Cultural Products and the World Trade Organization

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Debate about the trade and culture has a long history, but the application of WTO rules to cultural products such as films, radio and books remains one of the most divisive issues in the organisation. After assessing the economic and social arguments for treating cultural products differently from things like steel or wheat, this book explains how the vastly different views of WTO Members in earlier negotiations led to an outcome that is disappointing for all. It goes on to provide a comprehensive evaluation of possible solutions, including evolution of the law through WTO dispute settlement, a new agreement outside the WTO or reforms to improve the balance between trade liberalisation and cultural policy objectives. As UNESCO's new convention affecting trade and cultural diversity is due to enter into force in 2007 and the WTO's Doha Round of negotiations is stumbling, the need for such an evaluation is all the more pressing.
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Editorial Reviews

From the Publisher
"Books about trade-and-culture often promote one of the aspects, either the trade or the culture side. However, Voon avoids preferring one side of the debate and instead provides a balanced and thoughtful view of the highly complex issues surrounding the challenge of protecting and promoting culture and cultural diversity, while at the same time pursuing the goal of further trade liberalisation among Member States. Ultimately, the greatest merit of the very comprehensive and insightful book is that it proposes a clear solution to the stalemate in the trade-and-culture debate."
--Franziska Sucker, Research Fellow at the Max Planck Institute for Comparative Public Law and International Law, Heidelberg, Germany

"...the first, and so far the only, book-length publication in English on the WTO and cultural products....This book is not biased in favor of trade or culture. Voon presents some solutions that should be acceptable to both sides, citing international trade treaties and other materials extensively, while explaining the reasons for different countries' arguments....A discussion of a highly specialized topic..."
--Yuxin Li, Law Library Journal

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Product Details

Meet the Author

Tania Voon is Senior Lecturer in Law at the University of Melbourne.

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Read an Excerpt

Cambridge University Press
9780521873277 - Cultural Products and the World Trade Organization - by Tania Voon

Stalemate and its ideological origins

1   Trade and culture

1.1 ‘Trade and …’ problems

At the heart of a great many trade disputes lies a ‘trade and …’ problem;1 that is, a clash between the goal of trade liberalisation and some other goal. As Joel Trachtman has explained, these problems involve ‘conflicts between trade values and other social values’, such as ‘environmental protection, labour rights or free competition’.2 Indicative of such conflicts are clashes within the WTO (and its predecessor, GATT 1947) over EC import bans on asbestos3 and meat treated with certain growth hormones,4 US prohibitions on imports of shrimp harvested in a manner threatening sea turtles5 and on the cross-border supply of gambling and betting services,6 and import restrictions and tax requirements imposed on cigarettes by Thailand7 and the Dominican Republic.8

I do not propose to debate the virtues of trade liberalisation as a general matter. However, in a nutshell, the theory is that the removal of trade barriers (such as tariffs and import quotas), which distort international trade, will allow each country to specialise in producinggoods or providing services in industries in which it has the greatest ‘comparative advantage’, and to import goods and services in industries in which it lacks this advantage. Although initially this may cause some adjustment problems (because, for instance, a steel worker cannot transform overnight into a computer programmer), in the longer term, national and global welfare will increase.9 Of course, the underlying theory of comparative advantage has its limits. In some areas, such as national security, countries may want to retain all or some of their industrial and technical capabilities, regardless of their comparative advantage. In addition, even in industries to which the theory of comparative advantage applies easily, governments should not have to give up their right to regulate their territories as they see fit purely in the interests of trade liberalisation.

The WTO agreements reflect the goal of trade liberalisation, or at least its value as a means to achieve broader social and economic objectives. The WTO was established on 1 January 1995, following the eighth round of trade talks launched in Uruguay in 198610 under GATT 1947. In the preamble to the Marrakesh Agreement, WTO Members recognise ‘that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services’. The preamble goes on to express the Members’ desire to ‘contribut[e] to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations’.

