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Anti-Fragmentation Strategies: the Curious Case of the EU and World Trade Law

Published on February 20, 2015        Author: 

The investor-State dispute settlement provisions of the EU’s proposed new free trade agreements with the US (the Transatlantic Trade and Investment Partnership – TTIP), Canada (the Comprehensive Economic and Trade Agreement – CETA) and Singapore (the EU – Singapore Free Trade Agreement) are receiving considerable coverage in the popular media as well as within academic circles (note the recent EJIL: Talk! posts here and here). However, these agreements include not only investor-State dispute settlement but also inter-State dispute settlement provisions which should be equally interesting to international lawyers. On the one hand these provisions provide incentives to resolve trade disputes involving big trading players bilaterally, outside the WTO’s multilateral system, while on the other hand their provisions also reflect an attempt to address problems of fragmentation within the international legal system.

As with many areas of international law, world trade law has historically been concerned with the dangers of fragmentation. While the WTO may be viewed as a ‘fragment’ of the international legal system, within the WTO there is particular worry over the role of new free trade agreements. Why, when you have a multilateral institution with a comparatively clear set of obligations and relatively effective dispute system, would you conclude free trade agreements which contain substantively similar (though often wider ranging) obligations? The fear here is of what Jagdish Bhagwati called the ‘spaghetti bowl’ – a mass of regional or bilateral agreements concluded without consideration for each other or their implications for trade, potentially increasing costs, regulation and distorting conditions of competition for traders.

The concern is not only economic (i.e. that free trade agreements will undermine the non-discriminatory backbone of the current trade settlement), it is also legal: the ‘spaghetti bowl’ can distort the coherence of a legal system and its attendant expectation of certainty as much as it can distort the conditions of competition in trade. Nonetheless, institutional deadlock at the WTO has led to a number of free trade agreements being concluded globally. Until now, cases which have involved overlapping free trade agreement and WTO obligations have been resolved on the system in question’s own terms: for example, the Argentina v Brazil, Pork Subsidies MERCOSUR tribunal using more detailed WTO provisions to interpret a Decision (para. 57) or the Appellate Body in Mexico – Soft Drinks acknowledging NAFTA obligations but not seeing any basis for adjudicating upon them directly (paras. 54-56). Read the rest of this entry…