TWN Info Service on WTO and Trade Issues (Oct16/16)
18 October 2016
Third World Network

North's efforts to "bury" Doha, push e-commerce and GVCs at MC11
Published in SUNS #8334 Monday 17 October 2016

Geneva, 14 Oct (D. Ravi Kanth) -- The developed countries, ignoring the existing mandates and the unresolved issues of the Doha Work Program, are making concerted efforts to clinch their two major goals - electronic commerce/digital trade, and disciplines for small and medium enterprises as part of the global value chains - at the World Trade Organization's eleventh ministerial meeting in Buenos Aires next year, trade envoys told SUNS.

On Thursday (13 October), Switzerland brought the subject of global value chains to the center stage of discussions at the WTO by circulating a restricted proposal for convening informal meetings for discussing the "restrictiveness and divergence on non-preferential RoO [Rules of Origin]" which "impose significant compliance costs on firms wishing to integrate global value chains, notably MSMEs [Micro, Small and Medium Enterprises] and in particular those operating in less integrated economies."

As regards the e-commerce, the so-called Friend of the General Council chair Ambassador Harald Neple of Norway who is tasked to oversee the dedicated sessions, has convened a meeting on 18 October to discuss e-commerce and development.

These two unrelated developments - concerning MSMEs and global value chains on the one hand, and e-commerce and development on the other - demonstrate how the developed countries led by the United States, the European Union, Japan, Canada, and Australia among others are ratcheting up pressure on the developing and poorest countries to sidestep/bury all other issues in the unresolved Doha work program, according to trade envoys who asked not to be quoted.

To begin with, a discussion on rules of origin to facilitate trade of small and medium enterprises in the global value chains has taken precedence over the unfinished negotiations on the harmonization of non-preferential rules of origin as well as the preferential rules of origin which are weakly addressed on a non-binding framework in the Nairobi ministerial decision of December 2015.

The harmonization of rules of origin which is one of the most fundamental issues of global trade ought to have been concluded by 1998 under the Uruguay Round agreement. That RoO pose a major barrier for exporters of textiles and apparel products and leather items in the developing and least-developed countries is well established by several studies.

Under Article 9 dealing with the work program for "harmonization of rules of origin", it was clearly set out that "the work program shall be initiated as soon after the entry into force of the WTO Agreement as possible and will be completed within three years of initiation [i. e. by 1998]."

But one major developed country - the United States - which continues to impose a range of restrictions on textiles and apparels, and leather and leather products has ensured numerous roadblocks in the work program under the Committee on Rules of Origin, and thereby, succeeded in stymieing members' efforts for the past 18 years.

Given the clout and the influence the US wields on the WTO, the Secretariat and its successive directors- general, including the current director-general Roberto Azevedo, have remained silent and not named and shamed the US as they did when any developing or least-developed country raised objections during the negotiations.

The WTO DG Roberto Azevedo, for example, brought enormous pressure on the African Union countries in April 2014, when they refused to sign the Trade Facilitation Agreement protocol on the ground that it did not address their core developmental issues.

A former Indian customs official, Dr Chittaranjan Satapathy, had starkly pointed out at a seminar in Montreux, in late 2004, after the signing of the July 2004 Framework Agreement, that disciplines for addressing customs rules and provisions under Trade Facilitation will be futile if WTO members failed to conclude the agreement on harmonization of non-preferential rules of origin.

Now, the Swiss proposal, which wants to herald disciplines for MSMEs to legitimize global value chains, says "the HWP has been under discussions for more than 20 years."

"Despite all efforts made, the HWP [Harmonization Work Program] has not produced the expected results yet," Switzerland argued, without discussing the underlying reasons why the HWP failed to produce the result and which member or members obstructed an outcome.

Further, the Swiss proposal suggested that "the lack of common multilateral rules both for non-preferential and preferential RoO led to many different and complex regimes that hinder today's trade flows along global value chains."

Despite the crying need for ensuring that RoO "are transparent and that they do not have restricting, distorting or disruptive effects on international trade," the Swiss proposal argued that RoO continued to remain restrictive and divergent.

Therefore, "the lack of common multilateral rules both for non-preferential and preferential RoO led to many different and complex regimes that hinder today's trade flows along global value chains," it argued.

Moreover, "while restrictiveness refers to the complexity of the RoO regimes and the associated compliance costs that affect trade under tariff preference schemes, divergence denotes the proliferation of RoO known as the ‘spaghetti bowl of RoO,'" the Swiss proposal maintained.

"Both restrictiveness and divergence on non-preferential RoO impose significant compliance costs on firms wishing to integrate global value chains, notably MSMEs and in particular those operating in less integrated economies," according to the Swiss proposal.

"As a consequence, global trade is distorted as firms deviate from optimal trade patterns," the Swiss proposal argued.

Against this backdrop, Berne posed a "non-exhaustive list of questions" to stimulate "fresh informal discussions about principles and guidelines to streamline non-preferential RoO, and about ways to foster convergence between regimes of RoO." The questions include:

(a) What options could be envisaged to reduce compliance costs associated with non-preferential RoO?

(b) How could global value chains and the needs of MSMEs be reflected in non-preferential RoO?

