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America’s Refusal to Accept Outcome of WTO Leadership Race Creates New Deadlock

It remains to be seen as to what the US will do at the General Council meeting on November 9, as the American elections would have been completed by then.

Geneva: On October 28, Korean candidate Yoo Myung-hee, who was supported by the United States, lost the race to become the World Trade Organisation’s new director general.

Her rival, Dr Ngozi Okonjo-Iweala from Nigeria, was declared as the winner based on the “largest support” she received from WTO’s 164 members. If the WTO’s General Council adopts the recommendation made by the selection panel on November 9 at a special meeting, Dr Ngozi would become the new DG until August, 2024.

However, indications are that this is unlikely to happen due to the unfounded objections raised by Uncle Sam.

Instead of accepting the recommendation made by the WTO General Council chair Ambassador David Walker (New Zealand) at the informal heads of delegations meeting on October 28, Dennis Shea, the venerable US trade envoy, raised a ruckus.

In particular, Shea chose to cast serious aspersions on the recommendation, maintaining that the selection panel adopted “opaque” and “byzantine” procedures. He challenged the GC chair on how arrived at the decision when the US refused to accept the candidature of Dr Ngozi.

At a time when the WTO is facing the worst existential crisis largely due to the unilateral and hegemonic actions taken by Washington, the latest deadlock created by the US has thrown the appointment of the new DG into uncharted waters.

The US, for example, has paralysed the two-stage dispute settlement body since December 2019 when it blocked the selection for filling the highest adjudicating body or Appellate Body for global trade disputes. Washington has also refused to implement several verdicts against its discriminatory trade measures. The US has loaded the WTO with a divisive trade agenda that includes proposals to deny the special and differential treatment to China, India, South Africa, Indonesia, and Argentina, among others.

It wants to eliminate the consensus principle for taking decisions as per the Marrakesh Agreement that established the WTO in 1995. The US also wants to introduce punitive reforms such as stringent, naming-and-shaming transparency and notification requirements which impose considerable burden and massive administrative costs for developing countries. The US’ proposals are inconsistent with the rules as set out in the Marrakesh Agreement of 1994 that established the WTO.

Selection process

Against this backdrop, the selection of the new director general has assumed considerable importance. The selection process was launched in July this year to replace the vacancy created by the former WTO head Roberto Azevedo.

It is an open secret that Azevedo, during his tenure between 2013-2020, preferred to act as Washington’s voice and deliverer on a number of issues. Before becoming the WTO’s director general, Azevedo was Brazil’s trade envoy in Geneva. He had convinced the developing countries that he would advance their developmental interests as a DG. Contrary to the hopes he raised before his selection as the DG in August 2013, Azevedo ensured that the US along with a group of industrialised and several developing countries secured the trade facilitation agreement in December 2013 on the false promise that the agreement would generate $1 trillion benefits.

Up until now, the Trade Facilitation Agreement, which is aimed at harmonising customs rules and procedures of the US and other industrialised countries in developing countries, failed to generate any measurable gains for developing countries. In the run-up to the WTO’s eleventh ministerial conference in Buenos Aires in December, 2017 Azevedo helped the US and other developed countries to launch their plurilateral initiatives (in which two or more countries could launch negotiations on issues of interest the coalition of willing led by the US) to bypass the Doha Development Agenda multilateral negotiations. He remained utterly silent when the US started undermining the WTO’s Appellate Body in 2016.

So, it is hardly surprising that Azevedo suddenly cut his tenure at the WTO and jumped ship to take the second highest post in a second highest food and sugary drinks company PepsiCo on 1 September. Consequently, the chair for the WTO’s General Council Ambassador David Walker launched the selection process in July this year before the members went into summer recess. The process involves receiving the nominations to be followed by three rounds of scrutinising process based on what are called “confessionals” as per the procedures set out in the General Council decision (WT/L/509).

Accordingly, Ambassador Walker conducted three rounds of consultations beginning from September 6 to narrow the field of eight candidates that filed their nominations to two in the final round.

Also read: As WTO’s Dispute Settlement Body Dies a Dysfunctional Death, What Comes Next?

The elimination process in each round is based on the criterion where the selection panel chaired by Ambassador Walker along with two facilitators – the chair of the dispute settlement body Ambassador Dacio Castill (Honduras) and the chair of the trade policy review body Ambassador Harala Aspelund (Iceland) – would ask each member to indicate their preference for the eight candidates on the slate.

In the first round, each member-country was accorded four preferences, three in the second round, and one in the third and final round. Accordingly, in the first round of the selection process held last month, three candidates – Dr Jesus Seade Kuri from Mexico, Abdulhameed Mamdouh from Egypt and Ambassador Tudor Ulianovschi from Moldova – were eliminated from the race on grounds that they were least likely to attract consensus.

During the second round, three candidates – Amina Mohamed from Kenya, Mohammad Maziad Al-Tuwaijri from Saudi Arabia and Liam Fox from the United Kingdom – were asked to withdraw from the race because of the low level of support received from members.

Thus, two candidates – Nigeria’s Dr Ngozi, who is known for her rich experience in developmental finance and medicines and vaccines, and Korea’s trade minister Ms Yoo Myung-hee were left in the fray for the final round which began on October 19 and lasted till October 27.

Yoo Myung-hee. Photo: Reuters

The US has all along accepted the confessions-based procedures adopted by the selection panel. It had not raised any objections when the modalities were adopted at the GC meeting in July, nor during the second round of selection process early this month.

In the past, sharp concerns were raised about the confessions-led selection process. For example, in 2005, when the Brazilian candidate lost in the first round and in 2013, when Kenya’s former foreign minister Amina Mohamed lost in the first round. Serious questions were also raised about the opacity of the confessions-led process and whether they would involve subjective judgements.

However, the US or no member challenged the modalities as set out in procedures relating to the appointment of the director general in WTO documents WT/L/509, Job/GC/243 and Job/GC/245. Not even the countries of the losing candidates raised any hue and cry. Egypt merely said while it accepts the GC chair’s recommendations, it would seek reform of the procedures for the future selection process.

Dr Ngozi

Coming to the recommendation for appointing Dr Ngozi as the new Director General, the chair provided a brief summary of how the decision was reached by the selection panel at the meeting on October 28. He said “as was the case with the two previous rounds, members were asked “what is your preference” in the third and final round”, suggesting that the panel did not accept any negative preferences.

Quoting several provisions, particularly paragraph 18 and 19 of procedures for appointing the DG in document WT/L/509, Ambassador Walker said that the panel tried “to encourage and facilitate the building of consensus” around one of the two finalists based on the preferences expressed by members. Walker said “our (the panel) assessment of the preferences during the third round of consultations is that the candidate from Nigeria Dr Ngozi Okonjo-Iweala, is the candidate most likely to attract the consensus.”

Further, he clarified that “Dr Ngozi carried clearly the largest support of members in the final round and she clearly enjoyed the broad support of all levels of development and from all geographical regions”.

According to paragraph 19 of the procedures outlined in document WT/L/509, Ambassador Walker said “we are submitting the name of Dr Ngozi Okonjo-Iweal as the candidate most likely to attract consensus and recommending her appointment by the GC as the next DG of the WTO until 31 August 2024.”

