12th Ministerial Conference

Postponement of the WTO’s 12th Ministerial Conference, continued efforts to increase vaccinations

With the discovery of a new COVID-19 variant in Africa last week, a designation by the World Health Organization that the new variant (“Omicron”) was a “variant of concern”, surging infections in Europe, and reintroduced travel restrictions and quarantine requirements for visitors from certain countries, it was not surprising that the WTO Members decided to postpone the 12th Ministerial Conference which had been set to start on November 30 in Geneva. See World Health Organization, Classification of Omicron (B.1.1.529): SARS-CoV-2 Variant of Concern, 26 November 2021, https://www.who.int/news/item/26-11-2021-classification-of-omicron-(b.1.1.529)-sars-cov-2-variant-of-concern; WTO News Release, General Council decides to postpone MC12 indefinitely, 26 November 2021, https://www.wto.org/english/news_e/news21_e/mc12_26nov21_e.htm.

The spate of new travel restrictions ranged from restrictions on countries in southern Africa where early cases had been identified or where transborder movement was likely, to blanket blockage of entry of foreign travelers from any country (e.g., Israel, Japan and Morocco). Countries from Australia to Canada to various countries in Europe including the United Kingdom as well as Israel, Hong Kong and some countries in Africa have confirmed cases of the new Omicron variant. See, e.g., New York Times, Tracking Omicron and Other Coronavirus Variants, updated November 29, 2021, https://www.nytimes.com/interactive/2021/health/coronavirus-variant-tracker.html (” So far it has been detected in South Africa and Botswana, as well as in travelers to Australia, Austria, Belgium, Britain, Canada, Czech Republic, Denmark, Germany, Israel, Italy, the Netherlands, Portugal and Hong Kong.”). Government official in South Africa called the restriction unwarranted. See, e.g., BBC, Covid: US joins EU in restricting flights from southern Africa over new coronavirus variant, 27 November 2021, https://www.bbc.com/news/world-59427770 (“South African Health Minister Joe Phaahla told reporters that the flight bans against the country were ‘unjustified’.”). Many pointed to the continued inequitable access of vaccines in Africa as the cause of the development of a new variant. See, e.g., The Guardian, Larry Elliott, The Omicron variant reveals the true global danger of ‘vaccine apartheid’, 28 November 2021, https://www.theguardian.com/business/2021/nov/28/the-omicron-variant-reveals-the-true-global-danger-of-vaccine-apartheid.

The WHO on November 29, 2021 is reported to have indicated that the Omicron variant poses a “very high” risk. See, e.g., New York Times, The W.H.O. says Omicron poses a ‘very high’ risk globally as questions about the variant remain. November 29, 2021, https://www.nytimes.com/live/2021/11/29/world/omicron-variant-covid#the-who-says-omicron-poses-a-very-high-risk-globally (“The World Health Organization warned on Monday that global risks posed by the new Omicron variant of the coronavirus were ‘very high,’ as countries around the world rushed to defend against its spread with a cascade of border closures and travel restrictions that recalled the earliest days of the pandemic.”). One can expect continued international efforts to limit the spread of the Omicron variant until greater information is known on the variant and whether it reduces the effectiveness of existing vaccines.

With the postponement of the 12th Ministerial Conference, there will likely be a slowdown in fact in negotiations by WTO Members on topics such as the fisheries subsidies agreement, an outcome on trade and health including any resolution of the proposed waiver of TRIPS obligations to address the COVID-19 pandemic, ongoing agriculture negotiations, various Joint Statement Initiatives (a number of which appear completed already), actions on climate change, an agenda for discussing WTO reform, etc. While the Director-General and the Chair of the General Council have urged continued work and WTO Members have indicated a desire to continue to work to reduce differences, it is hard to imagine that any existing momentum doesn’t get lost at least until Members are approaching the date of the rescheduled Ministerial (which has not yet been announced). See, e.g., WTO News Release, General Council decides to postpone MC12 indefinitely, 26 November 2021, https://www.wto.org/english/news_e/news21_e/mc12_26nov21_e.htm (“WTO members were unanimous in their support of the recommendations from the Director-General and the General Council Chair, and they pledged to continue working to narrow their differences on key topics like the WTO’s response to the pandemic and the negotiations to draft rules slashing harmful fisheries subsidies. The Director-General and Amb. Castillo urged delegations to maintain the negotiating momentum that had been established in recent weeks. ‘This does not mean that negotiations should stop. On the contrary, delegations in Geneva should be fully empowered to close as many gaps as possible. This new variant reminds us once again of the urgency of the work we are charged with,’ the DG said.”).

Much government attention will return to expanding production and distribution of vaccines to countries with low vaccination rates while governments and the WHO seek answers to the questions surrounding the Omicron variant — is it more easily transmissible? Is it more severe in its consequences to those who become infected? How effective are existing vaccines in protecting people from the new variant? And many developed countries will continue to push booster shots to those who are already vaccinated in light of the declining efficacy after six months for the main vaccines used in Europe and the U.S.

In prior posts, I have reviewed some of the challenges in understanding vaccine equity in light of different levels of vaccination in countries of similar economic development. See, e.g., November 23, 2021:  WTO-IMF COVID-19 Vaccine Trade Tracker provides useful information in analyzing vaccine equity, https://currentthoughtsontrade.com/2021/11/23/wto-imf-covid-19-vaccine-trade-tracker-provides-useful-information-in-analyzing-vaccine-equity/; November 22, 2021:  Trade and Health at the WTO’s 12th Ministerial Conference, https://currentthoughtsontrade.com/2021/11/22/trade-and-health-at-the-wtos-12th-ministerial-conference/. Many actions have been taken which are increasing the volume of vaccines available around the world, including adding capacity for at least fill and finish in Africa and other parts of the world. Greater efforts at donations and filling contracts with COVAX are happening and will increase in 2022.

Interestingly, on November 29, 2021, there was a joint statement from the African Union, Africa Centres for Disease Control and Prevention, CEPI, GAVI, UNICEF and the WHO on one aspect of getting vaccines to low income countries and others — donations from other countries. See Joint Statement on Dose Donations of COVID-19 Vaccines to African Countries, 29 November 2021, https://www.who.int/news/item/29-11-2021-joint-statement-on-dose-donations-of-covid-19-vaccines-to-african-countries. While donations to date have been a small part of total vaccine doses available throughout the world, there are a series of challenges to ensuring donations provide the maximum benefit going forward. See UNICEF, COVID-19 Vaccine Market Dashboard, visited November 29, 2021, https://www.unicef.org/supply/covid-19-vaccine-market-dashboard (8.856 billion total doses delivered to countries and territories around the world, including 4.535 billion through bilateral/multilateral agreements; 163.3 million from donations; 560.1 million through COVAX and 3.574 billion unknown (but appearl largely from internal production for particular countries). The UNICEF data also looks at donations more granularly and the data are significantly larger than the summary data above (701.8 million donated doses of which 381.3 million are facilitated doses and 470.5 million are delivered doses).

The Joint Statement is copied below because of the importance of donated doses for low income countries in 2022.

“Building on lessons learned from our collective experience with dose donations over the past several months, the African Vaccine Acquisition Trust (AVAT), the Africa Centres for Disease Control and Prevention (Africa CDC) and COVAX wish to draw the attention of the international community to the situation of donations of COVID-19 vaccines to Africa, and other COVAX participating economies, particularly those supported by the Gavi COVAX Advance Market Commitment (AMC).

“AVAT and COVAX complement each other’s efforts to support African countries to meet their immunisation targets, recognising the global goal of immunising 70% of the African population. Dose donations have been an important source of supply while other sources are stepping up, but the quality of donations needs to improve.

“AVAT and COVAX are focused on accelerating access to and rollout of COVID-19 vaccines in Africa. Together we are rapidly expanding supply to the continent, and providing countries with the support to be able to utilise the doses they receive. To date, over 90 million donated doses have been delivered to the continent via COVAX and AVAT and millions more via bilateral arrangements.

“However, the majority of the donations to-date have been ad hoc, provided with little notice and short shelf lives. This has made it extremely challenging for countries to plan vaccination campaigns and increase absorptive capacity. To achieve higher coverage rates across the continent, and for donations to be a sustainable source of supply that can complement supply from AVAT and COVAX purchase agreements, this trend must change.

“Countries need predictable and reliable supply. Having to plan at short notice and ensure uptake of doses with short shelf lives exponentially magnifies the logistical burden on health systems that are already stretched. Furthermore, ad hoc supply of this kind utilises capacity – human resources, infrastructure, cold chain – that could be directed towards long-term successful and sustainable rollout. It also dramatically increases the risks of expiry once doses with already short shelf-lives arrive in country, which may have long-term repercussions for vaccine confidence.

“Donations to COVAX, AVAT, and African countries must be made in a way that allows countries to effectively mobilise domestic resources in support of rollout and enables long-term planning to increase coverage rates. We call on the international community, particularly donors and manufacturers, to commit to this effort by adhering to the following standards, beginning from 1 January 2022:

Quantity and predictability: Donor countries should endeavour to release donated doses in large volumes and in a predictable manner, to reduce transaction costs. We acknowledge and welcome the progress being made in this area, but note that the frequency of exceptions to this approach places increased burden on countries, AVAT and COVAX.

Earmarking: These doses should be unearmarked for greatest effectiveness and to support long-term planning. Earmarking makes it far more difficult to allocate supply based on equity, and to account for specific countries’ absorptive capacity. It also increases the risk that short shelf-life donations utilise countries’ cold chain capacity – capacity that is then unavailable when AVAT or COVAX are allocating doses with longer shelf lives under their own purchase agreements.

Shelf life: As a default, donated doses should have a minimum of 10 weeks shelf life when they arrive in-country, with limited exceptions only where recipient countries indicate willingness and ability to absorb doses with shorter shelf lives.

Early notice: Recipient countries need to be made aware of the availability of donated doses not less than 4 weeks before their tentative arrival in-country.

Response times: All stakeholders should seek to provide rapid response on essential information. This includes essential supply information from manufacturers (total volumes available for donation, shelf life, manufacturing site), confirmation of donation offer from donors, and acceptance/refusal of allocations from countries. Last minute information can further complicate processes, increasing transaction costs, reducing available shelf life and increasing risk of expiry.

Ancillaries: The majority of donations to-date do not include the necessary vaccination supplies such as syringes and diluent, nor do they cover freight costs –  meaning these have to be sourced separately – leading to additional costs, complexity and delay. Donated doses should be accompanied with all essential ancillaries to ensure rapid allocation and absorption.

“AVAT, Africa CDC and COVAX remain committed to collaborate with donor countries, vaccine manufacturers and partners on ensuring these standards are upheld, as we continue to work together towards achieving Africa’s vaccination goals.”

The challenge of improving global vaccination rates is complicated. Supply is certainly a major issue. But countries who receive vaccines may also have problems ramping up administration of doses to their populations. While Africa has many low income countries (as classified by the World Bank), it also has countries at higher levels of income. For example, South Africa is an upper-middle income country according to the World Bank criteria but has a very low vaccination rate for an upper-middle income country. A recent New York Times article reviews that there have been significant increases in supplies to South Africa recently such that it has five months of doses on hand but is having trouble getting shots to people in need quickly enough. See New York Times, South Africa, where Omicron was detected, is an outlier on the least vaccinated continent. November 28, 2021, https://www.nytimes.com/live/2021/11/28/world/covid-omicron-variant-news (“South Africa has a better vaccination rate than most countries on the continent: Just under one-quarter of the population has been fully vaccinated, and the government said it has over five months’ worth of doses in its stores. But they are not being administered fast enough. Vaccinations in South Africa are running at about half the target rate, officials said last week. To prevent vaccines from expiring, the government has even deferred some deliveries scheduled for early next year.”).

Thus, as the world reacts to the discovery of a new variant and struggles to understand its implications, the WTO will struggle ahead in the hope of narrowing differences ahead of a further delayed Ministerial Conference, and the world will continue to pursue improved vaccine equity while dealing with increased uncertainty flowing from the Omicron variant.

The answer to the issue of vaccine equity is complex and, at least for the COVID-19 pandemic, not really dependent on a temporary waiver of TRIPs obligations for vaccines which would have no meaningful effect on supply availability through at least 2022. Production has been ramped up in many countries. The volumes available in 2022 should permit meeting the global objective of getting 70% of the world’s people vaccinated by next fall. But challenges remain in terms of internal capacities in many poorer countries to get their populations vaccinated, as well as misinformation on vaccines, the large level of vaccine hesitancy in developed countries and in developing countries, and the rise of new variants and what effect on existing vaccines they will have. Cooperation is needed in addressing all aspects of the issue. Time will tell whether improved cooperation is likely as we close out 2021 and start 2022.

Will there be another extension of the WTO Moratorium on customs duties on e-commerce — expanding global trade or creating additional barriers

WTO Members have engaged for years in debate over the wisdom of extending the temporary moratorium on customs duties on e-commerce. Each Ministerial Conference has resulted in Members agreeing to an extension of the moratorium until the next Ministerial Conference along with an extension of a moratorium on non-violation TRIPs disputes. While Members have agreed to a draft extension of the moratorium on non-violation TRIPs disputes for the upcoming 12th WTO Ministerial, there is no agreement as yet on extending the moratorium on customs duties on e-commerce. See WTO News Release, Members agree on recommendation to extend moratorium on IP “non-violation” cases, 5 November 2021, https://www.wto.org/english/news_e/news21_e/trip_05nov21a_e.htm; Inside U.S. Trade’s World Trade Online, India, South Africa question WTO e-commerce moratorium ahead of MC12, November 9, 2021, https://insidetrade.com/daily-news/india-south-africa-question-wto-e-commerce-moratorium-ahead-mc12.

In recent years, India and South Africa have cited to information from UNCTAD to support their concern that the moratorium is costing developing countries tax revenues as well as their concern that the moratorium is limited to transmission and not content and doesn’t apply to services. See WORK PROGRAMME ON ELECTRONIC COMMERCE, THE MORATORIUM ON CUSTOMS DUTIES ON ELECTRONIC TRANSMISSIONS: NEED FOR CLARITY ON ITS SCOPE AND IMPACT, 8 November 2021, WT/GC/W/833 (communication from India and South Africa); WORK PROGRAMME ON ELECTRONIC COMMERCE, THE E-COMMERCE MORATORIUM: SCOPE AND IMPACT, Communication from India and South Africa, 11 March 2020, WT/GC/W/798; UNCTAD, RISING PRODUCT DIGITALISATION AND LOSING TRADE COMPETITIVENESS, 2017, https://unctad.org/system/files/official-document/gdsecidc2017d3_en.pdf; UNCTAD Research Paper No. 29, UNCTAD/SER.RP/2019/1, Rashmi Banga, Growing Trade in Electronic Transmissions: Implications for the South, February 2019, https://unctad.org/system/files/official-document/ser-rp-2019d1_en.pdf.

Some of the concerns expressed by India and South Africa and their rebuttal of OECD and other papers which look at upside benefits from the moratorium are captured in the following excerpt from the recent submission (WT/GC?W/833, pages 2-3).

2.2 Tariff Revenue Loss

“2.4. In our previous submission, WT/GC/W/798, we highlighted that based on the identification of a small number of digitizable goods in five areas, namely, printed matter, music and video downloads, software and video games, UNCTAD estimated a loss in tariff revenue of more than US$10 billion per annum globally because of the moratorium, 95% of which is borne by
developing countries.

“2.5. These submissions attempt to make the revenue foregone on account of the e-commerce moratorium seem insignificant by showcasing this revenue loss in terms of its share in customs revenue and total government revenue. However, even compared in this manner, it is evident that the percentage of government revenue lost for developing countries is higher than that for the
developed countries. The percentage of customs revenue lost for developing countries is 4.35% while that for the developed countries is a mere 0.24%. It is evident that the cost of the moratorium is almost completely borne by the developing countries for extending duty free quota free market access, largely for the developed countries.

