Category: trade law

Concluded WTO historic Nairobi Package

On 19 December was concluded the Tenth WTO Ministerial Conference in Nairobi. The Nairobi Package includes six Ministerial Decisions on agriculture, cotton and least-developed countries (LDCs) related issues. The most important decision (the Ministerial Decision on Export Competition (WT/MIN(15)/W/47)) hails from the fact of abolishing export subsidies for farm. Roberto Azevêdo, the general director of the organization, commented by saying that it is “the most significant outcome on agriculture” secured in the 20-year WTO history. The other decisions include safeguard mechanism for developing countries, public stockholding for food security matters, as well as preferential treatment for LDCs concerning services and criteria for determining whether exports from such countries might benefit from trade preferences.

Furthermore, WTO members concluded a landmark IT trade deal thanks to which tariffs on information technology products, valued at over $1.3 trillion per year, will be eliminated. Accordingly, all WTO members will benefit from the agreement by enjoying a duty-free market access to the markets of the members that eliminated tariffs on such products.

 

The Ministerial Decision on Export Competition

The Ministerial Decision on Export Competition is very significant as export subsidies have distorting effects not only on domestic product but also on trade overall. Such subsidies impose high costs on taxpayers of the subsidizing countries and they also reduce the price of competing products on the international market to the detriment of producers in developing and LDCs. However, on the other hand, they do benefit consumers in food-importing countries, several of which are developing countries.
By this decision, developed countries have agreed to remove export subsidies immediately; developing counties will do so by 2018, whereas the poorest and food-importing countries will enjoy additional time.

 

Decisions that benefit LDC

The first decision concerns the preferential rules of origin for LDCs (in particular, key beneficiaries will be sub-Saharan African countries). This will facilitate opportunities for LDCs’ exports of goods to both developed and developing countries. Such decision give detailed guidelines on specific issues, such as methods of determining when a product can qualify as “made in a LDC”.

The second decision concerns LDCs trade in services, the Ministerial Decision on Implementation of Preferential Treatment in Favour of Services and Service Suppliers of Least Developed Countries and Increasing LDC Participation in Services Trade (WT/MIN(15)/W/39). Such decision extends the current period, by 15 years (that is until 31 December 2030) under which non-LDCs WTO members might grant preferential treatment to LDCs services and service suppliers. Accordingly, WTO members are allowed to deviate from the MFN obligation under the GATS.

OVERVIEW OF CHAPTER 3 OF THE TPP: RULES OF ORIGIN AND ORIGIN PROCEDURES

The objective of Chapter 3 of the TPP is to set rules of origin in order to ensure that TPP Parties fully enjoy the benefits provided by such FTA. Rules of origin are important as they define whether a good is originating and thus suitable to enjoy the TPP preferential tariff benefits.

According to Article 3.2, a good is originating if it is:

  1. Wholly obtained or produced entirely in the territory of one or more of the Parties (in the meaning of Article 3.3);
  2. Produced entirely in the territory of one or more of the Parties, exclusively from originating materials;
  3. Produced entirely in the territory of one or more TPP Parties using non-originating materials provided that the good satisfies all applicable requirements of Annex 3-D,

Furthermore, the good must satisfy all the other applicable requirements of Chapter 3.

This chapter also provides for accumulation. Accordingly, an originating good and/or material coming from one or more TPP Party that is used in the production of another good within the territory of another Party to the Agreement shall be considered originating in the territory of the other Party.

Another contribution of chapter 3 is to create a rules-system of showing and verifying that goods produced in the TPP meet the rules of origin. Thanks to this system, business can easily operate in the TPP region. In order to enjoy the benefits provided by the preferential treatment related to tariffs, importers must present the concerned documentation (for example, the importer of the good must provide a written request for information, as prescribed by article 3.27).

Furthermore, the Parties hereby establish a Committee on Rules of Origin and Origin Procedures that is entitled to consider any possible matter arising under this chapter.

KEY ELEMENTS OF CHAPTER 2 OF THE TPP: NATIONAL TREATMENT AND MARKET ACCESS FOR GOODS

Chapter 2 of the TPP deals with the treatment of manufactured and agricultural goods traded between the Parties. Accordingly, this chapter regulates tariff reduction commitments, norms on import and export constraints, as well as defining import and export licensing procedures. Another of the objectives of chapter 2 is to regulate governmental policies that distort markets. Furthermore, the TPP Parties commit once again to implement and comply with related WTO Agreements, furthering the efforts to improve norms on trade of goods. They also agree not to use performance requirements that some countries do require in order to obtain custom duties benefits.

