The Two Noble Kinsmen: Internal and Legal Transparency in the WTO and Their Connection to Preferential and Regional Trade Agreements

On 21 March 2016, at the 9th Annual Update on World Trade Organization (WTO) Dispute Settlement, former Chairman of the Special Session of the Dispute Settlement Body (DSB), Ambassador Ronald Saborío Soto, spoke on the Dispute Settlement Understanding (DSU) negotiations in light of recent dispute settlement experience. He expressed that changes to the DSU ought to promote the future efficiency and effectiveness of the WTO as a dispute settlement system. The proliferation of Preferential Trade Agreements (PTAs) has been a recurrent curiosity for the WTO, with provisions often competing and overlapping. Earlier work studying these interactions emphasizes uncertainty in the application of non-WTO law, including PTAs, to WTO disputes and highlights the WTO’s implicit claim to supremacy. The purpose of this article is to critically analyse the state-of-play of negotiations on improvements and clarifications of the DSU in addressing PTAs. It examines whether current DSU proposals meet the DSB’s intended objectives and suggests solutions where problematic uncertainties remain. The article concludes that PTAs have not been sufficiently regarded by negotiators and that more express measures are required in the DSU to clarify such uncertainties and harmonize with PTAs in order to preserve the WTO’s future legitimacy.

Przedmiot badań: Od lat w dyskusji ekonomicznej trawa debata, czy gospodarki powinny być bardziej skłonne do liberalizacji handlu na preferencyjnych zasadach regionalizmu handlowego, czy w oparciu o klauzulę najwyższego uprzywilejowania, promowany przez Światową Organizację Handlu (WTO). Współcześnie wszystkie kraje członkowskie WTO mają zawarte przynajmniej jed­no regionalne porozumienie handlowe (RTA). Przedmiotem badań są RTA, które z jednej strony wy­dają się konkurować z WTO, to z drugiej – mogą wspierać wielostronny system handlowy WTO.1 Cel badawczy: Celem artykułu jest ocena zmian obserwowanych w tworzeniu się regionalnych ugrupowań handlowych i ich wpływu na wielostronny system handlowy. Badania skupią się na analizie RTA i odpowiedzi na pytanie, czy RTA odgrywają wyłącznie pozytywną (teoria Haberle­ra), czy może także negatywną (teoria Vinera) rolę w wielostronnej liberalizacji handlu. Metoda badawcza: Zastosowane metody badawcze obejmują przegląd literatury na­ukowej i raportów na temat regionalnych umów handlowych, statystyczną analizę da­nych ze źródeł wtórnych. Dokonano analizy zmian zachodzących w RTA pod względem ilościowym (liczba, dynamika), jakościowym (umowy dotyczące liberalizacji towarów i usług) i strukturalnym (zakres) na przestrzeni ostatnich dekad. Dane o RTA uzyskano z bazy danych WTO oraz danych UNCTAD. Wyniki: Z przeprowadzonej analizy wynika, iż kraje należące do WTO są jednocześnie powią­zane odrębną preferencyjną umową z jednym, bądź kilkoma innymi krajami. Multilateralna za­sada KNU jest osłabiana poprzez głębsze preferencje w ramach RTA, przez co multilateralizm handlowy traci na znaczeniu. RTA rozwijają się w sposób, który wykracza poza istniejące zasady wielostronne.

The rapid proliferation of preferential trade agreements (PTAs) has prompted numerous studies on why states seek PTAs. However, very little research examines why states vary in choosing different forms of PTAs, while states’ decisions to enter bilateral or multilateral PTA affect the global, regional, and national political economies. This paper thus finds global patterns regarding which pairs of states are more likely to enter bilateral or multilateral PTAs. Based on a wide range of existing research, the paper begins with hypothesizing different effects of economic and political factors that give rise to these PTAs during the last two decades. The empirical analysis then tests these hypotheses. The result shows stark differences in pairs of states joining the two types of PTAs. Bilateral PTAs are more likely to develop between democratic states with a large market size and the World Trade Organization (WTO) membership. Multilateral PTAs tend to form between less democratic states with greater political affinity.

