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Info Service on WTO and Trade Issues (Jan25/02) Cochin, 21 Jan (D. Ravi Kanth) — At a day-long retreat on “development” held at the Hilton Hotel in Geneva on 16 January, the World Bank (WB)’s chief economist urged the trade envoys of the World Trade Organization to consider the issue of investment, arguing that it is the other side of the trade coin, said people familiar with the development. The WB’s chief economist, Mr Indermit Gill, appears to have underscored the need for bringing investment into the rubric of trade, claiming that investment, infusion and innovation would lead to “development” in developing and least-developed countries (LDCs). The first retreat on “development” convened by the chair of the WTO’s General Council (GC) on 16 January sought to bring about a fundamental shift in special and differential treatment (S&DT) availed by the developing countries as well as removing some of the existing categories such as developing countries and least-developed countries from the trade negotiations. However, this appears to have made little headway at the retreat, said people familiar with the development. In a restricted document (Job/GC/419) circulated ahead of the retreat, the GC chair, Ambassador Petter Olberg of Norway, suggested that there is a “broad call to operationalize differentiation and revisit past ways of arriving at consensus without re-categorizing developing Members and LDCs.” He suggested that issues such as “trust deficit, lack of political will and procedural challenges” need to be diagnosed “to cure (them) properly.” Given the repeated demands by the first Trump administration to bring about differentiation among developing countries for availing of S&DT, which was fiercely opposed by the developing countries during 2017-2020, the GC chair along with the “Friends of the System” group seem to be preparing the ground to acquiesce to the US demands, said people familiar with the discussions. Although a full report on the discussions held at the retreat is yet to be circulated by the GC chair, it appears somewhat clear from the issues raised and the questions posed on “development” in the restricted document that the current leadership at the WTO is seeking to deliver on the US demands on development. To place the issue in perspective, the US, on 16 January 2019, raised the issue of “differentiation” in an alleged attempt to ensure that China, India, Brazil, South Africa, and Indonesia among others are prevented from availing of S&DT. In its 45-page paper, the US called for “differentiation” among developing countries because of the “economic tides” and “great strides” made in the years since 1995. The US had claimed that the WTO remains stuck in an outdated construct of “North-South division, developed and developing countries” that fails to reflect the realities of 2019. Responding to the assault launched by the US on S&DT, China and India circulated a 38-page paper in February 2019, arguing that “there is a huge development divide between the developing and developed Members of the WTO, not only in aspects of economic development level, industrial structure and competitiveness, regional balance, but also in education, social security and the ability to effectively participate in international governance.” (See SUNS #8846 dated 14 February 2019). Notwithstanding the significant progress achieved by developing Members since the creation of the WTO in 1995, China and India said that “the old divides have not been fully bridged or even have been widened, while new divides, such as those in the digital and technological areas, continue to emerge.” China and India had argued in their paper that “it is inappropriate, if not inhumane, to measure a member’s development level with select gross economic and trade statistics, so as to deny the divide between developing and developed Members, and to request the former to abide by absolute “reciprocity” or superficial “fairness”, essentially depriving the developing Members of their right to develop.” China and India had said in their paper, “the WTO rules-based system has helped the growth of trade but has not made it equitable.” At the WTO and in the global trading system, including at forums such as the G20, the developing countries are confronted by “capacity constraints” since they lack “human resources with capable negotiation skills, a well-functioning intra-governmental coordination mechanism, and sufficient social participation in and support to trade negotiations,” the China-India joint paper had suggested. Consequently, the developing countries are unable to overcome these deficiencies that “diminish not only the ability of developing Members to negotiate, but also the efficiency and effectiveness of translating negotiation outcomes into their domestic economic growth.” It is against this backdrop, China and India argue, that the S&DT was made one of the “cornerstone” principles of the GATT (General Agreement on Tariffs and Trade). Therefore, “the S&DT principle was meant to be the main instrument for addressing the development divide and capacity constraint of developing Members, to help them achieve growth, expand employment and reduce poverty through trade,” China and India argued. Moreover, “the current S&DT provisions in the WTO agreements are rules formulated through negotiations and compromises, not charities granted by developed Members,” China and India said. Besides, the S&DT provisions remain only best endeavour clauses. The developing countries led by India and South Africa among others have called for making the S&DT provisions effective and binding as part of the implementation issues in the Doha Development Agenda. After agreeing to the implementation issues, the developed countries led by the US and the European Union had vehemently opposed discussing any improvements for making the S&DT provisions effective. “In contrast, it is developed Members that have reaped substantial benefits by taking advantage of the “reverse” S&DT,” China and India argued in their joint paper. Worse still, the developing countries who acceded to the WTO since 1995, including China, made “tremendous efforts, significantly contributed to upholding the core values of the WTO, including free trade, openness and non-discrimination; supporting the rules-based multilateral trading system; and maintaining a transparent, stable and predictable global trade environment,” the joint paper pointed out. China and India reminded the US that “the dichotomy of developed and developing Members is frequently used by almost all International Organizations to describe the structure of today’s global economy.” PLENARY SESSION AT RETREAT During the plenary session at the retreat at the Hilton Hotel on 16 January, two speakers – Mr Indermit Gill, the WB chief economist, and Professor Mariana Mazzucato of University College, London, who is known for her expertise on industrial development and policy – addressed the trade envoys. In his address, Mr Gill provided a historical account as to how people developed and how productivity evolved in the countries, said participants familiar with the discussion. He said that countries that engaged more while “keeping their doors open” witnessed a sharp rise in their productivity. Mr Gill praised China and India for raising their productivity over the last three decades. At the retreat, South Africa sought further elaboration on industrial policy and how sometimes when countries want to undertake industrial policies, they are being told that their policies are in potential breach of their WTO commitments. In response, Mr Gill suggested that considering the governmental financial constraints, “I think the best way the governments can engage in their economy is by providing basically the rich infrastructure, and both digital and financial infrastructure, rather than engaging in individual sectors, which is generally not very productive,” said people familiar with the discussions. The WB chief economist also brought the issue of investment into his address, suggesting that investment and trade are two sides of the same coin, said people familiar with the development. Mr Gill underscored the need for investment, infusion and innovation, the “three Is”, that could lead to development. Without mentioning US President-elect Donald Trump’s demands and criticisms of the global trading system, Mr Gill said somewhat obliquely that problems relating to the level of development and the level of and share of restrictive or intrusive measures in the economy lie with the big advanced countries like the US, Canada, India, and China, said a participant who asked not to be quoted. +
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