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Info Service on WTO and Trade Issues (Feb23/05) Geneva, 7 Feb (D. Ravi Kanth) — India and South Africa, in separate communications, have raised major challenges/objections to the schedule of specific commitments filed by 35 countries, including the United States and the European Union, under the controversial Joint Statement Initiative (JSI) on services domestic regulation at the World Trade Organization. In what appears to be the first major challenge to the allegedly WTO-illegal Joint Statement Initiatives, India and South Africa seem to have objected to a reference paper ostensibly over additional commitments in the GATS (General Agreement on Trade in Services) schedules of commitments of 35 member countries, said people familiar with the development. While India sent its objections to the 35 countries separately, South Africa included all 35 countries in its submission on 3 February. The 35 member countries, who have to enter into consultations with India and South Africa, include Albania, Argentina, Bahrain, Canada, Chile, China, Costa Rica, European Union (which includes 27 member countries), Georgia, Hong Kong, China, Iceland, Japan, Kazakhstan, Korea, Liechtenstein, Mauritius, Mexico, Moldova, Montenegro, Nigeria, North Macedonia, New Zealand, Norway, Paraguay, Peru, Singapore, Switzerland, Chinese Taipei, Thailand, Ukraine, United Arab Emirates, United Kingdom, United States of America, the Russian Federation, and Saudi Arabia. Both India and South Africa noted the submissions by the 35 countries that “contains schedules of specific commitments relating to services domestic regulations, submitted for certification pursuant to the Procedures for the Certification of Rectifications or Improvements to Schedules of Specific Commitments (document S/L/84).” India and South Africa said they consider that “further information and clarifications are required in order to assess the legal basis and the effect of the proposed improvements, particularly their interaction with Members’ existing rights and obligations under the General Agreement on Trade in Services and the Marrakesh Agreement Establishing the WTO.” Accordingly, the two countries notified their “objection to the certification of the schedules of specific commitments” of the 35 countries. India and South Africa said that “further clarifications may be needed on other aspects of the schedules submitted for certification by the Members concerned and therefore, reserves the right to seek such clarifications.” According to paragraph two of the “Procedures for the Certification of Rectifications or Improvements to Schedules of Specific Commitments”, as agreed by the WTO’s Council for Trade in Services on 14 April 2000, “any Member wishing to object to the certification shall submit a notification to that effect to the Secretariat for circulation to all Members.” Further, “a Member making an objection should to the extent possible identify the specific elements of the modifications which gave rise to that objection.” “The objecting Member(s) and the modifying Member shall enter into consultation as soon as possible and shall endeavor to reach a satisfactory solution of the matter within 45 days after the expiry of the period in which objections may be made,” it said. Also, “when an objection has been notified, the certification procedure shall be deemed concluded upon the withdrawal of the objection by the objecting Member or the expiry of the period in which objections may be made, whichever comes later.” More importantly, “such a withdrawal shall be communicated to the Secretariat. When more than one objection has been raised, the certification procedure shall be deemed concluded upon the withdrawal of the objections by all objecting Members or the expiry of the period in which objections may be made, whichever comes later.” In short, India and South Africa have to be satisfied with the responses from the 35 countries for the conclusion of the submission of the schedules of specific commitments and if their objections are not addressed, then the schedules will not be able to come into effect, said people, who asked not to be quoted. India and South Africa stated unambiguously that their “objection should be read in conjunction with the paper WT/GC/W/819/Rev.1 circulated at the request of India, South Africa, and Namibia.” Since 2021, the two countries along with Namibia have challenged the legal status of the JSIs on domestic regulation in services, electronic commerce, investment facilitation, disciplines for MSMEs (micro, small, and medium enterprises), and trade and gender among others, on grounds that these initiatives allegedly violated the core principles of the WTO’s Marrakesh Agreement. India and South Africa complained that the WTO is a multilateral organization that allows multilateral negotiations that some have allegedly taken illegally out of its formal structure to conclude the JSI on services domestic regulation, said a negotiator, who asked not to be quoted. According to a joint proposal (WT/GC/W/819/Rev.1) issued on 28 April 2021, India, South Africa, and Namibia argued that the JSIs allegedly violated the following “fundamental principles and objectives of the multilateral system, enshrined in the Marrakesh Agreement”:
* Art. II.1: “The WTO shall provide the common institutional framework for the conduct of trade relations among its Members …”; * Art. III.2: “The WTO shall provide the forum for negotiations among its Members concerning their multilateral trade relations”; * Consensus-based decision-making, as enshrined in Arts. III.2, IX, X, and also X.9 of the Marrakesh Agreement; * The procedures for Amendments of rules as articulated in Art. X. India, South Africa and Namibia argued that the new form of “plurilaterals” or “Open Agreements” are inconsistent with the WTO’s core principles as set out in the Marrakesh Agreement. The three countries contended that “the Marrakesh Agreement provides that the agreements and associated legal instruments included in Annex 4 to the Agreement are “Plurilateral Trade Agreements”.” “The Ministerial Conference, upon the request of the Members party to a trade agreement, decides exclusively by consensus to add that agreement to Annex 4,” they said, suggesting that there was no consensus either