Seal trade dispute - It is not sealed yet

The Seals dispute case has attracted a lot of attention in international trade law circles. The Panel decision found the exceptions to the import ban to be inconsistent with EU's obligations under the TBT Agreement.

However, the battle is not yet done. Canada and Norway, who were complainants in the case have preferred appeals to the Appellate Body at the WTO. The details are found here.

Particularly Canada stated this in the notice of appeal:

"Canada submits that the Panel erred in finding that the EU Seal Regime is provisionally justified under Article XX(a). Specifically, the Panel failed to interpret and apply the first element12 of Article XX(a) correctly, by ignoring the words "to protect", and thereby omitting to determine whether the sale in the European Union of products derived from commercial seal hunts created a risk to an EU public moral.13 It also erred in its interpretation and application of the necessity test under Article XX(a) with respect to the issues of the contribution of the EU Seal Regime to the identified objective, and with respect to the reasonable availability of the alternative measure advanced by Canada already noted above in the context of Canada's request for review under Article 2.2 of the TBT Agreement.14 In addition, although it came to the correct conclusion that the EU Seal Regime is not consistent with the requirements of the chapeau of Article XX, the Panel erred in its reasoning in coming to this conclusion.15"

The Public Moral issue back to the forefront once again?

 

Local content was always there, my friend

For those who are following the domestic content requirements in renewable energy debate (I have blogged about it here, here and here), especially in the context of the Ontario Feed- in tariff case, a recent study highlights the universal use of domestic content requirements or local content requirements by countries in renewable energy programs around the world.

The study titled "Local Content Requirements and the Renewable Energy Industry - a Good Match? " by ICTSD is found here.

The paper concluded:

"Finally, as already emphasized at the beginning of this paper, further research is required to support a meaningful debate on this pressing issue. As indicated, to date there has been relatively little empirical analysis of the potential of LCRs being used in conjuncture with the creation of globally competitive innovators. This is especially the case for LCRs in RE policy. Econometric modelling of LCRs for RE growth is particularly needed. It is certain that many countries use LCRs in RE policies and that these schemes are often contradictory to WTO law. However, it is in the interest of neither the trade community, nor the green tech community, to have the necessary debate before the WTO Dispute Settlement System. Instead, there should be informed debate about what is effective, and what is agreed as appropriate, in the support of critically necessary green technology development."

A classic case of trade versus the environment? Or is there a need for a re-look at the trade rules itself? Or are they both compatible?

In another context, an interesting piece of the clash of policy goals of free trade, protection of the environment and geo-politics with respect to the dispute of Chinese solar panels imports into Europe.

All in all, trade and environment have a lot to sort out here.

Is this compliance cool?

The COOL dispute (DS384) is back again. I had blogged about it here, here and here. New regulations by the US in order to comply with the WTO ruling have been issued. They are found here. OpenMarket.org has a detailed account of the latest compliance issues here.

Canada states that it does not amount to compliance of the WTO decision.

A long battle over what constitutes compliance? A la the Airbus Boeing dispute?

"Made in California" labelling - Protectionism?

We are familiar with the Buy American provisions. Now a proposed Bill in California that encourages "Made in California" labelling is making the news. News about it is found here. The Bill is found here.

The purpose of the Bill is stated here:

"The Made in California Program, a public and private collaboration, is hereby created within the Governor’s Office of Business and Economic Development. The purposes of the program are to encourage consumer product awareness and to foster purchases of high-quality products manufactured in this state."

Private businesses can participate in the program on a voluntary basis. I am not sure if there is a GATT violation here but the Canada-US Blog termed it as State Protectionism.

"Canadian manufacturers and exporters should be concerned about the proliferation of State Buy America initiatives. This is just one example of a developing problem for cross-border trade."

It may just be a labelling program without any international trade law implications. Or who knows - a Canada-Us dispute at the WTO?

FiT ruling, government purchase and some interesting findings

The much awaited Canada FiT Appellate Body report is out. For those interested in a  quick look at the findings, here it is. The detailed 145 page decision for those die hard WTO fans is here. The IELP blog bringing out the aspect of the domestic policy space available for countries to implement renewable energy schemes had this initial reaction.

The implications of the decision for FiT programs based on local content requirements worldwide is important. One would also wait and see how the province of Ontario and Canada would respond in terms of compliance.

My initial reading of the summary and quick read of the decision indicates:

1. The mandatory local content requirements violate Article III:4 GATT and Article 2.1 of TRIMS.

2. They are not saved by the government procurement exception in Article III:8 GATT exception since there is no governmental purchase of renewable energy equipment. perhaps the striking feature of this decision is the distinction made between the electricity produced and the renewable energy equipment. The link that the Panel had found was over ruled.

