WTO MC12 Agenda: Too Much or Not Enough?

The World Trade Organization’s (WTO) 12th Ministerial Conference (MC12) is scheduled to take place from November 30 to December 3, 2021. The Ministerial Conference is the highest decisionmaking body of the WTO and is scheduled to meet at least once every two years. The last Ministerial Conference was held in 2017 in Buenos Aires, Argentina. Kazakhstan was originally scheduled to host the MC12 in 2020, but it was postponed due to the Covid-19 pandemic.

Recent developments in global trade, including the effect of the pandemic, have increased pressure on members to deliver concrete outcomes. As former WTO deputy director-general Alan Wm. Wolff expressed, this Ministerial Conference “is likely to be an inflexion point, towards either more multilateral cooperation or more fragmentation.” Complicating this situation is the lack of a major agreement at the WTO since the Trade Facilitation Agreement in 2013 and a ban on agricultural export subsidies in 2015. The relevance and effectiveness of the WTO as the primary trade governance platform hangs by a thread.

U.S. Trade Representative (USTR) Ambassador Katherine Tai has noted that a “successful” MC12 would need to deliver a meaningful agreement in the areas of fisheries subsidies negotiations, response to the Covid-19 pandemic, and importance of WTO reform. In October 2021, at the G20 Trade and Investment Ministerial Meeting, the members committed to “a successful and productive WTO 12th Ministerial Conference as an important opportunity to advance WTO reform to revitalise the organization.” As we inch closer to the MC12, here is a look at areas of ongoing negotiations and the expected outcomes.

Q1: What are the fisheries subsidies negotiations about? Where do they currently stand?

A1: Negotiations on disciplines for fisheries subsidies began in 2001 at the Doha Ministerial Conference. They gained momentum at the 11th Ministerial Conference in 2017, where members resolved to conclude the negotiations by 2020. The agreement aims to achieve the UN Sustainable Development Goal 14.6. In particular, the three central pillars of the agreement are rules covering the following: (1) fisheries subsidies to vessels engaged in illegal, unreported, and unregulated (IUU) fishing; (2) subsidies for fishing on overfished stocks; and (3) subsidies that contribute to overcapacity and overfishing. These negotiations are also unique in that the rules are targeted toward subsidies that threaten the sustainability of fishing to ensure the sustainable use and conservation of marine resources. In other words, the trade-distorting aspect of these subsidies—as is the case with industrial and agricultural subsidies within the framework of the WTO—is not necessarily the focus of these negotiations.

Following the discussions based on the revised draft text released in June 2021, the chair of the fisheries subsidies negotiations introduced a second revision of the draft text on November 8, 2021, to further intensify negotiations among members. The revised text leaves open the transition period for developing countries to comply with the obligations under the agreement for further discussions. It also introduces a de minimis approach for subsidies contributing to overcapacity and overfishing, where developing countries would be allowed to maintain subsidies if their “annual share of the global volume of marine capture production” based on Food and Agriculture Organization data exceeds a threshold that is open for negotiations. The text also includes the proposal by the United States to address the use of forced labor on fishing vessels, which was introduced only earlier this year. From now until MC12, members will engage in a “clause-by-clause” negotiation of the proposed text. Members have disagreed on the flexibilities for developing countries like China and India to develop their fishing capacity, as well as exemptions for subsistence, artisanal, or small-scale fisheries. The revised text attempts to assuage the concerns over key areas of disagreement such as special and differential treatment and tilts significantly in the direction of developing countries. The question that remains is whether it has gone too far for the developed countries and not far enough for the developing countries.

There may be light at the end of the tunnel for the marine environment as the heads of delegations have previously reported progress in their discussions and indicated that “there was an openness on all sides to look for solutions.” Successfully concluding this agreement will lend momentum to other efforts to address problems in the global commons, such as climate change and the Covid-19 pandemic.  

Q2: What is the WTO considering for its trade and health agenda?

A2: The Covid-19 pandemic significantly disrupted the global economy as the strain on people’s lives and livelihood affected production and consumption worldwide. At the onset of the pandemic, various countries imposed trade restrictions and export bans on medical products. With the development of vaccines in some countries, the focus shifted to global accessibility and distribution. In order to promote transparency, the WTO Secretariat has maintained a list of measures affecting trade in goods, services, and intellectual property taken by all members.

