TWN Info Service on WTO and Trade Issues (May22/21)
30 May 2022
Third World Network

MC12 draft "outcome" document mired in divergences at WTO
Published in SUNS #9584 dated 30 May 2022

Geneva, 25 May (D. Ravi Kanth) -  Ongoing discussions on the draft "outcome" document for the World Trade Organization's 12th ministerial conference (MC12) seem to be mired in divergences, particularly on the issues of "WTO reforms" and "environment" among others, with developing and least-developed countries seeking a clear roadmap based on the Marrakesh Agreement, said people familiar with the development.

In contrast, the major developed countries appear to be opposed to any mention of the Marrakesh Agreement so as to keep the mandate open to introduce their controversial proposals like on the elimination of the principle of consensus-based decision-making and the pursuit of plurilateral negotiations in several areas, among others, said people, who asked not to be quoted.

At an informal General Council (GC) meeting on 24 May, the divide between the positions of the developed countries and some of their developing country allies on the one side, and a large majority of developing countries on the other, came into the open on several paragraphs in the draft outcome document (RD/GC/17/Rev.2), particularly on paragraph eight and ten, as well as on the environment issue, said people, who preferred not to be quoted.

With less than two weeks left for MC12, which is scheduled to start on 12 June, the chair of the WTO's General Council, Ambassador Didier Chambovey of Switzerland, sounded alarm bells, saying that the "stakes are very high" on the outcome document, as "Members remain apart" particularly on the WTO reforms.

The chair provided an account of his meetings with members in different configurations on the outcome document.

He told members that "from the meetings and consultations on WTO reform, I could distill three common elements."

In a restricted document circulated to members (Job/GC/309), he specified the three elements as: (i) an acknowledgement of the need for WTO reform; (ii) that the reform process should be open, transparent and inclusive; and (iii) that it should address the interests of all Members.

However, he acknowledged that "discussions have also demonstrated that divergences remain, including on issues such as "where" and "how" this process should take place" on WTO reforms.

Without indicating these countries, Ambassador Chambovey said that "I should note that many prefer a short and general mandate on WTO reform, while some others would like to establish additional parameters for the reform discussion in the text."

It appears that not "many" but several developed countries such as the European Union and the United States and some developing countries, want a "short and general mandate" on WTO reform, said people, who asked not to be quoted.

Many developing and least-developed countries want a clear roadmap based on the Marrakesh Agreement to revitalize the multilateral trading system with development-oriented goals, said people, who asked not to be quoted.

In leaving the mandate for WTO reforms rather open and vague, as sought by the EU and the US, the developing countries fear repeating the controversial Nairobi Ministerial Declaration of the WTO's 10th ministerial conference (MC10) held in Nairobi, Kenya, in December 2015 that allegedly put an end to the Doha work program and laid the framework for plurilateral negotiations, said people, who asked not to be quoted.

To recall, paragraph 30 of the Nairobi Ministerial Declaration ambiguously laid the ground to discontinue the Doha Development Agenda (DDA) negotiations and the Doha work program while preparing the ground for pursuing "new approaches".

Paragraph 30 of the Nairobi Ministerial Declaration states: "We recognize that many Members reaffirm the Doha Development Agenda, and the Declarations and Decisions adopted at Doha and at the Ministerial Conferences held since then, and reaffirm their full commitment to conclude the DDA on that basis. Other Members do not reaffirm the Doha mandates, as they believe new approaches are necessary to achieve meaningful outcomes in multilateral negotiations. Members have different views on how to address the negotiations. We acknowledge the strong legal structure of this Organization."

Thus, a large majority of developing and least developed countries seem to have demanded that the proposed WTO reforms must spell out the goals based on the Marrakesh Agreement that could further revitalize the multilateral trading system, said a developing country trade envoy, who asked not to be quoted.

In response to the apparent clash of these two narratives, the GC chair said "based on what I heard, I sense that this is where Members remain apart and where a solution would need to be sought if we are to arrive at an agreeable mandate on WTO reform."

