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Info Service on WTO and Trade Issues (Mar26/37) Yaounde, 26 Mar (D. Ravi Kanth) — The United States Trade Representative (USTR), Ambassador Jamieson Greer, has suggested a new trade paradigm shift to ensure that “bilateral and plurilateral agreements” trump multilateral trade deals at the World Trade Organization, as “the benefits will accrue to those partners – not to free riders or countries that undermine fair, market-oriented competition,” in a statement to be delivered at the WTO’s 14th ministerial conference (MC14) in Yaounde, Cameroon, on 26 March. Ironically, in the same statement, the USTR is calling for a multilateral permanent moratorium on customs duties on electronic transmissions. “I also urge Members to seize the opportunity this week to finally make the e-commerce duty moratorium permanent,” he reiterated. On WTO reforms, the USTR said that “MC14 is an opportunity to have a serious conversation, one that won’t be concluded here in Yaounde but which is important if the WTO is going to be relevant and responsive to its Members”. The USTR’s statement remains silent on the issue of restoring the two-tier dispute settlement system, which Washington paralyzed in December 2019, and on farm trade reform, particularly the unresolved issue of a permanent solution for public stockholding (PSH) programs for food security in developing countries, said people familiar with the development. More importantly, Ambassador Greer – who extolled the Trump administration’s reciprocal and “fair” tariffs – is now calling for bilateral and plurilateral negotiations on grounds that “in such bilateral and plurilateral agreements, the benefits will accrue to those partners – not to free riders or countries that undermine fair, market-oriented competition.” Before arriving in Yaounde for MC14, the USTR outlined several “make-or-break” markers on how the WTO reform discussions must be focused as per American priorities, regardless of their extreme implications for developing countries. This appears to stymie the WTO Director-General’s much-anticipated aspirations of transforming the Yaounde meeting into a “turning point” event in WTO history, said people familiar with the development. Justification of reciprocal tariffs In a document (WT/MIN(26)/ST/24), to be issued on 26 March, an advance copy of which was seen by the SUNS, the USTR, Ambassador Greer, described how “MC14 comes at a time of generational transition and change for the WTO and for the broader global trading system,” extolling US President Donald Trump’s world-view “to address deep and structural problems in the trading system.” Justifying the allegedly illegal unilateral reciprocal tariffs – dismissed by the US Supreme Court and later pursued under Section 122 of the US Trade Act of 1974 – the USTR said President Trump’s tariff and trade actions aim to lay “the foundations for a better trading order based on principles of reciprocity, fairness, and balanced trade.” Ambassador Greer acknowledged that the US actions and the agreements being forged with WTO members “are disrupting a status quo that has become economically unworkable and politically unacceptable.” The USTR claimed that the US “trade policy measures are a corrective response to a trading system, embodied by the WTO, that has overseen and contributed to severe and sustained imbalances.” Further, according to Ambassador Greer, “they are a response to the failure of multilateral institutions and negotiations to achieve fairness in terms of market access and a level playing field.” He said “they are a response to the realities of the international system, and an admission of what we all know to be true: nations prioritize first and foremost their essential security and the needs of their citizens.” According to the USTR, “the trade imbalances we are combatting have damaged industries and their workforces in developed and developing economies alike, leading to de-industrialisation, dependency, and despair.” He maintained: “The new global trading order that is emerging will be more flexible than the current system. It will better enable us to maintain balance and reciprocity. Where appropriate, it will allow us to have bespoke trade arrangements with different partners or groups of partners based on the unique elements of those relationships.” Effectively, the USTR appears to be suggesting that “bespoke trade arrangements” will replace legally binding agreements under WTO rules, particularly Articles I and II of the GATT dealing with Most-Favoured-Nation (MFN) treatment and the sanctity of binding tariff commitments. Bilateral & plurilateral agreements The USTR contended that “the new order will involve bilateral agreements and agreements among smaller groups of partners (plurilateral agreements), but this will lead to increased cooperation and progress.” Ambassador Greer seems to indicate the end of agreements based “on a lowest-common denominator.” The USTR is seemingly bidding farewell to the multilateral trade agreements on which the WTO was based and established at the end of the Uruguay Round of trade negotiations in 1995. He is now highlighting the strength of bilateral and plurilateral agreements: “In such bilateral and plurilateral agreements, the benefits will accrue to those partners – not to free riders or countries that undermine fair, market-oriented competition.” Asking what role the WTO can play “in the new paradigm on trade,” particularly in the ongoing reordering of economic relationships, the USTR is calling for far-reaching changes based on proposals made during the Trump administration’s first term in 2016-20. The USTR said, “as ministers, our focus should be on reforms that would make the WTO more responsive to Members and improve our ability to achieve outcomes that optimize our trading relationships.” The US reform charter at MC14 comprises several areas, including: 1. Exploring a pathway to incorporate plurilaterals into the WTO architecture: “The future of trade negotiations is likely to be plurilateral. If the pathway to incorporation is blocked, countries will still negotiate with their trade partners, but it won’t be at the WTO.” 2. Using objective criteria to determine eligibility for special and differential treatment: “It is politically unacceptable for significant, wealthy, or influential Members to gain benefits intended for countries truly at a different and low level of development.” 