Worldwide: The Results Of Year 2015 In The WTO: Progress, Achievements And Challenges

On 27 May 2016, the WTO Secretariat published the annual report covering the key developments of the world trade policy within the organization's framework in 2015. This year was marked with a number of important decisions, in particular those, adopted during the 10th WTO Ministerial Conference held in Nairobi, Kenya (Nairobi Package). In this newsletter, we would like to bring your attention to the world's top trade topics of 2015, which have major influence on the further development of international trade system and practice.

Trade facilitation

The Trade Facilitation Agreement (TFA), as a part of a wider Bali Package of agreements, was adopted on 27 November 2014. As of the date of this newsletter, 82 WTO members ratified the TFA and presented their country's instrument of acceptance to the WTO Secretariat. According to the TFA, it will enter into force after being ratified by two-thirds of WTO members. This requires the ratification of the TFA by 108 countries of 162^[1] WTO members.

The TFA will simplify and speed up global procedures for the movement of goods across borders and could reduce average trade costs by over 14 per cent. The TFA covers the issues of movement, release and clearance of goods, including those in transit. It also provides for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues as well as encompasses technical assistance and capacity building in this area. The Global Alliance for Trade Facilitation, a new public-private platform that seeks to use private sector expertise and resources to support trade facilitation reforms, was launched during the 10th WTO Ministerial Conference.

Regional liberalization

Ten new free trade agreements between WTO members were concluded in 2015 (according to the number of notifications to the WTO Council).  Among them the agreements between ASEAN and China; Hong Kong, China and Chile; Mexico and certain Central America countries.

Furthermore, the year 2015 was marked by the lasting process of negotiating large global trade agreements covering relations between major world powers in multiple economic sectors. The Trans-Pacific Partnership Agreement (TPP) covering trade among 12 Pacific Rim countries was agreed on 5 October 2015 and was signed on 4 February 2016. Except for customs tariffs and market access issues, TPP governs a large number of issues including intellectual property, investor-state arbitration, digital economy, etc.

Other most notable negotiated free trade agreements of 2015 include the Transatlantic Trade and Investment Partnership (anticipated trade agreement between the US and the EU), the Pacific Alliance (a Latin American grouping) and the Tripartite Agreement (involves 26 African partners at present).

Government procurement

The Agreement on Government Procurement (GPA) and its implementation is another important trade topic of 2015. Though not all WTO members are GPA signatories, this Agreement opens markets of participating states in the sphere of government procurement enabling access of businesses to foreign procurement tenders, which total estimated amount equals US$ 1.7 trillion. Montenegro and New Zealand joined the GPA in 2015 and negotiations were concluded on the accessions of Moldova and Ukraine. Ukraine became a GPA party on 18 May 2016. At the same time, the work began on the accessions of Australia and Tajikistan while constructive discussions took place on China's accession. As of the date of this newsletter, 18 WTO members are parties to the GPA. The WTO takes further efforts to strengthen and deepen cooperation between member states in the sphere of government procurement, in particular in 2015 phase II of the e-GPA system, an automated market access information tool, was launched.

Agriculture

The Nairobi Package of the WTO 10th Ministerial Conference includes four decisions on agriculture.

• Export subsidies and related policies: developed countries committed to remove export subsidies on agricultural products immediately, except for a handful of agriculture products, which were given extra but limited time. Developing countries will do so by 2018, although net food-importing developing countries will have more time. The decision also contains new rules on export financing support, international food aid and exporting state-trading enterprises.
• Public stockholding for food security: the Ministerial decision commits the WTO members to engage constructively in finding a permanent solution to the issue of countries stockpiling staple food crops for food security purposes. The Bali Ministerial decision of 2013 set a deadline of the 11th Ministerial Conference in 2017 for resolving this matter. Until a permanent solution is approved, food stockpiling at administered prices will continue to be protected from legal action by the WTO members as long as certain conditions are met.
• Ministers decided that negotiations to establish a special safeguard mechanism – which would allow developing countries to raise tariffs temporarily to deal with import surges or price falls – will take place in dedicated sessions of the Committee on Agriculture and progress in these negotiations will be regularly reviewed by the General Council.
• Conference decision mandates developed countries to prohibit cotton export subsidies immediately while developing countries are required to do so no later than 1 January 2017. It also includes a commitment by developed countries – and those developing countries declaring they are able to do so – to grant duty-free and quota-free market access to cotton exports from least-developed countries (LDCs) from 1 January 2016, to the extent provided for in their respective preferential trade arrangements.

