Apec in the eyes of WTO

Focus

This is the first of a two-part series where Solomon Wanis explains the concept of Asia-Pacific Economic Cooperation (Apec) and its benefits.

THIS article is for the benefit of people who may not really understand the concept of Asia-Pacific Economic Cooperation (Apec) and how and why it will benefit Papua New Guinea.
These questions may naturally arise in the minds of many Papua New Guineans and the article endeavours to still the pricks of their curiosity to some extent.
Fundamentally, Apec is a platform for trade discussions between the 21 member countries and to fairly understand what Apec is, it is important to take a brief glance at how international trade is conducted under international laws.

What is international trade?
In simple terms, it is the buying and selling of goods and services between different countries.
These countries congregate into groups to conduct trading and such groups can be categorised as bilateral, trilateral, plurilateral or multilateral.
A trade between two countries is seen as bilateral trading and between three as a trilateral trading.
A plurilateral trading activity may go on between more than three or even more than 15 countries.
A multilateral trading is more reflective of world trading that includes almost all the countries on the planet.
However, a multilateral trading in some sense can include trilateral and plurilateral agreements.
This empirical classification is based on two important factors that distinguish the trading activities between countries.
Firstly, the trade agreements drawn up by the countries themselves. These can be Free Trade Agreements (FTA) or Regional Trade Agreements (RTA).
Secondly is by becoming member to the World Trade Organisation (WTO).
This is when countries accede to the general international trade laws by becoming members to the WTO.
For example, if PNG draws up a trade agreement with one or some of the 21 Apec member states, this may be regarded as a FTA.
If, however, all 21 member states consensually draw up a trade agreement, it can be regarded a RTA.
However, despite trading under specific trade agreements, the WTO is the most resourceful and influential international actor that all countries cannot completely overlook or do away with.
By International Law (General Agreement on Tariffs and Trade – GATT) all FTAs and RTAs must be WTO-compliant.
With very limited exceptions, countries are generally prohibited from entering into trade agreements to raise or lower tariffs to the exclusion of all other WTO member countries.
This may be one of the reasons why the US has, in the recent past, developed an attitude of WTO defiant.
One of the reasons why countries form regional groups enter into FTAs and RTAs is to avoid the stringent WTO rules to access markets with less customs and tariff barriers (trade barriers).
However it will be seen in the ensuing paragraphs that no country can ever successfully avoid the WTO – if so, it can only be done forcefully that can have very serious repercussions in the global economy.
All relationships at some point turn sour and FTAs and RTAs are no exceptions.
The most crucial element that lacks in all the FTAs and RTAs is the judicial component.
There are no or even it has proven difficult to establish strong, independent and impartial dispute settlement systems to adjudicate trade disputes and grievances.
Thus, countries under FTAs and RTAs have always had recourse to the WTO Dispute Settlement System.
If a trade dispute under a FTA or TRA is taken to the WTO, the first preliminary issues is whether the particular FTA or RTA is WTO-compliant.
If compliance is lacking, which is the case in almost all the cases, the FTA or the RTA will be subjected to two general principles of WTO – more of this below, under what are the laws for international trade.

What is WTO?
It is an international institution that is fully-resourced and funded by member countries – more by the rich and less by the poor.
The WTO was established by an international law in 1995.
The WTO is a separate legal entity that can sue and be sued too.
It is an international actor that regulates and controls the trade of goods and services and intellectual property rights all across the globe.
One of the important features of the WTO is the Dispute Settlement System (DSS).
This is the feature that makes the WTO most able and dominant.
If a member country to the WTO lodges a trade dispute, it goes first to the hearing of the Dispute Settlement Body (DSB).
If a country is aggrieved by the decision of the DSB, it can then lodge an appeal in the Appellate Body (AB).
The adjudicators in these bodies are voted in from different member countries. The USA is the only country that has, controversially, two seats in the AB.
Some countries, especially China, are vehemently disputing this seemingly unfair privilege accorded to the US.
The jurisdiction of the DSS is compulsory, exclusive and contentious. Compulsory in that all member countries have the right to access. Exclusive in that there is no other international court that can hear trade disputes and contentious in that the disputes are actual and not hypothetical.
Further it can also be said that it has a conclusive characteristic that the AB’s decisions are final.
The issue of “binding judgement’ is not fully settled.
However, whenever a country fails to comply, the WTO encourages reactionary measures. Judgements are not precedent based, in that a previous ruling cannot be relied on in later cases.

What are the laws for international trade?
The laws that are administered and interpreted by the Dispute Settlement System (DSS) of the WTO to resolve disputes and monitor world trade are:

  1. Agreement Establishing the World Trade Organisation
  2. General Agreement on Tariffs and Trade (GATT)
  3. The General Agreement on Trade and Services (GATS)
  4. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
  5. Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement)
  6. Technical Barriers to Trade (TBT Agreement).

The Vienna Convention on the Law of Treaties (VCLT) and the Free Trade Agreements (FTAs) and Regional Trade Agreements (RTAs) are not directly or necessarily administered by the WTO but do come into play if and when necessary.
The VLCT is the founding source of International Law and all international agreements resort to the VLCT for interpretation purposes at some stages.
The FTAs and RTAs are annexed to the Agreement Establishing the World Trade Organisation and are therefore, nevertheless, part of the WTO.
For example, if PNG enters into a FTA with another Apec member country, the FTA is part of the WTO.
All these six agreements and the FTAs or RTAs operate under two general governing principles.
The Most Favoured Nation (MFN) and the National Treatment (NT) principles.
These two principles are highly technical and may seem difficult to understand but on the face the MFN principle basically relates to any advantage, favour, privilege or immunity granted by a WTO member country on any product or service of another WTO member country coming in or going out of it, it must exactly at the same time accord the same advantage, favour, privilege or immunity to the ‘like product’ of other WTO member countries also going in or out of it.
This is often difficult to understand but an example will shed some light.
If Australia exports rice to PNG and imports pineapple from PNG and decides to impose a quota on export and import tariff at $2/kg of rice and pineapple, Australia must immediately, by international law, impose the same $2/kg on all pineapple and rice imported from or exported to other WTO member countries even though these countries are not part of the PNG-Australia trade deal.

…tomorrow we talk about the second international trade law principle, breaching these principles, Apec and its benefit

  • Solomon Wanis is a Senior Associate of Morgans Lawyers. He holds a Bachelor of Laws from UPNG and Master of Laws from the Victoria University of Wellington, New Zealand. He specializes in International Trade Law and International Intellectual Property Law. The views and opinions expressed are those of the author. He can be contacted via email on: [email protected]