The UAE was one of four countries - along with Saudi Arabia, Bahrain and Egypt - that cut ties with Qatar, a major gas supplier and site of the biggest US military base in the Middle East, on June 5. They accused Qatar of financing terrorist groups in Syria and allying with Iran, their regional foe.
Qatar denied the allegations and opened WTO dispute proceedings against the UAE, Saudi Arabia and Bahrain. It pressed its case against the UAE alone, and last month it asked the WTO to set up an adjudication panel.
The UAE was allowed to block Qatar's request once, but could not block a second request for a panel, which came on Wednesday.
The UAE has already said that it plans to thwart the Qatari litigation by resorting to the WTO's national security exception - something never before tested as a defence in WTO litigation.
Qatar's representative at the WTO's dispute settlement body on Wednesday said the UAE had used "provable fabrications, and rhetoric not befitting of this House".
"UAE has asserted an absolute unilateral right to be absolved of all of its substantive and procedural WTO obligations vis-a-vis Qatar based purely on its bald assertion that its coercive attempts to isolate Qatar reflect a security concern," he said.
Qatar said it backed the right of countries to take bona fide measures to protect their security but that could not be a self-regulating defence. No country speaking at the meeting disputed the UAE's right to invoke national security but none spoke up in favour of Qatar's move to litigate either.
The United States said the dispute panel should simply limit its findings to say the security exception had been invoked, according to a trade official attending the meeting.
Yemen said the issue should be resolved within the Gulf Cooperation Council, while South Korea said the WTO was not the right forum for resolving a political dispute. China's representative said the national security exception was sensitive and should be used only exceptionally.
Canada's representative suggested that WTO Director General Roberto Azevedo could use his good offices to try to resolve the dispute.
(Reporting by Tom Miles, editing by Larry King, William Maclean)