Incentives for development: The EC'S generalized system of preferences, India's WTO challenge and reform

Common Market Law Review

Volumn 42, Issue 6, 2005, Pages 1663-1689

  Harrison, James ^a  

^a UNIVERSITY OF NOTTINGHAM   (United Kingdom)

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EID: 34548639084     PISSN: 01650750     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (106)

1. Waiver Decision on the Generalized System of Preferences, GATT Document L/3545, 25 June 1971, BISD 18S/24.
2. GATT Doc. L/4903 (Nov. 1979).
3. For a more detailed description of the history and development of this legal status for preferential treatment for developing countries within the world trading system see Cole, "Labor standards and the Generalized System of Preferences: The European labor incentives", 25 Mich. J. Int'l L, 179,
4. and Bartels, "The WTO Enabling Clause and positive conditionality in the European Community's GSP Program", 6 Journal of International Economic Law (JIEL), 507-532 at 510.
5. Making this point, see Bartels, supra note 3, at 513 et seq.
6. See Bartels, supra note 3, at 521 et seq.,
7. and Howse, "Back to court after Shrimp/Turtle? Almost but not quite yet: India's short lived challenge to labor and environmental exceptions in the European Union's Generalized System of Preferences", 18 American University International Law Review (2003), 1333 at 1340 et seq. and 1353 et seq.
8. Applicable for the period 1 Jan. 2002 to 31 Dec. 2005.
9. Cole, supra note 3, at 193.
10. Council Regulation (EC) No. 2501/2001, (10 Dec. 2001) O.J. 2001, L 346/1.
11. See also User's Guide to the European Union's Scheme of Generalised Tariff Preferences (February 2003) section 5, available at www.europa.eu.int/comm/trade/issues/global/gsp/gspguide.htm
12. Generalised System of Preferences - "EBA " - Everything But Arms Initiative at www.europa.eu.int/comm/trade/issues/global/gsp/eba/ index_enote htm. Three particularly sensitive products are not liberalized immediately: Fresh bananas, rice and sugar. For details of reductions on these products see website.
13. The European Community's rules of origin for the GSP, A Guide for traders at europa.eu.int/comm/taxation_customs/customs/origin/gsp/ index_enote htm
14. User's Guide, supra note 8 at section 10. The 12 countries that benefit from these arrangements are Bolivia, Columbia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Pakistan, Panama, Peru and Venezuela.
15. European Communities - Conditions for the Granting of Tariff Preferences to Developing Countries - (Hereafter "EC - Tariff Preferences") Report of the Panel WT/DS246/R (1 Dec. 2003 ) para 2.8.
16. I owe this point to an anonymous commentator from the CML Rev. Pakistan was included within the Drug Arrangements from 2002 onwards. See EC- Tariff Preferences Report of the Panel at para 4.111. India's evidence to the panel suggests that on the basis of drug-based considerations only, Iran was a much more appropriate candidate for such incentives.
17. Council Regulation (EC) No. 2501/2001, supra note 8, Art. 14.
18. User 's Guide, supra note 8, at section 8.
19. Cole, op. cit. supra note 3, at 194 et seq.
20. User's Guide, supra, note 8 at section 9.
21. Ibid.
22. EC - Tariff Preferences - Report of the Panel WT/DS246/R (1 Dec. 2003).
23. EC - Tariff Preferences - Report of the Appellate Body WT/DS246/AB/R (7 April 2004).
24. Art. XX (b) allows Member States to justify the measures they have taken if they are "necessary to protect human, animal or plant life or health". But see the full text of Art. XX and the further conditions it places on Member States invoking this provision.
25. EC - Tariff Preferences - Panel Report paras 7.195-7.236.
26. EC - Tariff Preferences - Panel Report para 7.65.
27. EC - Tariff Preferences - Panel Report para 7.65.
28. Other than setting a priori import limitations as safeguard measures for products from particularly competitive developing countries and, since it is specifically authorized by para 2(d) of the Enabling Clause, special treatment for the least developed countries (LDCs) among developing countries 7.116.
