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TWN
Info Service on WTO and Trade Issues (Oct26/27) WTO:
LPF issues - industrial policy, SOEs & agricultural asymmetries Geneva, 23 Oct (D. Ravi Kanth) -- The report issued on 22 October by the facilitator overseeing the “level playing field” (LPF) issues track of World Trade Organization reform highlighted the divide between the proponents of new disciplines, including Australia, and many developing countries, said people familiar with the discussions. The facilitator, Ambassador Elmer Jose German Gonzalo Schialer Salcedo of Peru, said that more than 25 delegations took the floor during the discussions on submissions from Australia and Paraguay. Both proponents responded over several rounds. The exchanges exposed competing interpretations of what constitutes an unfair advantage and whether new multilateral disciplines are needed. Industrial policy Australia acknowledged that industrial policy can serve legitimate objectives. Many members nevertheless raised a central question: “how to distinguish trade-distorting support from legitimate policy, and who decides what is “genuine” or “strategic?” Australia pointed to existing WTO instruments, including GATT Article XX, the Green Box provisions in agriculture and the Agreement on Subsidies and Countervailing Measures (ASCM). Members differed over whether multilateral rule-making could address these issues in a timely manner. Some were sceptical, while others reaffirmed its value. Unilateral measures, including climate-related measures, were also raised. The facilitator reported that “some members noted that unilateral measures, including climate-related ones, should be part of the conversation.” The underlying question is whether new disciplines can address perceived distortions without constraining legitimate industrial and development policies. SOEs & competitive neutrality Several members supported examining state-owned enterprises (SOEs), while others, particularly China, argued that public ownership alone does not distort trade. SOEs perform legitimate functions in infrastructure, energy, food security and public services, reflecting members’ different economic models. Members asked whether existing difficulties arose from the rules themselves, their interpretation or their implementation. They also sought clarity on how SOEs, including indirectly controlled entities, should be defined. Australia described competitive neutrality as ensuring that SOEs do not receive advantages solely because of public ownership. The facilitator reported that some members questioned whether different treatment should be permitted to achieve public-service objectives. Others argued that competition policy extends beyond trade and that market-distorting conduct by private and multinational enterprises should also be considered. Development flexibilities & agriculture Brazil as well as other developing countries and LDCs stressed that a level playing field does not mean identical treatment. They argued that policy space is essential for industrialisation, economic development and structural transformation, and that S&DT and other development flexibilities must be preserved. Australia said that S&DT would form an integral part of the discussion. Agriculture emerged as another contested issue. Paraguay argued that the LPF discussions should extend beyond industrial policy to address the asymmetry between agriculture and non-agricultural market access (NAMA), as well as the cumulative effects of agricultural policies and non-tariff barriers. Many members supported including the issue of agriculture in the LPF track. However, the United States, the European Union and the Group of 10 farm-defensive countries led by Switzerland, Norway and Japan want agriculture to be addressed in the Committee on Agriculture in Special Session under Article 20 of the Agreement on Agriculture. Some members also underscored that each member’s specific circumstances, including commitments made in agriculture during WTO accession negotiations, should not be overlooked. Dispute settlement & transparency Questions about WTO enforcement remained unresolved. Several members asked how new disciplines could be enforced without a fully functioning two-tier dispute settlement system. Views also diverged over the Appellate Body’s interpretation of a “public body.” Some regarded it as a gap in existing rules, while others cautioned against using reform to revisit past rulings. Transparency & notifications Transparency and notification requirements generated another debate. Australia and the US want stronger counter-notifications and incentives for compliance.
Members also discussed whether monitoring should rely on Secretariat data or member-driven information. Supporters of stronger counter-notifications saw them as a potential means of addressing notification gaps. Brazil and other members warned that they could become instruments of pressure, particularly against LDCs. On ways to advance the discussion, the facilitator said that members proposed: * A stocktake or member-driven mapping of gaps before considering new rules. * Thematic sessions and focused consultations. * A diagnostic assessment of the problems the LPF track should address. * Hypothetical case studies. * More sophisticated market intelligence, as suggested by Australia. The Secretariat reported on ad hoc, one-time and regular notifications in the Council for Trade in Goods and its subsidiary bodies. Many members attributed notification gaps mainly to capacity constraints, complexity and duplication rather than unwillingness to comply. They supported simpler formats, digital tools and targeted technical assistance, while differing over positive and negative incentives and possible punitive consequences. Members also called for member-driven mapping of gaps before new rules are considered, alongside thematic sessions, focused consultations, diagnostic exercises, hypothetical case studies and more sophisticated market intelligence. Any further work, the facilitator stressed, should uphold transparency, inclusiveness and effective participation. Overall conclusion The four reform reports point to a common preference for more structured, evidence-based and inclusive discussions. Members increasingly favour thematic consultations, factual stocktakes and clearer access to proposals and responses. However, agreement on process has not resolved fundamental differences over the substance of reform. The consensus principle and plurilaterals remain contested; MFN reform raises questions about discrimination and predictability; the development discussions exposed divisions over S&DT and policy space; and LPF proposals raise difficult questions about industrial subsidies, SOEs, agriculture and enforcement. The decisive challenge is whether WTO reform can accommodate different economic models and development needs while addressing concerns about trade distortions and preserving the negotiated balance of rights and obligations. For a large majority of developing and least-developed countries, the central test will be whether WTO reform strengthens existing multilateral commitments and delivers on outstanding development mandates, rather than diluting established principles or narrowing their policy space. The four reform reports record possible avenues for further exploration, not negotiated outcomes. The next phase of the reform process will determine whether members can translate calls for diagnosis, transparency and dialogue into substantive proposals without prejudging the results or undermining the consensus-based multilateral trading system.
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