(c) Could non-preferential RoO be inspired by RoO practices in RTAs and other existing agreements?

In effect, the Swiss proposal, though, aimed towards removing the bottlenecks for MSMEs in global value chains, has unknowingly nailed the lie that the Trade Facilitation Agreement actually facilitates trade and contributes to US$1 trillion as repeatedly insisted by the WTO DG.

On 7 October, for example, Azevedo told an audience at a luncheon meeting that "the Trade Facilitation Agreement" will "cut trade costs and red tape, which could boost global exports by up to 1 trillion dollars per annum."

Like the Goebbelsian lie - repeat a lie a thousand times and it becomes the truth - Azevedo continued to repeat the US$1 trillion figure as gains from the TFA ad nauseam without providing concrete evidence.

The Economist magazine has given three different figures ranging from US$64 billion to US$300 billion in a matter of three weeks. It is not clear why Azevedo quotes such a figure when several economists said it actually imposes a heavy burden on developing countries without commensurate benefits.

Nevertheless, the Swiss proposal has demonstrated how the developed countries are ready to raise the stakes when it comes to addressing their core concerns while remaining silent on the "developmental" priorities of developing countries.

On a separate front, the so-called Friend of the General Council chair who is overseeing the dedicated sessions on e-commerce/digital trade, Ambassador Alfredo Suescum of Panama, has scheduled a meeting on 18 October to discuss e-commerce and development which doesn't fall under the mandate given by trade ministers at the WTO's tenth ministerial conference in Nairobi, in December 2015.

The Nairobi ministerial decision merely directed members to "continue the work under the Work Programme on Electronic Commerce since our last session, based on the existing mandate and guidelines and on the basis of proposals submitted by Members in the relevant WTO bodies as set out in paragraphs 2 to 5 of the Work Programme [under the General Council decision of 30 September 1998, WT/L/274]."

The bodies referred in paragraphs 2 to 5 of the Work Program include:

2.1 The Council for Trade in Services shall examine and report on the treatment of electronic commerce in the GATS legal framework. The issues to be examined shall include:

-- scope (including modes of supply) (Article I);

-- MFN (Article II);

-- transparency (Article III);

-- increasing participation of developing countries (Article IV);

-- domestic regulation, standards, and recognition (Articles VI and VII);

-- competition (Articles VIII and IX);

-- protection of privacy and public morals and the prevention of fraud (Article XIV);

-- market-access commitments on electronic supply of services (including commitments on basic and value added telecommunications services and on distribution services) (Article XVI);

-- national treatment (Article XVII);

-- access to and use of public telecommunications transport networks and services (Annex on Telecommunications);

-- customs duties;

-- classification issues.

Council for Trade in Goods

3.1 The Council for Trade in Goods shall examine and report on aspects of electronic commerce relevant to the provisions of GATT 1994, the multilateral trade agreements covered under Annex 1A of the WTO Agreement, and the approved work programme. The issues to be examined shall include:

-- market access for and access to products related to electronic commerce;

-- valuation issues arising from the application of the Agreement on Implementation of Article VII of the GATT 1994;

-- issues arising from the application of the Agreement on Import Licensing Procedures;

-- customs duties and other duties and charges as defined under Article II of GATT 1994;

-- standards in relation to electronic commerce;

-- rules of origin issues;

-- classification issues.

Council for TRIPS

4.1 The Council for TRIPS shall examine and report on the intellectual property issues arising in connection with electronic commerce. The issues to be examined shall include:

-- protection and enforcement of copyright and related rights;

-- protection and enforcement of trademarks;

-- new technologies and access to technology.

Committee on Trade and Development

5.1 The Committee on Trade and Development shall examine and report on the development implications of electronic commerce, taking into account the economic, financial and development needs of developing countries. The issues to be examined shall include:

-- effects of electronic commerce on the trade and economic prospects of developing countries, notably of their small- and medium-sized enterprises (SMEs), and means of maximizing possible benefits accruing to them;

-- challenges to and ways of enhancing the participation of developing countries in electronic commerce, in particular as exporters of electronically delivered products: role of improved access to infrastructure and transfer of technology, and of movement of natural persons;

-- use of information technology in the integration of developing countries in the multilateral trading system;

-- implications for developing countries of the possible impact of electronic commerce on the traditional means of distribution of physical goods;

-- financial implications of electronic commerce for developing countries.

Although the 1998 GC decision enables the GC to discuss "cross-cutting issues," the Nairobi mandate clearly emphasized "GC to hold periodic reviews in its sessions of July and December 2016 and July 2017 based on the reports that may be submitted by the WTO bodies entrusted with the implementation of the Work Programme and report to the next session of the Ministerial Conference."

In short, the Friend of GC chair must secure a mandate from the GC/ministerial meeting to conduct discussions on thematic issues which will go into his report.

Ambassador Suescum is clearly overstepping his mandate by convening the meeting on 18 October, according to trade negotiators.

The moot issue is whether the developing countries and LDCs object to this blatant move by Ambassador Suescum to undermine the Nairobi ministerial decision, said a trade negotiator who is familiar with the development. +