Ambassador Walker said he has scheduled a special GC meeting on November 9 for members to formally adopt the recommendation to appoint Ngozi Okonjo-Iweala as the WTO’s next director-general.

Uncle Sam’s rage

In response to the GC chair’s recommendation, the US trade envoy cast aspersions against the manner in which the process was conducted. Ambassador Shea said Washington “strongly supports the candidature of Korean minister Yoo Myung-hee from South Korea”.

“It is our understanding that Yoo enjoys breadth of support across the WTO membership,” he said, maintaining that the Korean candidate Yoo Myung-hee “is a bona fide trade expert and WTO expert and who has distinguished herself over the 25-year career as a successful trade negotiator”.

Arguing that the WTO is in deep crisis, Ambassador Shea said “we need someone at the helm with trade expertise” and “Minister Yoo (the Korean candidate) will not need on-the-job training and will hit the ground running here in Geneva”. In effect, Ambassador Shea implied that Nigeria’s candidate Dr Ngozi would need on-the-job training as she is not a trade expert.

Ambassador Shea reminded members that the WTO is a member-driven organisation, arguing that “it is for us, the members, to decide who the next director-general is going to be” and not “for the three individuals (the GC chair, the DSB chair, and the chair of the TPRB) to decide,” according to several persons, who preferred not to be quoted.

“I would like to assure members that the WTO is a consensus-based organisation and the consensus principle permeates everything we do here, including the DG selection process,” Ambassador Shea said, inveighing the selection process is “opaque” and “byzantine”. He said the US cannot join the consensus.

Even as the meeting was in progress in Geneva, the US Trade Representative Ambassador Robert Lighthizer issued a stern statement on the USTR’s website.

It reads: “The United States supports the selection of Korean Trade Minister Yoo Myung-hee as the next WTO Director- General. Minister Yoo is a bona fide trade expert who has distinguished herself during a 25-year career as a successful trade negotiator and trade policy maker. She has all the skills necessary to be an effective leader of the organisation.

Further, Ambassador Lighthizer cautioned WTO members that “this is a very difficult time for the WTO and international trade. There have been no multilateral tariff negotiations in 25 years, the dispute settlement system has gotten out of control, and too few members fulfill basic transparency obligations. The WTO is badly in need of major reform. It must be led by someone with real, hands-on experience in the field.”

In short, the sudden rage and unfounded criticisms against the DG selection process – just because the US-supported Korean candidate was not declared as the winner – appears to be a little like President Trump’s rant against mail-in-voting in the current American elections.

World Trade Organization (WTO) logo pictured on their headquarters in Geneva, Switzerland. Photo: Reuters

Where to go from here?

It remains to be seen as to what the US will do at the GC meeting on November 9, as the American elections would have been completed by then and with it, it will know whether the Trump administration would continue to be in power. “Either way, the gauntlet thrown (down) by the US about the selection process has created confusion,” said a person familiar with the selection process, who asked not to be named.

By creating confusion in the appointment of the new DG, the US may drag the selection process on for another four months or so, and it could even insist on a “neutral” candidate from the previous round such as Kenya’s Amina Mohamed or Britain’s former trade minister Mr Liam Fox, the person said.

In the past, the US had created similar chaos when Washington insisted that it will not accept the appointment of former Thai Prime Minister Supachai Panitchpakdi as the WTO DG in 1999, demanding that Mike Moore, the former New Zealand prime minister, should be appointed as the WTO DG

Later, as part of a compromise, both Moore and Panitchpakdi were appointed as the DG for a period of three years each starting from December 1999.

Surprisingly, even as the US held its ground in support of the Korean candidate, Korea remained silent at the meeting. and did not make any statement at the HoD meeting. More importantly, not one member supported the US charges against the DG, and several countries.

China, the European Union, South Africa, Barbados, St Lucia, the United Kingdom, and India among others supported the GC chair for navigating the selection process and for recommending Dr Ngozi as the next DG of the WTO.

Too Many Questions Remain Unanswered in India’s Proposal to Regulate Non-Personal Data

The expert committee’s report recognises the need to address the imbalances in power between those collecting the data and those most affected by it, but ultimately fails to adequately address the source of inequities in the digital economy.

On July 12, 2020, a committee of experts established by the government of India proposed a regulatory framework for ‘non-personal data’, which may well define the future of India’s digital policy.

The expert committee’s draft report has proposed an entirely new regulation for ‘non-personal data’, entailing an attempted definition of ownership rights over data with ‘communities’, and establishing a regulatory authority to make rules about data governance and use.

Non-personal data, such as data about the environment, production processes, or geospatial information, holds both public and economic value, but its collection and use can equally produce collective harms.

Take, for instance, the increasing ‘datafication’ of agriculture – where data collected about agricultural processes, which includes data about milk production, soil conditions, or pesticide use. This type of data is rarely about specific persons, and therefore does not fall under the scope of personal data protection law. However, who gets to collect, share and use agricultural data matters. Farmers could utilise such data to grow crops more efficiently, limit pesticide use and to move away from monocultures. However, the same data can be collected from farmers without their knowledge or consent, and then monitor a farmer’s ability to pay for inputs, lock them into services and machinery, or manipulate commodity markets. In short, it can further increase a farmer’s dependence on suppliers of seeds, fertilizers and pesticides.

Also read: Examining India’s Quest to Regulate, Govern and Exploit Non-Personal Data

How then, do we ensure that the economic and societal value of this data is unlocked, while safeguarding against the various harms to the communities that relate to the data?

One of the highlights of the Expert Committee’s report is that it clearly recognises the need to address the imbalances in power between those collecting the data and those most affected by it, and promises to foreground the interests of communities. However, despite its seemingly radical agenda, it ultimately fails to adequately address the source of inequities in the digital economy, or justify the forms of regulation that have been proposed.

The Committee’s recommendations stem from its equation of data to a resource or commodity, which is best governed through the allocation of ownership rights and by promoting its most economically efficient use. The committee’s recommendations are focused on ‘unlocking’ value in existing forms of data, primarily through mechanisms for data sharing between businesses and government. This is an explication of the common refrain that ‘data is oil’ and a valuable commodity with economic potential.

However, this conception of data is limiting in many respects. First, it ignores that ‘data’ is not merely something that is ‘captured’ by existing data businesses or technology providers, but rather reflects the motives, assumptions and biases of the people and the firms which collect and utilise this information. The processes and business models of ‘datafication’ are mired in a reductionist conception of people and spaces as resources and commodities.

Also read: Panel of US Firms to Push Back Against India’s Regulation of Non-Personal Data

The top-down approach taken by the Committee is insufficient to challenge this problem. Bottom-up approaches must consider the technical standards, technologies and the institutions which collect and utilise information, and establish agency over each of these elements.

Who gets to collect, share and use agricultural data matters. Photo: Dominik Hundhammer/CC BY-SA 3.0

Second, defining rights in data as those of ‘ownership’ can limit the range of interests which can be reflected in data. In particular, we need to look beyond economic interests and also consider the various other rights or interests that may be involved in different forms of information. In the case of agricultural data, for example, we may consider the interests of farmers who could benefit from crop sowing data, or consider environmental interests in developing agricultural practices that are safe and sustainable. Ultimately, these are questions about the governance of the data collection and processing which must be decided by the communities about whom the data pertains.

