The WTO legality of the EU's GSP+ arrangement

Journal of International Economic Law

Volumn 10, Issue 4, 2007, Pages 869-886

  Bartels, Lorand ^a,b  

^a UNIVERSITY OF CAMBRIDGE   (United Kingdom)

^b Max Planck Institute for Comparative Law and International Law   (Germany)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 36649009227     PISSN: 13693034     EISSN: 14643758     Source Type: Journal    
DOI: 10.1093/jiel/jgm035     Document Type: Article

References (75)

1. WTO Appellate Body Report, EC - Tariff Preferences, WT/DS246/AB/R, adopted 20 April 2004.
2. See below at n 17.
3. Council Regulation 2501/2001 [2001] OJ L346/1.
4. For discussion see Lorand Bartels, "The WTO Enabling Clause and Positive Conditionality in the European Community's GSP Program' 6 JIEL 507 (2003).
5. Article 8-11 of Council Regulation 980/2005 of 27 June 2005 [2005] OJ L169/1. All further references to Articles are to this Regulation unless specified otherwise. The legislative history of the regulation is as follows. A first proposal was set out in Commission Communication, Developing countries, international trade and sustainable development: the function of the Community's generalized system of preferences (GSP) for the ten-year period from 2006 to 2015, COM (2004) 461, 7.7.2004, in which the GSP+ arrangement was outlined in general terms, and to begin on 1 January 2006. This was followed by a concrete Proposal for a Council Regulation applying a scheme of generalized tariff preferences, COM (2004) 699, 20.10.2004, now to commence on 1 July 2005. In its Amended Proposal for a Council Regulation applying a scheme of generalized tariff preferences, COM (2005) 43, 10.2.2005, the Commission proposed to bring forward the commencement date to 1 April 2005, in order to assist countries affected by the recent tsunami, with a GSP+ application date of 31 May 2005. This Proposal was not adopted, and is not referred to in the GSP Regulation.
6. Article 30(2) provides that the GSP Regulation shall apply until 31 December 2008, but also (and a little ambiguously) that this date 'shall not apply to the arrangements for least-developed countries'.
7. Article 10. Art 11 specifies the procedure to be followed by the Commission in examining compliance with these conditions.
8. Article 9(1)(a).
9. Article 9(1)(d).
10. Art 9(2). This derogation derives from a recommendation made by the European Parliament when it was consulted on a draft of the regulation: see European Parliament legislative resolution on the proposal for a Council regulation applying a scheme of generalized tariff preferences, P6_TA(2005)0066, adopted 3.9.02 [2005] OJ C320E/145, Amendment 23. It was expressly intended to apply to El Salvador, which was done in Council Decision 978/2006 of 19 December 2006 [2006] OJ 365/86.
11. Article 9(1)(b).
12. Article 9(1)(c).
13. Article 9(1)(d).
14. Article 9(1)(e).
15. Article 9(3). The Common Customs Tariff is divided into twenty one 'sections'.
16. Articles 16 and 17.
17. Article 16(2). The Commission is also required to keep the ratification and effective implementation status under review and report to the Council in time for the next Regulation: Art 9(4).
18. Andean countries (Bolivia, Colombia, Ecuador, Peru, Venezuela); Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama). The 'drugs arrangement' dates from 1 January 1991, when Bolivia, Colombia, Ecuador, and Peru received exemptions from quotas as well as duty free access on certain industrial and agricultural products: Council Regulation 3835/90 [1990] OJ L370/126. On 1 January 1992, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama were granted equivalent access on agricultural (but not industrial) products: Council Regulation 3900/91 [1991] OJ L368/11. On 1 January 1995, Venezuela was granted equivalent access on both agricultural and industrial products: Council Regulation 3281/94 [1994] OJ L348/1 and Regulation 3282/94 [1994] OJ L348/57. From 1 July 1999, all of these countries received duty free access on most industrial and agricultural products: Council Regulation 2820/98 [1998] OJ L357/1. On 14 November 2001, the European Commission proposed adding Pakistan to the list of 'drugs arrangement', and this was effected in