With limited successes in its first 26 plus years, the WTO faced a challenging set of circumstances as the 12th Ministerial Conference commenced on June 12 and concluded in the early hours of June 17 — a global pandemic which had created multiple challenges for most countries including increased food insecurity, contractions in GDP for many countries, problematic access to vaccines, growing debt problems; an unprovoked war by the Russian Federation in Ukraine which has exacerbated food insecurity, increased food price volatility as well as volatility on fertilizers and energy. The WTO has been characterized as suffering from a lack of trust amongst Members for many years. The former WTO Director-General Roberto Azevedo had characterized achieving new agreements as challenging because of a lack of common purpose with Members in his view falling into three groups — those who didn’t want the WTO to succeed (or wanted to roll back trade liberalization); those Members happy with the agreements in place but not wanting to expand areas of activity; and those Members looking to expand and update the functioning of the organization. See May 17, 2022: “The Future of the World Trade Organization” a virtual event by the Bipartisan Policy Center, discussion of dispute settlement, https://currentthoughtsontrade.com/2022/05/17/the-future-of-the-world-trade-organization-a-virtual-event-by-the-bipartisan-policy-center-discussion-of-dispute-settlement/. Moreover, with Russia’s invasion of Ukraine, a significant number of countries would not negotiate with Russia at the WTO – creating potential challenges in a consensus-based decision making system.
Despite the challenging circumstances and the actions of some countries in staking out seemingly extreme positions, the WTO announced a number of agreements in the early morning hours of June 17. The WTO press release on the 17th described the results as follows, “WTO members secure unprecedented package of trade outcomes at MC12”. https://www.wto.org/english/news_e/news22_e/mc12_17jun22_e.htm. Members and the WTO not surprisingly use glowing terms to describe affirmative outcomes. That is reflected in the WTO press release. Nonetheless, the list of agreed texts is interesting and reflects some important forward movement, even if the fisheries subsidies agreement is a partial agreement only with an important section removed and subject to further negotiations. Part of the WTO press release is copied below.
“WTO members secure unprecedented package of trade outcomes at MC12
“WTO members successfully concluded the 12th Ministerial Conference (MC12) in Geneva on 17 June, securing multilaterally negotiated outcomes on a series of key trade initiatives. The ‘Geneva Package’ confirms the historical importance of the multilateral trading system and underlines the important role of the WTO in addressing the world’s most pressing issues, especially at a time when global solutions are critical.
“Round-the-clock negotiations among delegations produced the ‘Geneva Package’, which contains a series of unprecedented decisions on fisheries subsidies, WTO response to emergencies, including a waiver of certain requirements concerning compulsory licensing for COVID-19 vaccines, food safety and agriculture, and WTO reform.
“’The package of agreements you have reached will make a difference to the lives of people around the world. The outcomes demonstrate that the WTO is, in fact, capable of responding to the emergencies of our time,’ said WTO Director-General Ngozi Okonjo-Iweala. ‘They show the world that WTO members can come together, across geopolitical fault lines, to address problems of the global commons, and to reinforce and reinvigorate this institution. They give us cause to hope that strategic competition will be able to exist alongside growing strategic cooperation.’
“DG Okonjo-Iweala expressed her conviction that ‘trade is part of the solution to the crises of our time’ and noted that the WTO ‘can and must do more to help the world respond to the pandemic, tackle environmental challenges and foster greater socio-economic inclusion.’
“In addition, ministers adopted two decisions – on the Work Programme on Small Economies (WT/MIN(21)/W/3) and on the TRIPS non-violation and situation complaints (WT/MIN(21)/W/4) — and a Sanitary and Phytosanitary Declaration for the Twelfth WTO Ministerial Conference: Responding to Modern SPS Challenges (WT/MIN(22)/W/3/Rev.3).
“Acknowledging the ‘vital importance of agriculture,’ DG Okonjo-Iweala noted that differences on some issues, including public stockholding for food security purposes, domestic support, cotton and market access ‘meant that we could not achieve consensus on a new roadmap for future work.’ However, she added, ‘members found a renewed sense of purpose: they are determined to keep at it on the basis of existing mandates, with a view to reaching positive outcomes at MC13.'”
The efforts to address food security concerns resulted in adopting two of the documents that had been forwarded (with some revisions) to ministers ahead of the Conference but did not include the Draft Ministerial Decision on Agriculture (WT/MIN(22)/W/22) based on sharp differences on the elements needing to be addressed.
Response to the COVID-19 Pandemic and Possible TRIPS Waiver
Similarly, Members agreed to the Ministerial Decision on the Agreement on Trade-related Aspects of Intellectual Property Right — clarifying flexibilities to address compulsory licensing of patented vaccines during the COVID-19 pandemic (for a period of five years from adoption) with a decision in six months to extend the flexibilities to therapeutics and diagnostics for the pandemic. The last modification was to the language as to who was eligible, with the U.S. and China agreeing to language that made all developing countries eligible, encouraged developing countries who export vaccines to opt out and language from a General Council meeting where China had indicated it would opt out. The TRIPS decision and the Ministerial Declaration on the WTO Response to the COVID-19 Pandemic and Preparedness for Future Pandemics are the two documents agreed to which address the WTO’s response to the Pandemic.
The latest data from the UNICEF COVID Dashboard on COVID-19 vaccine deliveries over time (by month) show the dramatic decline in vaccine deliveries globally since December 2021. See COVID-19 Vaccine Market Dashboard, https://www.unicef.org/supply/covid-19-vaccine-market-dashboard, accessed June 17, 2022. Had vaccines been delivered just at the rate of December 2021 in January – May 2022 (ignoring expansions announced for 2022), 4.74 billion additional doses would have shipped by the end of May.
The most disappointing document is the only new “agreement” — the Agreement on Fisheries Subsidies. The agreement reached deletes the bulk of Article 5 from the document forwarded to ministers (” SUBSIDIES CONTRIBUTING TO OVERCAPACITY AND OVERFISHING”), replacing it with an Article 5 (Other Subsidies) which is limited to barring Members from granting or maintaining subsidies “provided to fishing or fishing related activities outside of the jurisdiction of a costal Member or a coastal non-Member and outside the competence of a relevant RFMO/A.” While India was reported to be protecting the interests of developing and LDC countries by insisting on a 25 year period and a 200 mile zone for subsidizing low income, resource-poor and livelihood fishing or fishing related activities under the prior draft of Article 5.5(c), the vast majority of developing and LDC countries would have had a total exclusion from the subsidy provisions of Article 5 under prior draft Article 5.5(b)(i) because of the size of their marine capture production [“A developing country Member may grant or maintain the subsidies referred to in Article 5.1 to fishing and fishing related activities if its share of the annual global volume of marine capture production does not exceed [0.8] per cent as per the most recent published FAO data as circulated by the WTO Secretariat.”). India was not eligible for the prior Art. 5.5(b)(i) provision based on its percent of global volume of marine capture production. See June 11, 2022: WTO 12th Ministerial Conference — Draft documents forwarded to Ministers for Consideration; a review of the Fisheries Subsidies latest text, https://currentthoughtsontrade.com/2022/06/11/wto-12th-ministerial-conference-draft-documents-forwarded-to-ministers-for-consideration-a-review-of-the-fisheries-subsidies-latest-text/ (India in 2018 had 3.62 million tonnes of marine capture production out of a global total of 84.41 million tonnes (4.29%)).
Members agreed to continue negotiating on the subsidies contributing to overcapacity and overfishing and included a new Article 12 (Termination of Agreement if Comprehensive Disciplines are Not Adopted) that would terminate the agreement if comprehensive disciplines are not adopted within four years of the agreement’s entry into force.
“Today we have taken a truly significant step. This is the first time that we have established a multilateral agreement at the WTO to support sustainability and clamping down on subsidies that lead to over-fishing.
“Under international law, it will now be illegal to subsidise vessels involved in illegal and unregulated fishing, subsidise fishing in unregulated areas of the high seas.
“Given that we did not yet fully deliver on our mandate under the UN Sustainability Development Goals, the EU will continue to work with our partners towards multilateral sustainability disciplines on those subsidies not covered by this first agreement.”
E-commerce moratorium on customs duties until MC13
An important result for companies engaged in e-commerce was the extension of the moratorium on the imposition of customs duties until the 13th Ministerial Conference as part of a decision to continue and “reinvigorate the Work Programme on Electronic Commerce”. The extension is good only to 31 March 2024 unless the General Council takes a further decision to extend.
TRIPS non-violation disputes
At past Ministerial Conference the e-commerce customs duty moratorium had been extended at the same time as Members agreed to extend the period when non-violation complaints would not be brought under the TRIPS Agreement. The General Council had agreed in November to forward to the 12th Ministerial Conference the extension of the ban on bringing non-violation TRIPS cases until the 13th Ministerial Conference. It was adopted as noted above.
Work Programme on Small Economies
The decision adopted continues the work programme on small economies and the evaluation of challenges such economies face and any actions that may be appropriate to be considered by various WTO bodies.
Ministerial Declaration on Sanitary and Phytosanitary Work
The declaration reviews the important work of the SPS Committee and the need to have the SPS Agreement fully implemented and how the SPS Agreement can support a number of themes flowing from changes to the world agriculture scene:
“How to facilitate global food security and more sustainable food systems, including through sustainable growth and innovation in agricultural production and international trade, and through the use of international standards, guidelines, and recommendations developed by the Codex Alimentarius Commission, the World Organisation for Animal Health and the International Plant Protection Convention as the basis of harmonized SPS measures to protect human, animal or plant life or health.
“How to support basing SPS measures on scientific evidence and principles, including where international standards, guidelines, or recommendations do not exist or are not appropriate; and how to promote the use by Members of principles employed by the international standard setting bodies for considering scientific uncertainty in risk analysis.
“How to enhance the safe international trade in food, animals and plants and products thereof through the adaptation of SPS measures to regional conditions, including pest- or disease-free areas and areas of low pest or disease prevalence which can strengthen Members’ ability to protect plant and animal life or health through efforts to limit the spread of pests such as the Mediterranean fruit fly, diseases such as African swine fever, disease-carrying organisms, or disease-causing organisms.
“How to encourage cooperation with observer organizations that support the work of the SPS Committee and the international standard setting bodies through technical exchanges and assistance in the context of this work programme.
“How to increase participation of and support for the special needs of developing and least developed country Members in the development and application of SPS measures; and in particular, to increase awareness of and sensitivity to the impacts of SPS measures on the export possibilities of such Members.
“Other topics as identified over the course of the work programme or as a result of emerging sanitary or phytosanitary challenges or risks worldwide.”
The SPS Committee has been recognized by many as performing very useful work in helping Members understand developments, improve implementation of obligations and reduce disputes. The adopted declaration should help ensure positive momentum within the Committee.
MC12 Outcome Document
The outcome document offers an abbreviated discussion of WTO reform (paras. 3 & 4), indicating a fully functioning dispute settlement system will be achieved by 2024. The document reaffirms the role of special and differential treatment for developing countries and LDCs (without addressing U.S. and other developed country concerns about lack of differentiation or graduation from developing, etc.). The outcome document includes a range of paragraphs addressing needs of LDCs including for countries who graduate from LDC status. The bulk of the document focuses on prior commitments for assistance to LDCs and developing countries. Considering the critical need for reform of the WTO, the outcome document is disappointing in the lack of focus on the needs of the organization going forward.
Consider the comments of EC Executive Vice-President Dombrovskis earlier today on the importance of the reform effort.
“The difficult discussions over the last five days confirm the EU’s strong belief that the WTO is in an urgent need of root-and-branch reform.
“A full reboot is the only way it can remain relevant and reactive to 21st century challenges. I remind that you that the EU published a clear WTO reform roadmap one year ago to show the way forward.
“The WTO must be able to resolve disputes effectively. It must provide a trust-based and constructive forum for negotiations, and be the guardian of the international rules-based system.
“Ultimately, it is also about restoring the trust and political buy-in of its members.
“We will now get to work immediately on this essential reform, with a view to getting it agreed by the next Ministerial, MC13.”
While the outcome document notes that reform will be discussed, it is hard to imagine agreement on an agenda and actual reforms being accomplished by the 13th Ministerial Conference. This is equally true for resolving dispute settlement, at least if U.S. longstanding concerns are actually going to be addressed.
Interestingly, a major push for many WTO Members since the 11th Ministerial Conference in Buenos Aires has been plurilateral work on so-called Joint Statement Initiatives (JSIs) . India and South Africa have opposed addressing results from JSIs within the WTO. There was no mention by DG Okonjo-Iweala or in the released documents of the work undertaken on the JSIs or the concluded work on services. Without a change to consensus decision making, JSIs offer the main alternative within the WTO for responding to emerging challenges to global trade. One can expect resolution of the role of open plurilaterals to be a major issue in establishing a reform agenda.
Today is a day for celebrating that that a dysfunctional organization and membership were able to come together for a group of decisions that at least suggest multilateralism can play a role going forward to address important issues confronting the global trading system, nations, and workers/citizens. As Director-General Ngozi Okonjo-Iweala stated last Sunday, an agreement on two issues is better than one on one issue, an agreement on one issue is better than no agreement. Today’s outcome is significant by the low standards created by the WTO over its 26+ years of existence. There are some positive results that have emerged. Hopefully the announced results will improve the lives of people around the world.
But the agreement and decisions/declarations are collectively relatively small in what is actually achieved and have taken way too long to achieve. Food security may be the most important, and the decision not to block shipments to the World Food Programme is potentially important. But the response to the pandemic while having some useful elements in terms of transparency and urging greater cooperation is dependent on the willingness of Members to act. The TRIPS decision will have virtually no real world benefit during the COVID-19 pandemic as the current challenge is lack of demand for vaccines not a lack of availability.
The extension of the e-commerce moratorium on customs duties will have ongoing importance to e-commerce companies and consumers globally but should have been easy to extend versus being the increasingly divisive issue it has become.
After 21 years, the fisheries subsidies agreement is at best a modest agreement with a major part of the subsidies disciplines removed from the package and kicked down the road for further negotiations.
