|
||
BOP,
a special and differential right in WTO without substance? GENEVA: Article XVIII:B of GATT 1994 as a whole embodies the principle of Special and Differential (S&D) treatment on measures taken for balance-of-payments (BOP) reasons, agreed the WTO panel on the Indian BOP case which, however, reflected this only in its suggestions for India being given a longer phase-out period than the normal 15-month time limit ordinarily set by arbitrators as a "reasonable period" for implementation. This may or may not help India, but the ruling appears to have some serious implications for developing countries in the run-up to the next Ministerial meeting and any negotiations that may ensue. The ruling, as some others before, suggests that S&D provisions (with various WTO bodies having to take decisions and operating under the GATT consensus practices) can be frustrated through the dispute settlement system. There are varying views on the way the Uruguay Round Dispute Settlement Understanding (DSU) was negotiated in the final stages of the Round by a few key delegations, and the agreements in goods, services and intellectual property, as well as the overarching DSU, were packaged into the WTO Agreement as annexes. Both then and later, some of the negotiators, and some outsiders who got access to official files, gave their versions. But to those who observed the Geneva scene of those days and talked to delegations, it was evident that the final shape was one cobbled together in a rush to meet deadlines - without any adequate scrutiny of the legal texts to see whether they reflected what the negotiators had agreed upon. To those raising questions at that time, some delegates explained then that the internal contradictions between texts on the same issue would be tackled during the scrutiny of the legal texts (between December and March). But contrary to these assurances, in fact, none of the texts were touched for fear that everything might unravel. Those who had concerns were told these could be redressed subsequently through agreed interpretations and so on. In the case between the US and India over the various import restrictions and measures maintained by India on the basis of its balance-of-payments situation (the India BOP case, as it has become known) (see following article on p.10), the panel has said that the consensus decision-making process of various WTO bodies dealing with agreements and understandings (decisions by consensus are presumed when no one present in the relevant body of the WTO specifically objects, and thus there is a "positive consensus") can coexist without conflict with the DSU process requiring at every stage a "negative consensus" - a proposal at every stage of the Dispute Settlement Body (from reference to a panel through various stages to adoption of panel rulings) being set aside only by consensus. Negotiating history The BOP provisions in the GATT have a long history. The original GATT 1947, a provisional agreement pending entry into force of the Havana Charter, was one drawn up at a time when the US was the only "surplus" country. GATT 1947 had an Art. XII (for special restrictions based on BOP considerations) applicable to all. There were less than a handful of developing countries in the GATT at that time. Subsequently, as more of them joined, and the political economy and problems of development became clearer, Art. XVIII was considerably revised and changed in the 1954-55 special review process, and the present Art. XVIII (sections A, B and C) came into effect in 1957. Art XVIII:B had a carefully balanced approach, enabling BOP restrictions by developing countries (on criteria different from those governed by Art. XII), but forcing countries to justify their case before the BOP Committee, which often accepted their view, but sometimes did not and merely recorded the views of various parties. And these reports were "taken note of" by the GATT Council. The BOP article itself (XVIII:B.12) provides for resolving disputes in the BOP Committee and then in the General Council; for the Council (as the Contracting Parties) making recommendations for a phase-out of BOP restrictions when they are not justified, and for authorizing retaliation by a complaining party when the recommendations are not accepted by the country applying the BOP restrictions. At the same time, the article had provisions to enable a contracting party against whom retaliation has been authorized to withdraw from the GATT (effective on the 60th day after notice), similar to the right of withdrawal when retaliation is authorized in an Art. XXIII dispute settlement, rather than six months in the GATT's general withdrawal in Art. XXXI. The scheme is one of a self-contained provision, dealing with substantive and procedural rights and obligations, resolving disputes, "retaliation" and even withdrawal from the GATT. The GATT also had provisions for customs unions, free-trade areas and so on in Art. XXIV. When the Rome treaty for the EC customs union (supported and encouraged by the US) was concluded and came up before a working party in terms of Art. XXIV, no agreement was reached on its compatibility or otherwise (the US in those days was supporting the Rome treaty, including its Common Agricultural Policy). The working party merely recorded the views of various members without a conclusion, and this was taken note of by the GATT Council. The EC subsequently used this to argue that "no disapproval" meant "approval". And with the GATT dispute settlement (Art. XXII and XXIII) needing a positive consensus for adoption, and the EC successfully blocking things, discontent was brewing, ultimately resulting in the issue being taken up in the Uruguay Round, and leading to the WTO "understanding" on Art. XXIV, with its qualifications for the application of the dispute settlement provisions. The various Uruguay Round agreements and understandings annexed to the WTO treaty provide for "consultations" and "dispute settlement". In some (Art. 8 of the TRIMs Agreement, for example), the relevant