Service on WTO and Trade Issues (Nov17/16)
proposal criticised at WTO Goods Council
Geneva, 14 Nov (Kanaga Raja) - The United States proposal, setting out stringent procedures on transparency and notification requirements under the WTO Agreements including penalties, was criticised at a meeting of the WTO Goods Council on 10 November by over a dozen WTO Members, both developed and developing.
According to trade officials, these members voiced concern over the "punitive" nature of the proposal and how it could impact on members who are already struggling to meet notification requirements.
The US formally introduced its proposal (JOB/CT/10) at the Goods Council meeting, which includes a draft Ministerial Decision that sets out "proposed actions intended to improve compliance with, and the quality and effectiveness of, notification requirements in general, as well as under specific agreements."
The US submitted its proposal on procedures to enhance transparency and strengthen notification requirements under WTO Agreements to both the Goods Council and the General Council.
The US has proposed that Members consider adopting this decision at MC11 (eleventh ministerial conference in Buenos Aires in December), and if timing does not permit agreement to be reached for MC11, for Members to consider continuing work on this proposal as a part of broader institutional reform post-MC11.
The US proposal on notification requirements covers the following WTO Agreements:
1. Agreement on Agriculture.
2. Agreement on Implementation of Article VI of the GATT 1994 (Anti-Dumping).
3. Agreement on Subsidies and Countervailing Measures.
4. Agreement on Safeguards.
5. Understanding on the Interpretation of Article XVII of the GATT 1994 (State Trading).
6. Agreement on Implementation of Article VII of the GATT 1994 (Customs Valuation).
7. Agreement on Import Licensing Procedures.
8. Agreement on Rules of Origin.
9. Agreement on Pre-shipment Inspection.
10. Decision on Notification Procedures for Quantitative Restrictions (G/L/59/Rev.1).
11. Agreement on Trade Related Investment Measures.
12. Agreement on the Application of Sanitary and Phytosanitary Measures.
13. Agreement on Technical Barriers to Trade.
Among the key elements cited by the US in its proposal are:
(1) Employing "administrative measures" already implemented by other parts of the WTO, and promoting the use of counter notifications of Member's policies that should have been notified, as provided for in the Agreement on Agriculture, are some mechanisms that could enhance the effectiveness of WTO transparency requirements.
(2) Regarding fisheries subsidies, the US has proposed that Ministers take a decision at MC11 to re-commit to complying with their existing notification obligations under the Agreement on Subsidies and Countervailing Measures, and agree on additional new categories of information to be reported.
(3) On agriculture, the US has proposed that Ministers take a decision at MC11 to re-commit to complying with their existing notification obligations under the Agreement on Agriculture and to commit to further strengthening the Committee on Agriculture as a forum for Members to discuss Members' implementation of agricultural policies.
(For full details of the US proposal, see SUNS #8566 dated 2 November 2017.)
In introducing its proposal at the Good Council meeting on 10 November, the US said that: "Compliance with notification requirements of the various WTO Agreements is inadequate."
"For example, the most recent report by the WTO Secretariat indicates that less than half of the WTO members have provided their 2015 subsidy notification," it added.
"This lack of transparency is problematic for traders and it undermines the proper functioning and operation of the WTO Agreements. From a systemic perspective, it is also very difficult to develop, evaluate, and assess negotiating proposals to improve the operation of various WTO agreements without the information that should have been provided under existing WTO notification obligations," the US said.
According to trade officials, members that took the floor agreed that enhancing transparency and improving members' compliance with notification requirements were important objectives.
Some expressed reservations, pending their studying the proposal further. Others were plainly critical of the punitive approach, and the need to distinguish between wilful default and non-compliance because of inherent capacity constraints.
Canada, the European Union, Switzerland, New Zealand, Singapore, Japan, Russia, Australia, and Korea said that they needed to study the proposal further.
However, a number of members expressed concern over the limited time left before MC11 and the burden on members who are already struggling to meet the notification requirements.
According to trade officials, some thirteen members raised concerns over the "punitive" nature of the proposal and how it could impact members who are genuinely struggling to meet the notification requirements.
These include New Zealand, Norway, Brazil, Hong Kong-China, China, India, South Africa, Egypt, Ecuador, Bolivia, Cuba, Chile, and Ghana.
New Zealand said that there is need to make sure that the incentives are right and we don't end up reinforcing disengagement, while Norway believed that positive incentives may be more effective than punitive actions to achieve the improvements members are seeking.
Brazil said that the approach could have harmful and unintended consequences to the functioning of the WTO with no assured benefits.
According to trade officials, India said we must recognize the difference between wilful default (on obligations) and a default due to inherent constraints (to meeting the notification requirements.)
