October 7, 2022

Lukmaan IAS

A Blog for IAS Examination

TOPIC : ANALYZING THE OUTCOME OF 12th WTO MINISTERIAL CONFERENCE

image_pdfPDFimage_printPrint

THE CONTEXT: The WTO’s 12th Ministerial Conference was held in Geneva from 12-17 June 2022. After days of protracted negotiations, the WTO agreed to a series of deals. This article analyses the outcomes of the ministerial conference in detail.

KEY TAKEAWAYS FROM THE MEETING

WTO REFORMS

  •  Members reaffirmed the WTO’s founding principles and committed to an inclusive and open process to reform all of the organization’s operations, from deliberation to negotiation to monitoring.
  • Notably, they pledged to make efforts to ensure that by 2024, all members would have access to a well-functioning dispute resolution system.

GLOBAL FOOD SECURITY

  • Members decided that any export restrictions should not apply to food purchased for humanitarian purposes by the UN’s World Food Programme (WFP).
  • WTO released a statement on the value of trade in ensuring global food security and pledging to refrain from food export bans due to global food shortages and rising prices brought on by the conflict between Ukraine and Russia.
  • Also, to ensure domestic food security needs, countries would be permitted to impose restrictions on food supplies.

E-COMMERCE TRANSACTIONS

  • In 1998, when the internet was still fairly new, WTO members initially agreed to refrain from levying customs duties on electronic transmissions. Since then, the moratorium has been repeatedly extended.
  • However, all participants agreed to extend the long-standing ban on customs duties for transmissions of e-commerce until the following Ministerial Conference or until March 31, 2024, whichever comes first.

COVID-19 VACCINE PRODUCTION

  • In order to facilitate easier domestic production of Covid-19 vaccines, WTO members agreed to temporarily waive intellectual property patents on those products without the consent of the patent holder for a period of five years.

CURTAILING HARMFUL FISHING SUBSIDIES

  • To better protect global fish stocks, the WTO approved a multilateral agreement that would stop “harmful” subsidies on illegal, unreported, and unregulated fishing for the next four years.
  •  Member states have been negotiating the prohibition of subsidies that encourage overfishing since 2001.
  • The current agreement, which establishes new trading rules, is the second multilateral agreement in WTO’s history.

ANALYZING THE INDIAN POSITION

FISH SUBSIDY

  • It was able to ensure that developing economies receive exemptions from fishing subsidies within their exclusive economic zone.
  • Within their exclusive economic zones of the sea, developing nations like India are given a two-year exemption.
  • Additionally, it limits fishing in overfished stocks while providing poorer nations with a two-year reprieve.
  • India’s proposal for a 25 year transition period for developing economies was not agreed upon. But it was able to ensure that subsidies were retained for small scale artisanal fishing.

IPR WAIVER

  • The current deal is a scaled-back version of the initial proposal made by South Africa and India in 2020. They had sought more extensive waivers of intellectual property for vaccines, treatments, and tests.
  • The waiver is limited to vaccines in the final agreement.
  • For developing nations like India, the exclusion of therapeutics and diagnostics has been a huge letdown.

ISSUE OF AGRICULTURE

  • Little progress was also made on important agricultural issues that India and other developing nations have fiercely debated.
  • It has been seeking to allow government-to-government sales of food grains kept in public stockholding programmes such as for the public distribution system.
  • On the grounds that the sale of grains with subsidies could skew global food prices, the proposal was rejected.

PUBLIC STOCK HOLDING ISSUE

  • The requirement for a long-term solution on public stockholding for food security is another ongoing issue where a decision has been repeatedly put off over the years.
  • A permanent solution has been pushed back until the next ministerial conference, which will put it off for another two years.

