fisheries subsidies

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

· October 15, 2021 · 12th Ministerial Conference · , , , , , , , , , , , , , , , , , , , , , · No Comments

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

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

WTO Reform

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

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

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

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

Trade and Health

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

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

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

Services and Investments


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

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

Government Support and Level Playing Field

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

Trade and Environmental Sustainability

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

MSMEs

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

Conclusion on G20 Trade and Investment Ministerial Statement

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Consider the history of this system.  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Thank you.”

Comments on USTR Tai’s statement on the WTO

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

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

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

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

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

Conclusion

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

U.S. proposed Draft Ministerial Decision — making weak or unenforced environmental standards potentially countervailable

· December 26, 2020 · lack of environmental standards as potentially countervailable subsidies · , , · No Comments

As reviewed in prior posts, there is ongoing interest in reducing domestic subsidies for agricultural producers and an interest in revising rules for industrial subsidies to address the problem that has arisen in the last several decades of massive subsidization creating global excess capacity in products or sectors. Moreover, there are no rules on subsidies in the services area despite the issue having been of ongoing interest to many Members at the start of the WTO with ongoing talks provided for within the GATS. See, e.g., November 24, 2020, Responding to a comment received on yesterday’s post, WTO subsidy disciplines – an update and coordination across areas is long overdue, https://currentthoughtsontrade.com/2020/11/24/responding-to-a-comment-received-on-yesterdays-post-wto-subsidy-disciplines-an-update-and-coordination-across-areas-is-long-overdue/; November 23, 2020, WTO subsidy disciplines – an update and coordination across areas is long overdue, https://currentthoughtsontrade.com/2020/11/23/wto-subsidy-disciplines-an-update-and-coordination-across-areas-is-long-overdue/; February 22, 2020: WTO Reform – Addressing The Disconnect Between Market and Non-Market Economies, https://currentthoughtsontrade.com/2020/02/22/wto-reform-addressing-the-disconnect-between-market-and-non-market-economies/.

The WTO Members have struggled for 19 years on trying to limit fisheries subsidies to achieve one of the UN Sustainable Development Goals (SDG 14.6) by stopping overfishing and illegal fishing practices that are harming wild fish stocks. While an agreement was due to be completed in 2020, the negotiations will continue into 2021. See, e.g., December 16, 2020, The fisheries subsidies negotiations – U.S. comments from December 2 meeting add clarity to the inability to achieve an agreement and the lack of “like-mindedness” among Members, https://currentthoughtsontrade.com/2020/12/16/the-fisheries-subsidies-negotiations-u-s-comments-from-december-2-meeting-add-clarity-to-the-inability-to-achieve-an-agreement-and-the-lack-of-like-mindedness-among-members/; December 15, 2020, The fisheries subsidies negotiations – failure by WTO Members to deliver an agreement by the end of 2020, https://currentthoughtsontrade.com/2020/12/15/the-fisheries-subsidies-negotiations-failure-by-wto-members-to-deliver-an-agreement-by-the-end-of-2020/.

At the latest General Council meeting held on December 16-18, the United States, in its second intervention on the topic of the importance of market-oriented conditions to the world trading system (agenda item 10, WT/GC/W/813), alerted Members that it would be filing a new paper on the topic of sustainability dealing with treating weak or unenforced environmental laws and regulations as being potentially countervailable under the Agreement on Subsidies and Countervailing Measures.

“The United States would like to thank all the Members who took the floor to provide their
comments. We look forward to continuing this important conversation in future meetings.

“On another subject, let me now take this opportunity to inform colleagues that the United States
will be circulating a draft Ministerial Conference Decision shortly entitled, ‘Advancing
Sustainability Goals through Trade Rules to Level the Playing Field.’

“We look forward to submitting this proposal for consideration during the upcoming Structured
Discussions on Trade and Sustainability.

“The draft Ministerial Conference Decision aims to reinforce our view that failure to adopt,
maintain, implement and effectively enforce laws and regulations that ensure environmental
protections at or above a threshold of fundamental standards constitutes an actionable subsidy
under the Agreement on Subsidies and Countervailing Measures.”

Meeting of the WTO General Council, December 16-17, 2020, U.S. Statements delivered by Ambassador Dennis Shea, page 7, https://geneva.usmission.gov/wp-content/uploads/sites/290/AmbassadorShea-WTOGeneralCouncil-Dec2020.pdf.

The United States draft Ministerial Decision was submitted and circulated to WTO Members on December 17 and is embedded below.

