TWN Info Service on WTO and Trade Issues (Dec20/16)
17 December 2020
Third World Network

No deals this year amid efforts to undermine multilateral framework
Published in SUNS #9255 dated 16 December 2020

Geneva, 15 Dec (D. Ravi Kanth) – The World Trade Organization is unlikely to conclude any agreement this year, particularly the much-touted fisheries subsidies agreement.

However, an alarming trend that has surfaced during this year appears to be the relentless effort by major developed countries and their developing country allies to undermine the multilateral framework for negotiating mandated outcomes and converting the WTO into a so-called plurilateral pulpit, trade envoys told the SUNS.

At a virtual informal Trade Negotiations Committee (TNC) meeting on 14 December, the divide between the sponsors of the non-mandated plurilateral initiatives led by the United States, the European Union, Japan, Canada, and China on the one side, and the large majority of developing countries seeking multilateral outcomes of mandated issues on the other, came into the open, according to the audio statements of several countries accessed by the SUNS.

The EU and other industrialized countries remained silent on the mandated multilateral issues such as work on electronic commerce and the unfinished Doha Development Agenda (DDA) trade negotiations.

Yet, the EU, Japan, and other industrialized countries as well as China proclaimed widely about the continued progress in the non-mandated plurilateral Joint Statement Initiatives (JSIs) on electronic commerce, services domestic regulation, disciplines for micro, small, and medium enterprises (MSMEs), and investment facilitation among others.

In sharp contrast, the developing countries – India, Indonesia, South Africa, and the ACP (Africa, Caribbean, and Pacific) group – reiterated their commitment to the multilateral initiatives, including the unfinished Doha Development Agenda negotiations, and reforms based on inclusive and developmental goals, according to the interventions made at the meeting.

At a time when the COVID-19 pandemic has claimed more than 1.5 million lives, the EU along with its partners in the Ottawa Group of countries have proposed negotiations on trade and health that seek to use the pandemic for further trade liberalization, which aims to put profits and patents before the ever-rising loss of human lives due to the pandemic, said trade envoys, who asked not to be quoted.

In stark contrast to the EU’s proposed trade and health initiative, a large number of developing countries, including India, Indonesia, and South Africa among others, called for a temporary waiver from the WTO’s crucial TRIPS obligations so as to enable developing countries to fight the COVID-19 pandemic.

In an attempt to divide the WTO into groups on the basis of the so-called “coalition of the willing” framework, which was earlier witnessed during the Afghanistan and Iraq conflicts, the outgoing US trade envoy Ambassador Dennis Shea has called for “like-mindedness” to address the challenges posed by China since its accession to the WTO in 2001 and to make progress at the WTO.

On the other hand, as opposed to the likely attempts to partition the WTO membership through the US-proposed market-oriented reforms, many developing countries, including India, Indonesia, South Africa, and members of the ACP (Africa, Caribbean, and Pacific) group as well as the African Group, called for inclusive and developmental reforms at the WTO.

Except for the United States, a large majority of developing and developed countries called for the expeditious appointment of the next director-general-select, Ms Ngozi Okonjo-Iweala from Nigeria, to lead the global trade body.

The US, however, remained silent on the appointment of the new DG despite calls from many members.

Apparently, the US seems reconciled to the view that Nigeria’s former finance minister Ms Ngozi Okonjo-Iweala would be appointed, said a person familiar with the process.

In a similar vein, a large majority of members except the US called for the restoration of the Appellate Body for the enforcement of WTO rules, trade envoys said, preferring not to be quoted.

INTERVENTIONS BY MEMBERS

Prior to the interventions by members, the chairs of the Doha Rules negotiating body, Doha agriculture negotiating body, and Doha trade and development body among others issued their respective reports on the state of play that revealed lack of progress in all areas.

The chair of the Doha fisheries subsidies negotiations, Ambassador Santiago Wills from Colombia, delivered his assessment of the work done this year, suggesting that he will issue a second revised draft text at the end of this week that will be further negotiated next year.

Ambassador Wills acknowledged that, though an agreement on fisheries subsidies is not being concluded by the end of this year, there is considerable progress in moving negotiations on the basis of the revised draft consolidated text, the chair said at a press conference on 14 December.

Ambassador Wills disagreed with the assessment that his alleged controversial approaches led to the impasse in the fisheries subsidies negotiations, saying that many members praised his work and that he did not hear any criticism at the meeting.

