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Info Service on WTO and Trade Issues (Aug23/01) Geneva, 31 Jul (D. Ravi Kanth) — For the 67th time, the United States on 28 July blocked a call from 130 members to expeditiously commence the selection process for filling seven vacancies on the World Trade Organization’s Appellate Body, the highest adjudicating body for resolving trade disputes, which remains dysfunctional since December 2019 due to the allegedly unilateral and intransigent position of the US, said people familiar with the development. At a meeting of the WTO’s Dispute Settlement Body (DSB) on 28 July, members agreed to establish a compliance panel, at the request of the European Union under Article 21.5 of the Dispute Settlement Understanding, to review US implementation of an earlier panel ruling in a dispute over the US imposition of countervailing duties on ripe olives from Spain. Canada, Turkiye, Switzerland, China, Brazil, Japan, the Russian Federation and India reserved their third party rights to the dispute. Also at the meeting, the DSB adopted a panel ruling in a complaint filed by Japan regarding China’s imposition of anti-dumping duties on imports of certain stainless steel products from Japan after China decided not to appeal the panel’s findings. Under a separate agenda item, China and Russia severely criticized the US after Washington raised “serious systemic and practical implications” of the proceedings in the dispute (DS597) that it lost to Hong Kong (China) over origin marking requirements. The US criticized the panel for its ruling, saying that the WTO lacks the competence or the authority to pass judgment on national security issues. The US claimed that it attaches importance to fundamental freedoms and human rights, which are not part of the WTO rule-book. Both Hong Kong (China) and China criticized the US for placing the item on the agenda after Washington chose to appeal the panel’s ruling to the defunct Appellate Body. The US has indicated in its proposal on dispute settlement (DS) reform that issues of national security cannot be adjudicated at the WTO. US POSITION ON AB VACANCIES UNCHANGED On its allegedly unilateral position on filling vacancies on the Appellate Body (AB), the US has continued to adopt the same position, saying that Washington’s longstanding concerns over the AB have not been addressed for more than five and a half years. On behalf of 130 members, Guatemala’s deputy trade envoy Mr Marco Molina informed that the Lao People’s Democratic Republic has joined the growing coalition of countries against Washington’s unilateral position. He apparently suggested that the joint proposal of the 130 members (WT/DSB/W/609/Rev.25) reflects their disapproval of the US position that has severely fractured one pillar of the WTO and has left the multilateral enforcement of trade disputes paralyzed, said people familiar with the discussions. Apparently repeating the same position for the umpteenth time, the US claimed that fundamental reform is needed to ensure a well-functioning WTO dispute settlement system, which supports WTO members in the resolution of their disputes in an efficient and transparent manner, and in doing so limits the needless complexity and interpretive over-reach that has characterized dispute settlement in recent years. According to the US, the reform must ensure that any future system meets the interests of all members to the greatest extent possible, saying that the US has been engaging with members to advance this goal. The US also said more work needs to be done for achieving fundamental dispute settlement reform, pointing out that it will not be easy. While Washington is seemingly adopting egregious and somewhat unilateral positions during the ongoing reform discussions, it said at the meeting that if members work collectively, they can bring about durable and lasting reform. In response to the US position, apparently some thirty members on behalf of different groups underscored the need for safeguarding the existing two-tiered dispute settlement system that was part of the Uruguay Round Agreements. Since 1995, the two-tiered system safeguarded members’ interests based on the rules-based Marrakesh Agreement and on the principle of negative consensus when any one member cannot set its priorities for resolving trade disputes. REPORT OF FACILITATOR ON DS REFORM All eyes are on the facilitator of the informal discussions on dispute settlement reform, Mr Marco Molina, deputy trade envoy of Guatemala, in navigating the process credibly, said a member, who preferred not to be identified. As reported in SUNS #9832 dated 31 July, the confidential document he had circulated on 8 July contains almost 20 percent of “make-or-break” issues, particularly as regards accountability, appeal/review mechanisms, and the sunset review provisions among others. In his report presented to members on 28 July, the facilitator made remarks in his personal capacity, saying that members have reached an understanding on 80 percent of the issues under consideration. Although he did not spell out the issues on which there is broad consensus or 80 percent agreement, a cursory look at the confidential document clearly reveals that they seem to be the “easy” issues like (1) alternative dispute resolution mechanisms; (2) streamlining the panel process; and (3) accessibility. As regards accessibility, the facilitator is apparently facilitating the discussions with the Geneva-based Advisory Centre on WTO Law (ACWL), which is being funded by major Western donors like the Netherlands. Surprisingly, Mr Molina is apparently the vice-chairman of ACWL at this juncture, said a member, suggesting that there are concerns of alleged conflict of interest. In his report at the DSB meeting, Mr Molina conceded that 20 percent of the issues are in the “highly sensitive” basket where members seem sharply divided, the member said. Mr Molina indicated that after the WTO’s summer break, he will continue consulting with delegates with a view to reaching a common understanding of potential solutions to these issues by the end of September. He remains upbeat that notwithstanding the conceptual differences, members can find a solution at the technical level that can reconcile their interests and concerns. “It is time to unlock our full creative potential,” he declared. “I am confident that we will succeed in this undertaking.” Even though the facilitator has not made his current confidential document, seen by the SUNS, public, some members privately said they want the so-called confidential document to be issued as an unrestricted document for the sake of transparency, the member said. The facilitator, however, maintained that the text (for a potential