TWN Info Service on WTO and Trade Issues (Dec11/09)
20 December 2011
Third World Network

WTO General Council meets just before MC8
Published in SUNS #7273 dated 2 December 2011

Geneva, 1 Dec (Kanaga Raja) -- The final General Council meeting of the World Trade Organisation (WTO) before the 15-17 December eighth ministerial conference (MC8) took up a range of issues, including the submission of several draft decisions for ministers to adopt.

The MC8 will be chaired by Nigeria's Trade and Industry Minister Olusegun Aganga.

Switzerland's Johann Schneider-Amman, Malaysia's Mustapa Mohamed and Trinidad and Tobago's Stephen Cadiz will be the Vice-Chairs.

The request for observer status by Palestine to MC8 was also approved.

Several countries took the floor to speak on the agenda item of China's transitional review under section 18.2 of the Protocol of Accession to the WTO. Trade officials said that this is the final year of the review.

The US (represented by Ambassador Michael Punke) said: "Following China's accession to the WTO, China took impressive steps to implement a sweeping set of commitments. It reduced tariffs, eliminated many non-tariff barriers that denied national treatment and market access for goods and services imported from other WTO members, and made legal improvements in intellectual property protections and in transparency. Almost all of these steps took place in the first five years after China's WTO accession. They deepened China's integration into the international trading system and strengthened China's rule of law and economic reform."

The US added: "Trade and investment has also expanded dramatically between China and its many trading partners, as China has become one of the major engines of economic growth in the world. From a bilateral perspective, the expanding trade and investment between the United States and China has provided numerous and substantial opportunities for US businesses, workers, farmers and service suppliers and a wealth of affordable goods for US consumers."

"Nevertheless," Ambassador Punke said, "despite this progress, the overall picture presented by China's first ten years of WTO membership remains complex, given a troubling trend in China toward intensified state intervention in the economy over the last five years. Increasingly, trade frictions with China can be traced to China's pursuit of industrial policies that rely on trade-distorting government actions to promote or protect China's state-owned enterprises and domestic industries."
"In fact, China seems to be embracing state capitalism more strongly each year, rather than continuing to move toward the economic reform goals that originally drove its pursuit of WTO membership. This is a troubling development, and the United States urges the Chinese government to reconsider the path it is on," said the US.

Ambassador Punke said: "Over the past ten years, the United States and various co-complainants have invoked the WTO dispute settlement mechanism against China on 12 separate occasions after bilateral engagement failed to address concerns about China's adherence to important commitments and obligations."

He further said: "China's pursuit of an array of other industrial policies also raises serious concerns. For example, while China has made progress in eliminating certain discriminatory ‘indigenous innovation' policies in the government procurement context, it continues to implement these trade-distorting policies in many other areas of its economy, retarding innovation and harming those who develop or first register their intellectual property outside China. China also makes selective use of border measures, such as value-added tax rebates and export duties to encourage or discourage exports of particular products. China continues to pursue unique national standards in a number of areas of high technology where international standards already exist. China continues to protect many domestic industries through a restrictive investment regime, particularly so-called ‘pillar industries' and ‘strategic emerging industries'."

"We do understand the difficulties that China must confront in order to transition from a planned economy to a more market-oriented economy. We also recognize the important contribution China's economic progress has been making to global economic growth and development."

"However, the developments I have described indicate that essential work remains ahead to reduce market access barriers, to increase rule of law, including transparency and predictability, and to fully institutionalize market mechanisms in China," said Ambassador Punke.

Ambassador Punke further said that "one other aspect of China's conduct as a WTO Member needs to be highlighted and discussed, and that is the perception among WTO Members that Chinese government authorities at times use intimidation as a trade tool."

According to trade officials, the European Union said that no one doubts that China's accession to the WTO is one of the defining moments of recent economic history. The final transitional review should not mean this is the end of China continuing to implement its reforms. The EU highlighted problems pertaining to transparency, non-tariff barriers, intellectual property enforcement, and restrictions in terms of entry of services companies.

