India, South Africa and China are among those that have pushed back against a joint US-EU proposal to call out and punish countries that have not followed notification requirements under various World Trade Organization (WTO) agreements. The countries feel it is unfair to impose harsh requirements on developing countries facing deep capacity constraints, and are reminiscent of colonial era rules.
As part of proposed reforms to the global trade body, the US and EU, along with Japan, Canada, Australia, Costa Rica, Argentina and Taiwan, on 11 April, sought to impose stringent notification requirements, including financial penalties, on countries for failure to comply.
At the meeting of WTO’s Council on Trade in Goods (CTG), the US justified the proposal on grounds of “chronic low level compliance with existing notification requirements under many WTO agreements (by members)". It seeks to allow “a counter-notification of another member concerning notification obligations".
Under this practice, deemed controversial by many countries, a WTO member can issue a counter-notification against a member, claiming the latter had breached its commitments under that specific WTO-agreement.
Recently, the US had filed counter notifications claiming New Delhi’s subsidy schemes, especially minimum support prices for rice, wheat and cotton, breached India’s scheduled subsidy commitments to the WTO.
India, however, rejected the US stand saying it was based on flawed assumptions and erroneous practices. The counter-notification by the US on Indian grains and cotton was based on data from American farm lobbies, which reckon India as a major threat to its subsidized-exports to countries, said a trade envoy, who asked not to be named.
The sponsors also proposed “administrative measures" in case a member “fails to provide a required notification by the deadline provided under an agreement". These would kick in after a member fails to provide notifications within one year of the deadline, and would include barring representatives of the erring country from presiding over WTO bodies and even financial penalties.
Administrative measures will also include naming and shaming provisions such as “the Member shall be designated as a Member with notification delay; (ii) representatives of the Member will be called upon in WTO formal meetings after all other Members have taken the floor, before any observers; and (iii) when the Member with notification delay takes the floor in the General Council, it will be identified as such."
In an overwhelming rejection of the proposal, many developing countries rallied around India and South Africa, saying there was no place for such a proposal in the 164-member inter-governmental trade body.
According to an Indian official who attended the meeting, India rejected the proposal saying it is “difficult to agree to such a proposal which provides for penalties and administrative actions in case of default, rather than making an effort to understand the difficulties, a large number of developing members are facing." India also sought to know why the sponsors were silent on complying with the notifications on trade in services, particularly filing notifications on the movement of short-term professionals under Mode 4 of the General Agreement on Trade in Services, and in trade-related intellectual property provisions.