DR.

RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY,

LUCKNOW

International Trade Law

Final Draft

EU’S POLICY ON MODERNISATION OF WTO: DISPUTE SETTLEMENT

SUBMITTED TO: SUBMITTED BY:

Ms. Priya Anuragini Jayati Gupta, Jayeta Singh

Assistant Professor(Law) 150101057, 150101058

VIIth Semester

B.A. LL.B. (Hons.)

 TABLE OF CONTENTS

SYNOPSIS ...................................................................................................................................... 4

Introduction ..................................................................................................................................... 4

Aim & Objective ............................................................................................................................. 4

Hypothesis....................................................................................................................................... 5

Research Questions ......................................................................................................................... 5

Literature Review............................................................................................................................ 5

INTRODUCTION .......................................................................................................................... 7

TRUMP ADMINISTRATION & THE LAST STRAW ................................................................ 8

EU’S ATTEMPT AT MODERNIZING THE WTO .................................................................... 10

CONCLUSION ............................................................................................................................. 12

BIBLIOGRAPHY ......................................................................................................................... 13
 SYNOPSIS

INTRODUCTION

The existence of agreed rules on cross border trade, monitored by the WTO and enforced
through an impartial system for resolving disputes helped for decades to diffuse trade tensions
and avert trade wars. However, the development of new rules on trade has not happened in sync
with economic, political and technological changes. In particular, market-distorting subsidies,
often channelled through state-owned enterprises are not adequately captured under current
international trade rules, eroding the level playing field for economic operators.

The WTO is now increasingly burdened by inflexible procedures and conflicting interest
amongst countries. The arm of the WTO that resolves trade disputes is on the verge of being
paralysed because of the blocking of nominations of new WTO Appellate Body Members. And
the WTO's role as a monitoring body is under threat by a lack of transparency from many
countries.

The European Council of 28-29 June 2018 gave the Commission a mandate to pursue WTO
modernisation in pursuit of the objectives of making the WTO more relevant and adaptive to a
changing world, and strengthening the WTO's effectiveness.

AIM & OBJECTIVE

This project is aimed towards the critique of secondary liability for copyright infringement. In
this project I will first be discussing the history of secondary copyright liability, focusing
particularly on contributory infringement and its application to traditional defendants, i.e.
product distributors, and Internet Service Providers (ISPs). Finally I will critique the principles
laid under this theory of secondary liability regarding copyright infringement. The two prongs of
the test for contributory liability i.e. the knowledge prong, and the participation prong would also
be discussed.

HYPOTHESIS
The secondary liability has generally been imposed under a theory of contributory infringement,
vicarious liability, or both. Under both these theories, the secondary infringer cannot be held
liable unless there is a showing of direct infringement by someone. Therefore, it is presumed that
contribution to conduct which is actually covered by the fair use doctrine, for example, does not
risk secondary liability for copyright infringement.

RESEARCH QUESTIONS
The research questionnaire that the project would try to answer in this area is as follows:

LITERATURE REVIEW
 INTRODUCTION

The World Trade Organization came into existence in January 1995 amidst much hope with a
greatly broadened membership, a significantly broadened mandate, including services, trade-
related aspects of intellectual property, the reintegration of textiles, and the start of reform in the
agricultural sector, and a more binding dispute settlement system.

By late August 2018, the WTO had grown to 164 members with an additional 22 countries or
customs territories undergoing a lengthy accession process. However, the WTO is now, and has
been for at least a decade, in serious trouble.

There have been some sectoral successes on liberalization (e.g., the information technology
agreement and its expansion) and the creation of one new agreement -- the Trade Facilitation
Agreement -- and an agreement to the phase out of agricultural export subsidies. Yet, the
organization has been unable to (1) advance broad-based liberalization, (2) address developments
in technology and commercial realities over the last 23 years, (3) update the rules of the
organization, (4) complete a review of the dispute settlement understanding that has been
underway for more than two decades, or (5) address the challenges posed by important members
with state directed economic systems and massive domestic subsidy programs.
 TRUMP ADMINISTRATION & THE LAST STRAW

While many countries have sought some forward movement through an expanding web of
bilateral and regional agreements, the center of the system has not been able to effectively
function because the negotiating arm of the WTO has been largely broken due to a changing
power structure within the WTO membership and a continued lack of agreement amongst the
major players on relative responsibilities to move the trading system forward.

