A Historical Perspective on India‘s and South Africa’s Threat to Block the Implementation of the Joint Statement Initiatives in the WTO, and a Potential Way Forward

Late last week, India and South Africa circulated a paper on the “Legal Status of ‘Joint Statement Initiatives’ and their Negotiated Outcomes” that was widely perceived as a threat to block the implementation of the four Joint Statement Initiatives in the WTO (Peter Ungphakorn has described it as “pouring cold water” on the talks; Inside U.S. Trade’s Hannah Monicken characterized it as “throwing a wrench in the plans for the WTO to become a plurilateral forum”). The paper was bound to cause some frustration among long-suffering observers of WTO negotiations who had hoped that the confluence of a new DG, a new US administration, and a new EU trade strategy would create the momentum needed to bring these negotiations to a successful conclusion.

A historical perspective can shed light both on the merits of the paper and its limits. There are parallels – and crucial differences – to the conclusion of both the Tokyo Round and the Uruguay Round (unless otherwise indicated, references for the quotes reproduced in this post can be found in my article on the “The Club Approach to Multilateral Trade Lawmaking”).

The Tokyo Round Debate Redux …

As is widely known, the Tokyo Round concluded with the adoption of several plurilateral ‘codes’ that were negotiated among small subsets of GATT contracting parties. What is less well known is that the developing countries attempted to make the adoption of these codes subject to a consensus decision by the Trade Negotiations Committee, or at least the consent of a “large majority” of contracting parties. At a meeting of the Trade Negotiations Committee in July 1978, Yugoslavia, speaking “on behalf of the developing countries”, stated:  

At this stage we are requesting that a rule be established for the decision-making process in the [multilateral trade negotiation] according to which no adoption of a negotiating document would be accepted unless the large majority of participants declared themselves in favour of it. We cannot proceed on the basis that a group of a few countries may consider it appropriate for others to be kept out of arrangements if they are not in a position to accept their conceptual approach.

Like India and South Africa today, Yugoslavia was concerned that the code approach circumvented the amendment provisions of the GATT. Thus, Yugoslavia noted that “whenever amendments are made in the General Agreement, the CONTRACTING PARTIES have to approve them according to the existing rules.” The developing countries attempted to amend the final drafts of the codes to the effect that they “should enter into force when two thirds of the participants in the MTN have accepted them” – a threshold that mirrored the amendment provisions of the GATT. An alternative proposal advanced at the conclusion of the negotiations was that the codes should only be opened for acceptance “after being adopted by the Trade Negotiations Committee” – a decision that would have to be taken by consensus, as was GATT practice.

The developed countries, by contrast, took the view that the multilateral trade negotiation …

… was not a general diplomatic conference, that no agreement was being forced on any government but that on the other hand the Committee could not prevent a number of countries from entering into an agreement if they wished to, unless the provisions of the agreement were contrary to the GATT. 

They argued that subsets of members who wished to enter into the codes were free to do so as long as they “were not imposing anything on other governments but simply moving to higher levels of discipline”.

Why were developing countries upset about the codes, and do those reasons apply today? A first reason was a lack of transparency and inclusivity in the Tokyo Round negotiations. In many instances, developing countries were not part of the negotiations until the basic outlines of the codes had been hammered out by the US and the EC; in fact, in some cases (specifically, the codes on anti-dumping and civil aircraft) the developing countries didn’t even find out that codes were being negotiated until the final stages of the Round.

As far as I can tell, we are in a very different world today when it comes to the transparency of negotiations. It is perhaps an indication of how the trade regime has changed in this respect that India and South Africa do not raise concerns about transparency in their paper.

