TWN Info Service on WTO and Trade Issues (Oct18/10)
16 October 2018
Third World Network

Secretariat violates WTO Treaty to promote US agenda at WTO
Published in SUNS #8773 dated 15 October 2018

Geneva, 12 Oct (D. Ravi Kanth) - The World Trade Organization (WTO) Secretariat has violated the Marrakesh Agreement by advocating a set of reforms without prior approval from its 164 members.

The reforms proposed by the WTO Secretariat, along with the World Bank and the International Monetary Fund (IMF), include jettisoning the consensus principle, launching plurilateral negotiations on new issues, and introducing a case-by-case approach for availing special and differential flexibilities, several trade envoys told SUNS.

In a 34-page joint report along with the World Bank and the International Monetary Fund, the WTO crossed the Marrakesh Rubicon that clearly laid out rules for the conduct of business for the Secretariat.

[In 1993, when the Uruguay Round (UR) accords and Marrakesh Treaty were settled at the level of officials, despite repeated efforts of then GATT DG , Peter Sutherland, the UR participants, including the US, EU and leading developing countries like India and Brazil, refused any role for the WTO secretariat, akin to that of executives of UN and system organisations. The secretariat was mandated to undertake only what members (at Ministerial Conferences or General Council) asked it to do. It is time developing countries call the WTO DG to account, and decline to allow the WTO-WB-IMF declaration to be tabled at WTO bodies. It may also be time for developing countries to decline to enable Azevedo's  remarks and interventions before WTO bodies. - SUNS]

Even though the WTO Secretariat is required to remain neutral in negotiations without advancing any member's positions, the reforms proposed in the joint report tilted towards the proposals made by the United States at the WTO's eleventh ministerial conference (MC11) held in Buenos Aires, Argentina in December 2017.

The Secretariat has "opted" for a change by setting aside the consensus principle on grounds that it is disrupting the negotiating activity at the trade body, said a trade envoy from South America, who asked not to be quoted.

Moreover, the report remained totally silent on the existential crisis facing the dispute settlement system, particularly the gradual demise of the Appellate Body.

Significantly, even as the report vociferously argued for new "rules" and "rulebook" in five areas - electronic commerce, investment facilitation, disciplines for micro, small, and medium enterprises (MSMEs), domestic regulation for services, and gender - that would penetrate into the autonomous space of domestic regulatory structures, it failed to answer the vital question as to how the se rules are going to be enforced and whether there will be a dispute settlement system to oversee trade disputes that would arise from the new rules in these areas.

The report's central goal is aimed at preparing the ground for the WTO's 12th ministerial conference to be held in Astana, Kazakhstan, in June or July 20 20, for a formal burial of the Doha Round and simultaneous launch of plurilateral negotiations in electronic commerce, investment facilitation, disciplines for MSMEs, domestic regulation for services, and gender, several trade envoys familiar with the report told SUNS.

The joint report, titled "Reinvigorating Trade and Inclusive Growth", in which the Secretariat provided major inputs, argues that "reliance on an approach [consensus principle] in which all members must agree on all issues [the Single Undertaking] risks driving negotiating activity outside the WTO."

Under the sub-title "Role of the International Trading System," the WTO has argued that "the practice of bundling negotiating issues together in giant, all-or-nothing trade rounds [based on the Single Undertaking] has become extremely difficult to manage."

The report suggested that the "single-undertaking approach", which was earlier adopted in the Uruguay Round and now the unfinished Doha Round, "became increasingly vulnerable to delays and deadlocks as progress on more feasible issues was held back by a lack of progress on more controversial and intractable ones."

According to the report, "the multilateral trading system has not always relied on large-scale "single undertakings" like the Uruguay Round."

The report unabashedly spoke about the American priorities in the trade policy since 1995.

The US had all along pressed for "compact" agreements such as the ITA (Information Technology Agreement), the "Trade Facilitation Agreement," and Competition Policy among others.

But the European Union, which was required to make a payment in agriculture, had proposed the Millennium Agreement based on a Single Undertaking that would include the four controversial Singapore Issues such as trade and investment, government procurement, competition policy, and trade facilitation.

Without providing the historical background, the report said "when the WTO was created in 1995 many expected it would foster a flow of new agreements on various topics."

It argued that "many approaches have been deployed over the years - some fully multilateral, and others not," suggesting that "key parts of the current WTO rule book were initially agreed by and applied (in the 1970s and 1980s) only to those countries adopting the Tokyo Round "Codes"."

"In certain areas - especially those emerging issues where policy innovation is needed and where not all 164 WTO members are equipped or ready to engage - some countries wish to move further and faster than others, and are doing so," the report maintained.

[In terms of the WTO Treaty, such plurilateral accords need agreement by consensus of all Members at Ministerial Conference. - SUNS]

The report made a strong case for launching plurilateral negotiations into electronic commerce, investment facilitation, disciplines for micro, small, and medium enterprises, domestic regulation for services, and gender.

