CHRONICLE OF THE INTERNATIONAL SEMINAR

 

THE DIRECTION OF INTERNATIONAL TRADE; SOME CURRENT ISSUES

April 22nd, 2022 - UCM Faculty of Law

 

As part of the work of the International Trade Law and Trade Wars research project, the UCM Faculty of Law hosted its first international seminar on 22 April 2022. Under the title "The direction of international trade; some current issues", the seminar, held in a bimodal format and using both English and Spanish, was organised around three sessions. The first two sessions focused on issues of great theoretical and practical importance, such as environmental and labour standards, on the one hand, and the state of international trade governance, on the other. The third and final session brought together the shared reflections of some of the members of the research project who, with this approach, presented the issues on which they have begun their research work.

The first session, moderated by Professor J. García López, included presentations by G. Van Calster, Professor of Private International Law at the University of Louvain, and K. Claussen, Professor of International Economic Law at the University of Miami.

Prof. Van Calster addressed the relationship between the regulation of international trade and the environment by recalling that, in the construction of the theory of comparative advantage, Adam Smith devoted many pages of The Wealth of Nations to emphasising the importance of individual welfare, which, together with the opening of markets, should be pursued by public authorities. Along these lines, there was a consensus on the compatibility between the liberalisation of international trade through multilateralism and the progress of states, including respect for human and labour rights and environmental protection. However, scepticism in this regard has recently reached high levels due to economic models based solely on growth and consumption that are clearly questionable. However, it should not be forgotten that the WTO's Preamble emphasises the pursuit of "sustainable development" as an objective, which includes respect for human rights and the environment.

In this sense, practice shows the existence of a relationship between the regulation of international trade and these so-called "trade and issues". Thus, it can be observed how the rules of international trade (in particular, but not exclusively, those of the WTO), which introduce prohibitions with their corresponding exceptions, and the existence of effective dispute settlement systems, have meant that the interpretative work that the latter have carried out, has been giving rise to a number of different interpretations. negative harmonisation" of rules, generating standards of behaviour (in particular with regard to measures relating to the production of goods, as illustrated by the well-known WTO tuna-dolphin case) and, therefore, establishing a level playing field for operators and states. Except in a few areas (chemicals and natural resources), fears of a race to the bottom in these standards have proven to be erroneous and, rather, what has been observed is that the mere threat of the start of a dispute motivates a change in behaviour and the adoption of measures adjusted to the highest requirements (freezing effect). In any case, this form of regulatory harmonisation suffers from a lack of predictability; hence, it is desirable to achieve some degree of "positive harmonisation".

To this end, the WTO encourages the use of standards reached in the framework of other international organisations (both public and private) and, although it has some committees working to this end within the organisation, their work is too slow to respond to the needs of international regulation today. This situation explains why the latest generation of bilateral free trade agreements incorporate, if not standards directly, then mechanisms that allow for their development, albeit slowly. This can be seen in the agreements signed by both the US and the EU with third countries. In the case of the latter, those signed with Ukraine, South Korea and Canada were brought up, without forgetting that, particularly the latter, have not ceased to cause controversy, as their lack of transparency and legitimacy has been questioned, given their distance from the activity and control of the respective national parliaments.

Finally, Professor Van Calster stressed the importance of the diversity of litigation options in the environmental field since, without prejudice to recourse to the dispute settlement systems of the aforementioned free trade agreements, direct action against States, both by other States and by private entities in national and international jurisdictions, should not be overlooked. All these means are acting as levers for the progressive expansion of environmental protection.

Professor Klaussen began her presentation on trade and labour by pointing out the confusion of the conjunction "and" in this expression given the intimate relationship between the two, as one cannot speak of trade without taking into account labour relations and vice versa. He went on to point out that the country that began to introduce the labour dimension into trade agreements was precisely the USA, in the early 1990s, as a consequence of the political moment in which Clinton found himself when he became President of that country. Thus, as an annex to the North American Free Trade Association (NAFTA), Canada, the US and Mexico signed the North American Labour Cooperation (NALC), by virtue of which the parties undertook to adopt and maintain labour standards (based on those established by the International Labour Organisation) and to implement them. The agreement included a dispute settlement system that was never used.

After 30 years, we can observe the progressive incorporation into free trade agreements of rules relating to labour standards (starting with prohibitions of discrimination), the effectiveness of which can be measured by case studies. In particular, Professor Klaussen referred to the case that pitted the US against Guatemala in the framework of the Central American Free Trade Agreement, which was resolved in 2017 by constantano that, although the latter country had violated labour standards, it had not done so in a way that affected trade. The protests that followed this ruling in the US explain why the negotiation of the United States, Canada and Mexico Agreement (USCMA) saw such a significant evolution that some of the negotiators went so far as to say that it was a genuine labour agreement. This evolution is particularly evident in the establishment of the rapid response labour mechanism, which allows the governments of the parties to identify specific workplaces in the other parties to the Agreement where trade union activity is not permitted and, consequently, to decide to halt the entry of goods produced there until the situation changes. This mechanism has been used successfully twice in 2020.

