Following Russia’s military invasion of Ukraine on February 24, 2022, the United States and other major global economies have taken a range of actions to impose economic costs on Russia and Russian interests.  These actions initially consisted of economic sanctions targeting Russian companies and individuals, but have been expanded to include trade in goods.

On March 11, 2022, the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States), as well as the European Union, issued a statement announcing their intention to impose additional economic costs on Russia in response to its military invasion of Ukraine, including with respect to trade in goods.  The joint statement included a range of commitments aimed at isolating Russia from the world’s major economies and global financial institutions, including revoking Russia’s “Most Favored Nation” (MFN) status, which affords Russian imports access to favorable tariff rates among World Trade Organization (WTO) members, and imposing additional restrictions on exports and imports of “key goods and technologies” to Russia.

As discussed below, the United States, the European Union, and the United Kingdom have each taken steps to effectuate the G7 statement.  In addition to revoking Russia’s MFN status, thereby increasing the cost of Russian imports generally, these jurisdictions have all imposed certain product-specific restrictions on the importation and/or exportation of specific goods from and/or to Russia.  In certain instances, these measures have also been extended to cover trade with Russia’s ally Belarus.

 
Continue Reading Major Global Economies Take Aim at Trade with Russia Following Military Invasion of Ukraine

2021 was an eventful year for international trade law and policy in the EU, with developments in several key areas.

The EU strengthens its trade policy toolbox

In the light of the recent ongoing problems with multilateralism and the continuing rise of China, the EU focused hard on strengthening its trade enforcement toolbox in a wide variety of trade related areas. This includes the use of recent tools and proposals for new instruments:

  • The Amended Trade Enforcement Regulation entered into force on 13 February 2021. This greatly expands the EU’s capacity to adopt trade countermeasures against third countries. It can now do so even before dispute settlement proceedings at the WTO or under other international agreements have been concluded if these are blocked by the other party. This would include, for instance, situations where a trading partner appeals an adverse panel report “into the void” to the non-functioning Appellate Body at the WTO, as well as in relation to a broader range of violations. The Commission is due to undertake a review of the Trade Enforcement Regulation, to consider additional commercial policy measures in the field of trade-related aspects of intellectual property rights, by 13 February 2022.
  • The FDI Screening Regulation, which has been in force since the end of 2020, has led to a growing number of FDI mechanisms notified or updated by Member States to the European Commission throughout 2021 (see here). For the EU, which did not have a role in FDI screening prior to this, this mechanism is starting to become a game-changer. In November 2021, the Commission published its first annual report on the screening of foreign direct investments into the EU. Of the 265 cases notified to the Commission between 11 October 2020 and 30 June 2021, 80% were closed by the Commission in Phase 1, whereas 14% of cases proceeded to Phase 2, with additional information being requested from the notifying Member State (the remaining 6% were still under assessment on 30 June 2021). The Commission issued an opinion, with recommended measures, in less than 3% of the notified cases. Actual prohibitions of investments by Member States appear to be limited for the moment, although there have been such instances (like Italy’s prohibition of the proposed acquisition of control in LPE, an Italian semiconductor equipment company, by a Chinese company). Moreover, parties sometimes abandon envisaged transactions prior to a formal prohibition. The imposition of conditions appears more common.
  • On 5 May 2021, the Commission published its proposal for a new Regulation to address distortions by foreign subsidies. The Regulation introduces three new instruments that would give the Commission the power to investigate foreign subsidies granted to companies active in the EU and identify whether they are causing distortions in the EU single market. Should the Commission identify distortive foreign subsidies, it could impose redressive measures to counteract their effects (see our blog post describing the Commission’s proposal here). If adopted, which currently appears likely, it would give the Commission far-reaching new powers. The Committee on International Trade, the leading committee in charge of the file within the European Parliament, has released its draft report on the proposal on 17 December 2021, generally supporting the new instruments and suggesting additional protections against home-market monopoly advantages and known future subsidies.
  • On 8 December 2021, the Commission published a proposal for a new anti-coercion instrument. The aim of this instrument would be to deter and, if necessary, retaliate against third countries exerting economic coercion against the EU or its Member States in order to influence their political decisions and policy choices (see our blog post describing the Commission’s proposal here). This is another example of a novel instrument in the field of trade that would grant the Commission with robust powers to address trade policy issues.
  • Negotiations on a proposed new International Procurement Instrument have also progressed in 2021. This instrument would enable the EU to limit, on a case-by-case basis, access to its public procurement market by companies from third countries which restrict access to their own procurement markets by EU businesses. This would represent a significant overhaul of the EU’s current public procurement system, which is currently one of the more open ones globally.

