Trade, Labour and some concerns

The linkage between trade and labour has been a contentious one. Should there be more discussion on labour standards and migration in trade negotiations involving trade liberalization? I have blogged about this issue here and here.

Anuradha R.V. and Nimisha Singh Dutta have provided this excellent analysis of the relationship between trade and labour standards in this study titled "Trade and Labour under the WTO and FTAs" in a study for the Centre for WTO Studies. Making detailed study of the labour provisions in various PTA's across the world, they have provided a set of recommendations which essentially concludes that any linkage of labour and trade must be resisted by developing countries.

" 1.Maintain opposition to the Trade and Labour linkage: While all countries (including the countries which have not ratified the CLS) should take steps towards promoting labour welfare, there are no reasons why developing countries should agree to linkage of labour issues in trade agreements. There is sufficient literature and evidence to show that increased labour will not result in decline in labour conditions; on the contrary greater economic development through expanding trade opportunities would actually result in better conditions for labour as well..."

While improving labour standards has to be a national policy concern, linking it to trade is problematic due to the protectionist overtones it has.Could countries use it for protecting their products from increased competition. Is it happening already? Do we have evidence of protectionist measures based on labour standards? Is the public morals clause unde Article XX GATT capable of being used to advance labour standards? Is the TBT Agreement the new arena where labour standards will be played out? There is an other issue of stakeholders here - the government, tree associations, the business owners, labour unions as well as the individual labour. Do all of them have the same interest in this debate? What constitutes national interest - increased labour standards or increased competitive pricing of the product or an international labour standard?

Trade restrictions and public morals - How far can one go?

The issue of restricting trade on the grounds of "public morals" or other exceptions is always a slippery slope. Are there any limits to the use of these exceptions (Article XX of GATT covers General Exception)? Can it be used as a "protectionist" tool in a discriminatory manner to achieve political objectives?

Recently, Opinio Juris carried a piece about the issue of the EU ban on trade in products from Israeli settlements in the West Bank. The debate revolved an opinion given by James Crawford that banning imports of goods from settlement territory would be in consonance with both EU as well as global trade law. In the context of the WTO, would it violate GATT obligations of MFN and quantitative restrictions or would the measure be in consonance with the general exceptions provided under Article XX of the GATT? Can a country ban import of these goods on the ground that being from a territory "occupied" by a country it affects their public morals? To what extent can political leanings and political disputes determine trading decisions?

The opinion, which was a detailed exposition of the international law on the point, alluded to the WTO obligations and stated:

"133. For the sake of completeness, it might also be mentioned that in extending a ban on settlement trade, the EC would not be in breach of its obligations under the General Agreement on Tariffs and Trade (GATT), now subsumed within the covered agreements of the World Trade Organization (WTO). Although  GATT Article I requires that most favoured nation treatment be extended to Israel as a WTO Member, and GATT Article XI forbids the use of quantitative restrictions such as a ban on imports, both these provisions are phrased in terms of products originating in the ‘territory’ of another WTO Member. As a matter of international law, the West Bank and Gaza cannot be considered to be Israel’s territory; thus the EC is not prevented by its  GATT/WTO obligations from banning settlement trade."

Thus, the violation of GATT/WTO obligations has been viewed in terms of a technicality that the settlement does not constitute the territory of Israel. Would the analysis have been different if international law held that it could be considered Israel's territory? Would the general exceptions provision of GATT have come to EU's rescue? Would it have been argued that settlement goods cannot be imported because it effects the public morals of the consumers in EU? What are the dangers of this interpretation? Can it be used as a tool to fight international, political conflicts? Positions can be taken depending on one's political standing and trade restrictions can be used as a ground to pressurise and intimidate trading partners. A deeper analysis of the use of the general exceptions in the context of political disputes in the international arena must be made so that international trade does not become a victim of international politics.

Pluralism, domestic policy and trade rules - Where is the Middle Path?

The issue of domestic policy space within the WTO rules has been a common and controversial theme running in this blog. How much policy space does a country have to enact measures that can be justified under the WTO legal system? Do the multilateral rules permit or deny "pluralism" in policy choice? Is there a hegemonic, universal set of norms that all countries need to follow or is their sufficient policy space for countries to manouevre?

