By: Colin McGinness; Junior Staffer
In late December 2022, the World Trade Organization (WTO) decided on a seemingly routine case regarding the trade of frozen french fries between Colombia and the European Union (EU). Colombia accused several countries within the EU of ‘dumping’ frozen french fries and other frozen potato products into the Colombian market. Dumping refers to the practice of selling products below market rate to offload overproduced supply or to unfairly price competitors out. Dumping goods has long been in the purview of the WTO and its dispute resolution processes, as anti-dumping treaties formed a core part of the General Agreement on Tariffs and Trade (GATT). It is the settlement mechanism at hand, however, that provides useful insight into how the WTO has managed to function in its current, arguably dysfunctional state. It also demonstrates the desire from states for such a body to function supranationally, and states’ willingness to sacrifice a portion of their sovereignty in return for arbitration in dispute resolution.
The case shows how an appellate mechanism is required to ensure fair trading practices and ensures that trade dispute resolution remains multilateral. In 2018, the Colombian Ministry of Commerce, Commerce and Industry (MinCIT) presented information to the Colombian government that showed the EU was importing frozen potato products below market value. Colombia accused the EU of ‘dumping’ goods into its market, arguing that the low prices of these goods was pricing out domestic producers. It then began levying import controls and tariffs against these imported products to protect its domestic industry. In response, the EU brought the issue to the WTO for judgment.
The findings of the panel were largely in favor of the EU. The panel found that the information provided by MINCIT, gathered first by the Colombian Federation of Potato Producers (Fedepapa), did not consider local pricing and thus did not validate MINCITs decision to impose import barriers. Colombia filed notice that it would be utilizing the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) arbitration process to appeal the findings. In the end, the arbitrators mainly agreed with the findings of the initial panel. Colombia will now need to remove the import controls imposed on the frozen potato products or risk legally justified backlash from the EU. This is how the system, broadly speaking, was designed to facilitate peaceful and fair settlement of international trade disputes. These settlements are so valuable to the WTO’s signatories, that the WTO is one of the very few international organizations that extend legal authority against otherwise sovereign states. The MPIA now serves a vital role in this enforcement.
The final decision handed down from the WTO was the first to be decided by the MPIA. Several WTO signatory states crafted the MPIA in 2020 in response to the effective shutdown of the previous WTO appellate mechanism, the Appellate Body. The shutdown of the Appellate Body followed the Trump administration’s refusal to approve any new appointments until the WTO addressed a number of its demands. As WTO arbitrators and officials’ terms ended, the United States vetoed any proposed replacement, eventually leaving the Appellate Body theoretically existing, but practically without any ability to operate. Without an appeals process, the viability of WTO dispute resolution seemed murky at best. For a ruling to be enforced with legal sanctions, there needs to be a standing appellate body through which the party decided against can appeal. Now that there is no such standing body, any subsequent sanctions would lack legal merit.
In an attempt to salvage multilateral trade dispute resolution, the EU and twenty-three other parties have signed the MPIA, committing themselves to the rulings imposed during the arbitrated appeal. The MPIA, to function within the WTO at large, follows the protocols established in Article 25 of the Dispute Settlement Understanding (DSU) adopted by WTO members. MPIA members select ten arbitrators from the signatory states and then add them to a collective pool to draw from. When a state triggers the MPIA appellate process, three arbitrators from the pool begin working on the case. The arbitrators have 90 days to assess panel reports provided by the WTO, then decide whether there are issues incorrectly or only partially resolved. The decision is then legally binding on signatories, thus giving parties the legal right to apply sanctions against non-complying parties after the appeal.
The MPIA will continue to operate as a crucial stopgap in the foreseeable future until the actual Appellate Body reconvenes. It seems unlikely that the Biden administration will rush to reinstate it, though this is far from certain. WTO panel findings against the United States will surely serve as a strong incentive to keep the organization as toothless as possible. In the meantime, it remains to be seen if more WTO members will sign on to the MPIA. Regardless, the successful implementation of the MPIA process in the Colombia-EU case will serve as a powerful reminder as to why the organization created the original Appellate Body and why states need a functioning dispute resolution mechanism.