Dispute settlement and reforms

Are we going into a possibility of some Dispute Settlement reforms? The statement of the DG, WTO recently indicates this:

"Before I conclude, let me briefly mention the Dispute Settlement negotiations, where the Chairman of the DSB Special Session Ambassador Saborío, is now launching a new phase of the DSU negotiations on the basis of consultations he held last month with delegations.  As the first step of this new phase, the Chairman will now consult a group of delegations on essentially all outstanding issues in the DSU negotiations.  At these consultations, the Chairman will invite proponents and other interested participants to follow up with a focussed exercise among themselves to explore solutions on specific issues.  The Chairman intends to assist this exercise and ensure its transparency for all delegations."

Looking at this space for more details...

No more wars?

Pascal Lamy recently commented on the ability of the dispute settlement mechanism of the WTO to prevent trade wars thus:

"I think one of the great things about the WTO is that we don’t have to wage wars anymore. We have trade frictions. The more trade you have, the more occasions you have to have frictions. Part of this friction becomes trade disputes. If there is a trade dispute we will adjudicate it, but there is nothing like a trade war, like there was in the past. So, in many ways, the existence of the WTO provides a sort of collective insurance policy against trade friction degenerating into political problems."

The significance and role of the dispute settlement mechanism is often underestimated in world trade. Though anointed the "crown jewel" of the WTO system, trade disputes are often seen as a negative thing. The other way to look at it is as a "safety valve". With increased trade in a globalized world there are bound to be disputes. National measures are bound to be challenged. Instead of domestic measures being a cause for embarrassment and rising diplomatic wars, what better way than to solve it within the rule-based system. With this, trade can go on while disputes can be resolved amicably through a channel. It is definitely better than a "power-based" system where the economic strength of the trading partner determines the result of the dispute. There are of course questions about the efficacy of the dispute settlement in terms of the time taken and compliance levels. However that does not take away the positives. We are not in a perfect world, are we?

Plain packaging of tobacco - Employment, developing country and a dispute

Apart from Honduras and Ukraine which have challenged the legislation on plain packaging of tobacco products of Australia, the Dominican Republic is also a complainant in the WTO dispute (DS441). The request for consultation is here. I have blogged about the issue here, here and here.The WTO website shows that this is Dominican republic's first case as a complainant as a WTO member. Challenging a developed country like Australia in the WTO is an indication of the level playing, rule based system that the dispute settlement system of the WTO offers to both the developed and developing worlds. 

Reuters recently reported that the Dominican Republic had now requested for the establishment of a WTO Panel, presumably because the consultations did not lead to any results.

"HE Luis Manuel Piantini, Ambassador of the Dominican Republic to the WTO, explains: "Tobacco has been an intrinsic part of the Dominican culture and heritage for centuries, and the tobacco sector is vital for our development.  Our producers have made enormous investments - including in intellectual property - to turn the Dominican Republic from a simple tobacco leaf exporter into one of the world's leading producers of premium cigars and the world's largest exporter of cigars.  This a significant achievement for a small developing economy.  Plain packaging will wipe away these achievements - our premium cigars will be dressed as discount products, which people will continue to smoke; prices will ultimately fall, affecting the livelihood of more than a hundred thousand Dominican workers and their families.  The TRIPS and TBT agreements protect our commercial and development achievements."

Interesting points from the Dominican Republic standpoint:

1. The critical role of the tobacco industry in the national economic growth perspective of the country

2. Livelihood of many locals will be affected by the measure

3. Investments and intellectual property rights impacted

4. Export of tobacco products integral part of the developing economies growth story

5. Multilateral trade rules protect the country's interests

6. Domestic pressures would definitely favor local employability against public health concerns of another country

What considerations will the Panel depend upon? Are the interests of developing countries and employment relevant at al in the dispute settlement process? Will they have a role to play in deciding the compatibility of the Australian measure? Australia's health concerns versus the Dominican Republic's economy - what will prevail? Include in this the business interests of Tobacco companies - it does make a heady cocktail that the WTO dispute settlement has to confront.

Protectionism - is it inevitable?

The Knowledge@Wharton website had an engaging piece about Argentina's rising protectionism. Argentina's protectionism has been on my blog here, here and here. Titled "The Risks and Rewards of Argentina's Growing Protectionism" the piece highlights the trend, both int he developed and developing world, towards inward looking policies. Is multilateralism and reduction of trade barriers under serious threat? Is the dispute settlement mechanism going to be over burdened with cases challenging protectionist measures across the world. 

Detailing the steps Argentina has taken to turn "inward" over the last few months the pice notes:

"In Argentina, this reality is reflected in a long list of measures imposed over the past year, notes Ernesto O’Connor, a professor of economics at Argentine Catholic University (ACA). These include quotas; non-automatic import licensing, which control imports by linking them to compliance with specific criteria; applications for compensation for tariffs paid by importers who also export other goods with a value that at least equals the value of their imports, and increases in the common external tariffs imposed on 100 industrial products covered by the rules of Mercosur, the economic and political agreement that includes full members Argentina, Brazil, Paraguay, Uruguay and, as of July 31, Venezuela. Beyond this, there are some restrictions on exports of meat, dairy products, wheat and corn that have been in force for five years, aimed at increasing their supply in the domestic market. 

Beginning this year, the Argentine government has also imposed what some call a “foreign exchange trap”, a restriction that makes it impossible for Argentines to buy foreign currency. This policy is also a mechanism for closing the Argentine economy, experts say, because, as a result, it has become more and more expensive for Argentines to travel to foreign countries and for Argentine students to save money in dollars, a practice that has long been common in the country. During the final week of August, the government also imposed on its citizens a 15% tax on their use of credit cards in foreign countries, which makes consumption overseas more expensive for Argentines and encourages them to spend in their own country."

