Strategic Trade Policy in Context: Canada- Caricom The Global Trading System and Trade Agreements International Law and Domestic Law Multilateral, regional and bilateral agreements Fundamental Trade Principles

Strategic Trade Policy in Context: Canada-Caricom2 International and Domestic Law National Legal Rules National Legal Rules State AState B International Legal Rules

Strategic Trade Policy in Context: Canada-Caricom3 What is international law? Law that regulates interactions of state states are sovereign and legally equal Largely consensual no central authority or binding enforcement in most cases Generally dependent on domestic legal systems for implementation

Strategic Trade Policy in Context: Canada-Caricom4 Sources of International Law Customary international law evolves into legal norm from state practice plus “opinio juris” – practice regarded as legally binding Treaty law – by far the more important May be vague and aspirational or Very specific

Strategic Trade Policy in Context: Canada-Caricom5 Interaction of International and Domestic Law Depends on national constitutional law Two conceptual models 1. Dualism International and domestic law regulate distinct subject matter Neither affects the other If conflict –which system prevails will depend on the forum in which conflict adjudicated – domestic or international Many domestic systems work on dualist model – including Canada’s

Strategic Trade Policy in Context: Canada-Caricom6 Interaction of International and Domestic Law Dualist Model For international law to have domestic effect must by transformed into domestic law Implementing legislation Preserves sovereignty

Strategic Trade Policy in Context: Canada-Caricom7 Interaction of International and Domestic Law Two conceptual models (continued) 2. Monism (Adoptionist/Incorporationist) International and domestic constitute one system If conflict - international rules prevail International law ipso facto incorporated in domestic law without any action by domestic law makers

Strategic Trade Policy in Context: Canada-Caricom8 Negotiation and Implementation of Treaties in Canadian Law Federal executive (Governor in Council) has exclusive treaty making power Typically seeks approval of provinces in advance if a matter within provincial jurisdiction – meaning that implementation will require provincial action Treaty performance requires legislative implementation (dualist model) Implementation by federal or provincial legislatures based on division of legislative powers in ss. 91 and 92 of the Constitution Act, 1867 Where is conflict between domestic law and treaty – domestic law prevails in Canada

Strategic Trade Policy in Context: Canada-Caricom9 Modes of Treaty Implementation in Canada Enactment of legislation that tracks obligations in treaty incorporates actual text of treaty by reference (often attached as a schedule) Delegates implementation to executive branch No legislation – existing law already conforms

Strategic Trade Policy in Context: Canada-Caricom10 Why have international trade rules? Temptation to protection Protect local firms Avoid costs of adjustment Development and industrial policy goals Revenue from tariffs WTO and other international trade rules impose “disciplines” on governments In the interests of increasing global welfare

Strategic Trade Policy in Context: Canada-Caricom11 Function of International Trade Rules – the basic rules for international trade Promoting Free Trade Limit ability of states to impose barriers to trade (e.g. tariffs) Impose basic principles on how states regulate trade (e.g. National Treatment and Most Favoured Nation) Address unfair trading and how states may deal with it (e.g. dumping and subsidizing exports) Enhance predictability of national regimes Limits on barriers to trade Transparency requirements

Strategic Trade Policy in Context: Canada-Caricom12 Function of International Trade Rules – the basic rules for international trade Preserve “policy space” to allow states to address non-trade interests (e.g. health, environment) Acknowledge different conditions in developing countries (e.g. special and differential treatment, transition periods)

Strategic Trade Policy in Context: Canada-Caricom13 International trade law at the Multilateral Level 1947 General Agreement on Tariffs and Trade Failure to achieve “International Trade Organization” GATT Rounds of GATT Negotiations 1995 – World Trade Organization Founded at the end of the Uruguay Round 2001 – Doha Development Round

Strategic Trade Policy in Context: Canada-Caricom14 Doha Development Round Negotiation Agenda Agriculture Non-Agricultural Market Access (NAMA) WTO Rules (Subsidies, Countervailing Duties and Dumping, RTAs) Services Intellectual Property Dispute Settlement Understanding Trade and Environment Trade Facilitation Trade and Investment Trade and Competition Policy Other Elements of Work Programme Uruguay Round Implementation Review of Special and Differential Treatment Provisions Trade, Debt and Finance Technical Cooperation and Assistance - Capacity Building Small Economies Trade and Transfer of Technology E-Commerce TRIPS and Biodiversity Least Developed Countries

Regional Trade Agreements GATT/WTO Context Cornerstone of the multilateral trading system is most favoured nation treatment (MFN) Preferences accorded under RTAs are inconsistent with GATT MFN GATT Article XXIV permits the formation of a customs union or a free trade area if certain conditions met Duties and other regulations of commerce in each constituent territory relating to the trade of non-parties are not higher or more restrictive based on weighted average tariff rates and customs duties and assessment of other measures Notice to WTO Free trade area defined as area in which “duties and other restrictive regulations of commerce” are “eliminated on substantially all the trade between the constituent territories” 15 Strategic Trade Policy in Context: Canada-Caricom

Regional Trade Agreements Why negotiate RTAs? Go beyond multilateral commitments in the WTO to reap greater economic gains from liberalization Deeper tariff cuts, additional issues addressed More customized obligations Less complex negotiating dynamic But power relations more significant and some issues can only be dealt with at multilateral level Avoid being left out Protect market access to trading partners as they negotiate RTAs with others Political alliances Stagnation of Doha Round 16 Strategic Trade Policy in Context: Canada-Caricom

Regional Trade Agreements and the WTO In principle, WTO rules balance Support for MFN With permitting substantial liberalization among parties to RTAs In practice, no effective compliance mechanism RTA Notifications examined by a working party of WTO Member representatives - reports to Committee on Regional Trade Agreements relating to compliance with GATT Standards for RTAs not applied rigorously Seldom subject of dispute settlement Turkey – Textiles one of the only cases GATS Art. V creates similar regime for trade in services New rules for RTA’s on Doha Round Agenda Enhanced concerns about effects of RTAs 17 Strategic Trade Policy in Context: Canada-Caricom

Spaghetti Bowl of RTAs 18 Strategic Trade Policy in Context: Canada-Caricom