WTO Commitments Research Articles

How WTO commitments tame uncertainty

This paper studies how WTO rules and flexibilities shape its members’ trade policy responses to import shocks. Guided by a cost–benefit analysis model and using a unique database of tariff bindings for all WTO countries over the 1996–2011 period, we show that WTO commitments do affect members’ trade policy. More stringent bindings reduce the likelihood of responding to import shocks by raising tariffs. In addition, consistent with cooperative behaviour, fear of retaliation also reduces the likelihood of tariff increases. In a counterfactual scenario where WTO members can arbitrarily increase tariffs, they are 4.3 times more likely to do so than under current bindings. The upshot is that WTO commitments contribute to a more stable trade policy environment.

TRIPS Pluralism

AbstractThe article explains that the interpretation of the TRIPS Agreement by WTO dispute-settlement panels and the Appellate Body has palpably shifted since the establishment of the WTO in 1995. Some of this shift is also arguably present in disputes concerning other WTO instruments. This progressive shift comes at a time when key debates about TRIPS waivers are taking place on the rue de Lausanne, namely a first for the COVID-19 pandemic and a second possible one for environmental protection measures related to climate change. According to the proposed pluralist analysis of TRIPS, it was less likely as of 2020 that the WTO dispute-settlement system would find unjustifiable inconsistencies between WTO commitments, on the one hand, and measures to protect public health or mitigate climate change, on the other hand. Whether future Appellate Body will follow that jurisprudence is an open question. Though the analysis contained in the article may make the COVID-related TRIPS waivers doctrinally unnecessary and allow Members to take measures now, its main aim is to inform the debates about the waivers and the future interpretation of the TRIPS Agreement, including the three-step test.

Restrictions on ultra-processed foods: challenge for compliance with World Trade Organization commitments

The health problems, due to obesity and overweight (NCD), which cross the countries worldwide faces the challenge of applying different measures and restrictions, and at the same time raises the question whether these measures and restrictions are compatible with WTO and other commitments. Nowadays trade restrictions should not be justified based only on the industry process but rather in the ingredients and quality of those food contents, when the critical nutrients ingredients exceed a healthy threshold. The justification for the restrictive measures of the SPS agreement has been applied both in food labelling formats and in other formats, to address NDCs and whether similar restrictions can be applied to ultra-processed foods, such as those that have been applied in the past to the tobacco consumption, without breaking commitments.

Do WTO Commitments Remain Tenable in the Age of Data? Renegotiating the Rules-Based System for the Data-Driven Economy

The adaptation of commercial frameworks to the digital environment has been underway for many years. Well-developed e-commerce regimes have already been developed in major regional trade agreements; the WTO is playing catch up - and it is imperative that it do so, both to make available the benefits of e-commerce to the full range of WTO members and for its own credibility. However, even the most advanced regional trade agreements are struggling to keep up with the rapidly evolving system and the main action in developing new norms for the digital economy is in domestic regulatory sandboxes. The most challenging issue facing the WTO is the new geopolitical security divide that has emerged between the United States and China. The WTO Agreement was framed for a unipolar world, in which “inert” goods and services were traded across borders that could be rigorously policed. This framework is challenged on multiple fronts in a multipolar, online world of smart products. Options to move forward include GATT Article XXVIII/GATS Article XXI renegotiation of WTO commitments across the security divide; conditional MFN in areas where parties agree to appropriate protocols to manage the risks in the digital environment; and a new detente agreement to narrow the range of issues subject to the new national security concerns. An up-front, open and low-rhetoric renegotiation seems infinitely preferable to a high-rhetoric acrimonious decoupling.

Technology Transfer Under China’s Foreign Investment Regime: Does the WTO Provide a Solution?

