More WTO disputes in 2014

2014 is going to witness some interesting disputes covering issues regarding anti-dumping duties imposed by EU on biodiesel from Argentina, energy adjustments imposed by EU on Russian energy imports, taxes on car imports by Brazil.

Here are some trailers:

Argentina vs. EU 

Russia vs. EU (Not yet reported in the WTO website)

EU vs. Brazil (Not yet reported on the WTO website)

Bali or no Bali, the dispute settlement process of the WTO is on a roller coaster ride for sure!

EU takes on Russia in the automobile recycling fee case

I was expecting this soon but did not think it would happen this soon. I have blogged about the Russia recycling fee issue here, here and here. The BBC reported it here.

Reports from the WTO indicate that the EU has decided to file a WTO complaint (DS462) against the fee. This would be the first case in which Russia is facing the dispute settlement mechanism after it joined the WTO in 2012.

"The European Union notified the WTO Secretariat on 9 July 2013 of a request for consultations with the Russian Federation on measures imposed by Russia relating to a charge, the so called “recycling fee”, imposed on motor vehicles. According to the European Union, these measures adversely affect exports of motor vehicles from the European Union to Russia. The EU claims that Russia subjects imported vehicles to the payment of a “recycling fee”.  In contrast, domestic vehicles are exempted from that payment under certain conditions. An exemption is also available to vehicles imported from certain countries, such as Belarus and Kazakhstan. However, there is no exemption for vehicles imported from the European Union.  As a result, vehicles imported into Russia from the European Union are treated less favourably than domestic vehicles, or vehicles imported from Belarus and Kazakhstan. The EU also claims that the structure of the “recycling fee” also appears to afford protection to domestic production."

Well, the dispute was anticipated but the complainant and timing was uncertain. Russia's time to defend or amend? There was news about some amendment to the legislation that addressed the alleged discrimination. One will have to see what the Russian response to this is.

Change by July 1st or else...

Could this be Russia's first WTO dispute as a respondent? Reports indicate that EU is contemplating a dispute against Russia with respect to its automobile recycling fee which it asserts discriminates imported cars from domestically manufactured cars. I had blogged about this months ago here, here and here.

A proposed Bill to amend the law to make it "WTO compliant" is under consideration - that is making it applicable to both imported as well as domestically manufactured cars.A detailed paper on the present law is found here. I am not sure what the amended proposal is - perhaps removing the exceptions relating to domestic manufacturing since the earlier law applied to domestic manufacturing too.

All eyes on July 1st - the deadline given for initiation of a dispute. This case also vividly shows how domestic legislation and policy making is impacted by multilateral trade rules. Russia, after entering into the WTO last year after 18 years of tough negotiations, would have to, inevitably face the realities of the multilateral trade body membership - dispute settlement.

Of negotiated settlements and international economic law

As reports of China, US and EU apparently reaching a settlement on the solar panels trade dispute trickled in, another dispute seems to be making an entry - EU initiating a suo moto anti-dumping and anti-subsidy enquiry into imports of telecommunication equipment from China. 

The EU statement is here:

""The European Commission has today taken a decision in principle to open an ex officio anti-dumping and an anti-subsidy investigation concerning imports of mobile telecommunications networks and their essential elements from China. This decision will not be activated for the time being to allow for negotiations towards an amicable solution with the Chinese authorities. I will revert to the College of Commissioners in due course."

Will this dispute go the negotiated settlement way too? Consultations and negotiations are an integral part of the international trade setting. However, this CATO piece was critical of a negotiated settlement. It highlights the multiplicity of stakeholders - consumers, industry invoked in downstream activities like installation as well as institutional users of these equipments, apart from the producers of these panels ofcourse.

I was just struck by the CATO piece of the usage of the term "un-trade agreement". Can negotiated settlements be contrary to principles of international law? In other words, can there be a settlement that violates the provisions of an Agreement? I am sure countries do it all the time - but strictly in legal terms, isn't it still a violation?

Trade war on biofuels again

I have earlier blogged about biofuels and WTO disputes here, here and here. Argentina formally filed a WTO dispute against the EU in DS 459 requesting for consultation against the EU. For those following the dispute across the Atlantic here is an update.

