This technical note is updated. It has been removed from duplicate sections of
India and South Africa pour cold water on alternative approach to WTO talks
and Explainer: The 18 WTO plurilaterals and ‘joint-statement initiatives’
See also:
Comment: on India’s claim that a plurilateral WTO deal is ‘illegal’
‘Plurilateral’ WTO services deal struck after breakthrough text released and
In General Council India alone opposes investment deal as a WTO agreement
NOTE: An error has been removed from this: most references to WTO Agreement Article 9 (on WTO decision-making) and paragraphs 1 to 8 of Article 10 (on amendments), which do not apply to amending Annex 4 of the agreement. Only Article 10.9 (requiring consensus without the option of voting) and Article 10.10 (other requirements) apply
By Peter Ungphakorn
POSTED JANUARY 3, 2024 | UPDATED MARCH 26, 2024
As World Trade Organization members struggle to find the consensus to conclude its mainstream negotiations — such as on fisheries subsidies and agriculture — many inside and outside the WTO believe that the best way around the problem is to start with talks among “the willing” rather than the whole membership.
That means “plurilateral” negotiations rather than “multilateral”. A vast majority of WTO members now participate in talks among only part of the membership, with the hope that others will join in later. Even so, a handful of countries vigorously oppose the approach.
India, South Africa and Namibia stated their opposition in writing in early 2021. Namibia participates in at least one plurilateral activity. Since April 2021 it does not seem to have repeated its opposition.
In the final General Council meeting of 2023, India called the practice “illegal”.
In the General Council on March 22, 2024, India, South Africa and Türkiye blocked a proposed decision to insert the plurilateral Investment Facilitation Agreement formally into WTO rules, although South Africa and Türkiye said they were willing to discuss the proposal with the 128 participants.
Many countries disagree with the objections on legal and practical grounds.
But opposition from a few countries, or even one (as was the case at the Abu Dhabi Ministerial Conference, February 26 to March 2, 2024, can prevent any new rules becoming proper WTO agreements because consensus is needed.
Participants in plurilateral deals have found ways to avoid the obstacle, but in some cases no way round is available. It all depends on the subject and the type of plurilateral agreement.
Continue reading or use these links to jump down the page:
What are plurilateral agreements? | Plurilaterals that do not discriminate (MFN): (1) commitments only | Plurilaterals that do not discriminate (MFN): (2) new rules (potentially messy) | Plurilaterals that discriminate: rules and commitments (Annex 4) | Test case: investment facilitation
What are plurilateral agreements?
“Plurilateral” agreements are negotiated and agreed by only some WTO members. Others do not participate. By contrast, deals among the whole membership are called “multilateral” in the WTO.
See: Explainer: The 18 WTO plurilaterals and ‘joint-statement initiatives’
The Doha Round, the last “single-undertaking” package of negotiations, stalled in 2008. Since then, sporadic agreements have been reached multilaterally on a handful of the individual Doha Round topics, not the whole package.
Two important multilateral negotiations continue in the WTO, on fisheries subsidies — which many consider to be a priority — and agriculture.
But a number of members say it’s all been too slow, while WTO rules are becoming out-of-date. They have started talks among smaller groups preferring not to wait until all members are ready for new legal obligations and commitments. This allows more modern topics to be negotiated, such as on digital trade. But not everyone agrees.
Plurilateral agreements are characterised by four features in two groups:
By equal treatment or discrimination
- Plurilaterals that don’t discriminate between participants and non-participants (MFN)
- Plurilaterals that do
By creating obligations or new rules
- No new rules, only commitments (schedules)
- New rules, with or without new commitments
Some academic analysis focuses only on the question of discrimination. But the practical problem is mainly on what to do if participants want to add new rules to the WTO’s package.
To understand this, we need to know the structure of WTO agreements.
In fact, there is only one “WTO Agreement” — officially the Marrakesh Agreement Establishing the World Trade Organization, and sometimes confusingly shortened to the “Marrakesh Agreement”.
All the other (subsidiary) agreements are annexed to it. The three big sets of WTO agreements — on goods, services and intellectual property — are annexed at a second level under Annex 1, the “multilateral agreements”.
And because it’s all one single agreement (with annexes), inserting any new set of rules means amending that one agreement. That requires consensus among the whole WTO membership — whether all members participate (“multilateral”) or only some of them do (“plurilateral”).
The rules governing amendments in general are in the WTO Agreement’s Article 9 (consensus decision-making and voting), and Article 10 (on amendments). But the rules for plurilateral agreements override those. Article 10.9 says any decision to add a one to Annex 4 can only be by consensus among the whole WTO membership.
