TWN Info Service on WTO and Trade Issues (Mar18/01)
5 March 2018
Third World Network

WTO chief, China, EU and US advocate plurilaterals
Published in SUNS #8633 dated 2 March 2018

Geneva, 1 Mar (D. Ravi Kanth) - The World Trade Organization director-general Roberto Azevedo along with the European Union, the United States, and China on Wednesday mounted a concerted campaign for launching plurilateral negotiations on the new issues albeit with differing justifications.

The new issues include rules for electronic commerce, investment facilitation, disciplines for micro, small, and medium enterprises (MSMEs), and even trade and gender.

There were recurring undertones and commonality of views in the separate statements made at the Graduate Institute in Geneva which conducted the meeting on "Plurilaterals, the New Way Forward in Global Trade?," on Wednesday.

The overall impression was that the views voiced appeared to be a well-coordinated effort of the DG with the three countries.

The Director-General and the European Union's trade envoy Ambassador Marc Vanheukelen echoed almost identical views on the need to emulate the Tokyo Round of codes - on subsidies and countervailing measures, technical barriers to trade (sometimes called the Standards Code), anti-dumping, import licensing, safeguards, and others - for advancing the plurilateral outcomes on new issues that can be subsequently multilateralised.

[The Tokyo Round of Multilateral Trade Negotiations and the Codes negotiated under it was under the auspices of the old GATT, a provisional treaty. It was the resulting view of a fragmented multilateral arrangement that ultimately resulted in the "Single Undertaking" concept of the Uruguay Round, whose final outcome of a definitive international treaty organisation and the requirement that every participant sign on to every one of the agreements. All the references and precedents of the Tokyo Round codes cited by the three major trading entities and the WTO head appeared to slur over this "history" of the old GATT and the WTO. SUNS]

In sharp contrast to the position papers on these three issues that were unveiled at Buenos Aires on 13 December 2017, the three dominant members of the global trading system echoed their openness to discuss electronic commerce, investment facilitation, and disciplines for MSMEs.

At Buenos Aires, for example, the US did not join the group of countries that issued the statement on investment facilitation. China and Pakistan did not join the sponsors of the call for plurilateral negotiations on electronic commerce. It is not clear whether the US joined the proponents who sought disciplines for MSMEs.

The three-hour discussion was moderated by the former WTO official Patrick Low at the Graduate Institute. The WTO DG Azevedo gave the concluding remarks.

Prof Bernard Hoekman, who had served at the WTO and the World Bank, delivered a keynote address as to why WTO members must embrace plurilaterals for regulatory practices.

Prof Hoekman argued that the multilateral trading system is not in a good shape with its negotiating function in a state of comatose because of the Doha Development Agenda trade negotiations. He said the bicycle principle of uninterrupted trade liberalization was undermined because of the "misuse of consensus and the misuse of special and differential treatment (S&DT)."

With "consensus" being used to block negotiations, and S&DT flexibilities constraining the system, people are not engaging in the negotiations, Prof Hoekman argued. There is a growing shift to preferential trade agreements which, he said, are discriminatory as they would address issues such as subsidies or state capitalism.

Therefore, trade cooperation on the lines of the Trade Facilitation Agreement (TFA) which is aimed to bring down trade costs must be considered in plurilateral initiatives, Hoekman said.

[The TFA was negotiated multilaterally, and was not the outcome of a plurilateral negotiation. SUNS]

"Moving on Plurilaterals can do more to advance the trade costs agenda and thereby, provide some oxygen to the system," said Hoekman. Plurilaterals on regulatory policies on non-tariff issues must be considered, he said.

He said that what groups of countries attempted to do in Buenos Aires on plurilaterals would be a good practice.

He spelt out the necessary conditions - leadership, open and transparent process monitored by the WTO and dissemination of information - essential for the success of the plurilaterals.

In a short statement, Benin's trade envoy Ambassador Eloi Laourou said the developing and least-developed countries want multilateralism with synergies for addressing the outstanding problems.

Ambassador Laourou said outstanding agricultural issues, as well as fisheries subsidies, must be addressed as per the Sustainable Development Goals.

He said the developing countries and LDCs want to ensure the "development dimension" of the multilateral trade negotiations as set out in the Doha trade agenda.

He said plurilaterals cannot address the development dimension as was the case with the plurilateral agreements on civil aircraft, bovine meat, and government procurement.

