International Trade and Finance Law - Coursework Example

International Trade and Finance Law Table of Contents Introduction 3 Discussion of ment 4 Critical Evaluation with Examples from Law Cases 9 Conclusion 11 References 13 Introduction The Doha Round indicated a series of trade negotiations that took place within World Trade Organization (WTO) members. It was commenced in 2001, with an aim to achieve vital reforms in International Trading Systems with the introduction of decreased trade barriers and revised rules of trade. However, even after 13 years of its launch, member countries had been unproductive in bringing the event to a successful termination. WTO members were also unable to successfully conduct the 9th ministerial conference in Bali that gave partial assurance to them for achievement. One of the central issues during negotiations was agriculture. To be noted in this regards, the acceptance of Bali agreement in 2013 was only a normal implementation towards the process of world trade liberalization. The ‘WTO Doha Round of Negotiations’ was also unable to improve the existing WTO laws for further liberalization of trade in agricultural products. Above all, clearing of subsidies had prohibited the right of entry of producers of agricultural products in developing nations to reach the markets of developed nations (Anderson & Martin, 2005). Moreover, the Doha Round had also failed to focus on the complicated questions that were surrounded by added liberalization of trade in services along with strengthening of the global government, which was governing the protection of intellectual property rights. It was thus argued that these rights should have been yielding for welfare of the developing countries so that such countries could gain access to essential patented drugs, which were manufactured by the foreign pharmaceutical organizations (Bossche & Zdouc, 2013). With emphasis laid on these shortcomings, the discussion henceforth will address the failure of WTO in mitigating these issues based on the statement that “The adoption of the Bali Agreement in December 2013 was only a modest development towards the liberalization of world trade. The WTO Doha Round of Negotiations has so far failed to reform WTO law for further liberalization of trade in agricultural products, in particular the phasing out of subsidies which prevent the access of producers in developing countries to the markets of developed countries. Moreover, Doha has so far failed to address the intricate questions surrounding further liberalization of trade in services; and the strengthening of the global regime governing the protection of intellectual property rights, which needs to be reconciled with the interest of developing countries to gain access to vital patented drugs developed by foreign pharmaceutical companies”. Discussion of Statement The promise of the Doha Ministerial Declaration for further agriculture trade liberalization by developed countries, while considering their development needs involving food security and rural development, further proved as an important incentive. To be noted in this regard, in 2013, arrangements for Bali’s 9th ministerial conference were focused on harvesting of new crops than utilizing the old ones. The campaign named ‘Really Good Friends of Service’ was commenced in 2013 along with multilateral agreements focused on trade liberalization of services (World Trade Organization, 2013). Even though the changes in agricultural field indicated the need for critical discussion among the member states, not every issue was settled therewith. Among these unsettled issues was the aspect of food security getting influenced by Doha Round Disciplines. While further disciplines on OECD nation’s agricultural policies had made a contribution to universal food security, fundamentally by enhancing the predictability of agricultural trade and by triggering the abbreviation of agricultural trade flows along with controlling the inequitable competition. Majority of the developing nations were anxious about the impact that these disciplines would have on their domestic agricultural production capacity (Das, 2003). Among the most difficult issues in the agricultural negotiations were to address the objectives of these countries to shelter the products that were important for their food security from tariff reductions as well as to have the rights to defend themselves from undermining import competition through the help of a ‘Special Safeguard Mechanism’. Under the influence of lofty and unstable global food products, developing countries, having net food imports, have highlighted their susceptibility towards interruption in import supplies and had called for corresponding disciplines on restrictions to exports by member nations (Matthews, n.d.). As argued by Trebilcock & et. al. (2013), negotiations had been difficult because of different views about the context in which they took place. This revealed the tension existing between the values of justice and reciprocity, original to the negotiations. The nations had different views, as they were concerned whether the negotiations were