Statements delivered by Ambassador Dennis Shea – WTO General Council Meeting Geneva, July 24, 2019

Statements delivered by Ambassador Dennis Shea
WTO General Council Meeting

Geneva, July 24, 2019

ITEM 8: STRENGTHENING THE WTO TO PROMOTE DEVELOPMENT AND INCLUSIVITY (WT/GC/W/778)

We thank the proponents for their paper.  While we disagree with much of the paper’s content, we expect some of the issues it raises to be a significant part of the discussion in this Council as we approach MC12, so we appreciate the opportunity to confront them head on.  The heart of this paper returns us to the longstanding, profound disagreement among Members on the relationship between trade rules and development, and on the role of S&D in the WTO.  In Paragraphs 1.3 and 1.4, the co-sponsors once again tell us that the framework of WTO rules is onerous, unfair, and anti-development. Further, they conceive of S&D as a means for self-declared developing countries to disconnect from certain WTO rules, such as in TRIPS, TRIMS, and the SCM Agreement.

For Members who hold this view, the common rules of this house are rules for others – not themselves.  They wish to avail themselves of the opportunities that WTO membership offers, but they no longer want to contribute to our common effort to create those opportunities through the full implementation of existing WTO rules. We have seen their vision expressed in proposals submitted for the last two ministerial conferences.

These include: effectively exempting all self-declared developing countries from the prohibition in Article 2 of the Agreement on Trade-Related Investment Measures (TRIMs) against applying a TRIM that is inconsistent with GATT provisions on national treatment and quantitative restrictions – and permanently exempting all LDCs from all TRIMS obligations. They also effectively exempt for eight years every self-declared developing country from the prohibition in Article 3.1(b) of the Subsidies and Countervailing Measures (SCM) Agreement against subsidies contingent upon the use of domestic over imported goods – and permanently exempting LDCs.  They also call for technology transfer that is not voluntary and on mutually agreed upon terms by both parties.

These Members wrongly believe that the opportunities made possible by WTO membership will continue to appear, even as they signal to investors that they are “closed for business.”

The United States, on the other hand, holds a firm conviction that the trade rules developed in this system over the decades are inherently positive building blocks for sustainable development.  To give just one example, we believe the TRIPS Agreement has increased the possibility of technology transfer by creating conditions whereby intellectual property owners feel confident in sharing their technology with entities in other Members.

WTO rules were crafted to establish conditions most conducive to increasing trade and investment flows, such as open, transparent, and predictable markets. These rules reflect lessons from the past that should not need to be re-learned. Further, we believe that S&D provisions are intended to be applied narrowly to facilitate the full implementation of WTO rules, not to provide indefinite deviations from these rules. These provisions should be available only to those having the greatest difficulty integrating into the global trading system.

In addition, we do not agree with the proposition that existing WTO rules are imbalanced in favor of developed countries.  All Members contributed to the Uruguay Round Agreement.  In this vein, we do not support additional work to renegotiate or revise S&D provisions in existing WTO agreements. For example, the CTD-SS has fulfilled its mandate to review all S&D provisions, and this work contributed to a significant harvest.

A few words as well, about the Doha Round.  The Doha Round failed because the more advanced, wealthier, and most influential of the self-declared developing countries refused to contribute in a meaningful way.  To oversimplify it, countries like China wanted to be treated like countries like Cameroon.  The most advanced of the self-declared developing countries hid behind the poorest and least advanced to ensure they did not have to contribute.

As a result, the Doha mandates no longer guide the work of this institution.  This has been the case since the Nairobi Ministerial in 2015.   There is no returning to the Round at this point.  But what we can do – and what the United States is doing – is moving to ensure that the reasons the Doha Round failed are not repeated.

We must be forthright in acknowledging that Members’ fundamental disagreement on the relationship between trade rules and development, and on the role of S&D, persists.  We must also acknowledge that we will not be able to bridge this divide until Members resolve the issue of differentiation.

