GHY Tradelines

(STR Trade Report)

As previously reported, the government of Canada released earlier this month a list of U.S. goods that could be subject to retaliation in an ongoing dispute over U.S. country of origin labeling regulations for meat. Canada contends that the final rule issued by the U.S. Department of Agriculture’s Agricultural Marketing Service amending the country of origin labeling (COOL) requirements for muscle cut covered commodities to provide consumers with more specific information merely perpetuates a “protectionist policy” that is “severely damaging to Canadian industry and jobs.” Accordingly, Canada has signaled its intention to pursue “a fair resolution of this issue through the WTO.”

In this regard, the U.S. and Canada on June 13 issued a set of agreed procedures under Articles 21 and 22 of the WTO Dispute Settlement Understanding regarding the COOL dispute. Article 21 relates to surveillance of implementation of recommendations and rulings while Article 22 involves compensation and the suspension of concessions. Highlights of these procedures are provided below.

- If Canada considers that the U.S. adopted a measure to comply with the recommendations and rulings of the Dispute Settlement Body in the case at hand that is inconsistent or there is disagreement between the parties as to the existence of a measure taken to comply, Canada may request the establishment of a panel at any time.

- Canada is not required to hold consultations with the U.S. prior to requesting the establishment of a panel.

- The parties shall cooperate to enable the panel to circulate its report within 90 days of its establishment, excluding such time during which the panel’s work may be suspended.

- Either party may request the DSB to adopt the report of the panel at a DSB meeting held at least 20 days after the circulation of the report unless either party appeals the report to the Appellate Body.

- In the event of an appeal, the parties shall cooperate to enable the Appellate Body to circulate its report to the members within 90 days from the date of notification of the appeal.

- In the event that the DSB rules that a measure taken to comply does not exist or is inconsistent with a covered agreement, Canada may request authorization to suspend the application of concessions or other obligations under the covered agreements to the U.S. pursuant to DSU Article 22. The U.S. shall not assert that Canada is precluded from obtaining such DSB authorization on the ground that the request was made outside the 30-day time-period specified in DSU Article 22.6.

- If Canada requests authorization to suspend the application of concessions or other obligations under the covered agreements to the U.S., the U.S. may object to the level of suspension of concessions or other obligations and/or claim that the principles and procedures set forth in DSU Article 22.3 have not been followed, thereby referring the matter to arbitration.

- The parties will cooperate to enable the arbitrator to circulate its decision within 60 days of the referral to arbitration.
 

(STR Trade Report)

A senior U.S. trade official warned last week that the World Trade Organization is again in danger of failing to conclude a trade liberalization agreement at this December’s ministerial meeting in Bali, Indonesia. With the long-running Doha Round negotiations at an impasse, WTO members are working to craft a more limited agreement covering trade facilitation, agriculture and least-developed country issues, but even that is proving to be difficult.

Just a month ago, U.S. Ambassador to the WTO Michael Punke told attendees at a May 29 meeting of the Organization of Economic Cooperation and Development, more than a dozen WTO members “came forward in a spirit of compromise, tabling more than 50 specific examples of new flexibility” in the ongoing negotiations. There was hope that “we could start with modest steps, establish traction over the course of May, build mutual confidence, and remove some of the ground clutter that might clear a path to bigger results.” Today, however, “we see an opportunity to make modest progress has been frittered away.”

Punke blamed the situation on unnamed WTO members who are “holding hostages in this negotiation” by “refusing to allow progress in one area, trade facilitation, until they get all they want on agriculture.” He asserted that to be able to conclude a trade facilitation agreement this year “there must soon be a dramatic reduction in the nearly 600 brackets [signaling areas of disagreement] currently littering the trade facilitation text.” He added that current proposals from various emerging and developing economies on agriculture are overly ambitious and need to be scaled back if there is to be an agreement at the ministerial meeting.

Punke also reiterated his concern about the impact of a potential failure this year on the WTO as a whole. “If Bali succeeds, including a high-quality trade facilitation agreement, stakeholders will see that the WTO is once more a functioning forum for negotiations” and “it will be possible to make a credible case that more difficult Doha Development Agenda issues can be tackled,” he said. “If Bali fails … many countries will continue their efforts to create new trading opportunities bilaterally and plurilaterally” and “the WTO as a negotiating body will continue to fall behind.” He therefore called for all WTO members “to make one last-ditch, good-faith effort to save the Bali package.”

Press reports indicate that following Punke’s remarks other trade ministers participating in a “mini-ministerial” on the sidelines of the OECD meeting agreed to intensify technical discussions on trade facilitation in an effort to remove the existing brackets in the draft agreement text. Ministers are expected to evaluate progress by the beginning of August.
 

