Wto Law

A Theory of WTO Law
By Chi Carmody Associate Professor and Canadian Director Canada-United States Law Institute Faculty of Law, University of Western Ontario London, Ontario CANADA N6A 3K7 Tel. (519) 661-2111 x 88437 email: ccarmody@uwo.ca
a draft prepared for the ASIL International Economic Law Research Colloquium UCLA Law School Los Angeles, California
February 4, 2009
ABSTRACT: The creation of the WTO Agreement in 1994 has left open the question whether we can identify a theory of its legal system. A theory as a system of ideas should help us better understand what the WTO Agreement as a body of law is as well as what it should be. This submission, which consists of the draft opening chapter in a forthcoming monograph, posits that a recurrent system of ideas about WTO law can be identified and, moreover, that these ideas explain many of the features observed in its legal system. The systems chief attribute is its particular opposition of collective and individual values, an opposition which is observable in WTO laws double-aspected nature that is, on the one hand, obligation-based, constitutional, dynamic and prospective, and on the other, rights-based, contractual, static and retrospective. These two idea complexes demarcate a series of borders that, like tectonic plates, are constantly shifting. They can also be understood interactively as expressing a tension between equality and fairness, ultimately producing a third thing, interdependence. Nevertheless, this three-fold identification leaves open many questions. One is the link between different types of justice. If WTO law can be said to embody an opposition between collective and individual values, and similarly, between equality and fairness, how is all of this related to the pressing question of social justice, or what has been defined as the well-being of all of societys members? Another question is how the arrangement of WTO law qualifies as a legal system. We may legitimately ask what the requirements of a legal system are and how far the features of WTO law go to satisfy them? And finally, what does this set of observations mean for the theory as theory? The chapter concludes with a series of preliminary answers to these questions as a prelude to their more thorough examination in subsequent chapters.
Theory Chapter 1 Final_U.doc created on 2/4/2009
A Theory of WTO Law

By Chi Carmody
I. II. III. IV. V. VI. VII. VIII.
A Theory of WTO Law The WTO Agreement and Justice The WTO Agreement as a Law of Expectations The WTO Agreement as a Law of Realities The WTO Agreement as a Law of Interdependence A Counter-Example: the Council for Mutual Economic Assistance A Theory of WTO Law and Law Conclusion
3 CHAPTER ONE A THEORY OF WTO LAW

The greater our knowledge, the more obscure the overall scheme. 1 1. INTRODUCTION 2. WHY A THEORY? 3. A THEORY OF WTO LAW 3.1 A Law of Expectations 3.2 A Law of Realities 3.3 A Law of Interdependence 3.4 Idea Complexes 4. THE IDEA OF A SYSTEM 5. THE THEORY AS THEORY 6. CONCLUSION
1. INTRODUCTION On April 15, 1994 the representatives of 109 countries met on a parade ground outside the old walls of Marrakesh, Morocco. The purpose of their meeting was to sign the Marrakesh Agreement Establishing the World Trade Organization, or WTO Agreement, thereby ending eight years of international trade negotiations. 2 By mid-afternoon all of the necessary signatures were received and the celebrations began. The festivities at Marrakesh highlighted the fact that the new WTO Agreement did a number of important things. First, it consolidated rules about international trade into a single treaty, thereby replacing the legal patchwork that had arisen under the General Agreement on Tariffs and Trade, or GATT 1947. 3 Second, it extended coverage of the rules to a wider range of goods, services and intellectual property than had been the case in the past. 4 Third, it formally established the WTO as an international organization. 5 In retrospect, the events at Marrakesh appear tinted with optimism and full of promise. They took place at a hopeful time both for international trade law and international law more generally and all that has happened since then suggests that countries working together may not always fulfill their high aims. Nevertheless, what Marrakesh implicitly conveys is the idea of the WTO Agreement as a deal among countries, or in other words, a bargain. 6
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Claude Lvi-Strauss, The Savage Mind 89 (1962). 33 I.L.M. 1125 (1994). For a list of signatories see Notification of Acceptances, GLI/302 Rev., Let/1884/Rev.1 (May 3, 1994). In addition to the 109 acceptances (103 immediate, six subject to ratification) the WTO Agreement was also accepted by Hong Kong, a separate customs territory. 3 61 Stat. A-11, T.I.A.S. 1700, 55 U.N.T.S. 194 (Oct. 30, 1947). 4 The GATT 1947 covered trade in goods. During the later years of the General Agreement it was acknowledged that a growing proportion of world trade involved the provision of services and trade-related aspects of intellectual property. Disciplines covering these subjects were therefore included in the WTO Agreement as Annexes 1B and 1C. 5 Articles I and II of the WTO Agreement provide, respectively, for the establishment of the WTO and indicate that [t]he WTO shall provide the common institutional framework for the conduct of trade relations among its Members. 6 The WTO Agreement is a treaty the international equivalent of a contract. It is self-evident that in an exercise of their sovereignty, and in pursuit of their own respective national interests, the Members of the WTO have made a bargain. Japan Alcoholic Beverages, WT/DS8/AB/R, p. 15 (Oct. 4, 1996) [emphasis added].
4 What I offer in this book is something different. What I offer here is an account of the WTO Agreement as a reflection of justice, by which I mean giving each their due. 7 This is more than an account of the treaty as simply the sum of negotiated trade concessions. Rather, what I seek to convey is the way in which the treatys operation is consistent with classic forms of justice and how together they express a theory of WTO law. A theory of WTO law is useful because it provides an independent means of analyzing the WTO Agreement. With a theory the treaty can be abstracted from its text and understood in terms of broader principle. More specifically, a theory of WTO law provides a way of confirming the WTO Agreements basic validity because the treatys legal system can be linked to generally accepted views of what is right. Thus, conforming with WTO law is not simply about compliance, but about doing justice. Nevertheless, justice is a contested subject, something which makes the task of identifying a theory in terms of it challenging. The task has been made all the more challenging in recent years by the proliferation of descriptive variants of justice. Thus, we now have restorative justice 8 , transitional justice 9 , social justice 10 and so forth, without care always being taken to explain what is meant. The theory put forward here attempts to avoid these problems by returning to original Aristotelian definitions of justice and demonstrating how WTO law is consistent with them, thereby providing an accessible framework for thinking about WTO law. 11 The usual way of thinking about it is, of course, along the lines of the events that culminated at Marrakesh. The popular version of things is that countries met in a number of negotiating rounds during which they made tariff concessions on a range of items. This would appear to confirm the idea of WTO law as based primarily upon those concessions and of justice as involving compensation. But as we will see, compensation is a secondary and voluntary remedy in WTO law - and for good reason. The aim of the treaty is to go beyond bilateral trade relations and to create a multilateral trading system. Consequently, the purposes of WTO law are more
Justice is the constant and perpetual wish to render everyone his due. Thomas Cooper, The Institutes of Justinian 7 (1975). Defined as a way of dealing with victims and offenders by focussing on the settlement of conflicts arising from crime and resolving the underlying problems which cause it. Originating in reactions to the application of Western-style legal systems to indigenous peoples, restorative justice has been inspired by consensual and communal ways inherent in many indigenous systems of justice. A key idea is that the traditional Western conception of crime as a crime against the state needs to be reconceived as a wrong against the community. This conceptual shift modifies the focus of justice, which now becomes to resolve the underlying problem. The emphasis is therefore subtly creative, one of dealing with crime generally in a rational problem-solving way. See Law Commission of Canada, From Restorative Justice to Transformative Justice: Discussion Paper, Law Commission of Canada (1999). 9 Defined as a range of approaches that societies undertake to reckon with legacies of widespread or systematic human rights abuse as they move from a period of violent conflict or oppression towards peace, democracy, the rule of law, and respect for individual and collective rights. The International Center for Transitional Justice website (visited July 1, 2008). What is Transitional Justice? Available at http://www.ictj.org/en/tj/. 10 Defined as the well-being of all of societys members. Philip Allott, Eunomia 13.30. 11 It is immediately possible to question the reliance on Aristotlean conceptions of justice in this book. There are three reasons why this reliance makes sense. First, the dualist way in which Aristotle conceived of justice in the Nichomachean Ethics is commonly agreed to be the building blocks of legal philosophy. (see Jason Neyers, The Inconsistencies of Aristotles Theory of Corrective Justice, 11 Can. J. L. & Juris. 311 at 311 (1998)). Simply put, they are the basis on which justice is most often discussed in legal, political and philosophical theory. Second, they are what best fits the available evidence from WTO law, as the examples provided in this book will demonstrate. Third, the descriptive variants identified above are really some combination of the distributive-corrective dyad evident in Aristotlean thought.
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5 complex. The chief purpose of the WTO Agreement is to protect expectations concerning the trade-related behaviour of governments. 12 These expectations arise from the concessions made by one WTO member country towards another WTO member country and which are presumptively applicable to all WTO countries. Thus, the nature of legal obligations in WTO law is collective and justice is distributive in that it seeks to protect the equal distribution of expectations. However, while the protection of expectations is the treatys principal concern, this is not its only concern. The treatys secondary purpose is to promote the adjustment to realities, by which I mean that the treaty gives some flexibility to governments to deal with situations encountered in the actual course of trade. These might involve unfair trade, or the need to protect the environment while engaging in trade, or recognition of the fact that some WTO members are less developed and need additional benefits when they participate in trade. The adjustment is often specific enough to appear bilateral, something which gives rise to the impression of WTO obligations as bilateral and justice as corrective, that is, as involving compensation. An account of WTO law as a law of expectations and a law of realities might appear to be sufficient as description, except that in daily operation the two types of law interact to create a third, overarching mode of law. I point to the tendency of the WTO Agreement to promote interaction among producers and consumers in different countries, and thereby to spin an indissoluble web of economic relations that goes beyond the interests of WTO members individually. We see evidence of this in global supply chains and justin-time delivery, in increased product differentiation and consumer choice. Here the laws purpose is to promote interdependence and justice is transformative in that it seeks to transform thinking about the common interest. These opening observations emphasize that there is an underlying pattern to WTO law. A common assumption in legal interpretation is that the law-maker is rational, or in other words, that the the form of the law is a reflection of logical and coherent thought. 13 The theory put forward in this book confirms that logic and coherence are also present in
For cases where panels stated that the purpose of GATT is to protect expectations see Working Party Report, Brazilian Internal Taxes, adopted 30 June 1949, B.I.S.D. II/181, para. 16; Panel Report, United States - Taxes on Petroleum and Certain Imported Substances, adopted 17 June 1987, B.I.S.D. 34S/136, para. 5.1.9; Panel Report, Canada - Administration of the Foreign Investment Review Act, adopted 7 February 1984, B.I.S.D. 30S/140, para. 6.6; Panel Report, Japanese Measures on Imports of Leather, adopted 15/16 May 1984, B.I.S.D. 31S/94, para. 55; Panel Report, Japan - Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages, adopted 10 November 1987, B.I.S.D. 34S/83, para. 5.11; Panel Report, European Economic Community Restrictions on Imports of Apples, adopted 22 June 1989, B.I.S.D. 36S/135, para. 5.25; and Panel Report, United States - Measures Affecting the Importation, Internal Sale and Use of Tobacco, adopted 4 October 1994, DS44/R, para. 99. For some WTO dispute settlement reports referring to the protection of expectations see India Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/R (Sept. 5, 1997); EC Customs Classification of Certain Computer Equipment, WT/DS62/AB/R (June 5, 1998); Korea Taxes on Alcoholic Beverages, WT/DS75/AB/R (Jan. 18, 1999); Korea Measures Affecting Government Procurement, WT/DS163/R (May 1, 2000). For further commentary see Laurent Ruessmann, The place of legitimate expectations in the general interpretation of the WTO Agreements, K.U. Leuven Institute for International Law Working Paper No. 36 (Dec. 2002). 13 It is presumed that the provisions of legislation are meant to work together, both logically and teleologically, as parts of a functioning whole. The parts are presumed to fit together logically to form a rational, internally consistent framework; and because the framework has a purpose, the parts are also presumed to work together dynamically, each contributing something toward accomplishing the intended goal. Ruth Sullivan, Sullivan and Driedger on the Construction of Statutes (4th ed.) 262 (2002). A further reflection of this principle is found in the Appellate Bodys identification of a presumption against conflict between WTO provisions: Indonesia Certain Measures Affecting the Automobile Industry, WT/DS54/R, para. 14.28 (July 2, 1998).
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6 WTO law in the sense that the treatys legal arrangement is not simply the result of a bargain, but also the result of justice. 2. WHY A THEORY? But why a theory of WTO law? What insight will it offer? A theory is a system of ideas 14 and so a theory of WTO law should reveal the system of ideas underlying WTO law as well as the particular way in which they are integrated together. This is the analytic purpose of a theory. A theory based on justice also provides an external standard against which to assess the treaty and what happens under it. Thus, it offers a means of assessing what the law is as well as some idea of what it should be. This is the normative purpose of a theory. To date, a general theory of this type has not been put forward. To be sure, we have a generally accepted economic theory of the WTO Agreement based on the exchange of trade concessions and a generally accepted political theory of the WTO Agreement based on the idea of a Kantian peace, but these do not explain much about what we observe in WTO law. 15 They do not explain, for instance, why WTO dispute settlement has evolved to recommending in most instances that a wrongdoing country simply bring its laws into conformity with the WTO Agreement, or why third parties are given significant rights of standing in the dispute settlement process, or why the treaty presumes injury in some instances but insists on strict proof in others. Likewise, they do not explain divergent attention in WTO law to the future versus the past, or tension between adjudication and negotiation in the WTO system, or why there might be debate about whether the WTO Agreement is a constitution versus a contract. Of course, one could look into the negotiating record and find historic explanations for some of these features, but even these accounts are lacking and do not supply answers to critical questions about why things look as they do. At the same time, what has happened since Marrakesh is tremendous growth in WTO law. This has happened principally through WTO dispute settlement, but also on occasion through new agreements that elaborate upon, and in some cases extend, what was agreed to in 1994. The reaction by commentators to all of these developments has been insightful, vigourous and sustained as indeed it should be. 16 Commentary has helped to publicize the WTO
S.v. Theory, Shorter Oxford English Dictionary (5th ed.) 3236 (2002). I prefer this basic definition of a theory to others that are often phrased in figurative or impressionistic terms. According to Hans Kelsen a theory of law would furnish concepts by which the positive law of a definite legal community can be described. The subject matter of a general theory of law is the legal norms, their elements, their interaction, the legal order as a whole, its structure, the relationship between different legal orders, and, finally, the unity of the law in the plurality of positive legal orders. Hans Kelsen, General Theory of Law and State xiii (1949); Sanne Taekema states that an adequate theory of law must identify the distinctive work done by law in society, the special resources of law, and the characteristic mechanisms that law brings into play. Sanne Taekema, The Concept of Ideals in Law 113 (2003); Philip Soper refers to a theory of law as an explication of the concept of law rather than a purely stipulative definition. Philip Soper, A Theory of Law 14 (1984). 15 Michael J. Trebilcock and Robert Howse, The Regulation of International Trade, 3nd ed. (London: Routledge, 2005) at 2-3, 37. For an econometric approach see Kyle Bagwell & Robert W. Staiger, An Economic Theory of GATT, NBER Working Paper No. 6049 (May 1997). 16 For a sampling see Fabian Delcros, Le statut juridique de lagriculture lOMC, 36 J.W.T. 353 (2002); Kym Anderson (ed.), The
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7 Agreement and in some sense to make it our own. However, what the commentary often displays is an understanding of the law that is either grounded in non-legal disciplines or that exhibits an interstitial rationality unconnected with any integrated system of ideas about the treaty. 17 The prevailing situation has much in common with the law of the European Union where, as Neil Walker has observed, there has been no subsequent magic moment of doctrinal consolidation to follow institutional innovations of the foundational phase. Consequently, theoretical reflection has been consigned to a secondary and largely parasitic role and kept to modest proportions. 18 In WTO law the result is the working assumption that there is no theory. 19 Instead, a number of commentators appear to have
