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TWN
Info Service on WTO and Trade Issues (Nov26/02) WTO:
Reform facilitators press ahead despite calls for a "rethink" Geneva, 2 Nov (D. Ravi Kanth) -- Notwithstanding calls from members on 23 October for a "rethink" of the controversial reform of the World Trade Organization (WTO), the chair of the WTO's General Council and facilitators overseeing the discussions across the four reform tracks appear to be pressing ahead with the same practices that many members have criticized on both procedural and substantive grounds, said people familiar with the development. The four tracks include foundational issues, decision-making, development and "level playing field" (LPF) issues for which a new facilitator (Kazakhstan's trade envoy) has been appointed. An early indication that the same "top-down" approaches were being pursued emerged on 30 October, when the facilitator overseeing the foundational issues track of WTO reform issued a convening notice reflecting past practices, said a trade envoy who asked not to be quoted. "Instead of seriously rethinking the reforms, given a general backlash and opposition among many developing countries to the controversial reforms, there appears to be an acceleration of the discussions on reforms in the same old ways," the trade envoy said. In a restricted convening notice (ICN/GC/REFORM/13) issued on 30 October, Ambassador Sumathi Balakrishnan of Malaysia, the facilitator overseeing the discussions on foundational issues, informed members that an "informal plenary of the Foundational Issues track will take place on Monday, 9 November." While acknowledging that discussions to date "have highlighted that Members hold different perspectives on what constitutes foundational issues for the WTO and which matters merit consideration under this track," she said "the most-favoured-nation (MFN) principle and the role of the Secretariat have featured prominently in our exchanges, with Members putting forward concrete papers and ideas." Without mentioning that the two issues had been raised by the United States, the facilitator appears to be focusing on them, adding that "building on these discussions, and as indicated in my previous report, there is interest among Members in complementing the consideration of individual submissions with more focused thematic discussions on issues raised thus far under this track". "As Members have requested," Ambassador Balakrishnan said, "I would suggest that we deepen our consideration of the ideas and concerns put forward to date, providing opportunities to explore these issues in greater depth, draw out Members' perspectives and identify areas that may merit further consideration, without prejudging possible outcomes." To facilitate the discussions, she suggested "structuring our next meeting in three parts: the presentation of recent submissions, followed by a thematic discussion on the MFN principle, and a discussion on the role of the Secretariat." The facilitator seeks to "begin with presentations of the recent papers submitted by the LDC Group (document WT/GC/REFORM/W/19) and the ACP Group (document WT/GC/REFORM/W/20)." LDC PROPOSAL On foundational issues, the least-developed countries (LDCs) clearly stated in their proposal (WT/GC/REFORM /19) that "the preamble to the Marrakesh Agreement begins with the purpose of the multilateral trading system fostering the economic advancement of all of its Members who are at different levels of development." However, the multilateral trading system is being cast aside as a small group of powerful countries, including the US, the European Union and the "Friends of the System" group, appear determined to turn the Marrakesh Agreement on its head in order to pursue plurilateral agreements, said people familiar with the development. On MFN (most-favoured-nation treatment, or the non-discrimination principle), the LDC Group reiterated that "in addition to the MFN principle, the key elements of the preamble and other elements in the Marrakesh Agreement are foundational." Further, the LDC Group argued that "the MFN principle under the General Agreement on Trade in Services (GATS) includes treaty negotiated time limited MFN exemptions, which are to be reviewed periodically at the Council for Trade in Services (CTS), was not necessarily mentioned." On agricultural exemptions, the LDC Group pointed out unambiguously that "many other exemptions or exceptions have not been highlighted by the proponents such as those embedded in the Agreement on Agriculture for large Members, GATT 1994 provisions, and GATT Article XXI." Therefore, it said "reform in this track should strengthen, not renegotiate the Marrakesh Agreement", as "the balance of rights and obligations were carefully negotiated and reflect the different levels of development of the Membership." Reflecting on the Doha work programme on implementation issues, the LDC Group said that "concerns about implementation rather than comprehensive overhaul or amendment should be the context of discussions." Without naming the US, the LDC Group said that "certain proponents of the perspective that MFN is no longer valid, insist that so many exemptions or carveouts to MFN were negotiated as part of the WTO foundational acquis, which means that MFN was already a dysfunctional concept." Again without naming the US, which cited GATT Article 24 to demonstrate the need to change the MFN principle, the LDC Group said: "Exceptions targeted by those proponents included GATT Article 24 allowances for regional and free trade agreements covering "substantially all trade" between the parties, waivers for preferential treatment, Enabling Clause, special