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Info Service on WTO and Trade Issues (Jul23/01) New Delhi, 3 Jul (D. Ravi Kanth) — The World Trade Organization’s Director-General Ms Ngozi Okonjo- Iweala is expected to address members of the controversial plurilateral Joint Statement Initiative (JSI) on Investment Facilitation for Development (IFD) on 6 July ostensibly over the conclusion of a draft IFD agreement, despite its alleged violation of the core provisions of the WTO’s Marrakesh Agreement, said people familiar with the development. Even though the members of the IFD initiative are yet to resolve the fundamental issues of its legal integration into the WTO rule-book, the DG is likely to “bless” them, knowing full well that it has not been approved either as a plurilateral or multilateral agreement since 2017. As attempts are underway to stitch a narrative that members of the JSI on IFD have reached an agreement, the DG’s presence at the plenary meeting does not seem to augur well for a member-driven, rules-based, multilateral trade organization like the WTO, said a trade envoy, who asked not to be quoted. Apparently, the members of the IFD initiative tried to push the draft agreement with members’ funds and the WTO Secretariat’s services, when it should have been done outside the WTO in an informal setting, as per the WTO General Council decision of 3 May 2017, the envoy suggested. DRAFT IFD AGREEMENT The IFD’s origin lies in the trade and investment pillar of the much-berated “Singapore issues” that failed to garner “explicit” consensus at the WTO’s fifth ministerial conference in Cancun, Mexico, in 2003. Subsequently, out of the four “Singapore issues” of trade and investment, trade and competition policy, transparency in government procurement, and trade facilitation, only trade facilitation was taken up for further negotiations following the July 2004 framework agreement. While the Trade Facilitation Agreement was finally concluded at the WTO’s ninth ministerial conference in Bali, Indonesia, in December 2013, the other three issues were permanently jettisoned. Even at the WTO’s eleventh ministerial conference (MC11) in Buenos Aires, Argentina, in December 2017, investment facilitation was pushed as part of the Joint Statement Initiatives – digital trade, investment facilitation, disciplines for micro, small, and medium enterprises (MSMEs) and trade and gender. However, these issues failed to secure consensus at MC11 after which they were announced on the margins of the meeting. Thus, so far, investment facilitation was neither agreed to as a plurilateral initiative, nor a multilateral one. Significantly, the draft IFD agreement comes at a time when the United States is pushing a new Washington Consensus under which nation-centred industrial policy is accorded a pivotal role with hundreds of billions of dollars of subsidies being provided by the US and other industrialized countries in apparent violation of the WTO rules. The Biden administration reckons that trade liberalization based on “the race to the bottom” is inimical to the pursuit of its security-driven trade policies wherein other developed countries are being subtly encouraged to pursue their own industrialization policies as part of the new Washington Consensus. In sharp contrast, the old Washington Consensus based on continued trade liberalization led to the establishment of the WTO based on the Marrakesh Agreement in 1995. It remains to be seen how the new Washington Consensus pushed by the United States will affect the conclusion/ implementation of the draft IFD agreement that seeks to further liberalize rules governing trade and investment at the WTO, said an analyst, who asked not to be quoted. Interestingly, at the G20 meeting in Hamburg, Germany in 2017, the previous Trump administration along with India and South Africa had opposed the entry of investment facilitation into the G20 text. Against this backdrop, it remains unclear how the issue of investment facilitation would be addressed at the upcoming G20 leaders’ meeting in New Delhi in September this year, the analyst said. CONVENING NOTICE ON IFD In a convening notice sent to all members on 22 June on behalf of Ambassador Dr Sofia Boza of Chile and Ambassador Jung Sung Park of Korea, the two coordinators of the structured discussions on IFD, it was stated that the WTO DG “will provide opening remarks” at the plenary meeting on 6 July. Subsequently, the co-coordinators will announce “the conclusion of the negotiations on the IFD Agreement” at the meeting, according to the convening notice seen by the SUNS. It says, “In keeping with the Joint Initiative’s open, transparent, and inclusive nature, all WTO members are invited to attend and participate in the meeting.” According to the notice, “in addition, the seven partner International Organizations who participated in drafting the IFD Self-Assessment Guide have also been invited to this plenary meeting.” At the end, China, the coordinator of the Friends of Investment Facilitation for Development, “will host a reception to celebrate the conclusion of the text negotiations on the IFD Agreement.” Interestingly, the WTO’s Trade in Services and Investment Division seems to have provided all the services for the IFD negotiations. In the convening notice sent to members, the issue of legal integration of the IFD agreement is not mentioned. The two coordinators briefly mentioned the draft IFD Agreement (INF/IFD/RD/124/Rev.2). Subsequently, they will finalize the draft IFD Agreement during a meeting beginning on 4 July. The co-coordinators