the new GSP Program as of 1 January 2002: Council Regulation 2501/2001, above at n 3. The EU's rationale was that as a result of the events of 11 September 2001, including increased refugee flows, Pakistan's campaign against illicit drugs needed to be supported, and that '[t]he GSP drug regime is therefore likely to stabilize its economic and social structures and thus consolidate the institutions that uphold the rule of law'. See the Explanatory Memorandum to the Amended Proposal for a Council Regulation applying a scheme of generalized tariff preferences for the period 1 January 2002 to 31 December 2004, COM (2001) 688, 14.11.2001. It was the addition of Pakistan to the list of 'drugs arrangement' beneficiaries that sparked India's complaint in EC - Tariff Preferences.
19. Commission Decision 924/2005 of 21 December 2005 [2005] OJ L337/50. According to Art 11(3), this Decision was supposed to have been published by 15 December 2005.
20. Commission Regulation 1649/2000 (Moldova) [2000] OJ L189/13, Commission Regulation 2342/2003 (Sri Lanka) [2003] OJ L346/34;
21. Notice regarding request (Mongolia) [2004] OJ C243/2; Notice regarding request (Georgia) [2001] OJ 2001 C127/13.
22. This is not however to say that these countries were automatically granted the benefits. In terms of the mandatory List A conventions, of the fifteen beneficiaries, only five (Costa Rica, Ecuador, Panama, Peru, and Sri Lanka) had ratified all of the required human rights conventions before the arrangement was announced. Eight beneficiaries (Bolivia, Colombia, Georgia, Guatemala, Honduras, Moldova, Nicaragua, and Venezuela) needed to ratify one outstanding convention, and two (Mongolia and El Salvador) needed to ratify two. I am extremely grateful to Gustavo Ribiero for sharing his data on this.
23. Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries ('Enabling Clause'), Decision of 28 November 1979, GATT Doc L/4903.
24. WTO Appellate Body Report, EC - Tariff Preferences, para 90.
25. Generalized System of Preferences, Decision of 25 June 1971, GATT Doc 173545.
26. WTO Appellate Body Report, EC - Tariff Preferences, paras 145-147.
27. The case is discussed in Steve Charnovitz et al, 'The Appellate Body's GSP Decision (Internet Roundtable)' 3 World Trade Review (2004) 239, Lorand Bartels, 'The WTO Ruling on EC - Tariff Preferences to Developing Countries and its Implications for Conditionality in GSP Programmes', Gregory Shaffer and Yvonne Apea, 'GSP Programmes and Their Historical-Political- Institutional Context'
28. and Jane Bradley, "The Enabling Clause and Applied Rules of Interpretation', all published in Thomas Cottier et al (eds), Human Rights and International Trade (Oxford: OUP, 2005), and Gene Grossman and Alan Sykes, 'A Preference for Development: the Law and Economics of GSP' 4 World Trade Review (2005) 41.
29. WTO Appellate Body Report, EC - Tariff Preferences, para 165.
30. Ibid, para 163.
31. Ibid, para 164.
32. Ibid, paras 187-8.
33. Opinion of the European Economic and Social Committee on the 'generalized system of preferences (GSP)', adopted 25 February 2004 [2004] OJ C110/34, para 6.6.2. M. Persson and F. Wilhelmsson, 'Assessing the Effects of EU Trade Preferences for Developing Countries' in Y Bourdet et al (eds), The European Union and Developing Countries: Trade, Aid and Growth in an Integrating World (Cheltenham and Northampton: Edward Elgar, 2007); Grossman and Sykes, above at n 25; and Çaglar Özden and Eric Reinhardt, 'The Perversity of Preferences: GSP and Developing Country Trade Policies, 1976-2000' 78 Journal of Development Economics (2005) 1.
34. It is not necessary to discuss 'trade' or 'financial' needs.
35. Article 31(3)(c) of the Vienna Convention on the Law of Treaties. The context includes the term 'sustainable development', found in the preamble of the WTO Agreement, and somewhat oddly omitted from the list of instruments in Recital 7.
36. WTO Appellate Body Report, US - Shrimp, WT/DS58/AB/R, adopted 6 November 1998, paras 129-30. It is a matter of some curiosity that Recital 7 of the GSP Regulation omitted to mention this, while listing a variety of other instruments relevant to the concept of sustainable development.
