TWN Info Service on WTO and Trade Issues (Jun18/11)
18 June 2018
Third World Network

China, India, South Africa holding "system to hostage", says EU
Published in SUNS #8695 dated 6 June 2018

Geneva, 5 Jun (D. Ravi Kanth) - The European Union suggested on Monday (4 June) that China, India, and South Africa among others are holding the "system to hostage" by pursuing at the World Trade Organization ideologically-driven toxic positions on "development". The EU insisted that the special and differential treatment (S&DT) must be "need-driven and evidence-driven."

At a meeting of the 65th session of the Trade and Development Board (TDB) of UNCTAD, the EU trade commissioner Cecilia Malmstrom claimed the debate on "development" is being blocked and the "system" is held "hostage" by some developing countries.

Without naming the countries such as China, India, and South Africa, which have repeatedly made it clear that S&DT is an integral part of the Uruguay Round commitments and that they will not accept any "differentiation" among developing countries for availing S&DT flexibilities, Commissioner Malmstrom said that developing countries need "flexibilities."

But two-thirds of members cannot be excluded from the purview of the WTO commitments, she said.

The S&DT must be based on "need-driven and evidence-driven" case-by-case framework.

Effectively, she argued, some big developing countries - China, India, and South Africa among others - cannot avail of the S&DT under the "differentiation" framework.

Malmstrom also expressed her frustration that the negotiations on fisheries subsidies are not moving well as some countries are blocking the negotiations.

While acknowledging the Doha agenda, she argued that a lot of developments (since the launch of the Doha negotiations) have overtaken the issues in the Doha agenda.

She urged members to continue with the plurilateral initiatives that have been launched through joint initiatives at Buenos Aires, despite the rejection of the initiatives by a large majority of developing countries at the open-ended heads of delegations meeting on 12 December 2017 at the WTO's eleventh ministerial meeting in Buenos Aires.

The EU trade commissioner came down heavily on the United States for slapping illegal duties on imports of steel and aluminum from the EU, Canada, and Mexico, but refused to say that the US duties amounted to a "trade war", ad ding though "we could be" approaching the trade war.

Malmstrom refused to characterize the retaliatory measures the EU would impose as part of the dispute at the WTO, along with measures by Canada and Mexico, would constitute "tit-for-tat" actions.

She justified the EU's actions as part of a trade dispute launched on 1 June at the WTO as a "rebalancing" move.

In short, the EU commissioner remained daggers crossed against the US on Washington's additional duties on steel and aluminum.

But the EU was in complete agreement with the US on the issue of "differentiation" and denying S&DT treatment to China, India, and South Africa, said a trade envoy familiar with the ongoing debate on "development" among select trade envoys.

The EU's positions are also echoed by Japan which reckons that the position s adopted by China, India, and South Africa among others are "ideological" and not evidence-based, said a trade envoy from a major industrialized country who asked not to be quoted.

Indeed, there is complete consensus among the developed countries to bring about "differentiation" among developing countries for deciding who should avail S&DT and who should not.

The common position held by the developed countries on differentiation, which they claim is not an "ideological" stand, is being aggressively echoed ate very informal trade ministerial summit, including at the recent meeting convened by Australia in Paris.

At that informal ministerial meeting in Paris on 31 May, India's commerce minister Suresh Prabhu said "trade must contribute to development."

He said India continues to make advances in some sectors while facing "compelling" challenges in many other sectors. Many developing countries are also facing daunting challenges in several sectors like India.

Consequently, many developing countries have not been able to integrate into the "global trading system."

"Any endeavour at the WTO for reciprocal trade rules, which ignores this reality, will further deepen the divide and aggravate the disenchantment with globalization," Prabhu warned.

"Special and differential treatment provisions for all developing countries without exception, and LDCs are an integral part of the WTO Agreement and this principle must be protected," India emphasized at the Paris meeting.

"Approaches based on selection, such as the "case-by-case" approach to gran ting special and differential treatment to developing countries must be avoided," India said.

South Africa said "the principle of special and differential treatment is also under challenge."

Speaking on behalf of his trade minister Rob Davies at the informal ministerial meet in Paris, the South African trade envoy Ambassador Xavier Carim said "recent proposals to narrow its scope, irrespective of objective difference s in levels of economic development between developed and developing countries will only compound our negotiating difficulties."

South Africa, which is the coordinator for the African Group at the WTO, said the group's "core positions" are built on the developmental objectives embedded in the Doha mandate.

"The African Group will continue to seek meaningful outcomes in agriculture, on domestic support, cotton, public stockholding, SSM, as well as on fisheries subsidies, and on the G90 S&DT proposals," South Africa said.

In a draft ministerial statement issued on 10 December 2017, the G90 group had said "the provisions for special and differential treatment (S&DT) remain a n integral part of existing and future WTO Agreements."

The G90 urged trade ministers to "instruct the Committee on Trade and Development in Special Session to expeditiously complete the review of all the outstanding Agreement-specific proposals and report to the General Council, with clear recommendations for a decision, at the next Ministerial Conference."

"Notwithstanding Articles 4 and 5 of the TRIMs Agreement and Articles III and XI of GATT, Members agree that developing countries shall be free to deviate temporarily from the provisions of Article 2 of the TRIMs Agreement, and introduce new investment measures related to trade in goods," the G90 countries maintained.

They outlined the following provisions, saying "measures notified by developing countries under this provision shall be effective for an initial period that does not extend beyond 15 years or up to the time these objectives have been met (whichever is shorter), provided the selected measures fulfil one of the objectives stipulated below:

i. Accelerate industrialization and achieve socio-economic transformation;

ii. Upgrade and modernize the domestic manufacturing capabilities of small and medium enterprises and their contribution to employment generation;

iii. Promote domestic manufacturing capabilities in high value-added sectors or technology intensive sectors;

iv. Stimulate and facilitate the transfer or indigenous development of technology;

v. Promote domestic competition and/or correct restrictive business practices;

vi. Promote purchases from disadvantaged regions in order to reduce regional disparities within their territories and support the development of geographically disadvantaged regions;

vii. Stimulate environment-friendly methods or products and contribute to sustainable development;

viii. Increase export capacity in cases where structural current account deficits would cause or threaten to cause a major reduction in imports;

ix. Close the digital divide in industrial production."

In short, the developing countries now clearly face a Herculean task on "development", particularly in stopping the "differentiation", which is part of the warlike agenda being advanced by the US, the EU, Japan, and other developed countries, trade envoys said.