A policy framework for the governance of data must take into account the overlapping and occasionally contested interests in such governance, which need to be accounted for not only at the level of the individual, but also at the level of collective governance.

Trust, but not blindly

As a solution to the twin problem of collective harm and lack of communal control over data, the Committee proposes to grant communities collective ownership and management rights over their data through institutions known as ‘data trusts’. The generally agreed on definition of a data trust is that it is a legal relationship between trustees, who steward data rights, those who hand over their rights for stewarding by the trustee and the beneficiaries of the trust. As an example: rights over agricultural data could be placed in a trust by the holders of those rights, to be stewarded for the benefit of the farmers (or for general public benefit). The key component of a data trust is the fact that trustees hold a fiduciary duty of loyalty. That is, they can only act in the sole interest of the beneficiaries.

Also read: Why India’s Proposed Data Protection Authority Needs Constitutional Entrenchment

Institutions like data trusts are an important addition to the conversation on forms of data governance. However, whether communal data rights and data trusts would indeed empower, instead of harm, communities depends in large part on their implementation. The Committee’s recommendations, unfortunately, raise more questions than they answer.

First of all, the report assumes an identifiable, pre-existing community, whose interests can be protected by allocating ownership rights to them. However, contemporary data analysis and automated decision making technologies challenge this notion. When it comes to data, communities could span virtual realms that do not adhere to geographical boundaries. Who then decides what constitutes a community? Is it the members themselves? Or would this decision be made by a central authority?

The key component of a data trust is the fact that trustees hold a fiduciary duty of loyalty. Photo: Pixabay

Another concern is the lack of consideration given to the question of who should be the ‘trustee’ of the data, which exercises rights on behalf of the community. From the examples provided by the Committee, these could range from existing government agencies to voluntary groups. However, the Committee fails to account for independence and conflict of interest, which are crucial factors for the governance of a trust. For example, a government agency may wish to access information about a community to fulfil its own responsibilities, creating a conflict with the interests of the community.

Finally, nothing is said about how decisions will be made about how data is collected, shared and used. Data trusts are primarily a legal instrument, which leaves the problem of governance largely undetermined. In our view, a legitimate data trust should be one in which the various voices within a community are heard and decisions made by trustees are transparent and can be challenged by those who are affected by them.

On the whole, while it is laudable that important questions of data governance are being given consideration, the recommendations of the Committee are substantially underdeveloped. The Committee fails to both adequately assess the reasons for the inequities in the data economy, nor does it provide a workable framework for community-led governance of non-personal data. A mature policy on non-personal data that truly respects the rights of communities to control if they want data relating to them to be collected or shared needs to carefully consider questions of community representation, governance and legitimacy, and addresses questions of agency and self-determination.

Divij Joshi is a Mozilla Fellow working on tech policy in India. Anouk Ruhaak is a Mozilla Fellow working on collective data governance.

Panel of US Firms to Push Back Against India’s Regulation of Non-Personal Data

US-India Business Council called imposed data sharing “anathema” to promoting competition.

India’s plan to regulate “non-personal” data has jolted US tech giants Amazon.com Inc, Facebook Inc and Alphabet Inc’s Google, and a group representing them is preparing to push back against the proposals, according to sources and a letter seen by Reuters.

A government-appointed panel in July recommended setting up a regulator for information that is anonymised or devoid of personal details but critical for companies to build their businesses.

The panel proposed a mechanism for firms to share data with other entities – even competitors – saying this would spur the digital ecosystem. The report, if adopted by the government, will form the basis of a new law to regulate such data.

But the US-India Business Council (USIBC), part of the US Chamber of Commerce, calls imposed data sharing “anathema” to promoting competition and says this undermines investments made by companies to process and collect such information, according to a draft letter for the Indian government.

“USIBC and the US Chamber of Commerce are categorically opposed to mandates that require the sharing of proprietary data,” says the USIBC’s previously unreported letter, which is likely to be completed and submitted in coming weeks to India’s information technology ministry.

“It will also be tantamount to confiscation of investors’ assets and undermine intellectual property protections.”

A USIBC spokeswoman had no comment on the draft letter. The US Chamber of Commerce didn’t respond to Reuters’ queries.

The head of the panel, Kris Gopalakrishnan, a founder of Indian technology giant Infosys Ltd, said the group will work with the government to review input from the industry.

India’s Ministry of Electronics and Information Technology, Amazon, Facebook and Google did not respond to requests for comment. The report is open for public comments until September 13.

“Forced data sharing”

India’s plan to regulate non-personal data is the latest irritant for US tech companies that have been battling tighter e-commerce rules and data storage norms that several countries are also developing.

New Delhi and Washington are already at odds on such issues, as well as over digital taxes and tariffs.

The USIBC draft letter says “forced data sharing” will limit foreign trade and investment in developing countries, and the panel’s proposals run against Prime Minister Narendra Modi’s calls for US companies to invest in India.

The lobby group expresses concern about the panel’s recommendation to mandate local storage for non-personal data, describing this as a “dramatic tightening” of India’s international data transfer regime.

“These are far-reaching concepts that would have a significant impact on the ability of both Indian and multinational firms to do business in India,” Washington-headquartered law firm Covington & Burling said in a note prepared for the USIBC, which was also seen by Reuters.

The law firm did not respond to a request for comment.

The Indian panel has listed research, national security and policymaking among purposes for which such data should be shared. Three sources said tech executives participated in several meetings in recent weeks to discuss concerns over the report.

Why Trump’s Trade War With China Actually Hurts Beijing Less

Trade data actually shows that China’s dependence on the US has fallen faster. In stark contrast, the US continues its dependence on China.

The US-China trade war has been at the centre-stage of economic discussions for quite some time now, with the world’s two largest economies imposing tariffs on each other’s goods.

The Trump administration has imposed tariffs on over $360 billion of Chinese goods, while Beijing has responded by imposing tariffs on over $110 billion of American goods.

Even though Donald Trump insists that his war has hurt the Chinese economy – with the country reportedly losing three million jobs and its GDP slipping to a 27-year-low of 6.2% – a relatively longer time horizon paints a different picture.

In fact, China is increasingly becoming less dependent on the US and the country’s slowing GDP growth rate could be for reasons other than the trade war.

Here is how the story unfolded

Over the last 10 years, trade interdependency between the US and China has fallen. Trade data actually shows that China’s dependence on the US has fallen faster. In stark contrast, the US continues its dependence on China.

The good news for policymakers in these two countries is that despite the trade war, long-term GDP growth (the trend for the last 10 years) is on the rise.

Between 2008 and 2018 the compound annualised growth rate (CAGR) of China’s GDP was 11.46%. If we are to take out China’s trade component with the US, the Chinese economy, in fact, has grown higher at 11.62%.

The story is a little different for the US. Between 2008 and 2018, the US economy grew at a CAGR of 4.10%, and without China, the growth of US economy dips to 4.07%.

