Ambassador Shea: Procedures to Strengthen the Negotiating Function of the WTO

Statements As Delivered

Ambassador Dennis Shea

WTO General Council Meeting, December 9, 2019

  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/REV.1)

The United States is pleased to continue our discussion of this important reform initiative. The United States in January submitted a paper on the lack of differentiation at the WTO, and why this is damaging the WTO’s negotiating function.

On that factual and analytic basis, the United States in February submitted to the General Council a proposal to resolve the differentiation problem through a pragmatic 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 blanket, open-ended “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 General Council last met in October, we have deepened our conversations with Members across the development spectrum.

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—such as 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.

These conversations have been candid, thoughtful, and detailed.  Members are listening to us, and we are listening to them.  Here a few examples of what we’ve heard:

  • A growing number of Members recognize that S&D reform is necessary for the WTO to be a viable forum for meaningful negotiations.
  • Many Members share our goal of reserving blanket S&D provisions for those Members that are the relatively less developed of the over 100 Members claiming developing country status.
  • Many Members have confirmed that the current situation does not lead to equitable outcomes.
  • An increasing number of Members indicate they are giving serious thought to the U.S. proposal.

Importantly, in late October, Korea committed to not seek special and differential treatment in ongoing and future WTO negotiations, in line with the U.S. proposal.  Korea noted the importance it attaches to maintaining the WTO’s key role in creating rules that lead to increased trade and prosperity.

In taking this step, Korea stated that its access to S&D in existing WTO agreements remains unchanged, and that it retains the ability to negotiate priority interests, such as flexibilities for agricultural goods that Korea considers sensitive.  We fully agree, and we applaud Korea for demonstrating sorely-needed leadership to reform the WTO’s negotiating arm.

Chair, in our many conversations with Members this fall, we heard several suggestions on how to improve our proposal.  To our ears, these suggestions were offered in a true spirit of reform.

We reflected on these suggestions and made several changes to our proposal in light of them. I will outline the changes, as found in WT/GC/W/757/Rev.1.

First, several Members asked that we make explicit in the text a point that we have emphasized all along.  That is, the U.S. proposal does not preclude any Member from negotiating the flexibilities it needs in current and future WTO negotiations.  Rather, the proposal requires that certain Members forego blanket S&D provisions in these negotiations.

We agree that this clarification would be helpful, so we added this sentence: “Nothing in this Decision precludes a Member seeking to address particular needs during a current or future WTO negotiation.”

To say it another way: any Member that forgoes blanket S&D provisions in a future WTO agreement still retains the ability to negotiate into the agreement text the flexibilities it needs to defend and advance its interests.

Second, several Members observed that, according to the language in the U.S. proposal, if a Member met the “high income” criteria or the “share of global merchandise trade” criteria one year, but did not meet that criteria the next year, that Member would still have to forego S&D in current and future WTO negotiations.  In other words, the proposal did not account for the possibility that a Member could fall below a criteria threshold.

This was a helpful observation.  To address this concern, we clarified that a Member would need to meet the relevant threshold for either of those criteria for three consecutive years immediately prior to the date of decision, or for a third consecutive year or any three consecutive years after the date of decision.

In practical terms, this change means that we have eliminated the possibility of unwelcome surprise. To meet the criteria, a Member must exceed the relevant threshold for a sustained period.  If a Member falls below the threshold for either criteria, it would not meet the criteria again until the Member has exceeded the threshold for a sustained period.

Importantly, these changes to the U.S. proposal ensure that eligibility for blanket, open-ended S&D in current and future WTO negotiations will stay current with the times.  The criteria will reflect the world we live in at the moment, not the vanished world of decades past.  This would be an important step forward from where we are today.

Let me provide a few examples of how this would work in practice for a hypothetical Member – Member A.  For this discussion, let us stipulate that the date of decision for the U.S. proposal is 8 June 2020.

  • To meet the “high income” criteria as of the date of decision, Member A would need to have been classified by the World Bank as “high income” on 1 July 2017, 1 July 2018, and 1 July 2019.

 

  • If Member A was classified as “high income” on 1 July 2019, but not on 1 July 2018, Member A would need to be classified as “high income” on 1 July 2020 and 1 July 2021 to meet the “high income” criteria.
  • If Member A was classified as “high income” on 1 July 2017 and 1 July 2018, but it was classified as “upper middle income” on 1 July 2019, Member A would not meet the “high income” criteria as of the date of the decision. The earliest possible date that Member A could meet the “high income” criteria is 1 July 2022, if Member A was classified as “high income” on 1 July 2020, 1 July 2021, and 1 July 2022.
  • To meet the “share of global merchandise trade” criteria as of the date of decision, Member A’s share would need to be no less than 0.5 percent for 2017, 2018, and 2019, according to WTO data.
  • If Member A met the share threshold for 2019 but not 2018, Member A would need to meet the threshold in 2020 and 2021 to meet the criteria.
  • If Member A met the share threshold in 2017 and 2018 but did not meet the threshold in 2019, Member A would not meet this criteria on the date of decision. The earliest possible date that Member A could meet this criteria is early 2023, when WTO data shows that Member A met the share threshold for 2020, 2021, and 2022.

Chair, we stand ready to continue our discussions with Members and answer any questions they have.  We appreciate Members’ engagement and their willingness to consider how they can show leadership in improving this organization for the good of all.

Finally, I’d like to provide an update on the memorandum to USTR from the President of the United States in July.

The President instructed USTR to no longer treat as a developing country for the purposes of the WTO any self-declared developing country that, in the USTR’s judgment, can inappropriately seek S&D in current and future WTO negotiations.  Some Members have asked how the USTR will carry this out.

USTR consulted with the interagency Trade Policy Staff Committee on this issue.  The interagency agreed that if a S&D provision is introduced in a WTO negotiation, the United States will indicate that it will not agree to that provision unless certain Members forego use of that provision.  The United States will also use the TPR process to continue to press countries that we believe should not be claiming blanket S&D in future agreements.  In addition, USTR is continuing to review additional steps that can be taken.

The President issued two other instructions to the USTR.

  • The USTR will not support the application for OECD membership of any self-declared developing country that, in the USTR’s judgment, can inappropriately seek S&D in current and future WTO negotiations.
  • Also, USTR shall publish on its website a list of all self-declared developing countries that the USTR believes can inappropriately seek S&D in WTO negotiations.

Members have asked when USTR will publish the list.  USTR is consulting on this issue. The memo did not require USTR to publish the list by a specific date.

I’d like to emphasize two important aspects about the memo and the U.S. proposal that we would like Members to keep in mind.

  • First, the President’s memo did not instruct USTR to ask any Member to change its self-declared development status. The U.S. proposal does not ask this of any Member, either.
  • Second, the President’s memo did not instruct USTR to ask any Member to forego S&D in existing WTO agreements. The U.S. proposal does not ask this of any Member, either.

In closing, we thank Members for their constructive dialogue with us.  This work is important, as this issue and the U.S. proposal will not go away.  We look forward to continuing to engage with Members and to making new progress on this reform effort.