The Oxford Handbook of International Trade Law (2e) 9780192868381, 0192868381

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The Oxford Handbook of International Trade Law (2e)
 9780192868381, 0192868381

Table of contents :
Cover
The Oxford Handbook of International Trade Law
Copyright
Dedication
Table of contents
List of contributors
List of abbreviations
List of cited WTO panel and appellate body reports, initiated WTO disputes and their common abbreviations
List of cited GATT panel reports
Table of Cases
1 Introduction
PART I The regulation of international trade
2 The development of the regulation of international trade: the past and the future
3 The regulation of international trade: an economic perspective
4 The sources of international trade law
5 International trade law institutions
6 The influence of international trade law on international law
7 The regulation of international trade and (democratic) legitimacy
Part II Bilateral and regional trade agreements
8 North American trade: NAFTA and US-​caused global trade tensions
9 Pacific trade
10 Trans-​Atlantic trade: the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States
11 Trade law in Europe
12. International trade policy in Latin America (Pacific Alliance—​MERCOSUR)
13 Trade and Investment Liberalization: The Case of China
14 Eurasian Economic Union and trade and investment liberalization
15 Africa and trade and investment liberalization
Part III Substantive law
16 An introduction to core principles of international trade law
17 Trade in goods
18 Trade in services
19 The relationship between intellectual property and trade through the lens of geographical indications: the journey before, during, and after the TRIPS Agreement
20 Trade in agriculture
21 Trade remedies in international trade
Part IV Balancing trade and non-​trade objectives
22 Development, aid, and preferential systems
23 Progressive trade: labour and gender
24 Balancing market and non-​market objectives: access to medicines
25 Environment
26. Food safety: balancing SPS scientific principles and Article XX(b) sovereignty
27 National security
28 Privacy and data protection
Part V International trade law development beyond the WTO
29 Digital trade
30 State-​owned enterprises (SOEs): a Trans-​Pacific Partnership (TPP) Agreement experience in developing new disciplines in the new world order
31 Fisheries
32 Investment law’s monstrous reform
33 Financial services law
Part VI The settlement of trade disputes in the WTO and bilateral/​regional trade agreements
34 Institutions
35 Interpretation
36 Jurisdiction and applicable law in the WTO and free trade agreements
37 Remedies and compliance
38 Procedural and evidentiary issues
39 Stakeholders in international trade law dispute settlement
40 Alternative dispute settlement in the GATT and the WTO
Part VII Conclusion
41 The international trading system—​looking to 2100
Index

Citation preview

The Oxford Handbook of

I N T E R NAT IONA L T R A DE L AW

The Oxford Handbook of

INTERNATIONAL TRADE LAW SECOND EDITION

Edited by

DANIEL BETHLEHEM DONALD McRAE RODNEY NEUFELD ISABELLE VAN DAMME

Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Oxford University Press 2022 The moral rights of the authors have been asserted First Edition published in 2009 Second Edition published in 2022 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2022937563 ISBN 978–0–19–286838–1 ​ 9780192868381.001.0001 ​ ​ ​ DOI: 10.1093/oxfordhb/ ​ Printed and​ bound by CPI Group (UK) Ltd, Croydon, CR0 4YY

Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

In memory of James R. Crawford

Foreword Valerie Hughes

International trade law has become a vast subject area comprising numerous topics once considered separate from the discipline. Not that long ago, proposals to include obligations to protect the environment or to ensure compliance with labour standards in an international trade agreement would have been roundly rebuffed. A dedicated chapter on trade and gender in an FTA would have been unthinkable. Cooperative provisions aimed at enhancing the trade capacity of small and medium-​sized businesses would have been out of place. And provisions governing digital trade and data protection would have been beyond many a trade negotiators’ vision. Today’s trade agreements often include all of these elements and the pressure to accommodate other interests—​ such as enhancing indigenous peoples’ access to trade and investment opportunities—​ continue to emerge. Not only has the subject of international trade law expanded in scope; it has also taken on a different character. Trade conflicts have increased in rancour, or at least they appear to be of a different order. There is renewed reliance on protectionist trade measures—​ be they imposed for national security reasons, to champion the rights of workers, or to repair damage considered to have been caused by ill-​conceived trade agreements. Unilateral as opposed to multilaterally sanctioned retaliation measures are more common and are perpetrated by more and more players. And ‘managed trade’ deals that likely fall foul of multilateral trade rules are concluded without protest from non-​ parties. The mantra has become ‘tools, not rules’. At the same time, the pandemic underscored the high level of economic interdependence among countries that are not otherwise linked. The wide-​spread imposition of trade barriers across the globe to restrict exports of personal protective equipment, pharmaceutical products, and health care devices have led some countries to call for onshoring and near-​shoring of manufacturing capability. But these are not viable solutions and the reality is that global supply chains are here to stay. Current work toward an instrument to facilitate trade in essential medical goods in critical times and to enhance the capacity of the trading system to deal with a future public health emergency appears to be a more realistic endeavour. Climate change poses a variety of new challenges, not least in the area of international trade law. Trade and environment, at one time considered strange bedfellows, are now

viii   Valerie Hughes often irrevocably linked because countries that chose to impose climate change mitigation policies (such as the imposition of a carbon tax on manufacturers) will need to complement these with trade measures (border carbon adjustment measures) to ensure that domestic firms operating under such a regime can remain competitive with foreign firms whose costs do not include payment of a carbon tax. The challenge of ensuring that climate-​focussed measures do not lead to carbon leakage is formidable. So too is the task of designing a border carbon adjustment measure that conforms with international trade rules and is not vulnerable to being struck down as discriminatory and protectionist. China’s accession to the WTO 20 years ago—​a pivotal moment in the multilateral trading system—​still reverberates. China’s induction into the WTO, hailed at the time as ushering in more predictable and mutually beneficial trading relations with a large and fast-​growing economy, is now much regretted and maligned in some US circles as a ruinous decision that led to the loss of millions of jobs in the United States. The United States, however, is not the only country voicing concerns about some of China’s practices. The European Union, Japan, Australia, and others have criticized China for not living up to expectations in terms of liberalizing its economy. These sentiments coincide with calls for new international trade rules that would bolster the regulation of industrial subsidies and that would curb actions by state-​owned companies that distort trade. China, for its part, responds to prodding for it to do more to level the playing field by recalling that it paid dearly at the time of its accession, taking on more obligations than any other WTO Member has had to do, and thus for China, it has already done its share. And, what of the WTO? Its relevance is once again being questioned. Although the demise of the WTO has been predicted before, including as early as 1998 at the time of the ‘banana wars’, in 2008 when the Doha Round negotiations collapsed, and in 2018 when the United States imposed tariffs on steel and aluminum on the basis of a need to protect national security, the current situation is different. This is because one of the main pillars of the WTO—​the dispute settlement system—​has been significantly weakened by the current paralysis of the Appellate Body. Indeed, the ability to guarantee binding dispute settlement for disputing parties is no longer available. Some predict that under these circumstances, WTO Members will be disinclined to negotiate much-​needed new rules to bring the WTO agreements into line with modern realities, including to address digital trade, data protection, labour issues, and climate change policies. Dispute settlement woes aside, the negotiating function of the WTO has long struggled due to its consensus-​based approach, and recent efforts by some WTO Members to move forward with initiatives on a plurilateral basis (called ‘Joint Statement Initiatives’) are meeting fierce resistance from those who depend on the consensus approach to secure space for their own agendas. These challenges are hampering the ability of the WTO to modernize its rules with the result that the WTO continues to risk waning influence, perhaps irreversibly. Finally, the invasion of Ukraine and the broad-​based economic responses through the imposition of sanctions, MFN-​flouting measures, and other actions, together with the

Foreword   ix consequent disruption of the work of multilateral organizations, including the WTO, add yet another complex dimension to the international trade law space, one that could not be taken into account by the contributors to the Handbook because they submitted their contributions prior to the Russian invasion. Given this current state of play in international trade law, designing and developing a handbook of international trade law today is an entirely different undertaking from what it would have been some 10 years ago. International trade law had a much narrower remit at that time. The retreat from multilateralism had not yet taken hold. And the WTO dispute settlement system, including the Appellate Body, was in high demand and very active. Terminology would have been different too: the handbook written just a few years ago would not have included the following words: Brexit, the Belt and Road Initiative, the US-​China trade war, paralysis of the WTO Appellate Body, inclusive trade, and trade and gender. The acronyms CPTPP, AfCFTA, DEPA, CUSMA, USMCA, and RCEP would not have appeared (nor needed explanation in the handbook’s helpful list of abbreviations). Nor would COVID-​19. Nor would we have seen several women heading their country’s trade ministries, or a woman serving as WTO Director-​General. Fortunately for those of us who try to understand international trade law in its many facets and to follow developments in this ever-​growing and fast-​changing field, the editors of this handbook—​Daniel Bethlehem, Donald McRae, Rodney Neufeld, and Isabelle Van Damme—​have pulled together a comprehensive, insightful, timely resource that manages to provide everything we need to know—​from the basics to the complexities, the traditional to the emerging, the history to future directions. The editors, themselves foremost authorities in international trade and investment law, have turned to many of the leading experts in the field to contribute chapters—​including government negotiators, leading scholars, current and former WTO Secretariat officials, former Appellate Body Members, former WTO panelists, and private practitioners. Each chapter concludes with a list of further reading that will be helpful to those wishing to explore a particular subject further, or to obtain another perspective on a particular subject. Put simply, the editors have created a treasure trove of information and a resource that none of us will wish to be without. Below is but a brief glimpse of what the reader will find in this thoughtfully curated volume. Part I of the Handbook is devoted to the role that international trade plays within international law. It includes three different perspectives on the regulation of international trade. Donald McRae reviews the way regulation of trade has developed since the advent of the WTO, noting the proliferation of preferential trade agreements at the bilateral, regional, and multilateral levels and the expansion of subjects being regulated in such agreements, and opines on the future of international trade regulation in the light of current economic and political conditions. Kamal Saggi and Simon Schropp offer an economic perspective on the regulation of international trade, focussing on the role of economic analysis in improving our understanding of trade agreements. Manfred Elsig adds to the analysis with an essay about the regulation of international trade and democratic legitimacy and asks whether the goal posts of legitimate governance are shifting or

x   Valerie Hughes are just relegated to the background as power politics make a revival in the international trading system. Matthew Kennedy surveys the different sources of international trade law, including the various elements of the WTO single undertaking as well as bilateral and regional rules, and points to the potential for divergence in interpretation going forward. James Flett and Mislav Mataija write of the importance of international trade law institutions in the WTO and under free trade agreements and argue that ensuring such institutions are effective is challenging, especially when consensus is the dominant decision-​making rule. Their deep dive on the consensus rule is unparalleled in the literature. Part I also includes James Crawford’s and Freya Baetens’ explanation of why international trade law has had limited influence in other areas of international law such as in disputes before the International Court of Justice and Investor-State tribunals, and sets out their views of the benefits international trade law could bring to other areas. Part II of the Handbook marks the biggest departure from the Handbook’s first edition. It focuses on bilateral and regional trade agreements in force in the various regions across the globe, its breadth and depth attesting to the proliferation of preferential agreements referred to in several contributions in the Handbook. Chapters typically begin with a geopolitical survey, before delving into the major treaty or treaties recently concluded in the region. Robert Brookfield and Lori Di Pierdomenico explore the renegotiation of the NAFTA, observing that although NAFTA 2.0 leaves much of the original NAFTA in place, there are some important improvements and innovations. Yuka Fukunaga and Pasha L. Hsieh explain the contours of Pacific trade. They trace the evolution of the ASEAN and explain the importance of RCEP and the CPTPP for Asia, which they argue is undergoing a wave of regionalism not unlike that which occurred in North America in the 1990s and Europe in the 1960s. Holger Hestermeyer provides a useful primer on the fundamentals of the EU legal order including its history, institutions, and the division of competencies, and follows with an explanation of the EU customs union, the treaty provisions and legislative actions governing the internal market, and the rules governing the negotiation of FTAs, closing with a discussion of the trade implications of Brexit. Colin Brown and Sylvie Tabet look at trade across the Atlantic, drilling down on Canada-​EU trade under the CETA. Jorge Luis Changanaquí Miranda and John Cusipuma write about the development of international trade policy in Latin America, including in the Pacific Alliance and MERCOSUR, and explain what is new in Latin American trade agreements (such as provisions on trade and gender and SMEs) and why provisions on labour and environment are often excluded from such agreements. Henry Gao’s is the only chapter in this part that does not focus on a region. However, given China’s emergence as one of the largest traders and its influence on world trade, particular attention to China is warranted. Gao traces China’s integration into the world economy following its accession to the WTO, examines its expanding influence in that organization and the world economy more generally, including through its far-​reaching Belt and Road Initiative, and explores the reasons for and solutions to the US-​China trade war. Maria Trunk-​Fedorova describes the history, workings, and international trade aspects of the Eurasian Economic Union (EAEU), including how the EAEU

Foreword   xi Customs Tariff includes exemptions to accommodate lower duty rates negotiated by individual EAEU States in their protocols of accession to the WTO, although she explains that EAEU Members States are seeking to renegotiate some of those concessions with WTO Members. The final chapter in Part II is about African efforts towards trade and investment liberalization. Kholofelo Kugler and Mulualem Getachew Adgeh discuss the challenges encountered in African regional economic integration and trace the history of such efforts under the Abuja Treaty, the Tripartite Free Trade Area, the Regional Economic Communities, and finally the African Continental Free Trade Area, the largest free trade area since the creation of the WTO. We also learn about the contrast in trade and investment dispute settlement involving African countries: while about ten percent of all Investor-State dispute settlement cases have been brought against African states, only a handful of African States have been involved in WTO disputes. Part III of the Handbook looks at substantive law, opening with an introduction to the core principles of international trade law penned by Nicolas Lockhart and Katherine Connolly. The authors discuss the range of obligations and exceptions that apply to international trade in goods and services under both the WTO and FTAs. More specifically, they explain market access obligations and how tariff barriers and quantitative restrictions are addressed, non-​discrimination among like products and services, and how ‘likeness’ is determined, and the provisions that seek to balance trade and non-​trade interests such as those addressing the protection of public health and the environment. Lockhart and Connolly also point out how good governance obligations such as transparency play a role in regulating trade. The chapter includes helpful explanations of how these various elements have been interpreted in dispute settlement. Ricardo Ramirez explains in his chapter on trade in goods that traditional trade regulation instruments such as tariffs and quantitative restrictions, once fading into disuse as tools of protection in favour of technical barriers and sanitary measures, have made a resurgence in recent years due primarily to the United States’ reliance on the imposition of tariffs to secure economic gains, as well as the widespread resort to import and export restrictions for personal protective equipment and other goods during the pandemic. Ramirez’s chapter includes instructive guidance, coupled with practical examples and references to WTO Appellate Body decisions, on classification of goods for trade purposes, types of duties and other charges, tariff bindings, and criteria used for determining the origin of products. He leaves us with some sobering thoughts about challenges ahead. Ramirez’s examination of trade in goods is complemented by Chantal Ononaiwu’s chapter on trade in services. Ononaiwu reviews the key features of the GATS and details how FTAs have surpassed the liberalization commitments and disciplines of that agreement, including in regulating subsidies that affect trade in services and domestic regulations as they apply to the supply of services within a country’s territory. Irene Calboli considers recent developments in the promotion and protection of intellectual property, including geographical indications. Fiona Smith addresses the ever-​ challenging topic of trade in agriculture. She reviews the rules in the WTO Agreement on Agriculture, discussing the three pillars of market access, domestic support, and export competition (subsidies) through the lens of the negotiators’ attempt to balance

xii   Valerie Hughes trade liberalization, non-​trade values (such as food security), and domestic policy autonomy. She maintains that States still disagree on the correct balance between these three competing objectives and wonders whether our faith in rules to deliver permanent solutions in this area may be misplaced. Part III closes with Hugo Perezcano’s discussion of trade remedies, namely, anti-​dumping duties, countervailing duties, and safeguards. Perezcano explains the history and purpose of these measures, how they work, and how they are disciplined in the WTO, observing that the vast majority of disputes brought under the WTO involve trade remedies. Perezcano also refers to recent developments with respect to trade remedies in regional trade agreements and elsewhere and concludes that calls to eliminate the use of trade remedies in the future will likely go unheeded. Part IV of the Handbook considers balancing trade and non-​trade objectives. It begins with Jan Yves Remy’s and Alicia Nicholls’ exploration of development—​both the traditional concept of Special & Differential Treatment (S&DT) as well as sustainable development issues as they relate to trade including environment, gender, and MSMEs. Remy and Nicholls review how development is addressed at the multilateral level and in FTAs, with the latter offering options for potential solutions to challenges at the multilateral level such as S&DT eligibility. Marcus Gustafsson and Amrita Bahri tackle the subject of progressive trade focusing on labour and gender, issues they consider ‘share a blind spot’ in WTO law. They argue that despite the WTO’s failure to address these issues, FTAs increasingly deal with them, albeit not in a uniform way. Jayashree Watal covers the highly topical subject of access to medicines, addressing both availability and affordability aspects. Her analysis includes insights into the negotiating history of the relevant TRIPS Agreement provisions and she offers recommendations for a possible way forward in reconciling incentives for pharmaceutical innovation with access to medicines for all. The theme of balancing trade and non-​trade objectives continues with a chapter by Dailola Olawuyi on the subject of environment. Olawuyi describes efforts from 1900 until today seeking to harmonize the trade and environment regimes, examines key issues in reconciling existing WTO rules with obligations in MEAs, and offers ideas on how to maximize coherence between the two regimes. The vexing challenges raised in balancing food safety concerns with trade obligations are addressed in a chapter by Marsha Echols. Isabelle Van Damme then reviews the relationship between trade and essential security interests, reviewing recent WTO disputes addressing the security exception in Article XXI of the GATT 1994. Van Damme’s chapter focuses on questions of jurisdiction and justiciability, standard of review, and burden of proof as they relate to the invocation of the security exception defence. Part IV closes with Mira Burri’s consideration of privacy and data protection and their relationship with international trade law. Noting the lack of progress in the WTO on developing rules for digital trade, Burri discusses how bilateral and regional agreements address digital trade and data governance, including privacy protection. Part V of the Handbook groups together five essays on ‘international trade law development beyond the WTO’, or what many authors and negotiators refer to as ‘WTO-​plus’

Foreword   xiii coverage, given its growing acceptance in FTAs as opposed to the WTO. It begins with a paper on digital trade in which Shin-​Ye Peng calls for updating the GATS classification and scheduling systems because market access commitments were made by WTO Members decades ago, before the data-​driven economy gave rise to numerous services not easily accommodated under existing sector and sub-​sector headings. She expresses concern about the uncertainty of market access for digital services and observes that dispute settlement is not the most appropriate method of clarifying whether a service is, or is not, covered in a Member’s schedule. Juliana Nam discusses international disciplines on State-​owned enterprises (SOEs), starting with WTO rules and their interpretation in WTO dispute settlement and then focussing on the SOE chapter of the TPP, the first stand-​alone SOE chapter. The chapter was replicated in the CPTPP and serves as a model for chapters in other free trade agreements. Margaret Young explores the interaction between two international law regimes—​ the law of the sea and international trade law—​in her discussion of efforts at the WTO and elsewhere to regulate subsides for illegal, unregulated and unreported fishing. Rodney Neufeld discusses investment law and Investor-State dispute settlement (ISDS), focussing on reform efforts seeking to address widely held criticisms such as inconsistent rulings and lack of predictability of the rules, skyrocketing damages awards, lengthy delays, and lack of diversity and independence of arbitrators. He illustrates that States differ in their approaches to reform, with some renegotiating investment treaties to bring more clarity to concepts such as ‘fair and equitable treatment’ as well as articulating the right of States to regulate, while others (smaller in number) have opted to terminate their bilateral investment treaties. Neufeld also discusses the intense engagement of States participating in the reform efforts being carried out under the auspices of ICSID and UNCITRAL, which he quips stands in marked contrast to the reform effort at the WTO that is ‘languishing in its indecision’. In the closing chapter of Part V on financial services law, Rosa Lastra and Marco Bodellini begin with an explanation of a number of key concepts involved in financial regulation as well as the rationale for financial regulation before explaining the conflicting goals of prudential supervision in the financial sector, on the one hand, and liberalization of financial services on the other. The authors also review the provisions of the GATS as well as various soft-​law instruments (standards, guidelines) administered by the IMF, the FSB, and other actors involved in financial regulation. Part VI covers settlement of trade disputes in the WTO and bilateral and regional trade agreements. In their chapter on ‘Institutions’, David Unterhalter and Erika Schneidereit describe the institutions, practices, and procedures of the WTO dispute settlement system at the panel and appellate levels, illustrating some of these with references to specific disputes (e.g., the role of general principles of international law). The authors include a review of the criticisms that led to the current paralysis of the Appellate Body (unusually dispassionate in tone compared to many writings on this issue) and conclude that the future of WTO dispute settlement is far from clear. Peter Van den Bossche and Parika Ganeriwal contribute a chapter on ‘Interpretation’ in which they write about interpretation of WTO agreements and RTAs. The authors review the

xiv   Valerie Hughes rules of interpretation codified in Articles 31 and 32 of the Vienna Convention on the Law of Treaties and illustrate the application of those rules by the WTO Appellate Body in several rulings. In a chapter entitled ‘Jurisdiction and Applicable Law in the WTO and Free Trade Agreements’, Lorand Bartels discusses issues related to a trade tribunal’s jurisdiction, including identification of the measure at issue and the applicable rules, making factual findings based on evidence, and the power to apply the applicable rules. Bartels opines that the Appellate Body has been rightly criticized for its determination that a WTO panel’s findings on domestic law are ‘legal characterizations’ and thus, unlike factual findings, are subject to appeal. On applicability, Bartels discusses whether and how a rule is to be applied to the measure at issue and refers to, among other things, WTO decisions about choice of forum and the inability of a WTO panel to decline to exercise validly established jurisdiction. Bartels also discusses overlapping jurisdiction between the WTO and FTAs. Geraldo Vidigal’s chapter on ‘Remedies and Compliance’ contrasts judicial remedies under international law with remedies under international trade law, the latter being compliance-​related and prospective while the former are often designed to provide reparation for injury caused by breach. Vidigal writes of the right under trade agreements to press for compliance without employing ‘the economically disruptive instrument’ of unilateral retaliation. He analyses the instances in which retaliation for non-​compliance has been authorized by the WTO and identifies patterns in how WTO Members use (or do not use) such authorization, concluding that the threat of retaliation is a powerful tool in forcing compliance with trade obligations. Andreas Sennekamp and Frederico Ortino discuss practices and procedures related to procedural and evidentiary issues in WTO and investment dispute settlement, including matters such as preliminary rulings, burden and standard of proof, transparency, including the ability of Members of the public to observe hearings, and the use of experts to assist adjudicators with science or technical matters raised in argument. The authors explain that although these matters are addressed differently in the two regimes, there are several common threads in how they are applied in practice. Katherine Connolly and Todd Friedbacher discuss the roles and contributions of different stakeholders involved in international trade dispute settlement, specifically Member States, adjudicators, Secretariat staff, experts, and those with commercial or industry interests in a particular dispute. They refer to and take issue with some of the criticisms that have arisen over time, such as the Appellate Body’s requirement that panels follow previous appellate rulings when addressing the same issue except when there are cogent reasons not to do so, as well as the view that the Secretariat has an outsized influence over the results of dispute settlement. However, they call for the establishment of clear procedures on the involvement of in-​house ‘ghost’ experts whose role is not made known to disputing parties nor disclosed in dispute settlement reports. Part VI closes with Amy Porges’ chapter on alternative dispute settlement in the GATT and the WTO. Following a brief explanation of the various forms of ADR (including negotiation, mediation, conciliation, arbitration, and enquiry) and their benefits (including saving time and costs, providing disputing parties with increased

Foreword   xv flexibility) and a quick review of the development of different channels for addressing trade conflicts in the GATT 1947 era, Porges focusses on the use of ADR mechanisms available under the WTO. She observes that the mechanisms provided for in Articles 5 and 25 of the DSU have been used rarely but they have inspired WTO Members to develop ad hoc procedures to deal with some of the most intractable trade irritants (such as the 50-​year banana saga and the more recent EU/​US settlement agreement on steel and aluminum tariffs). Porges also points to the establishment by 25 WTO Members of the Multi-​Party Interim Appeal Arbitration Arrangement (MPIA) that is rooted in Article 25 of the DSU, a mechanism that has yet to be tested. The Handbook concludes with ‘The International Trading System—​Looking to 2100’, a stunning essay by Sir Daniel Bethlehem and Donald McRae. Their chapter is stunning for its exquisite prose but also for its message, at once alarming and encouraging, that fundamental change is urgently required throughout the international trade law space because it no longer reflects the realities of global economic engagement, and that there is scope for real innovation in reconceptualizing the international trading system. In sum, this Handbook of International Trade Law is a comprehensive, highly topical, accessible reference book written and edited by the leading experts in the field. It will serve as an indispensable tool for the international trade expert and the novice alike. It is also timely: WTO Members seeking to embark on a broad-​based WTO reform agenda will do well to have this book at their fingertips.

Acknowledgements

The second edition of this Handbook is the result of a close collaboration between the editors and the contributors. The editors wish to thank the contributors for their cooperation, hard work, and patience. The editors are also grateful to Oxford University Press for its continuous support for this second edition, which is wider in scope, size, and ambition than the first edition. Special thanks go to Merel Alstein, Matthew Williams and Jack McNichol. The editors were assisted by Rownock Zamani, who diligently and patiently edited draft chapters. We are grateful for Rownock’s valuable assistance.

Table of Contents

Foreword List of contributors  List of abbreviations  List of cited WTO Panel and Appellate Body reports, initiated WTO disputes and their common abbreviations  List of cited GATT Panel reports  Table of Cases  1. Introduction  The Editors

vii xxv xxxix xlix lxxvii lxxix 1

PA RT I   T H E R E G U L AT ION OF I N T E R NAT IONA L T R A DE 2. The development of the regulation of international trade: the past and the future  Donald McRae

7

3. The regulation of international trade: an economic perspective  Kamal Saggi and Simon Schropp

29

4. The sources of international trade law  Matthew Kennedy

64

5. International trade law institutions  James Flett and Mislav Mataija

90

6. The influence of international trade law on international law  James Crawford and Freya Baetens

160

7. The regulation of international trade and (democratic) legitimacy  Manfred Elsig

192

xx   Table of contents

PA RT I I   B I L AT E R A L A N D R E G IONA L T R A DE AG R E E M E N T S 8. North American trade: NAFTA and US-​caused global trade tensions  211 Robert Brookfield and Lori Di Pierdomenico 9. Pacific trade  Yuka Fukunaga and Pasha L. Hsieh 10. Trans-​Atlantic trade: the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States  Sylvie Tabet and Colin M. Brown 11. Trade law in Europe  Holger P. Hestermeyer 12. International trade policy in Latin America (Pacific Alliance—​ MERCOSUR)  Jorge Luis Changanaquí Miranda and John Ramiro Cusipuma Frisancho

239

262 293

319

13. Trade and Investment Liberalization: The Case of China  Henry Gao

341

14. Eurasian Economic Union and trade and investment liberalization  Marina Trunk-​Fedorova

374

15. Africa and trade and investment liberalization  Kholofelo Kugler and Mulualem Getachew Adgeh

395

PA RT I I I   SU B STA N T I V E L AW 16. An introduction to core principles of international trade law  Katherine Connolly and Nicolas Lockhart

433

17. Trade in goods  Ricardo Ramírez-​Hernández

475

18. Trade in services  Chantal Ononaiwu

504

Table of contents    xxi

19. The relationship between intellectual property and trade through the lens of geographical indications: the journey before, during, and after the TRIPS Agreement  Irene Calboli

532

20. Trade in agriculture  Fiona Smith

553

21. Trade remedies in international trade  Hugo Perezcano Díaz

574

PA RT I V   BA L A N C I N G T R A DE A N D N ON -​T R A DE OB J E C T I V E S 22. Development, aid, and preferential systems  Jan Yves Remy and Alicia Nicholls

603

23. Progressive trade: labour and gender  Marcus Gustafsson and Amrita Bahri

625

24. Balancing market and non-​market objectives: access to medicines  Jayashree Watal

651

25. Environment  Damilola S. Olawuyi

673

26. Food safety: balancing SPS scientific principles and Article XX(b) sovereignty  Marsha A. Echols

694

27. National security  Isabelle Van Damme

713

28. Privacy and data protection  Mira Burri

745

PA RT V   I N T E R NAT IONA L T R A DE L AW DE V E L OP M E N T B E YON D T H E W TO 29. Digital trade  Shin-​yi Peng

771

xxii   Table of contents

30. State-​owned enterprises (SOEs): a Trans-​Pacific Partnership (TPP) Agreement experience in developing new disciplines in the new world order  Juliana Nam

790

31. Fisheries  Margaret A. Young

817

32. Investment law’s monstrous reform  Rodney Neufeld

838

33. Financial services law  Rosa Lastra and Marco Bodellini

867

PA RT V I   T H E SE T T L E M E N T OF T R A DE DI SP U T E S I N T H E W TO A N D B I L AT E R A L /​ R E G IONA L T R A DE AG R E E M E N T S 34. Institutions  David Unterhalter and Erika Schneidereit

895

35. Interpretation  Peter Van den Bossche and Parika Ganeriwal

923

36. Jurisdiction and applicable law in the WTO and free trade agreements  Lorand Bartels

945

37. Remedies and compliance  Geraldo Vidigal

967

38. Procedural and evidentiary issues  Andreas Sennekamp and Federico Ortino

993

39. Stakeholders in international trade law dispute settlement  Katherine Connolly and Todd Friedbacher

1017

40. Alternative dispute settlement in the GATT and the WTO  Amy Porges

1042

Table of contents    xxiii

PA RT V I I   C ON C LU SION 41. The international trading system—​looking to 2100  Daniel Bethlehem and Donald McRae

1065

Index 

1073

List of Contributors

Mulualem Getachew Adgeh is a J.D. Student at the University of St. Thomas, Minnesota, USA. Previously, he was a legal counsel, and First Secretary at the International Organizations Directorate in the Ministry of Foreign Affairs, where his duties ranged from providing legal and policy advisory opinions to the Ministry in WTO Law, and humanitarian issues relating to migration and refugees. In this capacity, he has represented Ethiopia in several international fora, including the six rounds of negotiation on the Global Compact for Migration. He has also worked closely with the Steering and Technical Committee for Ethiopia’s WTO accession. He previously worked at the Advisory Center on WTO Law in Geneva, Switzerland, as part of a secondment program. Mulualem holds an LL.M. degree in US and International Law, a postgraduate diploma in International Relations, and an LL.B. degree. Freya Baetens, Cand. Jur./​Lic.Jur. (Ghent); LL.M. (Columbia); Ph.D. (Cambridge), is Professor of Public International Law (Faculty of Law, Oxford University), Head of Programmes at the Bonavero Institute of Human Rights and Fellow at Mansfield College. She is also affiliated with the PluriCourts Centre (Faculty of Law, Oslo University) and affiliated with the Europa Institute (Faculty of Law, Leiden University). As a Member of the Brussels Bar, she regularly acts as counsel or expert in international and European disputes. She is listed on the Panel of Arbitrators and Conciliators of the International Centre for the Settlement of Investment Disputes (ICSID), the South China International Economic and Trade Arbitration Commission (Shenzhen Court of International Arbitration) and the Hong Kong International Arbitration Centre (HKIAC). Amrita Bahri is Associate Professor of International Trade Law at ITAM and Co-​Chair Professor for the WTO Chair Program (Mexico). Amrita is the Founding Chair of the International Trade & Investment Law Research Group (Law Schools Global League, LSGL) and Founding Member of the South Asian International Economic Law Network (SAIELN). Amrita has published in the areas of international trade law, WTO dispute settlement, public private partnership for capacity-​building in emerging economies, regional trade and gender justice. She has authored the monograph Public Private Partnership for WTO Dispute Settlement: Enabling Developing Countries (Edward Elgar, 2018). Her academic articles are published in prestigious journals including Journal of International Economic Law, World Trade Review, Journal of World Trade, European Journal of International Law, and others. Amrita also serves on the Editorial Board of the Journal of International Economic Law (JIEL) and the Journal of Law, Market

xxvi   List of contributors & Innovation (JLMI). Working with ITC’s team, Amrita has designed the very first framework to measure gender-​responsiveness of free trade agreements. She explains this framework in ITC’s policy paper titled ‘Mainstreaming Gender in Free Trade Agreements’. Lorand Bartels is a Professor of International Law and a Fellow of Trinity Hall at the University of Cambridge. Sir Daniel Bethlehem QC is a barrister in private practice at Twenty Essex Chambers in London specializing in public international law. In this capacity, he divides his time between acting as counsel before English and international courts on issues of international law and sitting as arbitrator in Investor-State and other arbitrations. He is a member of the ICSID Panel of Arbitrators and a panellist on the WTO Indicative List of Panellists maintained by the WTO Secretariat, both designated by the United Kingdom, and a member of the Chairpersons Arbitration Panel designated jointly by the United Kingdom and the European Union under the EU-​UK Withdrawal Agreement. From May 2006 to May 2011, Daniel was the principal Legal Adviser of the UK Foreign & Commonwealth Office. Before his appointment to the Foreign Office, in parallel with his Bar practice, Daniel was the Director of the Lauterpacht Centre for International Law at the University of Cambridge, in which role he taught (inter alia) a post-​graduate LL.M. course on WTO and International Trade Law. Marco Bodellini is a Research Scientist in Sustainable Finance at the House for Sustainable Governance and Markets, University of Luxembourg and a Visiting Professor at Fordham University in New York. He has published a number of books and articles in US, UK and European peer-​reviewed journals concerning bank restructuring and resolution, corporate governance of financial institutions, investment funds regulation, central banking, sustainable finance and fintech. His main areas of research include bank crisis and resolution, corporate governance of financial institutions, systemic risk and financial stability, shadow banking and investment funds, fintech and sustainable finance. He is a qualified lawyer admitted to the Italian Bar and provides legal consultancy to public and private institutions. He is also a member of the expert group advising the European Parliament on bank crisis management matters, a member of the Advisory Panel of the International Association of Deposit Insurers and a Special Advisor to the Unidroit Secretariat on bank insolvency. Robert Brookfield is presently Deputy Assistant Deputy Minister in the Policy Sector of the Canadian Department of Justice. Previously, for twenty years he served at Global Affairs Canada, including as Director General of the Trade Law Bureau, Director of the Technical Barriers to Trade Division, and with a posting to the Canadian Embassy in Moscow. During that time he led the NAFTA 2.0 legal team and has acted as primary legal counsel or negotiator of elements of many free trade negotiations, including the Canada-​EU Comprehensive Trade Agreement, the Trans-​Pacific Partnership, and free trade agreements with Korea, Honduras, Ukraine, and Panama. He has served

List of contributors    xxvii as counsel for Canada on several WTO disputes, including US –​Country of Origin Labelling and China –​Auto Parts. Before joining the Canadian federal government he was in private practice in Vancouver, Canada. He is called to the Bar of British Columbia and has a LL.B. from the University of British Columbia (1995) and a B.Arts Sc. from McMaster University (1992). Colin Brown is an international trade and investment lawyer. Since November 2020 he has been Head of Unit Legal Aspects of Trade and Sustainable Development and Investment in the Directorate General for Trade of the European Commission. From 2013 to 2020 he was Deputy Head of Unit of Dispute Settlement and Legal Aspects of Trade Policy. He leads the team of lawyers working on Investor-State dispute settlement in the trade and investment policy of the European Union, in particular the Investment Court System and now the work on the Multilateral Investment Court project. He is the head of the EU Delegation to UNCITRAL Working group III on ISDS reform. He also leads the teams providing legal advice on EU FTAs and on Trade and Sustainable Development. He is a guest lecturer in EU External Economic Relations Law at the Law School of the University of Edinburgh and the Academy of Internal Economic Law and Policy (Athens). He has taught EU and WTO law at IELPO, the University of Barcelona and the Université catholique de Louvain. He holds an LL.B. (first class Honours) from the Faculty of Law of the University of Edinburgh, Scotland, a Diploma in International Relations from the Bologna Center of the School of Advanced International Studies (SAIS), Johns Hopkins University, Bologna, Italy, and an LL.M. in European Law from the College of Europe, Bruges. Mira Burri is Professor of International Economic and Internet Law at the Faculty of Law of the University of Lucerne, Switzerland. She teaches international intellectual property, media, internet, and trade law. Mira’s current research interests are in the areas of digital trade, culture, copyright, data protection, and data governance. Mira is the principal investigator of the project ‘Trade Law 4.0’ (ERC Consolidator Grant 2021–​2026). She consults the European Parliament, UNESCO, the WEF, and others on issues of digital innovation and cultural diversity. Mira has co-​edited the publications Trade Governance in the Digital Age (Cambridge University Press 2012) and Big Data and Global Trade Law (Cambridge University Press, 2021). She is the author of Public Service Broadcasting 3.0: Legal Design for the Digital Present (Routledge, 2015). Mira’s publications are available at: http://​ssrn.com/​aut​hor=​483​457. Jorge Changanaquí is currently regulatory executive at Philip Morris International. Previously he has been legal counsel and trade negotiator at the Vice Ministry of Foreign Trade of Peru. He has also served as legal counsel in the trade remedies authority in Peru. Katherine Connolly is an Associate at Sidley Austin LLP, where she counsels and represents clients on all aspects of international trade law, with a particular focus on WTO law and dispute settlement. Before joining Sidley, Katherine was a dispute settlement lawyer at the WTO Secretariat servicing panels on complex and novel compliance-​ related issues. Katherine holds a law degree from the University of Sydney, Australia,

xxviii   List of contributors and an LL.M. from the University of Amsterdam, Netherlands. Katherine recently completed a 1-​year secondment with the UK Department for International Trade, where she advised on international trade law issues. James Crawford BA, LL.B. (Adelaide), D.Phil. (Oxon.); LL.D. (Cantab); SC (NSW); FBA, was a Judge at the International Court of Justice and a former Whewell Professor of International Law at Cambridge University. He was the first Australian member of the UN International Law Commission and was responsible for its work on the International Criminal Court (1994) and the second reading of the ILC Articles on State Responsibility (2001). John Cusipuma is Director at the Vice Ministry of Foreign Trade of Peru and Professor at the Pontificia Universidad Católica del Perú and Universidad Peruana de Ciencias Aplicadas. He holds an LL.M. in International Economic Law and a master’s degree in Political Science with a major in International Relations from Pontificia Universidad Católica del Perú. He is also a Ph.D. external candidate from Maastricht University. Marsha Echols is a Professor of Law at Howard University in Washington DC, where she teaches trade law and development, international business transactions, and food law among other courses. She is the Founding Director of The World Food Law Institute, an NGO. Professor Echols was a panelist in a WTO dispute and a Member of the United Nations Administrative Tribunal. She frequently attends Codex Alimentarius Commission meetings. After graduate studies and work in Belgium, working for USDA in Geneva, and private practice in Washington with a food trade focus, issues related to international food policy and regulation have been her concentration, with books about food safety and the SPS Agreement and about geographical indications and the TRIPS Agreement. Manfred Elsig is full professor of International Relations and Deputy Managing Director of the World Trade Institute, University of Bern. He holds a Ph.D. from the University of Zurich in political science. His research focuses on international political economy, international organizations, international courts, preferential trade agreements, and European trade policy. He is a one of the initiators of the DESTA database on trade agreements (www.desi​gnof​t rad​eagr​eeme​nts.org) and EDIT on investment agreements (https://​edit.wti.org/​docum​ent/​ttt/​sea​rch). His research has been published in leading journals in political science and law. He is currently a managing editor of the interdisciplinary World Trade Review and has been editing various books published with Cambridge University Press on the WTO and on Preferential Trade Agreements. James Flett is Deputy to the Director of the Trade Policy and WTO Team of the European Commission Legal Service. He has more than thirty years’ experience practicing international law, particularly international trade law. He has represented the European Commission before the European Court of Justice and the European Union before the WTO in more than 300 proceedings. Mr. Flett graduated from the London

List of contributors    xxix School of Economics and Political Science, and has a Master’s degree in European law from the College of Europe, Bruges. He is a qualified solicitor. Before joining the Commission Legal Service on 1 April 1995 (when the WTO was founded) he spent several years working for two international law firms in London and Brussels. He is a frequent speaker at conferences and universities and has published widely on international trade law. He teaches WTO Law at Leuven University, WTO Dispute Settlement Law at the Academy of International Economic Law and Policy in Athens, and WTO Subsidies Law at the World Trade Institute in Bern. Todd Friedbacher co-​founded the Sidley Austin LLP Geneva office in 2000 and serves both as the Managing Partner of the office and as a member of the firm’s Executive Committee. He helps clients manage the risk of doing business across borders and address critical trade and regulatory barriers impacting their ability to move, sell, and protect goods, services, and intellectual property across borders by leveraging the powerful market access and enforcement tools provided by the WTO and other bilateral and regional trade agreements. In his nearly twenty-​five years of practice, he has represented clients in more than fifty-​five WTO disputes, involving ninety distinct WTO dispute settlement proceedings. Yuka Fukunaga is a Professor at Waseda University, where she teaches public international law and international economic law. She is a winner of the Waseda Research Award in 2017. She is also an Executive Council Member of the Society of International Economic Law, an Executive Council Member of the Japan Chapter of the Asian Society of International Law, and a Board Member of the Japan Association of International Economic Law. She currently serves as a Book Review Editor of the Journal of International Economic Law. She was an Assistant Legal Counsel at the Permanent Court of Arbitration and an Intern at the Appellate Body Secretariat, WTO. She holds an LL.D. (2013) and an LL.M. (1999) from the Graduate Schools for Law and Politics, University of Tokyo, and an LL.M. (2000) from the School of Law, University of California, Berkeley. Parika Ganeriwal is a Legal Officer at the Commonwealth Secretariat, London where she advises on institutional matters (concerning international administrative and commercial law) and rule of law matters. Prior to that, she worked as a Dispute Settlement Lawyer at the WTO where she advised WTO panels on international trade disputes. She has also worked as a Research Associate to Prof. Peter Van den Bossche and assisted in editing and updating the 4th and 5th editions of The Law and Policy of the World Trade Organization. Parika completed her LL.M. in International and European Labour Laws from the University of Amsterdam. She graduated with a B.Sc., LL.B. (Hons in Intellectual Property Rights) degree from the National Law University, Jodhpur, India, prior to working as a Senior Associate in the General Corporate and Mergers & Acquisitions practice at the law firm, Amarchand & Mangaldas in New Delhi, India from 2009–​2014.

xxx   List of contributors Henry Gao is a tenured law professor at Singapore Management University and Dongfang Scholar Chair Professor at Shanghai Institute of Foreign Trade. With law degrees from three continents, he started his career as the first Chinese lawyer at the WTO Secretariat. He has been an advisor on trade issues for many national governments as well as the WTO, UN, World Bank, ADB, APEC, ASEAN and the World Economic Forum. Widely published on issues relating to WTO and China, he has been cited in the World Trade Report by the WTO and the Digital Economy Report by UNCTAD. He sits on the Advisory Board of the WTO Chairs Program, which was established by the WTO Secretariat in 2009 to promote research and teaching on WTO issues in leading universities around the world. He is also a member of editorial boards of the Journal of International Economic Law and the Journal of Financial Regulation, both published by Oxford University Press. Marcus Gustafsson is a member of the European Commission’s Legal Service, representing the European Commission before the EU courts in trade defence matters. He previously worked at the law firm Van Bael & Bellis, where he was involved in EU, WTO and FTA litigation, and represented exporters in trade defence investigations and on customs matters. Marcus holds an LL.B. from the University of Edinburgh, an LL.M. from Georgetown University, and is a member of the New York Bar. He is a regular contributor to books, academic journals, and blogs on issues of international economic law. Ricardo Ramírez Hernández is a Partner at RRH Consultores in Mexico City and an international trade expert and adjudicator. With over 25 years of private and public practice, Mr. Ramirez has advised governments and companies on the negotiation, implementation, litigation, and interpretation of multiple international trade instruments. He has been appointed to several rosters of adjudicators, such as the Panel of Arbitrators of the International Centre for Settlement of Investment Disputes (ICSID), the Beijing Arbitration Commission, and the Shenzhen Court of International Arbitration, as well as to the roster of panelists for several FTAs, including the USMCA and MERCOSUR. He is the Vice-​Chair of the Global Committee on Trade and Investment Policy of the International Chamber of Commerce (ICC) and Chairs the Mexican chapter of the same Committee. He is a Professor at the Faculty of Law of the National Autonomous University of Mexico (UNAM) and Chairman of the International Trade Professors Association of UNAM. He holds a Law Degree from the Universidad Autónoma Metropolitana, Mexico, and an LL.M. on International Legal Studies from American University, Washington DC. Holger Hestermeyer is a professor of International and EU Law at King’s College London and a Fellow at CAPAS, Heidelberg. He was the Co-​Executive Vice President of the Society of International Economic Law, a Co-​Director of the Red Latinoamericana de Derecho Económico Internacional and has served as a specialist adviser to the EU Select Committee of the House of Lords. Holger is admitted to the German and the

List of contributors    xxxi New York bars and advises on international and EU law. Before joining King’s College London, he was a Référendaire at the Court of Justice of the European Union. Pasha L. Hsieh is an Associate Professor and the Associate Dean (Faculty Matters & Research) at the Singapore Management University Yong Pung How School of Law. He received J.D. and LL.M. degrees from the University of Pennsylvania Law School and a Ph.D. in Political Science from Free University of Brussels. Prior to academia, he was a Legal Affairs Officer at the WTO and an associate at Shearman & Sterling LLP. He has been invited by various institutions such as the European Parliament and the Singapore Judicial College to present on trade law issues. He served as the Co-​Chair of the American Society of International Law-​Asia-​Pacific Interest Group from 2017 to 2020 and is an Executive Council Member of the Society of International Economic Law. He was awarded the Sumitomo Foundation research grant in 2021. Valerie Hughes, is Senior Counsel with Bennett Jones LLP. She served as Director of the WTO Legal Affairs Division and of the WTO Appellate Body Secretariat. She also held senior positions in the Government of Canada at Justice, Finance, and Global Affairs. She is a member of the pool of arbitrators for the WTO Multi-​Party Interim Appeal Arbitration Arrangement. Peter Van den Bossche is Director of Studies of the World Trade Institute and Professor of International Economic Law at the University of Bern, Switzerland. Since 2018, he serves as President of the Society of International Economic Law. From 2009 to 2019, he was a Member of the Appellate Body of the WTO and served as chairman of the Appellate Body in 2015. Van den Bossche is the author (with Werner Zdouc) of The Law and Policy of the World Trade Organization, 5th edition (Cambridge University Press, 2021); and (with Denise Prévost) of Essentials of WTO Law, 2nd edition (Cambridge University Press, 2021). Isabelle Van Damme is a Partner at Van Bael & Bellis, a Member of the Brussels Bar and a Visiting Professor at the College of Europe. She also serves as the Executive Vice-​ President of the Society of International Economic Law. Her practice focuses on WTO law, EU law and public international law. Isabelle regularly advises governments and industry and represents States and individuals before international courts and tribunals, including WTO panels, the Appellate Body, and the Court of Justice of the European Union. Isabelle previously worked as a référendaire (legal clerk) in the chambers of Advocate General Sharpston, at the CJEU, worked at a Geneva-​based firm specialized in WTO law and was the Turpin-​Lipstein Fellow at Clare College, University of Cambridge. She holds degrees from the University of Ghent, Georgetown University Law Center and the University of Cambridge. Her main publications include a monograph on Treaty Interpretation by the WTO Appellate Body (Oxford University Press, 2009) and A Commentary on the WTO Anti-​Dumping Agreement (Cambridge University Press, 2021). She currently teaches, at the College of Europe, on EU trade law and policy.

xxxii   List of contributors Matthew Kennedy, an Australian national, is a Professor in the Faculty of Law of the University of International Business and Economics, Beijing. He holds a Ph.D. from the University of Bern, Switzerland and is a Fellow of the Chartered Institute of Arbitrators. He has served as a dispute settlement panellist at the WTO and as a domain name dispute resolution panellist at the World Intellectual Property Organization Arbitration and Mediation Center and the Hong Kong International Arbitration Centre. He has published widely and is the author of WTO Dispute Settlement and the TRIPS Agreement: Applying Intellectual Property Standards in a Trade Law Framework (Cambridge University Press, 2016). He was formerly a senior lawyer in the WTO Secretariat and Secretary of the WTO Council for TRIPS. Kholofelo Kugler is an international trade lawyer. She is on sabbatical leave from the Advisory Centre on WTO Law in Geneva to complete a Ph.D. at the University of Lucerne, Switzerland, under the supervision of Mira Burri. She is part of the project Trade Law 4.0. Kholofelo is also a Visiting Research Fellow at the law school of Wits University in South Africa. Kholofelo holds a Bachelor’s degree in Economics and International Politics, an LL.B. degree, and a Master’s degree in International Law and Economics (MILE). She is an admitted attorney in her native South Africa. Rosa María Lastra is the Sir John Lubbock Chair in Banking Law at the Centre for Commercial Law Studies, Queen Mary University of London. She is co-​director of the Sovereign Debt Forum https://​www.qmul.ac.uk/​ccls/​resea​rch/​sovere​ign-​debt-​ forum/)​, Vice-​Chair of the Monetary (Committee of the International Law Association, founding member of the European Shadow Financial Regulatory Committee, research associate of the Financial Markets Group of the London School of Economics and Political Science, member of the European Banking Institute, member of the European Law Institute and member of P.R.I.M.E. She has served as a consultant to the International Monetary Fund, the European Central Bank, the World Bank, the Asian Development Bank, United Nations (UNCTAD) and the Federal Reserve Bank of New York. In 2021 she acted as specialist adviser to the House of Lords (Economic Affairs Committee) in their inquiry into the QE program of the Bank of England. She has also acted as expert witness in international arbitration. She is a member of two expert panels of the European Parliament: the Monetary Panel since 2015 and the Banking Union (Resolution) Panel since 2016. Prior to coming to London, she was Assistant Professor of International Banking at Columbia University School of International and Public Affairs in New York and a consultant in the Legal Department of the International Monetary Fund in Washington DC. She is a renowned expert in the areas of central banking, banking supervision and resolution, financial regulation, EU monetary and financial law, financial crisis management, and international monetary law. Nic Lockhart is a partner at Sidley Austin LLP in Geneva and works with WTO Members as complainants, respondents, and third parties. He has advised a wide range of governments and commercial stakeholders in dozens of disputes and assisted clients

List of contributors    xxxiii with the negotiation of trade agreements. Before joining Sidley, he spent five years at the WTO Appellate Body, advising on sixteen appeals. He offers clients an in-​depth knowledge of WTO practice, procedures, and substantive law, covering all stages of WTO dispute settlement, as well as his extensive experience in oral advocacy at hearings. Mislav Mataija, LL.M. (Columbia), Ph.D. (EUI, Florence), is a member of the Legal Service of the European Commission. He represents the European Commission in litigation before the European Court of Justice in various areas of EU internal market law, advises on EU law matters, and litigates WTO disputes on behalf of the European Union. He has also been a visiting professor at Columbia Law School, Sciences Po School of Public Affairs, Paris, and at the Catholic University of Lyon. Previously, he was a lecturer at the Jean Monnet Department of European Public Law at the University of Zagreb, taught at the Catholic University of Lille, and worked as a researcher at the European University Institute Centre for Judicial Cooperation. He has published extensively in EU and international law, including a monograph entitled Private Regulation and the Internal Market: Sports, Legal Services, and Standard Setting in EU Economic Law, with Oxford University Press in 2016. Donald McRae is Professor Emeritus at the University of Ottawa, Canada. He is the former Editor-​in-​Chief of the Canadian Yearbook of International Law and has published widely on international law including the law of the sea and international trade law. He has been counsel in several international fisheries and boundary arbitrations and has appeared before the International Court of Justice. He has appeared as counsel before WTO panels and the WTO Appellate Body and has been a member of several WTO and NAFTA panels. He has also been a member and chair of several investment dispute tribunals under NAFTA, ICSID and UNCITRAL and a judge ad hoc in the International Court of Justice. Professor McRae was a member of the International Law Commission from 2007 to 2016. Juliana Nam is a senior officer of the Australian Government’s Department of Foreign Affairs and Trade. She was Australia’s lead for the State-​owned Enterprises chapter in the original Trans-​Pacific Partnership (TPP) negotiations and the deputy chief negotiator in the ‘TPP-​11/​CPTPP’ process. She has served overseas in Brussels and Kuala Lumpur. Ms Nam has a Master of Law (International Legal Studies) from New York University, and Bachelor of Commerce/​Bachelor of Law (First Class Honours) from the University of Sydney. She is admitted to the New York State Bar and the New South Wales Supreme Court. Rodney Neufeld is an international lawyer with the Government of Canada. He has represented Canada in various trade negotiations, including the TPP and NAFTA 2.0, as well as in various WTO and NAFTA Chapter Eleven disputes. He also participated in the redraft of Canada’s Model Foreign Investment Protection Agreement, which was released in 2021.

xxxiv   List of contributors Alicia Nicholls, B.Sc, M.Sc., LL.B. is Junior Research Fellow with the Shridath Ramphal Centre for International Trade Law, Policy and Services of The University of the West Indies, Cave Hill campus in Barbados. Her research focuses on investment law and policy, trade and sustainable development and global financial regulation. Damilola S. Olawuyi, SAN, FCIArb, is Professor of Law and holder of the UNESCO Chair in Environmental Law and Sustainable Development at Hamad Bin Khalifa University (HBKU) College of Law, Doha, Qatar. He is also Chancellor’s Fellow and Director of the Institute for Oil, Gas, Energy, Environment, and Sustainable Development (OGEES Institute), Afe Babalola University, Ado Ekiti, Nigeria. He is an Independent Expert of the Working Group on Extractive Industries, Environment, and Human Rights Violations in Africa, formed by the African Commission on Human and Peoples’ Rights. Professor Olawuyi has published close to a hundred articles, book chapters, and books on petroleum law, energy, and international environmental law. His most recent book publications include Environmental Law in Arab States (Oxford University Press, 2022), Local Content and Sustainable Development in Global Energy Markets (Cambridge University Press, 2021), Climate Change Law and Policy in the Middle East and North Africa Region (Routledge, 2021), The Human Rights-​ Based Approach to Carbon Finance (Cambridge University Press, 2016); and Extractives Industry Law in Africa (Springer, 2018). Chantal Ononaiwu is the Trade Policy and Legal Specialist in the Caribbean Community (CARICOM) Secretariat, based in Barbados, where she advises the Community and its Member States on external trade negotiations and other matters pertaining to international trade and investment. She has served as a Negotiator for CARICOM in its external trade negotiations and has represented the Community in cases before the Caribbean Court of Justice. Dr. Ononaiwu is also a lecturer in International Trade and Investment Law at the University of the West Indies. Prior to joining the CARICOM Secretariat, she was the Director, Value Proposition Development at Invest Barbados. She is admitted to practise law in Jamaica and Barbados. A Rhodes Scholar, Dr. Ononaiwu holds a DPhil in Law from the University of Oxford, an LL.M. from the University of Cambridge, and an LL.B. from the University of the West Indies. Federico Ortino is Professor of International Economic Law at King’s College London. He joined King’s in 2007. He is a member of the ILA Committee on the Rule of Law and International Investment Law; founding Committee Member (and former co-​ Treasurer) of the Society of International Economic Law; consultative member of the Investment Treaty Forum; editorial board member of the Journal of International Economic Law; Journal of International Dispute Settlement, Journal of World Investment and Trade. He is a Consultant to Clifford Chance. Shin-​yi Peng is Distinguished Professor of Law at National Tsing Hua University. She is a former commissioner of the National Communications Commission of Taiwan (2012–​2016). Professor Peng specializes in international trade law, with a focus on trade in services, digital trade and, increasingly, data governance. She is a member of the

List of contributors    xxxv Indicative List of governmental and nongovernmental panellists to hear WTO disputes. She has served on the Executive Council (2012–​2020) and as Executive Vice President (2016–​2020) of the Society of International Economic Law. She is currently an Editorial Board Member of the World Trade Review. Hugo Perezcano is an international arbitrator and consultant specialized on international trade and investment. He worked for the Mexican government’s Ministry of Economy for nearly 20 years, where he served as head of Mexico’s trade remedy authority, and formerly as general counsel for international trade negotiations. He was involved on behalf of Mexico in the negotiations of the North American Free Trade Agreement (NAFTA), the Uruguay Round of Multilateral Trade Negotiations and numerous other trade and investment agreements. He was lead counsel for Mexico in Investor-State dispute settlement cases under NAFTA and other international investment agreements as well as in dispute settlement cases between States conducted under trade agreements that include NAFTA and the WTO Agreement. Lori Di Pierdomenico is a Senior Counsel in the Trade Law Bureau at Global Affairs Canada. Lori has acted as legal counsel for the Government of Canada in many of Canada’s free trade and international investment agreement negotiations, including the NAFTA 2.0 and CPTPP. Lori is also responsible for leading the Government of Canada’s defence in international investment disputes involving foreign investors under Canada’s free trade and investment treaties, and advises regularly on Canada’s international trade obligations. Educated in both common law and civil law, Lori is a law graduate of McGill University (LL.B., B.C.L.) and the University of Arizona (LL.M.) and is admitted to the Law Society of Ontario and the New York State Bar. Amy Porges practices international trade law in Washington DC, advising governments, companies and trade associations on international trade agreements and negotiations, WTO matters, and US trade and customs law. Amy previously was a Senior Legal Officer in the GATT Secretariat during the Uruguay Round; guided USTR’s litigation programme as USTR’s Senior Counsel for Dispute Settlement and head of enforcement during the first five years of the WTO; and practiced WTO law at major international law firms from 2000–​2009. She was principal author of the Analytical Index of the GATT (Cambridge University Press, 1996). She also teaches global trade policy at the Johns Hopkins University School of Advanced International Studies in Washington, DC. She holds degrees from Cornell, Harvard Law School and the Kennedy School of Government. Jan Yves Rémy is Director of the Shridath Ramphal Centre for International Trade Law, Policy and Services (SRC) of University of the West Indies, Cave Hill Campus, Barbados. In addition to her outreach and research activities at the SRC, she teaches trade law and Caribbean regional integration in the SRC’s flagship Masters in International Trade Policy Programme. Her doctoral thesis focussed on the role of the Caribbean Court of Justice in promoting Caribbean regional integration. Jan-​Yves also serves as Chair for the University of the West Indies (Barbados) under the Chair Programme of the WTO.

xxxvi   List of contributors She has also served as a WTO panelist in a dispute between WTO Members. Jan-​Yves holds a Ph.D. in International Law (summa cum laude) from the Graduate Institute of International and Development Studies (Geneva, Switzerland), an LL.M. (Hons) in Commercial and International Law from the University of Cambridge (UK) and an LL.B. (Hons) from the University of the West Indies, Cave Hill Campus (Barbados). Prior to joining the SRC, Jan-​Yves worked for five years as a Senior Trade Associate at the offices of Sidley Austin LLP in Geneva and Washington D.C and as a Legal Officer at the Appellate Body Secretariat of the WTO, where she assisted Members of the Appellate Body in their disposition of appeals in trade disputes. Kamal Saggi is the Frances and John Downing Family Professor of Economics and the Dean of Faculty Affairs in the College of Arts and Science at Vanderbilt University. He has held visiting appointments at Stanford University, the University of New South Wales, and the World Bank. After receiving his Ph.D. in Economics in 1995 from the University of Pennsylvania, Dr. Saggi joined the faculty at Southern Methodist University where he was named the Dedman Distinguished Collegiate Professor of Economics in 2007. Dr. Saggi has published extensively in the fields of international trade and economic development. Much of his research is centered on two major themes: (i) the inter-​ relationships between trade, intellectual property rights, and foreign direct investment in the global economy and (ii) the legal and economic underpinnings of the multilateral trading system. Erika Schneidereit J.D. (University of Ottawa), MA International Affairs (Carleton University). Counsel with the Department of Justice, Government of Canada. Simon Schropp is Managing Economist in Sidley Austin, a leading law firm in the field of international trade law. He oversees the work of Sidley’s in-​house economists and manages the Economic Analysis team. Simon has gathered extensive experience in an array of disciplines and business sectors and has supported Sidley’s clients in a variety of fora, including before WTO panels and the Appellate Body, arbitral tribunals, and domestic regulatory agencies and courts. He also serves as adjunct professor at the Elliott School of International Affairs at The George Washington University. Simon holds a Ph.D. in International Economics from the Graduate Institute, Geneva, a Ph.D. in economics from St. Gallen University and a Master’s in International Affairs from Columbia University’s School of International and Public Affairs. Andreas Sennekamp heads the WTO’s Academic Outreach Section. He joined the WTO in 2006 and served as Counsellor in the Appellate Body Secretariat until 2019. Prior to joining the WTO, he was an Associate at Sidley Austin LLP, advising businesses and governments on international trade law and WTO dispute settlement. He also worked at the OECD Trade Directorate as well as at a charitable institution in La Paz. He has lectured at the World Trade Institute, King’s College London, LSE, Universidad Católica Boliviana among others.

List of contributors    xxxvii Fiona Smith is Professor of International Economic Law and N8 Chair of Agri-Food Regulation at the School of Law, University of Leeds. She is also Associate Director of the University of Leeds Global Institute for Food and the Environment, where she directs research into International AgriFood Supply Chains. In March 2021, she was appointed as Special Adviser to the UK House of Commons International Trade Committee for the Committee’s scrutiny of UK’s international trade agreements. Her published research focuses on international trade law in the WTO, and she has a specialist interest in international agricultural trade. Sylvie Tabet is an international lawyer specialized in trade and investment law. She is General Counsel at Canada’s Trade Law Bureau where she is responsible for providing trade law advice and litigating international trade and investment cases on behalf of the Government of Canada. She has extensive experience in negotiating international trade and investment agreements. She was lead counsel to the Government of Canada for the Canada-​EU Trade Agreement, the Canada-​China BIT and has advised on CUSMA and CPTPP. Sylvie represented Canada before the WTO, and in ICSID and UNCITRAL investment arbitrations under NAFTA and other FTAs and bilateral investment treaties. She is Canada’s representative for UNCITRAL Working Group III on investor state dispute settlement reform. Sylvie holds a Baccalauréat en droit from Université de Montréal (LL.B) and was called to the Quebec Bar in 1994. She teaches and guest lectures frequently on trade and investment law issues. Marina Trunk-​Fedorova is associate professor at the Law Faculty of St. Petersburg State University and at the Ural State Law University, where she teaches courses on International Law and International Economic Law. She holds a Ph.D. from St. Petersburg State University and a IELPO LL.M. degree from the University of Barcelona. Marina Trunk-​Fedorova has numerous publications on different issues of International Economic Law and she is also a member of the editorial board of the Russian law journal ‘International Justice’. David Unterhalter serves as a judge in South Africa and is currently an Acting Justice of the Constitutional Court. He was formerly a member and chairman of the Appellate Body. Jayashree Watal worked in the Intellectual Property, Government Procurement and Competition Division of the WTO and from February 2001–​2019, contributing to work on TRIPS and public health, TRIPS-​CBD, Patents, Undisclosed Information, Economics of TRIPS, IP and Transfer of Technology, IP and Climate Change, and IP and Competition Policy. She is currently a part-​time consultant and teacher on TRIPS matters and holds the position of Honorary Professor at the National Law University, Delhi. She has held an Adjunct Professor position at Georgetown University Law Centre since 2009. She was a member of the Governance Board of the Medicines Patent Pool, a non-​profit organization based in Geneva, from 2015 to 2021. Ms Watal represented India at a crucial stage in the Uruguay Round TRIPS negotiations from 1989–​.90. She has

xxxviii   List of contributors written extensively and continues to participate in conferences, training programmes and webinars on intellectual property matters. Margaret A. Young is Professor at Melbourne Law School, University of Melbourne, specializing in public international law, the law of the sea, international trade law, climate change, and environmental law. Her research has received various awards, including the Certificate of Merit in a Specialized Area of International Law from the American Society of International Law, the International Union for Conservation of Nature (IUCN) Academy of Environmental Law Junior Scholar Prize and the University of Melbourne Woodward Medal in Humanities and Social Sciences. Elected in 2021 as a Fellow of the Australian Academy of Law, Margaret is currently academic consultant to the World Bank’s Blue Economy Program and serves as a member of the international expert group for the proposed United Nations ‘Global Pact for the Environment’. Before joining Melbourne Law School, she was the inaugural Research Fellow in Public International Law at Pembroke College and the Lauterpacht Centre for International Law, University of Cambridge.

List of Abbreviations

1979 Understanding 1989 Improvements AANZFTA AB ABMs ACP Group ACWL ADR AEC AfCFTA AGOA AI AIIB ALADI ALALC ALBA ALOP ANDEAN Community Anti-​Dumping Agreement/​AD Agreement ANZCERTA AO APEC APTA ARSIWA ASEAN ATIGA ATISA

Understanding on Notification, Consultation, Dispute Settlement and Surveillance, 28 November 1979, GATT BISD 26S/​210 Decision on Improvements to the GATT Dispute Settlement Rules and Procedures, 12 April 1989, GATT BISD 36S/​61 ASEAN-​Australia-​New Zealand Free Trade Agreement Appellate Body Appellate Body Members African, Caribbean, and the Pacific Group of States Advisory Centre on WTO Law Alternative dispute resolution Atomic Energy Council African Continental Free Trade Area African Growth and Opportunity Act Artificial intelligence Asian Infrastructure Investment Bank Latin American Integration Association Latin American Free Trade Association Bolivarian Alliance for Latin America and the Caribbean Appropriate level of protection ANDEAN Community (Comunidad Andina) Agreement on Implementation of Article VI of the GATT 1994 Australia-​New Zealand Closer Economic Relations Trade Agreement Appellation of origin Asia-​Pacific Economic Cooperation Asia-​Pacific Trade Agreement Articles on Responsibility of States for Internationally Wrongful Acts 2001/​ILC Articles on State Responsibility Association of Southeast Asian Nations ASEAN Trade in Goods Agreement ASEAN Trade in Services Agreement

xl   List of abbreviations AU BCBS BCI BIAT BIS BIT BRI CAC CACM CAFTA CAFTA-​DR

African Union Basel Committee on Banking Supervision Business confidential information Action Plan for Boosting Intra-​African Trade Bank of International Settlements Bilateral investment treaty Belt and Road Initiative Codex Alimentarius Commission Central American Common Market Central America Free Trade Agreement Central America-​Dominican Republic-​United States Free Trade Agreement CAI EU—​China Comprehensive Agreement on Investment CAP Common agriculture policy CARIBCAN Caribbean-​Canada Agreement CARICOM Caribbean Community and Common Market CARIFORUM Caribbean Forum CBD Convention on Biological Diversity CBPR Cross-​border privacy rules CCIA Agreement Investment Agreement for the COMESA Common Investment Area CCM Mercosur Trade Commission CEFTA Central European Free Trade Agreement CEMA Central African Economic and Monetary Union CEN-​SAD Community of Sahel-​Sharan States CEPA European Union-​CARIFORUM Economic Partnership Agreement CEPEA Comprehensive Economic Partnership for East Asia CETA EU-​Canada Comprehensive Economic and Trade Agreement CITES Convention on the International Trade in Endangered Species Civil Aircraft Agreement Agreement on Trade in Civil Aircraft CJEU Court of Justice of the European Union CMC Council of the Common Market CN Competitive neutrality CoE Council of Europe COMESA Common Market for Eastern and Southern Africa CPC Central Product Classification CPC Communist Party of China

List of abbreviations    xli CPTPP CSME CTD CTE CTG CUSFTA CUSMA Customs Valuation Agreement CVD CWB DEPA DOALOS DSB DSMs DSU EAC EACJ EAEC EAEG EAEU ECCAS ECFA ECGLC ECHR ECOSOC ECOWAS ECSC ECT ECtHR EEA Agreement EEC EFTA EMIT Group Enabling Clause EPA EPPs

Comprehensive and Progressive Agreement for Trans-​ Pacific Partnership CARICOM Single Market & Economy Committee on Trade and Development Committee on Trade and Environment Council for Trade in Goods Canada-​United States Free Trade Agreement Canada-​United States-​Mexico Agreement/​T-​MEC/​ USMCA Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 Countervailing duties Canada Wheat Board Digital Economy Partnership Agreement UN Division of Ocean Affairs and Law of the Sea Dispute Settlement Body Dispute settlement mechanisms Understanding on Rules and Procedures Governing the Settlement of Disputes/​Dispute Settlement Understanding East Asia Community EAC Court of Justice East Asia Economic Caucus East Asia Economic Group Eurasian Economic Union Economic Community of Central African States Economic Cooperation Framework Agreement Economic Community of Great Lakes Countries European Convention on Human Rights Economic and Social Council Economic Community of West African States European Coal and Steel Community Energy Charter Treaty European Court of Human Rights Agreement on the European Economic Area European Economic Community European Free Trade Association Group on Environmental Measures and International Trade Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries Economic Partnership Agreement Environmentally preferable products

xlii   List of abbreviations ESA EU EU—​Japan EPA EU—​Korea FTA EU—​Singapore FTA EU-​Colombia-​Peru Trade Agreement Euratom EU-​UK TCA

FAO FATF FCN FIT FSAP FSB FSF FTAs FTC FTZs GATB GATS GATT GATT 1947 GATT 1994 GCC GDP GDPR Geneva Act

GIs GMC

Eastern and South Africa European Union Agreement between the European Union and Japan for an Economic Partnership Free Trade Agreement between the European Union and its Member States, of the one part, and the Republic of Korea, of the other part Free Trade Agreement between the European Union and the Republic of Singapore Trade Agreement between the European Union and its Member States, of the one part, and Colombia and Peru, of the other part European Atomic Energy Community Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part/UK-EU TCA Food and Agriculture Organization Financial Action Task Force on Money Laundering Freedom Commerce and Navigation Feed-​in-​tariff Financial Sector Assessment Programme Financial Stability Board Financial Stability Forum Free trade agreements/​PTAs/​RTAs Federal Trade Commission Free trade zones Geneva Agreement on Trade in Bananas General Agreement on Trade in Services General Agreement on Tariffs and Trade General Agreement on Tariffs and Trade 1947 General Agreement on Tariffs and Trade 1994 Gulf Cooperation Council Gross Domestic Product General Data Protection Regulation Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications and Regulations Under the Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications, 20 May 2015 Geographical indications Common Market Group

List of abbreviations    xliii GPA GSP HS Convention HSBI IA IBRD ICCPR ICITO ICJ ICSID ICTY IFAD IIAs IISD ILC ILC Articles on State Responsibility ILO IMF Import Licensing Agreement IOC IOSCO IoT IP IPPC IPRs ISDA ISDS ITC ITO IUCN IUU (fishing) Japan—​ASEAN Agreement on Comprehensive Closer Economic Partnership JECFA

Agreement on Government Procurement Generalized System of Preferences International Convention on the Harmonized Commodity Description and Coding System Highly sensitive business information Investigating authority International Bank for Reconstruction and Development International Covenant on Civil and Political Rights Interim Committee for the International Trade Organization International Court of Justice International Centre for the Settlement of Investment Disputes International Criminal Tribunal for the former Yugoslavia International Fund for Agricultural Development International investment agreements International Institute for Sustainable Development International Law Commission Articles on Responsibility of States for Internationally Wrongful Acts 2001/​ARSIWA International Labour Organization International Monetary Fund Agreement on Import Licensing Procedures Indian Ocean Commission International Organization of Securities Commission Internet of things Intellectual propertys International Plant Protection Convention Intellectual property right International Swaps and Derivatives Association Investor-State dispute settlement. International Trade Centre International Trade Organisation International Union for Conservation of Nature Illegal, unreported and unregulated fishing Agreement on Comprehensive Economic Partnership among Japan and Member States of the Association of South-​East Asian Nations Joint FAO/​WHO Export Committee on Food Additives

xliv   List of abbreviations JEEPA KORUS (FTA) LAIA LCIA LCR LDC Lisbon Agreement LMICs Madrid Agreement Marrakesh Agreement MEAs MERCOSUR MFN MIP MOFCOM MPIA MRA MRU MSMEs NAAEC NAALC NAFTA NAFTA 2.0 NCDs NDC NEPAD NME NTE OAPI OAS OAU OCDs ODCs OECD OIE OMAs

Agreement between the European Union and Japan for an Economic Partnership US-​Korea Free Trade Agreement Latin American Integration Association London Court of International Arbitration Local content requirement Least developed country Lisbon Agreement for the Protection of Appellations of Origin and their International Registration, 31 October 1958 Low and middle-​income countries Madrid Agreement for the Repression of False and Deceptive Indications of Source, 14 April 1891 Agreement Establishing the World Trade Organization Multilateral environmental agreements Southern Common Market (El Mercado Común del Sur) Most-​favoured-​nation Minimum import prices Ministry of Commerce of the People’s Republic of China Multi-​Party Interim Appeal Arbitration Arrangement Mutual recognition agreement Mano River Union Micro, small and medium-​sized enterprises North American Agreement on Environmental Cooperation North American Agreement on Labour Cooperation North American Free Trade Agreement Canada-​United States-​Mexico Agreement/​CUSMA/​T-​ MEC/​USMCA Non-​communicable diseases National Determined Contributions New Partnership for Africa’s Development Non-​market economy National trade estimate OAPI -​African Intellectual Property Organization Organization of American States Organisation for African Unity Ordinary customs duties Other duties and charges imposed on or in connection with importation Organisation for Economic Cooperation and Development World Organization of Animal Health Orderly marketing arrangements

List of abbreviations    xlv PAAP PAFTA Paris Agreement PCA PCIJ POI PPMs PRC PSMA PTA R&D RCEP REC Revised Government Procurement Agreement RFMA RFMOs ROC RPT RTAA RTAs S&DT SAA SAA BiH SACU SADC SCM Agreement SDG SIDS SIECA SMEs SOEs SPA SPS Agreement SSDS STC SVEs

Pacific Alliance Additional Protocol Peru-​Australia FTA Paris Convention for the Protection of Industrial Property, 20 March 1883 Permanent Court of Arbitration Permanent Court of International Justice Period of investigation Process and production methods People’s Republic of China Agreement on Port State Measures to Prevent, Deter and Eliminate Illegal, Unreported and Unregulated Fishing Preferential trade agreement/​FTA/​RTAs Research and development Regional Comprehensive Economic Partnership Agreement Regional Economic Community Revised Agreement on Government Procurement Regional Fisheries Management Arrangements Regional Fisheries Management Organisations Republic of China Reasonable period of time 1934 Reciprocal Trade Agreement Act Regional trade agreements/​FTA/​PTAs Special and differential treatment US Statement of Administrative Action Stabilization and Association Agreement between the European Union and Bosnia and Herzegovina Southern African Customs Union Southern African Development Community Agreement on Subsidies and Countervailing Measures Sustainable development goal Small island developing States Central American Integration Secretariat Small and medium-​sized enterprises State-​owned enterprises Single electronic point of access Agreement on the Application of Sanitary and Phytosanitary Measures State-​to-​State dispute settlement Special trade concern Small vulnerable economies

xlvi   List of abbreviations TB TBT Agreement TED TEU TFA TFEU TFTA TiSA TISMOS TMB T-​MEC TNC Tokyo Round Anti-​ Dumping Code TOT TPA TPL TPP TPRB TPRM TRIMs Agreement TRIPS Agreement TRQs TSB TSD TTIP UHC UMA UN UN Charter UNCITRAL UNCLOS UNCTAD UNFCCC US USDOC USITC USMCA

Tuberculosis Technical Barriers to Trade Agreement Tenders Electronic Daily Treaty on European Union Trade Facilitation Agreement Treaty on the Functioning of the European Union Tripartite Free Trade Area and African Continent Free Trade Area Trade in Services Agreement Trade in services by mode of supply Textiles Monitoring Body Tratado entre Mexico, Estados Unidos y Canadá/​CUSMA/​ USMCA Trade Negotiations Committee Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade Terms-​of-​trade Trade Promotion Agreement Tariff preference level Trans-​Pacific Partnership Trade Policy Review Body Trade Policy Review Mechanism Agreement on Trade-​Related Investment Measures Agreement on Trade-​Related Aspects of Intellectual Property Rights Tariff rate quotas Textiles Surveillance Body Trade and sustainable development Transatlantic Trade and Investment Partnership Universal health coverage Arab Maghreb Union United Nations United Nations Charter United Nations Commission on International Trade Law United Nations Convention on the Law of the Sea United Nations Conference on Trade and Development United Nations Framework Convention on Climate Change United States United States Department of Commerce United States International Trade Commission United States-​Mexico-​Canada Agreement/​CUSMA/​ T-​MEC

List of abbreviations    xlvii USTR VCLT (1969) VERs VRAs W/​120 WA WAEMU WCO WHO WIPO WTO WTO Agreement

United States Trade Representative Vienna Convention on the Law of Treaties 1969 Voluntary export restrains Voluntary restraint agreements GATS Services Sectoral Classification List Wassenaar Arrangement West African Economic and Monetary Union World Customs Organization World Health Organization World Intellectual Property Organization World Trade Organization Marrakesh Agreement Establishing the World Trade Organization

List of Cited WTO Panel and Appellate B ody reports, Initiated WTO Disputes and their Common Abbreviations

Short title

Full title and citation

Argentina –​Ceramic Tiles

Panel Report, Argentina –​Definitive Anti Dumping Measures on Carton-Board Imports from Germany and Definitive Anti-Dumping Measures on Imports of Ceramic Floor Tiles from Italy, WT/​DS189/​R, adopted 5 November 2001, DSR 2001:XII, p. 6241 Appellate Body Report, Argentina –​Measures Relating to Trade in Goods and Services, WT/​ DS453/​AB, adopted 9 May 2016, DSR 2016:II Appellate Body Report, Argentina –​Safeguard Measures on Imports of Footwear, WT/​DS121/​AB/​ R, adopted 12 January 2000, DSR 2000: I, p. 515 Panel Report, Argentina –​Measures Affecting the Export of Bovine Hides and Import of Finished Leather, WT/​DS155/​R and Corr.1, adopted 16 February 2001, DSR 2001:V, p. 1779 Appellate Body Reports, Argentina –​Measures Affecting the Importation of Goods, WT/​DS438/​ AB/​R /​ WT/​DS444/​AB/​R /​ WT/​DS445/​AB/​R, adopted 26 January 2015, DSR 2015:II Panel Reports, Argentina –​Measures Affecting the Importation of Goods, WT/​DS438/​R /​ WT/​DS444/​ R /​WT/​DS445/​R /​and Add.1, adopted 26 January 2015, as modified (WT/​DS438/​R) and upheld (WT/​DS444/​R /​ WT/​DS445/​R) by Appellate Body Reports WT/​DS438/​AB/​R /​ WT/​DS444/​AB/​R /​ WT/​DS445/​AB/​R, DSR 2015:II

Argentina –​Financial Services

Argentina –​Footwear (EC)

Argentina –​Hides and Leather

Argentina –​Import Measures

l    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

Argentina –​Poultry Anti-​Dumping Panel Report, Argentina –​Definitive Anti-​Dumping Duties Duties on Poultry from Brazil, WT/​DS241/​R, adopted 19 May 2003, DSR 2003: V, p. 1727 Argentina –​Preserved Peaches Panel Report, Argentina –​Definitive Safeguard Measure on Imports of Preserved Peaches, WT/​ DS238/​R, adopted 15 April 2003, DSR 2003:III, p. 1037 Argentina –​Textiles and Apparel Appellate Body Report, Argentina –​Measures Affecting Imports of Footwear, Textiles, Apparel and other Items, WT/​DS56/​AB/​R and Corr.1, adopted 22 April 1998, DSR 1998:III, p. 1003 Australia –​ Anti-​Dumping Panel Report, Australia –​Anti-​Dumping Measures Measures on A4 Copy Paper on A4 Copy Paper, WT/​DS529/​R and Add.1, adopted 28 January 2020 Australia –​Apples Appellate Body Report, Australia –​Measures Affecting the Importation of Apples from New Zealand, WT/​DS367/​AB/​R, adopted 17 December 2010, DSR 2010:V, p. 2175 Australia –​Automotive Leather II Panel Report, Australia –​Subsidies Provided to Producers and Exporters of Automotive Leather, WT/​DS126/​R, adopted 16 June 1999, DSR 1999:III, p. 951

List of cited WTO Panel and Appellate Body reports    li Short title

Full title and citation

Australia –​Tobacco Plain Packaging

Appellate Body Reports, Australia-Certain Measures concerning Trademarks, Geographical Indications and other Plain Packaging Requirements Applicable to Tobacco Products and Packaging, WT/DS435/AB/R, WT/DS441/ AB/R, adopted 29 June 2020 Panel Report, Australia –​Certain Measures concerning Trademarks, Geographical Indications and other Plain Packaging Requirements Applicable to Tobacco Products and Packaging, WT/​DS435/​ R, Add.1 and Suppl.1, circulated 28 June 2018 [appealed by Honduras 19 July 2018] Panel Report, Australia –​Certain Measures concerning Trademarks, Geographical Indications and other Plain Packaging Requirements Applicable to Tobacco Products and Packaging, WT/​ DS441/​R, Add.1 and Suppl.1, circulated 28 June 2018 [appealed by the Dominican Republic 23 August 2018] Panel Report, Australia –​Certain Measures concerning Trademarks, Geographical Indications and other Plain Packaging Requirements Applicable to Tobacco Products and Packaging, WT/​DS458/​R, Add.1 and Suppl.1, adopted 27 August 2018 Panel Report, Australia –​Certain Measures concerning Trademarks, Geographical Indications and other Plain Packaging Requirements Applicable to Tobacco Products and Packaging, WT/​DS467/​R, Add.1 and Suppl.1, adopted 27 August 2018 Appellate Body Report, Brazil –​Export Financing Programme for Aircraft, WT/​DS46/​AB/​R, adopted 20 August 1999, DSR 1999:III, p. 1161 Panel Report, Brazil –​Export Financing Programme for Aircraft –​Recourse by Canada to Article 21.5 of the DSU, WT/​DS46/​RW, adopted 4 August 2000, as modified by Appellate Body Report WT/​DS46/​AB/​RW, DSR 2000:IX, p. 4093 Panel Report, Brazil –​Export Financing Programme for Aircraft –​Second Recourse by Canada to Article 21.5 of the DSU, WT/​DS46/​RW/​ 2, adopted 23 August 2001, DSR 2001:X, p. 5481

Brazil –​Aircraft

Brazil –​Aircraft (Article 21.5 –​ Canada I)

Brazil –​Aircraft (Article 21.5 –​ Canada II)

lii    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

Brazil –​Desiccated Coconut

Appellate Body Report, Brazil –​Measures Affecting Desiccated Coconut, WT/​DS22/​AB/​R, adopted 20 March 1997, DSR 1997: I, p. 167 Appellate Body Report, Brazil –​Measures Affecting Imports of Retreaded Tyres, WT/​DS332/​ AB/​R, adopted 17 December 2007, DSR 2007:IV, p. 1527 Panel Report, Brazil –​Measures Affecting Imports of Retreaded Tyres, WT/​DS332/​R, adopted 17 December 2007, as modified by Appellate Body Report WT/​DS332/​AB/​R, DSR 2007:V, p. 1649 Panel Report, Brazil –​Certain Measures Concerning Taxation and Charges, WT/​DS472/​R, adopted 11 January 2019, as modified by Appellate Body Report WT/​DS472/​AB/​R, DSR Panel Report, Canada –​Additional Duties on Certain Products from the United States, WT/​ DS557/​R, circulated 11 July 2019, mutually agreed solution notified 23 May 2019 Appellate Body Report, Canada –​Measures Affecting the Export of Civilian Aircraft, WT/​ DS70/​AB/​R, adopted 20 August 1999, DSR 1999:III, p. 1377 Panel Report, Canada –​Measures Affecting the Export of Civilian Aircraft, WT/​DS70/​R, adopted 20 August 1999, upheld by Appellate Body Report WT/​DS70/​AB/​R, DSR 1999:IV, p. 1443 Appellate Body Report, Canada –​Certain Measures Affecting the Automotive Industry, WT/​ DS139/​AB/​R, WT/​DS142/​AB/​R, adopted 19 June 2000, DSR 2000:VI, p. 2985 Panel Report, Canada –​Certain Measures Affecting the Automotive Industry, WT/​DS139/​R, WT/​DS142/​R, adopted 19 June 2000, as modified by Appellate Body Report WT/​DS139/​AB/​R, WT/​ DS142/​AB/​R, DSR 2000:VII, p. 3043 Canada –​Measures Concerning Trade in Commercial Aircraft, WT/​DS522, mutually agreed solution notified 18 February 2021

Brazil –​Retreaded Tyres

Brazil –​Taxation

Canada –​Additional Duties

Canada –​Aircraft

Canada –​Autos

Canada –​Commercial Aircraft

List of cited WTO Panel and Appellate Body reports    liii Short title

Full title and citation

Canada –​Continued Suspension

Panel Report, Canada –​Continued Suspension of Obligations in the EC –​Hormones Dispute, WT/​DS321/​R and Add.1 to Add.7, adopted 14 November 2008, as modified by Appellate Body Report WT/​DS321/​AB/​R, DSR 2008:XV, p. 5757 Appellate Body Report, Canada –​Measures Affecting the Importation of Milk and the Exportation of Dairy Products, WT/​DS103/​AB/​R, WT/​DS113/​AB/​R and Corr.1, adopted 27 October 1999, DSR 1999:V, p. 2057 Panel Report, Canada –​Measures Affecting the Importation of Milk and the Exportation of Dairy Products, WT/​DS103/​R, WT/​DS113/​R, adopted 27 October 1999, as modified by Appellate Body Report WT/​DS103/​AB/​R, WT/​DS113/​AB/​R, DSR 1999:VI, p. 2097 Panel Report, Canada –​Measures Affecting the Importation of Milk and the Exportation of Dairy Products –​Recourse to Article 21.5 of the DSU by New Zealand and the United States, WT/​DS103/​ RW, WT/​DS113/​RW, adopted 18 December 2001, as reversed by Appellate Body Report WT/​DS103/​ AB/​RW, WT/​DS113/​AB/​RW, DSR 2001:XIII, p. 6865 Appellate Body Report, Canada –​Term of Patent Protection, WT/​DS170/​AB/​R, adopted 12 October 2000, DSR 2000:X, p. 5093 Appellate Body Report, Canada –​Certain Measures Concerning Periodicals, WT/​DS31/​AB/​ R, adopted 30 July 1997, DSR 1997:I, p. 449 Panel Report, Canada –​Patent Protection of Pharmaceutical Products, WT/​DS114/​R, adopted 7 April 2000, DSR 2000:V, p. 2289 Appellate Body Reports, Canada –​Certain Measures Affecting the Renewable Energy Generation Sector/​Canada –​Measures Relating to the Feed-​in Tariff Program, WT/​DS412/​AB/​R /​ WT/​DS426/​AB/​R, adopted 24 May 2013 Panel Report, Canada –​Anti-​Dumping Measures on Imports of Certain Carbon Steel Welded Pipe from the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, WT/​DS482/​R and Add.1, adopted 25 January 2017, DSR 2017: I, p. 7

Canada –​Dairy

Canada –​Dairy (Article 21.5 –​New Zealand and United States)

Canada –​Patent Term

Canada –​Periodicals

Canada –​Pharmaceutical Patents

Canada –​Renewable Energy/​ Canada –​Feed-​in Tariff Program

Canada –​Welded Pipe

liv    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

Canada –​Wheat Exports and Grain Appellate Body Report, Canada –​Measures Imports Relating to Exports of Wheat and Treatment of Imported Grain, WT/​DS276/​AB/​R, adopted 27 September 2004, DSR 2004:VI, p. 2739 Canada –​Wine (Australia) Panel Report, Canada –​Measures Governing the Sale of Wine, WT/​DS537, mutually agreed solution 12 May 2021 Chile –​Price Band System Appellate Body Report, Chile –​Price Band System and Safeguard Measures Relating to Certain Agricultural Products, WT/​DS207/​AB/​R, adopted 23 October 2002, DSR 2002:VIII, p. 3045 (Corr.1, DSR 2006:XII, p. 5473) Chile –​Swordfish Chile—​Measures affecting the Transit and Importing of Swordfish, WT/​DS193, withdrawn/​ terminated 28 May 2010 China –​Auto Parts Appellate Body Reports, China –​Measures Affecting Imports of Automobile Parts, WT/​DS339/​ AB/​R /​ WT/​DS340/​AB/​R /​ WT/​DS342/​AB/​R, adopted 12 January 2009, DSR 2009:I, p. 3 Panel Reports, China –​Measures Affecting Imports of Automobile Parts, WT/​DS339/​R /​ WT/​DS340/​ R /​WT/​DS342/​R /​Add.1 and Add.2, adopted 12 January 2009, upheld (WT/​DS339/​R) and as modified (WT/​DS340/​R /​ WT/​DS342/​R) by Appellate Body Reports WT/​DS339/​AB/​R /​WT/​ DS340/​AB/​R /​ WT/​DS342/​AB/​R, DSR 2009:I, p. 119 China –​AD/​CVD on Barley China –​Anti-​dumping and countervailing duty (Australia) measures on barley from Australia, WT/​DS598, ongoing China –​Electronic Payment Panel Report, China –​Certain Measures Affecting Services Electronic Payment Services, WT/​DS413/​R and Add.1, adopted 31 August 2012, DSR 2012:X, p. 5305 China –​GOES Appellate Body Report, China –​Countervailing and Anti-​Dumping Duties on Grain Oriented Flat-​ Rolled Electrical Steel from the United States, WT/​ DS414/​AB/​R, adopted 16 November 2012, DSR 2012: XII, p. 6251 Panel Report, China –​Countervailing and Anti-​ Dumping Duties on Grain Oriented Flat-​Rolled Electrical Steel from the United States, WT/​DS414/​ R and Add.1, adopted 16 November 2012, upheld by Appellate Body Report WT/​DS414/​AB/​R, DSR 2012:XII, p. 6369

List of cited WTO Panel and Appellate Body reports    lv Short title

Full title and citation

China –​Intellectual Property Rights Panel Report, China –​Measures Affecting the Protection and Enforcement of Intellectual Property Rights, WT/​DS362/​R, adopted 20 March 2009, DSR 2009:V, p. 2097 China –​Intellectual Property Rights Panel Report, China –​Certain Measures II Concerning the Protection of Intellectual Property Rights, WT/​DS542, authority lapsed 9 June 2021 China –​Publications and Appellate Body Report, China –​Measures Audiovisual Products Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, WT/​DS363/​AB/​R, adopted 19 January 2010, DSR 2010:I, p. 3 Panel Report, China –​Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, WT/​DS363/​R and Corr.1, adopted 19 January 2010, as modified by Appellate Body Report WT/​DS363/​AB/​R, DSR 2010:II, p. 261 China –​Rare Earths Appellate Body Reports, China –​Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum, WT/​DS431/​AB/​R /​ WT/​DS432/​AB/​ R /​WT/​DS433/​AB/​R, adopted 29 August 2014, DSR 2014: III, p. 805 Panel Reports, China –​Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum, WT/​DS431/​R and Add.1 /​WT/​ DS432/​R and Add.1 /​WT/​DS433/​R and Add.1, adopted 29 August 2014, upheld by Appellate Body Reports WT/​DS431/​AB/​R /​ WT/​DS432/​AB/​ R /​WT/​DS433/​AB/​R, DSR 2014:IV, p. 1127 China –​Raw Materials Appellate Body Reports, China –​Measures Related to the Exportation of Various Raw Materials, WT/​ DS394/​AB/​R /​ WT/​DS395/​AB/​R /​ WT/​DS398/​ AB/​R, adopted 22 February 2012, DSR 2012: VII, p. 3295 Panel Reports, China –​Measures Related to the Exportation of Various Raw Materials, WT/​ DS394/​R, Add.1 and Corr.1 /​WT/​DS395/​R, Add.1 and Corr.1 /​WT/​DS398/​R, Add.1 and Corr.1, adopted 22 February 2012, as modified by Appellate Body Reports WT/​DS394/​AB/​R /​WT/​ DS395/​AB/​R /​ WT/​DS398/​AB/​R, DSR 2012:VII, p. 3501

lvi    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

China –​TRQs

Panel Report, China –​Tariff Rate Quotas for Certain Agricultural Products, WT/​DS517/​R, adopted 28 May 2019 Panel Report, China –​Definitive Anti-​Dumping Duties on X-​Ray Security Inspection Equipment from the European Union, WT/​DS425/​R and Add.1, adopted 24 April 2013, DSR 2013: III, p. 659 Colombia –​Anti-​Dumping Duties on Frozen Fries from Belgium, Germany and the Netherlands, WT/​ DS591, ongoing Panel Report, Colombia –​Indicative Prices and Restrictions on Ports of Entry, WT/​DS366/​R and Corr.1, adopted 20 May 2009, DSR 2009:VI, p. 2535 Appellate Body Report, Colombia –​Measures Relating to the Importation of Textiles, Apparel and Footwear, WT/​DS461/​AB/​R, adopted 22 June 2016 Costa Rica –​Measures Concerning the Importation of Fresh Avocados from Mexico, WT/​DS524, adopted 31 May 2022 Appellate Body Report, Dominican Republic –​ Measures Affecting the Importation and Internal Sale of Cigarettes, WT/​DS302/​AB/​R, adopted 19 May 2005, DSR 2005: XV, p. 7367 Panel Report, Dominican Republic –​Measures Affecting the Importation and Internal Sale of Cigarettes, WT/​DS302/​R, adopted 19 May 2005, as modified by Appellate Body Report WT/​DS302/​ AB/​R, DSR 2005: XV, p. 7425 Panel Report, Dominican Republic –​Safeguard Measures on Imports of Polypropylene Bags and Tubular Fabric, WT/​DS417/​R, adopted 22 February 2012 Panel Report, Dominican Republic –​Safeguard Measures on Imports of Polypropylene Bags and Tubular Fabric, WT/​DS415/​R, WT/​DS416/​R, WT/​ DS417/​R, WT/​DS418/​R, and Add.1, adopted 22 February 2012, DSR 2012:XIII, p. 6775 Panel Reports, European Communities –​Measures Affecting the Approval and Marketing of Biotech Products, WT/​DS291/​R /​ WT/​DS292/​R /​ WT/​ DS293/​R /​Add.1 to Add.9 and Corr.1, adopted 21 November 2006, DSR 2006:III, p. 847

China –​X-​Ray Equipment

Colombia –​Frozen Fries

Colombia –​Ports of Entry

Colombia –​Textiles

Costa Rica –​Fresh Avocados

Dominican Republic –​Import and Sale of Cigarettes

Dominican Republic –​Plastic Bags

Dominican Republic –​Safeguard Measures

EC –​Approval and Marketing of Biotech Products

List of cited WTO Panel and Appellate Body reports    lvii Short title EC –​Asbestos

Full title and citation

Appellate Body Report, European Communities –​Measures Affecting Asbestos and Asbestos-​Containing Products, WT/​DS135/​AB/​R, adopted 5 April 2001, DSR 2001:VII, p. 3243 Panel Report, European Communities –​Measures Affecting Asbestos and Asbestos-​Containing Products, WT/​DS135/​R and Add.1, adopted 5 April 2001, as modified by Appellate Body Report WT/​ DS135/​AB/​R, DSR 2001:VIII, p. 3305 EC –​Bananas III Appellate Body Report, European Communities –​ Regime for the Importation, Sale and Distribution of Bananas, WT/​DS27/​AB/​R, adopted 25 September 1997, DSR 1997:II, p. 591 Panel Report, European Communities –​Regime for the Importation, Sale and Distribution of Bananas, Complaint by Ecuador, WT/​DS27/​R/​ ECU, adopted 25 September 1997, as modified by Appellate Body Report WT/​DS27/​AB/​R, DSR 1997:III, p. 1085 EC –​Bananas III (Article 21.5 –​EC) Panel Report, European Communities –​Regime for the Importation, Sale and Distribution of Bananas –​Recourse to Article 21.5 of the DSU by the European Communities, WT/​DS27/​RW/​EEC, 12 April 1999, and Corr.1, unadopted, DSR 1999:II, p. 783 EC –​Bananas III (Article 21.5 –​ Panel Report, European Communities –​Regime Ecuador II)/​(Article 21.5 –​US) for the Importation, Sale and Distribution of Bananas –​Second Recourse to Article 21.5 of the DSU by Ecuador, WT/​DS27/​RW2/​ECU, adopted 11 December 2008, as modified by Appellate Body Report WT/​DS27/​AB/​RW2/​ECU, DSR 2008:XVIII, p. 7329 Panel Report, European Communities –​Regime for the Importation, Sale and Distribution of Bananas –​Recourse to Article 21.5 of the DSU by the United States, WT/​DS27/​RW/​USA and Corr.1, adopted 22 December 2008, upheld by Appellate Body Report WT/​DS27/​AB/​RW/​USA, DSR 2008:XIX, p. 7761

lviii    List of cited WTO Panel and Appellate Body reports Short title EC –​Bananas III (Ecuador)

Full title and citation

Panel Report, European Communities –​Regime for the Importation, Sale and Distribution of Bananas, Complaint by Ecuador, WT/​DS27/​R/​ ECU, adopted 25 September 1997, as modified by Appellate Body Report WT/​DS27/​AB/​R, DSR 1997: III, p. 1085 EC –​Bananas III (Ecuador) (Article Decision by the Arbitrators, European 22.6 –​EC) Communities –​Regime for the Importation, Sale and Distribution of Bananas –​Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/​DS27/​ARB, 9 April 1999, DSR 1999:II, p. 725 EC –​Bananas III (US) (Article Decision by the Arbitrators, European 22.6 –​EC) Communities –​Regime for the Importation, Sale and Distribution of Bananas –​Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/​DS27/​ARB/​ECU, 24 March 2000, DSR 2000:V, p. 2237 EC –​Bed Linen Appellate Body Report, European Communities –​ Anti-​Dumping Duties on Imports of Cotton-​Type Bed Linen from India, WT/​DS141/​AB/​R, adopted 12 March 2001, DSR 2001: V, p. 2049 Panel Report, European Communities –​Anti-​ Dumping Duties on Imports of Cotton-​Type Bed Linen from India, WT/​DS141/​R, adopted 12 March 2001, as modified by Appellate Body Report WT/​ DS141/​AB/​R, DSR 2001:VI, p. 2077 EC –​Bed Linen (Article 21.5 –​India) Appellate Body Report, European Communities –​ Anti-​Dumping Duties on Imports of Cotton-​Type Bed Linen from India –​Recourse to Article 21.5 of the DSU by India, WT/​DS141/​AB/​RW, adopted 24 April 2003, DSR 2003: III, p. 965 Panel Report, European Communities –​Anti-​ Dumping Duties on Imports of Cotton-​Type Bed Linen from India –​Recourse to Article 21.5 of the DSU by India, WT/​DS141/​RW, adopted 24 April 2003, as modified by Appellate Body Report WT/​ DS141/​AB/​RW, DSR 2003:IV, p. 1269 EC –​Butter Panel Report, European Communities –​Measures Affecting Butter Products, WT/​DS72/​R, 24 November 1999, unadopted

