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Good evening ladies and gentlemen,
I am happy and honoured to be at Georgetown University Law Center
tonight and pleased that Professor Jackson invited me to exchange views
with you on trade issues. This is quite a treat for me and I would like
to thank Professor Jackson and Dean Aleinikoff for this unique
opportunity.
Today I would like to share with you what is happening in an area of
work in the World Trade Organisation that may not necessarily be on your
radar screens.
In the media and in the literature, much attention is given to WTO
negotiations and to WTO disputes. But very little, if anything, is said
about the actions between these two activities, that is the WTO mandate
to ensure voluntary implementation of the Agreements by Members.
The theory of the separation of state powers as enounced by Montesquieu
identified a legislative, an executive and a judiciary powers. In
international relations and within international organizations, this
division is less pertinent, since the main actors remain the Westphalian
nations-states. This is especially true with respect to the so-called
“executive functions”, which would deal with the implementation of the
rules negotiated by some form of a “legislative”.
Within the concept of separation of powers, “monitoring and
surveillance” would be found somewhere between the executive and the
judiciary. In the WTO, this results in a sui generis mix of individual
and collective actions — occasionally assisted by the Secretariat — aimed at exploring, understanding, discussing and influencing Members'
implementation of their negotiated obligations. The WTO monitoring and
surveillance function has been expanding and, in my view, will continue
to do so as WTO obligations are deeper and deeper in scope and
complexity. Today, this activity absorbs around half of the WTO
Secretariat resources and of its wealth of knowledge and technical
expertise.
On a more personal level, I am convinced that this is one of the areas
where the WTO can contribute to harnessing globalization: the WTO offers
forums where States can discuss and explore how best to operationalize
the positive dimensions of market opening on the one hand, and the need
for measures that translate the results of negotiations into real
benefits for all Members, their economic operators and their people, on
the other.
So tonight, I propose first to discuss what I mean by “surveillance and
monitoring”, in the WTO. Then, I will provide you with a brief overview
of the existing monitoring and surveillance mechanisms in the
Organization, especially the ones resulting from the Uruguay Round.
Finally, I will address the additional monitoring mechanisms currently
under consideration by WTO Members in the on-going Doha Round. I will
conclude with a few comments on why and how I believe that expanding
this activity in the WTO could improve international trade relations.
What do I mean by monitoring and surveillance in the WTO?
Multilateral trade negotiations, as you all know, are difficult and tend
to be quite long. Once negotiations are completed, real work begins for
Members to implement the agreed obligations. What would be the purpose
of negotiating detailed trade rules, if they were not implemented? It is
in this context that the so-called “monitoring and surveillance” comes
into play.
The terms monitoring and surveillance cover a continuum of actions. On
one end of the spectrum we have voluntary or binding transparency and
notification obligations. On the other end we have actions undertaken by
Members to ensure implementation of WTO a commitment, short of
initiating a dispute.
Active Transparency in the WTO
Let's look at the traditional mechanisms of what I would call
“active
transparency” in the WTO.
I would like to start with GATT/WTO notifications and publications.
Transparency is one of the main pillars of the multilateral trading
system and pervades all actions related to implementation. Transparency
between Members has always been a basic GATT obligation. The old GATT
contained multiple notification, publication and transparency
requirements, both at the national or domestic level — what at home we
would call “publication”, and at the WTO we call “notifications”.
The basic provision on transparency and publication is contained in
Article X of GATT. It calls for Members to publish promptly in a
domestic accessible Gazette any measures (laws, regulations, judicial
decisions, etc.) relating to GATT matters, as well as any agreements
affecting international trade policy. The purpose of this provision is
to allow governments and trading entities to become familiar with those
laws and regulations.
Members are also required to notify all laws and regulations of general
application concerned with WTO matters. This includes all actions and
measures covered by the WTO provisions. Since the Tokyo Round, there has
been an obligation to notify specific measures affecting the operation
of the GATT. The WTO has multiplied notification obligations to add
specific requirements pursuant to some of the new WTO agreements. Only
in the area of trade in goods, there are currently more than 175
notification requirements!
Since the advent of the WTO, there are also cross-notifications, whereby
a Member notifies the WTO of a measure not notified by another Member.