In spite of their willingness to notify on time, developing countries may not be able to do so, it added.
South Africa said compliance with notification requirements can't be enhanced by requiring punitive measures.
This course of action would negatively impact the very members who require assistance, it underlined.
Bolivia noted that seventy to eighty members would be deemed to be in a position of delinquency under this proposal because they haven't notified their agricultural support.
The issue of incentives and punishment doesn't work very well in the international system, it said.
Turkey, Bolivia, Korea, Cameroon, Venezuela, Cuba, Chile and Ghana pointed out that there was not enough time to build consensus on the proposal ahead of MC11 in December.
According to trade officials, several members noted that as transparency issues on fisheries subsidies were being tackled as part of wider negotiations at the Negotiating Group on Rules, it would be best to contain discussions on this matter in that forum.
The US thanked members for their responses and said that it gave them useful material for their continued reflection.
There was also a discussion over the US Section 232 investigation into steel imports, put on the agenda at the request of Russia.
According to trade officials, Russia noted that the January deadline for the US to conclude its "Section 232" investigations on the effect of steel and aluminium imports on US national security was fast approaching.
(A similar discussion took place at the Good Council meeting on 30 June.)
"Despite the fact that the situation on the US market may soon dramatically change, there is still a lack of transparency and predictability because the key parameters of the investigations remain obscure," Russia said.
Russia repeated its request for more information on the matter. It again called on the US to "refrain from the introduction of any trade restrictive measures following the investigation."
Russia said it would be better to act on market imbalances through the G20 and the Global Forum on Steel Excess Capacity.
According to trade officials, a number of other members also voiced their concerns over this issue.
The EU said that it would like to know the current status of the investigations. It expressed concern that it could lead to trade restrictions and the EU would be most affected if Canada and Mexico were exempted.
The WTO exception for national security measures is circumscribed (by specific conditions which) appear to be absent in this case. This poses an unacceptable systemic risk, said the EU.
According to Australia, international trade rules should be upheld and the result of the investigation must be consistent with trade rules.
Otherwise, it said, unjustified measures may exacerbate the situation by sparking retaliatory measures.
China urged the US to take a prudent attitude to assess the impact in a cautious and just manner. It called on the US to avoiding triggering a surge of trade barriers and refrain from negatively affecting the flow of international trade, particularly of steel and aluminium.
Brazil said it remains seriously concerned about the possibility that the US will adopt restrictive measures on the import of steel and aluminium based on security concerns.
An elastic interpretation of the WTO's national security exception could lead to results not in the interest of the membership, it cautioned.
Korea believed that if a member country wishes to apply trade remedy measures, it should be based on WTO rules. It expressed hope that the US will make a final decision in a transparent manner.
Chinese Taipei also urged the US to follow WTO rules, while Japan said that it is interested and will follow the matter closely.
In response, the US said that its Commerce Department is "carefully considering" the views of all stakeholders as it prepares its report for the US President.
The US explained that the purpose of the investigation is to determine the effect of steel and aluminium imports on US national security and whether the global excess capacity in those industries is threatening the ability of the US to meet its national security needs.
According to trade officials, renewed calls were made by several members at the meeting for a decision to be taken on e-commerce at MC11.
China introduced its proposal of 19 October 2017 on e-commerce elements for MC11 (JOB/CTG/9).
According to the proposal, China believes that a pragmatic way of the preparations leading up to MC11 is to identify the elements acceptable to Members.
"These elements may be reflected in the MC11 Work Programme on Electronic Commerce as key building blocks in our work beyond for a high-priority discussion in the Dedicated Session of the General Council or a body to be agreed upon by all Members. We believe that this will help the WTO maintain its relevance and respond to the calls from the business communities," it said.
China therefore called upon Members to take a constructive attitude and strive to build consensus related to e-commerce at MC11 and beyond.
At the Goods Council meeting on 10 November, China expressed hope that "elements embodying members' shared interests may be reflected in MC11 as building blocks for work."
According to trade officials, Canada said "it's time to take the next step at MC11" and that members should agree to establish a working party to handle discussion for, and negotiations, on e-commerce.
The EU - co-sponsor of a proposal (JOB/CTG/4) with Canada, Chile, Colombia, Cote d'Ivoire, Korea, Mexico, Montenegro, Paraguay, Singapore and Turkey - also called for establishing such a working party "to address cross-cutting issues."
According to trade officials, Australia, Switzerland and Singapore expressed support for an MC11 outcome on e-commerce, while Cuba, Bangladesh and Ecuador said that any action taken on e-commerce should be limited to the agreed upon work program from 1998 for WTO bodies to "examine and report" on issues arising from the interaction of the WTO legal framework, e-commerce, and development needs.