TWN Info Service on WTO and Trade Issues (Oct19/14)
17 October 2019
Third World Network

WTO mired in "full-blown" crisis over US attacks on S&DT & AB
Published in SUNS #8998 dated 16 October 2019

Geneva, 15 Oct (D. Ravi Kanth) - The World Trade Organization is mired in a "full-blown crisis" because of the simultaneous attacks launched by the United States on the principles of non-discrimination, special & differential treatment (S&DT), and the Appellate Body (AB), many developing and least developed countries cautioned on Monday (14 October).

At an informal Doha Trade Negotiations Committee (TNC) meeting, many developed countries pointed the finger at the US for blocking the selection process for filling six vacancies at the Appellate Body.

The developed countries, however, remained silent on Washington's concerted attacks on the principles of non-discrimination and S&DT, trade envoys told the SUNS.

During the meeting, three issues dominated the proceedings: (1) the blockage by the US of the selection process for filling vacancies at the AB; (2) the US demand for introducing differentiation/graduation for availing S&DT by developing countries; and (3) the gridlock over the appointment of the chair for the fisheries subsidies negotiations.

Many countries said they would endorse the recommendations suggested by the facilitator, Ambassador David Walker of New Zealand, who is also the chair for the Dispute Settlement Body (DSB), for addressing the US concerns about the functioning of the AB.

But several recommendations suggested by the facilitator would undermine the independent functioning of the AB, said a trade envoy, who asked not to be quoted.

"Though we have some reservations, China welcomes the report [of the facilitator] and will continue to constructively engage in the process," the Chinese trade envoy Ambassador Zhang Xiangchen told his counterparts at the informal TNC meeting.

Ambassador Xiangchen urged "the United States to be meaningfully and constructively [engaged] as soon as possible [in breaking the impasse at the AB]."

The US decision to block the nomination of Ambassador Cheryl K Spencer of Jamaica for chairing the Doha rules negotiating body has caused a grave crisis in finalizing the fisheries subsidies agreement by the end of the year, said trade envoys, who asked not to be quoted.

The European Union stated that the fisheries subsidies agreement must be concluded at the WTO's 12th ministerial conference in Nur Sultan, Kazakhstan, in June 2020, a stand that was privately shared by many countries, said trade envoys, who asked not to be quoted.

In the face of growing criticisms, the US trade envoy Ambassador Dennis Shea remained defiant and unmoved by the concerns expressed by a large number of countries on the AB impasse and the S&DT, saying that there is huge bipartisan support on these two issues in the US.

The US proposal to bring about differentiation/graduation among developing countries for availing S&DT will come up for discussion at the General Council meeting on 15 October.

The WTO director-general Roberto Azevedo, who is the chair for the Doha Trade Negotiations Committee, expressed sharp concern over the impasse on the appointment of the chair for the Doha rules negotiating body that is overseeing the fisheries subsidies negotiations.

But Azevedo chose to say very little about the systemic crisis caused by the US at the Appellate Body, saying merely that he has nothing to add about the AB that would become dysfunctional after 11 December 2019 when it would be reduced to just one member, said trade envoys, who asked not to be quoted.

On the members' interventions at the meeting, a large majority of developing countries, including the major developing and least-developed coalitions such as the African Group, the ACP (Africa, Caribbean, and Pacific) group, and the LDC (least-developed countries) group among others, gave a strong message that they will not allow attempts to undermine the S&DT through differentiation/graduation as proposed by the US.

In a sharp statement on the state of play at the WTO, India's trade envoy Ambassador J S Deepak reminded his colleagues that the sustained attacks on the principle of non-discrimination, S&DT, and the AB are having "a chilling effect on the rules-based multilateral system, one that would be difficult to undo and which may last for a long time."

"The immediate threat to the system is the impasse on the appointment of AB members," said South Africa's trade envoy Ambassador Xolelwa Mlumbi-Peter at the meeting.

"The risk to the dispute settlement mechanism may have grave implications for the functioning of the multilateral trading system," she emphasized.

South Africa, she said, will "support a process that works towards the development of an instrument for a decision by the GC to avoid the AB being dysfunctional by December 2019."

On behalf of the ACP group, Jamaica maintained that the group remains disappointed with the lack of progress towards the appointment of the AB members.

"WTO members have a vested interest in safeguarding the maintenance of a functioning, fair, and effective dispute settlement system," Jamaica argued.

Benin, on behalf of the African Group, said the AB crisis must be resolved immediately without any further delay.

Chad, which is the coordinator for the LDC group, also gave a strong message for resolving the AB crisis on an expeditious basis.

The EU, which is now toying with the idea of an arbitration mechanism in the absence of the AB as a backstop, suggested at the meeting that "we will have an opportunity to lay down the ground for a reformed Appellate Body and for resuming nominations."

In response to the concerns expressed by members about the paralysis caused by the US at the AB, the US trade envoy Ambassador Shea merely said "I have often reminded my WTO colleagues that US concerns about the Appellate Body are not only principled, well-documented, and longstanding but also shared broadly across the political spectrum in the United States."