To resolve these problems, the general council chair selected Ambassador David Walker as a facilitator responsible for finding “a multilateral and horizontal response to the COVID-19 pandemic.” The objective is to have an outcome on trade and health in response to the current crisis as well as any future crises.

There have been numerous proposals made by WTO members in this regard. Any potential statement at MC12 would cover areas such as export restrictions, transparency and monitoring, trade facilitation, regulatory cooperation, and collaboration with other international organizations. Yet, it appears that there may be no statement on trade and health unless a compromise is reached on a crucial proposed waiver of certain obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) “in relation to prevention, containment or treatment of COVID-19,” originally put forward by India and South Africa in October 2020. The proposal argues that intellectual property rights could hinder the supply of vaccines and drugs at affordable prices.

In May 2021, the United States announced its support for a waiver on vaccines and committed to participating in text-based negotiations at the WTO. In order to garner further support, India, South Africa, and other counties submitted a revised proposal. However, it does not appear that members are significantly closer to a compromise based on the revisions as compared to the beginning of these discussions. The European Union opposes this request and submitted an alternative proposal for equitable access to vaccines through reducing export restrictions, expanding production, and facilitating flexibilities under Articles 31 and 31bis currently available under the TRIPS Agreement. Discussions continue at the WTO as members continue to pursue convergence at this critical juncture. A positive outcome on trade and health would reinforce the importance of the WTO as a facilitator in reviving the global economy in times of public health crises.

Q3: What are the various initiatives on trade and the environment?

A3: The role of trade policy in addressing climate change and other environmental challenges is at the forefront of today’s global economic discourse. A new initiative on trade and environmental sustainability by some WTO members works toward issuing a joint statement at MC12. The Trade and Environment Sustainability Structured Discussions were launched in November 2020 and seek to promote transparency, strengthen coherence, work with relevant actors, and propose “concrete deliverables, initiatives and next steps” through collaboration. Future talks may include topics ranging from plastic waste and biodiversity to climate change and decarbonizing supply chains. Both China and the United States have joined the discussions on a potential ministerial statement at MC12, increasing the participation to 56 members.

New Zealand spearheaded a proposal for a ministerial statement on fossil fuel subsidies in July 2021, which called for the “rationalization and phase out of inefficient fossil fuel subsidies that encourage wasteful consumption.” The initiative recognizes that the reform would contribute toward a more sustainable Covid-19 recovery. The European Union has supported this environmental initiative, while the United States has not indicated its desire to join.

Another initiative is the Informal Dialogue on Plastics Pollution and Environmentally Sustainable Plastics Trade,which assesses the possibility of a draft ministerial statement that develops a roadmap to reduce global plastic pollution. There are currently 18 WTO members co-sponsoring this informal dialogue, including Australia, Canada, China, New Zealand, and others. These discussions are on track for a positive outcome at MC12 since negotiating members are largely in agreement about the core goals and means of achieving them, unlike other initiatives.

These environmental initiatives are gaining traction as the world prepares for the MC12. The linkage between the environment and trade was also discussed at the recent COP26 summit. The European Union urged countries to put a price on carbon dioxide emissions, indicating its seriousness about forging ahead with the Carbon Border Adjustment Mechanism. At present, it appears that all the major economies are pursuing their own trade policies to combat climate change. Therefore, aligning climate and trade policy at the multilateral level is crucial to address the global commons concern of climate change and its devastating effects.

Q4: Can we expect any outcomes on WTO reform and agricultural issues?

A4: The past few years have witnessed the crippling of the WTO as an institution. The Appellate Body ceased its operations in December 2019 as a result of the United States blocking the appointment of its members over concerns relating to the Appellate Body exceeding its mandate, issuing advisory opinions, and treating prior decisions as binding, among others. As a result, the need for reform of some of the functions and core principles at the WTO has been hotly debated by the members. It does not appear, however, that sufficient progress has been made to enable a resolution of the differences at MC12.

