Significance of “Special and Differential Treatment” in the Free Trade System—From the Perspective of the Theory of Plurality of Norms (KODERA Satoshi)
What has Digital Trade Brought to Trade Agreements? – Focusing on Non-trade Concerns (IINO Aya)
Security Exception Clauses in the Post-Globalization Era—A Study from the Viewpoint of the Historical Development of the GATT/WTO System (ABE Yoshinori)
International Investment Law and Climate Change—Trends and Future Outlook for Climate Change-Related Investment Arbitration (FUKUNAGA Yuka)
Development in Compliance Mechanisms of a Free Trade Agreement—Through the Consideration of the Labor and the Environment Chapters in the United States-Mexico-Canada Agreement (USMCA) (OTASHIRO Mio, AKIYAMA Kohei)
Functions of Non-binding Alternative Dispute Resolution (ADR) Procedures in WTO’s Dispute Settlement System—Focusing on the GATT-Era Practice (KOBAYASHI Tomohiko)
Contemporary Significance and Challenges of Investment Dispute Settlement Systems (KAWANO Mariko)
| By KODERA Satoshi | (Professor, Faculty of Law, Seinan Gakuin University) |
This paper examines the significance of “special and differential treatment” (S&D) in the current and future free trade system, from the perspective of the theory of plurality of norms. Firstly, it provides an overview of the theory of plurality of norms, which has been used in international law to analyze cross-sectionally the relationship between developed and developing countries across multiple treaty systems. Following that, based on the said theory, it clarifies the components and characteristics of S&D in the WTO, which are distinct from the provisions related to developing countries in the GATT.
Next, this paper examines the changes in the circumstances surrounding S&D, which has become prominent since the 2000s. After analyzing the criticisms against S&D in recent years, it will consider S&D in the WTO Trade Facilitation Agreement which are attracting attention as a model for the future. Furthermore, it compares S&D under this agreement with the principle of common but differentiated responsibilities (CBDR) in the Paris Agreement on climate change, and analyzes the significance and issues of the “double self-selection method” that is perceived to be common to both systems.
Keywords: plurality of norms, special and differential treatment, international law of development, World Trade Organization, development, Trade Facilitation Agreement, double self-selection method
JEL Classification: F13, K33
| By IINO Aya | (Professor, Faculty of Commerce, Nihon University) |
The growing digitalization in the economy and society has brought a variety of impacts and new challenges for international trade. As a result, there is a need for changes or evolutions in trade agreements to adapt to this trend. Shedding light on some of these emerging changes or evolutions in trade agreements, this paper aims to examine the emerging global regulatory environment for digital trade, particularly in Free Trade Agreements (FTAs).
To that end, it first provides an overview of the concepts of digital trade and reviews the key impacts and challenges arising from the growth of digital trade. It then examines the extent to which trade agreements are adapting to these challenges by analyzing WTO agreements and FTAs. The FTAs considered here are the advanced FTAs of the “rule-maker” countries that are leading the way in establishing digital trade rules, namely CPTPP, USMCA, DEPA, DEA, UKSDEA, EU-UKTCA, and EUSDTP. In addition, RCEP is also included in the scope as it covers major trading partners.
Based on the results of the research, the paper presents the following conclusions: firstly, the state of mutual interaction between agreements in the formation of digital trade rules; secondly, the extension of the reach of trade agreements brought about by digital trade and the implications thereof; thirdly, the increasing presence of the "right to regulate" in trade agreements in consonance with the emergence of digital trade rules; and fourthly, the need for increased stakeholder participation in the regulation of digital trade.
Keywords: digital trade, electronic commerce (e-commerce), cross-border data transfer, cybersecurity, personal information protection, WTO, FTA, right to regulate
JEL Classification: F13, F15, K33
| By KATO Akiko | (Professor, Faculty of Law, Nihon University) |
Triggered by the global spread of COVID-19 (hereafter, “COVID-19 pandemic”), the relationship between international trade rules and infectious disease control measures, and with the access to medicine that constitutes an element of such measures, has once again been tabled for discussion in domestic and foreign forums, and the appropriateness of conventional responses and future direction have come under review. A wide range of trade measures were adopted to secure medical products that contribute to COVID-19 diagnosis, treatment, and immune-boosting, ranging from export and import restrictions as well as bilateral trade that was criticized as “vaccine nationalism,” to free donations to other countries/regions or to multilateral international organizations such as the COVAX Facility (hereafter, “COVAX”), exemption from protection for some intellectual property rights related to medical products based on the TRIPS Agreement, and further, application for import of vaccines based on Article 31bis of the TRIPS Agreement. International organizations, including the WTO, are gathering and analyzing information on the various measures implemented at the national level and providing feedback on such measures, and at the same time, considering international rules such as the WTO Ministerial Conference decision on the exemption of the protection of COVID-19 vaccine-related patent rights, and WHO’s proposed convention on infectious disease control measures. This paper aims to shed light on the development and challenges of infectious disease control measures in trade systems through the COVID-19 pandemic.
