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TWN
Info Service on WTO and Trade Issues (Jun26/13) Trade:
WTO edges toward "a la carte" system as plurilateralism
gains ground Geneva, 29 Jun (D. Ravi Kanth) -- Major industrialized nations and certain developing countries on 23 June seemingly refused to engage in reforming the World Trade Organization's dispute settlement system, signaling a willingness to allow the status-quo to continue, with a paralyzed enforcement mechanism, according to people familiar with the development. In a separate development, following the informal Heads of Delegation meeting on 26 June, the WTO's General Council (GC) issued a detailed "Indicative and Evolving Calendar for the Rest of 2026 and Indicative Checkpoints" aimed at accelerating the WTO reform discussions in the next six months. To recall, the GC chair, Ambassador Clare Kelly of New Zealand, has nominated five facilitators to facilitate work on WTO reform. They include: Ambassador Ms. Sumathi Balakrishnan of Malaysia, to oversee work on "Foundational Issues"; Ambassador Mr. Katsuro Nagai of Japan on "Decision-Making"; Ambassador Ms. Nthisana Motsete-Phillips of Botswana on issues concerning "Development"; Ambassador Mr Elmer Jose German Gonzalo of Peru on "Level Playing Field Issues"; and Ambassador Mr. Kairat Torebayev of Kazakhstan on "Any new issues arising" from proposals submitted by members. DSS REFORM Paradoxically, these same nations are apparently aggressively championing negotiations on controversial WTO reform designed to radically alter the organization's architecture, said people familiar with the development. By shifting decision-making power and elevating plurilateral negotiations as the primary instrument within the multilateral trading system, they appear to be actively working to the distinct disadvantage of developing and least-developed countries, said people familiar with the development. These contradictory developments appear to suggest that major industrialized countries are entirely prepared to bypass the dispute settlement system - the very cornerstone of the WTO's binding, rules-based, member-driven framework, said people familiar with the development. During the first informal "in-person" meeting held on 23 June, the chair of the WTO's Dispute Settlement Body (DSB), Ambassador Guilherme de Aguiar Patriota of Brazil, attempted to resuscitate the stalled two-year negotiations on reform of the dispute settlement system (DSS) by strategically targeting members with a set of questions designed to generate immediate traction. The underlying rationale of the 23 June meeting, the chair explained, is to "invite Members to share their current views on the technical work done so far and what basis further technical work could proceed." He cited the lingering lack of consensus surrounding the progress report (JOB/GC/DSR/5) issued in December 2024 by the former GC chair, Ambassador Petter Olberg of Norway, said people familiar with the development. However, major industrialized countries - apparently including the United States - made it clear that they have no inclination to engage on DSS reform, even as its enforcement function remains entirely dysfunctional, said people familiar with the development. Following the US blocking of Appellate Body appointments at the WTO in December 2019, a number of countries - particularly the US - have consistently voided dispute panel decisions by appealing them to a non-functioning Appellate Body, said people familiar with the development. In the absence of a binding dispute settlement system, the US appears to be freely pursuing allegedly unilateral, and WTO-illegal measures, such as imposing Section 301 tariffs, with the full knowledge that these actions can scarcely be resolved because of a dysfunctional Appellate Body, said people familiar with the development. This stark non-engagement in the DSS reform negotiations stands in sharp contrast to how aggressively this same bloc of countries is pushing plurilateral initiatives. They are advancing these initiatives despite a complete lack of consensus under the rules set out in the Marrakesh Agreement, said people familiar with the development. More disturbingly, sovereign nations are finding themselves unable to pursue independent domestic tax policies under the dire threat of facing tariffs on their goods and services, said people familiar with the development. Although a vast majority of members have called for restoring the two-tier DSS - with the Appellate Body serving as the final arbiter issuing binding rulings - there is now a sharp pushback against any reform of the DSS at this juncture, said people familiar with the development. This coordinated opposition appears to be a deliberate tactic by the major countries who are simultaneously upping the ante on broader, controversial WTO reform, said people familiar with the development. To jumpstart discussions on DSS reform, the DSB chair posed the following questions: 1. "To what extent do Members consider that recent technical discussions have identified avenues for convergence in specific DS reform areas? How do Members view the role of existing draft texts and technical outputs in relation to further work? 2. What are Members' views on the overall direction of DS reform in the area of appeal/review? 3. How do Members assess the usefulness and desirability of introducing "material impact on implementation" (MII)? How do Members support giving panels greater opportunity at the interim stage to address factual or legal issues before the final reports are circulated? 4. How do Members assess current challenges faced by developing and least-developed country Members in participating effectively in dispute settlement? What are Members' views on strengthening capacity-building and technical assistance initiatives in the context of dispute settlement? 5. What are the main issues that were not sufficiently discussed in previous DS reform processes that will require further work?" Despite these formidable roadblocks to productive discussion, the DSB chair remains determined to press ahead with another meeting to explore available options, said a person, who asked not to be quoted. AUSTRALIA'S PLURILATERAL PUSH Meanwhile, several major industrialized countries, alongside certain developing nations, are not only refusing to engage in discussions on dispute settlement reform but are also actively throwing their weight behind transforming the global trade body into an "a la carte" plurilateral establishment, said trade envoys familiar with the development. Australia is now leading the charge for new rules to promote plurilateral negotiations, arguing that multilateral trade negotiations are simply too difficult to "conclude." The Australian proposal aims to fundamentally change the WTO from a consensus-based, multilateral rule- making organization into an "a la carte" plurilateral body, said a trade envoy who asked not to be quoted. Amid these attempts to undermine the WTO's dispute settlement system, Australia