After Pascal Lamy, who?

(Tim Groser, Minister of Trade, New Zealand)

(Pascal Lamy, DG, WTO)

News of Tim Groser being in the race for the next WTO DG after Pascal Lamy (his second four year term ends in September 2013) is trickling in. The NZherald news confirmed this. Tim Groser has served New Zealand in a number of capacities including being New Zealand's chief negotiator in the Uruguay Round of trade talks. He is presently Minister of Trade of New Zealand. The IELP blog carried a speech of his recently highlighting his views on international law and the loss of sovereignty.

Tim Groser speaking at the 8th Ministerial Conference at Doha recently had opined about the way forward in the Doha round and how to get over the impasse:

"While we strengthen the existing system, deal with the 20th Century problems that lie at the heart of the Doha Development Agenda, we also need to look forward to emerging issues. The WTO is the place countries deal with the whole gamut of trade issues. The Doha mandate covers a subset of those issues. We need to accelerate our understanding of these emerging issues. This will be politically possible only if it is done explicitly on the basis that we are not trying to redefine the mandate. The developing countries would reject such an approach out of hand. But we need to start understanding emerging issues like the implications of the global supply chain for WTO Rules. Similarly, there is a whole set of issues in the trade and environment space that are going to demand attention, not simply the issue of environmental goods and services and the agreement we need on fishery subsidies that must be part of any Doha outcome. If we can develop a sense amongst negotiators that there are some solutions out there, this will exert positive gravitational pull on the Doha mandated issues and deal in part with the legitimate concern that we need to keep our system up to date. 

Our thinking is based on a frank admission that the path forward is by definition unclear. Therefore a more subtle, less prescriptive approach aimed at three levels - strengthening the existing defences against protectionism, finding ways forward on the 20th Century agenda defined by the Doha Mandate with development at the centre of that mandate, and starting to point the way forward on 21st Century issues - is the way forward."

His speech recently too highlighted the Doha impasse, the way forward and the need to recognize the multipolarity of today's global governance, especially in international trade:

"We are moving towards a multi-hegemonic system of power but the global governance system that would match that is remarkably immature My central view is that it is not a fundamentally different system that needs to be designed, but rather the informal modus operandi of the system needs to change to reflect the shift in relative power. 

The issue here is about leadership: no system of global governance can work without it. When China joined the WTO I heard some deeply experienced people speculate on how the WTO would work with the ‘800 pound gorilla’ in the ring. The concern is entirely the wrong way round. The greater danger is the opposite – these great emerging economies may not use their huge weight and influence to provide leadership but behave too passively. 

There can be no definitive conclusion to this. I think we are in a process of transition and the trick here will be to ensure that something gets done on both trade and climate change during that transition."

The race for the next WTO DG might have just begun. Some have argued that the next head must be from a developing economy to reflect changed dynamics and realities of world trade. Whoever the next chief is, the task would be an arduous one - to get Doha back on track and ensure multilateralism prevails in the context of increasing trends of protectionism.

Development, WTO and a few dilemmas

Sonia Rolland's new book "Development at the WTO" seems to be a brilliant exposition of the relationship between "development" and multilateral trade rules. What roles does the developmental agenda have in the context of a rule-based trading regime? Some would argue that the WTO's role and the role of trade rules is not to address the complex issues of development. Other disagree and posit that the developmental agenda is very much, or should be, a central part of the multilateral system. The book takes us through the complexities of this debate and touches upon many pertinent issues like "policy space, developing countries interests at the WTO and "non-trade" issues like labour, environment being part of the agenda.

The Introduction, which is only accessible online (and which is what I have read), puts forth two views of development in the context of the WTO:

1. Development as an Idiosyncrasy 

2. Development as a Normative Co-constitutent

As the Introduction states:

"The first paradigm treats development as a second-order normative considera- tion that does not fundamentally displace the objective of trade liberalization as the primary mandate of the WTO. In this framework, the needs of develop- ing members arising out of their economic, social, and political constraints are dealt with on a case-by-case basis rather than at a systemic level. Exceptions and carve-outs dealing with development issues, whether in general agreements or in individual members’ schedules of commitments and accession protocols, are idiosyncratic—ad hoc solutions rather than instantiations of an overarching normative principle. 

The key feature of the idiosyncratic paradigm is the absence of a principled approach to incorporating development at the WTO. Of course, that does not mean that no development issues will be included in WTO rules, but simply that there will be no systematic or coherent approach, no overarching legal obligation, or, at best, only a very loose and soft one, such as the statements in the preamble to the Marrakesh Agreement."

