international Economic Law, session 2

III

GATT: Basic Disciplines

 

Legal Texts:

 

GATT 1947

GATT 1994

Agreement on the Application of Sanitary and Phytosanitary Measures

Agreement on Technical Barriers to Trade

Agreement on Trade Related Investment Measures

 

Readings:

 

Mitsuo Matsushita, Thomas Shoenbaum and Petros Mavroidis, The World Trade Organization: Law, Practice, and Policy (2003)

 

         Chapter 6, Tariffs, Quotas and Other Barriers to Market Access

         Chapter 7, Most-Favoured-Nation Principle

         Chapter 8, National Treatment Principle

 

Cases:

 

European Communities—Measures Affecting Asbestos and Asbestos Containing Products, AB-2000-11, March 12, 2001

 

Australia—Measures Affecting Importation of Salmon, AB-1998-5, October 28, 1998

 

Japan—Measures Affecting Importation of Apples, AB-2003-4, November 26, 2003

 

European Communities—Trade Description of Sardines, AB-2002-3, September 26, 2002

 

Indonesia—Certain Measures Affecting the Automobile Industry, July 2, 1998

 

Comments

[Luz Angela D. Felicia]

The case of “Australia—Measures Affecting Importation of Salmon”, is indeed another such case which exudes an impression of an economic measure being undertaken by a World Trade Organization member-state the reason of which being claimed to be on non-economic considerations, which in this particular case is on health, that is, the prevention of a disease contagion threatened to be caused by salmon-originated pathogens. In this writer's opinion, this case is a depiction of the situation that has been recently discussed in class, that is, that the WTO, in the aspect of dispute settlement, indeed, derives its rulings based mainly, and more often than not, only on the textual interpretation of the legal provision concerned, or on the four corners of the governing bilateral or multilateral agreement.

The controversy having arisen from Australia's import prohibition on fresh, chilled, and frozen salmon on account of existing pathogens that salmon inherently carry, which, according to the position of respondent-state Australia, threatens to result in a spread of disease to the detriment of animal, plant and human life, Australia's case was anchored on the argument that it sufficiently satisfied the requirements of Article 5.1 of the Sanitary and Phytosanitary Measures Agreement (SPS Agreement), in relation to one of the general exceptions enumerated under Article XX, sub-paragraph (b) of the GATT 1994, that is, the requisite of a proper risk assessment regarding the likelihood of disease introduced by pathogens of such imported fresh, chilled and frozen salmon, before undertaking such an economic measure.

Although this writer undoubtedly agrees that from the Appellate Body ruled correctly in that the 1996 Final Report, submitted by respondent-state Australia to the Panel as requested by complainant-state Canada, does not satisfy the elements of a proper risk assessment required under Article 5.1 of the SPS Agreement, it can be readily observed from the manner in which the Appellate Body has resolved the case is undoubtedly in a legalistic manner. Unlike the Panel, which simply took the entirety of the 1996 Final Report hook, line and sinker as constituting a proper risk assessment, the AB reviewed the case, which is said to be in effect a remand of the case, and took pains in applying the letter of SPS Agreement.

It is to be remembered that the SPS Agreement, was created in pursuance of the general exception regarding protection of life and health provided for in the Article XX of the GATT 1994. It has once again been manifested that the WTO, although originally and essentially organized for the promotion of the international economy and the relations which operate within it, the non-economic aspects affected by such economic global-scale economic endeavors are still recognized and are still recognized and are being balanced within an international legal framework.

[Jaim Mari Crisostomo]

Technical Barriers: Varying Effects and Purpose

Trade Barriers have evolved from the obvious to the discreet. It seems that member States have been coming up with creative ways to avoid an open international trade. Why would they do such when International Trade is suppose to promote and develop local industries, build comparative advantage for more efficiency in the usage of resources? Primarily, I think the reason is that most member States are still not ready to fully open themselves to trade because of industries that are relatively underdeveloped. However, it is possible that trade barriers are implemented mainly for the protection of health, safety, and welfare of the citizens which is wholly independent from the reason stated above.

