WTO Trade Facilitation Deal in Limbo as Deadline Passes Without Resolution

31 July 2014

The 31 July midnight deadline for adopting the Protocol of Amendment for the WTO’s Trade Facilitation Agreement (TFA) has passed without a resolution, as members were unable to bridge a divide that had emerged in recent weeks over whether to link the protocol with progress toward a “permanent solution” on public food stockholding.

“We have not been able to find a solution that would allow us to bridge that gap,” WTO Director-General Roberto Azevêdo told members late on Thursday evening, with just a couple of hours to go before the midnight deadline.

Speaking at an informal meeting of Heads of Delegation (HoDs), which then became an informal gathering of the WTO’s Trade Negotiations Committee (TNC), he told members that they “tried everything we could. But it has not proved possible.”

Though the WTO chief noted that there was still a little time left in case any member was able to come forward with a proposal, “at present there is no workable solution on the table, and I have no indication that one will be forthcoming.”

The report caps a suspenseful week for the international trade community, as questions grew over whether the hard-won “Bali deal” – a series of decisions agreed by WTO members at their latest ministerial conference in December – could be lost, or at least be put at serious risk, and what this might mean for other negotiations currently underway.

Public food stockholding

Earlier this month, India had made clear that it would not approve the TFA protocol – which would annex the newly-minted agreement to the global trade body’s overall legal document – unless it saw visible signs that its concerns, namely regarding public food stockholding, were being addressed. (See Bridges Weekly, 24 July 2014)

The demand had received a cold welcome from many of India’s trading partners, coming so close to the 31 July deadline for adopting the TFA Protocol. Without the protocol, the TF pact would not be part of the WTO’s legal framework, and is a necessary pre-condition for countries to ratify the deal in their domestic legislatures.

In Bali, members had agreed to refrain from challenging subsidised purchases of farm goods under public food stockholding schemes, in exchange for additional information about the scale and nature of support provided to farmers. (See Bridges Daily Update, 7 December 2013)

India has said that it is dissatisfied with the pace of progress towards a “permanent solution” to replace this interim mechanism, which WTO members had previously agreed would be concluded by the global trade body’s eleventh ministerial conference in 2017.

New Delhi had therefore said last week that it wanted to link the two issue areas – TFA implementation and public stockholding – along with proposing a series of changes to the agreed timelines for the Bali decisions.

“In order to fully understand and address the concerns of Members on the TF Agreement, my delegation is of the view that the adoption of the TF Protocol be postponed till a permanent solution on public stockholding for food security is found,” India’s representative to the WTO told fellow members last Friday at a meeting of the General Council.

“Timelines are important but we cannot afford to act in haste in the WTO ignoring the concerns expressed by members,” India continued.

A permanent solution should be reached by 31 December of this year, India said, with a meeting of the General Council in October to review progress of these “accelerated discussions.” The talks should be held under an institutional mechanism “establish[ed] immediately,” with New Delhi suggesting a special session of the WTO’s Committee on Agriculture as being an example of such a system.

Such an approach, India added, should also be adopted for the other decisions reached in Bali, particularly those relating to least developed countries (LDCs).

Sources say that India was backed at last week’s meeting by Bolivia, Cuba, South Africa, Venezuela, and Zimbabwe. However, many developed and developing country members, for their part, lambasted the move, warning in a joint statement that members’ commitment toward implementing the Bali deal “would not survive a decision to step away from any element of the package approved by ministers.”

“The package of decisions reached in Bali was finely balanced... It would not be possible to reopen one of those decisions without unravelling the entire package,” said the 26-member group, which included countries such as Australia, Chile, Pakistan, and Nigeria. The Bali deal, they added, is “central” for the conclusion of the Doha Round talks and the global trade body’s negotiating function overall.

The EU similarly noted last week that it was “not ready to renegotiate basic elements or timelines that were agreed as integral part of the Bali package,” warning that missing the 31 July TFA deadline would translate into a lost opportunity for growth and development.

“Most of the members – both developed and developing – would like the trade facilitation deal to go through,” said one G-33 negotiator ahead of the Thursday deadline.