On this point, the paper before us today is predicated on a major flaw – which is the same flaw that ended the Doha Round.  That is, that self-declared developing Members are a monolithic group, despite overwhelming evidence of increased differentiation in economic performance, wealth, and influence.

If we want to deliver results for ourselves and this institution, it is time for action on this critical issue.   Crossing our fingers and hoping that those amongst us who refused to contribute previously will suddenly do so now is wishful thinking.

Rather, it is time for the more advanced, more influential, and wealthier economies among us to agree to forego S&D in current and future WTO negotiations;

It is time for Members to deliver on the promise of the WTO: free and fair trade based on market-oriented policies, with one set of rules and commitments applying to all Members, and with S&D available to those Members having the greatest difficulty integrating into the trading system through the full implementation of WTO rules.

ITEM 9. AN INCLUSIVE APPROACH TO TRANSPARENCY AND
NOTIFICATION REQUIREMENTS IN THE WTO

We thank the co-sponsors of this communication and welcome engagement on the critical issue of transparency and improving Members’ compliance with notification obligations.

As this paper notes, Members’ compliance with notification obligations has been disappointing. We agree with this assessment.  Transparency is a fundamental obligation for every Member. The ability to have a deep understanding of other Members’ trading systems is only possible when notifications are submitted in a timely manner.

It is also important to emphasize that there is more harm to other Members than to the country itself when it fails to meet notification requirements since the lack of information about the country’s laws and regulations actually hinders trade.

This communication notes that a deep understanding of WTO Agreements is necessary for compliance with WTO commitments.  While this is true, it is also a fundamental expectation of WTO membership that every Member comport with its obligations, and, in fact, there are resources available to support those Members who require assistance.

The United States and other co-sponsors have put forward a proposal in the Council for Trade in Goods which outlines steps that can be taken to enhance transparency and strengthen notification requirements without setting additional obligations on any Member. Many of the concerns set forth in the paper presented today can be addressed through capacity building, flexibility of time frames, and potential simplification of format of notifications. All of these elements are addressed in some form through our joint proposal currently under consideration in the CTG.

The United States welcomes engagement on the issue of transparency and improving Members’ compliance with notification obligations.  And we stand ready and committed to working with Members to improve capacity to implement notification obligations.

  1. PROCEDURES TO STRENGTHEN THE NEGOTIATING FUNCTION OF THE WTO –COMMUNICATIONS FROM THE UNITED STATES (WT/GC/W/757/REV.1 AND WT/GC/W/764)

The United States is pleased to continue our discussion of this important reform initiative.

As the Membership is aware, the United States in January submitted a detailed paper on differentiation at the WTO.  On that factual and analytic basis, the United States in February submitted to the General Council a proposal to resolve the differentiation problem through an approach that recognizes the complexity of this issue.

The U.S. proposal establishes objective criteria for determining whether a WTO Member may continue to avail itself of “special and differential treatment” (S&D) in current and future WTO negotiations.  The four criteria are:

A WTO Member that is a Member of the OECD, or a WTO Member that has begun the accession process to the OECD;

A WTO Member that is a member of the G20;

A WTO Member that is designated as a “high income” country by the World Bank; or

A WTO Member that accounts for no less than 0.5 percent of global merchandise trade.

Since the last meeting of the General Council in May, we have progressively broadened and deepened our conversation with Members in Geneva, in capitals, and in Washington. We are engaging Members who would meet at least one of the four criteria in the U.S. proposal.  We are also engaging other Members—especially LDCs—who would benefit if the more advanced, wealthy, and influential economies among us finally accept responsibilities commensurate with their role in the global economy. We are greatly encouraged by these conversations, from which several important themes are emerging.

First, we see growing traction for our call for reform.  Since January, differentiation has moved from the periphery to become one of the centerpieces of WTO reform.  Rest assured, when we submitted our proposal to the General Council in February, we did not expect consensus within a few months.  I want to assure the Membership that our focus on this issue, including the U.S. proposal to address it, will not go away.

