WTO Concerned as Third World Countries Slap
Trade Restrictions
At a meeting of the Committee on Market Access on 12 and 16 November
2020, WTO members discussed a large number of trade concerns. Special emphasis was
placed on Brexit, with less than 50 days until the end
of the EU-UK transition period, as well as on the Carbon Border Adjustment Mechanism
that may be introduced under the EU’s Green Deal. Anatoly Chaplin took the helm
of the Committee, becoming the first Russian to chair a WTO committee since Russia’s
accession in 2012.
As the
end of the transition period for the European Union and the United Kingdom looms,
a large number of WTO members voiced their concern about the lack of progress in
the renegotiation of the EU and UK tariff
rate quotas (TRQs) under Article XXVIII of the General Agreement
on Tariffs and Trade and the rectification and modification of schedules of concessions
of the United Kingdom as a result of its exit from the European Union. Like in previous
meetings, the issue was brought up by the Russian Federation. It stressed that negotiations
on the new apportionment of TRQs cannot be completed without a broader discussion
with other WTO members and a clear compensation strategy for the principal suppliers
to EU and UK markets in order to maintain a general level of reciprocal and usually
advantageous concessions.
Several
delegations intervened to share this concern with all of them stressing that, with
the end of the transition period around the corner, the EU and the UK had to ensure
compensatory concessions for the foreseen loss of market opportunities. They asked
them to clarify how bilateral EU-UK trade will be treated in the absence of a bilateral
agreement. These delegations reiterated that the proposed modifications to TRQs
will potentially diminish the commercial value of their existing market access or
render some TRQ allocations too small to be commercially viable. In addition, they
were concerned that, in the absence of a bilateral agreement between the EU and
the UK, their trade would be crowded out in those TRQs.
Delegations
encouraged the EU and the UK to demonstrate they are ready to bring to the table
meaningful answers to address their concerns. This includes assurances that other
WTO members will be left "no worse off" as a result of their TRQ renegotiations
and will not be "crowded out" of the market access they negotiated in
good faith under the so-called erga omnes
quotas (i.e. those TRQs with no country-specific allocation).
In its
response, the European Union said that negotiations under the Article XXVIII procedure
were still ongoing with the partners who have recognized rights, with the last round
held in October 2020 showing some good progress in these discussions. The EU welcomed
the increased engagement of many members and was ready to make further progress,
paving the way for a constructive finalization of discussions with as many members
as possible by the end of the year.
In the
same vein, the UK reiterated its commitment to engaging in good faith with members
and to building on the progress and constructive conversations of recent negotiations.
The UK said it had undertaken its transition after Brexit
with the aim of maintaining the existing balance of rights and obligations between
the UK and its trading partners.
Several
members also expressed concerns over the UK's initial rectification of its goods
schedule, which was circulated in July. They stressed that the rectification contains
substantial changes to the UK's current WTO concessions, including the UK's Aggregate Measure of Support (AMS) commitments and Special
Agricultural Safeguard (SSG) entitlements, and the proposed methodology to convert
the commitments expressed in euros into pounds sterling.
In its
response, the UK referred to the 'UK Global Tariff', the long-term applied most-favoured nation (MFN) tariff regime that will take effect from
1 January 2021 following the end of the transition period. This is a bespoke tariff
tailored to the UK’s economy expressed in pounds sterling. The UK indicated that
the exchange rate at which the new schedule has been redenominated (€1 = 0.83687
GBP) represents the average of the daily exchange rates between 2015 and 2019. It
reflects the most recent and relevant economic conditions at the time, ensuring
the scope of the concessions and commitments offered for application to the United
Kingdom are not altered, the UK said.
The Committee
saw many delegations taking the floor to voice their concerns about the potential
impact on international trade that may result from the EU's “Green Deal” strategy
unveiled in December 2019. They requested the EU to shed light on the status of
the relevant legislation as well as the sectors and products that would be affected.