Is this going to be a long term trend across countries - be it Brazil, India, Argentina, the EU or the U.S.? What are the implications of this strategy for multilateral trade? Will it result in further hardening of stands at the negotiating table and heighten tensions at the dispute settlement mechanism? Would it lead to more FTAs and bilateral agreements based on mutual convenience and power equations? Can the WTO intervene at all in this situation? While there have been growing signs of countries taking protectionist steps, are they short term measures which would blow away with the global economic crisis or is it part of a larger national strategy to look at domestic industries and shun international markets. Is it economically feasible or tuned to the international reality of global supply chains and comparative advantage?

Developing countries and compliance in WTO disputes - Some thoughts

Normally, one tends to focus on WTO disputes in terms of the issues they raise, developed -developing country relations as well as the political economy of the dispute. Seldom is detailed analysis done after the Panel or Appellate Body provide their decisions. What happens to compliance? How are the decisions implemented? What is the efficacy of the implementation of WTO disputes and what bearing does it have on implementation of international law? What special lessons does the study of compliance in WTO disputes have for developed-developing country dynamics at the WTO?

Sonia Rolland has a brilliant, detailed piece on development status of members at WTO disputes and what implications it has for implementation and compliance of the decision? Does it make it easier for developing countries to ensure compliance from developed countries? Does the WTO provide for such preferential treatment? Does one view developing countries more favourably as compared to a respondent developed country in terms of the need, speed and nature of compliance?

In her article "Considering Development in the Implementation of Panel and Appellate Body reports" Sonia Rolland makes a detailed analysis of Article 21 and 22 of the DSU and the impact it has for developing countries. Article 21 of the DSU, as suggested by the author has three specific clauses that pertains to a "development" preference:

"The Article includes three clauses regarding developing members: 

-Article 21.2 specifies that “[p]articular attention should be paid to matters affecting the interests of developing country Members with respect to measures which have been subject to dispute settlement”

- Article 21.7 provides that “[i]f the matter is one which has been raised by a developing country Member, the DSB shall consider what further action itmight take which would be appropriate to the circumstances” and

- Article 21.8 states that “[i]f the case is one brought by a developing country Member, in considering what appropriate action might be taken,the DSB shall take into account not only the trade coverage of measures complained of, but also their impact on the economy of developing country Members concerned.”

The article, however, after making a detailed analysis of Panel and Appellate Body decisions comes to the conclusion that "development" considerations are not paramount in deciding on implementation issues and though there are guiding principles in the provisions the Panels and Appellate Bodies have been rather "neutral" in their interpretation. Discussing the proposals of various developing countries during both the Uruguay and Doha rounds for a re-look at compliance of WTO decisions and developing country needs, the author raises pertinent questions about developing countries and their participation at DSM:

"The effect of the shift to a rule-based system is generally thought to have leveled the playing field for weaker members in terms of the accessibility of adjudication and their ability to win disputes. While it has been assumed that the reinforced procedures of the DSU would benefit developing country litigants, both the qualitative and quantitative data regarding developing country participation (and even more so the virtual absence of LDC participation as a main party in disputes)132 suggest a more complex story. With respect to implementation, the rule-based framework’s impact on developing members’ ability to gain compliance from more powerful members is equivocal. While some large developing members have been successful at obtaining compliance from powerful members (see Brazil’s success against the US in the Upland Cotton dispute), smaller developing members remain at a serious disadvantage. With some exceptions, such as Antigua in the Gambling dispute, weaker members have not often taken on more powerful members (developed or developing) in part because they realize that the retaliatory system of Article 22 may not be of much use to them.

Perhaps equally noteworthy is the virtual absence of developed country submissions on compliance procedures, both during the Uruguay Round and the Doha Round. Yet the reality of WTO disputes is that they have involved mostly developed countries–though the trend is rapidly shifting in favour of developed/developing country disputes and disputes between developing countries. In fact, trade asymmetries and the limitations they pose to effective retaliation affects small developed countries as well as developing countries.Submissions, however, generally propose to differentiate implementation recourses along the lines of the developed and developing members, rather than on macroeconomic criteria such as a ratio of the size of the economies of the country in disputes. Another approach would be to give all members access to the full range of implementation mechanisms (individual, third party and collective retaliation, for example) and to let the economic conditions of the disputants in specific cases determine which mechanism would be the most effective."

While the present report card of compliance and implementation issues vis a vis developing country concerns is not very positive, the author suggests a number of measures that could take into account the "development concern" during compliance:

"Nonetheless, a number of alternative avenues exist to reinforce the DSU’s effectiveness for developing countries with respect to compliance and retaliation, even in the absence of any textual reform. First, a more coherent and concerted practice by arbitrators, Panelists and the AB could lead to the emergence of new standards of interpretation. For instance, provisions urging members to “take into account” the developmental conditions of some members may be read as due diligence or best efforts obligations rather than be ignored altogether or treated as merely hortatory language. Second, decisions by the DSB, or WTO members acting as the General Council, could also be used to implement an interpretative framework that could be more cognizant of the needs of developing members. Third, increased resources and technical assistance could support both a shorter litigation calendar and faster compliance by developing country members. While trade asymmetries are certainly an economic problem hindering small developing countries from obtaining compliance from more powerful members, it is one that can be mitigated in part by legal and institutional intervention."