The chair of the Doha agriculture negotiations, Ambassador Gloria Abraham Peralta of Costa Rica, said that members are working on a General Council decision to ensure that export prohibitions do not come in the way of the work of the World Food Programme, said a trade official, who preferred not to be identified.

THE US INTERVENTION

On the specific interventions at the TNC meeting, the US trade envoy Ambassador Dennis Shea, who thanked the outgoing President Donald Trump for appointing him as the US trade envoy to the WTO, coined a new slogan called “like-mindedness” for bringing progress on various issues at the WTO, according to his audio statement.

He suggested that lack of trust is not the main problem for not making progress at the trade body. But lack of like-mindedness is responsible for not making progress at the WTO during the last 25 years, Ambassador Shea said.

According to the US trade envoy, the three areas of problems arising from the lack of like-mindedness are: (1) “some WTO members apparently do not believe that market orientation is part of the WTO’s DNA”, as well as the dangers posed by China’s state-led, non-market economic system which is incompatible with the WTO and the norms; (2) “the over-riding preoccupation of far too many WTO members is to be exempt from the rules” and advanced developing countries’ claim of entitlement of Special and Differential Treatment as a right; and (3) the third area, where lack of like-mindedness is pronounced, is dispute settlement, with some members having a fundamentally different vision for appellate review than the limited role set out in the Dispute Settlement Understanding (DSU).

Ambassador Shea asked that if the developing countries “do not want to abide by the rules of this organization, then, why be members?”

The US trade envoy said that “with divergences among the membership, it’s no wonder that the WTO has under-performed over the past 25 years – just one multilateral agreement, the Trade Facilitation Agreement, and no multilateral outcome that reduces tariffs and improves market access.”

Commenting on the fisheries subsidies negotiations, he praised the chair Ambassador Wills, stressing that “this negotiation has been ongoing for nearly 20 years (as part of the Doha Rules negotiations), and by that measure, progress is very modest.”

Consequently, the need of the hour is to build like-mindedness, Ambassador Shea concluded.

In its intervention, Japan supported the US initiative on the negotiating function of the WTO, the EU’s initiative on trade and health, and the US initiative to create a level-playing field based on the market-oriented policies and competition.

The EU spoke about the progress made in the JSIs, and also the controversial “needs-based approach” for availing of special and differential treatment (S&DT) by developing countries in the fisheries subsidies negotiations.

The EU said that there should be no carve-outs and exceptions on S&DT for developing countries in the fisheries subsidies negotiations.

Significantly, China appeared to remain silent over the US criticism of its policies, with the Chinese trade envoy Ambassador Zhang Xiangchen reminding members that “beginning from this month, there was no Appellate Body member at all, which makes the other major limb only on paper.”

Without naming the US, which has blocked the selection of the next director-general, China said that “members’ inability to make a decision” is a source of concern.

China highlighted the progress made on the JSIs on investment facilitation, electronic commerce, services domestic regulation and MSMEs.

INDIA’S INTERVENTION

In its intervention, India offered a year-end appraisal from its perspective that includes the failure to convene the MC12 due to COVID-19, the failure to appoint the next DG, the failure to restore the Appellate Body (AB), and the failure to “formulate a package of meaningful measures to address the immediate challenges posed by the pandemic.”

Emphasizing that “saving human lives, livelihood and arresting the losses in the world output and trade should be our topmost priority,” India said the proposal for a temporary waiver from the provisions of the TRIPS Agreement is first on its priority list.

India’s trade envoy Ambassador Brajendra Navnit said that “an outcome on this (issue of the temporary TRIPS waiver) will not only help in saving valuable human lives but a comforting signal on affordability and accessibility of medical products will also boost the confidence in economy and will accelerate the recovery of world trade and world GDP.”

The second priority for India is “ensuring easier cross-border movement of not only goods but also that of natural persons (in Mode 4 of the General Agreement on Trade in Services) particularly health care professionals.”

The Indian envoy called for “a multilateral initiative” at MC12.

The third issue, said India, is the immediate resolution of the Appellate Body impasse, and pursuing “an inclusive and balanced reform agenda for the WTO” that India along with the African Group and Cuba have proposed. It also emphasized how S&DT is central to the founding principles of the WTO.

