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From the Editor’s Mailbag

Published on October 4, 2016        Author: 

The following are two letters received from Claus Dieter Ehlermann and Robert Howse respectively.

“I am writing to you as Editor of the European Journal of International Law about the recent article by Robert Howse, ‘The World Trade Organization 20 Years On: Global Governance by Judiciary’ in the EJIL, Volume 27, No. 1 (2016). At page 41, Professor Howse devotes a paragraph to the resignation of Debra Steger, the first Director of the Appellate Body Secretariat, in late March 2001.

As Chair of the Appellate Body at that time, I would like to offer some facts to avoid misunderstandings.

First, as WTO Director of the Information and Media Relations Division, Keith Rockwell, said at the time, Professor Steger resigned for personal reasons. Second, the Appellate Body Members have always held her in the highest respect, she has always been very loyal and respectful to us, and we remain very close friends to this day. Third, there was absolutely no linkage whatsoever to the EC-Asbestos amicus brief issue. All seven Appellate Body Members and Professor Steger were in complete agreement on this issue and case all the way through.”

C-D.E.

“We should all be grateful to Claus-Dieter Ehlermann, former Member of the WTO Appellate Body, and one of its original Members, for clearing the air concerning the Appellate Body’s relationship with its Secretariat, and particularly the head Debra Steger, during the turbulent formative years that were marked by, inter alia, the controversy over amicus curiae briefs.  I have always had excellent amicable professional relations with both Dr. Ehlermann and his former Appellate Body colleagues, as well as with Ms. Steger; given my high esteem for all involved it is comforting to be assured that the controversy in question did not in any way test or strain a vital working relationship that was very likely crucial to the Appellate Body’s early success as a true trade court.”

R.H.

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Detecting Prohibited Subsidies and Determining Continued Compliance: WTO Panel Rules (Again) for the US in the Airbus Dispute with EU

Published on September 26, 2016        Author: 

On 22 September 2016, the United States Trade Representative (USTR) scored another victory in its long-running dispute with the European Union (EU) over subsidies provided by certain EU Member States to large civil aircraft manufacturer Airbus. The USTR sought to prove that 36 challenged EU measures remained inconsistent with its duty to comply with the rulings and recommendations issued by the WTO Dispute Settlement Body (DSB) after adopting the original 30 June 2010 Panel Report in this case.  Specifically, the US challenged four types of subsidies allegedly made by the EU and/or certain EU Member States to Airbus for continuing inconsistency with the Subsidies and Countervailing Measures (SCM) Agreement: 1) launch aid or member State financing; 2) equity infusions for the corporate restructuring of Aerospatiale and Deutsche Airbus; 3) infrastructure related measures of German and Spanish authorities; and 4) research and technological development funding provided by the EU and certain member States.

The 22 September 2016 WTO Panel Report European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft [hereafter, “2016 Panel Report”] found, among others, that: 1) French, German, Spanish, and UK launch aid or member State financing for the Airbus A350XWB constituted actionable specific subsidies (2016 Panel Report, para. 7.1.c.ii.); 2) the EU and certain member States have failed to comply with their obligation to withdraw the subsidies for other Airbus aircraft (2016 Panel Report, para. 7.1.c.ix.); 3) the EU continues to be in violation of Articles 5(c) and 6.3(a)(b) and (c) of the SCM Agreement by failing to comply with previous recommendations and rulings of the WTO Dispute Settlement Body in the original 30 June 2010 Panel Report (2016 Panel Report, para 7.2); 4) to the extent that the challenged EU measures remain inconsistent with the SCM Agreement, they have nullified or impaired benefits accruing to the US under that Agreement (2016 Panel Report, para. 7.3); and 5) the EU and certain member States failed to bring 34 of its 36 challenged measures into conformity with their obligations under the SCM Agreement (2016 Panel Report, para. 7.4).

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Back to the Lawless Jungle? The Vulnerability of EU Anti-Dumping Measures against China after December 2016

Published on June 15, 2016        Author: 

In a previous post, I argued that the European Union would violate its WTO obligations under the WTO Anti-Dumping Agreement (ADA) if EU anti-dumping investigators will continue to apply ‘non-market economy’ (NME) treatment of Chinese exports in AD investigations under the EU Anti-Dumping Regulation (ADR) after December 11, 2016. It is on that day that Art.15(a)(ii) of China’s Accession Protocol (CAP) expires. Until that date, Art.15(a)(ii) provides WTO members with the right to use non-standard price comparison methodologies to determine whether and to what extent Chinese exports have been ‘dumped’ onto a third country market. The provision has served as a legal basis for a highly effective trade defense remedy that allows for the imposition of extraordinarily steep anti-dumping duties against Chinese exports, and Chinese exports of steel products and solar panels in particular. After the expiration of the said provision, the adoption of EU AD measures against China that are based on the use of non-standard price and cost comparison methodologies will be highly vulnerable to legal challenge in WTO Dispute Settlement (DS) proceedings in Geneva. This conclusion, however, does not prejudge the legality of AD measures that the EU has (or will have) adopted against Chinese producers prior to the December deadline. The question about the post-2016 legality of already existing EU AD measures that are “not based on a strict comparison with domestic prices or costs in China” (Art.15(a)(ii) CAP), is particularly relevant in context of the rising amount of new EU AD measures and investigations against Chinese producers of steel and solar panels that the EU has imposed and initiated in the last 18 months. It is this very question that is subject to analysis in this post.

