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TWN Info Service on WTO and Trade Issues (Jul19/23) 
16 July 2019
Third World Network

South proposes strengthening WTO to promote development
Published in SUNS #8946 dated 15 July 2019

Geneva, 12 Jul (D. Ravi Kanth) - India, South Africa, and seven other developing and least-developed countries on Thursday (11 July) challenged the one-sided WTO reform proposals advanced by the US and other developed countries, and tabled, for the General Council, their own proposal for "strengthening the WTO to promote development and inclusivity."

In a five-page proposal submitted to the General Council on 11 July, the nine countries - India, South Africa, Uganda, Zimbabwe, Malawi, Tunisia, Bolivia, Cuba, and Ecuador - insisted that "a sine qua non for strengthening the system is unblocking the (impasse over filling up) vacancies in the Appellate Body."

"This is an urgent priority since in the absence of a functional, effective, and independent mechanism for enforcing rules, negotiating new rules in any area makes no sense," the nine countries said in their proposal that will come up for discussion at the WTO General Council on 23 July.

The United States has been repeatedly blocking the launch of a process for filling up vacancies in the Appellate Body (AB), while insisting on fundamental reforms such as "differentiation/graduation" to deny special and differential treatment (S&DT) flexibilities to more than 30 developing countries, and doing away with the consensus-principle for adopting decisions.

The AB will become dysfunctional on 11 December 2019 when it would be reduced to one member from its current strength of three members. For over two years now, the US has repeatedly blocked proposals for filling the vacancies on the Appellate Body expeditiously on grounds that its concerns about the functioning of the AB have not been addressed.

"The developing countries want "reforms through inclusion" at the WTO and such reforms must remain consistent with the Marrakesh Agreement," said a South American trade envoy, who asked not to be quoted.

Commenting on the wider "crisis of multilateralism", the nine countries in their proposal to the General Council said "inequities and imbalances in some of the existing multilateral trade rules have provided an inherent advantage mainly to the developed Members."

While "WTO rules such as those on border trade measures have helped developing countries by providing certainty to trade, more often than not, developing Members found themselves constrained from pursuing their development and industrialization objectives due to other rules which have been overly intrusive or imbalanced," the nine developing countries said.

Among others, they cited the "TRIPS [Agreement on Trade-Related Aspects of Intellectual Property Rights]" that provides "monopoly rents" while diminishing "the possibility for technology transfer."

According to the nine countries, the WTO's TRIMs (trade-related investment measures) agreement "has disallowed Members to use local content requirements."

Also, the WTO's Subsidies and Countervailing Measures Agreement has constrained "the policy space developing countries need to nurture their industries" while allowing "advanced economies that have the financial means to provide substantial support to their high-tech, knowledge-intensive industries deemed critical to their future prosperity," the nine countries said.

Worse still, the WTO's Agreement on Agriculture has allowed "developed countries to continue their high subsidies on agriculture products, including those exported to developing countries, impacting their small farmers' livelihoods and food security."

"This has been compounded by the lack of inclusiveness and transparency in the process of WTO negotiations," the nine countries argued.

Despite repeated proposals and demands for "certain reforms in the WTO since 1996 in an effort to address asymmetries and bring balance to the WTO rules, as well as create more policy space for themselves to pursue development and to use the same policy tools as developed countries to industrialize," there has been little progress, the nine developing-country proponents said.

"The reform agenda put forth by developing Members was incorporated into the Doha Development Agenda in 2001," they argued.

The reform agenda proposed by the developing countries in the Doha work program include "the strengthening of Special and Differential Treatment Provisions, Implementation Issues, addressing the existing asymmetries in the WTO Agreements, particularly in Agriculture with a view to facilitating the realization of the SDGs on food security and alleviation of rural poverty".

But the reform agenda of the developing countries has been repeatedly undermined on extraneous considerations, the nine countries argued.

According to the nine countries, "increasingly the WTO is moving away from the principles entailed in the Marrakesh Agreement and the negotiations mandate contained in the Doha Development Agenda which sought to place the needs and interests of developing countries at the heart of the Work Programme."

Without naming the US and other developed countries, the nine countries maintained that "in recent months, some Members have suggested a broad range of reforms at the WTO including a slate of new rules, even though existing mandates from the DDA remain unaddressed."

