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When the Multilateral Meets the Regionals: Regional Trade Agreements at WTO Dispute Settlement

  • MICHELLE Q. ZANG (a1)

Abstract

Interaction between regional trade agreements (RTAs) and the multilateral trading system established by the World Trade Organization (WTO) is an issue of significance but nevertheless remains unsettled. This article aims to explore the influence RTAs have generated had on the WTO system, with particular focus on the approach adopted by the adjudicators when dealing with irreconcilable RTA–WTO conflicts. During the development of 20 years’ jurisprudence, WTO adjudicators offered responses to a number of critical questions. On the one hand, direct endorsement of RTA provisions with the effect of prevailing over the counterpart WTO rules appears to be very difficult, either through legal interpretation or application. On the other hand, unlike often being argued, a close review of WTO case law does not reveal a biased adjudicatory approach against regionalism, as compared to other sources of public international law. When dealing with RTA-related matters, the Appellate Body has been advocating an all-encompassing approach featured by the emphasis on the common intention during the interpretative exercise and the promotion for the WTO built-in mechanisms for valid modification. Such an approach is, to a certain extent, misleading in the RTA –WTO context and has led to certain ill-founded adjudicatory choice.

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I am very grateful for the critics and comments from the anonymous referees prior to the publication. All the mistakes remain mine.

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1 Cottier, T. and Delimatsis, P. (eds.), The Prospects of International Trade Regulation: From Fragmentation to Coherence, Cambridge: Cambridge University Press, 2011; Cottier, T., ‘Multilayered Governance, Pluralism, and Moral Conflict’, Indiana Journal of Global Legal Studies, 16(2) (2009): 647679; Hillman, J., ‘Conflicts between Dispute Settlement Mechanisms in Regional Trade Agreements and the WTO – What Should WTO Do’, Cornell International Law Journal, 42 (2009): 193; Marceau, G., Izaguerri, A. and Lanovoy, V., ‘WTO's Influence on other Dispute Settlement Mechanisms: A Lighthouse in the Storm of Fragmentation’, Journal of World Trade, 47(3) (2013): 481574; C. Claude, A. Yanovich, J.-A. Crawford, and P. Ugaz, ‘Mapping of Dispute Settlement Mechanisms in Regional Trade Agreements – Innovative or Variations on a Theme?’, WTO Staff Working Paper, ERSD-2013-07, 10 June 2013; Martineau, A.-C., ‘The Rhetoric of Fragmentation: Fear and Faith in International Law’, Leiden Journal of International Law, 22 (2009): 1.

2 It is argued that Article 31(3)(c) VCLT expresses a more general principle of treaty interpretation, namely that of systemic integration within the international legal system. The foundation of this principle is that treaties are themselves creatures of international law. However wide their subject matter, they are all nevertheless limited in scope and are predicated for their existence and operation on being part of the international law system. K. Matti, ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law’, Report of the Study Group of the International Law Commission (2014); McLachlan, C., ‘The Principle of Systemic Integration and Article 31(3)(c) of the Vienna Convention’, International and Comparative Law Quarterly, 54 (2005): 279.

3 Salles, L. E., Forum Shopping in International Adjudication: The Role of Preliminary Objections, Cambridge: Cambridge University Press, 2014, p. 79.

4 Article 79 of the ICJ Rules of Court, www.icj-cij.org/en/rules.

5 Max Planck Encyclopedia of Public International Law, Oxford Public International Law, http://opil.ouplaw.com/home/EPIL.

6 Pauwelyn, J. and Salles, L. E., ‘Forum Shopping before International Tribunals: (Real) Concerns, (Im)Possible Solutions’, Cornell International Law Journal, 42 (2009): 77117. For detailed discussion on the distinction between jurisdiction and admissibility, see Salles, Forum Shopping in International Adjudication, pp. 163–168; Shany, Y., ‘Jurisdiction and Admissibility’, in Mackenzie, R. et al. , Manual on International Courts and Tribunals: International Courts and Tribunals, Oxford: Oxford University Press, 2010, p. 780; Northern Cameroons (Cameroon v. United Kingdom), Separate Opinion of Judge Fitzmaurice; Oil Platforms (Zslamic Republic of Iran v. United States of America), Judgment, I.C.J. Reports 2003.

