Twelfth WTO Ministerial Conference: Current Issues and Future Challenges

By Biswajit Dhar | Briefing Paper # 47 | November 16, 2021

The 12th Ministerial Conference (MC12) of the World Trade Organization is being convened in Geneva at the end of this month, a year and a half after it was scheduled to be held in Kazakhstan. MC12 is being held at an important juncture when the global trade scenario is quite upbeat. Recent WTO estimates show that global trade volumes could expand by 11 percent in 2021, and by over 4 percent in 2022, and could stabilise at a level higher than the pre-COVID trend.

The buoyancy in trade volumes has played an important role in supporting growth in economies such as India, where domestic demand has not yet picked up sufficiently. Therefore, these favourable tidings provide an ideal setting for the trade ministers from the WTO member states to revisit trade rules and to agree on a work programme for the organization, which can help maintain the momentum in trade growth.

But above all, MC12 needs to consider how in these good times for trade, the economically weaker countries “can secure a share in the growth in international trade commensurate with the needs of their economic development’, an overarching objective that is mandated by the Marrakesh Agreement Establishing the World Trade Organization.

Myriad Challenges

Does the run-up to MC12 provide any evidence that the global trading system can be slightly less iniquitous than it has been following the deliberations between the Ministers in Geneva? The answer to this question lies in the possible outcomes in some areas that are currently witnessing intense negotiations. These include the adoption of WTO rules on electronic commerce, investment facilitation, fisheries subsidies. But there is one issue that surmounts all others, namely, WTO’s response to demands that technologies necessary for producing vaccines, medicines, and other medical products for COVID treatment should be available without the restrictions imposed by intellectual property rights (IPRs).

From India’s perspective, one critically important issue that is on the table is the maintenance of public stockholding for food security purposes. This issue is important for two reasons. First, for implementing the food subsidy programme in a country that is home to the largest number of undernourished. And, secondly, public procurement of foodstuffs provides livelihood security to low-income or resource-poor farmers, who carry out their trade on 99.4 percent of the country’s farm holdings.

Besides ensuring that the outcomes that they agree to are equitable, Trade Ministers from the 164 WTO member countries will also have to find a way of getting the Organization out of the crisis that it finds itself in, ostensibly for two reasons. First, the negotiating processes ensure the full participation of member countries and should not get reduced to the “club of the willing”. Secondly, Ministers must find a way of getting the Appellate Body of WTO’s dispute settlement mechanism out of the deep freeze, which was caused by the then US President Donald Trump’s refusal to join the consensus for replacing the retiring members of the Appellate Body.

A Waiver on Enforcement of IPRs During COVID Pandemic

From the very outset of the COVID pandemic, it had become clear that IPRs protected using the provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) are formidable barriers to ensuring equitable access to vaccines. Major pharmaceutical companies used the monopoly power granted by their IPRs to deny technology and know-how to developing countries, thus preventing the production of vaccines in these countries. The large involvement of developing countries in vaccine production could not only have increased supplies, but more importantly, vaccines would have become more affordable. Availability of vaccines remains a critical problem in these countries even after a year since the first dose of the COVID vaccine was administered. Recent statistics show that until now, a mere 4.5% of the population in low-income countries has received at least one dose of vaccine.

To remedy this situation, India and South Africa had tabled a proposal in the WTO in October 2020, for temporarily waiving implementation or enforcement of several forms of IPRs on “affordable medical products including diagnostic kits, vaccines, medicines, personal protective equipment and ventilators for a rapid and effective response to the COVID-19 pandemic”. By so doing, barriers created by IPRs to timely access to affordable medical products could be removed. The developed countries batting for their corporates opposed this proposal, supported by nearly two-thirds of the organization’s membership.

In a subsequent submission in May 2021, the co-sponsors specified that apart from the waiver on implementation and enforcement of IPRs on vaccines, medicines and medical products used for COVID treatment, they were seeking a waiver also on the “methods and means” for manufacturing these products. Further, the demandeurs of waiver specified that they were seeking a 3-year period of waiver from the date on which WTO members took the decision.

The developed world led by the US and the European Union (EU) opposed the India-South Africa proposal to waive enforcement of IPRs during the pandemic. In the TRIPS Council Meeting in October 2020, the US contended that “[W]eakening IP protection and enforcement would be counterproductive to [the] global fight against COVID through the creation of needed medical technologies and would not address the current, main challenges to access concerning manufacturing and raw material resources”.

