Caribbean Trade Law and Development

Tag: SVEs

  • Urgent WTO reform needed, says G20 Trade and Investment ministers

    Urgent WTO reform needed, says G20 Trade and Investment ministers

    Alicia Nicholls

    Trade and investment ministers of the world’s twenty leading industrialised economies (G20) have called for urgent reform of the World Trade Organisation (WTO) to ensure its ability to “face current and future challenges”. This is according to the Ministerial Statement released following the G20 Trade and Investment Ministerial Meeting held on September 14, 2018 in Mar del Plata, Argentina.

    The 164-member WTO serves not just as the only multilateral forum for the negotiation of global trading rules, but is a forum for the orderly and peaceful resolution of trade disputes amongst WTO member countries. While the Ministerial Statement does not detail what specific reforms the G20 Ministers deem necessary, it implores all G20 member countries and other interested parties to explore ideas to safeguard the continued relevancy of the multilateral trade governance organisation. G20 member countries have also ‘stepped up’ dialogue on current international trade developments.

    The statement comes in the wake of increased threats to the multilateral rules-based trading system. The most recent are the current escalating trade tensions between the US and China manifested in the imposition of billions of dollars’ worth of tariffs on goods by both sides. It also comes  amidst new threats by United States’ President, Donald Trump, to withdraw the US from the WTO, which he perceives to be inherently biased towards the US. This is, despite independent research showing that the US, which is the most litigious of the WTO member countries, wins about 91% of the trade disputes in which it was the complainant, and 89% of cases as respondent. Despite this positive track record, the Trump administration continues to block Appellate Body judge selections, which threatens to grind the WTO’s once vaunted dispute settlement body system to a halt.

    Concerns about the relevance of the WTO predate the Trump administration, with a major concern being the WTO’s consensus-based decision making model which requires agreement by all member countries for progress to be made. Out of frustration with the slow pace of the Doha negotiations and the refusal to include new emerging issues into negotiations, there was a marked shift in the US focus during the Obama Administration from the now defunct Doha Development Round negotiations towards the negotiation of mega regional trade agreements. However, the Trump administration marks the first time a US administration has openly threatened to withdraw from the WTO, an organisation it was instrumental in pushing for and forming.

    One positive aspect to the Trump administration’s anti-WTO stance and actions is that they have given new urgency to the need to reform the WTO to secure its relevance, efficiency and effectiveness for all members, including small vulnerable economies (SVEs). SVEs account for only a tiny fraction of world trade, but generally have high levels of trade openness and a narrow range of exports and export partners. As such, any unfair trade practices by one of their major trading partners which prejudices an SVE’s exports, could have a deleterious impact on its economy and development prospects.

    Despite the problems inherent with the consensus-based decision making model, the removal of such a system would likely undermine the WTO’s legitimacy and disenfranchise less powerful member countries, such as SVEs. The WTO is of particular importance to SVEs because it is one international organisation in which they have equal voice, and because, at least in theory, it provides a mechanism for small States to hold hegemons to account when they engage in unfair trade practices. This, however, has not always been the case. For instance, Antigua & Barbuda’s inability to receive compensation from the United States following the rulings in the US-Antigua Gambling case is the most glaring example of how power asymmetries affect small States’ ability to hold powerful States to account, even where rulings have been made in their favour.

    There have been numerous calls for reform of the WTO over the years, as well as several studies, including this one by Bertelsmann Stiftung, which have posited recommendations. Encouragingly, current Director General of the WTO has expressed support and willingness for reform of the organisation, noting that some countries have already begun talks. It is hoped that CARICOM countries, as well as other SVEs, will demand a voice in these discussions and offer their ideas for reforming the WTO to ensure it meets their needs. The presence of CARICOM at the G20 Trade and Investment Ministers meeting, represented by Jamaica, is a good start.

    Despite the WTO’s shortcomings, the fact that non-Members continue to pursue accession to the WTO show that countries generally still see value in the organisation.