However, a second reason for the developing countries’ frustration in the Tokyo Round is still present today: if subsets of contracting parties are free to “go off to do business by themselves” (as Hudec memorably put it), the other contracting parties lose control of the agenda. In the Tokyo Round, the developed countries could focus on their priorities, and the developing countries had no leverage to force the developed countries to make concessions on those issues that were of most importance to them. This concern is echoed in India’s and South Africa’s paper, which highlights the “systemic implications” of the Joint Statement Initiatives, including that they

result in Members disregarding existing multilateral mandates arrived at through consensus in favour of matters without multilateral mandates

lead to the marginalization or exclusion of issues which are difficult but which remain critical for the multilateral trading system, such as agriculture, development, thereby undermining balance in agenda setting, negotiating processes and outcomes.

Both in the 1970s and today, there was and is a real frustration among some developing countries that plurilateral approaches allow their proponents to sideline the interests and priorities of developing countries (though it should be noted that many more developing countries are participating in the Joint Statement Initiatives than were involved in the code negotiations).

Finally, both the developing countries in the Tokyo Round and India and South Africa today were concerned not just about the negotiations at hand, but also about the precedential effect of a less-than-multilateral outcome of the negotiations. In 1979, Malaysia lamented that a “precedent” was being “set for various groups of countries to put up Agreements amongst themselves and to seek the umbrella of the [multilateral trade negotiation].” Similar, India and South Africa today warn against “creat[ing] a precedent for any group of Members to bring any issue into the WTO without the required consensus”.

… with a Twist

There is of course a crucial difference between the circumstances at the end of the Tokyo Round and the situation today: the legal default position has changed. In 1979, the developing countries were unable to prevent the adoption of the codes, because adding a consensus requirement for their adoption or a two-thirds majority requirement for their entry into force would have required a change to the codes. Today, by contrast, consensus for the addition of a new plurilateral agreement to Annex 4 of the Marrakesh Agreement is the legal default position. As India and South Africa correctly point out, a single WTO Member can even prevent the certification of other WTO Members’ schedules and hence frustrate the implementation of new plurilateral agreements through that route. In other words, the Marrakesh Agreement empowers developing countries to do exactly what they wished they could have done at the end of the Tokyo Round: to prevent subsets of WTO Members from concluding agreements among themselves within the framework of the multilateral trade regime. That does not mean, however, that India’s and South Africa’s position does not carry risks. And here the Uruguay Round potentially holds a lesson.  

A Lesson about Excessive Legalism from the Uruguay Round

Martti Koskenniemi once wrote that an “international lawyer is in part pleased, in part embarrassed when philosophers contemplating the international order put their hope in international law”. International trade lawyers might feel something similar when they see developing countries relying exclusively on legal rules to protect their interests. An anecdote from the Uruguay Round highlights the risks of excessive confidence in legal rules.

As is, again, well known, India was fundamentally opposed to the integration of substantive intellectual property rights into the multilateral trade regime for at least the first four years of the Uruguay Round. The 1988 mid-term ministerial in Montreal failed in part because India and other developing countries would not agree to continued negotiations on substantive intellectual property rights. How was this deadlock overcome? As the EC negotiators Hugo Paemen and Alexandra Bensch tell it (in their book From the GATT to the WTO, at 143), “the Community negotiator secretly told India and Brazil that the future agreement on TRIPs would not necessarily have to form part of the legal GATT texts. This represented a major concession …”. And here comes the money quote from Paemen and Bensch, which has stuck with me ever since I first read it (my highlights): “India, which tended to adopt a legalistic attitude in matters relating to the GATT, allowed itself to be persuaded.” The EC’s assurance was reflected in the following proviso in the document that recorded the mid-term compromise: “Ministers agree that the outcome of the negotiations is not prejudged and that these negotiations are without prejudice to the views of participants concerning the institutional aspects of the international implementation of the results of the negotiations in this area, which is to be decided pursuant to the final paragraph of the Punta del Este Declaration.” Clearly, India expected that the decision on the international implementation of the results would be taken by consensus, so that it would be free to decide whether to join the TRIPS Agreement or not.

