---------- Bellow is an initial draft for a study on trade and development in the WTO legal system. This has been, mutatis mutandis, the submitted final paper for the the fulfillment of a course on a relevant subject. If you are into the field, and also could manage to read the whole chunk, please do not abstain sharing your points and ideas. ---------- *** Break the Cask and Bring the Well Wrought Urn; A Recast in the WTO Enabling Clause Legal Framework *** Today global economy is subject to certain dynamism. Many countries are “developing” by name, but at the same time far more economically competent than many other countries that carry no such title as developing. And still, there remain to exist certain other countries that avoid being addressed as a developing economy (whether it be a mark of zeal, patriotism, or any particular traditional egoism), while the indices attributing to their general economic status, may herald the existence of the adequate elements for them to be recognized as a developing country. To this, one may add the issues regarding the Least Developed Countries (LDCs); to determine a country as a LDC, to schematize specific regimes for each and every one of them, and to materialize an objective yardstick to measure out their graduation from LDC status to a developing one. With all such factors at hand, it tends to be valid to believe that the WTO legal regime for distinguishing among developing countries (in the broad sense that encapsulates both developing countries and the LDCs) is obsolete and does not reflect the current trends in the global economy. The question to be viably asked here is whether the Enabling Clause available within the WTO framework, and the Generalized System of Preferences (GSP) as a whole, suffice as a basic tenet to ease out the existing problem with the WTO legal regime for distinguishing among developing countries, or do we need a thorough re-design in the WTO legal system, so that the Organization shall be enabled to respond directly and effectively to the individual trade challenges faced by developing countries, particularly the LDCs? The hypothetical answer to this question is a median way. New initiatives for casting novel legal frameworks within the WTO may come in parallel with staying true to the Enabling Clause roots. As the essay proceeds, the fruitfulness of the GSP in general and the Enabling Clause in particular is elaborated upon. On a second indent, a genuine vision on the possible recast for the WTO framework regarding trade and development - as it is currently devised within the Enabling Clause - in the contemporary context of the world economy is proposed. * ONE – An Assessment of the Enabling Clause As part of the Tokyo Round, the Enabling Clause was adopted in 1979, allowing the developed countries to derogate from the Most Favored Nation (MFN) principle, once they grant generalized and non-discriminatory preferences to developing countries, and in addition, for the sake of deeper preferences to be extended to the LDCs within the GSP schemes. Also, the developing countries themselves may derogate from the MFN principle for the sake of entering into regional trade agreements among themselves. The whole concept has rendered beneficial results, yet there have been, and still there are, remarks as to the betterment of the system, aiming at even a more efficient achievement. The positions of countries and the WTO case law, presents that there can be variant readings of the Enabling Clause. For St. Lucia, a reaction of its position over the subject has been that: “A positive response would … mean addressing the specific needs of each country separately – something which could not be done if preferential treatments were made generalized and non-discriminatory.” But in contrast, for countries like Paraguay, the view is that the Special and Differential Treatments (SDT) granted to developing countries (to which the Enabling Clause is a subcategory) should remain to be non-discriminatory in the sense that all benefits should be made available to all developing countries. They also were of the idea that the grant of SDT, including through waivers, should not prejudice the interests of other developing countries. The main concern raised here is that “Who is a developing country and who is not? What are the criteria for being a developing country? More simplistically, what is the definition of developing country?” This is the question that still challenges the WTO legal framework in terms of developmental issues. In a case before the WTO Panel which also ended up in the Appellate Body (EC – Conditions for the granting of tariff preferences to developing countries, WT/DS246), the issue of enabling Clause is elaborated upon. As a general principle, the Panel held that: “… the design and modification of a GSP scheme may not result in a differentiation in the treatment of different developing countries, except… [that]… differentiation is permitted among developing countries, in designing and modifying GSP schemes, in the case of special treatment to the LDCs… No other differentiation among developing countries is permitted.” The open room for particular differentiations, as devised by this case law, also sheds light over the term “non-discrimination”. While the Panel believed that according to this term “identical preferences under GSP schemes [has to] be provided to all developing countries without differentiation”, the Appellate Body refines this by saying that the term “does not prohibit developed-country Members from granting different tariffs to products originating in different GSP beneficiaries, provided that such differential tariff treatment meets the remaining conditions in the Enabling Clause.” Similarly, the Panel finds that the interpretation of “developing countries” shall be in a way “to mean ‘all’ developing countries”. But again the Appellate Body, with the application of the same praxis implemented in the case of its deliberation on “non-discrimination”, reverses this by expressing that: “The term ‘developing countries’ should not be read to mean ‘all’ developing countries… Paragraph 2(a) [of the Enabling Clause] does not prohibit preference-granting countries from according different tariff preferences to different sub-categories of GSP beneficiaries.” This case crystallizes the Enabling Clause as it is being practiced. While the Enabling Clause remains to be a tube through which the MFN principle is derogated in certain respects, the levels and limits of differentiations applicable to each and every developing country, within the ambit of the Enabling Clause itself, are contingently prescribed. Now the question is that whether the WTO legal regime regarding the Enabling Clause, with all its case-law-added niceties, meets the peculiar specificities of the current global economy, or still there can be a recast to the whole WTO legal framework targeting an optimum level of homogeneity with the circumstances governing our time. In the second part, this question is tried to be replied to. * TWO – A Recast for the Enabling Clause As a general fact, the existing legal regime for the Enabling Clause provides a suitable base for further progression, with the aim of addressing the factual standing of our time. As it was discussed earlier in this essay, there are certain