“2.6. These submissions conclude that the amount of physical trade replaced by 3D printing is expected to be limited. UNCTAD (2019) provides a deeper analysis on the status of 3D printing though. It indicates that while 3D printing is currently at a nascent stage in developing countries, its market has grown annually by 22% in the period 2014-2018 and it is estimated that if investment
in 3D printing is doubled, it could potentially replace almost 40% of cross-border physical global trade by 20407. Such a growth is expected to significantly increase the potential tariff revenue loss.

2.3 Impact on SMEs and Digital Industrialization

“2.7. Interestingly, when assessing the total trade of electronic transmissions, these submissions consider only digitizable goods and conclude that these remain modest but when estimating the impact of the moratorium on exports, especially of SMEs, these submissions considers the extended scope of the moratorium by including services8 and find the impact to be huge. Defining the scope of the moratorium is therefore important in order to estimate its impact.

“2.8. These submissions state that the use of 3D printing is growing slowly since the opportunities for mass production and economies of scale are limited and the inputs, materials and time required for 3D printing further constrain its use for manufacturing complex items. In this context, it is highlighted that with recent technological advances, namely high-speed sintering, mass production is becoming possible with 3D printers, where mass-producing up to 100,000 (smaller) components
in a day will be possible at a speed which is 100 times faster9. According to D’Aveni (2015)10, the advent of additive manufacturing in the US hearing aid industry meant that, in less than 500 days, 100% of the industry was transformed and not one company stuck to the traditional mode of manufacturing.

“2.9. These submissions do not reflect the impact that new technologies such as 3D printing can have on domestic industries especially MSMEs in developing countries. As outlined before, while 3D printing is currently at a nascent stage in developing countries, its market is expected to grow at a rapid pace. The most affected sectors could include sectors such as textiles and clothing, footwear, auto-components, toys, mechanical appliances, and hand tools, etc. which generate large scale employment for low skilled workers and are sectors in which most MSMEs operate. This could have a catastrophic effect on the ability of developing countries to protect their nascent domestic industries including MSMEs11.

“2.10. If, ‘customs duties on electronic transmissions’ cover not only digitised and digitizable goods but also digitally transmitted services, as asserted by a couple of institutions recently, then the negative impact of continuing with the moratorium on developing countries would be even greater. Effectively, this implies that the economy of the future (the digital economy) is totally liberalised. History has shown that trade policies are integral to successful economies’ development trajectory and are critical in advancing industrial policy.

“7 UNCTAD Research Paper No 47 (2020).
“8 UNCTAD Research Paper No 58 (2021).
“9 Ibid.
“10 Richard D’Aveni, ‘The 3-D Printing Revolution’ (2015) Harvard Business Review
https://hbr.org/2015/05/the-3-d-printing-revolution accessed 1 June 2021.
“11 UNCTAD Research Paper No 58 (2021).”

There are many WTO Members who support the continuation of the moratorium on customs duties on e-commerce, and there have been studies by the OECD taking a position opposite that of UNCTAD. See, e.g., WORK PROGRAMME ON ELECTRONIC COMMERCE BROADENING AND DEEPENING THE DISCUSSIONS ON THE MORATORIUM ON IMPOSING CUSTOMS DUTIES ON ELECTRONIC TRANSMISSIONS, Communication from Australia; Canada; Chile; Colombia; Hong Kong, China;
Iceland; Republic of Korea; New Zealand; Norway; Singapore; Switzerland; Thailand and Uruguay, 29 June 2020, WT/GC/W/799/Rev.1; Andrenelli, A. and J. López González (2019-11-13), “Electronic transmissions and international trade – shedding new light on the moratorium debate”, OECD Trade Policy Papers, No. 233, OECD Publishing, Paris. http://dx.doi.org/10.1787/57b50a4b-en. An excerpt from the submission of various WTO Members in WT/GC/W/799/Rev.1 is presented below characterizing some of the OECD analysis (pages 2-3).

“3 AN INSIGHTFUL WELFARE ANALYSIS OF ELECTRONIC TRANSMISSIONS

“3.1. Members have been referring to many different estimates in past discussions on this matter, which did not take into consideration the benefits associated with relevant reductions of trade costs, potential gains in productivity and increased consumer welfare. The welfare analysis in the study provides a clear illustration of what is induced by the absence of duties on electronic transmissions in terms of both revenue loss and the welfare surplus for consumers. Taking into consideration consumer welfare would bring depth to the discussion and could help move them forward.

“3.2. The welfare analysis outlines that the reduction in production and transportation costs associated with digital deliveries, as well as the removal of the tariff, can lead to a reduction in price. In consequence, the increase in demand leads to a rise in imports and an increase in consumer surplus, part of which is associated with redistribution from the domestic producer and part of which is from government revenue to the consumer. The study is unambiguous: the overall impact to the economy is ‘positive and large’.

“3.3. The study finds that the imposition of equivalent duties on electronic transmissions could negate those positive effects by increasing the price of the digital delivery, which shifts some of the consumer welfare back to the domestic producers and the government. Governments and producers would recover some of the revenue foregone but the amount recovered would depend on the elasticity of demand. The study also highlights that this would occur at the expense of consumer surplus. The positive welfare impact would decrease as the price of the digital product increases. Consequently, by introducing equivalent duties on electronic transmissions, governments would create a “deadweight loss” to the economy. The overall benefits associated with digitization
(i.e. lower trade costs) would be reduced and weaker economies would miss an opportunity to overcome their trade cost disadvantages.

“4 THE APPLICATION OF INTERNAL NON-DISCRIMINATORY TAXES AS AN ALTERNATIVE TO TARIFFS

“4.1. The study not only provides important elements regarding who bears the burden of tariffs, but also regarding the potential alternative sources of government revenue which would be better suited to the digital economy. The study notes that tariffs increase the price of a product to the domestic consumer. The extent to which the domestic price increases is dependent on the tariff pass-through, which ranges from full pass-through to none. If there is no pass-through, then the foreign company fully absorbs the tariff through reduced revenue. If there is full pass-through, then the domestic price increases in proportion to the tariff. Recent work quoted by the study notes that quasi complete-pass tends to be the most common – that is, foreign companies fully pass-on the price increase to domestic consumers. Moreover, recent work conveyed in the study has also demonstrated that tariff increases, in the medium-term, negatively affect domestic output and productivity, employment and lead to higher inequality and real exchange rate appreciation.

“4.2. The study highlights other means for governments to generate revenue. The use of consumption taxes, such as value added taxes (VAT) or goods and services taxes (GST) could represent a better alternative. Examples of VAT/GST applied to digital services and intangibles are provided and point out that internal non-discriminatory taxes provide a broader tax base, and thus more stable. According to the study, evidence indicates developing countries that adopt indirect taxes such as VAT experience 40 to 50% less tax revenue instability than countries that do not use indirect taxes. The OECD study suggests that consumption taxes are a feasible alternative to customs duties for generating revenue.

“4.3. In this respect, it should be noted that the OECD International VAT/GST Guidelines have been adopted by the G20 leaders and endorsed by more than 100 jurisdictions and organisations. Furthermore, the OECD has produced a report on best practices to implement international VAT/GST collection schemes.2

“2 Mechanisms for the Effective Collection of VAT/GST, OECD, 2017 http://www.oecd.org/tax/consumption/mechanisms-for-the-effective-collection-of-vat-gst.htm.”

A recent report by Prof. Simon J. Evenett

On November 12, 2021, Prof. Simon Evenett (founder of the St. Gallen Endowment for Prosperity Through Trade) released a paper looking at the question, “Is the WTO Moratorium on customs duties on e-commerce depriving developing countries of much needed revenue?”. The abstract for the paper states –

Abstract  This note vitiates assertions by UNCTAD staff that developing countries have lost significant government revenues as products previously delivered physically are supplied digitally. Taking for the sake of argument UNCTAD’s revenue loss estimates, this note shows that they represent small shares of tax revenues from sources other than customs duties. Forgone revenues would have financed less than 5 days of government spending in the Least Developed Countries and Sub-Saharan African nations. Moreover, domestic tax takes needed only to grow marginally faster to offset UNCTAD’s estimates of forgone customs duties. Low per-capita income status is not a barrier to successful national tax reform, calling in question the relevance of public finance objections to participation in multilateral trade initiatives to integrate economies.”

 The paper from Prof. Evenett is embedded below.

S.-Evenett_-WTO-Moratorium-12-Nov-2021_-finalised

Conclusion

There are obviously large differences in view on the costs and benefits of a moratorium on customs duties on e-commerce between India and South Africa on the one hand (and others supporting their view) and the group of WTO Members supporting the continuation of the moratorium.

A problem with the UNCTAD studies and papers is the definition of developing countries used. As is clear from the 2017 UNCTAD report, the largest cross border e-commerce sales for any country by far is China with 40% of such sales in 2015 (UNCTAD, Rising Product Digitalisation and Losing Trade Competitiveness, 2017 at 12) and largest customs revenue loss from the moratorium (id at 16). China should not be viewed as a developing country as reviewed in a recent post. See November 15, 2021:  The folly of self-selection as a developing country at the WTO, https://currentthoughtsontrade.com/2021/11/15/the-folly-of-self-selection-as-a-developing-country-at-the-wto/. Moreover, China is not understood to be opposing the continuation of the moratorium.

The UNCTAD report also lists as developing countries a number which clearly aren’t classified as such or that shouldn’t be, including — Saudi Arabia, Greece, Egypt, Israel, Romania, Russian Federation, Iceland, Bulgaria, Mexico, Norway, Thailand, Turkey, Portugal (see id, Table 2, Net Exports of Developing Countries of ET Products, pages 13-14; November 15, 2021:  The folly of self-selection as a developing country at the WTO, https://currentthoughtsontrade.com/2021/11/15/the-folly-of-self-selection-as-a-developing-country-at-the-wto/).

While WTO Members should be concerned about the digital divide that exists for some Members, the answer to addressing the divide is not to erect barriers to e-commerce. Rather Members should focus on technical assistance and other actions to help least developed countries and some developing countries who are behind develop the infrastructure and technical skills to actively participate in e-commerce.

Extending the moratorium on customs duties on e-commerce is one more hurdle in front of WTO Members as they get ready for the 12th Ministerial Conference which starts in 12 days.

The role of plurilaterals in the WTO’s future

As the WTO is less than two weeks from the start of its 12th Ministerial Conference, an important question for the WTO Membership is whether or not the WTO will incorporate results from plurilaterals started at and after the 11th Ministerial (the so-called Joint Statement Initiatives) into the WTO or will rather limit the role of plurilaterals and effectively further reduce the relevance of the WTO going forward.

As reviewed in prior posts, India and South Africa have challenged the role of plurilaterals where WTO requirements are not followed to make it part of the WTO acquis. See, e.g., February 20, 2021:  Will India and South Africa (and others) prevent future relevance of the WTO?, https://currentthoughtsontrade.com/2021/02/20/will-india-and-south-africa-and-others-prevent-future-relevance-of-the-wto/. The paper from India and South Africa, THE LEGAL STATUS OF ‘JOINT STATEMENT INITIATIVES’ AND THEIR NEGOTIATED OUTCOMES, 19 February 2021, WT/GC/W/819 and one revision (WT/GC/W/819/Rev.1) was the subject of discussions at the March 1-2 and 4, 2021 General Council meeting and has been raised in subsequent General Council meetings as well. See GENERAL COUNCIL, MINUTES OF MEETING HELD IN VIRTUAL FORMAT ON 1-2 AND 4 MARCH 2021, WT/GC/M/190 (23 April 2021), pages 65-78; GENERAL COUNCIL, 7-8 October 2021 PROPOSED AGENDA, WT/GC/W/828 (5 October 2021), agenda item 11 (PAPER TITLED “THE LEGAL STATUS OF ‘JOINT STATEMENT INITIATIVES’ AND THEIR NEGOTIATED OUTCOMES” BY INDIA, SOUTH AFRICA AND NAMIBIA (WT/GC/W/819/REV.1)). Neither India nor South Africa are participating in any of the Joint Statement Initiatives (“JSIs”) at the present time.

Below are some excerpts from the March 2021 General Council meeting which lays out the views of a few of the WTO Members on the topic. The excerpts start with the views of India and South Africa as the sponsors of the paper and then follows with the reaction of a number of Members who support the JSI process. Many more Members expressed views. The controversy basically revolves around whether WTO Members will pursue initiatives among those with an interest with all Members being able to monitor, participate and join when desired or be limited by a system which has proven largely unable to address new issues in a timely manner.

India (pages 65-67 of WT/GC/M/190)

“10.2. The representative of India recalled that India and South Africa had submitted the paper in document WT/GC/W/819 dated 19 February 2021 on the “The Legal Status of ‘Joint Statement Initiatives’ and their Negotiated Outcomes”. As a co-sponsor, India was not questioning the right of Members to meet and discuss any issue. However, when such discussions turned into negotiations
and their outcomes were to be brought into the WTO, the fundamental rules of the WTO should be followed. The WTO had been established as a forum concerning multilateral trade relations in matters dealt with under the agreements in the Annexes to the Marrakesh Agreement and for further negotiations among its Members concerning their multilateral trade relations and to provide a framework for the implementation of results of such negotiations.

“10.3. The Marrakesh Agreement defined ‘Plurilateral Agreements’ as the agreements and associated legal instruments that were included in Annex 4 to the Agreement. The Ministerial Conference, upon the request of the Members party to a trade agreement, decided exclusively by consensus to add that agreement to the said Annex 4. Procedures for amending rules were enshrined in Article X of the Marrakesh Agreement. On the other hand, the GATT and GATS contained specific provisions for modifications of Schedules containing specific commitments of Members.

“10.4. Amendments or additions to the rules were governed by multilateral consensus based decision-making or voting – right from the outset when a new proposal for an amendment was made. On the other hand, negotiations on modifications or improvements to Schedules could arise either as the outcomes of consensual multilateral negotiations pursuant to Article XXVIII of GATT or Article XXI of GATS or be reached through a bilateral request and offer process or as a result of a dispute. In fact, even changes to Schedules could not be made unilaterally as other Members had the right to protect the existing balance of rights and obligations.

“10.5. The GATS read in concert with the Marrakesh Agreement provided for different rules and procedures for amendment of rules and modification of schedules. While the GATS rules were governed by the GATS Part II, “General Obligations and Disciplines”, Part III of the GATS contained provisions concerning Members individual “Specific Commitments” pertaining to distinctly identified services sectors which were inscribed in Members’ Schedules. In case of conflict in interpretation, Article XVI.3 of the Marrakesh Agreement provided that in the event of a conflict between a provision of the Marrakesh Agreement and a provision of any of the Multilateral Trade Agreements, the provisions of the Marrakesh Agreement should prevail.

“10.6. Each of the JSIs was likely to pose different legal challenges to the existing WTO rules and mandates given the differences in the nature and scope of issues covered under each of those initiatives. However, any attempt to bring in the negotiated outcomes of the JSIs into the WTO by appending them to Members’ Schedules, even on MFN basis, following modification of Schedules
procedures, bypassing multilateral consensus would be contrary to the provisions of the Marrakesh Agreement.”10.7. Any attempt to introduce new rules, resulting from JSI negotiations, into the WTO without fulfilling the requirements of Articles IX and X of the Marrakesh Agreement would be detrimental to the functioning of the rules-based multilateral trading system. Among others, it would erode the integrity of the rules-based multilateral trading system, create a precedent for any group of Members to bring any issue into the WTO without the required mandate. bypass the collective oversight of Members for bringing in any new rules or amendments to existing rules in the WTO, usurp limited WTO resources available for multilateral negotiations, result in Members disregarding existing multilateral mandates arrived at through consensus in favour of matters without multilateral mandates, lead to the marginalization or exclusion of issues which were difficult but which remained critical for the multilateral trading system such as agriculture and development thereby undermining balance in agenda setting, negotiating processes and outcomes and fragment the multilateral trading system and undermine the multilateral character of the WTO.

