Saturday, July 21, 2012

Motivations to join a dispute - Dominican Republic joins consultations in Australia Tobacco Plain Packaging dispute

(cigar factory worker in Santiago, Dominican Republic)

The challenge to the Australian Plain Packaging legislation seems to be spreading with the Dominican Republic, a major exporter of cigars, joining the consultation as a party at the WTO. I have blogged about the issue here and here.

Business beyond the Reef and Trade, Investment and Health Blog had interesting pieces yesterday about this. 

The WTO website announced that the Dominican Republic had notified the WTO of a request for consultation. The grounds of the earlier challenge were centred wround the provisions of the TRIPs, GATT and TBT Agreements. Unlike Honduras and Ukraine which have no or negligible tobacco exports to Australia, Dominican Republic has a significant tobacco export trade to Australia. As per the Observatory of Economic Complexity, the Dominican Republic has 4.9% of exports as cigar exports and 7.15% of its exports to Australia were cigars.

Interestingly, many countries have joined the consultations in the two cases that have been filed at the WTO. Guatemala, Norway, Uruguay, Brazil, Canada, the European Union, New Zealand, Canada and El Salvador,Brazil, Canada, El Salvador, Indonesia, New Zealand, the Philippines, Uruguay, Zimbabwe  and Nicaragua requested to join the consultations and have joined the consultations as per Article 4 (11) of the DSU which states:
Whenever a Member other than the consulting Members considers that it has a substantial trade interest in consultations being held pursuant to paragraph 1 of Article XXII of GATT 1994, paragraph 1 of Article XXII of GATS, or the corresponding provisions in other covered agreements(4), such Member may notify the consulting Members and the DSB, within 10 days after the date of the circulation of the request for consultations under said Article, of its desire to be joined in the consultations.  Such Member shall be joined in the consultations, provided that the Member to which the request for consultations was addressed agrees that the claim of substantial interest is well-founded.  In that event they shall so inform the DSB.  If the request to be joined in the consultations is not accepted, the applicant Member shall be free to request consultations under paragraph 1 of Article XXII or paragraph 1 of Article XXIII of GATT 1994, paragraph 1 of Article XXII or paragraph 1 of Article XXIII of GATS, or the corresponding provisions in other covered agreements."
What are the motivations of countries to join a dispute? Canberra Times has an interesting piece on the dispute and states:

"The case before the WTO is still in the preliminary stage of consultations. Australia has refused to give ground, so the original complainants now have the option of requesting a disputes panel. That can take up to a year, and the loser then appeals, which can take another few months before there is a final ruling. Compliance with the ruling can take longer still.

The 12 countries that have joined the WTO consultations have a range of motives: three are neighbours of Honduras. Some, such as Indonesia, are significant tobacco producers; Indonesia's biggest tobacco maker Sampoerna, now part of the Philip Morris empire, withdrew its clove-flavoured Kretek cigarettes from Australia in 2009 rather than display the ghoulish warnings required by existing packaging laws.

But New Zealand has joined the case because it is considering similar legislation to Australia, and the European Union, which has interests on both sides, also signed up to the case as a neutral observer."

So, what can the motivations be for countries to join consultations or request for consultations:

1. If the domestic producers are impacted by the measures, and their exports would be affected, this would be a natural reason to engage in consultations.

2. The country joining for consultation may also be intending to impose similar measures as those challenged in the consultation. Thus, this consultation would serve as a good testing ground for analysing their measures.

3. In international trade politics, initiating a dispute sometimes is for strategic reasons to offset another dispute that the two countries face or are likely to face. It can be used as a bargaining chip in times of negotiation.

4. Even though a country may not have significant trade interests with the country that it seeks consultations with, it may have substantial interests with other countries on the same issue or measure at hand. 

5. Business interests may also play a role in persuading countries to challenge a measure though a country has no trade interest with the other country.

6. Some countries may perceive disputes as "training grounds" for their teams to get familiarised with the DSU and its functioning. It could be art of a strategic litigation strategy to get involved in WTO proceedings.

Any other motivations?

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