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(Bloomberg) -- The Trump administration’s decision to block new appointments to the World Trade Organization’s appellate body is compromising the ability of the system to resolve disputes, according to WTO Director-General Roberto Azevedo.

Speaking in Vietnam on the sidelines of Asia-Pacific Economic Cooperation forum meetings, Azevedo called for a quick resolution to the dispute, saying it was already impacting the functioning of the global trade watchdog.

“The U.S. has said consistently that they think the appellate body functioning could be improved,” he said in an interview. “They think the appellate body sometimes overreaches, particularly in a moment when the WTO was not delivering negotiated outcomes that there was a temptation of the appellate body to legislate. Other members disagree.”

While he described it as a conversation “members need to have,” Azevedo said the U.S. under Donald Trump’s presidency had pursued a corrective course more forcefully than prior administrations. “I think that pursuit at this point in time, the way that it’s being done, is compromising the functioning of the system,” he said. “So it’s important we try to find a solution, the sooner the better because the impact is already being felt.”

As a candidate, Trump called the WTO a “disaster” and threatened to withdraw from it. While he has not followed through as president, in April he ordered a review of all U.S. trade deals, including its participation in the WTO, to see if they would harm national interests and should be revised or terminated. He is renegotiating the North American Free Trade Agreement and pulled the U.S. out of a 12-nation trade pact known as the Trans-Pacific Partnership.

Having a Conversation

The Trump administration has blocked any new appointments to the WTO appellate body, saying WTO members must first address systemic problems with the dispute settlement mechanism. In December, the seven-member appellate body will be reduced to four, and members fear if the U.S. continues its obstruction, the appellate body could become completely paralyzed at the end of 2019.

Azevedo said from his recent meeting in Washington with U.S. Trade Representative Robert Lighthizer he got a clear message that the U.S. views the multilateral system as necessary.

“What they have been saying is it has not been working the way the United States would expect it to, so therefore improvements might be necessary and they want to have a conversation with other members about how to improve the system,” he said. “I think members are open to have that conversation.”

He downplayed the prospects for major breakthroughs on trade at the next WTO ministerial meeting in December in Buenos Aires.

‘Serious Challenges’

“I think we have serious challenges,” he said. “The global economy is still recovering from 2018 so we are not in an upbeat kind of mood economically. Governments are negotiating very carefully. We have political gaps, differences of views, which even include the way that the system should operate and the way that negotiations should go.”

Still, members realize the WTO has to continue to deliver and the message that they want out of Buenos Aires is that commitment remains, Azevedo said.

“We had two very successful ministerial conferences, in Bali and Nairobi with important outcomes being delivered to the world, but you cannot expect that every single ministerial conference you’re going to deliver such big results,” he said. “We cannot be held hostage to our own success.”

--With assistance from Haslinda Amin

To contact the reporter on this story: Rosalind Mathieson in Danang at rmathieson3@bloomberg.net.

To contact the editors responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net, Darren Boey, Karthikeyan Sundaram

©2017 Bloomberg L.P.

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