Also read: Trump’s Trade Wars Are a Trap, Not a Solution

These small changes in growth rate numbers are big in absolute terms, considering we are talking about two biggest economies in the world, the US at $20.41 trillion and China at $13.61 trillion). What is more startling from these observations, the US economy is likely to lose out more in comparison to China. The result does not change if we are to do the same analysis for the last 5 years. Little wonder that Beijing’s leadership is in such a defiant mood.

Pooh-Pooh WTO

The main tenets on which the World Trade Organisation (WTO) functions is that a fall in tariffs barriers will lead to an increase in trade between nations. The beneficial effect of trade in increasing productivity and income growth is well known. Economies such as South Korea, Taiwan, and much of the southeast Asian nations catapulted to a higher growth trajectory through trade.

In fact, as evidence from China suggests, trade has been instrumental in lifting millions out of poverty.

However, as the US-China trade war showcases, there are factors other than tariffs which may affect business and hence, income.

For instance, non-tariff barriers (NTBs) such as anti-dumping measures, sanitary and phytosanitary sanctions, etc. are used as a tool to restrict market access. Since the close of the Doha Round of WTO negotiations in 2001, the multilateral trading system has stalled.

In its place, there has been an increasing move towards regionalism, with a proliferation of bilateral Free Trade Agreements (FTAs) and Regional Trade Agreements (RTAs). RTAs, and many FTAs, have moved beyond addressing traditional tariff barriers to trade, and cover an increasing numbers of NTBs, and so-called “behind the border” issues such as regulatory standards, investment rules, and intellectual property rights.

And these factors have played an important role in explaining the growth in a region rather than lower tariffs barriers.

Also read: At Each Other’s Throats, US and China Defy Pragmatism and Compromise

How China is managing to grow?

China is not new to this world of protectionism. The Global Trade Alert, a database which tracks protectionist measures, shows that as many as 17,737 measures have been initiated against Chinese exports. Chinese policymakers realised they needed to do things differently. They started investing heavily in Asia, Africa, and to some extent in Latin America.

This meant four things. First, as the cost of production was lower in Southeast Asia, it meant Chinese firms could gain by shifting their production bases outside China.

Second, investing in these regions meant access to bigger markets for Chinese firms and more uniform regional development. For instance, the relatively underdeveloped Kunming region in Yunnan province became a commercial hub.

Third, Chinese firms could evade protectionist measures targeted at their exports if they started exporting from Southeast Asian countries instead.

Fourth, investing in Africa and Asia has also reduced some of China’s energy requirements, enabling Beijing to access cheaper foreign energy (oil and power) and minerals. Chinese firms have constructed six hydropower plants and one thermal power station in Myanmar. The country has also invested in power transmission and copper processing activities in Vietnam.

In Sri Lanka, Pakistan, and elsewhere in the Middle-East, Africa, and South-East Asia, Chinese money is used to build ports infrastructure. This has helped them to take management control (as is the case with Pakistan’s Gwadar port) and in some cases total ownership of the port like that of Hambantota port in Sri Lanka. Accessing new markets means Chinese GDP will remain afloat, even, in the event of a trade war.

A view of Gwadar port before the inauguration of the China-Pakistan Economic Corridor port in Gwadar, Pakistan, on November 13, 2016. Photo: Reuters/Caren Firouz/File Photo

The US side of the story

Proponents of the US-China trade war will argue imposing tariffs is not a bad idea. Tariffs are merely a transfer payment from one sector of the economy (consumer/producer) to another (the government). The government may use this revenue from additional tariffs and spend it on a sector with a larger multiplier effect on income and employment generation.

Additionally, imposing tariffs is often the right policy measures and may increase global welfare when targeted against foreign subsidies. Take, for instance, the case of US tariffs against Chinese solar panel industry, which possibly could have survived because of higher government subsidy. The Chinese subsidy is distortionary as it allows inefficient Chinese firms to flood the world market. Global prices of solar panels have crashed by over 75%. This has driven out the more-efficient, non-Chinese manufacturers from across the world out of their business.

Again, from the perspective of the consumer who usually complains about higher tariffs leading to higher domestic price, it depends on which sectoral tariffs are imposed. If tariffs are imposed more on capital goods, machinery, electronics, and other intermediate inputs, the impact of tariffs on the resultant domestic price increase will be less.

Also read: US’s Legacy of Using Trade Act to Steer Course of International Relations

When importers compete in the domestic market, they may sometimes absorb the impact of tariffs, leading to a higher input price in their own mark up (the difference between price and marginal cost). The consumer may not bear the brunt of tariffs at all. In the present context, the US has imposed tariffs and predominantly targeted the Chinese capital goods and electronic items.

In short, the Chinese dragon is more precisely described today as a bull in a china shop. Hopefully, the US will find newer ways to tame this new animal.

Nilanjan Banik and Parikshit Bhargava are with Bennett University, Greater Noida.

Trump: India, China No Longer ‘Developing Nations’, Take Advantage of WTO Loopholes

Trump, championing his ‘America First’ policy, has been a vocal critic of India for levying “tremendously high” duties on US products and has described the country as a “tariff king”.

Washington: US President Donald Trump has said that India and China are no longer “developing nations” and were “taking advantage” of the tag from the WTO and asserted that he will not let it happen anymore.

Trump, championing his ‘America First’ policy, has been a vocal critic of India for levying “tremendously high” duties on US products and has described the country as a “tariff king”.

The US and China are currently engaged in a bruising trade war after Trump imposed punitive tariffs on Chinese goods and Beijing retaliated.

Earlier in July, Trump asked the World Trade Organisation to define how it designates developing-country status, a move apparently aimed at singling out countries like China, Turkey and India which are getting lenient treatment under the global trade rules.

In a memorandum, Trump had empowered the US Trade Representative (USTR) to start taking punitive actions if any advanced economies are inappropriately taking benefits of the WTO loopholes.

Addressing a gathering at Pennsylvania on Tuesday, Trump said India and China, the two economic giants from Asia, are no longer developing nations and as such, they cannot take benefits from the WTO.

Also read | Trump’s Trade Wars Are a Trap, Not a Solution

However, they are taking the advantage of a developing nation tag from the WTO and putting the US to a disadvantage, he said.

“They [India and China] were taking advantage of us for years and years,” Trump said.

The Geneva-based WTO is an intergovernmental organisation that regulates international trade between nations.

Under the global trade rules, developing countries claim entitlement to a longer timeframe for the imposition of safeguards, generous transition periods, softer tariff cuts, procedural advantages for WTO disputes and the ability to avail themselves of certain export subsidies.

Trump expressed hope that the WTO will treat the US “fairly”.

He said the WTO views certain countries like China and India as “they’re growing”.

“Well, they’ve grown,” he said and warned that the US will not let such countries to take advantage of the WTO.

“We’re not letting that happen anymore…Everybody is growing but us,” he said.

(PTI)

EU Selects World Bank’s Kristalina Georgieva to Lead IMF

The 65-year-old chief executive of the World Bank got the backing of a majority of the 28 EU states, defeating the Dutch candidate Jeroen Dijsselbloem after two rounds of voting and prolonged negotiations among EU nations.

Brussels: EU governments picked Bulgaria’s Kristalina Georgieva as the bloc’s candidate to lead the International Monetary Fund after more than 12 hours of talks on Friday that highlighted the EU’s internal divisions.

