Deals Made, Transparency and Harmonisation

In the last several months there have been various developments in international economic law. Agreements have been made — both global and regional — of various scopes:

  • At the global level, the impasse that followed the World Trade Organization’s Bali Ministerial Conference has been lifted, yet questions remain;
  • Work has continued on the Trans-Pacific Partnership (TPP), though the politics of this trade agreement continue to be an obstacle to progress;
  • Australia recently completed a trio of free-trade agreements in East Asia, after finalising the content of a Chinese free-trade agreement; and
  • Public discussion on investor-state dispute settlement procedures (ISDS) has slowed early negotiations on an EU–US trade deal.

The lifting of the impasse over the Bali Accord

In November 2014, the WTO’s General Council signed off on a set of decisions (outlined below) that will resolve the impasse that had developed over the implementation of the ‘Bali Package’, which had been agreed in December 2013. Nonetheless, scepticism remains about the ultimate implementation of the Bali Package.

Significantly, the General Council decided to integrate the Trade Facilitation Agreement (TFA), arguably the core element of the Bali Package, into the overall WTO agreement. The TFA aims to lower customs barriers and expedite procedures at borders, and gives special allowances to developing countries. It is the first multilateral trade agreement under the WTO since its formation in 1995. A deadline for July this year was also set for completing a work programme on the remaining Doha Round issues, which include subsidy and market access reforms.

The WTO’s formal adoption of the TFA was the result of India and the US overcoming the deadlock caused by India’s veto in July 2014. The specifics of breakthrough are not public. India previously stipulated that it should be allowed to stockpile food without observing standard WTO rules on agricultural subsidies while it passed a food security law which expanded the class of citizens who could receive subsidised grain.

It is important to note that obligations of transparency, required under the original Bali Package, are still being maintained. As such, countries are required to provide other WTO members with detailed information about their farm subsidy programmes — including their food stockholding schemes — and to hold consultations with other countries on such programmes.

While progress has been made with the lift of the impasse, and optimism is renewed, there remain other outstanding contentious Doha Round issues that may yet jeopardise the extended July deadline.

Winding up the TPP: from Sydney to Washington

Last October, the 12-nation group of the Trans-Pacific Partnership (TPP) concluded a three-day meeting in Sydney. The Ministers cited ‘significant progress’ in their negotiations on both market access and trade and investment rules. Officials later advertised development in the difficult areas of intellectual property, environmental protection, and coverage for state-owned enterprises. Australian Trade Minister Andrew Robb went so far as to affirm that ‘we are working now to try and conclude this agreement by the end of this year [2014]’. However, that was not to be.

It seems that the political climate is driving the progress of the deal, particularly in the United States and Japan. The negotiations between the two countries (to reach a bilateral agreement on agricultural and automobile market access) have been widely blamed for slowing down the pace of the TPP negotiations. That is likely to change, however, with the re-election in December of Prime Minister Shinzo Abe in Japan and the promise by the US of legislative reform on trade (such as the renewal of the Trade Promotion Authority) that will expedite Congressional approval of the deal. While this marks the first time the Obama Administration has dealt with both legislative chambers dominated by the Republican Party, it is not anticipated that there will be great political clashes in the area of trade. Indeed, American and Japanese trade representatives began a new set of meetings in Tokyo in early January.

The China-Australia FTA

Closer to home, Australia has essentially completed its free trade agreement with China (ChAFTA). Since the Liberal government was elected in 2013, Australia has signed a trade agreement with South Korea (which is now in force) and finalised one with Japan (also now in force). Now an agreement with China has been completed in principle, with the standard legal vetting left to be completed.

While the exact terms of ChAFTA have not been released to the public, it is known that the agreement reduces (or in certain cases removes entirely) tariffs on Australian dairy, beef, sheep products and coal, as well as manufactured goods and pharmaceuticals. Better market access has also been predicted for various service sectors, including legal and financial services and extractive industries.

It is also known that the China-Australia FTA has included a mechanism for ISDS. As a consequence of this inclusion, the Japan–Australia trade agreement will need to be revisited, since that deal stipulated that Japan expects an ISDS process to be implemented should one be incorporated into any deal with China.

Moving forward, it would be useful to solicit the views of members of the national judiciaries throughout treaty negotiations, particularly the views on the selection and scope of ISDS provisions. Given the potential for arbitral decisions to be challenged in these states, advance consultation would promote harmonisation of the international and domestic dispute processes. Indeed, in Australia Chief Justice French recently stated that the judiciary ‘has not had any significant collective input into the formulation of ISDS clauses in relation to their possible effects upon the authority and finality of decisions of Australian domestic courts’.

Harmonisation of the TTIP with WTO Law?

While the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US is in a relatively infant stage of negotiation, various aspects of the agreement have become subject to public debate. In particular, the European Commission has stated that a decision on ISDS has been suspended until the final phase of the negotiations, following an ‘unprecedented public interest’ in the investment protection part of the agreement.

In an unprecedented move, the EU has now published a series of negotiating documents with its proposals for legal texts, which include areas of technical barriers to trade (TBT), state-to-state dispute settlement and customs issues. One interesting provision on state-to-state dispute settlement stipulates that the arbitration panel must ‘take into account’ WTO Dispute Settlement Body rulings. What is unclear, however, is the weight and effect that such rulings will have in the determinations made under the TTIP.

Regardless, the refreshing message from the EU is clear: it is committed to having a public and transparent discussion on the ramifications of an ISDS in its trade agreement with the US. The European Council recently stated that the EU and US ‘should make all efforts to conclude negotiations on an ambitious, comprehensive and mutually beneficial TTIP by the end of 2015’, but only time will tell.

Kyle Dickson-Smith, FCIArb. is an international lawyer and arbitration counsel at Appleton & Associates International Lawyers, who specialises in trade law and investment treaty disputes, such as the NAFTA. The views expressed in this article are those of Kyle Dickson-Smith and are not attributable to Appleton & Associates.