This process ensures further transparency and forces the originating
Member to justify its position regarding such cross-notified measure.
Following the WTO Decision of 2002 Destricting access to WTO documents,
and with the help of modern technology, essentially all notifications by
WTO members are now accessible on the WTO website. This is important as
it is often the private operators, not the governments themselves, who
will be most affected by the proposed or enacted measures that are
notified.
But publishing measures domestically and notifying them to the WTO may
not be sufficient to ensure full transparency. Full transparency also
requires an understanding of what is being notified. And this is where
our unique system of “peer review” in committees and other bodies comes
into play. This is what I call “active transparency”.
Traditionally in the GATT, and still today in the WTO, monitoring and
surveillance takes place in standing committees, through reviews of
notifications, questions, examination of individual policies against the
relevant WTO Agreements, and other procedures of control. Generally, the
right of Members to request information, necessary for any monitoring,
flows from the obligation of domestic publication and of WTO
notification. Some agreements, such as the one relating to Technical
Barriers to Trade (TBT), the Agreement on Sanitary and Phytosanitary
Measures (SPS), the Agreement on Trade-Related-Investment Measures
(TRIMS) or the General Agreement on Trade in Services (GATS), also
contain obligations on Members to maintain “enquiry points”, where any
Member can request information on any trade-related law, regulation or
measure in place domestically.
Let's take the example of the TBT Committee. Since 1995, more than 8,000
TBT notifications have been submitted to the TBT Committee. At each TBT
Committee meeting, a substantial amount of time is spent discussing
specific trade concerns — in most cases relating to measures that have
been notified. Typically, the most common concerns raised by Members
relate to whether the design or application of the measure creates an
unnecessary barrier to trade, the need for more clarification about the
legitimate objective of the measure and the use of international
standards.
Let me give you an example. In March 2004 and then again in August 2006,
Switzerland notified a draft ordinance on measures to reduce particle
emissions from diesel engines. The European Communities, supported by
the United States, raised concerns about these measures, in particular
with respect to their trade restrictiveness and the need for Switzerland
to comply with existing international standards. The discussions lasted
over several TBT meetings. At the last meeting of the TBT Committee, in
July 2007, Switzerland informed the Committee that, further to the
comments received by WTO Members, the Swiss authorities had decided not
to proceed with the introduction of the above mentioned draft ordinance.
Switzerland will instead be introducing emission limit values of the
European Union's standards.
The monitoring and surveillance of the Committee on Sanitary and
Phytosanitary Measures — the SPS Committee — also examines thousands of
such measures.
For example at the SPS Committee meeting in October 2005, Sri Lanka
reported that they could no longer export cinnamon to a number of EU
Members States, and in particular Germany, which applied a specific
legislation limiting residues of sulphur dioxide in cinnamon. Although
the Codex Alimentarius — which is world's standardizing body for food
safety — had standards for sulphur dioxide in other spices, it did not
have a specific one for cinnamon. Given the huge impact of such a
measures for Sri Lankan exports, and subsequent to the SPS meeting, the
EC agreed to help Sri Lanka pursue this issue at the European level. At
the same time, Sri Lanka was encouraged to seek a specific Codex
standard for sulphur dioxide in cinnamon. At the SPS meeting in October
2006, Sri Lanka reported that the problem with access to the EC market
had been resolved, and that the Codex had adopted an international
standard for sulphur dioxide in cinnamon in July 2006.
If I have mentioned these examples is to show just how these “active
transparency” through our committees allow Members to review and
“dissect” the notifications and monitor whether negotiated rules are
actually and effectively implemented. It is clear that in many of these
cases, it is unlikely that a number of developing countries would have
been in a position to litigate many of such measures. However, exposing
these measures to the public and collective scrutiny within the
Committees creates pressure to resolve differences.
A special mechanism : the Trade Policy Review Mechanism
One of the success stories of the Uruguay Round was the establishment of
a new Trade Policy Review Mechanism. It involves periodic reviews of
trade and trade-related policies, practices and measures of each WTO
Member. The reviews take place in the Trade Policy Review Body (TPRB),
which is composed of representatives of all WTO Members. The largest
trading entities — the United States, the European Communities, China
and Japan — are reviewed every two years; the next 16 trading partners
are reviewed every four years; the remainder of the Members are reviewed
every six years, although a longer period may be allowed for
least-developed countries. Each review is based on a report prepared by
the Member under review and on a report drawn up by the WTO Secretariat
on its own responsibility. Both reports are published by the WTO.
