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Info Service on WTO and Trade Issues (Jan24/08) Geneva, 23 Jan (D. Ravi Kanth) — The World Trade Organization’s Director-General, Ms Ngozi Okonjo-Iweala, said on 22 January that she expects “two or three agreements” such as on “harmful fisheries subsidies”, the “moratorium” on customs duties on electronic transmissions, and “development” involving increased flexibilities for developing countries, at the WTO’s upcoming 13th ministerial conference (MC13) that begins in Abu Dhabi on 26 February. Speaking along with the European Commission Vice-President Valdis Dombrovskis at the European Civil Society Dialogue on “Tackling Global Trade Challenges – Is Multilateralism Still the Answer?” in Brussels on 22 January, the DG also pitched for an outcome on “investment facilitation” for development (IFD), which is currently being negotiated by 110 countries on a plurilateral basis. However, the DG remained silent on agriculture in her initial comments on what she hoped for in terms of outcomes at MC13. Later, when asked about food security and agriculture by one of the food lobbyists, she suggested that “it is difficult to get an outcome on agriculture.” She said that for the last 20 years, there has been no outcome on agriculture, adding that she is “impatient” to get an outcome on this issue. However, she said it is difficult because of the domestic political groups. Ms Okonjo-Iweala went on to suggest that there are several important issues like “domestic support”, “PSH”, or the permanent solution for public stockholding programs for food security, and “market access”. She also said that cotton is another important issue for developing countries. Ms Okonjo-Iweala suggested that it is a “good thing if members can get a common understanding on these issues by agreeing to a future program.” “Setting up a work-stream on agriculture to be finalized at MC14 (expected to be held in Cameroon in 2026)” will be a good outcome at MC13,” the European Commission’s trade chief emphasized. The separate addresses as well as several answers on the MC13 outcomes by the WTO DG and the European Commission’s vice-president seemingly revealed a high degree of convergence, in which both supported each other’s expectations for MC13. For example, the two chiefs underscored the need for concluding the fisheries subsidies agreement (see below for the chair’s latest message on fisheries subsidies). E-COMMERCE MORATORIUM On extending the moratorium on customs duties on electronic transmissions that is proposed to be terminated at MC13 as per the MC12 decision, the DG and the European Commission vice-president seemed to be almost on board for a temporary extension. The DG said that she cannot take sides on the e-commerce moratorium, but stressed that she can ask Valdis to talk to those developing countries that are seeking the termination of the moratorium. The MC12 ministerial decision on the E-commerce moratorium (WT/MIN(22)/32) said rather unambiguously: “We agree to maintain the current practice of not imposing customs duties on electronic transmissions until MC13, which should ordinarily be held by 31 December 2023. Should MC13 be delayed beyond 31 March 2024, the moratorium will expire on that date unless Ministers or the General Council take a decision to extend.” Incidentally, some 32 US Congresspersons recently urged the US Trade Representative (USTR) Ambassador Katherine Tai to ensure the extension of the moratorium at MC13. South Africa had already circulated a draft ministerial decision on electronic commerce on 1 December calling for the termination of the existing e-commerce moratorium. In the draft decision (WT/GC/W/911), South Africa proposed that MC13 terminate the moratorium because it “provides the global tech firms with a distinct unfair tax advantage over local competitors in developing countries and hampers digital industrialization” and that the “transactions of most global platforms are channeled through to a global entity, thus depriving the importing country of corporate tax revenue, hindering developing countries in their efforts to support digital industrialization initiatives.” South Africa, in its draft ministerial decision which was supported by India, Indonesia, and several other developing countries, proposed the following: 1. Agree to terminate the moratorium on the imposition of customs duties on electronic transmissions. 2. Further agree to re-invigorate the work under the Work Programme on Electronic Commerce, including the development-related issues under it, based on the mandate set out in WT/L/274. 3. Instruct the General Council to deliver concrete outcomes on the implementation of the Work Programme on all the issues allocated to the relevant WTO bodies by December 2024. 4. Agree to establish a Fund that accepts voluntary contributions from developed countries and developing countries in a position to do so to provide developing countries including LDC Members with targeted support to address the digital divide and promote investments in developing domestic SME platforms in developing countries. 5. Agree that all leading platforms must promote greater levels of participation and promotion of historically disadvantaged SMEs on digital infrastructure through among others, funding via fee rebates for on-boarding and subscription, and ad credits or targeted promotions and to improve the visibility of developing countries including LDCs apps through a local app curation and provision of ad credits, as well as through promoting technology transfer. INVESTMENT FACILITATION Speaking at the European Civil Society Dialogue, the WTO DG and the EC trade commissioner supported an outcome on investment facilitation for development (IFD) at MC13, even though it is not a mandated issue. The DG said that IFD is already being negotiated and supported by 110 members. She said that it should be “done” at MC13. The EU is a member of the Joint Statement Initiative on IFD, with Brussels taking an active part in the negotiations. Yet, the IFD does not have consensus at this juncture because India has made it clear that it was never agreed since the WTO’s fifth ministerial conference in Cancun, Mexico in 2003, as well as in the 2004 July framework agreement. As of now, the IFD is not part of the MC13 outcome document and it remains to be seen how it will be addressed at MC13, said people who asked not to be quoted. EMAIL FROM FISHERIES CHAIR As regards the proposed disciplines on subsidies contributing to overcapacity and overfishing (OCOF), the DG expressed confidence that the disciplines would address the $22 billion worth of subsidies to prohibit them from depleting global fish stocks. Yet, the discussions on fisheries subsidies at the Doha rules negotiating body last week revealed that neither the chair, Ambassador Einar Gunnarsson of Iceland, nor the Secretariat has an inkling so far as to who the 20 largest subsidizers are, said people familiar with the negotiations. It appears that at the first week of the Fish Month that concluded on 19 January, members sought