TWN Info Service on WTO and Trade Issues (Mar19/09)
19 March 2019
Third World Network

US, working closely with DG, pushing for WTO reforms

Published in SUNS #8866 dated 14 March 2019

Geneva, 13 Mar (D. Ravi Kanth) – The United States Trade Representative (USTR) Ambassador Robert Lighthizer has stated categorically that Washington is aggressively pushing for comprehensive reforms at the World Trade Organization by “work[ing] closely with the very-able Director-General Roberto Azevedo.”

In a candid statement to the US Senate Finance Committee on Tuesday (12 March), Ambassador Lighthizer said his team is very active at the WTO on reforms of the Appellate Body (AB), the WTO’s negotiating function, the removal of self-designation of developing countries to claim special and differential treatment (S&DT), and enhancing the role of the secretariat by “re-energizing” the committee system.

The USTR said that the plurilateral agreements is the best way to get thing s done at the WTO in terms of setting new rules. “We joined the WTO in the hope that it would help us promote stronger and more efficient markets – unfortunately, those hopes have too often been disappointed,” he said.

“We work closely with the very-able Director-General, Roberto Azevedo, and we are busy on the various standing committees that do the actual day-to-day work of the organization,” he told Senators, who approved his “aggressive” approach for transforming the WTO to address the American concerns.

“It is unfortunate that this [aggressive] tactic is the only way the US [has] been able to get serious attention from other members,” said Senator Chuck Grassley, the Republican chair of the Senate Finance Committee.

“I am not necessarily endorsing this [aggressive] approach, but now that we are here we can’t waste time lamenting the tactics,” said Senator Grassley.

“WTO members must take the United States seriously and commit to meaningfully addressing our concerns,” Senator Grassley said during the meeting that was specifically convened to discuss the WTO and the ongoing reforms.

In his initial statement to the Senate Finance Committee, the USTR outlined the work undertaken by the Trump administration on various fronts, including the bilateral trade front.

He said the US had exported $2.5 trillion worth of goods and services, with exports “surging” at 12.8% from 2016 to 2018 and imports growing at 14.8%.

Commenting on the US initiatives at the WTO, Ambassador Lighthizer said “the WTO is a very important organization, as you say, but we believe it has significant deficiencies.”

He lamented that the WTO “has migrated from a negotiation forum to a litigation forum” over the past 20 years.

Incidentally, the last 20 years coincided with the launch of the Doha Devel opment Agenda (DDA) trade negotiations as well as some significant rulings issued by the Appellate Body against the illegal practices of the US, particularly in terms of the Anti-Dumping and Countervailing duty (AD/CV) agreement of the WTO, and the US use of the “zeroing” methodology for calculating dumping margins.

“This development [i.e., the migration from a negotiating forum to litigation forum] has unfortunate consequences [and] developing new trade agreements has been stifled, and the commitment to the organization has been undermined,” said Ambassador Lighthizer, without offering concrete evidence.

[The USTR thus skipped over the early years when the US pioneered the litigation approach, as against the negotiating mode – as when the US launched a dispute over import restrictions by India on balance-of-payments grounds, even when the issue was pending before the WTO’s BOP Committee and negotiations were continuing there to find an acceptable solution for the phasing out of the restrictions.

[The Appellate Body (constituted at the beginning when the US was given the sole prerogative of vetoing names, and had packed the AB with an initial membership known to be US supporters), upheld the US claim that the adjudication process could be invoked even when the matter was before the negotiating body. Nor did the USTR mention that in many of the AD/CV cases that the US lost, the USTR in his previous avatar was legal counsel for the US steel industry. SUNS]

The US along with the European Union and other developed countries had launched the DDA negotiations in 2001 immediately after the 9/11 terrorist attacks, promising the developing countries that their specific concerns on the implementation issues as well as the existing inequities, particularly in the reduction of the trade-distorting farm subsidies, would be addressed.

But the US along with other industrialized and several developing countries had walked away without delivering on the mandated Doha commitments after pocketing the Trade Facilitation Agreement with the able assistance of the WTO director-general Azevedo at the WTO’s ninth ministerial meeting in Bali, Indonesia, in December 2013, said a trade envoy, who asked not to be quoted.

Returning to the Trump administration’s constant refrain that the US allows goods to come into the American market at low or zero import tariff while other countries impose high tariffs on American goods, Ambassador Lighthizer said “many countries have very high “bound” tariffs and other barriers, and it is difficult to see how pressure can be created to get them to reduce either.”