The EU’s view was on similar lines: “[R]esearchers and pharmaceutical industry … have put extraordinary efforts into the development of future treatments and vaccines against COVID-19” and that a well-functioning IPRs system was “crucial to ensure that these efforts are adequately incentivised and rewarded”. The group argued further “that TRIPS Agreement provides for the possibility, under certain conditions, of issuing a compulsory licence for local consumption of medicines and provides for fast-track procedures in health emergencies”.

Switzerland, another major opponent to the waiver proposal, echoed the arguments of the US and the EU while stating that “a TRIPS waiver for COVID-19 would mean to put into question the foundation of a large part of the investments and efforts currently undertaken to research and develop a vaccine and medical products against the novel coronavirus”.

After the early opposition from the developed world, the Biden Administration brought a more conciliatory US on the negotiating table when it provided partial support to the India-South Africa proposal by agreeing to waiver on vaccines. Although this statement raised a glimmer of hope that WTO members would lift restrictions on access to technologies for COVID vaccines and medicines, at least by MC12, the other major opponents showed no inclination to change their positions. Members of the European Union, led by Germany, have been steadfastly opposed the waiver and supported the licensing of IPRs to expand the production of vaccines in developing countries. This was despite the fact the Doha Declaration, which had stamped its approval on the grant of compulsory licences, had recognised that “WTO Members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement”.

The unfortunate reality of the current discussions is that an outcome supporting affordable access to COVID vaccines and medicines looks distant. Further confirmation of this possibly came from the WTO Director-General, Ngozi Okonjo-Iweala, when in her recent musings on MC12 in The Economist, she was completely silent on this issue.

Fisheries Subsidies

Negotiations on fisheries subsidies were initiated after the Doha Ministerial Conference (2001) gave the mandate “to clarify and improve WTO disciplines on fisheries subsidies, taking into account the importance of this sector to developing countries”. The Hong Kong Ministerial Conference (2005) renewed the mandate for strengthening the “disciplines on subsidies in the fisheries sector, including through the prohibition of certain forms of fisheries subsidies that contribute to overcapacity and over-fishing”. Importantly, the new mandate stated that “[A]ppropriate and effective special and differential treatment for developing and least-developed Members should be an integral part of the fisheries subsidies negotiations, taking into account the importance of this sector to development priorities, poverty reduction, and livelihood and food security concerns”.

The Sustainable Development Goals (SDGs) reinforced the mandate for introducing disciplines on fisheries subsidies. Goal 14.6 gave the mandate to “prohibit certain forms of fisheries subsidies which contribute to overcapacity and overfishing, and eliminate subsidies that contribute to IUU fishing, and refrain from introducing new such subsidies” by 2020. Echoing the mandates of the Doha and Hong Kong Ministerial Conferences, Goal 14.6 insisted “that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the WTO fisheries subsidies negotiation”.

Earlier this month, the Chair of the fisheries subsidies’ negotiations, Ambassador Santiago Wills, tabled a Revised Draft Text aimed at finalising an agreement before MC12. The crux of the proposed disciplines on fisheries subsidies are as follows. No WTO member can grant or maintain (i) any subsidy to a vessel or operator engaged in illegal, unreported and unregulated (IUU) fishing (Article 3.1 of the Revised Draft); (ii) subsidies for fishing or fishing related activities regarding an overfished stock (Article 4.1); (iii) for fishing or fishing related activities that contribute to overcapacity or overfishing (Article 5.1).

However, two decades after the fisheries subsidies’ negotiations were initiated and six years after the SDGs were adopted, the focus of the negotiations, as reflected in Ambassador Wills’ recent Draft Text, is solely on an early conclusion of an agreement. The critical directives given by the WTO Trade Ministers in 2001 and 2005 and the United Nations General Assembly (UNGA) to incorporate effective provisions related to special and differential treatment (S&DT) to developing countries have been ignored almost completely. These texts are therefore completely unbalanced as they do not provide the wherewithal to rein in large-scale commercial fishing that is depleting fish stocks the world over, and at the same time, are threatening the livelihoods of small fisherfolk in countries like India.

What are the current proposals on S&DT for developing countries in Ambassador Wills’ Draft Text? Developing country Members, including LDC Members, could be allowed limited exemptions under Articles 3.1 (IUU) and 4.1 (overfished stock). These countries would be allowed to provide subsidies to low income or resource-poor and livelihood fishing up to 12 nautical miles (defined as “territorial sea”, by the 1982 United Nations Convention on the Law of the Sea) for a period of 2 years from the date of entry into force of the agreement. The S&DT proposals regarding Article 5.1 subsidies, those that are deemed to contribute to overcapacity or overfishing, are still not clear. In this regard, one of the proposals states that developing countries can continue to use these subsidies “if its annual share of the global volume of marine capture production does not exceed 0.7%”. These minimal S&DT proposals make it explicit that the fisheries subsidies’ regime seeks to establish a level playing field between unequals, namely, developed countries providing large volumes of subsidies to commercial fishing and developing countries, whose fisheries sector is dominated by small fisherfolk.

