Can Sectoral Plurilateral Agreements Overcome the Institutional Deadlock of the World Trade Organization? : Assessing the WTO framework and the Government Procurement Agreement

(1)

Can Sectoral Plurilateral Agreements Overcome the Institutional Deadlock

of the World Trade Organization?

–

Assessing the WTO framework and the Government Procurement Agreement

By Aljoscha Scott Schäfer Supervised by Mr. Dr. Ingo Venzke

(2)

described as exclusive clubs, giving benefits to members and discriminating non-members. The Members that turn away from the WTO as a forum of trade negotiations undermine and compromise the legitimacy of it as the leading institution in global trade. They question the raison d’être of the WTO and the multilateral idea of trade facilitation.7

1 Article III:2 and II:1 Agreement Establishing the World Trade Organization (WTO Agreement); C VanGrasstek, The History and Future of the World Trade Organization (World Trade Organization 2013) 3 ff.

2 See Article III:2 and IV:1 of the WTO Agreement; World Trade Organization, 'Whose WTO is it anyway?' (Understanding the WTO: The Organization) <https://www.wto.org/english/thewto_e/whatis_e/

tif_e/org1_e.htm#ministerial> accessed 27 July 2017.

3 P Van den Bossche and W Zdouc, The Law and Policy of The World Trade Organization (3rd edn, Cambridge University Press 2013) 177 ff.

4 World Trade Organization, 'Subjects treated under the Doha Development Agenda' (Doha Development

Agenda) <https://www.wto.org/english/tratop_e/dda_e/dohasubjects_e.htm> accessed 27 July 2017.

5 World Trade Organization, 'Members and Observers' (Understanding the WTO: The Organization) <https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm> accessed 27 July 2017.

6 BM Hoekman, Supply Chains, Mega-Regionals and Multilateralism (Centre for Economic Policy Research Press 2014) 1.

(4)

But before naming the multilateral project as failed, sectoral plurilateral agreements8_enclosed

in the WTO framework are often suggested in this context as an alternative solution.9

Plurilateral in the WTO jargon means that not all Members participate and only binds these Members that gave their consent to conclude the agreement, contrary to the multilateral approach, where all Members are involved.10_{These agreements usually concentrate on a}

singular trade topic, which makes them sectoral.11_{The WTO Members have already shown by}

negotiating PTAs that they are willing to collaborate as long as conclusions seem possible. The characteristics of the sectoral plurilateral approach could help to circumvent the above-mentioned shortcomings of the multilateral trading system. Having in mind that sectoral plurilateral agreements can be concluded by small numbers of WTO Members with a smaller range of topics, a positive outcome in the negotiations appear more realistic. The same is true for PTAs, notwithstanding the main distinction sectoral plurilateral agreements are integral part of the WTO and the former work outside. Even though both types of agreements share a high flexibility in common, they both evoke distinct consequences. PTAs can be seen as competitors to the WTO, while sectoral plurilateral agreements are compliant to the WTO legal framework.

To understand how sectoral plurilateral agreements are concluded, and to which extent they can contribute to trade facilitation, the Government Procurement Agreement (GPA) might be the best example. From originally four sectoral plurilateral agreements in force, just the GPA and the Agreement on Civil Aircraft (ACA) remain.12_{At present, the GPA has with 47 WTO}

Members more than the ACA with just 31 parties and therefore covers a wider geographical sphere.13_{Furthermore, 29 Members are as observers interested to access the GPA, while 9}

already started the process of accession talks.14_{Notwithstanding the personal scope, but the}

8 The WTO Agreement solely speaks of plurilateral agreements, compare Article II:3, but the term has another meaning outside the WTO context, why the term sectoral plurilateral agreements is preferred here. 9 Compare RZ Lawrence, 'Rulemaking Amidst Growing Diversity: A Club-of-Clubs Approach to WTO

Reform and New Issue Selection' [2006] 9(4) Journal of International Economic Law 823, 834; Hoekman,

Supply Chains, Mega-Regionals and Multilateralism (n 6) 41; BM Hoekman and PC Mavroidis, 'Embracing

Diversity: Plurilateral Agreements and the Trading System' [2015] 14(1) World Trade Review 101, 115 ff. 10 See for the term 'Plurilateral' World Trade Organization, 'Plurilateral' (Glossary) <https://

www.wto.org/english/thewto_e/glossary_e/plurilateral_e.htm> accessed 27 July 2017; see for the term 'Multilateral' World Trade Organization, 'Multilateral' (Glossary) <https://www.wto.org/english/ thewto_e/glossary_e/multilateral_e.htm> accessed 27 July 2017.

11 Van den Bossche and Zdouc (n 3) 108. 12 ibid.

13 World Trade Organization, 'Parties, observers and accessions' (Government Procurement: Agreement on

Government Procurement) <https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm> accessed 27

July 2017; World Trade Organization, 'Agreement on Trade in Civil Aircraft' (Civil Aircraft) <https://www.wto.org/english/tratop_e/civair_e/civair_e.htm> accessed 27 July 2017.

(5)

ACA’s regulated subject is narrower compared to the GPA, since it is strictly limited to objects subject to aircraft, compare Art. 1 ACA. In contrast the GPA addresses ‘any law, regulation, procedure, or practice regarding any procurement’ above a specific value

threshold, see Art. I (1) and (4) GPA 2012. The GPA from 1994 was revised recently and the revision, stepped into force on March 2014, and the ongoing development of negotiations show the significant influence public procurement has on trade law: estimated US$ 1.7 trillion per year have been opened to international competition.15_{This achievement can be traced}

back on the efforts to open and liberalize the domestic public procurement market via

standards the parties must comply with, but also with the dispute settlement system to enforce the standards. In sum, the GPA is a modern and effective legal framework, which is a prime example of what a sectoral plurilateral agreement is, how they work and which future role they can play.

But, can the sectoral plurilateral approach subject to the World Trade Organization legal framework help overcoming the institutional deadlock of the WTO? The thesis’ answer to this question bases on a legal-positivist assessment from an external perspective of the WTO legal framework subject to sectoral plurilateral agreements, which is then illustrated on the example of the Government Procurement Agreement. The WTO is currently not able to fulfil its function being a platform for its members for trade negotiation, hence the institution is deadlocked (See under B.). Reasons for this are manifold (See under B. 1.) and the deadlock causes further downsides (See under B.2.). Sectoral plurilateral agreements might help to get away from the deadlock (See under C.). An assessment of the history of the recently revised GPA (See under C. 1.) and its legal framework (See under C.2.) shows, what we can learn from this Annex 4 agreement for future sectoral plurilateral agreements. As will be seen in greater detail, the sectoral plurilateral approach allows for flexible and variable personal and subject matter scope (See under C. 2. a and b) in negotiating trade facilitation. Even though new Annex 4 agreements must pass the demanding consensus condition to be added, the thesis shows that this is not a general elimination criterion (See under C. 2. c). The GPA’s design stands for a pioneering model of how to create future sectoral plurilateral agreements in coherence with the institutional and legal framework of the WTO (See under C. 2. D). Using this approach along with the common multilateral trade negotiations, it might be

July 2017.

15 World Trade Organization, 'Agreement on Government Procurement' (Government Procurement) <https://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm> accessed 27 July 2017.

(6)

possible to overcome the institutional deadlock and to help the WTO to fulfil its functions (See under D.).

