Can schedules be brokered bilaterally, i.e. without consent of other WTO members, or do all WTO members have to ratify all WTO deals?
I am trying to understand if all WTO members will need to ratify schedules presented to the WTO by the UK for the post-Brexit interface, or if some members can ratify, while others demur?
The negotiation rules for such modifications are fairly complex. In order to avoid unnecessary consultations the GATT has roughly a 2-layer negotiation process, followed by a largely formal certification procedure. Three designations are given to countries involved in these:
Principal Supplying Interest (PSI):
There are two criteria that may be used to identify Members with a PSI: Criteria based on import shares: a Member has a PSI if it has had, over a reasonable period of time prior to the negotiations (usually three years), the largest share in the market of the requesting Member, or would have had it in the absence of discriminatory quantitative restrictions (Ad note to Article XXVIII of the GATT, para. 1.4); Criteria based on export shares: During the GATT times, Members could exceptionally be determined to have PSI whenever the modifications being sought affected trade which constituted a major part of the total exports of such Member (Ad note to Article XXVIII of the GATT, para. 1.5); This provision was developed further during the Uruguay Round, when it was agreed that a Member with the highest ratio of exports affected by the concession (i.e. exports of the product to the market of the Member modifying or withdrawing the concession out of a Member's total exports) shall be deemed to have a PSI if it does not already have an INR or a PSI as provided for in Article XXVIII:1 (Understanding on the Interpretation of Article XXVIII of the GATT 1994, para. 1). The objective of the new provision is to allow access to negotiating rights for a wider range of countries, particularly the small and medium-sized exporting Members.
Substantial interest (SI) Entitled to Consultations:
Article XXVIII provides explicitly that there is no precise definition of "substantial interest". It however clarifies that: Substantial interest should be understood as covering only those Members which have, or in the absence of discriminatory quantitative restrictions affecting their exports could reasonably be expected to have, a "significant share" in the market of the Member requesting to modify or withdraw the concession (Ad note to Article XXVIII of the GATT, para. 1.7). GATT practice: SI has normally been granted to those Members who accounted at least 10% of imports of the item for which modifications were being sought.
It is worth noting that the determination of Members with a "PSI" or a "SI" only considers trade in the affected product which has taken place on a MFN basis in a three year period. In other words, a PSI or a SI cannot be granted to Members whose exports are benefiting from preferential treatment from the Member requesting tariff modification (Understanding on the Interpretation of Article XXVIII of the GATT 1994, para. 3).
And then comes the negotiation process:
As mentioned above, a Member seeking to modify or withdraw a concession (e.g. increase a particular tariff binding) shall negotiate with Members having INRs and PSI with a view to agreeing on compensation in order to maintain "a general level of reciprocal and mutually advantageous concessions not less favourable to trade than that provided for in this agreement prior to such negotiations". Such compensation is negotiated between the parties primarily concerned and could consist, for example, in the reduction of bound tariff rate(s) applicable to another item or other items of interest to the INR holder and the Members with a PSI. In addition, requesting Members must carry out consultations with other Members having SI.
Although the terms used are different (i.e. negotiations vs. consultations), in practice, Members having SI have similar rights to those of INR holders and Members with a PSI. In most cases, negotiations conducted under Article XXVIII were successful and led to agreement (between parties primarily concerned) regarding the modification of concessions being sought and compensations made for the changes.
The procedural requirements for Article XXVIII renegotiations can be summarized as follows: [some less important ones omitted]
Once the relevant Members have been identified and their rights recognized, bilateral negotiations are conducted between the requesting Member and each of the Members having an INR or a PSI, as well as consultations with Members having SI. Upon completion of each bilateral negotiation, a joint letter should be submitted to the Secretariat including the following information: (a) concessions to be withdrawn; (b) bound rates to be increased; (c) reduction of rates bound in the existing Schedules; and, (d) new concessions on items not in existing schedules. Upon completion of all its negotiations the Member requesting the modification or withdrawal should send to the Secretariat a final report including the following information: (1) Members with whom Negotiations resulted in agreement; (2) Members with whom agreement was not reached; and, (3) Members with whom consultations were held.