What should the theoretical framework be in the context of developing country disputes? Also "developing countries" is not a monolithic homogeneous unit. It has countries of varying trading power, influence and capacity. Also, I was trying to contextualize this article, albeit in a very preliminary manner, with recent decisions of the Panel and Appellate Body of the WTO. The Tuna case, Cloves Cigarettes case, COOL case as well as Export of raw material case all have developing countries pitted against developed countries. While the first three have U.S.as the developed country with Mexico, Indonesia and Mexico as respondents, the fourth case has China as the defendant and a developed country (United States) as the complainant. What thrust should the "developing" country context play in ensuring compliance by the respondents in this case? Compliance should increasingly reflect the rule based nature of the DSU rather than trading power or politico-economic realities of countries. Will we see innovative interpretations of "compliance" that would make the decisions ineffectual? Will the developing countries involved have the legal capacity to take on the developed country in establishing the right way of implementation? On a different note, is the developing country-developed country dichotomy irrelevant for compliance? Will we see some lessons for compliance in the way these decisions are complied  (or not complied?) with?

WTO Analytical Index - A brilliant guide

I have always maintained that the WTO website is a fine piece of work showcasing the standards of transparency and ease of finding documents. I have also blogged earlier about the  website here and here. I came across the "WTO Analytical Index - Guide to WTO Law and Practice" on the WTO website which was very informative.

Explaining the rationale of the WTO Analytical Index, the WTO website decalres:

"The WTO Analytical Index is a guide intended to assist in the understanding of the legal interpretation given to, and the application of, the WTO Agreements by WTO dispute settlement panels and the Appellate Body, and decisions adopted by other WTO bodies. Its principal objective is to make WTO law and jurisprudence more understandable and accessible to the reader by identifying how the legal findings of these WTO adjudicatory bodies and the relevant decisions of the numerous WTO committees relate to any given provision of the various WTO Agreements."

Explaining in plain terms, it seeks to demystify various Agreements, their provisions and provisos and case law related to it. Tracing the legislative history of the provisions, the guide seeks to explain the current interpretation of the provisions by the Panel and Appellate Bodies and their interpretative history. The Guide is a welcome "help" in traversing the complex quagmire of WTO rules. It is another example of the emphasis of a "rule based system" rather than a power based one. Coming from the multilateral institution itself is an added advantage. The Analytical Guide is a necessary partner for any serious researcher of WTO law and practice.

A Dispute Tribunal for the WTO - Feasible?

The Dispute Settlement Mechanism in the WTO is often referred to as the crown jewel due too its effective mechanisms of dispute resolution and compliance. A judicial rule based system in an institution which has a history of political negotiation is indeed viewed as one of the positives of the WTO. While the failure of the Doha round of negotiations is viewed as a serious blow to the "negotiating" and "rule making" power of the WTO, the DSM has stood strong in contrast over the past decade. Some argue that the failure of the negotiation causes a serious strain on the judicial branch since disputes that are essentially political and require new rules are tried to be settled within existing legal frameworks leading to tensions.

A brief paper titled "Establishment of a Dispute Tribunal in the WTO" by Debra P Steger highlights another challenge to the DSM - the inadequacy of the Dispute Panels to address the increasing complexity and quantity of disputes at the WTO. Advocating for setting up a Dispute Tribunal which would be a permanent body consisting of international trade law experts to replace the ad hoc Panel system, the author seeks an overhaul of the DSM for ensuring that the legitimacy and credibility of the system is maintained. Highlighting the inadequacy of the Panel system as it exists today, the author states that the increasing complexity of the cases involving interpretation of many agreements as well as the inability to complete the cases within the stipulated time frame has aggravated the need for reform within the system. Increased competence and expertise in international trade law matters is the need of the hour.

Favouring the permanent Tribunal system with a set of part-time members, many advantages are seen in terms of timeliness and efficiency of disposal of cases, experience and expertise, independence and impartiality, collegiality and consistency in decision making, greater geographic diversity in members as well as a strong two-tier system along with the Appellate Body.

"There are compelling reasons to create a dispute tribunal at this point in the history of the WTO. As the WTO adjusts to the rapidly changing global economy, disputes are becoming more complex and challenging, both on their facts and in the novelty of the legal issues presented. Moreover, higher quality decisions would be produced by a tribunal whose members are available at all times and on short notice to serve on cases. This would allow the two-tier system in the WTO to function as it was designed, and enable the Appellate Body to focus on its mandate which is to review issues of law and legal interpretation in panel reports.

Finally, a dispute tribunal would result in significant time savings and efficiencies as compared with the present ad hoc panel system. Time would be saved in panel composition, and other procedural and organizational efficiencies would ensue from having members available at all times and on short notice to serve on cases and from the experience, knowledge and collegiality that would develop over time in the dispute tribunal as an institution.

There is currently a gap between the goals of the DSU and actual experience with respect to the timeliness of the dispute resolution system. While the number of disputes has been declining in recent years, panels have not generally completed their cases within the DSU timeframes and the Appellate Body has also recently begun to request the DSB to extend its timeframes. These delays could ultimately be problematic for the reputation of the WTO both with Members and stakeholders. If these delays continue and become accepted practice, they could undermine respect for the DSU as well as the credibility and legitimacy of the WTO."

The legitimacy of the multilateral system is under serious stress due to the failure of the Doha round. The judicial wing of the WTO has continued to perform an important role to implement a rule based system of mutlilateral trade devoid of "power-based" influences. Will the WTO members be ready for this reform? Though the Panel members are mandated to act independently without any affiliation, doubts have often been raised about the effectiveness of this mandate.   Is the present Panel system more favourable to members? Would the creation of the Tribunal be viewed as "over-judicialisation" of the WTO? Will the Tribunal system be an answer to this? Will the Tribunal be able to overcome the lack of progress in rule making with its judicial interpretation? Is there a danger of "judicial activism" wherein unintended interpretations may go beyond the original mandate? This possibility is true of the present panel system too but the likelihood of it happening more in a body of trade law experts seems more likely. While strengthening the DSM is pivotal to the continued credibility of the WTO, is the creation of the Tribunal system the answer?

