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China could prove pivotal to multilateral fisheries subsidies deal

01 June 2017, at 12:00am

China's apparent ambition to weaken trade remedy laws in exchange for strengthening fisheries subsidies disciplines could see the prospects of a multinational deal on ending potentially unsound fisheries subsidies collapse, writes Jennifer McCadney.

To address massive overexploitation of global fish stocks by international operators, World Trade Organization (WTO) members have been working for over a decade – under the direction of negotiating mandates delivered during the Doha (2001) and Hong Kong (2005) Ministerial Conferences – to clarify and strengthen WTO disciplines on fisheries subsidies.

Examples of subsidies falling under review include construction subsidies for new fishing vessels and subsidies for fishing operating costs.

Since the start of negotiations, there has been, for the most part, broad consensus among members on the prohibition and elimination of fisheries subsidies that contribute to overcapacity and overfishing, as well as illegal, unreported and unregulated fishing (IUU). Furthermore, there also has been agreement that any new disciplines must balance the policy concerns of developing countries and least-developing countries (LDCs) in accordance with Doha Ministerial principles that require consideration of special and differential (S&D) treatment for transitioning countries. Such accommodations may include exemptions from new requirements, or flexible implementation.

It is not uncommon for parties in multilateral trade negotiations to reach consensus relatively quickly on broad goals – but, as in any deal-making process, the devil is always in the detail. In the case of fisheries subsidies negotiations, there are a few substantive sticking points. Not all members, for example, concede there is causality between subsidies and over-fishing. Some are skeptical of the linkage and have pressed for the consideration of exceptions to subsidy prohibitions under certain circumstances, including beyond S&D treatment for LDCs. In addition, there has been much debate on the appropriate role for fisheries management in addressing and monitoring over-fishing and IUU fishing, including reliability and whether fisheries management should be a precondition for any exemptions. Parties are also still working on definitions for subsistence, small-scale and artisanal fishing and determining what subsidy rules should apply to these activities – all important issues to developing countries and LDCs.

Remaining work notwithstanding, negotiators are optimistic a deal can be concluded by the WTO’s 11th Ministerial, scheduled for December in Buenos Aires. The reasons are two-fold. First, there is “action-forcing” pressure to meet the United Nations (UN) Sustainable Development Target 14.6 deadline, which calls for signatories to prohibit, eliminate and refrain from introducing any new fisheries subsidies that contribute to overcapacity, overfishing and IUU fishing by 2020. Target 14.6 also calls for S&D treatment for developing countries and LDC. Second, success in the fisheries talks, though a modest achievement when compared to other WTO deals, would be an important gain for proponents of a global, rules-based, multi-party trade system. This is particularly so when viewed against the backdrop of apparent rising protectionism and expressed preferences for dealing with trade disputes bilaterally. Here is an opportunity for negotiators to secure a “win” for the multilateral trading system – perhaps the best chance they will get in some time.

China, however, appears poised to sink the whole deal, where it has clear defensive interests at stake. In 2014, the United States notified the WTO that China – which, according to the UN Food and Agriculture Organization, is the main producer and largest exporter of fish and fish products – has 30 undeclared and non-transparent fisheries support programs. Last month, China submitted a proposal to the WTO on a seemingly unrelated topic of trade remedies, where the country has significant offensive interests. Chinese products, worldwide, are subject to numerous trade remedy orders that have been imposed to offset illegally dumped or subsidized, injurious Chinese goods. While China’s trade remedy proposal did not specifically refer to the fisheries negotiations, it does specifically call for a “balanced” approach in the WTO rules negotiations – which covers anti-dumping and countervailing disciplines as well as illegal subsidies, including fisheries subsidies.

In short, China appears to be asking for a weakening of trade remedy laws – such as limiting orders to no more than 10 years – in exchange for strengthening fisheries subsidies disciplines. Under the WTO negotiating architecture, this tactic is permitted. China is not alone in its disdain for trade remedy orders. India and Japan have also submitted proposals criticizing trade remedy measures – though neither at this point have joined China’s proposal.

Experts do not believe China’s proposal is a real threat to trade remedy disciplines, as the vast majority of members would oppose weakening. There is, however, a real concern of losing momentum on the fisheries subsidies deal – an outcome that would be fine by China, but not the US or the vast majority of countries. Another intriguing aspect of the Chinese action, whether by design or happenstance, is that it effectively lures the US into a multilateral forum – whose relevance has been downplayed by the present Administration – in order to defend US trade remedy laws that President Trump has been flexing, most recently on headline-grabbing actions against China. With bait this tempting, fish just might save the WTO – and demonstrate the value of the multilateral trading system.

Jennifer McCadney is special counsel at Kelley Drye & Warren LLP, she is focused on both law and policy involving highly regulated products, services and industries. Kelley Drye has one of the nation’s foremost multidisciplinary practices in the area of marine fisheries and resource management.

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