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TWN Info Service on WTO and Trade Issues (Jun14/03)
9 June 2014
Third World Network  

Dear friends and colleagues,

We are pleased to share with you a two-part analysis by Chakravarthi Raghavan extracted from his forthcoming book titled "The Third World in the Third Millennium CE (Vol. 2): The WTO - Towards Multilateral Trade or Global Corporatism", published by Third World Network. All footnotes and references have been omitted. The first part was published in SUNS #7815 dated 3 June 2014 and the second part in SUNS #7816 dated 4 June.

For information on the first volume "The Third World in the Third Millennium CE (Vol.1): The Journey from Colonialism Towards Sovereign Equality and Justice" please see: http://www.twn.my/title2/books/TW%20in%20the%203rd%20millennium.htm

With best wishes,
Third World Network


Multilateralism or global corporatism? - Part I
Published in SUNS #7815 dated 3 June 2014
 
Geneva, 2 Jun (Chakravarthi Raghavan*) -- Just over 20 years ago, on 15 April 1994, the Uruguay Round of multilateral trade negotiations of the GATT 1947 was concluded in Marrakesh with the signing of a Final Act, annexed to which were the Marrakesh Agreement and Ministerial Declarations and Decisions that, on acceptance by participating governments, ushered in the World Trade Organization (WTO) on 1 January 1995.
 
The Marrakesh Agreement (also referred to as the Marrakesh Treaty) establishing the WTO, and the Declarations and Decisions adopted in Marrakesh (commonly known as the Legal Texts) remain to date the only legally binding commitment of member states enforceable at the WTO.
 
All subsequent Ministerial Declarations and Decisions, including the latest at Bali, Indonesia (ninth session of the WTO Ministerial Conference, 3-7 December 2013), do not have the same legally binding character, and remain only political declarations and commitments, albeit with Ministerial imprimatur.
 
When the WTO was ushered in on 1 January 1995, there wasn't much of a fanfare or ceremony. Peter Sutherland, the first Director-General of the WTO, with some staff around, hung up the new WTO signboard replacing the old GATT one, and that was that.
 
On the evening (Geneva time) of 15 April this year, the WTO, on its website, took note of the Marrakesh Treaty signing thus: "15 APRIL MARKS THE 20TH ANNIVERSARY OF THE WTO'S FOUNDING AGREEMENTS: Twenty years ago today, 15 April 1994, the WTO agreements were signed in Marrakesh, Morocco. They were the result of the 1986-94 Uruguay Round negotiations, and are the basis for the multilateral trading system in its present form. They also created the WTO."
 
Now, as the WTO and members, having put "the world back into the WTO", as Director-General Roberto Azevedo proclaimed at Bali, consider and decide on a "post-Bali agenda", they are at a fork in the road.
 
One path - via the Financial Services Agreement of the GATS, or the proposed plurilateral Trade in Services Agreement (TISA), for the further financialization of the global economy (see below) - leads to global corporatism: a combination of predatory, neo-mercantilist financial capitalism and a corporatist state, one with disconnects between ownership and control - with business associations nominally continuing to be privately owned but having little say in management, while control is exercised by managers (CEOs) and state officials beholden to (and captured by) each other.
 
That the US today, under President Barack Obama, is well on its way to the above style of corporatism is outlined in a post by Yves Smith on the Naked Capitalism blog.
 
(http://www.nakedcapitalism.com/2013/12/yes-obama-democrats-mussolini-style-corporatists-just-like-republicans.html)
 
The other path - based on the legal commitments of members and the long-forgotten and/or swept-under-the-carpet mandates of the Marrakesh Treaty (such as harmonization of the Most Favoured Nation Rules of Origin) - can help restore a genuine rules-based multilateral trading system (MTS) and put the WTO back into the world of the real economy, to subserve the interests of all the people around the world.
 
Before deciding and moving along either path, WTO members face two hurdles, one unforeseen at Bali.
 
The international backdrop for any intergovernmental negotiations has now been muddied by the "Ukraine crisis", a symptom of something more basic than that term suggests - whether this basic, but growing, divide in international polity is called a new Cold War 2.0, a return of the old Cold War, or a Cold War that never went away but merely went underground despite the George H. W. Bush-Mikhail Gorbachev declaration at their Malta summit of 1991.
 
Some of the explanations advanced now about NATO - such as that assurances to Gorbachev at that time (by US Secretary of State James Baker III and German Foreign Minister Hans-Dietrich Genscher) that NATO frontiers would stop at unified Germany's borders and not move eastwards, were only oral in nature and not written (and thus not binding) - have even more serious implications vis-a-vis public international law, reminding one of the ancient Indian saying, "The words of a king are like words writ on water, they disappear with the next wave."
 