“10.8. The document listed various options to move ahead. As per the provisions of the Marrakesh Agreement, for bringing in their negotiated outcomes in the WTO, the JSI Members could seek consensus among the whole WTO Membership, followed by acceptance by the required proportion of Members according to Article X of the Marrakesh Agreement. Alternatively, they could get the new agreements included in Annex 4 following Article X.9 of the Marrakesh Agreement. They also had option to pursue agreements outside the WTO Framework, as had been envisaged in the Trade in Services Agreement (TISA) or as had been done in multiple bilateral or plurilateral FTAs or RTAs. The proponents of a “flexible multilateral trading system” could even seek amendment to Article X of the Marrakesh Agreement following procedures enshrined therein to provide for such an approach.

“10.9. Through the paper WT/GC/W/819, India and South Africa reiterated that basic fundamental principles and rules of the rules-based multilateral trading system as enshrined in the Marrakesh Agreement should be followed by all Members including the participants of various JSIs. Negating the decisions of past Ministerial Conferences by decisions taken by a group of Ministers on the sidelines of a Ministerial Conference or the side-lines of any other event would be detrimental to the existence of the rules-based multilateral trading system under the WTO.”

South Africa (pages 67-68 of WT/GC/M/190)

“10.10. The representative of South Africa said that the WTO had been established as a forum concerning multilateral trade relations. South Africa’s interest in submitting the paper was to remind Members of the legal architecture that governed the functioning of the WTO which was critical to preserve its multilateral character. The pandemic was a sharp reminder of the importance of global cooperation in dealing with global challenges. The challenges facing humanity were not limited to
the pandemic but included rising inequality both within and between countries, poverty and food insecurity, among others. Those necessitated that Members avoided measures that undermined or fragmented the trading system.

“10.11. Any group of Members could discuss any issue informally. However, when discussions turned into negotiations, and their outcomes were sought to be formalized into the WTO framework, it could only be done in accordance with the rules of procedure for amendments as well as decision-making as set out in the Marrakesh Agreement. The plurilaterals were provided for in the Marrakesh Agreement and were included in Annex 4 to the Agreement – and there were specific rules to be followed to integrate those into the WTO framework. It was however important to note that the Ministerial Conference, upon the request of the Members party to a trade agreement, decided exclusively by consensus to add that agreement to the said Annex 4.

“10.12. The provisions in the Marrakesh Agreement had been carefully negotiated and were a result of the experience acquired in the GATT which had been characterized especially after the Tokyo Round by agreement on a number of plurilateral codes. There had been recognition that those plurilateral codes had created a fragmented system of rules. In respect of some Contracting Parties,
the GATT rules had been applicable, while in respect of the rest, both the GATT rules and the rules of plurilateral codes had been applicable. That created considerable complexity in determining what obligations had been applicable in respect of which Contracting Party.

“10.13. The Preamble to the Marrakesh Agreement clearly articulated Members’ vision for the WTO and it was to develop an integrated, more viable and durable multilateral trading system. Article II.1 stated that “The WTO shall provide the common institutional framework for the conduct of trade relations among its Members.” Article III.2 stated that “The WTO shall provide the forum for negotiations among its Members concerning their multilateral trade relations”. It provided for consensus-based decision-making as enshrined in Articles III.2, IX, X and also X.9 as well as procedures for the amendments of rules as articulated in Article X.

“10.14. The Marrakesh Agreement did not make provision for the so-called open plurilaterals and flexible multilateralism. Therefore, any suggestion that when offered on MFN basis, no consensus was required for bringing new rules into the WTO was legally inconsistent with the fundamental principles and procedures of the Marrakesh Agreement. Importantly, new rules could not be brought into the WTO through amendment of Members’ Schedules. It had also been suggested that the Telecommunications Reference Paper justified why the consensus principle could be bypassed. However, as part of the package of the Uruguay Round outcome, there had been a multilateral consensus and a formal mandate for the negotiations, including agreement on inscribing outcomes into Schedules without an amendment procedure.

“10.15. There were systemic and developmental implications inherent in plurilaterals especially if they attempted to subvert established rules and foundational principles of the Marrakesh Agreement. They risked eroding the integrity of the rules-based multilateral trading system, creating a precedent for any group of Members to bring any issue into the WTO without the required consensus, including disregard of existing multilateral mandates, marginalizing issues which were difficult but yet critical
for the multilateral trading system such as agriculture and development thereby undermining balance in agenda setting, negotiating processes and outcomes, fragmenting the system and undermining the multilateral character of the WTO which Members had sought to resolve by creating the WTO following the GATT experience.

“10.16. The legal framework of the WTO provided clear options for Members who were part of JSIs as outlined in the paper. South Africa was therefore calling on Members to respect the rules which continued to underpin the functioning of the WTO.

Australia (page 69 of WT/GC/M/190)

“10.24. The representative of Australia noted Members’ commitment to improving the effectiveness of the WTO’s rulemaking function. Australia was a participant in all the current JSI negotiations under way and strongly supported that important work at the WTO. Plurilateral initiatives were neither novel nor revolutionary in the multilateral trading system. They had always been a part of the WTO architecture had constituted the predominant form of rulemaking in the multilateral trading system for decades. WTO-consistent plurilateral trade agreements with wide participation played an important role in complementing global liberalization efforts. The current JSIs had the potential to deliver vital outcomes that strengthened the WTO’s rulemaking function and its health more generally. More than 110 Members were participating in one or more of the current JSI negotiations – demonstrating the wide acknowledgement from across the Membership that that was a legitimate and useful form of rulemaking. They had and continued to be inclusive, open and transparent.

“10.25. Australia did not agree with the legal analysis in India and South Africa’s paper. For instance, the suggestion that Members could not improve their GATT or GATS Schedules without consensus agreement was not accurate. Members could always incorporate improvements to their Schedules whether unilaterally or as a group of Members. That was the legal architecture which participants had agreed to use in the services domestic regulation JSI. Australia had full confidence in the WTO consistency of that approach. In the case of the e-commerce JSI, its participants were still exploring the legal structure options they could best use to incorporate eventual outcomes into the WTO legal framework but were confident that those pathways could be found. Australia encouraged all Members to participate in or at least keep an open mind on those plurilateral discussions to pursue
outcomes that modernized and enhanced WTO rules for the whole Membership.”

Costa Rica (pages 69-70 of WT/GC/M/190)

“10.26. The representative of Costa Rica was focused on ensuring that the WTO operated within the legal framework agreed by the Members. Costa Rica would reject any attempt to force Members to abide by new obligations without their consent. Costa Rica was a participant in the Joint Statement Initiatives on Electronic Commerce, Investment Facilitation for Development, MSMEs and Services Domestic Regulation. The reason for that was simple. Costa Rica was recognizing the need to adapt to the trade policy challenges of the 21st century. But that did not mean that any Member who chose to remain outside those discussions would be forced to adhere to any new obligations.

“10.27. Costa Rica focused its remarks that day on the negotiations on services domestic regulation as that was the initiative that it had the pleasure of coordinating. Those negotiations and the outcome they would produce were firmly within the rules of the WTO. 59 proponents of services domestic regulation had established the initiative at the end of 2017 after they had to accept with
great regret that no further progress had been possible in the Working Party on Domestic Regulation. Each and every proposal submitted had been rejected in its entirety by South Africa and other Members. Proponents of domestic regulation had no choice but to accept that position.

“10.28. Since that time, work on the subject had so far advanced in the Joint Statement Initiative on Services Domestic Regulation. To the extent that participants considered it to be a viable prospect for an outcome to be delivered that year, Costa Rica clarified that the outcome would consist of a set of disciplines on licensing, qualification and standards which would bind only participating
Members but would benefit services suppliers from all Members who traded with the participating Members which currently represented more than 70% of world services trade.

“10.29. The outcome that was envisaged would be incorporated into participating Members’ GATS schedules of specific commitments. In substance, it covered precisely those types of measures that were listed in the GATS as areas for additional commitments, namely, qualification standards and licensing matters That was important because the paper introduced by India and South Africa suggested that the disciplines developed by the initiative constituted some form of not further specified rules which did not fit under the architecture of services schedules. That was quite untrue. Rather, the disciplines constituted improvements of participating Members’ existing commitments.

“10.30. Participating Members would give legal effect to the outcome by inscribing the disciplines as additional commitments in the respective GATS schedules. That would not be done by seeking to add a new agreement to the WTO architecture but by applying well established multilateral WTO procedures to improve Members’ schedules of specific commitments. Concerns about the work of the JSI had been raised already at the end of 2019. At that time, India had argued that some of the disciplines could be of a GATS minus nature and the GATS Article VI.4 mandate could be affected by the work of the initiative. As the Coordinator of the initiative, Costa Rica had had the pleasure of discussing those concerns with India in more detail and to report back to the group. While participants in the initiative did not agree that the disciplines in question could be understood to undercut existing GATS obligations, they agreed wholeheartedly with India that the disciplines should not be understood to weaken any provision contained in the GATS.

“10.31. Indeed, participants had recently incorporated in the negotiating text language expressing clearly that the disciplines should not be constructed to diminish any obligations under the GATS. The GATS Article VI.4 mandate to develop any necessary domestic regulation disciplines was not, would not and could not be affected by the fact that Members participating in the JSI would undertake additional commitments on domestic regulation. Costa Rica was therefore disappointed to see that India currently appeared to question the right of any WTO Member to improve its services commitments. The JSI on Services Domestic Regulation remained open and transparent and all Members were welcome to join the meetings and to constructively engage ensuring that the outcome benefited service suppliers across the world and included as many Members as possible.”

Chinese Taipei (page 70 of WT/GC/M/190)

“10.32. The representative of Chinese Taipei noted that the plurilateral approach had contributed to global trade in the past. The ITA was an example. Certain limited use of the plurilateral approach could support and supplement the multilateral trading system by facilitating international trade. The discussions under JSIs had given the WTO new momentum which was necessary and healthy for the multilateral system. It was an unavoidable trend that more and more trade issues were emerging that urgently needed Members to establish new disciplines for them. It was highly important to update WTO rules and to make the WTO a living organization and not be left behind by the world.

“10.33. Through Joint Statement Initiatives, Members had developed a creative way to address the trend so that the WTO’s legislative function could be improved for it to maintain its relevancy given new developments in the world – with Members still maintaining the flexibility not to opt in. Chinese Taipei called on Members to jointly think about how plurilateral agreements could be integrated into the multilateral trading system while considering Members’ needs for their respective development stages and maintaining the existing rights and obligations of non-participating Members.”

Colombia (page 70 of WT/GC/M/190)

“10.34. The representative of Colombia believed that that was an important discussion for the future of the organization as those initiatives covered the interests of many Members to move forward on crucial issues in global trade relations. Colombia appreciated the interest the Director-General had expressed on JSIs. That was a necessary step for the strengthening of the WTO. Colombia was happy to see how the path that had begun with previous processes such as the ITA was currently joined by many Members who were involved in the JSIs – an important space to resolve pending priorities.

“10.35. Such perspective had led Colombia to actively and formally participate in the JSIs on ecommerce, investment facilitation for development, services domestic regulation, MSMEs and trade and gender. Colombia also expressed its interest in other nascent initiatives which would likewise have an important impact on the WTO’s future as a driver of development for Members. With regard to the document being reviewed that day, Colombia did not share the legal analysis that the paper had set out but remained ready to continue that discussion in the appropriate forum. Colombia reiterated its commitment to the JSIs and its support for any work that could be done in that area.”

Mexico (page 70 of WT/GC/M/190)

“10.36. The representative of Mexico said that JSIs provided an excellent opportunity to furnish the WTO with tools that would allow it to face the current challenges in global trade. Members were in a situation where some of them believed that they were still not in a position to fully integrate themselves into the work under way. The JSI participants had never foreclosed the possibility for more Members to join those initiatives when they deemed it appropriate to do so nor did those initiatives diminish the rights and obligations of non-participating Members. Rather, the JSIs offered a possibility to move forward and help the WTO become more relevant by promoting trade as a vehicle for development. Mexico had been a strong proponent of the JSIs as the work had taken place openly, inclusively and transparently with voluntary participation at its core.”

Russian Federation (page 71 of WT/GC/M/190)

“10.37. The representative of the Russian Federation found the paper by India and South Africa upsetting. There was no doubt that Members should respect the right of any of them to express its attitude towards current developments within the multilateral legal system and to point out issues which it could see as contradictory to the system’s rules. The paper was however not about that but
dealt with the issue of whether the WTO should move forward and regain its relevancy amid the changing global economic environment or should it be further bogged down by disagreements among Members and lack of consensus eventually turning into an archaic and useless institution.

“10.38. The multilateral outcomes at MC11 had clearly been quite poor. The decision to promote and accelerate fisheries subsidies negotiations – the only multilateral and negotiation-related result achieved in Buenos Aires – was evidently not enough to chart a way forward for the WTO. The JSIs in which Russia was proud to participate in had been considered globally as a signal of Members’ ability and readiness to explore possible formats to move ahead. The progress achieved in all JSIs since then demonstrated the effectiveness of that approach. For example, the JSI on Services Domestic Regulation was an attempt to deliver on a long standing commitment of all Members to develop the respective disciplines as set out in GATS Article VI.4.

“10.39. As for the incorporation of new plurilateral initiatives into the WTO Agreements, Russia agreed with suggestion of India and South Africa that it should be done in accordance with the relevant provisions of the Marrakesh Agreement. However, the final goal of the JSIs was not to create a set of isolated rules among like-minded Members but rather to update the multilateral legal
system as a whole. That was why the JSIs remained open to all Members at any stage.

“10.40. The most disappointing fact about the submission was that while attacking JSIs, it did not provide any way forward essentially keeping the WTO to languish in the current limbo. No Member had taken the position to leave behind the core WTO mandated issues like agriculture or ‘horizontal’ S&DT. However, if the needs of the businesses and the people worldwide including in developing countries required Members to agree on adequate and up-to-date rules on other important issues, they had no right to keep those requests as hostages of their inability to reach progress on all fronts.”

Japan (page 71 of WT/GC/M/190)

“10.41. The representative of Japan appreciated the Joint Statement Initiatives as an essential framework to allow the WTO to address in a flexible and realistic manner the changing global economic needs of the 21st century. The JSIs responded to calls from a broad range of stakeholders by discussing key economic issues and would contribute to updating the WTO rulebook and to
ensuring the relevance of the WTO in today’s world. Without the JSIs, the WTO risked becoming less relevant and even losing its raison d’être as a cornerstone of the multilateral trading system. The JSI meetings were organized in an open, transparent and inclusive manner.

“10.42. While taking into account the convenience of respective Members including the size of their delegations in organizing the process, the fact that many of them were participating in the JSIs and actively engaging in negotiations in a creative and innovative way clearly showed the JSI’s importance. A number of achievements made in the GATT and the WTO had initially been taken up
or discussed in plurilateral initiatives which were later merged in the system. Japan believed that the JSIs were consistent with the WTO and had high hopes that they would be a key part of the MC12 outcomes. Japan would continue to work with other Members to deliver substantial outcomes in the JSIs as a positive achievement of the WTO.”

Republic of Korea (page 71 of WT/GC/M/190)

“10.43. The representative of the Republic of Korea, as a staunch supporter of the multilateral trading system, was disappointed to see the WTO in limbo in particular its failure to function as a forum for multilateral trade negotiations in response to the diverse needs and interests of Members. Upon such impasse and trade liberalization shifting weight to regional agreements outside the WTO, plurilateral negotiations could be a meaningful stepping-stone for multilateral agreement. It also served as a test pad for pioneering new trade rules as demonstrated by the GPA and the ITA. The JSIs which were held parallel with multilateral negotiations were essential to maintain the WTO’s relevance in the changing trade environment. Those negotiations were responsive to the demands of diverse stakeholders which would help rebuild trust in the multilateral trading system. Korea
therefore expressed its concern on the communication submitted by India and South Africa which raised questions on the concerted endeavours for revitalizing the WTO’s negotiating function.”

