Multilateral Trade Research Articles

Book Review, Julien Chaisse , China's International Investment Strategy: Bilateral, Regional, and Global Law and Policy, Oxford University Press, 2019, 560 pp, ISBN 9780198827450

In this book, Professor Julien Chaisse, a renowned scholar in the field of international economic law and China-expert, focuses on one of the countries which are proactively (re)shaping our understanding of the international order: the People’s Republic of China (PRC or China). This edited book presents, in a comprehensive, accurate and organized manner, the gradual definition of the China’s investment strategy. This book’s scope includes reflections on the international investment regime, taxation, national economic reforms, mediation, competition law and anti-monopoly law, State-Owned Enterprises (SOEs), corruption, and the highly-debated China’s Belt and Road initiative (BRI) (object of another book edited by Professor Chaisse). Most of the leading legal scholars and professionals who contributed to the book are based in Asia and working on a daily basis on issues relating to China. This diverse group succeeded in offering different, relevant and innovative contributions. The question that the book attempts to answer is whether China is aligned with the dogmas of international investment and trade law. China’s involvement in the global context is in partial contradiction with the national situation, which formed the basis for many commentators’ critical views of China’s accession to the WTO as a risk to the multilateral trading system in the long term. Did this accession lead to free trade or the end of market-based reform of the national economy? Environmental protection or market domination of the environmental industry? Aid for development or aid for resources?

Evaluating waste and scrap trade risks in Belt and Road Initiative countries

China's Belt and Road Initiative (BRI) is a global development strategy with great potential for multilateral trade cooperation and economic growth in Asia, Europe and Africa. Commodities trade volumes across BRI countries have boomed in the last few years. However, the waste and scrap (WaS) trade, an important aspect of global waste management, has received little attention. In recent years, frequent trade frictions and restrictive import policies due to increasing environmental protection awareness have sent massive shocks through the international WaS trade system. Exploring the impacts of shocks on BRI-WaS trade is an important but unexamined research topic that can help ensure the steady operation of WaS recycling. To address this research gap, this study first provides a panoramic view of the BRI-WaS trade network and analyzes its structural relation to the global WaS trade network. Second, the hidden risks in the BRI-WaS trade are revealed by proposed shock propagation models in three real-life scenarios, namely, a unilateral trade disruption, a bilateral trade crash and an import ban. Third, the global circulations conceptual framework is mathematically examined in the BRI regional context. The findings reveal that BRI countries are increasingly important to global WaS trade and that BRI-WaS trade presents a heterogeneous structure with evenly distributed trade channels. The “most at-risk” sources in the BRI-WaS trade network are uncovered. The BRI circulation system is mathematically feasible but eco-ethically infeasible. Discussions are provided to support authorities in developing effective strategies to manage BRI-WaS trade and responses to future extreme disturbances as well as address the global WaS crisis.

‘Regionalism’ and the global trade system

AbstractThe post‐1945 global trading system was designed around the principle of non‐discrimination. During the 1947–94 GATT era, regionalism and multilateralism were often viewed as antagonistic approaches to international trade, and preferential treatment within regional blocs was to be deterred. Since 1995, although regional trade agreements are monitored by the WTO Secretariat and presented as a threat to the system, regionalism poses little threat to the multilateral trading system. This paper argues that major twenty‐first century RTAs go beyond preferential tariff treatment to focus on deeper integration issues. Such issues are addressed outside the WTO because, despite new features of the international trade map since 1995 such as Internet use and global value chains, extension of WTO rules has proved difficult due to the requirement for consensus. The paper analyses the rise of megaregional agreements such as CPTPP and RCEP, the shift in EU policy from protecting domestic producers to facilitating imports from best global suppliers and the use of WTO plurilateral agreements within the context of providing rules fit for purpose in the modern global trading system.

Consensus decision-making and democratic discourse in the General Agreement on Tariffs and Trade 1947 and World Trade Organisation

Abstract This paper provides a genealogy of consensus decision-making and democratic discourse in the multilateral trade regime. It argues that the contemporary link between the World Trade Organisation’s consensus procedure and ideas of ‘international democracy’ has its roots in a struggle that took place over the international economic order in the 1960s and 1970s.

Consensus Decision-Making and Democratic Discourse in the General Agreement on Tariffs and Trade 1947 and World Trade Organisation

This paper provides a genealogy of consensus decision-making and democratic discourse in the multilateral trade regime. It argues that the contemporary link between the World Trade Organisation’s consensus procedure and ideas of ‘international democracy’ has its roots in a struggle that took place over the international economic order in the 1960s and 1970s.