7 Other DSU rules are also frequently involved in the jurisdiction discussion. For example, Articles 3.2 and 19.2 DSU often serve as complimentary interpretative tools in understanding the scope and nature of the panel's jurisdiction. In particular, both articles specify the point that recommendations and rulings made by the panel cannot add to or diminish the rights and obligations provided in the covered agreements; and Article 3.2 also stipulates the main aim of the dispute settlement system is to provide ‘security and predictability to the multilateral trading system’, ‘to preserve the rights and obligations of Members under the covered agreements’, and ‘to clarify the existing provisions of those agreements’. According to Article 3.2 DSU, ‘the dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements.’

8 For detailed discussion on the jurisdiction of WTO panel, please see Bartels, L.Applicable Law in WTO Dispute Settlement Proceedings’, Journal of World Trade, 35 (2001): 499; Henckels, C., ‘Overcoming Jurisdictional Isolationism at WTO–FTA Nexus: A Potential Approach for WTO’, European Journal of International Law, 19(3) (2008): 571599; Hughes, L., ‘Limiting the Jurisdiction of Dispute Settlement Panels: WTO Appellate Body Beef Hormone Decision’, Georgetown Environmental Law Review, 10 (1997): 915; Marceau, G., ‘Conflicts of Norms and Conflicts of Jurisdictions’, Journal of World Trade, 35 (2001): 1081; Mitchell, A. D. and Heaton, D., ‘The Inherent Jurisdiction of WTO Tribunals: The Select Application of Public International Law Required by the Judicial Function’, Michigan Journal of International Law, 31 (2009): 559; Pauwelyn, J., ‘The Role of Public International Law in WTO: How Far Can We Go?’, American Journal of International Law, 95(3) (2001): 535578; Trachtman, J. P., ‘Domain of WTO Dispute Resolution’, Harvard International Law Journal, 40(2) (1999): 333.

9 Appellate Body Report, Mexico – Tax Measures on Soft Drinks and Other Beverages (Mexico–Taxes on Soft Drinks), WT/DS308/AB, para. 48–49.

10 Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft (Canada–Aircraft), WT/DS70/AB, para. 187; Appellate Body Report, Mexico–Taxes on Soft Drinks, para. 51.

11 Appellate Body Report, Canada – Continued Suspension of Obligations in the EC–Hormones Dispute (Canada–Continued Suspension), WT/DS321/AB, paras. 371–372.

12 K. Kwak and G. Marceau, ‘Overlaps and Conflicts of Jurisdiction between WTO and RTAs’, www.wto.org/english/tratop_e/region_e/sem_april02_e/marceau.pdf, p.3.

13 Appellate Body Report, Mexico–Taxes on Soft Drinks, paras. 45–46.

14 Ibid., paras. 45.

15 As the Panel observed in US–FSC, ‘a Member has the right to resort to WTO dispute settlement at any time … this fundamental right to resort to dispute settlement is a core element of WTO system. Accordingly, we believe that a panel should not lightly infer a restriction on this right … rather there should be a clear and unambiguous basis in the relevant legal instrument for concluding that such a restriction exists.’ Panel Report, United States – Tax Treatment for ‘Foreign Sales Corporations’ (US–FSC), WT/DS108/R, para, 7.17; Appellate Body Report, Mexico–Taxes on Soft Drinks, para. 53.

16 Appellate Body Report, Mexico–Taxes on Soft Drinks, para. 54.

17 The ICJ expressed a similar position in Oil Platforms (Zslamic Republic of Iran v. United States of America), Judgment, I.C.J. Reports 2003, p. 177, para. 29.

18 It is even argued that international economic law offers an interesting laboratory for the use and development of tools in pursuit of coordination of international dispute settlement. de Chazournes, L. Boisson, ‘Plurality in the Fabric of International Courts and Tribunals: The Threads of a Managerial Approach’, European Journal of International Law, 28(1) (2017): 1372.

19 Salles, Forum Shopping in International Adjudication, p. 245.

20 Article 20.3 of Central American Free Trade Agreement sets out similar rules on the choice of forum. In particular, it is provided:

  1. 1.

    1. Where a dispute regarding any matter arises under this Agreement and under another free trade agreement to which the disputing Parties are party or the WTO Agreement, the complaining Party may select the forum in which to settle the dispute.

  2. 2.

    2. Once the complaining Party has requested a panel under an agreement referred to in paragraph 1, the forum selected shall be used to the exclusion of the others.

