No Major Breakthrough Expected from WTO MC13

The biennial WTO 13th Ministerial Conference is scheduled to be held at Abu Dhabi from 26-29th February 2024. While hectic consultations are on and DG WTO making passionate appeal to all member nations, the overall scenario doesn’t look very promising with regards to the expected outcomes of this important Ministerial meet.  Today, the EU Commissioner for Trade Mr. Valdis Dombrovskis too has written an op-ed highlighting the need to reform WTO including the most important one is reinvigorating the function of dispute settlement system so that WTO legitimacy remains and effect of trade rules in not eroded.

However, most unfortunate is that WTO seems to have no substantive trade liberalisation agenda on the table to negotiate. The key issues under discussion/negotiation include – WTO reforms including reviving Dispute Settlement Body’s function, finding a permanent solution to moratorium on the imposition of customs duties on electronic transmissions, expediting ratification of fisheries subsidies agreement and negotiation on additional provisions, agriculture including India’s demand for a permanent solution to public stockholding for food security purposes, and developmental issues related to LDCs including their graduation.

As regards India, its key demands include finding a permanent solution to public stockholding for food security, terminating the moratorium on imposition of customs duties on electronically transmitted goods & services, and initiate the process of appointing members to WTO appellate body. Besides, India has made a detail submission on WTO Reform titled “30 for 30” and a proposal to reduce the cost of cross-border remittances.

Dispute Settlement Body Reform

WTO dispute settlement is in the midst of a serious crisis. Since December 2019 Its appeals mechanism is not functioning because USA has blocked appointments to the Appellate Body. This has resulted in most panel reports being appealed “into the void” and leaving the dispute unresolved. The 12th Ministerial Conference of WTO held in June 2022 mandated the members to work towards having a fully and well-functioning dispute settlement system accessible to all members by 2024. Subsequently, as claimed by WTO Secretariat considerable work has been done on many important issues but at the same time, issues relating to appellate/second tier review are still being worked on and are not yet complete.

USA so far has not offered concrete proposals for how the Appellate Body should be reformed to assuage Washington’s concerns. The USA has expressed concerns about the Appellate Body for many years, pointing to issues such as “judicial overreach.” Many WTO members (excluding USA) have put together an alternative appeals mechanism, the Multi-Party Interim Appeal Arbitration Arrangement. However, it has not yet heard any appeals. At best, this would be a partial solution, because it would not apply to the USA or several other prominent WTO members that seem reluctant to join.

India has its long-standing position on the Appellate Body crisis and the implications of interim arbitration arrangements. It is of the view that such interim arrangements undermine the right of members to appeal to a permanent standing body, which is fundamental to the multilateral trading system.  India strongly favours early restoration of the Appellate Body.

WTO Reform

The issue of WTO reform is a broad one, encompassing many facets of the WTO’s work. Almost from the organization’s inception, members have been thinking about how the WTO could be improved and respond more effectively to the challenges facing the multilateral trading system. However, the push for WTO reform has gained momentum in recent years, reflecting the four general concerns outlined below:

  • The challenges members face in initiating, negotiating, and concluding trade agreements, both for outstanding as well as for new issues.
  • The need to strengthen the work of WTO’s regular bodies and committees including notification and transparency disciplines.
  • The question of whether, and to what extent, the more advanced emerging economies (China, India etc.) should undertake greater obligations and whether existing special and differential treatment (S&DT) for developing and least developed countries are sufficient and effective.
  • Improving the functioning of the dispute settlement system and overcoming the four-year impasse on the appointment of Appellate Body members.

The ongoing debate on WTO reforms culminated in members’ agreement at 12th Ministerial Conference in June 2022 to undertake a comprehensive review of the WTO’s functions. Ministers adopted an MC12 Outcome Document which addresses the way forward on WTO reform. In the Outcome Document Ministers expressed commitment to work towards necessary reform of the WTO, with the aim of improving all its functions, with the work being member-driven, open, transparent, inclusive, and addressing the interests of all members, including development issues.

WTO reform has become an important element in efforts to ensure a successful Ministerial Conference in Abu Dhabi. In this regard, members are currently working on a section on WTO reform for a possible MC13 Outcome Document. As currently drafted, this would comprise the following elements:

  • A reaffirmation of MC12 commitment to work towards necessary reform of the WTO and acknowledgment of the progress made in this regard.
  • Welcoming and taking note of the work done to date to improve the daily functioning of WTO councils, committees and negotiating groups, with a view to enhancing the WTO’s efficiency and effectiveness.
  • Instructing the General Council and its subsidiary bodies to continue to conduct this work and report progress as appropriate to the next Ministerial Conference.

India in its formal submission reiterated that WTO reform does not mean accepting either inherited inequities or new proposals that would worsen imbalances. Reforms must be premised on the principles of inclusivity and development. India therefore urged that the priorities for WTO reform must include, among other things, strengthening the multilateral character of the WTO, reaffirming the principles of S&DT and keeping development at the organization’s core.

India is of the view that the gap between developed and developing members appears to have widened over time, thus justifying the continued need for S&DT. India, therefore, reaffirmed the principles of developing countries continued unconditional right to S&DT, the right to self-designation, upholding existing S&DT provisions, and the provision of S&DT in both current and future negotiations.

Moratorium on the Imposition of Customs Duties on Electronic Transmissions

One of the key subjects being intensely discussed in the run-up to MC13 is moratorium on applying customs duties on cross-border electronic transmission of goods and services. Since 1998, WTO Members have regularly extended a moratorium on applying customs duties on electronic transmissions.

