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THIRD WORLD RESURGENCE

The WTO agenda in the time of a pandemic: Aggravating constraints on policy space

In the context of the unprecedented turmoil that the global economy is now witnessing, many questions have been raised on whether the rules enshrined under WTO agreements aid countries in facing the crisis – both its public health and economic aspects – or whether they impede their responses.

Kinda Mohamadieh and Ranja Sengupta


 WHEN the COVID-19-compounded health and economic crisis hit, the World Trade Organization (WTO) was already facing an existential crisis, in both its institutional functions and negotiations processes. Institutionally, the organisation had effectively lost the functioning of its dispute settlement arm, given the paralysis of the Appellate Body (AB) as a result of the United States’ decision to block the appointment of new AB members.1 The WTO’s capacity to convene multilateral negotiations was also being undermined by the marginalisation of the Doha Development Round negotiations (i.e., the WTO’s multilaterally mandated negotiations agenda) as well as increasing recourse to a plurilateral configuration for negotiations, including on issues which have been covered by multilateral WTO mandates.

In the context of the unprecedented turmoil that the global economy is now witnessing, many questions have been raised on whether the rules enshrined under WTO agreements aid countries in facing the crisis – both its public health and economic aspects – or whether they impede their responses. 

The model of liberalisation that WTO rules have reflected and helped entrench increasingly dictated how countries produce and distribute goods and services. The WTO rules restricted the policy space and tools needed to support the development of domestic agriculture and key manufacturing sectors, particularly those of developing countries. This consequently shaped their dependency on vulnerable production models that have proved detrimental in the response to the current crisis.

For example, the food security challenges resulting from the disruptions of food chains triggered by COVID-related closures and confinements are, in part, the result of an unfair WTO Agreement on Agriculture (AoA). The AoA has failed to discipline gigantic developed-country subsidies and resulted in the destruction of much of the domestic agricultural capacity of many developing countries and least developed countries (LDCs).

Similarly, WTO rules have led to heavy concentration in the medical products2 market rather than the opposite. According to a recent WTO report, the US and Switzerland supply 35% of medical products, while China, Germany and the US export 40% of personal protective products. Singapore, the US, the Netherlands and China export more than half the world’s respirators and ventilators.

The assurances of global supplies from the ‘most efficient’ producer(s) under the current global trading system fell apart during the crisis. Access to essential supplies of medical products such as medicines and medical equipment, including personal protective equipment, was compromised as a result of disruptions in supply chains and severe shortages in local/regional production capacities. Health services, like other essential services such as education, water and sanitation, have been increasingly privatised and globalised as a result of liberalisation under WTO rules, making them more costly and inaccessible.

Over the last several years, the development agenda in the WTO, laid out even before the now moribund Doha Development Round, was being slowly annihilated. Issues of genuine concern for developing countries, which this agenda encompassed, such as correcting inequities in agricultural subsidy rules, support for domestic industrialisation, and easing intellectual property restrictions for the purposes of promoting technology transfer and timely access to affordable medicines and vaccines, remain unresolved. Moreover, the direct attack, started by the US, on special and differential treatment (S&DT) for developing countries in the WTO has been severe. Also, there is a major push for including new issues on the WTO’s agenda, such as rules on e-commerce and the digital economy, investment facilitation, and restrictions pertaining to state-owned enterprises (SOEs). 

In the context of the crisis, there is a major discrepancy between developed- and developing-country WTO members in their approach to the WTO trade rules. Several developed countries have been trying to exploit the crisis in order to justify pushing further liberalisation and rules with restrictive implications for policy space, many of which have been on their radar for a long time. These include, for example, propositions for permanent tariff elimination on pharmaceutical and medical goods and on food products and banning or conditioning export restrictions. On the other hand, developing countries have called for more policy space, elimination of trade-distorting farm subsidies, other agricultural trade reforms, addressing the development aspects of e-commerce, considering balance-of-payments needs, and strengthening S&DT across all trade agreements and negotiations.3 

During the COVID-19 period, negotiations at the WTO have continued in a non-participatory and non-transparent manner, for example in the fisheries subsidies negotiations. Given COVID-related restrictions, the chair of the fisheries subsidies talks has been tabling his own texts and pushing for a mix of face-to-face and virtual consultations. Such conditions make it difficult for poorer countries to participate fully as inputs from the capitals often lag behind, given the domestic focus on fighting the crisis. The systematic push for an invasive liberalisation agenda may create bigger challenges for developing countries, further reducing their ability to deal with the current and future crises. This article gives an overview of some of the important current issues at the WTO.