WTO and Agriculture (2004); Emily Rome, The Background, Requirements and Future of the GATT/WTO Preshipment Inspection Agreement, 7 MINN. J. GLOBAL TRADE 469 (1998); Anuwarul Hoda, Tariff Negotiations and Renegotiations under the GATT and the WTO (2001); Moshe Hirsch, International Trade Law, Political Economy and Rules of Origin, 36 J.W.T. 171 (2002); Kyle Bagwell, Petros Mavroidis et al., Its a Question of Market Access, 96 A.J.I.L. 56 (2002); Paul Beynon, Community Mutual Recognition Agreements, Technical Barriers to Trade and the WTOs Most Favoured Nation Principle, 28 Env. L. Rev., 231 (2003); Stefano Inama, Trade Preferences and the World Trade Organizations Negotiations on Market Access, 37 J.W.T. 959 (2003); Joel Trachtman, The Domain of WTO Dispute Resolution, 40 Harv. J. Intl L. 333 (1999); Robert Hudec, The New WTO Dispute Settlement Procedure, 8 Minn. J. Global Trade 1 (1999); Georg C. Umbricht, An Amicus Curiae Brief on Amicus Curiae Briefs at the WTO, 4 J.I.E.L. 773; Edwin Vermulst, WTO Dispute Settlement with Respect to Trade Contingency Measures, 35 J.W.T. 209 (2001); Joost Pauwelyn, The Use of Experts in WTO Dispute Settlement, 51 I.C.L.Q. 325 (2002); Hunter R. Clark, The WTO Banana Dispute and Its Implications for Trade Relations between the United States an dthe European Union, 35 Cornell J. Intl L. 291 (2002); Richard Cunningham, Dispute Settlement Through the Lens of Free Flow of Trade, 6 J.I.E.L. 155 (2003); Matthias Oesch, Standards of Review in WTO Dispute Resolution (2003); John Jackson, International Law Status of WTO Dispute Settlement Reports, 98 A.J.I.L. 109 (2004); Federico Ortino (ed.), The WTO Dispute Settlement System 1995-2003 (2004); Hans Mahncke, U.S. Steel Tariffs and the WTO Dispute Resolution Mechanism, 17 Leiden J. Intl L. 615 (2004); Petros Mavroidis (ed.), The WTO and International Trade Law (2005); Nicholas Perdikis (ed.), The WTO and the Regulation of International Trade Law (2005). 17 See for example Robert Howse, Protecting Human Rights in a Global Economy (2000); P.K. Rao, The World Trade Organization and the Environment (2000); Claude E. Barfield, Free Trade, Sovereignty, Democracy: the future of the World Trade Organization (2001); Steven Shrybman, The World Trade Organization: A Citizens Guide (2001); Gary P. Sampson (ed.), The Role of the World Trade Organization in Global Governance (2001); Thomas Hockin, The American Nightmare: politics and the fragile World Trade Organization (2003); Lori Wallach & Patick Woodall, Whose Trade Organization?: a Comprehensive Guide to the WTO (2004); Deborah Z. Cass, The Constitutionalization of the World Trade Organization: Legitimacy, Democracy, Community (2005); Bradley J. Condon, Environmental Sovereignty and the WTO: trade sanctions and international law (2006); John Barton et al., The Evolution of the Trade Regime: politics, law and Economics of the GATT and the WTO (2006); Rorden Wilkinson, The WTO: Crisis and the Governance of Global Trade (2006); Roman Grynberg (ed.), WTO at the Margins: Small States and the Multilateral Trading System (2006); Math Noortman, Enforcing International Law: from Self-Help to Self-Contained Regimes (2005). 18 Neil Walker, Legal Theory and the European Union: A 25th Anniversary Essay, 25:4 OXFORD J.L. STUDIES 581, 583 (2005). 19 Thus, Thomas Cottier, Matthias Oesch and Thomas Fischer have observed recently that the absence of a longstanding legal theory or tradition of international trade regulation explains why even basic questions are still in the open. Thomas Cottier et al., International Trade Regulation: Law and Policy in the WTO, the European Union and Switzerland (London: Cameron May, 2005) 33, 47. They observe additionally that Theoretical analysis of the exact contents and confines of the core legal principles governing the current multilateral trading system are in full swing in dialogue with the case law and far from settled, despite the fact that these concepts have been in existence for a very long time. An academic body of legal theory of trade regulation is only beginning to be built, dealing with basic structures, institutions and regulatory approaches. Work of other commentators is hardly more clear on the subject of an underlying theory. For instance, John Jackson has described the WTO Agreement as a very complex mix of economic and governmental policies, political constraints, and above all an intricate set of constraints imposed by a variety of rules or legal norms in a particular institutional setting. John Jackson, The World Trading System, 2nd ed. (Cambridge: MIT Press, 1998) 339. In more recent work he has disclaimed the notion of a grand theory and focused more directly on queries rather than theories: see John Jackson, Sovereignty, the WTO and Changing Fundamentals of International Law (Cambridge: Cambridge University Press, 2006) xi. For further attempts at theoretical development of GATT/WTO law see Ernst-Ulrich Petersmann, International Economic Theory and International Economic Law: On the Tasks of a Legal Theory of International Economic Order in R. St. J. Macdonald and D.M. Johnston, eds, The Structure and Process of International Law (The Hague: Martinus Nijhoff, 1983) 227; Andrew Caplin & Karla Krishna, Tariffs and the Most-Favoured Nation Clause: A Game Theoretical Approach, 1 Seoul Journal of Economics (1988) 267; Carolyn Rhodes, Reciprocity, U.S. Trade Policy and the GATT Regime (Ithaca: Cornell University Press, 1993); Warren F. Schwartz and Alan O. Sykes, Towards a Positive Theory of the Most Favoured Nation Obligation and Its Exceptions in the WTO/GATT System, 16 Intl Rev. L. & Econ. (1996) 27; Petros Mavroidis, Like Products: Some Thoughts at the Positive and Normative Levels in Thomas Cottier & Petros Mavroidis (eds.), Regulatory Barriers and the Principle of Non-Discrimination in World Trade Law (Ann Arbor: University of Michigan Press, 2000) 125; Meinhardt Hilf, Power, Rules and Principles: Which Orientation for WTO/GATT Law? 4 J.I.E.L. 111 (2001); Kyle Bagwell and Robert W. Staiger, The Theory of Trade Agreements in The Economics of the World Trading System (Cambridge; MIT Press, 2002); Darrel Moellendorf, The World Trade Organization and Egalitarian Justice in Christian Barry et al. (eds.), Global Institutions and Responsibilities: Achieving Global Justice (Oxford: Blackwell, 2005). Book-length treatments are also available: see Frank J. Garcia, Trade, Inequality and Justice: Towards a Liberal
8 adopted an attitude of wariness about it, as if such a notion were too grandiose or presumptuous to be contemplated. That attitude has to originate somewhere, and I suggest it comes from the way in which WTO law is commonly encountered. The law itself originates in the WTO Agreement, a complex document which in its official version runs more than 25,000 pages and which contains a large number of obligations, few of which fit together neatly. The treaty is so large and unkempt that it often seems to defy the legal imagination. The structure of the treaty also creates barriers to theoretical understanding. This is because the treaty is, in reality, a series of treaties on different subjects. To some extent each treaty is separate from the others and attention therefore naturally gravitates to one treaty, or to a combination of them, rather than to the WTO Agreement as a whole. Consequently, the conceptual unity characteristic of a theory seems to be missing. Then too there is WTO dispute settlement, which by most accounts has been highly successful since it began operation in 1995 but which inevitably generates pressure to look at the law from a professional angle and not to think of it otherwise than in terms of its litigious aspect. 20 The law is regarded as being developed principally through cases and is by nature highly fragmented. It seems odd to suggest that the patterns observed might be traceable to deeper, more pervasive forces. In addition, there are habits of thought that influence the way in which WTO law is approached. There is, for instance, the generally accepted idea that the WTO Agreement is about trade which, of course, in some sense it is. But as I have already pointed out, the overarching purpose of the treaty goes beyond the protection of individual concessions per se. The combination of purposes it serves needs to be kept in mind. Finally, there is a tendency to look upon what is happening in WTO law in light of current events, which consists of an ongoing parade of meetings, decisions and pronouncements, as well as commentary and debate. From this perspective all is constantly swirling 21 and it becomes difficult to identify any underlying system of ideas. Existing accounts have tried to make sense of things principally by understanding the WTO Agreement either as a contract or a constitution. The most authoritative reference to contractualism to date is the Appellate Bodys statement in Japan Alcoholic Beverages that: The WTO Agreement is a treaty the international equivalent of a contract. It is self-evident that in an exercise of their sovereignty, and in pursuit of their own respective national interests, the Members of the WTO have made a bargain. In exchange for the benefits they expect to derive as
Theory of Just Trade (Ardsley: Transnational Publishers, 2003); Raj Bhala, Trade, Development and Social Justice (Durham: North Carolina Academic Press, 2003). 20 Rene David, International Encyclopedia of Comparative Law, Vol. II, Ch. 1, pp. 1-18 (1975). 21 L. Patrick Glenn, Legal Traditions of the World 100 (2000).
9 Members of the WTO, they have agreed to exercise their sovereignty according to the commitments they have made in the WTO Agreement. 22 The statement in Alcoholic Beverages emphasizes the minimal nature of the treaty as a binding engagement. The WTO Agreement is a contract and sovereignty is limited according to the commitments countries have made. Consequently, WTO obligations would appear to be bilateral and conditional. 23 A second theoretical approach is to regard the treaty as constitutional. Thus, John Jackson, Deborah Cass and others have referred to the WTO Agreement as a constitution 24 and Gail Evans has suggested that the WTO may be explained as a trade constitution having the capacity to provide for the universalization of norms of substantive law. 25 Accordingly, WTO obligations would appear to be collective and absolute. Drawing on recent developments in international environmental law, a few commentators have gone on to describe the WTO Agreement as constitutional contract. 26 However, they have not provided much explanation about what they mean or what the implications of such a designation are. My own view is that even if this hybrid description is accurate, it makes little sense to refer to the treaty a contract, a constitution or something else unless we have a clear idea of what is meant as a matter of jurisprudence, that is, the fundamental elements of a legal system. 27 Only by setting aside conventional understandings and looking at what the true fundamental elements of the WTOs legal system really are is it possible to gain a more accurate picture of things and thereby derive a theory.
Japan Taxes on Alcoholic Beverages, WT/DS8/AB/R p. 14 (Oct. 4, 1996) [emphasis added]. Not surprisingly, countries have found this qualified conception of the treaty appealing and have referred to it on a number of occasions. See statement by Brazil in WT/DS69/AB/R, para. 15 (describing the WTO Agreement as an international treaty laying down contractual obligations and not erga omnes obligations.); Argentina in WT/DSB/M/42, pp. 14 (referring to SPS obligations as contractual international obligations). The contractual optic was also evident in The Future of the WTO: Addressing Institutional Challenges in the New Millenium (2004) [the Sutherland Report]. See for instance contractual requirements of membership (para. 3), the contractual detail of the WTO (para. 200), an institution founded on negotiated contractual commitments among governments (para. 206), countries should have contractual entitlement to capacity building support (para. 306), the WTO, in future, should contain provisions for a contractual right (para. 311). For commentators supportive of this view see Joost Pauwelyn, A Typology of Multilateral Treaty Obligations: Are WTO Obligations Bilateral or Collective in Nature?, 14:5 E.J.I.L. 907 (2003) p. 938 (Put differently, the values, aspirations and priorities of close to 150 WTO Members remain far too diverse for WTO norms to be streamlined into constitutional-type obligations ). Similarly, Petros Mavroidis has referred to the WTO Agreement as an incomplete contract. In his view negotiators were well aware that various [governmental] policies might have an impact on trade, and that is why they decided to discipline the exercise of these policies. They did not, however, proceed to enumerate every one of them, nor did they provide specific disciplines for each. Petros Mavroidis, The General Agreement on Tariffs and Trade: A Commentary (2005). 24 See John Jackson, The World Trade Organization: Constitution and Jurisprudence (1998); Gail Evans, Lawmaking under the Trade Constitution 44 (1999); Deborah Cass, The Constitutionalization of the World Trade Organization: Legitimacy, Democracy and Community (2005). Also Peter Gerhart, Two Constitutional Visions of the World Trade Organization, 24 U. Pa. J. Intl Econ. L. 1 (2003). For a critical appraisal of the constitutional view see Jeffrey Dunoff, Constitutional Conceits: The WTOs Constitution and the Discipline of International Law, 17:3 E.J.I.L. 647 (2006). For evidence of constitutionalism in international law generally see Nigel White, The United Nations System: Conference, Contract or Constitutional Order? 4 Singapore J. Intl & Comp. L. 281, 290291 (2000). 25 Evans, ibid., __ (2000). 26 This is the understanding of the WTO Agreement by several GATT Contracting Parties. See Xu Yu-Chong and Patrick Weller, The Governance of World Trade: International Civil Servants and the GATT/WTO (Cheltenham: Edward Elgar, 2004) at 67-68. The term has also been used in international environmental law: Catherine Redgwell, Multilateral Environmental Treaty-Making in Vera Gowland-Debbas (ed.), Multilateral Treaty Making: The Current Status of Challenges and Reforms Needed in the International Legislative Process (The Hague: Martinus Nijhoff 2000) 81 at 91. 27 s.v. jurisprudence, Blacks Law Dictionary (7th ed.) 858 (1999).
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This is behind my insistence initially at least at focusing on rights and obligations. It is rights and obligations that set out the parties commitments under the treaty and it is likewise rights and obligations that most often constitute the justification for what countries do under the treaty. 28 Moreover, there are frequent references to rights and obligations in the WTO Agreement but rarely, if ever, have they been subject to serious scrutiny. 29 Their arrangement, the contrapuntal stress they create, and the way they simultaneously work to constrain and enable 30 countries actions all appear to afford deeper insight as to why things are as they are. In law the traditional relationship between rights and obligations is one of correspondence: each right is said to be matched by a single, offsetting obligation. 31 In WTO law, however, there are two features that operate to modify this relation. First, the Most Favoured Nation (MFN) clause causes obligations owed by one country to another to be owed to the entire WTO membership. Second, there are places within the treaty where countries have the right to take action towards one country or a group of countries that constitute less than the entire membership. This reveals a curious dualism about WTO obligations: in some instances they are bilateral, but in most instances they are collective. Consequently, rather than fitting into the traditional categories of legal obligation in international law, they appear to straddle them. 32 The particular relationship among rights and obligations law can be linked to a number of other features observed in WTO law. If the appropriate connections are made, a conceptual divide comes into view in which WTO law is obligation-based, collective, constitutive, dynamic and prospective on the one hand, and rights-based, individual, contractual, static and retrospective on the other. These two idea-complexes 33 demarcate a series of borders that, like tectonic plates, are constantly shifting. (Fig. 1)
See for instance U.S. Underwear, WT/DS24/AB/R, p. 15 (10 Feb. 1997) where the Appellate Body described the WTO Agreement on Textiles and Clothing as composed of carefully negotiated language reflecting a carefully drawn balance of rights and obligations of Members.; see also Brazil Aircraft, WT/DS46/AB/R, para. 139 (2 Aug. 1999). 29 A sign of the difficulty of assessing what the term means is contained in the Appellate Bodys admission in Chile Alcoholic Beverages, WT/DS87/AB/R, para. 87 (13 Dec. 1999) that [I]n these circumstances, we do not consider that the Panel has added to the rights or obligations of any Member of the WTO. Moreover, we have difficulty in envisaging circumstances in which a panel could add to the rights and obligations of a Member if its conclusions reflected a correct interpretation and application of provisions. 30 Jutta Brunne and Stephen Toope, International Law and Constructivism: Elements of an Interactional Theory of International Law, COLUM. J. TRANSNATL L. 19, 31 (2000). 31 The idea of a correspondence between rights and obligations was recognized by early philosophers but developed most insightfully by Wesley Hohfeld, who postulated that there are rights and that these are distinct from privileges, powers and immunities, and that they are matched by jural correlatives: duties, no rights, liabilities and disabilities. See Wesley Hohfeld, Fundamental Legal Conceptions, As Applied in Judicial Reasoning and Other Essays (1919). Also Wlliam A. Edmundson, An Introduction to Rights 43 (2004) (discussing Edmund Burkes contribution to the idea of right-obligation correspondence). 32 The classification of treaty obligations in international law generally follows the scheme proposed by Gerald Fitzmaurice in the 1950s. See See, in particular, Gerald Fitzmaurice, Third Report on the Law of Treaties, UN Doc. A/CN.4/115, Yearbook of the International Law Commission (1958), ii, at 20. Fitzmaurice identified treaties as either bilateral or multilateral, and further divided multilateral treaties into reciprocal, interdependent or integral categories depending on the consequences arising from their breach. Bilateral treaties can be suspended or terminated by either party since they involve a simple exchange of obligations. Subsequent inconsistent treaties are valid subject to appropriate priority rules. The same could be said of multilateral treaties of a reciprocal type. By comparison, multilateral treaties of an interdependent type can be suspended or terminated by any party because they involve 'a mutual interchange of benefits between the parties, with rights and obligations for each'.32 Subsequent inconsistent treaties are void. Finally, multilateral treaties of an integral type cannot be suspended or terminated since 'the force of the obligation is self-existent, absolute and inherent for each party'.32 Subsequent inconsistent treaties are also void. 33 Philip Allott, The Health of Nations 47 (2002). (The idea-complex of sovereignty, command, sanction and obedience was all the lawyer needed to know about the theory of law.)
28
Chi Carmody Feb. 4, 2009
(Fig. 1)
A Theory of WTO Law

