Tuesday, June 5, 2012

Aid and Trade - Mexico, U.S. and dolphin-safe Tuna labeling case

The dolphin safe Tuna labeling case decided by the Appellate Body of the WTO held the US measure in violation of Article 2.1 of the TBT Agreement since it accorded less favourable treatment to tuna from Mexico. I have blogged about the issue here. While what steps constitute compliance is a subject matter of an interesting debate in the IELP blog here, my attention was drawn to a letter by some members of the US House of Representatives to the U.S. President regarding the need for complying with the WTO decision. I am not going into the merits of the reasoning provided here as to why the US should not comply with the decision. Rather, my attention was drawn to the last para of the letter which said:
"We urge your administration to make clear that the U.S. will not water down or eliminate the very successful dolphin-safe labeling regime. Any hardship that the Mexican government claims to be experiencing from its inability to comply with perfectly reasonable dolphin-safe requirements is clearly offset by the $33 million in development assistance Mexico is receiving from the U.S. in FY 2012, and dwarfed by the nearly $200 million it has received since 1999. If the Mexican government continues to pursue WTO action in this case, we ask that your administration reconsider the level of economic assistance Mexico receives from U.S.taxpayers.Moreover, we urge you to advocate for a means of clarifying that WTO rules are not meant to allow this type of dispute settlement case related to non-discriminatory voluntary labeling regimes" 
Is the suggestion of reconsidering economic assistance if Mexico persist with its WTO action indicating the political economy of trade? While the WTO rule based dispute settlement open to all member countries for disputes concerning alleged violation of obligations under the WTO agreements, is the political economy of aid stronger? Would it be right for a country receiving aid from another country to initiate a WTO dispute against it? If it is not right, then many countries in the developing world cannot initiate WTO disputes against their aid donors. Should the two issues be linked at all? While the WTO dispute settlement mechanism is a rule based system based on rights and obligations and not "power based" relations, in reality, is there a larger political economy of trading power, aid, foreign relations, economic influence that determine compliance and non-compliance of WTO disputes?

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