(Troy Marshall – Beef Magazine)

Last week, USDA issued its rule on mandatory country-of-origin labeling (COOL). Of course, no one was surprised by the final version, but I think most were amazed. Besides small changes like using the word “harvested,” the only real surprise was that USDA essentially did nothing to address the concerns cited by last year’s World Trade Organization (WTO) ruling.

As you might recall, WTO ruled against the U.S. in a complaint filed by Canada and Mexico regarding the fairness of mandatory COOL. WTO ruled that the law violated provisions of the WTO’s agreement on Technical Barriers to Trade, and gave the U.S. a May 23 deadline for bringing mandatory COOL into WTO compliance.

I love the fact that USDA actually had the nerve to defy WTO, while presumably also recognizing that the U.S. must belong to WTO, and that fair trade and a level playing field benefits everyone. Now, it appears that it will just be a matter of time before we learn what the penalties will be, and how damaging they will be to the industry. Read more here.

Related: Cattle Crisis? (Lethbridge Herald)
 

(Alex Binkley – Manitoba Cooperator)

Canada will go back to the World Trade Organization — rather than impose sanctions — to try and get Washington to change or scrap its country-of-origin labelling law rules that discriminate against Canadian beef and pork.

“There is a WTO process we intend to follow that takes time,” said Agriculture Minister Gerry Ritz. “We will comply with the process regardless of how long it takes.”

Ritz has previously suggested Ottawa was ready to slap retaliatory tariffs on American products coming into Canada, and he didn’t rule out doing that in future. Read more here.
 

(Max Hall – PV Magazine)

Following the failure of an appeal to the World Trade Organization (WTO) decision against the domestic content requirement of its renewable energy FIT scheme, the Ontario Energy Department has announced plans to remove the offending provision.

Canadian national newspaper the Globe and Mail has reported that the province will remove the stipulation that solar and wind installations must be at least 50 to 60% manufactured in the province to qualify for the premium FIT rate. Read more here.
 

(FAITC)

The Honourable Ed Fast, Minister of International Trade and Minister for the Asia-Pacific Gateway, today concluded his active participation in meetings with counterparts from the Organisation for Economic Co-operation and Development (OECD) and the World Trade Organization (WTO) in order to advance Canadian interests.

“As a government that has put Canada at the forefront of trade liberalization, we believe that trade and investment represent the twin engines of growth for the global economy,” said Minister Fast. “My message to my counterparts this week has been clear: there is no better creator of jobs, growth and long-term prosperity than freer and more open trade. In order to sustain the global economic recovery, our goal as legislators must be to turn border bottlenecks into global gateways.”

While in Paris, Minister Fast also welcomed the joint OECD-WTO report on global value chains, which will help governments gain a better understanding of the interconnectedness of trade and the world economy. Minister Fast also met with WTO Director General-designate Roberto Carvalho de Azevêdo and made clear Canada’s belief that meaningful progress on trade liberalization must be made at the WTO ministerial conference, scheduled to take place in December 2013 in Bali, Indonesia.

“The consequences of a lack of meaningful progress at Bali cannot be overstated,” said Minister Fast. “Essential to the credibility of the multilateral trading system itself is the ability to update rules and negotiate new commitments. Failure to deliver in Bali may confirm to the world that after 12 years of trying, the broader Doha agenda is simply not viable.”

OECD members account for approximately 64.5% of the world’s GDP, 58.5% of total world merchandise trade and 18% of the world’s population. Nine of Canada’s top 10 trading partners are members of the OECD (the exception being China).

Canada’s trade with OECD countries accounts for more than 80% of its total trade – amounting to $748.8 billion in 2012, up 2.6% from 2011.

Canada also welcomed the decision to invite Colombia and Latvia to begin the process toward OECD membership in 2013, and to consider membership for Costa Rica and Lithuania in 2015.
 

(Reuters)

A deal among the United States, China, the European Union and nearly two dozen other countries to eliminate duties on billions of dollars of technology products could be reached in the next two months, U.S. technology groups said on Thursday.

“We’re quite optimistic we’re going to get this across the finish line by the end of July,” John Neuffer, a senior vice president at the Information Technology Industry Council, told reporters in a phone call from Geneva, where some members of the the World Trade Organization met this week for talks.

Related: U.S. Decries ‘Hostage-Taking’ in Trade Talks, Sees Hope on IT Deal (Reuters)
 

(The Canadian Press)

The federal government is threatening “retaliatory measures” against the United States in a dispute over meat-labelling rules that Ottawa and the World Trade Organization consider discriminatory.