The objective of this exercise is to achieve greater transparency in,
and understanding of, Members' trade policies, practices and measures.
It allows for the evaluation of trade and related policies and measures,
including those that do not necessarily contravene, or indeed may not
even be subject to, WTO obligations. WTO Members value the
“non-confrontational” nature of the Trade Policy Reviews. The depth and
quality of the WTO Secretariat analysis is increasingly praised by our
Members. Many other international organizations are now exploring the
possibility of developing their own “policy review mechanism”, based on
this experience.
As you can see, the WTO has today a strong monitoring agenda, which will
only expand in the future, as evidenced by the state of the on-going
negotiations under the Doha Development Round. Pending the conclusion of
the Round, a number of monitoring mechanisms are already functioning
provisionally, such as the one relating to Regional Trade Agreements (RTAs).
Many others are being currently discussed in the context of the Doha
Round.
Monitoring and Surveillance in the Doha Round
In December last year WTO Members adopted, on a trial basis, a decision
setting up a mechanism to enhance the transparency of Regional Trade
Agreements (RTAs), to which I have just referred.
This Decision seeks to strengthen the WTO scrutiny of RTAs, from the
moment they are entered into, to the final version agreed, as well any
subsequent amendments. All RTAs notified to the WTO, including those
entered into between developing countries, are subject to the provisions
laid out in this transparency mechanism. The Decision charges the WTO
Secretariat with the preparation of factual presentations of RTAs
notified to the WTO, both on goods and services. The factual
presentation, which contains the legal provisions of the agreement and
also an analysis of the trade opening that is to take place between the
parties, provides the basis for discussions in the relevant WTO
Committees. The Secretariat has, thus far, completed 10 such factual
presentations, while 51 remain to be completed. It aims not only to help
Members better understand the content of the RTAs but also, in the
longer run, to address some of the systemic issues they are trying to
address in the negotiations.
Let me also mention two monitoring mechanisms on specific development
issues which are part of the Doha Round.
The first one concerns the duty-free-quota-free (DFQF) market access for
the world Least Developed Countries. Since this decision was taken at
the WTO Ministerial Conference in Hong Kong in December 2005, the steps
taken by Members to implement it have been the object of scrutiny at the
Committee on Trade and Development. Members have reviewed the
implementation of, as well as the steps being taken to implement, the
decision to grant DFQF access to LDCs exports. Regular reports are given
by countries on measures they are taking to implement the decision. This
has allowed us to see clearly who has done what and what remains to be
done.
Thanks to this transparency mechanism, we know that to date, Japan has
implemented the decision by extending DFQF for 98 per cent of LDC
exports at the tariff-line level. In addition, there are a number of
other Members whose DFQF market access for LDCs already meets the
requirement set out at in Hong Kong, that is they already provide DFQF
market access for at least 97% of LDC exports at the tariff line level.
These include, among others Switzerland, Canada, Norway, New Zealand and
the EC. Among the developing countries, Brazil, China, India and Korea
have also informed Members that they are working towards expanding the
provision of DFQF market access to LDCs.
The second one concerns a mechanism being discussed to monitor the
implementation and effectiveness of the Special and Differential
provisions agreed in favour of developing countries. In July 2002
Members agreed to establish a Monitoring Mechanism on S&D. For the past
year and a half, Members have been considering the possible elements of
such a Monitoring Mechanism, i.e. its function, structure and terms of
reference. This mechanism would allow a better evaluation of the
effectiveness of the provisions in WTO agreements adopted to address
specific needs of developing countries.
Finally, also in the ongoing Doha negotiations, two additional
monitoring mechanisms are being discussed. One in the area of
agriculture, sponsored by the Cairns Group and the G-20, and aimed at
enhancing the existing notification and review procedures of agriculture
subsidies. But why would we need to strengthen these procedures you may
well ask? Because some of the world's biggest subsidizers have not
respected existing notification requirements, notifying several years
after they were supposed to. This has itself complicated the Doha
negotiations, where some members have been uncertain as to how much
subsidy reduction to ask of their trading partners, given the limited
information on current spending. So the new proposal tries to create
greater “incentives” to notify, and to do so on time, for a change! The
second monitoring mechanism is in the area of the non-tariff barriers in
the field of industrial products where proposals have also been tabled
to improve the tracking of NTBs.