Bottom line – what was achieved is better than no deal. For that, we should be thankful. To all those who made the outcome possible, have a relaxed weekend and enjoy a toast to a successful ministerial. Multilateral challenges will be awaiting you again next week.
On June 10, 2022 the package of draft documents to be considered by Ministers at the 12th Ministerial Conference in Geneva from June 12-15, 2022 were released by the WTO. See WTO, MINISTERIAL CONFERENCES: TWELFTH WTO MINISTERIAL CONFERENCE, Documents, https://www.wto.org/english/thewto_e/minist_e/mc12_e/documents_e.htm (viewed June 11, 2022). While there are many documents in the total package of documents available on the WTO webpage, much of the attention will be on the revised draft fisheries subsidies agreement (WT/MIN(22)/W/20), the two documents on the WTO response to the COVID-19 pandemic (WT/MIN(22)/13) and the TRIPS Agreement (WT/MIN(22)/15), the three documents on agriculture (Draft Ministerial Declaration on Trade and Food Security, WT/MIN(22)/17; Draft Ministerial Decision on World Food Programme Food Purchases Exemption from Export Prohibitions or Restrictions, WT/MIN(22)/W/18; and Draft Ministerial Decision on Agriculture, WT/MIN(22)/W/19), competing provisions on a work program on electronic commerce (one including an extension of the moratorium on custom duties on e-commerce), WT/MIN(22)/W/9 and WT/MIN(22)/W/10, and a draft MC12 Outcome Document which includes, inter alia, some discussion of WTO reform.
The full list of documents shown for the 12th Ministerial Conference as of June 11 on the WTO webpage is copied below.
Sanitary and Phytosanitary Declaration for the Twelfth WTO Ministerial Conference : responding to modern SPS challenges – Submission by the African Group; ACP Group; Argentina; Australia; Belize; Brazil; Burkina Faso; Cabo Verde; Canada; Chile; China; Colombia; Costa Rica; Côte d’Ivoire; Dominican Republic; Ecuador; El Salvador; The Gambia; Guatemala; Honduras; Hong Kong, China; Japan; Malaysia; Mexico; Mongolia; Morocco; New Zealand; Nicaragua; Norway; Panama; Paraguay; Peru; Philippines; Senegal; Singapore; Switzerland; The Separate Customs Territory of Taiwan, Penghu, Kinmen And Matsu; Tajikistan; Togo; Ukraine; United States; Uruguay and Viet Nam – Revision
Work programme on electronic commerce – Communication from Albania; Australia; Bahrain, Kingdom of; Brazil; Brunei Darussalam; Canada; Chile; Colombia; Costa Rica; Dominican Republic; Ecuador; El Salvador; European Union; Georgia; Guatemala; Honduras; Hong Kong, China; Iceland; Israel; Japan; Kazakhstan; Korea, Republic of; Kuwait, the State of; Kyrgyz Republic; Liechtenstein; Malaysia; Mexico; Moldova, Republic of; Montenegro; New Zealand; Nigeria; North Macedonia; Norway; Panama; Paraguay; Peru; Philippines; Qatar; Russian Federation; Saudi Arabia, Kingdom of; Singapore; Switzerland; Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu; Tajikistan; Thailand; Ukraine; United Arab Emirates; United Kingdom; United States; Uruguay and Yemen
This post will take a closer look at the latest Fisheries Subsidies text. As will become obvious, while progress appears to have been made to reduce the number of unresolved issues in the text, there are important issues still unresolved. Moreover, many of the changes made suggest a reduction in level of ambition with little or no differentiation on actual need for special and differential treatment versus the simple use of self-selection by Members as developing countries.
The WTO issued a press release on the release of the revised fisheries subsidies draft text which covers the Chair’s explanation of what has been done in the document. See WTO News Release, Revised draft agreement on fisheries subsidies sets stage for pivotal negotiations at MC12, 10 June 2022, https://www.wto.org/english/news_e/news22_e/fish_10jun22_e.htm (“The chair of the fisheries subsidies negotiations, Ambassador Santiago Wills of Colombia, on 10 June submitted to WTO members a revised draft agreement for new global rules to curb harmful fishing subsidies. Released ahead of ministers’ arrival at the 12th Ministerial Conference (MC12) in Geneva, the text for consideration reflects delegates’ collective efforts in recent intensive meetings and suggests landing zones to bring over two decades of negotiations to a successful close.”). The Chair’s explanation of the latest draft and the changes made is contained in AGREEMENT ON FISHERIES SUBSIDIES, DRAFT TEXT, Addendum, WT/MIN(22)/W/20/Add.1 (10 June 2022). The document is embedded below.
In reviewing the text of the current draft and comparing it to the draft from 24 November 2021 (WT/MIN(21)/W/5 the following changes are noted. As reviewed by the Chair, some of the changes reflect not agreement of the Members but rather his effort at finding a possible landing zone that will attract consensus. This includes removing a number of brackets from articles or subsections.
Article 1: Scope – the latest version deletes former Art. 1.2 and adds a new footnote 3. Article 1.2, which was bracketed in the 24 November 2021 draft, indicated that the agreement applied “to fuel subsidies to fishing and fishing related activities at sea that are not specific within the meaning of Article 2 of the SCM Agreement”. The Chair has removed the paragraph based on his perception that most Members opposed extending disciplines to non-specific fuel subsidies. WT/MIN(22)/W/20/Add.1, page 3.
“3. Article 1.2 in the previous version of the text, which was in brackets, would have extended the scope of the Agreement to fuel subsidies that are not specific. The brackets indicated that no agreement had been reached on including this provision. The text of former Article 1.2 has been omitted from this draft because it is my assessment that, for both practical and systemic reasons, there is strong convergence among Members not to extend the scope of the disciplines to cover nonspecific fuel subsidies. On the other hand, it should be acknowledged that some of those Members that had proposed or supported disciplining all fuel subsidies, specific or not, on the basis that these are particularly harmful subsidies, continue to hold the view that non-specific fuel subsidies should be covered by this Agreement.
“4. There is a shared understanding, however, that fuel subsidies are relevant under SDG target 14.6 and the MC11 mandate from Ministers1. In this regard, it has been noted that Article 1 already covers fuel subsidies that are specific, which is consistent with the current framework of the subsidies disciplines in the SCM Agreement. It also is commonly understood that non-specific fuel subsidies can contribute to excessive and illegal fishing, but the paucity of data and information on such subsidies makes it difficult to assess their extent and impact.”
The new footnote 3 states that “For greater certainty, for the purposes of this Agreement, a subsidy shall be attributable to the Member conferring it, regardless of the flag or registry of any vessel involved or the nationality of the recipient.”
Article 2: Definitions — no changes from previous version.
Article 3: Subsidies Contributing to Illegal, Unreported and Unregulated Fisheries
There are two changes in Article 3. The first is the addition of clarifying language at the end of Article 3.3 (language in bold has been added), “The coastal Member shall notify an affirmative determination to the Committee provided for in Article 9.1 (referred to in this Agreement as ‘the Committee’)”.
The second change is the removal of brackets from Article 3.8 and from the two numbers within the article (2 years and 12 nautical miles). The changes to Article 3.8 are described in paragraphs 41 and 42 of the Chair’s explanation of the text. WT/MIN(22)/W/20/Add.1 at 9.
“41. Article 3.8 provides for special and differential treatment (SDT) for the IUU fishing pillar, in the form of a ‘peace clause’. The peace clause is for two years for developing Members, including least developed country (LDC) Members, in respect of subsidies for low income, resource-poor and livelihood fishing or fishing related activities, up to 12 nautical miles from the baseline. The effect of the peace clause is that the disciplines do apply but are not subject to the dispute settlement procedures during the specified duration. This is in line with the view shared by many Members, including many developing country Members, that subsidies to IUU fishing should be eliminated. At the same time, the unique and vulnerable circumstances of the artisanal fisheries sector have been raised as particularly challenging for developing country Members in implementing the disciplines. The peace clause in Article 3.8 is meant to address both of these concerns, while keeping with the mandate to eliminate subsidies to IUU fishing.
“42. The brackets in the previous draft around the period of two years and the limit of 12 nautical miles have been removed to reflect an emerging convergence around this text. That said, some Members remain firmly of the opinion that there should be no special and differential treatment for subsidies contributing to IUU fishing. Other Members would prefer a peace clause of a longer duration.”
Article 4: Subsidies Regarding Overfished Stocks
Article 4 has one change, to Article 4.4, which similar to Art. 3.8, takes brackets off of the entire article and for the two numbers within the article. The text in the current draft follows.
“4.4 For a period of 2 years from the date of entry into force f this Agreement, subsidies granted or maintained by developing country Members, including LDC Members, for low income, resource-poor and livelihood fishing or fishing related activities, up to 12 nautical miles measured from the baselines shall be exempt from actions based on Articles 4.1 and 10 of this Agreement.” The changes are for the same reason as Art. 3.8. See WT/MIN(22)/W/20/Add.1, page 10, para. 51.
Article 5: Subsidies Contributing to Overcapacity and Overfishing
The current draft of Article 5 contains the largest number of changes from the prior text. Article 5.1 adds a footnote (12) and deletes one group of subsidies (former category “(i)”). A new Article 5.2 has been added with two subarticles (5.2(a) and (5.2(b)). Article 5.3 is the old 5.2. Footnote 11 in the old draft (under Art. 5.1(i)) is now footnote 13 (under Article 5.2(a) with an added clause in a parenthetical). Article 5.4 is a modified version of the prior Art. 5.3 although there are not alternatives as previously and Members are not prohibited from granting subsidies to vessels not flying that Member’s flag. Article 5.5 in 5.5(a) modifies prior Art. 5.4(a) by providing alternative time periods for developing countries to provide subsidies (previously a bracketed “X” years; now either 7 years or until 2030) and adds a sentence with additional exceptions.). Old footnote 12 (now 14) changes the figure of 10 percent to an bracketed “x” percent. Article 5(b)(i) (former Article 5.4(b)(i) increases the percent of global marine capture a Member may have and still provide subsidies (old figure [0.7]; new figure [0.8], moves old footnote 13 into a new Article 5(b)(ii) and 5(b)(iii) (formerly 5(b)(ii)) changes the braketed figure for nautical miles from  to alternative figures of  and [24}.
Because of the large number and potential importance of the changes to Article 5, I copy below the Chair’s explanation of the Chapter and changes made. See WT/MIN(22)/W/20/Add.1, pages 10-16.
“ARTICLE 5: SUBSIDIES CONTRIBUTING TO OVERCAPACITY AND OVERFISHING
“52. Article 5 contains the disciplines on subsidies contributing to overcapacity and overfishing. This Article has been amended compared to the previous draft to incorporate several clarifications and changes of approach in different provisions.
“Article 5.1 and Article 5.1.1
“53. The core disciplines in this pillar are based on the compromise, “hybrid”, approach based on a list of presumptively prohibited subsidies qualified by sustainability-based elements. Thus, the prohibition consists of the provisions of Article 5.1 and the qualifications in Article 5.1.1, read together.
“54. Article 5.1 consists of a chapeau containing the main prohibition, followed by an illustrative list of subsidies in subparagraphs (a) through (h) that presumptively contribute to overcapacity or overfishing. Article 5.1 then is qualified by Article 5.1.1, which provides that a subsidy is not inconsistent with Article 5.1 if the subsidizing Member demonstrates that measures are implemented to maintain the fish stocks at a biologically sustainable level. To recall, the biologically sustainable level in Article 5 is defined identically to the same term in Article 4, via a single footnote, footnote 11.
“55. One important amendment has been made to Article 5.1 based on concerns raised by numerous Members since the two previous drafts were circulated. These concerns had to do with the placement of former Article 5.1(i), referring to subsidies contingent upon or tied to actual or anticipated fishing or fishing related activities in areas beyond the subsidizing Member’s jurisdiction. In earlier versions of the draft disciplines, this had been a separate Article creating a straightforward prohibition on this category of subsidies, the explanation being that these were subsidies explicitly for fishing outside the subsidizer’s jurisdiction and more likely to contribute to overcapacity and overfishing than, for example, the other subsidies listed in Article 5.1. However, it subsequently was moved into Article 5.1(i) to respond to the concerns of other Members that such subsidies did not necessarily contribute to overcapacity and overfishing, as a Member might be able to demonstrate that there were measures to maintain the stock or stocks were being fished at biologically sustainable levels.
“56. The concerns over placement remained, and a significant preponderance of Members called strongly for re-establishing the content of former Article 5.1(i) as a standalone prohibition, as in former Article 5.2. This has been done in this draft for the reasons further elaborated in respect of new Article 5.2, to which the previous Article 5.1(i) was moved.
“57. A new footnote, footnote 12, has been added to the start of Article 5.1. The footnote clarifies that Article 5.1 does not apply to subsidies to the extent that they regard stocks that are overfished. This footnote was added to address concerns raised by some Members that a subsidy for fishing a stock that was recognized as being overfished could be permitted under Article 4.3 but, because it is impossible to demonstrate that measures are in place to maintain an overfished stock at a biologically sustainable level, the same subsidy could be prohibited under Article 5.1. Although other Members did not share this concern over the interaction of Articles 4 and 5.1, they were open to this footnote because it ensures that such an interpretation would not arise. It should also be noted that, as set out in the previous Addendum, a fish stock recognized as overfished is in a particularly vulnerable state. Accordingly, the conditions of Article 4.3 are intended to be more stringent than those under Article 5.1.1, given that the object of Article 4.3 is to allow for subsidies or other measures to rebuild the stock to a biologically sustainable level, while that of Article 5.1.1 is to maintain the stock at such a level. At the same time, it was recognized that there could be a subsidy programme under which subsidies were provided both to fishing overfished stocks and to fishing stocks that are at biologically sustainable levels. Under such a programme, the subsidies to fishing overfished stocks would not be prohibited provided the requirements of Article 4.3 were met, and the subsidies to fishing stocks at biologically sustainable levels would not be prohibited provided the requirements of Article 5.1.1 were met. Some Members that had questioned the need for such a footnote indicated that they could accept it on the clear understanding that it did not change the operation of these provisions.
