Sunday 4 May 2014

Dumping Fuel

The Dispute Settlement Body (DSB) of the WTO has recently (25 April 2014) instituted three panels – one at the request of Argentina on European Union’s anti-dumping measures on biodiesel from Argentina, and two requested by the Dominican Republic and Cuba, respectively, against Australia’s plain packaging requirements on tobacco products. We look at a summary of the first of these three disputes in this post (the anti-dumping measures on bio-fuels). We shall look at the tobacco packaging requirements in the next post as well as catch up on the status of another panel established last year, on the request of the US against India’s Solar Mission.


This was Argentina’s second request to the DSB to establish a panel on this dispute. In May 2013, Argentina filed a formal complaint against the EU with the World Trade Organization, challenging European rules for the importation and marketing of biodiesel. The complaint concerned EU measures that were designed to promote renewable energy and reduce greenhouse gas emissions, as well as European subsidies on domestic biodiesel industry. The EU rejected the first request for consultation.

On 19 December 2013, Argentina requested consultations with the European Union regarding (a) anti-dumping measures imposed on biodiesel originating in Argentina; and, (b) a provision in Council Regulation (EC) 1225/2009 of November 2009, which refers to the adjustment or establishment of costs associated with the production and sale of products under investigation in the determination of dumping margins.

Provisions regulating anti-dumping measures are found in Article VI of the GATT as well as the Agreement on Implementation of Article VI of the General  Agreement on Tariffs and Trade 1994 (The Anti-dumping Agreement).

Dumping (as defined by the GATT) occurs when “products of one country are introduced into the commerce of another country at less than the normal value of the products”. Such dumping is prohibited if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry (GATT Article VI).

Article VI also provides a test for products being introduced at ‘less than its normal value’. Dumping occurs when the price of the exported product is either less than the comparable price for the like product in the exporting country, or, in the absence of such domestic price, is less than either the highest comparable price for the like product for export to any third country or the cost of production of the product in the country of origin plus a reasonable addition for selling cost and profit (GATT Article VI.1).

This is echoed in Council Regulation (EC) 1225/2009, whose provisions have also been disputed by Argentina. Through the Council Regulation, the EU instituted punitive trade measures on Argentinian exports on biofuel. In May 2013, the European Commission set preliminary anti-dumping rates between 6.8 percent and 10.6 percent on Argentinean exporters. According to Argentinian estimates these import taxes would range from €217 to 246 ($298 to $336) per metric ton. The anti-dumping measures will apply for the next five years.

These measures were instigated by a complaint from European biodiesel producers who claim that foreign exporters in Argentina benefit from a system of differentiated export taxes on raw material to biofuel. According to subsequent EU investigations, Argentina imposes high export taxes on the soya beans, soybean oil and palm oil used in biodiesel production. As a result companies exporting biofuel from Argentina, have an unfair advantage because they have access to raw materials at prices that are artificially low compared to world market prices (The EU, in its report, also took similar issue to Indonesian exports). A statement by the EU categorized these export taxes as ‘structural raw material distortions’ and implied that such biofuel distortions are a threat to the EU’s green energy sector.

The Argentine view on the issue is of course, different. According to a press release by the Argentinian Foreign Ministry, Argentina became the main provider of biodiesel to the EU, with sales of 1.847bn dollars in 2011, which represented 13% of all Argentine exports to the EU.

According to the press release, “The biodiesel sector in Argentina outstands for its sustainability and high level of development, scale and integration along the whole production chain, and is currently one of the most efficient producers globally”, while the EU industry is “highly over dimensioned and since 2012 the EU has been involved in different protectionist measures with the purpose of excluding from the European market the Argentine bio-diesel”.

As is often the perception with such North-South altercations, the Argentinians are recognizing this as “protectionist barriers imposed by the EU” and another effort to harm developing country interests.