“Congratulations Georgieva for being selected as European candidate to lead the IMF. In the face on rising global tensions, it is imperative to uphold the IMF as symbol of multilateralism,” said the chair of euro zone finance ministers, Mario Centeno.

Georgieva is a centre-right politician who grew up in Bulgaria under communism before a career that brought her to the top of the World Bank and the European Commission.

Most EU states backed Georgieva even though her candidacy will force a change in IMF rules that require the managing director to be younger than 65 years old when appointed. The need for that change could weaken the European candidate if a sufficiently large number of IMF member states opposed the reform.

However, a European official said support from EU countries and the US would be enough to overhaul the rules in the global fund that has historically been dominated by the Western bloc. According to an IMF fact sheet, a bylaw change to remove or modify the age limit would require approval by a majority of board votes cast.

The source added that France, which is leading the European selection process, had already secured Washington’s support on this change.

A US Treasury spokesman could not immediately be reached for comment on Georgieva‘s nomination, but US Treasury Secretary Steven Mnuchin spoke highly of her work in a Reuters interview last month.

The top job at the Washington-based world lender has always been filled by a European. The former IMF chief, France’s Christine Lagarde, resigned in July after EU leaders chose her to replace Mario Draghi as European Central Bank president.

“Great news and well deserved,” said World Bank President David Malpass in an emailed statement to Reuters. Georgieva “brings strong leadership and deep country knowledge,” he added.

Georgieva said in a tweet that she was relinquishing her World Bank responsibilities and would take administrative leave during the nomination process.

Also read: Christine Lagarde Resigns as IMF Chief, Prompting Search for Her Successor

Divisions

A group of countries led by the Netherlands and Germany preferred Dijsselbloem, but were outnumbered by southern and eastern states who backedGeorgieva, in a new sign of German Chancellor Angela Merkel’s fading clout in the EU bloc.

Since an informal compromise was impossible among increasingly split EU nations, France decided to use a complex voting system, under which only the candidate who obtained 55% of the votes of the 28 EU states, representing at least 65% of its population, would win.

Georgieva got the backing of 56% of EU states which however represented only 57% of the bloc’s population, falling short of one requirement.

But Dijsselbloem conceded defeat. “I congratulate Kristalina Georgieva with the outcome of today’s European votes. I wish her the utmost success,” he said on Twitter after the second voting round in which he had remained as the only opponent to Georgieva.

Dijsselboem, a former head of euro zone finance ministers, steered the euro zone out of the debt crisis, orchestrating with the IMF the bailout of Greece, Cyprus and Spanish banks.

But he was opposed by high-debt EU countries for the austerity measures attached to the rescues.

After the first round of voting earlier on Friday, Finland’s central bank governor, Olli Rehn, and Spanish Economy Minister Nadia Calvino withdrew from the race. Mario Centeno had pulled out on Thursday.

Britain opposed the plan to select a candidate now, saying it was “premature” and did not allow London enough time to propose one of its own as the country has just formed a new government, according to a confidential note seen by Reuters.

Candidates for the head of the Washington-based IMF can be fielded until Sept. 6. Other world powers and emerging countries are expected to submit their candidacies by the deadline. The IMF plans to select its new head by Oct. 4.

(Reuters)

Latin America More Vital for Indian Exports Than Many Traditional Trading Partners

Even with longer shipping times and more expensive freight costs, Indian exports to Latin America outstrip what we ship to South East Asia and the Central Asian Republics.

As India expands its Act East policy and looks to take advantage of the US-China trade war, it’s easy to forget how important Latin America is as a trading zone for New Delhi.

For instance, in 2018-19, India exported more to distant Guatemala ($305 million, 15,000 km away) than to neighbouring Cambodia ($196 million, 3,400 km away).

India’s exports worth $181 million to the remote and small Uruguay (15,000 km away; population 3.4 million) is more than to Kazakhstan ($143 million) which is 1,600 km away from Delhi and has more than five times population at 18 million.

India exported more ($216 million) to Dominican Republic (DR) than to Uzbekistan ($201 million), even though the latter has double the population of the former.

In fact, even on a region-to-region comparison, India’s exports to Central America ($968 million) are more than what we ship to the Central Asian republics ($442 million), although the latter is far closer and has a bigger population.

India’s exports to Mexico ($3.84 billion) are more than our exports to Myanmar ($1.2 billion), Russia ($2.4 billion), Canada ($2.9 billion), Egypt ($2.9 billion) or Nigeria ($3 billion).

In fact, Mexico is the second largest destination for India’s vehicle exports, clocking in at $1.61 billion. This is more than our exports to neighbouring Bangladesh ($1146 million), Nepal ($738 million), and Sri Lanka ($473 million).

The above statistics should open the eyes of those who might think that Latin America is less important for India’s exports on the ground that the region is too far and less familiar.

Also read: From Coolies to Patrons and Partners: The Chinese Paradigm Shift in Latin America

Also, 2018-19 isn’t the first year that Latin American countries have overtaken India’s neighbours and our more traditional trading partners who are often seen as more important for India’s exports.

This trend has slowly been building up from 2010, when Indian exporters started exploring the Latin American market more seriously. Even with longer shipping times and more expensive freight costs, Indian goods have become competitive in Latin America.

Some brands such as Bajaj, Hero, Mahindra and Tata have become popular in the region. Indian motorcycles have become industry leaders, grabbing the largest market share in a few countries.

Colombian President Juan Manuel Santos, with Hero Motorcorp’s Pawan Munjal at the company’s facility in Villa Rica. Credit: Hero MotorCorp

The growing importance of Latin America to Indian companies is best illustrated by the success story of UPL. This Indian agrochemical firm has more business in Brazil ($1.2 billion) than in India.

Brazil accounts for 25% of UPL’s global business while Latin America as a whole accounts for 30% of the company’s total global revenue. The region’s share is more than that of Europe, the US or Asia.

Trade ties

According to the figures recently released by the ministry of commerce, India’s exports to Latin America increased by 9.6% in 2018-19 (April to March) reaching $13.16 billion from $12 billion in 2017-18.

Imports from the region went up by 5.3% to $25.73 billion from $24.44 billion in 2017-18. Total trade with the region has gone up by 6.7% to $38.89 billion from $36.45 billion last year.

In 2018-19, Mexico overtook Brazil as the top trading partner of India in Latin America for the first time.

Latin American Trade with India (Figures in millions of dollars)

Country	Exports	Imports	Total trade
Mexico	3841	5577	9418
Brazil	3800	4406	8206
Argentina	563	1955	2518
Colombia	1117	1055	2172
Chile	990	1238	2228
Peru	721	2405	3126
Venezuela	165	7259	7424
Ecuador	298	219	517
Bolivia	105	852	957
Uruguay	181	43	224
Paraguay	161	21	182
Guatemala	305	16	321
Panama	227	39	266
Honduras	167	18	185
Costa Rica	136	51	187
El Salvador	79	4	83
Nicaragua	54	4	58
Dominican Republic	216	567	783
Cuba	35	4	39

Total	13161	25733	38894

Strategic or not?

Latin America contributes to India’s strategic energy and food security by supplying 12% of India’s global imports of $117 billion dollars of crude and 22% of India’s vegetable oil.

