The post-Bali agenda at the WTO

Mr. Abhijit Das, head of the Centre for WTO Studies at the Indian Institute of Foreign Trade, addressed the outcomes of the 9^th WTO Ministerial Conference held in Bali. The first key outcome he discussed was the binding agreement on trade facilitation (TFA). Mr. Das noted that the agreement is a significantly diluted version in terms of binding commitments compared to what was on the negotiating table around nine months before the conference in Bali. That was possible only because of stiff resistance and opposition by developing countries, he noted. Yet, the TFA as finalized at Bali does have a large number of difficult and onerous obligations that developing countries have to implement, Mr. Das added.

The agreement envisions a phased-in approach for implementation. It gives WTO Member countries some flexibility to self-designate, on individual basis, the provisions a country will implement upon the TFA’s entry into force, which would be considered ‘Category A’ commitments. Countries have the right to choose amongst the remaining obligations which ones to implement over what phasing period, Mr. Das noted. That is a significant flexibility that developing countries should take advantage of. There would be pressures expected on countries to limit their phase-in periods, but developing countries need to insist that the Bali text offers flexibilities that should be made use of, Das stressed.

The second decision taken at Bali that Mr. Das addressed was that on public stockholding programs for food security purposes. The decision has two parts; the first part is a commitment to set a work programme towards finding a permanent solution on this issue; and second is a due restraint provision that would apply in the interim until a permanent solution is agreed.

While the decision has some positive elements that are considered as considerable improvement over the draft text sent for the Bali Ministerial Conference, Das noted, however there are additional conditionalities included in the text at Bali that are likely to prevent developing countries from resorting to the interim mechanism. Mr. Das explained that the main assurance gained in Bali, and which was missing in the text transmitted to the Ministerial, was that the interim due restraint will remain in place until a permanent solution is achieved.

Apart from that, the Ministerial conference in Bali took a decision on tariff rate quotas (TRQs), with the objective of making TRQs more transparent and ensuring they are filled at higher rates. In respect to cotton, the mandate given in the Hong Kong Ministerial Declaration required countries to address this issue ambitiously, expeditiously and specifically. There has been no tangible progress towards reducing cotton subsidies under this mandate, Das explained. Under the Bali Ministerial Declaration, a transparency and monitoring mechanism in relation to trade-related aspects of cotton would be established, however the core problem remains unaddressed, Das noted.

In respect to duty-free quota-free (DfQf) market access, the Bali Ministerial decision does not even match the relevant decision taken at Hong Kong in 2005, Das argued.  The Bali decision is considerably diluted as it merely requires countries to “seek to improve” their existing DfQf coverage, he explained.

Mr. Das concluded that the Bali Ministerial Conference did not come up with anything concrete apart from the TFA and food security decision.

There is one area where the Bali Ministerial Conference is very relevant for the next twelve months, Das noted. The Trade Negotiations Committee (TNC) has been directed to prepare, within the next twelve months (i.e. by the end of 2014), a clearly defined work programme for the post-Bali phase.  However, it is not clear whether the work programme will result in cherry picking of a few issues from the Doha mandate or whether all Doha Round issues will be addressed, Das cautioned.

While there is a mention of the “work programme on the remaining Doha issues”, the intent appears to focus the work programme on a few issues, Das added. The work programme is mandated to build on the decisions taken at the Bali Ministerial Conference, particularly on agriculture, development and LDC issues. In addition there is a mention of “all other issues under the Doha mandate that are central to concluding the Round”. Yet, the language keeps a window open for cherry picking of a few issues instead of addressing all remaining issues, Das highlighted.  If, indeed this is the case, then developing countries need to carefully consider whether their interest lies in abandoning the Single Undertaking concept, Das stressed.

Das argued that if the post-Bali work programme departs from the Single Undertaking, such a step would raise serious questions in regard to the WTO jurisprudence. He explained that some of the key landmark dispute cases have been decided on the basis that WTO agreements have been negotiated as part of a Single Undertaking. Accordingly, Das questioned what would happen to the jurisprudence if the post-Bali work progamme departs from the Single Undertaking.

When it comes to trade facilitation, Das called upon developing countries to take fullest advantage of the flexibilities provided in the agreement in terms of deciding which obligations to kick in upon entry into force of the agreement and which to phase in later. Developing countries need to put resources into mapping what they have of existing trade facilitation capacities and what additional steps will be required on their part for implementing their obligations, Das underlined. This is necessary so that they can seek thereafter technical and financial support.