“58. In our discussions of the provisions of Article 5.1 and 5.1.1, questions had been raised over the presumption that the listed subsidies contribute to overcapacity and overfishing. One particular concern was that this presumption would mean that no subsidies of the types referred to in Article 5.1 could be provided until after the demonstration referred to in Article 5.1.1 had been completed. Having carefully considered the various suggestions to address this concern by restructuring these provisions, my assessment is that the aim and effect of these suggestions is essentially the same as that of the provisions as they were drafted, albeit using different approaches. In particular, the provisions of Article 5.1.1 contain no requirement to make the referenced demonstration before a listed type of subsidy could be granted, nor any implicit requirement to stop all current subsidization until such a demonstration is made. Instead, the aim and operation of the text is to ensure that sustainability measures factor in as one important consideration in the granting and maintaining of subsidies, and that decisions on subsidization likewise should factor into sustainability considerations. It is this linked set of subsidies and sustainability measures – drafted and implemented as the Member sees fit – that would be the subject of the demonstration. As for the demonstration itself, it would naturally begin with the notifications as required in Article 8 and Committee review of those notifications as provided for in Article 9.
“59. In particular, that review process would allow for other Members to pose questions and identify any issues of concern, and this in turn might lead to bilateral discussions. Ultimately, as a last phase, a dispute settlement proceeding could be initiated to address the issue. Thus, while the list in Article 5.1 refers to certain forms of subsidies that have been identified in many proposals and elsewhere as having the greatest potential to contribute to overcapacity and overfishing, the list does not constitute a blanket prohibition of such subsidies. Rather, the provisions of Article 5.1.1 make clear that because the issue is subsidies that contribute to overcapacity and overfishing – relative concepts that can only be understood in the context of a particular fishery – the question of whether a given subsidy is prohibited can only be determined in the context of the fishery in which it is provided. It is exactly that context that is the subject of the demonstration referred to in Article 5.1.1.
“60..To elaborate a bit further, from my reading of the current draft text, I would expect that in the majority of cases, simply complying with the notification requirements would be sufficient to ‘demonstrate’ to the satisfaction of other Members that the sustainability elements under Article 5.1.1 have been met. Most of the remaining cases would be clarified through the Committee work and dialogue among Members. A useful example is the experience under the SPS and TBT Agreements. In the more than 25 years of operation of those Agreements there have been tens of thousands of notifications. In respect of these, only several hundred specific trade concerns have been raised, and only a handful of disputes begun. Most of these were resolved before even getting to a ruling by a panel.
“61. Seen in this light, demonstration of sustainability under Article 5.1.1 is neither an impossible standard nor a meaningless procedural step. It is rather a step that would begin with and take account of the available data and other information about the subsidy, the fishery or fisheries in question, and specific management measures. And it also would include the various types of multilateral review and other scrutiny provided for in the disciplines.
“62. As noted above, this new draft of the Agreement once again contains a standalone prohibition of subsidies contingent on fishing outside a Member’s jurisdiction, in Article 5.2. As I mentioned above, there was a significant preponderance of Members sharing the view that this provision should be moved back to a standalone prohibition to ensure its effectiveness. Some Members preference was to retain the provision as Article 5.1(i), but indicated that they could accept the move back to Article 5.2 so long as the prohibition was accompanied by former Article 5.2(b). That provision exempted from this prohibition the non-collection from operators or vessels of government-to-government payments, subject to the sustainability elements in Article 5.1.1. That provision has been restored. Thus, new Article 5.2 has the same structure as and is very similar to former Article 5.2 found, for example, in the draft in TN/RL/W/276/Rev.1.
“63. The footnote to Article 5.2(a), now footnote 13, has been amended compared to the previous draft by adding clarifying language regarding fishing in a nearby Member’s exclusive economic zone pursuant to traditional or historical practices or arrangements, including relating to migratory stocks, an issue of relevance to some Members.
“64. As just noted, Article 5.3 is intended to complement the main prohibition in Article 5.1 on subsidies that contribute to overcapacity and overfishing. It provides for a prohibition of all subsidies to fishing or fishing related activities in the high seas – that is, outside of any coastal Member’s or coastal non-Member’s jurisdiction and outside the competence of any RFMO/A.
“65. Although it has been stated that the sustainability conditionality under 5.1.1 to grant otherwise prohibited subsidies under Article 5.1 de facto prohibits subsidies in areas where such demonstration cannot occur, including the high seas, Article 5.2 reinforces this prohibition by providing clarity that subsidies to fishing or fishing related activities in the unregulated high seas are prohibited not only in fact, but also in law.
“66. Along with footnote 3, Article 5.4 is part of a new approach to address the differences among Members concerning the two alternatives to this provision that appeared in the previous draft concerning subsidies to vessels not flying the flag of the subsidizing Member. As I stated above, footnote 3 clarifies that a subsidy is attributable to the Member conferring it, regardless of the flag or registry of any vessel involved or the nationality of the recipient. In addition, Article 5.3 requires the subsidizing Member to take special care and exercise due restraint when granting subsidies to vessels not flying its flag. This text is the result of compromise among the Members holding views on the opposite sides of the spectrum.
“67. Article 5.5 concerns special and differential treatment for subsidies contributing to overcapacity and overfishing, which has been an issue of particular concern for many Members in these negotiations. This is not surprising as this is a key element in the overall discussion on balance and ambition in the Agreement on Fisheries Subsidies.
“68. For a long time, Members held diverging views on both the structure and content of SDT provisions in this pillar of the disciplines. For this reason, I, as the Chair of the negotiations, was asked to try my hand at putting together different elements in the form of a new clean text on SDT for Article 5. This first try was circulated in an earlier version of this text in TN/RL/W/276/Rev.2 on 8 November 2021.
“69. On the basis of the discussions in the NGR, proposals, and textual suggestions from Members, I drafted Article 5.4 of TN/RL/W/276/Rev.2 as my best and honest attempt to reflect where I considered a landing zone could lie among different views at that time. The whole of the Article was in brackets in that draft, to reflect that the provisions remained under discussion. Three weeks later, on 24 November 2021, when I circulated the first Draft Agreement on Fisheries Subsidies in WT/MIN(21)/W/5, the structure of Article 5.4, including the language in it and brackets around it remained virtually unchanged. One addition was a footnote at the start of the Article, which provided that it would not apply to Members whose annual share of the global volume of marine capture production is at or above 10 per cent as per the most recent published FAO data. This was in response to a widespread call during discussions on the previous versions of the text that developing country Members with a relatively large share of global fishing should not be in the position to avail of the SDT provisions.
“70. Over the past few weeks, intensive and useful discussions with and among Members have given me the impression that views on SDT in Article 5 may not be as far apart as they had appeared. First, many delegations indicated that they could work on the basis of the approach that was in Article 5.4 of WT/MIN(21)/W/5, subject to some restructuring and rewording to make it more clear that the three elements of SDT in that provision are separate; and second, many Members showed some flexibility in respect of the length of the transition period, the de minimis threshold, and the geographical exemption for artisanal fishing.
“71. On the basis of this work, I have made certain changes to the previous formulations on SDT in the overcapacity and overfishing pillar, with the aim of making these provisions more broadly acceptable to Members. One important change was to separate and renumber the subparagraphs of the Article to make it more clear that the three elements of SDT are separate although they work in parallel during the transition period. This restructuring has been well-received by delegations, allowing us to focus on the specific elements themselves.
“72. Footnote 14, which was footnote 12 in the previous draft, has been revised, and the figure of 10 per cent has been replaced with an ‘X’. The entire footnote is in brackets to indicate that some Members are concerned that this is not the appropriate way to indicate that any developing country Member should not avail from SDT. Others consider, however, that those developing country Members with a large share of global marine capture should not be able to avail of SDT for subsidies contributing to overcapacity and overfishing.
“73. The other amendment concerns the reference to the most recent published FAO and adds the phrase “as circulated by the WTO Secretariat”. The intention of this amendment is to account for potential differences in nomenclature between the UN system and the WTO.
“Article 5.5 (a)
“74. Article 5.5(a) provides for a transition period available to all developing country Members not falling under the scope of footnote 14 and that choose to use this provision. During this period a developing country Member would be exempt from the prohibition in Article 5.1. That is, it could grant or maintain the subsidies in Article 5.1 without having to meet the sustainability requirements in Article 5.1.1, in its EEZ and in the area of competence of an RFMO.
“75. Members’ views on the duration of this transition period continue to range from no, or at best a very short transition period, to the proposal for a transition period of 25 years. However, these represent views at the opposite ends of the spectrum, while it appears that most Members now see the likely outcome within a narrower range. I have incorporated two alternative formulations of the transition period, based on Members’ discussions on this issue. The first alternative is 7 years, which represent a mid-point among the gradually narrowing range of numbers that Members have been discussing. The second alternative is based on the suggestion from numerous Members to refer to a specific end-date for the transition period, namely year 2030. This is the target date for implementation of the Sustainable Development Goals and Target 14.6 which, along with the MC11 Ministerial Decision on Fisheries Subsidies, is our mandate for negotiating this Agreement.
’76. The numbers associated with the transition period, 7 years or up to the year 2030, have been included in brackets, because this is an area where views have not converged enough for me to present a single suggested outcome.
“77. Another new element to the transition period is some further period of flexibility through a two-year peace clause, which would apply after the transition period ended. During this two-year period, a developing country Member using Article 5.1 would still have the obligation to implement that provision but would be exempt from dispute settlement under Articles 5.1 and 10 of this Agreement. A proposal with a similar objective has also been distributed, which would give developing country Members a set number of years after the transition period when they would not have to notify information about stock status.
“78. Finally, questions have been raised about the appropriateness and practicability of the final clause of Article 5.4(b) in the previous draft, that Members intending to invoke this provision should inform the Committee in writing before the date of entry into force of the Agreement. To address this concern, the drafting has been changed to mirror that in Articles 8.4 and 8.5, by referring to ‘within one year of the date of entry into force’.
“Article 5.5 (b)(i)
“79. Article 5.5(b)(i) is intended to provide flexibility for developing country Members with relatively small individual shares of marine global capture production. This provision would apply separately and in parallel to Article 5.5(a), that is during and after the transition period. Under Article 5.5(b)(i), a Member with no more than the specified de minimis share of global marine capture would be exempt from Article 5.1, including Article 5.1.1, for as long as its share of catch was below the de minimis limit for three consecutive years.
“80. The previous draft of the Agreement had proposed a 0.7 per cent share of global marine capture as the threshold. The number was in brackets to indicate that views varied on the threshold percentage, ranging from 0.3 up to 5 per cent. Once again, however, these represented the far ends of the spectrum. Some Members that had indicated a willingness to accept 0.7 per cent stated that this was their compromise position, noting that a Member with 1 per cent share of global catch would be among the top 20 fishing nations in the world with over 800,000 tonnes of fish caught a year. It also was noted that the vast majority of Members currently below a 0.7 per cent share of global catch well below this figure, giving them considerable policy space to increase catch before reaching this threshold. Others pointed out that some developing country Members might reach 0.7 per cent relatively soon, and therefore sought additional policy space.
“81. As a compromise solution, and based on discussion and negotiations among Members, in this new draft, I am suggesting that the de minimis threshold for the exemption from Article 5.1 be set at 0.8 per cent share of global volume of marine capture production as per the most recent published FAO data. This number is in square brackets since this is an area where views have not fully converged. In this provision the phrase ‘as circulated by the WTO Secretariat’ has been added for the same reasons as I outlined for footnote 14.
“82. Article 5.5(b) now contains two subparagraphs because footnote 13 of the previous draft has been moved into Article 5.5(b) as subparagraph (ii). Apart from editorial changes, the text of this provision remains the same. That is, it provides that a developing country Member would remain exempt from Article 5.1 until its share of global marine capture production exceeded the de minimis threshold for three consecutive years. Conversely, Article 5.5(b)(i) would apply again to a Member whose share of global marine capture production fell back below this threshold for three consecutive years.
“Article 5.5 (c)
“83. Article 5.5(c) is often referred to as the exemption for subsidies to artisanal fishing. This provision also works separately and in parallel to the transition period in Article 5.4(a). Article 5.5(c) would exempt from Article 5.1, including Article 5.1.1, for all developing country Members not falling under the scope of footnote 14, subsidies to low income, resource-poor and livelihood fishing within a geographic limit. Again, this is a stand-alone provision that operates in parallel with the transition period in Article 5.5(a), and would be relevant after the transition period for those Members with a greater than de minimis share of world catch.
“84. The previous draft Agreement set a geographic limit of 12 nautical miles (in brackets). Similar to the discussions on the length of the transition period and the de minimis threshold, Members’ views on what the limit should be are diverse. Some have noted that they see even having such an exemption as a compromise from their earlier opposition to an artisanal fishing exemption, or their view that it should be limited to de minimis Members. These Members generally oppose any expansion of the 12 nautical mile limit because it is a permanent exemption. On the other hand, some developing country Members argue that this exemption should apply to the entire EEZ or 200 nautical miles. From recent discussions among Members, I sense that the preponderance of Members are considering numbers in the 12 to 24 nautical mile range. This is the reason that these two figures appear in the text, as alternatives, and in brackets.
“85. Those in favour of 12 nautical miles have noted that this is the limit of the territorial sea in UNCLOS where the coastal Member has full sovereignty. Some Members in favour of a limit of more than 12 nautical miles argue, however, that artisanal fishers may fish somewhat beyond 12 miles and that such fishers should not be subject to any conditions or artificial boundaries for any subsidies they may receive. Some Members have suggested 24 nautical miles as an alternative, noting that this is the limit of the contiguous zone as set out in UNCLOS.
