Lack of WTO Appeals Process May Invite Rice Trade Violations

LSU Coach Ed Orgeron gets animated, referee stands nearby
Now that was a flagrant foul
May 12, 2020
BRUSSELS, BELGIUM – When a country believes another is violating its trade commitments, it can take the issue to the World Trade Organization (WTO), that provides a neutral forum to litigate and settle disputes.  These disputes are reviewed by panels of experts, who make recommendations to the WTO’s Dispute Settlement Body.  If a country that’s party to the dispute disagrees with the panel, they can go to an appeals process, managed by the Appellate Body.

The U.S. has raised concerns with certain Appellate Body rulings and practices, and in an attempt to force change, the U.S. began blocking confirmations for Appellate Body members in 2017.  As of December 2019, the Body had too few members to function and hear new appeals.  However, member countries still have the right to appeal panel recommendations under WTO rules, so at this point any request to appeal effectively kills a dispute without a conclusion.  

And now it seems the strategy may have backfired.  In March, the European Union, Canada, China, and Mexico, along with 12 other WTO member countries joined together here to announce the formation of the “Multi-Party Interim Appeal Arbitration Arrangement” or MPIA for short.  This new arrangement is just government jargon for “parallel appeals process without the U.S.”  Last month, the total members jumped to 19 and is likely to continue growing.  

Why does this wonky international trade drama matter for U.S. rice?  It is no secret that rice, as the world’s most widely consumed grain, is also one of the world’s most manipulated crops.  With widespread reliance on rice comes government efforts to ensure adequate supply, often through incentives to farmers to plant rice and subsidies that guarantee profitability or encourage exports.  Nearly every government provides some form of support for their rice farmers to make sure their industry stays afloat, and in many cases, these safety nets are legal under WTO rules, but in many cases, they are not.  

USA Rice has never been shy about leveling the playing field when it comes to trade, the U.S. rice industry can be competitive on many levels if everyone played by the rules.  After many years of calling on the Office of the U.S. Trade Representative to "throw the flag" on the bad actors, they picked China and won at the WTO. Twice.  Those important wins were just the start of building cases against leading rice exporters that have achieved their dominance by providing levels of support that violate WTO rules.

“The U.S. rice industry has clearly been hurt by WTO-inconsistent and trade-distorting policies in other rice-producing countries," said Ben Conner, partner at DTB Associates and USA Rice trade consultant.  "India, China, Thailand, Bangladesh, Brazil, and others all come to mind when we think about rice export subsidies, heavy input subsidies, price support schemes, and other practices that drive overproduction and exports, while limiting market opportunities for U.S. producers."

Conner added that, “U.S. agriculture depends on a predictable and binding international dispute settlement system.  The U.S. Trade Representative has identified some legitimate problems with the Appellate Body but convinced virtually no one that its goal is not a permanently crippled appeals system.  New cases will still be possible and important, but until the appeals problem is fixed there will be the risk that these cases cannot conclude, and trade violations will continue to fester.”

Due to the COVID-19 pandemic, rice-producing countries are scrambling to shore-up stocks and instituting new and questionable policies, making the time ripe for trade distorting WTO violations.