WTO Abu Dhabi Conference: Stalemate or Stepping Stone

It’s only 20 months since the WTO last had a ministerial conference.  Usually, it’s at least two years between meetings but the previous conference was delayed by COVID, so there’s an element of making up for lost time.  “MC13” – the Thirteenth Ministerial Conference since the WTO’s establishment in 1995 – will take place in Abu Dhabi from 26-29 February.

The agenda is extremely broad and there are only three and a half days for Ministers to achieve consensus.  The less controversial items have been largely dealt with through assiduous preparation in Geneva but, as is usual on such occasions, going into the conference a core of big-ticket items remains outstanding.  The WTO certainly seems to have a knack for setting itself up to fail…although it also has a history of pulling off narrow escapes.

Director-General Ngozi Okonjo-Iweala recently said that, while she was encouraged by members’ stamina and passion in advancing the MC13 preparations, “frankly speaking, we are still not where I would have wished us to be…”  But, she went on “…we never say never. We are going to get it done.”

Fortunately, ‘getting it done’ can encompass a range of outcomes – from full to partial agreement, to rolling negotiations forward to the next conference. At the risk of over-simplifying, there are three major issues which are likely to capture attention as the conference unfolds. It’s no surprise that they evoke a sense of déjà vu.

Casting the net again: Fish 2

First, a partial agreement on fisheries subsidies was reached at the last ministerial.  This was (understandably enough given the WTO’s patchy track record in negotiations) trumpeted at the time as a major success.  But in fact the agreement (now dubbed “Fish 1”) failed even to address one of the key Sustainable Development Goal targets – prohibiting harmful fisheries subsidies which contribute to overcapacity and overfishing.

Overcapacity and overfishing are now the subject of ongoing “Fish 2” negotiations.  The most recent text going into the conference is thought by some members to provide too much latitude for subsidisers to defend their subsidies on relatively easily justifiable sustainability grounds.  However, the major subsidisers of distant-water fishing fleets will not readily accept stronger disciplines. Another issue relates to the scope of carve-outs for developing countries.  Positions going into the conference remain far apart and it is by no means certain that these are reconcilable at MC13.

Agriculture – hard toil

Secondly, the long-running negotiations on highly sensitive trade in agriculture are still stalled.   The good news is that many (but as yet far from all) members are putting the baggage of the last 20 years of failed negotiations, and the now outdated assumptions on which they were based, behind them.  They are refocusing instead on the new challenges such as food insecurity and sustainability, which provides an opportunity to rekindle negotiations.  The bad news is that the sharp divisions between agricultural exporters, those with largely defensive interests, and developing countries persist.  Reforming domestic support (i.e. subsidies) is still seen as the highest priority but market access and export restrictions which exacerbate food insecurity are also controversial.

A potential flashpoint concerns subsidies associated with public stockholding for food security.  While stockpiling food is permitted under WTO rules, food purchases at  “administered” prices which are higher than market prices are considered to be subsidized and hence the support provided is counted towards a country’s overall ceiling on trade-distorting support under current WTO rules.

The 2013 Bali Ministerial Conference agreed that then-existing public stockholding programmes would be shielded from any legal challenge under the Agreement on Agriculture subject to various conditions until a permanent solution was found.  India has been leading a major push for developing countries to be given a freer hand in this area and for the promised – but still elusive – permanent solution (which would cover new programmes) to be delivered.  This is being strongly resisted by farm exporting countries, which feel that public stockholding programmes cannot be considered in isolation and that the permanent solution has to be part of a broader package of reform of trade-distorting support.  India has threatened to block any progress on agriculture if it doesn’t get its way.

Probably the best that can be hoped for at MC13 is a roadmap or work plan for future negotiations leading to MC14.  This would at least get agriculture back on a common track.

Dispute settlement – not yet settled

Thirdly, as is well known the US has, since 2019, single-handedly blocked appointments to the Appellate Body, rendering the upper tier of the WTO’s dispute settlement system inoperative.  The US was incensed at what it saw as judicial overreach, especially with respect to its cherished – but suspect – practice of “zeroing” in anti-dumping investigations.  It had other criticisms of the WTO’s dispute settlement system as well, some of which were shared by other countries.

Intensive talks in Geneva have produced convergence on some areas of reform: “alternative” dispute settlement methods such as conciliation and mediation, panel proceedings including streamlining of panel procedures, compliance, guidelines for adjudicators, procedures to discuss legal interpretations and Secretariat support.  However, there is no agreement yet on the key issue of the future of the Appellate Body and indeed the US has signalled that it is not going to move at MC13 (especially since this is a presidential election year).