Joost Pauwelyn on the future of the WTO

The WTO website has a Public Forum on "Is Multilateralism in Crisis" which has renowned experts in the field predicting the future of the world trading system. It has a piece on Jagdish Bhagwati's bleak future in the context of PTAs about which I have already blogged here.

Joost Pauwelyn in his submission at this Forum titled the "The WTO in Crisis: Five Fundamentals Reconsidered" has providing thought provoking insights with respect to some of the key underpinnings of the multilateral trading system. I have tried to summarise the five main points:

1. Consensus: A need for a relook on the definition of consensus which should strive to be conciliatory and inclusive yet not "single country" vetoes.

2. Member-driven organisations: Broadening the scope of involvement of stakeholders within countries to include affected interests and not just trade diplomats. Involvement of non-state actors.

3.WTO as "hard law": Emphasis on "soft law" rather than the formal dispute settlement mechanisms

4.Single package:Replacing the single package requirement with diversity of rights and obligations depending on the country's requirements and commitments

5.Special and differential treatment for "developing countries": Recognising that developing countries are not a homogeneous unit with identical interests and are in need of differential treatment.

The submission on the "hard law" aspect of the WTO and its importance is relevant in the context of the high reliance on dispute resolution as a mechanism of sorting out trade disputes. To elaborate on his point on the subject:

"3. The WTO as “hard law” subject to compulsory dispute settlement

The WTO was created at the highpoint of legalization of world politics (mid-1990s), on the (mistaken) assumption that “hard” law, enforced by binding dispute settlement, is necessarily “better” law.  To facilitate agreement and, in some cases, because it is simply the optimal way of addressing an issue (e.g. because the problem is merely one of coordination or enhanced flexibility and adaptation is needed¹⁰), the WTO should consider creating some agreements that are not subject to WTO dispute settlement or even mere guidelines with flexibility for domestic implementation and future adaptation subject to peer review and less adversarial monitoring mechanisms.¹¹  In many cases, the incentive structure to comply with soft or informal law may be greater and more effective than those to comply with hard law.  Many problems in today’s networked knowledge society, where technologies change rapidly and uncertainty prevails, are increasingly difficult to address through the rigidity of traditional treaties and formal dispute settlement.  WTO members have already engaged in this direction, adopting ministerial declarations or guidelines in specialized committees (such as the TBT Committee Principles for the Development of International Standards) or non-binding paragraphs in Accession Working Party Reports.  Although violations of these norms are not enforceable in WTO dispute settlement, WTO panels and the Appellate Body can and have referred to them in the interpretation of the WTO treaty.  They could also be backed-up with Trade Policy Review Mechanism style monitoring with the possible inclusion of non-state actors discussed above."

Would the WTO consider some agreements not subject to the WTO dispute settlement mechanism? The dispute settlement mechanism is considered the jewel crowns of the WTO system. It signifies the rule based system's primacy over a "power based" system. A Burkina Faso is as "powerful" in this system as the United States and can enforce a WTO commitment by a decision in its favour. Trading relations or power equations do not play a role in judicial decision making though it may have an impact on compliance issues. The message conveyed is that how so ever powerful you are in terms of your trading might in the globalised world, all countries are bound by a set of clear, rules that are interpreted in a judicial manner bereft of political considerations or pressures. It also acts as a safety valve in times of extreme tensions as well as assuaging domestic concerns of injustice. Should this system be replaced or supplemented by a "softer system?" Would the softer system of peer review, ministerial declaration, trade policy reviews or guidelines be as effective? Would it re-enforce trading power hierarchies? The Ministerial Declaration at the 8th Ministerial Conference at Doha announced a battle against protectionism. However, countries are increasingly adopting protectionist barriers. The only remedy for an aggrieved country against such measures is the dispute settlement mechanism rather than the reliance on a "soft" Ministerial declaration. Does the real world of trade politics and economics require "hard law" rather than "soft law"? Is a combination of the two desirable?

Dispute Settlement at the WTO - Special Issue

The latest issue of Trade, Law and Development is dedicated to Dispute Settlement at the WTO with articles by Joel Trachtman, Jan Bohanes, Simon Lester to name a few. I had blogged about the Journal earlier here. Promises to be an engaging issue.

Aid, trade and WTO disputes

I had recently blogged about the issue of linking aid and trade disputes in the context of Mexico's challenge of the dolphin safe tuna labelling of the US here. I had felt:

"Is the suggestion of reconsidering economic assistance if Mexico persist with its WTO action indicating the political economy of trade? While the WTO rule based dispute settlement open to all member countries for disputes concerning alleged violation of obligations under the WTO agreements, is the political economy of aid stronger? Would it be right for a country receiving aid from another country to initiate a WTO dispute against it? If it is not right, then many countries in the developing world cannot initiate WTO disputes against their aid donors. Should the two issues be linked at all? While the WTO dispute settlement mechanism is a rule based system based on rights and obligations and not "power based" relations, in reality, is there a larger political economy of trading power, aid, foreign relations, economic influence that determine compliance and non-compliance of WTO disputes."

CATO Institute in a blog piece titled "Protectionist Denial and Bribery" seemed to have a somewhat similar view on the issue:

"The most revealing part of the letter, however, is in the last paragraph when the representatives ask the President to bribe the Mexican government to go away.

"If the Mexican government continues to pursue WTO action in this case, we ask that your administration reconsider the level of economic assistance Mexico receives from U.S. taxpayers."

