|
||
|
TWN
Info Service on WTO and Trade Issues (Nov26/07) Geneva, 10 Nov (D. Ravi Kanth) -- China, joined by many developing and least-developed countries, has fiercely pushed back against proposed changes to the World Trade Organization's most-favoured-nation (MFN) principle and special and differential treatment (S&DT) sought by the United States, Norway and the European Union, among others, during a day-long meeting on 9 November on the WTO reform track on "foundational" issues. China, along with other developing countries, particularly the African, Caribbean and Pacific (ACP) Group, the least-developed countries (LDCs), Brazil, Pakistan and India, reportedly questioned the rationale for the proposed changes on various legal grounds. They argued that while proponents were seeking changes and exceptions to MFN and S&DT, they had neither clearly defined the problems nor provided concrete evidence to justify such changes, according to people who spoke to the SUNS. "I think a majority of members are not in agreement with the proposed changes, including exceptions, in MFN and S&DT," an African trade envoy said, preferring not to be identified. The day-long meeting was convened by Ambassador Sumathi Balakrishnan of Malaysia, the facilitator overseeing the discussions on foundational issues. She framed the meeting around "the MFN principle", given the divergent perspectives "on its importance, operation and continued relevance." She noted that "while many members have emphasized the importance of preserving and strengthening the principle, discussions [by the US and a few other members] have also raised questions about the operation and scope of existing exceptions and flexibilities, including whether they adequately address the circumstances and policy needs of Members." In her communication (ICN/GC/REFORM/13) sent to members on 30 October, the facilitator said she wanted "to deepen our collective understanding of the MFN principle". She added that "the aim would be to explore the purpose of the MFN, how existing exceptions function in practice, Members' understanding of the purpose of certain exceptions, any concerns or gaps that Members may identify, and whether there are aspects that merit further consideration." In framing the issues for discussion on 9 November, the facilitator said that "another theme raised in our discussions has been the role of the Secretariat". She noted that "issues identified by some Members in this context include neutrality, transparency and oversight of Secretariat activities and communications." She proposed focusing the discussion on the Secretariat's "neutrality, leaving the other issues for possible consideration in subsequent discussions." The facilitator also posed several questions: A. Do Members think Secretariat neutrality is important, and if so, why? B. Where, if anywhere, do Members see scope for improvement? C. What do Members think can be done to better ensure Secretariat neutrality? The underlying intention, she said, "would be to draw out Members' perspectives and practical suggestions, helping us better understand existing practices and identify any areas where further consideration may be useful." MEMBERS' RESPONSE The discussion began with the presentations of proposals by the ACP and LDC members, which reportedly raised several questions concerning MFN and S&DT. The LDC group, for example, emphasized the importance of preserving the Marrakesh Agreement as it stands, particularly Article 11.2. It pointedly asked whether "new rulemaking broadens or fragments the system and whether new rules will keep arrangements open and MFN-consistent." The group called for maintaining the Enabling Clause and other mechanisms that allow preferential treatment for LDCs, while also calling for a scoping exercise. In its proposal (WT/GC/REFORM/W/20), the ACP Group outlined several parameters for safeguarding MFN and S&DT. These include: 1. It "should not make MFN conditional upon reciprocity or another Member's domestic policy choices." 2. It should not "weaken Part IV of GATT 1994, non-reciprocity or negotiated special and differential treatment." 3. It should not "use trade balances alone as proof that MFN has failed." 4. It should not "legitimise measures inconsistent with WTO obligations." 5. It should not "normalise selective compliance or permanent impairment of enforceable dispute settlement." 6. "The relationship among MFN, Part IV of GATT 1994 and special and differential treatment should be understood as complementary." 