These "open-plurilateral discussions on e-commerce, investment facilitation, services domestic regulation, and micro, small, and medium scale enterprise s (MSMEs)" are not aimed at "exchanging market access concessions but to improve regulatory coordination - in order to minimize policy frictions and advance shared goals in a "least trade restrictive" way - they could lead to a more cooperative, less mercantilist, approach to WTO negotiations in the future."

New rules negotiated through plurilaterals in e-commerce, domestic regulation, investment facilitation, disciplines for MSMEs, and gender "would likely be inherently non-discriminatory - because they involve domestic regulations that cannot be easily tailored to benefit specific trade partners - making concerns about "discrimination," like calculations of "reciprocity," less relevant."

The report maintained that the General Agreement on Trade in Services (GATS ) offers a structure for new agreements in electronic commerce, domestic regulation for services, investment facilitation, disciplines for micro, small, and medium enterprises (MSMEs) and gender.

It explained the core features of the GATS but did not reveal the gross asymmetries in the market access commitments of Mode 3 concerning commercial participation and Mode 4 dealing with the movement of natural persons.

On electronic commerce, the report advocated that members must be guided by the Comprehensive Progressive Trans-Pacific Partnership (CPTPP) which had replaced the TPP (Trans-Pacific Partnership) Agreement.

The report (in Box 2) has cited the following benefits flowing from the CPT PP Electronic Commerce chapter:

* The CPTPP seeks to promote the free flow of data and prevent "localization requirements" of technologies and servers, while allowing the pursuit of legitimate public policy objectives. It includes disciplines ensuring that companies and consumers can access and move data freely (subject to safeguards, such as for privacy).

* CPTPP countries retain the ability to maintain and amend regulations related to data flows, including those oriented to protecting privacy, but have under aken to do so in a way that does not create barriers to trade.

* Also innovative [in the CPTPP] is the prohibition against forcing businesses to build data storage centers or use local computing facilities in CPTPP markets.

* CPTPP countries have committed not to impose these kinds of "localization" requirements on computing facilities, thus ensuring that information can travel across borders and business and consumers can benefit from the advantages o f the "cloud."

* Restrictions on data flows and localization requirements may be imposed for a "legitimate public policy objective," including the protection of privacy, to the extent that that measure is not a disguised restriction to trade, or that it imposed restrictions "greater than required" to achieve the desired policy objective.

* Another new provision in the chapter is the prohibition of measures that force suppliers to share software source code with governments or commercial rivals when entering a CPTPP market.

* Continuing the trend found in previous trade agreements, the chapter prohibits the imposition of customs duties on digital products, including products distributed electronically, such as software, music, video, e-books, and games.

* A similar provision prevents CPTPP countries from favouring national producers or suppliers of such products through measures such as discriminatory taxation or outright blocking or other forms of content discrimination.

* To facilitate electronic commerce, the chapter includes provisions encouraging CPTPP Parties to promote paperless trading between businesses and the government, such as electronic customs forms; and providing for electronic authentication and signatures for commercial transactions. The agreement also requires CPTPP members to maintain a legal framework for electronic transactions consistent with the principles of the UNCITRAL Model Law on Electronic Commerce 1996 or the United Nations Convention on the Use of Electronic Communications in International Contracts.

* To protect consumers, CPTPP members agree to adopt and maintain consumer protection laws related to fraudulent and deceptive commercial activities online and to ensure that privacy and other consumer protections can be enforced in CPTPP markets. Parties also are required to have measures to stop unsolicited commercial electronic messages (spam). The agreement recognizes that governments have different ways of implementing privacy protections, and CPTPP promotes interoperability between those diverse legal regimes.

Many developing countries, including China and India among others, have proposed for retaining the data in the local servers and sought clear localization requirements.

Trade envoys from the developing and poorest countries said the Secretariat has chosen to "compromise" the core principles of the Marrakesh Agreement that established the 164-member inter-governmental trade body.

The Secretariat's open advocacy for undermining the special and differentia l flexibilities and for launching plurilateral negotiations on all issues, except fisheries subsidies, does not augur well for the organization as it could polarize the membership horizontally, said trade envoys.

The long-standing developmental issues, particularly improving the special and differential flexibilities, have been ignored in the reforms proposed by the WTO Secretariat, said a trade envoy from South America, who asked not to be identified.

More crucially, the Secretariat's reforms which lean towards addressing the US' concerns have also completely ignored the most important issue of strengthening the dispute settlement system by filling the vacancies at the Appellate Body.

In crux, there has never been such a moment in the history of the GATT/WTO when the WTO Secretariat has chosen to behave like a global Minotaur in trade by openly undermining the rules-based organization.

The writing on the wall for developing and poorest countries is loud and clear: either they survive by safeguarding the consensus principle, the special and differential flexibilities, and the multilateral trade negotiating framework of give-and-take, or face the prospect of becoming vegetables forever.