Evaluating the Criticism that the Doha Round lacks Ambition:

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Evaluating the Criticism that the Doha Round
lacks Ambition The need for creative mechanisms
to give rapid and universal Legal Effect to the
Negotiations   Hunter Nottage BIICL Annual WTO
Conference Panel 3 The Doha Agenda Can It
Still Deliver Meaningful Results? 21-22 May 2009
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• PART I Evaluating the Criticism that the Doha
  Round is not ambitious
• Critics of the Doha Round's level of ambition
  advocate that it simply locks-in liberalisation
  that has been undertaken voluntarily
•  

"Parallel unilateral and regional efforts at
liberalization ended up robbing the multilateral
process of its raison d'être. By the time the
Doha Round resumed in Geneva last summer, little
of consequence was even on the table."  Aaditya
Mattoo and Arvind Subramanian, Foreign Affairs,
88(1), Jan/Feb 2009
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• Facts supporting the criticism
• - World trade has grown at approximately 6 per
  year despite no further WTO multilateral
  trade-liberalising treaties since the Uruguay
  Round ("UR").
• - A large proportion of this growth can be
  attributed to (i) unilateral actions by
  governments (many have voluntarily reduced
  tariffs or subsidies below UR bindings and
  ceilings), and (ii) regional actions through the
  proliferation of the RTAs (voluntary increases in
  RTAs from 90 to 400 over 14 years).
• - In a number of instances the D.Rd. Modalities
  would not significantly reduce currently applied
  tariffs or overall currently applied domestic
  support in agriculture

e.g. currently applied tariffs for BRIC countries
would remain unchanged (at 13.5 in agricultural
goods) or be reduced by minimal amounts (6.4 to
5.6 in manufactured goods). (Mattoo and
Subramanian, 2009) e.g. currently applied levels
of domestic support in agriculture provided by
the EC and US would remain within the legal
bindings of the D.Rd (i.e. EC CAP reforms will
shift support to the green box and US applied
level of US8.5billion in 2008 is well below its
D.Rd cap of US14.5 billion). (Bhagwati and
Panagariya, 2008) e.g. "My offer to the US is
that they should reduce their agricultural
subsidies by just one dollar in real terms and we
have a deal." (Indian Minister of Commerce and
Industry, Kamal Nath, June 2008)
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• Rebutting the criticism
• The criticism loses its cogency in a time of
  economic crisis where there are real risks of
  back-tracking to UR tariff bindings and subsidy
  ceilings
• "The trend in protection is up"
• Many Members are facing increased pressure to
  take protectionist measures. "At the start of
  this year, most WTO Members appeared to have
  successfully kept these pressures under control.
  Since then, there has been significant
  slippage. There have been increases in tariffs,
  new non-tariff measures, financial and stimulus
  packages etc.." Report to the TPRB from the WTO
  Director-General on the Financial and Economic
  Crisis, 26 March 2009 (JOB(09)/30)
• Despite the G20 London Communiqué of April 2009
  providing that "we reaffirm the commitment to
  refrain from raising new barriers to investment
  or to trade in goods and services" the World Bank
  has reported that
• - Since the start of the financial crisis several
  countries, including 17 G20 countries, have
  implemented 78 measures whose effect is to
  restrict trade at the expense of other countries
  (World Bank Monitoring Report, Gamberoni and
  Newfarmer, March 2009)
• - Within three weeks of the G20 London
  Communiqué, Robert Zoellick reported that "9 G20
  countries have taken or are considering 23 new
  protectionist measures" (Reuters, 23 April 2009).
• According to the World Bank and WTO Reporting
  these trade-distorting measures include
• - Tariff increases (one Member raised tariffs on
  over 600 items one acceding Member on used
  autos)
• - Export subsidies (one Member has announced new
  subsidies on butter, cheese and milk powder)
• - Subsidies to the auto industries (Worldwide,
  US48 billion one Member, US17.4billion) 

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The current trade-restricting measures are
arguably all consistent with WTO rules, current
Uruguay Round bindings and subsidy ceilings "The
current crisis is highlighting the extent to
which WTO rules and the individual market
access schedules of WTO Members provide
substantial room for trade restriction and
distortion to increase and will continue to do so
at least until the Doha Round is concluded."
(Pascal Lamy, TPRB Report, March 2009) There are
risks that if the recession deepens governments
will be placed under increased pressure to apply
further protectionist measures "To date most
countries have not yet raised tariffs to bound
levels or taken full advantage of headroom on
agricultural subsidies, however, as the recession
deepens, many countries may well do so. This
underscores the importance of pushing forward
with a rapid conclusion of the Doha Round."
(Gamberoni and Newfarmer, World Bank Monitoring
Report, March 2009) As an indication of how far
things could deteriorate It has been estimated
that if Members raised their tariffs to bound
rates the average applied rate would double and
value of world trade would be cut by 8. (Bouet
and Laborde, International Food Policy Research
Institute, Issue Brief 56, 2008)
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The criticism is based on an incorrect
assumption. The current environment of economic
crisis risks significant back-tracking on
voluntary liberalisation - The legal certainty
resulting from a Doha "Legal Consolidation" Round
could provide meaningful results to
traders. "Since the crisis makes backsliding a
real possibility, a Doha deal that locks-in
nations' unilateral liberalisation achievements
looks like a much more worthwhile achievement."
(Evenett and Baldwin, What World Leaders Must Do
to Halt the Spread of Protectionism, CEPR,
2008) "The dispute settlement system is a
central element in providing security and
predictability to the multilateral trading
system" (Article 3.2, DSU) THEREFORE There are
potentially significant benefits to a Doha "Legal
Consolidation" Round. HOWEVER The benefits
provided by legal security are only relevant if
the results of the negotiations are rapidly
transformed into legal commitments enforceable
through the WTO Dispute settlement system.
CHALLENGE How to give rapid and universal legal
effect to the results of the Doha Round
negotiations?
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• PART II The challenge of giving rapid and
  universal legal effect to the results of the Doha
  Round negotiations
• Under WTO law, there are four methods of giving
  legal effect to the results of trade
  negotiations
• Amendments
• Modifications of Schedules
• Decisions of the Ministerial Conference
• Reference Rules incorporated into Schedules
• Any creation of WTO law will have to operate
  within this legal framework.
• See Nottage and Sebastian, Giving Legal Effects
  to the Results of WTO Trade Negotiations, JIEL
  9(4)
• At least some of the results of the Doha
  Negotiations will require an amendment to the WTO
  agreements pursuant to Article X of the WTO
  Agreement.
• e.g. a new Agreement on Trade Facilitation
  revisions to the boxes in the Agreement on
  Agriculture revisions to the Anti-Dumping
  Agreement in the context of the Rules
  negotiations.
• Unfortunately, it will be difficult to give rapid
  and universal legal effect to the results of the
  trade negotiations through the current Article X
  amendment procedures.

