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Info Service on WTO and Trade Issues (Dec25/01) Geneva, 27 Nov (D. Ravi Kanth) — The facilitator overseeing the discussions on the reform of the World Trade Organization on 26 November circulated his findings, under his own responsibility, on changing the core principles of the member-driven and rules-based global trade body, said people familiar with the development. A document sent to members by email on 26 November, seen by the SUNS, contains the findings of the facilitator, Ambassador Petter Olberg of Norway, following small-group meetings on “decision-making”, “development and special and differential treatment (S&DT)”, and “level playing field issues”. The observations of the facilitator, somewhat framed in the idiom “on the one hand and on the other,” seem to have conflated the issues, while concealing the fierce pushback from a majority of members to the proposed changes, said several trade envoys who asked not to be quoted. Significantly, the core issues seemingly plaguing the WTO – such as the “broken” dispute settlement system that is at the heart of the WTO’s enforcement function and other unresolved mandated issues, including in agriculture – appear to have been brushed aside by the facilitator, said a South American trade envoy, who asked not to be quoted. The email from the facilitator starts with the observation that: “Members I have consulted share a common premise: none of them challenges the practice of decision-making by consensus. Consensus remains fundamental to the WTO’s legitimacy, inclusivity, and equity.” “At the same time,” said Ambassador Olberg, “the reality is that few decisions have been taken over the past 30 years”. However, the facilitator’s observation does not reveal why decisions could not be taken or how decisions were “pocketed” (a term used in the trade lexicon) by major industrialized countries such as the Trade Facilitation Agreement while demolishing the Doha Round of trade negotiations in 2015, said trade envoys, who asked not to be quoted. Justifying his seemingly conflated findings, the facilitator said, “In light of this, the need for greater flexibility, improved efficiency, stronger outcome-orientation, and enhanced relevance has been highlighted.” The facilitator added: “For others [perhaps referring to the “Friends of the System” group in which Norway is a key member], decision-making per se is not the problem; rather, deeper engagement on the substantive issues is needed instead of working around unresolved differences.” “Still others [the large majority of members] see the core challenges as stemming from broader institutional weaknesses – eroded trust, unfulfilled mandates, limited inclusivity, and ineffective implementation of S&DT,” the facilitator noted. Interestingly, the facilitator maintained that “others also caution that any changes must be approached carefully so as not to disrupt the delicate balance established in the Uruguay Round.” The facilitator’s failure to mention the Doha Round of trade negotiations, which was primarily launched to address the inequities in the Uruguay Round commitments as well as its implementation failures, appears rather troubling, said several trade envoys, who asked not to be quoted. The facilitator noted that “consensus, they stress, should remain a behavioural norm – grounded in mutual respect, compromise, and constructive engagement.” For many countries, the rules set out in the Marrakesh Agreement take precedence over any “behavioural norm”, said one trade envoy. “If you do not want to upset the delicate balance in the Uruguay Round agreements, then why change the rules based on those agreements?”. CONCRETE CHALLENGES Under the sub-heading of concrete challenges, the facilitator listed the following observations under his own responsibility: * Inability to reach consensus has left parts of the WTO framework outdated, delaying necessary rule updates over time. * The absence of a shared diagnosis of the gridlock’s root causes risks reforms that would address symptoms rather than root causes of the concerns raised. * Insufficient flexibility in the current framework constrains effectiveness in modernizing rules or deepening integration by those willing, even where there would not be material harm to others. * Non-multilateral approaches risk system fragmentation and exclusion of non-participants. * Weakened trust – driven by uneven transparency, lack of inclusivity, and unfulfilled mandates – undermines consensus-building and collective ownership. * Lack of progress on the substantive issues is a challenge, necessitating deeper and more sustained engagement among Members. * Applying consensus rules uniformly across all decision types hinders everyday operations and rulemaking, undermining efficiency. * Applying strict consensus in launching multilateral negotiations can slow progress, undermine efficiency and prompt some Members to pursue non-multilateral approaches. In a somewhat “top-down” approach, the facilitator proposed “possible approaches for ministers to consider for post-MC14 work”, implicitly suggesting a new Yaounde round of trade negotiations, said people familiar with the development. The list of possible approaches proposed by the facilitator include the following: 1. Reaffirm that the practice of decision-making by consensus is central to WTO decision-making. 2. Conduct a comprehensive evidence-based stocktake/audit of what has worked, what has not, and why, including unfulfilled mandates. 