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Info Service on WTO and Trade Issues (Mar21/06) Geneva, 3 Mar (D. Ravi Kanth) – The leading proponents of the informal Joint Statement Initiatives (JSIs) have apparently failed to answer to the legal status of the JSIs as challenged by India and South Africa, in that the proposed JSIs on e-commerce, domestic regulation in services, MSMEs and investment facilitation would violate the WTO’s fundamental rules as laid out in the Marrakesh Agreement, said people familiar with the development. At a General Council (GC) meeting on 2 March, the main proponents of the JSIs – Australia, the US, Japan, the European Union, Canada, Norway, Switzerland, the United Kingdom, Singapore among others – ostensibly brushed aside the legal issues raised by India and South Africa in their proposal (WT/GC/W/819) circulated on 19 February, said participants, who asked not to be identified. (See SUNS #9292 dated 24 February 2021). In the face of continued support from the new Director-General Ms Ngozi Okonjo-Iweala for the JSIs regardless of their legal status, India and South Africa showed how the WTO rules as laid out in Article X of the Marrakesh Agreement are being violated. Ms Okonjo-Iweala, who was present at the GC meeting, seemed to have ignored the succinct summary of the alleged JSI violations of Article X of the Marrakesh Agreement and went ahead with her support for the JSIs by writing an article in the Financial Times that appeared on 3 March, said a person, who asked not to be quoted. In her op-ed article in the Financial Times on 3 March, Ms Okonjo-Iweala wrote that “the WTO rule-book must be updated to take account of the 21st-century realities such as the digital economy.” Without mentioning the JSIs on electronic commerce, investment facilitation, domestic regulation in services, and disciplines for MSMEs (micro, small, and medium enterprises), the DG said that “the pandemic has accelerated the use of e-commerce, enabling women and small and medium-sized enterprises to participate in international trade. But we must bridge the digital divide that makes some developing countries reluctant to join the e-commerce negotiations.” Hours before discussing the legal status of the JSIs at the GC meeting, members also discussed the e-commerce moratorium under the 1998 work program in which India and South Africa made a strong case for discussing the scope and definition of electronic transmissions. India sought a standing item on this issue in the GC agenda, but the US opposed it on extraneous grounds and also apparently warned India that for discontinuing with the moratorium on customs duties on electronic transmissions, a consensus would be required, said people familiar with the development. Ms Okonjo-Iweala also watched the discussion on the moratorium on customs duties on electronic transmissions under the 1998 work program but did not mention it in her FT article, said a person, who asked not to be quoted. The DG went on to say in her FT op-ed article that “negotiations among some WTO members on facilitating investment and removing regulatory red tape in services trade have continued fairly intensely despite the pandemic. Participants need to broaden the support for these initiatives (regardless of their legal status) and attract interest from developing countries with the aim of concluding talks by the end of the year”. In short, the DG appears to be flagrantly violating her discharge of functions as set out in paragraph 4 of Article VI of the Marrakesh Agreement by pitching for non-mandated issues that were opposed by a large majority of developing countries at the WTO’s 11th ministerial conference (MC11) in Buenos Aires, Argentina, in December 2017, the person said. INDIA’S STATEMENT Introducing the joint proposal (WT/GC/W/819) on the legal status of the JSIs at the GC meeting, India’s trade envoy Ambassador Brajendra Navnit drew attention to the manner in which the JSIs were launched without any multilateral consensus at the WTO’s 11th ministerial conference in Buenos Aires. The JSIs, launched at the WTO’s eleventh ministerial conference (MC11) in Buenos Aires, Argentina, in December 2017, were not approved by many members through consensus. Ambassador Navnit delved into the legal provisions of the Marrakesh Agreement, particularly the legal underpinnings as laid out in Article X concerning how amendments to the multilateral agreements must be carried out, and Annex 4 in the Marrakesh Agreement concerning the plurilateral agreements. He said that decisions can be reached only by consensus and suggested that “flexible multilateralism” has to adhere to Article X of the Marrakesh Agreement. In their joint paper, India and South Africa argued that “a procedure for amending rules is enshrined in Article X of the Marrakesh Agreement”, while the GATT (General Agreement on Tariffs and Trade) and GATS (General Agreement on Trade in Services) contain specific provisions for modifications of Schedules. The two countries argued that the “proponents of JSIs have confused amendment to rules and modifications to schedules, and the proposed introduction of new agreements into the WTO to bypass the requirements of Article X of the Marrakesh Agreement.” India and South Africa spoke about the systemic and developmental implications of the JSIs raised in their joint paper, saying that “any attempt to introduce new rules resulting from the JSI negotiations into the WTO without fulfilling the requirements of Articles IX and X of the Marrakesh Agreement, will be detrimental to the functioning of the rule-based multilateral trading system.” SOUTH AFRICA’S STATEMENT In her intervention, South Africa’s trade envoy Ambassador Xolelwa Mlumbi-Peter said that “our interest in submitting this paper is to remind ourselves of the legal architecture that governs the functioning of the WTO which is critical to preserve the multilateral character of the WTO.” She said any group of members may discuss any issues informally, but “when discussions turn into negotiations, and their outcomes are sought to be formalized into the WTO framework, it