"5.79. We have found above that the conditions for derogation under Article III:8(a) must be understood in relation to the obligations stipulated in the other paragraphs of Article III. This means that the product of foreign origin allegedly being discriminated against must be in a competitive relationship with the product purchased. In the case before us, the product being procured is electricity, whereas the product discriminated against for reason of its origin is generation equipment. These two products are not in a competitive relationship. None of the participants has suggested otherwise, much less offered evidence to substantiate such proposition. Accordingly, the discrimination relating to generation equipment contained in the FIT Programme and Contracts is not covered by the derogation of Article III:8(a) of the GATT 1994.530 We therefore reverse the Panel's findings, in paragraphs 7.127, 7.128, and 7.152 of the Panel Reports, that the Minimum Required Domestic Content Levels of the FIT Programme and related FIT and microFIT Contracts are laws, regulations, or requirements governing the procurement by governmental agencies of electricity within the meaning of Article III:8(a) of the GATT 1994. Instead, we find that the Minimum Required Domestic Content Levels cannot be characterized as "laws, regulations or requirements governing the procurement by governmental agencies" of electricity within the meaning of Article III:8(a) of the GATT 1994."

3. The Appellate Body did not come to the conclusion that the measure was a prohibited subsidy under Article 3.1 (b) of the ASCM.

Hence, though the program mandating local content was found to be in violation of GATT provisions it was not held to be a prohibited subsidy under the ASCM.

Legal analysis of the Canadian FiT case

A detailed legal analysis of the Canadian FiT case by Shailja Singh of the Centre of WTO Studies is found here. I have blogged about it in three parts here, here and here.

On the dissenting opinion the analysis noted:

"The present dispute is one of those rare disputes in the working of the WTO disputes settlement mechanism, where a dissenting opinion has been given one member of the Panel. The dissenting opinion differed with the majority panel with respect to whether the challenged measures conferred a benefit within the meaning of Article 1.1(b) of the SCM Agreement."

Are we going to see more dissenting opinions in the Panel/AB reports of the WTO? Is it a sign of evolving jurisprudence or multiple interpretative discourses that can exist within the international trade regime?

Looking forward to more legal analysis of the decision in the ASIL Insights or IELP blogs, until it is appealed against by Canada. I am almost sure that the case will go to the Appellate Body of the WTO.

Procurement by government, commercial resale and feed in tariff - Some interesting questions

Canada has decided to appeal against the Panel decision in the Ontario feed in tariff case. I had blogged about it here.

The notice of appeal is found here.Going by the contents, The main challenge is on the applicability of Article III:8(a) GATT to the facts of the case. Canada claims that it's measure is exempted under his provision and thus does not violate national treatment principle under GATT.

"Canada seeks review by the Appellate Body of the Panel’s findings and conclusion that the Government of Ontario’s FIT Program, as implemented through the FIT and MicroFIT Contracts, is not covered by the terms of Article III:8(a) of GATT 1994.This conclusion is in error and is based on erroneous findings on issues of law and legal interpretation including the Panel’s finding that the Government of Ontario purchases renewable electricity "with a view to commercial resale". 

Canada also requests the Appellate Body to find that the Panel acted inconsistently with Article 11 of the DSU by failing to make an objective assessment of the facts related to this issue, specifically with respect to the Panel’s finding that the resale of electricity purchased under the FIT Program is "commercial" in nature, and by using this faulty factual finding to support its conclusion about the applicability of Article III:8(a) of GATT 1994 to the FIT Program."

Article III:8(a) GATT states:

"The provisions of this Article shall not apply to laws, regulations or requirements governing the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or with a view to use in the production of goods for commercial sale."

The contours of this provisions would definitely be the subject matter of the AB proceedings. For an interesting debate on this subject see my comments on the IELP blog here. Would be interesting to see the AB interpreting "commercial resale" and other provisions of GATT. This would definitely have widespread implications for renewable energy support programs across the world. Another classic example of domestic policy space being impacted by international economic law and policy.

Ontario feed-in tariff case countdown begins

WTO watchers are keenly awaiting the end of November decision of the Panel hearing the Ontario Feed-in tariff case against Canada (DS 412). The decision will be the first case at the WTO that lays down the jurisprudence relating to local content and applicability of WTO law (especially the nondiscrimination rule as well as subsidies) in the context of renewable energy programs. I have blogged about it recently here. With many countries implementing renewable energy  programs the decision will be awaited eagerly. The Panel decision is likely to be appealed against. It will also be judicially dissected and critically analyzed by the legal fraternity, especially at the IELP blog. The stakes are high for the renewable energy sector, which is one of the most subsidized sectors in both the developing and developed world.