B. The Deadlock of the WTO and Its Consequences

The WTO came into being on the 1 January of 1995, and with it the single undertaking approach was introduced, which put an end to the approach à la carte.16_{This had two}

consequences, first the conduct of negotiations was determined by the idea that all topics raised during the round were negotiated simultaneously and no conclusion could be found on any topic as long as in total there are still open questions.17_{Second, every negotiator wishing}

to become a WTO Member must accept all agreements concluded in the round, or they would not be eligible to become a party pursuant to Article II:2 of the WTO Agreement.18_{This led to}

the multilateral system, where all WTO Members are bound to the same core rules, see Article II:2 of the WTO Agreement and the agreements listed in Annexes 1, 2 and 3. Still integral part of the WTO, but excluded from the multilateral system are agreements and legal instruments under Annex 4, see Article II:3 of the WTO Agreement. These are plurilateral agreements concentrating on a sector, of originally four, just the GPA and ACA are still in force, only binding Members that have accepted them, but do not create any obligations on other parties. Having 164 Members, which are bound by the multilateral (and partly

plurilateral) trade framework, the WTO holds an outstanding position in global trade. However, this position is not uncontested, since progress in trade negotiations came to halt and Members started evasive movements negotiating global trade topics outside the WTO. 1. Deadlock of the WTO

The Doha Round was launched in 2001 concluding the 4th_{Ministerial Conference in Qatar,}

with approximately 100 trade related issues on its agenda.19_{The most important, but debated}

topics are agriculture, non-agricultural market access, intellectual property, trade and

environment, special and differential treatment of developing countries and trade facilitation in general.20_{As of today, no agreement has been reached. This resulted in the fact that the}

16 VanGrasstek (n 1) 45, 48, 73. 17 ibid 49.

18 ibid. 19 ibid 414.

20 World Trade Organization, 'Briefing notes on some of the main issues of the Doha Round' (Doha

Development Agenda) <https://www.wto.org/english/tratop_e/dda_e/status_e/brief00_e.htm> accessed 27

(7)

WTO legal and institutional framework remains mainly unchanged since its establishment in 1995. Regardless of being the longest round in the history of the WTO and its ancestor, no end is in sight. In order to understand the Doha deadlock, the following timeline gives some 'highlight examples' of the negotiations:21

 In 2003 the Members missed the deadline in the agricultural and services talks and the Fourth Ministerial Conference in Cancún ended without any result;

 In 2005 the official for concluding the round was missed and discrepancies among the Members on agricultural topics lead to an unsuccessful end of the Sixth Ministerial Conference in Hong Kong;

 In 2006, after more deadlines were missed, the negotiations were suspended by Pascal Lamy, the Director-General at that time;

 In 2007 talks started again without any breakthrough and a meeting in Potsdam broke down;

 In 2008 big efforts were made to revise drafts on agricultural and non-agricultural market access, but failed through disagreement by India and the United States of America;

 Albeit the negotiations on the Agreement of Trade Facilitation were seen as a major breakthrough, the conclusion of the agreement was blocked by India’s veto in July 2014, which used its vote as a means of leverage. Nevertheless, India received

commitments and gave up its blocking position, thus the agreement entered into force on 22 February 2017.

Reasons for the persistent deadlock during the Doha-Round are numerous. Before the round started, there was a trend that negotiating trade agreements takes more time; the Kennedy

Multilateralism (n 6) 30; S Evenett, The Doha Round impasse: A graphical account [2014] 9(2) The Review

of International Organizations 143, 160 ff; J Jacobsson and M Stocchetti, The WTO under Pressure – Tackling the Deadlock in Multilateral Trade [2013] 142 The Finnish Institute of International Affairs Briefing Paper 1, 3 ff <http://www.fiia.fi/en/publication/371/the_wto_under_pressure/> accessed 27 July 2017; M Elsig and C Dupont, Persistent Deadlock in Multilateral Trade Negotiations. in Narlikar and others (eds), The Oxford Handbook on the World Trade Organization (Oxford University Press 2012) 590 ff; R Wolfe, 'First Diagnose, Then Treat: What Ails the Doha Round?' [2015] 14(1) World Trade Review 7, 23 ff; JS Odell, 'How Should the WTO Launch and Negotiate a Future Round?' [2015] 14(1) World Trade Review 117; S Woolcock 'Getting Past the WTO Deadlock: The Plurilateral Option?' [2013] 8 European University Institute - Robert Schuman Centre for Advanced Studies Policy Papers 1, 1 ff

<http://eprints.lse.ac.uk/55842/> accessed 27 July 2017.

21 VanGrasstek (n 1) 416 table 12.1; Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 111 ff; R Adlung and H Mamdouh, 'Plurilateral Trade Agreements: An Escape Route for the WTO?' [2016] WTO Working Paper ERSD-2017-03 1, 18 <https://www.wto.org/english/res_e/reser_e/ersd201703_e.pdf> accessed 27 July 2017; S Majumder, 'India and US reach WTO breakthrough over food' British Broadcasting

(8)

Round consumed 3 years, the Tokyo Round 6 years, and the Uruguay Round 7 years.22_{With a}

larger Membership than ever and the wide agenda it should have been foreseeable that negotiations will take more time than the proclaimed 4 years. From the start of the Doha Round till today, many things have changed that influenced the talks. New global player emerged that influenced the balance of powers, China, India and Brazil might be exemplary to this.23_{Until Doha there existed a dichotomy in the balance of power with the European Union}

and the United States of America on the one side, facing the rest of the world on the other side.24_{Due to this, both had decisive influence on negotiated agendas and their outcome.}25

However, in the past years emerging economies as China, Brazil and India have shortened the economic gap and at least China acts now on equal eye level. The consequence is, that the landscape of power moved towards emerging economies.26_{Another shift was how developing}

countries engaged themselves in negotiations. Due to aid programmes via the WTO, they could play a more active role in trade talks.27_{The WTO membership grew larger and more}

diverse than ever before, and the proportion of developing countries increased.28_{The 164}

Members differ in interests and priorities.29_{A big change happened in the sentiment towards}

global and free trade to a more critical and sceptical tone in domestic media and people, especially in context with the recent financial crisis in 2008.30_{Another ground for this}

position is that more politically sensitive issues are discussed. Early trade discussions aimed at negative harmonization, which means tackling barriers of trade, as for example at the border measures like tariff classifications.31_{With the creation of the WTO, the aspect of}

positive harmonization came into play as well, which means to stipulate specific conduct behind the border in the domestic sphere.32_{Thus, positive harmonization touches the}

regulatory space of countries and even might restrict their sovereignty, which makes these issues highly sensitive topics.33

22 VanGrasstek (n 1) 305.

23 Hoekman, Supply Chains, Mega-Regionals and Multilateralism (n 6) 7; Van den Bossche and Zdouc (n 3) 1517.

24 Wolfe (n 20) 20 ff; Van den Bossche and Zdouc (n 3) 1517. 25 ibid.

26 ibid.

27 Van den Bossche and Zdouc (n 3) 179, 234; Odell (n 20) 119. 28 Van den Bossche and Zdouc (n 3) 179, 234.

29 P Low, 'WTO Decision-Making for the Future' [2011] World Trade Organization Staff Working Paper ERSD-2011-05 1, 1 <https://www.wto.org/english/res_e/reser_e/ersd201105_e.pdf> accessed 27 July 2017. 30 Van den Bossche and Zdouc (n 3) 180.

31 V Heiskanen, 'The Regulatory Philosophy of International Trade Law' [2004] 38(1) Journal of World Trade 1, 2 and 14; D Leebron, 'Claims for Harmonization: A Theoretical Framework' [1996] 27 The Canadian Business Law Journal 66, 68 ff.

