Domestic policy space and TRIPS

The tension between domestic policy space or the ability to carve out public policies based on domestic political will and intrnational trade rules has been a recurrent theme of this blog. There are no easy answers and neither is the debate in black and white. It is not whether countries have domestic policy space - it is how much of space they have and how do they exercise it? A parallel theme is can the claim of domestic space be misused for blatant, discriminatory protectionism?

I have highlighted the debate around domestic space and TRIPS in this blogpost and this one regarding compulsory licensing a few months ago. Joseph Stiglitz and Arjun Jayadev in their Project Syndicate piece interestingly highlighted the importance of domestic policy space in the context of the recent decisions around patentability and TRIPS.

"According to the Indian Supreme Court, the country’s amended patent law still places greater weight on social objectives than in the US and elsewhere: the standards of non-obviousness and novelty required to obtain a patent are stricter (especially as they pertain to medicines), and no “evergreening” of existing patents – or patent protection for incremental follow-up innovations – is allowed. The court thus reaffirmed India’s primary commitment to protecting its citizens’ lives and health. 

The decision also highlighted an important fact: Despite its severe limitations, the TRIPS agreement does have some (rarely used) safeguards that give developing countries a certain degree of flexibility to limit patent protection. That is why the pharmaceutical industry, the US, and others have pushed since its inception for a wider and stronger set of standards through add-on agreements. 

Such agreements would, for example, limit opposition to patent applications; prohibit national regulatory authorities from approving generic medicines until patents have expired; maintain data exclusivity, thereby delaying the approval of biogeneric drugs; and require new forms of protection, such as anti-counterfeiting measures. 

There is a curious incoherence in the argument that the Indian decision undermines property rights. A critical institutional foundation for well-functioning property rights is an independent judiciary to enforce them. India’s Supreme Court has shown that it is independent, interprets the law faithfully, and does not easily succumb to global corporate interests. It is now up to the Indian government to use the TRIPS agreement’s safeguards to ensure that the country’s intellectual-property regime advances both innovation and public health."

Of course, the debate whether TRIPS provides policy space depends on the area of applicability one is talking about as well as the view one holds on the extent to which international rules should impact domestic policy making. However, it is interesting to see the debate shifting from whether TRIPs provides that flexibility to how one can use the flexibility to pursue national interests. And what applies to TRIPS applies to all other WTO agreements. The questions is whether developing countries can unearth and effectively engage with these flexibilities.

Antigua case - An illogical ruling?

I have blogged about the US Online Gambling case here.

Stewart and Stewart, while making a detailed analysis of the dispute here, argue that the measure of cross-retaliation in this case is an illogical step and could harm the WTO system.

"As explained above, this case presents a unique situation in which a WTO member has responded to an adverse WTO ruling by seeking to amend its WTO commitments to make clear that its obligations do not apply to the domestic policy which had been found problematic. To obtain this amendment, the U.S. was required to provide compensation to all affected WTO members, not only those who would have been entitled to retaliate if they had brought the original dispute. As noted above, the U.S. was able to reach agreements with each of the countries that requested compensation except for Antigua. If agreement had been reached with Antigua, or if arbitration under Article XXI of the GATS had settled the amount of compensation to be provided, the U.S. would now be in compliance with its amended WTO obligations even with its domestic gambling policies still in place, and Antigua (along with other countries) would be compensated for the withdrawn concession.

Instead, because WTO rules permit Antigua to withdraw benefits for the on-going violation under the DSU even as arbitration under the GATS remains suspended, the U.S. is now faced with the prospect of open-ended retaliation for on-going violations it is unable to address through a renegotiation of its commitments. In short, the U.S. may have to pay two times to resolve one problem – once to amend its obligations to reflect what it thought it had originally agreed to when it negotiated the GATS, and once as a result of retaliation authorized in the course of a dispute launched before that amendment was made."

The above submission raises the important point of domestic policy space to amend past commitments in the context of a dispute.This piece however seems to support Antigua. Interesting...

Limiting global trade governance - what should the contours be?

I have often blogged about domestic policy space and international trade rules on this blog. The intrusion of trade rules into legitimate regulatory spaces is often a source of tension and opposition by governments.What should the limits of trade rules, embodied in multilateral, plurilateral and bilateral trade agreements, be? Who defines their limits?

Simon Lester has this piece in Voxeu on the extent of global trade governance arguing that it should be minimilistic with a focus on combating protectionism rather than be a over-prescriptive regulatory regime.

