Epps, Tracey --- "International Economic Law" [2011] NZYbkIntLaw 17; (2011) 9 New Zealand Yearbook of International Law 341

New Zealand Yearbook of International Law

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International Economic Law [2011] NZYbkIntLaw 17 (1 January 2011); (2011) 9 New Zealand Yearbook of International Law 341

Last Updated: 14 July 2015

<sup>INTERNATIONAL ECONOMIC LAW


I. Introduction</sup>

^{New Zealand pursued a full trade negotiating agenda in 2011, with work intensifying in the Trans Pacific Partnership (TPP) negotiations, and continuing with various bilateral partners. In the multilateral arena, negotiating activity tailed off in the World Trade Organisation (WTO) Doha Development Round, with a series of Chairs’ reports in April highlighting ongoing divergences across numerous negotiating areas. However, there were still a number of developments in the WTO, including accession of four new members, finalisation of a revision of the Plurilateral Government Procurement Agreement, and release of several panel and Appellate Body decisions. This review details multilateral, regional, and bilateral developments in 2011, focusing on New Zealand’s involvement. It also reviews key WTO dispute settlement decisions of interest to New Zealand.}

<sup>II. Regional and Bilateral Negotiations

A. Trans Pacific Partnership</sup>

^{In 2011, the nine TPP negotiating partners (New Zealand, Singapore, Brunei, Chile, Australia, Vietnam, Malaysia, Peru, and the United States of America) held five formal rounds of negotiations as they continued to work towards an agreement creating a regional free trade area. In the margins of the APEC Leaders’ Meeting in November 2011, leaders from the nine TPP economies endorsed a report from their Trade Ministers defining the broad outlines of a TPP agreement. The Leaders’ Statement noted the goal for the agreement to be “a model for ambition for other free trade agreements in the future, forging close linkages among our economies, enhancing our competitiveness, benefitting our consumers and supporting the creation and retention of jobs, higher living standards, and the reduction of poverty in our countries”.1 Along with the Leaders’ Statement, the Trade Ministers of the negotiating partners released a document setting out the broad outlines for the agreement. This document identified five characteristics of the agreement:2}

^{1. Comprehensive market access through elimination of tariffs and other barriers to goods and services trade and investment;}

^{2. Facilitation of development of production and supply chains among TPP members;}

^{3. Development of four cross-cutting issues, namely, regulatory coherence, competitiveness and business facilitation, small and medium-sized enterprises, and development;}

^{4. Promotion of trade and investment in innovative products and services, including those related to the digital economy and green technologies, and ensuring a competitive business environment across the TPP region; and}

^{5. Ensuring that the TPP is a “living agreement” which is capable of being updated as appropriate to address trade issues that emerge in the future as well as new issues that arise with the expansion of the agreement to include new countries.}

^{Following the APEC Leaders’ Meeting in November 2011, Canada, Mexico and Japan formally announced their interest in joining the TPP negotiations. The process for additional countries to join the negotiations requires discussions with each of the current partners to determine whether the aspirant country is in a position to negotiate rules and market access commitments consistent with the ambition of the nine countries currently around the table. These discussions will continue into 2012. For a new member to join the negotiations, all current TPP negotiating partners must reach consensus.}

^{B. Bilateral Negotiations}

^{In January 2011, the New Zealand – Hong Kong Closer Economic Partnership Agreement (the “CEP”) entered into force. The CEP included a commitment for New Zealand and Hong Kong to conclude a comprehensive Investment Protocol to the CEP (Investment Protocol) within two years of the CEP’s entry into force. In May 2011, the first round of negotiations for an Investment Protocol was held and this was followed by further rounds throughout the year. Hong Kong is New Zealand’s eighth largest investment destination, with investments worth approximately NZ$1.2 billion in the year to June 2009.3}

^{In other negotiating activity, following a political announcement in November 2011, New Zealand commenced substantive negotiations for a free trade agreement with Russia and its customs union partners Belarus and Kazakhstan. A number of negotiating rounds were held throughout 2011. Completion of the negotiations is scheduled for 2012. Negotiations also continued with India, with negotiating rounds being held in March, May, and August.}