This doesn’t seem very respectful of a dispute settlement process the U.S. has used on numerous occasions to challenge WTO-inconsistent measures like Europe’s aircraft subsidies, Korea’s beef restrictions, India’s chicken restrictions, China’s export quotas, China’s duties on chicken parts, China’s duties on steel, and China’s green energy subsidies, to name a few recent examples.  Criticizing the WTO judicial process as overreaching because it revealed the inadequacies of a favored piece of protectionist legislation and then threatening to abuse the process through petty sanctions does nothing to enable consumers to protect dolphins and makes it more difficult for the United States to mount effective challenges to foreign protectionism."

Some food for thought on issues relating to aid, trade and WTO disputes? 

Annual Report of the WTO 2012

The Annual Report of the WTO 2012 makes interesting reading. As the WTO website states it "provides a brief summary of the organization, an overview of 2011 and a detailed review of the WTO's main areas of activity: trade negotiations; implementation of WTO agreements and trade monitoring; dispute settlement; building trade capacity; and outreach."

The Annual Report is a good summation of WTO's activities for the year. The section on the Dispute Settlement mechanism caught my attention. A review of the disputes filed from 1995 to 2011 which is depicted in a map reveals the following:

"The most active users of the system are the United States (98), the European Union (85), Canada (33), Brazil (25), Mexico (21) and India (19). In eight of the last ten years, the filing of disputes by developing countries has come to equal or surpass the total by developed countries."

It is worth noting that the African continent, South East Asia, many countries in South America ( with the exceptions of Brazil and Argentina) and Australia have largely not utilised the Dispute Settlement mechanism of the WTO as compared to the countries mentioned above. 2011 saw the lowest number of cases being filed at the DSB (8). 1996 to 1998 saw the maximum number of cases being filed annually at the DSB whereas recent years has seen a drop.

The Annual report is a very good summation of the WTO's activities and is like a common person's guide to what the WTO does. Its simplicity, wonderful use of graphics and brevity makes it an easy and must read.

USTR IPR Report 2012 - Some thoughts

The USTR publishes every year an annual review of the state of Intellectual Property Rights (IPRs) protection and enforcement in trading partners around the world popularly known as the Special 301 Report. The Report for 2012 can be found here. While I am not dwelling into many controversial aspects of the country "watch lists" and the like, two sections caught my attention:

1. Implementation of the WTO TRIPS Agreement

2. WTO Dispute Settlement

The report alluded to the state of TRIPs compliance as perceived by the United States today:

"The TRIPS Agreement, one of the most significant achievements of the Uruguay Round, requires all WTO members to provide certain minimum standards of IPR protection and enforcement.  The TRIPS Agreement is the first broadly-subscribed multilateral IPR agreement that is subject to mandatory dispute settlement provisions.

Developed country members were required to implement the TRIPS Agreement fully as of January 1, 1996.  Developing countries were given a transition period for many obligations until January 1, 2000, and in some cases, until January 1, 2005.  Nevertheless, certain members are still in the process of finalizing implementing legislation, and many are still engaged in establishing adequate and effective IPR enforcement mechanisms. 

Recognizing the particular challenges faced by least-developed countries (LDCs), in 2005 the United States worked closely with them and other WTO members to extend the implementation date for these countries from January 2006 to July 2013.  The LDC members in turn pledged to preserve the progress that some have already made toward TRIPS Agreement implementation. Additionally, the LDC members have until 2016 to implement their TRIPS Agreement obligations for patent and data protection for pharmaceutical products, as proposed by the United States at the Doha Ministerial Conference of the WTO.  

In December 2011, WTO Ministers decided to invite the TRIPS Council to give full consideration to a duly motivated request from LDC members for an extension of the TRIPS Agreement transition period.  The U.S. supports this decision and looks forward to continuing to work with LDCs and other WTO members in this regard.     

The United States participates actively in the WTO TRIPS Council’s scheduled reviews of WTO members’ implementation of the TRIPS Agreement and also uses the WTO’s Trade Policy Review mechanism to pose questions and seek constructive engagement on issues related to TRIPS Agreement implementation.  Furthermore, the United States continues to work with other WTO members to encourage a discussion within the WTO TRIPS Council on implementation of the enforcement-related provisions of the TRIPS Agreement.  The United States hopes that the TRIPS Council can generate a useful sharing of experiences related to IPR enforcement to ensure effective implementation of enforcement obligations."

On the Dispute Settlement mechanism it referred to specific cases it had brought against China and EU and had this to say:

" The United States will continue pursuing the resolution of WTO-related disputes announced in previous Special 301 reviews and determinations.  The most efficient and preferred manner of resolving concerns is through bilateral dialogue.  Where these efforts are unsuccessful, the United States will not hesitate to use the dispute settlement procedures, as appropriate."

The reliance on WTO dispute settlement procedures to further one's domestic national interests is portrayed in the Report which is a sharp contrast to some voices in the US to abandon the WTO process after the adverse rulings of the Panel/AB in COOL, Cloves Cigarettes and Tuna cases. It is evident from the para relating to implementation of the TRIPS that the US actively engages the multilateral trade rules to further its national interests. It is often argued that the WTO and multilateral trade rules are a hindrance to national sovereignty. However, it is worthwhile to analyse how one can engage with the multilateral system in its various fora (including Dispute resolution) to further one's legitimate trade interests. While every dispute settlement need not be viewed as a trade war, developing countries should develop the capacity to effectively engage with the dispute settlement process to protect what they perceive as domestic interests be it producers, consumers or the economy as a whole.Engaging with the WTO can be done at two levels - one, using the existing provisions (exceptions) to further one's domestic policies and two, seeking remedies under the Agreements to ensure market access and unfair restrictions on trade are not imposed. However the engagement comes at a cost - and that is one needs to accept the multilateral trading system as a rule based, fair system as well as being a credible player in terms of compliance and action. With domestic compulsions and realities these are tough tightrope walks - but globalised governance and its impact was never going to be a simple cakewalk.

