The right to self-determination in the world trading system

3. The right to self-determination in the world trading system

After about ten years of establishing the WTO, there are many issues concerned with the continuity of negotiation and the fairness of the game-rules in order to provide mutual benefit both to developed states and to developing states around the world. The issue of unfairness is conceived by some states between which emerge common interests such as the loser and the victim of the powerful states. This chapter will explain merely some issues that need to be taken into account in favor of the failure of the sovereignty concept in the world trading system. From another perspective, the struggle to obtain fairness and justice from the developing countries, becomes a sign indicating the necessity to the right in the future of the world trading system with more respect to the welfare of people in developing countries.

It is widely known that the WTO has brought a remarkable change to the international trading system. 42 In particular, regarding the free trade issue, it is a way to the substantial reduction of tariffs and other barriers to trade

and to the elimination of discriminatory treatment in international trade relations. Free trade has been a common term without a satisfactory explanation due to the ambiguity of the meaning. It is an economic ideological struggle from the developed countries to find new markets in other worlds. Free trade to some extent steadily become the misleading word for some people and become a good opportunity to the others.

Many partial explanations tend to bring the issue to be more complicated and more difficult to understand. 43

This definition is inspired from Islamic law definition, however, in Islamic Law there are five standard values, namely: Wajib; Sunnat; Makruh; Mubah, and Haram. 40 The Period of approximately 30 years (from 1974-2004) shows that the NIEO has not implemented in the real world. Obviously

this argument will weaken the notion of Lege De Ferende. 41 See a deep explanation regarding the issue of then development “ Special and Differential Treatment”, IISD Trade and development Brief, No 2 of series, Spring 2003, derived from www.iisd.org/trade on 15 February 2004. 42 Even Condon states that the WTO has been affected by the major issue in our lives, such as, Aids, terrorism, illegal immigration. see Bradly J. Condom. (2002). NAFTA, WTO and global business strategy: How aids, trade and terrorism affect our economic future. London: Quorum Books.

43 For example, Sokhom points out that Free Trade and GATT is itself in crisis due to not concerning itself to agricultural and service sector, see Sokhom, S ” The Trade War of the Twenty-first Century” In: Moncarz R. (Ed.). (1995). International Trade and

The New Economic Order. Pergamon: Oxford., p. 124.

Towards a new paradigm of the right to self-determination in the world trading system

The huge ambiguity in ‘Free Trade” terminology leads to a long explanation due to the euphoria of globalisation that deceives almost everyone in the world. What and where can be said ‘free’ if the system consists of many provisions that created by groups of countries, which automatically can not separated from their profit

and interests. 44 Its role can be seen as Jackson emphasized “The GATT/WTO was intended to reverse the protectionist and

discriminatory trade practice that had multiplied during the pre-war depression years and designed to help the advanced industrial countries achieve the multiple objective of full employment, freer and expanding trade and stable exchange rate.” 45

Free trade is merely a notion and interpreted by the developed countries in order to have free markets for their goods and services. However, the developing countries had to follow the rules underpinning the term. Even though some experts still believe that the developing countries can benefit from the free trade system, in reality, fair trade is still difficult to be proven objectively. Free trade, regarded by Jackson as one of the globalization pillars that reduces the world to a small village, borderless and the role of government is reduced in some

extend. 46 However, there is a double standard of the developed countries in order to gain more benefit from developing countries. Bhagwati points out that “The stones are to be thrown at the poor countries glasshouses by

the rich countries that build fortresses around their own” 47 Many issues often blame the domestic policies of the developing countries as a argument to maintain the

world order, such as Hudec stating that differences in national domestic policies seem to be causing the most significant problems in international trade relations, particularly Environmental Policy, Labour Policy 48 and

Competition Policy. 49 Moreover, those who consent to pure free trade without any Special and Preferential Policy for the developing countries. 50

Free trade entails the elimination of many various forms of discrimination between national economies. 51 This means that countries can easily invest and export goods and services to other countries.

The problem emerges when the standards of countries are different, particularly in the area of environment, labour and competition. 52 Each country seeks a high benefit without attention to the other. Thus, the issue of

See the interests of the groups of countries in the background of the WTO, provisions regarding accession procedures, decisions making, amendments the WTO rules, Dispute Settlement in Mitsuo Matsushita, et al. (2003). The World Trade Organization, law, practice, and policy. Oxford University Press, p. 2-14. Regarding problems of membership and accession in the WTO, see Carlos A. Mgarinos, et al. (Ed.) (2002). China in the WTO, the birth of new catching-up strategy. Palgrave Macmillan, Hampshire. Regarding dispute settlements that are still largely the province of the rich, see Kara Leitner and Simon Lester, WTO Dispute Settlement 1995-2002,

A statistical analysis, Journal of International Economic Law, Vol. 6, Number 1 March 2003, Oxford University Press, p. 259-260. 45 Jackson J H, et al. (2002). Legal Problem of International Economic Relations, Cases, Materials, and Text (Fourth edition), West

Group, ST. Paul, Minn, p. 200-201. See also Thomas and Meyer. (1997). The new rules of global trade, a guide to the WTO. Canada: Carswell, p. 2, 347-349. 46

47 Ibid., p. 209. See how the developed countries blame the developing countries, although transgressions are to be found in developed countries like in prohibiting child labour, See Bhagwati, J. (1995). Free trade, fairness, and the new protectionism, reflection on an agenda for

the World Trade Organization. The Institute of Economic Affairs for the Wincott Foundation, London, p. 31-32. 48 Low Labour standards in developing countries give much profits to the developed countries, as a result this has become an issue of

49 unfairness, see Ozey Mehmet et al. (1999). Toward a fair global labor market, avoiding a new slave trade. London: Routledge.