Keywords: COVID-19, medical products, infectious disease control measures, access to medicine, intellectual property, patent rights, export and import restrictions, TRIPS Agreement, WIPO, WHO, WTO, vaccine nationalism, vaccine diplomacy, compulsory license, government use of intellectual property
JEL Classification: I18, O34, O36, O38
| By ABE Yoshinori | (Professor, Faculty of Law, Gakushuin University) |
This paper examines the history of the GATT/WTO regime and the security exception clauses that have been drawing much attention in recent years. The GATT era overlapped with the Cold War era; neither the Soviet Union nor China were contracting parties to the GATT, and trade-restrictive measures imposed on these two countries were outside the scope of GATT laws. For this reason, there was little need to justify, through security exception clauses, export restrictions or other measures taken against the backdrop of geopolitical conflict. Furthermore, since the GATT dispute settlement procedures adopted the consensus method, it was also unlikely that the interpretation and application of security exception clauses would be disputed in a panel, and these clauses had relatively limited functions in the GATT regime. During the era of globalization when the WTO was established, both China and Russia joined the WTO, and trade relations with China and Russia came under the scope of WTO laws. However, as export control measures such as the COCOM regulations were no longer implemented after the end of the Cold War, there was no need to provide justification through security exception clauses. During the post-globalization era, conflicts between liberal and democratic economies and state-controlled and authoritarian economies emerged within the WTO regime, and the focus was placed on the relationship between security exception clauses and trade-restrictive measures taken against the backdrop of geopolitical conflict. Moreover, as the negative consensus method is adopted in the WTO dispute settlement procedures, the invocation of security exception clauses is subjected to judicial reviews by a panel. On the other hand, the United States has maintained the stance that security exception clauses are completely self-judging in nature, and is attempting to secure its wide policy space.
Keywords: GATT, WTO, security exception clauses, geopolitical conflict
JEL Classification: F13, K33
| By SEKINE Takemasa | (Professor, Graduate School of International Social Sciences, Yokohama National University) |
EU’s Carbon Border Adjustment Mechanism (CBAM) regulation, which entered into force on May 17, 2023, establishes a system that requires the surrender of CBAM certificates corresponding to the amount of embedded CO₂ emissions of import goods produced outside the EU. The aim is to curb carbon leakage, which has become a concern with the abolition of free allocations in emissions trading within the EU region. As such a system has the effect of restricting trade, there is a need to ensure that it is consistent with World Trade Organization (WTO) agreements. On the other hand, if the WTO were to strongly deny such a system for violation of its agreements, it risks being perceived as sending out the wrong message that it is an organization which hinders proactive efforts to address global warming. Therefore, this paper analyzes how the CBAM is appraised under WTO agreements, and explores how it should ideally be dealt with. The results of the analysis in this paper conclude that under the existing legal system, there is a possibility that CBAM regulation may be found to be in violation of WTO agreements. As such, it is necessary to consider resolving the issue by means other than referring it to the WTO’s dispute settlement procedures, and specifically, to consider the utilization of means such as WTO’s Committee on Trade and Environment (CTE).
Keywords: Carbon Border Adjustment Mechanism (CBAM), trade and environment, WTO, Committee on Trade and Environment (CTE)
JEL Classification: F18, K33, Q54
| By FUKUNAGA Yuka | (Professor, Faculty of Social Sciences, Waseda University) |
International investment law has often been criticized for making it difficult for states to implement climate change policies. Such criticism is especially strong within Europe, where several countries are subject to investment arbitration under the Energy Charter Treaty (ECT), in relation to climate change policies, including renewable energy policies. This is despite the fact that the results of climate change-related investment arbitration are not necessarily favorable to investors.
In climate change-related investment arbitration, the consistency with the “fair and equitable treatment” (FET) obligation often becomes the main point of contention. In determining whether the FET obligation is breached, most investment arbitral tribunals took into account both the need to protect investors and investments and the need to respect the policy discretion of the host state. Therefore, the criticism that investment arbitration undermines the policy space of the host state is not necessarily accurate. Nevertheless, there is strong criticism of investment arbitration reviewing climate-related disputes, particularly those arising between investors from the European Union (EU) and EU member states. Investment arbitration on intra-EU disputes is the primary reason for criticisms of investment arbitration in Europe.
It is useful to explore alternative means of investment dispute settlement in the present day, when the political legitimacy of investment arbitration is questioned.
