WEBINAR: WTO vs. Policy Space: New Report Shows Trade Organization Rarely Allows Countries to Use Exceptions
A webinar presentation of Public Citizen’s Global Trade Watch’s new report, WTO General Exceptions: Trade Law’s Faulty Ivory Tower followed by a roundtable with international law and policy experts. This new analysis of WTO case decisions reveals that countries rarely succeed in attempts to use the World Trade Organization’s (WTO) exceptions to safeguard policies challenged as WTO violations even though the affirmative defenses ostensibly were designed to provide nations with policy space to pursue health, environmental and other goals. Absent changes to WTO rules, the global trade regime’s viability and legitimacy will continue to fade as governments prioritize addressing the major challenges of our times from climate crisis and the harmful rise of digital mega-corporations to extreme inequality and the threat of an endless pandemic.
Lori Wallach, Rethink Trade, Director
Daniel Rangel, Rethink Trade, Research Director and lead author
Jane Kelsey, University of Auckland Faculty of Law, Professor Emeritus
Alvaro Santos, Georgetown University Law Center, Professor of Law and Center for the Advancement of the Rule of Law in the Americas (CAROLA) Faculty Director
Melanie Foley, Public Citizen, Global Trade Watch International Campaigns Director (Moderator)
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Melanie Foley
Welcome everyone to today’s event releasing the new report from Public Citizen’s Global Trade Watch, titled WTO General Exceptions: Trade Laws Faulty Ivory Tower. My name is Melanie Foley, I’m the international campaigns director at Global Trade Watch, and I will be the moderator for today’s event. This new analysis of World Trade Organization case decisions reveals that countries rarely succeed and attempts to use the WTO exceptions to safeguard policy spaces challenged as WTO violations. Even though the affirmative defenses ostensibly were designed to provide nations with policy space to pursue health, environmental and other goals. Absent changes to WTO rules, the global trade regimes viability and legitimacy will continue to fade as governments prioritize addressing the major challenges of our times from climate crisis and the harmful rise of digital mega corporations, to extreme inequality and the threat of an endless pandemic. And now it is my honor to introduce our speakers. Lori Wallach is the director of the Rethink Trade Program at American Economic Liberties Project. She is also a senior adviser to the Citizens Trade Campaign, the US National Trade Justice Coalition of unions and environmental consumer, faith family, farm and other groups. Lori is an internationally recognized expert on trade with experience advocating in Congress and foreign parliaments, trade negotiations courts, government agencies, in the media and in the streets. Lori has written extensively on trade and globalization issues, most notably two books: The Rise and Fall of Fast Track Trade Authority, and Whose Trade Organization a Comprehensive Guide to the WTO. In 1991, Lori began Public Citizen’s Trade Program bounding its Global Trade Watch division in 1995, and directing it for 26 years. Daniel Rangel is the research director of the Rethink Trade Program at American Economic Liberties Project. And until recently, he had the same position at Global Trade Watch where he carried out most of the research for this paper. Daniel is a Colombian lawyer and political scientist and he holds a master’s degree in international economic policy from Sciences Po Paris, and an LLM in international legal studies from Georgetown University Law Center. He specializes in international trade and investment law and policy and he carries out advocacy activities in trade and labor issues, particularly in the context of Mexico’s commitments under the USMCA. Jane Kelsey is professor emeritus at the University of Auckland New Zealand, where she specialized in international economic law, focusing on trade and services investment and regulatory issues. In her long career, Dr. Kelsey has written many academic articles and technical reports, briefed to governments and affected sectors on legal developments advised delegations on bilateral mega regional and multilateral negotiations, and run training workshops on related matters for government officials, legislators, trade unions and civil society. Last but not least, Alvaro Santos is Professor of Law and faculty director of Corolla, the Center for the Advancement of the Rule of Law in the Americas at Georgetown Law. He teaches and writes in the areas of international trade, economic development, transnational labor, law and drug policy. In 2018, he served as deputy chief negotiator of the USMCA for the newly elected government of Mexico. Professor Santos is co-editor of the books World Trade and Investment Law Reimagined, a Progressive Agenda for an Inclusive Globalization, Law and the New Developmental States the Brazilian Experience in Latin America, and the New Law and Economic Development, a Critical Appraisal. He’s also the author of numerous journal articles and book chapters. And now the authors of the reports will present the findings and then the commentators will make some additional remarks about the importance of ensuring that trade agreements adequately safeguard policy space to attain non-commercial goals. So Lori, could you please tell us why Public Citizen tracks the WTO exceptions record? And what is the importance of conducting this study?
