University of the Philippines
College of Law
Diliman, Quezon City
International Economic Law
Prof. Marvic M.V.F. Leonen
Final Examinations
October 20, 2010
Instructions. This exam will be made available to the students starting 12:00 noon. Students should answer the examinations using their laptops. They should submit their answers to marvic.leonen@mac.com and marvic.leonen@gmail.com on or before 8:00 o’clock in the evening of the same day. The email should have the following subject: “2010 IEL Final Examinations, [name of student]” Students may also have a printed copy of their answers to this examination stamped at the Office of the Dean to prove submission.
Students are expected to answer the exams individually. They are not allowed to discuss the question or the answers or any other matter connected with the examination with anyone while taking the examinations. They are however allowed to consult any material properly citing the sources that are used. Any form of intellectual dishonesty shall deserve a FINAL grade of “5.0” without prejudice to prosecution under the Revised Rules of Student Discipline of UP Diliman and opposition to any application to taking the bar examinations.
All questions should be directed to the professor.
I
Cornucopia Inc. is an agricultural corporation. Munsanto Agricultural Holding Co. owns ninety nine percent of its shares of stock. One hundred percent of Munsanto Agricultural Holding Company’s shares are owned by Australian investors. Cornucopia Inc. intends to provide genetically modified corn seeds for Filipino farmers. It establishes its offices in the Philippines and creates a wide distribution network for distribution of its products.
The Philippines then passes a law which bans the use of genetically modified corn hybrids and its products. The law also provides appropriation for agricultural loans with at very low concessional interest rates from the Landbank and the Development Bank of the Philippines to assist farmers that will convert from genetically modified corn hybrids to organic or traditional corn hybrids. The law mandates that interest for this agricultural loan should always be 75% lower than the lowest commercial agricultural loan window of any rural or commercial bank.
This law also provides income tax breaks for farmers who shift production from corn to any other agricultural product. For farmers whose income is below Php 100,000 per year, the law provides for a cash transfer of Php 250,000 per year that the farmer does not plant corn.
Finally, the law allocates Php 500 million pesos for the UP in Los Banos to continue to do research to find corn substitutes. Php 100 million is also allocated for the UP College of Law’s Law Center to do research on how to establish a stronger regulatory framework for agricultural food products.
85% of all those who provide organic or traditional corn hybrids in the Philippines are Filipinos or are corporations owned by Filipinos.
The legislative committees that recommended passage of the law found that genetically modified corn has only been approved by various Food and Drug Authorities in developed countries for use as livestock feed. However, given the regulatory framework of developing countries like the Philippines, it has been shown that it would be impossible to actually separate genetically modified corn and corn products from those coming from traditional varieties. Cross pollination has also been shown to be a likely possibility.
The Philippines has a bilateral investment treaty with Australia.
Cornucopia Inc. files a complaint to initiate international commercial arbitration. It claims that the passage of the law banning the use of genetically modified corn amounts to indirect expropriation and therefore the Philippines would be liable for reparation.
Australia also files a complaint with the dispute settlement mechanism at the World Trade Organization. It claims that all the subsidies provided by the Philippine government are not WTO compliant. It also claims that the law violates article III of the GATT of 1947.
Questions:
(1) Identify the various subsidies that are provided by the law.
(2) Which of these are “subsidies” within the meaning of the Agreement on Subsidies and Countervailing Measures? Explain.
(3) Which of these subsidies are covered by the Agreement on Agriculture? Classify these subsidies.
(4) Are these subsidies compliant with the WTO? Explain.
(5) Is the ban on genetically modified products consistent with article III of the GATT? Explain.
(6) Is the ban on genetically modified products consistent with article XX of the GATT? Explain.
(7) Is the ban on genetically modified products consistent with the SPS agreement? Explain.
(8) Would the ban amount to an indirect expropriation covered by the current RP Australia Bilateral Investment Agreement? Explain.
II
(9) What is meant by special and differential treatment?
(10) How does this principle appear in the WTO agreements?
(11) Is it possible to have special and differential treatment provisions in preferential trade agreements and still be consistent with the WTO provisions which allow these arrangements?
(12) What is the enabling clause? Explain the features of the enabling clause.
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