Over the past twenty years, the rules-based global economy has been subject to a dynamic process of transformation. The trading environment has been characterized by shifts in the balance of economic power, emerging structures and rapid changes in global and regional alliances. Since its establishment in 1995, the WTO has sought to adapt to these global trends. The 2017 Trade Facilitation Agreement (TFA), the 2015 Nairobi Decisions on Agriculture, the 2015 expansion of the Information Technology Agreement (ITA) and twenty years of cumulative WTO accessions acquis are all part of this process of constant adaptation by the WTO to a rapidly changing environment. However, after the Seattle Ministerial meeting in 1999, free trade agreements (FTAs) and regional trade agreements (RTAs) mushroomed. The ‘spaghetti-bowl’ consequences and the continuing proliferation of preferential trade agreements (PTAs) and counter-PTAs have created challenges and opportunities for the rules-based multilateral trading system. Several questions have been raised, revolving around the compatibility and the discriminatory and trade diversion effects of such agreements. Are these agreements building blocks or stumbling blocks for the multilateral trading system? Moreover, the emergence of mega-regional RTAs (MRTAs), in particular the Trans-Pacific Partnership (TPP), have called into question, in some quarters, the power and relevance of the WTO at large. This chapter examines the core question of whether mega-regionalism (and FTAs by implication) poses an existential risk to the multilateral trading system and argues that the answer is ‘no’. The negotiating results from FTAs, including in their mega-regional forms, and trade multilateralism can coexist in a constructive, healthy and competitive relationship and both are essential for the governance of the multipolar twenty-first-century global economy. To substantiate this conclusion, the chapter reviews the WTO accessions acquis and compares it to the provisions of the TPP, without pre-judging its future. The comparative analysis is conducted across several areas: market access; trade rules (bilateral/plurilateral/multilateral); trade negotiations as an instrument for domestic reforms; and discriminatory effects. The results of the analysis point to areas of significant complementarity and mutual supportiveness between WTO accession acquis and the TPP, and different degrees of trade liberalization in certain sectors. The accessions acquis demonstrates a process of mutually supportive coexistence between bilateral and plurilateral negotiations and the multilateral legal and policy framework of the WTO.

Co-Existence, Complementarity or Conflict? Interaction between Preferential Trade and Investment Agreements and Bilateral Investment Treaties

The subject‐matter of this article is the recently altered trade policy and practice of Australia and their consistency with the WTO multilateral trading policies and principles. Following its unhappy experience with the power and politics driven trading under GATT, Australia unequivocally supported the legalistic approach of the WTO trading system during the Uruguay Round. Its active participation in the WTO has given it a fair share of global free trade. The rule‐based trading framework of the WTO protects, more often than not, Australia from powerful trading states and blocs using their economic clout to gain unfair terms of trade. Australia has recently opted to pursue its multi‐track trading together with its commitments to WTO multilaterial trade liberalization. Since 2002, it has been negotiating a preferential bilateral free trade agreement with its preferred trading partners. The flurry of such negotiations has resulted in the conclusion of a preferential bilateral free trade agreement with Singapore in 2003. Negotiation towards a similar agreement with the U.S. is ongoing. A preferential trade agreement (PTA) is by nature discriminatory and as such inconsistent with the Most Favoured Nation (MFN) rule under GATT Article I. Despite this apparent contradiction, GATT Article XXIV permits bilateral PTAs as an exception to the MFN rule under certain explicit conditions, which militate against discriminatory, differential and unequal trading deals among WTO members. This article examines the extent to which the existing and potential PTAs of Australia comply with the conditions of GATT Article XXIV. It concludes that these PTAs are not complementary, if not obstructive alternatives, to the WTO multilateral free trading system. They are not in the best long‐term trading interest of Australia either.

© Palgrave Macmillan a division of Macmillan Publishers Limited 2003. With the rapid advancement in new information and communications technologies (ICTs)1 geographical distance is becoming less relevant and boundaries of the nation-state are becoming increasingly permeable. We have inherited from the last century, among other things, the invention of the Internet - a global network of computer networks, which is undoubtedly a major achievement in the emancipation of cross-border human communication. The Internet was accompanied by the establishment of the World Trade Organisation (WTO), which can be said to be a big step forward in multilateral or global trade liberalisation. As against the euphoria of globalisation supported in part by the Internet and the WTO, however, is the proliferation of preferential trade agreements (PTAs), which has led to renewed interest in the economics and politics of regionalism (Freund 2000). One of the most prominent examples of PTAs is the Association of South East Asian Nations (ASEAN). Whilst much has already been said in the current literature about the major regional PTAs (e.g. the EU), the impact of the global communications revolution (arguably the most important globalising factor) on the development of regionalism, and vice versa, is a rather neglected area of study.