Current issues on the table at the WTO


      a) Fisheries and agricultural subsidies

The fisheries subsidies negotiations at the WTO have a long history but have been recently rekindled by the UN Sustainable Development Goals (SDGs). Under target 14.6, the SDGs mandated the WTO to discipline subsidies covering three pillars, namely, illegal, unreported and unregulated (IUU) fishing; overfishing and overcapacity; and overfished stocks. The deadline for reaching an agreement is December 2020.

However, the negotiations, like other multilateral negotiations at the WTO, have seen the usual share of politics. The definition of IUU has been a challenge, especially given the fact that small fishers engaged in traditional fishing across developing countries will likely be caught under this definition. Moreover, securing S&DT to protect both small fishers and the future of fisheries in developing countries with large dependent populations, but where fisheries is currently an under-subsidised sector, has been a severe challenge. The US has outright refused to accept any S&DT, in spite of it being clearly mandated by SDG 14.6. The issues of who gets S&DT, and how strong this S&DT needs to be (for example, in terms of coverage of national waters, or Exclusive Economic Zones etc.), are still unresolved. The negotiations have also gotten entangled in issues of fisheries management, which the WTO is not mandated nor experienced to handle.4

Although the objective of the negotiations is marine conservation, the negotiations are at risk of completely bypassing this. The aim should be to discipline the already existing huge subsidies for large-scale industrial fishing, conducted mainly by developed countries with the exception of China, which are responsible for overfishing and overcapacity. However, a capping proposal currently on the table, supported by many of the big subsidisers, will result in the continuation, maybe with minor cuts, of these subsidies. Yet, future subsidies of poorer countries, even those aiming at developing their fishing infrastructure, will be eliminated.

This ominously reminds us of the WTO Agreement on Agriculture. The large domestic farm subsidies given by the advanced countries such as the US, the EU, Japan, Switzerland and Canada have been enjoying a reprieve under this Agreement either through the actual rules such as extra subsidy entitlements (or AMS entitlements), or by skirting the rules, such as shifting of trade-distorting subsidies to a Green Box where subsidies are allowed to be given without limit. But most important, developed countries are not implementing the committed de-minimis limits (5% for developed and 10% for developing countries) in trade-distorting domestic subsidies. On the other hand, subsidies given even to small producers in developing countries for supporting much-needed public food programmes are being challenged. A permanent solution on a food security proposal tabled by the G-33, a group of 46 developing countries, is still languishing in spite of a mandate to deliver it by the WTO’s 2017 Ministerial Conference. Proposals on a Special Safeguard Mechanism (SSM), which would allow developing countries to raise import duties in the face of an import surge, face a similar fate. Efforts to promote cotton exports of very poor countries by addressing barriers posed by developed countries have seen only non-committal ‘best endeavour’ language in the Nairobi Ministerial of 2015. Finally, even S&DT for agriculture, which is an essential principle underpinning the AoA, is at risk of being diluted or eliminated in the near future as the US wants to reopen S&DT provisions across all areas of WTO agreements including on agriculture.

At this juncture, the severe livelihood challenges in agriculture and fisheries posed by the COVID-19 crisis in most developing and least developed countries may be aggravated by restrictions on current and future subsidies.

b) Intellectual property rights

The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) sealed the fate of many developing countries and constrained them from producing medicines, medical devices and many other products. It forced them to comply with high standards of intellectual property (IP) that protected patent monopolies of corporations and threatened timely and affordable access to treatment worldwide. In the time of COVID-19, this has manifested as one of the major challenges facing developing countries in ensuring treatment for their citizens. In recent discussions in the WTO, some developed countries have been pushing for further raising the IP standards and an aggressive implementation of the TRIPS Agreement even by smaller developing countries, while pushing against the use of inbuilt TRIPS flexibilities at the same time.

In these troubling times, a strong and momentous proposal on intellectual property rights has been put forward in the WTO by India and South Africa (WTO document IP/C/W/669, 2 October 2020) and co-sponsored by Kenya and Eswatini. The proposal requests a waiver from the implementation, application and enforcement of certain provisions of the TRIPS Agreement in relation to prevention, containment or treatment of COVID-19. The waiver would extend beyond patents, to cover other intellectual property rights that may pose a barrier, such as copyright, industrial designs and protection of undisclosed information. It is seen as necessary because there are very limited options under the TRIPS Agreement itself to overcome those barriers.

If agreed, the waiver will be a major demonstration of international cooperation among WTO members. Through this initiative, they could work together to ensure that intellectual property rights do not create barriers to the timely access to affordable medical products, including vaccines and medicines, or to the scaling-up of research, development, manufacturing and supply of medical products essential to combat COVID-19.

