Japan Agrees to Join Alternative WTO Trade-Dispute Resolution System

A sign of the World Trade Organization (WTO) is seen on its headquarters in Geneva on Sept. 21, 2018. Fabrice Coffrini/AFP via Getty Images

Japan has agreed to join an alternative dispute resolution system to the World Trade Organization (WTO) after a prolonged inactivity of the WTO Appellate Body left the country’s dispute cases in limbo.

The cabinet approved the decision to participate in the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) on Friday, according to the Japanese Ministry of Economy, Trade, and Industry.

This will make Japan the 26th MPIA member, including China, Australia, Brazil, Canada, the European Union, Ukraine, Pakistan, and Singapore.

It said the Appellate Body has “ceased functioning” for over three years, and the yearly number of WTO dispute settlement cases had dropped to “less than half of what it was before the current situation began.”

“In addition, two of the dispute cases that Japan has filed with the WTO have already been ‘appealed into the void,’ and those cases have been virtually left in limbo,” the ministry said in a statement.

“As an interim measure until the dispute settlement function is restored, the Japanese government decided to join the MPIA,” it added.

In 2019, the Trump administration decided against appointing new members to the Appellate Body over a host of issues with the WTO, including judicial overreach by its members, consistent rulings against U.S. tariffs designed to protect American businesses, and slow decision-making.

In turn, the Appellate Body cannot hear appeals because it lacks the numbers to constitute a body.

The MPIA was set up after the WTO Appellate Body was frozen. However, both parties must be willing to submit to an MPIA ruling, which could be another means to effectively “kill” the case.

The European Commission welcomed Japan’s decision to join the MPIA, citing global trade regulations as the “best guardrail against global economic fragmentation.”

“It is also a strong sign of support for the restoration of a reformed and fully functioning dispute settlement system, which WTO members have committed to putting in place by 2024,” the commission said.

“The EU reiterates that MPIA membership remains open to all members, to offer a practical tool for appeal arbitration, pending the restoration of a reformed and fully functioning WTO dispute settlement system,” it added.

South Korea’s WTO Dispute Against Japan

South Korea said on Monday that it will halt a WTO dispute process sparked by a complaint against Japan as the two countries discuss Japan’s export curbs on high-tech materials to South Korea.

“The suspension of the WTO dispute resolution process is not really a withdrawal ... but a pause,” Kamchan Kang, director-general at Korea’s trade ministry, told reporters.

“If the issue does not progress well, the process may resume again,” Kang added.

In July 2019, Japan imposed export curbs on materials used in smartphone displays and chips amid a decades-old row with Seoul about South Koreans who said they were forced to work under Japan’s 1910–1945 occupation of Korea.

South Korean tech firms such as Samsung Electronics Co. Ltd., SK Hynix Inc., and LG Display Co. Ltd. were among companies widely expected to be affected by Tokyo’s curbs on fluorinated polyimides, photoresists, and hydrogen fluoride, in which Japanese production dominated.

South Korea recently announced that its companies would compensate people forced to work under Japan’s 1910–1945 occupation, as the country seeks to end a dispute that has undercut U.S.-led efforts to present a unified front against China and North Korea.

Daniel Y. Teng and Reuters contributed to this report.