has escalated its efforts to fundamentally alter the foundational principles of the Marrakesh Agreement that established the WTO in 1995. Jumping on the "plurilateral bandwagon" following Argentina's recent proposal to create a "procedural mechanism for the incorporation of plurilateral agreements into Annex 4 of the Marrakesh Agreement," Australia has thrust the issue of plurilateral rule-making to the center stage. Its justification relies on the premise that multilateral rule-making has become unworkable at the WTO, according to its proposal. This mirrors the stance taken by the US at the recently failed WTO's 14th ministerial conference (MC14) in Yaounde, Cameroon, where the US insisted on converting the WTO into a plurilateral negotiating vehicle, allowing countries to pursue their core issues without the need for multilateral approval. At MC14, the US Trade Representative (USTR), Ambassador Jamieson Greer, explicitly called on members to explore incorporating plurilateral agreements into the WTO's architecture, warning that "if the pathway is blocked, countries will negotiate elsewhere." According to a trade envoy who asked not to be quoted, Australia's latest proposal, set out in document WT/GC/Reform/W/2, is a direct continuation of the US and Argentina proposals. Ultimately, these plurilateral outcomes - dominated by the interests and demands of powerful players - could exclude the vast majority of developing and least-developed countries, reducing them to mere "passive takers" of the resulting rules, said trade envoys who asked not to be quoted. Titled "Improving WTO rulemaking," the Australian proposal acknowledges that while rulemaking is a core WTO function, it is failing to be delivered due to the "multilateral rulemaking gridlock." The proposal points out that "hundreds of trade agreements have been secured outside of the WTO," arguing that "some Members have used free trade agreements to progressively set global standards on issues not covered by the WTO." According to Australia, "if Members cannot develop rules on important issues of global commerce, then all Members stand to miss out on the certainty, predictability and lower costs that shared global rules can provide." Furthermore, it said that "if WTO rules cannot be kept up to date, they may become less applicable to emerging trading practices." Australia concedes that "multilateral rules are the gold standard, but their application to all Members also makes them very difficult to conclude or amend." Consequently, the "multilateral WTO rulebook has been amended only three times since the WTO's creation." According to Australia, multilateral rulemaking negotiations are increasingly difficult due to: shifting national priorities over decades and the compounding effect of multiple unfinished or inactive negotiations; cross-linkage of interests across unrelated issues; proposals to expand exceptions to existing rules; and the difficulties posed in reaching consensus-based decisions. It is deeply ironic that, having secured major benefits from the multilateral trading system, Australia now argues that "it is not realistic to rely on an exclusively multilateral approach - plurilateral initiatives represent an inclusive, complementary approach." Seeking to legitimize this shift, Australia notes that plurilateral initiatives have historically been part of the GATT and WTO frameworks. It acknowledges that "while never intended as a perfect replacement for multilateral rules, plurilateral rules allow the WTO rulebook to reflect the diversity of Members and their priorities." The proposal argues, "today, other international organizations successfully make use of plurilateral instruments to achieve outcomes in addition to a set of core treaties, such as the World Intellectual Property Organization and the International Labour Organization." However, history tells a different story. During the Uruguay Round negotiations, the TRIPS agreement was initially slated to fall under the purview of WIPO. However, major industrialized countries insisted that it be integrated into the WTO, specifically to make it binding on all members to implement its provisions, said people familiar with the development. In its proposal, Australia laments that "despite multiple attempts, no proposal for a new standalone Plurilateral Trade Agreement has cleared the consensus requirement for incorporation into the WTO Agreement's Annex 4", a clear reference to the failure to incorporate the Investment Facilitation for Development Agreement (IFDA) and the Joint Statement Initiative's E-Commerce Agreement (ECA) into Annex 4 of the WTO Agreement, said people familiar with the development. Recently, in what trade envoys described as apparent coordination with the coordinators of the JSI group on digital trade (Australia, Japan, and Singapore), WTO Director-General Ms Ngozi Okonjo-Iweala facilitated the "transmission of a certified true copy" of the E-Commerce Agreement (ECA) to members of the group. NEW PLURILATERAL RULES In its proposal, Australia claims that "more plurilateral rulemaking could bring valuable benefits to the WTO, including: * more proposals could proceed further on their own merits, less susceptible to cross-linkage with unrelated issues; * rules could avoid a "lowest-common-denominator" outcome by involving only Members interested in participating; * by implementing new rules, participating Members may provide positive spillovers that benefit all Members in practice; and * Members not interested in participating in a plurilateral initiative would not need to invest their time and effort on that initiative." However, the proposal only briefly acknowledges in passing that "increased plurilateral rulemaking at the WTO may involve certain risks that would need to be managed." The risks include: * plurilateral negotiations may be seen to draw efforts away from resolving important multilateral disagreements; and * plurilateral negotiations may be seen to disadvantage smaller economies that must become "rule takers" or miss out on new agreements. To advance this agenda, Australia has proposed some WTO reform pathways. They include: * reform decision-making processes and practices to make it easier to initiate and adopt new rules (multilateral or plurilateral); * consider guidance for Members that would facilitate more plurilateral rulemaking and unlock consensus on incorporating new rules; * pursue other forms of WTO rulemaking including treaty rules not in the WTO Agreement but still administered at the WTO, rulemaking by decision, and/or soft law approaches; and/or * explore whether new legal pathways may be needed at the WTO for plurilateral rules to come into effect. In short, while Australia's proposal claims to establish "clearer pathways for new plurilateral rules at the WTO," it threatens to introduce a deeply divisive "them and us" system of exclusionary policies into the global trade body, said people familiar with the development. +
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