MC11 becoming a North-South battle

North-South faultlines are becoming more evident in the run-up to the WTO’s eleventh Ministerial Conference in December, with most developing countries calling for outstanding items on the WTO agenda to be addressed even as developed countries mainly seek to shift the focus to new issues.

by D. Ravi Kanth

GENEVA: The eleventh Ministerial Conference (MC11) of the World Trade Organization, which will be held in Buenos Aires on 10-13 December, is increasingly transforming itself into a North-South battle on unresolved trade issues of the WTO’s Doha Work Programmeme (DWP).

A large majority of developing and poorest countries issued the strongest message yet on 24 October that they remain firmly opposed to new issues such as investment facilitation, disciplines for micro, small and medium-sized enterprises (MSMEs), and a new mandate for electronic commerce, several trade envoys told the South-North Development Monitor (SUNS).

At an informal meeting of heads of delegation (HoD) on 24 October, the large majority of developing and poorest countries comprising the African Group, the Africa, Caribbean and Pacific (ACP) Group, the least-developed countries (LDCs), the G33 developing-country coalition, China, India and South Africa demanded categorically that the Buenos Aires meeting must deliver a credible outcome on the permanent solution for public stockholding programmes for food security without any linkage to an outcome on agricultural domestic support commitments as demanded by the European Union, Brazil and other members.

They also insisted that the special safeguard mechanism (SSM) which is mandated in the 2004 July Framework Agreement, the 2005 Hong Kong Ministerial Declaration, the 2008 revised draft Doha agriculture modalities and the 2015 Nairobi ministerial declaration must be delivered at Buenos Aires.

They emphasized that an outcome on cotton must be delivered at Buenos Aires as well so as to enable the so-called C4 West African cotton-producing countries – Benin, Burkina Faso, Chad and Mali – to secure a credible result on this much-promised issue.

The large majority of developing and poorest countries, including India, China and South Africa, also called for the elimination of the Aggregate Measurement of Support (AMS) in the industrialized countries as a prerequisite for commencing work on the domestic support reduction commitments.

The large majority of developing and poorest countries led by South Africa demanded that the specific improvements in the special and differential flexibilities in the Doha Work Programme and subsequently in other ministerial declarations, including the 2004 framework agreement, must be resolved at Buenos Aires so as to enable countries in Africa to industrialize and become competitive in international trade.

On e-commerce, the large majority of developing and poorest countries, including India and South Africa, said categorically that the 1998 work programme on e-commerce must continue and further work must follow after the Buenos Aires meeting.

The large majority of developing and poorest countries, including India and South Africa, said no to new issues such as investment facilitation and disciplines for MSMEs, which are outside the mandate.

The large majority of developing and poorest countries called for credible outcomes on duty-free and quota-free market access for the LDCs.

The large majority of developing and poorest countries said that they want a realistic and development-friendly outcome on fisheries subsidies without undermining the lives of poor and artisanal fishermen.

China, however, pursued a two-track strategy. It sided with the developing countries on issues concerning credible outcomes on the permanent solution for public stockholding programmes, SSM and cotton, and the elimination of AMS. But it chose to switch sides on e-commerce, investment facilitation and disciplines for MSMEs by joining with the EU and other industrialized countries. China said it would attend an informal high-level meeting being convened on investment facilitation by Nigeria on 3 November. On fisheries subsidies, China maintained that it wants an outcome only on illegal, unreported and unregulated (IUU) fishing.

On their part, several industrialized and some developing countries – including the EU, Japan, Australia, Switzerland, Norway, Korea, Hong Kong (China), Chinese Taipei, Chile and Argentina – called for a work plan on new issues such as investment facilitation, disciplines for MSMEs and e-commerce.

The EU supported by several others specifically linked an outcome on the permanent solution for public stockholding programmes for food security in developing countries with domestic support reduction commitments. The EU and more than 40 countries also called for an outcome on improved domestic regulation in services. The EU asked members to be prepared to strengthen the multilateral organization in the face of challenges posed to its credibility.