The most remarkable evolution in the field of international investment law is undoubtedly the massive proliferation of Bilateral Investment Treaties (BITs) and Preferential Trade Agreements (PTAs), either in the form of Free Trade Agreements (FTAs) of Custom Unions (CUs). PTAs increasingly, as will be pointed out, contain provisions on the liberalization and/or protection of foreign investment, and may then be referred to as Preferential Trade and Investment Agreements (PTIAs). PTAs differ substantially in terms of the extent to which they cover investment. Agreements in the area of trade and investment either contain explicit provisions on the protection, and possibly the liberalization of foreign investment, or are aimed essentially at the regulation of trade in services and/or goods, in which case the provisions on investment are usually less extensive than in the former or even completely absent. BITs and modern PTAs which include investment protection (and liberalization) provisions, which may then be categorized as PTIAs, follow the first approach, and thus contain extensive provisions on both the liberalization and the protection of foreign investment (PTIAs), while the majority of the traditional PTAs follow the second approach, containing only a framework or framework provisions committing to further liberalization, protection and promotion of investment. This contribution aims to analyze the interrelationship between the network of bilateral investment treaties and PTIAs with respect to the protection of foreign investment. In doing so, this contribution will examine the differences in the content and rationale of PTIAs as compared to BITs, and in particular how substantive investment protection and investment dispute settlement are dealt with in PTIAs and BITs. Finally, this contribution will address whether conflicts between PTIAs and BITs are possible, and if so, how these conflicts may be addressed.

Most analysts agree that the recent proliferation of Preferential Trade Agreements (PTAs) is largely the result of exasperation with multilateral trade liberalisation through the World Trade Organisation and a defensive response to the large-scale adoption of PTAs by major economies. The spread of PTAs, however, suggests that there are motivations other than economic that are inspiring these trade deals. It is becoming increasingly obvious that the use of PTAs to gain or reinforce strategic benefits, or to forestall strategic disadvantage, has been a major but largely unacknowledged driver of the recent trend towards PTAs. Three profound shifts in the international system over the past 15 years have led to the declining utility of traditional security institutions and thus the search for new forms of strategic deal-making: an enduring crisis of security institutions; the rise of new great powers; and the arrival of non-state security threats. In response, both large and small powers have resorted to a range of instruments, including strategically-driven PTAs.

It is generally presumed that World Trade Organization (WTO) members display a preference for dispute settlement under WTO rules over those provided for in preferential trade agreements (PTAs). This assumption is driven by observations relating to the large number of PTAs, the low number of PTA cases and the large number of WTO cases, including between PTA partners. These observations are challenged by adopting a methodology that has so far seen relatively limited use in the study of international law network analysis. This article finds, first, the network of connections among WTO members formed by PTAs is far less dense than appears to have been assumed. Second, while almost half of all WTO members have participated in WTO proceedings at least once, the vast majority of bilateral relations among WTO members have never been subject to WTO dispute settlement. This puts the perceived idleness of PTA dispute settlement into perspective. Lastly, the share of WTO cases that could have been settled under PTA procedures is far lower than commonly believed. This low share shows that there is no widespread predilection for the WTO, as commonly argued, but, more often than not, a genuine absence of choice. Ultimately, as the PTA network is unable to act as a substitute, WTO dispute settlement continues to hold a central place in the rules-based global trading system.

Promoting Coherence between PTAs and the WTO Through Systemic Integration

Promoting Coherence between PTAs and the WTO through Systemic Integration

The EU is a major participant in the world sugar market, being one of the top producers, importers and exporters in the world. The reform of the EU sugar regime will affect not only the EU member states and candidates, but also countries that are associated with the EU through the preferential, regional and multilateral trade agreements. For several decades, the EU has supported and protected the EU sugar sector. Sugar from developing countries will not be able to enter the EU sugar market without preferential trade agreements. In the EU sugar regime, the unique features of the trade concessions are that sugar under preferential import quotas can enter the EU market duty-free and the price paid for sugar equals to the high EU price for sugar. This paper attempts to analyse the complex hierarchy of trade arrangements between the EU and specific groups of countries. It compares the different trade agreements – including those achieved under the WTO – and explores the impact of these upon both the EU and the other countries involved.

Proliferation of Preferential Trade Agreements: A Quantification of Its Impact

The proliferation of preferential trade agreements (PTAs) has resulted in a heterogeneous regime of trade rules applicable among WTO Members. The interplay between PTA and WTO rules has several implications, including risks of legal tensions and incoherence between both regimes, as well as between overlapping networks of PTAs. Consequently, adjudicative bodies both under regional PTAs and global WTO dispute settlement mechanisms are increasingly confronted with taking account of alien legal sources for the purpose of interpretation. Coherence between PTA and WTO rules thus depends on the degree to which adjudication at both levels—PTA and WTO—allows integration of alien legal sources. This article explores the role of systemic integration as a method of interpretation under public international law allowing adjudicating bodies to deal with possible tensions and promote coherence within international trade law. It traces the various approaches to systemic integration pertaining to international trade rules as employed under both WTO and PTA adjudication. While systemic integration offers a public international law tool for reducing fragmentation of substantial law, there is heterogeneity in adjudicative practice regarding the readiness to employ systemic integration for the purpose of interpretation. The article identifies possible avenues through which future dispute settlement can exploit the potential for coherence through systemic integration, as well as elements which could be taken into consideration when integrating multilateral and preferential rules. It also provides insight on how PTAs could facilitate the application of systemic integration by adjudicating bodies at both levels.