provision says that the provisions of Art. XXII and XXIII of the GATT as elaborated by the DSU apply. In others (as in the Agreement on Textiles and Clothing), before XXII and XXIII can be invoked, a member has to go through the Textiles Monitoring Body process first. In still others, the recourse to XXII and XXIII is provided for, but with some differing phraseology. Uruguay Round understandings The new conflicts over the BOP and XXIV that came up in the 1980s and in the early 1990s resulted in the two understandings of the Uruguay Round. The BOP understanding is an elaboration of the provisions in Art. XII and XVIII of the GATT, which contains also XXII and XXIII. As such, there was no need to refer to XXII and XXIII. But the BOP Understanding does make such a reference in a footnote. There is a similar type of reference and qualification in the Understanding on Art. XXIV of the GATT (free- trade areas, customs unions and so on). The negotiations on these "understandings" took place in parallel, and the compromise on how to apply the dispute settlement to XXIV was brought into the BOP Understanding and put in as a footnote. This is the real negotiating history, but perhaps one not recorded in the GATT files (or is it a case of information on record not cited for the panel?). If the intention of the treaty makers was to provide an unqualified right to use XXII and XXIII and the DSU for all agreements, nothing would have been simpler than to put it in the DSU and say that these provisions would be applicable to all agreements, or elsewhere in the WTO. But the treaty makers did not do this. They chose to make references under individual agreements, and in varying phraseology. And if the negotiators of the BOP Understanding wanted an unqualified right, they could have stopped with the first sentence of the footnote, or the first part of the second sentence up to "matters". Why then did they add the subsequent words if it was to mean the same? Para 12 of XXIV:6 of the Understanding on Art. XXIV says: "The provisions of Art. XXII and XXIII as elaborated and applied by the DSU may be invoked with respect to any matters arising from the application of those provisions of Art XXIV relating to customs unions.... " The footnote to the BOP Understanding says: "Nothing in this Understanding is intended to modify the rights and obligations of Members under Art. XII or XVIII:B of GATT 1994. The provisions of Art. XXII and XXIII of GATT 1994 as elaborated and applied by the DSU may be invoked with respect to any matters arising from the application of restrictive import measures taken for BOP purposes." It is difficult to read a difference in the ordinary meanings of the two wordings. But the qualification in the footnote to the BOP Understanding has been interpreted in such a way as to render redundant the second sentence in that footnote. In the early stages of the GATT, until almost the mid-1970s, except for the US perhaps, the industrialized world took a benign view of import restrictions of the developing world to deal with their BOP problems - and even the IMF, when disbursing conditionality loans for BOP, required no more than devaluation and other remedies (and not changes in trade policy, for example). It was only in the Tokyo Round (when the US and other industrial nations, and their corporations, began eyeing the markets of the developing world) that the assault on BOP rights began. But it was resisted by all developing countries and finally resulted in the 1979 Declaration in the Tokyo Round, which sought to persuade developing countries to move to tariff protection rather than QRs, and towards the theory of raising tariffs generally as a BOP response rather than selectively on individual sectors. But the 1979 Declaration essentially preserved the rights of developing countries. BOP claims before panels But in ruling that the "application of restrictive import measures" allows the justification of BOP claims (for which XVIII:B. 12 provides a procedure for the Contracting Parties to settle disputes) themselves to be challenged under the DSU, and not merely the restrictive import measures, the panel has provided some strange arguments and precedents, citing secretariat notes and other references, without the parties (in this case, India) having an opportunity to argue about it or produce any contrary evidence (on the basis that no new evidence can be allowed), excepting perhaps during the interim review stage (by which time panels would have already reached substantial conclusions). The panel, though affirming XVIII:B as an important S&D right of developing countries, has in effect wiped out the rights therein by ruling that the entire range of BOP issues could be agitated before the BOP Committee and/or through the dispute settlement process. In taking such a view about Art. XVIII:B and the DSU enabling BOP claims to be justifiable before panels, the India BOP panel has made references to a secretariat note to it on the GATT practice from 1975-1988 on BOP issues. According to the note, cited by the panel, the actual GATT practice has been that the BOP Committee in some cases explicitly recognized existence of a BOP situation (and hence the restrictions), while in others, no conclusions were reached, with the views of parties merely recorded. The panel then cites a secretariat view from this that while there was never an explicit determination that BOP restrictions were unjustified, "various levels of tone" were used to indicate the strength of the Committee's doubts concerning the justification, and in other cases, the adoption of a BOP Committee report on BOP justification was not blocked but some contracting parties expressed regret at the continued existence of restrictions and pressed for faster liberalization. All these "points" of the secretariat note are drawn from its notes to the Uruguay Round negotiating committee and, by citing this (without any reference to India, in this case), the panel has made the secretariat's views during the negotiations a part of the negotiating