Service on WTO and Trade Issues (Sept20/08)
Geneva, 7 Sep (D. Ravi Kanth) – The trade envoys of the developing countries have called for reforming the World Trade Organization based on a “developmental and inclusive” agenda, in an attempt to counter the highly “imbalanced and skewed” reform narrative advanced by the United States, the European Union, and Canada among others, said participants at a virtual brainstorming session on 3 September.
At a virtual brainstorming session on 3 September hosted by Prof. Abhijit Das, the head of the Centre for WTO Studies in New Delhi, the Geneva-based South Centre and the Penang-based Third World Network, trade envoys from China, India, Jamaica, and South Africa among others delivered their nuanced perspectives for pursuing “developmental and inclusive” reforms at the WTO, as a counter to what they called imbalanced, skewed, and anti-developmental reforms proposed by the US, the European Union and Canada among others.
At the meeting, the trade envoys of China and South Africa exposed the dangers to developing countries posed by the reforms advanced by the United States Trade Representative (USTR) Ambassador Robert Lighthizer.
Jamaica and South Africa said that the plurilateral Joint Statement Initiatives (JSI) in electronic commerce and domestic regulation for services among others will lead to the fragmentation of the multilateral trade negotiations.
In his key address to the trade envoys at the meeting on “Strengthening the Multilateral Trading System to Foster Development: Prospects and Challenges,” the former South African trade envoy Ambassador Faizel Ismail said the current US-led reforms are not something new, suggesting that they started during the Obama period between 2008 and 2016.
Ambassador Ismail identified “seven” pathways that began in the Obama period starting with the former US Trade Representative Susan Schwab who declared during 2008-2009 that “Doha is dead!” while demanding that the “emerging countries” must take on additional responsibilities.
During the Obama period, the former US Trade Representative Ambassador Ron Kirk and the former US trade envoy to the WTO Ambassador Michael Punke had argued that “fundamental differences exist on the nature of emerging markets and their responsibilities (2009-2011)”, Ambassador Ismail argued.
At the WTO’s eighth ministerial meeting in Geneva in 2011, the US had proposed “new pathways” to break the impasse by suggesting global value chains and services, plurilateral negotiations, and issue-by-issue negotiations, said Ambassador Ismail.
In the second wave of reforms, according to Ambassador Ismail, the US had launched a campaign for comprehensive reforms at the WTO’s eleventh ministerial conference in Buenos Aires, Argentina in December 2017, that was later supported by French President Macron.
The proposed reforms were spelt out at the WTO in 2018-2019 and they include:
(a) Special and Differential Treatment/Categorization of Developing Countries;
(b) Rule Making – Substantive and Procedural;
(c) Regular Work and Transparency;
(d) Dispute Settlement.
In short, the seven pathways proposed by the US to reform the WTO include:
(1) S&DT (special and differential treatment) – re-categorization of developing countries;
(2) GVCs (global value chains) narrative on trade;
(3) abandonment of the consensus approach in favour of variable geometry and plurilaterals;
(4) abandonment of the single undertaking in favour of issue-by-issue negotiations;
(5) targeting China in the WTO;
(6) notifications and counter-notifications;
(7) reforming the dispute settlement system.
According to Ambassador Ismail, the underlying objectives of the US reforms are: (1) “deepen asymmetry of the rule-based system”, (2) “erode the gains of developing countries on special and differential treatment (S&DT)”, and (3) seven “new pathways” to change the strategic course of the WTO in favour of developed countries.”
The developing countries must respond to these “negative” reforms proposed by the US and other developed countries by: (a) “build Developing Country Coalitions – (in the) proud tradition – G20, G33, NAMA 11; LDCs, SVEs, African Group, Cotton 4 and G110,” (b) “build Alternative Vision of multilateralism based on (principles of Development and Inclusivity),” and (c) “unite behind the UNCTAD Geneva Principles for a New Global Green Deal – broadening the context for a WTO deal.”
INTERVENTIONS BY DEVELOPING COUNTRIES
During his intervention at the meeting, China’s trade envoy Ambassador Zhang Xiangchen inveighed against the reform proposals advanced by the USTR Ambassador Robert Lighthizer, saying that they would erode the results of the painstaking negotiations over the past many years.
In his op-ed article in the Wall Street Journal on 20 August, the USTR had proposed five major reforms at the WTO.
The five reforms are: (1) the need to agree on baseline tariff rates that apply to all, with minimal exceptions; (2) the need to end the free trade agreement land grab; (3) countries with large or advanced economies (China, India, Indonesia, South Africa, and Argentina among others) should not have access to special and differential treatment; (4) the WTO needs new rules to stop economic distortions that flow from China’s state capitalism; and (5) the WTO’s two-stage dispute settlement process be replaced with commercial arbitration, “in which ad hoc tribunals are impaneled and resolve particular disputes in an expeditious manner.”
At the meeting, China’s trade envoy Ambassador Zhang Xiangchen said the USTR’s proposal to have baseline tariffs for all countries “not only disregards the negotiating history of the previous negotiations but also is a contradiction with the principle of less than full reciprocity as embodied in the WTO agreements.”
