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Info Service on WTO and Trade Issues (Jun24/02) Geneva, 29 May (D. Ravi Kanth) — Several developing countries, including China, Indonesia, and India among others, strongly supported the African Group’s proposal on “policy space for industrial development – advancing WTO Committee work to support structural transformation and industrial development in developing countries” at the WTO’s General Council meeting last week, said people familiar with the development. Amidst the implementation of industrial development policies by the trans-Atlantic nations and China among others, the African Group’s proposal sought “policy space” and flexibility in the various provisions of the WTO agreements that were negotiated during the Uruguay Round more than 30 years ago, said people familiar with the development. At the WTO’s General Council meeting on 22 May, Chad tabled the African Group’s proposal, saying that the purpose “is to inform WTO Members of the activities and initiatives regarding policy space for industrial development.” The African Group said “through a series of discussions focused on this topic, including on key raw materials in the context of the green transition,” it aims to “reaffirm the priority and to stress the importance of broadening policy space and the policy tools provided in certain WTO Agreements to unlock Africa’s productive capacities and support the structural transformation and industrialization of its economies.” Lamenting that the WTO’s 13th ministerial conference (MC13) that concluded in Abu Dhabi on 2 March failed to provide “firm political guidance” on their proposal, Chad said “the need for policy space to advance industrial development of developing countries” was recognized at the conference. Based on an earlier proposal (WT/GC/W/868) that it had presented in March last year, the African Group said that it wants to step up the engagement on its current proposal following MC13. The Group said that it wants to focus discussions on the “development perspective”, emphasizing that it is at the center of the approach that is envisaged in its proposal. “The introduction of a sectoral dimension to this discussion, with critical minerals as, but one example, will allow for more meaningful and rich engagements,” it argued. AFRICAN GROUP’S PROPOSAL With “the deepening economic divergences, especially between developing country economies and developed or advanced economies,” the African Group said “developing countries face significant constraints in implementing industrial policy measures to transform their production structures due to among others, existing rules that uphold the status quo.” Ironically, the major industrialized countries have seemingly ignored the WTO rules in advancing their semiconductor and “green” technology policies, according to several media and academic reports. Against this backdrop, in its proposal (WT/GC/W/936) submitted on 14 May, the African Group said that “this situation highlights a critical oversight by developed countries that historically used similar measures to advance their industrial development.” Further, “in response to the reality of unequal distribution of the gains from trade and share in global value chains, there is a need to re-balance and re-calibrate the WTO policy toolbox,” the African Group said. More so, at a time when countries are facing existential climate change crises, it is imperative to address “contemporary challenges such as mitigating climate change and promoting sustainable development,” it added. The imperative of structural transformation is more pronounced now, and the time has come for a radical rupture with the early patterns of dependence on commodity exports, the African Group suggested. “This reality amplifies the importance of manufacturing and value addition as the bases for developing sustained industrial capabilities,” the African Group said. It argued that “multilateral trade rules cannot remain static in the face of these extant challenges and historical patterns of international trade that have inhibited structural transformation and crippled the resilience of many developing countries, especially African economies.” The African Group said that “the WTO has an important role to play in contributing to inclusive development and, principally, meaningful integration of developing countries in global value chains.” Emphasizing the importance of “export diversification” which is “a crucial factor for resilience”, the African Group observed that “overcoming the trust deficit in the multilateral trading system and bolstering the relevance of the WTO will entail making the institution responsive to developing countries’ development needs.” “Fundamentally,” according to the African Group, “this must include supporting a shift in Africa’s structural profile so that the continent is not trapped in a commodities-based growth path but also produces and exports a diversified range of products.” More importantly, “this transformative possibility will require more than just structural reforms; it also needs to draw on industrial policy measures and tools to help developing countries close the existing industrial development gap,” the African Group stated. Against the backdrop of the ongoing subsidy war between the major trading nations in building advanced semiconductor and “green” technologies, the African Group said that “it is notable that those developed economies that are building new capabilities, diversifying their economic base, and discovering new sources of competitiveness are not relying solely on structural reforms.” It said that these countries “are deploying various state-backed instruments to sustain competitiveness and create high-paying jobs in these new sectors.” “The consistency of some of these measures with WTO obligations appears questionable,” the African Group said. It added that “some of these Members have used and continue to use measures such as local content requirements, providing state aid and grants, and tapping into development finance institutions to provide subsidised capital.” According to the African