A Crumbling WTO at the

Hands of the Appellate Body

How Appellate Body Overreach is Undermining the WTO System

Katherine E. Nolan

Georgetown University Law Center | Fall 2016

 Abstract

The theory that a legalistic approach to the WTO system would produce more predictability and
fairness has not borne out. The Appellate Body, acting under this theory, has overreached its
appropriate role and function. In attempting to create legalistic certainty, the Appellate Body
rulings have consistently added obligations or diminished rights as prohibited by the DSU.
Further, by virtue of these violations, the Appellate Body has directly defeated the goals of
fairness and predictability the legalistic approach was intended to create. Through overreaching,
the Appellate Body has created uncertainty and undermined Member confidence in the dispute
settlement process; thereby marring the institution of the WTO as a whole.
 I. Introduction

A. Setting The Stage: The Debate On The Nature of WTO Law.

The extensive changes instituted during the Uruguay Round1 led to the formation of an

excessively legalistic international trade system. Prior to these changes, the international trade

dispute settlement process, under what was then known then as the GATT2, was largely

political.3 Dispute resolution under the GATT required the consent of the disputants to both

initiate the process and to accept its results. Thus, the entire process required diplomacy and

political tact with negotiation and conciliation imperative if any positive solution were to be

reached. Many commentators, then and now, deemed the procedure ineffective due to the

consensus requirement which stipulated that all members of the council, including the “losing”

party in the dispute, were required to approve the panel’s results for the report to become

binding.4 Partly in response to this criticism, the new dispute settlement system was established

under the Dispute Settlement Understanding (DSU).5 The DSU established compulsory

adjudication6 and binding results.7

1
General Agreement on Tariffs and Trade 1994, art. XIX, Apr. 15, 1994, Marrakesh Agreement Establishing the
World Trade Organization, Annex 1A, 1867 U.N.T.S. 187, 33 I.L.M. 1153 (1994).
2
General Agreement on Tariffs and Trade, Oct. 30, 1947, 61 Stat. A-I 1, 55U.N.T.S. 194 [hereinafter GATT].
3
Though some experts indicate the procedures embodied in the GATT were already more juridical than political
following the Tokyo Round. See John Jackson, The WTO Dispute Settlement Procedures: A Preliminary Appraisal,
in The World Trading System: Challenges Ahead 153, 155 (Jeffrey J. Schott ed., 1996), available at
http://www.piie.com/publications/chapters_preview/66/9iie2350.pdf (noting the procedural shift from the use of a
working party to consider disputes to that of a panel of experts – “signaling a shift to a more juridical, rather than
negotiating, procedure. The experts on a dispute panel were acting in their own right and not as representatives of
other governments. They had an obligation to be impartial and to apply careful reasoning to the cases brought
before them.”). Id.
4
See e.g., J.H.H. Weiler, “The Role of Lawyers and the Ethos of Diplomats: Reflections on the Internal and
External Legitimacy of WTO Dispute Settlement,” Jean Monnet Working Paper, Harvard University Law School
1,2 (Sept. 2000) (noting it was a feature which, “compromised foundational principles of the rule of law and chilled
the utility of dispute resolution, especially for the meek and economically and politically unequal.”). Id.
5
Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing
the World Trade Organization, Annex 2 (Apr. 15, 1994), 1869 U.N.T.S. 401 [hereinafter DSU].
6
Id. at art. 1.
7
Id. at art. 16-17.
 Yet, despite its faults, the GATT system worked fairly well in practice, as evidenced by

the fact that many States utilized it. In fact, Dr. Arie Reich noted:

In the 1980s, there was a 300% growth in the number of legal proceedings within
the GATT framework (citation omitted). Almost every application for the
appointment of a panel was ultimately honored (even if occasionally after lengthy
delays), and most of the recommendations of the panels were adopted in the end
(again, on occasion after long delays) (citation omitted). Once adopted, the
recommendations were generally respected and implemented by the States
involved. Except for one case in the 1950s, (citation omitted) it never became
necessary to take retaliatory steps against a State refusing to honor the
recommendations of the Council.8

Nevertheless, a significant portion of State Members were dissatisfied with the GATT

framework. As international trade became more sophisticated and the formation of the WTO

was negotiated, two divergent theories regarding the nature of WTO law emerged: that of the

“pragmatists” and that of the “legalists.”

The pragmatists supported a diplomatic approach to WTO law, stressing the importance

of conciliation and problem-solving over that of legal precision.9 The perspective was not that

the international trade system should necessarily maintain the status quo framework of the

GATT, but that any new framework should retain the GATT element of diplomacy as its

essential feature. For instance, in the late 1980s a Swiss GATT Director argued, “GATT cannot

be a world trade court. Conciliation is our priority; it is not our job to determine who is right and

wrong.”10 This perception was also reflected in the trade agreements in existence at the time

which were far more limited in scope and less binding in nature than those developed under the

WTO system. As Reich explains, under the GATT regime, “many governments saw these

8
Arie Reich, From Diplomacy to Law: The Juridicization of International Trade Relations, 17 NW. J. Int’l L. &
Bus. 775,776 (1996–1997).
9
Overreach at the WTO, VOX: CEPR’S POL’Y PORTAL COLUMNS, http://voxeu.org/debates/commentaries/
overreach-wto (last accessed Dec. 18, 2016).
10
Id.
agreements not as a binding legal regime but as a diplomatic-political framework which could

provide a ‘basis for negotiation between States for the purpose of attaining a balance between

benefits and obligations’.”11

The pragmatists’ theory of what WTO law should be was diametrically opposed to that of

the legalists, many of whom were Americans at a time when the United States had extraordinary

amounts of political sway in the international trade arena. Legalists argued that “legally binding

rules would produce more certainty, predictability and fairness for all GATT/WTO members.”12