"'WTO reform does not mean accepting either inherited inequities or new proposals that would worsen imbalances," the developing-country proponents said.

Therefore, "reforms must be premised on the principles of inclusivity and development and respond to the underlying causes of the current backlash against trade and the difficulties that developing Members continue to face vis-a-vis their industrialization challenges," the nine developing countries demanded.

To start with, the reforms must preserve core principles of the multilateral trading system by amending "laws and regulations of WTO Members which mandate unilateral action on trade issues that are inconsistent with WTO rules."

Such amendments, the nine countries argued, "will ensure that WTO Members are not perpetually under the threat of unilateral action on trade issues by some Members."

More important, the rules in the Marrakesh Agreement must be respected, the nine countries emphasized, pointing out that the following rules in the Marrakesh Agreement remain fundamental:

A. Articles II and III on the multilateral functions of the WTO;

B. Article IX on the continuation of the practice of decision-making by consensus;

C.  Article X - when there are amendments (additions or changes) to WTO rules, there must be consensus, followed by ratification by Members. New rules enter into force only when the ratification numbers required have been attained.

Further, "multilateral avenues, based on consensus, remain the most effective means to achieve inclusive development-oriented outcomes," the nine countries argued.

Commenting on the informal Joint Statement Initiatives (JSIs) for plurilateral negotiations launched at the WTO's eleventh ministerial conference in Buenos Aires in December 2017, the nine countries demanded that "provisions governing plurilateral agreements in the Marrakesh Agreement must be adhered to."

"If they are to be multilateral agreements, the outcomes of these initiatives, by way of new rules, can be introduced into the WTO when there is consensus," the nine countries maintained, arguing that "Art. X of the Marrakesh Agreement on amendments must govern any changes or additions to the WTO Agreement."

There is an urgent "need to address the implementation issues (correcting the imbalances in WTO Agreements) as mandated in the Doha Round and also build on the work done so far in negotiations, in accordance with existing mandates," the nine countries demanded.

For "resolving the dispute settlement issues," the nine countries said, "a functioning, independent and effective dispute settlement system is indispensable for preserving the rights and obligations of all WTO Members and for ensuring that the rules are enforced in a fair and even-handed manner."

"Without such a system," the nine countries underlined, "there would be no incentive to negotiate new rules or to undertake reforms."

"Therefore, the resolution of the Appellate Body (AB) impasse needs to precede other reforms," the nine countries emphasized.

Citing Articles "Articles 17.1 and 17.2 of the DSU [Dispute Settlement Understanding]," the nine countries said "all WTO Members have a collective duty to ensure the maintenance of a standing Appellate Body comprising of seven members."

Without naming the US, which is blocking the selection process at the AB, the nine countries said "it would be disingenuous to use the pretext of the Appellate Body's alleged digression from the clear mandate of the DSU to justify willful non-compliance with the same by the Membership."

It is important that the current "attempts at addressing the crisis in the dispute settlement system must preserve its essential features, namely an independent, two-tier dispute settlement system, automaticity in the launch of proceedings and decision-making by the Dispute Settlement Body (DSB) by negative consensus, where provided," the nine countries argued.

"Developing Members' concerns about affordability and equitable access to the use of the dispute settlement system are also very important," they maintained.

For "safeguarding development concerns",  the nine countries reminded the US and other industrialized countries that "Special and Differential Treatment (S&DT) is a treaty-embedded and non-negotiable right for all developing Members."

The US along with other developed countries are demanding "graduation/differentiation" for denying special and differential flexibilities to more than 30 developing countries.

Countering the US proposal for termination of S&DT flexibilities for developing countries in the current and future trade negotiations, the nine developing countries said "the preservation and strengthening of the S&D provisions in both current and future WTO agreements, with priority to outstanding LDC issues" must remain at the center of the WTO work.

It is important that the "multilateral trading system must give policy space for developing Members to fulfil their development goals including industrialization" with enhanced S&DT provisions.

Therefore, "the long-awaited outstanding "development" issues from the Doha Round continue to be paramount," the nine counties argued.