LDCs issues

The WTO 10th Ministerial Conference addressed as well particular issues concerning LDCs. Thus, special preferential rules of origin for the least developed countries were adopted. The decision provides more detailed directions on issues such as methods for determining when a product qualifies as "made in a least developed country". It is expected that such step will facilitate access of goods from LDCs to the markets of other WTO members.

The current waiver under which the WTO members may grant preferential treatment to services originating from LDCs was also extended. The waiver, adopted in December 2011, runs 15 years. Thus, it was extended for additional four years, i.e. until 31 December 2030.

TRIPS amendments & pharmaceutical sector

An additional protocol amending the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) was accepted by ten more WTO members in 2015. The Protocol aims to make it easier for the poorest WTO members to access affordable medicines. For this purpose, it allows the production of generic versions of patented medicines under a compulsory license (without the patent holder's consent) exclusively for export to countries that cannot manufacture the needed medicines by themselves. The Protocol will come into force once it is approved by two-thirds of the WTO members. As of the end of April 2016, the Protocol was supported by 61 per cent of the WTO members. Ukraine accepted the Protocol on 16 March 2016.

At the same time, the Council extended – until January 2033 – the period during which key provisions of the TRIPS Agreement do not apply to pharmaceutical products in LDCs. It means that LDCs can choose whether to protect pharmaceutical patents and clinical trial data before 2033. The decision also keeps open the option for further extensions beyond 2033.

Information Technology Development

On 24 July 2015, the WTO members agreed the extended scope of the WTO Information Technology Agreement. The original agreement was concluded in December 1996 eliminating customs duties on a large number of high technology products (computers, semiconductors, software, etc.). The total number of countries participants to the Information Technology Agreement equals to 82 after accession of Kazakhstan in 2015. The extended list includes 201 new products, the total annual trade in which is valued over USD 1,3 trillion per year (approximately 7% of total global trade). Among these new products there are new generation semi-conductors, equipment, optical lenses, GPS navigation equipment, magnetic resonance imaging products, ultra-sonic scanning apparatus, etc. The majority of duties are to be eliminated within 3 years starting from 2016.

The WTO members as well accepted a proposal by China to formalize the sharing of information on e-commerce by adding a regular item to the agenda of the Council.

Trade restrictions and remedies

In 2015, the WTO members were still committed to protecting domestic markets by imposing trade remedies. According to the official WTO statistics, countries initiated 107 new anti-dumping investigations from January to June 2015, just slightly up from 106 in the same period in 2014. The United States (15 new investigations), Brazil (12) and India (12) were again the leading initiators in 2015, along with Turkey, increasing their total number of investigations in comparison to the relevant period of the previous year. Other frequent users of anti-dumping investigations include China, India and Russia.

Notifications of new safeguard investigations in 2015 declined to 17 from 23 the year before. Safeguard investigations were initiated by 11 WTO members: Chile, Egypt, India, Indonesia, Malaysia, Morocco, Tunisia, Turkey, Ukraine, Viet Nam and Zambia. The products covered include ceramic tiles, cars, polyethylene terephthalate (PET), alloy and non-alloy steel, etc. The amount of new notifications of final measures in 2015 equaled to 14, the same as previous year.

As of 2015, 27 WTO members notified 731 quantitative restrictions on imports and exports, with most of the restrictions taking the form of import/export bans and non-automatic licensing procedures. Furthermore, two countries (Ukraine and Ecuador) imposed Balance-of-Payments Restrictions in the form of import surcharges. Ukraine lifted its measure at the end of 2015 while Ecuador extended his restriction until June 2017 due to "unfavorable economic climate". In 2015, the WTO Secretariat received, as well, 1681 notifications on sanitary and phytosanitary measures.

Dispute settlement

In 2015, the WTO dispute settlement system had in average 30 active panels per month, making this year one of the busiest ones. As of the end of 2015, the general number of disputes submitted to the WTO equaled to 501 with 26 active appeals and panels.

The WTO membership

While Seychelles and Kazakhstan joined the WTO in 2015, the total number of the WTO members reached 162. At the same time the next candidates for the WTO membership are Liberia and Afghanistan, whose WTO membership packages were approved during the Nairobi conference.

For more information, please contact  Anzhela Makhinova, counsel at Sayenko Kharenko.

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