This view, in addition to the influence of the Americans and a “growing demand by States to

regulate their trade relations by using norms and enforcement procedures that are legal in

character,” ultimately led to the adoption of the legalist regime which exists in the WTO today.13

Some have described the changes in the international trade system following the creation

of the WTO and DSU as the “juridicization” or “juridification” of international trade.14 This is in

no small part because amendment or interpretation of the WTO rules requires a consensus or

three-fourths majority, which is extremely difficult to obtain.15 Thus, WTO rules and

clarification of commitments are de facto interpreted by the judicial branch of the WTO: the

Panels and Appellate Body. The consensus requirement in the GATT framework forced

Members to resolve disputes largely through diplomacy and negotiation. Under the WTO

framework, the consensus requirement is so difficult to meet that it diminishes the legislative

ability of the General Council. As a result, the dispute resolution system is the major forum for

rule-making and interpretation of WTO rules and agreements.

11
Reich, supra note 8.
12
Overreach at the WTO, supra note 9.
13
Reich, supra note 8 at 776.
14
Weiler, supra note 4; see also Arie Reich, From Diplomacy to Law: The Juridicization of International Trade
Relations, 17 NW. J. INT’L L. & BUS. 775,795-96 (1996–1997).
15
Claude E. Barfield, FREE TRADE, SOVEREIGNTY, DEMOCRACY: THE FUTURE OF THE WORLD TRADE
ORGANIZATION 41 (Arthur Appleton et al. eds., 2001).
 B. What Is The Proper Role Of The WTO Appellate Body?

As articulated above, the proper role of the Dispute Settlement Body (DSB), and

particularly that of the Appellate Body, has been a subject of contention since the formation of

the WTO. Article 31 of the Vienna Convention states that a treaty must be interpreted “in

accordance with the ordinary meaning to be given to the terms of the treaty in their context and

in the light of its object and purpose.”16 Thus, the proper method for discerning the role and

limits of the role of the Appellate Body is to turn to the language of the original text which

established the WTO dispute settlement system.

The Dispute Settlement Understanding (DSU) proscribes the rules and procedures

governing dispute settlement under the WTO system.17 In Article 3.2 of the DSU, the Members

recognize that the dispute settlement system is a “central element in providing security and

predictability to the multilateral trading system. . . [and] it serves to preserve the rights and

obligations of Members under the covered agreements, and to clarify the existing provisions of

those agreements in accordance with customary rules of interpretation of public international

law.”18 While the Appellate Body is charged with “clarifying” WTO agreements, several articles

in the DSU make it clear that the Members intended the effects of that clarification to be

carefully limited. For instance, Article 3.2 goes on to state that, “[r]ecommendations and rulings

of the [Dispute Settlement Body] cannot add to or diminish the rights and obligations provided in

the covered agreements.”19 This limitation is reiterated in Article 19.2 which states that “in their

findings and recommendations, the panel and Appellate Body cannot add to or diminish the

16
Vienna Convention on the Law of Treaties art. 31, May 23, 1969, 1155 U.N.T.S. 331, 8 I.L.M. 679.
17
DSU, supra note 5.
18
Id. at art. 3.2.
19
Id.
rights and obligations provided in the covered agreements.”20 Further, DSU Article 3.9 makes

clear that the DSB reports do not set out “authoritative interpretations” of the WTO

agreements.21 The perception that the DSB must exercise judicial restraint is reinforced in a

declaration found within the WTO Charter itself which states: “The Ministerial Conference and

the General Council shall have the exclusive authority to adopt interpretations of this Agreement

and of the Multilateral Trade Agreements.”22

Clearly the Members did not want the Appellate Body to have the power to impose

additional obligations or minimize hard-won rights within the WTO agreements. Thus, the

Appellate Body is charged with walking a very fine line between analyzing and explaining

ambiguities in the legal texts and formulating clarifications that, in effect, alter the agreements

themselves. The Appellate Body must exercise judicial restraint to avoid crossing this blurry

line. Despite the clear indications of the DSU, Appellate Body members still struggle to define

the boundaries of their role. In a 2013 speech, Appellate Body member Thomas Graham

articulated several questions about the role of the Appellate Body illustrating the tightrope the

Appellate Body Members must walk. 23 Graham queried whether, in performing their duties, the

Appellate Body Members should generally construe the agreements broadly or narrowly:

Are the 22 agreements that form our body of statutory law akin to a constitution for
WTO law—to be interpreted broadly considering changing circumstances—or are
they a contract between the member governments—which are formally called the
Contracting Parties—to be interpreted narrowly and (as nearly as possible)
literally?24

20
Id. at art. 19.2.
21
Id. at art. 3.9. (“The provisions of this Understanding are without prejudice to the rights of Members to seek
authoritative interpretation of provisions of a covered agreement through decision-making under the WTO
Agreement or a covered agreement which is a Plurilateral Trade Agreement.”).
22
Marrakesh Agreement Establishing the World Trade Organization art. IX.2 (Apr. 15, 1994), 1867 U.N.T.S. 154.
23
Graham, Thomas R. Member of the Appellate Body, World Trade Organization (2013) "Present at the Creation,"
J. INT’L BUS. & L.: Vol. 12: Iss. 2, art. 14, available at http://scholarlycommons.law.hofstra.edu/jibl/vol12/iss2/14.
24
Id.
Graham also asked whether it was appropriate for the Appellate Body to fill in the gaps and

ambiguities of the agreements, and whether they were, in fact, deliberately included:

