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TWN
Info Service on WTO and Trade Issues (May26/09) New Zealand is a co-sponsor of two plurilateral initiatives that were not multilaterally agreed by consensus, as required under Article IX of the Marrakesh Agreement that established the WTO in 1995. The two plurilateral initiatives are the "Declaration on Interim Arrangements for the Agreement on Electronic Commerce," set out in document WT/MIN(26)/W/26 and announced at the WTO's 14th Ministerial Conference (MC14) in Yaounde, Cameroon, on 28 March; and the Joint Statement on the Moratorium on Customs Duties on Electronic Transmissions, contained in document WT/GC/286 dated 7 May. Both initiatives appear to violate the WTO's core principles as enshrined in the Marrakesh Agreement. Notably, the second initiative - championed by the United States alongside over 20 other countries - is a direct response to the continued impasse in agreeing to a four-year moratorium on customs duties on electronic transmissions at MC14. The US has reportedly made clear that it waited for an outcome on the e-commerce moratorium through the General Council meeting, and with no decision, it announced the Joint Statement on the Moratorium on Customs Duties on Electronic Transmissions. As of 12 May, the signatories to this US-led plurilateral initiative include: Argentina; Australia; Costa Rica; Ecuador; Guatemala; Iceland; Israel; Japan; Korea; Malaysia; Mexico; New Zealand; North Macedonia; Norway; Panama; Paraguay; Peru; Singapore; Switzerland; Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu; United Kingdom; the United States; and Uruguay. Surprisingly, several signatories of the Declaration on Interim Arrangements for the Agreement on Electronic Commerce - announced by 66 countries in Yaounde - opted out of the US-led initiative for reasons that remain unclear. The countries that did not join Washington's closed, Government Procurement Agreement (GPA)-type, plurilateral initiative include the European Union, Canada, and China, among others, said people familiar with the development. The US, which was a founding member of the Joint Statement Initiative on Digital Trade, announced at the WTO's 11th Ministerial Conference (MC11) in Buenos Aires, Argentina in December 2017, chose not to join the 66-member initiative in Yaounde due to several objections related to data flows, source code, data privacy, and data localization issues, said people familiar with the development. Against this backdrop, the US-led Joint Statement on the Moratorium on Customs Duties on Electronic Transmissions explicitly states the following: "1. We, the aforementioned co-sponsors of this communication, express disappointment at the lapse of the long-standing WTO e-commerce moratorium at the 14th Ministerial Conference (MC14) in Yaounde, Cameroon. Nonetheless, this group of Members remains committed to do what we can to provide to businesses and consumers a measure of predictability and certainty in the absence of the multilateral E-Commerce Moratorium. 2. Beginning on 8 May 2026, we, the co-sponsors of this communication, will continue to not impose customs duties on electronic transmissions among ourselves. For the purposes of this communication, "electronic transmission" means a transmission made using any electromagnetic means and includes the content of the transmission. 3. We encourage all WTO Members who seek the benefits of trading under these stable conditions to join this commitment at any time with the aim of eventually securing a multilateral commitment, building upon that which had been consistently agreed upon by all Members since 1998." To recall, the US initially called for a permanent e-commerce moratorium at MC14, but in the face of severe opposition, Washington scaled down its demand to a duration of four years. However, in the latest Joint Statement, the US and the other co-sponsors left the moratorium's duration open, stating that "we, the co-sponsors of this communication, will continue to not impose customs duties on electronic transmissions among ourselves." While the US and the other co-sponsors link their initiative to the original 1998 e-commerce moratorium, they appear to sidestep the norm of a two-year duration for the moratorium, which is a core element of the 1998 e-commerce work program, said people familiar with the development. The core issue is that in the absence of coverage under Annex 4 of the WTO Agreement or being excepted under the Free Trade Agreement clause of the GATS, how can the alleged violation of Most-Favoured-Nation (MFN) treatment be justified, said a trade envoy, who asked not to be quoted. If the parties to the US-led initiative agreed to pass on the benefits to everyone through their commitments, it would have been treated akin to the Information Technology Agreement (ITA), the envoy said, adding that it raises systemic issues in that the WTO Director-General might be accepting domestic ratification of an instrument that might violate the WTO rules. In fact, Brazil stated at last week's General Council meeting that it is willing to consider a two-year extension of the