doing policies is hard work. It’s not as easy as it looks from the outside. But going forward, there has to be a desire to enforce. Right? If you want to enforce, there are domestic laws on the books where you can enforce. The discussion of whether we’re going to have a WTO Appellate Body -- it’s almost less about the United State’s ability to get what it wants in the international arena and more about should we get together with other countries and give another college try to make everyone become more market-oriented, or are we going to take the last 25 years of data and evidence and say, “Well, that was a good experiment. It worked in some ways. Maybe we should try something different or try something else.”

      I mean, I think from a U.S. perspective, if you want to further U.S. national interests, we have U.S. laws on the books that we can use. If we can do it in coordination with our allies, good. If we can do it in a way that is compliant with international norms, good. But there just has to be a political willingness underlying all of it going forward.  

David Ross:    And, Trevor, one thing that I would add to what he said earlier -- if the rules had to be changed to such an extent that, for example, the EV tax credit would be seen as okay, you may as well not have the system because that is flatly, flatly WTO inconsistent and that it goes to the very core national [inaudible 41:46] obligation of the GATT, so you would really be throwing out the baby with the bathwater if you did that.

Jamieson Greer:  Yeah. I guess, the way -- I guess, one way around that—just to be academic, David, I -- well, first of all, from a realistic perspective, I agree with you. But I guess you could have a situation where you say, “Listen. We’re having a reset. We’re going to reset the WTO schedules,” and that kind of thing, “and we’re going to have certain sectors that we just put on our schedules.” Because even now, people have -- countries have schedules at the WTO of service sectors, where they’re not going to make changes, certain tariff lines are not going to make changes. I mean, you could just have everyone say, “Listen. Everyone’s going to have 90 percent of your economy -- we’re going to liberalize as much as we can, but everyone can account for 10 percent of your GDP, and you’re just going to do whatever you want because you think it’s important,” whether it’s autos or semiconductors or ag or whatever it is. I would say, by default, everyone has ag as their secret set apart. But I mean, that’s one way if you were to get to a position where you wanted a reset.

      And maybe do it with a few countries. Right? If you select a -- I mean, that’s what the GATT was. Right? It was never 190 people. It was, “Hey, let's have a set of folks who are generally like-minded, and let’s try to liberalize together.” There’s certainly a foreign policy aspect to this, given the Cold War. And then post-Cold-War, it was like, “Hey, everything’s fine. Everyone’s going to become a market economy.”

      I mean, in the same way people went into Iraq and Afghanistan, thinking we’re going to turn these places into democracies, we did at the WTO, bringing in China and Russia, thinking we’re going to make these people market-oriented—we’re going to make these governments market-oriented. And there’s some naivete to all that. But maybe there is a world where you can have a smaller group of folks. And frankly, we have that, to some degree, with the USMCA—agreements with some of our allies—and maybe this is not going to be big, fancy, flashy, and broad, but maybe it will be more sectoral and more targeted. 

Trevor Jones:  So on to the next question on Q&A. Someone asked about the national security WTO decisions, which I take to mean the national security exception jurisprudence. And recently—I believe last November—there was a case where the U.S. invoked the national security exception to the 232 tariffs on steel and aluminum, and the WTO Appellate Body -- well, no, the WTO dispute resolution panel, since there is no Appellate Body, said, essentially, that the national security exception did not apply here. And I was wondering, could you guys maybe talk about the national security exception, the Appellate Body’s jurisprudence, in contrast to the U.S. interpretation of that clause in the treaty?

Jamieson Greer:  Sure. I mean, what’s fundamental to the U.S. interpretation is that it is self-judging. Okay? So it’s not a question of, “What is national security? What isn’t? How should dispute settlement panels decide what is and isn’t appropriately national security?” No. The U.S. position is before then. The U.S. position is, “This is not justiciable. Right? This is self-judging. A country knows what its own national security interests are, and so no dispute panel should even be able to pass judgment on this at all. That’s the U.S. position.

      Does that come with risks? Oh, for sure, it comes with risks. Right? You can have someone -- you could have a bad actor say, “Well, this is all just national security.” And frankly, that’s probably the direction we’re going. But we also -- we live in -- we like to think that we’re beyond this Hobbesian world, but we’re in a world where political reality matters and power matters and geopolitics matter, and sometimes we create these norms to capture what everyone’s already doing. There’s certainly an aspirational level to them, but a lot of times, people aren’t going to agree to these if they’re going to go against what they think are their core national interests, even if they aren’t traditionally what might be national security interests. And the U.S. might be one of those, as much as any other country.

David Ross:  It’s interesting. If you look at USFTAs, starting with the Singapore and Chile FTAs, you’ll find that the essential security exception in those agreements is much shorter. The jurisprudence in the last couple of years under that exception turned on this language in Article 21 that talks about “during time of war or other emergency and international relations.” That text is not in the FTA essential security exceptions.