and differential treatment provisions across agreements, among a few." Moreover, "for LDCs, market access relies on precisely such agreed departures from MFN: the Enabling Clause, duty-free and quota-free schemes and the LDC Services Waiver," the LDC Group argued. These "benefit LDCs and cost other Members little and set no precedent for new exceptions in favour of larger economies." The LDC Group reminded the US and other industrialized countries that "should any review of exceptions nevertheless take place, one standard should apply to every exception, whichever Member uses it." It stressed that "LDC-specific treatment, which rests on Article XI:2 and embedded under various WTO Agreements, should remain outside any such review." "For the smallest Members," the LDCs said emphatically, "MFN treatment and bound tariffs are an insurance policy," adding that "predictability is the one benefit of the system that LDCs and small economies cannot obtain anywhere else." More disturbingly, it said that "the unilateral tariff measures have fallen on LDC exports that used to enter markets under preferences." The LDC Group warned that if the "system is weakened, larger economies retain other means to protect their interests; LDCs do not." "Bilateral arrangements that alter tariffs or market access increasingly shape the terms on which LDCs trade, and they cannot replace multilateral rules for LDCs." The LDC Group highlighted the following conclusions: a. Maintain the Marrakesh Agreement as is, especially Article 11.2. Focus on improving effective implementation of the foundational principles of the Marrakesh Agreement. The longstanding agreed departures from MFN are not anomalies and must be applied in a predictable manner. Where improvements in implementation are needed, reform should scope the problem and consider the means to resolve them. b. Examine whether new rulemaking broadens or fragments the system and whether new rules will keep arrangements open and MFN-consistent. c. Explore additional tools to assist LDCs in gaining sustained market access in light of preference erosion. d. Maintain Enabling Clause and other mechanisms to allow for preferential treatment for LDCs. e. Phased path: i. a scoping note; ii. a short reaffirmation and implementation solutions for improving the MFN principle; and iii. pilots to support LDCs on elements including regarding notifications and preference erosion. ACP PROPOSAL On foundational issues, the ACP (African, Caribbean and Pacific) Group of developing and least-developed countries, in its proposal (WT/GC/REFORM/20), reiterated the preamble of the Marrakesh Agreement, which states that the "WTO rules should help raise living standards, support employment and sustainable development, and enable developing and least-developed Members, including Small Vulnerable Economics (SVEs) and Small Island Developing States (SIDS) to secure a share in trade commensurate with their development needs." Therefore, "non-discrimination, predictability and the negotiated balance of rights and obligations remain essential to that task." More importantly, it said any discussion of "foundational issues should begin from the continued validity of the principles embodied in the Marrakesh Agreement and the covered agreements, including most-favoured-nation (MFN) treatment, non-discrimination, sovereign equality of Members, Special and Differential Treatment (SDT) for developing and least-developed country Members, consensus, development and the negotiated balance of rights and obligations." The ACP Group informed members that "the immediate task should be to determine whether concerns identified by Members arise from a foundational principle, from an agreed exception, from non-compliance, from lack of implementation, from an unresolved mandate, or from political disagreement." Such a "distinction is necessary before Members consider institutional or legal responses," the ACP Group said. It argued that "foundational discussions should also take into account the different structural circumstances of Members, including high trade and transport costs, limited economies of scale, narrow production bases and vulnerability to external shocks." Against this backdrop, the ACP Group reaffirmed "most-favoured-nation treatment and non-discrimination as foundations of a predictable multilateral system, subject to the exceptions and development provisions agreed by Members." Without naming the US, the ACP Group cautioned that "MFN treatment under Article I of GATT 1994 should not be recast as a benefit conditional on reciprocal concessions or on another Member's domestic policy choices." It subtly reminded the US that the "calls for greater reciprocity must be considered against the negotiated balance of rights and obligations, including the development provisions in Part IV of GATT 1994." The ACP Group "calls for reform that safeguards the rules-based multilateral trading system and responds to the needs of small and vulnerable Members, including SVEs and SIDS." Moreover, without naming the US, the ACP Group said that "trade measures taken by individual Members should remain subject to applicable WTO rules and disciplines, including relevant exceptions and safeguards." Amid fears that the reforms could serve as a backdoor for legalizing illegal actions, the ACP Group said unequivocally that "reform should not legitimise or normalise unilateral measures that circumvent or are inconsistent with WTO obligations and should take into account their effects on developing Members, including NFIDC's [net food importing developing countries]." It expressed serious concern "about increasing use of security exceptions, including Article XXI