The
Rise of Regional Trade Agreements and Dispute Settlement Fora
10 Questions for Gary Horlick, Wilmer Cutler Pickering Hale And Dorr Llp
"RTAs are like street
gangs: you may not like them but it is safer to belong."
-An introduction to Regional Trade Agreements and the WTO, by Jo-Anne
Crawford and Sam Laird
In this interview with WIIT co-editor Racquel Smith, Gary Horlick shares his expertise on the factors for consideration as WTO Members that are also parties to regional trade agreements pursue options for adjudication of disputes. Mr. Horlick is a partner at Wilmer Cutler Pickering Hale and Dorr LLP, where he provides global business, investment, regulatory and negotiating advice to US and international clients, including governments and business. He has been counsel to governments in six RTA negotiations.
1. Is there a WTO agreement
on regional trade agreements?
Under WTO rules, WTO Members are allowed to enter into RTAs provided that
trade barriers are not raised against non-members; barriers are eliminated
on "substantially all trade" among Members; and the formalities
leading to RTAs are completed quickly. Article XXIV of GATT permits signatories
to set up regional free trade agreements and customs unions for trade in goods;
Article V of the GATS for services; and the Enabling Clause provides legal
cover for preferential trade agreements among developing countries.
2. Are countries meeting
the criteria that would make their regional agreements WTO-consistent?
There is not a lot of reporting done on that. WTO Members are supposed to
notify the WTO, in advance, when they sign RTAs. Whether or not an agreement
is consistent with the WTO rules is reviewed by a consensus of all the Members.
But the rules don't give Members much detail to guide them. Consensus on WTO
consistency has been reached in only one case so far: the customs union between
the Czech Republic and the Slovak Republic after the break up of Czechoslovakia.
So far, no Member has challenged whether other Members' agreements are WTO
consistent
3. What are some of the options for adjudication of disputes under RTAs' and what are more common arrangements?
NAFTA's dispute settlement
procedure in chapter 20 is a common model for binding dispute resolution.
In practice, RTA dispute settlement relies more on ad hoc bargaining and negotiation
and results are generally not legally binding on parties. NAFTA and other
U.S. FTAs do not go as far as some other arrangements, such as those of the
European Communities (EC), European Free Trade Area (EFTA) and Andean Community
(CAN), which feature permanent international courts to settle disputes between
member states, individuals and the organization's institutions on the implementation
of the agreements and legislation
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1. See http://www.id21.org/id21ext/s7asl2g1.html
4. Is there a WTO agreement on forum and jurisdiction for dispute settlement? Can an RTA take away the jurisdiction of the WTO.
No. As far as WTO rules are concerned, RTA members that are also WTO members are free to choose the tools of the WTO's Dispute Settlement Understanding (DSU), or they can activate the dispute settlement provisions that are often written into their own agreements. They would come up with the recourse most likely to work for them by weighing variables such as the scope and legal status of the measure at issue, the applicable law, the procedures, structure and time frame of each mechanism, remedies available, and inherent characteristics of each dispute settlement process, and political circumstances of the dispute that might influence its resolution.
5. Can an RTA take away the jurisdiction of the WTO?
If there are any rules that dictate the choice and sequencing of dispute settlement systems, those would come from the regional agreement itself. Under some RTA's, requesting the establishment of a WTO panel excludes the jurisdiction of the regional forum. Another example is under the NAFTA, where a party defending itself based on certain environment measures can require the exclusion of the WTO. An RTA cannot, however, take away the jurisdiction of the WTO, so if either party to an RTA goes to the WTO the WTO panel will not refuse it because of RTA rules.
6. Does the private
sector tend to prefer the regional forum or the WTO for dispute settlement?
For speed alone, the private sector might opt for the regional forum. Either
forum contemplates a consultation phase, proceedings before an adjudicating
body, and the stage to seek and effective solution to the dispute, the private
sector would more. In general terms, the theoretical time frame for dispute
settlement under regional agreements is shorter. Sometimes a speedy process
is not so important, however, such as in the case of a challenge to a domestic
law that is in force but that has never been applied, with no immediate and
direct effect on trade flows.
7. How do the scope and provisions of RTAs and the WTO Agreement generally
compare?
Under the WTO Agreement most tariffs are negotiated lower but are not zero,
but RTAs have a better record. Most tariffs under RTAs are usually reduced
to 0, or stipulate a phase-out period to achieve 0 tariff rates.
Also, RTA provisions tend to be 'GATT-plus' because they aim to regulate issues that go beyond those covered by the WTO. Examples are investment, labor and environmental provisions. So this is another aspect that affects the choice of forum.
8. What are some practical examples of overlaps of conflict in RTA and
WTO jurisdiction, and resolution?
A number of cases between Brazil and Argentina and among NAFTA countries have
used both RTA and WTO fora.
9. Is it possible for an RTA adjudicating body to reach a conclusion contrary
to that of the WTO adjudicating body?
In essence, the WTO panel applies WTO rules. An RTA panel applies RTA rules,
which can be different.
10. Any recommendations to improve upon the development in dispute settlement
and forum choice?
Regional trade agreements might want to aim for better certainty of panel
appointments, to match WTO, and better adherence to deadlines.
Both RTAs and WTO need to aim for enough improvement in the speed and likelihood
of compliance to be credible to private economic actors.