32 Heiskanen (n 31) 5 ff and 14. 33 ibid 16 ff.

(9)

Even though the context, in which the Doha Round takes place, changed over the time, however, the main reason for the blocked talks is the combination of exogenous and endogenous factors: clashing interests on the one hand, and the institutional single

undertaking approach on the other hand.34_{From the start on, the very kind of a chosen modus}

is decisive whether a positive outcome in negotiations is more likely or not. It has been shown, that institutionalised consensus finding approaches like the single undertaking are less suitable to reach an agreement, diverging from that, majority voting is more likely coming to an agreement.35_{Pursuant to the single undertaking approach, that was chosen in the Doha}

Round again, it always has been possible for a Member to block the whole process with its negative vote.36_{Interests with more than 160 negotiating parties are diverse, and almost each}

single issue negotiated is affected by unilateral interests.37_{Thus, negotiations are vicious, even}

more the single undertaking gives negotiators’ votes leverage to bargain. However, it can still be separated between two big blocks of different interests, on the one side stronger or already emerged economies, on the other side weaker, still developing economies.38_Among

developing countries there was growing disappointment sensible, due to high hopes the Doha Development Agenda would serve their development interests. Yet, they were proven wrong, since negotiations drifted away from its formerly development goals.39_{Consequently,}

developing countries started to insist on their position in negotiations, bargaining their vote against commitments, favoured by the single undertaking and the cheap costs of blocking the negotiations.40_{Altogether, the context shows that the Doha deadlock sources on diverse}

reasons, although it is mainly favoured by contradicting interests in combination with the single undertaking approach. Thus, the multilateral single undertaking approach is the reflection of the weak decision-making system of the WTO.

However, there have been alternative attempts to circumvent the shortcomings of the multilateral consensus based single undertaking in the time between the Uruguay and Doha Round.41_{So called critical mass agreements (CMA) were negotiated, which are plurilateral in}

the specific sense of WTO jargon and consist of a 'critical mass' of parties, though they shared

34 Wolfe (n 20) 8 ff.

35 Elsig and Dupont, 'Persistent Deadlock in Multilateral Trade Negotiations' (n 20) 592. 36 Van den Bossche and Zdouc (n 3) 177, 179 ff.

37 ibid 179. 38 Odell (n 20) 126.

39 Elsig and Dupont, 'Persistent Deadlock in Multilateral Trade Negotiations' (n 20) 593. 40 Hoekman, Supply Chains, Mega-Regionals and Multilateralism (n 6) 7, 32; Odell (n 20) 126. 41 VanGrasstek (n 1) 307.

(10)

the commitments on a most-favoured-nation basis with the WTO membership.42_{Despite, this}

approach comes with a negative side-effect called free-riding by non-parties. Free-riding means that non-parties benefit from the commitments made under the CMA via the most-favoured-nation system, albeit the agreement’s limitations and obligations do not bind them.43

Thus, non-parties have no incentive to join the CMA. But just with a large membership CMAs become effective and free-riding less detrimental.44_{Finally, the Doha Round turned}

back to the multilateral consensual single undertaking approach, as the CMA approach was not sufficient to fix the multilateral shortcomings.45

2. Consequences of the Deadlock

The Doha Round and its deadlock created an atmosphere of frustration and resignation, it took all the diplomatic efforts of the persons involved, to keep the negotiations going. But despite all endeavours, there was a significant pattern in the last years to negotiate trade issues outside the WTO and concluding PTAs.46_{PTAs are not entirely new, the average WTO Member is}

party to 13 PTAs.47_{The largest plurilateral PTAs on deeper regional integration are the North}

American Trade Agreement, Southern Common Market (MERCOSUR) and the Association of Southeast Asian Nations (ASEAN) Free Trade Area Agreement and the European Union.48

Since there had been an impasse negotiating trade of services during the Doha Round, the number of PTAs covering services rose from 4 in 2001 to almost 120 in 2014.49_{In 2016, the}

total number of PTAs that have been notified to the WTO comprised of 423 and in 2017 of 445 agreements.50_{Furthermore, countries commenced negotiations of a new type of PTAs, so}

called mega-regionals. The difference to former PTAs is, that parties are not located in the

42 ibid; Odell (n 20) 125; BM Hoekman and PC Mavroidis, 'WTO ‘à la carte’ or ‘menu du jour’? Assessing the Case for More Plurilateral Agreements' [2015] 26(2) The European Journal of International Law 319, 321; Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 105; M Nakatomi, 'Plurilateral Agreements: A Viable Alternative to the World Trade Organization?' [2013] 439 Asian Development Bank Institute Working Paper 1, 11 <http://www.adbi.org/working-paper/2013/10/24/5914.plurilateral.agreements. alternative.wto/> accessed 27 July 2017.

43 Odell (n 20) 125; Hoekman and Mavroidis, 'WTO ‘à la carte’ or ‘menu du jour’?' (n 42) 322, 330, 339; Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 111; Nakatomi (n 42) 11.

44 ibid.

45 VanGrasstek (n 1) 307.

46 Hoekman and Mavroidis, 'WTO ‘à la carte’ or ‘menu du jour’?' (n 42) 324; Low (n 29) 1. 47 Van den Bossche and Zdouc (n 3) 989.

48 ibid 987; R Baldwin, Preferential Trading Arrangements. in Narlikar and others (eds), The Oxford

Handbook on the World Trade Organization (Oxford University Press 2012) 645.

49 R Adlung, 'The Trade in Services Agreement (TISA) and Its Compatibility with GATS: An Assessment Based on Current Evidence' [2015] 14(4) World Trade Review 617, 618; Hoekman, Supply Chains,

Mega-Regionals and Multilateralism (n 6) 8.

50 World Trade Organization, World Trade Statistical Review 2016 (World Trade Organization 2016) 46; World Trade Organization, 'Some Figures on Regional Trade Agreements notified to the GATT/WTO and in force' (Summary tables) <http://rtais.wto.org/UI/publicsummarytable.aspx> accessed 27 July 2017.

(11)

same region anymore, but encompass distinct parts of the globe.51_{Prominent examples are the}

Comprehensive Economic and Trade Agreement between Canada and the European Union, Trans-Pacific Partnership between more than 10 countries spread over the globe and the Transatlantic Trade and Investment Partnership between the United States of America and the European Union.

Either bilateral or plurilateral, PTAs aim to facilitating trade among its Members. The WTO accepts PTAs subject to the condition that a substantial degree of trade in goods or services must be covered, compare Article XXIV GATT and Article V GATS. This is a compromise the WTO is willing to accept. While some Members are discriminated, the PTA’s parties follow a deeper integration in their trade relations, which complies with the overall goal of the institution to facilitate free trade.52_{This construct in theory is not mirrored in practice, since}

these rules are not applied rigorous and the membership seems unwilling to contest FTAs non compliant with Article XXIV GATT.53_{Formerly, the coverage of PTAs concentrated on}

tariffs and similar barriers to trade, recently discussed PTAs deal with extensive regulatory topics.54_{Important policy issues are investment, certain subsidies, protection of the}

environment, labour standards, public procurement, distinct domestic regulation, protection of data and privacy. 55_{In addition, the way how trade is conducted changed, nowadays cross}

border supply chain productions are dominant. Therefore, one product might be affected in its production process by several different jurisdictions and domestic regulation, which creates barriers and increases the costs. There exists an interest to make differences in domestic regulation more equal and hence reducing barriers to trade. Although, since the Doha Round is blocked and these questions are of growing importance, countries commenced negotiating these issues in new PTAs.56_{The deadlock might be one explanation for the recent rise of}

PTAs, but there are more aspects. As already mentioned above, PTAs offer an alternative way for countries to conduct negotiations on new emerging topics. Further, negotiating preferential agreements can be a testing field and set a precedent in a specific field.57_{This is possible,}

51 Van den Bossche and Zdouc (n 3) 987.

52 Compare Article XXIV and the Enabling Clause of the GATT, and Article V of the GATS; Van den Bossche and Zdouc (n 3) 989.