These questions repeatedly come up when measures are undertaken by WTO members and challenged by others effected. While they are justified as being in conformity with the General Exceptions that GATT provides, they are challenged as being "discriminatory", an "unnecessary obstacle to trade" as well as a disguise for a "protectionist" measure. What principles are to be followed to determine if a measure is permissible in exercise of legitimate policy space? What constitutes discrimination and what is a protectionist measure are persisting questions that scholars of international trade law grapple with when dealing with measures that are alleged to violate WTO rules.

The ban on seal trade by the EU is a classic issue where this theme plays out. Do the principles of animal welfare and notions of member countries towards animal welfare permit it to impose restrictions on trade of animal products (including a ban)? I had blogged about this issue sometime back here.

Robert Howse and Joanna Langille have addressed this issue in their brilliant piece here. they essentially argue that member states have policy space to undertake measures in the interests of their notion of animal welfare and this can be justified under the General Exceptions under Article XX of GATT. Permitting pluralism in trade regulation based on notions of morals and welfare of individual member states is what they argue for.

Opinio Juris has a fascinating debate on this issue with Tamara Perisin, Simon Lester and Isabel Feichtner responding to the principle of permitting pluralism. While all the respondents agree with the notion of there being a right for a member country to exercise policy space in this respect, they raise pertinent issues about the limits of the measure, role of rationality in the debate as well as underlying motivations for a measure to be construed as a legitimate, regulatory measure with its basis in pluralist thought as against those based on ulterior mercantilist or protectionist intentions.

Reading this fascinating debate raised some questions for me:

1.When does "permitting pluralism" become a slippery slope in terms of protectionist measures and discrimination? Does it impact the legitimacy of the trading system based on universal, non-discriminatory rules? To what extent should motivations, business interests as well as "rationality" of a policy choice have a role to play in lifting the veil of the justification of "animal welfare" or other moral justifications? Can the DSM foray into this territory of questioning underlying motivations and justifications? Does the jurisprudence of Article XX GATT allow this as against the jurisprudence of Article XXI GATT which is more restrictive in terms of judicial oversight?

2. While blatant discrimination can be questioned, can the underlying basis for the "welfare measure" be also subjected to a rationality test? If not, does it not condone measures that are based on "national morality" and notions of welfare, but militate against universal principles of human rights, gender equality, religious toleration, racial equality? Ofcourse, Robert Howse and Joanna Langille do make the point that while allowing this pluralism it is recognised that  that states are also bound by non-WTO norms, such as international human rights law, which also shape the limits of their prerogative to regulate morality. However, is it just human rights law or is there a longer list? Who decides what this list should be?

3. While animal welfare, public morals, religious morals may be underlying reasons for justifying a national measure, to what extent should there be an analysis of the business motivations behind the measure? Is the enactment of a national legislation in itself enough to show representative "national will" and intent or can extraneous circumstances like existence of export interest, domestic competition also play a part in the analysis? Further, can the rationality of a "moral measure" as being discriminatory or "irrational" be a valid ground to question a policy choice? Can an "inherently non-rational" measure be put to a "rationality" test?

4. What have been the underlying motivations for countries to use the Article XX general exception, especially public morals and animal welfare? Has it been the notion of protecting animal welfare in real? Has it been a protectionist tool?

5.what if countries impose bans and restrictions based on their "religious beliefs", notions of morality (culture and decency) and what if the notion of banning goods from certain countries is part of that public morality? Would that be justified as being not subjected to a rationality test? 

6. Public morals is a more slippery ground. Is it an ideal setting for trade restrictive practices justified on the principle that countries have the policy space to pursue their notions of morality? What lessons do we have from the actual use of this exception? Mark Wu has a brilliant analysis of the use of the Public Morals exception under Article XX in this piece here about which I had blogged here.

The debate is a classic theme in international trade law - the tension between national sovereignty and the right to decide one's course of action against multilateral trade rules that are based on non-discrimination and universality. The reaction of what should prevail often depends on the measure in question. While the issue of the need for policy space and pluralism is never in question, what are its contours, limits and extent is often a matter of extreme complication. International trade supporters would want it to the minimum while votaries for pluralism would tend to argue that universality beyond a point is counterproductive. Where that point lies is unclear. One needs to tread the middle path - where this middle path actually lies is still unclear.