A solution to the "Ukraine crisis" is beyond anything that the WTO and its members can contribute; nevertheless, the crisis, however it is resolved, will impact on the WTO.
 
Unlike during the post-1945 Cold War when the post-Stalinist-era Soviet Union had rocky relations with Maoist China, this time around, both Russia and China appear to be moving closer together in resisting the US-NATO- led Western alliance and the efforts to extend the alliance's borders and influence.
 
Both China and Russia are members of the WTO too, with implications for agreements there in view of the WTO's consensus decision-making practice.
 
The second hurdle confronting the WTO is that any trade agreement which includes the US now faces Congressional obstacles.
 
Any agreement involving concessions from the US and requiring legislative or budgetary changes will need Congressional approval: Congress, in either house (the House of Representatives and the Senate), can change or amend the legislation, requiring other trading partners to the agreement to renegotiate (or accept US Congressional changes).
 
No one will accept that risk and engage in negotiations with the US, absent the traditional prior Congressional authority for the US President to negotiate trade agreements subject only to a Congressional "yes" or "no" vote.
 
The Obama administration has no chance of securing any such "fast-track" authority; and even more, the state of President Obama's relations with Republicans in Congress appears to be such that the Republicans will not allow anything he can claim as a legacy.
 
This not only affects any WTO negotiations, but also makes hollow the US Trade Representative (USTR)'s threats about ignoring the WTO and instead concluding the ongoing talks on trans-Pacific and trans-Atlantic trade and investment agreements.
 
There is a growing volume of US domestic opposition of substance against both.
 
As Yves Smith points out on the Naked Capitalism blog (posts in January and February 2014): "In the US, Congress is in revolt [against trade agreements]. Congress had over time abdicated much of its responsibility for these treaties by giving successive Administrations [beginning with the Nixon administration in the 1970s] ‘fast track' authority, authority to negotiate tariff and non-tariff agreements, and submit them to both Houses, for a yea or nay vote. But the Trans-Pacific Partnership, and its evil sister, the Trans-Atlantic Trade and Investment Partnership, have been shrouded in so much secrecy as to raise Congress' hackles. House Speaker Boehner has said he doesn't have the votes to pass fast track authority, and Senate Majority Leader Harry Reid has stated he won't table the bill."
 
Thus, the only deal the US can strike will be one that would need no US concession and legislative change.
 
It is also important to bear in mind, in particular over the current efforts of the USTR to accelerate liberalization of developing-country financial sectors and open them up to US Wall Street firms (through the GATS "trade in finance" agenda of the Doha Round or via the more recent proposed plurilateral TISA), that there always has been a measure of disconnect between financial regulators and trade negotiators on international trade in banking services.
 
It is now apparent that after the 2008 financial crisis this disconnect or gap seems to be widening.
 
In a major recent speech, Daniel Tarullo, the member of the US Federal Reserve Board principally responsible for bank regulation, has come out expressing his scepticism about the desirability of a single global bank regulator, venturing the view that such regulatory activities would need to vary across countries and jurisdictions, depending on the nature of a country and its overall economy and financial sector.
 
He notes that "host countries" may need the ability to exercise more regulatory controls and supervision in respect of firms (local or foreign) that may have a bigger impact on the host country, even if that particular institution is not too big for the "home country" regulator to worry about.
 
Tarullo has also stated that "Proposals to include prudential requirements or, more precisely, to include limitations on prudential requirements in trade agreements would lead us farther away from the ... goal of emphasizing shared financial stability interests, in favour of an approach to prudential matters informed principally by considerations of commercial advantage." 


[http://www.federalreserve.gov/newsevents/speech/tarullo20140327a.htm]
 
And the EU (the other demandeur at the WTO on trade in financial services) is also now beginning an examination of Basel III (the guidelines for minimum standards evolved by the Basel Committee on Banking Supervision) concerning the compatibility of the EU's own rules for systemic risks with Basel III guidelines.
 
Both the US and the EU, which brought their already liberalized financial sectors into the WTO/GATS framework and its Financial Services Agreement (FSA), adopting with some exceptions the "additional modality" of the Understanding on Commitments in Financial Services by scheduling such concessions in their GATS schedules, have nevertheless been changing their regulatory approaches and instituting new regulations and supervisory arrangements, without challenges so far - both viewing them as domestic regulatory measures for "prudential" or "macro-prudential" reasons, permissible in terms of paragraph 2 of the GATS Annex on Financial Services.
 
The above hurdles aside, as noted earlier, basic to the consideration of any path ahead for WTO members is the Marrakesh Treaty and its annexed agreements, as well as the third preambular paragraph of the Vienna Convention on the Law of Treaties (VCLT), the convention codifying public international law.
 