These members focused, in particular, on the proposal to have a carbon border adjustment
mechanism (CBAM), which appeared to them to be inconsistent with WTO rules.
Several
members said that, bearing in mind the Paris Agreement principle of "common
but differentiated responsibilities", this policy should be designed and implemented
in a fair manner and recognize carbon pricing systems in place in other countries
(including at the sub-national level), while aligning with international obligations
and standards. Some members pointed out that the EU's intention to use the CBAM
as a new budgetary source for powering the EU's economic recovery after COVID-19
suggested that this measure was not aimed at climate protection but rather at economic
objectives, including fiscal and protectionist ones. They asked the European Union
to provide WTO members with the list of goods (including Harmonized System codes)
that may be subjected to the CBAM, and to clarify if it also intended to charge
a tax on goods produced in the EU.
The European
Union underlined its commitment to climate neutrality by mid-century and recalled
that the Commission had pledged to increase EU's climate ambition for 2030. Thus,
as long as the EU’s trading partners did not take comparable climate action, there
was a risk of carbon leakage that must be addressed by the European authorities.
Carbon leakage is a situation that may occur if, for reasons of costs related to
climate policies, businesses were to transfer production to other countries with
laxer emission constraints. Should differences
in levels of ambition worldwide persist, the EU will propose by mid-2021 CBAM implementation
for selected sectors to reduce the risk of carbon leakage.
Before that, it will carry out a detailed impact assessment to support the preparation
of this initiative, notably looking at environmental, social and financial impacts,
economic efficiency and legal feasibility, in particular with respect to WTO rules.
The Committee
addressed a large number of trade concerns, new and previously raised, including:
·
Angola's import-restricting measures, raised by
the United States;
·
China's customs duties on certain integrated circuits,
raised by the EU, Japan and Chinese Taipei;
·
the enlargement
of the EU to include Croatia, raised by the Russian Federation;
·
India's customs duties on telecommunication and
other products, raised by China;
·
India's import policies on tyres, TV sets and air conditioners, raised by the EU and Thailand;
·
India's quantitative restrictions on certain pulses,
raised by Australia, Canada, the EU, the Russian Federation and the United States;
·
Indonesia's customs duties on telecommunication
products, raised by the United States;
·
Mongolia's
quantitative restrictions on the importation of certain agricultural products, raised
by the Russian Federation;
·
Nepal's import ban on energy drinks, raised by
Thailand;
·
Russia's draft decree restricting imports by certain
entities raised by the EU;
·
Russia's track and trace regime, raised by the
United States;
·
the selective
tax on certain imported products by Saudi Arabia, Bahrain, UAE, Oman and Qatar,
raised by the EU, Switzerland and the United States;
·
Sri Lanka's import ban on various products, raised
by the EU; and
·
Panama's Article XXVIII procedures raised by Costa
Rica.
The WTO
Secretariat summarized the status of notifications by members as of 30 September
2020. As indicated in document G/MA/QR/9 entitled
"Status of Notifications under the Decision on Notification Procedures for
Quantitative Restrictions", the situation has improved with respect to previous
years, and in particular for the biennial period 2018-2020, where the number of
members that notified increased by almost one third. However, the overall compliance
with this notification requirement remains relatively low.
The chair
underlined the obligation by members to make complete notifications of all quantitative
restrictions in force by 30 September 2012 and at two-yearly intervals thereafter,
and urged members that have never notified, or that have failed to notify for the
current biennial period (2020-2022), to comply with this important transparency
provision. Members in need of technical assistance were invited to contact the Secretariat.
Members
discussed the possibility of adopting on a voluntary basis the eAgenda system, like it is currently used by the Committee on
Sanitary and Phytosanitary Measures and the Committee
on Technical Barriers to Tarde. The majority was in favour
of continuing to explore this possibility. The Secretariat is working on a mock
eAgenda that will be presented at the first informal meeting
of the Committee next year. Once ready, members will have some time to test it and
the Committee will discuss whether adjustments are necessary before it becomes fully
operational.