The WTO legality of the EU's GSP+ arrangement Dr Lorand Bartels ...

The WTO legality of the EU’s GSP+ arrangementDr Lorand Bartels *AbstractIn EC – Tariff Preferences, the Appellate Body held that the WTO Enabling Clause permitteddeveloped countries to grant better tariff treatment to some developing countries than toothers, subject to certain conditions. It held further that these conditions were not met by theEU’s so-called ‘drugs arrangement’, a system of additional preferences (normally duty freetreatment) for certain countries which the EU had determined were in need of special tariffpreferences, thanks to their involvement in combating the production and trafficking ofnarcotics. In response to this ruling, when the EU renewed its GSP program in 2005, itreplaced its drugs arrangement and two similar, though less generous, labour and environmentarrangements with a new arrangement popularly known as the ‘GSP+ arrangement’. Underthis arrangement, additional tariff preferences (normally duty free treatment), were madeavailable to developing countries committing to ratify and implement a list of human rightsand good governance conventions. According to the EU, the GSP+ arrangement complieswith the Appellate Body’s interpretation of the Enabling Clause. This article argues that itdoes not. This is firstly because of the substantive criteria chosen by the EU to select GSP+beneficiaries, which do not meet the Appellate Body’s criteria for differential tariff treatmentof developing countries. Second, it is because the EU’s requirement that would-bebeneficiaries must have applied by a certain date, replicates the problem of the ‘closed list’ ofbeneficiaries that was fatal to the earlier incarnation of the EU’s GSP program. The articleconcludes with some suggestions for designing a GSP+ arrangement more likely to meet theAppellate Body’s conditions than the EU’s present arrangement.* Faculty of Law, University of Cambridge.

The WTO legality of the EU’s GSP+ arrangementDr Lorand Bartels *In EC – Tariff Preferences, the Appellate Body held that the WTO Enabling Clause permitteddeveloped countries to grant better tariff treatment to some developing countries than toothers, subject to certain conditions. 1 It held further that these conditions were not met by theEU’s so-called ‘drugs arrangement’, a system of additional preferences (normally duty freetreatment) for certain countries which the EU had determined were in need of special tariffpreferences, thanks to their involvement in combating the production and trafficking ofnarcotics. 2 In response to this ruling, when the EU renewed its GSP program in 2005, itreplaced its drugs arrangement and two similar, though less generous, labour and environmentarrangements 3 with a new arrangement popularly known as the ‘GSP+ arrangement’. 4 Underthis arrangement, additional tariff preferences (normally duty free treatment), were madeavailable to developing countries committing to ratify and implement a list of human rightsand good governance conventions. One of the conditions was that these countries had to applyby 31 October 2005, which was four months after the publication of the GSP Regulation. Thenew arrangement applies from 1 January 2006 to 31 December 2008. 5According to the EU, the GSP+ arrangement complies with the Appellate Body’sinterpretation of the Enabling Clause. This article argues that it does not. This is firstlybecause of the substantive criteria chosen by the EU to select GSP+ beneficiaries, which donot meet the Appellate Body’s criteria for differential tariff treatment of developing countries.Second, it is because the EU’s requirement that would-be beneficiaries must have applied bya certain date, replicates the problem of the ‘closed list’ of beneficiaries that was fatal to theearlier incarnation of the EU’s GSP program.* Faculty of Law, University of Cambridge; presently Humboldt Fellow at the Max Planck Institute forInternational Law in Heidelberg. This article has benefited greatly from comments and criticisms fromRobert Howse, Joost Pauwelyn, Melaku Geboya Desta, Gustavo Ribiero, Bryan Mercurio, FedericoOrtino, Nathalie Bernasconi, Margaret Young and Holger Hestermeyer and from the participants at theConference on WTO and Human Rights, Monash University Prato Centre, 21-22 June 2007.1 WTO Appellate Body Report, EC – Tariff Preferences, WT/DS246/AB/R, adopted 20 April 2004.2 See below at n 17.3 Council Regulation 2501/2001 [2001] OJ L346/1. For discussion see Lorand Bartels, ‘The WTOEnabling Clause and Positive Conditionality in the European Community’s GSP Program’ 6 JIEL 507(2003).4 Arts 8-11 of Council Regulation 980/2005 of 27 June 2005 [2005] OJ L169/1. All further referencesto Articles are to this Regulation unless specified otherwise. The legislative history of the regulation isas follows. A first proposal was set out in Commission Communication, Developing countries,international trade and sustainable development: the function of the Community’s generalised systemof preferences (GSP) for the ten-year period from 2006 to 2015, COM (2004) 461, 7.7.2004, in whichthe GSP+ arrangement was outlined in general terms, and to begin on 1 January 2006. This wasfollowed by a concrete Proposal for a Council Regulation applying a scheme of generalised tariffpreferences, COM (2004) 699, 20.10.2004, now to commence on 1 July 2005. In its Amended Proposalfor a Council Regulation applying a scheme of generalised tariff preferences, COM (2005) 43,10.2.2005, the Commission proposed to bring forward the commencement date to 1 April 2005, inorder to assist countries affected by the recent tsunami, with a GSP+ application date of 31 May 2005.This Proposal was not adopted, and is not referred to in the GSP Regulation.5 Art 30(2) provides that the GSP Regulation shall apply until 31 December 2008, but also (and a littleambiguously) that this date ‘shall not apply to the arrangements for least-developed countries’.2