Waiting game

India’s request at last Friday’s General Council kicked off a flurry of meetings at various levels as WTO members, and Director-General Azevêdo, tried to resolve the stand-off before the 31 July deadline. Sources say that the WTO chief met twice over the past few days with the coordinators of the major groups in Geneva to update them on the latest developments in the situation and outline efforts being made to resolve them.

One of those efforts, sources confirmed, included a suggested way forward that the Director-General conveyed to India. A developing country source explained that Azevêdo had suggested that a dedicated session be established within the Committee on Agriculture’s special session to deal specifically with the process of finding a permanent solution.

That proposal, the official said, did not appear to satisfy India, given that it did not feature a change to the timeline for the permanent solution.

“India wants substance, not process,” said one delegate close the talks. He added, however, that it was unclear what sort of concessions on substance India was actually seeking.

Many had eyed a Thursday meeting in New Delhi between US Commerce Secretary Penny Pritzker and Secretary of State John Kerry and their Indian counterparts – including Finance Minister Arun Jaitley, Minister of State for Commerce and Industry Nirmala Sitharaman, and External Affairs Minister Sushma Swaraj – as an opportunity for a resolution.

While Pritzker and Kerry had told reporters earlier on Thursday that they were still hopeful of a positive outcome, after the issue was reportedly raised in the US Secretary of State’s meeting with Jaitley, Indian officials for their part confirmed that they would be holding firm in their stance.

“At this stage, we’re all just waiting,” one developed country source said on Wednesday, a comment that was repeated by many in the hours leading up to Thursday night’s meeting.

Time for reflection

With no sign of a solution before midnight, the Director-General said, members must now take the August break to reflect and consider what to do next.

“You will be the ones that determine the consequences of today’s events,” he said, asking Geneva-based officials to discuss this with their capitals “at the highest possible level.”

“I urge you to stress the importance of the situation we find ourselves in, and how significant the position you take in September will be,” Azevêdo continued. The 31 July deadline, he reminded them, was not one he had set for them, but one that their own trade ministers had agreed this past December.

The prospect of missing the TFA deadline has prompted both WTO members and the broader trade community to speculate – both publicly and privately – on what ramifications there might be for efforts to resolve the remaining elements of the Doha Round trade talks, with many saying they were deeply concerned.

The Bali deal had been hailed in December as a stepping stone in advancing the 13-year Doha negotiations, which were declared at an impasse in 2011. Along with the TFA and other Bali decisions, ministers had agreed to begin preparing a work programme that would outline a potential path forward for resolving the Doha Round.

The deadline for developing such a programme had been set for end-2014, with consultations and meetings so far in Geneva still said to be at an early stage. While the Director-General reported last week that these discussions have reflected good engagement, some sources have noted that members have appeared hesitant so far to push these talks forward too much, unless it is clear that the Bali deal will go forward.

Furthermore, many members, such as the US, have openly warned that a failure of the Bali deal could be catastrophic for the WTO, particularly for the efforts to develop a post-Bali roadmap for the Doha Round.

“It’s pretty serious,” one developing country trade official speaking to Bridges confirmed. Another warned that, in the event of no resolution by midnight Thursday, “it would be a serious breach of good faith.”

Others, however, told Bridges that while the situation was far from ideal, it would not mark the first time a ministerial deadline had been missed. Some developing countries pointed, for instance, to slow progress on eliminating export subsidies – which WTO members had agreed nine years ago would take place by 2013.

Plurilateral approach next?

In the final hours before the midnight deadline, the question of whether a plurilateral approach might be taken toward trade facilitation – should a resolution not be found multilaterally – began to be raised in the corridors, following reports that some of the major economies were considering that option.

One source from an African developing country noted that there was a “tendency” to consider this sort of approach – either bilaterally or plurilaterally – by some countries before Bali.

However, the source suggested, the fact that there is an agreed text from the Bali ministerial conference means that taking a plurilateral approach would likely not be the first choice. Others concurred that a plurilateral would, at best, be just a second or third option.

“It’s just an implementation problem; we have an agreed text,” the source said. “Even those opposed to adopting the Protocol have no issue with the TFA itself.”

A developed country official, meanwhile, noted that while it was not involved in the reported discussions among some members for a plurilateral TF approach, members had considered that idea in the past and decided against it.

Others noted that, should the plurilateral idea gain traction, how it would work, in legal and technical terms, was not yet clear.

ICTSD reporting.

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