The VCLT which codifies "public international law", the yardstick stipulated by the Marrakesh Agreement to be used by the Dispute Settlement Understanding (dispute panels and Appellate Body) in clarifying the rights and obligations of WTO members, proclaims in its third preambular paragraph in some majestic tones: "Noting that its principles of free consent and good faith and the pacta sunt servanda rule are universally recognized."
 
By using the conjunctive "and" to connect the three principles, the VCLT, drawn up after years of discussion by the International Law Commission and adopted by the UN General Assembly, makes clear that all three principles stipulated in that preamble are of equal weight.
 
Non-observance of any one of them in effect makes any international agreement void (or voidable). If one party to an agreement fails to carry out or implement promises and commitments made by it (pacta sunt servanda), the other party or parties to the agreement can resile from their own promises and obligations.
 
There is little doubt on this in terms of international law.
 
At Marrakesh, developing countries undertook upfront various obligations and agreed to new disciplines on trade in goods and to new obligations in new areas which were only tenuously connected to "trade" by the use of the term "trade-related" or "trade", such as "Trade-Related Aspects of Intellectual Property Rights" (TRIPS) or the "General Agreement on Trade in Services" (GATS), where services produced and delivered for consumption within a country were still classified as "international trade" and thus subject to international disciplines.
 
The developing countries undertook these advance commitments, in return for which the developed countries agreed to carry out over time several obligations, including a firm commitment to phased programmes for reform of their agriculture sectors (which had until then long been kept out of the purview of the trading rules) entailing elimination of various subsidies and supports, and committed themselves to future work at the WTO in pursuance of such obligations.
 
Everyone at Marrakesh, though widely differing in their assessments of the benefits of the WTO agreements, was agreed that for the first time, the trading system would be rules-based and member-driven.
 
In retrospect though, it is clear that even at Marrakesh, the European Union (at that time the European Communities), and its trade commissioner, Sir Leon Brittan, had mental reservations, and laid the groundwork for delaying, if not repudiating, the agriculture commitments by mooting new agendas and new rules in new areas. [ http://www.wto.org/gatt_docs/English/SULPDF/92150213.pdf ]
 
Brittan's successor at the European Commission, Pascal Lamy, with some help from the then WTO Director- General Mike Moore and the then USTR Robert Zoellick, took advantage of the 9/11 terrorist attacks on New York and Washington to get the Doha Work Programme (DWP) or what has come to be known since then as the Doha Development Round's Single Undertaking, launched at Doha, Qatar, in 2001.
 
Subsequently, Lamy went before the EU Parliament in formal session to explain the Doha outcome; at an informal session thereafter, he told the EU Parliamentarians that he had bought them, through the Doha Round, at least 10 years to undertake changes to the EU's Common Agricultural Policy, since in his view, the Doha single undertaking would take at least 10 years to complete.
 
EU Parliament officials had forgotten to clear civil society organization (CSO) members present from the informal meeting, and a report on Lamy's remarks became available un-attributively from the CSOs.
 
Subsequently, when he became WTO Director-General, Lamy gradually changed the focus from the Doha Development Agenda (DDA) to a market access agenda, but found himself unable still to conclude the Round.
 
The EU, like the US, has effectively used the interregnum to do some "box shifting" of agricultural support, but both in fact effectively raising their total support to their agriculture sectors.
 
Thus, according to OECD data, the EU's total support (in USD millions) has increased from $96,815.24 in 1986 (when UR negotiations were launched), to $117,979.31 in 1994 (when the WTO treaty was concluded), to $119,990.43 in 2011.
 
The US figures (in millions) for the same periods were: $61,527.72 in 1986, $73,628.17 in 1994 and $105,498.82 in 2011.
 
[These figures, based on country reports to the OECD, are less than actual total support, as Jacques Berthelot, a French civil society activist and agricultural expert, has pointed out in several posts before and after Bali at the following website: www. solidarite. asso. fr - SUNS]
 
Now, under the new leadership at the WTO, members are effectively being asked to give up on the single undertaking and to just cherry-pick and deliver on those parts of the agenda that the US and the EU want.
 
Cherry-picking some issues on the agenda for a balanced package for an "early harvest", in order to achieve some progress on the long-deadlocked DWP and keep that momentum going to achieve further progress on other issues, is perhaps understandable, and so would be cherry-picking on a balanced package of issues to complete the DWP.
 
This is however subject to the caveat that the process of cherry-picking is not driven only by the agenda of the US and the EU, as has happened so far in the run-up to and at Bali, or as is being attempted now in terms of the so-called post-Bali workplan to conclude the DWP.
 