(The rules on ratification found in provisions for amending non-plurilateral annexes do not apply to Annex 4 either. Art.10.10 says “Amendments to a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement”)
But WTO negotiations also produce countries’ individual commitments, particularly on how much they are opening their markets to goods and services.
Those commitments are listed in “schedules” (which include timetables for phasing in the new commitments).
Each country’s commitments run to hundreds of pages. The total for the whole membership’s schedules is tens of thousands of pages.
By comparison, the rule book (containing the legal texts of the agreements) is barely 500 pages.
The schedules of commitments are attached to the relevant agreements. Plurilateral negotiations can produce their own schedules of commitments.
This is how existing plurilateral agreements have their schedules attached:
- For civil aircraft, pharmaceutical products and information technology products, the commitments come under “goods” (the General Agreement on Tariffs and Trade, GATT) — they are part of countries’ schedules of commitments on goods.
- For financial services, movement of people (in services), basic telecommunications and domestic regulation (in services), the commitments on services are attached to the General Agreement on Trade in Services (GATS).
- For government procurement, the commitments are attached to the (plurilateral) Government Procurement Agreement.
JARGON BUSTER
Most-favoured-nation (MFN) treatment — non-discrimination between trading partners. For example, a country’s commitment to lower or scrap a tariff applies equally to all WTO members: they are all equally “most favoured”. This is the default in WTO rules
Non-MFN — discriminating in favour of one or more WTO members, and excluding some WTO members. If a country scraps duty only on imports from other participants in a plurilateral agreement, that is non-MFN
Plurilaterals that do not discriminate (MFN): (1) commitments only
Plurilaterals already agreed in the WTO include duty-free trade in pharmaceuticals and information technology products. A third negotiation on environmental goods began in 2014, but has seen no movement since 2016.
When enough members agree — meaning a critical mass is achieved — each simply changes the lists, or “schedules,” of tariff commitments it has made in the WTO so that the tariff ceilings on these products are zero.
Those duty-free commitments do not discriminate. They apply to imports from all WTO members under the most-favoured-nation (MFN) rule. All countries are favoured equally.
These non-discriminating or MFN plurilaterals are sometimes called “critical mass agreements (CMA)”. See, for example, Bernard Hoekman and Charles Sabel (page 4). They are sometimes also called “open” plurilaterals.
Those that did not join in are free riders. Requiring a critical mass ensures the free riders are insignificant.
Effectively, each participant is altering its commitments unilaterally, but only when the whole group agrees.
Therefore, no WTO rules are changed. There are no new legal texts to add to the WTO agreements. No consensus is needed in the full membership.
This is true if you want to make your schedule more trade restrictive but not if you unilaterally modify your schedule to make it more liberal
— Andrew Stoler on the India-South Africa objections
However, commitments have to be “certified”. This could be difficult so long as any objections remain.
In February 2024, India and South Africa dropped their objections to the schedules of commitments in services of 53 WTO members who incorporated new plurilateral disciplines on services domestic regulation. The objections were dropped after those members modified their proposed documents. The schedules of 17 other participants still had not been certified.
India, South Africa and Namibia have implied that certification requires consensus approval from the membership, but certifying services schedules has its own rules, and a former US negotiator and deputy WTO director-general, Andrew Stoler, points out that consensus is not needed.
“For example, I disagree with [India’s and South Africa’s] assertion that ‘even changes to schedules cannot be made unilaterally, as other members have the right to protect the existing balance of rights and obligations’. This is true if you want to make your schedule more trade restrictive but not if you unilaterally modify your schedule to make it more liberal. The certification procedure they refer to in connection with the Information Technology Agreement (ITA) was not a negotiation with all other WTO members. The ITA was essentially negotiated as an early [joint-statement initiative] only among a subset of members on a critical mass basis.”
On top of that, schedules are often implemented in practice anyway even while they are not certified.
Plurilaterals that do not discriminate (MFN): (2) new rules
In one negotiation so far, the result is effectively new rules but because they do not discriminate and they clearly come under one of the three multilateral groups of agreements, participants have included the new rules in their schedules as if they were additional commitments.
This is the route chosen for domestic regulation in services announced in December 2021. Participants simply circulated revised schedules of commitments in services.
The way they did this originally was to write out the new disciplines in the form of a 12-page “reference paper”. Each revised schedule of commitments simply said the member or members would comply with that paper. The WTO rulebook would stay unchanged.