Lori Wallach
So the original impetus in this study, and really this work, the first version of this report was done in 2005, was when the scope of the trade agreements began to impact most directly be behind the borders domestic regulatory policy space. So at the time of the Uruguay negotiations that established the WTO. And NAFTA and other free trade agreements, scholars, advocates, members, policymakers, members of Congress started to worry, after that initial GATT case, before the WTO and the tuna dolphin case that increasingly trade agreements might undermine domestic health and environmental and other public interest policies. And the negotiators systematically around the world said don’t worry, there are exceptions, these general exceptions preserve policy space, they ensure that there’s a balance so we can get the benefits of expanded trade and also make sure we can have the policies that prioritize other goals. And pretty systematically, a lot of advocates and increasingly legal scholars said, “I’m not sure the balance is right, and actually do these exceptions work?” And what we have found over time is that unfortunately, the exceptions have not proved to function as the way they were promised. And in fact, in a pretty systematic way, the commercial goals and incentives have been prioritized in the implementation and in the rules of these trade agreements. So Public Citizen started tracking just to find out empirically, what was the score quantitatively, were these exceptions being used? Weren’t they being used for tribunals or countries trying to use them countries not trying were tribunals accepting them? And that is the genesis of this study. And this is the fourth iteration of it. And I don’t know if you want to ask a follow up question, if I should just keep going.
Melanie Foley
Thank you, Lori. I was wondering if you could tell us a bit about the thresholds and give us some of the top headlines of the report.
Lori Wallach
Yep. So what we found out was in this most recent version, which is now 26 years of the WTO’s existence, there have only been two successful uses of the general exceptions, which are premised on GATT article XX. So two uses have been successful out of 48 attempts. And the lead author and investigator, who is Daniel, can explain a little about the methodology of what those 48 attempts are based on. But two out of 48 is the score. And in both instances, which is the US shrimp, and US tuna dolphin cases, the particular sub provision that was used was the accepted was the one that is related to the conservation of natural resources. And that gets to sort of the threshold of tasks that have to be met. Because the bad record, just on the surface, is sufficient to show that some rebalancing these rules is necessary. Part of that will certainly be fixing general exceptions, though that its own is not going to be sufficient. The underlying rules need to be balanced. Countries need to think more about whether they’re going to cut out whole swaths of policy from being subjected to the rules or if the rule should be cut from covering whole sections of policy. So the rules themselves need work, but getting the exceptions right is of importance. And so part of what this study did is also break down on which prong of which test of these exceptions that attempted use of them failed. And so the first level of exception, and there’s a great chart that goes through each of these prongs. The first level exception, the first level of the thresholds to use these exceptions is the subject matter, something that is covered. And so some things are in the GATT. There are a couple of things are covered in the GATS services that aren’t covered in the exceptions for goods, and vice versa. But neither of those exceptions scope what kinds of policies are considered legitimate for an exception to otherwise violate the obligation. Neither of them cover a lot of subject areas that countries would have very legitimate purposes to regulate in the public interest. So the first question is, do you have a policy that’s actually covered in the scope of any exception? Then the second question is the qualifier. So does it have to be does your measure the policy you’re using doesn’t need to be necessary to that goal if there’s a legitimate goal? Or Is it good enough that it’s related to interestingly, the two cases that were successful in using exception have the related thresholds which is easier to satisfy. The study breaks down each prong of the necessary tasks, which is very hard to use, so have to have the goal, then how does your measure relate to the goal, next test you have to satisfy. And then there’s a there is an identical chapeau language on both the GATT and GATS set general exceptions and those that language is replicating a lot of FTA’s as well. And that language is another set of three sort of sub tests, you have to get through the chapeau. But the chapeau itself has three tests. And that has to do with how the measure is applied, and is it in the manner that would constitute a means of arbitrary discrimination. That would constitute a means of unjustifiable discrimination between countries with same conditions prevail, and then now applied in the manner that would constitute disguise restriction on international trade. And so the getting through that whole gauntlet, only two measures have made it the whole way. And Daniel will speak to at which part of those tests the most difficulties arise, because that helps us think about the reforms, which will also describe that we propose and what needs to be addressed.
Melanie Foley
Thank you, Lori. And now that we know a bit about all the thresholds that must be met. Daniel, could you please tell us some of the top findings of this report? And what policy recommendations you would suggest to fix the problem?
