Tag Archives: economy

Why multilateralism matters

 

 

 

Moritz Wüstenberg

Junior Researcher, Energy Law

LIBERAL TRADE has faced growing resentment from several directions in recent years. The decision by the United Kingdom to withdraw from the European Union following a 2016 referendum has affected both businesses and individuals. On the other side of the Atlantic, the 2016 election of President Trump was built on a campaign of protectionism and threats to multilateral trading rules. Disrupting the international trading system in order to realise an “America first” policy or to cast of the shackles of the European Union raise concerns and questions. In addition to creating economic benefits, trade on multilateral terms has for centuries been recognized as a key tool for maintaining peaceful relations between nations. If multilateralism fails, how will this impact geopolitics? Some exceptions, such as those allowing for closer cooperation without infringing on the multilateral rights, are sanctioned by the multilateral rules of the WTO and their use is on the rise. Is an increase in the use of exceptions to multilateralism a cause for concern?

THE REDUCTION of tariffs has been achieved through several rounds of negotiations under auspices of the General Agreement on Tariffs and Trade (GATT) in the wake of the Second World War. The outcome these means that trade in goods today is nearly tariff free. A key ingredient for the success of the GATT negotiations was the Most-Favoured Nation (MFN) clause, through which tariff concessions negotiated between some Members were multilateralized to all on a non-discriminator basis. In tandem with trade liberalization the global economy witnessed rapid growth of income, creating wealth for those taking part in the process. The driver of this growth has been argued to have been the virtuous cycle in which tariff cuts led to increased trade, which in turn led to more income which yet again enabled tariff cuts. Today, the MFN clause remains a cornerstone of the World Trade Organization Agreements (WTO) with only few exceptions to it.

PREFERENTIAL TRADE Agreements, such as the European Union, NAFTA or the CETA, that offer deeper liberalization to its Members, but do not raise tariffs or other barriers to trade vis-à-vis those WTO Members that are not part of the pact, form the most important exception to the MFN obligation. In general, the preconditions for deviations from the MFN principle are threefold: transparency (the requirement to notify), commitment to regional trade liberalization (the requirement that PTA´s cover all trade between parties) and neutrality in relation to non-parties. The number of PTA´s has grown rapidly in the past decades, leading to concerns on the erosion of multilateralism. This echoes also the broader discussion on the fragmentation of international law, ongoing for more than a century.

THE POSITIVE economic effects that can be achieved through liberal trading policies have been evident in both Great Britain in the 19th century as well as the United State in the 20th century. The repeal of the Corn Laws in 1846 ended a period of mercantilism in place since 1815 and pushed Great Britain into prosperity by embracing free trade, even on unilateral terms. The underlying theory was and remains that gains can be made by specializing in the production of certain products and then exchanging these for products that others produced efficiently. Free trade would eventually lead to an efficient outcome as nations produced those goods which they could produce most efficiently. With its bet on free trade, Great Britain would be the leading economic power of the 19th century.

SUCCESFUL POST-WAR settlements, at least since the 1648 Peace of Westphalia, have specifically recognized the relevance liberal trade has for the maintenance of peaceful relations. Are the mostly peaceful relations since the Second World War under threat from the rattling of trade sabres? While it is unlikely that neither the protectionist policies of the United States or the withdrawal of the United Kingdom from the EU will have any imminent effect on peaceful relations between nations, the stakes are high. Throughout recent history, liberal trade has functioned as an assurance against armed conflict and, conversely protectionism has preluded conflict.

A RECENT investigation on the effect of aluminium and steel imports (Section 232 investigation) on the US economy concluded that these have a negative effect on the National Security and can therefore be “adjusted”. Against a backdrop of several options to protect the domestic industries, President Trump chose to raise duties on imports from all countries including Canada and the European Union. Calls for retaliation were immediate, reflecting the conception that the measures of the United States are unjustified.

NATIONAL SECURITY exceptions are found in most trade agreements, including the WTO agreements. The US seems to have prepared to make use of this exception by broadening the traditional interpretation of national security beyond national defence to include also economic security in the aluminium and steel investigation. The apparent reason behind this interpretation is an attempt to rely on a little used MFN exception of the GATT (Article XXI) that allows WTO Members to take `any action which it considers necessary for the protection of its essential security interests`. While there are qualifications for the use of Article XXI, it is in effect self-judging it suffices that the measures taken are considered necessary by the state taking them. Invoking this article without due cause could be the straw that breaks the camel´s back, undermining the effectiveness of the multilateral framework and causing other nations to retaliate by also invoking Article XXI to justify their trade restrictive measures.

THE POLITICAL “TRILEMMA” is how the economist Dani Rodrik has described the problem facing international economic integration. Nations have to make a choice between two of three lines of policy: international economic integration, the nation-state and mass politics. Should international economic integration be maintained, either the nation-state or mass politics have to be sacrificed. With both America and the United Kingdom choosing the nation-state and mass politics over integration, only time will tell if history will repeat itself with trade protectionism flowing into geopolitical tensions.

DEEPER COMMITMENT to free trade without diminishing the rights of WTO Members is at the core of the Preferential Trade Agreement exceptions to MFN treatment. Negotiation with fewer nations enables faster decision making and makes it possible to overcome the foot-dragger effect which the consensus based rules of the WTO can have. Consequently, PTA can be seen as a building block as opposed to a stumbling block for multilateralism. Moves toward unilateralism as witnessed in the US aluminium and steel investigation, on the other hand can be considered conflicting with multilateralism. It remains to be seen if trade-politics convert to geo-politics and, more ominously, trade wars morph into real wars.