What about gaps and ambiguities, especially as we confront issues of national

policy versus WTO rules, or of meshing different economic and political systems
under WTO rules? In some cases were those gaps or ambiguities intentional, to
cover the inability of the negotiators to reach agreement, even in the simpler world
of decades ago?
....
If the text is unclear, must we always find a meaning? Or should we sometimes
leave matters undecided? Or decide by default: that is, the party asserting a
meaning loses if on examination the text remains unclear? Can we ever assume
negotiators left some things unsaid or ambiguous[] because they intended to?
Because they resorted to “creative ambiguity” when they couldn’t reach agreement
on something? Did they intend to leave it to us? We, who are commanded not to
“add to or diminish the rights and obligations provided in the covered
agreements?”25

The answer is in the text of the DSU. The Appellate Body must interpret agreements

narrowly as is required of them. It is not the Appellate Body’s proper role to fill in gaps thereby

altering the agreements. In many instances, the gaps and ambiguities present in the agreements

are there, not simply through oversight, but by design. It is well known that “many of the

specific provisions of the WTO agreements raise issues of interpretation which were known to be

highly contestable, and indeed were being contested, in the period when the texts were

negotiated and agreed.”26 In fact, in a joint paper, Michel Cartland, former Permanent

Representative of Hong Kong to the GATT and Chairman of Negotiating Group on subsidies and

countervailing measures in the Uruguay Round, Gérard Depayre, the Chief EC negotiator in the

Uruguay Round Negotiating Group on subsidies and countervailing measures, and Jan

Woznowski, the former Director of the Rules Division of the WTO and Secretary of the Uruguay

25
Id.
26
Sol Picciotto, The WTO’S Appellate Body: Legal Formalism as a Legitimization of Global Governance, 3
Lancaster Univ. (Jan. 2005), available at http://www.ucl.ac.uk/political-science/publications/downloads/spp-wp-
14.pdf.
Round Negotiating Group on subsidies and countervailing measures make it clear that Members

negotiating in the Uruguay round deliberately created ambiguities in the negotiated texts, “in the

belief that no interpretation which had not been agreed by them could be imposed on them.”27

Thus, where an adjudicative body attempts to clarify these “trip-wire texts,” the result will

undoubtedly be controversial,28 and where the Appellate Body fills in gaps, they do so in

violation of the WTO founding documents.

II. Appellate Body Overreach

A. The Adoption of A Legalist Regime Led Directly To Appellate Body Overreach.

The Appellate Body has frequently “overreached” by exceeding the scope of its authority

under DSU Articles 3.2 and 19.2 by adding to and diminishing the rights and obligations

provided for in the covered agreements. The Appellate Body has been overreaching by creating

new law for two interconnected reasons: (1) The legalist perspective is inherent in the WTO

framework and influences the Appellate Body members; and (2) The WTO legalist framework

created a legislative-judicial imbalance.

As discussed earlier, the legalists’ theory of international trade law, which was adopted at

the formation of the WTO, places emphasis on clear, well-defined, legally binding rules and an

efficient dispute settlement system. However, the WTO Agreements often contain deliberate

ambiguities and gaps. Because of this, when a dispute arises where the agreement at issue is

unclear or silent on a particular issue, the Appellate Body must decide whether to create new law

and resolve the dispute or leave the matter undecided and return the issue to the General Council

27
Michel Cartland, Gérard Depayre & Jan Woznowski, Is Something Going Wrong in the WTO Dispute Settlement?,
J. WORLD TRADE 46, no. 5 (2012): 979, 986 available at http://www.kluwerlawonline.com/dev/document.php?
id=TRAD2012031.
28
Alter, K. J. 2003. Resolving or Exacerbating Disputes? The WTO's New Dispute Resolution System, INT’L
AFFAIRS 79,4 (2003) 783-800, available at http://faculty.wcas.northwestern.edu/~kal438/KarenJAlter2/
Comparative_International_courts_files/WTOdisputeresolution.pdf.
to legislate. The WTO was created with the legalist perspective in mind. The Appellate Body

feels pressured to resolve disputes efficiently as is their mandate, but also to do so in such a way

that there is a clear rule going forward. The Appellate Body is also aware that the dispute at

issue likely has significant economic effects for the disputants, and should they leave the matter

undecided, the parties would be frustrated. The GATT framework which forced diplomacy and

reconciliation to resolve disputes is too far removed from the current system for the Appellate

Body to consider leaving matters undecided as they should in such circumstances.

As alluded to earlier, the current WTO system in place created an imbalance between the

legislative (the General Council) and judicial (the Panels and Appellate Body) elements.

Technically, only the Ministerial Conference and the General Council can set forth official

interpretations or clarifications of treaty rules. However, interpretations require support of three-

fourths of all 164 WTO Members29 before they may be adopted, which is an extremely

challenging undertaking. Any such interpretations also may not amend the treaty. To do so

requires even more stringent procedures. It is unsurprising then that to date, “no attempt to

utilize new interpretations or clarifications to resolve ambiguities in the new WTO rules has been

successful.”30 Notable professor Claude E. Barfield has articulated the difficult process that is

involved where a WTO rule is amended:

The process of amending the rules is even more complicated. In most cases,
amendments can be proposed by the Ministerial Conference and adopted with the
vote of two-thirds of WTO members. If the amendment is determined to affect the
rights and obligations of member states, however, then members opposed to the
amendment are not bound by it unless three-quarters of the overall WTO
membership votes to give them the option of either accepting the amendment or
withdrawing from the WTO. Furthermore, amendments to certain rules—those
involving WTO decision- making, most favored nation (MFN) status, tariff

29
WORLD TRADE ORGANIZATION, Understanding the WTO: Members and Observers (July 29, 2016),
https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm (last accessed Jan. 6, 2017).
30
Barfield, supra note 15.
 schedules, and dispute settlement, for example—must be enacted by consensus,
which is defined as no individual member dissenting publicly.31

As a result, many argue that the legislative process under the WTO system is therefore an

impractical solution to deal with disputes that involve ambiguities and gaps in the agreements.