Explaining the Normative Co-constituent concept, she states:

"In this paradigm, development constraints are balanced against the trade liber- alization objective of the WTO. Unlike the more pragmatic underpinning of the idiosyncratic model, this paradigm has an explicit normative underpinning. As a result, the need for derogations, safeguards, and escape clauses should be reduced because the mainstream rules are designed to account for development concerns. The issue then is how the WTO legal architecture would be redrawn if develop- ment were to be on par with trade liberalization."

Which stand should a developing country take in terms of addressing development at the WTO? IS there a unified stand of all developing countries? Would the stand of China, India and Brazil be the same at the negotiating table? What impact would consideration of "development" as a source of differential treatment have on the "formal equality" that WTO rules professes? Should countries with differing levels of development be treated differently at the WTO, much more than the SDT provisions presently available? Should unequals be treated unequally? Treating countries that are on different stages of their development path equally, some would say, is a very discriminatory and unjust treatment. How does this fit into the "same rules for all - big or small" paradigm? 

This Book sure does offer some very interesting insights into the complex relationship between trade, development and multilateral rules - dilemmas to be addressed.

Doha retreating? - Bhagwati and the future of dispute settlement

Jagdish Bhagwati writing in The American Interest narrates the reasons for the failure of the Doha round of multilateral trade negotiations inspire of more than a decade of sustained deliberations. While the reasons for the failure are many, Bhagwati narrates the various options that countries had in terms of concluding the Doha round and the main causes for the impasse. 

"Where does that leave us, however? There is great complacency that the fall of Doha is no cause for lament and that the WTO as the apex institution for trade will survive intact. It is as if loss of faith in Catholicism will not affect the Vatican. Doha has three legs: multilateral liberalization; framing of trading rules; and the Dispute Settlement Mechanism. The first is now broken. In turn, it cannot but break the other two."

This raises many concerns for the Dispute Settlement mechanism. It is considered the crown jewel of the WTO. However, what impact does the failure of the Doha round have on the existing judicial process. Some believe that the DSM would be unaffected and would continue to do what it does best - judicially interpret existing texts and adjudicate disputes systematically. Others, like Bhagwati, believe that it would have a negative impact on the DSM. When the political side of the multilateral system fails to change with changing times, the pressure is on the judicial wing to address new realities as well as address new concerns. This puts a lot of pressure on treaty interpretation as well as the judicial system. It can also lead to "judicial activism" wherein the adjudicatory bodies overstep their limits to address inadequacies of existing rules. While judicial activism in the national context is accepted by different institutions as inevitable and constitutionally mandated, how would a strong, forceful and often "judicially active" panel and Appellate Body be viewed by member countries/ Would it lead to increased compliance to international trade law or a growing discontent and non-compliance? Will the DSM be able to withstand the pressure of such non-compliance?

Another danger that is predicted with the failure of Doha is the rise of PTAs and their impact on the DSM. Bhagwati notes:

"In the absence of MTNs like Doha, these PTAs will also become the arrangements where rules such as anti-dumping and subsidies codes will be set and will then be muscled into WTO at Geneva. Similarly, the Dispute Settlement Mechanism at the WTO, a proud achievement in 1995, will also be in danger of falling into disuse as bilateral and regional dispute settlement arrangements will take over: and where the hegemons will expect that this asymmetric power will get them more favourable adjudication. None of this is cause for celebration; rather it calls for lamentation."

Thus, this would lead to the DSM gradually becoming irrelevant in multilateral trade relations. What would be the future of the DSM in the absence of a renewed successful negotiation in the coming years? Would it be strengthened or wither away into oblivion? Would it remain the crown jewel or just a disused bracelet?  Time, as usual, will tell.

Made in China - Earphones, laptop and an aircraft

I was on a flight yesterday. Took this picture. 

The earphones provided on the flight above had this characteristic - "Made in China". It was placed on a laptop that had a similar characteristic. I wondered that in a few years if the Airbus-Boeing dispute reached an impasse, the aircraft I would be travelling in would probably also have the same characteristic.Whether that is a positive development is an entirely different debate.

Things may be increasingly "Made in the World" but "Made in China" is still evident.

After Australia, its New Zealand - Tobacco Plain Packaging seems to cover the Australian continent

The Australian Tobacco Plain packaging has got a reprieve from local Australian courts against a challenge from tobacco companies. The decision has been widely debated and dissected in the IELP blog here on issues related to intellectual property, investment claims as well as violations of international trade rules. Benn MCGrady has raised some important issues here.  I have blogged about this issue here, here and here.