21 Award of the MERCOSUR arbitral tribunal on the dispute between the Brazil (claimant) and Argentina (defendant), ‘Application of Anti-dumping against the Export of Whole Poultry from Brazil’, Resolution No. 574/2000.

22 Panel Report, Mexico–Taxes on Soft Drinks, para. 7.11.

23 Ibid.

24 Ibid.

25 Appellate Body Report, Mexico–Taxes on Soft Drinks, para. 54.

26 Ibid.

27 Ibid.

28 Ibid.

29 Bowett has described the essentials of estoppel to be: an unambiguous statement of fact, which is voluntary, unconditional, and authorized, and which is relied on in good faith to the detriment of the other party or to the advantage of the party making the statement. Crawford, J., Brownlie's Principles of Public International Law, Oxford: Oxford University Press, 2012, p. 420.

30 J. P. Muller and T. Cottier, in Encyclopaedia of Public International Law, Oxford Public International Law, http://opil.ouplaw.com/home/EPIL.

31 Appellate Body Report, European Communities  Export Subsidies on Sugar, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, paras. 310 and 312.

32 Cook, Graham, A Digest of WTO Jurisprudence on Public International Law Concepts and Principles, Cambridge: Cambridge University Press, p.3. Appellate Body Report, EC–Export Subsidies on Sugar, paras. 307, 310, 312; Appellate Body Report, European Communities  Regime for the Importation, Sale and Distribution of Bananas (EC–Bananas III) (Article 21.5–Ecuador II), EC–Bananas III (Article 21.5–US), WT/DS27/AB/RW2/ECU, WT/DS27/AB/RW/USA, para. 228; Panel Report, Argentina – Definitive Anti-Dumping Duties on Poultry from Brazil (Argentina–Poultry Anti-Dumping Duties), WT/DS241/R, para. 7.38.

33 Also see, Appellate Body Report, EC–Export Subsidies on Sugar, para 312; Appellate Body Report, EC–Bananas III (Article 21.5–Ecuador II), EC–Bananas III (Article 21.5–US), para. 227.

34 Appellate Body Report, EC–Export Subsidies on Sugar, para 312; Appellate Body Report, EC–Bananas III (Article 21.5–US), para. 227.

35 Appellate Body Report, EC–Bananas III (Article 21.5–Ecuador II), EC–Bananas III (Article 21.5–US), para. 217.

36 Appellate Body Report, Peru – Additional Duty on Imports of Certain Agricultural Products (Peru–Agricultural Products), WT/DS457/AB, para. 5.25 and footnote 106.

37 Appellate Body Report, Peru–Agricultural Products, footnote 106.

38 Appellate Body Report, Peru–Agricultural Products, para. 5.5.

39 According to the Appellate Body, ‘while Article 3.7 of the DSU acknowledges that parties may enter into a mutually agreed solution, we do not consider that Members may relinquish their rights and obligations under the DSU beyond the settlement of specific disputes’. Appellate Body Report, Peru–Agricultural Products, footnote 106.

40 Ibid., para. 5.26.

41 Ibid., para. 5.25.

42 In fact, the Appellate Body was not even convinced that the FTA had disclosed the agreement as between disputing parties to allow Peru maintaining the PRS. Ibid., paras. 5.109–5.111.

43 Ibid., para. 5.25.

44 Ibid., footnote 106.

45 Mathis, J., ‘WTO Appellate Body, Peru–Additional Duty on Imports of Certain Agriculture Products, WT/DS457/AB/R, 20 July 2015’, Legal Issues of Economic Integration, 43(1) (2016): 97105.

46 J. Pauwelyn, ‘Interplay between WTO Treaty and Other International Legal Instruments and Tribunals: Evolution after 20 Years of WTO Jurisprudence’ (10 February 2016), available at SSRN: http://ssrn.com/abstract=2731144 or http://dx.doi.org/10.2139/ssrn.2731144, p.7.

47 Appellate Body Report, United States  Standards for Reformulated and Conventional Gasoline (US–Gasoline), WT/DS2/AB, p.17.

48 Ibid., p.17.

49 Appellate Body Report, United States  Import Prohibition of Certain Shrimp and Shrimp Products (US–Shrimp), WT/DS58/AB, paras. 128 and 130.

50 The Appellate Body also made reference to the Convention on International Trade in Endangered Species of Wild Fauna and Flora to buttress its understanding on the exhaustibility of sea turtles. Ibid., paras. 130–132.