United States (pages 71-72 of WT/GC/M/190)

“10.44. The representative of the United States believed that plurilateral negotiations at the WTO could be a useful means to advance issues of interest to Members and to keep the WTO relevant. It did not view plurilateral negotiations and outcomes as undermining multilateral ones. In fact, plurilateral initiatives could foster new ideas and approaches and build momentum toward
multilateral outcomes. The various rigid positions expressed in the paper would seem to foreclose Members’ ability to pursue creative and flexible approaches at the WTO to the challenges of today and tomorrow.”

Possible JSI outcomes at the WTO’s 12th Ministerial Conference

The WTO is hoping that the 12th Ministerial Conference will finally deliver a fisheries subsidies agreement after 20 years of negotiations. It would be a multilateral agreement and only the second such agreement (the other being Trade Facilitation) concluded since the creation of the WTO in 1995. There are hopes for collective action on trade and health and some other issues. But many of the likely deliverables will involve Joint Statement Initiatives. Hence the position of India and South Africa may muddy the outlook for whether such initiatives when concluded will be incorporated into the WTO acquis.

Press accounts of a recent Chatham House event noted the view of the European Union that the WTO needs to be able to bring these initiatives into the WTO. See Inside U.S. Trade’s World Trade Online, Weyand: WTO reform should include easier’ path for plurilateral deals, November 15, 2021, https://insidetrade.com/daily-news/weyand-wto-reform-should-include-easier-path-plurilateral-deals (“World Trade Organization members need an ‘easier’ way to integrate plurilateral agreements into the organization’s rulebook, European Commission Director-General for Trade Sabine Weyand said on Friday, calling for the idea to be a part of broader WTO reform discussions.”). The EU, like most other WTO Members, has been an active participant in various JSIs.

A former Deputy Director-General of the WTO, Alan Wolff, presented views in Singapore earlier this week on the subject of the role of plurilaterals in the WTO. See Peterson Institute for International Economics, Alan Wm. Wolff, Plurilateral Agreements and the Future of the WTO, November 16, 2021, Remarks delivered at the Nanyang Technological University, Singapore, https://www.piie.com/commentary/speeches-papers/plurilateral-agreements-and-future-wto. His speech is worth reading in its entirety. A few excerpts are provided below and highlight the critical importance of plurilaterals going forward. Whether plurilaterals are within the WTO or outside will basically determine whether the WTO can maintain relevance in the future.

“Plurilateral agreements have become and will remain the primary path forward for improving the conditions for international trade.

“Insofar as the future health of the multilateral trading system is concerned, there are three alternatives:

“(1) coalitions of the like-minded will be able to conclude open plurilateral agreements within the WTO,

“(2) forward-leaning agreements are negotiated outside the WTO but become templates for the multilateral rules, or

“(3) the WTO becomes increasingly irrelevant to new global challenges and there is a consequent fragmentation of the world trading system.”

After reviewing the JSIs and other initiatives on climate change, trade and health and other matters, Amb. Wolff notes that

“Global problems need global solutions.

“The only practical way forward for the WTO is through open plurilateral agreements. Otherwise, Members who are looking for solutions will view the WTO as being increasingly irrelevant. The WTO to thrive needs to become more flexible.

“Notionally, various subjects can be negotiated on their own, in disparate venues, each unrelated to the other, without full transparency, without interested countries having a say. That is a recipe for global incoherence. It is the opposite of what is needed.

“Where trade is a vitally important aspect of meeting a global challenge – such as a pandemic or climate change, there is no clear alternative venue for addressing fully countries’ needs. The WTO must be pressed into service.

“It is time for the WTO’s Members to take the next step and embrace the open plurilateral agreements being negotiated now and those that are going to be launched to meet their needs for the 21st century.”

The 12th Ministerial Conference is the opportunity for WTO Members to embrace the future or commit the WTO to reduced relevancy. By early December, we should understand the likely direction of the WTO.

The APEC 2021 Ministerial Meeting Joint Statement — portion relevant to WTO 12th Ministerial Meeting

The APEC 2021 Ministerial meeting was held remotely on November 8-9 and resulted in a joint statement which included ambitions of APECs 21 members for the upcoming 12th WTO Ministerial Conference which starts in Geneva at the end of November (November 30-December 3). New Zealand has chaired APEC in 2021. Because the APEC countries include members accounting for 38% of the world’s population, 62% of the world’s GDP and 48% of global trade in 2020 and includes both the United States and China among the 21 territories, what APEC members support for the upcoming WTO ministerial may offer a glimpse of what may be possible in Geneva in the coming weeks. The APEC Ministerial Meeting Joint Statement and a publication on APEC in Numbers can be found here. See 2021 APEC Ministerial Meeting Joint Statement, Wellington, New Zealand, 09 November 2021, https://www.apec.org/meeting-papers/annual-ministerial-meetings/2021/2021-apec-ministerial-meeting; APEC in Charts 2021, https://www.apec.org/docs/default-source/publications/2021/11/apec-in-charts-2021/221_psu_apec-in-charts-2021.pdf?sfvrsn=50537c36_2. APEC members include Australia, Brunei Darussalam, Canada, China, Hong Kong (China), Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russian Federation, Singapore, Chinese Taipei, Thailand, United States, and Viet Nam.

While the Declaration contains coverage of a number of issues, it has a separate section on the World Trade Organization (pages 4-5, paras. 17-22). The six paragraphs from the Joint Statement are copied below.

“World Trade Organization

“17. APEC takes pride in its long history of active support for the rules-based multilateral trading system (MTS), with the WTO at its core. The MTS has been a catalyst for our region’s extraordinary growth and we will work together to improve it. We seek a responsive, relevant, and revitalised WTO. We must support the WTO and its membership to modernise trade rules for the twenty-first century. Together, we will engage constructively and cooperate to ensure the 12th WTO Ministerial Conference (MC12) is a success and delivers concrete results.

“18. As a priority for MC12, we see an opportunity for the WTO to demonstrate that the MTS can continue to help address the human catastrophe of the COVID-19 pandemic and facilitate recovery. We call for pragmatic and effective ministerial outcomes that makes it easier to respond swiftly and effectively to the COVID-19 pandemic and accelerate the recovery. Our priorities include supporting the facilitation of manufacturing, distribution, and supply chains of essential medical goods, including vaccines. We will work proactively and urgently in Geneva to support text-based discussions, including on a temporary waiver of certain intellectual property protections on COVID-19 vaccines.

“19. We reiterate our determination to negotiate effective disciplines on harmful fisheries subsidies in line with SDG 14.6, and call for agreement to a comprehensive and meaningful outcome by MC12 in a few weeks’ time.

“20. Despite its importance for ensuring global food security and sustainable economic development, agriculture is one of the most protected sectors in global trade. We recognise the need for a meaningful outcome on agriculture at MC12, reflecting our collective interests and sensitivities, with a view towards achieving substantial progressive reductions in support and protection, as envisaged in the continuation of the reform process provided in Article 20 of the WTO Agreement on Agriculture and existing mandates.

“21. We recognise the positive role that existing plurilateral negotiations and discussions are playing in progressing outcomes. APEC member participants in the relevant Joint Statement Initiatives (JSIs) call for conclusion of negotiations on services domestic regulation by MC12; and substantial progress by MC12 in the JSIs on e-commerce; micro, small and medium-sized enterprises; and investment facilitation for development. We take note of the efforts by the APEC economies who endorsed the Joint Declaration on Trade and Women’s Economic Empowerment to deliver an ambitious outcome at MC12 that supports the advancement of trade and gender equality.

“22, We continued our frank and constructive discussions regarding improvement to the WTO’s monitoring, negotiating and dispute settlement functions. We continue to support the ongoing and necessary reform work to improve the WTO’s functioning, including the importance of making progress on enhancing transparency to support its monitoring and negotiating functions. We will work together at the WTO and with the wider WTO membership to advance the proper functioning of the WTO’s negotiation and dispute settlement functions, which require addressing longstanding issues. We urge WTO members to seek a shared understanding of the types of reform needed.”

The Joint Statement has some specific items where outcomes are pursued — conclusion of the fisheries subsidies negotiations, some outcomes in the Joint Statement Initiatives (services domestic regulation should be completed; micro, small and medium-sized enterprises is completed; progress on others). As reviewed in yesterday’s post, WTO Members still have a challenging road to achieve a completed fisheries subsidies agreement at the 12th Ministerial. See November 9, 2021:  WTO Fisheries Subsidies Negotiations — a second revised text from November 8 holds out hope for a deal by MC12; how realistic is the hope?, https://currentthoughtsontrade.com/2021/11/09/wto-fisheries-subsidies-negotiations-a-second-revised-text-from-november-8-holds-out-hope-for-a-deal-by-mc12-how-realistic-is-the-hope/. Moreover, India, South Africa and others are raising objections to having any plurilaterals being negotiated included in the WTO which will complicate what comes out of the 12th Ministerial Conference (as opposed to encouraging Members to pursue plurilaterals outside of the WTO). See February 20, 2021:  Will India and South Africa (and others) prevent future relevance of the WTO?, https://currentthoughtsontrade.com/2021/02/20/will-india-and-south-africa-and-others-prevent-future-relevance-of-the-wto/; September 18, 2021: The WTO’s 12th Ministerial Conference in Late November – early December 2021 — the struggle for relevance, https://currentthoughtsontrade.com/2021/09/18/the-wtos-12th-ministerial-conference-in-late-november-early-december-2021-the-struggle-for-relevance/.

The Joint Statement also seeks “pragmatic and effective” outcomes in the health and trade space to address responding to the COVID pandemic. Specifics are lacking although there is support to expanding production and access to vaccines and other medical goods. While supporting text based negotiations in the area, including on a possible temporary waiver of some TRIPS provisions on COVID vaccines, the lack of greater specificity reflects differences in positions of APEC members.

Similarly, while supporting WTO reform in all three areas of WTO activity (monitoring, negotiating and dispute settlement), APEC members have significantly different views on what is needed in these areas. Hence only general language is included in the Joint Statement.

In a prior post, I have opined that recent actions by the U.S. and EU to find ways around the civil aircaraft and steel and aluminum frictions suggests that the U.S. may agree to the start of a process to review the dispute settlement system issues raised by it as part of the 12th Ministerial (a high EU priority) and that the U.S. and EU could coalesce around an outcome acceptable to both in the TRIPS waiver dispute. See November 2, 2021:  What does the U.S.-EU Agreement on steel and aluminum imply for the upcoming 12th WTO Ministerial Conference?, https://currentthoughtsontrade.com/2021/11/02/what-does-the-u-s-eu-agreement-on-steel-and-aluminum-imply-for-the-upcoming-12th-wto-ministerial-conference/.

China has opposed greater transparency obligations and has tied reform of industrial subsidies to looking at agricultural subsidies as well. A recent post of mine reviews the need for better information on subsidies. See October 30, 2021:  WTO reform — distortions to market access and the need for better information, https://currentthoughtsontrade.com/2021/10/30/wto-reform-distortions-to-market-access-and-the-need-for-better-information/. Despite differences of view on some issues among major Members, it is not out of the question that a reform program will cover an examination of all three functions going forward.

On agriculture, there is a shared view for a need for results at the WTO 12th Ministerial and reflects on the fact that Article 20 of the WTO Agreement on Agriculture calls for periodic rounds of liberalization. However, the language of the Joint Statement doesn’t specify the areas where agreement is possible by the 12th Ministerial, reflecting different views among APEC members.

Nothing in the APEC Joint Statement addressed what, if anything should be agreed at the 12th WTO Ministerial on the climate crisis and what role trade can play in addressing the crisis. This omission is unfortunate but likely reflects large differences in views within APEC members on the topic. As I reviewed in a recent post, much more is needed but unlikely to come from the WTO and its members. See November 4, 2021:  The WTO and the environment — will the 2020s be different in terms of trade policies that are environmentally supportive?, https://currentthoughtsontrade.com/2021/11/04/the-wto-and-the-environment-will-the-2020s-be-different-in-terms-of-trade-policies-that-are-environmentally-supportive/.

Conclusion

The APEC 2021 Ministerial Meeting Joint Statement, being released three weeks before the start of the WTO’s 12th Ministerial Conference is a positive statement of support for the multilateral trading system. Coming from a group of WTO Members accounting for nearly 50% of global trade, it is a useful guide for topics these countries and territories will be pursuing in Geneva. Other group statements have been released as well as individual country or group objectives. But even within the APEC group of countries, large differences exist on outcomes of interest. With the exception of a possible conclusion to the fisheries subsidies negotiations and conclusions on several Joint Statement Initiatives, there may be only limited positive outcomes. There may be some limited agreement on the broad topic of health and trade and some agreement on topics for future negotiation. There may also be at least some provisions in a declaration dealing with the climate crisis and the important role trade can play in addressing the crisis.

Such a limited set of outcomes will likely be viewed as a success for an organization hamstrung by Members with no common vision for the role of the organization, with large differences in development levels, a cumbersome governance system and growing divergence on whether the organization can support global trade where market rules are not the required framework. More is needed for a truly relevant WTO and for a sustainable global trading system. The world is unlikely to achieve meaningful reform at the WTO in the coming decade. Progress, if any, will likely be slow and piecemeal.

The WTO and the environment — will the 2020s be different in terms of trade policies that are environmentally supportive?

With the world rapidly approaching the point of no return on rising temperatures, can an organization like the WTO characterized by negotiating paralysis play a meaningful role in seeing that trade rules support sustainable growth and a livable planet in a timely manner?. Recent history would suggest the answer is no or at least not in a timely manner.

Fisheries subsidies negotiations have dragged on for more than two decades, suggesting that even if a robust trade and environment work program is agreed to at the WTO’s 12th Ministerial Conference, the chances of meaningful progress in the current decade are modest at best.

The negotiations for an environmental goods agreement amongst 17 countries and groups accounting for 90% of trade in environmental goods which began in 2014 was essentially discontinued in 2016 despite the obvious global benefit from tariff reductions on the trade in goods that can improve the environment. While many have urged the restart of the talks, it is unclear whether talks will restart and how quickly they could conclude.

There are no ongoing negotiations to address the need to reduce the carbon footprint of industry and agriculture despite some 69 countries having adopted some form of carbon price and the impending start of carbon border adjustment measures (“CBAMs”) by some WTO Members. A global agreement on a carbon price is aspirational at this point without negotiations agreed to or started. Countries working to reduce carbon emissions are concerned about “leakage” of production and jobs to countries with low standards ensuring that there will be CBAMs imposed by some. Some WTO Members are threatening retaliation if such measures are adopted. So the 2020s will likely be a period of conflict among WTO Members on the topic instead of being a period of time in which the WTO and its Members are able to make a critical contribution to controlling the global warming crisis.

Efforts at plurilateral agreements (so-called Joint Statement Initiatives or JSIs) which include some in the environmental area (e.g., marine plastics pollution) are not certain to become part of the WTO, facing opposition from India and South Africa and others.

So recent history does not shout out that the WTO will play an important role in addressing the existential threat flowing from global warming.

This is not to say that the WTO Director-General isn’t advocating for trade to play its role in addressing the problems. Moreover, the Secretariat is attempting to generate information on the role trade can play in addressing global warming through a series of information notes. See, e.g., WTO news, DG Okonjo-Iweala highlights trade’s role in ambitious and just climate action at COP26, 2 November 2021, https://www.wto.org/english/news_e/news21_e/clim_02nov21_e.htm; WTO news, WTO issues information briefs on trade, climate, related issues with COP26 talks underway, 3 November 2021, https://www.wto.org/english/news_e/news21_e/clim_03nov21_e.htm. The press release reviewing DG Ngozi’s statement is copied below.

“Trade can and must make a contribution to a comprehensive climate action agenda, Director-General Ngozi Okonjo-Iweala declared in her engagements with world leaders and stakeholders at the United Nations COP26 Climate Summit in Glasgow, Scotland, highlighting the need for ambitious yet fair commitments that ensure a green transition that is just and inclusive to all economies.

