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This Week In Trade

Bali Breakdown, TPP Round Wraps Up, WTO Seal Ruling, Brazil Retaliation

Posted: November 25, 2013

Posted: November 25, 2013

The week in trade starts on a sober note as members of the World Trade Organization failed to reach consensus on a trade facilitation text, which is one of three key components for a small package of trade concessions that was meant to be announced at the Dec. 3 -6 ministerial.

They did so despite three days of almost non-stop negotiations, which ended Monday morning (Nov. 25). The WTO secretariat has scheduled a General Council meeting for tomorrow (Nov. 26), and Director-General Roberto Azevedo is expected to essentially convey the message that members did not reach their goal of coming up with a Bali package, according to Geneva sources.

In addition to the Bali negotiations, this week brings attention to the efforts by the U.S. to push forward the Trans-Pacific Partnership (TPP) initiative in advance of a ministerial meeting in Singapore Dec. 7-10.

Ahead of that gathering, U.S. Trade Representative Michael Froman will travel to Southeast Asia on Nov. 29 for government meetings until Dec. 2, according to USTR. Froman will then participate in the WTO Ministerial in Bali and the Singapore meeting of TPP ministers.

Froman met today (Nov. 25) in Washington with leaders of U.S. think tanks, and also presided over signing of the U.S.-Bangladesh Trade and Investment Cooperation Forum.

The third initiative on the U.S. trade agenda, the Transatlantic Trade and Investment Partnership (TTIP), comes to the forefront in a Nov. 25 meeting between Deputy USTR Miriam Sapiro and France's Ambassador to the U.S., Francois Delattre. In a related development, TTIP negotiator Dan Mullaney will meet on Dec. 4 with Pierre Delsaux, the deputy director-general for the EU's Directorate for Internal Market and Services.

Later this week, eyes will turn to Brazil, where senior government officials are expected to decide to impose hundreds of millions of dollars in trade retaliation against U.S. exports.

According to sources familiar with the Brazilian government's deliberations, a special inter-ministerial group known as CAMEX is slated to convene on Wednesday (Nov. 27) and consider a “menu” of options in terms of the monetary value, method and timing of imposing trade retaliation, as well as which sectors will be affected.

The expected move comes as another month closes without any signal that the U.S. will disburse the monthly $12.25 million it agreed to pay Brazil as part of a settlement to a long-standing fight over farm subsidies.

Back at the WTO, as of mid-day, one Geneva source said the trade facilitation negotiations ended with 65 brackets indicating areas of disagreement. Sources said some of these are issues that can only be resolved at the political level, while others are a matter of resolving technical differences.

Geneva sources said one example of an issue that would have to be resolved on a political level is a provision in the trade facilitation text that would obligate WTO members to refrain from imposing impediments to goods transported via fixed infrastructure. The European Union pushed on that issue to prevent Russia from turning off pipeline transport of oil and gas, but faced a strong backlash from Saudi Arabia and Nigeria and other oil-producing countries.

The number of outstanding issues, as well as the technical complexity of some of them, makes it hard to see how they could be resolved at the ministerial.

In addition to the differences on trade facilitation, new difficulties emerged late on Friday (Nov. 22) over a compromise on stockholding programs for food security purposes. The Indian government was quoted in press reports late last week as saying it could not adhere to the compromise worked out on Nov. 19, although it has not formally conveyed that position in Geneva at that time, sources said.

However, sources said India took a hard line on trade facilitation over the weekend, and some speculated that India sought to provoke confrontation and stalemate in that area instead of facing the consequences of rejecting the food security compromise. Pakistan had registered objections early last week due to its fears that India would use food stockholding programs to dump cereals in its markets, particularly rice (Inside U.S. Trade, Nov. 22).

On TPP, chief negotiators on Nov. 24 concluded a six-day meeting in Salt Lake City with “significant progress,” according to USTR. At the round, the U.S. fleshed out its ideas for how to handle intellectual property (IP) protections for medicines. USTR is floating the idea of two tiers of obligations, with a higher standard of protection for high-income countries and a lower standard for low-income countries.

The U.S. also wrestled with the sensitive issue of footwear tariffs, which seeks to address a key demand by Vietnam. According to USTR, negotiators were able to resolve a “substantial” number of outstanding issues in Salt Lake City, including on IP, cross-border trade in services, state-owned enterprises, investment, financial services, sanitary and phytosanitary issues and government procurement, legal issues, and rules of origin.

Aside from Bali, the WTO is also in the news with a ruling on the EU's ban on seal products. In a report made public today (Nov. 25), the WTO ruled that the ban met the obligations of the Agreement on Technical Barriers to Trade not to be more trade restrictive than necessary to meet the EU's legitimate objectives on animal welfare. The U.S. was one of several third parties in the case.

But the report is a mixed ruling in that it also found against the EU for violating its Most Favored Nation (MFN) and national treatment obligations because the ban was found to discriminate against Canada and Norway. It also ruled that these violations could not be justified under Article 20 of the General Agreement on Tariffs and Trade (GATT) because they are applied in a manner that constitutes an “arbitrary and unjustified discrimination where the same conditions prevail or a disguised restriction on international trade."

The Canadian government responded to the public release of the ruling saying that it will appeal to the WTO Appellate Body any findings that would allow the EU's ban to continue.

“The WTO panel confirmed Canada’s long-standing position that the EU ban is discriminatory and treats Canadian seal products unfairly. However, the panel also took the view that such a ban can be justified due to some of the public’s concerns regarding seal harvesting,” Trade Minister Ed Fast said in a statement issued on his behalf and on behalf of several other ministers.

“Canada remains steadfast in its position that the seal harvest is a humane, sustainable and well-regulated activity. Any views to the contrary are based on myths and misinformation, and the Panel’s findings should be of concern to all WTO members.”

Amidst the push for a Bali package, WTO members still found the time to hold a session of the Dispute Settlement Body today. The DSB established the first dispute settlement panel involving Russia, hearing the EU's complaints over a Russian auto recycling fee that the EU claims discriminates against foreign auto imports over domestic Russian cars.

In the DSB meeting, the EU acknowledged that Russian President Vladimir Putin has signed into law changes to the recycling fee, but said it needed more information about how these changes would be implemented. In seeking the panel, the EU said it would pursue the case in the WTO until it was satisfied that Russia has addressed its complaints (Inside U.S. Trade, Oct. 18).

Also at the meeting, Mexico acted on its complaints that the U.S. has failed to comply with a WTO ruling on its “dolphin-safe” tuna label requirements and made its initial request for a compliance panel. The U.S. rejected that first request, as it is entitled to do, but Mexico could raise it at the next DSB meeting, which is slated for Jan. 20. At that point, the U.S. cannot block the panel request.

The U.S. noted that it has complied with the Appellate Body ruling by issuing a regulation that expands dolphin-safe labeling requirements to tuna caught in oceans other than the eastern tropical Pacific Ocean (ETP), where Mexico primarily fishes for tuna.

But Mexico has taken the position that the rule would still make it harder for tuna caught by large "purse seine" vessels to receive the dolphin-safe label if they made their catch in the ETP rather than in a different ocean.