International Economic Law and Policy Blog

New AU funding system and the WTO

At its July 2016 summit in Kigali, Rwanda, the AU Assembly held a special retreat to consider new proposals intended to ensure that the AU “is financed in a predictable, sustainable, equitable and accountable manner with the full ownership by its Member States”.

The new funding proposal adopted by the Assembly reads as follows:

“To institute and implement a 0.2 percent Levy on all eligible imported goods into the Continent to finance the African Union Operational, Program and Peace Support Operations Budgets starting from the year 2017”. See here: http://www.au.int/en/sites/default/files/decisions/31274-assembly_au_dec_605-620_xxvii_e.pdf (p. 1.)

That is all there is in the Outcome document on this subject.

The origin of the goods on which the levy is to be imposed is clear: by using the language of “imported goods into the Continent”, it excludes goods imported into an African country from other African countries.

However, by qualifying the products on which the levy will be imposed as “all eligible goods”, the Decision (i) clearly suggests that the levy won’t apply to all goods coming into Africa; and (ii) has left to a future date the determination of which of these goods will be subject to the levy, and therefore “eligible”, and which ones won’t be.

Interestingly, the Decision does not provide any guidance on how this classification is to be done – e.g. will it adopt a positive list approach of goods to be “eligible” for the levy (and whatever is not included in the list to be exempted from it) or the other way round (i.e. a negative list approach in which goods not subject to the levy will be listed while all those not so listed will be subjected to the levy)? etc.

Whatever methodology is used, will it be guided by some general principles – e.g. exclude essential goods from the levy (such as food items, medicines, educational equipment, etc.) – or will it be left to each member state to decide? If the latter, will this be negotiated? etc.

Also, when it says “a 0.2 percent Levy”, 0.2 percent of what? Presumably of the import value of the product (e.g. the value determined according to the WTO customs valuation agreement)? What if a country is not a member of the WTO and follows a different methodology?

Then, will this proposal pass the test of WTO compatibility?

To start with the most obvious: what if the same or “like” product comes from another African country? MFN requires that WTO members may not apply tariffs on a product coming from one WTO member and not apply the same tariff on the same or like product when it originates in another WTO member. The only exception to this would be if the whole of Africa forms a free trade area (as the CFTA aims to become) or a customs union or some form of regional economic entity that can be justified as a south-south agreement as per the 1971 GATT Enabling Clause. At this moment, only the CFTA route looks viable; the fact that both the levy and the CFTA are meant to enter into force in 2017 might not be mere coincidence either, but of course I don’t know if this is indeed the case.

Beyond the MFN issue, what if an African country has already undertaken a zero tariff commitment at the WTO – i.e. the bound tariff level for the particular product is set at 0%? Any increase, even to 0.2%, would be in breach of GATT Art. II on schedules of commitments. Countries such as Mauritius that have gone in the Hong Kong direction of establishing a duty-free import regime may have a point here (and this might explain, at least in part, why Mauritius registered its reservations to the above AU Assembly Decision).

Finally, what if an African country has already concluded a bilateral/regional trading arrangement with a non-African country/ies in which it has undertaken to eliminate tariffs on “substantially all trade” as is required by WTO law? Will the introduction of a 0.2 % levy not put that country in breach of its bilateral/regional treaty obligations and, indirectly, of its WTO obligations (because chances are that such a bilateral/regional treaty has been reported to the WTO and justified under one or another of the exceptions mentioned above – GATT XXIV, Enabling Clause, GATS Art. V)? The Euro-Med agreements signed between AU member states in North Africa and the EU or the EPAs signed by some of the other African countries with the EU might easily encounter these challenges.

I suspect there will be many more issues to come here.

The question then is how to overcome any challenges that may come from other WTO members.

I doubt any country would take Africa to court (and, in any case, no case can be brought against Africa yet; it can only be brought against individual AU member states that are also members of the WTO because the AU does not have legal standing before the WTO).

