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TWN
Info Service on WTO and Trade Issues (May23/10) Geneva, 22 May (D. Ravi Kanth) — The leaders of the Group of Seven (G7) industrialized countries laid out a comprehensive roadmap for pursuing seemingly security-driven trade policies targeting China, as well as their priorities for the World Trade Organization’s 13th ministerial conference (MC13), while apparently shedding “crocodile tears” on reaching out to the Global South. In a communique issued in Hiroshima, Japan, on 20 May, the G7 leaders stated that they will seek to ensure that their responses to “unfair trading practices will not create unnecessary barriers to our partners’ industries” and that such responses are “consistent with our WTO commitments.” Incidentally, the meeting was held in the same city where the United States dropped the first atomic bomb in August 1945 that decimated the whole city, killing roughly over 140,000 people. The G7 members include the United States, Canada, Italy, France, Germany, the United Kingdom, and Japan, as well as being joined by the European Union. In their communique, the G7 leaders reiterated their commitment to “free and fair trade as foundational principles and objectives of the rules-based multilateral trading system with the WTO at its core, which proves more important than ever in the current geopolitical environment.” They maintained that “honoring these foundational principles is essential to creating resilient (new) global supply chains that are transparent, diversified, secure, sustainable, trustworthy, and reliable, and that is fair for all and responsive to the needs of global citizens.” While the WTO is mentioned 12 times in the communique, the policies proposed by the G7 leaders seem somewhat inconsistent with the core global trade rules. The policies adopted by the US along with the other G7 members against China seem to fragmentize the global trading system into separate trading blocs, said a trade envoy, who asked not to be quoted. The G7 communique states that the G7 countries will “seek to ensure that our responses to unfair trading practices will not create unnecessary barriers to our partners’ industries and are consistent with our WTO commitments.” China has already launched a trade dispute against the US at the WTO, challenging Washington’s security-driven policies on grounds that they are allegedly inconsistent with the core WTO rules. As regards targeted export controls against China and other countries that are seen as not adhering to the US policies against China, the G7 leaders seem to have blatantly justified the export controls on grounds of “regional, and national security.” Recently, a WTO dispute panel ruled against the US “national security policies” in a trade dispute raised by China and Hong Kong (China). INCLUSIVE GLOBAL TRADING SYSTEM The G7 communique reaffirmed the G7 countries’ attachment “to transparency, coordination and to the respect of WTO rules in our respective policies.” The communique said that the “global trading system must be inclusive and ensure that the prosperity it can bring is felt by all, including those that have been traditionally under-represented.” In an apparent outreach drive to draw countries in the Global South into their club, the G7 leaders invited several heads of developing countries like the President of Brazil, the Prime Minister of India, and several countries from Africa to the meeting. The G7 leaders pledged to “work with non-G7 partners, in particular developing country partners, which are integral partners in supply chains and in the global trading system.” WTO’S MC13 In their communique, the G7 leaders called for “achieving a successful MC13,” along the lines of what was achieved at the WTO’s 12th ministerial conference (MC12) held in Geneva last June. However, they appeared to remain silent on delivering on one of the core MC12 outcomes, namely, on extending the MC12 Ministerial Decision on the TRIPS Agreement to COVID-19 diagnostics and therapeutics, as outlined in paragraph eight of the Decision. The G7 members underscored “the importance of working towards WTO reform, including by conducting discussions with the view to having a fully and well-functioning dispute settlement system accessible to all Members by 2024 and by reinforcing deliberation to respond to global trade policy challenges.” However, the communique remains somewhat unclear as to whether the G7 countries will work towards restoring the two-stage dispute settlement system with the Appellate Body at the core of adjudication of trade disputes. Indications are that the US seems to be in no mood to continue with the two-stage dispute settlement system, as per the WTO’s Dispute Settlement Understanding (DSU), said negotiators who are currently engaged in the discussions on dispute settlement reform. FISHERIES SUBSIDIES In their communique, the G7 leaders called “on all WTO members to work together to secure the prompt entry into force of the Agreement on Fisheries Subsidies, to engage constructively on recommendations for additional provisions that would achieve a comprehensive agreement on fisheries subsidies.” Yet, the prospects for accomplishing a comprehensive Agreement on Fisheries Subsidies seem somewhat bleak at this juncture on several grounds. Firstly, the partial Agreement on Fisheries Subsidies signed last year will come into effect only after two-thirds of the WTO members ratify the Agreement. So far, only seven members – Switzerland, Singapore, Seychelles, the United Arab Emirates, the United States, Canada, and Iceland – have ratified it. It is highly unlikely that two-thirds of the members will be able to ratify the agreement by MC13. Secondly, at this juncture, the WTO members seem to be stuck on definitional issues and approaches for arriving at proposed disciplines that prohibit subsidies contributing to overcapacity and overfishing (OC&OF) allegedly provided by the big subsidizers such as the EU, the US, Japan, Canada, Korea, China, and Chinese Taipei among others. PLURILATERAL INITIATIVES In their communique, the G7 leaders called for outcomes on the allegedly controversial “plurilateral initiatives including the joint statement initiatives (JSIs),” specifically focusing on “accelerating the WTO JSI E-Commerce (electronic commerce) negotiations and working to conclude an ambitious outcome by the end of 2023.” The G7 countries want the JSI E-Commerce outcome to be “high standard and commercially meaningful.” However, at this juncture, the JSI e-commerce negotiations seem to be in an imbroglio on the main issues such as data-sharing, data localization, and several other fundamental issues, according to JSI e-commerce participants. E-COMMERCE MORATORIUM The G7 leaders called for making “permanent the Moratorium on Customs Duties on