"Global trade rules that focus on protectionist trade barriers are limited and targeted, addressing a specific problem: protectionism. In doing so, they maintain a balance between international oversight of domestic policies on the one hand, and domestic regulatory autonomy on the other. Countries are free to take whatever actions they want, as long as they are not being protectionist."

Countering Richard Baldwin's contention that global supply chains need more intervention by the WTO (about which I have blogged here and here) to remain relevant (in other words to be regulating many areas within the regulatory space of sovereign countries), he argues that the WTO should stick to addressing the issues of protectionism while the other issues of intellectual property rights must be left to national governments to regulate.

"But let me suggest an alternative interpretation. These bilateral and regional agreements have developed because that's where business groups want the rules to go. The rules in these new areas are in their interest and they would like to see them spread. Unfortunately, business demands do not necessarily lead to a sustainable vision of global trade governance. What business wants is not necessarily in the broader interests of society, although in some cases it may be. The push-back against these new rules has been very strong and it is not clear that the current regional trade agreements and bilateral investment treaties model can really work in the long run. It may be that the WTO as it stands now actually gets the balance between global trade governance and domestic regulatory autonomy about right. 

Under this interpretation, the WTO does not need to catch up. Rather, the WTO should focus on what it does best: that is, reducing protectionist trade barriers. Broader issues, such as intellectual property and regulatory expropriation, should be left to governments to deal with on their own. Those who handle these issues well will be the winners in the new world of supply-chain trade."

It is all about getting the balance right - a balance between national autonomy and global trade governance. Where does one draw a line in an area where definitions, perceptions and priorities are varied and often conflicting. It is easy to seek a middle path - to achieve it is an extremely demanding proposition.

David Trubek, BRICS economies and domestic policy space

The issue of domestic policy space in the context of international economic law and policy has been a constant theme of this blog. See posts here, here and here for an overview of thoughts. Does WTO law restrict democratic, regulatory autonomy unreasonably? Is the national development paradigm unduly affected by international trade rules? Are countries sovereignty affected? Is there domestic policy space to implement policies as per a national developmental agenda? 

While many scholars have attempted to address this issue and offer contrary opinions, I found David Trubek's piece in the context of the growth of the BRICS economies particularly contextual and interesting. Titled "Reversal of Fortune? International Economic Governance, Alternative Development Strategies, and the Rise of the BRICS" he asserts that there is space within international trade rules that developing economies can use to further their developmental agendas. Taking note of the ascendancy of developing economies in interpreting WTO law especially the TRIPS Agreement, China's proactive role of State -led development within the WTO system and Brazil's innovative use of TRIPS flexibilities, Trubek avers that there is scope for a "development-friendly" interpretation of WTO law:

"All these developments suggest that Faundez’s assessment of international economic law and policy may be overly pessimistic. The emerging economies are no longer so much under the sway of the IFIs and are beginning to have some say on the rules of the game. The BRICS are finding ways to shape WTO law to fit alternative strategies. BITs have become more reciprocal and more tolerant of industrial policy. Trade bureaucrats and investment arbitrators may still come disproportionately from developed countries and/or accept neo-­‐liberal ideas. But this may be changing. And as the role of the G-­‐20 expands the BRICS should have more of a chance to influence global policy."

However, there are many questions:

1. What really constitutes a development friendly paradigm of domestic policy? Are the State and market two exclusive domains or extremities? Can we see a convergence? Do State led development paradigms always have the answers? Can they be more oppressive, at times, than market led growth? and vice versa?

2.Trade is essentially guided by national interest. In this sense, the national interest of many developing countries conflict with each other as they vie for market access for their products or protect their domestic industry from products from outside. Is BRICS co-operation possible in this difficult situation of national self-interest? Is it too optimistic to implement? Brazil is seeking inclusion of currency misalignment as an area where WTO must intervene. the country to be largely affected by this is another BRIC country - China. What implication does this have  for BRICs co-operation in re-interpreting international economic law?

3. While BRICS co-operation and overall strategy to re-interpret international trade rules to advance their national priorities may be a positive step, to expect a bonhomie may be over-optimistic. After all, national trade interests would play a crucial role in how countries would react.

Trubek himself highlights some of the limiting factors to BRICS so-operation, including this:

"The BRICS share some general approaches to development and have common interests in making some changes in international economic law. But they may not always be in agreement: for example, Papa notes that China and India have taken different stances towards the scope of BITS and appropriate processes for dispute settlement. And there may be real conflicts between these countries: thus many in Brazil have been very critical of China’s trade and currency policy."