In the end the schedules of commitments that were certified — after India and South Africa dropped their objections — were revised again. Now, those members copied and pasted the text of the reference paper directly into their schedules. The objections were dropped on only those schedules that revised to include the copy-pasted text. The others remain uncertified.
Potentially messy
India and South Africa have been holding up the procedure for certifying the revised commitments, but some experts say they cannot do that forever. In practice those new commitments citing the domestic regulation reference paper are now being used by participating governments.
Including rules within commitments instead of separately, has raised a number of questions. Does it bypass the need for consensus to annex the rules to the WTO agreements? Can non-participants object or block the process?
The services domestic regulation agreement seems to be answering those questions. The schedules are commitments to apply the reference paper so no consensus is needed as would be the case for attaching the deal under Annex 4. And although India and South Africa have asked for time to comment on the new commitments, this does not seem to have held up their implementations.
One downside is that the text of the agreement might not be so easy to find. Normally, it would be in the full set of WTO agreements. But in this case it is a standard WTO document in the online documents database. Worse, the legally binding version is only in the individual members’ schedules of commitments. Tracking down the disciplines in those documents is a nightmare.
The draft schedules of commitments that were leaked in 2019 indicate how the additional commitments on rules (or “disciplines”) was being done for domestic regulation in services. They show that countries’ willingness to apply new disciplines varied. (Services schedules are explained here.)
Countries generally undertook “as additional commitments the disciplines contained in Section II of document INF/SDR/W/1”.
They varied in some details:
- either “for all sectors included in this schedule” (usually developed but also some developing countries, including China)
- or for listed sectors, with some variation (many developing countries but also, for example, New Zealand and Switzerland).
Some of them proposed making separate commitments on disciplines for financial services based on different texts. Uruguay’s draft had a 3-year phase-in period.
The complexity is typical of agreements on services in general.
Plurilaterals that discriminate: rules and commitments
Discriminating plurilaterals avoid the free-rider problem. The rules and commitments only apply among the “willing” (the participants), not the rest of the membership. Therefore critical mass is less important.
Discriminating plurilaterals are likely to include rules, which are attached as “plurilateral agreements” under Annex 4. The rule for doing this is almost unique. It can only be done by consensus among all WTO members (also a requirement for amending dispute settlement rules, nothing else).
The WTO has two existing plurilateral agreements of this type, on government procurement and trade in civil aircraft.
Government procurement discriminates in both its rules (creating rights and obligations only among participants) and participants’ individual commitments (the commitments, on which of their agencies will open up purchasing to competition from foreign suppliers, only apply to suppliers in fellow-participants).
Trade in civil aircraft, is a mixture. Tariff reductions apply to imports from all WTO members. These are included in countries’ schedules of commitments on goods. Some rules such as on government purchases and subsidies for civil aircraft only apply to the signatories and are in Annex 4.
Because plurilateral agreements of this type discriminate, and because there are rules, they can only come under the WTO umbrella by adding them to the package of WTO agreements, requiring a consensus agreement among all members.
The plurilateral investment facilitation agreement does not discriminate, but does not fit clearly under goods or services, meaning the option of attaching schedules of commitments is not available.
Participants therefore want to insert it under Annex 4. To do this requires consensus among the whole WTO membership. India said in December 2023 it would block consensus.
Investment facilitation has become a test case of whether any new agreement will be attached under Annex 4.
Annex 4
Technically, plurilateral agreements with rules would be in Annex 4 of the WTO Agreement — inserted by amending the WTO Agreement.
(For various legal reasons, Hamid Mamdouh has proposed attaching the new plurilaterals to the WTO rule-book by creating a new Annex 5.)
Plurilateral deals can only be added to the WTO agreements if there is a consensus among all WTO members to do so, including members that are not among the plurilateral participants.
To repeat from above: the WTO Agreement’s Article 10.9 says any decision to add a plurilateral agreement to Annex 4 must be by consensus among the whole WTO membership.
This is where dissenting countries like India or South Africa can block plurilaterals if they want to.
Some discussion has emerged on how these plurilaterals relate to bilateral or regional free trade agreements.
Where they discriminate, they explicitly bypass most-favoured-nation (MFN) treatment. But because the plurilaterals have their own rules under the package of WTO agreements, they are not subject to the disciplines that apply to free trade agreements (for goods, GATT Article 24).
Test case: investment facilitation
By the end of 2023, a new test case had emerged. Participants — 117, or 71% of WTO members — had agreed on a new plurilateral agreement on investment facilitation.