Phytosanitary measure, if not in accordance with the SPS agreement is considered as a technical barrier to trade that is prohibited by the WTO. Although it has the purpose of discriminating between foreign and local products its effect on such is different in comparison with other technical barriers to trade like for example tax.

Taxation as discussed in the cases of Japan Alcohol and Indonesia Cars has been held as a form of discrimination; however the impact of this kind of measure is not easily discernible primarily because it depends on the actions of the consumers. It could be possible that even if imported products are taxed higher than local ones, the consumer would still prefer the former. That is why it is understandable for the Appellate Body to reject the “aims and effect” test proposed by Japan in the Alcohol Case. Although its effects are not easily discernible, the determination of whether such can be considered a technical barrier could be easily detected, mainly because the provisions of the GATT provide for it and as can be observed from the reports of the Appellate Body, the latter provides for liberal interpretation of terms such as “like” or “protection to local industries”.

On the other hand sanitary and phytosanitary measures has the effect of minimizing or totally eradicating the presence of foreign goods, hence costumer participation in this case is very minimal, since the customer has limited or no choice to begin with. Such measure is greatly dependent on the Government’s implementation. In terms of protecting local industries, in the sense of eliminating competition, phytosanitary measures would be more effective, since in reality not all consumers are price driven. Also I think it is easier to defend this kind of measure since it is deeply grounded on scientific evidence. The SPS agreement provides for a more objective method of determining the purpose of a measure. A State who really has the intention on putting up barriers to trade can do such by invoking phytosanitary measures and presenting sound scientific evidence. I believe that this is where the double standards come in. It could not be denied that First world countries have an advantage over third world countries. Conducting research is not cheap and would require expensive equipments which probably most developing countries cannot afford.

In the case of Japan Apples, the Appellate Body upheld the decision of the Panel that it failed to comply with the provisions of the SPS agreement. What if the purpose of Japan is really to avoid infestation and trade barrier was just an incidental effect and it just so happens that they do not have the proper evidence to support such claim? What if it turns out that Japan was right and that eliminating or revising the measure resulted in infestation of fire blight? Will Japan have a remedy against the US? These are questions left unanswered but could possibly happen. That made me think if the provisions of the SPS agreement is indeed enough to protect the life, safety, health and welfare of the animals, humans and plants.

[Jessa Mary Ann Cedeno]

AN APPLE A DAY KEEPS THE IMPORTER AWAY

On its face, the Apples case appears to be a dramatic shift from the previous cases we have discussed in class because it does not deal with the fundamental and traditional “discrimination” principle of GATT. On the contrary, this case concerns SPS measures that reduce risk particularly health risk. Nevertheless, upon scrutinizing the decision of the Appellate Body in this case, the writer still saw a tinge of discrimination specifically against the developing countries. However, such discrimination is not imposed by a Member State; worse, it is from the Appellate Body itself in its standard of review.

Article 5.1 of the SPS Agreement requires risk assessment prior to imposing measures and bans on certain products for trade. While theoretically, as emphasized by the appellate body, there is no obligation to follow any particular methodology for conducting a risk assessment, it seems like such is not really the case. As observed by Neven and Weiler (n.d.), SPS cases have produced a pattern wherein "absent an international standard that a State might follow, it will be rather difficult for all countries, and notably developing countries, to conduct the kind of risk assessment that would satisfy the stringent methodological requirements stipulated by the Appellate Body." This pattern is apparently discriminatory; by imposing stringent methodological requirements, the poorer Member States are greatly prejudiced.

In reality, these developing countries enjoy less power than the developed ones. Hence, the developed Member States possess greater capacity to negotiate international standards which normally becomes the de facto to be imposed on the rest of the Member States (Neven and Weiler, n.d.).

In line with this, this special power possessed by the developed countries may also be used by them to circumvent whatever international standard there is.