Interesting times for a creative re-interpretation of multilateral trade rules to advance genuine, national priorities. While we may not agree with what actually constitutes "genuine, national priorities", the possibility of a creative interpretation is in itself re-assuring.

TRIPS, Compulsory Licensing and Domestic Policy Space

Attended a seminar on "Compulsory Licensing and Developing Countries" organized by the Centre for WTO studies recently. Very enlightened discussion on how a recent case of the use of the Compulsory Licensing provision is, inter alia, in consonance with the TRIPS Agreement.

Kudos to Shamnad Basheer (an authority on IP law and the founder of the hugely popular blog SpicyIP), Yogesh Pai (the force behind Trade, Law and Development Journal) and Madhukar Sinha for their brilliant presentation and interventions. It was interesting for me to see the possibility of yet another WTO provision being used as a domestic policy tool by a developing country within the framework of international trade rules to further one's national interest. I have often argued in this blog that critics of globalization tend to suggest that domestic policy space is totally curtailed in the context of the WTO, especially in the context of TRIPS. Though I am not an expert on patents and TRIPS, the seminar brought to light the fact that the use of Compulsory Licencing as per Indian Law can be reconciled with TRIPS provisions. Hence, a creative and flexible interpretation (or some would argue a literal interpretation) of Article 31 of TRIPS does provide that policy space.

This is another example that one must explore possibilities of using the existing multilateral legal framework to further one's national interest. The recognition that international economic law provides that flexibility is in itself a step forward.

Of seals, cigarettes and domestic policy space

Simon Lester in this post in the Cato blog discusses two disputes - the Canadian Seal dispute and the Australian Tobacco Plain packaging dispute in the context of the impact of multilateral trade rules on domestic policy making.  In both these cases, domestic policy measures have been challenged at the international fora. They are also measures that are equally applicable to domestic products as well as imported products. Thus, seemingly non-discriminatory policies that are an exposition of domestic policy/will have been challenged at the WTO dispute settlement as being discriminatory and too trade restrictive. Moreover, intellectual property rights (trademarks) also come into play the Tobacco case. Simon has brought out an important issue of what impact this has on domestic policy space without going into the merits of the measures at hand.

"I thought it was worth mentioning these cases here for the following reason.  If international trade rules can be used to challenge any government law or regulation that affects trade, even if the measure is facially non-discriminatory, these international rules are going to be quite broad, and could have an impact on much, if not all, domestic governing.  It may be worth thinking about these issues to make sure we properly balance international governance and domestic policymaking, and these cases provide a good opportunity to do so.  (I wrote more about this in an op-ed for The Jurist on the plain packaging case.)  The cases are at an early stage, and it’s not clear how they will turn out.  But the mere fact that they are being tried in an international court is noteworthy."

These cases are at an early stage of the dispute settlement process and will take their course. There will be Panel decisions and appeals. Amicus curiae briefs will be filed. There may well be a continuation of the dispute on what constitutes compliance. Ultimately it may lead to non-compliance resulting in retaliation. Whatever may be the result, it will bring to the fore the limits of domestic policy regulation space. I have often argued on this blog that domestic policy space is seriously questioned in the context of multilateral trade rules. This is not to imply that they need for multilateral rules is invasive of national sovereignty. The only issue is where the line is to be drawn and who draws the line. Where is the middle path? what kinds of domestic policy are blatantly in violation of international trade rules? Is there a danger of being "judicially active" and be overtly intrusive in domestic policy space? I don't have the answers - but it is a fascinating area of the interplay of international economic regulation, democratic, domestic will and interpretation of international law.

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.

Will countries increasingly look inward?

A recurring theme is this blog is the domestic policy space available to countries in the multilateral trading system. How much national autonomy do members have to craft their own domestic development agenda? How much are they constrained by the rule based trading system? opinion is divided on the issue and experts tend to argue that the multilateral trading system epitomised by the various multilateral agreements offer enough space for countries to pursue their respective agendas. How much of this domestic agenda is "protectionism" is another debate. Are these developmental agendas non-discriminatory and justifiable? Are countries looking more and more inward to find solutions to pressing economic problems rather than relying on the multilateral system?

Dani Rodrik, a critique of unhindered globalization, has recently written a brilliant piece in Project Syndicate indicating that in the future countries will increasingly look inward in terms of relying on their internal market instead of global, overseas markets. He, thus, implies that the multilateral trading system will lose its significance as countries will trade more internally than externally thus making the domestic policy debate redundant in a sense.

