As reviewed in prior posts, there is ongoing interest in reducing domestic subsidies for agricultural producers and an interest in revising rules for industrial subsidies to address the problem that has arisen in the last several decades of massive subsidization creating global excess capacity in products or sectors. Moreover, there are no rules on subsidies in the services area despite the issue having been of ongoing interest to many Members at the start of the WTO with ongoing talks provided for within the GATS. See, e.g., November 24, 2020, Responding to a comment received on yesterday’s post, WTO subsidy disciplines – an update and coordination across areas is long overdue, https://currentthoughtsontrade.com/2020/11/24/responding-to-a-comment-received-on-yesterdays-post-wto-subsidy-disciplines-an-update-and-coordination-across-areas-is-long-overdue/; November 23, 2020, WTO subsidy disciplines – an update and coordination across areas is long overdue, https://currentthoughtsontrade.com/2020/11/23/wto-subsidy-disciplines-an-update-and-coordination-across-areas-is-long-overdue/; February 22, 2020: WTO Reform – Addressing The Disconnect Between Market and Non-Market Economies, https://currentthoughtsontrade.com/2020/02/22/wto-reform-addressing-the-disconnect-between-market-and-non-market-economies/.
The WTO Members have struggled for 19 years on trying to limit fisheries subsidies to achieve one of the UN Sustainable Development Goals (SDG 14.6) by stopping overfishing and illegal fishing practices that are harming wild fish stocks. While an agreement was due to be completed in 2020, the negotiations will continue into 2021. See, e.g., December 16, 2020, The fisheries subsidies negotiations – U.S. comments from December 2 meeting add clarity to the inability to achieve an agreement and the lack of “like-mindedness” among Members, https://currentthoughtsontrade.com/2020/12/16/the-fisheries-subsidies-negotiations-u-s-comments-from-december-2-meeting-add-clarity-to-the-inability-to-achieve-an-agreement-and-the-lack-of-like-mindedness-among-members/; December 15, 2020, The fisheries subsidies negotiations – failure by WTO Members to deliver an agreement by the end of 2020, https://currentthoughtsontrade.com/2020/12/15/the-fisheries-subsidies-negotiations-failure-by-wto-members-to-deliver-an-agreement-by-the-end-of-2020/.
At the latest General Council meeting held on December 16-18, the United States, in its second intervention on the topic of the importance of market-oriented conditions to the world trading system (agenda item 10, WT/GC/W/813), alerted Members that it would be filing a new paper on the topic of sustainability dealing with treating weak or unenforced environmental laws and regulations as being potentially countervailable under the Agreement on Subsidies and Countervailing Measures.
“The United States would like to thank all the Members who took the floor to provide their
comments. We look forward to continuing this important conversation in future meetings.
“On another subject, let me now take this opportunity to inform colleagues that the United States
will be circulating a draft Ministerial Conference Decision shortly entitled, ‘Advancing
Sustainability Goals through Trade Rules to Level the Playing Field.’
“We look forward to submitting this proposal for consideration during the upcoming Structured
Discussions on Trade and Sustainability.
“The draft Ministerial Conference Decision aims to reinforce our view that failure to adopt,
maintain, implement and effectively enforce laws and regulations that ensure environmental
protections at or above a threshold of fundamental standards constitutes an actionable subsidy
under the Agreement on Subsidies and Countervailing Measures.”
Meeting of the WTO General Council, December 16-17, 2020, U.S. Statements delivered by Ambassador Dennis Shea, page 7, https://geneva.usmission.gov/wp-content/uploads/sites/290/AmbassadorShea-WTOGeneralCouncil-Dec2020.pdf.
The United States draft Ministerial Decision was submitted and circulated to WTO Members on December 17 and is embedded below.
W814While the current definition of subsidy contained in Art. 2 of the ASCM (Agreement on Subsidies and Countervailing Measures) does not appear to cover distortions that flow from the level of environmental protection an/or the lack of enforcement of such requirements, there is little doubt that in the coming years, a number of countries will likely be imposing taxes or taking other action to support sustainable development and prevent competition being determined by production of products in countries that are not moving rapidly to sustainable development. The EU is pushing its producers to become dramatically more environmentally responsible. and is committed to introducing a tax on products not meeting the desired environmental standards. Under the Biden Administration, it is likely the U.S. will be looking for ways to push a similar sustainable trade policy by neutralizing “false” advantages for products produced less environmentally responsibly.
In that context, the U.S. paper of December 17 provides an additional path to pursuing sustainable development and ensuring that responsible production methods are not penalized by competition from producers using less environmentally responsible approaches. WTO Members have not indicated an interest in doing a broad review of subsidy disciplines to ensure the rules reflect current economic realities and address all significant types of distortions found in the trade of goods and services. Such a review is long overdue in my view and would permit an evaluation of a host of issues not presently covered by the ASCM including the issue raised in the Draft Ministerial Decision.
While historically many developing nations would oppose proposed actions like the U.S. draft Ministerial Decision on the theory of limited existing capacities in developing countries or a perceived “entitlement” to develop in manners not significantly different than current developed countries, the climate crisis, UN Sustainable Development Goals and the reality of the potential destruction facing many countries from climate warming and rising oceans essentially make a decades-long approach to achieving sustainable development self-defeating. Whether the U.S. proposal will garner support and/or becomes an additional tool to help Members move to sustainable development is obviously unknown at the present time.
The WTO has proven itself unable in its first 25 years to modernize the rules of international trade to keep pace with global developments and with the pressing needs for more sustainable approaches to international trade. 2021 provides the WTO with the opportunity to change course and reestablish its role in developing rules that address the needs of Members, businesses, workers and the global population in international trade. Hopefully, the WTO will have a new Director-General early in 2021. Hopefully, Members can come together on the pressing needs of relevancy and sustainability by agreeing on core principles of the WTO. A comprehensive reform initiative is desperately needed and could be agreed to, though agreement on reform is unlikely based on current differences among Members. Yet even if a comprehensive reform program is agreed to, without a change in how the WTO operates, the organization and its Members will be unable to be nimble enough to make a timely difference. Leadership and a joint willingness to move forward have been missing. Let’s hope that 2021 will be different.