Group, “these measures are capabilities that the majority of developing countries do not possess, yet they are constrained by the rules in undertaking similar measures to support their economic resilience.” It drew attention to “certain provisions under GATT 1994/TRIMs Agreement”, which constrain “developing countries from enhancing domestic spill-overs from investments.” “This demonstrates the relevance of policy space to promote industrial upgrading,” the African Group said. FAILURE AT MC13 Although MC13 could not produce the outcome that the African Group envisaged, it noted that “the rich engagements on this topic by Ministers highlighted the urgency of the WTO to confront the structural transformation and industrialization challenges faced by many developing countries.” The African Group said “several Members underscored the need to re-balance existing trade rules, particularly in the Agreement on Subsidies and Countervailing Measures (ASCM), Trade-Related Investment Measures (TRIMs), and Trade Related Aspects of Intellectual Property Rights (TRIPS), including technology transfer, in a manner responsive to their development needs and facilitating the integration of developing countries into global value chains.” It said that it “will be building on the longstanding papers it has submitted on several occasions to the WTO over the years to explore how trade rules can become a positive force for promoting shared growth and inclusive development, including in the race towards a green transition.” “At the core of the African Group’s objectives for policy space is that trade rules should create an enabling environment for developing countries to undertake measures to promote structural transformation and industrial development,” it emphasized. On the way forward, the African Group said that it will “pursue discussions in the CTD [Committee on Trade and Development] as a focal point for the consideration and coordination of work on development in the WTO, including relevant WTO subsidiary bodies, as necessary and in line with their technical mandates, e.g. the SCM [Subsidies and Countervailing Measures] Committee, TRIMs Committee, the TRIPS Council, WGTTT [Working Group on Trade and Transfer of Technology], etc.” The African Group said it will soon “present a comprehensive submission and a concrete work program in this regard at the July 2024 General Council meeting.” China, which has become a leading proponent in advancing sustained industrialization policies, said it “agrees with the significance of providing policy space for developing members to pursue structural transformation, industrialization, and integrate into global value and supply chains.” Expressing regret that “the policy space paragraph could not be included in the outcome document” of MC13, China said that it “supports multilateral discussions on policy space, with a view to achieving meaningful development-oriented outcomes.” “This will increase the relevance of the WTO, respond to the concerns of developing members and rebuild trust,” China said. China offered a work plan for the “short, medium, and long terms” for advancing the discussions on the African Group’s proposal. “In the short term,” China said, “considering the current challenges, especially those facing the developing members including LDCs, maybe discussions could start from bringing back the non-actionable subsidy in the ASCM (Agreement on Subsidies and Countervailing Measures).” “In the meantime, we should also bear in mind that such discussions are not going to open the door to distortive, discriminatory and protectionist subsidies under the pretext of environmental protection, but rather the opposite,” China said. “On TRIPS and technology transfer,” China said that “we support the challenge-based, solution-oriented approach on those key issues,” adding that “business engagement may help us have a better understanding both on the situation and the possible solutions.” Among the other developing countries and coalitions that supported the African Group’s proposal, Indonesia made a strong statement, saying that it “attaches great importance to the issue of strengthening policy space in industrial development, especially given that industrialization plays a crucial and important role in increasing trade revenues and creating more job opportunities… thus producing a leap in welfare for our peoples.” Indonesia said it agrees to the notion that the WTO “needs to play a more active role in terms of supporting developing countries – especially in enabling them to catch up with developed members, and effectively transform their economies, and thus level their playing field.” Jakarta said it is “open to further discussing the idea of conducting more comprehensive deliberation regarding previous members’ proposals on this theme, as well as building on the deliberations pertaining to trade and industrial policies prior and during MC13 – especially with regard to the current state of play of the global industry development.” According to Indonesia, “the main objective of this exercise should be aimed at undertaking more comprehensive and structured evaluation – especially to ensure that there is adequate policy space for developing and least- developed Members to achieve sustainable industrialization and structural transformation – including through domestic production that could create more value-added commodities.” Further, “industrial development should also take into consideration different national circumstances and priorities,” Indonesia said, adding that “it should also come up with concrete suggestions on how WTO could provide effective assistance that will enable developing countries to overcome the challenges that they are facing in their industrialization efforts.” In crux, members of the African Group are seeking “policy space” to pursue “green” industrialization policies, not by violating the WTO rules allegedly like the major industrialized countries, but by improving them according to their priorities, said people familiar with the discussions at the General Council meeting. +
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