All the factual descriptions provided by the Appellate Body in this paragraph are accurate. Governments do attach significance to reasoning provided in previous panel and Appellate Body reports; adopted panel and Appellate Body reports are cited by parties in support of legal arguments in dispute settlement proceedings; and those reports are relied upon by panels and the Appellate Body in subsequent disputes. The use of the phrase “absent cogent reasons” by the Appellate Body was, however, new, and that phrase does not appear in the WTO Agreement. It is not treaty language; it is interpretive language used to clarify the treaty. And any language that is new will inevitably provoke questions as to its significance. In particular, new language will inspire questions as to whether it is truly different and therefore adds something new to the line of judicial interpretation, or whether it is only an alternative way of restating the same legal perspective.

In our view, the use of the phrase “absent cogent reasons” was essentially a restatement of the position previously expressed by the Appellate Body that, where the legal issues are the same, it is appropriate and to be expected that panels will rely on Appellate Body reasoning and rulings in previous disputes. Panels are free not to do so. There is, to be sure, no rule of stare decisis in the WTO. And yet legal issues are subject to appeal, which means that the panel’s legal judgments can be overturned by the Appellate Body. So, practically speaking, it is only to be expected that when panels choose to depart from previous Appellate Body reasoning and rulings they will try their best to explain their reasons in order to prevent a quick reversal on appeal.

The Appellate Body itself is free to depart in subsequent appeals from its reasoning and rulings in previous appeals. Again, there is no rule of stare decisis in the WTO. Like any other international tribunal, the Appellate Body should feel free to revisit its previous reasoning and rulings. But if it does, what then are the implications for the security and predictability of the multilateral trading system? What if a division of three Appellate Body members in one appeal says that “national treatment” means one thing, and another division of three Appellate Body members in a different appeal says that it means another? What if there is no longer any consistency in the legal rulings in WTO appeals? Reversals of past reasoning are allowed, but they should be undertaken with caution.

The U.S. Objections to the Cogent Reasons Standard

As part of the efforts by the United States to block appointments of new judges to the Appellate Body, it has cited what it sees as the Appellate Body’s establishment of a role for past interpretations as precedent. In December 2018, the United States made the following argument to the WTO’s Dispute Settlement Body: “The United States requested this agenda item to draw Members’ attention to an important systemic issue, the concern that the Appellate Body has sought to change the nature of WTO dispute settlement reports from ones that assist in resolving a dispute, and may be considered for persuasive value in the future, to ones that carry precedential weight, as if WTO Members had agreed in the DSU [Dispute Settlement Understanding] to a common law‐​like system of precedent.”8 The United States also said that “the Appellate Body’s statement concerning ‘cogent reasons’ in US—Stainless Steel (Mexico) is profoundly flawed.”9 The United States argued instead that the use of past Appellate Body interpretations should be based on their persuasiveness. On its proposed standard of persuasiveness, the United States explained, “This does not mean that the United States considers a prior panel or Appellate Body interpretation to be without any value. For example, to the extent that a panel finds prior Appellate Body or panel reasoning to be persuasive, a panel may refer to that reasoning in conducting its own objective assessment of the matter.”10

In our view, the concerns voiced by the United States about the Appellate Body’s cogent reasons standard and its alleged illegitimate adherence to precedent are vastly overstated. Although the cogent reasons language is new, it is not clear to us that an interpretative approach stating that a panel should have cogent reasons for departing from previous appellate reasoning and rulings differs from a reliance on persuasiveness. It could be argued that there are subtle differences in the two approaches, based on who has the burden to show that a previous ruling should not be followed.11 It seems likely, though, that the Appellate Body would have been explicit if it had intended to announce such a distinction. The Appellate Body has not been known for pronouncing major points of departure in its jurisprudence by implication.

Furthermore, it is not at all clear how the use of one interpretative approach instead of the other would lead, in practice, to different outcomes. Rather, it seems most likely that the use of the two different interpretative approaches will each reach the same result. In fact, a recent WTO panel applied the absent cogent reasons approach in a way that allowed it to depart from past Appellate Body reasoning.12 The difference between the absent cogent reasons approach and the standard of persuasiveness endorsed by the United States seems to us to be one mainly of semantics. This perceived legal distinction by the United States does not warrant the emphasis the United States has given it.

Of course, underlying this semantic debate is the true U.S. concern. The United States has long hoped that, in deciding new appeals, new members of the Appellate Body would overrule the judgments of previous members of the Appellate Body on an assortment of legal issues of political significance to the United States, particularly on antidumping, subsidies, and safeguards. The United States seeks more legal elbow room in employing these trade remedies than it is allowed by WTO rules as the Appellate Body has clarified them in previous appeals in WTO dispute settlement. Failing this, the United States wants WTO panels to disregard these previous Appellate Body rulings on trade remedies and rule differently in new disputes.

Implications of the U.S. Challenge for the World Trading System

Whatever their merit and practical impact, the United States continues to press hard for changes to the system regarding the role of previous Appellate Body reasoning. Without a resolution to this and several other issues, the Appellate Body may soon cease to function. That would be a significant loss for the world trading system. The security and predictability provided by an Appellate Body independent of political pressures and intimidation is crucial to the continued success of the WTO dispute settlement system.

In hopes of reaching some resolution, several other WTO members have tried to engage on this issue by offering reform proposals of their own. Australia and Japan have proposed a draft decision stating that “Members confirm that an interpretation by the Appellate Body of any WTO provision does not constitute a precedent for posterior interpretations,” and that “Members confirm that panels may adopt an interpretation of a WTO provision that is different from the one developed by the Appellate Body.”13 And Honduras put forward a number of underlying questions in order to stimulate thinking in this area.14

Unfortunately, the United States has not offered a response to this engagement, and a great deal of uncertainty remains about the U.S. criticism in this area. In the U.S. view, when exactly should the Appellate Body depart from the reasoning in past appeals? Where and how does the United States draw the line about following previous reasoning in its alternative approach that focuses on “persuasiveness”? And—importantly—what will be the result for the trading system if the United States gets what it wants? If the United States wants to convince other governments that a change from current practice is needed, it should set out its vision and explain what its alternative system looks like and how it compares to the existing system.

The “absent cogent reasons” language is one articulation of a standard that can be used for guidance here; the persuasiveness of past reports is another. In our view, the two standards are not all that different. The United States certainly continues to cite past cases when it litigates at the WTO, just as all other WTO members do. And, when past decisions do not support the United States’ current arguments, it tries to distinguish the current case from the past cases, just as all other WTO members do. Perhaps, then, this is just a question of finding language that sets a tone that all parties can accept. For example, adding a sentence to Article 3.2 along these lines could help: “Clarifications provided by panels and the Appellate Body can have persuasive value, but are of less authority than the interpretations adopted under Article IX:2 of the WTO Agreement.”15 The explicit reference to persuasive value could assuage the United States’ concerns by adopting its terminology without changing the rules or functioning of the Appellate Body in a way that could cause concern for other members.

An overarching consideration, however, is that, whatever resolution may be reached, security and predictability through judicial consistency and coherence must be maintained. A court system, including an appellate court, that offers interpretations to guide future cases is crucial in this regard. Nobody thinks the Appellate Body is set in stone, unchangeable for all time. All institutions must adapt and learn from experience. But the value of an appellate court for WTO disputes is indisputable, and all necessary efforts must be made to maintain the Appellate Body. The issue of the role of past cases has been vexing for some, but the differences in viewpoint, between cogent reasons and persuasiveness, are not actually all that large, and a compromise should be possible through a good‐​faith discussion of the issues by all the members of the WTO.