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TWN
Info Service on WTO and Trade Issues (Sep25/18) Geneva, 24 Sep (D. Ravi Kanth) — The facilitator overseeing the reform of the World Trade Organization is expected to discuss with members on 24 September on how they can “move forward in a pragmatic and results- oriented manner” in “laying the groundwork for ministerial guidance at MC14, which is now fast approaching.” In an email sent to heads of delegation last week, the facilitator, Ambassador Petter Olberg of Norway, sought members’ views on two guiding questions: the “Role of the WTO” and “advancing reform pragmatically.” Regarding the role of the WTO, the facilitator noted that “72% of global trade is still conducted on an MFN basis.” He asked members how they can “strengthen and/or reform this core of the WTO and the multilateral trading system?” However, the facilitator did not elaborate on what would constitute the “core” issues at this juncture, or whether they would include strengthening the significantly impaired enforcement function of the WTO involving the two- stage dispute settlement system, said a trade envoy who asked not to be quoted. The envoy also suggested that “even the assertion that 72% of global trade is still being conducted under most- favored-nation treatment is a misnomer, as much of the trade is taking place under preferential tariffs of zero percent, in some of the highest metals.” A trade analyst who asked not to be quoted said the WTO Secretariat now appears to be quoting the figure of 72%, a drop from the earlier 80%, which may be due to the “reciprocal” tariffs imposed by the Trump administration. Earlier, in an op-ed in the Financial Times, WTO Director-General Ms. Ngozi Okonjo-Iweala cited issues such as “lack of transparency from members, level playing field issues, unfair trading practices, and potential overreach of the Appellate Body.” These remarks were widely interpreted as indirectly referencing Washington’s repeated criticisms of China’s allegedly opaque trade practices, according to people familiar with the development. Notably, while the DG observed that “in the past six months, the global trading system has been jolted by the US’s unilateral actions,” she did not elaborate on why these actions are deemed “unilateral” within a rules-based trading system, nor did she address how Washington’s policies have arguably dismantled the very multilateral framework that has underpinned global trade since the establishment of the GATT in 1948 and the WTO in 1995. The DG’s apparent silence on the erosion of the two foundational pillars of the global trade order – Most- Favored-Nation (MFN) treatment under Article I and the binding sanctity of scheduled tariff commitments under Article II of the GATT – has been interpreted by some as a tacit cover-up of US actions. “It’s a conspicuous omission,” said a trade envoy, speaking on a background basis. NORMAL TRADE CONTINUES? In her op-ed, the DG cited recent WTO trade projections: “Global goods trade volumes are expected to grow by 0.9% this year – well below the 2.7% projected before the new US tariffs, but an improvement from the 0.2% contraction predicted in April.” She noted that following recent agreements, “US trade-weighted average tariffs have jumped from 2.4% at the beginning of the year to 18.4%.” Despite this turbulence, she claimed, “the rest of the world has mostly continued to trade on normal terms, as businesses scramble to re-calibrate.” She pointed out that according to WTO analysis, “roughly 72% of global goods trade is still operating on basic “Most-Favored-Nation” (MFN) tariff terms.” “If the anchor of the system is removed, what does “normal” even mean?” asked sources who requested anonymity. “Historically, smaller and poorer economies have gained more from a rules-based multilateral system than from bilateral bargaining… The erosion of that baseline protection leaves many without meaningful market access.” ADVANCING REFORM PRAGMATICALLY In his email, the facilitator asked members how to “organize our work on WTO reform between now and the December General Council – including governance issues such as decision-making, as outlined in my July report?” On decision-making, the DG said in her FT op-ed that “the treasured consensus decision-making system must not become a recipe for paralysis.” Privately, several members said the DG’s position on consensus decision-making is problematic, and appears to be an attempt to align with long-standing efforts by the US and other industrialized countries to replace consensus-based decision-making with mechanisms like “responsible consensus” or “flexible consensus” – practices many consider to be legally dubious under current WTO rules. “If the US’s actions are unilateral and inconsistent with the rules, the DG’s statement on consensus is equally inconsistent – and arguably illegal,” said a former African trade envoy. In the restricted document (Job/GC/456) issued last July, the facilitator said “there was strong and widespread support for preserving the principle of consensus, seen by many as foundational to the WTO’s legitimacy, inclusivity, and equity.” He said “members emphasized that consensus is more than a procedural rule – it is a core principle underpinning the multilateral trading system, ensuring all voices are heard and carry weight.” “At the same time,” the facilitator said, “many noted that consensus does not require unanimity. There was broad recognition that the current interpretation and application of consensus has contributed to decision-making paralysis,” a conclusion shared by the DG in her FT op-ed. Several trade envoys questioned the commonality in assessments shared by the facilitator and the DG and whether their proposals are a “top-down” reform recipe being foisted on the members, said people familiar with the development. +
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