Caribbean Trade Law and Development

Category: WTO

  • WTO and WB call for papers on “TRADE AND POVERTY: A COLLECTION OF CASE STUDIES”

    The WTO and the World Bank Group issue a call for papers for a joint edited volume on trade and poverty. Following their joint report released in June 2015, “The Role of Trade in Ending Poverty”, the WTO and the World Bank Group have committed to further work on this area.

    Authors are invited to submit before 15 September 2016 a comprehensive abstract or a draft paper for consideration to this project. Papers should deal with the topic “Trade and Poverty issues”.

    For further information, please see more here

  • Antigua, Are you ready to Gamble?

    Antigua, Are you ready to Gamble?

    Javier Spencer, Guest Contributor 

    Javier

    –Did you know that in 2000, the Antigua and Barbuda’s Online Gaming Industry accounted for 61% of the Global Online Industry?(Global Betting and Gambling Consultants, 2007) This figure declined in 2001 onwards as the United States introduced statutes that limited Antigua’s supply of online gambling services in the US.

    The clock has been ticking and the Government of Antigua and Barbuda (Antigua) has now decided to take the necessary actions to retaliate against the United States (US) in its long-simmering case at the World Trade Organization (WTO) (See US Gambling DS285). The US Gambling case is the first case of its kind brought to the WTO in respect of interpreting and applying member states’ commitments under the General Agreement on Trade in Services (GATS). The GATS is a WTO Agreement that emanated from the Uruguay Round of negotiations in January 1995 and much like the General Agreement on Tariffs and Trade (GATT), the GATS’ remit is to substantially reduce barriers to trade within the services sector based on principles of Most Favoured Nation (MFN) and National Treatment (NT).

    Background & WTO Findings

    Antigua in 2003 filed a complaint to the WTO to challenge domestic legislation in the US that have significantly restricted the ability for service providers of Gambling and betting services in Antigua, to offer their services to customers in the US. The statutes brought into question were: ‘The Wire Act’, ‘The Travel Act’, and the ‘Illegal Gambling Business Act’; all of which Antigua claimed were de facto discriminatory and therefore in breach of the US’ market access commitments (Article XVI (I) GATS). In response, however, the US claimed that it had never made specific GATS commitments on the cross border supply of gambling services and further iterated that the statutes were passed with the main objective of protecting public morals and maintaining public order (Article XIV (a)).

     Much to the surprise of the US, a WTO panel ruled in favour of Antigua in 2004. This ruling was upheld by the Appellate Body in 2005 on the US’ appeal. The ruling found that regardless of the US’ intent to “protect public morals or to maintain public order” the US indeed made specific GATS commitment in respect of the supply of gambling services. Against the backdrop of the chapeau of Article XIV, the US failed to demonstrate that the pieces of legislation did not constitute “arbitrary and unjustifiable discrimination” in respect of the supply of online gaming.

     The US was given the deadline of until April 2006 to amend its legislation to be consistent with WTO law (DSU Article 21.5). Years later, the US has failed to comply with the ruling which prompted Antigua to file an enforcement case at the WTO. Fast forward to 2016 and the U.S. has still failed to comply with the WTO ruling. Therefore the Government of Antigua has recently announced its intention to implement remedies authorised by the WTO.

      The Remedy – Cross Retaliation

    In light of the US’ failure to bring its laws in compliance with WTO law, Antigua requested permission to retaliate against the US by suspending obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The TRIPS Agreement is another result of the Uruguay Round of negotiations which seeks to “promote effective and adequate protection of intellectual property rights”. Ultimately, of course, the agreement regulates intellectual property rights (IPRs) in a manner that eliminates or reduces any barriers to trade.