KEY TRENDS DURING THE IMPLEMENTATION OF THE "ONE BELT AND ONE ROAD" INITIATIVE

At the "One Belt and One Road" forum held in Beijing on May 14-15, 2017, Chinese Leader Xi Jinping formulated the basic principles of the "Chinese new vision of globalization". These are the principles of respect for sovereignty, territorial integrity, social order and respect for the interests of all countries along the way. Dialogue, not confrontation, partnership, not rivalry. Within the framework of the project, China is creating an open platform for cooperation and a favorable investment environment. The most important component of globalization and economic growth is trade. It is on the basis of these assumptions that China calls for protecting multilateral trade relations and facilitating the simplification of customs and transit procedures. Investment "outside" will allow China not only to significantly expand the export market, but also to become a strong argument for the internationalization of the Chinese currency. In general, we are talking about maximizing the use of integration processes in the Eurasian space for the development of China's national economy. At the same time, China for the first time provided a strategic program for the creation of a land trade route, aimed at completely reformatting trade and economic processes on the continent, creating completely new geopolitical and geo-economic ties. The ongoing processes of globalization are gradually transforming the very concept of "landlocked country" into the definition of"country connected by land transport arteries". Keywords: "One Belt, One Road" initiative, Globalization and regionalization, development of trade relations in Eurasia, international transport corridors, integration with national projects.

Restrictions on Trade in Telecommunications: WTO’s Cybersecurity Conundrum

This article examines the role of the World Trade Organization (WTO) in balancing the nexus among a rule-based multilateral trade system, national security, and cybersecurity. It presents a historical account of restrictions placed on the telecommunications trade over national security concerns and focuses on the significant political risks thereof for the WTO if these restrictions are challenged at its dispute settlement system. An analysis based on the WTO Panel rulings in ‘Russia – Traffic in Transit’ and ‘Saudi Arabia – Protection of IPRs’ is revealing in this context. It shows that, despite the obvious cybersecurity concerns, the invocation of the national security exception is not straightforward. The turn to power politics and regionalism highlights the significance of multilateral organizations that provide a more inclusive structure to reflect and protect the interests of all their members, not just those that hold positions of power and control. As long as the stalemate at organizations such as the United Nations (UN) and the International Telecommunication Union (ITU) continues, despite the need for a more legitimate, inclusive multilateral framework, the expectation of a ruling on trade-related aspects of cybersecurity will place an unnecessary burden on the WTO dispute settlement system. Cybersecurity, World Trade Organization, National Security Exception, Telecommunications, Multilateralism, Regionalism, Geopolitics

Role of the Article XX of the general tariffs and trade agreement in international trade

This article examines the environmental exceptions in Article XX of the General Agreement on Tariffs and Trade (GATT) and analyzes the illegible or unclear content of the articles so that environmental provisions can be applied to current international environmental issues. GATT Article XX is the most important environmental clause in the GATT / WTO. This article states that under certain circumstances, a country’s laws or measures may deviate from multilateral trade rules. These exclusions include clause (b): “necessary to protect human, animal or plant life or health”; and (g): “relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.” The provisions of Article XX did not contain a clear concept of environmental protection during the development. As environmental awareness increases in the international community, the WTO is gradually focusing on environmental issues in trade, and Article XX plays an increasingly important role. Although the wording of the articles has not been changed, the interpretation of the meaning of the articles is constantly evolving. In specific cases, the existing legal loopholes in Article XX were analyzed and the prospects for their development were predicted. The study concluded that, in practice, the WTO Dispute Settlement Body, on the one hand, expands the scope of Article XX (b) and (g) to meet environmental protection requirements, on the other hand, through flexible preamble control, it is possible to prevent the impact of environmental protection measures on normal trade. Key words: Article XX of the GATT, environmental protection, general exceptions, WTO.

Old Wine in a New Bottle? Green Industrial Policy and the Use of Safeguards in the Solar Sector

Enhancing manufacturing competitiveness in the solar photovoltaics (PV) sector has been a political priority for numerous countries, with green industrial policies often used to effectuate such priorities. In 2018, safeguards were utilized by the United States as a new form of green industrial policies in the solar PV sector, which was quickly followed by India. Safeguards are distinctly different from other widely employed green industrial policies, and their use threatens the multilateral trading system and impedes much-needed efforts to mitigate climate change. This article seeks to advance the literature on the interaction between green industrial policies and the World Trade Organization (WTO) by exploring the legal considerations and policy implications of employing safeguards in the PV Sector. This article discusses why the WTO would likely find that both the US and Indian measures violate the General Agreement on Tariffs and Trade and the Agreement on Safeguards (AS), but perhaps more importantly reveals several deficiencies associated with the WTO rules and institutional difficulties which may curtail the reduction of trade barriers. This article suggests the negotiation of a plurilateral agreement to eliminate the use of safeguards in the solar PV sector and foster a positive synergy between the trade and climate regimes. WTO, Safeguards, Green Industrial Policy, Solar PV, Trade Protectionism, Climate Change