Daniel Rangel
Thank you, Melanie. So we started off by trying to figure out which are the exceptions are most often involved in the dispute settlement system that WTO and as you can see on this slide, and both public health so GATT, article 20 B, and the natural resources exception GATT, article 20 G, are up during the list. But interestingly, that article 20 D also there, which is an exception that is a mouthful, but I’m going to read to you, and is those measures that are related and that are necessary to secure compliance with laws or regulations, which are not themselves inconsistent with the provisions of the GATT. And the way in which I will see this is that this is this is supposed to be like a joker exception. So whenever you have a law that is not tied to any of the policy objectives that are in the other sports, you should be able to use paragraph D. The problem is that when we go into the first threshold, we realize that in most cases, not in most cases, but in a disproportionate number of cases, whenever a respondent has tried to use the subparagraph D exception, it has lost on these first step. So six of the 17 cases when the super graph has been analyzed, and are cases where the respondent lost on the first threshold. And while article 20 D represents 35% of the exceptions raised now as an analyzed in the dispute settlement system, it represents 67% of the cases lost on the subject matter threshold. So there is clearly an inflexibility of WTO tribunals, with regards to these specific thresholds on the stem. And we found that this is particularly important when other international obligations are in play. And in our paper, we assume in the India solar cells case, which is a case in which India attempted to use this exception to justify some domestic contract requirements that are adopted for the sale of solar energy to the government. And India in that case, pointed out that these measures were necessary to comply with its international obligations to reduce carbon emissions. And these international obligations came from the UN Framework Convention on Climate Change and the Rio declaration and other instruments. And in a very formal least interpretation interview The appellate body and the panel determined that since these instruments weren’t enshrined in India’s domestic legal system, then they couldn’t be considered laws or regulations within the meaning of article 20 D. And in our view that’s in itself an evidence that there is a need for a wider scope of the exceptions that actually give room to these important policy objectives or over time, like fighting climate change. But moving forward to the next step of analysis, and is what Lori referred to the qualifier thresholds. So as we mentioned, here, responses have to prove either that the measure is necessary to fulfill those universal objective or is related to, and as you can see on the graph, it has been way harder for respondents to prove that the measure is necessary. So here, we’re gonna go into something that people that are familiar with WTO law know very well, and it’s evolution of the necessity standard, and particularly when it comes to the contribution of the measure, because on one of the first important WTO cases, on the exceptions, a Korea beef the appellate body step basically, that for a measure to be considered necessary. It had to be almost indispensable. And that received a lot of pushback. And in 2007, in a new case, Brazil Retreaded Tires the arbitrary said, no, no, it doesn’t have to be indispensable. It just has to make a material contribution. And a lot of policy makers and scholars saw that decision as the appellate body moving forward to a more defense friendly approach to exceptions. But the thing is that when you look into the number of the cases that were decided before and after Brazil Retreaded Tires, it turns out that there was a greater proportion of cases involving the necessity test that passed this threshold before that case than after. So before 40% of exceptions relying on the necessity analysis pass the set the test, while after is only 35%. And we are aware that this is a small sample. But also if you look into all of these cases that failed the necessity test after Brazil Retreaded Tires in every one of them, the WTO adjudicating bodies question, the contribution of the measure. And these to the very least has to raise some questions about the extent to which the changes in the interpretation by these tribunals is actually generating changes in the outcomes of the cases and the degree of deference that is given to the states or trying to regulate in the public interest. And finally, going through the last threshold and I want to spend a lot of time on the cases in these because I want to get to our some of our recommendations. But as you can see, here are 48 cases where responds were trying to use GATT article 20 and GATS article 14, the general exception provisions of those agreements, only 14 reach to the chapeau threshold. And of those, only two were finally considered consistent with all of the requirements and justified under the general exceptions. And so how do we fix this system in order to actually give or recognize a country’s policy spac? The first thing will be to widen the scope of coverage of exceptions. As we mentioned, there are a lot of different policies that have been trying to be defended through subparagraph D. That is the Joker exception that that have failed on the very first step. And that is in itself approved that we need further exceptions and we need exceptions that deal with human rights, where we indigenous rights, with tobacco control. Also the existence of paragraphs could be amended so that’s paragraphs b and g which deal with health and exhaustible natural resources could be amended to include multilateral environmental agreements such as those that India was trying to invoke to justify its domestic control requirements in India solar cells, also