50 The Special and Differential Treatment is of benefit to developing countries, See Nottage, H. Trade and competition in the WTO, Bhagwati, J and Robert E. Hudec.(Ed.).(1996). Fair trade and harmonization: Prerequisites for free trade ? Vol. II, MIT , p. 1. pondering the applicability of special and differential treatment. Journal of International Economic Law, Vol. 6 Number 1 March

2003, Oxford university Press, p. 23. 51 Andree Sapir “ Trade Liberalization of Social Policies, Lessons from European Integration” in Bhagwati, J and Hudec, R.(1996),

Ibid, p. 179. 52 Bhagwati suggested to shape new leadership in the WTO “ …intellectual leadership, not the skill of political fixmanship” see Bhagwati, J. (1995). Op.Cit., p. 11.

Towards a new paradigm of the right to self-determination in the world trading system

unfairness is thereby conceived. For example, environmental problems include Health and Safety Regulations and Mistreatment of Animals. The problem arises when producers in high standard countries complain about an adverse effects and cost advantage for producers in low standard countries. It causes economic injuries to producers and workers. Moreover, Bhagwati explains that the fairness problem deals with difficulties in monitoring of one’s firm in a foreign country and a weakness country with lower standard

may object on grounds of “National sovereignty” 53 . The Fairness Norms questioned in two kinds. Firstly, the weakness of regulatory policies in other countries

gives the exporter of those countries an unfair advantage when they enter another country’s market. These complaints are usually labelled as “Social Dumping” or “Regulatory Subsidies”. Secondly, the unfairness claims

made against foreign laws, practice and institutions that impede one’s own exports to foreign markets. 54 Fairness concerns the ability of a country to feel and take in charge of the weaknesses of other countries. Hudec provides a

good statement regarding fairness within the WTO: “All nations have a tendency to distort the norms of fairness they apply to other countries. They assume that what they do at home is normal, natural, and pleasing to God, while at the same time feeling perfectly free to criticize superficially different practice of others that are no

rationale way distinguishable from their own”. 55 The “Birth Defects” 56 of the GATT has influenced the flaws in the WTO. Consequently, the struggle to

fairness in free trade has not yet been implemented instead of saying that the free and fairness is still jargon which does not have a substantial meaning. Relativism of understanding should be reduced as much as possible and the objectivism should be used in order to achieve the goal of human life in the world. The world economic order which is merely reserved for 20 % of the world population and disregard for the 80% as the rests has became a measure of the notion of the fairness, the developing countries and the least developed countries being trapped in

a ship driven by the developed countries. 57 The controversy between free trade and fair trade 58 can be seen from the diversity of world societies that

cannot be unified in the same rule such as Maduro emphasizes that “it is a reflection of the social self determination of the different political communities and it is considered as ideological rhetoric.” 59 He argues that

either the policies of free trade or fair trade challenge the social self-determination of their political communities, so how to balance the economic gains of free trade with the social values inherent in the ideals of fair trade. 60 It

needs a considerable effort to bring about free trade and social right simultaneously. It seems reasonable to look at the extent to which it can be called as ‘free trade’ or ‘fair trade’. There are

53 Bhaghwati, J. and Robert E. Hudec. (1996). Op. Cit., p. 16. also in another book Bhagwati describes a Globalization as “ The Wind of the Hundred Days” that explored how social agenda cannot be adopted in the free trade process. See Baghwati. (2000). The 54 wind of the hundreds days: How Washington mismanaged globalization, MIT, USA. Bhagwati and Srinivan, T N. (1996). Trade and environment: Does environmental diversity detract from the case for free trade? In: Bhagwaty, J and Robert Hudec. Ibid, p. 12.

55 Bhaghwati, J and Robert E. Hudec. (1996). Op.Cit., p. 16. 56 The term used by Professor Jackson, see complete explanation in Matsushita, M et al. (2003). Op. Cit., p. 3.

57 See a whole speech from Fidel Castro Ruz, Neo-liberal globalisation and The Third World, the speech presented in the opening summit Conference of the 77 groups’ countries in Havana, 12 April 2000. Derived from www.come.to/indomarxist.com on 14th January 2004.

58 Bhagwati said that “fairness, like beauty, is in the eye of the beholder”, See Bhaghwati J and Robert E. Hudec. (Eds.). (1996). Fair trade and harmonization: Prerequisites for free trade? Vol. II, MIT, p. 10.

59 Maduro, M P. (2001). Is there any such thing as free trade or fair trade, a constitutional analyses of their impact of international trade on the European Social Model. In: Burca & Joanna Scott. (2001). The EU and the WTO: Legal and constitutional issues, Hart

Publishing, Oregon. p. 258. 60 Ibid.