planned exclusively with the intention of trade liberalization or to offer the prospects to restore previously irregular entitlements for protection of agriculture that enlightened the intensity of disagreements over these issues in a larger context (Lowe, 2008). Developing nations were most affected by continued protection of developed countries’ markets. Some of the outstanding issues in agriculture were discharge of tariff cuts from special products, number of products eligible for making use of its benefits and their recognition. The Special Safeguard Mechanism (SSM) was established for use by members of developing nations concerning agricultural dealings between various nations. There was never an extensive contract on the purpose of SSM in WTO Doha Round talks. It convoluted and poised discussion on the purpose of the instrument to the point where divisions over SSM were blamed for the breakdown in Doha Round of talks. The principle difference was whether SSM was intended to deal with market disturbance arising from ‘Doha Round Liberalization’ or whether it was proposed to tackle market troubles. Beyond cotton, WTO members have failed even to agree on how to lessen the subsidies that are being paid to rich farmers around the world, whose overproduction threatens the source of revenue of farmers of developing nations (Guardian News and Media Limited, 2014). In the end, Bali declaration refrained from making any legal commitment with regard to tariff rate quota asserting that member nations would implement extreme command in using any form of export subsidy and ensured that growth towards the abolition of export subsidies will be maintained. In the case of service markets, WTO agreements have failed so far to address further liberalization of trade (Herdegen, 2013). It arouses the query further regarding whether industry country exporters of monetary, telecommunication and other services have an interest in seeking liberalization of developing country obstructions, which are high in services. Services remain an area where opportunities for enhancing national and universal interests had been tapped. However, despite the importance of unilateral liberalization, majority of the nations had been unable to engage in multilateral negotiations. First, it was complex in forming deep legislative and regulatory alterations required to launch service markets in the perspective of international trade negotiations. Next, the extent for reciprocity within services had been significantly shortened by the opposing manufacturing nations to think about huge openness where developing countries had a comparative advantage, particularly in the supply of services through the movement of persons. Evidence of poor overall results were usually fragile and incomplete structure of rules, which governed trade of services and the negligible level of liberalization commitments undertaken by nations. In addition, in tariffs, the difference between the reality of present authoritarian regimes and the bounding commitments were big enough (Bellmann, 2014). All these factors had led to the private sector perception that the multilateral system may not be overly affective and decidedly slow in delivering the real opening of services market around the globe. This perception had been toughened further by the increasing difference between the product cycle–which firms face in international markets, and the broadening cycle of negotiation - with which governments must satisfy themselves. The multilateral response regarding the services, such as transport, finance and telecommunication, which continues to be sluggish and cumbersome might be leading to additional decrease in enthusiasm levels of private sector. The call for regional governmental regime has further alarmed as the non-governmental course to save access of markets and standard settings has proved to be more attractive for the private sector than the WTO route (Bouët & Laborde, 2009). Even in the case of services, industrial countries had to counter complementary confrontations in the modes of interests for developing countries. To be mentioned in this context, the mobility of labour has always been a difficult issue, which resulted in tensions in cross border regions. Developing countries such as India, Philippines, Sri Lanka and Egypt have a profound stake in the mobility of skilled personnel, in terms of both capable and untrained workforce. Notwithstanding the large mutual gains from allocating better workforce mobility, migration procedure has produced only the most reluctant concession. Those traditional political complexities had been compounded by a new fear of terrorism, as it was complicated to accomplish greater openness (Trebilcock & et. al., 2013). In case of medicines, the financially backward developing nations were unable to access affordable medicines as members had failed to elucidate uncertainty between the needs for government to protect public health on one hand and on the other to protect intellectual property rights of pharmaceutical companies. Emphasizing the same, a major topic at the Doha Round regarded the WTO contract