One of the most longstanding and significant issues in the US-China trade war and international trade regulation in general has been the so-called ‘forced’ technology transfer. To contribute to the ongoing debate over this issue, this article reviews the role of technology transfer in the evolution of China’s foreign direct investment (‘FDI’) regime over the past four decades and shows that the use of foreign investment to promote diffusion of advanced technology and knowhow in the Chinese economy has long been rooted in the heart of China’s FDI policy and remains fundamental for China’s transformation to an innovative economy. This pursuit of economic upgrade and technological advancement is not illegitimate as it is common for countries to use similar policies for similar objectives at different stages of economic development. The question is whether China has done so in breach of its WTO obligations. To answer this question, this article examines China’s new FDI regime and argues that while China has removed the controversial provisions in the relevant legislations, the regime leaves flexibility for China to ‘force’ technology transfer in practice, particularly under the security review and retaliation mechanisms envisaged in the new Foreign Investment Law (FIL). It is submitted that the best way to address these outstanding challenges would be through the dispute settlement mechanism (DSM) of the WTO as opposed to unilateral and confrontational approaches which have proven to be counter-productive. While WTO litigation is likely to be limited to ‘as applied’ claims in specific cases, systemic changes may result from a series of successful ‘piecemeal’ attacks over time. Given China’s broad WTO commitments on technology transfer, we call for an increasing use of the existing rules to address any laws and practices that ‘force’ technology transfer instead of negotiating new rules. Technology Transfer, China, Foreign Investment Law, National Security, WTO, Accession Protocol, US-China Trade War

Elevating Services: Services Trade Policy, WTO Commitments, and Their Role in Economic Development and Trade Integration

Services have long been perceived as playing a secondary role in world trade. This article discusses the contribution of services trade in economic development, trade integration, and inclusiveness. It argues that the limited attention given to services trade policies and to international commitments is increasingly out of step with the role of services in the global economy. While services account for about 50% of world trade in value added terms, services trade policies are often restrictive and multinational commitments are generally modest. Taking steps to raise the profile of services trade within government policy-making would help close this gap and highlight the contribution of services trade policy to a wide range of broader national objectives that have an important services dimension, whether small and medium-sized enterprises (SME) and gender policy, or the achievement of Sustainable Development Goals (SDGs).

Technology Transfer under China’s Foreign Investment Regime: Does the WTO Provide a Solution?

One of the most longstanding and significant issues in the U.S.-China trade war and international trade regulation in general has been the so-called “forced” technology transfer. To contribute to the ongoing debate over this issue, this article reviews the role of technology transfer in the evolution of China’s foreign direct investment (“FDI”) regime over the past four decades and shows that the use of foreign investment to promote diffusion of advanced technology and know-how in the Chinese economy has long been rooted in the heart of China’s FDI policy and remains fundamental for China’s transformation to an innovative economy. This pursuit of economic upgrade and technological advancement is not illegitimate as it is common for countries to use similar policies for similar objectives at different stages of economic development. The question is whether China has done so in breach of its WTO obligations. To answer this question, this article examines China’s new FDI regime and argues that while China has removed the controversial provisions in the relevant legislations, the regime leaves flexibility for China to “force” technology transfer in practice, particularly under the security review and retaliation mechanisms envisaged in the new Foreign Investment Law. It is submitted that the best way to address these outstanding challenges would be through the dispute settlement mechanism of the WTO as opposed to unilateral and confrontational approaches which have proven to be counter-productive. While WTO litigation is likely to be limited to “as applied” claims in specific cases, systemic changes may result from a series of successful “piecemeal” attacks over time. Given China’s broad WTO commitments on technology transfer, we call for an increasing use of the existing rules to address any laws and practices that “force” technology transfer instead of negotiating new rules.

China – Domestic Support for Agricultural Producers (China–Agricultural Producers), DS511

The dispute concerns certain market price support measures by China to domestic agricultural producers of wheat, Indica rice, Japonica rice, and corn, which the United States (US) claimed were inconsistent with China's obligations under the WTO Agreement on Agriculture. Specifically, the US considered that China utilized market price measures in the period 2012–2015 to support farmer incomes and increase production of the said agricultural products, but that this support was in excess of China's WTO commitments. At the outset, the Panel found that the support measures for Chinese corn producers had expired, and that there were no factors weighing in favor of making findings on this expired measure. So, no findings were made with respect to this claim.