However, it was not to be: once Richard Steinberg and his colleagues at USTR had come up with the ingenious device of creating a new treaty of which both a copied-and-pasted GATT and the TRIPS were an “integral part”, a refusal to join the TRIPS Agreement suddenly meant staying entirely outside of the multilateral trade regime; as a result, India’s leverage and ability to protect its own interests dissolved into thin air (for an account of the conclusion of the Uruguay Round that traces these dynamics in great detail, see pp. 165-181 of my Club Approach paper; for a different reading of these events, see Robert Wolfe’s JIEL article on the single undertaking).

Is the India-South Africa paper another example of a “legalistic attitude” that might give them and other developing countries a false sense of security? I can think of three reasons why that might be the case.

First, at some point the political pressure to concede may simply become overwhelming. Blocking a consensus is politically costly, even for the largest WTO Members: The US had to give up its resistance to the TRIPS waiver in 2003, and India had to concede on the Protocol of Amendment for the Trade Facilitation Agreement in 2014. In both cases, the WTO Member had the “right” to maintain their veto, but because their position was not perceived as substantively legitimate by the vast majority of the membership, it ultimately became too costly from a political standpoint. I suspect that India and South Africa will find themselves in a similar position if they try to block the adoption of the Joint Statement Initiatives: unless they articulate concrete substantive demands that could provide a basis for compromise (more on that below), their position will probably attract little sympathy, especially since they would be able to free ride on the commitments adopted by the participants of the Joint Statement Initiatives.

Second, I wonder whether India and South Africa overestimate WTO Members’ sense of urgency in seeing their schedules certified. Assuming that the proponents of the Joint Statement Initiatives decide to implement their new commitments by inscribing them into their schedules, and India and South Africa proceed to block the certification of those schedules, what would the proponents do? I think the most likely scenario is that they would simply treat the schedules as reflecting their obligations and act accordingly. Delays in the certification of schedules are not uncommon: for example, the EU’s revisions to its goods schedule after the 2004 expansion were not certified until 2017. During the GATT years, the contracting parties routinely observed commitments that were technically not in force (John Jackson notes in World Trade and the Law of GATT (at 217) that “It sometimes seems as if those parts of GATT that are not legally binding have a better record of compliance than those parts that are!” For theoretical background, see also Robert Wolfe’s pluralist account of the role of law in the trade regime). Of course, uncertified schedules would not provide the same legal certainty as certified schedules, but I doubt that the prospect of non-certification will dissuade the proponents of the Joint Statement Initiatives from pursuing that option. Blocking the certification of schedules is such an obscure tool that I cannot see it making a significant dent in the momentum of the Joint Statement Initiatives (such as it is).  

Finally, as others have pointed out and India and South Africa themselves highlight, the likely consequence of blocking the Joint Statement Initiatives in the WTO would be that they are implemented in the context of a preferential trade agreement. It is hard to see why it will be better for developing countries in the long run if these issues are addressed outside the WTO context than within it. If the issues are dealt with in the WTO, developing countries will be in a better position both procedurally and substantively: procedurally, because the participants in the Joint Statement Initiatives will presumably be subject to transparency obligations that they would not have if the agreements were addressed outside the WTO, and substantively because the non-participants would be able to receive the benefits of the Joint Statement Initiatives through MFN. Moreover, a failure of the Joint Statement Initiatives due to vetoes from non-participants would do even more damage to the WTO as a negotiating forum and will further accelerate the tendency to tackle new issues outside the WTO. Further weakening the WTO as a negotiating forum would undermine India’s and South Africa’s objective of reviving negotiations in areas of interest to them.

What Could Be a Way Forward?

Even if their position is not without risks, it is clear that India and South Africa have some leverage over the participants in the Joint Statement Initiatives. How could they use that leverage?