Conversely, the Appellate Body is extremely efficient. Thus, the Appellate Body has taken on

the role of rule-making to deal with the gaps and ambiguities.

However, this is not the proper role of the Appellate Body. Rule-making directly violates

the DSU. Further, Members from both developed and developing countries have recognized and

objected to the activist approach the Appellate Body has taken in a wide variety of disputes

covering numerous agreements.32 The United States, Pakistan, Mexico, Canada, Malaysia,

Argentina, Japan, Chile, and India, among others, have all criticized the DSB for overreaching.33

Yet it is not entirely the fault of the Appellate Body. The legalist regime has made it difficult for

the Appellate Body to exercise judicial restraint. Nevertheless, while the legislative process may

be extremely difficult, if the Appellate Body continues to make rules to deal with gaps and

ambiguities, the Members will not be forced to negotiate and engage in the diplomatic process as

they would have under the pragmatists’ theory of WTO law.

B. The Appellate Body Rulings Consistently Add Obligations Not Set Forth In The
Agreements And Take Away Members’ Rights.

31
Id.
32
See e.g., Terence P. Stewart, Amy S. Dwyer & Elizabeth M. Hein, Trends in the Last Decade of Trade Remedy
Decisions: Problems and Opportunities for the WTO Dispute Settlement System, 24 Ariz. J. Intl. & Comp. L. 251,
283-84 (2007); Terence P. Stewart, Amy S. Dwyer & Elizabeth M. Hein, Proposals for DSU Reform that Address,
Directly or Indirectly, the Limitations on Panels and the Appellate Body Not to Create Rights and Obligations, in
REFORM AND DEVELOPMENT OF THE WTO DISPUTE SETTLEMENT SYSTEM 331, 337–341 (Dencho Georgiev & Kim
Van der Borght eds., Cameron May 2006).
33
See Terence P. Stewart, Patrick J. McDonough, Jennifer M. Smith & Sandra K. Jorgensen, The Increasing
Recognition of Problems with WTO Appellate Body Decision-Making: Will the Message Be Heard? GLOBAL TRADE
& CUSTOMS J. Vol. 8, issue 11-12, p. 390,392-94 (2013).
 In the earliest Appellate Body decisions, the Appellate Body respected the limitations on

the scope of their authority. Soon after, however, the decisions “reflect[ed] a distinct inability to

leave questions raised unanswered or to defer to the interpretation of the responding party where

agreement language is ambiguous or silent.”34 Terence P. Stewart suggested the problem of

overreach began when the Appellate Body began to “fill gaps” after encountering disputes

involving agreements that either were silent or ambiguous:

Relatively early on after the WTO came into existence, the Appellate Body decided
that it was not limited in its ability to fill gaps or interpret silence (citation omitted).
The Appellate Body also decided relatively early that there was no negotiating
history to reference for understanding the agreements, freeing the Appellate Body
to construe terms or gaps or silence without guidance from the positions of
Members during the negotiations.35

This is in stark contrast to the cautious judicial restraint exercised in GATT dispute

settlement decisions. Moreover, while the legalists approved of a rule-based approach to WTO

law, the Members did not empower the Appellate Body to reconstruct agreements by filling in

the gaps. Despite international objections, the Appellate Body persists in “filling gaps,

construing silences, selectively choosing one of many dictionary definitions available to define

terms in the texts of the agreements,” thereby creating additional obligations and diminishing

Members’ rights.36

i. The Appellate Body Rulings Deny Members The Appropriate Deferential

Treatment Required.

34
Stewart et al., supra note 21 at 278-79 (citing e.g., U.S.-Carbon Steel, (citation omitted) "[T]he task of
ascertaining the meaning of a treaty provision with respect to a specific requirement does not end once it has been
determined that the text is silent on that requirement. Such silence does not exclude the possibility that the
requirement was intended to be included by implication."); Canada-Autos, supra (citation omitted) Argentina-
Footwear (citation omitted) ("[I]f they had intended to expressly omit this clause, the Uruguay Round negotiators
would and could have said so in the Agreement on Safeguards. They did not.")).
35
Terence P. Stewart, The Changing Nature of the World Trade Organization: From a Negotiating Forum to
Legislating through Dispute, in A REVOLUTION IN THE INTERNATIONAL RULE OF LAW: ESSAYS IN HONOR OF DON
WALLACE, JR., Juris. Pub. 303,305 (2014).
36
Stewart et al., supra note 22 at 392.
 In assessing whether a Member’s trade measures are in violation of the WTO

Agreements, the Appellate Body must take the standard of review into consideration. The DSU

provides only cursory guidance in this regard: “a panel should make an objective assessment of

the matter before it, including an objective assessment of the facts of the case and the

applicability of and conformity with the relevant covered agreements.”37 The Appellate Body’s

clarification of the DSU standard of review provides little additional guidance. Per the Appellate

Body, the appropriate standard of review under Article 11 of the DSU, “must be considered in

light of the obligations of the particular covered agreement at issue in order to derive the more

specific contours of the appropriate standard of review.”38 This vague and varying standard of

review is hardly ideal, particularly considering the legalistic clarity Members aimed to achieve

with the formation of the WTO. Nevertheless, the Appellate Body has reaffirmed its position in

several cases, stating that the standard of review will vary depending upon the substantive

obligations being reviewed.39 According to the Appellate Body’s own assertions, the standard of

review should thereby vary depending on which WTO Agreement is at issue. Considering this

standard, Ross Becroft further argues:

In matters where there has been a prior national-level process, such as in trade
remedy matters, this approach should result in a more deferential standard being
applied. However, in many cases the standard actually applied is no more
deferential than would otherwise apply (citation omitted). Indeed, in various cases,
the Appellate Body has reversed certain findings of panels on the basis that the
standard applied was too deferential. Arguably, this has pushed the standard that
is actually required to be applied more in the direction of de novo review.40

