In this paper we empirically examine the determinants on utilization of the Korea–ASEAN Free Trade Agreement (KAFTA) by employing a database provided by the Korea Customs and Trade Development Institute. We find that, although three effects, namely preferential margin (margin effect), rules of origin restrictiveness (ROO effect), and average export volume (scale effect), contribute to determining the utilization of the FTA, the scale effect has the greatest impact. Our results suggest that, since firms with relatively small volumes of trade are usually small and medium-size enterprises (SMEs), policy assistance for reducing administrative costs should be geared toward SMEs. Our results further indicate that policymakers should also try to negotiate more extensive tariff reductions on products not only where MFN rates are high but also where shipments are large.

This is the eighth Appellate Body Report in which some aspect of zeroing was adjudicated. As in the prior cases, the AB again found the US practice inconsistent with several aspects of the Anti-Dumping Agreement. The novelty in this dispute was the EC attempt to broaden the concept of what constitutes an appealable measure. The EC challenged whether a WTO decision regarding zeroing could apply to subsequent proceedings that might modify duty levels and asked the AB to decide whether the United States' continued use of zeroing in the context of a given case was consistent with WTO obligations. The AB stated that in its attempt to bring an effective resolution to the zeroing issue, the EC is entitled to frame the subject of its challenge in such a way as to bring the ongoing use of the zeroing methodology in these cases, under the scrutiny of WTO dispute settlement. The AB then cautiously applied the new perspective to US zeroing practice.

Nondiscriminatory treatment at its border of a like product coming from another WTO signatory (Article I on Most Favored Nation Treatment), and of domestic and foreign suppliers of like or similar products within its borders (Article III on National Treatment) are widely held to be the fundamental principles of GATT/WTO. Yet GATT included significant exceptions to nondiscriminatory treatment, for example, in its articles relating to customs unions and free trade areas, antidumping and safeguards. I argue that these exceptions have become dominant over time so that not much nondiscrimination remains in the global trading system. With the recent inclusion of services, intellectual property and trade-related investment measures, traditional GATT issues of tariff and non-tariff barriers at the border to market access have become less important compared to regulatory barriers inside the border. It is an open question whether nondiscrimination per se is a salient issue in thinking about multilateral disciplines in these new areas.

Many governments provide subsidies to shift from ‘dirty’ but cheap fossil fuels to ‘clean’ but expensive renewable energy. Recently, public incentives in the renewable energy sector have been challenged through both dispute settlement procedures of the World Trade Organization and domestic countervailing duty investigations. One may expect that trade frictions in this field will intensify over time. This article argues that the Agreement on Subsidies and Countervailing Measures – a multilateral trade treaty on subsidization and anti-subsidy measures – should be revised to give more policy space to national authorities in implementing their low-carbon programmes. The Appellate Body made a few climate-friendly interpretations in Canada–Renewable Energy/Canada–Feed-In Tariff Program. It is now members’ turn to carry out meaningful rule-making reforms. This article explores some ways to ‘green’ the existing disciplines.

This article examines how fragmentation of the global trade regime into preferential agreements, built on a multilateral baseline of World Trade Organization (WTO) rules, affects trade governance. The analysis relies on 105 interviews with trade policy professionals in core WTO members and a conceptual distinction between ‘thick’ and ‘thin’ institutionalism to capture institutional changes in the global trade governance architecture. The WTO's thick institutionalism facilitates institutionalized interactions among members of the trade policy community that are essential for transparency and dialogue and the rule of law character of the trade regime. It secures the continued belief of trade policy professionals in the WTO's centrality in trade governance. The thin institutionalism of the network of preferential agreements spells the return to à la carte forms of trade governance and benefits those with the technical and political capacity to successfully navigate the fragmented governance architecture. Ongoing institutional transformations shift global trade governance away from rules-based back to more power-based forms.

This article introduces a new dataset on the intellectual property (IP) provisions included in preferential trade agreements (PTAs) and makes it available for research and policy communities alike. Several PTAs include IP commitments that go well beyond the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). A sound knowledge of these TRIPs-plus commitments is essential in order to improve our understanding of what drives them and of their legal, social, and economic consequences. Yet, until now, these provisions have not been mapped in a comprehensive and systematic way. The T + PTA dataset fills this gap by documenting the existence of 90 types of IP provisions in 126 agreements signed between 1991 and 2016. We show that, even for like-minded countries, significant variations exist in their reliance on TRIPs-plus provisions, their degree of consistency across PTAs, and their preferences for some IP rights. We also find that strong TRIPs-Plus provisions are correlated with the depth of PTAs, the asymmetry between trade partners, and the strength of their domestic IP law. By making the T + PTA dataset available, we hope to create the opportunity for a new generation of research on TRIPs-plus agreements.

This article explores the concept of ‘regulatory convergence’ in the context of the evolving literature on legal convergence and divergence. Such a concept has emerged as an overarching horizontal discipline in the latest generation of preferential trade agreements and aims to reduce unnecessary regulatory incompatibilities between countries in order to facilitate cross-border trade and investment.

