The International Trade Law Review: Editors' Preface
I Trade in the time of covid-19
Covid-19 has become the defining event of our time. For many years to come, this invisible but virulent pestilence will remain branded on our memories; and when we look back to the first decades of the twenty-first century, perhaps no other event would be found to have caused such turmoil and misery. The long-term and structural ramifications emanating from the pandemic are hard to predict, but some significant short-term effects have already surfaced: international travel has virtually halted, working from home has become the new normal and social distancing has emerged.
Changes brought about by the pandemic have also had an immense impact on the world of international trade and novel trade issues are being discussed – from covid passports to personal protective equipment to the global and equitable roll-out of vaccines, to name just a few. In order to go deeply into these issues, we have dedicated special attention in this edition to cover a number of relevant topics related to the pandemic.
In this endeavour, we are delighted to have received special contributions from a number of prominent authors in the field for this seventh edition: Simon Lester and Huan Zhu from China Trade Monitor, Virginia; Simon J Evenett from the University of St Gallen, Switzerland; and Hosuk Lee-Makiyama from the European Centre for International Political Economy, Brussels. These authors, drawing upon their experiences in both practice and academia, provide us with much needed legal, political and economic considerations, which may help to develop the debates at hand. For this, we thank these authors wholeheartedly.
II Can we be cautiously optimistic about the WTO?
Several issues continue to fester within the multilateral trading system – particularly concerning the World Trade Organization (WTO). However, there is cause for cautious optimism.1 WTO Members have recently elected a charismatic new Director-General – Dr. Ngozi Okonjo-Iweala, a Nigerian economist, who is the first woman and first African national to occupy the position. Her appointment is seen by some as particularly crucial at a time of immense health-related suffering, given that her most recent engagement was chair of the board of Gavi, the Vaccine Alliance. Now, all eyes are fixed on the Twelfth WTO Ministerial Conference (MC12), currently scheduled to take place in late 2021.
In this regard, proposals from Members have focused on three important issues: an agreement to curb harmful fisheries subsidies; outcomes on agriculture, with a particular focus on food security; and a framework to better equip WTO Members in responding to the covid-19 pandemic. Discussions are also ongoing with a view to achieve results regarding trade and environmental sustainability, the 'joint-statement initiatives' (particularly relating to investment facilitation, e-commerce and micro, small and medium-sized enterprises) and dispute settlement, in particular, to resolve the impasse over the Appellate Body.2
At this point, WTO reform is crucial, particularly given the rise of promising regional endeavours such as the Regional Comprehensive Economic Partnership3 and the African Continental Free Trade Agreement.4 That being said, activity at the WTO has not ceased: dispute settlement, for example, despite being particularly challenging in this period, has produced important panel reports, which have in turn developed jurisprudence on a number of significant issues. These reports are analysed in detail in the WTO chapter.5
III developments in the European Union
As one of the most important players in the field of international trade, the European Union (EU) has recently undertaken a flurry of initiatives6 as part of what it calls 'open strategic autonomy'.7 The initiatives are varied in nature, as demonstrated below.
i Transnational subsidies
By creatively using the WTO Agreement on Subsidies and Countervailing Measures (the SCM Agreement), the EU has started to countervail subsidies that are indirect or 'transnational' in nature – in other words, where more than one country was involved in providing the financial contribution.8 Unsurprisingly, this has led to much debate over the proper understanding of legal issues, most notably attribution.9
ii Enforcement officer and enforcement regulation
Faced with an increase in non-compliance with international trade rules, the EU has created the position of Chief Trade Enforcement Officer, a role that appears to emulate that of the United States Trade Representative. The position is currently held by Mr Denis Redonnet.10 Almost simultaneously, the EU armed itself with a new Enforcement Regulation, which allows it to take countermeasures if it wins a dispute at the WTO and the losing party fails to cooperate in the resolution of the matter.11
iii Foreign investment screening mechanism
In October 2020, the EU's foreign investment screening mechanism came into force,12 and as at 14 July 2021, 18 Member States have notified the details of their national screening mechanisms to the European Commission.13
iv Comprehensive Investment Agreement with China
In January 2021, amid much fanfare, the EU finalised an 'in principle' agreement with China called the Comprehensive Investment Agreement, which contained some unique obligations on notification of (services) subsidies. However, in May 2021, the European Parliament froze efforts to ratify the agreement.14
v Anti-coercion instrument
The EU is designing an anti-coercion instrument, in response to attempts by 'foreign countries seeking to influence the decisions or behaviour of the EU or EU Member States in the area of trade and investment policy'.15 This would allow the EU to take countermeasures against such actions,16 which could include import tariffs and restrictions in the areas of investment, services, public procurement access and intellectual property rights.