      And that goes back to -- I was the lawyer for the Chile FTA, and we were doing that FTR right after 911, and we got into a fight with DOJ and the Defense Department over that language, and they wanted a more streamlined version that didn’t have that extra verbiage. And they said, “We want to make sure that we have full freedom to do whatever we need.” And we said, “We’re all self-judging. You do have full freedom. And they said, “Well, whatever the WTO says, it’s not self-judging.” And we said, “Well, I mean, that’s just -- that’s never happened, and everyone exercises restraint in asserting that exception because no one wants to go down that road. And that’s mutually assured destruction. And that held for -- I mean, we lost that battle, and the language went into the FTAs in a more limited way, and then 20 years later, it got invoked. It got litigated. And once it got litigated and the panels decided to go down that road, it was pretty clear where they were going to end up, using the kind of textual interpretation that they do.

      But it’s a shame because, really, those cases shouldn’t have been brought in the first place because cases that go to these core issues of what a country has -- as Jamieson said -- what a country sees as its own essential security interest, they’re going to stick to their guns no matter what the outcome is. And so, once you push the issue anyway and litigate it knowing that the other country is not going to comply, you’ve really started the seed -- set the seeds for the destruction of the system, which, unfortunately, is what seems to be happening.  

Jamieson Greer:  Yeah. I mean, this is like Exhibit A for people like me who are pretty skeptical of the WTO system but who are willing to like, “Hey, let’s find a [inaudible 48:09]. Are there solutions? We should try to work together with folks to make non-sensitive trade as fluid as we can.” But when you do something like this, I mean, it’s like, “What are you guys thinking? You’re just stepping right in it.” The WTO -- I know we’re talking about the Appellate Body, but if you just take a step back -- I mean, one of the things they’ve done recently is there’s been a big push—largely, by their secretary general, too—to weaken intellectual property rules that are guaranteed by the agreement on trade-related aspects of intellectual property, to make it easier to waive intellectual property protections in the event of health emergencies, even though there are already lots of flexibilities for that.

      And so, when you look at the WTO, what have they done over the past couple of years? Well, they’ve weakened IP rules. They’ve told countries, “You don’t know what your own national security is.” I mean, none of that, really, is a recipe for consensus. None of it is a recipe for convincing the United States that, “You know what? We understand. We need to stay in our lane.” They’re just doing the opposite. Right? They’re weakening rules, and they’re purporting to rule on things that are at the core of a country’s national interests.

David Ross:  Trevor, I should say this is slightly off topic of the [inaudible 49:25] question, but I have a lot of U.S. clients who export both in the goods and the services sectors—especially in the services sectors. And we’re really suffering right now from the lack of a functioning WTO system because we’ve found -- I’ve found when I was at USTR, in a lot of countries, they find that the average WTO ruling makes it easier for them to do something they wanted to anyway but can’t for their own political reasons, domestically. And so, we can’t use the WTO to address these issues.

      We’re having trouble getting USTR to take them on under Section 301, and so you’re kind of in this position right now where these things are happening, and there’s not much we can do about it, which is really quite frustrating to me and to my clients and to U.S. exports. So ideally, I would like to see the system come back suitably reformed, but it’s going to be quite difficult, as I said, and I don’t know if it’s going to happen.

Trevor Jones:  Well, thank you. Oh, we just got a new question. All right. So Judge Vaden (sp) asks -- he says, “The USMCA established its own dispute resolution process that provided for final decisions on an expedited basis. To date, the process has most frequently been invoked for labor disputes involving individual Mexican manufacturing plants and disputes involving billions of dollars of American ag exports remain in limbo, relating to corn, or unenforced, relating to dairy. Does the uneven use of USMCA enforcement procedures run the risk of discrediting all trust in multi-national dispute resolution?”

Jamieson Greer:  I mean, I think there is some risk of that. Right? We’ve developed the dispute settlement system in USMCA with a few ideas in mind. One, we had a deal that had good rules for American farmers and workers and American interests, therefore, we would want a strong dispute settlement system. Of course, dispute settlement rests in the discretion of the administration who gets to decide when they’re going to enforce. We can hear from Congress, and we do hear from Congress, repeatedly, on how they think USTR should be enforcing. And Congress is talking about it in a pretty broad-based way. They certainly support the labor enforcement, but you also hear them coming down strongly and saying, “You need to be enforcing, whether it’s the dairy that the judge refers to or all the biotech trades in Mexico.”

      We have an energy case going on that got started, and now we’re just waiting, even though it’s kind of a slam-dunk win for the United States. So I think, unfortunately—and again, maybe this is just cynical being in Washington—again, we’re in a situation where I think, sometimes, political things can affect the way we do enforcement. Right?

