Tuesday, November 5, 2019

To sign or not to sign - RCEP and trade recipies...

The Regional Comprehensive Economic Partnership (RCEP) trade agreement, intending to cover half the world's population and negotiations which started in 2013, is all over the newspapers.

India has decided not to sign off on it.

This post is not to comment on the RCEP negotiations - I was curious to know the front page headlines in some of the major RCEP members. So here goes:

Japan - The Japan Times reported that the RCEP members have given up signing off on the deal this year.

China - The China Daily was on a more positive note quoting statements that indicated hope that the deal would be concluded soon. The present outcome was regarded as major progress.

New Zealand - The NZHerald focussed on New Zealand's interests and stated that though there was no RCEP sign off, most of the leaders were old acquaintances of the NZ premier.

Singapore - The Strait Times was more direct - it was India that rejected the RCEP deal while 15 others were ready to sign off next year.

Australia - The Canberra Times reported that though RCEP was not through New Zealand did manage to upgrade its bilateral deal with China.

The Guardian had an interesting quote from the Trade Minister from Australia:
“Australia goes into this trying to achieve the most ambitious agreement possible but realistic that we have, across the 16 countries, huge development differences, huge population differences, huge differences in the system of government and cultures of those countries. Bridging those divides is probably the biggest challenge that’s ever been faced in terms of a trade agreement being signed and sealed around the world.”
Trade negotiations and their complexities! But this is the first time a trade deal in Asia has got so much front page coverage. They were usually destined to the 8th or 9th page!



Tuesday, October 29, 2019

A globalisation guide

The Peterson Institute for International Economics has this interesting infographic guide to globalisation and what it has done to the US.

It covers the history, effects, perceptions on globalisation and has some policy recommendations for the US considering the backlash there is to it there.

Some interesting information:

1. Tariff rates have fallen of all major economies

Major economies dropped tariff rates and kept them low

2. China biggest source of imports to the US

China has become the biggest source of US imports
3. Services the mainstay of US trade surplus

United States has growing trade surplus in services and deficit in goods

While recognising that there are winners and losers in increasing reduction of trade barriers, the piece has a set of recommendations for the US including these:

1. Use FTAs to improve competitiveness of US businesses, increase total trade and boost overall economic growth

2. Work within the WTO and various FTAs to settle disputes, ensure fairness - improve the rules of the system rather than abandoning the rules

In other words, continue to play the role of a rule maker rather than being out of it. Lessons for others too?

Monday, October 28, 2019

May Day - Labour disputes under trade rules

The inter-linkage of labour standards and trade rules has been a contentious one. Many FTAs already have provisions relating to labour standards in them. 

I have blogged about it here, here and here.

However, disputes relating to labour standards have been few and far between even in the context of bilateral FTAs.

However, that is set to change. Two disputes have made a beginning.

The first one is a US-Guatemala labour dispute under the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). The US formally launched the case in 2010 and alleged that treatment of Guatemalan workers was in violation of their labour rights, while also putting American workers at an unfair competitive disadvantage. The panel is this case decided in favour of Guatemala finding that the alleged failure of Guatemala to enforce labour legislation was not done in "a manner affecting trade".

The second dispute, a more recent one in 2019, is a panel request under the EU-Korea FTA this time is from the European Union against the Republic of Korea concerning certain measures, including provisions of the Korean Trade Union Act, which are alleged to be inconsistent with Korea’s obligations related to multilateral labour standards and agreements under the EU-Korea FTA. Further, non-ratification of ILO conventions have also been alleged to constitute a breach of Korea's obligations under the FTA.

While labour standards have been finding their way in trade rules for some time now, disputes regarding their implementation had not seen the light of day. While the two disputes are very different in character, it indicates how local labour law and enforcement can become the subject of some serious international adjudication.

Will these two disputes accelerate or hinder the proliferation of labour standards in future trade agreements is a debatable question.


Sunday, October 27, 2019

Having the Appellate Body without the Appellate Body

The Appellate Body crisis is rather deep at the WTO. The AB will stop functioning if the blockage to the reappointment process is not solved by December 2019.

What happens if there are panel reports that cannot be appealed against due to this impasse. The EU and Norway have come out with an alternative - Article 25 arbitration as per the DSU.