29. EC- Tariff Preferences - Panel Report para 7.161.
30. EC- Tariff Preferences - Report of the Appellate Body, paras 98-99.
31. EC- Tariff Preferences - Report of the Appellate Body, para 125.
32. EC- Tariff Preferences - Report of the Appellate Body, para 78.
33. EC - Tariff Preferences - Report of the Appellate Body, para 182.
34. See Charnovitz, Bartels, Howse, Bradley, Pauwelyn, and Regan, "Internet Roundtable: The Appellate Body's GSP Decision", (2004) World Trade Review, 239-265 at 248. Opinion expressed by Howse and subsequently commented on by Charnovitz
35. EC- Tariff Preferences - Report of the Appellate Body, pages 52-57.
36. EC - Tariff Preferences - Report of the Appellate Body, para 148.
37. EC - Tariff Preferences - Report of the Appellate Body para 163. In support of this argument, the Appellate Body cite the preamble to the WTO Agreement (para 161) which recognizes the need for positive efforts to be taken to ensure that developing countries secure "a share in the growth of international trade commensurate with the needs of their economic development". It further recognizes that "Members' respective needs and concerns at different levels of economic development" may vary. Both these statements appear to support appropriate differential treatment.
38. EC - Tariff Preferences - Report of the Appellate Body, para 173.
39. EC - Tariff Preferences - Report of the Appellate Body, para 163.
40. EC - Tariff Preferences - Report of the Appellate Body, para 164.
41. EC - Tariff Preferences - Report of the Appellate Body, para 167.
42. See Bartels, supra note 3, at 521 et seq.
43. and Howse, supra note 5, at 1340 et seq.
44. Howse, supra note 5, at 1353 et seq.
45. Charnovitz et al., supra note 30, at 253 and 255.
46. Charnovitz et al., supra note 30, at 247
47. It is a fundamental principle of non-discrimination under WTO law that like countries (or products or services, depending on the context) must receive similar treatment. It is rather more contentious whether this leads to a legal obligation to treat dissimilar countries in a dissimilar manner. See Charnovitz, et al., supra note 30, at e.g. 249 et seq. and 263 et seq., where differing views are expressed by different participants about the extent to which such an obligation is implied by the Appellate Body's decision here as well as other WTO case law, and indeed the extent to which the imposition of such an obligation is in fact desirable.
48. Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee - Developing countries, international trade and sustainable development: the function of the Community's generalised system of preferences (GSP) for the ten-year period from 2006 to 2015, COM(2004)461 final, (7 July 2004), p. 6.
49. Communication from the Commission to the Council, supra note 44.
50. Proposal for a Council Regulation, European Commission, COM(2004)699 final, 20 Oct. 2004
51. Council Regulation (EC) No. 980/2005 of 27 June 2005, applying a scheme of generalized tariff preferences, O.J. 2005, L 169/1.
52. International Covenant on Civil and Political Rights, International Covenant on Economic Social and Cultural Rights , International Convention on the Elimination of All Forms of Racial Discrimination Convention on the Elimination of All Forms of Discrimination Against Women, Convention Against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment, Convention on the Rights of the Child, Convention on the Prevention and Punishment of the Crime of Genocide, International Convention on the Suppression and Punishment of the Crime of Apartheid.
53. These are the same Conventions as under the previous special incentives namely: Minimum Age for Admission to Employment (No. 138), Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour (No. 182), Abolition of Forced Labour Convention (No. 105), Forced Compulsory Labour Convention (No. 29), Equal Remuneration of Men and Women Workers for Work of Equal Value Convention (No. 100) Discrimination in Respect of Employment and Occupation Convention (No. 111) Freedom of Association and Protection of the Right to Organize Convention (No. 87), Application of the Principles of the Right to Organize and to Bargain Collectively Convention (No. 98).
54. Montreal Protocol on Substances that deplete the Ozone Layer, Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, Stockholm Convention on persistent Organic Pollutants, Convention on International Trade in Endangered Species, Convention on Biological Diversity, Cartagena Protocol on Biosafety, Kyoto Protocol to the UN Framework Convention on Climate Change.
