Geneva: An agreement between China and World Trade Organization (WTO) to promote technical work on investment facilitation without prior multilateral approval caused a stalemate on Thursday in approving the trade body’s budgetary matters, according to people familiar with the development.
During a meeting of the Committee on Budget, Finance and Administration (CBFA), the WTO’s Secretariat refused to share the November 2017 pact with China for receiving $8 million to promote technical work on investment facilitation, including popularizing China’s signature Belt and Road Initiative, said a trade diplomat, who asked not to be quoted.
China’s deal on investment facilitation runs into WTO roadblock
Work on investment facilitation remains blocked at the global trade body since May 2017 due to lack of multilateral consensus. Several countries, including India, had opposed investment facilitation on grounds that it is inconsistent with the WTO’s core objectives and priorities as set out in the Marrakesh Agreement that established the WTO.
“The Secretariat’s brazen defiance to justify the director general’s agreement in November 2017, had led to a stalemate at the CBFA meeting that was convened to approve budgetary matters,” said a trade envoy, who is familiar with the meeting.
Further, the flat refusal by the Secretariat to share the agreement raised serious “systemic” issues about the manner in which business is being conducted at the trade body without prior approval from the General Council or ministerial consensus, the envoy said.
Under China Development Cooperation Research Fund, China and the WTO had set up a trust fund “to strengthen collaboration in research and research-related technical assistance and capacity building for trade.”
“The trust fund aims to support the WTO in organizing a series of investment facilitation partnership fora and maintain a global database of investment facilitation measures and other related activities,” the Secretariat had informed members.
At last week’s CBFA meeting, WTO’s deputy director general Karl Brunner and CBFA’s chairperson ambassador Juan Esteban Aguirre Martinez from Paraguay justified the director-general’s agreement with China by citing Regulation 19 concerning “voluntary contributions, gifts or donations” of the financial regulations of the WTO, said a participant, after the meeting.
Officials from the WTO secretariat maintained that the funds from China did not cause any financial liability.
But, the director general is required to ensure that the voluntary funds are meant only for the purposes that “are consistent with the policies, aims, and activities of the WTO,” said a trade envoy who asked not to be quoted. Further, “the acceptance of such contributions which directly or indirectly involve additional financial liability for the WTO shall require the consent of the Committee,” the envoy said.
Moreover, the funds for technical workshops on investment facilitation by the Secretariat are not consistent with the policies, aims and activities of the WTO after the issue was blocked at the General Council in May 2017.
The Secretariat was caught on the wrong foot when it went on justifying the director general’s actions after two countries—India and South Africa—demanded that it must share the specific agreement so as to make a credible decision, said a participant present at the meeting.