TWN Info Service on WTO and Trade Issues (Dec20/24)
22 December 2020
Third World Network

Proposal on promoting “development & inclusivity” gathers momentum
Published in SUNS #9259 dated 22 December 2020

Geneva, 21 Dec (D. Ravi Kanth) – A proposal by the African Group, Cuba, and India on “strengthening the WTO to promote development and inclusivity” has gathered momentum at the World Trade Organization with support from many developing countries.

However, the United States and the European Union among others opposed the proposal on differing grounds in that they prefer plurilateral initiatives and the discontinuation of the consensus principle in decision making, trade envoys told the SUNS.

At the General Council (GC) meeting on 17 December, the proponents introduced their comprehensive reform proposal that calls for developmental orientation in the WTO reforms to address the imminent challenges arising from the COVID-19 pandemic as well as the systemic crises created by some major developed countries.

The ten-page proposal by the African Group, Cuba, and India places the developing countries at the heart of the Work Programme.

“In the last two years, 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 (Doha Development Agenda) remain unaddressed,” the proponents said.

“WTO reform” does not mean accepting either inherited inequities or new proposals that would worsen imbalances, the three proponents emphasized, arguing that “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 proponents argued that “inclusivity would require, at a minimum, preserving consensus decisions in the WTO.” They said the priorities for the reform at the WTO must include:

(a) The negotiating function of the WTO.

(b) Strengthening 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.

(c) Addressing the unilateral and protectionist actions taken by some Members.

(d) 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.

(e) 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.

(f) The dispute settlement function.

(g) Restoring the Appellate Body and the two-tier WTO DSU.

(h) The monitoring function of regular bodies.

(i) 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:

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.

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.

The African Group, comprising more than 50 developing countries, said that the joint reform proposal seeks to “identify the issues that must be addressed if the WTO is to be strengthened in a balanced manner.”

It argued that “in some areas, no change was required but simply a reinforcement of existing rules and architecture as some of the existing foundational WTO rules are currently being sought to be changed or adjusted.”

The African Group reiterated that “multilateral avenues, based on consensus, remain the most effective means to achieve inclusive development-oriented outcomes.”

Referring to the imbalances in the rules for developing countries in the Uruguay Round, which created more problems even before the onset of the COVID-19 pandemic, as well as the unprecedented COVID-19 pandemic that exerted a “radical and abrupt effect on both supply and demand,” the African Group said the developing countries are “disproportionately affected.”

The African Group said “special and differential treatment (S&DT) remains an important part of the multilateral consensus reached previously,” adding that “Special and Differential Treatment (S&DT) is a treaty-embedded and non-negotiable right for all developing Members.”

Moreover, the pursuit of S&DT does not mean that “developing countries are seeking unlimited carve-outs from the MTS (multilateral trading system),” the African Group said, suggesting that they made a contribution to international trade commensurate with their level of development.

The Marrakesh Agreement has recognized the contribution made by the developing countries in delivering on the wide mandate of the Uruguay Round, including the significant measures of economic reform and autonomous trade liberalisation implemented by developing countries.

Emphasizing that the developing countries would need “policy space,” the African Group warned that “any unilateral action depriving developing Members including LDCs of treaty-embedded rights would be inconsistent with Members’ obligations, and would in fact erode the foundation of the multilateral trading system which functions on the basis of being “rules-based”.”

The African Group said “the long-awaited outstanding “development” issues from the Doha Round continue to be paramount and include implementation issues, Cotton, Public Stockholding (PSH), Special Safeguard Mechanism and Agriculture Domestic Supports,” and that the development components in fisheries subsidies and e-commerce discussions under the 1998 Work Program must be resolved.

In its intervention, South Africa’s trade envoy, Ambassador Xolelwa Mlumbi-Peter, highlighted the following points focusing on strengthening the multilateral character of the WTO:

i. 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;

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

iii. Preserve policy tools to promote economic recovery, provide policy flexibility with a view to re-balance global rules and national economic development imperatives and ensure that trade rules support production-led growth, jobs and structural transformation.

iv. Reaffirming the principle of Special and Differential Treatment, which is a treaty-embedded, non-negotiable right for all developing countries in the WTO;

v. Keeping development at the core of the WTO through delivering on the long-promised development concerns, including reinvigorating the discussions in the 1998 E-Commerce Work Programme, assess the implications of E-Commerce Moratorium and address the issues of digital divide.