W814

While the current definition of subsidy contained in Art. 2 of the ASCM (Agreement on Subsidies and Countervailing Measures) does not appear to cover distortions that flow from the level of environmental protection an/or the lack of enforcement of such requirements, there is little doubt that in the coming years, a number of countries will likely be imposing taxes or taking other action to support sustainable development and prevent competition being determined by production of products in countries that are not moving rapidly to sustainable development. The EU is pushing its producers to become dramatically more environmentally responsible. and is committed to introducing a tax on products not meeting the desired environmental standards. Under the Biden Administration, it is likely the U.S. will be looking for ways to push a similar sustainable trade policy by neutralizing “false” advantages for products produced less environmentally responsibly.

In that context, the U.S. paper of December 17 provides an additional path to pursuing sustainable development and ensuring that responsible production methods are not penalized by competition from producers using less environmentally responsible approaches. WTO Members have not indicated an interest in doing a broad review of subsidy disciplines to ensure the rules reflect current economic realities and address all significant types of distortions found in the trade of goods and services. Such a review is long overdue in my view and would permit an evaluation of a host of issues not presently covered by the ASCM including the issue raised in the Draft Ministerial Decision.

While historically many developing nations would oppose proposed actions like the U.S. draft Ministerial Decision on the theory of limited existing capacities in developing countries or a perceived “entitlement” to develop in manners not significantly different than current developed countries, the climate crisis, UN Sustainable Development Goals and the reality of the potential destruction facing many countries from climate warming and rising oceans essentially make a decades-long approach to achieving sustainable development self-defeating. Whether the U.S. proposal will garner support and/or becomes an additional tool to help Members move to sustainable development is obviously unknown at the present time.

The WTO has proven itself unable in its first 25 years to modernize the rules of international trade to keep pace with global developments and with the pressing needs for more sustainable approaches to international trade. 2021 provides the WTO with the opportunity to change course and reestablish its role in developing rules that address the needs of Members, businesses, workers and the global population in international trade. Hopefully, the WTO will have a new Director-General early in 2021. Hopefully, Members can come together on the pressing needs of relevancy and sustainability by agreeing on core principles of the WTO. A comprehensive reform initiative is desperately needed and could be agreed to, though agreement on reform is unlikely based on current differences among Members. Yet even if a comprehensive reform program is agreed to, without a change in how the WTO operates, the organization and its Members will be unable to be nimble enough to make a timely difference. Leadership and a joint willingness to move forward have been missing. Let’s hope that 2021 will be different.

WTO Reform – Developments from Davos and What Might Be on U.S. Agenda

· January 23, 2020 · Uncategorized · , , , , , , , , · No Comments

This year’s World Economic Forum had the usual side meetings of trade ministers and an unexpected meeting between President Trump and WTO Director-General Azevêdo. Trade ministers are discussing what needs to be accomplished ahead of the 12th Ministerial Conference (“MC12”) to be held in Kazakhstan in June 2020 with a focus on how to achieve agreement on fisheries subsidies to address illegal, unrecorded and unregulated fishing and overfishing and hence deliver on the UN sustainable development goal 14.6 during 2020. There are, of course, many other issues potentially on the agenda for MC12.

The potentially more interesting development out of Davos was the meeting between President Trump and DG Azevêdo. The President and the Director-General spoke about the meeting and need for WTO reform at a press conference the President held before leaving Davos. Here is the relevant exchange:

“[President Trump]: One of the people that was very important for me to meet from the World Trade Organization is Roberto Azevêdo. And he is a highly respected man. He happens to be this gentleman right here. I
thought I’d have him say a few words.

“But the World Trade Organization — as you know, I’ve had a dispute running with them for quite a while, because our country hasn’t been treated fairly. China is viewed as a developing nation.

“India is viewed as a developing nation. We’re not viewed a developing nation. As far as I’m concerned, we’re a developing nation, too. But they got tremendous advantages by the fact that they were considered “developing” and we weren’t. And they shouldn’t be. But if they are, we are.

“And we’re talking about a whole new structure for the deal, or we’ll have to do something. But the World Trade Organization has been very unfair to the United States for many, many years. And without it, China wouldn’t be China, and China wouldn’t be where they are right now. I mean, China — that was the vehicle that they used. And I give them great credit. And I also don’t give the people that were in my position great credit, because, frankly, they let that all happen. But the vehicle was the World Trade Organization.
And Roberto and I have a tremendous relationship, and we’re going to do something that I think will be very dramatic. He’ll be coming with a lot of his representatives to Washington sometime — maybe next week or the week after — and we’ll start working on it.

“So I’d like to introduce, just for — briefly — Roberto, and say a few words on behalf of the WTO. And then I’m going to introduce Larry Kudlow to say exactly where we are, in terms of our economy. Some of you know, but we’ve had some tremendous numbers just over the very recent past.

“So, please, Roberto.