India’s and South Africa’s main objective appears to be to prod other WTO Members to re-engage in negotiations on issues that are of more interest to developing countries, such as agriculture, and to pursue negotiations on issues like services based on multilateral mandates. There are limited prospects that they will be able to employ their leverage to that end: there are complex reasons that those negotiations stalled, and the additional bargaining chip that India and South Africa now have will not be enough to overcome the deadlock. India has once before unsuccessfully attempted to use its blocking power to speed up negotiations on a substantively unrelated subject when it held up the adoption of the Protocol of Amendment for the Trade Facilitation Agreement with a demand to accelerate negotiations on public stockholding. There is no reason to expect that the dynamics will play out differently this time around.

A more promising option would be for India and South Africa to use their leverage to maximize the benefits of the Joint Statement Initiatives for non-participants. Bernhard Hoekman and Charles Sabel have proposed a “multilateral governance framework” for what they call open plurilateral agreements (OPA) (h/t Robert Wolfe), which includes the following principles:

1. Membership of an OPA is voluntary; WTO members that decide not to participate will not be pressured to join at a later date;
2. An OPA must be implemented on a nondiscriminatory basis, with benefits extending to non-signatories;
3. Openness to subsequent membership by WTO Members that did not join when an OPA was first agreed, and inclusion of a section laying out the requirements and procedures to be followed for accession by aspiring members;
4. Language stating that accession to an OPA cannot be on terms that are more stringent than those that applied to the incumbent parties, adjusted for any changes in substantive disciplines adopted by signatories over time;
5. An obligation to provide reasons to accession-seeking countries for decisions to reject membership applications;
6. A provision committing signatories to provide assistance to WTO members that are not in a position to satisfy the preconditions for membership in terms of applying the substantive provisions of the agreement but desire to do so;
7. Where feasible and in instances where capacities must be built for a country to meet OPA requirements, consideration be given to establish a stepwise schedule of compliance;
8. Provisions ensuring that nonparticipants have full information on the implementation and operation of the agreement. These should include:
   1. Compliance with WTO requirements pertaining to publication of information on measures covered by the OPA (along lines of Art. X GATT);
   2. Simple, robust notification requirements for OPA members regarding the implementation of the agreement, which could draw on recent proposals to develop augmented procedural guidelines for the operation of WTO bodies;
   3. Creation of a body to oversee implementation of the OPA that is open to observation by non-signatories, including mechanisms to engage stakeholders in an ongoing conversation about how the agreement is working and future needs;
   4. Annual reporting to the WTO General Council by the OPA on its activities;
   5. A mandate for the WTO Secretariat to assess the effects of implementing OPAs on the functioning of the trading system as part of the Director-General’s annual monitoring report of developments in the trading system.
9. Inclusion of consultation and conflict resolution procedures for non-signatories of OPAs in cases where they perceive that incumbents do not live up to the foregoing principles;
10. Provisions indicating whether the OPA envisages recourse to WTO dispute settlement mechanisms to enforce the agreement, and if so, specifying the standard of review as well as the criteria that will apply in the selection of arbitrators.

Again, there is a historical precedent for non-participants in plurilateral agreements using their leverage in this way: after the conclusion of the Tokyo Round, the non-participants in the codes used the fact that the participants needed their consent to allow the GATT Secretariat to administer the codes to extract important concessions, including a commitment (a) that the codes (with the exception of the Government Procurement code) would be applied on an MFN basis, (b) that the Contracting Parties would receive “regular reports” about the operation of the codes, and (c) that non-signatories would be able to follow the proceedings of the Committees overseeing the codes “in an observer capacity”.   

If India and South Africa were to employ their leverage in this way, the WTO as a negotiating forum would benefit twice over: it would show that it can accommodate plurilateral initiatives, and would build a governance framework that ensures that the WTO Membership at large benefits to the maximum extent possible from those initiatives. Admittedly, however, this solution would do little to address what appears to be India’s and South Africa’s main concern – that control of the agenda of the multilateral trade regime appears to be slipping away from developing countries yet again.