DEPUTY DIRECTOR-GENERAL ALAN WM. WOLFF
Ambassador Yuri Ambrazevich (Belarus),
Heads of Delegation of acceding governments,
Thank you for the invitation.
I was very pleased to learn last year that this new Informal Group had been established, bringing together all acceding governments. I understand that this Group is now meeting on a regular basis and it serves as a useful platform for information exchange and experience-sharing to advance accession negotiations.
A special tribute is due to Belarus for coordinating this Group, in addition to all the work that it is doing on advancing its own accession.
This morning, I have been asked to speak on WTO Reform. I will share with you some views on where the Reform process stands and how I see the connecting points with work on WTO accessions.
In meeting with acceeding governments these days, I am often asked how the current challenges facing the multilateral trading system and the ongoing discussions on WTO Reform may affect the way in which the system will operate by the time your governments complete the accession process. Or to put it differently: will it become more challenging for acceding governments to join the Organization? These are legitimate concerns. After all, to acceding governments, the WTO may seem like somewhat of a moving target. The precise shape of future WTO disciplines, in some areas, may be yet to emerge.
Before we start speaking about Reform, it is important to acknowledge that the WTO has achieved a lot in recent years. Since 2013, it has delivered new agreements in a variety of shapes and sizes, including the Trade Facilitation Agreement, the expanded Information Technology Agreement, and the elimination of agricultural export subsidies – all areas where accessions have made significant contributions. However, no major changes have been made to update the institution to enable it to deal with 21st century issues. In the meantime, the global trading system, and multilateralism itself, have come under fire.
As the global economy is undergoing change at an unprecedented pace, one of the leading policy debates of the day is how to improve and adapt the rules and operation of the trading system to today's realities. Expanding the scope of the issues covered by the WTO is part of the answer. Of equal importance is the need to address the perceived deficiencies in the current system without prejudice to the core values of the Organization.
While Members do not hold a uniform view on this, there is a desire among many to improve the functioning of the Organization. The debate is under way in capitals and in Geneva, in a variety of formats.
How did we get here? About 18 months ago, at the WTO Ministerial Conference in Buenos Aires, the U.S. Trade Representative called for three major changes in the WTO: significantly improved compliance with notification requirements; an end to the practice of self-designation of developing country status; and ensuring that litigation is not used to achieve what Members are not able to get through negotiation.
Two other announcements were also made in Buenos Aires:
- At the meeting, large numbers of like-minded countries issued joint statements pledging that they will meet and discuss what the trading system should do for E-Commerce; Investment; Domestic Regulation of Services, Micro-, Small- and Medium-sized Enterprises; and the interaction of the trading system with gender. I will come back to these so-called "Joint Initiatives" in a moment.
- Also at Buenos Aires, on the side of the Ministerial Meeting, Three major Members – the European Union, Japan and the United States – issued a joint declaration seeking to build a coordinated response to "non-market-oriented policies" that may skew competitive conditions and undermine global trade. Specifically, the declaration called for new rules to limit industrial subsidies and the build-up of excess industrial capacity; rules to discipline the conduct of state-owned enterprises; and rules to curb forced technology transfer.
Following Buenos Aires, the call for WTO reform found support with French President Macron, who addressed the issue at the time of the OECD informal ministerial gathering last May. Later in the year, Canada invited the EU and twelve other WTO Members to Ottawa to discuss the operation of the WTO. A mandate for WTO reform was eventually endorsed by the G20 on December 1, 2017. The Leaders' Declaration called for "necessary reforms" of the WTO, while also recognizing the important contribution that the multilateral trading system makes. What will be achieved in pursuing the G20 mandate is not yet known, but there are major efforts underway, including by Japan which hosts this year's G20 in June in Osaka.
A number of initiatives and papers have been put forward in Geneva in recent months. They touch on a range of issues, including transparency, notifications, differentiation, and the dispute settlement system. Some are also looking more closely at how the WTO regular bodies can be made more responsive. There is real momentum behind these discussions. Rather than overhauling the existing framework, discussions are focused on taking necessary practical, concrete steps that can have a direct impact on the work of the WTO.