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The USA and Re-Appointment at the WTO: A ‘Legitimacy Crisis’?

Published on May 27, 2016        Author: 

In recent weeks, it has been reported (for example, here, here, here and here) that the WTO faces a ‘legitimacy crisis’ in the wake of US opposition to the re-appointment to a second, four-year term of Mr Seung Wha Chang (South Korea) to the Appellate Body. In a joint statement of 12 May, US Permanent Representative to the WTO, Ambassador Michael Punke, and USTR General Counsel Tim Reif declared:

The United States is strongly opposed to appellate body members deviating from their appropriate role by restricting the rights or expanding trade agreement obligations […] The United States will not support any individual with a record of restricting trade agreement rights or expanding trade agreement obligations.

In their view, the Appellate Body member exceeded his powers during his mandate, and breached Art. 3(2) of the Dispute Settlement Understanding, which states that ‘[the] Appellate Body cannot add to or diminish the rights and obligations provided in the [agreements of the WTO].’ In other words, Mr Chang is accused of undue judicial activism.

In response, South Korea has reportedly declared its opposition to the re-appointment of any Appellate Body members. As a result, their number would fall from seven to five by June, since another member, Ms Yuejiao Zhang (China), finishes her second term on 31 May, and the Selection Committee has been unable to propose a candidate that would enjoy the membership’s consensus. All six sitting members of the Appellate Body have publicly supported Professor Chang (see here) praising his ‘independence and integrity’ and voicing their disquiet about the implications of the US position. The USA has chastised this move as another instance of undue judicial interference.

This standoff raises questions of general interest on procedures for the appointment of ‘judges’ Read the rest of this entry…

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China’s View of International Litigation: Is the WTO Special?

Published on November 13, 2015        Author: 

Yesterday, Geraldo Vidigal put up a really interesting post looking at recent patterns of use of the World Trade Organization’s dispute settlement system. One thing that was particularly striking to me was the extent to which China has participated in the WTO dispute settlement system given its previous position on resolution of disputes by international tribunals. Geraldo’s chart of the latest 100 disputes at the WTO shows that only the United States, the EU and Japan have initiated more cases at the WTO in recent years than China (with Japan initiating just one more case than China in this period). Given that the WTO system is the most widely used inter-state dispute settlement system, it might not even be an exaggeration to say that: in terms of numbers of cases brought before international tribunals by states, China is one of the most enthusiastic state users of international tribunals! Of course, that enthusiasm is only before one particular system.

In October 2010 I posted here on EJIL:Talk a piece titled “Is China Changing its View of International Tribunals?“in which I noted that China’s view on international tribunals more broadly seemed to be changing. At the time, I noted China’s participation in the Kosovo Advisory Opinion at the ICJ, which was the first time that the People’s Republic appeared in oral hearings before the ICJ. I also pointed out China’s participation, around the same time, in the written and oral phases of International Tribunal for the Law of the Sea’s (ITLOS) first advisory proceedings –  the Responsibilities and obligations of States sponsoring persons and entities with respect to activities in the Area (Request for Advisory Opinion submitted to the Seabed Disputes Chamber). In 2014, China submitted a substantial written statement in the Request for an advisory opinion submitted by the Sub-Regional Fisheries Commission (SRFC) though it did not take part in the oral hearings.

Of course, we have non-participation by China with respect to the United Nations Convention on the Law of the Sea Annex VII arbitration initiated by the Philippines (in respect of which the tribunal issued an award on jurisdiction a couple of weeks ago). Read the rest of this entry…

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WTO: The First 500 Disputes and the Last 100 Disputes

Published on November 11, 2015        Author: 

Yesterday, the WTO dispute settlement system received its 500th formal request for consultations. Because members may only request a WTO panel after unsuccessful consultations, filing such a request is the first step in the initiation of WTO disputes. For this reason, the request for consultations, without being per se a contentious act, signals the willingness of the member requesting consultations to take a dispute to adjudication. Between 1995 and 2015, therefore, the WTO received almost 24 disputes a year – an impressive amount for a purely inter-state dispute settlement system. Confirming the tendency of increased participation of developing countries, the 500th request was filed by Pakistan and targeted a measure imposed by South Africa.