“The Director-General highlighted trade and the WTO’s role in a wide breadth of approaches to climate action in her panels and bilateral meetings, covering carbon emission reductions, the conservation of forests as critical carbon sinks, climate adaptation, and finance.

“On carbon reduction and pricing, she championed a coordinated approach at the high-level event organized by Canada and the Carbon Pricing Leadership Coalition, saying: ‘Let’s move towards a global carbon price. We have a great deal of fragmentation and we are hearing increasingly from businesses that they are finding regulations difficult to navigate and sometimes it results in higher prices for consumers and others. We also have members who are afraid this measure is somehow disguised protectionism which will prevent them from selling products abroad. Their issues need to be respected as we develop these systems.’

“’The WTO provides a forum where we can initiate this dialogue and involve developing and least-developed countries in the conversation. Leaders should task the International Monetary Fund, Organisation for Economic Co-operation and Development, World Bank and the WTO to work together and come up with a global approach,’ she said.

“Halting deforestation and establishing sustainable markets for agriculture must also be part of the comprehensive trade and climate agenda, she said at a session of the World Leaders Summit on Forests and Land Use, organized by the United Kingdom, host of COP26, and the UN Framework Convention on Climate Change. WTO members have already notified an increasing number of policies relating to forestry management (514 measures from 2009 to 2019) as well as sustainable agriculture management (over 1,200 measures). However, more action is needed, such as reforming subsidies that create perverse incentives for market actors to deplete natural resources, the Director-General said.

“At the Africa Adaptation Acceleration Summit, moreover, the Director-General said: ‘Adaptation for Africa must be a priority for the international community. This region contributes the least to emissions but suffers the most. Climate finance for Africa to meet adaptation costs must be ramped up.’

“’We also need to put in place trade policies to cushion against and adapt to the negative impacts of climate change. Trade is part of the solution,’ she said, noting the need for trade to ensure food security in the face of climate threats, provide access to adaptation technologies, and create synergies in Aid for Trade and climate finance.

“The Director-General will also underline the importance of support for developing countries and least developed countries (LDCs) at the 3 November event organized by the United Kingdom on mobilizing climate finance.”

The five information papers released from the Secretariat on November 3, 2021 are:

TRADE AND CLIMATE CHANGE, INFORMATION BRIEF N°1, MAPPING PAPER: TRADE POLICIES ADOPTED TO ADDRESS CLIMATE CHANGE, https://www.wto.org/english/news_e/news21_e/clim_03nov21-1_e.pdf.

TRADE AND CLIMATE CHANGE, INFORMATION BRIEF N°2, CLIMATE CHANGE IN REGIONAL TRADE AGREEMENTS, https://www.wto.org/english/news_e/news21_e/clim_03nov21-2_e.pdf.

TRADE AND CLIMATE CHANGE, INFORMATION BRIEF N°3, TRADE RESILIENCE IN THE FACE OF A RISING BURDEN OF NATURAL DISASTERS, https://www.wto.org/english/news_e/news21_e/clim_03nov21-3_e.pdf.

TRADE AND CLIMATE CHANGE, INFORMATION BRIEF N°4, CARBON CONTENT OF INTERNATIONAL TRADE, https://www.wto.org/english/news_e/news21_e/clim_03nov21-4_e.pdf.

TRADE AND CLIMATE CHANGE, INFORMATION BRIEF N°5, AFRICA UNDER A CHANGING CLIMATE: THE ROLE OF TRADE IN BUILDING RESILIENT ADAPTATION IN AGRICULTURE, https://www.wto.org/english/news_e/news21_e/clim_03nov21-5_e.pdf.

A former Deputy Director-General of the WTO, Alan Wolff, in comments to the Harvard JFK School last week, identified a third required outcome of the WTO’s 12th Ministerial Conference (besides a statement on trade and health and the conclusion of the fisheries subsidies negotiations) to be —

“3. A clear pledge to deal with trade and climate, and other environmental issues (marine plastics pollution, fossil fuels, etc. – this last, probably unspecified).

“• The effort is likely to take the form of an open plurilateral negotiation, a joint statement initiative. This is now a path more often chosen, as agreement among 164 disparate sovereigns is becoming close to impossible to achieve.”

See Defining Success for MC12, Notes for remarks of Alan Wm. Wolff, Peterson Institute for International Economics, Harvard JFK School, 29 October 2021, https://www.piie.com/sites/default/files/documents/wolff-2021-10-29.pdf (page 3).

While the start of a JSI on trade and climate is the most that can be hoped for at the Ministerial, even if achieved, the question will be can progress be made quickly enough to affect global warming. The fact that the scope of any such negotiations is uncertain strongly supports the view that efforts at the WTO on a plurilateral or multilateral basis will be too limited and too late to make a difference.

This will likely mean any meaningful movement will be implemented by individual Members or potentially small groups and probably occur outside of the WTO. In the absence of global or plurilateral agreements, actions by individual Members will be needed but almost certainly not enough.

Let’s hope that the above analysis proves too pessimistic. For our children and grandchildren, a lot depends on a global robust response to global warming in many policy areas, including trade.

What does the U.S.-EU Agreement on steel and aluminum imply for the upcoming 12th WTO Ministerial Conference?

On October 31, 2021, the United States and the European Union took steps to lower the conflict over the 232 tariffs imposed in 2018 by President Trump on steel and aluminum and to start work on a new steel agreement that would protect both industries from the challenges posed by global excess capacity while moving towards a low carbon steel producing future. The Joint Statement released on October 31 is reproduced below and indicates that a tariff rate quota based on 2015-2017 volumes of steel and aluminum imports from the EU will be accepted in the U.S., duty free with volumes above that, that are not subject to exclusions entering at existing additional duty rates (25% on steel and 10% on aluminum) with periodic review. The EU will remove its additional duties that were imposed as result of the 232 action. WTO challenges by each party on the other will be stayed. And the countries will work on a new steel agreement over the next two years that will address both global excess capacity and reducing the carbon intensity of the products involved. Here is the joint statement.

“STEEL & ALUMINUM
“U.S.-EU Joint Statement
“October 31, 2021


“Given the joint desire of the United States and the European Union (“EU”) to address non-market excess capacity so as to preserve their critical steel and aluminum industries, the United States and the EU agree to the following:

1. Ongoing cooperation

“a. Trade Remedy/Customs Cooperation: To advance their efforts to address excess capacity, both sides agree to expand U.S./EU coordination involving both trade remedies and customs matters. The United States will also share public information and best practices with EU officials and/or member state officials, as appropriate, on topics including how detection of fraud/evasion and circumvention of duties is approached and possible self-initiation. Officials could also coordinate industry engagement with relevant sectors to hear their views and share observations/concerns. Insofar as customs cooperation is concerned, it may take the form of mutual administrative assistance in accordance with the U.S.-EU Agreement on customs cooperation and mutual assistance in customs matters.

“b. Monitoring: The United States and the EU will monitor steel and aluminum trade between them.

“c. Cooperation on Non-Market Excess Capacity: The United States and the EU agree to regularly meet to consult with a view to developing additional actions in order to contribute to adjustments and solutions and address non-market excess capacity in the global steel and aluminum sectors.

“d. Review: The United States and the EU agree to review the operation of this arrangement, and ongoing cooperation, on an annual basis, including in light of changes in the global steel and aluminum markets, U.S. demand, and imports.

2. Global steel and aluminum arrangements to restore market-oriented conditions and address carbon intensity

“Steel and aluminum manufacturing is one of the highest carbon emission sources globally. Excess capacity generates unnecessary greenhouse gas emissions, deflates prices of high emissions products and hinders the development and scaling up of competitive solutions for lower emissions production. For steel and aluminum trade to be sustainable, producers and consumers must address both global non-market excess capacity as well as the carbon intensity of the industries. Against this backdrop, the United States and the EU are resolved to negotiate, in accordance with their respective institutional frameworks, future arrangements for trade in these sectors that take account of both issues. The United States and the EU will invite like-minded economies to participate in the arrangements and contribute to achieving the goals of restoring market-oriented conditions and supporting the reduction of carbon intensity of steel and aluminum across modes of production. The United States and the EU will seek to conclude the negotiations on the arrangements within two years. In order to encourage similar efforts by other steel producing economies, the United States and the EU will consult with respect to bringing these matters into relevant international fora for discussion, as appropriate.

“Compatible with international obligations and the multilateral rules, including potential rules to be jointly developed in the coming years, each participant in the arrangements would undertake the following actions: (i) restrict market access for non-participants that do not meet conditions of market orientation and that contribute to non-market excess capacity, through application of appropriate measures including trade defence instruments; (ii) restrict market access for non-participants that do not meet standards for low-carbon intensity; (iii) ensure that domestic policies support the objectives of the arrangements and support lowering carbon intensity across all modes of production; (iv) refrain from non-market practices that contribute to carbon-intensive, non-market oriented capacity; (v) consult on government investment in decarbonization; and (vi) screen inward investments from non-market-oriented actors in accordance with their respective domestic legal frameworks.

“To enhance their cooperation and facilitate negotiations on a global sustainable steel and aluminum arrangements, the United States and the EU agree to form a technical working group. Through the working group, the United States and the EU will, among other things, confer on methodologies for calculating steel and aluminum carbon-intensity and share relevant data.

3. WTO Disputes

“The United States and the EU agree to suspend by November 5, 2021, pursuant to DSU Article 12.12, the WTO disputes they have initiated against each other regarding the U.S. Section 232 measures (DS548) and the EU’s additional duties (DS559). Regarding the matters that are before these panels, the United States and the EU mutually agree to resort to arbitrations pursuant to DSU Article 25, as set out below and so as to fully preserve the work of the parties and the panels and procedural steps in these disputes. The United States and the EU will agree by 17 December 2021 on the procedures to be followed in an arbitration of those matters, in accordance with the present arrangement. Upon agreement on these procedures, the EU and the United States will terminate their respective disputes before the panels, and the arbitrations will be suspended, without temporal limit. The United States and the EU intend for DSU rules and practices on panel proceedings to govern the arbitration and to be reflected as appropriate in the agreement on arbitration procedures.

“The arbitration procedures will permit the complaining party in each dispute to bring the matter forward from the panel into the arbitration, so as to preserve the work in each dispute and allow the arbitrators to continue the panel process on the basis of the procedural steps and work already performed and make findings on that matter. The three panelists in each dispute will serve as arbitrators, if available, and otherwise will be replaced by agreement of the parties or by the Director-General of the WTO, within one week from the complaining party’s request.

“Before resuming an arbitration, a complaining party will first seek to consult at the ministerial level with the other party with a view to reaching an alternative solution. A complaining party may request to resume the arbitration at any time after the lapse of a 30-day consultation period and no sooner than 12 months after the issuance of the present statement.

“An arbitration may be resumed only if a complaining party considers that this arrangement is not providing the benefits envisioned. The United States and the EU also intend not to initiate any new WTO dispute relating to these matters for so long as each party considers this arrangement to be operating satisfactorily.”

USTR press release, Joint US-EU Statement on Trade in Steel and Aluminum, October 31, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/october/joint-us-eu-statement-trade-steel-and-aluminum.

Under the Biden Administration, the U.S. and EU have found solutions to various trade and other bilateral conflicts (Boeing-Airbus; international taxation) and launched a the Trade and Technology Council. See, e.g., European Commission – Statement, Statement by President von der Leyen on a new Global Sustainable Steel Arrangement and EU-US steel and aluminium dispute
Brussels, 31 October 2021, https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_21_5679 (“Since the beginning of the year, as you said Mr President, dear Joe, we have restored trust and communication. We put to rest our disputes on aircraft subsidies. We set up our Trade and Technology Council. We created a vaccine partnership. We reached an agreement on global minimum tax. And now, we have found a solution on EU-US steel and aluminium trade.”); White House Briefing Room, Remarks by President Biden and European Commission President Ursula von der Leyen on U.S.-EU Agreement on Steel and Aluminum
Trade, October 31, 2021, https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/10/31/remarks-by-president-biden-and-european-commission-president-ursula-von-der-leyen-on-u-s-eu-agreement-on-steel-and-aluminum-trade/ (statement of President Biden)(“Over the past nine months, the United States and the European Union have come together to take on major global challenges by looking to all that unites us and the shared interests we have both in Europe and the United States. We resolved the 17-year Boeing-Airbus dispute. And we’ve been close partners to the — to address COVID-19 and combat climate change. As we move forward, we’re going to continue together to update the rules of the road and the 21st century economy, and prove to the world that democracies — democracies —are taking on hard problems and delivering sound solutions. And the European Union and the United States will continue to be the closest of friends and partners as we work together to solve the 21st century challenges.”)

The closer cooperation of the U.S. and the EU could be good news for the World Trade Organization and portend potential positive progress at the upcoming 12th Ministerial Conference in Geneva that starts in just four weeks.

Possible implications for MC12

The WTO’s Director-General has been anxious for the WTO Members achieving meaningful deliverables for the upcoming Ministerial Conference. The U.S. and EU are supportive of many initiatives — a meaningful fisheries subsidies agreement, several of the joint statement initiatives (“JSIs”) that have been pursued by certain WTO Members since the last Ministerial Conference in Buenos Aires in 2017, improved transparency and compliance with notification requirements, WTO reform particularly in terms of increased disciplines of industrial subsidies, rules of state-owned and state-invested enterprises, intellectual property theft and more.are supported by both Which of these elements will advance in Geneva at the MC12 is uncertain although two of the JSIs (services regulation; MSMEs) are reportedly complete though facing opposition from some countries (e.g., India and South Africa) in terms of being brought into the WTO. Some late progress has been reported on the fisheries subsidies negotiations which could mean an agreement may be reached in Geneva during the Ministerial Conference after 20 years of effort. For all of the above issues, progress in terms of meaningful outcomes depend on the membership as a whole. U.S.-EU solidarity are helpful, but not sufficient to resolve the issues.

In addition, there are issues where the U.S. and the EU have not been aligned including on starting a process of reform of the DSU to get back to a two tier dispute settlement system and what, if any, waiver of TRIPs rights/obligations should occur during the COVID pandemic. These are issues on which alignment of the two would likely result in resolution of the issue at least for purposes of the 12th Ministerial Conference. The EU has had as a high priority getting agreement from the U.S. to have a process start by the Ministerial with a defined deadline to find solutions on the Appellate Body and other DSU issues. If the U.S. accepts at the Ministerial the establishment of a two year program to understand the problems in the dispute settlement system and find solutions, that would be a significant victory for the EU and many other WTO Members. While not guaranteeing a resolution in two years (that would depend on whether Members will actually address the underlying problems in a way to ensure a process consistent with original DSU intent), creating a process for discussions would be a positive step forward.

Similarly, the U.S. position on the proposed waiver of TRIPs rights/obligations during the pandemic has been opposed by a number of countries with the EU having the largest voice. Efforts by the EU, U.S. and others to expand production of vaccines in Asia, Africa and South America are significant steps to address access to vaccines from regional or local sources, as are increased global production and increased shipments to COVAX. However, the U.S. could accept the EU’s more limited proposal for flexibilities under TRIPs, or the EU could move in the direction of a waiver of at least some TRIPs rights. Movement by the US to supporting the EU position or movement by the EU would likely result in some announced victory at the Ministerial.

While I have previously written extensively on both dispute settlement and on the waiver request from many TRIPS rights/obligations during the pandemic, and have supported the U.S. position on dispute settlement (and an unwillingness to proceed until there is greater agreement on the causes of the problems) and been supportive of the EU position on the proposed TRIPs waiver (not seeing practical benefits from the waiver during the pandemic), I believe that MC12 may prove to be more successful than many have thought possible. If so, it will likely flow from a decision by the U.S. and EU to find common ground on these two important issues and will be consistent with the increased level of cooperation between these historic leaders of the GATT and WTO. We will find out in the coming month if the increased cooperation can result in short term benefits at the WTO.

