The chair of the WTO's rules committee released a report last week outlining the state of play in the group's negotiations on dumping, fisheries support, and subsidies and countervailing measures. The paper does not aim to resolve ongoing differences of opinion; rather, it simply consolidates and summarises proposals that have been tabled to date.

In a written statement released with the working document, committee chair Guillermo Valles Galmes (Uruguay) assured Members that "all proposals and issues remain on the table."

The working document presents three sets of information in annexes on anti-dumping and fisheries: consolidated or textual proposals submitted to the group, the chair's draft text, and a summary of the delegations' reactions to the chair's text. In the less contentious annex on subsidies and countervailing measures, only the latter two sets of information are provided. The 282-page document (TN/RL/W/232) comes seven months after Galmes issued a draft text that stirred much controversy among the group's Members (see BRIDGES Weekly, 19 December 2007, http://www.ictsd.org/weekly/07-12-19/story4.htm).

'Zeroing' controversy continues

On the controversial issue of dumping, Galmes' 2007 draft text raised the ire of many Members because it included a provision to allow zeroing, a method - used predominantly by the US - of calculating the extent to which a trade partner is selling its products more cheaply abroad than in its home market, a practice known as 'dumping'.

While the WTO's Anti-Dumping Agreement does not explicitly ban the practice, it allows countries that have suffered 'material injury' as a result of dumping to take anti-dumping actions against the offending Member. Such actions include measures that would normally be prohibited by WTO rules, such as charging an extra import duty on the 'dumped' product.

Under WTO rules, before a country can take any anti-dumping actions, it must first demonstrate that dumping is in fact taking place by calculating the difference between the export price and the exporter's home market price. The complainant country must then show that the dumping is causing or threatening injury to its domestic producers.

The process of this calculation is the source of much disagreement. Specifically, Members disagree over whether a country should be allowed to ignore (or 'zero out') cases in which a good commands a higher price abroad than in the exporter's home market, only taking into account cases where prices overseas are lower.

Critics say that this practice of zeroing, commonly deployed by the US Department of Commerce, inflates 'dumping margins', thus allowing complainant countries to impose inappropriately high anti-dumping duties on competing imports.

In a series of decisions, the WTO's Appellate Body has consistently ruled that zeroing violates the Anti-Dumping Agreement (ADA), which requires the "fair comparison" of export prices and home market prices in dumping calculations.

However, the text that the chair released in November would reverse those decisions by allowing a limited form of zeroing. That section of the paper drew harsh criticism from both the US, which argued that the limitations on zeroing were too narrow, and the rest of the delegations, which felt that too much zeroing was allowed.

The working document that the chair issued last week makes no changes to that position, although it does more fully acknowledge other delegations' disagreements with the proposal to allow some level of zeroing.

In a reaction statement to the working document, Shri Kamal Nath, India's Minister of Commerce and Industry said, in a thinly veiled jab at the US, that he was "deeply disappointed to note that one major developed country has again succeeded in holding up the process because of its desire to protect its WTO inconsistent measure of zeroing in anti-dumping."

African, ACP countries detail desired special treatment

The working document adds much detail to Galmes' November draft with regards to Article 15 of the Anti-Dumping Agreement, which specifies the 'special and differential treatment' (S&DT) to be accorded to developing country Members.

The chair's draft text released in November included little detail on this section. Responding to that deficit, two groups of developing country Members, the African Group as well as the group of African, Caribbean and Pacific (ACP) countries, in February submitted a proposal (TN/RL/GEN/154) that details the specific types of technical assistance and S&DT that those countries would like to see included in the final text.

The African Group/ACP proposal relates to three broad areas: constructive trade remedies for developing country exporters that are found to be dumping their products; the role of the government in helping domestic industries launch dumping investigations; and technical assistance to help developing Members implement anti-dumping measures. Galmes included those provisions in the working document released last week.

Fisheries subsidies: differences remain on S&DT, small-scale fishing

Annex C of the working document relates to fisheries negotiations.

Under Galmes' November text, a wide range of fishery subsidy payments would be banned, particularly those that incentivise or boost fishing capacity. That draft provides a relatively narrow range of exceptions under which payments would be allowed if linked to effective fisheries management, with special provisions for developing countries.