If this requires cherry-picking, it must be a process involving all groups of countries to ensure a balanced package benefiting the entire membership.
 
On both these counts, there has been a failure - at the level of the WTO leadership, as also that of the developing countries themselves.
 
It cannot be overemphasized that at Marrakesh the developing countries had already paid a heavy advance price in the form of undertaking new disciplines and commitments on trade in goods and on new subjects, GATS and TRIPS, in return for the commitment of developed countries to bring their agriculture sector under WTO/GATT rules and disciplines applicable to other sectors of trade in goods.
 
This commitment of developed countries involved commitments under the Marrakesh Treaty to an initial modest set of reforms (in domestic support, market access and export subsidies) to be implemented over a six-year term, and to continuance of this reform process over the longer term.
 
To ask the developing countries [Director-General Roberto Azevedo's remarks at the WTO General Council, 12 May 2014, http://www.wto.org/english/news_e/news14_e/gc_rpt_12may14_e.htm] to pay anew now - by making more concessions on services trade, on non-agricultural market access (NAMA) and on other demands of the US, the EU and other developed countries - in order for these developed countries to deliver on their Marrakesh commitment to continue the process of reform of the agriculture sector is unfair and unjust.
 
There is no reason whatsoever for developing countries to pay a price in the Doha Round, for example, to get an agreement to prevent subsidization/dumping in agricultural trade similar to the OECD Understanding on Export Credits.
 


Multilateralism or global corporatism? - Part II
Published in SUNS #7816 dated 4 June 2014
 
Geneva, 3 Jun (Chakravarthi Raghavan) -- The WTO members, in preparing a post-Bali work programme, face a choice: prepare a work programme to ensure that the US, the EU and other developed countries fulfill all their commitments under the Marrakesh Treaty and complete the Doha Development Round (DDR) Single Undertaking or allow the US and the EU to cherry-pick only those parts of the DDR for reaching accords to benefit their corporations and abandon all others.
 
The leadership of the WTO, as of its predecessor the GATT, and the secretariat have always more or less identified their moorings with the interests of the two majors, though presenting outwardly a non-partisan image.
 
For a brief while at inception, the WTO secretariat (under Director-General Peter Sutherland) had functioned as the secretariat of a servicing organization to serve the interests of all members.
 
Soon after the WTO came into force, the secretariat, at the request of several members, produced a comprehensive report setting out in detail all the mandated (legally binding), and some time-bound, further work to be carried out.
 
This 11-page report is an official document (WTO document WT/L/88), downloadable from the WTO website (www. wto. org), and even those currently staffing and leading the secretariat, might benefit from reading or re-reading it. Even a cursory glance through this document shows that most of the Marrakesh commitments of substance remain to be carried out.
 
Four years down the line after Marrakesh, the idea that the rules-based WTO multilateral trading system, as set out in the preamble to the Treaty, would benefit all and there would be positive efforts favouring developing countries, was still prevalent among the members (though by then the secretariat had begun moving towards an "advocacy role").
 
These views were voiced at the 1998 second WTO Ministerial Conference in Geneva and the celebratory 50th anniversary events (of the multilateral trading system), with three different personalities from different points on the ideological spectrum - US President Bill Clinton, Cuban President Fidel Castro and South Africa's Nelson Mandela - all agreeing that the Marrakesh Agreement was a good thing and provided a framework that would benefit all. True, each of them, with their different ideological moorings, projected a different vision for the future.
 
Interestingly, though meeting within the UN's Geneva complex (18-20 May 1998) - behind huge barricades around the perimeters of the complex manned by the Swiss military to keep out raucous anti-WTO demonstrations - to commemorate the 50th anniversary of the UN-convened Havana Conference (which concluded in February 1948 with a treaty that never came into force), the WTO and many of its members tried to ignore its UN origins or its presence (for the event) inside the UN's own Geneva complex.
 
It was left to an "observer", a distinguished Brazilian speaking for the UN, the Secretary-General of the UN Conference on Trade and Development (UNCTAD), Mr. Rubens Ricupero, to remind the WTO delegates, including heads of government/state, of the origins of the postwar multilateral trading system and the source of their legitimacy. Warning against attempts to extend the frontiers of the trading system into new areas, Ricupero said "the use of trade rules as a mechanism for imposing disciplines in non-trade areas would create heavy strains on the system".
 
And in a reference to the demonstrations outside the celebratory event, Ricupero added: "Outside there is anguish and fear, insecurity about jobs and what Thoreau described as a ‘life of quiet desperation'. That is also part of the reality as much as the impressive achievements of global liberalization. It is the sacred duty of the United Nations system, the WTO and the Bretton Woods institutions to create reasons to believe in the future and to give people back sound reasons to hope." (See SUNS #4217, May 1988, ‘Birthday party that hosts didn't plan'.)
 