can only be done in accordance with the rules of procedure for amendments as well as decision-making as set out in the Marrakesh Agreement.” Ambassador Xolelwa said that “the language in the Marrakesh Agreement was carefully negotiated and is a result of the experience acquired in the GATT which was characterized especially after the Tokyo Round by agreement on a number of plurilateral codes.” According to the South African trade envoy, “there was recognition that these plurilateral codes created a fragmented system of rules.” She said “the Preamble to the Marrakesh Agreement clearly articulates Members’ vision for the WTO and it is to develop an integrated, more viable and durable multilateral trading system …” Ambassador Xolelwa said “the Marrakesh Agreement does not make provision for the so-called open plurilaterals and flexible multilateralism.” “Therefore, any suggestion that when offered on MFN basis, no consensus is required for bringing new rules into the WTO is legally inconsistent with the fundamental principles and procedures of the Marrakesh Agreement,” she argued. “Importantly, new rules cannot be brought into the WTO through amendment of Members’ Schedules.” Ambassador Xolelwa “listed out the following systemic and developmental implications inherent in plurilaterals, especially if they attempt to subvert established rules and foundational principles of the Marrakesh Agreement.” She said such agreements would result in various risks to the multilateral trading system. They include: (1) Eroding the integrity of the rule-based multilateral trading system; (2) Creating a precedent for any group of Members to bring any issue into the WTO without the required consensus; (3) Disregard of existing multilateral mandates; (4) Marginalization of issues which are difficult but yet critical for the multilateral trading system, such as agriculture, development, thereby undermining the balance in agenda setting, negotiating processes and outcomes; (5) Fragment the system and undermine the multilateral character of the WTO. She emphasized that “the legal framework of the WTO provides clear options for Members who are part of the JSI as outlined in the paper. We are therefore calling for the respect of the rules which continue to underpin the functioning of the WTO.” Several developing countries – Sri Lanka, Pakistan, Nepal, Bangladesh, Cuba, Zimbabwe, Tanzania and Indonesia, which is a member of the JSIs and also the multilateral negotiations – supported the legal issues raised by India and South Africa in their joint proposal. FAILURE TO ADDRESS LEGAL STATUS OF JSIs In response to the strong case made by India and South Africa, Australia said “we will not agree with the legal analysis”, suggesting that “we are exploring the legal architecture.” Without offering any evidence, Japan said flatly that “JSIs are constitutional.” Korea expressed concern about the adverse implications of the joint proposal by India and South Africa. In a brief statement, the US merely said that plurilateral negotiations are aimed at advancing the interests of a group of members. It argued that the plurilaterals are essential for multilateral outcomes, pointing out that they can address the challenges of today and tomorrow. The European Union said plurilateral agreements pave the way, arguing that without these negotiations, the WTO’s negotiating arm will not achieve any goals. The EU said very large members are in JSIs and they are essential to ensure that global trade rules are relevant. Otherwise, the WTO will become irrelevant without these plurilateral negotiations. Costa Rica, Colombia, Uruguay, Brazil, Chinese Taipei, South Korea, Singapore, the Philippines, Hong Kong- China, Saudi Arabia, and Nigeria among others – made strong statements that the JSIs and plurilateral negotiations have brought life and creative energies to the WTO, and made the WTO relevant by addressing the 21st century issues among others, said participants after the meeting. In differing short statements, the JSI participants said plurilaterals are vital for making the WTO cope with new challenges, and they brought much-needed change to the negotiating function. The plurilaterals must be multilateralized to strengthen the WTO, the JSI participants said, emphasizing that it is premature to discuss issues concerning the legal status, when most of the work is focused on negotiating new rules, according to the participants present at the meeting. At the meeting, the JSI proponents repeatedly emphasized that the JSIs are open, transparent and inclusive, urging other members to join the negotiations, who are also free to leave after joining the negotiations. “POLITICAL” & “THEOLOGICAL” POSITIONS BY JSI PARTICIPANTS In the face of “political” and “theological” positions, and not based on legal rules and evidence, adopted by the JSI participants, it is clear that they are rattled about the lack of legal status of the JSIs as per the Marrakesh Agreement, said a participant, who asked not to be quoted. In conclusion, at the end of the meeting, India said “we have not heard much of the legal issues.” India cautioned that in the name of improvements, changes cannot be made, pointing out that the JSI participants on domestic regulation on trade in services are the same members who failed to provide answers to issues raised in the WTO’s multilateral working group on domestic regulation. If the numbers of participants are any indicator, India asked what about the G90 proposal for making special and differential treatment effective, or the TRIPS waiver that is being co-sponsored by 57 countries, said participants, who preferred not to be identified. India said that if the negotiating function is important, “I would request the proponents of the JSIs that without a functional DSS (dispute settlement system) is there any point in moving forward on the JSIs.” In a nutshell, the JSI proponents failed to advance any credible legal arguments against the legal issues pertaining to the JSIs raised by India and South Africa, said participants, who asked not to be quoted.
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