TWN Info Service on WTO and Trade Issues (Jan19/08)
29 January 2019
Third World Network

Ministers unlikely to address “systemic” crisis facing AB at Davos

Published in SUNS # 8832 dated 25 January 2019

Geneva, 24 Jan (D. Ravi Kanth) – An informal meeting of select trade ministers from 34 countries in Davos on Friday is unlikely to address the “systemic” crises facing the World Trade Organization’s dispute settlement system, in particular the future of the Appellate Body (AB), trade envoys told SUNS.

The half-day meeting being hosted by Switzerland on the margins of the annual World Economic Forum (WEF) conclave of global political and economic elite will focus largely on “WTO reform or modernization” being advanced by the United States and other major developed countries and their allies in the developing world.

On 16 January, the US had circulated a proposal about “differentiation” aimed at denying special and differential flexibilities for major developing countries such as China, India, South Africa, Indonesia, and Brazil among others.

The US called for dismantling the current self-declaration approach for determining the development status of a country, arguing that this self-declaratory approach prevents “true liberalization while anchoring all members to a world that no longer exists.”

“Self-declaration and its first order consequence – inability to differentiate among members – puts the WTO on a path of failed negotiations,” the US had argued .

“It is also a path to institutional irrelevance, whereby the WTO remains anchored to the past and unable to negotiate disciplines to address the challenges of today or tomorrow, while other international institutions move forward,” the US claimed.

Against this backdrop, the half-day meeting being convened by Switzerland will focus on “WTO reform or modernization” due to unprecedented challenges in international trade.

Trade ministers of the European Union, Japan, Canada, Switzerland, Norway, Australia, New Zealand, China, India, Argentina, Brazil, Colombia, Costa Rica, Egypt, Hong Kong-China, Indonesia, Kazakhstan, Kenya, Korea, the coordinators of the least-developed countries and the ACP (Africa, Caribbean, and Pacific) group, Malaysia, Mexico, Morocco, Nigeria, the Philippines, Russia, Saudi Arabia, Singapore, South Africa, Turkey, and Thailand among others will discuss on how to proceed with WTO reforms.

The US will be represented by the deputy US Trade Representative and trade envoy to the WTO, Ambassador Dennis Shea.

The outgoing WTO General Council chair, Ambassador Junichi Ihara of Japan, and the WTO Director-General Roberto Azevedo will assist the ministers during the half-day meeting.

The one-page agenda for the meeting issued by the former Swiss economic affairs, education and research minister Johann N. Schneider-Amman last month says “discussions on WTO reform or modernization have gained momentum in various forums with increasing political engagement.”

“At this critical juncture,” according to Schneider-Amman, “it is important to enhance dialogue and devise actions for improving the WTO and addressing present and future challenges in coherence with the economic realities of the 21st century.”

However, he remained silent on the grave systemic crisis facing the Appellate Body because of repeated blocking by the United States of the selection process for filling the four current vacancies.

The AB, reduced to three members since September 2018, will become totally dysfunctional from 11 December 2019 when it will be left with only one member.

During the General Council (GC) meeting last month, the US failed to provide any “options” for addressing the concerns it had raised about the functioning of the AB.

India and China had sought to know from the US at the GC meeting on 13 December 2018 whether Washington will offer “options” for the specific issues it had raised about the functioning of the AB, especially the AB’s failure to adhere to the 90-day limit for issuing findings or overstepping the core provisions of the Dispute Settlement Understanding (DSU), according to trade envoys, who asked not to be identified.

At the GC meeting, the US simply rejected a proposal from India, China, and the European Union, saying the proposal from the “trilateral” will make the AB “even less accountable.”

The US trade envoy spoke briefly about Washington’s core concerns about the AB and how it strayed away from adhering to the rules established in 1995.

Ambassador Shea said the proposal by the “trilateral”- India, China, and the EU – intends “to change the rules to authorize and accommodate the very approaches that would make the AB even less accountable.”

The US had made it very clear that the AB members must follow the rules that were agreed to in 1995, he added.

But US did not provide any “option” for addressing its specific concerns, said several trade envoys, who asked not to be quoted.

India said the “existential crisis” facing the AB is its gravest concern. ” We believe that an independent, two-stage dispute settlement system is imperative for the fair enforcement of the rules of international trade,” India maintained.

“The impending paralysis and possible disappearance of the Appellate Body will be a fatal blow to the credibility of the WTO,” India’s trade envoy Ambassador J S Deepak argued.

“Without a system of enforcement of existing rules, the appetite for making new rules or for reforms would be poor,” he maintained.

“Therefore, an expeditious resolution of the Appellate Body crisis needs to be at the top of the agenda in the coming weeks and months,” he emphasized.

In the WTO, the normal practice is that any “Member” who has specific concern on any issue offers possible options on how to address it, Ambassador Deepak pointed out.

“However, we find ourselves in the unique position where the Member [the US ] who has issues with the functioning of the Appellate Body has failed to put forth a single proposal to address their oft-repeated concerns,” India had said.

Intervening twice during the GC meeting, China’s trade envoy Ambassador Dr Zhang Xiangchen said “the United States views that some suggestions by EU, China and India will make the Appellate Body even less accountable.”

“Could the United States give a response to the proposal regarding which of its concerns have been addressed and which are not?” Ambassador Dr Xiangchen asked.

“Does the United States have specific suggestions on how to address those remaining concerns?” China asked.

“If not, is it the intention of the United States to sit back and wait for the paralysis of the Appellate Body,” Ambassador Dr Xiangchen pointedly asked.

The US trade envoy, who remained silent to the specific questions raised by India and China, merely said the US would like to engage in the deep discussions with other Members on this issue.

Against this backdrop, the Swiss meeting on the margins of the WEF ought to have flagged the AB issue as the core priority for trade ministers to address, said trade envoys, who asked not to be quoted.

“The meeting will be dominated by discussion on WTO reforms, without addressing the most important issue concerning the AB crisis,” said a trade envoy who asked not to be quoted.

“At the gathering in Davos,” the Swiss host wants the participants to “make a frank assessment of the current situation”, without elaborating on the fundamental aspects of the crisis afflicting the inter-governmental trade body because of the intransigent positions adopted by one member, the United States.

“We should also discuss concrete ways – including ideas for reforming the W TO – to advance the trade agenda and to preserve the relevance and credibility o f the multilateral trading system for all members,” the former Swiss Minister Schneider-Amman added.

Switzerland will be represented at the informal meeting by the new economic affairs, education and research minister, Mr Guy Parmelin.

Prior to the informal ministerial meeting on Friday, the signatories of the informal plurilateral joint statement group on electronic commerce will hold a breakfast meeting to issue a political statement for accelerating the negotiations.

Trade ministers from the US, the EU, Japan, Canada, Switzerland, Norway, Australia, New Zealand, Bahrain, Brazil, Chile, Colombia, Honduras, Hong Kong-China, Israel, Korea, Malaysia, Mexico, Moldova, Myanmar, the Philippines, Russia, Singapore, Chinese Taipei, Turkey, Thailand, and Ukraine have already finalized the political statement for accelerating the e-commerce negotiations.

China is expected to attend the breakfast meeting on e-commerce as an observer.

WTO director-general Roberto Azevedo will participate in the breakfast meeting, according to the agenda obtained by SUNS.

Clearly, the plurilateral breakfast statement to be issued on Friday from he margins of the WEF meeting is an attempt to further sabotage the World Trade Organization’s multilateral discussions on e-commerce under the 1998 work program, said a trade envoy, who asked not to be quoted.