Type of Justice Distributive Corrective Transformative
Descriptor
The WTO Agreement as a law of expectations implemented by obligations.
The WTO Agreement as a law of realities implemented by rights.
The WTO Agreement as a law of interdependence implemented as a form of lex specialis.
Juridical perspective
The WTO Agreement is about expectations and seeks to protect the distribution of expectations concerning the trade-related behaviour of governments. Justice is therefore about maintaining the distribution of expectations, which is equal; the ethos is justice-as-equality.
The WTO Agreement is about trade and seeks to protect the trade between WTO member states. Justice is therefore about fairness between individual member states; the ethos is justice-as-fairness.
The WTO Agreement is about interdependence and seeks to protect the integration of trade networks. Justice is therefore about reconciling interests; the ethos is justice-asinterdependence.
Temporal perspective
The future; concern is with protecting expectations about the future behaviour of governments.
The past; concern is with protecting trade as estimated.
The present; concern interdependence.
is
with
protecting
Kinetic perspective
Dynamic, hence the law describes a relation.
Static, hence the law describes a transaction.
Diachronic, condition.
hence
the
law
describes
Substantive perspective
WTO obligations are collective, hence expectations belong to the entirety of the WTO membership in the manner of public property.
WTO obligations are bilateral, hence trade belongs to specific countries in the manner of private property.
WTO obligations are erga omnes partes (plurilateral), hence interdependence belongs to and is promoted among WTO members, but not necessarily beyond.
Legal perspective
The WTO instrument.
Agreement
as
constitutive
The WTO instrument.
Agreement
as
contractual
The WTO Agreement as a hybrid instrument.
Dispute settlement
The aim of dispute settlement is to restore the distribution of expectations, hence the emphasis on bringing measures into conformity with the WTO Agreement. Compensation is a strictly interim remedy pending conformity.
The aim of dispute settlement is to restore the trade lost as a result of any breach, hence the emphasis on countermeasures, compensation and calls for retroactive remedies.
The aim of dispute settlement is to achieve solutions that are acceptable to all of the parties, and that promote interdependence. No absolute requirement to restore the relationship by repairing the harm done. Relief is instead fashioned along flexible and broadly remedial lines.
11 The WTO Appellate Body has shown a passing awareness of this idea when it observed in U.S. Shrimp that [t]he location of the line of equilibrium is not fixed and unchanging; the line moves as the kind and shape of the measures at stake vary and the facts making up specific cases differ. 34 Over time the two idea-complexes operate together, thereby creating some third thing. In this tertiary and overarching mode WTO law seeks to achieve interdependence. Here the law is neither wholly obligation- nor rights-based. Rather, it is a combination of the two, something captured in the notion of WTO law as a special law, or lex specialis. 35 The outcome is a much richer insight into the treatys operation than any casual reference to rights and obligations might provide. Still, all of the above only makes sense if we agree on what WTO law is about. Generally speaking, we might assume that the WTO Agreement is about trade. After all, as mentioned, the origins of the WTO Agreement lie in GATT, the General Agreement on Tariffs and Trade of 1947, which was reformulated and expanded at Marrakesh to become the General Agreement on Tariffs and Trade 1994, now part of the WTO Agreement. But as I have already explained, the principal concern of the treaty is with something much more extensive than trade alone. At base, the point I seek to make emphasizes a difference in regulatory perspective. The treatys obligations do not operate directly to require specific quantities of trade as much as indirectly to maintain conditions that promote trade. This changes the optic. To say that the WTO Agreement is about trade is to adopt a frame of reference in the here and now. It is to conceive of the treatys chief purpose as being to protect individual transactions that take place in the present, or perhaps more accurately, in the immediate past, since trade cannot be accurately quantified unless it has already happened. On the other hand, to say that the WTO Agreement protects obligations concerning trade-related behaviour comes at matters a little more generally. It abstracts them and renders them timeless. We are no longer concerned with trade per se but with ensuring a regulatory environment in which trade is most likely to flourish, or in other words, the freedom to trade. This point was confirmed in United States Section 301. 36 The issue there was the consistency of certain U.S. trade remedy legislation with the WTO Agreement. The European Communities (EC) asserted that s. 304 of the U.S. Trade Act required the U.S. Trade Representative to determine whether another WTO member denied U.S. rights under the WTO Agreement irrespective of WTO dispute settlement timelines. The panel disagreed and decided instead that the Trade Representative had the discretion to make such a determination. However, the panel went on to examine whether there remained a residual risk to economic operators that the U.S. would invoke its discretionary law in a
WT/DS58/AB/R, para. 159 (Oct. 12, 1998). Gabrielle Marceau, WTO Dispute Settlement and Human Rights, 13 E.J.I.L. 753 (2002); see also Pieter Jan Kuijper, The Law of GATT as a Special Field of International Law Ignorance, Further Refinement or Self-Contained System of International Law, 25 NETH. Y.B. INTL L. 227 (1994). See contra Joost Pauwelyn, The Rule of Public International Law in the WTO: How Far Can We Go?, 95 AM. J. INTL L. 595 (2001); Lorand Bartels, Applicable Law in WTO Dispute Settlement, 35 J.W.T. 499 (2001). 36 United States Sections 301-310 of the Trade Act of 1974, WT/DS152/R (22 Dec. 22, 1999).
35 34
12 WTO-inconsistent manner. The panel concluded that while there was such a risk, it was not a real one due to official assurances that the U.S. would never do so. The decision emphasizes how the security and predictability afforded by the treaty are a vital part of its greater purpose, and how together they contribute to what is referred to in the preamble of the U.N. Charter as life in larger freedom. 37 Of course, there is a danger of founding a theory of law on an abstract concept such as the freedom to trade. This is the danger of confusion. Trade and the freedom to trade are closely related ideas, and when they are mixed up with everything else that happens in WTO law, it can be hard to identify a theory of law. We have to think deeply and carefully. In this respect, what I present in this book can be thought of as a meta theory, from the Greek meta, or afterwards, meaning that which is of a more fundamental character and subsists after all is said and done. Such a theory requires us to conceive of matters broadly. We have to assess many things, keeping one eye on the particular and another eye on the general, and needless to say, that is hard to do. At some point it is necessary to go beyond the positive law. The real value of the exercise is not the ability to predict what this or that case will say, but to look at the treaty and discern its overall scheme. 38 3. A THEORY OF WTO LAW A theory is a system of ideas and so in order to develop a theory of WTO law we need to identify the principal ideas involved in the system. Before doing so, however, it is useful to provide an overview of the WTO Agreement. The origins of the WTO Agreement lie in GATT, which was a treaty concluded in October 1947 that was designed to discipline the use of tariffs and other trade-related behaviour. The core of GATT is the obligation in GATT Art. II not to impose tariffs in excess of bound levels. These levels were individually agreed by each country in negotiations carried on with their trading partners. 39 At the same time, GATT also obliged countries to apply the MFN obligation in GATT Art. I, thereby extending the bindings to all other GATT member countries. The requirement to bind tariffs was supplemented by rules on non-tariff barriers such as subsidies, dumping, customs valuation, licencing and transparency. In the decades after the original treaty was concluded, GATT members also met in a series of negotiating rounds to further reduce their bindings and to conclude a set of side codes which elaborated on core GATT provisions. Not all members agreed to these codes, however, something which gave rise to differential obligations among members during the 1980s.
The preamble of the U.N. Charter states We the peoples of the United Nations determined to promote social progress and better standards of life in larger freedom . See also The purpose of many [GATT/WTO] disciplines, indeed one of the primary objects of the GATT/WTO as a whole, is to produce certain market conditions which would allow this individual activity to flourish. United States Sections 301-310 of the Trade Act of 1974, WT/DS152/R, para. 7.73 (Dec. 22, 1999). (emphasis added). 38 Claude Lvi-Strauss, The Savage Mind 89 (1962). 39 [M]ost tariff concessions are negotiated bilaterally, but the results of the negotiations are extended on a multilateral basis: EC Measures Affecting the Importation of Certain Poultry Products, WT/DS69/AB/R at para. 94 (13 July 1998).
37
13 The WTO Agreement came into being in 1994 in part to bring this diversity to an end. Countries were required to adhere to a single undertaking or package of obligations that complemented individual bindings. GATT itself was reformulated and, together with certain GATT decisions and protocols, was inserted into the WTO Agreement as GATT 1994. The WTO Agreement also dealt with a number of GATTs institutional birth defects. The original GATT was envisaged only as an interim arrangement pending the conclusion of the Havana Charter of 1948 and the creation of an international organization. However, when these efforts failed in the late 1940s GATT was left to operate on its own without a formal institutional structure. Instead, a small staff was organized into a secretariat that was housed in a villa on the grounds of the U.N. headquarters in Geneva. One of the principal changes introduced in 1994 was to transform this structure into a formal international organization endowed with its own legal personality. The WTO Agreement itself is a relatively brief document of 16 articles. It defines the organizations chief organs, its rules on voting, amendment and membership, and a number of key institutional provisions such as the obligation on members to comply with WTO law and the hierarchy of norms within the treaty. Attached to this are four annexes where much of the substance of the WTO Agreement is now located. Annex One is composed of three sub-annexes that cover trade in goods, trade in services and trade-related aspects of intellectual property. One of these subannexes, Annex 1A, is where GATT 1994 is now found. Annex Two contains a common set of rules for WTO dispute settlement. Annex Three contains a scheme for the periodic review of countries trade polices called the Trade Policy Review Mechanism (TPRM). Annex Four contains two agreements that only apply plurilaterally, that is, among countries that have specifically agreed to them. One plurilateral agreement involves disciplines on government procurement, the other disciplines on trade in civil aircraft. The WTO Agreements structure is reinforced by the WTO Dispute Settlement Understanding (DSU) in Annex 2. Pursuant to the DSU WTO members can taken each other before panels where there is reason to believe that the domestic laws of other members nullify or impair benefits accruing under the treaty. 40 Panel proceedings may be followed by an appeal to the Appellate Body, which has the power to uphold, modify or reverse the findings and conclusions of the panel. If a violation of the treaty is found, a recommendation is normally made to the offending country to bring its law into conformity with the WTO Agreement. Conformity is said to involve a solution mutually acceptable to the parties and consistent with the covered agreements. 41 In the absence of such a solution, however, the DSU
40
GATT Art. XXIII:1 provides If any contracting party should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded as the result of (a) the failure of another contracting party to carry out its obligations under this Agreement, or (b) the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement, or (c) the existence of any other situation . 41 DSU Art. 3.7.
14 goes on to specify that the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measure concerned. The wrongdoer is then give a reasonable time to comply, failing which the parties are permitted to negotiate compensation for future injury or, as a last resort, the plaintiff can request authorization from the WTO membership to retaliate. This retaliation is foreseen to consist of the suspension of concessions or other obligations under the covered agreements. There are, in addition, a number of remedies that are specific to certain causes of action and sub-disciplines under the WTO Agreement. 42 The WTOs system of dispute settlement is generally considered to be highly successful. 43 More countries have engaged in WTO litigation than under GATT and a number of decisions have prompted the withdrawal or amendment of offending national measures. 44 In rare cases compliance has not been possible immediately and ongoing compensation has been negotiated. 45 In others, the remedy of retaliation has been authorized, although the number of instances where retaliation has actually been invoked remains few. 46 3.1 A Law of Expectations The starting point of a theory of WTO law is the realization that the principal aim of the WTO Agreement is the protection of expectations. 47 An example is a concession by the United States to grant a certain tariff on textiles. The tariff is not about textile imports today. Rather, it is a promise by the U.S. government to treat textile imports in a certain
A number of these can be found in Appendix 2 of the DSU, which contains special or additional rules and procedures applying to disputes that involve one or more of the Multilateral Agreements on Trade in Goods. They prevail over the DSU in the event of conflict. For instance, Art. 4.7 of the WTO Subsidies Agreement provides that if a measure is found to be a prohibited subsidy, the panel shall recommend that the subsidizing Member withdraw the subsidy without delay. Other particular remedies include DSU Art. 25 (arbitration, where the parties shall agree to abide by the arbitration award), DSU Art. 26.1 (in non-violation cases there is no obligation to withdraw the measure but the panel or Appellate Body shall recommend that the Member concerned make a mutually satisfactory adjustment.), DSU Art. 26.2 (in situation complaints the panel is to circulate a report to the DSB addressing the complaint) and Art. XX.7 of the Agreement on Government Procurement (which requires signatory countries to provide challenge procedures in tendering situations with the possibility of rapid interim measures to correct breaches, decision-making on any allegation of breach and correction of the breach or compensation for the loss or damages suffered, which may be limited to costs for tender preparation and protest.). 43 As of January 2009 390 complaints had been notified to the WTO, of which 116 had been the subject of dispute settlement reports, 61 were the subject of mutually agreed solutions, and 38 others settled or inactive. See Statistical Overview in Update of WTO Dispute Settlement Cases, WT/DS/OV/34 (26 Jan. 2009). 44 As of January 2009 compensation had been negotiated as a temporary measure in Turkey Restrictions on Imports of Textile and Clothing Products, WT/DS34 (where Turkey agreed to remove certain quantitative restrictions on textiles from India and to carry out agreed tariff reductions, as well as a commitment to strive towards early compliance with DSB recommendations and rulings); United States Section 110(5) of the U.S. Copyright Act, WT/DS160 (the U.S. agreed to make a payment of $3.3 million to the EC for the period 2001-2004 to a fund to be established for the promotion of authors rights and provision of general assistance to members of EC performing rights societies. See WT/DS160/18/Add.16). 45 As of January 2009 retaliation had been authorized in 15 cases among 390 complaints reported to the WTO. 46 As of January 2009 retaliation was only ongoing in EC Hormones, WT/DS26,48/AB/R. 47 For cases where panels stated that the purpose of GATT is to protect expectations see Working Party Report, Brazilian Internal Taxes, adopted 30 June 1949, BISD II/181, para. 16; Panel Report, United States - Taxes on Petroleum and Certain Imported Substances, adopted 17 June 1987, BISD 34S/136, para. 5.1.9; Panel Report, Canada - Administration of the Foreign Investment Review Act, adopted 7 February 1984, BISD 30S/140, para. 6.6; Panel Report, Japanese Measures on Imports of Leather, adopted 15/16 May 1984, BISD 31S/94, para. 55; Panel Report, Japan - Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages, adopted 10 November 1987, BISD 34S/83, para. 5.11; Panel Report, European Economic Community - Restrictions on Imports of Apples, adopted 22 June 1989, BISD 36S/135, para. 5.25; and Panel Report, United States - Measures Affecting the Importation, Internal Sale and Use of Tobacco, adopted 4 October 1994, DS44/R, para. 99. For some WTO dispute settlement reports referring to the protection of expectations see India Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/R (Sept. 5, 1997); EC Customs Classification of Certain Computer Equipment, WT/DS62/AB/R (June 5, 1998); Korea Taxes on Alcoholic Beverages, WT/DS75/AB/R (Jan. 18, 1999); Korea Measures Affecting Government Procurement, WT/DS163/R (May 1, 2000).
42
15 way in the future. That promise gives security to textile producers and exporters in foreign countries that their goods will encounter a predictable kind of treatment when entering the U.S. In effect, the tariff serves as a basis for upstream decisions about investment, production and exports. 48 Producers and exporters may decide to invest in certain machinery, or use certain inputs, or locate their manufacturing in certain countries. Whatever the outcome, many decisions will turn on the expectations created by the U.S. tariff. As to whom these expectations belong, it might be thought that expectations arising from WTO concessions or commitments are the property of the country or countries that actually negotiate them. After all, those countries would be the ones most directly involved in the negotiations and would be the most likely to benefit. But as I will demonstrate, that is not at all the way in which expectations have been interpreted under the WTO Agreement. By virtue of the fact that the promises made under the treaty give rise to complex interactions that cannot be neatly disaggregated, it becomes effectively impossible to sort out whose expectations arise from the operation of the treaty or who should be compensated when they are breached. 49 The great collectivizing mechanism is the General Most-Favoured-Nation (MFN) Clause of GATT Art. I:1, which provides: With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 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. The wording of the MFN clause makes clear that the obligations owed by one WTO member country to another immediately and unconditionally become obligations owed to all WTO countries. At this point it might be wondered exactly how justice is manifested in such an arrangement. We usually think of justice as working interpersonally to promote the return
48 Warrick Smith & Mary Hallward-Driemeier, Understanding the Investment Climate, Finance & Development (March 2005) at 40. 49 Thus, arbitrators have described their work as a reasoned estimate (EC - Hormones (22.6)(U.S.), WT/DS26/ARB, para. 41 (July 12, 1999)), and have avoided claims that are too remote, too speculative, or not meaningfully quantified. U.S. Antidumping Act of 1916, para. 5.57 (Feb. 24, 2004). There is also recognition of the inflation that such claims are subject to: see Canada Aircraft (22.6), WT/DS222/ARB, n. 90 (observing that apart from U.S. FSC arbitrators have always rejected the level proposed by the member requesting the right to suspend concessions or other obligations and set a new level, based on their own assessment: see, e.g., EC - Bananas III (United States) (Article 22.6 EC): US$520 million requested, US$191.4 million authorized; EC Hormones (United States (Article 22.6 EC): US$202 million requested, US$116.8 million authorized; EC Hormones (Canada) (Article 22.6 EC): Can$75 million requested, Can$11.3 million authorized; EC Bananas III (Ecuador) (Article 22.6 EC) US$450 million requested, US$201.6 million authorized; Brazil Aircraft : Can$ 700 million requested, Can$344.2 million authorized).
16 of something to someone, but if WTO obligations are essentially one thing belonging to all, then how are they fairly and properly administered? The nature of justice was considered two millennia ago by Aristotle, who identified two types of justice: corrective and distributive. Corrective justice applies to private interests and plays a rectificatory role in transactions. Thus, when people are wrongly deprived of their property they are entitled to have it returned or to be compensated. The implicit metric is equality: you get what youve lost. Distributive justice, by comparison, applies to the distribution of public interests such as 'honour or money or other things that have to be shared among members of the political community'. 50 It presupposes some socially agreed means of allotment. Consequently, the implicit metric is proportionate: you get what youre entitled to. A modern example of distributive justice would be the assignment of broadcast licences. In most countries such licences are only awarded to well-established companies that can meet the public interest by carrying on continuous service while conserving spectrum. 51 Distributive justice has profound implications for outcomes. This is because remedies invoked to protect an individuals interest in private property are altogether different from remedies invoked to protect public property. The usual remedy in corrective justice is compensation for the victim; in distributive justice, it is to deny the wrongdoer their proportionate share. 52 Thus, while the breach of an individual right between two parties requires either specific performance or an award of damages 53 the breach of a collective obligation requires a change of behaviour by the wrongdoer. That change can be prompted by a deprivation, or possibly by a remedial programme to ensure that the wrongdoer and others never breach again. 54 The distributive remedy is, in particular, more ambitious than its corrective counterpart since it seeks to go beyond the one-off response of compensation and to change the wrongdoers conduct at every point in the future. The law must be more interventionist, and more attentive to considerations of jurisdiction, timing and resource allocation. Notwithstanding this difference, the natural tendency is to think of justice in corrective terms. That predisposition is an outgrowth of the presence of corrective justice in daily life. Like the bilateralism inherent in thinking about international trade, it is a device for comprehending the world. By comparison, distributive justice is relatively unfamiliar. It appears strange and suspect, principally because we are not used to thinking about the
50 Richard McKeon (ed.), The Basic Works of Aristotle 1131a 25-29 (2001). For a treatment of distributive justice see N. Rescher, Fairness: Theory and Practice of Distributive Justice (2002). 51 Freeing the Airwaves, The Economist, 31 May 2003, at 76. See also R. Posner, Economic Analysis of Law (4th edn., 1992), at 45 47, 672674. 52 International Encyclopedia of Comparative Law, xi, Ch. 8, 8-2. 53 'Although a judgment awarding a sum of money as damages is the most common judicial remedy for breach of contract, other remedies, including equitable relief in the form of specific performance or an injunction, may also be available': Restatement of the Law (2d) Contracts 110. 54 The relative ambition of this aim is to be contrasted with the more limited aim in domestic contract lawperhaps the most directly analogous situation to that of the WTO Agreementwhere '[t]he traditional goal of remedies has not been compulsion of the promisor to perform his promise but compensation of the promise for the loss resulting from the breach': ibid., at 100. More recently the compensatory orientation of contract law has been extended by the notion of 'efficient breach'. For an application of this idea in the trade context see Schwartz and Sykes, The Economic Structure of Renegotiation and Dispute Resolution in the World Trade Organization, 31 J Legal Stud (2002) S179 (arguing that the concept of efficient breach is a 'central feature' of WTO dispute settlement).