He said that it all hinges on the solution, suggesting that "the question is if and how these divergent views can be reconciled."

Without naming the delegations, Ambassador Chambovey said that "some delegations have also indicated that if the language on WTO reform in paragraph 8 is not agreeable, other paragraphs may be affected as well, including paragraph 9 (on DSU reform) and for some, the entire outcome document may be affected. Colleagues, it is clear that the stakes are very high."

Many developing countries have opposed changes to Articles 2.1, 3.2, and 9 of the Marrakesh Agreement that will do away with the principle of consensus-based decision-making and allegedly transform the WTO to the free pursuit of embarking on plurilateral trade negotiations.

The developing countries have set out their priorities in paragraph 8 of the draft outcome document (RD/GC/17/ Rev.2).

The bracketed paragraph 8 of the draft outcome document states: "We acknowledge the need to take advantage of available opportunities, address the challenges that the WTO is facing, and ensure the WTO's proper functioning. We commit to work towards necessary reform of the WTO. [We [establish a Working Group open to all Members] [agree to a review] under the auspices of the General Council to [review and] consider, based on contributions from Members, institutional and other improvements to the functioning of the WTO [as agreed by all WTO Members].] We agree that the discussions should be open, transparent, inclusive, and must address the interests of all Members [including the development and policy space needs of developing country Members and LDCs]. [It shall prepare recommendations on the following issues, among others: dispute settlement function, negotiating function, and monitoring and deliberating function.] We undertake to engage closely in this process, instruct officials to prepare recommendations [and update them regularly], and take appropriate decisions [at the next Ministerial Conference] [on the review as appropriate] [bearing in mind at all times the development issue].

Alternative 1: "[We agree to launch a comprehensive review of the operations of the WTO under the auspices of the General Council with the view to making the necessary reforms to improve its functions. The process should be open, transparent, inclusive, and must address the interests of all Members. We undertake to engage closely in this process and to instruct officials to prepare recommendations. We will consider the outcome of this process and take appropriate decisions on WTO reform at the next Ministerial Conference.]"

Alternative 2 (language proposed by developing countries): "[We agree to review the operations of the WTO with the view to making the necessary reforms to improve its functions, consistent with the principles and objectives of the multilateral trading system as set out in the Marrakesh Agreement Establishing the World Trade Organization and its multilateral trade agreements. The process as well as the outcomes of the review should be transparent, inclusive and give due regard to the development and policy space needs of developing and least-developed countries. The review and its outcomes shall not alter, or in any manner affect, Members' rights and obligations under the WTO Agreements and agreed mandates. We undertake to engage closely in this process and instruct officials to prepare recommendations. The review shall be undertaken in the dedicated sessions of the General Council led by the General Council Chair and the rules of procedure of the General Council Meetings shall be applicable to these sessions. The General Council shall present a report to the Ministers at the Thirteenth Ministerial Conference on the status of the review.]"

The GC chair said that there are differences even on paragraph 9 of the draft outcome document dealing with the dispute settlement system.

Paragraph 9 states: "We acknowledge the challenges and concerns with respect to the dispute settlement system including those related to the Appellate Body, recognize the importance and urgency of addressing those challenges and concerns, and commit to conduct discussions with the view to having a fully and well-functioning dispute settlement system accessible to all Members by MC13."

The chair said that "the remaining language in red or in brackets in the draft outcome document" in paragraph 10 suggests the language on the WTO's negotiating function.

It states as follows:

Developed countries' proposal on the negotiating function: "[We commit to revitalize the WTO negotiating function and to strengthen its rulemaking by facilitating trade negotiations [within the multilateral trading system]. Many Members reaffirm our commitment to exclusive multilateral negotiations. Many other Members believe that new approaches are necessary to achieve meaningful outcomes in WTO negotiations.]"

Developing countries' proposal on the negotiating function: "[We commit to preserve the WTO negotiating function and to strengthen the capacity of the WTO to perform its function as the forum for negotiations among all its Members concerning their multilateral trade relations as collectively decided by the Ministerial Conference, in accordance with Articles II.1 and III.2 of the Marrakesh Agreement Establishing the World Trade Organization and other relevant articles of the WTO Agreement, and with a view to strengthening its ability to develop an integrated, more viable multilateral trading system.]"