"Countries that rely excessively on world markets and global finance to fuel their economic growth will also be at a disadvantage. A fragile world economy will not be hospitable to large net foreign borrowers (or large net foreign lenders). Countries with large current-account deficits (such as Turkey) will remain hostage to skittish market sentiment. Those with large surpluses (such as China) will be under increasing pressure – including the threat of retaliation – to rein in their “mercantilist” policies.

Comments

Domestic demand-led growth will be a more reliable strategy than export-led growth. That means that countries with a large domestic market and a prosperous middle class will have an important advantage."

Forecasting that countries with low levels of public debt, reliance on local markets instead of global markets and strong institutions of democracy would do well in the coming years. India, Brazil and South Africa, according to Dani Rodrik, would fit this bill and will be in a better position to address the challenges of an inequitable global order. Are we going to see a reduced interest in the urge for countries to be part of the globalised economy? Is being integrated or taking advantage of the international supply chains going to reduce? Does the strategy to rely more on internal markets signal a legitimate use of protectionist measures for growth and equity? Recent trends of Argentina indicate that countries are looking at inward looking policies to further economic agendas. Will this be a long lasting trend? How would the WTO system react to this? How would the Dispute Settlement mechanism react to this development? Can it be achieved within the ambit of the multilateral trading system?

I read an interesting UNCTAD paper on finance-driven globalisation that echoed a similar view in the context of globalization in financial investments and countries reaction to it. Titled the "Paradox of Finance-Driven Globalization" it has come to the conclusion that countries that have pursued heterodox, innovative, local policies suited to their national conditions have been able to do better than countries that have followed a "liberalised", uninhibited finance-driven globalization model.

"Without going into detailed country profiles,success stories have been able to adopt creative and heterodox policy innovations tailored to local conditions. Many have established a strong investment–export nexus by managing their outward orientation with strategic policies including high (but temporary) tariff and non-tariff barriers, publicly owned development banks, directed credit, domestic content requirements, and capital controls. In addition, some have used targeted industrial policies to diversify their economies, developing a wider range of more productive activities. Such diversification appears to be closely linked to improving employment conditions and to build resilience against adverse shocks."

It appears that this paper reflects the notion that countries should exercise more domestic policy space in the multilateral trading agenda to pursue national goals. How much of this would violate WTO obligations is another issue.  Would using domestic content requirements or increasing protectionist measures be a permitted measure? Where does one draw the line?

EU, Japan and U.S. vs. China - Rare Earth Panel established

(Labourers work at a site of a rare earth metals mine at Nancheng county, Jiangxi province March 14, 2012.

Credit: Reuters/Stringer)

I had blogged about China "blocking" the establishment of a Panel to examine complaints into the restrictions on export of rare earths imposed by China. As rightly pointed by two comments on the post, the "blocking" was permitted in the first meeting where the request was placed. The WTO website has reported setting up of  Panel in the subsequent meeting of the DSB. The establishment of the panel was widely reported here, here, here and here. With China producing 90% of the world's rare earth output, this decision of the WTO would have significant impact on the trade in rare earth minerals like tungsten and molybdenum. The NYT and Reuters had earlier reported on the genesis of the dispute.

The European Union's main contention in the DSB meeting was:

"The European Union said that export restrictions in this dispute constitute a violation of China’s WTO commitments undertaken under the General Agreement on Tariffs and Trade (GATT) as well as commitments undertaken in China’s Accession Protocol specifically aimed at these types of restrictions. According to the EU, the export restrictions significantly distort the market and create competitive advantages in favour of China’s manufacturing industry to the detriment of foreign competition."

This dispute would be interesting in terms of the contours of permissible export restrictions under GATT, domestic policy space under Article XX GATT available to China as well as the special obligations China has under its special Accession Protocol (WTO plus obligations).With the U.S., EU and Japan being the complainants, and a host of other countries (11 to be precise) signing up as third parties, it promises to be a keenly fought battle.

Security interests, WTO and domestic policy space

The question of the balance between domestic policy space and following multlilateral treaty obligations has often been a topic in my blog. An article titled "The Self-Judging WTO Security Exception" by Roger Paul Alford in the Utah Law Review on the use of the 'Security exception" under GATT which explores this debate in the context of Artice XXI of GATT in great detail provides a brilliant overview of the issue. To what extent does Article XXI give a country the freedom to impose restrictions that hinder free trade? Is it an unrestricted right? Is it "self-judging" or based on objective criteria? Who decides (the member country or the Dispute Settlement Body) as to the necessity and desirability of the measure? Is the exception open to abuse? What has been the practice of countries in this regard? Can the threat of a "national security" issue be misused as a protectionist tool? Can it be used to pursue an ideological agenda in international relations?

