WTO REGIONAL TRADE AGREEMENTS: ENABLING CLAUSE

UNCLAS SECTION 01 OF 02 GENEVA 002629

SIPDIS

PASS USTR FOR DWOSKIN, HAFNER
STATE/EB/OT FOR CRAFT
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USDOC FOR ALDONAS, SPETRINI, JACOBS

E.O. 12958: N/A
TAGS: ETRD USTR WTRO
SUBJECT: WTO REGIONAL TRADE AGREEMENTS: ENABLING CLAUSE
TRANSPARENCY



1. On October 3, 2005, the WTO Negotiating Group on Rules held
an informal meeting devoted to discussing to the extent to which
new transparency procedures being considered in the Doha Round
for regional trade agreements (RTAs) should also cover RTAs
entered into between developing countries under the rubric of the
so-called Enabling Clause (the 1979 GATT Decision on
"Differential and More Favorable Treatment" of Developing
countries (L/4903)). Paragraph 2(c) of the Enabling Clause
explicitly permits developing countries to derogate from GATT's
fundamental most-favored-nation treatment requirement for
"regional or global arrangements" among developing countries "for
the mutual reduction or elimination of tariffs." Such agreements
now account for a large portion of mutual tariff remission
agreements around the world, are rarely notified, and receive
scant, if any, review in the WTO's Committee on Trade and
Development (CTD). Previous discussions of the issue in the
Rules group had been highly political, with developing countries
seeking an a priori exclusion of such agreements from any new
notification, information-sharing and multilateral review
procedures.


2. This particular meeting appeared to move beyond the previous
polemics. Developing countries such Brazil, Malaysia, Egypt,
China, Ecuador, Thailand, Barbados, Kenya, Pakistan, and the
Philippines continued to rely on general arguments that Enabling
Clause agreements should not be subject to review in the WTO's
Committee on Regional Trade Agreements (CRTA),but most conceded
that increased transparency would be valuable with respect to all
RTAs.


3. India elaborated its position at length. After stating that
it supported increased transparency generally, India identified
several "sensitivities." It claimed that in contrast to the
requirements of GATT Article XXIV governing customs unions and
free trade agreements, the Enabling Clause did not necessarily
require a mandatory or multilateral review. It also argued that
since most Enabling Clause agreements cover a small percentage of
world trade, those countries should not be subject to any
burdensome review process in the CRTA, particularly given the CTD
mandate that grants jurisdiction to the CTD over all issues
concerning development. India also argued that if the CRTA were
to be the forum for Enabling Clause agreements, it should also
provide a forum for review of GSP programs, which are allowed by
virtue of another paragraph of the enabling clause, be subject to
the transparency provisions under discussion. (Note: We
understand this concern stems from frustration with the lack of
transparency concerning multiple EU GSP programs. End Note.)


4. Korea stressed that the task of increasing transparency was
not to change the legal nature of the Enabling Clause, and sought
clarification on the practical difference between procedures
contemplated under GATT Article XXIV and the Enabling Clause.
The European Communities, Chile, Columbia, Japan, New Zealand,
Hong Kong, China and Chinese Taipei joined the United States and
Korea in supporting reviewing Enabling Clause agreements in the
CRTA and sought further information on developing countries'
specific, practical objections to the particular transparency
elements being considered in the Rules Group. Argentina also
supported reviewing Enabling Clause agreements in the CRTA to
increase efficiency and transparency. Canada took issue with
some of India's points, noting that the Enabling Clause does have
an obligation to consult, that although "south-south" RTAs may
have a minimal impact on the global market, they can impact
regional markets as well as neighboring markets, and that steps
could be taken to lessen the burden on developing countries.
Australia suggested discussing the types of information needed
for transparency. Barbados, an ACP country, notably, notably did
not join India in arguing for CTD jurisdiction, wondering what
the great burden was in notifying agreements to the CRTA.


5. Toward the end of the discussion, India argued that any
improvements in transparency for Enabling Clause agreements
should be negotiated in the CTD, to which the Chair vehemently
objected as an improper delegation of negotiating authority. He
reminded Members that the Rules meetings were open to all
Members, including members of the CTD, and that they were welcome
to attend future discussions. In concluding the discussion, the
Chair acknowledged that Members generally agreed that additional
transparency would be helpful, but expressed disappointment that
the discussion had not focused more on the practical concerns of
the developing countries regarding the specific elements under
consideration in the negotiations. Accordingly, he plans to
continue the informal discussions by focusing on the specific new
procedures being discussed in the Rules Group for RTAs, whether
any raise particular concerns regarding developing country rights
and obligations under the Enabling Clause, and if so, how to
address such concerns. In approaching this problem, he
underscored that the intent was by no means to change the legal
rights and obligations of developing countries under the Enabling
Clause, but rather to explore the extent to which certain
proposed procedural reforms might or might not be appropriate for
all agreements.


6. Comment: The United States sees coverage of Enabling Clause
agreements as an essential element of an eventual Rules Group
agreement on transparency. All WTO Members have an interest in
being better informed about RTAs between developing countries,
whether their neighbors or competitors. The WTO reforms being
contemplated for regional trade agreements envisage greater
Secretariat responsibility in collecting and presenting

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information. Accordingly, there seem to be few if any legitimate
practical reasons for developing countries to resist having
Enabling Clause RTAs covered. End Comment. Allgeier