Revisiting time as a trade barrier: Evidence from a panel structural gravity model

AbstractIn this paper, we revisit the evidence on the effects of time spent on border‐crossing procedures for international trade using a theory‐consistent structural gravity model. We exploit a rich panel dataset including domestic trade flows and employ a recent econometric estimator that exhibits favorable asymptotic properties for inference. The results indicate a significant negative effect of the time required for border procedures that is driven by the time needed for document preparation. We find that an additional day spent on those procedures corresponds to an ad valorem tariff equivalent of 0.4 percentage points. The parameters of our structural model are used to simulate three counterfactual scenarios, quantifying the effect of past and potential future trade facilitation efforts for middle‐, low‐, and high‐income countries. Full endowment general equilibrium effects suggest that in times of stagnating multilateral and bilateral trade liberalization efforts, unilateral implementation of trade facilitation carries the potential to induce an alternative stimulus for trade and welfare, especially for low‐ and middle‐income countries.

How Do Third Parties Affect Compliance in the Trade Regime?

A core insight of the literature on dispute settlement at the World Trade Organization (WTO) is that third party countries help enforce the organization’s multilateral objectives, including the fundamental principle of nondiscrimination. Little is known, however, about when countries comply with WTO rulings and whether these bystander states play a role. We introduce new data on compliance, measured as whether losing countries make tangible domestic reforms to bring policy in line with WTO rulings. We show that compliance is significantly less likely in disputes with more third parties. Using a variety of estimation techniques, including controlling for nonrandom selection into legal rulings, we demonstrate a robust correlation between third party participation and noncompliance. Our findings highlight a risk of stringent enforcement and suggest that compliance problems threaten to undercut the operation of the multilateral trade regime.

Holding Up a Mirror to the World Trade Organization: Lessons from the COVID-19 Pandemic

Holding Up a Mirror to the World Trade Organization: Lessons from the COVID-19 Pandemic

Commonality in intraday liquidity and multilateral trading facilities: Evidence from Chi-X Europe

This paper examines the effects of Chi-X, a pan-European multilateral trading facility, on intraday liquidity co-movements within European equity markets. Chi-X enables simultaneous trading of all European equities on a single trading platform. Further, it induces an increase in multi-market trading between Chi-X and the home exchange, connecting individual markets in a single network. Greater market consolidation combined with an increase in multi-market trading should induce stronger network-wide liquidity co-movements. Consistent with our predictions, we find that Europe-wide liquidity co-movements increase after the Chi-X entry. The increase is stronger in down markets and for stocks with more intense trading on Chi-X.

International Review of Equity Market Structure Regulation: Phase III

International Review of Equity Market Structure Regulation: Phase III

Developing a novel index to evaluate labour chapters in trade agreements: Canada’s ambition–enforceability compromise

Purpose Lack of progress advancing labour provisions in multilateral trade instruments has led some countries to develop their own labour chapters in bilateral and plurilateral trade agreements. This study aims to track the evolution of 25 years of labour chapters in Canadian trade agreements. Design/methodology/approach Modelled on Hoekman (1995), the authors present a novel index using the International Labour Organization’s (ILO) core labour standards to compare and evaluate ambition and enforcement in Canada’s labour chapters. Findings The quality of Canada’s labour chapters has steadily improved from 1994 to 2020, with scores rising from 46 to 91 out of 100. In addition, Canada has used its negotiating leverage to encourage partners with weak labour regimes to make improvements. Yet, the highest quality chapters were achieved with trade partners similar to Canada, and those chapters have not pushed either party to improve their own domestic labour regimes. The authors discuss the limits of the ILO standards for addressing contemporary debates about labour and trade. Originality/value The authors’ assessment provides the first empirical evidence to demonstrate that Canada’s labour chapters have evolved over time, and that the origins of this evolution predate the Liberal government’s progressive trade agenda by several decades. The authors also suggest that Canada’s “middle road” compromise on ambition versus enforceability may increase the relevance of the index for research on other middle powers and potentially countries in the global south.