He said Ambassador Lighthizer’s proposal to force countries to bring their tariffs down to the level of the tariffs being levied by developed countries is fundamentally flawed as it fails to take into consideration the levels of development among countries, particularly in the developing and least-developed countries.
The Chinese trade envoy said not every country is liberalized and it requires members to open their markets through give-and-take negotiations.
Ambassador Zhang said that “tariff” is an important policy instrument for developing and least-developed countries in their pursuit of industrialization.
As regards the USTR’s proposal for differentiation among developing countries for availing special and differential treatment, Ambassador Zhang said that “there is no internationally accepted criteria” of the developing members, suggesting that it will be difficult to have such a criteria even in the foreseeable future.
Ambassador Zhang said the US proposal on differentiation is not only an issue for China, India and South Africa but is also a “systemic” issue for which developing countries have to fight in a united manner.
As part of the WTO reforms, developing countries must ensure that special and differential treatment is made “precise” and “effective” so as to operationalize it, the Chinese envoy argued.
Commenting on the USTR’s proposal to replace the two-stage dispute settlement process with commercial arbitration, “in which ad hoc tribunals are impaneled and resolve particular disputes in an expeditious manner,” Ambassador Zhang said that it would take members back to the GATT panels and would lead to the fragmentation of the state-to-state dispute settlement process.
Moreover, it will lead to the controversial investor-state dispute settlement system, he suggested.
The Chinese trade envoy said that 121 countries have called for launching the selection process to fill the six vacancies at the Appellate Body.
On proposals for disciplining industrial subsidies as tabled by the US, the European Union, and Japan among others, the Chinese envoy said the proposals are targeted against developing countries to deny them “policy space”.
He said the developing countries must defend their “legitimate policy space.” The developed countries, who had used industrial subsidies all along their industrialization, are now trying to re-shore the supply chains, he argued.
Ambassador Zhang said the developing countries must press ahead with their own reform proposals, suggesting that the one-sided and imbalanced reforms proposed by the US and other developed countries must be opposed.
He said the S&DT must be safeguarded in the fisheries subsidies negotiations, suggesting that there should be a green box for fisheries subsidies.
Ambassador Zhang emphasized the need to address the continued “asymmetries” in agriculture, particularly the need to eliminate the aggregate measurement of support (amber box subsidies).
China, India, and several other countries had called for the elimination of AMS (highly trade-distorting domestic subsidies) almost two years ago.
Ambassador Zhang said that there should be an outcome on cotton. He supported the Joint Statement Initiative on plurilateral outcomes in investment facilitation.
In his intervention, India’s new trade envoy Ambassador Brajendra Navnit spoke about the preamble of the Marrakesh Agreement and how it set out the need for special and differential treatment.
Ambassador Navnit said the South East Asian countries which made significant strides in their industrialization must assist other developing countries.
The Indian envoy suggested that developing countries must pursue a “proactive” and a “curative” agenda of trade reforms and not merely “react” to the reforms advanced by developed countries in a preventive manner.
Ambassador Navnit said that issues concerning the non-tariff barriers as well as the balance of payments that may arise in the post-Covid-19 scenario must be included by developing countries in the list of reforms.
Jamaica called for pursuing an inclusive and developmental agenda, including the need to safeguard S&DT.
The Jamaican trade envoy Ambassador Cheryl K Spencer cautioned against growing plurilateralism, saying that it would lead to further fragmentation of multilateralism.
The Jamaican trade envoy called for the restoration of the two-stage dispute settlement mechanism and raised several concerns about the proposed reforms to strengthen the WTO Secretariat.
Ambassador Spencer highlighted the developmental component in the Doha agenda, suggesting that its linkage with development-oriented proposals must be at the center stage of reforms.
She also criticized proposals for strengthening the WTO Secretariat, suggesting that such a move could have adverse ramifications.
In her detailed critique at the meeting of the dangers arising from the reform package advanced by the US, the EU and Canada, South Africa’s trade envoy Ambassador Xolelwa Mlumbi-Peter scrutinized each proposal by the developed countries on the three functions – the negotiating function, monitoring, and the dispute settlement system.
On the negotiating function concerning the differentiation among developing countries for availing S&DT in the current and future trade negotiations and “leveling the playing field,” Ambassador Xolelwa said the arbitrary criteria adopted by the US entails serious implications for developing countries as well as least-developed countries.
According to Ambassador Xolelwa, the US proposal unambiguously states that “nothing in this Decision (the US proposal) precludes a Member seeking to address particular needs during a current or future trade negotiation,” and “nothing in this Decision precludes reaching agreement that in sector-specific negotiations other Members are also ineligible for special and differential treatment.”
Therefore, she said, developing countries must insist on the continuation of S&DT in the current and future trade negotiations as it is their “legitimate” right as well as the core element of trade relations.
Moreover, the S&DT is clearly laid out in the Marrakesh Agreement and it is the “scaffolding” for the successive WTO agreements, she said.