In so far as the WTO leadership and the secretariat are concerned, after the initial stance of a secretariat servicing the membership, by the time of the celebratory event, the secretariat was openly taking an advocacy role, and rewriting the history of the trading system itself. Since then, there has been more and more of an advocacy role and partisanship.
 
The effort to pursue the path promoted by the US, and pick and choose items from the Doha single undertaking, and push and pressure others to deliver what the US wants, became more visible both in the run-up to and at Bali itself. At the end of the Bali meeting, WTO Director-General Roberto Azevedo told the conference: "For the first time in our history, the WTO has truly delivered. I challenged you all, here in Bali, to show the political will we needed to take us across the finish line. You did that. And I thank you for it."
 
And to those not at Bali, the WTO website announced, "NINTH WTO MINISTERIAL CONFERENCE: Days 3, 4 and 5: Round-the-clock consultations produce ‘Bali Package'."
 
Those who were at Bali (media persons, civil society groups etc), and working round-the-clock too, hanging outside meeting rooms and corridors and following the comings and goings at the conference centre, have reported on how some individual ministers were summoned at odd times (e. g., 3 am local time) by the Director-General for "consultations" - involving the minister summoned, the Indonesian Chair of the Conference and the USTR - aimed at wearing down the individual delegation and trying to pressure it to yield to the US demands.
 
Having announced at the WTO General Council meeting on 26 November 2013 that there would be no more negotiations at Geneva and that 100 ministers gathering for three days at Bali could not be expected to negotiate and resolve differences, the WTO and TNC Chair Azevedo reverted to discredited old GATT practices, holding negotiations (misnomered "consultations") with selected delegations and the US, both in Geneva and at Bali, and produced a "Bali package" (‘What happened at the Bali WTO meet and why', D. Ravi Kanth, Economic & Political Weekly, Vol. 49, No. 2, January 11, 2014, pp. 15-19).
 
The only substantive agreement in that package was on what the US had demanded, trade facilitation (TF), to benefit such US enterprises as FedEx and UPS. Further procedures have been mandated for legal scrutiny at Geneva of the text of the TF agreement and the drawing up of a protocol for adoption to make the agreement part of the WTO Annex 1A agreements. Such a dubious procedure is being adopted to amend/change (bypassing specified amendment procedures set out in Article X of the Marrakesh Treaty) the rights and obligations of members, among others, under provisions of the GATT 1994 and the Agreement on Pre-Shipment Inspection.
 
The other parts of the package at Bali, very minor ones picked from the Doha agenda, were put on a "best endeavour" basis with further work to be done in relevant committees and negotiating bodies (with no time limit set for their conclusion).
 
Incidentally, the Bali meeting took place even as further disclosures about the "spying" and "surveillance" activities of the US National Security Agency (NSA) and its "partners" in Australia, Canada, Britain and New Zealand were tumbling out of newspaper headlines, stories based on the leaked Edward Snowden files, including on how the US, the UK and Australia (along with Canada and New Zealand in the Five Eyes alliance) have been spying and exchanging information on leaders of other governments at the highest levels, making special efforts at the time of summit-level meetings and trade or other negotiations - in complete disregard of diplomatic conventions and treaties on persons and premises of envoys, and of heads of state or government. (SUNS #7624, 11 July 2013, ‘Snowden, the NSA and the ever-changing US narrative'; and SUNS #7669, 7 October 2013, ‘Elephants on rampage on the way to Bali').
 
From published information, it is clear that even at Bali, the Australians were listening in on the conversations of trade ministers with their capitals, the Indonesian president and his wife, etc.
 
Judging by all these, the Bali outcome is violative of all three of the VCLT preambular paragraph principles, raising questions over how far any of the other partners are to feel bound by it.
 
In the light of all the above, and in terms of selecting a path ahead at the fork, WTO members can choose to base themselves firmly on their only binding legal commitments so far, namely the Marrakesh Treaty and its mandated work programmes, some of which in relation to agriculture and services have been laid out in the Doha Work Programme.
 
Or, as sought by the US and Europe, WTO members can do some cherry-picking and take up those parts of the Doha agenda that will benefit US and EU corporations, with developing countries making more concessions without getting anything in return and forgetting the unfulfilled obligations of the developed countries in terms of the Marrakesh Treaty and the Doha Work Programme on the ground that they are out of date. And the developing countries are further advised to adopt the new paradigm, find their niches in the "global value chains" and enter a new Valhalla of world trade. [SUNS #7128, 12 April 2011, ‘WTO catching up with two-century-old manufacturing models'.]
 