In simplified terms, the core obligations or disciplines imposed on WTO Members in connection with trade in goods (essentially unchanged since GATT 1947) are as follows.11

To reduce trade barriers and increase market access:

(a) A general prohibition on quantitative restrictions (such as quotas) and equivalent measures on imports or exports from or to other Members.12 Pre-existing quantitative restrictions and equivalent measures on agricultural and industrial products were converted to tariffs (customs duties) during the Uruguay Round, in a process known as ‘tariffication’. Various economic and policy reasons explain this preference for tariffs over quantitative restrictions as a form of protection.13
(b) Tariff bindings: the tariff that a Member applies to imported goods of other WTO Members must be no greater than the tariff that the importing Member has agreed or ‘bound’ for the relevant product in its ‘schedule of concessions’.14 These tariff bindings under GATT 1994 continue the process of negotiated tariff reductions that took place under GATT 1947.15

To eliminate discrimination:

(c) National treatment: Discrimination by WTO Members against products of other Members in favour of domestic products may distort trade, much like a tariff, artificially increasing the competitiveness of the domestic industry and reducing imports.16 Therefore, under national treatment, each WTO Member must treat imported products, after they have crossed the border,17 no less favourably than like products produced domestically. Specifically, internal taxes and charges, and laws and regulations affecting internal sale and distribution, ‘should not be applied to imported or domestic products so as to afford protection to domestic production’.18 Thus, national treatment precludes discrimination against imported products.
(d) MFN treatment: Discrimination by WTO Members in favour of imports from certain Member or non-Member countries (rather than imports from all WTO Members) may also distort trade.19 According to the MFN obligation, described as a ‘cornerstone’ of the WTO20 and ‘the defining principle of the GATT’,21 where a Member grants an advantage (with respect to import, export, sale, purchase, transportation, distribution or use) to a product being imported from or exported to another country, it must also accord that advantage to all Members’ like products.22 Thus, MFN treatment precludes discrimination among imports of WTO Members or in favour of imports of non-WTO Members.

A recurrent difficulty in the global trading system (as well as regional and national counterparts)23 involves distinguishing between trade-restrictive or discriminatory governmental measures that are imposed in the pursuit of a legitimate government objective from those imposed purely to protect domestic industries from foreign competition. Arguably, no ‘trade and …’ problem arises where the competing objective is mere protectionism, since trade liberalisation trumps protectionism in the absence of other considerations. However, numerous ‘other’ considerations exist, many of which the WTO agreements identify. The preamble to the Marrakesh Agreement itself recognises certain values or concerns other than trade liberalisation, such as development and the environment, noting that Members’ trade should

allo[w] for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development,

Recognizing further that there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development …

As Trachtman has pointed out, a variety of ‘trade-off devices’ may assist in resolving ‘trade and …’ problems.24 GATT Article XX provides an example of such a device in connection with the problem of trade and environment. As the key exception clause in GATT 1994, Article XX lists certain ‘[g]eneral exceptions’ to the usual trade-liberalising disciplines of the WTO, allowing Members to adopt or enforce measures ‘necessary to protect human, animal or plant life or health’25 or ‘relating to the conservation of exhaustible natural resources’26 (among other things) provided that certain other conditions are met.27 Other WTO agreements besides GATT 1994 also recognise the trade and health problem. Consider a strict quarantine law on imported produce, which a WTO Member might impose on genuine health grounds or to protect its farmers or fisheries from competitors worldwide.28 The WTO’s SPS Agreement (which governs Members’ ‘sanitary or phytosanitary’ measures that affect international trade)29 captures the difference between these objectives by

[r]eaffirming that no Member should be prevented from adopting or enforcing measures necessary to protect human, animal or plant life or health, subject to the requirement that these measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between Members where the same conditions prevail or a disguised restriction on international trade.30

Similarly, the Enabling Clause allows some discrimination in favour of developing countries, contrary to the usual WTO rules, recognising the importance of development.31 The WTO rules also recognise the potential problem of trade and security, providing that GATT 1994 is not to be construed to prevent a Member ‘from taking any action which it considers necessary for the protection of its essential security interests’ relating to traffic in arms, for example.32

