Transcript INTERNATIONAL LAW FOR SUSTAINABLE DEVELOPMENT

Introduction to
International Commercial Law
(Trade and Investment)
Dr. Markus W. Gehring, MA (Cantab), LL.M. (Yale), Dr. jur.
(Hamburg)
Vice-Dean Research and Jean Monnet Chair ad personam
in Sustainable Development Law
1
Introduction to International Trade Law
Lecture Outline:
1. GATT/International trade history
2. The World Trade Organization
3. The Institution
4. Key concepts – Tariffs, Most Favourite Nation and
National Treatment
5. Dispute Settlement
6. Reform – Trade negotiations
2
1. The General Agreement on Tariffs and Trade
(GATT) / International trade history
- one of the oldest areas governed by international
rules
- multi-layered trading system: bilateral, regional,
intra-regional and global
- provisional set of rules
- originally 23 contracting parties
- enacted 1 January 1948
- terminated 31 December 1995
- negotiated eight multilateral trade "rounds"
- reduced tariffs, attempted to reduce other
trade barriers
- converted int’l trade to a rules-based system
3
2. The World Trade Organization
- Objectives ?
- Main functions:
implementation, administration and operation
of the covered agreements;
negotiation of trade agreements;
settlement of trade disputes;
review of trade policies;
fostering coherence in policy making
- Pillar structure: GATT, GATS, TRIPS and
horizontal agreements: DSU, TPRM and
plurilateral agreements
4
3. The Institution
5
4. Key Concepts - Tariffs
-Tariffs (reciprocal and mutually
advantageous basis)
- Actual value tariffs
- Tariff schedules (Art. II GATT)
- Tariffication of other barriers to trade
- Brussels Convention on Tariff
Classification
- Harmonized system of customs
classification
6
4. Key Concepts – Most Favoured Nation
Principle
- Art. I GATT – Any advantage, favour,
privilege, or immunity in negotiated
concessions extends to all WTO
members.
- Unconditionally, like products, de facto
discrimination
- Rationale of MFN
- Important exceptions: Grandfathered
preferences, Art. XXIV – creation of
RTAs, Enabling clause, waivers such as
for the Cotonou Agreement.
7
4. Key Concepts – National Treatment
- Art. III GATT prohibits discrimination of
foreign producers vis-à-vis domestic
producers
- Early GATT jurisprudence: a formally
origin neutral taxation can violate
Art. III:2 GATT
- Centrality of likeness
- Non-fiscal measures (Art III:4 GATT)
- Relationship with Art. XX GATT
8
5. Dispute Settlement
- Integrated dispute settlement system
based on Articles XXII and XXIII GATT
and the DSU
- Function of the DSB
- Coverage: goods, services and intellectual
property
- Procedures: strict time-limits
- Adoption of panel reports: negative
consensus principle
- Appellate Body Review
- Non-compliance with recommendations
9
5. Dispute Settlement
- Consultation phase
- Panels (Art. 6-8 DSU)
- Panel process (Art. 12 DSU)
- Panels time periods (Appendix 3)
- Appeals Process (Art. 17 pp. DSU)
- Adoption of reports
- Compliance
- (Cross)retaliation
10
6. Trade negotiations
- Ministerial Conference  between Green
rooms and NGO scrutiny
- Consensus decision making (Art. XI
WTO)
- Panels time periods (Appendix 3)
- Trade negotiation committee
- Doha-Round: Agriculture as the most
contested issue (initially also competition
and investment)
- Draft Hong Kong Ministerial Declaration
11
2. Investment




Trade Related Investment Measures (TRIMS)
Physical and Portfolio Investment
Bilateral Investment Treaties (BITs)
Multilateral Attempts
- OECD - MIA
- WTO
- New EU Competence?
12
Investment Law
An Emerging Network of Int’l Investment Agreements (IIAs):



Current int’l legal framework governing foreign
investment is a vast network of over 2500 IIAs.
In 2005, 1,891 (75.8 %) in force, + 232 other
IAs with investment provisions, + other
regionals.
While other treaties and norms intersect and
interact, IIAs are the primary public
international law instruments that govern
foreign investment.
13
Investment law