Furthermore, being less scientifically equipped and sophisticated, these states may find it hard to match with the powerful facilities or apparatus that the developed countries have in aid of risk assessment. Consequently, the developed countries are at a more advantaged position in complying with the stringent methodological requirements.

In this regard, the writer is of the humble opinion that less stringent measures and lower standard of review must be imposed in SPS cases like this. As aforementioned, the Apples case does not revolve around traditional WTO principles such as discrimination which requires stricter scrutiny. Nonetheless, the writer does not suggest that the Panel or the Appellate Body should be lenient in its review regarding SPS cases; this should not be the case especially that the risk involved here is of great magnitude—the health and life of humans. It must only be remembered that upholding the right to protect life should not be at the expense of discriminating against Member States particularly the less privileged ones. The reason being is that this also holds adverse effects against the lives of the people in these countries. Thus, the exercise of the rights and privileges under the GATT should always be in line with the obligations likewise imposed by it on the Member States.

Reference:
Damien J. Neven And Joseph H.H. Weiler, Japan – Measures Affecting the Importation of Apples (AB-2003-4): One Bad Apple? (DS245/AB/R), available at http://ali.org/doc/wto/wto2003/Chapter_11_Japan-APPLES.pdf

[Lou Macabodbod]

GOING AGAINST THE CURRENT: TRADE OVER HEALTH AND SANITATION

In the case of Australia – Measures Affecting Importation of Salmon, Canada filed a complaint before the WTO regarding the import ban of fresh, chilled or frozen salmon in Australian shores. Invoking the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), Australia argued that it implemented the said import ban to “prevent the introduction of any infectious or contagious disease, or disease affecting persons, animals, or plants”.1 The Appellate Body (AB) ruled that Australia’s policy was inconsistent with certain provisions of the SPS Agreement because the particular ban on salmon caused its unreasonable distinction from other fish products which also pose the same risks creating thereby discrimination or a disguised restriction on international trade.

In this paper, I will discuss two of the most important issues resolved in this case. The first of which is the Appellate Body’s evaluation as to whether Australia complied with the risk assessment requirement of Article 5 Paragraph 1 of the SPS Agreement as embodied in its 1996 Final Report. The next issue, and the more complicated one, pertains to whether Australia has acted inconsistently with Article 5 Paragraph 5 of the same agreement in which the AB identified certain elements and indicators pointing to the fact that the said import ban is a disguised restriction to trade. Furthermore, I will also discuss Australia’s actions after this case was decided in 1997.

As regards the risk assessment requirement, it seems that the requirements cited by the AB appear to be almost identical. The second requirement which is to “evaluate the likelihood of entry, establishment of spread of these diseases, well as the associated potential biological and economic consequences” is almost similar to “evaluate the likelihood of entry, establishment of spread of these diseases according to the SPS measures which might be applied.” A cursory reading of the said elements would lead to the further confusion of its readers which is even exacerbated by the fact that the decision did not dwell on distinguishing the said elements but instead chose to emphasize on defining what “likelihood” and “probability” mean in this article. Moreover, the AB merely reversed the Panel Report because the latter merely required that some degree of likelihood or probability is sufficient. The fact that the AB merely “played” on the article’s words to correct the Panel’s mistake of assuming that the 1996 Final Report complied with the risk assessment requirement, it monumentally failed to explain the matter in a clear manner. The AB decision on this matter is not quite compelling in terms of the judicial soundness of its arguments.

