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Info Service on WTO and Trade Issues (Jul21/10) Geneva, 9 Jul (D. Ravi Kanth) – Ahead of the WTO’s 12th ministerial conference (MC12) to be held in Geneva in end-November, the seemingly growing “lawlessness” in several areas of work, including in the arena of domestic regulation in services, remains the biggest threat to the existence of the multilateral trading system, said people familiar with the development. The existing ministerial mandates in agriculture, services, and other areas are apparently being cast aside to promote the Joint Statement Initiatives (JSIs) on domestic regulation in services, digital trade, investment facilitation, disciplines for micro, small, and medium enterprises (MSMEs), and trade and gender. The WTO director-general Ms Ngozi Okonjo-Iweala has endorsed the JSIs despite criticism from several members. She has now tasked one of her deputy director-generals (DDGs), Ms Anabel Gonzalez from Costa Rica, to deliver on the JSI on domestic regulation in services at the upcoming MC12 to be held in Geneva in end-November. In the face of sharp concerns expressed by several WTO members on the new “deliverables” assigned to the four DDGs such as on labour rights (in the fisheries sector), “level-playing field” issues, and industrial subsidies among others, the DG issued a clarification on 1 July saying that some of the proposed “deliverables” are not intended for MC12. However, her clarification appears to have failed to convince the members, as she continues to speak in various forums about the need to accelerate work on the JSIs, said people, who asked not to be quoted. A CASE IN POINT A case in point about the apparently growing “lawlessness” at the WTO, is the JSI push, with active or passive support from the DG, on domestic regulation in services to be concluded at MC12. In a rules-based and member-driven organization, the multilateral mandate to frame rules on domestic regulation in services through the Working Party on Domestic Regulation (WPDR) is now being undone by a group of JSI members led by the European Union and Australia among others. The negotiations on domestic regulation in services were launched primarily to address the “development deficit” in the global trade in services, particularly between Mode 3 in the General Agreement on Trade in Services (GATS) concerning commercial presence and Mode 4 relating to the movement of natural persons, said people involved in the services negotiations. The negotiations were started in 2003 under the Doha Development Agenda trade negotiations. They were tasked to address the barriers between licensing requirements in Mode 3 of the GATS and the qualification requirements and procedures for the movement of short-term services providers in Mode 4. Subsequently, the former chair of the Working Party on Domestic Regulation, Mr Peter Govindasamy from Singapore, issued his first draft text in 2007 and a final draft in 2009. The final draft text was approved in 2009 through consensus. The major developing countries such as India and South Africa, and many other countries had supported the 2009 draft on grounds that it is a balanced text to rectify some of the asymmetries found between Mode 3 and Mode 4. However, in an attempt to do away with the WPDR’s significant volume of work, the key proponents of the current non-mandated JSI on domestic regulation in services such as the EU, Australia, Canada and others launched their negotiations in 2018, said people, who asked not to be quoted. “The JSI negotiations have violated the multilateral work being conducted by the WPDR as they are beneficial for several developed countries to promote licensing conditions in Mode 3 while ignoring the much needed improvements in the movement of services providers,” said a person, who is closely involved in the WPDR work since 2003. INDIA & SOUTH AFRICA ISSUE JOINT STATEMENT It is in this context that India and South Africa issued a joint statement at the WPDR meeting on 30 June. The five-page joint statement, circulated as a restricted room document (RD/Serv/WPDR/1) at the meeting, expressed sharp concern about the alleged violation of GATS commitments. India had already expressed its concerns at a WPDR meeting in 2019 about the JSI on domestic regulation in services on two grounds. India said, (a) any “additional commitments” under GATS Article XVIII by the Members of the JSI cannot purport to be a fulfilment of the GATS mandate under Article VI:4, which clearly envisaged only a multilateral process, and the WTO Members have constituted the Working Party on Domestic Regulation (WPDR) for this purpose; and (b) while each Member has the right to incorporate “additional commitments” into its schedule, the underlying principle is that none of these additional commitments should directly or indirectly amount to a dilution or amendment of any of the provisions of the GATS, and that what is incorporated pertain to “Specific Commitments”, not “General Obligations and Disciplines”. India had argued