“86. One technical clarification has been introduced at the end of this provision, to reflect that the baselines from which the geographic scope of the exemptions is measured includes archipelagic baselines, as referred to in Article 47 of UNCLOS, that is from the outermost points of the outermost islands and drying reefs of the archipelago. This means in practice that the exemption for artisanal fishing would apply to all of the waters inside the archipelagic baselines.
“Article 5.5 (d)
“87. From our extensive discussions on this issue to date, it has been suggested that Members availing themselves of the SDT provisions nevertheless should aim to provide subsidies in a sustainable manner, with a view to avoiding contributing to overcapacity and overfishing. This has been a shared view of both developed and developing country Members. This is reflected in Article 5.5(d), which was Article 5.4(c) in the previous draft text. Some Members consider that the mandatory ‘shall’ in this best endeavours clause is too strong and have suggested ‘should’ or ‘may’ instead. I have not changed the drafting here, noting the views of many Members that ‘shall endeavour’ merely implies a need to be cognizant of potential impacts of subsidies when granting them rather than requiring any specific action.
“88. As stated earlier, while the drafting of Article 5.5 is my best and honest attempt at presenting a possible landing zone, divergences remain with regard to specific figures, and I believe Ministers’ attention will be particularly warranted in resolving these issues. It must be noted, additionally, that the numbers in brackets are suggested as a compromise between long held positions on this issue.”
Article 6: Specific Provisions for LDC Members
Articles 6.1 – 6.3 remain unchanged except for the removal of the brackets around 6.2 and 6.3.
Article 7: Technical Assistance and Capacity Building
Article 7, like Article 6 is identical to the prior version with the exception of the removal of brackets around the article.
Article 8: Notification and Transparency
Article 8.1 remains unchanged from the November 2021 draft although footnote 16 of the new draft (15 of the old draft) includes modifications on the percentage of global marine capture and FAO data circulated by the WTO Secretariat similar to changes in Article 5. Article 8.1bis (and footnote 18) from the earlier draft has been deleted with a new Article 8.2 added. Article 8.7 (former Article 8.6) has a new footnote added (19). There is a new Article 8.9 added. While there is no change to the prior 8.2(b) (now 8.3(b)), this provision which requires notification of “any vessels and operators for which the member has information that reasonably indicates the use of forced labour, along with relevant information to the extent possible” is of importance to the United States. That 8.3(b) remains bracketed in the Chair’s draft indicates lack of movement to consensus (politely described as “discussions continuing”).
The Chair’s discussion of new Article 8.2, footnote 19 and Article 8.9 are copied below. See WT/MIN(22)/W/20/Add.1 at pages 17 and 19.
“102. Article 8.2 requires annual notification “to the extent possible” of fuel subsidies to fishing and fishing related activities that are not specific. As noted above, the language was developed by a group of interested Members with different and somewhat opposed views on this issue as a formulation around which all of them could converge.
“103. Article 8.2 has some changes compared to the previous formulation of the same provision, Article 8.1bis in the previous draft (WT/MIN(21)/W/5). First, concerning the placement, the discussion of new proposed Article 8.2 led to the conclusion that this separate provision should not be mixed with what is covered by Article 8.1, which refers to the SCM Agreement, given that nonspecific subsidies are outside the scope of the SCM Agreement. The suggestion was that, logically, this provision should immediately follow Article 8.1. Second, the old footnote 18 to Article 8.1bis in the Draft Agreement (WT/MIN(21)/W/5) clarified that this provision is without prejudice to Article 25 of the SCM Agreement. However, with the inclusion of the new Article 8.9, which is more general and clarifies that notifying a measure does not prejudge its legal status under the SCM Agreement, its effects or its nature, in Members’ view the old footnote 18 became redundant and it was deleted.
“104. In the discussion of this provision, it has been noted that the information that would be collected could be informative in the reviews of the substantive operation of the Agreement under Article 9.4. This element of discussion was an important consideration to many Members in finding the transparency elements in 8.2 to be a compromise approach to the overall treatment of nonspecific fuel subsidies in this Agreement.
“105. This provision is related to Article 1 and deletion of the former Article 1.2 on non-specific fuel subsidies. As a reminder, Members’ views on how to deal with this sensitive issue covered a spectrum from the simple deletion of the brackets around Article 1.2 at one end, to the deletion of Article 1.2 itself and any transparency provision on these subsidies at the other end.
“106. As mentioned above, the compromise solution arising from the long process we had on this issue that most Members could live with was to add language on transparency in respect of nonspecific fuel subsidies, currently reflected in Article 8.2, and to delete Article 1.2.”
“118. New footnote 19 has been added to Article 8.7 to clarify that there is no requirement to notify subsidy programmes before they are implemented, or prior to what is required under the regular notification process. This is a broadly shared understanding among Members, which is reflected in this footnote for clarity and does not change the substance of Article 8.7. This footnote also contains a cross-reference to footnote 16, pertaining to the periodicity of notifications by developing country Members below the de minimis threshold in Article 5.5(b)(i).”
“120. Article 8.9 is a new provision which repeats verbatim the text of Article 25.7 of the SCM Agreement. In particular, it provides that notifying a measure under the Agreement does not prejudge its legal status, effects or nature.”
Article 9: Institutional Arrangements
There are no changes to Article 9 in the current draft text.
Article 10: Dispute Settlement
There are no changes to Article 10 in the current draft text.
Article 11: Final Provisions
Article 11.3(b) deletes a clause at the end of provision (“that is contested by a party or a third party”) and adds a footnote 24 (“this limitation shall also apply to an arbitrator established pursuant to Article 25 of the Dispute Settlement Understanding.”).
A few thoughts
Since the fisheries subsidies negotiations have been ongoing for more than 20 years, an important test of whether the WTO can address important issues of today will be whether ministers are able to cobble together a final agreement. As important as completing the deal will be, equally important will be achieving a meaningful level of ambition. As is clear from the Chair’s write-up of the current state of negotiations, the number of brackets have been reduced, but getting to a final agreement will be up to the flexibilities of the Ministers attending.
The level of ambition in the current draft will be better gaged by others, but the impression of the changes in Article 5 are of large numbers of WTO Members essentially escaping many of the obligations of the draft agreement. For example, the exclusion for WTO developing country Members who each account for less than 0.8% of global marine capture from the disciplines of Article 5.1, means that very few developing countries will be subject to the disciplines of Article 5.1. See Art. 5.5(b)(1). Similar questions arise with regard to the nautical mile exception for subsidies from developing countries to “low income, resource-poor and livelihood fishing or fishing related activities” (Art. 5.5(c), Transition periods also seem very long (Art. 5.5(a)).
Data from the FAO on global marine capture shows data for 2018 on marine capture production the top 25 producers (accounted for 80% of capture) and the rest of the world (20%). See Food and Agriculture Organization of the United Nations, The State of World Fisheries and Aquaculture, 2020, at page 13, Table 2 (copied below). Most WTO Members are self-declared developing countries (or are LDCs). The vast majority of WTO developing countries are in the 20% all other grouping, virtually none of whom will be limited by Article 5.
The hope is that the 12th Ministerial Conference will provide a meaningful outcome. But the cards on the table look less than encouraging to Members being able to achieve a truly meaningful agreement.
When one looks at the other areas where Ministers will be trying to reach agreement, prospects are similarly guarded.
The show starts tomorrow in Geneva. We are just days away from knowing how relevant the WTO can be for the issues before it today and what that says for the organization’s future relevance.
Looking at WTO press releases over the last week, the WTO’s Director-General has been urging Members to find a path forward on a handful of issues — a response to the pandemic (including IP flexibilities), concluding the fisheries subsidies negotiations that have been dragging on for more than twenty years, obtaining some movement on agriculture (food security, no restrictions on sales to the World Food Programme) and an outline of a possible work program going forward including on WTO reform. Various press articles have suggested modest progress at best has been achieved in recent weeks and flag challenges to achieving any meaningful results at next week’s Ministerial Conference. See, e.g., Inside U.S. Trade’s World Trade Online, MC12: A preview, As ministers head to Geneva for MC12, success remains on a knife’s edge, June 9, 2022, https://insidetrade.com/daily-news/ministers-head-geneva-mc12-success-remains-knife’s-edge. The ongoing Russian war in Ukraine has created even further challenges to achieving any meaningful outcomes next week.
Yesterday’s article in The Globe and Mail had Director-General Ngozi Okonjo-Iweala talking about it still being possible to bring in the first two issues listed above without commenting on other items before the Members. See The Globe and Mail, Global agreement on COVID-19 vaccine rights waiver within reach, WTO chief says, June 8, 2022, https://www.theglobeandmail.com/world/article-global-agreement-on-covid-19-vaccine-rights-waiver-within-reach-WTO/ (“An international agreement on waiving intellectual property rights for COVID-19 vaccines is within reach ahead of a global trade meeting next week, the head of the World Trade Organization said on Wednesday. In a telephone interview, Director-General Ngozi Okonjo-Iweala also said an agreement could be reached on fishing subsidies in time for the meeting, when 120 trade ministers from around the world gather at the body’s Geneva headquarters.”).
As reviewed in prior posts, there are a range of matters that have been discussed including a number of joint statement initiatives (at least one of which is concluded among willing Members). See May 11, 2022: Less than five weeks to the WTO’s 12th Ministerial Conference — what are likely deliverables?, https://currentthoughtsontrade.com/2022/05/11/less-than-five-weeks-to-the-wtos-12th-ministerial-conference-what-are-likely-deliverables/. How many of the issues that have been being worked on will result in actual outcomes or simply be included in a future work program is the question heading into next week. Most bets would say the Ministerial Conference will be lucky to achieve even modest success.
There are a host of documents that are posted on the WTO webcite as documents for the Ministerial. See WTO, MINISTERIAL CONFERENCES: TWELFTH WTO MINISTERIAL CONFERENCE, https://www.wto.org/english/thewto_e/minist_e/mc12_e/documents_e.htm (accessed on June 9, 2022). There is a draft text and revision for fisheries subsidies (but not the current iteration). There is no draft text for the pandemic response as yet although both the IP flexibility draft forwarded to the membership in recent weeks and the broader package of provisions have been in the public domain, but don’t reflect recent negotiations. The agricultural negotiating group chair’s draft of a text from November 2021 is on the webcite but again doesn’t reflect developments from 2022. There are lists of issues various developing country groups and least developed countries would like to see as well as a Brazilian paper proposing having ministerial meetings every year versus the current every two years (which has twice slipped to only once in four years). While all these documents provide some background on issues of interest to at least some of the Members, the core documents will likely be those added by Sunday reflecting hoped for outcomes.
The world needs the WTO to be successful next week. Fisheries subsidies are a major problem and fish stocks globally have paid the price of the inaction by WTO Members. The pandemic has raised important issues for trade playing a more important role in minimizing negative effects and improving equitable access to vaccines. And the food insecurity issues which have been grossly worsened by the ongoing Russian war in Ukraine are critical for tens of millions of the world’s population, with trade being an important element to addressing the current issue. And the WTO is in need of fundamental reform if it is to be able to address changing global needs in a timely manner, something it has been unable to do in its first twenty 27 years.
The divisions among WTO Members on the path forward for the WTO and the opposition of many to working with the Russian Federation argue for a minimalist package in fact at next week’s Ministerial Conference. Even a minimalist package may prove illusive in today’s world. Let’s hope for a meaningful success next week.
Last week on May 12, 2022, the Bipartisan Policy Center presented a program on the Future of the World Trade Organization. See https://bipartisanpolicy.org/event/the-future-of-the-world-trade-organization/. The program was structured with two segments. The opening segment was a discussion between the moderator of the program, Amb. Dennis Shea (former U.S. Ambassador to the WTO in the Trump Administration) and Roberto Azevedo (former Director-General of the WTO and a former Brazilian Ambassador to the WTO). The second segment was a panel discussion consisting of Thomas Graham (a former WTO Appellate Body member and former Chair of the Appellate Body), William Reinsch (currently a Senior Advisor and Scholl Chair in International Business at the Center for Strategic and International Studies), and Nazak Nikakhar (former Assistant Secretary for Industry and Analysis, U.S. Department of Commerce during the Trump Administration).
The discussion with the former DG of the WTO was wide ranging and pointed up the near impossibility of achieving consensus among the 164 WTO Members as there is no common vision of the organization’s mission and a widely split view of Members on whether reform is needed and even whether some Members prefer a non-functioning organization. Much of the discussion with former DG Azevedo is summarized in an Inside U.S. Trade article from May 13. Inside U.S. Trade’s World Trade Online, Former WTO director-general: Finding consensus largely ‘impossible’, May 13, 2022, https://insidetrade.com/daily-news/former-wto-director-general-finding-consensus-largely-%E2%80%98impossible%E2%80%99.
The moderator asked Azevedo about the Appellate Body and the topic of dispute settlement reform was taken up in the second segment with the lead being taken by the former AB member Thomas Graham.
Today’s post looks at the discussion of dispute settlement and what implications the views presented may have for meaningful progress at the 12th Ministerial Conference in terms of agreeing on a work program for dispute settlement reform.
In the discussion with former Director-General Roberto Azevedo, the topic of dispute settlement came up in two contexts. The first had to do with a discussion of the need for reform including the U.S. perceived need for tools to address Chinese distortions from their economic system . Azevedo noted that reform would be difficult on a consensus basis in general and dealing with China’s practices specifically. Azevedo mentioned the Appellate Body had complicated the operation of the WTO as they had “legislated too much” in his view. He noted that the Appellate Body should have had “greater circumspection” and limited their decision to the minimum needed. In his view, the actions of the Appellate Body did not facilitate the ability of Members to achieve a political bargain.
The second context in which dispute settlement arose was in the discussion of the 12th Ministerial Conference which starts in Geneva on June 12th. While Mr. Azevedo didn’t view the outcome of the 12th Ministerial as a “make or break” moment for the WTO, he did view whether dispute settlement is addressed meaningfully as suggesting “success” or continued problems. For him, getting dispute settlement moving was the important element regardless of the specifics that are to be worked out by Members.