Anticipating the decision in November reports are predicting the fall out of the case.The Globe and Mail had this piece outlining the possible impact of the Panel decision.

"A crucial ruling from the World Trade Organization, expected as early as this week, could force a dramatic rethink of Ontario’s green energy policies. 

The WTO will decide whether to side with complaints from Japan and the European Union that insist Ontario’s “local content” rules breach international trade law. Those rules force firms that sell premium-priced renewable energy to the province to buy a proportion of their equipment and services in Ontario. The policy, part of the province’s Green Energy Act passed in 2009, was designed to try to create a 21st-century manufacturing sector with an emphasis on renewable technology."

WIll the WTO decision force a rethink across the world about support for local content in renewable energy projects? Will mandating local content become taboo or will countries continue to implement local content programs? Will the issue of whether mandating or incentivizing local content being a prohibited subsidy (subsidy contingent on the use of local over imported goods) under Article 3 of the ASCM also be settled in the decision? Is this going to be a long drawn battle which will go upto the Appellate and compliance stage like the Airbus-Boeing Subsidies case that has engaged the dispute settlement mechanism for more than seven years now? 

Over to the Panel now for a decision.

Local content, renewable energy and the WTO

The FiT ruling in the WTO case (DS 412) of Canada's (more specifically Ontario's) renewable energy program is eagerly awaited. I had blogged about a preliminary report of the WTO Panel here. It will surely be appealed against. What implication does the prohibition of "local content" requirements in renewable energy programs have on programs around the world?

A well written piece on the history and implications of a WTO ruling is found here.

Many questions:

1. What is the implication for countries following "local content' requirements in their FiT or renewable energy programs? Will domestic policy require a thorough revamp?

2. Is there a difference between "mandating" local content and "incentivizing" local content? Is the latter more acceptable?

3. Would the applicability of Article XX GATT general exceptions (protecting the environment) not be available in the case of local content rules?

4. Will we see a splurge of trade disputes wherein renewable energy programs across the world based on local content requirements will be challenged at the dispute settlement mechanism? Will countries take this path or will a negotiated settlement for a renewed multilateral agreement on renewable energy be worked out?

Will keenly await the Panel ruling and the reactions to it.

Seal trade ban - Some issues

I have earlier blogged about the Seal dispute here. Canada and Norway requested for consultations in 2009 regarding EU regulations that ban the importation and marketing of seal products into the EU. The dispute panel in these cases has still not been set up. News of Canada agreeing to the appointment of panelists in these cases is trickling in now. 

This piece highlights the different stakeholders and interests that surround this dispute. The importation and marketing of seal products are banned. Communities and industries related to seal hunting are naturally impacted. Their economies and livelihood are at stake. 

My thoughts on the quagmire of interests, issues and impact this dispute has:

1. Trading communities involved in seal trade are impacted by this ban.

2. The "animal welfare" concerns of people in the EU translated into EU legislation by expression of democratic will is an exercise of domestic, regulatory policy space. Moral choice has been exercised by the EU.

3. The EU measure undoubtedly impacts seal trade. Whether it is discriminatory or unreasonably restrictive of international trade is another issue. Does the exercise of EU's domestic regulatory space have a discriminatory impact on Canada?

4. Does the opinion of the Canadian people regarding seal trade have any bearing not he dispute? Should Canada's position in the WTO reflect the interest of those adversely effected by seal trade or public opinion in Canada which may be against seal trade? What is Canada's "national interest" in this case?

5. It is reported that the value of seal trade is minimal compared to the benefits that Canada will gain by a trade agreements with the EU. Should there be a trade off and Canada drop this dispute to gain in trade with the EU?

6. It is often said that there are winners and losers in the globalization game. In this case, "trade barriers" are impacting livelihoods of certain people in Canada. Is the answer fixing alternative employment avenues and compensatory packages for them rather than challenging EU's domestic policy space? Can this analogy of providing compensation packages extended to other "losers" in the globalization arena. Industries and sectors often lose out to international competition. Should national strategies increasingly look at cushioning such losses? Is it feasible at all or should market forces be allowed to take its course.

7. It is "animal welfare" today. Can it be extended to labour rights, democratic values, social norms and environmental standards tomorrow? Can domestic regulatory policy space be a weapon of protectionism?

And finally on the delay in the dispute being proceeding at the WTO. The request for consultation was made in 2009. It is 2012 and the panelist have still not been chosen. Does not augur well for the dispute settlement mechanism of the WTO as commented by Robert Howse here. The only consolation perhaps is that the complainant, Canada, is itself the cause for the delay in the establishment of the panel. Trying times for the dispute settlement system.