7. "Non-discrimination supports predictability, while development provisions recognise differences in capacity and development needs within the negotiated balance." Many developing and least-developed countries appeared to have strongly supported the LDC and ACP proposals during the discussion, according to people familiar with the development. During the discussion on MFN and S&DT, China's trade envoy, Ambassador Li Yongjie, said that China had "repeatedly underscored in previous plenaries and submissions its [MFN's] cornerstone role in upholding the rules-based multilateral trading system - a foundational principle that runs across goods, services, intellectual property rights, and numerous specific areas." Thanking the LDC and ACP groups for "their valuable contributions", China said it wanted to highlight three messages. First, China said the two groups had "rightfully pointed out [that the] foundational issues identified by the broad membership encompass much more than the MFN issue." Highlighting other elements of their submissions, China said that "the submissions presented by the LDC Group and ACP Group articulated the vast majority of developing Members highlighting in particular the vital importance of MFN in preserving predictability and safeguarding the rights and interests of developing and small economies." China emphasized that the "debate over MFN - and the impulse to weaken it - have persisted since the very birth of the multilateral trading system." It argued that "trade discrimination breeds trade discrimination and would trigger a downward spiral of shrinking commerce and economic welfare." China warned that "once you begin to condition MFN on bilateral reciprocity or domestic policy convergence, you set in motion a chain reaction of discrimination and retaliation." Commenting on the "exceptions to the MFN principle," China said its participation in the discussions "does not mean we have agreed - or should agree - to shift the center of gravity of our discussions toward scrutinizing or expanding exceptions to MFN." "Indeed, as several submissions have rightfully pointed out, we do not even have clarity on where the proponents of the MFN discussion actually intend to take us," the Chinese envoy said. China outlined its position on MFN exceptions through several points: 1. Existing exceptions: "Exceptions allowing Members to deviate from their MFN obligation do exist," China said, pointing to GATT Article XXIV and the Enabling Clause. Members also "have general exceptions of horizontal application." However, the two categories differ in legal nature and must not be conflated. 2. Legitimate purposes: These MFN exceptions exist for legitimate purposes. China suggested that "together with the MFN principle itself, they work in tandem to serve the overarching objective for which Members established the WTO and the multilateral trading system." 3. Limited scope: "While exceptions provide necessary flexibility, they were deliberately designed to be narrow and carefully circumscribed so that MFN, as a foundational rule, is neither weakened nor hollowed," China said. 4. Stability and predictability: China said "MFN and its calibrated exceptions together provide essential stability and predictability - not just for the WTO, but also for regional integration." 5. Risks of fragmentation: China warned that "Fragmentation and cherry-picking will by no means stop at the multilateral level." 6. No justification for discrimination: China reiterated that "the existence of MFN exceptions in no way validates discriminatory treatment, nor can it be used to deny the fundamental status of MFN or make it conditional." 7. Consequences of weakening MFN: China said "the problems we [members] see in the abuse of exceptions today serve as a stark warning of the dire consequences - fragmentation and power-based bargaining - that await us if the MFN principle is compromised." 8. Defending MFN: China said that it hoped a clear understanding of MFN exceptions would only strengthen Members' resolve to defend MFN as a bedrock principle of the WTO. On general exceptions, security exceptions and the concept of "new policy space", China said "the essence of General and Security Exceptions, which refers to Article XX and Article XXI, if only for the GATT purposes, is to preserve Members' right to regulate for legitimate non-trade public policy objectives." China argued that "while General and Security Exceptions can be invoked to justify measures that otherwise depart from MFN, the core policy issue surrounding these exceptions is how to balance legitimate regulatory space against the prevention of abuse." Regarding suggestions by some Members to contemplate "new policy space", including potentially introducing the concept of "economic security", China said it wanted to examine "whether the true essence of such proposals is to add new grounds to depart from MFN, or simply to expand unconstrained discretion - in other words, to lower the legal threshold for departing from MFN?" Without naming the US, China said that members had already "heard certain Member claiming that economic security is national security". China reminded members that "certain Member [is] invoking self-judging "security interest" to impose tariffs on products like kitchen cabinets." Finally, China said "when contemplating calls for "more policy space, we must ask ourselves: what is the policy space, will the majority of Members be able to enjoy this expanded "policy space", or will it merely