On May 28th last week, the trade ministers of the Group of Seven (G7) issued a joint statement (hereinafter referred to as "the statement"), covering several areas of the multilateral trading system with the WTO as its core. This is the position document of the seven Western countries on the WTO so far, and it is also a relatively comprehensive preparation for the agenda of the 12th WTO Ministerial Conference at the end of this year.

Although the statement involves some issues of common interest of WTO members, such as the exemption of COVID-19 vaccine, fishery subsidy discipline, domestic regulation negotiations on trade in services, investment facilitation, e-commerce negotiations, etc., the statement favours one over the other in the following aspects, which fully reflects the self-interest oriented characteristics of the seven countries in the multilateral trading system.

Dispute settlement mechanism

The crisis issue of the dispute settlement mechanism is the concern of a large number of member states, including China, but the statement has passed by without any specific claims.

In fact, the main problem or crisis of the WTO in recent years is the weakening of its dispute settlement mechanism.

The dispute settlement body (DSB) under the WTO is the core of the rules of the multilateral trading system. It handles international trade disputes just like domestic courts handle disputes. "If a WTO member believes that another member has violated WTO rules and harmed its trade rights and interests, it may bring a lawsuit against the latter in the DSB.". If initial efforts to resolve disputes through mediation fail, the DSB will appoint a panel to investigate and hear the case and make a decision. If either party is not satisfied with the Panel's decision, it may refer the matter to the Appeals Body (AB). AB's decision is final and binding.

The judges of AB are appointed by consensus among WTO members for a term of four years (up to one consecutive term). At any time, AB may have a maximum of seven members, three of whom constitute a quorum for hearing disputes.

For more than a decade, the United States has been dissatisfied with the decision of AB to file a lawsuit against it. Therefore, starting in 2011, it has consistently rejected the renewal of AB members' first term of office and the appointment of others to replace them. The cumulative impact of the veto power is that the total number of AB members fell to two on December 11, 2019, one less than the quorum for the hearing.

Although the United States has expressed dissatisfaction with the operation of the DSB, so far it has not made any specific proposals, leaving the prospects for the DSB to return to track unclear.

Unfair Trade Practices

The statement calls on the WTO to negotiate strict international rules regarding unfair trade practices under so-called market distortions, including subsidies, economic behavior of state-owned enterprises, and forced technology transfer, as well as transparency in so-called market distorting policies and behaviors. This is actually pointing to China. These issues have been involved in the Sino US trade negotiations and the Sino EU investment agreement negotiations. The statement clearly aims to multilateralize bilateral issues.

On bilateral occasions, in the Comprehensive Investment Agreement between China and the EU, the two sides committed to prohibiting forced technology transfer, making subsidies fully transparent, and stipulating the obligations of state-owned enterprises to regulate their conduct in accordance with commercial rules. In the multilateral context, in fact, among the aforementioned issues, there are specific agreements in the WTO to regulate subsidies. The disciplines of state-owned enterprises in trade also have the corresponding rules of Article 17 of the General Agreement on Tariffs and Trade, and transparency has specific requirements in Article 10 of the General Agreement. Like other member states, China abides by these rules and disciplines, and in the event of disputes between other parties, it will resort to the dispute settlement mechanism of the WTO. This is a normal practice for the operation of WTO rules. The statement specifically proposes another rule on this topic, which is difficult for others.

In fact, the newly appointed Director General of the WTO, Ngozi Okonjo Ivera, warned the EU, Japan, and the United States more than a month ago that they "must demonstrate that they do not target China", otherwise their planned changes will encounter strong resistance. Ivera warned that as a member of the WTO - and a strong member - only any reforms accepted by China can be passed, and only if China is not targeted as a member of other countries, will China be more willing to participate in global trade reform.

In fact, subsidies in WTO member countries are very common. Global agricultural subsidies are approximately $1 trillion per year and could reach $2 trillion by 2030. China has stated that it would be more willing to discuss industrial subsidies if the negotiations also extended to the widespread agricultural subsidies in the West.

Labor issues

The statement emphasizes the relationship between trade, labor, and human rights, advocates promoting sustainable supply chains, providing decent work for workers, and eliminating child labor, forced labor, human trafficking, and modern slavery.

When the Uruguay Round was launched 35 years ago, Western countries also tried to incorporate trade and labor standards into multilateral negotiations, but they were resisted by developing countries. Due to labor issues, United Nations agencies, especially the International Labour Organization, have corresponding legal norms. By incorporating them into the WTO and linking them to trade, they are actually using trade to weaken the comparative advantage of labor in developing countries. As far as China is concerned, in the Comprehensive Investment Agreement between China and the EU, China undertakes to abide by its obligations under relevant international treaties and not to lower labor and environmental standards for the sake of protectionism and attracting foreign investment.

Plurilateral doctrine

The statement strongly advocates using a plurilateral approach to promote negotiations. The so-called "multi lateral" refers to the situation where it is impossible to promote the joint action of all WTO members, and a small number of members act on their own, negotiate on issues of common concern, negotiate and jointly implement them, and promote participation to other members. Over the past twenty years since the establishment of the WTO, Western countries have advocated and implemented plurilateral ism in the WTO, and have negotiated and will continue to negotiate a number of agreements. Obviously, multilateralism has weakened the multilateral system of the WTO and has been opposed by developing countries. India and South Africa regard plurilateral ism as a demon, "sucking oxygen" from the multilateral system, dividing and splitting the multilateral system, and undermining the initiation mechanism of multilateral negotiations.

Finally, the statement is only the position expressed by the seven Western countries, and it is not necessarily and impossible to include all of it in the agenda of the ministerial meeting at the end of the year. After all, there are the Group of Seven (G7) countries, as well as the Group of Twenty (G20) countries, including the G7 countries and China. The content of the ministerial statement of the seven countries is only an issue of concern to individual groups of countries, not a common concern of the Group of Twenty, let alone a common issue of the 164 member WTO. Seeking common ground while reserving differences and seeking common development are the wisest choices.

(This article is translated by software translator for reference only.)