TWN Info Service on WTO and Trade Issues (Mar23/02)
16 March 2023
Third World Network

Trade: South Africa elicits responses from 35 JSI members on services DR
Published in SUNS #9742 dated 15 March 2023

Geneva, 14 Mar (D. Ravi Kanth) — South Africa held a meeting on 10 March with 35 countries, including the United States and the European Union, to elicit replies to its objections over their schedules of specific commitments concerning domestic regulation (DR) in services as part of their plurilateral Joint Statement Initiative (JSI), said people familiar with the discussions.

The JSIs on e-commerce, investment facilitation, disciplines for MSMEs (micro, small, and medium enterprises), domestic regulation in services, and trade and gender had been challenged by South Africa, India, and Namibia on grounds that they allegedly violate core provisions of the Marrakesh Agreement that established the World Trade Organization (WTO) in 1995.

In what appears to be an utter disregard of the WTO rules, the JSI members went on to adopt a reference paper as well as new schedules of specific commitments in services, said people, who asked not to be identified.

Against this backdrop, South Africa and India, in separate requests, asked 35 member countries of the JSI group to enter into consultations to address the objections raised by the two countries.

The 35 member countries, who appear to have participated in the two-hour consultations with South Africa, include Albania, Argentina, Bahrain, Canada, Chile, China, Costa Rica, European Union (which includes 27 member countries), Georgia, Hong Kong, China, Iceland, Japan, Kazakhstan, Korea, Liechtenstein, Mauritius, Mexico, Moldova, Montenegro, Nigeria, North Macedonia, New Zealand, Norway, Paraguay, Peru, Singapore, Switzerland, Chinese Taipei, Thailand, Ukraine, United Arab Emirates, the United Kingdom, the United States of America, the Russian Federation, and Saudi Arabia.

Apparently, the 35 JSI members adopted a common position to justify their schedules and reiterate that their actions are consistent with the provisions of the General Agreement on Trade in Services (GATS), said several members of the JSI group who asked not to be identified.

Significantly, the JSI members seem to have adopted a hardline stance on the plurilateral JSI on domestic regulation in services, knowing full well that it allegedly violates several core provisions of the Marrakesh Agreement, said members familiar with the discussions.

The 35 countries also justified a reference paper over additional commitments in the GATS, as part of the JSI on domestic regulation in services.

In its consultations request, South Africa noted the submissions by the 35 countries that “contains schedules of specific commitments relating to services domestic regulations, submitted for certification pursuant to the Procedures for the Certification of Rectifications or Improvements to Schedules of Specific Commitments (document S/L/84).”

It stressed that further information and clarifications are required in order to assess the legal basis and the effect of the proposed improvements, particularly their interaction with Members’ existing rights and obligations under the General Agreement on Trade in Services and the Marrakesh Agreement Establishing the WTO.

The request from South Africa also makes it clear that “further clarifications may be needed on other aspects of the schedules submitted for certification by the Members concerned and therefore, reserves the right to seek such clarifications.”

According to paragraph two of the “Procedures for the Certification of Rectifications or Improvements to Schedules of Specific Commitments”, as agreed by the WTO’s Council for Trade in Services on 14 April 2000, “any Member wishing to object to the certification shall submit a notification to that effect to the Secretariat for circulation to all Members.”

Further, “a Member making an objection should to the extent possible identify the specific elements of the modifications which gave rise to that objection.”

South Africa apparently informed the JSI participants about its specific objection on the specific elements of the modification.

“The objecting Member(s) and the modifying Member shall enter into consultation as soon as possible and shall endeavor to reach a satisfactory solution of the matter within 45 days after the expiry of the period in which objections may be made,” it said.

Also, “when an objection has been notified, the certification procedure shall be deemed concluded upon the withdrawal of the objection by the objecting Member or the expiry of the period in which objections may be made, whichever comes later.”

More importantly, “such a withdrawal shall be communicated to the Secretariat. When more than one objection has been raised, the certification procedure shall be deemed concluded upon the withdrawal of the objections by all objecting Members or the expiry of the period in which objections may be made, whichever comes later.”

South Africa will have to decide by 20 March whether it is satisfied with the clarifications provided by the JSI members or whether more consultations will have to be conducted in order to make a final assessment, said a services negotiator, who asked not to be identified.

INDIA’S INDIVIDUAL DISCUSSIONS

Meanwhile, India, which is the second complainant against the JSI members’ services schedules and reference paper, is expected to hold its consultations with each member, unlike the process adopted by South Africa.

Both countries are required to inform the WTO Secretariat by 20 March about their final response, after which it will be known whether the two countries are satisfied or need further consultation, the services negotiator said.

India and South Africa stated unambiguously that their “objection should be read in conjunction with the paper WT/GC/W/819/Rev.1 circulated at the request of India, South Africa, and Namibia.”

Since 2021, the two countries along with Namibia have challenged the legal status of the JSIs on domestic regulation in services, electronic commerce, investment facilitation, disciplines for MSMEs, and trade and gender among others, on grounds that these initiatives allegedly violate the core principles of the Marrakesh Agreement.

As reported in SUNS #9740 dated 8 February 2023, India and South Africa complained that the WTO is a multilateral organization that allows multilateral negotiations that some have allegedly taken illegally out of its formal structure to conclude the JSI on services domestic regulation, said a negotiator, who asked not to be quoted.

According to a joint proposal (WT/GC/W/819/Rev.1) issued on 28 April 2021, India, South Africa, and Namibia argued that the JSIs allegedly violated the following “fundamental principles and objectives of the multilateral system, enshrined in the Marrakesh Agreement”:

1. The multilateral underpinnings of the WTO, including,

* Art. II.1: “The WTO shall provide the common institutional framework for the conduct of trade relations among its Members …”;

* Art. 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 of the Marrakesh Agreement;

* The procedures for Amendments of rules as articulated in Art. X.

India, South Africa and Namibia argued that the new form of “plurilaterals” or “Open Agreements” are inconsistent with the WTO’s core principles as set out in the Marrakesh Agreement.

The three countries contended that “the Marrakesh Agreement provides that the agreements and associated legal instruments included in Annex 4 to the Agreement are “Plurilateral Trade Agreements”.”

“The Ministerial Conference, upon the request of the Members party to a trade agreement, decides exclusively by consensus to add that agreement to Annex 4,” they said, suggesting that there was no consensus either at the WTO’s eleventh ministerial conference (MC11) in Buenos Aires in December 2017 or now.

According to the three countries, “the JSI proponents intend to create a new set of Agreements, which are neither multilateral agreements nor Plurilateral Agreements [as defined in Article II.3 of the Marrakesh Agreement].”

Further, the JSI “proponents appear to suggest that when offered on MFN basis, no consensus is required for bringing in these new rules into the WTO.”

“This approach, however, is legally inconsistent with the fundamental principles and procedures of Marrakesh Agreement …”, India, South Africa, and Namibia said in their proposal.

According to the proposal submitted by the three countries, “a procedure for amending rules is enshrined in Article X of the Marrakesh Agreement. On the other hand, the GATT and GATS contain specific provisions for modifications of Schedules.”

They said that the JSI proponents “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. However, new agreements are not amendments to schedules.” +