  

       

Alvaro Santos, Robert Howse and Andrew Lang on Domestic Policy space and WTO - Brilliant exchange

I was delighted to see an Online symposium in Opinio Juris on Alvaro Santos' article on domestic policy space and the WTO. The discussion on the article by two leading international trade law luminaries Robert Howse and Andrew Lang was extremely enriching and very engaging. I had written about the article in a blog piece here. In this blog I will reflect on this interesting exchange as well as my thoughts on the issues involved.

In his original article titled "Carving Out Policy Autonomy for Developing Countries in the World Trade organisation : The Examples of Brazil and Mexico" Alvaro essentially argues that there is sufficient policy space within the WTO Agreements for developing countries to pursue their developmental agenda provided they are legally equipped and capacity to engage with the multilateral system is strengthened. Providing a synopsis of this stand Alvaro in the Opinio Juris piece states:

"In “Carving Out Policy Autonomy for Developing Countries in the World Trade Organization: The Experience of Brazil and Mexico”, I argue against the commonly held assumption that WTO legal obligations overly restrict countries’ regulatory autonomy. Despite the presence of restrictions, I claim that there is still flexibility in the system for countries to carve out regulatory space for themselves. That countries can expand their policy autonomy means that governments of developing countries have more agency and responsibility than development scholars typically admit. At the same time, however, the asymmetry of power and resources between countries does affect their experience in the system and thus influences the outcomes to a greater extent than liberal trade scholars usually acknowledge.

         ...

However, to show that countries subjected to similar international obligations can pursue divergent trade and development policies is to make clear that there is policy space and that this space can be put to different uses with divergent outcomes. Developing countries’ governments should bear responsibility — and their citizens should hold them accountable — for the kind of developing strategy they pursue, or refrain from pursuing, within the international trade regime."

The basic thrust of this piece is that, subject to certain limitations, WTO rules do afford sufficient domestic policy space for developing countries to pursue their developmental agendas and as part of the strategic lawyering that is proposed, it is suggested that it should be part of this overall developmental discourse.

Robert Howse while giving the example of compulsory licensing in the TRIPS Agreement as an example of policy autonomy broadly agrees with the view that the WTO rules offer sufficient policy space. He comments on the lack of expertise of WTO law in many countries which perhaps hinder the serious engagement of many countries in the dispute settlement system as well as postulates the need for taking forward the learnings of Brazil and mexico to other countries.

"In some countries, there is no independent expertise about WTO law. The government and the people only hear the views of officials who have been more or less inducted into the global trade policy elite, or those of the WTO Secretariat, or those of interests who are using the notion of WTO illegality to block a policy they oppose for other reasons. Today, however, NGOs are playing an increasingly useful role in entering policy debates and contesting interpretations that are particularly restrictive of policy space (ICTSD’s work on TRIPs is a good example). To be able to do this NGOs had to reposition themselves at least partly from being anti-globalization advocates trying to oppose and delegitimate the system to knowledgeable and shrewd lawyers who see the tensions, flexibilities, and balances in the existing norms that can be a basis for contestation within the legal framework as it stands. I am still struck by how journalists (many, though not all), who can be important in transmitting the meaning of WTO law in a domestic policy debate, will go to the same experts-mostly trade officials, lobbyists, or retired officials, and a few professors who are also consultants or closely connected to the WTO Secretariat-and take their views as the correct ones concerning the meaning of WTO law."

Andrew Lang while agreeing with the broad principle the existence of policy autonomy within the WTO also highlights the need for analysing the receptivity of the dispute settlement mechanism to respond to the development strategies of the developing world. In other words, he states that "the power to shape the interpretation of the law in WTO dispute settlement, in other words, is not just a function of the legal capacities of the parties to a dispute, but also about the structural conditions which make certain legal arguments appear more convincing, persuasive, institutionally appropriate, textually grounded, and so on to legal interpreters." He makes the important point that in the coming decade the importance of the dispute settlement bodies is going to become very crucial and central to global trading and will need to respond to the growing strategic lawyering that Alvaro's article talks about.

"A related thought has to do with the pressures that this project will place on the WTO dispute settlement system. Alvaro, and other writing in this area, are right to say that struggles over the interpretation of WTO law are likely to become an even more central aspect of global trade politics over the next decades, partly as a result of more and more Members building their legal capacity in precisely the way Alvaro describes. Is the dispute settlement system equipped at present to respond to the challenges that this will pose? Does it currently possess a sufficient set of juridical tools and techniques to carve out both a legitimate and effective role for itself as it finds itself ever closer to the centre of trade politics? One of the tasks for the next decade or so it to try to craft a way of ‘doing law’ in international economic governance which bears the weight that strategies such as those described in this article will necessarily place on it."

Andrew Lang ends with a different idea in terms of the absence of the notion of Autonomy itself in a globalised world wherein national policy choices are determined by a host of international factors, WTO law being only one of them. Proposing a radical shift in perception, he proposes that positive experimental domestic autonomy and institutional pluralism should be advocated rather than the "negative" restraint on autonomy by the WTO rules. What this would entail, I assume, is that the international economic order will be based on pluralism of national economic policies rather than an exception of autonomy to globalised rules at present. I am not very sure how that translates into multilateral trade rules, non-discrimination and lack of protectionism? 

"A related thought has to do with the pressures that this project will place on the WTO dispute settlement system. Alvaro, and other writing in this area, are right to say that struggles over the interpretation of WTO law are likely to become an even more central aspect of global trade politics over the next decades, partly as a result of more and more Members building their legal capacity in precisely the way Alvaro describes. Is the dispute settlement system equipped at present to respond to the challenges that this will pose? Does it currently possess a sufficient set of juridical tools and techniques to carve out both a legitimate and effective role for itself as it finds itself ever closer to the centre of trade politics? One of the tasks for the next decade or so it to try to craft a way of ‘doing law’ in international economic governance which bears the weight that strategies such as those described in this article will necessarily place on it."