"Argentina notified the WTO Secretariat, on 15 May 2013, of a request for consultations with the European Union on measures imposed by the EU and/or its member states that affect the importation and marketing of biodiesel as well as measures supporting the biodiesel industry. 

Argentina refers to measures applied by the EU for the promotion of the use of energy from renewable sources and the introduction of a mechanism to control and reduce greenhouse gas emissions as well as measures for their implementation at the level of the member states of the EU. It also refers to the establishment of support schemes for the biodiesel sector in the EU. 

According to Argentina, the measures violate, among other things, several provisions of GATT 1994 regarding non-discrimination, the Agreement on Subsidies and Countervailing Measures, the Trade Related Investment Measures Agreement, and the Agreement on Technical Barriers to Trade."

More biofuel disputes on the cards. 

Oil tar sands gets sticky

I had blogged about the issue of oil tar sands more than a year ago here, here and here. It is essentialy related to a potential dispute between Canada and the EU over labelling of oil extracted from the tar sands of Canada as more polluting than other conventional fuels.

I thought the controversy had died down but it seems to have erupted once again with this recent report that Canada is considering taking EU to the dispute settlement mechanism as the measure is allegedly discriminatory.

An interesting comparison with beer consumption in the EU is brought out here by Friends of Science who argue that the labelling is discriminatory:

“In Canada we create useful fuel products from the Alberta oil sands that drive world industry,” says Maier. “We also don’t come to the EU with a “Stop the Beer-maggedon” campaign trying to destabilize your economy.” 

According to calculations by Friends of Science, EU beer production accounts for 0.4% of EU carbon emissions. That means carbon dioxide emissions attributed to total EU beer production is more than half of the emissions from the oil sands – all just for entertainment and getting drunk, while oil sands provides the energy for value-added industrial development and jobs."

So, less of beer and oil from tar sands in the coming years? 

Will watch this space for a potential WTO challenge...

Bio-Ethanol - The next big dispute at the WTO?

A dispute between EU and the US over anti-dumping duties on US Ethanol seems to be brewing. In a letter to the USTR some US Senators have raised the issue of this move by the EU imposing a 5 year duty on ethanol produced in the US. More news about the $83.03 per metric ton tariff on US produced ethanol is found here and here.The EU has essentially determined that US produced ethanol has been dumped in the EU - the average normal price is less that the average export price.

The EU notification imposing the definitive anti-dumping duty on US produced bio-ethanol is found here.

Would this be the next big WTO dispute between the US and the EU?

Local jeans, tariffs and WTO disputes

Reports of an EU tariff on US made jeans was in the news recently. This is a result of a longstanding dispute which has reached the compliance stage - the EU measures are in relation to non-compliance by the US of the WTO decision in DS217 (United States — Continued Dumping and Subsidy Offset Act of 2000) in relation to the Byrd Amendment.The dispute itself had many other complainants (9 of them).Would the impact be much more if all these complainants imposed retaliatory tariffs?

I had blogged months ago about the urge to "but local". 

Some lessons from this dispute:

1. Compliance in WTO disputes need not always result in doing away with the challenged measure.the measure can continue but the country must be prepared to face the trade consequences.

2. WTO disputes, at times, are lengthy propositions - compliance and retaliation can take years. We have seen many disputes that are pending for ages.

3. The WTO dispute settlement system does have teeth - non-compliance can lead to retaliatory tariff. One can ignore implementing a WTO decision. But retaliation can be a consequence.

Airbus subsidies - it goes on!

For those following the epic Airbus dispute (DS 316) at the WTO it seems to be a never ending case. From the Panel to an Appellate body decision and now to a lengthy compliance proceedings - the dispute has seen it all. The recent move of Airbus to locate a plant in the US does not seem to have cooled down tempers. Many have argued that only a political settlement between the two countries can end this long standing dispute.Apart from the legal intricacies involved, the case reiterates the role subsidies play in boosting industries - and subsidies are not limited to the developing world. it cuts across economies and geographies.