Article XXI of the GATT states:

"Security Exceptions 

          Nothing in this Agreement shall be construed

(a)      to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or

(b)      to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests

(i)       relating to fissionable materials or the materials from which they are derived;

(ii)      relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;

(iii)     taken in time of war or other emergency in international relations; or

(c)      to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security."

The provision itself provides wide latitude to a member to take measures inconsistent with WTO obligations "which it considers" necessary for the protection of its essential security interests. The article makes a detailed analysis of the use of this provision and its challenge at the DSM of the WTO. Contrary to fears of its possible abuse and extensive use, State practice indicates that it has not been invoked too often. Further it has never been a subject of a WTO dispute though many countries could have justified some of their measures under this exception. The author asks some pertinent questions regarding the lack of abuse of this provision:

"The general and consistent practice of complying with a self-judging rule raises larger issues beyond the WTO. While the self-judging nature of Article XXI remains contested, it is undeniable that it has been invoked at the sole discretion of the Member States. As such, it provides a useful prism through which to consider theories of international law compliance. Unlike almost every other aspect of the WTO, there is no obvious sanction for ignoring its textual limits. So why does a State typically invoke Article XXI(b)(ii) to restrict military and dual-use goods, but not purely civilian products? Why does a State not declare virtually every crisis—economic, political, social, or military—an “emergency in international relations” under Article XXI(b)(iii)? Why does a State not consider virtually any national policy an “essential security interest”? With billions of dollars at stake in WTO litigation,350 why not invoke the security exception in bad faith? In short, what is to prevent Article XXI from becoming the exception that swallows the rule?"

Explaining the various theories of compliance to international law and its juxtaposition to the limited use of the security exception the article tends to view that the exception to be not abused in good faith. 

" The WTO security exception carries forward Adam Smith’s great insight: defense is more important than free trade. The security exception is an anomaly, a unique provision in international trade law that grants the Member States freedom to avoid trade rules to protect national security. In the long history of GATT and the short history of the WTO, that freedom has never been challenged seriously. Member States understand the exception to be self-judging, and presume that it will be exercised with wisdom and in good faith.

Thus far, the record has been impressive. While no doubt there have been departures, the self-judging security exception has worked reasonably well. It certainly has not undermined the effective functioning of the WTO. The overwhelming majority of security measures are unregulated by international trade law, and those few that have been challenged were never reviewed. International trade law, viewed by many as the most effective and intrusive branch of international law, has preserved one enclave of complete national sovereignty. There are many possible explanations for its success. Its ambit is sufficiently broad to cover most security concerns, and it is reinforced by other WTO provisions that facilitate compliance.

A self-judging rule that Member States honor provides helpful insights into broader questions regarding nations obeying other international laws. Any number of theories, including traditional normative theories of compliance, and more controversial rational choice theories that focus on national self-interest, can explain the strong compliance record. The one theory that has little explanatory power is a pure coercion theory. Whatever may be motivating Member States to respect the limits of the security exception, it is not fear of sanction."

A recent example of a ban on exports due to a possible security exception was seen in the case of the EU ban on exports of luxury items to Syria about which I have blogged here. Is the fact that the security exception has not been misused so far by any country to advance protectionist measures is in itself a guarantee for the future? With the trend of increased protectionist measures, is there a danger that this provision will be open to "innovative" interpretation to justify countries' measures? Does "essential security interests" include "economic interests" ? Who defines what the contours of this "economic interest' is? Are there objective criteria to do so? Is the exception "self judging" or subject to DSM judicial review? To what extent can the judicial review question the rationale of a domestic policy choice? Would an over authoritative judicial body undermine compliance? Would it be reasonable to argue that it is in a countries economic interest to protect its domestic industry? Only time will tell if this exception becomes the rule?

Animal welfare, WTO and domestic policy space

Simon Lester has raised the issue of the proposed Californian ban on Foie Gras and its WTO compatibility. Foie Gras is a food product made of the liver of a duck or a goose after specially fattening it. The methods of fattening differ.The ban has been widely reported here, here and here.

