MC13 Priorities Should Be E-Commerce Duty Moratorium, Fisheries Talks, Former USTR Official Says

Given the outcomes of the WTO's 12th Ministerial Conference in 2022, the MC13 agenda should be "less ambitious," and that this is "perfectly acceptable" for the U.S., said Dennis Shea, former deputy U.S. trade representative and U.S. ambassador to the WTO under President Donald Trump. Shea noted that those outcomes from MC12 included the initial fisheries subsidies deal, a two-year extension of the customs duties moratorium and, most problematically, he said, a decision waiving the Trade-Related Aspects of Intellectual Property Rights for COVID-19 vaccines.

Shea, along with many of his fellow witnesses, expressed his distaste for the TRIPS waiver decision, telling the committee that efforts should be made to stop the extension of the waiver to therapeutics and diagnostics.

On the other hand, an extension of the moratorium on customs duties for electronic transactions should be included on the MC13 agenda, Shea said. While the chances for a permanent extension are "remote," another extension combined with a "robust work program should be a good outcome," he said.

Top of mind for MC13 is the topic of dispute settlement reform, with Shea and the other witnesses expressing mixed views of the best path forward. Shea and Kelly Ann Shaw, partner at Hogan Lovells and former deputy assistant to the president for international economics, expressed skepticism at the returns a reform could offer.

Shea noted that the long-term viewpoint of the U.S. has been that the intended mandate of the WTO's Appellate Body was a "limited one," meant to swiftly correct legal errors made by dispute panels. Other WTO members view the Appellate Body differently as an "independent international court charged with establishing binding precedent, filling gaps in the WTO agreements and creating a global common law of trade." Reconciling these visions "can't be papered over with a few" tweaks, he said.

Shaw added that the "WTO in its current form is no longer capable of advancing mutually beneficial concessions or developing new rules that further facilitate trade, address new challenges and deal with China's unfair trade practices." The body's negotiating function is "effectively paralyzed," while more ambitious negotiations occur outside of the trade body, she said.

Regarding the prospect of reforming the WTO's dispute settlement system, Shaw claimed that the "WTO does not need an Appellate Body or a two-tier dispute settlement system, and we should neither negotiate nor agree to one." The body's "single biggest challenge" is rather the inability of members to "negotiate new rules." The WTO's large membership, which includes China, "has simply proven unworkable."

Other witnesses, including Bobby Hanks, the CEO of Supreme Rice, and Bruce Hirsh, founder of Tailwind Global Strategies, argued for a different approach. Hanks said U.S. rice producers need binding dispute settlements, claiming that having a defunct Appellate Body harms rice growers.

Hirsh said MC13 will prove ineffective at delivering results on dispute settlement reform, though it can lay the groundwork for new initiatives. Informal talks on dispute settlement have generated a number of textual proposals on "alternatives to litigation" and streamlining the system, though talks on the more "contentious U.S. concerns have lagged," he said. "The positive news is that members appear to be listening to U.S. concerns in a way they have not in the past."

Hirsh said that it is "important" that ministers engage with each other at MC13 on reform talks, since the dispute settlement system "has played an important part in resolving and containing disputes and more generally in reinforcing respect for the rules," despite its flaws.