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Will the WTO Finally Tackle the ‘Trump’ Card of National Security?
http://editors.cis-india.org/internet-governance/blog/the-wire-arindrajit-basu-may-8-2019-will-the-wto-finally-tackle-the-trump-card-of-national-security
<b>The election of Donald Trump has marked a foundational challenge to the rules-based international order based on “free and fair trade”.</b>
<p style="text-align: justify; ">The article by Arindrajit Basu was <a class="external-link" href="https://thewire.in/trade/will-the-wto-finally-tackle-the-trump-card-of-national-security">published in the Wire</a> on May 8, 2019.</p>
<hr style="text-align: justify; " />
<p style="text-align: justify; ">From <a href="https://www.reuters.com/article/us-usa-trade-wto/u-s-blocks-wto-judge-reappointment-as-dispute-settlement-crisis-looms-idUSKCN1LC19O">stonewalling appointments </a>at the appellate body of the WTO’s dispute settlement body (DSB) to <a href="https://www.bloombergquint.com/china/trump-is-said-to-delay-decision-on-steel-and-aluminum-tariffs">slapping exorbitant steel and aluminium tariffs on a variety of countries, Trump has attempted to desecrate an institution that he views as being historically unfair to America’s national interests.</a></p>
<p style="text-align: justify; ">Given this potentially cataclysmic state of affairs, <a href="https://www.wto.org/english/tratop_e/dispu_e/512r_e.pdf">a WTO panel report adopted</a> last month regarding a transport restriction dispute between the Russia and Ukraine would ordinarily have attracted limited attention. In reality, this widely celebrated ruling was the first instance of the WTO mechanism mounting a substantive legal resistance to Trump’s blitzkrieg.</p>
<p style="text-align: justify; ">The opportunity arose from the Russian Federation’s invocation of the ‘national security exception’ carved into the Article XXI of the General Agreement on Tariffs and Trade (GATT-the primary WTO covered agreement dealing with trade in goods.)</p>
<p style="text-align: justify; ">This clause has rarely been invoked by a litigating party at the DSB and never been interpreted by the panel or appellate body due to the belief among WTO member states that the exception is <a href="https://scholarship.law.nd.edu/law_faculty_scholarship/330/">‘self-judging’</a> i.e. beyond the purview of WTO jurisdiction sovereign prerogative to use as they see fit.</p>
<p style="text-align: justify; ">Over the past couple of years, the provision has taken on a new avatar with trade restrictions being increasingly used as a strategic tool to accomplish national security objectives. In addition to the Russian Federation, in this case, it was used by the <a href="https://www.cambridge.org/core/journals/american-journal-of-international-law/article/security-exception-in-wto-law-entering-a-new-era/CF8C3DCDF2CD924CAEEDD147840668F9">UAE to justify sanctions against Qatar in 2017</a>and notably by the <a href="https://www.washingtonpost.com/news/monkey-cage/wp/2019/01/11/trump-claims-that-a-national-security-exception-allows-him-to-block-imports-is-he-right/?utm_term=.5c178ecfcd7d">US administration in response to the commencement of WTO proceedings </a>by nine countries (including India) against its steel and aluminum tariffs.</p>
<p style="text-align: justify; ">India itself has also cited the clause in its diplomatic statements when justifying revocation of the Most Favoured Nation Status to Pakistan, although this has not yet resulted in proceedings at the WTO.</p>
<p style="text-align: justify; ">Even though the panel held in favour of Russia, this report lays down the edifice for dismantling the Trump Administration’s present strategy. By explicitly stating that Article XXI is not entirely beyond review of the WTO, the panel report gives a <em>cause de celebre</em> for all countries attempting to legally battle Trump’s arbitrary protectionist cause disguised as genuine national security concerns.</p>
<p style="text-align: justify; ">At the same time, it might act as a source of comfort for Huawei and China as it allows them to challenge the legality of banning Huawei (as some countries have chosen to do) at the WTO.</p>