      The Democratic Party has strong union base, and so they’re enforcing these labor issues, which I agree with. I think we should do that, but that doesn’t mean we should leave these other things undone. I think if you have a good agreement with strong enforcement across the board, then you can have support for trade and trade rules. But when you don’t do that, then you lose the folks who are thinking, “Well, I was willing to give this a try,” or, “We were willing to do this. Oh, but now I see that the benefits of enforcement are accruing to some other group and not to me.” That’s not a good situation. Right? You want to be able to show that, “Here are our agreements, and here's enforcement that can benefit U.S. interests, wherever that might be.” 

Trevor Jones:  And I guess [inaudible 52:59] -- last question in the Q&A was, “If given carte blanche to rework WTO rules or dispute settlement system, how would you address China’s non-market economy factors? A big question to close us out on there.

David Ross:  Jamieson, why don’t you go first. You were there for that.

Jamieson Greer:  Well, we just created our own dispute settlement mechanism with China is what we did. I had mentioned earlier there are certain things that the WTO just doesn’t cover—aspects of forced technology transfer, over capacity, excess capacity, subsidies, or dumping that affects our companies in third markets, things like that; the whole idea of Military-Civil Fusion, directed strategic acquisition programs, all kinds of things. Some of these things have resolutions that are not trade oriented, and so maybe it’s not exactly that you go to the WTO and say, “Hey, let’s deal with technology theft.”  I mean, you can. Right? But I mean, we have other means, too. Right? We have export controls to have some control on that. We have our Department of Justice that can do investigations and indictments. I mean, all these things have limitations, too.

      So if I could redo some of this stuff, I would actually start, not so much at the WTO. I’d start more on our regional and bilateral trade agreements. One thing I wish we had done in USMCA and now I regret is that we had limited -- that we had put a cap on the amount of content you could have from a non-market economy if you want to get duty-free treatment. So, in other words, if you have to have 65 percent or 75 percent North American content to get duty-free treatment under USMCA, that’s great, but that still means you can have, like, 35 percent Chinese content. Right? So they’re benefitting from this -- they, potentially, are benefitting from this agreement without having to live by any of the rules.

      We get at that a little bit in the IRA. They have rules that are like that, that are pretty draconian, to be honest. But, I mean, that kind of thing. We also have, in the USMCA, a provision that says, “If any of the parties to the agreement are going to do an FTA with China, we can kick you out, so you don’t become just an export hub for China into one of the parties.” So those are the kinds of things that I would incorporate into our regional and bilateral FTAs. 

David Ross:  I would just say, again, as far as changing the WTO rules in a way that would address the issues we have with China is just going to be probably impossible because China wouldn’t agree to make those changes. I think the problem that we’ve ended up with, with China, is that there was some expectation back when we first brought them into the WTO that they shared a certain viewpoint of how a government works in its economy and how it interacts with its companies, and those assumptions just haven’t born out, especially once they started with the Made in China 2025 Program and that kind of thing. China has just gone in a different direction that’s just not consistent with market-oriented views that you have in Western countries.

      And so, trying to figure out a way to capture these practices when one government just doesn’t adopt -- doesn’t accept the underlying premise, it’s probably going to be impossible, and so more likely that you see more—if we get back to negotiating market access, which the current administration isn’t doing—agreements like USMCA being expanded in more countries and maybe a separate system that doesn’t include China, that doesn’t include Russia, that liberalizes amongst those who are willing to do so and maybe those who aren’t willing to do so, you’re just going to have what you have now with Section 301 and other kinds of measures being used instead.

Jamieson Greer:  Yeah. I mean, there’s underlying assumptions. Right? Sometimes you hear people say, “Well, let’s just do this other big agreement, and then China will feel pressure that they need to comply with that, too.” I mean, that doesn’t make any sense to me because they were already in the WTO, and they didn’t feel pressured to it. The United States, when it comes to the WTO, it signs on thinking, “I’m going to comply with these, and then if I’m found that I haven’t followed it, I’m going to change my law,” which is what happened repeatedly over and over in the Bush and Obama administration.

      That’s not how China approaches it—just like David said. I mean, their view is not, “I’m going to join the WTO so can conform myself to the system.” Their view is, “I’m going to join the WTO because I think it furthers my national interest as the People’s Republic of China. And if it doesn’t and if there’s instances where it doesn’t, then I’m going to do what I think is best for the People’s Republic of China.” It’s just a very different approach to it. Right? I mean, obviously, we’re guilty, too, of sometimes doing things that don’t follow and probably intentionally. Right? And that’s part of why we’re seeing the breakdown in the system.

Trevor Jones:  Well, thank you both so much for this. This has been great. Jack is back, and he’s going to close us out, but I just wanted to thank, again, our two panelists. This was a great discussion. And thank you, everyone in the audience who decided to join us today. I hope you enjoyed it as much as we did.

Jack Capizzi:  Well, thank you, Trevor. Yes, and certainly on behalf of The Federalist Society, I do want to thank David and Jamieson for their time today. As always, we welcome any listener feedback that you might have by email at [email protected]. Please keep an eye on our website and your emails for announcements about upcoming webinars. But with that, thank you all for joining us today. We are adjourned.

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