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Melaku Desta
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Gentlemen, I have been following your insightful comments and exchanges and it looks like you are settling the matter by agreeing to side with the minority opinion. In fact, that was exactly what I also felt when I read the following in the panel report: “Mexico acknowledges that the United States' argument that carrying the dolphin-safe label is voluntary and that it is legal to sell tuna products in the United States that do not bear this label”. (para. 7.88). It does indeed look like this is a standard rather than a technical regulation. However, let me try to tell you why I think the majority view is the correct interpretation here. The US measure is “voluntary” in the sense that Mexico can still export its tuna but will not have access to the type of retail distribution channel that the dolphin-safe label would have allowed it to. And in this sense, we are in the market definition territory that Simon raised earlier. To the extent Mexico wants to enter the “labelled” tuna market, US law restricts Mexican fisheries to get certified as required by US law, leaving Mexico no other option whatsoever. And here is the key in my view: if Mexican fisheries ignore this US law, affix their own dolphin-safe label and try to enter the US market, they will be stopped right at the border, and they will be held in breach of US domestic law. This is what makes it mandatory in my view, which becomes clearer if we were to compare it with a non-mandatory dolphin-safe labelling scheme, for example. Imagine that the dolphin-safe label is a private standard. As a private standard, those who established it will devise different mechanisms to make sure it is observed in practice – e.g. if they are processors and distribution outlets, by boycotting any tuna product without their own label from their premises. But imagine a situation where Mexican fisheries choose to ignore such a standard, affix their own dolphin-safe label and try to enter the US market – nobody will stop them at the border, they will not be in breach of domestic law, and the only challenge they will have is a commercial one – that of finding distribution channels through which to sell their products. Naturally this can cause confusion on the market and consumer protection issues can arise, but at that point the only decisive factor is likely to be one of good will, reputation, credibility, etc. rather than any legal power to compel compliance with any particular conditions. This in my view takes the US measures within the definition of a technical regulation rather than a standard under the TBT Agreement. Over to you …
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To me, this is not about free trade or neo-liberalism; it is about hypocrisy. I remember paragraph 27 of the 13 September 2003 Cancun draft ministerial declaration (http://www.wto.org/english/theWTO_e/minist_e/min03_e/draft_decl_rev2_e.htm) on the issue of cotton. It goes like this: “27.We recognise the importance of cotton for the development of a number of developing countries and understand the need for urgent action to address trade distortions in these markets. Accordingly, we instruct the Chairman of the Trade Negotiations Committee to consult with the Chairpersons of the Negotiating Groups on Agriculture, Non-Agricultural Market Access and Rules to address the impact of the distortions that exist in the trade of cotton, man-made fibres, textiles and clothing to ensure comprehensive consideration of the entirety of the sector. The Director-General is instructed to consult with the relevant international organizations including the Bretton Woods Institutions, the Food and Agriculture Organization and the International Trade Centre to effectively direct existing programmes and resources toward diversification of the economies where cotton accounts for the major share of their GDP. Members pledge to refrain from utilizing their discretion within Annex A, paragraph 1 to avoid making reductions in domestic support for cotton.” Guy de Jonquiers of the Financial Times quoted one observer as saying: this is a situation in which “the US uses subsidies to deprive poor countries of comparative advantage. Then it tells them they have to find other kinds of business.” See Guy de Jonquiers, Comment and Analysis, Financial Times, 16 September 2003, p. 21. If there is anything neo-liberal in this system, I don’t see it.
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Julia, I agree with your analysis completely. When it comes to the rules relating to export restrictions through duties, do they affect natural resources in any secial way? My understanding is that the WTO simply lacks any effective rules to discipline export duties, and that applies to all goods, whether primary commodities or manufactures. If there is a distinction between export restrictions on natural resource products and others, it probably relates only to the grounds of justification under the exceptions, as you mentioned (like XX(g), etc.) Am I missing something?