“The Biden Administration, like the Trump Administration, believes that the operation of the dispute settlement system is in need of significant reform. The Trump Administration characterized the challenge as getting Members to explore why the Appellate Body felt at liberty to disregard the clear limitations on its authority in the Dispute Settlement Understanding and why Members had not moved earlier to ensure the limited role for the Appellate Body was respected. The Trump Administration also expressed concern that the dispute settlement system was not permitting Members to address the massive distortions caused to the global trading system from state-directed economies such as China. The Trump Administration was also not committed to a two-tier review system in light of the problems with the Appellate Body.
“The Biden Administration has expressed similar concerns although Amb. Pagán’s comments appear to change the focus from why did the Appellate Body view itself as permitted to deviate from its limited role to a review of what Members “real interests” are. It is unclear if the different language reflects a change in focus or just a rearticulation of the need to find reforms that will deliver a dispute settlement system that is limited to and achieves the objectives Members have articulated.”
In last week’s program, Thomas Graham gave a forceful argument for why blocking appointment of new Appellate Body members was correct in both 2017 and in 2022. As he notes, “the blockage was meant to force a discussion among Members of the U.S. critique that has been building for 20 years and is deeply bipartisan and, at a minimum, solidly sound on the text and the negotiating history. The discussion was badly needed and it still hasn’t occurred.”
Mr. Graham views the critique provided by the U.S. as not widely understood. Basically it is that “the Appellate Body was negotiated and authorized only to be a modest check on occasional egregious errors by panels in applying the specific rules. And it made itself into an international court issuing broad interpretations and requiring adherence to precedence. That coincides incidentally with what former Director-General Azevedo said in his critique which I wanted to applaud of the Appellate Body. By doing this, the Appellate Body altered the rights and obligations negotiated by Member governments and expressed in the Agreements without any way to check or reign them in.”
“As an aside, there is all the talk about restarting the dispute settlement system. There is a dispute settlement system – panels. And if people don’t like it, they can go to arbitration under Article 25, or they can go to other arbitration, or they can use the good offices of the Director-General which is within the Dispute Settlement Understanding. So there is a live question which Dennis you’ve raised yourself on several occasions on whether a second tier is actually even needed.”
Mr. Graham reviewed that during 2019, the last year of the Appellate Body’s operation, at each monthly Dispute Settlement Body meeting, Amb. Shea sought to have Members discuss the how and why of the Appellate Body deviating so much from its limited role. The only response was the Amb. Walker (NZ; Chair of the DSB) process. “The only thing that could be agreed upon by most but not all Members, still not even unanimous, were procedural things (conclude cases in 90 days and hortatory words (don’t overreach). That simply demonstrated actually the accuracy of the U.S. critique. That is consistent with what I observed inside the Appellate Body as well. The U.S. critique, for lack of a better way to put it, was treated with disdain and dismissed. It was frequently said they’re just mad about zeroing; they’re just mad about a few cases. To which I would reply, you are right that they are mad about that and other things because of what it shows about how the Appellate Body is operating. Real reform of the dispute settlement system would require starting from scratch and confronting the kinds of questions that Dennis and the U.S. and a few others have been asking. Does the WTO really need a second tier of dispute settlement? And if so, what should be the purpose and what should it be? And until those discussions start, nothing is going to happen. I am not even optimistic that some path to dispute settlement can come out of the Ministerial because if one is not going to go to those fundamentals on the dispute settlement system, then the rules become important and need to be more express because you can’t stand on the dispute settlement system to interpret the rules as they are correctly. They are going to have to be done together.”
William Reinsch expressed the view that it was important to restart the appointment of Appellate Body members on the theory that the problem with the AB was one of personnel which arguably the U.S. could handle through the appointment process versus structural and hence requiring reexamination of the dispute settlement process. In the alternative, he would support a system where panel decisions are binding. The key in his view is a binding system of dispute settlement. Nazak Nikakhar took the position that a second tier of review was needed because of the possibility of erroneously decided panel cases citing a panel decision involving Russia and Ukraine and limiting the authority of Members to take action for national security reasons without WTO review.
With less than four weeks to the start of the WTO’s 12th Ministerial, WTO Members are struggling to see what deliverables are possible. WTO reform is one of the core topics needing some definition. While dispute settlement reform will likely be part of the reform package (if one is agreed) what that means and whether a meaningful work program can be envisioned and developed are open questions.
On May 9-10, the WTO held a General Council meeting which followed an informal Trade Negotiations Committee (TNC) and Heads of Delegation meeting from May 4. The meetings resulted in a series of news releases from the WTO focusing on the Director-General’s views on areas for focus for the upcoming Ministerial as well as initial reactions from Members to the paper put forward following negotiations between the European Union, United States, India and South Africa on what, if any, modifications to TRIPS obligations were needed to help WTO Members address the COVID-19 pandemic. See WTO News Release, General Council, Members welcome Quad document as basis for text-based negotiations on pandemic IP response, 10 May, 2022, https://www.wto.org/english/news_e/news22_e/gc_10may22_e.htm; WTO News Release, General Council, DG Okonjo-Iweala urges WTO members to “meet the many challenges of our time”, 9 May 2022, https://www.wto.org/english/news_e/news22_e/gc_09may22_e.htm; WTO News Release, Trade Negotiations Committee, DG Okonjo-Iweala: Members can deliver results at MC12 despite challenging circumstances, 4 May 2022, https://www.wto.org/english/news_e/news22_e/tnc_04may22_e.htm.
The Director-General highlighted at the May 4 informal TNC and Heads of Delegation meeting a possible list of achievables by the 12th Ministerial Conference in the difficult political and economic environment that Members find themselves in.
“One potential MC12 deliverable is a WTO response to the current and future pandemics, including intellectual property issues, where members will discuss possible elements of a compromise at a time to be determined by the Chair of the TRIPS Council, the DG said. Other potential deliverables include concluding an agreement on fisheries subsidies, achieving outcomes on agriculture and making progress on reforming the WTO in addition to various initiatives members are taking forward, she added.
“The Director-General pointed to the threat of a global crisis in food security, with prices for food, fertilizer and energy rising sharply from already high levels. She suggested members could use MC12 as a platform to take actions on these issues separately from the ongoing agriculture negotiations.”
A WTO Response to the COVID-19 Pandemic
The WTO achieving a response to the COVID-19 pandemic became more likely with the release of the draft text from the EU, US, India and China. I reviewed the main changes from the earlier draft in a recent post. May 4, 2022: Access to vaccines – the public release of the text from the U.S., EU, India and South Africa to the full WTO Membership for consideration by the Council for Trade Related Aspects of Intellectual Property Rights, https://currentthoughtsontrade.com/2022/05/04/access-to-vaccines-the-public-release-of-the-text-from-the-u-s-eu-india-and-south-africa-to-the-full-wto-membership-for-consideration-by-the-council-for-trade-related-aspects-of-intellectual-prop/. While Members were not ready to sign off on the draft language and were awaiting instructions from capitals on positions to take, it is clear that the text will be the basis for negotiations. Moreover, as reflected in the WTO press release on the May 10 General Council session, China indicated it would not avail itself of the flexibilities on vaccines in the proposal. As reviewed in my May 4th post, China’s action will facilitate agreement on the text as it will permit adoption of language that makes the provisions available to all developing countries but encourages countries with strong export capabilities to not avail themselves of the provisions. China has self-identified itself as a developing country, but has been the largest manufacturer and exporter of COVID-19 vaccines, The U.S. and EU had drafted language that would have excluded China’s eligibility (as the only developing countries with exports of more than 10% of global totals in 2021). China’s position permits broader eligibility, hence avoiding what China would view as discriminatory language aimed at it. The implicit quid pro quo for using the broader language was China indicating it would not utilize the provisions.
However, there are remaining issues needing resolution in the draft text including whether diagnostics and therapeutics will be included in the provisions immediately versus subject to a separate determination to include within six months. And there is the broader set of issues including transparency, export restrictions, trade facilitation important to many countries as part of any WTO response to the pandemic. The European Union reviewed its views on the broader issues during the General Council meeting. See European Union interventions at the General Council, 09-10 May 2022, https://www.eeas.europa.eu/delegations/world-trade-organization-wto/european-union-interventions-general-council-09-10-may_en?s=69,
“Item 4. A. WTO RESPONSE TO THE PANDEMIC – REPORT BY THE CHAIR
“The European Union thanks the Facilitator for his report.
“The European Union has been a strong proponent of the WTO response to the pandemic from the onset of discussions that members had in this forum. We argued for a holistic approach, which would encompass all the necessary elements of the response, including intellectual property.
“Now that we have made a substantial step forward in the TRIPS Council, it is high time we had a fresh look at other elements of the pandemic, such as transparency, export restrictions, or trade facilitation. The “strategic pause” allowed us to reflect deeper on how to move the process forward and arrive at a multilateral outcome demonstrating that the WTO can meaningfully contribute to a response to the crisis and learn from it. In that regard, we also note the statement of Brazil in document WT/GC/W/845 on various aspects of the response to the pandemic.
“The European Union and the United States have invested great efforts into allowing progress towards a credible outcome. We have reached a common understanding on the minimum or the landing zone that could be the final outcome in a number of areas, acknowledging that other Members have additional issues of interest that they would like to see reflected in the text. Our new compromise paper presents the essentials of the Walker text, which we value the most, in a condensed format. We are encouraged by the positive feedback we have received so far and we will take account of the comments received.
“The new paper attempts to propose a balance that would be acceptable to all members. Even if slightly shorter on ambition than the Walker text, we believe that it still maintains the credibility of the WTO.
“As MC12 will start in a month time, we do not have the luxury of time. Our collective interest is to engage in a spirit of self-restraint and in a consensus-oriented mode.
“We are hopeful that all members will be able to engage constructively so that we could all resume and promptly finalize the negotiating process before Ministers arrive in Geneva.“
To get to a final agreement on a WTO response to the pandemic will require significant effort, but is looking hopeful at the moment.
While there has been a large agenda of items being discussed in agriculture, there are several possible deliverables besides a work program going forward. First, there has been agreement on tariff rate quota administration. See WTO News Release, General Council, General Council endorses final decision on Bali tariff rate quota underfill mechanism, 31 March 2022, https://www.wto.org/english/news_e/news22_e/gc_31mar22_e.htm; WTO Committee on Agriculture, REVIEW OF THE OPERATION OF THE BALI DECISION ON TRQ ADMINISTRATION REPORT BY THE CHAIRPERSON TO THE GENERAL COUNCIL, Addendum, G/AG/32/Add.1 (29 March 2022). G/AG/32/Add.1 is enclosed below.
It is unlikely that other aspects of the agriculture reform program will have concrete results by the 12th Ministerial with the possible exception of not blocking exports of agricultural goods to the UN World Food Programme. See WTO News Release, Agriculture Committee, MC12 outcome must help end hunger, improve food security, says chair, 27 April 2022, https://www.wto.org/english/news_e/news22_e/agng_02may22_e.htm; WTO, State of Play 13 December 2021, Agriculture negotiations, https://www.wto.org/english/thewto_e/minist_e/mc12_e/briefing_notes_e/bfagric_e.htm (topics include Public stockholding for food security purposes, Domestic support, Cotton, Market access, Special safeguard mechanism, Export prohibitions or restrictions, Export competition, Transparency).
Specifically, it is not clear that much progress has been made in 2022 on any of the topics being pursued. The last draft text from the Chair that has been released publicly dates from November 2021. COMMITTEE ON AGRICULTURE IN SPECIAL SESSION, REPORT BY THE CHAIRPERSON, H.E. MS GLORIA ABRAHAM PERALTA, TO THE TRADE NEGOTIATIONS COMMITTEE, TN/AG/50 (23 November 2021). The document is embedded below and basically lays out a work program on each topic going forward with an annex exempting food purchases by the UN World Food Programme from any export restrictions. Presumably some modified version of the November 2021 draft text will be presented to Ministers at the `2th Ministerial Conference.
At this week’s General Council meeting there were two agenda items that addressed the food security issue. Item 8 and item 12. See WTO General Council, Proposed Agenda, WT/GC/W/846, 6 May 2022. Item 8 dealt with a document entitled “Joint Statement on Open and Predictable Trade in Agricultural and Food Products” and was presented by the United Kingdom. Signatories to the document included Albania; Australia; Canada; Chile; Costa Rica; European Union; Georgia; Iceland; Israel; Japan; Republic of Korea; Liechtenstein; Mexico; Republic of Moldova; Montenegro; New Zealand; North Macedonia; Norway; Paraguay; Singapore; Switzerland; The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu; Ukraine; United Kingdom and United States (51 WTO Members). The document is embedded below.
A number of countries have imposed export restrictions which worsen the pricing spikes being experienced on key agricultural commodities where Ukraine is a major exporter. The action by the 51 WTO Members is an important step whether or not it will generate a consensus document by the 12th Ministerial Conference meeting or not.
The EU’s comments on item 8 are likely representative of those supporting maintaining open markets for agricultural products at the present time.
“Item 8 – JOINT STATEMENT ON OPEN AND PREDICTABLE TRADE IN AGRICULTURAL AND FOOD PRODUCTS – REQUEST FROM THE UNITED KINGDOM
“The European Union would like to thank the United Kingdom and other co-sponsors for their support in raising attention in the WTO to the global food security crisis that we see emerging.
“The crisis triggered by Russia’s unprovoked, illegal and unjustified aggression against Ukraine, is not only a dramatic humanitarian crisis for Ukraine. It has increased food insecurity in many developing countries around the world.
“We are witnessing a dramatic surge in food, fertilizer and energy prices, which exceed the levels reached during the last major food crisis in 2011, as well as risks to supply of staple commodities with immediate impacts on world food security and nutrition.
“Let me be clear that any negative impact on agricultural production in Ukraine, and therefore on global food security, prices or availability of commodities on the world market is a result of the destabilising effects of the Russian aggression and military activities on Ukrainian soil.
“The EU considers that the emerging food security challenges should be addressed as a priority at the 12th WTO Ministerial Conference.
