TWN Info Service on WTO and Trade Issues (Mar20/06)
5 March 2020
Third World Network

South demands safeguarding of MTS, restoration of AB at MC12
Published in SUNS #9081 dated 4 March 2020

Geneva, 3 Mar (D. Ravi Kanth) -- Developing and least-developed countries on Monday reiterated their demand for safeguarding the multilateral trading system (MTS) and restoring the Appellate Body (AB) in the two-stage dispute settlement system at the WTO's 12th ministerial conference (MC12) in Nur Sultan, Kazakhstan, in June, trade envoys told the SUNS.

At an informal Doha Trade Negotiations Committee (TNC) meeting on 2 March, India, South Africa, Botswana on behalf of the African Group, Jamaica on behalf of the ACP (African, Caribbean, and Pacific) group, and Chad on behalf of the least-developed countries (LDCs) expressed grave concern over attempts to undermine the multilateral framework of the WTO, said several trade envoys, who asked not to be quoted.

"The collapse of the Appellate Body, the attack on the principles that we have held dear, like non-discrimination and special and differential treatment, have cast a pall of hopelessness on the WTO," said India's trade envoy Ambassador J S Deepak at the informal TNC meeting.

"MC12 provides us an opportunity to address these grave challenges, if we can only get our act together," India said, according to trade envoys present at the meeting.

In another sharp critique on the threats posed to the multilateral framework, South Africa's trade envoy, Ambassador Xolelwa Mlumbi-Peter, said "we must preserve the multilateral nature of the MTS (multilateral trading system) to ensure that it delivers outcomes that serve the interests of all."

"The plurilateralization of the MTS does not result in an outcome that ensures that no one is left behind," South African cautioned.

Trade envoys of developing and least-developed countries and several coalitions called for adhering to the existing mandates, strengthening the special and differential treatment (S&DT) based on the G90 (Group of 90 developing and least-developed countries) proposals, providing adequate S&DT in the proposed fisheries subsidies agreement, and preventing the "plurilateralization" of the multilateral trading system among others, said several trade envoys.

Even some developed countries such as the European Union expressed "alarm about the state of affairs at the WTO" with the Appellate Body having come to a grinding halt.

"It is an entire pillar of our organization that is under existential threat," the EU's trade envoy Ambassador Joao Aguiar Machado said.

The United States, which is responsible for the Appellate Body crisis following its decision to block the selection process for filling six vacancies at the AB, remained silent to members' pleas for restoring the two-stage dispute settlement system, said trade envoys, who asked not to be quoted.

On the contrary, the US pressed ahead with its divisive demands to bring about "differentiation" for availing S&DT among developing countries, and to transform the WTO on "market-based" fundamentals, the US trade envoy Ambassador Dennis Shea suggested at the meeting.

Japan spoke about the proposed trilateral (the US, the EU, and Japan)  proposal on industrial subsidies that would be introduced at MC12 in Nur Sultan.

Speaking on broader reform of the WTO, China said that "the reform should reinforce the centrality of the multilateral trading system in international trade liberalization and facilitation."

Without naming the US that introduced the draft decision on market-based conditions to be implemented at the WTO, China's trade envoy, Ambassador Dr Zhang Xiangchen, said that "macroeconomic issues, such as market practices, industrial policies or economic models, are by no means within the functions or capabilities of the WTO as stated in Marrakesh Agreement."

"The moon is simply too far to reach," the Chinese trade envoy said mockingly.

In their reports to the members at the TNC meeting, the chair of the Doha fisheries subsidies negotiations, Ambassador Santiago Wills of Colombia, painted a bleak picture of continued differences on several issues in the proposed fisheries subsidies agreement.

The chair of the Doha agriculture negotiations delivered a report that suggested sharp difference on issues such as on domestic support as well as the mandated issues of the proposed permanent solution for public stockholding programs for food security and the special safeguard mechanism (SSM) among others.

The WTO's director-general Roberto Azevedo delivered his bleak assessment about the revival of the Appellate Body (see SUNS #9071 dated 19 February 2020).

On the existential crisis of the Appellate Body, India said "the resolution of the Appellate Body crisis deserves the utmost priority and it should precede all other reforms."

Expressing grave concern over the absence of the Appellate Body, India said "as a major user of the WTO's dispute settlement system and with 4 appeals involving India awaiting adjudication by the Appellate Body," it is important that the crisis at the AB be resolved urgently, according to trade envoys present at the meeting.

India urged "the US [to] consider the solutions developed under the Walker Process seriously unless they have better alternatives to offer."

Speaking on the AB crisis, South Africa, the African Group, the ACP, and the LDC group said the restoration of the Appellate Body is essential for safeguarding the enforcement function of the WTO.

"The impasse on the appointment of AB members has significant implications for the preservation of rights and obligations of Members," South Africa said.

"We need a solution-oriented multilateral process to restore a two-stage DSS (dispute settlement system) and unlock the impasse in the selection process of AB members," South Africa said.

On another contentious issue involving disciplines in the proposed fisheries subsidies negotiations, India said members must "work rapidly to conclude the negotiations on ending harmful fisheries subsidies."

