WTO Africa Group Proposes Reforms

The African Group (AG) has proposed a series of significant reforms to the World Trade Organization (WTO) rules, particularly the Agreement on Subsidies and Countervailing Measures (ASCM). This proposal aims to offer developing nations the "policy space for industrial development" and to rebalance trade rules to promote industrialization and address emerging global challenges such as climate change and digital industrialization. The AG's goal is to recalibrate ASCM disciplines and infuse more certainty and equity into the global trading system.

1. Subsidies as Critical Tools for Development:

The AG acknowledged subsidies as a critical tool for national governments to rectify market failures and achieve various policy goals. The ASCM regulates the types, scope, and permissible limits of subsidies provided by WTO members. The AG argues for reconsidering the flexibilities available to developing countries, allowing them to respond effectively to the current multiple crises.

2. Legitimate Development Goals and Countervailing Measures:

The AG emphasized that subsidies for achieving legitimate development goals, such as regional growth, R&D, and environmentally sound production methods, should not face countervailing measures. However, they have observed that developing countries are often the main targets of these measures from developed economies.

3. The Importance of Industrialization:

The AG underscored the importance of industrialization as a vital factor in the development process. The group also noted the vulnerability of Africa's growth trajectory due to its dependency on agricultural and extractive primary commodities. The lack of export diversification, they argue, leaves these countries vulnerable to global shocks.

4. The Critical Role of WTO:

The AG suggested the need to review WTO trade rules, including the disciplines under the ASCM, to bring them in line with the Paris Agreement on climate change. The group noted that the constraints imposed by the ASCM disciplines can potentially hinder public sector support for research and development, which is critical for developing countries' industrialization and sustainable transformation.

5. Challenges with Current ASCM Rules:

The AG identified certain issues with the existing ASCM rules that can undermine the potential for industrialization in developing countries. These include the prohibitions contained in Article 3 of the ASCM on local content requirements, the expiry of Article 8's carve-outs, and the ambiguity and uncertainty created by the restrictions in the Agreement on Trade-Related Investment Measures (TRIMS) on the domestic content requirement.

6. The Need for More Flexibility:

The AG concludes that more flexibility is needed for developing countries to promote sustainable regional value chains and develop domestic capacities. They call for urgent action at a multilateral level to devise rules that are fit for purpose given the magnitude of the multiple crises confronting the global economy and disparities in the development of countries and regions. The AG views this proposal as a step towards equitable growth, structural transformation, and diversification in developing economies, especially in Africa.