Competing liberalizations: tariffs and trade in the twenty-first century

This paper proposes a unique overview of trade policies since 2001, based on detailed data on tariffs and trade covering 130 countries. It shows that regionalism has delivered limited liberalization, representing only a 0.3 percentage point (p.p.) cut in the worldwide average applied tariff between 2001 and 2013. WTO commitments (1.0 p.p. average cut) and unilateral liberalizations on a most-favored-nation basis (1.3 p.p.) mattered far more. The study also shows that GVC participation was a powerful motivation underlying tariff liberalizations, including those carried out at governments’ own initiative. The paper finally assess that recent trade policy changes more than halved the worldwide welfare gains expected from multilateral tariff-cutting. If all PTA negotiations were concluded, gains would fall to one-third of their 2001 level.

Elevating Services: Services Trade Policy, WTO Commitments, and their Role in Economic Development and Trade Integration

Services have long been perceived as playing a secondary role in world trade. In particular, the role of services trade policies and multilateral services commitments often tends to be downplayed. However, in value added terms, services account for about 50% of world trade and are significant in exports of countries of all levels of development. In addition, cross-border trade is expanding as a result of technological advances, and the supply of services by foreign affiliates (mode 3) exceeds trade through other modes of supply. Services trade policies, which cover a wide range of 'inside-the-border' measures, are an important determinant of foreign direct investment, economy-wide productivity, manufacturing competitiveness and exports, and flows of services value added. This paper underscores, on the basis of recent services data and a growing body of research on the impact of services policies, the role of services trade in economic development, trade integration, and inclusiveness. It argues that the limited attention given to services trade policies and to international commitments is increasingly out of step with the role of services in the global economy. Indeed, services trade policies are often restrictive and multinational commitments are generally modest. Taking steps to raise the profile of services trade within government policy-making would help close this gap and highlight the contribution of services trade policy to a wide range of broader national objectives that have an important services dimension, whether SME and gender policy, or the achievement of Sustainable Development Goals (SDGs).

The Crisis in WTO Dispute Settlement: Fixing Birth Defects to Restore Balance

The impasse in the World Trade Organization over the appointment of new members of the Appellate Body is just one symptom of crisis in cooperation on trade. Driven by scepticism about multilateralism and binding dispute settlement, and a growing rivalry with China, the current US administration has elevated longstanding concerns about WTO dispute settlement to new heights. The collective inability of WTO members to exercise their authority to interpret the meaning of WTO commitments has meant that the Appellate Body is not subject to any checks and balances. As other WTO members blocked US efforts to negotiate more member control led nowhere, it turned to unpopular unilateral mechanisms, culminating in the current block on new appointments. Restoring the dispute settlement system and enhancing its legitimacy will now require some changes. This might include improving mechanisms for political oversight, diverting sensitive issues from adjudication, narrowing the scope of adjudication, improving institutional support and providing members more say over certain procedures. Preserving compulsory, binding and impartial dispute settlement in the WTO will require an accommodation of different perspectives on how that system should function. Achieving this, in whatever form, will contribute to maintaining and even strengthening multilateral cooperation on trade.

Do WTO Commitments Restrict the Policy Space of Countries Wishing to Provide Food Security Through Stockholding Programs?

The use of administered prices to acquire public stockholdings for food security purposes has become contentious among WTO members. G-33 countries have proposed that existing limits be lifted while other WTO members have not acquiesced. This impasse has threatened the success of WTO Ministerial Meetings in both Bali and Nairobi. Currently, a Peace Clause pertaining to cases being brought to the disputes settlement system has been agreed while members seek a permanent solution. The debate over public stockholdings, however, is being conducted with limited information – in particular whether the WTO de minimis limits restrict the policy space for developing countries pursuing food security goals. This article examines the restrictiveness of the limits on G-33 countries. Using conservative assumptions, it finds that for high food security risk G-33 countries the current de minimis levels are constraining. They are less constraining on medium and low food security risk countries. As a result, the policy space for some developing countries is restricted. The results also suggest that the current ‘one size fits all’ limits may not be appropriate and could be replaced by a flexible system.