history in interpreting the outcome - the views of the "contracted party" (the GATT DG and his staff) being equated to the views of the Contracting Parties which negotiated the agreements. But there was no approved negotiating history of the negotiators at the end of the negotiations, and the only way to draw any conclusions on the negotiating history has to be on the basis of various proposals that led to the final text. Without going through the various BOP reports and the differing languages used to reach the conclusions it did, the panel has adopted the secretariat's subjective view about "various levels of tone". Even stranger is the citation, at the instance of the secretariat, in para 5.38 of the report, about the US "consultations" with India on the BOP measures restricting "almond imports", and the constitution of a panel, but with no panel report, since the US and India reached a settlement (which in fact involved resolving India-US trade and non-trade differences). The almond dispute is thus a case, not of an unadopted panel report whose reasoning is used by a subsequent panel, but of a panel report that was never made; but the very establishment of a panel is cited as proof that a dispute could be raised! The only GATT case on BOP that ever went to a panel (and ended with a report) was the Korean beef case. India had contended in its arguments that the panel on Korean beef did not make its own finding on the BOP justification, since conclusions on it had been reached by the BOP Committee which the panel took into account. In rejecting this Indian argument, the panel makes an even more startling finding: "However, we find no evidence in the report that the panel would have refused to review the claims of the complainants as to the justification of the balance-of-payments measures if the committee had not issued any report." This argument is really mind-boggling, and in any legal proceedings in domestic courts functioning under a system of rule of law (with or without the US "due process" right), such citations, references and arguments of non-parties (like the secretariat) would be ground enough to strike down in appeal such a "speaking judgement". The panel has gone into elaborate arguments to justify that the added phrases in the footnote mean the same, but has made no attempt to explain how the wording of a dispute settlement right in one way in the TRIMs Agreement and in another in the BOP Understanding both could mean the same. The arguments are convoluted and thus unconvincing. Even curiouser are the arguments used to rebut the Indian argument that vesting a dispute settlement panel (whose findings are automatically adopted through negative consensus) with the same jurisdiction as that vested specifically in the BOP Committee and the General Council (which need positive consensus for a decision) could create systemic conflicts. If the BOP Committee and the General Council have not decided the issue at the time of reference of the dispute to a panel, there is no conflict, says the India BOP panel - thus opening the way in future for anyone to withhold consensus and block adoption of reports in the BOP Committee or the General Council, and then take the issue to the DSU (as the US has done in this case). The panel notes that the BOP Committee and the General Council have reached no decision on India's contention, and hence there is no conflict in the panel considering it. If the report had stopped there, it would have brought out the failures of the negotiators. But it has gone further. In support of the view that there is no limitation on a panel in BOP disputes, it cites that the Vienna Law of Treaties requires words to be given their ordinary meaning, and treaties interpreted as a whole (an ICJ advisory opinion about the ILO is cited in support of this). In fact, the ILO practice is of a 2-year period of extended treaty-making and publication and consultation by governments with unions and employers, with legal drafting expertise at every stage. It is totally unlike the WTO's secret process, and civil society everywhere would be happy for the open ILO processes to become the WTO norm in any future rule-making. This apart, the panel gives no explanation as to why the WTO treaty makers have used different wordings in different agreements, and why they did not just say that the provisions of XXII and XXIII and the DSU can be invoked in all disputes on all agreements. Overstating the effect? On the Indian argument that the panel's view will render "inutile" the difference in wordings used in different agreements, and that the panel's ruling on the meaning of the footnote to the BOP Understanding would imply a complete transfer of competence to determine the justification of BOP restrictions - from the BOP Committee and the General Council to the dispute settlement panels - and could create conflicts, the panel says: "India's argument overstates the effect of a decision that dispute settlement panels may consider the justification of balance-of-payments measures in individual cases. In most cases, it is reasonable to assume that there will be no resort to dispute settlement procedures on such issues. Past practice supports that assumption." One wonders what would be the "understated" effect. Also, can past practice really support the panel's view that there would be no conflict, when the "past" had no automatic dispute settlement process? The panel then says that even if some BOP issues are considered in the dispute settlement system, "it is our view that the BOP Committee procedures would play a significant role in these cases." The issues will first be discussed in the BOP Committee and the "results of the Committee process may influence the results of the dispute settlement process." The dispute settlement procedures and BOP Committee consultation procedures differ in nature, scope, timing and type of outcome, the panel says, citing the 1970 and 1979 (old) GATT Declaration in support. (SUNS4416) The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.
|