<p style="text-align: justify; ">History of Article XXI</p>
<p style="text-align: justify; ">Article XXI had <a href="https://www.wto.org/english/res_e/booksp_e/gatt_ai_e/art21_e.pdf">an uncertain presence</a> in the legal architecture of the WTO from its very inception. It had its origins in the US proposal to establish the International Trade Organisation. The members of the delegation themselves were divided between those who wanted to preserve the sovereign right of the United States to interpret the extent of the exception as it saw fit and others who felt that this provision would be abused to further arbitrary protectionism. The delegate of Australia was also skeptical about the possible exclusion of dispute resolution through a mere invocation of the security exception.</p>
<p style="text-align: justify; ">Given this divergence, the drafters of the provision thus sought to create a specific set of exceptions in order to<a href="http://sul-derivatives.stanford.edu/derivative?CSNID=90240173&mediaType=application/pdf"> arrive at a compromise</a> that “would take care of real security interests” while limiting “the exception so as to prevent the adoption of protection for maintaining industries under every conceivable circumstances”.</p>
<p style="text-align: justify; ">To attain that objective, the provision in the ITO Charter, which was reflected in Article XXI of GATT 1947 was worded thus:</p>
<blockquote class="blurb" style="text-align: justify; ">
<p>Nothing in this Agreement shall be construed</p>
<p>to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests;</p>
<p>or to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests (i) relating to fissionable materials or the materials from which they are derived; (ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; (iii) taken in time of war or other emergency in international relations; or</p>
<p>to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security</p>
</blockquote>
<p style="text-align: justify; ">Article XXI has been <a href="http://www.wl-tradelaw.com/gatt-article-xxis-national-security-exception-the-ultimate-trade-policy-conundrum/">historically invoked </a>in cases where national security is devised as a smokescreen for protectionism. For example, in 1975, Sweden cited Article XXI to justify global import restrictions it had had slapped on certain types of footwear. It argued that a decrease in domestic production of said kinds of footwear represented ” a critical threat to the emergency planning of its economic defense.” There was sustained criticism from some states, who questioned Sweden’s juxtaposition of a national security threat with economic strife, claiming that they too were suffering from severe unemployment at the time and the Swedish restrictions would be devastating for their economic position.</p>
<p style="text-align: justify; ">The Swedish problem dissipated when Sweden withdrew the restrictions but the uncertain peril of Article XXI remained.</p>
<p style="text-align: justify; ">In <a href="http://nujslawreview.org/wp-content/uploads/2017/01/2016-9-3-4-Sandeep-Ravikumar-The-GATT-Security-Exception_-Systemic-Safeguards-Against-Its-Misuse.pdf">another instance</a>, the US themselves had previously relied on the security exception to justify measures prohibiting all imports of goods and services of Nicaraguan origin to the US in addition to all U.S. exports to Nicaragua.It argued that Article XXI was self-judging and each party could enact measures it considered necessary for the protection of its essential security interests. In fact, it was successful in keeping its Article XXI invocation outside the terms of reference (which establishes the scope of the Panel’s report), which precluded the Panel from asserting its jurisdiction and examining the provision. It is worth noting, though, that the Panel was critical of the US for utilising the provision in this case and emphasised the need for balancing this exception against the need to preserve the stability of global trade.</p>
<p style="text-align: justify; ">The recent spate of national security driven justifications to subvert the adjudicatory powers of the WTO provided a necessary opportunity for the panel to clarify its stance on this issue.</p>
