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Info Service on WTO and Trade Issues (Dec21/12) Geneva, 21 Dec (D. Ravi Kanth) – In what appears to be a North-South divide on the proposed WTO reforms, countries from the Global South have a “Herculean” task ahead in ensuring that the rules-based inter-governmental body remains “multilateral”, so that decisions are taken on a consensus-based framework and that special and differential treatment (S&DT) for developing countries is not impaired. More importantly, the developing countries have to step up their battle to ensure that they can pursue development- friendly reforms that provide policy space for them to pursue their industrial policies. With the WTO’s 12th ministerial conference (MC12) having been postponed due to the emergence of the new Omicron variant of the SARS-CoV-2 virus, the “tug of war” on WTO reforms will continue into the new year. Given the indications of the reforms of the WTO’s negotiating function without resolving the enforcement function that has been stymied by the United States, the developing countries must ensure that they do not pay for resurrecting the Appellate Body by agreeing to reforms proposed by the European Union, the United States, and other industrialized countries, said people familiar with the development. For the 49th time, the United States has blocked the selection process for filling seven vacancies in the Appellate Body, making dysfunctional the enforcement function of the global trade body. The unilateral position adopted by the US was made clear at the WTO’s Dispute Settlement Body (DSB) meeting on 20 December, when the US said that WTO members must undertake fundamental reform if the dispute settlement system is to remain viable and credible. At the DSB meeting, Washington also said that the dispute settlement system can and should better support the WTO’s negotiating and monitoring functions, according to people familiar with the proceedings. At a time when the US is calling for major reforms at the WTO, Washington’s continued opposition to resurrecting the Appellate Body appears akin to an eyesore, said people, who asked not to be quoted. Effectively, the WTO’s enforcement mechanism has been made dysfunctional, raising concerns whether there is any merit in negotiating new trade agreements, including on fisheries subsidies, said people, preferring anonymity. Without addressing the issue of the immediate restoration of the two-tier dispute settlement system, the Northern countries have proposed WTO reforms that include the elimination of the principle of consensus-based decision making, proposing differentiation among developing countries for availing of treaty-bound S&DT on a self- designated basis, and allowing for negating flexibility in pursuing plurilateral agreements. Despite the Marrakesh Agreement having stated explicitly in Article IX that “the WTO shall continue the practice of decision-making by consensus followed under GATT 1947”, the US and the EU along with other developed countries have stated unambiguously that they want to do away with the principle of decision-making by consensus. INDIA’S DRAFT MINISTERIAL DECISION ON WTO REFORMS It is in this context that India’s proposed draft ministerial decision on WTO reforms ahead of MC12 assumes greater importance. The Indian proposal was circulated to members as a restricted document (Job/GC/287) on 26 November, but due to the postponement of MC12, it could not come up for consideration. India proposed that, “having regard to paragraph 1 of Article IX of the Marrakesh Agreement Establishing the World Trade Organization”, there is an urgent “need to advance the fulfilment of the founding WTO objective of developing an integrated, more viable and durable multilateral trading system.” The draft ministerial decision proposed a set of principles. It called for agreeing “to a review, under the auspices of the General Council, of ways to improve the functioning of the WTO with a view towards: 1. Enhancing the capacity of the WTO to perform its function as the forum for negotiations among all its Members concerning their multilateral trade relations as collectively decided by the Ministerial Conference, in accordance with Articles II.1 and III.2 of the Marrakesh Agreement Establishing the World Trade Organization; 2. Facilitating the effective participation of developing and least-developed Members in the multilateral trading system and its decision-making process, including through precise, effective and operational special and differential treatment in current and future rules; 3. Enhancing inclusiveness and transparency across the entire functioning of the WTO, taking due regard of limited resources and institutional capacities available to developing countries and least-developed countries; 4. Addressing the challenges facing the WTO dispute settlement system; 5. Safeguarding the multilateral trading system from fragmentation and upholding the founding principles under the Marrakesh Agreement Establishing the World Trade Organization.” Effectively, India proposed a robust framework on how to undertake WTO reforms based on the above principles. For the EU, the US, and other developed countries, these principles must be done away with, on the dubious grounds that the WTO has to be made relevant for the 21st century. Further, in its proposal, India stated unambiguously that “issues to be covered by this review, shall be agreed by all WTO members, without prejudice to the right of any Member to propose issues for consideration pursuant to paragraph 1 above.” India said “the review shall be undertaken in dedicated sessions of the General Council led by the General Council Chair and would meet as necessary and agreed by Members for the purposes of undertaking this review. The rules of procedure of the General Council shall apply to this review process.” More importantly, India said that “any steps or outcomes under this review shall be consistent with the following principles: (i) not alter, or in any manner affect, Members’ rights and obligations under WTO Agreements and agreed mandates; (ii) preserve the principles and objectives of the multilateral trading system as set out in the Marrakesh Agreement Establishing the World Trade Organization and its multilateral trade agreements; (iii) the consultations must be organized credibly so as to enable the full, effective and equal participation of developing and least-developed countries in recognition of the limited resources and institutional capacities available to them; (iv) takes into account the development and policy space needs of developing and least-developed countries.” In conclusion, India said that “the General Council shall present a report to the 13th Ministerial Conference on the status of the review.” GC CHAIR’S CONSULTATIONS ON WTO REFORMS Prior to MC12, during the consultations convened by the General Council (GC) chair, Ambassador Dacio Castillo from Honduras, on the “outcome document”, differences on the proposed WTO reforms led to an impasse between the Northern countries on the one side, and countries from the Global South, on the other. The GC chair’s consultations resulted in little success, as proposals remained in square brackets. The consultations failed to make progress on the proposed WTO reforms, particularly on the negotiating function of the WTO, language on the informal plurilateral Joint Statement Initiatives (JSIs) such as digital trade, disciplines for MSMEs (micro, small, and medium enterprises), and the EU’s proposal on trade and environment, among others. Significantly, there is no mention of the Doha work program and the reforms that it had mandated for members to negotiate during the past 20 years. WTO DG’S ROLE Regardless of the legal status of the JSIs on account of their alleged violation of Article IX of the Marrakesh Agreement, the WTO DG appears to have gone overboard by openly congratulating the JSIs on domestic regulation in services and on digital trade. The DG’s open embrace of these JSIs has apparently violated paragraph four of Article VI of the Marrakesh Agreement. According to paragraph four of Article VI, the DG and the WTO Secretariat “shall refrain from any action which might adversely reflect on their position as international officials.” But the manner in which the WTO Secretariat has provided resources to the meetings on the non-mandated JSIs is a serious cause for concern, said people, who asked not to be quoted. In short, the developing countries face two formidable forces in negotiating on the proposed WTO reforms. They include the powerful Northern countries as well as the WTO DG, who is allegedly siding with the powerful countries, said people, who asked not to be quoted.
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