IIAs seek to create ‘favourable conditions’ or a ‘stable framework’ for
investment, for economic development, by impose binding obligations
on States re: treatment of foreign investment:
(i) a wide asset-based definition of investment;
(ii) guarantees of non-discrimination (national and most-favourednation treatment);
(iii) a minimum standard of treatment often expressed as ‘fair and
equitable treatment’ coupled with an obligation not to impose arbitrary
or discriminatory measures;
(iv) the right to transfer investments and profits out of the host state;
and
(v) compensation for measures tantamount to expropriation.
A smaller number of IIAs provide for rights of entry for foreign
investment, prohibitions on performance requirements, and ‘umbrella
clauses’ under which a state agrees to observe its commitments to
foreign investors.
14
Investment law



In most IIAs, foreign investors enforce these rights through investor-state
arbitration provisions under which the state provides its general consent to
arbitrate claims under the IIA.
As of December 2005, 135 IIAs claims had been brought before ICSID.
Altogether by 2005, there were 229 known investment treaty arbitrations.
Over two thirds of the claims were filed after 2001.
SD concerns were first raised in 4 controversial claims under
Chapter Eleven of the North American Free Trade Agreement
(NAFTA):
- Ethyl v. Canada: export and interprovincial trade ban
prohibitions on MMT, a fuel additive;
- Azinian v. Mexico: cancellation of a municipal waste concession;
- Metalclad v. Mexico: closure of a hazardous waste site; and
- Methanex v. United States: Californian ban on the use of MTBE,
another fuel additive.
15
Trade Law and Sustainable Development
Lecture Outline:
1. Sustainable Development and Globalisation
2. Foundations – Trade and Environment
3. Foundations – Trade and Development
4. Integrated Trade Law and Policy-Making
5. Sustainable Development in WTO Disputes
6. Conclusion
16
1. Sustainable Development
… and Globalisation



Building on the 1992 UN Conference on Environment and
Development (Rio ‘Earth Summit’)
Addressing economic interdependence in the 2002
Johannesburg World Summit on Sustainable Development.
“Globalization offers opportunities and challenges for sustainable
development. We recognize that globalization and interdependence are
offering new opportunities to trade, investment and capital flows and
advances in technology, including information technology, for the
growth of the world economy, development and the improvement of
living standards around the world. At the same time, there remain
serious challenges, including serious financial crises, insecurity,
poverty, exclusion and inequality within and among societies.”
17
2. Foundations – Rapid Evolution in Law and Policy
on Trade, Environment & Development

Physical links (impacts)
- Complex relationships
- Neither good nor bad (shades of grey)

Legal links
- Three distinct bodies of international law
- Areas of intersection and integration

Institutional links
- WTO vis-à-vis MEA Secretariats and IGOs,
- UNEP, UNDP
- National and international NGOs
18
2. Foundations – Different Perspectives

The trade perspective


The environment perspective


Economic growth through trade will solve all environmental
problems
The environment is threatened by the status quo
The development perspective

Poverty needs first and foremost policy attention
19
2. Foundations – Global Environmental Management
Principal MEAs



Early Agreements
- CITIES
- UNCLOS
- Basel Convention
- Montreal Protocol
Trade Measures:
- Trade ban
- Protection provisions
- Trade restrictions
- Trade prohibition 3. Part
Rio Agreements
- CBD
- Desertification
- Climate Change
- Cartagena Protocol: GMO trade
restriction
- Kyoto Protocol: Trade links
New Generation
- PICs
- POPs
New Generation
- Trade restriction
- Trade ban
20
2. Foundation – Relevant WTO Provisions
WTO Agreement

Trade in Goods

GATT

TBT

SPS
Trade in Services

GATS
Trade in IPRs

TRIPS



Preamble; Art. V. 2
Art. III, XX GATT
Art. 2.2, 2.6 TBT
Art. 2.1, 5 SPS

Art. XIV GATS

Art. 7, 30 TRIPS



And Doha Negotiations
21
2. Foundations – Trade and Development






Growing membership of developing
countries
New Development Theory
GATT: Article XVIII
GATT: Part IV
Enabling Clause
The WTO Agreements
22
4. Integrated Trade Law and Policy-Making



Development that can meet the needs of the present
without compromising the needs of future generations
(Brundtland Report)
Reconciliation of development and environmental
objectives (ICJ in Gabcikovo-Nagymaros Case)
Balance / integration / mutual support between economic
growth, social justice and environmental protection
objectives (WTO AB Report from US – Shrimp Dispute)
23
4. Integrated Trade Law and Policy-Making, cont.


