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Info Service on WTO and Trade Issues (Apr23/08) Geneva, 12 Apr (D. Ravi Kanth) — The United States on 11 April submitted its instrument of acceptance of the protocol of the Fisheries Subsidies Agreement (FSA) to the World Trade Organization’s Director-General, Ms. Ngozi Okonjo-Iweala, amidst pomp and ceremony at the US Trade Representative’s Office in Washington DC. “The United States will continue to encourage other WTO Members to accept the Agreement so we can bring it into force quickly – because disciplining harmful fisheries subsidies benefits all WTO Members,” the US Trade Representative (USTR), Ambassador Katherine Tai, insisted at the ceremony at her office. She said that the US “will also continue to lead by example in the remaining negotiations to build on this Agreement.” “We will also continue to encourage Members to support greater transparency on the use of forced labour on fishing vessels,” she said. In her remarks posted on the WTO’s website, DG Ms Okonjo-Iweala said: “I am delighted and grateful to receive the United States’ formal acceptance of the WTO’s Agreement on Fisheries Subsidies.” “This strong show of support by the United States for the WTO’s work toward ocean sustainability marks a pivotal increase in momentum among the membership to ensure this landmark agreement enters into force,” Ms Okonjo-Iweala said. “US leadership is vital to the WTO and to multilateralism,” the DG said, adding, “I look forward to continuing to work with the United States to ensure that the WTO responds to the needs of people and the planet.” SILENCE OVER PARALYSIS IN WTO’S ENFORCEMENT FUNCTION However, the US is yet to indicate if Washington will allow the two-stage dispute settlement system to be restored as per the Final Act of the Uruguay Round negotiations, at the WTO’s 13th ministerial conference (MC13) to be held in Abu Dhabi in February 2024. It is public knowledge that Washington has systematically paralyzed the WTO’s enforcement function for the past five years. While bringing about changes in the negotiating and implementation process, the US appears to be concealing what it is going to create in the vital dispute settlement system, said several WTO members, who preferred not to be identified. Further, the recent statements made by the US, in the wake of it providing billions of dollars worth of subsidies in pursuing a new wave of industrialization policies that allegedly violate the WTO rules, indicate that Washington seems little concerned about the WTO and multilateralism, said people familiar with the US policies. China has repeatedly accused the US of undermining the multilateral trading system and resorting to unilateral trade measures against Beijing (see SUNS #9758 dated 6 April 2023). In what appears to be a move to demonstrate its commitment to the WTO and the multilateral trading system, the US has chosen to submit its instrument of acceptance of the protocol of the partial FSA to the DG, perhaps to strengthen her repeated pleas for acceptance of the protocol. It is an open secret that Washington has little to do in terms of implementing the provisions of the partial FSA. The decision on the partial FSA seems to suggest that the US wants the developing countries to recognize Washington’s commitment to the WTO and the multilateral trading system, while seemingly chipping away at the edges of the WTO that was established in 1995, said several members familiar with the US positions. “DOUBLE STANDARDS” & “HYPOCRITICAL” POSITIONS At one end, the US is seeking to pursue new industrialization policies by providing hundreds of billions of dollars of subsidies despite allegedly violating the WTO rules. China has already raised a trade dispute at the WTO against the US CHIPS Act of 2022 and the US Inflation Reduction Act (IRA) of 2022 that involves hundreds of billions of dollars in US subsidies. At the other end, the US has refused to engage with the Group of 90 (G90) developing and least-developed countries on ten Agreement-specific proposals aimed at enabling the necessary policy space for pursuing their respective industrialization policies (see the USTR Katherine Tai’s new trade agenda below). On the US submission of its instrument of acceptance of the protocol of the FSA, it is somewhat surprising that last July, the US had called for “legal scrubbing” of the FSA. Later, the demand for “legal scrubbing” was raised by several developing countries at a reportedly costly retreat held in October last year on the fisheries subsidies negotiations. As reported in SUNS #9674 dated 25 October 2022, the DG had allegedly spurned demands from several countries for the “legal scrubbing” of the Fisheries Subsidies Agreement. According to a restricted room document (RD/TN/RL/163*) on the fisheries subsidies retreat held in the Hilton Evian Hotel in France on 10 October, the DG adopted an allegedly “top-down” approach on the remaining unfinished fisheries subsidies negotiations by ruling out any further discussion on the issue of “legal scrubbing” of the agreement, which was raised by many members at the meeting. The room document, seen by the SUNS, was issued on 20 October. In response to demands from members on the issue of “legal scrubbing”, the DG said, as cited in the room document, “And then there were issues like legal scrubbing in almost every discussion. Without pronouncing one way or the other, I think there is an Agreement, it is there. Let’s move on with the second wave like a two-track thing.” By insisting that there is an agreement on “legal scrubbing”, the issue will not go away, said a retreat participant, suggesting that unless the “legal scrubbing” issue is discussed in a full session at the WTO, it remains on the table. “LEGAL SCRUBBING” The issue of “legal scrubbing” was first raised by the United States during a General Council (GC) meeting last July. Although the US appears to have indicated in a small-group meeting of trade envoys that it is ready to implement the agreement, Washington has not formally said so at a recent GC meeting, the participant said. Nevertheless, several developing countries raised the issue during recent meetings, including at the retreat. India, for example, raised the issue, saying that it looks forward to a quick “legal scrubbing” of the text of the agreement. Several other developing countries also called for “legal scrubbing”. Some developing countries said that they want “legal scrubbing” to be done before