Second, as we have seen through these conversations, the U.S. analytic paper on differentiation enjoys support from a diverse and deep cross-section of the Membership.  Some delegations in Geneva have not been willing to voice this support, but their authorities in capital have: specifically, their support for the idea that certain Members are inappropriately seeking S&D in WTO negotiations despite overwhelming evidence of economic strength, wealth, or influence; that these Members’ rigid insistence on receiving special treatment intended for much poorer, less-integrated Members is damaging the WTO and our collective ability to reach agreements; and that this issue must be addressed if the WTO is to be a viable forum for trade negotiations.

Third, a growing number of Members are giving serious thought to the U.S. proposal.  We stand ready to continue our discussions with them, and we appreciate their open-mindedness and willingness to consider how they can take a leadership role in improving this organization for the good of all.

Fourth, our continued engagement with Members in Geneva, in capitals, and in Washington is important to resolve lingering misconceptions about the U.S. proposal. For example, we continue to be told that the U.S. proposal should not ask any country to change its declaration of developing country status.  We agree, and the U.S. proposal does not ask this. Agreeing to forego S&D in current and future WTO negotiations does not require any Member to declare itself to be developed.  Nor does it require any Member to forego S&D in existing WTO agreements.

Another misconception is that, once a Member foregoes S&D in current and future WTO negotiations, it will not have the ability to negotiate flexibilities that it needs to join consensus on a WTO text.  This is not so; every Member will continue to have the right to negotiate such flexibilities.  We recognize that certain Members may lack the capacity to negotiate such flexibilities, but do any of us seriously believe that Members such as China, India, Korea, Mexico, Singapore, South Africa, and Turkey lack this capacity in 2019?

In addition, we sometimes hear that this proposal is all about one Member, and the United States just needs to reach an accommodation with that Member.  This is inaccurate.  Our concerns go far beyond just one Member. There are a large number of relatively wealthy, advanced, and/or influential economies who would seek to avail themselves of S&D in current and future WTO negotiations.  We believe a broad-based solution is required.

Fifth, we have learned through our conversations that a few large Members are resorting to scare tactics in an effort to derail this discussion.  For example, certain large Members are saying that the U.S. proposal would prevent them from continuing to provide trade preferences to LDCs.  We wish to be clear – there is no link between the U.S. proposal and this threat.

Finally, I’d like to discuss one of the criteria in the U.S. proposal in more detail. A few Members have asked us why OECD Members and countries in the OECD accession process should forego S&D in current and future WTO negotiations.

In our view, OECD Membership—and the decision to pursue membership—is a self-chosen mark of differentiation and responsibility.  According to the OECD’s founding convention, members are to promote the highest sustainable economic growth, the highest sustainable employment, and a rising standard of living.  Importantly, the governments that founded the OECD stated their conviction that “economically more advanced nations should cooperate in assisting to the best of their ability the countries in process of economic development.”

OECD members have knowingly and voluntarily accepted special responsibilities, and applicants for membership have vowed they are ready to do the same.  These countries have committed to holding themselves accountable to the highest possible standards, to seeking evidence-based solutions, and to shaping policy norms that foster prosperity, efficiency, stability, and a stronger world economy.

It is worth noting that Membership in the OECD is not automatic.  It is earned through an intensive process of peer evaluation and, often, domestic reform that spans years and requires enormous effort by the applicant, current members, and the Secretariat. The difficulty of the accession process reflects the value and importance of the OECD.  Eleven countries have completed the accession process in the past 24 years; despite the ardors of the process, there is currently a long line of countries interested in accession. For these reasons, we believe that OECD members and applicants have self-declared themselves to be ready to fully accept the obligations as negotiated at the WTO.

In closing, I note that the discussions that we are having with Members are constructive, sincere, and candid.  We look forward to continuing to engage with Members on this reform proposal.

ITEM 12.  STATEMENT BY THE UNITED STATES ON TRANSPARENCY IN WTO DISPUTE  SETTLEMENT

The United States requested this agenda item to draw Members’ attention to the statement by the United States at the July 22, 2019, meeting of the Dispute Settlement Body.  In that statement, the United States discussed an important systemic issue that is critical for the legitimacy of the WTO:  transparency – or, perhaps more accurately, the lack of transparency – in WTO dispute settlement.