An integrated agenda for the ‘Doha Development Round’
in the WTO – and likely for future trade rounds as well…
- Procedural integration through consultations in CTE &
CTD, sustainability impact assessment (inc. human rights
impact assessment), transparency & participation, reform
of dispute settlement procedures, etc.
- Substantive integration in standards (TBT, SPS),
agriculture, intellectual property rights, investment and
other negotiations
Innovations in regional (integration) processes such as the
European Union, the SADC, the NAFTA / FTAA, Cotonou
Agreement, ASEAN or bilateral free trade agreements
24
5. Sustainable Development in WTO Disputes

US - Shrimp Turtle Case
WTO Appellate Body: “We believe [the objective of
sustainable development] must add colour, texture and
shading to our interpretation of the agreements annexed to
the WTO Agreement.”

EC - Tariff Preferences Case
Appellate Body rejected EC arguments that its tariff
preferences were based on sustainable development
objectives.
25
6. Conclusions



Recent WTO negotiations and cases reflect that the
objective of sustainable development has become an
integral part of the world trading system.
Legal arguments encompassing an integrated
developmental and environmental approach have been
made by the parties and accepted by the relevant trade
dispute settlement organs.
However, WTO dispute settlement organs will not lightly
accept sustainable development as a trump card. A solid
legal understanding of the objective and its underlying
principles is required to make a successful sustainable
development argument in world trade law.
26
Thank you.
Markus W. Gehring
[email protected]
27
Important GATT rules
Article I GATT 1994
General Most-Favoured-Nation Treatment
1. With respect to customs duties and charges of any kind imposed on or in connection with
importation or exportation or imposed on the international transfer of payments for imports or
exports, and with respect to the method of levying such duties and charges, and with respect to all
rules and formalities in connection with importation and exportation, and with respect to all matters
referred to in paragraphs 2 and 4 of Article III, any advantage, favour, privilege or immunity granted
by any contracting party to any product originating in or destined for any other country shall be
accorded immediately and unconditionally to the like product originating in or destined for the
territories of all other contracting parties.
Article III GATT 1994
National Treatment on Internal Taxation and Regulation
1. The contracting parties recognize that internal taxes and other internal charges, and laws,
regulations and requirements affecting the internal sale, offering for sale, purchase, transportation,
distribution or use of products, and internal quantitative regulations requiring the mixture, processing
or use of products in specified amounts or proportions, should not be applied to imported or
domestic products so as to afford protection to domestic production.
Article XX GATT 1994
General Exceptions
Subject to the requirement that such measures are not applied in a manner which would constitute a
means of arbitrary or unjustifiable discrimination between countries where the same conditions
prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed
to prevent the adoption or enforcement by any contracting party of measures:
(a) necessary to protect public morals;
(b) necessary to protect human, animal or plant life or health;
(g) relating to the conservation of exhaustible natural resources if such measures are made effective
in conjunction with restrictions on domestic production or consumption;
(h) undertaken in pursuance of obligations under any intergovernmental commodity agreement
which conforms to criteria submitted to the CONTRACTING PARTIES and not disapproved by
them or which is itself so submitted and not so disapproved;
28
Important WTO rules
Article II GATS
Most-Favoured-Nation Treatment
1. With respect to any measure covered by this Agreement, each Member shall accord immediately
and unconditionally to services and service suppliers of any other Member treatment no less
favourable than that it accords to like services and service suppliers of any other country.
Article XIV GATS
General Exceptions
Subject to the requirement that such measures are not applied in a manner which would constitute a
means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, or
a disguised restriction on trade in services, nothing in this Agreement shall be construed to prevent
the adoption or enforcement by any Member of measures:
(a) necessary to protect public morals or to maintain public order;
(b) necessary to protect human, animal or plant life or health;
(c) necessary to secure compliance with laws or regulations which are not inconsistent with the
provisions of this Agreement including those relating to: (iii) safety;
Article 3 DSU
General Provisions
2. The dispute settlement system of the WTO is a central element in providing security and
predictability to the multilateral trading system. The Members recognize that it 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. Recommendations and rulings of the DSB cannot add to or diminish the rights and
obligations provided in the covered agreements.
29