G20 Trade and Investment Ministerial Statement of October 12 and Amb. Tai’s comments on the WTO from October 14 — the ongoing divide among major Members makes a meaningful WTO MC12 less likely

In prior posts, I have reviewed the challenges facing the WTO as it approaches the 12th Ministerial Conference in Geneva at the end of November, beginning of December. See, e.g., October 8, 2021: The gap between WTO activity and the needs of businesses and workers for the international trading system, https://currentthoughtsontrade.com/2021/10/08/the-gap-between-wto-activity-and-the-needs-of-businesses-and-workers-for-the-international-trading-system/; September 18, 2021: The WTO’s 12th Ministerial Conference in Late November – early December 2021 — the struggle for relevance, https://currentthoughtsontrade.com/2021/09/18/the-wtos-12th-ministerial-conference-in-late-november-early-december-2021-the-struggle-for-relevance/; May 10, 2021:  World Trade Organization — possible deliverables for the 12th Ministerial Conference to be held in Geneva November 30-December 3, 2021, https://currentthoughtsontrade.com/2021/05/10/world-trade-organization-possible-deliverables-for-the-12th-ministerial-conference-to-be-held-in-geneva-november-30-december-3-2021/.

The G20 Trade and Investment Ministerial Statement of October 12, 2021

WTO Reform

While the vast majority of WTO Members profess an interest in a successful MC12 beginning in late November, the reality is that success means very different things to different Members. The G20 countries have repeatedly called for a successful MC12, but this week’s meeting in Sorento Italy and resulting Ministerial statement on trade and investment shows limited actual convergence on what should be achieved at the upcoming WTO Ministerial Conference. See G20 TRADE AND INVESTMENT MINISTERIAL MEETING – OCTOBER 12, 2021, G20 MINISTERIAL STATEMENT ON TRADE AND INVESTMENT, https://www.g20.org/wp-content/uploads/2021/10/G20-TIMM-statement-PDF.pdf.

Paragraph 6 of the G20 Trade and Investment Ministerial statement reiterates support for a successful MC12.

“We commit to a successful and productive WTO 12th Ministerial Conference as an important opportunity to advance WTO reform to revitalise the organisation. We commit to active engagement in this work to provide the political momentum necessary for progress.”

Yet the statement is short on specific areas of reform other than improving rule making and dispute settlement — areas where there has been no meaningful forward movement ahead of MC 12 and where there are major divisions among G20 countries.

Trade and Health

On the topic of “trade and health” there is support among G20 countries for equitable access to vaccines, therapeutics, diagnostics and personal protective equipment, and G20 countries are making belated contributions to increased supplies to the most vulnerable. However, with the exception of export restraints where there is language recognizing the right of countries to take actions in limited circumstances, the divisions amongst the G20 make specifics on WTO issues merely aspirational.

“10. We will work actively and constructively with all WTO members in the lead up to the 12th Ministerial Conference and beyond to enhance the capacity of the multilateral trading system to increase our pandemic and disaster preparedness and resilience by adopting a multifaceted response. Trade-related aspects of intellectual property rights, contributions to international efforts to expand production and delivery of vaccines, therapeutics and essential medical goods, diversifying manufacturing
locations and fostering equitable distribution, trade facilitation measures, export restrictions, encouraging regulatory compatibility, are among the areas where our constructive engagement in the WTO, notably in the TRIPS Council, the Council for
Trade in Goods, the Council for Trade in Services, and other relevant bodies and processes, can enhance global public health efforts.”

While there may be language in an MC12 declaration and a work program for the future, there will not likely be any meaningful results announced at MC12.

Services and Investments


Embarrassingly for the WTO, Members, efforts to develop multilateral rules for digital trade and e-commerce continue to be far from concluded. This has led to the Joint Statement Initiative (“JSI”) on E-Commerce and other JSIs being launched at the 11th WTO Ministerial Conference in Buenos Aires in 2017 amongst a subset of WTO Members but open to all. Two of the other JSIs are Investment Facilitation for Development and Services Domestic Regulation. The JSI on Services Domestic Regulation has reportedly reached an agreement that will be presented at MC12. However, within the G20, there are some countries who oppose bringing JSIs into the WTO — most notably, India and South Africa. See WTO News, Participants in domestic regulation talks conclude text negotiations, on track for MC12 deal, 27 September 2021, https://www.wto.org/english/news_e/news21_e/serv_27sep21_e.htm; THE LEGAL STATUS OF ‘JOINT STATEMENT INITIATIVES’ AND THEIR NEGOTIATED OUTCOMES, submission from India, Namibia and South Africa, 30 April 2021, WT/GC/W/819/Rev.1. This difference of views is reflected in the G20 Trade and Investment Ministerial Statement.

“14. G20 participants in the Joint Statement Initiatives on E-Commerce, Investment Facilitation for Development and Services Domestic Regulation encourage and support the active participation of all WTO members in the initiatives and look
forward to meaningful progress in the lead up to the 12th WTO Ministerial conference. Concerns have been expressed on rule-making by some G20 members that are not part of the JSIs.”

Government Support and Level Playing Field

The section of the Ministerial Statement looking at government support and level playing field issues recognizes that there are “structural problems in some sectors, such as excess capacities” which cause problems and note that “Many G20 members affirm the need to strengthen international rules on industrial subsidies and welcome ongoing international efforts to improve trade rules affecting agriculture.” As is clear “many of us” means a number of G20 countries don’t agree. Industrial subsidy rule improvement is intended to address the distortions caused by China’s programs (and of others). Agriculture market access and agricultural subsidies and transparency are also issues where there is a significant division among G20 countries.

Trade and Environmental Sustainability

The challenges to the world from a warming climate are existential. The Ministerial Statement contains useful language of a general nature in terms of the importance of addressing environmental issues and that “trade and environmental policies should be mutually supportive”. The G20 support reaching a conclusion to the fisheries subsidies negotiations even though there have been recent actions by some G20 countries — again, India and South Africa — to weaken disciplines on “developing” countries which threaten the achievement of a meaningful agreement 20 years after negotiations commenced.

MSMEs

Micro-, small- and medium-sized enterprises are a critical part of most countries economies and make up a larger share of business in lower income countries. While the Ministerial Statement addresses MSMEs importance and need for additional assistance, there is no mention of the Joint Statement Initiative on MSMEs among some WTO Members and the fact that an agreement is ready for presentation at MC12 with the agreement being open to all. See WTO News, Working group on small business finalises MC12 draft declaration, 27 September 2021, https://www.wto.org/english/news_e/news21_e/msmes_28sep21_e.htm. India and South Africa and others have raised the same objection to the MSME JSI as they have to the others.

Conclusion on G20 Trade and Investment Ministerial Statement

The deep divisions within the WTO membership are reflected as well among the G20 countries with China, India, South Africa and others having much different priorities that the historic leadership of the GATT/WTO including the U.S., EU, Canada, United Kingdom, Australia and others. It is the lack of a common purpose and agreement on basic principles that has largely paralyzed the negotiating function at the WTO. The disappointing G20 Trade and Investment Ministerial Statement reflects that same lack of common purpose and agreement on basic principles.

USTR Katherine Tai’s October 14, 2021 Prepared Remarks on the WTO

The U.S. Trade Representative traveled to Geneva after the G20 Trade and Investment Ministers meeting in Italy and spoke on the WTO at an event hosted by the Graduate Institute of International and Development Studies’ Geneva Trade Platform on October 14. Ambassador Tai’s prepared statement is available on the USTR webpage and is reproduced below. See USTR,Ambassador Katherine Tai’s Remarks As Prepared for Delivery on the World Trade Organization, October 14, 2021, https://ustr.gov/about-us/policy-offices/press-office/speeches-and-remarks/2021/october/ambassador-katherine-tais-remarks-prepared-delivery-world-trade-organization.

” Good afternoon.  Thank you to Dmitry and Richard, the Geneva Trade Platform, and the Graduate Institute of International and Development Studies for hosting me today and putting together this event.

“It is a pleasure to be back in Geneva.  I have looked forward to making this trip since becoming the United States Trade Representative in March, and I am grateful to be here with all of you today.  

“I spent a lot of time in this city earlier in my career representing the United States Government with pride before the World Trade Organization.  

“I appreciate the importance of the institution.  And I respect the dedicated professionals representing the 164 members, as well as the WTO’s institutional staff working on behalf of the membership.  I also want to thank Director-General Dr. Ngozi for leading this organization through a difficult and challenging year. 

“Let me begin by affirming the United States’ continued commitment to the WTO.  

“The Biden-Harris Administration believes that trade – and the WTO – can be a force for good that encourages a race to the top and addresses global challenges as they arise.  

“The Marrakesh Declaration and Agreement, on which the WTO is founded, begins with the recognition that trade should raise living standards, ensure full employment, pursue sustainable development, and protect and preserve the environment. 

“We believe that refocusing on these goals can help bring shared prosperity to all.

“For some time, there has been a growing sense that the conversations in places like Geneva are not grounded in the lived experiences of working people.  For years, we have seen protests outside WTO ministerial conferences about issues like workers’ rights, job loss, environmental degradation, and climate change as tensions around globalization have increased. 

“We all know that trade is essential to a functioning global economy.  But we must ask ourselves: how do we improve trade rules to protect our planet and address widening inequality and increasing economic insecurity?

“Today, I want to discuss the United States’ vision for how we can work together to make the WTO relevant to the needs of regular people.

“We have an opportunity at the upcoming 12th ministerial conference – or MC12 – to demonstrate exactly that.

“Throughout the pandemic, the WTO rules have kept global trade flowing and fostered transparency on measures taken by countries to respond to the crisis.  But many time-sensitive issues still require our attention.  We can use the upcoming ministerial to deliver results on achievable outcomes.

“The pandemic has placed tremendous strain on peoples’ health and livelihoods around the world.  The WTO can show that it is capable of effectively addressing a global challenge like COVID-19, and helping the world build back better. 
  
“There are several trade and health proposals that should be able to achieve consensus in the next month and a half.  

“I announced in May that the United States supports text-based discussions on a waiver of intellectual property rights for COVID-19 vaccines.  The TRIPS Council discussions have not been easy, and Members are still divided on this issue.  The discussions make certain governments and stakeholders uncomfortable.  But we must confront our discomfort if we are going to prove that, during a pandemic, it is not business as usual in Geneva.  

“The United States is also working on a draft ministerial decision aimed at strengthening resiliency and preparedness through trade facilitation.  Our proposal would improve the sharing of information, experiences, and lessons learned from COVID-19 responses to help border agencies respond in future crises.  

“It is important that our work on trade and health does not end at MC12.  This pandemic will not be over in December, and it will not be the last public health crisis we encounter.  In the next six weeks, we also have an opportunity to conclude the two-decades-long fisheries subsidies negotiations and show that the WTO can promote sustainable development.  

“We want to continue working with Members to bridge existing gaps in the negotiations.  

“To this end, the United States is sharing options to respond to developing countries’ request for flexibilities.  We believe that any agreement must establish effective disciplines that promote sustainability.  

“It must also address the prevalence of forced labor on fishing vessels.  We call on all Members to support these goals.

“I recognize that discussing these complex issues during a pandemic is hard.  Despite this challenge, we can reach meaningful outcomes and set ourselves up for candid and productive long-term conversations on reforming the WTO.

“As I mentioned earlier, the reality of the institution today does not match the ambition of its goals.  Every trade minister I’ve heard from has expressed the view that the WTO needs reform.  

“The Organization has rightfully been accused of existing in a ‘bubble,’ insulated from reality and slow to recognize global developments.  That must change.

“We are used to talking to each other, a lot.  We need to start actually listening to each other.

“We also must include new voices, find new approaches to problems, and move past the old paradigms we have been using for the last 25 years.  

“We need to look beyond simple dichotomies like liberalization vs. protectionism or developed vs. developing.  Let’s create shared solutions that increase economic security.

“By working together and engaging differently, the WTO can be an organization that empowers workers, protects the environment, and promotes equitable development. 

“Our reform efforts can start with the monitoring function.  In committees, Members deliberate issues and monitor compliance with the agreements.  This important work is a unique and underappreciated asset of the WTO. 

“Increasingly, however, Members are not responding meaningfully to concerns with their trade measures.  The root of this problem is a lack of political will.  But committee procedures can be updated to improve monitoring work.  

“At MC12, Ministers can direct each committee to review and improve its rules. 

“It is also essential to bring vitality back to the WTO’s negotiating function.  We have not concluded a fully multilateral trade agreement since 2013.

“A key stumbling block is doubt that negotiations lead to rules that benefit or apply to everyone. But we know that negotiations only succeed when there is real give and take.

“We can successfully reform the negotiating pillar if we create a more flexible WTO, change the way we approach problems collectively, improve transparency and inclusiveness, and restore the deliberative function of the organization.

“Over the past quarter century, WTO members have discovered that they can get around the hard part of diplomacy and negotiation by securing new rules through litigation.    

“Dispute settlement was never intended to supplant negotiations.  The reform of these two core WTO functions is intimately linked.  

“The objective of the dispute settlement system is to facilitate mutually agreed solutions between Members.  Over time, ‘dispute settlement’ has become synonymous with litigation – litigation that is prolonged, expensive, and contentious.  

“Consider the history of this system.  

“It started as a quasi-diplomatic, quasi-legal proceeding for presenting arguments over differing interpretations of WTO rules.  A typical panel or Appellate Body report in the early days was 20 or 30 pages.  Twenty years later, reports for some of the largest cases have exceeded 1,000 pages.  They symbolize what the system has become: unwieldy and bureaucratic. 

“The United States is familiar with large and bitterly fought WTO cases.  Earlier this year, we negotiated frameworks with the European Union and the United Kingdom to settle the Large Civil Aircraft cases that started in 2004.  

“We invoked and exhausted every procedure available.  And along the way, we created strains and pressures that distorted the development of the dispute settlement system.

“With the benefit of hindsight, we can now ask: is a system that requires 16 years to find a solution ‘fully functioning?’

“This process is so complicated and expensive that it is out of reach for many – perhaps the majority – of Members. 

“Reforming dispute settlement is not about restoring the Appellate Body for its own sake, or going back to the way it used to be.  

“It is about revitalizing the agency of Members to secure acceptable resolutions.

“A functioning dispute settlement system, however structured, would provide confidence that the system is fair.  Members would be more motivated to negotiate new rules.

“Let’s not prejudge what a reformed system would look like. While we have already started working with some members, I want to hear from others about how we can move forward.

“Reforming the three pillars of the WTO requires a commitment to transparency.  Strengthening transparency will improve our ability to monitor compliance, to negotiate rules, and to resolve our disputes. 

“I began these remarks with an affirmation of commitment.  I’d like to conclude with an affirmation of optimism.

“I am optimistic that we can and will take advantage of this moment of reflection.

“In reading over the Marrakesh Agreement’s opening lines, I was struck by the founding Members’ resolve to develop ‘a more viable and durable multilateral trading system.’  

“These words are just as relevant today as they were then. We still need to work together to achieve a more viable and durable multilateral trading system.

“It is easy to get distracted by the areas where we may not see eye to eye.  But in conversations with my counterparts, I hear many more areas of agreement than disagreement.  

“We all recognize the importance of the WTO, and we all want it to succeed. 

“We understand the value of a forum where we can propose ideas to improve multilateral trade rules.  We should harness these efforts to promote a fairer, more inclusive global economy.  

“WTO Members are capable of forging consensus on difficult, complicated issues. It’s never been easy, but we’ve done it before.  And we can do it again.  

“Thank you.”

Comments on USTR Tai’s statement on the WTO

The Biden Administration has been supportive of multilateral institutions, and that support is relfected in Amb. Tai’s comments. At the same time, the U.S. has believed that a small package of deliverables is achievable for MC12 with hopefully a work program for the serious reform that is needed also being agreed to at MC12. Amb. Tai’s comments reflect both optimism and a limited set of deliverables being sought.