Towards a new paradigm of the right to self-determination in the world trading system

many reasons 62 for observing the WTO concerning free trade and fairness. Some of them are as follows; firstly, the WTO is a new international institution which still needs more feedback in order to embody its goals in the real

world. As stated by Jackson, the WTO is still “a modest step forward with regards to the institutional structure” 63 . Secondly, the background of the WTO as the successor 64 of GATT is dominated by the developed countries and

their interests. Therefore, there are assumptions that the WTO is merely an extension of the developed countries and huge trans-national companies. Rugman supports this “The reality of the WTO is that it is a bargaining forum

dominated by the US and Western Europe 65 . Thirdly, social, labor and environmental problems regarding free trade are an urgent issue nowadays due to the overwhelming profit interests from a wide market which was

restricted before. Fourthly, the developing countries still have difficulties in representing their economic interests and using their rights as the members of the WTO in comparison to developed countries that have more powerful

and well-prepared delegations 66 . Fifthly, free trade as a significant point of the WTO is a universal agenda that still has basic problems among the countries in ‘justice’ frame. Sixth, it is an assumption that there is an overlapping

role between the WTO and the UNCTAD 67 in ordering trade regulation among countries. Seventh, according to Makuch 68 , this institution has experienced a closed system since its ancestor the GATT was established in 1947, so

he hopes wide changes will be carried out towards a more open and beneficial situation to the others. Narakar believes that the bargaining coalitions of Developing Countries in the GATT and WTO, from 1982

to the present day, with a focus on the Uruguay Round as a case study shows that developing countries 69 have difficulties in forming coalitions before negotiation which has an influence both in internal coherence and external

weight before they can reach the stage of bargaining. The different interests of each country, as well as identity should seek an appropriate type of coalition. The sustainability and effectiveness are two key factors that she

suggests to be found in each coalition in order to achieve optimal advantage. 70

Compare with “ 10 Common Misunderstandings about the WTO”. This article contains counter arguments against 10 misunderstandings about the WTO; unfortunately, there is not enough evidence to support it, These are actually the problem faced by 62 the WTO, not “misunderstandings” retrieved on 6/9/2003 from www. Wto.org/English/res_e/doload_e/10mis_e.pdf. See Jackson, J H. (2000). The jurisprudence of GATT and the WTO, insights on treaty law and economic relations, Cambridge

University Press, p. 410-411. 63 Ibid. p. 411. Irwin also stated that “ The world trading system is far from perfect, and many reforms and changes in rules should be

under discussion”. See Douglas A. Irwin. (2002). Free trade under fire. Princeton University Press, USA, p. 228. 64 Apposes the popular belief that the WTO replaced the GATT due to an amended GATT remains is one of legal pillars of the world’s trade and investment systems, see Alan M. Rugman. The World Trade Organization and the international political economy. In: Alan M. Rugman and Gavin Boyd. (Eds.). (2001). The WTO in the new global economy, trade and investment issues in the millennium round, Edwar Elgar, UK, p. 3.

65 Alan M.Rugman. The World Trade Organization and the international political economy. In: Alan M. Rugman and Gavin Boyd. 66 (Eds.). (2001). Ibid., p. 6. According to Amrita Narikar, there are four pillars underlying WTO decision-making processes: one-member-one-vote principle, consensus-based voting, member-driven character, and the importance of informal processes, these latter three caused the developing

countries to encounter many difficulties in meeting processes, see Amrita Narikar. WTO decision-making and developing countries. Retrieved on July 27, 2003 from World Wide Web: http://www.southcentre.org/info/southbulletin/bulletin 26/bulletin2… 67

The United Nations Conference on Trade and Development (UNCTAD) is the principal organ of the General Assembly in the field of Trade and Development. It was established as a permanent intergovernmental body in 1964 in Geneva, in order to accelerate economic growth and development, particularly, that of the developing countries. See Mahomet Arda. The United Nations Conference on trade and development. In: Jacob Wersment. (Ed.). (1996). Greening international institution, London: Earthscan Publication, p. 71. 68

Makuch, Z . The World Trade Organization, General Agreement on Tariffs and Trade. In: Jacob Werksmen. (1996). Ibid. p. 94. 69 There is no WTO definition of “ Developing Countries” or “ Developed Countries”. For “Developing Countries” there is a degree

of self selection, whereas “ Least Developed Countries” are defined according to the UN list, namely 49 countries, among them: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Cape Verde, Central African Republic, Chad, Comoros, etc., see www.unctad.org/templates/countries.asp?intltemID, retrieved on Sept. 6, 2003. 70

See Narlikar, A. (2003). International trade and developing countries, bargaining coalitions in the GATT & WTO. Routledge, USA and Canada, p.197.