The USTR claimed that “many members have gotten into the habit of not living up to their basic obligations,” stressing “the requirements for subsidy notification by members is often ignored, and numerous transparency obligations go unfulfilled on a regular basis.”

Ambassador Lighthizer, however, remained silent on Washington’s own failure to live up to its obligations in implementing various Dispute Settlement Body rulings and recommendations, as well as the late filing of farm subsidy notifications until recently.

[Save for 2-3 exceptions, the US has so far failed to implement any ruling or recommendation involving changes to its statutes or regulations needing statutory approval on a range of the WTO’s multilateral trade agreements. SUNS]

Without mentioning the recent US proposal to deny special and differential treatment to several developing countries such as China, India, Brazil, South Africa, Indonesia, and other countries in future trade negotiations and commitments, the USTR said “another problem is the anomaly that many members self-declare themselves to be developing countries even though they are among, in many cases, the richest in the world.”

Commenting on the crisis at the Appellate Body and the dispute settlement system, Ambassador Lighthizer said “the dispute settlement process is in need of reform.”

“We have an Appellate Body that often does not follow its own rules,” said Ambassador Lighthizer, arguing that “the Administration has complained about this, as have its previous administrations.”

The US, however, has not offered any concrete suggestion on how to address its concerns to reform the Appellate Body until now.

The European Union, China, and India among others had made concrete proposals for addressing the specific issues raised by the US for improving the AB’s functioning.

The US had opposed the solutions tabled by the EU, China, and India among others for addressing all the issues concerning the AB.

The US has repeatedly blocked proposals from more than 75 countries for filling the four vacancies at the AB so as to ensure that it continues to function after 11 December 2019.

Against this backdrop, the USTR’s comments on the AB clearly indicate that Washington is not in a hurry to address the AB crisis and will allow it to become dysfunctional from 11 December 2019, said trade envoys familiar with the US position.

Major developed countries are almost reconciled to the likely demise of the AB and a return to the “arbitration” process under Article 25 of the Dispute Settlement Understanding as insisted by the US, said a trade envoy, who asked not to be quoted.

Even the WTO director-general Roberto Azevedo, who had expressed concern about the crisis in the Appellate Body at the Trade Negotiations Committee meeting last month, is aware of the US wanting to revert to the GATT-1947 process for dispute settlement, where an unsuccessful party to the dispute could block consensus and prevent adoption of the ruling.

The US strategy to revert to the arbitration process under Article 25 is in line with what is happening in the American domestic market.

In his article “Market Concentration Is Threatening the US Economy” in Project-Syndicate on 11 March, Nobel Laureate Joseph E Stiglitz wrote that as the American market and the economic system “has become more rigged in business’s favor, it has become much harder for ordinary citizens to seek redress for mistreatment or abuse. A perfect example of this is the spread of arbitration clauses and user agreements, which allow [American] corporations to settle disputes with employees and customers through a sympathetic mediator, rather than in court.”

Turning to the US initiatives on the negotiating front, the USTR said, in spite of the challenges at the WTO, that the Trump administration is working “diligently to jump-start new negotiations in the areas of digital trade, fishing subsidies and other areas.”

In response to questions from US Senators, the USTR said he remains confident that the WTO reform will be accelerated before the WTO’s 12th ministerial conference in Astana, Kazakhstan, in June next year.

Senators from both Republican and Democratic Parties concurred with the USTR that at the heart of the WTO’s deficiencies has been its failure to make sure China is living up to its commitments after joining the trade body.

“Based on the nearly two decades of evidence, it’s clear that the agreements that allowed China to join fell far short,” said Senator Ron Wyden from the Democratic Party.

“The Chinese government identifies weaknesses in the WTO system and it seizes on them to further its economy’s explosive growth,” said Senator Wyden, after agreeing with Ambassador Lighthizer’s overall WTO Strategy.

[Forgotten by both the USTR and the Senators was the fact that it was the US and its then USTR, Ms. Charlene Bershefsky, that not only negotiated with the Chinese authorities the terms and conditions of China’s accession, but also insisted (with the help of the WTO secretariat) at meetings of the China Working Party that the terms and conditions should be accepted by all, except in relation to any market access concessions to be negotiated between China and existing members. SUNS]

It is clear that the developing and least-developed countries must carefully assess the implications of the US-led reforms that are being steamrolled with the assistance of a “very-able Director-General.”

Otherwise, they will find the WTO Multilateral Trading System will be given its final fatal blows at the 12th ministerial conference in Astana next year.