The Fisheries Subsidies negotiations has made limited progress on a range of important issues. The U.S. is attempting to find answers to problems raised by others while still achieving a meaningful outcome. With the limited time remaining, this suggests either a less robust agreement or movement by others to a higher level of ambition or to no agreement being finalized. Addressing forced labor in fishing and more broadly should be important to all WTO Members, was raised by the U.S. (and is important to Democratic leadership in the Congress) but is opposed by some, including China. If the U.S. continues to pursue the addition of this issue to the fisheries subsidies text,

On greater transparency, Members agreeing to have Committees review their procedures to improve the monitoring function are important steps that could be taken to improve Member confidence in actions of trading partners and affect negotiations and dispute settlement as well. Even such seemingly simple steps, however, may not move forward as at least one major country — China — has as one of its negotiating priorities not changing transparency obligations.

Revitalizing the negotiating function and restoring a dispute settlement system are longer term efforts, with the U.S. vision on dispute settlement (focus on what dispute settlement is doing vs. ensuring a two stage process) far apart from that of the EU and many other Members.

And, of course, the U.S. is supportive of some form of outcome on addressing the pandemic and trade and health moving forward. Whether there will be outcomes in this area are dependent more on flexibility by others as the U.S. has been looking for solutions that will meet the pandemic needs and prepare for the future.

Conclusion

With very limited time until the 12th WTO Ministerial Conference begins at the end of November, it is hard to see an ambitious outcome emerging from the efforts of WTO Members. The G20 Trade and Investment Ministerial Statement from October 12 reflects the divisions amongst the major WTO Members. Amb. Tai’s statement yesterday in Geneva while positive on the WTO and its important role tees up a relatively limited outcome as likely for MC 12. Even Amb. Tai’s more realistic set of expectations are likely to be challenging to achieve.

The WTO’s 12th Ministerial Conference in Late November – early December 2021 — the struggle for relevance

As the end of year 27 approaches since the WTO commenced operation, the struggle for relevance in a significantly changed world continues for the organization that is supposed to be the negotiating forum for international trade rules and for ensuring compliance with such rules. The current Director-General of the WTO has been working with Members to try to achieve positive results by the 12th Ministerial Conference scheduled to commence on November 29. The jury is out on whether WTO Members will be able to find sufficient common ground to permit a successful Ministerial.

While there has been broad agreement by WTO Members that reform is needed, there is no agreement as to what reform is needed as the 164 WTO Members have long since lost a common vision of the mission of the WTO. The lack of a common vision has been complicated by the rise of nonmarket economies like China and the abandonment of market principles by many either in sectors or more broadly.

A consensus system for decision making stifles rapid movement in addressing new challenges/opportunities and has permitted delay to characterize all aspects of the business undertaken at the WTO. For businesses, the WTO is not where pressing new issues get resolved or even addressed as a general matter.

Rules on electronic commerce are being pursued by a group of willing Members with questions and challenges presented by those not wishing strong rules to be pursued on a plurilateral basis. The same is true for other plurilateral initiatives of potential importance to updating the rule book.

The only multilateral negotiation ongoing, on fisheries subsidies, has dragged on for 20 years and remains mired in an effort by many to escape the disciplines being proposed to save marine life in the oceans.

Efforts from the Doha Development Agenda to continue reform and liberalization in agriculture have had some successes in terms of curbing export subsidies but has not been able to deliver significant liberalization through tariff reductions and have faced pressure from India and others to roll back the liberalization agreed to in the Uruguay Round through special rules on some topics. It is unclear that Members will actually find the desire to move agriculture forward by the 12th Ministerial.

The many trade challenges flowing from climate change are not yet central to the efforts of the organization but will increasingly occupy governments and companies and will complicate ensuring the relevance of the WTO moving forward.

While the COVID-19 pandemic has presented challenges to the operation of the WTO in terms of in person meetings and presented challenges and opportunities to have trade rules facilitate movement of medical goods versus compound trade problems flowing from efforts to control the pandemic, the effort by India, South Africa and others to get a broad based waiver to TRIPS obligations during the pandemic has generated little forward movement in terms of getting more vaccines to low- and middle-income countries while occupying a lot of band width in terms of Member energies at the WTO.

As is increasingly clear, while there have been production issues for some companies and while India’s need for vaccines in country led to its cutting off exports to COVAX and many countries, vaccine production in 2021 will exceed 10 billion doses (UNICEF’s COVID-19 Vaccine Market Dashboard visited on September 15, 2021 showed 6.077 billion doses as having been distributed by that point with capacity to produce vaccines at 4.5 billion in the first half of 2021 and 8.6 billion in the second half of 2021). In late June 2021, the International Federation of Pharmaceutical Manufacturers and Associations presented information at a WTO event that COVID-19 vaccine production in 2021 would likely be 10-12 billion doses. Similarly, the CEO and Founder of Airfinity prepared estimates for the WTO which showed global production could reach 11.856 billion by the end of the year. See WTO News, COVID-19 Vaccine Supply Chain and Regulatory Transparency Technical Symposium, June 29, 2021, https://www.wto.org/english/tratop_e/trips_e/technical_symposium_2906_e.htm (talking points of Ms Laetitia Bigger, Vaccines Policy Director, International Federation of Pharmaceutical Manufacturers and Associations and presentation of Mr Rasmus Bach Hansen, CEO and Founder, Airfinity.

Thus, the pressing issue for getting the world vaccinated is getting vaccine doses produced distributed to markets in need. That need has not and is not likely to be met through efforts at large scale waivers from TRIPS obligations which will not change the reality on the ground in 2021-2022.

The WTO along with the WHO, IMF and World Bank have held various events and issued joint statements seeking greater production, addressing production bottlenecks and getting expanded investments in areas of the world with limited supplies. Many governments and many manufacturers have provided some level of cooperation in expanding production and shipments to low- and middle-income countries. See, e,g,, International organizations, vaccine manufacturers agree to intensify cooperation to deliver COVID-19 vaccines, 16 September 2021, https://www.wto.org/english/news_e/news21_e/covid_16sep21_e.htm.

On dispute settlement, the two tier system embodied in the Dispute Settlement Understanding has unravelled as a range of important concerns raised by the United States over the last two decades have not been addressed meaningfully by WTO Members, leading to U.S. blockage of replacing Appellate Body members over recent years and the inability of the Appellate Body to consider appeals once the number of members declined below 3. While many WTO Members continue to seek a restart of the Appellate Body, it is clear that there will be no restart without serious reform. Such reform is unlikely to be achieved in the short term. The European Union which has been one of the challenges in terms of meaningful DSU reform has been making statements that they are now ready for fundamental reform. See, e.g., Financial Tribune, EU Calls for Urgent WTO Reforms, September 18, 2021 (“Dombrovskis said he was ready to consider a major shake-up of the WTO’s dispute settlement system, news outlets said.”), https://financialtribune.com/articles/international/110329/eu-calls-for-urgent-wto-reforms. So while the EU’s apparent changing view will be helpful, it is not clear if it will be sufficient to change the dynamics in Geneva.

Conclusion

There is a lot of work going on in Geneva with efforts to conclude the fisheries subsidies negotiations and achieve some resolution on the TRIPS waiver issue by the Ministerial in late November. There has also been progress made in various plurilaterals but questions have been raised as to whether plurilaterals can occur within the WTO if there is not consensus to include. The reform proposals on issues like industrial and agricultural subsidies, state owned enterprises, eligiblity for special and differential treatment and many others will not be resolved by the Ministerial and will not likely be part of an agreed agenda going forward. Agriculture and dispute settlement will be unlikely to see significant (agriculture) or any (dispute settlement) movement by the Ministerial.

Thus, while the jury is out on whether the WTO will remain relevant in a rapidly changing world, the challenges the WTO faces are daunting and the odds don’t favor success in today’s environment. Being an optimist, I am hopeful that the above analysis will prove wrong and the 12th Ministerial will start the process of a more relevant WTO. Here’s hoping.

_______________________________

This is my first post since May 17. I have been taking care of personal business the last four months and had included a note in the “About” page indicating my next post would be in September.

WTO Director-General Ngozi Okonjo-Iweala’s first week on the job starts with a two day General Council meeting

While the WTO’s General Council, in special session, appointed Dr. Ngozi Okonjo-Iweala to be the next Director-General on February 15, 2021, her term starts on Monday, March 1. The challenges facing the WTO membership and the incoming Director-General are many and complex. At the same time, there is a lot of useful work that is done within the WTO including efforts of non-members to join the WTO (accessions).

In speaking to an informal Trade Negotiations Committee and Heads of Delegation meeting on February 25, Deputy Director-General Alan Wolff spoke in part on “The Ngozi Okonjo-Iweala Era”. See WTO, DDG Wolff calls on members to work with new Director-General to reform WTO, 25 February 2021, https://www.wto.org/english/news_e/news21_e/ddgaw_25feb21_e.htm. Part of the section of his statement on the new DG’s era is copied below.

“The Ngozi Okonjo-Iweala Era

“The landmark event of the last six months was the appointment of the new Director-General ten days ago after what turned out to be a lengthy process.  91 member delegations spoke last week to congratulate the new Director-General. The DDGs and the Secretariat join you in welcoming Dr Okonjo-Iweala’s appointment with great enthusiasm.

“Of course, member enthusiasm, optimism and hope need to be translated into concrete action.  

“There is much that needs to be done at this critical juncture for the WTO. World trade must contribute to a more effective pandemic response as well as a strong and sustainable economic recovery. Climate issues are demanding more urgent attention. WTO reform is overdue, having been called for repeatedly by you, by your ministers and by many heads of government. 

“The challenges are many but so are the opportunities. Dr Ngozi’s remarks at the Special General Council meeting last Monday, subsequently circulated to delegations in document JOB/GC/250, presented a worthy and ambitious agenda for the members of this organization.

“What did she say?

“To act with a sense of urgency to assist in controlling the COVID-19 pandemic through the nexus of trade and public health:

“First, by playing a more forceful role in exercising the WTO’s monitoring function. Part of this would involve encouraging members to minimise or remove export restrictions that hinder supply chains for medical goods and equipment. WTO monitoring suggests that as of yesterday, 59 members and 7 observers still had pandemic-related export restrictions or licensing requirements in place, mostly for personal protective equipment, disinfectants and to a lesser extent, for medicines and food. This represents a significant level of rollback compared to the 81 members and 10 observers that had implemented such measures over the past year. A welcome development — but there is much room to improve this record.  

“And second, by broadening access to new vaccines, therapeutics, and diagnostics by facilitating technology transfer within the framework of multilateral rules.

“Beyond these immediate responses to the pandemic, Dr Ngozi set out a number of other, also vitally important, challenges:

“To swiftly conclude the fisheries subsidies negotiations, and thus pass a key test of the WTO’s multilateral credibility while contributing to the sustainability of the world’s oceans.

“To build on the new energy in the multilateral trading system from the joint statement initiatives attracting greater support and interest, including from developing countries.

“To address more broadly the nexus between trade and climate change, using trade to create a green and circular economy, to reactivate and broaden negotiations on environmental goods and services, to take the initiative to address the issue of carbon border adjustments as they may affect trade.

“To level the playing field in agricultural trade though improving market access and dealing with trade distorting domestic support, exempting from export restrictions World Food Programme humanitarian purchases.

“To strengthen disciplines on industrial subsidies, including support for state-owned enterprises. 

“To defuse the divisions over Special and Differential Treatment (SDT).

“And to develop a work programme for restoring two-tier dispute resolution, to be agreed no later than MC12.

“I sense from my discussions with members that you chose this leader, Ngozi Okonjo-Iweala, because she has shown herself during her career to be fearless in the face of daunting challenges — and is experienced in knowing how to work with others to make progress toward solutions. 

“Each of the challenges the WTO faces, I am sure, can be met and overcome.  Echoing Dr Ngozi’s words, the trading system that we inherited, now only three-quarters of a century old, is about people.  This is inscribed in the opening section of the Marrakech agreement: ‘to raise living standards, ensure full employment, increase incomes, expand the production of and trade in goods and services, and seek the optimal use of the world’s resources in accordance with the objective of sustainable development.”’

DDG Wolff’s summation correctly lays out many of the issues needing to be addressed by the WTO membership. The vast majority of the issues are highly controversial among at least some Members.

The first major order of business is a two day General Council meeting on March 1-2 which has several agenda items that lay out controversies on important potential deliverables by the WTO in 2021. The agenda for the two day meeting contains sixteen items. See WT/GC/W/820 (26 February 2021) embedded below.

W820

General Council meetings deal with updates on ongoing work at the WTO and address issues teed up by particular Members for consideration at the meeting. This post does not take up all agenda items but highlights a few of possible interest. Because DDG Wolff’s statement on February 25 reviews many of the activities of the WTO in the last six months which shows some of the positive developments, the full statement is embedded below.

WTO-_-2021-News-items-Speech-DDG-Alan-Wolff-DDG-Wolff-calls-on-members-to-work-with-new-Director-General-to-reform-WTO

The 12th WTO Ministerial Conference

Agenda item 4 deals with the 12th WTO Ministerial Conference. It is expected that there will be a decision on the timing and location of the twelfth Ministerial Conference at the General Council session on Monday-Tuesday. The 12th MC was postponed from June 2020 because of the COVID-19 pandemic. With the continued challenges from the pandemic the likely date will be the end of 2021. Kazakhstan which had offered to host the conference in 2020 and again in the summer of 2021 has recently indicated a willingness to host in December of this year as well. The ministerial had originally been scheduled for June because of challenging weather conditions in Kazakhstan in December. See TWELFTH SESSION OF THE MINISTERIAL CONFERENCE, COMMUNICATION FROM KAZAKHSTAN, 8 February 2021, WT/GC/229 (24 February 2021)(embedded below).

229

Report on WTO Accessions

Deputy Director-General Wolff will provide a statement on the annual report on WTO accessions. The report is WTO ACCESSIONS, 2020 ANNUAL REPORT BY THE DIRECTOR-GENERAL, WT/ACC/38, WT/GC/228 (18 February 2021). Activity on accessions was challenged by the pandemic and inability to travel/hold in person meetings. More technical assistance and virtual meetings were held. Accessions are important for acceding governments in terms of promoting reforms at home and obtaining increased certainty in their international trade relations. Accessions are also an important benefit of membership for existing Members as acceding Members reduce tariffs and various non-tariff barriers to gain accession. The first eight paragraphs of the report provide an overview of activities in 2020 and are copied below.

Overview of activities in 2020

“1. 2020 was an unprecedented year in recent history due the COVID-19 pandemic outbreak and its consequences which have touched upon every single aspect of our lives in every corner of the world. It was a challenging year for the WTO, not least because the pandemic disrupted its core activities, especially during the first half of the year, and it also disrupted the international trade of Members, except for supplies of essential goods critical to combatting the health crisis as trade in these goods expanded dramatically. The difficulties and challenges arising from the pandemic were particularly pronounced in acceding governments due to the uncertainties of being outside of the multilateral trading system. In fact, the desire and urgency to be part of the WTO was never felt stronger than in the pandemic year. This was reflected in the level of accession activities in 2020, which was sustained vis-à-vis previous years, with a significant increase in technical assistance and outreach activities.

“2. The year for accessions started with the establishment of a new Working Party for the accession of Curaçao, a constituent country within the Kingdom of the Netherlands (WTO Member), following its application for an independent membership as a separate customs territory pursuant to Article XII of the Marrakesh Agreement. This constituted the 59th request by a state or separate customs territory for membership since the establishment of the Organization in 1995. In July, Turkmenistan was granted observer status in the WTO, with the understanding that it would apply for accession no later than in five years. This brought the total number of observer governments with the intention to accede to the WTO to 24, an increase by five since 2016 when Afghanistan and Liberia became the Organization’s most recent Members. The continuing interest to become part of the multilateral trading system is a testament to the attraction and relevance of its values and principles for all economies, regardless of their size or level of development.

