“Joint Statement Initiatives” and Progress in the WTO System
“Joint Statement Initiatives” (JSIs) are today seen by many governments as crucial to making trade progress, given some WTO Members opposition to further liberalization and rulemaking on a multilateral basis. Two governments that have actively worked to stymie progress, India and South Africa, are currently challenging the legality of JSIs within the multilateral system of the WTO in a new bid to prevent other WTO Members from moving forward on the trade front.
This article briefly recounts the history of progressive multilateral liberalization and makes the argument that JSIs, far from being alien to the system, reflect the way progress has historically been made.
Anyone who knows the history of the multilateral trading system of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) was not surprised by the failure of the Doha Round. A critical mistake was made when it was decided that the outcomes of the Doha Round should be decided by consensus and that all Members should be bound by those outcomes (the “single undertaking” approach). Trying to make progress on this basis was bound to fail and it also reflected a misunderstanding of the origins of the Uruguay Round’s “single undertaking”.
When one revisits the Punta del Este Declaration that launched the Uruguay Round negotiations, it’s clear that there were a number of subjects, such as trade in services and protection of intellectual property rights, listed for negotiation where it was never expected that all of the Contracting Parties would participate in the negotiations and be bound by the outcomes. How these outcomes would be implemented was left open for decision at the end of the talks. Technically, the services negotiations were not even under GATT auspices. It was decided that from a timing standpoint, the disparate negotiations should move forward as a “single undertaking”.
Progress in the GATT and WTO has almost never been possible on the basis of all member countries being bound by the same rules. In the 1950s only a limited number of governments undertook to be bound by the export subsidy disciplines of GATT Article XVI:4. The Kennedy Round produced the limited-membership Antidumping Code and the Tokyo Round resulted in a large number of limited-membership agreements that were implemented as “codes”. I would argue that even with their limited membership, the codes represented a big step forward in rule-making for important trade issues.
Bringing the codes into the GATT system was problematic. Developing countries refused (initially) to have the GATT Secretariat administer the codes of which few of them were members. They blocked agreement and funding for this to happen. This led to a negotiation whereby, in order to get the codes into the system, developed countries agreed to the inclusion in GATT of Part IV – Trade and Development, and in particular the so-called “Enabling Clause” in paragraph 8 of Article XXXVI. The ‘Enabling Clause’ is the basis for special and differential treatment, including non-reciprocity and a lower level of commitments from developing countries. For developed countries, this was the price to pay for bringing the codes into the GATT framework.
It was the creation of a new organization - the WTO - at the end of the Uruguay Round, that made it possible to broaden membership in what had been the limited-membership codes and other agreements resulting from the round. But it was not the WTO Agreement itself that obliged countries to participate. In reality participation was the result of blackmail by the Quad countries (the USA, European Community, Japan and Canada). At the end of the Round, the Quad countries quit GATT 1947 and said that any country that did not join the WTO and accept all the agreements’ commitments would lose their MFN access to Quad markets. That is why there is a GATT 1994 and a GATT 1947. It was the blackmail more than the creation of the WTO that enabled a “single undertaking” approach to WTO membership.
After the advent of the WTO, trade liberalization progress on the “multilateral” front came with limited-membership agreements for telecommunications services, financial services, and information technology products. Generally, these are called “critical mass agreements” because enough of a percentage of global trade was covered that participants were willing to accept some free-riding. Non-participants did not object because they received the benefits of the agreements on an MFN basis.
Fast forward to the post-Doha period where we find ourselves now. Over the past twenty years, all significant trade rule-making and liberalization has taken place in the context of bilateral and plurilateral trade agreements outside of the WTO. WTO rule-making has been frozen in the 1990s while important trade issues have been subject to updated rules in the plurilaterals.
In recent years, some WTO Members have moved to update WTO rules through new “critical mass” agreement efforts called JSIs. JSIs address electronic commerce, services domestic regulation, and investment facilitation. Certain countries – chief among them India and South Africa – evidently do not want to see progress in these areas and have opposed JSIs. In February 2021, India and South Africa circulated a paper arguing against the “legality” of JSIs (WT/GC/W/819).
There are a number of points made in this paper that I agree with. If a subset of WTO members negotiates an agreement that would modify rules and then want to “add that agreement to Annex 4” or formalize the agreement “into the WTO framework of rules” or bring the results of their agreement “under the umbrella of the WTO”, this cannot be done outside of the accepted framework of WTO rules and decision-making procedures. Related to this, in another part of their paper they correctly suggest that a proposed Trade in Services Agreement (TISA) involves rule-making and therefore would need to be implemented outside the framework of WTO rules. I don’t see a problem here as it was always my understanding that TISA would have been an agreement concluded pursuant to GATS Article V.
Where I disagree with India and South Africa is with some of the things they put forward in the Annex to their paper. For example, I disagree with their assertion that “even changes to schedules cannot be made unilaterally, as other members have the right to protect the existing balance of rights and obligations”. This is true if you want to make your schedule more trade restrictive but not if you unilaterally modify your schedule to make it more liberal. The certification procedure they refer to in connection with the Information Technology Agreement (ITA) was not a negotiation with all other WTO members. The ITA was essentially negotiated as an early JSI only among a subset of members on a critical mass basis.
So, as long as a JSI only involves changes in schedules (making them more liberal) and does not seek to modify WTO rules or bring the resulting agreement into Annex 4, I don’t see any conflict between JSIs and the legality of decision-making in WTO. With Members like India and South Africa blocking progress at the multilateral level in WTO, other Members have no recourse other than to pursue the JSI route, either as critical mass agreements within the WTO framework or where rule-making is involved, outside the WTO as plurilateral agreements.
Progress in the WTO has been scant over the past two decades, with many questioning its continued relevance as they pursue liberalization through bilateral and plurilateral agreements outside the system. In the lead up to WTO’s next Ministerial Conference, it could well be the success or failure of JSIs that determines whether Members will see that WTO has continued relevance.
Andrew Stoler, former WTO Deputy Director-General; former Office of the United States Trade Representative senior trade negotiator; former Executive Director of Institute for International Trade; current advisory board member for European Centre for International Political Economy (ECIPE) and the University of Sydney’s United States Studies Centre.
The views expressed here are the authors, and do not represent the views of the Institute for International Trade.
This work is licensed under Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
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