vi Other ongoing initiatives
A number of other projects exist, such as the EU and its Member States being actively involved in the process of modernising the Energy Charter Treaty.
vii Carbon border adjustment mechanism
On 14 July 2021, the European Commission's proposal for a carbon border adjustment mechanism (CBAM) was finally published. It reflects the EU's desire to prevent carbon leakage, inter alia, by requiring the purchase of carbon-emission certificates. The prices of these certificates will be based on the average closing prices of all Emissions Trading System permits in the previous week. The CBAM will apply to imports of cement, electricity, fertilisers, iron, steel and aluminium. The intention is to have the system up and running, in a simplified form, by 2023, with full implementation in 2026.
viii United Kingdom
For its part, the newly 'independent' United Kingdom (UK), breaking away from the EU fold, is making moves of its own. It has signed several free trade agreements, most recently concluding substantial negotiations with Iceland, Liechtenstein and Norway (part of the European Economic Area and European Free Trade Association), and Australia. Further, the country now has an official and operational Trade Remedies Authority, which made its first determination in an anti-dumping transitional review investigation in July 2021.17 It has also extended EU safeguard measures on certain steel products for a period of three years to protect the UK industry.
IV How about the United States?
The EU position – and its eventual impact on international trade governance – is best understood when juxtaposed with its geo-economic and geo-strategic ally and competitor, the United States (US). The new US administration has shed some of its predecessor's proclivity towards generating trade turbulence – under President Biden, the US seems to be returning to its leadership role in trade governance and, with the help of a congressional majority, the US is seeking to reaffirm its commitment to, and deepen its engagement with, the multilateral agenda.
i The good
Among recent developments, of particular note is the (largely unexpected) push by the US in support of a proposal by India and South Africa to waive the protections for covid-19 vaccines under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).18
Prior to this, the US and the EU announced a suspension of tariffs in the long-standing Boeing-Airbus dispute for a period of four months to allow for negotiations. On 15 June 2021, following a visit by President Biden to Brussels, the two sides announced the 'Understanding on a cooperative framework for Large Civil Aircraft'.19 They agreed to suspend tariffs for five years,20 increase transparency of research and development funding21 and cooperate on competition coming from non-market economies.22 A complete resolution of the Boeing-Airbus dispute would no doubt help both sides rid themselves of an albatross – notably, one that has stalled (the much needed) renegotiation of the SCM Agreement, as far back as in the Doha Round of trade negotiations among WTO Members.23
ii The bad
Relations are not entirely good between the two partners: in June 2021, the US announced that it would take (unilateral) action, under Section 301 of its Trade Act, against Austria, Italy and Spain, among others, for their digital services taxes (DST) within six months if a multilateral agreement on the issue was not finalised by then.24 And given that the EU is considering an EU-wide DST, trade friction between the US and EU could deepen over the issue in the future.
Further, the Biden administration has chosen to retain the unilateral tariffs on steel and aluminium inherited from the previous administration, and has designed a 'buy American' policy, which seeks to leverage government purchasing power to counter the economic influence of rivals. Both these actions, while perhaps of strategic importance to the US, contravene both the letter and the spirit of the WTO agreements.
iii The ugly?
In May 2021, the US Department of Commerce (USDOC) drew inspiration from new regulations,25 and in an investigation into imports of tyres from Vietnam found that currency devaluation by the Vietnamese government constituted a countervailable subsidy.26 Further, in December 2020, the US Treasury (the body entrusted to make determinations about the existence of currency undervaluation) branded Vietnam and Switzerland currency manipulators, and has placed China, Japan, Korea, Germany, Italy, Singapore, Malaysia, Taiwan, Thailand and India on a 'monitoring list'.27
The US has also insisted upon the inclusion of currency provisions in the United States–Mexico–Canada Agreement and the US–China Phase One deal. Thus, it is likely that the USDOC will expand its new practice of countervailing goods from a range of WTO Members in the future. However, in light of issues such as specificity and financial contribution, the consistency of the USDOC's approach with the WTO is not a given, and opening this Pandora's box may well lead to other WTO Members developing their own versions of this trade tool.
