Digest Content

·          Members indicate strong preference for Ngozi Okonjo-Iweala as DG but US objects

·          DDG Yi calls on ministers to ramp up cooperation on trade to bolster economic recovery

·          United States appeals panel report regarding US tariffs on Chinese goods

·          Global foreign direct investment (hereinafter – FDI) falls 49%, outlook remains negative

·          Indonesia launches safeguard investigation on cigarette paper

·          Chair cites “chronic” low compliance with subsidy notification requirements

·          Members grant EU authorization to impose countermeasures against US in Boeing dispute     

·          Over 60 safeguard actions reviewed at WTO committee

·          Thailand – Customs and fiscal measures on cigarettes from the Philippines (DS371)

Members indicate strong preference for Ngozi Okonjo-Iweala as DG but US objects

General Council Chair David Walker of New Zealand and his two co-facilitators in the selection process to choose the WTO’s next Director-General told the organization’s members on 28 October that based on their consultations with all delegations the candidate best poised to attain consensus and become the 7th Director-General was Ngozi Okonjo-Iweala of Nigeria.

“She clearly carried the largest support by Members in the final round and she clearly enjoyed broad support from Members from all levels of development and all geographic regions and has done so throughout the process. I am therefore submitting the name of Ngozi Okonjo-Iweala as the candidate most likely to attract consensus and recommending her appointment by the General Council as the next Director-General of the WTO until 31 August 2024,” Amb. Walker said.

Amb. Walker stressed at a Heads of Delegation meeting on 28 October that this was the assessment of the “troika” of facilitators and that a formal decision had to be taken by the members at a General Council meeting, which he has scheduled for 9 November. The General Council is the WTO’s pre-eminent decision making body, save for the Ministerial Conference which normally meets every two years.

But the assessment was challenged by the United States which said it would continue to support Minister Yoo and could not back the candidacy of Dr Ngozi Okonjo-Iweala.

Amb. Walker said members had expressed their views to him, Amb. Dacio Castillo (Honduras) and Amb. Harald Aspelund (Iceland) during the third and final stage of consultations from 19 to 27 October.

The General Council chair explained that since the process to replace former Director-General Roberto Azevêdo began, the ultimate objective of this measured and clearly defined selection process has been to secure a consensus decision by members. He praised the membership for their adherence to the guidelines and for their robust participation in the exercise.

DDG Yi calls on ministers to ramp up cooperation on trade to bolster economic recovery

Addressing a virtual meeting of ministers organized 27 October by the Australian government ahead of the OECD’s annual meeting, Deputy Director-General Yi Xiaozhun urged them to step up cooperation at the WTO to lay the foundation for a strong economic recovery from the COVID-19 pandemic. “A robust and inclusive economic recovery requires open and predictable international trade, supported by a well-functioning trading system,” he said.

The informal session, convened by Australia, looked at two issues: how to narrow differences and move towards an agreement in the WTO fisheries subsidies negotiations, and how the WTO can best contribute to global economic recovery in the wake of the damage caused by the pandemic.

DDG Yi’s remarks are below:

In the wider economy, trade remains a catalyst for growth and productivity. By the same token, closing markets to trade would amount to an additional — self-inflicted — supply shock.

Greater cooperation at the WTO can defuse trade tensions and provide greater certainty for international trade. There is scope for much more. Groups of WTO members are negotiating rules on digital commerce, investment facilitation, and services domestic regulation. Each would help fill gaps in the global trade architecture.

Several members have put forward ideas for making supply chains more resilient, which would reduce incentives to restrict trade in future crises.

United States appeals panel report regarding US tariffs on Chinese goods

The United States notified the Dispute Settlement Body on 26 October of its decision to appeal the panel report in the case brought by China in “United States — Tariff Measures on Certain Goods from China” (DS543). The panel report was circulated to WTO members on 15 September.