<p style="text-align: justify; ">The findings of the panel</p>
<p style="text-align: justify; ">The findings of the panel can be divided into <a href="https://www.ejiltalk.org/the-wto-panel-ruling-on-the-national-security-exception-has-the-panel-cut-the-baby-in-half/">three </a>broad clusters:</p>
<p style="text-align: justify; ">1) The WTO tribunals’ jurisdiction over the security exception: Right from the outset, the panel clearly stated that it had jurisdiction to adjudicate the matter at hand. It rebutted Russia’s claim that any country invoking the exception had unfettered discretion in the matter</p>
<p style="text-align: justify; ">2) The ambit of the self-judging nature of the security clause: Both the Russian Federation and the United States, which had filed a third party submission, re-emphasised the supposed self-judging nature of the security clause due to the incorporation of the words “ which it[the WTO member] considers necessary for the protection of its essential security interests” in clause (2) of the provision.</p>
<p style="text-align: justify; ">However, the panel argued that the sub-paragraphs (i)-(iii) require an objective review by the Panel to determine whether the state of affairs indicated in the sub-paragraphs do, in fact, exist. In this way, the Panel added,the three sub-clauses act as “limiting qualifying clauses.” The determination of the measures that may be ‘necessary’ for protecting their ‘essential security interests’ are then left to each WTO member. By interpreting the clause in this manner,the Panel deftly preserved the sovereign autonomy of member states while preventing the bestowing of carte blanche’ ability to take shelter behind the provision.</p>
<p style="text-align: justify; ">3) Determination of emergency in international relations: The use of the term “other emergency in international relations” as used in the provision is an amorphous one because the term ‘emergency’ is not clearly defined in international law. Therefore, the Panel relied on UN General Assembly Resolutions and the fact that multiple states had imposed sanctions on Russia to conclude that there was, in fact, an ‘emergency’ in international relations in this case. In doing so, the Panel upheld the transport restrictions imposed by Russia. However, the implications extend far beyond the immediate impact on the two parties.</p>
<p style="text-align: justify; ">Implications of the ruling</p>
<p style="text-align: justify; ">Before considering the implications of this report, we must consider that, like in other avenues of international law, the municipal legal principle of <em>stare decisis </em><a href="https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c7s1p1_e.htm">does not apply to Panel or Appellate Body decisions.</a> This means that future panels are not bound by law to follow the finding in this report.</p>
<p style="text-align: justify; ">However, WTO tribunals have often used the reasoning put forward in previous panel or Appellate Body reports to support their findings.</p>
<p style="text-align: justify; ">Steel and aluminium tariffs</p>
<p style="text-align: justify; ">The US, whose third party submission failed to sway the panel has recognised the potential implications of the report and disparaged it as being <a href="https://news.bloomberglaw.com/international-trade/u-s-calls-wto-national-security-ruling-seriously-flawed">“seriously flawed”.</a> They have also discouraged the WTO tribunals deciding the steel and aluminium tariff disputes from using it as precedent.</p>
<p style="text-align: justify; ">However, Australia, Brazil, Canada, China, European Union, Japan, Moldova, Singapore and Turkey had all filed third party submissions which encouraged the panel to assert its jurisdiction in the matter and <a href="https://www.reuters.com/article/us-usa-trade-wto-idUSKCN1S21V9">have openly supported</a> the panel’s approach – which would be a boost for the panels set up to adjudicate the Trump sanctions.</p>
