Transparency at the WTO: Why Does Transparency Matter, and Are Members Meeting Their Obligations?
April 22, 2020
Transparency is a critical obligation of World Trade Organization (WTO) members—one that has been a focus of the Trump administration. Countries fulfill this obligation through notification requirements spread throughout WTO agreements. These obligations—and how to ensure compliance with them—were going to be significant considerations at the June 2020 WTO Ministerial Conference, which has been postponed due to the Covid-19 pandemic.
- Tariff quotas and surcharges
- Quantitative restrictions, including voluntary export restraints and orderly marketing arrangements affecting imports
- Other non-tariff measures, such as licensing and mixing requirements, and variable levies
- Customs valuation
- Rules of origin
- Government procurement
- Technical barriers
- Safeguard actions
- Anti-dumping actions
- Countervailing actions
- Export taxes
- Export subsidies, tax exemptions, and concessionary export financing
- Free-trade zones, including in-bond manufacturing
- Export restrictions, including voluntary export restraints and orderly marketing arrangements
- Other government assistance, including subsidies and tax exemptions
- Role of state-trading enterprises
- Foreign exchange controls related to imports and exports
- Government-mandated countertrade
- Any other measure covered by the Multilateral Trade Agreements in Annex 1A to the WTO Agreement
The importance of compliance with transparency and notification obligations and the consequences of noncompliance can be grave. Incomplete information makes it more difficult to develop trade policies and undermines the international trade order. And in a global crisis, like the Covid-19 pandemic, the need for compliance with these obligations has even greater significance. The director-general of the WTO, Roberto Azevêdo, emphasized the importance of maintaining transparency obligations during the pandemic, given that members are undertaking both trade-restricting and trade-liberalizing measures that will impact their ability to obtain critical medical supplies.
Q1: What are the transparency and notification obligations under the WTO agreements? Are countries complying with them?
A1: The WTO Glossary describes transparency as “the degree to which trade policies and practices, and the process by which they are established, are open and predictable.” Transparency has been encouraged through the general transparency principles stated in Article X of the General Agreement on Tariffs and Trade (GATT), Article III of the General Agreement on Trade in Services (GATS), and Article 63 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Notification obligations compliment transparency provisions by requiring countries to share information on trade measures with their trading partners through the WTO. Notification obligations are found throughout the WTO agreements. The WTO agreements have three kinds of notification obligations:
- Ad hoc notifications required when a member takes a certain action.
- One-time-only notification obligations, most of which are required to provide information on the situations existing at the time of a member’s entry into the WTO.
- Regular, periodic notifications that may be annual, semi-annual, biennial, or triennial.
The number of countries complying with WTO notification obligations has remained stable. However, as new members have joined the WTO, the percentage of members complying with these obligations has gone down. This is evident from the trend of notifications of subsidies under Article 25.1 of the Agreement on Subsidies and Countervailing Measures, which requires members to notify the WTO of subsidies covered by the agreement.
Noncompliance with these provisions may be due to unwillingness of members to comply with these obligations or due to capacity constraints.
Breakdown of WTO Subsidy Notifications
Source: “Notification Provisions under The Agreement on Subsidies and Countervailing Measures, Background Note by the Secretariat, G/SCM/W/546/Rev.10,” (WTO Secretariat).
Q2: Why are transparency and notification obligations important?
A2: During the November 2017 meeting of the Council for Trade in Goods, U.S. Ambassador to the WTO Dennis Shea highlighted the importance of the transparency and notification obligations by stating that noncompliance with these obligations creates problems for traders; undermines the proper functioning of the WTO; and makes it difficult to evaluate, assess, and develop negotiating proposals without complete information about the existing WTO agreements.
Information sharing also makes it possible to track implementation of WTO obligations. This information helps set the agenda for future trade negotiations and guides ongoing negotiations. Accurate information on trade measures is a prerequisite to spotting gaps in the WTO rulebook, crafting targeted and effective disciplines, recognizing measures that may breach WTO obligations, and identifying trading partners that have the most at stake in a negotiation.
The ongoing negotiations over new limits on harmful fisheries subsidies highlights the need for transparency and compliance with notification obligations. Shea, in a statement relating to fisheries subsidies, highlighted the significance of transparency to ensure intended policy outcomes in ongoing negotiations. In this instance, transparency can help ensure the subsidies being provided help those in need of support, like subsistence fishers or minorities that need assistance to compete.
An effective transparency regime may also incentivize member states to devise policies that are WTO consistent. Through the obligations to publish trade-related measures and notify these measures to the WTO, the larger group of WTO members may serve as a watchdog against violations. Thus, these provisions use moral suasion rather than the threat of retaliation to ensure compliance with WTO agreements. Moreover, in the absence of information about trade policies the enforcement of agreements is much more difficult. Failure to notify trade-related measures makes it difficult for member states to identify WTO-inconsistent measures of trading partners and use the dispute settlement mechanism to address the inconsistency. Noncompliance with transparency and notification obligations has a direct impact on the efficiency of the WTO’s dispute settlement function.