37
DSU, supra note 11 at art. 11.
38
Appellate Body Report, United States — Countervailing Duty Investigation on Dynamic Random Access
Memory Semiconductors (DRAMS) from Korea, WT/DS296/AB/R, 27 June 2006, para. 184.
39
See e.g., US – Lamb; US – Cotton Yarn; US – Countervailing Duty Investigation on DRAMS.
40
Ross Becroft, “The WTO Standard of Review: A Means to Strengthen the Trading System” in Susy Frankel and
Meredith Kolsky Lewis (eds.), Trade Agreements at the Crossroads (Routledge 2014) 66,70.
 While it appears the Appellate Body does not afford Members the appropriate level of

deference when reviewing trade remedy disputes, in the majority of cases the infringement on

Member rights is slight. This is largely due to the fact that neither the DSU, nor most other

Agreements, explicitly command the Appellate Body to give deference to Member

interpretations of Agreements. There is, however, one Agreement that does establish a distinct

and deferential standard of review: the Anti-Dumping Agreement.41 Nevertheless, the Appellate

Body has largely ignored the requirement.

Article 17.6 of the Anti-Dumping Agreement establishes a deferential standard of review

for factual assessments, including factual determinations and evaluations, and legal

interpretations in anti-dumping proceedings. Specifically, where the States authorities’

establishment of facts was proper and their “evaluation of those facts was unbiased and

objective,” Article 17.6(i) requires panels to defer to the State authorities’ expertise, "even

though the panel might have reached a different conclusion."42 In addition to interpreting the

relevant provisions in “accordance with customary rules of interpretation of public international

law,” Article 17.6(ii) requires panels to defer to authorities' legal interpretations even if the panel

would have chosen a different "permissible interpretation."43 Experts agree, “as the negotiating

history makes clear, this language incorporates administrative law principles analogous to

Chevron deference, while also adopting traditional international law norms regarding treaty

interpretation, i.e., the interpretive methodology reflected in the Vienna Convention on the Law

of Treaties.”44

41
Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, Apr. 15, 1994,
Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1868 U.N.T.S. 201 (hereinafter Anti-
Dumping Agreement).
42
Id. at art. 17.6(i).
43
Id. at art. 17.6(ii).
44
See e.g., Roger Alford, The WTO Appellate Body and International Judicial Deference, OPINIO JURIS,
http://opiniojuris.org/2006/08/28/the-wto-appellate-body-and-international-judicial-deference/ (Aug. 28, 2006
 Despite the Members’ clear intention to secure a deferential standard of review in anti-

dumping cases, the Appellate Body has concluded that application of the customary rules of

interpretation of public international law results in a single permissible interpretation of the Anti-

Dumping Agreement.45 In reaching such conclusions, the Appellate Body has deprived

Members the deferential standard of review enshrined in Article 17.6. In fact, “no adopted panel

or Appellate Body decision has ever found that there is more than one permissible construction,

even if they are selecting the seventh dictionary definition as the ‘sole’ permissible

construction.”46 The Appellate Body’s disregard for the deferential standard of review is not a

new phenomenon. More than ten years ago Daniel Tarullo wrote:

It is difficult to identify any issue in any of the cases in which this special standard
has produced an outcome different from that which would have prevailed had there
been no Article 17.6. In a number of instances, a panel or the Appellate Body has
found a single, unambiguous meaning for provisions of the Agreement that seem
readily susceptible to multiple readings. As actually applied in WTO anti-dumping
cases, Article 17.6(ii) resembles not at all the Chevron-type standard contemplated
by the United States at the time the Anti-Dumping Agreement was drafted.47

Still after all this time, the Appellate Body blatantly ignores the second part of Article 17.6(ii)

and permits only a single interpretation of the Agreements. Because this deferential standard

was included largely as a result of the efforts of U.S. negotiators, it is unsurprising that the U.S.

has been most vocal about this type of overreach by the Appellate Body.48 In overreaching and

denying Member rights as set forth in the Agreements, the Appellate Body is destabilizing the

entire WTO system. The former U.S. Trade Representative Portman has stated that, “[a]

11:03AM EDT); John D. Greenwald, A Comparison of WTO and CIT/CAFC Jurisprudence in Review of U.S.
Commerce Department Decisions in Antidumping and Countervailing Duty Proceedings, 21 TUL. J. INT'L & COMP.
L. 261,264 (2013).
45
See e.g., Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed
Linen from India, ¶ 65, WT/DS141/AB/R (Mar. 1, 2001) [hereinafter EC – Bed Linen].
46
Stuart et al., supra note 24 at 253-54.
47
Daniel K. Tarullo, The Hidden Costs of International Dispute Settlement: WTO Review of Domestic Anti-dumping
Decisions, working paper no. 351080 available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=351080.
48
See Stuart et al., supra note 24 at 279-280, tbl. 6.
critically important component of maintaining confidence in a rules-based trading system like the

WTO is an effective dispute settlement system,” meaning one that “follow[s] the appropriate

standard of review in trade remedy cases and [does] not impose obligations that are not

contained in the WTO Agreements.”49 Should the Appellate Body continue on this path, the

destabilizing effects of its decisions will result in a collapse of the WTO system.

ii. Appellate Body Members Invoke Precedent In Violation Of The DSU.

As noted previously, in accordance with Article 3.2 of the DSU, the Appellate Body’s

role is to clarify the existing provisions of . . . agreements in accordance with customary rules of

interpretation of public international law.”50 International law expert Isabelle Van Damme notes:

Practice shows that decisions of international courts and tribunals are binding only
on the disputants, except if provided otherwise in the constitutive treaties
establishing those courts and tribunals. So far, no example of such a contrary
provision is available and no binding judicial precedent applies. The general
principle is that final judicial decisions are only binding on the disputants and with
respect to the specific dispute to which the decision applies.”51

In principle the Appellate Body has upheld this practice, even stating that adopted panel reports

“are not binding, except with respect to resolving the particular dispute between the parties to

that dispute.”52 In practice, however, the Appellate Body has rebuked the panels for failing to

follow the Appellate Body’s prior decisions. This is alarming not only because it is further

evidence of Appellate Body overreach by violating the DSU, but also because it denies Members

their right to an objective assessment of the particular dispute at issue.