The resolution of the subsequent issue was done in an impressive yet complicated manner. In studying Article 5 Paragraph 5 of the SPS Agreement, the Panel not only identified the elements necessary to show inconsistency with said provision but also went to establish indicators in the form of “warning signals” and other “additional factors” to hold their arguments firmly. The first element pertains to the Member’s adoption of different appropriate levels of sanitary protection in several “different situations”. At this juncture, it is important to note that the Canada’s brilliant lawyers are commendable in invoking the SPS Agreement instead of Article III of the GATT pertaining to “like products”. Perhaps realizing that it was a weak argument in the European Communities – Asbestos case, the concept of “like products” may not have been invoked in this case because it requires stricter scrutiny in identifying what like products really are. In this case, the first element pertains to different levels in “different situations” which turned out to be fatal to Australia’s defense. It is in this element that the panel was able to compare salmon with other fishes such as herrings and cods and proved that the permission to import the latter group, despite the fact that it posed the same risks as that of salmon, would later be branded in the second element as “arbitrary and unjustifiable”, and therefore, a form of discrimination.

The third element refers to measures embodying those differences which result in a disguised restriction on international trade. The panel used three warning signals to again show the existence of discrimination. However, these so-called signals seem to be a reiteration of the first two elements and the AB has observed this through Australia’s insistent argument. It is clear from the wording (e.g., “arbitrary or unjustifiable) of these signals that they were merely repeated but the fact that the panel employed three additional factors salvaged the soundness of their argument in ultimately identifying the import ban as a form of discrimination. Among the three substantial factors, I find the second one as most compelling. It points the “unexplained change in conclusion between the 1995 Draft Report (recommending the permission of importation of salmon under certain conditions) and the 1996 Final Report (recommending the continued import ban). At first glance, the said factor can be considered as the strongest weapon that is responsible for the demise of Australia’s case. However, the arguments given by the AB are not convincing to be accepted as substantially complete. It only mentioned about Australia’s decision-making processes in passing which could explain the radical change better than evaluating the sanitary measures with the scientific studies supporting it. Again, the AB went back to strictly interpreting the provisions of the SPS Agreement instead of adducing more evidence in explaining other aspects which might be more helpful such as domestic political pressure to change economic policies, etc. This could even help in the explaining the third factor which is the “absence of controls on the internal movement of salmon products within Australia compared to the prohibition of the importation of ocean-caught Pacific salmon.” In establishing this factor, it is noteworthy to point that the AB seemed to be merely parroting the findings of the panel. I can be audacious enough to say that there is no point for it to affirm since it did not give a reason at all. This apparent ineptitude of affirming despite its admission that such doubts on the part of the Panel do not carry much weight does not send a good message to Australia. In fact, it can be said that this is a form of depriving Australia with due process by ruling on something that was not explained well at all.

Lastly, it is interesting to know what ultimately happened to this case. The AB recommended that Australia should bring its measures into conformity with the agreement. As one scholar of international economic law2 (Magnuson) pointed out, the recommendation “had the potential of leading to further trade restrictions, as Australia could eliminate discrimination either by lowering restrictions on salmon or raising restrictions on other fish.” Although Australia decided to do both, Magnuson further opined that this choice is contrary from the point of view of the WTO’s purpose of improving the individual welfare of states by reducing barriers to trade. He observed that this is “inherent in all discrimination cases”. In its desire to uphold liberalization and fair trade, it could possibly neglect the importance of health, security or environment which I find to be of equal importance. Further, this trend of producing decisions contrary to the ideals of the WTO is perhaps due to the fact that the AB can only recommend conformity; that the establishment of international laws with sufficient teeth to penalize offending member-states with the least infringement on their sovereign powers is still anticipated. Indeed, the tough balancing act continues.

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1 Quarantine Proclamation 86A
2 William Magnuson, WTO Jurisprudence & Its Critiques: The Appellate Body’s Anti-Constitutional Resistance, 51 HARV. INT’L L.J. ONLINE 121 (2010), http://www.harvardilj.org/online.

[Jasmine Cuizon]

erratum

Implicit in the proximate cause test is “probability” as opposed to “possibility”.

[Jasmine Cuizon]

The Environment and the SPS Agreement

With the looming problems of the environment, the slow progress of development of International Law on the environment and the vague status of current international law on the matter, the International Lawyer has to look elsewhere for remedies in the short term.

