The legality of plurilateral e-commerce agreements and its implications for “WTO2.0”

The legality of plurilateral e-commerce agreements and its implications for “WTO2.0”

After a COVID-19 hiatus, we hope to resume publishing more regular articles on digital trade on this blog as discussions continue to expand.

The WTO “Joint Statement Initiative on E-commerce” (E-commerce JSI) may not have been concluded or formalised during the bi-annual Ministerial Conference (MC12) in June, but it remains very much at the forefront of discussions on digital trade.

As the previous blog on the JSI negotiating positions summarised, one of the major questions about this negotiation is not about the content, but process and if such a plurilateral agreement is legal within the WTO system. Since then, this debate has intensified, and this blog will outline some of the discussions.

Implementing an e-commerce JSI

WTO agreements are decided by consensus, meaning they will not come into force unless they are agreed upon by all 164 WTO member states. Plurilateral agreements, where only a subset of members are involved, have been incorporated into the WTO in the past, but rarely and only under very specific circumstances.

The E-commerce JSI discussions have been notable for the fact that several WTO members have decided not to join negotiations. So for this agreement, a key question has is how it could be legally implemented within WTO rules and regulations.

What is at stake was illustrated in strongly worded communication from India and South Africa in March 2021. These two countries, who have been outside the JSI, suggest that it would break the “Marrakesh Agreement” which defines major WTO rules.

Similar sentiments have been echoed in more detailed analysis, suggesting that E-commerce JSI negotiations might face barriers

JSI parties are likely to face challenges if they are to consider negotiating the JSI as a plurilateral agreement…..consensus from the WTO membership is likely to be required. Garnering consensus has not been possible to date and would be expected to be onerous in the future

However other nations, including the lead negotiators of the JSI (Australia, Singapore, Japan) remain convinced that they can push such an agreement through in the future.

More insight on how they see this happening comes from a major source of guidance – an opinion from Geneva-based law firm King & Spalding written by Hamid Mamdouh. (Mamdouh is a former Director at the WTO, and a trade negotiator from Egypt once going as far as standing as a reform candidate for the WTO director-general).

Although this opinion [not available publicly but with some copies online] argues that plurilateral negotiations are consistent with WTO rules, its major message is that the negotiations will be

…political in the first order….WTO rules were made by Members and can be changed by Members.

The above quote is crucial. It suggests that the path for the e-commerce JSI is likely to be linked to a change in the rules at the WTO (this is more overtly expressed in Mahdouh’s presentation at the 2021 WTO public forum).

This provides the basis for the JSI to continue to negotiate. There is an expectation of the need for (unspecified) political actions needed in the future for the e-commerce JSI to come into force.

The WTO 2.0

The idea might initially seem far-fetched. No matter how important digital trade is, it might seem unlikely that such a large amount of political capital would be spent on ensuring that the JSI is ratified. But the e-commerce JSI is not the only plurilateral agreement emerging.

Over recent years, other areas of plurilateral negotiation have been revived or sprung up in areas such as domestic regulation and investment facilitation.

Some see such JSIs as the heart of how a future WTO would work (the so-called WTO 2.0). Stalled agendas would be pushed forward through a set of plurilateral agreements at the WTO, with E-commerce as just one strand of a broader agenda.

These pluilateral directions are also becoming visible in discourses in more liberal countries, with arguments being built as to how this reform can be beneficial to all nations. In the UK for instance, a recent report on the future of plurilateral agreements by the UK Trade Policy Observatory, a government-sponsored policy research group, argues that such initiatives would be beneficial even for developing countries

…once they [developing countries] have the security and ability to stand aside from new agreements, the nervous or indifferent might no longer feel the need to veto them.

This would reduce the ability of ‘the system’ to bring laggards along i.e., to muscularly encourage reluctant parties to liberalise – but equally, it would greatly reduce the incentive for those laggards to hold everybody else back.” (p6)

Opposing voices

For those who oppose the JSIs, these future directions are problematic because they move towards a WTO where consensus is not required.

In a response to the King & Spalding option, Auckland-based legal and trade scholar Jane Kelsey discusses these ideas in some detail. In her paper, she examines the legal opinions related to JSIs. But more critically, she pushes back on the idea that the JSIs should instigate political actions to move forward.

[Actions]…must be legal in the first order….[and going outside this]….would seriously undermine another foundational tenet of the WTO…

In contrast to this bringing benefits to less powerful nations, Kelsey argues they might not be represented within new rules, if consensus is not necessary.

…if the JSIs are legitimised, the voice of the Global South, already foresaken in the stagnant Doha round, will become even more marginalised in the WTO.

The positions gives just a flavour of the recent debates surrounding the e-commerce JSI and how it links this into a broader discussion about the future of the WTO.

The legal question about how to implement a plurilateral e-commerce JSI is increasingly entwined within broader discussions about plurilateral agreements at the WTO. How these questions pan out appear to be core to how the WTO will operate in the future. Will the WTO operate within new remits defined by plurilateral groups of powerful nations, or will a new direction or consensus be found?

Image source: “World Trade Organization: MC12 – Day 3 – 14 June 2022” (CC BY-SA 2.0)

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