on “Trade Related aspects of Intellectual Property Rights” (TRIPS). The issue involved balance of interests amongst the pharmaceutical corporations prevailing in developed nations, which apprehended the patents on medicines and public health needs in developing countries. The Doha declaration had the merit to focus on the meaning of TRIPS agreement and the way it was interpreted. In Doha, the members reassured the significance of intellectual property for the expansion of latest medicines along with the importance of providing public health. With regard to the pricing of patented medicines, the declaration, having a cautious wording, raised concerns regarding the effects of intellectual property protection on prices without proposing a solution. Compulsory Licensing was also done for medicines, with the motive of providing full advantage of TRIPS flexibilities in order to address public health issues. This was however hindered by the limitation of compulsory licensing in TRIPs agreements. Furthermore, limiting the compulsory license equalled to allowing the marketing of only such drugs that were patented and had the consequence of raising the prices of medicines (Bakhoum, 2008). The limitation of parallel trade relating to patent of medicines also proved to be a major drawback in this agreement. The TRIPS-plus agreements on the parallel trading had gone in different directions. With a successful lobbying of pharmaceutical companies, some nations had made use of ‘TRIPS- Plus Agreement’ against the use of a parallel import. This limited the freedom of developing countries, making them to face public health issues to make use of parallel imports as a tool to lower the prices of patented medicines by importing them from countries, which sold them at lesser prices (Mattoo & Subramanian, n.d.). Critical Evaluation with Examples from Law Cases In order to obtain a better insight to the above arguments, reference has been drawn from different cases related to the context. WTO, United States: Subsidies on Upland Cotton – Report of the Appelate Body (2005), WT/DS/267/AB/R This ‘WTO dispute settlement case (DS267)’ was commenced by Brazil against definite requirements of the cotton programs of the US. The key findings included that the US’ domestic cotton subsidies have gone beyond WTO Commitments in 1992, finally losing the security afforded by the ‘Pease clause’, which protected them from substantive challenges. The findings also argued regarding two major types of direct expenditures, which were made under the US farm programs wherein one was about the ‘Production Flexibility Contract Payments of 1996 Farm Act’ while the other emphasized the Direct payments of 2002 farm acts, which did not qualify for WTO exemptions from decreased commitments, as completely segregated income support and therefore, should be counted in opposition to the Peace clause limits. In subsequence, the third finding illustrated the ‘step 2 agenda payments’ that were restricted subsidies and fourth considered the US export credit that guaranteed effective export subsidies that made them subjected to previously notified export subsidy commitments (Schnepf, 2005). The last focused on domestic support measures of the US, which were contingent on market prices and had resulted in excessive production of cotton and its exports, which as a result, caused low international prices and serious prejudice to Brazil (Schnepf, 2005). In 2005, panel reports adopted by WTO membership suggested that all the US export subsidies those were prohibited must be withdrawn. A subsequent decision was also taken on the ‘actionable subsidies’ on the identification of serious prejudice that was caused by price contingent subsidies, making the U.S. come under an obligation to take suitable steps to eradicate the undesired effects and thereafter, had to withdrew the subsidy. The panel findings about the US’ direct payments did not qualify for WTO exemptions from reduction in commitments as wholly differentiated revenue support that appeared to have no further consequences within the context of this case. This was because direct expenses were supposed as non-price dependent and were evaluated rigorously in terms with the violation of the ‘peace clause’ (Schnepf, 2005). WTO, European Community: Subsidies on Exports of Wheat Flour SCM/42 21 March 1983 While presenting the arguments and complaints to the committee, the US delegates claimed that ECC subsidies on the export of wheat flour were first, applied in a way that was inconsistent with Article 10:1 of the agreements on explanation and use of articles on general agreements on tariffs and trade. In subsequence, it resulted in pricing materially to remain lower than that of other suppliers to the same market. The third was nullification of profits mounting up to the US under the general agreements that resulted severe unfairness to the interest of the nation. The panel also concluded that EEC refunds on exports should be considered as a form of subsidy that was subjected to the provisions of general agreement as interpreted by the court. It was also evident to the panel that EEC share