49
Hearing on the Nomination of Robert J. Portman To Be the United States Trade Representative, at 21-22 (Apr. 21,
2005) (questions for the record from Sen. Lincoln for Congressman Portman).
50
DSU, supra note 13.
51
Isabelle Van Damme, Treaty Interpretation by the WTO Appellate Body 198 (Oxford University Press 2009).
52
Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R,
WT/DS11/AB/R (Nov. 1, 1996), at 14.
 The clearest example of the Appellate Body overreaching in this manner comes from the

dispute Stainless Steel (Mexico).53 On the one hand, the Appellate Body stated, it is well settled

that Appellate Body reports are not binding, except with respect to resolving the particular

dispute between the parties.”54 However, the Appellate Body goes on to say:

This, however, does not mean that subsequent panels are free to disregard the
legal interpretations and the ratio decidendi contained in previous Appellate Body
reports that have been adopted by the DSB. . . . Ensuring “security and
predictability” in the dispute settlement system . . . implies that, absent cogent
reasons, an adjudicatory body will resolve the same legal question in the same
way in a subsequent case.
...
In the hierarchical structure contemplated in the DSU, panels and the Appellate
Body have distinct roles to play. . . . The Panel’s failure to follow previously
adopted Appellate Body reports addressing the same issues undermines the
development of a coherent and predictable body of jurisprudence clarifying
Members’ rights and obligations under the covered agreements as contemplated
under the DSU….”55

The Appellate Body’s decision is incongruous. Under this reasoning, where the legal questions

are the same, one cannot imagine a “cogent reason” that would justify a departure from the

Appellate Body’s prior decisions; if such a reason existed, the Appellate Body would have

decided differently in the prior instance. Thus, in an attempt to adhere to the legalistic regime of

the WTO, the Appellate Body violates the very documents which mandate their appropriate role,

thereby undermining the integrity of the system the Appellate Body attempts to protect.

In the minutes of the DSB meeting following the report in Stainless Steel (Mexico), some

countries, while agreeing with the findings in the final report, objected to the Appellate Body

overreaching on the issue of precedent. From the minutes of the meeting, Columbia in particular

had grave concerns:

53
Appellate Body Report, US – Final Anti-Dumping Measures on Stainless Steel from Mexico, WT/DS344/AB/R
(Apr. 30, 2008).
54
Id. at ¶ 158
55
Id. at¶ 158-161.
 Colombia wished to express its views on the systemic issue as to whether a
panel may rely on the findings of previous panel reports that the Appellate
Body had reversed, and in particular whether panels were required to follow
the Appellate Body's findings. In this connection, Colombia agreed with the
reasoning of the Panel that there was no provision in the DSU that required
WTO panels to follow the findings of previous panels or of the Appellate
Body on the same issues brought before them. In fact, a panel or Appellate
Body decision bound only the parties to the relevant dispute. On the other
hand, in compliance with the last sentence of Article 3.2 of the DSU:
"recommendations and rulings of the DSB cannot add to or diminish the
rights and obligations provided in the covered agreements". While
recognizing the need to provide security and predictability to the
multilateral trading system through the development of a consistent line of
jurisprudence, Colombia wished to recall that the Ministerial Conference
and the General Council alone were empowered to adopt authoritative
interpretations.56

Despite the reminders from Members’ of the Appellate Body’s proper role and the limitations of

that role, the Appellate Body continues to overreach, ignoring the damage it causes.

iii. Appellate Body Overreach Deprives Members Of The Opportunity To

Negotiate.

Because of the legalist regime of the WTO and lack of restraint by the Appellate Body,

new rules are written into agreements, particularly where there are gaps and ambiguities.

However, by the Appellate Body creating new law through the judicial process, they deprive

Members of the opportunity to negotiate and engage in diplomacy rather than resort to the

dispute settlement system. It is true that there is extreme legislative-judicial imbalance in the

WTO system and adopting official interpretations of the rules or creating new rules is very time-

consuming and difficult. Nevertheless, where the Appellate Body creates new law, they take

away the opportunity for the Members to settle that issue through the legislative process. Even

where the process is difficult, the Members would likely come to a resolution regarding the

interpretation of an ambiguous agreement if there was no other option. That is to say, if the

56
Dispute Settlement Body Minutes of Meeting, US – Final Anti-Dumping Measures on Stainless Steel from
Mexico, WT/DSB/M/250 para. 72 (May 20, 2008).
Appellate Body exercises judicial restraint and refuses to fill in gaps, the Members would have to

legislate on the issue. There would certainly be political pressure to come to a diplomatic

decision as there would presumably be an injured State industry demanding results. However,

considering the difficult legislative process, the Appellate Body has been creating new law to

avoid the problem, thereby depriving Members of the necessary incentives to overcome the

challenges.

The Zeroing Cases are a prime example of where judicial restraint would have likely led

to Members legislating on ambiguities and gaps in the Agreements. The Zeroing Cases involved

“dumping” under the Anti-dumping Agreement (ADA).57 In accordance with Article VI:2 of the

GATT 1994, the term “margin of dumping” has been defined as the “price difference” between

export price and normal value where export price is less than normal value.58 Accordingly,

where dumping is occurring, the margin of dumping is the amount (in monetary terms) by which

normal value exceeds the export price. The amount of Anti-dumping (AD) duty that may be

levied on a dumped product in order to offset or prevent dumping is limited to this price

difference. Where normal value does not exceed the export price, dumping is not occurring and

the amount of dumping is properly understood to be zero. The amount by which normal value is

less than the export price is not properly understood as “negative dumping,” nor can it be

properly understood to remedy or offset dumping.