This proposal has received widespread support from international organisations in the health field, and the global health community including health professionals, academics, civil society organisations and health activists. In a tweet posted on 17 October, the Director-General of the World Health Organization (WHO), Dr Tedros Adhanom Ghebreyesus, also welcomed the proposal. During the WTO TRIPS Council meeting of 15-16 October, the proposal was widely supported by developing countries. However, the US, the EU, the UK, Japan, Canada, Switzerland, Norway, Australia and Brazil rejected it. The discussion has been kept open by the Chair of the Council. Given the strong opposition from these developed countries, the fate of this proposal remains to be seen. 

c) The politics of preferential treatment

 In recent years, the US has launched an assault on the principle of special and differential treatment. S&DT is a fundamental pillar of the international trade rules and an integral part of all WTO agreements. It was central to the original compromise that enabled the establishment of the WTO. The COVID-19 crisis highlights that S&DT is essential for developing countries if they are to retain policy space to develop key sectors and industries and deal with the current and future crises.

S&DT could take different forms of flexibilities, including allowing developing countries to undertake lower commitments or to benefit from longer implementation periods. However, most S&DT rules under the WTO agreements have been phrased vaguely or in hortatory language, whereby developing countries and LDCs have not been able to effectively benefit from these provisions. The Doha Development Work Programme included a mandate to review all S&DT provisions with a view to strengthening them and making them more precise, effective and operational. Since 2001, several attempts by developing countries to undertake this review (including during the last two Ministerial Conferences of the WTO in Kenya and Argentina) were effectively undermined by developed countries, through watering down the proposed revised language on S&DT to the point where it was of no value and certainly did not fulfil the mandate of the Doha Work Programme.

As part of its current attack on S&DT, the US wants to see that certain developing countries be ‘graduated’ out of their developing-country status – and, thus, out of their eligibility for S&DT – and that the principle of ‘self-declaration’ of developing-country status be given up. In a proposal circulated in February 2019, the US laid out four criteria for graduating countries: if a country is a member of the Organisation for Economic Cooperation and Development (OECD); if a country is a member of the G20; if a country is classified as ‘high income’ by the World Bank; or if a country accounts for more than 0.5% of global merchandise trade (including imports). By that definition, even Vietnam will be graduated. This approach ignores the fact that there are multiple dimensions of (under)development and, most important, that S&DT has been a key principle of international trade rules even before the WTO was born.

Moreover, the developed countries are simultaneously attempting to replace S&DT as a system of rights that any developing country can avail itself of, with a system of horizontal preferences, manifest in their push for an agenda on gender and trade and micro, small and medium enterprises (MSMEs). There are no doubts that these constituencies merit special attention due to the pressures that WTO rules impose on disadvantaged stakeholders. However, this agenda of horizontal preferences has been seen as an attempt to hijack genuine concerns of these constituencies, and use these issues as a Trojan horse in order to push forward new rules and liberalisation, especially in the areas of e-commerce, government procurement and investment facilitation.

In the midst of this concerted attack on S&DT, developing countries organised in the Group of 90, which is comprised of the Organisation of African, Caribbean and Pacific States, the African Group and the group of LDCs, resubmitted their proposal to strengthen selected S&DT provisions. A discussion in this regard took place among WTO members in September 2020. The provisions covered by the proposal relate to transfer of technology, trade-related investment measures (TRIMs), technical barriers to trade, sanitary and phytosanitary measures, customs valuation, subsidies and countervailing measures, and the accession of LDCs to the WTO.

Institutional issues 

In March 2020, the European Union (EU) and Ministers from 17 WTO member states5 announced an agreement to put in place a multi-party interim appeal arbitration arrangement (MPIA), based on an initiative taken by the EU in December 2019. This step was a reaction to the impasse pertaining to the WTO Appellate Body. The MPIA is intended as an interim procedure that will operate as long as the AB is not able to hear cases.

Article 25 of the WTO Dispute Settlement Understanding (DSU) provides for arbitration as ‘an alternative means of dispute settlement [that] can facilitate the solution of certain disputes that concern issues that are clearly defined by both parties’. The MPIA would institutionalise the arbitration mechanism envisioned under Article 25. It could potentially make arbitration a norm in WTO dispute settlement processes, while up until now it has been rarely used. States adhering to this arrangement would be able to appeal a WTO panel decision through this arbitration mechanism. In doing so, the MPIA would enable some decisions by WTO panels to become final and therefore enforceable between the countries which joined the arrangement while the WTO AB is not functioning.