However, whether this is a protectionist policy or not may be a moot point as the intent behind the anti-dumping measures, as well as the act perceived as dumping may not be a factor, as long as the provisions of GATT VI and the anti-dumping Agreement are met.

In US — 1916 Act the AB held that, the intent with which action against dumping is taken is not relevant to the determination of whether such action is ‘specific action against dumping’ of exports. Similarly, the AB also held that neither the intent of the persons engaging in ‘dumping’ nor the injurious effects that ‘dumping’ may have on a Member’s domestic industry are constituent elements of ‘dumping’.


The EU has claimed that its measures are in conformity with the WTO agreements. Australia, China, Malaysia, Norway, the Russian Federation, Saudi Arabia, Turkey and the United States reserved their third-party rights to participate in the panel’s proceedings.

Tuesday 2 April 2013

BRICS Summit


The 5th BRICS summit was held last week at Durban and culminated into the eThekwini declaration. The declaration was able to raise a few eyebrows by declaring negotiations for a Development Bank (Para 9 eThekwini Declaration) within the BRICS and the formations of a Contingent Reserve Arrangement (CRA) (Para 10 eThekwini Declaration). Both these moves signify not only a flexing of muscles of an ever growing BRICS faction but also a show of reduced dependency on international financial institutions (IFIs) such as the IMF, World Bank, etc. This also means that BRICS is evolving from a set of inward looking individualistic nations to ones that are experimenting with looking after one another as a group. This helps in entrenching themselves against adversaries in world trade.

The BRICS nations have also been trying to reduce dependency on the US dollar and the Euro for a while now; a fact illustrated by the side agreements signed between China and Brazil for trade worth billions of dollars in their local currency. Indeed, China has for some time now insisted on a single international currency.

The BRICS certainly have ample justification to be taken notice of. According to the UNCTAD website, FDI into BRICS nations reached $263 billion last year. This accounted for 20% of all global FDI flows last year – a significant increase from a mere 6% in 2000. The numbers also contain an increase in outward FDI flow of these countries from $7 billion in 2000 to $126 billion in 2012 signifying that these countries have evolved into economies that are not merely satisfied with inward FDI anymore, but rather are mature enough to invest significantly outside national borders. The BRICS nations collectively account for 25% of the global GDP as well as a little over 40% of the global population. 

This has indeed resulted in a political clout in the international arena, which the individual nations could not have had on their own (with the exception of China perhaps). The recent diplomatic row between India and Italy, concerning the trial of two Italian marines, is an example of such political muscle power. A goodwill gesture by India to allow the marines to go back to Italy for Christmas on the promise of their return to continue their trial, turned sour when the Italian government reneged on their promise to return the marines. The following few weeks witnessed a massive diplomatic row, the Italian governments reversing their earlier stand, the resignation of the Italian Foreign Minister Giulio Terzi and a national headache for the Italian Prime Minister Mario Monti. Monti later revealed to the Italian Senate that it was not just the threat of an economic and political backlash from India but the BRICS nations as a unit that compelled Italy to fall in line with their obligations.

Nations previously comfortable in their political position of power within international politics are rudely waking up to a new and powerful faction in a post-crisis world that is not only unafraid to stand up for their rights but to go so far as to bully nations into seeing things their way. The Italian Marines incident was a sign of the growing unanimity between the BRICS nations as is the Development Bank and the CRA.

However, as the BRICS themselves admit (see Para 13 of the eThekwini declaration), institutions such as the World Bank, the International Monetary Fund and the UN Security Council are not changing fast enough to reflect their new-found muscle. Even today the president of the World Bank and the managing Director of the IMF is from the U.S. and Europe respectively.