India has sought to restore the balance through several proposals, two of which relate to are important. First, developing countries can subsidise low income, resource-poor or livelihood fishing or fishing related activities within their territorial waters and the Exclusive Economic Zone; and, secondly, developing countries not currently engaged in distant water fishing can subsidise future fishing or fishing-related activities, including distant water fishing, for a maximum period of 25 years after the entry into force of the fisheries subsidies’ agreement. But will India’s voice be heard?

Electronic Commerce

In recent months, the OECD and the G-20 members’ proposal to introduce global minimum taxes on digital companies has made headlines. But in the WTO, most of these countries have been investing their negotiating capital to facilitate the expansion of e-commerce firms. Discussions on e-commerce are being held in the WTO since 1998, after the adoption of the Ministerial Declaration on Global Electronic Commerce wherein WTO members agreed to “continue their … practice of not imposing customs duties on electronic transmissions”. The more substantive outcome was the decision to “establish a comprehensive work programme” taking into “account the economic, financial, and development needs of developing countries”.

Fast forward to the discussions in 2021, and a key focus of the 1998 e-commerce work programme, namely “development needs of developing countries”, is entirely missing from the text document that is the basis for the current negotiations. On the negotiating table are issues relating to liberalisation of the goods and services trade, and of course guarantee for free flow of data across international boundaries, all aimed at facilitating the expansion of businesses of e-commerce firms. In fact, the decision on a moratorium on the imposition of import duties agreed to in 1998, has become the basis for a push towards comprehensive trade liberalisation. A perfectly logical way forward, given that the sole objective of the negotiations on e-commerce is to facilitate the expansion of e-commerce firms.

Investment Facilitation

Complementing the current focus of the WTO to promote the global interests of oligopolies is the initiative for the adoption of an investment facilitation agreement. The inclusion of substantive provisions on investment in the WTO has been one of the more divisive issues. In 2001, the Doha Ministerial Declaration had included a work programme on investment, but it was soon taken off the table as developing countries were opposed to its continuation because the discussions were geared to expanding the rights of foreign investors through a multilateral agreement on investment. The Decision adopted by the General Council on 1 August 2004 to revive the negotiations after the failed Cancun Ministerial in 2003 had mentioned that no work towards negotiations on investment will take place within the WTO during the Doha Round. However, discussions on investment issues have been revived, not through the decision taken by the members of the Organization as a whole, but by a segment of the membership.

Investment facilitation has reintroduced the old agenda of concluding such an investment agreement. The proponents have been careful not to load the agenda by seeking substantial commitments from the government to promote the interests of foreign investors, but it should be clear even to the uninitiated that the ultimate objective is to bind the host governments into a multilaterally agreed commitment to comprehensively protect investor interests.

Besides the bias in favour of global oligopolies, the current negotiating processes in the WTO are fundamentally flawed.

Public Stockholding for Food Security Purposes

In agriculture, the most crucial issue for India is Public Stockholding for Food Security Purposes (PSH). This issue has arisen because the AoA imposes two sets of conditions on WTO members maintaining food stocks to provide subsidised food to address the problem of domestic food insecurity. First, every member must procure foodstuffs and sell them at administered prices. Secondly, if the foodstuffs are sold below the administered prices, implying that if a member sells at subsidised prices, the difference between the administered prices and selling prices must be accounted for in the subsidies bill of the member concerned. Thus, the AoA considers providing subsidised foodstuffs to the poor as market-distorting and, therefore, countries implementing food security programmes by using publicly held stocks of foodstuffs, are not allowed to breach the subsidy threshold of 10 percent of their value of agricultural production.

Grave Implications for India

The provisions regarding PSH became important for India after the government began implementing the National Food Security Act (NFSA) in 2013. Having made the commitment to provide subsidised food grains to almost two-thirds of the country’s population, India was staring at a situation where the possibility of breaching the subsidies’ threshold of 10 percent become imminent. If the government had continued to implement the NFSA despite breaching the subsidy limit, any other WTO member could have initiated a dispute against India. And, if India had lost the dispute, distribution of subsidised food grains would have to be discontinued immediately.

