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Developing countries spurn US proposal on differentiation

Developing countries spurn US proposal on differentiation

Geneva, 4 Mar (D. Ravi Kanth) — India, South Africa, China, and several other countries have spurned the controversial proposal from the United States to bring about differentiation for availing of special and differential treatment (S&DT) among developing countries in current and future trade negotiations at the World Trade Organization (WTO), trade envoys told the SUNS.At a General Council (GC) meeting on 3 March, the US again brought up, for the umpteenth time since the GC meeting in February 2019, its proposal, titled “Procedures to strengthen the negotiating function of the WTO”.
Despite the lack of consensus among WTO members on its proposal to introduce differentiation for availing of S&DT in the current and future trade negotiations, beginning with the ongoing fisheries subsidies negotiations, the US trade envoy Ambassador Dennis Shea insisted that “the US proposal establishes objective criteria for determining whether a WTO member may continue to avail itself of blanket special and differential treatment in current and future WTO negotiations.”
It repeated its four-point criteria:
* A WTO member that is a member of the Paris-based OECD (Organization for Economic Cooperation and Development) or a member that has begun the accession process to the OECD;
* A WTO member that is a member of the G20;
* A WTO member that is designated as a “high income” country by the World Bank, or
* A WTO member that accounts for no less than 0.5 percent of global merchandise trade.
The deputy USTR argued that “members who meet at least one of the four criteria would forego blanket S&DT provision in current and future WTO negotiations”, suggesting that the developing countries “would retain the ability to negotiate the flexibilities they need to defend their interests.”
The US, he said, is encouraged by the discussions it has held with “several members across the development spectrum,” particularly those developing countries that would meet at least one of the four criteria.
He elaborated on the G20 membership, saying that the G20 finance ministers and central bank governors had agreed on the G20 mechanism to conduct informal dialogue “in the framework of the Bretton Woods Institutional system.”
“An important differentiating characteristic of G20 membership,” he claimed, “is influence, the opportunity and the capacity to shape the agenda for international engagement on a diverse set of issues, including globalization, aid, financial market development, regional economic integration, reserves, and demographics.”
Without naming Brazil and South Korea, which have declared their intent to forego S&DT in the current and future trade negotiations, the US said “we are pleased two of the ten self-declared developing country G20 members have their intent to forego S&DT in the current and future WTO negotiations, and we hope to see more step forward during Saudi Arabia’s G20 presidency this year.”
He also clarified that the recent changes announced by the US for imposing countervailing duties “does not affect in any way the approach laid out in our S&DT reform proposal, which is exclusively focused on S&DT in future WTO agreements.”
In a sharp response to the US, India said that “S&DT is a treaty embedded right at the WTO, an entitlement which developing countries have paid for, and that cannot be taken away from us, based on certain arbitrary assumptions, including creative interpretations of the basis of G20 membership.”
The parameters used in the US proposal are “unrelated to development, to target certain Members,” India’s trade envoy Ambassador J S Deepak argued.
Notwithstanding progress made by some developing countries, India said “old gaps in the levels of development persist, and in some areas have even widened.”
More disturbingly, “new divides, especially in the digital and technological spheres, are becoming more pronounced,” India’s trade envoy argued.
“The S&DT in favour of developing countries and LDCs is, therefore, as relevant and required today as it was in 1995,” India insisted.
The Indian trade envoy told the US that the “basis of S&DT is to give Members time and flexibility to integrate into the rules-based system”.
Therefore, “members with huge differences in economic and social development cannot be put in the same category,” Ambassador Deepak said.
It is wrong “to put India, which has an annual per capita income of USD 2,500, in the same development category as the United States, with a per capita GDP of more than USD 70,000,” as it is “unfair,” he argued.
He challenged the US whether it is right to say that its draft decision as well as the US Presidential Memo “relate only to the Special and Differential Treatment in the current and future negotiations and not under the existing WTO Agreements.”
“However, in complete negation of such repeated assertions, the United States has been unilaterally denying S&DT to developing countries even under the existing WTO Agreements,” Ambassador Deepak said.
He drew attention to “a recent example of such unilateral action, vide Notice dated 2 February, 2020, wherein the United States Trade Representative, using the criteria mentioned in their draft decision for the General Council, has denied 10 WTO country Members S&DT under Article 27.10 (a) and (b) of the Agreement on Subsidies and Countervailing Measures, which deals with rules for termination of countervailing duty investigations.”
Ambassador Deepak also highlighted another US Presidential Proclamation of May 2019, when Washington “unilaterally removed India and Turkey from the list of developing countries exempt from application of the safeguard duty on crystalline silicon photovoltaic cells and large residential washers, an S&DT provision for the developing countries under Article 9(1) of the Agreement on Safeguards.”
Given the proliferation of unilateral measures over the past three years, India suggested to other developing countries and the LDCs (least-developed countries) that “in future, using arbitrary criteria, the United States can deny S&DT under the existing WTO Agreements to other developing countries and even to LDCs.”
“In fact, such actions on the part of the United States fuel our apprehensions that the real purpose behind the United States submission at the GC, the Presidential Memorandum on the issue and the draft decision for the General Council is to ultimately terminate S&DT at the WTO altogether,” India said.
Ambassador Deepak debunked the “so-called case-by-case approach” that was mooted by the US during its intervention.
The case-by-case approach, which is now being proposed by other developed countries along with the US, “is dependent on a developing country providing evidence of the need for S&DT, sector wise to start with, which will soon expand to requesting for and seeking S&DT, product by product and line by line,” he said.
