|
||
|
TWN
Info Service on WTO and Trade Issues (Mar26/25) Yaounde, 24 Mar (D. Ravi Kanth) — On the eve of the World Trade Organization’s 14th ministerial conference (MC14) on 26-29 March, the United States has unveiled a comprehensive proposal on “further perspectives on WTO reform” that seeks to turn the tables by pushing for fundamental changes to decision-making, special and differential treatment (SDT), and the “level playing field.” Washington has extended the list of proposed reforms to three additional topics: the “application of the Most- Favoured Nation principle, the role of the Secretariat, and essential security,” said people familiar with the development. Ahead of MC14, which begins in Yaounde, Cameroon on 26 March, the US – which had previously taken rather indifferent positions on the Norwegian facilitator-led process – appears to have come out into the open with a “maximalist” agenda that could turn the multilateral global trade body upside down and possibly create a new differentiated plurilateral system, several trade envoys said. In one go, the US proposal seems to “torpedo” the core principles of the Marrakesh Agreement once and for all, said several trade envoys who asked not to be quoted. After having upended the rules-based WTO with its allegedly illegal unilateral reciprocal tariffs – dismissed by the US Supreme Court but still being pursued under Section 122 of the US Trade Act of 1974 – the latest WTO reform proposal by the US seems somewhat astounding in its attempt to legitimize its seemingly illegal acts, said a South American trade envoy who asked not to be quoted. The US proposal (WT/GC/W/998), titled “Further perspectives on WTO reform”, has remained silent on restoring the WTO’s two-tier dispute settlement system while upping the ante on US demands first echoed during the Trump administration’s first term (2016-2020), particularly regarding differentiation among developing countries for availing of special and differential treatment, said people familiar with the development. After “weaponizing” tariffs while dismantling the MFN principle and the sanctity of binding tariff commitments, the US, in its proposal, said that “as United States Trade Representative Ambassador Jamieson Greer has noted elsewhere, the current global order in international trade, overseen by the WTO, is untenable and unsustainable, and the objective of the United States in submitting the December 2025 Report was to spur candid discussions about the WTO’s problems and limitations and to facilitate work with like-minded partners to address these issues.” Citing the European Union’s proposal (WT/GC/W/986) submitted on 21 January (“EU Report”), the US concurred with Brussels that “the root causes of the crisis at the WTO” are “the growing mismatch between WTO rules and today’s trade environment, geopolitical tensions, the weaponization of trade, far-reaching and impactful State intervention leading to systemic imbalances and overcapacities, and paralyzed decision-making.” The US also quoted the Paraguayan proposal (WT/GC/W/987) submitted on 6 February stating that “reform work should focus on institutional topics such as plurilateral initiatives, SDT, dispute settlement, fairness, the WTO budget, and the Secretariat’s external relations.” Washington also referred to China’s proposal (WT/GC/W/989) submitted on 18 February, which “focused on decision-making, development, and fairness.” Mentioning the proposal (WT/GC/W/991) submitted by the least-developed countries (LDCs) on 26 February, the US said it “detailed its views on maintaining trust in negotiations, taking into account LDCs’ needs and capabilities in considering their commitments and concessions, and putting transparency and participation at the core of governance reform.” In a similar vein, Washington referred to the African Group proposal (WT/GC/W/992) submitted on 5 March “that strongly reaffirmed consensus-based decision-making and called for policy space for industrialization as well as a fairness agenda based on symmetry.” Lastly, it drew attention to the submission (WT/GC/W/993) made by the United Kingdom on 6 March “that diagnosed the WTO’s problems related to fair competition, transparency, dispute settlement, decision-making, and SDT eligibility. The UK Report noted that “[t]he reality is that we live in a world with different economic models with fundamental incompatibilities” and called for a WTO that is more relevant, flexible, and accessible.” US VIEWS Against the backdrop of different priorities underlined in the above proposals, the US summarized its views on the following issues ad verbatim: * “The United States believes WTO Members can take a step toward leveling the playing field by significantly strengthening incentives to comply with existing obligations to submit notifications.” (This appears to be targeted against China and other developing countries.) * “The United States believes that Members should seek to restore the purpose of SDT by agreeing to objective criteria for determining eligibility.” (This was also echoed by the facilitator on WTO reform, the “Friends of the System” group, and the European Union.) * “The United States believes efforts should focus on finding a more flexible pathway to incorporate plurilateral agreements into the WTO architecture.” (This implies that the procedural process set out in Article IX of the Marrakesh Agreement should be set aside.) * “The United States believes Members need to rethink how the MFN principle functions in its current form and embark on a frank discussion of the link between MFN and reciprocity, which itself is a bedrock WTO founding principle.” (This comes after the US allegedly violated the MFN principle by imposing tariffs as part of the unilateral reciprocal framework.) * “The United States believes that Members should address the role of the Secretariat and consider issuing guidance or taking other actions to ensure the Secretariat serves the interests of the Members – and not of the institution or any abstract trading “system”.” * “With