    Further to Antigua’s request, the WTO granted Antigua (as a compensatory measure) the authorization to retaliate in January 2013. This means that Antigua could withdraw US $21 million worth of concessions in IPRs held by US firms, per annum. This cross retaliation strategy has proven to be the best strategy in getting a developed country to comply with WTO rulings. As a precedent, the WTO granted Ecuador the rights to suspend IPR concession against the European Communities (EC) in EC- Bananas III (See DS27). In the final analysis, Ecuador never suspended its TRIPS obligations, but used it as leverage to quickly negotiate with the EC on a mutually agreed solution. This case signals that suspending IPRs as a retaliatory measure gives developing countries a strengthened negotiating position that will serve as an impetus for the developed country to comply or to quickly negotiate a mutually agreeable settlement.

    For Antigua, the cross-retaliation remedy could redound to the greater good of its citizens. For example, pharmaceuticals could be legally produced and distributed in Antigua to fight diseases without paying the remunerations otherwise required under TRIPS.

    However, a closer look at the suspension of TRIPS obligations yearns a pertinent question. Does Antigua possess the clout and capacity to retaliate using this method? In order for this remedy to secure a great impact on the U.S., firms in Antigua ought to demonstrate that they have technological capacity for (large scale) domestic production of copies of IPR goods from the U.S. This example is further exacerbated if Antigua’s import of IP goods and services from the U.S. is insignificant.

    The suspension of IPRs held by US firms is confined to the borders of Antigua and Barbuda which means that goods that would have been created under the TRIPS suspension regime cannot be exported out of Antigua to any other WTO country. At this juncture, a careful examination of the ‘first sale doctrine’ or ‘international exhaustion’ should be applied.

    Additionally, Antigua ought to guard against the risk associated with the authorization to retaliate. For instance, suspending TRIPS obligations may cause Antigua to violate its obligations under the Berne Convention and the Paris Convention. Secondly, the authorisation to suspend TRIPS obligations is only temporary in nature (Article 22.8 DSU), although the authorization set out by the DSB has no time limit to implement. However the broader picture portends that Antigua could only suspend TRIPS obligations until the US has removed or amend laws to become WTO consistent. In this regard, Antigua ought to be mindful of new industries that could emanate from this suspension as it would be highly susceptible to a quick change in US laws. Furthermore, Antigua’s preferences under the Caribbean Basin Economic Recovery Act (CBERA) could be negatively affected as one of the criteria is respect for IPRs.

    Conclusion

    The US Gambling case is a peculiar case where a WTO ruling has been in favour of the developing country’s complaint against the developed country. In such cases, the authorization of TRIPS obligations as a strategy for a developed country to comply could be highly flawed and wreaks greater havoc for the developing country.  Antigua’s retaliation, as case in point, could be ineffective whereas in comparison to the effect that the US statutes had on the Antiguan economy. There are many risks involved in respect of being in breach of other international treaties. Ultimately, however, the measure is meaningless if developing countries do not have the capacity to implement such an authorization.

    After a keen assessment of the economic and political risks associated, what other cards are left for Antigua to play? Perhaps Antigua could consider transferring its rights to suspend its TRIPS obligations to another WTO Member State who has the capacity and the clout to successfully implement such a regime. The uncertainty of the outcome is high as there is no precedent of a developing country who has successfully cross-retaliated through a suspension of their TRIPS obligations. This is truly a gamble and Antigua, are you ready?

    Javier Spencer, B.Sc., M.Sc., is an International Business & Trade Professional with a B.Sc. in International Business and a M.Sc. in International Trade Policy. His professional interests include Regional Integration, International Business, Global Diplomacy and International Trade & Development. He may be contacted at javier.spencer at gmail.com.

  • WTO launches its new World Trade Statistical Review

    Alicia Nicholls

    The World Trade Organisation (WTO) launched its new annual flagship statistical publication, the World Trade Statistical Review yesterday. According to the WTO’s press release, this new report replaces the WTO’s previous annual statistical publication, International Trade Statistics, which was published each October. The new report will be published online in July each year and a printed report will be available from September.

    In his foreword to the report, Director-General of the WTO, Roberto Azevedo notes that “[t]he new structure of the publication allows for more comprehensive information about trade and trade policy developments to be provided, and in a more timely way.”