37. UN Declaration on the Right to Development, Adopted by General Assembly resolution 41/128 of 4 December 1986.
38. World Commission on Environment and Development, Our Common Future (Oxford: Oxford University Press, 1987).
39. Johannesburg Declaration on Sustainable Development, 4 September 2002, para 5, available at www.un.org/esa/sustdev/documents/WSSD_POI_PD/English/ POI_PD.htm (visited 25 July 2007).
40. See also the very broad definition set out in the ILA New Delhi Declaration of Principles of International Law Relating to Sustainable Development, available as UN Doc. A/57/329 (2002).
41. See especially Amartya Sen, Development as Freedom (Anchor, 2000).
42. 'What is HD', http://hdr.undp.org/hd/(visited 25 July 2007).
43. Sen notes that the average life expectancy of black US residents is lower than residents of certain developing countries with a lower per capita GDP: Sen, above at n 37, at 21-3. In this sense, the United States has a 'development need' similar to, if not greater than, some developing countries, though as a non-developing country it remains excluded from GSP benefits under the Enabling Clause.
44. WTO Appellate Body Report, EC - Tariff Preferences, para 164.
45. Ibid.
46. One might be more sceptical of certain extraterritorial aspects of some of the conventions, such as the requirement in the Genocide and Apartheid Conventions to prosecute these crimes even if they are committed outside of the jurisdiction of the ratifying country. It is difficult, if not impossible, to see how this requirement corresponds to a 'development need' of the beneficiary country, even if it corresponds to a 'development need' of the country in which the crime took place.
47. See above at n 27.
48. As the GSP Regulation requires ratification and implementation it is not necessary to consider the actual results of ratification alone. On this question see Oona Hathaway, 'Do Human Rights Treaties Make a Difference?' 111 Yale Law Journal (2002) 1935.
49. Indeed, logically speaking, it is tempting to suggest that a country that has ratified and already implemented a convention is less likely to have the relevant development need than one that has not.
50. Macao also receives GSP preferences from Canada, New Zealand, Norway, Turkey, and Switzerland. Hong Kong, another non-State WTO Member, does not receive GSP benefits from the EU, but does from Canada and Norway (and the non-WTO Member Russia): see UNCTAD, Generalized System of Preferences - List of Beneficiaries, UNCTAD/FTCD/TSB/ Misc.62/Rev.1, 2005, at 5.
51. Ironically, this very same point has been made by the EC Trade Commissioner, Peter Mandelson, when criticizing a proposal of an eco-tax on products produced by countries not party to the Kyoto Protocol. He pointed out that 'China has ratified Kyoto but has no Kyoto targets because of its developing country status. The US has not, but states like California have ambitious climate change policies'. See Larry Elliott, 'Mandelson Calls for Open Markets in Green Products', The Guardian, 18 December 2006.
52. Among EU Member States the Apartheid Convention has only been ratified by Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Poland, Romania, Slovakia and Slovenia: see www.unhchr.ch/html/menu3/b/treaty8_asp.htm (visited 25 July 2007).
53. See www.ohchr.org/english/law/(visited 25 July 2007). Some of the previously captured beneficiaries (Costa Rica, Georgia, Moldova, Mongolia, and Venezuela) have also not ratified this convention.
54. WTO Appellate Body Report, EC - Tariff Preferences, para 160.
55. Ibid, para 163.
56. Report of the International Law Commission on the Work of its Thirtieth Session, 8 May to 28 July 1978, Doc A/33/10, 11(2) YBILC 1 (1978), at 31-2. This document contains an interesting gloss on the story from an (unreferenced) Food and Agriculture Organization document stating that 'the specialized tariff may have been technically justified because of the genetic improvement programme which was carried out in Southern Germany at that time'.
57. WTO Appellate Body Report, EC - Tariff Preferences, paras 164 and 179.
58. Statement by Mr Maurice Brasseur, in Proceedings of the United Nations Conference on Trade and Development, Policy Statements, Vol. II (New York: United Nations, 1964), 108at 111.
