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Just as conservatives and liberals at different times argue that the Supreme Court has engaged in judicial overreach domestically, both Democratic and Republican administrations have complained that the World Trade Organization (WTO) dispute settlement system has repeatedly overreached in invalidating US trade remedy actions. Extreme cures for claimed overreach are deployed for both institutions. At home, removing lifetime tenure for sitting justices is being proposed. The cure applied by the United States in the WTO was equally extreme. Former president Donald Trump's administration blocked appointments to that organization’s Appellate Body (the WTO’s equivalent of a Court of Appeals), killing it. This ended the agreed form of settling trade disputes at the WTO.
To resolve each of these problems of judicial overreach, domestic and international, resetting standards of judicial deference provides a middle way that would improve the functioning of each of these institutions.
US judicial deference to agency interpretations: The Chevron doctrine
The immediate issue at home is illustrated by a radical Supreme Court decision taken this June. Before its summer break, the Supreme Court overruled a 40-year precedent of judicial deference to the interpretations of regulatory agencies where the statutes they administer are ambiguous, an approach known as the Chevron doctrine. While executive branch agencies can go too far, we also expect the courts to be careful when the public interest requires executive action not to stand in the way, for example, of the Centers for Disease Control and Prevention mandating the use of masks in public places when a pandemic is beginning to spread. The Court’s sweeping decision is part of its current majority's agenda for change that has far-reaching effects, this one with extensive negative consequences for the US economy, given that expert opinion is to be paid less attention. In reaction, President Joseph R. Biden Jr. has proposed that the Congress impose term limits on the Supreme Court justices, just as President Franklin Roosevelt proposed expanding the number of Supreme Court justices nearly a century earlier.
America’s founders sought and achieved a balance between the three basic functions of government: legislative, executive, and judicial. There are high risks for the future of America if any of the three branches of government overreaches, going beyond its authority. The balance needs to be restored by clarifying that deference to executive branch agencies will be accorded when Congress clearly intended this as necessary to effectuate its intent in enacting a statute. As it is impractical for Congress to anticipate every question that will arise under every piece of legislation it writes, it needs to rely on the law’s administrators to fill in the gaps. The fix: Congress needs to be more specific that it intends executive branch agencies to have leeway in interpreting the grant of authority they have received to regulate a vast array of activities relating to public health, banking, consumer protection, privacy, the environment, and so forth.
WTO Appellate Body accorded no judicial deference to national administrators’ interpretations
At the WTO, administering the rules governing world trade likewise requires striking a careful balance. When the WTO Appellate Body was created in 1995, US trade negotiators were worried that trade remedy cases, in particular dealing with dumping, would not fare well under the new dispute settlement system. To avoid judicial overreach by the newly created “court,” US trade negotiators sought to deploy the doctrine of judicial deference to safeguard American rights. It was a key point in that negotiation. Acting on this concern, they negotiated a judicial standard of deference that was clearly designed to codify the Chevron doctrine as part of the new WTO Antidumping Agreement. It states in plain language: “Where the [dispute settlement] panel finds that a relevant provision of the Agreement admits of more than one permissible interpretation, the panel shall find the authorities' measure to be in conformity with the Agreement if it rests upon one of those permissible interpretations.”
In a quarter century of interpreting the agreement, dealing with a vast number of antidumping cases (WTO members have invoked the Antidumping Agreement 143 times out of the 621 disputes entertained from 1995 through 2023), the WTO Appellate Body (AB) never found any ambiguity that would cause it to defer to national authorities. Applying, the AB said, “customary rules of interpretation of public international law,” in each case it ruled that there was only one true and correct interpretation, the one it had found. Never was any deference paid to national administrators.
Possible paths for addressing judicial overreach concerns in the WTO dispute settlement system
While domestically the corrective could be passing new legislation, the international equivalent, changing an international agreement through WTO reform, is very difficult, as it requires agreement among 166 members. Nor is there, under the agreement establishing the WTO, a strong executive to seek to maintain balance. The corrective must be found in two forms, a new understanding as to how the current agreement is to be read and judicial self-restraint, learning from past failings.
If Vice President Kamala Harris wins the US presidential election, her administration will have to grapple with how to deal with judicial overreach at home and abroad. (This would not be an issue for a Trump administration. It agrees with the Supreme Court majority on domestic matters and has not indicated an interest in negotiating mutually beneficial trade agreements.) At present dozens of WTO disputes are frozen, warehoused on the pretext that they are being “appealed” to the nonexistent (and likely never to be brought back) Appellate Body. To deal with past cases would require the parties to negotiate outcomes for each of them.
One possible path forward was identified by an arbitral panel in December 2022 in a case brought by the European Union against Colombia. The panel, consisting of distinguished and experienced trade diplomats, delved into how to interpret the deference standard the American negotiators had inserted in the Antidumping Agreement. While the panel did not side with Colombia, the country applying antidumping duties in this instance, it provided reasoning that could mark a departure from decades of AB rejection of deference to national decision-makers. The panel stated: “different treaty interpreters applying the same tools ... may, in good faith and with solid arguments in support, reach different conclusions on the 'correct' interpretation of a treaty provision.”
Other possible ways to deal with the problem of deference have been suggested. WTO scholars have proposed, for example, that a separate adjudicatory body be created just for trade remedy cases or that difficult matters of interpretation, when what an agreement covers is unclear, be referred to WTO members. Had the AB been more flexible, deferring to national administrators’ permissible alternative interpretations of the rules, it might still be in existence today.
Why, then, might any of these fixes work? It could be hoped that the lesson of the former method of appealing disputes causing the AB to self-destruct would be front of mind. More practically, and with less reliance on faith, any new appellate mechanism could be tried for a short period, subject to renewal every three or four years.
WTO members have pledged “to achieve the objective of having a fully and well-functioning dispute settlement system accessible to all Members by 2024.” It is very unlikely that the members can join in reaching that objective by the end of this year, and it will not get immediately easier with a new US administration setting its trade policy. However, international cooperation is required for so many global challenges—from dealing with climate change to pandemics—that a means must be found to improving the world trading system’s primary institution, the WTO, rather than finding ways to work around it.
At the WTO Public Forum last week, it was suggested that the United States, which once led the WTO, now “lead, follow, or get out of the way.” To achieve a widely supported solution, American policy toward the world trading system will need a reset.
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