    In addition to statistical compilations, this current report includes a discussion on trends in global trade over the past 10 years, discussions on merchandise trade and commercial services, global and regional trading patterns. An addition is the detailed analysis of developing countries’ participation in global trade, including Least Developed Countries (LDCs).

    Among its findings are that the value of both global merchandise and commercial services trade are nearly two-times greater in 2015 than in 2005 but declined in 2015 compared to 2014. Although developing country merchandise trade declined in 2015, their commercial services exports saw a robust increase. The report also mentions the increase in the overall stockpile of restrictive measures, including trade remedies, introduced by WTO members in 2015.

    The WTO’s press release may be viewed here.

    The full report may be accessed here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • WTO Panel rules in Argentina’s favour in EU Biodiesel Anti-dumping Case

    Alicia Nicholls

    A World Trade Organisation (WTO) dispute settlement body panel has ruled primarily in Argentina’s favour regarding anti-dumping measures imposed by the EU on Argentine biodiesel exports to the EU. Inter alia, the panel found that the EU had contravened the Anti-dumping Agreement and the GATT 1994 by failing to calculate the cost of production of the product on the basis of the records kept by Argentine producers, and by imposing anti-dumping duties in excess of the margins of dumping that should have been established per the Anti-dumping Agreement and the GATT 1994.

    Background

    The dispute (DS473) European Union – Anti-dumping Measures on Biodiesel from Argentina surrounds two EU measures regarding biodiesel imports from Argentina and Indonesia, namely:

    • Article 2(5), second subparagraph, of Council Regulation (EC) No. 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community (the Basic Regulation)
    • Anti-dumping measures imposed by the European Union on imports of biodiesel originating in Argentina and Indonesia.

    The EU’s anti-dumping measures were implemented following an investigation by the European Commission after the European Biodiesel Board (EBB), which represents the interests of EU biodiesel producers, lodged a complaint on July 17, 2012, for anti-dumping against biodiesel imports from Argentina and Indonesia. The  EBB has argued that Argentine and Indonesian biodiesel producers were selling biodiesel at artificially low prices in the EU market thereby putting the EU biodiesel industry at a disadvantage, compromising jobs in the industry and the industry’s ability to contribute to sustainable green transport in the EU.

    In January 2013, the Commission made Argentine and Indonesian biodiesel imports in the EU subject to registration. Following its investigation, the Commission imposed provisional anti-dumping duties on May 29, 2013 and definitive anti-dumping duties on 27 November 2013. In the Definitive Regulation No 1194/2013, it was calculated that the injury margins ranged from 41.9% to 49.5% . The EU applied anti-dumping duties of 22.0% to 25.7% which took the form of specific duties expressed as a fixed amount in euro/tonne.

    Argentina, one of the world’s largest exporters of biodiesel, argued that the EU’s measures were protectionist and aimed at protecting inefficient European biodiesel producers. It has been reported in Argentine media that the measures are estimated to have cost Argentina almost the equivalent of 1,600 million dollars worth in biodiesel exports annually.

    The Dispute

    In December 2013, Argentina requested consultations with the EU and requested that a panel be established in March 2014. A panel was established in April 2014.

    Argentina based its claims on various articles of the Anti-Dumping Agreement, the General Agreement on Tariffs and Trade (GATT) 1994 and the WTO Agreement, arguing that “as applied” the EU’s measures were inconsistent with various articles of these agreements. Argentina also asked the Panel to find that Article 2(5), second subparagraph of the Basic Regulation was  “as such” inconsistent with Articles 2.2, 2.2.1.1 and 18.4 of the Anti-Dumping Agreement, Article VI:1(b)(ii) of the GATT 1994, and Article XVI:4 of the WTO Agreement.

    “As such inconsistent”, basically means that the measure is inconsistent in and of itself and is not solely inconsistent because of its application in a specific instance. “As such” challenges are therefore “serious challenges” as noted by the Appellate Body in US – Oil Country Tubular Goods Sunset Reviews particularly given the presumption that WTO Members act in good faith in the implementation of their WTO commitments.