ELECTRONIC TRANSACTIONS

  • India has requested that the World Trade Organization (WTO) reconsider the extension of the moratorium on customs duties on Electronic Transactions (ET), which include digitally traded services.
  • Broadly, ETs consist of online deliveries such as music, e-books, films, software and video games. They differ from other cross-border e-commerce since they are ordered online but not delivered physically. 
  • India argued that developing countries faced the brunt of the financial consequences of such a moratorium.
  • India said that from 2017-2020, developing countries lost a potential tariff revenue of around $50 billion on imports from only 49 digital products.
  • However, finally, all members decided to extend the moratorium on customs duties.

THE GENEVA PACKAGE

WTO wrapped up the Ministerial Conference’s twelfth outing (MC12), securing agreements on relaxing patent regulations to achieve global vaccine equity, ensuring food security, according to subsidies to the fisheries sector and continuing moratoriums relevant to e-commerce, among others. Together they constitute the “Geneva Package.”

 A CRITICAL COMMENT ON THE WTO MINISTERIAL OUTCOME

The WTO Ministerial Meeting was held after a gap of 2 years due to the Covid- 19 pandemic. Being consensus-based international organisation decision-making on the key issue has been very difficult in WTO. But it is the consensus-based decision-making that keeps apart the WTO from the IMF, World Bank or other international institutions. It was to the credit of the members that they could reach an agreement on the fisheries subsidy. Due to the opposition of the European Union and other rich countries, other important areas like drugs, diagnostics etc. were excluded from IPR Waiver. Also, the issues of agriculture especially the public stock holding program has been pushed further to be discussed in the next conference. Environmentalists also criticized the text of the fishing subsidy agreement calling it highly watered down and not meeting the demand for sustainable fisheries.

As far as  India is concerned the outcome of the conference has many positives while having some negative aspects. For instance, there has been no outcome on the public stockholding program and India’s proposal for exclusion of government to government purchase as also been rejected. On the positive side, India was able to balance its international commitments with respect to the World Food Programme and the domestic need for food security and the protection of the livelihood opportunity of small-scale fishermen.

THE WAY FORWARD:

  • The WTO needs to focus on resolving the existing issues, especially in the context of the Doha Development Agenda before pushing new issues into the discussion table.
  • Although the member countries agreed on the need for reforms in WTO, the content and nature of reforms have not been spelt out. It is necessary to develop a broad-based agenda on reforms and then carry out extensive deliberations to avoid a piecemeal approach.
  • The G 33 needs to work in a coordinated manner and position itself as a pressure group to safeguard and promote the developing country’s interests in a transparent manner.
  • The Dispute Resolution Body of WTO is the backbone of the rule-based world order which was kept dysfunctional thanks to the USA and others. WTO members need to take steps to make this body functional again.
  • The IPR waiver related to Covid-19 drugs and treatment needs to fast-tracked as it is agreed by members that the issue will be reviewed after six months. A comprehensive waiver is necessary for developing the south from a public health perspective.
  • India needs to actively strive to safeguard its core interests while balancing its credentials of a responsible rule-abiding nation.

 THE CONCLUSION: On the whole, when multilateralism is on the downslope WTO outcomes from the 12th ministerial conference opens up new possibilities and opportunities for rule-based world trade order. India has been partially successful in areas such as fisheries subsidies and vaccine patent waivers, but not so much in others such as food subsidies and e-commerce taxation. It is clear that at future ministerial meetings, India must stand firm on issues that are critical to the country’s long-term interests, particularly farmer livelihood issues.

Questions:

  1. Critically analyze the outcomes of the WTO 12th Ministerial Conference 2022.
  2. The outcomes of the 12th WTO Ministerial Conference have been a mixed bag for India. Comment
  3. “The Geneva Package scores more in form, less in substance”. Examine

ADDITIONAL INFORMATION

CLARIFYING CONCEPTS: THE WTO TERMINOLOGIES

WTO AND THE MINISTERIAL CONFERENCE

  • The only international body that deals with international trade regulations is the World Trade Organization. The 164 members of the WTO, which was established in 1995, govern it, and in accordance with its rules, all decisions are made by consensus and any member has veto power.
  • Its objective is to advance free trade, which is accomplished through trade pacts that the member states negotiate and ratify. The WTO offers a forum for nations to discuss trade regulations and resolve business disagreements.
  • The Ministerial Conference is the WTO’s top decision-making body and usually meets every two years.
  • All members of the WTO are involved in the MC and they can take decisions on all matters covered under any multilateral trade agreements.