“We hope this plurilateral statement may help in focussing attention on the crucial importance of responding to these challenges.
“The discussions in the recent food security seminar, including contributions from FAO, WFP and other organisations, were also useful.
“The plurilateral statement is also a response to the call of Director-General Okonjo-Iweala for coordinated actions in areas like export restrictions on food, and transparency, including transparency of stocks.
“We call for unanimous support for a decision exempting World Food Programme humanitarian purchases from export restrictions. This would facilitate sourcing supplies by the WFP in these critical times. The EU expects the WTO and its members to act at this critical moment in order to help ensure open trade, strong rules, resilient markets, and less trade distortions.
“The EU will remain engaged in negotiations towards MC12 for outcomes, which will provide a tangible response to the food security challenges.“
Item 12 was a topic raised by the Russian Federation in its submission of 16 March 2022 (WT/GC/245) in which it alleges that the food security and other supply chain problems flow from sanctions imposed on Russia by various WTO members. See COMMUNICATION FROM THE RUSSIAN FEDERATION, WT/GC/245 (16 March 2022). The document is embedded below.
The countries imposing sanctions on Russia strongly disagree with Russia’s characterization of the causes for the food security challenge as the EU’s intervention at the General Council meeting makes clear.
“Item 12 – TRADE-DISRUPTIVE PRACTICES OF CERTAIN MEMBERS AND THEIR IMPLICATIONS FOR THE WTO – COMMUNICATION FROM THE RUSSIAN FEDERATION (WT/GC/245)
“Let us be clear from the outset: it is the Russian army that has invaded the Ukrainian territory. We strongly condemn the illegal, unprovoked, unjustifiable aggression of Ukraine by the Russian Federation, which has brought catastrophic loss of life and human suffering in Ukraine and poses a direct threat to the European and international security order.
“The Russian Federation’s hostile act is a blatant violation of international law and the rules-based international order, the consequences of which have already extended well beyond Ukraine’s borders.
“We are greatly concerned about the global trade consequences of the aggression; in particular as regards the supply of a number of commodities, including oil and gas, staple foods, and critical minerals.
“The European Union also strongly specifically condemns Russia’s actions targeting Ukraine’s food supply and production. Credible reports highlighted that Russian forces are attacking and plundering grain silos in Ukraine as well as damaging and removing Ukrainian farm equipment. Furthermore, the closure of the Black Sea by Russian armed forces effectively blocks the exports of grains via Ukrainian seaports.
“The food security situation is already dramatic for those directly involved in Ukraine. The impact of the Russian aggression is however not just restricted to Ukraine and its citizens but is seriously challenging food availability in some vulnerable net food-importing countries in particular. Russia’s war of aggression in Ukraine is thus jeopardizing the food supply to some of the most vulnerable parts of the world, particularly in developing countries, and pushing millions of people into food insecurity.
“The Russian Federation has now embarked on a further campaign of disinformation in the context of the WTO. In the face of this, the European Union, alongside our partners, deems it important to set the record straight for the benefit of the membership.
“In a transparent manner, the European Union have issued a Joint Statement together with partners in relation to the trade measures that the European Union and other members are adopting towards Russia, including measures that deny the Russian Federation the benefits which the WTO Agreement provides, such as the benefit of the most-favoured nation treatment. The measures include export restrictions and import restrictions targeting the Russian Federation.
“The European Union considers these actions necessary to protect its essential security interests within the meaning of the applicable security exceptions of the WTO Agreement. The purpose of these measures is to restore peace and security, in full respect of Ukraine’s territorial integrity, sovereignty and independence within its internationally recognised borders. Therefore, these measures are fully consistent with WTO rules.
“The European Union would like to underline that the EU’s sanctions do not target the agricultural sector of the Russian Federation. The sanctions are primarily directed at the Russian Government, the financial sector and the economic elites. They target the ability to finance the Russian aggression against Ukraine and its people.
“Therefore, the European Union, alongside our partners, strongly condemns Russia’s attempts at putting the blame on international sanctions for the global food security crisis that is directly caused by Russia’s aggression against Ukraine and its people.
“In this context, we are committed to helping Ukraine cope with the trade consequences of the aggression. We will seek to facilitate access and transit for imports from Ukraine to our markets and encourage Members to do likewise – including by eliminating tariffs and other restrictions to imports, facilitating the use of infrastructure and facilitating customs procedures in a manner commensurate with their capacity and consistently with WTO rules.
“The European Union will continue to provide humanitarian aid to alleviate the suffering of Ukrainian civilians by securing their access to basic goods and services, notably food. The European Union will also help Ukrainian farmers to continue planting and growing cereals and oilseeds, much needed for themselves and for the world, and to facilitate their exports.
“We call on the Russian Federation to immediately stop its military aggression in Ukraine, which is also the only way to stop the humanitarian and food security crisis.“
A number of WTO Members are providing temporary duty free treatment to goods from Ukraine besides the EU — Canada and U.K.. The U.S. has removed Section 232 tariffs on steel from Ukraine for the next year as well.
While many WTO Members will push for a WTO decision to bolster food security, it is unlikely that Russia and those engaging in export restraints will permit a consensus decision.
While many Members and the WTO Director-General talk about delivering an agreement on fisheries subsidies, there has not been a lot of progress in recent months according to WTO news releases on meetings to review the issues. See, e.g., WTO News Release, Negotiations on Fisheries Subsidies, Chair of fisheries subsidies negotiations reports on consultations with members, 15 February 2022, https://www.wto.org/english/news_e/news22_e/fish_15feb22_e.htm.
After more than 21 years of negotiations, there is obviously a feeling that Members need to reach agreement. However, considering the entrenched positions of some and the current geopolitical situation, any agreement is likely to be modest in actual effect. I have reviewed developments in the negotiations in prior posts. See, e.g., https://www.wto.org/english/news_e/news22_e/fish_15feb22_e.htm.
There will likely be a document identifying some areas for future negotiations with a timeline of the 13th Ministerial as the target date for completion of the analysis. The level of ambition agreed up is not likely to be high in the current environment. Certainly, there won’t be agreement on tackling core issues such as the need for convergence of economic systems. While I would expect dispute settlement to be included, there has been no real movement by Members to come to grips with underlying U.S. concerns. Without that happening, there will likely be little chance of an agreed reform package by the 13th Ministerial.
There could also be a decision on transparency at the 12th Ministerial. See, e.g., General Council agenda item 9 and JOB/GC/204/Rev.9 (document from 50 Members). The latest version of the proposed decision is embedded below. The key to movement is eliminating any “penalties” for noncompliance and addressing concerns of some developing countries and LDCs on the challenges they face (capacity building, assistance, etc.). Those seem to be addressed in the latest draft, so hopefully agreement can be reached in the coming weeks.
India, Namibia and South Africa have raised issues with whether such plurilateral agreements can be made part of the WTO body of agreements without consensus. See THE LEGAL STATUS OF ‘JOINT STATEMENT INITIATIVES’ AND THEIR NEGOTIATED OUTCOMES, Revision, WT/GC/W/819/Rev.1 (30 April 2021). While that question will not likely be resolved at the 12th Ministerial Conference, important progress is being made on the JSIs.
Moratorium on Imposing Customs Duties on Electronic Transmissions
During prior Ministerial Conferences there was agreement both on Members holding off on non-violation nullification and impairment cases under the TRIPS Agreement and also agreement to extend the moratorium on imposing customs duties on electronic transmissions. WTO Members have already agreed to extend til the 13th Ministerial the ban on non-violation TRIPS cases. But a number of developing countries are seeking to end the moratorium on customs duties citing studies on loss of government revenue from the moratorium and the increased importance of electronic commerce.
Some Members have also expressed concern about the JSI on e-commerce in light of the ongoing work program on e-commerce within the WTO.
In the briefing note on e-commerce on the WTO webpage from January 11, 2022, the following is a discussion of activities in 2020 and 2021 on the topics.
“In summer 2020, WTO members put forward proposals on the implications of the moratorium, its scope, the definition of electronic transmissions and the implication of the moratorium on revenue loss for developing countries. This discussion is part of the broader developmental aspect of e-commerce: developing and least-developed countries face various challenges related to e-commerce, such as connectivity, infrastructure and capacity to implement policies related to e-commerce.
“The General Council continued to review progress in the Work Programme based on reports submitted by the chairs of the relevant WTO bodies. The General Council Chair convened a Structured Discussion under the Work Programme in July 2021. The discussion focused on three themes: electronic transmissions, imposition of internal non-discriminatory taxes on electronic transmissions, and e-commerce challenges and opportunities particularly in light of the COVID-19 pandemic.
“In a subsequent submission in November 2021, some members outlined that it is necessary to have more clarity on the definition of electronic transmissions, consensus on the scope of the moratorium and an understanding of the impact of the moratorium in order to enable the WTO members to take an informed decision at MC12 on whether or not to extend the moratorium on customs duties.
“In November 2021, a group of WTO members put forward a proposal that contains draft ministerial text for possible adoption by ministers at MC12 for the extension of the moratorium and continuing the reinvigoration of the work programme. Views of members vary and consultations led by the General Council chair continued ahead of the conference scheduled to start on 30 November.”
It is likely that the moratorium will be extended to the 13th Ministerial but it will likely be a late agreed topic and will be coupled with a “reinvigorated” WTO work program on e-commerce and a likely lack of agreement on the role of plurilaterals moving forward.
At a time of tremendous trade challenges globally, the WTO continues to struggle to demonstrate its relevance to addressing current issues. The large number of Members, the very different perspectives on what they look to the WTO to provide, the emergence of economically important Members with economic systems not really compatible with existing WTO rules, the consensus based system and many other factors make restoring relevance for many of the current challenges a daunting task. The geopolitical crisis flowing from Russia’s invasion of Ukraine has both expanded the challenges and made resolution through the WTO more difficult.
The WTO Director-General is urging Members to achieve results at the 12th Ministerial even if less ambitious than might have been possible in a different environment. As the above review suggests, a modest package is possible but not at all certain. There is very little time to close the gaps and get a meaningful package ready. Let’s hope that Members can rise to the occasion.
One of the hoped for outcomes from the upcoming 12th Ministerial Conference in Geneva June 12-15, 2022 is a possible agreed outcome on the WTO’s response to the COVID-19 pandemic including some action on intellectual property issues. See, e.g., WTO News Release, DG Okonjo-Iweala concludes US mission, 28 April 2022, https://www.wto.org/english/news_e/news22_e/dgno_28apr22b_e.htm (“Director-General Ngozi Okonjo-Iweala met on 28 April with US Trade Representative Katherine Tai to discuss prospects for the upcoming 12th Ministerial Conference, the WTO’s response to the pandemic including intellectual property, reform of the organization, the looming food shortage crisis and disruptions to global supply chains.”).
Equitable access to vaccines has been a matter of concern to many countries and the focus of the effort by India and South Africa to obtain a waiver from TRIPS obligations for vaccines, therapeutics and more for a period of years to address the pandemic.
The WHO has set the objective of getting 70% of the world’s population vaccinated by this summer, a goal that should be achievable based on production capacity. Unfortunately, it is clear that for low income countries generally and for Africa as a continent, the 70% target will not be met. It is also not likely that lower middle income countries will reach the target either. The WTO-IMF vaccine information available from the WTO webpage is currently updated through the end of March 2022. See WTO-IMF COVID-19 Vaccine Trade Tracker, Last updated: 28 April 2022, Table 6, https://www.wto.org/english/tratop_e/covid19_e/vaccine_trade_tracker_e.htm. Specifically when examined on an income level basis (World Bank definition), low income countries have only 12.0% of their population fully vaccinated (15.2% with at least one dose); lower middle income countries have 48.4% of their population fully vaccinated (57.3% with at least one dose). These rates compare to 72.6% of Upper middle income countries’ populations being fully vaccinated and 73.2% of high income countries’ populations. On a continent-wide basis, Africa has only 15.3% of its population fully vaccinated; Oceania is at 62.3%; North America is at 62.7%; Europe is 65.1%;, Asia is 67.8%; and South America is 73.0%.
Shockingly, data on a monthly basis show total supply declining in each of the first three months of 2022 compared to December 2021 and, in fact, below every month since June 2021. March 2022 appears to be roughly 1/3 of supply from December 2021. WTO-IMF COVID-19 Vaccine Trade Tracker, at Table 4. This decline in volume is despite new vaccine producers of vaccines being approved and UNICEF’s tracking of capacity showing 2022 ranging from 16.8-20.9 billion doses versus the 2021 rate of 11.5 billion. UNICEF, COVID-19 Vaccine Market Dashboard, accessed 4-30-2022, https://www.unicef.org/supply/covid-19-vaccine-market-dashboard.
Since last fall, there have been news stories about countries with low vaccination rates not being able to accept all deliveries scheduled. See, e.g., Reuters exclusively reports South Africa delays COVID vaccine deliveries as inoculations slow, November 24, 2021, ttps://www.reutersagency.com/en/reutersbest/article/reuters-exclusively-reports-south-africa-delays-covid-vaccine-deliveries-as-inoculations-slow/ (“Reuters exclusively reported that South Africa has asked Johnson & Johnson and Pfizer to delay delivery of COVID-19 vaccines because it now has too much stock, as vaccine hesitancy slows an inoculation campaign. About 35% of South Africans are fully vaccinated, higher than in most other African nations, but half the government’s year-end target. It has averaged 106,000 doses a day in the past 15 days in a nation of 60 million people.”).
The causes can vary from vaccine hesitancy (which can be higher in countries with low death rates such as much of Africa), to challenges with distribution (particularly to rural parts of countries), to weak health care infrastructure and more.
Moderna, one of the major mRNA vaccine producers, had its annual shareholders meeting on April 28, 2022. One of the shareholder initiatives voted on was whether the company should generate a Report on Feasibility of Transferring Intellectual Property. The proposal was rejected by over 3/4th of the votes. But in a document released by the company, there is a description of the large volume of production that has not been accepted or delayed and the resulting reduction of production that Moderna is going through because of a lack of demand. See Moderna, Global Access to COVID-19 Vaccines, April 28, 2022, https://s29.q4cdn.com/435878511/files/doc_news/2022/04/Access-Statement_4.28_817am.pdf. A section of the document pertaining to COVAX and the Africa Union is copied below.