WTO, public morals, domestic space and protectionism

The debate on domestic policy space and exercise of national sovereignty in the context of WTO Agreements is often a contentious one. While proponents of the WTO argue that multilateral trade rules are necessary to create a level playing field to ensure smooth, non-discriminatory flow of goods and services across national borders, its opponents tend to accuse the system of severely curtailing State rights and regulatory independence. There is also an argument that the WTO Agreements allow for sufficient domestic policy space "within" the Agreements itself and that goes often unnoticed. Where does the truth lie?

Further, there is an increasing clamour to include certain non-trade issues within the ambit of WTO rules such as global labour standards, human rights, environmental standards to name a few. Can States take unilateral restrictive measures to enforce these standards on the grounds of the necessity to protect "public morals'? While the provision provides for domestic policy space, does it also have the scope of being "abused" to enforce standards that impact trade?

The debate around Article XX GATT (General Exceptions) is often raised in this context. Providing justifications for a State to act in its "domestic interest" Article XX, inter alia, provides:

"Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(a)      necessary to protect public morals;

..."

This is commonly know as the Public Morals clause. A country can suo moto take trade restrictive measures which are not arbitrary, unjustifiably discriminatory between countries where the same conditions prevail and which are not a disguised restriction on international trade in order to protect "public morals". Isn't this an example of domestic regulatory space, albeit specific, within the WTO legal framework?

Mark Wu in the Yale Journal of International Law has analysed in great detail the scope and ambit of this clause in Free Trade and the Protection of Public Morals: An Analysis of the Newly Emerging Public Morals Clause Doctrine. Highlighting the increasing relevance of this clause he states:

"In recent years, the public morals exception has increasingly drawn the attention of academics and international organizations. Since the late 1980s, calls for the global trade regime to take a more proactive stance in enforcing certain transnational norms have grown louder. GATT Article XX lent support for countries to restrict trade in favor of certain norms such as environmental protection, cultural protection, and prison labor norms. However, for other norms, such as human rights, gender equality, or labor standards outside of prisons, no explicit exception exists in the text. Therefore, several academics began calling for a broader reading of “public morals” that would permit trade restrictions fostering such norms."

Mark Wu traces the history of the doctrine, its legislative history and judicial interpretation by the Appellate Body of the WTO in great analytical detail. He advocates a "middle path" approach wherein "public morals" exception can be interpreted to include universal standards subject to more stringent conditions and evidentiary proof. In conclusion he states:

"Several possibilities exist as to how the public morals doctrine can evolve as these questions are answered. To many, by far the most attractive possibilities to activists are expansive approaches that emphasize the unilateral right of countries to delineate their own morals and/or the importance of transnational norms. This Note suggests that while these are noble approaches, they entail inherent dangers. Such  doctrinal evolutions, if not implemented carefully, may ultimately lead to unintended consequences that threaten the stability and legitimacy of the WTO regime. Yet at the same time, to wait for textual amendments to the GATT/WTO legal documents that would affirmatively enumerate members’ rights to exercise restrictions based on concerns of human rights or labor standards is to wait largely in vain. Calls for such additions to date have been ignored or met with skepticism.  If we are to move beyond U.S.-Gambling to affirmatively recognize a right to exercise a public morals exception for human rights, labor standards, and other rights, we must do so through judicial interpretation in a careful, limited manner. This Note has suggested a bifurcated approach, in which countries are given greater leeway to enact restrictions that protect their own citizens, but must concurrently meet more stringent requirements if they seek to impose restrictions that affect citizens in other WTO member states. This proposed approach recognizes the right of countries to shape their own norms rather than have them imposed through trade leverage, but at the same time demands that those that make normative commitments actually follow them."  

The public morals exception clause has not been extensively interpreted by the WTO DSM though it has been widely debated and interpreted by international trade law scholars. There is a fine line between upholding certain universal values of human rights, gender equality and labour rights and allowing States to use these values to restrict trade. The motivations to use these values are guided mainly by geopolitical or trade interests rather than protecting the value itself. The difficult arises when countries use it as disguised protectionism which then gets entangled in complex judicial interpretation. Since disputes itself take time to get resolved at the WTO the purpose of restricting trade sometimes get served. While one may argue that Article XX gives domestic policy space to States it is debatable whether the overriding purpose of unhindered trade can be restricted by expanding he scope of the exception to include universal standards. Further, other international institutions in the area of labour rights and human rights are playing a proactive role in pursuing their agendas. Would an expanding interpretation of the GATT be an unnecessary overlap? The developing countries see an expanding interpretation as a threat by the developed world to introduced unimplementable standards. Is there a middle path one can tread here?