Sunday, November 4, 2012

Domestic policy space, trade agreements and protectionism - A balance required?

The Tobacco Plain Packaging dispute has reached the doorstep of the WTO. An Australian legislation that mandates that both imported and locally made tobacco products must not have any kind of advertising on the package has been challenged as a violation of Australia's obligations under the WTO. I have blogged about the issue here, here, here and here.

Simon Lester in a recent piece in the Jurist has brilliantly discussed the issue in the context of protectionism, non-discrimination, domestic policy space and international trade. While curbing protectionism (treating imported goods less favorably than local goods) remains the main focus of international trade agreements, it is clear now that trade rules go much beyond it. It impacts not only discriminatory treatment but also whether a measure is an unreasonable restriction on international trade. This has a major impact on domestic policy space since the interpretation of what constitutes a "reasonable restriction" becomes debatable. It has the potential to lead to international trade agreements treading on sovereign decisions disturbing the delicate balance between international law and domestic sovereignty. This often leads to calls for rejecting multilateralism and pursuing unilateral policies in "national interest".
"Complaints about a purely domestic regulation in these international fora may seem odd, but they are a direct consequence of the expanding scope of trade agreements and provide a good illustration of the difficulties for domestic policy-making caused by this broad scope. The complaints highlight an important, but often overlooked, question regarding today's trade agreements: what is free trade? Traditionally, practicing free trade simply meant not being protectionist. However, today's trade agreements go beyond anti-protectionism in a number of ways, which leads to the potential conflict between trade agreements and domestic regulation that we see with the plain packaging cases."
The implementation and interpretation of international trade agreements will constantly face this challenge of balancing competing interests of national, domestic policy making with the imperatives of international trade. Often the line will be blurred and domestic policy choice will be challenged. To what extent this will be accepted by the WTO members is a crucial question. WIth the negotiations reaching a stalemate at Doha, the dispute settlement mechanism will face serious strain trying to balance these competing interests. Should the interpretation limit itself to non-discrimination and be more liberal in allowing domestic space in other cases? Will such an approach ease the tensions and promote international trade? Or should the Panels and Appellate Bodies take a proactive role in ensuring that free trade is not restricted in anyway - whether based on national treatment or otherwise. As Simon correctly points out it is a delicate balance to be treaded very carefully.
"Existing international trade rules are a balancing of competing concerns and interests, developed over the years through a complex negotiating process. Questioning particular aspects after the fact is not without its dangers. Trade liberalization over the past few decades has benefited the world greatly. At the same time, challenges to laws like the plain packaging one risk undermining support for the broader push for such liberalization. It may not be a coincidence that multilateral trade liberalization has stalled in recent years, just as the scope of these agreements has expanded. No matter what the resolution of the plain packaging cases in international courts, they may be a chance to examine just what the goal of trade agreements should be.  
Fighting protectionism is not without its own controversy, but a focus on protectionism, with rules narrowly tailored for that purpose, may avoid sensitive issues relating to health and other social policy regulation, and thus make further trade liberalization, with its accompanying benefits, possible."
Apart from the tobacco legislation, would the stand of Canada in the Canadian Seal dispute also fall under the category of exercise of legitimate domestic policy space? 


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