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MC11: Did Argentina break an impasse, or the WTO itself?

This article is powered by Agra Europe

Perhaps the most surprising thing to come out of World Trade Organization’s (WTO’s) 11th ministerial conference (MC11) in Buenos Aires was the upbeat statement issued by the United States afterwards.

As the meeting closed with no deal on December 13, the mood among delegates, journalists and others at the venue was said to be gloomy.

“We failed to achieve all our objectives, and did not achieve any multilateral outcomes,” EU Trade Commissioner Cecilia Malmström said in one of the closing sessions. The bravest face she could put on it was by adding: “There is life after Buenos Aires.”

Many will therefore have been surprised to see US Trade Representative Robert Lighthizer declare that the conference “will be remembered as the moment when the impasse at the WTO was broken.”

Why such a stark contrast? Clearly Lighthizer’s objectives were different from Malmström’s, and probably from most other ministers'. The majority were looking for at least some multilateral deal, and were thwarted. The US aimed to get its issues on the agenda, leaving some members behind if necessary, and claimed success.

The questions now are: what can be achieved by the next conference in 2019, will working in smaller groups be more effective than waiting for the full membership, and where does that leave agriculture and fisheries subsidies?

No multilateral outcomes

The failure to reach agreement was on the cards. Last minute preparations in Geneva showed that even the best candidates for a deal were in trouble — such as banning subsidies for illegal fishing and improving the information countries have to provide if they want to restrict food exports.

No one could accuse negotiators of sitting on their hands. New or modified proposals continued to fly in from all directions, but they did not bridge any differences. In some cases they made the talks more complicated. And so the deadlocks remained before and throughout the Buenos Aires meeting.

Some had hopes that agreement on one other topic might be possible: revised disciplines for developing countries to acquire food security stocks at government-supported prices.

This continues to be controversial among WTO members even though a temporary patch was agreed in 2013 pending a permanent solution intended by the end of this year. This is still unresolved and so the temporary solution stays in place.

It was already clear that tightening disciplines on domestic farm support and improving market access for agricultural products were nowhere near agreement. That was also the case with curbs on subsidies to deal with over-fishing (not just illegal activities) and a number of other subjects.

They and other subjects will either continue to be negotiated in Geneva as before, or drop into new work programmes, with no guarantee of a better chance of success.


Impasse broken?

None of that constitutes breaking an impasse. What Lighthizer enthused about were decisions by various subgroups of members to start work among themselves on a number of issues, even if the whole membership does not participate.

“Many members recognized that the WTO must pursue a fresh start in key areas so that like-minded WTO members and their constituents are not held back by the few members that are not ready to act,” he said.

The US, he said, will participate in talks on “e-commerce, scientific standards for agricultural products, and the challenges of unfair trade practices that distort world markets”.

The US would also work with the full membership “to continue pushing meaningful disciplines on harmful fisheries subsidies based on guidance agreed to by Ministers at Buenos Aires,” he added.

The topics Lighthizer listed are not all the same, however.


Plurilateral-multilateral cycle

The move has been hailed by some as a new era of “plurilateralism” (work in subsets of WTO members instead of the full membership) as a way round multilateral deadlock.

Agreements actually reached

Few noticed that the WTO did actually succeed in reaching agreement on two subjects. They are so obscure they were not on the radar for Malmström and Lighthizer.

Ministers agreed continue to exempt electronic commerce from import duties for another two years.

They also agreed to continue to exclude “non-violation” cases in intellectual property from WTO dispute settlement — these are cases where an expected right could be undermined by a government’s action even if a WTO agreement is not explicitly violated.

Both have been routinely extended at every ministerial conference for a number of years, but this time it was unclear whether the newly WTO-sceptical US would insist on its opposition to the moratorium on intellectual property. It didn’t.

This is not new. In the 1970s, the Tokyo Round of negotiations in the pre-WTO General Agreement on Tariffs and Trade (GATT) produced a set of ground-breaking trade rules known as “codes”.

They were not signed by all members and were therefore plurilateral. 

Before long, the US and others complained that this produced too many free-riders in the system. When new talks were launched in the next decade (the Uruguay Round), the governments agreed that each would sign on to everything with a single signature — the round would be a “single undertaking”.

The result was the creation of the WTO and a large package of new and updated agreements.

Then the Doha Round was launched in 2001, again as a single undertaking. It floundered. Officially there has been no consensus to end the Doha Round despite attempts at the last ministerial conference in Nairobi in 2015.

What is clear is that the single undertaking no longer exists.