    In essence, the G20 Statement shows support in principle, at least from a majority of the world’s largest economies, for the continuation of the rules-based multilateral trading system which the WTO affords and states commitment towards making the reform of the WTO an urgent priority. Now these words must be translated into action.

    The full G20 Trade and Investment Ministers’ Ministerial Statement may be read here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • WTO General Council Agrees Draft Ministerial Decision on Small Economies

    Alicia Nicholls

    On November 30th, the General Council of the World Trade Organisation (WTO) agreed on a draft ministerial decision on small economies which affirms WTO Members’ commitment to the work programme on small economies which was adopted in 2002.

    The Draft Decision

    Under the Draft Decision agreed to this week, WTO members meeting as the General Council have:

    • Affirmed their commitment to the Work Programme on Small Economies
    • Taken note of the work carried out since 2013, including on the challenges and opportunities faced by small economies in linking into global value chains in trade in goods and services
    • Instructed the CTD to continue its work in Dedicated Session under the overall responsibility of the General Council.
    • Instructed the Dedicated Session to consider in further detail the various submissions that have been received to date, examine any additional proposals that Members might wish to submit and, where possible, and within its mandate, make recommendations to the General Council on any of these proposals.
    • Indicated that the General Council will direct relevant subsidiary bodies to frame responses to the trade-related issues identified by the CTD with a view to making recommendations for action.
    • Instructed the WTO Secretariat to provide relevant information and factual analysis for discussion among Members in the CTD’s Dedicated Session
    • Requested the WTO Secretariat to also conduct work on the challenges small economies experience in their efforts to reduce trade costs, particularly in the area of trade facilitation.
    • Mandated the CTD in Dedicated Session to continue monitoring the progress of the small economy proposals in WTO bodies and in negotiating groups

    The Draft Decision has been forwarded to the Ministerial Conference to be held in Nairobi, Kenya later this month for adoption by the WTO ministers.

    Brief background on Small Economies 

    The Small Vulnerable Economies (SVEs) do not form an official sub-category of WTO members but are one of the negotiating coalitions in the WTO which have been active in the negotiations on agriculture, NAMA and fisheries rules.

    These small states, which  account for only a small fraction of world trade, pushed for WTO recognition of the unique  challenges they face in participating in world trade because of their small size, concentration of exports, distance from major markets, lack of economies of scale and limited trade capacity. They also expressed concern about what they saw was an erosion of their policy space.

    The countries which have been spearheading the SVE initiative are small island states in the Caribbean and the Pacific and smaller Central and South America nations like Honduras, El Salvador and Paraguay.

    The Doha Ministerial Declaration of November 20, 2001, which provided the negotiating mandate for the Doha Development Agenda negotiations, provided for a work programme “to examine issues relating to the trade of small economies”. Paragraph 35 of the Declaration states the objective of the work programme is to:

    frame responses to the trade-related issues identified for the fuller integration of small, vulnerable economies into the multilateral trading system, and not to create a sub-category of WTO Members.

    The Work Programme on small states is being done under the auspices of the General Council which instructed the Council on Trade and Development (CTD) in March  2002 to hold dedicated sessions  on the work programme and make periodic progress reports to the General Council, making the work programme on small states an agenda item of the General Council.

    Under paragraph 41 of the Hong Kong Ministerial 2005 a two-pronged track was agreed where the CTD was instructed, under the General Council’s responsibility, to continue the work in the Dedicated Session and to monitor progress of the small economies’ proposals in the negotiating and other bodies. The aim of this was to be able to provide responses to the trade-related issues of small economies.

    So far several Ministerial and General Council decisions have been taken and proposals by SVEs have been made in areas such as agriculture, industrial goods, service trade and trade facilitation. These decisions as well as proposals are routinely compiled by the WTO Secretariat to show what has been achieved under this agenda item so far. The text of the most recent WTO Secretariat compilation paper of October 16, 2015 may be found here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. Please note that the views expressed in this article are solely hers. You can also read more of her commentaries and follow her on Twitter @LicyLaw.