Since Biden became president, trade policy has been guided by the slogan "worker-centred". Although no specific guidelines have been given in this respect, Professor Klaussen concludes that three categories of targeted workers can be distinguished: (1) those at home; (2) those working abroad; and finally (3) those subject to forced labour. While for the latter, the only novelty of the policy is the focus on enforcement, for the first group, measures - whose compatibility with trade regulation may be questionable - are adopted in order to promote the level of employment in the country ("do your work here/buy American"). Finally, goods produced using forced labour can be stopped at the border as a result of their production process. In addition, Professor Klaussen highlighted the incorporation of the gender dimension in the chapters of free trade agreements devoted to labour aspects, although the advisability of introducing specific chapters on a subject that goes beyond the purely labour dimension is currently being debated.

The second session dealt with the situation of global governance. Moderated by Esther López Barrero, Senior Lecturer in Public International Law at the UDIMA, the session was chaired by J. Klabbers, Professor of Public International Law at the University of Helsinki, followed by A. Fernández Martos, Head of Unit A.1 Multilateral Affairs and WTO of the European Commission's Directorate-General for Trade.

With regard to the current state of governance of international trade relations, Professor Klabbers addressed the situation of the WTO as an atypical international organisation ("a strange animal, even a little stranger than others, in the zoo of international organisations"). It is assumed that international organisations are created by states for the purpose of fulfilling a specific purpose. function (regulatory, managerial or administrative) which, it is often argued, will be beneficial to humanity as a whole. In the case of the WTO, Professor Klabbers emphasised its function of liberalising international trade, rather than for the good of humanity, but for the good of its member states, which, moreover, are practically all the member states of the international community (164 out of a total of 195). If the organisations fail to fulfil their intended functions, or if their performance does not satisfy the interests of any of their members, reform is considered or dissatisfied states threaten or announce their withdrawal.

 

In practice, calls for reform of international organisations can be answered by deposing their secretary general (as happened in the United Nations with Butros Gali) or by introducing changes that satisfy the states that announced their withdrawal (as happened, for example, with the US with respect to the Universal Postal Union in 2018). In the case of the WTO, one cannot lose sight of its peculiarities, both from a historical perspective and in its current configuration. Historically, the General Agreement on Tariffs and Trade (GATT) is characterised by its "permanent state of reform", being applied provisionally for forty years and creating bodies on an ad hoc basis as they became more precise (panels, CONTRACTING PARTIES). Even once formalised as an international organisation, the WTO, run by its own members and taking decisions by consensus, is unwieldy given the number of states that make it up and the political and economic circumstances of a world in which the leadership of the USA and the EU and Japan has given way to the emergence of the new economic superpower of China.

These circumstances also highlight the close relationship that, as highlighted in the previous session, exists between international trade and other matters (such as labour and the environment), and in this sense it is clear that, unlike other international organisations (the World Health Organisation expressly states that when its Director General declares health emergencies he must take trade implications into account), the WTO agreements only refer to the relationship with other matters when they introduce exceptions to its rules. Moreover, structurally, the WTO has a relatively small general secretariat with little power even to set the agenda of the organisation, and the rest of its bodies have poor normative powers. In short, the WTO is little more than a set of international agreements together with a dispute settlement system to establish a free trade regime, in which decisions have to be taken by difficult-to-achieve consensus.

The reform of the WTO has arisen from the crisis provoked by the US in the functioning of its dispute settlement system, arguing its excesses in entering into areas that go beyond trade liberalisation. Regardless of the reasonableness of this criticism - which, given the possibility of using it in many other fora, seems more of a pretext than anything else (the stick to hit the dog with) - it should be noted that that even for the reform of the Marrakesh Agreement, consensus is necessary and, moreover, the reform would only enter into force for those states that accept it. From this perspective, Professor Klabbers' position on WTO reforms is not optimistic from the outset. Nevertheless, a path to "reform/informal metamorphosis" can be observed which, while, on the one hand, resorts to a new temporary, plurilateral agreement for the continuity of the dispute settlement system - which, as with the GATT, could drag on for years - on the other, escapes from the organisation itself by resorting to mega-regional trade agreements; so that the WTO appears almost defunct. In any case, Professor Klabbers concludes that, with the tools it has been given, the organisation can hardly do more.