Importantly, the WTO must also allow for different economic models rather than push for one form or another.

Ambassador Xolelwa 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.”

She said “a sine quo non for strengthening the WTO system is the restoration of the Appellate Body,” stating that this is an urgent priority “since without such a system, the rationale for negotiating new rules or to undertake reforms remains questionable.”

Intervening on behalf of the ACP (Africa, Caribbean, and Pacific) group, Jamaica thanked the co-sponsors “for their very insightful submission,” arguing that “it sheds light on the myriad of issues confronting developing countries and that would have to be a part of our discussions on the future of S&DT and WTO reform.”

The ACP group said the reform proposal is ” a good first step and an important effort to capture the relevant issues at stake that require reflection by all.”

“If we are serious about having a discussion on WTO reform and the future of the S&DT, the agenda cannot be pre-determined by a small group of members, when the implications of reform affect and the rationale for reform is the business of all members,” the ACP said.

The ACP group said “the WTO is not an organization immune from democratization,” pointing out that the ACP group “continue to request an open, transparent and inclusive discussion on the rationale, parameters, scope and elements of reform.”

The ACP group said “we already have a number of papers on the table giving various perspectives on WTO reform and the S&DT and more is being prepared.”

The ACP group said that it is currently working on a paper for WTO reform, suggesting that there are “important questions to reflect on as we move forward”. The questions, according to the ACP group, include:

(1) How do we plan to bridge divergences on the issue of reform and S&DT in the WTO?

(2) Do we leave these issues to be handled in the current exclusive groups that lack representivity?, and “if so, what implications will this have for the future of the WTO and the principles it is known to espouse?

(3) Are we guided by the unique circumstances of members of the WTO or are we pursuing narrow agendas?

(4) How do we ensure that previous Ministerial Decisions are streamlined into our discussions on reform?

(5) How do we ensure that reform accommodates unforeseen shocks to the trade and development of developing countries and LDCs, especially in light of the impact of the COVID-19 pandemic?

(6) And how do we ensure that our ministers are placed in a position to provide clear guidance on how we move forward with these issues at MC12?

Jamaica cautioned that “the WTO can only be sustainable if the needs of all its members are taken into account.”

Responding to the reform proposal from the developing countries, the US trade envoy Ambassador Dennis Shea said Washington continues to disagree with the vast majority of the paper, saying that “it is backward-looking and unhelpful, and disconnected from where this organization and the international business community are today.”

Ambassador Shea said “the heart of this paper continues to directly call into question whether Members share a common understanding that WTO rules, and the implementation of those rules, are helpful to development and economic growth”, as it maintains that “the framework of WTO rules is onerous, unfair, and anti-development.”

Also, the proponents reckon that S&DT is a means for self-declared developing countries to disconnect from various WTO rules, including in the TRIMS Agreement and the SCM Agreement,” the US envoy argued, maintaining that “for Members who hold this view, the common rules of this house are rules for others – not themselves.”

“They want the opportunities that WTO membership offers, but they no longer want to contribute to creating those opportunities through the full implementation of existing WTO rules,” Ambassador Shea insisted, calling on the proponents “to return to the premise that we believe in the rules, and in their full implementation.”

“Without this common understanding, it is hard to understand how reform efforts can succeed,” Ambassador Shea said.

The European Union trade envoy Ambassador Joao Aguiar Machado said that while Brussels would agree that “members should pursue their efforts in finding multilateral solutions, it urged for members to constructively engage on WTO reforms on the “three areas of negotiating function of the WTO; the dispute settlement function; and the monitoring function of regular bodies”.”

The EU said that “without departing from the objective of advancing multilateral rulemaking, the EU is supportive of an open plurilateral track of negotiations with a view to preparing multilateral outcomes,” indicating ambiguously its preference for the plurilateral route.

While welcoming “the active participation of both developed and developing Members in the e-commerce, domestic regulation in services and investment facilitation negotiations,” the EU said that “developing countries should be allowed assistance and flexibilities when justified,” implying that S&DT has to be on a needs-based framework.

Without indicating that the EU would not approve the consensus principle, Brussels said “to grant open-ended block exemptions to 2/3 of the Membership is no longer a viable model.”