3. Assess the drivers behind Members’ decision-making views – why some see a problem and others, not – to support a more inclusive, functional system post-MC14. 4. Explore ways for flexibility to enhance efficiency and support outcomes-oriented approaches with appropriate guardrails. 5. Explore how to better enhance transparency, inclusivity and feedback mechanisms. 6. Explore differentiating amongst types of WTO decisions (e.g., chair appointments, budget, conclusion of agreements/new rules) and consider whether varied decision thresholds could apply. 7. Explore whether initial procedural steps to launch multilateral negotiations could proceed without strict consensus, while preserving consensus for final outcomes. In some ways, the approaches proposed by the facilitator seem akin to corporate management edicts and not for a treaty body with a diverse membership and differing interests, said a trade envoy, who asked not to be quoted. S&DT & DEVELOPMENT Reflecting on S&DT and Development, the facilitator said that “Trade and WTO rules are important enablers for growth and development for all Members.” He stated that “development is a central and cross-cutting theme in the WTO’s work.” Without mentioning the US proposal in 2020 on “differentiation” among developing countries for availing of S&DT, which was then opposed by China, India, and several other developing countries, the facilitator seems to have reflected the views of the US, Japan, and the European Union among others by saying that “members hold differing views on how best to advance development within the WTO, including in relation to S&DT.” Ambassador Olberg argued that “while Members recognize that development extends beyond S&DT, S&DT remains key. Not a single Member I consulted advocates elimination of S&DT.” “Rather, the concern is about its effectiveness,” the facilitator said. With regards to what he considers as “concrete challenges”, the facilitator listed the following issues: i. Development challenges persist: While progress has been made and WTO rules have contributed, many developing Members and LDCs continue to face significant obstacles that limit their ability to fully achieve their trade and development goals and fully integrate into the multilateral trading system. ii. Lack of Effectiveness of S&DT: Blanket application of S&DT; Outdated, redundant, or non-operational provisions; Untargeted, open-ended exemptions; Implementation gaps, not design, create shortcomings; Difficulty in adapting S&DT to evolving development needs of Members. iii. Lack of Differentiation and Criteria for S&DT: Lack of objective criteria or transparency to determine who qualifies; A one-size-fits-all approach is unsustainable; Politically sensitive nature of imposing external criteria. [After several rather convoluted remarks, the facilitator comes to the topic of “differentiation” in a surreptitious way, according to one trade envoy]. iv. Lack of Integration and Equity: Development should include fair distribution of trade outcomes, not only S&DT; Need to ensure that S&DT supports genuine integration; Some developing Members have become major competitors yet still enjoy S&DT including exemptions. v. Lack of Flexibility, Needs-Based Support, and Responsiveness: Current S&DT lacks needs-based or targeted approaches; Absence of mechanisms for crisis responsiveness, waivers, or “trigger-ready” measures; Balancing flexibilities while maintaining treaty obligations is complex. vi. Political and Institutional Challenges: Potential destabilization of treaty balance if S&DT is altered; Different views on whether reform should focus only on future negotiations or also correct imbalances caused by existing rules. vii. Technical Assistance and Capacity-Building Challenges: Weak alignment between technical assistance and S&DT implementation; Lack of systematic tools to monitor or assess S&DT utilization and impact; Concerns over neutrality, oversight, and accountability in Secretariat support. To address these challenges, the facilitator proposed the following approaches for “Ministers for post-MC14 work”: * Have Evidence-Based Approaches such as compiling “factual information on S&DT use, beneficiaries, and gaps to support a fact-based reform discussion”; and using “Trade Policy Review findings to better link technical assistance to actual needs”. * Maintaining Legitimacy and Balance: “Reaffirm treaty-embedded nature of S&DT”; “Make S&DT precise, effective and operational”; and “Avoid destabilizing the Marrakesh balance while modernizing provisions.” * Explore Targeted and Needs-based Approaches: “Explore shift from open-ended exemptions to time-bound, targeted S&DT based on demonstrated need”; “Explore voluntary opt-outs for those in a position”; “Explore a flexible approach, allowing Members to access S&DT in agreements where needed, and opt out where it is not”; and “draw comparative lessons from other international organizations using needs-based approaches”. * Explore Defining Differentiation Criteria: “Explore objective criteria for S&DT eligibility (e.g. percentage of global trade, World Bank income level, OECD membership) while considering limitations of GNI (gross national income) only approaches”; “Explore mechanisms for others to challenge one’s self-designated status for transparency and accountability”; and “consider gradual politically sensitive differentiation approaches that respect sovereignty”. * Improve Implementation and Responsiveness: “Explore “trigger-ready” mechanisms or crisis waivers to enhance adaptability”; “Align S&DT