53 T Bernauer, M Elsig, J Pauwelyn, Dispute Settlement Mechanism – Analysis and Problems. in Narlikar and others (eds), The Oxford Handbook on the World Trade Organization (Oxford University Press 2012) 498; G Mastel, 'The Rise of the Free Trade Agreement' [2004] 47(4) Challenge 41, 44; Hoekman and Mavroidis, 'WTO ‘à la carte’ or ‘menu du jour’?' (n 42) 324; VanGrasstek (n 1) 480 ff.

54 Hoekman and Mavroidis, 'WTO ‘à la carte’ or ‘menu du jour’?' (n 42) 324.

55 Hoekman, Supply Chains, Mega-Regionals and Multilateralism (n 6) 1, 61; Odell (n 20) 121.

56 Hoekman, Supply Chains, Mega-Regionals and Multilateralism (n 6) 1, 61; Van den Bossche and Zdouc (n 3) 1518; Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 104.

(12)

because talks are conducted among like-minded partners, in contrast to the WTO’s multilateral approach with 164 Members finding a consensus is much easier.58

Plurilateral agreements might be stepping stones to further multilateral agreements on the WTO level. The planned mega regional Trade in Services Agreement (TISA) might be exemplary to that, since its parties long-term goal is to incorporate it in the WTO

Agreement.59_{To realize this process, the TISA shall work in close compliance with the given}

WTO obligations.60_{However, TISA would work outside the institutional framework, which}

means it cannot use the WTO dispute settlement system. Therefore, it is not clear how compliance with WTO law shall be guaranteed. Especially, some of the negotiating parties argued strongly against a too close foundation on GATS and it is not clear whether these resentments are still existent.61_{Clear is, with TISA there will be added another regime on}

trade in services law. And the more trade rules outside the WTO framework exist, the higher the fragmentation of trade law will be, like a spaghetti bowl.62_{Thus, the global trade law}

becomes more unpredictable and less clear, and might even displace the WTO framework.63

Further, there is a general scepticism whether PTAs create or divert trade, or if they can be integrated into the WTO at a later stage.64_{This raises some concern that PTAs, especially}

mega-regionals, lead to asymmetrical global trade order.65_{For one reason, there could be a}

balkanization, which means that blocks between strong economies are created, which consequences that private actors concentrate their economic activities in-between these blocs.66_{That leave weaker regions out economically and takes away their, even small,}

political bargaining power they have in the WTO.67_{This thought seems to be confirmed by}

the fact, that the above mentioned mega regionals are exclusively negotiated between large economies. Even more, there exists the concern, whether PTA aggravates the institutional deadlock and questions the legitimacy of the WTO.68_{In Article II:1 Agreement on the}

58 Hoekman and Mavroidis, 'WTO ‘à la carte’ or ‘menu du jour’?' (n 42) 324; Hoekman, Supply Chains,

Mega-Regionals and Multilateralism (n 6) 2.

59 Adlung 'The Trade in Services Agreement (TISA) and Its Compatibility with GATS' (n 49) 619 ff; P Sauvé, 'Towards a plurilateral Trade in Services Agreement (TISA): Challenges and prospects' [2014] 5(1) Journal of International Commerce, Economics and Policy 1.

60 Adlung 'The Trade in Services Agreement (TISA) and Its Compatibility with GATS' (n 49) 639; Sauvé (n 59) 1.

61 Adlung 'The Trade in Services Agreement (TISA) and Its Compatibility with GATS' (n 49) 640. 62 Baldwin (n 48) 649 ff; Nakatomi (n 42) 6; Adlung 'The Trade in Services Agreement (TISA) and Its

Compatibility with GATS' (n 49) 639. 63 Baldwin (n 48) 647.

64 Van den Bossche and Zdouc (n 3) 989. 65 Nakatomi (n 42) 6.

66 Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 104.

67 Hoekman, Supply Chains, Mega-Regionals and Multilateralism (n 6) 32; Odell (n 20) 126. 68 Van den Bossche and Zdouc (n 3) 991.

(13)

Establishing the World Trade Organization it says that the raison d’être of the WTO was to 'provide the common institutional framework for the conduct of trade relations among its Members'. But with the distinct and large rise of negotiating PTAs outside the WTO, the Members signalise they might no longer attribute this function to the WTO.69

While the overarching function of the institution’s dispute settlement mechanism is to achieve compliance with WTO obligations, the system is depended on Members action.70_{So far, the}

system was considered to be very effective and therefore successful.71_{In theory, Article 23.1}

of the Understanding on rules and procedures governing the settlement of disputes protects the WTO system vis-à-vis other international agreements, including PTAs.72_{However, so far}

just one case was filed concerning the compliance of a PTA with Article XXIV of the GATT and the numbers of requests for dispute settlement are decreasing in the last years.73_In

contrast, the numbers of PTAs and their scope of their coverage are rising. Since the impasse on negotiating new trade rules, the coverage of WTO law has not changed since 1995. Important trade issues were discussed outside of the WTO, and therefore a large amount of trade issues will lie outside of the DSM’s jurisdiction, once the PTAs are concluded.74

Without Members taking the necessary steps to claim the violation of obligations, and the migration from the WTO to other trade negotiation foras, the DSM will be most likely undermined and the WTO remains unprotected vis-à-vis PTAs.

Albeit the existence of the WTO itself is not the goal of trade facilitation, yet the multilateral organisation is representative for the idea that trade shall be to the benefit of all.75_The

multilateral approach combined with the consensus principle ensures protection and equality across the membership, because no decision can be taken to the detriment of any Member against its will. Multilateralism and the WTO once stand for progress, that Members can create a global market hand in hand. But the rise of PTAs, especially mega regionals might lead to the foundation of building blocks, which usually work among stronger economies excluding and discriminating weaker economies. This development erodes the cohesion of

69 Elsig and Dupont, 'Persistent Deadlock in Multilateral Trade Negotiations' (n 20) 603.

70 See AO Sykes, The Dispute Settlement Mechanism: Ensuring Compliance?. in Narlikar and others (eds),

The Oxford Handbook on the World Trade Organization (Oxford University Press 2012) 560; Bernauer and

others (n 53) 497.

71 Van den Bossche and Zdouc (n 3) 422 ff. 72 ibid 288.

73 Bernauer and others (n 53) 488, 498. 74 Van den Bossche and Zdouc (n 3) 422 ff.

75 World Trade Organization, 'Overview' (What is the WTO?) <https://www.wto.org/english/thewto _e/whatis_e/wto_dg_stat_e.htm > accessed 27 July 2017.

(14)

trade law and shifts the platform for trade negotiations to multiple foras, what is diametrically opposed to multilateral idea and therefore harmful for the WTO.

The considerations above have not yet become reality, since the Doha Round is still going on and the Members participate.76_{But if the WTO takes its aims serious and wants to cope with}

being the global forum of trade facilitation, then it must find answers to these challenges.77

But little has been done. Thereby, all the signs indicate that a turnaround is in reach. Even tough countries migrated to other trade negotiation foras, they show general willingness to talk about facilitating trade.78_{Members try to find answers to recent developments on global}

markets and to integrate new policies in their trade relations. But the WTO in the state of 1995 lags behind these developments. Since these important subjects were not part of the Doha Round agenda, which is blocked by the institutional single undertaking, the institution risks losing its legitimacy and importance as the global forum of trade facilitation. However, the institution could profit from a momentum that came by recent incidents. With facing the exit of Great Britain from the European Union, the relation between both might governed by WTO law in future if they fail to conclude alternative solution. Even though this scenario is purely speculative, the discussion about it gives the WTO a new value. Anyhow, more significant is the conclusion of the Trade Facilitation Agreement that entered into force on 22 February 2017. This is the first multilateral agreement since the establishment of the WTO in 1995, that the members are still willing and able to cooperate successfully on a multilateral level.79_{Therefore, this leads to a momentum that could be used to generate positive outcomes}

in negotiating trade facilitation.

