Alerts & Updates 17th Jun 2022

The WTO’s MC-12: Key outcomes and highlights

Authors

Sanjay Notani Partner | Mumbai
Parthsarathi Jha Partner | New Delhi | Noida
Naghm Ghei Principal Associate | Delhi NCR

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  • Introduction

    The much-awaited 12th Ministerial Conference of the World Trade Organization took place from 12 to 16 June 2022, resulting in a package of declarations and decisions on a variety of issues. This update highlights the key outcomes of MC-12 from the Indian perspective.

  • E-Commerce

    With respect to e-commerce, Members agreed to maintain their current practice of not imposing customs duties on electronic transmissions until MC-13, which is expected to be held by 31 December 2023. Members also committed to reinvigorating efforts under the Work Programme on Electronic Commerce and intensify discussions on the moratorium including with respect to its scope, definition, and impact on customs duties.[1]

    The possibility of an end to the moratorium, had been a key concern for India, which has long viewed the moratorium as a loss of revenue for developing countries. However, it appears that a conclusion to the issue is likely to take significant time going forward. Despite the moratorium having been in place since 1998, little progress has been made to resolve outstanding questions including the scope of what constitutes an “electronic transmission” to begin with. The draft declaration leaves open the possibility for further extension of the moratorium past 31 March 2024, if Members so decide. The tussle between emerging economies and the established data giants in developed countries over such duties will likely continue. Thus, significant efforts and deliberations in the interim between MC-12 and 13 will be required if a conclusive decision is to be reached before the end of the year.

  • Food Security

    In the realm of food security, Members formally adopted the Draft Ministerial Declaration on Emergency Responses to Food Insecurity and Draft Ministerial Declaration on World Food Programme Food Purchases Exemption from Export Prohibitions or Restrictions. According to these declarations, any emergency measures introduced to address food security concerns shall minimize trade distortions as far as possible; be temporary, targeted, and transparent; and be notified and implemented in accordance with WTO rules.[2] Members imposing such measures are also required take into account their possible impact on other Members, including developing countries, and particularly least-developed and net food-importing developing countries. Further, such export prohibitions or restrictions on foodstuffs shall not extend to foodstuffs purchased for non-commercial humanitarian purposes by the World Food Programme.

    Crucially, the decision makes an exception for measures adopted to ensure domestic food security in accordance with the relevant provisions of the WTO agreements.[3] India had previously been opposed to the idea of a blanket exemption of any kind in relation to such export restrictions, and this carve out may address some of India’s concerns from a food security perspective. Having recently banned the export of wheat over food security concerns, India may continue to take similar measures in the future. However, India may need to be cognizant of the need for transparency and timely notification at the WTO while taking such measures. Moreover, the declaration is likely to attract greater scrutiny from trading partners in the future for such measures taken in the name of food security and which digress from the exemption, to determine whether they are indeed in line with WTO rules.

    Separately, India had been pressing for a permanent solution to the issue of public stock holding of grains for food security programmes and to address the needs of low income and resource poor farmers in developing countries. However, no consensus appears to have been reached on this issue and this will likely continue to serve as a key point for negotiations carrying on into MC-13.

  • Intellectual Property Waivers

    After much advocacy from Members such as India, a decision has been reached on the TRIPS waiver for COVID-19 vaccines through a Draft Ministerial Decision on the TRIPS Agreement. As per the Declaration, eligible Members may limit the rights provided for under Article 28.1 of the TRIPS Agreement by authorizing the use of the subject matter of a patent required for the production and supply of COVID-19 vaccines without the consent of the right holder to the extent necessary to address the COVID-19 pandemic.[4] All developing countries are eligible for this waiver. However, developing country Members with existing capacity to manufacture COVID-19 vaccines (which includes India) have been encouraged to make a binding commitment not to avail themselves of this waiver, thereby seeking to limit the waiver to a certain extent. Such patent rights may be limited through any instrument available under the law of the Member including executive orders, emergency decrees, government use authorizations, and judicial or administrative orders, whether or not a Member has a compulsory license regime in place. For the purposes of transparency, Members are required to communicate all such measures to the Council for TRIPS as soon as practicable after their adoption.