17 collective interest. Yet if we conceive of the WTO Agreement as protective of collective expectations, then distributive justice must apply. Distributive justice prevails under WTO rules that extended and formalized GATT practice in relation to dispute settlement. Distributive justice explains why it is that the principal remedy under the WTO Agreement is a recommendation of conformity: in classic distributive fashion a recommendation insists on a return to desired behaviour, nothing more. There is diminished concern with the consequences of wrongful behaviour; the immediate emphasis is on re-establishing the conditions originally upset. Furthermore, distributive justice explains why WTO remedies focus on prospective as opposed to retrospective relief: their aim is not to repair prior or existing damage, but rather to correct future behaviour. Finally, distributive justice explains why the ultimate sanction of the system is retaliatory suspension: it denies the wrongdoer their proportionate share. Still, developments in WTO dispute settlement have tended to obscure the predominately distributive character of justice under the treaty. This is largely due to procedural changes. Ready recourse by countries to dispute settlement has promoted a practice of framing claims in terms that are unique to the litigants, implicitly bilateralizing them. 55 The evident bipolarity of dispute settlement has tended to work in a limitative way by promoting views of the treaty as involving identifiable interests specific to individual litigants and making it less likely that WTO obligations will be respected in their original collective character. A corrective view of the treaty ensues. To appreciate how this happens, it is important to recall what the WTO Agreement actually 'distributes'. As seen, the principal interest protected by the WTO Agreement is expectations. In essence, all WTO Member countries are supposed to enjoy the same expectation of trade with a given Member country. Such a configuration has important consequences. To start with, it tends to stress obligation. 56 Likewise in WTO law, the sense of duty upon member countries in the treaty system is all-pervasive. The law is more likely to be perceived as a body of obligations than as a balance of rights and obligations. Second, the laws obligatory character influences its logic. Traditionally, GATT and WTO law have functioned according to deductive logic, or the logic of what must be, based on presumptions about what is likely to happen. Thus, DSU Art. 3.8 states the presumption that a breach of WTO rules causes nullification or impairment.57 This gets at
55 Joost Pauwelyn, The Limits of Litigation: Americanization and Negotiation in the Settlement of WTO Disputes, 19 Ohio St J on Dispute Resolution (2003) 121, at 129132. 56 The notion of a generalized obligation is something encountered in a number of legal traditions, most notably in the Hindu notion of dharma. Dharma is difficult to define, but it has always been closely associated with the idea of duty. In traditional Hindu society individuals possess a dharma, or duty, and are charged with upholding it for the greater good of society. All of life is thus suffused with obligation: to ones kin, to ones associates, and to the wider forces of the cosmos. See H. Patrick Glenn, Legal Traditions of the World (Oxford: Oxford University Press, 2000) 262ff. 57 DSU Art. 3.8 provides: In cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment. The presumption continues to stand and has in practice operated as an irrefutable presumption. United States Taxes on Petroleum and Certain Imported Substances, B.I.S.D. 34th Supp. 136, 155, 157-158 at para. 5.1.7. (17 June 1987). For presumptions of compliance that operate in WTO law see U.S. OCTG,
18 the fact that it is difficult to know with certainty what is actually happening. Instead, the law is based on what is assumed to occur rather than any careful inquiry into what actually occurs. 3.2 A Law of Realities I have identified the WTO Agreement as a law of expectations, but that identification is not exclusive because the operation of the WTO Agreement is complex. We can think of the WTO Agreement as being primarily about the protection of expectations, as it undoubtedly is, yet here and there under the treaty are rules that simultaneously allow governments to respond to specific realities. By realities I mean conditions as they actually are. The idea of the WTO Agreement as a law of realities emphasizes what is happening at a given point in time. In this respect it is essentially static, and in so being, is more likely to coincide with a bilateral view of WTO obligations. A good example are non-violation claims made pursuant to GATT Art. XXIII:1(b). There the issue is whether a measure that may not formally violate GATT is nevertheless causing nullification or impairment. Unlike violation claims under GATT Art. XXIII:1(a), the complainant's reasonable expectations at the time of negotiation are taken into account. 58 Non-violation claims also require the complainant to present a detailed justification in support, and where the claim is successful, the panel or Appellate Body examining the matter is to recommend a mutually satisfactory adjustment. 59 This last requirement, in particular, could give rise to the perception of a deal between a pair of parties. Other cases involving realitybased rules are still more evidently bilateral. WTO rules on safeguards, subsidies and anti-dumping, for example, often present the spectacle of a single, discrete injury and bipolar dispute settlement in response.
WT/DS268/AB/R (29 Nov. 2004) at para. 173. In Canada/U.S. Continued Suspension the panel said it was inclined to agree with the European Communities that every party to an international agreement must be presumed to be performing its obligation under that agreement in good faith. Whether a presumption of good faith "can be equated with presumption of compliance with treaty obligations, the panel explained that a State acting in good faith should be honestly seeking to comply with its obligations, and therefore [a] presumption of good faith could thus extend to compliance. Canada/U.S. Continued Suspension in the EC Hormones Dispute, WT/DS320-321/R (21 Dec. 2007) at para. 7.308-317. A number of other presumptions operate in WTO law: see the evidentiary presumption of good faith to statements and evidence presented by the parties see Brazil Export Financing Program for Aircraft, WT/DS46/ARB (28 Aug. 2000) at para. 2.10; the interpretative presumption that all parts of the treaty are to be read together harmoniously see Korea Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R (14 Dec. 1999) at para. 81 and EC Export Subsidies on Sugar, WT/DS283/R (15 Oct. 2004) at para. 7.65; the presumption that upon the privatization of a state-owned enterprise there is a rebuttable presumption that [countervailable] benefits cease to exist. U.S. Countervailing Measures Concerning Certain Products from the EC, WT/DS212/AB/R (9 Dec. 2002) at para. 127. 58 In Japan Film, WT/DS44/R (31 March 1998), for instance, the evidentiary issues were complicated by the fact that the United States claimed to have had expectations of improved market access benefits in respect of four different products granted during three successive rounds of multilateral trade negotiations. This raised two general issues: first, whether the benefits legitimately expected by a WTO member could derive from successive rounds of tariff negotiations, and second, what factors should be considered to determine if a Member should have reasonably anticipated measures that it claims nullified or impaired benefits. Ibid. at para. 10.62 On the first issue the panel recognized that establishing expectations from [negotiating] rounds concluded 18 or 30 years ago might be difficult. Ibid., para. 10.70. On the second issue the panel stated that: where the United States claims that it did not know of a measure's relevance to market access conditions in respect of film or paper, we would expect the United States to clearly demonstrate why initially it could not have reasonably anticipated the effect of an existing measure on the film or paper market and when it did realize the effect. Such a showing will need to be tied to the relevant points in time (i.e., the conclusions of the Kennedy, Tokyo and Uruguay Rounds) in order to assess the extent of the United States' legitimate expectations of benefits from these three Rounds.(ibid., para. 10.80 (emphasis added)) It is the reference to effects presumably meant as trade effects that is notable here. See also EC Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/R, paras. 8.275-282., 8.299. (18 Sept. 2000). 59 DSU Art. 26.1(b).
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Not surprisingly, the WTO Agreement as a law of realities suggests a different model of justice. The impulse becomes subtly corrective. Partly for this reason countries and commentators have pointed out that under existing dispute settlement procedures something is missing and that the deficit could be remedied by the introduction of more corrective justice under the treaty. 60 The WTO Agreement as a law of realities is also more evidently a regime of rights. This point was made by the panel in Turkey Textiles, where the issue was whether Turkey had the right to adopt certain import restrictions on textiles and clothing prior to entering into a customs union with the EC. Turkey's argument was that it could adopt the EC's restrictions without the need for renegotiation with third countries because the restrictions were already part of the EC's WTO commitment. The panel observed: The WTO system of rights and obligations provides, in certain instances, flexibility to meet the specific circumstances of Members. For instance, the ATC has grand-fathered certain MFA derived rights regarding import restrictions for specific Members and Articles XII, XIX, XX and XXI of GATT authorize Members, in specific situations, to make use of special trade measures. We consider that, even if the formation of a customs union may be the occasion for the constituent member(s) to adopt, to the greatest extent possible, similar policies, the specific circumstances which serve as the legal basis for one Member's exercise of such a specific right cannot suddenly be considered to exist for the other constituent members. 61 The panel's comments suggest an important distinction in the law. This is that WTO law as a law of rights is much less cohesive than WTO law as a law of obligations.62 A reality for one country will not be the same reality for every other country.63 Consequently, WTO law in this second mode is made up of a range of apparently unconnected rights arising in different circumstances. Their variability makes them more difficult to discern.
See for instance Marcko Bronkers & Naboth van den Broek, Trade Retaliation is a poor way to get even, FINANCIAL TIMES [of London] 15 (June 24, 2004) (Financial compensation should be high on the agenda of every trade negotiator at the WTO.); Joost Pauwelyn, Enforcement and Countermeasures in the WTO: Rules are Rules Toward a More Collective Approach, 94:2 AM. J. INTL L. 335, 345-46 (Why not, therefore, make compensation compulsory and automatic the way that countermeasures currently are?). See also WTO member proposals on great compensation made in the Doha Development Round by the African Group, TN/DS/W/15, at 2 (Sept. 25, 2002); Ecuador, TN/DS/W/9 at 3 (July 8, 2002); and China, TN/DS/W/29, at 1 (Jan. 22, 2003). 61 Turkey Restrictions on Imports of Textiles and Clothing Products, WT/DS34/R (31 May 1999) at para. 9.184 [emphasis added]. 62 Thomas Franck has explained the subordinate emphasis on rights as opposed to obligations in international law as follows: [u]nlike liberal democracies . the global secular system [accommodates differing moral values] less by compromising, than by deemphasizing the importance of, diverse precepts of right. Iranian Shiite fundamentalists, Irish Catholics, Orthodox Israelis, Indian Hindu secularists, American Episcopalians, and West African Animists may share a world of states and secular rules, but not a common system of values, a globalized understanding of fairness, or a shared cannon of justice principles. They may agree that armed aggression is too dangerous to permit, yet disagree about the rights of workers, women, homosexuals, the unborn, blasphemous or pornographic writers, and usurous bankers. Compromise on such matters remains elusive. The co-existence of radically different concepts of right within an emergent global secular system often is made possible by emphasizing the manifest legitimacy of secular rules while deliberately postponing to another day considerations of justice. THOMAS FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 235-236 (1990) (emphasis in original). 63 This tension was at the heart of EC Conditions for the Granting of Tariff Preferences to Developing Countries, WT/DS246/AB/R (7 April 2004) where the Appellate Body had to distinguish between treatment of developing countries as a group and their treatment as members of sub-groups or individually. The Appellate Body observed at para. 169 that: [W]e are of the view that the objective of improving developing countries share in the growth in international trade, and their trade and export earnings, can be fulfilled by promoting preferential policies aimed at those interests that developing countries have in common, as well as those interests shared by sub-categories of developing countries based on their particular needs. [emphasis in original].
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Rights under the WTO Agreement are further diminished by their conditionality. The right might be the right of a country to take anti-dumping or countervailing duty action. Most often the issue in dispute settlement is whether the conditions precedent to the exercise of a right - such as a properly conducted investigation - have been fulfilled. These aspects of the law were highlighted in Argentina Footwear Safeguard. 64 In that case the issue was whether Argentina had met requirements to impose safeguards on imports of footwear from the EC. The Appellate Body observed: it must always be remembered that safeguard measures result in the temporary suspension of concessions or withdrawal of obligations, such as those in Article II and Article XI of the GATT 1994, which are fundamental to the WTO Agreement. As such, safeguard measures may be applied only when all the provisions of the Agreement on Safeguards and Article XIX of the GATT 1994 are clearly demonstrated. 65 The Appellate Body's comments in Argentina Footwear Safeguard also demonstrate another feature of reality-based disciplines: the insistence on a clear showing. 66 This is unlike the law of expectations and its use of presumptions, and is particularly true where the right is exercised provisionally or anticipatorily. 67 The exact requirements to satisfy such a need for evidence will vary according to the discipline involved and the particular circumstances of each case. 68
Argentina Safeguard Measures on Imports of Footwear, WT/DS121/AB/R (14 Dec. 1999). Ibid. (Dec. 14, 1999) at para. 95. 66 See for example Korea Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/AB/R (10 Jan. 2001) at para. 162-164 (determination of whether a measure determination of whether a measure, which is not indispensable, may nevertheless be necessary within the contemplation of Article XX(d), involves in every case a process of weighing and balancing a series of factors which prominently include the contribution made by the compliance measure to the enforcement of the law or regulation at issue, the importance of the common interests or values protected by that law or regulation, and the accompanying impact of the law or regulation on imports or exports.). Evidentiary obligations can also be found in ADA Arts. 3.4 (impact examination to include an evaluation of all relevant economic factors and indices), 3.5 (causal relationship determination shall be based on an examination of all relevant evidence before the authority), Annex II (determinations permissible on the basis of facts available), 5.3, 5.8 and 6 (accuracy and adequacy of evidence, and opportunity to present), 10.7 (sufficiency of evidence) and 11.2 (evidence required for revocation). For various instances of application see U.S. Measures Affecting Imports of Softwood Lumber from Canada, B.I.S.D. 40th Supp. 358 (27-28 October 1993) at para. 332; U.S. Anti-Dumping Duty on Dynamic Random Access Memory Semiconductors (DRAM) of One Megabit or Above from Korea, WT/DS99/R (29 Jan. 1999) at para. 6.43; Mexico Anti-Dumping Investigation on Imports of High Fructose Corn Syrup (HFCS) from the United States, WT/DS132/R (28 Jan. 2000) at para. 7.97; Guatemala AntiDumping Investigation Regarding Portland Cement from Mexico, WT/DS60/R (19 June 1998) at para. 7.77; U.S. Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS 184/R (28 Feb. 2001) at para. 7.153; see also application of SCM Arts. 4.2, 11 and 12, CVA Art. 8.3, and Annex 1; SPS Art. 3.3 (scientific justification) and EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26,48/AB/R (16 Jan. 1998) at para. 184; PSA Art. 2.2 (evidentiary standards for price verifications); DSU Art. 26.1 (detailed justification in support of non-violation claims). 67 See for example Safeguards Agreement Art. 6 (provisional safeguard possible in critical circumstances and pursuant to a preliminary determination based on clear evidence), Subsidies Agreement Art. 17.1(b) (provisional measures possible where preliminary affirmative determination that subsidy exists and that there is injury to a domestic industry) and Antidumping Agreement Art. 7.1(ii) (provisional measures possible where preliminary affirmative determination of dumping and consequent injury to a domestic industry). See also the standard for threatened injury: SAF Art. 4.2(a), SCM Arts. 15.7-8; AD Art. 3.7. In this respect see also U.S. Safeguard Measures on Imports of Fresh, Chilled and Frozen Lamb Meat from New Zealand and Australia, WT/DS177,178/AB/R (1 May 2001) at para. 125 (where in interpreting the phrase threat of serious injury the Appellate Body emphasized the phrase clearly imminent which it considered to mean that there must be a high degree of likelihood that the anticipated serious injury will materialize in the very near future.). 68 This has led to concern about fact-finding ability in WTO dispute settlement. See Claus-Dieter Ehlermann & Lothar Ehring, WTO Dispute Settlement and Competition Law: Views from the Perspective of the Appellate Bodys Experience, 26 Fordham Intl L.J. 1505 at 1542 (2003) (observing that [d]espite the extensive right to seek information of every panel, it is generally believed that the investigation of facts is among the weakest spots of the panel procedure.). Petros Mavroidis, Essay: Dispute Settlement Procedures and Mechanisms, 16 Ariz. J. Intl & Comp. L. 225 at 258 (1999) (The WTO has been criticized for its fact-finding defects ).
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The requirement of evidence is linked to the laws aspect in this mode as contractual and justices aspect as corrective, that is, as seeking to repair harm done. We can easily see how the exercise of a right by one country could give rise to a claim for reparation from another country, a possibility contemplated in the remedy of negotiated compensation under DSU Art. 22.2. 69 A further feature serving to limit rights under the WTO Agreement is their mutuality. WTO law as a law of realities, and therefore a law of rights, cannot be exercised in such a way as to eviscerate the rights of other WTO members, a doctrine known as abuse of rights (abus de droit). 70 This point was emphasized in U.S. Shrimp where the issue was the right of the U.S. to invoke the exception in GATT Art. XX(g) involving conservation measures. 71 The U.S. raised the exception as a defence to its violation of GATT Art. XI:1, the prohibition on quantitative restrictions, since the U.S. legislation in question effectively prohibited the importation of shrimp that was not caught in a turtle-friendly manner. The Appellate Body agreed that the U.S. had met the terms of the exception, but then went on to analyze whether it had fulfilled the conditions of the preamble, or chapeau, of Art. XX. 72 In doing so the Appellate Body observed: Exercise by one Member of its right to invoke an exception, such as Article XX(g), if abused or misused, will, to that extent, erode or render naught the substantive treaty rights in, for example, Article XI:1, of other Members. Similarly, because the GATT 1994 itself makes available the exceptions of Article XX, in recognition of the legitimate nature of the policies and interests there embodied, the right to invoke one of those exceptions is not to be rendered illusory. The same concept may be expressed from a slightly different angle of vision, thus, a balance must be struck between the right of a Member to invoke an exception under Article XX and the duty of that same Member to respect the treaty rights of the other Members. To permit one Member to abuse or misuse its right to invoke an exception would be effectively to allow that Member to degrade its own treaty obligations as well as to devalue the treaty rights of other Members. If the abuse or misuse is sufficiently grave or extensive, the Member, in effect, reduces its treaty obligation to a merely facultative one and dissolves its juridical character, and, in so doing, negates altogether the treaty rights of other Members. The chapeau was installed at the head
If the Member concerned fails to bring the measure found to be inconsistent with a covered agreement into compliance such Member shall, if so requested, and no later than the expiry of the reasonable period of time, enter into negotiations with any party having invoked the dispute settlement procedures, with a view to developing mutually acceptable compensation. 70 Reference to the doctrine can be found in United States Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R at para. 152 (12 Oct. 1998). It is traditionally a doctrine of the civil law. Its application in international law is discussed in Ian Brownlie, System of the Law of Nations: State Responsibility Part I 52 (1983). 71 U.S. Shrimp, ibid. 72 The preamble to GATT Art. XX provides that Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: .
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22 of the list of "General Exceptions" in Article XX to prevent such farreaching consequences. 73 A similar observation was made in U.S. Line Pipe Safeguards, where the dispute involved the U.S.'s right to impose safeguards against imports of certain steel pipe from Korea. The Appellate Body observed: There is, therefore, a natural tension between, on the one hand, defining the appropriate and legitimate scope of the right to apply safeguard measures and, on the other hand, ensuring that safeguard measures are not applied against "fair trade" beyond what is necessary to provide extraordinary and temporary relief. A WTO Member seeking to apply a safeguard measure will argue, correctly, that the right to apply such measures must be respected in order to maintain the domestic momentum and motivation for ongoing trade liberalization. In turn, a WTO Member whose trade is affected by a safeguard measure will argue, correctly, that the application of such measures must be limited in order to maintain the multilateral integrity of ongoing trade concessions. The balance struck by the WTO Members in reconciling this natural tension relating to safeguard measures is found in the provisions of the Agreement on Safeguards. 74 The Appellate Body's statements in U.S. Shrimp and U.S. Line Pipe Safeguards illustrate the fact that the WTO Agreement as a law of realities involves action that is highly conditioned and contextualized, and that exists within a larger matrix of rights and obligations. 3.3 A Law of Interdependence The classification of WTO law into a law of expectations and a law of realities, and likewise of obligations and rights, is attractive since it emphasizes both the WTO regimes legality and unity. At the same time, the theorys coherence implies that there is something else arising from the interaction of its parts. This is the idea of WTO law as lex specialis. The term lex specialis has no fixed meaning in international law. 75 We can take from its Latin roots, however, that it is a special or exceptional body of law distinct from the law that which is regularly applied. The extent of displacement is determined by the lex specialis. 76 Some idea of the special character of this regime comes by comparing WTO