At a time when the development divide is being further widened, developing countries need S&DT for addressing the “structural challenges”, including “inequality”, “poverty” and other disparities shown by the Covid-19 pandemic.
The developing countries must remain concerned over the market-oriented reforms advanced by the US and other industrialized countries as they would further tilt the level playing field in their favour, she cautioned.
Ambassador Xolelwa said that the eight elements of the “market-oriented policies” advanced by the US will have serious repercussions for developing countries.
The eight elements of the market-oriented policies include:
* decisions of enterprises on prices, costs, inputs, purchases, and sales are freely determined and made in response to market signals;
* decisions of enterprises on investments are freely determined and made in response to market signals;
* prices of capital, labour, technology are market-determined – minimum wage laws to address exploitation of workers;
* capital allocation decisions determined and made in response to market signals;
* enterprises are subject to internationally recognized accounting standards, including independent accounting;
* enterprises are subject to market-oriented and effective corporation law, bankruptcy law, competition law, and private property law, and may enforce their rights through impartial legal processes, such as an independent judicial system;
* enterprises freely access relevant information on which to base their business decisions; and
* there is no significant government interference in enterprise business decisions described above.
The South African trade envoy argued that markets are not perfect, suggesting that there are adverse outcomes arising from “over-pricing, market-concentration, rising unemployment and inequality” among others.
With the growing need for governmental intervention as demonstrated by the current Covid-19 pandemic, as well as the presence of mixed economies in WTO member countries, she said “we need a multilateral trading system that supports inclusive growth, and enables national authorities to pursue steps to achieve national developmental objectives and outcomes based on their peculiar circumstances.”
She criticized the recent proposals advanced by the US, the EU, and Japan against forced transfer of technologies, and disciplines on industrial subsidies and state-owned enterprises, saying that the new industrial subsidy disciplines will “limit policy tools to advance industrial development.”
Ambassador Xolelwa said that while the US, the EU, and Japan clamour for industrial subsidy disciplines, there is total silence on how to reform the farm subsidies.
According to Ambassador Xolelwa, the US proposal for resetting the bound tariff rate and agreeing on “baseline tariff rates that apply to all, with minimal exceptions” is harmful as it “implies that WTO members would have the same commitments regardless of the level of development, while developed countries are refusing to facilitate IP (intellectual property) and technology transfer.”
Resetting the bound tariff rate would be “the biggest trade injustice of treating unequal members the same,” Ambassador Xolelwa emphasized, arguing that developing countries must “resist” the proposal.
Ambassador Xolelwa also criticized “flexible multilateralism/open plurilaterals through JSI (Joint Statement Initiative) or coalition of the willing/critical mass agreements,” suggesting that it “will result in the fragmentation of the MTS (multilateral trading system)” as the JSI discussions are about multilateralizing the plurilateral initiatives.
She said that the JSIs are all about bringing “new rules” into the WTO to the complete disregard of the provisions of the Marrakesh Agreement, and is a brazen attempt to “undermine the fundamental principles of the WTO such as consensus-decision making” and establishing parallel structures in negotiations.
The reforms proposed by the US and other industrialized countries such as punitive measures for non-compliance of notification requirements “disregard the genuine capacity constraints facing many developing countries.”
“We therefore propose a “developmental and cooperative approach” to notifications and that transparency is not limited to notification requirements but permeates all the processes of the WTO to ensure inclusive participation in all WTO processes and decision-making,” the South African trade envoy argued.
Referring to the enforcement function and the dispute settlement system, Ambassador Xolelwa said that while developing countries recognize the importance of the dispute settlement system, “preserving the system does not mean accepting either inherited inequities or proposals that would worsen imbalances.”
“Any reform (of the WTO) must address the longstanding concerns, especially those that constrain policy space to nurture our industries, including rules (that) have contributed to an unbalanced globalization where benefits increasingly accrue to a few and generate growing concentrations of wealth, inequality, job losses and insecurity,” she emphasized.
Ambassador Xolelwa proposed reforms based on “inclusivity and development.” The reforms include “new developments”, including the COVID-19.
The other reforms include:
1. Preserving S&DT and advance the 10 G90 ASP (agreement-specific proposals) – promoting public health, accelerate industrialization, BoP (balance of payments), upgrade and modernize manufacturing, promote technology transfer and close the digital divide to promote an inclusive digital economy;
2. Advancing a development-oriented and cooperative approach to Transparency rather than a punitive approach;
3. Re-balancing global rules and national economic development imperatives to provide for policy flexibility in order for countries to address their peculiar challenges – promote economic resilience and recovery.
4. Developed countries are trying to do this with leveling the playing field proposals that would constrain policy space and re-opening of principles that underpin the WTO, including S&DT and consensus decision making.
5. Resisting rules on e-commerce that will confine developing countries to consumers of digital products rather than foster digital industrialization and review the moratorium on ET (electronic transmissions) given the implications on digital industrialization, revenue and broader socio-economic implications.