A larger question that Mr. Das posed was whether the TFA should be implemented on a provisional or definitive basis. Das noted that there are legal grounds to argue that even if the TFA gets incorporated into the WTO acquis of agreements, it can be implemented on a provisional basis. It needs to be borne in mind that for more than four decades GATT itself was implemented on a provisional basis. If some developing countries want to take such a stand, there are legal arguments that could support such approach, Das underlined.

In regard to the issue of public stockholding programs for food security purposes, Mr. Das recalled that the draft modalities of December 2008 had an un-bracketed paragraph that would have given considerable flexibilities for developing countries. That paragraph said that government stockholding programs for food security purposes with the objective of supporting low-income or resource-poor producers would not be considered part of the Amber box (i.e. the box under the Agreement on Agriculture that usually covers trade distorting subsidies). That should be the starting point of negotiations towards a permanent solution for public stockholding programs for food security purposes, Das noted.

If that does not work, then WTO Member countries can go back to one of the alternatives proposed by the G33 (i.e. a coalition of developing countries at the WTO pressing for flexibility for developing countries to undertake limited market opening in agriculture), one of which is to pursue further elaboration of Article 18.4 of the Agreement on Agriculture (AoA), which talks about giving due consideration to the implications of “excessive rates of inflation”.

The G33 proposal proposes deflating the administered price and comparing it with the 1986 to 1988 price, or taking the other way around through inflating the 1986-1988 price based on inflation indexes and comparing that to the administered price. If the December 2008 text is not found to be generating consensus, then the consideration of Article 18.4 of the AoA could be one way to go forward, but certainly this would be a difficult issue, Das noted.

If the approach to the post-Bali work programme ends up to be a cherry picking process, Das added, then developing countries should identify the areas of key interest to them.

In agriculture, the dilemma before negotiators is whether they should consider the December 2008 text as a settled document and continue negotiations based on it. If that happens, then the possibilities for improvements in the area of Green Box subsidies (i.e. the Green Box under the Agreement on Agriculture that is considered to encompass non-trade distorting subsidies) will be lost, Das pointed out.

While the initial mandate did not talk on reducing Green Box subsidies, it did mention the need to clarify and improve the criteria of the Green Box subsidies to ensure they are not trade distortive or have minimal impact on production, Das explained. Good proposals have been put forward by the G20 (i.e. coalition of developing countries at the WTO pressing for ambitious reforms of agriculture in developed countries with some flexibility for developing countries) in 2007-2008 on the subject, but the group appears to subsequently have lost steam on this issue.

Das cautioned that if the Green Box support is not disciplined, WTO members would be missing out an opportunity to have a close examination of this area and to establish disciplines in this area, especially given that the bulk of the agriculture subsidies by developed countries have shifted from the Amber to the Green Box.

In agriculture, tariff simplification was another area tackled by Mr. Das. He explained that while most developed countries’ tariffs are on ad valorem basis, there are still a high number of tariffs that are not on ad valorem basis, but take the form of specific duties and compound duties. In the case of the EU, many tariffs are based on very complex matrixes, he added. The text on the table is rather liberal and would not result in big improvements in this area, Das noted.

In the area of export subsidies, strict implementation of what was decided in Hong Kong could give developing countries some assurance that export subsidies would be phased out, Das underlined. He highlighted that the Bali Decision provided that countries will ‘exercise utmost restraint’ in using export subsidies, and that is a fairly strong language. He called for holding WTO Member countries accountable to that strong language.

Another issue highlighted by Mr. Das was special safeguard measures (SSM). That is a new right that developing countries were trying to acquire to counter surges in low priced imports. It resulted in stringent conditionalities being imposed on developing countries wanting to use such SSM. There is a need to ensure that if the SSM is finalized it be devoid of such stringent conditionalities, Das stressed, so that it becomes a practical tool which can be implemented whenever the need arises.

In the area of non-agricultural market access (NAMA), the key challenge for developing countries is sectorals, according to Das. Sectorals were supposed to be non-mandatory, yet there have been pressures especially on emerging economies that they must join sectorals. Das acknowledged that some emerging economies might catch up with developed economies, but highlighted that such a catch up would happen in too far a future. So developing countries taking on obligations by joining sectorals at this juncture amount to taxing their future gains, Das concluded. The other challenge in this area is the request-offer approach, Das added. Instead of negotiating using a formula, the current approach appears to be shifting into a request-offer approach, whereby developing countries will be exposed to huge amounts of bilateral pressure.