The proposal by the African Group, Cuba, and India (WT/GC/W/778/Rev.3), issued on 4 December, has called for including the following priorities for reform at the WTO:

1. The negotiating function of the WTO needs to be strengthened on the basis of the multilateral character of the WTO. Critically, this must include the preservation of consensus decision-making and respecting Art. X of the Marrakesh Agreement on Amendments with regards to new rules;

2. Addressing the unilateral and protectionist actions taken by some Members;

3. Reaffirming the principle of Special and Differential Treatment, which is a treaty-embedded, non-negotiable right for all developing countries in the WTO; and promoting inclusive growth, widening spaces for states to pursue national development strategies in the broad framework and principles of a rules-based system;

4. Keeping development at its core through delivering on the long-promised development concerns, in particular the outstanding development issues of the DDA; as well as address the asymmetries in WTO Agreements such as those in Agriculture, the Subsidies Agreement, TRIMS and the related GATT articles (Art. III and XI), TRIPS and other areas; continuing with the on-going multilaterally mandated negotiations; reinvigorating the discussions in the 1998 E-Commerce Work Programme particularly looking at the E-Commerce Moratorium and the issues of digital divide.

On the dispute settlement function:

i. Restoring the Appellate Body and the two-tier WTO DSU.

ii. The monitoring function of regular bodies: Reaffirming existing commitments and not adding more obligations in the areas of transparency; specific trade concerns and the functioning of regular bodies. The WTO must also allow for different economic models rather than push for one form or another.

On COVID-19:

i. Responding to the COVID-19 pandemic, including through introducing a Moratorium on trade measures and providing sufficient flexibilities on intellectual property disciplines for developing countries. Such a Moratorium will be in place for the duration of the pandemic for governmental action taken to directly respond to the pandemic. Unlike developed countries, developing countries without deep pockets must be more creative, including by using trade policy measures to provide medicines, diagnostics, health equipment, and to address the serious balance of payments crises many developing countries now find themselves in.

ii. To address COVID-19, developing countries should not be asked to relinquish their required trade policy space such as through the permanent liberalization of tariffs or agreement to end the use of export restrictions.

India also emphasized the need for a permanent solution on public stockholding programs for food security.

More importantly, on the fisheries subsidies negotiations, India called for ensuring “that common but differentiated responsibility and Polluter Pays principle should be applicable in any agreement relating to sustainability.”

India said that “those who have provided huge subsidies leading to overfishing and overcapacity should take higher cuts in subsidy and capacity,” arguing that India would support the Doha Rules chair’s suggestion of the concept of “debt repayment” which has become overdue.

India said it is “an established principle that debt is repaid by respective debtors in proportion to the debt taken,” suggesting that “debt repayment can’t be assigned to all in uniform manner. S&DT in the final outcome must be effective and appropriate having regard to the development needs, livelihood and food security concerns of millions of small fishers of developing countries including LDCs.”

Therefore, “any discipline should factor in their capacity to put in place effective mechanism to deal with unregulated and unreported fishing and appropriate conservation and management measures,” India said.

India also emphasized that the “pandemic has shown to us that the need of the hour is to build capacity in areas such as digital skills and digital infrastructure, rather than negotiating binding rules on e-commerce (through the JSI).”

The Indian trade envoy said “it is also important to bring clarity on the scope of the moratorium on custom duty on electronic transmission, its potential impact on the sustainability of the domestic industry and negative impact on job creation and revenue generation.”

He urged members to “move forward by reinvigorating the mandated work under the 1998 Work Programme on e-commerce in various Councils.”

In his intervention, Indonesia’s trade envoy Ambassador Syamsul Bahri Siregar said members need to focus on the mandate for the fisheries subsidies, particularly on the need to “prohibit certain forms of fisheries subsidies that contribute to overcapacity and overfishing.”

Ambassador Siregar suggested that it is not members’ task “to define the sustainability issue in this discipline, as the FAO is working on that.”

“While the WTO and FAO work to achieve the same objectives concerning fisheries sustainability, our approach should not overlap,” the Indonesian envoy said.

Indonesia, which coordinates the G-33 group of developing countries at the WTO, said members need to “continue to pursue the objective of Bali Ministerial Decisions to establish a permanent solution for Public Stockholding for Food Security Purposes (PSH) and a comprehensive and balanced outcome in Special Safeguard Measures (SSM).”

