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TWN
Info Service on WTO and Trade Issues (Sep26/24) Trade:
Battle-lines drawn over the WTO's development architecture Geneva, 29 Sep (D. Ravi Kanth) -- Many developing countries, including Brazil and China, clashed with the United States, Singapore and other members of the "Friends of the System" group, as well as Costa Rica during an informal meeting on 28 September on the World Trade Organization reform track concerning "development". Amid mounting efforts by the US and its close allies to deny special and differential treatment (S&DT) to developing countries, the developing countries fiercely pushed back, asserting that S&DT is a treaty right and a cardinal principle of the GATT/WTO agreements, participants said during their interventions. The US and Singapore - a key member of the "Friends of the System" group largely responsible for the seemingly flawed reforms being proposed - appear determined to undermine the development architecture of the WTO agreements, several participants told the SUNS. At the meeting on the WTO reform track on development, the facilitator, Ambassador Nthisana Motsete-Phillips of Botswana (who previously worked at the International Monetary Fund and the WTO in various administrative capacities), reportedly posed six questions to members on 4 September. The questions, based on six themes, include the following: 1. Expectations for work under this track: The facilitator said Members noted that "some areas are being taken up in either other Committees or processes" and stressed the need to avoid "recycling what has been done in other Committees to date". Accordingly, the facilitator asked members: "Which of the ideas shared so far are already being discussed in other WTO bodies, and which represent new reform-oriented elements that could be suitable for focused work under this track?" 2. Categorization and differentiation among developing members: "An observation was made that "the current self-designated system has become increasingly unsustainable and risks eroding the WTO's credibility"." The facilitator asked: "How do Members assess the adequacy of the current S&DT architecture, and what elements, if any, of a more targeted, or needs-based approach could be explored further?" 3. Voluntary opt-outs: The facilitator stated that "questions were posed regarding "the circumstances under which a voluntary approach would remain appropriate" and whether clearer expectations may be needed." Basing the discussion on voluntary opt-outs, the facilitator asked: "How do Members view the voluntary opt-out approach for S&DT, and what conditions or parameters would make such an approach credible, predictable and effective?" 4. Differentiation based on objective and transparent criteria: The facilitator stated: "Members referred to income thresholds, export shares, staged accountability and a proposed development index." Ambassador Motsete-Phillips asked: "Have Members advanced their thinking on possible objective criteria or indicators for differentiation, and is any proposal incorporating such elements being developed?" 5. Policy space for industrialization and structural transformation: She stated: "calls were made to support policy space, while some Members cautioned that policy space should not become a basis for non-compliance." The facilitator asked: "How should this track approach questions of policy space in a manner that supports industrialization and diversification, while ensuring coherence with existing disciplines and avoiding duplication of work underway in other WTO bodies?" 6. Process-related suggestions: The facilitator said that "members requested a more structured format for future discussions, while noting the capacity constraints faced by smaller delegations." She sought to know: "What structured modalities - for example, written Q&A, dedicated plenary sessions or a centralized portal - would best support inclusive and effective engagement without imposing additional burdens on Members with limited capacity?" After members addressed the facilitator's questions, Singapore was reportedly called first to present its joint document with New Zealand and Norway, focusing on needs assessment to help the least-developed countries (LDCs) understand why plurilaterals would be beneficial to them. Last week, during a discussion on "level playing field" issues, several developing and least-developed countries outrightly rejected the joint proposal of Singapore, New Zealand, and Norway, participants said on condition of anonymity. Singapore echoed that there is a difference between being a developing country (an autonomous decision) and not utilizing S&DT, which should be based on criteria, tests, needs, etc. During US President Donald Trump's first term, Singapore and South Korea, though claiming developing country status, renounced their use of S&DT. The facilitator, who appeared to show her hand in support of the US, the EU, and the "Friends of the System" group through the way she structured the six questions, seemingly tried to force convergence on tightening the modalities of work and consultation methodology to narrow down topics and options, thereby excluding more fundamental aspects of the development question, participants noted on condition of anonymity. "This is a more serious and structural conversation which precedes the discussion about flexibilities to the rules or S&DT," a trade envoy suggested. Responding to the needs assessment, Brazil is understood to have said that needs-based assessment could be useful in supporting developing countries to implement both their rights and obligations within the existing multilateral system of rules. A major African country stated that the issue of development is much more comprehensive than S&DT, adding that it should be at the center of the WTO and continue to be at the center of the reformed WTO. However, it said that this would entail long-stalled discussions on technology transfer, the G90 proposals for more effective S&DT, the TRIMs and TRIPS Agreements, and agriculture, participants said on condition of anonymity. However, it should not become a tool for "early implementation" of agreements not yet formally incorporated into the WTO legal framework, such as certain plurilaterals. UNITED STATES The US, in its intervention, commented on the graduation of developing country members, participants said on condition of anonymity. The US argued that S&DT might have been reasonable in 1994 as a description of the economies at the time, but that is no longer the case. Continuing its assault on S&DT, which began during the Trump administration's first term, the US stated that an organization in which 75% of Members negotiate knowing that they will not abide by those same rules no longer makes sense, participants said on condition of anonymity. Furthermore, the US asserted that blanket S&DT is one of the main issues plaguing the organization, insisting that objective criteria are needed and S&DT must be reformed. Echoing the facilitator's question on voluntary opt-outs, the US suggested that opt-outs could work but cannot be purely voluntary, said people familiar with the development. However, several members, including China and India, challenged the US when it first raised the graduation issue in 2018, suggesting that the US is the single biggest beneficiary of Article 3(a) of the GATT. This provision grants a special legal carve-out to Washington relating to the Jones Act, which protects US domestic shipping restrictions from being overturned by the WTO, participants noted on condition of anonymity. While countries like