Towards a new paradigm of the right to self-determination in the world trading system

Free trade is a faulty theory of misunderstanding of freedom. Non- tariffs are not always useful if domestic rule not sufficient enough. We need to consider that we are not the same condition but have the same right to life. Every country has their own characteristics. Therefore, it is highly worthy to give preference to such countries. Even discrimination is regarded as fairness in many cases, due to

differentiations among countries. 71 The failure of scholars in understanding the realities has widened the gap between fairness and free trade on

one side with the reality of world trade on another side. 72 Even, people such as Thabo Mbeki, the president of South Africa points out that “Free trade system might perpetuate global apartheid that locks certain people into a

position of poverty, unequally and disenfranchisement, the accident of birth into particular nationality has affected to the life opportunities”. 73

Matsushita said that at the beginning of the twenty-first century, the world trade organization is facing three fundamental challenges. First, it must reform its own internal structures and decision making to address adequately the needs of the future. Second, it must respond to the demands of civil society and integrate broader social concerns into its agenda. Third, it must address the problem of poverty and become more responsive to the

needs of developing countries. 74 All the problems above show that the world trading system poses a basic problem relating to the demands of

justice and welfare from the developing state and the oppressed people. Hence, it seems that the WTO is a provisional means to reaching that goal. Furthermore, the concept proposes that the sovereignty of the state can be negotiated in the world trading system. However, in reality the state cannot release their sovereignty automatically without any advantages. The power to drive the world cannot be avoided from the right to self determination of the state in order to achieve justice and welfare throughout the earth.

The right is a basic means in order to create sovereignty of territory, politics and economy, but sovereignty worth considering fails when facing free trade and globalization 75 . Accordingly, the right will be needed even

more to maintain sovereignty and to adjust to free trade. The difference between sovereignty and the right to self determination is that the right is active in nature. Meanwhile sovereignty is passive in the frame of International

Law. 76 In other words, when the sovereignty fails the right is required again. The existence of state sovereignty does not mean erasing the right to self determination to some extent. The

See Mathis, James H. (2002). Regional trade agreements in the GATT/WTO, article XXIV and the internal trade requirement. T.M.C. Asser Press. 72 The core problems remain unresolved, such as perennial problems of unemployment, underemployment, growth and development, trade, sovereign debt, regional integration and so on. See Raul Moncarz. (Ed.). (1995). International trade and the New economic order. Oxford: Pergamon, p. 1-2. 73

See Joel P. Trachman. Legal aspects of a poverty agenda at the WTO: Trade law and ‘Global Apartheid’. Journal of International 74 Economic Law, Vol. 6 Number 1 March 2003, Oxford University Press, p. 4.

75 Matsushita, M, et al. (2003). The World Trade Organisation law, practice, and policy, Oxford University Press, p. 589. The theory of sovereignty which from the right to self-determination signifies the absolute power of an independent state in relation to other states. However, International Law is concerned with the establishing the legal mechanism of the relation. The

friction of sovereignty into internal and external sovereignty means that each state can determine their own way politically, economically without undue external interference. However, the internal is absolute whereas the external is not absolute. Actually this friction does not show an appropriate meaning. The sovereignty remains absolute, but there is a limit when related to other states. See Hinsley, F. H. (1986). Sovereignty. Cambridge: Cambridge University Press, p. 54. 76

The doctrine of sovereignty developed in two distinct dimensions: the first is concerned with the “ internal”, the second with the “ external” aspects of sovereignty. The former involves the claim that a person, or political body, established as a sovereign rightly exercises the “ supreme command” over a particular society. Government–whether monarchical, aristocratic, or democratic–must enjoy the “ final and absolute authority” within a given territory. The latter involves the assertion that there is no final and absolute authority above and beyond the sovereign state. States must be regarded as independent in all matters of internal politics and should in principle be free to determine their own fate within this framework. External sovereignty is a quality that political societies possess in relationship to one another, it is associated with the aspiration of a community to determine its own direction and politics without undue interference from other powers. Hinsley, F. H. (1986). Sovereignty, (2nd ed). Cambridge: Cambridge University Press. p. 124.

Towards a new paradigm of the right to self-determination in the world trading system

state is very much concern and prefers to use sovereignty of state rather than-self determination. Surprisingly the right usually is still used by the groups of people who claim depression by states such as minorities, indigenous and ethnic. The state is afraid to use the right to self determination for the people in its territory or merely undermining it as internal self-determination. Further, the state has attempted to use the right in facing the domination of developed countries. These are well-known as the struggle of the new international economic order which is emerging due to the unbalancing of economic power in the world order. However, the right was not adopted by international law as the continuity or the partner of people’s self determination.

The right is not merely intended to establish sovereignty of state, but also to establish the long term aim: That is the right to welfare. This right is more obvious as well to show the intention of International Law to promote economic justice around the world. The right is not meant as a one side meaning, but a reciprocity of meaning, that is the obligation of another side to fulfill the right of the other.

In sum, the right currently contains three elements. First the group of oppressed people in the independent state (politically), the group of oppressed states in the world trading system which has not had sufficient benefits from their sovereignty (economically). Also the depressed people of the world economically and politically, such as Palestinian or small poor countries that have no ability to gain access to world system. The latter two must be taken into account in the twenty first century besides the first one.

Hence, nowadays, the right is needed in order to create the welfare of people. So the trading system should adopt the right to self determination of the states and also the poor people in the world as duties countries have. So, free in terms of trade with the obligation to share the benefit to the “have not” countries.