Is the ban consistent with U.S.'s WTO obligations? The French exporters of this product definitely do not think so. There are a number of stakeholders involved here: Hotel industry, exporters of the product, the Government, consumers,animal welfare activists, and the animals themselves. Does it violate the TBT Agreement? Since the ban applies to both imported as well as domestic food products, Article 2.1 of the TBT Agreement may not be violated. However, does it create an unnecessary obstacle to trade under Article 2.2 of the TBT Agreement? Is it necessary to "fulfill a necessary objective" of protecting animal life or health and thus justifiable under Article 2.2 of the TBT? Does Article XX of GATT provide the justification for this measure?

The larger issue is to what extent moral, non-trade values can restrict trade? The Californian legislature, in its wisdom and choice, views foie gras as violating animal welfare as well as against its values of animal welfare. Is that sufficient ground for banning the food product? Can individual countries' (or their constituent's) values be a justifiable reason for a restriction on trade? Do the WTO rules allow this?

Opinio Juris has an interesting debate on the use of public morals to justify animal welfare measures with Robert Howse and Joanna Langille's article being the discussion point. I had briefly touched on this topic in by earlier blog post titled "WTO, pluralism and domestic policy space - Some questions" here. Will get back to this fascinating debate in forthcoming posts.

Is the WTO Transparent?

Transparency in functioning of democratic institutions has often been the subject of intense discussion and debate. Transparent decision making enhances accountability and ensure that public policy decisions are not arbitrary and capricious. It is considered as a hallmark of a well functioning democracy.Is the principle of transparency equally applicable to international institutions? Are international institutions as transparent as national institutions?

The WTO as an international institution has often been accused of being non-transparent in its dealings. Be it the negotiations during the earlier years, functioning of the Secretariat or the conduct of the dispute settlement proceedings, critics often emphasis that decisions of the body are taken without taking into account the interests of public transparency. This often leads to public criticism and a suspicion that decisions are taken under a cloud of secrecy against larger public interest. While various WTO Agreements require that countries should follow transparency in terms of notification of their measures in accordance with WTO rules, the functioning of the WTO itself in terms of a transparency record is a subject matter of debate. The questions therefore is: Is the WTO transparent in its functioning?

Gabrielle Marceau and Mikella Hurley have comprehensively addressed this issue in "Transparency and Public Participation in the WTO: A Report Card on WTO Transparency Mechanisms" in the Trade, Law and Development Journal. The article analyses three broad themes: Transparency in the context of information available to the public, the status of amicus curiae (friend of the Court) briefs in the dispute settlement proceedings as well as public participation in the WTO of non-State actors. The articles lauds the efforts of the WTO in terms of the innovation it has made in bringing about transparency in dissemination of information through the WTO website. Further, the increasing trend of acceptance of amicus curiae briefs is seen as a sign of opening up of the functioning of the WTO. Increasing participation of NGOs in various fora of the WTO is also cited as proof of the willingness of the WTO to engage with the outer world and not act as a closed door entity.

Preparing a "report card" of WTO's efforts to enhance transparency, they have suggested specific measures to enhance the "transparency" of the WTO, especially in the area of dispute resolution:

"In the area of dispute settlement, some have pressed for the following: 

1. WTO Members should take the initiative to make their submissions available 

to the public, sanitizing any confidential or proprietary information. The United States is already taking this initiative as a matter of policy. Increased Member willingness to do so is thus encouraged so as to help prospective amici provide more useful information to panels and the Appellate body. Such initiative would also do a great deal to dispel the remaining public concerns about the WTO dispute settlement process.  

2. There is a need to negotiate clear rules regarding the acceptance of amicus curiae briefs. Members have not done so, despite repeated calls for such guidelines, leaving prospective amici and litigants alike in a state of continuing uncertainty.

          ...

3. Panels and the Appellate Body should take a predictable and uniform approach in the treatment and discussion of amicus briefs, both in terms of why they are accepted for consideration (or not), and how they are used. In order to ensure maximum transparency, reports should address the main arguments put forward in  amicus briefs, which will allow Members and the public to understand how they may influence the outcome of a case.    

4. All open hearings should now be made available to the public by webcast. This technology is now established, and  is already in use in other fora.  In addition to furthering the WTO's reputation as a transparent organization, this practice would also ensure that developing country interests are not left out. 

 For the working committees of the WTO: 

5. WTO Members should consider additional, systematic avenues for the participation of and consultation with NGOs. If the membership is not prepared to open committee and working group meetings to NGO participation at this time, the WTO should make certain that the agendas of other meetings – particularly the Public Forum – reflect the important issues under consideration in Member-only discussions."  