(http://www.airbus.com/company/americas/us/locations/)

The latest oral submission of the US in the case at the WTO gives an overview of what the US feels are the subsidies Airbus receives. The submission made in the compliance proceedings is rather hard hitting so had to quote some of it here:

"1. What is most remarkable about this dispute is how little has changed in the last eight years. In spite of the longest, most complex WTO dispute ever, and the largest-ever findings of subsidization and serious prejudice, the EU has done nothing to change its WTO-inconsistent behavior. It has withdrawn only a few tiny subsidies, and has taken no meaningful steps to remove the adverse effects of the $15 billion in subsidized financing that it left untouched. And then, just as the original panel was completing its work, the EU granted Airbus more than $4 billion in subsidized financing for the A350 XWB with the same core terms as LA/MSF for earlier aircraft, and once again with a massive benefit. 

2. The market situation has not changed in a meaningful way, either. Where subsidies caused Airbus’s market share to skyrocket in the years leading up to 2006, they have allowed Airbus to retain that market share today. Thanks to subsidies, Airbus overcame major setbacks, including the A380 production and design flaws, the failure of its initial proposal for the A350, and the failure and premature end of the A340 program in 2011. Thanks to the EU’s relentless subsidies, the U.S. large civil aircraft industry continues to lose billions of dollars’ worth of sales and market share to Airbus every year.

3. Instead of taking meaningful compliance action, the EU seeks to convince the Panel that the same arguments it raised before the original Panel now justify inaction in the face of the DSB recommendations and rulings rejecting those arguments. Its arguments are certainly lengthy, but that does not mask their fundamental lack of substance. ..."

This case is not only a landmark case to understand the concept of subsidization under the Agreement on Subsidies and Countervailing Measures but is also a reminder of the fact that a dispute settlement proceeding need not necessarily offer immediate remedies of removal of subsidies that may be adversely impact one's industry.

  

         

How to choose your trading partner

An interesting piece in Vox Eu on how EU should choose its Preferential Trade Agreement partners is found here titled "The much needed EU-pivot to East Asia". A good ready reckoner for the present status of EU and PTAs is found here. The Vox Eu piece essentially highlights the following pre-requisites that the EU should be looking for in its PTA partner:

They should be big enough to generate economies of scale and scope capable of having a substantial impact on the EU’s relative prices – changes in relative prices are the source of welfare gains.  

They should also be well regulated because modern economies are intensive in norms and dominated by services, the efficiency of which depend largely on the quality of the regulatory schemes in place.  

Finally, they should have a wide network of good-quality preferential trade agreements, capable of offering EU firms opportunities to access the economies already covered by those preferential trade agreements (the ‘hub’ quality) without waiting for longish negotiations with the EU.

Lessons for other countries to choose their PTA/FTA trading partners? 

Latest work on the EU Seal trade case

For those following WTO cases, the EU seal trade ban has been an interesting case. It essentially relates to an EU ban on trade in seal products which has been challenged by Canada. In December 2011 I had blogged under the title "Fate of Seal trade "sealed"? essentially outlining the dispute.

Those interested in the subject may like to see Tamara Perisin's latest article titled "IS THE EU SEAL PRODUCTS REGULATION A SEALED DEAL? EU AND WTO CHALLENGES" here.

"In both the EU and the WTO there are currently pending cases on the legality of EU Regulation 1007/2009 on trade in seal products and its Implementing Regulation 737/2010. While seals seem to be very attractive to the public so that raising arguments against these EU measures are not popular, the Regulations do raise concerns about competences, subsidiarity and proportionality which are relevant for compliance with EU primary law. They also raise concerns about possible protectionism, the use of public morals, coherence and necessity with regard to compatibility with WTO law. This paper seeks to examine all these issues."

The dispute at the WTO (DS400) is at the panel stage. We will be hearing a lot about this case in the coming days.

