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Info Service on WTO and Trade Issues (Sept23/10) Geneva, 15 Sep (D. Ravi Kanth) — The facilitator overseeing the informal discussions on the reform of the World Trade Organization’s dispute settlement system (DSS) is apparently planning to issue a draft negotiating text next week following ongoing intense meetings in different groups focused on drafting, implementation, and peer review among others, said people familiar with the development. The intense discussions apparently began early this week, and based on the ongoing discussions among members in different groups, the facilitator, Mr Marco Molina, the deputy trade envoy of Guatemala, is expected to issue his draft text next week, said a person, who is familiar with the ongoing discussions. The draft text, when presented to members next week, is likely to indicate how far the US proposals have been accommodated by the facilitator, said a participant, who asked not to be quoted. The draft text would also be judged on whether it reflects the seemingly weak language of the G20 Leaders’ Declaration on DSS reform that was adopted at the recent G20 leaders’ summit in India. The G20 Leaders’ Declaration merely said: “We reiterate the need to pursue WTO reform to improve all its functions through an inclusive member-driven process and remain committed to conducting discussions with a view to having a fully and well-functioning dispute settlement system accessible to all members by 2024. We commit to work constructively to ensure positive outcomes at the WTO’s Thirteenth Ministerial Conference (MC13).” Surprisingly, the G20 Leaders’ Declaration remained silent on the issue of preserving the two-tier binding dispute settlement system at the WTO with the Appellate Body being the final adjudicator of global trade disputes. In an interview with The Times of India on the day when the G20 leaders’ summit began in New Delhi on 9 September, the WTO Director-General Ms Ngozi Okonjo-Iweala apparently downplayed the issue of DSS reform. She told The Times of India on 9 September that the “Dispute Settlement System has been one problem and somehow WTO came to be defined by that. It took time to explain to people that it is not defined by that alone. Even now, the first level system (the panel process) is working… only the Appellate Body is not working. We need to bring it up-to-date with things like digital trade.” Significantly, the expanded BRICS (Brazil, Russia, India, China, and South Africa, with the addition of six new members Egypt, Argentina, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates), in its declaration issued on 24 August, apparently called for “the restoration of a fully and well-functioning two-tier binding WTO dispute settlement system accessible to all members by 2024, and the selection of new Appellate Body Members without further delay.” A rather weak language would imply that one critical pillar of the WTO, namely, the “two-tier binding dispute settlement system accessible to all members by 2024” is going to be permanently weakened, said people, who asked not to be quoted. At a time when the DG and the European Union are emphasizing on the need to strengthen the deliberative function of the WTO purportedly to bring in any issue, particularly the non-mandated climate change-related trade issues while also seemingly legitimizing the non-mandated and allegedly WTO-illegal plurilateral issues, it seems to vindicate that a “weak and toothless” DSS would be helpful for the major industrialized countries, particularly the United States, “to game” the multilateral trading system, with the WTO at is center, said a former trade negotiator. Against this backdrop, the prospects for a robust two-tier binding dispute settlement system with the Appellate Body being the final adjudicator of trade disputes seem pretty grim at this juncture as attempts are underway to elevate the concerns of the United States and to reduce the binding appellate review to a process “without any teeth”, the negotiator said. Interestingly, during the Uruguay Round of trade negotiations that led to the establishment of the World Trade Organization in 1995, the US negotiated the two-tier binding dispute settlement system with the Appellate Body at its helm – allegedly to contain the European Union, said people familiar with the Uruguay Round negotiations. But now, the US seems to be engaged in “killing” off the Appellate Body, said people, who asked not to be identified. The “killing” off of the Appellate Body has been advocated by the former United States Trade Representative (USTR) Ambassador Robert Lighthizer in his book “No Trade is Free – Changing Course, Taking on China, and Helping America’s Workers.” Ambassador Lighthizer’s apparent influence on the US positions appears to be significantly noticed in the ongoing discussions on the reform of the DSS, people said. FACILITATOR’S REPORT As previously reported in the SUNS, in his last report issued in July, the facilitator, Mr Molina, said there are “highly sensitive issues for which Members still hold different conceptual views about how to tackle them,” without explaining what these “conceptual views” are and who has raised them, said people familiar with the development. Earlier, the African Group had tabled a proposal calling for enhanced transparency and inclusiveness in the WTO’s dispute settlement system reform discussions. Though several members with the necessary negotiating resources in the informal discussions like the United States, the European Union, China, Japan, Canada, Norway, Australia, New Zealand, India, and a few other countries may be aware of the “highly sensitive issues” and the “conceptual views” surrounding them, as mentioned by the facilitator in his report to members on 28 July, a large majority of members with limited or no negotiating resources are allegedly being kept in the dark, said several members, who preferred not to be quoted. The facilitator, who was praised for his efforts by the US and other industrialized as well as some developing countries, seems to be adopting a “stealthy” approach that could further reinforce serious doubts as to whom he is working for, said a regular participant in the DSS reform discussions, who preferred not to be quoted. Apparently, the US is in favour of informal discussions rather than having them in a formal mode at the Dispute Settlement Body, the participant said. The facilitator’s one-page report appears to be “ambiguous and unhelpful” for those countries that are unable to participate in the informal discussions, particularly those from Africa, as they are being forced to spread thin their negotiating resources in other areas of work that are simultaneously taking place at the WTO, said several participants, who preferred not to be quoted. CONTEXT The reform of the dispute settlement system