Japan praised the efforts of China in putting in place its commitments, but said that it had concerns on export restrictions on non-ferrous metals and coal. There were also problems with trade-related investment measures, enforcement of anti-counterfeiting, and compulsory certification, which it said was not transparent.

Australia said that China's tariff and non-tariff barriers have been significantly reduced as a result of joining the WTO, but there remain non-transparent measures that are cause for some concern.

Pakistan congratulated China's efforts and welcomed the end of the transitional review mechanism. It said that China had done a very good job of implementing what it had pledged to do.

Mexico said that important steps have been taken by China. It however had concerns on sanitary and phytosanitary measures, technical barriers to trade, subsidies, and countervailing and anti-dumping measures.

Cuba welcomed the quick progress that China had made. Venezuela expressed similar views. Chile said China had made great strides and that it is the largest market for Chile's exports, and the second biggest source of its imports.

According to trade officials, China thanked members for their comments. It said it stands ready to engage with any member on any questions that they may have. China's accession is not the end of reform for the very simple reason that after ten years there is a consensus among the Chinese people that reform should be accelerated and this is not something that is going to change.

Under the agenda item, report by the Chair of the Trade Negotiations Committee (TNC), Pascal Lamy, who is also the WTO Director-General, said: "We all know that these are not ordinary times. The outlook for the global economy has worsened considerably in recent months. After the encouraging signals of recovery seen at the end of 2010, risks and uncertainties are now increasing. Global activity is slowing down, economic performance continues to be uneven across countries, debt levels and financial markets' volatility are rising, high unemployment persists in many countries, and confidence is falling sharply."

He added: "These risks are aggravated by perceptions that governments' responses to these challenges have so far been insufficient to provide opinions and markets with a convincing exit strategy framework. This is the reality that we face as a backdrop against which our meeting will be taking place. As a result of that, world trade has grown more slowly than expected in recent months."

"I believe it is therefore important for our Ministerial Conference to send signals that trade openness can remain a stable trade anchor to the world economy. The last thing the world economy needs is more cacophony."

Noting that the elements for political guidance under all three themes (importance of the multilateral trading system and the WTO, trade and development and the Doha Development Agenda) were circulated in document JOB/GC/15, Lamy said that in his consultations, he did not hear any signals or proposals to give up on the objectives members set when the Doha Development Round was launched.

"What I heard in my consultations is that all Members remain committed to working to deliver on the Doha mandate. So, the Doha mandate and all the principles enshrined in the Doha Ministerial Declaration, including the single undertaking, transparency and inclusiveness continue to guide our work forward."

"I also sensed in my consultations convergence emerging around the idea that Members advance negotiations in areas where progress can be achieved, in line with our existing provisions that allow Members to reach agreements based on consensus earlier than the full conclusion of the single undertaking. Obviously it is for the Membership to see which are these areas as it is for the Membership to negotiate and reach agreement."

Lastly, said Lamy: "I wish to clarify that in my consultations there was convergence that work should continue on the basis of progress already made and that any agreement reached at any time will have to respect fully the development component of the mandate. The strong language used in this respect provides clarity on the importance of the development component of our work, which is not relegated in any way simply because it appeared as the last paragraph of the elements for political guidance."

"Let me be very, very clear on this point, this is not about re-interpreting the Doha mandate, or re-interpreting the principles included in the Doha mandate. I hope that these clarifications help dispel concerns that were expressed by some during our meeting yesterday [on Tuesday]," he stressed.

The TNC Chair said: "Looking ahead, we heard yesterday that one of the sessions during the Ministerial Conference will be devoted to discussing the Doha Development Agenda. The elements for political guidance provide us with a shared sense of direction. What is needed now is to operationalise these elements. I would therefore encourage Ministers to use their interventions at the upcoming Ministerial to provide guidance in this respect to ensure that real progress can be achieved in 2012. Guidance is needed both in respect of where and how progress can be achieved in the shorter term as well as on how to overcome the stalemate in areas where convergence has proven challenging."

"In doing so, I believe that Ministers need to address the essential question which in my view is behind the current impasse: different views as to what constitutes a fair distribution of rights and obligations within the global trading system, among Members with different levels of development. This is a political question to which a political response will be required," he added.

