THAILAND: CONCILIATING A DISPUTE ON TUNA EXPORTS TO THE EC

MANAGING THE CHALLENGES OF WTO PARTICIPATIONCASE STUDY 40

PRESENTED BY : SYED MIR AHMER ALI (16943)

COURSE : EEM 709 TRADE & ENVIRONMENT

OVERVIEW OF PRESENTATION

• CASE SUMMARY• TUNA FISH • THAILAND’S EXPORT PROFILE• CASE BACKGROUND• CLIMATE OF NEGOTIATION• SETTLEMENT PROCESS• CRITICISIM ON SETTELMENT• LEARNING OUTCOME• TRADE AND ENVIORNEMENT NEXUS

TUNA FISH - CHICKEN OF THE SEA• Tuna is arguably one of the most

well-known and abundant of fish, found in large quantities at supermarkets and convenience stores around the world,

• Easy accessibility and popularity translates into big business, thriving markets and fierce competition.

• CANNED TUNA - an important source of income and an industry of serious economic significance

TYPE OF TUNA FISH

Source : http://www.atuna.com/index.php/en/tuna-info/tuna-species-guide

THAILAND’S EXPORT PROFILE• 3RD largest producer/exporter of canned tuna in World

• 31% of Global share of volume of exports

• Thailand’s biggest export destinations are ;– United States of America – European Community (EC) – Canada

• Thailand industry is capable of considerably better performance given more equitable access to the EC market.

TUNA DEPENDNET ECONOMY

• Thailand’s tuna industry is export-oriented, with almost all its production intended for overseas markets, foreign import restrictions and regulations wield considerable impact on its growth and overall dynamism. This is where Thailand encountered difficulties with one of its major TRADING PARTNERS — the EC.

CASE SUMMARY

THAILAND WAS FACING AN INHIBIT TARIFF OF 24% WHILE ACP COUNTRIES

WERE ENJOYING ZERO TARIFFS ON TUNA IMPORTS WHICH WAS PROVING

DETRIMENTAL TO THE LEGITIMATE ECONOMIC INTERESTS OF THAILAND AS A

MAJOR PRODUCER OF CANNED TUNA

ACP = African, Caribbean and Pacific states

BACKGROUND OF EC-ACP AGREEMENTEC-ACP RELATIONSHIP DATES BACK ALMOST FORTY YEARS TO 1963 • During this time a number of agreements were produced

through which the EC granted ACP countries trade benefits on a number of products, including canned tuna.

• For CANNED TUNA ACP countries had been enjoying free access to the EC market for almost thirty years prior to the ACP Agreement of 2000.

• By the mid-1990s, Thailand’s tuna industry was increasingly feeling the negative impact of this preferential trading arrangement, as reflected in revenue, investment and opportunity losses.

FAVOURABLE CLIMATE• With the formal establishment of the WTO in 1995 and the entry

into force of the GATT 1994 rules came a more favorable climate in which to address such preferential or discriminatory trading relationships in the international arena.

• One of the basic principles of the WTO legal framework is the MFN (Most – Favored Nation) principle, which states that

‘’All WTO Members are bound to grant to each other treatment as favorable as they give to any other Member in

the application and administration of import and export duties and charges’’

FAVOURABLE CLIMATE• A tariff concession made to one Member must be extended

immediately and unconditionally to all other Members of WTO .

• Thailand challenge the discriminatory tariff were in place with respect to Legal framework in place.

CLIMATE IN FAVOUR OF THAILANDDOHA MINISTERIAL CONFERENCE (9-13 NOVEMBER 2001)• A give-and-take situation presented itself. The EC-ACP Agreement

could not be extended without the consensus of all WTO members in approving the adoption of the requested waiver. Realizing that Thailand would not concede, the EC agreed to hold consultations with Thailand and the Philippines to examine their differences.

• In the end, Thailand agreed to concede on the waiver, on condition that their case be taken up in an appropriate forum, with the aim of resolving the conflict of interest.

WTO: DISPUTE SETTLEMENT UNDERSTANDING (DSU)

• This case study illustrates the manner in which Thailand raised the issue and challenged the EC tariff within the framework of the Dispute Settlement Understanding (DSU) provided in the WTO Agreement.