But, if the proposed formula is really good enough for Africa to want to fight for it at the WTO, I think it can do so successfully through a politico-diplomatic route. I am thinking here of a waiver under Art. IX of the Marrakech Agreement as perhaps the most obvious route.

Thoughts welcome.

Shaping the Pacific Alliance

Readers may be interested in a new blog, Shaping the Pacific Alliance, which aims to contribute to discussion about the Pacific Alliance, an integration scheme comprising Chile, Colombia, Mexico and Peru. The blog provides a platform for governmental and intergovernmental communities to engage with civil society, academics and industry in constructive conversations about the future prospects of and challenges facing the Pacific Alliance. The blog is edited by Ana Maria Palacio, a current PhD student at Melbourne Law School, the University of Melbourne, formerly with Colombia’s Ministry of Trade, Industry and Tourism. Her research project will propose a viable legal architecture to support the Pacific Alliance in long term consolidation. pacificallianceblog.com

Financial University Organizes Conference on Russia and the WTO

On 19-20 May 2015, the Financial University of the Russian Federation held its first international conference on the topic of "WTO Law in the Legal System of the Russian Federation: Problems of Application and Teaching."  To my knowledge, this was the first international legal conference held to address the Russian Federation's 2012 accession to the World Trade Organization (WTO) and the current role of the Russian Federation in the WTO.  The Financial University under the Government of the Russian Federation (Finuniversitet) is a leading publicly-funded institution of higher professional education (whose roots go back to the early 20th century).  The conference was supported by a grant from the U.S. Russian Foundation for Economic Advancement and the Rule of Law (USRF).

The conference consisted of over two dozen presentations regarding international trade law and policy and the trade law of the Russian government. 

Among the main lecturers on the first day of the conference were: Jan Bohanes, senior counsel of the Advisory Centre on WTO Law (Geneva), who lectured on constructed normal value in antidumping; Professor Steve Charnovitz of George Washington University Law School (Washington, D.C.) who lectured on the WTO-plus provisions in the Russian WTO accession package; Professor Anatoly Kapustin, Head of the Legal Comparative Research Centre who lectured on Russia and WTO Law; Professor Vasilka Sancin of the University of Ljubljana who lectured on models for an appellate mechanism in investor-state dispute settlement; Anait Smbatyan, Senior Expert at the WTO Expertise Center (Moscow) who lectured on WTO implementation; Eric M. Solovy, partner at Sidley Austin LLP (Washington, DC) who lectured on the obligations of and caselaw under the WTO Agreement on Trade-Related Intellectual Property Rights (TRIPS) and the WTO Agreement Subsidies and Countervailing Measures (SCM).  Excellent additional presentations were made by Mark G. Pomar, President of USRF and by Professor and Deputy Rector Dmitry Sorokin of Finuniversitet.

On the second day of the conference, two parallel workshops were held featuring scientific presentations by leading academics and practitioners from Moscow and other Russian cities.  Several presentations addressed the challenges and opportunities of teaching international economic law to Russian students.  In addition, Professor Alexey N. Ruzhin of the Russian Foreign Trade Academy gave a lecture on the enforcement of international trade and customs law in the Russian economy.

Organizing a major global conference on WTO law is a difficult task and Financial University Associate Professor Igor Shulyatyev is to be commended for planning and carrying out a landmark conference on key policy and technical challenges facing the Russian government in its WTO membership.  In the future, the Financial University should consider building on its success and holding a second annual conference in 2016. 

Colombia FTA Links

I don't have anything particularly insightful to say about the Colombia FTA recently submitted to Congress, so I'll just pass along some links (in no particular order):

George Will: "Under the Andean Trade Preference Act, passed by a Democratic Congress is 1991, the United States imposes tariffs on only 8 percent of imports from Colombia. But more than 90 percent of U.S. exports to Colombia are subjected to tariffs, some as high as 35 percent. The trade agreement would make this "one-way free trade," which now primarily serves Colombia's interests, more mutually beneficial. "

Kevin Gallagher: "The U.S.-Colombia Free Trade deal is one of the most deeply flawed trade pacts in U.S. history. It will hardly make a dent in the U.S. economy, looks to make the Colombian economy worse off and accentuate a labor and environmental crisis in Colombia. The Democratic majority in Congress is right to oppose this agreement and call for a rethinking of U.S. trade policy."

