TWN Info Service on WTO and Trade Issues (Sept18/04)
13 September 2018
Third World Network

WTO DG, EU and Canada propose comprehensive WTO reform
Published in SUNS #8749 dated 11 September 2018

Geneva, 10 Sep (D. Ravi Kanth) - The World Trade Organization director-general Roberto Azevedo along with the European Union and Canada have prepared comprehensive reform proposals involving substantial changes in the "WTO monitoring function," the dispute settlement system, and the negotiating function to bring "trade rules for the twenty-first century," trade envoys told SUNS.

Close on the heels of the European Union's informal WTO reform proposal last month, which has been further fine-tuned by the DG, the EU trade commissioner Cecilia Malmstrom will present the ideas for reforming the three limbs of the WTO to the US Trade Representative Ambassador Robert Lighthizer in Brussels today (10 September).

Azevedo, according to a report in Politico on 5 September, had sent his chef de cabinet Tim Yeend to Brussels to discuss the reform proposals floated by the EU and Canada.

Subsequently, Canada has announced that it will hold a ministerial meeting of thirteen select countries - the EU, Japan, Canada, Switzerland, Norway, Australia, New Zealand, Singapore, Korea, Brazil, Chile, Mexico, and Kenya - in Ottawa on 24-25 October.

Ahead of the Ottawa meeting, Canada has issued a nine-page draft discussion paper called "Strengthening and Modernizing the WTO".

It argues that the structural transformation of the global economy has resulted in "insecurity and inequality."

It says benefits from the liberal international trading system "have not been shared fairly and that the existing rules no longer reflect a fair balance of rights and obligations."

But, most of the rules were framed in the Uruguay Round (UR) which was largely an agreement between the old Quad countries comprising the US, the EU, Japan, and Canada.

Many developing countries, particularly India and South Africa among others, repeatedly pointed to the "asymmetries" in rights and obligations arising from the UR commitments.

The developing countries had raised both implementation issues as well as gross asymmetrical commitments arising from the UR.

Without addressing the asymmetrical rules stemming from the UR, Canada now says that "the vast majority of trade continues to take place in a secure and predictable environment" but "the combination of disruption and paralysis has begun to erode respect for rules-based trade, and the institutions that govern it, paving the way for trade-distorting policies."

Consequently, "all three main functions of the WTO are currently affected: the monitoring of existing commitments appears unable to contain escalating trade tensions; beset by the increasing complexity of disputes, the dispute settlement system struggles to cope with demand; and longstanding negotiations to update the trade rules [to] reflect modern economic realities have delivered only modest results," Canada has argued.

Without mentioning the United States, which is singularly contributing to the lawlessness in the global trading regime with its crowbar trade measures in all areas, Canada has called for "action to restore confidence in the multilateral trading system and discourage protectionist measures and counter-measures."

"In the absence of a single WTO member with the capacity, willingness or credibility to lead, an alliance of members who share a commitment to the multilateral trading system can engage in a deliberate and transparent process to develop a progressively broader consensus on how to strengthen the WTO and modernize the trade rules," Canada has maintained.

Hence, the formation of a new "alliance" of thirteen countries in which Brazil, the champion of 20th century issues in agriculture and the founder of the G-20 group of developing countries, and Kenya from Africa, are the new entrants. The rest are known for their 21st century issues as well as for their traditional alliance with the US.

It has become an imperative to "restore confidence in the multilateral trading system and discourage protectionist measures", Ottawa has suggested.

"The structural transformation of the global economy, combined with technological change, has disrupted national economies and societies, some more so than others," Canada has maintained.

Canada has suggested actions and measures that it says would improve all the three arms of the WTO. The proposed measures cover (1) improving the efficiency and effectiveness of the monitoring function, (2) safeguarding and strengthening the dispute settlement system, and (3) laying the foundation for modernizing the substantive trade rules when the time is right.

As part of improvements for streamlining the monitoring system, Canada has suggested (a) improving notification and transparency of domestic measures [particularly in countries like China], (b) improving the capacity and opportunity for deliberating on domestic trade measures, including reports from the WTO Secretariat, and (c) improving the opportunities and mechanisms to address specific trade concerns.

For strengthening "the notification and transparency of domestic measures," Canada has suggested that "counter-notifications from other members and independent information gathering by the Secretariat" needs to be pursued.

Recently, the US had issued a controversial counter notification against India's notification of domestic support payments. India had dismissed the US counter notification as baseless.

As part of the WTO monitoring system, Canada has called for improving "the capacity and opportunity for deliberation" as well as "new and innovative approaches to multilateral dialogue on trade" from diverse sources.

Further, Canada has called for a "robust mechanism" in all regular bodies “for sharing information about specific concerns between relevant bodies, and providing for referral to confidential third-party mediation and conciliation when appropriate."

Canada's proposals for "safeguarding and strengthening the Dispute Settlement System" underscore the need for "the availability of compulsory, binding and impartial dispute settlement" system.

It has suggested three major issues for safeguarding and strengthening the WTO dispute settlement system.