List of cited WTO Panel and Appellate Body reports    lix Short title

Full title and citation

EC –​Chicken Cuts

Appellate Body Report, European Communities –​ Customs Classification of Frozen Boneless Chicken Cuts, WT/​DS269/​AB/​R, WT/​DS286/​AB/​ R, adopted 27 September 2005, and Corr.1, DSR 2005:XIX, p. 9157 Panel Report, European Communities –​Customs Classification of Frozen Boneless Chicken Cuts, Complaint by Brazil, WT/​DS269/​R, adopted 27 September 2005, as modified by Appellate Body Report WT/​DS269/​AB/​R, WT/​DS286/​AB/​R, DSR 2005:XIX, p. 9295 Panel Report, European Communities –​Customs Classification of Frozen Boneless Chicken Cuts, Complaint by Thailand, WT/​DS286/​R, adopted 27 September 2005, as modified by Appellate Body Report WT/​DS269/​AB/​R, WT/​DS286/​AB/​R, DSR 2005:XX, p. 9721 Appellate Body Report, European Communities –​ Customs Classification of Certain Computer Equipment, WT/​DS62/​AB/​R, WT/​DS67/​AB/​ R, WT/​DS68/​AB/​R, adopted 22 June 1998, DSR 1998:V, p. 1851 Appellate Body Report, European Communities –​ Export Subsidies on Sugar, WT/​DS265/​AB/​R, WT/​ DS266/​AB/​R, WT/​DS283/​AB/​R, adopted 19 May 2005, DSR 2005:XIII, p. 6365 Appellate Body Report, European Communities –​ Definitive Anti-​Dumping Measures on Certain Iron or Steel Fasteners from China, WT/​DS397/​AB/​R, adopted 28 July 2011, DSR 2011: VII, p. 3995 Panel Report, European Communities –​Definitive Anti-​Dumping Measures on Certain Iron or Steel Fasteners from China, WT/​DS397/​R and Corr.1, adopted 28 July 2011, as modified by Appellate Body Report WT/​DS397/​AB/​R, DSR 2011: VIII, p. 4289

EC –​Computer Equipment

EC –​Export Subsidies on Sugar

EC –​Fasteners (China)

lx    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

EC –​Fasteners (China) (Article 21.5 –​China)

Appellate Body Report, European Communities –​ Definitive Anti-​Dumping Measures on Certain Iron or Steel Fasteners from China –​Recourse to Article 21.5 of the DSU by China, WT/​DS397/​AB/​RW and Add.1, adopted 12 February 2016, DSR 2016:I, p. 7 Panel Report, European Communities –​Definitive Anti-​Dumping Measures on Certain Iron or Steel Fasteners from China –​Recourse to Article 21.5 of the DSU by China, WT/​DS397/​RW and Add.1, adopted 12 February 2016, as modified by Appellate Body Report WT/​DS397/​AB/​RW, DSR 2016:I, p. 195 Panel Report, European Union –​Anti-​Dumping Measures on Certain Footwear from China, WT/​ DS405/​R, adopted 22 February 2012, DSR 2012: IX, p. 4585 Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/​DS26/​ AB/​R, WT/​DS48/​AB/​R, adopted 13 February 1998, DSR 1998:I, p. 135 Panel Report, EC Measures Concerning Meat and Meat Products (Hormones), Complaint by Canada, WT/​DS48/​R/​CAN, adopted 13 February 1998, as modified by Appellate Body Report WT/​DS26/​ AB/​R, WT/​DS48/​AB/​R, DSR 1998:II, p. 235 Panel Report, EC Measures Concerning Meat and Meat Products (Hormones), Complaint by the United States, WT/​DS26/​R/​USA, adopted 13 February 1998, as modified by Appellate Body Report WT/​DS26/​AB/​R, WT/​DS48/​AB/​R, DSR 1998:III, p. 699 Decision by the Arbitrators, European Communities –​Measures Concerning Meat and Meat Products (Hormones), Original Complaint by the United States –​Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/​DS26/​ARB, 12 July 1999, DSR 1999:III, p. 1105

EC –​Footwear (China)

EC –​Hormones

EC –​Hormones (Canada)/​EC –​ Hormones (US)

EC –​Hormones (US) (Article 22.6 –​EC)

List of cited WTO Panel and Appellate Body reports    lxi Short title

Full title and citation

EC –​Price Comparison Methodologies

European Union—​Measures Related to Price Comparison Methodologies, WT/​DS516, authority lapsed 15 June 2020 Panel Report, European Communities –​Anti-​ Dumping Measure on Farmed Salmon from Norway, WT/​DS337/​R, adopted 15 January 2008, and Corr.1, DSR 2008: I, p. 3 Appellate Body Report, European Communities –​ Trade Description of Sardines, WT/​DS231/​AB/​R, adopted 23 October 2002, DSR 2002:VIII, p. 3359 Panel Report, European Communities –​Trade Description of Scallops –​Request by Canada, WT/​ DS7/​R, 5 August 1996, unadopted, DSR 1996:I, p. 89 Panel Report, European Communities –​Trade Description of Scallops –​Requests by Peru and Chile, WT/​DS12/​R, WT/​DS14/​R, 5 August 1996, unadopted, DSR 1996:I, p. 93 Appellate Body Reports, European Communities –​Measures Prohibiting the Importation and Marketing of Seal Products, WT/​DS400/​AB/​R /​ WT/​DS401/​AB/​R, adopted 18 June 2014 Appellate Body Report, European Communities –​ Selected Customs Matters, WT/​DS315/​AB/​R, adopted 11 December 2006, DSR 2006:IX, p. 3791 Panel Report, European Communities –​Selected Customs Matters, WT/​DS315/​R, adopted 11 December 2006, as modified by Appellate Body Report WT/​DS315/​AB/​R, DSR 2006:IX, p. 3915 Appellate Body Report, European Communities –​ Conditions for the Granting of Tariff Preferences to Developing Countries, WT/​DS246/​AB/​R, adopted 20 April 2004, DSR 2004:III, p. 925 Panel Report, European Communities –​Conditions for the Granting of Tariff Preferences to Developing Countries, WT/​DS246/​R, adopted 20 April 2004, as modified by Appellate Body Report WT/​ DS246/​AB/​R, DSR 2004:III, p. 1009

EC –​Salmon (Norway)

EC –​Sardines

EC –​Scallops (Canada)

EC –​Scallops (Peru and Chile)

EC –​Seal Products

EC –​Selected Customs Matters

EC –​Tariff Preferences

lxii    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

EC –​Trademarks and Geographical Panel Report, European Communities –​Protection Indications (US) of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs, Complaint by the United States, WT/​DS174/​R, adopted 20 April 2005, DSR 2005:VIII, p. 3499 EC –​Tube or Pipe Fittings Appellate Body Report, European Communities –​ Anti-​Dumping-​ Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/​DS219/​AB/​R, adopted 18 August 2003, DSR 2003:VI, p. 2613 EC and certain member States –​ Appellate Body Report, European Communities Large Civil Aircraft and Certain Member States –​Measures Affecting Trade in Large Civil Aircraft, WT/​DS316/​AB/​R, adopted 1 June 2011, DSR 2011:I, p. 7 Panel Report, European Communities and Certain Member States –​Measures Affecting Trade in Large Civil Aircraft, WT/​DS316/​R, adopted 1 June 2011, as modified by Appellate Body Report, WT/​ DS316/​AB/​R, DSR 2011:II, p. 685 Egypt –​Steel Rebar Panel Report, Egypt –​Definitive Anti-​Dumping Measures on Steel Rebar from Turkey, WT/​DS211/​ R, adopted 1 October 2002, DSR 2002: VII, p. 2667 EU –​Biodiesel Appellate Body Report, European Union –​Anti-​ Dumping Measures on Biodiesel from Argentina, WT/​DS473/​AB/​R and Add.1, adopted 26 October 2016, DSR 2016:VI, p. 2871 Panel Report, European Union –​Anti-​Dumping Measures on Biodiesel from Argentina, WT/​ DS473/​R and Add.1, adopted 26 October 2016, as modified by Appellate Body Report WT/​DS473/​ AB/​R, DSR 2016:VI, p. 3077 EU –​Cost Adjustment European Union –​Cost Adjustment Methodologies Methodologies (Russia) and Certain Anti-​Dumping Measures on Imports from Russia, WT/​DS474, ongoing EU –​Cost Adjustment Panel Report, European Union –​Cost Adjustment Methodologies II (Russia) Methodologies and Certain Anti-​Dumping Measures on Imports from Russia –​(Second complaint), WT/​DS494/​R, circulated 24 July 2020 (appealed) EU –​Energy Package Panel Report, European Union and its Member States –​Certain Measures Relating to the Energy Sector, WT/​DS476, circulated 10 August 2018 (appealed)

List of cited WTO Panel and Appellate Body reports    lxiii Short title

Full title and citation

EU –​Fatty Alcohols (Indonesia)

Appellate Body Report, European Union –​Anti-​ Dumping Measures on Imports of Certain Fatty Alcohols from Indonesia, WT/​DS442/​AB/​R and Add.1, adopted 29 September 2017, DSR 2017:VI, p. 2613 Panel Report, European Union –​Anti-​Dumping Measures on Imports of Certain Fatty Alcohols from Indonesia, WT/​DS442/​R and Add.1, adopted 29 September 2017, as modified by Appellate Body Report WT/​DS442/​AB/​R, DSR 2017:VI, p. 2765 Panel Report, European Union –​Anti-​Dumping Measures on Certain Footwear from China, WT/​ DS405/​R, adopted 22 February 2012, DSR 2012:IX, p. 4585 China –​Certain Measures on the Transfer of Technology, WT/​DS549, ongoing Appellate Body Report, European Union –​ Countervailing Measures on Certain Polyethylene Terephthalate from Pakistan, WT/​DS486/​AB, adopted 25 May 2018, DSR Panel Report, European Union –​Measures Affecting Tariff Concessions on Certain Poultry Meat Products, WT/​DS492/​R, circulated 19 April 2017, mutually agreed solution notified 30 May 2019 European Union –​Measures Related to Price Comparison Methodologies, WT/​DS516, authority lapsed 15 June 2017 Appellate Body Report, Guatemala –​Anti-​ Dumping Investigation Regarding Portland Cement from Mexico, WT/​DS60/​AB/​R, adopted 25 November 1998, DSR 1998: IX, p. 3767 Appellate Body Report, India –​Additional and Extra-​Additional Duties on Imports from the United States, WT/​DS360/​AB/​R, adopted 17 November 2008, DSR 2008:XX, p. 8223 Panel Report, India –​Measures Affecting the Automotive Sector, WT/​DS146/​R, WT/​DS175/​ R and Corr.1, adopted 5 April 2002, DSR 2002:V, p. 1827

EU –​Fatty Alcohols (Indonesia)

EU –​Footwear (China)

China –​Transfer of Technology EU –​PET (Pakistan)

EU –​Poultry Meat (China)

EU –​Price Comparison Methodologies Guatemala –​Cement I

India –​Additional Import Duties

India –​Autos

lxiv    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

India –​Iron and Steel Products

Panel Report, India –​Certain Measures on Imports of Iron and Steel Products, WT/​DS518/​R and Add.1, circulated 6 November 2018 [on appeal] Panel Report, India –​Patent Protection for Pharmaceutical and Agricultural Chemical Products, Complaint by the European Communities and their Member States, WT/​DS79/​R, adopted 22 September 1998, DSR 1998:VI, p. 2661 Appellate Body Report, India –​Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/​DS50/​AB/​R, adopted 16 January 1998, DSR 1998:I, p. 9 Panel Report, India –​Patent Protection for Pharmaceutical and Agricultural Chemical Products, Complaint by the United States, WT/​ DS50/​R, adopted 16 January 1998, as modified by Appellate Body Report WT/​DS50/​AB/​R, DSR 1998:I, p. 41 Panel Report, India –​Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/​DS90/​R, adopted 22 September 1999, upheld by Appellate Body Report WT/​ DS90/​AB/​R, DSR 1999:V, p. 1799 Appellate Body Report, India –​Certain Measures Relating to Solar Cells and Solar Modules, WT/​ DS456/​AB, adopted 14 October 2016 Panel Report, Indonesia –​Measures Concerning the Importation of Chicken Meat and Chicken Products, WT/​DS484/​R, adopted 22 November 2017 Appellate Body Report, Indonesia –​Importation of Horticultural Products, Animals and Animal Products, WT/​DS477/​AB, adopted 22 November 2017 Panel Report, Indonesia –​Safeguard on Certain Iron or Steel Products, WT/​DS490/​R, WT/​DS496/​ R, and Add.1, adopted 27 August 2018, as modified by Appellate Body Report WT/​DS490/​AB/​R, WT/​DS496/​AB/​R DSR 2018:VII, p. 3707

India –​Patents (EC)

India –​Patents (US)

India –​Quantitative Restrictions

India –​Solar Cells

Indonesia –​Chicken

Indonesia –​Import Licensing Regimes

Indonesia –​Iron and Steel Products

List of cited WTO Panel and Appellate Body reports    lxv Short title

Full title and citation

Japan –​Alcoholic Beverages II

Appellate Body Report, Japan –​Taxes on Alcoholic Beverages, WT/​DS8/​AB/​R, WT/​DS10/​AB/​R, WT/​DS11/​AB/​R, adopted 1 November 1996, DSR 1996: I, p. 97 Japan –​Measures Related to the Exportation of Products and Technology to Korea, WT/​DS590, ongoing Panel Report, Japan –​Measures Affecting Consumer Photographic Film and Paper, WT/​ DS44/​R, adopted 22 April 1998, DSR 1998:IV, p. 1179 Panel Report, Japan –​Import Quotas on Dried Laver and Seasoned Laver, WT/​DS323/​R, 1 February 2006, unadopted Appellate Body Report, Korea –​Taxes on Alcoholic Beverages, WT/​DS75/​AB/​R, WT/​DS84/​AB/​R, adopted 17 February 1999, DSR 1999:I, p. 3 Panel Report, Korea –​Taxes on Alcoholic Beverages, WT/​DS75/​R, WT/​DS84/​R, adopted 17 February 1999, as modified by Appellate Body Report WT/​DS75/​AB/​R, WT/​DS84/​AB/​R, DSR 1999:I, p. 44 Panel Report, Korea –​Measures Affecting the Importation of Bovine Meat and Meat Products from Canada, WT/​DS391/​R, 3 July 2012, unadopted Panel Report, Korea –​Anti-​Dumping Duties on Imports of Certain Paper from Indonesia, WT/​ DS312/​R, adopted 28 November 2005, DSR 2005: XXII, p. 10637 Panel Report, Korea –​Anti-​Dumping Duties on Imports of Certain Paper from Indonesia –​ Recourse to Article 21.5 of the DSU by Indonesia, WT/​DS312/​RW, adopted 22 October 2007, DSR 2007: VIII, p. 3369 Panel Report, Korea –​Measures Affecting Trade in Commercial Vessels, WT/​DS273/​R, adopted 11 April 2005, DSR 2005: VII, p. 2749

Japan –​Exportation of Products and Technology to Korea Japan –​Film

Japan –​Quotas on Laver

Korea –​Alcoholic Beverages

Korea –​Bovine Meat (Canada)

Korea –​Certain Paper

Korea –​Certain Paper (Article 21.5 –​Indonesia)

Korea –​Commercial Vessels

lxvi    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

Korea –​Dairy

Appellate Body Report, Korea –​Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/​DS98/​AB/​R, adopted 12 January 2000, DSR 2000: I, p. 3 Appellate Body Report, Korea –​ Anti-​Dumping Duties on Pneumatic Valves from Japan, WT/​ DS504/​AB/​R and Add.1, adopted 30 September 2019 Appellate Body Report, Korea –​Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/​DS161/​AB/​R, WT/​DS169/​AB/​R, adopted 10 January 2001, DSR 2001:I, p. 5 Panel Report, Mexico –​Additional Duties on Certain Products from the United States, WT/​ DS560/​R, circulated 11 July 2019, mutually agreed solution notified 28 May 2019 Appellate Body Report, Mexico –​Definitive Anti-​ Dumping Measures on Beef and Rice, Complaint with Respect to Rice, WT/​DS295/​AB/​R, adopted 20 December 2005, DSR 2005: XXII, p. 10853 Panel Report, Mexico –​ Anti-​Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States, WT/​DS132/​R, adopted 24 February 2000, and Corr.1, DSR 2000: III, p. 1345 Appellate Body Report, Mexico –​ Anti-​Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States –​Recourse to Article 21.5 of the DSU by the United States, WT/​DS132/​AB/​ RW, adopted 21 November 2001, DSR 2001: XIII, p. 6675 Panel Report, Mexico –​ Anti-​Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States –​Recourse to Article 21.5 of the DSU by the United States, WT/​DS132/​RW, adopted 21 November 2001, upheld by Appellate Body Report WT/​DS132/​AB/​RW, DSR 2001:XIII, p. 6717 Panel Report, Mexico –​Definitive Countervailing Measures on Olive Oil from the European Communities, WT/​DS341/​R, adopted 21 October 2008, DSR 2008:IX, p. 3179

Korea –​Pneumatic Valves (Japan)

Korea –​Various Measures on Beef

Mexico –​Additional Duties (US)

Mexico –​Anti-​Dumping Measures on Rice

Mexico –​Corn Syrup

Mexico –​Corn Syrup (Article 21.5 –​US)

Mexico –​Olive Oil

List of cited WTO Panel and Appellate Body reports    lxvii Short title

Full title and citation

Mexico –​Steel Pipes and Tubes

Panel Report, Mexico –​Anti-​Dumping Duties on Steel Pipes and Tubes from Guatemala, WT/​DS331/​ R, adopted 24 July 2007, DSR 2007: IV, p. 1207 Appellate Body Report, Mexico –​Tax Measures on Soft Drinks and other Beverages, WT/​DS308/​AB/​ R, adopted 24 March 2006, DSR 2006:I, p. 3 Appellate Body Report, Morocco –​ Anti-​dumping Measures on Certain Hot-​Rolled Steel from Turkey, WT/​DS513/​AB/​R and Add.1, adopted 8 January 2020 Panel Report, Morocco –​Anti-​dumping Measures on Certain Hot-​Rolled Steel from Turkey, WT/​ DS513/​R and Add.1, adopted 8 January 2020; appeal withdrawn by Morocco as reflected in Appellate Body Report WT/​DS513/​AB/​R Appellate Body Report, Peru –​Additional Duty on Imports of Certain Agricultural Products, WT/​ DS457/​AB/​R, adopted 31 July 2017, DSR Appellate Body Reports, Philippines –​Taxes on Distilled Spirits, WT/​DS396/​AB/​R /​ WT/​DS403/​ AB/​R, adopted 20 January 2012, DSR 2012:VIII, p. 4163 Appellate Body Report, Russia –​Measures affecting the importation of railway equipment and parts thereof, WT/​DS499/​AB, adopted 5 March 2020 Panel Report, Russia –​Measures Concerning Traffic in Transit, WT/​DS512/​R, adopted 26 April 2019 Panel Report, Saudi Arabia –​Measures concerning the Protection of Intellectual Property Rights, WT/​ DS567/​R, circulated 16 June 2020, terminated 25 April 2022 Appellate Body Report, Thailand –​Customs and Fiscal Measures on Cigarettes from the Philippines, WT/​DS371/​AB/​R, adopted 15 July 2011, DSR 2011: IV, p. 2203 Panel Report, Thailand –​Customs and Fiscal Measures on Cigarettes from the Philippines, WT/​ DS371/​R, adopted 15 July 2011, as modified by Appellate Body Report WT/​DS371/​AB/​R, DSR 2011: IV, p. 2299

Mexico –​Taxes on Soft Drinks

Morocco –​Hot-​Rolled Steel (Turkey)

Peru –​Agricultural Products

Philippines –​Distilled Spirits

Russia –​Railway Equipment

Russia –​Traffic in Transit

Saudi Arabia –​IPRs

Thailand –​Cigarettes (Philippines)

Thailand –​Cigarettes (Philippines)

lxviii    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

Thailand –​Cigarettes (Philippines) (Article 21.5 –​Philippines)

Panel Report, Thailand –​Customs and Fiscal Measures on Cigarettes from the Philippines, Recourse to Article 21.5 of the DSU, WT/​DS371/​ RW, circulated 12 November 2018 Appellate Body Report, Turkey –​Restrictions on Imports of Textile and Clothing Products, WT/​DS34/​AB/​R, adopted 19 November 1999, DSR 1999:VI, p. 2345 Panel Report, Turkey –​Restrictions on Imports of Textile and Clothing Products, WT/​DS34/​ R, adopted 19 November 1999, as modified by Appellate Body Report WT/​DS34/​AB/​R, DSR 1999:VI, p. 2363 Appellate Body Report, Ukraine –​ Anti-​Dumping Measures on Ammonium Nitrate, WT/​DS493/​AB/​ R and Add.1, adopted 30 September 2019 Panel Report, Ukraine –​Definitive Safeguard Measures on Certain Passenger Cars, WT/​DS468/​ R and Add.1, adopted 20 July 2015, DSR 2015:VI, p. 3117 Appellate Body Report, United States –​Anti-​ Dumping Act of 1916, WT/​DS136/​AB/​R, WT/​ DS162/​AB/​R, adopted 26 September 2000, DSR 2000:X, p. 4793 Appellate Body Report, United States –​Definitive Anti-​Dumping and Countervailing Duties on Certain Products from China, WT/​DS379/​AB/​R, adopted 25 March 2011, DSR 2011: V, p. 2869 United States –​Anti-​Dumping Measures on Cement from Mexico, WT/​DS281, authority lapsed 14 January 2007, mutually agreed solution notified 16 May 2007 Appellate Body Report, United States –​Anti-​ Dumping Measures on Oil Country Tubular Goods (OCTG) from Mexico, WT/​DS282/​AB/​R, adopted 28 November 2005, DSR 2005: XX, p. 10127 Appellate Body Report, United States –​ Countervailing Duties on Certain Corrosion-​ Resistant Carbon Steel Flat Products from Germany, WT/​DS213/​AB/​R and Corr.1, adopted 19 December 2002, DSR 2002: IX, p. 3779

Turkey –​Textiles

Ukraine –​Ammonium Nitrate (Russia) Ukraine –​Passenger Cars

US –​1916 Act

US –​Anti-​Dumping and Countervailing Duties (China)

US –​Anti-​Dumping Measures on Cement

US –​Anti-​Dumping Measures on Oil Country Tubular Goods

US –​Carbon Steel

List of cited WTO Panel and Appellate Body reports    lxix Short title

Full title and citation

US –​Carbon Steel (India)

Appellate Body Report, United States –​ Countervailing Measures on Certain Hot-​Rolled Carbon Steel Flat Products from India, WT/​DS436/​ AB/​R, adopted 19 December 2014, DSR 2014: V, p. 1727 Panel Report, United States –​Import Measures on Certain Products from the European Communities, WT/​DS165/​R and Add.1, adopted 10 January 2001, as modified by Appellate Body Report WT/​DS165/​ AB/​R, DSR 2001:II, p. 413 Appellate Body Report, United States –​Measures Affecting the Production and Sale of Clove Cigarettes, WT/​DS406/​AB/​R, adopted 24 April 2012, DSR 2012:XI, p. 5751 Panel Report, United States –​Anti-​Dumping and Countervailing Measures on Certain Coated Paper from Indonesia, WT/​DS491/​R and Add.1, adopted 22 January 2018 Panel Report, United States –​Continued Suspension of Obligations in the EC –​Hormones Dispute, WT/​DS320/​R and Add.1 to Add.7, adopted 14 November 2008, as modified by Appellate Body Report WT/​DS320/​AB/​R,DSR 2008:XI, p. 3891 Appellate Body Report, United States –​Continued Suspension of Obligations in the EC –​Hormones Dispute, WT/​DS320/​AB/​R, adopted 14 November 2008, DSR 2008:X, p. 3507 Appellate Body Report, United States –​Continued Existence and Application of Zeroing Methodology, WT/​DS350/​AB/​R, adopted 19 February 2009, DSR 2009: III, p. 1291 Panel Report, United States –​Continued Existence and Application of Zeroing Methodology, WT/​ DS350/​R, adopted 19 February 2009, as modified as Appellate Body Report WT/​DS350/​AB/​R, DSR 2009: III, p. 1481

US –​Certain EC Products

US –​Clove Cigarettes

US –​Coated Paper (Indonesia)

US –​Continued Suspension

US –​Continued Suspension/​ Canada –​Continued Suspension

US –​Continued Zeroing

lxx    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

US –​COOL

Appellate Body Reports, United States –​Certain Country of Origin Labelling (COOL) Requirements, WT/​DS384/​AB/​R /​ WT/​DS386/​AB/​R, adopted 23 July 2012, DSR 2012:V, p. 2449 Panel Reports, United States –​Certain Country of Origin Labelling (COOL) Requirements, WT/​ DS384/​R /​WT/​DS386/​R, adopted 23 July 2012, as modified by Appellate Body Reports WT/​DS384/​ AB/​R /​WT/​DS386/​AB/​R, DSR 2012:VI, p. 2745 Appellate Body Reports, United States –​Certain Country of Origin Labelling (COOL) Requirements, Recourse to Article 21.5 of the DSU, WT/​DS384/​ AB/​RW /​ WT/​DS386/​AB/​RW, adopted 29 May 2015 Appellate Body Report, United States –​Sunset Review of Anti-​Dumping Duties on Corrosion-​ Resistant Carbon Steel Flat Products from Japan, WT/​DS244/​AB/​R, adopted 9 January 2004, DSR 2004: I, p. 3 Appellate Body Report, United States –​ Transitional Safeguard Measure on Combed Cotton Yarn from Pakistan, WT/​DS192/​AB/​R, adopted 5 November 2001, DSR 2001: XII, p. 6027 Panel Report, United States –​Countervailing and Anti-​Dumping Measures on Certain Products from China, WT/​DS449/​R and Add.1, adopted 22 July 2014, as modified by Appellate Body Report WT/​ DS449/​AB/​R Appellate Body Report, United States –​ Countervailing Measures on Certain Hot-​Rolled Carbon Steel Flat Products from India, WT/​ DS436/​AB, adopted 19 December 2014 Appellate Body Report, United States –​ Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/​DS296/​AB/​R, adopted 20 July 2005, DSR 2005:XVI, p. 8131 Appellate Body Report, United States –​ Countervailing Duty Measures on Certain Products from China, Recourse to Article 21.5 of the DSU, WT/​DS437, adopted 15 August 2019

US –​COOL (Article 21.5 –​Canada and Mexico)

US –​Corrosion-​Resistant Steel Sunset Review

US –​Cotton Yarn

US –​Countervailing and Anti-​ Dumping Methodologies (China)

US –​Countervailing Duties (India)

US –​Countervailing Duty Investigation on DRAMS

US –​Countervailing Measures (China) (Article 21.5 –​China)°

List of cited WTO Panel and Appellate Body reports    lxxi Short title US –​Countervailing Measures (China)

Full title and citation

Appellate Body Report, United States –​ Countervailing Duty Measures on Certain Products from China, WT/​DS437/​AB/​R, adopted 16 January 2015 US –​Customs Bond Directive Appellate Body Report, United States –​Customs Bond Directive for Merchandise Subject to Anti-​ Dumping/​Countervailing Duties, WT/​DS345/​AB, adopted 1 August 2008 US –​Differential Pricing Panel Report, United States –​Anti-​Dumping Methodology Measures Applying Differential Pricing Methodology to Softwood Lumber from Canada, WT/​DS534/​R and Add.1, circulated 9 April 2019, appealed on 4 June 2019 US –​DRAMS (Article 21.5 –​Korea) Panel Report, United States –​Anti-​Dumping Duty on Dynamic Random Access Memory Semiconductors (DRAMS) of One Megabit or Above from Korea –​Recourse to Article 21.5 of the DSU by Korea, WT/​DS99/​RW, 7 November 2000, unadopted US –​Export Restraints Panel Report, United States –​Measures Treating Exports Restraints as Subsidies, WT/​DS194/​R and Corr.2, adopted 23 August 2001, DSR 2001:XI, p. 5767 US –​FSC Appellate Body Report, United States –​Tax Treatment for “Foreign Sales Corporations”, WT/​ DS108/​AB/​R, adopted 20 March 2000, DSR 2000: III, p. 1619 US –​FSC (Article 21.5 –​EC) Appellate Body Report, United States –​Tax Treatment for “Foreign Sales Corporations” –​ Recourse to Article 21.5 of the DSU by the European Communities, WT/​DS108/​AB/​RW, adopted 29 January 2002, DSR 2002:I, p. 55 Panel Report, United States –​Tax Treatment for “Foreign Sales Corporations” –​Recourse to Article 21.5 of the DSU by the European Communities, WT/​DS108/​RW, adopted 29 January 2002, as modified by Appellate Body Report WT/​DS108/​AB/​RW, DSR 2002:I, p. 119

lxxii    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

US –​Gambling

Appellate Body Report, United States –​Measures Affecting the Cross-​Border Supply of Gambling and Betting Services, WT/​DS285/​AB/​R, adopted 20 April 2005, DSR 2005:XII, p. 5663 (Corr.1, DSR 2006:XII, p. 5475) Panel Report, United States –​Measures Affecting the Cross-​Border Supply of Gambling and Betting Services, WT/​DS285/​R, adopted 20 April 2005, as modified by Appellate Body Report WT/​DS285/​ AB/​R, DSR 2005:XII, p. 5797 Panel Report, United States –​Measures Affecting the Cross-​Border Supply of Gambling and Betting-​ Services –​Recourse-​ to Article 21.5 of the DSU by Antigua and Barbuda, WT/​DS285/​RW, adopted 22 May 2007, DSR 2007:VIII, p. 3105 Appellate Body Report, United States –​Standards for Reformulated and Conventional Gasoline, WT/​ DS2/​AB/​R, adopted 20 May 1996, DSR 1996:I, p. 3 Appellate Body Report, United States –​Anti-​ Dumping Measures on Certain Hot-​Rolled Steel Products from Japan, WT/​DS184/​AB/​R, adopted 23 August 2001, DSR 2001:X, p. 4697 Panel Report, United States –​Anti-​Dumping Measures on Certain Hot-​Rolled Steel Products from Japan, WT/​DS184/​R, adopted 23 August 2001 modified by Appellate Body Report WT/​DS184/​ AB/​R, DSR 2001:X, p. 4769 Award of the Arbitrator, United States –​Anti-​ Dumping Measures on Certain Hot-​Rolled Steel Products from Japan –​Arbitration under Article 21.3(c) of the DSU, WT/​DS184/​13, 19 February 2002, DSR 2002: IV, p. 1389 Appellate Body Report, United States –​Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/​ DS177/​AB/​R, WT/​DS178/​AB/​R, adopted 16 May 2001, DSR 2001: IX, p. 4051 Appellate Body Report, United States –​Measures Affecting Trade in Large Civil Aircraft (Second Complaint), WT/​DS353/​AB/​R, adopted 23 March 2012, DSR 2012:I, p. 7

US –​Gambling (Article 21.5 –​ Antigua and Barbuda)

US –​Gasoline

US –​Hot-​Rolled Steel

US –​Hot-​Rolled Steel (Article 21.3(c))

US –​Lamb

US –​Large Civil Aircraft (2nd complaint)

List of cited WTO Panel and Appellate Body reports    lxxiii Short title

Full title and citation

US –​Lead and Bismuth II

Appellate Body Report, United States –​Imposition of Countervailing Duties on Certain Hot-​Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/​DS138/​ AB/​R, adopted 7 June 2000, DSR 2000: V, p. 2595 Appellate Body Report, United States –​Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/​DS202/​ AB/​R, adopted 8 March 2002, DSR 2002:IV, p. 1403 Panel Report, United States –​Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/​DS202/​R, adopted 8 March 2002, as modified by Appellate Body Report WT/​DS202/​AB/​, DSR 2002:IV, p. 1473 Panel Report, United States –​Anti-​Dumping Measures on Certain Oil Country Tubular Goods from Korea, WT/​DS488/​R and Add.1, adopted 12 January 2018 Appellate Body Report, United States –​Continued Dumping and Subsidy Offset Act of 2000, WT/​ DS217/​AB/​R, WT/​DS234/​AB/​R, adopted 27 January 2003, DSR 2003: I, p. 375 Panel Report, United States –​Continued Dumping and Subsidy Offset Act of 2000, WT/​DS217/​R, WT/​ DS234/​R, adopted 27 January 2003, as modified by Appellate Body Report WT/​DS217/​AB/​R, WT/​ DS234/​AB/​R, DSR 2003:II, p. 489 Appellate Body Report, United States –​Sunset Reviews of Anti-​Dumping Measures on Oil Country Tubular Goods from Argentina, WT/​DS268/​AB/​R, adopted 17 December 2004, DSR 2004: VII, p. 3257 Panel Report, United States –​Countervailing Measures on Certain Pipe and Tube Products (Turkey), WT/​DS523, circulated 18 December 2018 Panel Report, United States –​Certain Measures Affecting Imports of Poultry from China, WT/​ DS392/​R, adopted 25 October 2010, DSR 2010:V, p. 1909

US –​Line Pipe

US –​OCTG (Korea)

US –​Offset Act (Byrd Amendment)

US –​Oil Country Tubular Goods Sunset Reviews

US –​Pipes and Tubes (Turkey)

US –​Poultry (China)

lxxiv    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

US –​Steel Safeguards

Appellate Body Report, United States –​Definitive Safeguard Measures on Imports of Certain Steel Products, WT/​DS248/​AB/​R, WT/​DS249/​AB/​R, WT/​DS251/​AB/​R, WT/​DS252/​AB/​R, WT/​DS253/​ AB/​R, WT/​DS254/​AB/​R, WT/​DS258/​AB/​R, WT/​ DS259/​AB/​R, adopted 10 December 2003, DSR 2003:VII, p. 3117 Panel Report, United States –​Section 110(5) of the US Copyright Act, WT/​DS160/​R, adopted 27 July 2000, DSR 2000:VIII, p. 3769 Award of the Arbitrators, United States –​Section 110(5) of the US Copyright Act –​Recourse to Arbitration under Article 25 of the DSU, WT/​ DS160/​ARB25/​1, 9 November 2001, DSR 2001:II, p. 667 Panel Report, United States –​Section 129(c)(1) of the Uruguay Round Agreements Act, WT/​DS221/​R, adopted 30 August 2002, DSR 2002:VII, p. 2581 Panel Report, United States –​Sections 301-​310 of the Trade Act of 1974, WT/​DS152/​R, adopted 27 January 2000, DSR 2000:II, p. 815 Appellate Body Report, United States –​Import Prohibition of Certain Shrimp and Shrimp Products, WT/​DS58/​AB/​R, adopted 6 November 1998, DSR 1998:VII, p. 2755 Appellate Body Report, United States –​Import Prohibition of Certain Shrimp and Shrimp Products –​Recourse to Article 21.5 of the DSU by Malaysia, WT/​DS58/​AB/​RW, adopted 21 November 2001, DSR 2001:XIII, p. 6481 Appellate Body Report, United States –​Measures Relating to Shrimp from Thailand/​United States –​ Customs Bond Directive for Merchandise Subject to Anti-​Dumping/​Countervailing Duties, WT/​DS343/​ AB/​R /​WT/​DS345/​AB/​R, adopted 1 August 2008, DSR 2008:VII, p. 2385 /​DSR 2008:VIII, p. 2773 Panel Report, United States –​Preliminary Determinations with Respect to Certain Softwood Lumber from Canada, WT/​DS236/​R, adopted 1 November 2002, DSR 2002: IX, p. 3597

US –​Section 110(5) Copyright Act

US –​Section 110(5) Copyright Act (Article 25)

US –​Section 129(c)(i) URAA

US –​Section 301 Trade Act

US –​Shrimp

US –​Shrimp (Article 21.5 –​Malaysia)

US –​Shrimp (Thailand)/​US –​ Customs Bond Directive

US –​Softwood Lumber III

List of cited WTO Panel and Appellate Body reports    lxxv Short title US –​Softwood Lumber IV

Full title and citation

Appellate Body Report, United States –​Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/​ DS257/​AB/​R, adopted 17 February 2004, DSR 2004: II, p. 571 US –​Softwood Lumber V Appellate Body Report, United States –​Final Dumping Determination on Softwood Lumber from Canada, WT/​DS264/​AB/​R, adopted 31 August 2004, DSR 2004:V, p. 1875 US –​Stainless Steel (Mexico) Appellate Body Report, United States –​Final Anti-​ Dumping Measures on Stainless Steel from Mexico, WT/​DS344/​AB/​R, adopted 20 May 2008, DSR 2008: II, p. 513 US –​Stainless Steel (Mexico) Panel Report, United States –​Final Anti-​Dumping Measures on Stainless Steel from Mexico, WT/​ DS344/​R, adopted 20 May 2008, as modified by Appellate Body Report WT/​DS344/​AB/​R, DSR 2008:II, p. 599 US –​Steel and Aluminum Products United States –​Certain Measures on Steel and (China/​EU/​India/​Norway/​Turkey) Aluminium Products, WT/​DS548, WT/​DS544, WT/​DS547, WT/​DS550, WT/​DS551, WT/​DS552, WT/​DS554, WT/​DS556, WT/​DS564 US –​Supercalendered Paper Panel Report, United States –​Countervailing Measures on Supercalendered Paper from Canada, WT/​DS505/​R, adopted 5 March 2020, as modified by Appellate Body Report, WT/​DS505/​AB US –​Tariff Measures Panel Report, United States –​Tariff Measures on Certain Goods from China, WT/​DS543/​R, circulated 15 September 2020 US –​Tariff Measures II United States –​Tariff Measures on Certain Goods from China II, WT/​DS565, ongoing US –​Textiles Rules of Origin Panel Report, United States –​Rules of Origin for Textiles and Apparel Products, WT/​DS243/​R and Corr.1, adopted 23 July 2003, DSR 2003:VI, p. 2309 US –​Tuna II (Mexico) Appellate Body Report, United States –​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, WT/​DS381/​AB/​R, adopted 13 June 2012, DSR 2012:IV, p. 1837 US –​Upland Cotton Appellate Body Report, United States –​Subsidies on Upland Cotton, WT/​DS267/​AB/​R, adopted 21 March 2005, DSR 2005:I, p. 3

lxxvi    List of cited WTO Panel and Appellate Body reports Short title

Full title and citation

US –​Upland Cotton (Article 21.5 –​Brazil)

Appellate Body Report, United States –​Subsidies on Upland Cotton –​Recourse to Article 21.5 of the DSU by Brazil, WT/​DS267/​AB/​RW, adopted 20 June 2008, DSR 2008: III, p. 809 Panel Report, United States –​Subsidies on Upland Cotton –​Recourse to Article 21.5 of the DSU by Brazil, WT/​DS267/​RW and Corr.1, adopted 20 June 2008, as modified by Appellate Body Report WT/​DS267/​AB/​RW, DSR 2008:III, p. 997 Appellate Body Report, United States –​Anti-​ Dumping and Countervailing Measures on Large Residential Washers from Korea, WT/​DS464/​AB/​ R and Add.1, adopted 26 September 2016, DSR 2016:V, p. 2275 Appellate Body Report, United States –​Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/​DS166/​AB/​ R, adopted 19 January 2001, DSR 2001: II, p. 717 Appellate Body Report, United States –​Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/​DS33/​AB/​R, adopted 23 May 1997, and Corr.1, DSR 1997:I, p. 323 Appellate Body Report, United States –​Laws, Regulations and Methodology for Calculating Dumping Margins (“Zeroing”), WT/​DS294/​AB/​ R, adopted 9 May 2006, and Corr.1, DSR 2006: II, p. 417 Appellate Body Report, United States –​Measures Relating to Zeroing and Sunset Reviews, WT/​ DS322/​AB/​R, adopted 23 January 2007, DSR 2007: I, p. 3 Appellate Body Report, United States –​Section 211 Omnibus Appropriations Act of 1998, WT/​DS176/​ AB/​R, adopted 1 February 2002, DSR 2002:II, p. 589

US –​Washing Machines

US –​Wheat Gluten

US –​Wool Shirts and Blouses

US –​Zeroing (EC)

US –​Zeroing (Japan)

US –​Section 211 Appropriation Acts

List of Cited GAT T Panel Reports

Short title Canada –​Herring and Salmon

Full case title and citation

GATT Panel Report, Canada –​Measures Affecting Exports of Unprocessed Herring and Salmon, L/​6268, adopted 22 March 1988, BISD 35S/​98 Canada –​Provincial Liquor Boards GATT Panel Report, Canada –​Import, (US) Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies, DS17/​ R, adopted 18 February 1992, BISD 39S/​27 EU –​Faroes Herring European Union—​Measures on Atlanto-​ Scandian Herring, WT/​DS469, withdrawn/​ terminated 21 August 2014 Japan –​Agricultural Products I GATT Panel Report, Japan –​Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages, L/​6216, adopted 10 November 1987, BISD 34S/​83 Nicaragua –​Measures Affecting Nicaragua –​Measures Affecting Imports Imports from Honduras and Colombia from Honduras and Colombia, WT/​DS201, consultations Nicaragua –​Measures Affecting Nicaragua –​Measures Affecting Imports from Imports from Honduras and Colombia Honduras and Colombia, WT/​DS188, panel established 18 May 2000 US –​Cuban Liberty and Democratic US –​Cuban Liberty and Democratic Solidarity Solidarity Act DS38 Act, WT/​DS38, authority lapsed 22 April 1998 US –​Nicaraguan Trade GATT Panel Report, United States –​Trade Measures Affecting Nicaragua, L/​6053, 13 October 1986, unadopted US –​Sugar Quota GATT Panel Report, United States –​Imports of Sugar from Nicaragua, L/​5607, adopted 13 March 1984, BISD 31S/​67 US –​Section 337 Tariff Act GATT Panel Report, United States Section 337 of the Tariff Act of 1930, L/​6439, adopted 7 November 1989, BISD 36S/​345

lxxviii    List of cited GATT Panel reports Short title

Full case title and citation

US –​Tuna (EEC)

GATT Panel Report, United States –​Restrictions on Imports of Tuna, DS29/​R, 16 June 1994, unadopted GATT Panel Report, United States –​Restrictions on Imports of Tuna, DS21/​R, DS21/​R, 3 September 1991, unadopted, BISD 39S/​155

US –​Tuna (Mexico)

Table of Cases

GATT 1947 DISPUTE SETTLEMENT Canada –​Herring and Salmon (Panel) ��������������������������������������������������������������������������������497n.67 Canada –​Provincial Liquor Boards (US) (Panel Report)��������������������������������������������������444n.50 EEC –​Oilseeds (retaliation)��������������������������������������������������������������������������������������������������� 976–​77 French Assistance to Exports of Wheat and Wheat Flour (Panel Report)������������������������� 976–​77 Japan –​Agricultural Products I (Panel)�����������������������������������������������������������497–​98n.68, 498–​99 Uruguayan Recourse to Article XXIII (Panel Report)��������������������������������������������������������� 976–​77 US Import Restrictions on Dairy Products (resolved)��������������������������������������������������������� 976–​77 US –​Nicaraguan Trade (Panel Report)�������������������������������������������������������� 721n.23, 725n.47, 727 US –​Restrictions on Imports of Tuna (Panel Report)���������������������������������������� 677n.23, 678n.27 US –​Section 337 Tariff Act (Panel Report)��������������������������������������������������������������������������444n.49 US –​Sugar Quota (Panel Report)��������������������������������������������������������������������������������������������������721 US –​Superfund (retaliation not authorized) ����������������������������������������������������������������������� 976–​77 US –​Tuna (EEC) (Panel Report) �������������������������������������������������������������������������������������������� 819n.8 US –​Tuna (Mexico) (Panel Report)���������������������������������������������������������������������������������������� 819n.8 WTO DISPUTE SETTLEMENT Argentina –​Financial Services (Appellate Body Report) ����������������� 442n.39, 442n.40, 445n.55, 507n.20, 508n.24, 508n.29, 508n.30, 513n.55, 756–​57, 880–​81 Argentina –​Financial Services (Panel Report)��������������������������������������������������������������������� 880–​81 Argentina –​Footwear (EC) (Appellate Body Report)����������������������� 79n.116, 88n.170, 100n.49, 464n.142, 464n.143, 596n.86, 598n.92, 938n.79 Argentina –​Hides and Leather (Panel Report)���������������������������������������������������� 450n.87, 493n.41 Argentina –​Import Measures (Appellate Body Report)�������������������� 438–​39, 444n.47, 484n.24, 493n.38, 493n.40, 496 Argentina –​Import Measures (Panel Report)����������������������99n.37, 484n.24, 1026–​27, 1030n.52 Argentina –​Preserved Peaches (Panel Report)��������������������������������������������������������������������79n.116 Argentina –​Textiles and Apparel (Appellate Body Report) ���������������� 100n.47, 435n.5, 480n.10 Armenia –​Anti-​Dumping Measures on Steel Pipes (request for consultations)��������������������������������������������������������������������������������������382n.45, 388 Australia –​Anti-​Dumping Measures on A4 Copy Paper (agreement to arbitrate)����������������������������������������������������������������������������������������� 1058–​59n.83 Australia –​Anti-​Dumping Measures on A4 Copy Paper (Panel Report) ������ 462n.137, 584n.31 Australia –​Apples (Appellate Body Report)�������������������������������� 436n.8, 472n.179, 702n.50, 705 Australia –​Apples (Panel Report) ����������������������������������������������������������������������������������������705n.80 Australia –​Automotive Leather II (Panel Report)������������������������������������������110n.140, 1002n.48 Australia –​Salmon (Appellate Body Report)������������������������������������������������������� 705n.79, 818–​19 Australia –​Salmon (Panel Report)��������������������������������������������������������������������������������699n.27, 705 Australia –​Tobacco Plain Packaging (Appellate Body Report) ��������������������������������������467n.157

lxxx   TABLE OF CASES Australia –​Tobacco Plain Packaging (Panel Report)��������������������������������������467n.156, 1022n.29 Brazil –​Aircraft (Appellate Body Report)��������������������������������������������������588n.48, 982t, 1002–​03 Brazil –​Aircraft (Article 21.5 –​Canada) (authorization to retaliate) (request for consultations)���������������������������������������������������������������������������������������������������� 982t Brazil –​Aircraft (Article 21.5 –​Canada) (Panel Report)�������������������������������������� 99n.37, 1019n.1 Brazil –​Desiccated Coconut (Appellate Body Report)���������������������65n.3, 99n.37, 100n.49, 387 Brazil –​Measures on Import Licensing and Minimum Import Prices (request for consultations)����������������������������������������������������������������������������������������������496n.59 Brazil –​Retreaded Tyres (Appellate Body Report)���������������22n.36, 467–​68, 468n.159, 755n.80, 989–​90, 1029n.46, 1030n.50 Brazil –​Retreaded Tyres (Panel Report)����������������������������������������������������������������������������1020n.11 Brazil –​Taxation (agreement to arbitrate)������������������������������������������������������������������� 1058–​59n.83 Brazil –​Taxation (Appellate Body Report)������������������������������������������������������������������������641n.118 Brazil –​Taxation (Panel Report)��������������������������������������������������������������������������������������������� 786–​88 Canada –​Additional Duties (Panel Report)����������������������������������������������������������������������134n.285 Canada –​Aircraft (Appellate Body Report) ������������������������������������������������������ 589n.52, 740n.127 Canada –​Aircraft (Brazil) (informal settlement)��������������������������������������������������������������1053n.51 Canada –​Aircraft (Panel Report)������������������������������������������������������������������������������������������999n.27 Canada –​Autos (Appellate Body Report)���������������������������������������������������������� 221n.64, 1030n.47 Canada –​Commercial Aircraft (authorization to retaliate) ���������������������������������������������������� 982t Canada –​Commercial Aircraft (MPIA) ������������������������������������������������������995n.12, 1058–​59n.83 Canada –​Dairy (Article 21.5 –​New Zealand and the United States) (Panel Report)������������������������������������������������������������������������������������������������������������������567n.94 Canada –​Dairy (Panel Report)������������������������������������������������������������������������������ 225n.88, 559n.38 Canada –​Patent Term (Appellate Body Report)�����������������������������������������������65n.3, 79–​80n.118 Canada –​Periodicals (Appellate Body Report) ������������������������������������������������������������������441n.36 Canada –​Pharmaceutical Patents (Panel Report) ��������������������������������������������������������������664n.46 Canada –​Renewable Energy/​Canada –​Feed-​in Tariff Program (Appellate Body Report) ���������������������������������������������������113–​14, 457–​58, 615n.63, 679n.41 Canada –​Welded Pipe (Panel Report)��������������������������������������������������������������������������������1032n.58 Canada –​Wheat Exports and Grain Imports (Appellate Body Report) ����������� 795–​96, 949n.15 Canada –​Wheat Exports and Grain Imports (Panel Report)��������������������������������������������� 795–​96 Canada –​Wine (Australia) (informal settlement)������������������������������������������������������������1053n.51 Canada –​Wine (Australia) (MPIA)��������������������������������������������������������������995n.12, 1058–​59n.83 Canada –​Wine (Australia) (Panel Report)����������������������������������������������������������������� 1058–​59n.83 Chile –​Price Band System (Appellate Body Report)���������������������������������� 559n.36, 560, 934n.56 Chile –​Swordfish (Panel requested)��������������������������������������������������� 178n.141, 178n.143, 818–​19 China –​AD/​CVD on Barley (Australia) (MPIA)����������������������������������������995n.12, 1058–​59n.83 China –​Auto Parts (Appellate Body Report) ������������ 79–​80n.118, 436n.9, 436n.12, 479n.7, 930 China –​Canola Seed (Canada) (MPIA) ������������������������������������������������������995n.12, 1058–​59n.83 China –​Certain Measures on the Transfer of Technology (request for consultations)��������������������������������������������������������������������������361n.113, 363n.123 China –​GOES (Panel Report) ����������������������������������������������������������������������������������������������588n.51 China –​Intellectual Property Rights II (informal settlement)����������������������������������������1053n.51 China –​Intellectual Property Rights II (request for consultations)���������������� 349n.51, 363n.123 China –​Publications and Audiovisual Products (Appellate Body Report)���������������������80n.119, 363n.123, 440n.29, 508n.30, 756–​57, 775–​76, 776n.36, 778–​79, 929, 936, 939, 940 China –​Publications and Audiovisual Products (Panel Report)��������221–​22, 775n.28, 775n.29 China –​Rare Earths (Appellate Body Report) ������������������������������������ 97n.25, 100n.49, 132n.270

TABLE OF CASES    lxxxi China –​Rare Earths (Panel Report)������������������������������������������������������������������������� 99n.37, 998–​99 China –​Raw Materials (Appellate Body Report)���������������������������������99n.37, 438, 444n.47, 451, 485n.26, 493n.38, 494n.46, 496n.60, 497n.63, 497n.64, 497n.65, 726n.52, 973n.38, 1010n.81 China –​Raw Materials (Panel Report)������������������������������������������������������������������������132n.269, 496 China –​TRQs (Panel Report)������������������������������������������������������������������������������������������������494n.48 Colombia –​Frozen Fries (MPIA)������������������������������������������������������������������995n.12, 1058–​59n.83 Colombia –​Ports of Entry (Appellate Body Report)����������������������������������������������������������496n.62 Colombia –​Ports of Entry (Panel Report)���������������� 80–​81, 442n.39, 493n.42, 496n.57, 496n.62 Colombia –​Textiles (Appellate Body Report) ������������������������������������������������������������������737n.114 Colombia –​Textiles (Panel Report)������������������������������������������������������������������������������������641n.116 Costa Rica –​Avocados (MPIA) ��������������������������������������������������������������������������������������������995n.12 Costa Rica –​Avocados (Panel Report)������������������������������������������������������������������������� 1058–​59n.83 Dominican Republic –​Import and Sale of Cigarettes (Appellate Body Report)�������������446n.63 Dominican Republic –​Import and Sale of Cigarettes (Panel Report)����������������������438, 483n.17 Dominican Republic –​Safeguard Measures (Panel Report)������������������������������� 328n.37, 435n.6, 464n.144, 464n.148 EC and Certain Member States –​Large Civil Aircraft (Appellate Body Report) �������������������������������������� 80n.119, 114n.192, 906, 934–​35, 934n.59, 959n.67, 982t, 1001n.45, 1002n.50, 1022n.32, 1027n.41, 1030n.48, 1030n.50, 1030n.51 EC and Certain Member States –​Large Civil Aircraft (Article 21.5) (Appellate Body Report) ����������������������������������������������������������������������������������������������1026n.36 EC and Certain Member States –​Large Civil Aircraft (authorization to retaliate)���������������� 982t EC and Certain Member States –​Large Civil Aircraft (Panel Report)������������������������������999n.27 EC –​Approval and Marketing of Biotech Products (informal settlement)��������������������1053n.53 EC –​Approval and Marketing of Biotech Products (Panel Report)���������������� 471n.178, 709n.97 EC –​Asbestos (Appellate Body Report)���������������������������������������80n.120, 114n.190, 436n.8, 441n.35, 905n.54, 930 EC –​Asbestos (Panel Report)��������������������������������������������������������������������������������������������������������437 EC –​Bananas III (Appellate Body Report)������������������� 113n.181, 130n.257, 134n.283, 163n.23, 413n.125, 444n.52, 495n.51, 496n.56, 507n.18, 961, 961n.75, 964n.89, 1019n.1, 1022n.27 EC –​Bananas III (Article 21.5 –​EC) (Panel Report)��������������������������������������������������������134n.285 EC –​Bananas III (Article 21.5 –​Ecuador II) (Appellate Body Report)��������� 131n.265, 494n.49, 926n.11, 932n.47, 933, 933n.51, 936n.70 EC –​Bananas III (Article 21.5 –​US) (Appellate Body Report)����������������������� 131n.265, 494n.49, 926n.11, 932n.47, 933, 933n.51, 936n.70 EC –​Bananas III (authorization to retaliate) ���������������������������������������������������������� 982t, 986n.106 EC –​Bananas III (Ecuador) (Article 22.6 –​EC) (decision by arbitrators)������������������������729n.66 EC –​Bananas III (good offices)����������������������������������������������������������������������������������������������901n.21 EC –​Bananas III (Panel Report)������������������������������������������������������������������������������������������1022n.31 EC –​Bed Linen (Article 21.5 –​India) (Appellate Body Report)������������������������������������������������937 EC –​Butter (informal settlement) ��������������������������������������������������������������������������������������1053n.52 EC –​Butter (Panel Report)��������������������������������������������������������������������������������������������������134n.285 EC –​Chicken Cuts (Appellate Body Report) ������������������������������� 65n.5, 73n.64, 479n.7, 929–​30, 931n.41, 931n.45, 934, 936–​37 EC –​Chicken Cuts (Panel Report)������������������������������������������������������������������������������������������ 478n.5 EC –​Commercial Vessels (Panel Report)����������������������������������������������������������� 962–​63, 987n.109 EC –​Computer Equipment (Appellate Body Report)�������������99n.37, 479n.7, 560n.45, 936n.70

lxxxii   TABLE OF CASES EC –​Export Subsidies on Sugar (Appellate Body Report)�������557n.22, 559n.37, 906n.63, 956–​57 EC –​Fasteners (China) (Appellate Body Report)������������������������������������������������������������������������936 EC –​Hormones (Appellate Body Report)���������������������������������� 80n.119, 168, 169–​70, 459n.127, 471n.176, 471n.177, 471n.178, 687n, 696–​97, 697n.5, 699n.28, 701, 703n.60, 704n.69, 704n.70, 715n.7, 913n.82, 928n.24, 940, 951n.31, 956–​57, 981–​83, 1009n.80 EC –​Hormones (Canada) (authorization to retaliate) ������������������������������������������������������������ 982t EC –​Hormones (Canada) (informal settlement)��������������������������������������������������������������1053n.55 EC –​Hormones (US) (Article 22.6 –​EC) (Decision of the Arbitrators)���������������������������� 697n.5 EC –​Hormones (US) (Panel Report)������������������������������������������������������������������������������������956n.50 EC –​Sardines (Appellate Body Report)��������������������������������������������������������������������������������� 818–​19 EC –​Scallops (Canada) (informal settlement)������������������������������������������������������������������1053n.52 EC –​Scallops (Canada) (Panel Report)������������������������������������������������������������������������������134n.285 EC –​Scallops (Peru and Chile) (Panel Report)������������������������������������������������������������������134n.285 EC –​Scallops (Peru and Chile) (informal settlement)������������������������������������������������������1053n.52 EC –​Seal Products (Appellate Body Report) ����������������������436n.8, 446n.60, 446n.64, 736n.102, 739n.122, 833n.116, 989–​90 EC –​Selected Customs Matters (Appellate Body Report)�������������������������� 450, 450n.85, 450n.86 EC –​Tariff Preferences (Appellate Body Report)��������������������������� 454n.105, 455n.107, 937n.76, 959n.65, 1009n.80 EC –​Tariff Preferences (Panel Report) ��������������������������������������������������������������������������������721n.24 EC –​Trademarks and Geographical Indications (US) (Panel Report) ��������������������� 79–​80n.118 EC –​Tube or Pipe Fittings (Appellate Body Report)��������������������������������������������������������461n.134 EU –​Biodiesel (Argentina) (Appellate Body Report)������������������������������������462n.136, 462n.137 EU –​Biodiesel (Argentina) (Panel Report)������������������������������������������������������������������������462n.136 EU –​Biodiesel (Indonesia) (Panel Report)������������������������������������������������������������������������1032n.58 EU –​Cost Adjustment Methodologies II (Russia) (arbitration offer) ��������������������������������������������������������������������������������������������������� 1058–​59n.83 EU –​Cost Adjustment Methodologies II (Russia) (Panel Report)��������� 462n.137, 1058–​59n.83 EU –​Energy Package (Panel Report)����������������������������������������������������438, 445n.55, 508n.23, 615 EU –​Fatty Alcohols (Indonesia) (Appellate Body Report)������������ 135n.287, 950n.27, 1003n.53 EU –​Fatty Alcohols (Indonesia) (Panel Report) ��������������������������������������������������������������135n.287 EU –​Footwear (China) (Panel Report)������������������������������������������������������������������������������1032n.58 EU –​Herring (Panel established)����������������������������������������������������������������������178n.144, 178n.145 EU –​Herring (request for consultations) ����������������������������������������������������������������������������819n.13 EU –​PET (Pakistan) (Appellate Body Report)���������������������������������������������������� 484n.19, 950n.28 EU –​Poultry Meat (China) (informal settlement)������������������������������������������������������������1053n.53 EU –​Price Comparison Methodologies (informal settlement)��������������������������������������1053n.52 Guatemala –​Cement I (Appellate Body Report)������������������������������������������������������������������ 899n.4 India –​Additional Import Duties (Appellate Body Report)��������������������434n.2, 435n.6, 435n.7, 436n.13, 479n.8, 493n.39 India –​Agricultural Products (Appellate Body Report)������������������������������������705, 729n.67, 938 India –​Agricultural Products (Panel Report)������������������������������������������������������ 699n.27, 708n.90 India –​Autos (Appellate Body Report)��������������������������������������������������������������������������������496n.61 India –​Autos (Panel Report)����������������������������������������������������������������������������������� 437–​38, 496n.61 India –​Export Related Measures (Panel Report)����������������������������������������������������������������980n.88 India –​Patents (US) (Appellate Body Report) ����������������������������79–​80n.118, 929n.25, 1031n.54 India –​Patents (US) (Panel Report)������������������������������������������������������������������������������������1032n.57 India –​Quantitative Restrictions (Appellate Body Report) ��������������������������������������110, 726n.56

TABLE OF CASES    lxxxiii India –​Quantitative Restrictions (Panel Report)�������������������������� 99n.37, 437n.14, 438, 560n.40 India –​Solar Cells (Appellate Body Report)�������������������������������������������������� 99n.37, 615, 679n.42 India –​Solar Cells (Panel Report)�������������������������������������������������������������������������������������������������679 Indonesia –​Autos (Panel Report)����������������������������������������������������������������������������������������1002n.48 Indonesia –​Chicken (Panel Report) ������������������������������������������������������������������������������������562n.58 Indonesia –​Import Licensing Regimes (Appellate Body Report)������������������� 557n.22, 559n.36, 560n.41, 562, 739n.118 Indonesia –​Import Restrictions (Appellate Body Report)������������������������������������������������955n.46 Indonesia –​Iron or Steel Products (Appellate Body Report) �������� 464n.144, 464n.145, 959n.65 Indonesia –​Iron or Steel Products (Panel Report)������������������������������������������������������������1032n.58 Japan –​Agricultural Products II (Appellate Body Report)�������������������702–​3, 702n.52, 705n.73, 707n.89, 740n.126, 740n.127, 741n.129 Japan –​Alcoholic Beverages II (Appellate Body Report) ����������������������71n.50, 72n.57, 79n.114, 112–​13n.179, 163n.23, 170, 172n.93, 441n.36, 442n.38, 924, 928n.22, 929n.27, 933, 933n.51, 938, 942n.111, 1032n.57 Japan –​DRAMS (Korea) (informal settlement)����������������������������������������������������������������1053n.54 Japan –​Exportation of Products and Technology to Korea (Panel established)��������������731n.76 Japan –​Film (Panel Report) ��������������������������������������������������������������������������������� 951n.30, 1020–​21 Japan –​Quotas on Laver (informal settlement)����������������������������������������������������������������1053n.51 Japan –​Quotas on Laver (Panel Report)����������������������������������������������������������������������������134n.285 Kazakhstan –​Anti-​Dumping Measures on Steel Pipes (request for consultations)��������������������������������������������������������������������������������������382n.45, 388 Korea –​Alcoholic Beverages (Appellate Body Report)������������������������������������������������������441n.36 Korea –​Alcoholic Beverages (Panel Report)����������������������������������������������������������������������1002n.48 Korea –​Bovine Meat (Canada) (Panel Report)�����������������������������������������������134n.285, 1053n.51 Korea –​Certain Paper (Panel Report)����������������������������������������������������������������������������������1019n.1 Korea –​Commercial Vessels (Panel Report)����������������������������������������������������������������������460n.128 Korea –​Dairy (Appellate Body Report)���������������������������������������������� 88n.170, 464n.142, 938n.80 Korea –​Pneumatic Valves (Appellate Body Report)��������������������������������������������������������113n.183 Korea –​Radionuclides (Appellate Body Report)������������������������������������������� 443n.41, 705, 707–​8 Korea –​Radionuclides (Panel Report)������������������������������������������������������������������������������������������708 Korea –​Various Measures on Beef (Appellate Body Report)��������������������������� 444n.46, 444n.48, 444n.53, 756–​57 Kyrgyz Republic –​Anti-​Dumping Measures on Steel Pipes (request for consultations)��������������������������������������������������������������������������������������382n.45, 388 Mexico –​Additional Duties (US) (Panel Report)��������������������������������������������������������������134n.285 Mexico –​Corn Syrup (Article 21.5 –​US) (Appellate Body Report) ���������������������������������������������������������������� 726n.58, 958n.58, 1019n.3 Mexico –​Olive Oil (Panel Report)��������������������������������������������������������������������������������� 79–​80n.118 Mexico –​Taxes on Soft Drinks (Appellate Body Report) ��������������������������������� 22n.36, 112n.178, 726n.58, 906–​7, 956–​57, 961–​62, 964n.89 Morocco –​Definitive AD Measures on School Exercise Books (Tunisia) (notification of appeal)��������������������������������������������������������������������������������������������������427n.216 Morocco –​Definitive AD Measures on School Exercise Books (Tunisia) (request for consultations)��������������������������������������������������������������������������������������������427n.215 Morocco –​Hot-​Rolled Steel (Turkey) (notification of appeal)��������������������������������������������������427 Nicaragua –​Measures Affecting Imports from Honduras and Colombia (consultations)�������� 714n.2 Nicaragua –​Measures Affecting Imports from Honduras and Colombia (Panel not composed)�������������������������������������������������������������������������������������������������������� 714n.2

lxxxiv   TABLE OF CASES Peru –​Agricultural Products (Appellate Body Report)������������� 80n.123, 559n.36, 906n.64, 932, 934n.61, 956–​57, 964, 966 Peru –​Agricultural Products (Panel Report)���������������������119n.219, 435n.7, 1020n.6, 1032n.58 Philippines –​Distilled Spirits (Appellate Body Report) ����������������������������������������������������441n.35 Russia –​Commercial Vehicles (Appellate Body Report)��������������������������������������������������� 382, 388 Russia –​Commercial Vehicles (Panel Report)������������������������������������������������������������387, 388n.82 Russia –​Pigs (Article 21.5) (informal settlement)������������������������������������������������������������1053n.54 Russia –​Railway Equipment (Appellate Body Report)������������ 384n.55, 388, 950n.27, 1011n.89 Russia –​Railway Equipment (Panel Report)����������������������������������������������������������������384, 388n.81 Russia –​Tariff Treatment (Panel Report)�������������������������������������������������������������� 382n.41, 387–​88 Russia –​Traffic in Transit (Panel Report) ��������������27n.47, 95n.9, 105n.93, 180n.155, 468n.163, 469n.165, 715, 719n.17, 721, 723, 725n.48, 726n.57, 728n.63, 732n.79, 733n.87, 733n.90, 734n.92, 735–​36, 736n.105, 737n.110, 739n.120, 741n.131, 742, 955n.45, 955n.46, 1002n.47 Saudi Arabia –​IPRs (Panel Report)������������������27n.48, 220n.56, 466n.153, 466n.155, 469n.165, 715, 723, 725n.51, 727n.60, 732n.83, 733n.90, 735n.100, 736n.101, 736n.107, 740n.124, 994n.4, 1059–​60 Thailand –​Cigarettes (Article 21.5 –​Philippines) (Panel Report)������������������� 449n.79, 449n.82, 449n.83, 449n.84, 451, 1020n.10, 1022n.29 Thailand –​Cigarettes (Article 21.5 –​Philippines II) (Panel Report)������������������������������1032n.58 Thailand –​Cigarettes (Philippines) (Appellate Body Report) ���������������721n.24, 739n.123, 931, 951n.32, 1003n.52, 1010n.85, 1030n.53 Thailand –​Cigarettes (Philippines) (Panel Report)����������������������������������������1022n.30, 1023n.33 Turkey –​Pharmaceutical Products (EU) (arbitration agreement)������������������������������������995n.12 Turkey –​Pharmaceutical Products (EU) (Panel Report)�������������������������������������������������1059n.85 Turkey –​Textiles (Appellate Body Report)�������������������������������������������������������� 453n.96, 453n.100 Turkey –​Textiles (Panel Report)������������������������������������������������������������������������������������492, 1020n.9 Ukraine –​Ammonium Nitrate (Russia) (Appellate Body Report)����������������������������������462n.137 Ukraine –​Passenger Cars (Panel Report)��������������������������������������������������������������������������464n.143 US –​1916 Act (authorization to retaliate)���������������������������������������������������������������������������������� 982t US –​Anti-​Dumping Methodologies (China) (authorization to retaliate) ���������������������������� 982t US –​Anti-​Dumping and Countervailing Duties (China) (Appellate Body Report) ������������������������������������������� 88n.170, 180n.155, 256n.96, 456n.113, 460n.129, 589n.55, 797, 797n.35, 797n.37, 798, 934, 935, 959n.68, 1019n.4, 1020n.9, 1021n.19 US –​Anti-​Dumping Measures on Cement (informal settlement)����������������������������������1053n.51 US –​Carbon Steel (Appellate Body Report)������������������������������������������ 924n.1, 928n.23, 951n.32 US –​Carbon Steel (Appellate Body Report)�������������������������������������������������������� 797–​98, 797n.33, 1021n.15, 1021n.16, 1031n.54 US –​Certain EC Products (Panel Report)����������������������������������������������������������������������������493n.43 US –​Clove Cigarettes (Appellate Body Report)�����������������78n.101, 125n.241, 127–​28, 443n.42, 443n.45, 445n.56, 446n.63, 926, 932–​33, 932n.46, 933n.51 US –​Clove Cigarettes (informal settlement)����������������������������������������������������������������������1053n.53 US/​Canada –​Continued Suspension (Appellate Body Report)��������� 80n.120, 95n.8, 115n.193, 134n.281, 470n.174, 471n.178, 702n.49, 703n.60, 703n.61, 705n.77, 913, 962n.81, 975n.54, 988, 1006n.66, 1038n.74 US/​Canada –​Continued Suspension (Panel Report) ����������������������� 95n.8, 115n.193, 134n.281, 471n.178, 1005, 1038

TABLE OF CASES    lxxxv US –​Continued Zeroing (Appellate Body Report) ���������������������� 905n.52, 925n.5, 929, 938n.79 US –​COOL (Appellate Body Report)�������������������������������������445n.57, 450–​51, 981–​83, 981n.92 US –​COOL (Art 21 .5 –​Canada) (Appellate Body Report)����������������������������������������������958n.57 US –​COOL (authorization to retaliate)�������������������������������������������������������������������������������������� 982t US –​COOL (Panel Report)����������������������������������������������������������������������������������������������������449n.84 US –​Corrosion-​Resistant Steel Sunset Review (Appellate Body Report) ������������������������������������������������������������������335n.72, 950–​51, 1020n.8 US –​Cotton Yarn (Appellate Body Report) ������������������������������������������������������������������������907n.66 US –​Cotton Yarn (authorization to retaliate)���������������������������������������������������������� 982t, 986n.106 US –​Countervailing and Anti-​Dumping Measures (China) (Appellate Body Report) ������������������������������������������������������������������������������ 956n.48, 1032n.58 US –​Countervailing Duties (India) (Appellate Body Report)�����������������������������������������798 [???] US –​Countervailing Duty Investigation on DRAMS (Appellate Body Report) ������������������������������������������������������������������������������ 456n.114, 937n.76 US –​Countervailing Measures (China) (Appellate Body Report)�����������������������������������589n.57, 797n.32, 1021n.15 US –​Countervailing Measures (China) (Article 21.5) (Appellate Body Report) ������������������������������������������������������������������������������ 79n.115, 135n.288 US –​Countervailing Measures (China) (Article 21.5) (Panel Report) ��������������������������135n.288 US –​Cuban Liberty and Democratic Solidarity Act (Panel -​authority lapsed)���������������� 714n.2 US –​Customs Bond Directive (Appellate Body Report)����������������������������������������������������80n.119 US –​DRAMS (Article 21.5 –​Korea) (Panel Report)��������������������������������������������������������134n.285 US –​Export Restraints (Panel Report) ����������������������������������������������������������������������456n.111, 588 US –​FSC (Appellate Body Report)��������������������������������������������������� 73n.66, 103, 981–​83, 981n.92 US –​FSC (Article 21.5 –​EC) (Appellate Body Report)����������������������������������������������������1022n.28 US –​FSC (authorization to retaliate)������������������������������������������������������������������������������������������ 982t US –​Gambling (Appellate Body Report) ������������������������������������������� 79n.116, 440n.26, 513n.55, 641n.117, 740n.126, 741n.128, 755, 774n.19, 775n.27, 778–​79, 929n.26, 931, 934, 936n.70, 957–​58, 981–​83, 986n.106, 988n.111, 1009n.79, 1011n.88, 1030n.53 US –​Gambling (Article 21.5) (Panel Report)����������������������������������������������������������������������79n.116 US –​Gambling (authorization to retaliate)�������������������������������������������������������������������������������� 982t US –​Gambling (Panel Report)������������������������������515n.70, 755n.75, 774–​75, 997n.20, 1020n.13 US –​Gasoline (Appellate Body Report) ������������17n.21, 72n.57, 88n.169, 99n.37, 112–​13n.179, 161–​62, 173n.106, 369–​70, 678–​79, 730n.74, 739n.117, 756–​57, 924n.1, 938n.79, 942n.111 US –​Gasoline (Panel Report)������������������������������������������������������������������������������������������������444n.51 US –​Hot-​Rolled Steel (Appellate Body Report)��������������������������������������17n.24, 583–​84, 907n.65 US –​Lamb (Appellate Body Report)����������������������������������������������������������������459n.127, 464n.143 US –​Large Civil Aircraft (2nd Complaint) (Appellate Body Report) ���������������������������������������������103n.76, 110, 134n.281, 588n.49, 982t US –​Large Civil Aircraft (Article 21.5 –​EU) (Appellate Body Report) ����������������������������������������������������������������������������������������������1026n.36 US –​Large Civil Aircraft (authorization to retaliate)���������������������������������������������������������������� 982t US –​Lead and Bismuth II (Appellate Body Report)������� 80n.120, 114n.189, 187n.213, 912n.80 US –​Line Pipe (Appellate Body Report)�������������������������� 453n.101, 455n.106, 598n.92, 929n.30 US –​Line Pipe (Panel Report)���������������������������������������������������������������������������453n.101, 463n.140 US –​Offset Act (Byrd Amendment) (authorization to retaliate)��������������������������������������� 981–​82 US –​Oil Country Tubular Goods (Korea) (sequencing agreement)����������������������� 1058–​59n.83

lxxxvi   TABLE OF CASES US –​Oil Country Tubular Goods Sunset Reviews (Korea) (Appellate Body Report) ������������������������������������������������������������������������������������������������79n.115 US –​Pipes and Tubes (Turkey) (Panel Report)������������������������������������������������������������������1021n.17 US –​Poultry (China) (Panel Report)����������������������������������������������������������������������� 106–​7, 708n.96 US –​Section 110(5) Copyright Act (Article 25) (Panel Report)����������������������������111n.148, 1052 US –​Section 110(5) Copyright Act (Panel Report)����������������������������������73n.66, 111n.148, 1052 US –​Section 129(c)(1) URAA (Panel Report)������������������������������������������������������������� 79–​80n.118 US –​Section 211 Appropriations Act (Appellate Body Report)������������������79–​80n.118, 952n.33 US –​Section 301 Trade Act (Panel Report)��������������������������������������������������������������������������951n.32 US –​Shrimp (Appellate Body Report)�������������������������� 17n.23, 17n.25, 72n.59, 79n.114, 99n.37, 114n.189, 170n.78, 449n.79, 449n.82, 450n.88, 678–​79, 721n.23, 726n.53, 726n.54, 730n.74, 736n.102, 736n.104, 756–​57, 818–​19, 820n.19, 832–​33, 906, 939, 989–​90, 1019n.5, 1020n.7, 1037n.73 US –​Shrimp (Article 21.5 –​Malaysia) (Appellate Body Report) ������� 79n.114, 756–​57, 1032n.57 US –​Shrimp (Thailand)/​US –​Customs Bond Directive (Appellate Body Report) ������741n.129 US –​Shrimp II (Vietnam) (informal settlement)��������������������������������������������������������������1053n.53 US –​Softwood Lumber III (Panel Report) ������������������������������������������������������������������������456n.112 US –​Softwood Lumber IV (Appellate Body Report)�������������������������������72n.57, 221–​22, 436n.9, 587n.41, 590n.59, 924n.3, 929n.26, 937n.75, 942n.111 US –​Softwood Lumber V (Appellate Body Report)���������������������������������������������������������1032n.59 US –​Stainless Steel (Mexico) (Appellate Body Report)����������������������������������� 79n.115, 113n.182, 462n.135, 915n.84 US –​Stainless Steel (Mexico) (Article 21.5 –​Mexico) (Panel Report)����������������������������134n.285 US –​Stainless Steel (Mexico) (Panel Report) ����������������������������������������������������������������������79n.117 US –​Steel and Aluminium Products (Canada) (Panel Report) ��������������������������������������134n.285 US –​Steel and Aluminium Products (China)��������������������������������������������������������������������468n.164 US –​Steel and Aluminium Products (EU) ������������������������������������������������������������������������468n.164 US –​Steel and Aluminium Products (India)����������������������������������������������������������������������468n.164 US –​Steel and Aluminium Products (Mexico) (Panel Report) ��������������������������������������134n.285 US –​Steel and Aluminium Products (Norway)����������������������������������������������������������������468n.164 US –​Steel and Aluminium Products (Russia)��������������������������������������������������������������������468n.164 US –​Steel and Aluminium Products (Turkey)������������������������������������������������������������������468n.164 US –​Steel Safeguards (Appellate Body Report) ����������������������������������������������������������������459n.126 US –​Tariff Measures (Panel Report) ������������������������������ 369n.167, 442n.39, 466n.154, 466n.155 US –​Tariff Measures II (proceedings initiated) ����������������������������������������������������������������369n.167 US –​Textiles Rules of Origin (Panel Report) ����������������������������������������������������������������������488n.30 US –​Tuna II (Article 21 .5 –​Mexico) (Appellate Body Report) ����������������������������������������445n.57 US –​Tuna II (Mexico) (Appellate Body Report) �������������������78n.102, 88n.170, 106–​7, 443n.44, 445n.57, 678–​79, 933, 933n.51, 981–​83, 1003n.52, 1006n.68 US –​Tuna II (Mexico) (Article 21.5 –​Mexico II) (Appellate Body Report)������������������1006n.68 US –​Tuna II (Mexico) (Article 21.5 –​United States) (Panel Report) ������������������������������679n.38 US –​Tuna II (Mexico) (authorization to retaliate)�������������������������������������������������������������������� 982t US –​Tuna II (Mexico) (Panel Report)���������������������������������������������������������������� 963n.84, 1020n.12 US –​Upland Cotton (Appellate Body Report)�����������������������������������79n.116, 428, 936, 937n.78, 938n.79, 942n.111 US –​Upland Cotton (Article 21.5) (Panel Report)����������������������������������79n.116, 428n.222, 1010 US –​Upland Cotton (Article 21.5 –​Brazil) (Appellate Body Report)���������������������������1010n.86, 1014n.103, 1030n.51, 1030n.52, 1031n.55, 1039n.80 US –​Upland Cotton (informal settlement)������������������������������������������������������������������������1053n.55

TABLE OF CASES    lxxxvii US –​Upland Cotton (Panel Report)������������������������������������������������������������������������������428, 589n.56 US –​Washing Machines (Appellate Body Report)��������������������������������������������������������������79n.117 US –​Washing Machines (authorization to retaliate)���������������������������������������������������������������� 982t US –​Wheat Gluten (Appellate Body Report)��������������������������������������������������1030n.48, 1030n.49 US –​Wheat Gluten (Panel Report) ������������������������������������������������������������������������������������464n.143 US –​Wool Shirts and Blouses (Appellate Body Report)�������������������������������������������������113n.180, 497n.63, 738–​39, 1009–​12 US –​Zeroing (EC) (Appellate Body Report)�������������������������������������������������������� 79n.117, 910n.75 US –​Zeroing (Japan) (Appellate Body Report) ������������������������������������������������������������������79n.117 US –​Zeroing (Japan) (Panel Report)�������������������������������������������������������������������� 79n.117, 910n.75 OTHER JURISDICTIONS INTERNATIONAL COURTS/​A RBITRAL BODIES Permanent Court of International Justice Brazilian Loans (France v. Brazil) (1929) PCIJ Rep Ser A, Nos 20/​21 ������������������������������951n.32 Chorzów Factory (Germany v. Poland) (Jurisdiction) (1927) PCIJ Ser A, No 9����������������������������188n.225, 947n.8, 956n.52, 970, 971–​72, 983n.94 Competence of the ILO to Regulate Agricultural Labour (1922) PCIJ Ser B, Nos 2 and 3 ��������������������������������������������������������������������������������������930n.33 Customs Régime between Germany and Austria (Protocol of March 19th, 1931), Advisory Opinion (1931) PCIJ Ser A/​B No 41 ��������������������������������������164n.25, 298–​99n.36 Oscar Chinn (United Kingdom v. Belgium) (1934) PCIJ Ser A/​B, No 63���������� 162n.8, 163n.13 S.S. Lotus France v. Turkey (1927) PCIJ Ser A����������������������������������������������������������������������698n.16 International Court of Justice Aerial Herbicide Spraying (Ecuador v. Colombia), Memorial of Ecuador ����������������������168n.66 Anglo–​Norwegian Fisheries Case (United Kingdom v. Norway) (Judgment) [1951] ICJ Rep 116�������������������������������������������������������������������������������������������������������������������������������� 819n.6 Arbitral Award of 31 July 1989 (Judgment) [1991] ICJ Rep 53����������������������������������������181n.163 Barcelona Traction, Light and Power Company, Ltd. (Belgium v. Spain) (Judgment) [1970] ICJ Rep 40��������������������������������������������������������������������������������������181n.162 Certain Iranian Assets, (Islamic Republic of Iran v. United States of America), Preliminary Objections (Judgment) (13 February 2019)��������������������������� 167n.53, 167n.56, 722n.27, 722n.29 Complaint Filed against the International Fund for Agricultural Development (Advisory Opinion) [2012] ICJ Rep 10.64��������������������������������������������������������������������168n.63 Continental Shelf (Tunisia/​Libyan Arab Jamahiriya) (Judgment) [1982] ICJ Rep 18 ������������������������������������������������������������������������������������������� 181–​82, 189n.229 Fisheries Jurisdiction (Spain v. Canada) [1998] ICJ Rep 432 ��������������������������������������������949n.16 Frontier Dispute (Burkina Faso/​Mali) (Judgment) [1986] ICJ Rep 577 ������������������������189n.230 Kasikili/​Sedudu Island (Botswana/​Namibia) (Judgment) [1999] ICJ Rep 1059������������942n.110 LaGrand [2001] ICJ Rep 466����������������������������������������������������������������������������������������������������������970 Land, Island and Maritime Frontier Dispute (El Salvador/​Honduras: Nicaragua intervening) (Judgment) [1992] ICJ Rep 351 ������������������������������������������������������������181n.165 Land and Maritime Boundary between Cameroon and Nigeria (Cameroon v. Nigeria: Equatorial Guinea intervening) (Judgment) [2002] ICJ Rep 303��������������181n.165 Maritime Delimitation and Territorial Questions between Qatar and Bahrain, Jurisdiction and Admissibility (Judgment) [1995] ICJ Rep 6 ������������������ 928n.23, 942n.110

lxxxviii   TABLE OF CASES Maritime Delimitation and Territorial Questions between Qatar and Bahrain (Merits) (Judgment) [2001] ICJ Rep 40��������������������������������������������������������181n.165 Maritime Dispute (Peru v. Chile) Peru, CR 2012/​33, 11 December 2012 ��������������������������������170 Marshall Islands, Preliminary Objections, CR 2016/​3, 9 March 2016��������������������������������������170 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America) ��������������������������������������������������������������������������� 180n.156, 722n.25, (Judgment), jurisdiction and admissibility [1984] ICJ Rep 392 (Judgment), merits [1986] ICJ Rep 14 ��������������������������������������������166–​67, 722n.26, 722n.29 Navigational and Related Rights (Costa Rica v. Nicaragua), Rejoinder of Nicaragua������������170 North Sea Continental Shelf (Judgment) [1969] ICJ Rep 6����������������������������������������������189n.229 Nottebohm Case (Preliminary Objection) (Judgment) [1953] ICJ Rep 111��������������������� 181–​82 Nuclear Weapons, Advisory Opinion [1996] ICJ Rep 226���������������������������������������������������� 947n.6 Oil Platforms (Islamic Republic of Iran v. United States of America) (Judgment) [2003] ICJ Rep 161������������������������������������������������������������������������� 165–​67, 722n.29, 942n.110 Passage through the Great Belt (Finland v. Denmark) (Provisional Measures Order) [1991] ICJ Rep 20������������������������������������������������������189n.230 Pulp Mills on the River Uruguay (Argentina v. Uruguay) Joint Dissenting Opinion of Judges Al-​Khasawneh and Simma [2010] ICJ Rep 98 ������������������������������������������������������������������������������1013n.101, 1040n.81 Judgment [2010] ICJ Rep 14 ������������������������������������������������������������������������������������������168n.59 South West Africa, Second Phase (Judgment) [1966] ICJ Rep 6��������������������������������������180n.156 Sovereignty over Pulau Ligitan and Pulau Sipadan (Indonesia/​Malaysia) (Judgment) [2002] ICJ Rep 625������������������������������������������������������������������181n.165, 942n.110 Territorial Dispute (Libyan Arab Jamahiriya/​Chad) (Judgment) [1994] ICJ Rep 6 �������������������������������������������������������������������������������������������� 928n.23, 942n.110 Whaling in the Antarctic (Australia v. Japan: New Zealand intervening) (Judgment) [2014] ICJ Rep 226����������������������������������������������������� 169n.67, 169n.72, 169n.76, 169n.77, 170n.78, 819n.6, 970n.21 International Centre for Settlement of Investment Disputes Abaclat and Others v. Argentine Republic, ICSID Case No. ARB/​07/​5��������������������������1003n.56 Procedural Order No. 15, 20 November 2012����������������������������������������������������������1014n.108 ADF Group Inc. v. United States, ICSID Case No. ARB/​AF/​00/​1, Award, 9 January 2003��������������������������������������������������������������������������������������������������228n.108 AES Corporation and Tau Power BV v. Republic of Kazakhstan, ICSID Case No. ARB/​10/​16, Award, 1 November 2013��������������������������������������������393n.111 Aktau Petrol Ticaret AS v. Republic of Kazakhstan, ICSID Case No. ARB/​15/​8, Award, 13 November 2017��������������������������������������������������������������������������������������������393n.111 Alexander Nelin v. Republic of Cyprus, ICSID Case No. ARB/​18/​41, Tribunal Constituted, 18 March 2019��������������������������������������������������������������������������393n.112 Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/​01/​12, Decision on Annulment, 1 September 2009 ������������������������������������������������������������������������������1011n.93 Bear Creek Mining Corp. v. Peru, Award, ICSID Case No. ARB/​14/​21, 30 November 2017 ����������������������������������������������������������������������������������������������������������844n.29 Belenergia SA v. Italy, ICSID Case No. ARB/​15/​40, Award, 6 August 2019����������������������171n.87 Biwater Gauff v. Tanzania, ICSID Case No. ARB/​05/​22, Procedural Order No. 3, 29 September 2006��������������������������������������������������������������������������������������������������������1004n.57 Brandes Investment Partners, LP v. Venezuela, ICSID Case No. ARB/​08/​03, Decision on the Respondent’s Objection under Rule 41(5) of the ICSID Arbitration Rules, 2 February 2009�������������������������������������������������������������������������������1000–​01

TABLE OF CASES    lxxxix BSG Resources Ltd. (In Administration), BSG Resources (Guinea) Ltd. and BSG Resources (Guinea) SARL v. Republic of Guinea, ICSID Case No. ARB/​14/​22, Procedural Order No. 2, 17 September 2015��������������������������������������������������������������1008n.75 Procedural Order No. 19 Objections to Publication, 15 August 2018 ��������������������1005n.61 Caratube International Oil Company LLP and Devincci Salah Hourani v. Republic of Kazakhstan (II), ICSID Case No. ARB/​13/​13, Decision on the Claimants’ Request for Provisional Measures, 4 December 2014����������������������������1001n.42 Cargill Inc. v. Mexico, ICSID Case No. ARB(AF)/​05/​2, Award, 18 September 2009������������������������������������������������������������������������������������������������������������������172 Churchill Mining and Planet Mining Pty Ltd. v. Republic of Indonesia, ICSID Case No. ARB/​12/​40 and 12/​14, Decision on Annulment, 18 March 2019����������������������������������������������������������������������������������������������������������������1011n.93 Consolidated Exploration Holdings Ltd. and others v. Kyrgyz Republic, ICSID Case No. ARB(AF)/​13/​1����������������������������������������������������������������������������������������������393 Continental Casualty v. Argentina, ICSID Case No. ARB/​03/​9 Award, 5 September 2008����������������������������������������������������������������������������������������������������������174n.111 Decision on Annulment, 16 September 2011��������������������������������������������������������������������1011n.91 Corn Products International Inc. v. Mexico, ICSID Case No. ARB(AF)/​04/​1, Decision on Responsibility, 15 January 2008����������������������������������������������������������������171n.89 Gemplus SA v. Mexico, ICSID Cases No. Arb(AF)/​04/​3, Award, 16 June 2010 ����������1013n.100 Gerald International Ltd. v. Republic of Sierra Leone, ICSID Case No. ARB/​19/​31, Procedural Order No. 2, Decision on the Claimant’s Request for Provisional Measures, 28 July 2020��������������������������������������������������������������������������������������������������1001n.43 Gold Reserve Inc. v. Venezuela, Award, ICSID Case No. ARB(AF)/​09/​1, Award 22 September 2014����������������������������������������������������������������������������������������������844n.26 GRAND EXPRESS Non-​Public Joint Stock Company v. Republic of Belarus, ICSID Case No. ARB(AF)/​18/​1 Constitution of the Tribunal, 31 January 2018��������������������������������������������������������������������������������������������392n.105, 393n.114 Ioannis Kardassopoulos v. The Republic of Georgia, ICSID Case No. ARB/​05/​18, Award, 3 March 2010����������������������������������������������������������������������������������������������������1012n.96 Lao Holdings N.V. v. Lao People’s Democratic Republic (I), ICSID Case No. ARB(AF)/​12/​6, Award, 6 August 2019��������������������������������������������1012n.98 Libananco Holdings Co. Ltd. v. Republic of Turkey, ICSID Case No. ARB/​06/​8 Award, 2 September 2011������������������������������������������ 999n.31, 1012n.99 Decision on Preliminary Issues, 23 June 2008������������������������������������������������������������1000n.40 Liman Caspian Oil BV and NCL Dutch Investment BV v. Republic of Kazakhstan, ICSID Case No. ARB/​07/​14, Award, 22 June 2010����������������������������������������������������393n.111 Maffezini v. Spain, ICSID Case No. ARB/​97/​7, Decision of the Tribunal on Objections to Jurisdiction, 25 January 2000 ����������������������������������������������������������������845n.33 Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/​99/​1, Award, 16 December 2002������������������1011n.92, 1011n.93 Mercer v. Canada, ICSID Case No. ARB(AF)/​12/​3, Award, 18 March 2018������������������228n.108 Merrill & Ring Forestry LP v. Canada, ICSID Case UNCT/​07/​1, Award, 31 March 2010,)����������������������������������������������������������������������������������������������������������������172n.99 Nova Group Investments, BV v. Romania, ICSID Case No. ARB/​16/​19, Procedural Order No. 7, 29 March 2017����������������������������������������������������������������������1001n.43 Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Ecuador, ICSID Case No. ARB/​06/​11, Award, 5 October 2012����������174n.112 Pawlowski AG and Project Sever s.r.o. v. Czech Republic, ICSID Case No. ARB/​17/​11, Award, 1 November 2001��������������������������������������� 971–​72n.30

xc   TABLE OF CASES Plama Consortium Ltd. v. Republic of Bulgaria, ICSID Case No. ARB/​03/​24, Decision on Jurisdiction, 8 February 2005��������������������������������������������������������������������845n.33 Reinhard Hans Unglaube v. Republic of Costa Rica, ICSID Case No. ARB/​09/​20, Award, 11 November 2009��������������������������������������������������������������������������������������������1012n.97 Saba Fakes v. Turkey, ICSID Case No. ARB/​07/​20, Award, 14 July 2010�������������������������1000–​01 Salini v. Jordan, ICSID Case No. ARB/​02/​13, Decision on Jurisdiction, 29 November 2004 ����������������������������������������������������������������������������������������������������������845n.33 Sempra Energy International v. Argentina, ICSID Case No. ARB/​02/​16, Award, 28 September 2007��������������������������������������������������������������������������������������������������������174n.111 Türkiye Petrolleri Anonim Ortaklığı v. Republic of Kazakhstan, ICSID Case No. ARB/​11/​2��������������������������������������������������������������������������������������������393n.111 United Parcel Service of America Inc v. Canada, ICSID Case No. UNCT/​02/​1, Award on the Merits, 24 May 2007���������������������������������������������������������������� 171n.90, 225n.85 Vattenfall AB and others v. Federal Republic of Germany, ICSID Case No. ARB/​12/​12, Public Hearing���������������������������������������1008–​09n.76, 1009–​10 Watkins Holdings SARL and others v. Kingdom of Spain, ICSID Case No. ARB/​15/​44, Award, 21 January 2020 ��������������������������������������������1013n.100 International Law of the Sea Tribunal Case concerning the Conversation and Sustainable Exploitation of Swordfish stock in the South-​Eastern Pacific Ocean (Chile/​European Community), Order of 20 December 2000������������������������������������������������������������������������������������������178n.142 Request for Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission, Advisory Opinion, 2 April 2015, ITLOS Reports 2015, 4 ����������������835n.131 Southern Bluefin Tuna (New Zealand v. Japan, Australia v. Japan) (Jurisdiction and Admissibility) (2000) 119 ILR 508������������������������������������������������������������������������834n.129 Permanent Court of Arbitration Arctic Sunrise Arbitration (Netherlands v. Russia), PCA Case No. 2014-​02, Award on the Merits, 14 August 2015������������������������������������������������������������ 971n.28, 971n.29 Atlanto-​Scandian Herring Arbitration (The Kingdom of Denmark in respect of the Faroe Islands vs. the European Union), PCA Case No. 2013-​30������������������������178n.145 Award between the United States and the United Kingdom Relating to the Rights of Jurisdiction of United States in the Bering’s Sea and the Preservation of Fur Seals (US v. UK) XXVIII RIAA 263 (Perm Ct Arb 1893) �������������������������������������� 819n.6 Carthage (France v. Italy) (1913) 11 RIAA 449������������������������������������������������������������� 971–​72n.30 Hulley Enterprises Ltd. v. Russian Federation, PCA Case No. AA 226 ��������������������������392n.103 Iberdrola, SA and Iberdrola Energia SAU v. Bolivia, PCA Case No. 2015 -​05, Procedural Order, 7 August 2015��������������������������������������������������������������������������������1008n.74 KazTransGas JSC v. Georgia, PCA Case No. 2017-​22 ������������������������������������������������������393n.112 Manouba (France v. Italy) (1913) 11 RIAA 463������������������������������������������������������������� 971–​72n.30 Mesa Power Group, LLC v. Canada, PCA Case No. 2012-​17, Award, 24 March 2016������������173 National Center on Complex Processing of Mineral Raw Materials of the Republic of Kazakhstan v. Kyrgyz Republic, PCA Case No. 2019-​01������������������������������������������������393 OOO Manolium Processing v. The Republic of Belarus, PCA Case No. 2018-​06����������392n.104 PJSC RusHydro v. Kyrgyz Republic, PCA Case No. 2018-​21, PCA Case No. 2018-​21������� 393n.107 Swissbourgh Diamond Mines (Pty) Ltd., Josias Van Zyl, The Josias Van Zyl Family Trust and others v. The Kingdom of Lesotho, PCA Case No. 2013-​29���������424n.199 Veteran Petroleum Ltd. v. The Russian Federation, PCA Case No. 2005-​05/​AA228������� 392n.103 Windstream Energy LLC v. Canada, PCA Case No 2013–​22, Procedural Order No 1, 16 November 2013 ������������������������������������������������������������1014n.106

TABLE OF CASES    xci Yukos Universal Ltd. (Isle of Man) v. The Russian Federation, PCA Case No. 2005-​04/​AA227������������������������������������������������������������������������������������392n.103 Other Air Service Agreement Arbitration (1978) Arbitral Award,18 RIAA 417����������������������988n.112 Ascom Group SA, Anatolie Stati, Gabriel Stati and Terra Raf Trans Traiding Ltd. v. Republic of Kazakhstan, SCC Case No. 116/​2010������������������������������������������������������393n.111 Canfor Corporation v. United States of America and Tembec v. United States of America and Terminal Forest Products Ltd. v. United States of America Decision on Preliminary Question, 6 June 2006��������������������������������������������������������1011n.93 Order of the Consolidation Tribunal, 7 September 2005������������������������������������������1011n.92 Case Concerning the Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v. Serbia and Montenegro) (Judgment) 26 February 2007, ICTY ������������������������������������������182n.166 Chemtura Corporation v. Canada, UNCITRAL, Award, 2 August 201������������������� 1012–13n.98 In the Matter of the South China Sea Arbitration before an Arbitral Tribunal Constituted under Annex VII to the 1982 United Nations Convention on the Law of the Sea (Philippines v. China) (Award) (Perm Ct Arb, Case No 2013-​19, 12 July 2016)������������819n.6 International Labour Organization, Judgment No. 2867 of the Administrative Tribunal������ 168 Methanex Corporation v. USA Final Award of the Tribunal on Jurisdiction and Merits, 3 August 2005�����������������������������������������������171n.86, 172, 173–​74, 177–​78n.137 Hearing Open to Public����������������������������������������������������������������������������������������� 1007–​08n.71 Partial Award, 7 August 2002����������������������������������������������������������������������������������������173n.107 Occidental Exploration and Production Company v. Ecuador (LCIA Case No. UN3467), Final Award, 1 July 2004 ������������������������������������������172n.98, 173 Panel of Experts Proceeding Constituted under Article 13.15 of the EU-​Korea FTA (‘EU-​Korea Panel Report’), 20 January 2021�����������������636n.81, 636n.84, 637n.87, 638n.94 Petrobart Ltd. v. The Kyrgyz Republic, SCC Case No. 126/​2003��������������������������������������393n.111 Pope & Talbot Inc. v. Canada, Award in relation to preliminary motion by Canada 26 January 2000����������������������������������������������������������������������������������������������������������������� 173–​74 Republic of Korea –​compliance with obligations under Chapter 13 of the EU-​Korea Free Trade Agreement (Panel requested) ��������������������������������������������������980n.86 Restrictions applied by Ukraine on exports of certain wood products to the European Union—​Final Report of the Arbitration Panel established pursuant to Article 307 of the EU-​Ukraine Association Agreement, 11 December 2020 ������������������������������������������������������������������������������������������949, 949n.17, 960 SD Myers Inc. v. Canada, Partial Award (12 November 2000) �����������������������������������172, 173–​74 Yaung Chi Oo Trading Pte Ltd. v. Government of the Union of Myanmar (2003) 42 I.L.M. 404��������������������������������������������������������������������������������������������������������244n.23 REGIONAL COURTS/​T RIBUNALS: AFRICA EAC Court of Justice British American Tobacco (U) Ltd. v. The Attorney General of Uganda (Reference No 7 of 2017)������������������������������������������������������������������������������������������������� 422–​23 SADC Campbell and Another v. Republic of Zimbabwe (SADC (T) 03/​2009) [2009] SADCT 1 (5 June 2009)������������������������������������������������������������������������������������424n.199 Fick and Another v. Republic of Zimbabwe (SADC (T) 01/​2010) [2010] SADCT 8 (16 July 2010)������������������������������������������������������������������������������������424n.199

xcii   TABLE OF CASES Mike Campbell (Pvt) Ltd. and Others v. Republic of Zimbabwe (2/​2007) [2008] SADCT 2 (28 November 2008)������������������������������������������������������������������������424n.199 SACU –​Safeguard Measure imposed on Frozen Chicken from the European Union (arbitration panel)������������������������������������������������������������ 416n.140, 980n.85 REGIONAL COURTS/​T RIBUNALS: AMERICAS CAFTA Guatemala –​Issues Relating the Obligations Under Article 16.2.1(a) of the CAFTA-​DR (Arbitration Panel report)���������������� 332n.61, 632n.45, 960, 979n.79, 996n.14 Caribbean Court of Justice Original Jurisdiction CCJ Application No. AOOJ2019/​001 In the matter of a request for an Advisory Opinion by the Caribbean Community������������������������������617n.72 Inter-​American Court of Human Rights Mack Chang v. Guatemala (Merits, Reparation and Costs), 25 November 2003, Ser C No 101 ��������������������������������������������������������������������������������������������������������������������� 972–​73 Mercosur Award No IX, 4 April 2003����������������������������������������������������������������������������������������������������988n.112 Award No 1/​2007, 8 June 2007 ����������������������������������������������������������������������������������������������978n.71 Award No 1/​2008 , 25 April 2008 ������������������������������������������������������������������������������������������978n.72 NAFTA Tariffs Applied by Canada to Certain US-​Origin Agricultural Products (Panel Report)�������������������������������������������������������������� 219n.48, 225n.87, 943n.112, 943n.113 US –​Cross-​Border Trucking Services (Panel Report)�������������������������������������� 943n.112, 958n.61 US –​Cross-​Border Trucking Services and Investment (USA-​98 -​2008-​01)������������������������������������������������������������������������������������������ 219n.48, 224n.80 US Safeguard Action Taken on Broomcorn Brooms from Mexico (USA-​97-​2008-​01) ����������������������������������������������������������������������������������������������������������219n.48 REGIONAL COURTS/​T RIBUNALS: EURASIA EAEU Court Decision of the Court of the EAEU of 21 December 2018 and Decision of the Appeal Chamber of 7 March 2019 on challenging of the Decision of the Board of the Eurasian Economic Commission of 3 October 2017����������������������������382n.40 Judgment of the EAEU Court of 27 April 2017 on the application of the PJSC ArselorMittal Krivoy Rog���������������������������������������������������������������������� 387n.71, 387n.74 Judgment of the EAEU Court of 28 December 2015 on the application of K.P. Tarasik���������� 387n.78 EurAsEC Court Judgment of the Appeal Chamber of the EurAsEC Court of 21 October 2013 on the application of Novokromatorsky Machine-​Building Plant����������������������������������386n.67 Judgment of the EurAsEC Court of 24 June 2013 on the application of Novokromatorsky Machine-​Building Plant������������386n.67, 386n.68, 386n.69, 386n.70, 387n.72

TABLE OF CASES    xciii REGIONAL COURTS: EUROPE Court of Justice of the European Union Cassis de Dijon, Case 120/​78, EU:C:1979:42������������������������������������������������������������������������304n.85 CETA, Opinion 1/​17, EU:C:2019:341 �������������������������������������������������� 290n.73, 953n.38, 953n.40 Commission v. Hungary, Case C-​66/​18, EU:C:2020:792����������������������������������������������������962n.82 Commission v. Italy, Case 7/​68, EU:C:1968:51��������������������������������������������������������������������300n.47 Commission v. Luxemburg and Belgium, Joined Cases 90/​63 and 91/​63, ECR [1964] 625��������������������������������������������������������������������������������������������������988n.112 Commodity Agreement on Natural Rubber, Opinion 1/​78, EU:C:1979:224 ����������������308n.114 Costa v. ENEL, Case 6/​64, EU:C:1964:66������������������������������������������������������������������������������298n.34 Council v. Commission (Swiss MoU), Case C-​660/​13, EU:C:2016:616����������������������������284n.53 Daiichi Sankyo, Case C-​414/​11, EU:C:2013 :520��������������������������������������������������������������308n.116 Dassonville, Case 8/​74, EU:C:1974:82����������������������������������������������������������������������������������304n.82 Data Protection Commissioner v. Facebook Ireland Ltd., Maximillian Schrems (Schrems II), Case C-​311/​18, EU:C:2020 :559����������������������������������������������������������������������754 ECHR, Opinion 2/​13, EU:C:2014:2454������������������������������������������������������������������������� 952–​53n.36 EU-​Singapore FTA, Opinion 2/​15, EU:C:2017:376����������������������������������������308n.117, 309n.118 European Parliament v. Council of the European Communities, Case 302/​87, EU:C:1988:461 ����������������������������������������������������������������������������������������������������������������387n.77 France and Orange v. Commission, Case C-​486/​15 P, EU:C:2016:912 ��������������������������1031n.56 Google Spain, Case C-​131/​12, EU:C:2014:317��������������������������������������������������������������������751n.39 Istanbul Convention, Opinion 1/​19, EU:C:2021:198����������������������������������������������������������289n.70 Keck and Mithouard, Case C-​267/​91, EU:C:1993:905��������������������������������������������������������304n.83 Luisi and Carbone, Joined Cases 286/​82 and 26/​83, EU:C:1984 :35����������������������������������305n.87 OECD Understanding on a Local Cost Standard, Opinion 1/​75, EU:C:1975:145 ��������������������������������������������������������������������������������������������308n.111, 308n.114 Portuguese Republic v. Council, Case C-​149/​96, EU:C:1999:574�������������������������������������285n.55 Richardt, Case C-​367/​89, EU:C:1991:376����������������������������������������������������������������������������722n.28 Schiebel Aircraft, Case C-​474/​12, EU:C:2014:2139������������������������������������������������������������722n.29 Schrems (Schrems I), Case C-​362/​14, EU:C:2015 :650 ������������������������ 750–​51, 752, 753, 756–​57 Slovak Republic v. Achmea BV, Case C-​284/​16, EU:C:2018:158 ���������������������� 390n.95, 847n.48 Van Gend en Loos, Case 26/​62, EU:C:1963:1������������������������������������������������������ 298n.32, 299n.41 Werner v. Germany, Case C-​70/​94, EU:C:1995:328������������������������������������������������������������722n.28 Wightman, Case C-​621/​18, EU:C:2018:999����������������������������������������������������312n.139, 312n.147 WTO Agreements, Opinion 1/​94, EU:C:1994:384������������������������������������������������������������308n.115 European Court of Human Rights Albert and others v. Hungary (App No 5294/​14), Judgment of 29 January 2019����������176n.131 Anheuser-​Busch v. Portugal (App No 73049/​01) [GC], Judgement of 11 January 2007��������175 British-​American Tobacco Company Ltd. v. The Netherlands (App No 19589/​92), Judgment of 20 November 1995��������������������������������������������������������������������������������������������175 Catan and others v. Moldova and Russia (App Nos 43370/​04, 8252/​05, and 18454/​06) [GC], Judgment of 19 October 2012��������������������������������������������������������������������������������������176 De Luca v. France (App No 8112/​02), Judgment of 2 May 2006����������������������������������������� 174–​75 Herrmann v. Germany (App No 9300/​07) [GC], Judgment of 26 June 2012������������������176n.131 Hertel v. Switzerland (App No 25181/​94), Judgment 25 August 1998��������������������������������������176 Ilaşcu and others v. Moldova and Russia (App No 48787/​99) [GC], Judgment of 8 July 2004������������������������������������������������������������������������������������������176, 971n.28

xciv   TABLE OF CASES Ivanţoc and others v. Moldova and Russia (App No 23687/​05), Judgment of 15 November 2011 ������������������������������������������������������������������������������������������������������������������176 Kamoy Radyo Televizyon Yayıncılık ve Organizasyon AŞ v. Turkey (App No 19965/​06), Judgment of 16 April 2019������������������������������������������������������������������175 Khamtokhu and Aksenchik (App No 60367/​08 and 961/​11) [GC], Judgment of 24 January 2017����������������������������������������������������������������������������������������������������������176n.131 La société Etablissements Biret Cie SA et la société Biret international v. 15 States (App No 13762/​04), Decision on Admissibility of 9 December 2008����������������������175n.117 Mozer v. Moldova and Russia (App No 11138/​10) [GC], Judgment of 23 February 2016����������������������������������������������������������������������������������������������������������������������176 Refah Partisi (The Welfare Party) and others v. Turkey, App Nos. 41340/​98, 41342/​98, 41343/​98 and 41344/​98, Judgment of 13 February 2003��������������������������750n.37 Smith & Grady v. United Kingdom, Applications nos. 33985/​96 and 33986/​96, Judgment of 27 September 1999������������������������������������������������������������������������������������722n.29 NATIONAL COURTS United Kingdom Associated Provincial Picture Houses, Ltd. v. Wednesbury Corporation [1948] 1 KB 223��������������������������������������������������������������������������������������������������������������1031n.56 R (on the application of Miller and another) v. Secretary of State for Exiting the European Union [2017] 1 All ER 593��������������������������������������������������������������������������312n.141 United States Pennoyer v. Neff, 95 U.S. 714 (1878)��������������������������������������������������������������������������������������698n.16

Chapter 1

Introdu c t i on The Editors

In 2009, when OUP published the first edition of the Handbook on International Trade Law, the financial crisis and recession was nearing its end, and international trade was chugging back, resuming its seemingly unstoppable pre-​recession pace. By 2009, 25 additional States had acceded to the WTO, including China, Saudi Arabia and Vietnam. Russia was also well along its path to accession. A sophisticated jurisprudence had been developed by WTO panels and the Appellate Body, which added clarity to the WTO agreements and to a growing number of preferential trade agreements borrowing from them. The prospects were for greater liberalization and acceptance of multilateral disciplines regulating trade. In this context, 32 authors provided analysis across 26 chapters, one of which was devoted to regional trade agreements (RTAs). The introduction of that edition concluded that the growth of international trade law, and particularly the Uruguay Round agreements, were ‘one of the most important developments in international law over the past decade’. Two decades later, as drafts of the present edition were being prepared and finalized, the optimists believed that global trade was in a similar state of recovery, this time from its COVID-​19 pandemic lows. However, the world has also witnessed the breakdown of supply chains, increased protectionism, and trade wars. Tensions within the WTO membership are palpable, evidenced by stalled or stilted negotiations, but also by the disabling of the Appellate Body. The organization remains vulnerable, even with the consensus-based decisions of the 12th Ministerial Conference in June 2022, which breathed some life back into the negotiating body. At the same time, there has been an explosion of bilateral and regional free trade agreements (FTAs). As the edition was being prepared for printing and after the submission of all chapters to the editors, a more striking and visceral threat to the world trading system also emerged, in the form of the Russian invasion of Ukraine, which, as the manuscript proofs were being finalized, was entering its fourth month. This conflict presents at least four stark challenges to the global trading system. The first of these takes the form of the sanctions and other economic measures of constraint taken by many States against

2   The Editors Russia following the invasion and their intentionally trade—​financial—​and economic-​ disruptive effects. These measures, it may be expected, will be time-​limited—​whatever the time-​period might be—​and will in due course be unwound. The second challenge, no doubt also time-​limited, but also uncertain in duration, concerns the trade, financial and economic effects on Ukraine arising from the invasion, and the knock-​on consequences for the global supply chain and economy. Global shortages of basic foodstuffs and other supplies, heavily sourced from Ukraine, were apparent from the early days of the conflict. This has already caused certain WTO Members to impose export restrictions. The third challenge, of longer duration, but still finite, is likely to come with action consequential on the sanctions and related measures that have been imposed, as these play out in trade and investment disputes the resolution of which, having regard to the example of the 2014 Russian annexation of Crimea, is likely to be protracted beyond the events and measures from which they emerged. The last challenge, however, is likely to pose a more enduring and systemic test for the global trading system. While the preceding challenges operate in the near-​to-​medium term, and are unlikely to survive much beyond the tenure in office of the current global leadership and perhaps their immediate successors, the events in Ukraine, coupled with other global trends, raise the more fundamental question of whether true multilateralism, notably in the field of trade, but also more widely, is at all likely to be a realizable long-​term goal. The challenge to the world trading system is that it should provide and plan for the longer term. This was the vision of the drafters of the Havana Charter and the architects of Bretton Woods—​stability through multilateral rules. However, the exceptionalism of Russia, the rise and muscularity of China, the fraying of democracy and leadership of the United States, the bureaucracy of decision-​making in Europe, and wider growing alienation from the global trading system, suggest that multilateralism is increasingly less likely to be an achievable goal, driving cooperation and engagement, and more likely to become simply a point on the far horizon that is used by few only to calibrate their compass to their perceived true bearing. These issues, and wider themes, are addressed in the concluding Chapter 41 of this edition. While the picture that emerges from the preceding is bleak, it is also speculative. And in a contested and multipolar world, in which there is everything to play for, there is a plausible countervailing scenario in which resilient global rules, coupled with a clear and creative impetus to change, which is moved forward by benign and visionary leadership, could form the bedrock of an affirmed and sturdier multilateralism. It is in this space that the contribution of the chapters that follow is to be found. The authors of this edition, individually and collectively have analysed the current state of international trade law, placing it within the wider context of international law. This new edition stands on its own, 54 authors, across 41 chapters, offering their analysis on a widening body of trade law focused on developments occurring largely over the past decade. The collective analysis in the contributions that follow points to two key processes of development in international trade since 2009. First, trade law has grown and deepened

Introduction   3 through FTAs. While the WTO remains the most important multilateral body governing international trade, Members have mostly pursued negotiations outside its walls. Today, every WTO Member is party to at least one FTA. Successful negotiations involving either the United States, the European Union, or China have resulted in an agreement based on that trader’s preferred model. Where the models of two large trading partners have clashed, for example in the negotiations of a Transatlantic Trade and Investment Partnership (TTIP), negotiations have failed. As a result, no FTA exists between any of the world’s three largest traders, whose mutual trade relations remain generally governed by multilateral rules. Numerous authors point to an increasing trade divisiveness between the large traders to explain why the WTO is unlikely to generate new obligations in the short term, given its unbroken practice of consensus decision-​making. The same trade divisiveness has not hampered the negotiation of FTAs, but when an FTA results out of a threat of sanctions, as was pursued by the Trump Administration, it may contribute to a lowering of expectations around the democratic legitimacy of international trade law. In this regard, it is interesting that the Transpacific Partnership (TPP), now the Comprehensive and Progressive TPP (CPTPP), was not negotiated under the threat of sanctions. Rather, it was the threat of US withdrawal that challenged the very existence of the agreement. Yet, despite the United States’ decision to abandon it, growth in membership is on the horizon, with applications to join from Taiwan, China and the United Kingdom, and interest expressed by Indonesia, Korea, Thailand and Ecuador. Having a foothold in the Pacific region appears to be no prerequisite to joining. Second, trade law has been clarified through dispute settlement, particularly WTO dispute settlement, which remains the leading source. It is clear from a number of authors that, like it or not, dispute settlement’s regulatory role seems unlikely to abate, even with the demise of the Appellate Body. In contrast to the WTO, dispute settlement is rare under FTAs, while at the same time, the guidance of WTO panels and the Appellate Body influences the positions taken by Members in their bilateral and regional negotiation. At times, the clarifications provided by panel and Appellate Body decisions form the basis of new rules; other times, they highlight where the treaty language is deficient to address a trade issue. Whichever the case, its effects are lasting, even if, as Freya Baetens and the late James Crawford point out, its influence in non-​trade areas has been unfortunately restricted due to its jurisdictional separateness and the ‘sui generis’ character of trade law. It is appropriate here to repeat their call for all international legal practitioners to learn from international trade law, and in particular the WTO as an institution. There are lessons to be learned from this analysis. The trend towards multilateral rule-​ fragmentation, through the proliferation of differently conceived and dominant actor-​ driven FTAs, poses a considerable challenge to global rules, even as they liberalize trade amongst their participants. The separateness of trade law is an impediment to its influence and its openness to be influenced by developments from outside the system. Both

4   The Editors elements contribute to a stalling in the widening and deepening of trade rules, and of systemic innovation. But what is unarguable, as the chapters that follow show, is that, over the past decade, international trade law has again emerged as one of the most important developments in international law. We hope that this second edition of the Handbook of International Trade Law will contribute both to the accessibility and understanding of international trade law and to its evolution into a stronger driver of a rules-​based international system.