International Law jurisprudence which did not concern environmental issues directly have been used to support environmental action. Perhaps the WTO system can only be utilized to assert a pro-environment agenda. The Agreement on Sanitary and Phytosanitary Measures presents a promising prospect in this regard.

If a Member were intent on banning from its territory products that are not friendly to the environment, it may possibly invoke the SPS Agreement. Let us take a non-controversial example. Chloro-fluoro-carbons (CFCs). Let us assume that this a time before Montreal Protocol on Substances that deplete the Ozone Layer.

At the time, there were numerous studies on the ozone depletion and CFCs. There have also been quite a number of studies relating ozone depletion in the increase of hot gasses trapped in the planet. Further studies have also linked these with an increase risk of skin cancer in humans.

The SPS Agreement does not provide a standard of causation which requires that there must be a direct link. It simply requires that there must be sufficient relevant scientific evidence. It only requires that the chance the product will cause harm be probable.

If a Member invoked the SPS Agreement to ban the importation of products with CFCs into its country, it would be easy to claim that these products threaten the lives of its population. It cannot be said that this causation is tenuous. We may apply here a torts claim approach, the proximate cause. The standard for proximate cause, of course, is the foreseeability that harm will result from an act. And in the case of CFC and skin cancer, there is no question in the scientific community that ozone depletion has increased the intensity of Ultra Violet radiation. There is also no question that this increase in UV intensity has caused an increase in risk of the cancer. The harm is certainly foreseeable.

Of course, it may be argued that the proximate cause test is a tool that is highly prone to abuse. But that argument does not attack the soundness of the standard. It only means that additional safeguards must be put in place to make the standard more effective.

The proximate cause frame of reference is sufficient for the purpose of the SPS Agreement. Again, the Agreement requires only that the cause and effect relation is probable. It does not require that it be direct. Implicit in the proximate cause test is “probably” as opposed to “possibility”. It must be remembered that the element of reasonable foreseeability was added to address criticisms against its predecessor, the But For test. The But For test simply required that the harm be possible. That was why it could be stretched to its most logical extremes leading to dubious legal argumentation.

Faced, for example, with the case of Aerial spraying of pesticides, the SPS Agreement is a very helpful device. A ban on agricultural products that were sprayed with pesticides in this way could be based on the harm that it causes to human population.

The WTO/GATT system has been criticized for its failure to address environmental issues. However, it can also be used to foster the green agenda. We have already seen this applied. In the US-Shrimp case, the WTO Appellate Body recognized that the measure, on its face, was GATT compliant. It is a sorry state that the measure was struck down for having been applied in violation of other provisions of the GATT. But this decision should be seen as a stepping stone towards stronger environmental advocacy in the WTO. The day will come when environmental measures will be upheld under the SPS exception and this is an exciting spectacle.

[Christopher Louie Ocampo]

THE MOST FAVORED NATIONS

Non-discrimination is the single most important principle of world trade under the WTO. Non-discrimination entails an obligation on the part of Member States not to confer favoritism on the product and services of particular Member States, much less on their domestic counterparts. Thus, the Most Favored Nation Principle codified in Article I of the GATT is a misnomer, insofar as no State is supposed to be favored under the framework of the Organization.

Just like any other general rule, Non-discrimination succumbs to several exceptions. While exceptions to general rules find application in particular cases, they do not weaken the strength and rationale of the general rules; on the contrary, the former are intended to reinforce the latter. In the WTO, however, exceptions to the general rule of Non-discrimination seem to have become the general rule in on-ground international trade. Exceptions like the permissible FTAs and the legitimate policy-oriented measures such as SPSMs, as employed, serve to render the Most Favored Nation Principle illusory at best.

The very idea of FTAs and customs unions is diametrically opposed to the concept of Non-discrimination. Although the GATT provides for certain standards in establishing FTAs and customs unions, the fact remains that these arrangements accord preferential treatment to particular States on more or less arbitrary considerations. Theoretically, FTAs and customs unions forward what WTO is precisely all about – free trade. But the realization of free trade is limited to the preferred States, with concomitant distorting effects on world trade itself.