<sup>III. World Trade Organisation

A. Membership</sup>

^{The WTO approved four new members in 2011. On 26 October 2011, the WTO General Council formally approved Vanuatu’s Accession Package, and on 17 December, WTO Ministers adopted Samoa’s and Montenegro’s terms of entry. However, the most significant development was WTO Ministers’ approval on 16 December 2011 of the Approval Package of the Russian Federation. This was the culmination of a lengthy and often difficult accession process that began in June 1993. All countries acceding to the WTO are required as part of the process to bring their trade regime into compliance with WTO rules. Russia’s Accession Package is particularly long and complex, with the final document containing over 700 pages in addition to goods and services schedules. As part of its accession, Russia concluded 30 bilateral agreements on market access for services and 57 on market access for goods. Russia also undertook a number of obligations in order to bring its domestic policies in line with WTO rules, including in the area of domestic subsidies, sanitary and phytosanitary measures, technical barriers to trade, trade-related investment measures, and protection of intellectual property rights. Russia has until 15 June 2012 to ratify its Accession Package. The other remaining barrier to Russia’s membership is for the US to repeal its so-called Jackson-Vanik legislation to allow the US to establish permanent normal trade relations with the Federation.}

^{B. Doha Development Agenda}

^{Progress on the Doha Development Agenda was slow in 2011. In April, chairs of the various negotiating groups partook in the “Easter process” which involved them submitting revised drafts of texts or chairs’ reports to describe the state of play of the negotiations. A brief summary of the state of play in the negotiations on key areas of interest to New Zealand follows.}

1. ^Agriculture

^{In his April 2011 report, the Chair of the Agriculture Negotiating Group noted that in respect of issues bracketed or otherwise annotated in the draft text, Members had not made any discernible progress over the previous year that could be captured in that text.4 These outstanding issues include: blue box (product-specific limits); cotton; designation of sensitive products; tariff cap levels for products outside a Member’s overall ‘sensitive product’ entitlement’; tariff quota creation; tariff simplification; special products; special safeguard mechanism for developing countries; and tropical and diversification products. Members had similarly failed to make any substantive progress in the ongoing negotiations on the proposal on cotton made by Benin, Burkina Faso, Chad, and Mali.5 In November, Members elected New Zealand Ambassador John Adank as the new Chairperson of the Agriculture Negotiating Group. John Adank replaced New Zealand Ambassador David Walker who had held the position since April 2009.}

2. ^{Non-Agricultural Market Access}

^{As with the Agriculture Negotiating Group, the news out of the Non- Agricultural Market Access (NAMA) Negotiating Group in 2011 revealed little substantive progress. In his April report, the Chair noted that the divergence in views between some Members about the appropriate level of ambition has been considered the main stumbling block of the NAMA negotiations since mid-2008.6 However, the Chair did report that the Group had made some progress on non-tariff barriers (NTBs) – an area which has been under negotiation since the beginning of 2009. The Chair reported that there is a significant potential NTB package “within reach” which would improve the functioning of the Agreement on Technical Barriers to Trade (the TBT Agreement), create incentives for legislators to privilege the reference to international standards, and reduce the tendency for countries to deviate from international standards.7}

3. ^{Trade and Environment}

^{The Committee on Trade and Environment (CTE) has a mandate which includes considering the relationship between existing WTO rules and specific trade obligations set out in multilateral environmental agreements (MEAs), and looking at procedures for regular information exchange between MEA secretariats and the relevant WTO committees, and the criteria for the granting of observer status. To this end, the Chair of the CTE reported in April 2011 that Members had agreed on the idea of producing a Ministerial Decision to address these two issues and attached a bracketed draft of the same (noting that the draft text was “conditional in the deepest sense”).8 The textual proposals for preambular language cover matters such as the objective of sustainable development, mutual supportiveness of trade and environment, recognition of the different bodies of international law, and the importance of technical assistance and capacity building. The Chair reported that substantially all Members agree that an outcome should highlight the importance of coordination at the national level in the negotiation and implementation of specific trade obligations in MEAs and the sharing of domestic experiences in this regard in the CTE. The draft text includes provisions dealing with observer status, technical assistance and capacity building, and dispute settlement.}

^{On the issue of environmental goods and services, where the CTE is working towards the reduction or elimination of tariff and non-tariff barriers to environmental goods, the Chair reported that a number of technical difficulties remain, including questions concerning preambular language; coverage; treatment of tariffs and non-tariff barriers; and cross-cutting and development elements.9}

