By Emma Farge

GENEVA It will be "hard" to reach a deal on fully restoring the World Trade Organization's (WTO) arbitration powers by a major meeting set for February 2024 and the system can persist without it, the U.S. ambassador to the WTO told Reuters on Thursday.

Countries are reviewing a draft proposal deemed the most serious effort to date to reform the hobbled system which has been only partially functional since December 2019 due to U.S. blockages of judges to its top court the Appellate Body.

However, the proposal leaves blank a section on whether the court - which then U.S. President Donald Trump accused of over-reach when he introduced the block - will be revived.

Maria Pagan, the Deputy United States Trade Representative, said the talks had made "amazing" progress but thought it would be difficult to land a deal by the WTO's next ministerial meeting in Abu Dhabi in February 2024, as negotiators currently hope.

"I think that would be hard to achieve," she said, suggesting that negotiations continue throughout 2024. She added that the proposal had yet to address its "key concerns", like WTO judicial overreach.

Many other WTO members say later next year is too late, fearing that a U.S. presidential election in November 2024 would mean more scrutiny of the 28-year-old trade body that could tie negotiators' hands.

While countries can currently still file trade complaints to a lower body, they cannot appeal findings they disagree with and dozens of multibillion-dollar disputes are now in legal limbo.

Asked whether the U.S. could accept any form of revamped appeals bench, she said: "Because we don't believe that it's absolutely necessary I don't have an answer to that."

WTO delegates told Reuters that Washington has submitted proposals, including a so-called "sunset clause" that would automatically mean any future deal would one day expire. Asked to react, Pagan said: "This is fundamental for us. We don't want to just make changes and then watch the system again go sideways, and not be able to stop it."

Countries have privately criticised this idea. "Why would we want to institutionalise a mechanism that gets us back to where we were before?," one delegate said on condition of anonymity since he cannot voice his country's position.

The United States has also proposed that "erroneous interpretations" previously made by the Appellate Body should be clarified, WTO delegates told Reuters. "We do want to engage with members in correcting some of those interpretations," Pagan said.

(Reporting by Emma Farge; Editing by Mark Potter)