WHAT IS AoA?

  • To reform the agriculture trade and to improve the predictability and security of importing and exporting countries, the World Trade Organization came up with the agriculture agreement. It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade and entered into force with the establishment of the WTO on January 1, 1995. The three provisions/pillars that the agriculture agreement focuses on are –
  • Market access — the use of trade restrictions, such as tariffs on imports
  • Domestic support — the use of subsidies and other support programmes that directly stimulate production and distort trade
  • Export competition — the use of export subsidies and other government support programmes that subsidize exports.

DOMESTIC SUPPORT

  • There are basically two categories of domestic support — support with no, or minimal, distortive effect on trade on the one hand (often referred to as “Green Box” measures) and trade-distorting support on the other hand (often referred to as “Amber Box” measures).
  • For example, government-provided agricultural research or training is considered to be of the former type, while government buying-in at a guaranteed price (“market price support”) falls into the latter category.
  • Under the Agreement on Agriculture, all domestic support in favour of agricultural producers is subject to rules. The Green Box also provides for the use of direct payments to producers which are not linked to production decisions, i.e. although the farmer receives a payment from the government, this payment does not influence the type or volume of agricultural production (“decoupling”).
  • The “Blue Box” exemption category covers any support measure that would normally be in the “Amber Box”, but which is placed in the “Blue Box” if the support also requires farmers to limit their production.
  • All domestic support measures which do not correspond to the exceptional arrangements known as the “Green” and “Blue” boxes, are considered to distort production and trade and therefore fall into the “Amber Box” category.

DE MINIMIS LEVEL

  • Minimal amounts of domestic support are allowed even though they distort trade — up to 5% of the value of production for developed countries, 10% for developing.
  • All domestic support measures in favour of agricultural producers that do not fit into any of the above exempt categories are subject to reduction commitments. This domestic support category captures policies, such as market price support measures, direct production subsidies or input subsidies.
  •  However, under the de minimis provisions of the agreement, there is no requirement to reduce such trade-distorting domestic support in any year in which the aggregate value of the product-specific support does not exceed 5 per cent of the total value of production of the agricultural product in question.
  • In addition, non-product-specific support which is less than 5 per cent of the value of total agricultural production is also exempt from reduction. The 5 per cent threshold applies to developed countries whereas in the case of developing countries the de minimis ceiling is 10 per cent.

AGGREGATE MEASUREMENT OF SUPPORT

  • The AMS represents trade-distorting domestic support and is referred to as the “amber box”. As per the WTO norms, the AMS can be given up to 10 % of a country’s agricultural GDP in the case of developing countries.
  •  On the other hand, the limit is 5% for a developed economy. This limit is called de minimis level of support. It means that the AMS and the De Minimis Level are similar. Both relate to the Amber box.

SCM

  • The Agreement on Subsidies and Countervailing Measures (Subsidies Agreement) of the World Trade Organization (WTO) provides rules for the use of government subsidies and for the application of remedies to address subsidized trade that has harmful commercial effects.
  • These remedies can be pursued through the WTO’s dispute settlement procedures, or through a countervailing duty (CVD) investigation which can be undertaken unilaterally by any WTO member government.
  • Countervailing measures may be used against subsidies when imports of subsidized goods harm a competing domestic industry. They are used to offset the effect of the subsidy by, for example, imposing a countervailing duty (limited to the amount of the subsidy) on the import of subsidized goods or securing quid pro quo commitments from the subsidizing country (that it will abolish or restrict the subsidy, or that exporters will raise prices).
  • Export subsidies which are in full conformity with the Agriculture Agreement are not prohibited by the SCM Agreement, although they remain countervailable. Domestic supports which are in full conformity with the Agriculture Agreement are not actionable multilaterally, although they also may be subject to countervailing duties.