On the basis of the EU's exclusive competence in trade policy and its position as an international organisation that was part of the WTO along with the other EU members, Mr Fernández-Martos pointed out that the need for reform of the WTO was the result of a crisis which, to a large extent, had its origins in China's accession in 2001. Contrary to what some had expected, China's accession had not led to its transformation into a market economy, as it had maintained trade-distorting state interventions. Moreover, the major crisis in the dispute settlement system since the appeals body became inoperative in December 2019 cannot go unnoticed. On the other hand, although the WTO has made some achievements (such as the trade facilitation agreement and the export competition measures reached in Nairobi), the difficulties being experienced in the negotiations, the shortcomings in the role that could be played by the WTO Secretariat General and, last but not least, the failures in the implementation of the WTO's commitments are evident, not least, the non-compliance of some states which, as in the case of subsidy notifications, not only affects transparency but also makes it difficult to carry out the monitoring and subsequent deliberations that would otherwise allow members to address new issues. In this context, the EU's position is in favour of a reform of the Organisation that would allow it to fulfil its functions, namely the implementation of the various agreements, the continuation of negotiations and the settlement of disputes. It should not be forgotten that, despite the large number of free trade agreements the EU has, 60% of its trade is conducted under the umbrella of the WTO (including such important countries as China, India and the US).

Sustainable development is already identified as an objective in the WTO but, for the EU, there is a need to ensure that the organisation is able to deliver results, in particular on issues such as subsidies, trade and health (considering supply chains and intellectual property protection) as well as climate change and environmental protection. To this end, the dispute settlement system based on negative consensus should be maintained, with a system of appeal and guaranteeing the independence of the members of the Dispute Settlement Body. Furthermore, the Director-General and the General Secretariat should be given greater powers. Furthermore, the integration of plurilateral agreements into the WTO system should be facilitated, especially for new issues such as e-commerce and investment facilitation. It should not be forgotten that the WTO has the great advantage of being very inclusive and ensuring that everyone feels genuinely integrated into it and, with this approach, the next Ministerial Conference in June is eagerly awaited.

Finally, in this context, Mr. Mr Fernández-Martos highlighted the situation generated by the Russian invasion of Ukraine which, in addition to other considerations, has led to the adoption of restrictive measures on certain Russian individuals and entities, as well as trade sanctions which, together with the withdrawal of the advantages of WTO membership - which, in his opinion, is justifiable on the basis of the WTO rules - have led to the adoption of a number of measures to combat the Russian Federation, This is justifiable on the basis of the GATT and GATS security exceptions - entails the adoption of measures restricting trade with Russia both in services (such as the exclusion of Russian banks from the Swift system) and in goods (import and export bans on various categories of products).

To conclude the seminar, the third session brought together researchers from the project who, under the moderation of C. Otero García-Castrillón, shared their reflections on various issues. Professor Moreno Blesa focused on the compatibility with the WTO Agreements of the measures that the EU plans to adopt at the border to tackle carbon pollution in the production of goods in order to achieve the objectives set by the Paris Convention. Professor González Marín focused on the suspension of most-favoured-nation treatment for Russia and Russia's reactions, questioning the international legality of this and the role of the different international jurisdictions in this respect, considering the line of responsibilities that are opening up in this respect. Professor López Barrero then focused on the changes in global governance between multilateralism and unilateralism (sometimes justified by imbalances) in the situation of the pandemic and the invasion of Ukraine, both of which reveal that states can do little alone in this area, and she called for concerted action and the need to strengthen international organisations such as the WTO, which, in addition to facilitating their functioning, would serve global governance. Professor Gallegos Zúñiga highlighted the importance of regional trade agreements in Latin America, where China has a significant presence, and the demands of civil society for transparency, its own participation, and the incorporation of social demands into these texts. Finally, Professor García López expressed his doubts about the scope of the legal coverage of national security exceptions when it comes to justifying breaches of the Agreements that entail the adoption of sanctions against Russia, despite the fact that not only the EU but also the US - which has also announced the withdrawal of most-favoured-nation status for this country - seem to be moving in this direction, without China or other countries having made any pronouncements on the matter for the time being. He also argued that, in the same way that in non-reciprocal preferential agreements, access for all goods is conditional on compliance with labour and environmental standards contained in international conventions and, similarly, standards are incorporated into reciprocal trade agreements, perhaps the WTO could open up this path, given that, for the moment, only through the WTO dispute settlement system has the possibility of this conditioning been confirmed for some specific products, but not for all of them.

The seminar was attended by 126 participants, including students and professors from Spanish universities (mainly UCM, but also the Universities of Seville, Pablo de Olavide, Malaga, Carlos III, Almeria, Castilla la Mancha, Autónoma de Barcelona, Pompeu Fabra, Pública de Navarra, UNED, UNIR, León, Lleida, Oviedo, Abat Oliva and Zaragoza) and foreign universities (Panamericana in Mexico, Universidad de Chile, Universidad de Sao Paulo in Brazil, European University Institute in Italy, Geneva Business School in Switzerland, UDELAR and ORT in Uruguay; British Council School), as well as professionals from the legal profession, NGOs (Ecologistas en Acción, Asociación Pro-Derechos Humanos de Andalucía) and the Ministry of Industry, Trade and Tourism (Secretaría de Estado de Comercio).