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TWN
Info Service on WTO and Trade Issues (Jan26/12) Geneva, 27 Jan (D. Ravi Kanth) — As the World Trade Organization’s 14th Ministerial Conference (MC14) approaches its opening in Yaounde, Cameroon on 26 March, developing countries appear to face a do-or-die battle to preserve the core provisions of the Marrakesh Agreement that established the WTO in 1995, said people familiar with the development. A new submission by the European Union to the WTO’s General Council signals a powerful alignment with the United States, setting the stage for contentious negotiations aimed at launching a new round of WTO reform negotiations in which the developing countries are seemingly ignored for proposing “fundamental reforms” to the multilateral trading system. In its submission (WT/GC/W/986) on WTO reform, the EU calls for sweeping changes to the WTO rulebook. Its proposals include instituting the practice of “responsible consensus”, weakening the Most-Favoured-Nation (MFN) treatment principle, curtailing special and differential treatment (S&DT) for developing nations, and delaying any restoration of a “robust” dispute settlement system until after the core WTO reforms are secured. The EU has also signaled the need to do away with the “single undertaking” of multilateral trade negotiations while embracing plurilateral as well as variable geometry approaches for participation in negotiations, reminiscent of the General Agreement on Tariffs and Trade (GATT) that was replaced by the WTO. POLITICAL COMMITMENT In its nine-page proposal, Brussels opens with a stark warning: “Without a strong political commitment by the Membership to a process of deep and comprehensive reform, the organization will slide into irrelevance, and with that the rules-based global trading system will further erode.” The proposal largely mirrors the US stance and endorses the controversial WTO reform track facilitated by Ambassador Petter Olberg of Norway. It centres on three key areas: amending consensus-based decision-making, curtailing S&DT provisions, and promoting plurilateral over multilateral negotiations. Like the US, the EU also targets the foundational MFN treatment principle that guarantees non-discrimination in global trade. The EU unveils a vision “for a substantially transformed WTO and calls for a reform centred on three pillars: predictability, fairness and flexibility.” Notably, the submission sidelines all the unfulfilled mandates from the Doha Development Agenda. “At the WTO’s creation,” the EU states, “the balance of concessions was not meant to be static, but to evolve through a successive process of negotiating rounds to further liberalise tariffs and trade, safeguard a global level playing field and modernise the WTO rulebook.” However, it remains silent on the negotiations that it pursued with the US in December 2001 to alter the Doha agenda. While acknowledging that the Doha mandate included substantial issues like trade and environment, the EU contends that “the system was not designed to address a range of challenges that have become central to international trade, such as the rise of digital trade and data-driven business models, as well as the increasing use of climate-related measures with significant trade implications.” Having benefited immensely from the existing system, the EU now argues that this “growing mismatch between the current WTO rulebook and today’s trade environment has contributed to the Organization’s crisis.” It points out that the “crisis is further exacerbated by geopolitical tensions, the weaponisation of trade and tariff measures,” sidestepping its own inability to unite against the US unilateral tariffs last year. Without explicitly mentioning China, the EU said that “another root cause for the crisis is the increasingly impactful and far-reaching State interventions leading to overcapacities and systemic imbalances, with negative spillovers on other Members.” It adds: “The outdated WTO rules cannot tackle these negative externalities.” “The increasing number of non-compliant autonomous measures by Members demonstrates that due to the outdated rulebook these imbalances cannot be sufficiently addressed within the current parameters of the system,” it suggests. Echoing the US criticisms, the EU blames the WTO’s “substantially enlarged and diverse Membership” for the institutional deadlock. It noted that “only two multilateral agreements [on trade facilitation and the Bali “peace clause” for public stockholding programmes for food security] have been concluded over the past 30 years.” The EU concludes that “the status quo is not an available option for the WTO as it will merely contribute to a continuous downhill trajectory.” It said that “the WTO and its Membership therefore urgently need to deliver on a deep and comprehensive reform.” THREE-PILLAR FRAMEWORK The EU’s proposed blueprint for “a reformed WTO” rests on three elements: predictability, fairness, and flexibility. 1. Predictability: A reformed system must be rules-based with an effective dispute settlement mechanism. However, in a critical footnote, the EU states that “discussions on dispute settlement reform should resume when progress is made on WTO reform and when the conditions are right.” Trade envoys interpret this as requiring developing countries to concede on other reforms to secure a functional dispute settlement system – a nuanced difference from the US position, which prioritizes national sovereignty over multilateral rules. 2. Fairness: The reformed system must “reflect the changed economic realities and address imbalances in the rights and commitments of Members and ensure level playing field.” 