During the Uruguay Round negotiations, some countries argued that Members should be

obligated not to consider the amount of dumping associated with non-dumped sales to be zero,

but instead offset dumped transactions with the amount of “negative dumping” asserted to be

associated with those non-dumped sales. Several proposals were made that would have required

57
ADA, supra note 41.
58
GATT, supra note 2 at art. VI:2.
changes to the longstanding practice of the US and other countries. However, the general

position at the time was that offsetting dumped sales by the amount of non-dumped sales would

mask dumping. Thus, certain countries, including the US, strongly opposed all proposals to

prohibit “zeroing” or to require an offset for “negative dumping,” and such proposals were never

incorporated into any of the draft agreement texts prepared during the Uruguay Round

Negotiations.

Despite these facts, the Appellate Body and certain Panels concluded in a series of WTO

disputes, known as the Zeroing Cases, that the ADA requires Members, when using certain

comparison methodologies, to offset the margins on dumped sales with “negative” dumping

margins on non-dumped sales. In arriving at its conclusions regarding zeroing in the first few

disputes, the Appellate Body focused on language in Article 2.3.2 of the ADA, which states:

Subject to the provisions governing fair comparison in paragraph 4, the existence

of margins of dumping during the investigation phase shall normally be established
on the basis of a comparison of a weighted average normal value with a weighted
average of prices of all comparable export transactions or by a comparison of
normal value and export prices on a transaction-to-transaction basis. A normal
value established on a weighted average basis may be compared to prices of
individual export transactions if the authorities find a pattern of export prices which
differ significantly among different purchasers, regions or time periods, and if an
explanation is provided as to why such differences cannot be taken into account
appropriately by the use of a weighted average to weighted average or transaction-
to transaction.59

The AB concluded that dumped and non-dumped sales were all “comparable” so they should be

compared to the weighted average normal value, with the “negative” margins on non-dumped

sales offsetting the dumping margins on dumped sales.

In United States – Softwood Lumber from Canada (Article 21.5 proceeding), Commerce

had modified its calculations to compare the prices of individual sales in the US to home market

59
GATT, supra note 2 at art. 2.3.2.
sales (i.e., the exporters’ sales in Canada), to calculate the dumping margin, instead of using the

average-to-average methodology central to the Appellate Body’s previous analysis.60 The

compliance panel found that the ADA did not prohibit zeroing in that context, because the “all

comparable export transactions” language in the ADA did not apply when comparing individual

transactions to individuals transactions.61 The Appellate Body, however, reversed the panel,

finding that prior Appellate Body reports on the average-to-average zeroing investigations

necessitated the same result in this different context.

The different positions of the Panel and Appellate Body continued to resurface in a

number of subsequent cases. In a series of challenges to Commerce’s use of zeroing when using

average-to-transaction comparisons in administrative reviews, multiple Panels concluded that

Members were not obligated to offset dumping margins on dumped sales with the “negative”

margins on non-dumped sales because the relevant text relied upon by the Appellate Body

applied only to comparisons in the “investigation phase,” and only in the context of “average-to-

average” comparisons. Nevertheless, the Appellate Body, once again relying on its analysis with

respect to investigations, reversed each of these panel findings and concluded that Members were

prohibited from applying zeroing in administrative reviews as well.

This finding was particularly troubling because the Appellate Body reports did not

provide historical or textual support for its conclusions. It simply created new law without

justification and in violation of the DSU mandate. Zeroing was a controversial subject that was

still being negotiated and debated at the formation of the WTO. It is also a clearly important

issue as there have been so many cases which involve the Anti-dumping Agreement and dumped

60
Article 21.5 Appellate Body Report, United States — Final Dumping Determination on Softwood Lumber from
Canada, WT/DS264/AB/R (Aug., 15, 2006).
61
Id.
products. Thus, had the Appellate Body refrained from judicial activism and followed the

pragmatists’ theory by not filling gaps and interpreting ambiguities in the Agreements, the

Members would likely have been forced to negotiate and adopt an official interpretation. This is

one area where there would have certainly been enough political pressure to motivate the

Members to act diplomatically. Yet such a departure from the legalists regime likely was not

even considered by the Appellate Body.

iv. The Appellate Body Overreaches By Interpreting Provisions of

Agreements Not At Issue In Disputes.

The Appellate Body may only consider the provisions of an agreement at issue in a

dispute. To do otherwise not only violates the mandate of the DSU, but also deprives Members

of an opportunity to legislate on issues that have not yet arisen in a dispute. Nevertheless, the

Appellate Body has done precisely this on numerous occasions. One such instance occurred in

the Argentina – Financial Services dispute.62

The Argentina – Financial Services case concerned eight financial, taxation, foreign

exchange and registration measures imposed by Argentina mostly on services and service

suppliers from jurisdictions that do not exchange information with Argentina for the purposes of

fiscal transparency (“non-cooperative jurisdictions”). Argentina argued, among other things, that

its regulations were "defensive tax measures" that were designed to "protect Argentina's tax base

by preventing tax evasion, tax avoidance, and fraud.”63 The September 2015 Panel reported,

among other things, that the Argentine measures violated the MFN obligation of GATS Article II

because they did "not accord, immediately and unconditionally, to services and service suppliers

of non-cooperative countries treatment no less favourable than that which they accord to like