V 'East' and 'West': Fundamentally Incompatible?
And what about the elephant in the room? Today, one cannot talk about trade without talking about China. Take fisheries subsidies, for example. Fairly recently, China overtook the US and Japan, and is now at the helm of the largest fishing fleet in the world. As a result, an argument has broken out over which rules should apply to China: should it still be granted 'special and differential treatment' (S&DT) or should it be forced to acknowledge its economic weight and be made to play on equal terms with developed nations?
As such, the growing fissure between economic liberalisation and state capitalism is becoming increasingly apparent, particularly in the field of trade remedies. This has led the US – and, increasingly, Belgium – to stretch existing trade remedies agreements, arguably beyond their initial purpose. The examples and initiatives mentioned in Sections III and IV in the US and the EU bear witness to this observation. Accordingly, the debate over the purpose, effectiveness and continued relevance of S&DT continues, and will also form an important part of MC12 discussions.
VI Trade Remedies
This brings us, finally, to our 'beloved' trade defence instruments (TDI). Even though the possibility of travel for persons is non-existent, the same is not true for the movement of goods, let alone for the number of trade remedy investigations trying to restrict this movement. Both new cases, as well as reviews, have continued unfettered, with authorities worldwide requesting questionnaire responses to be supplied as if everything was business as usual. Yet, some noticeable differences with pre-pandemic times have emerged worldwide. For one, using EU terminology as a shorthand, remote cross-checks (RCCs) have replaced on-site inspection visits. RCCs have exponentially increased the workload for respondents (at least in the EU), with massive homework assignments being imposed for every next day of the RCC. This workload is then compounded with the fact that inspections are, on average, taking twice as long as traditional on-site inspection visits.
In the TDI context, court cases in various jurisdictions and WTO panel reports have continued unabated. At the WTO level, one of the more eye-catching reports was that of the panel in European Union – Cost Adjustment Methodologies and Certain Anti-Dumping Measures on Imports from Russia – (Second complaint) (DS494). While, in a sense, the case was a simple continuation in the line of European Union – Anti-Dumping Measures on Biodiesel from Argentina, Ukraine – Anti-Dumping Measures on Ammonium Nitrate and Australia – Anti-Dumping Measures on A4 Copy Paper,28 the panel nonetheless took an important step and established the existence of the EU's Cost Adjustment Methodology as a 'measure of general and prospective application attributable to the European Union'.29 Accordingly, the panel found a number of the EU's anti-dumping measures to be inconsistent with several provisions of the WTO Anti-Dumping Agreement – for example, its measures on Russian ammonium nitrate and Russian welded pipes and tubes.30 In the wake of this report, despite the EU's repeated offers to litigate the case on appeal, Russia refused to participate in the Multi-Party Interim Appeal Arbitration Arrangement, even on an ad hoc basis. The EU has serious qualms about the panel report, as evidenced by its lengthy and detailed notice of appeal.31 Other noteworthy panel reports in the TDI context have been those in Pakistan – Anti-Dumping Measures on Biaxially Oriented Polypropylene Film from the United Arab Emirates (DS538), Korea – Sunset Review of Anti-Dumping Duties on Stainless Steel Bars (DS553) and United States – Anti-Dumping and Countervailing Duties on Certain Products and the Use of Facts Available (DS539).
These significant TDI developments, at the national level and the multilateral level, are described in the country chapters and the WTO chapter, respectively.