United States Import Prohibition of Certain Shrimp and Shrimp Products (Oct. 12, 1998) para. 156 (emphasis in original). United States Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R (15 Feb. 2002) at para. 83 (emphasis in original). 75 Instead, it is often transliterated directly as a special law to distinguish it from the more usual consequences of state responsibility. See Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law, A/CN.4/L.682 34 (13 April 2006). 76 It will depend on the special rule to establish the extent to which the more general rules on State responsibility are displaced . James Crawford, The International Law Commissions Articles on State Responsibility: Introduction, Text and Commentaries 307 (2002) [hereinafter Crawford].
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23 obligations with those typically found in international law. The International Law Commissions Articles on State Responsibility (ASR) suggest that in the typical bilateral relationship rights are linked to corresponding obligations. Thus, ASR Art. 2(1) provides that a countrys wrongful act imposes upon it an obligation of state responsibility. ASR Art. 42(a) further specifies that this obligation is owed in the first place to the injured state, the injured state being defined as the State whose individual right has been denied or impaired by the internationally wrongful act or which has otherwise been particularly affected by that act. 77 ASR Art. 42(b) goes on to specify that the obligation may be owed to the international community as a whole, or to a subset thereof. Similarly, ASR Art. 48 contemplates that responsibility may be invoked by a state other than an injured state provided that the obligation is owed to a group of states and is established for the groups collective interest, or is an obligation owed to the international community as a whole. The dominant impression left by ASR is therefore that obligations under international law are of two types: either bilateral or collective, not both. Yet if we look carefully at the WTO Agreement, it becomes clear that WTO obligations have a dual quality. To be sure, MFN operates to presumptively multilateralize all obligations. Nevertheless, there remain significant bilateralizing tendencies at work. For instance, a purely collective arrangement would allow any country that is a member to contest a breach of obligations, yet the WTO Agreement does not do this. Instead, it requires individual countries to launch claims and only permits them to retaliate where they have actual trade with the defendant. 78 Likewise, countries invoking third party status in dispute settlement are required to show a substantial interest.79 More generally, the Appellate Body has made references to countries concerned, a phrase which suggests that there are issues of concern within the treaty that extend to some, but not necessarily all, WTO members. 80 The treatys intermediacy can be comprehended with reference to the ASR. ASR Art. 33(1) provides that obligations may be owed to another State, to several States, or to the international community as a whole, depending in particular on the character and content of the international obligation and on the circumstances of the breach. The commentary goes on to clarify that the scope of the obligation is dictated both by the nature of the primary rule and the situation encountered in its breach. Thus, it is entirely conceivable that WTO obligations might have a dual character and, strictly speaking, be neither wholly bilateral nor wholly collective, but rather some combination of the two. This hybridity is a good way to think about WTO obligations: bilateral in some instances,
Crawford, ibid., 254. a [WTO] Members legal interest in compliance by other Members does not, in our view, automatically imply that it is entitled to obtain authorization to suspend concessions under Article 22 of the DSU. EC Regime for the Importation, Sale and Distribution of Bananas (Recourse to Arbitration under Art. 22.6), WT/DS27/ARB (April 9, 1999) at para. 6.10. 79 Chi Carmody, Of Substantial Interest: Third Parties under GATT, 18 Mich. J. Intl L. 615 (1997). 80 EC Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R (Mar. 7, 2003) at para. 7.125; United States Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/R (May 15, 1998) at para. 7.55.
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24 multilateral in most others. 81 What does this peculiar regime of law amount to? The immediate overarching purpose of WTO law is the promotion of interdependence. 82 That comes about as a result of the interaction of rights and obligations and is apparent in two respects: one is the way in which national bureaucracies function, the other is the way in which economic operators think. 83 In both instances, the treaty aims to create something new. The shift occurs because national bureaucrats are more likely to take account of international law and to consult, or at least to advert to, international standards, while economic operators are more likely to look for trading partners that offer the most attractive terms regardless of nationality. In both cases, bureaucrats and economic operators are more likely to know and be able to rely upon the rights and obligations of foreign governments. 84 The result is greater interdependence. Interdependence is a product of a transformation brought about by what has been termed transformative justice. 85 Transformative justice does not presume wrongdoing. Instead, it aims to resolve conflicts of interest through the exploration of options and the formulation of acceptable responses. A vital attribute of transformative justice is that it seeks to develop and strengthen relationships among those involved. A notable example of transformation is the Doha Declaration on TRIPS and Public Health. The Declaration dealt with the extent of a countrys right to compulsory license intellectual property, as provided for in TRIPS Art. 31. The Declaration was something arrived at gradually through efforts in many fora, but ultimately took shape in a consensual pronouncement by the WTO membership in November 2001. Outwardly, the Declaration would appear to confirm an event-driven, interstitial view of the treaty,
Elsewhere I have suggested that such dualism may be evidence of WTO obligations as fundamentally interdependent, that is, conditioned on the observation by other countries of their obligations under the treaty. See Chios Carmody, WTO Obligations as Collective, 17 E.J.I.L. 419 (2006). 82 Donald McRae has written: international trade highlights the concept of interdependence. In fact, when we talk of international trade law and of international law we are dealing with two regimes, with two systems that in quite a fundamental way are talking about different things. Donald M. McRae, The Contribution of International Trade Law to the Development of International Law 260 Recueil des Cours 99, 117 (1996) [emphasis added]. 83 This observation is consistent with Philip Allotts insistence on the ability of international legal arrangements to transform the way people think. The history of human societies contains many examples of revolutionary change not only in real constitutions of societies but also in their ideal self-constituting, revolutions in the mind. Allott, Health, above note 18 at 81 (emphasis added). 84 Transparency, information sharing and consultation are recurrent requirements throughout the WTO Agreement. See for instance GATT Art. II (scheduling), Art. X (publication and administration of trade regulations), GATS Art. III (transparency),, TBT Art.s 2.9, 5.6, SPS Art. 5.8, API Art. 3.2, ARO Art. 5. 85 Transformative justice must be driven by the needs of participants. Decisions on how to resolve the conflict ought to be based on a consensus. By consensus, we mean an agreement on how to move forward that is acceptable to all parties. A consensus cannot be imposed. Nor is a consensus just a middle ground position. The goal will be to find common ground on which a mutually acceptable resolution can be established. This is the power of transformative justice: the possibility of using the substance of a conflict as a means of exploring options and establishing responses that are not only acceptable to all parties but develop and strengthen relationships among those involved. Law Commission of Canada, From Restorative Justice to Transformative Justice: Discussion Paper, Law Commission of Canada Catalogue No. JL2-6/1999 (1999). Philip Allott speaks of international economic law and administration as socially transformatory law: Philip Allott, The Health of Nations (Cambridge: Cambridge University Press, 2002) 36, 99 [hereinafter Allott, Health]. Andrew Robinson and Simon Tormey, Horizontals, Verticals and the Conflicting Logics of Transformative Politics in Philip Hayden and Chamsy el-Ojeili (eds), Confronting Globalization: Humanity, Justice and the Renewal of Politics (Houndmills, Basingstoke: Palgrave Macmillan, 2005) 208. Some idea of the successive articulation of GATT/WTO law in dispute settlement and then negotiation (and potentially back again) is given by John M. Weekes, The External Dynamics of the Dispute Settlement Understanding: Its Impact on Trade Relations and Trade Negotiations An Initial Analysis (2004) (on file with author). See also generally Gene Grossman & Elhanan Helpman, Trade Wars and Trade Talks, 103:4 J. Pol. Econ. (1995) 675; Steven Woolcock (ed.), Multilateralism in Neutral: The Interaction between Levels of Rulemaking in International Trade and Investment (2006).
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25 or in other words, a sort of big bang theory about the origins of WTO law. Reality, however, is different. Haochen Sun has done a masterful job of tracing the transformation at work in the drafting and adoption of the Declaration. 86 He illustrates how a number of countries and non-governmental organizations were concerned about the hard-line approach to pharmaceutical patent protection in India Patent Protection 87 and how they sought to recast the issue of compulsory licencing as one of human rights by discussing it in the World Intellectual Property Organization, the Office of the U.N. High Commission for Human Rights, the U.N. Sub-Commission on Human Rights, the World Health Organization and its Assembly, and the U.N. General Assembly. 88 These discussions had the desired effect. Each body adopted statements broadly supportive of a countrys right to compulsorily licence in order to protect public health. Sun also details how litigation launched by the branded pharmaceutical companies in South Africa in 1998 and by the United States against Brazil in the WTO in February 2001 effectively backfired because it depicted the branded pharmaceutical companies as profit-driven and the global public in many developing countries as denied the right to human health. 89 These perceptions were reinforced by the apparently self-interested behaviour of certain developed countries in response to an anthrax scare in the fall of 2001. 90 The outcome of these events was a certain ripening of the compulsory licencing issue internationally. A new balance embodying the emerging global consensus about intellectual property protection was ready to be struck. The Doha Declaration on TRIPS and Public Health of November 2001 achieved this by acknowledging that intellectual property protection is important for the development of new medicines and also confirming that the TRIPS Agreement does not and should not prevent [WTO] Members from taking measures to protect public health. 91 Proceeding from these principles, the Declaration recognized that the flexibility inherent in the TRIPS Agreement allows each member the right to grant compulsory licences and the freedom to determine the grounds on which such licences are granted. The Declaration likewise recognized that [e]ach Member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, specifically mentioning those relating to HIV/AIDS, tuberculosis, malaria and other epidemics . The foregoing confirmation of rights in the Doha Declaration on TRIPS and Public Health was important because it established a framework for resolving many questions in a far more comprehensive manner than the typical result in WTO dispute settlement. It possessed the added advantage of being interpretative in nature and therefore not
Haochen Sun, The Road to Doha and Beyond: Some Reflections on the TRIPS Agreement and Public Health, 15 Eur. J. Intl L. (2004) 123 [hereinafter Sun]. 87 India Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R (19 Dec. 1997). 88 Sun, above note 79 (Feb. 2004) at 127-32. 89 Ibid., 132-133. 90 Ibid., 133-134. 91 WTO Declaration on TRIPS and Public Health, WT/MIN(01)/DEC/2 (20 Nov. 2001).
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26 necessarily requiring immediate action on implementation. However, one issue that it did not resolve was identified in paragraph 6 of the Doha Declaration: We recognize that WTO Members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licences under the TRIPS Agreement. The Declaration therefore instructed the [WTO] Council for TRIPS to find an expeditious solution to this problem and report to the General Council before the end of 2002. This statement provided impetus for negotiation and agreement on the Decision on the Implementation of Paragraph 6 of the Doha Declaration in August 2003. 92 The Decision solved the problem of exporting compulsorily licenced pharmaceuticals to countries with little pharmaceutical manufacturing capacity by waiving the requirement in TRIPS Art. 31(f) that any such use shall be authorized predominately for the domestic market of the Member authorizing such use. 93 The Decision effectively allows but does not require countries to identify whether they will be eligible importing Members, that is, whether they will use the system established by the Decision to import compulsorily licenced pharmaceuticals, and in parallel, whether they wish to be designated as exporting Members to produce pharmaceuticals for export to eligible importing WTO members. 94 What is striking about both the Declaration and the Decision in light of the theory put forward above is the way in which they are, fundamentally, documents about the arrangement of rights and obligations. Importing countries are obliged to notify the WTO TRIPS Council of the quantities of products needed, to confirm insufficient manufacturing capacity, and then proceed to grant compulsory licences. Exporting countries are likewise obliged to issue compulsory licences, to indicate how much product is being produced, to ensure distinctive packaging, and so forth. The obligations set out in the Decision - and the reciprocal rights they infer - are fundamentally about the way in which countries will work together in future, a key feature of transformative justice. In the case of the Decision this is further emphasized by overarching obligations of technical and financial cooperation to prevent the reexportation of compulsorily licenced products, to develop systems of regional patents, and to cooperate in paying special attention to the transfer of technology and capacitybuilding in the pharmaceutical sector. 95
92 Decision on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health, WT/L/540 (2 Sept. 2003). 93 The Decision also waives TRIPS Art. 31(h) which provides that in securing a compulsory licence for a patented product the right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization. 94 The Decision was supplemented in December 2005 by a move to permanently incorporate the operative provisions of the Decision into the TRIPS in the form of a projected TRIPS Art. 31bis. The amendment requires ratification by two-thirds of the WTO membership, or approximately 100 countries. As of the deadline for doing so in December 2007 only 13 countries had ratified. In December 2007 the ratification deadline was postponed until 31 December 2009. See WT/L/711 (21 Dec. 2007). 95 Decision on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health, WT/L/540, Art. 7 (2 Sept. 2003).
27
The Decision is a useful example of what the interaction of rights and obligations under the WTO Agreement can achieve. At the same time, it is not problem-free. To recall the Appellate Bodys statement in U.S. Shrimp, [t]he location of the line of equilibrium is not fixed and unchanging. This suggests that the balance struck in documents like the Decision is fluid and may, or may not, be broadly acceptable depending upon its ability to reflect the deeper sense of what is required. In the aftermath of the Decision, for instance, there continues to be skirmishing over compulsory licencing apparent in the halting way that countries have implemented the Decision and the small number of notifications received from both importing and exporting countries so far. 96 3.4 Idea Complexes The threefold division of legal elements described above (expectations/realities/interdependence) is only one aspect of the theory of WTO law. As seen, the same division is reflected in WTO law structurally (constitution/contract/hybrid), substantively (obligations/rights/lex specialis) and juridically (distributive/corrective/transformative). But that is not all. What makes the tripartite division most noteworthy, and therefore most valuable in terms of theory, is the fact that it is also replicated in many other spheres of WTO law. These include in the philosophical sphere as a reflection of ideal, real, or combined values, in the temporal sphere as either future-, past- or present-oriented, in the kinetic sphere as dynamic, static or variable, and in the associative sphere as either collective, individual or plurilateral. The elements within each sphere tends to operate in conjunction with other elements of the same type in other spheres so that in general two discrete idea-complexes become apparent. One is expectation- and obligation-based, and is constitutive, prospective, dynamic and collective in nature. Its logic is deductive and its evidentiary standard is presumptive. It is based on the ethos of justice-as-equality. The second ideacomplex is reality- and rights-based, and is contractual, retrospective, static and individual in nature. Its logic is empiric and its evidentiary standard is proof-oriented. It is based on the ethos of justice-as-fairness. The two idea-complexes work together to produce a system of law that is a combination of all of the foregoing divisions. As a lex specialis it aims to promote interdependence, being alternately idealistic and realist, past- and future-oriented, dynamic and static, collective and individual. Its logic is abductive and its evidentiary standard is variable. 97 It is based on the ethos of justice-as-transformation. The fundamental division in issue is always between ideal and real. The centrality of this dichotomy to the laws particular normative character was noted by Hans Kelsen, who
In July 2007 Rwanda made the first notification under the Paragraph 6 system when it notified the WTO about the importation of 260,000 doses of TriAvir, a combination anti-retroviral, from Canada. See IP/N/RWA/1 (19 July 2007). Canada later made a coordinate notification. See IP/N/CAN/10/1 (8 Oct. 2007). 97 . [a]bductive logic seeks the best explanation in response to novel or interesting data that doesnt fit an extant model. Deductive or inductive logic might prove such a model true or untrue over time, but in the interim, abductive logic generates the best explanation of the data. Roger Martin, The Opposable Mind (Cambridge: Harvard University Press, 2007) at 146.
96
28 wrote that: [o]nly if law and natural reality, the system of legal norms and the actual behavior of men, the ought and the is, are two different realms, may reality conform with or contradict law, [and] can human behaviour be characterized as legal or illegal. 98 Rather than criticize the division, however, Kelsen observed that a certain antagonism between the normative order and the actual human behavior to which the norms of the order refer must be possible. 99 Indeed, Kelsen went so far as to state that [w]ithout such a possibility, a normative order would be completely meaningless. 100 In WTO law the division of ideal and real is most evidently manifested in competing notions of equality and fairness. The first of these is embodied in GATT Art. I. The second is contained in various provisions that derogate from equality across the WTO Agreement. As will be seen in greater detail in Ch. 3, the notion of equality as an unfinished project is a recurrent theme in political discourse. 101 It instills a powerful momentum and direction in the law. The laws inherent idealism obviously influences the way in which it is arranged and proved. If WTO law always tends towards equality, then it is possible to understand why it is primarily constitutive, inasmuch as most constitutional obligations are presumptively of a broad, overarching and equally applicable character.102 The connection between the MFN Clause and the substantive obligations is particular noteworthy here. Yet we can also appreciate why WTO law so intensely preoccupied with the future, why it might have evolved a formal dispute settlement system of distributive justice, and why this system generally avoids the problem of calculation and compensation, settling instead for a presumption of injury. By implication, the same features also tend to make it understandable why WTO law might also be subordinately preoccupied with fairness that is, what is appropriate to specific circumstances in its secondary mode. 103 If the law is primarily concerned with
Hans Kelsen, General Theory of Law and State 121 (1949). Ibid., p. 120. 100 Ibid. 101 For instance, see the statement by Abraham Lincoln that When the authors of the [U.S.] Declaration [of Independence] spoke of equality they did not mean to assert the obvious untruth, that all were then actually enjoying that equality. . They meant to set up a standard maxim for free society, which should be familiar to all, revered by all; constantly looked to, constantly laboured for, and even though never perfectly attained, constantly approximated, and thereby constantly spreading and deepening its influence, and augmenting the happiness and value of life to all people of all colours everywhere. Doris Kearns Goodwin, Team of Rivals 207 (2005). 102 To an extent, bivalence is an aspect of all constituent treaties of international organizations. Constituent treaties will feature obligations that are uniform for their membership and others that may, or may not, be. This point was made by the International Court of Justice in the Legality of the Threat of Nuclear Weapons (Advisory Opinion), [1996] ICJ Rep. 226, para. 19 when it observed that: the constituent treaties of international organizations are also treaties of a particular type; their object is to create new subjects of law endowed with a certain autonomy, to which the parties entrust the task of realizing common goals. Such treaties can raise specific problems of interpretation owing, inter alia, to their character which is conventional and at the same time institutional; the very nature of the organization created, the objectives which it has been assigned by its founders, the imperatives associated with the effective performance of its functions, as well as its own practice, are all elements which may deserve special attention when the time comes to interpret these constituent treaties. 103 The possibility that GATT and WTO dispute settlement might offer a justice tailored to the circumstances and therefore less than