The WTO has seen countries like Ukraine and Honduras challenge the tobacco plain packaging legislation. The outcome of this international trade dispute will be eagerly awaited by both anti-tobacco public health activists as well as the multinational tobacco industry.In the meantime, the possibility of the spread of plain packaging to other countries is widely being seen as a distinct possibility.

New Zealand has recently brought out a "consultation paper" as a prelude to a possible plain packaging legislation. It essentially lays down the rationale for the proposal and seeks comments on the proposal. The closing date for submissions is October 5th 2012. The paper is found here.

The consultation document is in seven parts. Part 7 poses a number of consultation questions designed to elicit responses to the key issues and fill any information gaps. I found several of the questions interesting in terms of their relation to international trade. Some of them are reproduced below:

" 7.2 Specific questions relating to impacts on manufacturers, exporters, importers and retailers of tobacco products

9. What are the likely impacts that plain packaging would have for manufacturers, exporters, importers or retailers of tobacco products?
   
10. What would be the impact of plain packaging on the market mix and retail price of tobacco products?
    
11. What would be the additional costs of manufacturing tobacco packaging, including redesigning packs and retooling printing processes, if plain packaging of tobacco products were introduced?
    
12. Would the ongoing cost of manufacturing cigarette packs be lower or higher if plain packaging of tobacco products were introduced compared with the current cost of manufacturing packs, and by how much?
    
13. How often do manufacturers amend the design of tobacco packaging for brands on the New Zealand market, and what are the costs of doing so?
    
14. Would the ongoing costs of brand marketing increase or decrease over time under plain packaging?
    
15. To what extent is the design, manufacture and printing of packaging of tobacco products sold in New Zealand undertaken in New Zealand, including work outsourced to external specialist design, packaging and printing firms?
    
16. Would plain packaging of tobacco products result in a discontinuation of importation of tobacco products with small markets, and if so, what financial loss would be incurred by importers of those products?
    
17. Would it take longer for tobacco retailers to serve customers, and if so, why and by how much would this occur?
    
18. Would retailers face any other costs or benefits if plain packaging of tobacco products were introduced?"
    
    New Zealand has embarked on a detailed consultative process prior to taking a decision on plain packaging. The consultation process is also a way of eliciting domestic opinion on the measure. An interesting issue is whether public opinion, consultative processes and scientific studies are relevant in WTO dispute proceedings.While scientific evidence is relevant in justifying the "reasonableness" of a measure, domestic opinion need not always assist in justifying an action. It could still be incompatible with international trade law. One would have to wait and see where the New Zealand measure culminates. Another issue is whether there is a middle path at all in this dispute? Is Plain packaging the most suitable way to go forward in dealings with the health hazards of smoking? is tobacco trade, investment and employment in the tobacco industry irrelevant considerations as compared to the health impact of smoking? Is the balance to be decided nationally or internationally? Can there be culturally, and hence nationally, different stands on this issue - one more health conscious while the other less? Is there an internationally universal standard in this regard?

Asian economies and WTO

The Asian Development Bank recently brought out a report titled "Asian Economic Integrator Monitor" which analyses, inter alia, regional co-operation and integration in the Asian context. Business Beyond the Reef has commented on the report recently.

Two aspects dealt in the report caught my attention:

1. The trade/GDP ratio in Asian countries has gradually increased over the years. This signifies integration into an interconnected world economy as well as increased reliance on the external, globalised world as compared to a domestic, inward looking policy.

                                   Table 5: Trade/GDP Ratio by Region and Subregion (%)

                                                                                            1990     2000     2010       2011

Asia                                                                                      30.1       40.4     54.1        57.3

East Asia                                                                               26.7       34.1     51.1       52.8

People's Republic of China                                                    29.9       39.6     50.2       49.9

Southeast Asia                                                                       89.4      130.8   107.2     116.1

ASEAN-4                                                                                62.9      103.7      78.1     86.0

BCLMV                                                                                   75.3       84.4    110.1    130.8

Singapore                                                                              293.1    289.3     292.3    299.4

Central Asia                                                                             -          62.8       52.4      59.7

South Asia                                                                              16.0      23.0     36.7       44.0

India                                                                                       12.9      19.5     35.9       44.2

The Pacific and Oceania                                                          28.3      37.3     36.3       37.8

European Union                                                                         –         57.6      62.5      67.2

North America                                                                          18.4     25.6      27.4      29.9

World                                                                                       31.1     40.2      48.0       51.9

2. Role of Asian countries in the dispute settlement process of the WTO

"Some 31 economies in Asia have acceded to the WTO. Asia has also been an active participant in WTO processes. For example, the region has been active in pursuing cases involving anti-dumping and countervailing duties (Table 18). But multilateral cooperation goes beyond the design and use of existing measures. International law often progresses through adjudication, particularly since the Doha Round has stalled. Middle- and high-income Asian economies have been active participants in dispute settlement since the WTO was established in 1995 (Table 19). In addition, Asian nationals have served as panelists to disputes, and several Asian representatives sit on the Appellate Body,which hears appeals from panel cases and cannot be overridden."