Differing approaches to regulatory convergence found in recently concluded PTAs, or are currently under negotiation, are examined, with a special focus on the ‘regulatory cooperation’ approach embedded in CETA, the path of ‘regulatory improvement’ taken by members of the Pacific Alliance, and the ‘regulatory coherence’ track included in the TPP. We also refer to the TTIP negotiations conducted between the EU and the US.

The article offers a broad understanding of the different ways in which regulatory convergence is implemented across PTAs, and the legal complexities resulting from the ambiguity of the concept. It further describes the scope and effects of the different mechanisms used to achieve regulatory convergence, on both substantive and procedural matters.

The WTO Secretariat describes sustainable development as a central WTO principle. Relevant international law treaties have declared sustainable development's mutual supportiveness with trade liberalization, and also emphasized the need to balance its ‘pillars’: economic development, often equated with trade liberalization, with environmental conservation and social welfare. While ‘mutual supportiveness’ suggests that sustainable development's environmental and social goals are a side effect of trade liberalization, ‘balancing’ involves weighing these different goals, and prompts the difficult question of which are most important, and who is empowered to decide. This paper traces these two broad theoretical conceptions through WTO legal texts, negotiations and dispute settlement, arguing that they have important pragmatic implications. In particular, to create mutual supportiveness WTO Director-General, Pascal Lamy, has stated the need for adequate domestic policies, suggesting that the WTO should support these. Yet, if they have negative trade impacts, pure ‘sustainable development’ policies may be difficult to balance against the WTO obligation to liberalize trade.

This paper reviews the emerging literature on the political economy of public standards in an open economy to explain why standards are set at certain levels, and how this affects trade. We use a simple framework to illustrate how interest groups may influence the standard-setting process, and which factors may affect the political equilibria. We analyze the relation between trade and standards, and their potential protectionist nature. We argue that standards may act as barriers or catalysts to trade, that both under- or over-standardization may occur, and that standards may serve as protectionist instruments, or not.

New food regulations may impede international trade, but multilateral mechanisms can resolve trade conflicts when they do arise. Food safety regulation in industrialized countries during the 1990s increasingly uses risk analysis in a farm-to-table approach, promotes the Hazard Analysis and Critical Control Point (HACCP) system, and increases the stringency of standards or creates new regulations for hazards. The 1995 Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), negotiated by World Trade Organization (WTO) members, establishes a framework to reduce their trade distorting aspects. Three of the principles under the SPS Agreement – science-based risk assessment, equivalence, and harmonization – directly address aspects of food safety regulation that create the potential for trade disputes. In many cases, the science requirements of the Agreement have led to the elimination of unnecessary regulatory barriers to trade. However, some high profile cases remain unresolved because of gaps in convergence around risk management principles that were not spelled out in the Agreement in deference to national sovereignty. The evidence also indicates that there has been limited progress in reducing regulatory transactions costs to trade in food through equivalence or harmonization.

The EC-Biotech dispute exposed the WTO dispute settlement system to a more challenging test than any previous dispute. Not only did the Panel have to take a stand on the limits of science, or technocratic regulatory controls, to protect against objective risk, but in this regard faced more complex issues than ever addressed before by an adjudicating body. The dispute also concerned an extremely charged political issue, partly because of inherent ethical sensitivities with regard to foodstuffs, partly due to public skepticism about the role of science, and partly due to a common public perception of the complaint as being driven by the interests of an untrustworthy industry. Because of these and other challenges, the Panel faced an almost impossible task. This paper discusses how the Panel addressed some of these issues. The recently (after our report was drafted) decided appeal in EC–Hormones Suspension is likely to reduce the significance for WTO jurisprudence of some of the Panel's findings in EC–Biotech, given the apparently different approach of the AB to fundamental interpretative issues under SPS concerning the meaning of risk assessment and precaution.

The two papers in this special issue both look at the problems that small economies face in participating in the world trading system. For Winters and Martins (W&M) small means small in population; they motivate their analysis with reference to the 82 countries with the smallest population, accounting collectively for less than 0.5% of world population. Many of these countries are also remote, making trade costly. For Mattoo and Subramanian (M&S) the focus is on countries that are small and poor; their list covers the 73 countries which each account for less than 0.05% of world imports and which also have low income. They investigate the engagement of these countries in the WTO. My comments will address both papers, although focus on W&M.

This paper examines recent trends in the US antidumping process. We trace the experience of different groups of countries at each stage of the investigation process and through follow-up activity in disputes initiated at the GATT/WTO. The data reveal that lower income developing countries are more likely to be targeted, less likely to settle cases, more likely to confront high dumping duties, and less likely to bring cases to the WTO. We argue that differences in administrative and institutional ‘capacity’ may be a contributing factor that explains the observed bias facing developing countries, in addition to the other hypotheses that have been offered in the literature, such as higher protection and limited retaliatory ability.

Conventional wisdom holds that international trade agreements can serve as a source of external pressure and credible commitment to overcome opposition and to lock in domestic economic reforms. This belief, however, underestimates the ability of politicians not only to circumvent these pressures, but to leverage international trade agreements to advance their own policy preferences – preferences that may be highly anti-reformist. Thus, trade agreements do not necessarily induce reforms and, in certain circumstances, they can even be counterproductive. Through an analysis of aggregate data and 40 interviews with senior politicians, government officials, and state-owned enterprise managers in Vietnam, this paper illustrates these insights by analyzing the political economy of SOE reform backsliding on the eve of Vietnam's accession to the WTO.