The United States, however, continued to maintain its position that there cannot be any negotiated outcomes at Buenos Aires. The US said the ministerial meeting will be reckoned as a success if it results in an agreed blueprint for starting a dialogue to strengthen the WTO by rejuvenating its institutional structures in the near future, said a participant who asked not to be quoted.

The US, however, remained silent on the Dispute Settlement Understanding (DSU) and the systemic crisis it had triggered off in recent weeks following its decision to block the selection process for filling vacancies at the WTO’s dispute settlement Appellate Body.

On this front, without naming the US, members from across all regions issued on 24 October a resounding message for strengthening the DSU in the face of grave challenges arising from the intransigent positions adopted by one member. Many members called for delinking the selection process for filling the Appellate Body vacancies from the issues raised by the US, said a trade envoy who asked not to be quoted.

African Group position

The strongest message delivered at the 24 October HoD meeting came from Rwanda’s trade envoy Ambassador Francois Xavier Ngarambe on behalf of the African Group. He said the African Group wants a “fair and equitable rules-based multilateral trading system that supports our development objectives.”

“Since the launch of the Doha Round,” he said, the African Group “has made contributions consistently aiming at eliminating systemic inequities inherited from many of the Uruguay Round Agreements.”

It is little surprise, he said, that “the African Group supported the 2008 Rev.4 [modalities text] in Agriculture and submitted a number of Special and Differential Treatment proposals to review GATT/WTO Agreements in line with paragraph 44 of the Doha Declaration, among others.”

Therefore, the Buenos Aires conference must deliver “a meaningful outcome on the Doha Development Issues, in particular those with direct connection with our continental integration, structural transformation and industrialization in line with Agenda 2063: The Africa We Want.”

On behalf of the African Group, he listed the markers for the Buenos Aires meeting in all areas. In agriculture, the African Group listed the following issues:

(i) Given the role agriculture plays in Africa, especially in its economy for employment, GDP generation, rural development, food security and livelihoods, the African Group wants a high-ambition and development-friendly outcome at Buenos Aires that results in removing inequities in global farm trade.

(ii) It underscored the need for a fair and market-oriented agriculture trading system in line with Article 20 of the WTO Agreement on Agriculture and in accordance with paragraph 13 of the Doha Ministerial Declaration.

(iii) The African Group supported the elimination of all historical imbalances, notably the elimination of AMS by MC11 as well as establishing disciplines on product-specific support to avoid subsidy concentration while preserving all the necessary policy space for purposes of fairness and equity.

Other approaches, such as the EU/Brazil approach based on the value of production, according to the African Group, “do not address these systemic inequities and may in fact perpetuate them; and, therefore these approaches are not conducive to any tangible outcome and cannot be supported as a basis for future work.”

The African Group listed other important issues: a permanent solution on public stockholding programmes for food security purposes, a special safeguard mechanism as well as an ambitious outcome on cotton by MC11.

On public stockholding programmes for food security, the African Group maintained that “the Nairobi Ministerial Decision mandated a constructive engagement towards a permanent solution on this issue; to be conducted in a dedicated process and accelerated time-frame, distinct from the agriculture negotiations.” “We therefore cannot support any linkage to the domestic support negotiations,” the African Group said.

On fisheries subsides, the African Group said it supports the ACP Group’s proposal for a substantial outcome while preserving the policy space for countries to develop the fisheries sector.

On the development issue concerning special and differential treatment, the African Group stressed “the urgent need to make flexible the GATT/WTO stringent rules in order to create a conducive environment for industrialization, diversification and structural transformation.”

It expressed sharp concern that “the current stiff resistance” to the proposals for special and differential flexibilities may be seen as “a testament to the fact that this may not be an Organization that promotes development, contrary to the objectives of the Doha Development Agenda.”

The African Group said “rules were negotiated during the Uruguay Round without the participation of our countries”, maintaining that “industrialized countries crafted these rules in accordance with the needs of their industries.” It recounted how industrialized countries closed the policy space after establishing the WTO, particularly through agreements that prohibited the use of local content requirements, industrial subsidies and infant industry protection, among others.

The G90 developing countries, according to the African Group, are “simply seeking to make these rules commensurate with the economic needs of our industries in fulfilment of the mandate found in paragraph 44 of the Doha Ministerial Declaration.”