Monitoring and Evaluation Mechanism for Aid for Trade
In an area which is outside the scope of the Doha Round, but on which the WTO has been given a specific mandate to work, Aid for Trade, monitoring and evaluation also figures prominently. The challenge here is to use these instruments to ensure a better mainstreaming of trade in the development strategies of developing countries, while ensuring adequate and coordinated provision of funding by donors.
Great potential but also shortcomings
There is no doubt that monitoring and surveillance is one of the most
intense areas of work in WTO, holding great potential for improvement. I
would nevertheless want to share with you that a number of challenges
that we face to fully implement these mechanisms, including basic issues
such as compliance with notification obligations.
WTO rules establish notification obligations for Members but, what
happens when a Member refuses to notify or does not notify adequately?
It is surprising how much time is devoted to negotiating new
obligations, including notification obligations, and yet too often
Members simply do not comply with their notification obligations. And
very often this is not due to limited capacity. For example, the EC and
the US had until very recently a backlog in notifications of agriculture
subsidies dating from 2001. It is clear that with negotiations on-going
to reduce the level of trade-distorting subsidies in rich countries,
having this information available would be essential to understand the
value of the figures being discussed. At times Members simply don't
notify and wait to be sued but another Member. But again, in order to
initiate a dispute, one needs to know what is happening!
Even when a Member does notify, it may take quite some time to verify if
the notification is accurate. What can be done about this? In order to
respond to such problems, some agreements — such as the Subsidies
Agreement — foresees the possibility of cross-notifications, that is, a
notification by a Member of a measure not notified by the Member
concerned. But cross-notifications also require a certain level of
knowledge!
Many ideas have been floated to deal with these situations, such as, for
example, the reversal of the burden of proof against the Member at
fault. For example, in case of a dispute relating to excessive
trade-distorting subsidies granted by a Members who has failed to notify
its level of subsidies, it could be for the subsidizing member — and not
for the complainant — to bear the burden of proving that its subsidies
are WTO consistent. Another idea floated would call for the Secretariat
to submit notifications based on best information available for
discussion among Members and eventually for a rebuttal by the Member
concerned. Another suggestion would prohibit Members from taking certain
actions in the absence of notifications.
The problem is even more complex, when publication requirements are
concerned with generic actions such as the obligation to publish
domestically “any action that can affect trade”. Some say that we need
to find “incentives” for Members to do so. Maybe a “reward” or a “candy”
for those who provide information voluntarily could be envisaged,
perhaps in the form of an extended period of implementation. Perhaps
also by providing additional technical cooperation for those who inform
the Committee early on of the unsuccessful efforts undertaken to comply.
Should we put in place a system whereby the Secretariat would ring bells
when notifications are delayed? Should we set up a system of “good
points” reflected in the Secretariat section of the Trade Policy Review
Mechanism report? Should there be a third party responsible for policing
the filing of notifications? Maybe a designated Member, the Secretariat
or a third party? Bright ideas are welcome !
There are also important practical and logistical problems with the
number of notifications. With less than full notification by all
Members, the information flow is simply not manageable for many of our
Members, especially those with limited administrative resources. The
problem is further compounded by the fact that some notifications are
still not fully in electronic form. More than a decade after the WTO
agreements came into effect, there are areas where there is still no
electronic submission of notifications, existing databases are limited
or are just beginning to be established.
The WTO notification process is very labour-intensive for Members — despite the Secretariat's efforts to assist in building capacity in many
of our Members. In the early days of the WTO a working group on
notifications was created to try to identify overlaps in notification
requirements and discussed how notifications could be streamlined. A
good deal of progress has been made soon but with monitoring and
surveillance coming high on the agenda of this Round too, we may soon
need to conduct a new review to determine whether the enormous amount of
accumulated information is fulfilling its purpose of allowing for
effective surveillance, under resource constraints of the Members and
the Secretariat.