Some observations:

1. The WTO website is exceptionally well organised and "transparent". I had blogged about it here a few months back. The ease with which one can find information based on one's need itself signifies that a lot of thought and energy has gone into the design and construct of the website. Agreements, interpretations, updated proceedings as well as status of dispute settlement proceedings all find their place. It definitely promoted transparency. It definitely outshone several other Government and International organisation websites. The design, layout, ease of access and most importantly content and "uptodate" nature of subjects uploaded is very impressive. The Agreements, Dispute settlement cases as well as plethora of documents make very interesting reading. The use of this tool of public transparency will go a long way in enhancing WTO's record of transparency. It is one of the most well organised website for a public institution, especially an international organisation. However, Steve Charnovitz in the IELP blog was rather critical of WTO's transparency in putting accession protocol details on the website.

2. The WTO can be transparent largely to the extent its members want it to be. The WTO, as is often referred to, is a member driven organisation. Though the Secretariat does exist as an independent entity and does play a critical role, decisions at the WTO are largely that of the members. The need and contours of transparency must be thus defined by the members after due deliberation. Is increased transparency detrimental to developing country interests or interests of weaker countries? Why does the notion prevail that enhanced transparency can jeopardise developing country interests? Is transparency in the interests of only powerful trading partners? Can transparency be used as a tool against the less equipped world? This notion has to effectively combated. Transparency in decision making, whether national or international, should be valued as a universal value which enhances the public interest. 

3. Is transparency necessarily increased participation of non State actors? While increased participation of various interests like NGOs, citizen groups enhance the diversity  of the WTO and democratises the working of international institutions, several countries feel that it is an encroachment of its sovereign right to represent its people. they accuse "civil society" of representing elite interests within their countries as well as at times representing other countries interests. How representational are non State actors? How transparent are they in their functioning? While this may be an alarmist and inward looking view, the fear that non State actors can be non-representational, elitist and the concealed flagbearers of vested interests needs to be adequately addressed.

4. Lastly, on the dispute resolution mechanism. The DSM is the jewel crown of the WTO system. The idea of increased public access to proceedings is a welcome step. Public broadcast of proceedings can open the doors to public interest in the WTO. Today, WTO and dispute settlement at the WTO is absent in the national discourse except when a country's interests are adversely affected. WTO is commonly seen as an institution that invades national sovereignty and domestic policy space. This is largely due to the perceived "opaqueness" of the international institution's functioning as well as the "closed door" aura of the dispute settlement mechanism. Can opening proceedings to the public change this perception? Will it bring about a positive change in public perception? Can it lead to increased interest in the functioning of the dispute settlement mechanism as a "rule based system" having its  grounding in transparent rules and procedures rather than being a power based decision making body? In most national judicial proceedings, Court proceedings are open to the public except when in-camera proceedings are specifically ordered. Can this be made the rule at the WTO? This would not only increase transparency but also make the country accountable to its domestic constituents of the positions it takes in international disputes. Is it too radical for implementation?

The debate of transparency at the WTO needs to be one of the foremost agendas at the negotiating forum. While many steps can be undertaken by the Appellate Body itself many measures will require concrete, bold steps from member countries. Achievable or highly unlikely in the context of the Doha impasse?

Food security, WTO and domestic policy space

(Congolese boys push a wooden bicycle as they transport goods to the market near Goma, in Democratic Republic of Congo, on December 4. (Simon Maina/AFP/Getty Images)

An interesting debate between Olivier De Schutter, United Nations Special Rapporteur on the Right to Food and Pascal Lamy, Director General of the WTO regarding the relationship between international trade and food security as well as the role of the WTO throws open issues of food security in the context of globalised trade.The Epoch Times captured this debate here.

Olivier De Schutter in his report in November 2011 titled "The World Trade Organization and the Post-Global Food Crisis Agenda Putting Food Security First in the International Trade System" seriously questioned the adequacy of the present multilateral legal framework to address the issue of food security of States implying that countries must have much more domestic policy choice to ensure food security and strengthen its fight against hunger. He calls into question the compatibility of WTO rules in ensuring food security and advocates an overhaul of the present legal framework. Questioning the model of reliance on international trade to address food security issues, he opines:

"The increased dependency on international trade by many countries with significant food production capacity can have a number of direct and indirect impacts on the realization of the human right to adequate food. This may lead to loss of export revenues when the prices of export commodities rapidly fluctuate downwards. When low-priced imports arrive on the domestic markets –- against which local producers are unable to compete—,local producers suffer ; and when the prices of food commodities go up, balance of payments problems for the net food-importing countries. High food import dependence also further exposes producers and consumers to increased vulnerability both to worsening terms of trade and to fluctuations in commodity prices. Such situations significantly reduce the capacity of States that are highly dependent on international trade and imports to buffer external shocks, such as overproduction or harvest failures in other States."