regard to essential security, the United States believes that Members should agree to an authoritative interpretation of Article XXI of the GATT 1994, Article XIV bis of the GATS, and Article 73 of the TRIPS Agreement, to clarify the understanding of the essential security exception.” This comes after the US recently appealed the panel ruling in a trade dispute with China in order to make it void. The US also made it clear that it shall not allow its national sovereign positions on trade issues and agreements to be undermined by panel or Appellate Body rulings. On strengthening incentives to comply with existing obligations to submit notifications, the US elaborated on its December 2025 Report, which stated that the “actions of Members with economic systems that are incompatible with the principles of the WTO have tilted the playing field away from free market economies and have eroded trust in the ability of [the WTO] to ensure fair treatment in global trade”. The US argued that many of the issues associated with the level playing field cannot be adequately addressed at the WTO. It “requires coordinated action by like-minded trading partners outside the WTO.” Nevertheless, the WTO, according to the US, “can take specific action that would address some level playing field concerns by doing more to ensure Members meet their notification obligations, a basic principle of WTO membership.” Emphasizing the importance of transparency, the US said that “transparency is a precondition for trust and for negotiating “reciprocal and mutually advantageous arrangements” envisioned in the WTO’s founding documents.” If Members have seemingly failed to comply with their notification requirements, the US also took several domestic investment-related measures that were never notified at the WTO, said an ASEAN trade envoy who asked not to be quoted. However, for more than a decade, many Members have recognized that the organization has a severe problem with Members fulfilling their notification obligations. The US proposal further states: * The UK Report showed the scale of the problem by highlighting Members’ performance in submitting a single, biennial notification on subsidies. As of the final meeting of 2025 of the Committee on Subsidies and Countervailing Measures, 113 Members – more than two-thirds of the Membership – had not submitted their 2025 notification, and about half had not submitted their 2023 or 2021 notifications. Importantly, the UK Report noted that many notifications that have been submitted are incomplete and of very poor quality. * For certain Members, this reflects a choice not to be transparent. The EU Report noted that failure of Members to notify their trade measures contributes to a non-level playing field and stated that “the design of the current transparency regime contains too few incentives to notify.” The EU Report recommended that “notified measures should enjoy better treatment than non-notified measures.” * The United States agrees that the WTO does not provide sufficient incentives for Members to submit required notifications. The only incentive for a Member to submit a notification is the normative value that a Member assigns to upholding the obligation; the only disincentive for failing to submit a notification is being named-and- shamed by other Members. The low level of Members’ notification compliance since the WTO was established, and in particular certain Members’ chronic refusal to provide transparency, confirms these incentives are too weak. The consequences for the WTO are clear; until this problem is solved, it seems naive to expect any Members to undertake new commitments on more complex issues when other Members have flouted their basic transparency obligations for decades. As US Trade Representative Greer said in a recent speech, “Members consistently don’t comply with the most basic obligations on transparency and notifications related to domestic trade laws. If they can’t do this, how can they purport to fix bigger problems like overcapacity and development?” The US boasted that it “has been a leader in calling for notification reform since 2017” during the first Trump administration. WAY FORWARD According to the US, which claims that it has come up with a new approach, the “way forward” includes the following tenets: 1. The United States embraces the principle that notified measures should enjoy better treatment than non- notified measures. To ensure that Members have meaningful incentives to submit notifications, the disadvantageous treatment of non-notified measures needs to be concrete and actionable. 2. While the specific disadvantages will likely be agreement-specific and reflect the nature of the measure or practice that was not notified, there are a few high-level principles to this approach that Members should consider across WTO bodies: * Recognizing that transparency is the objective and not retaliation, a Member that has failed to meet its notification obligation should be given an opportunity to promptly rectify any deficiency identified by another Member before any disadvantage is imposed. * If a Member fails to meet its notification obligations, even when given an opportunity to rectify the error, the entire Membership must have a recourse. * Members that experience harm from the non-notified measure or practice should have immediate recourse to protect themselves from the measure or practice. * Any response by Members should be proportionate to the harm caused by the measure. The mere fact that a Member failed to notify a regulatory change should not give another Member the right to immediately suspend all imports of goods subject to that regulation. However, for many developing countries and LDCs, the above notification requirements could prove to be extremely burdensome and costly at a juncture when most of these economies are facing a whirlpool of crises following the meteoric rise in oil and gas prices due to the allegedly unprovoked and illegal war launched by the US and Israel against Iran, said people familiar with the