Do restrictive regulatory policies matter for telecom performance? Evidence from MENA countries

The past decade has witnessed a significant transformation in trade and regulatory policies of the telecom sector across the Middle East North Africa (MENA) region. Many countries committed to opening up their telecom sector for trade and investment under WTO commitments. However, these commitments do not always reflect actual policies. Although some MENA countries started alleviating telecom market restrictions and tended to adopt more open policies, other countries are still reluctant to change and adopt highly restrictive policies limiting foreign ownership and control in the market. This paper assesses the impact of telecom restrictions on landline and mobile sector performance in MENA countries using the World Bank Services Trade Restrictiveness database (STRD). We use three-stage least squares-seemingly unrelated regression (3SLS-SUR) to test for the effect of restrictions and the level of competition in the telecom sector on selected performance indicators. Our findings suggest that restrictive policies in the telecom sector are rather likely to affect landline than mobile communications. Moreover, being a MENA country affects the level of competition in the landline market. MENA countries are very protective to their incumbent operators, irrespective of the stipulated market regulations in place.

Understanding the Role of the WTO in International Data Flows: Taking the Liberalization or the Regulatory Autonomy Path?

Recent years have witnessed a surge in discussions relating to data and data flow in trade fora. This was predictable given the importance of data for trade in the digital economy, especially e-commerce. However, there is a major discord between WTO members on issues relating to data flows and data localization. This article sets out to understand how data flows across borders and the types of trade restrictive data localization measures members use. The analysis of various restrictions on data flows imposed by states reflects the different objectives behind them, targeting all or specific types of data. Such regulations potentially violate existing WTO commitments. The article concludes with a call for issuing a multilateral amendment of existing norms, and undertaking a data differentiated approach to resolve the deadlock at the WTO.

A Comparative Study of Profitability of Selected Pharma Companies of India

The Indian pharmaceutical industry is growing rapidly in the number of production, value, quantity, units and there are two main things that appear to conform to the story of the full growth of the Indian economy. Second, there has been a major change in the very basic system of pharmaceutical business in India. By issuing a patent ordinance, India fulfills WTO's commitment to identify foreign product patents from January 1, 2005, the culmination of the 10-year process. In this new scenario, Indian pharmaceutical manufacturers will not be able to manufacture patented drugs, which they have been doing for a long time, though by another process. This study has been done for important evaluation of India's pharmaceutical industry. This study focus on to analyse the profitability of the selected pharmaceutical companies of India and to study the relation between the pharmaceutical companies for various measures of profitability. The study period is ten years from 2007-08 to 2016-17. Based on the study it can be seen that pharmaceutical companies had a very good profitability in 2008, while the weakest profitability of all time in year 2015.

Diminishing returns: Russia’s participation in the World Trade Organization

Russia’s 2012 accession to the World Trade Organization was widely expected to spur economic growth and modernization, by helping the country abandon its import-substitution model and fully integrate into the global economy. However, thus far, Russia’s compliance record with its WTO commitments has been mixed, and WTO membership has given Russia limited economic benefits and few political gains. In analyzing why, this article uses neoclassical realism as a framework for assessing Russia’s behavior in WTO trade disputes and negotiations. During Russia’s economic recession, the regime of President Vladimir Putin advanced protectionist policies and maintained statist control over the heights of the economy, while using rhetorical strategies to counter accusations from Western powers that Russia had violated WTO norms. Russia’s struggling economy weakened its status as a global economic power, and it was viewed as unqualified to sit among the core group of negotiators in the WTO.