The requesting Member holding successful negotiations pursuant to paragraph 1 will be free to give effect to the changes agreed upon in the negotiations as from the first day of the period referred to in Article XXVIII:1. In the case of negotiations under paragraph 4 or 5 of Article XXVIII, **as from the date on which the conclusion of all the negotiations have been notified to the WTO Secretariat. However, "formal effect" of such modifications have to be introduced into the Schedule through the 1980 rectification /modification procedures, which conclude with a "certification" by the Director General (see below). [...]
Regarding the renegotiation of concessions, the changes as agreed upon by interested parties involved in such negotiations, can be introduced in the national tariff schedule of the requesting Member right after the conclusion of negotiations, but further multilateral procedures are required in order to introduce the modification into the Member's WTO Schedule of concessions. A draft of such changes shall be communicated to the Director-General where possible within three months but not later than six months thereafter. The Director-General will then circulate the draft to all Members and if no objection has been raised by another Member within 3 months after circulation, the changes will be certified and be given formal effect. Objections to this type of amendment to a Schedule may only be raised on the grounds that the draft does not correctly reflect the modifications as agreed upon during such negotiations.
Now there is also a simpler WTO notion of rectification rather than modification of schedules:
one should distinguish the process of "modification" of tariff Schedules explained above from the procedure of "rectification" of the Schedule. The latter is limited to changes of a purely formal character that do not alter the scope of the concessions contained therein.
This has a simpler approval process that basically involves just circulating a draft previously certified by the director-general.
The UK appears to be trying to use this rectificatino route, but doubts have been raised as to whether that (avoiding the bilateral negotiations) needed for modification will actually work:
On 26 September 2017 a letter was sent to the UK and EU Ambassadors to the WTO by their counterparts from Argentina, Brazil, Canada, New Zealand, Thailand, USA and Uruguay. [...] For the avoidance of doubt the letter [...] also stated that:
“The modification of these TRQ access arrangements cannot credibly be achieved through a technical rectification. None of these arrangements should be modified without our agreement.” [...]
The EU realised that an approach based on simply asserting the split of TRQs would not work, and as reported on 25 April 2018, proposed a full renegotiation, based on WTO Article 28, for their schedules This was approved by Member States in June 2018. The UK Government has said it may follow suit if required for some TRQs, but asserting our new schedules remains the main plan. Secretary of State Liam Fox said recently that the EU reducing their TRQ requires a negotiation, but this is not required for the UK. Contrary to what he suggested, major agricultural countries remain opposed, and this is likely to mean a full negotiation. The UK submitted schedules to the WTO Secretariat on July 19, as the first step in the process.
But any WTO member can object to calling something a mere rectification (quoting again from the WTO book):
Modification vs. Rectification The GATT Contracting Parties adopted the 1980 Procedures for Modification and Rectification of Schedules of Tariff Concessions 27 (Decision on Rectification), which provides that changes resulting from formal modification or rectification could be certified by the Director-General if no objection is raised by any other Member within a 3 month period. This procedure is subject to the following conditions:
- The proposed rectification shall be limited to amendments or rearrangements which are of a purely formal character and which do not alter the scope of the concessions. The proposed modifications resulting from action under Article II, Article XVIII:7, Article XXIV:6, Article XXVII or Article XXVIII, shall be a correct reflection of the modification.
- If objections are raised (e.g. because another Member considers the change alters the scope of the concession) on any of these grounds, the Member wishing to modify / rectify its Schedule could end-up in Article XXVIII of the GATT 1994 renegotiations.
So unlike the mostly formal process of circulating a draft after negotiations in view of modifications (negotiations which need to be registered with the director-general, as detailed above), any country can nay the UK's request to call their changes a rectification. Which kinda begs the question why the UK even sent the draft as a rectification knowing that some countries have already expressed opposition to that route... unless I (and the author of that paper) missed some important developments.