DISPUTE SETTLEMENT BODY(DSB)

  • Settling disputes is the responsibility of the Dispute Settlement Body (the General Council in another guise), which consists of all WTO members. The Dispute Settlement Body has the sole authority to establish “panels” of experts to consider the case and to accept or reject the panels’ findings or the results of an appeal. It monitors the implementation of the rulings and recommendations and has the power to authorize retaliation when a country does not comply with a ruling.
  • Under the Subsidies Agreement, if a WTO member government believes that a non-permissible subsidy is being granted or maintained by another member government, it can request consultations with that government under the WTO’s dispute settlement procedures..
  • If no mutually agreeable solution is reached in initial consultations, the matter can be referred to the WTO’s Dispute Settlement Body (DSB), which consists of representatives of all WTO members.
  •  The DSB establishes a panel, which reports its findings to the parties to the dispute within a time frame. If the panel finds that the measure in question is a prohibited subsidy, the subsidizing government must withdraw it without delay.
  • But when the appeal is filed in the AB and not yet decided, the practice is that the member country does not withdraw the subsidy immediately. The recommendations of the Panel can only be rejected by the DSB on consensus among the members.

APPELLATE BODY

  • The Appellate Body was established in 1995 under Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). It is a standing body of seven persons that hears appeals from reports issued by panels in disputes brought by WTO Members. The Appellate Body can uphold, modify or reverse the legal findings and conclusions of a panel, and Appellate Body Reports are adopted by the Dispute Settlement Body (DSB) unless all members decide not to do so. The Appellate Body has its seat in Geneva, Switzerland.
  • Currently, the Appellate Body is unable to review appeals given its ongoing vacancies. The term of the last sitting Appellate Body member expired on 30 November 2020.

NAIROBI PACKAGE

  • The Nairobi Ministerial conference was held in 2015 where WTO members decided to eliminate the export subsidies on agriculture and to make new rules on export measures that have a covalent effect. To implement this decision, the developed countries will remove all the subsidies on export immediately and developing countries will have a little longer period to eliminate the subsidies except for a few agricultural products.
  • The decision was taken to give effect to the sustainable development goal of zero hunger and also help the farmers of the poor countries who face intense competition against the rich countries and the artificially boosted exports with the help of subsidies.
  • Members also collectively agreed to engage in finding a permanent solution for developing countries to use the public stockholding programs for food security purposes. Negotiation on a special safeguard mechanism, which allows the developing countries to raise tariffs temporarily on agricultural products in cases of import surges or price falls, was also agreed upon by the ministers.

BALI PACKAGE 2013

  • Members agreed to refrain from challenging the breach of domestic support commitments that resulted from developing countries’ public stockholding programs for food security if certain conditions were met by them. They also decided to negotiate towards a permanent solution for public stockholding for security purposes.
  • A more transparent tariff rate quota administration was called for whereby the governments were not allowed to create trade barriers by how the quotas among importers are distributed.
  • The list of general services includes more spending on land use, Land Reforms water management, and other poverty reduction programs which come under the green box(the Green box is domestic support which is allowed without any limit as it does not distort the trade) were to be expanded.
  • A declaration on the reduction of all forms of export subsidies and enhancement of transparency and monitoring was made.
  • The Bali package also provides for a peace clause that protects the food procurement programs of developing countries from the action of other WTO members if the developing country branches the subsidy ceiling as given.
  •  In the financial year, 2018-19 India became the first WTO member country to invoke this clause. India stated that its rice production was $43.67 billion and it provided subsidies of $ 5 billion to the farmers, which is more than the de minimis level of 10%. To safeguard its domestic support policy the Indian government invoked the peace clause.
Spread the Word