PA RT I

T H E R E G U L AT ION OF I N T E R NAT IONA L T R A DE

Chapter 2

T he Devel opme nt of t he Regul at i on of International T ra de : T h e Past and th e Fu t u re Donald McRae

I. Introduction II. The origins and content of international trade regulation III. The contribution of the GATT 1947 IV. The advent of the World Trade Organization V. The role of dispute settlement in the new regulatory regime VI. The return to bilateral international trade regulation VII. The move to mega-​regionals V   III. The future of international trade regulation

7 9 10 14 15 18 23 25

I. Introduction In the first edition of this handbook, the international trading system’s evolution was dealt with by Gil Winham, who provided the economic and political context,1 and John

1 

G.R. Winham, ‘The Evolution of the World Trading System—​The Economic and Policy Context’ in D. Bethlehem, D. McRae, R. Neufeld, and I. Van Damme (eds), The Oxford Handbook of International Trade Law, 1st edition (Oxford: Oxford University Press, 2009), at 5–​29.

8   Donald McRae Jackson, who provided the legal and institutional context.2 Professor Winham traced the development of international trade law from the early economic analyses of Adam Smith and David Ricardo to, bilateral treaties of the nineteenth century, the negotiation of GATT 1947 and then the Uruguay Round and the WTO. Professor Jackson focused more specifically on the Uruguay Round and the institutional and legal innovations that emerged with the WTO. The present chapter will not go over the ground covered in the two earlier contributions of the first edition, although it will come back to some of the essential material and issues dealt with by Winham and Jackson. Instead, it will focus less on the institutional development of an international trading regime and more on the phenomenon of regulation in international trade. In doing so, it will go beyond the WTO and look at the way the regulation of trade has developed since the advent of the WTO. If the period before the GATT 1947 and the WTO can be seen as a period of bilateralism and the GATT 1947, and the WTO, as the apogee of multilateralism, the period since the WTO has been characterized by a return to bilateralism but at the same time a new form of plurilateralism, sometimes described as ‘mega-​regionalism’. A description of the history of international trade regulation cannot focus solely on the form in which trade regulation is embodied. The full picture is much more complex. There are other questions about trade regulation that have to be canvassed in order to gain a proper understanding of the development of international trade regulation. This includes looking at how regulation is put in place, what is being regulated, and the reasons for regulation. All of these matters together enable a full appreciation of the history of the regulation of international trade and where the regulation of international trade stands today. The Cambridge English Dictionary defines regulation as the ‘act of controlling something’.3 While the idea of control reflects one aspect of the legal regulation of international trade, there is much more in trade regulation than control. The regulation of international trade encompasses a myriad of mechanisms and institutions designed to facilitate trade, to enhance opportunities for exchange, to resolve disputes that arise between States or claims against States, and to protect the interests of participants in the activity of exchange—​all under the rubric of the regulation of international trade. In short, to understand how the regulation of international trade began and has continued and to consider prospects for the future, these many aspects of trade regulation have to be considered. The history of international trade regulation is a history of managing the cross-​ border movement of goods and products—​things that a person in one State seeks to sell in another State—​even if trade has expanded into manifestations that go well beyond the movement of goods. Cross-​border movements, however, are the essence of 2 J.H. Jackson, ‘The Evolution of the International Trading System—​ The Legal and Institutional Context’ in Bethlehem, McRae, Neufeld, and Van Damme (eds), above fn 1, at 30-​53. 3  Cambridge English Dictionary, sub verbo ‘act of controlling something’, at < https://​dic​tion​ary. cambri​dge.org/​dic​tion​ary/​engl​ish/​reg​ulat​ion > (last visited 7 October 2020).

The development of the regulation of international trade    9 international trade. In the absence of any arrangement to the contrary, the goods that are moved across borders would be governed completely by separate legal regimes. This includes the laws of the place of origin and the laws of the place of destination and, if they transit a third State, the laws of that State as well.

II.  The origins and content of international trade regulation Before the development of the modern State, trade was regulated by empires: ancient Persia, and China. The historian Peter Frankopan4 provides a picture of trade within the Persian empire and the trade between China and Persia. There were revenue implications—​trade was important for ancient Persia to finance military expeditions. And there were regulatory implications—​China had a strict regime for controlling foreign merchants and their goods. However, this meant that foreigners trading in China were at the whim of China. But national control in this way was not attractive to States that wished to protect the interests of their trading nationals. This led to a move beyond national regulation to the international regulation of trade. The fundamental mechanism for trade regulation was agreement. By the seventeenth century, States were seeking commitments from other States regarding the treatment of their nationals engaged in commerce.5 The 1654 Treaty of Peace and Commerce between Great Britain and Sweden6 provided: The people, subjects, and inhabitants of both confederates shall have, and enjoy in each other’s kingdoms, countries, lands, and dominions, as large and ample privileges, relations, liberties and immunities, as any other foreigner at present doth and hereafter shall enjoy.

This was essentially a guarantee of non-​discrimination, which became known as the MFN clause, and was a staple of treaties of friendship, commerce and navigation (FCN) throughout the eighteenth and nineteenth centuries. While the basic instrument of trade regulation was agreement, non-​discrimination was the core principle of regulation. Under the MFN principle, States agreed to grant to the nationals of their trading partner treatment as favourable as that granted to the nationals of other States.7 In part, non-​discrimination was an effort by States to ensure 4 

P. Frankopan, The Silk Roads: A New History of the World (New York: Vintage Books, 2017) 4, at 13. Hudec points out that the Italian city-​state of Mantua claimed MFN treatment from the Holy Roman Emperor. R.E. Hudec, ‘Tiger, Tiger in the House: A Critical Evaluation of the Case against Discriminatory Trade Measures’ in R.E. Hudec (ed), Essays on the Nature of International Trade Law (London: Cameron, 1999), at 281. 6  Treaty of Peace and Commerce Between Great Britain and Sweden, 17 July 1656, 64 BFSP 691. 7  For further information on MFN, see Chapter 16 of this handbook. 5  Robert

10   Donald McRae a level playing field for their nationals engaged in trade, but it also served an economic function. Non-​discrimination was the vehicle for giving effect to the comparative advantage principle according to which countries would benefit if they exported their least cost products (those in which they had a comparative advantage) and imported their higher cost products (those in which they had no comparative advantage). Non-​ discrimination through the MFN principle served such a goal, and thus its inclusion in FCN agreements had an economic objective as well.8 The move from conditional MFN—​ MFN treatment granted in exchange for some other concession—​to unconditional MFN—​where MFN was granted without restriction—​laid the basis for a common acceptance of MFN in international trade relations and opened the way for MFN to be the organizing principle for a multilateral system regulating international trade. Non-​discriminatory trade liberalization was the common goal of the United States and the United Kingdom in discussions both during and after the War. Those two States played the principal role in the negotiation of the GATT 1947.9

III.  The contribution of the GATT 1947 The GATT 1947, which was drafted as the first portion of the planned International Trade Organization (ITO), was primarily concerned with trade in goods and included provisions, often hortatory, on subsidies, antidumping and countervailing duties, quotas, and balance of payments. But perhaps the greatest achievement of the GATT 1947 was the reduction of tariffs and the commitment to continue with tariff reduction over time. The key to this agreement was concessions made by the United Kingdom regarding imperial preferences and concessions made by the United States regarding their high tariffs and the ‘grandfathering’ of inconsistent domestic legislation. But this was to be just the beginning. The imperial preferences and the high US tariffs were to be further negotiated down over time through successive negotiating rounds. In the negotiating rounds, tariffs that were to be applied on an MFN basis were granted in exchange for reductions of tariffs on other products. MFN treatment was not unconditional like under many FCN agreements but granted in return for ‘payment’ obtained through tariff negotiations. In a sense, conditional MFN had gone, but conditionality was extracted by negotiating tariff reductions. Reciprocity still existed, just in another form. Moreover, the GATT 1947 went explicitly much further than earlier trade treaties. It articulated the terms of a national treatment obligation and provided for general 8  For a detailed discussion on the economic rationale of the MFN principle and of trade agreements more generally, see Chapter 3 of this handbook. 9  P.C. Mavroidis, The Regulation of International Trade (Cambridge: The MIT Press, 2015) Vol I, 7, Section 1.1.4.

The development of the regulation of international trade    11 exceptions, permitting Contracting Parties to deviate from their obligations when justified by such matters as public morals, the protection of human or animal plant life or health, the conservation of exhaustible natural resources, or national security.10 All of these were to resonate when trade regulation became more encompassing, and trade disputes abounded. Agreement continued to be the basic instrument for the regulation of international trade, but in the form of a multilateral agreement, not just through bilateral treaties. The ambition had been much greater than what had emerged with the GATT 1947. The GATT 1947 was only part of what should have been a fully-​fledged international organization, the ITO, to regulate trade going well beyond trade in goods. However, the ITO never came into existence, so the GATT 1947 remained a provisional agreement and not an organization. It was not seen as a formal treaty; it was an agreement operating under a Protocol of Provisional Application. In common parlance, the GATT 1947 was viewed as a ‘contract’. Nonetheless, the GATT 1947 included specific obligations on its contracting parties, including obligations of a general character. The GATT 1947 was a treaty, although perhaps unusual in its origins and in the method by which it came into effect.11 The GATT 1947 suffered, as a regulatory instrument, from the lack of organs or any real institutional element that would exercise a monitoring function in respect of the implementation of the agreement. In accordance with Article XXV of the GATT 1947, ‘joint action’ of the Contracting Parties was the mechanism for ‘facilitating the operation of and furthering the objectives’ of the agreement. The GATT 1947 was never intended to be an international organization in its own right, and no provision had been made for a secretariat. This defect was overcome pragmatically. The Interim Committee for the International Trade Organization (ICITO) became de facto the secretariat for the GATT 1947,12 and the Contracting Parties informally established a Council that became the permanent body to direct the GATT 1947.13 However, the GATT 1947 did provide for a rudimentary form of oversight of the obligations under that agreement, and in particular for the preservation of tariff concessions. Apart from a fairly routine obligation of the contracting parties to consult on any matter regarding the agreement’s operation,14 there was also a potential formal dispute settlement process with an enforcement mechanism. Article XXIII, entitled ‘Nullification or Impairment’, provided that matters which could not be resolved by the parties could be referred to the contracting parties. The Contracting Parties were then to investigate the matter and make recommendations to the parties or make a ruling. They

10 

Articles XX and XXI of the GATT 1947. above fn 2, at 35: ‘Although subsequent attempts were made to obtain the “definitive” application of the GATT 1947, none succeeded’. 12  The Executive Secretary for ICITO, Sir Eric Wyndham-​White, became the Executive Secretary of GATT and later, when the post was created, Director-​General. 13  Jackson, above fn 2, at 35–​36. 14  Article XXII of the GATT 1947. 11  Jackson,

12   Donald McRae could authorize the suspension of concessions against a Contracting Party if it were appropriate to do so. A Contracting Party against which the suspension of concessions had been ordered could, if it wished, give notice of withdrawal from the agreement. The GATT 1947 had thus moved beyond the traditional model of international trade regulation in significant ways. Although the mechanism for trade regulation was still an agreement, in the case of the GATT 1947, it was a multilateral agreement under which obligations and benefits were provided for across the board based on the non-​ discrimination principle, MFN. Moreover, the GATT 1947 was the framework for further negotiating rounds in which tariff reduction could be continued. The GATT 1947 also provided for oversight of the performance by parties of their obligations under the agreement, which became the basis for a future, sophisticated third-​party dispute settlement system. Trade regulation under the GATT 1947 was moving toward a system with obligations that were seen to be binding and not just political obligations. The process for the resolution of disputes was more than traditional diplomatic representation. The Contracting Parties’ involvement in dispute settlement, including the power to make rulings and order the suspension of concessions in respect of a Contracting Party, was a move toward independent third-​party adjudication. With hindsight, it can be seen that international trade regulation was on a trajectory of formalizing, creating more stringent obligations with much stronger methods of adjudication and enforcement. But it was not necessarily seen that way at the time. In many respects, the GATT 1947 was a temporary measure that secured tariff concessions but, in large part, would be subsumed within the ITO. Reciprocity governed tariff concessions, although more of the larger economies were primarily responsible for negotiating tariff concessions. MFN allowed the smaller economies to free ride on those benefits. Moreover, although the economic benefits of liberalization and MFN were an underlying factor that led to the GATT 1947, the agreement was negotiated in the post-​ War context of building institutions to promote peace. A multilateral trade agreement was seen as a major contributor to world peace.15 The tariff negotiating rounds were an important achievement of the GATT process. Originally seen as the mechanism for achieving trade liberalization through tariff reductions, by the end of the Kennedy Round, which lasted through 1963–​1967, tariffs had been reduced by 35 per cent on top of the lesser reductions of the earlier negotiating rounds. However, tariff reduction was only part of what occurred in the negotiating rounds. The Tokyo Round, in the following decade, turned attention to non-​tariff barriers and resulted in the extension of GATT disciplines into areas not previously seen as subject to international trade regulation or had been dealt with in only a rudimentary way. Six ‘codes’ emerged from the Tokyo Round dealing with antidumping measures, government procurement, technical barriers to trade, customs valuation, import licensing, and subsidies. These codes were agreements in their own right, either

15 

Mavroidis, above fn 9, at 7, who points out that Cordell Hull, the US Secretary of State, who was instrumental in the negotiation of the GATT, was convinced that trade ‘dovetailed with peace’.

The development of the regulation of international trade    13 elaborating on provisions of the GATT 1947 or developing disciplines for matters not yet regulated by the GATT 1947. While tariff reductions resulting from each negotiating round were simply incorporated into the schedules of the GATT 1947, and the Contracting Parties were committed to them under Article II, the ‘codes’ were not part of the GATT 1947. They were separate agreements to which GATT Contracting Parties could become a party. Thus, not all of the codes were accepted by all of the GATT Contracting Parties. This was later to create problems interpreting provisions of the GATT 1947 where a code relevant to the interpretation of that provision was in force for one GATT Contracting Party but not for another. The agreement that constituted the GATT 1947 was unusual in that, in addition to the substantive provisions, it included an Annex of Notes and Supplementary Provisions, which included interpretative notes for each provision and understandings of the parties at the time of the negotiation of GATT. These provisions were said to be an ‘integral part’ of the GATT 1947.16 The Codes, however, were separately negotiated and agreed upon instruments and were not part of the GATT 1947, even though they were deposited with the GATT Director-​General and ‘serviced by the GATT secretariat’.17 In addition to the Codes, the Tokyo Round also resulted in several Declarations, Decisions, and Understandings. The Declaration on Trade Measures taken for Balance-​of-​Payments Purposes uses the language that the Contracting Parties ‘agree as follows’. The Decision on Safeguard Action for Development Purposes does not use the language of ‘agree’, but states that the parties ‘recognize’. However, the Understanding regarding Notification, Consultation, Dispute Settlement, and Surveillance, while using the language of ‘understanding’, also reverts to the language that the Contracting Parties ‘agree’. The precise legal status of these instruments was unclear. Article XXV of the GATT 1947 provides for joint action by the Contracting Parties. Still, such action contemplates the existence of ‘exceptional circumstances’, which does not appear to be the basis on which the Tokyo Round instruments were prepared. However, regardless of strict legal status, these instruments represented how the GATT Contracting Parties wanted to conduct their relationship under the GATT 1947. Some were carried out as if they involved legal commitments. Thus, the understanding on dispute settlement guided the way the panel dispute settlement process developed under the GATT 1947. Moreover, notwithstanding the uncertainty of the legal status of some of the Tokyo Round instruments, they were to have an important influence on the development of the regime that emerged from the Uruguay Round. The practice under the GATT 1947, in particular through the tariff negotiating rounds, was an important step forward in international trade regulation. Not only did it clarify and extend the scope of GATT disciplines, but it also caused the mechanism

16  17 

Article XXXIV of the GATT 1947. Article 9 of the WTO Agreement on Import Licensing Procedures.

14   Donald McRae for trade regulation to evolve. Agreement was still the basic instrument for embodying the substance of trade regulation, but the GATT 1947 agreement was both less and more than what a treaty normally comprised. It was less because it was seen as a contract that was provisionally applied. It was more in that it had its own provisions incorporated in the agreement to guide in the interpretation and application of the treaty’s substantive obligations. Moreover, the Tokyo Round complicated this further with its conclusion of separate agreements, declarations, decisions, and understandings. The regulation of international trade had become a complex of legal commitments and related clarifications of those commitments and expressions of willingness to move ahead in common without the overall cover of a legally binding agreement. It was a practical, albeit piecemeal, approach.

IV.  The advent of the World Trade Organization The Uruguay Round of Multilateral Trade Negotiations brought into being the WTO and, in many respects, a new international order for international trade regulation. It was fundamentally based on the GATT 1947, which was incorporated and brought into the new WTO. But it was a more comprehensive regime expanding the regulation of trade in goods to regulate trade in services and trade-​related aspects of intellectual property. In addition to broader coverage in the WTO, the regime for trade in goods, the staple of the GATT 1947, was enhanced with obligations being specified and what may have been implicit or hortatory under the GATT regime was made subject to more precise obligations. Also, a highly sophisticated dispute settlement system was elaborated. The mechanism for international trade regulation under the WTO was once again an agreement, but it was agreement in a much more comprehensive way. The Tokyo Round approach of concluding additional agreements (codes), declarations, decisions, and understandings was continued. Still, the result was wrapped together in a comprehensive package under which all was binding as if it were a single instrument. The GATT approach of separate codes, or declarations or understandings whose legal status was obscure, was abandoned in favour of a ‘single undertaking’ under which everything was binding regardless of whether it was called an agreement, a declaration, a decision, or an understanding. The mechanism to implement the WTO obligations was the WTO Agreement to which was annexed all of the other agreements entered into as a result of the Uruguay Round (covered agreements). Thus, the WTO Agreement was a framework agreement, and three of the annexes were, as in the GATT 1947, designated as ‘integral parts’ of the WTO Agreement. The fourth annex consisted of ‘plurilateral’ agreements that applied only to the WTO Members that had become a party to them. The model of the Tokyo

The development of the regulation of international trade    15 Round codes was thus continued for these agreements. In addition, during the Uruguay Round, in December 1993 and April 1994, States adopted, within the framework of the Trade Negotiations Committee, a number of decisions and declarations regarding the operation of the WTO and the covered agreements. Those decisions are listed by the WTO with the legal texts and, if not formally binding, operate in the same way as the Tokyo Round decisions and declarations. The regulation of international trade under the WTO is based on a complex constitutional system founded on the WTO Agreement, which incorporates the substantive covered agreements and includes as Annex 2 the Dispute Settlement Understanding. Notwithstanding the use of the term ‘Understanding’, the DSU is simply another agreement that is an integral part of the WTO constitutional system. And that system includes the ministerial decisions and declarations adopted during the Uruguay Round. Moreover, Article XVI of the WTO Agreement provides that ‘the WTO shall be guided by the decisions, procedures and customary practices followed by the CONTRACTING PARTIES to GATT 1947 and the bodies established in the framework of GATT 1947’.18 Thus, the WTO brought together under a single treaty regime the disparate parts of the GATT 1947 that had previously enjoyed a degree of independence. That independence was no longer possible under the WTO regime. However, despite its characterization as a single undertaking, the WTO is not a single unitary arrangement. The plurilateral agreements are not part of the single undertaking. The potential variation in the normativity of the various ministerial decisions and declarations adopted separately from the WTO agreement itself indicates a more complicated regulatory system than the notion of a single undertaking might imply. This highlights the importance of the new WTO dispute settlement system in interpreting the WTO agreements and the related undertakings.

V.  The role of dispute settlement in the new regulatory regime Under the GATT 1947, dispute settlement had an important focus, encouraging the disputing parties to resolve their dispute through an amicable resolution if possible. The original purpose of a panel having two meetings with the parties was that one meeting would be devoted to ascertaining the facts and alleged violation and the other to seeking a resolution of the dispute. Indeed, violation of the GATT 1947 was only one basis for bringing a matter to the Contracting Parties. Complaints could also be brought where a Contracting Party could show that the benefits it expected to get under the Agreement had been nullified or impaired by the actions of another Contracting Party even though those actions did not constitute a violation of the GATT 1947. 18 

See also Chapter 4 of this handbook.

16   Donald McRae WTO dispute settlement maintained the form of GATT dispute settlement, including two panel hearings with the parties and the possibility of a non-​violation complaint. But the fundamental orientation of dispute settlement changed. The panel process’s objective was less to encourage the parties to find a solution to their differences but more to resolve disputes that were fundamentally about the interpretation and application of the WTO agreements. Provisions for consultation remained as well as encouragement to parties to resolve their disputes through mutual agreement. A ‘mutually agreed’ solution is still preferred. More importantly, the DSU characterizes the dispute settlement system as ‘a central element in providing security and predictability to the multilateral trading system’19 and provides that its functions include, ‘to clarify the existing provisions of those (covered) agreements in accordance with customary rules of interpretation of public international law’. In other words, the WTO negotiators saw the dispute settlement system in terms of resolving disputes between WTO Members and as being the guardian of the interpretation of the WTO agreements and thereby maintaining security and predictability in the multilateral trading system. The WTO was clearly now a system based on rules with a mechanism for interpreting those rules and ensuring they would be applied to ensure that the rules of the international trade regime were stable and predictable. The effect of these provisions was to create the potential for dispute settlement to have a key role in the constitutional system of the WTO. The Members negotiated the text of the WTO agreements. After that, the scope and ambit of international trade regulation, through the power of interpretation, was assigned to the dispute settlement process. Two other elements of the Uruguay Round regime served to bolster the centrality of the dispute settlement process. First, the reverse consensus procedure took away from States the power to block both the bringing of disputes and the implementation of decisions of the dispute settlement organs. Article 6.1 of the DSU provides for the establishment of panels unless there is a consensus in the DSB not to do so. Article 16.4 of the DSU states that panel reports placed before the DSB are to be adopted unless there is a consensus not to adopt them. Under Article 17.14 of the DSU, the same result is achieved for reports of the Appellate Body. These provisions essentially made WTO dispute settlement compulsory and the decisions of WTO dispute settlement organs binding. Second, the WTO covered agreements also created an Appellate Body, an organ whose function was to consider appeals from panel reports on ‘issues of law covered in the panel report and legal interpretations developed by the panel’.20 Since the dispute settlement process’ function was ‘to clarify the existing provisions of those [covered] agreements’, that role inevitably would fall to the Appellate Body. This is because the Appellate Body had the power to review interpretations of law formulated by panels. The ultimate arbiter on the interpretation of the WTO agreements’ provisions was to be the Appellate Body. 19 

20 

Article 3.2 of the DSU. Article 17.6 of the DSU.

The development of the regulation of international trade    17 The first members of the Appellate Body clearly saw their role in constitutional terms. They set about establishing a framework for interpretation. Since a treaty established the WTO, the interpretation of the WTO agreements was to be in accordance with the principles of interpretation of public international law. Indeed, that was required by Article 3.2 of the DSU: ‘to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law’. Thus, Articles 31 and 32 of the VCLT became boilerplate for the interpretation of the WTO agreements.21 The Appellate Body had established the WTO firmly in the mainstream of public international law: ‘the General Agreement is not to be read in clinical isolation from public international law’.22 The Appellate Body then went about filling in gaps that had become apparent because there was no provision made in the WTO agreements. In large respect, these were procedural or administrative. WTO dispute settlement had no rules on the burden of proof. The Appellate Body, aligning itself with other international courts and tribunals, adopted the rule that a party that asserts must prove. But the Appellate Body went further and made substantive additions. The DSU makes no provisions for amicus briefs. However, relying on a panel’s power to seek information (Article 13 of the DSU), the Appellate Body concluded that a panel could consider information provided to it by a third party (an amicus) that had been submitted voluntarily and not sought by the panel.23 It then went further and concluded that the Appellate Body itself had the power to consider amicus briefs, notwithstanding that there is no equivalent to Article 13 of the DSU relating to the Appellate Body.24 Moreover, the Appellate Body asserted its primacy in interpretation. When panels have failed to follow a decision of the Appellate Body’s decision in an earlier case, the Appellate Body has simply reversed them.25 Since, in practice, the Appellate Body’s decision could not be overturned by the DSB, the Appellate Body stands alone as the authentic interpreter of the WTO agreements. In principle, the WTO Members can amend the relevant agreement to overturn an interpretation of it by the Appellate Body. But amendment is complicated and politically unlikely, so the decisions of the Appellate Body remain. The WTO regime changed the nature of international trade regulation in two critical ways. It put trade regulation into a comprehensive treaty framework, which moved beyond the uncertainty of the GATT era. It created a dispute settlement process that

21 In US –​Gasoline, adopted 20 May 1996, the Appellate Body pointed out that the provisions of Articles 31 had attained the status of customary international law. 22 Ibid. 23  Appellate Body Report, US –​Shrimp, adopted 6 November 1998, paras 99–​110. 24  Appellate Body Report, US –​ Hot-​Rolled Steel, adopted 7 June 2000, para 39. 25  See, e.g., the Appellate Body’s treatment of the Panel’s approach to the application of Article XX of the GATT 1994, which the Panel had disregarded the approach taken by the Appellate Body in previous applications of Article XX. Appellate Body Report, US –​Shrimp, adopted 6 November 1998, paras 118–​119.

18   Donald McRae granted the dispute settlement organs a major role in determining the scope and extent of international trade regulation. The full potential for this role of dispute settlement was perhaps not appreciated at the time of the Uruguay Round negotiations. And there were several safeguards in the WTO agreements that could have suggested the opposite result. Article 3.2 of the DSU provides that dispute settlement is meant to ‘preserve the rights and obligations of Members’ and ‘[r]‌ecommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements’. The Members have the power to amend the agreements. There were still to be negotiating rounds (Ministerial Conferences) where the consequences of dispute settlement interpretations of the covered agreements could be negotiated away. But the reality is different from the text. Ministerial Conferences, by and large, have not resulted in significant amendments to the WTO covered agreements. Although some major new agreements have been concluded under the auspices of the WTO, membership oversight and control of the function of interpretation and thus the application of WTO agreements have not materialized. The consequences of this, culminating in the lack of a functioning Appellate Body today, are dealt with elsewhere in this book.26

VI.  The return to bilateral international trade regulation Multilateral trade regulation under the GATT 1947 did not replace bilateral trade agreements. It was recognized in the GATT 1947 itself that bilateral trade agreements existed, and it provided a mechanism in Article XXIV for reconciling such bilateral agreements with the multilateral regime. The fundamental problem was that a bilateral agreement provided preference to the Contracting Parties to that agreement that was not being provided to other GATT Contracting Parties and thus was contrary to the general requirement for MFN in Article I of the GATT 1947. The objective of Article XXIV was to permit the continuance of customs unions and free trade areas outside the GATT framework, provided they were structured and operated in a way that minimized trade diversion. This resulted in a diminution of the basic principle of non-​discrimination, but it also recognized a reality that States had entered into customs unions and free trade agreements notwithstanding their commitment to the GATT 1947 and were likely to continue to do so. The WTO, through incorporating the GATT 1947, accepted Article XXIV and its framework for accepting customs unions and free trade areas, notwithstanding their incompatibility with the non-​discrimination principle. It also included a similar provision in respect of services—​Article V of the GATS. The Uruguay Round agreements also 26 

See Chapters 5, 34, 38, 39 and 40 of this handbook.

The development of the regulation of international trade    19 included an Understanding on the Interpretation of Article XXIV of GATT 1994, setting out clarifications and factors to be taken into account in Article XXIV’s interpretation. In February 1996, the General Council set up a Committee on RTAs27 to examine notifications by WTO Members of their creation or intent to create a customs union or free trade area and consider its compatibility with the provisions of Article XXIV and make recommendations to the General Council. However, the formulae in Article XXIV for the creation of WTO-​compatible customs unions or free trade areas are not models of clarity or easy to apply in a straightforward manner. While over 500 notifications have been made to the WTO,28 few have been endorsed as compatible with Article XXIV of the GATT 1994. But, the Committee has also been reluctant to conclude that customs unions or free trade areas are not compatible with Article XXIV of the GATT 1994. Thus, although there are procedural hurdles under the WTO to the conclusion of preferential trade agreements, there is no effective regulation by the WTO over the creation of such agreements. Preferential or free trade agreements (PTAs or FTAs) existed during the era of the GATT 1947. A major development in this regard was the European Economic Community (EEC) in 1958 and the subsequent enlargements of the Community. There was the European Free Trade Association (EFTA) in 1960 of countries that were not part of the EEC. Both the EEC and EFTA also entered into bilateral agreements with neighbouring states. The Central American Common Market (CACM) was established in 1960, and some 13 years later, the Caribbean Community and Common Market (CARICOM) came into existence. Bilateral free trade agreements (FTAs) were entered into among countries of Eastern Europe which were not part of the GATT 1947. And there were isolated bilateral FTAs elsewhere in the world. The United States had not in the early GATT days entered into bilateral free trade agreements, but in 1985 it entered into a free trade agreement with Israel and three years later into an agreement with Canada. In the years immediately prior to the Uruguay Round, changes in the landscape of PTAs began to occur. Argentina, Brazil, Paraguay, and Uruguay negotiated their own customs union (MERCOSUR, 1991). The United States began to negotiate a much deeper and more comprehensive free trade agreement that would be an enlargement of the Canada-​US Free Trade Agreement and would include Mexico (NAFTA, 1994). NAFTA, which came into force prior to the WTO, was in many respects a precursor of the type of trade agreement negotiated in the Uruguay Round and a model for later, broader FTAs. NAFTA covered services as well as goods and included provisions relating to intellectual property and an investment regime. It contained a comprehensive dispute settlement system for State-​to-​State disputes, which built on and went beyond GATT dispute settlement. It also included a novel dispute settlement process of bilateral review of domestic decisions on antidumping and countervailing duty matters. Moreover, it included side agreements relating to the environment and labour standards. Thus, even 27 

The terms of reference for the Committee are found in WT/​L/​127. World Trade Organization, ‘Regional trade agreements’, at < https://​www.wto.org/​engl​ish/​trato​p_​ e/​regio​n_​e/​regio​n_​e.htm#facts > (last visited 7 October 2020). 28 

20   Donald McRae by the time that the WTO came into existence, a competing model of trade regulation had emerged. And in addressing investment within the context of a trade agreement and including institutions that would focus on the environmental and labour standards, NAFTA went beyond anything included in the WTO agreements. However, in practice, there was little challenge to the trade regulation model developed in the WTO. The mechanism for dispute settlement adopted in the WTO went beyond what had been provided for in NAFTA, and the combination of the institutional support for dispute settlement that the WTO provided, the compulsory and binding nature of WTO dispute settlement, and the presence of an appellate jurisdiction all made WTO dispute settlement a much more viable and attractive option for the parties. As a result, apart from matters that involved the interpretation of NAFTA regarding provisions for which there is no counterpart in the WTO, NAFTA dispute settlement gained no real traction. Even in respect of matters for which there were no parallel WTO obligations, the parties were to find that the process was deficient, and a NAFTA party was able to block dispute settlement by refusing to agree to the appointment of a panel member necessary for the dispute to proceed. In two respects, NAFTA dispute settlement functioned well. Dispute settlement regarding antidumping and countervailing duties operated without problems, and Investor-State dispute settlement was active and effective. However, as between Canada and the United States, following a three-​year legacy period, Investor-State dispute settlement terminated on 1 July 2020, the date on which NAFTA’s successor came into force.29 MERCOSUR also has its own provisions for dispute settlement, with a panel process similar to the GATT and NAFTA but, as with NAFTA, there is no indication that dispute settlement under that agreement has challenged or supplanted WTO dispute settlement. However, the conflict between WTO decisions and MERCOSUR dispute settlement has arisen and is discussed elsewhere in this volume.30 In its early years, then, WTO dispute settlement occupied the field and dispute settlement through the interpretation and application of trade agreements as a form of trade regulation was essentially a WTO-​phenomenon. Therefore, it might have been assumed that the comprehensive scope of the WTO agreements, with a sophisticated dispute settlement process, together with a process for amendment of the WTO agreements and the negotiation of new agreements, would have meant that the negotiation of FTAs outside of the WTO would, at least in respect of WTO members, have been unnecessary. A few FTAs entered into force in the years immediately following the WTO’s establishment, but in the 2000’s the number increased dramatically. In 1990 there were 70 FTAs in the world. By 2020, 303 were in force.31 While many of these FTAs were bilateral, 29 

Annex 14-​C to the CUSMA. See Chapter 12 of this handbook. 31  WTO, World Trade Report, 2011, ‘The WTO and Preferential Trade Agreements’, at < https://​www. wto.org/​engl​ish/​res_​e/​books​p_​e/​anre​p_​e/​wor​ld_​t​rade​_​rep​ort1​1_​e.pdf > (last visited 7 October 2020). 30 

The development of the regulation of international trade    21 there was an increasing tendency to conclude agreements with more than two parties. While these multi-​party agreements were designated as ‘regional’ there has been an increasing tendency to conclude trade agreements that are plurilateral but not based on a specific region. Trade regulation, therefore, was functioning at multilateral, bilateral, regional, and other plurilateral levels. The nature of FTAs could be measured not only in terms of who was subject to them (bilateral, regional, plurilateral) but also in terms of the subject-​matter or scope of regulation. Early FTAs were concerned largely with tariff reduction, but with the substantial gains made in tariff reduction under the GATT, the scope for tariff reduction lessened. FTAs started to be characterized in terms of the depth of regulation that they encompassed. This has led to the scholarship on FTAs being categorized into ‘WTO plus’ agreements, that is to say, agreements that include obligations that exist under the WTO but take them further, and ‘WTO extra’ agreements, that is to say, agreements that include obligations not found in the WTO. WTO plus agreements might relate to tariffs and particular provisions on safeguards; WTO extra agreements might cover investment, a matter not dealt with under the WTO. The rationale for the conclusion of FTAs outside the WTO framework is debated, with a division between those who see FTAs as trade-​distorting and those who see them as potentially trade enhancing. FTAs are seen as a means of negotiating on issues on which no movement can be seen in the WTO since the organization has been unable to advance a negotiating agenda after the failure of the Doha Round. This is coupled with paralysis over the Appellate Body. FTAs are also seen as a way of providing better market access into larger economies. A WTO study identifies market access and investment as the primary factors put forward by States in government reports for entering into FTAs,32 encompassing both of the above rationales. FTAs can be mechanisms whereby trade regulation is deepened and covering matters not included in the WTO.33 This can be illustrated by FTAs that cover matters like investment, labour rights, environment, digital commerce, and corporate social responsibility. However, depth regarding coverage does not always mean depth in terms of the stringency of obligations. A study comparing FTAs entered into by the European Union with FTAs entered into by the United States concluded that while the EU FTAs were broader in coverage of new areas, US FTAs included more obligatory language in the areas covered.34 As has always been the case with trade agreements, there is also a political element. FTAs are entered into with States to further political objectives, either because of who

32 

WTO, World Trade Report, 2011, The WTO and preferential trade agreements: From coexistence to coherence, at 98, at < https://​www.wto.org/​engl​ish/​res_​e/​books​p_​e/​anre​p_​e/​wor​ld_​t​rade​_​rep​ort1​1_​e.pdf > (last visited 7 November 2020). 33  C. Hofmann, A. Osnago and M. Ruta, ‘The Content of Preferential Trade Agreements’ 18 World Trade Review (2019) 365, at 366. 34  H. Horn, P.C. Mavroidis and A. Sapir, ‘Beyond the WTO: An Anatomy of EU and US Preferential Trade Agreements’ The World Economy (2010) 1565, at 1585.

22   Donald McRae they include or who they do not include. This is a phenomenon that has increasing salience in recent years, as will be mentioned later. There is, however, a further emerging economic reason for such FTAs. Changes in manufacturing have changed how trade occurs and hence how trade has to be regulated. The simple model, which underlay the GATT 1947 and to some extent the WTO, was that of a good produced or manufactured in State A that was shipped to State B for sale. But trade patterns are more complex than that. Production may be completed in one country, but it can result from the production of components and assembly in other countries. There is in effect a chain throughout the production process culminating in the sale of the product to a consumer in a final country. In this broader perspective, trade is concerned not just with the crossing of a final product across a border but with the whole ‘global value chain’ that integrates what has been traditionally understood as trade with investment and services. A focus on global value chains provides an incentive for FTAs between countries that are part of such a chain and seek to provide a comprehensive and more integrated approach to trade. As will be mentioned later, this factor has had more influence in developing large FTAs rather than bilateral agreements, resulting in mega-​regionals and mega-​regulation. What, then, are the trade regulation implications of FTAs? The 2004 Sutherland Report35 stated, ‘what has been termed the “spaghetti bowl” of customs unions, common markets, regional and bilateral free trade areas, preferences and a miscellaneous assortment of free trade deals has almost reached the point where MFN treatment is exceptional treatment’. The Sutherland Report perceived the erosion of MFN to be a fundamental failing diminishing the authority of the WTO, undermining the economic rationale on which the MFN principle is based, and resulting in incoherence in international trade regulation. The hope expressed in the Sutherland Report was that States would think again before entering into FTAs. That hope, however, did nothing to stop the continued conclusion of FTAs. Nor can the claim of incoherence be seriously substantiated. It is true that States entering into FTAs will be regulated by the terms of both the WTO and their FTAs but conflicts between the multilateral regime and bilateral or regional agreements have arisen infrequently. In part, this is because the parties have been able to manage those conflicts and in part because FTAs generally do not have active and effective dispute settlement regimes that can adjudicate authoritatively on conflicts between a FTA and another international trade agreement. By contrast, the WTO dispute settlement regime is authoritative and widely used. On each occasion when the issue of priority between the WTO agreements and a FTA has arisen, the Appellate Body has ruled conclusively in favour of the priority of the WTO.36 Thus, while in, principle, there 35 WTO,

The Future of the WTO: Assessing Institutional Challenges in the New Millennium, Report to the WTO Director-​General by the Consultative Board on the Future of the WTO (Geneva: WTO, 2004), para 60. 36  Appellate Body Report, Brazil –​Retreaded Tyres, adopted 17 December 2007, para 228; Appellate Body Report, Mexico –​Taxes on Soft Drinks, adopted 24 March 2006, para 56.

The development of the regulation of international trade    23 could be incoherence in international trade regulation through the proliferation of FTAs, in practice, the few issues that have arisen have been managed within the WTO framework. Yet, the situation is not entirely satisfactory. In a global economic order with an active resort to creating FTAs, does it make sense that the WTO regime always has priority? The reality of FTAs was recognized in the GATT 1947. Does Article XXIV of the GATT 1994 mandate a system of supremacy for the WTO over customs unions and free trade areas, or a system of complementarity? And, in fact, is WTO supremacy the best policy choice? If supremacy is what WTO Members want, why have they been engaged in a frenzy of concluding preferential trade agreements? This matter requires more reflection, particularly in the context of WTO reform.

VII.  The move to mega-​regionals In recent years a new phenomenon has emerged in international trade regulation, the concept of mega-​regulation. The concept evolved out of analyzing the Trans-​Pacific Partnership (TPP), which in its negotiated form involved 12 States across a wide area of the Americas and the Pacific, from Chile and New Zealand in the south to Japan and Canada in the north.37 To the extent that this represented a region, it is a mega-​region. TPP was characterized by the number of States, the total size of the economies included, the breadth and coverage of the economic disciplines included, regulatory alignment within national legal systems, and the provision of a space where economic enterprises could function within global value or supply chains across national markets.38 To a certain extent, TPP was a framework for a new form of transnational economic regulatory arrangement that went beyond the scope of existing FTAs and in many ways beyond what the WTO offered. The withdrawal of the United States from the TPP reduced the number of parties, and the extent of the economic market included within it. But, with a few exceptions, the agreement continued the comprehensive mega-​regulation of the original draft that included the United States.39 The same kind of mega-​regulation can be seen in the negotiation of the TTIP, between the United States and the European Union (although negotiations appear to have been suspended), involving two large markets, and the agreement between the European Union and Canada, CETA, although the combined

37  The

12 States were Canada, United States, Mexico, Peru, Chile, Australia, New Zealand, Brunei, Singapore, Malaysia, Viet Nam and Japan. The United States subsequently withdrew and the treaty as ratified, in essentially its original form, covered only 11 States. 38 B. Kingsbury et al. (eds), Megaregulation Contested: Global Economic Ordering After TPP (Oxford: Oxford University Press, 2019), at 27–​28. 39  It became the Comprehensive and Progressive Trans-​Pacific Partnership (CPTPP), in force on 31 December 2018 for those States that ratified it. The current parties are Canada, Australia, Japan, Mexico, New Zealand, Singapore, and Vietnam.

24   Donald McRae market size is not in the same category. However, the breadth of coverage and the integration of supply chains is similar. Mega-​regulation provides a new orientation to international trade regulation. It integrates not only the expansion of trade regulation under the WTO, encompassing goods, services, and trade-​related aspects of intellectual property, but incorporates non-​WTO areas, such as investment, labour, environment, telecommunications, digital commerce, competition, regulatory coherence, transparency, and anti-​corruption. Of course, some of these areas are related to WTO obligations through the operation of the exceptions under Article XX of the GATT 1994 or through WTO committees looking ahead to future issues. However, the mega-​regulation agreements deal with these matters directly and make them the subject of specific obligations. Moreover, unless specifically excluded, these new areas are also subject to the dispute settlement provisions of the TPP. However, dispute settlement is not granted the role that it has in the WTO. Dispute settlement under the TPP was to be by ad hoc panel proceedings. The role of the panel was to resolve a dispute. Dispute settlement was not granted the systemic and almost constitutional role of WTO dispute settlement in clarifying the provisions of the agreement or providing stability and certainty in the operation of the TPP regime. Moreover, no appellate system was created. Thus, the de facto regulatory function of dispute settlement organs developed under the WTO was not contemplated in the TPP, in the subsequent CPTTP, or in other international agreements that share mega-​regulation characteristics. Although the TPP has not yet been fully replicated through the development of other mega-​regional agreements, apart from CPTPP, it has an imitator to some degree in Regional Comprehensive Economic Partnership (RCEP), which was signed on 20 November 2020,40 and it has become a model for other agreements of lesser geographical scope. CETA has already been mentioned as well as the TTIP. However, its influence has extended to bilateral FTAs, which are now reflecting TPP coverage, particularly in Latin America.41 Thus, TPP has been seen as having an impact beyond the agreement between the parties and as shaping the new rules of global trade.42 The other side of the mega-​regional development is the question of whether there are limits to the linking of trade and other matters—​the ‘trade and . . .’ agenda. While the linkages are intellectually viable and make economic sense, whether they are politically sustainable in the longer term is questionable. The agenda delves more deeply into matters of domestic regulation. For example, digital commerce, transparency, anti-​corruption, and regulatory coherence all encroach on matters of traditional domestic jurisdiction 40  RCEP

is megaregional in terms of markets covered, encompassing the 10 ASEAN States and the ASEAN trade partners China, Japan, Korea, Australia and New Zealand. Although it is focused more on market access, it does include provisions on matters such as investment, competition and economic commerce. See also Chapter 9 of this handbook. 41  R. Polanco Lazo, ‘Regional and Preferential Agreements: The ‘Pacific’ and ‘Atlantic’ Styles in Latin America’ in Kingsbury et al. (eds), above fn 38, at 644. 42  A. Rodiles, ‘After TPP Is Before TPP: Mexican Politics for Economic Globalization and the Lost Chance for Reflection’ in Kingsbury et al. (eds), above fn 38, at 619.

The development of the regulation of international trade    25 and enhance the claims about a lack of democratic legitimacy in international trade policymaking. The question is whether the reaction to the breadth of mega-​regulation will foster a retrenchment in the coverage of trade regulation under future FTAs.

VIII.  The future of international trade regulation In the current era of fundamental uncertainty about world health and economic ordering, disenchantment with the WTO, the lack of political leadership in the major economic powers, and destructive approaches on the part of some, and the re-​emergence of military conflict in Europe, it is difficult to make any reliable assessment of the future of international trade regulation. The current circumstances may be transitory, dependent on the development of new vaccines and changes in governments and leadership. Alternatively, they may be deep-​seated, reflecting fundamental changes to the world order that will not be altered simply through political change. This means that any discussion of the future on international trade regulation has to be seen as contingent and speculative. Yet some tentative indication of trends can be offered. The WTO’s inability to foster and sponsor change and development in international trading relations means that it is unlikely that the WTO will be the driver for new international trade regulation. This does not mean that the WTO has become irrelevant. It still retains the monopoly of international trade dispute settlement, and that is unlikely to change. Current concerns over the demise of the WTO Appellate Body seem to suggest that this important function of the WTO is also in crisis, but the continual resort by WTO Members to WTO dispute settlement suggests that WTO Members in practice see a continuing need to have some sort of body to resolve their disputes. One of the main contributions of the WTO may have been to make dispute settlement an accepted and necessary part of international trade regulation. Of course, the lack of an Appellate Body might suggest that a critical function of dispute settlement in the WTO of clarifying the obligations under the WTO agreements, and providing security and predictability under the WTO regime, will be lost. However, while this function might have been seen as the preserve of the Appellate Body, largely because it seemed to arrogate that role to itself, there is no reason why a panel system alone cannot equally fulfill that role. Moreover, it is clear that over time panel reports have become more like Appellate Body reports regarding their approach to legal issues, their concern with the systemic implications of their decisions, and their attempts to ensure that the law applied is consistent over the range of panel decision-​making. This is more difficult to do in a system based on ad hoc panels, but the prominent, albeit discreet, role played by the WTO Secretariat in panel decision-​making and writing panel reports ensures that that certainty and consistency, as well as security and predictability, are maintained.

26   Donald McRae In any event, at least in the short term, the matter may be somewhat alleviated through an interim arbitral arrangement which is to act as the Appellate Body has done until it is reinstated or reformed and brought back.43 With a WTO largely maintaining the status quo, developments in international trade regulation are occurring elsewhere, bilaterally through PTAs, but more broadly with plurilateral agreements that broaden and deepen the scope of international trade regulation. In part, this corresponds to the practical consequence of globalization. Money and goods have moved more freely, and patterns of investment and production have changed. The development of an understanding of global value chains where multiple jurisdictions may be involved in the investment in and production of goods has forced a rethinking about both who should be involved in regulating and how and what the subject matter of regulation has to be. The movements of services or products across borders today can implicate investment, financial regulation, competition policies, and the environment. This, in turn, broadens into digital commerce, labour rights, corporate social responsibility, transparency, and anti-​corruption regulation. In BITs, these were seen as ‘WTO-​extra’ matters; in the context of mega-​regulation, these matters became part of a central core. This was becoming a new shaping for global trade rules, seen in a much broader context, and a shaping that was taking place via plurilateral, regional, and bilateral agreements that were in effect providing the basis for a multilateralization of a new trade order. Will these developments be the forerunner of international trade regulation of the future? They are not without their critics. Megaregulation is seen as the triumph of experts who do not have legitimacy in society generally. The TPP has been characterized as an ‘exercise in expert power and authority’44 from the negotiations’ secrecy to the encroachment on national regulatory regulation. And the loss of policy space, it is argued, will have particularly negative consequences for the developing world.45 Thus, the legitimacy of trade negotiations continues to be questioned, and mega-​regulation is a contested development.46 Whether the mega-​regulation model is sustainable has yet to be seen. The refusal of the United States to participate in the TPP can probably be seen more as a matter of domestic politics since the broader approach to trade regulation reflected in mega-​regulation is pursued by the United States in its other trade agreement negotiations. A further trend in trade regulation is the linking of security with economics and hence trade. This has manifested itself in the increasing invocation of the national

43 

For a discussion of the Multi-​Party Interim Appeal Arrangement (MPIA), see Chapters 34 and 40 of this handbook 44  A. Riles, ‘The Politics of Expertise in Transnational Economic Governance: Breaking the Cycle’ in Kingsbury et al. (eds), above fn 38, at 105. 45  B.S. Chimni, ‘Power and Inequality in Megaregulation: The TPP Model’ in Kingsbury et al. (eds), above fn 38, at 139. 46  E. Benvenisti, ‘Democracy Captured: The Megaregional Agreements and The Future of Global Public Law’ 23(1) Constellations (2016) 58, at 59.

The development of the regulation of international trade    27 security exception, Article XXI of the GATT 1994, in WTO trade disputes47 and its equivalent in Article 73 of the TRIPS Agreement.48 But it has broader application in the unilateral actions of the United States and China in their retaliations and counter retaliations over trade issues in recent years outside of the WTO context. This trend has been characterized as developing a ‘geoeconomic world order’ under which economics are invoked to achieve national security goals.49 In the short term, at least, this will inhibit the development of modes of international trade regulation. The future of international trade regulation will depend in large part upon the way global trade develops. The existing regimes have been a response to globalization and a consequent need to develop a trading regime that reflects the reality of how the movement of goods and services occurs around the world. This has led to a need to move beyond border measures to deal with internal regulation and to move from goods alone to services and the related aspects of integrating markets, including intellectual property, investment, labour, and the environment. As the net expands it also brings in competition policies, telecommunications, digital commerce and to move on to regulatory coherence and transparency. The expansion to mega-​regulation was a response to the increasing complexity of economic management in a globalizing world. The continuation of this deepening of international trade regulation is not inevitable and different models narrowing the scope of such regulation may develop. The increasing divisiveness among large economic powers makes it unlikely that in the short term at least there will be much of a role for the WTO in generating new regulation. However, the regulatory role through dispute settlement seems unlikely to abate. It also means that PTAs are likely to continue either on a bilateral basis or involving a larger group of States regionally and perhaps on a mega-​regional basis. Whichever form is used, it would seem that the reality of cross-​border economic activity will dictate that the substantive new areas of regulation that have emerged in recent years, and particularly as embodied in the TPP, with variations and different emphases will be included in these agreements. But there is an important qualification whose impact cannot be assessed adequately at present. This concerns the consequences of the current COVID-​19 pandemic. The enforced restrictions and quarantining requirements within States have had not only an impact on the volume of international trade, they also have implications for the way international trade regulation can develop. There are two levels at which this can operate. The first relates to dispute settlement. WTO dispute settlement is characterized by panels meeting in person on two occasions. The challenge for international courts and tribunals is to find a way to conduct hearings remotely through videoconferencing or other means. Arbitral bodies established under the PCA and 47 Panel

Report, Russia –​Traffic in Transit, adopted 26 April 2019. See also Chapter 27 of this handbook. 48  Panel Report, Saudi Arabia –​IPRs terminated. 49  A. Roberts et al., ‘The Geoeconomic World Order’ (19 November 2028), online (blog): < https://​ www.lawf​areb​log.com/​geoe​cono​mic-​world-​order > (last visited 7 November 2020.

28   Donald McRae ICSID are responding to this, as is the International Court of Justice. The challenge for the WTO is to adapt its dispute settlement process to accommodate this as well. The WTO’s inability to adapt in respect of trade liberalization has been a reason for the development of PTAs, so the question arises whether the WTO can adapt in respect of dispute settlement. The second consequence of the pandemic is that multilateralism that depends on large meetings of States cannot go ahead in its traditional form. Will this mean a further push towards bilateralism? It may be easier for States to revert to bilateral agreements rather than manage a multilateral negotiation by videoconference. But, at present, it is impossible to predict whether this will be a transitory trend or one of longer, far-​reaching implications. Finally, as this edition goes to press, the conflict in Ukraine raises questions about the multilateral order and its economic regulation that could have far-​ reaching consequences for both the international legal order generally and the international trading regime. The progression of international trade regulation from the GATT 1947 and on has been to widen and deepen the ambit and scope of that regulation. This has led to greater obligations on States, limitations on traditional policy space, and greater use of mechanisms to enforce these disciplines. This progression has not been universally welcomed, nor has it been a continuous trajectory. But the genie is out of the bottle and short of a fundamental restructuring of the world economy and a return to the pre-​ GATT era (a possibility that cannot be completely ruled out at the time of writing), this trajectory is likely to continue.

Further reading Acharya, R. (ed), Regional Trade Agreements and the Multilateral System (Cambridge: Cambridge University Press, 2016) Bethlehem. D., D. McRae, R. Neufeld and I. Van Damme (eds), The Oxford Handbook of International Trade Law, 1st edition (Oxford: Oxford University Press, 2009), Chapters 2 and 3 Jackson, J. H., The World Trading System: Law and Policy of International Economic Relations, 2nd edition (Cambridge: The MIT Press, 1997) Kingsbury, B. et al. (eds), Megaregulation Contested: Global Economic Ordering After TPP (Oxford: Oxford University Press, 2019) Mavroidis P.C., The Regulation of International Trade (Cambridge: The MIT Press, 2015) Vol I

Chapter 3

T he Regul at i on of Internationa l T ra de : An Ec onom ic Pe rspe c t i v e Kamal Saggi and Simon Schropp *

I. II.

Introduction 30 Why do countries sign trade agreements? 31 A. Overcoming international externalities caused by unilateral beggar-​thy-​neighbour policies 32 B. Trade agreements as commitment devices vis-​à-​vis powerful domestic constituents 42 C. Trade agreements as devices to achieve coordination and transparency 44 III. The economics underlying the design of trade agreements 45 A. Why is universal free trade not observed in the global trading system? 45 B. Why do the WTO agreements regulate border instruments more than behind-​the-​border policies? 46 C. Why does the WTO mandate the ‘tariffication’ of quotas? 47 D. Why are export duties regulated less than import tariffs? 49 E. Why subsidies are heavily regulated 50 F. Reciprocity in the WTO 53 G. Rules on non-​discrimination: MFN and national treatment 56 H. Exceptions to non-​discrimination rules 59 I. Why are Members allowed to escape market access commitments? 61 I V. Conclusion 63 *  All opinions expressed in this paper are the authors’ and reflect neither the views of their employers nor the clients they represent. The authors wish to thank the editors for extremely helpful comments and valuable suggestions. All errors remain those of the authors alone.

30    Kamal Saggi and Simon Schropp

I. Introduction This chapter examines the various economic rationales that underlie international trade agreements and analyses how the principal rules and design features of such agreements help achieve their key objectives. We make two contributions. First, we provide an intuitive discussion of the economics of international trade agreements in general, and the GATT 1947/​WTO Agreement in particular. Second, we shed light on the economic underpinnings of some of the key rules of the international trading system while also addressing some important regulatory developments since the early GATT years. These tasks require us to summarize a vast and rapidly evolving literature. Due to space limitations, we offer neither a comprehensive survey nor an exhaustive evaluation of the relevant literature.1 Instead, we focus on the overall role that economic analysis has played in improving our understanding of trade agreements, while also summarizing the leading analytical approaches to the study of trade agreements. In so doing, we focus on conceptual ideas underlying the literature, as opposed to the latest empirical findings; description, rather than prescription; multilateral trade agreements, rather than bilateral or plurilateral trade agreements; and on trade in goods, rather than trade in services, or issues related to intellectual property or investment. Lastly, this chapter deals with the economics of international trade law (that is, the economic foundations of international trade regulation), rather than on the use of economic analysis in international trade law (that is, the application of economic tools in international trade regulations, such as trade disputes or negotiations).2 1 The

interested reader is referred to a number of excellent literature reviews on the economic rationales for trade agreements and on the economics of their design, including R. Baldwin and A. Venables, ‘Regional Economic Integration’ in G.M. Grossman and K. Rogoff (eds), Handbook of International Economics (Amsterdam: North Holland, 1995), vol. 3, 1597–​1644, R.W. Staiger, ‘A Theory of Gradual Trade Liberalization’ in A.V. Deardorff, J.A. Levinsohn and R.M. Stern (eds), New Directions in Trade Theory (Ann Arbor: Michigan University of Michigan Press, 1995); G.M. Grossman, ‘The Purpose of Trade Agreements’ in K. Bagwell and R.W. Staiger (eds), Handbook of Commercial Policy (Amsterdam: North Holland, 2016), vol. 1, part A, 379–​434; G. Maggi, ‘International Trade Agreements’ in G. Gopinath, E. Helpman, and K. Rogoff (eds), Handbook of International Economics (Amsterdam: North Holland, 2014), vol. 4, 317–​390; G.M. Grossman and H. Horn, ‘Why the WTO? An Introduction to the Economics of Trade Agreements’ in H. Horn and P.C. Mavroidis (eds), Legal and Economic Principles of World Trade Law (Philadelphia, PA: The American Law Institute, 2012), 9–​67; K. Bagwell and R.W. Staiger, ‘The World Trade Organization: Theory and Practice’ 2 Annual Review of Economics (2010), 223–​256; K. Bagwell and R.W. Staiger, ‘The Design of Trade Agreements’ in K. Bagwell and R.W. Staiger (eds), Handbook of Commercial Policy (Amsterdam: North Holland, 2016), vol. 1, part A, 435–​529. 2  While the application of economic concepts, principles, models, and methods to international trade law, in particular to WTO dispute settlement, can be useful for interpreting legal concepts, establishing causal relationships, or quantifying damages, we abstract from these topics, and refer the interested reader to ‘Quantitative Economics in WTO Dispute Settlement’ in World Trade Report: Exploring the Links Between Trade, Standards and the WTO (Geneva: World Trade Organization, 2005), Chapter III.A; R. Teh and A. Yanovich, ‘Integrating Economic Analysis into WTO Dispute Settlement Practice’ in T. Carpenter, M. Jansen and J. Pauwelyn (eds), The Use of Economics in International Trade and Investment

The Regulation of International Trade: an economic perspective    31 Section II introduces the leading economic theories for why countries find it mutually beneficial to enter into international trade agreements. Section III examines the economics of trade agreement design, i.e., the economic foundations of important rules of trade agreements, including features commonly viewed as the fundamental pillars of the WTO, such as the MFN and the national treatment obligations, the principle of reciprocity, as well as various exceptions to the non-​discrimination obligation found in the GATT 1947/​WTO system. Section IV concludes.

II.  Why do countries sign trade agreements? By their very nature, trade agreements are shaped by the economic incentives of the involved parties. After all, trade agreements are contracts that govern international commerce between sovereign countries. Given that design usually follows purpose, understanding the rationale behind trade agreements is a crucial first step to (i) advance our understanding of the purpose and design of commonly observed trade rules, (ii) improve interpretation of the text, and (iii) ultimately contribute to an informed discussion of institutional reform. A satisfying theory of trade agreements must explain why countries would be tempted to impose trade restrictions in the absence of an international agreement precluding such behaviour. A trade agreement would evidently be unnecessary if all parties agreed that free trade is in everyone’s best interest. Economists generally endorse free trade. Perhaps the most widely accepted proposition in classical economics is that international trade generates welfare gains for participating economies by leading to a more efficient allocation of resources worldwide.3 However, no country in the world practices free trade, despite the fact that trade improves allocative efficiency worldwide and generates gains in consumer welfare. For Disputes. (Cambridge: Cambridge University Press, 2017), and the various contributions in C.P. Bown and J. Pauwelyn (eds), The Law, Economics and Politics of Retaliation in WTO Dispute Settlement (Cambridge: Cambridge University Press, 2010). See also Chapter 39 of this handbook. 3 

The international division of labour follows naturally from the principle of ‘comparative advantage’, which holds that countries should produce and export those goods and services for which their opportunity costs of production are lower than those of their trading partners. International trade can also help satisfy consumers’ penchant for variety, as different countries specialize in varieties of the same product or service (e.g., cars, computers, or banking services), and subsequently engage in intra-​ industry exchange with one another, thereby expanding the variety of products available to all (see, e.g., P.R. Krugman, ‘Increasing Returns, Monopolistic Competition, and International Trade’ 9(4) Journal of International Economics (1979) 469–​479; P.R. Krugman, ‘Scale Economies, Product Differentiation, and the Pattern of Trade’ 70(5) American Economic Review (1980) 950–​959). Openness to international trade can also generate welfare gains by subjecting domestic firms with substantial market power to foreign competition, which benefits using industries and end-​consumers (for example, a domestic monopolist can be forced to lower prices when faced with international competition. See, e.g., J.A. Brander and B. Spencer, ‘Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry’ 14(3) The

32    Kamal Saggi and Simon Schropp the various political and economic reasons we discuss below, most countries impose at least some trade restrictions in the form of tariffs, quantitative restrictions, import bans, production subsidies, regulatory discrimination vis-​à-​vis competing domestic products, and bureaucratic red tape. The presence of such restrictions creates a role for international cooperation in the form of trade agreements. Below, we sketch some of the leading analytical approaches economists have developed to study trade agreements.

A. Overcoming international externalities caused by unilateral beggar-​thy-​neighbour policies The most influential class of economic models posits that trade agreements help overcome countries’ incentives to use their respective market power in world markets to tilt the terms at which international trade occurs in their favour and at the expense of their trading partners. More specifically, unilateral decision-​making—​a government taking its decisions without coordinating with other governments—​in the form of higher trade barriers gives rise to international externalities since the imposing government ignores the negative effects its choices have on its trading partners and world markets overall. Such ‘beggar-​thy-​ neighbor’ behaviour on the part of all large countries can result in global inefficiencies—​a suboptimal outcome that the conclusion of trade agreements helps overcome.4 Trade agreements are a means of ‘internalizing’ externalities flowing from the pursuit of nationally rational, yet opportunistic, policies. A trade agreement forces involved decision-​makers to behave as if they genuinely Took the external effects of their policies into consideration (a strategy that a hypothetical ‘global’ government would pursue), which ultimately benefits every party participating in the agreement. Below, we first introduce a simple ‘terms-​of-​trade’ model of trade agreements. Next, we demonstrate that the basic rationale for trade agreements highlighted by this model—​i.e., overcoming international externalities caused by opportunistic unilateral trade policies—​holds under more complex settings.

1. The baseline model: a simple terms-​of-​trade model of trade agreements In its most basic form,5 the canonical terms-​of-​trade (TOT) model describes the interaction between two large economies that trade two commodities in accordance with Canadian Journal of Economics (1981) 371–​389; J.A. Brander and B. Spencer, ‘Trade Warfare: Tariffs and Cartels’ 16 The Economic Record (1984a) 227–​242. 4 

This theory dates back at least to H. G. Johnson, ‘Optimum Tariffs and Retaliation’ 21(2) The Review of Economic Studies (1953–​4) 142–​153. 5 See generally, K. Bagwell and R.W. Staiger, ‘An Economic Theory of GATT’ 89(1) American Economic Review (1999) 215–​248; K. Bagwell and R.W. Staiger, The Economics of the World Trading System (Cambridge, MA: The MIT Press, 2002); Bagwell and Staiger (2010), above fn 1.

The Regulation of International Trade: an economic perspective    33 p Supply

X ptar pft pt

A

B

F

E

D

J

C

K

Domestic price World price

Sft Dom. prod.ft

Dom. prod.tar

G

H

Star

Dtar

Demand

Dft

q

Imports (Ift)

Importstar (Itar)

Figure 1:  The terms-​of-​trade effects of an import tariff

the principle of comparative advantage:6 Country A imports good b from Country B while exporting good a to Country B in return. Markets for both goods are assumed to be perfectly competitive,7 and governments are assumed to set trade policies with the objective of maximizing their national welfare. Under these stylized conditions, each country can be shown to have a unilateral incentive to erect trade barriers with the objective of improving its TOT, i.e., lowering the relative price of its imports (a policy that increases national welfare by allowing a country to import a larger number of imports per units of its exports). Figure 1 , above, provides a diagrammatic analysis of the incentives Country A has to impose a tariff on imports of good b from Country B.8 The figure is constructed in the typical price-​quantity plane. The vertical axis plots the price at which good b is sold in Country A’s market, and the horizontal axis plots trade volumes (quantities). Domestic demand for good b in Country A is downward-​sloping (representing the standard assumption that the quantity demanded by consumers decreases with price). Domestic supply is upward-​sloping: Local producers are willing to provide higher quantities if the 6 

The assumption of ‘large’ countries means that each country is capable of affecting its terms of trade, i.e., the relative world price at which the two goods are exchanged. A large country is a ‘price-​maker’, rather than a ‘price-​taker’ in international markets for a given product or service. 7  ‘Perfect competition’ means that there is a very large number of buyers and sellers (none of which has market power) and that there exist no barriers to entry or asymmetric market information. As a consequence, sellers are unable to generate any ‘excess’ profits. 8  To understand the key insights behind the TOT model, it is sufficient to focus on the market for a single product. The mirror-​image analysis applies to Country B for the other good a.

34    Kamal Saggi and Simon Schropp price of good b increases. The horizontal line pft represents the world price for good b under free trade.9 Point X denotes the equilibrium in the absence of international trade (i.e., where domestic supply and demand intersect). The fact that the world price is lower than the domestic market-​clearing price indicates that Country A is a net-​importer of good b. Quantities Dft and Sft represent the free-​trade levels of consumption and production, respectively. The horizontal distance between the two (Ift) measures Country A’s imports from Country B under free trade. Based on Figure 1, we can now examine the key implications of a tariff on imports of good b in Country A. Let the government of Country A impose an import tariff of t per unit of imports of good b. By design, such a policy drives a wedge between the price received by foreign suppliers and the price paid by domestic consumers. The new domestic price shifts upwards from pft to ptar, and since Country A is assumed to be large (i.e., it has market power), its import tariff t depresses the world price for good b, thus making per-​unit imports cheaper for consumers in Country A.10 In Figure 1, the reduction in the world price of good b from pft to pt captures country A’s TOT gain resulting from the imposition of its tariff on good b. Domestic producers, protected by the import tariff, can sell at the higher domestic price, ptar, and thus are willing to provide higher quantities of good b.11 This increase in domestic production of good b results in a reduction of imports from Ift to Itar. With the tariff in place, Country A pays less for those import quantities that it still purchases since pt is smaller than pft. This is the terms‐of‐trade improvement first identified by economists Robert Torrens and John Stuart Mill in the nineteenth century. It has come to occupy a central role in the TOT theory of trade agreements.12 It is worth emphasizing that the imposition of tariff t affects Country A’s welfare through three channels. First, consumers lose from the rise in the domestic price from pft to ptar. This loss comprises the increased amount they pay for the quantities that they continue to consume at the higher domestic price ptar, plus the loss of consumer surplus that results from reduced consumption (from Dft to Dtar).13 9  In

this simple two-​country, two goods set-​up, the world price for good b is simply the (untaxed) relative price of good b over good a, or formulaically: pw =​ pb/​pa. 10  This is so, because, faced with higher import prices, consumers in Country A demand less of good b. This, in turn, results in a glut (over-​supply) for good b in the rest of the world, thus suppressing world prices. 11  This is so, since less competitive domestic producers, whose production costs were too high under free trade, are willing and able to sell domestically at the higher price ptar. 12  See R. Torrens, The Budget: On Commercial and Colonial Policy (London: Smith, Elder & Co., 1844); J. Stuart Mill, Essays on Some Unsettled Questions of Political Economy (London: John W. Parker, 1844). The benefits that Country A derives from unilaterally restricting its imports are analogous to those that a firm with market power derives from restricting its output in a domestic setting. For example, a monopolist typically maximizes profits by selling less than the competitive level of output: It does so in order to set a price at which the marginal revenue of sales equals its marginal cost of production. Similarly, a large country can improve its TOT by buying less than the free trade level of imports, thereby driving the world price of its imports. 13  The total loss to consumers is measured by the area ABCD in Figure 1.

The Regulation of International Trade: an economic perspective    35 Second, domestic producers benefit from tariff protection. They receive higher revenues for the output that they originally produced (point Sft). In addition, the price wedge created by the tariff results in an expansion in domestic production (from point Sft to Star).14 Finally, the government collects tariff revenues on imported quantities. This revenue equals the volume of imports, Dft minus Star (the distance between points D–​F in Figure 1), times the gap between internal and foreign prices, ptar–​pt.15 Tariff revenue can be decomposed into two parts, reflecting the distribution of the tariff burden between (i) domestic consumers and (ii) foreign producers. More specifically, rectangle FDKJ represents the tariff revenue Country A effectively collects from its own consumers, who end up paying a higher price on imports due to the tariff (although this price increase is lower than the level of the tariff because of the TOT gain bestowed on Country A). In contrast, rectangle JKHG captures the reduction in the short-​run profits of foreign suppliers of good b caused by the tariff‐induced decline in its price. The net welfare benefit for the importing Country A is the sum of the effects on consumers, producers, and the government. In Figure 1, this net gain is represented by the difference between the area of the rectangle JKHG and the area of the two triangles, EFJ and DKC. Rectangle JKHG represents the terms‐of‐trade gain accruing to Country A—​the volume of imports with the tariff in place, multiplied by the amount by which the tariff causes the world price to fall. It is worth noting that Country A’s gains from rectangle JKHG is a net wealth transfer from Country B to Country A. The two triangles measure the so-​called ‘deadweight loss’—​the economic costs resulting from an inefficient resource allocation in Country A (over-​production and under-​consumption of good a, respectively) resulting from Country A’s tariff.16 Under normal economic conditions, and as long as the tariff hike is not prohibitively large, the TOT gains (rectangle JKHG) will outweigh the efficiency losses to Country A (triangles EFJ and DKC), such that the imposition of an appropriately calculated tariff generates a net welfare gain for the importing Country A.17 Four corollary observations directly flow from the above. First, Country A has a unilateral incentive to impose an import tariff to improve its terms of trade. Acting in isolation, a national income-​maximizing government of a 14 

Area ABEF in Figure 1 measures the net increase in domestic producer surplus in Country A.  In Figure 1, the tariff revenue equals the rectangle FGHD. Higher revenues enable a welfare-​ maximizing government to provide public goods, transfer wealth to certain constituents, or reduce taxes. 16 More specifically, the deadweight loss reflects the inefficiency resulting from a reduction of consumption below the point where consumers’ willingness to pay exactly equals the opportunity cost in terms of the payment to foreigners (triangle DKC), and by increasing domestic production beyond the point where the marginal cost of the resources used by the domestic industry equals the opportunity cost of importing the goods from the foreign industry (triangle EFJ). 17  Rational cost-​benefit considerations on the part of Country A call for it to balance the marginal gain from improving its TOT against the marginal cost of exacerbating the deadweight loss of the tariff. The result is called the ‘optimum tariff ’—​the non-​cooperative tariff level at which the marginal reduction of consumer welfare is just balanced by the marginal increase in the surplus for import-​competing industry and in tariff revenue. 15

36    Kamal Saggi and Simon Schropp country that has market power on world markets perceives a benefit from implementing restrictive trade policies regardless of whether its trading partners are doing the same or not. Second, though it is not immediately apparent from Figure 1, exporting Country B suffers economic losses from Country A’s unilateral imposition of a tariff on good b. Specifically, Country B faces two types of costs: (i) the reduction in the price of those units of good b that continue to be traded after the imposition of the tariff (rectangle JKHG);18 and (ii) and the net loss suffered by its domestic participants in the market for good b because of the reduction in exports of good b caused by the tariff.19 Third, in a two-country, two-goods setting the same opportunistic zeal that drives Country A’s treatment of good b applies in mirror image from the perspective of Country B for good a, Country A’s export good. Using its TOT advantage with respect to imports of good a, country B also has a unilateral incentive to impose an optimum tariff for imports of good a. The roles in the market for good a are reversed: Country B gains at the expense of Country A. Fourth, a situation in which both Countries A and B impose tariffs on their respective imports, and each country disregards the negative effect of its tariff on its trading partner, is inefficient from a global welfare perspective.20 In sum, each country has a unilateral incentive to exploit its national market power and impose trade barriers (in this example, tariffs) in an effort to improve its TOT. The resulting outcome is globally inefficient, not only because each country’s TOT gains cancel each other out, but also because trade volumes are inefficiently low. This situation has been likened to a prisoners’ dilemma in which each party takes rational decisions in anticipation of the other party’s non-​cooperative actions, but the overall outcome makes both parties worse off. The above analysis suggests the contours of an agreement that increases trade volumes and improves aggregate welfare for both governments. Countries have an incentive to negotiate reductions in barriers to avoid negative effects on their welfare caused by their partner’s trade policies. The currency of the deal is market access concessions achieved by mutually lowering trade barriers.21 By granting each other better market access, each 18 

This is the mirror image of Country A’s gain, so in the calculus of global efficiency, these two effects cancel each other out. 19  While consumers in Country B benefit from cheaper prices for good b, Country B’s economy as a whole suffers because, as a net exporter of good b, producer losses outweigh consumer benefits. 20  Global inefficiencies occur, because, while TOT gains to one country (rectangle JKHG, above) simply reflect a net wealth transfer from one country to the other, the allocative inefficiencies (the two triangles, EFJ and DKC, above) always constitute net losses (hence the name ‘deadweight losses’). 21 Some commentators have questioned whether overcoming TOT-​ related externalities really is a rationale for trade agreements, arguing that, in practice, trade-policy negotiators care little about the effect of their actions on relative world prices of traded goods (which is what the concept of TOT is about; see above fn 6). Instead, so the argument continues, trade policymakers seem intensely focused on securing ‘market access’ for domestic export industries in other countries through trade agreements. Yet, as Bagwell and Staiger (1999), above fn 5, and Bagwell and Staiger (2002), above fn 5, have shown, market access and TOT are two sides of the same coin: THe TOT concept is concerned with the price of imports for any imported quantity, while market access is concerned with quantities traded at a given price.

The Regulation of International Trade: an economic perspective    37 country foregoes the opportunistic TOT gains reaped from unilateral action in the import sector in exchange for mirror-​image TOT losses suffered in the export sector—​an effect that cancels out in the simple two-​country set-​up discussed here. However, in addition, a trade agreement allows each country to enjoy greater allocative efficiency by allowing it to focus on its comparative advantage. In that sense, a trade agreement overcomes the TOT induced prisoners’ dilemma by internalizing the externalities that result from the imposition of unilaterally optimal tariffs by each country.

2. Extensions of the baseline model confirm the basic rationale for trade agreements The basic TOT model of trade agreements discussed above was first described by John Stuart Mill in the nineteenth century and subsequently formalized by Harry Johnson in the 1950s.22 It has withstood the test of time despite its rather restrictive assumptions. Its basic insights—​namely that (i) unilateral trade policies will be excessively restrictive due to the temptation for governments to exercise their national market power, and (ii) trade agreements help overcome the prisoners’ dilemma caused by countries’ incentives to engage in unilaterally optimal policies that have beggar-​thy-​neighbor effects—​are robust to a number of refinements and extensions subsequently explored by trade economists. We summarize important modifications and extensions to the basic TOT model aimed at capturing alternative economic conditions, new trends in international trade, and/​or more realistic government objectives. As we demonstrate, the key intuition spelt out in the basic TOT model proves to be robust.

a. Alternative types of trade barriers The basic TOT model assumes that, in the absence of cooperation, countries restrict trade by imposing import tariffs on one another. Various contributions have extended this set-​up to include other types of trade barriers, including different border measures (quantitative restrictions and export taxes23), as well as behind-​the-​border policies, such as export subsidies, domestic taxes, local content rules, and technical barriers to trade (including product standards).24 Inclusion of these non-​tariff policies does not However, any tariff imposed by a large country necessarily affects both world prices and quantities at the same time. Because of this intrinsic interrelationship (or ‘duality’) between prices and quantities, market access and TOT are effectively interchangeable concepts. See K. Bagwell and R.W. Staiger, ‘Domestic Policies, National Sovereignty and International Economic Institutions’ 116(2) Quarterly Journal of Economics (2001b) 519–​562; Bagwell and Staiger (2002), above fn 5, Chapter 8. 22 

See Mill, above fn 12; Johnson, above fn 4. taxing exports, a large country reduces the supply of its export goods to the world market, thereby driving up world prices, thus generating a TOT improvement in the export sector. 24  See, e.g., Bagwell and Staiger (2001b), above fn 21; Bagwell and Staiger (2002), above fn 5; K. Bagwell and R.W. Staiger, ‘Will International Rules on Subsidies Disrupt the World Trading System?’ 96(3) American Economic Review (2006) 877–​895; K. Bagwell and A.O. Sykes, ‘India –​Measures Affecting the Automotive Sector’ in H. Horn and P.C. Mavroidis (eds), The WTO Case Law of 2002, The American Law Institute Reporters Studies (New York: Cambridge University Press for the American Law Institute, 2005) 158–​178; G. Maggi and A. Rodriguez-​Clare, ‘A Political-​Economy Theory of 23  By

38    Kamal Saggi and Simon Schropp materially change the basic rationale of trade agreements, which remains to curb unilateral incentives for TOT manipulation on the part of countries. The regulation of export subsidies presents a special challenge to the TOT theory. According to the basic TOT theory, a policymaker negotiating a trade agreement should encourage export subsidies on the part of trading partners, not seek to have them prohibited. This is because the use of export subsidies by one country worsens its TOT (which is the same as improving its partner’s TOT).25 In other words, the use of export subsidies by a country’s trading partners is a gift from its perspective, as opposed to something that calls for retaliation. The fact that export subsidies are banned in the WTO has been termed the ‘export subsidy puzzle’ of the TOT theory.26 As discussed below, possible ways of resolving this puzzle include certain extensions of the basic TOT model, as well as alternative motives for trade agreements.

b. Politically motivated policymakers The basic TOT model described above assumes that trade policymakers seek to maximize national welfare. This is evidently an oversimplification since most policymakers are probably motivated by a number of political objectives, not least that of being re-​ elected or re-​appointed. Trade-​policymakers thus often cater to concerns of organized special interest groups—​be they import-​competing (and therefore likely protectionist) or export-​promoting. Trade policies that emerge from domestic political processes are hence best described as the result of a weighted average of domestic aggregate welfare and the welfare of organized special interest groups in politically influential industries or factor markets (such as labour or capital). Various academic contributions have added richer descriptions of the political motivations driving trade policymakers.27 While these contributions generally yield more realistic predictions concerning the level of trade liberalization resulting from a trade agreement, they rely on similar explanations as to the motivation for international

Trade Agreements’ 97(4) American Economic Review (2007) 1374–​1406; N. Limão and P. Tovar, ‘Policy Choice: Theory and Evidence from Commitment via International Trade Agreements’ 85(2) Journal of International Economics (2011) 186–​205; D.R. DeRemer, ‘The Evolution of International Subsidy Rules’, ECARES Working Paper, 2013, 2013-​45; R.W. Staiger and A.O. Sykes, (International Trade, National Treatment, and Domestic Regulation’ 40(1) The Journal of Legal Studies (2011) 149–​203. 25   Export subsidies lower world prices for export products, thus improving the TOT of the subsidizing country’s trade partners. In other words, export subsidies impose a positive externality on importing countries. But since export subsidies are also costly, countries tend to ‘under-​subsidize’ exports in a non-​ cooperative setting without a trade agreement in place. A trade agreement should thus encourage, rather that discourage, more export subsidies. 26  Maggi (2014), above fn 1, at 326. 27 See, e.g., A.L. Hillman and P. Moser, ‘Trade Liberalization as Politically Optimal Exchange of Market Access’ in M. Canzoneri, W.J. Ethier and V. Grilli (eds), The New Transatlantic Economy (Cambridge: Cambridge University Press, 1996) 295–​312; G.M. Grossman and E. Helpman, ‘Trade Wars and Trade Talks’ 103(4) Journal of Political Economy (1995) 675–​708; Bagwell and Staiger (2002), above fn 5; K. Bagwell and R.W. Staiger, ‘Delocation and Trade Agreements in Imperfectly Competitive Markets’ 69(2) Research in Economics (2015) 132–​156.

The Regulation of International Trade: an economic perspective    39 cooperation: overcoming international externalities that arise from the unilateral pursuit of nationally optimal trade policies.28

c. Imperfectly competitive markets and heterogeneous goods Looking beyond the set-​up of the basic TOT model, the literature also considers international externalities that arise in imperfectly competitive environments, including situations involving trade in differentiated goods. One strand of literature assesses trade policies for an imported good supplied by a foreign monopolist.29 In such a setting, a small tariff on the imported goods reduces the price charged by the foreign monopolist, which corresponds to a TOT improvement for the home country. In other words, under fairly general conditions, the foreign monopolist can be shown to absorb part of the tariff imposed by the domestic country, as opposed to passing all of its costs on to domestic consumers. In a symmetrical setting of trade between two countries trading two goods produced by a monopolist in each country, the motivation for a trade agreement to internalize such a TOT externality emerges once again. Another strand of literature considers a market in which two firms with different national origins compete as duopolists, each offering a differentiated version of the same product (e.g., aircraft offered by Boeing, a US company, and Airbus, an EU-​based company).30 In this global duopoly setting, a unilateral tariff or subsidy by one country has the potential to not only transfer rents from the foreign firm to the domestic treasury but can also alter the nature of competition between the two firms, resulting in higher global market shares for the domestic producer.31 Again, we recognize an international externality, this time in the form of the unilateral pursuit of ‘profit-​shifting’, i.e., a loss of market share by the foreign firm that results in profit gains for the domestic champion. 28 

See Bagwell and Staiger (1999), above fn 5; Bagwell and Staiger (2002), above fn 5. Katrak, ‘Multi-​National Monopolies and Commercial Policy’ 29(2) Oxford Economic Papers (1977) 283–​291; P. Svedberg, ‘Optimal Tariff Policy on Imports from Multinationals’ 55(1) The Economic Record (1979) 64–​67; Brander and Spencer (1984a), above fn 3. 30  See J.A. Brander and B. Spencer, ‘Tariff Protection and Imperfect Competition’ in H. Kierzkowski (ed), Monopolistic Competition and International Trade (Oxford: Clarendon Press, 1984b); J.A. Brander and B. Spencer, ‘Export Subsidies and Market Share Rivalry’ 18 Journal of International Economics (1979) 83–​100; J. Eaton and G.M. Grossman, ‘Optimal Trade and Industrial Policy Under Oligopoly’ 101(2) Quarterly Journal of Economics (1986) 383–​406; K. Bagwell and R.W. Staiger, ‘Profit Shifting and Trade Agreements in Imperfectly Competitive Markets’ 53(4) Journal of International Economics (2012a) 1067–​ 1104, Section 5. Subsequent contributions have generalized this setting to include multiple firms offering differentiated products. See M. Mrazova, ‘Trade Agreements when Profits Matter’ Mimeo (2013), revised February 2013; R. Ossa, ‘Profits in the New Trade Approach to Trade Negotiations’ 102(3) American Economic Review (2012) 466–​469; K. Bagwell and R. W. Staiger, ‘Delocation and Trade Agreements in Imperfectly Competitive Markets’ NBER Working Paper No. 15444 (2009); K. Bagwell and R.W. Staiger, ‘The Economics of Trade Agreements in the Linear Cournot Delocation Model’ 88(1) Journal of International Economics (2012b) 32–​46; A. Constinot, A. Rodriguez-​Clare and I. Werning, ‘Micro to Macro: Optimal Trade Policy with Firm Heterogeneity’ 88(6) Econometrica (2020) 2739–​2776. 31  The same goes for an export subsidy to the domestic firm, which again changes the nature of competition in world markets, resulting in higher market shares for the domestic firm, and thus extra profits captured by the domestic firm at the expense of its foreign rival. Such market-​share gains typically outweigh the costs to the domestic government of subsidizing its national champion. 29  H.

40    Kamal Saggi and Simon Schropp Importantly, if both governments were to pursue their unilateral incentives to subsidize their firms, the resulting pair of subsidies would roughly neutralize one another, leaving market shares about where they would have been without the costly interventions while causing market price to drop due to the expansion in their output levels—​something that makes industries in both countries worse off. Therefore, governments of the two exporting countries have a shared incentive to negotiate a trade agreement that limits the use of trade policies aimed at globally inefficient profit-​shifting behaviour.

d. Entry and exit of firms The basic TOT model, as described above, is agnostic over the entry and exit of firms, since in competitive markets (where price equals marginal cost and no firm makes excess profits) the number of firms participating in commerce is largely irrelevant. However, whenever price exceeds marginal cost (i.e., firms reap excess profits) and transportation costs create price differences across markets, entry and exit of firms matter. In a setting with flexible entry and exit, a government may have an incentive to pursue trade policies that encourage entry at home and/​or force exit abroad. Various contributions have shown that trade barriers can raise the profitability of home production, thus stimulating additional entry in the longer term. With tariffs or shipping costs, home products are cheaper than imports, thus raising real income and lowering consumer prices. Foreign firms lose directly from the trade barrier and indirectly from fiercer competition from home firms. As a result, some foreign firms are forced to exit.32 Governments may achieve such ‘delocation’ of firms by using import tariffs and export subsidies. By acting unilaterally, each government neglects the harm that delocation causes to producers and consumers elsewhere and the deadweight losses that result from its policy intervention. As before, the specter of this mutually inefficient behavior may motivate the negotiation of a trade agreement aimed at overcoming the delocation externality.33

e. Global value chains, intermediate inputs, and bilateral bargaining A more recent strand of trade literature examines the cross-​border inefficiencies that result when governments make unilateral policy choices in situations with international 32 

The US policy of ‘bringing back’ manufacturing jobs in the steel, coal, and automotive industries through the imposition of tariff barriers pursued by the Trump Administration may serve as an example. According to former President Trump’s economic advisor Peter Navarro, the Administration’s objective was one of ‘unwinding and repatriating the international supply chains on which many US multinational companies rely’; S. Donnan, ‘Trump’s Top Trade Advisor Accuses Germany of Currency Exploitation’ Financial Times (31 January 2017). This strategy was pursued by a mix of domestic incentives (favorable tax and environmental regulation), as well as trade barriers (mainly tariffs and trade remedies). Ibid. 33  The delocation motivation for trade agreements was first pioneered by A. Venables, ‘Trade and Trade Policy with Imperfect Competition: the Case of Identical Products and Free Entry’ 19 Journal of International Economics (1985) 1–​20; A. Venables, ‘Trade and Trade Policy with Differentiated Products: a Chamberlinian-​Ricardian Model’ 97 Economic Journal (1987) 700–​7 17, and subsequently developed further by R. Ossa, ‘A New Trade Theory of GATT/​WTO Negotiations’ 119(1) Journal of Political Economy (2011) 122–​152; Bagwell and Staiger (2009), above fn 30; Bagwell and Staiger (2012b), above fn 30; Bagwell and Staiger (2015), above fn 27.