The U.S. government has announced new regulations on so-called country of origin labelling that would track beef and hogs through the meat processing and distribution systems.

Canada objects to the labelling system on the grounds that it is costly, burdensome and will lead to the “disintegration” of the North American supply chain.

“Canada is extremely disappointed with the regulatory changes put forward by the United States today,” Agriculture Minister Gerry Ritz and Trade Minister Ed Fast said in a joint release Thursday. Read more here.

Related:

• U.S. Revises Meat-Labelling Rules to Satisfy WTO (Globe & Mail)

• FAITC News Release
 

(Bridges Weekly)

Agriculture committees in the US Senate and the House of Representatives cleared their respective versions of a potential 2013 Farm Bill last week, marking the first major advance in a process that had stalled last year. However, with the full Senate now in the midst of debating the legislation, some members of the chamber are raising questions on the impact of the new bill on trade and whether its provisions will indeed be WTO-compatible.

Although the proposals under discussion have ostensibly cut trade-distorting counter cyclical payments – transfers to farmers when prices fall – a host of new programmes appear poised to take their place. The Senate, for instance, has proposed two schemes in its version of the Farm Bill: Adverse Market Payments (AMP) and Agricultural Risk Coverage (ARC). Representatives in the House, meanwhile, are assessing the merits of Price Loss Coverage (PLC) and the Revenue Loss Coverage (RLC). Read more here.
 

(World Bulletin)

The WTO ruled in late June last year that a U.S. program for labeling imported meat unfairly discriminated against Mexico and Canada.

The United States is not respecting a World Trade Organization (WTO) ruling on meat labeling, Mexico’s Agriculture Minister Enrique Martinez said on Tuesday, saying it was hurting local industry.

The WTO ruled in late June last year that a U.S. program for labeling imported meat unfairly discriminated against Mexico and Canada, putting pressure on the United States to bring the scheme in line with global country-of-origin meat-labeling rules.

“We can’t understand why once the very WTO … issues a ruling, the government of the United States does not respect it,” Martinez said.

“We have talked with beef producers in the United States and Canada, and totally agree this is an arbitrary decision and means discrimination against Mexican beef, which we will never agree with and as a government will defend against.” Read more here.
 

(Charles Kenny – Bloomberg)

Over the past few weeks, much has been made about the transatlantic trade pact President Obama proposed in his State of the Union address, as well as the announcement that Japan will join the Trans-Pacific Partnership, which the U.S. hopes to wrap up this year. Largely overlooked, however, was another development in the area of trade: the leadership contest for the post of the World Trade Organization’s director general. The winning candidate, Brazil’s Roberto Carvalho de Azevêdo, managed to secure the closed-door consensus that passes for a selection procedure with milquetoast statements designed to offend no one.

The lack of excitement about Azevêdo’s appointment reflects the extent to which the WTO has been marginalized in favor of trade regionalism. That’s a real problem for the U.S.: Regional approaches can’t handle a lot of the country’s most significant trade issues. The World Trade Organization, meanwhile, remains vital to national and global economic prospects. Read more here.
 

(MercoPress)

Brazil’s Roberto Azevedo vowed to revive the deadlocked World Trade Organisation, as he was confirmed this week as the incoming leader of the body which sets the rules for global commerce.

“I have been working in and with this organisation continuously for the last 15 years,” Azevedo, still officially Brazil’s WTO ambassador, told the 159-country organisation’s assembly which approved him by consensus as its next leader.

“I have seen it in much better days. I pledge to all members that I will work with them, with unwavering and steadfast determination, to restore the WTO to the role and pre-eminence it deserves and must have,” he said. Read more here.
 

(Wall Street Journal)

The trade body picks a Brazilian who helped to scuttle the Doha talks.

A depressing rule of international institutions is that whatever their founding intentions they inevitably evolve to serve themselves or their worst members more than their original cause. The latest example is the World Trade Organization, which began as a rule-making body to promote free trade and has drifted toward protectionism when it isn’t useless.

That drift was illustrated last week with the election of Brazilian Roberto Azevedo as new WTO director-general. The 55-year-old career diplomat beat out Mexican economist Herminio Blanco, who had U.S. support and has a reputation as a more assertive free trader. Mr. Azevedo is by all accounts a charming diplomat who won because of support among developing nations.