Participation in global value chains - or at any rate benefiting from them - seems to depend on possession of certain physical and transactional infrastructure such as container ports. Poor countries sometimes lack even good correspondent banking arrangements. Such participation, in any event, will condemn the developing countries to conformance to the plans and business models of the transnational corporations motivated by their profit maximization and capital accumulation processes, without any self-sustaining forward and backward linkages in the host countries.
 
Though the US and the EU push their demands differently - the US more bluntly and the EU obliquely - both want developing countries to forget the 2008 agriculture modalities texts from the Doha Round negotiations and abandon demands for further agriculture reforms in the developed world, accept subsidized agriculture in developed countries as a given, and provide more market access to such agricultural exports in developing- country markets, as well as agree to the further liberalization of the financial sectors of developing countries and thus the financialization of the global economy.
 
This is the US-EU narrative and agenda that appears to have been bought into by the WTO Director-General Roberto Azevedo and the secretariat in an advocacy role.
 
In his remarks at the WTO Trade Negotiations Committee (TNC) on 7 April, Azevedo advocated moving away from the December 2008 draft modalities texts, taking up the "doables" and "achievables" of the Doha Work Programme, preparing within the next 12 months a clearly defined work programme on the remaining DDA issues, and enabling the WTO to take up new "21st-century issues".
 
However, the large majority of the developing countries appeared to reject this idea at the TNC, insisting on taking up the Doha Development Agenda negotiations based on the 2008 texts in terms of a post-Bali agenda (see SUNS #7782, 10 April 2014, ‘Diverging views on work programme to conclude Doha agenda').
 
Nevertheless, the WTO Director-General has been visiting capitals to sell his narrative. It was set out by him in some detail most recently on 30 April, at a meeting in Kampala, Uganda [currently the coordinator of the grouping of least developed countries (LDCs) at the WTO], with prominent people from the private sector and civil society organizations working on trade issues in the country. The purpose of this meeting, according to SEATINI, a prominent Uganda-based CSO dealing with trade in the Southern Africa region, was to discuss the major multilateral trade negotiation issues.
 
During the meeting, according to Mr. Africa Kiiza of SEATINI, Azevedo said that while it is the responsibility of the WTO to pass rules that are fair enough to help LDCs and developing countries connect to a higher end of the global value chain, it remains a cardinal responsibility of governments of these countries to ensure that national policies have a clearly mapped out strategy to promote local and regional value chains. This should be done by prioritizing sectoral budgetary allocation and through an enhanced role of the state in regulating markets to control illicit trade, among others.
 
Azevedo said that an agreement reached at the Bali Ministerial Conference had opened up an agenda and started things moving. Therefore, WTO members should ensure that the post-Bali workplan does not turn off, but instead keep things moving. This, he said, will necessitate a process and workplan that will enable movements of the WTO and the multilateral trading system in the right direction.
 
This right direction, in his view, is to move away from negotiations based on the 2008 text (presumably the agriculture modalities text, which the US and the EU do not want), as insisting on using the text as the basis will not only restore the impasse as witnessed 12 years back before the Bali Ministerial Conference, but will also threaten the future of the MTS and WTO. This, he claimed, is because the 2008 text contains demands from LDCs and developing countries which they well knew would never be delivered upon by developed countries.
 
Azevedo was cited by Africa Kiiza as saying that before Bali, things were bad, while post-Bali, things are worse as LDCs continue insisting on the 2008 text. LDCs, he said, should not expect a perfect deal in the WTO negotiations, because there has never been such a thing. They should rather consider the achievables, he stressed, adding, "There is nothing like S&D [Special and Differential] Treatment of LDCs issues in the 2008 text ... it is only a request by some players to the core players for things they know the core players won't do."
 
The 2008 text, the Director-General said, is not doable. There is a need to come up with a doable post-Bali workplan, which definitely necessitates moving away from the 2008 text. This, however, doesn't indicate that the 2008 text will be discarded, but rather that doable elements in the 2008 text will be cherry-picked. A post-Bali workplan based on the 2008 text, as is being demanded by developing countries and LDCs, will not only create an impasse but might bring about "removing of tables for negotiations", as this threatens the future of the WTO, Azevedo added.
 
B. K. Zutshi, former Indian ambassador to the GATT (1989-94) who negotiated for India the Marrakesh Treaty, in an emailed comment to this writer on Azevedo's remarks to CSOs in Kampala (posted on civil society listservs), expressed surprise and "a sense of outrage" at Azevedo's position on the post-Bali workplan and what he expects from the developing countries in that regard.
 