55. UN Single Convention on Narcotic Drugs (1961), UN Convention on Psychotropic Substances (1971),
56. UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988)
57. Mexico UN Convention against Corruption. See Annex 3 of Proposal for a Council Regulation, European Commission, supra note 46, for a full list of the 27 Conventions.
58. Arts. 10.2 and 16.1(a) and 17, Council Regulation No. 980/2005, supra note 46.
59. Explanatory Memorandum to the Proposal for a Council Regulation, European Commission, COM(2004)699 final, 20 Oct. 2004, section 4.
60. Communication from the Commission to the Council, supra note 44, p. 6.
61. Communication from the Commission to the Council, supra note 44, p. 6.
62. The relevant conventions are No. 29 and No. 105 on the elimination of all forms of forced and compulsory labour, No. 87 and No. 98 on freedom of association and the recognition of the right to collective bargaining, No. 100 and No. 111 on the elimination of discrimination in respect of employment and occupation and No. 138 and No. 182 on the effective abolition of child labour.
63. Alston, '"Core Labour Standards' and the transformation of the international labour rights regime", 15 EJIL (2004), 457-521,
64. at 492, footnote to Novitz, "The European Union and international labour standards: The dynamics of dialogue between the EU and the ILO", in Alston (Ed.), Labour Rights as Human Rights (forthcoming 2005).
65. Assessment of whether there is sufficiently "broad-based" recognition of each individual convention is beyond the scope of the current article. But in terms of the ILO and UN Conventions listed, it is suggested that recognition of the rights set-out therein is indeed broad-based. For a discussion of whether these rights can be correlated to development needs, see the discussion below.
66. See Provisional Consolidated Version of the Draft Treaty Establishing a Constitution for Europe, version CIG 87/2/04 REV 2 of 29 Oct. 2004, Art. 1-3.4. Thanks to John Morijn for this point.
67. Alston, supra note 58.
68. Alston, supra note 58, 497
69. E.g. see Alston, supra note 58, at 492, arguing that despite the fact that existing labour conditionality is tied to international standards, in much of its subsequent work the Commission appears to have very much focused on the more general principles of the core labour standards rather than the conventions themselves
70. Communication from the Commission to the Council, supra note 44, p. 8.
71. Communication from the Commission to the Council, supra note 44, p. 9.
72. European Parliament Resolution, supra note 47, section 12.
73. Making a similar point see Charnovitz et al., supra note 30, at 249.
74. I owe this point to John Morijn.
75. Communication from the Commission to the Council, supra note 44, p. 10.
76. The universality of the international human rights framework was endorsed by 171 States at the Vienna World Conference on Human Rights in 1993. By this declaration States agreed that all human rights are a legitimate concern of the international community and a priority objective of the United Nations.
77. By utilizing this term here I intend to include both positive trade conditionality/incentives and negative trade conditionality/sanctions within its scope. The differentiation between the two is explained below.
78. Alston, supra note 58, at 471 et seq.
79. For a variety of such views from a legal perspective see Vazquez, "Trade sanctions and human rights - Past, present and future", 6 JIEL, 797-839, at 803 et seq., 817;
80. Dommen, "Raising human rights concerns in the World Trade Organization: Actors, processes and possible strategies", (2002) Human Rights Quarterly, 1-50, 4;
81. Roberts and Roomkin, "Models of International Labor Standards", 40 Industrial Relations (2001).
82. From an economic perspective see Brown, Deardoff, and Stern, "Pros and cons of linking trade and labor standards", Research Seminar in Economics, School of Public Policy, The University of Michigan, Discussion Paper No. 477, 6 May 2002.
83. From a policy perspective compare Bullard, Social Standards in International Trade, Report for the Deutscher Budestag Commission of Enquiry, July 2001 with Polaski, Trade and Labor Standards, A Strategy for Developing Countries, Carnegie Endowment for International Peace, 2003.