In addition to the reform of the Appellate Body, institutional reforms on the topics of special and differential treatment, notification requirements, industrial subsidies, and non-market economies have also gained traction. Recently, USTR Katherine Tai affirmed the United States’ continued commitment to the WTO and remarked that the MC12 should set the stage for “candid and productive long-term conversations on reforming the WTO.” This would hopefully lead to fruitful discussions that would help the WTO adapt to the changing world economy.

Negotiations on agricultural subsidies reform and tariff reductions began as part of the Doha Round mandate. While some progress has been made on specific topics, broader reform on core areas such as domestic support has remained elusive. In July 2021, the chair of the negotiations on agricultural trade introduced a draft negotiation text for a possible outcome on agriculture at MC12. These include topics such as domestic support, market access, special safeguard mechanisms, public stockholding for food security purposes, and others. A new negotiating document is expected in the first half of November.

Developed and developing countries continue to disagree on what would constitute a permanent solution for public stockholding for food security purposes, despite repeated deadlines to do so. The United States has flagged transparency as an important issue and considers this to be a feasible outcome for MC12. This long-standing issue has become more relevant in light of the increase in food insecurity due to the Covid-19 pandemic, pressure from climate change, and increased expenditure by developed countries such as the United States, which have long-lasting distortive effects on agricultural trade. Progress on agriculture is vital for developing countries to retain their faith in the WTO. Despite this, it is unlikely that there will be any tangible outcomes in agriculture given the divergence of members on various issues.

Q5: What are the topics discussed under the Joint Statement Initiatives?

A5: As a consequence of the inability to achieve “consensus” on numerous issues, plurilateral talks (i.e., negotiations among a subset of members) have proliferated in the WTO. The five areas of plurilateral discussions currently underway include (1) electronic commerce; (2) domestic regulation in services; (3) investment facilitation; (4) micro, small, and medium enterprises; and (5) trade and gender.

The expected outcome for each of these issues is the establishment of “work programs,” except for domestic regulation on services where participants have concluded negotiations on a reference paper, which would be endorsed at MC12. The joint initiative on services domestic regulation was launched at the end of MC11, and it includes new disciplines aimed at facilitating trade in services by mitigating the trade-restrictive effects in areas such as technical standards, licensing and qualification requirements and processes, and increasing transparency. These disciplines would be inscribed as additional commitments in the respective members’ schedule under Article XVIII of the General Agreement on Trade in Services. The 65 WTO members currently participating in these talks represent over 90 percent of world services trade.

The joint initiative on e-commerce has attempted to address key issues such as data flows, localization, custom duties on electronic transmissions, and transparency, among others. At this stage, participants have agreed to provisions on spam, electronic signatures and authentication, and e-contracts, and are close to finalizing provisions on open government data and online consumer protection. Yet, the largest issues, like data localization, remain unresolved.

Separate from the plurilateral initiative, electronic commerce has had a long history at the WTO which began with the establishment of a Work Program on Electronic Commerce in 1998. Perhaps the most critical issue is the temporary moratorium on customs duties on electronic transmissions, which has been repeatedly renewed at each ministerial meeting until now. It is unclear, however, whether the moratorium will be extended in light of the opposition of some developing countries, such as India and South Africa, who consider this to be a potential revenue stream. Historically, the extension of the e-commerce moratorium has been tied to the moratorium on non-violation and situation complaints under the TRIPS Agreement. Essentially, this pertains to the possibility of raising disputes over allegations that do not involve a violation of the agreement but result in the deprivation of the expected benefit. On November 5, 2021, WTO members agreed on a recommendation to extend this moratorium until the next Ministerial Conference. A potential consequence of delinking these two issues combined with the opposition of some developing countries raises serious questions about the extension of the e-commerce moratorium at MC12.

India and South Africa have challenged the legal effect of these joint initiatives and their negotiated outcomes and argue that such initiatives will have systemic implications that would be detrimental to the functioning of the rules-based multilateral trading system. Consequently, the proponents of these plurilateral initiatives should ensure that any outcome does not threaten the foundations of the multilateral underpinnings of the WTO. MC12 would perhaps act as a test case for how such initiatives may impact the future of the WTO’s negotiation arm

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Sparsha Janardhan is a research 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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