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Info Service on WTO and Trade Issues (Feb21/17) Geneva, 23 Feb (D. Ravi Kanth) – India and South Africa have challenged the legal status of the proposed informal Joint Statement Initiatives (JSIs) on electronic commerce, investment facilitation, MSMEs, and domestic regulation in services, on grounds of their inherent contradiction with the core principles of the WTO’s Marrakesh Agreement, as well as their systemic and development implications. The JSIs, in their current form, will erode the multilateral trading system once and for all, said a person familiar with the proposal. In an eight-page joint proposal (WT/GC/W/819) circulated on 19 February, India and South Africa systematically exposed the fallacies and flawed arguments advanced by the JSI participants of electronic commerce, investment facilitation, disciplines for micro, small, and medium enterprises (MSMEs), and domestic regulation in trade in services among others, the person said. Ahead of the WTO’s General Council meeting on 1 March, the proposal by the two countries will directly challenge the JSI participants to explain what their real intentions are and whether it is appropriate to advance initiatives that lack legal basis, the person said. THE NEW DIRECTOR-GENERAL AND JSIs Besides, the joint proposal is a subtle reminder to the new WTO director-general Ms Ngozi Okonjo-Iweala, who has spoken in favour of the JSIs, that the initiatives lack legal status and undermine the core architecture of the WTO as laid out in the Marrakesh Agreement, the person said. In her acceptance speech delivered at a special General Council meeting on 15 February, the new director- general had said that “plurilateral initiatives have brought new energy in the Multilateral Trading System.” “Negotiating work on other joint statement initiatives (JSIs) – domestic regulation and investment facilitation – has continued fairly intensively despite the pandemic,” Ms Ngozi said, suggesting that an agreement on domestic regulation in services has to be concluded at the WTO’s 12th ministerial conference (MC12) later this year. Against this backdrop, India and South Africa have argued in their paper that “the Joint Statement Initiatives (e.g. on e-commerce, domestic regulation, investment facilitation etc.) have to be assessed on the basis of the provisions of the Marrakesh Agreement establishing the WTO, which defines “Plurilateral Agreements” as the agreements and associated legal instruments that are included in Annex 4 to the Agreement.” The JSIs, launched at the WTO’s eleventh ministerial conference (MC11) in Buenos Aires, Argentina, in December 2017, were not approved by many members through consensus. The joint proposal by India and South Africa argues that “the Ministerial Conference, upon the request of the Members party to a trade agreement, decides exclusively by consensus to add that agreement to the said Annex 4.” “Any group of Members may discuss any issue informally,” according to India and South Africa. However, “when discussions under Joint Statement Initiatives turn into negotiations, and their outcomes are sought to be formalized into the WTO framework of rules, it can only be done in accordance with the rules of procedure for amendments as well as decision-making as set out in the Marrakesh Agreement.” India and South Africa exposed the “contradiction between JSIs and the fundamental principles at the WTO,” questioning suggestions “that, if the negotiated JSI outcomes are offered on an MFN basis, no multilateral consensus is required for bringing in such results under the umbrella of the WTO, especially if these new rules are appended to schedules.” “Such a proposition would be contrary to the following fundamental principles and objectives of the multilateral system, enshrined in the Marrakesh Agreement,” according to India and South Africa. The two countries explained that the “multilateral underpinnings of the WTO” include the following WTO provisions: * Art. II.1: “The WTO shall provide the common institutional framework for the conduct of trade relations among its Members …”; * Art. III.2: “The WTO shall provide the forum for negotiations among its Members concerning their multilateral trade relations”. * Consensus based decision-making, as enshrined in Arts. III.2, IX, X, and also X.9. * The procedures for Amendments of rules as articulated in Art. X. PROCEDURES FOR AMENDING RULES According to India and South Africa, “a procedure for amending rules is enshrined in Article X of the Marrakesh Agreement”, while the GATT (General Agreement on Tariffs and Trade) and GATS (General Agreement on Trade in Services) contain specific provisions for modifications of Schedules. The two countries argued that the “proponents of JSIs have confused amendment to rules and modifications to schedules, and the proposed introduction of new agreements into the WTO to bypass the requirements of Article X of the Marrakesh Agreement.” However, new JSI agreements are not amendments to schedules, India and South Africa argued. Also, “Art. XVI.3 of the Marrakesh Agreement provides that in the event of a conflict between a provision of the Marrakesh Agreement and a provision of any of the Multilateral Trade Agreements, the provision of the Marrakesh Agreement shall prevail to the extent of the conflict,” India and South Africa said. Further, each JSI is “likely to pose different legal challenges to existing WTO rules and mandates, given the differences in the nature and scope of issues covered under each of these initiatives,” the joint paper has suggested. SYSTEMIC AND DEVELOPMENT IMPLICATIONS India and South Africa pointed out that “any attempt to introduce new rules resulting from the JSI negotiations into the WTO without fulfilling the requirements of Articles IX and X of the Marrakesh Agreement, will be detrimental to the functioning of the rule-based multilateral trading system.” According to the joint proposal, the following systemic and development implications are likely to arise from the JSIs: A. Erode the integrity of the rule-based multilateral trading system by subverting established rules and foundational principles of the Marrakesh Agreement; B. Create a precedent for any group of Members to bring any issue into the WTO without the required consensus; C. Bypass the collective oversight of Members for bringing in any new rules or amendments to existing rules in the WTO; D. Usurp limited WTO resources available for multilateral negotiations; E. Result in Members disregarding existing multilateral mandates arrived at through consensus in favour of matters without multilateral mandates; F. Lead to the marginalization or exclusion of issues which are difficult but which remain critical for the multilateral trading system, such as agriculture, development, thereby undermining the balance in agenda setting, negotiating processes and outcomes; G. Leave Members with no option other than to choose between remaining outside the discussions or participating on matters that are inconsistent with their economic development priorities, needs, concerns and levels of economic development. H. Fragment the multilateral trading system and undermine the multilateral character of the WTO. The two countries further explained that “as per the provisions of the Marrakesh Agreement, JSI Members have the following options for their negotiated outcomes.” Within the WTO framework, the JSI proponents can seek consensus amongst the whole WTO Membership, followed by acceptance by the required proportion of Members according to Art. X of the Marrakesh Agreement, and “get new agreements included in Annex 4 following Art. X.9 of the Marrakesh Agreement.” Outside the WTO framework, according to India and South Africa, the JSI initiatives can be concluded in multiple bilateral or plurilateral Free Trade Agreements (FTAs) or Regional Trade Agreements (RTAs). Finally, the JSI proponents can amend Article X of the Marrakesh Agreement to allow for a “flexible multilateral trading system”, by seeking amendments to the provisions of Article X to provide for the so-called “Flexible Multilateral Trading System,” India and South Africa concluded.
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