Other ‘exceptions’33 to WTO disciplines are not necessarily or ordinarily characterised as such. For example, to counter injury to their domestic industries, Members are entitled to impose anti-dumping duties on dumped imports,34 and countervailing duties on certain subsidised imports,35 subject to compliance with detailed procedural and substantive requirements set out in the WTO agreements. That these kinds of ‘trade remedies’ involve exceptions to WTO disciplines is clear. They might otherwise violate the MFN obligation or tariff bindings. They are also examples of ‘trade and …’ problems. Although their rationale is debatable,36 some might describe anti-dumping and countervailing duties as reflecting the conflict between free trade and unfair trade.37 This conflict is purportedly resolved by creating strict conditions on the imposition of these duties to prevent their use as protectionist measures, just as the SPS Agreement, ‘[i]n an effort to eliminate protectionist and unnecessary non-tariff barriers … imposes strict scientific justification requirements’.38

According to the Appellate Body, Article XX of GATT 1994 describes ‘measures that are recognized as exceptions to substantive obligations established in GATT 1994, because the domestic policies embodied in such measures have been recognized as important and legitimate in character’.39 Petros Mavroidis has pointed out that ‘one tenable reading’ of this list of exceptions ‘would be to exclude regulatory intervention on grounds not mentioned’ therein.40 However, although Article XX is restricted to certain domestic policies that WTO Members have identified as legitimate, this does not necessarily mean that all other domestic policies (including policies regarding cultural products) are illegitimate for the purposes of WTO law.41 Leaving to one side the issue of whether it is appropriate for WTO Panels and the Appellate Body (which resolve disputes between WTO Members regarding trade-related measures)42 to assess the legitimacy of particular domestic regulatory goals,43 several factors suggest that WTO Members never intended to limit their regulatory objectives to those listed in Article XX (or explicitly specified elsewhere in the WTO agreements), and that the Appellate Body would be loath to impose such a requirement.

First, this reading is inconsistent with the preamble to the Marrakesh Agreement, which appears to recognise other legitimate objectives of WTO Members, as already mentioned. Indeed, the Appellate Body itself has looked to the preamble in the course of interpreting GATT Article XX(g).44 Second, it inexplicably excludes numerous goals of domestic policy that are both common and apparently non-protectionist, such as consumer protection,45 ‘competition policy, company law and investment-related matters’, ‘income distribution, revenue raising’ and ‘the environment per se46 (i.e. other than for measures ‘relating to the conservation of exhaustible natural resources …’, which are explicitly recognised in Article XX(g)).47 Third, and most importantly, it is contrary to ‘the notion of trade liberalization as consistent with deep regulatory diversity, accommodating a full range of noneconomic public values’.48 This notion is supported by GATT contracting parties’ refusal during the Uruguay Round to craft the WTO system ‘as an autonomous level of governance’ with regulatory powers.49 Moreover, it is a key factor in maintaining support for and institutional legitimacy of the WTO. Although certain WTO agreements involve some harmonisation,50 in general the WTO refuses to characterise the multilateral trading system as harmonising or deregulating.51 Substantial freedom to regulate domestically according to any social or political agenda is essential to achieving agreement in the WTO among countries of vastly different backgrounds, values, and levels of development.52

© Cambridge University Press

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Table of Contents

Detailed chapter outline     ix
Table of GATT/WTO agreements     xiii
Table of GATT/WTO cases     xiv
Table of abbreviations     xvii
GATT/WTO agreements     xvii
GATT/WTO cases     xviii
Other abbreviations     xxvi
Foreword     xxxi
Acknowledgements     xxxiv
Stalemate and its ideological origins     1
Trade and culture     3
A case study of cultural products: protectionism vs cultural policy     37
What's wrong with the current treatment of cultural products?     69
Options for the future     121
Resolution through dispute settlement and international law     123
Constructing a new agreement outside the WTO     173
Improving the existing WTO agreements     217
Conclusion     248
Bibliography     257
Non-WTO agreements, cases, statutes, and treaties     257
Other official documents and reports     259
Articles, books, chapters, and papers     271
Index     295
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