Toward Synergistic Building Blocks: Social Regulations under RTAs and Their Ramifications to the Global Trading System

1. Toward Synergistic Building Blocks: Social Regulations under RTAs and TheirRamifications to the Global Trading System Seminar on Regionalism and the WTO WTO Headquarter (Geneva, Switzerland), November 14, 2003 SUNGJOON CHO Assistant Professor of Law Chicago-Kent College of Law Illinois Institute of Technology Chicago, Illinois, USA

2. Roadmap Introduction I. The Structure of Inquiry II. Four Scenarios III. Current Legal and Institutional Apparatus IV. Evaluating the Status Quo V. Suggestions Conclusion

3. Introduction • A Problematic Blend of Two Phenomena 1. RTAs in the Surge plus U.S.’ Post-Cancún Drive toward Regionalism / Bilateralism (Source: WTO Secretariat)

4. 2. Social Regulations in the Surge “For each Member country, it contains over 1100 observations, both quantitative and qualitative. The areas covered are economy-wide regulations concerning product markets: … barriers to international trade and investment ;…” (Source: The OECD International Regulation Database)  Diversion, Distraction, Fragmentation and Disintegration

5.  Doha Declaration “Negotiations which shall aim … to reduce or, as appropriate, eliminate … non-tariff barriers” (Para. 16) “Negotiations aimed at clarifying and improving disciplines and procedures under the existing WTO provisions applying to RTAs” (Para. 29)

6. I. The Structure of Inquiry • Two Interwoven Issues of Social Regulations and RTAs 1. Social Regulations (Standards, Technical Regulations and SPS Measures) : Free Trade v. Regulatory Autonomy  Synergy / Positive-Sum (efficient, predictable yet still achieving certain legitimate policy objectives) 2. RTAs : Multilateralism v. Regionalism  Building Block

7. II. Four Scenarios 2-1.   Synergistic Building Block (Open Regionalism) 2-2.   Synergistic Stumbling Block (Regulatory Fortress) 2-3.   Non-Synergistic Building Block (Transitional Regionalism) 2-4.   Non-Synergistic Stumbling Block (Malfunctioning Regionalism)

8. III. Current Legal and Institutional Apparatus 3-1. Legal Apparatus ●GATT (Mainly Article XXIV) & TBT/SPS 3-2. Institutional Apparatus ●WTO Committee on Regional Trade Agreements (CRTA)

9. IV. Evaluating the Status Quo 4-1. Ineffective GATT Article XXIV (Paras. 5 & 8) ● Concerns only about Creation or Expansion of RTAs, not their Operation. Yet most regional standards or other social measures are developed and evolve on later stages. ● Art. XXIV is Useless as to “Mutual Recognition Arrangements” (MRAs), which are NOT RTAs per se.

10. ● Too Tariff-Oriented (Even Article XXIV Understanding mostly concerns Rebalancing.) ●Legal Vacuum: “Substantial” & “On the Whole”  “Economic Test” (Panelists’ Nightmare) ● How to Calculate “General Incidence” of Technical Regulations? Or How to Quantify Trade-Restrictiveness of Non-Tariff Barriers? ● Remedies?: Should an Entire RTA Become Invalid when it violates Article XXIV?  After All, GATT Article XXIV Was Drafted Fifty Years Ago When Only 20-30 Countries Were Involved and Their Interests Mostly Concerned Tariffs.

11. 4-2. Not Very Satisfactory Committee Enterprise ● “A Lengthening Backlog of Uncompleted Reports.” (WTO Secretariat)  “Factual Examinations,” But Not Legal Evaluation / Reluctant Disclosure due to “Dispute Settlement Awareness” 4-3. Development Concern  ●Capacity Gap and Negative Implications for Development  Little Technical and Financial Capacity to Adopt and Implement Sophisticated Regulations

12. V. Suggestions 5-1. Focusing on Procedural Disciplines in TBT/SPS, rather than Article XXIV ●Transparency, Notification and Duty to Comment (From WHAT to HOW)  Tends to give more room for regional regulatory maneuvering as well as minimizing trade restrictive effects  At any rate, we cannot control regulatory details! (“essential requirements” / “performance-based”)  Regulatory Reform as Regulatory Convergence (“Global Administrative Law”)

13. 5-2. Encouraging Regulatory Experiments (Laboratory Effect) ● Open Regionalism (“Transitivity”: “Equivalence” Mechanism)  Towards Multilateralization / Assimilation (e.g., EU’s New Approach  TBT/SPS and NAFTA) ● Soft Regionalism (Soft Institutionalization: APEC / ASEM)  Healthy Regulatory Competition, rather than Regulatory Arbitrage ●Alliance (e.g., EU-NAFTA / EU-MERCOSUR)

14. 5-3. Producing Regulatory Prototypes (International Standards and Harmonization) ● Inter-Institutional Cooperation  Dispatch WTO Secretariat staffs to Codex, OECD, ISO meetings or Establish permanent linchpins in the headquarters of those institutions. 5-4. Jumpstarting the CRTA ● Depository of Information from RTAs and other institutions  Facilitate functional, professional deliberation in the CRTA (GATT Article XXIV, Para. 7 may still be Useful.)

15. 5-5. Dispute Prevention rather than Resolution ● To Avoid “Wrong Cases” or political escalation ●TPRM, rather than over-adjudication under the DSU  More Budget, More Personnel 5-6. Capacity Building (Hardest Part) ● Technical / Financial Assistance in the Regional Level  May be Easier than in the Multilateral Level Cf. “Structure Enhancement Fund”?

16. cConclusion -       Toward Synergistic Building Blocks  “An Integrated, More Viable and Durable Multilateral Trading System” (WTO Agreement Preamble) -        Need both Legal and Institutional Efforts -Need Both More (Substantive) Flexibility and More (Procedural) Discipline