Therefore, “the argument that operationalizing the special and differential treatment with respect to these rules might be difficult simply does not hold”, the African Group maintained.

The African Group rejected calls for an outcome on domestic regulation for trade in services, saying that their specific questions were not even addressed. (See the article “Outcome unlikely on domestic regulation in services at MC11” in this issue.)

On new issues without a mandate, paragraph 34 of the Nairobi Ministerial Declaration and paragraph 1(g) of the 2004 July Framework will prevail. “It is impossible to envisage or expect any outcome whatsoever on issues without reaching consensus on the negotiating mandate,” the African Group maintained.

Commenting on e-commerce, the African Group said “it may be possible to agree to the continuation of the current work programme, although some members are deeply concerned that this is intended to lay the basis for premature and not sufficiently informed rule-making in future.” It added that these concerns are heightened by current proposals for a new institutional framework, which appear to be designed for negotiations on rules in future.

On the extension of the moratorium on customs duties on electronic transmissions, the African Group said “it is time to engage in a serious discussion on the implications of the moratorium in view of the rapidly evolving digitization trend. We are increasingly concerned about the economic rationale for providing duty-free and quota-free treatment to the most competitive companies in the world.”

“Moreover, in view of the increasing digitization of goods and services, what is likely to be the implications on revenue losses in a few years ahead? In view of these unanswered questions, the extension of the moratorium should not be seen as automatic,” the African Group cautioned.

Recipe for disaster

After endorsing the statement made by Rwanda on behalf of the African Group, South Africa said “aside from more than three or four issues that have some prospect for an outcome at MC11, the remaining DDA [Doha Development Agenda] issues, which Members continue to prioritize, will need to be taken up after Buenos Aires.”

South Africa’s trade envoy Ambassador Xavier Carim, who is also the chair of the WTO General Council, said “there is wide support to continue to work for outcomes at MC11 on fishery subsidies and public stockholding.” He warned that “while the complex technical questions will not easily be resolved on either, the most serious risk to an outcome on public stockholding is the linkage being made to the one proposal on domestic support.”

“We need to be frank here: That proposal, based on a value of production cap, and being presented as an incremental step, will not achieve consensus because it does not establish a fair or equitable basis for future work,” the South African trade envoy said. “The linkage thus risks derailing possible progress on public stockholding, with possible knock-on consequences.”

India’s trade envoy Ambassador J.S. Deepak also warned that any linkage between the permanent solution for public stockholding programmes for food security and the outcome on domestic support is a recipe for disaster at Buenos Aires.

On e-commerce, South Africa said it is ready “to agree to continue exploratory discussions under the current work programme and to obtain a two-year extension of the moratorium – in tandem with an extension of the TRIPS moratorium – but even these cannot be taken for granted.”

Carim also expressed sharp concern over “the disengagement on and even rejection of” the G90 proposals on special and differential treatment.

He urged members not to attempt outcomes on domestic regulation in services, trade remedies or others that “cherry-pick” transparency and/or regulatory-related demands in agriculture, NAMA or elsewhere.

Carim said “it is abundantly clear now that any proposal for decision at MC11 on non-Doha, non-mandated issues, such as investment facilitation and MSMEs, will not be agreed.”

He called for the process leading to MC11 to be fully transparent and inclusive, and cautioned against “a repeat of the process at MC10 [which took place in Nairobi in 2015]”.

“We should therefore be fully focused on completing all technical work before departing Geneva, leaving very few, manageable political issues for Ministerial decision,” he said. It is imperative that “when our Ministers meet at MC11 they do not confront deeply contested issues that put the Conference itself at risk, as a breakdown at MC11 would deal the most serious blow to the multilateral trading system.”

“We must do all we can now to avoid that scenario,” he said.

In short, the strong messages delivered at the HoD meeting on 24 October point towards a continuing battle that might go to the wire, particularly on new issues, said a trade envoy who asked not to be quoted. (SUNS8561)                       

Third World Economics, Issue No. 649, 16-30 September 2017, pp2-4