84. Dommen, supra note 73, 19 et seq.
85. and see Statement of Third World Intellectuals and NGOs ' Statement Against Linkages presented before the Seattle Ministerial Conference which gives a synopsis of the reasons why many in developing countries are against such linkage in the WTO. www.cuts-india.org/linkages-twinsal.htm
86. Bartels, supra note 3, at 508 who lists a number of occasions where developing countries have expressed concern with the EC's scheme "both within the political organs of the WTO, and also by way of initiating formal consultations with the EC."
87. Bartels, supra note 3 at 508.
88. Zammat, "Labour standards and the 'race to the bottom': Rethinking globalization and workers' rights from the developmental and solidaristic perspectives", 20 Oxford Review of Economic Policy, 94-96.
89. Alston, "Linking trade and human rights", 23 German Yearbook of International Law (1980), 126: "The most blatant cases of exploitation and deprivation are not generally found in ... industries which produce for export. The worst offences are usually found in plantations, mines, construction industries and small service firms working entirely for the domestic market".
90. Alston, supra note 58.
91. Kabeer, "Globalization, labor standards and women's rights: Dilemmas of collective (in)action in an interdependent world", 10 Feminist Economics (2004), 3-35 at 26.
92. See Howse, supra note 5 at 1362;
93. Cole, supra note 3 at 200. Examples of uncritical citation of the OECD study are very common among authors discussing many aspects of trade conditionality.
94. E.g. Howse, supra note 5 at 1362.
95. Charnovitz, "Trade, employment and labour standards: The OECD study and recent developments in the trade and labour debate", Chapt. 10 in Charnovitz, Trade Law and Global Governance (Cameron May, 2002), at p. 235.
96. Zammat, supra note 77, 93 et seq.
97. Zammat, supra note 77, 93-94.
98. European Parliament Resolution, supra note 47.
99. The most comprehensive recent analysis of US GSP is Compa and Vogt, "Labor rights in the Generalized System of Preferences: A 20 year review", 22 Comp. Lab. L. & Pol'y J. (2001), 199. This series of case studies shows how the effects of the US system is mixed and heavily affected by geopolitical concerns.
100. See Bartels, supra note 3, 529;
101. Cole, supra note 3, 202. Neither author, however, deals with the issue of whether ratification of the relevant conventions necessarily entails acceptance of any kind of discriminatory trade treatment for non-compliance with any of the standards contained therein. Surely, at the very least, to be deprived of significant trade preferences on the basis of only minor infractions is contentious?
102. Although the EC - Tariff Preferences case certainly appears to give them a potentially great scope to make judgements in this regard if they should wish to do so. On this point see Charnovitz et al., supra note 30 at 255 (point made by Joost Pauwelyn).
103. See Hoekman, "Operationalizing the concept of policy space in the WTO: Beyond special and differential treatment", in Petersmann (Ed.), Reforming the World Trading System: Legitimacy, Efficiency and Democratic Governance (OUP, 2005).
104. Also Report by the Consultative Board to the Director-General Supachai Panitchpakdi, The Future of the WTO: Addressing Institutional Challenges in the New Millenium, WTO, 2004 para 94. These contributions suggest that GSP systems are not necessarily good for promoting long-term development, and developing countries may become hooked upon them, thereby reducing enthusiasm for multilateral reduction in tariff barriers, as well as encouraging production of goods in developing countries that is only sustainable because of the preferences granted. Such problems are exacerbated when GSP systems are unpredictable, for example with preferences removed on products that suddenly become "sensitive" as a result of lobbying from domestic producers
105. The World Bank's conditionality-based approach to lending, which focuses on good governance, is an example of the problems that can occur where developing countries are only complying with conditionality requirements in order to obtain financial advantages, rather than because they are convinced of the importance of undertaking such measures. See Koeberle, "Should policy-based lending still involve conditionality?" in 18 World Bank Research Observer, 249-273.
106. For a taste of all the complications of this issue see papers presented at the The World Bank Group "Conditionality Revisited: Development Policy Forum" available at web. worldbank.org/WBSITE/EXTERNAL/PROJECTS/0., contentMDK:20292755~pagePK:41367~piPK:51533~theSitePK:40941,00.html