The Regulation of International Trade: an economic perspective    41 outsourcing involving global value chains.34 This literature captures the changing nature of trade (from trade in final goods to trade in intermediate goods) and uncovers an even more pronounced role for trade agreements. Models of this literature feature an economic environment in which a producer located in the home country sources customized intermediate inputs from an international supplier (e.g., auto parts from Mexico for a Ford production facility in the United States). While the exact setting is complicated, the gist is that each government has a unilateral incentive to influence the bilateral bargaining of the outsourcing arrangement to tilt the division of ex post surplus between firms in favor of the domestic player. Specifically, by imposing trade barriers, each government attempts to engineer a bargaining outcome that is favorable to its local firms—​at the expense of the foreign firms. This two-​sided international externality, as before, is globally inefficient.35 The requisite trade agreement helps internalize the mutual value-​chain externalities and achieve a globally efficient outcome.

f. Negative non-​pecuniary externalities In most of the models described so far, the international externality that gives rise to global inefficiencies travels through prices—​either domestic prices or world prices. Various authors have extended this set-​up to include non-​pecuniary externalities, for example, cross-​border pollution, which can equally serve as a motivation to conclude trade agreements.36

g. Extensions to include services, investment, intellectual property The trade economic literature has also developed formal models of trade agreements focused on services,37 intellectual property,38 and foreign direct investment.39 34  See

P. Antras and R.W. Staiger, ‘Offshoring and the Role of Trade Agreements’ 102(7) American Economic Review (2012a) 3140–​3183; P. Antras and R.W. Staiger, ‘Offshoring Trade agreements and the Nature of International Price Determination’ 102(3) American Economic Review Papers and Proceedings (2012b) 470–​476. 35  The externality described in international outsourcing models is no longer related to TOT (world prices) but related to local price externalities whose effects influence resource allocation and welfare abroad. This, however, does not change the basic rationale for contracting, which is to internalize international externalities resulting from bilateral opportunism. 36 See N. Limão, ‘Trade Policy, Cross-​ Border Externalities and Lobbies: do linked Agreements Enforce more Cooperative Outcomes?’ 67(1) Journal of International Economics (2005) 175–​179; G. Spagnola, ‘On Interdependent Supergames: Multimarket Contact, Concavity and Collusion’ 89(1) Journal of Economic Theory (1999a) 127–​139; G. Spagnola, ‘Issue Linkage, Delegation, and International Policy Cooperation’ 16 March 1999, 1999 FEEM Working Paper No. 49/​96. 37  J. Francois and B. Hoekman, ‘Services Trade and Policy’ 48(3) Journal of Economic Literature (2010) 642–​692. 38  G.M. Grossman and E.L.-​C. Lai, ‘International Protection of Intellectual Property’ 94(5) American Economic Revue (2004) 1635–​1653; S. Scotchmer, ‘The Political Economy of Intellectual Property Treaties’ 20(2) Journal of Law, Economics and Organization (2004) 415–​437. 39 W.J. Ethier, ‘Regionalism in a Multilateral World’ 106(6) Journal of Political Economy (1998) 1214–​1245; E.J. Blanchard, ‘Foreign Direct Investment, Endogenous Tariffs, and Preferential Trade Agreements’ The BE Journal of Economic Analysis & Policy (2007) 7; E.J. Blanchard, ‘Reevaluating the

42    Kamal Saggi and Simon Schropp For example, Grossman and Lai develop a model in which countries determine the degree to which they choose to protect intellectual property, such as patents.40 The authors show that both governments, when acting unilaterally, ignore externalities on foreign consumers and producers and consequently provide inadequate patent protection. These externalities create the opportunity for an international patent agreement that is mutually welfare-​improving in that it strengthens patent protection in each country and thus provides greater incentives for innovation worldwide.

B. Trade agreements as commitment devices vis-​à-​vis powerful domestic constituents Thus far, we have focused on governments that are tempted to impose harmful cross-​ border externalities on one another. A smaller, but complementary, economic literature highlights an alternative view that trade agreements provide a mechanism for governments to credibly commit to liberal trade policies and to resist pressures from influential domestic interests seeking import protection. This is typically referred to as the ‘domestic commitment theory’ of trade agreements.41 Proponents of this theory argue that policymakers leverage external pressure generated by an international contract to overcome the threat of inefficiencies by domestic stakeholders. Such domestic inefficiencies arise from the strategic interaction between policymakers and the private sector: By engaging in irreversible (or costly-​ to-​reverse) actions, such as investment decisions, private-​sector interests can force policymakers to backtrack on previously made trade liberalization commitments, thus rendering such commitments non-​credible ab initio. In such a situation, a binding obligation to a trade agreement is valuable, because it restricts the future discretion of governments over trade policy. Domestic policymakers credibly ‘lock in’ their trade liberalization commitments by exposing themselves to sanctioned retaliation in case of protectionist backtracking. Such commitment to an international agreement then serves as a signal to domestic political actors that the government cannot, and will not, renege on its initial contractual commitment to lower trade barriers. The external Role of Trade Agreements, Does Investment Globalization Make the WTO Obsolete?’ 82(1) Journal of International Economics (2010) 63–​72. 40 

Grossman and Lai (2004), above fn 38. While the domestic commitment theory can be found in a variety of early papers (e.g., R.W. Staiger and G. Tabellini, ‘Discretionary Trade Policy and Excessive Protection’ 77(5) American Economic Review (1987) 823–​837; R.W. Staiger and G. Tabellini, ‘Do GATT Rules Help Governments Make Domestic Commitments?’ 11(2) Economics and Politics (1999) 109–​144; see Staiger (1995), above fn 1, for an overview), G. Maggi and A. Rodriguez-​Clare, ‘The Value of Trade Agreements in the Presence of Political Pressures’ 106(3) Journal of Political Economy (1998) 574–​601 is particularly elegant and has become the workhorse model of this idea. Their model is one of a small, open economy for which the TOT argument for trade agreements is completely absent by design. Maggi and Rodriguez-​Clare, above fn 24, provide a unified model that incorporates both the TOT and commitment motives for trade agreements. 41 

The Regulation of International Trade: an economic perspective    43 commitment makes the policy announcement ex ante credible vis-​à-​vis influential domestic interest groups, thereby changing their incentives for exerting lobbying pressure to implement protectionist measures in the first place. This, in turn, eliminates socially wasteful protectionist lobbying and enables the government to take actions that are beneficial to the country’s long-​term interests.42 The domestic commitment theory offers attractive justifications for important real-​ life features of the GATT 1947/​WTO Agreement that appear puzzling when viewed through the lens of the TOT theory. In particular, it can explain (i) the export subsidy puzzle described above;43 (ii) the transition from a shallow-​integration agreement (the GATT 1947), with relatively few rules and issues areas, to a deep-​integration agreement (the WTO Agreement); and (iii) why small countries may want to join trade agreements at all. On the last point, it is worth recalling that the TOT model can only explain the behaviour of ‘large’ countries with the necessary power to affect world market prices for the products they trade. Since the domestic commitment approach addresses a domestic struggle of policymakers against local special interest groups, the signatory country may well be ‘small’ in the sense that it lacks any market power to influence world prices. However, even the domestic commitment theory cannot fully explain why large countries would find small countries to be attractive partners for a trade agreement because, by definition, the trade policies of small countries have no impact on their trading partners. Furthermore, it is not immediately clear what exact problem a commitment contract solves to justify the conclusion of an elaborate international agreement.44 In the same vein, many design features found in actual trade agreements, including the GATT 1947/​WTO Agreement, are not consistent with those predicted by the domestic commitment rationale.45 42  The 1998 model by Maggi and Rodriguez-​Clare, above fn 41, delivers some interesting predictions regarding the effect that a government’s bargaining ability vis-​à-​vis domestic lobby groups has on its incentive to enter into a trade agreement. For example, a stronger bargaining position vis-​à-​vis domestic lobby groups makes the government less likely to enter into a trade agreement. This is because a stronger bargaining position allows the government to derive large rents from the political process, thereby raising its cost of entering into a trade agreement. 43  Unlike the TOT model, which predicts that trade agreements encourage export subsidies (see above fn 25), the domestic commitment approach predicts that a government may want to commit to the elimination of export subsidies if export interests are heavily organized in a world without trade agreements (and thus may succeed lobbying for excessive export subsidies). See Maggi and Rodriguez-​ Clare, above fn 41, and T. Potipiti, ‘Import Tariffs and Export Subsidies in the WTO: A Small-​Country Approach’, Chulalongkorn University’ Mimeo (2012). See also Section III.G, below. 44  Policymakers wishing to tie their hands could outsource policymaking to an independent domestic agency akin to a central bank, rather than to undergo extensive (and costly) international negotiations. See S.A.B. Schropp, Trade Policy Flexibility and Enforcement in the WTO: A Law & Economics Analysis (Cambridge: Cambridge University Press, 2009), Chapter 4; Grossman, above fn 1, at 415. 45  Examples here include the existence of safeguards or tariff renegotiation clauses, or of exceptions to non-​discrimination rules (such as for preferential trade agreements). From the position of a government wanting to tie its hands against future protectionist backsliding, these real-​life institutional features of the GATT 1947/​WTO Agreement are unnecessary, and perhaps even harmful.

44    Kamal Saggi and Simon Schropp Overall, the domestic commitment approach to trade agreements is probably best seen as complementing some form of externality-​driven motivation for trade agreements described in Section II.A, above. It also offers a good explanation of why economically small countries may find it useful to join an existing trade agreement initially conceived between large countries.46

C. Trade agreements as devices to achieve coordination and transparency The models described thus far largely assume a stable economic environment and rule out (i) any sources of uncertainty pertaining to real-​life economic shocks emanating from changes in technology, natural resources, tastes, weather, politics, etc., as well as (ii) any informational constraints regarding the actions and intentions of the economic actors involved. In recent years, trade economists have attempted to add more realism to their models. In addition, in so doing, they have found new, complementary rationales for trade agreements. First, since real-​ world trade agreements typically involve many countries and millions of goods and services in a dynamic environment where policymakers can select among a large number of policy instruments, a trade agreement may be a means for coordinating trade-​related interests and determining a specific distribution of gains from trade among parties to the agreement.47 Second, certain publication, transparency, and dispute settlement provisions in trade agreements with more than two parties can serve an informational role for the purposes of verifying violations of the agreement and informing third countries when such violations have occurred. In that sense, multilateral trade agreements can increase transparency in international trade.48 This is especially the case when violations take the form of non-​tariff barriers and other behind-​the-​border measures, which are otherwise hard to detect. Third, various authors examine an uncertainty-​managing motive for trade agreements. For example, Limão and Maggi consider a model in which trade policymakers from different countries have idiosyncratic levels of risk aversion for dealing with political

46 

See Grossman and Horn, above fn 1, at 60; Grossman, above fn 1, at 415. After all, many different combinations of trade concessions can be consistent with a given level of negotiated market access. A formal agreement can be used to record a mutual understanding of what is to be expected, such that misunderstandings do not invoke a return to a protectionist past that existed prior to the agreement. On the potential coordination benefits of regulatory harmonization, see Schropp, above fn 44, Sec. 4.1.2.5; Grossman, above fn 1, at 387. 48  See, e.g., G. Maggi, ‘The Role of Multilateral Institutions in International Trade Cooperation’ 89(1) American Economic Review (1999) 190–​214; J.-​H. Park, ‘Enforcing International Trade Agreements with Imperfect Private Monitoring’ 78(3) The Review of Economic Studies (2011) 1102–​1134. 47 

The Regulation of International Trade: an economic perspective    45 and economic uncertainties.49 Governments can achieve mutual gains from changing (reducing) the degree of uncertainty in each other’s trade policies, relative to a non-​ cooperative situation without a trade agreement in place. Importantly, the uncertainty-​ reducing motive may be relatively more important for lower-​income countries.

III.  The economics underlying the design of trade agreements A minimal requirement for any economic theory of trade agreements is that it identifies a plausible rationale for the existence of such agreements. However, since design follows purpose, it is arguably equally important that such a theory be compatible with the salient features of actual trade agreements. Any theory of trade agreements should explain how the agreement’s fundamental principles and rules contribute to solving the problem(s) it has identified as the key rationale(s) for the agreement. Otherwise, the theory is not a helpful contribution to improving the interpretation of the text of the agreement or to reforming the agreement itself. The rest of this section discusses a number of international trade rules and features that are particularly important from an economic perspective. It examines how the theories discussed in the previous section can help shed light on these rules.50

A. Why is universal free trade not observed in the global trading system? A common question posed to trade economists is why trade agreements rarely, if ever, codify free trade and instead primarily aim at lowering trade barriers. The economics literature has ready responses to this key question. Policymakers, even those uniquely motivated by national welfare concerns, may find it beneficial to temporarily impose trade restrictions for the benefit of the domestic economy.51 For example, the sudden demise of an important industry can inflict considerable harm on a 49 N. Limão and G. Maggi, ‘Uncertainty and Trade Agreements’ 7(4) American Economic Journal: Microeconomics (2015) 1–​42. 50  For deeper analysis than is permitted here, the reader is referred to the sources mentioned that follow and to the excellent survey articles mentioned in above fn 1. 51  The erection of trade barriers as part of a welfare-​maximizing strategy may result in the context of the TOT, delocation, profit-​shifting, and international outsourcing rationales for trade agreements discussed in Section II.A.2, above. Moreover, for many countries, particularly developing countries with underdeveloped tax regimes, trade barriers, such as import tariffs can be an expedient policy tool for raising tax revenues necessary for funding government spending. Next, temporary trade barriers may counteract domestic market failures that prevent a nascent or ‘infant’ industry that is otherwise viable from becoming internationally competitive. Similarly, trade barriers may help counter international

46    Kamal Saggi and Simon Schropp small group of domestic citizens. The need to diffuse such harm helps explain why categorically ruling out trade barriers under all circumstances is not in the interest of policymakers. Indeed, a trade agreement that eliminates the ability to use temporary trade barriers to protect local firms from import competition would be attractive to very few countries. Equally important, it is widely understood in modern economics that policymakers are motivated not just by national welfare concerns but also their own self-​interest. This can lead them to favor certain domestic special interest groups over others.52 As a result, policymakers may champion trade protection for preferred industries for reasons of political expediency and personal gain. This explains why trade agreements typically codify a ‘political’ optimum with higher trade barriers relative to a purely economic optimum (which would be obtained if policymakers were to maximize national welfare).53

B. Why do the WTO agreements regulate border instruments more than behind-​the-​border policies? The WTO agreements regulate border instruments (such as import tariffs and quotas) fairly strictly. However, they leave governments with significant discretion to set their own internal (behind-​the-​border) policies, only subjecting them to a set of general constraints such as the national treatment obligation. While any border measure can essentially be replicated by a combination of behind-​the-​border measures,54 there are valid economic reasons that help explain why behind-​the-​border policies are regulated more leniently than border measures. First, Bagwell and Staiger have extended the basic TOT model to include domestic policies (taxes, standards, subsidies, etc.) along with border measures (tariffs).55 The authors find that, once governments have committed to a certain level of market access, they should be free to determine their own mix of domestic policies—​as long as these domestic policies are not aimed at undoing any agreed-​upon market access concessions. If a government were to use behind-​the-​border policies for protectionist means, a successful non-​violation claim under GATT Article XXIII:1 could help reinstate the previous balance of concessions. Second, Bagwell and Staiger have argued that since behind-​the-​border measures are an efficient way of addressing domestic market failures and meeting redistributive goals, market failures (e.g., cross-​border pollution, insufficient labor or environmental standards abroad, or health and safety risks of imported goods). Finally, trade barriers serve as retaliation for protectionist behaviour by other countries, such as dumping, subsidization of exports, a boycott, an embargo, or a violation of a prior trade commitment. 52 

Recall Section II.A.2.b, above. See, e.g., Bagwell and Staiger (2002), above fn 5; Grossman and Helpman, above fn 27. 54 For example, any import tariff can be replicated by a combination of a product subsidy and consumption tax (see Bagwell and Staiger (2016), above fn 1, at 62). 55  Bagwell and Staiger, above fn 21; Bagwell and Staiger (2002), above fn 5, Chapter 8; Bagwell and Staiger, above fn 24. 53 

The Regulation of International Trade: an economic perspective    47 restrictions on them can have a ‘chilling effect’ on tariff negotiations. Therefore, those policies can reduce the degree of market access that countries are willing to grant each other ex ante.56 Third, Limão and Tovar, in a model based on the domestic-​commitment rationale for trade agreements, show that governments have an interest in tying their hands with respect to more efficient redistributive instruments (such as a tariff) while leaving the less efficient instrument (non-​tariff barriers) unconstrained.57 However, while border measures remain paramount, trade liberalization in the contemporary world economy is shifting from a system largely focused on border measures in the GATT 1947 to one that includes multiple behind-​the-​border regulations with the advent of the WTO Agreement. Substantive literature has sought to explain why the international trading order has gradually moved from ‘shallow’ integration during the GATT years (1947–​1993) to ‘deeper’ integration with the advent of the WTO in 1994.58 For example, Bagwell and Staiger use a model featuring a profit-​shifting rationale for trade agreements59 to show that trade liberalization negotiations may initially only comprise import tariffs (shallow agreement). However, in a subsequent phase, once tariffs are sufficiently close to zero, there is scope for imposing restrictions on behind-​the-​border measures, in that case on export subsidies (deep agreement).60 Based on a model of trade agreements that features international outsourcing externalities, Antras and Staiger conclude that governments typically find it optimal to utilize many of their policy choices—​border as well as behind-​the-​border policies—​to manipulate international prices and shift costs onto trading partners.61 In that sense, the steady rise of global value chains and international outsourcing over the last few decades may have partly eroded the effectiveness of the old tariff-​centric GATT shallow-​integration approach and necessitated deeper integration to guide efficient policy choices.62

C. Why does the WTO mandate the ‘tariffication’ of quotas? As just discussed, the economics literature can explain why behind-​ the-​ border policies are generally regulated more leniently than border measures. However, not all

56 

Bagwell and Staiger, above fn 24. Limão and Tovar, above fn 24. 58  See K. Bagwell, C.P. Bown and R.W. Staiger, ‘Is the WTO Passé’, World Bank Policy Research, 2015 Working Paper No. 7304, for an overview of that literature. The terms ‘shallow’ and ‘deep’ refer to (i) the level of trade liberalization (e.g., tariff cuts), as well as (ii) the number of product categories and issue areas covered (e.g., services trade, intellectual property, investment measures, etc.). 59  See Section II.A.2.c, above. 60  See Bagwell and Staiger, above fn 31. For a similar argument, see DeRemer, above fn 24. 61  Antras and Staiger (2012a), above fn 34; Antras and Staiger (2012b), above fn 34. 62  See N. Rocha and G. Orefice, ‘Deep Integration and Production Networks: An Empirical Analysis’ 37(1) World Economy (2011) 106–​136 for an empirical analysis of the increasing ‘deepening’ of trade integration in trade agreements. 57 

48    Kamal Saggi and Simon Schropp border measures are treated equally under the GATT 1947 and the WTO agreements. Quantitative restrictions and voluntary export restraints (VERs) are generally prohibited by Article XI of the GATT 1994 and Article 11 of the Safeguards Agreement. While certain exceptions are granted in the agricultural sector, the Agreement on Agriculture mandates a gradual ‘tariffication’ of quotas. On the one hand, to an economist it is unclear why the WTO system adopts a more hostile attitude towards quantitative restrictions relative to tariffs. After all, any quota can exactly replicate the import effect of a tariff and vice versa.63 Economists are puzzled as to why governments may wish to impose quantitative restrictions and VERs at all because the bulk of distortionary costs resulting from quantitative restrictions is borne by the country imposing them. Indeed, in contrast to tariffs, which generate tariff revenue for the imposing government, quantitative restrictions result in so-​called ‘quota rents’ that can accrue to foreign exporters, depending on how quota rights are allocated.64 From an international relations perspective, such rent transfers to trading partners may limit the damage they suffer from trade restrictions. Therefore, in the context of the international political economy, quantitative restrictions such as VERs can sometimes be more appealing than tariffs. On the other hand, trade literature has shown that, relative to tariffs, quantitative restrictions suffer from several disadvantages. Among other things, quantitative restrictions can (i) entail higher administrative costs; (ii) be less transparent;65 (iii) incentivize otherwise non-​competitive suppliers to export; (iv) create more monopoly power than an equivalent tariff when the domestic market is imperfectly competitive;66 and (v) create incentives for exporters competing for quota rents to engage in socially wasteful activities (such as bribery).67

63  In perfectly competitive markets, an import tariff and a quota are equivalent instruments in the sense that a country can replace a tariff that results in a given level of imports by a quota resulting in the same level of imports, without affecting its own welfare or that of its trading partners. 64  See, e.g., D.W. Skully, ‘US Tariff-​Rate Quotas: Historical Allocation and Non-​discrimination’ 29(1) Agricultural and Resource Economics Review (2000) 81–​90; D.W. Skully, ‘Economics of Tariff-​Rate Quota Administration’, Economic Research Service, US Department of Agriculture, 2001, Technical Bulletin No. 1893; S.A.B. Schropp and D. Palmeter, ‘Commentary on the Appellate Body Report in EC–​Bananas III (Article 21.5): Waiver-​Thin, or Lock, Stock, and Metric Ton?’ 9(1) World Trade Review (2010) 7–​57. 65  Some types of quantitative restrictions (such as VERs) transfer quota rents to foreign exporters. This might make it less likely that the exporter’s government challenges the quantitative restriction before the WTO and keeps an active trade restriction unsanctioned. 66  The foreign supply response under the quantitative restrictions and tariffs is not the same. Since the quantitative restriction directly limits the level of imports, it grants an import-​competing domestic monopolist greater freedom to charge higher prices: THe sales of foreign suppliers cannot exceed the quota level, no matter what the domestic price. Compare that with a tariff: It directly links the domestic price to the foreign price (and does not limit imports in the same rigid manner as a quota), so that it constrains the market power of the domestic monopolist more effectively than a quota. Indeed, an important result in the economics literature is that the domestic price is higher under a quota that allows the same level of imports as a tariff. 67  See Skully (2000) and (2001), above fn 64; Schropp and Palmeter, above fn 64.

The Regulation of International Trade: an economic perspective    49 Moreover, Bagwell and Sykes argue that, by ‘tariffying’ quantitative restrictions, governments may facilitate mutually beneficial and reciprocal trade liberalization. In other words, by imposing tariffs rather than allocating quotas across foreign exporters, governments make market-​access gains easier to assess. Thus, tariffs reduce the transaction costs of trade liberalization as well as the uncertainty facing risk-​averse exporters. As a result, tariffication can enhance the value of market-​access concessions, and increase the transparency of trade-​policy conduct, such that cheating on the agreement becomes less tempting. An additional advantage of tariffs over quantitative restrictions is that they are easier to apply and enforce on a non-​discriminatory basis.68 In sum, while the strict regulation of quantitative restrictions and VERs, compared to import tariffs, may not be fully compelling, there are good arguments in favor of tariffs relative to quantitative restrictions. Tariffs are easier to manage, more transparent, less discriminatory, and less damaging when the market environment is imperfectly competitive.

D. Why are export duties regulated less than import tariffs? While WTO Members have spent multiple negotiation rounds, reducing import tariffs, export taxes have remained unbound. Most WTO Members are free to use export duties, provided those duties are consistent with Articles II and XXVIIIbis of the GATT 1994.69 From the perspective of a two-​country, two-​goods externality model (like the basic TOT model described in Section II.A.1), failure to regulate export duties is puzzling since an export tax has analogous effects on resource allocation and welfare as an import tariff of equal magnitude.70 WTO Members may have come to understand this equivalence because the accession protocols of new WTO Members (most notably China) typically contain a full or partial prohibition of export tariffs.71 68  K. Bagwell and A.O. Sykes ‘Chile—​Price Band System and Safeguard Measures Relating to Certain Agriculture Products’ 3(3) World Trade Review (2004) 507–​528. 69  G.Z. Marceau, ‘The World Trade Organization and Export Restrictions’ in M. Matsushita and T.J. Schoenbaum (eds), Emerging Issues in Sustainable Development: International Trade Law and Policy Relating to Natural Resources, Energy, and the Environment (Tokyo: Springer, 2016) 99–​137. While the majority of Members have not bound their export duties, some WTO Members have unilaterally done so. 70  According to the ‘Lerner symmetry’ the direct effect of an import tariff on the domestic economy is to increase domestic prices in an import-​competing sector. This will attract productive resources from the export sector into the import-​competing sector. The direct effect of an export duty for the domestic economy is to reduce domestic prices in the export sector, thus stimulating resources to move out of the export sector and into the import-​competing sector. This, in turn, encourages domestic consumption of the export good. Both measures have the same influence on the relative price of imports, resource allocation, and consumer incentives. While this symmetry is most obvious in a simplified two-​good, two-country, two-goods framework, its basic intuition holds in models with multiple goods. 71  Sixteen new WTO Members have made commitments to limit export duties in their accession protocols. See Marceau, above fn 69, at 577. See also Chapter 4 of this handbook.

50    Kamal Saggi and Simon Schropp However, from the perspective of policymakers, the use of export duties has historically been low. This may be due to politically unattractive features of export taxes, such as their tendency to push export-​sector workers into unemployment and depress rents to the factor owners specific to the sector (land or capital).72 Going forward, WTO Members remain free to limit the use of export duties through negotiating bindings (just like tariffs) in case countries were to start using export duties as an alternative to bound tariffs.

E. Why subsidies are heavily regulated The treatment of subsidies in the multilateral trading system has evolved from relative permissiveness during the GATT 1947 years to an outright prohibition of export subsidies,73 coupled with serious limitations on the use of production (‘actionable’) subsidies, under the 1994 WTO SCM Agreement.74 From an economic point of view, the treatment of subsidies in the WTO is a complex issue and arguments can be made in both directions. Some models indicate that the restrictive treatment of subsidies in the WTO constitutes major progress.75 Others suggest that WTO rules on export/​production subsidies are a step backward compared to the GATT 1947.76 Superficially, constraints on the use of subsidies are difficult to square with economic theory. For example, a fundamental aspect of export subsidies is that they worsen (rather than improve) the TOT of the subsidizing country77 and therefore impose positive externalities on its trading partners. This suggests that export subsidies should be encouraged rather than prohibited. Similarly, to the extent that production 72 While

productive factors will gradually move to other sectors as the rewards in the affected industries fall (see above fn 70), such process may take time, possibly longer than an electoral cycle. As W.J. Ethier, ‘Political Externalities, Non-​discrimination, and a Multilateral World’ 12(3) Review of International Economics (2004) 303–​320 argues, the political process seems to disproportionately reward direct effects of policymaking, and the direct effects of export duties are likely to adversely affect the popularity of incumbent policymakers. 73  See Article 3 of the SCM Agreement. This prohibition includes local content subsidies. 74  Domestic production subsidies are considered legal (‘non-​actionable’), unless they cause ‘adverse effects’ to the interest of another Member (Article 5 of the SCM Agreement). One of the adverse effects listed is ‘serious prejudice to the interests of another Member’ (Articles 5(c) and 6). Interesting from an economic perspective is that a domestic production subsidy can be deemed actionable under the WTO independently of whether it actually nullifies or impairs the market-​access expectations associated with earlier trade liberalization. 75 Bagwell and Staiger, above fn 24; H. Horn, G. Maggi, and R.W. Staiger, ‘The GATT as an Endogenously Incomplete Contract’ 100(1) American Economic Review (2010) 394–​419; Maggi and Rodriguez-​Clare, above fn 41; D. Brou and M. Ruta, ‘A Commitment Theory of Subsidy Agreements’ 13(1) The B.E. Journal of Economic Analysis & Policy (2013) 239–​270; DeRemer, above fn 24. 76  Bagwell, Bown, and Staiger (2015), above fn 58, at 53. 77  In a two-​country, two-goods setting, the Lerner symmetry (see above fn 70) implies that a domestic country’s export subsidy has the same effect on prices (and thus on government welfare) as a decrease in import tariff.

The Regulation of International Trade: an economic perspective    51 subsidies help overcome domestic market failures and achieve domestic redistribution objectives,78 their use should remain unencumbered.79 Yet, this does not fit with the obligations assumed under the SCM Agreement. In that sense, the basic TOT model does not seem well equipped to provide a rationale for the prohibition of export subsidies and the restriction of production subsidies.80 However, some of the extensions of the basic TOT model81 can help explain the WTO’s restrictive stance on subsidies. Starting with the prohibition of export subsidies, consider a two-​country, two-goods TOT model in which policymakers are politically motivated (rather than motivated uniquely by national welfare). More specifically, assume that policymakers in both countries have strong import-​competing preferences but also find it beneficial to subsidize exports (e.g., because export-​oriented special interest groups are particularly influential). In such a setting, each country may have a unilateral incentive to subsidize its exports, which creates negative externalities for its trading partner since each country sets its subsidy without considering the harm it does to foreign import-​competing interests. This leaves scope for an international agreement that helps internalize mutual externalities.82 A prohibition of export subsidies can also be rationalized in an environment in which governments maximize national welfare but where markets are imperfectly competitive. As explained in Section II.A.2.d above, such a setting may lead each government to deliberately subsidize its exports to shift profits from foreign to domestic producers. However, all subsidizing countries lose as a result of such subsidies (through a worsening of their TOT). This opens the room for a mutual agreement banning export subsidies.83 Applying a model based on profit-​shifting as a rationale for trade agreements, Mrazova finds that in the presence of fixed costs of administrating and policing trade policy instruments, a tariff-​only agreement is more easily self-​enforced than a 78 

As explained in fn 51, above, governments may wish to enact temporary trade barriers, including subsidies, to protect infant industries. However, the economic literature has shown that while trade barriers can partly address such market failures, they are rarely the first-​best policy response from an economic perspective. H. Pack and K. Saggi, ‘Is There a Case for Industrial Policy? A Critical Survey’ 21(2) The World Bank Research Observer (2006) 267–​297. 79  Bagwell and Staiger (2006), above fn 24. 80 See, e.g., W.J. Ethier, ‘The Political Economy of Protection’ in D. Bernhofen, R. Falvey, D. Greenaway and U. Kreickemeier (eds), Palgrave Handbook of International Trade (London: Palgrave Macmillan, 2013). 81  See Section II.A.2, above. 82  See Grossman and Helpman, above fn 27. Also, export subsidies generate distortions in production and may encourage rent-​seeking behaviour. See K. Bagwell, R.W. Staiger and A.O. Sykes, ‘Border Instruments’ in H. Horn and P.C. Mavroidis (eds), Legal and Economic Principles of World Trade Law (New York: Cambridge University Press for the American Law Institute, 2013), vol. 68-​204, at 186–​189. 83 However, such a prohibition on export subsidies will adversely affect importing countries which benefit from the export subsidies (and the low world prices they entail). Thus, a prohibition of export subsidies may not result from a multilateral agreement if all governments (importers as well as exporters) have equal negotiation power.

52    Kamal Saggi and Simon Schropp subsidy-​only agreement. This provides another reason for why an export subsidy ban may be desirable.84 Bagwell and Staiger consider a model in which delocation (enabling entry of domestic firms at home and forcing exit of firms abroad) is the source of mutual externalities and thus the key motivation for a trade agreement.85 They find that, once tariffs have been reduced to low levels, parties have an incentive to overuse export subsidies to encourage delocation. Thus, their model provides a compelling explanation for why subsidies were regulated less stringently during GATT years (when average tariffs were still high) but have been regulated more restrictively in the WTO since tariffs in most industrialized countries are now sufficiently low.86 Finally, the domestic commitment theory of trade agreements also sheds useful light on the WTO ban on the use of export subsidies. Where export interests are highly organized, export subsidies would prevail in the absence of a trade agreement, even though such subsidies are expensive to maintain and distort the local economy. As Maggi and Rodriguez-​Clare demonstrate, governments will want to commit to eliminating or reducing export subsidies, relative to a non-​cooperative situation without an agreement. This is so since with a trade agreement in place, export-​focused special interest groups recognize that future lobbying for export subsidies will be futile. They thus make their long-​term resource allocation decisions accordingly, which benefits the national economy and the long-​term interests of policymakers alike.87 We may conclude that there are good economic reasons for prohibiting export subsidies. However, why are production subsidies permitted subject to the conditions under Articles 5 and 6 of the SCM Agreement? Bagwell and Staiger argue that, in the presence of market failures and redistributive goals by policymakers, it can be inefficient to impose tight restrictions on domestic production subsidies. Such restrictions can have a ‘chilling effect’ on negotiations and reduce the level of market access (e.g., the size of tariff cuts) that countries are willing to grant to each other. Hence, production subsidies should be permitted but regulated.88

84 

Mrazova, above fn 30, see also Section II.A.2.c, above. Bagwell and Staiger (2012b), above fn 30, see also Section II.A.2.d, above. 86  Bagwell, Bown, and Staiger, above fn 58, at 52. However, the model does not deliver a compelling interpretation for why subsidies are treated more severely in the WTO than import tariffs. 87  Maggi and Rodriguez-​Clare, above fn 41. 88 Bagwell and Staiger, above fn 24. This points to an inherent trade-​ off between the risk that production subsidies (through their potential to cause international externalities) may partially undo previous market access commitments, on the one hand, and the necessity to maintain flexibility over domestic policymaking, on the other. A government should enjoy flexibility over its domestic policies, provided they do not erode negotiated market-​access commitments (and therewith the agreed-​upon TOT). After tariffs are negotiated, a government may enact production subsidies, as long as the overall effect does not result in a TOT loss for its trading partner. If the subsidizing country fails to withdraw the offending measures or to remove the adverse effects, and in the absence of an agreement on compensation, the complaining Member may impose countermeasures that are ‘commensurate’ with the adverse effects attributable to the subsidy. In that sense, Article 7 of the SCM Agreement enables a rebalancing of market access commitments. 85 

The Regulation of International Trade: an economic perspective    53 Brou and Ruta argue that the domestic commitment theory of trade agreements provides another rationale for the WTO’s restrictions on using actionable production subsidies. They show a distortion associated with the subsidy level that a tariff-​only agreement with a non-​violation rule cannot address. Hence, disciplines on domestic production subsidies are necessary to avoid economic distortions.89 Next, based on a TOT model that acknowledges the presence of contractual incompleteness and transaction costs of negotiating and drafting an agreement, Horn et al. find that a restriction of domestic subsidies is more likely (i) the higher trade volumes are between countries; (ii) the larger the monopoly power in trade that countries exert (such that they have the capacity to manipulate TOT); and (iii) the stronger the financial ability of countries to substitute subsidies for tariffs.90

F. Reciprocity in the WTO Reciprocity, along with rules of non-​discrimination (discussed below), is a key pillar of the WTO system. From an economic perspective, reciprocity calls for a balanced exchange of trade concessions between parties negotiating mutual trade liberalization. Reciprocity arises in at least three forms in the WTO, each of which can be readily explained by leading economic models of trade agreements. First, reciprocity is a fundamental norm guiding trade liberalization negotiations between WTO Members. While reciprocity in negotiations is an informal bargaining norm, trade liberalization negotiations are often seen as a quid pro quo.91 The reciprocity principle fits well into the narrative of leading economic models on trade agreements.92 In a basic two-​country, two-​goods TOT model, Bagwell and Staiger show that the exchange of reciprocal tariff concessions leaves the world relative price unchanged, relative to a situation without an agreement. Therefore, trade liberalization, in accordance with reciprocity helps achieve efficiency. In other words, reciprocal trade liberalization 89 

Brou and Ruta, above fn 75. Maggi, and Staiger, above fn 75. According to the authors, point (i)—​an increase in trade volume—​may help explain why domestic production subsidies were largely left to Contracting Parties’ discretion under the GATT 1947 but have been constrained with the advent of the WTO. Moreover, points (ii) and (iii)—​economic power and ability to subsidize—​together may explain why developing countries have largely been exempted from constraints on subsidies through special and differential treatment clauses in the WTO Agreement. 91  See, e.g., the preamble to the WTO Agreement, which states that Members are ‘. . . desirous of contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce . . .’ (emphasis added). This is also reflected in Article XXVIIIbis of the GATT 1994, of which paragraph 1 states: ‘The contracting parties recognise that . . . negotiations on a reciprocal and mutually advantageous basis, directed to the substantial reduction of the general level of tariffs and other charges on imports and exports and in particular to the reduction of such high tariffs as discourage the importation even of minimum quantities . . . are of great importance to the expansion of international trade’ (emphasis added). 92  See Bagwell and Staiger (2016), above fn 1, at ­Chapter 3, for an overview. 90  Horn,

54    Kamal Saggi and Simon Schropp eliminates any TOT effects between countries, and increases in trade volumes that result from a reduction in trade barriers benefit both sides.93 Moreover, in the context of different ‘rounds’ of negotiation, Bagwell and Staiger show that reciprocity helps overcome the ‘Achilles heel of the MFN principle’,94 namely the ‘free-​rider problem’, whereby a country holds back offers of market access concessions in the hope of obtaining tariff cuts from other trading partners through MFN.95 Second, reciprocity is critical in renegotiations of tariff bindings under Article XXVIII of the GATT 1994. Article XXVIII:2 stipulates that such renegotiations must maintain the reciprocal balance of concessions initially agreed upon by the parties.96 Article XXVIII:4 provides for the ‘withdrawal of substantially equivalent concessions’ in response to a breakdown of tariff renegotiations. The economic literature can readily explain the usefulness of the reciprocity principle in tariff renegotiations. Reciprocity establishes a ‘balance of concessions’, whereby each government makes the ‘concession’ of lowering its import barriers in exchange for receiving a similar concession from a trading partner.97 93 

Bagwell and Staiger (1999), above fn 5; Bagwell and Staiger (2002), above fn 5. Bagwell and Staiger (2016), above fn 1, at 511. 95 Bagwell and Staiger (1999), above fn 5; K. Bagwell and R.W. Staiger, ‘Multilateral Trade Negotiations, Bilateral Opportunism and the Rules of GATT/​WTO’ 67(2) Journal of International Economics (2005) 268–​294. The reason is as follows: Suppose Country A engages in reciprocal market concessions with Country B under the MFN obligation. This stimulates consumption of the import good and the production of the export good in each country. According to the Lerner symmetry (see above fn 70), reciprocal import tariff cuts by Countries A and B have the same effect as would an increase in export subsidies. Thus, while exporters in a third Country C enjoy lower tariff barriers in Countries A and B, they also face, in effect, subsidized competing exports from Countries A and B. From the perspective of Country C, the countervailing effects of lower foreign tariff barriers and quasi-​export subsidies by Countries A and B balance out, with the increase in Country A’s import demand exactly fulfilled by expanded exports by Country B—​leaving Country C in the exact same position as prior to the other two countries’ market access negotiations. Country C’s position is no worse than before, but also not better, thus obviating any incentive on Country C’s part to free-​ride on the other countries’ MFN commitments. 96 Specifically, Article XXVIII:2 reads: ‘In such negotiations and agreement, which may include provision for compensatory adjustment with respect to other products, the contracting parties concerned shall endeavour to maintain a general level of reciprocal and mutually advantageous concessions not less favourable to trade than that provided for in this Agreement prior to such negotiations’ (emphasis added). 97  Using the TOT model as an example, recall that countries do not gain from unilateral tariff cuts, because doing so worsens their TOT (even though lowering tariffs implies greater import volumes). Governments may enjoy mutual gains, however, if they jointly reduce trade barriers. According to K. Bagwell and R.W. Staiger, ‘An Economic Theory of GATT’ 89(1) American Economic Review (1999) 215–​248; Bagwell and Staiger (2002), above fn 5), reciprocity mandates that the balance of concessions leave the pre-​agreement world prices (TOT) unchanged. In other words, reciprocity fixes the terms of exchange of market access at a common level for all members. This allows all countries to enjoy greater trade volumes, without suffering TOT losses, and so creates a bargaining forum within which TOT manipulation is effectively removed from policymakers’ calculus (meaning that countries can focus on the optimal degree of trade liberalization). Reciprocity extends beyond the TOT rationale for trade agreements. See Ossa, above fn 33, for a model based on delocation externalities, and Antras and Staiger (2012b), above fn 34, for a model based on offshoring externalities, both of which confirm the salience of the reciprocity principle. 94 

The Regulation of International Trade: an economic perspective    55 Furthermore, tariff renegotiations can act as a safety valve in situations where uncertainty over future contingencies exist and where the affected Member privately observes protectionist shocks. Renegotiations can provide Members an ‘escape’ route when facing internal pressures to increase tariffs. Renegotiations consistent with reciprocity ensure that world prices (and thus the TOT) remain stable.98 Moreover, Bagwell and Staiger find that the reciprocity rule induces a rebalancing of power across countries. This is because it incentivizes large countries to commit to not exploiting their bargaining power by renegotiating the agreement ex post in future renegotiations. This, in turn, encourages smaller, less powerful countries to participate in the WTO.99 Finally, the concept of reciprocity plays an important role in the context of dispute resolution and enforcement. The objective of remedies is to re-​ establish a balance of concessions between parties.100 This is in line with the ‘efficient breach’ hypothesis101 under which Members are provided a safety valve to react to unforeseen circumstances, as long as trading partners are left in as good a position as they would

98 

G. Maggi and R.W. Staiger, ‘Optimal Design of Trade Agreements in the Presence of Renegotiation’ 7(1) American Economic Journal: Microeconomics (2015) 109–​143; M. Beshkar, ‘Optimal Remedies in International Trade Agreements’ 54(3) European Economic Review (2010a) 455–​466; M. Beshkar, ‘Trade Skirmishes and Safeguards: a Theory of the WTO Dispute Settlement Process’ 82(1) Journal of International Economics (2010b) 35–​48. 99  Bagwell and Staiger (1999), above fn 5. See also J. McLaren, ‘Size, Sunk Costs, and Judge Bowker’s Objection to Free Trade’ 87(3) American Economic Review (1997) 400–​420. 100 See Article 22(4) of the DSU. Some commentators reject the view that WTO enforcement rebalances Members’ concessions and have countered that ‘inducing compliance’ is the only objective of WTO enforcement. The compliance-​rebalancing controversy has essentially been led by J.H. Bello, ‘The WTO Dispute Settlement Understanding: Less is More’ 90(3) American Journal of International Law (1996) 416–​418; A.O. Sykes, ‘The Remedy for Breach of Obligations under the WTO Dispute Settlement Understanding: Damages or Specific Performance?’ in M. Bronckers and R. Quick (eds), New Directions in International Economic Law (Boston: Kluwer Law International, 2000) 347–​357; C.P. Bown, ‘The Economics of Trade Disputes, The GATT’s Article XXIII, and the WTO’s Dispute Settlement Understanding’ 14(3) Economics and Politics (2002) 283–​ 322; W.F. Schwartz and A.O. Sykes, ‘The Economic Structure of Renegotiation and Dispute Resolution in the WTO/​GATT System’ 31(1) Journal of Legal Studies (2002) 170–​204 on the rebalancing side, and by J.H. Jackson, ‘The WTO Dispute Settlement Understanding –​Misunderstandings on the Nature of Legal Obligation’ 91(1) American Journal of International Law (1997) 60–​64; J.H. Jackson, ‘International Law Status of WTO Dispute Settlement Reports: Obligation to Comply or Option to ‘Buy Out’?’ 98(1) American Journal of International Law (2004) 109–​125; J. Pauwelyn, ‘Enforcement and Countermeasures in the WTO: Rules are Rules—​Toward a More Collective Approach’ 94(2) American Journal of International Law (2000) 335–​347; S. Charnovitz, ‘Rethinking WTO Trade Sanctions’ 95(4) American Journal of International Law (2001) 792–​832; S. Charnovitz, ‘Should the Teeth Be Pulled? An Analysis of WTO Sanctions’ in D.L.M. Kennedy and J.D. Southwick (eds), Political Economy of International Trade Law: Essays in Honor of Robert E. Hudec (Cambridge: Cambridge University Press, 2002) 602–​635 on the compliance side of the debate. S.A.B. Schropp, ‘Revisiting the ‘Compliance-​vs.-​Rebalancing’ Debate in WTO Scholarship: Towards a Unified Research Agenda’, HEI Working Paper 29-​2007 constitutes an attempt to integrate both views into one theory. See further Chapter 37 of this handbook. 101  See Sykes, above fn 100; Schwartz and Sykes, above fn 100; K. Mahlstein and S.A.B. Schropp, ‘The Optimal Design of Trade Policy Flexibility in the WTO’ HEI Working Paper 27-​2007.

56    Kamal Saggi and Simon Schropp have been had the other side respected its obligations throughout.102 This is done by either offering compensation or allowing affected trading partners to re-​impose equivalent tariff barriers.103

G. Rules on non-​discrimination: MFN and national treatment The GATT 1994 leaves ample discretion for Members to set policies unilaterally—​as long as they do not discriminate in favor of (i) domestic goods in violation of Article III of the GATT 1994 (‘national treatment’), or (ii) goods from third countries contrary to the Most-​Favoured Nations (‘MFN’) obligation under Article I of the GATT 1994.104 Economic literature helps explain why these two non-​discrimination obligations are widely considered to be the cornerstones of the multilateral trading order.105 102  According

to the ‘efficient breach’ theory, the severity of retaliation available to a complainant should be such that it re-​establishes the balance of concessions to where it was prior to the breach. In contrast to ‘punitive’ retaliation, this type of remedy induces a government to increase protection when, and only when, the gains from opting out of the agreement are high enough. In other words, it avoids ‘over-​breach’ but does not discourage breach in general. What makes that interpretation appealing is that the severity of retaliation is in line with the reciprocity rule. Article 22.4 of the DSU seems to mandate just that, when it states: ‘The level of suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of nullification or impairment’—​in other words, the appropriate remedies (‘suspension of concessions’) must be equivalent to the economic damage (‘nullification of impairment’) suffered by the complainant. See M. Herzing, Essays on Uncertainty and Escape in Trade Agreements (Stockholm: Institute for International Economic Studies, 2005), Monograph No. 50; Mahlstein and Schropp, above fn 101, Schropp, above fn 44, Chapter 6. 103  Various authors have argued that remedies in the WTO fall short of the ‘efficient breach’ ideal, because Members affected by another Member’s use of ‘safety valves’ are not put in as good a position as they would have been had the other side continued to perform its contractual duties. This, in turn, may lead to excessive (opportunistic) breach and inefficiently low trade liberalization commitments by all Members. See Herzing, above fn 102; Schropp, above fn 44, ­Chapter 6; Mahlstein and Schropp, above fn 101; Beshkar (2010a), above fn 98. 104 The MFN principle applies to any type of border measures and ensures non-​ discrimination between trading partners. National treatment regulates behind-​ the-​ border measures; it prohibits discriminatory treatment against foreign-​produced goods, once they have cleared customs. On the non-​ discrimination principle, see also Chapter 16 of this handbook. 105   The MFN obligation has received substantial attention from economists; see, e.g., Bagwell and Staiger (1999), above fn 5, Bagwell and Staiger (2002), above fn 5, and Bagwell and Staiger, above fn 95. H. Horn and P.C. Mavroidis, ‘Legal and Economic Aspects of MFN’ 17 European Journal of Political Economy (2001) 233–​279 provide a comprehensive survey of the literature on MFN treatment. The national treatment obligation has only recently begun to receive formal scrutiny. H. Horn, ‘National treatment in the GATT’ 96(1) American Economic Review (2006) 394–​404 constitutes the first formal analysis of national treatment in the context of bilateral trade agreements. G.M. Grossman, H. Horn and P.C. Mavroidis, ‘National Treatment’ in H. Horn and P.C. Mavroidis (eds), Legal and Economic Principles of World Trade Law (Cambridge: Cambridge University Press, 2013) 205–​345 provide an extensive study of Article III of the GATT 1994 and argue that case law, economic theory, and negotiation history all suggest that the purpose of Article III is to outlaw protectionist use of domestic policies. H. Horn and P.C. Mavroidis, ‘Still Hazy After All These Years: The Interpretation of National Treatment in the GATT/​

The Regulation of International Trade: an economic perspective    57 Beginning with MFN, it is relatively straightforward to see that the MFN obligation saves transaction costs (i.e., the costs of negotiating with multiple Members). In addition, the economic literature shows that if countries are free to discriminate between their import sources, then each country levies higher tariffs on low-​cost exporters, relative to high-​cost exporters.106 Thus, the MFN obligation, which imposes the same tariff on all exporters can improve welfare by eliminating socially harmful discrimination against efficient sources of supply. Using a TOT model with multiple countries, Bagwell and Staiger have shown that the MFN obligation, if used in tandem with the reciprocity rule, converts a complex multilateral bargaining problem between WTO Members into a comparatively simple set of bilateral bargains that extend to the entire Membership. More importantly, MFN, working in concert with reciprocity, induces countries to disclose privately held information, thus guiding countries towards the most efficient trade agreement that locks in world prices (i.e., the multilateral TOT). The key point here is that, in a multi-​country setting, the combination of the MFN obligation and reciprocity has a similar effect as reciprocity does in a stylized two-​country world.107 Finally, the MFN obligation also solves the problem of ‘bilateral opportunism’, which implies an incentive for a pair of countries to liberalize trade bilaterally with the objective of exploiting their joint market power in world markets vis-​à-​vis third parties. The absence of MFN thereby risks eroding the value of concessions that the excluded third countries obtained in the initial multilateral negotiations, an outcome referred to as ‘concession erosion’ in the literature. MFN prevents concession erosion and the resulting ‘trade diversion’ (i.e., the reduction of imports from third countries), therefore strengthening the original multilateral trade concessions and thus the stability of the multilateral trading order.108 WTO Case Law on Tax Discrimination’ 15 European Journal of International Law (2004) 39–​69 discuss lessons that can be learned from WTO disputes regarding violations of the national treatment obligation. 106  See,

e.g., K. Gatsios, ‘Preferential Tariffs and the Most Favoured Nation Principle: A Note’ 28 Journal of International Economics (1990) 365–​373; H. Hwang and C.-​C. Mai, ‘Optimum Discriminatory Tariffs under Oligopolistic Competition’ 24 The Canadian Journal of Economics (1991) 693–​702; J.P. Choi, ‘Optimal Tariffs and the Choice of Technology: Discriminatory Tariffs vs. the Most Favored Nation Clause’ 38(1-​2) Journal of International Economics (1995) 143–​160; K. Saggi, ‘Tariffs and the Most Favored Nation Clause’ 63(2) Journal of International Economics (2004) 341–​368, P. McCalman, ‘Multi-​lateral Trade Negotiations and the Most-​Favored Nation Clause’ 57(1) Journal of International Economics (2002) 151–​176. 107  Bagwell and Staiger (1999), above fn 5. See also Ossa, above fn 33, who shows that reciprocity and the MFN obligation working in tandem can help countries internalize the production-​delocation externalities generated by opportunistic trade policies. 108 The concept of ‘trade diversion’ dates back to J. Viner, The Customs Union Issue (New York: Carnegie Endowment for International Peace, 1950). See A. Panagariya and P. Krishna, ‘On Necessarily Welfare-​Enhancing Free Trade Areas’ 57 Journal of International Economics (2002) 353–​ 367; C. Freund, ‘Different Paths to Free Trade: The Gains from Regionalism’ 115 Quarterly Journal of Economics (2000) 1317–​1341; D. Trefler, ‘The Long and Short of the Canada-​US Free Trade Agreement’ 94 American Economic Review (2004) 870–​895; J. Romalis, ‘NAFTA’s and CUSFTA’s Impact on International Trade’ 89 Review of Economics and Statistics (2007) 416–​435; C. Magee, ‘New Measures of Trade Creation

58    Kamal Saggi and Simon Schropp Notwithstanding these advantages of the MFN obligation in the GATT 1994, there is growing concern that the recent proliferation of preferential trade liberalization has led to a situation where discrimination has become widespread in the WTO.109 Despite those developments, in our view, MFN treatment remains the single most important principle behind the multilateral trading system. Without it, discriminatory policies would likely be even more pervasive and the multilateral system that much weaker. Regarding national treatment, Horn notes that absent some discipline on internal taxes, international trade agreements may be meaningless since countries can undo such agreements by imposing different internal taxes on imported and domestic goods.110 However, specifying constraints on all internal measures is virtually impossible. In light of the inevitable incompleteness of trade agreements, Horn and co-​authors show that a national treatment obligation reduces the transaction costs of drafting a contract that predicts a multitude of contractual contingencies. At the same time, it leaves enough discretion for countries to enact non-​discriminatory policies that allow them to be responsive to all manners of unforeseen contingencies.111 In this respect, the national treatment obligation constitutes an indirect (and cheap) way to make the trade agreement state-​contingent.112 Saggi and Sara build on Horn’s two-​country partial equilibrium framework by introducing heterogeneity along two important dimensions: product quality and market size.113 These two types of heterogeneity are likely to be important determinants of how WTO non-​discrimination obligations affect its Members. The authors find that when market size differs between countries that produce the same good in different qualities, a trade agreement with national treatment can make both countries better off, relative to a scenario where both countries tax-​discriminate against foreign firms.114 This result and Trade Diversion’ 75 Journal of International Economics (2008) 340–​362; K.A. Clausing, ‘Trade Creation and Trade Diversion in the Canada–​United States Free Trade Agreement’ 34 The Canadian Journal of Economics (2001) 678–​696 for more recent literature on the topic. 109 

Apart from Article XXIV of the GATT 1994, Articles XX, VI, and XIX of the GATT 1994, and the notion of Special and Differential Treatment for developing Members have all played a role in weakening the influence of MFN treatment. See also Chapter 16 of this handbook. 110  Horn, above fn 105. Any border measure can be replicated with the right combination of behind-​ the-​border measures (see Bagwell and Staiger (2016), above fn 1, at 62). 111  Horn, Maggi, and Staiger, above fn 75. 112 See also Maggi, above fn 1, at 350. However, as H. Horn, ‘The Burden of Proof in National Treatment Disputes and the Environment’ 2009 Research Institute of Industrial Economics, Working Paper Series 791 shows, the national treatment obligation is a blunt tool that may prevent countries from reacting in the most efficient manner to contingencies (for example, in situations where a discriminatory treatment of domestic and international goods would be efficient from a global welfare perspective). Consequently, common tax levels respecting the national treatment obligation may not always be efficient. See also Horn, above fn 105. 113 K. Saggi and S. Nese, ‘National Treatment at the WTO: The Roles of Product and Country Heterogeneity’ 49(4) International Economic Review (2008) 1365–​1394. 114  Intuitively, asymmetry in market size helps counterbalance the quality asymmetry between goods, thereby making national treatment acceptable to both parties. Even so, a trade agreement with national treatment arises only when the quality gap between goods is not excessive.

The Regulation of International Trade: an economic perspective    59 corresponds well with the emphasis placed on product ‘likeness’ in the context of Article III of the GATT 1994.

H. Exceptions to non-​discrimination rules There are multiple exceptions to the non-​discrimination principle in WTO law. Such exceptions include Articles XX and XXI of the GATT 1994 (on general and security exceptions), Article XIX of the GATT 1994 (on safeguards), and rules on antidumping and countervailing duties. However, the most important exception is Article XXIV of the GATT 1994, which allows for the formation of preferential trade agreements. This term encompasses bilateral and regional trade agreements, as well as customs unions. Preferential trade agreements are by default discriminatory. They allow subsets of WTO Members to drastically reduce (ideally, eliminate) trade barriers on each other while simultaneously maintaining positive tariffs vis-​à-​vis the rest of the WTO Membership not party to the preferential trade agreement. Thus, by their very nature, preferential trade agreements discriminate against non-​member countries, thereby setting up a potential clash with the MFN principle. Economists have addressed what the net effects of preferential trade agreements are on global welfare (i.e., whether they are ‘building blocks’ or ‘stumbling blocks’ of global trade liberalization), and whether the GATT rules (such as the requirements that parties liberalize ‘substantially all trade’ and refrain from increasing tariffs vis-​à-​vis non-​ parties) make sense from an economic perspective. The economic literature offers a cautionary outlook on whether preferential trade agreements are ‘building blocks’ of global trade. As Bagwell and Staiger show, discriminatory tariffs between parties and non-​parties of preferential trade agreements vitiate the attractive features of reciprocity and the MFN obligation, as described above.115 Furthermore, various authors conclude that countries, in the formation of preferential trade agreements, may be motivated by ‘bilateral opportunism’—​the incentive for a pair (or group) of countries to enter into preferential trade arrangements with the objective of exploiting their joint market power in world markets vis-​à-​vis non-​parties, thus eroding the value of concessions that the excluded countries had obtained in the initial multilateral negotiations.116 Bilateral opportunism is a form of ‘concession erosion’, and results in what is referred to as ‘trade diversion’ in the literature.117 Lastly, 115 

Bagwell and Staiger (1999), above fn 5. e.g., Bagwell and Staiger, above fn 95; N. Limão, ‘Are Preferential Trade Agreements with Non-​Trade Objectives a Stumbling Block for Multilateral Liberalization?’ 74 Review of Economic Studies (2007) 821–​855; A. Stoyanov, ‘Trade Policy of a Free Trade Agreement in the Presence of Foreign Lobbying’ 77(1) Journal of International Economics (2009) 37–​49; J. Kennan and R. Riezman, ‘Optimal Tariff Equilibria with Customs Unions’ 23 The Canadian Journal of Economics (1990) 70–​83; E. Ornelas, ‘Rent Destruction and the Political Viability of Free Trade Agreements’ 120 Quarterly Journal of Economics (2005) 1475–​1506. 117  See above fn 108. 116  See,

60    Kamal Saggi and Simon Schropp Levy and Krishna argue that parties to preferential trade agreements may lose the zeal to engage further in multilateral agreements after having concluded preferential trade agreements.118 In short, a significant portion of the literature finds that there is a substantial risk that preferential trade agreements could permit third-​party externalities to re-​enter the calculus of trade policymaking and takes a cautious position on the proposition that preferential trade agreements complement WTO agreements.119 This sobering assessment raises important follow-​up questions, including whether the WTO system would serve the cause of global free trade more effectively if it did not include Article XXIV of the GATT 1994, and what purpose the WTO’s guardrails regarding the formation of preferential trade agreements (substantially all trade; prohibition against raising external tariffs; etc.) play in mitigating those agreements’ negative effects. Economic research cautions against a rush to judgment and argues that to properly evaluate the role of bilateral trade agreements in a world of multilateral trade liberalization, it is necessary to determine the answer to an important counterfactual question: what multilateral liberalization would look like if preferential trade agreements were not permissible. Saggi and Yildiz address this key counterfactual question by developing a theory of trade agreements in a three-​country model in which they compare the advantages and disadvantages of bilateral and multilateral approaches to trade liberalization. One of their key results is that there exist circumstances where global free trade results only if countries are free to form bilateral trade agreements.120 In this way, the freedom to pursue bilateral preferential trade agreements can act as a driving force for multilateral trade liberalization. 118  P.I. Levy, ‘A Political-​ Economic Analysis of Free-​Trade Agreements’ 87(4) American Economic Review (1997) 506–​ 519 and P. Krishna, ‘Regionalism and Multilateralism: a Political Economy Approach’ 113(1) Quarterly Journal of Economics (1998) 227–​251. But see K. Saggi and H. Murat Yildiz, ‘Bilateralism, Multilateralism, and the Quest for Global Free Trade’ 81(1) Journal of International Economics (2010) 26–​37; K. Saggi, A. Woodland and H. Murat Yildiz, ‘On the Relationship Between Preferential and Multilateral Trade Liberalization: the Case of Customs Unions’ 5(1) American Economic Journal: Microeconomics (2013) 63–​99; E. Ornelas, ‘Feasible Multilateralism and the Effects of Regionalism’ 74(1) Journal of International Economics (2008) 202–​224 for more optimistic takes on preferential trade agreement in situations in which governments are self-​interested (and not only welfare-​maximizing). 119  Bagwell, Bown, and Staiger, above fn 58, section 6, convincingly argue that alternative approaches to trade agreements (profit-​shifting, delocation, outsourcing, and commitment approaches to trade agreements) do not suggest specific global welfare benefits of preferential trade agreements, when compared to the multilateral trading system. 120  Saggi and Yildiz, above fn 118. The logic for this surprising result is as follows. When considering whether or not to participate in multilateral trade liberalization, each country has to take into account its welfare under the trade regime that emerges in the absence of its participation. A non-​participating country is made worse off if the other two countries choose to enter into a bilateral trade agreement with each other that discriminates against it. Therefore, each country’s ex ante incentive to participate in multilateral trade liberalization is stronger when its non-​participation is coupled with a discriminatory bilateral preferential trade agreement between the other two countries, as opposed to a non-​ discriminatory (MFN) preferential trade agreement between the other two countries.

The Regulation of International Trade: an economic perspective    61 Economic literature has also detected incentives by parties to engage in à-​la-​carte liberalization, that is, selective liberalization of trade between the parties to a preferential trade agreement, which harms global welfare, and decreases the probability of further multilateral liberalization.121 To avoid this, the strictures of Article XXIV of the GATT 1994 appear appropriate and globally geared towards achieving welfare-​enhancing outcomes for the WTO Membership as a whole.

I. Why are Members allowed to escape market access commitments? From the inception of the GATT 1947, it was accepted that governments might need to ‘escape’ their negotiated market access commitments in situations of intense domestic import-​competing pressure. Such flexibility is expressly envisaged by Article XXVIIIbis of the GATT 1994 on tariff renegotiation (discussed above) or Article XIX of the GATT 1994 on ‘safeguards’. Building on GATT 1947 rules, the Safeguards Agreement represents an attempt to strengthen the mechanisms via which WTO Members can unilaterally (and temporarily withdraw) trade concessions.122 The economics literature agrees that, in light of the inevitable emergence of unforeseen contingencies, flexibility is efficient in that it leads to higher degrees of mutual market access and lower trade barriers. Intuitively, countries are more likely to make market access concessions if they know that in times of great domestic political pressure they will have the option of temporarily limiting market access of foreign firms. Most of the literature dealing with contractual escape is centered on the TOT family of models.123 Horn et al. find that escape clauses allowing governments to increase tariffs in times of high import activity are important tools for counteracting contractual incompleteness and prevent policymakers from overusing their policymaking discretion.124

121  B.M.

Hoekman and P.C. Mavroidis, ‘WTO “à la carte” or WTO “menu du jour”? Assessing the Case for Plurilateral Agreements’ 2013 EUI Working Paper No. RSCAS, 2013/​58; B.M. Hoekman and P.C. Mavroidis, ‘Embracing Diversity: Plurilateral Agreements and the Trading System’ 2014 CEPR, Discussion Paper No. 10204. 122  Such safeguard actions can only be undertaken under specific legal prerequisites and if affected Members are properly compensated for their loss of market access (Article XIX:1(a) of the GATT 1994). Article 8 of the Safeguards Agreement lays down the appropriate remedies for Members affected by any safeguard action, namely compensation (para 1), or suspension of equivalent concessions (para 2), i.e., unilateral trade sanctions on the imposing Member. See also Chapters 16 and 21 of this handbook. 123  In a typical model, countries enter into trade agreements in anticipation of preference shocks that are usually privately observed by the affected country. Such shocks may provoke contractual ‘regret’ in the afflicted country in a way that affects the efficient degree of trade liberalization. In other words, the Member impacted by a preference shock may need to temporarily increase trade protection for reasons of national welfare (or political expediency by trade policymakers). 124  Horn, Maggi, and Staiger, above fn 75.

62    Kamal Saggi and Simon Schropp The literature acknowledges a balance between countries’ need to escape from otherwise rigid bindings for global efficiency reasons, on the one hand, and the need to check Members’ incentives to cheat, i.e., pretend injury from random shocks for purely protectionist purposes, on the other.125 This requires governments affected by preference shocks to be ‘truthful’, i.e., to only exercise escape clauses in situations of true ‘regret’. According to economists, the WTO system for contractual escape has some appealing features that entice such truth-​telling by governments affected by ‘regret’ contingencies resulting from protectionist shocks. Some authors argue that the ‘dynamic-​use constraint’ enshrined in the Safeguards Agreement may facilitate truth-​telling. If a government imposes safeguard protection for up to 180 days, then it is not allowed to re-​impose escape-​clause protection for the same product for the next year (Article 7.6(a)), and no more than twice in a five-​ year period (Article 7.6(b)). According to Bagwell and Staiger, this dynamic constraint introduces an opportunity cost to a government, so that it will impose an escape-​clause tariff only after careful consideration.126 Bond and Beshkar consider a model with costly ‘state verification’, that is, costs that the importing government must incur to publicly prove that its preference shock is real.127 These costs, again, induce the importing Member to tell the truth.128 Most contributions dealing with contractual escape in the WTO e­ mphasize the nature and degree of WTO remedies through which trading partners are compensated following the invocation of an escape clause. As long as the level of compensation to trading partners is at least commensurate with their loss of market access, Members affected by preference shocks will only trigger escape mechanisms in times of crises, and not for opportunistic (protectionist) reasons. (This is a restatement of the ‘efficient breach’ theory introduced above.129) Some authors have expressed concern that the current design and level of remedies granted in the WTO are insufficient to elicit ‘efficient’ breach, resulting in excessive use of available escape mechanisms and under-​compensation of those WTO Members affected by opportunistic use of escape.130

125  Horn,

Maggi, and Staiger, above fn 75; Mahlstein and Schropp, above fn 101; Schropp, above fn 44; H.V. Milner and P. Rosendorff, ‘The Optimal Design of International Institutions: Uncertainty and Escape’ 55(4) International Organization (2001) 829–​857; M. Beshkar and E.W. Bond, ‘Cap and Escape in Trade Agreements’ 9(4) American Economic Journal: Microeconomics (2017) 171–​202; Schwartz and Sykes, above fn 100; P. Rosendorff, ‘Stability and Rigidity: Politics and Design of the WTO’s Dispute Settlement Procedures’ 99(3) American Political Science Review (2005), 389–​400; Herzing, above fn 102. 126  Kyle Bagwell and Robert W. Staiger, ‘Enforcement, Private Political Pressure and the GATT/​WTO Escape Clause’ 34(2) Journal of Legal Studies (2005b) 471–​513. 127  See above fn 122 for verification costs laid out by the WTO’s rules on safeguards. 128  Beshkar and Bond, above fn 125. 129  See above fn 103. 130  Mahlstein and Schropp, above fn 102; Schropp, above fn 44; Beshkar and Bond, above fn 125; Herzing, above fn 102.

The Regulation of International Trade: an economic perspective    63

IV. Conclusion In this chapter, we have reviewed leading theories for why sovereign countries conclude trade agreements and the extent to which these theoretical rationales can explain key rules and pillars of the international trading order, as laid down in the WTO agreements. We conclude with a few observations. First, since the WTO, at its core, is an economic treaty, it is of paramount importance to understand the political-​economic determinants of trade agreements and the international trade rules they set out. Second, while the various rationales for trade agreements are potentially complementary, there has not yet emerged a fully satisfactory unified theory of trade agreements that integrates all leading rationales for such agreements. Third, and as a corollary to the previous point, although the TOT theory has proven to be a powerful conceptual tool, no single theory of trade agreements can explain all the most important design features of the GATT 1994 and the WTO agreements as a whole. Finally, empirical research that can confirm or disconfirm the accuracy of theoretical models has been slow to catch up with the theory primarily due to data limitations. Fourth, the economic literature on trade agreements puts a significant emphasis on description while oftentimes shying away from prescription. Given the intense pressures facing the multilateral trading system today, economic analyses proposing reforms aimed at improving the system’s performance seem to be the need of the hour.

Further reading K. Bagwell, C.P. Bown, and R.W. Staiger, ‘Is the WTO Passé’, World Bank Policy Research, 2015 Working Paper No. 7304 C.P. Bown and M.A. Crowley, ‘The Empirical Landscape of Trade Policy’ in K. Bagwell and R.W. Staiger (eds), Handbook of Commercial Policy (Amsterdam: North Holland, 2016), vol. 1, part A, 3-​108 G.M. Grossman, ‘The Purpose of Trade Agreements’ in K. Bagwell and R.W. Staiger (eds), Handbook of Commercial Policy (Amsterdam: North Holland, 2016), vol. 1, part A, 379–​434 G.M. Grossman and H. Horn, ‘Why the WTO? An Introduction to the Economics of Trade Agreements’ in H. Horn and P.C. Mavroidis (eds), Legal and Economic Principles of World Trade Law (Philadelphia, PA: The American Law Institute, 2012), 9–​67 G.M. Grossman, P. McCalman, and R.W. Staiger, ‘The ‘New’ Economics of Trade Agreements: From Trade Liberalization to Regulatory Convergence?’ NBER 2019 Working Paper No. 26132 G. Maggi, ‘International Trade Agreements’ in G. Gopinath, E. Helpman, and K. Rogoff (eds), Handbook of International Economics (Amsterdam: North Holland, 2014), vol. 4, 317–​390

Chapter 4

The Sou rc e s of In ternationa l T ra de L aw Matthew Kennedy

I. II.

Introduction Multilateral rules A. WTO agreements B. WTO decisions and other actions III. Bilateral and regional rules A. Bilateral and regional trade agreements B. Other agreements I V. Preferential trade arrangements . Concluding remarks V

64 65 65 74 80 80 86 87 87

I. Introduction International trade law springs from multiple sources. Multilateral trade rules administered by the WTO overlap with bilateral and regional arrangements, producing a so-​ called ‘spaghetti bowl’ of rules and commitments. Some incorporate rules developed in other fora. At each level, treaty rules are supplemented by decisions and by procedures, such as dispute settlement, that can clarify the primary rules. Rule-​ making is often more organic than systematic: old rules developed in the framework of the GATT were not codified at the establishment of the WTO and new instruments continue to be adopted up to the present day without always clarifying their normative value. International trade law relies on customary rules of public international law regarding certain fundamental issues. These include customary rules on the conclusion

The Sources of International Trade Law    65 and entry into force of treaties1 and the temporal and territorial application of treaties.2 International trade law also leaves issues of Statehood and the delimitation of national territory to be determined outside trade fora. National law is not a source of international trade law. National law is the subject of international trade law and therefore expected to conform to its rules.3 However, on certain issues, international trade law rules may incorporate national law rules4 or take them into account.5 National laws addressing foreign trade practices lie outside the field of international law and are beyond the scope of this chapter.

II.  Multilateral rules The multilateral rules of international trade are administered by the WTO. Most primary WTO rules are located in the WTO agreements, which may be substantive or procedural. Certain agreements include schedules of individual concessions or commitments applicable to each Member. The primary rules include some developed in the framework of the WTO’s predecessor (the GATT), and some developed in other international organizations. Subsequent developments within the WTO framework, such as Ministerial Declarations and decisions by WTO bodies, are another potential source of rules. Many clarifications of the rules have been provided by the WTO dispute settlement system.

A. WTO agreements The primary rules of the WTO are set out in the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement6) and its annexes, as amended.7 1  See Vienna Convention the Law of Treaties (1969). See further A. Aust, Modern Treaty Law and Practice, 3rd edition (Cambridge: Cambridge University Press, 2013). 2  See Articles 28 and 29 of the VCLT. See Appellate Body Report, Brazil –​Dessicated Coconut, adopted 20 March 1997, 15; Appellate Body Report, Canada –​Patent Term, adopted 12 October 2000, para 71. See further M. Kennedy, ‘Overseas Territories in the WTO’ 65 International and Comparative Law Quarterly (2016) 741. 3  See, e.g., Article XVI:4 of the WTO Agreement. 4  For example, as regards the nationality of persons: Article XXVIII(k), (m) and (n) of the GATS, Article 3.1 of the TRIPS Agreement; and waivers for preferential trade arrangements based on the terms of national preference schemes (see Section IV below). 5  National law can constitute a supplementary means of interpretation if it sheds light on the common intention of the parties to an agreement. See, e.g., Appellate Body Report, EC –​Chicken Cuts, adopted 27 September 2005, paras 302–​9. 6  1867 U.N.T.S. 154, 33 I.L.M. 1144. This Agreement is not referred to as the ‘Marrakesh Agreement’ in any of the annexed agreements or in the Final Act of the Uruguay Round. 7  The WTO Agreements, The Marrakesh Agreement Establishing the World Trade Organization and its Annexes, 2nd edition (Cambridge: Cambridge University Press, 2017).

66   Matthew Kennedy

1. Constitutive agreement The WTO Agreement is the constitutive agreement of the organization. Three of its important features affect the development of trade rules. These are: a. the WTO is a Member-​driven organization. The agreement provides that the organization’s governing body (the Ministerial Conference), as well as the General Council and its major subsidiary bodies, are composed of, or open to, representatives of the whole membership.8 It does not create any non-​plenary organ such as an executive board9 nor does it confer on the WTO Secretariat or its head, the WTO Director-​General, any power of initiative besides presenting the WTO budget estimate;10 b. the WTO operates by consensus. The agreement provides that decisions are taken by consensus.11 Although it also contains provisions for voting in the Ministerial Conference and General Council12, these are not used in practice;13 and c. the WTO was established according to the single undertaking approach. The constitutive agreement and the trade agreements are fused into a single treaty that Members must accept as a whole.14 That approach was adopted during the Uruguay Round that led to the establishment of the WTO15 but it is not a rule 8 

Article IV:1, 2, 5 and 7 of the WTO Agreement. the Chair or the Director-​General often convenes so-​called Green Room meetings among selected Members during ministerial conferences and negotiations. The Director-​ General decides who to invite to these meetings based on his or her own assessment of whose participation might be useful. Other Members tolerate this process but it has no formal status. Developments in these meetings are reported to the relevant WTO body. See P.J. Kuijper, ‘WTO Institutional Aspects’ in D. Bethlehem, D. McRae, R. Neufeld, and I. Van Damme (eds), The Oxford Handbook of International Trade Law, 1st edition (Oxford: Oxford University Press, 2009), Chapter 5, 112–​115. 10  Articles VI and VII:1 of the WTO Agreement. Nevertheless, the Director-​General was appointed, in an ex officio capacity, Chair of the Trade Negotiations Committee for the Doha Round: TN/​C/​1 (4 February 2002). 11  Article IX:1, first sentence, of the WTO Agreement. A matter submitted for consideration is deemed to have been decided by ‘consensus’ if no Member present at the meeting when the decision is taken formally objects to the proposed decision. 12  Articles IX:1, IX:2; IX:3, X:1, X:3, X:5, and XII:2 of the WTO Agreement. The voting provisions do not apply to subsidiary bodies, which can only make decisions by consensus. See, for example, Rules of Procedure for meetings of the Council for Trade in Goods, WT/​L/​79 (7 August 1995), Rule 33. 13  Regarding waivers and accessions, see ‘Decision-​Making Procedures under Articles IX and XII of the WTO Agreement’, Statement of the Chairman as agreed by the General Council on 15 November 1995, WT/​L/​93 (24 November 1995). 14  Articles II:2, XII:1, and XIV:1 of the WTO Agreement. Original Members are not required to accept amendments agreed after the establishment of the WTO or the plurilateral agreements: see Article XI:1 of the WTO Agreement. In their accession protocols, acceding Members do commit to accept the later amendments and they often agree to sign or initiate negotiations for membership of one or both of the plurilateral agreements. 15  Ministerial Declaration on the Uruguay Round, MIN/​DEC, para B(ii) (20 September 1986). 9 Informally,

The Sources of International Trade Law    67 applicable to the conduct, conclusion or entry into force of future negotiations, unless agreed.16

2. Substantive multilateral agreements The annexes to the WTO Agreement contain agreements that address the conduct of trade relations among the organization’s Members.17 There are currently 19 such trade agreements, of which 17 contain substantive rules and two are procedural. All agreements are multilateral except for two of the substantive agreements, which are plurilateral (that is, they are binding on some Members only). All 15 multilateral substantive agreements are set out in Annex 1. Many of them elaborate on GATT 1947, or revise Codes concluded within the GATT framework. These agreements can be grouped as follows: a. a broad agreement on trade in goods: • GATT 1994, comprising: • GATT 1947 and certain instruments developed in its framework;18 • six Understandings on the interpretation or application of GATT provisions;19 and • the Marrakesh Protocol.20 b. one sectoral agreement: • the Agreement on Agriculture; c. two agreements on particular types of non-​tariff barriers: • the SPS Agreement; and • the TBT Agreement; d. three agreements on contingent trade remedies: • the Anti-​Dumping Agreement; • the SCM Agreement; and • the Safeguards Agreement; e. five agreements on customs formalities and procedures: • the Customs Valuation Agreement; • the Agreement on Preshipment Inspection; • the Agreement on Rules of Origin; • the Agreement on Import Licensing Procedures; and

16 

For example, this approach was originally agreed for the results of the negotiations launched in the Doha Ministerial Declaration, WT/​MIN(01)/​DEC/​1 (20 November 2001), para 47. 17  Article II:2 of the WTO Agreement. 18  Discussed in Section II.A.6 below. 19  GATT 1994 incorporating text para 1(c). 20  GATT 1994 incorporating text para 1(d).

68   Matthew Kennedy • the Trade Facilitation Agreement;21 f. the TRIMS Agreement; g. the GATS; and h. the TRIPS Agreement, as amended.22 These substantive agreements apply cumulatively and frequently overlap. Most of them appear in Annex 1A on trade in goods. In the event of a conflict among those agreements, the Agreement on Agriculture ranks first23 while GATT 1994 ranks last.24 Two agreements appear in separate annexes: these are the GATS (Annex 1B) and the TRIPS Agreement (Annex 1C). The organization of the annexes provides a parameter for the principles of retaliation in disputes25 and it also separates discussion of the latter two agreements into different subsidiary bodies of the General Council.26 There is no express order of precedence among the substantive agreements vis-​à-​vis the GATS or the TRIPS Agreement.27

3. Procedural agreements There are two procedural agreements in Annexes 2 and 3. Both are multilateral. These are: a. the DSU: this is the procedural law applicable in WTO disputes. It provides an integrated mechanism that covers almost all WTO agreements. It applies together with special or additional rules and procedures found in certain covered agreements; and b. the TPRM, as amended:28 this agreement creates a transparency mechanism that periodically reviews the trade policies and practices of each WTO Member. It is not covered by the DSU.29

21 Protocol

Amending the Marrakesh Agreement Establishing the World Trade Organization, annexed to General Council Decision of 27 November 2014, WT/​L/​940 (28 November 2014). The amendment entered into force on 22 February 2017 for those Members that had accepted it. 22  Protocol Amending the TRIPS Agreement, annexed to General Council Decision of 6 December 2005, WT/​L/​641 (8 December 2005). The amendment entered into force on 23 January 2017 for those Members that had accepted it. 23  Article 21.1 of the Agreement on Agriculture. 24  General interpretative note to Annex 1A. In addition, the scope of the TBT Agreement is partly defined by reference to the scope of the SPS Agreement: see Article 1.5 of the TBT Agreement. 25  Article 22.3(g) of the DSU. 26  Article IV:5 of the WTO Agreement. 27 The WTO Agreement prevails over all the multilateral trade agreements to the extent of any conflict between it and them: see Article XVI:3 of the WTO Agreement. 28  General Council Decision, Amendment of the Trade Policy Review Mechanism, WT/​L/​1014 (27 July 2017). The amendment took effect on 1 January 2019. 29  Article 1.1 of, and Appendix 1 to, the DSU; para A(ii) of the TPRM.

The Sources of International Trade Law    69

4. Plurilateral agreements There are two remaining plurilateral agreements in Annex 4, both of them substantive.30 They are ‘plurilateral’ because only some WTO Members are party to them. These are: a. the Civil Aircraft Agreement: this agreement was concluded in 1979, entered into force in 1980 and was annexed to the WTO Agreement in 1994. Its product coverage has been updated, most recently in 2015.31 It is not covered by the DSU;32 and b. the GPA: a prior version of this agreement was concluded in 1994 at the establishment of the WTO. The current version was concluded as an amendment in 2012.33 It is covered by the DSU but participation in DSB decisions or actions in this respect is limited to parties to that agreement.34 Plurilateral agreements do not create obligations or rights for WTO Members that have not accepted them, in accordance with Article II:3 of the WTO Agreement and consistent with the general rule of public international law regarding third States.35 This does not mean that parties to plurilateral agreements can infringe the rights of WTO Members that have not accepted them; rather, such WTO Members retain their rights under other WTO agreements, including their rights to most-​favoured-​nation treatment.

5. Schedules Schedules are annexed to three WTO agreements.36 Each one is an integral part of its respective agreement37 but sets out concessions or commitments that relate to an individual Member or Members only.38 The schedules are as follows:

30 

Article II:3 of the WTO Agreement. (2015) Amending the Annex to the Agreement on Trade in Civil Aircraft, TCA/​9 (5 November 2015). 32  No decision has been adopted by the parties to the Civil Aircraft Agreement to apply the DSU to that agreement in accordance with Appendix 1 to the DSU. 33   2012 Protocol Amending the Agreement on Government Procurement (1994), GPA/​113 (2 April 2012). This version of the GPA entered into force for those parties that had accepted it on 6 April 2014 and had replaced the 1994 version in relation to all parties by 1 January 2021. 34  Article 2.1 of the DSU. 35  See Article 34 of the VCLT. See generally J. Crawford, Brownlie’s Principles of Public International Law, 8th edition (Oxford: Oxford University Press, 2012), pp. 384–​386. 36  The Trade Facilitation Agreement also incorporates developing countries’ and LDCs’ respective notifications of category A, B and C commitments, regarding the timing of implementation of each: see Articles 15:1, 15:2, 16:5, 24:10, and 24:11 of the Trade Facilitation Agreement. 37  Article II:7 of the GATT 1994; Article XX:3 of the GATS; Article XXII:15 of the GPA. 38  See generally WTO, A Handbook on Reading WTO Goods and Services Schedules (Cambridge: Cambridge University Press, 2009). 31 Protocol

70   Matthew Kennedy a. goods schedules annexed to GATT 1994. These contain concessions on tariffs in Part I, concessions on non-​tariff measures in Part III, and specific commitments on domestic support and export subsidies on agricultural products under the Agreement on Agriculture in Part IV; b. services schedules annexed to the GATS. These contain market access, national treatment and additional commitments. Lists of exemptions from most-​favoured-​ nation treatment are also annexed to the GATS; and c. coverage schedules annexed to the GPA. These set out the procuring entities, goods and services covered by the agreement, the threshold values above which procurement activities are covered, and exceptions to coverage. ‘Critical mass’ and certain other sectoral agreements are compilations of improvements to concessions or commitments in the schedules of a given group of Members. The improvements are offered only by participating Members but the benefits are applied on an MFN basis to all WTO Members. Entry into force of these agreements may be linked to implementation by Members whose combined trade coverage represents a ‘critical mass’, i.e. a specified proportion of trade in the relevant sector that creates sufficient incentive for an agreement among those Members to outweigh the disincentive of free-​riding by other Members. The Information Technology Agreement is a ‘critical mass’ agreement.39 Similar agreements also compile improvements in the schedules of a group of Members but their entry into force is not based on a specified proportion of trade in the relevant sector. Examples include the so-​called ‘Pharma Agreement’40 and the four GATS Protocols.41 Other instruments set out model commitments which take effect only to the extent that Members choose to incorporate those commitments in their respective schedules. Examples are the Understanding on Commitments in Financial Services and the Reference Paper on the regulatory framework for basic telecommunications services.

6. Instruments from the prior GATT framework The GATT 1947 and certain rules previously agreed within its framework are incorporated in the GATT 1994. As part of the latter agreement, they have the status of primary rules in the WTO regardless of whether they were primary or secondary rules in the prior GATT framework. The GATT 1994 incorporating text42 describes these instruments by type without an itemized list. They can be summarized as follows: 39 Ministerial Declaration on Trade in Information Technology Products, WT/​ MIN(96)/​ 16 (13 December 1996), expanded in the Ministerial Declaration on the Expansion of Trade in Information Technology Products, WT/​MIN(15)/​25 (16 December 2015). 40  Originally noted in a Record of discussion, L/​7430 (25 March 1994). Several reviews to its product coverage have taken place and been circulated in G/​MA/​W/​10 (11 October 1996), G/​MA/​W/​18 (13 November 1998), G/​MA/​W/​85 (19 March 2007), and G/​MA/​W/​102 (2 August 2010). 41  S/​L/​11 (24 July 1995), S/​L/​12 (24 July 1995), S/​L/​20 (30 April 1996), and S/​L/​45 (3 December 1997). 42  The incorporating text is titled ‘General Agreement on Tariffs and Trade 1994’ and appears at the beginning of Annex 1A to the WTO Agreement.

The Sources of International Trade Law    71 a. the text of the GATT as signed in 1947 and subsequently rectified, amended or modified prior to 1 January 1995, including the interpretative notes and supplementary provisions listed in Annex I, and other annexes.43 Certain provisions of GATT 1947 are nonetheless superseded by provisions of the WTO Agreement;44 b. GATT 1947 tariff protocols and certifications of goods concessions.45 These set out the results of successive tariff negotiations and renegotiations; c. GATT 1947 accession protocols of original WTO Members, except that these now apply on a definitive basis and do not ‘grandfather’ prior inconsistent measures;46 d. GATT 1947 waivers still in force on 1 January 1995;47 and e. other decisions of the CONTRACTING PARTIES to GATT 1947.48 These include the 1979 Enabling Clause49 but they do not include adopted GATT panel reports.50 It can also be noted that the decisions, procedures and customary practices followed by the GATT CONTRACTING PARTIES and bodies established in the framework of GATT 1947 continue to provide guidance to the WTO.51

7. Instruments developed in other international fora Certain WTO agreements incorporate substantive rules agreed in other international organizations. As part of those agreements, these rules now have the status of primary rules in the WTO and are enforceable under the DSU. This is a major feature of the TRIPS Agreement, which incorporates scores of provisions in Conventions administered by the World Intellectual Property Organization (WIPO).52 The TBT Agreement also incorporates definitions from the sixth edition of the ISO/​IEC Guide 2: 1991, General 43 

GATT 1994 incorporating text para1 (a). For example, the provisions on decision-​making and on acceptance, entry into force, and deposit in Articles IX and XIV of the WTO Agreement prevail to the extent of any conflict with Articles XXV and XXVI of the GATT 1994, by virtue of the precedence clause in Article XVI:3 of the WTO Agreement. 45  GATT 1994 incorporating text para 1(b)(i). 46  GATT 1994 incorporating text para 1(b)(ii). However, paragraph 3 maintains an exemption for Section 27 of the US Merchant Marine Act (the ‘Jones Act’). 47  GATT 1994 incorporating text para 1(b)(iii). See the list in WT/​L/​3 (27 January 1995) and Corr.1 (23 March 1995). Most have since expired. 48  GATT 1994 incorporating text para 1(b)(iv). Whenever reference was made to the contracting parties to GATT 1947 acting jointly, they were referred to in all capitals: see Article XXV:1 of the GATT 1947. 49  Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries, L/​4903 (28 November 1979). 50  See Appellate Body Report, Japan –​Alcoholic Beverages II, adopted 1 November 1996, 14. 51  Article XVI:1 of the WTO Agreement. 52  These include most substantive provisions of the Paris Convention for the Protection of Industrial Property (1967) and the Berne Convention for the Protection of Literary and Artistic Works (1971), as well as many provisions of the Treaty on Intellectual Property in Respect of Integrated Circuits (which never entered into force) plus certain provisions of the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (administered by WIPO and UNESCO). See Articles 1.3, 2.1, 3.1, 9.1, and 35 of the TRIPS Agreement. See further Chapter 19 of this handbook. 44 

72   Matthew Kennedy Terms and Their Definitions Concerning Standardization and Related Activities. The SCM Agreement cross-​references certain provisions of the OECD Arrangement on Officially Supported Export Credits.53 Two WTO agreements make reference to the work of standardizing organizations, including public/​private bodies. The SPS Agreement creates a presumption that SPS measures that comply with international standards, guidelines and recommendations developed by relevant international organizations also comply with that agreement and GATT 1994.54 Similarly, the TBT Agreement creates a rebuttable presumption that a technical regulation with a legitimate objective that is in accordance with relevant international standards complies with the obligation not to create unnecessary obstacles to international trade.55 The DSU incorporates by reference the customary rules of interpretation of public international law.56 These customary rules of interpretation have been identified principally as those codified in Articles 31 to 33 of the VCLT, drafted by the International Law Commission.57 This is not a reference to rules of public international law in general. WTO panels and the Appellate Body have at times referred to certain public international law principles and concepts as well.58 Other treaties and instruments from international fora outside the WTO have also been referred to in the interpretation of provisions of WTO agreements, but not always with an explanation of the legal basis for doing so.59 Decisions on least-​developed country (LDC) status are taken by the United Nations General Assembly.

8. Instruments contemporaneous with the establishment of the WTO A series of 27 Declarations and Decisions of the Uruguay Round Trade Negotiations Committee was made in connection with the conclusion of the WTO Agreement and annexed to the Final Act of the Uruguay Round. One such Decision is incorporated by reference in the Agreement on Agriculture.60 Several others set out draft decisions that 53 

Annex 1, Item (k) to the SCM Agreement. Article 3.2 of the SPS Agreement; see further Chapter 26 of this handbook. 55  Article 2.5 of the TBT Agreement. 56  Article 3.2 of the DSU. 57  Appellate Body Report, US –​Gasoline, adopted 20 May 1996, p. 17; Appellate Body Report, Japan –​ Alcoholic Beverages II, adopted 1 November 1996, 10; Appellate Body Report, US—​Softwood Lumber IV, adopted 17 February 2004, para 59 and fn 50. In turn, Article 31 of the VCLT lists among the authentic elements of treaty interpretation ‘any relevant rules of international law applicable in the relations between the parties’. See further Chapters 35 and 36 of this handbook. 58  See further Chapter 6 of this handbook and G. Cook, A Digest of WTO Jurisprudence on Public International Law Concepts and Principles (Cambridge: Cambridge University Press, 2015). 59  See, for example, Appellate Body Report, US –​Shrimp, adopted 21 November 2001, paras 130-​4. See generally J. Pauwelyn, Conflict of Norms in Public International Law, How WTO Law Relates to other Rules of International Law (Cambridge: Cambridge University Press, 2003), Chapter 3. 60  Article 16 of the Agreement on Agriculture, referring to the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-​Developed and Net Food-​Importing Developing Countries. 54 

The Sources of International Trade Law    73 were later adopted by WTO bodies.61 One provided for measures in favour of LDCs.62 Others concerned organizational matters, transitional arrangements, incomplete negotiations and work programme items.63 The Harmonized System (HS) product nomenclature developed by the WCO has been deemed an agreement made in connection with the conclusion of the WTO Agreement.64 Given the age and origin of the HS, this is a surprising approach but one that leads to a convenient result. The HS, including its chapter notes and explanatory notes, can be taken into account in interpreting tariff commitments in WTO Members’ goods schedules. The Customs Valuation Agreement and the Agreement on Rules of Origin also established two technical committees under the auspices of the WCO.65 Statements by Chairpersons that evidence an agreement between the Members, in certain circumstances, must also be taken into account as context in interpreting the terms of a WTO agreement. Contemporaneous statements at the time of adoption of an instrument that is later incorporated in a WTO agreement may also constitute an agreement made in connection with the conclusion of that WTO agreement.66

9. Terminated and expired rules Certain agreements and provisions that were annexed to the WTO Agreement in 1994 are no longer in effect either by their own terms or due to subsequent decisions. The Agreement on Textiles and Clothing terminated.67 Articles 6.1, 8 and 9 of the SCM Agreement68 and Article 13 of the Agreement on Agriculture (the ‘peace clause’)69 have expired. The International Dairy Agreement and the International Bovine Meat Agreement, both plurilateral agreements, were terminated and deleted from the WTO Agreement.70 61 For example, the Marrakesh Ministerial Decision on Notification Procedures (adopted by the General Council), WT/​GC/​M/​1 (28 February 1995), item 9; Decision Regarding Cases Where Customs Administrations Have Reasons to Doubt the Truth or Accuracy of the Declared Value, G/​VAL/​1 (27 April 1995); Decision on Certain Dispute Settlement Procedures for the General Agreement on Trade in Services, S/​L/​2 (4 April 1995) (now superseded). 62  Decision on Measures in Favour of Least-​Developed Countries. 63 Certain decisions purported to create derogations from WTO obligations on a transitional basis but they have now expired: see Decision on the Acceptance of and Accession to the Agreement Establishing the WTO, cf. Article XIV of the WTO Agreement; Decision on Financial Services, cf. Articles II and XXI of GATS. 64   Article 31(2)(a) of the VCLT. See Appellate Body Report, EC –​Chicken Cuts, adopted 27 September 2005, para 199. The HS is governed by the International Convention on the Harmonized Commodity Description and Coding System of 1983, as amended. 65  Article 18.2 of and Annex II to the Customs Valuation Agreement; Article 4.2 of and Annex I to the Agreement on Rules of Origin. The WCO was formerly the Customs Co-​operation Council. 66  See Panel Report, US –​Section 110(5) Copyright Act, adopted 27 July 2000, para 6.53; Appellate Body Report, US –​FSC, adopted 20 March 2000, para 112. 67  Terminated on 1 January 2005: see Article 9 of the Agreement on Textiles and Clothing. 68  Expired on 31 December 1999: see Article 31 of the SCM Agreement. 69  Expired on 31 December 2000: see Articles 1(f) and 13 of the Agreement on Agriculture. 70 Both terminated from the end of 1997: see IDA/​ 8 (30 September 1997) and IMA/​ 8 (30 September 1997).

74   Matthew Kennedy

B. WTO decisions and other actions The WTO agreements grant powers to the Ministerial Conference, the General Council and its subsidiary bodies to adopt decisions. The Ministerial Conference also continues the GATT practice of adopting Ministerial Declarations. All decisions and declarations are taken by consensus. Decisions specifically provided for in the WTO agreements can affect the operation of primary rules laid down in those agreements, while others may purport to create secondary rules. However, actions taken by the DSB cannot add to or diminish Members’ rights and obligations under the covered agreements.

1. Special decisions and actions The WTO agreements specifically provide for certain types of decision and action that can alter the operation of their own rules. The decisions and actions variously take effect upon adoption or notification or after an acceptance procedure.71 The WTO Agreement specifically provides for the following four types of decision that can be taken by the Ministerial Conference or the General Council:72 a. Authoritative interpretations adopted under Article IX:2 of the WTO Agreement. No interpretation has been adopted according to this procedure;73 b. Waivers from obligations granted under Article IX:3 and 4 of the WTO Agreement. Over 200 waivers have been granted;74 c. Approval of amendments under Article X of the WTO Agreement which, in most circumstances, take effect only upon acceptance by a qualified majority of Members.75 Three such amendments have been agreed;76 and d. Approval of Protocols of Accession under Article XII:2 of the WTO Agreement. An accession protocol requires acceptance by the acceding Member and takes effect according to its own terms. Each protocol, which incorporates specific commitment paragraphs of a working party report, includes commitments that are considered enforceable under the DSU.77 To date, 36 protocols of accession have been approved.78 71 See W.J. Davey, ‘Institutional Framework’ in P.F.J. Macrory et al. (eds), The World Trade Organization, Legal, Economic and Political Analysis, Vol. 1 (Berlin: Springer, 2005), 51–​87, at 67–​7 1, 81–​85. 72   Article IV:2 of the WTO Agreement. 73  Interpretations of provisions have been adopted pursuant to general powers (discussed below). 74 By far the most common reason for a waiver is to allow a Member to update the customs classification in its goods schedule. Many waivers are also granted to authorize preferential trade treatment. See, e.g., the Decision on Preferential Tariff Treatment for Least-​Developed Countries, WT/​L/​ 304 (17 June 1999), extended by WT/​L/​759 (29 May 2009) and WT/​L/​1069 (17 October 2019). 75  Amendments of the DSU, the TPRM and certain amendments of the TRIPS Agreement can take effect upon approval by the Ministerial Conference: see Articles X:6 and X:8 of the WTO Agreement. 76  Above fn 21, fn 22, and fn 28. 77  Accession commitments are searchable online at < http://​acdb.wto.org/​ >. 78 The list of completed accessions is available at .

The Sources of International Trade Law    75 The WTO Agreement also provides for two types of action that take effect upon notification by a Member: e. Non-​application of the WTO Agreement vis-​à-​vis an acceding Member may be invoked by an existing Member under Article XIII:1 upon notice to the Ministerial Conference prior to approval of the terms of that Member’s accession. Non-​ application has been invoked on multiple occasions, usually temporarily;79 and f. Withdrawal from the WTO Agreement may be effected by a Member under Article XV upon written notice to the Director-​ General. No Member has withdrawn from the organization. The substantive multilateral agreements, on rare occasions, specifically attribute powers to subsidiary bodies of the General Council to take decisions that alter the operation of primary rules. These powers are limited in scope. The major examples are: g. Decisions to extend transition periods under Article 27.4 of the SCM Agreement80; Article 5.3 of TRIMS81; and Article 66.1 of the TRIPS Agreement;82 and h. Decisions to adopt procedures to certify rectifications or improvements to services schedules under Article XXI:5 of GATS.83 Not all specifically attributed powers are intended to create binding rules. One example is the responsibility to develop a procedure to monitor the process of international harmonization under Article 12.4 of the SPS Agreement.84 Nor do provisions of the WTO agreements that mandate negotiations on specific issues necessarily prejudge the

79 See,

e.g., the United States’ invocation as regards Mongolia, WT/​L/​159 (17 July 1996), later withdrawn in WT/​L/​306 (8 July 1999); and Turkey’s invocation as regards Armenia, WT/​L/​501 (3 December 2012). 80  See minutes of the SCM Committee regular meeting of 23 October 2012, G/​SCM/​M/​83 (10 January 2003), para 28. 81  See, e.g., G/​L/​499-​504 (9 November 2001). 82  IP/​C/​25 (1 July 2002); IP/​C/​35 (17 June 2005); IP/​C/​40 (30 November 2005); IP/​C/​64 (12 June 2013); IP/​C/​73 (6 November 2015). In addition, Article 64.3 of the TRIPS Agreement specifically attributes powers to the Ministerial Conference to take decisions regarding non-​violation and situation complaints under that agreement. The Ministerial Conference and the General Council have instead issued a series of decisions on a moratorium for such complaints under the TRIPS Agreement, for example, WT/​L/​1033 (18 December 2017). 83  Decision on Procedures for the Implementation of Article XXI of GATS adopted by the Council for Trade in Services on 19 July 1999, S/​L/​79 (20 October 1999); Decision on Procedures for the Certification of Rectifications or Improvements to Schedules of Specific Commitments adopted by the Council for Trade in Services on 14 April 2000, S/​L/​83 (18 April 2000). Although the Council for Trade in Services has adopted disciplines under Article VI:4 of GATS, these have not been formally integrated into the GATS, see S/​L/​63 (15 December 1998), para 3. In addition, Article XII:5(b) and XII:6 of the GATS specifically attributes powers to the Ministerial Conference to adopt procedures regarding review of balance-​of-​payments restrictions on trade in services. No such decision has been taken. 84  G/​SPS/​40 (5 July 2006).