4. ^{Fish Subsidies}

^{An area of particular importance to New Zealand, the fish subsidies negotiations, remained in a state of flux in 2011. New proposals were discussed during the year, but Members continued to find themselves unable to agree on either technical issues or the core substantive issues. The latter include: the breadth of any eventual prohibition on subsidies (ie, what types of subsidies should be targeted); whether there should be a broad and strict prohibition of subsidies with narrowly defined exceptions, or a more conditional approach to prohibition; whether there should be an exemption for at least some subsidies benefitting “artisanal” or “small-scale” fisheries; whether there should be a de minimus general exception; the question of special and differential treatment for developing country Members; and questions surrounding the role of fisheries management in the disciplines.}

^{The Chair noted in his April 2011 report that a text showing all of the proposals as possible “options”, would probably be “impossible to produce as one text that was comprehensible”.10 The importance of the issues under discussion in this area is highlighted by the fact that there is consensus among Members that the state of global fisheries resources is “alarming and getting worse”.11 The Chair’s report notes that12}

^{all delegations, when referring to data, rely on the same statistics – those published by the FAO – the latest of which show that 85 per cent of world fish stocks are either fully- or over-exploited. All recognise that this is a crisis of exceptionally serious implications for all humankind, and particularly for the poor in many countries who are heavily dependent on fisheries as a source of nutrition and employment. ... Furthermore, most agree that subsidies play a major role in contributing to these problems, and that this is what is behind the negotiating mandate to strengthen disciplines on fisheries subsidies, including through a prohibition.}

^{However, the Chair suggests that despite this convergence as to the nature and extent of the problem, and the role of subsidies, many delegations are focusing principally on maintaining their own status quo by “placing on others the main responsibility to implement solutions, while minimising the impact of disciplines on their own activities” and emphasising their individual needs to continue to provide subsidies (eg, harnessing fisheries as a basis for development, economic growth, and employment). The Chair was to the point in noting that negotiators will need to focus less on protecting their short-term defensive interests if there is likely to be any success in the negotiations.13}

^{C. Plurilateral Negotiations}

^{In December 2011, Parties to the Plurilateral Government Procurement Agreement (GPA) finalised revision of the 1994 Agreement. The GPA aims to open the government procurement processes of the Parties up to international competition. The rules focus on increasing the transparency of measures regarding government procurement, and ensuring non-discriminatory treatment with regard to the products, services or suppliers of any Party to the Agreement. New Zealand is currently an observer to the 1994 GPA.}

^{D. Dispute Settlement}

^{While progress on the “legislative” side of the WTO may have been slow in 2011, the “judicial” function was very active, with a number of important disputes working their way through the system. Of particular significance to New Zealand were two panel decisions in disputes under the Technical Barriers to Trade (TBT) Agreement: United States – Tuna14 and United States – Mandatory Country of Origin Labelling.15 New Zealand has a strong systemic interest in how the TBT Agreement is interpreted and therefore participated as a Third Party in both these disputes. The Panel Report in United States – Tuna was circulated on 15 September 2011; followed by the Panel Report in United States – Mandatory Country of Origin Labelling (MCOOL) on 18 November 2011.}

^{The US – Tuna dispute involved certain US measures that, taken together, set out the requirements for when tuna products sold in the US may be labelled as “dolphin-safe”. The measures condition eligibility for a “dolphin-safe” label upon certain documentary evidence that varies depending on the area where the tuna contained in the tuna product is harvested and the type of vessel and fishing method by which it is harvested. Tuna caught by “setting on” dolphins is not eligible for a “dolphin-safe” label in the US, regardless of whether this fishing method is used inside or outside the Eastern Tropical Pacific Ocean (ETP). However, the measure does not make the use of a “dolphin-safe” label obligatory for the importation or sale of tuna products in the US.}

^{Mexico brought a claim against the US alleging that its measures had the effect of blocking its imports into the US market, and in so doing, violated various provisions of the TBT Agreement. While the Panel found that the US measures were not discriminatory (and therefore did not violate art 2.1 as claimed by Mexico), it found that the measures were more trade-restrictive than necessary to fulfil a legitimate objective and thus violated art 2.2. The Panel identified two objectives which the US measures purported to fulfil: 1) ensuring that consumers are not misled or deceived about whether tuna products contain tuna that was caught in a manner that adversely affects dolphins; and 2) contributing to the protection of dolphins, by ensuring that the US market is not used to encourage fishing fleets to catch tuna in a manner that adversely affects dolphins. While it considered these objectives to be legitimate ones under art 2.2 of the TBT Agreement, the Panel found that they were only partially fulfilled by the measures at issue and that other, less trade-restrictive alternatives existed.}