Canada has called for "diverting some disputes or issues from adjudication" because "adjudication has taken on a more prominent role in sustaining trade cooperation than originally envisaged, in some cases substituting for negotiation[s]."

Therefore, "diverting certain disputes or issues from adjudication can be accomplished through renewed commitment to self-restraint, the improvement and use of alternative mechanisms such as mediation to settle disputes or at least narrow their scope, and possibly even formal exclusion of certain disputes or certain issues from the jurisdiction of adjudication," Canada has

Further, the adjudicative proceedings need to be streamlined by including "alternative procedures tailored to specific kinds of disputes, supplementary procedures for specific features of existing proceedings and a mechanism for more interaction between panel and appeal level (i.e. remand)," Canada has argued.

Canada has also called for "updating and ensuring appellate review" in the face of the "impasse over the appointment of Appellate Body members."

It has underscored the need for "addressing concerns raised about the functioning of the Appellate Body and perhaps even about perceived imbalances in the rights and obligations of members [a concern raised by the United States]."

Therefore, it wants the participating ministers in the scheduled Ottawa meeting next month "to acknowledge the concerns expressed by some members and indicate a willingness to work with those members to find mutually agreeable solutions."

"The first set of concerns relate to whether the Appellate Body has, through its clarifications of WTO provisions, added to the rights and obligations of WTO members," Canada has argued, pointing out that "addressing concerns about specific obligations raised in the past disputes may require agreement of members to override those interpretations, which may [be] difficult."

In the meantime, Canada says, "mechanisms might be developed that allow members more opportunity to provide binding and non-binding guidance to adjudicative bodies on specific issues."

Such mechanism would enable "holding thematic discussions of issues that arise in disputes, and developing a formal pathway for some of these discussions to progress to the adoption, by consensus, of "authoritative interpretations" (a decision-making option already available in the WTO Agreement) of the WTO obligations in question."

In the face of considerable criticism against the functioning of the WTO dispute settlement system, particularly from the US, Canada has suggested several actions such as:

* Narrowing the scope for "advisory opinions" by clarifying that the primary objective of the dispute settlement system is the settlement of specific disputes and that only findings that are necessary to achieve this objective are required;

* Focussing appellate review on legal issues by clarifying the standard of review to be applied by the Appellate Body to panels, especially with regard to factual findings and those related to the operation of domestic law;

* Promoting a more robust adjudicative dialogue by allowing for the express ion of minority views in panel and Appellate Body apply only to the disputes in which they are adopted; and

* Developing guidance related to consultations with parties when the Appellate Body is unable to meet its deadline.

To beef up the negotiating function for "modernizing the trade rules for the twenty-first century," Canada wants discussions on (1) continuing discussion on outstanding issues from the Doha Round such as tariff escalation and peaks, agricultural support and development issues, and especially those facing least developed countries; (2) modernizing the rules for the modern economy and address the social dimensions of globalization, such as digital trade, incl usive trade, sustainable development, disciplines for micro, small, and medium enterprises, investment and domestic regulation; and (3) addressing more recent concerns about distortions of competitive conditions, for example, through the market-distorting effects of SOEs [state-owned enterprises], industrial subsidies, transfer of technology and trade secrets, and transparency.

In the absence of a multilateral consensus for taking on new obligations, countries must be free to move in various configurations in areas where they are willing to undertake new disciplines through binding plurilateral initiatives for eventual multilateralization.

"They could take on several forms, both inside and outside the WTO legal framework," Canada has suggested.

For extending special and differential flexibilities for all developing countries during the negotiations for new rules, Canada says a new approach based on differentiation or what was done in the Trade Facilitation Agreement must be adopted.

As part of "the formation of actions" needed urgently, Canada says "the most realistic choice of instrument in the near term will be likely needed to be plurilateral in participation", as "new binding multilateral agreements or significant institutional changes to the WTO are unlikely in the near term, alternative instruments may still be feasible."

Canada has also called "for more operational actions, instruments such as plurilateral codes of conduct of procedural agreements."

Further, new approaches must be adopted "where multilateral consensus may be achievable on operational actions, but where treaty commitments are still too ambitious," it has argued.

The new approaches suggested by Canada include WTO bodies adopting "non-binding instruments (i.e., soft law) covering both the procedural aspects of their work and incremental adjustments to existing commitments", the General Council and the DSB to make greater use of formal decisions to administer their work, and adopting "authoritative interpretations" under Article IX.2 of the WTO Agreement to clarify certain existing obligations for completing "previously incomplete negotiations, fill[ing] gaps that existed or that have emerged through changes in commercial practices, or override interpretations that have emerged in past disputes."

In conclusion, the reforms suggested by Canada and the EU last month fundamentally undermine the existing multilateral architecture of consensus-based decision-making and the special and differential treatment framework.

Both Canada and the EU have specifically targeted China for bringing new disciplines in subsidies and state- owned enterprises while remaining silent on the egregious violations committed by the US.

Clearly, there seems to be an opportunistic gang-up of the Northern countries to undermine the consensus principle and the special and differential architecture.