Assessing WTO's track record in addressing issues of food security, the Special Rapporteur felt: 

"The WTO’s track record of taking food security seriously is mixed. To a certain extent the WTO’s track record reflects the dominance of net food exporters in the negotiations for whom food security is a low priority compared to opening markets for their exports. The structure of WTO negotiations themselves, which involve tradeoffs between agriculture and other goods trade (e.g., services, industrial goods, etc.) in practice precludes food security from being addressed in isolation and on its own merits instead of as a  “bargaining chip” to be leveraged. In addition, the relative lack of expertise on food security among trade negotiators and the WTO secretariat provides a further explanation for the way food security has been ignored."

Recommending a number of steps to enhance domestic control over food security issues, the Report sought a panel of experts to to systematically analyze the compatibility of existing WTO rules, and those under consideration in the Doha Round, with best practices and current national and international food security strategies and policies. The report essentially questions the compatibility of WTO rules to protect food security and seeks a broader mandate to the States to take measures in times of a food crisis.

Pascal Lamy, the Director General of WTO responded to the Report of the UN Special Rapporteur in a letter by questioning the rationale that international trade in food products is antithetical to food security concerns.

"Secondly, I fundamentally disagree with your assertion that countries need to limit reliance on international trade to achieve food security objectives. On the contrary, there is agreement among most UN-led experts that international trade is part of the package of solutions to achieve food security. The UN High Level Task Force on the Global Food Security Crisis in their 2010 Updated Comprehensive Framework for Action noted that “more liberalized international markets would contribute to global food and nutrition security through increased trade volumes and access to diverse sources of food imports.” (“Updated Comprehensive Framework for Action”, United Nations High Level Task Force on Global Food Security Crisis, September 2010, paragraph 76.) The Inter-agency report for the G-20 stated, for example, that “trade is an essential component of any food security strategy” and that “Policies that distort production and trade in agricultural commodities potentially impede the achievement of long run food security”. (“Price Volatility in Food and Agricultural Markets: Policy Responses”, Policy Report including contributions by FAO, IFAD, IMF,OECD, UNCTAD, WFP, the World Bank, the WTO, IFPRI and the UN HLTF, 2 June 2011, page 23.) Indeed, our Members negotiate towards a more level playing field in agriculture in order to enhance their ability to achieve food security."

He argued that the WTO rules provide sufficient policy space for countries to implement food security policies that are nationally relevant.

" Current WTO rules in agriculture and possible outcomes from the DDA allow policy space and flexibility in these areas. Hence, the Agreement on Agriculture leaves developing countries broad room to implement measures to achieve their national objectives, including food security, notably through Green Box support and Article 6.2 development programmes. As you rightly mention, the Doha Round would further increase this flexibility by relaxing some of the Green Box criteria to make it easier to use by developing countries, for example on public stockholdings for food security purposes."

Asserting that WTO rules provide for preventing trade distorting measures, he concludes by referring to several mechanisms to review the relationship between international trade and food security thus rejecting, by implication, the need for a panel of experts as suggested by the UN Special Rapporteur.

The debate raises interesting questions:

1. Is international trade in food products and food security incompatible?

2. Do WTO Agreements provide sufficient domestic regulatory space for countries to address their food security concerns?

3. is there a fundamental difference between the tarde in non-food products and food products and do they have to be treated differently?

4. Will increased international tarde in food products, hence more imports benefit end consumers due to a fall in prices?

5. Are developing countries impacted by a loss of control over their food security when they depend largely on cheaper food imports? Can there be a cartelisation and subsequent impact on food prices?

6. Do the present WTO rules, especially the Agreement on Agriculture, have sufficient policy space that countries can use to protect their domestic interests?

7. Can the interests of small, marginal farmers, the poor and the marginalised be protected by the State with increased trade/imports in food?

8. Are interests of small, marginal and other farmers really in increased access to export markets? 

Each country perhaps needs to draw a matrix of interests specific to their conditions which would involve small, marginal, large farmers, rural and urban consumers, exporters and importers of food and business interests to assess the impact of international trade in food vis vis food security.

     
       

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.