The development issues in the Doha work program include:

* Implementation Issues - aimed at rebalancing the imbalanced rules from the Uruguay Round such as in the areas of agriculture, TRIMS (Trade Related Investment Measures), TRIPS (Trade-Related Aspects of Intellectual Property Rights), Subsidies Agreement etc.

* Special and Differential Treatment (S&DT) - strengthening and making effective and operational the S&DT provisions in WTO Agreements, in accordance with paragraph 44 of the Doha Declaration.

* Cotton - the imbalances in Agriculture Domestic Support due to AMS beyond de minimis leading to subsidized exports by some, show up clearly in the area of cotton, where cotton prices have been depressed. This has impacted negatively on rural livelihoods and employment across many developing countries including the C4 Members.

* Public Stockholding (PSH) - a permanent solution must be agreed upon and adopted. The General Council Decision of 27 November 2014 (WT/L/939) says that, "If a permanent solution for the issue of PSH is not agreed and adopted by the 11th Ministerial Conference, the mechanism... shall continue to be in place until a permanent solution is agreed and adopted".

* Special Safeguard Mechanism - Ministers in Nairobi (MC10, 2015) mandated Members, "To pursue negotiations on an SSM for developing country Members in dedicated sessions of the Committee on Agriculture in Special Session".

* Agriculture Domestic Supports - to rectify the imbalances in the existing rules due to some Members having Aggregate Measures of Support (AMS) entitlements whilst others do not. High per farmer subsidies by OECD countries, with huge flexibility continue to have serious implications on food insecurity and rural poverty in developing countries.

* Fisheries Subsidies - in accordance with the Doha, Hong Kong and MC11 Ministerial Declarations. All of these emphasize the importance of S&D in the outcome of these negotiations because of the "importance of this sector to development priorities, poverty reduction, and livelihood and food security concerns. SDG 14.6 also reinforces S&D."

* Discussions under the 1998 E-Commerce Work Programme in the relevant WTO bodies.

* The alleged theft of traditional knowledge that is held, preserved and developed by traditional communities/indigenous people.

* The rules of the multilateral trading system must also support developing countries in building their technological capacities, and their access to affordable medicines and medical technologies.

The nine countries said the United Nations Sustainable Development Goals have articulated "important development challenges still confronting developing countries, including overcoming poverty and hunger. WTO rules must be supportive, rather than a constraint to these efforts."

As part of the transparency and notification reforms, the nine countries demanded improvements in the following notifications:

* Regular notification of entry-related measures affecting existing Mode 4 commitments of Members;

* Article 66.2 of the TRIPS Agreement. Developed countries have a legal obligation in the area of technology transfer towards LDCs. More transparency would be supportive of LDCs' efforts to build a viable technological base;

* Disclosure of origin of traditional knowledge and genetic resources in patent applications;

* Transparency in tariffs - non-ad valorem tariffs should be notified in ad valorem terms or converted to ad valorem tariffs.

More importantly, the nine countries demanded that "transparency must permeate the entire functioning of the WTO."

In particular, the nine countries made two important demands:

i. Taking note of the resource constraints of small delegations and thus rationalizing meetings at the WTO so that there are no overlaps. In areas where there are active negotiations for outcomes, these meetings should as far as possible take place in formal mode. They should always be open, inclusive and transparent and take seriously the resource constraints of developing countries.

ii. Ministerial Conferences (MCs) and the processes preceding them in Geneva. The basic principles and procedures for this Member-driven organization need to be agreed upon. For instance, all meetings in the MC, which is the body for decision-making, should be open to all Members without restricting the decision-making process to smaller Green Rooms.

In short, any reforms at the WTO must "keep development at its core through delivering on the long-promised development concerns, in particular the outstanding development issues of the DDA", while addressing "the asymmetries in WTO Agreements such as those in Agriculture and other areas," the nine countries said.

The WTO reforms, the nine countries argued, must "strengthen the multilateral character of the WTO, especially preservation of consensus decision-making and respecting Art. X of the Marrakesh Agreement on Amendments."

"Last but most importantly, reform must reaffirm the principle of Special and Differential Treatment, which is a treaty-embedded, non-negotiable right for all developing countries in the WTO" for promoting "inclusive growth, widening spaces for states to pursue national development strategies in the broad framework and principles of a rules-based system," the nine countries concluded.

 


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