62
Appellate Body Report, Argentina – Measures Related to Trade in Goods and Services WT/DS453/AB/R (May 9,
2016) [hereinafter Argentina – Financial Services].
63
Id.
services and service suppliers of cooperative countries.”64 The Appellate Body, however,

subsequently rendered an extremely narrow decision that shed little light on the substantive issue

of whether Argentina’s tax transparency measures violated the Agreement.65 Instead, more than

two-thirds of the Appellate Body’s analysis (forty-six pages) was in the nature of obiter dicta in

which the Appellate Body set out interpretations of various provisions of the GATS. The

Appellate Body reversed the panel’s findings on likeness and said that this reversal rendered

moot all the Panel’s findings on all other issues.66 After determining that the other findings of

the Panel were moot, the Appellate Body should not have continued to interpret the provisions,

thereby overreaching its authority under the DSU. In a later statement, the United States noted,

“These interpretations served no purpose in resolving the dispute – they were appeals of moot

panel findings. Thus, more than two-thirds of the Appellate Body’s analysis is comprised simply

of advisory opinions on legal issues.” 67 The United States further argued, “[The] Appellate

Body is not an academic body that may pursue issues simply because they are of interest to them

or may be to certain Members in the abstract.”68

The problem in Argentina – Financial Services was not that the Appellate Body rendered

a narrow decision, but that it did not exercise judicial restraint. Under the legalism theory, it is

not necessarily incorrect to address potential issues that may arise under the same provisions

under different circumstances, as doing so would promote legal certainty. However, it violates

the Appellate Body’s mandate. Further, had the Appellate Body not interpreted the GATS

provisions, it would have allowed an opportunity for the legislative body to anticipate that a

64
Panel Report, Argentina – Measures Related to Trade in Goods and Services WT/DS453/R (Sept. 30, 2015).
65
Appellate Body Report, supra note 58.
66
Id.
67
STATEMENT BY THE UNITED STATES, Meeting of the WTO Dispute Settlement Body, Geneva (May 23, 2016),
available at https://geneva.usmission.gov/wp-content/uploads/2016/05/Item7.May23.DSB_.pdf (last accessed Dec.
19, 2016).
68
Id.
future dispute may involve those provisions and thus adopt an official interpretation of those

provisions. Of course, in the current environment, that would be unlikely as the Members would

likely anticipate that should a dispute arise involving those provisions, the Appellate Body would

interpret them as necessary, even if it meant creating new law. The Appellate Body must

therefore restrict itself to only the issues relevant in the dispute and set a new precedent of

refusing to interpret ambiguous text or fill in gaps in such a way that they add or diminish rights

and obligations set forth in the Agreements.

III. The Appellate Body’s Rulings Will Lead To The Collapse Of The WTO System.

As articulated above, lack of judicial restraint, a direct result of the adoption of the

legalistic regime during the formation of the WTO, has crippled the legislative abilities of

Members. The Appellate Body overreaches in instances where there is ambiguity or gaps in the

text of the Agreement by filling in those gaps and creating new obligations or restricting Member

rights which were not set forth in the Agreements.

As is evident from the comments quoted earlier and from the cases examined, Members

have lost confidence in the WTO system due to questionable Appellate Body rulings. Only a

few months ago, on October 7, 2016, Director-General of the WTO, Roberto Azevêdo delivered

a keynote speech at National Press Club in Washington D.C. in response to what he called “the

catchy and often ill-informed anti-trade arguments we are hearing [which] have encouraged

others to speak up.”69 He acknowledged that the “current climate it is beginning to seem

radical.”70 He urged the US to support the WTO system, stating, “It was American leadership

that opened the global economy to trade after the Second World War — as a means of building a

69
Director-General Roberto Azevêdo, “Towards a More Inclusive Trading System”, at the National Press Club in
Washington D.C. (Oct. 7, 2016), available at https://www.wto.org/english/news_e/spra_e/spra139_e.htm.
70
Id.
more peaceful and prosperous world, and it is American leadership that can move us forward

now.”71

However, looking for an ally in Trump seems unlikely. Trump stated in July 2016, “The

World Trade Organization is a disaster.”72 President-elect Donald Trump will likely take a hard

stand against the WTO, and there will likely be more vocal backlash against the Appellate

Body’s judicial activism and creating law. Distrust and resentment toward the WTO has been

building for years across party lines and across the world as a result of the Appellate Body, and

this result was not unforeseen. In fact, in 1996 Alan Wolff and John Ragosta, two prominent

members of the U.S. international trade bar, warned, “A fast-track, binding international

litigation procedure cannot yield a satisfactory result where there are no precise or clear

substantive rules . . . [and] there are hundreds of unresolved questions in WTO agreements.”73

Further, in 1999, European trade lawyer Arthur Appleton stated:

[B]y transgressing certain limits, however impractical, established by the DSU, the
Appellate Body risks losing the confidence of certain WTO members. . . . The WTO
dispute settlement system depends on member confidence. It will only remain
successful if the members believe that the Appellate Body is interpreting the
covered agreements as negotiated, as opposed to modifying them. . . . While the
[AB] can be expected to make temporary patches for the holes that are discovered
in the covered agreements on a case-by-case basis, such ad hoc repair work is no
substitute for the consensual modification of these agreements, in particular the
DSU, by the members.74

The legalistic nature of the WTO has put the Appellate Body in an unfortunate position.

However, if the WTO wishes to remain a sustainable system, the Appellate Body needs to

quickly rein in its judicial activism and leave the legislating to the Members. If it does not,

71
Id.
72
Ian Mount, Donald Trump Says It Might Be Time for the U.S. To Quit the WTO, FORTUNE (July 25, 2016 8:13
AM EDT), http://fortune.com/2016/07/25/donald-trump-free-trade-wto/.
73
Barfield, supra note 15 at 42.
74
Id. at 28.
President Trump may well pull the United States out of the WTO. It is not unlikely that others,

also frustrated with the Appellate Body overreaching, will follow.