at the WTO’s eleventh ministerial conference in Buenos Aires in December 2017 or now. According to the three countries, “the JSI proponents intend to create a new set of Agreements, which are neither multilateral agreements nor Plurilateral Agreements [as defined in Article II.3 of the Marrakesh Agreement].” Further, the JSI “proponents appear to suggest that when offered on MFN basis, no consensus is required for bringing in these new rules into the WTO.” “This approach, however, is legally inconsistent with the fundamental principles and procedures of Marrakesh Agreement ….”, India, South Africa, and Namibia said in their proposal. According to the proposal submitted by the three countries, “a procedure for amending rules is enshrined in Article X of the Marrakesh Agreement. On the other hand, the GATT and GATS contain specific provisions for modifications of Schedules.” They said the JSI proponents “have confused amendment to rules and modifications to schedules, and the proposed introduction of new agreements into the WTO to bypass the requirements of Article X of the Marrakesh Agreement. However, new agreements are not amendments to schedules.” The overriding effect of the Marrakesh Agreement, according to the three countries, is that “Art. XVI.3 of the Marrakesh Agreement provides that in the event of a conflict between a provision of the Marrakesh Agreement and a provision of any of the Multilateral Trade Agreements, the provision of the Marrakesh Agreement shall prevail to the extent of the conflict.” As regards the different challenges posed by individual JSIs, the three countries argued that “each of the recent Joint Statement Initiatives is likely to pose different legal challenges to existing WTO rules and mandates, given the differences in the nature and scope of issues covered under each of these initiatives.” More disturbingly, the JSIs are replete with systemic and development implications, the three countries noted in their proposal. “Any attempt to introduce new rules resulting from the JSI negotiations into the WTO without fulfilling the requirements of Articles IX and X of the Marrakesh Agreement, will be detrimental to the functioning of the rule-based multilateral trading system.” According to the three countries, “such a step will: * erode the integrity of the rule-based multilateral trading system by subverting established rules and foundational principles of the Marrakesh Agreement; * create a precedent for any group of Members to bring any issue into the WTO without the required consensus; * bypass the collective oversight of Members for bringing in any new rules or amendments to existing rules in the WTO; * usurp limited WTO resources available for multilateral negotiations; * result in Members disregarding existing multilateral mandates arrived at through consensus in favour of matters without multilateral mandates; * lead to the marginalization or exclusion of issues that are difficult but which remain critical for the multilateral trading system, such as agriculture, and development, thereby undermining balance in agenda setting, negotiating processes, and outcomes; * leave Members with no option other than to choose between remaining outside the discussions or participating on matters that are inconsistent with their economic development priorities, needs, concerns, and levels of economic development. * fragment the multilateral trading system and undermine the multilateral character of the WTO.” Against this backdrop, they said that the options open for the JSI proponents include: i. Seek consensus amongst the whole WTO Membership, followed by acceptance by the required proportion of Members according to Art. X of the Marrakesh Agreement. ii. Get new agreements included in Annex 4 following Art. X.9 of the Marrakesh Agreement. Outside the WTO Framework: iii. Pursue an agreement outside the WTO Framework as was envisaged in the Trade in Services Agreement (TISA), or as has been done in multiple bilateral or plurilateral Free Trade Agreements (FTAs) or Regional Trade Agreements (RTAs). Amendment to Article X of the Marrakesh Agreement to allow for “Flexible Multilateral Trading System” iv. Seek amendments to the provisions of Article X to provide for the so-called “Flexible Multilateral Trading System”. Significantly, Article VI:4 of the GATS relating to domestic regulation in services states that “with a view to ensuring that measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services, the Council for Trade in Services shall, through appropriate bodies it may establish, develop any necessary disciplines. Such disciplines shall aim to ensure that such requirements are, inter alia: (a) based on objective and transparent criteria, such as competence and the ability to supply the service; (b) not more burdensome than necessary to ensure the quality of the service; (c) in the case of licensing procedures, not in themselves a restriction on the supply of the service. According to a WTO statement, “in December 2005, the WTO Hong Kong Ministerial Declaration called on members to intensify negotiations and to develop a text for adoption before the end of the Doha Round.” Subsequently, the Working Party on Domestic Regulation had more than 60 WTO members submitting drafting proposals. These were consolidated into a number of texts issued by the chair of the working party. The most recent was contained in a 2011 progress report reflecting progress in the negotiations up to 2011 and containing possible options for disciplines on services domestic regulation. The United States apparently blocked the draft texts of the multilateral Working Party on Domestic Regulation and in March 2019, the Working Party on Domestic Regulation met to discuss a revised proposal for disciplines on services domestic regulation. However, on the margins of the WTO’s eleventh ministerial conference in Buenos Aires in December 2017, a group of industrialized and several developing countries launched the JSI on domestic regulation in services. In conclusion, India and South Africa have set the ground in seeking clarifications for the first time on the legal status of the JSI on domestic regulation in services that could determine how the other JSIs will be treated, said people, who asked not to be quoted. +
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