VII In sum
So much has happened over the past year (and still is happening) that we had to cut this preface in half from its original draft to avoid it being too lengthy. Thankfully, however, our faithful contributors make up for our omissions and oversights; their comprehensive overviews are precisely what makes this volume of The International Trade Law Review a particularly valuable and fascinating read. Therefore, as always, we extend our sincere thanks to our ever-expanding group of faithful contributors: Philippe De Baere at Van Bael & Bellis for the WTO chapter; Matthew Weiniger QC and Alex Fawke at Linklaters for the chapter on UK customs and trade; Simon Lester and Huan Zhu at China Trade Monitor for the chapter on the TRIPS waiver and covid-19 vaccine production; Simon J Evenett at the University of St Gallen for the chapter on whether an effective activist state must harm trading partners; Hosuk Lee-Makiyama at the European Centre for International Political Economy for the chapter on laws of vaccine nationalism; Alfredo A Bisero Paratz at Wiener Soto Caparrós for the Argentina chapter; Mauro Berenholc, Renê Medrado, Carol Sayeg and Cora Mendes at Pinheiro Neto Advogados for the Brazil chapter; Peter Jarosz and Chris Scheitterlein at McMillan LLP for the Canada chapter; Ignacio García at Porzio Ríos García for the Chile chapter; David Tang, Jessica Cai, Yong Zhou and Jin Wang at JunHe LLP for the China chapter; Juan David López at Baker McKenzie SAS for the Colombia chapter; Sergey Lakhno at International Law Firm Integrites for the Eurasian Economic Union chapter; Nicolaj Kuplewatzky at the Court of Justice of the European Union and Nia Bagaturiya at V V G B for the EU chapter; Shiraz Rajiv Patodia and Mayank Singhal at Dua Associates for the India chapter; Lim Koon Huan and Manshan Singh at Skrine for the Malaysia chapter; Saifullah Khan at S.U.Khan Associates, Corporate & Legal Consultants for the Pakistan chapter; Apisith John Sutham and Chalermwut Nilratsirikulat at Weerawong, Chinnavat & Partners Ltd for the Thailand chapter; M Fevzi Toksoy, Ertuğrul Canbolat and E Kutay Çelebi at Actecon for the Turkey chapter; and Matthew R Nicely, Devin S Sikes, Julia K Eppard and Brandon J Custard at Akin Gump Strauss Hauer & Feld LLP for the US chapter. Finally, we also wish to thank Oscar Beghin and Akhil Raina at V V G B for their most kind and invaluable assistance.
We wish you, as ever, an enjoyable reading experience. We hope that you are keeping safe and healthy, and that you share our cautious optimism about the future of international trade.
Folkert Graafsma and Joris Cornelis
V V G B
1 The expression 'cautiously optimistic' was popularised by Ronald Reagan in 1982.
2 With the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) in operation since last year, five disputes, as at July 2021, have submitted to deploying their appeal procedures should the need or desire arise after the panel stage: Canada – Measures Governing the Sale of Wine (DS537); Costa Rica – Measures Concerning the Importation of Fresh Avocados from Mexico (DS524); Canada – Measures Concerning Trade in Commercial Aircraft (DS522); Colombia – Anti-Dumping Duties on Frozen Fries from Belgium, Germany and the Netherlands (DS591); and Australia – Anti-Dumping Measures on A4 Copy Paper (DS529). However, a panel report has not yet been released in three of these disputes (DS524, DS591, DS522), while one dispute has been resolved through a mutually agreed solution (DS537) and one panel report has been adopted without appeal (DS529). The MPIA is therefore still waiting for its first real test.
3 The largest multilateral trading pact in terms of combined output (US$26.2 trillion).
4 The largest free trade agreement, measured by number of participating countries (54 signatories).
5 See further: Chapter 1 on the WTO by Philippe De Baere.
6 See further: Chapter 13 on the EU by Nicolaj Kuplewatzky and Nia Bagaturiya.
7 European Commission, 'Commission sets course for an open, sustainable and assertive EU trade policy', Press Release, 18 February 2021, available at: <https://ec.europa.eu/commission/presscorner/detail/en/ip_21_644>.
8 See: Commission implementing Regulation (EU) 2020/776 of 12 June 2020 imposing definitive countervailing duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt and amending Commission Implementing Regulation (EU) 2020/492 imposing definitive anti-dumping duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt; and Commission implementing Regulation (EU) 2020/870 of 25 June 2020 imposing a definitive countervailing duty and definitively collecting the provisional countervailing duty imposed on imports of continuous filament glass fibre products originating in Egypt, and levying the definitive countervailing duty on the registered imports of continuous filament glass fibre products originating in Egypt.
9 See: Victor Crochet and Vineet Hegde, 'China's 'Going Global' Policy: Transnational Production Subsidies Under the WTO SCM Agreement' (2020), Journal of International Economic Law, Volume 23, Issue 4, at 10–11, 19–20.