The draft Ministerial Decision on Dispute Settlement Reform for MC13 is procedural in nature.  It simply recognizes the progress made to date, and instructs officials to accelerate discussions and work on unresolved issues, including issues regarding appeal/review.  Accordingly the outlook, once again, is that no substantive decision will be taken and negotiations will be rolled forward after MC13.

That said, it’s worth noting that new dispute cases are still being brought to the WTO, albeit less frequently than when the Appellate Body was in operation. And the Multi-Party Interim Arbitration Arrangement (MPIA), which is an agreement between some WTO members to mirror Appellate Body procedures in disputes between them, is up and running.

E-commerce – a real deadline

Notwithstanding the likelihood of these three key negotiations being rolled forward, there is one hard deadline at MC13 which cannot be ducked.  This concerns the longstanding moratorium on imposing customs duties on electronic transmissions, which will expire at MC13 unless it is renewed.

At issue is whether customs duties could or should be applied to the content of cross-border digital transmissions. Countries such as India, South Africa and Indonesia want to have the policy space to be able to do so.  A much larger set of WTO members – including China, Japan and the EU – think the moratorium should be renewed.

It’s an important issue because the WTO could end up restricting trade rather than facilitating it.  For the first time, customs duties could potentially be applied to trade in services, which would add yet another layer of cost and bureaucracy for firms to deal with.

Some observers think it would be difficult in practice to apply tariffs to electronic transmissions but large segments of the international business community are sufficiently worried to be mobilising.  To take one example, no fewer than 178 trade and industry associations from all over the globe issued a statement at the beginning of February in support of extending the moratorium. They point out that the moratorium is particularly beneficial to MSMEs while internal taxes would be a preferable means of raising revenue if considered necessary.

Some uncertainty surrounds the position of the US.  Historically it was at the forefront of previous efforts to renew the moratorium but more recently questions have arisen as to how committed it now is.  Meanwhile, there are expectations that India will use its opposition to the moratorium as leverage to get its way on other issues such as public stockholding in agriculture.

This issue could go either way.  On balance and taking an optimistic view, it seems possible that the moratorium will in the final analysis be extended, but only until MC14 and subject to ongoing assessment of its impact through a work programme.

‘Open plurilaterals’ – still an open question

Related to the e-commerce work programme, there will be a subplot in Abu Dhabi on a number of so-called ‘open plurilateral’ negotiations that have been taking place in the margins of the WTO in Geneva.  These are not formally on the MC13 agenda but proponents will be looking to use the opportunity to advance their cause. One such item is a “Joint Initiative on E-commerce”, in which participation has now grown to 90 (out of 164) WTO members accounting for 90 percent of world trade.

This substantial group – which includes the US, EU and China – is within reach of an agreement.  The main thrust is to facilitate e-commerce through providing a common basis for practices such as electronic contracts, signatures and invoices, while also promoting common approaches to other factors such as treatment of data and access to the internet.  There is still work to do on some subjects such as electronic payments and on the scope of the agreement – significantly, whether it would cover financial services.

In passing, the ambition of this potential agreement was lowered last October when the US suddenly withdrew its interest in key areas under negotiation such as disciplines on restrictions on data flows and data localization, and on mandatory disclosure of source code.  This caused a degree of dismay not only in some parts of the tech community but also among US allies in Geneva who now want to proceed with what is already on the table while, if possible, keeping the door open to come back to these missing elements.

The bigger institutional question is how ‘plurilateral’ agreements, such as that on e-commerce, as well as similar agreements on investment facilitation and services domestic regulation, developed among significant subsets of the membership, can be incorporated into the WTO legal framework.  At present a consensus among the whole membership is required in order to do so. India and South Africa have voiced objections but many others think this is a pathway to rescue the WTO from negotiating paralysis.  The WTO badly needs to become nimbler in this area which is a vital aspect of much-touted reform.  Pressure will continue to mount as further initiatives in the trade and environment policy space are coming down the line.  MC13 could be used as an occasion to advance this process.

No breakthrough but…

It’s clear that MC13 is not going to be a breakthrough conference.  That will understandably disappoint strong supporters of the multilateral trading system – or alternatively, confirm the prejudices of cynics who already think the WTO is doomed to irrelevance.

However, the meeting comes at a time of enormous political and economic uncertainty.  International economic cooperation is out of fashion and it’s unrealistic to expect the WTO, as a “member-driven” organization, to buck the trend.

In the current hostile environment, even modest outcomes at MC13 would constitute a step forward.  There would be grounds for hoping that tangible results were coming within reach on a whole range of major issues – fisheries subsidies, agriculture, dispute settlement and WTO reform more broadly, as well as digital trade.  Admittedly the process is much slower than many would like but MC13 offers an opportunity to provide a solid foundation on which to build a better future for the world trading system.  It should be taken.