For more than twenty years, the United States has called for Members to support the WTO by bringing openness and accountability to its operations, including dispute settlement.  At the 1998 Ministerial Conference, the United States proposed that all dispute settlement hearings at the WTO be opened to the public, and all submissions by the parties be made publicly available.

In its statement at the 1998 Ministerial Conference, the United States urged that Members could act to improve transparency even without changes to the rules.  To that end, the United States formally offered to open every panel proceeding that it is a party to, and we invited every other Member to agree to make this happen.  The United States also made a proposal to mandate greater transparency through public meetings and access to submissions, but that proposal is without prejudice to the ability of Members to agree to greater transparency in each dispute.

The story over 20 years later is disappointing, at best.  Several WTO Members – including Australia, Canada, Chinese Taipei, the European Union, Japan, New Zealand, Norway, and others – have joined the United States in supporting greater transparency in WTO dispute settlement, for example, by agreeing to open hearings and public submissions.  But most WTO Members continue to insist on closed hearings and confidential submissions.  What is worse, some even seek to prevent the United States and other Members from making statements publicly available through direct viewing when they are made.

By pushing to keep WTO dispute settlement closed and secret, these Members deny other Members, the public, and the WTO itself of significant benefits.  Open and transparent WTO dispute settlement enhances WTO Members’ understanding of the dispute settlement system, particularly for those who do not participate often in the system.  Transparent dispute settlement promotes confidence in the professionalism and objectivity of WTO adjudicators, to the benefit of both parties and the dispute settlement system as a whole.

Experience under the WTO dispute settlement system since 1995 has demonstrated that the findings contained in reports adopted by the Dispute Settlement Body can affect large sectors of society.  At the same time, increased membership in the WTO has also meant that more governments and their citizens have an interest in DSB recommendations.  Yet the citizens of the parties, and those Members not party to a dispute, have been unable to even observe the arguments or proceedings that result in these recommendations.

The public has a legitimate interest in WTO dispute settlement proceedings.  Indeed, acceptance of the results of WTO dispute settlement may be facilitated if those being asked to assist in the task of implementation, such as the constituencies of legislators, have confidence that the DSB recommendations are the result of a fair and adequate process.

Despite the myriad benefits that greater transparency would bring to the WTO, a number of Members – including several major users of the dispute settlement system such as China, India, Indonesia, Korea, Mexico, Russia, Turkey, Vietnam, and others – have not only failed to agree to be more transparent in WTO dispute settlement.  These Members have also actively obstructed efforts by others to provide greater transparency.  Regrettably, some panels have acquiesced to the efforts of those Members by failing to permit another party to at least make its own statements open to public observation.

And so what we observed in the early days of the WTO continues to remain the general rule, and not the exception:  “Today, when one nation challenges the trade practices of another, the proceeding takes place behind closed doors.”

For us, this is unacceptable.  The lack of transparency in WTO dispute settlement at the inception of the WTO was regrettable, but could perhaps be viewed as a remnant of the GATT system we inherited that could be expected to change as the WTO dispute settlement system matured.  Today, over 20 years later and after the initiation of nearly 600 disputes, the continued lack of transparency is simply untenable and threatens to further erode public support for and, ultimately the viability of, this system that Members profess to support.

In the U.S. statement in the DSB, we first examined the rules we have and dispelled common myths that certain Members seek to perpetuate about the dispute settlement system.  There is no obligation in the DSU for WTO dispute settlement to be transparent.  However, as we explained in detail in the statement, while the DSU does not mandate and ensure transparency, it does not prohibit decisions by Members to provide transparency, either.