11 Regulation (EU) 2021/167 of the European Parliament and of the Council of 10 February 2021 amending Regulation (EU) No 654/2014 concerning the exercise of the Union's rights for the application and enforcement of international trade rules. See: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32021R0167.
12 Regulation 2019/452 establishing a framework for screening of foreign direct investments into the European Union.
13 List of screening mechanisms notified by Member States, available at: <https://trade.ec.europa.eu/doclib/docs/2019/june/tradoc_157946.pdf> (last updated: 28 May 2021).
14 European Parliament resolution of 20 May 2021 on Chinese countersanctions on EU entities and MEPs and MPs, available at: <https://www.europarl.europa.eu/doceo/document/TA-9-2021-0255_EN.html>.
15 European Commission, 'Strengthening the EU's autonomy – Commission seeks input on a new anti-coercion instrument', 23 March 2021, available at: <https://ec.europa.eu/commission/presscorner/detail/en/IP_21_1325>.
16 See: Joint Declaration of the Commission, the Council and the European Parliament on an instrument to deter and counteract coercive actions by third countries, 2021/C 49/01, 12 February 2021.
17 TD0001: Welded Tubes and Pipes from Belarus, China and Russia.
18 United States Trade Representative (USTR), 'Statement from Ambassador Katherine Tai on the Covid-19 Trips Waiver', available at: <https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/may/statement-ambassador-katherine-tai-covid-19-trips-waiver>. More recently, however, the EU has failed to get on board with the idea of a 'broad TRIPS waiver'. See: <https://ec.europa.eu/commission/presscorner/detail/en/qanda_21_2802>. Instead, it has put forward an alternative proposal at the WTO, based largely on existing flexibilities in the WTO framework. See: WTO General Council 'Urgent Trade Policy Responses to the COVID-19 Crisis: Communication from the European Union to the WTO General Council', WT/GC/231, 4 June 2021. At the time of writing, WTO Members have agreed to move to 'text-based' negotiations with an aim to reach an agreement in the second half of 2021. See: Borderlex, 'TRIPS Waiver: WTO Members move to text-based negotiations', 9 June 2021. For in-depth legal analysis, see: Chapter 3 on the TRIPS waiver and covid-19 vaccine production (Lester and Zhu).
19 'Understanding on a cooperative framework for Large Civil Aircraft', available at: <https://trade.ec.europa.eu/doclib/docs/2021/june/tradoc_159645.pdf>.
20 ibid., Para. 7.
21 ibid., Para 4. The two sides also intend to ensure that 'R&D funding or other support . . . is [not] specific, to its LCA producer in a way that would cause negative effects to the other side'. This language is reminiscent of the US–Japan semiconductor agreement of 1986.
22 ibid., Para. 6 and also attached Annex, the latter of which foresees information sharing, investment screening and joint analysis on non-market economy practices.
23 See comments of Pascal Lamy in: Bruegel, 'China and the WTO: (How) can they live together?', 28 April 2021, recording available at: <https://www.bruegel.org/events/china-and-the-wto-how-can-
24 USTR, 'USTR Announces, and Immediately Suspends, Tariffs in Section 301 Digital Services Taxes Investigations', 2 June 2021, available at: <https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/june/ustr-announces-and-immediately-suspends-tariffs-section-301-digital-services-
25 Modification of Regulations Regarding Benefit and Specificity in Countervailing Duty Proceedings, 85 Fed. Reg. 6031 (Department of Commerce Feb. 4, 2020).
26 Passenger Vehicle and Light Truck Tires from the Socialist Republic of Vietnam: Final Affirmative Countervailing Duty Determination, 86 Fed. Reg. 28566 (Department of Commerce May 27, 2021), and accompanying Issues and Decision Memorandum.
28 For further details see: chapter on the WTO in the sixth edition of The International Trade Law Review.
29 Panel Report, European Union – Cost Adjustment Methodologies II (Russia) (DS494), Para. 8.1 (a) (i).
30 ibid., Para. 8.1 (a) (f) and (g).
31 WTO, European Union – Cost Adjustment Methodologies II (Russia) – Notification of an Appeal by the EU under Articles 16.4 and 17.1 of the DSU and Rule 20(1) of the Working Procedures for Appellate Review, WT/DS494/7, 1 September 2020.