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.

My paper is on the IELP blog!

My paper on "Renewable Energy Programmes in the EU, Japan and the US and their compatibility with WTO law" was referred to on the IELP blog here in the context of the Canadian FiT case. 

Thank you, Simon Lester.

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.

Domestic policy space, trade agreements and protectionism - A balance required?

The Tobacco Plain Packaging dispute has reached the doorstep of the WTO. An Australian legislation that mandates that both imported and locally made tobacco products must not have any kind of advertising on the package has been challenged as a violation of Australia's obligations under the WTO. I have blogged about the issue here, here, here and here.

Simon Lester in a recent piece in the Jurist has brilliantly discussed the issue in the context of protectionism, non-discrimination, domestic policy space and international trade. While curbing protectionism (treating imported goods less favorably than local goods) remains the main focus of international trade agreements, it is clear now that trade rules go much beyond it. It impacts not only discriminatory treatment but also whether a measure is an unreasonable restriction on international trade. This has a major impact on domestic policy space since the interpretation of what constitutes a "reasonable restriction" becomes debatable. It has the potential to lead to international trade agreements treading on sovereign decisions disturbing the delicate balance between international law and domestic sovereignty. This often leads to calls for rejecting multilateralism and pursuing unilateral policies in "national interest".

"Complaints about a purely domestic regulation in these international fora may seem odd, but they are a direct consequence of the expanding scope of trade agreements and provide a good illustration of the difficulties for domestic policy-making caused by this broad scope. The complaints highlight an important, but often overlooked, question regarding today's trade agreements: what is free trade? Traditionally, practicing free trade simply meant not being protectionist. However, today's trade agreements go beyond anti-protectionism in a number of ways, which leads to the potential conflict between trade agreements and domestic regulation that we see with the plain packaging cases."

The implementation and interpretation of international trade agreements will constantly face this challenge of balancing competing interests of national, domestic policy making with the imperatives of international trade. Often the line will be blurred and domestic policy choice will be challenged. To what extent this will be accepted by the WTO members is a crucial question. WIth the negotiations reaching a stalemate at Doha, the dispute settlement mechanism will face serious strain trying to balance these competing interests. Should the interpretation limit itself to non-discrimination and be more liberal in allowing domestic space in other cases? Will such an approach ease the tensions and promote international trade? Or should the Panels and Appellate Bodies take a proactive role in ensuring that free trade is not restricted in anyway - whether based on national treatment or otherwise. As Simon correctly points out it is a delicate balance to be treaded very carefully.

"Existing international trade rules are a balancing of competing concerns and interests, developed over the years through a complex negotiating process. Questioning particular aspects after the fact is not without its dangers. Trade liberalization over the past few decades has benefited the world greatly. At the same time, challenges to laws like the plain packaging one risk undermining support for the broader push for such liberalization. It may not be a coincidence that multilateral trade liberalization has stalled in recent years, just as the scope of these agreements has expanded. No matter what the resolution of the plain packaging cases in international courts, they may be a chance to examine just what the goal of trade agreements should be.  

Fighting protectionism is not without its own controversy, but a focus on protectionism, with rules narrowly tailored for that purpose, may avoid sensitive issues relating to health and other social policy regulation, and thus make further trade liberalization, with its accompanying benefits, possible."

Apart from the tobacco legislation, would the stand of Canada in the Canadian Seal dispute also fall under the category of exercise of legitimate domestic policy space?