Is the increased participation of Asian countries in the WTO DSU a sign of a strategic engagement in the WTO or an ad hoc response to disputes that have an impact on economic interests? Do Asian countries have a development agenda that they consciously pursue at the adjudication body of the WTO? It would be interesting to study the comparative journeys of Asian countries in their pursuit at the WTO DSM in order to achieve their domestic interests. Are there lessons they can learn from each other that can be a ground for developing country co-operation? While national interests ultimately should guide WTO engagement, is there scope for a wider partnership in the WTO of the Asian economies? Do trade realities and converging interests mandate such an eventuality or are the interests too diverse and conflicting to achieve such a partnership? 

U.S. takes on Argentina now - Import licensing procedures challenged

This was expected for some time. The U.S. finally initiated a dispute against Argentina by requesting for consultations for what it called "restrictive import licensing procedures" that violate Argentina's commitments at the WTO. I have earlier blogged about Argentina's measures here, here and here. The E.U. and Japan are the other members that have also taken Argentina to the DSM. Reports of Argentina striking back with a complaint against Spain's biofuel policy is reported here. MoneyBox has a succinct analysis of the "tit for tat" policy surrounding some of these trade measures which typifies a "protectionist" trend necessitated by domestic compulsions.

The gist of the US request is reproduced below:

"Argentina often requires the importers of goods to undertake certain commitments, including, inter alia, to limit their imports, to balance them with exports, to make or increase their investment in production facilities in Argentina, to increase the local content of products manufactured in Argentina (and thereby discriminate against imported products), to refrain from transferring revenue or other funds abroad and/or to control the price of imported goods. 

The issuance of CIs and the approval of DJAIs are being systematically delayed or refused by the Argentinean authorities on non-transparent grounds. The Argentinean authorities often make the issuance of CIs and the approval of DJAIs conditional upon the importers undertaking to comply with the above-mentioned trade-restrictive commitments. 

These measures restrict imports of goods and discriminate between imported and domestic goods. They do not appear to be related to the implementation of any measure justified under the WTO Agreement, but instead appear to be aimed at advancing Argentina's stated policies of re-industrialization, import substitution and elimination of trade balance deficits. 

... 

Argentina's measures appear to be inconsistent with Argentina's obligations under the following provisions of the covered agreements: 

(i)  Articles III:4, X:1, X:2, X:3(a) and XI:1 of the GATT 1994; 

(ii)  Article 2 of the TRIMs Agreement; 

(iii)  Articles 1.2, 1.3, 1.4, 3.2, 3.3, 3.4, 3.5, 5.1, 5.2, 5.3 and 5.4 of the Import Licensing Agreement; and 

(iv)  Article 11 of the Safeguards Agreement." 

The USTR officially announced this request for consultation here. This also seems to be one of the first disputes wherein the new agency created for trade violation enforcement in the U.S. - The Interagency Trade Enforcement Center - seems to have played a role. I had earlier blogged about setting up of this agency here. 

The Center has been established within the USTR itself and is headed by an Assistant USTR named as the Director of the Center. The setting up of the Interagency Trade Enforcement Center with representatives from Agriculture,Homeland Security, Justice, State, Treasury and the Intelligence Community is a good example of interdepartmental co-ordination to take on trade disputes with other WTO members. Most of the times WTO disputes are not the preserve of the Ministry dealings with Commerce alone. It has an impact on the jurisdiction of other departments as well and is usually concerned with areas concerning other departments. An agency that can co-ordinate this effort with a strong team of law experts, trade analysts and researchers, is perhaps, what is required for effective engagements within the WTO. Can this Center be a model for other countries, albeit with local modifications, to engage with the multilateral system?

Vsego Dobrogo (All the Best) Russia!

Russia finally is the 156th member of the multilateral trading system bringing to an end 18 years of negotiation. News of the membership trickled in here, here, here and here. Various analysis and comparisons with China are beginning to be made. Will russia take advantage of the WTO as China did? Will WTO be the magic wand that Russia will use to boost it's economy as China did? i have earlier blogged about Russia's entry here, here and here.

The WTO website has a detailed table on the progress of the accession process from June 1993 to December 2011.

