US attempts to use wrecking ball against WTO

A new US proposal on transparency and notification requirements envisages drastic punitive measures for non-complying WTO members while at the same time bypassing the WTO’s Doha work programme. D. Ravi Kanth considers the potentially far-reaching implications of the US move.

GENEVA: The United States on 31 October indicated how it is going to put the Doha Round of trade negotiations to bed, after circulating a proposal on mandatory transparency provisions and notification requirements in all the WTO agreements that would amount to altering the rights and obligations of members, trade envoys told the South-North Development Monitor (SUNS).

[A mere ministerial decision altering the rights and obligations of members may not even be valid. The WTO treaty makes clear that such an alteration in rights and obligations could only be done through the amendment procedure, and where (as in this case) it affects the most-favoured-nation (MFN) principle, it has to get the acceptance of all the WTO members. – SUNS]

At a 31 October informal meeting of the Doha rules negotiating body, the US intervened a few times to suggest that it does not agree to the ongoing textual discussions on fisheries subsidies, indicating that it could possibly reject it during the week, said a fisheries negotiator from a developing country.

The US pointedly told the chair of the Doha rules negotiations, Ambassador Wayne McCook of Jamaica, that it does not accept the textual discussion that members are having as the basis for outcomes on harmful fisheries subsidies.

The US also demanded for the first time that the discussion on harmful fisheries subsidies must include fishing activities in inland waters as well as aquaculture. The US disagreed with a proposal from Guatemala on issues concerning territorial jurisdiction in the ongoing discussion on harmful subsidies.

The US referred to its proposal on transparency notifications on fisheries subsidies, which is part of a comprehensive seven-page proposal it submitted to the WTO General Council as well as the Council for Trade in Goods on 30 October.

The US proposal on strengthening transparency notifications on fisheries subsidies would require, among others, that each member notify, as part of its regular notifications under Article 25.3 of the WTO Agreement on Subsidies and Countervailing Measures, the following information to the extent possible: (a) programme name; (b) legal authority for the programme; (c) name of recipient; (d) vessel name and identification number; (e) catch data by species in the fishery for which the subsidy is provided; (f) status of the fish stocks in the fishery for which the subsidy is provided (overfished, fully fished or underfished); (g) fleet capacity in the fishery for which the subsidy is provided; (h) conservation and management measures in place for the relevant fish stock; and (i) total imports and exports per species.

The US proposal says that “each Member shall also provide, to the extent possible, information in relation to other subsidies that the Member grants or maintains to persons engaged in fishing or fishing related activities that are not covered by paragraph 12, in particular aquaculture and fuel subsidies.”

It has set out how transparency and comprehensive notifications must be complied with in other agreements, failing which punitive triggers will be applied.

“Nuclear triggers”

A draft ministerial decision on enhanced transparency provisions and notification requirements circulated by the US suggested for the first time how a member failing to comply with the transparency provisions will be denied access to the WTO as well as other rights.

Effectively, the transparency provisions and notifications cover all the regular committees of the WTO.

“The US assessment is that by using the regular committee route and by using the ministerial decision, including in areas such as subsidies and counter-vailing measures, they are creating nuclear triggers which will not only add to members’ obligations – where there are currently none – but more importantly ensure that the current text on fisheries subsides which has references to the Doha work programme and the Hong Kong Ministerial Declaration is put to bed once and for all,” said a trade envoy who asked not to be quoted.

“Consequently, there will be no ministerial decision and even if there is one, that will also include the US proposal on intrusive transparency notifications which have nothing to do with the Doha work programme,” the envoy suggested.

In short, the US has taken the oxygen out of the Doha work programme by coming out with a punitive proposal on transparency notifications that amount to altering the rights and obligations of members, the envoy suggested.

The US proposal on transparency notifications covers the following WTO agreements:

i.     Agreement on Agriculture;

ii.   Agreement on Implementation of Article VI of the GATT 1994 (Anti-Dumping);

iii.  Agreement on Subsidies and Countervailing Measures;

iv.  Agreement on Safeguards;

v.    Understanding on the Interpretation of Article XVII of the GATT 1994 (State Trading);

vi.  Agreement on Implementation of Article VII of the GATT 1994 (Customs Valuation);

vii. Agreement on Import Licensing Procedures;

viii. Agreement on Rules of Origin;

ix.   Agreement on Preshipment Inspection;

x.     Decision on Notification Procedures for Quantitative Restrictions (G/L/59/Rev.1);

xi.   Agreement on Trade-Related Investment Measures;

xii.  Agreement on the Application of Sanitary and Phytosanitary Measures;

xiii. Agreement on Technical Barriers to Trade.