in 2019 that “Article XVIII only envisages “additional commitments” pertaining to “Specific Commitments” regarding measures affecting trade in services.” India and South Africa have highlighted in their proposal on the “Legal Status of Joint Statement Initiatives and their Negotiated Outcomes” (WT/GC/W/819) as to how the JSIs are working against the multilateral mandates including the JSI on domestic regulation in services (INF/SDR/W/1/Rev.2). The JSI proponents referred to a reference paper in their document which says that “Members have agreed to the disciplines on Services Domestic Regulation in this Reference Paper (“disciplines”) with the objective of elaborating upon the provisions of the General Agreement on Trade in Services (“Agreement”), pursuant to paragraph 4 of Article VI of the Agreement.” According to India and South Africa, the JSI document “highlighted that there is a contradiction between JSIs and the fundamental principles and objectives of the multilateral system, enshrined in the Marrakesh Agreement including Article II.1 (“The WTO shall provide the common institutional framework for the conduct of trade relations among its Members …”); Article III.2 (“The WTO shall provide the forum for negotiations among its Members concerning their multilateral trade relations”); Consensus-based decision-making, as enshrined in Arts. III.2, IX, X, and also X.9 and the procedures for amendments of rules as articulated in Art. X.” India and South Africa argued that the JSI document contains “systemic and development implications of JSIs and any attempt to introduce new rules resulting from the JSI negotiations into the WTO without fulfilling the requirements of Articles IX (decision making) and X (amendments) of the Marrakesh Agreement.” Therefore, the JSI document is “detrimental to the functioning of the rule-based multilateral trading system,” India and South Africa said. “Such a step,” according to India and South Africa, “will erode the integrity of the rule-based multilateral trading system by subverting established rules and foundational principles of the Marrakesh Agreement.” The JSI document creates “a precedent for any group of Members to bring any issue into the WTO without the required consensus”. Further, the controversial JSI on domestic regulation in services “bypasses the collective oversight of Members for bringing in any new rules or amendments to existing rules in the WTO”, while usurping “limited WTO resources available for multilateral negotiations.” More disturbingly, according to India and South Africa, the JSI proposal on domestic regulation would “result in Members disregarding existing multilateral mandates arrived at through consensus in favour of matters without multilateral mandates.” The JSI action on domestic regulation would “lead to the marginalization or exclusion of issues which are difficult but which remain critical for the multilateral trading system, such as agriculture, development, thereby undermining balance in agenda setting, negotiating processes and outcomes [and] leave Members with no option other than to choose between remaining outside the discussions or participating on matters that are inconsistent with their economic development priorities, needs, concerns and levels of economic development and fragment the multilateral trading system and undermine the multilateral character of the WTO.” In short, the JSI proponents “have subverted the WPDR’s multilateral mandate by not just undertaking exploratory discussions, but actually negotiating such disciplines through a parallel discussion format designed to bypass the multilateral process.” India and South Africa stated that “the JSI on Domestic Regulation, not having been mandated to do so either by the Ministerial Conference or the Council for Trade in Services, cannot legitimately purport to be pursuant to GATS Art. VI.4.” Further, “outcomes of these discussions cannot also directly or indirectly amount to a variation of any of the provisions of the GATS, including Article VI.5.” India and South Africa challenged the JSI proponents on domestic regulation on several other issues that they say undermine the GATS provisions, particularly Article VI of the GATS dealing with domestic regulation in services. India and South Africa argued that “both DR [domestic regulation] JSI and Investment Facilitation JSI have implications for services sectors where Members have undertaken Mode 3 commitments.” Based on an internally-consistent assessment, India and South Africa reiterated that “the JSI on domestic regulation is not mandated to and cannot assume the role of making disciplines under GATS Article VI:4, which is a multilateral function.” India and South Africa said that if JSI members want to press ahead on domestic regulation in the face of alleged glaring violations of Article VI of the GATS, they need to secure “an amendment procedure in the WTO to bring their text into the multilateral framework, as required in the Marrakesh Agreement.”
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