Dani Rodrik: "Virtually all of Colombia's exports enter the United States tariff-free, a  fact that is advertised in the USTR web site to assuage US critics who worry about adverse employment implications in this country.  But of course the same fact suggests Colombia is not getting much out of the proposed FTA either (or at least any more than what it could have gotten on its own)."

Ben Muse: "Congress is supposed to take action on a trade agreement negotiated under the trade promotion authority within 90 days of the date the president submits it.  However the 90 day requirement just lies in the legislature's rules, and a legislature can change the rules it sets for itself. "

Dan Drezner: "The biggest benefit of the FTA with Colombia has little to do with economics and everything to do with our bilateral and regional relationships. Go back to NAFTA. Kevin is right to point out that the agreement's efonomic effects were not terribly large. On the other hand, even skeptics of trade liberalization -- Dani Rorik, Paul Krugman, and Joseph Stiglitz -- supported NAFTA because it locked Mexican economic reforms, promoted political reforms, and cemented a stronger bilateral relaionship. There's no reason to believe that the same effects would not take place with Colombia."

The Economist: "Killing the treaty would be a blow to Colombia and its leader, Álvaro Uribe, a staunch American ally in a region trending in the opposite direction. This week he issued a plea for America to maintain its long tradition of bipartisan policy towards his country and pass a measure that would help Colombia give its people alternatives to drugs and terrorism. If the deal goes down, the benefits of befriending the colossus to the north will seem less dependable across the continent, complicating American diplomacy there. And in America the FTA's death might shatter the long-standing consensus on free trade in Washington by emboldening protectionists."

Jonathan Dingel: "The US-Colombian free trade agreement is not a free trade agreement -- it's a preferential trade agreement. Calling it a PTA instead of an FTA will satisfy both Jagdish Bhagwati and Dean Baker."

And Todd Tucker is live-blogging the fast track debate.

State of Play of U.S. FTAs

I found this table from Washington Trade Daily to be a useful summary of the state of play of U.S. FTAs:

1985	US-Israel FTA	Implemented
1989	US-Canada FTA	Implemented; combined with NAFTA in 1994
1994	North American Free Trade Agreement	Implemented
2001	US-Jordan FTA	Implemented
2004	US-Singapore FTA	Implemented
2005	US-Chile FTA	Implemented
2005	US-Australia FTA	Implemented
2006	US-Morocco FTA	Implemented
	US-Central American-Dominican Republic FTA	Implemented for the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.  Implementation for Costa Rica expected early 2008
	Free Trade Area of the Americas	Negotiations inactive
	US-Southern African Customs Union	Negotiations inactive with South Africa, Namibia, Lesotho, Botswana and Swaziland
	US-Bahrain FTA	Implemented
	US-Thailand FTA	Negotiations inactive
	US-Columbia FTA	Under Congressional review
	US-Peru FTA	Signed into law; implementation expected by mid-2008.
	US-Ecuador FTA	Negotiations inactive
	US-Panama FTA	Under Congressional review
	US-United Arab Emirates FTA	Negotiations inactive
	US-Oman FTA	Signed into law, implementation expected in 2008
	US-Malaysia FTA	Negotiations ongoing
	US-South Korea FTA	Under Congressional review

The EU-ACP EPAs

I've only been following the EU-ACP negotiations from a distance, and there were a number of aspects that I found confusing.  For example, how serious was the talk about an end of year deadline?  A good FT article from today offers thoughts and insights on a lot of the issues, including this one:

But since there is a dearth of case law, no one knows what degree of liberalisation would survive legal challenge. Some regard the EU’s insistence on the end-year deadline rather than, say, extending existing privileges for a temporary period, as aggressive and unjustified brinkmanship. The WTO disputes process takes years, so the spectre of the current agreements being mown down in a hail of hostile litigation on January 1 is unlikely.