Added Zutshi, "Having worked with two previous DGs [Directors-General], Mr. Arthur Dunkel and Mr. Peter Sutherland, during the second half and the closing phase of the Uruguay Round, the most complex multilateral trade negotiations ever (which resulted in the setting up of the WTO itself with a vastly enhanced mandate), I can't recall their ever having interfered in the negotiating process in such a fashion, even when their help was specifically sought for resolving some basic differences and disagreements among the participants; I can't even imagine their doing so.
 
"This time around though it seems that with members seeking the DG's intervention to resolve differences among them, Mr. Azevedo has ceased to see his role in the process as one of a facilitator (at best); he appears to see himself as the saviour of the MTS in grave danger, leading him to take such a partisan position, a messianic stand, not even being subtle or somewhat circumspect about it.
 
"Under the Marrakesh Agreement, the DG has no substantive authority in the matter of negotiations and the administration of the existing agreements; he heads the secretariat with its functions, role and responsibility clearly spelt out, which excludes a participatory role for the DG/secretariat in the negotiating process."
 
Since the Bali meeting, the work in Geneva at the WTO has focused on further work on the trade facilitation accord reached at Bali. With the help of its Philippine Chair, and functioning with all speed in pursuing the Bali ministerial declaration and accord, the Preparatory Committee on Trade Facilitation (at the moment of writing) is now getting ready a final legal text of the TF agreement and preparing a protocol for adoption by the General Council, whose acceptance by two-thirds of the membership will incorporate the TF agreement in Annex 1A of the Marrakesh Agreement.
 
The efforts to ‘cherry pick' the TF Agreement, separating it from the Doha Round Single Undertaking, for inclusion in WTO Annex IA, by means of a protocol to enter into force when two-thirds of the membership accept it, appears however to have hit a snag, with African nations and LDCs asking for the protocol to be so worded, as to make TF entry into force only at the conclusion of the Doha Single Undertaking and incorporation of all its agreements into the WTO.
 
The issue is yet to be resolved for the protocol to be cleared by the Preparatory Committee and its adoption by the General Council. If the protocol, without such a change, is still pushed through, the only way the Africans, LDCs and others of the same thinking can achieve their objective would be to hold up the acceptance of the TF protocol until the other parts of the Single Undertaking are completed and a protocol to incorporate them is also approved, and accept the two protocols together.
 
This speed and progress on at best a political commitment on TF at the Bali Ministerial Conference is in contrast to the progress on the time-bound Marrakesh work programme for harmonization of MFN rules of origin, mandated by the Marrakesh Treaty, for work to be taken up and completed within three years of the WTO's entry into force (that is, by end-1997).
 
This is still to be completed, and is pending before the General Council. It was referred in 2007 to the General Council for decisions on "core policy issues" and "political guidance", and remains pending without any consideration and decision by the General Council or Ministerial Conference.
 
The issues referred to the General Council [according to the report of the Committee on Rules of Origin (CRO), G/L/1047, a report which was before the Bali Ministerial Conference, as part of the annual reports by the General Council] include:
 
‘i. "Implications" or what became known as the "implications issue" ..... divergences regarding the scope of application of the newly harmonized rules of origin. In fact, several trade instruments require the determination of origin, as is recalled in article 1 of the Agreement on Rules of Origin, including: most-favoured nation treatment in the determination of import duties; safeguard measures; anti-dumping measures; countervailing duties; origin marking and labelling; discriminatory quantitative restrictions or tariff quotas, government procurement; and trade statistics. Members have polarized views regarding whether the harmonized rules should also apply to such other instruments or not.
 
‘ii. "Dual rule for machinery": Members also held divergent views on the identification of rules for the machinery sector (about 600 tariff lines in HS Chapters 84-90), largely because of uncertainties regarding the utilization of harmonized rules of origin for trade policy measures......'
 
The Committee report further added:
 
‘As a result of negotiating deadlocks and the absence of political guidance from the General Council, work in the CRO lost momentum. In his bilateral consultations with Members..... two views emerged clearly:
 
‘i. Some Members believed that fully harmonized, non-preferential rules of origin remains an important objective to facilitate world trade...
 
‘ii. Other Members mentioned that concluding the negotiations is no longer a political priority ... world trade had changed dramatically since the late 1990s ... products were now "made in the world", so the concept of national origin had lost its importance.'
 
It is perhaps in pursuance of advocacy of this (last) concept that in 2011 the WTO economists "discovered" and began promoting the "global value chain" theory, an "issue" they said they had not dealt with before. (See SUNS #7128, 12 April 2011, ‘WTO catching up with two-century-old manufacturing models'.)
 