It consists entirely of new rules; there are no market access commitments. But the rules do not discriminate either. Each participant’s streamlined and transparent rules on foreign investment would apply to all other WTO members, participants and non-participants alike.
Even so, the only way of getting the new deal into the WTO rule-book would be by attaching it to Annex 4, which needs consensus among the whole membership.
Participants realised that doing this by schedules of commitments (as with domestic regulation in services), would not be possible. Investment does not fit well under either “goods” or “services”.
In the December 2023 General Council meeting, India announced it would not agree to placing investment facilitation under Annex 4. It called the whole process “illegal”. Many other WTO members dispute India’s legal argument.
This seemed to be heading for a major row at the February 26–29, 2024 Ministerial Conference.
Meanwhile, other subjects are lining up to follow investment facilitation.
In the negotiations on an agreement on digital trade, there will be rules and commitments. Participants have not indicated yet what route they will take for the new rules and whether the commitments will discriminate or not.
If some members persist in blocking consensus to attach a new agreement to Annex 4, can anything else be done?
An alternative is to take the agreement outside the WTO. It would lose a lot. It would not be subject to legal dispute settlement. And it would not have the infrastructure and operational support of the WTO Secretariat.
That is not what participants in plurilateral negotiations have in mind.
Based on all of these sources, the full list of participants in WTO plurilateral talks is (at least): 152 (93%):
PARTICIPANTS in WTO plurilateral talks
February 26, 2024
Afghanistan; Albania; Angola; Antigua and Barbuda; Argentina; Armenia; Australia; Austria; Bahrain; Barbados; Belgium; Belize; Benin; Bolivia; Botswana; Brazil; Brunei Darussalam; Bulgaria; Burkina Faso; Burundi; Cabo Verde; Cambodia; Cameroon; Canada; Central African Republic; Chad; Chile; China; Colombia; Dem. Rep. Congo; Congo; Costa Rica; Côte d’Ivoire; Croatia; Cyprus; Czech Republic; Denmark; Djibouti; Dominica; Dominican Republic; Ecuador; El Salvador; Estonia; Eswatini; European Union; Fiji; Finland; France; Gabon; Gambia; Georgia; Germany; Greece; Grenada; Guatemala; Guinea; Guinea Bissau; Guyana; Haiti; Honduras; Hong Kong, China; Hungary; Iceland; Indonesia; Ireland; Israel; Italy; Jamaica; Japan; Kazakhstan; Kenya; Rep. Korea; Kuwait; Kyrgyz Republic; Laos; Latvia; Lesotho; Liberia; Liechtenstein; Lithuania; Luxembourg; Macao, China; Madagascar; Malawi; Malaysia; Maldives; Mali; Malta; Mauritania; Mauritius; Mexico; Moldova; Mongolia; Montenegro; Morocco; Mozambique; Myanmar; Namibia; Netherlands; New Zealand; Nicaragua; Niger; Nigeria; North Macedonia; Norway; Oman; Panama; Papua New Guinea; Paraguay; Peru; Philippines; Poland; Portugal; Qatar; Romania; Russia; Rwanda; Saint Kitts and Nevis; Saint Lucia; Saint Vincent and the Grenadines; Samoa; Saudi Arabia; Senegal; Seychelles; Sierra Leone; Singapore; Slovak Republic; Slovenia; Solomon Islands; Spain; Suriname; Sweden; Switzerland; Chinese Taipei; Tajikistan; Thailand; Togo; Tonga; Trinidad and Tobago; Turkey; Uganda; Ukraine; United Arab Emirates; United Kingdom; United States; Uruguay; Vanuatu; Venezuela; Vietnam; Yemen; Zambia; Zimbabwe (152)
Sources are here
Those not participating in plurilaterals: 12 (7%)
NOT PARTICIPATING in WTO plurilateral talks
February 26, 2024
Bangladesh, Cuba, Egypt, Ghana, India, Jordan, Nepal, Pakistan, South Africa, Sri Lanka, Tanzania, Tunisia (12)
Sources are here
Updates:
March 26, 2024 — adding the objections from India, South Africa and Türkiye in the March 22 General Council meeting, and adding certification of services schedules in the section on “commitments only”
January 14, 2024 — adding the consensus rule for attaching plurilaterals under Annex 4, and removing references to other parts of WTO Agreement Article 10, which were incorrectly cited as applying to amendments to Annex 4
January 4, 2024 — correcting the references to rules under the WTO Agreement, on consensus and voting on amendments
Image credits
Main image | Aung Soe Min, Unsplash licence
Marrakesh agreements photo; charts | the author, CC BY-SA 4.0
Trade β Blog 