WTO Members Agree on a 2020 Budget, Averting Jan. 1 Shutdown

(Bloomberg) --

World Trade Organization members agreed to a preliminary 2020 budget, bowing to U.S. demands to choke off funding to the alliance's appellate body.

The WTO's budget committee on Thursday gave initial approval to a 197.2 million-Swiss franc ($200 million) funding package for next year and agreed to delay their consideration of the 2021 budget, according to a spokesman for the Geneva-based institution.

Last month, the Trump administration said it was considering a veto of the budget over its opposition to the WTO's appellate body, the panel that has the final say in trade disputes that affect billions of dollars in international commerce. The new financing plan is expected to receive final approval at the WTO's general council meeting Dec. 9-11.

“We live to fight another day,” Dagfinn Sorli, chairman of the WTO's committee on budget finance and administration, said in an interview.

Funding Cut

The deal limits annual spending for appellate body members to no more than 100,000 francs, an 87% reduction from the full allotment, and caps spending by the body's operating fund to 100,000 francs, a 95% reduction.

The European Union, China, India and Turkey initially said they wouldn't support the U.S. compromise, other people said. The EU, India and Turkey all have pending disputes.

The U.S., which said the appellate body has overstepped its mandate and threatens American sovereignty, has criticized the WTO's compensation structure. The U.S. delegation said the WTO creates an incentive for appellate body members, who make more than 300,000 francs a year, to drag out cases to boost pay.

Read more: WTO Faces Cliff-Edge Crisis Next Week as Mediator Eyes Departure

The budget dispute isn't the only existential threat to the appeals panel.

The U.S. has also refused to consider any nominees to replace vacancies on the seven-member appellate body roster, which has been whittled down to three, the minimum required to sign off on rulings. The terms for two of those panelists end at midnight on Dec. 10, after which no new appeals can be reviewed.

While WTO members can still bring disputes to the trade body and receive an initial ruling, any party to the dispute could appeal that ruling into legal limbo -- thereby providing the losing party with a veto.

To contact the reporter on this story: Bryce Baschuk in Geneva at bbaschuk2@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Richard Bravo, Zoe Schneeweiss

©2019 Bloomberg L.P.