76   Matthew Kennedy procedures required to give legal effect to the results. One example is the negotiation on a multilateral register of geographical indications for wines under Article 23.4 of the TRIPS Agreement. Analogous provisions in the plurilateral agreements also establish procedures to modify primary rules. There have been accessions85 and amendments86 to both remaining plurilateral agreements. Schedules can be rectified or modified according to certification procedures established in the text of the relevant agreement or special decisions provided for in the text.87 Certifications of changes to schedules are usually made by the WTO treaty depositary (i.e. the Director-​General) after circulation of proposed changes without any objection from any another Member within the prescribed period of time.88 Protocols have also been used to introduce commitments into services schedules.89 Procès-​verbaux of rectification are also issued by the WTO treaty depositary (i.e. the Director-​General) to rectify errors in WTO treaty texts, in particular, in the schedules.90

2. Other decisions Most WTO decisions discharge the general responsibilities of the Ministerial Conference, the General Council or a subsidiary body rather than any specifically attributed power. The scope of decisions is limited only by the responsibilities granted to the bodies that adopt them.91 These decisions are made according to the ordinary decision-​making procedure set out in Article IX:1, first sentence, of the WTO Agreement.92 The ordinary decision-​making procedure does not state whether these decisions create legal rights and obligations for Members. It implies that these decisions cannot

85 See Status of WTO Legal Instruments (2021).

86 Protocol (2001) Amending the Annex to the Agreement on Trade in Civil Aircraft, TCA/​ 4 (23 November 2001) and Protocol (2015) Amending the Annex to the Agreement on Trade in Civil Aircraft, TCA/​9 (5 November 2015); and the 2012 Protocol Amending the Agreement on Government Procurement (1994), GPA/​113 (2 April 2012). See further Status of WTO Legal Instruments (2021). 87 See Decision on Procedures for the Modification and Rectification of Schedules of Tariff Concessions, L/​4962 (28 March 1980); Decision on Procedures for the Implementation of Article XXI of GATS adopted by the Council for Trade in Services on 19 July 1999, S/​L/​79 (20 October 1999); Decision on Procedures for the Certification of Rectifications or Improvements to Schedules of Specific Commitments adopted by the Council for Trade in Services on 14 April 2000, S/​L/​83 (18 April 2000); Article XIX of the GPA. 88  A notable exception is the GPA, under which Parties notify modifications to the information contained in three particular appendices to that agreement: see Article VI:3 of the GPA. 89  Above fn 41. 90  These are circulated in the WT/​Let/​document series. 91  Articles III and IV of the WTO Agreement; Article XXIV:1 of GATS; Article 68 of the TRIPS Agreement; committee provisions of other agreements, such as Article 12.1 of the SPS Agreement; and decisions establishing subsidiary bodies, such as General Council Decision on Committee on Regional Trade Agreements, WT/​L/​127 (7 February 1996). 92  See also the Rules of Procedure of the Ministerial Conference, the General Council and each subsidiary body.

The Sources of International Trade Law    77 prevail over the WTO agreements because they neither waive obligations nor amend agreements. The fact that these decisions are not part of the covered agreements does not imply that they are not binding; even one multilateral WTO agreement (the TPRM) is not covered by the DSU. On the other hand, the procedure does not subject decision-​ making to the administrative law principles of participation, transparency, reasoned decision and review.93 Many WTO Ministerial declarations and decisions, by their own terms, indicate that they are not intended to create rights or obligations. They often address the organization and progress of negotiations and work programs. Their substantive provisions are often expressed in hortatory terms, as guidelines or as a statement of future objectives. Others set out negotiating results but mandate compliance with other procedures to give them legal effect.94 The terms of certain other WTO decisions indicate that some or all of their provisions are indeed intended to be binding. The more recent of these decisions have been taken while wider WTO negotiations, which would lead to a package of amendments to the WTO agreements, are at an impasse. These decisions may be procedural, such as the 2006 and 2010 General Council decisions that established transparency mechanisms for regional trade agreements and preferential trade arrangements.95 They may also be substantive, such as the SPS Committee Decision on the Implementation of Article 4 of the SPS Agreement,96 the 2013 Understanding on Tariff Rate Quota Administration Provisions of Agricultural Products, as defined in Article 2 of the Agreement on Agriculture97 and the 2015 Ministerial Decision on Export Competition.98 In any event, particular provisions of certain Ministerial Declarations and WTO decisions have been taken into account in dispute settlement. These provisions have been regarded as expressing a subsequent agreement between Members bearing specifically upon the interpretation or application of a provision of WTO law as foreseen by the general rule of treaty interpretation.99 Examples include the Doha Declaration on the TRIPS Agreement and Public Health, paragraph 5,100 the 2001 Doha Ministerial

93 

See generally B. Kingsbury, N. Krisch, and R.B. Stewart, ‘The Emergence of Global Administrative Law’ 68 Law and Contemporary Problems (2005) 15. See also Chapter 7 of this handbook. 94  See, e.g., ITA (above fn 39). See also the Doha Declaration on the TRIPS Agreement and Public Health, WT/​MIN(01)/​DEC/​2 (20 November 2001), para 7, and the Doha Ministerial Decision on Implementation-​Related Issues and Concerns, WT/​MIN(01)/​17 (20 November 2001), para 10.6, which both directed subsidiary bodies to extend transitional periods. 95  WT/​L/​671 (18 December 2006); WT/​L/​806 (16 December 2010). 96  G/​SPS/​19/​Rev.2 (23 July 2004). 97 WT/​ L/​914 (11 December 2014). This Understanding is expressed in the form of a Ministerial Decision. 98  WT/​L/​980 (21 December 2015), paras 6 and 7. 99  Article 31(3)(a) of the VCLT. See further Chapter 35 of this handbook. 100 WT/​ MIN(01)/​ DEC/​ 2 (20 November 2001). See Panel Reports, Australia –​Tobacco Plain Packaging, adopted 29 June 2020, para 7.2409. The legal status of the Declaration was left open in the Appellate Body Reports, adopted 29 June 2020, para 6.657.

78   Matthew Kennedy Decision on Implementation-​Related Issues and Concerns, paragraph 5.2,101 and a 2000 TBT Committee Decision on Principles for the Development of International Standards, Guides and Recommendations.102 This approach has the merit that it values rare instances of consensus in the WTO. However, the WTO Agreement grants the Ministerial Conference the ‘exclusive’ authority to adopt authoritative interpretations of the WTO agreements pursuant to a procedure that has not been observed103 and it grants no such authority to subsidiary organs such as WTO committees.

3. Clarifications provided by the dispute settlement system The WTO dispute settlement system serves not only to preserve Members’ rights and obligations under the covered agreements but also to clarify the existing provisions of those agreements.104 Given that Ministerial Declarations and WTO decisions expressing agreement on the interpretation of WTO agreements are relatively rare, dispute settlement is in practice the main source of clarification of the WTO agreements due to the sheer volume of cases. Every dispute addresses the conformity of the respondent Member’s measures with one or more covered agreements. Panels develop, inter alia, legal interpretations of provisions of the covered agreements in order to reach their conclusions and those legal interpretations may be reviewed on appeal by the Appellate Body, if requested by a party.105 Panel and Appellate Body reports take effect upon adoption by the DSB.106 The DSB is composed of representatives of all WTO Members.107 Dispute settlement reports have been adopted in over 200 distinct matters.108 Legal interpretations developed in dispute settlement reports lack normative status. Reports are binding, but only on the parties to the dispute.109 Dispute settlement reports cannot add to or diminish the rights and obligations provided in the covered agreements.110 The power to issue authoritative interpretations of the WTO agreements is reserved exclusively to the Ministerial Conference.111 The dispute settlement system 101 

WT/​MIN(01)/​17 (20 November 2001). See Appellate Body Report, US –​Clove Cigarettes, adopted 24 April 2012, paras 261-​8. 102  G/​TBT/​1/​Rev.14 (24 September 2019), at 62-​64. See Appellate Body Report, US –​Tuna II (Mexico), adopted 13 June 2012, paras 371–​8. 103  Article IX:2 of the WTO Agreement, also referred to in Article 3.9 of the DSU. 104  Article 3.2 of the DSU. See further Chapter 35 of this handbook. 105   Decisions or awards on certain issues are also issued by arbitrators and notified to the DSB. See Articles 21.3(c), 22.7, and 25 of the DSU. 106  Articles 16.4, 21.5, and 17.14 of the DSU. After an appeal, adoption is virtually automatic due to the reverse consensus rule, according to which a report will be adopted unless there is consensus not to adopt it. 107  Article IV:2 and 3 of the WTO Agreement. 108  See Dispute Settlement Body, ‘Overview of the State of Play in WTO Disputes’, WT/​DSB/​64/​Add.1 (26 November 2014), Section III, and subsequent annual reports of the Dispute Settlement Body. 109  Article 17.14 of the DSU provides that an adopted Appellate Body shall be unconditionally accepted ‘by the parties to the dispute’. 110  Articles 3.2 and 19.2 of the DSU. 111  Article IX:2 of the WTO Agreement; Article 3.9 of the DSU.

The Sources of International Trade Law    79 is a central element in providing security and predictability to the multilateral trading system112 because the dispute settlement system makes the rules enforceable. For a large number of delegations in the Uruguay Round, the key objective of the creation of the Appellate Body was to prevent losing parties from blocking the adoption and implementation of panel reports in individual disputes.113 Nevertheless, a system of precedent operates in practice. Panels and the Appellate Body cite prior GATT/​WTO dispute settlement reports, which may create legitimate expectations among WTO Members.114 Appellate Body reports are cited most often, because that body is the only instance of appeal and it considers that panels should follow its precedents, absent cogent reasons to do otherwise.115 However, panels have not always felt bound to agree with Appellate Body reports where they contain errors,116 avoid addressing all relevant context,117 or are otherwise unpersuasive.118 The Appellate

112 

Article 3.2 of the DSU. See ‘Profile on the Status of the Work in the Group—​Report by the Chairman’, MTN.GNG/​NG13/​ W/​43 (18 July 1990), para 6; and final text as adopted, Article 17.14 of the DSU. 114 See Appellate Body Reports, Japan –​Alcoholic Beverages II, adopted 1 November 1996, 13-​ 14 (regarding adopted GATT panel reports), US –​Shrimp (Article 21.5 –​Malaysia), adopted 21 November 2001, para 109 (regarding adopted Appellate Body reports). 115 Appellate Body Report, US –​Oil Country Tubular Goods Sunset Reviews, adopted 17 December 2004, para 188; Appellate Body Report, US –​Stainless Steel (Mexico), adopted 20 May 2008, paras 158–​61; cf. a separate opinion that encourages panels not to regard past Appellate Body Reports as necessarily determinative: Appellate Body Report, US –​Countervailing Measures (China) (Article 21.5), adopted 15 August 2019, para 5.281. See further P. Van den Bossche and W. Zdouc, The Law and Policy of the World Trade Organization Text, Cases and Materials, 4th edition (Cambridge: Cambridge University Press, 2017), 55–​58. 116  For example, Appellate Body Report, Argentina –​Footwear (EC), adopted 12 January 2000, para 131 (misstating the findings at paras 91–​98 of the same report), not followed in Panel Report, Argentina –​ Preserved Peaches, adopted 15 April 2003 (without appeal), para 7.24; Appellate Body Report, US –​ Gambling, adopted 20 April 2005, para 354 (misreading ‘interstate and foreign’ at paras 258 and 260 of the same report as ‘domestic and foreign’), not followed in Panel Report, US –​Gambling (Article 21.5), adopted 22 May 2007 (without appeal), para 6.121; Appellate Body Report, US –​Upland Cotton, adopted 21 March 2005, para 764 (making the wrong recommendation under the SCM Agreement regarding prohibited and actionable subsidies), not followed in Panel Report, US –​Upland Cotton (Article 21.5), adopted 20 June 2008, paras 2.8–​2.13, 9.76–​9.77, and 14.11–​14.12 (referring to the recommendations in the original panel report instead). 117  Appellate Body Report, US –​Zeroing (EC), adopted 9 May 2006, paras 126–​7 and 132, not followed in Panel Report, US –​Zeroing (Japan), adopted 23 January 2007, paras 7.100–​7.101, 7.158, and 7.195 (reversed on appeal); Appellate Body Report, US –​Zeroing (Japan), adopted 23 January 2007, paras 108–​ 116, and 155–​6, not followed in Panel Report, US –​Stainless Steel (Mexico), adopted as modified by the Appellate Body Report, 20 May 2008, paras 7.115–​7.128 (reversed on appeal); Appellate Body Report, US –​ Washing Machines, adopted 26 September 2016, para 5.171 (majority view), not followed in Panel Report, US –​Differential Pricing Methodology, circulated 9 April 2019, para 7.107 (under appeal). 118  For example, Appellate Body Report, Canada –​Patent Term, adopted 12 October 2000, para 56, not followed in Panel Report, EC –​Trademarks and Geographical Indications (US), adopted 20 April 2005, para 7.744, fn 634; Appellate Body Reports, India –​Patents (US), adopted 16 January 1998, para 68, US –​Section 211 Appropriations Act, adopted 1 February 2002, para 105, China –​Auto Parts, adopted 12 January 2009, para 225, and others (all asserting that the meaning of municipal law is reviewable on appeal), not followed in Panel Reports, US –​Section 129(c)(1) URAA, adopted 30 August 2002, para 6.28, 113 

80   Matthew Kennedy Body’s own approach to certain issues can vary119 and it has evidently heeded certain criticism.120

III.  Bilateral and regional rules International trade rules are also established outside the WTO in bilateral and regional trade agreements (‘RTAs’).121 Although these agreements and arrangements deviate from the multilateral principle of non-​discrimination in international trade relations, WTO rules create certain exceptions that may shield them, on certain conditions, and they all share the objective of reducing barriers to trade. Nonetheless, RTAs and other bilateral trade agreements are independent sources of law.

A. Bilateral and regional trade agreements The proliferation of RTAs, particularly since the end of the Uruguay Round, means they are now a widespread source of international trade rules.122 RTAs reflect the willingness of certain trade partners to integrate faster and more deeply than multilateral rules require, particularly to facilitate international production networks and when multilateral negotiations are at a stalemate. RTA chapters may cover a wider or narrower range of topics than the WTO agreements but they do not modify the WTO agreements, even as between their parties.123 RTA and WTO rules coexist and can complement each Mexico –​Olive Oil, adopted 21 October 2008, paras 7.29–​7.30, Colombia –​Ports of Entry, adopted 20 May 2009, para 7.93, and others (maintaining that the meaning of municipal law is an issue of fact). 119  For example, contrast the strict standard of review under Article 11 of the DSU in Appellate Body Report, EC –​Hormones, adopted 13 February 1998, para 133, with the standard in later reports, such as Appellate Body Report, EC –​Large Civil Aircraft, adopted 1 June 2011, para 881. Further, contrast the arguendo approach in Appellate Body Report, US –​Customs Bond Directive, adopted 1 August 2008, paras 310–​319, with the disapproval of such an approach in similar circumstances in Appellate Body Report, China –​Publications and Audiovisual Products, adopted 19 January 2010, paras 214–​215. 120  The Appellate Body espoused an authority to accept and consider unsolicited amicus curiae briefs from individuals and organizations not Members of the WTO in Appellate Body Report, US –​Lead and Bismuth II, adopted 7 June 2000, para 36–​42, and a communication from the Appellate Body in EC –​Asbestos, WT/​DS135/​9, 8 November 2000. After receiving a warning from the Chair of the General Council on 24 November 2000, WT/​GC/​M/​61, (7 February 2001), para 403), the Appellate Body denied all applications for leave to file such briefs, while insisting on its authority to accept them: Appellate Body Reports, EC –​Asbestos, adopted 5 April 2001, paras 55–​57. Subsequent appellate divisions repeatedly found it unnecessary to consider such briefs in rendering their decisions. The Appellate Body is also unlikely to make another so-​called ‘recommendation’ like those in Appellate Body Reports, US –​ Continued Suspension/​Canada –​Continued Suspension, adopted 14 October 2008, para 737, which the respondents dismissed as misconceived (WT/​DSB/​M/​258, 4 (February 2009), paras 12, 37, and 43). 121  Information regarding many of these negotiations and agreements is available at < bilaterals.org >. 122  See Chapters 8 to 15 of this handbook. 123  See Appellate Body Report, Peru –​Agricultural Products, adopted 31 July 2015, para 5.116.

The Sources of International Trade Law    81 other124 although different RTAs may promote different, and potentially conflicting, regulatory models. RTAs can be grouped into the following basic types of agreement: a. free trade agreements125 and customs unions within the meaning of Article XXIV of GATT 1994 (in respect of trade in goods); b. partial scope trade liberalization agreements between developing countries or LDCs, or both, under the Enabling Clause (in respect of trade in goods)126; and c. economic integration agreements under Article V of GATS (in respect of trade in services), that, up until now, have been incorporated in free trade agreements and customs unions. There are currently over 300 RTAs in force and every WTO Member is party to at least one.127 Free trade agreements are the most common type. Most RTAs are bilateral and the parties are not necessarily located in the same region. RTAs concluded by a large trading partner tend to be based on its own model, which develops over time in successive generations of agreements. There is no RTA applicable between any of the world’s three largest traders, i.e. the European Union, the United States and China, whose mutual trade relations are generally governed by multilateral rules.128 Due to the limited number of parties to each RTA, the procedures for amendment and, especially, decision-​making are less cumbersome than in a multilateral forum. Amendments of RTAs, and joint decisions, are therefore more common than in the WTO. While some amendments may upgrade an agreement, many decisions concern the establishment of institutions and dispute settlement procedures or implementation of issues left over from the negotiations that led to the conclusion of the RTA. Larger trading partners do not necessarily exercise the same leverage after an RTA enters into force, as both parties can continue to enjoy market access without further agreement, and proposals at that stage often relate to a single issue rather than to a broader negotiation. Conversely, dispute settlement proceedings in RTAs are much rarer than in the WTO. WTO dispute settlement procedures have long been operational within an existing institutional structure, at least up until the time of writing.129 Although RTAs are not 124   The 2011 World Trade Report, The WTO and Preferential Trade Agreements: From Co-​Existence to Coherence (Geneva: WTO, 2011), 128–​145. 125 Free trade agreements can form part of larger agreements, including association agreements, stabilization agreements and economic partnership agreements. However, EU partnership and cooperation agreements and US trade and investment framework agreements are not intended to be RTAs. 126  See above fn 49, para 2(c). 127  Source: WTO Regional Trade Agreements database (below fn 130), as of 31 August 2021. 128  However, China and the United States signed a bilateral economic and trade agreement on 15 January 2020. 129  The Appellate Body has ceased to hear appeals, which creates the opportunity to block adoption of panel reports indefinitely: see Chapter 36 of this Handbook.

82   Matthew Kennedy covered by the DSU, the frequent overlap in multilateral and regional rules means that some disputes between parties to an RTA can be resolved in the WTO.

1. RTA chapters Bilateral and regional rules overlap substantially with multilateral rules. RTA chapters cover at least some of the topics covered by WTO agreements.130 RTAs may specifically reaffirm the parties’ rights and obligations under WTO agreements, while some RTA chapters substantially or fully reproduce the text of WTO agreements. Although RTAs tend to diverge from multilateral rules in certain areas, such as market access, they do so less in others, such as trade remedies. Even divergent RTA rules may be applied on an MFN basis, either because there is no applicable RTA exception from MFN obligations, as in the case of the TRIPS Agreement, or for practical reasons, as in the case of competition policy.131 All RTAs cover trade in goods.132 They provide for more extensive concessions on import tariffs than does GATT 1994, with rules of origin that determine which products are eligible for preferential access, and they may prohibit export duties and charges. Many RTAs also cover non-​tariff measures including quantitative restrictions, SPS measures, technical regulations, balance-​of-​payments measures, safeguard mechanisms, anti-​ dumping measures, countervailing measures, designated monopolies or state-​owned enterprises, and intellectual property rights. They may include chapters dedicated to specific goods sectors. On the other hand, they do not usually address subsidies, other than a prohibition of agricultural export subsidies. Approximately half the RTAs in force cover trade in services as well. They provide for more extensive commitments to liberalization of services trade than does the GATS, either according to a positive list, negative list, or hybrid approach. Some provide for a standstill obligation on existing regulation of services trade and some negative list agreements contain a ‘ratchet clause’ that incorporates any subsequent unilateral liberalization. Some cover domestic regulation, mutual recognition and movement of natural persons. They may also include chapters dedicated to specific service sectors. RTAs usually include general exceptions and security exceptions, as do GATT 1994 and the GATS. These may be identical to the respective WTO exceptions or they may

130  The WTO Regional Trade Agreements database can be consulted online at < http://​rtais.wto.org/​ UI/​Public​Main​tain​RTAH​ome.aspx > (last visited 31 August 2021). The number of notifications is higher than the number of agreements due to the dual notification requirements for agreements covering both goods and services and the separate notification of accessions to existing RTAs. 131  R. Acharya, ‘Regional Trade Agreements: Recent Developments’ in R. Acharya (ed) Regional Trade Agreements and the Multilateral Trading System (Cambridge: Cambridge University Press, 2016), 10–​14. 132  The EEA Agreement was notified under GATS only but it incorporates a free-​trade area covering trade in goods based on existing agreements between the parties.

The Sources of International Trade Law    83 clarify or depart from those exceptions.133 RTAs also provide for dispute settlement procedures but in a variety of ways (discussed below). Later generations of RTAs often contain chapters covering a range of topics on which there is no dedicated multilateral agreement. These include investment,134 competition policy, environment, labour standards, electronic commerce and governance. Some of these topics may be covered in separate agreements. Schedules or annexes are attached to RTAs variously setting out concessions on tariffs, rules of origin, commitments on trade in services and coverage for government procurement, as relevant, and many other matters. These are integral parts of the respective RTA but they relate to an individual party or parties only rather than to both or all parties. Other instruments are very often made contemporaneously with the conclusion of an RTA and may also have to be taken into account when interpreting the RTA. These take a range of forms, including joint declarations, side letters, understandings, and side agreements on particular subjects, such as labour standards and the environment.135 Instruments developed in other international fora may be incorporated in RTAs by reference. For example, more recent US and EU free trade agreements create obligations to protect labour rights in accordance with certain ILO instruments and to comply with a list of multilateral environmental agreements.136 Some RTAs contain an MFN clause that incorporates preferences or concessions granted by either party to a third party. Amendments of RTAs are not uncommon. The parties may conclude protocols to amend specific provisions137 or to add or delete whole chapters.138 Accession protocols also amend RTAs. However, modifications of schedules and annexes are often given effect by means of a decision (discussed below). The original treaty text must be read together with these amendments, additions and modifications but there is frequently no consolidated version. Parties also reach side agreements regarding the conclusion of an amending protocol and subsequent agreements regarding the interpretation and application of an RTA. In Latin America, many sub-​regional partial scope agreements are concluded pursuant to the 1980 Treaty of

133  For example, Article 17.12 of the Regional Comprehensive Economic Partnership (RCEP) (which has not entered into force) clarifies the scope of general exceptions for health measures, while Article 17.13 includes a security exception to protect critical public infrastructure. 134  To the extent that investment provisions go beyond GATS commitments on services supplied through commercial presence. 135  For example, the CPTPP has over 150 side letters. 136  See further Chapter 23 of this handbook. 137 For example, the 2018 Protocol Amending KORUS as regards the US tariff schedule, trade remedies and investment. 138  For example, the 2008 and 2012 Supplementary Agreements on trade in services and investment and the 2017 upgrading Protocol to the Chile-​China Free Trade Agreement, which added commitments, revised and supplemented rules, and added new topics including e-​ commerce, competition and environment, and numerous Mercosur protocols and agreements at < https://​www.mre.gov.py/​trata​dos/​ pub​lic_​web/​Consu​ltaM​erco​sur.aspx > (last visited 31 August 2021).

84   Matthew Kennedy Montevideo and registered with the Latin American Integration Association (ALADI) Secretariat.139 Many RTAs are no longer in force, usually because they have been superseded by another RTA.

2. Decisions of RTA bodies RTAs typically create a supervisory body that oversees implementation of the RTA and may also serve as a forum to discuss disputes. Each supervisory body, whether it be a joint committee, commission or council has a decision-​making procedure. Some RTAs establish one or more specialized committees that oversee the implementation of specific chapters (such as SPS matters) and these may also have decision-​making power. These committees do not always meet. Some RTAs establish a more elaborate institutional structure that produces a range of instruments, such as decisions, resolutions, and directives.140 The degree of transparency in the work of these committees may vary. The supervisory bodies established under free trade agreements concluded with the European Union, EFTA or the United States, in particular, take decisions regarding the operation and implementation of their respective agreements.141 These decisions are not only procedural but also substantive. Many such agreements grant the supervisory body an express power to issue interpretations, which has been exercised in some cases.142 Certain EU free trade agreements specifically provide that these decisions are binding on the parties and that interpretations are binding on arbitral tribunals.143 Many of these free trade agreements grant the supervisory body or a subsidiary committee the power to modify schedules and annexes, in particular on tariff concessions,144 rules of origin145

139 

The 1980 Treaty of Montevideo is the constitutive treaty of ALADI and was notified to the GATT under the Enabling Clause. 140  See Andean Community norms at < http://​www.comu​nida​dand​ina.org/​Normat​iva.aspx > (last visited 31 August 2021); and MERCOSUR norms at < https://​www.merco​sur.int/​doc​umen​tos-​y-​normat​ iva/​normat​iva/​ > (last visited 31 August 2021). 141  EU free trade agreements may establish the supervisory body in the overarching agreement of which the free trade agreement is a part, or the trade committee may report to that body. 142  Notes of Interpretation of Certain Chapter Eleven Provisions of the North American Free Trade Commission (31 July 2001); Decisions Nos. 1, 3 and 4 of the Colombia-​US TPA Free Trade Commission, regarding particular product classifications (September 2012, November 2017 and December 2017, respectively). See also an interpretation issued by the KORUS Free Trade Commission on an exchange of letters regarding its TBT Chapter (24 September 2018). See further G. Kaufman-​Kohler, ‘Interpretive Powers of the Free Trade Commission and the Rule of Law’ in Fifteen Years of NAFTA Chapter 11 Arbitrations (JurisNet, 2011), 175–​194. 143  See, e.g., Articles 16.1.4(d) and 16.4.1 of the EU-​Singapore FTA. 144  See, e.g., Decision No. 1/​2006 of the EU-​Chile Association Council; Decision No. 5 of the Panama-​ US TPA Free Trade Commission to amend Annex 4.1 (HS2007 & HS2012 update). 145 See, e.g., CAFTA-​ DR-​US Free Trade Commission Decision regarding the rules of origin for textiles and apparel products (23 November 2011).

The Sources of International Trade Law    85 and government procurement coverage.146 The supervisory body may also have the power to amend the agreement in other specific instances147 and to consider and adopt amendments that require ratification. A decision of the supervisory body to approve an accession protocol may be required before a new party may accede.148 Copies of decisions are published on certain official websites (listed in the WTO Regional Trade Agreement database).149 Most RTAs establish some form of dispute settlement mechanism.150 This may be (i) a diplomatic process, consisting of a consultation procedure or referral to a political body, such as the governing council, commission or joint committee; (ii) an ad hoc adjudicative process modelled on parts of the DSU; or, less frequently, (iii) a judicial process in which disputes are referred to a permanent court or other standing tribunal.151 Most of the ad hoc adjudicative and judicial processes contain a forum clause that regulates recourse to RTA and WTO mechanisms. Rulings emanating from these judicial and ad hoc adjudicative processes are usually considered binding but they are more common in RTAs that have established permanent courts (such as EFTA), where private parties and RTA bodies have standing. There is also a docket of binational panel reviews of anti-​dumping and countervailing duty determinations under NAFTA (now available under the USMCA), tribunal decisions in the Andean Community, arbitral awards in MERCOSUR and arbitral awards in Investor-State dispute settlement (ISDS) under various free trade agreements. Dispute settlement decisions in other ad hoc adjudicative processes provided for in RTAs have been relatively rare to date, although several such proceedings have been commenced in recent years.152

146  See,

e.g., Decision of the Colombia-​US TPA Free Trade Commission modifying Annex 9.1 with regard to ECOPETROL (19 November 2012). 147  This may be pursuant to an evolutionary clause to take account of developments in multilateral rules. For example, Decision No. 1/​2005 of the Joint EFTA-​Turkey Committee on State Aid, that took account of the conclusion of the SCM Agreement. 148  See, e.g., Article 329 of the 2012 EU-​Colombia-​Peru Trade Agreement and the 2016 Protocol of Accession of Ecuador; CPTPP Commission Decision No. 2/​2019 on the accession process, and Annex, para 4.1. 149  See above fn 130. 150   Each mechanism does not necessarily cover every topic addressed by the RTA. 151  See C. Chase et al., ‘Mapping of Dispute Settlement Mechanisms in Regional Trade Agreements—​ Innovative or Variations on a Theme?’ in R. Acharya (ed) Regional Trade Agreements and the Multilateral Trading System (Cambridge: Cambridge University Press, 2016), 608–​702; R. McDougall, ‘Regional Trade Agreement Dispute Settlement Mechanisms: Modes, Challenges and Options for Effective Dispute Resolution’, RTA Exchange (Geneva: ICTSD/​ Inter-​ American Development Bank, 2018). 152  See USTR Annual Reports of the President of the United States on the Trade Agreements Program (2017) 45–​46, (2019) 107, (2020) 50–​51; Report from the European Commission on the Implementation of EU Trade Agreements (2020) 47–​49; and Integrated Database of Trade Disputes for Latin America and the Caribbean at < badicc.cepal.org >. See generally Chase et al., above fn 151, at 681–​5.

86   Matthew Kennedy

B. Other agreements Other agreements are concluded outside the framework of an RTA covering areas such as agriculture, aviation, customs procedures and regulatory cooperation. These may be bilateral or plurilateral and they may be entered into by parties with no RTA between them. These agreements may supplement WTO rules or they may cover topics on which there is no dedicated multilateral agreement. Bilateral agreements on non-​tariff measures often address the conditions of trade in specific products or sectors, or they may address a particular theme.153 SPS protocols and agreements address the requirements for import or export of particular animal and plant products. Mutual recognition agreements allow each party to rely on conformity assessments conducted by the other party while agreements on conformity assessment and acceptance of industrial products provide for common rules.154 Wine agreements provide for the protection of individual geographical indications (and other terms) and may recognize certain oenological practices and processes.155 The TBT Agreement authorizes mutual recognition agreements on conformity assessment.156 The TRIPS Agreement authorizes bilateral and multilateral negotiations on increased protection of individual geographical indications.157 International investment agreements establish standards of treatment that each party will grant to investments made by individuals or companies from the other party.158 Most are bilateral investment treaties (BITs),159 of which over 2300 are in force, while over 300 more have been concluded as part of a free trade agreement, or concluded between the parties to an RTA and a third party.160 International investment agreements

153 See, e.g., the 2019 Agreement between the United States of America and Japan concerning Digital Trade. 154  See, e.g., the 1998 Agreement on Mutual Recognition between the European Community and the United States of America. Agreements notified under Article 10.7 of the TBT Agreement are available in the TBT information management system here: < http://​tbt​ims.wto.org/​en/​Agr​eeme​ntNo​tifi​cati​ons/​Sea​ rch > (last visited 4 August 2021). 155  See, e.g., the 2008 Agreement between the European Community and Australia on trade in wine. 156   Article 6.3 of the TBT Agreement. In this context, MFN treatment might only be required in comparable situations. See generally J. Zell, ‘Just Between You and Me: Mutual Recognition Agreements and the Most-​Favoured Nation Principle’ 15 World Trade Review (2016) 3–​23. For all agreements notified under Article 10.7 of the TBT Agreement, see < http://​tbt​ims.wto.org/​en/​Agr​eeme​ntNo​tifi​cati​ons/​Sea​ rch > (last visited 4 August 2021). 157  Article 24.1 of the TRIPS Agreement. 158  For the content of IIAs, see < https://​inve​stme​ntpo​licy​hub.unc​tad.org/​IIA/​mapped​Cont​ent#iiaIn​ nerM​enu > (last visited 4 August 2021); see further Chapter 32 of this handbook. 159 For a database of BITs, see < https://​icsid.worldb​ank.org/​en/​Pages/​resour​ces/​Bilate​ral-​Inv​estm​ ent-​Treat​ies-​Datab​ase.aspx > (last visited 4 August 2021). 160  For a database of other IIAs, see < https://​icsid.worldb​ank.org/​en/​Pages/​resour​ces/​Other-​Treat​ies. aspx > (last visited 4 August 2021).

The Sources of International Trade Law    87 provide for dispute settlement through recourse to international arbitral tribunals, not only in State-​State disputes but often also Investor-State disputes.161 Plurilateral treaties can also set out international trade rules. Examples include the Energy Charter Treaty162 and the World Wine Trade Group Agreement on Mutual Acceptance of Oenological Practices.163

IV.  Preferential trade arrangements Non-​reciprocal preferential trade arrangements (‘PTAs’) are also a source of trade rules. These deviations from the multilateral principle of non-​discrimination are authorized by the Enabling Clause164 or WTO waivers165, on certain conditions.166 Given that these arrangements are unilateral preference schemes, they are established in the national law of the preference-​granting Member rather than in an international agreement. Therefore, the eligibility requirements and benefits are found in national laws.167 PTAs apply to a substantial volume of trade from certain developing countries and LDCs. There are currently 31 preferential trade arrangements in force, operated by 23 WTO Members. These comprise (i) Generalized System of Preference schemes operated by developed countries in favour of developing countries and LDCs; (ii) preference schemes operated by developing countries in favour of LDCs, and (iii) other preference schemes operated by certain Members, usually for beneficiaries in particular regions.168

V.  Concluding remarks In the WTO’s Member-​driven system, Member governments are both the makers and the addressees of the rules. International trade law is not interpreted in ‘clinical 161  For

a database of known ISDS cases, see < https://​inves​tmen​tpol​icy.unc​tad.org/​inv​estm​ent-​disp​ ute-​set​tlem​ent > (last visited 4 August 2021). See generally N. Blackaby et al., Redfern and Hunter on International Arbitration, 6th edition (Oxford: Oxford University Press, 2015), 441–​499. 162   Signed on 17 December 1994, amended as regards its trade-​related provisions by an amendment signed on 24 April 1998. 163  Signed on 18 December 2001. 164  See Enabling Clause, above fn 49, paras 2(a) and 2(d) authorizing GSP scheme preferences. 165  WT/​L/​958 (30 July 2015), WT/​L/​970 (2 December 2015), WT/​L/​1000 (12 December 2016), WT/​ L/​1001 (12 December 2016), WT/​L/​1002 (12 December 2016), WT/​L/​1069 (17 October 2019) and WT/​L/​ 1070 (17 October 2019). 166  See Chapter 22 of this handbook. 167  For example, Regulation (EU) No 978/​2012 of the European Parliament and of the Council; Trade Act of 1974 (19 USC 2461-​2467); Trade Preferences Extension Act of 2015 (U.S. Public Law 114-​27). 168  The WTO database of preferential trade arrangements can be consulted online at < http://​ptadb. wto.org/​?lang=​1 > (last visited 31 August 2021).

88   Matthew Kennedy isolation’169 because the WTO agreements rely on public international law regarding certain fundamental issues and Members incorporated rules of interpretation and instruments developed in other international fora where they saw fit. This does not imply that those same governments incautiously agreed to the more general application of other rules of international law in the WTO’s system of compulsory jurisdiction, independent adjudication and trade sanctions. The single undertaking approach to multilateral trade rules, as it was implemented in the results of the Uruguay Round, encompasses a variety of instruments and origins quite unlike the ordered results of a diplomatic conference with an official negotiating record. Disparate agreements, understandings and decisions, general rules and individual commitments, some newly agreed in 1994, some from the old GATT framework, some contemporaneous with the establishment of the WTO, were merged in a single agreement fused at the head and they must somehow all be read together. Different agreements were negotiated in separate rooms by different people without offering a systematic explanation of how these agreements relate to each other or whether they provide rules or exceptions, beyond rudimentary precedence clauses that only apply in some cases of conflict. The system has relied heavily, until now, on its dispute settlement mechanism to provide coherence; the outcomes that benefitted some Members at the expense of others have inevitably led to controversy.170 The unbroken practice of consensus in WTO decision-​making creates a formidable lock on further multilateral rule-​making. Although the alternative of voting is envisaged by the WTO procedures and could lead to swifter decisions, it would not necessarily lead to compliance if Members in an eventual minority did not consider such decisions binding upon them. Most multilateral trade rules were agreed over 25 years ago and, while the fundamental rules retain their practical relevance, the agreements cannot always keep pace with economic and technological developments in world trade. Nothing requires future rules to be concluded as part of a new single undertaking. The new Trade Facilitation Agreement is a multilateral example. More plurilateral and critical mass agreements can be added to the WTO framework, with the consent of the membership, provided free-​riding can be reduced to an acceptable level. A hybrid category of plurilateral rules, implemented on a multilateral basis, may yet emerge. Meanwhile, bilateral and regional rule-​ making proceeds apace. Like multilateral rules, these processes aim to reduce trade barriers, but they often cover a wider range of topics. Although bilateral and regional agreements operate, in some respects, within exceptions to non-​discrimination, there is already a considerable amount of

169 

Appellate Body Report, US –​Gasoline, adopted 20 May 1996, p. 17. e.g., Appellate Body Reports, Korea –​Dairy and Argentina –​Footwear (EC) (regarding the Safeguards Agreement and the GATT 1994); Appellate Body Report, US –​Anti-​Dumping and Countervailing Duties (China) (regarding the concurrent imposition of duties under the Anti-​Dumping Agreement and the SCM Agreement); and Appellate Body Report, US –​Tuna II (Mexico) (regarding the TBT Agreement and the GATT 1994). 170 See,

The Sources of International Trade Law    89 discrimination at the multilateral level itself, due to special and differential treatment, individualized schedules, and terms of accession that do not apply to original Members. Diverse rules can be tailored to different circumstances and facilitate international production networks but there is a potential for different regulatory models to end up competing with each other. The potential for divergence between different sources of international trade law is partly mitigated by the fact that bilateral and regional agreements tend to be based on the WTO model, and treaty interpretation mainly occurs under the DSU. However, that may change if the WTO dispute settlement should falter and bilateral and regional dispute settlement mechanisms become more active.

Further reading R. Acharya (ed), Regional Trade Agreements and the Multilateral Trading System (Cambridge: Cambridge University Press, 2016) P. Van den Bossche and W. Zdouc, The Law and Policy of the World Trade Organization: Text, Cases and Materials, 4th edition (Cambridge: Cambridge University Press, 2017), 43–​64 M. Kennedy, ‘Two Single Undertakings: Can the WTO Implement the Results of a Round?’’ 14 Journal of International Economic Law (2011) 77 D. Palmeter and P.C. Mavroidis, Dispute Settlement in the World Trade Organization: Practice and Procedure, 2nd edition (Cambridge: Cambridge University Press, 2004), 49–​85 J. Pauwelyn, ‘Sources of Law: The Most Burning Question in WTO Dispute Settlement?’ in J. d’Aspremont, S. Besson, and with the assistance of S. Knuchel (eds), The Oxford Handbook of the Sources of International Law (Oxford: Oxford University Press, 2018), 1027–​1045 Status of WTO Legal Instruments (2021), at: < https://​www.wto.org/​engl​ish/​res_​e/​books​p_​e/​ wto_​l​egal​_​ins​trum​ents​_​202​1_​e.pdf > WTO Regional Trade Agreements database, at: < http://​rtais.wto.org/​UI/​Public​Main​tain​ RTAH​ome.aspx >

Chapter 5

In ternationa l T ra de L aw Institu t i ons James Flett and Mislav Mataija *

I. II. III. IV. V. VI. VII.

Introduction Origins of the WTO Transparency at the WTO Legal status of the WTO Membership of the WTO Budget of the WTO WTO institutional entities and their powers and responsibilities A. Introduction: objectives and functions of the WTO B. The Ministerial Conference C. The General Council D. The Dispute Settlement Body E. The Trade Policy Review Body F. The Council for Trade in Goods, the GATS Council and the TRIPS Council, and their subsidiary committees and other bodies G. Other subsidiary committees, working parties and working groups H. Plurilateral bodies I. The Trade Negotiations Committee J. Dispute settlement panels and the Appellate Body K. The Director-​General and the Secretariat L. The Chair VIII. WTO decision-​making A. No formal typology of WTO acts B. The right to propose C. The general WTO decision-​making procedure: if no consensus (consensus meaning no Member present formally objects), majority of votes cast

91 93 94 95 96 97 99 99 101 101 102 104 105 108 109 109 110 115 117 118 118 119 119

*  Members of the Legal Service of the European Commission. Any views expressed are the personal views of the authors and not the Commission or the European Union.

International Trade Law Institutions    91 . Interpretation: if no consensus, three-​fourths of Members D 127 E. Waivers: if no consensus, three-​fourths of Members 129 F. Amendments: if no consensus, two-​thirds of Members (in principle), ratification 131 G. Accessions: if no consensus, two-​thirds of Members 131 H. Budget: two-​thirds majority comprising more than half the Members 132 I. Rule 33 of the (CTG) Rules of Procedure: if no consensus, refer the matter up 132 J. Decisions and actions of the DSB (the so-​called ‘reverse/​negative consensus’ rule) 133 IX. Elements lacking in the WTO institutional structure and proposals for change 136 . The current institutional crisis at the WTO: causes and resolution X 139 XI. Institutional aspects of other trade agreements 142 A. Overview 143 B. The FTA model 147 C. Horizontal questions 155 II. Conclusion X 157

I. Introduction This chapter focuses on international trade law institutions, and particularly the WTO, as the entity that contains by far the most developed and operationalized institutional structures in international trade law. That is, it focuses on the entities that make-​up, or operate within, the WTO, how they are constituted, their powers and responsibilities (general and specific, conferred, delegated, or implied), the procedures governing the conduct of their proceedings, and the relationships between them. We begin by briefly recalling the origins of the WTO, because this context is helpful for understanding why the WTO institutional structure is cast as it is. Sections III to VI then deal with certain threshold issues: transparency; legal status; membership; and budget. Section VII turns to a detailed explanation of the various entities and their powers and responsibilities, distinguishing between legislative and judicial entities. Section VIII addresses decision-​making. It clarifies what the consensus rule actually means, both in law and practice, and explains why, to-​date, Members have not generally called for a vote on contentious issues, notably because of the ‘one Member one vote’ rule, that is, the absence of any formal weighting according to the populations and relative economic and trade importance of different Members. It also addresses the specifics of judicial decision-​making and explains what the so-​called ‘reverse consensus’ rule actually means, namely that the relevant document is adopted automatically

92    James Flett and Mislav Mataija or by operation of law (ipso jure). Relatedly, it explains that, as a matter of law, the procedure for appointing members of the Appellate Body is majority voting (just as for the Director-​General): it is only a practice to extend indefinitely the period during which consensus is sought, with no Member calling for a vote. Section IX discusses certain elements lacking in the institutional structure of the WTO, notably an executive, a parliamentary assembly and a formal role for civil society (including non-​governmental organizations). It also considers various proposals that have been made for change or reform, particularly the 2004 Sutherland Report on the Future of the WTO and the associated literature. Many if not all of the proposals for change or reform are premised on the basic proposition that WTO Members might agree, one way or another, to further pool elements of ‘sovereignty’ in order to make the WTO operate more efficiently, in the interests of all Members. At the time of writing, there is little prospect of such proposals coming to fruition in the foreseeable future. This section also includes a discussion of recent proposals that have been made in response to the Trump administration’s attack on the WTO dispute settlement system, and by extension the WTO itself. Previous institutional analyses of the WTO have been written from the perspective of describing and critiquing the new organization, identifying its strengths and weaknesses and making proposals for how to improve it. The focus of those critiques has been on the inability of the WTO to conclude negotiations on new agreements necessary to respond to a rapidly changing global environment. However, it has generally been assumed that we should be able to build on what we have, and that we would not experience any significant step backwards, at least in institutional terms.1 Needless to say, the context in which this chapter is written is very different. The institutional vulnerabilities of the WTO have been starkly exposed through the actions of the government of one Member. Section X aims to explain why and how this has happened, and to expose the fallacies upon which this attack was based. However, in every crisis, there is opportunity. Several specific institutional opportunities present themselves and those are also explored in this section. If these institutional opportunities are seized, then we may in fact be living through a ‘constitutional moment’,2 even if it is to take a 1  See, e.g., A.H. Quershi, The World Trade Organization: Implementing Trade Norms (Manchester: Manchester University Press, 1996); J.H. Jackson, The World Trade Organization, Constitution and Jurisprudence (London: Royal Institute of International Affairs, 1998); W.J. Davey, ‘Institutional Framework’ in P.F.J. Macrory, A.E. Appleton and M.G. Plummer (eds), The World Trade Organization, Legal, Economic and Political Analysis, Vol 1 (Berlin: Springer, 2005); M. Footer, An Institutional and Normative Analysis of the World Trade Organization (Leiden: Martinus Nijhoff, 2006); Warwick Commission, The Multilateral Trade Regime: Which Way Forward? (Warwick: University of Warwick, 2007); D.P. Steger (ed), Redesigning the World Trade Organization for the Twenty-​first Century (Waterloo: Wilfred Laurier University Press, 2010); P. Van den Bossche and W. Zdouc, The Law and Policy of the World Trade Organization, 4th edition (Cambridge: Cambridge University Press, 2017), Chapter 2. 2  J.P. Trachtman, ‘The Constitutions of the WTO’ 17(3) Journal of International Trade Law (2006) 623, at 625 and fn 5; J.L. Dunoff, ‘Constitutional Conceits: The WTO’s ‘Constitution’ and the Discipline of International Law’ 17(3) European Journal of International Law (2006) 647, at 661 and fn 59.

International Trade Law Institutions    93 few years to fully unfold. That is, the moment at which all WTO Members, including the United States (under a new administration), finally came to understand that, ultimately, the benefits of the WTO and the rules-​based system far outweigh the compromises that it necessarily entails. Section XI addresses the institutional aspects of certain other international trade agreements. It shows, on the basis of a sketch of the main institutional features of a number of modern FTAs, that there are essentially two institutional models: that of an advanced, broad FTA, and that of a so-​called ‘regional economic organization’. The second is, generally speaking, more developed, but also more sui generis, and less defined by trade issues.

II.  Origins of the WTO Understanding the origins of the WTO is both helpful and necessary in order to properly comprehend its institutional structure and operation. The WTO Agreement states that, unless otherwise provided, the WTO is to be guided by the decisions, procedures, and customary practices followed by the parties to the GATT 1947 and the bodies established within that framework.3 The history of the regulation of international trade, including the WTO, is described in Chapter 2. This helps us to understand, from the outset, the key institutional features of the WTO. First, in essence, it consists of a legislature, on the one hand, and a judicial arm, on the other hand. There is no executive or parliamentary assembly and little if any formal role for civil society. The Director-​General and the Secretariat do not have the authority to set the agenda or formulate proposals designed to accommodate and balance the interests of all Members. Second, there is no system of voting weighted according to the population and relative economic and trade importance of different Members. Decisions are taken by consensus, meaning that no Member present formally objects. In practice, Members do not call for a vote on contentious issues. Although this may allow the organization to operate on a day-​to-​day basis with respect to non-​contentious issues, it makes the conclusion of new agreements very difficult. Third, this means that the key institutional relationship is between the legislature, on the one hand, and the judicial arm, on the other hand (with mandatory and binding dispute settlement being the central institutional novelty of the WTO compared to the GATT). As we shall see, it is the resolution of tensions associated with this institutional relationship that defines both the current state of the WTO and its future.

3 

Article XVI:1 of the WTO Agreement.

94    James Flett and Mislav Mataija

III.  Transparency at the WTO Transparency at the WTO is an important threshold issue at least in the sense that, if one wants to understand what the institutional structures of the WTO are and how they actually operate in practice, it is essential to be able to access the relevant information. It is also important to be clear that the issue of transparency may be different depending on the context. Transparency in the context of negotiations is different compared to transparency in the context of dispute settlement, for example. Furthermore, transparency in the sense of obtaining a document is a different issue compared to transparency in the sense of being present at or observing a meeting. It is also necessary to recognize that there may be legitimate reasons for curtailing access to information, such as the need to protect business confidential information, or the need to protect the effectiveness of negotiations. There may also be significant cultural differences between Members on the question of transparency. Finally, it is also important to be aware that, inevitably, in practice, some important information is likely never to be recorded in a formal document. WTO documents issued before 14 May 2002 are governed by the Decision adopted by the General Council on 18 July 1996.4 That decision provides that, in principle, documents shall be circulated as unrestricted, but with a significant list of exceptions. Notably, minutes of meetings of all WTO bodies (other than the Trade Policy Review Body) were only to be considered for derestriction six months after their date of circulation, with such derestriction normally taking at least a further two months. However, on 14 May 2002, the General Council decided5 to make most WTO documents immediately available, with a few exceptions relating, for example, to tariff negotiations and accessions. Minutes of meetings are automatically derestricted forty-​five days after the meeting.6 On 13 June 2006, the General Council decided to derestrict all GATT documents.7 At the request of certain Members, WTO dispute settlement hearings have been opened to public viewing with respect to those Members, both at the level of panels and 4  General Council, Procedures for the Circulation and Derestriction of WTO Documents, decision adopted 18 July 1996, WT/​L/​160/​Rev.1 (26 July 1996). 5  General Council, Procedures for the Circulation and Derestriction of WTO Documents, decision of 14 May 2002, WT/​L/​452 (16 May 2002). 6 There are special rules for public procurement (Committee on Government Procurement, Procedures for the Circulation and Derestriction of Documents on the Committee on Government Procurement, Decision of 8 October 2002, GPA/​72 (23 October 2002)) and civil aircraft (Committee on Trade in Civil Aircraft, Procedures for the Circulation and Derestriction of Documents Under the Agreement on Trade in Civil Aircraft, Decision of 13 November 2002, TCA/​8 (3 December 2002)). 7 General Council, Decision on Derestriction of Official GATT 1947 Documents, decision of 15 May 2006, WT/​L/​647 (13 June 2006). See also General Council, Derestriction of Some GATT 1947 Historical Bilateral Negotiating Documentation, decision of 25 July 2013, WT/​L/​892 (26 July 2013); General Council, Derestriction of Historical Bilateral Negotiating Documentation of the Kennedy Round, decision of 24 July 2014, WT/​L/​966 (25 July 2014); General Council, Derestriction of Historical Bilateral Negotiating Documentation of the Tokyo Round, decision of 30 November 2015, WT/​L/​966 (2 December 2015); General Council, Derestriction of Additional Negotiating Materials, decision of 30 November 2017, WT/​L/​1025 (1 December 2017).

International Trade Law Institutions    95 at the level of the Appellate Body.8 In this context, the rule in Article 18.2 of the DSU prevails: nothing in the DSU precludes a party to a dispute from disclosing statements of its own position to the public, even if, indirectly, this means that the position of the other party is also disclosed.9

IV.  Legal status of the WTO The WTO is established as an international organization.10 It has legal personality and is to be accorded by each of its Members such legal capacity, privileges and immunities as may be necessary for the exercise of its functions. The officials of the WTO and the representatives of the Members are also to be accorded by each Member such privileges and immunities as are necessary for the independent exercise of their functions in connection with the WTO.11 The WTO is authorized to conclude a headquarters agreement.12 The WTO is not part of or affiliated to the United Nations. However, the WTO maintains close ties with many other international organizations and entities, including those of the United Nations.13 The WTO Agreement has been registered in accordance with the provisions of Article 102 of the Charter of the United Nations.14 The WTO Agreement entered into force on 1 January 1995.15 8  Panel Report, Canada/​US –​Continued Suspension, adopted 14 November 2008, paras 7.38–​7.40; See also Chapter 38 of this handbook. 9  Panel Report, Russia –​Traffic in Transit, adopted 26 April 2019, Annex B-​2, Confidentiality Ruling. 10  Article I of the WTO Agreement. 11  Articles VIII:1-​3 of the WTO Agreement. See Staff Regulations 1.6; WT/​GC/​W/​103. The privileges and immunities to be accorded are to be similar to those stipulated in the Convention on the Privileges and Immunities of the Specialized Agencies, approved by the General Assembly of the United Nations on 21 November 1947 (Article VIII:4 of the WTO Agreement; G.A. Res. 179(III) of 21 November 1947, 33 U.N.T.S. 261). 12  Article VIII:5 of the WTO Agreement. See: General Council, Headquarters Agreement, decision of 31 May 1995, WT/​L/​69 (1 June 1995), approving the Headquarters Agreement between the World Trade Organization and the Swiss Confederation contained in WT/​GC/​1 and Add.1 and the Infrastructure Contract between the Swiss Authorities and the World Trade Organization contained in WT/​GC/​2. On 31 July 2008, the General Council approved the conclusion of a memorandum of understanding between the Swiss Confederation and the WTO on the Long-​Term Housing Needs of the WTO, concerning renovation and adaptation of the building housing the WTO, and other facilities for the WTO (WT/​GC/​ M/​115, WT/​BFA/​W/​170, WT/​BFA/​103). Pursuant to a decision adopted by the Preparatory Committee for the World Trade Organization on 8 December 1994, the Preparatory Committee, the Contracting Parties to the GATT 1947 and the Executive Committee of ICITO entered into the Agreement on the Transfer of Assets, Liabilities, Records, Staff and Functions from the Interim Commission of the International Trade Organization and the GATT to the World Trade Organization (PC/​9, L/​7580, ICITO/​1/​39 and WT/​GC/​M/​1, L/​36). 13  See further below: ‘Membership of the WTO’. 14  Article XVI:6 of WTO Agreement. 15  Article XIV of WTO Agreement; W/​Let/​1 (27 January 1995). The Preparatory Committee for the World Trade Organization, on 8 December 1994, confirmed 1 January 1995 as the date of entry into force of the WTO Agreement (PC/​M/​10 (19 December 1994), para 4).

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V.  Membership of the WTO There are currently 164 Members of the WTO, accounting for 99.5 per cent of the global population and 98 per cent of world trade.16 This includes the European Union, as well as each of its twenty-​seven Member States.17 Separate customs territories possessing full autonomy in the conduct of their external commercial relations may also be Members,18 and there are currently three: Hong Kong, China; Macau, China; and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matus (Chinese Taipei). Members include developed countries, developing countries (entitled to certain special and differential treatment), and least developed countries (entitled to certain additional special and differential treatment). There is no WTO definition of a developing country, and in practice, for the time being, this status is based on self-​declaration. Least-​developed countries are those recognized as such by the United Nations.19 There are currently 23 Observer Governments, which are generally required to commence accession negotiations within five years of becoming Observers.20 There are also numerous intergovernmental organizations that have Observer status in the WTO, or in particular WTO bodies corresponding to their interests.21 Non-​governmental organizations may be present at meetings when invited, including at the Ministerial Conference, but they do not have observer status such that they are able to speak or directly present documents to the meeting.22 The WTO organizes an annual Public Forum, at which NGOs are invited to make their views known, including through the presentation of position papers on issues relevant to the WTO. The original Contracting Parties to the GATT 1947 became WTO Members with effect from 1 January 1995, whilst other Members have subsequently acceded. Accession is ‘on terms to be agreed’ between the acceding Member and the WTO.23 The WTO Agreement does not delimit what may or may not be negotiated as the ‘price’ of accession. Some Members, notably China and Russia, have been required to agree 16 

WTO Annual Report 2019, at. 7; Van den Bossche and Zdouc, above fn 1, at 113 and fn 193 (referring to data available on the website of the World Bank and the WTO). 17  Article XI:1 of the WTO Agreement. 18  Article XII:1 of the WTO Agreement. 19  Article XI:2 of the WTO Agreement. See also Decision on Measures in Favour of Least-​Developed Countries. 20  At < https://​www.wto.org/​ > (last visited 1 October 2021). 21 Article V:1 of the WTO Agreement. See guidelines for ‘Observer Status for International Intergovernmental Organisations in the WTO’ (WT/​L/​61 (25 July 1996), Annex 3). The following organizations have permanent observer status in General Council meetings: IMF, World Bank, UN, UNCTAD, FAO, WIPO, OECD and ITC. For complete information for the other WTO bodies, at < https://​www.wto.org/​ > (last visited 1 October 2021). 22  Article V:2 of the WTO Agreement; General Council, Guidelines for Arrangements on Relations with Non-​Governmental Organizations, Decision adopted by the General Council on 18 July 1996, WT/​ L/​162 (23 July 1996). See also WT/​GC/​M/​65 (18 June 2001), 66, 68, 78 and 95. 23  Article XII:1 of the WTO Agreement.

International Trade Law Institutions    97 terms that do not place them on an equal footing with all other Members. The acceding Member accedes to the WTO Agreement and the Multilateral Trade Agreements. Decisions on accession are taken by the Ministerial Conference.24 Significantly, they do not need to be ratified by national parliaments. It has been accepted that accession protocols, and by extension integrated provisions of working party reports, may be subject to dispute settlement, and are to be interpreted and applied on the basis of the customary rules of interpretation of public international law.25 Pursuant to Article XIII of the WTO Agreement, there are certain circumstances that may result in the non-​application of the multilateral trade agreements between particular Members, and these provisions have occasionally been used. Any Member may withdraw from the WTO Agreement with effect from the expiration of six months from the date on which written notice of withdrawal is received by the Director-​General.26

VI.  Budget of the WTO The Director-​General is required to present an annual budget estimate and financial statement for the WTO to the Committee on Budget, Finance, and Administration, for review and recommendation to the General Council for approval, by a two-​thirds majority comprising more than half the Members of the WTO. The General Council has adopted financial regulations, including the scale of contributions apportioning the expenses of the WTO among its Members and the measures to be taken in respect of Members in arrears.27 Members are required to promptly contribute to the WTO their share in the expenses of the WTO in accordance with the financial regulations.28 The total WTO budget for 2019 was CHF 197 million,29 which is relatively modest compared to other international organizations, reflecting the relatively small size of the Secretariat (currently about 600 people) and the relatively limited nature of its activities outside Geneva. Members contribute to the budget on the basis of their share of international trade (imports plus exports) in relation to the total international trade of all WTO Members, with a minimum contribution of 0.015 per cent.30 The European Union does not contribute to the budget, but its Member States do, including on the basis of intra-​ Union trade, making the European Union by far the largest contributor, at 33.6 per cent. Other important contributors include: the United States (11.6 per cent); China (10.1 per cent); Japan (4 per cent); Korea (2.9 per cent); Hong Kong (2.8 per cent); Canada (2.5 per 24 

Article XII:1-​2 of the WTO Agreement. See, e.g., Appellate Body Report, China –​Rare Earths, adopted 29 August 2014. 26  Article VI of the WTO Agreement. 27 Financial Regulations of the World Trade Organisation, WT/​ L/​156/​Rev.3 (27 February 2015); Financial Rules of the World Trade Organisation, WT/​L/​157/​Rev.1 (21 May 2007). 28  Article VII of the WTO Agreement. 29  WTO Annual Report 2019, at 177. 30  Regulation 12, Financial Regulations of the World Trade Organisation. 25 

98    James Flett and Mislav Mataija cent); Singapore (2.4 per cent); India (2.3 per cent); and Russia (2 per cent).31 The budget is subject to review by the WTO Office of Internal Oversight, which was established on 30 November 2015 to review management practices, expenses, budgetary control, and allegations of misconduct at the WTO. The budget is also subject to external audit.32 In 2003 a question arose about how to change from annual to biennial budgeting, notwithstanding the reference to ‘annual’ in Article VII:1 of the WTO Agreement. Ultimately, this was achieved by the Director-​General preparing and submitting two annual budget estimates covering each year of a biennium; the Committee considering these estimates and making recommendations to the General Council once every two years; and the General Council adopting two annual budgets once every two years.33 In the context of the 2019 crisis, the United States threatened to block the entire WTO budget proposal unless specific changes would be made designed to achieve Trump administration policy objectives regarding the dispute settlement system and specifically the Appellate Body. Remarkably, the changes demanded by the United States were adopted by the Director-​General and presented to the Committee on Budget, Finance, and Administration, for recommendation to the General Council, thus relieving the United States of the political burden associated with blocking the entire WTO budget. Instead, this placed other WTO Members in the untenable position of having to block the adoption of the entire WTO budget should they have wished to object to the Trump administration’s specific policy objectives. One may seriously reflect on whether, in so acting, the Secretariat has fully complied with the obligations under Article VI:4 of the WTO Agreement. On one view, as in previous years, the Director-​General should have maintained the original proposal, designed to cover all the lawful activities of the WTO, with the Budget Committee reporting any requests for changes to the General Council, leaving the Trump administration to block the original proposal should it have wished to do so.34 31 

WTO Annual Report 2019, at 180–​181. Regulations 43–​46, Financial Regulations of the World Trade Organisation. 33  Committee on Budget, Finance and Administration, Biennial Budgeting in the WTO, Possible Legal Approaches, WT/​BFA/​W/​104 (16 July 2003), paras 16–​17. 34 The budget originally proposed (WT/​ BFA/​W/​492 (10 September 2019); and WT/​BFA/​W/​492/​ Rev.1 (1 November 2019)) was discussed in the Budget Committee on 12 November 2019, which meeting was suspended. A revised budget proposal (incorporating the changes demanded by the Trump administration) was discussed in the Budget Committee on 27 November 2019 and 5 December 2019 (WT/​BFA/​183 (6 December 2019), paras 1.12-​1.104). The changes introduced at the demand of the United States were: (i) Article 25 DSU arbitrations would be funded from the WTO Secretariat Budget and arbitrators would be compensated on the same basis as panellists (rather than Appellate Body Members); (ii) a temporary limitation of CHF 100,000 would be placed on expenditure from the budget line for Appellate Body Members fees (thus effectively ruling out the conclusion of most pending appeals and the use of Article 25 of the DSU for appeal arbitrations by Appellate Body Members); and (iii) only the 2020 budget would be approved (thus reverting to an annual rather than a biennial approach) (WT/​BFA/​183 (6 December 2019), paras 1.33–​1.34, referring to emails sent to the Committee on 25 and 26 November 2019, stating that the additional elements have been ‘put forward by a Member’ (the United States)). Following the recommendation from the Budget Committee, the budget was approved at the General Council meeting on 9–​11 December 2019. 32 

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VII.  WTO institutional entities and their powers and responsibilities A. Introduction: objectives and functions of the WTO In order to properly understand the nature of the various WTO institutional entities, it is necessary to place them in the context of the objectives and functions of the WTO: raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of trade in goods and services, while allowing for the optimal use of the world’s resources35 in accordance with the objective of sustainable development. WTO Members also recognize the need for positive efforts to ensure that developing countries and especially least-​developed countries secure a commensurate share in the growth of international trade.36 These objectives inform the WTO Agreement as a whole and have often been referred to in the case law.37 The WTO was established to provide the common institutional framework for the conduct of trade relations among its Members in matters related to the WTO agreements.38 The constituting documents include the WTO Agreement, including the Multilateral Trade Agreements, and the Plurilateral Trade Agreements (which are optional),39 as well as various Ministerial Decisions and Declarations, although both directly and indirectly the WTO is connected with many other elements of public international law.40 In the event of a conflict the WTO Agreement prevails,41 and the subsidiary agreements prevail over the GATT 1994.42

35  The reference to the optimal use of the world’s resources may be understood as a reference to the concepts of absolute advantage and comparative advantage. 36  This may be understood as a reference to the concept of special and differential treatment. 37  See, e.g., Appellate Body Report, US –​Gasoline, adopted 20 May 1996, p. 30; Appellate Body Report, US –​Shrimp, adopted 6 November 1999, para 153; Appellate Body Reports, China –​Raw Materials, adopted 22 February 2012, para 8; Panel Reports, China –​Rare Earths, adopted 29 August 2014, para 7.259; Appellate Body Report, India –​Solar Cells, adopted 14 October 2016, paras 5.72 and 5.138-​5.149; Panel Reports, Argentina –​Import Measures, adopted 26 January 2015, para 6.5; Panel Report, Brazil –​ Aircraft (Article 21.5 –​Canada), adopted 4 August 2000, para 6.47 and fn 49; Panel Report, India –​ Quantitative Restrictions, adopted 22 September 1999, para 7.2; Appellate Body Report, EC –​Computer Equipment, adopted 22 June 1998, para 82; Appellate Body Report, Brazil –​Desiccated Coconut, adopted 20 March 1997, at 17. See also Ministerial Conference, Doha Ministerial Declaration, WT/​MIN(01)/​DEC/​ 1 (20 November 2001), paras 2 and 6. 38  Article II:1 of the WTO Agreement. 39  Articles II:2-​4 of the WTO Agreement. These are the Agreement on Trade in Civil Aircraft and the Agreement on Government Procurement. The International Dairy Agreement and the International Bovine Meat Agreement were terminated at the end of 1997. 40  See Chapters 4, 6 and 36 of this handbook. 41  Article XVI:3 of the WTO Agreement. 42  General Interpretive Note to Annex 1A of the WTO Agreement.

100    James Flett and Mislav Mataija The WTO Agreement is binding on all Members.43 The function of the WTO is to facilitate the implementation, administration and operation, and further the objectives, of the WTO Agreement and the Multilateral Trade Agreements, and to provide the framework for the implementation, administration and operation of the Plurilateral Trade Agreements.44 The WTO is also to provide a forum for negotiations among its Members concerning their multilateral trade relations,45 and to administer the DSU and the TPRM.46 It also co-​operates with the IMF and the World Bank in order to achieve greater coherence in global economic policymaking.47 Members must ensure the conformity of their laws, regulations, and administrative procedures with their WTO obligations.48 The WTO is commonly described as a ‘single undertaking’:49 no reservations are permitted.50 Within this framework there are a number of different institutional entities, with different powers and responsibilities. Before considering these different institutional entities in detail, it is important to note that issues of conferred versus implied powers do not assume particular importance in the WTO. Most entities are constituted in the same way (any Member may participate) and decide in the same way (by consensus). Furthermore, if consensus cannot be reached, matters are ‘referred up’ the hierarchy, even to the General Council and ultimately the Ministerial Conference.51 Thus, whilst there are some differences between the provisions establishing and controlling these various entities, which also often overlap significantly, ultimately the leitmotif is essentially the same. There is no executive or parliament, only the legislature in its various guises. This in turn means that the key institutional relationship in the WTO is between the legislature and the judiciary, which is therefore the focus below. 43 

Article II:2 of the WTO Agreement. Article III:1 of the WTO Agreement. 45 Article III:2 of the WTO Agreement. Several WTO agreements call for further negotiations, reviews or other work (the so-​called Built-​in Agenda issues) (1996 Singapore Ministerial Declaration, WT/​MIN(96)/​DEC (18 December 1996), paras 1 and 19). At the Doha MC Members launched a new round of negotiations (WT/​MIN(05)/​DEC), the scope of which has been subsequently adjusted or clarified (WT/​L/​579; WT/​MIN(05)/​DEC; WT/​MIN(11)/​11, Part I; WT/​MIN(13)/​DEC, Part III; WT/​ MIN(15)/​DEC, Part III; WT/​MIN(17)/​SR/​6; and WT/​MIN(17)/​67). 46  Articles III:3–​4 of the WTO Agreement. 47  Article III:5 of the WTO Agreement. See also Declaration on the Contribution of the World trade Organization to Achieving Great Coherence in Global Economic Policymaking; and Declaration on the Relationship of the Word Trade Organization with the International Monetary Fund. The agreements between the WTO and the IMF and World Bank are contained in WT/​L/​194 and WT/​M/​195 (18 November 1996). In certain circumstances these entities may provide information to dispute settlement panels and attend meetings of the DSB. However, the Appellate Body has found that there is nothing in these documents that affects the rights and obligations of WTO Members (Appellate Body Report, Argentina –​Textiles and Apparel, adopted 22 April 1998, paras 70–​73). 48   Article XVI:4 of the WTO Agreement. 49 See, e.g., Appellate Body Report, Brazil –​Desiccated Coconut, adopted 20 March 1997, 11–​ 12; Appellate Body Report, Argentina –​Footwear (EC), adopted 12 January 2000, para 81; Appellate Body Reports, China –​Rare Earths, adopted 29 August 2014, paras 5.30, 5.41, and 5.53. 50  Article XVI:5 of the WTO Agreement. 51  See, e.g., CTG, Rules of Procedure, WT/​L/​79 (7 August 1995), Rule 33 (‘Where a decision cannot be arrived at by consensus, the matter at issue shall be referred to the General Council for decision.’). 44 

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B. The Ministerial Conference The Ministerial Conference is the WTO’s highest decision-​making body, providing general political direction. It is comprised of representatives of all Members, at ministerial level, and meets (usually) at least once every two years. It is tasked with carrying out the functions of the WTO and taking actions to that effect. It has general authority to take decisions on all matters under any of the Multilateral Trade Agreements, if requested by a Member.52 The extraordinarily broad nature of these conferred powers makes any consideration of implied powers essentially moot. The Ministerial Conference also has specific authority, notably to appoint the Director-​General;53 adopt staff regulations;54 adopt interpretations of the WTO agreements;55 grant waivers;56 amend the WTO agreements;57 and decide on accessions.58 It also has certain specific powers under other agreements.59 To-​date there have been eleven meetings of the WTO Ministerial Conference.60

C. The General Council The General Council, consisting of representatives of all Members at ambassador level, meets in practice at least once every two months, in Geneva, and carries out the functions of the Ministerial Conference in the intervals between meetings of that body (including, for example, appointing the Director-​General, granting waivers, and approving accessions).61 The General Council also has specific authority, notably, to: make arrangements for co-​operation with other international organizations62 and 52  Article

IV of the WTO Agreement. See, for example, Ministerial Conference, Implementation-​ Related Issues and Concerns, Decision of 14 November 2001, WT/​MIN(01)/​17 (20 November 2001). 53  Article VI:2 of the WTO Agreement. 54  Article VI:3 of the WTO Agreement. 55  Article IX:2 of the WTO Agreement. 56  Article IX:3 of the WTO Agreement. 57  Article X of the WTO Agreement. 58  Article XII of the WTO Agreement. 59  See paragraph 2(b) of the GATT 1994 incorporation text; Articles XII:5(b) and XII:6 of the GATS; Article 64.3 of the TRIPS Agreement. 60  1996 (Singapore), 1998 (Geneva), 1999 (Seattle), 2001 (Doha), 2003 (Cancún), 2005 (Hong Kong), 2009 (Geneva), 2011 (Geneva), 2013 (Bali), 2015 (Nairobi) and 2017 (Buenos Aires). The twelfth meeting was scheduled for 2020 in Kazakhstan, but has been postponed to June 2022, in Geneva, due to the covid pandemic. The resulting Ministerial Declarations and Decisions can be found on the WTO web site (< www.wto.org >). The Rules of Procedure of the MC (and the GC) are contained in WT/​L/​161 (25 July 1996). 61   Article IV:2 of the WTO Agreement. 62  Article V:1 of the WTO Agreement. See also Article XXVI of the GATS; and Article 68 of the TRIPS Agreement. For example, the WTO has concluded agreements with the IMF and the World Bank (WT/​ L/​195 (18 November 1996)), the World Intellectual Property Organisation (WIPO) (IP/​C/​6 (13 December 1995)), the International Telecommunications Union (ITU) (S/​C/​11 (21 September 2000)), and the World Organization on Animal Health (OIE) (WT/​L/​272 (8 July 1998)). For an exchange of letters between the WTO and the UN, see: WT/​GC/​W/​10 (3 November 1995) and WT/​GC/​M/​(13 December 1995).

102    James Flett and Mislav Mataija non-​governmental organizations;63 approve the annual budget;64 and adopt financial regulations.65 It is, operationally, the central and dominant organ, acting in lieu of the Ministerial Conference, and supervising and guiding most of the other councils, committees and other bodies.66 It also has the authority to ‘assign functions’ to the subsidiary councils,67 and has adopted several decisions regulating the activities of the sectoral Councils and their subsidiary bodies, as well as certain other procedural matters.68 It also oversees a work programme on e-​commerce, against the background of a moratorium on the imposition of customs duties on electronic transmissions.69

D. The Dispute Settlement Body The General Council also convenes in order to discharge the responsibilities of the Dispute Settlement Body (DSB),70 as set out in the Dispute Settlement Understanding (DSU).71 The DSB may have a different chair and in practice has always done so.72 It is responsible for ‘administering’ the rules and procedures set out in the DSU, through decisions and actions, and, ‘accordingly’, has the specific authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions and other obligations.73 It also has the authority to appoint and reappoint persons to serve on 63 

Article V:2 of the WTO Agreement. See the Guidelines contained in WT/​L/​162 (23 July 1996). Article VII of the WTO Agreement. 65  Article VII of the WTO Agreement. 66  For an example of such guidance, see General Council, Minutes of Meeting Held on 3 and 8 May 2000, WT/​GC/​M/​55 (16 June 2000). 67  Article IV:5 of the WTO Agreement. 68 WT/​ GC/​M/​8 (13 December 1995), item 11 (reporting procedures and annual overview); WT/​ GC/​M/​5 (17 August 1995), at 11 and WT/​L/​76 (25 July 1995) (Procedure for decisions having financial implications which may be taken by WTO bodies); WT/​GC/​M/​8 (13 December 1995), item 13 and WT/​L/​106 (27 November 1995) (Guidelines on the arrangements for scheduling of meetings of WTO bodies); WT/​GC/​M/​8 (13 December 1995), item 3 and WT/​L/​93 (24 November 1995) (Decision-​Making Procedures under Articles IX and XII of the WTO Agreement); WT/​GC/​M/​74 (1 July 2002), item 5 and WT/​L/​452 (16 May 2002) (Procedures for the circulation and derestriction of WTO documents); WT/​ GC/​M/​77 (13 February 2003), item 17 and WT/​L/​510 (21 January 2003) and JOB/​GC/​22 (Guidelines for the appointment of officers to WTO bodies); and WT/​GC/​M/​77 (13 February 2003), item 17 and WT/​L/​ 509 (20 January 2003) (Procedures for the appointment of Directors-​General). 69  See WT/​DEC(98)/​DEC/​2 (25 May 1998); WT/​MIN(13)/​32 –​WT/​L/​907 (11 December 2013); WT/​ MIN(15)/​42 –​WT/​L/​977 (21 December 2015); WT/​MIN(17)/​65 –​WT/​L/​1032 (18 December 2017); WT/​ MIN(17)/​68 (20 December 2017) and WT/​MIN(17)/​SR/​6 (26 January 2018), Annex 1. 70  See also Chapter 34 of this Handbook. 71  Article IV:3 of the WTO Agreement. The Rules of Procedure of the DSB are contained in WT/​ DSB/​9 (16 January 1997). Rule 1 provides that the DSB follows the General Council’s Rules of Procedure, except as provided in the DSU or in the DSB Rules of Procedure. 72  See General Council, Guidelines for Appointment of Officers to WTO Bodies, Adopted by the General Council on 11 December 2002, WT/​L/​510 (21 January 2003), para 4.1 (each body should have a separate chairperson). 73  Articles 2.1, 6.1, 16.4, 17.14, 21 and 22 of the DSU. 64 

International Trade Law Institutions    103 the Appellate Body.74 It meets, in practice, once a month, and more frequently when required by the DSU.75 Appendix 2 of the DSU identifies certain special or additional rules concerning dispute settlement contained in the covered agreements. Some of these set out additional powers and responsibilities for the DSB. Notably, Annex V to the SCM Agreement provides for the DSB to initiate the procedure under Annex V to obtain information concerning serious prejudice, and to designate a representative to serve the function of facilitating this information-​gathering process. In US –​Large Civil Aircraft, the Appellate Body confirmed that the Annex V procedure is initiated by so-​ called reverse consensus, that is, in effect, automatically, or by operation of law (ipso jure).76 Apart from the specific powers and responsibilities conferred upon it, and notwithstanding the term ‘accordingly’, the DSB also has a general authority to ‘administer’ the DSU.77 However, this does not mean that the DSB has the authority to amend the DSU,78 or any covered agreement,79 or to interpret any covered agreement.80 An example of the exercise of this general authority to administer the DSU is the adoption of the Rules of Conduct.81 Another example is the decision regarding the calculation of time limits in dispute settlement proceedings, when the relevant time limit expires during the weekend or a WTO holiday, deferring to the first following working day.82 From time-​to-​time Members engaged in particular litigation reach procedural or other agreements between themselves, which are sometimes, if not always, notified to the DSB. Sometimes such an arrangement has been put to the DSB for decision, without any objection being raised. For example, in US –​FSC, the parties agreed to extend the period for compliance fixed by the adjudicator by one month, and that was approved by DSB decision.83 One may doubt whether this modification of an adopted report falls within the ‘administration’ of the DSU. The important point was rather that the parties had agreed to waive their respective DSU rights and would be bound by that agreement.

74 

Article 17.2 of the DSU. Article 2.3 of the DSU. See fn 5 to Article 6.1, fn 7 to Article 16.4, fn 8 to Article 17.14, fn 11 to Article 21.3 of the DSU. Compare Article 22.2 and 22.7 of the DSU. 76  Appellate Body Report, US –​Large Civil Aircraft (2nd Complaint), adopted 23 March 2012, paras 480–​549. 77  Article 2.1 of the DSU. 78  See Article X:8 of the WTO Agreement. 79  See Article X of the WTO Agreement. 80  See Article IX:2 of the WTO Agreement. As an actor in the context of the DSU, the DSB (which may mean in practice the Chair or the Secretariat acting under the authority of the Chair) may be called upon to apply and thus interpret various provisions of the DSU in the specific context of a particular dispute. However, they do so always subject to subsequent control by the adjudicators in that dispute (to the extent that such subsequent control remains a possibility). 81  Rules of Conduct for the Understanding on the Rules and Procedures Governing the Settlement of Disputes, adopted 3 December 1996, WT/​DS/​RC/​1 (11 December 1996). 82  See Working Practices Concerning Dispute Settlement Procedures, WT/​DSB/​6 (6 June 1996). 83  DSB, Minutes of Meeting held on 12 October 2000, WT/​DSB/​M/​90 (31 October 2000), paras 6–​7. 75 

104    James Flett and Mislav Mataija The DSB also provides a forum for Members to express their views on panel reports84 and Appellate Body reports.85 However, such views remain attributable to the Members expressing them, and not to the DSB. Members have occasionally circulated a document setting out their views (as opposed to simply recording them in the minutes of the DSB) and sought inclusion of such documents in the document series relating to that particular dispute.86 The DSB also provides a forum for the surveillance of the implementation of adopted reports. This is an important function. It provides for the ‘shaming’ of WTO Members that have not yet complied. The issue of implementation of the recommendations or rulings may be raised at the DSB by any Member at any time following their adoption. Unless the DSB decides otherwise, the issue of implementation of the recommendations and rulings must be placed on the agenda of the DSB meeting after six months following the date of establishment of the reasonable period of time for compliance and must remain on the DSB’s agenda until the issue is resolved. At each subsequent DSB meeting the Member concerned must provide the DSB with a status report in writing of its progress in the implementation of the recommendations or rulings.87

E. The Trade Policy Review Body The General Council also convenes, also, in practice, with a different chair, as the Trade Policy Review Body (TPRB).88 The TPRB meets regularly to conduct trade policy reviews of Members under the Trade Policy Review Mechanism (TPRM)89 and to consider the Director-​General’s annual reports on the WTO’s major activities and significant trade policy issues.90 The four Members with the largest share of world trade are reviewed every two years; the next sixteen every four years; and the rest every six years, with the possibility for longer periods for least-​developed Members.91 The purpose of the TPRM is to improve transparency and adherence to the rules and it makes an important contribution to that objective. However, such reports are not intended to serve as a basis for the enforcement of specific obligations or for dispute settlement purposes, or to impose new policy commitments on Members.92 The TPRM is 84 

Article 16.4 of the DSU. Article 17.14 of the DSU. 86  See, e.g., WT/​DS294/​16 (17 May 2006) (one of a series of such documents submitted by the United States with respect to the issue of zeroing). 87  Article 21.6 of the DSU. 88  Article IV:4 of the WTO Agreement. The Rules of Procedure of the TPRB are contained in WT/​ TPR/​6/​Rev.4 (16 June 2017): Rule 1 provides that the TPRM follows the GC Rules of Procedure, except as provided in the TPRM Rules of Procedure. 89  WTO Agreement, Annex 3. 90  WTO Agreement, Annex 3, para G. 91  WTO Agreement, Annex 3, para C(ii). These periodicities have been extended (see WT/​L/​1014 (27 July 2017)). 92  TPRM, para A(ii). 85 

International Trade Law Institutions    105 not a covered agreement, that is, it is not one of the agreements referred to in Article 1(1) and Appendix 1 of the DSU. This means that a case cannot be initiated on the basis of an affirmation that a Member has allegedly acted inconsistently with an obligation contained in the TPRM. However, the mere fact that information would be provided pursuant to the TPRM would not preclude use of that information in dispute settlement, especially since such information could normally be obtained or also obtained through other channels.93

F. The Council for Trade in Goods, the GATS Council and the TRIPS Council, and their subsidiary committees and other bodies Operating under the guidance of the General Council are the Council for Trade in Goods (CTG), the GATS Council and the TRIPS Council. They oversee respectively the functioning of the Multilateral Trade Agreements in Annex 1A of the WTO Agreement, the GATS and TRIPS Agreement. They also carry out the functions assigned to them by their respective agreements and by the General Council.94 They meet, formally or informally, several times a year. They establish subsidiary bodies as required, which in turn establish their own rules of procedure.95 The CTG96 exercises the powers of the Members in the context of the GATT 1994, and additionally oversees a variety of other agreements and committees.97 Certain agreements confer specific powers on the CTG.98 In practice, many of these subsidiary agreements and committees operate in a relatively autonomous way, probably because some of them were effectively carried over from the Tokyo Round, and because the WTO negotiations on specific agreements were conducted in a relatively compartmentalized manner. For example, the Committee on Anti-​Dumping Practices is directly established

93  See,

in this respect, the discussion in Panel Report, Russia –​Traffic in Transit, adopted 26 April 2019, paras 7.115–​7.118. 94  Article IV:5 of the WTO Agreement. 95  Article IV:6 of the WTO Agreement. 96  The CTG Rules of Procedure are contained in WT/​L/​79 (7 August 1995). 97  The CTG has Committees on: Market Access; Agriculture; Sanitary and Phytosanitary Measures; Technical Barriers to Trade; Subsidies and Countervailing Measures; Anti-​Dumping Practices; Customs Valuation; Rules of Origin; Import Licensing; Trade-​Related Investment Measures; Safeguards; Trade Facilitation; Expansion of Trade in Information Technology Products—​as well as a Working Party on State Trading Enterprises. 98  See paras 1, 4 and 5 of the Understanding on the Interpretation of Article XVII of the GATT 1994; paras 3, 7, 9 and 11 of the Understanding on the Interpretation of Article XXIV of the GATT 1994; Articles 8.1 and 8.11 of the Agreement on Textiles and Clothing (terminated on 1 January 2005); Articles 5.1, 5.3, 7.2 and 9 of the Agreement on Trade-​Related Investment Measures, Articles 5.1, 5.3, 7.2 and 9; Article 14.4 of the Anti-​Dumping Agreement; and Articles 7.4, 8.1, 8.2, 12.2 and 13.1 of the Safeguards Agreement.

106    James Flett and Mislav Mataija by the Anti-​Dumping Agreement (not the CTG); and responsibilities are assigned to it by the Anti-​Dumping Agreement or the Members (not the CTG).99 In order to precisely ascertain the relationships between the CTG and each of these subsidiary bodies it is necessary to study the precise wording of the relevant provisions in each subsidiary agreement, together with the relevant provisions of the WTO Agreement. For example, the Committee on Trade-​Related Investment Measures is closely linked to the CTG, in the sense that it is responsible for carrying out the responsibilities assigned to it by the CTG, and reports to it.100 Furthermore, significant TRIMs-​related decision-​making powers are reserved for the CTG.101 This is understandable, given that the TRIMs Agreement is in large measure a consolidation of various aspects of the application of Articles III and XI of the GATT 1994. In the case of the SPS Agreement, it is specifically provided that the Committee shall reach its decisions by consensus.102 There is no provision in the SPS Agreement that defines consensus as a decision with no Member present formally objecting. The SPS Committee Rules of Procedure re-​affirm the consensus rule, but do not further clarify this matter.103 Nevertheless, it would appear that, in adopting a number of decisions,104 the SPS Committee has in practice operated not by voting, but by consensus, meaning no Member present formally objecting. Presumably, this is based on the proposition that the SPS Agreement is an integral part of the WTO Agreement, and that therefore the consensus rule in Article IX:1 of the WTO Agreement, including the footnote that refers to no Member present formally objecting, also applies to the SPS Committee. The same observation would appear to apply to the other subsidiary committees and bodies. One important issue that has arisen in this context concerns the legal significance of secondary acts. Notably, in US –​Poultry (China), the Panel was called upon to consider the SPS Committee Decision on the Implementation of Article 4 of the Agreement on the Application of Sanitary and Phytosanitary Measures. The Panel noted that SPS Committee decisions typically state that they are not meant to affect the rights and obligations of Members, but this particular decision contained no such statement. It opined (erroneously 99 

Article 16 of the Anti-​Dumping Agreement. Articles 7(2) and (3) of the TRIMs Agreement. 101  Article 5(3) of the TRIMs Agreement. 102  Article 12(1) of the SPS Agreement. 103  CTG, Rules of Procedure for Meetings of the Committee on Sanitary and Phytosanitary Measures, Approved by the Council for Trade in Goods on 11 June 1997, G/​L/​170 (20 June 1997), Rule 33. See also SPS Committee, Working Procedures of the Committee, Adopted by the Committee at its Meeting of 29-​ 30 March 1995, G/​SPS/​1 (4 April 1995). 104  SPS Committee, Decision on the Implementation of Article 4 of the Agreement on the Application of Sanitary and Phytosanitary Measures, G/​SPS/​19/​Rev.2 (23 July 2004); SPS Committee, Guidelines to Further the Practical Implementation of Article 5.5, G/​SPS/​15 (18 July 2000); SPS Committee, Guidelines to Further the Practical Implementation of Article 6 of the Agreement on the Application of Sanitary and Phytosanitary Measures, G/​SPS/​48 (16 May 2008); SPS Committee, Recommended Procedures for Implementing the Transparency Obligations of the SPS Agreement (Article 7), G/​SPS/​7/​Rev. 2 (2 April 2002); SPS Committee, Revision of the Procedure to Monitor the Process of International Harmonization, G/​SPS/​11/​Rev.1 (15 November 2004). 100 

International Trade Law Institutions    107 in our view) that the decision is not binding, but that it expands on the Members’ understanding of certain provisions of the SPS Agreement.105 In US –​Tuna II (Mexico), the Appellate Body found that the TBT Committee Decision on Principles for the Development of International Standards, Guides and Recommendations with Relation to Articles 2, 5, and Annex 3 to the Agreement is a subsequent agreement within the meaning of Article 31(3)(a) of the Vienna Convention, and was therefore to be taken into account.106 A number of the subsidiary agreements authorize their Committees to establish further subsidiary bodies,107 and in some instances mandate this.108 In addition, a number of the subsidiary agreements confer quasi-​judicial powers. For example, the SCM Agreement mandates the establishment of a Permanent Group of Experts, from which a panel may seek assistance and from which the SCM Committee or a Member may seek an advisory opinion on the existence and nature of any subsidy.109 The Safeguards Agreement provides for the Committee on Safeguards to find, upon request by an affected Member, whether or not the procedural requirements of the Safeguards Agreement have been complied with, and to report its findings to the CTG.110 Perhaps not surprisingly, these mechanisms have never been used. The GATS Council111 also oversees the work of a number of subsidiary bodies.112 It is responsible for receiving notifications from Members of, inter alia, changes in laws pertaining to their commitments under the GATS; measures of other Members considered to affect the operation of the GATS; economic integration agreements; and the adoption and termination of security measures.113 It also has the authority to establish such subsidiary bodies as it considers appropriate for the effective discharge of its functions.114 That same decision established the Committee on Trade in Financial Services to carry out the responsibilities set out in that decision. The GATS Council is also charged with developing disciplines on domestic regulation115 and establishing rules for the rectification or modification of schedules.116 A number of GATS provisions 105 

Panel Report, US –​Poultry (China), adopted 25 October 2010, para 7.136 and fn 345. Appellate Body Report, US –​Tuna II (Mexico), adopted 13 June 2012, para 372. 107  Article 13(2) of the TBT Agreement; Article 16(2) of the Anti-​Dumping Agreement; Article 24(2) of the SCM Agreement. 108 For example, Article 24.3 of the SCM Agreement requires the Committee on Subsidies and Countervailing Measures to establish a Permanent Group of Experts composed of five independent persons, highly qualified in the fields of subsidies and trade relations. 109  Articles 24.3-​4 and 4.5 of the SCM Agreement. 110  Article 13(1)(b) of the Safeguards Agreement. 111  The GATS Council Rules of Procedure are contained in S/​L/​15 (19 October 1995). 112  The Council for Trade in Services has Committees on: Trade in Financial Services; and Specific Commitments—​as well as Working Parties on Domestic Regulation and General Agreement on Trade in Services Rules. 113  Articles III:3, III:5, V:7, Vbis (b), VII:4, VIII:4, X:2, XII:2, XIVbis2, XXI:1 of the GATS. 114  Article XXIV:1 of the GATS; Decision on Institutional Arrangements for the General Agreement on Trade in Services adopted together with the Marrakesh Agreement. 115  Article VI:4 of the GATS. 116  Article XXI:5 of the GATS. See GATS Council, Decision on Procedures for the Implementation of Article XXI of the General Agreement on Trade in Services (GATS), S/​L/​7 (20 October 1999); 106 

108    James Flett and Mislav Mataija call for multilateral negotiations on specific issues117 and a Working Party on GATS Rules oversees these matters.118 The TRIPS Council119 is responsible for monitoring the operation of the TRIPS Agreement and Members’ compliance with their obligations thereunder and affords Members the opportunity to consult on matters relating to the trade-​related aspects of intellectual property rights. It is also charged with carrying out such other responsibilities as may be assigned to it by the Members, including any assistance requested by them in the context of dispute settlement procedures. For these purposes, the TRIPS Council is empowered to receive relevant notifications;120 to consult with and seek any information it deems appropriate from any source; and to recommend amendments.121 It is also charged with several more specific duties, such as keeping under review negotiations on geographical indications122 or extending the initial period of ten years during which least-​developed countries are not required to apply most of the provisions of the TRIPS Agreement.123

G. Other subsidiary committees, working parties and working groups The Ministerial Conference is also required to establish a Committee on Trade and Development,124 a Committee on Balance-​of-​Payments Restrictions,125 and a Committee

GATS Council, Procedures for the Implementation of Article XXI of the General Agreement on Trade in Services (GATS), S/​L/​80 (29 October 2000); GATS Council, Decision on Procedures for the Certification or Rectifications or Improvements to Schedules of Specific Commitments, S/​L/​83 (18 April 2000); GATS Council, Procedures for the Certification or Rectifications or Improvements to Schedules of Specific Commitments, S/​L/​84 (18 April 2000). 117 See generally Article XIX of the GATS and Article X:1 (safeguard measures); Article XIII:2 (government procurement); Article XV:1 (subsidies); Annex on Movement of Natural Persons Supplying Services under the Agreement, para 3; Annex on Financial Services, para 3(b); Annex on Negotiations on Maritime Transport Services; Annex on Negotiations on Basic Telecommunications. 118  In addition, the GATS Council consults with Members on double taxation issues (Article XII:2), reviews Annex II Exemptions (Annex on Article II Exemptions) and reviews periodically developments in the air transport sector (Annex on Air Transport Services). 119  The TRIPS Council Rules of Procedure are contained in IP/​C/​1 (28 September 1995). 120  Articles 1.3, 3.1, 4(d) and 63.2 of the TRIPS Agreement. 121  Article 71 of the TRIPS Agreement. 122  Articles 23 and 24 of the TRIPS Agreement. 123  Article 66.1 of the TRIPS Agreement. Provision for such prolongation was one element addressed in the Declaration on the TRIPS Agreement and Public Health adopted by the Ministerial Conference at Doha, and the prolongation has been duly decided upon by the TRIPS Council. 124  Article IV:7 of the WTO Agreement; WT/​GC/​M/​1 (28 February 1995), item 7.A(1) (establishment and terms of reference). WT/​COMTD/​6 (17 October 1995) (Rules of Procedure). The Committee on Trade and Development has a Sub-​Committee on Least Developed Countries (WT/​COMTD/​M/​2 (8 August 1995), para 3). 125  Article IV:7 of the WTO Agreement; WT/​GC/​M/​1 (28 February 1995), item 7.A(1) (establishment and terms of reference); WT/​BOP/​10 (12 December 1995) (Rules of Procedure).

International Trade Law Institutions    109 on Budget, Finance and Administration,126 which carry out the functions assigned to them by the WTO agreements and any additional functions assigned to them by the General Council. For example, the General Council has charged the Balance-​of-​Payments Committee with conducting consultations on balance-​of-​payments issues under Articles XII:4 and XVIII:12 of the GATT 1994, Article XII:5 of the GATS and the Understanding on Balance-​of-​Payment Provisions of the GATT 1994.127 The MC may also establish additional Committees with such functions as it may deem appropriate.128 These include the Committee on Trade and Environment129 and the Committee on Regional Trade Agreements.130 The Ministerial Conference and General Council are also assisted by numerous Working Parties on Accessions, and Working Groups on Preshipment Inspection,131 Trade, Debt and Finance,132 as well as Trade and Technology Transfer.133

H. Plurilateral bodies The bodies provided for in the Plurilateral Trade Agreements, specifically the Trade in Civil Aircraft Committee and the Government Procurement Committee, carry out the functions assigned to them under those Agreements and operate within the institutional framework of the WTO. They must keep the General Council informed of their activities on a regular basis.134 The Information Technology Agreement Committee also operates under the auspices of the CTG.

I. The Trade Negotiations Committee The 2001 Doha MC established the Trade Negotiations Committee (TNC), in order to conduct the Doha Round Negotiations, under the authority of the General Council.135 126 

Article IV:7 of the WTO Agreement; WT/​GC/​M/​1 (28 February 1995), item 7.A(1) (establishment and terms of reference); WT/​L/​161 (25 July 1996) (Rules of Procedure). 127  General Council, WTO Committee on Balance-​of-​Payment Restrictions, WT/​L/​45 (23 February 1995). 128  Article IV:7 of the WTO Agreement. 129  WT/​GC/​M/​1 (28 February 1995), item 7.A(3) (establishment and terms of reference); WT/​L/​42 (23 February 1995) (Rules of Procedure). 130  WT/​ GC/​M/​10 (6 March 1996), para 11 (establishment and terms of reference); WT/​REG/​1 (14 August 1996) (Rules of Procedure). 131  The relevant activities are currently initially performed by the Committee on Customs Valuation (see WT/​GC/​M/​40/​Add.3 (15 July 1999), item 5 and G/​L/​300 (18 March 1999), para 23). 132  WT/​MIN(01)/​DEC/​1 (20 November 2001), para 36 (establishment and terms of reference). 133  WT/​MIN(01)/​DEC/​1 (20 November 2001), para 37 (establishment and terms of reference). There are also Working Groups on: The Relation Between Trade and Investment; Interaction Between Trade and Competition Policy; and Transparency in Government Procurement. However, these are currently inactive (WT/​L/​579 (2 August 2004), item g). 134  Article IV:8 WTO Agreement. 135  Ministerial Conference, Ministerial Declaration Adopted on 14 November 2001, WT/​MIN(01)/​ DEC/​1 (20 November 2001).

110    James Flett and Mislav Mataija It has established negotiating groups on market access, rules and trade facilitation. Negotiations also take place in special sessions of standing WTO bodies. The TNC is chaired by the Director-​General.

J. Dispute settlement panels and the Appellate Body Apart from three brief references to the DSB and the DSU,136 the WTO Agreement itself makes no reference to the dispute settlement system, panels or the Appellate Body.137 Almost all of the relevant provisions are set out in the DSU. The DSU clearly applies to disputes between Members regarding measures ‘taken by another Member’.138 It does not refer expressly to judicial review of measures attributable to the WTO. Clearly, certain provisions would not be apt for such a purpose, such as the provisions concerning consultations.139 However, the DSU does not contain any provision expressly precluding judicial review of measures attributable to the WTO. Thus, it seems that this may be possible, at least indirectly or by implication, and in a manner that is ancillary to a case directed against another Member’s measure. Thus, the case law supports the view that a panel may consider the propriety of its own establishment,140 which may be seen as an indirect consideration of the lawfulness of a DSB act (albeit one that occurs automatically or by operation of law that is, ipso jure). The Appellate Body’s finding regarding the initiation of an Annex V procedure under the SCM Agreement in US –​Large Civil Aircraft (2nd Complaint) may be seen in a similar light.141 Consistent with this, in India –​Quantitative Restrictions, the Appellate Body rejected the proposition that there was a principle of institutional balance in WTO law.142 The DSU provides for the establishment by the DSB of panels,143 including so-​called compliance panels144 and arbitration panels,145 and a standing Appellate Body.146 It also provides for the possibility of an arbitration to determine a reasonable period of time for compliance.147 Provision is made for the possibility of arbitration by mutual agreement

136 

Articles III:3 and IV:3 and fn 3 of the WTO Agreement. See also Chapter 34 of this Handbook. 138  Article 3.3 of the DSU. 139  Article 4 of the DSU. 140  Panel Report, Australia –​Automotive Leather II, adopted 16 June 1999, paras 9.13–​9.15. 141  Appellate Body Report, US –​Large Civil Aircraft (2nd Complaint), adopted 23 March 2012, paras 480-​549. 142 Appellate Body Report, India –​Quantitative Restrictions, adopted 22 September 1999, paras 102-​105. 143  Article 6.1 of the DSU. 144  Article 21.5 of the DSU. 145  Article 22.6 of the DSU. 146  Article 17.1 of the DSU. 147  Article 21.3(c) of the DSU. 137 

International Trade Law Institutions    111 between the disputing parties.148 Other DSU actors149 are the Members themselves (as parties150 or third parties151), the Director-​General,152 the Secretariat,153 the Chair of the DSB,154 the Chair of the relevant council or committee,155 the DSB,156 any individual or body from whom information is sought,157 and any expert or expert review group.158 Certain of the special or additional rules159 also refer to other actors.160 Panels and the Appellate Body are required to act independently161 and objectively.162 Panel and Appellate Body reports are adopted by the DSB by so-​called negative consensus,163 that is, in effect, automatically or by operation of law (ipso jure). Panels are charged with resolving the dispute before them and clarifying the provisions of the covered agreements in accordance with the customary rules of interpretation of public international law164 to the extent necessary in order to do so.165 They 148  Article 25 of the DSU. To-​date, this provision has been used once, in US –​Section 110(5) Copyright Act (Article 25). This provision is also being used in order to work around the current US blockage of AB appointments. 149  See also Chapter 39 of this Handbook. 150  Article 1.1 of the DSU. 151  Article 10 of the DSU. 152 Articles 5.6 (Good Offices, Conciliation and Mediation), 8.7 (Composition of Panels), 17.9 (working procedures for appellate review), 22.6 and footnote 12 (appointment of arbitration panellists), and 24.2 (good offices in cases involving least-​developed countries) of the DSU. The Director-​General is also charged with convening DSB meetings as necessary. See: Rules of Procedure for Meetings of the GC, Rule 2; Article 2.3 of the DSU. See also fn 5 to Article 6.1, fn 7 to Article 16.4, fn 8 to Article 17.14, fn 11 to Article 21.3 of the DSU. Compare Articles 22.2 and 22.7 of the DSU. 153  Articles 8.4 (maintenance of the indicative list), 8.6 (proposed nominations), 12.6 (depository) and 27 (Responsibilities of the Secretariat) of the DSU. 154 Articles 1.2 (resolution of conflicts between special or additional rules), 7.3 (special terms of reference), 8.7 panel composition), 12.10 (extension of consultations period in cases involving developing countries), 17.9 (working procedures for appellate review), 24.2 (good offices in cases involving least-​ developed countries) of the DSU. 155  Article 8.7 of the DSU (panel composition). 156 See, notably, Articles 2 (Administration), 6 (Establishment of Panels), 16.4 (Adoption of Panel Reports), 17.4 (Adoption of Appellate Body Reports), 21 (Surveillance of Implementation of Recommendations and Rulings), and 22 (Suspension of Concessions). 157  Article 13.1 of the DSU. 158  Article 13.2 of and Appendix 4 to the DSU. 159  Article 1.2 of and Appendix 2 to the DSU. 160  Notably, Article11.2 of the SPS Agreement refers to the use of experts or an advisory technical experts group and the consultation of other international organizations; (although not a special or additional rule, Article 11.3 of the SPS Agreement refers to the dispute settlement mechanisms of other international organizations or agreements); Articles 14.2-​4 of and Annex 2 to the TBT Agreement refer to a technical expert group and to any bodies referred to in Articles 3, 4, 7, 8 and 9; Article 19 Customs Valuation Agreement refers to the Technical Committee; Articles 4.5 and 24.4 SCM Agreement refer to the Permanent Group of Experts, Article 6.6 to all Members, Article 8.5 to the Subsidies Committee and an arbitration body, and Annex V to a Facilitator. 161  Articles 8.2, 8.9 and 17.3 of the DSU. 162  Article 11 of the DSU. 163  Articles 16.4 and 17.14 of the DSU. 164  It is generally accepted that these are codified, at least in part, in Articles 31 to 33 of the VCLT. 165  Articles 3.2 and 3.3 of the DSU.