The competition of Latin American crude and edible oil have put pressure on the monopoly suppliers of these items from the Middle East and South East Asia (Indonesia and Malaysia supply palm oil) to offer to India lower prices and better terms.

The suppliers of crude were: Venezuela ($7.25 billion), Mexico ($4.27 billion), Brazil ($1.6 billion), Colombia ($571 million), Ecuador ($128 million) and Argentina ($47 million).

The region has abundant reserves and the potential to meet India’s needs of lithium (for electric vehicles) and pulses in the long term.

India has started importing raw gold from Latin America in the last five years. Peru is the top supplier at $2.2 billion, followed by Bolivia at $849 million, Brazil at $541 million, Dominican Republic at $537 million and Colombia at $380 million. Direct imports from the region have helped India to cut costs by saving from the margins paid to gold sellers in Switzerland and UAE.

Venezuela continued as the main source of imports in the region with its crude oil supply. But this will go down drastically this year since India has been forced to stop import of Venezuelan oil by the US sanctions. But India can source more crude from other Latin American suppliers.

Figures in million US Dollars

Petroleum crude	14080
Gold	4556
Vegetable oil	2194
Copper	1364
Equipment and machinery	1054
Wood and pulp	454
Raw sugar	437
Chemicals	290
Iron and steel products	281
Fruits and vegetables	154
Plastic products	145

Future of the market

Latin America is a large market of 600 million people, with a combined GDP of $6 trillion.The region’s imports are around a trillion dollars.

The economies of the region are doing relatively well. The GDP of the region is projected to grow by a modest 1.3% in 2019 and continue its growth trajectory in the medium and long term. The average inflation and external indebtedness are in manageable figures. Democracy has become stronger in the region with more political stability.

The only exceptions, however, are Venezuela and Argentina.

Venezuela’s GDP is forecast to shrink by 10%. The country suffers from hyperinflation of several hundred thousand percent, devaluation of the currency by 99%, shortages of essential consumer items and energy shortage. The economic misery is compounded by the political crisis, break down of institutions and social instability. US sanctions have made the economic situation worse.

Also read: Why It’s Important for India to Trade With Latin America

Argentina’s GDP is expected to contract by 1.2% in 2019. Inflation is over 40% and the country has contracted a debt of $57 billion from IMF. The country is preparing for elections in October. It is hoped that 2020 will see recovery of the economy.

Brazil and Mexico, the two largest markets are set to grow in the coming years with the new Presidential terms starting from the beginning of 2019.

Moving forward

India’s exports can be increased to %25 billion dollars in the next five years if exporters, the export promotion councils, the government and the embassies coordinate with a plan of action seriously and systematically. India should take a leaf out of Beijing’s book, which has set a target of $500 billion in trade with Latin America by 2025, taking it up from their 2018 figures of $148 billion in exports and $157 billion in imports.

The commerce ministry should revive its ‘Focus LAC’ programme, which helped in the past in encouraging and supporting Indian exporters to explore the business opportunities in Latin America.

The Indian government should consider extending large Lines of Credit to support Indian exports. While China has given $150 billion dollars of credit to the region, India has given less than $300 million.

The Narendra Modi government should also open embassies in countries such as Ecuador, Bolivia, Paraguay and Dominican Republic.

This is a good time to accelerate the economic push into Latin America which has started attaching importance to India, the third largest export destination for the region’s exports after US and China.

Disenchanted with the protectionist US and Europe, and determined to reduce its over dependence on China, Latin Americans see India as a large and growing market as well as a benign economic partner for win-win in the long term.

R. Viswanathan is a Latin America expert and former ambassador to Latin American countries.

Tensions Between US and China Ratchet up as Tariff Hikes Set to Take Effect

The 10-month-old trade war between the two countries has already cost companies billions of dollars.

Washington: Top US and Chinese trade negotiators concluded the first of two days of talks on Thursday to rescue a trade deal that is close to collapsing as Washington prepares to go ahead with plans to hike tariffs on hundreds of billions of dollars of goods imported from China.

Tension between Washington and Beijing has risen after a major setback in negotiations last week when China revised a draft deal and weakened commitments to meet US demands for trade reform.

President Donald Trump responded by ordering a tariff hike, and China has said it would retaliate. The 10-month-old trade war has already cost companies in both countries billions of dollars.

Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin talked for 90 minutes on Thursday and were expected to resume talks on Friday. Officials did not speak to reporters as they left the talks.

In comments to Chinese state media upon arriving in Washington, Liu said that hiking tariffs “is very disadvantageous to both parties”.

“We come here this time, under pressure, which shows China‘s greatest sincerity, and want to sincerely, confidently, and rationally resolve certain disagreements or differences facing China and the US. I think there is hope,” he said.

Before they get back around the table on Friday, the US will have increased duties on $200 billion of Chinese goods, to 25% from 10%. The duties apply to cargo leaving China after 12:01 am EDT (0401 GMT) Friday.

Also Read: Trump Must Avoid Trade Wars to Make America Great Again

Consumer products, including cell phones, computers, clothing and toys, are to be especially hard hit.

Lighthizer and Mnuchin have agreed with Liu to continue trade talks on Friday morning, a White House spokesman said on Thursday. Trump met with Lighthizer and Mnuchin earlier to discuss the talks.

Trump on Thursday took aim at the $325 billion in Chinese goods that are so far untouched by the trade war, saying he was “starting…paperwork today” to tax those with a punitive tariff of 25%.

Trump, who has adopted protectionist policies as part of his “America First” agenda aimed at rebalancing global trade and boosting US manufacturing, accused Beijing of reneging on commitments made during months of negotiations.

“We were getting very close to a deal, then they started to renegotiate the deal. We can’t have that. We can’t have that,” Trump said at an event at the White House.

Trump said if the two sides cannot make a deal, the US would go back to manufacturing products that China now makes. “It’ll be the old-fashioned way, the way we used to do it: We made our own product.”

US stock indexes closed lower on Thursday ahead of the trade talks, though they pared losses after Trump said he had received a “beautiful” letter from Chinese President Xi Jinping. US oil prices slid and US Treasury yields fell as investors sought safe-haven assets.

US President Donald Trump (L) and China’s President Xi Jinping shake hands while walking at Mar-a-Lago estate after a bilateral meeting in Palm Beach, Florida, US., April 7, 2017. Credit: Reuters

Data released Thursday showed the US goods trade deficit with China shrank to its smallest level in five years in March, which could further embolden Trump as he escalates the trade war with Beijing.

Plans by Washington to hike tariffs could cut China‘s growth by 0.3% points but the strengthening economy has become more resilient to external shocks, a Chinese central bank adviser said on Friday.

Also read: Will the WTO Finally Tackle the ‘Trump’ Card of National Security?

Tense Talks

China appealed to the US to help salvage the deal earlier on Thursday. Commerce Ministry spokesman Gao Feng said the decision to send Liu to Washington despite the tariff hike threat demonstrated China‘s “utmost sincerity.”

“The US side has given many labels recently, ‘backtracking,’ ‘betraying,’ etc….China sets great store on trustworthiness and keeps its promises, and this has never changed,” he told a news briefing in Beijing.