• There are three major stages to the DSU: i. Consultation between the concerned partiesii. Adjudication/ arbitration by Panels and the Appellate Bodyiii. Implementation of the ruling

• However, it is not always necessary for every case to follow this trajectory and to be taken to Panels. In fact, the preferred path is for members to settle the dispute between themselves, through consultations.

PRO & CONS OF DSU

• DSU provides good offices, conciliation and mediation which may be requested by members if consultations fail to produce an acceptable solution.

• These options serve as an intervening step in which an independent third party is engaged to help members resolve the dispute at hand, thereby

• Avoiding Panel proceedings which can be the most costly and time-consuming stage of the DSU procedures.

THE COMPLAINANTS PLAYERS

• The Philippines, as a fellow ASEAN and WTO member facing similar difficulties, joined with Thailand

• ‘Complainants’ collectively refer as Thailand and the Philippines.

Thailand & Philippines

European Com

munity

ASEAN = Association of Southeast Asian Nations

WTO PROCEEDINGS : THAI NEGOTIATOR

THAI AMBASSADOR TO THE WTO, WHO THEREBY SERVED AS THE OFFICIAL VOICE OF THAILAND

DR.CHANINTR CHALISARAPONG

THE PLAYERS From the start role of each players was well delineated

• The major task was to provide industry data, information and support in every form possible to the Ministry of CommercePrivate

Sector

• Examined the legal and related aspects associated with the negotiation process, as well as providing an official link to Geneva and the WTO proceedings.

Ministry of Commerce

• The Firm provided in-depth legal counsel and professional backing in writing official submissions, although it did not participate in the actual mediation.

Brussels Law Firm

FOCA

L PO

INT

Chanintr Chalisarapong

CASE OVERVIEW(Chronological Oder)

The Events of Case Span Approximately Three and a Half (3.5) Years

5 June 2003

New EC Council Regulation (Officially Adoption of Quota)

03 February 2000EC - ACP Agreement

2 March 2000EC requested waiver of MFN obligations

4 September 2002 Requesting Dir. General -WTO for arbitration

21 October 2002WTO Mediator

WTO Ambassadors Oral Statements5 November 2002

New Quota of 25K tonnes @ tariff of 12% - Thailand (for 52% or 13, 000 tonnes), - Philippines (36% or 9, 000 tonnes) - Indonesia (11% or 2, 750 tonnes) and - Other third countries (1% or 250 tonnes)

mediator came out with an advisory opinion 20 December 2002

Doha Ministerial Conference 9-13 November 2001

6-7 December 2001 (Brussels)29-30 January 2002 (Manila)

4-5 April 2002 (Bangkok)

Rounds of Consultations

• Another challenge related to WTO members’ rights and obligations and the difficulty in striking a balance between what one might characterize as a ‘legal’ versus a ‘political’ spin on the situation. Legally speaking, Thailand had a solid right to pursue dispute resolution. Politically speaking, however, one must recall that in the WTO there are certain forms of ‘positive’ discrimination which are acceptable; that is, discrimination in favour of the poorest countries. In the light of this, Thailand argued that, while the preferential tariff was perhaps justifiable in the 1970s as a means of support for least developed countries (LDCs), greatly improved investment and economic situations in the ACP countries by the 1990s no longer warranted it. Thailand did not refute the rationale behind ‘positive’ discrimination, but maintained that favorable treatment should not be extended to any developing member to the detriment of another developing member.

THAILAND SUPPORTER Doha, Brussels or Geneva Of the fifteen EC members at the time, northern Europe supported our cause, as they had no tuna industry of their own to protect. Spain and Portugal, on the other hand, were extremely opposed to the mediator’s opinion.

In between were France and Italy. We realized that France’s opinion carried so much weight among EC constituents that it could have turned the majority vote within the EC either way.

Thailand - Prime Minister paid an official visit to France at the time and he raised the issue with President Jacques Chirac. He also held discussions with the French Prime Minister and some of his Cabinet members. France ended up supporting our case — this was the real turning point. We knew then that our case had achieved success in concrete terms.