Several delegations spoke following the TNC Chair's remarks.

According to trade officials, the Dominican Republic said that it would like to see from the Doha Development Agenda (DDA), development as being the underlying and central theme and any decision to have an early harvest or outcome must be development-oriented. It wanted the Committee on Trade and Development (CTD) to be the focal point of all development activity.

Argentina agreed with the Director-General's views that there is an impasse (in the Doha talks). It said that it is very important that members look at issues that have to do with development and also the question of food security.

Chinese Taipei said that it was unhappy about being left out of this process at a critical stage. It said that it is ready to engage and is prepared to operationalise paragraph 47 (of the Doha Declaration) in way that is within the mandate. The development dimension needed to be at the heart of this.

El Salvador said that the development dimension must be central. It said that it is open to looking at new approaches but always with the development dimension at front and centre.

Kenya (African Group) said that it had wanted a ministerial declaration (out of MC8) that talked about the work that had been done so far, the single undertaking, a transparent and inclusive bottom-up process, and the development dimension at the centre. Any new approach must be multilaterally acceptable on an MFN (most favoured nation) basis, and it would see that any elements that emerged for agreement first would be development-oriented for issues like Least Developed Countries (LDCs), special and differential treatment or implementation. No other issues could come forward until those issues were addressed.

Instead, it added, there is this document that is less than what it had hoped for, but it was pleased about measures with respect to LDCs, and strengthening of the CTD as the focal point for LDC work. Trade-related technical assistance needs to be integral in any Aid for Trade.

Barbados said that the WTO is about more than the Doha Round, and urged a strengthening of the organisation. It recognized the difficult effort that was required to produce the document and everyone had to compromise, but it wanted to make sure that development remains at the centre.

Ecuador said that there should be language in the document that says that the crisis was the result of the Washington Consensus. It said that paragraph 47 (of the Doha Declaration) must be considered in the framework of a work programme where developing countries end up with a greater share of international trade.

Bangladesh (LDCs) said that it is happy to see that members were able to advance something concrete. It was not an outcome that everyone was happy with but everyone has calibrated their expectations and there are things in there that are of interest to the LDCs.
Burkina Faso (Cotton-4 - Burkina Faso, Benin, Chad and Mali) supported the African Group and LDC statements. It said that it had originally sought a more concrete outcome for cotton. It wound up with language that it was glad to have but was the lowest common denominator on cotton.

Cuba said that Tuesday was the first time that it had a chance to look (at the document). It had voiced some concerns on Tuesday and it felt that the text is not yet mature, and that there is need for more discussions.

The EU hoped that work at MC8 will inspire more activity in the coming year.

Bolivia said that there is need for some reference to the causes of the crisis. While some had pointed to industrial goods trade as being the source of the main separation, that is only a partial explanation. There are other issues as well. It mentioned its concerns about rules of origin.

On the agenda item on the development assistance aspects of cotton, the Director-General said that: "All in all, we can see emerging results on trade capacity building. But they will only deliver their full potential if trade regulations address more vigorously distortions which are still present, whether on market access or on subsidies. It was always understood that cotton development assistance was a complement and not a substitute to reforms in cotton market access and subsidies. This remains as true today as it was yesterday."

Trade officials said that according to the Director-General's periodic report on this issue, in the period 2010-2011 that ended in July, cotton prices were at historic highs and as a result, subsidies were at historic lows. The high price for cotton was $2.44 per lb.

According to trade officials, on development assistance for active cotton-specific programmes, there were 25 beneficiaries and 64 commitments, $332 million being pledged and $94 million being dispersed. On completed programmes, there were 33 beneficiaries and 106 commitments, $255 million being pledged of which $244 million were dispersed. On infrastructure, in terms of active programmes, there were 26 beneficiaries and 56 commitments, $4.72 billion pledged with $619 million being dispersed. On completed projects, this involved 16 beneficiaries and 62 commitments, $207 million pledged and all of that being dispersed. All of these took place over the past 7 years.

