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TWN Info Service on WTO and Trade Issues (June08/06)
16 June 2008
Third World Network

Trade: Rules Group Chair issues working document

Published in SUNS #6485 dated 30 May 2008

Geneva, 29 May (Kanaga Raja) -- The Chair of the WTO Negotiating Group on Rules issued on Wednesday a "working document" highlighting the current state of play in the rules negotiations.

The Chair, Ambassador Guillermo Valles Galmes of Uruguay, said that the document seeks to convey in detail the full spectrum and intensity of the reactions to his first draft texts and, to the extent possible, to identify the many suggested changes put forward by delegations.

The Chair also said that "all proposals and issues remain on the table, that there are very serious concerns on the part of many if not all delegations about the first drafts, and that their revision will be necessary."

In a cover note to the working document, the Chair acknowledged that "there are sharply conflicting views on most of the issues reflected in the texts," and that many delegations consider that his draft texts "do not reflect a satisfactory balance in the Rules negotiations".

The working document issued by the Chair is the latest in a series of texts relating to the Doha negotiations that have been issued at the WTO within the past two weeks. On 19 May, both the Chairs of the agriculture and non-agricultural market access (NAMA) negotiations issued their new revised draft texts, while the Chair of the services talks issued a report on 26 May.

The working document on rules takes the form of a cover note and three lengthy annexes, relating to anti-dumping, horizontal subsidies and fisheries subsidies. According to the Chair, the three annexes differ somewhat in form, due to the particularities of the different areas of the negotiations.

According to trade officials, all three annexes reproduce the Chairman's texts tabled in November 2007, accompanied by a detailed description of positions advanced by delegations, with specific references to any positions submitted in the form of texts.

(The Chairman's text that was tabled last November - TN/RL/W/213 - contained draft texts that were presented in the form of proposed revisions to the existing agreements on anti-dumping and subsidies and countervailing measures.

(On the issue of anti-dumping, a key element in the negotiations, the November text addressed the controversial practice of "zeroing". In what trade observers viewed to be a concession to the United States, the text expressly allowed the practice of zeroing in several limited circumstances.

(In a first reading of the November draft negotiating texts at an informal meeting of the Rules Group in December, an overwhelming number of countries sharply criticized the "zeroing" provisions outlined by the Chair in his texts. In a subsequent meeting in February, several members called on the Chair to revise his text as soon as possible.

(Moreover, in a number of anti-dumping disputes that were brought up against the US, where the US had used the zeroing methodology in its calculation of dumping margins, dispute panels and the Appellate Body had repeatedly ruled that the practice of zeroing in anti-dumping was contrary to the WTO agreements. The latest of these was the Appellate Body ruling in the US-Mexico stainless steel dispute, where the Appellate Body, in reversing an earlier panel ruling, confirmed the zeroing methodology to be illegal.

(The US however has been strongly disputing this, and has specifically proposed changes to the rules to permit such "zeroing". Several key Senators and Congressmen have warned the US Trade Representative that unless the WTO rules are changed to allow "zeroing", the US Congress would not be able to accept any agreement out of the Doha negotiations.)

In his cover note to the working document, the Chair noted that in November 2007, he issued a first draft of comprehensive texts in the Rules area, which he explained were technical papers that were bracketed in their entirety.

Moreover, he said that he had indicated that they were not submitted for approval, whether in whole or in part. "To the contrary, I stated that their intended role was to serve as a basis for intensive, technical and focussed discussion, and that they represented the first step in a new phase of negotiations in the Group."

"It was evident when they were circulated, and it remains evident today, that these texts were the beginning of the negotiating process, not its culmination."

Since November, the Group has held intensive discussions on the basis of the draft texts, said the Chair, adding, "we have now completed our first reading of all of the issues contained in the texts, and, at the request of various delegations, we have reverted to certain proposals advanced by delegations but not reflected in those texts."

"There are sharply conflicting views on most of the issues reflected in the texts," the Chair observed.

On any given issue, some delegations consider that the text goes too far (or in the wrong direction altogether), others that it doesn't go far enough, others that the basic thrust is correct but that technical adjustments are required. In addition, some delegations are unhappy that issues they consider important are not addressed in these texts. In the area of fisheries subsidies, "we are still wrestling with conceptual issues relating to the major building blocks of the disciplines and how they fit together."

"In short, many delegations consider, for different and sometimes contradictory reasons, that my draft texts do not reflect a satisfactory balance in the Rules negotiations," the Chair acknowledged.

Noting that given this state of affairs, some delegations have requested that he issue revised texts at the earliest possible moment, the Chair said, "Although it remains my firm intention to revise these texts, I do not yet have a sufficient basis to do so. While I appreciate the constructive dialogue that has taken place in the Group, I have received no hints on possible middle ground approaches nor suggestions for possible compromises or trade-offs."

"I have therefore chosen - as an interim step forward - to table this working document, which takes the form of three annexes relating to anti-dumping, horizontal subsidies and fisheries subsidies."