The arrangement poses immediate implications for the members opting into the mechanism as well as longer-term implications of a broader and more systemic nature that ought to be of concern to all WTO members. Pursuing arbitration between members of the MPIA will require a case-by-case consent of the two parties. This means that joining the MPIA does not provide a guarantee that a request to appeal using the MPIA will be accepted by the other party to the MPIA. In this sense, the MPIA does not provide an added value in comparison to what Article 25 of the DSU already provides to all WTO members. Moreover, while the MPIA’s functions will cease at the time the AB resumes its functionality, its procedures might disallow the countries that join it from reverting to the AB regarding cases that are covered under the MPIA’s scope.

The MPIA attempts to provide more clarity on procedural issues pertaining to pursuing arbitration cases based on Article 25 of the DSU and to organise the relationship of the decisions that could result with WTO rules and procedures. However, the MPIA text leaves several crucial issues either unaddressed or lacking clarity. This could potentially undermine its stated objective of preserving the essential principles and features of the WTO dispute settlement system, and consistency and predictability in the interpretation of the rights and obligations under WTO agreements.

For example, while the MPIA text provides that the appeal arbitration procedure will be based on the substantive and procedural aspects of DSU appellate review, countries utilising the MPIA will have the possibility to diverge from the procedures and other substantive elements, such as the scope and effect of appeal, which opens the door for potentially significant divergences. This will undermine the main potential added value claimed by proponents of the MPIA, which seems to be its attempt to secure consistency in the way members pursue arbitrations pursuant to Article 25 of the DSU.

Issues of legality under WTO rules arise where the MPIA attempts to assign additional roles to the WTO’s secretariat, including its Director-General, and presumes that WTO funds will cover its costs of operating and providing arbitrators. Systemic issues arise when it comes to the relationship between decisions to be taken by the MPIA arbitral tribunals and the existing and future WTO jurisprudence.

While the MPIA does not seem equipped to deliver on its promises, it poses multiple drawbacks for members joining it, particularly by excluding them from the ability to use the AB for cases that fall under the scope of the MPIA if and when the AB is functional again.  Furthermore, the fact that not all WTO members will join the MPIA will mean that WTO rules (such as on intellectual property) could be enforced against part of the WTO membership (i.e., those which opt in), while others which do not opt into the MPIA could free-ride on the compliance of those WTO members which do join the MPIA.

Plurilateral initiatives and their systemic undermining of the WTO

Plurilateral initiatives on e-commerce, investment facilitation, services domestic regulations, disciplines for MSMEs, and trade and gender were announced at the WTO’s 11th Ministerial Conference in Buenos Aires in 2017. These announcements took the form of declarations by selected member states, which they launched when their proposals failed to secure multilateral consensus. Some developing countries have taken on a role as proponents of these plurilateral initiatives. This has been a significant divergence from the historic position of developing countries.

These initiatives do not constitute part of the WTO work, as they are not officially covered by multilateral mandates of negotiation agreed at the WTO. However, most of the meetings pertaining to these plurilateral initiatives are hosted at the WTO. The WTO secretariat plays a facilitating role by arranging the hosting of meetings at the WTO premises, supporting the coordinators of the initiatives in preparing the reports of the meetings, and providing technical support for posting the materials on subpages of the WTO website.

Negotiations on these tracks have continued throughout the COVID-19 crisis period, including through written submissions and online exchanges. The plurilateral initiative on services domestic regulation disciplines is meant to establish multilateral standards to discipline the administration of services licensing requirements and procedures, qualification requirements and procedures, technical standards as well as authorisations. The plurilateral initiative on investment facilitation overlaps with that on domestic regulations but tackles a broader range of measures including foreign direct investment measures in all the services and non-services sectors. Among its main sections are rules setting a transparency regime, multilateral standards to discipline the administration of covered measures, criteria for measures relating to authorisation of investments, rules on transfers related to investments, and movement of business persons for investment purposes, among other issues. Both of these initiatives could have an intrusive effect on the regulatory space of governments in a broad scope of sectors, including in relation to regulating in the public interest.

The e-commerce initiative is shaping up to be a full-fledged set of rules on the digital economy. It addresses issues ranging from rules on electronic transactions that could restrict policy tools available to states to address security of online transactions and guard against theft of personal data, to digital trade facilitation. It also covers the free flow of cross-border data that could potentially undermine privacy protections and digital industrialisation policies, a permanent restriction on customs duties on electronic transmissions that could undermine governmental revenues, and liberalisation in selected services sectors like computer and related services, among other proposals.

