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Info Service on WTO and Trade Issues (May21/10) Washington DC, 7 May (D. Ravi Kanth) – The proponents of the Joint Statement Initiatives (JSIs) on 6 May touted the benefits stemming from these non-mandated initiatives but failed to answer to the legal issues as raised by India, South Africa, and Namibia at the World Trade Organization. At the General Council (GC) meeting on 6 May, the European Union, one of the central navigators of the JSIs, said “what matters is not the legal form but that they (the JSIs) bring undeniable benefits.” “Legal form (of these JSIs) should be secondary in consideration,” the EU’s trade envoy Ambassador Joao Aguiar Machado said at the meeting, according to people familiar with the development. He insisted that members should establish a working group on “WTO reforms” at the WTO’s 12th ministerial conference (MC12) to be held later this year in Geneva so as to discuss the institutional issues, including how to integrate the plurilaterals into the multilateral trading system. The EU’s remarks, which were also echoed by the other JSI members in varying degrees, seem to have unwittingly exposed that the JSIs have no legal status at this juncture, said a person, who asked not to be quoted. The GC meeting also witnessed the JSI proponents citing the remarks of the WTO director-general Ms Ngozi Okonjo-Iweala as having said that the JSIs energized the rule-making process for updating rules for the 21st century, regardless of the chaos they are creating in the multilateral trading system. Incidentally, the DG was stopped in her tracks for including an agenda item on reviewing progress on the JSIs at an informal Trade Negotiations Committee (TNC) meeting on 3 May after India raised “serious” objections to her decision that appears to have violated the core provisions of the Marrakesh Agreement that established the WTO. The DG acknowledged her mistake on introducing the item on the JSIs in the agenda, and later did not mention the word “JSI” in her concluding statement at the meeting on 3 May. The GC meeting on 6 May exposed the legal fault lines in the way the JSIs on electronic commerce, investment facilitation, and disciplines for MSMEs (micro, small, and medium enterprises) are being steam-rolled through regardless of their alleged violation of the Marrakesh Agreement in a rules-based inter-governmental trade organization, said people familiar with the development. In their proposal on the legal status of the JSIs (WT/GC/W/819), the co-sponsors – India and South Africa and later joined by Namibia – showed: (1) the contradiction between the JSIs and the fundamental principles of the WTO; (2) the different challenges posed by the JSIs; (3) the systemic and development implications; (4) the options for the JSI participants to bring their initiatives into compliance with the WTO rules; and (5) other issues concerning the utter lack of compliance with the Marrakesh Agreement. (See SUNS #9339 dated 4 May 2021). During the meeting, the co-sponsors of the proposal made a strong case that the allegedly illegal JSIs would not only lead to the partition/division of the WTO, but will also destroy the rules-based multilateral trading system once and for all. India’s trade envoy Ambassador Brajendra Navnit said that where informal discussions on the JSIs such as digital trade, investment facilitation, disciplines for MSMEs, and domestic regulation on trade in services turn into actual negotiations, they must be brought into the WTO rule-book and the fundamental rules of the WTO must be followed. He said any attempt to introduce new rules arising from the JSI negotiations into the WTO without fulfilling the requirements of Articles IX and X of the Marrakesh Agreement that established the WTO “will create a precedent for any member to bring into the WTO without the principle of consensus and collective oversight of members.” More important, such rules, he said, will undermine the balance “in agenda-setting and members disregarding the multilateral mandates through consensus” and pave the way for “marginalization and exclusion of issues which are difficult and critical such as agricultural negotiations.” India said that their proposal is that members must follow the rules enshrined in the multilateral mandates, adding that the paper provided options to the JSI participants to bring their negotiating outcomes into the WTO. However, said Ambassador Navnit, we are yet to hear from the JSI participants the legal basis for their disagreement (with the proposal), arguing that the JSI members must “express explicitly their objections to the various aspects of our paper.” He showed how the Tokyo Round codes led to the fragmentation of the GATT system and they were integrated during the Uruguay Round of trade negotiations that ended at the official level in December 1993. Ambassador Navnit drew attention to the preamble of the Marrakesh Agreement to bolster his argument to “develop an integrated, more viable and durable multilateral trading system encompassing the General Agreement on Tariffs and Trade, the results of past trade liberalization efforts, and all of the results of the Uruguay Round of Multilateral Trade Negotiations.” Therefore, the integrated multilateral trading system clearly highlighted the concerns arising from the fragmentation of the rules on account of the Tokyo Round of codes, he said, suggesting that even the Appellate Body, in one of its first