“Committing Vaccines to COVAX and the African Union
“Beginning in the summer of 2020, the Moderna team was engaged with Gavi, the Vaccine Alliance, on behalf of the COVAX Facility, hoping to secure a commitment from them to procure a significant number of Moderna COVID-19 vaccines. An agreement was not reached until April 2021, though we were pleased to commit up to 500 million doses to COVAX – a number that was subsequently increased to 650 million doses. Similarly, we were proud to reach an agreement with the African Union to supply 110 million doses, which we were prepared to start delivering as early as the fourth quarter of 2021. In each case, we offered these vaccines at our lowest price, and in the latest agreements the price for each of these organizations was $7 per 100 μg dose.
“Despite our efforts, ultimately COVAX and the African Union deferred or declined hundreds of millions of doses of Moderna’s vaccine. While we were prepared to deliver tens of millions of doses to the African Union in December 2021, they asked us to delay delivery, noting that they did not have the means of distributing them. They also declined to exercise an option for 60 million doses that were available to them in the second quarter of this year.
“Similarly, COVAX has declined options for over 320 million doses that Moderna was prepared to deliver in 2022, noting that they have ample access to vaccines. And even for those doses where COVAX submitted a firm order covering the first and second quarters, they have asked to defer delivery. As a result, Moderna is incurring significant costs as it winds down relationships with outside manufacturers who were engaged to produce these declined doses.
“Asking Moderna to transfer intellectual property to local manufacturers—as the Oxfam America proposal suggested—when hundreds of millions of doses are being declined and already operating manufacturing plants are being idled will do nothing to accelerate the end of the pandemic. It would also require diverting Moderna personnel already engaged in manufacturing with other partners, or who are working on other initiatives, including the company’s Global Health strategy as described below.
The WTO-IMF COVID-19 Vaccine Trade Tracker in its table 4 on total supply shows that supply by all or nearly all major COVID vaccine producers has declined on a monthly basis since December 2022 including for Sinovac, AstraZeneca, Pfizer, Sinopharm, Moderna, J&J, Sputnik and other. Thus, the reduction in production is not limited to mRNA products or to just Moderna. The table from the current WTO-IMF Vaccine Trade Tracker is copied below.
So the challenges of vaccinating the world against the COVID-19 pandemic continue but are not driven in 2022 by availability of the vaccine or even access to the vaccine. Neither waiver of TRIPS obligations nor easier compulsory licensing of the COVID-19 vaccines will solve the underlying ongoing issue of vaccinations.
The draft intellectual property document being worked on by the EU, U.S., India and South Africa that when signed off on by those four will need to be considered by the WTO Membership as a whole, is limited to vaccines, with therapeutics and other elements of goods needed to address the pandemic potentially addressable in six months after an agreement. If the draft agreement among the four (actual language has not been finalized and reportedly has not been signed off on by the U.S., India and South Africa) is the intellectual property part of the WTO’s response to the pandemic, its relevance, if any, will be how Members might look at future pandemics and actions by WTO Members. Its utility for the COVID-19 pandemic is at the most very limited with more capacity than demand in 2022 and with the major drivers of nonvaccination this year not being availability of vaccines. This means that while there will be potentially symbolic relevance to the IP portion of the package, the meat of the response will be in the areas of keeping markets open, limiting export restraints, improved transparency, etc.
With the 12th WTO Ministerial Conference now set for June 12-15, 2022 in Geneva, the WTO Members have a limited amount of remaining time to achieve progress on pending matters and to decide how to move forward with WTO reform (and what such reform might cover). For many Members, the issue of dispute settlement — whether restoration of the Appellate Body through starting selecting new AB members or reform of the system — is an important component of any WTO reform agenda.
Earlier this week on April 27, the Dispute Settlement Body held its monthly meeting. As has been true for several years, the agenda included the question of Appellate Body vacancies/appointments. WTO, Dispute Settlement Body, 27 April 2022, Proposed Agenda, WT/DSB/W/697 (Agenda item 3). While the WTO’s news release on the meeting is titled “Members commit to engagement on dispute settlement reform”, the summary of the discussion that followed sounds virtually identical to the summaries of dozens of prior Dispute Settlement Body meetings on the same topic. Compare WTO News Release, Members commit to engagement on dispute settlement reform, 27 April 2022, https://www.wto.org/english/news_e/news22_e/dsb_27apr22_e.htm (Appellate Body appointments section) with WTO News Release, WTO panels to review Russian procurement measures, Dominican duties, 20 December 2021, https://www.wto.org/english/news_e/news21_e/dsb_20dec21_e.htm (Appellate Body appointments section) and WTO News Release, Members pledge flexible arrangements in WTO dispute proceedings during COVID pandemic, 18 December 2020, https://www.wto.org/english/news_e/news20_e/dsb_18dec20_e.htm (Appellate Body appointments). Moreover the full statement of the U.S. on the topic is quite similar to earlier statements. See USTR, Statements by the United States at the Meeting of the WTO Dispute Settlement Body, Geneva, April 27, 2022, https://uploads.mwp.mprod.getusinfo.com/uploads/sites/25/2022/04/Apr27.DSB_.Stmt_.as_.deliv_.fin_.pdf (agenda item 3, Statement by Ambassador Maria Pagán.
While Members will likely agree to include dispute settlement reform in any WTO reform agenda agreed to at the 12th Ministerial, the difference in positions reflected in the WTO news release among Members suggest a continued yawning gap between the needs of the United States and the positions of many other WTO Members.
Below is the summary of the discussion contained in the April 27, 2022 WTO News Release.
“Appellate Body appointments
“Mexico, speaking on behalf of 123 members, introduced for the 53rd time the group’s proposal to start the selection processes for filling vacancies on the Appellate Body. The extensive number of members submitting the proposal reflects a common concern over the current situation in the Appellate Body which is seriously affecting the overall WTO dispute settlement system against the best interest of members, Mexico said for the group.
“The United States said that its longstanding concerns with WTO dispute settlement remain unaddressed, and that it does not support the proposed decision to commence the appointment of Appellate Body members. Many members share US concerns with the functioning of the system and its negative impact on the WTO’s negotiating and monitoring functions, it said.
“The US added that it wants to be clear it supports WTO dispute settlement reform and that it is prepared for continued and deepened engagement with members on the basis that such discussions should aim to ensure that WTO dispute settlement reflects the real interests of members and not prejudge what a reformed system would look like.
“More than 20 delegations (including the European Union for its 27 members, Nigeria for the African Group and St Vincent and the Grenadines for the Organization of Eastern Caribbean States) took the floor to reiterate the importance of the WTO’s two-tiered dispute settlement system to the stability and predictability of the multilateral trading system. They called on all members to engage in constructive discussions in order to restore a fully functioning dispute settlement system, which some cited as a top priority for reform of the organization.
“For the 123 members, Mexico again came back to say the fact a member may have concerns about certain aspects of the functioning of the Appellate Body cannot serve as pretext to impair and disrupt the work of the Dispute Settlement Body (DSB) and dispute settlement in general, and that there was no legal justification for the current blocking of the selection processes, which is causing concrete nullification and impairment of rights for many members.
“The DSB chair, Ambassador Athaliah Lesiba Molokomme of Botswana, said she hoped members would be able to find a solution to this matter.”
The statement of the new Deputy U.S. Trade Representative in Geneva, Amb. Maria Pagán, is copied below.
“Statement by Ambassador Maria Pagán
“• Thank you, Chair. This is my first DSB meeting since arriving in Geneva, and I am pleased to be here. The United States values the work of Members in the DSB, and I look forward to supporting you as Chair in this important body.
“• Members are aware of the longstanding U.S. concerns with WTO dispute settlement. Those concerns remain unaddressed, and the United States does not support the proposed decision.
“• But let me be clear: The United States supports WTO dispute settlement reform. Like Ambassador Tai, I have personally participated in various dispute settlement proceedings, and I can appreciate the benefits of a system that effectively meets the needs of Members.
“• WTO dispute settlement currently fails in this regard – for many years it has not met the needs of Members, including the United States, for example, due to its complexity, delays, lack of transparency, and interpretive overreach. We know well that many Members share U.S. concerns with the functioning of the system and its negative impact on the WTO’s negotiating and monitoring functions.
“• This fact underscores the importance of understanding better the interests of all Members, and not just ‘what does the United States want’. A true reform discussion should aim to ensure that WTO dispute settlement reflects the real interests of Members, and not prejudge what a reformed system would look like.
“• My delegation has been, and will continue to be, hard at work meeting with Members to better understand the interests of all Members. This important first step provides us with the greatest chance of achieving durable, lasting reform. That is the goal of the United States and we are prepared for continued and deepened engagement with Members on that basis.”
The Biden Administration, like the Trump Administration, believes that the operation of the dispute settlement system is in need of significant reform. The Trump Administration characterized the challenge as getting Members to explore why the Appellate Body felt at liberty to disregard the clear limitations on its authority in the Dispute Settlement Understanding and why Members had not moved earlier to ensure the limited role for the Appellate Body was respected. The Trump Administration also expressed concern that the dispute settlement system was not permitting Members to address the massive distortions caused to the global trading system from state-directed economies such as China. The Trump Administration was also not committed to a two-tier review system in light of the problems with the Appellate Body.
The Biden Administration has expressed similar concerns although Amb. Pagán’s comments appear to change the focus from why did the Appellate Body view itself as permitted to deviate from its limited role to a review of what Members “real interests” are. It is unclear if the different language reflects a change in focus or just a rearticulation of the need to find reforms that will deliver a dispute settlement system that is limited to and achieves the objectives Members have articulated.
With the major efforts of the U.S. and EU to work together on a host of trade and non-trade issues under the Biden Administration’s time and knowing the importance the EU has always placed on reobtaining binding dispute settlement, it is clear that the U.S. will agree to have dispute settlement reform as part of the WTO reform agenda as in indicated by Amb. Pagán’s statement. That doesn’t mean there is an obvious path to reform or that a two year time period (to the 13th Ministerial Conference) in the current circumstances will permit reform in all areas needing to be addressed. Nor is there any indication that Members are willing to consider corrections to the errant Appellate Body decisions to restore rights Members had when the WTO was launched.
But at a time where the ability of the WTO Members to deliver meaningful outcomes is even more limited than usual because of the Russian war in Ukraine, agreeing on an agenda for WTO reform topics may hold out the best hope for achieving a promise of a better future for Members at the upcoming 12th Ministerial.
The COVID-19 pandemic has twice delayed the 12th Ministerial Conference from its original date in June 2020. Assuming the Ministerial Conference in fact takes place the week of June 13, 2022 (and isn’t delayed by a new surge in COVID-19 infrections or by other complications), there will have been a four and a half year delay from the 11th Ministerial Conference held in Buenos Aires in late 2017. Ministerial conferences are intended to be held every two years. Considering the challenges facing the World Trade Organization, many will be looking to see if this year’s Ministerial can help restore the WTO’s relevancy. The effort to get positive results at the 12th Ministerial Conference has been complicated by Russia’s invasion of Ukraine.
The list of challenging issues is long. Fisheries Subsidies is the only new multilateral agreement under discussion. While it is nearing the finish line, negotiations have been ongoing for more than twenty years, and it is unclear the level of ambition that will be agreed to if negotiations are concluded.
There are a range of agriculture issues that have been under discussion for years. The topics under discussion include public stockholding for food security purposes, domestic support (subsidies other than export subsidies), cotton, market access, special safeguard mechanism, export prohibitions or restrictions, export competition and transparency, See WTO Briefing Note, Agriculture Negotiations, State of Play 13 December 2021, https://www.wto.org/english/thewto_e/minist_e/mc12_e/briefing_notes_e/bfagric_e.htm. In the most recent WTO press notice on the agriculture negotiations is from March 23, 2022 and notes the challenges from the Russian invasion. See WTO, Agriculture negotiators chart path towards MC12, 23 March 2022, https://www.wto.org/english/news_e/news22_e/agng_21mar22_e.htm (“WTO agriculture negotiators met on 21 March to discuss the way forward ahead of the 12th Ministerial Conference (MC12), which is now scheduled to take place the week of 13 June. The chair of the agriculture negotiating group, Ambassador Gloria Abraham Peralta (Costa Rica), noted the impact of the conflict in Ukraine on global food markets and the agriculture negotiation environment. She asked members to prepare for intensive negotiations and use the remaining time wisely so as to achieve pragmatic, meaningful outcomes at MC12.”).
There are a host of Joint Statement Initiatives that are at various stages of progress on a plurilateral basis, with India and South Africa raising objections to plurilateral agreements being part of the WTO without consensus agreement. See, e.g., April 14, 2022: Challenging China’s Trade Practices — What Role for the WTO?, https://currentthoughtsontrade.com/2022/04/14/challenging-chinas-trade-practices-what-role-for-the-wto/ (“Ongoing JSI include those on electronic commerce, investment facilitation for development, plastics pollution and environmentally sustainable plastics trade, services domestic regulation, informal working group on MSMEs, and trade and environmental sustainability. The WTO issues periodic press releases on developments in the talks. See, e.g., JOINT INITIATIVE ON E-COMMERCE, E-commerce negotiators seek to find common ground, revisit text proposals, 21 February 2022, https://www.wto.org/english/news_e/news22_e/jsec_23feb22_e.htm (hoping to have convergence on majority of issues by end of 2022)(86 WTO Members participating accounting for 90% of e-commerce trade including China, U.S. and most other major countries); INVESTMENT FACILITATION FOR DEVELOPMENT, Investment facilitation negotiators take steps to assess needs of developing countries, 15 February 2022, https://www.wto.org/english/news_e/news22_e/infac_23feb22_e.htm (looking to complete by end of 2022)(over 100 WTO Members participate including China and most developed countries, but not the U.S.); INFORMAL DIALOGUE ON PLASTICS POLLUTION AND ENVIRONMENTALLY SUSTAINABLE PLASTICS TRADE, Plastics dialogue emphasizes need for international collaboration, cooperation, 30 March 2022, https://www.wto.org/english/news_e/news22_e/ppesp_31mar22_e.htm (70 Members participate including China and most major developed countries but not the U.S.); Joint Initiative on Services Domestic Regulation, Negotiations on services domestic regulation conclude successfully in Geneva, https://www.wto.org/english/news_e/news21_e/jssdr_02dec21_e.htm (67 Members participated including China, the U.S. and other major developed countries); . MICRO, SMALL AND MEDIUM-SIZED ENTERPRISES (MSMES), Working group on small business welcomes three more members, 8 February 2022, https://www.wto.org/english/news_e/news22_e/msmes_08feb22_e.htm (94 participants including China and most major developed countries but not the U.S.).”).