create wider room for applying the law of the jungle?" Speaking after China, the US trade envoy reportedly read out a lengthy statement tracing the history of MFN from the GATT's establishment in 1947 to the present. The US envoy appeared to suggest that Washington had opposed MFN, but that the United Kingdom and other European colonial powers had pushed for the principle because of their colonial past. The US reportedly argued that the Enabling Clause, which provided the legal basis for S&DT, was an exception to MFN and had been introduced by the UK and other European countries. Washington suggested that it had gone along with these countries, according to people familiar with the discussions. The US envoy also reportedly argued that S&DT allowed discrimination among parties and had evolved over the years, having initially been introduced as a temporary provision for infant industries. According to the US, the Enabling Clause, agreed at the end of the Tokyo Round of GATT negotiations in 1970, apparently made S&DT permanent, said people familiar with the development. The US said that during the establishment of the WTO, S&DT continued through certain flexibilities for acceding countries undergoing economic transformation. However, it was not rigid and continued to evolve, Washington argued. The US also appeared to maintain that the closed plurilateral Agreement on Government Procurement contained an exception to S&DT, according to people familiar with the discussions. The overall thrust of the US position appeared to centre on the argument that a new political reality was emerging from the threat posed by China, said a developing-country trade official who asked not to be quoted. The US apparently suggested that new exceptions within the MFN framework needed to be discussed for democratic members or democracy-based economies. Responding rhetorically to India's critical comments on the proposed MFN exceptions and its support for the existing rules, the US said it was not surprised by New Delhi's embrace of MFN because India was a country with the highest bound tariffs, said the developing-country trade official, who asked not to be quoted. Apparently posing a rhetorical question about where members should go from here, New Zealand appeared to argue that new exceptions to MFN were necessary. It suggested that these exceptions had been designed to cement bonds between democratic countries, said an Asian trade official who asked not to be quoted. Justifying the exceptions as reasoned and necessary in response to evolving fundamentals, New Zealand apparently said that members should take a similar approach again in these uncertain times, the official said. Norway, one of the key proponents of WTO reform, said that while it did not challenge MFN, it wanted new exceptions, including a time-bound and limited exception to MFN on economic security or other grounds. Calling for further discussions, Norway underscored the need for MFN exceptions that were regulated, conditioned and targeted, the official said. Norway suggested that the best way to reaffirm MFN was probably to accept a new and better exception, the official added. The European Union reportedly offered an ambiguous position, arguing that while things needed to change, members could not pretend that the world had remained unchanged since 1995. Brussels, known for its "constructive ambiguities", apparently said that while members preferred MFN, the Enabling Clause and S&DT, these provisions needed to change, the Asian trade official said. In a sharp intervention, Brazil reportedly said that MFN was what gave the WTO its multilateral framework. Describing it as the original idea behind the system, Brazil argued that the principle generated a virtuous circle. Brasilia reminded that MFN should not be discussed in isolation, warning that doing so would pose risks, said a trade official who asked not to be quoted. Brazil said members needed to distinguish between problems with the rules and problems with compliance. It suggested that members were witnessing a situation of widespread non-compliance, including through the recent imposition of unilateral tariffs, the trade official said. Brazil argued that the virtuous circle was now moving in the opposite direction, with an increasing resort to unilateral tariffs. Brasilia maintained that the MFN clause provided members with a safeguard or safety valve whenever there was liberalization or an increase in trade barriers. It warned that weakening MFN would amount to paving the way for bilateral agreements based solely on power-based arrangements, according to the official. Colombia also cautioned against the MFN proposals, suggesting that what had changed most significantly was the relative positions of countries rather than the underlying economic discussions, said a person who asked not to be quoted. Recalling the discussions held in the 1950s, 1960s, 1970s and 1980s in South America, Colombia said members were now witnessing a repeat of the same debates. +
|
||