the final agreement, said people, who asked not to be quoted. The European Union, Australia, and many other countries have opposed the issue of “legal scrubbing” on grounds that once the Protocol amending the WTO Agreement was agreed upon, there is no room for “legal scrubbing.” Against this backdrop, at the meeting at the Hilton Evian Hotel on 10 October, the facilitators maintained that countries had raised the issue of “legal scrubbing”. With the submission of the instrument of acceptance of the protocol of the FSA by the US, four countries – Switzerland, Singapore, Seychelles, and now the US – have so far accepted the FSA. The partial FSA will come into effect only after two-thirds of the WTO’s 164 members submit their instruments of acceptance. It remains to be seen whether the process of submission by two-thirds of the members can be concluded by MC13. However, pressure is bound to be exerted on the other countries following the US acceptance of the FSA, said fisheries subsidies negotiators, who asked not to be quoted. “GOODBYE” TO AGGRESSIVE TRADE LIBERALIZATION During the period from 1986-95, and even later, the US piled pressure on the developing and least-developed countries (LDCs) to follow aggressive trade liberalization policies, even though the latter raised several concerns about the dangers posed by such policies, according to several developing countries and academic evidence. Overnight, the developing countries and LDCs, particularly those LDCs acceding to the WTO, had to pay a high price for implementing the WTO commitments and rules. As part of the Doha Development Agenda (DDA) negotiations, the developing countries brought a long list of implementation issues as well as the need to improve provisions in various WTO agreements concerning special and differential treatment (S&DT). The US singlehandedly opposed the mandated issues and later other developed countries joined the US in their opposition to the G90’s ten Agreement-specific proposals for making S&DT simple and effective. The US and other developed countries opposed any changes in the WTO’s TRIMs Agreement that particularly impeded autonomous industrialization policies that developing countries wanted to pursue, as previously reported in the SUNS. Surprisingly, the US now claims that those aggressive trade liberalization policies have apparently led to a decimation of factories and a rise of inequalities. BIDEN’S VISION OF US TRADE POLICY Meanwhile, in an address to the American University Washington College of Law on 5 April, the USTR, Ambassador Katherine Tai, laid bare her president’s vision of US trade policy. She said that “this audience knows the traditional approach to trade well, which prioritized aggressive liberalization and tariff elimination.” While this approach produced significant benefits such as “massive increases in economic activity and historic reductions in poverty in some regions,” it also resulted in “significant costs and side effects,” the USTR said. Alas, she said, the US has realized that “prosperity without inclusiveness contributed to rising inequality and wealth concentration.” Apparently, when it suits its transformational changes overnight, the US finds it important to bolster its narrative by citing figures from an Oxfam report of last year that said “nearly two-thirds of all new wealth created since 2020 went to the richest 1%, almost twice as much as the bottom 99% of the world’s population.” Without mentioning the manner in which US industries moved their investments to China to gain the benefit of low wages and rapid production, the USTR argued that “trade also played a role in shipping jobs overseas, which decimated manufacturing communities” and “our supply chains became more dispersed and fragile.” “All of this has fueled resentment and mistrust in global institutions and the international economic system here in the United States and elsewhere,” the USTR said. “And this version of globalization – focused on low costs and weak regulation – is responsible for how economies like the People’s Republic of China (PRC) came to control a number of key industries,” the USTR said, without acknowledging how the profit-oriented American companies internationalized production in developing countries. Apparently taking solace in its aggressive and somewhat unilateral trade liberalization policies, the US seems to have shifted the blame to China and Beijing’s entry into the WTO in 2001. “But it has doubled down on its state-led, non-market economic model over time,” and “the PRC continues to use unfair, distortive trade policies and practices in pursuit of harmful and anti-competitive industrial policy objectives,” the USTR claimed. According to Ambassador Tai, China became “a dominant supplier for many important goods and technologies”, while China’s unstoppable exports “hurt US workers and manufacturers -and those of other WTO Members – and caused trade imbalances on a global scale.” Citing examples ranging from the COVID-19 pandemic, when the US had to depend on China for personal protective equipment and other essential items to the chips shortage due to the disruption of global supply chains, as well as Russia’s war against Ukraine, the USTR said the US President said in the State of the Union address that “the United States is in the strongest position to compete with the PRC or anyone else in the world.” Regardless of the WTO rules, she said it is imperative to make “smart investments here at home to increase our own competitiveness” as well as “investing in research and development and clean energy technology and strengthening our manufacturing base”. However, what remains unsaid, is that the US programs are being funded through hundreds of billions of dollars of subsidies, which other countries, including the European Union, are apparently scrambling in order to face the US challenge, according to reports in the Financial Times and other economic publications. In her address, Ambassador Tai sought to justify the 360-degree shift in US trade policy by saying that it is “absolutely necessary if we are going to win the economic competition of the 21st century.” She further said: “Industrial policy and trade policy must work hand-in-hand.” The moral of the US story appears to be that it can abruptly change its policies and accordingly, resort to unilateral actions, despite the WTO rules that it had helped create during the Uruguay Round negotiations. +
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