The EU's trade envoy Ambassador Vanheukelen said it is a political imperative that no one can impose anything on anybody, suggesting that there would not be any pressure exerted on those who are not members of the plurilaterals.

He said the EU is comfortable with a sub-set of issues being pursued at this juncture. The EU, he said, wants "flexible multilateralism", a point that was also echoed by the WTO Director-General at the end of the meeting.

Ambassador Vanheukelen said plurilaterals by no means are going to be easy, maintaining that the voluntary codes of the Tokyo Round, which were later multilateralised in the Uruguay Round, could become the best route for achieving plurilateral outcomes that would be later multilateralised.

He said the critical mass of membership in the plurilaterals is essential. Besides, the plurilateral outcomes must be enforceable in the dispute settlement system, he said. Further, they must not lead to any deviation, the EU trade envoy argued.

China's trade envoy Ambassador Xiangchen Zhang said he is a "fundamentalist on multilateralism but I'm open to new issues."

When the multilateral system is strong and robust, supplementary approaches could be followed for e-commerce and investment facilitation, he said.

"Otherwise, WTO will lose relevance," he argued. The Chinese envoy said it is fine if some members don't want to join in the plurilaterals, emphasizing that pressure must not be exerted on those members who remain outside the plurilaterals.

The US deputy trade envoy Mr Chris Wilson said the WTO's negotiating function is working well as it had produced an agreement on trade facilitation and even on an enhanced Information Technology Agreement-II.

The US perspective is one of "optimism," as the Buenos Aires meeting allowed members to experiment with new processes. He said the utility and appropriateness have to be considered on a situational process, arguing that the US is open to plurilaterals on fisheries subsidies and agriculture.

He said the US is participating in e-commerce and remains interested in MSMEs. The US is open to discussing investment facilitation, though, it remains skeptical on some aspects concerning investment facilitation.

Mr Wilson said that certain structural aspects such as transparency and differentiation must be sorted out before starting plurilaterals. While it is important for having the broadest participation, it is equally important to grapple with the contributions of members that must be commensurate with their trading status, the US trade official maintained.

China said plurilaterals are only a process for conducting negotiations for establishing rules among like-minded members.

China said the developing countries remain reluctant about plurilaterals because they don't have the capacity. They need special and differential treatment flexibilities in the plurilateral agreements, China maintained.

The Chinese envoy argued that members need to make a distinction between the Tokyo Round and the current new plurilaterals.

The Director-General, who did not participate in the deliberations and arrived at the end of the meeting, was asked to give a concluding statement.

He said there were many reasons why there were no substantive outcomes at Buenos Aires but "one important reason was that there were few potential trade-offs that would force flexibility."

Azevedo said "flexibility is essential in the process of consensus-based decision making that we follow at the WTO", suggesting that members "who want a particular outcome often calculate: "if I block progress in other areas, the others will agree with what I'm asking"."

Being a former negotiator, he said, "I know that this is how many approach negotiations in the WTO."

Such a "rationale does not always work as there may be no strong push to get outcomes somewhere else, so others would have no reason to agree with one's demands" and "one's demands may be too costly for the others."

"If the costs of agreeing to demands exceed the benefits sought in other areas of the negotiations, you are unlikely to find a way forward," he said.

Without naming the countries, he said "a careful analysis of these forces and trade-offs before Buenos Aires would likely have shown that such "hostage-taking tactics" would not work."

It was not clear whether the director-general was pointing a finger towards India which had blocked new issues, particularly institutional issues such as trade and gender, after the permanent solution for public stockholding programs for food security was blocked by the United States.

Did the director-general mean that for countries like the US, there is no interest in issues like food security or reduction commitments in domestic subsidies?

His remarks did not address these questions.

Azevedo said "under any circumstances, the major problem with this approach is that it does not encourage flexibility or a search for compromise."

"Instead, it encourages an all-or-nothing game of "mutually assured destruction"," he said.

In what seemed a subtle critique of the "consensus-based system" that invariably leads to "zero risk" approach, he said, "a member can look at any initiative they don't particularly like and simply stop it from even being discussed."

"Of course, the outcome of such an approach is paralysis, because virtually all issues will meet some opposition from someone," Azevedo argued.

"For a consensus-based system to work, participants must realize that the indiscriminate usage of the power to block will paralyze and ultimately destroy it," he argued.

