The WTO: Fair or Foul?

During the summer of 2020, the Appellate Body of the World Trade Organization (WTO) handed down its final ruling. Before former US President Donald Trump blocked appointments to the Appellate Body—which effectively disbanded it—the Appellate Body served as the final round of arbitrators that would give the ultimate verdict on international trade disputes between countries. Should a country take issue with the findings of the lower, panel-level decisions, that country could appeal the issues in question before the Appellate Body. However, the Trump administration felt that the WTO treats certain countries differently and that the Appellate Body had acted beyond its powers and ruled incorrectly too frequently, so now the Appellate Body is no more.

This decision begs a few questions. Did the Appellate Body favor certain countries to the detriment of others? And how could such a conclusion be reached? In short, I spent about seven months going through WTO resources and compiling a dataset from roughly 25 years of Appellate Body decisions. This is more complex than just figuring out which country “wins” each dispute. The Appellate Body ruled on individual issues—usually specific measures instituted by one country that another country alleges are unlawful—rather than on a case in its entirety. As such, the dataset includes every individual issue brought before the Appellate Body, which could be as many as 20 or 30 per dispute between countries.

Though the Appellate Body, and the entire WTO dispute resolution apparatus, was available to all WTO members, it is no surprise that a few major countries show up often. In terms of total number of issues appealed, the leaders were the European Union (464, acting as one political unit), the United States (417), China (162), Japan (95), and Canada (92). It is important to remember that at the appellate level, issues raised on appeal can come from either the original claimant or respondent, depending on the panel-level findings.

The following shows the country’s ratio of wins to losses (so 1 would mean that the country won just as much as they lost). A “win” refers to an issue raised that the Appellate Body overturned, and a “loss” refers to an issue that the Appellate Body upheld.

  • Canada: 0.558
  • China: 0.354
  • European Union: 0.496
  • Japan: 0.967
  • United States: 0.419

A couple of things stand out with these statistics. First, Japan wins decisions on issues it raises on appeal almost as many times as it loses. Considering how many issues Japan raises on appeal, that is incredible and considerably higher than the rest. Considering that panel-level decisions and Appellate Body decisions interpret the same laws, it should be expected that the Appellate Body upholds issues more than they overturn them.

Another thing to note is the relatively high overturn rate for Canada and the European Union. These statistics likely underscore one of the major concerns of the Trump administration, that the WTO favors a more European, interpretation-based approach to international law rather than a more American, contract-based approach, and would seemingly advantage countries or entities with a more European-inspired legal system.

Though the above statistics appear to show a wide disparity in how the Appellate Body ruled on appeals from particular countries, at this point we are only getting half of the story. For a more complete view of whether to WTO Appellate Body treats certain countries differently, we need to know how the Appellate Body ruled on issues raised against each country in addition to issues raised by each country. The following shows the ratio of wins to losses of other countries that raise issues on appeal against the listed country.

  • Canada: 0.594
  • China: 0.625
  • European Union: 0.373
  • Japan: 0.385
  • United States: 0.481

These figures show the frequency of other countries prevailing on an issue against the listed country per each issue upheld. Of note are the figures for the European Union and Japan—the lowest of the batch, indicating that other countries prevail relatively infrequently against the European Union and Japan. Interestingly, other countries have relative success prevailing on issues against Canada, just as Canada does against other countries. However, other countries also prevail relatively easily against the United States and China while the US and China have a relatively hard time prevailing against other countries. Further steps of this project will shed more light on whether the WTO treats certain countries differently.

This post analyzes the raw data of this dataset, without any tests of statistical significance or robustness checks. I intend to engage in further analysis of these numbers in the future and I will report back here when I have done so.