Continue Reading EU Trade: 2021 Takeaways, 2022 and Beyond – What to Expect

2022 is shaping up to be a critical year for the Biden Administration regarding U.S. international trade policy.  In 2021, the Biden Administration made headway in resolving some of the challenges with United States’ allies that arose during the last Administration, and trying to build bridges in important regions that had perhaps had been neglected.  But in a number of other critical areas, and arguably in the most significant areas, the Biden Administration made little tangible progress over the past year.  The discussion below offers a look back at the key developments in 2021 with respect to U.S. trade relations with the EU, China, the rest of Asia and North America, and a look ahead at what could come in 2022.
Continue Reading The US International Trade Agenda: A Look Back, A Look Ahead

On 2 October 2020, India and South Africa submitted to the Council for Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) of the World Trade Organization (“WTO”) a proposed waiver from the implementation, application and enforcement of intellectual property (“IP”) rights under the WTO TRIPS Agreement (“COVID Waiver”) insofar as these rights relate to the prevention, containment, and treatment of COVID-19.  In essence, the COVID Waiver would allow WTO Members to forgo some protections of IP rights set out in the TRIPS Agreement in the hope that this waiver could speed up the production of affordable medical products including COVID diagnostic kits, vaccines, medicines, personal protective equipment and ventilators.

The proposed COVID Waiver has divided the WTO Membership.  While a majority of WTO Members have expressed support for the COVID Waiver, some developed countries (such as the EU, Korea, Japan, Australia and Singapore) have expressed reservations as to whether the COVID Waiver is necessary and whether it would actually help achieve the aim that it is intended to serve.Continue Reading Tensions Between Consensus and Voting in WTO Decision-Making – Part II: The Proposed Waiver on TRIPS and COVID-19

The United States has imposed trade restrictions on imports of solar cells and panels starting in 2012, and since then, the number and nature of these restrictions has grown.  The last several weeks have seen a potential for further increase and/or extension of these measures, further complicating trade in this critical component of alternative energy.

First, on September 2, 2021, a World Trade Organization (“WTO”) panel circulated its report in United States – Safeguard Measure on Imports of Crystalline Silicon Photovoltaic Products (DS562), upholding the Section 201 safeguard tariffs imposed by the United States on crystalline silicon photovoltaic cells (“solar safeguard”).  The solar safeguard is a 2.5GW tariff-rate quota that was imposed by the United States in 2018 on imports of solar cells from most countries.  The tariff was initially set at 30 percent, and was scheduled to be reduced by five percentage points each year in the subsequent three years (lasting for a total of four years).  China challenged the solar safeguard at the WTO, arguing that the U.S. International Trade Commission (“ITC”) failed to comply with the 1994 General Agreement on Tariffs and Trade (“GATT”) and the Agreement on Safeguards when conducting its safeguard investigation.  China argued that the ITC had failed to demonstrate that imports of products increased “as a result of unforeseen developments,” as required by the GATT, while also attacking the ITC’s analysis regarding the link between increased imports and serious injury.  The WTO dispute settlement body has historically been skeptical of safeguard actions, often finding them inconsistent with members’ obligations.  However, in this instance, the panel rejected all of China’s claims, and affirmed the reasoning of the ITC.Continue Reading U.S. Imports of Solar Products Face Increased Restrictions

There exists a deep-seated practice and tradition of resorting to consensus as the favoured means of decision-making at the World Trade Organization (WTO).  This practice was carried over from the time of its predecessor, the General Agreement on Tariffs and Trade (GATT).  This marked preference for decision-making by consensus over voting has been enshrined in Article IX:1 of the Marrakesh Agreement Establishing the WTO (Marrakesh Agreement) which provides that: “[t]he WTO shall continue the practice of decision-making by consensus followed under GATT 1947”.

However, Article IX:1 of the Marrakesh Agreement also states that: “[e]xcept as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting”.

Thus, while the Marrakesh Agreement formally recognizes consensus as the preferred means of decision-making, it also clearly recognizes the validity of taking decisions by voting as a subsidiary means when consensus is unattainable on any given matter.

As an added twist to decision-making at the WTO, Article IX:1 of the Marrakesh Agreement also establishes that: “[d]ecisions of the Ministerial Conference and the General Council shall be taken by a majority of the votes cast”.  In other words, majority voting was intended to be the default means of decision-making for the Ministerial Conference (MC) and the General Council (GC).

