Bridges Weekly Trade News Digest • Volume 13 • Number 1 • 14th January 2009
New WTO Rules Text Brings Old Rifts into Focus
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Longstanding differences in some areas of the WTO’s negotiating group on rules appear as entrenched as ever, a draft text released by the chair of the group last month revealed. But some incremental progress has been made in the 13 months since the previous text was released, and the chair has vowed to intensify the group’s work beginning in early February in an effort to narrow gaps in the rules talks, one of several negotiating areas that have prevented the seven-year-old Doha Round talks from reaching a successful conclusion.
The draft text, which was released on 19 December, includes new language on anti-dumping as well as subsidies disciplines, and offers a ‘roadmap’ for the negotiations on regulating subsidies in the fisheries sector. The document had been expected to be released a few months earlier, but was ultimately put on hold so as not to distract from a strong end-of-year push to conclude critical negotiating areas of industrial and farm goods.
When efforts on those fronts failed to produce results by mid-December, the chair of the rules group, Ambassador Guillermo Valles Galmés of Uruguay, released his draft text.
In an introductory note to the document, the chair stressed that while some compromises had been struck, Members remained starkly divided on several issues, most notably a long-controversial anti-dumping tool known as zeroing.
“It should not be expected that my new texts will offer any magic solutions in the many areas where Members’ positions differ dramatically and where the alternatives remain as delegations originally tabled them, i.e., very far apart,” Valles wrote.
To counter criticism that he has not paid enough attention to all Members’ views, Valles stressed that he relied on a ‘bottom-up’ approach in creating the new text, and that he only provided draft language “only in those areas where some degree of convergence appears to exist.” Several delegations had slammed the previous draft, which was released in November 2007, as unbalanced, claiming that it failed to acknowledge the positions of several parties (see Bridges Weekly, 19 December 2007, http://ictsd.net/i/news/bridgesweekly/6605/).
No end in sight to ‘zeroing’ battle
By far one of the most controversial aspects of the rules negotiations has centred on the US’ use of ‘zeroing’, a method of calculating anti-dumping duties that has raised the ire of many of Washington’s trading partners.
When determining the extent to which imports are being exported at artificially low prices (‘dumped’, in WTO parlance), US trade authorities ‘zero out’ cases in which goods are sold at higher prices in the US than in the exporting country. They only take into account cases where prices in the US are lower.
Critics say that zeroing artificially inflates ‘dumping margins’ and allows affected US companies to secure unsuitably high levels of anti-dumping duties on imports with which their products compete.
WTO dispute panels and the Appellate Body have repeatedly ruled against the practice. But US officials claim that these rulings have been based on inappropriate interpretations of world trade law and that the dispute settlement body has overstepped its authority in making the rulings. Specifically, the United States argues that nothing in the WTO’s Agreement on Anti-Dumping specifies that ‘non-dumped comparisons’ (those that have been zeroed out) have to be ‘offset’ when in the calculation of dumping margins.
The debate over zeroing reached a fever pitch in late 2007 with the release of the previous draft rules text, which would have explicitly permitted zeroing under certain circumstances. Outcry against that provision was both strong and widespread; the US was the lone Member to defend its inclusion.
The draft text released last month showed just how little progress has been made to bridge Members’ differences on zeroing.
“Delegations remain profoundly divided on this issue,” Valles wrote in the text. “Positions ranged from insistence on a total prohibition of zeroing irrespective of the comparison methodology used and in respect of all proceedings to a demand that zeroing be specifically authorised in all contexts.”
Thus, instead of outlining a potential compromise solution on zeroing, the chair in the latest text has simply described the positions of the opposing parties. The wording on zeroing that had caused so much grief in 2007 was taken out, a move that did not please Washington.
“We are deeply disappointed that the chairman has eliminated the limited language on zeroing contained in the November 2007 text,” the office of the US Trade Representative said in a statement. “As we have said repeatedly, the United States cannot envision an outcome in the Rules negotiations that fails to adequately address this critical issue.”
Other areas of disagreement on anti-dumping include whether countries should be required to distinguish the effects of dumped imports and other factors, and whether retaliatory tariffs should be subject to a sunset clause that would faze them out automatically after a set period has elapsed.
Chair lays out ‘roadmap’ for fisheries talks
The rules group is also charged with strengthening disciplines on subsidies in the fisheries sector. A particular challenge for the group on this front has been to balance the need to protect the world’s fish stocks from overfishing – a goal that the chair says all delegations appreciate – and the need to afford a just amount of ‘special and differential treatment’ to the world’s poorer countries, many of which rely heavily on the sector.
The November 2007 text, which included specific legal language on fisheries, called for a ban on several types of fisheries subsidy payments, especially those that boost fishing capacity or create other incentives to fish, such as payments that cover the construction, operating and fuel costs of fisheries vessels. Other forms of support for the fishing industry, such as for port infrastructure “exclusively or predominantly for activities related to marine wild capture” fishing, including storage and processing facilities, were also prohibited in that version of the text.
But following controversy over several of those positions, Valles took a step back this time: the legal language of the previous draft was replaced with a ‘roadmap’ for future work on the matter.
“We have no pre-existing agreement to which to revert, and the differences among delegations go to the very concepts and structure of the rules,” Valles explained. Instead of dictating potential compromises, the roadmap “identifies the key questions that we need to address in order to reconcile the approaches and advance our work in this area,” he wrote.
Those key issues include identifying which subsidies lead to overfishing, establishing an objective way of defining a fishery as being overfished, and determining the extent of the group’s mandate to discipline subsidies in the sector.
Environmental group Oceana welcomed the chair’s new approach to the fisheries talks.
“Oceana strongly and actively supports the WTO mandate to limit fisheries subsidies that contribute to overcapacity and overfishing,” Courtney Sakai of Oceana said. “The new roadmap offers a productive way for negotiators to move forward in implementing an effective agreement that achieves these objectives.”
Discussions of the new documents are expected to begin the first week of February.
ICTSD reporting.
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