provisions with evolving economic realities, including graduation and transition mechanisms for LDCs”; and “Explore making flexibilities more effective and credible by targeting rather than eliminating them”. * Strengthen Capacity-Building and Technical Support: “Strengthen coordination and impartiality of technical assistance”; and “Ensure closer alignment between capacity-building and S&DT provisions to enhance operational impact.” “LEVEL PLAYING FIELD” The facilitator offered his reflections on exploring reform for “leveling the playing field”, which seems to be largely based on a joint paper issued by the US, the EU and Japan in 2020 aimed at targeting China, said people familiar with the development. In his introduction on this topic, the facilitator maintained that “calls for reform aimed at fostering a level playing field stem from concerns that certain aspects of the WTO rulebook – and the way the system functions today – have not kept pace with profound shifts in the global economy.” The facilitator ought to have mentioned whose “calls for reform” he is reflecting on, said people familiar with the development. “All Members I have consulted agree that this is the issue of the moment,” the facilitator said, adding that “every Member is affected in some way, and there is a strong, shared call for reform.” He continued: “Fairness, however, means different things to different Members. Views differ widely on how to achieve a level playing field.” The facilitator said: “A range of views has been expressed, including overcoming barriers to industrialization, policy space for industrialization and economic diversification and the ability to compete on fair terms, addressing issues in agriculture, improving transparency and notifications, addressing dispute settlement concerns, advancing open and market-oriented policies, tackling fragmentation, unilateral actions, and preferential arrangements.” The facilitator, however, did not clarify the supposed “unilateral actions” – whether they relate to the Trump administration’s unilateral reciprocal tariffs or China’s alleged subsidies to state-owned enterprises. “Given this broad spectrum of perspectives, Members emphasize the need for a more focused and structured approach to these discussions,” the facilitator noted. The facilitator highlighted the following “level playing field” issues: a. Diverse Interpretation of Fairness and Rules Not Fit for Purpose: Current rules are increasingly seen as insufficient for today’s trade realities; Some stress that trade-distorting state interventions undermine a level playing field, while others underline the role of targeted state support in achieving development and diversification; b. Policy Space and Development Needs: Many developing Members and LDCs view current rules as too rigid to support structural transformation, industrialization and diversification; The ASCM and related disciplines are seen by some as constraining policy tools even as others stress the need to prevent trade distortions; Persistent disparities in agricultural and other sectoral support, including differences in Members’ ability to use subsidies in the past and present, contribute to perceptions of unequal competition. c. Subsidies, State Interventions and Other Distortions: Rules are viewed as outdated; Non-actionable subsidy provisions are inactive; Perceived gaps in the current framework for assessing harm caused by subsidies, both in terms of economic methodology and in how rules capture complex state support; Developing economies face challenges to fair competition not only from state subsidies but also from broader sources of distortions such as dominant suppliers and anti-competitive practices. d. Transparency and Compliance Concerns: Lack of effective compliance with notification obligations limits ability to respond effectively; Capacity differences hinder compliance; Enforcement and dispute settlement has curtailed effectiveness of WTO remedies; Lack of transparency in the application of standards and rules significantly constrains exports from developing and LDC members. e. Institutional and Forum Challenges: Lack of cross-cutting avenue to discuss national policies and trade impacts; f. Inclusiveness and Development Orientation Challenges: Fairness concerns span many areas which should be recognized (critical minerals, TRIPS, TRIMs, S&DT, NTMs); Structural disadvantages of developing Members and LDCs hinder participation. The facilitator’s approaches to address the “level playing field” challenges include the following: I. Recommit to WTO Rules and Principles: * Reaffirm Members’ commitment to upholding WTO rules and disciplines. II. Explore Rule Reform and Updating Mechanisms on Subsidies, State Interventions and Other Distortions: * Explore updates to ASCM rules and non-actionable subsidies. * Focus on harm caused by subsidies rather than narrow definitions. * Recast WTO rules to better support development objectives. III. Explore Development-Oriented Approaches: * Explore flexible policy tools to promote structural transformation, industrialization and economic diversification. * Address agricultural and sectoral imbalances. * Explore introducing a Development Review Mechanism to assess rule impacts. * Strengthen Aid for Trade to address industrial competitiveness infrastructure. In a nutshell, the facilitator’s seemingly “top-down” approach appears to be fraught with dangers, and it could collapse outright, several trade envoys warned. +
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