The preferential market access will boost trade between TPP Parties by 800 million people; likewise it will contribute to promotion of high quality jobs in the 12 economies.

Tariffs and Fees

The Parties agree to lower their custom duties, in accordance with the annexes to chapter 2. Furthermore, this chapter lays down circumstances under which releases from obligation of customs duties will be permitted, as well as circumstances under which TPP Parties may allow goods to enter or re-enter a market duty free (such as goods temporarily exported for repair or alteration).

Customs and other Duties on Information Technology Products

The Parties agree to implement the WTO Information Technology Agreement, which mandates to eliminate customs and related duties from information technology products (such as computers, software, scientific instruments etc.).

Treatment No Less Favorable than Like Domestic Goods

The Parties agree to act in accordance with the national treatment obligation in the meaning of Article III of the GATT 1994. Such obligation prescribes that domestically produced and foreign goods, produced within the territory of a State Party, that are like shall be treated equally.

Import and Export Constraints and other Non-Tariff Barriers to Trade

The Parties agree, in compliance with their WTO obligations, not to impose import or export restrictions for goods bound for another State Party, with the exceptions set out by Article XI of the GATT. Such obligations apply to remanufactured goods, that is goods being rebuilt from the original using new or used parts.

The chapter also sets out obligations on import licensing preventing TPP Parties from adopting or maintaining measures which are inconsistent with the WTO Agreement on Import Licensing Procedures.  

The Parties agree that export duties and taxes are permitted only in limited circumstances as they disadvantage foreign exporters by increasing the cost of the product on the international market, which, in return, curbs exports.

Export restrictions due to food security reasons

Chapter 2 allows to temporary restrict exports due to food security reasons, working together with the WTO and implementing its commitments.

Agricultural Export Subsidies

The Parties agree not to adopt nor maintain export subsidies on agricultural goods that will enter the market of other TPP Parties. Likewise, also in this field they agree to work closely with the WTO.

Trade in Products of Biotechnology

Chapter 2 also includes a provision addressed to biotechnology products, that is genetically modified products. The provision does not mandate the Parties to alter the way they regulate the trade of such products. One of the main objectives of the provision is to improve the information sharing.

Transparency and Consultation

In accordance with WTO commitments, chapter 2 mandates to publish any requirement may relevant to trade. Furthermore, two a Committee on Trade in Goods and a Committee on Agricultural Trade are established.

CHAPTER 1 OF THE TPP: INITIAL PROVISIONS AND GENERAL DISPOSITIONS

Chapter 1 of the Trans-Pacific Partnership Agreement (TPP) specifies the Initial Provisions and the General Definitions of the specific terms used in more than one chapter of the agreement.

Section A of Chapter 1 deals with the Initial Provisions. Accordingly, it establishes a free trade area (Article 1.1), in accordance with the terms laid down in Article XXIV of the General Agreement on Tariffs and Trade of 1994 (GATT 1994) and in Article V of the General Agreement on Trade in Services (GATS).

In particular, aforementioned section recognizes that the TPP can coexist with other international agreement as follows:

  1. In relation to the international agreements to which all Parties of the TPP are party, including the agreements of the World Trade Organization (WTO); and
  2. In relation with the international agreements to which at least two Parties are party.

In both cases, every Party recognizes its existing rights and obligations that stem from aforesaid agreements, and, accordingly, agrees to respect and honor them.

If a Party believes that a clause of the TPP is inconsistent with a disposition of another agreement to which said Party, and at least another Party, are party, the concerned Parties shall consult in the view of reaching a mutually satisfactory solution. It must be outlined that this paragraph is without prejudice to a Party’s rights and obligations under Dispute Settlement (Chapter 28).

Section B of Chapter 1 deals with General Definitions (Article 1.3). Accordingly, the terms used in at least two chapters of the agreement are defined. Among other things, are defined:

  • International agreements, above all several agreements of the WTO (TRIPS, GATS, etc.); and
  • Technical terms (custom duties, textile good, state enterprise, etc.).

Chapter 1 comes with Annex 1-A, where the Party-Specific Definitions are specified, in relation with the General Definitions of Article 1.3. Said Party-Specific Definitions prescribe the different meanings that every Party gives to a same term.