South countries soundly reject US proposal on “differentiation”

Developing countries have spoken out against proposals that would effectively erode the flexibilities they enjoy in the WTO rules.

by D. Ravi Kanth

GENEVA: A large majority of developing and least-developed countries have flatly rejected a proposal by the United States to introduce “differentiation” in availing of special and differential treatment (S&DT) at the WTO.

The developing countries and the LDCs said that the divide-and-rule principle behind the US proposal would undermine the existing WTO architecture for S&DT flexibilities, trade envoys told the South-North Development Monitor (SUNS).

South Africa and many other developing countries also challenged a Norwegian proposal on development that aims to bring about differentiation in a nuanced format.

Discussion on these two proposals dominated the proceedings of the WTO’s General Council on 7 May, with repeated interventions by several countries.

Members also addressed the impasse at the WTO’s Appellate Body (AB) due to the US repeatedly blocking the selection process for filling four current vacancies in the AB. The AB will become dysfunctional by 11 December if the vacancies are not filled.

The US, however, turned a deaf ear to the concerns of members over the AB impasse. Despite repeated concerns voiced about its lack of engagement in the ongoing consultations being held to resolve this issue, the US merely repeated its previous arguments about the AB’s failure to adhere to the WTO rules.

US and Norwegian proposals

Although the US proposal on differentiation had already received a frosty response at various WTO meetings previously, the US Ambassador to the WTO Dennis Shea resubmitted it for consideration on grounds that it had received support from several countries over the past two months. Shea quoted the statement made by Brazilian President Jair Bolsonaro during his March visit to Washington about Brasilia’s decision to forgo S&DT in current and future trade negotiations.

The US trade envoy argued that Washington’s proposal is not aimed at the LDCs but rather seeks to introduce differentiation among developing countries, insisting it is necessary for the WTO to remain a viable and credible organization.

He defended the four criteria proposed by the US to disqualify WTO members from availing of S&DT, including membership in the Organization for Economic Cooperation and Development (OECD) and in the G20.

The WTO, he added, “needs reform, not sentimentality.”

In its proposal, Norway has argued that “while the principle of S&DT is firmly embedded [in various WTO agreements] and should not be put into question, there is not one single predefined operational S&DT modality that can be applied horizontally to every subject under negotiation.”

“What is practical and possible in one area may not be practical or possible in another area,” Norway said.

“We cannot predefine the result of a negotiation; it has to be negotiated; it has to be negotiated in a specific context; and it cannot be negotiated in the abstract.”

Norway said its proposal should not be interpreted as suggesting “some kind of request/offer process or that access to agreed provisions have to go through some kind of notification and question/answer process of approval.”

Norway said that “the LDCs represent a separate category, and there is consensus that the special treatment of LDCs should be maintained.”

In effect, Norway subtly suggested that the same special treatment hitherto available to the developing countries since 1978 cannot be continued.

While referring to several agreements on S&DT, Norway did not mention the agreement in paragraph 44 of the Doha work programme, said a trade envoy who asked not to be quoted.

Rejected

A large majority of developing and least-developed countries, including India, China and South Africa, flatly rejected the resubmitted US proposal on differentiation.

South Africa, in a sharp critique, pointed to the underlying ramifications/dangers arising from the separate proposals by the US and Norway on S&DT.

It urged members “to respect multilateral mandates by ensuring that debates on development and S&DT do not undermine mandated negotiations.”

It drew attention to paragraph 44 of the Doha Ministerial Declaration that “provides a clear mandate”, and said the Special Session of the WTO Committee on Trade and Development (CTD) was the only mandated body for discussions of this kind.

“We find it highly disturbing that certain Members would object to mandated negotiations in the CTD Special Session only to raise the very same issues in the General Council, a body which has no mandate in this respect,” South Africa said emphatically.

It reminded the chair of the General Council about the key points it had consistently raised on “S&DT in conjunction with the implementation issues.” These issues “remain key to unlocking the development component of the Doha Development Round,” it maintained.

South Africa referred to the remark by former US Trade Representative Robert Zoellick in 2010 that “If 1989 saw the end of the ‘Second World’ with Communism’s demise, then 2009 saw the end of what was known as the ‘Third World’...” South Africa told the General Council that “much like Francis Fukuyama’s false herald of the ‘end of history’, Mr. Zoellick’s premature obituary to the ‘Third World’ suffers from the same defect”.

It reminded the US and other developed countries that “very early on in the GATT era, Contracting Parties took steps to accommodate specific concerns of developing countries prevailing at that time in order to better meet their development needs and objectives.”

“During this time developing countries sought to emphasize the uniqueness of their development problems and challenges and called for treatment that would be different and more favourable than was provided in the GATT 1947.”

Against this backdrop, South Africa said, “it made sense to allow developing countries not to liberalize their own trade and to be granted preferential access to developed country markets, [and] this was no different from exemptions accorded to developed countries from general trade rules, often times to the detriment of developing countries.”

South Africa said “in many areas where WTO rules apply, one can detect reverse S&DT in favour of developed countries” and “there is no rationale or justification for the egregious and deleterious consequences that such flexibilities [for developed countries] have had for developing countries in areas where they have comparative advantages.”

Broken pledges

On the current debate on S&DT for developing countries under the WTO agreements, South Africa said several questions have been raised “whether developed countries have lived up to the spirit of commitments identified in WTO Agreements.”

It reminded members that “the preamble of the Agreement Establishing the WTO calls for the need for positive efforts to ensure that developing and least developed countries secure a share in the growth in international trade commensurate with the needs of their economic development.”

South Africa pointed to the pledges that were made to reform agriculture trade more than two decades ago. “For over two decades the pledge to reform agricultural trade has fallen on deaf ears, market access for developing countries is still undermined by application of unclear and non-transparent tariff protection, tariff escalation, high domestic support and stringent sanitary and phytosanitary measures,” South Africa said.

The failure to bring about credible reforms in global farm trade enabled the developed countries to avail of “special treatment through large bound Aggregate Measures of Support (AMS), more affectionately known as ‘trade-distorting domestic supports’, whilst developing countries bound their AMS to zero,” South Africa pointed out.

Consequently, the developing countries can only provide AMS limited by their de minimis support. “This was not a voluntary choice on the side of developing countries since at that time they did not provide this kind of support and were otherwise constrained by structural adjustment conditions,” South Africa said.

“Clearly, a lack of capacity was a main driver of this kind of outcome; yet we are now asked to make the same kind of commitment in fisheries subsidies negotiations where capping proposals bear an uncanny resemblance to de minimis outcomes under domestic support,” said South Africa.

“Such an outcome will tend to lock in the level of subsidies that big subsidizers provide, even if certain cuts are undertaken, whilst most developing countries are locked into an absolute ceiling with no flexibility to sustainably increase their subsidies over time in order to address their development needs,” South Africa maintained, calling this “manifestly anti-development and unfair”.

South Africa emphasized “the importance of the principle of self-selection which in itself is an expression of the principle of sovereignty” as “more than two-thirds of the WTO Members are developing countries.” (SUNS8903)                                     

Third World Economics, Issue No. 680/681, 1-31 January 2019, pp8-9