Trade laws: Principles, breaches and Apec

Focus

We continue with SOLOMON WANIS’ report on the Asia-Pacific Economic Cooperation and its benefits, international trade and trade law principles.

Our last talking point yesterday was ‘What are the laws for international trade?’ and we left while looking at the trade law principles – Most Favoured Nation (MFN) and National Treatment (NT). Today we begin with the latter.

IN simple terms, the National Treatment (NT) principle underlies that the product or service of the territory of a member country imported by any other member country must not be subjected, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied directly or indirectly to domestic “like products” so as not to be arbitrary or discriminatory to the imported product.
Take the same example here:
If Australia imports pineapple from PNG and decides to sell its locally produced pineapple at A$5/kg (K11.79/kg), Australia must, by international law, sell the pineapple from PNG at the same price in its local stores.
If Australia sells the PNG pineapple at a A$10 (K23.59), it has the potential to repel customers and that can amount to unfair treatment to the PNG product (pineapple).
These two principles are founded to safeguard against product discrimination and behind the scene protectionism measures.
They promote fair trade and innovation and further boost world peace.

When does breach of these principles occur?
This is the most difficult part, as it gets too technical.
Ascertaining likeness of a product is cumbersome and highly arguable.
Likeness is subjected to factors such as physical characteristics, consumer taste, tariff classification and the competitiveness and sustainability of the product.
Also to ascertain whether measures are discriminatory and unfairly imposed on products and services is a daunting task and requires great deal of investigation.
In the nutshell, countries look at things like their trading partners’ internal trade policy, legislation, freight charges, taxes, subsidies and off-course the selling price of their products in comparison to the “like products”.
If their exported product is unfairly taxed by the importing country and sells at a higher price so as to reduce demand for it and to give an market advantage over its own local like product, the exporting country can launch a dispute to the WTO Dispute Settlement System (DSS) and pull down the policy or legislation of the country imposing such a discriminatory measure.

Turning now to the big question.

What is Apec?
It stands for Asia Pacific Economic Cooperation (Apec).
It was formed in 1989 by 21 member countries in response to growing economic activities in the Asia Pacific and as a regional trade block to promote free and fair trade amongst the countries in the Pacific Rim.
The forum is primarily to establish free trade deals between all, various or specific member countries in the block.
It is not necessarily a platform for exchange of gifts, loans or aids.

Setbacks of Apec
There is no central dispute settlement mechanism established by the Apec block in the event disputes arise in trade.
However, if there was one, the issues of membership, jurisdiction, transparency, impartiality and enforcement are to be tightly tackled.
Secondly, there is no regional body to oversee that scheming protectionism or discriminatory measures member countries may covertly employ to disadvantage other member states’ “like products”.
These barriers will cause countries to have recourse to the WTO to have grievances resolved.
Apec is the oldest forum in the region but records of its success, especially for PNG is yet to be publicly disclosed.
The success may depend on the Free Trade Agreements PNG enters into with a member country and its responsibility to carefully and closely monitor to ensure that its products are safely exported to consumption in other Apec member countries.

The US and China
When President Donald Trump entered the White House, international trade rules seemed to have been challenged.
The first unfavourable move was the President’s withdrawal from the Trans-Pacific Partnership (TPP) in 2016 that left the body defunct.
The second move is the President’s threat to impose almost 54 per cent tariff on Chinese imports which amounts to over US$250 billion (K815 billion).
The US fundamentally claims that China is robbing it of its intellectual property rights which the WTO is not doing enough to protect.
US alleges that China is entering into join venture and partnership agreements with the US IT companies but discreetly manipulating and copying the technologies invented by the US companies.
Thus not respecting the US patents.
China is claiming there is no evidence.
Secondly, the US is claiming China is adopting a dumping tactic in which its products are dumped all over the world at a very cheap price than their actual labour costs.
Again, China rebuts in saying there is no evidence.
In this seemingly Trade War, China appears to have the upper hand in technology.
China has taken over most of the abandoned mines in the US and is extracting special resources such manganese and others used in the manufacturing of mobile phones.
Also, most Chinese manufactures of IT products are actually placed outside of China and even in the US.
This provides a leeway for China to avoid full brunt of trade restrictions imposed by US.
Further, China has in its foreign reserve of about US$3 trillion (K1.4 trillion) while US has US$120 billion (K390 billion).
This may be the reason why China keeps saying, “no one wins in trade war or cold war or hot war”.
This goes to explain, in some respect, the opposing sentiments strongly expressed by both countries in the recent Apec 2018 Business Leaders’ Summit in Port Moresby.
The failure to adopt an Apec Communiqué was orchestrated by China’s insistence that the present WTO rules should remain and that the Apec member countries should abide by them.
On the other hand, the US pushed for the Apec member countries’ endorsement to overhaul the WTO rules for the reasons stated above.
Both countries could not reach a compromise on this issue.
There were other geopolitical undercurrents at play at the Apec 2018 meeting but they are beyond the scope of these discussions.

What are the benefits of Apec for PNG?
It opens up opportunity for our government to negotiate and enter into trade agreements with most or few of the member countries on products or services we need or produce to be traded.
Hence, PNG needs to have robust international trade policy and legal frameworks to engage and take advantage of the opportunities presented by the international trade blocks such as Apec and others.

  • 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 specialises 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]