Q3: What are the proposals made at WTO meetings to encourage countries to fulfill their transparency and notification obligations?
A3: Various WTO members have proposed new procedures to encourage countries to comply with their transparency and notification obligations. There are currently two major proposals on this front—one from a group of major traders and mostly developed countries and another from India, Cuba, and the African Group.
The first proposal, made by Argentina, Australia, Canada, Costa Rica, the European Union, Japan, New Zealand, Taiwan, and the United States, sets out new procedures for members to request an extension to meet notification obligations and introduces penalties for noncompliance. Under the proposal, developing countries and least developed countries (LDCs) that have difficulty meeting notification obligations can request assistance from the WTO Secretariat. Members that receive assistance and provide information on it to the WTO membership are exempt from penalties for one year.
If a member fails to meet its notification obligations, a series of escalating penalties will be imposed. The initial penalties include:
- Restrictions on that member from being nominated to chair WTO bodies;
- The option to not respond to questions from that member during Trade Policy Reviews;
- A charge on that member’s WTO budget to be used for technical assistance to fulfill notification obligations;
- An annual report on that member’s notification status by the Secretariat; and
- Specific reporting on that member during General Council meetings.
If a member has not met its notification obligations one year after those penalties are imposed, the following measures will be taken:
- The member will be designated as a “member with a notification delay”;
- The member will be last member called on during formal WTO meetings; and
- The member will be identified as a member with a notification delay when it takes the floor during General Council meetings.
The proposal also encourages members to provide counter-notifications of another member regarding notification obligations under the WTO agreement.
The proposal from Cuba, India, and the African Group highlights the challenges faced by the developing and least developed countries with respect to transparency and notification obligations. While presenting the proposal, the Indian delegation highlighted that transparency should be included in all aspects of the work of the WTO, including decisionmaking in the organization and Ministerial Conferences, an implicit criticism of the WTO’s practice of using “green rooms” composed of select countries—often high-income—to negotiate outcomes on behalf of the entire membership
Due to the capacity constraints of developing countries, with a special reference to LDCs, this second proposal suggests that no punitive measures be taken in case of failure to comply with notification requirements in case of LDCs and supports extensions of notification deadlines for developing countries and LDCs. It also proposes the use of simplified notification formats, technical assistance, and capacity-building programs. It suggests that no counter-notification practices be initiated and that no notifications be made by the WTO Secretariat.
The proposal also highlights noncompliance with transparency and notification obligations by developed countries in certain sectors such as obligations under Article III.3 of the GATS and aggregate measurement of support (AMS) for agriculture notifications. The proposal also suggests ensuring that various committee meetings do not conflict and that WTO meetings remain open to all and not be conducted in Green Room processes to deliver greater institutional transparency.
Q4: What can be done to encourage countries to comply with transparency and notification obligations and address conflicting interests between developed countries and developing and least developed countries?
A4: While all WTO members recognize the importance of transparency and notification obligations, there is a conflict of interest among members about how these obligations should be modified to address noncompliance. These concerns could be addressed through the following mechanisms.
Self-identification of countries requiring assistance for notification and transparency obligation
The proposals highlight issues faced by both developed and developing countries. Considering the diverse needs of both groups, it may be advisable to require countries to identify themselves in case they need further assistance and capacity to comply with notification and transparency obligations.
The process of self-identification should be based on the consideration of objective criteria, which may include factors such as GDP and rate of economic growth or be based on the classification of an international organization like the World Bank. The WTO Secretariat or the United Nations Conference on Trade and Development (UNCTAD) may aid developing countries in self-identification.
The WTO Secretariat could develop a special program in association with other organizations such as the Advisory Center for WTO Law or UNCTAD to build capacities and provide technical assistance to countries in need. This will ease the burden of the committees and the Secretariat while allowing for timely and specialized assistance. Administrative measures may not be imposed on members who have identified themselves as countries that require capacity-building assistance or technical assistance.
Timeline flexibilities for developing countries
Countries seeking assistance may be required to create a timeline, keeping in mind their need to fulfill the transparency obligation. If a country fails to adhere to its transparency obligation, a system similar to the one under the Trade Facilitation Agreement may be developed, allowing the country to seek an extension from the relevant committee. If the committee fails to approve the extension, it may establish an expert group to examine the issue and provide recommendations for moving forward.
The system of counter-notification, as adopted in Article 25.10 of the Agreement on Subsidies or Countervailing Measures, may be adopted for the purposes of all notifications. This will allow the Secretariat to remain neutral and independent while providing members a means to pressure noncompliant members.
Considering the developmental status and limited resources of developing and least developed members, members that have identified themselves as needing assistance for notification and transparency purposes may not be subject to the counter-notification process unless they volunteer to participate.
Simplifying notification formats
It may be advisable to simplify the notification formats to make it easier for countries to fulfill their requirements. Special assistance with respect to translation services may also be helpful to ensure compliance by developing and least developed countries.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Jack Caporal is an associate fellow with the CSIS Scholl Chair in International Business. Sanvid Tuljapurkar is an intern with the CSIS Scholl Chair.
Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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