TWN Info Service on WTO and Trade Issues (Jul20/02)
2 July 2020
Third World Network

US refuses to negotiate improvements in provisions on S&DT
Published in SUNS #9151 dated 2 July 2020

Geneva, 1 Jul (D. Ravi Kanth) – The United States has refused to negotiate improvements in ten agreement- specific provisions on special and differential treatment (S&DT) being sought by the Group of 90 countries at the World Trade Organization.

The largest developing and least-developed country coalition at the WTO said that the changes in the ten ASPs (agreement-specific proposals) are sine qua non for pursuing their legitimate developmental priorities to overcome the fiscal and economic crisis caused by the Covid-19 pandemic on developing countries.

Ironically, the US, which wants to pursue domestic industrialization in violation of its TRIMs (trade-related investment measures) commitments in the face of the Covid-19 pandemic, “particularly for re-shoring on the basis of so-called strategic vulnerabilities and the risks presented by unmitigated globalization,” remains opposed to our proposals, said several trade envoys from developing countries, who asked not to be quoted.

In a 15-page restricted document (Job/Dev/61), seen by the SUNS, the G90 coalition provided answers to questions raised by the US and other major developed countries which have seemingly adopted obstructive and stonewalling tactics.

The G90 coalition had pressed for making the ten ASPs more “precise, effective and operational” so as to enable them to pursue their developmental agenda.

South Africa, on behalf of the G90 coalition, explained the importance and the underlying rationale of the ten ASPs that include improvements in the TRIMS (trade-related investment measures) Agreement for pursuing domestic industrialization, safeguard measures, balance of payment provisions, sanitary and phytosanitary (SPS) measures, Agreement on Subsidies and Countervailing Measures (SCM), and Agreement on Technical Barriers to Trade (TBT) among others.

“To summarize our responses, we would like to emphasise that developing countries and LDCs have been seeking effective, precise, and operational S&DT in compliance with the mandate,” South Africa argued.

“The G90 took into consideration the views of members on the G90 S&DT proposal,” reiterating that “the current proposal is just a starting point in the collective work that lies ahead of us in order to move negotiations forward.”

The G90 emphasized that its “S&DT (special and differential treatment) proposals reflect the legitimate needs of developing countries and LDCs because of their development priorities and concerns, especially in dealing with various financial crises and pandemics.”

Moreover, “the COVID-19 pandemic has had a more severe economic impact than previous crises, and eclipses the 2008 economic crisis in various respects,” with the increasing poverty levels.

Further, while the developed countries are better cushioned with resources to overcome the severe economic consequences of COVID-19 and address any social or economic impacts sooner and more effectively, the “developing countries and, especially least-developed countries, will encounter more obstacles to reactivate their economies and to address any new potential waves of the coronavirus, as many of our members were already in crisis before the pandemic,” South Africa said on behalf of the G90 coalition.

Therefore, “S&DT in the WTO must serve to provide developing countries and least-developed countries with better tools to overcome any crisis and enable them to build resilience,” South Africa pointed out, underscoring the need for “WTO Members” to be aware that “it is to everyone’s benefit to avoid, to the extent possible that the current inequality gap widens any further”.

“S&DT should not be regarded as a compromise but as a necessity to address the challenges faced by developing countries,” South Africa reiterated.

“It is on the basis of this understanding that the WTO membership resolved to strengthen S&DT provisions and make them more precise, effective and operational,” South Africa said.

It suggested that “there are 155 S&DT provisions in the WTO covered agreements,” adding that “the current proposal only tackles ten agreement-specific provisions to increase the trade opportunities of developing country Members and LDCs, achieving the flexibility of commitments, of action, use of policy instruments, access to effective transitional time-periods, and to help to achieve our developmental goals.”

South Africa said the ASPs are “in line with the mandate as entailed in paragraph 44 of the Doha Ministerial Declaration.”

The G90 proposals would ensure “resilience and policy flexibility needed by developing countries to overcome the ensuing crisis,” as “developing countries are disproportionately affected by the health and economic calamity that accompanies the pandemic,” South Africa argued.

Citing a recent UNCTAD (United Nations Conference on Trade and Development) report, South Africa said “whereas many developed countries have introduced large financial stimulus packages to support their domestic industries, most developing countries do not have access to such financial resources.”

“UNCTAD has estimated that developing countries will need at least 2.5 trillion USD over the next 2 years to meet their external financing needs, for example,” South Africa said.