EU, Protectionism and a strategy

For those interested in the EU's views on protectionism and trade one can look at the Trade and Investment Barriers Report 2013. I am not going into the specifics of the report (it is a wealth of information of EU's perception of trade barriers implemented by other members of the WTO) and the views expressed but the broad strategy on how to tackle trade barriers seems to be clearly outlined. It lists 4 broad strategies:

1.Trade Diplomacy

2. Dispute Settlement

3. Effective use of WTO Committees 

4. FTA negotiations

The broad strategy is detailed here:

"Against the evidence of rising protectionism around the world, the European Commission will continue to ensure that the EU's trading partners stick to their commitments and keep their markets open. Firstly, it will use the trade diplomacy instrument, leveraging on EU's global network of Delegations and working closely with the EU Member States. Secondly, it will use the WTO's Dispute Settlement Mechanism and the EU's presence in WTO Committees to enforce international trade rules. Finally, the European Commission will use negotiations for bilateral trade agreements and WTO accessions to address certain specific trade disruptive measures in third countries."

Some tips to be picked up by other WTO members on how to use international trade rules to pursue national interest?

Malawi, Tobacco regulations and a WTO challenge

The link between Tobacco and the WTO does not seem to be going away anytime soon. After the Tobacco Plain packaging dispute about which I have blogged about here and here, concerns about EUs new Tobacco Products Directive (TPD) were raised by Malawi at the TBT Committee at the WTO.

As per the WTO website:

"The TPD includes a wide range of provisions related to packaging, composition and sale of tobacco products in the EU.  For instance, tobacco products with characterising flavours (including menthol) and slim cigarettes (with a diameter of less than 7.5 mm) would be banned; health warnings would need to occupy at least 75% of the front and the back of the packs; and, cigarette packs would need to be of a uniform size and shape.  These provisions would not apply to cigars, cigarillos, and pipe tobacco, according to the rationale that such products are predominately used by older people — instead the provisions of the existing tobacco directive would continue to apply (Directive 2001/37/EC)."

Reuters reporting about it here highlighted Malawi's concerns about the measure impacting its foreign exchange earning capacities as well as it's employment.

Will this be the next Tobacco dispute at the WTO with developing countries that rely on tobacco exports as one of the main sources of employment and trade challenging the measure? Is the exemption of cigars and other cigar products justified under the TBT Agreement? While Plain packaging was a TRIPS issue, this regulation is more int he nature of a technical regulation that is a restriction on international trade. WIll we see Malawi requesting for consultation at the WTO? Another example of the "rule-based" WTO system where countries irrespective of economic power and standing can participate in the multilateral system to protect their national interests?

EU and Japan also appeal - Ontario case becomes more interesting

I have blogged about the Canadian FiT case at the WTO case here, here and here. News of Canada appealing the matter was reported here. It was not surprising since Canada had lost the case and was contesting the finding of the panel report that it had violated the provisions of the TRIMS and GATT.

Reports of the EU and Japan cross-appealing caught my attention. This would presumably be mainly on the interpretation of the provisions of the ASCM, especially the definition of a subsidy and benefit.

It is clear that the Appellate Body would decide the legal contours of this dispute, especially the compatibility of local content requirements with WTO law in the context of governments guaranteeing a minimum feed in tariff. With a number of countries across the world, both developing and developed, having massive renewable energy support programs (many of them with local content requirements), the AB ruling all be keenly awaited. One hopes that going by timeframe of the Antigua and Airbus-Boeing cases at the WTO dispute settlement, the wait for a closure is not too long!

EU Seal product case and a day to day account!

The EU Seal Product case is being fought at the WTO panel and the proceedings are on. I have blogged about the issue earlier here, here and here.

For a running commentary on the proceedings it is interesting to see Rob Howse's account of the proceedings detailed out on the IELP blog here, here, here and here! It gives a sense of the legal analysis being undertaken, the nuances as well as the excitement of courtroom drama that is associated with legal disputes.It is the window to the otherwise closed world of dispute settlement.

Would be interesting to see blogs dedicated to unravelling the debates of dispute settlement proceedings  on a day to day account! Too much to ask?

It is Argentina's turn now

Argentina had requested for consultations with the EU and US in 3 cases regarding importation of lemons, beef and biodiesel. I have blogged about the rising tensions between Argentina and its trading partners here. Now it seems that the consultations have not borne fruit and reports of Argentina deciding to file a WTO complaint in this regard. The three disputes where the request for consultation were made are DS 443, DS 447 and DS 448. News reports of Argentina going ahead with the complaints are found here and here.