This has allowed deals to be struck on eliminating agricultural export subsidies and food security stockholding, both multilateral and extracted from the Doha Round’s original agricultural package, and on trade facilitation (streamlining border procedures).

Now we have the new plurilateralism.

After Buenos Aires, Lighthizer was able to proclaim: “We are proud to defend the interests of US stakeholders at the WTO, including our farmers and ranchers, who need a result on agriculture that is based on the realities of today, rather than a 16-year-old, outdated and unworkable framework.”

From e-commerce to pesticide residues

In truth, only one of the issues Lighthizer mentioned is heading for a proper, structured plurilateral negotiation — e-commerce.

He did not mention investment facilitation, and work on micro, small, and medium-sized enterprises, which are also now going ahead.

The plurilateral route has the advantage of allowing a critical mass of countries to proceed without having to wait for reluctant countries. But it does not guarantee success. Plurilateral talks on free trade in information technology products has produced results. Talks on a Trade in Services Agreement (TISA) outside the WTO, and on environmental goods inside it, have not.

In the WTO, plurilaterals fall into two categories. Some apply the general WTO rule of non-discrimination, which produces free riders. When countries cut their tariffs on information technology products, they did it for imports from all WTO members, not just those who had signed the agreement and were making their cuts. Therefore participation had to be broad enough for free riders not to be seen as a problem.

The WTO’s Government Procurement Agreement is also plurilateral but different. Participating countries only open their public procurement markets to each other and so there are no free riders.

“We are proud to defend the interests of US stakeholders at the WTO, including our farmers and ranchers, who need a result on agriculture that is based on the realities of today, rather than a 16-year-old, outdated and unworkable framework.” - Robert Lighthizer, US Trade Representative

Then there are two other topics Lighthizer mentioned: “Scientific standards for agricultural products, and the challenges of unfair trade practices that distort world markets.”

These are entirely different animals. Essentially, they are statements by small coalitions of like-minded countries targeting other WTO members.

The one on “scientific standards” came from the US, Kenya and Uganda. It actually pledges to work in the WTO’s (multilateral) Sanitary and Phytosanitary Measures (SPS) Committee, and the standard-setting Codex Alimentarius, so that maximum pesticide residue levels are based more on science.

This has become a hot topic in the SPS committee, with a number of countries objecting to EU residue regulations. To be successful, a deal would have to be struck with the EU, and there is little sign of that happening.

The one on “unfair trade practices” was the result of a meeting of the EU, US and Japan. No target is specified but the statement is understood to be aimed at China. There is little chance that it will produce a change of heart in Beijing either.

On the other hand, the US has shunned another statement issued in the same vein — calling for talks to phase out subsidies for fossil fuels, from Chile, Costa Rica, Iceland, Liechtenstein, Mexico, Moldova, New Zealand, Norway, Samoa, Switzerland, Taiwan and Uruguay.

What next?

Out of the last three ministerial conferences, two (Bali in 2013 and Nairobi in 2015) produced multilateral results. Only one (Buenos Aires last week) did not, and therefore it is far too soon to declare multilateralism dead because of that.

The various tasks that ministers set themselves — including on agriculture and fisheries subsidies — will return to Geneva and will continue to be discussed or negotiated over the next two years.

More urgent for the WTO is a solution to the deadlock over the appointment of appeals judges, which the US is blocking, and is threatening the WTO dispute settlement system. How that evolves and how much it weakens the WTO remains to be seen.

The WTO “is a global public good, and the EU attaches enormous value to it,” Malmström said. “And in the coming months, we will do what is necessary to support it if it comes under further pressure.”
Often forgotten is how the WTO’s present agreements and routine work by its members in the organisation quietly keep $20 trillion-worth of trade in goods and services flowing smoothly every year.

One idea for strengthening this under-reported function is to improve the information that members need in order to monitor how well it is working, and to find ways to encourage members to supply their own information more quickly. Already ministers agreed to do that with fisheries subsidies.

The WTO “is a global public good, and the EU attaches enormous value to it,” Malmström said. “And in the coming months, we will do what is necessary to support it if it comes under further pressure.”

She was echoing a statement from 44 ministers issued two days earlier, calling on “all members to safeguard the integrity of the open, rules-based multilateral trading system embodied in the WTO” and pledging to “continue working with all members to address the challenges facing the organization to ensure its sound functioning”.

As for Lighthizer, having declared the meeting was such a success in defending its interests, it will be more difficult for him and the US to complain that the WTO is biased against it.


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