Second, the United States highlighted that some Members, including the United States, have promoted transparent dispute settlement over the years.  For example, the United States and European Union have agreed to open meetings in at least 15 dispute settlement proceedings, including open meetings by panels, the Appellate Body, and Article 22.6 Arbitrators.  The United States has also worked closely with Canada and agreed to open meetings in a number of WTO disputes, including in at least nine separate proceedings and including open panel meetings, appellate hearings, and the meeting of an Article 22.6 Arbitrator.  Open meetings have also been held in disputes in which the United States was not a party.

However, for too long, too many Members that claim to support the multilateral trading system actively undermine it by promoting a lack of transparency in WTO dispute settlement.  For example:

The United States proposed open meetings in at least 17 disputes with China, but China has always declined. The United States proposed open meetings in at least nine disputes with India, but India has always declined. The United States has proposed open meetings in at least six disputes with Korea, but Korea has always declined. The United States has proposed open meetings in at least three disputes with Indonesia, but Indonesia has always declined. The United States has proposed open meetings in at least three disputes with Turkey, but Turkey has always declined. The United States has proposed open meeting in at least nine disputes with Mexico, and Mexico has declined, except for in a joint dispute with Canada.

The positions of those Members opposed to greater transparency in WTO dispute settlement are misguided and only serve to erode support for the WTO and its dispute settlement system.

Third, the United States explained why opposition to greater transparency is contrary to the choices Members have made in other fora, including other international adjudicatory systems and regional free trade agreements.  For example, at least 40 regional free trade agreements, involving more than 75 WTO Members, require transparency – be it through public submissions, open hearings, or both.

This highlights that WTO Members do not object to transparent dispute settlement in principle.  Rather, Members recognize the value of transparency.  Thus, there should be no impediment for all Members to take action now to remedy the lack of transparency in WTO dispute settlement.

In our DSB statement the United States also discussed additional benefits associated with a transparent dispute settlement system.

Many Members claim to want to reform and keep relevant the WTO, and we have seen some proposals brought forward to enhance transparency and notifications.  But the actions of too many Members have stymied transparency in WTO dispute settlement for far too long.

The lack of transparency in WTO dispute settlement is not required by the DSU and Members cannot defend the lack of transparency on this basis.

To the contrary, whether the WTO has an open and transparent dispute settlement system depends, to a great extent, on the willingness of Members to support such a system.

Members’ participation in other fora illustrates Members do not object to transparency in international adjudicatory systems and trade agreements in principle.  Thus, there is no impediment to Members taking action today to address this lack of transparency in WTO dispute settlement.

It is long overdue for Members to agree to open all substantive dispute settlement meetings to observation by all Members and the public while protecting confidential information.  Each Member should immediately take steps in each dispute in which it is participating to request to make its statements publicly observable and to make its written submissions publicly available.

ITEM 13 (III) UNITED STATES – CARIBBEAN BASIN ECONOMIC RECOVERY ACT, GRANTED ON 5 MAY 2015 UNTIL 31 DECEMBER 2019

The U.S. trade preferences programs for the Central American and Caribbean region were initially launched in 1983 by the Caribbean Basin Economic Recovery Act (CBERA). Since its implementation, CBERA has continued to generate important benefits for beneficiary countries and territories.  The expansion of benefits through enactment of subsequent legislation represents an important affirmation of the ongoing U.S. commitment to economic development in the Caribbean Basin, by expanding duty-free access to the U.S. market for eligible goods.

At present, 17 countries and territories receive benefits under the program: Antigua and Barbuda, Aruba, The Bahamas, Barbados, Belize, British Virgin Islands, Curaçao, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago.

In 2018, U.S. imports under CBERA preferences increased 9.1 percent over 2017, to $1.7 billion.  Our report to the WTO includes detailed trade data on the program. We are seeking a new waiver to continue to provide these preferences to the countries and territories in the Caribbean.  Our waiver request includes a revised termination date of 30 September 2025, which is the date that certain preferences are scheduled to expire.

The United States is committed to working in partnership with our neighbors in the Caribbean to expand economic opportunities.  The CBERA provides a vital contribution to the efforts in this partnership by creating opportunities to expand trade between the United States and the Caribbean, thus promoting economic opportunity and growth in the region.