Take for example the case of Philippine tuna. According to official statistics, tuna is the Philippines’ second largest export product. Naturally, tuna exporters would seek to access the largest markets for tuna: the US and the EU. Unfortunately, these economies have FTAs that markedly favor similar product of their member economies. While the US allowed duty-free imports of tuna from Mexico by virtue of the NAFTA, the US has been imposing varying tariff rates ranging from 6.5% to 30% on Philippine tuna. In an attempt to lobby for Filipino tuna exporters, President Arroyo asked then US Secretary of State Colin Powell when he visited the Philippines in 2005, to allow greater access to the US market for Philippine tuna. Powell could not give any word, and instead jokingly replied that he never once thought he would, one day in his career, be dealing with tuna. The same scenario occurs in the EU. Spain, one of the most industrialized in terms of tuna fishing, enjoys duty-free tuna exporting privileges in EU. Moreover, the EU extends preferential treatment to the tuna products of its former colonies – the ACP countries. This explains the tariff quota EU imposes on Philippine tuna at the very high rate of 24% for the very limited volume 9,000 metric tons only. The case of the Philippine tuna clearly shows how FTAs and the maintenance of pre-existing preferential treatment by colonial powers to its former colonies acutely affect the free flow of goods even in the context of the WTO.

Another exception that deserves a closer examination is the SPSMs. The SPS Agreement is commendable in seeking to strike a balance between the legitimate interest of protecting human and animal health as well as phytosanitary situations in Member States, and the treaty right of Member States not to be arbitrarily and unjustifiably discriminated against upon a pretext of an SPSM. The SPS Agreement allows for a wide manoeuvring space where Sovereign States can flex its muscles in the exercise of police power. Thus, most of the provisions of the SPS Agreement are procedural in nature, leaving to the discretion of Sovereign States the determination of what constitutes health risk.

Perhaps the most striking procedural requirement in applying SPSMs is that they must be based on scientific risk assessment (Sec. 2, Art. 5, SPS Agreement). But even when a State has no sufficient scientific basis, it may nevertheless employ SPSMs albeit in a provisional measure (Sec. 7, Art. 5, SPS Agreement). Recently, several Member States complained of SPSMs employed by other Member States restricting entry of meat and meat products on account of the H1N1 scare. Aside from pointing out that the SPSMs in question are without basis in science, meat importers even allude to the probability that these measures could be nothing more but disguised protectionism.

Indeed, it is because of the beleaguering perception that SPSMs are tools for deception that the SPS Agreement was concluded. But in spite of the strict procedural requirements levelled against SPSMs, several States cannot seem to be deterred in pursuing protectionist objectives. Case in point is Australia’s banning of Philippine bananas beginning 2002. Australia justified its ban on account of what it claims ‘scientific studies’ that Philippine banana could be carrying pests that could destroy Australian banana industry. Although Australia had no hard proof of its claim, it nonetheless applied the precautionary principle embodied in Sec. 7, Art. 5 of the SPS Agreement and altogether banned Philippine banana. This case is but one of the multitudes of controversies concerning SPSMs, evidence that the leeway afforded the States by Art. XX of the GATT and the SPS Agreement are being misused and abused to achieve protectionist aims.

Pressed to the wall, Member States who are discriminated against through FTAs and SPSMs are left with no other choice but to look for markets willing to accept their products and services. The surest way of securing market access is through a bilateral agreement. Thus, the ‘un-favored’ States enter into bilateral agreements, usually with the huge economies, imposing on them concessions more onerous than what is multilaterally required by the WTO Agreement. The paradox of the Non-discrimination principle in the WTO lies in that while it is suspended in the case of FTAs and SPSMs, it automatically applies to the bilateral agreements entered into by Member States. This means that States that grant more favorable concessions to a Member State through a bilateral agreement must also grant the same benefit to all Member States.