The report continued: ‘As it is, the implementation and operation of the Agreement [on Rules of Origin] is not satisfactory as the adoption of harmonized non-preferential rules of origin constitutes its central objective ... In the absence of any guidance from the General Council, it would be difficult for the Chairman of the CRO to put forward any concrete agenda of work on the HWP other than the transposition exercise for the Committee's forthcoming meeting in April 2014.'
 
Neither at the General Council in November 2013, when it forwarded this report to the Bali Ministerial Conference, nor at that conference itself was there even perfunctory consideration on the issue, beyond the Ministerial Conference taking note of the report (as of others before it).
 
Thus, the work mandated to be completed by end-1997 remains suspended. And perhaps in line with the thinking outlined in Kampala, at some future point members will be advised to cherry-pick implementation of this or other WTO agreements and mandates for further work, abandoning all those that are not "doable" and "deliverable" by the US and the EU.
 
And in terms of the pacta sunt servanda rule (apart from the issue of implementing the promises and commitments made at Marrakesh and at Doha), the US has quite an appalling record on implementing the WTO Dispute Settlement Body (DSB)'s rulings and recommendations against it. A reading of the report from the DSB to the Bali Ministerial Conference (WT/DSB/61) brings out that the US has not implemented any ruling and DSB recommendation where changes to US statutes are required.
 
When the Marrakesh Treaty was concluded in 1994 and the WTO came into being in 1995, amidst all the differing views on "winners" and "losers" of the Marrakesh agreements, the Dispute Settlement Understanding (DSU) was seen as "the flagship" of the WTO and as the most important pillar of the "rules-based" WTO system. This was a fairly consensual view at that time, inside and outside the WTO, for settling disputes among members arising from the implementation of the WTO and/or any of its annexed agreements.
 
In a departure from the past, the DSU provided that reports of the dispute settlement panels and, in cases of appeals on issues of law covered in panel reports, the panel reports as modified by that of the Appellate Body (AB), be adopted by "negative consensus", so that no one party could withhold consensus and block adoption. Also, it was made an obligation of membership to implement the panel/AB ruling (or, in rare cases, negotiate with the other party to the dispute and agree upon equivalent compensation), and the DSB was mandated to undertake a surveillance role in this regard.
 
The dispute settlement system, often referred to in the media and in some academic writings as the "top court for trade disputes", is not without problems (and in some respects its procedures are contrary to some accepted principles of natural justice and even public international law). It was envisaged at Marrakesh itself that the DSU and its procedures, in their actual working, may give rise to problems. Hence, the WTO Ministerial Conference was mandated at Marrakesh to "complete a full review" of the DSU and its procedures "within four years" of the WTO's entry into force, that is by end-1998.
 
This mandated, legally binding work programme is still to be completed. The fourth WTO Ministerial Conference (Doha, 2001) provided for these negotiations to be taken up and completed by May 2003, and the outcome implemented as soon as possible thereafter. It was stipulated that this was not a part of the Doha Round single undertaking. The negotiations though are yet to be pursued and completed.
 
If the WTO is to endure as a multilateral trade system, its role as "a court for trade disputes" will become more important. For this to become credible and gain public legitimacy, the DSU review process must be pursued in a focused way, and not confined or limited as so far to mere technical details, but extend to substantive issues (such as ensuring that the secretariat's role is limited to mere "functioning" as a servicing body, and not directly or indirectly functioning behind the backs of disputants and having a role in guiding panels to reach conclusions and drawing up reports).
 
The WTO membership will need to exercise a more inclusive control over the dispute settlement process and panels, and find a method by which weaker and smaller parties can effectively get implemented rulings in their favour against stronger parties. In some extreme cases the concept of collective sanctions needs to be explored.
 
In sum, WTO members face a choice between two options.
 
The first is to cherry-pick the "doable" and "achievable" parts of the Doha agenda, and continue efforts at total financialization of the world economy, leading inevitably to global corporatism and a WTO on an orbit of its own with no links to the real economy of the real world.
 
The other is to choose a path firmly rooted in the Marrakesh Treaty and Legal Texts, and ensuring a multilateral trading system and a WTO that serves the interests of the real economy, with rules fair to all and ensuring policy space for members, in particular the development of developing countries, ensuring policy space for countries to pursue policies and programmes suited to their own needs and particularities.
 
Such a WTO linked to and serving the real economy should serve as an institution facilitating smooth interfacing in trade between countries with different models of economic policy, rather than the neoliberal concept of all countries trying to converge on one policy model. Such a WTO should facilitate, rather than hinder, full employment and living wages, and reduce the inequalities within and across countries.
 
If the former path is chosen, the future of the WTO and its MTS will be in jeopardy.
 
The latter path, and its concepts and goals of full employment, should not remain a mere remnant of the Havana Charter, enshrined only in the preamble of the WTO treaty. It should and could become a reality.

 


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