was mandated by trade ministers at the WTO’s 12th ministerial conference (MC12) held in Geneva last June. The need for DSS reform arose because the two-tier system, with the Appellate Body at the helm of adjudicating trade disputes, was made dysfunctional by the United States in December 2019. As reported in the SUNS, for the 67th time, the US blocked a request from 130 WTO members at a meeting of the Dispute Settlement Body (DSB) on 28 July for expeditiously filling the vacancies on the Appellate Body, according to people familiar with the development. To overcome the continued paralysis in the two-tier dispute settlement system, trade ministers at MC12 mandated their respective representatives at the WTO to “commit to conduct discussions with the view to having a fully and well-functioning dispute settlement system accessible to all Members by 2024.” Unsurprisingly, many members at the July WTO General Council meeting echoed their concerns about the paralyzed dispute settlement system and demanded the full restoration of the Appellate Body. However, the manner in which the informal discussions started with the appointment of Mr Molina as the facilitator five months ago was never clearly explained to members, said one member, suggesting that it seemed like a “surreptitious” process. Nevertheless, the facilitator went about conducting the process in an informal mode and on an expeditious footing, by trying to narrow down differences on several issues, said another member, who preferred not to be quoted. The facilitator has issued confidential reports at different stages during the last five months, with the latest being the one he circulated on 8 July. It is not clear whether he has issued another report as everything about the process remains somewhat mysterious, the member said. On 28 July, the facilitator issued a one-page report at the DSB meeting. The report, seen by the SUNS, says, “As in previous occasions, I would like to note that I am making this statement in my personal capacity and under my own responsibility, as the convenor of the informal process on dispute settlement reform.” He said that since his last report on 30 May 2023, “delegates, experts on dispute settlement, have continued to actively participate in the intense program of meetings.” “We have had substance-based and highly technical discussions with a view to finding practical solutions to the concerns and interests identified by Members,” he claimed. He added: “We have reached an understanding on 80% of the issues under consideration, which are now ripe to move to the drafting process. Let me be clear, this did not happen overnight. This is the result of five months of tireless and constructive engagement by all delegates, who through conversations and mutual understanding have explored ways to reconcile the different interests and concerns identified during this process. This process belongs to everyone and delegates participating in the informal process should be recognized and commended for their efforts and dedication.” Further, Mr Molina said that “during the last five months, delegates have had plenty of opportunities to express their ideas, interests, and concerns; and to make as many observations as they deemed appropriate.” “We have proceeded with flexibility and, when necessary, we have returned to review our understandings to ensure that we have taken into account everybody’s interests and concerns,” he maintained. “In my assessment,” according to the facilitator, “half of the issues in the remaining 20% are close to reaching the level of maturity needed for the drafting process.” “The other half of that 20% refers to the highly sensitive issues for which Members still hold different conceptual views about how to tackle them.” He suggested that “after the summer break, I will continue consulting with delegates with a view to reaching a common understanding of potential solutions to these issues by the end of September.” Mr Molina remained rather upbeat and confident by saying that “I am convinced that despite our conceptual differences, we can find a solution at the technical level that can reconcile our interests and concerns.” “It is time to unlock our full creative potential,” the facilitator said, adding, “I am confident that we will succeed in this undertaking.” According to the facilitator, “in addition to the conversations on the remaining issues, the drafting process will start right after the summer break. The texts will be drafted by delegates through a process that I will organize and facilitate.” In the next phase of the informal process, the facilitator asserted, “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 Members.” Mr Molina said that he plans to circulate a tentative calendar of meetings, adding that “this calendar of meetings seeks to avoid, as much as possible, clashes with other important meetings.” The deputy trade envoy from Guatemala acknowledged that, “In this regard, I am trying to prevent scheduling conflicts with meetings that have been identified by some small delegations as also important to them, such as those of the fisheries negotiations, the TNC, the General Council, WTO reform retreats, the Senior Officials, and the DSB.” The facilitator said that he anticipates “a very intense process,” suggesting that, “Time is of the essence and circumstances oblige. Members have identified the reform of the dispute settlement system as the top priority and an expected outcome of the 13th Ministerial Conference.” He maintained that, “Before being considered by the Ministerial Conference, 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 us only 3 to 4 months to conclude our work as part of the informal process,” he said. Mr Molina acknowledged that “we are in the final stretch and there is still a lot of work to do.” The facilitator emphasized that, “To strike the right balance between the intensity needed to achieve the objective of delivering by the Ministerial Conference; and the need to ensure meaningful participation of all, particularly, of small delegations, I will continue to take every possible measure to ensure that all delegates have plenty of opportunities to participate, express their views and see those reflected in the final outcome.” DOUBTS PERSIST Despite the facilitator’s seemingly reassuring words about the process, doubts continue to persist over the informal process and how a text is likely to be cobbled together informally. There are also alleged fears that a text agreed informally could be foisted onto members at an appropriate stage as a “take-it-or-leave-it” text, said a former trade negotiator, who is well versed in the negotiating “pyrotechnics” of the earlier ministerial conferences, including MC12, at which several African members said that they were excluded from the “green room” processes. +
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