said that they will hear from those delegations who had requested additional time to further consult with capitals at the June IFD meeting regarding the following issues: * Footnote 8 to paragraph 7.1 (“Information to be Publicly Available if an Authorization is Required for an Investment”) in Section II (proposed by Canada as part of “Basket 2” issues). Footnote 8, which is in square brackets (denoting lack of agreement), states: “[With respect to an authorization a Member requires regarding financial services, the requirement under this Article to publish or make publicly available technical regulations or standards, indicative time-frames for processing of an application, or authorization fees, applies to the extent that this is consistent with the laws, regulations, guidelines and regular administrative practices of the Member.]” Paragraph 7.1 states: “For purposes of these disciplines, “publish” means to include in an official publication, such as an official journal, or on an official website. If a Member requires authorization for investment in its territory, the Member shall promptly publish or otherwise make publicly available in writing, to the extent practicable via electronic means, and keep updated, the information necessary to comply with the requirements and procedures for obtaining, maintaining, amending and renewing such authorization. Such information shall include, inter alia, where it exists: (a) the requirements including the relevant technical regulations and standards applicable to the respective investment; (b) the relevant forms; ( c) procedures; (d) indicative time-frames for processing of an application; (e) authorization fees; (f) opportunities for public involvement, such as through hearings or comments; (g) procedures for appeal or review of decisions concerning applications; (h) procedures for monitoring or enforcing compliance with the terms and conditions of authorizations; and (i) contact information of the relevant competent authorities.” * The use of the term “Member” in paragraphs 5.1 and 5.2 of Article 5 (“Most-Favored-Nation Treatment”) in Section I in a plurilateral IFD Agreement Scenario. According to the draft text dealing with Most-Favored-Nation Treatment in Article 5: “5.1. Each Member shall accord to investors of another Member and their investments treatment no less favourable than that it accords, in like circumstances, to investors of any other Member and their investments, in applying the provisions set out in this Agreement in its territory. 5.2. Paragraph 5.1 shall not be construed as requiring a Member to extend to investors of another Member or their investments the advantage of any treatment resulting from: (a) an International Investment Agreement, whether it is: (i) a separate agreement; or (ii) investment-related chapters in an agreement forming a free trade area or a customs union pursuant to Article XXIV of the GATT 1994 or the Enabling Clause, or an economic integration agreement pursuant to Article V of GATS; (b) other relevant provisions in an agreement forming a free trade area or a customs union pursuant to Article XXIV of the GATT 1994 or the Enabling Clause, or an economic integration agreement pursuant to Article V of GATS; or (c) measures providing for recognition, including the recognition of the standards or criteria for the authorization, licensing, or certification of a natural person or enterprise to carry out an economic activity, or the recognition of prudential measures as referred to in paragraph 3 of the GATS Annex on Financial Services.” * The term “inter alia” in Paragraph 39.5 (WTO Committee on Investment Facilitation) in Section VII. (It states: 39.5. The Committee shall prepare an annual report on investment facilitation measures undertaken to implement the Agreement based [, inter alia,] on information notified by Members or otherwise authorized by them.) In addition, the convening notice suggests that members would hear from New Zealand and any other interested delegation on the inter-sessional developments regarding New Zealand’s proposed exception concerning indigenous people, with a view to solving this issue. The IFD members will continue discussions on the adjustments and final provisions needed in the draft IFD Agreement respectively under a multilateral (Annex 1) and plurilateral (Annex 4) scenario – based on the two Informal Working Documents reflecting the adaptations to the IFD Agreement needed under each scenario. The members will also discuss “the proposed July 2023 Statement by the co-Coordinators (forthcoming and the final arrangements for the high-level plenary meeting on 6 July afternoon.)” According to the notice, the IFD members will switch to negotiations on legal scrubbing of the agreement during the months of September to December 2023. DG FLOUTING WTO RULES? The DG’s decision to address the IFD members on 6 July apparently flouts an earlier General Council decision, as well as her statement made at an informal Doha Trade Negotiations Committee (TNC) meeting in May 2021, said people familiar with her statements. At an earlier General Council (GC) meeting on 3 May 2017, the former GC chair, Ambassador Xavier Carim of South Africa, had stated that “the proponents [of investment facilitation] seek to share information on informal dialogues on investment facilitation, and that the communications do not constitute proposals for negotiations. Proponents believe that informal dialogues on investment facilitation are important.” The language has made it clear that investment facilitation can only be discussed informally