subparagraph E to be expanded, which is the defense studies related to prison labor to include more international labor standards, particularly those related to the right to organize. And to be clear, this could be done either ideally reforming the WTO agreements, but also in a lot of different free trade agreements that have language that is very similar to the one establish very similar or identical to the one established in the in GATT, article 20. And another important fix and is one of the most important in our view is that the something has to be done with the necessity test. And we have three proposals in that regard. First is make the necessity element of the exception. So judging, and this has been done, for instance, in the recent agreement of RCEP, in the data provisions that this agreement has, and basically what it will entail is that whenever a country proves that the measure is designed to address the policy objective that is mentioned in this paragraph, then the measure is treated as necessary, because the country consider those is necessary. And if there is further discussion, it will be given in the support. But then there wouldn’t be discussion about trade restrictiveness or something like that. Another option is actually removing the trade restrictiveness analysis from the exceptions, or even replacing in all of the subparagraphs, the necessity standard for a design and applied to threshold. And this actually has been done in a lot of international investment agreements that have borrowed the language from the GATT article 20. And the two other recommendations that we have are related with the Chapeau. The first one is that it’s necessary to adjust the checkbook terms to the realities of domestic policymaking. And here we’re drawing a lot from the work from Timothy Meyer, a super interesting article, in which he explains how policymaking has mixed motives and mixed motives are necessary to pass or enacting legislations many, many times. And that these realities do not find their way in the analysis in which the analysis that has been conducted by the appellate body and departments at the WTO. And a fix to reform this condition will be to include a predominant motive test into the Chapeau language, so that there is some room for the appellate body and to for panels to actually understand all of these problems. And the second recommendation related to the Chapeau will be to place the burden of proof on the complainant berry with regards to those conditions establishing the Chapeau. And this is very important, because in the very first case of the WTO use gasoline, there are a body without giving it a lot of thought or at least explanation plays the burden of proof of the Chapeau requirements on the respondent. And if you take a look at the response of the Chapeau requirements, these are negative conditions, and a general rule in international law is that whoever affirms boss positive proposition, then that party has to prove it. And for some reason that didn’t happen on this case, and to this very day, it hasn’t changed. And the respondent still has the burden of proof to say that the measure is not discriminatory or is not a disguised restriction on trade, which doesn’t make sense. That should be the burden of the complainant theory. And if the complainant party makes a case in that regard, then the respondent could be able to refute it. So we think that these are important policy recommendations that could be adopted, and that they will go a long way into actually recognizing the domestic policy space of a stage for undertake the important measures that are necessary to deal with the different challenges of our lifetimes. And I think I will stop there and I will let yield the floor to Jane.
Melanie Foley
Thank you, Daniel. Now Dr. Kelsey knows very well that for many years Public Citizen has tracked this WTO exceptions record. Jane, could you please tell us about the importance of this effort and what alternatives there might be to the general exceptions, given the evidence that shows that they are increasingly inadequate?
Jane Kelsey
Well, thank you very much. Kia ora from New Zealand. It’s a real pleasure to offer some reflections on this paper because for over many, many years, decades now, when governments have been confronted with concerns that WTO rules and then subsequently similar roles in free trade agreements have threatened policy space and created conditions for regulatory chill on the adoption of important public policies or compliance with international obligations that are not about traditional ideas of trade. The government’s have routinely misrepresented these exceptions which we’ve seen are largely ineffective as providing full protection, and those who hear these reassurances really have not had access to counter information. And so the past iterations of Public Citizen’s analyses, and I’m sure this latest update have been very important resources to be able to show people that not only are the exceptions, deeply problematic, but that government sales pitch, if you like, for the agreements, relies on an imbalanced perception of the role of commercial interests versus the importance of protecting policy space in the domestic and the international domain. And so I’m really delighted to see that public citizen has updated in such a comprehensive way, their earlier analysis. I have been tracking these developments since the Uruguay round in the late 1980s. And as someone who works in particular on areas of services, and regulatory constrains, what has become an extremely problematic is the extension of so-called trade rules behind the border to constrain what governments are able to do in what are considered to be legitimate domestic policy, regulatory and legislative forums. And that started with the WTO. It extended through various free trade agreements. And now we’re seeing it back in the WTO, with the so called joint statement initiatives. And