Finally Alvaro has brilliantly responded to the two responses. Reiterating his stand that developing countries should use the existing legal frameworks to pursue policy autonomy, he states:

" Finally, a word on the character of policy autonomy. Lang calls policy autonomy an illusion because international law –or multiple layers of transnational legal regimes- to some extent already structures countries’ economic policy choices when it comes to trade-related regulations. We can imagine procedural rules about sovereignty, state responsibility, jurisdiction and treaty-making, or overlapping substantive regimes of investment and finance, to name a few. So, a country is never entirely free from constrains. I think that diagnosis is right although once made visible, a country might also be able to influence those background legal regimes that affect its choices on trade measures.

At any rate, it might be that Lang’s understanding of policy autonomy and mine are not so far apart. I see policy autonomy not as some limitless or pre-regulatory status that developing countries should strive to inhabit but as a quest for empowerment within the existing international regulatory regimes that could yield better consequences for them. The call is not for disengagement but for a different kind of engagement. If there were a rallying cry it would not be “leave me alone” but “let me experiment and thrive in the system”."

This interesting exchange throws open many issues in the context of the engagement of developing countries in the WTO? What are the limits to domestic policy choice within the WTO. While it is recognised that WTO rules do provide for domestic autonomy, what are the contours and limits of it? Are there certain fundamental principles that even domestic policy choice cannot question? Can we generalise on these limits or do they depend on the facts of each case that are brought to the dispute settlement body? WTO law and interpretation are becoming increasingly complex quagmire of legalese and requirement of legal expertise is a sine qua non for effectively engaging with the trading system. Engaging and using domestic policy autonomy would perforce require a thorough understanding of the law as well as its nuanced interpretation. How many developing countries are capable of this journey? Is the domestic, political regime prepared for such an engagement? 

Another issue of recognising domestic policy autonomy within the WTO regime is to understand that the developed world too would be using this same policy space for protecting their interests. In today's globalised world as much as developing countries are markets for the developed world, developing countries are increasingly exploring markets in the developed world.  Further, using domestic policy space by another country has serious impact on an exporting countries exports. There will be essential trade offs a country will have to make. While using its domestic policy space in a particular context will serve its domestic developmental agenda, the use by another country will affect its trade interests which also may be part of its developmental agenda. How does one reconcile these interests? While countries want to protect domestic industry within WTO rules and it is a legitimate claim, they want reduced barriers and access to markets when their exports are affected. How does one balance the two policy choices of a developmental agenda and market access? In other words, where should the line between domestic policy space, protectionism and innovative interpretation of WTO rules be drawn? Can there be a legitimate domestic policy choice on the grounds of protecting one's domestic industry as part of a country's developmental agenda? Would it be permissible even if it is discriminatory vis a vis foreign competitors? Is there a danger of increased protectionism by the developed world (or even the developing world) by innovative policy autonomy interpretation that the developing world may not be able to use because of a lack of legal capacity? 

Is the assumption that reduced barriers to trade is not in the interests of developing countries? Is the assumption that international trade is not an ally of a country's developmental agenda? Isn't it possible that domestic policy autonomy is hijacked by "hegemonic" national business interests which may not always be co-terminus with national interests? At times domestic policy choice is not guided by developmental agendas but by vested interests to keep international competition at bay. Is this also a permissible domestic policy choice that a developing country should adopt? Does domestic business interest always constitute national interest?

One of the extremely positive outcomes I see from this exchange is the possibility of Law Schools providing independent, "development friendly" advice to developing countries to engage with the WTO. As Alvaro stated:

"Moreover, beyond the role of developing country governments and NGOs, Howse makes clear that there is also a role for legal scholars to play. I am enthusiastic about his idea of using law school clinics to provide independent and development-friendly legal advice to countries in need of counsel for WTO litigation and to other groups, like NGOs, for domestic policy debates about the meaning of WTO obligations. I am on board and hope that this exchange could be the beginning of a project of that sort."

I would be excited to study the journey of India and other developing countries in their use of the Dispute Settlement mechanism to further developmental agendas.It would be worthwhile to study a few developing countries engagement with the DSM in relation to their developmental paradigms like Alvaro did for Mexico and Brazil. One will have to go into the specific examples of measures taken and whether the domestic measure was part of the larger developmental agenda or a purely "protectionist" measure. I would indeed watch very keenly the progress of this project as it seeks to bring international law from its "rarified" confines as many see it to "grassroot" domestic policy making and the rigours of democratic political compulsions.

Jagdish Bhagwati on the future of Dispute resolution at the WTO

Painting a dismal picture of the failure of the Doha round of trade negotiations, Jagdish Bhagwati highlights the advantages of a multilateral trading system compared to Preferential Trade Agreements (PTAs) in this piece in Project Syndicate.

"The failure to achieve multilateral trade liberalization by concluding the Doha Round means that the world lost the gains from trade that a successful treaty would have brought. But that is hardly the end of the matter: the failure of Doha will virtually halt multilateral trade liberalization for years to come."

He argues that PTAs will inevitably reflect the "power relations" between trading partners and the rule based system that hinges on a fair deal to countries irrespective of trading power will be replaced by a more unequal trading regime of agreements favouring the more powerful trading nations.

"Now, however, with the era of multilateral trade rounds and system-wide rules behind us, the PTAs are the only game in town, and the templates established by the hegemonic powers in unequal trade treaties with economically weaker countries will increasingly carry the day. In fact, such templates now extend beyond conventional trade issues (for example, agricultural protection) to vast numbers of areas unrelated to trade, including labor standards, environmental rules, policies on expropriation, and the ability to impose capital-account controls in financial crises."

