Strategic Trade Policy in Context: Canada- Caricom The Global Trading System and Trade Agreements International Law and Domestic Law Multilateral, regional

Strategic Trade Policy in Context: Canada- Caricom

The Global Trading System and Trade Agreements

International Law and Domestic LawMultilateral, regional and bilateral agreementsFundamental Trade Principles

Strategic Trade Policy in Context: Canada-Caricom 2

International and Domestic Law

NationalLegal Rules

NationalLegal Rules

State A State B

International Legal Rules


What is international law?

Law that regulates interactions of state

states are sovereign and legally equal

Largely consensualno central authority or binding enforcement in most cases

Generally dependent on domestic legal systems for implementation


Sources of International Law

Customary international lawevolves into legal norm from • state practice plus • “opinio juris” – practice regarded as legally

binding

Treaty law – by far the more important

May be vague and aspirational or Very specific


Interaction of International and Domestic Law

Depends on national constitutional lawTwo conceptual models

1. Dualism• International and domestic law regulate

distinct subject matter• Neither affects the other• If conflict

– which system prevails will depend on the forum in which conflict adjudicated – domestic or international

• Many domestic systems work on dualist model – including Canada’s



Dualist ModelFor international law to have domestic effect must by transformed into domestic law•Implementing legislation•Preserves sovereignty



Two conceptual models (continued)2. Monism (Adoptionist/Incorporationist)

• International and domestic constitute one system

• If conflict - international rules prevail• International law ipso facto incorporated

in domestic law without any action by domestic law makers


Negotiation and Implementation of Treaties in Canadian Law

Federal executive (Governor in Council) has exclusive treaty making power

Typically seeks approval of provinces in advance if a matter within provincial jurisdiction – meaning that implementation will require provincial action

Treaty performance requires legislative implementation (dualist model)

Implementation by federal or provincial legislatures based on division of legislative powers in ss. 91 and 92 of the Constitution Act, 1867

Where is conflict between domestic law and treaty – domestic law prevails in Canada


Modes of Treaty Implementation in Canada

Enactment of legislation that tracks obligations in treatyincorporates actual text of treaty by reference (often attached as a schedule)Delegates implementation to executive branch

No legislation – existing law already conforms


Why have international trade rules?

Temptation to protectionProtect local firmsAvoid costs of adjustmentDevelopment and industrial policy goalsRevenue from tariffs

WTO and other international trade rules impose “disciplines” on governments

In the interests of increasing global welfare


Function of International Trade Rules – the basic rules for international trade

Promoting Free TradeLimit ability of states to impose barriers to trade (e.g. tariffs)Impose basic principles on how states regulate trade(e.g. National Treatment and Most Favoured Nation)Address unfair trading and how states may deal with it(e.g. dumping and subsidizing exports)Enhance predictability of national regimes

• Limits on barriers to trade• Transparency requirements


Function of International Trade Rules – the basic rules for international trade

Preserve “policy space” to allow states to address non-trade interests (e.g. health, environment)Acknowledge different conditions in developing countries (e.g. special and differential treatment, transition periods)


International trade law at the Multilateral Level

1947 General Agreement on Tariffs and Trade

Failure to achieve “International Trade Organization”

1947-94 8 GATT Rounds of GATT Negotiations

1995 – World Trade OrganizationFounded at the end of the Uruguay Round

2001 – Doha Development Round


Doha Development RoundNegotiation Agenda

•Agriculture•Non-Agricultural Market Access (NAMA)•WTO Rules(Subsidies, Countervailing Duties and Dumping, RTAs)•Services

•Intellectual Property•Dispute Settlement Understanding•Trade and Environment•Trade Facilitation•Trade and Investment•Trade and Competition Policy

Other Elements of Work Programme•Uruguay Round Implementation•Review of Special and Differential Treatment Provisions•Trade, Debt and Finance•Technical Cooperation and Assistance - Capacity Building

•Small Economies•Trade and Transfer of Technology•E-Commerce•TRIPS and Biodiversity•Least Developed Countries

Regional Trade AgreementsGATT/WTO Context

Cornerstone of the multilateral trading system is most favoured nation treatment (MFN)

Preferences accorded under RTAs are inconsistent with GATT MFN

GATT Article XXIV permits the formation of a customs union or a free trade area if certain conditions met

Duties and other regulations of commerce in each constituent territory relating to the trade of non-parties are not higher or more restrictive

• based on weighted average tariff rates and customs duties and assessment of other measures

Notice to WTOFree trade area defined as area in which “duties and other restrictive regulations of commerce” are “eliminated on substantially all the trade between the constituent territories”

15Strategic Trade Policy in Context:

Canada-Caricom

Regional Trade Agreements

Why negotiate RTAs?Go beyond multilateral commitments in the WTO to reap greater economic gains from liberalization

Deeper tariff cuts, additional issues addressedMore customized obligationsLess complex negotiating dynamic But power relations more significant and some issues can only be

dealt with at multilateral level

Avoid being left outProtect market access to trading partners as they negotiate RTAs with others

Political alliancesStagnation of Doha Round


Canada-Caricom

Regional Trade Agreements and the WTO

In principle, WTO rules balance Support for MFNWith permitting substantial liberalization among parties to RTAs

In practice, no effective compliance mechanismRTA Notifications examined by a working party of WTO Member representatives - reports to Committee on Regional Trade Agreements relating to compliance with GATTStandards for RTAs not applied rigorouslySeldom subject of dispute settlement

• Turkey – Textiles one of the only cases

GATS Art. V creates similar regime for trade in servicesNew rules for RTA’s on Doha Round Agenda

Enhanced concerns about effects of RTAs


Canada-Caricom

Spaghetti Bowl of RTAs


Canada-Caricom

Documents

Strategic Trade Policy in Context: Canada- Caricom The Global Trading System and Trade Agreements International Law and Domestic Law Multilateral, regional