US transparency proposal criticized at WTO Goods Council

Several WTO members have expressed concern over a US proposal which envisages punitive action against countries that run afoul of notification requirements at the trade body.

by Kanaga Raja

GENEVA: A United States proposal setting out stringent procedures on transparency and notification requirements under the WTO agreements, including penalties, was criticized at a meeting of the WTO Council for Trade in Goods on 10 November by over a dozen WTO members, both developed and developing.

According to trade officials, these members voiced concern over the “punitive” nature of the proposal and how it could impact on members which are already struggling to meet notification requirements.

US proposal

The US had formally introduced its proposal on procedures to enhance transparency and strengthen notification requirements under WTO agreements at the Goods Council meeting. The proposal includes a draft ministerial decision that sets out “proposed actions intended to improve compliance with, and the quality and effectiveness of, notification requirements in general, as well as under specific agreements.”

The US submitted its proposal to both the Goods Council and the WTO General Council.

The US has proposed that members consider adopting the decision at MC11, and if timing does not permit agreement at MC11, that members consider continuing work on the proposal as part of broader institutional reform post-MC11.

The US proposal on notification requirements covers the following WTO agreements: Agreement on Agriculture; Agreement on Implementation of Article VI of the GATT 1994 (Anti-Dumping); Agreement on Subsidies and Countervailing Measures; Agreement on Safeguards; Understanding on the Interpretation of Article XVII of the GATT 1994 (State Trading); Agreement on Implementation of Article VII of the GATT 1994 (Customs Valuation); Agreement on Import Licensing Procedures; Agreement on Rules of Origin; Agreement on Pre-shipment Inspection; Decision on Notification Procedures for Quantitative Restrictions (G/L/59/Rev.1); Agreement on Trade-Related Investment Measures; Agreement on the Application of Sanitary and Phytosani-tary Measures; and Agreement on Technical Barriers to Trade.

Among the key elements cited by the US in its proposal are:

(1) Employing “administrative measures” already implemented by other parts of the WTO, and promoting the use of counter-notifications of members’ policies that should have been notified, as provided for in the Agreement on Agriculture, are some mechanisms that could enhance the effectiveness of WTO transparency requirements.

(2) Regarding fisheries subsidies, the US has proposed that ministers take a decision at MC11 to re-commit to complying with their existing notification obligations under the Agreement on Subsidies and Countervailing Measures, and agree on additional new categories of information to be reported.

(3) On agriculture, the US has proposed that ministers take a decision at MC11 to re-commit to complying with their existing notification obligations under the Agreement on Agriculture and to commit to further strengthening the Committee on Agriculture as a forum to discuss members’ implementation of agricultural policies.

(For more details of the US proposal, see TWE No. 649.)

In introducing its proposal at the Goods Council meeting on 10 November, the US said: “Compliance with notification requirements of the various WTO Agreements is inadequate. For example, the most recent report by the WTO Secretariat indicates that less than half of the WTO members have provided their 2015 subsidy notification.”

“This lack of transparency is problematic for traders and it undermines the proper functioning and operation of the WTO Agreements. From a systemic perspective, it is also very difficult to develop, evaluate, and assess negotiating proposals to improve the operation of various WTO agreements without the information that should have been provided under existing WTO notification obligations,” the US said.

Concerns over punitive approach

According to trade officials, members that took the floor agreed that enhancing transparency and improving members’ compliance with notification requirements were important objectives. However, some expressed reservations over the US proposal, pending further study. Others were plainly critical of the punitive approach, and stressed the need to distinguish between wilful default and non-compliance because of inherent capacity constraints.

Canada, the European Union, Switzerland, New Zealand, Singapore, Japan, Russia, Australia and Korea said that they needed to study the proposal further.

According to trade officials, some 13 members raised concerns over the punitive nature of the proposal and how it could impact members which are genuinely struggling to meet the notification requirements. These countries were New Zealand, Norway, Brazil, Hong Kong-China, China, India, South Africa, Egypt, Ecuador, Bolivia, Cuba, Chile and Ghana.

New Zealand said that there is a need to make sure that the incentives are right and that they do not end up reinforcing disengagement, while Norway believed that positive incentives may be more effective than punitive actions to achieve the improvements members are seeking.

Brazil said that the approach could have harmful and unintended consequences to the functioning of the WTO with no assured benefits.

According to trade officials, India said there must be recognition of the difference between wilful default on notification obligations and a default due to inherent constraints. In spite of their willingness to notify on time, developing countries may not be able to do so, it added.

South Africa said compliance with notification requirements cannot be enhanced by punitive measures. This course of action would negatively impact the very members which require assistance, it underlined.

Bolivia noted that 70-80 members would be deemed to be in a position of delinquency under this proposal because they have not notified their agricultural support. Incentives and punishment do not work very well in the international system, it said.

Turkey, Bolivia, Korea, Cameroon, Venezuela, Cuba, Chile and Ghana pointed out that there was not enough time to build consensus on the proposal ahead of MC11 in December.

According to trade officials, several members noted that as transparency issues on fisheries subsidies were being tackled as part of wider negotiations at the WTO Negotiating Group on Rules, it would be best to have discussions on this matter in that forum.

The US thanked members for their responses and said that it gave them useful material for their continued reflection. (SUNS8575)                                          

Third World Economics, Issue No. 650, 1-15 October 2017, pp8-9