Argentina has been criticized for putting up protectionist measures about which I have blogged here.Panama recently filed a dispute (DS 453/1) against Argentina at the dispute settlement  body. These cases seem to be in retaliation to those allegations.I have done a detailed piece about the possible WTO violations in the case of biodiesel here.

We again see the WTO dispute settlement mechanism playing out as a forum for resolution of disputes without being seen as causing a "trade war" or "imbroglio". Argentina has been active in the WTO dispute settlement process being a complainant in 20 cases beginning in 1996. 

Things are heating up at the dispute settlement forum with more countries seeking trade remedies and taking on their trading partners. News of EU contemplating a WTO complaint against the new member Russia is the topic of my next post. Good news for a rule based resolution of disputes?

After Australia, it is EU now - Tobacco packaging regulation goes global

After Australia, it is the EU now which is going ahead with a tobacco packaging regulation that has health warnings as well as a ban on flavored cigarettes. Reuters and IELP blog reported about it. After the Cloves Cigarettes and Australian Tobacco Plain Packaging case, will this be the next biggest battleground (once the EU regulations are enacted) for the tobacco industry to agitate?

"Manufactures have increasingly looked to developing Asian and African markets to compensate for falling European sales where rising incomes have led to a big increase in sales of cigarette brands such as Marlboro in recent years, making those markets a major source of revenue growth for tobacco firms. 

Due be published on Wednesday, the proposals must be jointly approved by EU governments and the European Parliament before they can become law, a process that could take up to two years. 

"There's going to be a long way to go once these proposals are published," said Simon Evans, a spokesman for Imperial Tobacco. "We are confident looking many years into the future that the EU will be an area where we can sustainably grow and develop our business."

The WTO dispute settlement mechanism and tobacco seem to be going along rather too often...

Russia and WTO - new challenges

Russia's entry into the WTO has been heralded as a major event in the world trading regime's history. I have blogged extensively on Russia's entry here, here and here.

While Russia is settling down in its new position in the multilateral trading institution, its trading partners are getting a little impatient it seems. Reports of the EU being unhappy with certain restrictions placed by Russia in the automobile sector, exports of live animals and other goods.

Reuters commented on the issue thus:

"Russia joined the WTO this year after a 19-year wait and Putin has said the country would use its membership to develop worldwide trade links. 

But he said in November the country's $1.9 trillion (1.17 trillion pounds) economy could suffer from WTO entry due to the increase in imports that would result. 

Russia's team at the WTO is not fully up and running, something which may be delaying an EU decision to launch a case at the global body."

The Russian Team - Case for the strengthening of the legal capacity of the Russian Federation to meet these challenges? It is just the beginning. 

How will Russia engage with the multilateral system?

Strong opposition to trade policies and measures not only get expressed by filing of trade disputes at the dispute settlement mechanism of the WTO. The Councils at the WTO also provide important platforms for countries to express their reservations against measures they see as discriminatory or incompatible with the WTO. How much of this leads to a resolution of the dispute is debatable, but the Councils do act as platforms where all members can align and realign their positions.

The recently held   Council on Trade in Goods saw such an expression of opposition to Russia's measures after it entered the WTO. I had earlier blogged about Russia's recycling fee as a possible violation of WTO rules here and here. Several members including Japan, EU and the US raised concern on the recycling fee as unfairly impacting imported vehicles while not impacting locally made automobiles.

"The EU expressed concern over what it described as a surge of protectionist measures taken recently by the Russian Federation. It criticized two measures in particular: the ban on importation of live animals, especially slaughtered pigs; and the recycling fee for automobiles, which imposes fees on imported cars but gives a choice of non-payment to domestic cars. The EU said it is consulting with Russia on these measures. 

Japan also expressed concern that the recycling fee discriminates against foreign car companies. The US shared the concern about the recycling fee. In addition, it urged Russia to take the final step to join the WTO’s Information Technology Agreement (ITA), and to notify its Customs Union to the WTO. Norway expressed concern over Russia’s system of permits subject to veterinary control. 