of wheat flour exports has increased significantly, but the share entitled for the US had diminished significantly. The panel, on the basis of adequate information, also made the statement that was no sufficient ground to reach a definite conclusion regarding whether the EEC had granted subsidies on export of wheat flour in such a way that resulted in prices to stay lower than other suppliers in the similar markets. The panel considered the situation as regard to subsidies on export and other trade phases in wheat flour to be extremely unacceptable along with being concerned over what it implied for the effectiveness of legal provisions in this area, and hence, indicated the limitations of the agreement (WorldTradeLaw.net LLC, 1983). Conclusion In a nutshell, irrespective of the much debated success potentials of the Doha Round, it had to face a failure. Critics have thus been arguing that the most possible reasons for the failure were globalization and liberalization opportunities not being exploited up to their fullest extent. In addition, the aggressive interest of the participating nations was less, more being the defensive ones along with the large geopolitical distractions. Overall, the agreement led to poor tariff implementations, wherein nations were setting their tariff at very huge rates to reduce the quota elimination. Ignoring the impact of intellectual rights also reduced the warfare gains for the developing countries that were expected through this agreement. During quota-elimination as well, the quota tariffs for industries were reduced; agricultural tariffs were also trimmed down when the farmers were struggling to understand the deductions in creation of subsidies. The conference was however unable to secure more candidness for the effective mobility of labour at the period when terrorism had an influence over the immigration procedures, mostly only the member states of WTO. WTO Conference also failed to address preservation of openness about cross country trading in services at the time when a thunder in outsourcing industry was creating anxieties about security of jobs. In case of medicines too, supply of patented medicines and vital drugs for the treatment for diseases like cancer and H.I.V. to Africa was not implemented. As more opportunities for the WTO Doha agreements come in future, The Doha Round must take care about the liberalization of goods and services along with providing patented medicines at cheap rates to the developing countries. It should focus on the existing issues rather than discussing about their achievements. References Anderson, K. & Martin, W., 2005. Centre for International Economic Studies. Agricultural trade reform and the Doha development agenda, pp.1-41. Bakhoum, M., 2008. Trips, Patent Rights and Right To Health: “Price” Or “Prize” For Better Access To Medicine? Max Planck Institute for Intellectual Property, Competition & Tax Law Research Paper Series No. 10-07, pp.1-51. Bellmann, C., 2014. International Development Policy. The Bali Agreement: Implications for Development and the WTO. [Online] Available at: http://poldev.revues.org/1744 [Accessed Dec. 14, 2014]. Bouët, A. & Laborde, D., 2009. Potential cost of a failed Doha Round. World Trade Review, 9(2), pp.1-31. Bossche, P. V. & Zdouc, W., 2013. The Law and Policy of the World Trade Organization Text, Cases and Materials. Cambridge University Press. Das, D. K., 2003. The Doha Round of Multilateral Trade Negotiations: Causal Factors behind the Failure in Cancún. Harvard. [Online] Available at: http://www.cid.harvard.edu/cidtrade/Papers/das2003.pdf [Accessed Dec. 14, 2014]. Guardian News and Media Limited, 2014. Global Development. The WTO has failed developing nations. [Online] Available at: http://www.theguardian.com/global-development/poverty-matters/2011/nov/14/wto-fails-developing-countries [Accessed Dec. 14, 2014]. Herdegen, M., 2013. Principles of International Economic Law. Oxford University Press. Lowe, A., 2008. International Economic Law. Oxford University Press. Matthews, A., No Date. Doha Negotiations on Agriculture and Future of the WTO Multilateral Trade System. 135 EAAE Seminar Challenges for the Global Agricultural Trade Regime after Doha, pp. 1-44. Mattoo, A. & Subramanian, A., No Date. Multilateralism and the Doha Round: A Stock-Taking. Peter G. Peterson Institute for International Economics [Online] Available at: http://www.iie.com/publications/papers/subramanian0305.pdf [Accessed Dec. 14, 2014]. Schnepf, R., 2005. Background on the U.S.-Brazil WTO Cotton Subsidy Dispute. CRS Report for Congress. [Online] Available at: http://fpc.state.gov/documents/organization/57876.pdf [Accessed Dec. 14, 2014]. Trebilcock, M., & et. al., 2013. The Regulation of International Trade: 4th Edition. Routledge. World Trade Organization, 2013. Ministerial Declaration and Decisions. Ministerial Conference Ninth Session, pp. 1-65. WorldTradeLaw.net LLC, 1983. European Economic Community - Subsidies on Export of Wheat Flour. Report of the Panel [Online] Available at: http://www.worldtradelaw.net/reports/gattpanels/eecwheatflour.pdf.download [Accessed Dec. 14, 2014]. Read More