Nevertheless, in practice, voting at the WTO never takes place.  Instead, WTO Members have strictly adhered to consensus since the WTO’s inception.

In this three-part series, we intend to explore how the WTO Membership’s traditional aversion to voting as a means of decision-making is coming under fire and putting a strain on the proper functioning of the WTO.

Each part will in turn discuss the following three instances where significant pressure is currently building up on consensus as the exclusive means of decision-making at the WTO: (i) the appointment of Appellate Body (AB) members; (ii) the proposed decision to waive certain provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) with regard to combatting COVID-19; and (iii) the outcomes of negotiations on e-commerce, investment facilitation, micro, small and medium-sized enterprises (MSMEs) and the domestic regulation of services conducted as “joint statement initiatives” (JSIs).

This first instalment of our three-part series will focus on the appointment of AB members.Continue Reading Tensions Between Consensus and Voting in WTO Decision-Making – Part I: Appointing Appellate Body Members

Recent events at the World Trade Organization (WTO) illustrate how decision-making activities of its Dispute Settlement Body (DSB) can easily be derailed, notably by political frictions spilling over into its meetings.  However, the rarity of instances in which the DSB found itself paralysed underlines the extent to which the WTO has developed coping mechanisms which should enable it to keep such frictions at bay and thus minimize disruptions to its continued functioning.

The penultimate DSB meeting, scheduled for March 26, 2021 was suspended due to the lack of consensus required for the adoption of its agenda.  Rules applicable to DSB meetings require that its proposed agenda be adopted by consensus before a meeting can take place.  The proposed agenda circulated ahead of the March 26, 2021 DSB meeting included a request by Venezuela for the establishment of a dispute settlement panel in respect of U.S. measures.

The United States objected to the inclusion of what it perceived to be an illegitimate panel request, on the grounds that representatives of the Nicolás Maduro regime do not speak on behalf of the Venezuelan people, and that this was a misuse of the WTO aimed at challenging U.S. sanctions that sought to restore human rights and democracy to Venezuela.  As a result of the U.S. objection, the agenda could not be adopted and the DSB meeting could not take place.  All remaining items for consideration at that DSB meeting could not move forward as long as that DSB meeting remained suspended.  These included a request for the establishment of a dispute settlement panel by Australia regarding measures adopted by China in relation to barley from Australia.Continue Reading A Bumpy Road Ahead? How International Standoffs Periodically Hold the WTO Dispute Settlement System Hostage

On February 18, 2021, the European Commission (the Commission) published its Communication on an Open, Sustainable and Assertive Trade Policy which we previously analyzed in our blog post. Below, we look into the Communication’s Annex on Reforming the WTO: Towards a Sustainable and Effective Multilateral Trading System.

The Commission in its Trade Policy Review listed reforming the World Trade Organization (WTO) as a clear European Union (EU) priority. The Commission notes in the Annex that “Not only is trade vital for our economy; promoting rules-based international cooperation is the very essence of the European project. The EU must therefore play a leading role in creating momentum for meaningful WTO reform.”  Achieving this goal clearly will require engagement with other WTO members. In particular, the Commission calls on the United States’ support to unblock the current Appellate Body impasse and to cooperate closely on reforming all aspects of the WTO.  The Commission will also organize consultations with China and India to better align their WTO commitments with the size of their respective economies.Continue Reading The EU’s Approach to Reforming the WTO Towards a Sustainable and Effective Multilateral Trading System

The future direction of the World Trade Organization (“WTO”) hinges not only on the consensus agreement of the Members in appointing the WTO’s next Director-General, but also on the ability of that Director-General to forge a path forward to resolve the myriad issues currently facing the organization.

In August of this year, Roberto Azevêdo stepped down from his position as WTO Director-General, leaving his post open and eight candidates from around the globe in the running.  After months of campaigning, this pool was narrowed to two candidates: Nigeria’s Ngozi Okonjo-Iweala and Korea’s Trade Minister Yoo Myung-hee. On 28 October 2020, the WTO Committee Chairs of the selection process announced that Ms. Okonjo-Iweala was the candidate with the widest support. However, Ms. Okonjo-Iweala must be formally appointed by consensus by the General Council; a prospect that remains tenuous in light of the opposition of the United States. The United States was the only WTO Member to say that it would not support Ms. Okonjo-Iweala, but instead has reiterated that Minister Yoo “must” lead the WTO.  See USTR Statement on the WTO Director-General Selection Process.Continue Reading A New Year and a Potential New Era for the WTO