1.	Application Received	June 1993
2.	Working Party Established	16-17 June 1993
3.	Memorandum	1 March 1994 (Goods) 27 October 1995 (TRIMs) 21 November 1995 25 October 1995 (Services) 25 October 1995 (TRIPS) 7 April 1997 9 April 1997
4.	Questions and Replies	2 June 1995
5.	Meetings of the Working Party	17-19 July and 4-6 December 1995 30-31 May and 15 October 1996 15 April, 22-23 July and 9-10 December 1997 29-30 July and 16-17 December 1998 25-26 May and 18-19 December 2000 26-27 June 2001 23-24 January, 25 April, 20 June and 16 December 2002 10 January, 6 March, 10 April, 10 July and 30 October 2003 5 February, 2 April, 16 July and 8 November 2004 17 February, 15 April, 24 June and 19 October 2005 23 March 2006 10 November 2011
6.	Other Documentation
	(a) Additional Questions & Replies	24 January 2005
	(b) Information on agriculture (WT/ACC/4)	18 March 2008
	(c) Information on services (WT/ACC/5)	25 October 1995
	(d) SPS/TBT checklists (WT/ACC/8)	10 July 1997 (TBT) 11 July 2011 (SPS)
	(e) TRIPS checklist (WT/ACC/9)	25 October 2000
	(f) Legislative Action Plan	14 August 2007
7.	Market Access Negotiations
	Goods (a) initial Offer (b) Goods Schedule	16 February 1998 17 November 2011
	Services (a) initial Offer (b) Services Schedule	8 October 1999 17 November 2011
8.	Accession Package Approved by the Eighth WTO Ministerial Conference (December 2011)
	Working Party Report Goods Schedule Services Schedule	17 November 2011 17 November 2011 17 November 2011

An interesting aspect of Russia's entry would be to analyze the impact of the protocol of accession on Russia's commitments. We have seen that the Chinese accession protocol uncharacteristically ran into more than 500 pages providing for WTO plus obligations for China which was reflected in disputes over export restrictions imposed by China.A look at the Russia's accession protocol gives a different picture. It is a brief document and does not seem to have similar provisions like China.However it refers to paragraph 1450 of the Working party report wherein Russia has agreed to specific commitments. Para 1450 of the Working party report states:

"1450.The Working Party took note of the explanations and statements of the Russian Federation concerning its foreign trade regime, as reflected in this Report.  The Working Party took note of the commitments by the Russian Federation in relation to certain specific matters which are reproduced in paragraphs 34, 72, 99, 115, 116, 117, 132, 133, 183, 209, 214, 215, 227, 251, 275, 302, 313, 319, 323, 324, 337, 351, 352, 353, 364, 366, 369, 382, 392, 417, 424, 472, 476, 477, 480, 481, 483, 486, 487, 497, 514, 527, 548, 562, 566, 574, 591, 613, 620, 638, 668, 669, 677, 698, 712, 714, 715, 719, 728, 738, 739, 744, 745, 756, 761, 765, 772, 773, 784, 785, 787, 789, 798, 799, 803, 804, 813, 826, 844, 847, 870, 875, 876, 880, 885, 890, 893, 895, 901, 904, 908, 923, 926, 927, 928, 932, 935, 936, 944, 950, 952, 955, 981, 984, 989, 1009, 1011, 1030, 1031, 1033, 1035, 1051, 1055, 1060, 1062, 1089, 1090, 1122, 1124, 1137, 1143, 1144, 1161, 1186, 1187, 1189, 1200, 1208, 1218, 1224, 1226, 1232, 1253, 1260, 1271, 1277, 1294, 1295, 1303, 1312, 1325, 1331, 1338, 1339, 1350, 1353, 1392, 1393, 1395, 1397, 1398, 1400, 1401, 1402, 1404, 1405, 1406, 1413, 1426, 1427, 1428, 1430 and 1449.  The Working Party took note that these commitments had been incorporated in paragraph 2 of the Protocol of Accession of the Russian Federation to the WTO."

Now, these are a lot of paragraphs and commitments and the devil is always in the details. One would have to make a more detailed analysis about whether Russia has agreed to onerous "WTO plus" commitments like China. Further, a dispute (now that Russia is a member its trade measures would be open to scrutiny under the DSM) would bring to the fore such commitments as in the case of China.A synopsis of Russia's commitments under the WTO have been provided here.

One would have to wait and see how Russia faces the multilateral challenge, what impact it's accession protocol will have on its WTO commitments, how engaging with the international trade network would benefit it's exporters and importers and how other countries would engage with Russia in the multilateral forum.

All we can say is "всего хорошего" (Vsego dobrogo) meaning "All the Best" in Russian!