C. The WTO framework on sectoral plurilateral agreements and the GPA

The multilateral law-making system of the WTO has its shortcomings. Until now, it is impossible for the Members to bring the Doha Round to a positive outcome. Due to this, the institutional framework remains largely unchanged and traces back to 1995. In addition, the regulation of important topics stuck in consequence of the deadlock, hence countries started

76 Evenett (n 20) 144.

77 J Bacchus, A Way Forward for the WTO. in Meléndez-Ortiz and others (eds), The Future and the WTO:

Confronting the Challenges (International Centre for Trade and Sustainable Development 2012) 6;

Nakatomi (n 42) 11.

78 Hoekman and Mavroidis, 'WTO ‘à la carte’ or ‘menu du jour’?' (n 42) 319; Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 102.

79 World Trade Organization, 'WTO’s Trade Facilitation Agreement enters into force' (Trade Facilitation) <https://www.wto.org/english/news_e/news17_e/fac_31jan17_e.htm> accessed 27 July 2017.

(15)

negotiating trade issues externally, which might undermine the legitimacy of the WTO system. To preserve the institution from this fate, the sectoral plurilateral approach might come into play. Already in 2004, the Sutherland Report suggested plurilateral options under the WTO roof as a solution to overcome the deadlock, which incipient started to materialise in the Doha Round.80_{This claim was repeated frequently by other authors over the time until}

today.81_{The main proposition of authors suggesting the use of the sectoral plurilateral}

approach is condensed to the idea, that content reduced agreements in smaller groups among like-minded partners are easier to conclude as trade big trade rounds.82_{Emerging PTAs show}

that countries are willing to make trade commitments. To take advantage of this factor, the multilateral approach was not effective in the recent past, due to the Doha deadlock. The alternative way would be sectoral plurilateral negotiations, which combine the variable geometry and other advantages of PTAs. Even though sectoral plurilateral agreements might lead to a fragmentation of the international trade law system, it still must comply with other WTO law and is open to the dispute settlement body.83_{Therefore, the disadvantages of PTAs}

are not shared, which is the balkanization and the erosion of a coherent, clear, and predictable trade law framework.84_{Sectoral plurilateral agreements are open to accession, but remain}

elsewise a distinguishable system, like rooms under the roof the WTO, allowing Members to vary their speed of trade facilitation.85_{Plurilateral means, not every Member participates the}

negotiations or the final agreement, but can join the club all the time. Further, the agreement is part of the WTO legal framework, but does just put binding obligations on the signatories to the agreement, see Article II:3 WTO Agreement. To prevent Members from free-riding, as it was the case with critical mass agreements as shown above, the sectoral plurilateral

agreements benefit are not shared with non-members on a most favoured nation basis.86

An exemplary sectoral plurilateral agreement is the GPA, which was implemented as an Annex 4 to the WTO Agreement through the Uruguay Round. Since its implementation, no further sectoral plurilateral agreement has been negotiated or established. Therefore, to understand how sectoral plurilateral agreements are concluded, and to which extent they can contribute to trade facilitation, the GPA might be the best working example for a sectoral 80 P Sutherland, The Future of the WTO – Addressing institutional challenges in the new millennium (World

Trade Organization 2004) 66.

81 Lawrence (n 9) 834; Hoekman, Supply Chains, Mega-Regionals and Multilateralism (n 6) 41; Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 115 ff.

82 Hoekman, Supply Chains, Mega-Regionals and Multilateralism (n 6) 2.

83 Sutherland (n 80) 66.

85 Hoekman and Mavroidis, 'WTO ‘à la carte’ or ‘menu du jour’?' (n 42) 320. 86 Hoekman and Mavroidis, 'WTO ‘à la carte’ or ‘menu du jour’?' (n 42) 321.

(16)

plurilateral agreement.87_{In the following sections, it will be assessed on the case of the GPA,}

what sectoral plurilateral agreements pursuant to the WTO framework are and what they most likely can achieve as an alternative to the multilateral path.

1. The way to the GPA

There have been efforts to regulate government procurement multilaterally, but the progress was little and so procurement remains excluded from the scope of the WTO agreements until today.88_{During the Tokyo Round, for the first time some progress was made on negotiating}

government procurement on a global level, but still no multilateral solution was found.89

Instead, the Tokyo Round Code on Government Procurement was concluded in 1979, which was a plurilateral agreement between ten signatories.90_{The coverage was substantially low,}

but still established the basis for the later GPA.91_{Signatories to the Tokyo Round Code on}

Government Procurement, were bound by the agreement’s text to open their procurement markets, if the volume of the tender exceeds a specific threshold, causing public procurement could no longer being used as a mean of policy tool.92_{This approach was later adopted by the}

GPA, which was negotiated during the Uruguay Round, compare Article I:1 and 4 GPA 2012.93_{Since its establishment in 1994, the GPA was revised recently with effect to March}

2014, estimated US$ 1.7 trillion per year have been opened to international competition.94

This achievement can be traced back to the efforts to open and liberalize the domestic public procurement market and the ongoing extension of its scope and membership.95_{As of today, an}

average country spends 10-15 percent of its annual gross domestic product in public procurement, but just 47 WTO Members are signatories to the GPA, which shows the vast economic potential of this market.96

87 Compare argumentation in I. Introduction and the same conclusion in BM Hoekman, Proposals for WTO Reform: A Synthesis and Assessment. in Narlikar and others (eds), The Oxford Handbook on the World

Trade Organization (Oxford University Press 2012) 759.

88 Compare Article III: 8a of the GATT and Article XIII:1 of the GATS; S Arrowsmith and RD Anderson,

The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011)

6, 14. 89 ibid 14.

90 Austria, Canada, the European Community with six members, Finland, Hong Kong, Japan, Norway, Singapore, Switzerland and the United States of America, see Arrowsmith and Anderson, The WTO Regime

on Government Procurement (n 88) 14.

91 ibid. 92 ibid 15.

93 ibid 17; Hoekman and Mavroidis, 'WTO ‘à la carte’ or ‘menu du jour’?' (n 42) 322.

94 World Trade Organization, 'Agreement on Government Procurement' (Government Procurement) <https://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm> accessed 27 July 2017.

95 Arrowsmith and Anderson, The WTO Regime on Government Procurement (n 88) 5.

96 World Trade Organization, 'WTO and government procurement' (Government Procurement) <https://www.wto.org/english/tratop_e/gproc_e/gproc_e.htm > accessed 27 July 2017.

