TWN Info Service on WTO and Trade Issues (Apr19/02)
3 April 2019
Third World Network

US tries to ram through intrusive WTO notification requirements

Published in SUNS #8878 dated 1 April 2019

Geneva, 29 Mar (D. Ravi Kanth) – As the World Trade Organization’s Appellate Body faces the prospect of becoming dysfunctional by the end of this year, attempts are currently underway to ram through controversial “WTO reforms” involving US demands for intrusive notification requirements.

These, if agreed to and become effective, would not only diminish the rights and obligations of developing country members, but would also tilt the balance within the WTO’s Multilateral Trading System (WTO-MTS) against them even more than now, trade envoys told the SUNS.

As reported in the SUNS on 14 March, the United States Trade Representative (USTR) Ambassador Robert Lighthizer made it very clear that Washington will aggressively push for comprehensive reforms at the WTO by “work[ing] closely with the very-able Director-General Roberto Azevedo.”

During his testimony to the US Senate Finance Committee on 12 March, the USTR said Washington will pursue reforms of the AB, the WTO’s negotiating function, particularly the removal of the self-designation by developing countries to claim special and differential treatment, and increasing the role of the secretariat by “re-energizing” the committee system.

The USTR had also indicated during his testimony that the plurilateral agreements is the best way to get things 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.

“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.

The repeated blocking by the US of an expeditious selection process for filling four vacancies at the AB, will make the AB dysfunctional as it will be reduced to one member by 11 December 2019.

As a result, the rights and obligations of members of the WTO-MTS will no longer be resolved under the dispute settlement system, with panel rulings becoming inoperative, if one of the parties to the dispute gives notice of intention to appeal. (See SUNS #8873 dated 25 March 2019, “WTO-MTS facing existential threat, needs political decisions”.)

Against this background of the US-announced “blackmail” tactics, a group of countries such as the European Union, Canada, Australia, Japan, and New Zealand seek to decouple the AB crisis from the WTO reforms, thus yielding to Washington’s demands on notification and compliance requirements in different WTO committees.

[These moves ironically ignore the fact that within the WTO-MTS, the US has been the largest non-complier — it has failed to implement a plethora of rulings of the WTO and its dispute settlement system, rulings that involve changes to US laws and regulations to comply with the WTO, a US commitment to bring its own laws and regulations to be in compliance when it signed onto the WTO treaty at Marrakech. SUNS]

Australia, one of the leading campaigners for the intrusive notification provisions, mentioned during a closed- door meeting that the US Trade Representative Ambassador Robert Lighthizer has emphasized the need to finalize an outcome on the notification and compliance provisions in the WTO committees, said an African trade envoy, who asked not to be quoted.

During separate closed-door outreach meetings held over the past four days, trade envoys of developing countries were told to agree to outcomes on the fisheries subsidies and WTO reforms in the likelihood of the Appellate Body’s inability to function.

While several proposals have been put forward to meet what seemed to be US objections to the AB functioning, the US has remained non-engaged during the facilitator-led meetings on efforts to break the deadlock.

It is not even clear that the US will lift its blockage of the AB selection process to enable the AB and the WTO dispute settlement system to function.

The USTR, Robert Lighthizer, has repeatedly mentioned that the US would like to go back to the practice under the GATT-1947, when any party to a dispute could block adoption of panel rulings.

Several countries – India, China, and the EU among others – had expressed g rave alarm about this non- engagement of the US during the facilitator-led meetings on the deadlock over filling AB vacancies.

Despite the continued silence of the US during these meetings, the facilitator has said he is now considering offering a “package of answers” to the US to see if it could join other members in breaking the impasse at the Appellate Body, said a South American trade envoy, who asked not to be quoted.

The facilitator wants members to consider each issue on its own merits and not resort to hostage-taking even if there are strong linkages between the continuation of the AB and the transparency and notification provisions, the South American trade envoy said on condition of anonymity.

At a separate closed-door outreach meeting, the EU’s trade envoy, Ambassador Marc Vanheukelen, said members must agree to enhanced notification provisions as part of the WTO reforms so as to ensure rapid compliance on specific trade concerns.

The EU had finalized a non-paper, which says that “despite the significant amount of time and resources that Members put into this work, positive outcomes are limited for a number of reasons.”

The three-page non-paper observed that “not giving substantive replies does not have consequences for a Member beyond being put on the spot for the duration of the agenda point” and “the result is too many repetitive, time-consuming exchanges in meetings which fail to generate genuine dialogue and incentive s to seek collaborative solutions.”

“In some instances, unresolved trade concerns remain on agendas for several years; this is unsatisfactory because the potential of councils and committees to solve problems is not fully utilized and because a more effective pre-litigation problem solving at the WTO could alleviate some of the strain the dispute settlement system faces,” the EU said.

[The EU paper, and its arguments, ignore the fact that the US and the EU are mainly responsible for stymying the unfinished agenda of the Doha Development Round, in particular relating to their own non-compliance with the rules of the Agreement on Agriculture (AoA) and the rulings adopted by the Dispute Settlement Body that the so-called “green box” support provided by them to their agriculture sector is violative of the AoA rules on subsidies. SUNS]

Perhaps, the increasing emphasis on stringent notification and compliance provisions may have a hidden agenda, said a developing country trade envoy, who asked not to be quoted.

The EU’s non-paper, which was finalized after discussions among the technic al experts of the developed countries last week, has underscored the need for “a set of horizontal procedural rules for addressing trade concerns in WTO councils and committees. Such horizontal rules would be without prejudice to specific rules that were or might be agreed by individual WTO councils or committees.”

According to the EU’s non-paper, the procedural rules include improved meeting arrangements, including mentioning of trade concerns on an expeditious basis, refraining from repeating arguments during the meetings to address a trade concern, provision of substantive replies to trade concerns, strengthening cross-committee coordination, and constitution of facilitators if persistent trade concerns are not addressed.

As part of these intrusive measures, the EU wants enhanced provisions to “encourage” the WTO Secretariat, and if requested by the parties, to enable the participation of technical experts from organizations that have observer status at the WTO.

“The Chair/Secretariat shall report about the outcome of the informal meeting (e.g. on positions taken, way forward identified) at the next formal meeting,” the EU said.

[Such a role for the WTO secretariat would be a major departure from the policy followed by the members, including in particular the US, right from the inception of the WTO-MTS, not to give any role to the DG in substantive decision-making and insist on members themselves discharging the three functions of negotiating (legislative), administering the agreements (executive) and dispute settlement (judicial). See SUNS #8873 dated 25 March 2019, “WTO-MTS facing existential threat, needs political decisions”. SUNS]

In short, other industrialized countries are now turning their focus, at the behest of the US, on the so-called WTO reforms, particularly the notification and compliance provisions in which the developing and least-developed countries have to pay the most.