Meanwhile, theoretically, at the heart of this shift is the human rights regime 77 . The human rights regime consists of overlapping global, regional, and national conventions and institutions. 78 Three interrelated features of

the regime are worth dwelling on: (1) the constitutive human rights agreements; (2) the role of self determination and the democratic principle that were central to the framework of decolonisation; and (3) the recent recognition of the rights of minority groups.

The barriers for trade are not necessarily barriers for justice and welfare. To bridge the this gap the concept of human rights, in particular the right to self determination of state and people should be taken into account. From a free trade perspective, domestic law has been a barrier but from a justice perspective International Trade Law has been a barrier as well.

The reality above shows that the action to self determination can not be avoided, even though the WTO did not admit it, the right is automatically inherent in the body of people and states. Before explaining in detail how

the right to self determination work at the WTO, below are the principles 79 of the WTO law: Most Favoured Nation Treatment (MFN). This is governed in Article I GATT 1994. This principle means that

a state cannot give preferential treatment like tariffs to other states. All treatment has to be equal and non discriminatory. This is the basic principle of the world trading system 80 .

78 Held, D. and McGrew, A. (Eds.). (2000). The global transformation reader. Cambridge: Polity Press, p. 35. 79 Donnelly, J. (1998). International human rights. (2 nd edition). Boulder, West View Press, p. 58 It is noted that the basic document of the world trading system drafted by the United States, see GATT, analytical index: Guide to

GATT law and practice. (1994). ( 6 th 80 edition). Geneva, p. 3.

Article I GATT: With respect to customs duties and charges of any kind imposed on or in connection with importation and exportation or imposed on the international transfer of payments for imports or exports, and with respect to the methods of levying such duties and charges, and with respect to all rules and formalities in connection with importation or exportation, and with respect to all matters referred to in Paragraph 2 and 4 of Article III, any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties. GATT, analytical index: Guide to GATT law and practice. (1994). ( 6 th edition). Geneva, p. 24.

Towards a new paradigm of the right to self-determination in the world trading system

Tariff binding is governed in Article II GATT 1994. Each member has to make a list of tariffs for its products and entrance fees. This is aimed for predictability in international trade and states can not change or increase tariffs unilaterally. 81

Article II GATT 1994 also gives limited exception XXVIII with condition: The government of (contracting parties) will as soon as possible enter into negotiations or consultations

pursuant to paragraph 1 to 3 of Article XXVIII and article XXV. The negotiations or consultations mentioned above shall be completed not later than certain date. Pending the entry into forces of the result of the negotiations or consultations mentioned above, the other

contracting parties will be free to suspend concessions initially negotiated with [contracting parties] to the extent that they consider this adequate compensation is not offered by the government of contracting party. 82 The

concession shall include factual information: date of original waiver; date of submission of document; number of extensions and dates when granted; number of countries with which article XXVIII negotiations have been initiated; numbers of countries with which article XXVIII negotiations have been concluded; status of outstanding

article XXVIII negotiations as well as a general outline of relevant problems, if any. 83 National treatment. This principle is governed in article III GATT 1994. The principle is not allowed to make

any discrimination between or among domestic products and imported products in the frame of protections such as, regulation, conditionality of buying and selling, transportation and distribution. 84 The article actually specifies

the MFN principle in the context of non discrimination. The protection of domestic industry permitted is only by tariff, Article XI GATT 1994. 85

Special and Differential Treatment for developing countries. Article V of GATT 1994: Freedom of transit also violates the territorial sovereignty of contracting parties, but much more important is the compliance of the Article. The right to self determination is obviously eroded in this case, so if there is a violation from developed countries, the developing countries cannot do anything if the right to self determination has not been adopted. It

can be viewed at Article VI regarding Anti-dumping and Countervailing Duties 86 These principles require the member countries to obey the agreement in international forum. The right, that

for the time being is known as sovereignty of states, could not react to the principles above, due to the fact that the state having given a part of their sovereignty to the other states by signing agreements. The right to self

Article II GATT: Each contracting party shall accord to the commerce of the other contracting parties treatment no less favourable than that provided for in the appropriate part of the appropriate schedule annexed to this agreement”.

83 For example. Waiver decisions on “ Indonesia-Establishment of new schedule XXI” L/6331. GATT, analytical index: Guide to GATT law and practice. (1994). ( 6 th edition). Geneva, p. 98. 84 Article III GATT 1994: The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and

requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.

85 Article XI GATT 1994: No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of

any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party. 86

Article VI GATT 1994: The contacting parties recognize that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry. For the purpose of this article, a product is to be considered as being introduced into the commerce of an importing country at less than its normal value, if the price of the product exported from one country to another (a) is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, or (b) in the absence of such domestic price, is less than either…