With the current U.S. Administration determined to right what it views as a flawed system, WTO
members find themselves under increased pressure to address (1) long-standing concerns with
the dispute settlement system, (2) the balance and current relevance of existing bilateral and
plurilateral agreements to which the U.S. is a party, and (3) the long-running concerns with the
lack of progress in China’s reforms and the distortions its policies are creating for the global
trading system. The Trump Administration has made it clear that it will shake up the system to
obtain focus and action on matters viewed as important to the United States. While this
approach has upset many trading partners and much of the business community, the reality is that
many pressing problems have been festering for long periods – in some cases, decades – and
prior approaches have not actually achieved a change in structure or behavior.

To apply pressure on trading partners and the system, the Administration has utilized laws that
have been on the books for long periods of time but seen little use or, where used, very limited
application (e.g., Section 232 of the Trade Expansion Act of 1962, as amended) or pursued long-
standing business concerns through a detailed examination of the practices of China under
Section 301 of the Trade Act of 1974, as amended. Finally, the U.S. has used one of the few
levers available in the WTO to obtain attention of other members – holding up the start of a
replacement process for Appellate Body seats following the end of terms for existing AB
members to get focus on the myriad problems the U.S. (and other WTO members) have raised
over time about the operation of the Dispute Settlement System and, in particular, the Appellate
Body.

Much has been written on the ongoing impasse in the WTO on the Appellate Body selection
process and U.S. issues. The U.S. Administration has made clear that its concerns involve both
procedural and substantive issues and that it wants those issues addressed before a return to
starting the selection process. The U.S. has both outlined, in its 2018 Trade Policy Agenda, the
nature of its concerns and has provided detailed statements in various DSB meetings that review
the serious concerns the U.S. has and its determination to see them addressed. While many
members have had grievances about the system over time and some undoubtedly agree with
some or all of the U.S. concerns, most WTO members have been pressing for the filling of AB
vacancies first and addressing U.S. concerns (and other concerns) over time.

As the WTO is down to four AB members, with one of those four facing a decision of the
membership on whether reappointment will be considered/granted by the end of September, and
with a requirement for each appeal to be heard by three members of the Appellate Body, pressure
is building on the WTO membership to find a resolution.

A number of countries have started to talk about the need for reform of the organization. Some
seek to address the challenges of consensus decision-making in such a large group. Others are
more focused on addressing new issues that have arisen over the last 24 years. Some note the
need to update the WTO’s rule book. And many question the need for reform at all.
 EU’S ATTEMPT AT MODERNIZING THE WTO

The EU’s proposals from July 2018 contain suggestions for both a future negotiating agenda as
well as procedural changes to the deliberation and dispute settlement functions of the WTO.
Dwelling on the cure more than its ailments and lacking a focus on advancing a negotiating text,
these proposals seek to inform ongoing “talks about talks” on reforming the WTO.

With respect to updating the WTO rule book, the EU makes two proposals. First, a number of
policy areas are identified where new or stronger rules are advocated. These policy areas include
subsidies and state-owned enterprises (the so called “level playing field” agenda), regulation of
services, treatment of foreign investors, technology transfer requirements and barriers to digital
trade. Mention is also made of furthering the sustainability objectives of the international
community and new rules relating to flexibilities afforded to developing countries.

Second, the EU advocates “flexible multilateralism, where members interested in pursuing a

certain issue which is not yet ready for a full multilateral consensus, should be able to advance
the issue and reach an agreement if its benefits are made available to other WTO members on a
MFN basis”. Upon elaboration, this amounts to pursuing more plurilateral negotiations among
the WTO membership, greater support from the WTO Secretariat for plurilateral accords, and
“building greater political support and engagement in the WTO, including possible options as to
the frequency of Ministerial Conferences as well as intensifying Senior Official processes”.

