TWN Info Service on WTO and Trade Issues (Oct22/03)
6 October 2022
Third World Network

Trade: US, EU & allies adopt "stealthy" approach on WTO reforms
Published in SUNS #9661 dated 6 October 2022

Geneva, 5 Oct (D. Ravi Kanth) -- A large majority of developing countries have remained vocal about reforming the World Trade Organization based on their development-oriented priorities, including strengthening the special and differential treatment (S&DT) provisions.

In contrast, the Northern bloc of developed countries seems to be adopting a rather "stealthy" approach of not disclosing their major demands in the WTO reform negotiations.

There have been fears that the Northern countries would "parachute" proposals on an infrequent basis through their small-group negotiations without bringing them to the General Council first, said a trade envoy, who asked not to be quoted.

This message has apparently come out loud and clear from a six-page report presented by the WTO's General Council (GC) chair, Ambassador Didier Chambovey of Switzerland, at an informal General Council meeting on 4 October, said people familiar with the report.

The six-page report, perused by the SUNS, has revealed little on what are the specific demands of the major developed countries led by the United States, the European Union, and other countries of the Northern bloc.

However, the report mentioned what a large majority of developing countries have echoed on their development priorities.

It has laid out the major concerns raised by members during the discussions with the chair on reforming the three pillars of the WTO.

They include the negotiating pillar, the enforcement pillar, which has been paralyzed due to the unilateral actions of the United States since 2019 in blocking appointments to the Appellate Body, and the implementation function, including compliance with commitments in the various WTO agreements.

Reading between the lines of the report, which is based on the chair's consultations with 105 countries, it is somewhat odd to see little mention of the specific fundamental demands of the major developed countries led by the United States, the European Union, and other countries of the Northern bloc.

CLASH OF NARRATIVES ON WTO REFORMS

Commenting on the specific areas, the GC chair noted that "many Members stressed that development should be at the center of WTO Reform - for peace, security and global equity."

A large majority of developing and least-developed countries have consistently called for reforms based on development-oriented priorities in their proposals since December 2019.

The developing countries said that WTO reforms must address the historic inequities as well as ensure that the fundamental principles of the Marrakesh Agreement are preserved, said a trade envoy, who asked not to be quoted.

The GC chair said "reform, in their view, should be premised on the principles of inclusivity and development."

Without mentioning their number or even naming them, he said that these countries sought that reforms "should respond to the developmental challenges that persist in developing and LDC Members, and help them integrate into the global economy. They called for the reassertion of development within the WTO by delivering on longstanding mandates including on food security, addressing asymmetries in WTO rules, and reviewing all S&DT provisions with a view to strengthening them and making them more precise, effective, and operational. They stressed the need to safeguard policy tools and the WTO's multilateral character and core principles as enshrined in the Marrakesh Agreement. These would promote economic recovery, and provide policy space to support developing and LDC Members' structural transformation and industrialization."

But the reform demands raised by the US and other major developed countries such as legalizing the plurilateral negotiations based on the so-called criteria of "critical mass", doing away with the principle of consensus-based decision-making, and differentiation among developing countries for availing of special and differential treatment (S&DT), are not mentioned in the chair's report.

The chair merely said that several countries "suggested that the debate on S&DT should not occur in a vacuum."

The US has all along called for differentiation among developing countries for availing of S&DT, while others, such as the European Union, want a case-by-case approach for providing S&DT, said a trade envoy, who asked not to be quoted.

As regards reforming the negotiating practices, the chair said that while many noted that MC12 (WTO's 12th ministerial conference) had proven that the WTO's negotiating pillar still worked, they also said that there was room for improvement.

In fact, a large majority of developing countries want the negotiating processes to remain "Member-driven, inclusive, open, and transparent."

After MC12, many members complained that they were excluded from key "green room", small-group and other closed-door meetings.

The WTO Director-General, Ms Ngozi Okonjo-Iweala, pushed back against these countries, saying that anybody could attend any meeting.

Yet, the chair's report did not offer a clear account of what the developed countries have demanded during the consultations, said several people, who asked not to be quoted.

US REMAINS SILENT

Despite repeated calls for reforming the WTO's three pillars - the enforcement, negotiating and implementation pillars - the United States on 4 October did not intervene during the discussion on the General Council chair's comprehensive report on his consultations with around 105 members.

At the informal General Council meeting, where around 30 members took the floor, the US, which has proposed several changes in the negotiating and implementation pillars, and continuing informal discussions on the dispute settlement system, apparently remained conspicuously silent on how the reform discussion must be carried forward, said trade envoys, who preferred not to be quoted.

On the state of play following the intense consultations with members, the GC chair said that it is his impression that "the Membership seemed flexible on the approach as long as the discussions remained Member-driven, inclusive, open, and transparent, respected consensus-based decision-making, and were meaningful."

Even though members' perspectives on WTO reforms differed somewhat sharply, the GC chair said that "no one disputed that discussions should address all WTO functions in line with Paragraph 3 of the MC12 Outcome Document."

He said that "a number of Members suggested starting with less contentious issues - specifically on the monitoring and deliberative functions - to provide momentum and build trust". The chair suggested that the discussions on this issue "should be organic and bottom up."

According to the chair, "several Members cautioned against a "package approach" since reforms should be undertaken whenever and wherever possible."