A source familiar with the talks said China‘s changes to the language of the draft trade deal were so extensive it could take a month to fix them, assuming the US rejects them.

The talks could still go several ways, a person close to the discussions said.

China could make some concessions to prolong talks even after tariffs and retaliation. The two sides could end negotiations, given they are so far apart. Or China could reverse the changes to the text and return the negotiations to where they were a week ago and work toward a deal to be signed at the G20 summit in Japan in June, the source said.

Wide Rift

Reuters on Wednesday revealed the extent of the rift that has opened between the two countries, reporting that a draft trade agreement text sent by Beijing on Friday night was riddled with changes that marked reversals in Chinese commitments that undermined core US demands.

Also Read: Trump Says China ‘Broke’ Trade Deal’, Vows to Continue Tariffs

In seven chapters of the draft, China deleted commitments to change laws to resolve complaints that caused the US to launch a trade war: theft of US intellectual property and trade secrets; forced technology transfers; competition policy; access to financial services; and currency manipulation, sources told Reuters.

The stripping of binding legal language from the draft struck directly at Lighthizer’s highest priority. The US trade representative views changes to China‘s laws as essential to verifying compliance after years of what US officials have called empty reform promises.

Trump told supporters at a rally in Florida on Wednesday that China “broke the deal,” and vowed not to back down on imposing new tariffs on Chinese imports unless Beijing “stops cheating our workers.”

(Reuters)

Will the WTO Finally Tackle the ‘Trump’ Card of National Security?

By taking the ‘national security’ exception head on, a WTO panel has potentially foiled the utilisation of a dangerous tactic used by the US and many other countries.

The election of Donald Trump has marked a foundational challenge to the rules-based international order based on “free and fair trade”.

From stonewalling appointments at the appellate body of the WTO’s dispute settlement body (DSB) to slapping exorbitant steel and aluminium tariffs on a variety of countries, Trump has attempted to desecrate an institution that he views as being historically unfair to America’s national interests.

Given this potentially cataclysmic state of affairs, a WTO panel report adopted last month regarding a transport restriction dispute between the Russia and Ukraine would ordinarily have attracted limited attention. In reality, this widely celebrated ruling was the first instance of the WTO mechanism mounting a substantive legal resistance to Trump’s blitzkrieg.

The opportunity arose from the Russian Federation’s invocation of the ‘national security exception’ carved into the Article XXI of the General Agreement on Tariffs and Trade (GATT-the primary WTO covered agreement dealing with trade in goods.)

This clause has rarely been invoked by a litigating party at the DSB and never been interpreted by the panel or appellate body due to the belief among WTO member states that the exception is ‘self-judging’ i.e. beyond the purview of WTO jurisdiction sovereign prerogative to use as they see fit.

Over the past couple of years, the provision has taken on a new avatar with trade restrictions being increasingly used as a strategic tool to accomplish national security objectives. In addition to the Russian Federation, in this case, it was used by the UAE to justify sanctions against Qatar in 2017 and notably by the US administration in response to the commencement of WTO proceedings by nine countries (including India) against its steel and aluminum tariffs.

Also read: Legal Options for India After Trump’s Attack on Preferential Trade

India itself has also cited the clause in its diplomatic statements when justifying revocation of the Most Favoured Nation Status to Pakistan, although this has not yet resulted in proceedings at the WTO.

Even though the panel held in favour of Russia, this report lays down the edifice for dismantling the Trump Administration’s present strategy. By explicitly stating that Article XXI is not entirely beyond review of the WTO, the panel report gives a cause de celebre for all countries attempting to legally battle Trump’s arbitrary protectionist cause disguised as genuine national security concerns.

At the same time, it might act as a source of comfort for Huawei and China as it allows them to challenge the legality of banning Huawei (as some countries have chosen to do) at the WTO.

History of Article XXI

Article XXI had an uncertain presence in the legal architecture of the WTO from its very inception. It had its origins in the US proposal to establish the International Trade Organisation. The members of the delegation themselves were divided between those who wanted to preserve the sovereign right of the United States to interpret the extent of the exception as it saw fit and others who felt that this provision would be abused to further arbitrary protectionism. The delegate of Australia was also skeptical about the possible exclusion of dispute resolution through a mere invocation of the security exception.

Given this divergence, the drafters of the provision thus sought to create a specific set of exceptions in order to arrive at a compromise that “would take care of real security interests” while limiting “the exception so as to prevent the adoption of protection for maintaining industries under every conceivable circumstances”.

To attain that objective, the provision in the ITO Charter, which was reflected in Article XXI of GATT 1947 was worded thus:

Nothing in this Agreement shall be construed

to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests;

or to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests (i) relating to fissionable materials or the materials from which they are derived; (ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; (iii) taken in time of war or other emergency in international relations; or

to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security

Article XXI has been historically invoked in cases where national security is devised as a smokescreen for protectionism. For example, in 1975, Sweden cited Article XXI to justify global import restrictions it had had slapped on certain types of footwear. It argued that a decrease in domestic production of said kinds of footwear represented ” a critical threat to the emergency planning of its economic defense.” There was sustained criticism from some states, who questioned Sweden’s juxtaposition of a national security threat with economic strife, claiming that they too were suffering from severe unemployment at the time and the Swedish restrictions would be devastating for their economic position.

Also read: What Should the Role of G-20 Countries Be in Reforming the WTO?

The Swedish problem dissipated when Sweden withdrew the restrictions but the uncertain peril of Article XXI remained.

In another instance, the US themselves had previously relied on the security exception to justify measures prohibiting all imports of goods and services of Nicaraguan origin to the US in addition to all U.S. exports to Nicaragua.It argued that Article XXI was self-judging and each party could enact measures it considered necessary for the protection of its essential security interests. In fact, it was successful in keeping its Article XXI invocation outside the terms of reference (which establishes the scope of the Panel’s report), which precluded the Panel from asserting its jurisdiction and examining the provision. It is worth noting, though, that the Panel was critical of the US for utilising the provision in this case and emphasised the need for balancing this exception against the need to preserve the stability of global trade.

The recent spate of national security driven justifications to subvert the adjudicatory powers of the WTO provided a necessary opportunity for the panel to clarify its stance on this issue.

The findings of the panel

The findings of the panel can be divided into three broad clusters:

1) The WTO tribunals’ jurisdiction over the security exception: Right from the outset, the panel clearly stated that it had jurisdiction to adjudicate the matter at hand. It rebutted Russia’s claim that any country invoking the exception had unfettered discretion in the matter

2) The ambit of the self-judging nature of the security clause: Both the Russian Federation and the United States, which had filed a third party submission, re-emphasised the supposed self-judging nature of the security clause due to the incorporation of the words “ which it[the WTO member] considers necessary for the protection of its essential security interests” in clause (2) of the provision.

However, the panel argued that the sub-paragraphs (i)-(iii) require an objective review by the Panel to determine whether the state of affairs indicated in the sub-paragraphs do, in fact, exist. In this way, the Panel added,the three sub-clauses act as “limiting qualifying clauses.” The determination of the measures that may be ‘necessary’ for protecting their ‘essential security interests’ are then left to each WTO member. By interpreting the clause in this manner,the Panel deftly preserved the sovereign autonomy of member states while preventing the bestowing of carte blanche’ ability to take shelter behind the provision.

