TWN Info Service on WTO and Trade Issues (Oct18/17)
24 October 2018
Third World Network

Ottawa meet to initiate first steps to launch new talks at MC12
Published in SUNS #8779 dated 23 October 2018

Geneva, 22 Oct (D. Ravi Kanth) - Thirteen trade ministers are expected to initiate the first steps in Ottawa, Canada on Wednesday for launching a new round of trade negotiations in Astana, Kazakhstan in June 2020, that could fundamentally transform the World Trade Organization from a multilateral to a plurilateral trade body almost on a permanent footing, trade envoys told SUNS.

The thirteen trade ministers who will congregate in Ottawa on Wednesday (24 October) are from Canada, the European Union, Japan, Switzerland, Norway, Australia, New Zealand, Kenya, Singapore, South Korea, Mexico, Chile, and Brazil.

The United States, China, India, and South Africa among others are not invited to the meeting.

But Canada, which is hosting the two-day meeting, has already sounded the US which apparently has given the green signal but with a caveat that Washington will not support the proposed reforms for the Dispute Settlement Body, particularly filling the four vacancies at the Appellate Body, said a person familiar with the preparations for the Ottawa meeting, preferring anonymity.

On Friday (19 October), trade envoys from the 13 participating countries for the Ottawa meeting finalized a joint communique that will call for adopting "flexible" approaches for pursuing new issues for making rules at the World Trade Organization, immediate resolution of the crisis at the Dispute Settlement Body by filling the vacancies at the Appellate Body, and revitalization of the transparency and notification mechanism of the trade body.

The communique will emphasize that issues in the three pillars - the negotiating function, the dispute settlement system, and transparency and notification mechanism - must be pursued simultaneously.

As regards reforms in the negotiating function, the Ottawa communique will insist on pursuing "flexible" approaches for new issues at the WTO.

The EU, which is advancing "flexible multilateralism" and "pragmatic multilateralism", wants both multilateral and plurilateral approaches.

The EU wants that issues such as fisheries subsidies and trade-distorting industrial subsidies among others must be approached on a multilateral track, according to people familiar with the development.

Brussels wants to continue with the plurilateral negotiations for making rules in electronic commerce, government procurement in services, investment facilitation, disciplines for micro, small, and medium enterprises (MSMEs), and trade and gender among others on a plurilateral track.

The EU's "flexible multilateralism" or "pragmatic multilateralism" seems akin to what Brussels had proposed - i.e., "multi-functionality" in the Doha agriculture negotiations to stall comprehensive commitments for reducing domestic support and market barriers in agricultural market access.

Many developing countries had likened the EU's argument of "multi-functionality" as a ruse for continuing with its heavily-protected farm programs as embodied in the Common Agricultural Policy, said a trade envoy from a developing country, who asked not to be quoted.

Brazil, which had opposed the EU's negotiating positions in agriculture and created the G-20 group of developing countries to oppose the protectionist positions of the EU and the US in 2003 before the Cancun ministerial meeting, has now switched ranks and joined the EU by adopting common positions in agriculture since the past four years, said a South American trade envoy, preferring anonymity.

Coming back to the Ottawa meeting, the participants are expected to adopt a Christmas tree approach for starting work on several proposals at warp speed.

Brazil and Kenya, for example, insisted that issues concerning "development", particularly special and differential flexibilities and differentiation, must be pursued as a top priority.

Kenya has already supported "differentiation" that seeks to remove some countries such as China, India, and South Africa among others from availing special and differential flexibilities.

In the Canadian discussion paper on issues pertaining to "the development dimension," it is argued that differing levels of development among developing countries need to "be accommodated in a way that strikes a balance between reciprocity and flexibility."

Canada proposed that "a new approach is required, one that recognizes the need for flexibility for development purposes while acknowledging that not all countries need or should benefit from the same level of flexibility."

Therefore, Canada has proposed a new approach that includes the following markers:

* recognizing that while the development needs of certain countries justifies transitional implementation, the long-term objective is the convergence and full implementation of all obligations by all Members;

* developing categories of need, differentiated by obligation, by country and by the length of the transition required, to be applied based on evidence of need and subject to negotiation; and

* linking implementation of the most onerous obligations, at least for countries with the least capacity, to the acquisition of capacity to do so, for which other Members might have an interest in providing support and assistance.

The EU demanded that issues that would address the "level playing field" such as trade-distorting industrial subsidies, state-trading enterprises, and disciplines to stop forced transfer of technologies, and theft of intellectual property among others must remain high on the agenda.

In the discussion paper for the Ottawa meeting, Canada has argued that "modernizing the trade rules for the 21st century" cannot happen as "a single undertaking, at least not for the foreseeable future."

Therefore, Canada wants "alternative approaches to cooperation and rule-making" that would reflect the "realities of a WTO Membership with increasingly diverse needs, levels of development and capacity."

And those alternative approaches, according to Canada, must "allow for differentiated participation in negotiations and for accommodating differentiated levels of development."

In short, Canada wants "differentiation" in negotiations so as to exclude some members. Effectively, this would bring a "them vs us", said a trade envoy who asked not to be quoted.

Canada also proposed a combination of issues that includes:

* outstanding from previous negotiations, including issues from the Doha Round such as agricultural support and development issues, and especially those facing Least-Developed Countries;

* required to modernize the rules for the modern economy and address the social dimensions of globalization, such as digital trade, inclusive trade, sustainable development, MSMEs, investment and domestic regulation; and

* required to address more recent concerns about distortion 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.

Canada maintained that "while no WTO Member should be expected to take on obligations to which it did not consent, likewise no Member should expect to be able to prevent others from moving forward in various configurations in are as where they are willing to make greater commitments which could vary from political statements to more ambitious binding agreements, e.g. plurilateral initiatives."

"Binding initiatives should be inclusive, open and provide clear rules for accession by other Members or eventual multilateralization," Canada maintained.

Such initiatives could take on several forms, both inside and outside the WTO legal framework:

* "open" agreements where the benefits are extended on a Most-Favoured Nation (MFN) basis (e.g., Information Technology Agreement), if critical mass of coverage is achieved or the risk of free-riding is low, [and] do not require agreement of all Members;

* "closed" agreements that apply only to the participants (e.g., Government Procurement Agreement), [and] are subject to agreement by all Members, but might be feasible in certain areas;

* closed agreements can also be pursued outside the WTO framework (e.g., TiSA), but these may be less transparent and may not be subject to WTO dispute settlement.

For addressing the current crisis in the dispute settlement system, particularly the Appellate Body, Canada has proposed a two-phase approach.

As part of the first phase, members must address issues concerning "whether the Appellate Body has, through its clarifications of WTO provisions, added to the rights and obligations of WTO Members."

The second set of concerns, according to Canada, must involve "systemic and procedural practices of the Appellate Body."

Actions to address these concerns could include:

* 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;

* focusing 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 expression of minority views in panel and Appellate Body reports and reiterating that interpretations adopted by the 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.

Lastly, Canada has put forward several proposals for strengthening transparency and notification procedures at the WTO.

During the meeting of the 13 trade envoys last Friday, Brazil, Australia, New Zealand, and Chile pressed for addressing the central issues of trade-distorting farm subsidies in agriculture.

But Switzerland, Japan, and Korea among others opposed the inclusion of agriculture in the Christmas tree approach.

In crux, a large majority of developing and poorest countries face a moment of "float or drown" in the tsunami caused by a group of industrialized and developing countries at the World Trade Organization. If they fail to join hands, they could find themselves drowned by the concerted assault launched by major developed countries with the support of some developing countries, said
trade envoys, who asked not to be quoted.