3. Increasing incentives for Members to meet their notification obligations: “Transparency is a basic precondition to work to level the playing field. If major traders cannot meet their notification obligations to other Members and their trading communities, it is impossible to expect that we can tackle more challenging issues.” 4. Having an honest and frank conversation on the Most Favored Nation or MFN principle, including its shortcomings and how it can be improved: “Members have long recognized the limits of unconditional MFN, first by negotiating exceptions and carve-outs, and then by avoiding MFN entirely. In its current form, the MFN principle fails to promote reciprocity and balance within the system. It does not prevent discriminatory trade practices or promote equal treatment, and it does prevent countries from optimizing their trade relationships in ways that would benefit each party to the relationship. WTO Members should acknowledge reality: holding progress and national interests hostage to rigid concepts of MFN will continue to undermine support for the WTO and the trading system generally.” Ambassador Greer said that he looks forward to having frank conversations this week on WTO reform, the future role of the WTO, and what this Organization realistically can, and cannot, accomplish. E-commerce moratorium For Washington, the only major priority at every ministerial meeting is the moratorium on customs duties on electronic transmissions, which trumps all other issues. “I also urge Members to seize the opportunity this week to finally make the e-commerce duty moratorium permanent,” the USTR reiterated. Ambassador Greer maintained that “this is a legacy-making issue for Cameroon as host and for the WTO.” “The United States has made this a priority in our bilateral negotiations over the past year and has made incredible progress. The WTO should capitalize on that,” he said. He said that “the United States is not interested in another temporary extension of the moratorium” on grounds that “it would not provide our businesses the certainty needed for their operations.” The USTR warned that a temporary extension “would also further weaken the WTO’s standing.” In conclusion, he said that “as we all traveled to Cameroon, I suspect many Ministers shared a similar thought. MC14 is an opportunity to have a serious conversation, one that won’t be concluded here in Yaounde but which is important if the WTO is going to be relevant and responsive to its Members.” Sharp criticism Several trade negotiators seem alarmed at the USTR’s “make-or-break” statement at MC14. “They claim Trump’s policy is a “corrective response” to “achieve fairness in terms of market access and a level playing field” and then go on to propose a “new order” for the WTO involving bilaterals and plurilaterals. This is a most dangerous prescription,” said a leading trade negotiator from a developing country. “This selective guardianship of the system conveniently limits the debate to tariffs, leaving out huge regular and ad hoc subsidies especially in the agriculture sector hence denying the claimed level playing field to a majority of developing countries whose livelihood rests on this sector,” another negotiator from South America said on a background basis. The latest subsidy notification from the US shows subsidies for cotton and sugar – key livelihood crops in several developing countries, including the poorest – being close to 20% and 40% of the respective size of these sectors in the US, a luxury most developing countries can’t contemplate in being bound at 10% via the so-called de minimis cap. “By proposing that the WTO hosts and manages bilaterals and plurilaterals, it poses a threatening question to the majority of developing countries as to why they should exist and pay for a system which wouldn’t invariably include them in such power-playing trade arrangements,” an African negotiator argued. “The key motivation and domestic selling point for most vulnerable developing countries in participating in the multilateral trading system has been their existence on an equal footing via the MFN, which is now considered by the US to be a concept with “shortcomings”,” the negotiator said. “This is natural if the key modality of engagement under the newly envisioned “multilateral” trading system is going to be bilateral and plurilateral. This enlightenment was completely missing among the US and EU (who also sympathises with the US on MFN “bashing”) and other richer countries who inserted deeply constraining agreements like TRIPS and GATS in the throats of then hugely suspicious developing countries in the name of the “single undertaking” and multilateralism. If the new norm is plurilateralism, let it be practiced honestly with equal opportunities for both the existing and new undertakings, allowing unwilling countries to part ways from agreements they find harmful to their interests,” the negotiator said. “It is also very intriguing that the e-commerce moratorium is a “legacy-making” issue, as being practiced for “nearly three decades”, but that MFN is not despite being in the deepest veins of the multilateral trading system since its inception for almost eight decades. If irony has to manifest itself in writing, the US statement fits squarely into the task.” +
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