Norway, the European Union, Japan, and other major economies vehemently opposed the Jones Act exemption, they never called for its removal, as they are currently doing with S&DT and development architecture, participants added. The facilitator seemingly tried to bypass discussions on the development architecture of various WTO agreements - particularly whether the rules truly support development in developing countries and therefore require revision - a trade envoy noted on condition of anonymity. For context, the Doha Development Agenda mandated members to address a plethora of problems arising from the manner in which the S&DT provisions were addressed, people familiar with the development recalled. CHINA'S PROPOSAL During the discussion, China presented its proposal (WT/GC/Reform/W/12), emphasizing that the "reform discussions should begin with reviewing development opportunities and challenges identified by developing Members as they integrate into the multilateral trading system." China said, "after specific development issues have been identified", discussions should proceed to "improving relevant existing WTO rules, tools and mechanisms", and "developing new ones where necessary". China said the underlying logic is straightforward, adding that members should "identify the problem, then assess the available tools, and finally determine what practical action is required." Rather than discussing technical assistance, policy space, or the operation of S&DT only in the abstract or solely as a matter of principle, China said "an issue-based and integrated approach would be most suited to the reform discussions, as it would allow us to consider the relevant rules, implementation constraints and support measures together in a [holistic] manner." According to China, "while individual WTO committees may examine certain development issues within their respective mandates, the development track can identify cross-cutting issues, connect different instruments, and explore possible reform areas from a system-wide perspective." "Such an approach may be more conducive to tangible and incremental outcomes addressing specific issues," China said. China said it remains open to discussing all issues of concern to members, including "the longstanding issues; we should be prepared to consider new perspectives." On S&DT, China said that it does not believe that eligibility should be the entry point of the discussion on development. China said that it recognizes that the tool of needs assessment has proved useful to developing members in past negotiations and implementation processes. In conclusion, China said it is committed to working with interested members to further advance the discussions under the development track. "Our objective should be to uphold the fundamental principles while identifying concrete ways to improve the tool-boxes for facilitating development." In response to the Chinese proposal, Brazil and many other members apparently agreed with much of what was put forward, particularly the centrality of development to the WTO system and the reform discussions. Costa Rica argued that S&DT is very important in the WTO but only for those that truly need it, adding that economies are now so different that a binary classification is no longer fit for purpose. Costa Rica appears to have aligned its position with the US, suggesting that most developing countries should relinquish S&DT and the WTO should preserve it only for those most in need, a South American participant said on condition of anonymity. COLOMBIA Colombia raised three points concerning procedural issues, S&DT, and the evolution of this issue and the agreements that, in its view, have the greatest impact on it. Colombia said "while the circulated documents are described as an informal synthesis of discussions - neither exhaustive nor implying a specific order of importance - it is worth clarifying that, for instance, references to proposals on the categorization and differentiation of developing members do not reflect the views of the entire membership, but rather those of specific members." On the issue of S&DT, Colombia said that it believes that S&DT is a non-issue, suggesting that there are deeply flawed interpretations of S&DT. According to Colombia, "in reality, if we examine the share of global trade held by countries that retain the right to use SDT and have not renounced it, we find it accounts for less than 20% of the total - just 20%. The 39 developed countries identified in the UK's paper, plus China and South Korea, account for 80% of global trade; they either cannot use S&DT or have renounced it." The remaining group of 125 countries - representing that 20% share - are the ones that could potentially utilize some form of flexibility, Colombia said. "However, in the vast majority of cases, these flexibilities do not affect substantive disciplines, let alone trade flows; examples include the timeframes for Trade Policy Reviews or specific provisions regarding technical cooperation," Colombia said. Additionally, Colombia recalled that "the S&DT flexibilities resulted from negotiations on specific disciplines and commitments; they therefore reflect a balance between the concessions developing countries made in areas such as agriculture, intellectual property, market access, and technology transfer - among many others - and the interests of developed countries." Therefore, Colombia said it does not "subscribe to the narrative that attributes one of the organization's problems to developing countries using and abusing S&DT." On the contrary, S&DT has become a point of contention, Colombia argued, stressing that "it undermines trust, consumes a great deal of time, and diverts our attention from issues that are truly important." Finally, Colombia said that "more than GDP, more than trade flows, and more than the accumulation of foreign currency reserves, the true determinant of a country's development is technology: specifically, the degree to which it is absorbed and disseminated, and the extent to which it contributes to the value added of goods produced and traded. In the long run, technology determines a country's level of development." "Within the WTO," Colombia said, "there are two agreements that significantly impact countries' ability to advance technologically, improve their standing, and "catch up": TRIMs and TRIPS." "TRIMs and TRIPS contain numerous rules that affect this capacity - sometimes positively, sometimes negatively," said Colombia, adding that "TRIMs and TRIPS are the WTO agreements with the greatest impact on the process of industrial learning - that is, the process of structural change regarding what countries can trade and produce. TRIMs and TRIPS should be termed the WTO's "learning treaties"." Meanwhile, according to Colombia, "developing countries have put forward numerous proposals to make TRIMs more flexible in order to pursue development goals or respond more effectively to environmental challenges, disasters, and the like." "The fact that no one wants TRIMs right now is one of the WTO's best-kept secrets - perhaps the second best- kept secret," Colombia said. On TRIPS, which is a more complex matter, Colombia said "there are ways to analyze how intellectual property rules affect the medium- and long-term development processes of nations - factors we ought to consider for a reformed and fairer WTO." Colombia said that it "submitted a proposal to the TRIPS Council focusing on rewarding inventors and creators, rather than emphasizing exclusivity rights and the potential avenues for protectionism they create." +
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