rulings, acknowledged that the authors of the new WTO intended to put an end to the fragmentation of what had characterized the previous system. Consequently, he said, going back to plurilaterals will be a step in the wrong direction and contrary to the preamble of the Marrakesh Agreement. In short, “the JSIs do not have a multilateral mandate and if MC12 is to create trust and build confidence then this issue must be addressed at once,” he suggested. SOUTH AFRICA’S INTERVENTION In its intervention, South Africa’s trade envoy Ambassador Xolelwa Mlumbi-Peter reminded members about the legal architecture that governs them and the need to preserve the systemic basis of the multilateral character of the WTO, including the underpinning of the incorporation of new rules into the WTO legal framework. She argued that there is a difference between sectoral negotiations that involve changing the schedules, emphasizing that their paper lays out the options that JSI members can consider in bringing new rules into the WTO system. Moreover, it stresses that the amendment of new rules must follow Article X of the Marrakesh Agreement for amendments, she said. She said that it is important to acknowledge that the different JSIs are going to cause different legal challenges to the existing WTO rules and mandates given the nature and scope of issues that are covered under each of these JSIs, said people familiar with the discussions. Ambassador Xolelwa said when the JSIs were proposed in the run-up to the eleventh ministerial conference in Buenos Aires in December 2017, the JSI members did not obtain consensus due to serious substantive concerns raised by many members. She said JSIs introduce new systemic and developmental challenges that the membership must reflect on such as implications for decision-making, and the consensus principle in decision-making as well as the core principles that underpin the WTO. She said we want to reiterate that we do not question the right of any member or any group of members for that matter to discuss any issue informally. But where such discussions turn into negotiations and the outcomes are sought to be formalized into the system, then there is a serious legal problem, Ambassador Xolelwa suggested. She further clarified by saying that what we are saying is that such negotiations are to be set out as per the multilateral trade agreement. In addition, it is not the number of members that participate in these initiatives, it is their legal status, the South African trade envoy suggested. The paper is about the legal challenges and the principles that underpin the WTO, she said. As regards the legal status of the Information Technology Agreement (ITA) as raised by several JSI members, Ambassador Xolelwa argued that what the ITA did was to change the commitments, and it was given the legal effect by amending the schedules, and a certification procedure after the negotiations with members. This was also done on an MFN basis, she said. Commenting on the telecom reference paper, Ambassador Xolelwa said that this came about due to a mandated negotiation during the Uruguay Round. Commenting on the JSI on domestic regulation on trade in services, the South African trade envoy drew attention to the GATS, suggesting that the Working Party on Domestic Regulation in services was mandated multilaterally and there is currently no mandate to discontinue the ongoing work in the Working Party. However, what the JSIs are doing now is to circumvent that multilateral mandate, and to just undertake exploratory negotiations, but are actually undermining it through a parallel process. Therefore, she said, our view is that it would be good for members to answer the legal questions that are entailed in the paper because we believe that the legal questions are important in a rules-based system. Ambassador Xolelwa urged the JSI members to engage in addressing these legal and systemic questions as they stand to create issues going forward. INDONESIA’S INTERVENTION Indonesia, which is a member of two JSIs (investment facilitation, and digital trade), said that it had also raised the issue of the legal status of the JSIs when it joined these two initiatives but unfortunately its queries have so far not been answered. The Indonesian trade envoy said that “in the Joint Initiative on Investment Facilitation for Development, Indonesia sought information on what steps are to be taken for integrating the outcome into the WTO architecture, knowing that there is no multilateral mandate on this initiative yet.” Going forward, the Indonesian envoy said, it is incumbent on the JSI co-convenors to explain and clarify how they would try to integrate these JSIs into the multilateral trade framework, suggesting that an agreed understanding on the legal status would provide a level of comfort to members engaged in the JSIs. JSI CO-CONVENORS’ DEFENCE However, the JSI co-convenors – China, Singapore, Japan, Australia, and Costa Rica – brushed aside the legal concerns raised by India, South Africa, Namibia, and Sri Lanka. They touted as to how the JSIs have energized the WTO as was echoed by the WTO Director-General and the enormous benefits that they are going to provide to members. But on the crucial question of the legal status of the JSIs, the JSI co-convenors either remained silent or maintained that the issue is premature to discuss at this juncture, said people familiar with the development.
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