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Info Service on WTO and Trade Issues (May26/20) Geneva, 28 May (D. Ravi Kanth) -- Argentina on 26 May proposed a "procedural mechanism for the incorporation of plurilateral agreements into Annex 4 of the Marrakesh Agreement" - a move that appears to be aimed at circumventing the World Trade Organization's cardinal norm of decision-making by consensus, said people familiar with the development. In a paper (WT/GC/W/1001), titled "Perspectives on WTO reform", Argentina, a co-sponsor of several recent and controversial plurilateral initiatives, said that it "is of the view that the current paralysis in the decision- making process constitutes one of the most pressing challenges facing the WTO." Against the backdrop of repeated failed attempts to legitimize plurilateral initiatives pursued without prior consensus - as required under paragraph one of Article IX of the Marrakesh Agreement concerning decision- making - Argentina contends that "in the absence of progress on this procedural aspect, it will be difficult to move the process forward in other areas, including in the negotiating function". However, critics warn that framing the binding WTO rules as being merely "procedural" issues risks undermining the institutional foundations of the WTO itself. As the WTO is a rules-based and member-driven organisation, any attempt to characterize the WTO rules as "procedural" issues would be tantamount to eroding the sanctity of these rules on a selective basis, with systemic implications, cautioned a trade envoy who requested anonymity. The WTO system is steadily being transformed into an "a la carte" mechanism for advancing plurilateral deals - an approach pushed by the United States at the recently failed WTO's 14th Ministerial Conference (MC14) in Yaounde, Cameroon, another trade envoy warned, speaking on a background basis. Championing plurilateral initiatives Against this backdrop, in its paper, Argentina said that it "recognizes that plurilateral initiatives can provide a useful avenue for willing Members to advance negotiations on specific disciplines in a flexible and efficient manner, while remaining open to broader participation by the Membership." Argentina further argues that "the Marrakesh Agreement already provides a legal mechanism for incorporating such agreements into the WTO framework. Article X:9 clearly states that their incorporation into Annex 4 requires a decision by consensus." Yet, critics note that paragraph three of Article II of the Marrakesh Agreement explicitly states: "The agreements and associated legal instruments included in Annex 4 (hereinafter referred to as "Plurilateral Trade Agreements") are also part of this Agreement for those Members that have accepted them, and are binding on those Members. The Plurilateral Trade Agreements do not create either obligations or rights for Members that have not accepted them." Moreover, paragraph two of Article III of the Marrakesh Agreement unequivocally declares: "The WTO shall provide the forum for negotiations among its Members concerning their multilateral trade relations in matters dealt with under the agreements in the Annexes to this Agreement. The WTO may also provide a forum for further negotiations among its Members concerning their multilateral trade relations, and a framework for the implementation of the results of such negotiations, as may be decided by the Ministerial Conference." According to Argentina, however, the consensus principle under paragraph nine of Article X of the Marrakesh Agreement has meant that "in certain instances, the application of this requirement may have had the effect of slowing progress in the decision-making process." At MC14, around 66 countries appeared to go against the established rules and conventions by announcing "the Declaration on Interim Arrangements for the Agreement on Electronic Commerce" (WT/MIN(26)/W/26) on 28 March. Subsequently, the United States, alongside more than 20 countries, launched another plurilateral initiative - the Joint Statement on the Moratorium on Customs Duties on Electronic Transmissions, contained in document WT/GC/286 dated 7 May. Argentina, which co-sponsored both initiatives, argues that "Members may wish to avoid situations where the entry into force of such agreements depends on procedural considerations that could affect the Organization's ability to deliver results." Several members, however, rejected Argentina's justification, warning that introducing plurilateral deals through the proverbial backdoor could fundamentally reshape the WTO into a non-multilateral structure built on a "them vs. us" framework. Although Argentina insists that it "does not seek to replace the principle of consensus," one trade envoy said that Buenos Aires appears, in practice, to be rendering the consensus principle irrelevant. Argentina maintains that the underlying objective of its proposal is "to contribute to ensuring that consensus operates in a more effective, transparent and results-oriented manner, allowing outcomes supported by a critical mass of Members to move forward within the WTO framework." Yet, several members argue that invoking a "critical mass" framework could pave the way for majority-based decision-making that overrides the WTO's rules-based architecture. Argentina said that its proposal seeks "to contribute to the ongoing discussions" under the decision-making pillar "with a view to developing a procedural mechanism for the incorporation of plurilateral agreements into Annex 4 of the Marrakesh Agreement." It further argues that "Such a mechanism could establish clear criteria and requirements for incorporation, thereby reducing potential uncertainty in the application of the consensus rule." Way forward Under the sub-heading of "Way forward," Argentina said its proposal seeks "to establish a procedural mechanism to allow plurilateral agreements to be incorporated into Annex 4, provided that they meet the following criteria or requirements:" a. Consistency with WTO objectives: "The agreement under consideration must be compatible with the objectives of the Marrakesh Agreement and the WTO legal framework." b. Critical mass: "An assessment should be undertaken on a case-by-case basis, taking into account the specific discipline or sector covered by the agreement. To provide guidance in this regard, Members could consider whether the agreement is supported by a substantial proportion of the Membership (for example, two-thirds of the Membership), or whether participating Members represent a significant share of trade in the sector covered by the agreement (for example, 66%)." c. Disciplined use of consensus/objection: "A Member opposing the incorporation of a plurilateral agreement that enjoys broad support among the Membership should be required to do so only by submitting a written communication setting out the reasons for its position, including an indication that the matter concerns a vital national interest. In such cases, the Member concerned would bear the burden of proof to justify its veto and demonstrate the existence of such a vital national interest." d. Open accession: "The agreement must provide for accession by any WTO Member." Argentina further contends that "in this regard, Members may wish to further consider whether such a mechanism could be established through an amendment to the WTO Agreement or through an authoritative interpretation under the auspices of the General Council or the Ministerial Conference." It added that it looks "forward to further engaging with Members on the basis of the elements set out in this document, with a view to refining and further developing this proposal." Implications In reference to the "Declaration on Interim Arrangements for the Agreement on Electronic Commerce", which was announced by 66 countries at MC14 in Yaounde, trade law analyst and academic Prof Jane Kelsey warned: "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." She raised several major concerns, including: 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." In essence, several members appeared to warn that Argentina's proposal could mark a turning point for the multilateral trading system - weakening the principle where every member, large or small, exercises an equal right in the decision-making process based on consensus. +
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