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29 equality, then there must be some valid reason to depart from that standard. Logically, the justification will come about in the form of an exercise of rights based upon clear evidence and will lend itself naturally to empiricism that seeks to measure precisely the scope of the departure, itself a limited event. These observations highlight a number of important points, but they cannot obscure certain qualifications of the theory even at this juncture. One is the degree of symmetry apparent in WTO law, something that suggests a degree of equality between the two idea complexes outlined above. Aesthetically, WTO law appears to assume a balanced form composed of two idea complexes. 104 However, conceptual equality should not be confused with substantive equality, which is plainly not the case. WTO law tends very definitely towards the first idea-complex and away from the second. That emphasis is the raison-detre of the WTO Agreement. 105 Another qualification is the degree of conceptual independence. The two idea-complexes at work in WTO law consist of conceptual opposites and are therefore appear to be separate. But as is examined further in Ch. 5, there are very definite connections between them. On a purely political plane, for instance, reality-based rules offer the option of seeking selective release from WTO disciplines, and hence work to reinforce the collectivity of the greater whole. Put differently, the freedom to derogate from this or that WTO rule, and therefore occasionally to disappoint collective expectations, is an integral part of the WTO Agreement. No country would have agreed to the treaty otherwise. The symmetry can also be understood in terms of nested oppositions, or as Jack Balkin has described them, conceptual opposites that tend become each other over time. 106 Substantively, the connection is most apparent in the tension in WTO law between constitution and contract, but is also apparent in the way that the law is oriented both to the future and past, in its conception of the underlying substance of the treaty as dynamic or static, and in its insistence on the use of presumptions in some instances and proof in others. 107 At different points the opposing values merge, giving lie to the perception that they are in fact autonomous. 4. THE IDEA OF A SYSTEM The description of a theory of WTO law presented above is just that: a description. It sets
the harm done, was adverted to in United States Anti-Dumping Duties on Gray Portland Cement and Cement Clinker from Mexico, ADP/82, adopted 9 July 1992 unadopted, para 5.43 where the panel suggested that there could be situations where a corrective remedy would be onerous due to the passage of time and the difficulty of calculating reimbursement. It has also been implicit in several other instances of authorized retaliation under the WTO. In those cases recovery was permitted only to the extent determinable or where recovery would not impair the trading system. These recall outcomes experienced in Anglo-American contract law where the plaintiff is not entitled to recover the full value of their loss due to the greater social cost in making the plaintiff whole: Peevyhouse v Garland Coal & Mining Co., 382 P.2d 109 (Okla. 1962); Ruxley Electronics and Construction Limited v Forsyth, [1996] AC 344 (HL). Consequently, fairness is a variable standard tailored to the circumstances. 104 See Ed Morgan, The Aesthetics of International Law (2007). For further discussion see Richard Garner, Law & Society in Classical Athens 75-82 (1987) (discussing the importance of symmetrical balance and oppositions in the law of Ancient Athens). 105 Jos Alvarez points to the importance of international organizations in promoting a shift from bilateralism to multilateralism: see Jos Alvarez, International Organizations as Lawmakers 603 (2005) (IOs represent, and perhaps supply, the international community that lead to ostensible communal responsibilities ). 106 Jack Balkin, Nested Oppositions 99 Yale L.J. 1669 (1990). 107 See for example the statement in U.S. Lamb, WT/DS177/AB/R, para. 137 (1 May 2001) (The likely state of the domestic industry in the very near future can best be gauged from date from the most recent past.) (emphasis added).
30 out the principal ideas underlying WTO law and explains how they work together. In this respect it satisfies the task of analytical jurisprudence to describe what the law is. Such an account, however, falls short because it fails to convey the entirety of the ideas involved. We need something more. That more is the idea of WTO law as a system. A system is a group or set of things forming a unity . 108 In the case of a legal system, unity is apparent in the relationships exhibited by elements within the system that is not observed among elements outside the system. In discussing the idea of WTO law as a system, therefore, we are chiefly concerned with identifying the relationship among elements in WTO law. At the same time, the concept of a system in law is not entirely neutral or without controversy. A number of commentators dispute whether a body of law can constitute a system, regarding talk of systems in law as a cover for what is essentially a conservative project order which tends to eclipse other juridical goals like justice, equity and emancipation. 109 Still, the term system is frequently employed in WTO law and in international law as a whole, and we can take from this usage a generally recognized intuition that systems and systemic thinking are very much a part of law and need to be addressed. 110 A number of leading legal theorists have also dealt with the notion of legal systems and their work serves to confirm the idea that an understanding of the concept of a legal system is a necessary prerequisite for understanding the concept of a law. 111 Reference is commonly made to both the WTO Agreement and WTO law as a system, but as Ernst-Ulrich Petersmann observed about GATT in 1983, the precise meaning of the postulated system is seldom defined. 112 The ambiguity identified by Petersmann reveals an interesting point: while it may be attractive to think of WTO law as a system, that idea is at odds with much that we know about WTO law, both because of its unplanned and largely evolutionary development and because of recurrent concern over the idea of a system as somehow exclusive. 113
108 System, Shorter Oxford English Dictionary (5th ed.) 3157 (2002). The term system has been defined by W. Edwards Deming as follows: What is a system? A system is a network of interdependent components that work together to try to accomplish the aim of the system. A system must have an aim. Without an aim, there is no system. The aim of the system must be clear to everyone in the system. The aim must include plans for the future. The aim is a value judgement. W. Edwards Deming, The New Economics for Industry, Government, Education 3 (2nd ed.) (1993). For discussion of law as a system see Niklas Luhmann, Law as a Social System (2004). 109 See for instance Grard Timsit, Systme in Denis Alland & Stphane Rials, Dictionnaire de la Culture Juridique 1462 (2003) (On prsente volontiers, dans tous les sectuers de la pense juridique, le droit comme un systme. Mais cest pour designer, sous cette expression, les ralitis empiriques les plus diverses et les plus htrognes.) 110 Use of the term system in relation to WTO law is frequent and must represent some intuition that WTO law is indeed systemic. See for instance Robert Howse, The WTO System (2007), Debra Steger, Peace Through Trade (2004) 255ff (The Authority and Legitimacy of the WTO as a Legal System). See also Canada Autos, WT/DS139/AB/R, para. 69 (June 19, 2000); United States Section 211 Appropriations Act, WT/DS176/AB/R para. 297 (Feb. 1, 2002). 111 P.J. Fitzgerald, Review of The Concept of a Legal System, 34 Mod. L. Rev. 586 at 589 (Sept. 1971); see also Joseph Raz, The Concept of a Legal System 2 (2003). Raz identifies the following criteria for the existence of a legal system: a legal system exists if and only if: (1) its supreme legislator is habitually obeyed, that is to say the laws of the system are by and large efficacious; (2) its supreme legislator does not habitually obey anyone; (3) its supreme legislator is superior to the subjects of every one of his laws relative to the sanction of that law; and (4) that all the laws of the system were actually legislated and were legislated, ultimately, by one person, or group. Ibid. at 16. 112 Ernst-Ulrich Petersmann, International Economic Theory and International Economic Law: On the Tasks of a Legal Theory of International Economic Order in R. St.J. Macdonald & D.M. Johnston (eds), The Structure and Process of International Law 227 at 234 (1983). 113 In international law the idea of a system or more precisely, the idea of a subsystem within the larger system of international law is less well defined but has been present for some time. Treaties of alliance are an evident example. See Oppenheims International Law (9th ed.) Vol. 1 Parts 2-4 1318-1322 (1996). They impose differential obligations upon groups of countries in their relations inter
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What is the unique relationship, or series of relationships, in WTO law that make it a system? Most theorists have disclaimed the idea of exhaustively identifying all the components of a legal system. I will not do so here. 114 However, I think it is possible to identify some of the features of WTO law that serve to make it a legal system. One is the fact that the WTO Agreement constitutes a single package of rights and obligations, something inherent in the idea of the treaty as a single undertaking. Singularity, however, goes beyond the fact that the treaty was concluded at one point in time. It is also reflected in the way that the treaty is consistently interpreted as a unity. In Brazil Dessicated Coconut 115 , for example, the Philippines challenged a countervailing duty investigation undertaken by Brazilian authorities into imports of Philippine coconut. The investigation began in June 1994 at a time of transition between GATT and WTO rules on subsidization. The Philippine complaint asserted that the Brazilian investigation should be analyzed under WTO rules whereas the Brazilian response was that GATT rules still applied. The Appellate Body noted: Article VI of GATT 1947 and the Tokyo Round SCM Code represent, as among Code signatories, a package of rights and obligations regarding the use of countervailing measures, and Article VI of GATT 1994 and the SCM Agreement represent a new and different package of rights and obligations, as among WTO Members, regarding the use of countervailing duties. Thus, Article VI and the respective SCM Agreements impose obligations on a potential user of countervailing duties, in the form of conditions that have to be fulfilled in order to impose a duty, but they also confer the right to impose a countervailing duty when those conditions are satisfied. 116 The Appellate Body went on to comment: The [GATT and WTO] SCM Agreements do not merely impose additional substantive and procedural obligations on a potential user of
se. Nevertheless, how different a subsystem will be from the broader body of international law is probably a matter of degree. As James Crawford has observed, there cannot be, at the international level, any truly self-contained regime, hermetically sealed against bad weather. Daniel Bodansky, John Crook & James Crawford, The ILCs Articles on Responsibility of States for Internationally Wrongful Acts: A Retrospect, 96 AM. J. INTL L. 874, 880 (2002). 114 questions arises out of the hidden complexity and vagueness of the assertion that a legal system exists in a given country or among a given social group. When we make this assertion we in fact refer in compressed, portmanteau form to a number of heterogenous social facts, usually concomitant. The standard terminology of legal and political thought, developed in the shadow of a misleading theory, is apt to oversimplify and obscure the facts. Yet when we take the spectacles constituted by this terminology and look at the facts, it becomes apparent that a legal system, like a human being, may at one stage be unborn, at a second not yet wholly independent of its month, then enjoy a healthy independent existence, later decay and finally die They are worth our study because, baffling as they are, they throw into relief the full complexity of what we take for granted when, in the normal case, we make the confident and true assertion that in a given country a legal system exists. H.L.A. Hart, The Concept of Law 112 (2nd ed.) (1994). See also Lon L. Fuller, The Morality of Law (revd ed.) 122 (1969) (referring to the fact that both rules of law and legal systems can and do half exist The truth that there are degree of success in this effort is obscured by the conventions of ordinary legal language.) 115 Brazil Measures Affecting Desiccated Coconut, WT/DS22/R (Oct. 17, 1996). 116 Ibid., para. 246.
32 countervailing measures. Rather, the SCM Agreements and Article VI together define, clarify and in some cases modify the whole package of rights and obligations of a potential user of countervailing measures. 117 What is noteworthy about Brazil Dessicated Coconut is the way in which the Appellate Body identified of the relevant obligations as cumulative, and the way in which it tied them together repeatedly as a package of rights and obligations. It confirmed this understanding by referring to the WTO Agreement as an integrated system. 118 The systemic aspect of WTO law is not purely interpretative. It is also conceptual. This is most evidently manifested in the notion of WTO law as a balance. 119 Perhaps the most frequent examples of this usage occur in WTO dispute settlement, where breaches of the treaty are often problematized as imbalances, meaning that in most instances a country will have to do something in order to correct the balance. Balance, and the bipolarity it suggests, manifest themselves in departure from the equilibrium and the laws insistence on re-establishing it. Systemic thinking thus introduces a dynamic into the treaty that provides a degree of momentum, or vis vitae. 120 Another facet of WTO laws systemic nature lies in its internal arrangement, an arrangement which is premised on ideas of consistency and coherence. The great mass of WTO obligations makes some more regular ordering of WTO law a necessity. This ordering is accomplished in three ways. First, the WTO Agreement contains rules that establish an internal hierarchy of norms. Thus, for instance, the Interpretative Note to Annex 1A of the WTO Agreement provides that a conflict between a provision of GATT and the WTO SCM Agreement is to be resolved in favour of the latter. Second, the WTO Agreement also contains certain rules about its interaction with other systems of law. Article XVI:3 of the WTO Agreement, for instance, requires that WTO member countries bring their laws, regulations and administrative practices into conformity with the treaty. A third mechanism, dispute settlement, is often resorted to where express rules may be lacking. 121 Dispute settlement functions to supply a response where the treaty is unclear or silent, doing so in a way that tends to unify the law. The importance of dispute settlement in this regard was highlighted in U.S. Section 301, where the panel observed that its exclusivity for WTO members was important for the spill-over effect [it has] on
Ibid. WT/DS22/AB/R, p. 11 (Feb. 21, 1997) [emphasis added]. On this basis it determined that the applicable set of rules was governed by the commencement date of the investigation which, in the instant case, fell within the period of GATT and the GATT SCM Code, something which led to dismissal of the Philippine complaint. See also U.S. 1916 Act, WT/DS136/R, para. 6.97 (Aug. 28, 2000). 119 See for instance U.S. Underwear, WT/DS24/AB/R, p. 15 (Feb. 25, 1997) (referring to ATC Art. 6 as reflecting carefully negotiated language ... which reflects an equally carefully drawn balance of rights and obligations of Members ... ."); U.S. HotRolled Steel, WT/DS184/AB/R, para. 102 (July 24, 2001) (We, therefore, see paragraphs 2 and 5 of Annexes II of the Anti-Dumping Agreement as reflecting a careful balance between the interests of investigating authorities and exporters.); Brazil Aircraft, WT/DS46/AB/R, para. 139 (Aug. 2, 1999) (paragraphs 2 and 4 of Article 27 contain a carefully negotiated balance of rights and obligations for developing country Members.). 120 In biology vis vitae is the doctrine that the functions of a living organism are due to an unknown vital principle distinct from purely chemical or physical forces. 121 Indonesia Autos, WT/DS54/R, para. 14.28 (July 2, 1998).
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33 all material WTO rights and obligations. 122 There are, nevertheless, discernible limits as to how far dispute settlement can go to ensure the laws systematic integrity. Panels and the Appellate Body are generally limited to making an objective assessment of the claims and arguments put before them. 123 Jurisdiction is also limited. In most cases it will only apply to obligations assumed under the WTO Agreement. 124 Finally there are the limitations imposed by the fact of domestic jurisdiction. 125 The idea of a system therefore helps to convey much of what otherwise evades existing accounts of WTO law. These accounts tend to regard the system as a set of discrete rules that are not necessarily connected by anything more than the fact of their inclusion in the WTO Agreement. Not surprisingly, the analysis of law that takes place is mainly obligation by obligation. The counterpoint approach I propose in a theory is more comprehensive. Its method is conducted through the analysis of obligations as part of the greater context of obligations. 126 5. THE THEORY AS THEORY So how is what I have presented here a theory of law? To recall, a theory is a system of ideas and most systems of ideas about law take as their point of departure the so-called semantic theories of law: natural law and positivism. 127 In natural law the law is considered to be given; in positivism it is created. In the former the law is considered to embody justice; in the latter the law can be independent of it. The semantic theories are principally concerned with the origin or source of law. The theory put forward in this book differs from them in that it is premised on the idea of law as the instrumentality of justice. It therefore focuses more immediately on ideas of justice. The theorys principal point is that the idea of justice changes from community to community, with the law being employed in each situation to serve justices purpose. In relation to public property the law maintains what belongs to all; in relation to private property it maintains what belongs to individuals. As a result, the idea of law is constantly changing. Within this, the subjects of law will owe multiple allegiances to different communities. Each community will possess its own arrangement of the
U.S. - Section 301, para. 7.94. DSU Art. 11 ( a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements .) 124 In India Quantitative Restrictions, WT/DS90/AB/R, para. 84 (23 Aug. 1999), the Appellate Body defined the ambit of dispute settlement as follows: According to [GATT] Article XXIII, any Member which considers that a benefit accruing to it directly or indirectly under the GATT 1994 is being nullified or impaired as a result of the failure of another Member to carry out its obligations, may resort to the dispute settlement procedures of Art. XXIII. See also the discussion of WTO dispute settlement jurisdiction in Mexico Soft Drinks, WT/DS308/AB/R, para. 56 (Mar. 6, 2006). 125 Panels and the Appellate Body have stressed the residual freedom that countries maintain in acceding to the treaty. 126 This approach is mandated by Art. 31(2)(a) of the Vienna Convention on the Law of Treaties, which provides that the context for the purposes of treaty interpretation shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty . In international law generally a parallel requirement is what has been referred to as the principle of systemic integration. See Campbell McLachlin, The Principle of Systemic Integration and Article 31(3)(c), 54 I.C.L.Q. 279 (April 2005). McLachlin refers to the principle, expressed in Art. 31(3)(c) of the Vienna Convention, as an inarticulated major premise in the construction of treaties having the status of a constitutional norm within the international legal system. (p. 280) 127 Ronald Dworkin, Laws Empire 31-37 (1986).
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34 relationship to public and private goods. A body politic will constitute a weaving together and reconciliation of many of these relationships. What this depiction suggests is that a theory of WTO law possesses both natural law and positivist attributes. It shares with natural law the idea of law as given, or perhaps more accurately, of law as a given. Law is always present, doing the work of giving expression to the different forms of justice. The theory also shares with positivism the idea that law is the product of deliberate human action, action that is constantly working to accommodate diverging collective and individual values. Their divergence, and the fact that they embody competing attributes, tend to introduce inconsistencies into the normative project so that no legal system is entirely just. 128 Hence, the reconciliation mentioned above is ever-evolving as the law seeks to more perfectly embody what justice is. In this respect, the theory has much in common with constructivism. Constructivism is a school of international relations (IR) theory which regards law as the mutual construction of agent and structure. 129 This distinguishes it from liberal IR theory, which regards actor identities as dictated by domestic interests, or realism, which regards such identities as the product of self-interest. Drawing on the work of Lon Fuller, and in particular on his idea of law as enterprise 130 , constructivism maintains that these identities are instead shaped and reshaped by action within structures. The structures constrain social action, but they also enable action, and are in turn altered by the friction of social action against the parameters of the structure. 131 Law is a momentary phenomenon as it attempts to capture what justice is, constantly making and remaking itself in the way that the theory of WTO law predicts. However, constructivisms insistence on construction poses challenges to any consistent understanding of what the law is. One particular challenge is that of instability. The theory describes a system of law as reflective of deeper, subterranean forces that are in a constant state of flux. In WTO law this is apparent in the way that national concessions and commitments constantly interact with each other. They are always creating something new. This suggests that WTO laws intellectual origins in comparative advantage and Ricardian efficiency have evolved and are better explained by complexity economics. 132
It seems best to abandon the idea that there is one master ideal of law. Instead, we can distinguish a number of complex ideals that govern law in variable measures, of which justice and legality are the central and most encompassing ideals specific to law Neither the complex ideals nor their constituting values can be said to have an a priori higher standing: the importance of one ideal over the other depends on the specific legal context, on the place of law in society at a given moment and the tasks law needs to fulfil. At times, the core values of a practice may harmonize perfectly with certain legal standards, but there are also cases where the demands of such a practice clash with important legal values. There is always a need for adjustment in order to realize the ideals involved to the largest extent. Sanne Taekema, The Concept of Ideals in Legal Theory 188-189 (2002). 129 Jutta Brunne and Stephen Toope, International Law and Constructivism: Elements of an Interactional Theory of International Law, Colum. J. Transnatl L. 19, 31 (2000). See also Robert O. Keohane, International Relations and International Law: Two Optics, 38 Harv. Intl L.J. 487 (1997). 130 Lon L. Fuller, The Morality of Law (revd ed.) 122 (1969). 131 Jutta Brunne and Stephen Toope, International Law and Constructivism: Elements of an Interactional Theory of International Law, Colum. J. Transnatl L. 19, 30 (2000).