Also read: Why India Has Had a Heated Year at the World Trade Organisation

3) Determination of emergency in international relations: The use of the term “other emergency in international relations” as used in the provision is an amorphous one because the term ‘emergency’ is not clearly defined in international law. Therefore, the Panel relied on UN General Assembly Resolutions and the fact that multiple states had imposed sanctions on Russia to conclude that there was, in fact, an ‘emergency’ in international relations in this case. In doing so, the Panel upheld the transport restrictions imposed by Russia. However, the implications extend far beyond the immediate impact on the two parties.

Implications of the ruling

Before considering the implications of this report, we must consider that, like in other avenues of international law, the municipal legal principle of stare decisis does not apply to Panel or Appellate Body decisions. This means that future panels are not bound by law to follow the finding in this report.

However, WTO tribunals have often used the reasoning put forward in previous panel or Appellate Body reports to support their findings.

Steel and aluminium tariffs

The US, whose third party submission failed to sway the panel has recognised the potential implications of the report and disparaged it as being “seriously flawed”. They have also discouraged the WTO tribunals deciding the steel and aluminium tariff disputes from using it as precedent.

However, Australia, Brazil, Canada, China, European Union, Japan, Moldova, Singapore and Turkey had all filed third party submissions which encouraged the panel to assert its jurisdiction in the matter and have openly supported the panel’s approach – which would be a boost for the panels set up to adjudicate the Trump sanctions.

Given the groundwork laid out by the panel in this dispute, it would be difficult for the US to satisfy the panel’s understanding of ‘emergency in international relations’ as the Panel clearly stated that “political or economic differences between Members are not sufficient, of themselves, to constitute an emergency in international relations for purposes of subparagraph (iii)”.

Also read: India in a Bind as it Considers How to Respond to Trade Skirmishes with the US

Huawei and cybersecurity

In addition to steel and aluminium tariffs, the panel’s decision also has an impact on the rapidly unfolding Huawei saga. Huawei, which is the world’s largest telecom equipment company and is now taken the lead in the race to develop one of the world’s most critical emerging technologies: fifth generation mobile telephony.

However, Huawei has recently fallen out of favour with the US and other western countries amidst suspicions of them enabling the Chinese government to spy on other countries by incorporating backdoors into their infrastructure.

Various countries, including Australia, Japan, New Zealand have effectively banned Huawei from public participation while the US has prevented government agencies from buying Huawei infrastructure-triggering litigation by Huawei seeking to prevent the move.India has adopted an independent approach by allowing Huawei to participate in field trials of 5G equipment despite Indian agencies flagging concerns over the use of Chinese made telecom equipment.

On April 11, China complained about the Australian decision at the formal meeting of the WTO’s Council for Trade in Goods by highlighting its discriminatory impact on China. To defend itself, Australia may need to invoke Article XXI and argue that the ban fits in under one of the sub-paragraphs (i)-(iii) of clause (2) The report by this panel, may, therefore propel the WTO’s first big foray into cybersecurity and enable it to act as a multi-lateral adjudicator of the critical geo-political issues discussed in this piece.

The history of international law has been a history of powerful nations manipulating its tenets for strategic gain. At the same time, it has been a history of institutional resilience, evolution and change. The World Trade Organisation is no exception. Despite several aspects of the WTO ecosystem being severely flawed with a disparate impact on vulnerable groups in weaker nations, it has been the bulwark of the modern geo-economic order.

By taking the ‘national security’ exception head on, the panel has undertaken a brave act of self-preservation and foiled the utilisation of a dangerous trump card.

Arindrajit Basu is a Senior Policy Officer at the Centre for Internet & Society, India where he focuses on issues revolving around geo-politics and international law.

India Advises Refiner to Avoid US System for Venezuela Oil Buying

The fresh sanctions mean that if oil buyers pay PDVSA through the US banking system, the funds could be seized by US authorities.

New Delhi: India has asked one buyer of Venezuelan oil to consider paying the South American nation’s national oil company PDVSA in a way that avoids the US financial system, an Indian government source said, after Washington imposed fresh sanctions on Venezuela last month.

The United States is seeking to cut off Venezuela’s oil revenue and pressure the nation’s President Nicolas Maduro to step down after it recognised opposition leader Juan Guaido as head of state.

The sanctions mean that if oil buyers pay PDVSA through the US banking system, the funds could be seized by US authorities. There may also be problems for transactions by banks that have a heavy US presence even if they aren’t in US dollars and don’t go through the United States.

The Indian buyer “expressed concern that there could be a problem in payments to PDVSA, so we have advised them to move away from the US banking and institutional mechanism”, said the source, who did not wish to be identified due to the sensitivity of the matter. He declined to name the buyer.

Also read: As US Sanctions Continue to Bite, Venezuela Moves to Double Oil Exports to India

Most Western countries have recognised Guaido as Venezuela’s interim head of state, but Maduro retains the backing of Russia and China as well as control of state institutions including the military.

The sanctions limit US refiners to paying for Venezuelan oil by using escrow accounts that cannot be accessed by Maduro’s government.

India still recognises Maduro as Venezuela’s leader, which means “it does not make sense to shift to the other (escrow) payment avenue”, the source said.

India’s Foreign Ministry on Thursday said the country was monitoring the evolving situation in Venezuela.

“We are of the view that it is for the people of Venezuela to find a political solution, to resolve the political differences through constructive dialogue and discussion without resorting to violence,” ministry spokesman Raveesh Kumar said.

Purchases of oil are based on “commercial” factors, he said.

India, Venezuela’s second-biggest oil market after the United States, has already restricted oil imports from Iran to win a waiver from US sanctions against Tehran over its nuclear and missiles programmes.

The US sanctions have forced Venezuela to turn its focus increasingly to Asia to sell its oil.

Reliance Industries Ltd, operator of the world’s biggest refining complex, and Nayara Energy, part-owned by Russian oil major Rosneft and trader Trafigura, are the two Indian buyers of Venezuelan oil.

Trafigura itself has decided to stop trading oil with Venezuela due to sanctions.

India’s Oil Ministry, Reliance and Nayara did not respond to Reuters emails seeking comment for this story.

Venezuelan Oil Minister Manuel Quevedo this week travelled to India in an attempt to convince refiners to boost their purchases. The OPEC member aims to double oil sales to India from the current 300,000 barrels per day, he said.

Quevedo told reporters he would like to see the creation of a non-dollar trading bloc involving China, India and Russia.

After Quevedo’s visit, White House National Security Advisor John Bolton tweeted: “Nations and firms that support Maduro’s theft of Venezuelan resources will not be forgotten. The United States will continue to use all of its powers to preserve the Venezuelan people’s assets and we encourage all nations to work together to do the same”.

In a note to clients on Tuesday, banking group Barclays said it would be difficult for Venezuela to find new markets in Asia given the stringent nature of the sanctions.

“Considering all the difficulties that Venezuela faces in delivering oil to other markets and the legal, reputational and financial risks confronting traders or counterparties that do business with it under the current conditions,” the bank wrote, “It seems unlikely that all production can, in short order, go to other markets.”

(Reuters)