agreement) will be drafted by delegates through a process that he will organize and facilitate. In the next phase of the informal process, he said the same principles will continue to apply, namely, a process that is multilateral, because all members will be invited to participate; transparent, because everyone will have access to all documents and information; and inclusive, because it will continue to facilitate the participation of small delegations and take into account the interests and concerns of all WTO members. Informing members that he would circulate the tentative calendar of meetings in the coming days, Mr Molina declared that “Time is of the essence.” He said before being considered by MC13 (WTO’s 13th ministerial conference to be held in Abu Dhabi next February), any outcome of this informal process should be introduced to a WTO body, most likely the DSB. Considering that members should have enough time to analyze the outcome of the informal process, that gives members only 3 to 4 months to conclude the work as part of the informal process. “We are in the final stretch and there is still a lot of work to do,” he said. If any proposed issues require changes in the Dispute Settlement Understanding (DSU), then, such changes can only be done by trade ministers because they could result in altering the balance of rights and obligations in the Marrakesh Agreement that was concluded on the basis of the Uruguay Round agreements. MEMBERS’ RESPONSES At the meeting on 28 July, apparently 30 members commented on the ongoing informal consultations convened by Mr Molina. For many members, who are unable to participate in the informal discussions because of the intense pace and lack of negotiating hands, particularly at the small missions, the discussions appear somewhat like a mirage. Cameroon, the coordinator of the African Group, raised issues of transparency and the inability to attend meetings. In its proposal (WT/GC/W/892) circulated on 12 July, the African Group listed out its concerns and priorities. AFRICAN GROUP PROPOSAL ON DS REFORM In its proposal, the African Group recalled paragraph 3 of the MC12 Ministerial Outcome Document, “which reaffirmed the foundational principles of the WTO and set out that the work on WTO reform shall be Member- driven, open, transparent, inclusive, and must address the interests of all Members, including development issues.” It also recalled paragraph 4 of the MC12 Ministerial Outcome Document, “which recognizes the importance and urgency of addressing the challenges and concerns with respect to the dispute settlement system including those related to the Appellate Body, and the need to conduct discussions with the view to having a fully and well- functioning dispute settlement system accessible to all Members by 2024.” The African Group recognized that “the reform of the WTO dispute settlement system will have significant implications on the functioning of the entire multilateral trading system and is an issue of high importance for developing and least-developed countries.” The Group, representing more than 50 countries, reiterated its commitment “to work constructively, through multilateral engagement, towards achieving the necessary and effective reforms in the WTO dispute settlement system, in accordance with the mandate of paragraphs 3 and 4 of the MC12 Ministerial Outcome Document, and while effectively reflecting the principle of special and differential treatment.” It stressed that the interests and priorities of the African Group must be effectively addressed “in any final outcome of the Dispute settlement reform process according to the understanding that nothing is agreed until everything is agreed; while ensuring that all issues under discussion are given equal attention.” The African Group emphasized that, for the purposes of enhancing transparency and inclusivity, the methods of work to be adopted in any process should ensure that: i. Discussions and negotiations remain open to all delegations, and that Members are able to raise issues of concern to them throughout the process; ii. Multilaterally mandated facilitator or co-facilitators hold periodic formal transparency meetings for the entire WTO Membership in order to ensure that delegations unable to participate in some meetings are kept updated; iii. All Members have effective access to all information within this process; iv. The allocation of time to different issues of concern to Members be undertaken in a participatory and inclusive manner, enabling a balanced agenda that is multilaterally agreed, balanced discussions, and a balanced outcome; v. The agenda of work be circulated within a reasonable period of time ahead of meetings, to allow delegations time to properly prepare for the meetings; vi. The pace of scheduled meetings allows delegations with limited capacities and human resources a reasonable opportunity to participate in the meetings or be fully updated on a periodic basis, and thereby allow time to consult with capitals and regional groupings; vii. Parallel meetings in small group configurations be reasonably paced to ensure effective participation of small delegations and reports of small group meetings should form part of the updates to be issued at the transparency meetings; viii. The participation of all Members be enabled through different means, including oral or written submissions by individual Members, regional groupings or coalitions, as well as through in-person and virtual participation. Several members, including some major developing countries, expressed concerns over the pace and frequency of the discussions and that the process needed to be more transparent and inclusive. Several industrialized countries apparently praised the facilitator for the process that he conducted, which they claimed is “transparent, inclusive, and multilateral.” Also, some countries like the US warned against shifting the discussion from its current informal basis to formal discussion in the DSB or other WTO bodies, arguing that the informal nature was key to the progress achieved so far. The chair of the Dispute Settlement Body, Ambassador Petter Olberg of Norway, apparently said that (1) there is broad appreciation for the work that Mr Molina is doing and his efforts to make the discussions transparent, multilateral, and inclusive; (2) there are real concerns regarding resource constraints of members and scheduling of sessions which need to be taken into account; and (3) there appears to be broad convergence that at some point members will need to formalize this process, but there is no convergence yet on how and when that will happen. Members will have to come back to that after the summer break. +
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