I took this opportunity to undertake a small and very simple (some might say crude) quantitative exercise: who are currently the main WTO litigators? If we go back to 1995, the US and the EU will clearly dominate (the WTO helpfully provides a map of disputes). However, China only joined the WTO in 2001, and Russia in 2012. Thus, a more helpful exercise is to look at the last few disputes. Read the rest of this entry…

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A Bacon Dispute at the WTO? International Trade Regulation and the WHO Decision on Red Meat and Processed Meat

Published on October 28, 2015        Author: 

To the chagrin of meat-eaters worldwide, the International Agency for Research of Cancer (IARC) – the cancer agency of the World Health Organization – has just published a summary of over 800 studies, some of which decades-long, on the link between consumption of red meat and processed meat and cancer. The summary concludes that consumption of red meat is probably linked to cancer, and that consumption of processed meat is demonstrably linked to bowel cancer. Specifically, every 50 gram portion of processed meat consumed daily increases the risk of bowel cancer by a significant 18%. An average sausage weighs about 70-80 grams.

On the basis of this research, IARC experts decided to add red meat and processed meat to the list of potential cancer-inducing agents. Red meat, i.e. ‘all mammalian muscle meat, including, beef, veal, pork, lamb, mutton, horse, and goat’, was classified under Group 2A, as ‘probably carcinogenic to humans’. More worryingly, processed meat, including all red meat ‘that has been transformed through salting, curing, fermentation, smoking, or other processes to enhance flavour or improve preservation’, was classified as ‘carcinogenic to humans’ (Group 1).

With this decision, processed meat now ranks together cancer-wise not only with the usual suspects against which healthcare professionals advise us – alcoholic beverages, tobacco smoking, and solar radiation – but also with less pleasant substances such as mustard gas, arsenic, and plutonium. To leave no room for doubt, the Q&A clarifies that among the new known carcinogens are ‘hot dogs (frankfurters), ham, sausages, corned beef, and biltong or beef jerky as well as canned meat and meat-based preparations and sauces’. (Surprisingly, bacon was left out of this particular clarification.)

Few people, of course, were under the illusion that these products were good for your health. However, their classification as known carcinogens has significant public health implications, which may lead governments worldwide to consider adopting measures to prevent consumption, or at least excessive consumption, of processed red meat. As with regulatory measures aimed at lowering consumption of tobacco and alcohol, we can expect the new anti-bacon measures to become the subject of international litigation under trade and investment dispute settlement.

The question of how to give weight to health and other public interest concerns under investment law is still a tricky one. Under the law of the World Trade Organization (WTO), on the other hand, I believe the issue is essentially settled: once a decision of an internationally recognized scientific body such as the IARC exists to ground policies, WTO law will in principle pose no obstacle to even-handed measures aimed at reducing consumption or even removing the product from the market entirely. Read the rest of this entry…

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Authors’ Concluding Response: Assessing the Case for More Plurilateral Agreements

Published on October 2, 2015        Author: 

Editor’s Note:  This is the authors’ concluding response in a series of posts discussing the article in the current issue of EJIL Vol. 26 (2015) No 2, by Bernard Hoekman and Petros Mavroidis. The original post is here. See also the  posts  discussing the article by Junji Nakagawa, Diane Desierto, and Geraldo Vidigal.

We have profited a lot reading the responses to our article by our three colleagues. Undoubtedly, this discussion will help us streamline our thinking going forward, since we believe the discussion regarding the institutional design of the WTO is about to start. Indeed, the passage from the Tokyo round ‘GATT clubs’ approach to the ‘WTO single undertaking’ was not discussed in depth among the institutional stakeholders. It is high time it takes place now, and this is what we hope our contribution will help happen.

We would like at the outset to set the record straight regarding property rights on this issue. We claim no originality in making a case for more plurilateral agreements (PAs). The main contribution on this front is a paper by Robert Z. Lawrence (2006), to which we refer a number of times in our article, and which, surprisingly had been left unanswered. Lawrence brought together discussion that preceded him, and provided a clear framework to think in concrete policy terms about clubs within the multilateral system. Academic literature on ‘clubs’ or ‘codes’ (the term used during the Uruguay round, in the GATT, and more generally, “minilateral” liberalization and cooperation goes back to the 1980s). A notable contribution on this score is B. Yarborough and R. Yarborough (1992), Cooperation and Governance in International Trade: The Strategic Organizational Approach.