"Disciplines should focus on distant water and large scale industrial fishing, provide exemption and carve outs for the needs of small and subsistence fishermen who operate in the territorial seas and EEZs (exclusive economic zones) and seek greater contribution from those who provide large subsidies, both in value and on per capita basis," India's trade envoy Ambassador J S Deepak said.

Given the sharp differences among members on overcapacity and overfishing (O&O), India said members need to "quickly converge the various approaches for O&O on the table and start negotiating the consolidated text covering all pillars."

India also cautioned that without "S&DT for developing countries who need it and for LDCs as agreed to by our Leaders in SDG 14.6 and by our Ministers at MC11 [the 11th WTO ministerial conference in Buenos Aires]", it would be difficult to accept any disciplines in the fisheries subsidies.

"This is a very sensitive issue involving livelihood of millions of marginal fishermen and there could be nothing more unequal than an equal discipline for unequals," India warned.

"Without appropriate S&DT, these negotiations would be doomed to end in a deadlock," India's trade envoy argued.

The ACP group underscored the need for strong S&DT provisions in the proposed fisheries subsidies agreement.

South Africa said to get an outcome on fisheries subsidies, members need to narrow approaches on "the table to those that truly deliver on the mandate which is to prohibit harmful subsidies."

South Africa called for targeting "large scale industrial fishing, safeguard[ing] food security and livelihoods of coastal communities and allow members policy space to develop marine resources."

"The outcome must deliver on all the pillars of the mandate, S&DT must be an integral part of the outcome. Text-based negotiations will need to be inclusive and Member-driven," South Africa said.

Sharp differences among members on how to address overfishing and overcapacity came into the open during the meeting.

The United States, which is one of the major subsidizers, called for an "agreement on comprehensive and effective disciplines," while China underscored the need for "all big major subsidizers" to undertake "substantial reductions."

China said that it is wrong to presume "that all fishing activities in the high seas contribute to overcapacity or overfishing," arguing that "the high seas fishing is very complicated."

The European Union, which is another major subsidizer, said, as per the United Nations Sustainable Development Goal 14.6, members are required to prohibit harmful subsidies while treating positive subsidies differently.

"Proper fisheries management must have a place in the negotiations because it can neutralize any negative effect a subsidy might have," the EU's trade envoy Ambassador Joao Aguiar Machado said, cautioning that "any attempt to ignore" the demand for proper fisheries management by a group of countries "is doomed to failure."

On S&DT, which the US wants to do away with in the current and future trade negotiations, the G90 group of countries said they will table their revised proposals for a meaningful outcome at MC12.

"Delivering on the G-90 proposals will contribute to the achievement of SDGs through socioeconomic development, industrial and structural transformation of LDCs and developing countries by operationalising the existing S&DT provisions in the WTO Agreements in accordance with paragraph 44 of the Doha Ministerial Declaration," South Africa said.

Commenting on the lack of progress in agriculture negotiations, India raised questions over the Chair's report of 14 February (see SUNS #9070 dated 18 February 2020).

India said "we are proponents of a sequential approach where FBT (final bound total) AMS entitlements are capped, reduced and eliminated first."

"Only once the playing field is levelled, should we have a discussion on disciplining other forms of domestic support," India said.

More important, India emphasized that "Article 6.2 support is meant for low-income and resource-poor farmers in developing countries [and] this is a S&DT flexibility to support rural development, food and livelihood security of marginal farmers, therefore, by its very definition, it is minimally trade distorting."

In the face of demands to negotiate on Article 6.2 of the Agreement on Agriculture by the Cairns Group of countries, including Brazil, India said "there can be no question of accepting any limits or reduction in Article 6.2 support."

Members must not lose sight of the "proportionality," India said, arguing that "it is high per capita support that has the most trade-distorting effect on the global markets as it incentivizes large scale commercial production mostly for exports."

"Equating subsidies of 200 dollars per capita that Indian farmers receive with 60,000 dollars per capita in many developed countries is absurd," India said.

"Therefore, domestic support disciplines need to be guided by per capita numbers as well," India argued.

India said "mandated issues in Agriculture, like the permanent solution on public stockholding for food security, for which we have missed deadlines, need to be prioritized for MC12."

The African Group and the least-developed countries called for credible outcomes for reducing trade-distorting subsidies in cotton.

"We need an outcome on cotton as advanced by the C4, a permanent solution for Public Stockholding that makes provision for new programmes and advance discussions on SSM," South Africa said.

"We underscore that S&DT must be integral to any outcome in agriculture."

Brazil said "reform of agricultural trade rules is imperative for the success of MC12 and key to a package in Nur Sultan."

Brazil, Canada, and the US are seeking a ministerial declaration at MC12 on "sanitary and phytosanitary measures."

With three months left for MC12, India said "the results we achieve at Nur Sultan, especially on fisheries subsidy disciplines and resurrection of the Appellate Body, can increase the trust that the world reposes in the rules-based multilateral trading system."

"In order to succeed, we need to prioritize a balanced agenda that is inclusive and development-oriented," India said. +