(17)

2. Assessment of the WTO framework and the GPA

In 1994, the WTO and the GPA came into being, which means that there has not been a WTO agreement to rely on and how to establish sectoral plurilateral agreements. Article II:3 of the WTO Agreement incorporates pre-existing plurilateral agreements like the GPA into the WTO framework as an Annex 4 to the WTO Agreement. However, Article III:1 officially declares, that the organization 'shall also provide the framework for the implementation, administration and operation of the Plurilateral Trade Agreements. ' First, the provision governs that the WTO is generally open to new sectoral plurilateral agreements; and second, the it shall give assistance to the foundation of such agreements. Although, no use was made of this possibility until today, it remains the first determination that future agreements as the GPA are possible under the WTO framework.97

a. Personal scope

Subject to the personal scope of sectoral plurilateral agreements, the signatories consist of some but not all the WTO Members, see Article II:3 WTO Agreement. This is a highly flexible approach, since not interested Members do not participate, and like-minded Members work together.98_{The WTO Agreement itself makes no statement on accession to sectoral}

plurilateral agreements, but delegates this subject to such agreements itself pursuant to Article XII:3 WTO Agreement. But open access is generally granted, since sectoral plurilateral agreements aims at growing larger and become a multilateral agreement later. However, the WTO Agreement does not stipulate the requirement, that Members wishing to access must be given access.99_{Moreover, the accession can be made depended on specific requirements.}

Anyhow, this entails the risk, that such requirements could be misused to construct exclusive clubs, which do not allow the accession of specific members that are not welcome due to some reasons. Therefore, it was discussed to make the open access criterion more robust and obligatory.100_{Nevertheless, an obligatory and strict open to all approach would open the gates}

for tactical behaviour by single signatories and might lead to the same stalemate as in the

97 Hoekman, 'Proposals for WTO Reform' (n 87) 759.

98 ibid 760; R Anderson and AC Müller, 'The Revised WTO Agreement on Government Procurement (GPA): Key Design Features and Significance for Global Trade and Development' [2017] WTO Working Paper ERSD-2017-04 1, 15 <https://www.wto.org/english/res_e/reser_e/ersd201704_e.pdf> accessed 27 July 2017.

99 Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 113 ff. 100 ibid.

(18)

Doha Round. Though, the WTO Agreement offers enough leeway for sectoral plurilateral agreements to make the accession contingent under certain conditions only, as might be that all provisions of the agreement will be accepted and no signatory will use its voting power arbitrarily to block the progress. Yet, accession of new signatories is very important for sectoral plurilateral agreements, since its overarching goal is to facilitate and spread its regulated subject and finally being incorporated as a multilateral agreement to the WTO framework. Therefore, it is decisive, that the sectoral plurilateral allows broadly the accession of new signatories subject to the condition, new parties to not undermine the efforts of the agreement.

The starting signatories of the GPA were Canada, the European Union with its fifteen members, Israel, Japan, Norway, Switzerland, and the United States of America.101_Article

XXIV:2 GPA 1994 opened the agreement to every WTO Members wishing to access 'on terms to be agreed between' the signatories and the prospect. What exactly to understand under these terms, was not explained further. A decision by the Committee on Government Procurement, the institutional body, set the procedure for accession. Hereafter, a working party should be established, which examines the coverage offer wit all relevant information by applicants provided to the Director-General of the WTO.102_{However, such a working party}

never existed, but the accessions were negotiated bilaterally between the applicants and each signatory.103_{Contingent on a consensual vote of the membership, the agreed terms of}

accession are deposited by the Director-General of the WTO and the agreement becomes binding on the thirteenth day, see Article XXIV:2 GPA 1994. This procedure was performed several times, so the membership today consists of 47 parties.104_{Exemplary for the flexibility}

of this approach is the case of Hong Kong and Singapore, which were part during the

negotiations, but then decided not to sign the agreement.105_{In 1997, a year after the agreement}

came into effect, they both joined.106_{The recent regime of the revised GPA 2012 is not much}

different from the above mentioned, which means that the applicants still must provide information in its accession requests, on which basis negotiations between the parties and the

July 2017.

102 S Arrowsmith, Government Procurement in the WTO (Kluwer Law International 2003) 93; Arrowsmith and Anderson, The WTO Regime on Government Procurement (n 88) 67.

103 Arrowsmith, Government Procurement in the WTO (n 102) 93.

104 ibid 92; World Trade Organization, 'Parties, observers and accessions' (Government Procurement:

Agreement on Government Procurement) <https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm>

accessed 27 July 2017.

105 Arrowsmith, Government Procurement in the WTO (n 102) 92. 106 ibid.

(19)

applicants were held, see Article XXII:2 GPA 2012.107_{Both, the GPA 1994 and 2012,}

stipulate the condition that every applicant ensures its domestic law is compliant with the GPA’s provisions, see Article XXIV:5(a) GPA 1994 and Article XXII:4 GPA 2012. Thus, the GPA shows how sectoral plurilateral agreements combines the open access approach with conditions on accession, which safeguards that the agreement’s membership remains

homogeneous and like-minded. In face of this burden, it is remarkable to notice, that currently 29 WTO Members are observers and are interested in accessing the agreement.108_{Ten of these}

observers already are in the process of accession, as described above, these are Albania, Australia, China, Georgia, Jordan, Kyrgyz Republic, Oman, Russian Federation, Tajikistan, and the former Yugoslav Republic of Macedonia.109_{While already the accession of some}

weaker economies in the last years shifted the agreement from an originally developed club to a more balanced composition, the access of further Members will 'multilateralize' the

agreement even more.110

As same as the access, the WTO Agreement assigns the issue of withdrawal from a sectoral plurilateral agreements to be regulated by the agreement itself, see Article XV:2 WTO Agreement. The GPA 2012 regulates this issue in its Article XXI:12, whereupon the party that wishes to withdraw shall hand the Director-General of the WTO a written notice and the withdrawal will take effect 60 days later. But any party has the right to request for an

immediate meeting of the Committee, to discuss the circumstances of the withdrawal, which might lead to a stay concerning the requesting party.

b. Content Scope

The WTO Agreement does not say much about the subject-matter dealt in sectoral plurilateral agreements.111_{While agreements must not violate any existing WTO rule, the range of issues}

can vary from single issues to more comprehensive bundles.112_{The GATT’s and GATS’ most}

favoured nation rules clearly shrink down the margin of possible issues.113_{So, sectoral}

plurilateral agreements will usually concentrate on fields, that were not governed by any

107 Arrowsmith and Anderson, The WTO Regime on Government Procurement (n 88) 67 n 21.

July 2017. 109 ibid.

110 Arrowsmith and Anderson, The WTO Regime on Government Procurement (n 88) 61.

111 Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 106; Hoekman and Mavroidis, 'WTO ‘à la carte’ or ‘menu du jour’?' (n 42) 325.

112 Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 104. 113 ibid 101, 106.

(20)

WTO agreements so far. This was the case with the GPA and public procurement, which is excluded from the scope of GATT and GATS.114_{But it is even possible, to create sectoral}

plurilateral agreements on fields, which are already subject to the existing WTO law.115

However, non-members must not be discriminated and shall given equal treatment based on the WTO commitments, sectoral plurilateral agreements can go further and broaden their commitments. This way, deeper integration is made contingent upon membership to the agreement on the one side, though, the benefits need not to be shared with non-members, because no WTO commitment was violated.116_{Next to areas already subject to WTO}

agreements, suitable issues for the sectoral plurilateral approach could be topics that are stalemated in the Doha Round, or future topics, which have not been discussed yet on the WTO level. In this context, future topics might be investment, competition, green energy, electronical commerce, global supply chains, currency practices, services, intellectual

property, regulatory harmonization, standards and technical regulations, trade facilitation and product safety.117

The GPA 1994 and 2012 works on the trade area of public procurement and aim to open this market among its parties. This is made in a two-folded way: Firstly, the text of the agreement contains rules and general principles, which shall guarantee fair, open and transparent

procurement procedures.118_{Secondly, through commitment schedules made by the parties, the}

coverage of the rules is governed. Just those activities listed in the schedules fall under the provisions of the agreement’s text and can be enforced.119_{Article IV GPA 2012 stipulates that}

no measure subject to covered procurement activities shall be accorded in a discriminatory manner, nor in regard to nationals or other parties. This non-discrimination clause is exclusive for signatories to the GPA, which other WTO Members can not invoke themselves.120_{This is}

an effective measure to prevent the phenomena of free-riding, as its was the case with critical-mass agreements already mentioned above. Furthermore, just parties to the agreement are entitled to benefit from the commitments under the GPA. The old GPA 1994 contained in Article XVII a provision, which exceptionally allowed to pass the benefits to non-parties if

114 ibid 101, 106; Arrowsmith, Government Procurement in the WTO (n 102) 49 ff, 61 ff,78 ff, 83 ff; K Dawar, 'Government Procurement in the WTO: A Case for Greater Integration' [2016] World Trade Review 15(4) 645, 653 ff.

