Info Service on WTO and Trade Issues (Jul18/20)
27 July 2018
Third World Network
EU for "reforms" to end MFN, consensus decision-making
Published in SUNS # 8729 dated 25 July 2018
Geneva, 24 Jul (D. Ravi Kanth) - The European Union has called for
modernizing the World Trade Organization by undertaking comprehensive
reforms in the negotiating, dispute settlement, and monitoring functions
of the WTO, and for "plurilateral processes" for framing
new rules, trade envoys told SUNS.
Brussels has underscored the need for introducing "differentiation"
among developing countries for availing special and differential flexibilities,
said a trade envoy, who asked not to be quoted.
In a non-paper "for modernizing the World Trade Organization"
issued sometime last month, the EU said it disagrees with the "path
recently followed by the US to solve trade challenges."
However, said the EU, there is a need to address "the root causes
of the current crisis, namely gaps in the [WTO's] rulebook leading
The EU said the recent US actions such as blocking the appointment
of members to the WTO Appellate Body that serves as the final arbiter
in trade disputes, and the additional tariffs imposed by the US on
imports of steel and aluminum or the additional tariffs on products
from China, constitute "the more immediate threat."
But, WTO members should "not lose sight of the root causes of
the current crisis" for continued trade-distorting policies being
implemented by some major trading nations, it argued.
These "distortions", according to the EU, are "associated
with non-market policies and practices in major trading nations that
WTO does not seem to address adequately."
Effectively, the EU is echoing the charge constantly hurled at China
by the United States Trade Representative Ambassador Robert Lighthizer
that the WTO's rulebook is incapable of addressing the non-market
policies followed by China.
The EU maintained that it will accelerate "efforts and show its
intention to invest political will and capital in ensuring the WTO
remains vital, relevant and effective" to face the challenges
of the 21st-century trade realities.
The trade realities of the 21st-century, according to the EU, called
for making the WTO system "flexible enough to accommodate different
sets of ambition among its membership," and enable plurilateral
negotiations for accomplishing different sets of rule-making goals.
Further, the realities underscored the need for enforcing the rules
"effectively and efficiently" with requisite "checks
and balances" in the WTO system, the EU said.
After having worked with the US and Japan as part of the "trilateral"
process for the past seven months since the WTO's eleventh ministerial
meeting (MC11) in Buenos Aires, the EU said it had formulated the
proposals seeking to modernize the WTO as well as "creating a
circle of like-minded Members that will eventually lead to multilateral
Although many of the proposals in the EU's non-paper are targeted
against China and other developing countries, the EU said China must
remain "at the table from the beginning of the negotiations"
for modernizing the WTO.
Last week, after a meeting with China's premier Li Keqiang in Beijing,
Donald Tusk, president of the European Council on Monday called for
reforms of the WTO, with new rules on industrial subsidies and intellectual
property rights, according to a report in the Financial Times on 17
In response, the Chinese premier Keqiang said: "as I said at
the beginning of my meeting with Mr. Tusk and Mr. Jean-Claude Junker
(president for the European Commission), our negotiations are not
targeted at any third party and cannot be influenced by any third
"Leaving behind any other country - let's not even talk about
leaving behind the US or a country located between the European Union
and China - is unfeasible. Because this is a multilateral trade agreement,"
the Chinese premier maintained.
Brussels maintained that "the accession of China in the WTO and
its failure to converge towards the market economy model has revealed
gaps in the WTO rulebook that need to be addressed now."
"These gaps relate mostly to the way a government exercises its
powers to either give preferential treatment to its domestic operators,
i.e., through subsidies or skewed regulatory practices and policies
or to obtain the competitive advantages of foreign operators for its
own use (i.e., through forced technology transfer or failure to protect
intellectual property)," the EU argued.
The EU sought approval for a negotiating mandate from its member states
to "develop new rules to address current gaps in the rulebook
with regard to level playing field issues such as subsidies and state-owned
enterprises; investment market access; regulatory barriers to services
and investment, including rules on technology transfer."