One, however, cannot help seeing the similarities between the organizational evolution of BRICS and the
post war Bretton Woods dynamics (The World Bank and the IMF emerged from the Bretton Woods
discussions). Both sets of international discussions rode an economic turmoil (post-war depression for Bretton Woods and the economic crisis for the BRICS) and disillusionment of the previous regime. Although the Bretton Woods discussions were held between 44 sovereign nations, the booming voices were primarily those of the US and to a lesser extent the UK and other allied countries (all hiked up on post war hysteria of the winning side). Similarly, BRICS can arguably be considered the survivors of the economic crisis (that is to say, they were less scathed) and political and economic frontrunners in their own right.

If the BRICS have aspirations of world leadership however, then they must learn from the grievances arising from the Bretton Woods institutions. Inequitable power distribution is a myopic way of thinking. The veto powers found in the Bretton Woods institutions of IMF and the World Bank and even in the UN are misrepresentative of a modern politico-economic dynamic. This is still a dangerous possibility given China’s economic superiority within BRICS.

Secondly, one must be ever cautious of tying exchange rates to a single currency. The entire Bretton Woods system of tying exchange rates to the dollar, which in turn was tied to gold reserves, was flawed. This became transparently clear when President Nixon severed the link between the dollar and gold in 1971 and the Bretton Woods system collapsed. This was the start to a fresh batch of inflation, stock price volatility and rising oil prices and one which (if one was to disallow arguments of proximity) may still be affecting international economics.

The BRICS must also remember that they are transitional economies and not post war winners filled with the confidence and the authority of a nation that has just won. The problems of the developing world are different. Moreover, the BRICS must also cautiously consider that the world is slowly waking up to a hangover from western dominance, and not be too hasty in policy and decision making, just to prove a point.

Also the dynamics themselves are different today and (if one is to learn anything from the past) ever changing. Russia, a previous world leader (in the form of the USSR) is now a transitional economy. China, on the other hand is fast being recognized as one of the heads of a bipolar world. That in itself is paradoxical (or at the very least confusing) because it means that a head of an emerging international scenario is a developing/transitional economy with problems of its own and the complexities of a nation that is still in a materialistic stage of its societal evolution.

One must also remember that the BRICS are not as unified in every way as the world might perceive them to be. Tibet continues to be a major bone of contention between India and China, as do the regions of Aksai Chin and Arunachal Pradesh. Brazil and China often flare up on monetary policy, and only recently China opposed a Brazilian proposal that WTO rules could deal with currency misalignments.  Diplomatic rather than military intervention in Iran finds a political common ground in Russian, Chinese and Indian policy but the Syrian regime produce differing views. It is noteworthy however, that differing views did not prevent the BRICS from issuing a joint statement on Syria (Para 26), Palestine (Para 27), Iran (Para 28) and Afghanistan (Para 29) in the eThekwini Declaration.

It is easy to forget but essential to remember that the BRICS is a grouping of culturally and economically diverse countries that is only 5 years old. In such time they have risen to be a significant political and economic group that rubs shoulders with previous and present powers. Teething problems aside, it is still a remarkable and thoroughly exciting grouping. 






Saturday 23 March 2013

Triangle of Coherence


For some time now Pascal Lamy has been propagating his idea of ‘the Triangle of Coherence’ in Global Governance.  At a time when Lamy’s term at helm of the WTO is about to end this might well be the sound bite legacy he leaves the WTO with. A fairly broad governance model, it describes a global institutional triumvirate of the UN, the G20 and International Organizations (such as the WTO). Lamy has used this model often to enhance the notion of a need for a stronger global structure of cooperation and coordination in the various global scenarios.

Whether it be as a solution for bringing some form of coherence to a confusing global structure, especially in a ‘post economic downturn’ world (Warwick 2009), or as a counter to economic recession and global environmental problems through a strong global governance network (New Delhi 2009), Lamy’s ‘Triangle of Coherence’ seems to be ever present. It must be noted however, that although Lamy mentions the triangle when in need of a model of a coherent global institutional nexus, he does not always mention the need FOR the model. Rather he stresses on the eventuality of it. In other words, whether we like it or not, according to Lamy we are heading for such a structure.

