Plurilateral Trade Agreement

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2 Plurilateral Trade Agreement (1) three or more WTO members (not unilateral, bilateral, multilateral) (2) trade related (WTO plus, WTO extra, WTO minus) Silent on: in or out of WTO, Annex 4 or GATT XXIV/GATS V, MFN or preferential, critical mass or not, other actors, 2

3 Examples Existing: Government Procurement Agreement Agreement on Trade in Civil Aircraft Information Technology Agreement Kimberly Process Scheme Anti Counterfeiting Trade Agreement In progress: Trans Pacific Partnership Agreement Plurilateral Services Agreement Sustainable Energy Trade Agreement BRICS Summit 3

4 MAIN OPTIONS (1) Agreement added to Annex 4 by consensus GPA (preferential), Civil Aircraft (partly MFN) (2) Side agreement extending benefits to all WTO members ITA (critical mass), ACTA (3) Regional trade agreement TPP, ISA (?) (4) Agreement with WTO waiver Lomé (WTO plus), Kimberley Scheme (WTO minus) (5) Preferential WTO extra Agreement competition, migration, investment 4

5 Legal Limits on Plurilaterals? I. Vienna Convention on the Law of Treaties II. Specific WTO decision making rules only for plurilaterals within the WTO WTO allows for variable geometry; no single package principle unlike EU enhanced cooperation no substantive limits II. MFN only where it applies (WTO plus & no exceptions); obligation to extend benefits; never prohibition on plurilateral 5

6 Vienna Convention & WTO lex specialis (1) No right or obligation on third parties without their consent The Plurilateral Trade Agreements do not create either obligations or rights for Members that have not accepted them (WTO Art. II:3) (2) Adoption of treaty at international conference: 2/3 majority The Ministerial Conference may decide exclusively by consensus to add [a trade] agreement to Annex 4 (WTO Art. X:9) (3) Successive treaties: later in time prevails (4) Inter se modification/suspension of multilateral treaty: respect third parties & object and purpose WTO minus only (5) Treaty is void only if in conflict with jus cogens 6

7 Plurilaterals In or Outside the WTO? 7

8 Why in the WTO? More transparent & open Third parties better protected Build critical mass WTO dispute settlement Multilateralize regionalism Why outside WTO? Avoid WTO consensus Closed negotiations Involve non WTO members, non state actors Creation of soft law Outside plurilaterals as international standard MFN applies anyhow 8

9 MFN or Preferential? MFN is irrelevant for WTO minus or WTO extra Scope of application of particular MFN clauses is limited MFN applies to agreements in and outside WTO Annex 4 plurilaterals remain subject to MFN (?) MFN exceptions: GATT Art. XXIV GATS Arts. V/VI Enabling Clause GATS MFN Exemptions TRIPS Waiver Recognition Also FTAs/BITs may impose MFN, with own exceptions Where violated, MFN does not invalidate plurilateral 9

10 Why extend on MFN basis? Avoid distortions Where critical mass De facto gets benefits anyhow (non reciprocal rules/services)? Why keep preferential? Avoid free riding Incentive for outsiders to join Economic harm limited? 10

11 MFN or Preferential? 11

12 Questions for Discussion (1): Legal Limits? There are few limits imposed for the conclusion of plurilaterals: no consensus needed outside Annex 4; MFN has limited scope of application, many exceptions, is less relevant today, does not prohibit agreements. 12

13 Questions for Discussion (2) Consensus requirement? Should one WTO member be able to block housing of plurilateral in the WTO? Review practice of WTO consensus rule? How avoid both hostage taking by veto and divide and rule by progress? 13

14 What is Consensus Decision Making? Decision making process v. decision making rule Consensus decision making is a group decision making process that seeks the consent, not necessarily the agreement of participants and the resolution of objections. Consensus should not be confused with unanimity (EACJ, 2009) ISO/IEC Guide 2: "general agreement, characterized by the absence of sustained opposition to substantial issues by any important part of the concerned interests and by a process that involves seeking to take into account the views of all parties concerned and to reconcile any conflicting arguments (TBT, Art. 1.1). A decision shall be deemed to be taken by consensus if no Member, present at the meeting when the decision is taken, formally objects to the proposed decision (ftn 1, WTO Agr.) 14

15 Questions for Discussion (3) Relevance of MFN? Is MFN extension of plurilaterals a red herring, less relevant for non reciprocal rules/services? Is the problem with plurilaterals more systemic, e.g. their precedential value, transparency, open architecture? 15

16 Questions for Discussion (4): Are RTA exceptions adapted? Are the old bottles of GATT XXIV/GATS V adapted to the new wine of recent plurilaterals? Are the conditions for RTAs too strict, too lenient, in line with economic theory, business reality? Is the scope of MFN and related exceptions sufficiently adapted? 16

17 Wiggle room under GATS Art. V (1)not all but substantially all sectors must be covered (2)the substantially all requirement leaves discretion to consider number of sectors, trade volume and modes of supply (3)the caveat regarding a priori exclusion of one of the four modes of supply is a should not a shall obligation (4)only national treatment discrimination (GATS Art. XVII), not market access measures (GATS Art. XVI) or other services restrictions must be liberalized (5)not all but substantially all discrimination must be eliminated, and this (6)only in respect of those sectors covered by the RTA (7)which can be done through elimination of existing discrimination and/or standstill provisions (8) reasonable phase in periods are permitted (9)as soon as one developing country is involved the flexibility in GATS Art. V:3(a) applies (no such flexibility under GATT Art. XXIV; the Enabling Clause) (10) further flexibility applies when all parties are developing countries (GATS Art. V:3(b)). 17

18 Questions for Discussion (5): Timing? When should a decision be taken on the appropriate forum, question of MFN or preferential: Early on, or at the end of the negotiations? 18

19 QUESTIONS (1) Legal limits? (2) Consensus requirement? (3) Relevance of MFN? (4) Are RTA exceptions adapted? (5) Timing? 19

20 MAIN OPTIONS (1) Agreement added to Annex 4 by consensus GPA (preferential), Civil Aircraft (partly MFN) (2) Side agreement extending benefits to all WTO members ITA (critical mass), ACTA (3) Regional trade agreement TPP, ISA (?) (4) Agreement with WTO waiver Lomé (WTO plus), Kimberley Scheme (WTO minus) (5) Preferential WTO extra Agreement competition, migration, investment 20