115 Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 106. 116 ibid.

117 Bacchus (n 77) 7; Nakatomi (n 42) 14 ff.

118 Arrowsmith and Anderson, The WTO Regime on Government Procurement (n 88) 17 ff. 119 ibid.

(21)

they voluntarily met the GPA’s standards of transparency.121_{However, this clause was}

dropped during revising the GPA. In practice, it was difficult to proof whether the conditions were met or not and thus, the clause did not have a practical impact.122_{But even this did not}

work in the context of government procurement, such a conditional opening clause might be a promising approach to attract non-parties to comply with regulatory rules under the

agreement. Hence, the regulatory system of a closed sectoral plurilateral agreement spreads over the border of its membership and 'multilateralize' the field.

Admittedly, not every WTO Member will be able to participate in negotiating sectoral plurilateral agreements, this is usually the case for weaker economies lacking the financial and organizational resources.123_{To make them able engaging equally in the discourse of}

negotiating sectoral plurilateral agreements, they should be supplied with assistance subject to economic and organizational means. This is not to be confused with assistance to access or preferential treatment, because at this stage the sectoral plurilateral agreement already exists, while during negotiations the agreement is not yet in force. The easiest way to provide developing countries with assistance might be the WTO platform, which already has a working programme to give technical assistance to developing countries.124_{Among the}

provisions in the WTO agreements containing special and differential treatment, the technical assistance aims to further integrate weaker countries equally into the WTO community.125

Integration in that sense means, that Members shall become able to perform their obligations and use the benefits the membership comes with, hence the WTO assists its developing Members with know-how, financial and organizational means under the theme 'Aid for Trade'.126_{Enlarging the programme’s funds and expressly supporting the negotiation on}

sectoral plurilateral agreements could help to generate greater acceptance towards them. The assistance could be made contingent exclusively on negotiations for agreements inside the WTO, which would leave PTAs out and developing countries would be encouraged to open themselves towards the sectoral plurilateral approach. However, the GPA 1994 was concluded solely among developed countries, which might proof the exclusionary effect of being a weaker economy to such negotiations.127_{Still, its aspiration is to include and help developing}

countries, which is expressed in the GPA’s 1994 and 2012 preamble. The accession of some

121 ibid 97. 122 ibid.

123 Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 113. 124 Van den Bossche and Zdouc (n 3) 98, 194.

125 ibid 175. 126 ibid 191.

(22)

weaker economies commenced a slow-moving shift in the composition of the membership to include more developing countries. The GPA 1994 already assisted developing countries with special and differential treatment, even if the were no signatories to the agreement.128_{Due to}

the revision this framework subject to development issues was enhanced and evolved largely, so now developing countries are assisted in their efforts to access the GPA, compare Article V:1 GPA 2012. In addition, they enjoy further special and differential treatment once being a signatory, pursuant to Article V GPA 2012.129_{Hereafter, developing countries are granted}

transitional measures that opens access to markets and still protect their developing market.130

They are given more time upon accession to make their legal system compliant with the GPA obligations and coverage.131_{In total, this system offers more flexibility towards weaker}

economies, which helps them engaging equally in the context of the GPA and hopefully attracts more developing countries to access the GPA in the future.132_{The GPA 2012}

framework shows, that it is possible in sectoral plurilateral agreements to give weaker economies incentives for accession, through putting them in the position where they can engage themselves equally among more developed members. This finally might lead to a more diverse and multilateral membership.

Cases in which sectoral plurilateral agreements shall not be applicated between its signatories are governed through provisions of the agreement itself, pursuant to Article XIII:5 of the WTO Agreement. During the negotiations of the agreement, countries can specify the situations in which they do not want to be bound by the agreement. The GPA 2012 follows a diverse and flexible approach and divides between several exclusionary options.133_{First, no}

party to the GPA shall be prevented of taking actions that are necessary for the protection of its essential security interests, compare Article III:1 GPA 2012. Further, every party can take measures that are necessary to protect general interests such as public morals, order or safety, human, animal or plant life or health, intellectual property or relating to goods or services of persons with disabilities, philanthropic institutions or prison labour, see Article III:2 GPA 2012. Both provisions are abstract exception clauses, which retains parties’ policy space in specific situations. A more individual and concrete exclusion of application is offered by the commitment schedules, where parties can exclude certain activities. In-between, there exists

129 Arrowsmith and Anderson, The WTO Regime on Government Procurement (n 88) 339. 130 ibid 353.

131 ibid. 132 ibid.

133 Dawar (n 114) 645, 649 ff; Anderson and Müller, 'The Revised WTO Agreement on Government Procurement (GPA)' (n 98) 18 ff and 22.

(23)

another option, which disqualify specific activities generally, except the signatories included them to their schedules, see Article II:3 GPA 2012. However, all activities with an estimated value below the thresholds are fall out the coverage, see Article II:2(c) of the GPA 2012. The GPA system on application is very complex and has grown over the years, but offers

individual solution for every signatory.

How to proceed with reservations subject to provisions shall be determined by the specific sectoral plurilateral agreements pursuant to Article XVI:5 WTO Agreement. Reservations might be a variable approach to get as many parties as possible to sign an agreement with controversial provisions, which elsewise would not would have been concluded.134_{A party}

that enters a reservation successfully will not be bound hereby, but the rest of the agreement. Turning to the GPA 1994 and 2012, in neither case reservations are possible, see Article XXIV:4 GPA 1994 and Article XXII:3 GPA 2012. But reservations are just one approach under several to establish flexibility for countries engaging in negotiations of agreements. As seen previously, provisions on non-application of the agreement offer much flexibility to find individual solution, as it is the case for signatories of the GPA. The WTO Agreements give its Members free rein to choose the adequate approach.

The same is true for amendments to sectoral plurilateral agreements, which shall govern themselves how amendments shall be done, according to Article X:10 WTO Agreement. The GPA 2012 is an amendment to the GPA 1994, and is a good example how sectoral plurilateral agreements can be a vibrant instrument to regulate a trade area. Article XXIV:9 GPA 1994 says that amending the agreement, the Committee establishes the procedure, which the parties must follow in accordance. The amendment enters in force, once the parties have accepted it unanimously. The revised GPA 2012 has changed the system slightly. Article XXII:11 GPA 2012 now constitutes, that the decision to amend the agreement must be taken by consensus. However, the actual amendment enters into force upon acceptance by parties, which is achieved by a minimum quota of two thirds of the parties. Alternatively, the amendment is binding upon all parties by acceptance of two thirds of the parties, if the Committee

previously has determined that the amendment will not alter the rights and obligations of the parties. This system secures the agreement’s capability to progress, thus it cannot be blocked by the negative voting of single parties, especially when no far-reaching amendments are concerned.