51 Ibid., footnotes 111 and 113.

52 Ibid., para. 131.

53 Appellate Body Report, European Communities – Measures Affecting Importation of Certain Poultry Products (EC–Poultry), WT/DS69/AB para. 83.

54 Panel Report, Argentina–Poultry Anti-Dumping Duties, para. 7.41; Appellate Body Report, Peru–Agricultural Products, paras. 5.101–5.104.

55 Appellate Body Report, European Communities – Customs Classification of Certain Computer Equipment (EC–Computer Equipment), WT/DS62/AB, para. 84; Appellate Body Report, European Communities – Customs Classification of Frozen Boneless Chicken Cuts (ECChicken Cuts), WT/DS269/AB, paras. 238–240; Appellate Body Report, United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China (USAnti-Dumping and Countervailing Duties (China)), WT/DS379/AB, paras. 312–313; Appellate Body Report, European Communities – Measures Affecting Trade in Large Civil Aircraft (EC and Certain Member StatesLarge Civil Aircraft), WT/DS316/AB, paras. 844–845; Appellate Body Report, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products (ChinaPublications and Audiovisual Products), WT/DS363/AB, para. 405.

56 Appellate Body Report, ECComputer Equipment, para. 84; Appellate Body Report, ECChicken Cuts, paras. 238–240; Appellate Body Report, EC and Certain Member States–Large Civil Aircraft, paras. 844–845.

57 Appellate Body Report, EC and Certain Member States–Large Civil Aircraft, para. 845.

58 Ibid., para. 845.

59 Mathis, ‘WTO Appellate Body, Peru–Additional Duty on Imports of Certain Agriculture Products, WT/DS457/AB/R, 20 July 2015’.

60 Appellate Body Report, Peru–Agriculture Products, para. 5.106.

61 Appellate Body Report, US–Shrimp, para. 131.

62 For example, while WTO accepts tariff as a legitimate border measure, most RTAs are built upon free circulation that prohibits any tariffs among the members.

63 Schiff, M. W. and Winters, L. A., Regional Integration and Development, World Bank Publications, 2003, pp. 247250; Mavroidis, P. C., ‘Always Look at the Bright Side of Non-Delivery: WTO and Preferential Trade Agreements, Yesterday and Today’, World Trade Review, 10(3) (2011): 375387.

64 Mavroides, P. C., ‘If I Don't Do It, Somebody Else Will (or Won't)’, Journal of World Trade, 40 (2006): 187214.

65 Other explanations for the exceptionally few disputes might be the institutional establishment at WTO on RTA-related matters. As a rule, WTO members are bound to notify RTAs in which they participate. At the 10th Ministerial Conference in Nairobi in 2015, WTO members adopted a Ministerial declaration in which they agreed to work towards the transformation of the provisional RTA transparency mechanism into a permanent mechanism. Under the transparency mechanism, members participating in an RTA undertake a series of obligations from the negotiation until the end of the implementation period. Such obligations include early announcement, formal notification, submission of relevant data, as well as change reporting. Through such institutional establishment, WTO membership is assumingly well informed of RTA policies that deviate from the standard WTO commitments and is offered a number of occasions and opportunities to comment or even object before it becomes necessary to initiate a formal complaint at the dispute settlement. For more information, www.wto.org/english/tratop_e/region_e/region_e.htm See also, Mavroidis, ‘Always Look at the Bright Side of Non-Delivery’.

66 van den Bossche, P. and Zdouc, W., The Law and Policy of the World Trade Organization: Text, Cases and Materials, Cambridge: Cambridge University Press, 2016, p. 648.