Das also spoke about some important positive agenda items for developing countries, to focus on in the area of ‘implementation issues’. These, he explained, have receded from the radar and countries have not been addressing them. He tackled three important areas that could be of interest to developing countries;

In the area of the Agreement on Trade-Related Investment Measures (TRIMS), one implementation issue was that developing countries shall have another opportunity to notify existing TRIMs measures which they would then be allowed to maintain till the end of a new transition period. Another issue in this area was that developing countries shall be exempted from the disciplines on the application of domestic content requirements by providing for an enabling provision in Articles 2 and 4 of the Agreement to this effect. It is clear from the work in the subsidies committee and the TRIMS committee that even developed countries, in the area of renewable energy, are resorting to domestic content policies. So it is just justifiable that developing countries should not be forced to abide by disciplines on local content, Das stressed.

In the area of the agreement on Subsidies and Countervailing Measures, Das highlighted that one of the implementation issues to be considered could be giving a certain flexibility to developing countries in offering export credits.

In the area of the TRIPS agreement, an area of possible interest to a large number of developing countries could be the links with the Convention on Biological Diversity (CBD), Das noted. There are quite a few proposals arguing that in the case of a patent based on traditional knowledge, there must be full disclosure and prior and informed consent from the holder of the traditional knowledge as well as benefit sharing. Such proposals galvanize large support from developing countries and would hold significant commercial value for developing countries. One study, highlighted by Das, estimated that out of 111 plant-based drugs, 74% was estimated to have been in prior use by indigenous communities. Another study concluded that by using traditional knowledge as a ‘lead’, bio-prospectors could increase success ratio in trials from 1 in 10,000 to 1 in 2. Clearly such an implementation issue has a commercial value, Das stressed.

Das underlined that the Doha mandate has strong language on ‘implementation issues’, which notes that utmost importance shall be attached to these issues that shall be addressed on priority. Lots of work has been done between 2002 and 2005, after which these issues became quite dormant. Das stressed that the mandate on addressing these issues exists, yet what is required is for developing countries to take these issues as priority. He underlined the importance of reigniting coalitions among developing countries to work on some of these issues.

Das went on to discuss issues beyond the Doha mandate, whereby he noted that the most complex 21^st century issue is global value chains (GVCs). Under the GVC narrative, he explained, some countries are expected to demand that WTO agreements need to be updated in order to take account of this phenomenon, arguing that an increasingly larger share of world trade is taking place through GVCs. These countries could ask for negotiating new rules on this issue. Such new rules could include zero tariffs on products that are covered by GVCs, very deep liberalization in services that centre around GVCs, and prohibition of remedies on products that are covered by GVCs, Das noted. It could also imply stringent investment protection rules and restrictions of governments’ ability to provide support to state-owned enterprises, as well as a push towards upward harmonization across countries. It could also imply something on labour standards, which was alluded to in the report of the panel set up by the previous director general of the WTO, Pascal Lamy, which was entitled “The Future of Trade: The Challenges of Convergence” (24 April 2013). Many of these issues, which developing countries have previously rejected, could come through the back door under this approach.

Das cautioned that GVCs have a large number of asymmetries; the significant portion of incomes in GVCs essentially accrues to the lead firms that are based in developed countries. There are studies that clearly indicate that developing country firms are effectively prevented from undertaking functional upgrading, which in turn limits the possibility of increasing their incomes. GVCs might be a reality, Das noted, but he questioned whether trade policy measures are preventing countries from participation in their GVCs. He rejected this assumption, highlighting that policies other than trade policy are hindering developing country participation in GVCs, calling for addressing those issues first.

On climate change, Das noted that what could happen is the demandeurs could seek flexibility whereby unilateral trade measures taken pursuant to provisions of Article 3.5 of the United Nations Framework Convention on Climate Change (UNFCCC) would not be challenged under the WTO’s Dispute Settlement Mechanism. That could pose another barrier for exports from developing countries, according to Das.

Das concluded by stressing that the 21^st  century  issues   might   seem  attractive, but he called upon developing countries to assess the ramifications of agreeing to negotiate these issues and to carefully study the likely outcomes      and whether these outcomes will be to their benefit. Das was of the view that if there is no mutual benefit, then it makes sense for developing countries to come together like they did in Cancun and take a stand against these issues whenever they are raised.