(24)

c. Procedural Aspects

Subject to procedural aspects, Article X:9 WTO Agreement stipulates a very strict requirement establishing sectoral plurilateral agreements, the exclusive consensus of the Ministerial Conference is needed, which means in fact the consensus by the whole

membership. However, it is not further explained what to understand with this expression. In practice, the interpretation of the WTO Agreement follows the standard of treaty

interpretation displayed in Articles 31 -33 of VCLT.135_{Hereafter, treaties shall be interpreted}

in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose, see article 31 (1) VCLT. The ordinary meaning of 'consensus' is somewhat vague, as it means that a decision is commonly accepted among a group.136_{Consequently it remains unclear, whether every member of the group must}

vote positively or just the absence of any negative veto is sufficient. 'Exclusively' in conjunction with 'consensus' means that consensus is the only condition and no other

mechanism is possible.137_{Turning to the context, in Article IX:1 WTO Agreement stipulates}

that the decision-making of the WTO underlies the same consensus principle already used under the GATT 1947. Footnote 1 to the WTO Agreement refers to this clause and clarifies, that consensus is understood as the lack of a formal objection by any present Member at the meeting. The same approach is applied in the context of technical barriers to trade, compare Article 1.1 of the Agreement on Technical Barriers to Trade in conjunction with paragraph 1.7 of the ISO/IEC Guide 2:2004. This shows, that commonly in the WTO context the consensus principle is understood as long as no party objects (formally) to the issue at hand, consensus is assumed. Nevertheless, the object and purpose for such a common understanding lies in the multilateral idea, that every Member approves the law without any opposition and no Member can be bound by any agreement against its will.138_{Following the principle of}

argumentum a maiore ad minus, it might be deducted that the consensus condition for sectoral plurilateral agreements in Article X:9 WTO Agreement should be read in consistence with the

135 Vienna Convention on the Law of Treaties (23 May 1969) 1155 UNTS 331; LA Gruszczynski, Customary Rules of Interpretation in the Practice of WTO Dispute Settlement Bodies. in Nollkaemper and Fauchald (eds), The Practice of International and National Courts and (De-)Fragmentation of International Law (Hart Publishing: 2012) 55.

136 Cambridge University Press, 'Consensus' (Cambridge Dictionary) <http://dictionary.cambridge. org/dictionary/english/consensus> accessed 27 July 2017.

137 Cambridge University Press, 'Exclusive' (Cambridge Dictionary) <http://dictionary.cambridge. org/dictionary/english/exclusive> accessed 27 July 2017.

(25)

consensus law making principle in Article IX:1 WTO Agreement.139_{This is, because}

multilateral agreements are binding at all Members, and therefore contain a greater

proposition than compared with the weaker proposition of sectoral plurilateral agreements, which only bind participating Members. Hence, from a logical perspective it is given to read the less contentful proposition in coherence with a stronger proposition, like here the

consensus condition in Article X:9 with Article IX:1 of the WTO Agreement.

Having in mind, that the Ministerial Conference consists of all 164 WTO Members, the consensus condition in Article X:9 WTO Agreement is a high burden. The situation is aggravated by the fact, that Members tend to use their vote tactically. This means, that they bargain their vote in return for a benefit, even the outcome of their vote does not affect them. This already happened in the case of India blocking the Trade in Services Agreement in July 2014.140_{Thus, the consensus rule is prone to abuse of votes and the vast majority of}

commentary is of the view, the rule must be changed to allow the sectoral plurilateral approach to work efficiently.141_{Though, amending the WTO Agreement to relax the}

consensus rule could be done by replacing it through a majority voting system or make the acceptance contingent upon a specific share of the world market.142_{Pursuant to Article X:2 of}

the WTO Agreement, amendments to the provisions of this specific Article the WTO Agreement take effect upon acceptance by all Members. This is a stronger requirement than the consensus condition of Article X:9 WTO Agreement, because every Member must confirm and the sole lack of objection is not sufficient. Unfortunately, it seems more unlikely that Members agree collectively to amend the consensus condition, rather than reaching a consensus to add a sectoral plurilateral agreement as an Annex 4 to the WTO Agreement. This is due to the reservation of some Members opposed to sectoral plurilateral agreements, especially the United States of America and a majority of developing countries fear to be outnumbered, while most developed countries tend to be more open to the sectoral plurilateral approach.143_{Thanks to the consensus condition Members have a bargaining power, because}

they can always block a new Annex 4. This would be not the case anymore, if the consensus

139 See also VanGrasstek (n 1) 200 ff; P Draper and M Dube, 'Plurilaterals and the Multilateral Trading System' [2013] International Centre for Trade and Sustainable Development E15Initiative Think Piece 1, 3

<http://e15initiative.org/wp-content/uploads/2015/02/E15_RTA_Draper-Dube_FINAL.pdf> accessed 27 July 2017; Tijmes-Lhl (n 138) 418.

141 Tijmes-Lhl (n 138) 437; Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 112; Nakatomi (n 42) 12; Hoekman, 'Proposals for WTO Reform' (n 87) 749-53; Adlung and Mamdouh, 'Plurilateral Trade Agreements' (n 21) 18.

142 Hoekman and Mavroidis, 'Embracing Diversity' (n 9) 111. 143 ibid; Woolcock (n 20) 3; Odell (n 20) 126.

(26)

condition were replaced by a voting or share of world market system. Thus, in theory possible and desirable, an amendment of the consensus condition would come at high costs to the detriment of Members’ bargaining power.

However, achieving consensus among the WTO members to add a new sectoral plurilateral agreement might be strenuous and even seem impossible due to the impasse in trade

development, but it was possible in the past already. The GPA 1994 just could have been added to the WTO Agreement by consensual vote of all parties on the Uruguay Round, which happened in Marrakesh in April 1994.144_{The GPA’s history shows exemplary, how countries}

can contribute to the facilitation on a highly controversial trade topic. Formerly government procurement was used as a means of protection, the efforts made by Tokyo Round Code on Government Procurement paved the way for a change in this policy.145_{The very narrow scope}

of the Tokyo Round Code on Government Procurement was widened through the GPA 1994, in substantial but also personal aspects.146_{Through the revision the signatories were}

successful in widening the GPA’s scope again, having with the GPA 2012 the most

demanding framework on government procurement in substantial and personal respect.147_As

seen, the evolution of the GPA 2012 was made by one step after the other, starting on a basic and very low level, to evolve to a demanding framework. The minimal content ensured the necessary consensus, while the time and ongoing negotiations helped to make progress. In the context of the consensus condition, the approach starting with a minimum content that can be enlarged on a later stage might be the most promising for future sectoral plurilateral

agreements and should be adopted by parties interested in negotiations.

Even though very prominent, the GPA is not the only example for a successful achievement of a consensus in the last years. Most recently, the Agreement on Trade Facilitation came into being on the 22 February 2017 after two-thirds of the WTO membership ratified it.148_This

multilateral agreement was a long-term negotiation process, that started with the talks at the 9th_{Ministerial Conference in Bali under the Doha agenda and followed by the Decision of the}

Ministerial Conference to negotiate the Agreement on Trade Facilitation.149_{As the Ministerial}

145 Arrowsmith and Anderson, The WTO Regime on Government Procurement (n 88) 3, 14. 146 ibid 14, 17.

147 ibid 20 ff.

148 World Trade Organization, 'Trade Facilitation' (Trade Topics) <https://www.wto. org/english/tratop_e/tradfa_e/tradfa_e.htm> accessed 27 July 2017.

149 World Tarde Organization, Ministerial Conference – Ninth Session, Ministerial Decision Document WT/MIN(13)/36, WT/L/911, 11 December 2013 <https://www.wto.org/english/thewto_e/

Can Sectoral Plurilateral Agreements Overcome the Institutional Deadlock of the World Trade Organization? : Assessing the WTO framework and the Government Procurement Agreement

Can Sectoral Plurilateral Agreements Overcome the Institutional Deadlock

of the World Trade Organization?

–

Table of contents