<p style="text-align: justify; ">Given the groundwork laid out by the panel in this dispute, <a href="https://www.csis.org/analysis/wtos-first-ruling-national-security-what-does-it-mean-united-states">it would be difficult</a> for the US to satisfy the panel’s understanding of ‘emergency in international relations’ as the Panel clearly stated that “political or economic differences between Members are not sufficient, of themselves, to constitute an emergency in international relations for purposes of subparagraph (iii)”.</p>
<p style="text-align: justify; ">Huawei and cybersecurity</p>
<p style="text-align: justify; ">In addition to steel and aluminium tariffs, the panel’s decision also has an impact on the rapidly <a href="https://www.aljazeera.com/news/2018/12/countries-banning-huawei-181206130850129.html">unfolding Huawei saga</a>. Huawei, which is the world’s largest telecom equipment company and is now <a href="https://foreignpolicy.com/2019/04/03/the-improbable-rise-of-huawei-5g-global-network-china/">taken the lead in the race to develop </a>one of the world’s most critical emerging technologies: fifth generation mobile telephony.</p>
<p style="text-align: justify; ">However, Huawei has recently fallen out of favour with the US and <a href="https://www.bbc.com/news/av/technology-47489411/government-s-worries-over-backdoors-in-huawei-s-5g-tech-castle">other western countries amidst suspicions of them </a>enabling the Chinese government to spy on other countries by incorporating backdoors into their infrastructure.</p>
<p style="text-align: justify; ">Various countries, including Australia, Japan, New Zealand have effectively <a href="https://www.aljazeera.com/news/2018/12/countries-banning-huawei-181206130850129.html">banned Huawei from public participation</a> while the US has prevented government agencies from buying Huawei infrastructure-<a href="https://www.cnbc.com/2019/03/08/china-supports-huawei-lawsuit-against-us.html">triggering litigation by Huawei</a> seeking to prevent the move.India has <a href="https://www.orfonline.org/expert-speak/the-huawei-issue-and-dilemma-before-countries-like-india-47442/">adopted an independent approach </a>by allowing Huawei to participate in field trials of 5G equipment despite Indian agencies flagging concerns over the use of Chinese made telecom equipment.</p>
<p style="text-align: justify; ">On April 11, <a href="https://www.businessinsurance.com/article/00010101/STORY/912327909/Australia-defends-Huawei-ban,-China-complains-to-WTO">China complained about</a> the Australian decision at the formal meeting of the WTO’s Council for Trade in Goods by highlighting its discriminatory impact on China. To defend itself, Australia may need to invoke Article XXI and argue that the ban fits in under one of the sub-paragraphs (i)-(iii) of clause (2) The report by this panel, may, therefore propel the WTO’s first big foray into cybersecurity and enable it to act as a multi-lateral adjudicator of the critical geo-political issues discussed in this piece.</p>
<p style="text-align: justify; ">The history of international law has been a history of powerful nations manipulating its tenets for strategic gain. At the same time, it has been a history of institutional resilience, evolution and change. The World Trade Organisation is no exception. Despite several aspects of the WTO ecosystem being severely flawed with a disparate impact on vulnerable groups in weaker nations, it has been the bulwark of the modern geo-economic order.</p>
<p style="text-align: justify; ">By taking the ‘national security’ exception head on, the panel has undertaken a brave act of self-preservation and foiled the utilisation of a dangerous trump card.</p>
<p>
For more details visit <a href='http://editors.cis-india.org/internet-governance/blog/the-wire-arindrajit-basu-may-8-2019-will-the-wto-finally-tackle-the-trump-card-of-national-security'>http://editors.cis-india.org/internet-governance/blog/the-wire-arindrajit-basu-may-8-2019-will-the-wto-finally-tackle-the-trump-card-of-national-security</a>
</p>
No publisherbasuInternet GovernanceWTO2019-05-08T14:22:14ZBlog EntryShape of IPRs and Agriculture post the WTO Nairobi Ministerial
http://editors.cis-india.org/a2k/blogs/shape-of-ip-and-agriculture-post-the-wto-nairobi-ministerial
<b>CIS is running a series of meetups focused on intellectual property to bring folks interested in IP law to discuss developments in access to knowledge, climate change, health, trade, etc.