outside without any specific WTO mandate or the DG’s direct involvement, said another trade envoy, who asked not to be quoted. The former GC chair’s statement also included language proposed by India that “some Members believe that investment facilitation does not lie within the scope of the WTO and hence the General Council”. Therefore, “pursuant to rules 2 and 4 of the Rules of Procedure for the General Council, we note that the General Council is not required to take any decisions under this item of the agenda,” the GC chair’s statement said unambiguously. India had reiterated on 18 May 2017 its “strong opposition to discussions in any formal structures of the WTO on Investment Facilitation, as this subject we believe is outside the scope and ambit of the Marrakesh Agreement establishing the WTO.” It praised the GC chair’s consultations and stated that India’s opposition to the discussion on investment facilitation in the WTO is “based on serious, substantive, systemic concerns.” India argued that such discussion does not fall within the ambit and scope of the WTO and hence, the General Council or any of the formal structures of the WTO since investment facilitation does not concern “multilateral trade relations”. DG ACKNOWLEDGES HER “MISTAKE” IN DISCUSSING JSIs More than a month after she took office at the WTO in March 2021, Ms Okonjo-Iweala brought the issue of the non-mandated Joint Statement Initiatives (JSIs) into an informal Trade Negotiations Committee (TNC) meeting. At an informal TNC meeting on 3 May 2021, the DG intervened twice and accepted her “mistake” when a serious objection was raised by India at the very outset. In her introductory remarks, the DG said that trade envoys conveyed a “word” about bringing the controversial JSIs into the discussion. She said that these issues had been discussed in the past by her predecessor, and went on to suggest that she will ensure an appropriate discussion on the JSIs. Following the above comment by the DG, India took the floor to raise a “serious objection” about the inclusion of the JSIs by the DG in the discussions. As reported in SUNS #9340 dated 5 May 2021, India’s trade envoy Ambassador Brajendra Navnit said he wishes to raise a “serious procedural issue” arising from the notice the DG had circulated on 27 April. “In this regard,” he said, “we wish to point out that as Head of the TNC, the DG can only deliberate on the mandated issues,” suggesting that the informal Heads of Delegation (HoD) meetings “are not negotiating forums and had been started only to exchange information on non-mandated issues, for the sake of transparency.” He referred to the clarification provided by the previous DG at a meeting on 25 July 2017 after many members had “raised concern over the convening of Informal HoDs itself, as they saw it as a back-door for bringing in non-mandated issues.” Ambassador Navnit said members questioned the “creation of a parallel structure competing with the TNC without a mandate since the Ministerial Conference is the only authority to create a negotiating forum.” Accordingly, the previous DG had explained that “while the TNC was the sole negotiating forum, the Informal HoDs serve a useful purpose for information sharing and transparency.” Further, the previous DG had categorically stated that “the Informal HoDs was not and will not be a negotiating forum, as such a negotiating forum can only be set up with an express Ministerial decision.” India said that it has no objection “to the continuation of the existing practice of JSI Coordinators presenting their oral reports while delivering their country statements, but we object to any discussion on JSIs or any other non-mandated issue at this informal HoDs Meeting.” Moreover, it said, “it is also not appropriate for the DG, as the Head of the TNC, to engage on the JSIs, both inside and outside the Informal HoDs framework.” In her response, the DG said that she takes responsibility for this “mistake” and that the Secretariat was not responsible. Subsequently, several countries cautioned the DG to not bring the JSIs into the informal TNC meeting. Despite her assurance to India and several other countries, the DG went on to participate in the JSI meetings, whether it is on digital trade or other JSIs, said another trade envoy, who asked not to be quoted. IS IFD CONSISTENT WITH MARRAKESH AGREEMENT? 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”: 1. The multilateral underpinnings of the WTO, including, * 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 “plurilateral(s)” or “Open Agreements” are inconsistent with the WTO’s core principles as set out in the Marrakesh Agreement. Further, India, South Africa and Namibia 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 (MC11) 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 a most-favored-nation (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 the 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 that 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.” In short, the WTO seems to be no longer governed by the rules, particularly those set out in the Marrakesh Agreement. While the US and several other industrialized countries seem to be embarking on a maze of industrialization programs allegedly in violation of the WTO rules, the DG and WTO Secretariat seem to be increasingly chipping away at the margins of the Marrakesh Agreement, said people familiar with the development. Little wonder that the WTO seems to be in “a free fall” due to its own allegedly non-mandated actions. +
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