South reject moves to curtail policy space to pursue industrialization

Faultlines around the issue of WTO reforms were evident at a recent meeting of trade ministers, with developing-country participants opposing reform proposals seen as eroding their policy space and calling instead for a more inclusive and development-oriented trading system.

by D. Ravi Kanth

GENEVA: Trade ministers and senior officials of South Africa, India and the Group of 90 (G90) countries rejected on 23 May in Paris attempts by developed countries to curtail “policy space” for developing countries to pursue their autonomous industrial development.

The attempts of the developed countries have been put forward under the pretext of reforms of the World Trade Organization.

At an informal trade ministerial meeting hosted by Australia on the margins of the annual Organization for Economic Cooperation and Development (OECD) ministerial meeting in Paris, South Africa’s trade minister Rob Davies told his counterparts from developed countries that “adequate policy space” was imperative for pursuing “our industrialization.”

According to a participant in the meeting, trade ministers from the European Union, Canada, Norway, Switzerland and Japan among others insisted that “WTO reforms” were essential for bringing about differentiation among developing countries to avail of special and differential flexibilities.

Prior to the informal ministerial meeting, the trade ministers of the trilateral group – the US, the EU and Japan – issued a joint statement on WTO reforms, including on issues concerning “the special and differential treatment in current and future WTO negotiations.”

The three trade ministers called on “advanced WTO Members claiming developing country status to undertake full commitments in ongoing and future WTO negotiations.”

Without naming Brazil, which intends to forgo the special and differential flexibilities in the current and future trade negotiations, the trade ministers of the US, the EU and Japan applauded “some WTO Members [that] have indicated their intent to do so.”

The US, the EU and Japan also expressed their intention to bring about new rules at the WTO to prohibit industrial subsidies, discipline state-owned enterprises and proscribe forced transfer of technologies, along with stringent transparency and notification requirements at the WTO.

(The joint statement of the US, the EU and Japan did not however indicate how they would be able to bring about change in the WTO rules that would need unanimous acceptance, in terms of Article X.2 of the WTO’s foundational Marrakesh Agreement. – SUNS)

Several developed-country trade ministers in Paris also spoke about the progress made in their joint statement initiatives on electronic commerce, disciplines for micro, small and medium enterprises (MSMEs), domestic regulation of services, and investment facilitation.

The US said that its concerns about the WTO Appellate Body (AB) over the past 16 years were being acknowledged by several members. The US said it remained opposed to a proposal from the EU, China and India that called for an impartial and independent adjudicating body.

China said that it wanted outcomes on electronic commerce, investment facilitation, and domestic regulation of services.

In a separate development on the margins of the OECD ministerial meet, a group of 31 countries issued a ministerial statement for finalizing the schedule of specific commitments concerning domestic regulation of services by the 12th WTO Ministerial Conference in Nur-Sultan, Kazakhstan, in June 2020.

Significantly, when the floor was offered to the WTO Director-General Roberto Azevedo to make his concluding remarks at the Paris meeting, Azevedo simply said that he had nothing to say, according to a participant who asked not to be quoted.

Developmental dimension

Responding to the demands of the developed countries, particularly on the WTO reform proposals, South Africa’s Davies said “any proposal for WTO reform will be looked through the lens of the Delhi declaration which has called for advancing the capacity of the multilateral trading system and for enhancing the developmental dimension in global trade through an inclusive framework.”

“We have seen proposals that would need us to reclassify [for availing of special and differential treatment or S&DT],” he said.

South Africa, according to Davies, had undertaken onerous obligations as a developed country during the Uruguay Round, hindering the prospects for industrial and economic development. “Therefore, we are very much determined to safeguard our policy space as a developing country so as to address our ‘developmental’ tasks,” he said.

The South African trade minister called on his counterparts from the developed countries to first address the “unfinished agenda of the existing mandates” for delivering “outcomes in agriculture, reduction commitments in domestic support, cotton, permanent solution for food security and the special safeguard mechanism for developing countries.”

He reminded developed countries about the G90 proposals on S&DT, saying South Africa was determined to “pursue industrialization and regional integration in Africa.”

“Policy space”, he said repeatedly during the meeting, was a sine qua non for economic development of Africa.

Davies emphasized that members must first address the systemic crisis at the AB caused by one member so as to ensure that there was an independent and impartial adjudicating body for resolving global trade disputes. He said any proposals to address the AB crisis must “not be unjustifiable and must safeguard the interests of the developing countries.”

Commenting on the fisheries subsidies negotiations in the WTO, Davies said South Africa “continues to engage” in the talks to ensure that there was an “equitable” outcome that would squarely address the overfishing and depletion of fish stocks caused by large fleets from developed countries.

He urged his counterparts to be “realistic” on what can be accomplished at the WTO Ministerial Conference in Nur-Sultan in 2020.

Serious challenges

In a hard-hitting statement delivered at the meeting, a senior Indian trade official reminded his counterparts that “we are meeting again at a time when the multilateral rules-based trading system continues to face serious challenges, which include a spate of unilateral measures and counter-measures, deadlock in key areas of negotiations and the ongoing impasse in the Appellate Body, which is now threatening to completely paralyze the dispute settlement mechanism of the WTO.”

The Indian official said that the recent New Delhi meeting of developing countries, broadly representing the sentiments of over 100 countries, emphasized the need to work “collectively to strengthen the WTO to promote development and inclusivity.”

The Delhi meeting, according to the capital-based Indian official, underscored the need to ensure that “the process of WTO reform must keep development at its core, promote inclusive growth and fully take into account the interests and concerns of developing Members.”