The China–Rare Earths decision of the Appellate Body addressed two main issues: (i) whether China's obligations not to impose export duties under its accession protocol are subject to exceptions under Article XX of GATT, and (ii) the scope of the exception for China's export quota measures relating to conservation under Article XX(g) of GATT. In accord with its China–Raw Materials decision, the Appellate Body found that there is no textual basis for the application of the Article XX exception to China's export duty obligations. This interpretation exalted a narrow contextual approach over an approach to interpretation that would focus on broader context, object, and purpose. The Appellate Body also approved the Panel's overall approach to determining the availability of the Article XX(g) exception. This approach focused on the design and structure of China's quota measure, but left unresolved important issues, including the extent to which non-conservation purposes may prevent use of the exception and the role of empirical evidence of effects in these determinations. While the Appellate Body found that there is no ‘even-handedness’ requirement in Article XX(g) itself, we argue that the chapeau's requirement of non-discrimination is an appropriate additional criterion for determining whether a policy with a target of reducing extraction of a natural resource satisfies the requirements of Article XX.

Countries can choose between a wide range of policy instruments to address climate change. While economists tend to argue for the efficiency of instruments such as environmental taxes, many countries are incorporating subsidies into their plans for limiting greenhouse gas emissions. However, these subsidies may conflict with World Trade Organization rules. This paper analyzes the potential benefits of using climate change subsidies in terms of addressing market failures as well as the risks of protectionism arising from such subsidies. It then examines World Trade Organization rules to determine whether they optimally differentiate between beneficial and harmful subsidy policies. It concludes that existing WTO rules do not provide adequate scope for legitimate subsidies and makes suggestions for reforming subsidies law.

The European Union (EU) often conditions preferential access to its market on compliance with Non-Trade Policy Objectives (NTPOs), including human rights and labor and environmental standards. In this paper, we first systematically document the coverage of NTPOs across the main tools of EU trade policy: its (association and non-association) trade agreements and Generalized System of Preferences (GSP) programs. We then discuss the extent to which the EU can use these tools as a ‘carrot-and-stick’ mechanism to promote NTPOs in trading partners. We argue that, within trade agreements, the EU has limited scope to extend or restrict tariff preferences to ‘reward good behavior’ or ‘punish bad behavior’ on NTPOs, partly because multilateral rules require members to eliminate tariffs on substantially all trade. By contrast, GSP preferences are granted on a unilateral basis, and can thus more easily be extended or limited, depending on compliance with NTPOs. Our analysis also suggests that the commercial interests of the EU inhibit the full pursuit of NTPOs in its trade agreements and GSP programs.

Special Economic Zones (SEZs) have been a huge success and brought a great number of benefits to the whole world. With different kinds of incentives, SEZs have created favorable conditions in order to attract foreign investors. In this article, several specific issues are considered. First, whether SEZs are legal under international economic law (IEL). Second, what kind of specific issues they raise under IEL. Thirdly, what measures governments can take in order not to be challenged. The first section illustrates the definition of SEZs and their rapid development; the second section will consider the interaction between SEZs and international tax law, especially the base erosion and profit shifting (BEPS) Action 5; the third section focuses on the relationship between SEZs and investment agreements and the disputes raised as a consequence; the fourth section will talk about SEZs and the World Trade Organization (WTO), as some incentives used by SEZs may not be compatible with WTO regulations. The article shows that SEZs can be harmful. For one thing, tax incentives applied in SEZs may lead to tax evasion, and the competitive circumstances between states may be changed. For another thing, the frequent changes of policies in SEZs may result in indirect expropriation, and investor-state arbitration under investment treaties can be used by foreign investors to protect their SEZ-related benefits. In addition, although WTO rules do not explicitly regulate SEZs, a number of measures, such as subsidies, do fall under the ambit of WTO rules, and these measures cannot be discriminatory.

Private standards are increasing in number, and they affect trade, but their status in the WTO remains problematic. Standards-takers are typically countries with little bargaining power, who cannot affect their terms of trade, and, thus, even if they possess domestic antitrust laws, will find it hard to persuade standard-setters to take account of their interests. Our concern is to bring more of these standards within the normative framework of the trade regime – that is, we worry that these private forms of social order can conflict with the fundamental norms of transparency and non-discrimination. The WTO membership has consumed itself in endless discussions regarding mundane, legalistic issues, and has not moved at all towards addressing the real concerns of developing countries. We discuss one aspect of the problem: How reclusive should the WTO allow product standards to be? We argue that the WTO should adopt a ‘Reference Paper’ that would encourage its members to apply WTO rules for adopting those standards that already come under the aegis of the WTO to private standards. In the absence of centralized enforcement, utopia in the WTO legal paradigm, transparency disciplines imposed on standard-setters is the best the WTO could offer to those who are negatively affected by private standards.