At the first meet-up in February, Prof. Biswajit Dhar delivered a short talk on intellectual property rights and agriculture in a post-Nairobi Ministerial world. This post is a summary of his talk.</b>
<h2 align="JUSTIFY"><strong>Extension
of abeyance of Non- violation complaints</strong></h2>
<p align="JUSTIFY">At
the Nairobi Ministerial, members agreed to extend the
non-applicability of non-violation complaints for two years. There
are two kinds of disputes which
can be initiated at the WTO -<em>first</em>,
when the partner country does not fulfill a commitment and such a
non-implementation is injures the member country, leading to either
nullification or impairment. <em>Second</em>,
a country may deem itself to be injured even though the partner
country has fulfilled its obligations. For instance, despite India's
compulsory license grants complying with TRIPS, the US initiated a
dispute against India.</p>
<h2 align="JUSTIFY"><strong>Need
for greater negotiating muscle and coalition building at multilateral
fora</strong></h2>
<p align="JUSTIFY">The
Convention on Biological Diversity(CBD) came into force in 1993,
followed by the TRIPS agreement in 1995. India became a member of the
CBD and gained sovereign rights over its diversity. Before CBD,
inventions related to diversity were protected by private rights. The
turmeric case, and increasing bio-piracy led to introduction of
requirement of disclosing the source. India proposed that along with
other details, the source
of the biological material should be mandatorily disclosed, including
any associated traditional knowledge. Subsequent benefits arising out
of use of biological resources had to be shared with the country- it
was important to acknowledge that the community had nurtured these
resources. The coalition in favour of the disclosure requirement was
an interesting one because it was between India, Brazil, sometimes
South Africa, Andean countries and Pakistan. This was pushed for in
WIPO where the need for a treaty was advocated. The
consensus around the disclosure requirement was an example of
developing countries forming coalitions to make their interests more
pronounced.</p>
<p align="JUSTIFY">Further,
greater the evidence, better is a country’s case in negotiations.
After the Turmeric case, India realised that it needs written and not
oral evidence to produce in the US Courts. That realisation led to
the creation of a documentation project for traditional
knowledge(Traditional Knowledge Library Database). Since the last
decade, India has been sharing this database with patent officers.
Since 2009, TKDL has also contested patents in various jurisdictions.
At the EPO, India contested 94 patents, while in Canada the number is
25. Although there has been some success in US but major success has
been in EU only. However, there is a shortage of manpower to work on
the challenges, and as a consequence the efforts have largely failed
to push the process of the law. Mounting these challenges also proves
to be be exorbitantly expensive. There are indeed very few countries
which have effectively done this without succumbing to international
political pressure- India is one of them. It is possible to use this
democratic space wisely to push back the dominant powers.</p>
<p align="JUSTIFY">Trade
is imminent and there will be trade. However, if we do not deal with
trade effectively, it will spell doom for us. The
Transpacific Partnership(TPP) and Nairobi ministerial should serve as
a warning for us. The
prevalent fear has been that countries in favour of TPP will be
multilateralised.
India's steps indicate a roll back of its role at the WTO. Once it
moves out of the WTO framework and the Doha agenda fails, TPP
signatories will begin to exert pressure on WTO. Granted
that there is very little window to move forward, nevertheless, India
should try using its influence to fight at the WTO with all resources
available. WTO has limitations but such organizations are the only
bet we have against multilateral organizations.
Currently, India is allowing these organizations to be shaped in an
undesirable manner. We<strong>
</strong>have
not used the WTO truly well enough, and neither have we been able to
influence ongoing negotiations. There is, therefore, a need to
rethink our strategy. It is time to step up and engage with
lawmakers instead of only engaging with bureaucrats.</p>
<p align="JUSTIFY">Negotiating
teams at these multilateral fora are of utmost importance, because of
their unique position to influence the law making process at the
top-down level. In the long term, they are also a cost saving measure
(compared to mounting opposition to patents, etc). Unfortunately,
India has kept silent as it watches US and its allies taking over
ASEAN. Through TPP, rules are changing and the US-led alliance is
taking over countries beyond Pacific Rim, by moving into ASEAN. India
is in an isolated position right now and needs a group of its own to
collaborate and work as a formidable force against US.</p>
<p align="JUSTIFY">India
should have seized the opportunity to group with African nations in
the India-Africa forum to consolidate its position. Similarly, Latin
countries may also be pursued. These regions are important since
India's support at the WTO has been on a sharp decline.</p>
<h2 align="JUSTIFY"><strong>Agriculture
</strong></h2>
<p align="JUSTIFY">India
is also under pressure to remove agricultural subsidies. The subsidy
regime was crafted by the EU and US to enable them to exempt their
subsidies in an exempt list (green box). Further, US cleverly
protected its own export credits so that its own subsidies became
exempt. In this manner, even subsidies pertaining to export
competition are not totally eliminated. However, other countries like
India have raised an issue that in these countries, export subsidy is
but one part of total subsidies. The latter has come down and this is
problematic because countries like India simply must have potential
to safeguard against hunger. The public distribution system is
essential for this.