For the reasons set forth in this Report, the Panel concluded that:

a) the parties have not reached a mutually satisfactory solution within the meaning of Article 12.7 of the DSU, or otherwise relinquished their rights to pursue WTO dispute settlement action on the measures at issue in this dispute;

b) all measures challenged by China fall within the Panel’s terms of reference, and it is appropriate for the Panel to make findings and recommendations with respect to the first measure as identified in China’s panel request (additional duties of 25% on List 1 products), and the second measure as amended on 9 May 2019 (additional duties of 25% on List 2 products);

c) the challenged measures are prima facie inconsistent with Articles I:1, II:1(a) and II:1(b) of the GATT 1994;

d) the United States has not met its burden of demonstrating that the measures are provisionally justified under Article XX(a) of the GATT 1994.

As a consequence, the Panel concludes that the measures at issue are inconsistent with Articles I:1, II:1(a) and II:1(b) of the GATT 1994.

Under Article 3.8 of the DSU, in cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment. The Panel concludes that, to the extent that the measures at issue are inconsistent with certain provisions of the GATT 1994, they have nullified or impaired benefits accruing to China under that agreement within the meaning of Article XXIII:1(a) of the GATT 1994.

Pursuant to Article 19.1 of the DSU, the Panel recommended that the United States bring its measures into conformity with its obligations under the GATT 1994.

Global foreign direct investment (hereinafter – FDI) falls 49%, outlook remains negative

Global FDI flows fell 49% in the first half of 2020 compared to 2019, due to the economic fallout from COVID-19, reveals UNCTAD’s latest Global Investment Trends Monitor released on 27 October.

In the wake of the pandemic, lockdowns around the world slowed existing investment projects and the prospects of a deep recession led multinational enterprises to reassess new projects.

“The FDI decline is more drastic than we expected, particularly in developed economies. Developing economies weathered the storm relatively better for the first half of the year,” said James Zhan, UNCTAD’s investment and enterprise director. “The outlook remains highly uncertain.”

Developed economies saw the biggest fall, with FDI reaching an estimated $98 billion in the six-month period – a decline of 75% compared to 2019

FDI flows to North America fell by 56% to $68 billion.

Meanwhile, the 16% decrease in FDI flows to developing economies was less than expected, due mainly to resilient investment in China.

Flows decreased by just 12% in Asia but were 28% lower than in 2019 in Africa and 25% lower in Latin America and the Caribbean.

In the six months to June 2020, developing countries in Asia accounted for more than half of global FDI. Flows to economies in transition were down 81% due to a strong decline in the Russian Federation

The report shows that Greenfield investment project announcements decreased by 37%, cross-border M&A – by 25%, International project finance – by 25% in the first three quarters of 2020.

According prospects for the full year of FDI inflows, the drop will be 30-40%.

Indonesia launches safeguard investigation on cigarette paper

On 27 October 2020, Indonesia notified the WTO’s Committee on Safeguards that it initiated on 26 October 2020 a safeguard investigation on cigarette paper and plug wrap paper non-porous in form of rolls, whether or not coated, underHarmonized System (HS.) codes ex. 4813.20.00, ex. 4813.90.10 and ex. 4813.90.90. An application for a safeguard measures was received by the Investigating Authority from Indonesia Pulp and Paper Association (Asosiasi Pulp dan Kertas Indonesia/APKI).

Those having substantial interest and wishing to be considered as interested parties in this investigation should submit written request within a period of 15 working days in Indonesia from the date of initiation to the Investigating Authority. All submissions and request made by interested parties must be sent both in written letter and in electronic format. In the notification Indonesia indicated, among other things, as follows:

In Accordance with article 3.1 WTO Agreement on Safeguard, the Government of the Republic of Indonesia will conduct a hearing in order to provide opportunities for those Members who having a substantial interest to present their evidence and views, Hearing is scheduled to be held on Thursday, 19 November 2020 at 10.00-11.30 am (Indonesia time). All interested parties, who wish to participate in the hearing and all written evidence and views, submitted to the Investigating Authority not later than 16 November 2020 (G/SG/N/6/IDN/37).

Chair cites “chronic” low compliance with subsidy notification requirements

WTO members continue to fall well behind in meeting their obligations to notify the organization of their subsidy programmes. That was the assessment delivered by the chair of the WTO’s Committee on Subsidies and Countervailing Measures (SCM) at a meeting on 27 October.

