TWN Info Service on WTO and Trade Issues (May19/05)
10 May 2019
Third World Network

South countries soundly reject US proposal on “differentiation”

Published in SUNS #8903 dated 9 May 2019

Geneva, 8 May (D. Ravi Kanth) – A large majority of developing and least-developed countries have flatly rejected the proposal by the United States to introduce “differentiation” for availing special and differential treatment (S&DT) at the World Trade Organisation and its annexed agreements.

The developing countries and the LDCs said that the divide-and-rule principle behind the US proposal would undermine the existing WTO architecture for S&DT flexibilities, trade envoys told the SUNS.

South Africa and many other developing countries also challenged the Norwegian proposal on development that aims to bring about differentiation in a nuanced format.

Discussion on these two proposals dominated the proceedings of the WTO’s General Council on Tuesday (7 May), with repeated interventions by several countries.

Members also addressed the impasse at the WTO’s Appellate Body (AB) due to the US repeatedly blocking the selection process for filling four current vacancies at the AB.

The AB will become dysfunctional by 11 December 2019 if there is no immediate resolution for filling the vacancies.

The US, however, turned a deaf ear to the concerns of members over the AB impasse.

Despite repeated concerns voiced about lack of engagement by the US in the consultations being held by the facilitator Ambassador David Walker of New Zealand, the US merely repeated its previous arguments about the AB’s failure to adhere to the WTO rules.

Although the US proposal on differentiation had already received a frosty response at various WTO meetings, the US trade envoy Ambassador Dennis Shea re-submitted the proposal for consideration on grounds that it had received support from several countries over the past two months.

Ambassador Shea quoted the statement made by Brazil’s President Jair Bolsonaro during his visit to Washington (see SUNS #8871 dated 21 March 2019) about Brasilia’s decision to forego special and differential flexibilities in the current and future trade negotiations.

The US trade envoy argued that Washington’s proposal is not aimed at the least-developed countries but rather seeks to introduce differentiation among developing countries, insisting it is necessary for the WTO to remain a viable and credible organization.

He defended the four criteria outlined in the US proposal, including participation in the Paris-based Organization for Economic Cooperation and Development and meetings of the G20.

The WTO, he added, “needs reform, not sentimentality.”

In its proposal on development, Norway has argued that “while the principle of S&DT is firmly embedded [in various WTO agreements] and should not be put into question, there is not one single pre-defined operational S&DT modality that can be applied horizontally to every subject under negotiation.”

“What is practical and possible in one area may not be practical or possible in another area,” Norway said.

“We cannot predefine the result of a negotiation; it has to be negotiated; it has to be negotiated in a specific context; and it cannot be negotiated in the abstract.”

Norway said its proposal should not be interpreted as suggesting “some kind of request/offer process or that access to agreed provisions have to go through some kind of notification and question/answer process of approval.”

Norway said that “the LDCs represent a separate category, and there is consensus that the special treatment of LDCs should be maintained.”

In effect, Norway subtly suggested that the same special treatment hitherto available to the developing countries since 1978 cannot be continued.

While referring to several agreements on S&DT, Norway did not mention the agreement in paragraph 44 of the Doha work program, said a trade envoy, who asked not to be quoted.

A large majority of developing and least-developed countries, including India, China, and South Africa among others, however, flatly rejected the re-submitted US paper on differentiation for improving the negotiating function at the WTO.

South Africa, in a sharp critique, pointed to the underlying ramifications/dangers arising from the separate proposals by the US and Norway on S&DT.

The General Council, said South Africa, is not the right forum to conduct the debate on S&DT. The Doha negotiating body on development is the right forum, it underlined.

South Africa urged members “to respect multilateral mandates by ensuring that debates on development and Special and Differential Treatment (S&DT) do not undermine mandated negotiations.”

It drew attention to Paragraph 44 of the Doha Ministerial Declaration that “provides a clear mandate [and] the CTD [Committee on Trade and Development] Special Session is the only mandated body for discussions of this kind.”

“We find it highly disturbing that certain Members would object to mandated negotiations in the CTD Special Session only to raise the very same issues in the General Council, a body which has no mandate in this respect,” South Africa said emphatically.

It reminded the GC chair about the key points it had consistently raised about “S&DT in conjunction with the implementation issues.”

These issues “remain key to unlocking the development component of the Doha Development Round,” South Africa maintained.

Little wonder that these issues were identified as a priority in the Doha work program, South Africa argued.

Citing the remarks of former US trade representative Robert B Zoellick in 2010 that, “If 1989 saw the end of the “Second World” with Communism’s demise, then 2009 saw the end of what was known as the “Third World” …”, South Africa told the General Council that “much like Francis Fukuyama’s false herald of the “end of history”, Mr. Zoellick’s premature obituary to the “Third World” suffers from the same defect!”

It reminded the US and other developed countries that “very early on in the GATT era, Contracting Parties took steps to accommodate specific concerns of developing countries prevailing at that time in order to better meet their development needs and objectives.”

“During this time developing countries sought to emphasise the uniqueness of their development problems and challenges and called for treatment that would be different and more favourable than was provided in the GATT 1947,” South Africa argued.

Against this backdrop, South Africa argued, “it made sense to allow developing countries not to liberalise their own trade and to be granted preferential access to developed country markets, [and] this was no different from exemptions accorded to developed countries from general trade rules, often times to the detriment of developing countries.”

South Africa said “in many areas where WTO rules apply, one can detect reverse S&DT in favour of developed countries” and “there is no rationale or justification for the egregious and deleterious consequences that such flexibilities (for developed countries) have had for developing countries in areas where they have comparative advantages.”

On the current debate on S&DT under the WTO agreements for developing countries, South Africa said several questions have been raised “whether developed countries have lived up to the spirit of commitments identified in WTO Agreements.”

It reminded members that “the preamble of the Agreement establishing the WTO calls for the need for positive efforts to ensure that developing and least developed countries secure a share in the growth in international trade commensurate with the needs of their economic development.”

South Africa asked the US and other developed countries on the pledges that were made to reform agriculture over two decades ago.

“For over two decades the pledge to reform agricultural trade has fallen on deaf ears, market access for developing countries is still undermined by application of unclear and non-transparent tariff protection, tariff escalation, high domestic support and stringent sanitary and phytosanitary measures,” South Africa said.

The failure to bring about credible reforms in global farm trade enabled the developed countries to avail “special treatment through large bound Aggregate Measures of Support (AMS), more affectionately known as “trade- distorting domestic supports”, whilst developing countries bound their AMS to zero,” South Africa pointed out.

Consequently, the developing countries can only provide AMS limited by their “de minimis” supports.

“This was not a voluntary choice on the side of developing countries since at that time they did not provide this kind of support and were otherwise constrained by structural adjustment conditions,” South Africa argued.

“Clearly, a lack of capacity was a main driver of this kind of outcome; yet we are now asked to make the same kind of commitment in fisheries subsidies negotiations where capping proposals bear an uncanny resemblance to de minimis outcomes under domestic support,” South Africa said.

Little wonder that “such an outcome will tend to lock in the level of subsidies that big subsidisers provide, even if certain cuts are undertaken, whilst most developing countries are locked into an absolute ceiling with no flexibility to sustainably increase their subsidies over time in order to address their development needs,” South Africa maintained.

“Such an outcome [of locking the subsidies at the current level for fisheries subsidies as proposed by the US and Australia] would be manifestly anti-development and unfair,” it argued.

In short, South Africa emphasized “the importance of the principle of self-selection which in itself is an expression of the principle of sovereignty” as “more than two thirds of the WTO Members are developing countries.”