112    James Flett and Mislav Mataija may not add to or diminish the rights and obligations of Members.166 There is, evidently, a certain tension between these two statements.167 Panels are authorized168 to consider the matter within their terms of reference, which may be standard (based on the panel request) or special (agreed with the other party).169 Panels may also consider certain provisions raised by the respondent (which should normally be done in the first written submission).170 The matter consists of a measure attributable to the respondent, an obligation (or right), and whether the measure is inconsistent with the WTO obligations and rights of the respondent. The DSU has no provision exhaustively delimiting the applicable law.171 Claims must in principle be brought under the covered agreements172 (subject to special terms of reference), but other law may be applicable. If a panel concludes that a measure is WTO inconsistent, it must recommend that the respondent bring the measure into conformity with the relevant agreement.173 Compliance panels have the specific task of adjudicating disagreements as to the existence or consistency of a measure taken to comply;174 arbitration panels have the task of quantifying nullification or impairment;175 and arbitrators the task of determining a reasonable period of time in which to comply.176 Panels establish their own working procedures, taking as a starting point the model set out in Appendix 3 to the DSU.177 In practice, a more or less standard set of working procedures has developed over time, although the procedures continue to evolve, and there are still significant variations from case to case. The working procedures cover such matters as confidentiality, the form, timing and content of submissions, preliminary rulings (which are not expressly provided for in the DSU), evidence, the posing of questions, the conduct of substantive meetings, third party sessions, executive summaries, interim review, the service of documents, and the correction of clerical errors. Panels also frequently adopt additional working procedures, for example on business confidential information or open hearings. WTO adjudicators have an implied power to address any matters arising during the proceedings that need to be addressed in order for them to exercise their functions.178 This has been exercised in order to clarify such things as, for example: the applicable rules of interpretation;179 the question of 166 

Articles 3.2 and 19.2 of the DSU. See also Chapter 35 of this handbook. 168  See also Chapter 36 of this handbook. 169   Article 7 of the DSU. 170  Such as, e.g., Articles XX and XXI of the GATT 1994. 171  Article 1.2 of the DSU. 172  Appendix 1 to the DSU. 173  Article 19.1 of the DSU. 174  Article 21.5 of the DSU. 175  Article 22.6 of the DSU. 176  Article 21.3(c) of the DSU. 177  Article 12.1 of and Appendix 3 to the DSU. 178  Appellate Body Report, Mexico –​Taxes on Soft Drinks, adopted 24 March 2006, para 45. 179  Appellate Body Report, US –​Gasoline, adopted 20 May 1996, at 17 (Article 31 of the VCLT); Appellate Body Report, Japan –​Alcoholic Beverages II, adopted 1 November 1996, para 23 (Article 32 167 

International Trade Law Institutions    113 burden of proof;180 the use of outside lawyers;181 the significance of prior reports;182 and so forth. The Secretariat has also produced an Editorial Guide for Panel Submissions, which the parties and third parties are invited to follow. Article 17 of the DSU expressly addresses appellate review. Article 17.1 provides that appeals lie from panel cases; Article 17.6 states that appeals must be limited to issues of law and legal interpretation; Article 17.12 instructs the Appellate Body to address all issues raised before it; and Article 17.13 empowers the Appellate Body to uphold, modify or reverse the panel. There is no provision for remand, although the Appellate Body can complete the legal analysis on the basis of facts that have been found or are uncontested.183 Other provisions of the DSU are also clearly directly relevant and applicable to appellate review.184 Some provisions of the DSU are clearly not directly relevant to, or applicable in, the context of appellate review,185 although all provisions of the DSU are susceptible to being interpreted and applied by the Appellate Body, given that the DSU itself is a covered agreement.186 Only one provision of the DSU expressly excludes appellate review: Article 26.2 of the DSU provides that, in the case of so-​called situation complaints, the procedures set out in the DSU only apply up to the point at which the panel report is circulated to Members. The conventional wisdom is that appeals do not lie from an arbitration panel. However, this remains an open question. Article 17.1 of the DSU provides that appeals lie from panel cases. And the rule in Article 22.7 of the DSU that the parties must accept the arbitration decision as final and not seek a second arbitration can be understood as merely preventing an endless loop of requests pursuant to Article 22.2 and arbitration pursuant to Article 22.6. The Appellate Body was established by the DSB, together with the conditions of employment of Appellate Body Members.187 The Appellate Body draws up its own working of the VCLT); Appellate Body Reports, Canada –​Renewable Energy/​Canada –​Feed-​in Tariff Program, adopted 24 May 2013, fn 512 (Article 33 of the VCLT). 180 

Appellate Body Report, US –​Wool Shirts and Blouses, adopted 23 May 1997, at 13–​16. Appellate Body Report, EC –​Bananas III, adopted 25 September 1997, paras 4–​12. 182  Appellate Body Report, US –​Stainless Steel (Mexico), adopted 20 May 2008, paras 160–​161. 183  See, for a recent example, Appellate Body Report, Korea –​Pneumatic Valves (Japan), adopted 30 September 2019, para 5.38. 184  For example, Articles 1 (Coverage and Application); 2 (Administration); 3 (General Provisions); 4.9 (Acceleration of Procedures in Case of Urgency); 18 (Communications with the Panel or Appellate Body); 19 (Panel and Appellate Body Recommendations); 20 (Time-​frame for DSB Decisions); and 26 (Non-​Violation Complaints) of the DSU. 185  For example, Articles 8 (Composition of Panels); and 15 (Interim Review) of the DSU. 186  Article 1.1 of and Appendix 1 to the DSU. 187  Preparatory Committee for the World Trade Organization, Establishment of the Appellate Body, Recommendations by the Preparatory Committee to the WTO approved on 6 December 1994, PC/​ IPL/​13 (8 December 1994); General Council, Minutes of Meeting on 31 January 1995, WT/​GC/​M/​1 (28 February 1995), at 8 (referring the matter to the DSB); DSB, Minutes of Meeting on 10 February 1995, WT/​DSB/​M/​1 (28 February 1995), items 3 and 4 (Establishment of the Appellate Body, Procedures for appointment of members of the Appellate Body); DSB, Establishment of the Appellate Body, WT/​DSB/​ 1 (19 June 1995). Appellate Body Members receive a monthly retainer, daily fees, travel and subsistence payments, and certain other benefits. Proposals to move them to full-​time employment, with a salary 181 

114    James Flett and Mislav Mataija procedures, in consultation with the Chairman of the DSB and the Director-​General.188 The Working Procedures for Appellate Review is an extensive and important institutional document, regulating such matters as the duties and responsibilities of Appellate Body Members; decision-​making; collegiality; the election of a Chair; the constitution of divisions and election of a presiding member; rules of conduct; incapacity; replacement; resignation; transition; and procedural aspects of an appeal, such as notices of appeal, the transmittal of the record, the working schedule and the conduct of the oral hearing. Rule 16(1) of the Working Procedures contains a specific expression of the doctrine of implied powers. It provides that, in the interests of fairness and orderly procedure in the conduct of an appeal, where a procedural question arises that is not covered by the rules, a division may adopt an appropriate procedure for the purposes of that appeal only, provided that it is not inconsistent with the DSU, any covered agreement, or the Working Procedures for Appellate Review. In this respect, some see the role of amicus curiae briefs in WTO litigation as opening the process to civil society. Others, including many developing countries, are concerned that non-​governmental organizations may not be democratic, may be rent-​seeking and may in fact represent the views of a narrow constituency. The case law on this issue gradually developed so as to recognize that such briefs are not per se excluded, either in panel proceedings or in appeal proceedings, notably given the flexibilities permitted by Article 12 of the DSU and the fact that Article 13 of the DSU permits panels to seek information from any source.189 However, when the Appellate Body adopted specific procedures regulating ex ante the submission of amicus curiae briefs in a particular case,190 the Members reacted. At a special meeting of the General Council requested by a large group of developing countries there was strong criticism of the Appellate Body, resulting in a Chair’s statement suggesting extreme caution in future cases, until the Members had considered what kind of rules might be needed.191 In practice, no such rules have ever been adopted, although at the same time neither panels nor the Appellate Body have since sought to establish ex ante rules governing the submission of amicus briefs. Such briefs still get filed, at both panel and appellate level, and are not rejected, but the substance of such briefs is rarely if ever referred to in the report itself. By contrast, like panels, the Appellate Body has also adopted procedures regulating the submission and treatment of confidential business information,192 as well as open and pension have been considered, but not adopted (see, e.g., WT/​DSB/​M/​101 (8 May 2001), at 25; JOB(01)/​46/​Rev.1 (30 April 2001)). 188  Article 17.9 of the DSU. See Appellate Body, Working Procedures for Appellate Review, WT/​AB/​ WP/​6 (16 August 2010). 189  Appellate Body Report, US –​Shrimp, adopted 6 November 1998, paras 104–​106; Appellate Body Report, US –​Lead and Bismuth II, adopted 7 June 2000, para 39. 190  Appellate Body Report, EC –​Asbestos, adopted 5 April 2001, paras 51–​52. 191 General Council, Minutes of Meeting Held on 22 November 2000, WT/​ GC/​ M/​ 60 (23 January 2001). 192  Appellate Body Report, EC and Certain Member States –​Large Civil Aircraft, adopted 1 June 2011, Annex III. Similar procedures have been adopted in a number of subsequent cases.

International Trade Law Institutions    115 hearings,193 without any objection from Members. On the other hand, it has not adopted rules regulating the issue of judicial holidays (that is, a period of time when the court is closed and time limits do not run). In this respect, it probably lacks the power to decide that certain days would not count towards the mandatory 90-​day period in Article 17.5 of the DSU. Furthermore, the 164 Members of the WTO have significantly different national holidays, which may make it difficult to identify those days that should qualify.

K. The Director-​General and the Secretariat The WTO Agreement establishes a Secretariat headed by a Director-​General. The Ministerial Conference appoints the Director-​General and adopts regulations setting out the powers, duties, conditions of service, and term of office of the Director-​General. The Director-​General in turn appoints the staff of the Secretariat and determines their duties and conditions of service in accordance with regulations adopted by the Ministerial Conference.194 He or she is also responsible for presenting the annual budget to the Committee on Budget, Finance, and Administration.195 The General Council has adopted procedures for the appointment of Directors-​General.196 Interestingly, that decision confirms that, if consensus cannot be reached, Members should consider the possibility of voting. The decision also establishes a term of office of four years, renewable once, and provides that the remuneration package is to be fixed by the Committee on Budget, Finance and, Administration, and subject to approval by the General Council. However, there is no decision setting out in general terms the powers and responsibilities of the Director-​General. In the past, as necessary, the Director-​General has from time-​to-​time delegated decision-​making to a Deputy Director-​General, for example when travelling or recusing themselves in order to avoid a conflict of interest. With the resignation of the Director-​General in August 2020, decision-​making powers were temporarily devolved upon the Deputy Director-​Generals, according to their areas of responsibility. The responsibilities of the Director-​General and the staff of the Secretariat are exclusively international in character. They are prohibited from seeking or accepting instructions from any government or any other authority external to the WTO. They are required to refrain from any action that might adversely reflect on their position as international officials. The Members of the WTO themselves are also required to respect the international character of the responsibilities of the Director-​General and the Secretariat and are prohibited from seeking to influence them in the discharge of their duties.197 193 

The first panel and AB hearings that were open to public viewing were in Canada/​US –​ Continued Suspension (see paras 7.38–​7.40 of the panel reports and the Procedural Ruling in Annex IV of the AB reports in those cases). Similar procedures have been adopted in a number of subsequent cases. 194  Articles VI:1-​3 of the WTO Agreement. 195  Article VII:1 of the WTO Agreement. 196  See WT/​GC/​M/​7 7 (13 February 2003); WT/​L/​509 (20 January 2003). 197  Article VI:4 of the WTO Agreement.

116    James Flett and Mislav Mataija The Director-​General and the Secretariat do not generally have any explicit rights of initiative or proposal. In practice, their role is generally considered to be one of supporting the Members, hence the oft-​repeated observation that the WTO is a Member-​driven organization. However, the Director-​General does chair the TNC, and may even produce draft texts,198 which is a recognition of the fact that, in practice, the Director-​General and by extension the Secretariat have a significant role to play in guiding negotiations. Proposals have been made to clarify and enhance the role of the Director-​General and the Secretariat.199 However, there is no reasonable prospect of these coming to fruition in the foreseeable future. The Director-​General has an important role to play in the dispute settlement system. Absent agreement, and upon request, the Director-​General is required to appoint panellists whom the Director-​General considers most appropriate, in accordance with the rules set out in the DSU.200 This specific institutional responsibility is critical to the functioning of the dispute settlement system, and thus the WTO itself. Failure to discharge it in accordance with the rules would be legitimate grounds for dismissal, with the responsibility then falling on the replacement, whether permanent or temporary. The independence and competence of panellists is central to the proper functioning of the dispute settlement system. The rules envisage that the Secretariat, acting under the authority of the Director-​General, should propose the persons considered most appropriate and that the nominations cannot be opposed other than for compelling reasons.201 However, the practice has departed dramatically from what is envisaged in the DSU.202 Instead of the Secretariat proposing adjudicators of the very highest quality who are then essentially automatically appointed, absent compelling reasons, a complex process of selection has arisen, tainted by the interests of the parties in that particular case. This raises serious questions about the quality and consistency of panel reports, and in turn significantly increases the pressure on the Appellate Body. There is an urgent need for the Director-​General to address this critical stress point in the institutional structure of the WTO and rectify the situation. The Director-​General also has a specific and similarly critical institutional responsibility to convene meetings of the DSB regularly and particularly when required by the DSU,203 and to establish the agenda in 198  See, e.g., the so-​called Dunkel Draft, Trade Negotiations Committee, Draft Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, MTN.TNA/​ W/​ FA (20 December 1991). 199  For an in-​ depth description of the formal and informal roles of the Director-​General and the Secretariat, see H. Nordstrom, ‘The World Trade Organization Secretariat in a Changing World’ 39(5) Journal of World Trade (2005) 819–​853. 200  Article 8.7 of the DSU. 201  Article 8 of the DSU. 202 For a description, see R. Malacrida, ‘WTO panel composition: searching far and wide for administrators of world justice’ in G. Marceau (ed), A History of Law and Lawyers in the GATT/​WTO (Cambridge: Cambridge University Press, 2015). 203  Rules of Procedure for Meetings of the General Council, Rule 2; Article 2.3 of the DSU. See also fn 5 to Article 6.1, fn 7 to Article 16.4, fn 8 to Article 17.14, fn 11 to Article 21.3 of the DSU. Compare Articles 22.2 and 22.7 of the DSU.

International Trade Law Institutions    117 conformity with the applicable rules.204 He or she may also provide good offices, conciliation or mediation.205 The WTO Secretariat, which currently has about 600 staff, has always been relatively small compared to other international organizations. It has been established based on rules specific to the WTO.206 In principle, disputes between staff and the administration may be heard by the Administrative Tribunal of the International Labour Organization, and this has occasionally occurred. The work of the Secretariat has grown steadily, and at some stage led to serious delays in the dispute settlement system, although this issue now appears to have been resolved, at least for the time being. Additional earmarked contributions have been made and trust funds have been established in order to support technical assistance for developing countries. Like the Director-​General, the Secretariat has an important role to play in the dispute settlement system. It is responsible for assisting panels, especially on the legal, historical and procedural aspects of matters dealt with by panels, and with providing secretarial and technical support.207 The Appellate Body is also provided with appropriate administrative and legal support as it requires.208 Although the extent of the Secretariat’s role in dispute settlement will never be publicly known, and no doubt varies from case-​to-​ case, it has surely been significant. In addition, the Secretariat assists Members in respect of dispute settlement at their request, and it is also recognized that there may be a need for additional legal advice and assistance in respect of dispute settlement to developing country Members. To that end, the Secretariat makes available qualified legal experts, whilst ensuring the continued impartiality of the Secretariat, and provides training.209 Furthermore, a dozen developed countries fund an Advisory Centre for WTO Law to provide legal assistance to developing countries and least developed countries.210 Whilst not formally part of the WTO institutional framework, it performs an important institutional function.

L. The Chair The General Council has adopted Guidelines for the Appointment of Officers to WTO Bodies.211 Whilst the Chair of a particular entity may appear at first sight to have

204 

Rules of Procedure Meetings of the General Council, Rules 3–​7. 5 of the DSU; Communication from the Director General, Article 5 of the Dispute Settlement Understanding, WT/​DSB/​25 (17 July 2001). See also Chapter 40 of this handbook. 206  WT/​L/​282 (21 October 1998), as most recently modified (WT/​GC/​M/​170 (9 February 2018), item 11 and WT/​BFA/​169 (20 November 2017)). 207  Article 27.1 of the DSU. 208  Article 17.7 of the DSU. 209  Articles 27.2–​3 of the DSU. 210  See < https://​www.acwl.ch/​ > (last visited 1 October 2021). 211  General Council, Guidelines for Appointment of Officers to WTO Bodies, adopted 11 December 2002, WT/​L/​510 (21 January 2003). 205 Article

118    James Flett and Mislav Mataija relatively limited procedural authority, he or she nevertheless has an important role to play. In addition to exercising any specific powers conferred by the relevant rules of procedure, the Chair declares the opening and closing of each meeting, directs the discussion, accords the right to speak, submits questions for discussion, announces decisions, rules on points of order and generally has complete control of the proceedings. The Chair may also call a speaker to order if the remarks of the speaker are not relevant.212

VIII.  WTO decision-​making A. No formal typology of WTO acts There is no formal typology of WTO acts. One can posit a distinction between primary acts, such as those by which the treaties are amended, and secondary acts, but even this distinction is unclear (for example, in the case of accessions). Generally speaking, reference is made to ‘decisions’, such as in Article IV of the WTO Agreement (decisions by the Ministerial Council) and in the title of Article IX of the WTO Agreement. However, whilst in some contexts it may be clear that what is required is a ‘decision’ and/​or that what has occurred is a ‘decision’, in other contexts significant ambiguity may arise. For example, sometimes reference is made to a ‘recommendation’.213 Notably, the DSU appears to refer to ‘decisions’ as a sub-​set of ‘actions’,214 and it is clear that when the so-​called negative consensus procedure applies there cannot be a decision (because this would require consensus),215 so there must rather be an ‘action’, which occurs automatically, or by operation of law (ipso jure). Committees tend to adopt a variety of descriptions for the documents they issue, such as, for example, ‘Guidelines’. Usually, the minutes of the relevant meeting will simply record that something was ‘agreed’. Thus, in sum, one may say that there are few if any formal distinctions, such as between: primary and secondary acts; general and specific acts; external and internal acts; acts with legal effects and those without. In this Chapter, for ease of reference, we use the term ‘decision’ in a general and non-​technical manner, without prejudice to the foregoing observations.

212

  See, e.g., Rules of Procedure for Meetings of the GC, Rule 17. See, e.g., Article VII:1 of the WTO Agreement (the Budget Committee makes a recommendation on the budget to the General Council). 214  Article 2.2 of the DSU. 215  Article 2.4 of the DSU. 213 

International Trade Law Institutions    119

B. The right to propose In WTO law, the right to propose a WTO act lies with any WTO Member216 or sometimes, for very specific matters, with a particular WTO body217 or with the Director-​ General.218 However, nothing generally precludes the Director-​ General or the Secretariat from making informal proposals, provided that they comply with any applicable procedural rules.

C. The general WTO decision-​making procedure: if no consensus (consensus meaning no Member present formally objects), majority of votes cast The general WTO decision-​making procedure219 is set-​out in Article IX:1 of the WTO Agreement. Members must first seek to arrive at a decision by consensus. A decision by consensus on a matter submitted for consideration is deemed to occur if no Member present at the meeting formally objects.220 Except as otherwise provided, where consensus cannot be achieved, the matter is to be decided by voting. At meetings of the Ministerial Conference and General Council each WTO Member has one vote.221 Decisions are taken by a majority of votes cast, unless otherwise provided in the WTO agreements. In using the term ‘shall’, the first sentence of Article IX:1 transforms the prior practice of decision-​making by consensus under the GATT into a mandatory rule. By definition, a practice is not something that is mandated, but merely the re-​iteration of something. When that thing is mandated, as in Article IX:1, by definition it ceases to be a practice. Therefore, it is not accurate to speak of the ‘practice’ of consensus in the WTO. There was a practice of consensus under the GATT, but under the WTO it is mandatory to first seek consensus. Article IX:1 does not specify the period of time during which Members are obliged to seek consensus before voting (in contrast to certain other provisions that do, such 216  Article IV:1 of the WTO Agreement (‘. . . if so requested by a Member . . .’) (for the Ministerial Conference and by extension the General Council); Articles X:1 and X:8 of the WTO Agreement (any Member may propose amendments). 217 For example, Article VII:1 (Budget Committee recommends annual budget and proposes financial regulations to the General Council); Article X:1 of the WTO Agreement (councils may propose amendments); Article 9 of the TRIMs (CTG proposes amendments of TRIMs to the General Council). 218  Article VII:1 of the WTO Agreement (Director-​General presents annual budget estimate to the Budget Committee). 219  To the extent of any conflict, the specific decision-​making procedures of the WTO prevail over other provisions of general international law (Appellate Body Report, Peru –​Agricultural Products, adopted 31 July 2015, para 5.112). 220  Fn 1 to Article IX:1 of the WTO Agreement. 221  The European Union has a number of votes equal to the number of EU Member States that are also Members of the WTO (currently 27).

120    James Flett and Mislav Mataija as Articles IX:3 and X, for example). Typically, the relevant rules of procedure provide that any Member may at any time move for the closure of the debate, that is, that the matter under consideration be decided on, by consensus, or if necessary by voting.222 However, the rules also typically provide that any Member may move for the adjournment of the debate, that is, for the deferral of the decision, which motion shall have priority.223 Such motion would also be decided upon by consensus or, where necessary, by voting. Where the voting procedure is simple majority, if there is no simple majority in favour of the proposed decision, it is unlikely that there would not be a simple majority in favour of deferral. In practice, if consensus cannot be reached, the meeting may well be suspended. Thus, the practice is that Members generally do not move for the closure of the debate, if necessary by voting, in circumstances where it is apparent that consensus has not yet been achieved. It should be noted that, because of the way that consensus is defined, the Chair of the meeting has, in practice, an important power, which is the power to determine that the period of time during which a Member present may formally object is closed. Once that point is reached, the Chair may gavel the decision, after which, it may be argued, it is too late for a ‘formal objection’ to have any legal effect. Certainly, Members must be given an opportunity to formally object, and they must also be given timely notice that the objection period is coming to an end. However, these are matters over which, in practice, the Chair has significant control, especially when proposals or changes are put forward with little notice, or in the meeting itself.224 The general voting rule is a majority of the votes cast, not a majority of the Members. It is probably correct to say that abstention is not a vote that is cast. Rather, a vote must be cast either by raising the hand (or the Member’s nameplate), by the provision of a voting paper in the meeting, or by postal ballot.225 Observance of this rule logically requires that it is necessary to ascertain how many Members support the motion and how many reject it, the total of these two categories being the total number of votes ‘cast’, and the motion being carried if the first category contains more votes than the second.

1. The two faces of consensus It is important to be clear that, somewhat confusingly, the consensus rule can be viewed from two quite distinct perspectives. The first perspective focuses on the fact that the consensus rule means that any one WTO Member can, in effect, veto approval of the document or matter submitted for 222 

See, e.g., Rules of Procedure for Meetings of the General Council, Rule 20. See, e.g., Rules of Procedure for Meetings of the General Council, Rule 21. 224  Normally, agenda items must be proposed with the notice of meeting, and the accompanying documentation, ten days beforehand (see, for example, Rules of Procedure of the General Council, Rules 2, 3 and 4). However, Rule 28 provides that proposals and amendments shall normally be introduced in writing and circulated not later than twelve hours before the commencement of the meeting. 225  It has been accepted that, in order to maintain social distance during the covid-​ 19 pandemic, meetings and hearings may also be conducted ‘virtually’, notwithstanding objections from some Members, notably the United States. Although ‘virtual’ meetings are not the same in all respects to in-​ person meetings, there is no doubt that this temporary compromise is both lawful and appropriate. 223 

International Trade Law Institutions    121 consideration, just by formally objecting. This is the aspect of the rule that can prevent the adoption by consensus of decisions in sensitive and controversial areas. Normally, according to Article IX:1 of the WTO Agreement, Members should then proceed to voting, either by a majority of the votes cast or according to the specific voting procedure that governs a particular matter. However, as a matter of practice, WTO Members do not generally call for a vote. From this perspective, consensus is an obstacle to decision-​ making, and voting would be preferable in terms of getting things done. The second perspective focuses on the fact that, because of the way consensus is defined (no Member present formally objects), a decision can be adopted by consensus even if some Members present at the meeting disagree but remain silent and/​or do not attend the meeting at all. That is, provided no Member formally objects to the decision, Members’ silence or abstention will not block consensus. By contrast, unanimity would mean that all Members or all Members present affirmatively support the decision. If unanimity occurs, one may also say there is consensus (because no Member present has formally objected). However, unanimity is not required by the WTO Agreement: all that is required is consensus, meaning that no Member present formally objects. In some if not many circumstances obtaining a decision by consensus, defined in this way, can actually be easier than obtaining the requisite number of affirmative votes in support of the document under consideration. From this perspective, consensus (as defined) facilitates decision-​making, and voting would make it more difficult to get things done. The fact is that many Members, especially developing country Members, do not attend all meetings, through choice or for lack of resources, or do not have a developed position on certain issues. The consensus rule, thus framed, nevertheless permits business to be conducted. On the other hand, this may also mean that developed country Members, with the resources to participate in principle in all meetings, may, in effect, dominate the decision-​making process, even when (or especially when) the procedure is consensus. To put the same point in slightly different terms, the consensus rule, as defined, encapsulates a self-​regulating mechanism for all Members. For political non-​priorities it allows Members to acquiesce in permitting the day-​to-​day interests of other Members to be processed through the system; but for political priorities it allows any one Member to veto, or at least force a vote should they wish to do so. It may be argued that the consensus rule, so defined, means that the voices of Members are de facto or latently weighted, in the sense that a delegate from a less economically powerful Member may prefer to remain silent faced with a proposal and a strongly-​worded intervention by a more economically powerful Member. Where the rules provide for a show of hands,226 the more powerful Member could see and react to the behaviour of the less powerful Member. Typically, it is provided that any voting would be by ballot, although the ‘raising of cards’ may also be suggested by the Chair.227

226  227 

See, e.g., Rules of Procedure of the General Council, Rule 24. See, e.g., Rules of Procedure of the General Council, Rule 34.

122    James Flett and Mislav Mataija Postal ballots may also be called where a qualified majority of all Members is required, although in practice such postal ballots have rarely been used.228

2. Consensus as a principle of general application With these observations in mind, an important legal question is whether or not the consensus rule in Article IX:1 (including footnote 1) of the WTO Agreement is confined to that provision, or also applies in the context of other decision-​making provisions, such as under Articles IX:2, IX:3, X and XII. It is submitted that the latter proposition is the better reading. Several elements support this. First, the title of Article IX is ‘Decision-​ Making’, and Article IX:1, first sentence is in the nature of a general statement of principle that informs all of the following provisions. Second, the first sentence refers to the ‘WTO’, suggesting that it is of general application to and within the WTO. Third, by their own terms, the first two sentences of Article IX:1 and footnote 1 are not limited to the majority voting procedure set out in the final sentence of Article IX:1. Fourth, whilst Article IX:1 refers to the Ministerial Conference and the General Council, footnote 1 refers to ‘the body concerned’, suggesting that it is of more general application. Fifth, the reference to ‘except as otherwise provided’ would appear to mean except as otherwise provided in any other treaty provision, or at least any other provision of the WTO Agreement. In this respect, it is also noteworthy that the final sentence of Article IX:1 refers more generally to ‘the relevant Multilateral Trade Agreement’. Finally, the third and fourth sentences of Article IX:1 (which provide that each Member has one vote whilst the European Union has a vote for each of its member States) would also appear to be of general application. It is true that some of the following provisions refer (again) to consensus,229 whilst others do not.230 However, these references are either incidental drafting associated with the introduction of a specific 90-​day period for seeking consensus,231 or specific provisions that exclude voting.232 It is therefore incorrect to juxtapose them with other provisions that do not refer to consensus for the purposes of concluding that the general consensus rule does not apply in the context of those other provisions. It could be argued that the phrase ‘except as otherwise provided’ in Article IX:1 does not meaningfully qualify the phrase ‘where a decision cannot be arrived at by consensus’. Rather, the latter simply introduces the premise, upon which the rest of the sentence is based. In other words, the sense of the sentence is that, ‘where a decision cannot be arrived at by consensus’, ‘the matter shall be decided by voting’, ‘except as otherwise provided’. In any event, even if such qualification would be considered to operate, the other specific provision would have to state expressly that the Members must not first seek to decide by consensus. No other provision contains such a statement.

228  See, e.g., Rules of Procedure of the General Council, Rule 34; and WT/​GC/​ M/​6 (20 September 1995), paras 2-​5 (postal ballot for certain draft waivers and the draft decisions on the accession of Ecuador). 229  Article IX:3(a), fn 4, Article X:1, X:8 and X:9 of the WTO Agreement. 230  Articles IX:2, IX:3 chapeau, IX:3(b), IX:4, X:2-​7, XII of the WTO Agreement. 231  Articles IX:3(a) and X:1 of the WTO Agreement. 232  Fns 3 and 4 and Articles X:8 and X:9 WTO of the Agreement.

International Trade Law Institutions    123 Consequently, in the context of the following provisions that do not refer to consensus,233 the general rule in Article IX:1 applies: the Members are mandated to first seek consensus, meaning no Member present formally objects. This reading would also be consistent with the approach that has been adopted in the context of waivers and accessions,234 which is discussed in more detail below. It would also be consistent with the views expressed by the Secretariat when considering how to give effect to the Doha Declaration on the TRIPS Agreement and Public Health.235 The same approach was adopted by the Secretariat when considering the change from annual to biennial budgeting in the WTO.236 This would also appear to be consistent with the rules of procedure of various bodies.237 It should be noted that this proposition would also apply to the provisions of the WTO Agreement that precede Article IX. Thus, it would appear correct to state that, in the context of Article V (relations with other organizations) and Article VI (including appointment of the Director-​General), Members are mandated to first seek consensus, which means no Member present formally objects. The position with respect to the budget (Article VII) is discussed in more detail below.

3. Majority of votes cast as the default voting rule A similar question arises in contexts where consensus cannot be reached, no specific voting rule is set-​out, but voting is not specifically excluded (see the following section). In these circumstances, it would appear to be the case that the default voting rule is the majority of votes cast. Thus, it would appear correct to state that, in the context of Article V (relations with other organizations) and Article VI (including appointment of the DG), Members are mandated to first seek consensus, which means no Member present formally objects, but if they proceed to vote, the vote would be by a majority of the votes cast.238

233 

Articles IX:2, IX:3 chapeau, IX:3(b), IX:4, X:2-​7, XII of the WTO Agreement. General Council, Minutes of Meeting of 15 November 1995, WT/​GC/​M/​8 (13 December 1995), at 6; Decision-​Making Procedures Under IX and XII of the WTO Agreement, Statement by the Chairman, as agreed on 15 November 1995, WT/​L/​93 (24 November 1995). 235  TRIPS Council, Proposals on Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health: Thematic Compilation, Note by the Secretariat, IP/​C/​W/​363/​Add.1 (23 July 2002), para 8 (‘If a decision concerning interpretation cannot be arrived at by consensus . . . ’). 236  Committee on Budget, Finance and Administration, Biennial Budgeting in the WTO, Possible Legal Approaches, WT/​BFA/​W/​104 (16 July 2003), para 7 (‘However, the decision-​making practice here, as in the case of other decisions by these two bodies, is that of consensus, pursuant to the first sentence of Article IX:1.’) 237 Rules of Procedure for Sessions of the MC, WT/​ L/​161 (25 July 1996), Rule 28 (decisions in accordance with Article IX of the WTO Agreement; Rules of Procedure for Meetings of the General Council WT/​L/​161, (25 July 1996), Rule 33; Rules of Procedure for Meetings of the CTG, WT/​L/​79 (7 August 1995), Rule 33 (absent consensus, refer the matter to the GC). 238  Notably, the same would be true for counterbalancing measures under the Safeguards Agreement, Article 8.2 of which refers to a suspension of which the CTG does not disapprove. Assuming that, in this context, consensus would not be found, the voting rule would be a majority of the votes cast. 234 

124    James Flett and Mislav Mataija

4. Specific provisions that exclude voting As explained above, the phrase ‘except as otherwise provided’ in Article IX:1 of the WTO Agreement qualifies the phrase ‘the matter at issue shall be decided by voting’. This means that, if there is another specific provision that excludes voting, that specific provision will prevail. There are a number of such provisions. Thus, footnote 4 of the WTO Agreement provides that a decision on a waiver to extend a transitional period or a period of staged implementation shall only be taken by consensus. This means that a three-​fourths majority vote in favour will not suffice. However, it is important to note that, as explained above, consensus still means consensus in the sense of no Member present formally objecting. That is because the consensus rule in the first sentence of Article IX:1, including footnote 1, is of general application, and it is not specifically excluded by footnote 4. The same observation applies to Article X:8 of the WTO Agreement, which provides for amendments to the DSU by the Ministerial Conference acting by consensus. This cannot be done by voting. It must be done by consensus. But consensus includes the situation in which no Member present at the meeting formally objects. The same observation applies to Article X:9, which provides for the addition of a Plurilateral Trade Agreement by the Ministerial Conference exclusively by consensus. Footnote 3 of the WTO Agreement provides that decisions of the General Council when convened as the DSB must be taken only in accordance with the provisions of paragraph 4 of Article 2 of the DSU. That provision in turn provides that, where the rules and procedures of the DSU provide for the DSB to take a decision, it shall do so by consensus. As discussed further below, the provisions of the DSU provide for the DSB to take a decision not to do certain things in six specific instances (corresponding to so-​ called ‘negative consensus’). Absent such a decision, where negative consensus operates, the relevant document is adopted automatically or by operation of law (ipso jure). For these matters, therefore, voting is excluded. For other matters arising in the DSB, the general rules apply: consensus (meaning no Member present formally objects), failing which, majority voting. Article 12.1 of the SPS Agreement provides that the SPS Committee shall decide by consensus. The same logic applies. This means consensus in the sense of no Member present formally objecting. Voting is excluded. The same statement is re-​iterated in Rule 33 of the SPS Committee Rules of Procedure.239 Furthermore, a note to the CTG Rules of Procedure240 provides that, where an Annex 1A Agreement specifically requires a decision to be taken by consensus and the matter is referred to the General Council under Rule 33, the General Council shall take the decision ‘only’ by consensus. The explanation usually offered for this is that SPS matters, and particularly public health, are so important that each Member retains a veto.

239  G/​L/​170 (20 June 1997). See also: SPS Committee, Working Procedures of the Committee, G/​SPS/​ 1 (4 April 1995). 240  WT/​L/​79 (7 August 1995).

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5. Formal objections to the proposed decision Because of the practice of almost never proceeding to a vote there is very little practice or clarity on what actually amounts to a ‘formal objection’ within the meaning of footnote 1 of the WTO Agreement. This is an important question, since the absence of a formal objection defines the existence of consensus. First, it would appear that a decision must have been proposed. Otherwise, there is nothing that can be objected to. Furthermore, for the parameters of the proposal to be sufficiently precise, it would also appear that such decision would generally need to have been proposed in writing beforehand, meaning that a mere ex post minute would be insufficient. In principle, this would require circulation of a document in a timely manner in accordance with the applicable rules. Whilst it would appear possible to modify a proposed decision during the meeting, it would appear that such modification should be effected in writing in order to avoid any contest as to the accuracy of the minute. Second, it is not clear what amounts to an ‘objection’. Members often criticize proposals without objecting to them. Arguably, in order for an objection to be made, the term ‘object’ should be explicitly used by the objecting Member, failing which there is a risk that the decision may pass by consensus.241 Third, it is also unclear what amounts to a ‘formal’ objection. Probably this does not need to be made in writing. Nevertheless, it probably does need to be recorded clearly in the minutes. Furthermore, it probably needs to be clear from the language used in the minutes that an objection was officially advanced by the Member in question. Equivocal or contradictory language is likely to be insufficient. Fourth, it is important that an opportunity has been provided to ‘formally object’. Whilst some provisions explicitly fix the time period during which consensus will be sought,242 the general rules do not. Logically, this is the time period during which a Member must ‘formally object’ if it wishes to prevent a decision by consensus. This may well be during the meeting itself. Thus, if the Member does not ‘formally object’ before the end of the discussion on that particular agenda item, a risk remains that the Chair will determine the existence of consensus and gavel accordingly. Evidently, in the conduct of such matters, the Chair of the meeting has some latitude and discretion when it comes to determining whether or not consensus, meaning no Member present formally objects, has actually been reached, within the relevant period.

6. The issue of the quorum Turning to the issue of quorum, there is a certain tension between the rule that a decision may be taken by consensus and the rule that a simple majority of Members shall

241  See, e.g., Appellate Body Report, US –​Clove Cigarettes, adopted 24 April 2012, para 253, finding that the ‘recommendation’ referred to in Article IX:2 of the WTO Agreement is an indispensable procedural requirement, that is, adopting a ‘strict’ and ‘literal’ reading of a procedural provision. 242  Notably, Article IX:3 of the WTO Agreement (waivers) (90 days).

126    James Flett and Mislav Mataija constitute a quorum.243 It might be argued that, absent a quorum, no decision by consensus is possible. The same logic might also apply to voting. Nevertheless, the practice is that decisions are adopted by consensus notwithstanding the rules on quorum. Indeed, the minutes of meetings do not generally record which Members were present, no doubt also because of the difficulty of monitoring this throughout long meetings with many attendees, making it impossible to verify, ex post, whether a particular meeting was quorate. This situation would appear to reflect the proposition that, in case of conflict, the primary treaty rules (which contain the consensus rule and the rules on voting) override the rules of procedure (which contain the quorum rule). This proposition would also operate with respect to the primary treaty language in the DSU regarding so-​called ‘negative consensus’. This means that DSB reports are adopted, in effect, automatically, that is, by operation of law (ipso jure), notwithstanding the fact that the DSB meeting may not be attended by a simple majority of all Members.

7. The practice of almost never voting and ‘green room’ meetings (consensus building) WTO Members have not generally exercised their right to call for a vote, and in any event chairs have preferred to continue the search for consensus.244 Rather, Members choose to remain within the bounds of the mandatory consensus rule. As explained above, given that consensus merely requires the absence of a formal objection, it may often be easier to obtain a decision by consensus than by voting. However, consensus also means that any Member opposing the decision can attend the meeting and veto the proposal. Consensus decisions are sometimes said to be more legitimate than voting on the grounds that they accommodate the interests of all Members, including both the more powerful and less powerful Members, in the sense that no Member is out-​voted. However, this proposition is based on the assumption that all Members are informed about meetings in advance and able to participate. At the same time, it is also recognized that the consensus requirement renders it increasingly difficult to find agreement, especially on important issues, given that any Member can veto a proposal. Proposals have been made to change the consensus rule, or to move away from the practice of not seeking a vote, although it remains unlikely that such proposals or initiatives will come to fruition in the foreseeable future.245 Also,

243  See, e.g., Rules of Procedure for Sessions of the MC, WT/​L/​161 (25 July 1996), Rule 16; Rules of Procedure for Meetings of the GC, WT/​L/​161 (25 July 1996), Rule 16. 244  For examples of rare exceptions, see: WT/​DSB/​M/​54 (20 April 1999), paras 26–​30 (the European Communities requested a vote on whether to overturn a ruling of the chair of the DSB in connection with the EC –​Bananas dispute, but the chair declined to call a vote); WT/​GC/​M/​40/​Add.4 (5 July 1999), para 10 (Egypt suggested that, in the absence of consensus, the Director-​General should be chosen by voting, but the chair preferred to continue searching for consensus); WT/​GC/​M/​6, paras 2–​5 (postal ballot for certain draft waivers and the draft decisions on the accession of Ecuador). 245  The Future of the WTO, Addressing Institutional Challenges in the New Millennium, Report by the Consultative Board to the Director-​General Supachai Panitchpakdi (Geneva: WTO, 2004) (the ‘Sutherland Report’).

International Trade Law Institutions    127 in practice, the consensus-​building process often has recourse to meetings among more restricted groups of Members, sometimes referred to as ‘green room’ meetings. Such meetings have had a controversial history. In the past, they have been perceived as restricted to a relatively few powerful and wealthy Members, to the exclusion of developing countries, which also lack the resources to fully participate. Today, such meetings are generally open to all Members and much more transparent.

8. Explicit consensus Finally, in certain circumstances, the Members have stated that ‘explicit consensus’ is required.246 There is uncertainty about what this means. Presumably, it means something different from what is provided for in the WTO Agreement, otherwise there would be no purpose in using different treaty language. On the other hand, presumably it does not mean a unanimous vote in favour by all Members: if that would have been the intent it would have been a straightforward matter to state that.247 The best view is that it probably means an affirmative statement in favour by all Members present at the relevant meeting or when voting by post.248

D. Interpretation: if no consensus, three-​fourths of Members The Ministerial Conference and General Council have exclusive authority to adopt interpretations of the WTO agreements, on the basis of a recommendation by any relevant council, by three-​fourths majority of the Members.249 In US –​Clove Cigarettes the Appellate Body opined that interpretations adopted pursuant to Article IX:2 of the WTO Agreement have pervasive legal effects and are binding on all Members.250 Such an interpretation must not be used to undermine the procedures for amendments, set out in Article X of the WTO Agreement. The procedure set out in Article IX:2 has never

246  Singapore Ministerial Declaration, WT/​MIN(96)/​DEC (18 December 1996), para 20 (for opening future negotiations on trade and investment, and trade and competition policy); Doha Ministerial Declaration, WT/​MIN(01)/​DEC/​1 (20 November 2001), paras 20, 23, 26 and 27 (for agreeing negotiating modalities for trade and investment, trade and competition policy, transparency in government procurement and trade facilitation). 247  Notably, Article X:2 of the WTO Agreement provides that certain amendments shall take effect only upon acceptance by all Members. 248  See Doha Work Programme, Decision Adopted by the General Council on 1 August 2004, WT/​ L/​579 (2 August 2004), para 1(g), stating that the General Council decides by ‘explicit consensus’ to commence negotiations on trade facilitation pursuant to the mandate provided in para 27 of the Doha Ministerial Declaration. 249  Article IX:2 of the WTO Agreement. Use of the term ‘exclusive’ would appear to mean that this power may not be assigned or delegated. 250  Appellate Body Report, US –​Clove Cigarettes, adopted 24 April 2012, paras 250 and 257.

128    James Flett and Mislav Mataija been explicitly used.251 As discussed above, the correct reading of Article IX:1 is that the consensus rule also applies to the adoption of authoritative interpretations.252 By contrast with the general rule in Article IX:1, it should be noted that the voting rule is three-​ fourths of Members, not three-​fourths of votes cast. In adopting an authoritative interpretation, and by contrast with the position of panels and the Appellate Body,253 the Members are not expressly enjoined by the treaty to follow the customary rules of interpretation of public international law, which it is generally accepted are codified, at least in part, in Articles 31–​33 of the Vienna Convention. On one view, this means that the Members could apply other rules of interpretation, or give different weight to specific elements of interpretation, such as preparatory work.254 Nevertheless, even if this would be correct, the more removed the proposed rules of interpretation would be from the customary rules of interpretation of public international law, the more difficult it might be to get the proposed interpretation adopted. Furthermore, it is not clear that such a view would sufficiently take into account the rule that the procedures must not be used to undermine the procedures for amendments. That rule must be given significance, even if it is of uncertain scope. The issue is important because an interpretation can be adopted by the Ministerial Conference or the General Council, but does not need to be accepted by Members. By contrast, amendments must generally be accepted by Members.255 One point that is clear is that an interpretation cannot contradict or conflict with the terms of the treaty as they are written. Furthermore, one may reasonably argue that, if a particular outcome could not be achieved in litigation through the application of the customary rules of interpretation of public international law, the only appropriate course of action in order to achieve such outcome would be an amendment. Therefore, using different rules of interpretation in the context of Article IX:2 to achieve the same objective would indeed undermine the rules on amendments. Hence, to give meaning to the rule that authoritative interpretations should not be used to undermine the rules on amendments, the better view may well be that such interpretations should

251 The Doha Ministerial Decision on Implementation-​ Related Concerns (WT/​ MIN(01)/​ 17 (20 November 2001)) contains interpretations of the WTO agreements. In US –​Clove Cigarettes, the Appellate Body ruled that paragraph 5.2 of the Doha Decision is not an authoritative interpretation within the meaning of Article IX:2 of the WTO Agreement because it was not based on a recommendation from the relevant Council (Appellate Body Report, US –​Clove Cigarettes, adopted 24 April 2012, para 255). For an example of a request for such an interpretation on which the General Council took no action, see WT/​GC/​W/​133 (25 January 1999) (relating to the so-​called sequencing issue). 252  The Appellate Body noted in US –​Clove Cigarettes that this specific issue was not raised in that appeal (Appellate Body Report, US –​Clove Cigarettes, adopted 24 April 2012, para 252). 253  Article 3.2 of the DSU. 254  For the contrary view, see A.H. Quershi, The World Trade Organization: Implementing Trade Norms (Manchester: Manchester University Press, 1996), at 7. 255  For the exceptions, see Articles X:6, X:8 and X:9 of the WTO Agreement.

International Trade Law Institutions    129 indeed be based on the customary rules of interpretation of public international law. In practice, given that, within the four corners of those rules, there is still significant room for reasonable people to disagree, the most likely approach is that a request for authoritative interpretation would not expressly state the interpretative rules on which it is based, but leave open the possibility that it might be based on Articles 31–​33 of the Vienna Convention. It has sometimes been argued that use of the term ‘exclusive’ in Article IX:2 of the WTO Agreement means that panels and the Appellate Body have no authority to make interpretations of the covered agreements. And yet, Article 3.2 of the DSU provides that the dispute settlement system serves to preserve the rights and obligations of Members under the covered agreements and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. In addition, Article 3.9 of the DSU provides that the DSU is without prejudice to the rights of Members to seek authoritative interpretation of provisions of a covered agreement through decision-​making under the WTO Agreement. Article 3.9 of the DSU confirms both the potential for conflict between Article IX:2 of the WTO Agreement and Article 3.2 of the DSU, and the manner in which any such conflict would need to be resolved, namely, in favour of the authoritative interpretation. It should be noted that authoritative interpretations are binding on all Members, whereas the outcome of a dispute is binding only on the parties, there being no formal rule of precedent in WTO law. Furthermore, another way of tracing the line of distinction between Article IX:2 of the WTO Agreement and Article 3.2 of the DSU is that an interpretation pursuant to Article IX:2 of the WTO Agreement would be made in a manner detached from any particular fact and evidence pattern. Such an interpretation would rather be focused on resolving any apparent tensions between different treaty provisions in purely abstract terms. By contrast, in the context of Article 3.2, panels are engaged in the process of applying the law to a particular fact and evidence pattern. It is in the process of such an application that they construct reasoning that explains whether or not the measure at issue is inconsistent with the defendant’s WTO obligations and rights, and in doing so, to the extent necessary, clarify the meaning of the law. Although the distinction will always remain a problematic one, and may sometimes be difficult to discern, taken as a whole, these provisions nevertheless confirm that the focus of adjudication should be the resolution of a particular dispute through the application of the law to the facts, and not the clarification of the law for its own sake.

E. Waivers: if no consensus, three-​fourths of Members The Ministerial Conference (or the General Council in the intervening periods) may decide, exceptionally, to waive an obligation imposed on a Member by the WTO

130    James Flett and Mislav Mataija Agreement or any of the Multilateral Trade Agreements, after first seeking consensus, by three-​fourths majority of the Members.256 Waivers clearly have legal effects and can be relied upon in dispute settlement.257 On one reading, Article IX:3(a) refers to waivers from ‘this Agreement’ and foresees an attempt to reach consensus before voting; whilst Article IX:3(b) refers to waivers from the Multilateral Trade Agreements and neither it nor the chapeau of Article IX:3 envisages an attempt to reach consensus before voting.258 However, on another reading, the function of Article IX:3(b) is simply to engage the relevant subsidiary councils before a report is submitted to the Ministerial Conference (or the General Council in the intervening periods), following which Article IX:3(a) controls, because the Multilateral Trade Agreements are an integral part of the WTO Agreement.259 Furthermore, as explained above, the consensus rule, including as defined in footnote 1 to Article IX:1 of the WTO Agreement, applies in principle to all decision-​making. It is submitted that this latter reading is the better one. The General Council has agreed that, when dealing with waivers and accessions, the General Council will seek a decision in accordance with Article IX:1 (that is, by first seeking consensus), and only if this is not possible proceed to voting, ‘except as otherwise provided’.260 In proposing this statement, the Chairman of the General Council affirmed that it was merely a ‘clarification’ of the issue and did not change in any way the provisions of the WTO Agreement. As a matter of practice, all waiver decisions now follow the consensus procedure.261 According to Kuijper, this is a clear example of interpreting or de facto modifying the WTO Agreement without following either the procedure in Article IX:2 for authoritative interpretation or the procedure for amendment in Article X.262 In fact, what appears to have occurred is that the practice has changed and aligned with an interpretation of Article IX:3 suggested and facilitated (but not mandated) by the General Council decision, which is not itself an authoritative interpretation. This would not appear to be inconsistent with Articles IV:1, IV:2 or IX:1 of the WTO Agreement.

256  Article IX:3 of the WTO Agreement. See also Understanding in Respect of Waivers of Obligations Under GATT 1994. 257  See, e.g., Appellate Body Report, EC –​Bananas III, adopted 25 September 1997, paras 183-​188. For a more in-​depth discussion of the legal effects of waivers, see I. Feichtner, The Law and Politics of WTO Waivers (Cambridge: Cambridge University Press, 2012), at 169–​173. 258  Van den Bossche and Zdouc, above fn 1, at 149. 259  Article II:2 of the WTO Agreement. 260  General Council, Minutes of Meeting of 15 November 1995, WT/​GC/​M/​8 (13 December 1995), at 6; Decision-​Making Procedures Under IX and XII of the WTO Agreement, Statement by the Chairman, As agreed by the GC on 15 November 1995, WT/​L/​93 (24 November 1995). 261  For a more detailed discussion, see Feichtner, above fn 257), at 218–​220. 262  P.-​J. Kuijper, ‘Institutional Aspects’ in D. Bethlehem, D. McRae, R. Neufeld and I. Van Damme (eds), The Oxford Handbook of International Trade Law, 1st edition (Oxford: Oxford University Press, 2009), Chapter 5, at 96.

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F. Amendments: if no consensus, two-​thirds of Members (in principle), ratification The procedure for amendments is set out in Article X of the WTO Agreement. In sum, any Member or council may propose an amendment to the Ministerial Conference. The Members will first attempt, during a period of 90 days, to reach consensus. If consensus cannot be reached, the Members vote by two-​thirds majority. If the amendment is accepted, it must then be ratified by Members according to their municipal laws. Amendments to certain fundamental provisions must be ratified by all Members in order to take effect. Amendments to the DSU must be decided by consensus (voting is excluded), and take effect for all Members upon approval by the Ministerial Conference.263 Amendments to the TPRM are decided by consensus (meaning no Member present formally objects), failing which by voting, and take effect for all Members upon approval by the Ministerial Conference.264 The Ministerial Conference may decide by three-​fourths majority that certain amendments must be accepted by any Member wishing to remain in the organization. Modifications of schedules are governed by the special procedures in Article XXVIII of the GATT 1994 and are not subject to the formal amendment process provided for in Article X of the WTO Agreement.265 The General Council has decided to amended the TRIPS Agreement.266 It has also adopted the Protocol Amending the Marrakesh Agreement Establishing the World Trade Organization.267

G. Accessions: if no consensus, two-​thirds of Members Decisions on accession are taken by the Ministerial Conference, which must approve the accession by two-​thirds majority.268 However, the better reading of Article IX:1 is that the consensus rule applies to all decision-​making, including decision-​making on accession. Therefore, also with respect to accessions, first an attempt must be made to reach consensus, meaning no Member present formally objects, and only if this is not possible should voting be used. In practice, to-​date, all accessions have been agreed by consensus. Accession protocols are integral parts of the WTO Agreement, having full

263 

Article X:8 of the WTO Agreement, second sentence. The DSU has never been amended. Article X:8 of the WTO Agreement, third sentence. See, e.g., WT/​L/​1014 (27 July 2017) (amending the TPRM by reducing the periodicity of reviews by one year). 265  Appellate Body Reports, EC –​Bananas III (Article 21.5 Ecuador II) /​EC –​Bananas III (Article 21.5 –​ US), adopted 11 December 2008, paras 384–​385. 266  General Council, Amendment of the TRIPS Agreement, Decision of 6 December 2005, WT/​L/​641 (8 December 2005). 267  Agreement on Trade Facilitation, Ministerial Decision of 7 December 2013, WT/​MIN(13)/​36 –​ WT/​L/​911 (11 December 2013). 268  Article XII:1-​2 of the WTO Agreement. 264 

132    James Flett and Mislav Mataija legal effect, and can be enforced through dispute settlement.269 Whether or not Article XX of the GATT 1994 is available to justify violations of an accession protocol depends on the particular wording of the provisions of that protocol.270

H. Budget: two-​thirds majority comprising more than half the Members Article VII of the WTO Agreement, which concerns the budget, precedes Article IX, which is titled ‘Decision-​Making’. There are significant legal questions about the relationship between the two provisions. Article VII:1 requires the Director-​ General to ‘present’ an ‘estimate’ to the Budget Committee, which is then to make ‘recommendations thereon’ to the General Council. Whether or not such ‘recommendations’ are decisions is unclear. If they are, it would appear that the general rules apply by default: in making such recommendations, the Members in the Budget Committee must first seek consensus, failing which they should vote by a majority of the votes cast. In practice, to-​date, as in other areas, decisions have been taken by consensus. Article VII:1 further provides that the annual budget estimate is to be subject to approval by the GC. Article VII:3 provides that the GC shall adopt the annual budget estimate ‘by a two-​thirds majority comprising more than half the Members’. This rule implies that the two-​thirds majority refers to votes cast, as opposed to two thirds of all Members, because otherwise the subsequent reference to more than half the Members would be meaningless (given that two-​thirds is always more than half). A significant legal question is whether or not the consensus rule applies in this context. Although there is room for discussion on this matter, it is submitted that the better view is that the consensus rule applies generally, and there is no bar to it being also applied here. The consensus rule co-​exists with the rule on two-​thirds of votes cast in the same way that the consensus rule co-​exists with the rule on a majority of votes cast, as in Article IX:1. Furthermore, it co-​exists with the rule on ‘more than half ’ the Members in the same way that it co-​exists, for example, with the rules requiring a three-​fourths majority in provisions such as Article IX:2 and IX:3.

I. Rule 33 of the (CTG) Rules of Procedure: if no consensus, refer the matter up The rules of procedure of subsidiary bodies do not generally provide for voting on substantive issues. Rather, they typically provide that matters on which there is no 269  270 

Panel Reports, China –​Raw Materials, adopted 22 February 2012, paras 7.112–​7.115. Appellate Body Reports, China –​Rare Earths, adopted 29 August 2014, paras 5.22–​5.34.

International Trade Law Institutions    133 consensus may be referred to a higher body, and eventually the General Council and the Ministerial Conference.271

J. Decisions and actions of the DSB (the so-​called ‘reverse/​negative consensus’ rule) As discussed above, the first two sentences of Article IX:1 of the WTO Agreement, which provide for a decision by consensus and, where this is not possible, majority voting, are of general application. Hence they also apply to the DSB, except as otherwise provided. Decisions by the General Council when convened as the DSB may only be taken ‘in accordance with’ the provisions of Article 2.4 of the DSU,272 which states that when the rules and procedures of the DSU provide for the DSB to take a decision, it must do so by consensus.273 It is further specified that the DSB is deemed to have decided by consensus on a matter submitted for consideration if no Member present at the meeting formally objects.274 The DSU provides for the DSB to take a decision in six instances: a decision by consensus not to establish a panel;275 a decision by consensus not to adopt a panel report;276 a decision by consensus not to adopt an Appellate Body report;277 a decision by consensus not to place the issue of implementation on the DSB agenda absent resolution of the issue;278 a decision by consensus to reject a request to suspend concessions or other obligations made pursuant to Article 22(2) of the DSU;279 and a decision by consensus to reject a request to grant authorization to suspend concessions or other obligations following a decision by an arbitration panel.280 Thus, it is clear that, in each of these six instances of so-​called ‘negative consensus’ or ‘reverse consensus’, the specific DSU provisions control the relevant issue. However, it is important to be very clear about what the legal rules actually are and what actually occurs. When a DSB meeting is convened to consider, for example, an Appellate Body report, Article 17.14 of the DSU provides that the report shall be adopted by the DSB, unless the DSB decides by consensus not to adopt the report. For the DSB to decide by consensus not to adopt a report, one or more Members objecting to its adoption would have to propose a DSB decision by consensus to that effect. However, if one Member present formally objects (and normally the Member sponsoring the adoption of the report would be expected to object), then such proposal would be rejected. In this 271 

See, notably, CTG Rules of Procedure, WT/​L/​79 (7 August 1995), Rule 33. Fn 3 to Article IX:1 of the WTO Agreement. 273  Article 2.4 of the DSU. 274  Fn 1 to Article 2.4 of the DSU. 275  Article 6.1 of the DSU. 276  Article 16.4 of the DSU. 277  Article 17.14 of the DSU. 278  Article 21.6 of the DSU. 279  Article 22.6 of the DSU. 280  Article 22.7 of the DSU. 272 

134    James Flett and Mislav Mataija eventuality, the report is adopted automatically or by operation of law (ipso jure).281 This means that there is no DSB decision, but rather a DSB ‘action’ (the term used in Article 1.2 of the DSU) adopting the report, which is why the document subsequently circulated refers to a DSB ‘action’ not a DSB ‘decision’. It would not matter what the objecting Members would say or do, or for that matter what the Chair of the DSB or the Secretariat would say or do: absent a decision by consensus not to adopt the report it is adopted at that meeting automatically or by operation of law (ipso jure). The same logic must and indeed does apply to the adoption of any agenda item controlled by the so-​called ‘negative consensus’ procedure.282 As a matter of law, nothing in the DSB Rules of Procedure or, by extension, the GC Rules of Procedure, which are secondary WTO law, can be construed as overriding the provisions of the DSU, which constitutes primary WTO treaty law. In case of conflict, the DSU would prevail to the extent of the conflict. Accordingly, when the DSB Rules of Procedure provide for the approval of the agenda, the procedure for approving the agenda with respect to negative consensus items must also be construed as negative consensus. Such approval therefore also occurs ‘by operation of law (ipso jure)’ or ‘automatically’, and nothing said or done by others can prevent that.283 In the unlikely event that the Director-​General fails to comply with the obligation to convene a DSB meeting for the purposes of adopting the report,284 the Director-​General should be removed from office and the meeting convened by his or her replacement, whether permanent or temporary. The only situation in which a report will not be adopted is one in which no Member requests that the adoption of the report be placed on the DSB agenda (often, but not always, because the matter has been otherwise resolved).285 With these provisions in mind, it is important to note that, although Members often criticize panel or Appellate Body reports during a DSB meeting, it is extremely unusual for a Member to actually propose a decision by consensus not to adopt a report. Thus, there is usually nothing to which the sponsoring Member will be required to ‘formally object’. This is because Members well-​understand that

281 

Appellate Body Report, US –​Continued Suspension, adopted 14 November 2008, paras 310, 355 and 367; Appellate Body Report, US –​Large Civil Aircraft (2nd Complaint), adopted 23 March 2012, paras 524, 531, 532 and 549. 282  According to Rule 6 of the GC Rules of Procedure, WT/​ L/​161 (25 July 1996), the first item of business at each meeting is the consideration and approval of the agenda. 283  See WT/​DSB/​M/​54 (20 April 1999), paras 1-​10. In the context of EC –​Bananas III, and on the issue of sequencing, faced with a lack of consensus on approval of the agenda the meeting nevertheless went forward on the basis of the proposed agenda. 284  Rules of Procedure for Meetings of the General Council, Rule 2; Article 2.3 of the DSU. See also fn 5 to Article 6.1, fn 7 to Article 16.4, fn 8 to Article 17.14, fn 11 to Article 21.3 of the DSU. Compare Articles 22.2 and 22.7 of the DSU. 285  See, e.g., the following panel reports: EC –​Scallops (Canada); EC –​Scallops (Peru and Chile); EC –​ Bananas III (Article 21.5 –​EC); EC –​Butter; US –​DRAMS (Article 21.5 –​Korea); Japan –​Quotas on Laver; US –​Stainless Steel (Mexico) (Article 21.5 –​Mexico); Korea –​Bovine Meat (Canada); Mexico –​Additional Duties (US); US –​Steel and Aluminium Products (Canada); US –​Steel and Aluminium Products (Mexico); Canada –​Additional Duties.

International Trade Law Institutions    135 attempting to block the adoption of an Appellate Body report (for example) is futile as long as there is a sponsoring Member that would formally object. This means that, in practice, reports have been adopted by consensus,286 in the shadow of the negative consensus rule. Recently, the United States has expressed the view that it could unilaterally critique some procedural or substantive aspect of a report (such as its issuance after the 90-​day limit provided for in Article 17.5 of the DSU), thus rendering the applicable procedure consensus rather than negative consensus, thus allowing the United States to block the adoption of the report should it wish to do so.287 This proposition is clearly incorrect. Most recently, the United States actually sought to block the adoption of an Appellate Body report on such grounds, but the Chair of the DSB gavelled in any event, and rightly so.288 However, as indicated above, it would in fact make no difference what the Chair would do, since the report would be adopted in any event automatically, that is, by operation of law (ipso jure). An important legal issue is what procedure governs when the DSB acts other than in the context of the six negative consensus situations referred to above. The classic example of this would be the procedure for the appointment and reappointment of Appellate Body Members.289 It is sometimes assumed that the applicable procedure is consensus and that voting is excluded. However, this is not the way the treaties are written. As explained above, the general rule in Article IX:1 of the WTO Agreement refers to consensus (meaning no Member present formally objects), failing which majority voting, unless otherwise excluded. Such a decision by majority voting would be ‘in accordance’ with Article 2.4 of the DSU (as required by footnote 3 of the WTO Agreement) in the sense that it would not be out of accordance (or inconsistent) with that provision. Article 2.4 only applies where the DSU provides for the DSB to take a decision, but Article 17.2 of the DSU does not provide for the DSB to take a decision. It merely refers to appointment and re-​appointment. Thus, the procedures for appointment and re-​appointment of Appellate Body Members in fact align with those for appointment of the Director-​General (as a matter of law, consensus, meaning no Member present formally objects, failing which, majority voting). As a matter of practice, the period of time during which the search for consensus goes on is not curtailed, and no Member proposes a vote.

286  Footnote 1 of the DSU provides that: ‘The DSB shall be deemed to have decided by consensus on a matter submitted for its consideration, if no Member, present at the meeting of the DSB when the decision is taken, formally objects to the proposed decision.’ 287  See, e.g., DSB, Minutes of Meeting of 29 September 2017, WT/​DSB/​M/​402 (24 January 2018), point 5 (concerning the adoption of the Panel and Appellate Body Reports in EU –​Fatty Alcohols (Indonesia)). 288  DSB, Minutes of Meeting on 15 August 2019, WT/​DSB/​M/​433 (29 October 2019), paras 9.33-​35 (concerning the adoption of the Panel and Appellate Body Reports in US –​Countervailing Measures (China) (Article 21.5 –​China)). 289  Article 17.2 of the DSU.

136    James Flett and Mislav Mataija

IX.  Elements lacking in the WTO institutional structure and proposals for change As is often observed, the WTO institutional structure lacks an executive (non-​plenary) organ.290 Although the Director-​General and the Secretariat have an important informal role to play, they lack the powers to carry out the necessary functions. In particular, they lack the formal authority to set the agenda and formulate proposals that aim to reflect the interests of the Membership as a whole. As is also often observed, the WTO institutional structure makes no provision for a parliamentary organ. In recent years, a Parliamentary Conference of the WTO, convened under the auspices of the International Parliamentary Union, has met in parallel with the Ministerial Conference.291 However, it has no formal role in the WTO institutional structure. Civil society also has a relatively limited role to play in the WTO. Non-​governmental organizations do not have official observer status. Furthermore, for the time being, amicus curiae briefs have little if any formal or informal status in WTO dispute settlement. The 2004 Sutherland Report addressed these and many other institutional challenges facing the WTO in considerable detail.292 Its principal conclusions and recommendations may be summarized as follows: –​ The benefits and limitations of globalization are not sufficiently well-​understood by many constituencies and need to be explained. –​ Preferential trade agreements are seriously eroding the benefits of most favoured nation treatment and should be subject to meaningful review and effective disciplines. –​ The balance between loss of policy space and the advantages of cooperation and the rule of law is positive for all WTO Members. –​ The WTO should remain separate from other international organizations but continue to co-​operate closely with them and support trade policy related adjustments, with a view to coherence in global economic governance.

290  See,

eg, P.-​J. Kuijper, ‘Institutional Aspects’ in D. Bethlehem, D. McRae, R. Neufeld and I. Van Damme (eds), The Oxford Handbook of International Trade Law, 1st edition (Oxford: Oxford University Press, 2009), Chapter 5. 291  See < https://​www.ipu.org/​ > (last visited 1 October 2021). 292  The Future of the WTO, Addressing Institutional Challenges in the New Millennium, Report by the Consultative Board to the Director-​General Supachai Panitchpakdi (Geneva: WTO, 2004) (the ‘Sutherland Report’).

International Trade Law Institutions    137 –​ External transparency remains important, and is also the responsibility of Members. The WTO should continue to calibrate its relations with civil society, taking into account development objectives and available resources. –​ The dispute settlement system is a success that should not be diplomatically curtailed. A special expert group appointed by the DSB could provide measured criticism. Improvements could be made with respect to remand, panel selection, amicus curiae briefs, open hearings, compliance and compensation. –​ Members blocking consensus should be required to provide written reasons explaining why the matter is one of vital national interest. Greater use should be made of plurilateral agreements. –​ A Consultative Board of senior officials chaired by the Director-​General should be created, without executive powers. –​ The role of the Director-​General and the Secretariat, as the guardians of the WTO, should be strengthened. There is an extensive amount of academic literature devoted to these issues.293 For example, based on the Sutherland Report, Van den Bossche and Alexovicova have set out a comprehensive agenda for research into institutional reform of the WTO, covering: improvements to and alternatives for consensus decision-​making; transparency, democratic legitimacy and participation of civil society; secondary law-​making by WTO bodies; and an expanded role for the WTO Secretariat.294 Petersmann has argued for a long-​term perspective that would ensure that the world trading system will protect consumer welfare and citizens’ interests more effectively, with due regard for universal human rights and democratic self-​government.295 Steger has pleaded for a change in the culture of the WTO, which should move away from outdated mantras, including those identified by John Jackson, such as: the WTO is a government-​to-​ government organization; the WTO is a Member-​driven organization; WTO decisions are taken by consensus; national sovereignty must be preserved at all costs; the WTO is a single undertaking; with respect to the MFN principle, there should be no exceptions or reservations; negotiation rounds must always lead to early deliverables; the WTO is a contract from which Members may withdraw at any time; the WTO is about reciprocal concessions, not compliance with the rules; the exclusive purpose of the WTO is trade liberalization; and rule change can only take place through negotiating rounds.296 Cottier has proposed the creation of a Consultative Committee and a Standing Committee on Legal Affairs to consider the relationship between negotiation

293 

See also Chapter 2 of this Handbook. Van den Bossche and I. Alexovicova, ‘Effective Global Economic Governance by the World Trade Organization’ 8(3) Journal of International Economic Law (2005) 667–​690. 295  E.-​U. Petersmann, ‘Addressing Institutional Challenges in the WTO in the New Millennium: A Longer-​Term Perspective’ 8(3) Journal of International Economic Law (2005) 647–​665. 296  D.P. Steger, ‘The Culture of the WTO: Why it Needs to Change’ 10(3) Journal of International Economic Law (2007) 483–​495. 294  P.

138    James Flett and Mislav Mataija rounds and current work; the balance of negotiations and dispute settlement; the role of the Secretariat; the structure and process of decision-​making; the use of variable geometry; alternatives to special and differential treatment; technical assistance and capacity building; the relationship with other international law and organizations; the relationship with domestic law; the relationship with business and civil society; the relationship with national parliaments; and the role of academia.297 However, at the time of writing, there is little prospect of any of these proposals coming to fruition in the foreseeable future. The Trump administration’s blocking of further Appellate Body appointments has also given rise to a number of proposals for change.298 Notably, in an effort to engage with the concerns expressed by the Trump administration, several Members have made specific proposals for improvements.299 However, at present, these are also unlikely to be fruitful. At the DSB meeting on 29 July 2020, 120 Members supported the proposal to immediately launch the selection procedure for appointments to the Appellate Body, a level of support that is unprecedented in the history of the GATT and the WTO. In addition, 52 Members are participating in the Multi-​Party Interim Appeal Arbitration Arrangement (MPIA) pursuant to Article 25 of the DSU, which preserves, as between the participating Members, the possibility of appellate review and final resolution based on the same rules and procedures governing appellate review pursuant to Articles 16.4 and 17 of the DSU.300 The 10 Appeal Arbitrators and Members of the Pool were notified to the DSB on 31 July 2020.301 They are presently in the process of organizing themselves so as to ensure compliance with all of the requirements of the MPIA. 297 T. Cottier, ‘Preparing for Structural Reform in the WTO’ 10(3) Journal of International Economic Law (2007) 497–​508. For further contributions to the debate, see E. Bohne, The World Trade Organization, Institutional Development and Reform (London: Palgrave Macmillan, 2010); D.P. Steger (ed), Redesigning the World Trade Organization for the Twenty-​First Century (Waterloo: Wilfred Laurier University Press, 2009); C. Deere-​Birkbeck and C. Monagle, Strengthening Multilateralism: A Mapping of Proposals on WTO Reform and Global Trade Convergence (Geneva: International Centre for Trade and Sustainable Development, 2009); R. Meléndez-​Ortiz, C. Bellmann and M. Rodriguez Mendoza, The Future and the WTO: Confronting the Challenges, Part IV, Institutional Reform of the WTO (Geneva: International Centre for Trade and Sustainable Development, 2012); M. Elsig, The Functioning of the WTO: Options for Reform and Enhanced Performance (Geneva: International Centre for Trade and Sustainable Development, 2016). 298  G. Sacerdoti, ‘The WTO in 2018: Systemic Developments, Disputes and Review of the Appellate Body’s Reports’ (22 May 2019), Bocconi Legal Studies Research Paper No. 3392194; E.-​U. Petersmann, ‘How Should WTO Members React to Their WTO Governance and WTO Appellate Body Crisis?’ European University Institute, 2018. 299  See, notably, General Council, Communication from the European Union, China, Canada, India, Norway, New Zealand, Switzerland, Australia, Republic of Korea, Iceland, Singapore and Mexico, WT/​ GC/​W/​752/​Rev.1 (10 December 2018); and General Council, Communication from the European Union, China and India, WT/​GC/​W/​753/​Rev.1 (11 December 2018). With respect to the so-​called Walker Process (Informal Matters Related to the Functioning of the Appellate Body), see General Council, JOB/​GC/​215 (1 March 2019); JOB/​GC/​217 (8 May 2019); JOB/​GC/​220 (25 July 2019); JOB/​GC/​222 (15 October 2019); and JOB/​GC/​225 (9 December 2019). 300  JOB/​DSB/​1/​Add. 12 (30 April 2020) (and Suppl. 1-​4 and 6-​7). 301  JOB/​DSB/​1/​Add. 12/​Suppl. 5 (3 August 2020).

International Trade Law Institutions    139

X.  The current institutional crisis at the WTO: causes and resolution As explained, the key institutional relationship in the WTO is between the legislature in its various guises, on the one hand, and the judiciary, on the other hand. It is this relationship that stands at the core of the current institutional crisis at the WTO and that will define its future. In this section, we briefly explain the allegations advanced by the Trump administration. We also explain what, in our view, is institutionally required, in order to prevent the WTO in future being held hostage to cyclical dysfunctions in the domestic politics of any powerful Member. The Trump administration and its stakeholders would never have signed the WTO Agreement with its provisions on mandatory and binding dispute settlement. Many of the relevant individuals might even have wished the United States to withdraw entirely from the WTO but were unable to achieve this for domestic political reasons. A decision was therefore taken to neutralize mandatory and binding dispute settlement by opposing appointments to the Appellate Body. The situation was exacerbated by the early resignation of the Director-​General. The actions of the Trump administration were not in the interests of the United States or the other Members. However, no WTO Member has yet called a vote on the issue of Appellate Body appointments. The US objections to the functioning of the dispute settlement system were blended with a narrative about China because there is a significant overlap with stakeholders who would also never have agreed to China’s accession. That narrative was that Chinese state-​capitalism is unfair and the WTO is unable to apprehend it. The narrative did not seriously consider the possibility that, to the extent that there is an issue with Chinese state-​ capitalism, it would be rational to use all available tools to address it, including the WTO. Blended into this mix was also a narrative about trade remedies adjudication, particularly, for example, on the issues of zeroing and public bodies, and a closely related narrative about alleged judicial ‘activism’ by the Appellate Body. These aspects of the narrative represented the views of a narrow group of stakeholders who are unable or unwilling to understand the nature of WTO adjudication or accept specific outcomes with which they disagree. Given the remarkable diversity of WTO Members and the complexity of the issues that the WTO Agreement seeks to govern, significant ambiguity at the margins was unavoidable. Such ambiguity is said to be ‘constructive’ because it allows an agreement to be concluded even though there is no consensus ad idem between dominant domestic constituencies in different Members. The only reason why such ambiguity is not ‘destructive’ is because the parties simultaneously agree to mandatory and binding dispute settlement. Domestic executives are used to enjoying a certain margin of discretion, that is, deference from the courts in the interpretation and application of domestic legislation, including in areas such as trade defence. However, there is no WTO executive. WTO panels and the Appellate Body are engaged in a different kind of law: multilateral,

140    James Flett and Mislav Mataija constitutional, treaty law. They are performing a function similar to the function of the Court of Justice of the European Union when it interprets EU regulations in a manner that must be the same throughout the European Union, or the function of the US Supreme Court when it resolves conflicting lower judgments. The reference to ‘permissible interpretation’ in Article 17.6(ii) of the Anti-​Dumping Agreement is a specific instance of this problem. In sum, whilst domestic courts may rule on what is ‘permissible’, WTO adjudicators rule on what is the best understanding of the law; and there is no doubt that this difference has led to different expectations and significant tension. That is not to say that there is no policy space in WTO law. In what is arguably the most important part of WTO law, namely regulatory law, there is considerable policy space. Whilst in dubio mitius is not a general principle of public international law and is ill-​suited to the multilateral WTO system, the fact remains that, in WTO law, Members choose their own legitimate policy objectives and set their own levels of protection, and there is no general proportionality rule, in which trade effects are set-​off against legitimate policy objectives: only a more limited necessity test. Thus, while there is no explicit ‘discretion’, there are certainly a number of safeguards protecting Members’ policy space. In general, these safeguards have been taken seriously by the dispute settlement system and the Appellate Body. A judgment that would consist only of the terms of the treaty, the terms of the measure, and a declaration of inconsistency (or not) would not be a judgment at all. For something to even be an adjudication it must include the ‘basic rationale’302 or ‘the bridge of reason’. This also follows from basic requirements of due process and the rule of law. It is essential in order to permit the litigants to understand why a particular conclusion has been reached and why it may be said to be objective.303 The parties only consent to be judged because they will be given the reasons for the judgment. Without such reasons, it would be impossible to ensure that the agreements are interpreted and applied in a non-​ discriminatory way, and impossible to achieve the basic objective of security and predictability.304 The bridge of reason consists of inferring one or more propositions from two premises. It may be constructed deductively, from the general to the specific, from the law to the facts; or inductively, from the specific to the general, from the facts to the law. Political discourse about judicial pronouncements is incomplete and unbalanced if it uses only one of the four relevant metrics (judicial ‘activism’). The other relevant metrics are the judicial error of ‘default’ and the judicial virtues of ‘engagement’ and ‘restraint’.305 To critique all bridges of reason as judicial activism is to negate the judicial function completely, which seems, in a nutshell, to have been the (unstated) objective behind the actions of the Trump administration.

302 

Article 12.7 of the DSU. Article 11 of the DSU. 304  Article 3.2 of the DSU. 305 J.H. Jackson, The World Trade Organization, Constitution and Jurisprudence (London: Royal Institute of International Affairs, 1998), at 91. 303 

International Trade Law Institutions    141 As a simple matter of logic, in all multi-​level judicial systems, the controlling court must have the capacity to control the lower entity, including with respect to the bridge of reason (which is why legal characterizations of fact are legal matters susceptible to appeal), as well as, in exceptional circumstances, the establishment of the facts themselves (which is why appeals also lie, exceptionally, on the basis of Article 11 of the DSU). Otherwise, the lower court would have the means to unilaterally avoid scrutiny by the higher court. Relatedly, the meaning of municipal law is not a fact (it is fundamentally nonsensical to conflate meaning and fact), this being a proposition that is also aimed at frustrating or obstructing appellate review. The existence and content of a municipal law document (such as a judgement) opining that the measure at issue has a certain meaning is a fact; but when a panel adopts it as its own it takes the first step along the bridge of reason, constructed inductively. To criticize the Appellate Body on these grounds is, again, to criticize appellate review as such. The Appellate Body must confine itself to resolving the dispute before it. It must not stray outside its terms of reference. It must only clarify or interpret the terms of the treaty that directly frame the relevant obligation or right. It must not clarify or interpret context, which is merely a tool for clarifying or interpreting the relevant terms of the treaty. It should assimilate the proposition that frequently all if not most of a dispute is about how the law is applied to the facts (as opposed to how the law is interpreted) and begin and end its analysis with that in mind. There is no binding system of precedent in WTO dispute settlement, only a reasonable expectation of consistency, and a reasonable expectation that first instance judges properly understand their position and role within the system as a whole. To criticize the Appellate Body for acting consistently with its own case law and expecting panels to do the same is, again, to criticize the notion of consistency and the notion of a dispute settlement system, and a binding body of law, as opposed to ad hoc dispute resolution. If the Appellate Body fails to comply with the 90-​day time period in Article 17.5 of the DSU, this does not prevent the adoption of the report automatically or by operation of law (ipso jure). It does mean that the WTO (to whom the breach is attributable) may have breached its internal rules vis-​à-​vis Members. Whether or not that is the case and what the consequences are may fall to be determined according to the applicable rules of general public international law.306 Certainly, the legal consequence of surpassing the 90-​day deadline cannot reasonably be to consider the Appellate Body itself as acting unlawfully, and its reports as not being true Appellate Body reports. Rule 15 of the Working Procedures for Appellate Review is a standard provision in all courts. It is immaterial that it is in the Working Procedures rather than the DSU. It has been accepted by all Members, including the United States, and functioned extremely well for years. Exceptionally, the two (huge) aircraft cases involved a significant 306 

See Draft Articles on Responsibility of States for Internationally Wrongful Acts 2001, Text adopted by the International Law Commission at its fifty-​third session, in 2001, and submitted to the General Assembly (A/​56/​10), particularly Article 10.2 (breach of any international obligation that may arise for an international organization towards its members under the rules of the organization) and Chapter V (circumstances precluding wrongfulness).

142    James Flett and Mislav Mataija time period in the operation of the rule. All other delays were engineered by the Trump administration’s blocking of further Appellate Body appointments. Unless the Members are prepared to vote (if necessary, by secret and/​or postal ballot) for the appointment of new Appellate Body Members, the only agenda-​setting option they have is to use the Multi-​Party Interim Appeal Arbitration Arrangement under Article 25 of the DSU to continue appellate review. This will also maintain the existing institutional structures in place. If the system is to protect itself from the inevitable cycles of domestic politics in powerful Members it needs to construct a direct channel of communication between WTO adjudicators and municipal judges. This has been the key factor in the successful evolution of the European Union. It can be done on the basis of Article XVI:4 of the WTO Agreement. It should not involve imposition, but at the very least, in ‘as such’ cases, credit should be given to those Members that allow direct effect or have a functioning interpretation in conformity rule. Specifically, in ‘as such’ cases, the WTO adjudicator is often called upon to compare two normative rules expressed in relatively abstract terms: the WTO rule and the municipal rule. Where these rules are simply different it can be difficult to determine whether the municipal rule is consistent or inconsistent with the WTO rule, since the consistency of ‘as applied’ measures may depend upon how discretion or ambiguity in the municipal rule is construed when that rule is applied. For Members that do not provide for direct effect or interpretation in conformity, this can result in the repeated inconsistent application of the rule. Since WTO remedies are ‘prospective’ only, a complaining Member can find itself locked in an endless game of ‘cat and mouse’. In this situation, at some point it becomes reasonable to resolve the matter ‘as such’ at the level of the municipal rule. By contrast, for Members that allow direct effect or require interpretation in conformity, municipal judges should be called upon to construe the municipal rule consistently with WTO law, including as it has been clarified by the Appellate Body. This should provide a domestic law solution to the problem, thus meaning that the municipal law itself should not be found to be WTO inconsistent ‘as such’.

XI.  Institutional aspects of other trade agreements This section will examine the institutional framework of trade agreements outside the WTO framework, other than dispute settlement institutions. As a starting point, it is impossible to provide anything close to a comprehensive picture of the institutional set-​up across the universe of trade agreements (including bilateral FTAs, regional agreements, international organizations focused on trade, agreements such the European Union’s association agreements which go beyond trade issues etc.). The nature of the topic does not lend itself to generalizations. While one can classify and ‘code’ large numbers of trade agreements based on their substantive content (e.g. whether or not they contain ‘disciplines’ on certain issues), their institutional structure tends to be at least somewhat

International Trade Law Institutions    143 sui generis and difficult to compare without a fine-​grain analysis that is difficult to do for a large number of cases. This may explain the relative lack of scholarship dealing with the institutional aspects of trade agreements beyond dispute settlement. For these reasons, and due to the lack of space, this chapter will take a relatively modest approach. It will survey the provisions of several recent bilateral and plurilateral trade agreements including major trading countries (including the EU-​ Canada Comprehensive Economic and Trade Agreement (CETA), the EU-​Japan Economic Partnership Agreement, the US-​Korea Free Trade Agreement (KORUS), United States-​ Mexico-​Canada Agreement (USMCA), the Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP)), as well as (regional) trade agreements that set up more extensive institutional structures, in the context of regional economic organizations (including MERCOSUR, the Caribbean Community (CARICOM), the African Continental Free Trade Area (AfCFTA), Eurasian Economic Union (EAEU), Association of Southeast Asian Nations (ASEAN) and others). This ‘sample’ (if one can call it that) is admittedly small, but it does cover some of the most important recent trade agreements. On the basis of a sketch of the institutional aspects of these agreements, this section will attempt to draw some general conclusions about the types of institutional structures that trade agreements include, and how these differences correspond to the different types of agreements. It will be argued that, broadly speaking, modern trade agreements fall into one of two distinct groups or models: that of a standard FTA, which is comparable to the WTO model of committees, and that of a regional economic organization, which may include additional features such as an executive body or a supranational court. We also touch upon certain horizontal institutional questions, notably membership and decision-​making.

A. Overview To date, relatively little has been written on the institutional set-​up of trade agreements, especially in comparison with the extensive literature, and even database resources,307 studying their substantive aspects and dispute settlement questions.308 307  A. Dür, L. Baccini and M. Elsig, ‘The Design of International Trade Agreements: Introducing a New Dataset’ 9(3) The Review of International Organizations (2014), 353–​375; T. Allee and M. Elsig, ‘Dispute Settlement Provisions in PTAs: New Data and New Concepts’ in A. Dür and M. Elsig (eds), Trade Cooperation: The Purpose, Design and Effects of Preferential Trade Agreements (Cambridge: Cambridge University Press, 2015). 308  Two recent cases in point are the edited collections S. Lester, B. Mercurio, and L. Bartels (eds), Bilateral and Regional Trade Agreements: Case Studies (Cambridge: Cambridge University Press, 2015); R. Acharya (ed), Regional Trade Agreements and the Multilateral Trading System (Cambridge: Cambridge University Press, 2016). Putting dispute settlement to one side, neither of these volumes specifically addresses the institutional set-​up of trade agreements, and the authors of individual chapters touch upon the topic only tangentially (see, e.g., the chapters by C. Brown and J. Record, ‘EU-​Korea Free Trade Agreement’, and H. Gao, ‘China-​New Zealand Free Trade Agreement’ in S. Lester, B. Mercurio and L. Bartels (eds), Bilateral and Regional Trade Agreements: Case Studies (Cambridge: Cambridge University Press, 2015)).

144    James Flett and Mislav Mataija The literature frequently approaches the ‘institutional’ aspects of trade agreements in a rather broad sense. Thus, Duina and Morano-​Foadi describe ‘institutionalization’ as a concept encompassing a ‘rich body of law. . . clearly articulated and permanent principles for the resolution of disputes . . . decision-​making and decision-​monitoring organs charged with significant mandates, a body of judicial decisions that grows over time, rules setting out supranational mechanisms (and organizations) for governance, and established networks of actors (interest groups, lobbyists, etc.) outside the formal structure of RTAs lobbying and interacting in formal and informal (but established) ways with the official bodies and actors of RTAs.’309 On that metric, they conclude that, over time, trade agreements ‘by and large appear to move from less to more institutionalization’.310 Importantly, however, they include in their analysis both regional trade agreements such as NAFTA and those in the framework of a more elaborate international organization, such as the African Union or MERCOSUR. Relying on a similarly broad understanding of ‘institutionalization’ (strength and independence of secretariats, the degree of ‘legalization’ etc), a number of studies have looked at the link between economic interdependence and institutionalization. While the link between the two is more ambiguous than it might intuitively seem, Haftel suggests that there is indeed a positive link, as long as one takes into account not just the stated objectives of the agreements but the level of their implementation.311 This would suggest that higher levels of economic integration tend to go hand in hand with a more developed institutional structure. There is, of course, a chicken and egg question there: is the institutionalization driving the integration, or vice versa? A more elaborate and innovative institutional structure goes hand in hand not just with the level of trade and investment between the contracting parties, but also with the complexity of the substantive issues covered by the agreement. As Stoll explains, the issues covered by ‘advanced PTAs and mega-​regionals’ increasingly require the parties to set up a sort of dialogue, or procedures to take binding decisions. For similar reasons, they provide for broader involvement of civil society and non-​governmental actors.312 It has also been suggested that the increasing institutional ‘depth’ of an FTA is linked to the rise of international production networks, especially when developing countries are involved, and the need to manage the associated externalities.313 In a nutshell, a ‘deep’ FTA is not just a tool for eliminating trade barriers, but a mechanism 309 F.

Duina and S. Morano-​ Foadi, ‘Introduction: The Institutionalisation of Regional Trade Agreements Worldwide: New Dynamics and Future Scenarios’ 17(5) European Law Journal (2011) 561–​ 567, at 563. 310  Ibid., at 566. 311  Y.Z. Haftel, ‘Commerce and institutions: Trade, Scope, and the Design of Regional Economic Organizations’, 8 Review of International Organizations (2013) 389–​414, at 409. 312  P.-​T. Stoll, ‘Mega-​Regionals: Challenges, Opportunities and Research Questions’ in T. Rensmann (ed), Mega-​Regional Trade Agreements (Berlin: Springer, 2017) Section 3.5. 313  WTO, World Trade Report 2011, The WTO and preferential trade agreements: From co-​existence to coherence, at 111–​112.

International Trade Law Institutions    145 enabling the governance of international production. From that point of view, it seems clear why a more complex institutional structure might be needed for the FTA itself. Thus, unlike traditional FTAs which focus on the elimination of tariffs, modern FTAs might be better described as an incomplete contract requiring an institutional structure for further development or elaboration, as well as for enabling transparency and non-​State participation. Nevertheless, in the case of ‘standard’ FTAs, those structures rarely rise to the level of supranationalism, their ability to legislate is limited, and they are almost without exception based on contracting party consensus. Furthermore, like the WTO, they lack centralized enforcement.314 Indeed, some of the seemingly most effective powers of the organs set up by such agreements are designed not to enable them to act independently or to adapt the agreement to new conditions, but to re-​ assert contracting party control. The best example of this is the power to issue authoritative interpretations.315 Another oft-​debated question is the relationship between the proliferating FTAs and their accompanying institutional models and the WTO, or multilateralism more broadly. Trommer describes this as a contrast between the ‘thin’ institutionalism of FTAs (forum for exchanging pre-​determined preferences, based on consensus) and the ‘thick’ institutionalism of the WTO (a permanent institutional structure with repeat interactions, permanent central organs, a seat and a secretariat, which not just enables cooperation but, over time, shapes the preferences of the participants).316 Compared to the WTO, the ‘thin institutionalism’ and fragmentation of multiple FTAs is less transparent, and more difficult for smaller countries and civil society to effectively participate in.317 Linked to the theoretical point that, over time, ‘the proliferation of institutions leads global governance back towards more power-​based forms’,318 Trommer suggests that the lack of permanent institutional support may make the ‘adjudication of international trade disputes under PTA dispute settlement . . . return to a more diplomatic, rather than judicial format.’319 Looking into the nuts and bolts of the institutional set-​up of trade agreements reveals, however, significant diversity. Apart from the many differences between every single one of the hundreds of trade agreements currently in force, there are distinct families or groups of trade agreements. The differences between them are quite pronounced when it comes to institutional issues. 314 A.

de Mestral and L. Vanhonnaeker, ‘Exception Clauses in Mega-​ Regionals (International Investment Protection and Trade Agreements)’ in T. Rensmann (ed), Mega-​Regional Trade Agreements (Berlin: Springer, 2017), at 116–​117. 315 Compare, with respect to investment disciplines, S.W. Schill and H.L. Bray, ‘The Brave New (American) World of International Investment Law: Substantive Investment Protection Standards in Mega-​Regionals’ in T. Rensmann (ed), Mega-​Regional Trade Agreements (Berlin: Springer, 2017), Section 3.3. 316  S. Trommer, ‘The WTO in an Era of Preferential Trade Agreements: Thick and Thin Institutions in Global Trade Governance’ 16(3) World Trade Review (2017) 501, at 504–​505. 317  Ibid., at 504–​506 and 512. 318  Ibid., at 504. 319  Ibid., at 514.

146    James Flett and Mislav Mataija Baccini, Dür and Haftel, for example, speak of three groups: narrow and shallow agreements, focussing on trade in goods and tariff elimination; the ‘EU model’ (meaning: agreements setting up an internal market comparable to the EU), which is used by more deeply integrated regional economic organizations; and the more popular ‘NAFTA model’ which goes much further than ‘narrow and shallow agreements’ but focusses on rules rather than institutions.320 While a distinction should be drawn between FTAs and regional economic organizations, the specific categories outlined by Baccini, Dür, and Haftel are not fully representative of the landscape. For example, it is a stretch to describe the numerous modern FTAs concluded by, basically, all large trading countries as following the model of NAFTA. Nevertheless, despite the numerous differences, there are sufficient parallels in the institutional set-​up of most recent ‘deep’ FTAs to treat them as a single group. This group, interestingly, includes some plurilateral agreements, such as the CPTPP. This chapter does not focus on the institutional set-​up of what has been termed by Baccini, Dür, and Haftel, and others,321 as ‘shallow’ agreements, focussing on tariff reduction and other border measures. It can be safely assumed, at least, that the institutional set-​up of such agreements does not reach the complexity of ‘deep’ FTAs. For example, an agreement that does not touch upon TBT, SPS or IP issues would certainly not need as many (or any) specialized committees and would have less need of procedures for the adoption of secondary law. A second main model is that of a regional economic organization. Unlike Baccini, Dür, and Haftel, we do not necessarily describe this as the ‘EU model’, any more than we would describe the first as the ‘NAFTA model’. It is doubtless true that certain elements of the institutional set-​up of the European Union itself influenced other organizations, like CARICOM or MERCOSUR. But even those REOs having to some extent followed such EU models are vastly different from the European Union itself. In fact, given the breadth and depth of integration within the European Union in areas going far beyond trade, we do not propose to even look at the European Union itself in this context.322 Finally, a number of agreements do not neatly fit in either of the two models described above. One example are the European Union’s association agreements, which are bilateral treaties going beyond trade, but with most of their enforceable provisions focused 320 

A. Dür, L. Baccini, and Y.Z. Haftel, ‘Imitation and Innovation in International Governance: The Diffusion of Trade Agreement Design’ in A. Dür and M. Elsig (eds), Trade Cooperation: The Purpose, Design and Effects of Preferential Trade Agreements (Cambridge: Cambridge University Press, 2015). Horn, Mavroidis, and Sapir similarly argue that US FTAs contain more enforceable rules in a narrower set of areas, compared to EU FTAs. H. Horn, P.C. Mavroidis and A Sapir, ‘EU and US Preferential Trade Agreements: Deepening or Widening of WTO commitments’ in K.W. Bagwell and P.C. Mavroidis (eds), Preferential Trade Agreement: A Law and Economic Analysis (Cambridge: Cambridge University Press, 2011) 150–​172. 321  WTO World Trade Report 2011, above fn 316, at 110. 322  See further Chapter 11 of this handbook.

International Trade Law Institutions    147 on trade and competition issues. Compared to standard FTAs, those agreements foresee a simpler but somewhat stronger centralized institutional structure.323

B. The FTA model For all the differences between them, the rough outlines of the institutional set-​up of modern FTAs are similar. Bearing some resemblance to the WTO, FTAs (including, for example, recent US and EU FTAs) typically set up a joint committee, a number of specialized committees focused on particular topics, and other subordinate organs such as working groups. The decision-​making rule tends to be consensus. Typically, there is no centralized enforcement, and there is no permanent secretariat.

1. Joint committees A fairly typical feature of the institutional set-​up of FTAs is a joint committee. This is the central, and hierarchically superior body set up by an FTA. It has a horizontal role, not limited to particular subject-​matter. It tends to be composed of an equal number of representatives of the contracting parties, and chaired by their respective ministers (or equivalent), either together or on a rotating basis.324 One would expect the presiding ministers to be those in charge of trade, but some agreements leave this question somewhat open.325 An interesting feature of USMCA is a sort of variable geometry in the composition of its Free Trade Commission: when deciding on, interpreting or modifying a USMCA provision that applies between only two of the parties, the Commission is itself composed of representatives of those parties.326 The joint committee is typically in charge of overseeing the implementation of the agreement. It also supervises the specialized committees and other bodies set up by the agreement. To some extent, it may even have a legislative role: it is empowered to adopt decisions that are binding on the parties (on the basis of mutual consent).327 In KORUS, by contrast, there is no explicit provision of a general nature allowing the joint committee to take binding decisions. Rather, such powers must be found in specific provisions of the agreement, or in one of the other specific powers given to the joint committee, such as ‘considering ways to further enhance trade relations between the Parties’ or ‘seeking to resolve disputes that may arise regarding the interpretation or application of this Agreement’.

323  Baccini, Dür, and Haftel, above fn 323, nevertheless place them in the same category as regional economic organizations. 324  Article 26.1 of CETA; Article 22.1 of the EU-​Japan FTA. 325  For example, EU-​Japan refers to ministerial-​level representatives ‘responsible for matters under this Agreement’. One could imagine, for example, the ministers of environment being in charge of an environmental question, or ministers of health discussing an SPS question, and thus chairing a meeting of the joint committee devoted to such a topic. 326  Article 30.2.3 of the USCMA. 327  Article 26.3 of CETA; Article 22.2 of the EU-​Japan FTA.

148    James Flett and Mislav Mataija A joint committee may have the ability to consider or even adopt certain amendments to the agreement.328 Furthermore, it tends to be authorized to adopt authoritative interpretations of the agreement, binding on the adjudicators of trade and investment disputes. The joint committees tend to have a rather broad discretion in determining their rules of procedure, which presumably extends also to their composition. In CETA, for example, there are no specific provisions on the composition of the joint committee, other than that it shall comprise representatives of both parties and be co-​chaired by their trade ministers or their ‘designees’.329 Some of the powers of joint committees are phrased rather broadly, which may in practice be either far-​reaching or a dead letter. Thus, the CETA Joint Committee shall ‘consider any matter of interest relating to an area covered by this Agreement’ (Article 26.1.4) and may ‘communicate with all interested parties including private sector and civil society organisations’, ‘study the development of trade between the Parties and consider ways to further enhance trade relations between the Parties’ (Article 26.1.5), or ‘make appropriate recommendations’ (Article 26.3.2). In the EU-​Japan FTA, the joint committee ‘shall seek to solve problems that may arise under this Agreement or resolve disputes that may arise regarding the interpretation or application of this Agreement’ (Article 22.1.4) and can ‘take any other action in the exercise of its functions as the Parties may agree’ (Article 22.1.5). In KORUS, the joint committee may ‘consider any other matter that may affect the operation of this Agreement’ (Article 22.2) or ‘develop arrangements for implementing this Agreement’.330 The relationship between the joint committee and the specialized committees is somewhat comparable to the relationship between the WTO General Council and the WTO specialized councils, or to that between the Council for Trade in Goods and subsidiary committees and bodies. Apart from overseeing their work, the joint committees may delegate responsibilities to them, but also take over the tasks assigned to them by the agreement, change those tasks or even dissolve those bodies or create new ones.331 The broad roles of the joint committee are limited by the fact that it is not a standing body. Typically, joint committees only meet once per year, if they meet at all, bar urgency or requests for more frequent meetings. Interestingly, the role of a joint-​committee-​like body in recent plurilateral FTAs like USMCA and TPCPP is largely similar. There is still a body, perhaps named differently (e.g., Trans-​Pacific Partnership Commission in the case of the CPTPP, or the Free Trade Commission in the case of USMCA) with broad supervisory, interpretative, and decision-​making powers (including, notably, the power to decide on certain

328 

Article 26.1.5 of CETA; Article 22.2 of KORUS. Article 26.1.1 of CETA. 330  See also Article 27-​2.2 of the CPTPP. 331  Article 26.1.5 of CETA; Article 22.1.5 of the EU-​Japan FTA. 329 

International Trade Law Institutions    149 amendments332 and to issue authoritative interpretations) on a wide range of issues affecting the agreement, composed of ministerial or similar representatives of each party, chaired on the basis of rotation, and deciding by consensus.