On paragraph 12 (which deals with WTO accessions), the chair said he is "yet to receive feedback on the bracketed language and an update today would be welcome."

On paragraph 14, which deals with the package of flexibilities for graduating LDCs, the chair said that "where delegations have expressed some reservations, I understand from the proponents that they will be reaching out to delegations. I also understand that a reference welcoming the decision recently taken in the Committee on Rules of Origin may usefully replace the bracketed text in this paragraph."

The US has opposed a blanket agreement on extending the flexibilities for graduating LDCs for a period of six or nine years, said people, who asked not to be quoted.

The GC chair said that "concerning the footnote that applies to paragraphs 15 and 16, I have checked with both delegations and the reservations have been reiterated. So, unless there have been further developments, there appears to be no agreement on these two paragraphs."

Paragraphs 15 and 16 are in relation to the issues of trade and gender and disciplines for micro, small, and medium enterprises (MSMEs).

On the controversial issue of "environment", the chair said that "I would of course make an assessment on the feasibility and scope of such an exercise based on the many interactions I have had and will have with Members."

The bracketed paragraph on environment is as follows: "[We recognize global environmental challenges such as climate change and related natural disasters, loss of biodiversity and pollution. We note the importance of the contribution of the multilateral trading system to promote the UN 2030 Agenda and its Sustainable Development Goals in its economic, social, and environmental dimensions. We reaffirm support to the UNFCCC, and the Paris Agreement and note the outcome of COP26. We believe trade and environmental policies should be mutually supportive and contribute to optimal use of the world's resources in accordance with the objectives of sustainable development. We reaffirm that measures to protect and preserve the environment should be WTO consistent [, not constitute unnecessary barriers to trade] and safeguard the multilateral trading system. We reaffirm the importance of providing appropriate support to developing country Members and LDCs in order to help their transitions, including through technological innovations, towards resource-efficient and sustainable development. We will reinvigorate our efforts geared towards enhancing the resilience of these Members and to better enable them to seize sustainable trade opportunities including through Aid for Trade [, transfer of environmentally sound technology on mutually agreed terms] and other capacity-building support that assists in the promotion of production and trade of goods and services that are respectful of the environment. We note the role of the Committee on Trade and Environment as a standing forum dedicated to dialogue among Members on the relationship between trade rules and environmental measures.]"

Ambassador Chambovey said overall, "we should not underestimate the challenges and difficulties of finalizing this outcome document."

"Therefore, at this late stage of our preparatory process, if Members are still willing to work towards a consensus outcome document, this will require flexibility and pragmatism and willingness to compromise," the chair said.

E-COMMERCE MORATORIUM

The chair also commented on his discussions with members on the "Work Programme and the Moratorium".

Without mentioning Barbados, which on behalf of the CARICOM (Caribbean Community), had submitted a compromise proposal, the chair said: "I held small group consultations to hear whether there has been any further progress or developments towards possible convergence with respect to the way forward ahead of MC12. Delegations reiterated their well-known positions as contained in the two draft decisions."

"On behalf of a group, one delegation shared new language in an effort to bridge the gaps and submit a single draft text for Ministers' consideration," he added.

He said that "reactions to the new ideas were mixed," as "several delegations were of the view that the proposed language could be a good basis for further work," while "other delegations said that the proposal does not properly address their concerns on the moratorium", raised in particular by India and South Africa.

Despite promising robust engagement with the proponents seeking changes to the current e-commerce moratorium and addressing the specific issues of the scope and definition of what would constitute electronic transmissions, there was apparently no engagement with India and South Africa over the last ten months, said people, who asked not to be quoted.

In conclusion, it appears that developing countries cannot afford to make the same mistake as they did at MC10 in Nairobi, Kenya in December 2015, this time around on the proposed WTO reforms, said people, who asked not to be quoted.