the GATT exceptions, which date back to 1947, have become increasingly problematic when we’ve been seeking to apply them to this expanding range of behind the border constraints. Yet, when these issues are raised, there is an inertia or more often positive resistance to revisiting them, because that would implicitly concede that there are limitations and faults in the rules and the agreements. And so what we see instead is that they’re just routinely rolled over, which compounds the problems. And at the same time, as we’ve seen the rules becoming more expensive, the post-1990s neoliberal agenda, or the 1990s onwards, neoliberal agenda has, in fact, expanded the scope of the agreements, leaving the general exceptions to do even more work. So if we take the GATS, for example, the so called public services carve out, which was always inadequate because it only applied to non-commercial services provided through a state monopoly. How many services do we have now that non commercial state monopoly services? So that’s so called public services carve out which is still routinely pointed to by governments is in applicable to almost anything that governments do. And because the carve out is even less applicable than it was in the 80s and 90s. When it was being designed, we have to rely more and more on the inadequate general exceptions whose three layer test leaves almost nothing to be protected as the Public Citizen analysis showed. An additional problem that we’ve been finding is that, of course, the categories set out in the GATT general exception, and in the GATS, general exceptions of the time, and so they reflect both the historical era and the power politics in which they were negotiated. And the report refers to the culture question in that context, but I work a lot on indigenous rights, which were nowhere near the negotiating agenda, even during the EU Dugway round with the GATS lit alone back during the GATT. And we had battles in this country during the Uruguay Round around the TRIPS, which, to which the general exceptions don’t apply, and to the GATs, where there was as a minimalist limitation in New Zealand’s schedule. Of course, after both the GATT and the GATSwere created, we had, for example, in the United Nations, the UN Declaration on the Rights of Indigenous Peoples, but that was only adopted in 2007. So we have a question about how those rights to be reflected when we’re dealing with arguments in either the GATT or GATS TRIPS Agreement, or then in the general exceptions, and we had a tribunal case here recently, which involved one of the contemporary issues that we have on the agenda and the WTO and, in the FTAs, which is the e-commerce or digital trade agenda. And the issue for Maori was how to protect their data in light of those chapters, which effectively give big tech control over that data and the ability to hold it wherever they want in the world. And the government said they could rely on the general exceptions, as part of the defense the government raised, but of course, the general exceptions have no recognition of indigenous rights. And the government suggested or maybe they could be squeezed into the category of public morals, which is totally inappropriate for indigenous rights over data. And we argued successfully in the tribunal, that there’s no way a panel or an appellate body, if one existed, would have enough understanding about indigenous rights over data, let alone that such matters would survive the three tier test. And so there was for us a really important contemporary example of the problems, which the tribunal recognized that you cannot rely on exceptions to address such fundamental tensions between the rules of the trade agreements, and other internationally recognized rights. And in the case of New Zealand, the Treaty of Waitangi, which provides protection for those rights, but not in formal domestic law or regulation. So that comes back to the importance of having carve outs right at the beginning of the rules, so we don’t need to rely on the general exceptions at the end. But we’re seeing now, even in the contemporary roles, such as e-commerce, those carve outs are very limited. And instead, there’s a tendency still, firstly, to cross reference to the GATT and GATS exceptions to the extent that they are applicable. But that’s uncertain and highly debatable before we even get to the problems that Public Citizen has identified. And then within the chapters on e-commerce or digital trade, and DJSI text. There are specific exceptions, such as those on movement and storage of data that import some of the wording from the general exceptions, such as the necessity or the chapeau language, but with variations on the wording that create even further uncertainties about how they would be interpreted. So in some, the various proposals that Public Citizen has put forward in the paper are a really important start to thinking about more effective public policy protections. But the only part of the picture. It’s clear that governments can’t just keep rolling over the same flawed exceptions in FTAs, and future WTO agreements. They can’t expand the rules even further beyond what is the legitimate rubric of trade. They need more effective carve outs for public policy measures and international obligations. And they need to exclude matters from the jurisdiction of dispute bodies, but they also have to be prepared to revisit the ineffectual decades of WTO exceptions. Sadly, there is no political will that I can see on the part of trade negotiators. The WTO to do so. So hopefully those who are listening to today’s launch of this report and then reading the report will help generate that political will. Thank you.
Melanie Foley
Thank you, Jane. And now Alvaro, I’d like to ask you what lessons for the future? Can we learn from the findings of this new paper, and particularly from the perspective of developing countries and considering important issues like labor rights?