On fisheries subsidies, India, South Africa, the ACP Group, and the African Group said S&DT for developing countries is an integral part of the mandates of the UN Sustainable Development Goal 14.6.

"These mandates need to be honoured in letter and in spirit," India emphasized, arguing that "in sensitive areas like fisheries and agriculture, where livelihoods of a large number of the poor and marginalized are at stake, especially in developing countries, reneging from mandates is likely to unravel progress and delay outcomes."

"The lessons of Buenos Aires cannot be forgotten so soon," Ambassador Deepak cautioned.

India categorically rejected attempts to dilute special and differential treatment.

Ambassador Deepak underscored the need to make S&DT more precise and enforceable instead of the current "imprecise, unenforceable and "best endeavour" nature of existing S&DT obligations in the WTO Agreements."

"Continuing with the divisive rhetoric on differentiation would only serve to widen the trust deficit amongst Members," he warned.

"In this important area," said Ambassador Deepak, "the silence of those who are committed to the WTO principles enshrined in the Marrakesh Agreement, can be more harmful than the violence of those who challenge those principles."

South Africa's trade envoy reminded her counterparts that S&DT is captured in paragraph 44 of the Doha Ministerial Declaration which calls on Members to make S&DT more precise, effective and operational.

She said the Group of 90 countries are finalizing their proposals on improvements in S&DT to be delivered at the WTO's 12th ministerial conference.

"S&DT is an unconditional and treaty-embedded right that has been provided to all developing countries at the WTO in recognition of the enormous difference in the levels of development," and S&DT "is extremely important for trade to be more inclusive and equitable, as well as for developing countries to meet their SDGs," she maintained.

Commenting on the "WTO reforms," India said, along with other developing countries, it has presented a "developing country reform paper" at the WTO's General Council meeting in July 2019 on the basis of the New Delhi consensus among some developing Members.

"This paper has now been co-sponsored by 45 WTO Members," India said.

Any discussion "on WTO reform should be premised on the principles of inclusiveness and equity, and not serve to widen existing asymmetries in the covered agreements," India maintained.

South Africa supported India's demand for a "development-oriented approach".

The ACP Group and the African Group also endorsed India's proposal on transparency and WTO reforms.

On the e-commerce moratorium for not levying customs duties, India and South Africa further clarified on why there is an urgent need for reconsidering the current moratorium that has been implemented since 1998.

India said "the 1998 Work Programme on e-commerce needs to be worked further to get clarity on many areas including definitions and potential impact on revenues and domestic industry of developing Members."

"Otherwise a decision on that moratorium," Ambassador Deepak warned, will be "much like rulemaking on e- commerce, [and] will be a leap in the dark."

"It will be a case of the undefined being negotiated by the unprepared in order to get the unspecified for the uninformed!" the Indian envoy cautioned.

Commenting on the e-commerce moratorium, Ambassador Xolelwa said "we have highlighted the need for a deeper discussion on the revenue, economic and trade and industrial policy implications of the moratorium to inform decision-making."

"This is an extremely important issue given the increasing role of the digital economy which will define the future of our economies," she said, arguing that "it is important to learn from past experiences lest we disable the very tools we need now and in future to properly position ourselves in the digital economy."

But members of the informal plurilateral Joint Statement Initiative (JSI) group on e-commerce led by the US, Japan, Singapore, and Australia opposed the demand from India and South Africa for reconsidering the 1998 moratorium.

On TRIPS non-violation complaints (NVC), South Africa said "it may be useful for the Proponents of the NVC remedy to clarify what situations they wish to avoid by having a non-violation remedy available under the TRIPS Agreement."

It expressed concern "with any NVC remedy that would have the effect of expanding existing TRIPS obligations or reduce flexibilities that Members currently have."

Many developing countries also underscored the need for addressing the trade-distorting domestic subsidies (in agriculture) based on the Rev 4 modalities of 2008.

South Africa called for an "outcome in MC12 and said it should include substantial reform of Trade Distorting Domestic Support, notably Cotton; a permanent solution for Public Stockholding; and advancing the discussions on a Special Safeguard Mechanism."

"We underscore that S&DT must be integral to any outcome in agriculture, and we would seek to ensure that LDCs and NFIDCs are exempted from further commitments," South Africa maintained.

"Keeping in view the aspirations of the large majority of Members," India said "our priority should be to balance our agenda and make it inclusive, transparent and development oriented."

The urgent priority is to "preserve the system by ending the impasse in the Appellate Body appointments with a sense of utmost urgency," India maintained.

But the participants of the informal plurilateral Joint Statement initiatives - on electronic commerce, investment facilitation, disciplines for micro, small, and medium enterprises, domestic regulation in services, and trade and gender - attempted to hijack the proceedings towards their issues, said a developing country trade envoy, who asked not to be quoted.

In crux, the WTO remains sharply divided and polarized because of the sustained attacks launched by the US on the core principles of the rules-based multilateral trading system, said several trade envoys, who asked not to be quoted.