Russia requested all comments in writing so it could respond in writing."

Russia's entry into the WTO will expose it to various kinds of challenges which it must be prepared for. WHile it was not a WTO member such domestic measures were hardly questioned. Now they become the centre of every trading country which has an interest. How will Russia respond?  How will it equip itself with the legal and technical capacity to fight these cases? It will need multidisciplinary teams of trade policy analysts, legal experts, lawyers, economists and domain specialists to take on a slew of dispute settlement cases. It will have to take on the might of the USTR and EU Trade Commissioner. How Russia will fare will become increasingly clear in the coming days as disputes will be filed against it at the dispute settlement mechanism. Russia would have to recognize that it is part and parcel of being a multilateral member rather than an "assault" on its sovereignty. Will it have to carefully and creatively engage the multilateral system like, perhaps, China did? Early times for Russia still.

EU, BRICS and impact of Globalization

I came across two contrasting pieces on the impact on globalization on national economies.

"Globalization and the Crumbling BRICS: From Promises to Threats" brought out the dangers of over-reliance on globalization, and highlighted the importance of the growth of local economies in the context of BRICS. It also emphasized the interconnectedness of large economies like the EU and the U.S. with big emerging economies in Asia.

"Globalization now means that as long as Europe is in semi-collapse due to its inability to resolve its banking and sovereign-debt problems, and the US economy is stagnant and hostage to partisan struggles over state spending and taxation, emerging markets will not be able to pursue their past growth strategy. 

The real risk now is that facing high expectations and slow growth, the BRICS will turn from motors of the economy to threats of unrest and disruption.  China is facing an uncertain transition to new leadership amidst growing waves of strikes, environmental protests, and demands for greater openness and democracy driven by rapidly-expanding social media.  India is facing corruption scandals and a political transition as regional parties are supplanting the national consensus created in the past by the Congress party.  Russia has seen unprecedented protests against President Putin since his return to power in disputed elections, while its prospects for oil and gas exports are threatened by the rapid expansion of fossil fuel production through fracking in the U.S. and rising production in Qatar, Iraq, and Turkmenistan.  Brazil is perhaps best positioned to pursue domestic growth, as its ethanol-fueled economy and still-abundant land offer opportunities for its own population to improve their status.  But South Africa faces severe risks from a still greatly underemployed young population that has yet to benefit economically from the end of apartheid and confronts increasingly corrupt and ineffective national ruling party (the ANC). 

Europe and the U.S. had thus better focus hard on getting their own economic houses in order.  Far from expecting the BRICS economies to lead them to greener pastures, they may need all their resources and attention to deal with looming unrest and disruption in the BRICS as the latter struggle with an end to easy export-led growth and try to find new pathways to economic growth."

"Globalisation brings opportunities, not problems, for EU industries" stresses on the importance of export led growth for the EU. It calls for a more open Europe harnessing the advantages of the globalized world. Referring to a report on competitiveness by the European Union, it says:

"The report suggests that the EU pursues policies that increase openness to trade and better-target the promotion of R&D in process and market innovations. This will help local companies become part of global value chains, allowing them to reap the benefits of products produced abroad. Gaining access to these global value chains is paramount given that more than two-thirds of EU imports consist of intermediary products – that is, products traded among producers and suppliers. 

Off-shoring, which is when companies relocate a business process from one country to another, will also require that regulations evolve to adapt to the 21st century. The report therefore promotes policies that will increase the EU’s share of exports of finished goods from trading partners, particularly emerging industrial powers like China, Brazil and India. 

Closer to home, the report suggests ‘neighbourhood policies’ targeted at fostering trade in Europe’s backyards. Cross-border investment and trade with neighbouring countries are, in the words of the report, ‘low-hanging fruits’ that have not yet been utilised to their full potential. The report says that Russia, Ukraine, Switzerland, Norway and Egypt are some of the EU’s top non-EU trading partners.

There is perhaps no single way to achieve economic growth in a globalized world. The importance is perhaps to keep one's options open  and move forward in national interest.