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35 The discipline of complexity economics rejects many aspects of traditional economic theory, and in particular, its reliance on the idea of a return to equilibrium. It regards matter as constantly changing, both independently and conjunctively. Economic systems, composed as they are of thousands of transactions daily, are intrinsically evolutionary. Complexity economics therefore tends to reject the fiction that the political community is founded at a single magic moment of social contract. 133 As applied to WTO law, this infers that the systems preoccupation with the conclusion of formal negotiating rounds involving the reciprocal exchange of concessions and commitments is only partly justified. Such agreements may be useful for the limited purpose of channeling political momentum, but they do not reflect reality because almost as soon as any agreement is achieved the underlying quantitative assumptions on which it is based start to change. 134 The second insight of complexity economics is with respect to entropy, or the phenomenon of uncertainty. Entropy involving information uncertainty encompasses the idea that all information contains unknowns which cannot be accounted for in precise modeling. A further insight to be derived from complexity economics is in its postulating network effects, or the idea that a group of individual transactions, when taken together, can have substantial secondary and tertiary consquences that are not directly accounted for by linear economic models and that alter the web of relationships within the group over time. In particular, classic linear models assume that economic actors will only interact through market mechanisms. On the other hand, social science evidence suggests that there are important derivative consequences that arise from complex economic relationships. 135 A number of transactions will result in innovation that is, things which were not previously foreseen. Perhaps the most powerful confirmation of these ideas is the expansion in recent decades of just-in-time (JIT) inventory strategies. JIT aims for greater business profitability by reducing in-process inventory and its associated carrying costs. The synergies that are achieved through JIT are experienced not only in the target enterprise and its suppliers, but also up and down the supply chain. Throughout, a skillset evolves which stresses consistency and efficiency. For this reason JIT has been recognized as an important driver of technologic diffusion and follow-on economic expansion that go well beyond a single bilateral trading relationship. . Many of the foregoing ideas may appear novel, especially as they are applied to WTO law, but they are not entirely new. Instead, in many respects they replicate recurrent strands of thinking about the nature of law. One is the idea of dialectic, which is something that has been a feature of moral philosophy and law since the time of the ancient Greeks. The dialectic was famously
133 134 135 See Uwe Deichmann & Indermit Gill, The Economic Geography of Regional Integration 43:1 Finance & Development 45-47 (2009) (discussing the fact that regional integration means much more than preferential trade access between neighbours, since it often includes steps such as infrastructure investment and labour market liberalization that helps to connect countries to world markets.)
Karl Klare, Legal Culture and Transformative Constitutionalism 14 S. Afr. J. Hum. Rts. 146 at 155 (1998).
36 revived in the early 19th century by George Wilhelm Friedrich Hegel, who maintained that mental patterns manifest themselves over time in sets or pairs of contradictions that are ultimately integrated with each other. 136 Thus, the contradictions are not simply opposing categories. Rather, they unite together to produce some third, and entirely distinct, thing. The theorys foundation in opposing concepts most notably in that of the One and the Many 137 , but also substantive, structural, temporal, kinetic and evidentiary analogues is an example of this analytic method. In modern times dialecticism has been forcefully relied upon by Jrgen Habermas, who applies it to law, most notably in A Theory of Communicative Action. 138 According to Habermas law can be considered dialogue and legal disputes are attempts to establish common meaning. 139 Habermasian analysis is relevant to the theory of WTO law in the sense that it explains the debate over individual and collective values that lies at the heart of the theory as one of achieving agreement over the definition of key terms, something explored more fully in Ch. 5. 140 Indeed, the Appellate Bodys observation in U.S. Shrimp that [t]he location of the line of equilibrium is not fixed and unchanging 141 , can be reconceived as a metaphor for struggle over the content of terms. The dualist character of dialectic also highlights one of the theorys chief attributes: opposability. Antithetical ideas of obligations and rights, of future and past, of presumption and proof demand that we hold directly conflicting concepts in mind. To that extent they demand no small degree of mental agility. One source on opposable thinking has observed: Once you start integrating things, you end up with a much more complex problem than you had before. Its harder to work with. Things are more in flux. You get more interactions between things, so the knowledge you have has to be more robust. 142 The advantage offered by such an approach is insight. The oppositions the theory highlights are not meant to complicate the analysis so much as to reveal the true richness
136 To Hegel philosophy, culture, and society seemed fraught with contradictions and tensions, such as those between the subject and object of knowledge, mind and nature, self and other. In the mature phase of his career Hegels main philosophical project was to take these contradictions and tensions and interpret them as part of a comprehensive, evolving, rational unity that, in different contexts, he called "the absolute idea" or "absolute knowledge". The main characteristic of this unity was that it evolved through and manifested itself in contradiction and negation. Contradiction and negation have a dynamic quality that at every point leads to further development until a rational unity is reached that preserves the contradictions as phases and sub-parts in the attainment of a higher unity. See Frederick Beiser (ed.), The Cambridge Companion to Hegel __ (1993); Terry Pinkard, Hegels Dialectic (1988). 137 Philip Allott, The Health of Nations 89 (2002). (observing that The universal and perennial dialectic of the duality of the One and the Many has shaped the constituting of human societies throughout human history.) 138 Jrgen Habermas, A Theory of Communicative Action, trans. Thomas McCarthy (1987). 139
For example, Sri Lanka and the EC have made efforts to establish a new standard for chemical residues in cinnamon, something relevant to their obligations under the SPS Agreement. A WTO press release noted that the EC maintained a ban on sulphur dioxide in cinnamon, even though it allowed minimal levels in other spices. The issue arose partly because Codex Alimentarius, the WHO-FAO body where countries negotiate standards for food safety, did not have a standard for SO2 residues in cinnamon. In July [2006], Codex approved a new standard and Sri Lanka praised the EU for excellent cooperation in finding a solution, partly through administrative means. In February [2006] the EU offered to help Sri Lanka apply for approval for a standard and to seek support from the European Parliament and the [EU] member states. See Sri Lankan cinnamons future brightens, SPS Committee told (Oct. 11-12, 2006), available at www.wto.org; see also Sulphur Dioxide in Cinnamon, G/SPS/GEN/716 (July 25, 2006). 141 WT/DS58/AB/R, para. 159 (Oct. 12, 1998). 142 Roger Martin, The Opposable Mind 80 (2007).
140
37 of the legal relationships in order to gain leverage for new thinking and solutions. . The theory provides additional benefit in its integrated picture of WTO law and, to that extent, offers something new. As mentioned, there has already been a considerable amount written about WTO law. Nevertheless, because much of this has been in response to individual disputes it has tended to focus on conflict. The conflict-driven focus feeds latent discontent with the WTO Agreement because of its short-term nature and its preoccupation with who has won and lost. To that extent, it generates a subtractive perception, thereby playing in to a latent sense that countries and people are worse off with the WTO Agreement than they would be without it. Associated with this perspective is a habit of dealing with WTO law as if it consists of a succession of disputes and not something more. The habit can be traced to the laws heavy reliance on case law [a habit that eclipses awareness of development by negotiation or the interplay between them] and was established in the early days of WTO law when concern fixed on WTO laws internal and external coherence, and in particular, on its potentially preclusive effect. 143 The singular way in which the treaty came into being gave rise to fears that it would encroach upon, and supplant, other norms of international law. Much time and attention therefore were devoted to the questions of hierarchy and legal ordering, as if the principal challenge posed by the WTO Agreement was essentially a conflict-driven one. The theory of WTO law presented here offers a subtle counterpoint to this polemical view in the form of an irenical counterpart, one which focuses attention on agreement. 144 Because of its emphasis on the reconciliation of interests, the theory highlights how consensus is achieved in a way that deepens and strengthens the relationship among those involved. The theory therefore corrects the bias inherent in the current vision of the WTO Agreement as one characterized by conflict and inconsistency. Still, it also infers that the two visions polemical and irenical work together as a duality. 145 Without awareness of this, without a clear idea of the contrapuntal forces at work, I would argue that much of what is observed in WTO law is not truly comprehensible. The theorys inclusivity also it offers answers to many questions concerning WTO law and indeed law generally - that for a long time have defied ready explanation. Take, for instance, the purposes of WTO law. It is generally agreed that the principal purpose of the law is to protect expectations. This view has been taken by leading legal theorists and is something that has been acknowledged by WTO panels and the Appellate Body.146 Yet
Joost Pauwelyn, Conflict of Norms in Public International Law (2003). Agreements concluded since the end of the Uruguay Round include the WTO Information Technology Agreement (1996), the Second Fifth Protocols to GATS (1996-99) and the Decision on Implementation of Paragraph 6 (2003). 145 Some idea of the successive articulation of GATT/WTO law in dispute settlement and then negotiation (and potentially back again) is given by John M. Weekes, The External Dynamics of the Dispute Settlement Understanding: Its Impact on Trade Relations and Trade Negotiations An Initial Analysis (2004) (on file with author). See also generally Gene Grossman & Elhanan Helpman, Trade Wars and Trade Talks, 103:4 J. Pol. Econ. (1995) 675; Steven Woolcock (ed.), Multilateralism in Neutral: The Interaction between Levels of Rulemaking in International Trade and Investment (2006). 146 For cases where panels stated that the purpose of GATT is to protect expectations see Working Party Report, Brazilian Internal Taxes, adopted 30 June 1949, BISD II/181, para. 16; Panel Report, United States - Taxes on Petroleum and Certain Imported Substances,
144 143
38 the greater debate about purpose, the contradictory pronouncements of commentators, and the assertions of civil society have all but obscured this vitally important insight. 147 What we are left with is the uneasy feeling that all is constantly swirling. The true nature of the law remains opaque. Another example is that of the relationship between distributive and corrective justice. This has long been an open question of legal theory. 148 The theory of WTO law makes clear that the two apply to different things: distributive justice to public property, corrective justice to private property. This key distinction helps to clarify the point that mass redistribution schemes of private property to the less well-off are problematic because they deal with different things. 149 These insights would be much less clear without a theory of WTO law. . At the same time, the theory is not imbued with a total, Weberrian rationality. It is not perfect, nor does it account for all of WTO law perfectly. There is much that happens in WTO law that is hard to reconcile what is put forward here. For this reason, many readers will be skeptical about the theory. The extensive answers that it offers about many unresolved questions ensure that it will be subject to debate and challenge. But debate and challenge should be welcomed as means of testing the theorys framework and ensuring its integrity.
adopted 17 June 1987, BISD 34S/136, para. 5.1.9; Panel Report, Canada - Administration of the Foreign Investment Review Act, adopted 7 February 1984, BISD 30S/140, para. 6.6; Panel Report, Japanese Measures on Imports of Leather, adopted 15/16 May 1984, BISD 31S/94, para. 55; Panel Report, Japan - Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages, adopted 10 November 1987, BISD 34S/83, para. 5.11; Panel Report, European Economic Community - Restrictions on Imports of Apples, adopted 22 June 1989, BISD 36S/135, para. 5.25; and Panel Report, United States - Measures Affecting the Importation, Internal Sale and Use of Tobacco, adopted 4 October 1994, DS44/R, para. 99. For some WTO dispute settlement reports referring to the protection of expectations see India Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/R (Sept. 5, 1997); EC Customs Classification of Certain Computer Equipment, WT/DS62/AB/R (June 5, 1998); Korea Taxes on Alcoholic Beverages, WT/DS75/AB/R (Jan. 18, 1999); Korea Measures Affecting Government Procurement, WT/DS163/R (May 1, 2000). 147 It is hard to discern any single overarching purpose to the WTO Agreement, and consequently, to its remedies. For example, the preamble of the WTO Agreement refers to several aims: raising standards of living, ensuring full employment, expanding the production of and trade in goods and services, allowing for the optimal use of the worlds resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment. This mix is also apparent within the WTO Agreement. The DSU, for instance, describes the purpose of WTO dispute settlement as being to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with the customary rules of interpretation of public international law. At the same time it also expresses the purpose as being to achieve a satisfactory settlement of the matter in accordance with the rights and obligations under this Understanding and under the covered agreements. Panels and the Appellate Body have been little clearer in identifying what the treatys ultimate purpose might be. On the purposes of GATT and the WTO Agreement as a whole see EC Conditions for the Granting of Tariff Preferences to Developing Countries, WT/DS246/R, para. 7.156 (Dec. 1, 2003) (Both GATT and the WTO Agreement contain multiple objectives, none of which should be viewed in isolation). To complicate matters further, commentators have ascribed different purposes to different parts of the WTO Agreement. Petros Mavroidis, for instance, has identified the purpose of WTO remedies as being to redress illegality and to act as a credible threat against potential violators. Petros Mavroidis, Remedies in the WTO Legal System: Between a Rock and Hard Place, 11:4 EUR. J. INTL L. 763 (2000). Steve Charnovitz has described the purpose of retaliation under the WTO Agreement as being to induce compliance. He is concerned with the failure of retaliation to achieve compliance in several cases and concludes that it is an empty toolbox requiring greater non-governmental involvement. Steve Charnovitz, Rethinking WTO Trade Sanctions, 95:4 AM. J. INTL L. 792 (2001). Joost Pauwelyn has referred to the purpose of WTO dispute settlement as being to enforce WTO rules and suggests that collective sanctions and compulsory compensation would enforce the WTO Agreement more effectively. Joost Pauwelyn, Enforcement and Countermeasures in the WTO: Rules are Rules Toward a More Collective Approach, 94:2 AM. J. INTL L. 335 (2000). 148 Peter Benson, The Basis of Corrective Justice and Its Relation to Distributive Justice, 77 IOWA L. REV. 530 (1992); Ernest Weinrib, Corrective Justice in a Nutshell, LII:4 U.T.L.J. 349 (2002); 149 Michael Walzer, Spheres of Justice 8-9 (1983) (Distributive criteria and arrangements are intrinsic not to the good-in-itself but to the social good. All distributions are just or unjust relative to the social meanings of the goods at stake.)
39 From an aesthetic point of view, the theory will also raise suspicions because of its symmetry. According to the theory, obligations are offset by rights, a constitutional vision by a contractual one, and so forth across the legal landscape. Critics will assert that no legal system could manifest such a neatness and regularity. They will also seize upon this of that instance of the theorys failure to predict what is observed in WTO law and point to it as proof of the theorys lack of integrity. The logical conclusion to be drawn is that there is no theory. To these objections some observations are in order. First, the term a theory has an imposing - and therefore intimidating quality, and this undoubtedly contributes to the general reluctance to undertake the kind of work presented here. We tend to associate theory with the certainties of the hard sciences and with a bygone optimism about the power of rationality to discern fundamental truths that seems nave and misguided in the modern world. 150 Second, the theory describes something that is complex and that will not reproduce itself with mechanical regularity. While the theory is meant to organize, and to some extent simplify, understanding of WTO law, it also presents a number of challenges of its own. Chief among them is its characteristic of reconciling phenomena long considered to be separate. Identifying them and arranging them as opposites may appear a little strange at least to start with. A third point involves the issue of prediction. A viable theory should be able to predict with certainty outcomes observed in WTO law. After all, [p]hilosophical theories and concepts have to pay their way by making a difference in the lives and experience of real people in the actual world. 151 Is predictability a characteristic of the theory put forward in this book? Not in every instance, but I also posit that care needs to be taken with how water-tight a theory of WTO law can be expected to be in the circumstances. There is substantial play in the WTO system that interferes with its ability to regularly reproduce outcomes predicted by theory. One source of play is the fact that there is a more complex ecology to WTO legal relations than the simple obligation-right dyad I employ in this book. 152 Both rights and obligations possess variants, as originally identified by Wesley Hohfeld. 153 Rights may be rights in the classic sense that is, claims but they may also serve as a label for freedoms, powers or immunities. Likewise, obligations may be duties, but they may also be constraints, liabilities or disabilities.
150 Ronald Dworkin has summed up skepticism of legal theory as follows: At centurys end our intellectuals distrust theory perhaps more than any earlier age has. We hear, wherever we turn, the injunctions and disclaimers of the post-modernists, the prestructuralists, the deconstructionists, the critical legal students, the critical race scholars, and a thousand other battalions of the antitheory army. Some say that theory is phony, and others that it is oppression, and many that it is both. Ronald Dworkin, Justice in Robes 57 (2006). 151 As H.L.A. Hart observed, a theorys legitimacy is in the last resort, dependent on its power to predict what will occur, which is based on generalizations of what regularly occurs. H.L.A. Hart, The Concept of Law 188 (2nd ed.) (1994). 152 Rights and obligations are not bestowed exclusively upon states in WTO law. For instance, under the DSU a panel has a duty to make an objective assessment of the matter before it. In EC Hormones, WT/DS26/AB/R, paras. 132-135 (13 Feb. 1998) the Appellate Body found the issue of [w]hether or not a panel has made an objective assessment [to be] a legal question . 153 The idea of a correspondence between rights and obligations was recognized by early philosophers but developed most insightfully by Wesley Hohfeld, who postulated that there are rights and that these are distinct from privileges, powers and immunities, and that they are matched by jural correlatives: duties, no rights, liabilities and disabilities. See Wesley Hohfeld, Fundamental Legal Conceptions, As Applied in Judicial Reasoning and Other Essays (1919).
40 Each forms a jural correlative with its opposite. Thus, in addition to the right-obligation relationship that is at the heart of the theory, there is also freedom-constraint, powerliability and immunity-disability. This diversity has important implications. That is because it suggests a far richer, and potentially more diffuse, matrix of legal relations than the theory is based on: the relationship between two legal persons can be analyzed in many different ways and an analysis in terms of one particular legal relation always implies the existence of many other supporting legal relations 154 The same diverse ecology exists in WTO law. The difficulty is that all of it is not legally enforceable at least not yet. WTO members are limited to invoking formal dispute settlement when they perceive that benefits under the treaty have been nullified or impaired, but to date this formulation has not been interpreted to go beyond concessions negotiated in the treaty or, in certain limited instances, outside of it. 155 The result is that other, more diverse interests in WTO law are determined politically. Although there have been calls to broaden the jurisdiction of WTO dispute settlement to include other interests, for the time being such a move looks unlikely. 156 The prevailing framework suggests that the obligation-right dyad possesses a certain underlying resonance, and therefore an appropriateness, in thinking about WTO law. A second source of play in the WTO legal system is the natural diffusion of legal power and the fact that the exercise of a right or the observance of an obligation is rarely a oneoff transaction. For this reason we have to be wary of linearity and of what Ihering referred to as the cult of the logical, which thinks it can twist jurisprudence into a mathematics of law. 157 There may well be instances when bilateralism is useful in analyzing WTO law, but more often the overarching paradigm is multilateral and therefore of greater complexity. All law can, in fact, be said to reflect a degree of pluralism: One legal relators power does not necessarily involve an exactly equivalent loss of power in another legal relator. The benefit and burden may be shared in a complex legal relation, or a complex of legal relations. The burden may not be referable specifically to another legal relator for example, if the legal power is to make use of natural resources. In such cases, a corresponding loss of power may be widely distributed in
Ibid., para. 10.50. To recall, GATT Art. XXIII:1 provides that If any contracting party should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded as the result of (a) the failure of another contracting party to carry out its obligations under this Agreement, or (b) the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement, or (c) the existence of any other situation . Most claims have been brought under GATT Art. XXIII:1(a) (nullification or impairment), a few under Art. XXIII:1(b) (non-violation), and none under Art. XXIII:1(c). 156 Frieder Roessler, Why only a small part of WTO law is enforced through WTO dispute settlement procedures and whether something should be done about this (April 2006) (unpublished paper on file with the author). 157 Robert Alexy, A Theory of Constitutional Rights 18 (2004).
155
154
41 society. 158 This feature of legal relations poses a substantial challenge to the analysis of WTO law in purely numeric or quantitative terms, or to the exactitude of a theory about it. For these reasons, I suggest that care needs to be taken with just how water-tight a theory of WTO law can or will be, and therefore, its predictive power. Indeed, the position that a theory needs to predict regularly and perfectly is a manifestation of the age-old desire for what John Rawls referred to as a complete theory, or in other words, an abstract conception that accounts for everything. 159 No theory does - and a theory of WTO law is no exception. What is put forward in this book is a useful way of organizing thinking, but it is not the only way. And even if it does possess some advantages for thinking about the law coherently and comprehensively, it need not continue to do so as new information comes in. 160 . One final point is the broader applicability of what is being put forward in this book. Is the theory a manifestation of some iron law to which all legal systems must inevitably tend or adhere? My preliminary conclusion on this point is in the negative since there are many legal systems that deviate and often deviate substantially from the dualist distributive-corrective framework described in this opening chapter. At the same time, I think it is highly significant that the International Law Commission in its work on the ASR identified the two regular consequences of a finding of state responsibility to be cessation (ASR Art. 30) and reparation (ASR Art. 31). Thought about in terms of the theory presented above, the consequences appear to duplicate the two categories of Aristotelian justice: cessation in its insistence on the termination of wrongful conduct being in some sense distributive, reparation in its insistence on repairing the consequences of wrongful behaviour being in some sense corrective. I venture this view in a preliminary way, however, because even if the same dialectical framework can be identified in the law of state responsibility, it is likely to be much more diffuse and irregular than its manifestation in WTO law. I return to this subject in greater detail in Ch. 7. Nevertheless, the observed differences between WTO law and other systems of law may explain another feature of the theory. Statements are often made that legal theories must be seen within their own context 161 and raise the question why a theory of WTO law should suddenly be visible in the present context? In other words, what is it about this juncture that makes it opportune for the identification of a theory? I am not sure of the answer, but my intuition is that the substantial development of WTO law over the last decade has something to do with matters. This book is studded with references to WTO jurisprudence that would not have been available prior to 1995, a time at which many of the trends I have sketched in this opening chapter would have been