The draft ministerial decision instructs “appropriate committees, working groups or other bodies, such as the Working Group on Notification Obligations and Procedures, to assess and report annually to their designated supervisory bodies on Members’ compliance with notification obligations under the agreements, take appropriate steps to reinforce compliance with the notification requirements under such agreements (for example, by carrying out notification workshops), and to make recommendations, as appropriate, on means by which greater compliance can be encouraged and achieved.”

The US draft decision “instructs the Trade Policy Review Body to ensure that beginning in 2018 all trade policy reviews include a specific, standardized focus on the Member’s compliance with its notification obligations under the agreements.”

Further, it says “at any time, Members are encouraged to provide a counter notification on behalf of the delinquent Member concerning notification obligations under the agreements.”

Under the US proposal, “beginning in 2018, a Member that fails to provide a required notification under an agreement listed in paragraph 1(b) by the relevant deadline or has failed to provide any prior required notification shall submit to the relevant committee by 1 November 2018 and by 1 November of each subsequent year an explanation for the delay, the anticipated time-frame for its notification, and any elements of a partial notification that a Member can produce to limit any delay in transparency.”

“If a Member fails to provide the complete notification within one year of the deadline, the Secretariat shall research the matter and, in consultation with the relevant delinquent Member, provide a notification on its behalf,” the draft decision maintained.

More important, the US proposed a set of administration measures “if a Member fails to provide the complete notification within one year of the deadline and the delinquent Member fails to cooperate with the Secretariat so that the Secretariat is unable to obtain enough information to provide a notification.”

The administrative measures that shall apply to the delinquent member include:

“(a)   After one but less than two full years from a notification deadline, the following measures shall be applied to the delinquent Member at the beginning of the second year:

“(i)    representatives of the delinquent Member cannot be nominated to preside over WTO bodies;

“(ii)   documentation will not be provided to delinquent Member delegations in Geneva nor to the Member’s capital;

“(iii)  the delinquent Member’s access to the WTO Members’ web site will be discontinued;

“(iv)  the Director-General will contact annually the Minister of the delinquent Member responsible for the WTO, or any other official at the appropriate level emphasizing the question of notifications;

“(v)   the Secretariat will report annually to the Council on Trade in Goods on the status of the delinquent Member’s notifications; and

“(vi)  the delinquent Member will be subject to specific reporting at the General Council meetings.

“(b)   After two but less than three full years following a notification deadline, the following measures shall be applied to the Member at the beginning of the third year, in addition to the measures in paragraph 6(a):

“(i)    the Member will be designated as an Inactive Member;

“(ii)   the Inactive Member will be denied access to training or technical assistance other than that necessary to meet their WTO Article XIV:2 obligations; and

“(iii)  when the Inactive Member takes the floor in the General Council it will be identified as such.”

The US said that “at the beginning of each year when measures will be applied, the Director-General will notify the Ministers of the Members responsible for the WTO of the administrative measures being applied with respect to the delinquent Member.”

“Once the Member comes into compliance with its notification requirements, the measures will cease to apply,” the US maintained.

In conclusion, the US has assumed a role that corresponds to a “global bully” which wants to apply nuclear triggers while blowing up the Doha work programme in the run-up to the WTO Ministerial Conference in Buenos Aires, several envoys suggested.

(As an op-ed on 31 October in The New York Times pointed out, the US bullying on trade may have produced limited results in the early 1980s, when the US accounted for about 25% of world trade. But now the US accounts only for 13%. The WTO thus may survive a US withdrawal, though suffering grievous harm, while the US will open itself to trade retaliatory actions and US enterprises may find their intellectual property rights, for example, franchising, trademarks or patents, violated or transgressed and be unable to respond. – SUNS) (SUNS8566)                                    

Third World Economics, Issue No. 649, 16-30 September 2017, pp9-11