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Julia, You say: “the sovereign rights of WTO members over their natural resources are contracted out to the extent GATT and other WTO rules provide international disciplines.” I was not very clear with the first part of this sentence (“the sovereign rights of WTO members over their natural resources are contracted out”), but then the second part of the sentence (“to the extent GATT and other WTO rules provide international disciplines”) seems to dilute the meaning of the first away. The discussion in the previous thread revealed that the WTO discipline on natural resources, as natural resources, is probably marginal and indirect. Indeed, your own question on export restrictions here relates to the natural-resource-based product rather than the natural resource as such. I agree with your analysis of the implication of GATT’s approach to export duties. But, I am not sure I understand what you mean when you ask: “What does this basic fact mean for trade in natural resource?” The lack of serious constraint on the power of WTO members to impose non-quantitative export restrictions applies to all products. Given that you are specifically referring to the natural resource “post production”, what makes the issue unique to trade in natural resources? I see no reason to differentiate between such a natural resource product and other goods. The question you asked earlier thus remains the key: “is there any international norm requiring equitable sharing of natural resources among nations”? I do not know any. The only thing remotely relevant I could think of would be the old international commodity agreements (which might be on their way back as I mentioned earlier) concluded between groups of producers/exporters on the one hand and consumers/importers on the other. Typically in such ICAs the producers/exporters would commit to sell/export and the importers/consumers to buy/import agreed quantities of the product within a certain price range and timeframe. In those circumstances, one could probably say that the obligation to sell a given quantity of, say, tin, carries within it an obligation to produce and share one’s resources with the importing countries, and to that extent constituted an international norm. But, I cannot see it taking us far: most of these agreements, even during their heyday, were negotiated for a fixed period of time, more in the nature of ‘contracts’ rather than norm-generating international treaties. Even then, they have effectively disappeared since the late 1980s; those that are still in existence play little role in the regulation of production and trade in these commodities; etc. Finally, if there were an obligation to share one’s resources, where would it stop?
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Julia, Yes that is a good point. But, let's say, for arguments sake, that SINOPEC (China Petroleum & Chemical Corporation) is a state-owned enterprise -- I know proving if this is the case can be difficult even in cases like SINOPEC that is majority-owned by the state of China, but let's just assume it is. Let's further assume that Sinopec has signed a twenty-year deal to explore, produce, etc. oil in an Angolan oil block. If Sinopec later decides, without any pressure or instruction from the state, to sell all its Angolan production in the Chinese market to the exclusion of others, would that be captured by GATT Article XVII? Relevant provisions for ease of reference: GATT Article XVII 1.* (a) Each contracting party undertakes that if it establishes or maintains a State enterprise, wherever located, or grants to any enterprise, formally or in effect, exclusive or special privileges,* such enterprise shall, in its purchases or sales involving either imports or exports, act in a manner consistent with the general principles of non-discriminatory treatment prescribed in this Agreement for governmental measures affecting imports or exports by private traders. (b) The provisions of subparagraph (a) of this paragraph shall be understood to require that such enterprises shall, having due regard to the other provisions of this Agreement, make any such purchases or sales solely in accordance with commercial considerations,* including price, quality, availability, marketability, transportation and other conditions of purchase or sale, and shall afford the enterprises of the other contracting parties adequate opportunity, in accordance with customary business practice, to compete for participation in such purchases or sales. Nota Ad GATT Article XVII: Paragraph 1 (a) Governmental measures imposed to insure standards of quality and efficiency in the operation of external trade, or privileges granted for the exploitation of national natural resources but which do not empower the government to exercise control over the trading activities of the enterprise in question, do not constitute "exclusive or special privileges".
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I think Canada Softwood Lumber is a very relevant example, and it shows that natural resources are in some sense covered by the WTO. But, my reading of it would be something like this: WTO law comes into play only after a given natural resource has passed through a production process and converted into a product ready for exchange and trade. If this law applies to the pre-production stage, it is only to the extent necessary to ensure that measures taken at that stage do not affect the competitive relationship on the market between the products that come out of the process. In Canada Softwood Lumber, the claim was that subsidies provided upstream, in the form of grant of licences to harvest standing trees at below-market prices, resulted in actionable subsidies on the downstream softwood lumber exports. Perhaps, to make that case relevant to our discussion, a helpful question might be to ask whether any law, investment or trade, would require Canada to allow access to its forest resources at all. That is what I could not see.
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Thank you for these thoughts. The more I think about the gaps in the rules relating to natural resources, it is the investment law aspect of it that seems to be the most important. Whether or not we say WTO rules cover natural resources as resources, ultimately the question is whether WTO can or does require its members to exploit or allow the exploitation of their natural resources. The investment short cut would be to say that there is an international law obligation to allow investment, including foreign investment, in any of these sectors, and the power of the member states is limited to administration of the licensing, etc. system according to certain standards (non-discrimination, fair and equitable treatment, etc.). I do not see a place for such law yet. Even the BITs normally differentiate between pre-investment and post-investment issues; they rarely, if at all, provide a right to invest while they provide an array of guarantees and protections once the investment has happened or started. I agree that the MFN clause would address some of the issues I put under competition law, but that happens only if the bilateral agreements of concern are inter-governmental. In reality, in the oil sector for example, long-term agreements are signed between a producing country and an international coil company, and the decision of where to sell the resulting crude might be taken only by that company. It is from this perspective that I wondered if these are not issues totally outside the WTO's remit -- at least for now.