158 159
Allott, Eunomia, para. 11.20. David Schmidtz, Elements of Justice 225 (2006). 160 David Schmidtz, Elements of Justice 28 (2006). 161 Ian McLeod, Legal Theory 4 (2005).
42 much more obscure and harder to discern. 162 In addition, notwithstanding many recent and highly significant developments in WTO law, the systems basic structure remains relatively simple. The underlying tension in the law between the One and the Many continues to be sharply drawn. In this respect it is unlike EU law, which has become progressively more complex, or public international law as a whole, which has splintered into a plurality of subsystems. Those subsystems have given rise to a more variegated legal architecture in which coherence of the whole is always precarious and derivative. 163 WTO law, by contrast, involves fewer legally recognized interests and therefore retains a clarity that distinguishes it from much else. 164 At the same time, I think it is important not to simplify WTO law unduly. The phrase the One and the Many is almost a caricature of the central tension in legal systems since it overlooks the excluded middle 165 , or in other words, the intermediate interests that lie between individual and collective. One of the principal features complicating a legal system is the degree to which such interests become legally recognized.166 This complication is also a feature of WTO law, as was revealed in EC Tariff Preferences 167 , where in a dispute over preferential access for developing countries the Appellate Body confirmed that equal treatment had to be at least a theoretic possibility for similarly situated countries. The decision implied that there is a distinction between equal treatment for one, some, or all countries in WTO law, but it also suggested that the distinction may be less pronounced in WTO law than in other, more mature, legal systems. . The jurisprudential analysis of WTO law of WTO law offered here differs substantially from the approach of other commentators. Two of them Frank Garcia and Raj Bhala should be dealt with. Frank Garcia has dealt with the relationship between international trade, inequality and justice. In his view WTO law is corrective and should be made more equal. However, Garcia does not posit a theory of WTO law so much as a series of observations about how equality of outcome might be achieved according to a liberal political theory of WTO law. 168 Similarly, Raj Bhala has examined the claim that international trade law is unjust, especially in the way that it treats developing countries. In Bhalas view that claim is exaggerated. He seeks to counter it by developing a theory
162 Many of these observations will therefore be timely [and something we can only do now]. As Claude Lvi-Strauss has observed, the principle underlying a classification can never be postulated in advance. It can only be discovered a posteriori . that is, by experience. In the last decade, we have witnessed the development of considerable WTO law through dispute settlement and this has helped to illustrate and clarify many of the features of the law I will discuss in this book. In short, we are in a better position to identify the underlying classifications than we were in the past. Claude Lvi-StrausS, The Savage Mind 58 (1962). 163 Neil Walker, Legal Theory and the European Union: A 25th Anniversary Essay, 25:4 Oxford J.L. Studies 581, 583 (2005). 164 165 166
H. Patrick Glenn, Legal Traditions of the World ___ (2000). In EU law, for instance, legal action can now be maintained by the EC Commission, the Councils, the European Parliament, member states, and in some instances by individuals, minorities, and other forms of affiliation. Likewise in the Reparation for Injuries case, the International Court of Justice acknowledged that states are not the sole bearers of rights and responsibilities in public international law and that other interests might be direct subjects of international law. While the recognition of such interests is inconsistent at the moment, it does tend to complicate the picture of who is entitled to what and therefore to obscure the distinction between distributive and corrective justice. 167 WT/DS246/AB/R (7 April 2004). 168 Frank J. Garcia, Trade, Inequality and Justice: Towards a Liberal Theory of Just Trade (2003)
43 of WTO law which draws upon development economics and religious precepts. 169 I share the concerns of both Garcia and Bhala with respect to the ultimate justice of WTO law. As mentioned, and as will be explored further below, the success or failure of the WTO Agreement to significantly improve the lives of the disadvantaged is critical to the treatys legitimacy. Still, upon reflection, it appears that Garcia and Bhalas preoccupation is with making WTO law more just and therefore focuses on the issue of what WTO law should be whereas the theory presented here is more directly concerned, at least to start, with the issue of what WTO law is. [There is also a strong resemblance between the theory and the work of Philip Allott in Eunomia. 170 Eunomia proposes that international society is constituting itself today not only in the form of law and legal institutions and not only in the real-world struggles, political, economic and personal, of everyday life, but also in societys struggle about ideas. 171 Those ideas, according to Allott, taken the form of a permanent moral tension . between our inescapable experience of the actual and our ineradicable idea of the ideal. 172 For Allott, the universalization of the idea of the ideal is a first step in reducing worldwide social evil. 173 Readers will note immediately the similarity of Allotts thesis with the core of what is set out in A Theory of WTO Law. A Theory also proposes that WTO law can be understood as a permanent legal tension between the ideal of treating everyone the same, as embodied in MFN, and the reality (or actuality) of existing conditions. In this respect, A Theory can be regarded as a concretization and therefore a confirmation of Allotts thoughts. In particular, A Theory is supportive of the view that the chief function of international law is to promote what Allott refers to as a revolution in the mind. 174 The WTO Agreement does this, as mentioned, by protecting expectations about the traderelated behaviour of governments. At the same time, I think it is important to clarify the exact relationship between Eunomia and A Theory of WTO Law as a way of illuminating the contribution of one to the other and of highlighting ways in which they differ. I read Eunomia at a fairly late stage in the development of the ideas set out here and I do not think I could have read it without the outline of the theory already in mind. Eunomia is a dense, tightly reasoned work, breathtaking in its scope and ambition. However, it is also full of bewildering, Alice-inWonderland phrasing and almost entirely devoid of practical detail. What I quickly recognized, however, was the way in which Eunomia distilled many of the ideas I was already working on and took them to the level of pure and transcendental theory - pure theory being the explanation and justification of practical theories, transcendental theory being the explanation of the way in which ideas are formed from ideas and become part of the great idea-structures of theory. 175 Eunomia is Allotts classification of these and
169 170
Raj Bhala, Trade, Development and Social Justice (2003). Allott, Eunomia (1990). 171 Ibid., p. xx. 172 Ibid., p. xxiii. 173 Ibid. 174 Allott, Health, above note 18 at 81 (emphasis added). 175 Allott, Eunomia 34 (1990).
44 his attempt to derive from them a general theory of society and law appropriate for a new international order. 176 I am grateful for Allotts work. He went ahead and showed the way, and moreover, did so with an acute consciousness of the enormous responsibility that the theorization of international law entails. Nevertheless, as I thought about Eunomia and the ideas contained in this book I realized that I did not agree with everything he had to say. I wondered whether our differences might stem from A Theory of WTO Laws particular instantiation of theory-in-practice, or something more. To start with, there are also all sorts of oppositions in WTO law that Eunomia had barely touches upon and that I think are important to examine. I seek to explore, for instance, the evidentiary consequences of this multi-dimensionality in rules about presumption and proof, the logical consequences in patterns of thinking that are alternately deductive and inductive, the spatial consequences of the law being alternately plenary and particular, the legal consequences of its arrangement as both constitutional and contractual, and so forth. And because ultimately everything is related to everything else, I also aim to explore how far these oppositions extend and the points at which, intriguingly, they seem to come together. The subject of a theory of WTO law is rich - almost too much so. However, the most profound difference between Eunomia and A Theory of WTO Law is on the issue of justice. Allott states that justice has no substantive content. Instead, its effect is always contrapuntal: [j]ustice is present in its presence; and it is present in its absence. 177 Thus, Allott is able to conclude that its effect is perceived in every event of every society. There is nothing which does not reflect the idea of justice.178 This statement can be taken to confirm the correctness of arranging this book around the theme of justice, but A Theory of WTO Law clearly departs from the idea that justice has no substantive content. Instead, it takes the view that justice does indeed have specific content in WTO law, being a combination of distributive and corrective justice whose principal underlying values are equality and justice. It is the tension between these that animates WTO law and that creates a third thing - transformative justice - whose principal underlying value is interdependence. Readers will again observe that in describing transformative justice I have left something out, and it may be this that Allott is getting at when he insists that justice has no substantive content. Here I am referring to the fact that the true content of justice goes beyond either distributive or corrective justice, and that even the moniker transformative justice cannot fully encompass all that justice involves since it necessarily applies to situations that are outside that which is either purely collective or purely individual and must, in fact, reconcile them. In this sense I take Allott to be saying that justice has no fixed substantive content, a position which can be reconciled with the idea that it does have a variable content under the WTO Agreement.
176 177
Ibid., p. xlvi. Ibid., para. 5.43 178 Ibid., para. 5.42.
45 Why might justice in domestic and international law be different from justice found in the WTO Agreement? Simply put, the answer appears to be that the range of interests covered in those realms is far more diverse than they are under the treaty. Allott, in his kaleidoscopic style, provides a thumbnail sketch of what those interests might be: The modern world is gripped in a frenzy of self-improvement, as individuals and societies labour, with mind and body, to improve the condition of life. The seeking may be for a tin roof that does not leak, a water supply that does not fail or spread disease, a nutritious meal once a day or once a week, employment or regular employment, a living wage, some land of your own, a fair price for your crop or your animals, some basic health-care for your family, some primary education for your children, a loan to stock a farm or buy a house or set up a business, a police force that is not corrupt, local officials who are not abusive or venal, local politicians who are not only self-interested, freedom to worship in your religion, equality of social and economic opportunity, the end of a war, the avoidance of war, a husband or a wife, a horse or a car, happy and healthy children, a holiday, less stress, a bigger house, a modern kitchen, a better job, a university degree, recognition and reward for a skill or talent, much more money, a second home, another yacht, a pure heart, higher states of consciousness, mystical union with God, eternal life in heaven, nirvana. 179 Justice, to be perceived in every event in society, must encompass all of these and must therefore be mutative. It is what Allott refers to as social justice, a phrase of uncertain meaning which I take to refer to justice in its broadest and most extensive definition. Obviously, under the WTO Agreement the sense of justice is much more limited. Justice conforms with the traditional Aristotlean conceptions of justice and that limitation may be the source of future problems. As the treaty continues to incrementally expand in substantive coverage there will be demand for it to render justice where it cannot readily do so without re-thinking the balance currently struck. 6. CONCLUSION This book sets out a theory of WTO law. The theory is principally jurisprudential - that is, it seeks to discover what the law is through an analysis of its elements and their relationship to one another. The analysis is facilitated by the close correspondence in WTO law between collective obligations and distributive justice on the one hand, and individual rights and corrective justice on the other. When observed together, the two modes can be seen to operate reflexively in the manner of moieties. A moiety is a borrowing from the French term moiti, or half, and in its standard English meaning is used to suggest the greater whole that the half is a part of. 180
179 180
Ibid., pp. 85-86 ( 5.50). S.v. Moiety, The Oxford English Dictionary 1809 (5th ed.) (2002).
46 In anthropology a moiety is defined as either of two kinship groups based on unilateral descent that together make up a tribe or society. Each moiety has a specialized function indispensable to the collectivity as a whole and complementary to the functions assigned to other groups. 181 Claude Lvi-Strauss has written, for example, about clan moieties among the Aborigines of Northern Australia. 182 Similarly in this book, I distinguish between the two dominant forms of justice in WTO law and then set out a taxonomy that illustrates their respective roles. Perhaps the most salient role is the distinction between a generalized notion of obligations and a more particularized sense of rights, but there are others. All of them work together, however, so that WTO law can be regarded as managing the interplay between the collective and the individual, the international and the domestic. This is where the idea of a system arises, for a key value of theory as a system of ideas lies not only in its identification of its contrasting elements, or moieties, but also - and perhaps most critically - in its explanation of their ongoing interaction. Indeed, an important point to be taken away from the analysis is the vital sense of dynamism, or in other words, the fact that the theoretical framework must account for constant movement, and in most instances, growth. The growth in world trade has in fact been substantial recently. As part of its functions the WTO also monitors trade statistics and they generally tell an impressive tale.183 But it is a mark of the trading system's dynamism that the organization cannot estimate at any given moment what the actual amount of international trade is. There is simply too much happening for precise measurement. 184 The same indeterminacy is encountered in the field of physics and thermo dynamics where an equation of state can be derived to predict the properties of gases and liquids under fixed conditions. The problem with such equations, as scientists have discovered, is that conditions are constantly changing and therefore any equation is only valid for the initial state in which it is derived. Not surprisingly, attempts to derive a single equation to predict the properties of all substances under all conditions have failed. The scientific analogy should help to clarify why the theory posited here is not something reducible to a simple algorithm, as in Einsteins mass-energy equation, E = MC2. [The principal relationship that the treaty seeks to attain is an equal one in line with the idea of justice-as-equality, but this proposition is constantly qualified by the need for justice-asfairness in certain circumstances. The two relationships interact over time.] This fact is expressed thousands of times daily. A parts supplier in Argentina may decide to increase production because its leading customer, a bus manufacturer in Brazil, sees new opportunities for international sales due to lower tariffs in Eastern Europe. Multinational chains that source from several countries may expand their presence in Egypt due to the
Claude Lvi-StrausS, The Savage Mind 113 (1962). Ibid., 118. World Trade Organization, International Trade Statistics 2006 (2006). See also Alexander Keck & Alexander Raubold, Forecasting Trade, WTO Staff Working Paper ERSD-2006-05 (April 2006). 184 Efforts to do so in the context of the Doha Round have at best yielded results that are only an approximation: Alan Beattie et al., Bid to Pin Down Trade Deal, The Financial Times (March 10, 2006).
182 183 181
47 removal of excise taxes on foreign goods. Such examples of interdependence explain the WTO's difficulty in estimating trade. But even if these ideas are accepted, it is still possible to say so what? How does a theory of WTO law make any difference - or help win cases? Here the answer is that a theory can help to make sense of what we see happening. It allows us to explain, to categorize, and from the resulting arrangement to make connections between the treaty's disparate features. Things fall into place. Order becomes apparent. Order is important because there is something very slight, almost surreal, about the WTO Agreement. The laws emphasis on expectations and ideals makes the treaty appear at times like an emperor with no clothes. In particular, its emphasis on the abstract recalls various historic epochs the Amarna Period, Heian Japan, Spain of the Golden Age when the cultural ethos became fixated upon the ideal at the expense of the real. That impression is reinforced by continuing examples of non-compliance with the treaty and by the stark fact that, at least in the short term, international trade has produced both winners and losers. All of this, taken together, makes it hard to escape the sense that we are being asked to believe in too much. 185 Nevertheless, it is important to consider carefully what the treaty involves to see that its basic arrangement does make sense. The real issue is one of balance. Perhaps the most direct confirmation of this point comes from a comparison made in Ch. 6 between the GATT/WTO Agreement and the Council for Mutual Economic Assistance (CMEA), the now-defunct economic grouping of the Soviet Union and its socialist trading partners. 186 CMEA trade was negotiated annually among governments and was followed up by interenterprise contracts. Total trade was planned. Expectations were therefore fixed. Consequently, there was little motivation or incentive to go beyond what had been agreed. Over time such rigidity created problems as world prices, especially for energy, diverged from pre-arranged prices used for CMEA trade. 187 Barter or hard currency transactions became more attractive. The regime failed to adapt and was ultimately disbanded in 1991. The theory of WTO law suggests that GATT and the WTO Agreement avoided similar fates because they are based on incalculable, and therefore essentially fluid, expectations that can readily adjust to the ebb and flow of international trade. In this respect, WTO laws indeterminacy is not an indication of weakness: it is a sign of strength. In saying this I do not want to be taken to be describing something perfect. The theory of WTO law conceives of the law's subjects countries as fixed in their relations with each other. All countries are formally equal. Still, a critical eye will recognize that the equality of MFN masks great inequality. Some WTO countries are rich, but most are
It may be that this thinking takes us to the edge of myth. Much work has been done by anthropologists on the role of myths in societies, and in particular, on the way in which they served to shape a collective consciousness. Karen Armstrong, A Short History of Myth (2005). For a recent view of economics as a faith see Duncan K. Foley, Adams Fallacy: A Guide to Economic Theology (2006). 186 For reviews of Comecons organization and work see J.J. Brine, COMECON: The Rise and Fall of an International Socialist Organization (1992). Lee Kendall Metcalf, The Council of Mutual Economic Assistance: the failure of reform (1997). 187 Brine, p. 144; Kendall Metcalf, p. 219ff.
185
48 poor. The WTO Agreement can then be accused of consigning the majority of countries to their existing status and not some brighter future. From this perspective, the theory I have posited here starts to look a lot less organic and acceptable and a lot more artificial and objectionable. Similarly, the interdependence identified as the treatys overarching purpose appears parasitic. The central question of normative jurisprudence - that is, what the law should be suddenly, and very forcefully, reasserts itself. 188 Yet the question of what law should be is a complex one. It cannot be dealt with fully here. I will return to it later, but in order to develop any answers we have to have some knowledge of justice, and it is to this subject that I next turn.
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188
Nor can you rely on any embedded notion of equality to escape the role which the tradition accords you. If no one can create the tradition, no one can escape its teaching and the roles it defines, except by departure (and there may be no place to go). This represents a classic problem that no one, anywhere, has solved. How can a communal form of organization avoid disequilibrium, and inequality, of social role? H. Patrick Glenn, Legal Traditions of the World 67-68 (2000).

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A Theory of WTO Law

Theory Chapter 1 Final_U.doc created on 2/4/2009

A Theory of WTO Law

I. II. III. IV. V. VI. VII. VIII.

Theory Chapter 1 Final_U.doc created on 2/4/2009

3 CHAPTER ONE A THEORY OF WTO LAW

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Chi Carmody Feb. 4, 2009

A Theory of WTO Law

The WTO Agreement as a law of expectations implemented by obligations.

The WTO Agreement as a law of realities implemented by rights.

The WTO Agreement as a law of interdependence implemented as a form of lex specialis.

The past; concern is with protecting trade as estimated.

The present; concern interdependence.

Dynamic, hence the law describes a relation.

Static, hence the law describes a transaction.

The WTO instrument.

The WTO instrument.

The WTO Agreement as a hybrid instrument.

Theory Chapter 1 Final_U.doc created on 2/4/2009

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Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

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Theory Chapter 1 Final_U.doc created on 2/4/2009

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Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

Theory Chapter 1 Final_U.doc created on 2/4/2009

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Theory Chapter 1 Final_U.doc created on 2/4/2009

Ibid., p. xlvi. Ibid., para. 5.43 178 Ibid., para. 5.42.

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