^{In US – MCOOL, Canada and Mexico successfully challenged the WTO consistency of US country-of-origin labelling (COOL) rules for livestock and meat exports. These rules require that consumers be informed of the country of origin of meat by means of a label on the packaging. The regime provides for five different categories of labels, depending on whether the animals were born, raised, and slaughtered in the US, or whether they had a “mixed” life (e.g., born abroad but raised and slaughtered in the US). The Panel did not find that country of origin labelling is in itself WTO-inconsistent, but found that the particular US regime in question was too trade restrictive and discriminated on the basis of nationality. It found that – while the same rules apply to both foreign and domestic meat – there was de facto discrimination because “the competitive opportunities of imported livestock are reduced as the additional costs of compliance with the COOL measure are incurred”. The Panel rejected the US argument that the measures “pursued a legitimate objective” as allowed under art 2.2 of the TBT Agreement. While the Panel recognised that consumer information was a legitimate objective, and that this also included labels dealing with the country of origin, it found that the COOL measure was not able to achieve that goal. This is because the information provided on the COOL labels was misleading and not understandable for consumers.}

<sup>Finally, developments in respect of the Australia – Apples dispute should be noted. In early 2011, New Zealand and Australia agreed on a reasonable period of time for implementation of the findings of the Appellate Body, whose report had been adopted by the WTO Dispute Settlement Body on 17 December 2010. Following adoption of the Appellate Body Report, Australia had indicated that it accepted the decision and would carry out a review of the import risk analysis for New Zealand apples. New Zealand and Australia reached agreement on an eight month period for Australia to undertake this task and bring its measures into compliance with its WTO obligations. The eight month period expired on 17 August 2011 and Australia shortly thereafter released a new determination for the importation of apples to Australia which opened the way for Australia to issue import permits for New Zealand apples.

Tracey Epps
Senior Trade Law Adviser, Legal Division,
New Zealand Ministry of Foreign Affairs and Trade</sup>

^{1 Trans-Pacific Partnership Leaders Statement (Honolulu, United States, 12 November 2011).}

^{2 “Enhancing Trade and Investment, Supporting Jobs, Economic Growth and Development: Outlines of the Trans-Pacific Partnership Agreement” (2011) <http://beehive.govt.nz/sites/ all/files/TPP_broad_outlines%20.pdf> .}

^{3 New Zealand Ministry of Foreign Affairs and Trade (10 May 2011) <http://www.mfat.govt. nz/Trade-and-Economic-Relations/2-Trade-Relationships-and-Agreements/Hong-Kong/ NZ-Hong-Kong-CEPIP.php> .}

^{4 Report by the Chairman, H E Mr David Walker, to the Trade Negotiations Committee WTO Doc TN/AG/26 (21 April 2011).}

^{5 This proposal asks Ministers to affirm a number of decisions taken on cotton which include a commitment to cut distorting subsidies for cotton by more than the reductions on other agricultural products.}

^{6 Textual Report by the Chairman, Ambassador Luzius Wasescha on the State of Play of the NAMA Negotiations WTO Doc TN/MA/W/103/Rev.3/Add.1 (21 April 2011).}

^{7 Ibid, at [3].}

^{8 Report by the Chairman, Ambassador Manual A J Teehankee, to the Trade Negotiations Committee WTO Doc TN/TE/20 (21 April 2011) at [3] and [4].}

^{9 Ibid, at [11].}

^{10 “Communication from the Chairman” WTO Doc TN/RL/W/254 (21 April 2011) at 46.}

^{11 Ibid, at 48.}

^{12 Ibid.}

^{13 Ibid.}

^{14 United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products WTO Doc WT/DS381/R, 15 September 2011 (Panel Report).}

^{15 United States – Certain Country of Origin Labelling Requirements WTO Doc WT/DS384/R; WT/DS386/R, 18 November 2011 (Panel Report).}