What is evident at this stage, as is so clearly outlined by the comments and textual proposals contained in the working document, is that Members continue to disagree significantly on key issues in the fisheries negotiations. Among the various questions under debate are a few key concerns about the sections of the chair's draft the cover the prohibition of subsidies and the S&DT to be accorded to developing nations.

Regarding special treatment, Members continue to disagree over which of the otherwise-prohibited subsidies developing countries should be allowed to implement, as well as over the conditionalities that should be attached to the use of those subsidies. While there is general agreement that the new disciplines should include provisions for substantial S&DT, including a blanket exception to place no restrictions on direct payments provided by least-developed countries (LDCs), many delegations consider the draft provision too inflexible for developing nations. Other Members, however, are wary of providing unlimited and unconditional subsidies - a 'blank cheque' - to developing countries.

Within the S&DT debate, Members disagree over whether developing countries should be required to implement fisheries management schemes in order to gain the right to provide certain types of payments. Some delegations argue that such a requirement would effectively put the special treatment out of reach of many developing Members. A proposal tabled by India, Indonesia and China at the last rules group meeting argued for what amounts to unconditional S&DT for developing countries by doing away with the conditionality of fisheries management (see BRIDGES Weekly, 21 May 2008, http://www.ictsd.org/weekly/08-05-21/story3.htm). Yet many delegations wonder whether eliminating the condition of basic fisheries management would contradict the overarching goal of achieving the sustainability of the world's fish stocks.

Another major topic of divergence has been over subsidies in the small-scale fishing sector. Canada, with support from the EU, Korea, Norway and Taiwan, proposed that exemptions for small-scale fishing should be extended to both developing and developed Members. India, Indonesia and China have argued that developing countries should be allowed to subsidise vessels up to 24 metres in length, instead of the 10-metre length limit in the chair's draft, arguing that fishing communities in remote areas are economically marginalised and require subsidies.

While most delegations are sympathetic to granting flexibility to artisanal fishing, many developed and developing nations are cautious of granting a definition so broad that it could ultimately encourage overfishing. In particular, some consider that the only exception for small-scale fisheries should be in the form of special and differential treatment for developing Members. However, the issue of small-scale fisheries is foremost hindered by definition, and further clarification of the concept of 'small scale' is required.

A third annex of the chair's latest paper outlines the state of the negotiations on subsidies and countervailing measures (SCM), a topic that has proven much less controversial than dumping and fisheries subsidies. The chief areas of remaining disagreement on SCM include export competitiveness, regulated prices, and whether to include a de facto list of export subsidies.

Working document adds value, but makes no progress

By reflecting the current state of negotiations and conflicting reactions to the chair's draft, the working document is intended to serve as an interim step to stimulate further dialogue. Galmes has stated his intent to issue a revised text, but does not consider there is yet sufficient basis for compromise to do so.

There have been varied reactions to the working document. Many Members, especially those involved in anti-dumping negotiations than in fisheries negotiations wanted the chair to issue a revised text to be considered by the ministers in the horizontal process. The fact that one hasn't come out has meant, for them, the dialogue has not been taken forward.

Nath, India's trade minister, said that Galmes' working document was "a mere compilation of 'who said what'" and did not represent "an iota" of progress in moving the negotiations forward.

Japan's chief trade official, Akira Amari, was equally unenthusiastic about the paper. "There is still a large gap between this new document and a possible revised text that will adequately reflect actual negotiations and balance of Members," he said. "I am obliged to say that I am disappointed with his document."

But other delegations feel the working document nevertheless does add value to the negotiation process. While the document is unlikely to change any Members positions, it has provided greater clarity to otherwise undocumented proceedings. The document gives a fair reflection of the range of views expressed regarding the draft text and issues since put forward.

Progress in the rules negotiations hinges in part on advancements in talks on tariff reductions on agricultural and industrial goods, delegates have indicated. Any advancement in these areas would provide momentum to finalising an agreement on rules. However, delegates have indicated that they do not want the rules negotiations to be rolled into the initial set of 'horizontal negotiations' on tariff-reduction trade-offs between the agricultural and industrial sectors.

ICTSD reporting.

4 June 2008

Source: www.ictsd.org