“DIRECTOR-GENERAL AZEVÊDO: Well, thank you, Mr. President. And I think it’s fair to say that we have been saying, for quite some time, that if the multilateral system, if the WTO is to deliver and perform its role in today’s global economy, it has to be updated. It has to be changed. It has to be
reformed.

“This is an agenda that is squarely before members. I don’t think anybody in Geneva misses the point. I think they understand that the — the system has not been functioning properly in many areas. That’s something that we’re trying to address.

“I’m very happy that, in the conversation today with President Trump, he agreed that this is something that needs to happen; the WTO has to change. We are committed to effect those changes. And this is something we are serious about.

“And I am going to be, together with President Trump, as soon as possible, discussing what needs to change, what needs to be effected in the WTO, and we are committed to doing that.

“And, of course, I will be talking to all of the other WTO members, making sure that they all understand that this is serious. This is a path that we all have to be on together if we want to make the WTO relevant and performing to today’s requirements, frankly.

“So thank you very much, Mr. President. It’s an honor to be with you and with everybody else.

“Thank you.”

https://www.whitehouse.gov/briefings-statements/remarks-president-trump-press-conference-davos-switzerland/

U.S. Objectives for WTO Reform – Articulated and Possible

In the first three years of the Trump Administration, the Administration has identified a range of areas for reform and provided some specifics as well as identifying areas of key negotiating interest.

Dispute Settlement

WTO dispute settlement reform has been a top priority for the Administration with a wide range of issues of importance but an overriding issue of preventing panels and the Appellate Body from creating rights or obligations not contained in the negotiated agreements. This is also an area of priority for other WTO members for the different reason of wanting to get the Appellate Body functioning again. While the U.S. has not articulated specifics in terms of what type of reform is needed, the problem areas are clear. The U.S. position has been that the existing DSU text is clear and that proposals to date do nothing more than restate the existing requirements. Without understanding why the system has deviated from the plain language of the DSU, it is not possible to identify the reforms that are needed has been the Administration’s position. Much has been written about this area and one can assume it will be an important part of the upcoming discussions between the Administration and the WTO Secretariat. Broader reform of the WTO is unlikely if reform of the dispute settlement system isn’t achieved. It would be unacceptable to many WTO Members not to find a solution to the dispute settlement system.

Improved transparency

Much of the value of the WTO flows from the requirement of WTO Members to provide notifications on a wide range of topics, notifications which are important for other WTO Members to understand what trading partners are doing and whether there are potential WTO problems with the actions of particular trading partners.

Unfortunately, many WTO Members have failed to file required notifications in a timely manner, and, in many cases, notifications that are filed are demonstrably incorrect. In the areas of subsidies, the United States has over the past decade filed counternotifications on subsidy programs on China and India believing that the notifications submitted by those two countries were woefully incomplete. The counternotifications were an effort to identify the magnitude of the problem of under reporting.

While the WTO Secretariat has been tasked with providing periodic updates on notifications by Members, the present system has no consequences for failure to file notifications in a timely manner or for filing incomplete notifications.

How to address the transparency issue is of importance to many WTO Members. Indeed, lack of transparency and full notifications can complicate efforts to move specific issues forward. For example, the United States has raised concerns about the lack of information on cotton subsidies from China and India within the discussions on addressing concerns of cotton producting Members in Africa.

The U.S. and other countries have put forward proposals on modifying notification requirements and potential consequences for failure to keep notifications up to date. Because of the importance to the overall operation of the WTO, one can expect some effort in any reform package to ensure greater likelihood of notification requirements being met in fact.

Who gets Special and Differential Treatment under New Agreements

During the history of the GATT and the WTO to date, whether a Member was a developing country was a matter of self-selection, and, as a result, there have never been criteria that would help Members decide on eligibility. Nor has the organization had any system for graduating Members as their economies grew. Over the years, this has led to the situation where some of the wealthiest countries, largest exporting countries and others have maintained developing country status and hence taken lower levels of commitments through special and differential treatment provisions contained in agreements for developing countries.

As the comments of President Trump indicate, the United States has felt that the WTO system has permitted a number of countries not to assume responsibilities commensurate with their state of development and importance to the global trading system.

The United States has put forward proposals to have various countries, based on objective criteria, be ineligible for special and differential treatment for new agreements. Three WTO Members have indicated that they will not seek special and differential treatment in future agreements, though not agreeing that they are not developing countries — Korea, Singapore and Brazil.

While the need to have advanced economies carry their weight as part of the system would seem to be obvious, this is a highly sensitive issue where a number of major economies will fight hard against modifications of the current system. China, India and South Africa are three who have opposed any changes.