Our basic point, simply put is that there are three factors that all bolster the case for PAs, and the ensuing ‘club of clubs’ approach originally advocated by Lawrence almost ten years ago. These factors are:

  • the proliferation of PTAs (preferential trade agreements) following the advent of the WTO, that is, at a time when tariffs are at an all-time low. Modern PTAs deal to a significant extent with regulatory matters;
  • the geo-political dynamics associated with the rise of China and other emerging economies; and
  • the fact that the trade agenda increasingly centers on regulatory differences, an area where the ‘single undertaking’ approach has not proved to be much of a success.

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Whose Club Is It Anyway? PTAs 2.0 and the Creeping Non-Trade Rules

Published on October 1, 2015        Author: 

Editor’s Note: This post responds to Bernard Hoekman and Petros Mavroidis’ article in the current issue of EJIL Vol. 26 (2015), No. 2, titled “WTO ‘à la carte’ or ‘menu du jour’? Assessing the case for more Plurilateral Agreements”. For a post by the authors of the article, introducing their piece, see here. For other comments see here and here. For the authors’ concluding response, see here.

Bernard Hoekman and Petros Mavroidis’s article comes at an important time for the WTO. Alternatives to the multilateral trade talks have always existed, both outside the WTO (PTAs) and within it (PAs). However, the repeated failure of Doha talks to deliver meaningful results is leading PTAs to take an ever more important role. Their capacity to displace WTO rules has so far been limited, in no small part because they do not cover trade between the largest WTO Members. This is about to change, however, if TTIP and TPP really get off the ground – one could add to the list the China-led Regional Comprehensive Economic Partnership (RCEP). We may call these agreements PTAs 2.0. Both the US and the EU have been signing similar deals with third parties over the past two decades. A PTA 2.0 between the two would amount to a fait accompli to everyone else regarding a number of issues. To avoid a fragmentation of global rules, Hoekman and Mavroidis propose to expand the scope of intra-WTO plurilateral agreements, and incorporate the rules conveyed in PTAs 2.0 into WTO law, as PAs if necessary.

I should begin by saying that I am generally suspicious of the argument that the WTO has somehow become too big for consensus decision-making. It is not the world’s Cubas, Venezuelas and Nicaraguas that are halting trade talks (even if they can delay results for a few hours). If we are to go beyond consensus, it seems reasonable to state whose veto it is we expect to overcome. In this case, it seems that it is mainly large developing countries – in particular India, who has repeatedly been playing spoilsport in trade talks, but perhaps China and Brazil as well – who will be given an option between accepting the incorporation of PTAs 2.0 into the WTO or being left out of trade rules 2.0.

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Flexibility or Gridlock? The Promises and Perils of Popularizing Plurilateral Agreements at the WTO

Published on October 1, 2015        Author: 

Editor’s Note: This post responds to Bernard Hoekman and Petros Mavroidis’ article in the current issue of EJIL Vol. 26 (2015), No. 2, titled “WTO ‘à la carte’ or ‘menu du jour’? Assessing the case for more Plurilateral Agreements”. For a post by the authors of the article, introducing their piece, see here. For other comments see here and here . For the authors’ concluding response, see here.

Professors Bernard Hoekman and Petros Mavroidis’ EJIL article WTO ‘a la carte’ or ‘menu du jour’? Assessing the Case for More Plurilateral Agreements provokes much thought on opportunities for achieving better flexibility and neutralizing gridlocks at the WTO. The article was published soon after WTO Director General Roberto Azevedo lamented the organization’s failure to reach a work programme under the Doha Development Agenda (DDA) under its 31 July 2015 deadline, which could conceivably impede trade negotiations at the next WTO Ministerial Conference at Nairobi in December 2015. Professors Hoekman and Mavroidis provide a brilliant exposition of the factors to be considered in using the plurilateral agreement (PA) route while attempting to build multilateral agreement on more frontiers of world trade.

While I completely agree with Professors Hoekman and Mavroidis that more ‘variable geometry’ is needed now to breathe life into the trade negotiations mandate of the WTO, I do wonder whether devoting organizational resources at this stage to develop a PA ‘code of conduct’ with transparent terms on the mode of negotiating issue-specific PAs, is something that the WTO can politically afford at this stage of institutional stagnation and negotiations inertia over the DDA. A PA duly approved by the WTO membership under Art. X.9 of the WTO Agreement could indeed be a viable path to achieve harmonization and discipline over non-tariff measures, but how could this be harnessed to incentivize reaching a multilateral agreement among WTO members? If the two remaining PAs to date – on civil aircraft and government procurement – have not been universally ratified or widely opted into by WTO members to date, how can this be done under a strategically-crafted PA (as Hoekman and Mavroidis appear to suggest in proposing more usage of this route under an upfront code of conduct addressing the scope of coverage, e.g. an issue for WTO Plus, or a WTO Minus X issue on regulatory policy cooperation)?

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