He said, "while agreeing that a pragmatic approach was a sensible way forward, several Members cautioned that this should not lead to a lowering of the level of ambition."

The chair noted that "the reform process needed to be forward-looking," emphasizing that "having an ambitious agenda was vital to ensuring successful, effective WTO Reform."

He drove home the message that "reform should enable the WTO to become more responsive and to address current global challenges," suggesting that "all issues would be addressed - some in the short term and others in the medium to long-term."

It is somewhat puzzling that many delegations preferred a "top down" reform process, with the General Council defining common goals and objectives, while others, whose names are not mentioned, said that "the priorities should be identified through a "necessity" test."

Without naming these members, the chair suggested that "the General Council should likewise provide a forum for Members to be updated and have an overview of the entire process."

However, several countries apparently suggested that the GC should not only be limited to keeping an overview of the different reform discussions, but must also "engage in horizontal/cross-cutting issues - whether in informal or formal mode."

The chair said that countries want "relevant discussions at the General Council; however, cautioned that Members should implement Paragraph 3 in a more effective manner - without resorting to sterile debates."

ENFORCEMENT FUNCTION

The enforcement function of the WTO has been paralyzed since December 2019, after the US repeatedly blocked the filling of vacancies in the most vital adjudicating body, namely the Appellate Body, on one ground or the other.

Despite the substantial changes in the functioning of the Appellate Body mooted by the former General Council chair Ambassador David Walker of New Zealand to accommodate the US concerns, Washington unilaterally chose to block the selection process to fill seven vacancies on the Appellate Body even though 126 members, in a joint proposal, made repeated calls to fill the vacancies as soon as possible.

Against this backdrop, in his report, the GC chair noted that "my consultations likewise confirmed the high priority attached by all Members to addressing the issues faced under the dispute settlement function."

Ambassador Chambovey said "the dispute settlement function is one of the most urgent areas for WTO Reform," suggesting that "many reiterated the importance of restoring a fully functioning two-tier dispute settlement system."

Without mentioning the ongoing informal consultations launched by the US with several developing countries at the recent G20 trade ministers' meeting in Bali (see SUNS #9652 dated 23 September 2022), the chair said that "at the same time, many recognized the ongoing informal conversations among Members and a number of delegations were aware of the political sensitivities."

As for Brazil's proposal of holding annual ministerial conferences instead of the current practice of holding them biennially, there has been lukewarm support for any change in the way ministerial conferences are conducted, said a trade envoy, who asked not to be quoted.

The GC chair plans to "organize an informal conversation among Members, under the auspices of the General Council, at the end of October or at the beginning of November."

Ambassador Chambovey is not choosing the route of convening a costly retreat as adopted by the DG on fisheries subsidies and agriculture. He plans to host meetings "within the WTO premises and will be open to all Members."

The purpose of this meeting on WTO reforms, he says, "is to set a collective vision on how to proceed with WTO Reform and identify cross-cutting issues" and it "must address the interests of all Members, including development issues".

WORK ON THE MULTILATERAL E-COMMERCE WORK PROGRAM

On the crucial issue of the multilateral e-commerce work program involving the continued moratorium on levying customs duties on electronic transmissions since 1998, MC12 mandated members to intensify discussions on the scope and definition of electronic transmissions as well as the need to terminate the moratorium either by the 13th ministerial conference or by early first quarter of 2024.

"My hope is that this informal conversation would lay the foundation of trust in this process. For WTO Reform to be successful, we must ensure that Members are talking to, not at, each other. Should this be agreeable, I will develop a program and structure for this event that would promote an interactive and serene dialogue," said the GC chair.

On the e-commerce work program, the chair posed the following questions to members:

a. Are there any priority issues of a cross-cutting nature that Members wish to address in the General Council?

b. How do Members see the work in the General Council complementing that of the regular bodies, in view of the specific tasks that the Work Programme assigns to each of these bodies?

c. With regard to the moratorium, what elements are needed to achieve more clarity on its impact?

He expressed satisfaction that he "sensed a readiness, from all, to reinvigorate work under the Work Programme and to intensify the discussions on the moratorium."

The GC chair said that "with regard to the moratorium, delegations recognized that positions remain polarized but that this was an important issue that could not be left for last-minute negotiations ahead of the next Ministerial Conference."

Apparently, the DG said that many business groups and their representatives had expressed their concerns on the termination of the moratorium, said people, who asked not to be quoted.

FILLING VACANT POSITIONS OF NEGOTIATING CHAIRS

On the issue of filling the vacant positions of the chairs of the Committee on Trade and Environment in Special Session and the Negotiating Group on Rules, the GC chair said that he is being assisted in this task by the DSB chair, Ambassador Athaliah Lesiba Molokomme of Botswana, and the former GC chair, Ambassador Dacio Castillo from Honduras.

As regards the chair of the Negotiating Group on Rules, the Asian group of developing countries has proposed Ambassador Ms. Gothami Silva of Sri Lanka, while the industrialized countries have proposed Ambassador Peter Olberg of Norway.

As regards the chair of the Doha agriculture negotiations, the Asian group of developing countries has proposed Turkiye's Ambassador Alparsian Acarsoy, while the industrialized countries have proposed New Zealand's trade envoy Ambassador Ms Clare Kelly. +