The proliferation of plurilateral initiatives could have an erosive effect and systemically undermine the WTO as a multilateral institution. Proponents of the plurilateral route argue that such an incremental path would help the WTO advance and acquire more relevance instead of being bogged down in multilateral negotiations. Yet, starting with agreements among some WTO members and then gradually transforming them into fully global agreements means that some will be rule-takers and others rule-makers.

Mere participation in a plurilateral initiative does not automatically make a country a rule-maker either. Indeed, if a country is not ready at the national level with a clear vision for the sectors and issues being negotiated, including what it wants out of advancing international trading relations related to the relevant sector, then just having representatives in the negotiation room will not actually make this country a rule-maker. In fact, countries in such situations might only be adding quantitatively to the number of participants, in a way that allows the initiative to formally secure a ‘critical mass’, without substantively shaping or bringing anything to the actual negotiations.

The proliferation of plurilateral initiatives also limits the bargaining capacity of developing countries in the multilateral setting. Such capacity, particularly for small and medium-sized economies, results from collective positioning rather than unilateral economic and political weight. For those reasons, the proliferation of plurilateral initiatives will be in tension with the collective interest of developing countries in preserving a multilateral space that allows them opportunities to benefit from the international trading system. It will also not serve the developing countries’ interests in preserving and strengthening the multilateral character of the WTO

Concluding observations:  The future of the WTO and its reform

The WTO is indeed at a crossroads. While developing countries supported by public interest civil society organisations have long called for reform of the multilateral trading system, it was meant to be in favour of developing countries and large vulnerable constituencies such as small farmers, producers, workers, patient groups and indigenous peoples. Central to this reform agenda was the call to review and rebalance existing WTO rules, in order to address the implementation challenges that developing countries and LDCs have been facing and to strengthen and improve operational special and differential treatment.

In contrast, the narrative and proposals pertaining to WTO reform as promoted by developed countries, led by the United States, are premised on pleasing big business. Therefore the ‘reform’ agenda, as advanced by developed countries, has continued to push for agreements on new issues, while ignoring agriculture and TRIPS reform in favour of developing countries. The proposed agenda also advocates new approaches on S&DT that will eventually limit the availability of these flexibilities to developing countries. It attempts to (re)inject in the WTO agenda issues that will further constrain the policy tools available to developing countries and undermine inclusivity and participation in WTO negotiations, through attempting to alter decision-making procedures. 

Among the benchmarks for assessing reforms proposed for the WTO ought to be whether these reforms enhance the capacity of developing countries to tackle crises such as COVID-19, and enable this multilateral body to find rules and solutions that could benefit its entire membership. Such reforms should be true to the original mandate of the WTO, which is rooted in the sustainable development objective and seeks to create opportunities for developing countries and LDCs to benefit from the international trading system.

In the current final stage in the selection of a new Director-General for the WTO, the race has come down to two women candidates, Nigeria’s Ngozi Okonjo-Iweala and South Korea’s Yoo Myung-hee. This is hailed as a breakthrough in the gender-biased history of the WTO. The new Director-General will face the momentous challenge of nurturing a narrative and environment that would refocus attention on reforms aligned with the original mandate of the WTO.  This will include focusing on the needs of developing countries and LDCs, and privileging the multilateral process instead of encouraging the proliferation of plurilateral initiatives.  Her credibility – and the future of the WTO – will rest  on her ability to deliver on this critical challenge.                          

Kinda Mohamadieh and Ranja Sengupta are senior researchers with the Third World Network.

Endnotes

1    https://www.wto.org/english/tratop_e/dispu_e/ab_members_descrp_e.htm

2    According to a recent WTO paper, ‘medical products’ include: 1. medicines (pharmaceuticals) – including both dosified and bulk medicines; 2. medical supplies – refers to consumables for hospital and laboratory use (e.g., alcohol, syringes, gauze, reagents, etc); 3. medical equipment and technology; and 4. personal protective products – hand soap and sanitiser, face masks, protective spectacles.

3    See, for example, the African Group communication WT/GC/219.

4    See the article ‘WTO fisheries subsidy negotiations being used to undermine sovereignty and development’ in this issue.

5    Australia; Brazil; Canada; China; Chile; Colombia; Costa Rica; the European Union; Guatemala; Hong Kong, China; Mexico; New Zealand; Norway; Singapore; Switzerland; Ecuador; Nicaragua; and Uruguay. https://trade.ec.europa.eu/doclib/press/index.cfm?id=2127

*Third World Resurgence No. 345/346, 2020, pp 76-81


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