59. For more on this, see Lorand Bartels, 'The Trade and Development Policy of the European Union' 18 European Journal of International Law (2007) forthcoming.
60. John Huhs, 'Trade Preferences for Developing Countries: Options for Ordering International Economic and Political Relations' 20 Stanford Law Review (1968) 1150-75. See also Gardner Patterson, Discrimination in International Trade: The Policy Issues 1945-1965 (Princeton: Princeton University Press, 1966), 360-64.
61. WTO Appellate Body Report, EC - Tariff Preferences, para 164.
62. On the distinction between ideals and needs, see Sen, above at n 37, 154.
63. This assumes that the additional preferences do generate increased economic growth. On this, see Persson, above at n 30.
64. European Parliament Resolution on the Commission Communication, Developing countries, international trade and sustainable development: the function of the Community's generalized system of preferences (GSP) for the ten-year period from 2006 to 2015 (COM (2004) 461) [2005] OJ C166E/65, para 12. Whether development assistance could alleviate discriminatory trade measure is an interesting question. In this context, however, it is moot, as the Regulation was adopted without any incorporation of this suggestion.
65. This author has argued elsewhere that where the conditions reflect customary international law, developing countries might be deemed to be in the same situation as countries meeting these conditions: see Bartels, above at n 3, 525. Even if this is true, the obligations in the EU's current GSP+ arrangement do not all reflect customary international law (as noted of the previous regime: ibid, 526).
66. See Art 15 (labour) and Art 22 (environment) of Council Regulation 2501/2001, above at n3.
67. See the European Parliament legislative resolution, above at n 9, Amendment 22. The justification was that '[t]he special incentive arrangement is an essential part of the GSP as an incentive for sustainable development and good governance. It should therefore not be limited to the countries that are sufficiently developed when this Regulation enters into force, but should remain an incentive in the years to come.'
68. WTO Appellate Body Report, EC - Tariff Preferences, para 187.
69. See, e.g., Jonathan Adabre, 'Ghanaian MPs Adopt GSP-Plus as Alternative to EPAs', 30 April 2007, Public Agenda, available at http://allafrica.com/ stories/printable/200704301176.html (visited 25 July 2007). There are certain differences in terms of product coverage, safeguards clauses, rules of origin, but in practice for many such countries these differences are not significant in practice.
70. For a comprehensive discussion, though without linking this to GSP programs, see Barbara von Tigerstrom, 'Small Island Developing States and International Trade: Special Challenges in the Global Partnership for Development' 6 Melbourne Journal of International Law (2005) 402.
71. The United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and the Small Island Developing States (UN-OHRLLS) was established by the UN General Assembly in 2001: see http://unohrlls.expressiondev.com/en/about/(visited 25 July 2007).
72. UN Millennium Declaration, UN Doc A/RES/55/2, adopted 18 September 2000, paras 17-18.
73. United Nations, Road Map towards the Implementation of the United Nations Millennium Declaration, Report of the Secretary-General, UN Doc A/56/326, 6 September 2001, Goal 8 Target 14.
74. Ibid, para 155. The Road Map makes no similar recommendation for landlocked developing countries (paras 156-7). This is not entirely easy to understand, given that the increased transport costs of these countries, which is mentioned by the report, affects their development, and would seem to be appropriately addressed by trade preferences: see e.g. WTO Cancun Ministerial Conference, Paragraph 18 of the Draft Ministerial Text (JOB(03)150/Rev.2), Small Economies, Joint Proposal by Landlocked Developing Countries, WT/MIN(03)/W/23, 14 September 2003; and Third Party Written Submission of Paraguay to the Appellate Body in EC - Tariff Preferences, 30 April 2003, para 26, available at www.acwl.ch (visited 25 July 2007).
75. European Commission, COM (2004) 461, above at n 4, para 6.2.