Alvaro Santos
Thank you very much for the invitation to comment on the report. And so I will answer those questions, Melanie. And so first, let me say one thing about the report and its method, and then talk about labor development and conclude by saying a word about the lessons for other trade agreements. So first, on the method, congratulations on the report. It’s a sobering analysis of how difficult it’s been for countries to use the general exceptions. And I think it makes a really valuable contribution. And it’s also sort of a call for reflection and action. As a scholar of international trade, I myself, have written about certain progress in the interpretation of general exceptions. And I think, you know, many other scholars have done that, too. And, and so there is a there was, at least for a while a sense that the panels on the appellate body were actually making these exceptions more capacious. So if one looks, for instance, at the difference between, you know, the tuna dolphin case in GATT, and how limited that interpretation was, but didn’t allow a measure that was unilateral and had extraterritorial effects, a mentioned before was deemed to protect the environment, compared to high was dealt with shrimp turtle, in the end, there seems to be progress. And so I’m thinking also of the work, for example, of Rob House and John Alandra, about the use of the general exceptions, and particularly public morals, or the work of Andrew Lange, talking about world trade after neoliberalism. All of these and many more scholars sort of had a sense that there was there were some important changes, and that the more narrow neoliberal view, that predominated industrial establishment for a while, was given way, even in piecemeal fashion, to a much more integral and perhaps more pluralistic view of trade. And I think this report calls that into question or at least makes us reckon with the fact that if you look over sort of the arch of the, this 26 years, not much has been achieved, even if there has been some, you know, optimistic or hopeful decisions. And so, Daniel’s reference to Brazil tires, which was one of those decisions that seemed to be even more deference to countries and particularly making an allusion to the capacity of developing countries when considering, you know, alternative measures. It’s troubling, it’s a call for thinking that despite what seemed like progress, there is, in fact, not much in the end, in terms of what we can basically point out to space for countries that try to use this exception. So in that regard, I think it’s an incredibly valuable contribution, and one that will create a lot to talk about and a lot to analyze. I have one suggestion in terms of the method or that I think could be complimentary for further study in terms of what we have in the report. And that is that this provides a formal analysis of the way in which the cases have turned out in really good and detailed way. But I think there’s also something more that can be done, which is to basically analyze what happened with those measures that countries tried to pass using the general exceptions, and how were they adjusted, right. So even if you think about the shrimp turtle case, you can think about that case, as a case of the US lost just one the last, you know, implementation panel. But there was a lot of sort of gaming to try to pass measure and then adjusted without over complying, sort of testing the limits of the exception, and I wonder whether some of these other measures that lost, these countries also adjust them in a way that then led them to let them have them, even if not in the original design. Even cases, for example, like us gambling, which is here counted as a loss, and rightly so, you know, there can be sort of partial losses and partial wins, right. So not all the measure was found in violation, there was like a specific aspect of the measure what happened with the rest. And also what happened with the one that was found in violation, we’ll see that just know. These were, these are things that I think would be helpful to get perhaps more robust sense of how countries use the exceptions and in what way that affected them ultimately. Again, I think that this is a key work. And it’s already very important, I think it can lead to this further analysis, to get a better picture of how this has worked for countries. But again, the census really puts it’s basically focus on the problem of have exceptions have been so difficult to use, and so narrowly interpreted, despite their sense of progress. And that’s why I think it’s so insightful. Let me now move to the question of labor. And here the report recommends that, you know, the exception, the exception 20 E in GATT, he expanded beyond the illusion to prison labor to cover other core international labor standards. And I wholeheartedly agree with this proposal. But I also think that, you know, one, one really interesting aspect about the timing in which this report comes is that we’re all thinking about the future of the international trade regime, both in the WTO and elsewhere. And so it’s a really good moment for thinking about, you know, other potential changes. So expanding the exception, for sure, could be one, but since we’re thinking about change, you know, I think we can take some sort of cues from the asbestos decision, particularly when it comes to questions like labor, as well, as dealt with health matters. But what was noted in the report was that, in the end, this was not decided, on the basis of an exception, but it was based on the analysis of non-discrimination and national treatment. And here think that it’d be useful to think about how concerns about labor violations could be incorporated in the rules of trade, rather than in the exceptions. So for example, can we think about how countries may be able to make distinctions between goods that have an able to discriminate if products are basically produced in violation of labor rights, and so here, just to use asbestos, again, the example is, asbestos products made in Canada, are different from asbestos lack from other products made in France, based on an analysis of likeness. So they were found not to be like, precisely because of the health effects, given the physical characteristics and consumer preferences. So something like that could be sort of attempted rather than deal with labor as an exception. And there are important differences here in whether you treat it as basically part of the discrimination analysis. That is that is valid, because they’re not like products, or whether you’re treated as a general exception. One is symbolic, because you’re entitled to it, and you’re not in violation. So you don’t have to use