TWN Info Service on WTO and Trade Issues (Jul19/14)
5 July 2019
Third World Network

South faces defining moment on "development-friendly" WTO reforms
Published in SUNS #8939 dated 4 July 2019

Geneva, 3 Jul (D. Ravi Kanth) - The developing countries are facing a defining moment for pursuing "development-friendly reforms" at the World Trade Organization, with the Doha Development Agenda (DDA) negotiations having almost been killed by the United States and other developed countries with the tacit support of the WTO Secretariat, trade envoys told the SUNS.

Significantly, the European Union, which had hitherto remained as a counterweight to the US at the WTO, appears to have abdicated its role and joined forces with the US on WTO reforms, said a trade envoy, who asked not to be quoted.

The EU and other developed countries are almost reconciled to the prospect of the Appellate Body (AB) becoming dysfunctional, due to the US, though alone, blocking the selection process for filling the vacancies at the AB.

After 11 December 2019, the AB will cease to function when it would be reduced to one member.

Yet the EU and other developed countries have lined up behind the US in calling for sweeping "reforms" concerning transparency and notifications, the trade envoy said.

Key countries like Brazil in South America appear to have decided that it would be beneficial to support the US instead of antagonizing it, said a South American trade envoy who asked not to be quoted.

Brazil, which had created the G20 developing country coalition to bring about reforms in global farm trade, is now one of the front runners for pushing the informal plurilateral initiatives for rules on electronic commerce and investment facilitation among others.

Given the near unanimity among the US and its allies on the WTO reforms, other developing countries must join forces to safeguard the core multilateral principles embodied in the Marrakesh Agreement for governing the WTO, the trade envoy suggested.

Two important issues of the proposed reforms - transparency and notification requirements and other major changes involving the consensus principle in decision making, graduation/differentiation for availing special and differential flexibilities, and the Appellate Body among others - will test the resolve of developing countries in the face of concerted attempts by the US and other developed countries to bring about rifts and fragmentation among developing countries, the trade envoy argued.

On 8 July, the WTO's Council for Trade in Goods (CTG) will discuss two proposals on transparency and notification requirements.

The US and its allies on 27 June circulated a revised proposal on "Procedures To Enhance Transparency and Strengthen Notification Requirements Under WTO Agreements" with naming and shaming provisions and financial penalties for non-compliance.

As a counter to the US-led proposal, seven developing countries - South Africa, India, Cuba, Tunisia, Nigeria, Uganda, and Zimbabwe - have circulated their proposal on 27 June centering on "An Inclusive Approach To Transparency and Notification Requirements in the WTO".

In the revised proposal by the US, the European Union, Japan, Canada, Australia, New Zealand, Argentina, Costa Rica, and Chinese Taipei on 27 June, the proponents made some cosmetic changes in the language on "counter notifications" and "administrative measures."

Earlier, the US had tabled counter-notifications against India's notifications on rice, wheat, and cotton among others based on the data provided by its powerful farm lobbies. The US had proposed that members "provide a counter notification of another Member concerning notification obligations".

In paragraph 9 of the revised proposal, the US has inserted new language: "to encourage Members, at any time, to bring attention of the relevant Committee information they consider has not been notified by another Member in accordance with the Agreement and Understanding listed in paragraph 1 [which relates to WTO Agreements on agriculture, anti-dumping, subsidies and countervailing measures, safeguards, and state trading among others]."

The US and its allies have also made inconsequential changes in language concerning administrative measures and delay in notifications.

However, the US and its allies stuck to their naming and shaming proposals if a member fails to adhere to timely notifications and financial penalties.

The naming and shaming administrative measures include designating a member with notification delay, calling the representatives of countries that failed to submit notifications at WTO formal meetings to explain the reasons for the delay, and identifying the member with "notification delay" among others.

"When the administrative measures identified in paragraphs 10 and 11 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 US and its allies proposed.

A financial penalty would include that the member who failed to comply with the notifications "shall be assessed a charge by the Secretariat at the rate of [x][5] per cent of normal assessed contribution to the WTO budget, to be effective in the following biennial cycle, that may be used for the purpose of providing Members with technical assistance to full notification obligations, including ITTC [the WTO's Institute for Training and Technical Cooperation]."

In short, the joint proposal by the US and its allies on transparency and notification procedures ignored the concerns raised by developing countries since 1996 and the proposals on implementation issues submitted by developing countries in the Doha Round.

Challenging the naming and shaming measures and financial penalties, the developing countries led by South Africa and India have proposed an "inclusive approach" that would involve:

(a) the capacity constraints faced by developing countries;

(b) the failure by developed countries to provide information in agriculture (members with final bound Aggregate Measurement of Support commitments);

(c) the need to comply with notification obligations by the developed countries in GATS Article III.3 [notifying new, or any changes to existing laws, regulations or administrative guidelines which significantly affect trade in services] and GATS Mode 4;

(d) notification of incentives provided by developed country members to enterprises and institutions in LDCs;

(e) disclosure of origin of biological resources and/or associated traditional knowledge;

(f) transparency in tariffs involving submission of ad-valorem equivalents of opaque tariffs for farm products;

(g) transparency that would permeate the operation of the WTO to ensure "transparent and inclusive" working of the trade body, particularly "how Ministerial Conferences are conducted, and the processes that precede them in Geneva - each WTO member must be provided an equal opportunity in the decision-making process. Thus, meetings must be open to all, not only to some in green room processes."

Further, India has floated a "concept paper" at the retreat of trade envoys from developing countries hosted by China on 19 June in which it had proposed "strengthening the WTO to promote development and inclusivity" by preserving the "core principles of the Multilateral Trading System."

India has demanded amendments to "laws and regulations" of a Member that mandate unilateral action such as Section 232 tariffs imposed by the US under security provisions.

More importantly, India has said "the following rules in the Marrakesh Agreement [that established the WTO] are fundamental and must be respected:

* Article II and Article III on the multilateral functions of the WTO;

* Article IX on the continuation of the practice of decision-making by consensus;

* Article X: when there are amendments (additions or changes) to WTO rules, there must be consensus, followed by ratification by members. New rules enter into force only when ratification numbers required have been attained."

In the face of the aggressive assault on the consensus-principle "in the post-MC 11 phase" [after the WTO's eleventh ministerial meeting in Buenos Aires in December 2017], India said "many members have evinced interest in pursuing outcomes in some areas through joint plurilateral initiatives (JPIs)."

Against this backdrop, India had called for adhering to "provisions governing plurilateral agreements in the Marrakesh Agreement."

[Article X:9 of the Marrakesh Agreement sets out conditions, procedures and decision-making for adding a plurilateral agreement to Annex IV of the WTO Treaty. It states: "The Ministerial Conference, upon the request of the Members parties to a trade agreement, may decide exclusively by consensus to add that agreement to Annex IV." SUNS]

"If they are to be multilateral agreements, the outcomes of these initiatives, by way of new rules, can only be introduced into the WTO when there is consensus, and Article X of the Marrakesh Agreement on amendments must govern any changes or additions to the WTO Agreement," India has argued in its concept paper.

In short, the JPIs or Joint Plurilateral Initiatives must "not change the fundamental architecture of WTO," India has demanded.

The meeting of the CTG and the upcoming General Council meeting on 23 July will indicate whether the developing countries are able to thwart the one-sided agenda being pushed by the US and its allies, said trade envoys, who asked not to be quoted.