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Simon, The fish example is a good one I think, which reminds me of the 1988 Herring/Salmon GATT case. In a short paper I published in 2009, (“Legal Issues of OPEC Production Management Practices: An Overview”, in Jacques Werner and Arif H. Ali (eds.), A Liber Amicorum: Thomas Wälde – Law Beyond Conventional Thought (Cameron May, 2009), pp. 158-31.) I wrote the following: “Likewise, in a GATT case between the US and Canada relating to a Canadian restriction on the export of unprocessed salmon and herring, the parties as well as the panel made clear that GATT rules do not apply to any measures restricting fish catch but only to measures restricting the export of fish after they have been caught. In the words of the US itself, Canada has ‘the undeniable right … to conserve fish in the accepted sense of enhancing stocks and limiting harvesting in order to ensure future yield.’ [GATT, Canada Measures Affecting Exports of Unprocessed Herring and Salmon, Report of the Panel adopted on 22 March 1988 (L/6268 - 35S/98) 20 November 1987, para. 3.8.] The US further recognized Canada’s sovereign right to ‘implement conservation programmes through … [its] sovereign authority to limit and require reporting of catch …’. The panel, in rejecting Canada’s defence that its restriction on the export of raw fish did not fall within the scope of the GATT, also followed the same approach by noting: ‘the export prohibitions do not limit access to salmon and herring supplies in general but only to certain salmon and herring supplies in unprocessed form.’ This makes it clear that, in the view of the panel, which was also explicitly recognized by the US, Canada would have been within its rights had it been limiting access to fish supplies, i.e. a production restriction, rather than limiting access to already harvested but still raw salmon and herring.” I then concluded that: “In sum, it appears clear that OPEC member states are in analogous positions to Canada or the US asserting that trade law, whether from NAFTA or WTO, has nothing to do with the issue of access to their respective fresh water resources in their natural state (e.g. in rivers and lakes) or their sovereign right to determine the rate at which they exploit their fisheries resources. One obvious parallel to the Canadian fisheries case would have been a situation where OPEC member countries would allow production of crude oil but make its exportation conditional on a certain degree of refinement taking place within their borders. What they in fact do is restrict access to the resource in its natural state, i.e. while it is still underground, just as Canada could have done, within its legal rights, if it had limited the amount of fish that could be harvested over a given period. The moment OPEC countries produce the crude and ban its exportation, or make exportation conditional on any further processing within the countries, they would be in breach of their WTO obligations. To the extent they only restrict production, their acts remain outside the scope of the GATT-WTO system, falling instead under the established principle of permanent sovereignty over natural resources.” I totally agree with you that there is no way we can be sure which way to go until a panel and the Appellate Body get a chance to rule on this, but this is how I see it for now.
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Simon, I think the product v. potential product distinction that your definitions bring out is very important. Let’s look at your point on water for example, where you say: “assuming this water is fit for consumption or other use, it could be turned into a product. As a result, a ban on the extraction of this water would be a measure that affects goods (and thus in all likelihood trade in goods), and thus would be covered by the GATT and other goods agreements.” Then you added: “Of course, this does not mean that measures regulating natural resources would necessarily violate WTO rules. For example, it's not clear that a production ban on a natural resource would constitute a violation.” I entirely agree with you that a ban on the catching of fish, the cutting of trees, the extraction of water/oil/minerals would be a measure that affects trade in fish/timber/water/oil/minerals as goods, but does that necessarily make the government measure upstream one covered by the GATT and other goods agreements? That is where I differ (and I have been inconsistent myself on this issue as I admitted earlier). To my mind, when we say a measure is covered by an international agreement, what we mean essentially is that that the national measure must fit within the constraints of the rules of that international agreement, that its legality can be challenged on the basis of the rules of that agreement. The typical, though not the only, situation in our case would be whether the production bans above become export restrictions in the sense of GATT Article XI:1. If we say these upstream measures are covered by the GATT/WTO rules, I fear that we will almost certainly conclude these production bans are equivalent to export bans, and therefore prima facie a violation. We can then of course go further and ask whether the measures can be justified under GATT Art. XX(g), but I am sure we will come to that later. The issue for now seems to me the following: what is the test to determine whether a particular upstream measure in the natural resources sector is subject to the GATT/WTO system: is it whether the measure has any impact on trade in the product downstream – in which case, I fear, virtually every government measure upstream will affect trade and therefore fall within the scope of the WTO – or is there any requirement of direct relationship between the measure and the tradable product? If we adopt the former, even denial of an investment/production license to a company would be a violation that will need to be justified through an exception. I cannot see the scope of the WTO reaching that far and potentially undermining such sacrosanct principles as permanent sovereignty of natural resources and so on.
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