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TWN
Info Service on WTO and Trade Issues (Aug23/05) Geneva, 8 Aug (D. Ravi Kanth) — As trade ministers of the Group of 20 (G20) industrialized and developing countries convene a two-day meeting in Jaipur, India, on 25-26 August, the central issue for reforming the World Trade Organization could test the resolve of New Delhi in inserting strong language on preserving/safeguarding the WTO’s two-tier dispute settlement system (DSS), said people familiar with the development. However, the US is unlikely to dent India’s efforts on dispute settlement (DS) reform by agreeing to a two-stage dispute settlement system, and even the restoration of the Appellate Body (AB), but that may not mean much as Washington remains somewhat intransigent and committed to its strategy of permanently paralyzing the Appellate Body to an extent that its presence could seem like the proverbial patient caught up in a chronic illness and unable perform any task. The binding rulings of the Appellate Body since 1995, when the WTO was established, have been its raison d’etre, said people familiar with the development. The two-day ministerial meeting in Jaipur is expected to be preceded by senior officials meeting for three days starting on 21 August. The G20 officials/sherpas from 19 countries are expected to negotiate texts in which India, as the chair and host of the conference, to be held at the Rambagh Palace hotel, is likely to make every effort possible to bring about convergence in apparently five areas. They include logistics, global value chains, WTO reforms, MSMEs (micro, small and medium enterprises) and their importance after the COVID-19 pandemic, and perhaps, issues concerning food security, according to people familiar with the development. The G20 comprises Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom and the United States, plus the European Union. The texts likely to emerge after the negotiations may seem like balanced agreements of convergence in these five areas, but they may not substantively address the real issues in the WTO reform, especially the dispute settlement system. The continued divergences between the US and one or two members on the one side, and developing countries like India, South Africa, Indonesia, Argentina, Turkey, and Brazil, on the other, seem somewhat irreconcilable. The latter may try hard to press for some real/fundamental outcomes in ensuring a robust dispute settlement system, but the chances seem somewhat bleak, said people familiar with the ongoing discussions. DS REFORM The dispute settlement reform was mandated by trade ministers at the WTO’s 12th ministerial conference (MC12) last June. Paragraph four of the Outcome Document of MC12 states somewhat ambiguously: “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 2024.” Though the mandate doesn’t explicitly mention restoring the two-stage DSS as it existed till December 2019, a large majority of members have continually underscored the restoration of the two-stage dispute settlement system with an un-weakened Appellate Body. The US may say that it is ready for the restoration of the two-tier DSS but with an Appellate Body that has “no teeth” to rectify the egregious trade measures adopted by any member, particularly itself, said people familiar with the discussions. The US remains firm in its stance on allegedly converting the Appellate Body into a proverbial “vegetable”, going by the continuity of the stand taken between the Trump administration and the Biden administration with inconsequential differences. The former US Trade Representative (USTR) Ambassador Robert Lighthizer praised his successor Ambassador Katherine Tai when she said that the WTO is on very, very thin ice and it really challenges the integrity of the system when two panels struck down measures imposed on grounds of national security considerations. “KILLING THE APPELLATE BODY” Instead of “killing the Appellate Body”, as proposed by Ambassador Lighthizer, the Biden administration may follow the popular song of “Killing me softly…”, said a trade negotiator, who preferred not to be quoted. In his latest book, “No Trade is Free: Changing Course, Taking on China, and Helping America’s Workers,” the former USTR Ambassador Lighthizer, a key official in the Trump administration, seems to play the victim card like his former boss Donald Trump, who is currently facing several legal challenges, said an official who read Ambassador Lighthizer’s book. Ambassador Lighthizer says that “more must be done to fix the WTO,” emphasizing that “no one is arguing that we should revert from a rules-based system to the so-called law of the jungle in trade relations.” “But sticking with the current WTO would actually entail betraying the core principles of a rules-based system, because this organization has shown itself to be chronically incapable of proceeding according to those principles.” The Biden administration, with some alleged degree of sophistry, is essentially following the Trump administration, said negotiators who are involved in the DS reform discussions. For example, the US is now pursuing unilateral measures like the hundreds of billions of dollars in subsidies being provided to promote “green” industrialization as well as for transforming the semiconductor industry in ways that China can never compete with the US. Ambassador Lighthizer argued that “the dispute settlement system should be scrapped.” He said “a new one, modeled after commercial arbitration, should be put in its place.” “There should be a one-stage panel process with a vote of the WTO member states being able to overturn the decisions. Further, the decisions should be on the basis of party negotiations and not be binding. The strawman of the law of the jungle versus the status quo cannot obscure the fact that the current system is a massive failure on its own terms – and certainly with respect to US interests. The status quo is not an option.” In the ongoing DS discussions, the US seems to be adopting the diktats pronounced by Ambassador Lighthizer. For example, the US has issued a statement spelling out its views on what needs to be done in the face of growing opposition to some of its demands. Already, the US proposal on Appellate Review in the ongoing DS discussions was rebuffed in what is being seen as its move to practically eliminate the Appellate Body, said people familiar with the development. At the informal discussions chaired by the facilitator, Mr Marco Molina, deputy trade envoy of Guatemala, on 8 June, several countries including China, the European Union, Canada, Australia, India, Pakistan, and South Africa appear to have opposed the US proposal, said participants familiar with the discussions. During the plenary meeting, the facilitator tried hard the whole day (two sessions of three hours each) to see if the members could make progress on the US proposal, but his attempts were proved to be in vain, said people, who took part in the meeting. The US proposal on Appellate Review in the facilitator’s so-called Yellow Box of proposals that are supposed to be more refined for further discussions, calls for an “amendment” to Article 17.2 of the Dispute Settlement Understanding to expedite appointments to the Appellate Body and also a “mechanism agreed by the Parties.” As per Article 17.2 on Appellate Review in the WTO’s Dispute Settlement Understanding (DSU), “the DSB (Dispute Settlement Body) shall appoint persons to serve on the Appellate Body for a four-year term, and each person may be reappointed once. However, the terms of three of the seven persons appointed immediately after the entry into force of the WTO Agreement shall expire at the end of two years, to be determined by lot. Vacancies shall be filled as they arise. A person appointed to replace a person whose term of office has not expired shall hold office for the remainder of the predecessor’s term.” Similarly, under the “scope of appeal/review mechanism” in the facilitator’s Yellow Box, the US proposed that the new Appellate Body would agree to the following conditions, including:
In short, the G20 trade ministers’ meeting is going to be assessed on what the trade ministers would have to say on WTO reform, including on the strength, or lack thereof, of the two-tier system. +
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