Sidley Austin

This chapter examines the various economic rationales that underlie international trade agreements and analyses how the principal rules and design features of such agreements help achieve their key objectives. Our contribution is twofold. First, we provide an intuitive discussion of the economics of international trade agreements in general and the GATT 1947/WTO Agreement in particular. Second, we examine the economic underpinnings of some of the key rules of the international trading system, including the most-favored-nation and the national-treatment obligations, the principle of reciprocity, as well as various exceptions to non-discrimination found in the GATT 1947/WTO system, and address some important regulatory developments since the early GATT years.

As part of its sanctions regime, the United States recently announced the imposition of punitive import tariffs on 570 product groups from Russia. The European Union may follow suit and enact sanctions on Russia that mirror the US sanctions in scale and scope. Using a sector-specific partial-equilibrium model, we quantify the impact of such mirror sanctions. We find they would inflict on Russia welfare losses of at least $996 million per year — at an overall cost of $150 million to EU consumers. Breaking down these totals in a sectoral analysis, we find that mirroring the US action would produce mixed results from the EU’s perspective. On the one hand, tariff sanctions cover a number of sectors whose inclusion would inflict particularly large welfare losses for Russia and/or high welfare gains for the EU. On the other hand, mirror sanctions would bring significant inefficiencies for the EU. For example, in 72 sectors, higher tariffs would inflict greater harm on the EU than on the Russian economy, causing EU losses in excess of $560 million. Thus, consistent with the spirit of international coordination and alignment, the EU may consider adjusting the suite of tariff sanctions rather than simply adopting the US package.

This chapter identifies the range of stakeholders in international trade dispute settlement. The community of stakeholders is diverse, and begins with Member states, which have standing to bring disputes, participate in disputes as third parties, and (in the WTO) are the ultimate source of legal authority in the dispute settlement system, through their participation in the Dispute Settlement Body. Industries are the actors who actually engage in trade across borders; they cannot initiate disputes, or participate directly, but their knowledge of how the substantive rules work ‘on the ground’ makes their involvement and cooperation key to a successful dispute, and to making the most out of Members’ legal rights and obligations. Adjudicators are the ‘deciders’, whose independence and impartiality are of fundamental importance to the legitimacy of any dispute settlement system. Accountability of the adjudicators is paramount, and they must both be, and appear to be, independent and impartial in their decision-making. The WTO Secretariat is an important source of institutional support and consistency over time, although also a source of controversy over the appropriate boundaries of its role vis-à-vis the adjudicators. Finally, experts are an often overlooked stakeholder, but increasingly crucial as disputes grow more complex, technical and scientific. Each stakeholder participates in dispute settlement in a different way, for different reasons, and each makes its own contribution to the effective functioning of the various systems.

The ne bis in idem principle (the prohibition of double jeopardy) is a fundamental protection under EU law. It has long been of particular importance in the decentralised system of EU competition law enforcement brought about by Regulation 1/2003. While the mechanism for cooperation between the European Commission and national competition authorities provided for in Reg 1/2003 had tended to work well in the past, recent shortcomings in cooperation have led to inefficient and inconsistent enforcement, especially in the tech sector. The status quo in this regard is contrary to the letter and spirit of Reg 1/2003 and undermines the legal certainty that used to exist for companies under investigation. The European Commission and national competition authorities must therefore act to ensure consistent application of case allocation rules and uphold ne bis in idem protection in line with the underlying objectives of Reg 1/2003. The Digital Markets Act proposal risks similar shortcomings in cooperation between the Commission (charged with enforcing the DMA) and a number of national authorities (charged with enforcement of national DMA-like tech regimes). What is more, in addition to the potential for overlap and inconsistency in enforcement between the DMA and the DMA-like obligations at national level, the promulgation of the DMA creates an additional layer of potential overlap and inconsistency – between enforcement under competition law-derived regulation (in the form of the DMA and its national equivalents) on the one hand and competition rules on the other hand. Legislators should therefore improve the DMA in order to define appropriate limits to enforcement and to prevent a proliferation of parallel and/or overlapping investigations relating to the same conduct.