In 2013, India was able to negotiate a “peace clause”, or a temporary reprieve from facing a dispute even if it had breached the subsidies’ threshold of 10 percent while implementing the NFSA. WTO members must find a “permanent solution” to this problem that India is faced with. But the discussions in the run-up to the MC12 show that the odds are stacked against India owing to two proposals that have been included in the Chair’s text. The first is that a developing country like India would have to limit its total procurement to 15% of the domestic production of “traditional staple food crops” to implement public stockholding programmes for food security purposes. The second proposal states that countries maintaining public food stocks must not allow exports from such stocks. What does this condition imply for India?

Restricting procurement of food grains can have serious implications for India in terms of realising the twin objectives of supporting livelihoods of the low-income or resource-poor farmers and meeting domestic food security. In 2019-20, India’s production of its main staple crop, namely rice, was 118.4 million tonnes, and the government’s rice procurement was nearly 52 million tonnes. According to the Government of India’s submission to the WTO, the quantity of rice released in compliance with NFSA was about 33.4 million tonnes. Thus, while more than 34 million tonnes are needed for the government to provide subsidised food grains to the country’s underprivileged, the WTO is proposing that India should have procured less than 18 million tonnes.

In the case of wheat, the government procured 34 million tonnes in 2019-20, while 20.2 million tonnes were distributed to the beneficiaries, as per the records of the Department of Food and Public Distribution. As against these requirements for minimally supporting the farmers and the underprivileged, the WTO is proposing that can procure at most 16 million tonnes.

The second proposal was tabled by the G-33, a developing country grouping in which India has played a major role in the past. Implementing this proposal, which states that countries maintaining the food security stocks must ensure the stocks are not used to promote exports, could entail an administrative burden for the country at a time when exports of cereals from India are on an upswing. Clearly, Government faces serious challenges as MC12 takes a call to find a permanent solution regarding PSH.

An Institution in Deep Crisis

The above discussion raises several questions regarding the processes through which the negotiations are taking place in the WTO, and on issues that are vital for the sustenance of their economies. While this is an aspect that lies at the heart of the multilateral trading system, an equally important aspect arises from the fact that the WTO is battling a severe legitimacy crisis on several counts that are striking at its foundations.

For more than a decade, WTO’s negotiating arm has largely been dysfunctional, having delivered just the Agreement on Trade Facilitation since the formation of the organization. Over the past few years, the organization’s dispute settlement body, about which the former WTO Director-General, Pascal Lamy had once remarked that “many consider [it] to be a role model for the peaceful resolution of disputes in other areas of international political or economic relations” is in jeopardy because President Donald Trump refused to allow the appointment of new members on the Appellate Body, replacing the retiring members.

Negotiations to rebalance the major WTO agreements, especially to factor in the needs and aspirations of developing countries, which were being conducted under the rubric of the Doha Development Agenda (DDA) since 2002, came to a virtual standstill after the 2008 economic recession.

Worse still, in the Buenos Aires Ministerial Conference held in 2017, there was no consensus among members on continuing with the DDA, and recent discussions show that the development agenda is off WTO’s agenda. The WTO is keener to serve the interests of the dominant commercial entities and not the interests of the majority of its members, the developing countries.

More contentious is the fact that most of the issues being currently discussed, which includes discussions on e-commerce and investment facilitation, are being conducted not by a mandate given by the entire membership of the WTO in a transparent manner that are also consistent with the objectives of the WTO. Instead, these negotiations owe their origins to the so-called “Joint Statement Initiatives” (JSI) in which a section of the membership has developed the agenda with a view to producing agreements in the WTO. This will then be offered to the rest of the membership on a “take-it-or-leave-it” basis. This entire process is “detrimental to the very existence of rule-based multilateral trading system under the WTO”, as India and South Africa have forcefully argued in a submission against the JSIs early this year.

Equally damaging for WTO’s legitimacy was President Trump’s move to scuttle WTO’s dispute settlement mechanism, considered vital for enforcing global trade rules. President Trump had refused to join the consensus for appointing new members of the Appellate Body, without whom disputes between members cannot be resolved.

Unfortunately, the Biden Administration has shown no signs to reverse the previous administration’s decision, leaving the future of the Appellate Body in limbo. Clearly, the role of the WTO as an enforcer of global trade rules and to thus facilitate conduct global trade in a seamless manner is seriously compromised in the absence of a functioning Appellate Body. In the run-up to MC12, WTO members have strangely been reluctant to discuss this issue. However, if Trade Ministers do not step up their efforts to ensure that the Appellate Body functions normally, the relevance of the rules-based trading system could be in serious jeopardy.

Biswajit Dhar is a Professor of Economics at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi.

Image courtesy of the WTO