    Additionally, the ruling’s contribution to the WTO’s body of jurisprudence should not be overlooked. As noted by the panel, Argentina’s claims “raise[d] complex questions pertaining to the interpretation of Articles 2.2 and 2.2.1.1 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994 that have not been addressed previously by panels or the Appellate Body”.

    Ruling

    In its panel report released yesterday (March 29), the panel found in favour of most of Argentina’s complaints. However, the Panel found that Argentina did not establish that Article 2(5), second subparagraph of the Basic Regulation was “as such” inconsistent with Articles 2.2.1.1 and 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994.The Panel also rejected  Argentina’s claim that the amount for profits established by the EU authorities (15% on turnover) was not based on a reasonable method  within the meaning of Article 2.2.2(iii) and also rejected Argentina’s claim that the EU had failed to meet the “fair comparison” requirement under Article 2.4 of the Anti-Dumping Agreement.

    However, the Panel did find in Argentina’s favour on several key issues. Argentina claimed that the EU had failed to calculate the cost of production of biodiesel on the basis of the records kept by the producers/exporter under investigation and had therefore acted inconsistently with Article 2.2.1.1 of the Anti-dumping Agreement.

    Article 2.2.1.1. of the Anti-dumping Agreement provides that:

    For the purpose of paragraph 2, costs shall normally be calculated on the basis of records kept by the exporter or producer under investigation, provided that such records are in accordance with the generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the product under consideration.

    One of the issues the Panel had to consider was whether an investigating authority’s belief that a producer/exporter’s records reflect costs that are artificially low due to an alleged distortion constitutes a legally sufficient ground under Article 2.2.1.1. for that authority to find that a producer/exporter’s records do not “reasonably reflect the costs associated with the production and sale of the product under consideration”.

    The EU authorities had argued that Argentina’s Differential Export Tax had artificially depressed the domestic price of soybeans and soybean oil (the inputs for Argentina’s biodiesel) and had distorted Argentine producers’ production costs.  They argued that this cost distortion should be taken into account in constructing Argentine producers’ normal value and chose  to rely on the average reference price of soybeans published by the Argentine Ministry of Agriculture for export as opposed to the actual price for soybeans reported in the Argentine producers/exporters’ records.

    The panel found that the EU’s argument for ignoring the producers’ costs  did not constitute a legally sufficient basis  for arguing that the producers’ records do not reasonably reflect the producers’ costs as required per Article 2.2.1.1 of the Anti-dumping Agreement.Because of its ruling on Article 2.2.1.1, the Panel did not see it necessary to rule on whether as a consequence, the EU had acted inconsistently with Article 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994 in this regard.

    The Panel also found that the EU did not use a cost that was the cost prevailing in the country of origin (i.e. Argentina) in the construction of the normal value and had therefore acted inconsistently with Article 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994.

    The Panel ruling also supported Argentina’s claim that the EU had imposed anti-dumping duties in excess of the margin of dumping per Article 2 of the Anti dumping argument and had therefore also acted inconsistently with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994.

    The Panel upheld Argentina’s claim finding that as it relates to production capacity and capacity utilisation, the EU had acted inconsistently with Articles 3.1 and 3.4 of the Anti-Dumping Agreement. However, the Panel ruled that Argentina’s claims with respect to the EU authorities’ evaluation of return on investments fell outside of the Panel’s terms of reference.

    The Panel concluded that “to the extent that the measures at issue have been
    found to be inconsistent with the Anti-Dumping Agreement and the GATT 1994, they have nullified or impaired benefits accruing to Argentina under these agreements”. Pursuant to Article 19.1 of the DSU, the Panel recommended that the EU bring its measures into conformity with its obligations under the Anti-Dumping Agreement and the GATT 1994.

    Both parties have 60 days in which to file an appeal against the panel’s decision.

    Indonesia, which was also affected by these EU measures, was one of the third parties to this dispute. Indonesia also currently has a dispute pending against the EU on this matter (DS480 :  EU – Anti-dumping measures on biodiesels from Indonesia).

    A summary of the panel report and  the full panel report may be accessed on the WTO’s website here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.