Article 25 states:
Arbitration1. Expeditious arbitration within the WTO as an alternative means of dispute settlement can facilitate the solution of certain disputes that concern issues that are clearly defined by both parties. 
2. Except as otherwise provided in this Understanding, resort to arbitration shall be subject to mutual agreement of the parties which shall agree on the procedures to be followed. Agreements to resort to arbitration shall be notified to all Members sufficiently in advance of the actual commencement of the arbitration process. 
3. Other Members may become party to an arbitration proceeding only upon the agreement of the parties which have agreed to have recourse to arbitration. The parties to the proceeding shall agree to abide by the arbitration award. Arbitration awards shall be notified to the DSB and the Council or Committee of any relevant agreement where any Member may raise any point relating thereto. 
4. Articles 21 and 22 of this Understanding shall apply mutatis mutandis to arbitration awards.
The text of the EU Norway agreement to resort to arbitration is here. It reiterates that it is a temporary phenomenon. The Arbitrators will consist of former Appellate Body Members - that ensures some continuity. The agreement emphasizes that "under the appeal arbitration procedure the European Union and Norway intend to replicate as closely as possible all substantive and procedural aspects as well as the practice of Appellate Review pursuant to Article 17 of the DSU including the provision of appropriate administrative and legal support to the arbitrators by the Appellate Body Secretariat."

In effect it is the AB back in action without the AB members? Also Article 25(4) of the DSU states that the provisions relating to surveillance of implementation of recommendations and rulings of the DSB as well as compensation and the suspension of concessions would apply.

So, is Arbitration appeal under Article 25 the way forward for appeals for other members of the WTO, except those opposing the AB? It is like having the benefits of the AB without the AB members.

Interesting times.

Currency misalignment - Barking up the wrong tree?

Image result for currency wars


Currency manipulation and trade rules have a contentious link. For long the debate has been whether the IMF is the right arbiter of the complex issue of currency manipulation. However, recent bilateral trade negotiations as well as trade narratives have tended to argue that currency manipulation should be covered by strong enforcement mechanisms in trade rules.

I have blogged about it herehere and here. I almost thought there would be a currency dispute at the WTO in 2013!

recent piece by Stephen S.Roach in the Project Syndicate seems to indicate that the push on currency manipulation doesn't seem to be particularly effective.
Promises of a currency agreement are equally suspicious. This is an easy, but unnecessary, add-on to any deal. While the renminbi’s exchange rate against the US dollar has fallen by 11% since the trade war commenced in March 2018, it is up 46% in inflation-adjusted terms against a broad constellation of China’s trading partners since the end of 2004. Like trade, currencies must be assessed from a multilateral perspective to judge whether a country is manipulating its exchange rate to gain an unfair competitive advantage.
 That assessment makes it quite clear that China does not meet the widely accepted criteria for currency manipulation. Its once-outsize current-account surplus has all but disappeared, and there is no evidence of any overt official intervention in foreign-exchange markets. In August, the International Monetary Fund reaffirmed that very conclusion in its so-called Article IV review of China. Although the US Treasury recently deemed China guilty of currency manipulation, this verdict was at odds with the Treasury’s own criteria, and Mnuchin is now hinting that it may be reversed. Far from essential, a new currency agreement is nothing more than a feeble grab for political bragging rights.
While debates about whether currency manipulation and undervaluation do fall under the ambit of trade rules still continue, does reality offer a different picture?

Thursday, October 24, 2019

ISDS, UNCITRAL and reform

For those following the Investor State Dispute Settlement reform debates, the UNCITRAL process is quite informative. While investment facilitation plurilateral negotiations are finding some beginnings at the WTO, bilateral investment treaties are being rescinded and reworked at national levels, the UNCITRAL Working Group III  debates on ISDS provides opportunities to look at the underlying critiques of the present system.

Details of the UNCITRAL sessions are found here.

A recent account of the narratives is found in the IELP blog here.

Some reading to do

This book promises to be interesting in terms of offering out of the box solutions to the vexed issues of trade and investment law and policy. Need to get hold of it soon!


World Trade and Investment Law Reimagined

I have blogged earlier about Alvaro Santos' work in the context of developing country policy space in trade negotiations here, here and here.

This one will no doubt be a good read!