By Alicia Nicholls
Much of the trade policy world released a collective sigh of relief when on June 17 it was announced that ministers and delegates at the World Trade Organisation (WTO)’s Twelfth Ministerial Conference (MC12) had reached an agreement. MC12 had been postponed for two years due to the on-going COVID-19 pandemic. Negotiators worked late into the night two days after the initial deadline to achieve consensus on a narrow package of low-hanging fruit. Now that the dust has settled, this SRC Trading Thoughts assesses what was agreed to under the “Geneva Package” of agreements and decisions. Furthermore, it examines what this all means for Caribbean countries, all of which are WTO members with the exception of The Bahamas which is an observer and is currently in the accession process.
The WTO is the inter-governmental organization with responsibility for overseeing the multilateral trading system. Though global merchandise trade reached a “record high” in 2021, it has seen some challenging years and is likely to be subdued in 2022, according to UNCTAD. The COVID-19 pandemic, compounded by the Russia-Ukraine conflict and consequent western sanctions against Russia, has adversely impacted global supply chains and skyrocketed global inflation.
Like any institution, the WTO is not without flaws. However, despite the dysfunction of the two most visible parts of the WTO, other functions continue such as its Trade Policy Review mechanism. Moreover, throughout the COVID-19 pandemic the WTO Secretariat has compiled invaluable data and studies on Members’ trade-related pandemic responses, while the organisation continues to serve as a forum for Members to share and discuss trade-related aspects of the pandemic, climate change, among other issues. In a world with an escalating number of crises, each with its own trade impacts, the WTO is needed now more than ever.
Moreover, as small open economies, Caribbean countries are particularly invested in the success of the rules-based multilateral trading system and have consistently advocated the need to fix on-going issues, including with the WTO’s negotiation and dispute settlement functions. Indeed, in Geneva, Caribbean countries are widely regarded as having been pivotal to the success of the MC12 negotiations. The tireless work of the negotiators, including those from the Caribbean, should be lauded.
MAIN OUTCOME DOCUMENT
In the main outcome adopted by Ministers on June 17, they, inter alia, reiterated their resolve to strengthening the rules-based multilateral trading system, committed to reforming the WTO and solving the current Appellate Body impasse by 2024. It was also the first time there has been reference to climate change, broad environmental and gender issues in the main outcome document.
Critical to the global trading system’s security and predictability is the WTO’s compulsory and binding dispute settlement system (DSS) where Members can settle trade disputes in an orderly and peaceful manner. As the higher tier of the two-tier DSS, the WTO Appellate Body (AB) is the forum to which parties could appeal points of law following a panel decision. The AB has been dysfunctional since December 2019 when it lost its quorum owing to the US’ blocking the appointment of new judges to the Body. Although the Multi-Party Interim Appeal Mechanism (MPIA) has gained some modest traction, it is only a temporary fix with just a handful of the WTO’s membership having signed on and all with the recognition that the ideal solution would be a resumption of the AB’s functioning. WTO Members committed to conduct discussions to have a “fully and well-functioning dispute settlement system accessible to all Members” by 2024.
FISHERIES SUBSIDIES AGREEMENT
The Fisheries Subsidies Agreement, which seeks to limit and not eliminate harmful fisheries subsidies, is only the second major multilateral trade agreement to be agreed under the WTO’s auspices and its first with sustainable development at its heart. The Agreement was over two decades in coming as the negotiations had begun in 2001 and only really picked up speed in 2015. It tackles Sustainable Development Goal 14 target 6 under the United Nations 2030 Agenda. The agreement prohibits subsidies contributing to illegal, unregulated and unreported (IUU) fishing, subsidies for fishing an overfished stock and subsidies for fishing on the unregulated high seas. It, nonetheless, allows developing countries, including Least Developed Countries, to continue to grant or maintain these subsidies up to and within their Exclusive Economic Zone (EEZ) for up to two years from the date of the Agreement’s entry into force.
A Fisheries Subsidies Committee will be established to monitor the agreement’s implementation and there will also be a Funding Mechanism. As countries washed by the waters of the Caribbean Sea where overfishing is a threat to reefs and livelihoods, Caribbean countries would have wanted a more ambitious agreement. There will be further negotiations on disciplining subsidies contributing to overcapacity and overfishing. However, if comprehensive disciplines are not adopted four years after the Agreement’s entry into force the Agreement will lapse unless the General Council decides otherwise.
In 2020, South Africa and India had proposed a waiver to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) allowing countries to suspend patent and other IP protections on COVID-19 related products and technologies, such as vaccines, therapeutics and diagnostics, for the duration of the pandemic. However, this proposal had been strongly resisted by some of the major developed countries with substantial pharmaceutical sectors who deemed the waiver unnecessary. What was ultimately decided at MC12 was a waiver for eligible countries of certain procedural aspects of the TRIPS Agreement for COVID-19 vaccine manufacture only, and for up to five years. Within six months Members are to further determine whether to extend this waiver to the production and supply of diagnostics and therapeutics. The waiver has drawn significant criticism from several quarters including Medicins sans Frontiers (MSF) for not going far enough.
EXTENSION OF E-COMMERCE MORATORIUM
WTO Members have extended the temporary moratorium banning customs duties on electronics transmissions, such as streaming services, by another two years (until MC13 which is to be held December 31, 2024 latest). India and several other developing countries have increasingly objected to the moratorium’s continuation, blaming it for lost customs revenues. A South Centre research paper, which was subsequently critiqued, has found that “in the period 2017-2020, developing countries and LDCs lost $56 billion of tariff revenue, of which $48 billion were lost by the developing countries and $8 billion by the least developed countries”. Without any public data on the amount of tariff revenue lost by Caribbean countries to the moratorium, it is difficult to state empirically whether this continued moratorium would negatively affect the region.
OTHER NOTEWORTHY OUTCOMES
Members have also made non-binding best endeavour commitments not to apply export restrictions on medical supplies and food.
UNFINISHED BUSINESS AND THE WAY FORWARD
The fact that any agreement was achieved is noteworthy as the expectations going into the Ministerial were indeed low. Since the WTO’s birth in 1995, its membership has grown and diversified. Finding consensus among 164 members, and an increasingly more assertive group of developing countries, is a tall order. What helped in MC12 is that regardless of the dysfunction most, if not all, WTO members realise the organisation’s importance and are invested in its success even if they disagree on how that success could be achieved. What also helped was having a Director General, Dr. Ngozi Okonjo-Iweala, who is unwavering and committed to working with WTO members to find solutions to address the dysfunction.
To be sure, there remains much unfinished business coming out of MC12. For example, the Fisheries Subsidies Agreement must be ratified and the ‘built-in agenda’ for the negotiation of comprehensive disciplines must be completed within four years if not the Agreement lapses. Members have agreed to accelerate WTO reform and this requires renewed commitment to address longstanding and sensitive issues such as the effectiveness of special and differential treatment and the decision making process.
While not as ambitious as many of us would like, the MC12 “Geneva Package” should be regarded from a “glass half-full” and not “half-empty” perspective. It invigorates new life and confidence in an organization which had been dismissed by some as moribund, and in the rules-based multilateral trading system which affords our Caribbean small States some semblance of equity in an international system where small States’ voices are not always equally heard. Now the hard work truly begins.
Alicia Nicholls is the Junior Research Fellow with the Shridath Ramphal Centre for International Trade Law, Policy and Services of The University of the West Indies, Cave Hill, Barbados. Learn more about the SRC at www.shridathramphalcentre.com.