Towards a new paradigm of the right to self-determination in the world trading system

determination basically still exists implicitly in particular when the action looks unfair. The Special and Differential Treatment for developing countries is a part of the right to self determination for oppressed states in order to reach or approach justice that has become the goal of international law. The right in the world trading system based on a group of states concerned to compete with other groups of

states can be seen in many exceptions contained in the GATT principles 87 : Article XXIV GATT 1994 allows the members to make bilateral, regional treaties and customs unions as

long as they are not harmful to others. General exception. Article XX (b, e) allows member states to protect healthy human beings, animals, plants,

immoral goods, conservation, heritage/ cultural values and gold trade. 88 Article VI anti-dumping and subsidy agreements allow the members to impose entrance fees as a

compensation for the firm evidently dumping and subsidies. Article XIX, safeguard action agreement allow a member state to impose quota for import in order to protect domestic industry . Safeguard actions to handle the balance of payments. To forbid the import of evidently harmful diseases for human beings, plants and animals. In addition, the agreement on the application of Sanitary and Phytosanitary Measures (the SPS agreement)

which has promulgated to interpret Article XX (b). An evolutionary approach could interpret the article XX (a) public moral exception to embrace both Jus Cogens norms and human rights norms that are mutually binding a state by treaty. This name could include the prohibitions against systematic racial discrimination, slavery, forced labour, and exploitative child labour. Article XX (b) human life exception could be understood to embrace fundamental human rights values such as prohibitions against genocide, summary execution, disappearance,

crimes against humanity and the execution of juveniles. 89 The developing countries has the right to be equally treated by other countries (non discrimination), in tariff,

non tariff and national treatments. In addition the developing countries have the right to settle disputes with other members that has harmed their interests. The WTO agreement can help the developing world to protect themselves against domestic products from unfair imports. Another point is that the developing countries can determine the members of the next trade agreement meeting. It is not undertaken if the countries are not involved in the WTO. To examine to what extent the right to self determination is used in the world trading system; below it will be described specifically.

A. Most-Favoured Nation The Most Favoured Nation concept (MFN) has been a central pillar of the WTO rules. The concept GATT Article I requires members to give unconditional Most Favoured Nation status(for example: Equal market access)

Cottier, T. (2002). Trade and human rights, a relationship to discover. Journal of International Economic Law, Vol. 5, No.1 March 2002, p. 111-132.

88 Article XX, entitled “General Exception” provides the following relevant points: “Subject to the requirement that such measure are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the

some conditions prevail, or disguised restriction on international trade, nothing in this agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: necessity to protect public morals, necessity to protect humans, animal or plant life or health, relating to the import and export of gold or silver, relating to the product of prison labour, imposed for the protection of national treasures of artistic, historic or archaeological value, relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption, security 89 exceptions”. Sarah H. Cleveland. (2002). Human rights sanction and international trade: A theory of compatibility. Journal of International

Economic Law, Oxford University Press, p.162.

Towards a new paradigm of the right to self-determination in the world trading system

to ‘like’ 90 products from all other GATT members. The Article III National Treatment requirement in turn bars discrimination between a party’s own products and ‘like’ 91 products of another member state.

The GATT trade liberalisation system seeks to eliminate unilateral trade barriers that undermine free trade. This goal is accomplished through 2 primary mechanisms: Article I and III, which prohibit non tariff barriers to trade, Article XX and XXI of the GATT, in tern create exceptions to the GATT requirement of promoting certain non- trade values, such as human life and health, public morals, the prohibition against prison labour, and national

security. 92 On the other side, the exemption of the MFN principle is commonly used by countries in different ways such as the ‘Belgium Family Allowance’, ‘Accession of Hungary’, ‘EEC Programme of Minimum Import

Price, Licences and surety deposits for certain processed fruits and vegetables’. 93 In addition to Article I, the general agreement contains a number of other Most-Favoured-Nation or Non-Discrimination Clauses. 94 It is

certainly the case that the MFN is a cause for the emergence of the right to self determination of many countries. Even the United States itself. The implications of the MFN are a big dilemma for weak countries and to some extent it will give an advantage solely to the developed countries. Meanwhile, a decision on the “Generalized System of Preference” of 25 June 1971 has waived the provisions of Article I for a period of ten years in accordance with Article XXV: 5, Article XXII. The limited time of waiver from MFN principle indicates that the developed countries cannot give absolute freedom as the required by the self-determination principle.

The disagreement of MFN principles can be seen with the first agreement on trade negotiations among developing member countries of the Economic and Social Commission for Asia and the Pacific (Bangkok Agreement) 14 March 1978. It was drafted by the working party which examined the provisions of this agreement, and was concluded between Bangladesh, India, Laos, Philippines, Republic of Korea, Sri Lanka and Thailand. The report of the working party record that the spokesman for the parties to the agreement stated: ‘That article I,

XXIV and XXXVII of the General Agreement all had equalled force. In the Bangkok Agreement, the participating States were fulfilling the commitments and undertakings accepted by developing contracting parties in Part IV of the General Agreement in a manner which was consistent with their individual development, financial and trade

needs…’ 95 The third, Trade Expansion and Economic Co-Operation Agreement of 14 November 1968, a trade arrangement between India, the United Arab Emirates and Yugoslavia provided that the three participating

contracting parties may implement trade expansion and economic cooperation agreements between themselves notwithstanding the provision of Article I:1 subject to certain conditions and procedures including a renewal at the

Twenty Sixth Session. This decision has been renewed successively since 1983. 96 The fourth: Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries (Enabling Clause), 97

“…Any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties” GATT Article I. 91

“The Products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to ‘like’ products on national origin in respect of all laws, regulation and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution, or use…” GATT Article III.