Ambassador Siregar said the COVID-19 pandemic has emphasized “the importance of food security. Concluding the PSH and SSM negotiation are paramount to ensure this objective.”

The Indonesian envoy said that “food reserves is imperative in food security by addressing price volatility and facilitating emergency distribution in time of crisis.”

Ambassador Siregar said that Indonesia is committed to “advance the development of the Work Programme on Electronic Commerce.”

Indonesia, according to Ambassador Siregar, shares “the view on the need to clarify the scope of the electronic transmission, which in our view, shall not apply to electronically transmitted goods and services.”

He called for the restoration of the two-tier dispute settlement system, and underscored the need for a successful outcome on the TRIPS waiver “for prevention, containment and treatment of Covid-19.”

SOUTH AFRICA’S INTERVENTION

In her intervention, South Africa’s trade envoy Ambassador Xolelwa Mlumbi-Peter underscored the need for setting realistic goals for MC12, cautioning against unrealistic expectations.

South Africa said members must “ensure that trade contributes to inclusive growth and development,” suggesting that it would require members to “listen to each other’s concerns and craft an agenda that will ensure that trade rules work for all.”

Ambassador Xolelwa said “incremental progress on mandated issues under the TNC/DDA agenda can go a long way towards this objective.”

She said that “a food security agenda is going to be critical”, starting with “contribution to the WFP, a permanent solution for PSH and preserving support to resource-poor farmers through Art. 6.2 (of the Agreement on Agriculture) who are vulnerable due to COVID-19.”

Further, “a meaningful outcome in agriculture negotiations should address historical imbalances, concentration and must also deliver on cotton and SSM,” Ambassador Xolelwa argued.

As regards fisheries subsidies negotiations, South Africa said “members must focus on delivering on all mandates, including on SDG 14.6, (and) this, however, does not mean that management aspects should be brought into the WTO.”

She said that “those Members with massive capacity must reduce their capacity substantially if we are to achieve sustainability.”

The South African envoy said that “a list-based approach (for subsidies) is the most pragmatic in order to make progress,” suggesting that disciplines must target large-scale industrial fishing and safeguard food security and livelihoods of small-scale fisheries.

More importantly, the outcome of fisheries subsidies agreement “must deliver on all the pillars of the mandate, including S&D(T).”

Commenting on the importance of S&DT, Ambassador Xolelwa emphasized that “meaningful S&D(T) should be meaningful and cannot be limited to transitional periods.”

Ambassador Xolelwa thanked the chair of the Doha trade and development negotiating group “to facilitate substantive discussions among Members and we support the process to discuss two ASPs (agreement-specific proposals) per session to enable focused discussion among Members.”

“COVID-19 has exposed the strategic vulnerabilities of developing countries,” the South African trade envoy said, arguing that “S&D(T) in the WTO must serve to provide developing countries and least-developed countries with better tools to overcome any crisis and enable them to build resilience.”

Commenting on the WTO reform, South Africa said “we are concerned with any reform agenda that worsens the existing imbalances and inequities”, emphasizing that “reforms must be premised on the principles of inclusivity and development.”

On reinvigorating the Work Programme on e-commerce, the South African envoy said the joint paper with India has stressed “that progress on the developmental aspects of e-commerce will be essential to inform decision making on the e-commerce moratorium at MC12.”

She expressed concern “with the lack of a developmental agenda on the exploratory discussion on the services sectors discussed in the CTS-SS and whether these will result in equitable outcomes.”

Ambassador Xolelwa called for the restoration of the AB, cautioning that “the dysfunctionality of the AB is a systemic issue that undermines the enforcement function of the WTO, renders the negotiations pointless and must be resolved as a matter of urgency.”

Ambassador Xolelwa said members “cannot afford to stall the DG selection process,” calling on “all Members to ensure finalization of the process in accordance with agreed rules.”

In short, the developing countries face a Herculean task at the World Trade Organization in the new year with attempts being made to terminate the consensus principle in decision-making, the special and differential treatment, the multilateral framework underlying the WTO, and the Appellate Body among others.

Under the apparent pretext of reforming the WTO, the US, the EU, Japan, Canada, and Australia among others want to turn the WTO into a plurilateral trade body, while blocking the genuine development-oriented initiatives like the temporary TRIPS waiver for combating the COVID-19 pandemic or advancing work on the 1998 e-commerce work programme, trade envoys said.