Commenting on the fisheries subsidies negotiations, the Indian official emphasized that “while negotiating the disciplines, members must be mindful of the mandates of SDG [Sustainable Development Goal] 14.6 and MC11 [the 11th WTO Ministerial Conference] on fisheries subsidies.”

“Both clearly mandate that there should be appropriate and effective special and differential treatment for developing countries. These mandates need to be honoured in letter and in spirit,” the Indian official insisted.

“Special and differential treatment should not be replaced or derailed by new proposals and it would not be right to cherry-pick elements from the mandate,” he emphasized.

According to the Indian official, “any new disciplines must also consider the capacity constraints of developing countries in conducting regular stock assessment based on the best scientific evidence available to them.”

He warned against the recent US-Australia proposal for capping fisheries subsidies at the current level, saying that this approach “will unfairly impact developing countries and it will reward the big subsidizers by giving them higher caps, and thus create a permanent asymmetry.”

“Further, the capping proposals do not have an S&DT component, thereby denying much-needed policy space to developing countries to develop their livelihood-oriented fisheries sector,” the Indian official maintained.

According to the Indian official, “subsidies, both specific or non-specific, have the same adverse effect on sustainability of fish stock.” “The attempt by some Members to discipline only specific fuel subsidies will result in a large proportion of operating cost subsidies being left out of the disciplines,” he argued.

Without naming the US and other countries seeking “graduation and differentiation” among developing countries for availing of S&DT, the Indian official said “the reality remains that developing countries continue to face formidable challenges in integrating with global trade and in addressing their development goals.”

“India cannot agree to any approach which undermines the centrality of the development dimension in the WTO,” the Indian official said. “Hence, it would be best to refrain from this divisive debate now and instead focus on strengthening the WTO and reviving the negotiating agenda.”

Commenting on the WTO reform proposals, he said India remained concerned about the proposals on the table as they lacked balance, while pushing “for one-sided narrative with disregard for issues of importance and concern to developing countries.”

He said that “WTO reform initiatives must keep development at the centre, promote inclusiveness and non-discrimination, build trust and address the inequalities and glaring asymmetries in existing agreements, which are against the interest of developing countries.”

Moreover, said the Indian official, “the first priority for us should be to address the ongoing impasse in the Appellate Body with a sense of urgency to launch the process of filling up the vacancies before December 2019.”

Seeking clarification

A representative of the Africa, Caribbean and Pacific (ACP) Group of more than 90 countries said “the question of WTO reform is not limited to simply updating of the rules.” The Group wanted clarification of what was being sought to be achieved through the WTO reforms, the official said. Absence of such clarification was “inimical to what should be our collective efforts to build and maintain an open, inclusive and transparent dialogue on the issue which enjoys the buy-in of the broader Membership.”

The ACP Group cautioned against “a new or re-calibrated distribution of rights and responsibilities”, arguing that it would not “support a reform agenda that does not preserve special and differential treatment in WTO agreements for all developing countries and LDCs [least-developed countries].”

“Members who so wish can voluntarily self-declare or opt out of those provisions,” the ACP official added.

Commenting on transparency, he said the proposed punitive measures for not complying with transparency and notification requirements would result in “a fundamental rebalancing of the rights and responsibilities of Members.”

“A greater understanding of and customized response to the unique circumstances of developing countries and LDCs is needed,” the ACP official argued.

The ACP Group called for reaffirming “the paramount importance of preserving an independent, impartial and well-functioning dispute settlement system which is essential to preserving the legitimacy and credibility of the multilateral trading system, in all of its facets.” It urged other WTO members to “redouble their efforts to unlock the selection process of Appellate Body members.”

On fisheries subsidies, the ACP official said it was imperative that “the membership of the WTO concentrate their efforts on reconciling the shared commitment of all Members, as reflected in SDG Target 14.6 and the MC11 mandate, that is, not to subsidize fisheries in ways that harm the sustainability of those resources.”

The ACP Group underscored the need for “flexibilities to be accorded to developing countries and LDCs to, inter alia, develop fisheries sustainably, while accommodating the special needs of our vulnerable small-scale and subsistence fishing communities.” It demanded that there should be no onerous obligations under any future fisheries subsidies outcome for developing countries.

It emphasized the need for “an inclusive, transparent and development-oriented approach by Members towards the negotiations”. It also urged members to “avoid expansion of the WTO’s mandate into fish management areas, including the rights of coastal states in areas under their jurisdiction.” Further, it called for policy space to provide subsidies that support communities in a manner that fosters sustained stocks, food security and livelihoods.

China, which has one leg in the controversial joint initiatives on electronic commerce, investment facilitation, domestic regulation of services and MSME disciplines and another leg in issues concerning developing countries, especially for safeguarding S&DT flexibilities, indicated at the Paris meeting that it would put forward “a proposal on cap-based approach” for fisheries subsidies in the coming days.

Chinese Ambassador to the WTO Zhang Xiangchen said its proposal would “suggest different approaches” that would allow members to choose in accordance with their own interests. There would be a “Green Box” for environmentally friendly subsidies that were in line with sustainable development goals and that would be exempt from reduction commitments.

Zhang said the proposal would contain transparency provisions for calculation of the caps for reducing subsidies. He added that “the specific concerns of developing members must be properly addressed, and LDCs should be exempted from subsidy caps.”

On WTO reforms, Zhang said that China had tabled a proposal, suggesting that it was  ready to engage on this issue.

The Chinese envoy also underscored the need for making “utmost efforts to achieve progress in areas including e-commerce, investment facilitation, and domestic regulation by MC12.”

The Paris meeting showed that developing countries are increasingly coalescing around a common narrative on WTO reforms and policy space for achieving their developmental priorities. (SUNS8915)                                        

Third World Economics, Issue No. 682, 1-15 February 2019, pp6-8