The Nexus Between Energy and Trade in South Asia: A Panel Analysis

Following Sadorsky (Energy Economics, 2011, 33, 739), we examine the nexus between energy and trade in South Asia in a panel framework using annual data from 1990 to 2015. Given the cross‐sectional dependency issue, we use robust second‐generation panel econometric methods for the analysis. We find that variables are stationary at the first difference and cointegrated in the long run. The Dumitrescu‐Hurlin panel causality test shows a long‐run unidirectional causality from trade openness to energy consumption but not vice versa. Moreover, the panel symmetric and asymmetric estimation techniques reveal that energy consumption rises by 0.47 per cent on average and 0.83 per cent, with a 1 per cent rise in trade openness in the long run. However, a negative shock of similar magnitude reduces energy consumption by 0.37 per cent. We further fortify the panel results in the country‐level data with robust methods. We recommend energy efficiency and conservation policies and renewable energy technology augmentation policies through bilateral or multilateral trade strategies for sustainable development in the selected South Asian countries.

No More Strategical Neutrality on Technological Neutrality: Technological Neutrality as a Bridge Between the Analogue Trading Regime and Digital Trade

AbstractThe World Trade Organization (WTO), a unique multilateral trading regime, has failed to establish its relevance to the digital nature of trade. This article revisits the ‘principle of technological neutrality’ to make the cross-border supply of services by electronic means subject to the current rules-based trading regime. I argue that the principle of technological neutrality could help resolve a number of thorny legal issues: confirming the applicability of the General Agreement on Trade in Services (GATS) rules to the delivery of services by electronic means; providing a guideline to determine the likeness of services in the era of digital trade; and backing up an evolutionary approach to interpreting the GATS schedules of commitments. However, the WTO adjudicatory bodies have been reluctant to rely on the principle of technological neutrality, which is referred to as strategic neutrality in this article. This article urges the WTO adjudicatory bodies to abandon their strategically neutral position on technological neutrality immediately. It also explores ways to incorporate the principle of technological neutrality into the world trading system at the bilateral, plurilateral, and multilateral levels.

Digital‐based Services Globalization and Multilateral Trade Cooperation

AbstractThe pandemic crisis will likely shift global trade into digital services. This turn is consistent with the broader picture in which the nature of globalization becomes increasingly based on the Internet, ideas, information, and data. That provides new trade opportunities for poorer countries to participate in digital services. To harness the benefits of this trend, policymakers around the globe should take action to stop the reversal of open digital trade policies, find common grounds to foster regulatory cooperation on cross‐border data flows, and enhance the understanding of the economic impact of new trade restrictions in digital services.

Agriculture after a year with COVID‐19: Any long‐term implications for international trade policy?

Coronavirus disease 2019 (COVID‐19) initiated shocks to the Canadian agri‐food industry moving the sector away from its prepandemic equilibrium. Disequilibrium can mean, postshock, that sectors follow different paths of adjustment. The public and politicians appear to desire that economic activity returns to prepandemic norms—but this is far from assured. In the case of the Canadian agri‐food industry, the postshock path of adjustment appears to be returning to the preshock equilibrium, or near to it. This provides a familiar and stable anchor for those whose lives are otherwise considerably disrupted by the pandemic. The multilateral international trade system has long been in need of reform—reforms that would benefit Canada's agri‐food exporting sector. The pandemic has raised trade issues that require urgent action and some countries see this as an opportunity for reform. Canada has been at the forefront of this activity through the fostering, hosting, and chairing of the Ottawa Group of 13 World Trade Organization members that have been charged with bringing forward proposals for reform that will break the log jam in multilateral negotiations. The work of the Ottawa Group is examined and the likelihood of the initiative succeeding assessed.

Article 25 as an Alternate Way to Resolve the Crisis of the WTO Dispute Settlement Mechanism: A Chinese Perspective

The primary purpose of this research is to propose the solution to the current crisis of the WTO dispute settlement system focusing on Article 25 of the WTO Agreement. The Dispute Settlement Understanding is one of the significant successes of the WTO. Recent years, however, have witnessed the difficulties and challenges facing the multilateral trading system along with rising anti-globalization and trade protectionism. The Appellate Body (AB) has been experiencing an unprecedented crisis of dysfunction mainly due to the US’s boycott of appointing the new members. The WTO Members, including China, have thus proposed various reforms in response to the crisis. However, they have not touched the core demands of the US. Because of the imminent crisis that the AB is about to stop operating, China should take urgent action with other WTO members, consider launching a majority voting program, design and use alternative appeal arbitration, and combine international rules with domestic deepening reforms.