Yet he won that support in large part by helping to scuttle the Doha round of free-trade talks. Mr. Azevedo was Brazil’s chief Doha negotiator, and opposition to freer trade in manufacturing by Brazil, India, South Africa and other emerging economic powers made a worthwhile Doha deal impossible. It’s now moribund. Read more here.
 

(Deutsche Welle)

Ahead of the official announcement, the Brazilian government has named Roberto Azevedo as the new head of the World Trade Organisation (WTO). He beat the candidate Washington preferred for the job.

The result of the WTO selection process was meant to be secret until a formal announcement on Wednesday, but the Brazilian government confirmed on Tuesday that Azevedo, 55, won by a wide margin.

“For Brazil it is clear that, given his commitment and experience, he would be able to lead the organization toward a path of a fairer and more dynamic global economic order,” Brazilian President Dilma Rousseff said in a statement.  “This is not a victory for Brazil, nor for a group of countries, but for the World Trade Organisation.”

Azevedo, a career diplomat who had been Brazil’s ambassador to the WTO since 2008, will take over from France’s Pascal Lamy, who steps down on August 31. The Brazilian will become the first Latin American to take charge of the 640-strong Geneva secretariat responsible for facilitating global trade agreements. Read more here.
 

(The Star)

Canada has lost an appeal at the World Trade Organization in a landmark case over incentives for electricity producers, the European Union said on Monday, ahead of the official publication of the appeal decision.

Japan and the European Union brought the case over a scheme intended to promote green energy in the province of Ontario.

They said the incentives were illegal because they discriminated against foreign firms, a complaint that was upheld by a WTO adjudication panel in December 2012.
 

(AFP)

China must fall into line by July 31 with a World Trade Organisation order to change its restrictive policy on certain steel imports from the United States, an arbitrator said Friday.

A WTO dispute settlement hearing decided that Beijing had failed to prove why it needed more time to adapt its rules in order to respect a decision handed down by global commerce’s rule-setting body in November. [...]

The dispute dates back to September 2010, when Washington accused China of breaching trade rules by not providing sufficient evidence that anti-dumping duties were needed on US imports of electrical steel used in the power sector. Read more here.
 

(William New – IP Watch)

The WTO announced on 26 April that the field had shrunk from five candidates down to two, based on the views of the 158 WTO members.

The remaining candidates are Herminio Blanco of Mexico and Roberto Carvalho de Azevêdo of Brazil. Blanco is coming from the private sector, and is the former trade minister and trade negotiator for Mexico. Carvalho de Azevêdo is Brazil’s ambassador to the WTO as well as to the World Intellectual Property Organisation (WIPO), the UN Conference for Trade and Development (UNCTAD), and the International Telecommunication Union (ITU).

The next round of consultations with members will run from 1 to 7 May. The outcome is expected to be announced on 8 May. Read more here.
 

(AFP)

US trade representative says it can agree that food security is a valid issue to be dealt with under the WTO talks

The US on Tuesday gave some ground on the contentious issue of food security in world trade talks in hopes of gaining at least some progress toward a limited new World Trade Organization (WTO) pact this year.

The US trade representative, which has been pressing for freer trade in food in hopes of boosting US exports, said it could agree that food security is a valid issue to be dealt with under the WTO talks.

The issue, which had put especially the US and India at loggerheads, has threatened to stymie the negotiations toward even a limited new WTO pact targeted for December’s WTO ministerial meeting in Bali. Read more here.
 

(Carla A. Hills – NYT)

The opening of global markets — starting in 1947 with the first round of trade negotiations among 23 nations and the creation of the General Agreement on Tariffs and Trade (GATT), through the creation of the World Trade Organization in 1995 — caused international trade to explode and standards of living for nations rich and poor to soar.

Economic studies show that the opening of global markets since the end of World War II has added about $9,000 of additional wealth for the average American household. Developing nations have also gained from global trade. On average, poor countries that opened their markets to trade and investment have grown more than three times faster than those that kept their markets closed. No country has prospered by sealing itself off from global economy. Read more here.
 

(Bridges Weekly)

Governments are facing a series of “convergence challenges” on the future of the international trading system, according to a report issued on Wednesday by a 12-member panel convened by WTO Director-General Pascal Lamy.

The report – which was issued under the Director-General’s own responsibility – marked the conclusion of a process that was announced at the global trade body’s 2011 ministerial conference. The panel that prepared the report was made up of 12 members from the business sector and civil society, and had been tasked with identifying 21st century trade challenges. […]

The report – which takes a medium to long-term view of the trading system’s challenges – provides “food for thought” for both WTO members and other stakeholders, the Director-General told a packed conference room at the organisation’s headquarters in Geneva. Read more here.