- The Ottawa Group of 13 Members is reviewing how to improve the functioning of WTO committees, i.e. the deliberative function of the WTO. An area of particular focus is the need to improve transparency. Compliance with existing notification obligations has not been even. It is low in many cases, with the exception of SPS and TBT measures. Members are exploring ways to ensure that major changes in measures affecting imports would be notified promptly and not await periodic updates of tariff schedules, or a request for verification by the WTO Secretariat, or a counter-notification by another Member.
- Still in the area of strengthening the work of the WTO's regular bodies, the trilateral initiative of the European Union, Japan and the United States has produced a proposal for an enhanced enforcement mechanism to help ensure that notification obligations are honoured.
- The question of developing country status and who this should apply to has emerged as a key focus of attention. There is an active ongoing discussion on this issue in the General Council, which started in February. The simple separation of the Membership between developed and developing countries has become highly contested.
- Several proposals have been tabled on possible ways to reform the functioning of the Dispute Settlement Understanding. New Zealand Ambassador David Walker, the GC Chair's facilitator (and now also Chair of the Dispute Settlement Body), has been holding consultations with Members. Much of the reform effort was triggered by the crisis created by the United States in blocking appointments to the WTO's Appellate Body. Although observers are looking at December as the deadline - when the terms of 2 additional Appellate Body members of the remaining three are due to expire. The reality is that the situation in December can continue for a year or so beyond as the caseload of the AB is already full, and Rule 15 may be applied for AB Members to continue to serve on divisions where a case has already begun before their term expired. The impasse is already affecting decisions today, as Indonesia and Vietnam in beginning a case have decided that if there is no appeal available, the panel decision for them will be binding and final.
- What is needed is a good faith attempt by all parties to put into place a mutually acceptable outcome, without which an important element of the management of the world trading system, an appellate process, will likely fall away. This can pose serious systemic risks.
In parallel, Members are also actively exploring ways to deliver outcomes for the negotiating arm of the WTO - keeping an eye on the next WTO Ministerial Conference which will take place in Nur-Sultan, Kazakhstan, in June 2020. Work is ongoing on longstanding issues where progress has proved difficult, such as agriculture and food security. Members are also negotiating an agreement on fisheries subsidies. This is a technically and politically very difficult negotiation. Only 8 months remain before the end-of-year deadline that was agreed by Ministers in Buenos Aires and reaffirmed in the GC last July. This is a very important endeavour and a major undertaking led by Mexican Ambassador Roberto Zapata.
Members are also engaging in different, more flexible and innovative ways to deliver progress through the WTO. At the Buenos Aires Ministerial Conference, groups of like-minded Members announced what they call 'Joint Initiatives', to pursue discussions in a number of areas of emerging economic importance, covering: E-Commerce; Investment Facilitation; Micro-, Small- and Medium-sized Enterprises; and Women's Economic Empowerment. Although we must acknowledge that not all Members support these initiatives, it is clear that they have attracted interest and are gaining momentum. For instance, intensive work is underway by 77 Members accounting for 90% of global trade to work together to establish rules on E-commerce. Together they are creating a platform for launching negotiations on new E-commerce rules and disciplines under the WTO. There is a clear recognition that the digital world has become part of the environment in which trade now takes place and that digital protectionism could have negative consequences.
WTO accessions and the Reform debate
The WTO demands investment not only through the continued engagement of the founding Members, but also through the active contribution of those of you seeking Membership through accession negotiations, which can be lengthy and complex. At the individual level, for many applicants - in particular the smaller economies - the main net positive contribution to the multilateral trading system will be made through the domestic reform processes which drive each accession negotiation.
Systemically, however, the accession process also contributes to the evolution of the international trading system – i.e., to WTO rule-making. Overall, more than 1500 commitment paragraphs have been incorporated into the WTO legal framework through the 36 accessions concluded under Article XII since 1995. Each new accession protocol has been adopted with the aim of strengthening multilateral disciplines and has represented a building block for the multilateral trading system. In many instances this has set a new standard for WTO rules. Transparency is a case in point, with over 250 specific commitments in this area alone.
Accession commitments also have the potential to stimulate rule-making discussions at the multilateral level. Members have consistently pursued a set of trade objectives concerning aspects of the current rules in accession negotiations, which have provided an open channel for developing new approaches. Accessions have already been a step ahead of the multilateral trade negotiations in the areas of trade facilitation, tariff rate quota disciplines, and export subsidies. Is there scope for Members to look at the experience of accessions for additional inspiration in the ongoing Reform debate?