83 WTO members have not yet made their new and full subsidy notifications for 2019, despite a deadline for submission of notifications more than a year ago. In addition, 68 members still have not made their subsidy notifications for 2017, although the deadline was more than three years ago, while 58 members still have not made their 2015 notifications, which were due more than five years ago.

The United States submitted a further revised proposal (G/SCM/W/557/Rev.4) for ensuring timely responses to questions posed by members on the subsidy programmes of other members. Canada, the European Union, Norway, Japan and the United States expressed their joint concern about the role of subsidies in contributing to excess production capacity in certain sectors.

At the end of the meeting, members elected Ms Sungyo Choi of the Republic of Korea as the new chair of the SCM Committee. The next meeting of the SCM Committee is tentatively scheduled to take place the week of 26 April 2021.

Members grant EU authorization to impose countermeasures against US in Boeing dispute

At a meeting of the Dispute Settlement Body on 26 October, WTO members agreed to a request from the European Union for authorization to impose countermeasures on US goods and services trade with the EU up to a value of US$ 4 billion annually. The authorization was granted in line with a WTO arbitrator decision stemming from the longstanding EU-US dispute over government subsidies to Boeing.

DS353: United States – Measures Affecting Trade in Large Civil Aircraft – Second Complaint.

The EU said the action marks the end of some 16 years of litigation in which the US complained about EU subsidies to Airbus, while the EU complained about US subsidies to Boeing.

The US said it recently provided proposals for a reasonable settlement that would provide a level playing field for the US, the EU and the United Kingdom, and that with serious engagement, the parties should be able to find a resolution in a short period of time.

The United Kingdom said it was pleased that the arbitrator authorized nearly US$ 4 billion in countermeasures and that it hoped the award would lead to substantive progress in negotiations for a fair and balanced settlement in order to finally put an end to these disputes.

In this dispute, Kazakhstan does not participate as a third party.

Over 60 safeguard actions reviewed at WTO committee

More than 60 specific safeguard investigations were reviewed by WTO members at the WTO’s Safeguards Committee meeting on 26 October. The large number of actions under review was partly due to the spring meeting not taking place because of the COVID-19 lockdown. The European Union’s safeguard measures on imports of steel products continued to draw many comments from members. Members also discussed the United Kingdom’s “transition review” of safeguard measures currently imposed by the EU.

Thailand – Customs and fiscal measures on cigarettes from the Philippines (DS371)

The chair of the DSB, Ambassador Dacio Castillo (Honduras), reported to members that consultations with the Philippines and Thailand were still ongoing with regards to resolving their differences in a dispute over the next steps in the DS371 proceedings.

Background: the given trade dispute concerns the Philippines’s retaliation request to suspend the application to Thailand of concessions or other obligations, covering trade in an amount of approximately USD 594 million annually, since, in their view, Thailand  failed to comply with DSB’s recommendations and rulings in a trade dispute, where Thailand had applied fiscal and customs measures inconsistent with WTO rules affecting cigarettes from the Philippines (customs valuation practices, excise tax, health tax, TV tax, VAT regime, retail licensing requirements and import guarantees imposed upon cigarette importers).

Both the Philippines and Thailand made statements reiterating their positions on the matter as expressed in previous DSB meetings. Both said they were still committed to finding a mutually acceptable solution to the matter. However, the Philippines said it should become increasingly clear to the chair and others that Thailand, as the losing party in the dispute, was not able to engage constructively in a solution. The Philippines said that under the mandatory applicable WTO rules, there were only two solutions: either the DSB accepts the Philippines’ request to impose retaliation on Thailand for non-compliance, or Thailand objects to the Philippines’ request and the matter is referred to arbitration.

Thailand said there were no possible interpretations of the WTO dispute rules or its earlier sequencing agreement with the Philippines which would allow the Philippines to proceed with its request. The Philippines’ retaliation request is without legal foundation because it was made long after the expiry of the 30-day deadline to submit such a request. The real problem, Thailand said, was the absence of a functioning Appellate Body; it was imperative that a solution be found to this crisis.

The EU added that the Philippines and Thailand could resort to alternative means of resolving their dispute, such as using the Multiparty Interim Appeal Arbitration Arrangement (MPIA).