Westphalia Strikes Back: The 2018 Trade Wars and the Threat to the WTO Regime

Amsterdam Law School Research Paper No. 2018-31

Amsterdam Center for International Law No. 2018-13

59 Pages Posted: 1 Nov 2018 Last revised: 16 Nov 2018

Date Written: October 2, 2018

Abstract

The regime that has governed trade relations among the world’s largest economies since the creation of the World Trade Organization in 1995 is now under threat. While WTO Members adopting trade-restrictive measures on doubtful legal grounds is not a novelty, two developments make the current crisis unique. First, Members are reacting to perceived WTO-inconsistent conduct by imposing countermeasures, based on their own assessment that the justifications put forward are ill-founded. Second, acting on long-standing grievances against activism on the part of the Appellate Body, the United States has blocked all appointments of new members to the organ. Under present conditions, by the time any panel reports concerning these disputes are issued the Appellate Body will be non-operational. These developments undermine the core bargain underlying the WTO regime: the commitment by sovereign entities to entrust decisions regarding permissible and impermissible conduct to authoritative decision-making and to react to other Members’ conduct only following an institutional authorization to do so, when, within the Westphalian international order, they retain the ability to react unilaterally. After reviewing the development of the multilateral trade regime, this paper examines how the 2018 trade wars represent a breakdown of this core commitment and will potentially lead to fragmentation of the WTO regime. Members seeking to preserve the regime are faced with a paradox: overcoming the United States’ block through non-consensual procedures would undermine another commitment: that of decision-making by consensus. Without an Appellate Body or an alternative arrangement to reconstruct an authoritative institution, the WTO regime may devolve into one of Westphalian, de-institutionalized dispute resolution.

Keywords: WTO, World Trade Organization, Appellate Body, International Courts

JEL Classification: K33

Suggested Citation

Vidigal, Geraldo, Westphalia Strikes Back: The 2018 Trade Wars and the Threat to the WTO Regime (October 2, 2018). Amsterdam Law School Research Paper No. 2018-31. Available at SSRN: https://ssrn.com/abstract=3259127 or http://dx.doi.org/10.2139/ssrn.3259127

Geraldo Vidigal (Contact Author)

University of Amsterdam ( email )

P.O. Box 1030
Amsterdam, 1000 BA
Netherlands

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