Frankly, it is not a bad model of global governance. What it states is that the inherent characteristics of good governance are leadership, legitimacy and efficiency. In the ‘Triangle of Coherence’ these are provided by the G20 (Leadership), the UN (Legitimacy) and international institutions such as the WTO (Efficiency through expert knowledge). At the UN General Assembly in 2011, Lamy argued that there really isn’t any alternative to ‘Globalizations’ other than ‘Better Globalization’ and refers to his triangle as a policy model in that general direction. However there are certain flaws – perhaps not with his model itself, but with the institutions designated to perform the three requirements of governance.

Let us first look at the idea of the G20 performing the role of the leader. Lamy recognizes the G20 to be more ‘inclusive’ and ‘representative’ than the G8 and therefore ‘much more legitimate’. However, by discussing the comparative legitimacy of the leadership of the G20 over the G8, Lamy has inadvertently acknowledged legitimacy to be an issue indeed. One must recognize that this is only a comparative improvement of the ‘legitimacy of a leader’ in global governance. The question will always be asked – what right does a group of 20 nations have to dictate the policy direction of a globalized planet of over 200 sovereign states? Should economic supremacy be the sole criteria for global leadership?

The reality is that even though economic supremacy may not be the most efficient or the most authentic choice of leadership, it is certainly a more coherent one. It is perhaps in the same spectrum of humanity’s psyche as the determination of individual success through a measure of wealth or power. In such circumstances, for want of a better system of determination this may remain a current solution.

Moreover by Lamy’s own admission “leadership at the international level is collective. Replacing the G8 with the G20, which is more inclusive and representative, was an important step, even though the G20 does not decide. It is not a world government, but it gives signals, impulses that matter for us all” (UN 2011). In other words the work of a global leader is not a coerced determination of world policy but rather guidance through suggestive cooperation (although the practicality of this statement is subject to debate).

In terms of Legitimacy, one is to look towards the UN, with its 193 sovereign members, to legitimize the leadership of the G20.  Although there is the potential for academic argument on whether the UN should legitimize the leadership of the G20, the commercial reality is they probably already are, whether bullied by the more influential nations or not. Ironically, this also dilutes the legitimacy of the UN, whether as a legitimizing tool for the leadership of the G20 or as a leader itself. The ability (and the image) of the UN being able to take decisions of World policy is heavily influenced by the interests of the more powerful nations. One merely has to look towards the Iraq war or even more recently the UN resolution in Sri Lanka’s Human Rights violations, to understand this dynamic. Moreover, the veto itself is an outdated post war hangover, indifferent to modern day economic reality. Nonetheless, it would be difficult to deny the UN its place as an international body, unique even just by its membership numbers.

Lastly, Lamy looks at international organizations for providing efficiency through expert knowledge. One is able to see the logic behind this allocation of responsibility, as the experts of a subject area would in all likelihood be at an organization pertaining to that subject – trade experts in trade organizations, environmentalists at an environmental organization, and so on and so forth. However, what of the times when there is an overlap of subjects? The WTO itself has often been accused of compromising dire environmental needs and turning a blind eye to human rights violations for the sake of trade. The recent CITES conference illustrated the fact that even in environmental organizations the original mandate of protection can be severely diluted by trade interests (Look out for my April article on the CITES conference in Kindle Magazine India).

Moreover, if international organizations are to perform the role of experts in their fields they must listen to experts outside the organization, such as NGOs and private interest groups (something the WTO must do at a more regular basis), and involve them more in policy and decision making processes. As Lamy rightly identifies, “the challenge of global governance today is also about “networking” institutions in a better way in order to align the global governance structure that emerged from WWII with today’s growing interdependence” (UN 2011).

