TWN Info Service on WTO and Trade Issues (Nov18/09)
12 November 2018
Third World Network
  
EU steps up campaign for changes to dispute settlement system
Published in SUNS #8793 dated 12 November 2018

Geneva, 9 Nov (D. Ravi Kanth) - The European Union has stepped up a concerted campaign for making procedural and substantive changes in the dispute settlement system of the World Trade Organization under the dubious banner of addressing the concerns raised by the United States at the cost of making developing and poorest countries pay a heavy price for problems created by the developed countries, sources told SUNS.

But the EU remains clueless as to what improvements the US wants in the functioning of the Appellate Body (AB) or the removal of the highest adjudicating body for trade disputes, according to people familiar with the development.

In a closed-door outreach meeting with trade envoys of a regional group early this week, a senior EU trade official has outlined the grand strategy that Brussels intends to adopt in the coming months.

The EU official underscored the need for adopting a framework of "flexible multilateralism" in which the unfinished Doha issues are taken up multilaterally, while the new rule-making issues in electronic commerce and investment facilitation among others are negotiated on a plurilateral framework.

According to people familiar with the meeting, the EU proposed inserting new plurilateral agreements in Annex 4 of the Marrakesh Agreement so that they are multilaterally justiciable like the Government Procurement Agreement which is cited in the panel and AB rulings.

The EU has maintained that it will not prefer a single undertaking approach for negotiating new plurilateral rules on grounds that such an approach could be a recipe for disaster.

On the much-vexed issue concerning the crisis of the AB, following the US repeatedly blocking the filling of four vacancies in the AB, the EU told trade envoys at the meeting that it does not know what the US will do.

Nevertheless, it is important that members present concrete proposals as part of Plan A so that the US engages in a thorough negotiation, the EU argued, according to people familiar with the development.

In case Plan A does not work then members should pursue Plan B, which will only become evident in December 2019, the EU suggested.

The Plan A is aimed at resurrecting the AB which has been reduced to three members. In December 2019, the AB will become dysfunctional when it will be reduced to only one member without the expeditious filling of the vacancies.

The EU said once concrete proposals are presented to the US, then it will not be able to say that there are no proposals on the table.

Effectively, the EU is asking members at the WTO to make a payment for free in order to bring procedural and substantive changes in the Dispute Settlement Understanding to satisfy the US, said a trade envoy from a South American country, who asked not to be quoted.

After presenting concrete proposals as part of the Plan A, the EU said "we hope the US will engage," according to the South American trade envoy, who asked not to be quoted.

Despite the Plan A and best efforts by members on the front foot, the EU said "we don't know and sometimes even in the US they don't know what their real aim is," according to another envoy who asked not to be quoted.

"It is not clear whether the US wants to improve the AB or remove the AB," the EU official said.

"But the only way you can find out is to make proposals," the EU official suggested, arguing that the time has come for ensuring a proper discussion.

The EU said that, as far as things are concerned, it would make proposals that would directly address the problems raised by the US about the AB's functioning, including some substantive issues.

The EU conceded that substantive issues involving the AB's litigation are difficult to address, nor can they be tackled through procedural changes.

The EU expressed confidence that once the procedural issues have been dealt with, including the question of filling vacancies in the AB as spelled out in Article 17.2 of the Dispute Settlement Understanding, then the selection process can go forward.

By presenting proposals to address the concerns raised by the US, members are not giving "any freebies to the US that they can pocket and say what next," the EU official maintained.

"We are coming up with proposals. I believe they are good for the system because some of the issues raised by the US have substance, which can be discussed and that is what we are doing now," the EU official said, according to people familiar with the meeting.

Nevertheless, the EU admitted that nobody knows where members will be on 1st December 2019, when the AB will be reduced to one member.

The EU said it doesn't want to speculate about what will happen to the AB on 1st December 2019, as it could become a major distraction.

"To put it very bluntly, I want to discuss Plan A first and if the Plan A does not work I will consider Plan B," the EU official suggested, according to people familiar with the development.

There is no point in discussing Plan B at this juncture when Plan A is not executed, the EU has suggested.

As regards the EU's latest Penelopian ruse of "flexible multilateralism," Brussels wants to push the unfinished business of Doha issues to a multilateral framework since they were started on a multilateral basis under a single-undertaking framework.

The EU official suggested that on the new issues - digital trade and investment facilitation on which there has not been a mandate - members must opt for a plurilateral framework process.

The EU also wants an "ASCM [Agreement on Subsidies and Countervailing Measures]-plus" outcome for addressing industrial subsidies as well as mandatory technology-transfer policies on a plurilateral framework so as to target China, said a South American trade envoy who asked not to be quoted.

In these areas such as electronic commerce, investment facilitation, and industrial subsidies among others, the EU is confident that "a plurilateral process is the way forward provided that it is MFN-based."

The EU maintained that the Annex 4 of the Marrakesh Agreement offers the route for inserting new plurilateral outcomes that can be used in the dispute settlement system.

But inserting the new agreements into Annex 4 has to be approved by all WTO members, which could pose a problem, the EU has admitted.

Brussels intends to float an array of ideas/proposals soon to kick-start discussions on several fronts. Further, the EU is going to queer the pitch with proposals in fisheries subsidies so that negotiations are held on a war footing next year.

The EU has already circulated a joint proposal with the United States, Japan, and Chinese Taipei among others on strengthening notifications and transparency requirements, including naming and shaming sanctions if members fail to comply with timely notifications.

The EU said it is holding intense negotiations with China on many of the proposals.

In short, under the dubious banner of addressing the issues of interest to the US, the EU along with its Ottawa allies (Japan, Canada, Mexico, Brazil, Chile, Norway, New Zealand, Australia, Switzerland, Singapore, Korea, and Kenya) are moving heaven and earth by forcing the developing and poorest countries to undertake onerous commitments without any commensurate return.