67 Appellate Body Report, Turkey – Restrictions on Imports of Textile and Clothing Products, WT/DS29/AB, para. 58.

68 Appellate Body Report, Peru–Agricultural Products, paras. 5.109–5.111.

69 Ibid., para. 5.112.

70 Ibid., para. 5.113.

71 Ibid., para. 5.116.

72 ILC Report, ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law’, http://legal.un.org/ilc/guide/1_9.shtml, para. 56. For detailed discussion, see also Lindroos, Anja, ‘Addressing Norm Conflicts in a Fragmented Legal System: The Doctrine of Lex Specialis’, Nordic Journal of International Law, 74(1) (2005): 2766; M. Koskenniemi, ‘Study on the Function and Scope of the Lex Specialis Rule and the Question of “Self-Contained Regimes”’, UN Doc. ILC (LVI)/SG/FIL/CRD 1 (2004); Akehurst, M., ‘The Hierarchy of the Sources of International Law’, British Yearbook of International Law, 47(1) (1976): 273285; Crawford, J., ‘The ILC's Articles on Responsibility of States for Internationally Wrongful Acts: A Retrospect’, American Journal of International Law, 96 (2002): 874; Pauwelyn, J., ‘Bridging Fragmentation and Unity: International Law as a universe of inter-connected islands’, Michigan Journal of International Law, 25 (2003): 903; Howse, R. and Mavroidis, P. C., ‘Europe's Evolving Regulatory Strategy for GMOs – the Issue of Consistency with WTO Law: Of Kine and Brine’, Fordham International Law Journal, 24 (2000): 317.

73 Articles 40 and 41 VCLT respectively deal with ‘amendment of multilateral treaties’ and ‘agreement to modify multilateral treaties between certain of the parties only’ under Part IV of ‘Amendment and Modification of Treaties’.

74 J. Pauwelyn, ‘Interplay between WTO Treaty and Other International Legal Instruments and Tribunals: Evolution after 20 Years of WTO Jurisprudence’ (10 February 2016), pp. 21–22.

75 Bartels, L., ‘Applicable Law in WTO Dispute Settlement Proceedings’, Journal of World Trade, 35 (2001): 499; Pauwelyn, J., ‘The Role of Public International Law in WTO: How Far Can We Go?’, American Journal of International Law, 95 (2001): 535578; Trachtman, J. P., ‘Domain of WTO Dispute Resolution’, Harvard International Law Journal, 40 (1999): 333.

76 Shaffer, G., and Winters, L. Alan, ‘FTA Law in WTO Dispute Settlement: Peru–Additional Duty and the Fragmentation of Trade Law’, World Trade Review, 16(2) (2017): 303326.

77 Appellate Body Report, Peru–Agricultural Products, para.5.116.

78 Shaffer and Winters, ‘FTA Law in WTO Dispute Settlement’, p.320.

79 Pauwelyn, J., Conflict of Norms in Public International Law: How WTO Law Relates to other Rules of International Law, Vol. 29, Cambridge: Cambridge University Press, 2003, pp. 315316.

80 The same problem also arises under the proposal made by Shaffer and Winters, ‘FTA Law in WTO Dispute Settlement’, according to whom the roll-back measure could be defended under Article XXIV GATT insofar as RTA concerned meets the requirements thereunder and is thus WTO-compatible.

81 ‘The Chinn Case, 1935’, British Yearbook of International Law, 16 (1935), p. 166.

82 Appellate Body Report, Mexico–Taxes on Soft Drinks, para. 76.

83 Ibid., paras. 69 and 75.

84 Ibid., para.148.

85 Ibid., para.78.

86 Howse, R., ‘World Trade Organization 20 Years On: Global Governance by Judiciary’, European Journal of International Law, 27 (2016): 977.

87 Pauwelyn, ‘Interplay between WTO Treaty and Other International Legal Instruments and Tribunals: Evolution after 20 Years of WTO Jurisprudence’ (10 February 2016), http://ssrn.com/abstract=2731144 or http://dx.doi.org/10.2139/ssrn.2731144, p.12.

88 Appellate Body Report, EC–Bananas III, para. 167.

89 Appellate Body Report, India–Patents (US), paras. 65–66.

90 Appellate Body Report, EC–Bananas III, para. 167.

91 Appellate Body Report, India–Patents (US), paras. 65–66.

92 Appellate Body Report, Mexico–Taxes on Soft Drinks, para.148.

93 Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres (Brazil–Retreaded Tyres), WT/DS332/AB, para. 228.

94 Ibid., para. 228.

95 Ibid., para. 232.

96 Howse, R., ‘The World Trade Organization 20 Years on: Global Governance by Judiciary’, European Journal of International Law, 27 (2016): 977.

97 Appellate Body Report, Peru–Agricultural Products, para. 5.113.

I am very grateful for the critics and comments from the anonymous referees prior to the publication. All the mistakes remain mine.

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When the Multilateral Meets the Regionals: Regional Trade Agreements at WTO Dispute Settlement

  • MICHELLE Q. ZANG (a1)

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