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Talking Trade blog

Trade without a referee


Published 10 December 2019

The game of football is basically the same all over the world. Kids can learn the game in Morocco, Brazil, Laos or Germany secure in the knowledge that they might all one day compete together in the World Cup.

They can sleep soundly at night because the rulebook is the same and because the referees that enforce the rules on the pitch do so in a broadly consistent manner.

Both parts are important.  If kids in various countries had the same rulebook, but enforcement varied by a lot in different places, it would not be possible to play the same game anymore.  If what counted as a penalty was widely different in Morocco from Germany, or the total number of players allowed on the field was different in Laos from Brazil, the game would no longer be the same even if the “rulebook” were officially identical.

We are about to find out what happens if the referees simply vanish from the pitch entirely.  How long will players keep following the same rules before local variations of the game appear?  Without a referee to maintain order, how will players behave in each match?  How long will the global game continue at all?

Before football fans panic, this problem is not actually found in football, but in the global trade arena.  The referees are a much more obscure group of just seven individuals known as the Appellate Body of the World Trade Organization (WTO). 

Today in Geneva, the referees were officially pulled off the trade pitch.

The appellate body has ceased to function because there are not enough judges on the bench to hand down rulings.  The vacant slots could not be filled because the United States has been blocking new appointments for more than a year.  This is not the place to argue over whether or not the US was justified in its complaints about the role of the appellate body, its critiques of the entire dispute settlement system, or its broader arguments about WTO reform.  (For this, see Chad Bown’s outstanding review here.)

Instead, this Talking Trade is more focused on what happens next.  Members of the WTO have been working all year on potential replacement mechanisms and temporary workarounds.  Thus far, these options have not been accepted either.  Given that the WTO operates on consensus, it can be challenging to find a solution that will satisfy 164 members. 

Trade, of course, is not going to suddenly stop, just because there is no appellate body to hear disputes, any more than football games would cease to happen if there were suddenly no referees in striped clothing on the pitch. 

In children’s games, parents might step in to try to officiate as a temporary measure.  In league games, players and teams might agree on some possible replacement options. 

But over time, these solutions are likely to be problematic.  If the referees cannot be brought back and made to enforce the same rulebook in the same way at every level, it should be clear that the rules will be unevenly enforced—at best.  The parents watching over their children in one setting will surely not follow the same procedures or perhaps do so with the same zealous nature as parents in a different location.

By the time games rise to the level of the World Cup—which is the football equivalent of the WTO’s dispute settlement system—it is quite easy to see the challenges ahead.  The problem is not so much that referees are always needed on every pitch in every single game.  But in the big games, with a lot at stake, it is necessary to have an excellent set of referees that are universally acknowledged to be using the same interpretation of the rules as everyone else. 

This is why it matters that the appellate body has ceased to function, even if these judges rule in a relative handful of cases (a total of 592 disputes have been filed since 1995 and only 166 cases moved to the appeal stage). 

When a dispute has reached the appellate body stage, it means that the two countries have already failed to solve the problem through bilateral discussions.  They have not resolved the issue through what is called the panel ruling (the first round of ruling on the case).  The case has reached the final appeal at the appellate body.

When the appellate body rules in a WTO dispute, the decision is final.  Unlike other international institutions, trade has legally binding ways to enforce decisions, including the imposition of penalties on the losing side, or the approval of payments to the victor to resolve the matter.  As of 10 December 2019, the appellate body can no longer make such determinations.

It would be impossible to find a World Cup referee who enjoyed global admiration for every call ever made in a game.  The same is certainly true for appellate body judges and the process as a whole.  The fact that no referee is globally loved does not mean that the game does not need referees.

Absent referees in football, teams would surely start rethinking strategy.  Players selected for skill in working with the ball in a rules-based system may be less relevant when a law-of-the-jungle prevails.  Bigger, more powerful players are likely to be necessary to win matches since they are increasingly likely to be fought in ways that are now considered “dirty” or at least more physical than acceptable under current conditions.   

The trade world is about to find out just how much love the trade referees ought to have been given.  Unfortunately, this already looks like another “own goal” for the WTO and global trade.

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Dr. Deborah Elms is Head of Trade Policy at the Hinrich Foundation in Singapore.  Prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre (ATC). She was also President of the Asia Business Trade Association (ABTA) and the Board Director of the Asian Trade Centre Foundation (ATCF).

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