TWN Info Service on WTO and Trade Issues (Apr19/14)
18 April 2019
Third World Network

South reacts sharply against US notification requirement proposals

Published in SUNS #8888 dated 15 April 2019

Geneva, 12 Apr (D. Ravi Kanth) – A large majority of developing countries on Thursday sharply rejected the onerous and burdensome notification requirements proposed by the United States and several other countries at the World Trade Organization (WTO) that call for naming and shaming “administrative measures”, trade envoys told the SUNS.

[The proposals would appear to be aimed at several membership rights of the “erring” member, including budgetary extra levies! SUNS]

The sponsors, according to many developing countries, have selectively chosen some elements in various WTO Agreements while ignoring notification requirements concerning trade in services and trade-related intellectual property provisions among others.

South Africa on behalf of the African Group, India, China, the ACP (Africa, Caribbean, and Pacific) Group, and the least-developed countries (LDCs) firmly opposed a draft proposal circulated by the United States, the European Union, Japan and other industrialized countries and a few developing countries, calling for stringent notification requirements, including naming and shaming provisions for an erring member, on a horizontal basis.

At a meeting of the WTO’s Council for Trade in Goods (CTG) on Thursday, the sponsors – the United States, the European Union, Japan, Canada, Australia, New Zealand, Argentina, Costa Rica, and Chinese Taipei – made a strong pitch for strengthening and enhancing notification requirements.

The sponsors justified their proposal on grounds of “chronic low level of compliance with existing notification requirements under many WTO agreements.”

The four-page draft – JOB/GC/204/REV.1-JOB/CTG/14/REV.1 – originated in the trilateral US-EU-Japan initiative launched at the WTO’s eleventh ministerial conference (MC11) in Buenos Aires in December 2017. It was not agreed to at MC11.

The draft calls for a Working Group on notification obligations and procedures for developing recommendations in several WTO agreements. The agreements include:

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 (St ate 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 Preshipment 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.

14. Agreement on Trade Facilitation, Section I.

The draft proposal has suggested that members can file “a counter-notification of another Member concerning notification obligations under the Agreements and Understandings” in the 14 agreements listed above.

Already, the US had filed several counter-notifications against India over New Delhi’s subsidy payment programs for rice, wheat and cotton.

India had rejected these counter-notifications, saying that they were based on flawed assumptions by the American trade lobbies.

The sponsors proposed “administrative measures” in case a member “fails to provide a required notification by the deadline provided under an Agreement.”

The administrative measures, to come into force after a member fails to provide notifications within one year of the deadline, include:

(i) representatives of the Member cannot be nominated to preside over WTO bodies;

(ii) questions posed by the Member to another Member during a Trade Policy Review need not be answered;

(iii) the Member shall be assessed a charge by the Secretariat at the rate of [x][5] percent of its normal assessed contribution to the WTO budget, to be effect ive in the following biennial budget cycle, that may be used for the purpose of providing Members with technical assistance to fulfil notification obligations, including through the ITC;

(iv) the Secretariat shall report annually to the Council for Trade in Goods on the status of the Member’s notifications; and

(v) the Member shall be subject to specific reporting at the General Council meetings.

The burden of administrative measures after one year will also include naming and shaming provisions such as “the Member shall be designated as a Member with notification delay; (ii) representatives of the Member will be called upon in WTO formal meetings after all other Members have taken the floor, and before any observers; and (iii) when the Member with notification delay takes the floor in the General Council it will be identified as such.”

The proposal is based on the “carrot and stick” approach, the EU trade envoy Ambassador Mark Vanheukelen had told several trade envoys at a closed-door meeting at the EU mission early this month, according to a trade envoy who asked not to be identified.

The commencement of administrative measures “shall be deferred [for] a year, respectively, for a developing country Member that has submitted information on the assistance and support for capacity building that the Member requires” on the basis of a request made to the WTO Secretariat.

Further, the proposal has maintained that “when the administrative measures will be applied to any Member, the Director-General will notify the Ministers of those Members responsible for the WTO of the administrative measures being applied with respect to those Members.”

The administrative measure, according to the proposal, shall cease to apply once a member complies with the required notification requirements.

During the CTG meeting, the US, the EU and other sponsors spoke on why the proposed notification requirements are essential for improving the transparency and notification requirements to ensure smooth functioning of the trade body.

On behalf of the African Group, South Africa denounced the proposal, saying that “if this proposal is any indication of what some Members want the WTO to look like in the future, then the proponents need to demonstrate” the underlying rationale/purposes.

The African Group sought to know from the sponsors “what is the clearly defined problem they are seeking to address” and “what evidence and criteria” they adopted for covering only those 14 agreements.

The sponsors were asked to substantiate through a case-by-case approach why they “think” each and every developing country should fall under arbitrary and strengthened oversight.

More pertinently, the African Group pinned the sponsors to explain in areas “where developed countries have difficulties, why are there more flexibilities so that developed countries enjoy “reverse S&DT”.”

“Without this context and evidence,” said the African Group, “we do not see this proposal advancing any further.”