an exception if you impose a barrier against a product that’s in violation of labor standards. And the other is questions of evidence, and who has the burden of proof. And you know, this has been written about so it’s not, it’s not a new idea. Again, Rob House has written about this, but it’s an important moment where this could be done. And we can even go much more boldly thinking about maybe a new agreement in the WTO free lateral agreement on labor, given that all the subsequent regional trade agreements have actually incorporated labor, with lots of problems, but in their texts. So maybe this is a time to actually create a multilateral norm that really gives justice to the concerns about labor. Let me now move to the development question. And so here, what I would say is that it’d be important to think about rights and also the use of general exceptions in a relational way. So, obviously, this is a familiar concept, the idea that REITs are relational. And so they often enter into conflict. In this case, one country’s policy space is another country’s trade barrier. And so here the idea is that just needs to be worked out and understood and accepted. That is that there will be a more capacious exception that would entail trade restrictions for these justifications. And here, my concern is how that affect or benefit developing countries, partly because some of the exceptions that are often invoked have to do with concerns of developed countries, but that that go, you know, government of developing countries or producers in developing countries, often called protectionist or worried about being protectionist. And so I think that, you know, they’re obviously very good reasons to protect the environment and labor rights. And in my view, this will be beneficial to developing countries. But I think that we also need to analyze how these more capacious and expansive exceptions would be used and deployed. And it would be good to get from the report, also an idea of, you know, how the use of these exceptions, caught across developed and developing countries. And the idea that I want to propose here is that some of these general exceptions, could be useful to developing countries. But I think that if we’re going to have sort of refocus the trade regime, in a way that doesn’t obsess so much with market access, that is that it becomes more understanding of the societal values that countries have, and that we accept that, in fact, they could represent trade barriers for other countries, including developing countries, we also then need to think about ways in which development policies in poor countries need to be incorporated and allowed in the regime. So thinking about, for example, exceptions for industrial policy and in the industry development. So Daniel, I can mention India’s solar cells case, well, there the use of a general exception, was trying to use the other laws and regulations provision, but maybe there is a case for creating an exception that explicitly regulates the possibility of experimenting with industrial policy. And that has all sorts of criteria to also create certain discipline so that it’s not abused, and that it has a time exploration and so forth. We can think about also reinstalling, some of the exceptions to the provisions on subsidies that expired already. And were aimed to research and development and also to serve new technologies in green in the development of green technologies, and thinking here of their work, for example of Greg Shafer who has proposed some of these. But so all of this to say, yes, I’m all in favor of expanding the general exemptions. I also think we need to go beyond the existing ones and think about the needs for developing countries, particularly in this area, especially if we’re going to accept that market access is going to be affected by the general exceptions for good reasons. And let me just conclude with some lessons for reform and other agreements. Part of it deals with, I mean, relates to what Jane was talking a minute ago, which is that, you know, I think one of the sobering aspects of this report is that it shows that what we thought or some of us thought could be understood as gradwell progress doesn’t really provide much reassurance and so, as we are seeing or experiencing norm generation in other agreements, this practice of incorporating the general exceptions by reference to GATT or GATS should give us pause. And so it’s basically it’s a flag and a cautionary message to saying, don’t negotiate new agreements or new provisions in agreements that you’re uncomfortable with, because you think that the exceptions will basically give you the escape valve. And this is true for digital trade, but also many other areas. And I’ll just finish by saying that I think this is a very good example of an area that was supposed to give countries policy space, and it didn’t. But there are also other examples in the WTO, for example, safeguards that were supposed to give policy space to countries to deal with around domestic industries, problems and struggles. That has also been very limited. And so I think this can help us to think more holistically about the areas in which the trade regime has failed to do that, which have come to bite the regime and affected legitimacy. So, again, congratulations to the report, and I’m looking forward to seeing how some of these insights and conclusions could be further developed.
Melanie Foley
Thank you all, and thank you to all our speakers. So for our last few minutes left, I’d like to turn to some audience questions, folks, you can click the q&a button down below and enter your questions. First off, we have Simon Lester, he says, I’ve raised the issue of overly stringent necessity and similar tests with people at USTR, the European Commission and the Canadian government. And none of them think there’s a fundamental problem with the existing approach. Although they may support small tweaks in one direction or another. Part of the issue may be that for many lawyers, these types of scrutiny balancing proportionality tests are exactly what courts are supposed to do. And they can’t see why trade courts wouldn’t do the same thing. Thus, the challenge is to think about ways to shift these trade lawyers away from what they learned in school and feel comfortable with to a great extent, then the issue is not really free trade or even trade. Rather, it’s about the appropriate function of courts and judicial review, efforts to fix the problem should take this into account. In my view, a big part of the focus should be this question: Why shouldn’t trade courts use the same type of analysis as domestic courts do? Do I have any volunteers? From our speakers? Maybe, Daniel?