92 Cleveland, S H. (2002). Human rights sanction and international trade: A theory of compatibility. JIEL, Oxford University Press, p. 133-189. 93

94 See complete explanation in GATT, analytical index: Guide to GATT Law and Practice. (1994). (6 th edition). Geneva, p. 34-35. GATT, analytical index: Guide to GATT Law and Practice. (1994). (6 th edition). Geneva, p. 44.

96 25 S/6 quoted in GATT, analytical index: Guide to GATT Law and Practice. (1994). ( 6 th GATT, analytical index: Guide to GATT Law and Practice. (1994). ( 6 edition). Geneva, p. 51. th edition). Geneva, p. 52. 97 The decision of contracting parties of 28 November 1979, insofar as it provides for departure from Article I of general agreement, provides as follows,(1). Notwithstanding the provision of article I of the General agreement, contracting parties may accord differential and more favourable treatment to developing countries, without according such treatment to other contracting parties…See GATT, analytical index: Guide to GATT Law and Practice. (1994). ( 6 th edition). Geneva, p. 53.

Towards a new paradigm of the right to self-determination in the world trading system

Preferential Arrangements notified under the Enabling Clause as of March 1994.

B. Special and Differential Treatment (S&D) 98 S&D is merely a result of the struggle of the right to self determination. Article 1 of the provisions states

“…the provisions of Paragraph 1 of Article I of the GATT 1994 shall be waived until 30 June 2009, to the extent necessary to allow developing country Members to provide preferential tariff treatment to products of least-developed countries, designated as such by the United Nations, without being required to extend the same tariff rates to like products of any other Member”.

There are two problems with this document. First, the absence of developed countries to give preferential treatment is limited until 30 June 2009, and the absence of certain treatment. 99 The former mentioned that the S&D

is only a problem between the developing countries and the least developed countries. It is not signified that the developed countries will open market for the other. Mentioning the developing countries to give S&D to least developed countries cannot solve the problem of the imbalance of economic power in the world, even it causes problems for developing countries to adjust their economy. The later regards the timing showing that poor countries have to hang onto the other. The last one considers that there is flexibility for countries in negotiating, however, somehow, the powerful still win the game, so the S&D treatment has not solved the problem yet.

It has not solved the real problem between the developed countries that have a good product to export and in the meantime the developing and least developed countries merely market for them. From this provision, clearly, the right will be useful to compensate against economic dominance from developed countries.

The General Council shall review annually whether the exceptional circumstances justifying the Waivers still exist and whether the terms and conditions attached to the Waivers have been met. 100 This principle has given the

right to least developed countries to gain more benefit from the trading system. This exception should be regarded as essential in current circumstances where the domination of some countries cannot help others that lack of human resources or natural resources. The argument against S&D has dominated by scholars from the West such

as Hunter Nottage 101 who agrees that it should not be considered rational in terms of the real conditions of human beings which differ in economic capability, human resources and natural resources.

The concept of S&D has been at the forefront of efforts of the GAT T and the WTO to facilitate the integration of developing countries into the multilateral trading system. The concept has assumed renewed pertinence following the Doha conference, with Ministers mandating that the WTO’s future work shall “take fully

into account the principle of special and differential treatment” 102 including consideration of “how special and differential treatment may be incorporated into the architecture of the WTO rules” 103 .

The concept is regarded as the challenge to Most-Favoured Nation principle which should be reciprocal and

98 The World Trade Organization, Preferential Tariff Treatment For Least-Developed Countries, Decision on Waiver, adopted 19 June 1999, WT/L/304, 17 June 1999 (99-2452) Article 1 “Subject to the terms and conditions set out hereunder, the provisions of

paragraph 1 of Article I of the GATT 1994 shall be waived until 30 June 2009, to the extent necessary to allow developing country Members to provide preferential tariff treatment to products of least-developed countries, designated as such by the United Nations, without being required to extend the same tariff rates to like products of any other Member”.

99 Preferential Tariff Treatment for Least-Developed Countries, Decision on waiver Adopted on 15 June 1999, WT/L/304, 99-2452, derived from http://www.wto.org/english/docs_e/legal_e/waiver1999_e.doc on 22 July 2004.

100 Article 4 of Preferential Tariff Treatment for Least-Developed Countries, Ibid.

See Nottage, H. (2003). Trade and competition in the WTO: Pondering the applicability of special and differential treatment, Journal of International Economic Law, 6(1), Oxford University Press, p. 23-47.

103 WTO Ministerial Declaration, Ministerial Conference, 4 th session, 14 November 2001, WT/MIN (1)/DEC/1, Paragraph 23. WTO implementation –Related issues and Concerns, Ministerial Conference 4 th Session, 14 November 2001, WT/MIN (1)/17 Paragraph 12.

Towards a new paradigm of the right to self-determination in the world trading system

equal. Hunter Nottage highlights that the international community sought to accommodate the specific concerns of developing countries in the period between the early 1950s and the 1980s and this was heavily influenced by the consensus prevailing at the time regarding the type of trade strategy best suited to meeting developmental

objective. 104 However, the concept is regarded as an implication of the intention of the developing countries to gain a

balanced position in trade negotiations in which the developing countries still feel uncomfortable to sit in at the same table with the developed states. It signifies the right to self determination of developing countries in the face of trade hegemony, but the concept merely provides for special treatment under supervision of the WTO that is dominated by developed countries.