Such an approach is “so burdensome and impractical that it will make S&DT for developing countries and LDCs, extinct and a part of history of the WTO,” India warned.
Referring to “the issue of the S&DT at the WTO,” he said, “the United States has been denying any discussion on the G90 Agreement Specific Proposals in the CTD SS, which inter alia include a proposal that “importing developed country Members shall not ban the importation and marketing of products originating from a least developed country Member and developing county member facing capacity constraints based on the rejection of shipments from one or a limited number of suppliers from that Member”.”
India also drew attention to the recent “Economic and Trade Agreement between the United States and China of 15 January, 2020,” saying that it “contains similar provisions for US exports to China of dairy products and infant formula (products); meat, poultry and processed meat; aquatic products; feed additives, pre-mixes, compound feed, distillers’ dried grains, and distillers’ dried grains with solubles; pet food and non-ruminant derived animal feed.”
“This reflects the double standards of the US,” the Indian trade envoy argued.
“On the one hand, they [the US], even as a developed country, have negotiated a flexibility for their exports to China, and on the other, they have been refusing even to discuss a similar flexibility under special and differential treatment for developing countries, including LDCs in the CTD SS, as part of the G90 proposals for decades,” he said.
The US stance on S&DT “appears to be a case of not only not practising what you preach but also not preaching what you actually practice!”, he pointedly told his US counterpart at the GC meeting.
In her intervention during the discussion on the US proposal on differentiation, South Africa’s trade envoy Ambassador Xolelwa Mlumbi-Peter reiterated that “S&DT is a treaty-embedded right.”
The proposed US criteria for determining which WTO Members should continue to access S&DT is not acceptable, South Africa argued.
She reminded the US that the only mandate that WTO members have “is to strengthen S&DT and make it precise, effective and operational as entailed in paragraph 44 of the Doha Ministerial Declaration.”
The Group of Ninety (G90), she said, has circulated “10 specific S&DT proposals entailed in documents (JOB/GC/160/ – JOB/TNC/65), including the room document RD/DEV/182”.
“They remain important departure points to deliver on this mandate. The G90 will be submitting its revised proposals with a view to get a meaningful outcome in MC12 [WTO’s 12th ministerial conference in Nur Sultan, Kazakhstan, in June],” South Africa emphasized.
Expressing concern over “unilateral measures that take away rights of Members in covered agreements [and] that upset the delicate balance reached in negotiations,” she said that “the case in point are rights Members have under the Agreement on Subsidies and Countervailing Measures through the revised list of World Trade Organization (WTO) Members designated as eligible for special de minimis countervailable subsidy and negligible import volume standards under the countervailing duty (CVD) law.”
South Africa said that “the implementation of unilateral differentiation on the basis of arbitrary criteria is not supported.”
Referring to the G20 membership as one of the criterion for differentiation proposed by the US, South Africa said that “the G20 was established to provide a new mechanism for informal dialogue to achieve stable and sustainable world economic growth that benefits all and should not be a determinant for a development status of a country.”
“The G20 was never conceived as a grouping of developed countries,” she argued.
“As the WTO, we must ask ourselves whether we are laying the right foundation to achieve the Sustainable Development Goals (SDGs),” she asked, suggesting that “the 2019 SDG Report states that there is increasing inequality among and within countries.”
“Therefore, while developing countries have made some progress, it is disingenuous to ignore the persistence of the enormous development divide between the developing and developed Members of the WTO,” she suggested.
Moreover, “the development divide is reflected in a wide range of indicators,” South Africa said.
“It is evident in levels of economic development, industrial structure and competitiveness, such as GDP (gross domestic product) per capita, poverty levels, levels of under-nourishment, production and employment in agriculture sector, trade in services, receipts from IPR (intellectual property rights), share of trade in value-added under GVCs, energy use per capita, financial infrastructure, R&D capacity, company profits, and a range of institutional and capacity constraints, among other things,” she argued.
Ambassador Xolelwa drew attention to what her country’s former President Nelson Mandela had said at the Make Poverty History campaign in 2005 in Trafalgar Square, London, when he had “identified areas of global cooperation required to deal with poverty.”
“The first is ensuring trade justice,” said President Mandela, pointing out that “trade justice is a truly meaningful way for the developed countries to show commitment to bringing about an end to global poverty. The second is an end to the debt crisis for the poorest countries. The third is to deliver much more aid and make sure it is of the highest quality.”
South Africa reminded the US that “trade justice can be achieved by ensuring that developing countries have access to the same policy tools developed countries used to industrialise, it is by ensuring that we have appropriate and adequate policy space to achieve our national development objectives within the parameters of global trade rules, it is by recognizing the differences in levels of development and it is by preserving S&DT and to ensure that in the context of the multilateral trading system, developing countries and LDCs take commitments commensurate with their levels of development.”
Drawing from the wisdom in the words of Thomas Jefferson (1743-1826), she said Jefferson had famously said “there is nothing more unequal than the equal treatment of unequal people”.
China said its opposition to the US proposal on differentiation remains unchanged.
In varying responses, several other developing countries – Colombia, several Caribbean countries, Barbados, and Chad on behalf of the least-developed countries – challenged the US proposal on several grounds.
But several developed countries, such as the EU and Australia among others, supported the US proposal on differentiation for availing S&DT.
(Published in SUNS #9082 dated 5 March 2020)