RESULT Regulation No. 975/2003 of 5 June 2003• Tariff-rate quota suggested by the mediator was officially adopted. • The Regulation specifies that the ‘tariff quota shall be opened annually for

an initial period of five years. • first two years shall be fixed as follows:

– 25,000 tonnes from 1 July 2003 to 30 June 2004, – 25, 750 tonnes from 1 July 2004, to 30 June 2005.

• The regulation also allowed for a revision in the second year after the tariff quota is opened, so that the volume of the quota could be adapted to the market needs of the EC, if necessary.

• The regulation entered into force following its publication in the Official Journal of the European Union, and is ‘binding in its entirety and directly applicable in all EU Member States’.

Lessons• This case is a good example of how developing country members were able to use their WTO

rights to secure more equitable treatment from a developed country trading partner.

• Once the positive resolution had been reached, EU Trade Commissioner Pascal Lamy travelled to Bangkok to inform Thailand’s Minister of Commerce, Adisai Bhodharamik, an indication of continued good relations between the two trading partners.

• Indeed, Chanintr emphasized that, although the tariff situation was of great importance to its canned tuna industry and national interests, Thailand made a conscious effort to maintain good relations with the EC throughout the proceedings. He said that

• ‘in resorting to the dispute settlement process, we did not seek to confront, but opted for friendly persuasion and understanding. After all, the EC is one of our major trading partners, and a very important consumer not only of Thai tuna but in other sectors as well. We intended

to avoid at all costs doing anything that would jeopardize our long-standing and good relationship with the EU.’

Lessons

• On a broader level, it is well accepted that taking action can itself be a sticking point for developing countries wary of investing the time, energy and financial resources in a consultation and mediation process which may not even produce any binding outcomes, let alone taking the matter to Panel proceedings. This is often the case for other sectors within Thailand as well.

• Economic players collect data and maintain consistent industry information. Solid factual evidence makes a legal impression and argument on the opposing side.

• Initially EC rejected just about every argument made by the complainants

• Thailand’s ambassador to the WTO was assure that the private sector would not back down, and that they would continue to support the government.

• Another major obstacle is the issue of unity within a given industry or sector, which is often lacking, resulting in poor co-ordination and teamwork. Therefore, efforts must be made to achieve the level of commitment and the momentum necessary to support the industry throughout the dispute settlement process.

THAILAND : MESSAGE TO WORLD

“Thailand’s main objective was to show the international

community that an unfair practice was being directed at

the complainants and that they were serious about

challenging it”

CRITICISM

• 12% TARIFF IS STILL TOO HIGH

ANSWER TO CRITICISM

• In the word of Chanintr – Ambassador of Thailand

‘‘Compromise was the best outcome, and we are satisfied with the result. We wanted a win-win situation where trade would be managed as fairly as possible. We didn’t

want to take advantage of our opponent, or to simply turn the tables on them.’’

LEARNING OUTCOME 1. Co-operation between a well-represented tuna industry and the Thai government . 2. Government and the private sector working hand in hand can be the best weapon to

defend our national interests. 3. The government cannot negotiate effectively without good information and support from

the private sector. 4. The two sectors must work together and determine very clearly how much time and

resources they have to spend and, if they win, how much the industry will benefit as a whole.

5. This case sets a precedent for other member countries, demonstrating that even without full court proceedings, a binding result could ultimately be achieved.

6. Thailand present close collaboration between government officials and industry leaders challenged proposed changes in EU tariff preferences.

7. The Thai tuna case illustrates the operation of the conciliation procedures in WTO disputes, using the good offices of the Director General of the WTO.

8. These provisions of the disputes mechanism do not capture headlines in the same way as a panel adjudication, but they offer many advantages as this case shows, including less contentious procedures, and significantly lower costs.

HISTORICAL RECORD OF CASE

• First case in WTO history to be settled through mediation, it sets a valuable example for fellow member countries, demonstrating that disputes may be resolved within the WTO without resorting to formal litigation.

GAIN ON SOLUTION

The tuna industry of Thailand fights to retain access to the European Union (EU) market on comparable terms to its competitors, but manages to avoid a costly formal dispute adjudication.

Trade & Environment Nexus

• ’ rights and obligations• legal’ versus a ‘political• Status of Quo• fully-fledged legal battle