Electronic Transmissions,” despite the MC12 outcome calling for the termination of the moratorium by end-March 2024, in the absence of an extension. As per the MC12 Decision on the e-commerce moratorium, trade ministers had agreed “to maintain the current practice of not imposing customs duties on electronic transmissions until MC13, which should ordinarily be held by 31 December 2023. Should MC13 be delayed beyond 31 March 2024, the moratorium will expire on that date unless Ministers or the General Council take a decision to extend.” Against this backdrop, the Hiroshima communique appears to be a call to its members to fight for a permanent moratorium at MC13, to be held in Abu Dhabi in February next year. ENVIRONMENTAL GOODS Although the G7 leaders insist that “Free and fair trade flows, consistent with our commitment to our multilateral trading system, play an important role in the green and just transition,” they want to continue collaboration at the WTO including “to facilitate and promote trade in environmental goods and services, and technologies.” The plurilateral initiative on environmental goods was discontinued in December 2016, after the Trump administration came into office. Little wonder that the Biden administration would like to kick-start the much-abandoned negotiations on an Environmental Goods Agreement, of which China is also a member. CHINA TARGETED Without naming China, the G7 leaders said that they “reaffirm their shared concerns with non-market policies and practices, including their problematic evolution, that distort global competition, trade and investment.” For the past several years, the US, the EU and Japan – or the so-called “Troika” – had held consultations aimed at targeting China over its state-owned enterprises and its allegedly pervasive subsidy programs, but the talks have made modest progress. The Hiroshima communique calls on the G7 leaders to “further step up our efforts to secure a level playing field through the more effective use of existing tools, as well as the development of appropriate new tools and stronger international rules and norms.” It is interesting to note that the US and other G7 members are calling for industrialization suffused with hundreds of billions of dollars in subsidies. That these countries have so far never allowed industrialization to take place in other countries on grounds that they violate the rules in the WTO’s TRIMS (Trade-Related Investment Measures) Agreement and the Agreement on Subsidies and Countervailing Measures (ASCM), said people familiar with the US and the EU’s green policy initiatives. EXPORT CONTROLS The Hiroshima communique gives a special role to export controls, even though they fall into a grey zone of the WTO rules. The communique emphasizes that “export controls are a fundamental policy tool to address the challenges posed by the diversion of technology critical to military applications as well as for other activities that threaten global, regional, and national security.” According to recent media statements issued by some of the G7 members, export controls are being almost egregiously used against China. Since Russia’s war against Ukraine on 24 February last year, the G7 countries have almost pervasively imposed export controls against Russia. During the COVID-19 pandemic in 2020, the WTO issued an Information Note on export prohibitions and restrictions. According to that Note, “while Article XI of the General Agreement on Tariffs and Trade (GATT) 1994 broadly prohibits export bans and restrictions, WTO rules also contain more general exceptions, which could be used to justify restrictions provided that they do not constitute a means of arbitrary or unjustifiable discrimination between countries, or a disguised restriction on international trade.” Without naming China and Russia, in their communique, the G7 leaders affirmed “the importance of cooperation on export controls on critical and emerging technologies such as microelectronics and cyber surveillance systems to address the misuse of such technologies by malicious actors and inappropriate transfers of such technologies through research activities.” Apparently targeting China over its alleged “economic coercion”, the G7 leaders tasked their “Trade Ministers to deepen these discussions towards the G7 Trade Ministers’ Meeting in October, and to explore, both within and beyond the G7, coordinated or joint actions where appropriate against trade-related challenges, including economic coercion.” FOOD SECURITY The G7 leaders expressed deep concern over “the ongoing and worsening global food security and nutrition situation, with the world facing the highest risk of famine in a generation,” due to multiple factors. They said these factors including “the COVID-19 pandemic, soaring energy prices, the climate crisis and shocks, biodiversity loss, land degradation, water security, and armed conflicts have contributed to the global disruption and disorder in food systems and supply chains and the deterioration in global food security in recent years. In particular, Russia’s illegal war of aggression against Ukraine has drastically aggravated the global food security crisis.” The G7 leaders said that they are “committed to continuing our efforts to address pressing issues to improve global food security including through initiatives already launched by the G7 and relevant international organizations, building on the positive outcomes achieved.” They welcomed the MC12 Ministerial Decision on “World Food Programme (WFP) Food Purchases Exemption from Export Prohibitions or Restrictions” adopted at MC12 and called for its full implementation. “HIJACKED” DOHA AGENDA However, the G7 leaders seem to have “hijacked” the WTO’s Doha mandate on agriculture, including the permanent solution for public stockholding (PSH) programs for food security purposes in developing countries. The communique fails to mention the development issues raised by the developing countries at the WTO. Instead of delivering on the issues of PSH and the special safeguard mechanism (SSM), the G7 leaders brought the issue of food security into their agenda, which could reinforce trade-distorting food aid, said an agriculture negotiator, who asked not to be quoted. The Hiroshima communique also acknowledged “the importance of supporting fertilizer value chains including local fertilizer production in line with WTO rules and through supporting the use of local sources of energy in consistency with a 1.5 degrees C warming limit and the goals of the Paris Agreement.” In short, the G7 leaders sought to justify some of their allegedly questionable trade policies as being WTO- consistent, while apparently shedding “crocodile tears” on the real bread-and-butter issues of the developing countries. +
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