Obviously there has been some positive movement by the actions of three WTO Members. At a minimum, hopefully more Members will make similar commitments. And the United States has indicated that special and differential treatment provisions will not be agreed to in future agreements if certain countries don’t opt out of receiving such benefits. Thus, this issue will be an important and ongoing one that will generate a great deal of debate within the WTO and, hopefully, a meaningful advancement through its outcome. As the United States has indicated in statements at the WTO’s General Council, failure of many Members to carry their proper weight in liberalization has frustrated the ability of the WTO’s negotiating function to achieve the types of success that the system needs.

Update Rules to Address Different Economic Systems

For the United States, the European Union and other countries, the GATT and now WTO rules were written for and are applicable to market economies. WTO Members with different economic systems historically were not significant players in the global economy or when they joined the GATT or WTO undertook obligations which held the promise of the Member’s economy shifting to market economy principles.

The rise in importance of non-market economies like China engaged in different versions of state capitalism has created major challenges for the global trading system and for the viability of the WTO. The size and extent of industrial subsidies, forced technology transfer, role of state-owned and state-invested enterprises, state planning and resulting massive global excess capacity and targeting of technologies are just a few of the challenges market economy countries around the world have been confronting. Existing WTO rules don’t adequately address the many distortions flowing from the actions of the WTO members with non-market economies.

The United States, European Union and Japan announced an initiative at the 11th Ministerial Conference in Buenos Aires to address some of these issues. They recently released a joint statement outlining actions needed on industrial subsidies in particular.

The United States has also indicated that there is need for the WTO to address the disconnect that flows from major economies being within the WTO without being market economies.

While one would hope that a major trading nation, like China, who has benefitted enormously from WTO membership would understand the need for their to be an understanding on how different economic systems can coexist and rules to deal with major distortions or differences, this is an area where it is hard to see meaningful reform under a consensus system such as that used in the WTO.

Updated Rule Book to Address Current Commercial Realities

The Uruguay Round was the last major update of the global trading system’s rule book and occurred over 1986-1994. Technology and the organization of much of business today is dramatically different than the world that existed in the 1980s. There are few rules within the WTO dealing with electronic commerce. The plurilateral effort underway to come up with rules for the e-commerce field is important and long overdue.

Similarly, the world is facing issues of critical importance to the maintenance of food supplies, commercial activity and survival of islands, coast lines and much more. For example, more than one third of fish species are overfished. The oceans of the world are suffering massive pollution with waste areas in some locations being the size of states or smaller countries. Similarly, water temperatures are rising and weather patterns are shifting with consequent effects on agricultural productivity, on human and animal health and much more.

A few of these issues are being pursued within the WTO at the present time, including fisheries subsidies (negotiations now in their 19th year) and the plurilateral talks on e-commerce. Other topics are receiving consideration as well including domestic regulation of services, facilitating investment, the role of women and of small and medium sized enterprises.

Much more can and should be done to address the changes we are currently facing and that can be predicted. Where trade is affected, the WTO should have an important role. But a system that takes decades to work through a single issue, like fishery subsidies, will need a serious review as to how to permit much more timely responses and rule setting that can be ahead of the curve.

Free Trade Agreements and MFN

While Article XXIV of GATT 1994 deals with customs unions and regional trade agreements, the reality is that there are now hundreds of free trade agreements that have been negotiated and are in place of various breadth and different levels of coverage. While such agreements can permit countries to address bilaterally or plurilaterally issues not covered by the WTO, there is no doubt that free trade agreements lead to significant trade diversion as large volumes of trade are done at tariff rates that are more advantageous that the most favored nation rates negotiated during the GATT rounds. For some countries, the bulk of their trade may be at non-MFN rates. Do such facts favor additional efforts at bilateral or plurilateral liberalization even if not on an MFN basis?

Moreover, as many WTO members are opting not to contribute to further liberalization on new topics, there is the challenge of Members willing to liberalize providing benefits to non-participating members. While this is not a new problem, WTO reform may need to explore whether MFN has continuing relevance in a world of bilateral and plurilateral deals and/or whether plurilateral deals on topics not presently covered by WTO agreements should permit participating Members only to be the beneficiaries of the texts.

Conclusion

Other countries have raised a series of topics that they would like to see addressed in WTO reform talks that are not addressed in this note. What is clear is that if the United States is going to find satisfaction in a WTO reform effort, some major changes to the system will be needed. Deputy Director-General Alan Wolff had indicated in the past that WTO reform by 2025 was possible (looking at being ready for adoption by the 15th WTO Ministerial). https://www.wto.org/english/news_e/news19_e/ddgaw_13nov19_e.htm That timeline, while ambitious for the WTO based on past experience, is almost certainly unacceptable to the current U.S. Administration.