In 1971, the GATT members adopted a ten year waiver to GATT Article XXV that permitted member states to give more preferential treatment to less-developed countries, in 1979 the members adopted a decision allowing “Differential and more favourable treatment to developing countries that eliminated the need for extension of the GSP waiver”. 105

C. Safeguard measures Safeguards or safeguards measures has been used to denote certain restriction on import of an emergency nature, irrespective of the importing member’s obligation under its concession. Safeguard measures are distinguished from some other forms of import restrictions such as antidumping actions and countervailing duties

that are applied on the basis of “unfair” trade practise of exporters 106 . Safeguards are applicable as a temporary measure, where increased imports cause or threaten to cause serious injury to domestic industry, regardless of the

existence of any unfair trade practice on the part of exporters. 107 The justification from safeguard measure is somewhat controversial, particularly in relation to the economic rationale. 108

Article XVI GATT regarding subsidies, seems to control domestic policy from any subsidies on their domestic product. A state is required to negotiate its subsidies with the contracting parties 109 . There is an odd

action in this case, where subsidies are really needed by developing countries that poorly performing industries, but it should be negotiated with developed countries that are fully established industrially. In adverse circumstances, developed countries still insist on subsiding to their products and at the same time they force developing countries to reduce subsidies. This view makes the article partially give advantages to developed countries, in particular when there is a bargaining power imbalance.

Article XVIII regarding Governmental Assistance to Economic Development, GATT, provides more opportunity for the state to use the right to self determination to pursue their economic interests. However it

104 Nottage, H, Op.Cit, p. 24-25. 105 Jackson, J. (2000). The jurisprudence of GATT and the WTO, Cambridge University Press, p. 65-66. 106

Restriction to Safeguard the Balance of Payments, article XII GATT 1994: “ Notwithstanding the provisions of Paragraph 1 of Article XI, any contracting party, in order to safeguard its external financial position and its balance of payments, may restrict the quantity or value of merchandise permitted to be imported, subject to the provisions of the following paragraphs of this article”. 107 Yong Shik Lee. (2003). Safeguard measures in world trade, the legal analysis. Kluwer Law International, London, p. 3 108 Yong Shik Lee, Ibid, p. 5. 109 Article XVI GATT: “ If any contracting party grants or maintains any subsidy, including any form of income or price support,

which operates directly or indirectly to increase exports of any product from, or to reduce imports of any product into, its territory, it shall notify the contracting parties in writing of the extent or the nature of the subsidization, of the estimated effect of the subsidization on the quantity of the affected product or product imported into or exported from its territory and of the circumstances making the subsidization necessary. In any case in which it is determined that serious prejudice to the interest of any other contracting party is caused or threatened by any such subsidization, the contracting party granting the subsidy shall, upon request, discuss with the other contracting party or parties concerned , or with the contracting parties, the possibility of limiting the subsidization”.

Towards a new paradigm of the right to self-determination in the world trading system

merely works for that “which can only support low standards of living and are in the early stages of development”. The interpretation of the provision will determine to what extent the right to self determination can be used 110 .

Article XIX is concerned with emergency action on imports of particular products, meaning that the right of the state to take an action “self defence” of their interest from damages caused by imported products. However, such emergency action can also used by other contracting parties and therefore, the dispute of the meaning of

emergency action is vague, vulnerable and only used by the powerful. 111 The WTO System requires members to commit themselves to their previously agreed import concessions and

does not, in principle, allow withdrawing or modifying their concessions unilaterally without re-negotiation. Nevertheless, certain exceptions to this principle are found in GATT/WTO rules, and the notable ones are those restrictions on imports often characterized as “administered protection” such as anti-dumping measures, countervailing duties and safeguard measures. Anti-dumping and countervailing are caused by unfair treatment from exporter countries. The justification for anti-dumping measures and countervailing duties is that exporters who sell below their costs or receive certain trade related subsidies from their government enjoy unfair competitive advantages. Therefore, the importing countries should be allowed to apply counter measures to offset these unfair advantages. Agreement on Safeguards, Article 2, “Safeguards measures are applied to remedy or prevent serious injury to a domestic industry that is caused by increases in imports”. However, safeguard measures are regarded as temporary protection. The maximum stretch of safeguard measures under the WTO agreement on

Safeguards is 8 years including a one time extension (Art. 7.1 and 7.2). 112 Article 5.1 of the agreement on safeguards provides that a member shall apply safeguard measures only to

the extent necessary to prevent or remedy serious injury and to facilitate adjustment. However the provision does not specify the permissible amount of quota or the tariff rate. Therefore the adequate level of protection would be subject to determination by the government. The existence of safeguard measures can be perceived as a safety net for the survival of domestic industries. Through safeguard measures the government has the right to self-determination to protect their domestic industries from market hegemony. Even though it is temporary, but the right still has to be respected in small areas.

Safeguard measures give a chance for the state to temporary self-determination and it can not be guaranteed that a different type of self determination will emerge if the state still feels unfairly treated in trading that harms its domestic interests. To some extent it functions as a form of self-defence from trade attacks and economic attacks. So basically the right to self-determination will always exist when there it is unilaterally forced by another state.