The objectives of two global trade ministerial summits in West Asia, convened amid the backdrop of war, a deteriorating international order, and mounting geopolitical and geoeconomic tensions, appear to be at odds.
One of the summits has concluded, while the other is scheduled to commence on February 26.
In 2001, the fourth ministerial conference of the World Trade Organization was held in Doha. It took place after violent anti-globalisation riots in Seattle at the WTO’s third ministerial conference in December 1999. Then there was a pause for almost two years. The Doha meeting coincided with the war on terror following the 9/11 attacks. The US touted trade as a panacea for global peace, launching a new round of trade negotiations with the European Union and other industrialised countries, famously known as the Doha Round in the Qatari capital.
The Doha Round ambitiously covered various issues ranging from agriculture to development, and improving the elements introduced in the Uruguay Round commitments as set out in the WTO agreements. It also discussed Singapore issues including trade and investment, competition policy, trade facilitation, and government procurement.
The US and the European Union played pivotal roles in initiating the ambitious Doha work programme. However, India and numerous developing nations resisted launching a new round of trade negotiations due to systemic concerns. Their rationale stemmed from the fact that many countries had yet to fully absorb and implement the commitments from the preceding Uruguay Round, which laid the foundation for the establishment of the WTO.
Indeed, there was little room for a new ambitious round of negotiations. But India was isolated at Doha when some other developing countries fell prey to the pressure tactics and arm-twisting adopted by the US and the EU. Subsequently, the two trans-Atlantic elephants and their allies thwarted the Doha round after pocketing what they wanted, namely, the trade facilitation agreement. The developing countries who pinned their hopes on several developmental outcomes in various areas of the Doha work programme were left high and dry. The moral of the story is that a multilateral round of trade negotiations based on what is called Single Undertaking, implying nothing is agreed upon until everything is agreed, has been decimated.
Fast forward to Abu Dhabi
Twenty-three years after dismantling the Doha round, trade ministers of 164 countries will convene in Abu Dhabi for the WTO’s 13th ministerial conference on February 26. In a letter sent to the trade ministers on February 16, WTO Director-General Ngozi Okonjo-Iweala admitted that “a number of outstanding issues remain to be resolved at the ministerial level as reflected in the brackets in the texts.”
In the multilateral parlance, the bracketed text implies that there is no agreement or convergence yet on the proposed language. She urged ministers “to focus on issues that are bracketed and not reopen areas where there is convergence.” But she seems to have ignored the normal rule that in multilateral trade negotiations, member countries retain the sovereign prerogative to open or refrain from opening discussions on specific issues.
The draft package comprises texts including the draft “Abu Dhabi Ministerial Declaration”, a draft text on “Agriculture”, a very short draft text on “Dispute Settlement Reform”, a draft text on “fisheries subsidies”, and “Work Program on Electronic Commerce”. Additionally, it includes discussions on “Ministerial Conversations on Trade and Sustainable Development, including Trade and Industrial Policy and Policy Space for Development, and on Trade and Inclusion, among other information.”
Interestingly, issues such as Industrial Policy and Policy Space raised by developing countries and previously dismissed as breaches of WTO commitments, have found their way onto the Abu Dhabi Ministerial Agenda. This shift, attributed to the Biden administration’s embrace of industrial policies and sustainable development, perhaps indicates the evolving influence of Uncle Sam on the WTO.
Instead of resolving mandated issues like the permanent solution for public stockholding programmes for food security, which has been pending since 2015, the termination of the e-commerce moratorium for not levying customs duties as agreed at the 12th ministerial conference in Geneva in June 2022, and restoring a two-tier dispute settlement system, something else is underway. Over the years, ministerial mandates, which are considered sacrosanct, are set aside and goalposts are shifted by the dominant members, particularly the US.
India is a leader
“We look at India as a leader, and we thank that as a leader, India has a lot to do in terms of making sure we have a successful MC 13”, the DG said, in an interview with an Indian news daily. She hopes India, Brazil, and South Africa “will work together to ensure MC 13 is a success… the entire package… not one issue or the other, it is across the board.”
However, her elevating comments on India to take the leadership role seem somewhat odd, when one considers developments in the small group meetings behind the scenes. The WTO establishment appears to be working furiously behind the scenes at isolating India on three mandated issues – the permanent solution for public stockholding programmes for food security, the moratorium on customs duties on electronic transmissions, and investment facilitation for development, said people familiar with the ongoing discussions
For example, the DG’s remarks against the stand adopted by India and South Africa at a special general council meeting on February 14 were rarely witnessed. India and South Africa raised procedural as well as systemic issues against a proposed plurilateral agreement, called the Investment Facilitation for Development (IFD), on grounds that it went against the WTO’s core principles.