The Most Favored Nation Principle is a strong pillar upon which international trade is founded. Arguably, it is because of the practical implications of this Principle that even non-market economies opened up their doors and joined WTO. That the Principle admits of several exceptions is a testimony to its flexibility, recognizing as it does legitimate circumstances justifying its suspended application. But the reality of current world trade suggests that this flexibility is being stretched to its most probable extreme. The Principle seems to be lost in world trade. All that there is, it appears, are Most Favored Nations.

[Leonardo C. Zulueta, Jr.]

The evolution of the global free trade economy has been monitored by the WTO and the GATT, adhering to the basic standard of the Most-Favoured-Nation (MFN) Principle, which in itself, has undergone an expansion in its coverage throughout the existence of the WTO. MFN treatment has gone beyond trade in goods; it now covers trade in services and intellectual property protection, and has begun expanding into the field of info-tech and electronic commerce. The MFN Principle remains broad and unconditional, still functioning as the guiding post of all the treaties and agreements which propel the growth of the free trade economy.

However, Mitsuo Matsushita was able to point out that the MFN Principle is yet to evolve as a customary international norm, and attempts to elevate it into such status have been unsuccessful. This is perhaps due to the fact that the driving mechanism of a real global free trade economy is rooted in political freedom among the members of the WTO, and such freedom necessarily connotes the absence of a customary norm, even if the member nations of the WTO agree that the MFN Principle remains as the fundamental guideline. The reality is, as Matsushita was able to point out, is that the MFN Principle operates only in a limited sense, either through multilateral or bilateral treaty provisions.

The existence of the trade barriers that are beyond the reach of the WTO, as pointed out by Matsushita, should also be considered as another guiding principle for designing international trade policies and internal economic policies. While a free trade economy remains to be the ideal model, the WTO does not specify outcomes and concerns itself mainly with ensuring that the principles remain intact. Comparing this ideal model to today’s actual scenario, it will be easy to discern the very simplistic approach of the ideal to the complexity of reality. As such, the term free trade economy would be misleading if such term is to be used to describe the global trading scene.

Given this pretext, there is no absolute free market anywhere in the world, rather, there are only varying degrees of freedom accorded to different markets around the world, depending on the amount of government regulation on the market. This creates a mixture of state and market-based models, contrasted to the free market model. Does this mean that it would be more accurate to say that the real ideal of the WTO is to impart a principle based on a perfectly balanced free trade economy, where there should be the least possible government intervention involved?

NO. The WTO is supposed to impart a principle hinged on the removal of discrimination and the maintenance of free and fair competition, following the simplistic free market model. To adopt a policy that recognizes the need for government intervention would be dangerous, allowing the more influential players in the world trading scene to justify the use of coercive measures to attain their goals. Of course, a danger to this approach which was pointed out in the discussion of Matsushita, is the existence of free-riding states who may take advantage of the liberalization forged by other states while keeping their own markets closed. Nonetheless, the evolution of the principles in the GATT and the WTO should always point towards more freedom, rather than devolution to recognizing the need for government regulation.

Another factor to consider in evolving the principles of the WTO is the growth of the electronic economy through the internet, which is a useful tool in enhancing the efficiency of global trading, overriding some of the existing trade barriers. In a micro scale, the electronic economy, as it stands today, is governed by its own rules where participants are able to stand on equal footing in terms of ease-of-access and freedom from government intervention. The limited influence of a coercive force in the electronic trading scenario has so far created the freest market on a wide, even perhaps, global scale. An evolution of the principles of WTO and the GATT towards this direction could create a solution in giving all member nations a real sense of equality and opportunity, and another step forward towards the elimination of discrimination in global trade.