In the area of notification and transparency, many Article XII Members have made significant contributions through extensive notifications, sometimes in areas where original Members have underperformed or where multilateral disciplines do not yet exist (such as the notification of privatization programmes). And although the multilateral disciplines have in many ways caught up with the results of accession negotiations with the entry into force of the TFA, some accession transparency benchmarks are yet to be reached (e.g. publication requirements). The fact that acceding members and candidates do more than some existing members in terms of commitments is for their own benefit, ensuring effective reforms and integration into the world trading system, but also benefits the system by lighting the path forward.
As for the differentiation debate, rather than relying on a binary approach, accessions have dealt with the need for differentiation between Members in terms of specific tailor-made flexibilities based on explicitly expressed needs. The Legislative Action Plan has provided a simple and effective tool for defining these needs in a structured manner.
Here and in other areas, the conversation needs investment from all sides. Article XII Members and the observer governments seeking WTO Membership, in particular, are key stakeholders in the ongoing debate and have a voice that should be heard. You should remember that your contribution to the multilateral trading system is of tremendous value.
Finding ways to make the multilateral trading system more effective, which is the focus of the ongoing Reform debate, would make the WTO deliver more for its Members. It would also make the Organization more attractive for those seeking to join (although some might argue that it may also make it harder to join in the first place!).
The Joint Initiatives on e-Commerce; Micro-, Small- and Medium-sized Enterprises; Investment Facilitation; Domestic Regulation of Services; and the Participation of Women in Trade are of significant interest to small and medium-sized developing economies, which make up the bulk of acceding countries. Many Article XII Members are already participating in these discussions. It is also important to note that these Initiatives are open not only to all WTO Members, but also to WTO Observers. Two weeks ago, Belarus became the first acceding government to officially submit a request to join the discussions in the four Joint Initiatives. I understand that some other acceding governments may be contemplating following suit. Participation in the Joint Initiative discussions provides an opportunity to be informed about ongoing work in areas of emerging economic importance, which may pave the way for new trade rules in the future.
Turning to the discussions on DSU reform, a well-functioning DSU is indispensable for the negotiation of new and adherence to existing rules. It is equally important, however, in providing reassurance to prospective Members for many of which the protective umbrella of the dispute settlement mechanism is a key reason for seeking to join the WTO.
This is a time of serious risks, but even more of major opportunities, unparalleled in recent years. To remain relevant, the WTO needs to embrace the metamorphosis that it is currently going through as the "new normal". WTO Members can either adjust to change, and try to direct it to their collective advantage, or ignore it and thereby risk rendering the WTO irrelevant. To quote Director-General Azevêdo, "Multilateralism will not survive if it becomes a synonym for paralysis".
Article XII Members and the observer governments currently seeking accession have a critical role to play in tending the WTO garden. By undertaking irreversible domestic reforms, linked to legally binding commitments, new Members have ensured that the multilateral trading system continues to move forward from the existing commitment levels and never backwards. This puts positive pressure on original Members to level the playing field upwards.
With over one-fifth of the WTO Membership now composed of economies that have gone through the accession process, and with a further 22 (and possibly more) economies in the accession queue, it is inevitable that the results of accession negotiations will continue to inform discussions on the future of the multilateral trading system and will accompany the evolution of WTO rules.
WTO Members who come in through Article XII are generally better equipped to exploit the multilateral trading system than many of their senior partners who had an easier time getting in. Thanks to the rigours of the accession process, they have in place WTO-compliant legislation and institutional mechanisms. Their awareness of the system's challenges and its weaknesses and strengths has been honed by the negotiating process. And more importantly, their political commitment to the WTO should normally be assured due to the difficult political choices that have had to be made at home to meet the demands for domestic reform. In other words, Article XII Members tend to be very good and active friends of the system. All members need to increase their efforts, exercising collective leadership, it the multilateral trading system is to progress and continue to be fit for purpose.
These are exciting times. Your governments should not miss the chance to play their part in shaping the multilateral trading system. The full value of the WTO is in experiencing the benefits of day-to-day membership, and in exercising leadership in the system, like Kazakhstan which is due to host the next Ministerial Conference. It is my hope that several of the acceding governments represented here today will have become active friends of the system, as WTO Members, in the near future.