TWN Info Service on WTO and Trade Issues (Jul18/09)
10 July 2018
Third World Network

Developing and least-developed face worst crisis yet at WTO
Published in SUNS #8714 dated 4 July 2018

Geneva, 3 Jul (D. Ravi Kanth) - Developing and least-developed countries are facing the worst crisis yet at the World Trade Organization due to the sustained assault by the United States along with the European Union and Japan.

They want to curtail the special and differential flexibilities of developing countries, while foisting plurilateral negotiations in select areas without multilateral consensus, trade envoys told SUNS.

US President Donald Trump on Monday ratcheted up pressure on the WTO to fall in line or face the dire consequences.

Using the Trump's aggressive trade demands as a pretext, some major developed countries such as the EU and Japan have been attempting to deny the S&DT (special and differential treatment) flexibilities to developing countries. They are also attempting, without multilateral consensus, to foist plurilateral outcomes in select areas, said a trade envoy from a major developing country, who asked not to be quoted.

"The entire system [the WTO] is under threat following the Trump administration's trade initiatives based on fair and reciprocal market access as well as other related developments at the WTO such as the attempt to foist plurilateral outcomes without multilateral consensus, [and] intensified moves to undermine the special and differential treatment flexibilities by industrialized countries, particularly the EU," the envoy suggested.

Some members such as the EU and other developed countries are seeking to undermine the S&DT architecture in every committee, including customs valuation when some countries demanded technical assistance at a recent meeting, the envoy said.

Even in an area of transfer of technology, which was discussed recently at the TRIPS Council last month, the US, the EU, Japan, and Switzerland said they will not accept a proposal from the LDCs for transfer of technology.

The developed countries remained cold to proposals on the incentives needed to encourage companies to transfer technologies to LDCs.

"In fact, the Trump campaign against the WTO has become useful and handy for the EU and other industrialized countries to deny S&DT flexibilities and insist on individual developing and least-developed countries to demonstrate the need to avail S&DT," the envoy said.

"The threat from the US is much more open and transparent while the EU and other developed countries are posing threats for eliminating the policy space that is in-built in the WTO system," the envoy added.

According to another developing country trade envoy, who asked not to be quoted, "the WTO director-general Roberto Azevedo will use the threats from President Trump and his trade representative Robert Lighthizer much more to satisfy Washington."

On Monday, President Trump said his administration would take action against the WTO because the US has been treated "very badly."

"We are not planning anything now, but if they don't treat us properly we will be doing something," the US President said during an appearance with the Netherlands Prime Minister Mark Rutte, according to Washington Trade Daily on 3 July.

"The WTO has treated the United States very badly and I hope they change their ways. They have been treating us very badly for many years, many years and that's why we were at a big disadvantage with the WTO," he said.

In response to questions from reporters on the draft bill - "United States Fair and Reciprocal Tariffs Act" - prepared by the White House for ignoring the most-favoured-nation and scheduled commitments at the WTO, a spokesperson acknowledged the existence of the draft but denied that it will be pursued at this juncture.

"The President asked his team to develop ideas to remedy this situation and create incentives for countries to lower their tariffs," the spokesperson said.

"The current system [at the WTO] gives the US no leverage and other countries no incentive. The American people should expect their leadership to fight for our workers and find ways to improve the system," the White House spokesperson said.

President Trump is expected to impose punitive tariffs on imports of autos and auto products on 6 July following the additional duties imposed on imports of steel products last month. The EU and Canada have implemented their retaliatory measures against the US' additional steel duties.

In response to Trump's threats and the draft bill leaked by Axios last week , several trade envoys said they are "astonished" and "shocked" at a draft bill - "United States Fair and Reciprocal Tariff Act" - that would enable President Trump to abrogate Washington's MFN and scheduled commitments at the World Trade Organization.

The five-page leaked draft bill, which may not sail through the US Congress given its far-reaching implications, is "worrisome" because of the ideas contained in it, said trade envoys, who asked not to be identified.

After all, the underlying objectives of the draft bill are repeatedly echoed by President Trump, said a trade envoy from an industrialized country, preferring anonymity.

"It raises fundamental questions about the division of powers between the executive and legislative body in the US," the envoy said.

Moreover, the draft leaked bill came at a time "when the US Senate is planning to take away a number of powers from the executive, especially those arising from Section 232," the envoy said.

"The draft bill, if passed, on grounds of securing reciprocity, then, it is a serious blow to the MFN principle as well as the integrity of scheduled commitments ," the envoy said. "And it means the US could not stay in the WTO," the envoy argued.

"Everyone has taken this with a great degree of astonishment and let us see how it comes out," the envoy added.

Another industrialized country trade envoy said that he would not attach much importance to the draft bill because there have been reports that it is exaggerated. "Unless I see it as a draft bill under consideration by the US Congress, I would not comment," the envoy said.

A third envoy said the "draft bill is so much against the WTO and doing this unilaterally would mean you are leaving the WTO."

"If they leave the organization it would be a very bad thing given their large share of 16% in the global trade," he argued.

"They are the architects of the WTO and I'm not saying if they leave, the WTO will collapse but it would be a very bad thing," the envoy maintained. "I don't want to prejudge what would come out of the draft bill but I cannot see that it will fly through Congress," the envoy added.

During the "last 12 months so many things happened, and I would not be surprised if it happens," the envoy concluded.

A developing country trade envoy said that such a bill would imply "they [the US administration] is simply discarding and bypassing the rules they designed and implemented all these years."

"The US extracted maximum gains from these rules," the envoy said.

"If anything, the developing countries had consistently said they are being disproportionately disadvantaged because of the WTO rules and denied policy space to develop their industries for generating employment in their economies," the envoy added.

In short, the developing and least-developed countries face the prospect of their hard-won S&DT flexibilities being taken away once and for all so as to ensure that the US stayed at the WTO, said trade envoys who asked not to be quoted.