development. On modernizing eligibility for special and differential treatment, the US commented on its December 2025 Report wherein it had noted that (i) it is unacceptable for significant players in the trading system to benefit from preferential treatment; (ii) it is untenable for WTO rules to apply to some Members but not to others in perpetuity; and (iii) the efforts of so many Members to avoid the application of WTO rules to their own activities undermine confidence in the wisdom of such rules. However, the US appears to have forgotten that it is a permanent user of SDT through the controversial Jones Act, as well as the subsidies it provides in agriculture and even some industrial subsidies on a standalone basis, as had been pointed out in a joint paper by China and India in 2019, said people familiar with the development. Along with the EU, the US now reckons that “the WTO Agreement does not specify criteria or a process for determining development status,” although per capita income is a major determinant for the self-designated SDT framework, said people familiar with the development. According to the US, “whether the WTO’s approach to using self-declared development status to determine eligibility for SDT was sensible in 1995, it makes no sense today in light of the vast changes in development and increasing heterogeneity among Members, seen in a wide range of economic, social, and other indicators.” The US argues that “OECD members and other Members who have made significant gains in development can continue to claim to be developing Members whenever and wherever they see fit, as if the world has stood still for three decades.” However, devastated by the 2008 global financial crisis that originated in the US and subsequently the COVID- 19 crisis in 2020, developing countries are now in a much worse economic situation according to the United Nations Human Development Index, with rising poverty levels and wide disparities, said people familiar with the development. As echoed in 2019 during the Trump administration’s first term, the US again reiterated that “self-declaration has severely damaged the negotiating arm of the WTO by making differentiation among Members near impossible.” By throwing a wedge between developing countries and LDCs, the US – notoriously known for creating an asymmetrical playing field in global trade – claimed that SDT creates “asymmetries that ensure that ambition levels in WTO negotiations remain far too weak to sustain viable outcomes.” On finding a pathway for plurilateral agreements, Washington argued in its proposal that “there are many aspects to “decision-making”‘ but the aspect that is the most urgent – and most ripe for meaningful reform – is the issue of plurilateral agreements.” The US said that in addition to its position on plurilaterals, “nearly all other Members across the development spectrum have long considered plurilateral agreements to be a useful means to foster new ideas, approaches, and innovative disciplines that are responsive to Members’ evolving needs and interests. Plurilateral options have become increasingly important as the WTO’s negotiating arm has atrophied.” The US maintains that “if the WTO is to have a future as a negotiating forum, it is likely to be for plurilateral negotiations, and that finding a path forward at the WTO for plurilateral agreements that limit their benefits and responsibilities to the contracting parties must be a priority.” Essentially, the US appears to be jettisoning the multilateral trade negotiations that embody the WTO, after securing several multilateral agreements – the last being the Trade Facilitation Agreement, followed by the Fisheries Subsidies Agreement on disciplining subsidies to illegal, unreported, and unregulated (IUU) fishing – said several trade negotiators who asked not to be quoted. Bringing its reciprocal theme to center stage, the US insists that “such plurilateral agreements would allow those Members that are ready to undertake new commitments to do so in a reciprocal manner, while allowing other Members to join and gain the benefits of those commitments in the future, when they are ready.” As part of the way forward on plurilaterals, the US said that “efforts to persuade a few holdout Members [in an oblique reference to India] to stop blocking plurilateral agreements that would not damage those Members economically have not succeeded. Efforts to encourage “responsible consensus” have not led to discernible change.” The US said that “to open a viable pathway to incorporate closed plurilateral agreements into Annex 4, Members should explore new concepts for developing plurilateral WTO agreements.” “These might include “interim plurilaterals” – voluntary and temporary agreements among a subset of Members to move forward on specific issues without needing full consensus. Parties to the interim plurilateral agreements would not pursue incorporation into the broader WTO framework for a specified number of years (e.g., five years). During that period, the parties would implement the agreement and monitor compliance. The interim period would afford the parties and non-parties – and, importantly, their stakeholders – an opportunity to observe the agreement, its impact, and the benefits it creates.” On rethinking the MFN principle, citing the EU Report about the applicability of the MFN principle in today’s trading environment, the US said that “even a brief review of the history of the MFN principle demonstrates that it is not always general and unconditional.” It argued that “historically, countries often negotiated conditional MFN commitments in their treaties and sometimes departed from the principle to best serve their interests amid particular economic and political conditions.” The US claimed that “for most of its history, the United States did not extend MFN treatment to the majority of its trading partners.” “Finally, a maximalist MFN practice in the current global economic circumstances does not advance, and in fact hinders, national interests,” the US said. +
|
||