The EU said "it has not been possible to advance negotiations
in the WTO for a number of years, with the exception of the Agreement
on Trade Facilitation and agricultural export subsidies" because
of the lack of flexibility within the system.
Consequently, the "like-minded Members" were unable to go
ahead with rule-making within the WTO as a group, the EU lamented.
Therefore, "plurilateral processes should be encouraged, whether
the benefits of such rule-making apply to all or only to the like-minded
members," the EU maintained.
The EU said it wants to "inject flexibility in the negotiating
process, by facilitating the conclusion of agreements among willing
Members which would form part of the broader WTO framework."
"The initiatives launched in Buenos Aires with joint statements
by large groups of Members committing to explore negotiations in some
specific areas are a good step in the direction of increased flexibility
in negotiations," the EU said.
Brussels said that it will "continue to support exploratory work
toward negotiations on a broad range of issues relating to the reduction
of trade costs, in particular in the areas of the joint statements
endorsed in Buenos Aires in December 2017 (such as the statements
on e-commerce, domestic regulation as well as investment facilitation
as signed by the European Union)."
In order to further improve the "WTO's negotiating function,"
members must also address "the question of development and special
[and] differential treatment," the EU argued.
"Since the creation of the WTO, the rapid economic growth among
developing countries has led to the emergence of significant differences
in economic development," the EU said.
Acknowledging that "special rules may be necessary to address
specific development needs," the EU said "a re-examination
of the way development flexibilities operate and who can benefit from
them is warranted, in order to ensure appropriate, targeted assistance
and ambitious disciplines."
Consequently, the EU said it will work towards developing "a
new approach to development and special and differential treatment
based on a case-by-case, needs-driven analysis."
In short, the EU wants to dismantle the current architecture for availing
special and differential flexibilities by developing countries and
introduce "differentiation" among developing countries to
decide who can avail of special and differential flexibilities on
a case-by-case basis.
The EU also emphasized "developing country Members to move toward
undertaking greater commitments."
For strengthening the WTO's effectiveness, the EU said "the dispute
settlement function of the WTO" which is currently "at grave
danger", must be strengthened and preserved.
The EU said it put forward a comprehensive proposal to "address
the concerns raised by the WTO Member blocking the Appellate Body
appointments to the extent that they have merit while preserving and
further strengthening the main features and principles of the WTO
dispute settlement system."
The EU said its comprehensive proposal "will - in a first stage,
and in order to unblock the appointments - aim at improving the efficiency
of procedures, at creating conditions for a better interaction between
the Appellate Body and the WTO Members while at the same time strengthening
the independence of the Appellate Body."
"In a second stage, substantive issues concerning the application
of WTO rules would be addressed," the EU argued.
As part of transparency and strengthening the regular committees of
the WTO , the EU called for enhancing "transparency by increasing
incentives for Members to comply with notification requirements and
by challenging wilful non-compliance".
It called for using "regular committees better to address trade
issues by empowering the WTO Secretariat."
The EU claimed its proposals are "comprehensive and far-reaching,
aiming to revitalise the organisation and bring the WTO back to the
centre of trade policy-making."
The EU's non-paper did not mention what needs to be done for addressing
"development," said a trade envoy who asked not to be quoted.
If anything, the EU's non-paper intends to strengthen the "system
designed by the US, the EU and other trade majors over the course
of the GATT and consolidated in the Uruguay Round negotiations that
established the WTO," the envoy said .
Another developing country trade envoy said Brussels' non-paper is
"replete with imbalances and inequities that prejudice interests
of many developing countries."
In conclusion, the EU's non-paper seeks to terminate the principle
of "consensus" on which the 164-member WTO functions.
After foisting the Doha Round of trade negotiations in 2001, and failing
to address the developmental concerns raised by developing countries,
and implement its own commitments under the WTO treaty to reverse
course and end subsidies distorting agricultural trade, the EU is
now pursuing a dangerous course to transform the WTO by excluding
the majority of developing and poorest countries from the decision-making