of GATT 1994, as a broad justification for unilateral trade restrictions." It is common knowledge that the US has repeatedly invoked security exceptions for several of its allegedly illegal actions, including "voiding" panel rulings in various cases by appealing to a dysfunctional Appellate Body. Against this backdrop, the ACP Group cautioned that "members should consider the systemic effects of such invocations in light of the treaty terms, without prejudging individual disputes or legitimate security interests." As part of the foundational issues, the ACP Group said "structural asymmetries in existing agreements, including in agriculture and industrial goods, should be considered alongside newer trade concerns." Without naming the US and the EU, the ACP Group said: "For proposals concerning differentiation among developing Members, MFN treatment, subsidy disciplines or consensus practice, proponents should identify the precise problem, relevant WTO provisions and proposed legal route." It called on members to "agree on the scope and mandate of any further work in the competent bodies, with coordination across reform tracks." The Group reminded members that mere "discussion must not imply acceptance of a proposal or create parallel negotiations that fragment the process." Aside from effective implementation of "existing WTO commitments," the ACP Group said it "recognises that an independent, fully functioning, accessible, binding and two-tier dispute settlement system is central to predictability, enforceability and confidence in the multilateral trading system." Moreover, it said "work under this track should complement, and not prejudge, the dedicated dispute settlement reform process under the auspices of the Dispute Settlement Body." PARAMETERS The ACP Group set the following parameters for work under the foundational issues track: 1. It should not make MFN conditional upon reciprocity or another Member's domestic policy choices; 2. It should not weaken Part IV of GATT 1994, non-reciprocity or negotiated special and differential treatment; 3. It should not use trade balances alone as proof that MFN has failed; 4. It should not legitimise measures inconsistent with WTO obligations; 5. It should not normalise selective compliance or permanent impairment of enforceable dispute settlement. 6. The relationship among MFN, Part IV of GATT 1994 and special and differential treatment should be understood as complementary: and 7. Non-discrimination supports predictability, while development provisions recognise differences in capacity and development needs within the negotiated balance. THEMATIC DISCUSSION Under the sub-heading on the thematic discussion of the MFN principle, the facilitator said that "the MFN principle has featured prominently in our discussions, with Members expressing a range of perspectives on its importance, operation and continued relevance." She notes that "while many members have emphasized the importance of preserving and strengthening the principle, discussions [by the US and a few other members] have also raised questions about the operation and scope of existing exceptions and flexibilities, including whether they adequately address the circumstances and policy needs of Members." The facilitator appears to be equating a large number of countries with the US, which seems somewhat preposterous, said a trade envoy who asked not to be quoted. In the second part of the discussion on 9 November, the facilitator wants "to deepen our collective understanding of the MFN principle", seemingly placing centre stage a country that is imposing unilateral tariff and non-tariff measures hither tether, said a trade official who asked not to be quoted. The facilitator justifies her decision by suggesting that "the aim would be to explore the purpose of the MFN, how existing exceptions function in practice, Members' understanding of the purpose of certain exceptions, any concerns or gaps that Members may identify, and whether there are aspects that merit further consideration." Knowingly or otherwise, the facilitator seems to be showing her hand in one direction, even as she said, "this would be an exploratory exchange, recognizing that Members hold different views on the principle and on possible ways forward." ROLE OF SECRETARIAT The US had raised several concerns about the functioning of the Secretariat, including its allegedly controversial actions, particularly that of the WTO Director-General in acting as a depository for collecting the instruments of acceptance of the plurilateral Agreement on Electronic Commerce without members having formally agreed to it by consensus. Against this backdrop, the facilitator said that "another theme raised in our discussions has been the role of the Secretariat," suggesting that "issues identified by some Members in this context include neutrality, transparency and oversight of Secretariat activities and communications." The facilitator wants to begin the discussion on the Secretariat's "neutrality, leaving the other issues for possible consideration in subsequent discussions." She posed what she calls broad questions for members to address at the upcoming meeting. They include: A. Do Members think Secretariat neutrality is important, and if so, why? B. Where, if anywhere, do Members see scope for improvement? C. What do Members think can be done to better ensure Secretariat neutrality? The underlying intention, according to the facilitator, "would be to draw out Members' perspectives and practical suggestions, helping us better understand existing practices and identify any areas where further consideration may be useful." +
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