3. Flexibility: A reformed system needs to offer “a more flexible framework of rules, including variable geometry approaches underpinned by a revisited governance structure.” On predictability, the EU claims that “the current trade turmoil has served to demonstrate the system’s continued relevance and value in providing a basic floor of predictability,” an argument echoed by WTO Director-General Ms. Ngozi Okonjo-Iweala. It stresses that “core WTO rules in areas such as customs valuation, technical barriers to trade (TBT), sanitary and phytosanitary measures (SPS), trade facilitation, or intellectual property protection continue to provide predictability for Members, their citizens and businesses.” Unlike the US, the EU suggests that a reformed system “should still anchor trade relations in a stable and predictable rules-based framework” and “should be underpinned by an effective dispute settlement mechanism, providing a way for Members to resolve conflicts and enforce rules on the basis of established procedures rather than resorting to unilateral actions with the risk of escalation and a downward spiral.” Yet, it insists that discussions on fixing the dispute settlement system must follow agreement on fundamental reforms. The EU implies that a Member’s share of global trade should influence its commitments, arguing that “the perception that there is a discrepancy between some Members’ share in global trade and their levels of openness leads to reduced buy-in by other Members adversely impacted by the imbalances and resulting spillovers.” It warns that “WTO rules come under increasing strain if the overall balance of rights and commitments is no longer seen as fair by many Members.” It calls for “a broader debate on WTO reform focusing on the fundamentals underpinning the current balance of rights and commitments,” which “should include reflections on the role of the MFN principle in today’s context, its link to reciprocity and to Members’ respective levels of openness, as well as possible new links between commitments taken and the level of tariffs.” This push comes after the EU secured a framework agreement with the US involving zero tariffs on many goods. Analysts suggest that Brussels is now determined to extract concessions from other nations to compensate for leverage lost in that bilateral deal. Aligning with the WTO reform facilitator on “fairness and level playing field,” the EU urges focus on the negative trade effects caused by State interventions in favour of industrial sectors, advocating for new rules “going beyond the scope of the current ASCM (Agreement on Subsidies and Countervailing Measures).” In a veiled reference to China, it targets “excessive levels of subsidisation, non-commercial behaviour of SOEs [state-owned enterprises] … and measures that artificially keep struggling firms afloat and cause overcapacity.” The EU argues that “a balance needs to be found between the effectiveness of the rules, the policy space for supporting industrialisation and the necessary space to address negative trade impacts of State interventions.” A trade envoy interpreted this as the EU demanding that developing countries “pay a price” for their policy space. The EU also launched a direct assault on the current framework for special and differential treatment (S&DT). It states that “developing countries have had different experiences in terms of reaping the benefits of global economic integration” and “this shows the limits of the one-size-fit-all approach to development in the WTO.” It advocates for “more granular, targeted and differentiated approaches,” aligning with the US view that S&DT should primarily benefit the least-developed countries (LDCs). The EU cautions that “S&DT is not an objective in itself,” and that “seeking broad exemptions can be counterproductive and reduce the leverage of developing countries in the negotiations that shape those rules.” It concludes that “S&DT therefore should be targeted, and when possible, time-bound and aim at providing an appropriate path to all Members to be able to ultimately comply with the same rules.” To break decision-making deadlocks, the EU proposes moving away from the Marrakesh Agreement’s consensus principle – a key protection for developing countries. It argues that “the current misguided practice of equating consensus with unanimity has resulted in paralysis.” Instead, it promotes “the operationalisation of the concept of responsible consensus,” claiming that this distinction is already reflected in Article IX of the Marrakesh Agreement – an interpretation that a legal analyst familiar with trade disputes called “factually incorrect and flawed.” The EU suggests additional tools like “constructive abstention” and “opt-outs” to overcome blockages, arguing that the practice of consensus should not allow blocking of agenda setting or constraining the monitoring and deliberative function in the WTO. It also proposes “a smaller body with a steering or consultative function” to assist the General Council. Finally, endorsing the US push for “plurilateral” agreements among subsets of members, the EU argues that “accommodating different types of plurilateral approaches is a necessary recognition that the future trading system will inevitably be more multi-layered than envisaged in 1995.” It advocates for a reformed system that should facilitate closer economic cooperation through plurilaterals that a single or small group of non-participating members cannot block. In conclusion, the EU asserts that it is “imperative that MC14 focuses on WTO Reform and how to bring it about,” and that “this upcoming ministerial should serve as a stepping stone towards substantive work on deep and comprehensive reform between MC14 and MC15.” +
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