Expect modest outcomes from WTO’s upcoming ministerial

The fourth and perhaps the most important issue is WTO reform.

By Anwarul Hoda

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After witnessing a somewhat messy conclusion to COP 26, we await with anticipation the Twelfth Ministerial Conference (MC 12) of the WTO, due to begin on November 30, 2021. The WTO Agreement provides for the Ministerial Conference to meet at least once in two years, but MC 12 is being convened after a gap of almost four years due to Covid-19 and will have a crowded agenda. We take a closer look at four key issues to assess the outlook for the conference.

The first issue is the WTO response to the Covid-19 pandemic, on which Ambassador David Walker, the former Permanent Representative of New Zealand to the WTO, has been given the role of a facilitator to develop a package of measures on trade and health. During the facilitation process, progress has been difficult, but convergence seems likely on a number elements of the package, such as WTO members exercising restraint on imposing export restrictions and prohibitions and accelerating trade facilitation measures envisaged in the Trade Facilitation Agreement to expedite customs clearance of Covid-19 products and ingredients. There is also a proposal, initially mooted by India and South Africa, but now supported by a large number of other delegations, that proposes a temporary waiver of the obligations on copyright, industrial design, patents and protection of undisclosed information for at least three years in relation to health products and technologies used for Covid-19. While the US appears receptive at least in respect of vaccines, the European Union is opposed to the proposal. It maintains that the TRIPS Agreement already provides for compulsory licensing to deal with such emergencies. The proponents of the waiver argue that a product-by-product or country-by-country approach that compulsory licensing would entail makes it unsuitable for dealing with the pandemic. They hold the view that intellectual property rights are the main reason for the prevailing high prices and shortage of supplies of diagnostics, therapeutics, vaccines and medical devices. There is a total standoff between the two sides.

The second issue of fisheries subsidies is no less important for many Members. There is not only the need for effective measures to deal with the challenge of dwindling fish stocks in the oceans, but also the issue of demonstrating that WTO members have the political will and the capacity to conclude negotiations in vital areas. These negotiations have been going on for 20 years. The aim of negotiations is to prohibit three categories of harmful subsidies (referred to as pillars): subsidies to illegal, unreported and unregulated (IUU) fishing, subsidies for fishing an over-fished stock, and subsidies contributing to overcapacity and over-fishing. The main divergence among members is on special and differential treatment (S&DT) of developing countries in all three pillars. Developed countries want S&DT to be of limited validity in time and restricted in scope to only low-income, resource-poor and livelihood fishing and that too only up to 12 nautical miles from the baseline, not for the entire Exclusive Economic Zone (EEZ). Developing countries are not willing to accept any limitation and are particularly emphatic in seeking that the flexibilities are available over the entire EEZ.

There is one more source of discord in this area. In a recent communication, India has proposed going beyond the main obligation to prohibit certain subsidies and requiring every Member engaged in distant water fishing to reduce its capacity every year until overcapacity or over-fishing is eliminated. It is difficult to assess whether the proposal is tactical, but if it is definitive, it certainly increases chances of an impasse.

The third issue is a permanent solution for public stockholding for food security purposes that has been on the agenda since the Bali meeting in 2013. There is an interim arrangement already in place whereby WTO members have agreed not to raise disputes on compliance of a developing country with the obligations of the Agreement on Agriculture in relation to domestic support connected with stockholding programmes on traditional staple food crops until a permanent solution is agreed and adopted. The source of the problem for developing countries is that the Agreement provides for the use of 1986-88 prices as the fixed external reference price for calculation of the Aggregate Measurement of Support (AMS) or the de minimis subsidy. This provision is completely unrealistic in a situation of inflation, even at a low level, and a permanent solution can be found only if this problem is addressed and changes made in the substantive rules. Until that happens, it is best to allow the interim arrangement to continue without any change. The danger in trying to improve the decision on the interim arrangement is that it could also open the door to proposals for narrowing it down. It is learnt that the latest Chairperson’s text has proposed tentatively to put an upper limit of 15% of domestic production on stockholding programmes.

The fourth and perhaps the most important issue is WTO reform. There is a strong sense among WTO members that reform is needed to revitalise the WTO in all its three functions viz., negotiations, dispute settlement and monitoring. In the more than 26 years since the WTO was established, there has been no successful round of multilateral trade liberalisation. With a non-functioning Appellate Body since December 11, 2019, the machinery for dispute settlement has also been crippled. The high incidence of non- compliance with notification obligations has had an adverse impact on the monitoring function as well. In this context, it is learnt that the European Union and Brazil have recently taken a joint initiative to propose establishment of a Working Group to consider institutional improvements to the functioning of the WTO embracing all three functions of the WTO. Exclusion of any aspect of S&DT from the mandate of the proposed group improves chances of its acceptance.

To sum up, MC 12 could have a modest positive outcome after some tough negotiations. Agreement is likely on WTO response to Covid-19 but it is less certain if the package will include waiver of intellectual property rights. The US willingness to consider the waiver in respect of vaccines gives hope for at least partial success on this aspect. The agreement on fishery subsidy is within reach, but, for this, ministers will have to engage in negotiations and be willing to make compromises. It is difficult to envisage progress on public stockholding. The Working Group to consider institutional improvement is a good idea and could find acceptance.

The author is Honorary professor, ICRIER