Under the WTO rules, as set out in Articles IX and X of the Marrakesh Agreement, which led to the creation of the WTO, members have to arrive at any decision based on prior consensus to negotiate a plurilateral agreement. India and South Africa have consistently opposed the proposed plurilateral (among a group of countries) agreement on IFD for violating rules and also on systemic grounds. It may well be the case that the IFD, which has been spearheaded by China since 2016, despite a lack of consensus, is currently supported by more than two-thirds of the members.
In a rules-based, consensus-driven (as per Article IX of the Marrakesh Agreement) intergovernmental, multilateral trade organisation, new initiatives or agreements, whether multilateral or plurilateral, cannot simply be imposed based on a brute majority. This is especially true when such initiatives have consistently faced rejection since the WTO’s fifth ministerial meeting in Cancun, Mexico, in 2003.
For the sake of success in Abu Dhabi, it would be imprudent to break the rules and create a wave of impunity. It is essential that even if an agreement is advanced by more than 120 countries, multilateral rules as enshrined in the Marrakesh Agreement ought to take precedence.
Increasingly, the MC 13 appears to be an exercise in weakening the core principles of the multilateral trading system to advance controversial new issues by adopting seemingly dubious forms of decision-making, such as the ‘responsible consensus,’ ‘flexible consensus,’ and ‘constructive consensus,’ to jettison Article IX of the Marrakesh Agreement. So, a new road to cherry-picking issues appears to be underway depending on the power and status of the countries.
In the process, what is being done to multilateralism seems somewhat akin to what had happened to Africa more than a century ago, i.e., the Scramble/Partition of Africa. Well, India and South Africa appear to be coming in the way of the partition of the multilateral trading system that may take place at Abu Dhabi.
Trade and environment
Another controversial issue that is being pushed by the US and the EU is on trade and climate change.
The DG even proposed language on this issue which remains in the square brackets: “[We reaffirm the importance of the contribution that the multilateral trading system can make to addressing global environmental challenges, including climate change and related natural disasters, loss of biodiversity and pollution, and promoting the UN 2030 Agenda and its Sustainable Development Goals (SDGs) in its economic, social and environmental dimensions, insofar as they relate to WTO mandates and in a manner consistent with the Members’ respective needs and concerns at different levels of economic development. We recognise the ongoing efforts of the Committee on Trade and Environment (CTE), including hosting Thematic Sessions to allow Members to deepen discussions, including on the relationship between trade measures and environmental measures. The CTE will provide a factual report on its activities to the General Council before the 14th Session of the Ministerial Conference, including possible recommendations.].
At a time when unilateral trade measures such as the EU’s controversial unilateral carbon border adjustment mechanism (CBAM) or carbon border tax are poised to enter an 18-month trial period starting October 1, it appears that the WTO is offering its support. The proposed penalties under CBAM range from €50 per tonne of carbon emissions, with formal introduction slated for 2026.
In a signed piece in the Financial Times on September 28, the EU Commissioner for Economy, Paolo Gentiloni, extolled the virtues of the proposed CBAM, claiming that it is “fully compatible with the WTO rules” and it is not about trade protection. However, these claims are being challenged by several members, who argue that the CBAM allegedly violates the core WTO rules and worse still, it goes against the Paris Climate Change Agreement of 2015, particularly the principle of common but differentiated responsibilities.
Both the EU and the US seem to be in no mood to abide by the multilateral rules as set out in the Paris Climate Change Agreement. Instead, they are on the verge of deploying unilateral, trade-related measures to address climate change in the developed world, which risks damaging the development prospects in developing countries, including the BRICS (Brazil, Russia, India, China, and South Africa).
According to a UNCATD report last year, the EU’s “Carbon Border Adjustment Mechanism (CBAM), which would impose a carbon tariff on imports into the EU from non-EU countries, (is) based on the level of carbon emissions generated in the production of the imported products.”
The CBAM’s effect on reducing greenhouse gas (GHG) emissions is projected to be minimal, accounting for less than 0.1% decrease. However, its impact on energy-intensive exports from BRICS countries to the EU is expected to result in a decline ranging from 15% to 26%, contingent on the carbon pricing scenarios implemented.
“The real income of BRICS may fall between $4 billion to $7 billion with maximum fall in the Russian Federation ($2.5 billion), followed by India ($1.6 billion) and South Africa ($1.3 billion),” the report suggested, adding that, “Such measures which reduce real incomes in BRICS will make it more challenging for these countries to progress on their climate goals.”
Due to growing adaptation costs to address accelerating climate change, developing countries will be hit hard. “Undoubtedly, economic diversification, technological progress, robust government finances, and reliable sources of foreign exchange are the preconditions for successful climate change adaptation and mitigation strategies in the developing world,” the report suggested.
In short, the Abu Dhabi meeting is a litmus test for India’s resolve to stand up for its stated positions or make compromises without securing credible results, as had happened in the previous ministerial meetings. It has become a familiar tactic to project India as a “leader” only to ensure that the Modi government does not pursue its issues in the multilateral fora when push comes to shove.