2. Specialized committees, working groups and contact points Mirroring the WTO at least to some extent, modern trade agreements envisage a large number of specialized committees, which tend to be subordinate to the joint committee, not just in their daily functioning but also in their very set-​up and in the definition of their tasks. A sub-​set of these committees corresponds quite closely to the WTO institutional set-​ up. Thus, trade agreements variously foresee committees in charge of: –​ trade in goods; –​ services and investment; –​ SPS issues; –​ TBT issues; –​ agriculture; –​ customs cooperation, rules of origin, trade facilitation (USMCA); –​ mutual recognition of professional qualifications; –​ financial services; –​ government procurement; –​ intellectual property; –​ trade remedies (KORUS); –​ temporary entry for business persons (CPTPP); –​ telecoms (CPTPP). Beyond these most classic topics, certain FTAs envisage committees in charge of:





–​ regulatory cooperation; –​ civil society (CETA); –​ trade and sustainable development; –​ geographical indications; –​ investment; –​ e-​commerce; –​ textile and apparel (KORUS); –​ medicines and medical devices (KORUS); –​ labour (KORUS, CPTPP); –​ environmental affairs council (KORUS), committee (CPTPP); –​ fisheries (KORUS);

332 

CPTPP lists expressly the issues subject to such amendment in Articles 27-​2.2. See also Article 30.2 of the USMCA.

150    James Flett and Mislav Mataija

–​ SOEs (CPTPP); –​ cooperation and capacity building (CPTPP); –​ competitiveness and business facilitation, development, SMEs, regulatory coherence (CPTPP); etc. Neither of these lists is exhaustive, and there is quite a lot of diversity, but it can be generally concluded that most modern FTAs have a large number of specialized committees, on a range of issues that goes beyond the WTO framework. Typically, specialized committees do not have independent decision-​making powers. Instead, they are authorized to recommend certain decisions, or even amendments to the agreement if they appear necessary in light of the experience with its operation,333 to the joint committee. In addition, their task is to consider or discuss certain topics (in this respect, their powers tend to be worded rather broadly)334 and to monitor the implementation of particular chapters of the agreements. They may also set up ad hoc working groups on particular issues.335 In this sense, the role of specialized committees is relatively consistent and harmonized, both within and across the various individual agreements. Compared to the WTO context, the particular committees are less ‘sui generis’ because they are put in place at the same time, through a single agreement. The decision-​making rule for specialized committees tends to be the same as for the joint committee, i.e. consensus or a variation of consensus (CETA, for example, uses the terms ‘mutual consent’). KORUS, for example, provides that ‘all decisions of the Joint Committee and all committees, working groups, and other bodies established under this Agreement shall be taken by consensus of the Parties’.336 Like the joint committee, those bodies typically meet once per year, or more frequently as required. Specialized committees can be set up at several levels. Thus, in CETA, the Committee on Agriculture is subordinate to the Committee on Trade in Goods, and Joint Committee on Mutual Recognition of Professional Qualifications reports to the Committee on Services and Investment.337 Compared to the WTO framework, there tends to be more innovation in the design of these bodies when they are in charge of WTO +​areas, at least superficially. Examples of this are bodies in charge of regulatory cooperation or sustainable development. On regulatory cooperation, provision is usually made for a body (for instance, the ‘Regulatory Cooperation Forum’ in CETA) to not only discuss general 333 See, e.g., Article 7.13.2(c) of the EU-​ Japan FTA: ‘reviewing this Chapter in light of any developments under the WTO Committee on Technical Barriers to Trade established under Article 13 of the TBT Agreement, and if necessary, developing recommendations for amendments to this Chapter.’ 334  See, e.g., Article 2.14 of KORUS: The Committee on Trade in Goods may ‘consider any matter arising under’ several chapters of the agreement, ‘address tariff and non-​tariff barriers to trade in goods’ and refer them to the Joint Committee. 335  For example, Article 6.15.2 (e) of the EU-​Japan FTA. 336  Article 22.1.7 of KORUS; see also Article 22.3.3 of the EU-​Japan FTA. 337  Article 26.2.1 of CETA.

International Trade Law Institutions    151 regulatory issues, but to reach out to national regulators, or to review specific regulatory initiatives of a party.338 Nevertheless, the CETA Regulatory Cooperation Forum still falls squarely within the definition of a specialized committee and does not have independent decision-​making powers. In US trade agreements, there typically is no specialized body in charge of regulatory cooperation.339 As Steger reports, however, certain FTAs have taken the institutional design of regulatory cooperation further. Thus, the Australia—​New Zealand Closer Economic Relations Trade Agreement envisages ‘joint accreditation and harmonization systems, establishment of joint regulatory agencies, and mutual recognition arrangements covering both occupational qualifications and product standards’.340 In other areas, the CETA Civil Society Forum is innovative in its composition, grouping civil society representatives in order to ‘conduct a dialogue’ on the sustainable development aspects of the agreement.341 On labour issues, some recent FTAs set up committees or mechanisms for cooperation, which are in some cases somewhat de-​ coupled from ‘trade and’ issues but rather focus directly on labour matters, including respect for the ILO Declaration and ILO Convention, fundamental rights, prohibition of child labour and so on. The work of such committees seems to be more open to the stakeholders and the public at large than that of the other specialized committees.342 The same is true of committees devoted to environmental issues.343 Apart from specialized committees, trade agreements frequently envisage the operation of working groups. While similar in their set-​up and powers, working groups are typically in charge of more discrete topics, such as a particular sector. Thus, in the EU-​ Japan FTA there are working groups on wine and motor vehicles and parts. Working groups are typically subordinate to one of the specialized committees or to the joint committee. Indeed, ad hoc working groups can be set up on any subject matter under the auspices of certain specialized committees (typical examples are the TBT and SPS Committees). A frequent feature of FTAs are contact points, within the national administrations of the parties, in charge of certain defined tasks within specific chapters or for the agreement as a whole. For example, CETA envisages ‘CETA contact points’ for each party, which act as a sort of decentralized secretariat: their task is to monitor the work of all of the bodies set up by the agreement, coordinate the preparations for

338 

Article 21.6 of CETA. NAFTA (and still today), the United States had separately set up two ‘regulatory cooperation councils’ with Canada and Mexico. 340  D.P. Steger, ‘Institutions for Regulatory Cooperation in New Generation Economic and Trade Agreements’ 39 Legal Issues of Economic Integration (2012) 109, at 114. 341  Article 22.5 of CETA. Similarly, see the ‘Joint Dialogue with civil society’ in Article 16.16 of the EU-​ Japan FTA. See also the discussion of the EU –​Korea FTA in Brown and Record, above fn 308, p. 53. 342  Annex 19-​A to KORUS. The CPTPP provides for a Labour Council, the powers of which are rather more vaguely described, and its work is less open to external stakeholders, apart from the possibility of liaising with ‘relevant regional and international organisations, such as the ILO and APEC’ (19.12). 343  Article 20.6 of KORUS. See also Gao, above fn 308, at 92. 339 During

152    James Flett and Mislav Mataija committee meetings and follow up on joint committee decisions, as well as to facilitate communications between the parties.344 As mentioned before, FTAs do not typically have a permanent secretariat. One notable exception is the USMCA, which provides for a secretariat to be established by the Free Trade Commission (the USMCA’s take on a joint committee), with mostly supportive and administrative tasks. Still, compared to the WTO, this secretariat is hobbled by the fact that it has separate national sections, with separate offices in the territories of the parties, responsible for its own operation and costs, and with separate leadership.345 Thus, in effect, the difference between the USMCA Secretariat and the contact points envisaged in CETA is smaller than it may superficially appear. The European Union’s development-​oriented Economic Partnership Agreements, while resembling a standard FTA, contain some institutional specificities. For example, the EU-​CARIFORUM EPA provides for a Trade and Development Committee, with relatively extensive powers (including overall responsibility for the implementation of the agreement and its further elaboration, resolving certain disputes etc.), as well as a Parliamentary Committee, a forum for members of the parties’ legislatures to exchange views.346

3. Regional economic organizations The second model is that of an international organization, or regional organization, set up to address trade issues, at least to a significant extent. This has sometimes been referred to in the literature as ‘regional economic organizations’ or REOs. While we have decided not to address the European Union itself as an example of this model347—​given the complexity and scope of its legal system and its institutions, going far beyond trade issues—​there is no escaping the fact that many organizations in this group have been, at least to some extent, modelled on the European Union. Thus, for example, REOs tend to have one or more bodies made up of heads of state or high-​ level officials, loosely comparable to the European Council and the Council of the EU (‘Council of Ministers’). Several REOs have courts modelled on the Court of Justice of the European Union, including with respect to the various types of jurisdiction and powers.348 Departing from the FTA model, and disregarding the various substantive differences from the FTA model, organizations like the Eurasian Economic Union, CARICOM, ASEAN, MERCOSUR, the Andean Community or the African Continental Free Trade Area (AfCFTA) have several of the following institutional features: 344  Article

26.5 of CETA; see also Article 22.6 of the EU-​Japan FTA; somewhat less ambitiously, Article 22.1 of KORUS; Article 27.5 of the CPTPP. 345  Article 30.4 of the USMCA. 346  Articles 230-​231 of the EU-​CARIFORUM EPA. 347  See Chapter 11 of this handbook. 348  K.J. Alter and L.R. Helfer, Transplanting International Courts: The Law and Politics of the Andean Tribunal of Justice (Oxford: Oxford University Press, 2017) studies the Andean Tribunal of Justice from this point of view.

International Trade Law Institutions    153 –​ Legal personality, as well as the ability to conclude treaties in their own right;349 –​ At least one permanent body composed of heads of State or other high-​level officials, whose task is to provide political guidance and take decisions on matters concerning the agreement (although this is not always precisely defined). In many cases, there is more than one high-​level political body. For example, in CARICOM the Conference of Heads of Government must be distinguished from the Community Council (composed of ministers for CARICOM affairs). Likewise, in the case of ASEAN, there is the ASEAN Summit (heads of state) and the ASEAN Coordinating Council (ministers of trade). In the Eurasian Economic Union, a distinction should be made between the Supreme Council (heads of state) and the Intergovernmental Council (prime ministers); in addition, within the Eurasian Economic Commission, there is the Council of the Eurasian Economic Commission (deputy prime ministers) and the Board, composed of appointees to the Commission itself. MERCOSUR’s Council of the Common Market is composed of foreign affairs and economy ministers, with a rotating presidency. –​ A parliamentary body or assembly. This feature is by no means universal. Among the exceptions are MERCOSUR, with its parliament (PARLASUR), and the Andean Parliament, one of the institutions of the Andean Community. –​ A permanent court or arbitration mechanism.350 Unlike in a typical FTA, this court tends at least on paper to be more than simply a ‘dispute settlement’ mechanism (whether State-​to-​State or even individual-​State) limited to settling disputes in the interpretation and application of the treaty itself. Instead, the court is in some sense integrated into the domestic legal systems of the parties. For example, appeals may lie to that court from domestic jurisdictions,351 something like a preliminary reference or advisory opinion jurisdiction may be possible,352 and the decisions of such a court may have direct legal effects within the domestic legal orders of the parties. Moreover, it is common for such a court to exercise judicial review over the decisions taken by the other institutions.353







349 Article

228 of the Revised Treaty of Chaguaramas Establishing the Caribbean Community Including the CARICOM Single Market And Economy. See, similarly, Article 3 of the ASEAN Charter; Article 34 of the Additional Protocol to the Treaty of Asunción on the Institutional Structure of MERCOSUR, Protocol of Ouro Preto (1994). 350  MERCOSUR’s Permanent Review Court, while composed of permanent arbitrators, has a rather wide jurisdiction beyond State-​to-​State disputes, extending to claims by individuals as well as advisory opinions (Protocol of Olivos for the Settlement of Disputes in MERCOSUR). 351  This is true, in some instances, for the Caribbean Court of Justice (Article XXV of the Agreement Establishing the Caribbean Court of Justice). 352  The EAEU Court is, for example, authorized to deliver ‘clarifications’ on the request of EAEU bodies or Member States. Articles 45 and 46 of the Statute of the Court of the Eurasian Economic Union. 353 The EAEU Court, for example, may hear challenges to decisions of the Eurasian Economic Commission, or for failure to act (Statute, Article 39/​2). The same is true in the case of the Andean Community Court of Justice (Article 19 of the Treaty Creating the Court of Justice of the Cartagena Agreement (Amended by the Cochabamba Protocol)). Private litigants may also be parties before

154    James Flett and Mislav Mataija –​ A permanent secretariat or similar body, possibly headed by a Secretary General. –​ A central executive body in charge of implementing the agreement(s), although the effectiveness and methods vary greatly. For example, the CARICOM Bureau merely ‘assists’ the heads of government in reaching decisions and ‘facilitates’ implementation. By contrast, the Eurasian Economic Commission is described as a ‘permanent supranational regulatory body’. ASEAN foresees three ‘Community Councils’, including a ‘Community Economic Council’ which, together with subordinate ‘Sectoral Ministerial Bodies’ is in charge of implementing the agreements and decisions of the ASEAN Summit. MERCOSUR’s Common Market Group is explicitly defined as the ‘executive organ of the common market’354 which monitors compliance with the Treaty, enforces decisions taken by the Council, and has the power of initiative. Nevertheless, it is not a truly supranational body, as its members represent ministries and central banks of the parties. The Andean Community Commission is an example of a body with wide-​ranging executive powers; it is nevertheless also composed of the representatives of member State governments.355



As this already shows, there is significant diversity in this group, more so than among standard FTAs. This is in large part due to the diversity of issues dealt with by these organizations, and their higher level of political ambition which is not necessarily (only) focussed on trade issues. It should also be kept in mind that, as with all other features of the agreements, the proof of the pudding is in the eating. Thus, the fact that certain bodies and institutions appear significant on paper does not necessarily mean that the same will occur in practice, whether more generally or on trade issues. In some cases, the institutional set-​up is a mix between the FTA model and the REO model. For example, the AfCFTA has some features of a REO (an assembly of heads of state, a council of trade ministers, a permanent secretariat), but also has a WTO-​like structure of specialized committees and bodies, including a Dispute Settlement Body. Interestingly, specialized committees are essentially absent from most other REOs. Presumably, centralized executive bodies or secretariats are meant to take over the role played by specialized committees in the WTO or an FTA. Nevertheless, from a purely trade perspective one might raise the question if the type of discussion that takes place in a WTO or FTA specialized committee, such as a TBT or SPS committee, can truly be replicated in a generalist body, especially from the point of view of technical expertise. Special mention should be made of the European Union’s stabilization and association agreements, typically concluded with neighbouring third countries in the run-​up to their accession to the European Union. They contain among other things a strong set the Caribbean Court of Justice (Article XXIV of the Agreement Establishing the Caribbean Court of Justice), but under a more complex set of conditions. 354  Article 13 of the Treaty Establishing a Common Market between the Argentine Republic, the Federal Republic of Brazil, the Republic of Paraguay and the Eastern Republic of Uruguay (Treaty of Asunción). 355  Article 21 of the Andean Subregional Integration Agreement (Cartagena Agreement).

International Trade Law Institutions    155 of disciplines on trade, including common-​market type provisions on free movement of services, capital, and persons as well as provisions on competition. Institutionally, the central element of these agreements is a Stabilisation and Association Council, comparable to an FTA joint committee, composed of members of the Council of the European Union and the European Commission, on the one hand, and representatives of the third country, on the other. The SAC is authorized to take binding decisions in various areas covered by the agreement, which the parties are required to implement; to create subcommittees; as well as to resolve disputes between the parties.356 In addition, SAAs set up a joint parliamentary committee for exchanging views among legislators.357 However, probably the most important institutional aspect of SAAs is not obvious from their text: the role of EU law, and therefore of EU institutions, notably the Court of Justice of the European Union. SAAs universally contain an obligation for the third country to progressively align its legal system with that of the European Union, and in some cases (typically, competition, and state aid) to apply its own laws consistently with ‘interpretative instruments’ adopted by the EU institutions, which includes the case law of the Court of Justice of the European Union and decisions of the European Commission.358 Thus, one could argue that the EU institutions themselves form a crucial part of the institutional machinery of an SAA, and this certainly extends to trade issues as well.

C. Horizontal questions 1. Membership The question of membership depends very much on the type of agreement. A bilateral FTA, as a rule, does not envisage any other country joining. Plurilateral FTAs, on the other hand, may do so, but even in those cases the circle of States eligible to accede to plurilateral FTAs is geographically or otherwise restricted. Thus, the CPTPP allows for the accession of Asia-​Pacific Economic Cooperation (APEC) members, and other States or separate customs territories ‘as the Parties may agree’. The accession procedure takes its cue from the WTO rules: based on a request, a working party is formed, and conditions may be imposed on the acceding State. A relevant difference from the WTO

356  See,

e.g., Articles 115-​120 and 128 of the Stabilisation and Association Agreement between the European Union and Bosnia and Herzegovina (SAA BiH). 357  Article 121 of the SAA BiH. 358  For example, see Articles 70 (imposing a general obligation to ‘endeavour to ensure that its existing laws and future legislation will be gradually made compatible with the Community acquis’) and 71(2) of SAA BiH (concerning ‘interpretative instruments’ in the area of competition). For some examples of sector-​specific harmonization clauses in trade-​related areas, see Articles 59 (1) (transport), 76 (b) (consumer protection), 77 (labour), and 79 (personal data). For a discussion, see M. Mataija, ‘The Unfulfilled Potential of Stabilisation and Association Agreements Before SEE Courts’ in S. Rodin and T. Perišin (eds), Judicial Application of International Law in Southeast Europe (Berlin: Springer, 2015).

156    James Flett and Mislav Mataija process is that the accession must be ratified by each of the CPTPP parties domestically, i.e., there is no majority decision.359 Unsurprisingly, REOs universally provide for the possibility of accession of new members, which tends however to be restricted, for example on a geographical basis or on the basis of membership in other organizations.360 The decision-​making rule for approving new accessions tends to be consensus.361 There is, however, significant diversity on the exact procedure, and on the involvement of various bodies. Thus, the revised Treaty of Chaguaramas (CARICOM) authorizes the Conference of Heads of Government to decide on the accession of new members. While there is no specific rule on matters of accession, it appears that the general decision-​making rule for Conference decisions is three quarters of the membership.362 The Cartagena Agreement opens the possibility of any Latin American country to ‘adhere’, and simply provides that the ‘Commission shall define the terms of adherence’ in light of the Agreement’s objectives.363

2. Decision-​making The joint committees of FTAs tend to take decisions by ‘mutual consent’ or ‘consensus’. Usually, this is not further defined. Presumably, in bilateral FTAs it is envisaged that affirmative acceptance of a proposal will be given by both parties. Ambiguity remains, however, with respect to particular committees. For example, one can ask the question what ‘mutual consent’ means in the context of the CETA Joint Committee, which is composed of several representatives of both parties. The CETA Joint Committee Rules of Procedure do not shed much light on the matter, beyond reaffirming the mutual consent rule; however, it appears that the intention is that the two parties must accept each decision, with their members of the Joint Committee acting as a sort of delegation.364 In some cases, notably in plurilateral FTAs, it appears that something like the WTO definition applies. Thus, the CPTPP provides that ‘the Commission or any subsidiary body shall be deemed to have taken a decision by consensus if no Party present at any meeting when a decision is taken objects to the proposed decision’.365 For other instances, however, the same agreement explains that ‘agreement of all Parties’ is required—​but even then, provision is made for a sort of tacit consent within five days of consideration by the Commission (Article 27.3). In REOs, the question of decision-​making tends to get rather more complicated and case specific. 359 

Article 30.4 of the CPTPP. Article 20 of the Treaty of Asunción. AfCFTA is restricted to Member States of the African Union. It simply provides that it is open for signature and ratification or accession by those States, in accordance with their respective constitutional procedures (Article 22(1) of the Agreement Establishing the African Continental Free Trade Area). 361  Article 20 of the Treaty of Asunción. 362  Articles 28 and 238 of the Treaty of Chaguaramas (CARICOM). 363  Article 133 of the Cartagena Agreement. 364  Rule 10.4 of the Rules of Procedure thus provides that each decision will be signed by the co-​chairs. 365  Article 27.3. Similarly, see Article 30.3 of the USMCA. 360 

International Trade Law Institutions    157 It is common for the decision-​making rule to be consensus. However, there are examples of majority voting in certain bodies of REOs. One example is the AfCFTA, which requires consensus for substantive issues in all of its institutions (with a mechanism of cascading up to hierarchically superior bodies in case consensus cannot be achieved, which does not however explicitly state that in the final instance a decision can be made by majority), but majority voting is the rule for procedural issues.366 In CARICOM, a number of decisions, even beyond procedural ones, may be reached by various kinds of majority voting.367 In the Andean Community, which has a more complex institutional structure, the decision-​making rule depends on the specific body, but there are examples of both consensus and majority requirements.368 In MERCOSUR, by contrast, the decisions of all organs must be taken by consensus and in the presence of all State parties.369 In the EAEU, only one body (the Board of the Eurasian Economic Commission) adopts certain decisions by qualified majority, but it appears that this possibility is heavily restricted, such that all politically sensitive issues revert to the Council of the Eurasian Economic Commission, which decides by consensus.370 In some cases, the relevant provisions appear to be deliberately vague. Thus, the ASEAN Charter provides for ‘consultation and consensus’ as a basic principle but allows the ASEAN Summit to decide how a specific decision can be made where consensus cannot be achieved (obviously begging the question how the Summit makes that decision); moreover, these rules can be overridden by any one of the numerous legal instruments agreed within the framework of ASEAN.371

XII. Conclusion This chapter has looked at the institutional structure of, first, the WTO and, second, various recent trade agreements. With respect to both, the importance of institutions should not be underestimated. The complexities of modern trade, going far beyond the 366 

Article 14 of the Agreement Establishing the African Continental Free Trade Area. Interestingly, classifying a question as procedural or substantive is also to be decided by simply majority. An interesting question, which we are not well placed to answer, is whether the question of which is the appropriate decision-​making rule for the hierarchically highest body, the Assembly, in case a consensus cannot be reached, is itself procedural or substantive. 367  Articles 27-​ 29 of the Revised Treaty of Chaguaramas Establishing the Caribbean Community Including the CARICOM Single Market And Economy. 368  See, e.g., the contrast in the Cartagena Agreement between the Andean Commission, which in principle decides ‘by affirmative vote of the absolute majority of the Member Countries’ (Article 26), and the Andean Council of Foreign Ministers, which adopts decisions by consensus (Article 17). 369  Article 37 of the Protocol of Ouro Preto, Additional Protocol to the Treaty of Asunción on the Institutional Structure of MERCOSUR. 370  R. Dragneva and K. Wolczuk, ‘The Eurasian Economic Union: Deals, Rules and the Exercise of Power’, Research Paper Russia and Eurasia Programme, Chatham House, May 2017, at 13–​14. 371  Article 20 of the ASEAN Charter.

158    James Flett and Mislav Mataija mutual reduction of tariffs, require active rule making, monitoring, and enforcement. This, in turn, requires appropriate and effective institutional mechanisms. Ensuring that such institutions are effective is, however, a tall order, especially where consensus is the dominant decision-​making rule, which is the case both in the WTO system and for most FTAs. The complexity goes further than that. For example, the WTO consensus rule is often misunderstood. In FTAs, references to consensus or ‘mutual consent’ tend to be insufficiently elaborated in the context of committees with multiple members representing a single contracting party. In our analysis of the WTO, we conclude that the many proposals for making its institutional set-​up more effective are unlikely to come to fruition, or even be seriously debated, in the near future. Instead, we focus our analysis on the intersection of the ‘judicial’ and the ‘legislative’ function of the WTO, brought into sharp relief by the current dispute settlement crisis. In this respect, two particular points stand out. First, if institutional structures and procedures are to remain effective and properly protected from inappropriate exogenous influences more must be done to embed them and ensure proper adherence to what the rules actually say, as opposed to just paying lip service to them. Responsibility for this, as a matter of institutional culture, lies in the first place with the Director-​General, but by extension other management and indeed all employees. Second, serious consideration must be given to provisions of the relevant international laws that address the relationship between the relevant international law and the municipal law of the contracting parties. Even if direct effect and/​or interpretation in conformity are not imposed by the relevant international law, their existence as a matter of municipal law should be considered relevant to questions of whether municipal law is consistent with the relevant international law. In the context of FTAs, the institutional debate is rather undeveloped. In many cases, it remains to be seen how the institutional mechanisms will develop. In this chapter, we have examined two main types of FTA institutional structures: the ‘standard’ FTA model, which follows to a significant extent the WTO template (albeit with important individual differences), and the ‘regional economic organization’ model, which ventures into supranationalism, with varying degrees of effectiveness.

Further reading W.J. Davey, ‘Institutional Framework’ in P.F.J. Macrory, A.E. Appleton and M.G. Plummer (eds), The World Trade Organization, Legal, Economic and Political Analysis, Vol 1 (Berlin: Springer, 2005), 51–​87 F. Duina and S. Morano-​Foadi, ‘Introduction: The Institutionalisation of Regional Trade Agreements Worldwide: New Dynamics and Future Scenarios’ 17(5) European Law Journal (2011) 561–​567 A. Dür, L. Baccini, and Y.Z. Haftel, ‘Imitation and Innovation in International Governance: The Diffusion of Trade Agreement Design’ in A. Dür and M. Elsig (eds), Trade Cooperation: The Purpose, Design and Effects of Preferential Trade Agreements (Cambridge: Cambridge University Press, 2015), 167–​194

International Trade Law Institutions    159 M. Elsig, The Functioning of the WTO: Options for Reform and Enhanced Performance (Geneva: International Centre for Trade and Sustainable Development, 2016) D.P. Steger (ed), Redesigning the World Trade Organization for the Twenty-​first Century (Waterloo: Wilfred Laurier University Press, 2010) The Future of the WTO, Addressing Institutional Challenges in the New Millennium, Report by the Consultative Board to the Director-​General Supachai Panitchpakdi (Geneva: World Trade Organization, 2004) P.-​J. Kuijper, ‘Institutional Aspects’ in D. Bethlehem, D. McRae, R. Neufeld and I. Van Damme (eds), The Oxford Handbook of International Trade Law, 1st edition (Oxford: Oxford University Press, 2009), Chapter 5, 79–​128 E.-​U. Petersmann, ‘How Should WTO Members React to Their WTO Governance and WTO Appellate Body Crisis?’ (European University Institute, 2018) S. Trommer, ‘The WTO in an era of preferential trade agreements: Thick and thin institutions in global trade governance’ 16(3) World Trade Review (2017) 501–​526

Chapter 6

The Influ e nc e of In ternationa l T ra de L aw on Internati ona l L aw James Crawford and Freya Baetens *

I. II.

Introduction International trade law before ‘other’ international courts and tribunals A. International trade law before the World Court B. International trade law before Investor-State arbitral tribunals C. International trade law before regional human rights courts III. Expanding the limited influence of trade law on international law A. Explaining the limited influence of trade law on international law B. Gaining from international trade law’s experiences I V. Conclusion

160 161 162 170 174 176 176 182 189

I. Introduction International trade law is a subset of the larger field of international law. While Chapter 4 showed that this larger field exerts a considerable influence on international trade law, the present chapter will demonstrate that this influence is not unidirectional.1 *  The authors wish to thank the editors of this book for their feedback, as well as Rose Cameron and Niall Moran for their research assistance. This work was partly supported by the Research Council of Norway through its Centres of Excellence funding scheme (project number 223274) and the FRIPRO Young Research Talents (project number 274946). 1  See, e.g., J. Pauwelyn, ‘The Role of Public International Law in the WTO: How Far Can We Go’ 95 American Journal of International Law (2001) 535, at 538; Articles on Responsibility of States for Internationally Wrongful Acts (ARSIWA), with commentaries, [2001]-​II(2) Yearbook of the International

The Influence of International Trade Law on International Law    161 Commercial import and export treaties go back centuries.2 Later treaties of friendship, cooperation and navigation (FCN), popular until the late 1960s, provided States with ‘a framework for the cross-​border trade of their citizens’.3 The current international trade law system, with the WTO at its centre, grew out of post-​World War II efforts to prioritize economic and social stability, starting with the establishment of the United Nations’ Economic and Social Council.4 The effect of international trade law on international law as examined in the present chapter is, however, not limited to the WTO covered agreements but includes also bilateral and multilateral preferential trade agreements.5 This chapter discusses, first, to what extent international trade law has played a part in the development of international law through the lens of international adjudication (in other words, how ‘other’ international courts and tribunals have dealt with trade law); and second, why the influence of trade law on other fields of international law appears to have been limited and what international law might gain from international trade law’s experiences.6

II.  International trade law before ‘other’ international courts and tribunals This section considers the influence of international trade law on judgments and separate opinions at the PCIJ and its successor, the ICJ. It also looks at the impact of Law Commission 31, at 140, para 3; Appellate Body Report, US –​Gasoline, adopted 20 May 1996, at 17; D. McRae, ‘The Traditional Relationship Between International Trade Law and International Law’ 260 Recueil des cours (1996) 109, at 119 citing G. Schwarzenberger, ‘The Principles and Standards of International Economic Law’ 87 Recueil des cours (1966). 117. 2  P. Lamy, The Place of the WTO and its Law in the International Legal Order’ 17 European Journal of International Law (2007) 969, at 969, in relation to a fourteenth century commercial treaty relating to customs duties for Cypriot traders; see also McRae, above fn 1, at 114: FCN treaties are ‘among the earliest treaties entered into by States’. 3  McRae, above fn 1, at 159. 4  P.-​ T. Stoll, ‘World Trade Organization’ in R. Wolfrum (ed), Max Planck Encyclopedia of Public International Law (Oxford: Oxford University Press, 2014) at para 1. Institutional links between trade law and the UN remain, in particular between the WTO, the Economic and Social Council (ECOSOC), and United Nations Conference on Trade and Development (UNCTAD). See also Arrangements for effective cooperation with other intergovernmental organizations, Relations between the WTO and the United Nations, WT/​GC/​W/​10 (3 November 1995). 5  For the purpose of the present chapter, the influence of EU law is not discussed due to its special object and purpose. See further Chapter 11 of this handbook. 6  For the complex relationship between the CJEU and the WTO see, e.g., M. Mendez, ‘The GATT and WTO Before the EU Courts: Judicial Avoidance Techniques or a Case Apart?’ in M. Mendez (ed), The Legal Effects of EU Agreements (Oxford: Oxford University Press, 2013) 174–​249; M. Zhang, ‘Shall We Talk? Judicial Communication between the CJEU and WTO Dispute Settlement’ 28(1) European Journal of International Law (2017) 273–​293; T. Soave, ‘European Legal Culture and the WTO Dispute Settlement: Thirty Years of Socio-​Legal Transplants from Brussels to Geneva’ 19(1) The Law and Practice of International Courts and Tribunals (2020) 129.

162    James Crawford and Freya Baetens international trade law on other areas of international law, such as investment law and human rights law.

A. International trade law before the World Court The World Court does not decide cases in a legal vacuum and some judges have been well-​versed in international trade law.7 Yet, there is scant reference to trade law in general in the PCIJ’s and ICJ’s jurisprudence. The ICJ has been equally parsimonious in its reference to the jurisprudence of the WTO dispute settlement body in particular. Nevertheless, both the ICJ and PCIJ have dealt with disputes involving some aspect of trade law.

1. Too early to influence: trade before the PCIJ Oscar Chinn, heard by the PCIJ in 1934, concerned two transport operators on the River Congo (in present-​day Democratic Republic of the Congo, then a Belgian colony). The operators were Unatra, a majority State-​owned enterprise of Belgium, and Oscar Chinn, a British subject. In 1930–​31, the Belgian Government decided to reduce rates for certain items transported on the river and to compensate only certain government-​ run enterprises for any losses, in effect only offering compensation to Unatra.8 The United Kingdom asked the Court to adjudge that the measures taken by the Belgian Government were in conflict with the Convention of Saint-​Germain-​en-​Laye and customary international law.9 In particular, contrary to the Convention, Belgium had created a de facto monopoly for Unatra, in breach of freedom of trade (Article 2) and navigation (Article 5), and had thereby infringed the ‘complete commercial equality’ between nationals of the parties guaranteed by Article 1.10 In relation to customary international law, the United Kingdom relied on an asserted requirement that Belgium ‘respect the vested rights of foreigners’ in another State’s territory.11 The Court took a strict view of what would infringe freedom of trade as protected by the Convention. A ‘concentration of business’ would only be an infringement ‘if commerce is prohibited by the concession of a right precluding the exercise of the same

7 Certain judges have held important positions within the international trade legal system: e.g. Judge ad hoc Georges Abi-​ Saab (former chairperson of the WTO’s Appellate Body); Judge Yuji Iwasawa (Member of a WTO Permanent Group of Experts and author of the leading Japanese WTO law textbook); Judge Shi Jiuyong authored《普遍优惠制度与国际贸易》 (‘The Generalized System of Preferences and International Trade’) and《香港与关税和贸易总协定》 (‘Hong Kong and the General Agreement on Tariffs and Trade’); Judge Patrick Robinson (representative on the United Nations Commission on International Trade Law (UNCITRAL)); President Abdulqawi Yusuf (Representative and Head of the New York office of UNCTAD). 8  Oscar Chinn (United Kingdom v. Belgium) (1934) PCIJ Ser. A/​B, No. 63, at 75. 9  Ibid., at 65. 10  Ibid., at 83 and 86. 11  Ibid., at 81.

The Influence of International Trade Law on International Law    163 right by others’.12 The Court paid much attention to the ‘motive and aim’ of Belgium’s actions, noting that Belgium had intended to ‘assist trade during a period of depression’.13 The Court also took into account that Chinn would have been aware of the ‘existence of competition’ for trade on the Congo river when he began trading, and in particular he would have known of Unatra and its connection to the Belgian Government.14 Finally, in relation to the alleged violation of customary international law, the Court found that Chinn had no ‘vested right’.15 Rather, any ‘[f]‌avourable business conditions and goodwill are transient circumstances, subject to inevitable changes’.16 Belgium’s measures did not discriminate on the basis of nationality but simply favoured Unatra as a State-​ controlled enterprise.17 The Court thus rejected the United Kingdom’s claim. In his dissenting opinion, Judge Altamira contested that the consistency of the measure depended upon the ‘economic aim’ of the Belgian government.18 While he did not regard the prohibition of discrimination as absolute, he found that there was a point where it infringed the equality accorded in Article 1 of the Convention. He did not, however, view this as an encroachment upon State sovereignty as it was in line with Belgium’s treaty obligations under the Convention of Saint-​Germain.19 Sir Cecil Hurst concurred with Judge Altamira that Article 1 had been infringed and that there had been a lack of ‘complete commercial equality’.20 He did not share the majority’s view that it was necessary to show that the discrimination was based on nationality,21 because the aim of Article 1 was ‘the protection of individual equality’, as affirmed throughout the Convention.22 If the factual scenario presented in Oscar Chinn were dealt with today through the WTO, for example, the ‘motive and aim’ of the Respondent State would be irrelevant. Not even the impact of the measure might be determinative as the Appellate Body has rather conclusively rejected the ‘aims and effects’ test, in favour of a likeness determination under the non-​discrimination provisions of GATT and GATS.23 Further, insofar as the freedom of trade covered transit, GATT Article V:2 would appear to impose a broader standard of equal treatment, likely to require more extensive protection of

12 

Ibid., at 85. Ibid., at 86. 14  Ibid., at 84. 15  Ibid., at 88. 16  Ibid., at 88. 17  Ibid., at 88. 18  Oscar Chinn, above fn 8, Dissenting Opinion of Judge M Altamira, para 129. 19  Ibid., at para 115. 20  Oscar Chinn, above fn 8, Dissenting Opinion of Cecil Hurst, para 265. 21  Ibid., at para 268. 22  Ibid., at para 271. 23  See, e.g., Appellate Body Report, Japan –​Alcoholic Beverages II, adopted 1 November 1996, at 29; Appellate Body Report, EC –​Bananas III, adopted 25 September 1997, para 241; see in general M. Herdegen, Principles of International Economic Law, 2nd edition (Oxford: Oxford University Press, 2016) at 224–​225; M. Matsushina et al., The World Trade Organization: Law, Practice, and Policy, 3rd edition (Oxford: Oxford University Press, 2016) at 186–​189. 13 

164    James Crawford and Freya Baetens individuals and companies such as Oscar Chinn. Arguably, there would still be no breach of the prohibition against discrimination and neither would the measure be ‘prohibited generally under international law’.24 However, the different standards (‘commercial equality’ under the Convention of Saint-​Germain vs. ‘treatment no less favourable than that accorded to like products’ under GATT) make it hard to detect any interaction between general international law and current-​day international trade law. The PCIJ’s Advisory Opinion concerning the Customs Régime between Germany and Austria also touched on aspects of trade law as it assessed the compatibility of a proposed customs union between Germany and Austria with the applicable treaty law.25 Specifically, the question was whether the formation of such a union would be contrary to treaty undertakings by Austria not to ‘compromise’26 or ‘alienate’27 its independence. Ultimately, the PCIJ (by a narrow majority) held that the proposed customs union would not be compatible with Austria’s treaty obligations.28 The case was decided at a time when, as the Court predicated, each State retained the ‘sole right of decision in all matters economic, political, financial’.29 There was increasing concern as to the stability of the post-​war order, in which Austria’s independence from Germany was key. But the quality of the Advisory Opinion was criticized, as it allegedly gave too much weight to political considerations, rather than purely legal arguments.30 Others argued that ‘the interpretation of treaties is a judicial function, even if the treaty enjointment is one against doing acts which may have certain economic or political consequences’.31 Such debates casted a pall over the Court’s processes at a sensitive time.32 Although the legality of a customs union today could be examined in accordance with WTO standards, the particular political and historical focus of this case makes it rather difficult to extrapolate any of its findings to the current context.

2. Gradually gaining in importance: trade before the ICJ A first group of cases dealing with trade matters before the ICJ relate to disputes brought before the ICJ under the 1955 Treaty of Amity between the United States and Iran.33 24   T. Weiler, ‘Saving Oscar Chinn: Non-​Discrimination in International Investment Law’ in T. Weiler (ed) International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (London: Cameron May, 2005) at 593–​595. 25  PCIJ, Customs Régime between Germany and Austria (Protocol of March 19th, 1931), Advisory Opinion, PCIJ Ser. A/​B No 41 (5 September 1931), para 23. 26  Article 88 of the Treaty of Peace between the Allied and Associated Powers and Austria, St Germain-​en-​Laye, 10 September 1919. 27   Austria, Great Britain, France, Italy, Czechoslovakia, Protocol No I concerning the Restoration of Austria, Geneva, 1922. 28   Austro-​German Customs Régime, para 65. 29   Austro-​German Customs Régime, para 25. 30   M. Finkelstein, ‘The World Court and the Anschluss’ 6(2) St. John’s Law Review (1932) 220, referring to E. M. Borchard, ‘The Customs Union Advisory Opinion’ 25 American Journal of International Law (1931) 711, at 715. 31  P.C. Jessup, ‘The Customs Union Advisory Opinion’ 26 American Journal of International Law (1932) 105, at 110. 32 See also R. Alleweldt, ‘Customs Regime between Germany and Austria (Advisory Opinion)’ MPEPIL (August 2009), paras 10 and 11. 33  US-​Iran, Treaty of Amity, Economic Relations and Consular Rights, Tehran, 15 August 1955.

The Influence of International Trade Law on International Law    165 A second group of cases concern disputes which deal with the tension between trade and environmental objectives. In a third and final group of cases parties before the Court have invoked WTO jurisprudence as support for arguments relating to procedural and interpretative issues.

a. Disputes under the 1955 US-​Iran Treaty of Amity The 1955 Treaty of Amity between the United States and Iran is an FCN treaty with certain special provisions protecting trade and investment. From around the middle of the twentieth century, FCN treaties began to be replaced by bilateral or regional trade and/​ or investment treaties.34 Nevertheless some discussion of cases that arose under the Treaty of Amity may provide an insight into how the ICJ has dealt with international trade law. The preamble of the Treaty of Amity states that the parties intended, inter alia, to ‘encourag[e]‌mutually beneficial trade and investments and closer economic intercourse generally between their people’. In terms of trade protection, the parties agreed to accord to products ‘destined for exportation’ to the other party ‘treatment no less favorable than that accorded to like products’ of any third State.35 That provision deals expressly with ‘duties, other charges, regulations, and formalities, on or in connection with importation and exportation’.36 The parties also agreed not to impose ‘restrictions or prohibitions’ on the import of any product of the other party unless the import of that product from all third States was similarly restricted or prohibited.37 Another Article dealt with customs regulations and procedures, obliging each party, inter alia, to ‘apply such requirements in a uniform, impartial and reasonable manner’, and granting national treatment to companies of each party vis-​à-​v is the other ‘with respect to all matters relating to importation and exportation’.38 However, these trade provisions did not come directly into play in the cases discussed below. In Oil Platforms, Iran alleged that the United States had violated the Treaty of Amity by attacking its oil platforms.39 At the preliminary objections stage of the case, the Court upheld its jurisdiction to hear Iran’s claim and the counter-​claim of the United States, but only in relation to breaches of Article X(1) of the Treaty: ‘[b]‌etween the territories of the two High Contracting Parties there shall be freedom of commerce and navigation’. Article I (‘[t]here shall be firm and enduring peace and sincere friendship between the United States of America and Iran.’) was not considered a free-​standing, substantive provision and could thus not form an independent basis of claim, although it could be 34  A. Paulus, ‘Treaties of Friendship, Commerce and Navigation’ Max Planck Encyclopedia of Public International Law online (article updated March 2011), para 4. 35  Article VIII(1) of the Treaty of Amity 1955. 36  Article VIII(1) of the Treaty of Amity 1955. 37  Article VIII(2) of the Treaty of Amity 1955. 38  Article IX of the Treaty of Amity 1955. 39  Oil Platforms (Islamic Republic of Iran v. United States of America) (Judgment) (2003) ICJ Rep 161, 170. The United States argued, by way of a counterclaim, that Iran had violated the Treaty of Amity by attacking vessels in the Gulf, at 172.

166    James Crawford and Freya Baetens relevant for the interpretation of other provisions, including Article X.40 Article IV, on reciprocal treatment of nationals and companies, was rejected as a basis of jurisdiction.41 At the Merits phase, the Court interpreted Article X in the context of Iran’s claim, which concerned the alleged interference in oil exports from Iran to the United States.42 The Court found that there had been ‘in principle an interference with [Iran’s] freedom of international commerce’ given the actions of the United States.43 However, it concluded that a violation of Article X would require interference with the freedom of commerce between the territories of Iran and the United States.44 In determining whether there had been trade in oil between the two territories at the relevant time, the Court noted the existence of ‘international trade law criteria, such as the “substantial transformation” principle, or the “value added approach”.’45 However it determined that the criterion was not whether oil arriving in the United States was ‘Iranian’, but whether there was ‘commerce’ in oil between the territory of Iran and the United States at the relevant time.46 Ultimately the Court held that there had been no such commerce, so the US actions against the oil platforms did not violate Article X(1).47 Of the dissenters, Judge Al-​Khasawneh was critical of the majority’s determination that Iranian oil that had been refined in a third country was no longer Iranian oil for the purpose of the Treaty of Amity. In particular, he stressed that ‘international trade law concepts are ill-​suited to be used as a yardstick against which a treaty-​protected freedom of commerce can be measured’.48 Judge Elaraby criticized the exclusion of indirect commerce saying it was ‘not well founded in law’ as there was no explicit mention of such an exclusion in the Treaty and its MFN clause suggested that products reaching the territory indirectly were covered.49 The reference to international trade terminology in Oil Platforms at least demonstrates the Court’s awareness of its potential relevance. So much is also clear from the judgment in Military and Paramilitary Activities, where the Court referred to Article XXI of the GATT in relation to the ambit of jurisdiction.50 Article XXI(d) provides that nothing in the Agreement was ‘to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests’. Similarly, Article XX(1)(d) of the Treaty of Amity states that the Treaty does not preclude the application of measures ‘necessary to fulfill the obligations of a High Contracting Party for the maintenance or restoration of international peace and 40 

Ibid., at 174. Ibid., at 178. 42  Ibid., at 161 and 200. 43  Ibid., at 203. 44  Ibid., at 204. 45  Ibid., at 207. 46  Ibid., at 207. 47  Ibid., at 218. 48  Oil Platforms, above fn 39, Dissenting Opinion of Judge Al-​Khasawneh, para 4. 49  Oil Platforms, above fn 39, Dissenting Opinion of Judge Elaraby, para 2.4. 50  Case concerning Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America), Merits, para 222. 41 

The Influence of International Trade Law on International Law    167 security, or necessary to protect its essential security interests’. Judge ad hoc Rigaux relied on commentaries to Article XXI of the GATT in his separate opinion,51 arguing against ‘the idea that the use of armed force could be one of the “measures” envisaged by such a provision’.52 Although the Treaty of Amity has now been terminated, this may well not affect jurisdiction over cases already commenced, or specific rights of either party which had accrued prior to termination.53 Several further cases are pending before the ICJ which were brought by Iran against the United States under the Treaty of Amity. First, Alleged Violations of the 1955 Treaty of Amity involves a claim by Iran that the United States violated a range of provisions under the Treaty of Amity, including Article X(1), by imposing certain sanctions on Iran.54 In a second case, Certain Iranian Assets, Iran claims that a series of legislative, administrative and judicial acts of the United States have ‘deprived Iranian companies and their property of the rights and protection guaranteed by the Treaty of Amity’.55 Such acts created exceptions to the immunity from execution of Iran, making certain Iranian assets held in the United States, including assets of Iran’s central bank, available for the execution of judgments.56 Iran claims that these actions violate, inter alia, Article X(1) of the Treaty of Amity (freedom of commerce). In this case, the ICJ may consider for the first time, standards which were regularly contained in FCN treaties, and which are now contained in international trade (and, more recently, investment) agreements,57 such as fair and equitable treatment, non-​discrimination, and most-​favoured-​nation and national treatment.

b. Disputes concerning the tension between trade and environmental objectives A second group of relevant disputes deals with the tension between trade and environmental objectives, which is addressed via dissenting and separate opinions of individual judges and submissions of the parties, rather than forming part of the judgment of the Court itself. For example, the Pulp Mills case concerned, inter alia, Argentina’s claim that the construction by Uruguay of a pulp mill on the River Uruguay would 51 

Oil Platforms, above fn 39, Separate Opinion of Judge ad hoc Rigaux, at 379.

52 Ibid.

53  Certain Iranian Assets (Islamic Republic of Iran v. United States of America) Judgment, (13 February 2019), para 30: ‘The Court begins by noting that . . . the denunciation of the Treaty announced by the United States on 3 October 2018 has no effect on the jurisdiction of the Court in the present case.’ 54  Alleged Violations of the 1955 Treaty of Amity, Economic Relations, and Consular Rights (Islamic Republic of Iran v. United States of America) [written submissions are currently being filed regarding the preliminary objections raised by the US]. 55  Iran, Observations and Submissions, para 2.5. Treaty of Amity, Economic Relations, and Consular Rights between the United States of America and Iran, Tehran, 15 August 1955. 56  Certain Iranian Assets, (Islamic Republic of Iran v. United States of America), Preliminary Objections, Judgment, 13 February 2019, paras 22-​26. 57  G. Jaenicke, ‘International Trade Conflicts before the Permanent Court of International Justice and the International Court of Justice’ in E.-​U. Petersmann and G. Jaenicke (eds) Adjudication of International Trade Disputes in International and National Economic Law (Fribourg: University Press Fribourg, 1992), at 44.

168    James Crawford and Freya Baetens adversely affect water quality.58 In their joint dissenting opinion, Judges Al-​Khasawneh and Simma referred to the jurisprudence of the WTO in respect of the standard of review and scientific evidence.59 Their opinion characterizes the Court’s determination as a ‘wasted opportunity’.60 This is because, they contend, ‘it would have been imperative that an expert consultation, in full public view and with the participation of the Parties, take place’, given the complex scientific evidence presented in the case.61 It is perhaps the World Trade Organization . . . which has most contributed to the development of a best practice of readily consulting outside sources in order better to evaluate the evidence submitted to it; in fact, it was devised as a response to the needs of the dispute resolution process in cases involving complex scientific questions.62

Another illustration of the reliance upon WTO jurisprudence can be found in the Advisory Opinion proceedings in Judgment No. 2867 of the Administrative Tribunal of the International Labour Organization upon a Complaint Filed against the International Fund for Agricultural Development (IFAD). The margin of appreciation or standard of review, as developed in the WTO context, was relied upon by IFAD in its Written Statement.63 More precisely, IFAD referred to the determination by the Appellate Body in EC –​Hormones,64 to argue that the scope of judicial review of a decision by an international organization is limited to determining whether ‘an egregious error that calls into question the good faith’ of the organization under review has occurred.65 In its Advisory Opinion, the Court did not address this jurisprudence. In Aerial Herbicide Spraying, Ecuador relied on WTO jurisprudence in its Memorial in relation to a related issue, namely a State’s sovereign ability to determine its own desired level of protection for the environment and for human health.66 Again, the Court chose not to comment on this source. While the Court’s decision in the Whaling Case also did not mention WTO jurisprudence, Judge Owada’s dissenting opinion relied on it to criticize the majority’s determination as to the appropriate scope and standard of judicial review of Japan’s whaling 58 

Pulp Mills on the River Uruguay (Argentina v. Uruguay), Argentina’s Application, para 2. In its Counter-​Memorial in Pulp Mills, Uruguay made reference to WTO jurisprudence in relation to the foreseeability of harm: Counter-​Memorial of Uruguay, at 303, para 4.105. 59  Pulp Mills on the River Uruguay (Argentina v. Uruguay) (Judgment) (2010) ICJ Rep 14. 60  Ibid., joint dissenting opinion of Judges Al-​Khasawneh and Simma, para 17. 61  Ibid., joint dissenting opinion of Judges Al-​Khasawneh and Simma, para 17. 62 Ibid., joint dissenting opinion of Judges Al-​ Khasawneh and Simma, para 16. In relation to provisions of the WTO DSU which relate to experts and fact-​finding, see McRae, above fn 1 at 200–​201. 63  Judgment No. 2867 of the Administrative Tribunal of the International Labour Organization upon a Complaint Filed against the International Fund for Agricultural Development (Advisory Opinion) (2012) ICJ Rep 10. 64  Appellate Body Report, EC –​Hormones, adopted 13 February 1998. 65  Judgment No. 2867 of the Administrative Tribunal of the International Labour Organization upon a Complaint Filed against the International Fund for Agricultural Development, Advisory Opinion, IFAD’s Written Statement, para 295. 66  Aerial Herbicide Spraying (Ecuador v Colombia), Memorial of Ecuador, para 7.9, fn 580.

The Influence of International Trade Law on International Law    169 programme, JARPA II.67 Judge Owada focused his criticism on the majority’s use of the ‘objective reasonableness’ test, applied to the ‘design and implementation’ of JARPA II which, he argued, was drawn from the WTO case, EC–​Hormones.68 In particular, the majority allegedly applied the WTO test ‘somewhat mechanically . . . without giving proper consideration to the context in which this standard of review was applied [in the WTO]’.69 The Appellate Body determined in its final report in EC –​Hormones that fact-​ finding by WTO panels is ‘neither de novo review as such, nor total deference’, but rather the ‘objective assessment of facts’.70 It concluded that: the review power of a panel is not to determine whether the risk assessment undertaken by a WTO Member is correct, but rather to determine whether that risk assessment [by which a measure taken is justified] is supported by coherent reasoning and respectable scientific evidence and is, in this sense, objectively justifiable.71

Judge Owada expressly recognized that the WTO Appellate Body decision ‘cannot in any sense constitute a precedent for [ICJ] purposes’,72 But he argued that ‘the WTO decision can be a useful point of reference for this Court in the present case’.73 Judge Owada contended that the majority in the Whaling Case overstepped its mandate by going beyond its role of determining whether JARPA II was ‘objectively reasonable, in the sense that the programme of research is based upon a coherent reasoning and supported by respectable opinions within the scientific community of specialists on whales’.74 He concluded that in light of the available scientific evidence, ‘it is difficult to see how the activities of JARPA and its successor, JARPA II, could be considered ‘unreasonable’.75 Also, all three parties referred to WTO jurisprudence in their written pleadings. Australia argued that the Court should look to the design and implementation of JARPA II based on WTO panel decisions.76 New Zealand urged the Court, based on WTO case law, to engage in an ‘objective identification of the purpose of a [whaling] programme’, taking into account ‘the facts and circumstances surroundings its development and implementation’.77 Japan pointed to the ‘margin of appreciation’ as defined in 67 

Whaling in the Antarctic (Australia v. Japan: New Zealand intervening) (Judgment) (2014) ICJ Rep 226. 68  Appellate Body Report, EC –​Hormones, adopted 13 February 1998; Whaling in the Antarctic, above fn 67, Dissenting opinion of Judge Owada, paras 32–​34. 69  Ibid., at para 34. 70  Appellate Body Report, EC –​Hormones, adopted 13 February 1998, para 589. 71  Ibid., at para 590. 72  Whaling in the Antarctic, above fn 67, Judge Owada, para 37. 73  Ibid., at para 37. 74  Ibid., at para 42. 75  Ibid., at para 48. 76  Whaling in the Antarctic, above fn 67, Australia’s Memorial, at 262. 77  Whaling in the Antarctic, above fn 67, New Zealand’s Written Statement, para 61.

170    James Crawford and Freya Baetens EC –​Hormones.78 The Court addressed these arguments but without making any reference to the invoked WTO sources.

c. Support for procedural and interpretative issues WTO jurisprudence in relation to fact-​finding was relied upon by Bosnia-​Herzegovina during oral proceedings in the Genocide Case, a case concerning very different subject matter. In that case, counsel urged the Court, on the basis of WTO jurisprudence, to draw what counsel described as ‘logical inferences’ from facts that were known to the Court.79 In Marshall Islands, the United Kingdom relied upon dispute settlement procedures of the WTO to support its argument for explicit prior notification before filing a claim.80 In Maritime Dispute (Peru v. Chile), counsel made oral submissions on the requirements of clarity and consistency needed to demonstrate State practice, referring to Japan-​Alcoholic Beverages II.81 In Navigational and related rights, Nicaragua relied on WTO determinations in its written pleadings in relation to the meaning of the phrase in contention in that case, objetos de comercio.82 In all of these instances, the Court refrained from making any reference to the invoked WTO jurisprudence and procedures when deciding upon the issue.

B. International trade law before Investor-State arbitral tribunals Investment tribunals are not empowered to decide on alleged violations of obligations under international trade agreements falling outside their jurisdiction. However, international trade law may come into play in several ways in the context of investment arbitration. Leaving aside instances in which rights and obligations under trade agreements are directly applicable under investment treaties,83 trade law may shed light on the appropriate interpretation of investment treaty provisions.84 Moreover, the case law of the WTO Panels and Appellate Body may provide guidance in the interpretation and 78 

Whaling in the Antarctic, above fn 67, Japan’s Counter-​Memorial, at 412. Also in Whaling in the Antarctic, counsel referred to the US –​Shrimp in relation to abuse of rights: Whaling, CR 2013/​16, at 32, para 5 (Pellet). MA, at 163, fn 435, and at 259, fn 775; CR 2013/​11, at 39, para 45 (Gleeson). Appellate Body Report, US –​Shrimp, adopted 6 November 1998, para 158 (also para 153). 79  CR 2006/​3, 28 February 2006, at 26, para 18 (Franck). 80  Marshall Islands, Preliminary Objections, CR 2016/​3, 9 March 2016, at 22, para 31 (Bethlehem). 81  Peru: CR 2012/​33, 11 December 2012, at 35, para 15 (Wood) on the clarity of state practice. Referring to Chile: CR 2012/​32, 7 December 2012, at 48, para 38 (Dupuy). 82  Costa Rica v Nicaragua, Rejoinder of Nicaragua, Annex 63, letter from Director of language services at WTO to UN in Geneva, 12 October 2006. 83  G. Verhoosel, ‘The Use of Investor-​State Arbitration under Bilateral Investment Treaties to Seek Relief for Breaches of WTO Law’ 6 Journal of International Economic Law (2003) 493, at 496; C. Kotuby, ‘ “Other international obligations” as the applicable law in investment arbitration’ 14 International Arbitration Law Review (2011) 162, at 162. 84  Verhoosel, above fn 83, at 496; Kotuby, above fn 83, at 162.

The Influence of International Trade Law on International Law    171 application of other rules of international law—​for instance, rules (whether in treaties or in customary law) not specific to investment law,85 including the rules of treaty interpretation themselves. In that sense, decisions on the meaning of WTO law may constitute subsidiary means for the determination of other rules of international law.86 Although investment tribunals are usually prevented from directly applying international trade law in the disputes of which they are seized, they use trade rules in the process of interpreting investment provisions proper. Investment tribunals commonly refrain from explicitly justifying the permissibility of relying on trade law from a methodological perspective87 and adopt varying approaches with respect of the desirability of doing so.88 The subsections below highlight three examples of areas in which investment tribunals have relied on WTO law. First, investment tribunals have turned to the concept of national treatment under trade law for the interpretation of the similarly worded obligation under investment law. Secondly, investment tribunals have had recourse to trade law with a view to delimiting the scope of legal concepts shared between the two regimes. Lastly, the WTO case law has provided guidance in the interpretation and application of interstitial norms indicating a connection or comparison commonly used in dispute settlement.

1. National treatment and the concept of ‘likeness’ The national treatment principle is of pivotal importance in both trade law and investment law.89 Given the similarities of the principle in the two regimes,90 investment tribunals frequently find themselves discussing the national treatment standard under 85  For a discussion of which such provisions might be see C.O. Verrill, Jr., ‘Are WTO Violations also Contrary to the Fair and Equitable Treatment Obligations in Investor Protection Agreements?’ 11 ILSA Journal of International and Comparative Law (2005) 287. 86  Methanex Corporation v. USA, Final Award of the Tribunal on Jurisdiction and Merits (3 August 2005), para 6. 87  See also Belenergia SA v. Italy (ICSID Case No ARB/​15/​40), Award (6 August 2019), para 546, where a party argued that the ‘likeness standard’ under WTO case law should be used by the tribunal as an ‘interpretative tool in the light of Article 31(3)(c) VCLT’ for the interpretation of the national treatment principle under the applicable investment treaty. 88  Such varying approaches are replicated in the doctrine. Contrast between Q. Ren, Public Interests in International Investment Law: Balancing Protection for Investor and Environment (Newcastle upon Tyne: Cambridge Scholars Publishing, 2018), at 82–​83 and J. Kurtz, ‘The Use and Abuse of WTO Law in Investor-​State Arbitration: Competition and its Discontents’ 20 European Journal of International Law (2009) 749, at 770. 89  Corn Products International Inc. v. Mexico (ICSID Case No ARB(AF)/​ 04/​ 1), Decision on Responsibility (15 January 2008), paras 109–​ 111, citing US—​ Section 337 of the Tariff Act of 1930, L/​6439 –​36S/​345 (16 January 1989), para 5.11; A. Bjorklund, ‘National Treatment’ in August Reinisch (ed), Standards of Investment Protection (Oxford: Oxford University Press, 2008) 29; F. Baetens, ‘Discrimination on the Basis of Nationality: Determining Likeness in Human Rights and Investment Law’ in S. Schill (ed), International Investment Law and Comparative Public Law (Oxford: Oxford University Press, 2010) 279–​316. 90  United Parcel Service of America Inc. v. Canada (ICSID Case No UNCT/​02/​1), Award on the Merits (24 May 2007), Separate Statement of Dean Ronald A. Cass, para 57; for an overview of the principle in the two regimes see Raúl Emilio Vinuesa, ‘National Treatment, Principle’ in Max Planck Encyclopedia of Public International Law online (last updated April 2011, accessed 14 May 2020).

172    James Crawford and Freya Baetens WTO law, either as a source from which analogies may be drawn or as a concept for which distinctions ought to be made. The determination of ‘likeness’ is key in the application of the obligation to accord national treatment, both under trade and under investment law. WTO Members are required to accord foreign products and services treatment no less favourable than the one accorded to ‘like’ domestic products or services.91 Under investment treaties, host States commonly undertake an ostensibly similar obligation to accord foreign investors and investments treatment at least as favourable to the one accorded to domestic investors and investments ‘in like circumstances’.92 When interpreting the latter term with a view to determining the common ground of comparison between the product or service in question and its domestic counterparts, investment tribunals have often sought recourse to WTO case law. For example, the Tribunal in SD Myers relied on Japan—​Alcoholic Beverages93 to affirm that the assessment of ‘likeness’ must be made on a case-​by-​case basis in light of all circumstances.94 The Tribunal then explained that ‘likeness’ under the GATT is not dispositive of the case, because different treatment of ‘like’ situations might be justified under the exceptions listed in Article XX GATT.95 By contrast, the Methanex Tribunal stressed the distinction between ‘like products’ under WTO law and ‘like circumstances’ under NAFTA, holding that trade criteria were deliberately excluded from the NAFTA Chapter on Investment.96 This approach was also adopted in the Cargill case97 and echoed in the Occidental Exploration award, where the Tribunal elaborated on the distinct purposes served by the principle of national treatment in the trade and investment regimes.98 In a similar vein, the Merrill & Ring Tribunal cautioned against treating the two similar expressions interchangeably in disregard of the distinct contexts in which they appear.99

2. Delimitation of the scope of legal concepts International trade law may be relevant for delimiting the scope of concepts shared by investment and trade law, including ‘procurement’, ‘services’ and ‘taxation,’

91 

Article III(4) of the GATT 1994; Article XVII(1) of the GATS; Article 2.1 of the TBT Agreement; see also Article 3.1 of the TRIPS Agreement and Article 2.3 of the SPS Agreement. 92  See, e.g., Article 1102(1) of NAFTA; for an overview of provisions see G. Tereposky and M. Maguire, ‘Utilizing WTO Law in Investor-​State Arbitration’ in A Rovine (ed), Contemporary Issues in International Arbitration and Mediation (Leiden: Martinus Nijhoff, 2011) 247, at 262–​263. 93  Appellate Body Report, Japan –​Alcoholic Beverages II, adopted 1 November 1996, paras 8.5–​8.6. 94  SD Myers, Inc. v. Canada, Partial Award (12 November 2000), para 244, and Separate Opinion by Dr Bryan Schwartz, para 126. 95  Ibid., at para 246, and Separate Opinion by Dr Bryan Schwartz, para 128. 96  Methanex Corporation v. USA, Final Award of the Tribunal on Jurisdiction and Merits (3 August 2005), Part IV Chapter B, paras 29–​35. 97  Cargill, Incorporated v. Mexico (ICSID Case No. ARB(AF)/​05/​2), Award (18 September 2009), paras 193–​194. 98  Occidental Exploration and Production Company v. Ecuador (LCIA Case No. UN3467), Final Award (1 July 2004), paras 174–​176. 99  Merrill & Ring Forestry L.P. v. Canada (ICSID Case UNCT/​07/​1), Award (31 March 2010), para 86.

The Influence of International Trade Law on International Law    173 ‘public bodies’, ‘measures’, ‘performance requirements’, and ‘legitimate expectations’. Most often investment tribunals choose to emphasize the differences between the two regimes, leading them to reject the WTO interpretation (delimitation through distinguishing). The concept of ‘procurement’ may illustrate the point. Provisions protecting investments tend to be inapplicable to ‘procurement’,100 a term which investment tribunals have occasionally been called to interpret. Having adopted a broad definition of ‘procurement’, the Mesa Tribunal noted that this approach was consistent with WTO case law on the matter.101 At the same time, the Tribunal noted the different context in which the term appears in Art. III(8)(a) GATT, where it is confined to procurement of products intended for governmental use and not for commercial resale. As a result, the Tribunal refused to read such qualifications into the NAFTA provision or impose additional requirements for its application.102 Similarly, the Occidental Tribunal considered that WTO law (as invoked by the claimant) was not helpful in defining ‘matters of taxation’, which fell beyond the jurisdiction of the tribunal.103

3. Interstitial norms indicating a connection or comparison Interstitial norms used in international trade indicating a connection or comparison may also be considered relevant for the purposes of investment adjudication.104 These include interpretations of ‘in relation to’, ‘consistent with’, necessity, proportionality, ‘alternative to’, self-​judging character and allocation of responsibility. For instance, the protection under investment treaties is commonly granted against measures adopted by the host State that ‘relate to’ foreign investors or investments.105 The claimant in Methanex relied on an interpretation of the term ‘relate to’ as put forward by its host State (the US) in the context of WTO proceedings.106 As the Tribunal observed, this interpretation was ‘of only marginal assistance’ in substantive terms, even if it highlighted the methodological importance of interpreting terms against the backdrop of their context and of the relevant instruments’ object and purpose.107 The Pope & Talbot Tribunal did not directly address the Respondent’s invocation of WTO case law to support the argument that ‘measures relating to’ (the investor or investment) 100 

See, e.g., Article 1108(7) of NAFTA. Mesa Power Group, LLC v. Canada (PCA Case No 2012-​17), Award (24 March 2016), paras 411–​414; see also paras 436, 449 and 456. 102  Ibid., at paras 431–​433; see also para 459. 103  Occidental Exploration and Production Company v. Ecuador (LCIA Case No. UN3467), Final Award (1 July 2004), para 69. 104 V. Lowe, ‘The Politics of Law-​ Making: Are the Method and Character of Norm Creation Changing?’ in M. Byers (ed), The Role of Law in International Politics: Essays in International Relations and International Law (Oxford: Oxford University Press, 2001) 213. 105  See, e.g., Article 1101(1) of NAFTA. 106  Appellate Body Report, US –​Gasoline, adopted 20 May 1996. 107  Methanex Corporation v. USA, Partial Award (7 August 2002), paras 144–​145; contrast SD Myers, Inc. v. Canada, Partial Award (12 November 2000), Separate Opinion by Dr Bryan Schwartz at paras 51–​ 52, relying on the interpretation of the same term in the WTO case law. 101 

174    James Crawford and Freya Baetens must amount to measures ‘primarily aimed at’ (the investor or investment), although it rejected such a narrow reading of the term.108 In SD Myers, the Tribunal articulated the principle that a legitimate objective—​in that case, environmental protection—​ought to be achieved by the host State through the means that are most in line with open trade, affirming (without references) that this was ‘consistent with the language and the case law arising out of the WTO family of agreements’.109 When ascertaining whether a specific measure ran contrary to the prohibition against performance requirements under Article 1106 of NAFTA, the same Tribunal considered WTO law to support the proposition that the substance of the measure in question ought to be assessed, rather than merely its form.110 Moreover, investment tribunals have relied on WTO law to interpret the concepts of ‘necessity’111 and ‘proportionality’,112 which are important tools in the application of obligations under both trade and investment law.

C. International trade law before regional human rights courts Very few references to international trade law can be found in the jurisprudence of regional human rights courts. Trade law does not seem to have been mentioned at all by the Inter-​American Court of Human Rights or the African Court of Human and Peoples’ Rights. Only in a small number of cases heard by the European Court of Human Rights (ECtHR), have applicants referred to WTO law to support their claims. Even in these cases, the Court has avoided engaging with international trade law, reaching its decisions on other grounds.

1. Food safety measures In De Luca, the applicant, wishing to avoid a ministerial ban on the trade of sweetbread of US origin, falsely declared it as originating from Yugoslavia.113 He was prosecuted and convicted under French criminal law, which prohibited smuggling in contravention of a ministerial decree. Before the domestic courts, the applicant argued that the decisions of the European Community, in implementation of which the relevant ministerial decree was issued, had been determined by the WTO Appellate Body to be contrary to the 108 

Pope & Talbot, Inc v. Canada, Award in relation to preliminary motion by Canada (26 January 2000), paras 28, 30, and 33. 109  SD Myers, Inc. v. Canada, Partial Award (12 November 2000), para 221. 110  Ibid., at paras 273–​275. 111  Sempra Energy International v. Argentina (ICSID Case No ARB/​ 02/​16), Award (28 September 2007), para 384; Continental Casualty v. Argentina (ICSID Case No ARB/​03/​9), Award (5 September 2008), para 192; the tribunal then extensively discussed the case law in paras 193–​195. 112  Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Ecuador (ICSID Case No ARB/​06/​11), Award (5 October 2012), para 402. 113  De Luca v. France (App No 8112/​02), Judgment of 2 May 2006, paras 6–​8.

The Influence of International Trade Law on International Law    175 Agreement on the Application of the SPS Agreement. Thus, the applicant contended, his conviction was contrary to international (trade) law and violated the principle of legality.114 The domestic French court rejected the argument, denying the direct applicability of the SPS Agreement in the domestic legal order and affirming that, in any case, the applicant’s conviction was not based on the (allegedly unlawful) ministerial decree as such, but rather on the relevant provisions of the French Criminal Code.115 When addressing the same argument, the ECtHR adopted a similar approach, noting that the criminal conviction was based on domestic legal provisions fulfilling the requirements of accessibility and foreseeability.116 For the Court, an assessment of WTO law, or of the recommendations of the WTO Appellate Body, was simply irrelevant. Relying on the incompatibility of the same European Community decisions with WTO law, other veal importers sought to claim non-​contractual damages from the European Community for loss incurred by the unlawful measures. As their claims before the European Community courts were declared inadmissible, the importers turned to the ECtHR, asserting a breach of their right to a fair trial.117 Once again, the Court did not need to address the merits of the question of international trade law because the presumption (first articulated in Bosphorus) in favour of the European Community in matters of human rights protection provided a sufficient basis to dismiss the applicants’ complaints.118

2. Intellectual property rights In three ECtHR cases concerning governmental treatment of alleged intellectual property rights—​British-​American Tobacco,119 Anheuser-​Busch,120 and Kamoy Radyo Televizyon Yayıncılık ve Organizasyon121—​applicants referred to protection afforded by the Paris Convention for the Protection of Industrial Property,122 which is incorporated by reference within the TRIPS Agreement. In Anheuser-​Busch, the applicant also referred to other provisions of the TRIPS Agreement.123 In none of these cases did the Court directly address the arguments based on international trade law.

114 

Ibid., at paras 11–​12. Ibid., at para 13. 116  Ibid., at para 39. 117  La société Etablissements Biret Cie S.A. et la société Biret international v. 15 States (App No 13762/​04), Decision on Admissibility of 9 December 2008, section ‘complaints’. 118 Ibid. 119  British-​American Tobacco Company Ltd v. The Netherlands (App No 19589/​92), Judgment of 20 November 1995. 120  Anheuser-​Busch v. Portugal (App No 73049/​01) [GC], Judgement of 11 January 2007. 121  Kamoy Radyo Televizyon Yayıncılık ve Organizasyon A.Ş. v. Turkey (App No 19965/​06), Judgment of 16 April 2019. 122  Paris Convention for the protection of industrial property of March 20, 1883, as revised at Brussels on December 14, 1900, at Washington on June 2, 1911, at The Hague on November 6, 1925, at London on June 2, 1934, at Lisbon on October 31, 1958, and at Stockholm on July 14, 1967 (signed 14 July 1967, entered into force 26 April 1970) 828 UNTS 305. 123  Namely Articles 16, 17, 24 §5, and 65 §1. 115 

176    James Crawford and Freya Baetens Another context where human rights claims might interact with international trade law is suggested by the Hertel case.124 A scientist who had published assertions that microwave ovens were dangerous to human health was found by the Swiss courts to have infringed domestic law prohibiting unfair competition. He challenged this in the ECtHR as a violation of his right to freedom of expression, a claim upheld by the Court.125 Academic commentary has noted that Article 10 bis of the Paris Convention (incorporated in the TRIPS Agreement), which binds States to ensure effective protection against unfair competition and to prohibit false or misleading allegations concerning a competitor, has a similar rationale to the Swiss legislation the application of which was at issue in this case.126 However, the Court made no reference to the Paris Convention in its judgment.

3. Trade and customs agreements The WTO was mentioned in several cases before the ECtHR that all concerned the ‘Moldavian Republic of Transdniestria’, notably Ilaşcu,127 Ivanţoc,128 Catan,129 and Mozer.130 The situation arising pursuant to trade and customs agreements under the WTO between Moldova and Ukraine is part of the factual background of these cases; however, international trade law as such was not legally relevant. Moreover, the Court has refrained from using WTO case law as an aid to treaty interpretation: the only two such references to WTO jurisprudence are found in separate opinions (one partly concurring and partly dissenting, one dissenting) of Judge Pinto de Albuquerque.131

III.  Expanding the limited influence of trade law on international law A. Explaining the limited influence of trade law on international law This section investigates why the influence of international trade law on other fields of international law is relatively limited—​ as is particularly visible in how other 124 

Hertel v Switzerland (App No 25181/​94), 25 August 1998. Ibid., at para 51. 126  See T. Cottier and S. Khorana, ‘Linkages between Freedom of Expression and Unfair Competition Rules in International Trade: The Hertel Case and Beyond’ in T. Cottier, J. Pauwelyn and E. Bürgi (eds), Human Rights and International Trade (Oxford: Oxford University Press, 2005), at 266–​267. 127  Ilaşcu and others v. Moldova and Russia (App No 48787/​99) [GC], Judgment of 8 July 2004, para 180. 128  Ivanţoc and others v. Moldova and Russia (App No 23687/​05), Judgment of 15 November 2011, para 32. 129  Catan and others v. Moldova and Russia (App Nos 43370/​ 04, 8252/​05, and 18454/​06) [GC], Judgment of 19 October 2012, para 28. 130  Mozer v. Moldova and Russia (App No 11138/​10) [GC], Judgment of 23 February 2016, para 95. 131  Herrmann v Germany (App No 9300/​ 07) [GC], Judgment of 26 June 2012; Khamtokhu and Aksenchik (App No 60367/​08 and 961/​11) [GC], Judgment of 24 January 2017. Judge Pinto de Albuquerque also refers to a NAFTA investment arbitration in his Dissenting Opinion in Albert and others v. Hungary (App No 5294/​14), Judgment of 29 January 2019. 125 

The Influence of International Trade Law on International Law    177 international courts and tribunals (do not) refer to international trade law and case law in their judicial decisions. Reasons include jurisdictional limitations, applicable law limitation and the informal hierarchy of international norms.

1. Jurisdictional limitations: exclusive and compulsory jurisdiction of the WTO ‘Other’ international courts and tribunals most often do not have jurisdiction to decide on claims based on international trade law. This is reinforced by the exclusive competence given by international trade treaties to the dispute settlement mechanism identified in the treaty itself. In other words, parties are obliged to bring their claims before the tribunal stipulated in the trade agreement and even if they would have a choice, the jurisdiction rules of other courts are likely to preclude bringing such claims elsewhere. Most notably, the DSU provides for the exclusive and compulsory jurisdiction of the WTO dispute settlement bodies over claims under the WTO covered agreements.132 Moreover, unlike what is the case before most other courts and tribunals, a WTO Member does not need to prove that it has a particular interest in the dispute, nor any negative impact to that State, to be able to bring a claim, as there is a presumption of adverse impact on WTO Members when a (potential) infringement (‘of a Member’s rights’) occurs.133 The result is that disputes concerning trade under the WTO Agreement will almost always be brought to the WTO dispute settlement mechanism.134 There are exceptional situations, including the following three examples, in which jurisdictional limitations will not prevent a non-​trade tribunal to assess trade matters. First, a non-​WTO dispute resolution body may be called upon to resolve a trade dispute involving States that are not parties to the WTO. For example, Serbia and Iran could request the ICJ to resolve their trade disputes. The jurisdiction of the ICJ is limited to disputes which States agree to bring to the Court. Seventy-​four states currently have declarations accepting the compulsory jurisdiction of the Court.135 Of these, many contain extensive reservations.136 Modern international trade law is primarily treaty law, not customary international law.137 While some treaties which remain in force and relate to 132 Article

23 of the DSU. However, see Article 11.3 of the SPS Agreement, which provides that ‘[n]‌othing in this Agreement shall impair the rights of Members under other international agreements, including the right to resort to the good offices or dispute settlement mechanisms of other international organizations or established under any international agreement’; ARSIWA with Commentary, above fn 1, at 133, para 10; Pauwelyn, above fn 1, at 557. 133  Article 3.8 of the DSU. 134  Furthermore, new bilateral treaties relating to trade have to be reported to the WTO so they can be checked for consistency with other trade rules: P. Lamy, above fn 2, at 969. 135  ICJ website, ‘Declarations recognizing the jurisdiction of the Court as compulsory’, at < https://​ www.icj-​cij.org/​en/​decla​rati​ons > (last visited 8 October 2021). 136 For example, Australia’s Declaration, 22 March 2002; the United Kingdom’s Declaration, 22 February 2017; see also E.-​U. Petersmann, ‘Dispute Settlement in International Economic Law—​Lessons for Strengthening International Dispute Settlement in Non-​Economic Areas’ 2 Journal of International Economic Law (1999) 189, at 202. 137 McRae, above fn 1, at 231; Petersmann, above fn 138, at 202: ‘International economic law is essentially based on treaties on the reciprocal liberalization of market access barriers’; Methanex Final

178    James Crawford and Freya Baetens trade contain compromissory clauses sending disputes to the ICJ,138 most trade disputes are likely to arise under the WTO covered agreements or preferential trade agreements, and therefore fall under the jurisdiction of WTO dispute resolution mechanisms or their PTA counterparts. Second, some trade agreements explicitly allow their parties to take their non-​WTO trade disputes elsewhere. For example, the Agreement on the Global System of Trade Preferences among Developing Countries sends disputes to a ‘Committee of participants’ made up of representatives of the governments of the participants to the agreement.139 Third, occasions of concurrent or overlapping jurisdiction between the WTO and other dispute resolution bodies can arise. For example, in 1999 Chile closed its ports to European Community-​flagged vessels which did not respect certain conservation standards for swordfish, as identified by Chile.140 The European Community claimed that Chile’s measures were inconsistent with the GATT 1994 and a WTO panel was established to deal with the claim on 12 December 2000.141 On 18 December 2000, Chile sought to initiate proceedings concerning the same facts before a special tribunal of ITLOS.142 Ultimately the dispute was withdrawn from both institutions and settled.143 Similarly, on 16 August 2013, Denmark (on behalf of the Faroe Islands) initiated arbitration proceedings against the EU under UNCLOS with regard to the use of coercive economic measures by the EU in relation to Atlanto-​Scandian herring and Northeast Atlantic mackerel. On 4 November 2013, Denmark also requested WTO consultations with the EU concerning the same facts.144 Again both cases were settled.145 These cases Award: ‘As to the question of whether a rule of customary international law prohibits a State, in the absence of a treaty obligation, from differentiating in its treatment of nationals and aliens, international law is clear. In the absence of a contrary rule of international law binding on the States parties, whether of conventional or customary origin, a State may differentiate in its treatment of nationals and aliens. No conventional rule binding on the NAFTA Parties is to the contrary with respect to the issues raised in this case. Indeed, the text of NAFTA indicates that the States parties explicitly excluded a rule of non-​ discrimination from Article 1105’. 138 

For example, US –​China, Treaty of Friendship, Commerce, and Navigation, Nanking, 4 November 1946, Article XXVIII; US –​Italy, Treaty of Friendship, Commerce, and Navigation, Rome, 2 February 1948, Article XXV. 139  Articles 7 and 21 of the Agreement on the global system of trade preferences among developing countries, Belgrade, 12 April 1988. 140  Lamy, above fn 2, at 982. 141 WTO, Chile –​Swordfish, Panel requested on 6 November 2000, at < https://​www.wto.org/​engl​ish/​ trato​p_​e/​disp​u_​e/​case​s_​e/​ds19​3_​e.htm > (last visited 8 October 2021). 142 ITLOS, Case concerning the Conversation and Sustainable Exploitation of Swordfish stock in the South-​Eastern Pacific Ocean (Chile/​European Community), Order of 20 December 2000, at 4. 143  Chile –​Swordfish, above fn 142; ITLOS, Case concerning the Conversation and Sustainable Exploitation of Swordfish stock in the South-​Eastern Pacific Ocean (Chile/​European Community), Order of 16 December 2009, at 18. 144 WTO, EU –​Herring, Panel established 26 February 2014, at < https://​www.wto.org/​engl​ish/​trato​p_​ e/​disp​u_​e/​case​s_​e/​ds46​9_​e.htm > (last visited 8 October 2021); The Atlanto-​Scandian Herring Arbitration (The Kingdom of Denmark in respect of the Faroe Islands vs. the European Union), PCA Case No. 2013-​30. 145  EU –​Herring, settled on 21 August 2014; PCA Case No. 2013-​ 30 Atlanto-​Scandian Herring Arbitration, settled on 23 September 2014.

The Influence of International Trade Law on International Law    179 illustrate the possibility of a dispute, at least indirectly related to trade, being brought to a non-​WTO dispute resolution body, namely ITLOS and an arbitration panel constituted under UNCLOS, respectively. Such disputes are, however, relatively uncommon—​as further discussed below.

2. Applicable law limitations: the ‘sui generis’ character of WTO law WTO law is frequently accorded a ‘sui generis’ character, almost as if it were operating in a vacuum, or at the very least, separate (as a form of lex specialis)146 from other rules of international law. WTO law, and international trade agreements more broadly, do not generally fall under the scope of the applicable law before other courts and tribunals, and neither is it often seen as forming part of the interpretative framework (with some exceptions in the field of international investment law, as discussed above). This is also reflected in Article 55 of the ILC Articles on State Responsibility which refer to WTO law in relation to remedies as an example of a situation in which general law does not apply and WTO law, as lex specialis, prevails.147 As a result, the reverse is also true: for the application and interpretation of general law, non-​trade courts and tribunals will not easily refer to WTO law, which is perceived as solely relevant in a WTO context. As McRae stated in 1996, ‘the WTO may be the defining regime for multilateral trade in its broadest sense’ and ‘is on the road to achieving universality in the regulation of international trade’.148 This is partly due to jurisdictional restrictions, but the WTO’s quasi-​monopoly in the arena of international trade law is also due to the distinctive character of trade law. Powerful States and private players have long promoted the GATT, and then WTO, dispute settlement mechanisms. WTO law is beneficial to traders, investors and consumers149 who may support mechanisms which help ensure respect for it. Until recently, States generally supported judicial review of the implementation of WTO law.150 One reason for this involvement and support is the rationale behind international trade law. According to McRae, States have: accepted as the foundation of the international trading regime a principle [against barriers to trade] that fully implemented runs counter to the assumptions on which international law traditionally has rested.151

These foundations are ‘individual and welfare-​based’, whereas the assumptions of international law are ‘State and security-​based’.152 Moreover the units on which 146 D.

McRae, ‘The Place of the WTO in the International System’ in D. Bethlehem, D. McRae, R. Neufeld and I. Van Damme (eds), The Oxford Handbook of International Trade Law, 1st edition (Oxford: Oxford University Press, 2009), at 70. 147  ARSIWA, above fn 1, at 140, para 3 (Article 55). 148  McRae, above fn 1, at 27. See also Lamy, above fn 2, at 972 who described the WTO legal rules and forming ‘an integrated system’ governing ‘a community, namely its Members’. 149  Petersmann, above fn 138, at 210 and 235. 150  Ibid., at 230. 151  McRae, above fn 1, at 147–​8. 152  Ibid., at 215.

180    James Crawford and Freya Baetens international trade law depends (including customs territories such as the European Union and Hong Kong) are not the same as the units on which international law generally is built (States). Traditionally, it has been argued that this is because trade law does not have sovereignty at its centre.153 Rather, ‘[i]‌nternational trade law is concerned with removing the impediments that sovereignty places in the way of trading across borders’.154 However, this would seem to be changing in light of some of the ongoing developments in the WTO, such as the discussions and litigation regarding Article XXI GATT, the concept of State-​owned enterprises, and the US objections to the workings of the WTO Appellate Body.155 As a result, ‘sovereignty’ is emerging more frequently at the forefront of international trade law debates. Where States used to generally promote GATT and WTO dispute settlement mechanisms, this is no longer a certainty. Perhaps the WTO enjoyed a ‘honeymoon’ in this regard: the ICJ has known a similar backlash from African States after the South-​West Africa cases and from the United States after the Nicaragua case.156 Proponents of international trade law also suggest that it differs from international law in terms of its relationship to the individual. Individuals are central to the WTO legal order, as its rationale is that once impediments to free trade have been removed, it is through ‘improved conditions’ for private operators conducting trade that Members of the WTO benefit from the regime.157 While individual, often private, traders carry out the transactions which make up international trade,158 they are not per se protected by international trade law. Whereas in other areas of international law, such as human rights law or international humanitarian law, the rights of physical or moral persons are guaranteed as such, that is not the case in international trade law. Similar to general international law but unlike human rights or investment law, the focus of international trade law is the overall safeguarding of the system, such that all actors are encouraged or forced to abide by the rules of the system, which is designed, and aimed at, fostering positive living conditions for all through free trade.

153 

Ibid., at 158. Ibid., at 123. 155  Panel Report, Russia –​Traffic in Transit, adopted 26 April 2019, paras 7.5.3 and 7.5.6; Appellate Body Report, US –​Anti-​Dumping and Countervailing Duties (China), adopted 25 March 2011, paras 318–​20; European Commission, ‘State-​Owned Enterprises in the EU: Lessons Learnt and Ways Forward in a Post-​Crisis Context’ Institutional Paper 31/​2016, at < https://​ec.eur​opa.eu/​info/​sites/​info/​files/​file​_​imp​ ort/​ip0​31_​e​n_​2.pdf > (last visited 8 October 2021); USTR, ‘Report on the Appellate Body of the World Trade Organization’ (February 2020), at 5, at < https://​ustr.gov/​sites/​defa​ult/​files/​Report_​on_​the_​ Appellate_​Body_​of_​t​he_​W​orld​_​Tra​de_​O​rgan​izat​ion.pdf > (last visited 8 October 2021). 156  South West Africa, Second Phase (Judgment) [1966] ICJ Rep 6 and Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America) (Jurisdiction and Admissibility Judgment) [1984] ICJ Rep 392; see R. Jennings, R. Higgins and P. Tomka, ‘General Introduction’ in Andreas Zimmermann and Christian Tams (eds), The Statute of the International Court of Justice: A Commentary 3rd ed (Oxford: Oxford University Press, 2019), paras 81-​82 and 135. 157  Panel Report, US –​Sections 301–​310 of the Trade Act of 1974, adopted 27 January 2000, para 7.77. 158  McRae, above fn 1, at 132. 154 

The Influence of International Trade Law on International Law    181

3. Informal hierarchy of international norms The almost complete absence of consideration of international trade law by the ICJ and the ECtHR may reflect the relative rarity of clear overlap or conflict between the two bodies of law,159 combined with a belief in the primacy of general international law and human rights law in relation to other subfields of public international law such as international trade or investment law.160 The detailed survey of ICJ case law above suggests that references to international trade law, though not insignificant, have not been central to the decision-​making of the ICJ. One could wonder why the ICJ has not considered more the case law of the GATT and the WTO, as WTO panels and the Appellate Body have commonly referred to the case law of the ICJ. Some might think that this is because international law and the ICJ have, for a long time, seen WTO law as a self-​contained system. It is impossible to divine how individual judges have regarded the position of WTO law, or international trade law more broadly, within international law—​and a formal opinion in this respect has certainly never been put forward by the institution as such. In our view, the reality is far simpler: by the year 2000, the ICJ had made only three specific references to any other international tribunal.161 In its first decades, the Court exclusively cited its own judgments and advisory opinions, omitting for example to refer to the arbitral awards invoked by the parties in the Barcelona Traction case on the ground that these could not ‘give rise to generalization going beyond the special circumstances of each case’.162 In the Nottebohm Case, the ICJ cited external case law for the first time (namely the nineteenth century Alabama Claims decisions in the context of the competence-​compétence principle),163 followed by its partial reliance on the maritime delimitation method employed by an earlier arbitral tribunal in Continental Shelf (Tunisia v. Libya).164 Subsequently, the Court has shown more willingness to refer to external case law in delimitation cases (both territorial and maritime).165 It sharply distanced itself from the findings of another

159  A.R.

Ziegler and B. Boie, ‘The Relationship Between International Trade Law and International Human Rights Law’ in E. de Wet and J. Vidmar (eds), Hierarchy in International Law: The Place of Human Rights (Oxford: Oxford University Press, 2012), at 277–​278. 160 S. Joseph, ‘Trade Law and Investment Law’ in D. Shelton (ed), The Oxford Handbook of International Human Rights Law (Oxford: Oxford University Press, 2013), at 866. 161  E. Voeten, ‘Borrowing and Nonborrowing Among International Courts’ 39 Journal of Legal Studies (2010) 547, at 569. 162  Barcelona Traction, Light and Power Company, Limited (Belgium v Spain) (Judgment) (1970) ICJ Rep 40 at para 63. 163  Nottebohm Case (Preliminary Objection) (Judgment) [1953] ICJ Rep 111, 119; see also Arbitral Award of 31 July 1989 (Judgment)(1991) ICJ Rep 53, 68, para 46. 164  Continental Shelf (Tunisia/​Libyan Arab Jamahiriya) (Judgment) [1982] ICJ Rep 18, 57, paras 66, 79 and 111. 165  Land, Island and Maritime Frontier Dispute (El Salvador/​ Honduras: Nicaragua intervening) (Judgment) (1992) ICJ Rep 351, 591-​92, para 391; Maritime Delimitation and Territorial Questions between Qatar and Bahrain (Merits) (Judgment) (2001) Rep 40, 70–​7 1, paras 100 and 117; Sovereignty over Pulau Ligitan and Pulau Sipadan (Indonesia/​Malaysia) (Judgment) (2002) ICJ Rep 625, 682, para 135; Land and Maritime Boundary between Cameroon and Nigeria (Cameroon v Nigeria: Equatorial Guinea intervening) (Judgment) (2002) ICJ Rep 303, 414–​15, para 222.

182    James Crawford and Freya Baetens tribunal (the ICTY) concerning the international rules on State responsibility in the context of the Srebrenica murders.166 Case law of regional courts has never been cited by the Court. Hence, one would be hard-​pressed to disagree with the conclusion that ‘the Court’s policy of precedent essentially aims to assure a constructive dialogue with arbitration tribunals dealing with interstate disputes, primarily in border disputes’167—​and no more than that.

B. Gaining from international trade law’s experiences This section examines what international law might gain from international trade law’s experiences, specifically in the fields of membership, negotiations and outreach, as well as dispute resolution. Particularly the WTO has ‘certain particular characteristics that give it a degree of uniqueness and are themselves contributions to the process and substance of international law’.168 This final section will not address the influence of WTO law on international trade law (where the model of WTO dispute settlement is being used and improved) as many other authors in the present book focus on the interaction between WTO law and other trade agreements, but rather its potential influence on international law more broadly.

1. Membership, negotiations, and outreach The WTO has been described as an ‘exclusive club’ with ‘no limits on the terms of accession that the WTO can offer to applicant countries’.169 Indeed, unlike many international organizations, the barrier to entry is high. Serbia and Iran, for example, have not obtained membership, despite requesting it prior to 2005.170 Russia finally became a WTO Member in 2011 after eighteen years of accession talks. The underlying idea is that the commitment that must be demonstrated in order to gain WTO membership will translate, once membership has been attained, into an enhanced commitment to comply with WTO law. The WTO’s requirement of involved negotiations to arrive at bespoke terms of accession for each new member stands in contrast with the process generally applicable to a State acceding to a multilateral treaty. A State to which the treaty is open by its terms may ordinarily simply accede to it without seeking the approval of the other parties.171 Any tailoring of the acceding State’s obligations under the treaty takes place through a reservation 166  Case Concerning the Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v Serbia and Montenegro) (Judgment) 26 February 2007, paras 402-​403. 167 G. Guillaume, ‘The Use of Precedent by International Judges and Arbitrators’ 2(1) Journal of International Dispute Settlement (2011) 5, at 20. 168  McRae, above fn 1, at 179. 169 S. Charnovitz, ‘The World Trade Organization in 2020’ 1 Journal of International Law and International Relations (2004) 167, at 179-​180. 170  WTO Website, Accessions, Iran and Serbia, at < https://​www.wto.org/​engl​ish/​thewt​o_​e/​acc_​e/​ acc_​e.htm > (last visited 8 October 2021). 171  See Article 15 of the VCLT.

The Influence of International Trade Law on International Law    183 unilaterally made by the acceding State, to which the existing parties to the treaty then decide whether or not to object.172 This contrast raises the question whether the rigorous requirements for WTO accession could be applied in other contexts to establish the seriousness of the treaty commitment and to increase the likelihood of compliance. However, it seems unlikely that the WTO process can be generalized for application in other contexts. The requirements for accession to a treaty, like the permissible scope for reservations, will depend on various factors such as the extent of the changes to domestic law which the treaty requires, the degree to which broad membership is desired, and the value placed on the integrity of the treaty (i.e., the uniformity of parties’ rights and obligations under it).173 Moreover, the WTO acts as a model for inter-​organizational cooperation, for example with the World Health Organization.174 Moreover, the WTO maintains and encourages links and participation of non-​governmental organizations in its proceedings.175 The WTO promotes transparency through its website and open public meetings. It also does so through notification requirements present in various WTO agreements, which seek to ensure that information concerning members’ trade-​related measures is available to the membership as a whole.176 Scrutiny of members’ policies takes place through the Trade Policy Review mechanism; the information obtained through this process feeds into decision-​making and into negotiations for further trade liberalization.177 On the other hand, some aspects of the WTO’s decision-​making process have been criticized for lack of transparency. Although formally decisions are taken by all members meeting together in the Ministerial Conference or the General Council (as well as by numerous specialized councils and committees), in practice the agenda is heavily influenced by a subset of members meeting in the informal ‘Green Room’ process.178 It has been argued that the establishment of an elected executive board could help provide greater transparency to the organization’s decision-​ making.179 WTO dispute settlement 172 ‘Guide

to Practice on Reservations to Treaties, adopted by the Commission at its sixty-​third session’, UN Doc A/​CN.4/​SER.A/​2011/​Add.1, [2011]-​II(3) Yearbook of the International Law Commission 23, guidelines 1.1 and 2.6.1. 173  Relatedly, States show marked variations in their willingness to prohibit reservations depending on the subject matter of the treaty in question: for example, treaties on environmental topics often expressly prohibit reservations: United Nations Office of Legal Affairs, Final Clauses of Multilateral Treaties Handbook (United Nations 2003), at < https://​treat​ies.un.org/​doc/​sou​rce/​publi​cati​ons/​FC/​Engl​ish.pdf > (last visited 8 October 2021), at 47; L.R. Helfer, ‘Not Fully Committed: Reservations, Risk and Treaty Design’ 31 Yale Journal of International Law (2006) 367, at 376. 174  Lamy, above fn 2, at 981. 175  Charnovitz, above fn 170, at 183–​4 and 186. 176 Agreements imposing such a requirement include the Agreement on Agriculture, the Anti-​ Dumping Agreement, the Agreement on Technical Barriers to Trade (TBT) and the Sanitary and Phytosanitary (SPS) Measures Agreement: WTO, MC11 Briefing Note, ‘Transparency’ (2017), at < https://​www.wto.org/​engl​ish/​thewt​o_​e/​minis​t_​e/​mc1​1_​e/​brief​i ng_​note​s_​e/​bftra​nspa​renc​y_​e.htm > (last visited 8 October 2021). 177 Ibid. 178 P. Delimatsis, ‘Institutional Transparency in the WTO’ in A. Bianchi and A. Peters (eds), Transparency in International Law (Cambridge: Cambridge University Press, 2013), at 116–​117. 179  Ibid., at 117–​8.

184    James Crawford and Freya Baetens proceedings also remain more confidential in some respects than those before some other international tribunals; for example, oral hearings are held in private.180 Written communications are also treated as confidential; however, a party may choose to make public its own submissions.181 Lessons can be learned from the decision-​making process applicable in the WTO. Majority voting was gradually replaced by consensus during the application of the GATT 1947,182 and now the WTO decision-​making process is governed entirely by consensus.183 In practice, failure to achieve consensus means that no decision is taken at all in the WTO.184 This process can exert significant pressure on objecting States to explain their position.185 Consensus then undermines, rather than promotes, the equality of participant States, because only the stronger States will have the ability to sustain a veto.186 More broadly, the consensus requirement makes it difficult to achieve change, thus reinforcing the status quo.187 By contrast, majority voting would empower the political branch of the WTO, which is arguably less efficient than the WTO dispute settlement system at present.188 In an ironic twist, of course, it is the consensus requirement under Article 2(4) DSU which has allowed the United States, by formally objecting to the (re-​)appointment of Appellate Body members, to paralyse the dispute settlement system itself. The WTO experience may also provide guidance with respect to the role of negotiations in dispute settlement. Given that the preferred aim of the WTO dispute settlement system is a ‘solution mutually acceptable to the parties to a dispute’,189 negotiations either directly or under the auspices of the WTO (in the form of good offices, conciliation, and mediation) are embedded in the WTO’s dispute settlement framework from the first until the final stages of a dispute.190 However, the use of alternative mechanisms of dispute resolution while the dispute is pending before a panel

180  T. Neumann and B. Simma, ‘Transparency in International Adjudication’ in A. Bianchi and A. Peters (eds), Transparency in International Law (Cambridge: Cambridge University Press, 2013), at 448. 181  Article 18(2) of the DSU; Panel Report, Argentina –​Poultry Anti-​Dumping Duties, adopted 22 April 2003, paras 7.14–​7.16; Neumann and Simma, above fn 181, at 442–​3. 182  J. Pauwelyn, ‘The Transformation of World Trade’ 104 Michigan Law Review (2005) 1, at 21–​22. 183 P.J. Kuijper, ‘WTO Institutional Aspects’ in D. Bethlehem, D. McRae, R. Neufeld and I. Van Damme (eds), The Oxford Handbook of International Trade Law, 1st edition (Oxford: Oxford University Press, 2009), at 96. 184 C.-​ D. Ehlermann and L. Ehring, ‘Decision-​Making in the World Trade Organization: Is the Consensus Practice of the World Trade Organization Adequate for Making, Revising and Implementing Rules on International Trade?’ 8 Journal of International Economic Law (2005) 51, at 55. 185  R. Wolfrum and J. Pichon, ‘Consensus’, Max Planck Encyclopedia of Public International Law online (updated October 2010, visited 23 July 2020), para 19. 186  Ehlermann and Ehring, above fn 185, at 66. 187  Ibid., at 65. 188  J. Tijmes-​ Lhl, ‘Consensus and majority voting in the WTO’ 8 World Trade Review (2009) 417, at 418. 189  Article 3(7) of the DSU. 190  See Articles 4, 5, 22(2) of the DSU.

The Influence of International Trade Law on International Law    185 remains rather limited in practice.191 As discussed below, negotiations play a more significant role at the stage of implementation of the findings of the dispute settlement mechanism.