In addition to quantity, the quality and comprehensiveness of
notifications vary widely from agreement to agreement, also with much
unevenness between Members. So these notifications need to be “reviewed”
and since “reviews of notifications” is left to Members themselves in
Committees, it is clear that the limited capacity in many of our Members
to digest these notifications reduces their effectiveness. There may be
scope for enhancing the Secretariat’s role in providing a neutral
analysis of the most complex notifications.
If the system offers conceptually a very good balance between respect of
Members' sovereignty and of the overall systemic interests, in practice
the effectiveness of committees' monitoring and surveillance is greatly
reduced by the lack of participation of many developing countries, which
often have very limited human resources — often two or three people
following the work of all International Organisations in Geneva — or are
not even present in Geneva. Members and in particular developing country
Members need to attend and participate more in committees. It is hard
for them to benefit from the surveillance and cross-notification
processes if they are not present or actively following the work of the
WTO.
In this context we have created what we call the “Geneva Week for
Non-Residents” where twice a year all Members who do not have a mission
in Geneva are invited to briefings on all topics under negotiation as
well as regular WTO work, including monitoring and surveillance. But
this may simply not be enough and perhaps more could be done to actively
involve regional organisations who could follow these issues on behalf
of several Members to benefit from economies of scale.
For transparency and for notifications to be effective, Members need to
be able to understand what is notified, what is not notified, and what
is hidden. And the only way to guarantee that all Members understand the
scope of what has to be notified, is to make sure that all Members have
a solid understanding of the WTO provisions. This means, therefore, that
the WTO technical assistance for developing countries needs to comprise
also in-depth training in this area and in particular assist developing
countries in the drafting of their notifications and in better
understanding those that may have an impact on them, as in the cinnamon
case we just discussed. Today a standard feature of our training
programme for developing countries includes an entire course on
notifications. But I am convinced that more will need to be done in his
area in the future.
In sum, we need to focus more on how to operationalize these
notifications, as well as our monitoring and surveillance process, so as
to ensure that we not only have more functional and effective but also
more accessible mechanisms to ensure the full implementation of WTO
obligations by all Members. This is easy to say but difficult to
realize. But before entering into new obligations, shouldn't we focus on
ensuring that existing obligations are actually being implemented by all
players?
It is now time for me to conclude, so that I can benefit from your
comments and suggestions.
Firstly, transparency, effective monitoring and surveillance of trade
rules, of trade preferences, of regional agreements, of Aid for Trade
etc. are key for economic operators who need to know the terms of trade.
Secondly, monitoring and surveillance cannot and will not replace
binding dispute settlement but can be an effective means to avoid
clogging the dispute settlement. GATT contracting parties and WTO
Members worked very hard to put in place the sophisticated dispute
settlement mechanism that we now have. But with the growing number of
technical obligations and an expanding Membership, ensuring effective
implementation of those obligations by everyone becomes more difficult.
Transparency must become more “active” and this is where, in my view,
monitoring and surveillance becomes useful, even necessary.
Thirdly, monitoring and surveillance will continue to increase, as a
means to allow Members to better understand each other's actions to
implement their obligations. But the notification mechanisms in place
and the committee's reviews must be made fully operational ensuring the
informed participation by all Members. Since monitoring and surveillance
are here to stay, the demand for further informed and understood
transparency will only increase as the scope, depth and technicality of
our obligations continue to increase. But it goes even further than
understanding WTO obligations, to also cover the manner in which
developed, as well as developing country Members implement these
provisions.
Fourthly, surveillance and monitoring will become all the more important
in the future that the nature of obstacles to trade is changing. Duties
or quantitative restrictions are rather straightforward: easy to
identify, to understand and to cope with. Non tariff barriers, technical
requirements about the safety of products or hidden subsidies are
generally more obscure and hence more difficult to address. Monitoring
and surveillance will have to adjust to the expansion, both in width and
depth, of these regulatory requirements. We will have to plan for that
if we are serious about our core business which is to keep opening
trade.
We all have great hopes for the Doha Round which aims at rebalancing the
rules multilateral trading system in favour of developing countries. But
such new rules will only be as good as their implementation. This is
true for existing rules as well. We cannot lose sight of the importance
of implementation. I am looking forward to hearing your suggestions!
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