The G90 coalition expressed sharp concern over “the views of some (developed countries) Members who question the very existence of S&DT,” arguing that its “responses will not only address concerns of the delegations but open up an inclusive dialogue on the substance of our proposals.”

In response to the G90’s demand for making binding changes to the 10 ASPs, the US said “we do not support the (G90’s) proposal, nor do we see any need to discuss them.”

Responding to the US, the G90 members said that they have been “consistently arguing for more policy space to enable economic development in order to build capacity and resilience through infant industry development and further flexibilities through domestic content and local value addition.”

“This request (from the G90) was roundly rejected not only by the US but by many other developed members of the WTO,” the G90 noted.

However, the US opposition to the 10 ASPs appears to be contrary to the recent pronouncements of the US Trade Representative (USTR) Ambassador Robert Lighthizer in an op-ed article he wrote in the New York Times on 11 May 2020.

Ambassador Lighthizer had argued in the op-ed “for re-shoring on the basis of so-called strategic vulnerabilities and the risks presented by unmitigated globalization.”

“This post-coronavirus pandemic industrial policy hinges on the ability of the US to manufacture at home all things that are needed covering medicines, PPEs (personal protective equipment) as well as low and high-tech goods,” Ambassador Lighthizer argued, according to the G90 response to the US rejection in discussing the ASPs.

“The USTR further emphasized the need for industrial policy at the Economics Club of New York on 4 June 2020,” the G90 said, suggesting that it stands “ready to engage the US on these statements to ensure that all WTO members have the same opportunity to develop domestic production capacity.”

“The G90 agreement-specific proposals form a good basis for this discussion,” it argued, asking the US whether it thinks that “it is an opportune time to consider flexibilities to address strategic autonomy concerns raised by various members to promote industrial development and domestic manufacturing capacity?”

In response to Australia’s remarks that it is “difficult” to negotiate in the absence of new or revised proposals from the G90, the G90 coalition said that “the ability of developed countries to provide financial stimulus packages places them in a better position than most developing countries to address the impacts of the COVID-19 pandemic and demonstrates the special vulnerabilities that developing countries face.”

“However, such financial stimulus packages also distort trade and may impact recovery strategies of developing countries and other members of the WTO,” the G90 said, noting that “many of our (G90) Members have debt to GDP ratios that are extraordinarily high; during this time provisions that deal with BOP [balance of payments] could be invoked to temporarily deal with liquidity concerns of our Members and to divert such resource to mitigate the impacts of COVID-19 and to shore up their economies.”

The G90 posed several questions to Australia in order to understand its response. The questions include:

a. The WTO has the obligation to ensure that all its Members achieve their highest possible economic and development goals in line with UN SDGs, and that the WTO can and should facilitate these goals by supporting approaches that allow developing the necessary policy space to do so. Does Australia agree with this statement? If not, why not?

b. The COVID-19 pandemic makes a compelling case for policy space that allows members to address “constraints that they face”. Could measures to deal with liquidity constraints, infant industry development, TRIMs and local content requirements and TRIPS flexibilities for access to medicine and medical technology be considered “appropriate policy responses”? If so, given the vast differences in capacity between developed and developing countries, why are the G90 agreement-specific proposals considered not to be “appropriate policy responses”?

The G90 also asked Australia to clarify on “strategic vulnerability and strategic autonomy”, particularly on the pronouncements of various developed countries’ intention to what they call “strategic vulnerabilities” and the need to amend the TRIMs Agreement to facilitate re-shoring and the use of domestic content rules.

“Developing countries have been asking for such flexibilities for the longest time; the emergence of discussions on open strategic autonomy suggests a need for an objective discussion on how multilateral rules can promote production-led growth and job-creation,” the G90 told Australia.

Canada, the European Union, Japan, Switzerland, and Singapore also appeared to stick to their obstructive positions to the G90 proposals, insisting on their reluctance to negotiate on the 10 ASPs.

In short, the developed countries, who are seeking reforms at the WTO to address the 21st century issues, remain opposed to negotiating the unresolved issues concerning the effective use of provisions of special and differential treatment in various covered agreements that have also been raised in the first half of the 21st century.

Despite the huge costs imposed by the Covid-19 on developing countries and the consequent need by developing countries and LDCs to use policy space, the developed countries appear not to be concerned about the problems faced by the G90 members, thus exposing their “double-standards,” said trade envoys, who asked not to be quoted.