UPDATE 1-EU, China and others agree appeals system to settle WTO disputes

Seventeen World Trade Organization members including the European Union and China agreed on Friday to create a temporary mechanism to settle trade disputes after the United States paralyzed the WTO's appeals body last month.

The European Commission said the WTO members involved had agreed this contingency step would preserve the WTO's two-step dispute system until its own Appellate Body became operational again. Washington froze the Appellate Body, which acts as a supreme court for international trade, by blocking appointments for over two years. Two of the body's three members came to the end of their terms in December, leaving it unable to issue rulings.

The EU had previously teamed up with Norway and Canada to form a separate appeals body that could resolve disputes. The other countries that signed up on Friday are Australia, Brazil, Chile, China, Colombia, Costa Rica, Guatemala, South Korea, Mexico, New Zealand, Panama, Singapore, Switzerland, and Uruguay.

While the United States is outside the group, U.S. President Donald Trump, speaking in Davos on Wednesday, vowed "very dramatic" action for the Geneva-based WTO. WTO Director-General Roberto Azevedo is due to visit Washington soon. An EU source said the bloc welcomed the fact that the Trump administration was engaging with the WTO, which many of its members believe needs to reform to reflect changes in the global economy, including the rise of China.