A common theme throughout recent speeches has been a fear of ‘de-globalization’ (see the introductory post to this blog). It is perhaps this fear that has led to recent effort to reinvigorate the drive for multilateralism. Yet as Lamy correctly identifies, the true salvation of multilateralism lies in ‘localizing global issues’ (Oxford Matin, UK 2012) and avoiding ‘remote global governance’ (Bilkent University, Turkey 2013). However, such a sense of belonging, of community, of solidarity, based on common values does not yet exist on a global scale. (UN 2011) 

Monday 29 October 2012

Of Minnows and Giants


The WTO, very soon, will have a new member in its ever growing fold. The membership package for Laos was recently approved by the General Council of the WTO which signifies that the negotiations at the WTO level are now over (http://www.wto.org/english/news_e/news12_e/acc_lao_26oct12_e.htm). Pending ratification through an “Instrument of Acceptance”, Laos is well on its way to becoming the WTO’s 158th member.
Although in terms of world trade, the significance of Laos joining the WTO may not be as immense as Russia’s recent accession, it is definitely significant for the country of Laos itself. In fact that is the inherent purpose of free trade, where one of the world’s largest import/export economies (Russia) rubs shoulders with a least developed country (Laos) for the mutual symbiotic benefit of all.
Laos now needs to use this opportunity to develop its knowledge and skill base not only to derive maximum benefits from the WTO but also to counter what can often be intimidating negotiations and dispute settlements. What is certain, however, is that this is indeed an interesting future ahead for Laos now and if the proponents of free trade and the WTO are to be believed a road to upliftment for Laos.

Tuesday 25 September 2012

Multilateralism is Struggling


The WTO Public Forum 2012 is upon us and this is certainly an adequate opportunity to start this World Trade blog that I have been meaning to pursue for quite some time now. A topic very close to my heart, my interest in this discussion is derived primarily from a personal conclusion that if one is sufficiently far afield to look at the big picture then the root cause of all effect in human society is trade. In such circumstances therefore, the solution to problems may either be found within the remit of either the individual problem subject (i.e. environment, human rights etc) or within trade itself. It is with this thought that I intend to devote this blog to the ‘trade plus’ aspects of world trade as an attempt to analyse the problems, and indeed the solutions that World Trade may have to offer to human society.

This ironically brings us back to the 2012 WTO Public Forum where the fundamental question being asked is whether Multilateralism is itself in crisis.  Is a solution required for the World Trade system itself perhaps? Pascal Lamy (the Director-General of the WTO), in his welcome speech to the forum has categorically stated that ‘Multilateralism is struggling’ (http://www.wto.org/english/news_e/sppl_e/sppl244_e.htm). According to Lamy, the expectations on the multilateral trade system are far higher today than before.

Perhaps what should be considered here is whether the reasons given are the only reasons why multilateralism is struggling, if indeed it is struggling at all. Can it not be envisaged that this is, in reality, the natural progression of multilateralism, itself? If the objective behind free trade was the equitable distribution of wealth through free markets, for the benefit of all, then surely the increased influence and demand of the poorer countries is a step in the right direction.

This brings up a further question – Is the multilateralism that Lamy speaks about, specifically WTO style multilateralism? Surely the bilateralism and Regionalism that is such a threat to the authority of the WTO has furthered into inter-trade relationship between them to form a more patch-worked multilateral world of international trade. Although this form does not have the aesthetic agreeability of a rule based forum, it is perhaps less ephemeral because of its evolutionary character.

In the interest of furthering this thought therefore, it may be wise to allay the earlier suspicions of a subtext of North-South friction and move on to the next question Lamy posed in his speech  –  "can multilateral co-operation live up to their expectation?"

There seems to be no definitive answer to his question – at least not according to Lamy's speech (and the opinion of several commentators). One is only left with unexplained optimism and the premonition that we are all probably thinking the same thought  – it is a rough road ahead indeed. Ironically, in what seems to be misplaced optimism, we have probably and inadvertantly answered Lamy's initial question on whether multilateralism really is struggling.