According to trade officials, Brazil said that while it is true that cotton subsidies are at an historic low, members should not forget the 1990s and the early part of this century when subsidies were very high.

China said that the trade and developmental aspects are clearly linked. It said that it has 30 million small cotton farmers, and it is important for their well-being that cotton trade issues are addressed ambitiously, expeditiously and specifically in terms of the Doha mandate.
India said that it is the second largest cotton producer. Eight million farming families are involved in cotton production and most of them are small with holdings of less than one hectare. They are vulnerable to price fluctuations, and are as vulnerable as countries in Africa to these fluctuations.

The EU said that it had donated 320 million euros since the EU-Africa programme was devised.

Burkina Faso welcomed the establishment of the mechanism as well as South-South cooperation, which it said is on the increase.

Pakistan said that it is one of the world's largest cotton producers as well as one of the largest importers. The Director-General's programme had been an effective mechanism for keeping this issue on the table.

An EU proposal on food export barriers and humanitarian food aid by the World Food Programme and an Egyptian proposal on the WTO response to the impact of the food crisis on LDCs and net-food importing developing countries (on behalf of NFIDCs, African and Arab groups), trade officials said, were not approved (on account of lack of consensus).

Another proposal by the EU on improving the record of notifications was also rejected.

According to trade officials, during the discussion under the agenda item of the MC8, several delegations took the floor to say that they could not join the consensus on the possible elements for political guidance (document JOB/GC/15) as it stands.

According to trade officials, Cuba indicated that while it did not want to block consensus, it could not accept the document as it is.

Cuba referred to paragraph 4 of the section on the Doha Development Agenda (DDA) in document JOB/GC/15, which reads as follows: "In order to achieve this end and to facilitate swifter progress, Ministers recognize that Members need to more fully explore different negotiating approaches while respecting the principle of transparency."

According to trade officials, Cuba asked that the words "and inclusiveness" be added at the end of this paragraph.

Trade officials said that Venezuela, Bolivia, Peru, Honduras, Ecuador, Zimbabwe and Israel expressed similar views.

There was also a request for more time to consider this (the document) in capitals, and there was an acceptance among members of this as well.

According to trade officials, the General Council Chair noted the need for the slight change (to include the two words in the JOB document) and asked if there were any objections, and the response he received was that there were no objections.

He also said that nobody wants any more additions beyond this and the words "and inclusiveness" will be added, after which there will be no more negotiations on this text. This was accepted by members, said trade officials.

The Chair proposed the time-line of 6.00 p. m. on 1 December, in that if he has not heard any objections from any member by then, he will assume that there is consensus on the political guidance document.

Trade officials said that if no one informs the General Council Chair of their objections by the stated deadline, the document will be sent to the Chair of the ministerial conference for distribution to ministers.

The General Council Chair also said that he will submit the decisions that were taken here to ministers for their approval at MC8.

The decisions, trade officials said, pertain to the extension of the work programme on small and vulnerable economies, on TRIPS non-violation complaints, on E-Commerce, the extension of the transition period for Least Developed Countries (LDCs) under TRIPS, on LDC accession, and an LDC services waiver.

On the attendance of observers from intergovernmental organisations (IGOs), trade officials noted that the League of Arab States had applied for observer status to MC8, but this was not supported by two member states. As a result, the Arab Group had said that it could not allow the participation of other IGOs, as long as the process of selection continues to remain as it has been.

At an informal General Council meeting on Tuesday, the Chair had announced that he would begin consultations after MC8 on a proposal by the Arab Group on improving the guidelines for observer status for IGOs at the WTO. (See SUNS #7272 dated 1 December 2011.)

On TRIPS Council matters, trade officials said that the General Council agreed to extend for another two years the period for the acceptance by members of the protocol amending the TRIPS Agreement pertaining to public health. The new deadline is now 31 December 2013.

Two thirds of WTO members have to accept the amendment before it can take effect, and according to the TRIPS Council Chair, Ambassador Federico A Gonzalez of Paraguay, with the present WTO membership at 153, the target for acceptance is 102. +