Keywords: investment agreements, investment arbitration, the Energy Charter Treaty (ECT), climate change, renewable energy
JEL Classification: K33
| By OTASHIRO Mio | (Visiting Scholar, Policy Research Institute, Ministry of Finance) |
| By AKIYAMA Kohei | Visiting Scholar, Policy Research Institute, Ministry of Finance) |
Three years have passed since the United States-Mexico-Canada Agreement (USMCA) entered into force. The USMCA is considered as the most important tool to achieve a “worker-centered trade policy” advanced by the Biden administration, and includes a “Facility-Specific Rapid-Response Labor Mechanism (RRLM)” to ensure compliance with obligations under the labor chapter, which had never been included in trade agreements. RRLM has already built up a track record of 14 cases, and is exerting widespread influence over corporate behavior within the covered areas. Similarly regarding the environment, continuous efforts can be seen to ensure compliance with environmental obligations through an improvement to a previous mechanism of the North American Free Trade Agreement (NAFTA).
The labor and the environment are increasingly emphasizing not only for protecting their fundamental values, but also for ensuring a level playing field, as well as building a resilient supply chain. The important feature of the USMCA labor and environment chapters is having strengthened compliance procedures with the involvement of non-state actors such as trade union, environmental organization, and general public, in addition to conventional state-to-state dispute settlement mechanism.
Through the consideration of the current status of the compliance mechanisms for the labor and the environment chapters in the USMCA, this article shows some development in the compliance mechanisms included in a free trade agreement, and considers their implication on new U.S.-led negotiations such as the Indo-Pacific Economic Framework for Prosperity (IPEF).
Keywords: United States-Mexico-Canada Agreement (USMCA), Indo-Pacific Economic Framework for Prosperity (IPEF), Americas Partnership for Economic Prosperity (APEP), trade and labor, trade and environment, dispute settlement mechanism, compliance mechanism
JEL Classification: F13, F16, F18, K33
| By KOBAYASHI Tomohiko | (Professor, Faculty of Commerce, Otaru University of Commerce) |
The dispute settlement mechanism of the World Trade Organization (WTO) has been characterized by the quasi-judicial procedures under a two-tier adjudicative system comprising panels and the Appellate Body. In comparison, the role of alternative dispute resolution (ADR) procedures, which include not only binding arbitration but also non-binding negotiation, conciliation, and mediation listed in Article 5 of the Dispute Settlement Understanding (DSU), has not received sufficient attention until recent years. However, since December 2019, the Appellate Body has been defunct for four years, significantly restraining the function of the two-tier adjudicative system. To address the current challenges to the rule of law in the WTO, this paper explores the role of the non-binding rather than binding arbitration, with special focus on the practice of ADRs under the GATT 1947, the predecessor of the WTO. Learning the lessons from the rich use of non-binding ADRs at that time, it sheds light on the potentials of the non-binding ADRss inherited in the WTO dispute settlement mechanism. . Finally, it stresses the need to ensure mutually supportive relationships between two-tier adjudicative system, binding arbitration, and non-binding ADRs.
Keywords: World Trade Organization (WTO), alternative dispute resolution (ADR), arbitration, conciliation, mediation, negotiation, General Agreement on Tariffs and Trade (GATT)
JEL Classification: F13, K33
| By KAWANO Mariko | (Professor, Faculty of Law, Waseda University) |
Systems that settle investment disputes between foreign investors and host State through international arbitration are aimed at mitigating risks associated with foreign investments to the host State and avoiding the politicization of investment disputes in inter-States relations. the rapid increase of investment treaties and free trade agreements or economic partnership agreements providing for the investment part or chapter, which set out the consent to such investment arbitration (ISDS clause) has resulted in the significant increase of investment arbitration precedents. It is true that those precedents have contributed to the effective settlement of investment disptues and clarification of the interpretation of the conventional provisions. However, their impact on the judicial and legislative systems of sovereign States cannot be denied. The increasing concerns have led to the arguments concerning the revision of the procedures for the settlement of investment disputes, including setting up a multilateral investment court. The agreements that the EU has concluded with Canada, Singapore, and Vietnam reflect those arguments. This paper examines the significance and issues of investment arbitration based on ISDS clauses, and of arguments aimed at the establishment of a multilateral investment court.
Keywords: Bilateral Investment Treaty (BIT), FTA/EPA, ISDS clause, International Centre for the Settlement of Investment Disputes, investment arbitration, New International Economic Order (NIEO), Energy Charter Treaty (ECT), Canada-European Union Comprehensive Economic and Trade Agreement (CETA), multilateral investment Court (MIC)
JEL Classification: F20, F15, K33, K49
Top of Page