Daniel Rangel
Yeah, I think that there’s truth to the part of the comment that Simon made that lawyers feel comfortable with the things that they’re comfortable with, and they’re comfortable then replicating that in other scenarios. But that doesn’t mean that the other scenarios are fit well with those practices that are most common and that fit better in the initial scenario that our domestic legal systems. And I think that I briefly discussed with Alvaro before this call, and is that trade courts are not administrative courts nor they are constitutional courts, they don’t have the substistantial values of the different places where they are adjudicating cases for embedded in an instrument. Conversely, the rule exception framework has a rule that gives prevalence to commercial values. While the exception is something that only in exceptional cases, could trump that idea of the commercial value given problem that has to be given prevalence. And I think that that is the problem with pretended that a trade court could act as an administrative court in a domestic setting that could weigh and balance different sources tell objectives, when it’s very clear that there is a bias and that there is a priority in the system. And that is why I found so appealing some of the comments Jane made about we need to think about this maybe in a different way about disclosures and carve outs, so that the system is actually in a way the system protects certain areas. And we only get into the cases that are actually agrevious trade discrimination. And the policy space of countries in specific areas is not decided by lawyers that are not considering all of these different values that the society is where the policies come from, are considering.
Melanie Foley
Thanks, Daniel. Our next question is from Emmylou Walters. Clearly the exceptions only kick in when there’s a breach of the GATT obligation. Do you think there’s a role to play here and also reforming these obligations? Each likeness test that doesn’t allow for differentiation on sustainability or animal welfare, which then pushes you into the exceptions for a policy with these objectives.
Jane Kelsey
Well, if I can make a quick response, Melanie, and I’ve written an answer to that in in the Q&A. There have been some recent moves to do that, for example, in the TPP, CPTPP text for national treatment and MFN, the likeness test, there is a footnote. And the footnote basically says like circumstances includes whether the distinction is based on legitimate public welfare objectives. But that raises all sorts of ongoing problems as well, because it refers to public welfare, not public policy objectives, which is a new level of uncertainties. It doesn’t have a necessity test, yet it’s going to coexist with the general exceptions. And it’s very unclear how the interrelationship of them will be interpreted, it also coexists with other agreements involving the same parties that do not have such a footnote. So before we even look at whether the trade bodies should in fact be passing judgment on what is a legitimate public welfare objective. We have these huge complexities in the attempt to fix the notion of likeness in a way that is really a kind of pragmatic expediency rather than a genuine fix.
Melanie Foley
Thank you, Jane. And I think we have time for one more. Marcus Gustafson. Do you think that there may be a selection bias in your data? It seems members will most likely challenge the most egregious examples of protectionism. That’s only the worst examples of protectionism deviating from the actual policy goals are likely to be challenged. Others are not challenged, or many are likely settled during consultations. And a secondary question of how do you regard pieces such as EC seals or China audio visuals where despite a loss under the WTO, the respective countries modify their regime to remove the protectionist element and continue to pursue their policy goals?
Lori Wallach
Yep, I can certainly speak to the modifications, which is in the US context, in several instances. And this gets to the issue that was raised in the past, when the laws were modified to try and comply, they actually weakened the achievement of the underlying goal. And that has been an unfortunate consequence, both in the chilling when there’s not full adjudication, but also in the actual compliance with some of these rulings. And this sort of gets the point that Alvaro is making, which is what you know, what actually happens practically, and in a variety of these use cases is a not been a good outcome, actually, in the compliance has actually undermined the goal, which then gets the selection bias, which is, I don’t think there is a selection bias, if you look at the mix of cases, some of them are, you know, clearly not anything like your classic protectionism case. And some of the classic protectionism cases that we can all cite, have not been subjected to WTO dispute settlement. Typically, actually, there’s like a unilateral threat over that, and or other nasty bargaining. And that’s how that gets resolved on the side. So I don’t think in the data, you have the bias that’s being suggested on the front end, I do think it’s worth just coming back to what I think a lot of this study reveals, which is as well as getting the exceptions to be effective, it’s looking at the rules and the front ends and understanding that when you have rules that have such broad scope of what kinds of policies they’re trying to cover. And you have a system that systematically puts commercial priorities first, which is the trade regime, it’s not world government, where there’s some set of values and you’re balancing, you’re going to have these structural problems. And you’re not going to exception your way out of it, even though you need good exceptions. And so that does on the front end, talk about what kind of actual rules we want to meet what kind of goals we can get the benefits of trade expansion, while maximizing the policy space for other equally valid goals. So sort of closing historically on the the redoing of the study, and again, you know, thanking Daniel for doing that work. One of the points that having done this starting, you know, 10 years after the WTO was established and now many many years after was to make the underlying point, not just that the exceptions need to be be improved true, but that the actual system is really structured in a very lopsided way. And as the scope gets bigger and bigger and bigger, and now we have another round of that being threatened with the JSI, we need to think at the broadest sense of what rules are appropriate and what subject matters of should be have any rules made in the context of trade negotiations.
Melanie Foley
Thank you, Lori. And since we are now at time I would like to thank our speakers again and all of you for attending. The new report is available on tradewatch.org. And a recording of this webinar will be posted there shortly. Thank you all again.