countries today (e.g. China, South Korea, Taiwan, or Singapore) that carry the title of “developing”, but there are in fact reasonable grounds to single them out from the roster of developing countries. Also, there are no feasible means at hand to assess the graduation of countries from and LDC to less developed, from less developed to developing, and from developing to developed. The whole idea behind the Enabling Clause is rewarding. But it seems that this Enabling Clause is not, at least in some areas, effectively “enabling” the targeted developing countries in the strict sense of the matter; instead, it is more providing a chance of “tolerance”, and postpones the resolve for the very hardcore deficiency of the developing countries, and more specifically the LDCs. While it is true to believe that the regime as a whole has been effective so far, it seems to be proper to set for the re-design in the conceptual essence of the Enabling Clause i.e. to drift away from the MFN-derogation basis, and opt for more daring steps which are at the same time in parallel with the trade liberalization goals as a whole. One may metaphorically say that the liberalized international trade in today global economy is a swimming pool, and the developing countries are the timid individuals right beside the pool, who know not how to swim. Using the Enabling Clause oriented with the possibilities for derogation from the MFN, is like putting life-jackets and wind-tubes on the developing countries and taking them hand in hand to the shallow part of the pool. Although this might be a suitable method to expose them to the pool of global economy, - with holding up forever to this approach - these “potential swimming champions” shall never learn how to swim on their own. They will probably be able to “tolerate” moving around in the shallow water, but they shall never be “enabled” to dive and swim all across the current globalized (and still globalizing) pool of trade. With this imagism, it shall be easier to understand that deviation from a MFN-oriented enabling program in favor of a more liberalization-oriented methodology tends to accelerate the development rate in the developing countries. It is the time to put the life-jackets and wind-tubes of prudence out and try the reality of the contemporary global economy. Back to the legal terminologies, it is the time to believe that the developing countries, not only are to disregard derogations from the MFN principle, but they even have to go for the outmost of liberalization initiatives. Trade is good. Liberalization is good. If the developing countries mean to graduate and enter the lounge of the developed countries, they have to do as the proverbial Romans do. In order to develop, more trade and more liberalization are not the enemies; they are friends – the best and the “only” friends. Of course one may not ignore the hazards attributable to this approach. What happens to the still feeble domestic market and industry of the developing countries if they happen to be suddenly exposed to foreign omnipotent economic actors? First of all, it must be accepted that such an open up is not really “sudden”, whereas the whole development programs (including the Enabling Clause) have been available for the last decades. Second of all, it must be born in mind that for a certain number of still nominally developing countries (China, South Korea, etc.) there seems to be no traceable “hazard” as such if their markets are going to be liberalized in a more material manner. And the third point is that in the case of some particular countries (if any) for whom this proposed approach objectively appears to be counter-productive, the enabling Clause, among other things, in its present format, is still available and shall remain in place. But as for the developed countries’ role in this proposed approach, one may think of a cluster of “capacity-building obligations” fixed on three pillars: Training, Intellectual Property, and Investment. Once the developing countries went for a paradigm shift in favor of excessive liberalization (compared to the present existing reluctance reflected in manners such as MFN derogations), their markets are to be at the reach of the developed countries in a greater extent. In order for the developing countries to be able not only to survive the new situation but also to prosper from it, the developed countries have to take up the simultaneous obligations to seriously contribute to the capacity-building in the developing countries. The first pillar for these general obligations is the designation and application of meaningful and thorough training programs. With such programs, the labor force available in the developing countries’ market shall be truly “enabled” to apply the most advanced techniques of efficient production and supply, and use the hi-tech facilities to enhance the local productivity level. The second pillar is the dissemination of know-how and technology via granting licenses for the IP rights. Of course such IP rights are in principle held by private parties in developed countries and not the developed countries themselves. Yet, this remains with the developed countries to structure a system based on which the developing countries shall enjoy the rapid and effective availability of IP rights. With the markets of the developing countries opened up to the developed countries, and the IP rights driving from the developed countries into the developing countries, the game will be a win-win one. The third and the last pillar herein, is the availability of investments if the developing countries. Money is the blood in the veins of trade. With the developing countries markets opened up, the high-quality and well-trained work force available, and the know-how and technology accessible, little is possible to be done if there happens to be no investment to finance the production and trade. In this third aspect, the obligation of the developed countries is concurrent with an obligation to be shouldered by the developing countries themselves. The most important criterion for the investors is the availability of reliable guarantees to secure both their initial investment and their subsequent profit. This is the concurrent obligation of both developed and developing countries to make such guarantees available. Yet, if there are reasonable grounds, attributing to economic factors in certain cases, due to which a developing country is not able to provide adequate guarantees, this shall be the pertinent obligation of the developed countries to supersede and make up for the required guarantees to be made available. Consequently, it is considered to be acceptable that a re-designation in the WTO legal framework regarding the Enabling Clause (while staying true to its roots and raison d’etre), in respect with a paradigm shift from the current MFN-derogation approach to a more ardent pro-liberalization one, shall render to more efficiency of the whole trade and development agenda. Still, it is of vital importance to embrace the novel obligations of the developed countries within the proposed paradigm, to address the real capacity-building programs in the developing countries, by means of training, intellectual property, and investment.
Posted on: Thu, 27 Jun 2013 16:43:02 +0000
Trending Topics
Recently Viewed Topics
© 2015