“3. The COVID-19 pandemic undoubtedly hampered or delayed the technical work by acceding governments, Members and the Secretariat to prepare for, engage in and follow up on Working Party meetings. However, thanks to the firm commitment of the acceding governments to advance their work, four Working Parties met, including through the use of virtual platforms that connected the acceding governments which were unable to travel to Geneva. One acceding government had to cancel its already scheduled meeting due to the suspension of all WTO meetings in March. Out of the four accession Working Party meetings held in 2020, three were on LDC accessions (Ethiopia, Comoros and Timor-Leste). In two cases – the Working Parties of Ethiopia and Uzbekistan – this also represented the formal resumption of accession processes after several years of inactivity (8 and 15 years, respectively), signalling their desire to use WTO membership negotiations to drive domestic economic reforms, which have broader implications in the regions where they are located.

“4. When the pandemic halted planned missions, technical assistance, and outreach activities which required air travel, the Secretariat rapidly shifted the mode of operation to virtual format and took advantage of the opportunities provided thereby. In addition to the formal accession Working Party meetings which took place via Interprefy, the Accessions Division organised virtual technical meetings and briefing sessions with acceding governments, Working Party Chairpersons and partners in support of accessions. Moreover, the Division delivered a number of technical assistance, training and outreach activities in response to articulated needs of acceding governments, using various virtual platforms, such as MS Teams, Zoom and WebEx. In fact, the number of activities delivered by the Division and of participants who attended or were trained in 2020 exceeded considerably the numbers in previous years.

“5. One of the novel outreach programs developed in 2020 was two week-long activities which consisted of a series of webinars combining lectures, training and panel discussions. The first Accessions Week was organised from 29 June to 3 July, and the first edition of the Trade for Peace Week took place from 30 November to 4 December. These virtual events brought together a large number of resource persons and panellists from around the world and reached out to a larger number of participants, in a highly cost-effective manner, in comparison with traditional in-person activities. While the full values and benefits of in-person interaction cannot be replaced or replicated, the Accessions Week enabled the Secretariat to remain engaged with acceding governments and Members, experts and partners, beyond Geneva and around the world. The Trade for Peace Week provided an effective networking platform to expand the WTO’s partnership with the peace and humanitarian communities in support of fragile and conflict affected (FCA) countries in accession.

“6. The importance of collaboration and cooperation with partners was never felt more strongly than in 2020. The Secretariat made concerted efforts to enhance and expand the “Trade for Peace through WTO Accession” Initiative to support FCA countries in accession and those recently acceded to the WTO. In 2020, nine acceding governments were identified as being in a FCA situation according to the World Bank’s classification1, while conflicts emerged or resurged in some others. The pandemic hit hardest countries which had already been suffering from years of conflict, political crises, drought and other natural disasters, compounded by declines of the price of oil and other commodities. Nonetheless, some FCA acceding LDCs showed remarkable resilience in sustaining their engagement in accession. The Working Party on the Accession of the Union of Comoros resumed its work with determination to finalise the process as soon as possible. The Working Party on the Accession of Timor-Leste activated the Working Party by holding its first meeting nearly four years after its establishment, despite various challenges faced on the domestic front. Moreover, Somalia submitted its Memorandum on the Foreign Trade Regime, the base document to start its accession engagement with Members. Furthermore, the Secretariat continued to provide support to the g7+ WTO Accessions Group, which was coordinated by Afghanistan.

“7. The year 2020 marked the 25th anniversary of the WTO. The Secretariat used its annual flagship event, the China Round Table on WTO Accessions, to review the contributions made by accessions to the multilateral trading system since 1995. The event also provided an opportunity for an exchange of ideas to explore the future expansion of WTO membership towards universality, including through possible improvements in the accession process. The year also marked a significant anniversary milestone for five Article XII Members2 – Albania, Croatia, Georgia, Jordan and Oman which joined the WTO in 2000, the year with the largest number of new members to date. Other anniversary milestones included the fifth anniversaries of Membership of Kazakhstan and Seychelles and the fifteenth anniversary for the Kingdom of Saudi Arabia. In recent years, membership anniversaries have become an important occasion to reflect on the benefits and values of being part of the Organization.

“8. Finally, the thematic focus of the 2020 Annual Report was on the complementarities and synergies in negotiating WTO membership and regional trade agreements. Almost all acceding governments are involved in regional integration initiatives in parallel with their efforts to achieve WTO membership. The highlight of the year was the implementation of the African Continental Free Trade Area (AfCFTA) to which all African WTO applicants are signatories. The Report’s thematic section builds on the rich discussions held on the topic during the 2020 Regional Dialogues on WTO Accessions for Africa and for the Arab Region, as well as other meetings on Central Asia and Eurasia. It aims to explore key opportunities and challenges that may arise in a simultaneous pursuit of regional and global integration efforts and to provide a checklist of issues for trade negotiators to consider in maximising the benefits from the participation in multiple trade arrangements.”

The full report is embedded below.

WTACC38

Waiver of TRIPS Obligations During COVID-19 Pandemic

The sixth agenda item involves the effort from India and South Africa with a number of other developing or least developed countries to obtain a waiver from most TRIPS obligations on medical goods needed for the COVID-19 pandemic. This has been a very controversial issue with developed countries with pharmaceutical companies involved in the production of vaccines and other items opposing the waiver on the basis of existing flexibilities within the TRIPS Agreement and on the global efforts through the WHO, GAVI and CEPI to provide vaccines to low- and middle-income countries through COVAX with financial contributions from many countries, NGOs and others. See, e.g., February 19, 2021, COVAX’s efforts to distribute COVID-19 vaccines  to low- and middle income countries — additional momentum received from G-7 virtual meeting, https://currentthoughtsontrade.com/2021/02/19/covaxs-efforts-to-distribute-covid-19-vaccines-to-low-and-middle-income-countries-additional-momentum-from-g-7-virtual-meeting/

The TRIPS Council received the proposal back in October but has been unable to provide a recommendation to the General Council. A meeting of the TRIPS Council earlier this month continued the lack of agreement. Thus, the agenda item will simply result in the item being continued on the General Council’s future agendas until resolved or dropped. See WTO, Members discuss TRIPS waiver request, exchange views on IP role amid a pandemic, 23 February 2021, https://www.wto.org/english/news_e/news21_e/trip_23feb21_e.htm (” In this context and given the lack of consensus on the waiver request, members agreed to adopt an oral status report to be presented to the General Council at its next meeting on 1-2 March. The report indicates that the TRIPS Council has not yet completed its consideration of the waiver request and therefore will continue discussions and report back to the General Council.”); December 11, 2020, Council for Trade-Related Aspects of Intellectual Property Rights meeting of December 10, 2020 – no resolution on proposed waiver of TRIPS obligations to address the pandemic, https://currentthoughtsontrade.com/2020/12/11/council-for-trade-related-aspects-of-intellectual-property-rights-meeting-of-december-10-2020-no-resolution-on-proposed-waiver-of-trips-obligations-to-address-the-pandemic/; December 6, 2020, Upcoming December 11th Council for Trade-Related Aspects of Intellectual Property Rights meeting – reaction to proposed waiver from TRIPS obligations to address COVID-19, https://currentthoughtsontrade.com/2020/12/06/upcoming-december-11th-wto-council-for-trade-related-aspects-of-intellectual-property-rights-meeting-reaction-to-proposed-waiver-from-trips-obligations-to-address-covid-19/; November 2, 2020, India and South Africa seek waiver from WTO intellectual property obligations to add COVID-19 – issues presented, https://currentthoughtsontrade.com/2020/11/02/india-and-south-africa-seek-waiver-from-wto-intellectual-property-obligations-to-address-covid-19-issues-presented/.

Fisheries Subsidies negotiations — Draft Ministerial Decision

The WTO has been pursuing negotiations on fisheries subsidies to address sustainable fishing concerns since the end of 2001. Conclusion of the negotiations were supposed to take place in 2020 but WTO Members were unable to get the job completed in part because of disruptions from the COVID-19 pandemic. While completing the negotiations remains a key objective of Members and the incoming Director-General and such completion is needed to fulfill the UN Sustainable Development Goal 14.6, WTO Members continue to face a large number of challenging issues. See, e.g., WTO press release, WTO members hold February cluster of meetings for fisheries subsidies negotiations, 24 February 2021, https://www.wto.org/english/news_e/news21_e/fish_24feb21_e.htm; February 22, 2021, An early test for the incoming WTO Director-General — helping Members get the Fisheries Subsidies negotiations to a conclusion, https://currentthoughtsontrade.com/2021/02/22/an-early-test-for-the-incoming-wto-director-general-helping-members-get-the-fisheries-subsidies-negotiations-to-a-conclusion/.

Agenda item 7 is entitled “Supporting the Conclusion of Fisheries Subsidies Negotiations for the Sustainability of the Ocean and Fishing Communities — Draft Ministerial Decision — Communication from Brazil (WT/GC/W/815. The draft Ministerial Decision is an effort by Brazil to highlight the critical aspect of the negotiations which is to address environmental sustainability and presumably reflects Brazil’s concerns with the efforts of so many Members to protect their subsidies versus ensuring sustainable fishing. The document is embedded below.

WTGCW815

An attack on Joint Statement Initiatives

As reviewed in the incoming Director-General’s statement on February 15 and the summary of her statement by DDG Wolff on February 25, an important aspect of ongoing work at the WTO is a number of Joint Statement Initiatives that were started at the end of the 11th Ministerial Conference in Buenos Aires, including on e-commerce/digital trade.

Agenda item 10 is a frontal attack on such initiatives by India and South Africa through their paper, “Legal Status of Joint Statement Initiatives and Their Negotiated Outcomes”, WT/GC/819. I had reviewed the submission in an earlier post. See February 20, 2021, Will India and South Africa (and others) prevent future relevance of the WTO?, https://currentthoughtsontrade.com/2021/02/20/will-india-and-south-africa-and-others-prevent-future-relevance-of-the-wto/. The agenda item will like see many delegations take the floor to support the use of joint statement initiatives within the WTO or to oppose them. While there won’t be a resolution of the issue, the challenge to the process could significantly handicap some of the efforts envisioned by the incoming Director-General to help developing and least developed countries take advantage of the e-commerce/digital trade world and eventually participate in talks and/or in an agreement. WT/GC/W/819 is embedded below.

WTGCW819-1

Agenda item 8 is viewed as related to agenda item 10. India has been seeking to limit WTO consideration of e-commerce issues to the multilateral efforts over many years within the existing Councils and Committees of the WTO (but where limited progress has been made).

COVID-19 and possible future pandemics — addressing existing trade restrictions and improving the functioning of the WTO to better handle in the future

The incoming Director-General has as a high priority to work with Members to improve monitoring of export restraints on medical goods and agricultural goods during the pandemic and working with Members to see that the WTO helps Members recover and better handle any future pandemics. The Ottawa Group had put forward a trade and health initiative in November 2020. See COVID-19 AND BEYOND: TRADE AND HEALTH, WT/GC/223 (24 November 2020). The communication was made by Australia, Brazil, Canada, Chile, the European Union, Japan, Kenya, Republic of Korea, Mexico, New Zealand, Norway, Singapore and Switzerland. The document contains an annex reviewing the types of actions Members could take to improve the response to the pandemic and improve conditions going forward. Included in the annex to the communication are sections on export restrictions; customs, services and technical regulations; tariffs; transparency and review; cooperation of the WTO with other organizations. Several paragraphs in the communication review the issue of possible export restrictions on vaccines and are copied below.

“9. We realize that the challenges related to the scarcity of essential medical goods, now alleviated to some extent by the response on the supply side, may be repeated at the moment of the development of a vaccine or new medical treatments. In this context, we welcome the COVID-19 Vaccine Global Access Facility (COVAX), a global pooled procurement mechanism for COVID-19 vaccines, managed by Gavi, the Vaccine Alliance, the Coalition for Epidemic Preparedness Innovations (CEPI) and WHO. This mechanism is critical in securing an equitable share of vaccines for all Members of the international community. As we strongly support the objective of this facility, we call on WTO Members to ensure that any export-restricting measures do not pose a barrier to the delivery of necessary supplies under the COVAX facility.

“10. We recognize the collaborative efforts of private and public stakeholders in the research and development of COVID-19 diagnostics, vaccines and treatments. We encourage the industry to take actions to ensure access at affordable prices to COVID-19 diagnostics, vaccines and treatments for vulnerable populations and support voluntary pooling and licensing of IP rights to accelerate the development of such diagnostics, treatments and vaccines and scaling up their production. We recognize the importance of the IP system in promoting R&D and innovation for access to effective treatments. We note that the flexibilities provided by the TRIPS Agreement and reaffirmed in the Doha Declaration on the TRIPS Agreement and Public Health remain available to protect public health and to promote access to medicines for all.”

The full document is embedded below.

WTGC223

Canada will be providing an update on the initiative at the General Council meeting and will likely see many Members provide comments on the agenda item.

Agenda item 9 was added by Colombia, Costa Rica, Ecuador, Panama and Paraguay reflecting concerns by them (and presumably many other trading partners) about actions taken by the European Union to exert control over exports of vaccines from the EU in light of EU concerns about its own access to vaccines from manufacturers. See CALL TO PREVENT EXPORT RESTRICTIONS ON COVID-19 VACCINES, WT/GC/818 (18 February 2021). The document is embedded below.

WTGCW818

Since the EU is one of the Members who has pushed the trade and health initiative, there is concern by some WTO Members that its actions on vaccines run counter to the initiative it is supporting. Presumably the EU will argue that its actions are consistent with its rights under the WTO and is consistent with the language laid out in paragraphs 9 and 10 above.

The two agenda items are likely to show the concerns of many Members on equitable access to medical goods during the pandemic and the reluctance of at least some Members to reduce their flexibilities under the existing WTO rights and obligations.

Conclusion

DDG Wolff indicated that Members selected the incoming Director-General because she is “fearless in the face of daunting challenges”. There is no shortage of daunting challenges facing the WTO and its new Director-General. A few have been reviewed above.

Some good news is that the EU and the United States are supportive of many of the priorities laid out by DG Ngozi Okonjo-Iweala in her February 15 statement to the Special Session of the General Council as seen in the recent EU revised trade policy and the opening statement of USTR nominee Katherine Tai at yesterday’s Senate Finance Committee confirmation hearing See February 18, 2021, The European Commission’s 18 February 2021 Trade Policy Review paper and Annex — WTO reform and much more proposed, https://currentthoughtsontrade.com/2021/02/18/the-european-commissions-18-february-2021-trade-policy-review-paper-wto-reform-and-much-more-proposed/; February 25, 2021, U.S. Trade Representative nominee Katherine Tai confirmation hearing before the U.S. Senate Finance Committee, https://currentthoughtsontrade.com/2021/02/25/u-s-trade-representative-nominee-katherine-tai-confirmation-hearing-before-the-u-s-senate-finance-committee/.

The challenges the new Director-General and the WTO Members face will be made harder by the lack among Members of a common vision and agreed purpose of the WTO, by the current inability of the WTO system to address fundamentally different economic systems, by the structure of decision making, by the failure of obligations to be updated to match level of economic development and role in global trade and by the related issue of how special and differential treatment is used. These challenges have resulted in a negotiating function that is broken, in a dispute settlement system that has no checks on the reviewers for errors or failures to operate within the bounds of authority granted in the Dispute Settlement Understanding and in the underperformance of the monitoring and implementation function.

Hopefully, DG Okonjo-Iweala will develop a strong personal staff and group of DDGs to help her attempt the seemingly impossible — getting meaningful progress and reform from the 164 current WTO Members. See February 13, 2021, Leadership change at the WTO — with Dr. Ngozi Okonjo-Iweala’s arrival next week, what support team and early changes in the role of the Secretariat could help WTO Members move forward?, https://currentthoughtsontrade.com/2021/02/13/leadership-change-at-the-wto-with-dr-ngozi-okonjo-iwealas-arrival-next-week-what-support-team-and-early-changes-in-the-role-of-the-secretariat-could-help-wto-members-move-forward/

Director-General Ngozi Okonjo-Iweala will get her first reality check at the General Council meeting on March 1-2.