2. Exporting elements of international trade dispute resolution The WTO dispute settlement system may also provide a useful point of reference in the context of reforms of other dispute settlement fora. The field of investment law is a prominent example, considering that Investor-State dispute settlement reform is being contemplated.192 Even though the precise structure of the proposed model has not yet been decided,193 the WTO model is sometimes presented as a solution, at least in the context of the proposal envisaging a two-​tier mechanism for the resolution of investment disputes.194 The EU in particular has been advocating the need for a two-​ tier mechanism for the resolution of investment disputes,195 proposing it in TTIP196 and agreeing to it with Vietnam, Singapore and Canada.197 In the European Commission’s words, ‘[t]‌he bilateral appellate mechanism could be modelled largely on the institutional set-​up of the WTO Appellate Body, with some adaptations both to make it specific for ISDS, and in light of experience in the WTO.’198 There are several grounds for scepticism as to the transposability of the WTO institutional and procedural structure to the field of investment law. It has been pointed out that coherence and integrity in the interpretation and application of the law, which are core reasons underlying the 191 N. Park and M.-​ H. Chung, ‘Analysis of a New Mediation Procedure under the WTO SPS Agreement’ 50 Journal of World Trade (2016) 93, at 93; X. Li and Y. Chen, ‘Constraints of the WTO Compensation Mechanism and Implications from Recent Practice’ 49 Journal of World Trade (2015) 643, at 646. 192  United Nations Commission on International Trade Law, ‘Possible future work in the field of dispute settlement: Reforms of Investor-State dispute settlement (ISDS): Note by the Secretariat’, A/​ CN.9/​917 (20 April 2017); see Chapter 32 of this handbook. 193  United Nations Commission on International Trade Law, ‘Report of Working Group III (Investor-​ State Dispute Settlement Reform) on the work of its resumed thirty-​eighth session’, A/​CN.9/​1004/​Add.1 (28 January 2020), para 15. 194 R.L. Katz, ‘Modeling an International Investment Court After the World Trade Organization Dispute Settlement Body’ 22 Harvard Negotiation Law Review (2016-​17) 163; J.M. Alvarez Zárate, ‘Legitimacy Concerns of the Proposed Multilateral Investment Court: Is Democracy Possible?’ 59 Boston College Law Review (2018) 2765, at 2784. 195  European Commission, ‘Trade for all: Towards a more responsible trade and investment policy’ (European Union 2015), at < https://​trade.ec.eur​opa.eu/​doc​lib/​docs/​2015/​octo​ber/​tradoc​_​153​846.pdf > (last visited 8 October 2021), at 21; also Council of the EU, ‘Negotiating directives for a Convention establishing a multilateral court for the settlement of investment disputes’ 12981/​17 ADD 1 DCL 1 (1 March 2018). 196 European Commission, ‘Proposal for Investment Protection and Resolution of Investment Disputes’ (12 November 2015), at < http://​trade.ec.eur​opa.eu/​doc​lib/​docs/​2015/​novem​ber/​tradoc​_​153​955. pdf > (last visited 8 October 2021). 197  See Chapter 32 of this handbook. 198  European Commission, ‘Investment in TTIP and Beyond—​The Path for Reform Enhancing the right to regulate and moving from current ad hoc arbitration towards and Investment Court’ (5 May 2015) Concept Paper, at 6–​9, at < http://​trade.ec.eur​opa.eu/​doc​lib/​docs/​2015/​may/​tradoc​_​153​408.PDF > (last visited 8 October 2021), 9.

186    James Crawford and Freya Baetens establishment of an appellate mechanism, are infeasible and potentially undesirable in the context of investment law, which in principle consists of a matrix of obligations of an essentially bilateral character.199 Furthermore, the fact that one of the two litigant parties is an individual investor, rather than a State, potentially leads to a difference not only in the likely workload of the adjudicative body,200 but also in the available bargaining tools and in the desired outcome of the dispute settlement process, compared to the litigant parties in a trade dispute. An individual litigant is often not interested in prospective remedies, such as the ones preferred under the WTO.201 If, however, the proposals for investment courts are taken forward, there are lessons to be learned from the WTO system. For example, timely progress in the proceedings may be achieved by using several features of the WTO dispute settlement mechanism as the blueprint for an investment court. These would include an appellate body comprising few members, which works in a collegiate manner even if it does not hear all cases in plenary formation,202 operates under short and strict time-​limits with a clear mandate,203 and does not remand but rather renders its own decision if it reverses the original award.204 The WTO dispute settlement mechanism is among the most widely used in the international legal order.205 The Dispute Settlement Understanding (DSU) is a modern example of what States in the 1990s desired in terms of dispute resolution. It can therefore serve as a model for other forms of dispute resolution. Much of the strength of the DSU has emanated from the exclusive and compulsory jurisdiction, and the quasi-​automatic formation of a WTO panel.206 It may be, however, that States do not have the will to establish dispute resolution forums which possess exclusive and compulsory jurisdiction in areas other than international trade law. Moreover, it is too idealistic to imagine that institutions such as the ICJ would now be altered to make the bases of their jurisdiction compulsory.207 Slightly less idealistic are calls for the creation of a trade chamber 199  D. McRae, ‘The WTO Appellate Body: A Model for an ICSID Appeals Facility?’ 1 Journal of International Dispute Settlement (2010) 371, at 383–​4. 200  See J. Ketcheson, ‘Investment Arbitration: Learning from Experience’ in S. Hindelang and M. Krajewski (eds), Shifting Paradigms in International Investment Law: More Balanced, Less Isolated, Increasingly Diversified (Oxford: Oxford University Press, 2016), at 118. That said, the potentially higher financial costs in investment treaty arbitration might lead to a less frequent exercise of the right of appeal: C.M. Brown, ‘A Multilateral Mechanism for the Settlement of Investment Disputes. Some Preliminary Sketches’ 32 ICSID Review (2017) 673, at 684. 201 S.S. Kho et al, ‘The EU TTIP Investment Court Proposal and the WTO Dispute Settlement System: Comparing Apples and Oranges?’ 32 ICSID Review (2017) 326, at 340–​1. 202  M. Bungenberg and A. Reinisch, From Bilateral Arbitral Tribunals and Investment Courts to a Multilateral Investment Court, 2nd edition (Berlin: Springer, 2020), at 109 (para 361). 203  Ibid., at 22–​23 (para 62), at 105 (para 347), at 126 (para 398). 204  F. Baetens, ‘The European Union’s Proposed Investment Court System: Addressing Criticisms of Investor-​State Arbitration While Raising New Challenges’ 43 Legal Issues of Economic Integration (2016) 367, at 381. 205  McRae, above fn 1, at 178. 206  Lamy, above fn 2, at 976; E.-​U. Petersmann, above fn 138, at 208 (exclusive and compulsory). 207  Jaenicke, above fn 57, at 58.

The Influence of International Trade Law on International Law    187 within the ICJ, in which judges might cultivate specialist knowledge and adopt efficient timelines of proceedings, and for compromissory clauses in treaties making recourse to an ICJ trade chamber mandatory in the event of a trade dispute.208 Setting aside purely aspirational lessons, there are practical lessons to be learned in terms of ‘tweaking’ existing institutions. The schedule for decision-​making and time-​ limits for the adoption of WTO panel reports is short.209Nevertheless WTO members still consider that the procedures take too much time (though they appear not to raise similar concerns when participating in judicial proceedings before other international courts and tribunals).210 These aspects, as well as the promotion of interventions by third States, and reliance on amicus curiae participation in the WTO, could be emulated by other international courts and tribunals.211 However, even though WTO panels and the Appellate Body accept such briefs but have never expressly relied on them (especially because many WTO Members such as the EU, Mexico, and Brazil considered that the AB overstepped when deciding that it could accept such briefs).212 Finally, there may be scope for the ‘increased integration’ of political and legal dispute settlement mechanisms, as in the WTO, for example by the Security Council more actively referring matters to the Court or by considering the use of judicial processes for addressing the lack of compliance with judicial rulings.213 There are also lessons to be learned, and features of the WTO to be noted and potentially replicated, in terms of the establishment of future international dispute resolution mechanisms. The WTO’s jurisdiction was established as a ‘single undertaking’ under the 1993 Marrakesh Agreement,214 pursuant to which WTO Members accepted all WTO-​covered agreements. This provides a blueprint for future institutions to mandate that participants must accept all relevant obligations, rather than pick and choose which obligations they might adopt, as is the practice with reservations to States’ declarations accepting the jurisdiction of the ICJ. The organs of the WTO are also all plenary organs, in which respect for sovereign equality is guaranteed (each State has one vote). The reliance on negative consensus voting avoids delays in contentious areas of decision-​making.215

208 

Ibid., at 58. McRae, above fn 1, at 184. 210  ISTR, ‘Report on the Appellate Body of the World Trade Organization’ (February 2020), at < https://​ustr.gov/​sites/​defa​ult/​files/​Report_​on_​the_​Appellate_​B ody_​of_​t​he_​W​orld​_​Tra​de_​O​rgan​izat​ ion.pdf > (last visited 8 October 2021), at 5. 211  Petersmann, above fn 138, at 212–​213, 240–​242. 212  DSB, ‘Minutes of Meeting held in the Centre William Rappard on 7 June 2000’, WT/​DSB/​M/​83 (7 July 2000). Interestingly, the United States welcomed the Appellate Body report in US –​Lead and Bismuth II, adopted 7 June 2000, para 38. There appears to be no reference to the contrary in the recent report by the USTR. 213  Petersmann, above fn 138, at 212. 214  Ibid., at 235. 215  McRae, above fn 1, at 181. 209 

188    James Crawford and Freya Baetens The WTO also acts ‘as a forum for permanent negotiations’,216 so that it is not restricted to third-​party decision-​making. It encourages parties to negotiate and settle their disputes out of court.217 Its two-​tier system (with appellate review) used to provide reassurance to parties, although that is currently (due to the US’s refusal to appoint Appellate Body members) an impossibility.218 Finally, the DSU has a role to play in the review of domestic implementing measures adopted by WTO Members, and this either avoids disputes in the follow-​up to decision-​making by the WTO dispute resolution mechanisms, or, at least channels such disputes through a structured judicial process.219

3. Considering the extrapolation of prospective remedies The remedies available in international trade law provide another source of reflection with respect to the approach to remedies in international law more broadly. The emphasis on ‘prospective remedies’ is an important feature of the international trade law dispute settlement system, and in particular of the WTO framework.220 Trade retaliation—​the suspension of trade obligations221—​even though frequently employed,222 is only seen as a second-​best alternative to compensation.223 In turn, both compensation and trade retaliation are less preferable to ‘full implementation of a recommendation to bring a measure into conformity with the covered agreements’.224 In this sense, the focus does not lie so much in ‘wip[ing] out all the consequences of the illegal act’225 but rather in ensuring compliance in the future. As explained by Vidigal, the findings and recommendations issued under the auspices of the WTO move beyond the binary of affirming or rejecting the existence of a breach but instead identify the specific problematic aspects giving rise to a breach and propose tailored solutions to rectify them.226 Ultimately, the WTO findings are not the final chapter in the dispute but merely another step in the attempt to reach a ‘solution mutually acceptable to the parties to a dispute’,227 for the benefit of all.228 In this respect, the WTO regime institutionalizes an approach to international litigation that has not realized its full potential in other fields of international law, including general international law. Litigant States occasionally have recourse to the ICJ by way of special agreement wishing not to establish a breach but rather seeking guidance as 216 

Lamy, above fn 2, at 984. Ibid., at 984. 218  Petersmann, above fn 138, at 234. 219  Ibid., at 208–​209. 220  See Chapter 37 of this handbook. 221  Article 22(1) of the DSU. 222  Li and Chen, above fn 192, at 643. 223  Ibid.; D.N. Palmeter and P.C. Mavroidis, Dispute Settlement in the World Trade Organization, 2nd edition, (Cambridge: Cambridge University Press, 2004), at 265–​266. 224  Article 22(1) of the DSU. 225  Factory at Chorzów (Claim for Indemnity), Merits, PCIJ Ser. A No 17, at 47. 226  See Chapter 37 of this handbook. 227  Article 3(7) of the DSU. 228  See Chapter 37 of this handbook. 217 

The Influence of International Trade Law on International Law    189 to the applicable rules in a dispute between them, especially when the stakes are high, as is often the case with disputes of a territorial character.229 When utilizing the Court’s compulsory jurisdiction, States commonly claim, and are content with, a declaration of a past or ongoing breach, showing little interest in the modalities which will ensure future compliance and maintenance of the good relations between the litigant parties. Negotiations out-​of-​court while the dispute is pending, particularly successful negotiations, have been rare in recent years, even though the Court has repeatedly emphasized their importance in achieving a friendly resolution of the dispute.230 The European Court of Human Rights has generally been reluctant to recommend specific measures to prevent future breaches, as the supervision of judgments is generally seen as a political task entrusted to the Committee of Ministers;231 this trend has however started to emerge following the adoption of several structural reforms, including the ‘pilot-​judgment procedure’232 and the procedure for an advisory opinion triggered by domestic courts under Protocol 16 ECHR.233 The Interamerican Court of Human Rights has focused more systematically on the extent and character of measures necessary to provide adequate remedy to ensure compliance with the States’ obligations under the American Convention on Human Rights.234 Seen in this light, the WTO dispute settlement framework lies at the forefront of an approach which views litigation as a means towards an end, rather than as an end in itself.

IV. Conclusion Numerous commentators have lauded international trade law, and the WTO dispute resolution mechanism in particular, as vehicles for change in international law more generally. Donald McRae, for example, has written that ‘there are procedural, institutional and substantive developments under the WTO that have important implications for the process and substance of international law’.235 Pascal Lamy, former 229 

For example, North Sea Continental Shelf (Judgment)(1969) ICJ Rep 6; Continental Shelf (Tunisia/​ Libyan Arab Jamahiriya) (Judgment) (1982) ICJ Rep 21. 230  Passage through the Great Belt (Finland v Denmark) (Provisional Measures Order) (1991) ICJ Rep 20; cf Frontier Dispute (Burkina Faso/​Mali) (Judgment) (1986) ICJ Rep 577. 231  M. Fyrnys, ‘Expanding Competences by Judicial Lawmaking: The Pilot Judgment Procedure of the European Court of Human Rights’ 12 German Law Journal (2011) 1231, at 1250. 232  See Article 61 of the Rules of Court; for an assessment A. Di Marco, ‘L’État face aux arrêts pilotes de la Cour européenne des droits de l’homme’ 108 Revue trimestrielle des droits de l’homme (2016) 887. 233  See L.-​A. Sicilianos, ‘L’élargissement de la compétence consultative de la Cour européenne des droits de l’homme –​À propos du Protocole no 16 à la Convention européenne des droits de l’homme’ 97 Revue trimestrielle des droits de l’homme (2014) 9. 234  See G. Staberock, ‘Human Rights, Domestic Implementation’, Max Planck Encyclopedia of Public International Law online (updated February 2011, visited 23 July 2020), para 9. 235  McRae, above fn 1, at 189. McRae also states, at 177, that there is ‘considerable scope for the provisions of the [VCLT], as well as other principles of international law, to be applied, developed and refined through dispute settlement under the WTO’.

190    James Crawford and Freya Baetens Director-​General of the WTO, describes the WTO as ‘an engine, a motor energizing the international legal order’.236 Joost Pauwelyn argues for ‘cross-​fertilization’,237 through which he hopes that WTO law will enrich public international law. In the sense that new rules of international trade law enhance international law, by creating new rights and obligations for the States parties to trade agreements, it is true that international trade law develops international law generally. In preparing the Articles on Responsibility of States for Internationally Wrongful Acts, the International Law Commission (ILC) had frequent regard to international trade law and the WTO. For example, the ILC sought to demonstrate that ‘[c]‌essation [of internationally wrongful conduct] is often the main focus of the controversy produced by conduct’ by referring to the WTO dispute settlement mechanism.238 International trade law was also relied upon in the ILC’s commentary on the Articles in relation to countermeasures.239 The WTO is a useful reference in relation to countermeasures because the WTO dispute settlement regime ‘required an authorization to take measures in the nature of countermeasures in response to a proven breach’.240 However, the influence of international trade law remains curtailed within the wider field of international law, outside the realm of WTO adjudication. At the present time, an important qualification, however, is necessary. The WTO system is not without its troubles: since December 2019, the future of the WTO dispute resolution mechanism is in doubt as a result of the United States’ continuing refusal to approve the appointment of Appellate Body members.241 The influence of international trade law on international law in non-​trade areas has been restricted for reasons such as its jurisdictional separateness, its limited relevance as part of the applicable law or even source of interpretation (due to the distinct or ‘sui generis’ character of trade law) and the informal hierarchy of international norms. However, there is room for non-​trade-​related areas of international law, and associated dispute resolution institutions, to learn from international trade law and in particular from the WTO as an institution.

236 

Lamy, above fn 2, at 984. Pauwelyn, ‘The Role of Public International Law in the WTO: How Far Can We Go?’ 95 American Journal of International Law (2001) 535, 552. 238  ILC Articles on State Responsibility with Commentaries, above fn 1, at 89, para 4. 239  Ibid., at 129, para 9; at 130, para 5; at 133, para 10. 240  Ibid., at 129, para 9, with reference to Articles 1, 3(7) and 22 of and Annex 2 to the Marrakesh Agreement. 241  WTO Press Release, ‘Members reiterate joint call to launch selection process for Appellate Body members’, (22 November 2019). Inside US Trade, ‘U.S. Slammed At DSB For Blocking Korean Appellate Body Reappointment’ Inside US Trade (23 May 2016); Statement by the United States at the Meeting of the WTO Dispute Settlement Body of 23 May 2016, at 1; Minutes of Meeting of the Dispute Settlement Body of 28 February 2018, para 7.2 W/​DSB/​M/​409; R. Lighthizer, ‘Appellate Body block the only way to ensure reform’ Inside US Trade (15 March 2019), at 1; P.-​J. Kuijper, ‘From the Board: The US Attack on the WTO Appellate Body’ 45 Legal Issues of Economic Integration (2018) 1, at 3. 237 J.

The Influence of International Trade Law on International Law    191

Further reading T. Cottier, J. Pauwelyn and E. Bürgi Bonanomi (eds), Human Rights and International Trade (Oxford: Oxford University Press, 2005) I. Van Damme, Treaty Interpretation by the WTO Appellate Body (Oxford: Oxford University, 2009) J. Harrison, The Human Rights Impact of the World Trade Organization (Oxford: Hart, 2007) S. Joseph, ‘Trade Law and Investment Law’ in D. Shelton (ed), The Oxford Handbook of International Human Rights Law (Oxford: Oxford University Press, 2013) 841 S.S. Kho et al., ‘The EU TTIP Investment Court Proposal and the WTO Dispute Settlement System: Comparing Apples and Oranges?’ 32 ICSID Review (2017) 326 J. Kurtz, ‘The Use and Abuse of WTO Law in Investor-​State Arbitration: Competition and its Discontents’ 20 European Journal of International Law (2009) 749 J. Kurtz, ‘WTO Norms as “Relevant” Rules of International Law in Investor-​State Arbitration’ 108 Proceedings of the American Society of International Law (2014) 243 J. Kurtz, The WTO and International Investment Law (Cambridge: Cambridge University Press, 2016) D. McRae, ‘The WTO Appellate Body: A Model for an ICSID Appeals Facility?’ 1 Journal of International Dispute Settlement (2010) 371 J. Pauwelyn, ‘The Rule of Law without the Rule of Lawyers? Why Investment Arbitrators are from Mars, Trade Adjudicators from Venus’ 109 American Journal of International Law (2015) 761 E.-​U. Petersmann and G. Jaenicke (eds), Adjudication of International Trade Disputes in International and National Economic Law (Fribourg: University Press Fribourg, 1992) G. Sacerdoti, ‘Trade and Investment Law: Institutional Differences and Substantive Similarities’ 9 Jerusalem Review of Legal Studies (2014) 1 G. Tereposky and M. Maguire, ‘Utilizing WTO Law in Investor-​State Arbitration’ in A. Rovine (ed), Contemporary Issues in International Arbitration and Mediation (Leiden: Martinus Nijhoff, 2011) 247 G. Verhoosel, ‘The Use of Investor-​State Arbitration under Bilateral Investment Treaties to Seek Relief for Breaches of WTO Law’ 6 Journal of International Economic Law (2003) 493

Chapter 7

The Regu l at i on of In ternationa l T ra de a nd (De mo cratic) L e g i t i mac y Manfred Elsig

I. II. III. IV. V.

Introduction Democratic legitimacy (Democratic) legitimacy and the WTO (Democratic) legitimacy and PTAs The lost discourse on democratic legitimacy in a new era of China-​United States rivalry I. Conclusions V

192 193 196 199 203 205

I. Introduction The trading system has undergone turbulent times. The liberal order created by the United States and its allies has been facing its biggest stress test. During the Presidency of Donald Trump, the World Trade Organization (WTO), the underlying rules, and its dispute settlement system came under attack to an extent not yet observed in its 25-​ year history. The WTO’s Appellate Body has stopped operating. The criticism of the Trump Administration vis-​à-​vis the multilateral system was accompanied by unilateral trade measures. In particular, tariffs became the preferred instrument of the Trump Administration to coerce other States into bilateral negotiations. While most trading partners reluctantly accepted these negotiations, in the case of China it has led to a stand-​off. Against the backdrop of the first major trade war in decades, this chapter analyses how perceptions about democratic legitimacy have evolved in recent years. Are

regulation of international trade    193 the goalposts of legitimate governance shifting, or are they just relegated to the background as power politics are making a revival in the global trading system? Have we witnessed a one-​time shock to the legitimacy of international trade institutions or are there structural changes underway that transcend US politics? The chapter is organized as follows. First, I briefly discuss various interpretations and narratives of democratic legitimacy and offer a cautionary note about applying democratic concepts without qualification when analysing global trade governance. Second, I focus on the WTO and discuss the most recent crises in light of debates about different forms and types of legitimacy. Third, I analyse how the debate on democratic legitimacy has been developing in relation to the increasing prominence and also changing nature of preferential trade agreements (PTAs). The chapter ends with reflections on how the new economic rivalry between the US and China further leads to a weakening of the perceived democratic legitimacy of existing institutions and might shape trade governance in years to come.

II.  Democratic Legitimacy Most concepts of legitimate democratic governance have developed in the context of democratic nation-​states. Therefore, when applying the notion of legitimate democratic governance to international institutions, the yardstick of comparison has been widely debated. Can international organizations be democratic, or if there are democratic deficits, should that be of concern?1 As I wrote back in 2007, ‘one needs to distinguish the disordered polities of international cooperation from domestic governance structures, where demos is clearly discernible, deliberation is more structured and mostly parliament-​driven, and where raison d’état has been shaped, defined, and brushed up over many decades of the respective polis’ existence’.2 In other words, some caution is in order when applying concepts developed in democratic systems to the international level. Just scaling the concept upwards without reservations is questionable. Whereas democratic States have increased in absolute numbers over time, we also notice that a number non-​democracies have become more influential in global governance, particularly China, which has recently moved from a rule-​taker to become a rule-​ maker.3 Further, we observe a backlash in the form of democracies moving from liberal to non-​liberal democracies (e.g. Brazil, India, Hungary, and Poland) that are openly

1 

A. Moravcsik, ‘Is There a “Democratic Deficit” in World Politics?’ 39(2) Government and Opposition (2004) 336–​363; see also R. Dahl, ‘Can International Organizations Be Democratic? A Skeptic’s View’ in I. Shapiro and C. Hacker-​Cordon (eds), Democracy’s Edges (Cambridge: Cambridge University Press, 1999) 19–​36. . 2  M. Elsig, ‘The World Trade Organization’s Legitimacy Crisis: What Does the Beast Look Like?’ 41(1) Journal of World Trade (2007) 75, at 79. 3  See also Chapter 13 of this handbook, on China’s role over time in creating trade rules.

194   Manfred Elsig questioning democratic norm diffusion originating at the international level.4 These recent developments offer a sober reading about the state of ‘democracy’ but also about the constraints and limits for applying concepts of democratic legitimacy to assessing international institutions. The terms democracy and legitimacy are largely overlapping. The term ‘legitimacy’ itself can be understood as ‘general compliance of people with decisions of a political order that goes beyond coercion or the contingent representation of interests’.5 A high level of compliance is driven by a shared view of fair and transparent processes through which those decisions are generated and by a strong perception that decisions coming out of the process positively impact people’s well-​being. Following this line of argument, the work by Fritz Scharpf has been instrumental.6 He differentiates between input and output legitimacy of political systems. Input legitimacy refers to the processes that lead to a decision. It focuses on issues such as participation, access, transparency and inclusiveness. Most of these elements are also in line with concerns for democratic decision-​making and should, in theory, increase the general compliance and acceptance of a political system and its outcomes. By comparison, output legitimacy is primarily focusing on whether decisions taken contribute to societal problem-​solving. For political institutions to be perceived as legitimate, they need to deliver both on the input and the output side of decision-​making. For political theorists, these concepts interact. Overall legitimacy (and therefore acceptance) increases when both input and output legitimacy are perceived to be meeting defined standards, many of which are also found in theories of democracy. A complicating factor, however, is that expectations about the role of international organizations vary. As Andrew Moravcsik in his work on the European Union argues, the individual assessment of legitimacy is strongly affected by philosophical conceptions, emphasizing different aspects of input or output legitimacy.7 The most important ones in his view include ‘a deliberate conception of democracy to improve political capacity of the citizenry, a pluralist conception concentrating on accountability, a libertarian conception as a means to protect individual liberties and a social-​democratic conceptions as a means to offset the power of concentrated wealth’.8 While the first two concepts are predominantly centred on input legitimacy by highlighting the quality of discourse and access to and control of decision-​makers, the latter two tackle issues of output legitimacy by highlighting various objectives such as the protection of individual rights and the protection of underprivileged segments of the society. There is thus disagreement on what functions and roles international organizations need to carry out

4 

J. Pevehouse, ‘Democracy from the Outside-​in? International Organizations and Democratization’ 56(3) International Organization (2002) 515–​549. 5  P. Nanz and J. Steffek, ‘Global Governance, Participation and the Public Sphere’ 39(2) Government and Opposition (2004) 314, at 315. 6  F. Scharpf, Governing in Europe. Effective and Democratic? (Oxford: Oxford University Press, 1999). 7  Moravcsik, above fn 1. 8  Elsig, above fn 2, at 80.

regulation of international trade    195 to be perceived as legitimate and democratic. In other words, an important ‘eye-​of-​the-​ beholder’ problem exists as well. Ruth Grant and Robert Keohane have further refined the pluralist concept of ‘accountability’ of institutions.9 They provide a sceptical account of global democracy and focus on how best to constrain the abuse of power by leading States and institutions. While the authors acknowledge the possibility of a participation (direct democracy type) model of global governance (i.e. to enlarge the political capacity of people), their preference goes to a delegation model (parliamentary democracy type) to which they attribute a better fit for the world of international organizations. Based on the latter model, they sketch several mechanisms to hold accountable those who govern.10 They find that only organizations that meet a minimal standard of accountability are perceived as (democratically) legitimate. Following their logic, the bar for a judgment of legitimacy is lowered to addressing mainly power politics. While various benchmarks have developed for assessing the input side of legitimacy, recent contributions have further shown that there is also little consensus on what makes international institutions legitimate from an output side. Tamar Gutner and Alexander Thompson argue alongside Andrew Moravcsik that expectations about the objectives of international organizations often vary.11 The authors convincingly show that performance matrices are manifold in order to assess the outcome side. They introduce the concept of performance parameters and objectives—​these range from process outputs to intermediate and macro outcomes.12 Macro outcomes for instance are more ambitious than process outputs which should be reflected in expectations about how well international organizations fulfil their mandates. Jonas Tallberg and Michael Zürn further remind us that legitimacy matters for international institutions insofar as it helps them to perform their tasks, to remain focal, to retain their capacity to develop new rules and their ability to commit States to comply with agreed obligations.13 This idea goes back to the early regime theories, which suggested that regimes only function if the expectations of States converge around their goals, principles, rules and decision-​making procedures; otherwise international

9  R. Grant and R. Keohane, ‘Accountability and Abuses of Power in World Politics’ 99(1) American Political Science Review (2005) 29–​43. They have the following working definition: ‘accountability implies that some actors have the right to hold other actors to a set of standards, to judge whether they have fulfilled their responsibilities in light of these standards, and to impose sanctions if they determine that these responsibilities have not been met (2005:29)’. 10 These accountability mechanisms are very diverse. Instruments range from hierarchical, supervisory, fiscal, legal, market-​based, peer-​based to public reputational approaches. 11  T. Gutner and A. Thompson, ‘The Politics of IO Performance: A Framework’ 5(3) The Review of International Organizations (2010) 227–​248. 12  The literature on performance not only develops different performance indicators, but also maps the sources of performance, usually distinguishing between international organization-​internal or international organization-​external factors. 13 J. Tallberg and M. Zürn, ‘The Legitimacy and Legitimation of International Organizations: Introduction and Framework’ 14(4) The Review of International Organizations (2019) 581–​606.

196   Manfred Elsig cooperation is lacking any impact.14 In other words, legitimacy is an important value in itself for international organizations to play an authoritative role in global governance. The flipside of this argument is that the de-​legitimation of international institutions can lead to a collapse of international cooperation.15 From the above, it follows that there are various notions and approaches to measure legitimate governance of international institutions, yet the broad differentiation between instruments that strengthen input legitimacy and outcomes that help address societal problems can be a helpful compass for the discussion. In addition, input and output legitimacy need to be considered as two sides of the same medal. If a lack of input or output legitimacy exists, this cannot be easily compensated. In the following, I discuss how different perceptions of legitimacy have evolved in the trading system by zooming in on different venues of rule-​making. I focus on progress (or lack thereof) in trade regulation and how this relates to the perceived legitimacy of international trade institutions and treaties. I also discuss how the tensions between the United States and China might shape discussions on trade regulation and democratic legitimacy in the future.

III.  (Democratic) Legitimacy and the WTO How has the debate on democratic legitimacy evolved in the context of the WTO? In the aftermath of the Uruguay Round negotiations, attention was first devoted to how developing countries can increase their participation and influence in WTO rule-​ making. Not only were developing countries relying on various coalitions to pursue their trade preferences, but inner circles of WTO concentric decision-​making also became more accessible as part of a general trend to make processes more transparent. As a result, criticism on the lack of input legitimacy became less vocal over time.16 At the end of the 1990s, when a new trade round was about to be launched, many developing countries pushed for greater attention to be paid to development concerns which should lead to greater output legitimacy in the long term. By the turn of the millennium, the WTO, a member-​driven organization, had adjusted its governance model by adapting its informal proceedings to give more access to less powerful trading nations and by agreeing to launch a new trade round in 2001 that would prioritize concerns voiced by 14 

S. Krasner, ‘Structural Causes and Regime Consequences: Regimes as Intervening Variables’ 36(2) International Organization (1982) 185–​205. 15  Tallberg and Zürn, above fn 13, develop in their contribution a framework of analysis for the legitimation and de-​legitimation of international organizations. 16  See also M. Elsig and T. Cottier, ‘Reforming the WTO: The Decision-​Making Triangle Revisited’ in T. Cottier and M. Elsig (eds), Governing the World Trade Organization: Past Present and Beyond Doha (Cambridge: Cambridge University Press, 2011) 289–​312.

regulation of international trade    197 developing countries.17 While the Doha Agenda and its goals were structuring the trade negotiations in the first decade of this century, progress was very limited. After the experience of a successful conclusion of the Uruguay Round and some sector-​specific agreements in the late 1990s, a significant expectations-​capacity gap emerged in the negotiations. With each deadline that passed without tangible results, the deficit in output legitimacy started to grow gradually. Paradoxically, one can observe that while input legitimacy increased, output legitimacy plummeted. Put differently, whereas power was increasingly constrained in decision-​making, this gain in input legitimacy did not translate into more outcome legitimacy in the form of substantial negotiation results. The imbalance between access to rule-​making and tangible outcomes became increasingly obvious. The idea of a trade round slowly died. Another imbalance started to materialize at the end of the 1990s. In comparison to the rule-​making and negotiation arm of the organization, the dispute settlement system was used actively by a growing number of WTO Members. The authority of both panels and the Appellate Body increased.18 In particular, final and binding Appellate Body decisions were in most cases implemented by the losing parties, panels generally followed the guidance provided by Appellate Body and a light form of precedence in WTO law developed. The growing authority of the Appellate Body was by and large accepted.19 So, originally, both input and output legitimacy went up.20 However, the Appellate Body’s authority came under increased scrutiny over time.21 If we focus on attempts to delegitimize the dispute settlement system, those attempts were always concentrated around the Appellate Body rather than the panel system. Criticism was first directed at procedural issues exemplified by the infamous Amicus Curiae Brief episode. Many WTO members called for limiting the access of non-​governmental organizations to the legal proceedings by not soliciting non-​governmental briefs sent to the Appellate Body. As Petros Mavroidis wrote at the time, this event was a storm in a teacup.22 The prominence of the Appellate Body rose with decisions producing important distributional consequences (e.g. on subsidies, on taxation) as well as cases addressing important non-​trade concerns. Not surprisingly, politicization increased while the legitimacy of the Appellate Body seemed to grow initially. However, the question arose whether the degree of legalization of the WTO dispute settlement system had gone too far.23 There was an increasing fear that due to lack 17 WTO, Doha WTO Ministerial Declaration, WT/​MIN(01)/​DEC/​1 (20 November 2001).

18   G. Shaffer, M. Elsig and S. Puig, ‘The Extensive (but Fragile) Authority of the WTO Appellate Body’ 79(1) Law and Contemporary Issues (2016) 237–​273. 19  A notable exception was the constant US criticism of how the Appellate Body overturned decisions of panels when it came to US practice in calculating dumping margins, known as zeroing. 20  Although, participation by low incoming developing countries in dispute settlement has remained low, see M. Elsig and P. Stucki, ‘Low-​Income Developing Countries and WTO Litigation: Why Wake Up the Sleeping Dog?’ 19(2) Review of International Political Economy (2012) 292–​316. 21  See also Chapters 5 and 34 of this handbook. 22  P.C. Mavroidis, ‘Amicus Curiae Briefs Before the WTO: Much Ado About Nothing’ 2001 Harvard Jean Monnet Working Paper No 02/​01. 23  J. Goldstein and L. Martin, ‘Legalization, Trade Liberalization, and Domestic Politics: A Cautionary Note’ 54(3) International Organization (2000) 603–​632.

198   Manfred Elsig of progress in rule-​making, the dispute settlement system could step in and through judicial decisions fill gaps in the various WTO contracts. WTO Members’ growing interest in recent years in regaining control over an independent judicial body was particularly reflected in Appellate Body Members’ selection and nomination dynamics.24 The refusal by the US Administration to appoint new Appellate Body Members or re-​appoint existing ones starting in 2017 has led to a paralysis of the system, and by 2020, the Appellate Body was no longer operational. The Trump Administration, notwithstanding many reform proposals put forward by other WTO Members to address and accommodate US concerns, did not blink and showed no willingness to give up its veto. The Trump Administration used various types of criticism to try to delegitimize the court. These ranged from false statistics about lost and won cases, criticism of the Appellate Body overstepping its mandate, concerns with procedural decisions, such as delaying the submission of the final report within 90 days of appeal, to directly attacking individual judges and individual members of the Secretariat, as well as lamenting that the system costs too much and criticizing individual Appellate Body Members for having earned excess money in delaying their work. The Trump Administration’s attempt to de-​legitimize the Appellate Body received relatively little support from other WTO members. Nevertheless, the United States has used its blocking power successfully. The above observation suggests that for an organization to be perceived as legitimate, it needs both to deliver on input and output in relation to its main functions. In the case of the WTO, an imbalance between rule-​making and rule enforcement may have put extra strain on the Appellate Body over the years, an issue which Appellate Body Members also grappled with.25 Many experts predicted that this alleged asymmetry between lack of rule-​making and the increasing strength of dispute settlement would hamper negotiations. It remains to be seen whether a more soft law approach with only a panel system will help unblock negotiations on updating trade rules that were negotiated more than 25 years ago.26 The alternative multi-​party interim appeal arbitration arrangement (MPIA) put into place in 2020 by two dozen WTO Members might provisionally act as an ad hoc Appellate Body for some limited number of cases, but the MPIA will in no way be able to replace the Appellate Body.27 Even if the Biden Administration can help overcome the existing impasse and work pragmatically towards reforming the Appellate Body (which at the time of writing does not seem to be the case), the institution will hardly regain its former level of legitimacy. Future Appellate Body Members would face public 24 M.

Elsig and M. Pollack, ‘Agents, Trustees, and International Courts: Nomination and Appointment of Judicial Candidates in the WTO Appellate Body’ 20(2) European Journal of International Relations (2014) 391–​415; see also J. Dunoff and M. Pollack, ‘The Judicial Trilemma’ 111(2) American Journal of International Law (2017) 225–​227. 25 C.-​ D. Ehlermann, ‘Tensions Between the Dispute Settlement Process and the Diplomatic and Treaty-​Making Activities of the WTO’ 1(3) World Trade Review (2002) 301–​308. 26  See also Chapters 4 and 5 of this handbook. 27  See K. Kugler, ‘Operationalising MPIA Appeal Arbitrations: Opportunities and Challenges’ in M. Elsig, R. Polanco and P. Van den Bossche (eds), International Economic Dispute Settlement: Demise or Transformation (Cambridge: Cambridge University Press, 2021) 68–​96.

regulation of international trade    199 scrutiny about their level of independence from the key WTO Members, potentially further de-​legitimizing the dispute settlement system. In other words, institutional tweaks to the design of the AB and more control over the work of Appellate Body Members and its Secretariat will reduce the dispute settlement’s independence, which is needed for such a ‘world court’ to be perceived as fully legitimate. The benchmark for legitimacy is not the GATT system but a functioning two-​tiered WTO system. From a macro perspective, one could argue that the big achievements of the WTO have been to tame US unilateralism which was prevalent in the 1980s by strengthening the rule of law and later to accommodate other powerful States in a rules-​based system, exemplified by the accession of China to the WTO in 2001.28 It is also noteworthy that, after the financial and economic crises in 2007, many commentators were upbeat about the WTO’s role in taming protectionism.29 Until recently, the general view was that the WTO did largely achieve these macro objectives. However, the most recent US turn to focus on trade deficits and promote economic nationalism through unilateral actions has unsettled the predominant view of WTO success. This optimism has now been replaced by many pessimist outlooks for the organization. The Trump Administration no longer accepted independent and compulsory third-​party adjudication for trade relations and put forward unspecified proposals which did not find consensus within the Geneva-​based organization.30 Losing the support of the main designer and supporter of the system certainly affects the overall perception of legitimacy. Also, the fact that a single country can hold an entire organization hostage suggests important input legitimacy gaps and an urgent need to revise decision-​ making processes. The push for going back to former GATT-​type power-​based dispute settlement will certainly not strengthen the perception of democratic legitimacy and will hamper expectations about the enforceability of new rules agreed in the future.

IV.  (Democratic) Legitimacy and PTAs As a result of the lack of progress in rule-​making in the WTO, we have witnessed an increasing number of PTAs since the late 1990s.31 For a long time, the core concessions in these agreements were about reciprocal tariff cuts, as an exception to the MFN rule of the WTO. Later, the scope of liberalization expanded and included various market 28 

Shaffer et al., above fn 18; see also M. Elsig, ‘The World Trade Organization at Work: Performance in a Member-​Driven Milieu’ 5(3) The Review of International Organizations (2010) 345–​363. 29  The role of the WTO in addressing protectionism as a result of the COVID pandemic will be an important research question. 30  While a number of WTO Members in principle supported some of the concerns raised by the Trump Administration, which had already appeared under President Obama, the lack of willingness by the Trump Administration to offer constructive solutions dampened other WTO Members’ enthusiasm to publicly support the US stance. 31  A. Dür, L. Baccini, and M. Elsig, ‘The Design of International Trade Agreements: Introducing a New Dataset’ 9(3) The Review of International Organizations (2014) 353–​375.

200   Manfred Elsig access commitments in areas such as services or public procurement. Beyond these so-​ called WTO-​plus commitments, non-​core WTO topics also entered the world of PTAs, ranging from investment regulation to non-​trade issues such as environmental, labour, or security concerns. While originally, some WTO Members were reluctant to negotiate PTAs, every WTO Member has now joined the PTA bandwagon, which has also provided a legitimacy boost for using these types of treaties to liberalize markets. What has also helped increase acceptance is that early criticism of non-​compatibility with the WTO and fragmentation has been overblown.32 A systematic study of WTO presence in PTAs has recently shown that the WTO covered agreements provide an important base for PTA commitments and that concerns about venue-​shopping have been potentially overstated.33 It is beyond this chapter to discuss the democratic legitimacy, both in terms of input and output dimensions for hundreds of PTAs that vary greatly along many dimensions.34 However, what can be observed generally is that given the absence of institutional structures, with the exception of regional trade pacts (e.g. MERCOSUR, EFTA, SADC), relatively little attention has been paid to questions of input legitimacy.35 Criticism has mostly emerged from non-​governmental groups representing environmental and labour concerns as well as from small and medium-​sized traders about the lack of input into the negotiations.36 As a reaction, in many democracies, transparency in policy formulation for trade agreements has increased, and consultation procedures have been established. In addition, in some countries, parliaments have become more engaged and vocal in trade talks. In the case of the European Union, the Lisbon Treaty has further empowered the European Parliament vis-​à-​vis other EU institutions, both in terms of mandating new trade talks, constant exchange with the negotiators from the European Commission, and most importantly, establishing co-​decision procedures with the European Council in terms of ratification of PTAs. In the United States, the PTA agenda under Trump was strongly driven by executive privileges as the US President drew on a number of instruments granted to the executive, which also led to pushback by Democrats in Congress. The Trump Administration was implicitly arguing that the

32  J. Bhagwati, Termites in the Trading System: How Preferential Agreements Undermine Free Trade (Oxford: Oxford University Press, 2008). 33  T. Allee, M. Elsig and A. Lugg, ‘The Ties between the World Trade Organization and Preferential Trade Agreements: A Textual Analysis’ 20(2) Journal of International Economic Law (2017) 333–​363. Presence in this context is measured by the amount of texts that are copy-​pasted from WTO agreements into PTA texts and the type and number of references to WTO agreements found in PTAs. 34  L. Baccini, A. Dür and M. Elsig, ‘The Politics of Trade Agreement Design: Revisiting the Depth-​ Flexibility Nexus’ 59(4) International Studies Quarterly (2015) 765–​775; T. Allee and M. Elsig, ‘Why Do Some International Institutions Contain Strong Dispute Settlement Provisions: New Evidence from Preferential Trade Agreements’’ 11(1) The Review of International Organizations (2016) 89–​120. 35 A. Capling and P. Low, Governments, Non-​ State Actors and Trade Policy-​Making: Negotiating Preferentially or Multilaterally? (Cambridge: Cambridge University Press, 2010). 36  In democratizing States with strong governments, business groups also often complain about the lack of engagement in the policy formulation stage.

regulation of international trade    201 output (‘fantastic’ new PTAs) will make up for a possible input legitimacy deficit within the US policy formulation process. The societal concerns about the effects of PTAs (and therefore output legitimacy) have also increased over time. The Trump Administration focused its narrative on PTA’s distributional effects and other economic externalities. While research shows that the overall trade flow impacts of PTAs are relatively moderate and on the aggregate positive,37 in many democracies, a discourse has developed about how trade deals mostly benefit highly competitive global firms, which finds support in newer studies.38 In addition, some critics lament the extent to which PTAs lead to outsourcing of jobs and putting pressure on wages, leading to overall negative outcomes, such as de-​industrialization and increasing domestic inequality.39 This type of criticism had been instrumentalized in the 2016 US elections by both main party contenders, and it continued into the 2020 US elections. Today, we observe in the US a growing consensus among members of Congress that trade agreements need to be re-​designed to protect US workers. The renegotiated NAFTA (called USMCA) has been the first major deal to attempt to lower the US trade deficit in goods trade by inserting certain corrective instruments (e.g. higher wages and increased labour protection in Mexico) and watering down independent enforcement mechanisms.40 Other US trading partners, particularly those having surpluses in goods trade with the US were targeted by the Trump Administration, and as a result trade talks started with many of the ‘surplus’ countries. Overall, one can observe that domestic support for trade agreements among the governing elites in the United States has shifted remarkably, although citizen support for free trade is still strong, as many surveys show. In the case of the United States, one could argue that an approach of competitive liberalization has been eroded by a new type of mercantilist and economic nationalist approach to trade. Taking a middle ground, some scholars are now advocating strengthening elements of ‘social inclusion’ in trade agreements.41 Such an approach aims to increase the acceptance and therefore legitimacy of PTAs among a growing sceptical electorate. At the same time, other major trading partners, for instance, the European Union, Australia, Korea or Japan, have continued to negotiate or modernize their PTA network. If we focus on the European Union, there seems to be large enough and

37  Dür et al., above fn 31; S. Baier and J. Bergstrand, ‘Do Free Trade Agreements Actually Increase Members’ International Trade?’ 71(1) Journal of International Economics (2007) 72–​95. 38 L. Baccini, P. Pinto, and S. Weymouth, ‘The Distributional Consequences of Preferential Liberalization: Firm-​Level Evidence’ 71(2) International Organization (2016) 373–​395. 39  US specific studies increasingly provide evidence of such shocks, in particular in relation to China, although trade concessions have occurred in the context of the WTO treaties, there is no PTA between the two countries, see D. Autor, D. Dorn and G. Hanson, ‘The China Shock: Learning from Labor-​ Market Adjustment to Large Changes in Trade’ 8 Annual Review of Economics (2016) 205–​240. 40  The KORUS FTA was the first re-​negotiated trade deal. 41  See, e.g., G. Shaffer, ‘Reconceiving Trade Agreements for Social Inclusion’ in M. Elsig, M. Hahn and G. Spilker (eds), The Shifting Landscape of Global Trade Governance (Cambridge: Cambridge University Press, 2019) 157–​181.

202   Manfred Elsig continued support for negotiating the market-​access type of PTAs. However, when it comes to the ratification of EU trade agreements, we observe occasional setbacks.42 Nevertheless, the EU has recently finalized an agreement with Japan and the ratification process for the EU-​Canada Comprehensive Economic and Trade Agreement (CETA), while highly politicized, is close to the finish line at the time of writing. One reason for continued support might be that trade shocks have not occurred as abruptly in the European Union compared to the alleged China shock in parts of the United States’ rust belt region. In addition, the existence of an established welfare system and the availability of trade-​adjustment programs have allowed European States to better cope with the short-​term pain of restructuring industries. In particular, in the UK, as a result of Brexit, we observe a high legitimacy of trade agreements among the governing elite. By announcing that the UK government is keen to copy-​paste existing EU agreements, it further lent credibility to the European Union’s network of treaties.43 Overall, the European Union is strongly influenced by a pragmatic market-​access-​ seeking agenda which is combined with an expanding agenda on tackling non-​trade concerns (including labour and human rights).44 The politicization then mostly kicks in during the ratification stage and in relation to large trading partners (e.g. Canada MERCOSUR). Overall, we observe that input legitimacy has improved, while output legitimacy remains contested to some degree. If we turn to the third big player in the universe of trade regulation, we see that China has been following a mix of classical PTAs with mainly smaller trading nations in Europe (e.g., Switzerland, Norway) and countries in the Asia-​Pacific region (e.g. Korea, Australia, Singapore, Chile) and most recently as part of a mega-​regional agreement (RCEP). In addition, it has prominently pushed for an infrastructure-​led approach to foster economic integration with its neighbourhood and beyond. The so-​called Belt and Road Initiative stands out as well as the Agenda 2025 through which the Chinese leadership aspires for China to become the leading competitor in many of the industries of the future. At the same time, the Chinese leadership is following a soft power approach through trade by building coalitions using a mix of infrastructure-​related agreements. However, it has also had recourse to demonstrating market power when it comes to countering criticism of its overall economic and political system. Overall, we observe a clear shift from China as a rule-​taker to a rule-​maker in global trade. Applying standards of democratic legitimacy to the Chinese efforts is tricky. The observed political processes hardly meet any standards of input legitimacy. On the output side, there is a lack of studies about the effects of Chinese bilateral trade agreements.

42  In particular groups on the left and right spectrum of politics have increasingly called into question the loss of sovereignty from signing up to international trade treaties that, for instance, involve investor-​ State arbitration systems in which firms can sue governments. See also Chapter 32 of this handbook. 43  See also Chapter 11 of this handbook. 44  However, also the European Union moves towards experimenting with unilateral enforcement, at < https://​trade.ec.eur​opa.eu/​doc​lib/​press/​index.cfm?id=​2204> (last visited 21 December 2020).

regulation of international trade    203 PTA negotiations are usually characterized by concession-​trading and the idea that countries voluntarily select themselves into PTAs. So, there is somewhere a win-​win situation in a world where cooperation is assumed to be a positive sum-​game. However, given the specific interests of the United States, China and the European Union in trade agreements, it seems that power politics may increasingly dominate the diffusion of distinct PTA templates. In addition, the danger of block-​building can no longer be discarded. The USMCA deal provides some illustrations. For instance, the United States insisted on a China-​clause which is intended to make it harder for Canada or Mexico to negotiate a bilateral trade agreement with China, a so-​called non-​market economy.45 Such disguised geopolitical approaches put existing and future PTA partners in an uncomfortable position. They affect the domestic support for PTAs, leading to an overall legitimacy crisis as the policy processes (and interests) in many PTA partners are trumped by the strategic concerns of powerful States. If solely the model treaties and templates of the dominating actors prevail in trade agreements, the public’s perception and acceptance will quickly turn negative.

V.  The Lost Discourse on Democratic Legitimacy in a New Era of China-​ United States Rivalry Beyond the lack of US leadership in the trading system, trade regulation also faces challenges related to an increasing China-​United States rivalry. Early realist international relations theory described conflictual situations emerging in times of power transition.46 Hegemonic stability theories suggested that when the hegemon loses relative power, he turns inwards, and the global system becomes less stable.47 After the Cold War, which was characterized by bipolarity and US-​Soviet rivalry, the 1990s were dominated by US unipolar power. Projections, however, suggest a potential power transition in a few years from now as China may overtake the United States as the most potent trade power. This has been one of the important concerns of the Trump and Biden Administrations, and therefore the United States has attempted to recalibrate its economic relations with China. The past years have seen a remarkable shift towards economic nationalism, and the United States has, under the pretext of pursuing ‘economic security’ started to increase and expand its existing unilateral measures. International institutions are seen again as epiphenomenal to State power. The Trump discourse suggested that the WTO covered agreements and its dispute settlement system had not 45 

See also Chapter 8 of this handbook. A.F.K. Organski, World Politics, 2nd edition (New York: Knopf, 1968). 47  M. Webb and S. Krasner, ‘Hegemonic Stability Theory: An Empirical Assessment’ 15(2) Review of International Studies (1989) 183–​198. 46 

204   Manfred Elsig delivered and that also PTAs had a detrimental effect on the US economy. The Trump Administration called for reform of the WTO, re-​negotiated its most important regional trade deal, put pressure on the European Union to re-​start transatlantic negotiations and finally tried to find a trade deal with China. At the same time, the Trump Administration threatened other countries with the imposition of high tariffs to make concessions in trade talks. While it could well be that overall legitimacy (based on the interpretation of trade deals protecting US workers and bringing back jobs) might eventually rise in the US again, the wider public in other parts of the world are more concerned that mercantilism and power politics have re-​captured US foreign policy. In turn, their assessment of PTAs as legitimate tools might turn more negative. Once power politics bluntly overtake cooperative forms of economic integration, the resulting international law instruments lose their appeal. As to WTO reform, it is noteworthy that WTO Members have reacted to accommodate various concerns of the United States relating to the working of the Appellate Body.48 However, most of the US criticism relates to constraining the autonomy of the Appellate Body and its Secretariat and has been voiced for some time. It is hard to see under what understanding of democratic legitimacy this could be interpreted as a move toward greater legitimacy of international organizations. The slogan of regaining sovereignty might resonate well in key constituencies of conservative and populist parties. However, when countries demand a treaty re-​negotiation or proceed to withdraw from an international organization, they undo the existing status quo compromise. As Stefanie Walter shows with respect to Brexit, disintegration also affects and hampers the sovereignty of the rest of the States party to an agreement. These sovereignty costs are not sufficiently accounted for.49 While some partial solutions are advocated, such as the provisional appeal instrument for WTO dispute settlement, these are transitional at best. The idea that the current legitimacy decline related to a weakening institution for arbitrating disputes could be compensated for by the increased performance of the negotiation arm is more than questionable. The prospects of progress in negotiations remain doubtful in times of superpower rivalry as trade talks in the WTO are increasingly affected by a new trade bipolarity. So, it looks like the WTO achieved its highest level of legitimacy in the late 1990s, and since then, it has been on a downward path, undergoing existential threats. The US power-​based initiatives relegate concerns about democratic legitimacy to the background. Even regular calls for further development-​mainstreaming in the WTO have taken a backseat to geopolitical concerns and the survival of multilateralism.

48 Informal Process on Matters Related to the Functioning of the Appellate Body, Report by the Facilitator H.E. Dr. David Walker (New Zealand), World Trade Organization, JOB/​GC/​222 15 October 2019). 49  S. Walter, ‘The Mass Politics of International Disintegration’, paper presented at Political Economy of International Organizations (PEIO) Conference, Salzburg (2019) at .

regulation of international trade    205 As far as China is concerned, it has signalled publicly that it is willing to fill the gap of leadership in multilateralism in the Trump era.50 Given the shock status in many Western democracies in early 2017, this announcement was positively received. However, it became obvious that this remained largely a declaration without a clear and constructive agenda. Few concrete proposals were put forward by China on how to re-​ invigorate multilateralism and address the crises in the WTO. At the same time, China has intensified its collaboration network through the Belt and Road Initiative, which has been received with varying enthusiasm in Europe. The very different reactions of European countries vis-​à-​vis this infrastructure-​centred project exemplify the degree of uncertainty and unpreparedness with which governments engage with a growing and more powerful China. It is hard to speculate how future rule-​making advocated by China through different trade venues will impact the overall acceptance of China’s move from rule-​taker to rule-​maker. From a democratic legitimacy perspective, there are many questions about how inclusive this process will be, how much it will be based on participation, and how much it will focus on global goods instead of narrowly defined national interests. Overall, Chinese definitions of legitimate governance will further clash with established Western-​type concepts. Output legitimacy will likely trump input legitimacy. As the power balance shifts towards non-​democracies and illiberal democracies, the attention to legitimacy concepts inspired by democratic countries’ perspectives will also further fade.

VI. Conclusions This chapter has discussed the current developments in global trade regulation through the prism of various concepts of democratic legitimacy. The diagnosis concluded that both the goalposts of legitimate governance are shifting and that concerns about democratic legitimacy have been relegated to the backseat as power politics again dominate in global trade. Anti-​globalism has been on the rise in many Western countries as witnessed by the election of Donald Trump in the United States and Boris Johnson in the United Kingdom.51 The ‘America First’ approach has led to re-​negotiations of bilateral trade deals by the United States following a mercantilist logic. The Biden Administration’s focus on ‘Build Back Better’ might not look that different when it comes to trade. In addition, the role of the WTO in international economic law has been drastically reduced by paralysing the dispute settlement system. China has also been actively pursuing its trade policy strategies through various venues, ranging from multilateral institutions to regional trade pacts (e.g. RCEP), bilateral deals and infrastructure-​led initiatives. The

50 

WEF talk by Chinese President Xi Jinping (17 January 2017). J. Bisbee, L. Mosley, T.B. Pepinsky. and P. Rosendorff, ‘Decompensating Domestically: The Political Economy of Anti-​Globalism’ 27(7) Journal of European Public Policy (2020) 1090–​1102. 51 

206   Manfred Elsig current trade clash between the United States and China might redefine how we see and assess the legitimacy of trade agreements in the future. Looking ahead, the growing rivalry between the United States and China risks further destabilizing the WTO as expectations about the role of the multilateral organizations among key WTO Members further diverge. Even if the approach by the Biden Administration softens to some degree vis-​à-​vis the WTO, it looks like both the US and China will increasingly compete to dominate rule-​making and engage in more aggressive forms of venue-​shopping. This will lead to further politicization. For the WTO, an organization that has been built on the premise of consensus decision-​making, this development is not good news for overall input legitimacy and will hardly make the performance of the WTO better (output legitimacy). Most scenarios suggest that a decline in the authority of the WTO will continue, and public opinion in many WTO constituencies will increasingly cast doubt on the legitimacy of the organization. Even if the Biden Administration pursues a more diplomatic path, the damage remains done. As to PTAs, there is a real danger that different spheres of influence develop and processes to strengthen regional blocks accentuate. Forms of coercive diffusion of templates (trade rules) could become more dominant than in the past.52 This would deprive countries of existing influence to shape PTA design and lower the perceived degree of legitimacy of PTA negotiation outcomes. The work of many years of calibrating the WTO to different demands and to foster the development of PTAs is certainly undermined by the power struggles we observe. In the end, the potential for international trade regulation, international law, and international institutions is also defined by how much WTO Members are willing to constrain themselves and abstain from unilateral measures. Recent debates about using national security exemptions to protect industries and ‘weaponizing’ interdependence show how political authorities might increasingly use tools to control market decisions. As Henry Farrell and Abraham Newman argue, governments with influence over central nodes of network structures can ‘weaponize networks to gather information or choke off economic and information flows, discover and exploit vulnerabilities, compel policy change, and deter unwanted actions’.53 The strategic use of these central nodes will certainly increase, even though the impact in a world with integrated supply chains will also yield negative consequences for those controlling the nodes. The crises of the WTO, the power politics and geopolitical interests dominating PTAs, and the increasing temptation to use unilateral tools for trade regulation have led to a lowering of expectations about the democratic legitimacy of current trade institutions. However, unfettered protectionism, trade conflicts and the COVID pandemic could also be a wake-​up call for re-​building and strengthening international institutions to

52  T. Allee and M. Elsig, ‘Are the Contents of International Treaties Copied and Pasted? Evidence from Preferential Trade Agreements’ 63(3) International Studies Quarterly (2019) 603–​613. 53  H. Farrell and A. Newman, ‘Weaponized Interdependence: How Global Economic Networks Shape State Coercion’ 44(1) International Security (2019) 42–​79.

regulation of international trade    207 reap the benefits of cooperation. Any alternative to a minimal rules-​based global trade system is worse.

Further reading A. Dür and M. Elsig (eds), Trade Cooperation: The Purpose, Design and Effects of Preferential Trade Agreements (Cambridge: Cambridge University Press, 2015) M. Elsig, B. Hoekman, and J. Pauwelyn (eds), Assessing the World Trade Organization: Fit for Purpose? (Cambridge: Cambridge University Press, 2017) M. Elsig, R. Polanco, and P. Van den Bossche (eds), International Economic Dispute Settlement: Demise of Transformation? (Cambridge: Cambridge University Press, 2021) P. Mavroidis and A. Sapir, China and the WTO: Why Multilateralism Still Matters (Princeton: Princeton University Press, 2021) J. Tallberg, K. Bäckstrand, and J-​ A. Scholte (eds), Legitimacy in Global Governance (Oxford: Oxford University Press, 2018)

Pa rt I I

B I L AT E R A L A N D R E G IONA L T R A DE AG R E E M E N T S

Chapter 8

North Ame ri c a n Trade: NAF TA a nd US- ​C aused Gl oba l T ra de Tensions Robert Brookfield and Lori Di Pierdomenico

I. II. III. IV.

Introduction North American trade: NAFTA and beyond (1994–​2017) Trump administration: TPP withdrawal and NAFTA renegotiation Trump administration: ​breakdown of the rule of law? A. Use of unilateral tariffs B. United States undermining the enforceability of the NAFTA and the WTO agreements V. Updating traditional North American trade issues through NAFTA 2.0 A. Automotive products B. Investment C. Cross-​border trade in services D. Agriculture E. Intellectual property F. Government procurement G. State-​owned enterprises VI. Newer issues reflected in NAFTA 2.0 A. Sectoral issues addressed in new ways B. Digital trade C. Labour and environment D. Greater inclusion E. Structural innovations

212 212 215 216 217 218 220 221 222 224 225 227 227 229 230 230 230 231 233 234

212    Robert Brookfield and Lori Di Pierdomenico VII. Important issues that did not change A. Bi-​national review of trade remedies B. Temporary entry C. Cultural industries exception VIII.  Conclusion

235 235 236 236 237

I. Introduction This chapter will focus on developments in North American trade since NAFTA entered into force in 1994 through its recent renegotiation/​replacement.1 Because NAFTA involves Canada, the United States, and Mexico, these countries will be the focus of the analysis. As the chapter will illustrate, despite criticisms over the years from political leaders and various special interest groups, the history of North American free trade,2 from the entry into force of NAFTA to its recent renegotiation, demonstrates the vitality, dynamism, and resilience of the North American trading system.

II.  North American trade: NAFTA and beyond (1994–​2017) NAFTA came into force during the successful conclusion of the Uruguay Round of the GATT and the establishment of the WTO. Despite changes in political parties of the US and Canadian governments to parties that had initially been skeptical of the agreement,3 the NAFTA entered into force and endured. As one of the first FTAs involving major 1 The

Protocol Replacing the North American Free Trade Agreement stipulates that the new agreement ‘supercedes’ NAFTA (para 1), a term that is somewhat ambiguous in treaty terminology. However, other elements of the Agreement suggest that the Protocol ‘terminates’ NAFTA and replaces it with the new Agreement. See for example Annex 14-​C (Legacy Investment Claims and Pending Claims), paras 3 and 5. Given treaty practice is to refer to one’s own country first, three official versions of the Protocol referring to each Party first are available: see Canadian text of the Protocol, at < https://​www.intern​atio​ nal.gc.ca/​trade-​comme​rce/​ass​ets/​pdfs/​agr​eeme​nts-​acco​rds/​cusma-​aceum/​cusma-​000-​proto​col.pdf > (last visited 14 March 2021). US text of the Protocol is at < https://​ustr.gov/​sites/​defa​ult/​files/​files/​agr​ eeme​nts/​FTA/​USMCA/​Text/​USM​CA_​P​roto​col.pdf > (last visited 14 March 2021); Mexican text of the Protocol is available at < http://​dof.gob.mx/​2020/​SRE/​T_​MEC​_​290​620.pdf > (last visited 14 March 2021). To limit confusion in this chapter, we will call the new agreement ‘NAFTA 2.0’, which entered into force on 1 July 2020. 2  The Canada-​US FTA, while still technically in force, has been suspended while NAFTA is in force. 3  US President Bill Clinton insisted on adding two side agreements on labour and the environment, while Canadian Prime Minister Chrétien, elected after promising to renegotiate the deal, did not succeed

North American trade: NAFTA    213 economies (in particular the United States), NAFTA served as a template for a number of other WTO Members seeking similar arrangements with their trade partners.4 In North America, for a long time after NAFTA entered into force, there were no significant developments in trade and investment law between the Parties, except for decisions in investor-​State litigation and a few State-​State dispute settlement cases.5 The Parties focussed instead on multilateral negotiations at the WTO, or bilateral or regional negotiations with other parties. The biggest engagements were by Mexico, which by 2005, had in force several significant FTAs, including with Japan, the European Union, and the European Free Trade Association (EFTA, composed of Switzerland, Norway, Iceland, and Lichtenstein).6 At that point, in addition to NAFTA, Canada had only FTAs in force with three smaller economies.7 The United States was party to six FTAs, the most significant being the regional agreement with Central America and the Dominican Republic.8 The pace of successful FTA negotiations picked up somewhat from 2005 to 2015, with the United States entering into agreements with seven countries,9 Mexico nine,10 and Canada seven.11 Negotiations actively continued thereafter with a number of other parties, notably the European Union, with which Canada entered into an agreement that has been provisionally applied since 2017,12 and with which the United States tried for some time to reach agreement.13 Most significantly for North America, all three North in doing so. See, e.g., The Canadian Encyclopaedia, Canada and NAFTA, at < https://​www.thec​anad​iane​ ncyc​lope​dia.ca/​en/​arti​cle/​north-​ameri​can-​free-​trade-​agreem​ent-​nafta > (last visited 7 April 2021). 4  Not

surprisingly, the new North American trade deal is viewed similarly. See J. Zumbrun, ‘New North American Trade Deal Seen as Template for Deals to Come: USMCA’s provisions could find their way into other trade deals, based on Trump administration’s reworking of NAFTA’ Wall Street Journal (14 December 2019). 5  There was also active dispute settlement under the NAFTA Chapter 19 bi-​national panel mechanism (over 120 decisions, including multiple remands, ​see < http://​worldt​rade​law.net/​databa​ses/​naft​a19.php > (last visited 14 March 2021). However, as that mechanism provides for an application by a bi-​national panel of domestic law, it does not advance international law obligations on the point. 6  Mexico’s Free Trade Agreements, (Congressional Research Service: 25 April 2017), at < https://​fas.org/​ sgp/​crs/​row/​R40​784.pdf > (last visited 14 March 2021). 7  Chile, Costa Rica, and Israel, at < https://​www.intern​atio​nal.gc.ca/​trade-​comme​rce/​trade-​agr​eeme​ nts-​acco​rds-​comm​erci​aux/​agr-​acc/​index.aspx?lang=​eng > (last visited 14 March 2021). 8  The other agreements were with Israel, Jordan, Australia, Chile, and Singapore, at < https://​ustr.gov/​ trade-​agr​eeme​nts/​free-​trade-​agr​eeme​nts > (last visited 14 March 2021). 9   Bahrain, Morocco, Oman, Peru, Panama, Colombia and South Korea. 10  Colombia, Israel, Peru, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. 11 European Free Trade Association (EFTA), Peru, Colombia, Jordan, Panama, Honduras and South Korea. 12  Notice concerning the provisional application of the Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part, at < https://​eur-​lex.eur​opa.eu/​legal-​cont​ent/​EN/​TXT/​PDF/​?uri=​CELEX:220​17X0​916(02)&from=​EN > (last visited 14 March 2021). 13  The US-​EU agreement was tentatively named the ‘Transatlantic Trade and Investment Partnership’ or TTIP. The TTIP negotiations were launched in 2013 and ended without conclusion at the end of 2016 (some of the European Union’s negotiating texts are available at < https://​trade.ec.eur​opa.eu/​doc​lib/​ press/​index.cfm?id=​1230/​ > (last visited 14 March 2021).

214    Robert Brookfield and Lori Di Pierdomenico American countries, together with nine other countries, concluded negotiations for the Trans-​Pacific Partnership (TPP) in 2015, signed it in early 2016 and moved energetically towards its ratification.14 The TPP was US President Obama’s top trade priority for 2016, signalled as ‘the heart’ of his trade agenda.15 With the election of President Trump, the trajectory of trade negotiations in North America changed significantly. In January 2017, the United States ‘permanently withdr[ew]’ from the TPP.16 According to the express terms of the TPP, the agreement could not enter into force without the United States, bringing into doubt whether the agreement would be implemented at all.17 Additionally, the NAFTA Parties began to renegotiate that FTA in 2017, leading to signature of ‘NAFTA 2.0’18 in November 2018. While NAFTA renegotiations were ongoing, Mexico and Canada (together with other TPP Parties, except the United States) effectively incorporated by reference the vast majority of the TPP into the re-​branded ‘Comprehensive and Progressive TPP’ (CPTPP), that came into force on December 2018 for six of the remaining eleven CPTPP countries, including both Canada and Mexico.19 The United States took other significant trade actions during the NAFTA 2.0 negotiations that affected North American trade, and in some instances were meant to create leverage in the negotiations. Among other actions, it imposed unilateral tariffs on steel and aluminum, threatened tariffs on automotive products, and blocked reappointments to the WTO’s Appellate Body. We will touch on these issues in the context of North American trade, noting that they are also dealt with in other chapters of this book.20

14 See

timeline at < https://​www.intern​atio​nal.gc.ca/​trade-​comme​rce/​trade-​agr​eeme​nts-​acco​rds-​ comm​erci​aux/​agr-​acc/​cptpp-​ptpgp/​timeli​ne_​n​egot​iati​ons-​chron​olog​ie_​n​egoc​iati​ons.aspx?lang=​eng > (last visited 14 March 2021). 15  Office of the Trade Representative, The President’s Trade Agenda: 2016, at < https://​ustr.gov/​sites/​ defa​ult/​files/​2016-​Trade-​Pol​icy-​Age​nda.pdf > (last visited 14 March 2021). 16 The Memorandum on Withdrawal of the United States from the Trans-​ Pacific Partnership Negotiations and Agreement of 23 January 2017 further elaborated that it is the policy of President Trump’s Administration to ‘represent the American people and their financial well-​ being in all negotiations, particularly the American worker and to create fair and economically beneficial trade deals that serve their interests’, 82 FR 8497, at < https://​www.govi​nfo.gov/​cont​ent/​pkg/​DCPD-​201700​064/​ html/​DCPD-​201700​064.htm > (last visited 5 May 2021). 17   See Article 30.5.2 of the TPP—​signatories representing at least 85 per cent of combined GDP or the original signatories in 2013 need to ratify the agreement for the TPP to enter into force. Since the United States has well over 15 per cent of that GDP, the TPP could not enter into force without them. 18  The new North American trade agreement refers to all three North American countries in the title of the agreement. Therefore, it carries a different name in each of the North American countries, as treaty practice is to refer to one’s own country first. In Mexico, for example, the Agreement is referred to as ‘T-​MEC’ for Tratado entre los Estados Unidos Mexicanos, los Estados Unidos de América y Canadá. In Canada, ‘CUSMA’ or the Canada-​United States-​Mexico Agreement. In the United States, ‘USMCA’ refers to the United States-​Mexico-​Canada Agreement. 19  The six original CPTPP Parties are Australia, Canada, Japan, Mexico, New Zealand and Singapore. Vietnam joined shortly thereafter in January 2019; see timeline, above fn 14. 20  See Chapters 17, 21 and 37 of this Handbook.

North American trade: NAFTA    215

III.  Trump administration: TPP withdrawal and NAFTA renegotiation As mentioned above, one of the first major decisions by President Trump when he took office in January 2017 was to ‘permanently withdraw’ the United States from the TPP. In a letter dated 30 January 2017, the United States advised New Zealand, as Depositary of the TPP, of their intention not to become a Party to the TPP and that the ‘United States has no legal obligations arising from its signature on February 4, 2016’.21 The letter does not address principles of good faith and consent to be bound under international law.22 The US withdrawal from the TPP was followed quickly by all three Parties to NAFTA initiating renegotiation of that agreement on 16 August 2017 after ‘repeated threats’ by US President Trump to withdraw from NAFTA.23 However, it is not clear under US law if a US President could indeed withdraw from NAFTA without Congressional approval.24 The US withdrawal from TPP and insistence on reopening NAFTA was not surprising in light of highly charged comments made about both agreements during the presidential campaign. For example, then-​candidate Trump blamed NAFTA for wiping out US manufacturing jobs because it allowed companies to move their factories to Mexico.25 In reality, researchers have found mixed effects on the US labour force. Some industries have shrunk, while others have grown.26 That said, the two primary goals for the United States in the re-​negotiation of NAFTA were to modernize the Agreement and to ‘rebalance’ it by improving the US trade balance and reducing the 21 

M.L. Pagan, Acting United States Trade Representative, Executive Office of the President letter to the TPP Depositary, Ministry of Foreign Affairs and Trade (30 January 2017), at < https://​ustr.gov/​sites/​ defa​ult/​files/​files/​Press/​Relea​ses/​1-​30-​17%20U​STR%20Let​ter%20to%20TPP%20Dep​osit​ary.pdf > (last visited 14 March 2021). 22  Articles 11 (Means of Expressing Consent to be Bound by a Treaty), and 12 (Consent to be Bound by a Treaty Expressed by Signature) of the VCLT. 23 ‘NAFTA Renegotiations: What You Need to Know’, Centre for International Governance Innovation, at < https://​www.cig​ionl​ine.org/​artic​les/​nafta-​ren​egot​iati​ons-​what-​you-​need-​know > (last visited 16 April 2020). The North American Free Trade Agreement (NAFTA), Summary (Congressional Research Service, 25 May 2017), at < https://​fas.org/​sgp/​crs/​row/​R42​965.pdf > (last visited 26 April 2020). 24  The President’s Authority to Withdraw the United States from the North American Free Trade Agreement (NAFTA) Without Further Congressional Action (Congressional Research Service: 5 March 2019), at < https://​fas.org/​sgp/​crs/​row/​R45​557.pdf > (last visited 14 March 2021), at 6: ‘. . . applying relevant methods of interpretation does not provide a clear answer as to whether the President possesses plenary constitutional authority to terminate US obligations under NAFTA’ (last visited 14 March 2021). 25  The North American Free Trade Agreement (NAFTA), Summary (Congressional Research Service: 25 May 2017), at < https://​fas.org/​sgp/​crs/​row/​R42​965.pdf > (last visited 14 March 2021). 26  The Economic Policy Institute said in 2013 that some 700,000 jobs had been lost as production moved to Mexico, with California, Texas, and Michigan among the worst hit states. See J. Faux, NAFTA’s Impact on US Workers’ Economic Policy Institute: Working Economics Blog (9 December 2013). A 2014 report from the Peterson Institute for International Economics said that at most 5 percent of dislocated US workers could be traced to imports from Mexico. It said over four million Americans lose their jobs each year by plant shutdowns and mass layoffs, regardless of trade.

216    Robert Brookfield and Lori Di Pierdomenico trade deficit with the NAFTA countries (notably, through tightening rules of origin for which the United States has ‘significant trade imbalances’, like autos and auto parts).27 Refocusing or renegotiating the NAFTA was not a trade priority for Canada, which had not questioned its viability or utility for Canadians.28 In 2017, by the time NAFTA was clearly on the US President’s chopping block, Prime Minister Trudeau’s only direction to his Trade Minister on North American trade was merely on strengthening cooperation under the current rules.29 For its part, despite some downsides resulting from NAFTA, the Mexican government has never wavered in its support.30 The Mexican economy expanded at an average annual rate of 2.57 percent since 1994, according to the World Bank,31 though falling well short of expectations.32 Further, some sectors (probably most importantly, corn production) suffered significantly from US competition.33 But on balance, the consensus view in Mexico appears to be that NAFTA assisted efforts to diversify the Mexican economy, which depended heavily on oil exports.34 It also helped the country to industrialize and build a manufacturing base.

IV.  Trump administration: b ​ reakdown of the rule of law? President Trump’s position on trade deals in general has been described as ‘combative economic populism and protectionism’.35 Others might call it the politics of the 27  2018

Trade Policy Agenda and 2017 Annual Report of the President of the United States on the Trade Agreements Program’, Office of the United States Trade Representative, at 9. 28  Mandate letters set out the priorities for the Minister in their particular portfolio. The Agreement is not even mentioned in any of Prime Minister Justin Trudeau’s mandate letters to his trade Ministers during the relevant period: dated 12 November 2015, 1 February 2017 and 28 August 2018, respectively archived at < https://​pm.gc.ca/​en/​all-​archi​ved-​mand​ate-​lett​ers > (last visited 14 March 2021). 29  Mandate Letter to Minister Freeland, 1 February 2017, at < https://​pm.gc.ca/​en/​all-​archi​ved-​mand​ ate-​lett​ers > (last visited 14 March 2021), the only mention of NAFTA provides that the Minister should ‘[s]‌trengthen trilateral North American cooperation with the United States and Mexico. This will involve working with the relevant Ministers to enhance North America’s global competitiveness and facilitate trade and commerce within the continent, including with respect to the North American Free Trade Agreement.’ 30  D. Agren, ‘The View from Mexico on NAFTA: It’s Complicated’ CIGI (12 October 2017), at < https://​www.cig​ionl​ine.org/​artic​les/​view-​mex​ico-​nafta-​its-​comp​lica​ted > (last visited 26 April 2020). 31 Ibid. 32  As stated by Fernando Tur Dávila, Economic Development Secretary in Nuevo León state, an industrial hub, ‘Mexico overestimates the positive effects of NAFTA. The growth due to the trade deal hasn’t been good . . . An increase in well-​being for the majority of the population has not yet arrived. There are 55 million poor people.’ Agren, above fn 30. 33  J.-​B. Velut, ‘NAFTA’s Developmental Impact on Mexico: Assessment and prospects’ IdeAs. Idées d’Amériques (1 Automne 2011), Intégrations dans les Amériques, para 26, at < https://​journ​als.open​edit​ ion.org/​ideas/​7 1?lang=​en#text > (last visited 14 March 2021). 34  Ibid. at para 45. 35  See C. Lima, ‘Trump Calls Trade Deal “A Rape of Our Country” ’ Politico (28 June 2016).

North American trade: NAFTA    217 breakdown of the rule of law. Two areas to highlight in this connection are use of unilateral tariffs and undercutting of the enforceability of trade agreements.

A. Use of unilateral tariffs President Trump made no secret of his desire to use impermissible tariffs (at the WTO or under FTAs) to allegedly protect US producers and as a weapon to compel trading partners to agree to unfavourable terms in trade agreements.36 His Administration did so primarily through three means. Section 232 of the Trade Expansion Act of 1962 gives the President broad authority to restrict imports in the interest of ‘national security’ by imposing tariffs.37 The power has been used to impose tariffs on steel and aluminum from all but certain excluded countries, whose application appears to have been based primarily on political considerations.38 For example, within North America, Canada and Mexico were first excluded, then included as an attempt to gain ‘leverage’ in the NAFTA 2.0 negotiations, then excluded once again following industry and congressional pressure.39 During the NAFTA 2.0 negotiations, the US Administration also threatened to impose tariffs on automotive products, which it ultimately did not do. The United States has since specifically committed to Mexico and Canada in binding treaty commitments not to impose tariffs on import volumes below specified thresholds.40 Section 301 of the Trade Act of 1974 allows the United States Trade Representative (USTR) to suspend trade agreement concessions if it unilaterally determines that a US trading partner engages in ‘discriminatory or unreasonable practices that burden or restrict US commerce.’ This power has not yet been used against North American trading partners.41 However, Section 301 has been the basis of US tariffs imposed 36  See, e.g., the summary in the European Union’s Opening Oral Submission in United States –​Steel and Aluminum Tariffs, at < https://​trade.ec.eur​opa.eu/​doc​lib/​docs/​2019/​novem​ber/​tradoc​_​158​427.pdf > (last visited 30 August 2021), paras 12-​16. 37  Trump Administration Tariff Actions: Frequently Asked Questions (Congressional Research Service: 22 February 2019), at < https://​fas.org/​sgp/​crs/​row/​R45​529.pdf > (last visited 14 March 2021). 38  For example, Australia was excluded from tariffs on steel and aluminum, apparently because of a political understanding: see J. Norman, ‘Donald Trump, Malcolm Turnbull hit deal to exclude Australia from new U.S. tariffs’ ABC News (Australian Broadcasting Corp.) (9 March 2018). Tariffs on steel from Turkey were increased and then reduced, apparently in part due to issues related to detention of an American pastor, see J. Deaux, ‘Trump Cuts Tariffs on Turkish Steel in Half, to 25 %’ Bloomberg (17 May 2017). Also, exclusions for Argentina and Brazil based on their agreement to voluntary export restraints were withdrawn because of currency changes, see J. Deaux ‘Trump Expands Aluminum, Steel Tariffs to Some Imported Products’ Bloomberg (24 January 2020). 39  Section 232 Investigations: Overview and Issues for Congress (Congressional Research Service: updated 2 April 2019), 7–​9, at < https://​fas.org/​sgp/​crs/​misc/​R45​249.pdf > (last visited 14 March 2021); M. Blanchfield and J. McCarten, ‘U.S. Agrees to Lift Steel and Aluminum Tariffs from Canada, Mexico’ Financial Post (17 May 2019). 40  Ibid., at 5. 41  Although the USTR, Ambassador Lighthizer, suggested in testimony to the US Congress that it could be used in that way—​see ibid. at 45.

218    Robert Brookfield and Lori Di Pierdomenico on China,42 and threat of tariffs on other countries if they proceed with proposed digital taxes.43 While increasing its use of unilateral tariffs, the Trump Administration further aggressively pursued an increasing number of trade remedy actions (anti-​dumping, countervail, and safeguards) within North America.44 These actions are not unprecedented, unlike the 232 and 301 tariff increases. They have been done in a framework of rules permitted by the WTO and other agreements (notably Chapter 19 of NAFTA, which allows anti-​dumping and countervail decisions to be challenged before a bi-​national panel). Indeed, while the specific trade remedy tools have been a long-​standing irritant between Canada and the United States45 there was never any suggestion that the tools themselves were unavailable to any WTO Member. And while those actions are generally initiated by private interests, the Trump Administration has been particularly aggressive in its use of them.46

B. United States undermining the enforceability of the NAFTA and the WTO Agreements State-​ to-​ State dispute settlement (SSDS) in NAFTA has been a longstanding problem, given that for some time it has been rendered ineffective when blocked by a defending Party. That mechanism, contained in Chapter 20 of the Agreement, provides that disputes are heard by ad hoc panels (rather than a permanent court structure) which offers flexibility and cost-​efficiency in a system with a limited number of disputes.47

42  Enforcing U.S. Trade Laws: Section 301 and China (Congressional Research Service: updated 26 June 2019), at < https://​fas.org/​sgp/​crs/​row/​IF10​708.pdf > (last visited 14 March 2021). 43  For USTR documents on the first investigation, initiated against France in 2019, see < https://​ustr. gov/​issue-​areas/​enfo​rcem​ent/​sect​ion-​301-​inv​esti​gati​ons/​sect​ion-​301-​fran​ces-​digi​tal-​servi​ces-​tax > (last visited 14 March 2021). For announcement of a broader investigation in June 2020 see < https://​ustr.gov/​ about-​us/​pol​icy-​offi​ces/​press-​off​i ce/​press-​relea​ses/​2020/​june/​ustr-​initia​tes-​sect​ion-​301-​inv​esti​gati​ons-​ digi​tal-​servi​ces-​taxes > (last visited 14 March 2021). 44   Canadian products were subjected to only two investigations between 2005 and 2014, but 11 times between 2015 and 2018, see C. Fournier, ‘Forget NAFTA. America’s Trade War with Canada Has Already Started’ Financial Post (26 January 2018). 45  Notably regarding softwood lumber—​see, for example, the summary at < https://​www.random​leng​ ths.com/​in-​depth/​us-​can​ada-​lum​ber-​trade-​disp​ute/​#Timel​ine > that covers the dispute since 1982 (last visited 14 March 2021). 46  For example, for the first time in 25 years it ‘self initiated’ an investigation (on aluminum sheet from China), at < https://​www.lexol​ogy.com/​libr​ary/​det​ail.aspx?g=​5fc19​4a0-​c3ec-​4889-​8d9d-​de841​a297​74f > (last visited 14 March 2021). 47  S. Lester, I. Manak and A. Arpas, ‘Access to Justice: Fixing NAFTA’s Flawed Dispute Settlement Process’ SSRN (5 October 2017), at < https://​pap​ers.ssrn.com/​sol3/​pap​ers.cfm?abst​ract​_​id=​3047​876 > (last visited 14 March 2021).

North American trade: NAFTA    219 While NAFTA Chapter 20 had been invoked successfully several times in NAFTA’s earliest days,48 this changed with the NAFTA sugar dispute in the early 2000’s. The United States was able to block the constitution of a dispute settlement panel in that case because there was no composed roster of panellists. The process for selecting panellists under NAFTA Article 2011(1) requires the disputing Parties to agree, or failing that, to appoint a panel through drawing lots from the roster of appointed panelists. However, at that time, the roster was not in place. Moreover, NAFTA Article 2011(3) provides a right of unlimited peremptory challenges of a Party to proposed panellists who are not on the roster.49 That potential problem was not initially fixed in NAFTA 2.0 when signed in 2018.50 It was fixed the following year in modifications agreed to by the three Parties following US internal negotiations between the US Administration and US Congress. Significantly, the Parties also created bilateral labour enforcement mechanisms.51 On entry into force of NAFTA 2.0, rosters and related rules of procedure were immediately established.52 The SSDS difficulties experienced in the NAFTA context have been replicated in the WTO, where the United States has also blocked appointments to the Appellate Body. While some have viewed the US complaints about the Appellate Body as legitimate,53 the lack of US engagement to address the issues alarms many. Some have argued that it may be that the Trump Administration wished to use the unilateral remedies provided under 48  Panel decision of 2 December 1996, Tariffs Applied by Canada to Certain U.S. Origin Agricultural Products (CDA-​95-​2008-​01); Panel decision of 6 February 2001, U.S. Safeguard Action Taken on Broomcorn Brooms from Mexico (USA-​97-​2008-​01); US-​Cross-​Border Trucking Services and Investment (USA-​98-​2008-​01). 49  Article 2011(3) of NAFTA: ‘Panelists shall normally be selected from the roster. Any disputing party may exercise a peremptory challenge against any individual not on the roster who is proposed as a panelist by a disputing party within 15 days after the individual has been proposed.’ 50 S. Lester and I. Manak, ‘Enforcement in the USMCA: The Draft SAA and the Trump Administration’s Elevation of Section 301k’ CATO Institute (June 2019), at < https://​www.cato.org/​ blog/​enfo​rcem​ent-​usmca-​draft-​saa-​trump-​admi​nist​rati​ons-​elevat​ion-​sect​ion-​301 > (last visited 14 March 2021). 51  USMCA: Amendment and Key Changes, (Congressional Research Service, updated 30 January 2020), at < https://​crs​repo​rts.congr​ess.gov/​prod​uct/​pdf/​IF/​IF11​391 > (last visited 14 March 2021). 52  Decision No.1 of the Free Trade Commission of the CUSMA, T-​MEC, USMCA (‘Agreement’), at (last visited 14 March 2021). 53 See D. Gantz, ‘An Existential Threat to WTO Dispute Settlement: Blocking Appointment of Appellate Body Members by the United States’ 2018 Arizona Legal Studies: Discussion Paper No.18-​26, at 3–​4: namely (i) alleged overreaching by the Appellate Body in a manner that conflicts with the WTO Dispute Settlement Understanding’s requirement that the panel and Appellate Body not ‘add to or diminish the rights and obligations provided in the covered agreements;’ (ii) the practice of the Appellate Body of discussing issues which are not before it, creating obiter dicta that is in the US view unwarranted; (iii) other Members’ use of the Appellate Body to obtain through litigation benefits that they could not have achieved through negotiations; (iv) Appellate Body review of facts and of a Member’s domestic law de novo; and (v) the Appellate Body’s alleged insistence that its reports be treated as precedent. It is worth noting as well that the United States sees the covered agreements as contractual, while other Members and some observers see them more as akin to a constitution. The United States has also objected to the recent practice of the Appellate Body and its secretariat permitting Appellate Body Members, whose terms have expired, to continue sitting on cases for which they were originally empaneled.

220    Robert Brookfield and Lori Di Pierdomenico Section 301(b) of the Trade Act of 1974,54 without regard to WTO rules. It is also possible that the United States hoped to avoid WTO litigation altogether as a result of its imposition of Section 232 tariffs and/​or quotas on imported steel and aluminum for ‘national security’ reasons.55 Importantly in this connection, there has been a rise in invoking the national security exception by other WTO Members in their respective claims.56 How the United States responds to multilateral efforts to preserve the WTO dispute settlement system moving forward will be significant in assessing its real motives.57 The United States’ recent monumental shift in policy toward supporting a waiver of the Trade-​Related Intellectual Property Rights (TRIPs) Agreement at the WTO to suspend patent protections on COVID-​19 vaccines may be indicative of a renewed support of the multilateral system.

V.  Updating traditional North American trade issues through NAFTA 2.0 The original NAFTA and the WTO Agreement negotiations overlapped,58 and covered similar topics. Notably, the Dunkel Draft put forward in December 199159 formed the basis of both the WTO Agreement and several elements of the NAFTA text.60 These WTO provisions cover general obligations in areas of trade in goods,61 services, 54

  Under which the Executive Branch (USTR) is empowered to take action under ‘an act, policy, or practice of a foreign country [that] is unreasonable or discriminatory and burdens or restricts United States commerce’. 55   Gantz, above fn 53. 56   Panel Report, Saudi Arabia –​Intellectual Property Rights, terminated; Panel Report, Russia –​Traffic in Transit, adopted 26 April 2019; see Chapter 27 of this handbook. 57  See Chapter 5 of this handbook. 58  NAFTA negotiations began formally in 1991 and concluded in August 1992. NAFTA was signed in December 1992, and entered into force in January 1994. The Uruguay Round negotiations took place from 1986 to 1993, with the new WTO Agreement entering into force in January 1995. 59  This text was intended to reflect the results of negotiations and to provide an arbitrated solution to issues on which negotiators failed to agree. As described at < https://​www.wto.org/​engl​ish/​thewt​ o_​e/​whati​s_​e/​tif_​e/​fact​5_​e.htm > (last accessed May 3, 2021), the draft became the basis of the final agreement. 60  For example, in intellectual property, NAFTA Chapter 17 is largely based on the Dunkel Draft even when the WTO TRIPS Agreement diverged. Article 20 of the TRIPS Agreement and Article 1708(10) of NAFTA, for instance, are very similar. While the Dunkel Draft and NAFTA refer to an obligation not to ‘encumber’ a trademark with special requirements, the final WTO Agreement added a requirement that the special requirement not be ‘unjustifiably encumber[ing]’. 61  As a question of terminology this chapter uses the term ‘goods’ for physical products. This is in keeping with the NAFTA drafting convention and general usage in North American FTAs. In contrast the WTO Agreement, as with GATT 1947, and some other trade agreements (such as those entered into by the European Union) generally use the term ‘product’ for physical goods. WTO panel reports have

North American trade: NAFTA    221 intellectual property, and government procurement. NAFTA provisions on those issues, plus on investment, in turn formed the basis of most FTAs that Canada, Mexico, and the United States put in their subsequent trade agreements, including the TPP.62 Many provisions did not significantly change in NAFTA 2.0, including ‘core’ non-​ discrimination obligations related to goods, services, and investment. Others changed largely in keeping with the outcome of the TPP. This section elaborates on some areas of development from the 1990s through to NAFTA 2.0, with an emphasis on novel elements in NAFTA 2.0 specifically.

A. Automotive products Arguably the most economically significant changes in NAFTA 2.0 are to the rules of origin for automotive products. Automotive production has always been significant in North America, presently accounting for almost US $300 billion in trilateral trade,63 with special rules dating back to at least 1965 through the Canada-​US Auto Pact, the Canada-​US FTA, then NAFTA.64 NAFTA effectively created a single North American market for light vehicles, increasing the ability to have integrated supply chains across the three countries. In part due to that flexibility, the focus of automotive investment generally moved from Canada and the northern United States to the southern United States and Mexico.65 This trend led to much criticism, particularly by unions in Canada examined the difference between these terms, finding that ‘product’ has a potentially broader meaning to include services (see Panel Report, China –​Publications and Audiovisual Products, adopted 19 January 2010, paras 7.1188 and 7.1340). Goods, used for example in Article 1.1(a)(1)(iii)) of the SCM Agreement, refers to property or possessions (see Appellate Body Report, US –​Softwood Lumber IV, adopted 17 February 2004, paras 57-​67). ‘Products’ refer to physically trade goods, although in some cases there is some inconsistency in usage, notably in the TRIPS Agreement where there are several references to ‘goods’ and ‘services’. 62 

See Chapter 10 of this handbook. for approximately US $290 billion worth of trade in passenger vehicles and parts in 2017, in D. Alanis, et al., ‘Preparing for North America’s New Auto Trade Rules’ BCG (1 November 2018). 64 The Agreement Concerning Automotive Products Between the Government of Canada and the Government of the United States of America, 4 ILM 302, reduced tariffs between the two countries. It imposed various requirements on production for the ‘big three’ major automotive producers in North America (Ford, Chrysler, and General Motors). The history of the Agreement is set out in some detail in Appellate Report Body Canada –​Autos, adopted 19 June 2000, paras 8-​14, and in particular fn 17. That case effectively prohibited the Auto Pact as it applied in Canada, and Canada removed those measures effective 18 February 2001, at < https://​www.wto.org/​engl​ish/​trato​p_​e/​disp​u_​e/​case​s_​e/​ds13​9_​e.htm > (last visited 14 March 2021). For a general history of automotive trends in North America starting with the Auto Pact see NAFTA and Motor Vehicle Trade, (Congressional Research Service, updated 28 July 2017), at < https://​crs​repo​rts.congr​ess.gov/​prod​uct/​pdf/​R/​R44​907 > (last visited 14 March 2021). See also S. A. Silver, ‘NAFTA’s Rules of Origin for Automobiles: A Need for Reform’ 62 Fordham Law Review (1994) 2245. Note in particular the discussion at 2247–​2248 of the controversy regarding valuation that existed in the original Canada-​US FTA, which was at least partially resolved in NAFTA. 65  Regarding movement from Canada and the Northern United States in the 1990s and early 2000s, see The Auto Industry Moving South: An Examination of Trend, 2003, at < http://​www.cargr​oup.org/​ 63  Accounting

222    Robert Brookfield and Lori Di Pierdomenico and the United States. Those unions supported NAFTA renegotiations that would in various ways increase wages and labour rights in Mexico.66 That led to substantial changes in rules for determining origin (and therefore lower tariffs) for those automotive products. In particular, there was an increase in the value that needed to be produced in North America, a requirement that a high level of North American steel and aluminum be used in their production, and a requirement that a significant percentage of the value of a vehicle must be produced by workers earning at least US $16 per hour.67 It is significant also in the context of threats by President Trump to impose charges on imports of Canadian and Mexican vehicles, that agreements related to those potential charges became effective in November 2018 in connection with the signature of NAFTA 2.0. The agreements committed the United States not to impose additional charges on Canadian and Mexican exports of vehicles or auto parts up to specified thresholds,68 which were significantly higher than existing volumes.69

B. Investment NAFTA 2.0 contains its predecessor’s core disciplines on investment protection, but with CPTPP-​like clarifications reflecting lessons learned from the case law. For instance, a clarification to the national treatment and most-​favoured nation treatment (MFN) principles helps to interpret the term ‘in like circumstances’. It stipulates that the obligation to treat other NAFTA investors no less favourably ‘in like circumstances’ requires a consideration of whether the treatment distinguishes between foreign investors and their investments on the basis of ‘legitimate public welfare objectives’.70 wp-​cont​ent/​uplo​ads/​2017/​02/​The-​Auto-​Indus​try-​Mov​ing-​South-​An-​Exam​inat​ion-​of-​Tre​nds.pdf > (last visited 14 March 2021), and regarding movement to Mexico see The Growing Role of Mexico in the North American Automotive Industry, 2016, at < http://​www.cargr​oup.org/​wp-​cont​ent/​uplo​ads/​2017/​02/​The-​ Grow​ing-​Role-​of-​Mex​ico-​in-​the-​North-​Ameri​can-​Aut​omot​ive-​Indus​try-​Tre​nds-​Driv​ers-​and-​Foreca​ sts.pdf > (last visited 14 March 2021). 66  NAFTA and Motor Vehicle Trade, above fn 64, with UAW comments at 20 and link to full comment at 21; report from UNIFOR, a Canadian Union with significant automotive workers ‘Update on Auto and NAFTA’, at < https://​www.uni​for.org/​sites/​defa​ult/​files/​docume​nts/​docum​ent/​2017-​02-​updat​e_​on​_​aut​ o_​an​d_​na​fta-​en.pdf > (last visited 14 March 2021). 67  See, e.g., the Canadian Government’s summary of those changes, at < https://​intern​atio​nal.gc.ca/​ trade-​comme​rce/​trade-​agr​eeme​nts-​acco​rds-​comm​erci​aux/​agr-​acc/​cusma-​aceum/​auto.aspx?lang=​eng > (last visited 14 March 2021); see also analysis in Alanis et al, above fn 63. 68  Mexico-​US side letter, at < https://​ustr.gov/​sites/​defa​ult/​files/​files/​agr​eeme​nts/​FTA/​USMCA/​Text/​ MX-​US_​Sid​e_​Le​tter​_​on_​232.pdf > (last visited 14 March 2021); Canada-​US side letter, at < https://​ustr. gov/​sites/​defa​ult/​files/​files/​agr​eeme​nts/​FTA/​USMCA/​Text/​Sid​e_​Le​tter​_​Tex​t_​on​_​232​_​CA-​US_​R​espo​ nse.pdf > (last visited 14 March 2021). 69  Alanis et al., above fn 63, which says that the export of vehicles and parts by Mexico and Canada to the United States are ‘currently well below’ the limits set out in the side letters. 70 Articles 14.4.4 and 14.5.3 of NAFTA 2.0 provide: ‘For greater certainty, whether treatment is accorded in ‘like circumstances’ under this Article depends on the totality of the circumstances, including whether the relevant treatment distinguishes between investors or investments on the basis of legitimate public welfare objectives.’

North American trade: NAFTA    223 Similarly, the provision on minimum standard of treatment is now expressly tied to customary international law and reflects a shared understanding between the Parties on what comprises customary international law71 for the purposes of the requirement of guaranteeing a minimum standard of treatment. The Parties also attempted defining the concepts of ‘fair and equitable treatment’ and ‘full protection and security’ under customary international law. However, the clear articulation of these concepts was no doubt hampered by the evolving nature of what might constitute customary international law.72 The most significant change to investment protection is in respect of the investor-​State Dispute Settlement (ISDS) mechanism. An investor of a Party may now only submit a claim to arbitration as provided for in NAFTA 2.0’s Annexes 14-​C (Legacy Investment Claims and Pending Claims), 14-​D (Mexico-​United States Investment Disputes), and 14-​E (Mexico-​United States Investment Disputes Related to Covered Government Contracts). For Legacy Investment Claims, an investor of Mexico, Canada or the United States has three years to bring a claim under NAFTA 2.0 for substantive breaches under NAFTA, after which time the NAFTA Parties’ consent to arbitrate NAFTA investment claims expires.73 Going forward, only the United States and Mexican investors will have the ability to bring ISDS claims under the substantive provisions of NAFTA 2.0.74 However, such challenges can be brought on limited grounds: they may only pursue a NAFTA Party for post-​establishment breaches of the national treatment and MFN provisions, as well as claims for breaches of the expropriation and compensation provision.75 The time allowed for initiating a claim is expanded under NAFTA 2.0 to four years.76 There is also a new requirement to pursue local remedies for 30 months in the case where the claimant or the enterprise has already initiated a proceeding before domestic courts or administrative tribunals.77 Investors in some sectors, such as oil and gas, telecommunications and transportation service sectors where US or Mexican investors have a contract with their host government may bring a claim for any substantive 71 

Annex 14-​A to NAFTA 2.0 (Customary International Law). Article 14.6 of NAFTA 2.0 provides: ‘For greater certainty, the mere fact that a Party takes or fails to take an action that may be inconsistent with an investor’s expectations does not constitute a breach of this Article, even if there is loss or damage to the covered investment as a result.’ 73  Annex 14-​C (Legacy Investment Claims and Pending Claims) to and Article 3 of NAFTA 2.0. 74 Canadian investors maintain investment protections vis-​ à-​ vis Mexico through the CPTPP. That agreement contains a modernized version of NAFTA’s ISDS mechanism, under which CPTPP investors, including investors of Mexico and Canada, may still bring a claim for substantive breaches of substantively similar investment disciplines. 75 Annex 14-​ D (Mexico-​ United States Investment Disputes) to and Article 14.D.3 (1) and (2) of NAFTA 2.0 (Submission of a Claim to Arbitration). NAFTA allowed pre-​establishment claims for national treatment, MFN, minimum standard of protection and performance requirements obligations. 76  Annex 14-​D (Mexico-​United States Investment Disputes) to and Article 14.D.5 (Conditions and Limitations on Consent) of NAFTA 2.0. Under NAFTA, the limitation period was capped at three years. 77  Annex 14-​D (Mexico-​United States Investment Disputes) to and Article 14.D.5(b) of NAFTA: ‘the claimant or the enterprise obtained a final decision from a court of last resort of the respondent or 30 months have elapsed from the date the proceeding in subparagraph (a) was initiated’. 72 

224    Robert Brookfield and Lori Di Pierdomenico breach of the Investment Chapter, although still subject to a three year time limitation for bringing a claim.78 Overall, it remains to be seen whether the ‘improvements’ to the NAFTA 2.0 ISDS mechanism will yield a net benefit to the NAFTA Parties. Certainly, Canada is generally viewed as being better off without ISDS under NAFTA 2.0.79 While investment claims can still be brought by governments under the regular SSDS process of Chapter 31, governments can be expected to be more restrained in bringing claims or defining the scope of their claims. Further, the remedy for success is unlikely to be financial compensation to the aggrieved investor.

C. Cross-​border trade in services The NAFTA Parties capitalized on the negotiated TPP outcomes, which improved