[Emma Theresa N. Maglaque]

Misplacing Human Rights in the Pillars of Multilateral Trade Liberalization

The World Trade Organization thrives in a mission of lowering barriers to market access, faithful to its mantra of non-discrimination as defined by the most-favored-nation principle and the national treatment principle. While these two pillars ring of valiance, contemporary nuances in trade contextualized in a dynamic socio-political environment point to the reality of a necessity in accommodating preferential trade agreements and exceptions, particularly as developing economies and sensitive trade subjects enter the picture. Questions on the erosion of non-discrimination surface, with the presupposition that the concept of non-discrimination is primarily frozen in time, and that the principles carry with them a semblance of settled meaning. In practice, stare decisis is set aside to favor case-to-case approach, which then creates a line of decisions showing varying gradients of progressive thinking in achieving multilateral trade liberalization. To some scholars, difficulties and opportunity areas in carrying out the spirit behind non-discrimination hardly pose compelling critique in the soundness of the concept, given that the theory must be treated separately from the actors. However, complexity and struggles do not surface a mere imperfection in the human aspect of non-discrimination – they point to a clear question of practicability and relevance.

A striking reality in the application of non-discrimination in the tenets of the WTO is the apparent absence of recognition of the human rights perspective in multilateral trade liberalization. It appears that interventions towards lowering barriers to market access are conceptualized and accomplished with a hollow sense of human rights, in that the human rights-based approach to process and substance is hardly mentioned as if it could be divorced from state economic concerns and relations. At best, human rights are mentioned as hiccups that plague the WTO in the social sphere, courtesy of strong civil society groups and grieving developing economies.

Imbibing a rights-based approach to non-discrimination entails recognition of state obligations at the forefront, and employment of the principles of most-favored-nation and national treatment as guiding forces in crafting means of discharging said obligations. The idea is to create a two-level system in fostering an atmosphere that allows full enjoyment of rights: (1) internal mechanisms of each state, and (2) universal mechanisms and cooperation among states. While it may be argued that the WTO is not the relevant unit tasked with reconciling the various classes of rights with trade and economy, human rights pervade state obligations that cannot be categorized in a vacuum. This is particularly crucial in consensus-building among states in rounds of negotiations and discussions; as the state acts for the people in which it draws authority and existence, representatives must wear a human rights lens to appreciate state economic wealth without bargaining levels of basic entitlements.

The danger of a myopic appreciation of non-discrimination becomes a compelling issue given what appears to be an imbalance in the distribution of powers within the WTO. The WTO has designed a system of application of non-discrimination principles sensitive to the unique plight of developing economies. However, the crafting of preferential trade agreements and the application of exceptions remain faithful to the most-favored-nation principle and the national treatment principle even when the grant of these agreements and exceptions between states of wide disparity in economies is laced with a political agenda favoring the dominant party and approaching a prostitution of the ailing party. The wide discretion allowed to parties, the minimal coercion pressed by dispute resolution, and the varying definitions of tests and key words in the GATT/WTO create an atmosphere permitting arrangements faithful to the tenets of the WTO to be dangled in the faces of developing economies with little to bargain save for cooperation – a cloak to compromise sovereignty and entitlement of people. Opportunity areas in which the rights-based approach could aid in serving as an analytical framework would be defining tests in application of certain provisions of agreements and in designing an effective dispute resolution structure – both of which in the present appear to rely heavily on the case-to-case approach and the changing personalities, ideologies, and sensibilities behind panels.

The place of human rights in multilateral trade liberalization and notable aim of the WTO is at the core – it is not an issue that merits handling in the same manner as emerging trends in services and commerce, which are treated distinct from the heart of the WTO and the concept of non-discrimination. Instead, the place of human rights pervades the understanding of and the motivation behind the most-favored-nation principle and the national treatment principle, such that it laces the lifeblood of the WTO in rightful recognition of the impossibility of divorcing human rights from economy and trade.

The concept of human rights lies in the heart of each state, acknowledging the element of people and the obligations impossible to divorce form a state’s being; hence, the concept of human rights is central in an organization that draws its existence in coming together of states.