to know who are the largest subsidizers before addressing the specific exemptions granted to them. In a four-page email sent to Heads of Delegation on 22 January, seen by the SUNS, the chair urged members to engage on the text in a “without-prejudice mode”. Expressing his concern, the chair said that members on 16 January “focused on the mechanism to identify the largest subsidizers that would fall under the stricter tier of the two-tier hybrid approach, in Article A.1.1 (a).” He admitted that he got “a little worried” during that session. He expressed disappointment that “Members seemed to have a lot more questions than answers, and it was clear that a lot of work remains to arrive at a common understanding of how the mechanism based on the aggregate level of a Member’s fisheries subsidies would operate.” “There also seemed to be some discomfort due to uncertainty over which Members would fall under which tier at the outset, when the disciplines would first enter into force,” the chair said. Ambassador Gunnarsson said, “In general, I found it a bit concerning that some seem to want absolute clarity on the interpretation and implications of each word in the provisions.” However, he said, “I would again ask you to keep in mind that no multilateral treaty has ever achieved such absolute clarity – in practical terms, it is not feasible to judge our progress against such a standard.” In his email, the chair recalled that “identifying the top subsidizers is supposed to be a mechanism for distinguishing the Members that would fall into the two tiers,” adding that “it is not, as such, an operational part of the discipline itself.” Ambassador Gunnarsson said that members will “remember that the reason for using the top subsidizers as the basis for sorting Members into the two tiers is the priority placed by many Members on imposing stricter disciplines on the Members that subsidize the most.” Without knowing the 20 largest subsidizers, the chair now said: “If we were going to use this criterion, the subsidy information should come from subsidy notifications to the WTO, and not from any outside source.” He said: “If, however, Members are of the view that the mechanism is not suitable or not workable, we will need to quickly go back to the drawing board.” 17 JANUARY DISCUSSION As previously reported in the SUNS, the chair acknowledged that during discussions on 17 January on the substantive obligations under the two tiers in Article A.1.1 of the draft text, “most Members recognized the draft as capturing our attempts to have somewhat stricter standard for the sustainability test in Tier 1,” while “some Members questioned how much difference there is between the standards in the two tiers. In this regard, the view was expressed that the language in the top tier “… reasonably be expected to ensure…” can even be seen as a weaker standard than the language in tier 2 “… to maintain”.” He said: “This is definitely not the intention of the drafting – Tier 1 is supposed to have a higher standard than Tier 2. Thus, if the current formulation could give rise to such an unintended interpretation, then we will need to look more closely at how the drafting could be clarified.” Commenting on the discussion on 18 January on the notification and transparency provisions, the chair said: “Similar to the discussion on Tuesday, there remains a lot to unpack with regard to Article C.4. One recurring theme is how the notification requirements in the provisions we were discussing relate to and potentially overlap with the notification requirements of the Agreement on Fisheries Subsidies.” On Article C.2 (b) (iii) regarding the full text of access agreements or arrangements, which is allegedly a carve- out for protecting the EU’s access agreements that would have otherwise constituted a subsidy, the chair said: “We heard some specific concerns from some Members regarding the potential need to provide confidential information, as well as some textual suggestions to address these concerns.” He suggested that “many Members refrained from reiterating their well-known positions regarding Article C.2 (a) on transparency in respect of the use of forced labour, and Article C.3 on transparency in respect of non- specific fuel subsidies.” While the issue of forced labour was proposed by the United States, which was opposed by China during the negotiations, the issue of “non-specific fuel subsidies” has been a major demand of India. On both these issues, the chair said, “There has been no movement on these issues yet” based on the statements made at the meeting. Regarding Article A.1.1 ( c), which states that “the notifications referred to in Article A.1.1 (a) and A.1.1 (b) shall be sufficiently precise to enable other Members to evaluate the consistency of the subsidy with the conditions set out in Article A.1.1,” the chair said, “there were differing views on whether the items to be notified under the two tiers of the discipline should be the same for both tiers, as is currently the case in the draft text, or whether more items of information should be notified under Tier 1 compared with Tier 2.” DISCIPLINES ON DISTANT-WATER FISHING During the discussion on 19 January on “Article A.2 on subsidies contingent upon or tied to fishing outside a subsidizing Member’s jurisdiction” or distant-water fishing, the chair said, “the views exchanged indicated that Members remain quite far apart on this issue.” He said that he identified several sets of views, including the following: * First, some Members want a standalone prohibition of such subsidies, with no flexibilities (that would be essentially the current text in Article A.2 (a), with no sub-paragraph (b) for flexibilities); * Some Members also support a standalone prohibition, but only if it contains flexibilities for non-collection of access fees paid to foreign governments, subject to sustainability requirements; * Some Members consider that this prohibition should be moved to the list in Article A.1 and thus be subject to the sustainability-based flexibilities in Article A.1.1; * Some Members propose that Article A.2 should apply only to developed members; and * Some other Members expressed the view that the contingency language in Article A.2 (a) should be deleted, such that all subsidization outside of a Member’s own jurisdiction would be prohibited. He said that his “overall assessment is that there seems to be a general feeling amongst many Members that subsidies to distant water fishing are the most harmful and should therefore be prohibited. This is also the reason that we hear calls to limit the geographic scope of the flexibilities in Article A.1.1 to the jurisdiction of the subsidizing Member.” In conclusion, it seems that the discussions that took place on 15-19 January have exposed the fault-lines in the chair’s draft text as well as the difficulties in identifying the 20 largest subsidizers. Besides, the so-called two-tier sustainability test is seemingly proving to be unsustainable, said people familiar with the discussions. +
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