"While these three annexes differ somewhat in form, due to the particularities of the different areas of our negotiations, they all seek to convey in detail the full spectrum and intensity of the reactions to my first draft texts and, to the extent possible, to identify the many suggested changes put forward by delegations," said the Chair.

Annex A relates to anti-dumping, he said. In the first column, and in response to repeated calls from some delegations to reflect all views and proposals, the Chair said that he has consolidated all text-based proposals submitted to the Group up to the date of circulation of his texts, as well as one new proposal, on Article 15, which had not until recently been the subject of significant text-based proposals.

"This consolidation is lengthy because I did not consider that it would be appropriate for me to pick and choose among proposals in this context."

The second column shows the Chairman's text itself. The third column summarizes delegations' reactions to the Chairman's text, including a detailed description of positions advanced by delegations, with specific references to any positions submitted in the form of texts, said the cover note.

Annex B relates to horizontal subsidies. Because in this area fewer proposals were tabled and therefore fewer changes proposed in the Chairman's text, Ambassador Valles Galmes said that he has not reproduced the entire SCM Agreement here, nor has he sought to produce a consolidation.

Rather, the first column shows those portions of the Chairman's text where significant changes to the existing Agreement were proposed. The second column summarizes delegations' reactions to the Chairman's text, including a detailed description of any positions submitted in the form of texts.

"I have also referred specifically to any pre-Chairman's text proposals not reflected in the Chairman's text with respect to which delegations have sought further discussion and consideration," said the Chair.

Annex C relates to fisheries subsidies. "As there is no existing WTO text on fisheries subsidies and therefore no agreed structure on the basis of which I could construct a consolidation, I have in the first column sought to identify the core issues in the negotiations and included under each issue the relevant language proposed by delegations, listed chronologically in the order submitted."

"Because new comprehensive proposals have been made since my text was circulated, and in order to ensure that the full range of views are reflected, I have included in the first column all proposals submitted to the Group, whether made before or after my text was circulated. The second column contains my text, and the third column summarizes delegations' reactions to the Chairman's text," said the Chair.

"It should be clear to all from this working document that the first draft Chairman's texts do not prejudge the results of these negotiations. To the contrary, it is evident that all proposals and issues remain on the table, that there are very serious concerns on the part of many if not all delegations about the first drafts, and that their revision will be necessary," said Ambassador Valles Galmes.

"As we steadily move from these first draft Chairman's texts (which were intended to provoke discussion on the broad parameters of possible outcomes to the negotiations) to draft final texts (which by nature will have to describe a gradually emerging consensus) we will need to find compromises and balance." he concluded.

In the first column of Annex A relating to anti-dumping, the Chair has consolidated all text-based proposals submitted to the Group up to the date of circulation of his texts, as well as one new proposal on Article 15. The second column outlines the Chairman's text itself, while the third column summarizes delegations' comments on the Chairman's text.

With respect to the issue of "zeroing" (Articles 2.4.2, 2.4.3 of the Chairman's text), in the third column of Annex A of his working document, which highlights delegation's comments on the Chairman's text, the Chair said that "numerous delegations expressed the view that zeroing is a biased and partial method for calculating the margin of dumping which inflates anti-dumping duties, and that its use could nullify the results of trade liberalization efforts, and therefore considered that the Chairman's text on zeroing was unacceptable."

The Chair noted that twenty delegations co-sponsored a Working Paper that proposed alternative language that would prohibit a Member from disregarding the amount by which the export price exceeds the normal value for any comparisons in all proceedings, including original investigations, proceedings under Articles 9.3 and 9.5 and reviews under Articles 11.2 and 11.3, in respect of all methodologies.

"They further proposed to make clear that Article 2.4.2 applies in all proceedings, to set a minimum time period on the basis of which a margin of dumping could be calculated, and to require consistency between the methodology used in an original investigation and a subsequent proceeding pursuant to Article 9.3," said the Chair.

"Other delegations had different views about the Chairman's text. Some of these delegations believed that while the draft text went too far, zeroing might be permitted in some contexts." In particular, a number of delegations expressed the view that zeroing should be permitted in the context of the weighted average-transaction comparison methodology ("targeted dumping"), while it was also suggested that the same methodology need not necessarily be applied in original investigations as in the context of duty collection.

"One delegation considered that the Chairman's text permitted zeroing in certain contexts but prohibited it in the most common comparison methodology in investigations, and insisted that a restoration of zeroing in all contexts was necessary to return to the status quo that emerged from the Uruguay Round. This delegation could not conceive of a result that did not address zeroing."

(While the Chair did not name the delegation concerned, this is widely believed to be the position of the United States in the rules negotiations. According to trade diplomats, recently, Ambassador Valles Galmes had visited Washington, where he had met administration officials and several Congressmen.)

"Delegations on all sides of the issue emphasized how critical the issue was to their delegations," said the Chair.

With respect to the imposition of anti-dumping duties (Article 9.1 of the Chairman's text), the Chair said that participants were "sharply divided" on the desirability of a possible procedure for taking due account of the representatives of domestic interested parties when deciding whether to impose a duty and if so whether to impose that duty at the full margin of dumping or less.