 The more damaging indictment is that the PTAs will overshadow the pride of the WTO - the Dispute Settlement Mechanism (DSM). He visualises PTA-driven dispute resolution undermining the DSM at the WTO.

"Unfortunately, this insidious attack on the second leg of the WTO also extends to the third leg, the dispute-settlement mechanism. The DSM is the pride of the WTO: it is the only impartial and binding mechanism for adjudicating and enforcing contractual obligations defined by the WTO and accepted by its members. It gives every member, big or small, a platform and a voice.

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Once PTA-based DSMs are established, however, adjudication of disputes will reflect asymmetries of power, benefiting the stronger trade partner. Moreover, third countries will have little scope for input into PTA-based DSMs, though their interests may very well be affected by how adjudication is structured."

Are the fears of inequitable PTAs taking over trading relations real? While the failure of the Doha round is a matter of serious concern for those who have invested time and energy in developing multilateral trade rules, is there a serious threat to the multilateral trading system because of PTAs? Is it an alarmist stand? What is the extent to which PTAs cover international trade? Are we seeing an end to the WTO as an influential international institution that has compelling powers in international law epitomised by its "binding" nature of dispute resolution? Are all PTAs inequitable and usurped by powerful trading partners? Is there scope to democratise PTAs and ensure developing conutries interests are protected? if this can be done and PTAs become the preferred route for trade rule making, does WTO lose its relevance. More importantly, if the PTAs have their own dispute resolution mechanisms, will the "crown jewel" of the WTO too face a serious threat? I had blogged earlier of a bright future for the WTO? Is it realistic to presume that the authority of the WTO as a negotiating and dispute resolution body will wane over the years?

Tuna decision, US domestic policy space, WTO

(Courtesy:Pacific bluefin tuna caught in a net in Baja California, Mexico. Photograph: Oxford Scientific/Getty Images)

The Appellate Body (AB)decision in the Tuna case is out and is available on the WTO website here. It has already generated considerable debate in the press here and here as well as on premier international trade law blogs IELP and O'Neil Institute Trade Blog. The Eyes on Trade blog termed the ruling as a major blow to US consumer interests to make an informed choice. The AB reversed many aspects of the Panel decision and found that the US measure of "dolphin safe" labelling is inconsistent with Article 2.1 of the TBT Agreement as it accorded "less favourable treatment" to Tuna products from Mexico. It, however, reversed the Panel finding that the measure was inconsistent with Article 2.2 of the TBT on the grounds that the measure was not more trade-restrictive than necessary.

The AB finding on the violation of Article 2.1 of the TBT Agreement is interesting. Article 2.1 of the TBT Agreement states:

"2.1        Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country."

After a detailed analysis of the measure the AB held:

" 298. In the light of uncontested facts and factual findings made by the Panel, we consider that Mexico has established a prima facie case that the US "dolphin-safe" labelling provisions modify the conditions of competition in the US market to the detriment of Mexican tuna products and are not even-handed in the way in which they address the risks to dolphins arising from different fishing techniques in different areas of the ocean.  We consider further that the United States has not met its burden of rebutting this  prima facie case.  Since we are not persuaded that the Panel acted inconsistently with Article 11 of the DSU in reviewing the evidence and arguments before it, we accept the Panel's conclusions that the use of certain tuna fishing methods other than setting on dolphins "outside the ETP may produce and has produced significant levels of dolphin bycatch"and that "the US dolphin-safe provisions do not address observed mortality, and any resulting adverse effects on dolphin populations, for tuna not caught by setting on dolphins or high seas driftnet fishing outside the ETP." Thus, in our view, the United States has not justified as non-discriminatory under Article 2.1 the different requirements that it applies to tuna caught by setting on dolphins inside the ETP and tuna caught by other fishing methods outside the ETP for access to the US "dolphin-safe" label.  The United States has thus not demonstrated that the detrimental impact of the US measure on Mexican tuna products stems exclusively from a legitimate regulatory distinction.  

299. For these reasons, we reverse the Panel's finding, in paragraphs 7.374 and 8.1(a) of the Panel Report, that the US "dolphin-safe" labelling provisions are not inconsistent with Article 2.1 of the TBT Agreement.  We  find, instead, that the US "dolphin-safe" labelling provisions provide "less favourable treatment" to Mexican tuna products than that accorded to tuna products of the 

United States and tuna products originating in other countries and are therefore inconsistent with Article 2.1 of the TBT Agreement." 

Thus, though the measure does not specifically state that Mexican Tuna fish are subjected to the regulation, there is defacto discrimination. The measure impacts the competitive conditions for Mexico as well as being discriminatory since it has not considered the risks to Dolphins from other methods of fishing. Hence, a measure can be found to violate Article 2.1 of the TBT Agreement if it "in effect" is discriminatory and accords less favourable treatment even without specifically stating the origin of the product. This has implications of measures which overtly seem non-discriminatory but in practice, due to the reality of conditions, have a bearing on the competitive conditions of the country exporting.

The decision is in a series that have gone against the US at the WTO (COOL, Cloves Cigarettes being the other examples). What would the US reaction to this decision be?  The USTR website had no official reaction yet to the decision. Would it comply with the AB decision by modifying its measure and by removing the dolphin safe labelling? Would it risk non-compliance and face retaliatory measures from Mexico? What are the options before the US? Critics of the WTO would argue that it is yet another case of domestic policy choice being regulated by international law and a challenge to US national sovereignty. Others would argue that the rule based multilateral system had delivered yet again - of providing a rational, rule based interpretation to a long standing dispute.