moratorium, consistent with the practice of the last 30 years, according to people familiar with the Brazilian statement. INTERIM ARRANGEMENTS Meanwhile, sharp concerns are being raised over the "Declaration on Interim Arrangements for the Agreement on Electronic Commerce", announced by 66 countries at MC14 in Yaounde. The 66 countries include New Zealand, among others, while the US has not joined this initiative. The signatories explicitly stated their intention to implement a plurilateral agreement on electronic commerce and to proceed with domestic procedures for its acceptance. The co-sponsors of the Declaration said it would come into force after 45 "Participants" have notified the WTO Director-General of their acceptance of the agreement. Further, they stated that it would be implemented on the basis of "interim arrangements" until WTO Members decide to incorporate it as a plurilateral agreement in Annex 4 of the WTO Agreement. In the absence of consensus, the "interim arrangements" will remain somewhat illegal within the WTO. The WTO's Director-General, Ms Ngozi-Okonjo-Iweala, reportedly announced in Yaounde that the Secretariat can accommodate the agreements after they are ratified by their members. According to New Zealand trade law academic and analyst Jane Kelsey: "The implications of this plurilateral Declaration strike at the very core of the WTO. The agreement had no mandate for the negotiations, but was based on a Joint Statement by a number of Members in 2017 (hence the description "Joint Statement Initiative" or JSI). It failed to secure the consensus support of Members at the General Council for its adoption as an Annex 4 plurilateral agreement." Although the adoption of the "interim arrangements" was never communicated to Members either before or during the Yaounde conference, it appears somewhat inexplicable how it was included as a formal WTO document (document number WT/MIN(26)/W/26) in the Ministerial Conference series, she noted. India also reportedly stated that members were not informed that the "interim arrangements" were part of the MC14 agenda, said people familiar with the GC proceedings. Several key concerns were raised about the JSI e-commerce as a precedent. According to Prof Kelsey, the concerns include: 1. Unmandated plurilateral negotiations, and the adoption of the resulting agreement as a WTO instrument, using a "pragmatic" approach that is not provided for in the rules, would create a precedent for more general non- compliance with WTO rules. 2. If the WTO's instruments and the scope of its agreements can be expanded by collective action outside the rules, the institution itself will have no boundaries. 3. If the Director-General and Secretariat exceed the constitutional limits on their power by facilitating, and then servicing, these agreements, they will have no effective constraints on what they do. 4. If plurilaterals can be adopted as de facto agreements in this way, Members will have no incentive to comply with the explicit requirements of Article X.9 for consensus, enabling plurilateralism to become the norm, rather than the exception, in the multilateral trading regime. 5. An open-ended plurilateral that provides for future negotiations based on the will of a sub-group of Members can override in-built negotiating mandates on the subject matter and render them irrelevant. 6. All of this works in favour of the power-brokers in the WTO, whose economic and strategic influence will enable them to dictate the future direction, subjects, and activities of the WTO at the expense of developing countries and LDCs, and their needs and priorities. Prof Kelsey said that by the end of MC14, the Interim Arrangement for the JSI on e-commerce had become a precedent for the back-door adoption of existing and future unmandated plurilateral agreements. She noted that in March, prior to the ministerial, US Trade Representative Jamieson Greer foreshadowed the adoption of "interim plurilaterals," which he described as "voluntary and temporary agreements among a subset of Members to move forward on specific issues without needing full consensus." There is no such thing as an "interim plurilateral" in the WTO, Prof Kelsey argued. In her statement at last week's General Council meeting, GC chair Ambassador Kelly said: "In respect of the e-commerce moratorium and work programme, it is clear that there is more work to be done. I propose that following the conclusion of this meeting, I meet with delegations to continue to explore their willingness to conserve and agree on the elements of the text on the e-commerce moratorium and work programme." According to the restricted document Job/GC/507, the GC chair also stated: "In the first instance, I would look to meet with those delegations unable to join consensus on this text at MC14. I would intend to report to the July General Council, or if possible, sooner, on this matter." Against this backdrop, the GC chair's oversight of the consultations on the e-commerce moratorium could raise conflict-of-interest issues, said a trade envoy who asked not to be quoted. +
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