India has a system of Minimum Support Price(MSP) and input subsidy.
On the other hand, US provides direct income support, arguing that
markets should be as close to their pristine form as possible. And
input subsidy and MSP do not reconcile with this. According to them,
income transfers are better because that does not manipulate prices.</p>
<p align="JUSTIFY">In
US and EU, the irony is that, they have farm policies. US has had a
farm bill every 4 years since 1933, and EU has a common agricultural
policy. India does not have any such policy. The US and EU inform
their producers their about expected subsidies for the next 4 years,
enabling the producers to plan in advance. In this case, income
transfer can work. Therefore, the farmers can take higher risks and
can manipulate prices. Their farm rate price is well below the
economic cost and international price since they have protection
because of the income transfer. The international price is supposed
to be efficient (in almost 3 decades, international prices have been
same). Since their prices are below international prices, they can
dump in the international market. On the other hand, nobody else can
enter the US market. Ironically, this income support, which affects
international trade so unfairly, is kept out of the scope of WTO
deliberations - no questions asked. Further, while the US Farm Bill
expenditure has gone up, in contrast, India has a limit on subsidy.
Food subsidy is counted in the 10% limit prescribed by the WTO.</p>
<p align="JUSTIFY">The
situation is can be summarised as, thus: US's activities eventually
escape the WTO, while Indian programmes fall within the scope, more
than the usual. Before the Food Security Act, the below poverty line
population were the only beneficiaries. And now, the Act benefits
two-thirds of the population. As a result, quantum of subsidized food
has gone up. If the government decides to give income transfers
(instead of subsidies), in order for it to be successful, the tiller
has to be the owner of the land, which is problematic in India.
Although people want to follow direct benefit transfer for
agriculture as well, the question remains that how many workers will
<em>actually</em>
benefit from it.</p>
<p align="JUSTIFY">It
is evident that agriculture is suffering- Mint recently reported on
how India is becoming an agro importer. Sugar output has suffered.
India might import sugar next year along with pulses, wheat.
Productivity is going down. This is will make way for support for
genetically modified crops-- which is again what the US wants. If
the WTO gets populated by TPP signatories, India cannot continue with
providing subsidies because TPP
eliminates agricultural subsidies. The only relevant factors
are market entry and tariff. This could be agriculture’s deathbed.</p>
<p align="JUSTIFY">Negotiations
on agricultural issues have not been effective because of divisions
within it. Fragmentations have caused a lack of unity - even a bare
common minimum position does not exist. Further, US and allies have
used diversionary tactics such as repeatedly asking for evidence, not
bringing anything concrete to the table, etc. When the process is
frustrated frequently, activist movements also die down.</p>
<p align="JUSTIFY">Loss
of bargaining power has led to fatigue within various activist groups
in the country. On the other hand, corporations continue prospering.
India had put up a strong fight for TRIPS flexibilities, but today
elements like TPP are destroying balanced regimes across the world.</p>
<p align="JUSTIFY"><em>Thanks to our intern Aniruddha Majumdar for his assistance on this post.</em></p>
<p align="JUSTIFY"> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/a2k/blogs/shape-of-ip-and-agriculture-post-the-wto-nairobi-ministerial'>http://editors.cis-india.org/a2k/blogs/shape-of-ip-and-agriculture-post-the-wto-nairobi-ministerial</a>
</p>
No publishersinhaIP MeetupIntellectual Property RightsAccess to KnowledgeWTO2016-05-05T07:11:16ZBlog Entry