Will current WTO rule-making reform proposals benefit Caribbean Small States?
Will current WTO rule-making reform proposals benefit Caribbean Small States? Author: The rules-based multilateral trading system (MTS), institutionalized by the World Trade Organization (WTO), is confronting an existential threat. Questions about the fairness and efficacy of the WTO, the guardian of the MTS, have plagued it since its inception in 1995, but the calls for reform have reached fever pitch over the past two years. Withdrawal threats by the US, coupled with increasing protectionism and unilateralism, threaten to chip away at the foundation of the MTS unless comprehensive, inclusive and transparent reform of the WTO is undertaken. For small economies like ours in the Caribbean with high levels of trade openness, SRC Trading Thoughts May 13, 2019 The rules-based multilateral trading system (MTS), institutionalized by the World Trade Organization (WTO), is confronting an existential threat. Questions about the fairness and efficacy of the WTO, the guardian of the MTS, have plagued it since its inception in 1995, but the calls for reform have reached fever pitch over the past two years. Withdrawal threats by the US, coupled with increasing protectionism and unilateralism, threaten to chip away at the foundation of the MTS unless comprehensive, inclusive and transparent reform of the WTO is undertaken. For small economies like ours in the Caribbean with high levels of trade openness, WTO reform is more than a moot topic, but a question of economic and developmental pertinence. Our small states have inherent structural vulnerabilities and capacity constraints which complicate their integration into the global economy and constrain their ability to respond to large countries’ unfair trading practices. These include limited exports and export partners, small populations, limited bargaining power, geographic distance from major markets, and vulnerability to financial, environmental and other shocks. It is these vulnerabilities which compel our disproportionate reliance on the certainty and predictability provided by the MTS through the WTO. In response to the crisis at the WTO, the European Commission released a concept paper on WTO reform in September 2018. The proposals made do not necessarily reflect the European Union’s final position on the matters discussed, but are intended to serve as a basis for discussion, including with other WTO Members. The EU concept paper, which was in effect three papers in one, outlined three broad areas for WTO reform: (1) future rule-making, (2) regular work and transparency and (3) dispute settlement. The Government of Canada has also released its own proposals, which in most cases, are in sync with those made by the EU. This present article discusses the main reform proposals regarding future rule-making at the WTO, and whether these proposed reforms would lead the WTO to better serve the development imperatives of some of the world’s smallest and most vulnerable economies. The WTO’s rule-making function Rule-making is one of the WTO’s most important functions. Unlike its predecessor the GATT, the WTO provides a permanent forum for its members to conduct negotiations on matters relating to global trade. The last round of negotiations– the Doha Round negotiations – were launched in 2001 with the intention to bring global trading rules into the twenty-first century through, inter alia, concentration on topics of interest to the WTO developing countries. Unfortunately, the Doha Round is yet to be concluded, and its future hangs in the balance as WTO Members appear split on whether the current round should continue. The stalemate is in part due to the poor rule-making functions of the WTO, aggravated by the increased number of WTO members and the shift in the balance of power towards developing countries which have made reaching a unanimous decision on increasingly more complicated trade matters less straightforward. The European Commission’s reform proposals for future rule-making fall into three main categories: (1) creating rules that rebalance the system and level the playing field; (2) establishing new rules to address barriers to services and investment, including in the field of forced technology transfer and; (3) addressing the sustainability objectives of the global community. Creating rules to rebalance the system and level the playing field The European Commission identified transparency and notification of subsidies as one area in which the trade rules needed to be balanced. The proposals focused primarily on industrial subsidies. However, for small states, agricultural subsidies, including fisheries subsidies, by large countries are an area of greater concern. These subsidies are trade-distorting in the sense that they alter competitive conditions in favour of industries from those countries that are able to provide them. They can negatively impact small states’ food security because subsidized imports from advanced economies could replace costlier locally produced products and thereby create an import dependence. A classic example is Jamaica’s dairy industry which was adversely affected when the Jamaican Government was forced to remove the tariff on imported powdered milk as a conditionality of a World Bank loan in the early 1990s. Establish new rules to address barriers to services and investment, including in the field of forced technology transfer One of the sticking points in the now defunct Doha Round was whether rules should be developed in some of the “newer” areas on the trade agenda. While developing countries have traditionally opposed expansion of the Doha trade agenda before the existing mandate has been completed, the time has come for trade rules to capture the new realities of international commerce and the global economy, including digital trade. While digital trade will bring challenges due to the technological divide and the impact on employment by replacing humans with computers, the internet could reduce traditional barriers to cross-border trade, by allowing MSMEs access to global markets without the traditional red tape and trading costs, in some cases. The European Commission’s proposal for new rules to address barriers to services and investment is another proposal potentially beneficial to small states. The majority of Caribbean economies, for example, are services-based and are keen on further market access openings for their services providers, particularly in Mode 4 (temporary presence of natural persons). This is one of the four modes of service