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• The Limits of the WTO Amendment Procedures
• The first major limitation of WTO amendment
  procedures is that they are highly likely to
  result in considerable delays before the results
  of negotiations become legally enforceable.
• Even if all Members agree to an amendment
  incorporating the results of trade negotiations,
  Article X7 of the WTO Agreement provides that
  amendments only take legal effect once
  two-thirds, and in certain instances all, Members
  have deposited formal instruments of acceptance
  with the DG.
• This formal deposit requirement, which for many
  Members requires ratification by their domestic
  legislature, runs the real risk of considerable
  delays before the results of negotiations will
  have legal effect.
• For example, the only amendment to be given legal
  effect in the last 40 years, the addition of Part
  IV on Trade and Development to the GATT 1947,
  took over 13 years before it was universally
  accepted.
• More recently, it is alarming to note that over
  three years after Members unanimously agreed to
  the General Council decision to amend the TRIPS
  Agreement to include Article 31bis only 21
  Members, have deposited instruments of
  acceptance.

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• The second major limitation of the WTO amendment
  procedures is the risk of creating an unintended
  two-tier system of obligations between WTO
  Members
• Article X3 of the WTO Agreement, the paragraph
  that would govern the majority of amendments,
  provides that
•  

"Amendments shall take effect for Members that
have accepted them upon acceptance by two thirds
of the Members and thereafter for each other
Member upon acceptance by it. ".

• Thus amendments only bind Members that have
  formally deposited instruments of acceptance.
  (Article 40.4 of the VCLT similarly provides
  that an amendment to a multilateral treaty"does
  not bind any State already a party to the
  multilateral treaty, which does not become a
  party to the amendment".)
• Hence, amendments risk creating an unintended
  two-tier sytem of obligations in WTO law between
  depositing and non-depositing Members. A
  situation that is more or less inevitable as
  there will always be delays in the deposit of
  instruments of acceptance.
• Awareness that amendments may result in two-tiers
  of obligations among Members is not new.
  A GATT Secretariat note from 1954 recognising
  that amendments entail

"some risk that there may be an indefinite period
during which two-thirds or more of the
contracting parties will be governed by the new
set of rules and the others by the old."
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• The third limitation of WTO amendment procedures
  is the risk of free-riders in a system where the
  MFN principle pervades
• Members that have accepted an amendment must
  accord to the goods, services and service
  suppliers of all Members the treatment required
  by that amendment (pursuant to the GATT and the
  GATS MFN clauses).
• They must accord the increased commitments of the
  Doha Round on a MFN basis, including to Members
  that have not yet deposited instruments of
  acceptance of, and are not legally bound by, the
  amendment.
• In this way, the combination of the MFN principle
  and the WTO amendment rules creates the real
  possibility for Members to delay the acceptance
  of the amendment and free-ride on the economic
  benefits of the Round.

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• HOWEVER Amendments can be used to give rapid and
  universal legal effect to the results of trade
  negotiations if accompanied by similarly rapid
  and universal deposit of instruments of
  acceptance.
• The Challenge and Question What mechanism will
  create the incentive for Members to quickly and
  universally ratify a Doha Round amendment?
• The participants in the Uruguay Round were
  confronted with the same question as they also
  wanted to use amendments to give rapid and
  universal effect to a single undertaking. The
  solution they devised was a radical one -
  replacing the GATT 1947 and the Tokyo Round
  Agreements with the WTO Agreement. (Which in turn
  involved replacing the GATT as an institution
  with the WTO)
• This replacement forced participants to rapidly
  and universally accept the results of the Uruguay
  Round as the consequences of not doing so would
  have been to be left outside the multilateral
  trading system altogether.
• At the moment, repeating this "nuclear option"
  (Bill Davey) and replacing the current WTO
  agreements with a new agreement (incorporating
  the existing agreements and the results of future
  trade negotiations) as well as the replacement of
  the WTO with a new organisation (the WTO Mark II)
  does not appear to be under serious consideration.

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Other options - Use scheduling as much as
possible. - Create a MFN waiver for those Members
that have deposited instruments accepting the
amendment. Key message  - Rapid and universal
methods of changing WTO law are limited. Creative
methods will need to be considered if the full
benefits of the Doha Round, as a legal security
against protectionist roll-backs, are to be
realised.