Four proposals are made concerning the EU’s ongoing work and transparency. The greatest
emphasis is placed on strengthening the incentives for WTO members to supply complete
notifications on time, committee-level monitoring and deliberation of those notifications. In
addition, the EU seeks to encourage further solutions to market access disputes before resorting
to WTO dispute settlement. This would make greater use of WTO councils and committees to
clarify and adjust incrementally existing WTO accords, and to reallocate resources to committees
that are most active rather than dormant bodies.

The EU’s discussion of dispute settlement reform is organized differently. In this section, the
‘context’ and ‘the nature of the current crisis’ are laid out, including a lengthy account of several
American criticisms of the current system of WTO dispute settlement. As such, on the current
trajectory, there will be fewer than three Appellate Body members in office – the minimum
number for that Body to hear an appeal – by December 2019. Unlike the other two issues
discussed above, failure to address this matter soon will result in the suspension of one pillar of
the current multilateral trading system.

The EU proposes a two-pronged solution. The first phase is comprised of six measures relating
to functioning of the Appellate Body, such as timely reports that focus exclusively on the matter
at hand and a move towards longer, single term appointments to that Body. In the second phase,
‘substantive issues’ would be discussed, including some of the Appellate Body’s interpretations
that the US considers judicial ‘over-reach’. While it would be wrong to argue that the proposals
relating to new rules, transparency and notification lack any specificity, they do pale in
comparison to the explicit steps the EU has proposed for addressing concerns about WTO
dispute settlement.

Generally, the EU’s proposals are more detailed when addressing procedural matters compared
to substantive areas of negotiation of new or existing trade rules. In terms of commerce involved,
the impact on living standards, and the nature and extent of cross-border harm created by
government policies, all matters that ought to influence an assessment of the case for
negotiations on new or current rules, the EU proposals are silent.
 CONCLUSION

It is noteworthy that the EU’s proposals contain greater specificity on important procedural
matters. The proposals imply that others can stand aside when they allow for groups of WTO
members to forge ahead.

The world wrote a rulebook in the WTO over twenty years ago. Again, it has served all of us
well. It still does. But even as it is used, it must be updated, or it would very likely face the fate
of other organizations approaching their eclipse. In recent years there have been new challenges
– challenges that the rules were not equipped to deal with.

Global trade does not stay still – it is constantly changing. If WTO wants to avoid finding itself
at a point like this again, it will need to adapt to these changes.

The way negotiations in the WTO work at the moment is flawed. Time and again, we have seen
progress held back by a small number of countries that pursue narrow, selfish interests. And as
the WTO functions on consensus, we cannot move. This approach has now shown its
limits. Members should be free to move forward at different speeds – to integrate and meet
criteria at different times. Exploring this option would allow us to make progress in key areas.

However, we may encounter a problem related to the content of the new rules, the binding
enforceable nature of those rules, or the long shadow of unfinished business.

If we want to ensure people follow the rules, we also need to make sure the WTO
is effective. Without enforcement, the rules are pointless

.
 BIBLIOGRAPHY

ONLINE SOURCES

 Terence P. Stewart, Can the WTO Be Saved From Itself? - Not without a major crisis,
and probably not even then-
http://www.stewartlaw.com/Article/ViewArticle/1127; Terence P. Stewart
 Storm Clouds in Geneva - The Building Crisis Over the WTO Dispute Settlement System,
at http://www.stewartlaw.com/Article/ViewArticle/1124; Terence P. Stewart
 The like-minded countries include: Australia, Brazil, Chile, the European Union, Japan,
Kenya, Mexico, New Zealand, Norway, Singapore, South Korea and
Switzerland. See Reuters, Canada to host meeting on WTO reform, U.S. and China left
out for now; https://www.reuters.com/article/us-usa-trade-wto-canada/canada-to-host-
meeting-on-wto-reform-us-and-china-left-out-for-now-idUSKBN1KH26V.

 Council of the European Union, Paper from the European Commission to the Trade
Policy Committee (Deputies) on WTO – EU’s proposals on WTO modernisation, WK
8329/2018/INIT available at
https://www.ghy.com/images/uploads/default/EU.Proposal.on.WTO.Modernization.pdf.

 https://www.euractiv.com/section/economy-jobs/news/eu-proposes-to-sanction-countries-
breaching-wto-rules/