Property rights security and firm survival: Micro-data evidence from China

The security of property rights has been found to play important roles in various aspects of firm behaviors. However, its effects on firm survival have been largely neglected in previous research. Using annual data of Chinese manufacturing firms over the period 1998–2008, we analyze the link between property rights security and firms' survival probabilities, differentiating firms into stated-owned enterprises (SOEs) and non-SOEs, and considering whether the linkage evolves over time. Examining a wide range of specifications, we find that the protection of property rights, by limiting government intervention and promulgating laws and rules, is crucial for firm survival. Moreover, better security of property rights benefits non-SOEs more. We also find that the beneficial effects of secure property rights on firm survival are more pronounced for years after 2003 when China speeded up deregulation to comply with its WTO commitments and reform target to establish a modern system of property rights than for years before 2002.

COMPETITIVENESS OF DAIRY PRODUCTS EXPORT TO RUSSIA AND ALTERNATIVE MARKETS

In order to protect certain sectors, Russia has introduced some new protectionist measures for EU agricultural products such as meat and dairy products. Russia is a member of WTO for four years, but is still not respecting its WTO commitments concerning the liberalisation of trade regime. The research was conducted in order to measure the level of competitiveness of Lithuanian dairy products in trade with Russia and in alternative markets. Measuring the competitiveness, International competitiveness index in the specific (local) region (LIIC) was used. The research has found an increase in the competitiveness of export of dairy products in EU-28 countries and countries outside the EU markets. The results differed by level of competitiveness among two groups of countries. In the period of analysis, LIIC index was higher in the first group than in the second group of EU countries.

Liberalism in International Trade, Illiberalism in Domestic Economic Governance and Human Rights Protection in the Context of the WTO

This analysis focuses on one aspect of liberalism – the fundamental human right to fair trial – and discovers the possibility for private actors to protect domestically their (human) rights violated by infringements of WTO commitments. In the course of the discussion of relations between the issues of human rights protection and WTO States obligations several dimensions can be revealed.

Non-compliance, renegotiation and justice in international adjudication: A WTO perspective

Abstract:Focusing on the expanding realm of international adjudication, this article approaches justice from the domain of the empirical and shows – through a careful, interview-based case study analysis in the WTO context – that justice in the international context is not only a contested concept, but also a multifaceted one, deeply embedded in notions such as the rule of law, fairness, equality, transformation, and cooperation. Whereas in the past, the primary, if not the sole role of international courts was that of settling disputes, in their modern legalised reincarnation these empowered international institutions have come to be seen primarily as enforcement mechanisms. Mechanisms that have been put in place by states in order to give effect to their originally negotiated commitments, and to hold states (or other entities) accountable for the international rules agreed-upon. Within this common enforcement-centred discourse of international courts, in turn, the natural tendency has so far been to think of ‘justice’ mainly through its ‘legal’ or ‘rule of law’ dimension. This article challenges this enforcement-centred discourse. Focusing on the vibrant WTO dispute settlement system (DSS) and its operation throughout the perennial EC–Bananas dispute, the article argues that the current enforcement-oriented debate of international courts, and the WTO DSS in particular, is lacking in several aspects. First, it brushes aside other important roles served by the DSS, and consequently overshadows the manifold social outcomes – beyond rule-compliance – produced by this system. Second, the prevalent rule-enforcement discourse further works in turn as to mask the multiple challenges of justice encapsulated in international disputes reaching the DSS docket, and obstructs the need to explore other conceptions of justice – beyond its legal-procedural meaning – such as global distributive, corrective, or transformative justice, through which the diverse roles and outcomes of the DSS may (and should) be evaluated. Against this backdrop, the article puts forwards a broad multifunctional account of the WTO DSS, which goes beyond the prevalent view of the system as primarily an enforcement mechanism, portraying it instead as a system of multiple, competing, and shifting roles. Among them, providing an orderly mechanism of renegotiation, redistribution, and settlement. Roles that essentially allow WTO Members to readjust their original WTO commitments and reallocate their burdens and benefits of international cooperation, and thereby to arrive at new – at times not fully legally-compliant – but not necessarily ‘unjust’ cooperative and sustainable social outcomes.