The original Ministerial Declaration in 1998 contained a simple commitment which has come to be known as e-commerce moratorium – “Members will continue their current practice of not imposing customs duties on electronic transmissions”. This language has been replicated in subsequent WTO Ministerial Declarations, including at the last MC12 held in Geneva in June 2022.

However, in recent years, the opportunity costs of Moratorium have been questioned by several WTO Members including India. Their concerns range from – the lack of clarity on the scope of the moratorium, the definition of electronic transmissions to the potential foregone customs revenue and the desire to maintain ‘policy space’ in view of rapid technological change.

As a result, the WTO Members at MC12 agreed to preface the renewal of the moratorium with a commitment to intensify discussions on its scope, definition, and impact. If not extended or no consensus emerges on any permanent solution, the moratorium would expire on 31st March 2024 as per the MC12 text. No consensus seems to have emerged so far on moratorium. According to the facilitator the differences remain on the future of the moratorium, including the need for more discussions on its definition, scope, and impact.

India is concerned by the impact of the moratorium on customs duties on electronic transmissions which provides the global tech firms with a distinct unfair tax advantage over local competitors in developing countries. Further, since the transactions of most global platforms are channeled through to a global entity, it deprives the importing country of corporate tax revenue, hindering developing countries in their efforts to support digital industrialization initiatives. India along with South Africa are proposing practical steps to be pursued under the e-commerce Work Programme, such as the establishment of a fund that could provide developing economies, including LDCs, with targeted support to address the digital divide. The proposal further calls for an end to the moratorium.   

Fisheries Subsidies

Adopted by consensus at MC12, held in Geneva in June 2022, the Agreement on Fisheries Subsidies sets new, binding, multilateral rules to curb harmful subsidies, which are a key factor in the widespread depletion of the world’s fish stocks. In addition, the Agreement recognizes the needs of developing and least-developed countries and establishes a fund to provide technical assistance and capacity building to help them implement the obligations.

The Agreement prohibits support for illegal, unreported, and unregulated (IUU) fishing, bans support for fishing overfished stocks and ends subsidies for fishing on the unregulated high seas. For the Agreement to become operational, two-thirds of members have to deposit their “instruments of acceptance” with the WTO. Till date about 60 members have ratified the agreement. India is yet to ratify.

Members also agreed at MC12 to continue negotiations on outstanding issues, with a view to making recommendations by MC13 for additional provisions that would further enhance the disciplines of the Agreement.

India’s stand is that it is one of the lowest fisheries subsidizers despite such a large population. India is one of the disciplined nations in sustainably harnessing the fisheries resources. India does not exploit the resources indiscriminately like other advanced fishing nations. India’s fisheries sector primarily depends on several millions of small-scale and traditional fishers. Therefore, those WTO Members who have provided huge subsidies in the past, and engaged in large-scale industrial fishing, which is responsible for the depletion of fish stocks, should take more obligations to prohibit subsidies based on the ‘polluter pay principle’ and ‘common but differentiated responsibilities’.

In the negotiations, India sought a 25-years’ transition period to eliminate fisheries subsidies as India and other developing countries need support to protect the livelihoods of low-income fishermen. This assistance includes subsidies given to fishermen for construction, acquisition, modernization of vessels, purchase of fishing gear and engines, including refrigerators.

Agriculture Including Public Stockholding of Foodgrains 

The WTO’s agriculture negotiations encompass various topics, including domestic support, market access, export competition, export restrictions, cotton, public stockholding for food security purposes, the special safeguard mechanism, and the cross-cutting issue of transparency.

Despite intensive negotiations and several submissions, most members consider that the upcoming ministerial conference will not be able to agree on “modalities” setting out formulas for new commitments. They do however agree that MC13 should serve as a significant stepping stone to MC14. 

One of the key issues which has divided a large number of developing countries and agriculture exporting countries including both developed and developing is public stockholding of foodgrains for food security purpose. The proponents including India want that WTO farm subsidy rules should not limit their ability to buy food at government-set prices, as part of their public stockholding programmes for food security purposes. The opponents argue that a solution in this area should not allow countries to distort trade and undermine food security elsewhere — for example, by enabling countries to export subsidized food that was bought for public stocks.

India along with several other developing countries are seeking a permanent solution to the issue of public stockholding for food security as the present rules limit subsidies for food procurement to 10 per cent of the value of production. The decision taken at WTO Bali Ministerial in 2013 had allowed developing countries a peace clause, which legitimizes breach of prescribed agriculture subsidy limit without the risk of legal action from other members. But India is seeking a permanent solution so that it gets included in the Agreement on Agriculture.

Road Ahead

The MC13 kick starts on 26th February but members’ negotiating position on all important issues remain divergent. The Draft Ministerial Text released last week by General Council Chair on his own responsibility and not a significantly agreed text. It appears that the Abu Dhabi Declaration on critical areas of DSB reform, agriculture etc. might just have timelines for further work, instruction to negotiators to expedite the work and report the expected outcomes by MC14.

Deep Kapuria is the Chairman of The Hi-Tech Group of Companies comprising The Hi-Tech Gears, The Hi-Tech Engineering Systems, The Hi-Tech e-Soft, and Novus Hi-Tech Robotic Systemz. The Group has manufacturing, R&D and engineering facilities in India, Canada and USA. He is Chairman of Global Innovation & Technology Alliance (GITA – a PP project with Dept. of Science & Tech. Gov. Of India). He is the Past Co-Chair of Digital Economy and Industry 4.0 Task Force of B20, 2018 Argentina and Past Co-Chairman, CII National Committee on International Trade & Trade Policy.

You may also like...