This blog is based on the author’s recent publication ´Back to the future: MFN treatment in an era of protectionism´ in the Nordic Journal of International Law. This publication reviews the development of the Most-Favoured Nation clause in light of historical events and analyses its importance in trading relations today.

 

E-waste Realities and Legal Utopias: Labourers Lost in Translation

Sabaa A. Khan

Postdoctoral researcher, International Environmental Law, PhD

 

“Does the law exist for the purpose of furthering the ambitions of those who have sworn to uphold the law, or is it seriously to be considered as a moral, unifying force, the health and strength of a nation?” James Baldwin. No Name in the Street. 1972.

THE MASSIVE amount of electronic waste that is produced from the global use of digitized commodities is one of the most pressing social and environmental challenges of the 21st century. Global flows of e-waste are particularly problematic for the many developing countries where informal, dangerous e-waste recycling work has proliferated. While providing a poverty alleviation strategy for some of the most marginalized communities in countries such as Ghana and India, informal e-waste recycling work is dangerous, presenting substantial risks to human and environmental health.

Dismantling and smelting at Agbogbloshie. Photo: Sabaa A. Khan

REGULATORY RESPONSES to curtail the pollution emanating from these informal ‘urban mining’ industries are on the rise but the economic and social prospects they carry for informal waste workers are uncertain.

WASTE GOVERNANCE regimes can be entirely ineffective when designed without meaningful consideration of the socioeconomic realities of e-waste recycling. This is evidenced by India’s e-waste law adopted in 2012, despite international human rights concerns linked to its negative impact on the 80,000 people working in India’s informal e-waste recycling sector and their families.

REGRETTABLY IT seems Ghana is pursuing a similar, highly exclusionary legal path.  A look at Ghana’s newly adopted Hazardous and Electronic Waste Control Management Bill (2016) reveals that this ‘sustainable’ e-waste regime lacks any coherent linkage to the existing waste management system, in which 95% of the e-waste generated is collected by the informal sector.

Agbogbloshie e-waste worksite. Photo: Sabaa A. Khan

IN GENERAL, the legal framework maintains the informal e-waste sector in invisible and insecure arrangements along the e-waste value chain. It establishes a State-led e-waste collection and recycling system that is totally delinked from the current reality of the e-waste chain in which e-waste generating households and businesses sell e-waste to informal sector collectors.

EXISTING SOCIAL arrangements surrounding e-waste that involve exchanges between formal and informal actors on local and transnational scales are buried underneath this new, top-down, state-centered legal vision for the social and economic ordering of e-waste management. Rather than incentivizing manufacturers and importers to develop efficient closed-loop systems and foster sustainable relationships with informal waste collectors, the legislation gives the government immense discretion and control over e-waste management. It advocates a state-managed chain from collection to processing, providing no clarity on potential opportunities for the legal recognition of small-scale informal collectors who currently dominate the system.

GHANA’S NEW e-waste law appears to create an imaginary space in which the informal sector simply does not exist. Moreover, it is a space under the strict command of governmental authorities who are empowered to order the “sealing up” of any “area, site or premises” suspected to be a place for hazardous waste disposal. Law enforcement officers are also granted a “power of search, seizure and arrest” over any person or place suspected of keeping or transporting hazardous wastes. Spaces that fall under the scope of these governmental powers include vehicles, lagoons, ponds, landfills, buildings, structures, storage containers and ditches. Evidently, this vaguely configured broad authority further legitimizes the persecution of informal waste collectors who are already subject to constant harassment, hostility and seizure by municipal authorities.

THE NEWLY adopted legislation reflects the State’s distorted vision of what constitutes the e-waste economy. It is entirely removed from the spatial reality of actual e-waste flows and is likely to further drive the informal sector into places of invisibility that are characterized by environmental and social risk. Hence, law as embodied within the new e-waste legislation presents new threats to the livelihood of informal workers, rather than clarifying their engagement as stakeholders in a sustainable e-waste economy.

95 percent of e-waste is collected by the informal sector. Photo: Sabaa A. Khan

IN ESSENCE, the laws of e-waste, at all scales, have originated from an artificial perspective of what constitutes sustainable waste governance, and have thus fostered the invisibility and precarious growth of the informal workforce.

AS TO international environmental law, the evolving dynamics of the Basel Convention show that the Convention works together with the international trade regime to legitimize the e-waste trade.  It does so by retaining its primary focus on removing barriers on transnational movements of used e-products. Global objectives in relation to human health protection remain mostly symbolic and unactionable, trapping the social and labour hardships of the global waste economy within the realm of national sovereignty. The possibility for certain transnational actors to play a role in international waste trading without engaging any form of accountability, and sometimes even preserving their anonymity, inevitably expands opportunities for transnational environmental crime in the global e-waste value chain and facilitates the proliferation of exploitative working conditions within the informal economy.

GHANA HAS certainly taken a critical step forward in introducing national e-waste legislation. However, the social and environmental success of the new law is far from imminent and will entirely depend on how inclusively the new regime will be operationalized with respect to the most marginalized social groups whose livelihoods have come to depend on their participation in the urban waste economy.

This post has also been published at CCEEL Blog at CCEEL website.