    India had been pushing for diagnostic and therapeutic goods to be included within the realm of the waiver, however, Members have decided to park the issue for further discussion and agreement to be completed within 6 months from the issuance of the declaration.

  • Fishery Subsidies

    Members have arrived at an agreement on the longstanding negotiations relating to the fisheries subsidies aimed at eliminating subsidies on Illegal, Unregulated and Unreported (IUU) fishing activities.[5] India and other developing nations had been advocating for special and differential treatment for developing countries in relation to elimination of subsidies.

    In this regard, Article 5.1 of the draft agreement that was being negotiated placed a blanket  prohibition on subsidies to fishing or fishing related activities that contribute to overcapacity or overfishing and provided an illustrative list of the types of such subsidies, including subsidies to construction, acquisition, modernization, renovation or upgrading of vessels, subsidies to the purchase of machines and equipment for vessels, subsidies to the purchase/costs of fuel, ice, or bait, etc. The draft agreement also specified a transition period of seven years for developing nations during which they will be able to continue providing such subsidies, subject to them meeting certain conditions (including with respect to their share in the global volume of marine production). This was in contrast to the 25-year transition period that India had been advocating for.

    The draft agreement also prohibited the grant of subsidies for fishing or fishing related activities regarding an overfished stock as well as illegal, unreported and unregulated (IUU) fishing or fishing related activities in support of IUU fishing. Again, developing country members are allowed a two-year transition period for these kinds of subsidies (subject of course, to certain conditions laid down in the agreement).

    This had raised concerns among members that the text disciplined small-scale fishers unfairly compared to large scale fishers in developed countries, by placing numerous conditions on the use of special and differential treatment flexibilities, a point that India has been repeatedly making during the course of negotiations. As a result, the provision relating to overfishing was changed to read that “no Member shall grant or maintain subsidies provided to fishing or fishing related activities outside of the jurisdiction of a coastal Member or a coastal non-Member and outside the competence of a relevant RFMO/A”, thereby significantly limiting the prohibition, while the provisions for a 7-year transition period were deleted altogether. The transition period for IIU fishing and overfished stock were continued. As a result, the complete prohibition on subsidies for fisheries, is currently limited to illegal, unreported, unregulated fishing, something that is not provided in India.

  • Conclusion

    The Indian Government has expressed its satisfaction with the outcome of MC-12 negotiations, having played a key role in pushing negotiations through. India has successfully navigated the issue relating to food security and patent waivers for vaccines and is reported to have been instrumental in pushing through a conclusion on fisheries as well.

    Indeed, many are viewing the adoption of concrete decisions on various pertinent issues as a significant turning point for the WTO, which had long been vilified for the paralysis of its negotiating wing. Hopes are now high that the impetus provided by the outcome of MC-12 will continue, resulting in much more concrete decisions to come. Going forward, India is expected to play a key balancing role between safeguarding that future decisions consider the needs of developing country Members on the one hand and ensuring that decisive action is taken where needed, on the other.

  • References

    [1] Work programme on electronic commerce – Draft Ministerial Decision of 16 June 2022, WT/MIN(22)/W/23.
    [2] Draft Ministerial Declaration on the Emergency Response to Food Insecurity – RevisionWT/MIN(22)/W/17/Rev.1
    [3] Draft Ministerial Decision On World Food Programme Food Purchases Exemption From Export Prohibitions Or Restrictions 16 June 2022, WT/MIN(22)/W/18.
    [4] Ministerial Conference Twelfth Session Geneva, 12-15 June 2022, Draft Ministerial Decision On The Trips Agreement Revision WT/MIN(22)/W/15/Rev.2
    [5] Agreement on Fisheries Subsidies – Draft Ministerial Decision of 17 June 2022, WT/MIN(22)/W/22

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice. This document is not intended to address the circumstances of any individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.