Without saying that the proposal by the sponsors harkens back to the colonial-era regulations, the African Group said “the extremity of the proposal which seeks to regularize counter-notifications in paragraph 5 and introduces administrative measures in paragraph 11 – is reminiscent of an era best left in the past.”

Sadly, “this proposal [by the sponsors] sits uncomfortably in a multilateral context, and we cannot support a submission that negatively impacts all Members in the African Group,” South Africa said.

The proposed obligations “far exceed existing commitments and is in fact extreme in terms of the severity of punishment by relegating non-complying Members to a humiliating exercise of naming and shaming,” the African Group maintained.

“This is not the WTO we signed up to and it is not the WTO we want in the future,” it argued.

The developing countries face enormous difficulties in compiling and collecting information, the African Group reminded members.

“The lack of proper institutional coordination is the primary reason why our Members continue to struggle with non-compliance,” the African Group argued.

Besides, there is an acute lack of “institutional memory in Ministries”, the African Group said, pointing out that “no matter how many workshops the WTO may provide, if there is not enough institutional memory or succession plans, or sufficient qualified human resources trained to study and analyse data according to the requirements of different notifications, a punitive measures approach will not help to address these challenges.”

Such punitive challenges “will result in further marginalization of developing and least developed countries,” the African Group pointed out.

Instead of punitive measures, a “more cooperative approach is required, where Members are incentivized for complying, rather than punished,” the African Group said.

Such a cooperative approach “will go a long way in building trust that this organisation so desperately needs,” the African Group reminded the sponsors.

In short, “any potential reform in this area should begin with a comprehensive review of notification requirements in all WTO agreements by the respective committees to ensure they are not unnecessarily complex, burdensome or vague,” it maintained.

The African Group firmly made clear that it “is not in a position to support any transparency and notification measures that go beyond our existing obligations.”

The African Group, the statement of the group said, is willing to engage ” within the parameters set by the Marrakesh Agreement, including the importance of respecting mandates, the principle of consensus and respecting the limited scope of the CTG to consider this substantive negotiating proposal.”

Lastly, the sponsors must realize that their proposal cannot get any traction “so long as there is no clarity on the more fundamental and more urgent question on the future of the Appellate Body and Dispute Settlement Mechanism, which we view as an indispensable part of a proper functioning WTO system,” the African Group insisted.

In another sharp intervention at the CTG meeting, India said it “strongly b elieves in transparency, as it is one of the pillars of the rule-based multilateral trading system and provides Members the information and clarity on the laws and regulations, facts and figures as well as the measures impacting the international trade are being taken by other Members.”

But the sponsors fail to take into “account the actual difficulties being f aced by the Members in compliance with the notification requirements.”

The constraints faced by developing countries include “human resources, institutional arrangements, infrastructure requirements and financial requirements,” India said.

Further, the notification requirements involve “interpretational issues” that cannot be merely resolved through technical assistance, India said.

Rejecting the “proposed Administrative Measures,” India raised two concerns. The sponsors sought “to address the issue of notification compliance by bringing two different aspects — one for the compliance with the existing notification obligations for goods and the administrative actions for non-compliance thereof and second, one related to the need for expansion of the existing notification obligation.”

India asked the sponsors to explain whether the existing notification obligations under the WTO agreements will also apply to “agreements such as GATS & TRIPS.”

The proposal, according to India, seeks “to cover the notification requirements for the past period, since the inception of the WTO.”

“Given the capacity constraints developing country Members are facing and the fact that the past notifications would be of little relevance to trade today, any process of improving notification compliance should be restricted to present and future notifications,” India said.

India also wanted to know from the sponsors why their proposal focused on the notification requirements under the “SPS and TBT Agreements, leaving out a number of other Agreements where such ad hoc notifications exist.”

Finally, India said it will oppose the “Administrative Measures” which go beyond what has been agreed under the WTO Commitments.

“Hence the question of accepting such onerous conditions does not arise,” India flatly said.

Punitive measures and administrative actions, said India, are not the way to address the difficulties faced by a large majority of developing countries which face enormous capacity constraints for complying with timely notifications.

“In a nutshell, my delegation finds it difficult to agree to such a proposal which provides for penalties and administrative actions in case of default, rather than making an effort to understand the difficulties, a large number of developing Members are facing, given the breadth and length of notification requirements under various agreements under the WTO and the capacity constraints of the Members,” India said.

In its intervention, China said that “no member has fully fulfilled all the required notification obligations. Particularly, on trade in services, developed members have set very bad examples, using the GATS vague notification requirement as an excuse.”

Commenting on the proposed “administrative measure[s]” for erring members, China said that “it is not our preference and we don’t believe punishment could be an effective approach in WTO.”

“Even if such measures should be adopted, they should be limited to reminding, warning and minor reprimand,” China argued.

“We do not support the measures that would deprive members of their legitimate rights as a WTO member, and we disagree with the financial punitive approach, which we assume can incur negative incentives and may lead some members to give up in despair, like someone may smash a porcelain pot to pieces just because it’s cracked,” China maintained.

It is clear that unless developing countries stand firmly against the transparency and notification requirements, which is the first salvo at re-designing the WTO as per the diktats of the US, the multilateral trade body could soon turn out to be the nodal watchdog of hyper-globalists.