On Sunday Mr Birmingham said Australia would work with “all willing partners in support of a rules-based trading system where disputes can be fairly resolved”.
“We won’t always agree with any other nation on every aspect of policy or international cooperation but we work hard in Australia’s interest to align approaches with willing partners wherever possible,” he said.
The MPIA will have a pool of 10 judges that will be chosen by the 20 WTO members so far involved. These arbitrators will be separate from the WTO, with their own administrative support structure, but will base their decisions on WTO law.
Mr Trump has been adept at disrupting organisations such as the WTO and the World Health Organisation, which he regards as hostile to US interests. But the new EU-driven trade body suggests that he is unable to capitalise on the vacuums he creates, allowing others to fill them.
The Appellate Body move “does take away some of the US’ power,” said Dmitry Grozoubinski, founder of Geneva-based consultancy ExplainTrade. “It says ‘you can’t break the system for us. You can’t stop us from using this system for ourselves’.”
The list of signatories includes US neighbours Canada and Mexico, Trumpian Brazil, plus New Zealand, Norway, Switzerland, Singapore and a clutch of Latin American countries.
Conspicuously absent are South Korea and Japan, which are both are in the midst of contentious negotiations with Mr Trump over his demands that they increase their payments for hosting the US military in their countries by several hundred per cent. But there are hopes Seoul and Tokyo will sign on in the next 30 days. Countries that join after that won’t have the ability to appoint their own arbitrators to the pool.
In the meantime, Beijing has leapt into the fray, eager to demonstrate its willingness to support multilateral efforts.
“China wants to portray itself as an upstanding citizen of the global community and it’s being criticised on a lot of fronts. Here’s an opportunity for it to say ‘we’re upstanding’,” said Simon Lester at the Cato Institute’s Centre for Trade Policy Studies in Washington.
It’s pretty deep-seated in the US, this suspicion around dispute settlement. It’s not necessarily Republican versus Democrat.
— A senior European trade official
At the same time, the US is now on the back foot. It had objected that the Appellate Body had been overreaching its remit, and was creating new international trade law rather than looking at each case on its merits. The MPIA could address that, but it might still be politically difficult for the US to back down and join it.
That said, Mr Lester argued that the creation of an alternative that Washington has not joined was probably exactly what the most hawkish wing of the Trump administration wanted, because in their view the US cannot lose either way.
“It doesn’t bother them if they’ve undermined it,” Mr Lester said. “They’d rather use US economic leverage to open foreign markets or keep US trade restrictions.”
Under the MPIA arrangement the members of the new body agree that in any dispute to which they are parties, if they want to appeal against the initial “panel” ruling, they will follow a process that almost mirrors that of the Appellate Body.
While it does not have Washington’s blessing, there’s still a chance the new body may end up addressing US concerns if it can operate in a way that avoids judicial activism.
“If it turns out MPIA outcomes are more in line with US expectations of the Appellate Body, then the US could turn around and say ‘if the Appellate Body was more like this, we could live with it’,” Mr Grozoubinski said.
“But politically I can’t imagine the US joining an EU-created and EU-led replacement for an Appellate Body that the US broke.”
The MPIA is likely to be a slow-moving beast, so it may not have heard many cases by the time Mr Trump comes up for re-election in November.
If he wins, he may double down his attacks on the WTO; but even if he loses, it will not mean an automatic new mandate for the Appellate Body.
“It’s pretty deep-seated in the US, this suspicion around dispute settlement,” said one senior European trade official. “It’s not necessarily Republican versus Democrat.”
All eyes are now on a couple of big WTO cases involving the US, which are still at the first stage of dispute resolution. One is against Canada on lumber, the other against Vietnam on fish.
The concern is that if the decisions go against the US, the White House may look to escalate its anti-WTO campaign from the appeals process to the dispute settlement system as a whole.
“The US has in no way exhausted its toolbox for disrupting the WTO,” Mr Grozoubinski warned.
“But how long will other WTO members put up with being in a system where the rules are binding on everyone except the world’s largest economy?”
with Matthew Cranston