Clearly, the DG seemed to be worried that like India, which had blocked the discussion on investment facilitation at the General Council last year, any one member could block further discussions on new plurilateral initiatives that he and his office had assiduously worked to promote in the run-up to the Buenos Aires meeting.

His remarks also seemed to gloss over the fact that the WTO is structured on specific rules and mandates as set out in the Marrakesh Agreement and that clearly lay out what issues can be discussed and what issues cannot be brought to the WTO.

Thus, he seemed to be asking members not to insist on consensus but work for the system and its common good and "be ready to compromise and seek common ground from day one."

Without mentioning a word about the Doha Development Agenda negotiations and why they were not being pursued, Azevedo said the "new normal" is "we have to be more flexible."

"No one should be forced to accept anything or to negotiate anything they don't want to," he said. "But, at the same time, everyone should be free to discuss issues that are of importance to them," the director-general said.

He did not address how any issue can be discussed without a formal ministerial/General Council approval. But his remarks suggested that in his thinking there is no sanctity of a Round of negotiations launched by trade ministers with specific issues as anybody can raise any issue?

He went on to espouse the GATT rules that had "inbuilt flexibilities, in different forms", which is what the current US Trade Representative Ambassador Robert Lighthizer is pressing for resolving trade disputes unlike the current binding dispute settlement mechanism.

Azevedo said "people often see WTO disciplines as a monolith, or as a rigid, one-size-fits-all set of rules," arguing that it "is far from true."

"While our core rules do apply to everyone, specific obligations vary considerably across the membership," he said.

Effectively, he brought in differentiation under the garb of flexibilities. "Look at the Tokyo Round in the 1970s, for example," he said, arguing that "a series of agreements on non-tariff measures emerged" after the Tokyo Round.

"However, only a relatively small number of GATT members - mainly industrialized - subscribed to these agreements. Because they were not accepted by the full GATT membership, they were often informally called "codes"."

The codes included such areas as subsidies and countervailing measures, technical barriers to trade (sometimes called the Standards Code), anti-dumping, import licensing, and safeguards, and others.

"These codes were not multilateral, but they were a beginning, and helped to plant the seeds for our existing WTO multilateral agreements," he said.

In short, he made a case for the plurilateral initiatives which were launched "in Buenos Aires, which may be testing yet other forms of flexibility."

"The open-ended groups created at MC11 are a somewhat new approach," he said, suggesting that "they respond to the risk of paralysis brought about by objections to any conversation on issues not already covered by the Doha Work Programme, regardless of how important they are to others or to the trade environment today."

[In advancing this view, Azevedo seemed to overlook the fact that the decision that no other issue should be addressed before the conclusion of the Doha Work Programme negotiations, was a fundamental part of the July 2004 General Council decision that enabled re-launch of the negotiations after the collapse of the 2003 Cancun Ministerial meeting of the WTO. Brazil and its then foreign Minister, Celso Amorim, along with India's Kamal Nath had enabled the successful re-launch of the negotiations at the General Council in July 2004. SUNS]

The director-general also remained silent on the role played by his office in propping up these open-ended groups starting from last August, according to an authoritative source, who closely monitored the developments in his office.

These groups, according to Azevedo, "do not represent a north-south divide, unlike some previous initiatives of the times of the GATT."

"Instead, they encompass developed, developing and least-developed countries, big and small," he said.

Credit goes to him for stitching these groups behind the scenes to demonstrate that there is no North-South divide in these groups, the source said.

He said that these groups must "afford any and all WTO members the opportunity to participate actively and constructively from day one" and "any discussions in those groups should already be taking into account the perspectives of others - including of those who are not at the table."

Azevedo said discussing issues inside the WTO "with everybody or with those who are willing to do so" would remain "open and transparent, where anyone and everyone has a chance to shape the conversations if they so desire."

As regards whether plurilaterals are the new way forward, he said, "in my view, the future is not plurilaterals - the future is flexibility."

He went on to say "plurilateral initiatives may be part of that - but as I have set out, there are ways of delivering flexibility within multilateral approaches as well."

He said "flexibility will not lead to fragmentation. In fact, in a system with 164 members of different sizes, different priorities and different stages of development, flexibility is precisely the way to avoid fragmentation."

The Machiavellian views advanced by the director-general seemed to pose the greatest threat to the developing and poorest countries, turning every rule to advance the interests of the US and other industrialized countries, according to a trade envoy at the meeting who asked not to be quoted.