There are many issues that have been raised as potential subjects for WTO reform including dispute settlement, industrial subsidies, state-owned and state-invested enterprises, excess capacity, transparency and many others.
Russia’s President Putin has indicated that he wants a revised WTO strategy by June 1 to deal with sanctions imposed by western countries. See Reuters, Russia to update its strategy in World Trade Organization amid sanctions, says Putin, April 20, 2022, https://www.reuters.com/world/russia-update-its-strategy-world-trade-organization-amid-sanctions-says-putin-2022-04-20/ (“Russian President Vladimir Putin said on Wednesday that ‘illegal’ restrictions on Russian companies by Western states ran counter to World Trade Organization rules and told his government to update Russia’s strategy in the WTO by June 1. Speaking at a government meeting on the country’s metals industry, Putin said that Western countries had banned Russia from buying components needed to produce rolled metal, steel sheets and other products.”). It is unclear if that “revised strategy” will include blocking consensus in the WTO on topics being negotiated/discussed for the 12th Ministerial Meeting. Western countries have also opted to walk out of meetings when Russian delegates are participating/speaking. See, e.g., NPR, Janet Yellen and other finance ministers walk out of G20 meeting as Russia speaks, April 20, 2022, https://www.npr.org/2022/04/20/1093841174/janet-yellen-crystia-freeland-canada-rishi-sunak-uk-g20-walk-out-russia (“Treasury Secretary Janet Yellen and other global financial leaders walked out of a G20 session as Russian officials were speaking on Wednesday in an effort to underscore Moscow’s isolation following the invasion of Ukraine.”).
Thus, the atmosphere for moving trade talks forward is clouded at best at the present time.
As prior Director-Generals have done for prior Ministerial Confernces, WTO Director-General Ngozi Okonjo-Iweala has been traveling the world seeking support from major countries to a successful Ministerial Conference. See, e.g., WTO news release, DG calls on Brazil’s support in preventing food crisis, seeks leadership towards MC12, 19 April 2022, https://www.wto.org/english/news_e/news22_e/dgno_19apr22_e.htm (” Director-General Ngozi Okonjo-Iweala concluded a two-day trip to Brazil on 18-19 April, her first to Latin America as head of the WTO, meeting government officials, parliamentarians and businesspeople. She thanked Brazil for its constructive role in the WTO, highlighted the country’s potential role in alleviating risks of a food security crisis linked to the conflict in Ukraine and acknowledged the government’s concerns about the difficulties in securing fertilizers. She also sought Brazil’s continued and strong support for multilateralism and a fruitful 12th Ministerial Conference (MC12).”). The Director-General will be in Washington the week of April 25, 2022. See, e.g., Inside U.S. Trade’s World Trade Online, WTO director-general to visit Washington next week in lead-up to MC12, April 20, 2022, https://insidetrade.com/daily-news/wto-director-general-visit-washington-next-week-lead-mc12. The Inside U.S. Trade article reviews the tensions caused by the Russian invasion and the resulting uncertainty about what, if any, outcomes are possible for the 12th Ministerial Conference.
“Her conversations in Washington are likely to focus significantly on the waiver and on the upcoming 12th ministerial conference, set for the week of June 13 in Geneva. If all went according to plan, the ministerial gathering was to be the venue for delivering a long-awaited agreement on fisheries subsidies, a step forward on agriculture and a pandemic response package, including a compromise IP waiver.
“But the twice-postponed gathering is poised to be derailed once again – if not actually rescheduled – by political and diplomatic tensions arising from Russia’s invasion of Ukraine. Whether WTO members will be able to produce deals at MC12 is in doubt as the WTO has had to adapt to conducting its negotiations around the tensions. Okonjo-Iweala said last week that plenary meetings of the full membership have become more difficult to hold, with members opting instead for small-group or bilateral meetings.”
There have also been efforts to develop a factual background to support some elements of a possible WTO reform agenda. The U.S., EU and Japan have been working over the last few years on potential modifications to the current Subsidies and Countervailing Measures Agreement to address some of the major distortions in industrial goods trade caused by China’s state-directed economy — industrial subsidies, state-owned and state-invested enterprises, global excess capacity. China has indicated a willingness to discuss subsidies if all subsidies (including agricultural subsidies) are included. On April 22, 2022, a report prepared by the staff of the IMF, OECD, World Bank and WTO was released. See IMF, OECD, World Bank and WTO, Subsidies, Trade, and International Cooperation, April 22, 2022, https://www.wto.org/english/news_e/news22_e/igo_22apr22_e.pdf; WTO news release, Greater international cooperation needed on subsidies data, analysis and reform — report, 22 April 2022, https://www.wto.org/english/news_e/news22_e/igo_22apr22_e.htm. The Executive Summary of the report (pages 3-4) is copied below.
“Dealing constructively with subsidies in global commerce is central to G20 leaders’ goal of reforming and strengthening the multilateral trading system. The growing use of distortive subsidies alters trade and investment flows, detracts from the value of tariff bindings and other market access commitments, and undercuts public support for open trade. Sharp differences over subsidies are contributing to global trade tensions that are harming growth and living standards.
“There are good reasons why this issue, which has challenged policymakers for decades, should be addressed now. Among them: distinguishing ‘good’ and ‘bad’ subsidies is analytically and politically fraught, while the unilateral responses available to trading partners (such as ‘trade defense’ measures) are a limited deterrent. The renewed drive toward industrial policies to promote ‘strategic’ sectors may distort international competition, especially against smaller, fiscally constrained developing countries. With the frequency and complexity of distortive subsidies increasing, even as the need grows for active policies to address climate, health, food, and other emergencies, subsidies and the subsidies debate have brought significant discord to the trading system. The issue demands global attention and cooperation.
“Subsidies are common in all sectors, used by countries at all stages of development, take many forms, and affect all countries. Despite important gaps in our information about subsidies, the broad landscape is clear. Most merchandise trade occurs in products and markets in which at least one subsidized firm operates. National and sub-national entities provide subsidies through—to name a few forms—direct grants, tax incentives, and favorable terms for financing, energy, land, or other inputs. Many subsidies are explicitly aimed at the important task of correcting market failures and may do this well. Many others, however, are designed in ways that do little to advance their stated objective, or do so at high domestic cost or with harmful effects on the global commons and on other countries, notably the poorest and most vulnerable countries. International cooperation can reduce the overall use of subsidies and improve their design.
“Existing international rules provide a strong basis for regulating subsidies. International subsidy disciplines were progressively strengthened, notably in 1995 with the WTO Agreement on Subsidies and Countervailing Measures and the WTO Agreement on Agriculture, although the agenda to negotiate detailed subsidy rules for services has been largely set aside. Many major countries also adhere to the disciplines of the OECD Export Credit Arrangement. Some recent free trade agreements have also gone beyond WTO rules, containing, for instance, provisions disciplining the behavior of state-owned enterprises and more extensive lists of prohibited subsidies.
“Still, both longstanding and recently-exposed gaps remain in these international rules. Extensive trade distorting domestic farm subsidies are still allowed in many cases, and WTO members have yet to agree special disciplines for harmful fisheries subsidies that contribute to overfishing. The recognition of gaps is shaped by such developments as the emergence of global value chains; digital markets and related network concentration effects; the global importance of economies in which the state plays a central role, and of international SOEs; the urgent challenge of climate change; and the recognition that well-crafted subsidies can be an important part of the public response to economic and health emergencies. These developments make the issue of subsidies in the trading system both more complex and more urgent. Investment incentives are widespread, often at sub-national levels where they can be hard to monitor. Much of this debate occurs in the context of the industrial sector. This paper does not advocate particular outcomes. However, international cooperation that delivers improved subsidy disciplines, improves business certainty, and reduces trade frictions would be superior to unilateral actions and should be expected to reduce their use.
“In many of these areas, better information, more extensive objective analysis, and regular dialogue can help governments accelerate reform of their own subsidies and expedite negotiations toward improved international disciplines. Careful, high-quality economic analysis is needed to understand not only how well current subsidy programs meet domestic policy objectives, and at what cost, but also how they spill over onto international markets and how they interact with international policy goals, like climate mitigation. That effort must improve the information available on existing subsidy programs and their effects, especially on trading partners. It should feed into a structured inter-governmental dialogue, informed by analysis, and lead to a more common perspective on the appropriate roles of subsidies that, in turn, facilitates the development of updated norms and standards. Improved transparency and analysis, more robust intergovernmental consultation, and strengthened international rules can be expected to reduce the use of harmful subsidies and to improve their design—leading to better outcomes with fewer negative effects at home or abroad.
“The international organizations (IOs) authoring this report can strengthen their individual and joint work to support governments in this endeavor. While the brunt of this work lies with finance ministries, trade ministries, and sectoral and specialized agencies of national governments, international organizations have key roles to play. The four authoring institutions are examining ways to help, individually and jointly, such as by collecting, organizing, and sharing data, coordinating analytical work agendas to develop methodologies to assess the cross-border effects of different forms of subsidies, and supporting inter-governmental dialogues. This will involve reaching out to and working with other international institutions as well.”
The report also contains a list of some recent international reports relating to subsidies (Box 1 on page 6, copied below).
“Box 1. Selected Recent International Reports Relating to Subsidies
“Noting that COVID-19 caused severe stress for tourism industries in the region and around the world, the Asian Development Bank’s Asian Economic Integration Report (ADB, 2021) examined measures to support tourism in selected ADB developing members. It draws positive lessons to help governments maintain critical levels of tourism infrastructure and to facilitate a rapid rebound in a sector that is key to many economies.
“Global Trade Alert set out to inventory subsidies of the “major players”—China, the EU, and the United States (Evenett and Fritz, 2021). It finds that in 2019, more than three-fifths of global goods trade was in products and on trade routes in which one or more subsidized Chinese, EU, or U.S. firms compete. When a major player introduces a new subsidy, the others usually respond within six months with their own subsidy.
“The 2021 FAO, UNDP, and UNEP report, A Multi-Billion-Dollar Opportunity: Repurposing Agricultural Support to Transform Food Systems, finds that some forms of support to agricultural producers are distortive and socially and environmentally harmful. It sets out a six-step guide for repurposing the provision of public goods and services for agriculture.
“The World Resources Institute 2021 report, Repurposing Agriculture Subsidies to Restore Farmland and Grow Rural Prosperity, likewise argues that public agricultural subsidies failed to achieve their stated objectives but that smart agricultural subsidies can restore degraded land and rural economies.\
“IMF (2020) advises governments on raising efficiency and managing other challenges related to SOEs—frequent recipients or providers of subsidies. It calls for global principles for multinational SOEs, noting that SOEs account for 20 percent of assets of the world’s largest 2,000 firms. Some IMF Article IV country reports have called for specific reforms of farm subsidies or industrial subsidies.
“As part of its ongoing work on agricultural support, OECD (2021a) provides country-comparable data and information and analyzes whether current support is helping to meet the triple challenge facing food systems (food security and nutrition, environmental sustainability, and livelihoods). OECD (2019a) and OECD (2019b) examine support received by the largest firms in the aluminum and semiconductor value chains; these reports shed light in particular on support provided through the financial system; current work also explores the environmental harm that can arise from subsidies.
“The case for international cooperation on subsidy disciplines was previously reviewed in WTO (2006), which also examined existing WTO subsidy disciplines. A recent World Trade Report (WTO, 2020) showed that international cooperation can shape the pursuit of digital development more effectively, while minimizing cross-border spillovers from national policies. WTO Trade Policy Reviews have triggered extensive discussions of subsidy policies in individual WTO members.
“Noting the growing role of the state in the context of COVID-19 and climate change, WEF (2021) calls for international cooperation to tackle these global challenges and to address cross-border spillovers from state intervention. It outlines the current state of play and proposes ways forward across subsidies, state ownership and control, government procurement, investment screening, and trade remedies.”
The report from the four organizations was supported by a paper published from former WTO Deputy Director-General Alan Wm. Wolff last week, part of a forthcoming book World Trade Governance: The Future of the Multilateral Trading System. See Peterson Institute for International Economics, Working Paper 22-6 WTO 2025, Alan Wm. Wolff, Enhancing Global Trade Intelligence, April 2022, https://www.piie.com/sites/default/files/documents/wp22-6.pdf.
The week of June 13, 2022 and the 12th Ministerial Conference is just eight weeks away. It is unclear what, if any, package of documents will be ready for adoption/release during the 12th Ministerial Conference in Geneva. In a member driven organization with a consensus system being the norm outcomes among 164 Members with dramatically different interests are hard to achieve. Thus, there has been limited progress in the past Ministerials. The Russian war in Ukraine adds a layer of uncertainty to what can be achieved at the Ministerial Conference in June this year.
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.
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.
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 theirimmunisation 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.
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
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.”
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.
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.
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 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 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.
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.
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.
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:
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.”
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.
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.
“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.”
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.
The G20 Trade and Investment Ministerial Statement of October 12, 2021
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.
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
” 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.
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.
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.
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.
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.
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.
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.
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).
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.”
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/
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.
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.
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.”
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.
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.
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.
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.