On lesser duty, the Chair said that many delegations reiterated their strong desire that a mandatory lesser duty rule be included. Other delegations welcomed the non-inclusion of such a rule in the draft text, with one delegation noting that it was not practically possible to calculate an injury margin. Many delegations also objected to the removal of language regarding the desirability of applying a lesser duty, noting that no Member had requested the removal of this language. Various delegations emphasized the view that public interest and lesser duty are distinct concepts and should not be traded off against each other.

With regards to anti-circumvention measures (Article 9bis. 1 of the Chairman's text), the Chair said that the Group was "sharply divided" on whether or not specific rules on anti-circumvention should be included in the text, and on the adequacy of the proposed rules contained in the Chairman's text.

With respect to the termination of anti-dumping duty orders (Article 11.3, 11.3.5 of the Chairman's text), the Chair said that a key element in the discussion of sunset was the 10-year automatic termination suggested in the text. Some delegations welcomed the text's suggestion of automatic termination, but suggested shortening it to eight years, and including detailed criteria governing the five-year sunset review. Other delegations believed that an absolute five-year automatic termination with no sunset reviews at all was the proper approach. Other delegations rejected the principle of automatic termination altogether.

In Annex C of the working document relating to fisheries subsidies, the first column of the annex is devoted to all proposals submitted by members to the Group. The second column contains the Chairman's text, while the third column summarizes delegations' comments to the Chairman's text.

With regard to the scope of the prohibition (of fisheries subsidies) in general, in the third column of Annex C that summarizes delegations' comments, the Chair said that some delegations consider that the Chairman's text is far too ambitious, while for other delegations, the text falls considerably short of their expectations. Certain delegations view the list of proposed prohibitions as far too broad.

Other delegations continue to prefer a top-down (broad ban) approach, rather than the bottom-up approach in the draft text, but have indicated that they can accept the latter approach so long as the ultimate scope of the prohibition is sufficiently broad. In this regard, some of these delegations consider that the scope of the proposed prohibition is too narrow. They advocate extending it to cover additional subsidies, especially to activities further downstream.

Another group of delegations view the proposed list of prohibited subsidies as generally reflecting an appropriately high level of discipline. In their view, said the Chair, the text respects the mandate from Ministers by striking the right balance in proposing for prohibition the subsidies that they consider to be most closely linked to overcapacity and overfishing.

Concerning the general exceptions (Article II of Chairman's text), some delegations consider that many of the exceptions proposed are too narrowly defined and the conditions attached to them too restrictive. Other Members consider that the management conditionalities associated with the general exceptions alleviate the need for tailoring the exceptions narrowly.

Other delegations seeking broader general exceptions suggest that all of the management requirements may not be necessary in respect of each exception, as in their view, some of the subsidies covered by general exceptions have no possibility to contribute to overcapacity and overfishing. A number of other delegations, however, consider that for the disciplines to be effective, any general exceptions must be limited in number and scope, and subject to strict conditionalities, said the Chair.

On special and differential treatment (Articles III. 1, III. 2, III. 3, and III. 4 of the Chairman's text), according to the Chair, there is general agreement among delegations that new fisheries subsidies disciplines must include provisions for substantial special and differential treatment for developing Members. There are different views, however, over the nature and extent of such provisions.

Concerning least-developed country ("LDC") Members, most if not all delegations consider appropriate the proposed blanket exception for subsidies granted by LDCs. Concerning developing Members other than LDCs, delegations generally agree that the S&D provisions should not amount to a "blank check", i. e., an unlimited and unconditional right to provide fisheries subsidies.

Views differ considerably, however, as to which types of otherwise prohibited subsidies should be permitted, as well as the respective conditionalities that should be attached thereto. In this regard, said the Chair, a large number of delegations, especially developing country delegations, consider the draft provisions to be too narrow, and subject to too many conditionalities, to be usable in practical terms. Other delegations take the view that the difficulties identified in the S&D text stem from the excessive breadth of the prohibition, and that a major part of the solution would be in appropriately narrowing the prohibition.

Another group of delegations, however, considers that the draft text strikes an appropriate balance between substantial flexibility for developing Members to provide subsidies in keeping with their development needs, and necessary conditionalities to ensure that the subsidized activities are sustainable, said the Chair.

Regarding the exception for subsidies to subsistence-oriented fisheries (Article III. 2(a)), some developing country delegations consider that this category is drafted too narrowly and in overly-restrictive terms. They consider that it should be broadened beyond subsistence-oriented fisheries, to cover all artisanal fisheries and small-scale commercial fisheries. Other delegations oppose any broadening of this exception, said the Chair.

Concerning the conditioning of most S&D provisions in the Chairman's text on the management requirements in Article V, the Chair said that many developing country delegations consider that the management requirements are so strict that the S&D provisions could become difficult if not impossible to use in practice.

On fisheries management (Article V. 1 and V. 2 in the Chairman's text), there is strong support among delegations for the inclusion of sustainability conditionalities - in particular for fisheries management - for the provision of subsidies under general exceptions or S&D provisions. That said, there are widely differing views as to the strength of such management requirements, said the Chair. +

 


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