are also now joined by Sri Lanka, Moldova, Georgia and Mongolia, 18 making fifteen GSP+beneficiaries in total. Of these four countries, the first two were existing beneficiaries of theEU’s labour arrangements, while the last two were in the process of applying for thesepreferences. 19 This means that, with the exception of Pakistan and with the addition of twoapplicants, the beneficiaries of the EU’s new GSP+ arrangement are the same as thebeneficiaries of its former drugs and labour arrangements. 20II.WTO rulesThe WTO rules applicable to GSP programs are set out in the 1979 Enabling Clause 21 (nowpart of the GATT 1994). 22 The Enabling Clause states that the most-favoured-nationobligation in Article I GATT is not applicable to the grant of preferences by developed WTOMembers to developing countries in accordance with the Generalized System of Preferencesas described in the 1971 GSP Decision of the GATT Contracting Parties. 23 As a result,preferences under the Enabling Clause must be ‘generalized, non-reciprocal and nondiscriminatory’.24In EC – Tariff Preferences, India argued that the reference to ‘non-discriminatory’preferences in the Enabling Clause meant that no difference in treatment between developingcountries was permitted. 25 The Appellate Body rejected this argument, stating that ‘non-Regulation 3282/94 [1994] OJ L348/57. From 1 July 1999, all of these countries received duty freeaccess on most industrial and agricultural products: Council Regulation 2820/98 [1998] OJ L357/1. On14 November 2001, the European Commission proposed adding Pakistan to the list of ‘drugsarrangement’, and this was effected in the new GSP Program as of 1 January 2002: Council Regulation2501/2001, above at n 3. The EU’s rationale was that as a result of the events of 11 September 2001,including increased refugee flows, Pakistan’s campaign against illicit drugs needed to be supported,and that ‘[t]he GSP drug regime is therefore likely to stabilise its economic and social structures andthus consolidate the institutions that uphold the rule of law’. See the Explanatory Memorandum to theAmended Proposal for a Council Regulation applying a scheme of generalised tariff preferences for theperiod 1 January 2002 to 31 December 2004, COM (2001) 688, 14.11.2001. It was the addition ofPakistan to the list of ‘drugs arrangement’ beneficiaries that sparked India’s complaint in EC – TariffPreferences.18 Commission Decision 924/2005 of 21 December 2005 [2005] OJ L337/50. According to Art 11(3),this Decision was supposed to have been published by 15 December 2005.19Commission Regulation 1649/2000 (Moldova) [2000] OJ L189/13, Commission Regulation2342/2003 (Sri Lanka) [2003] OJ L346/34; Notice regarding request (Mongolia) [2004] OJ C243/2;Notice regarding request (Georgia) [2001] OJ 2001 C127/13.20 This is not however to say that these countries were automatically granted the benefits. In terms ofthe mandatory List A conventions, of the fifteen beneficiaries, only five (Costa Rica, Ecuador, Panama,Peru and Sri Lanka) had ratified all of the required human rights conventions before the arrangementwas announced. Eight beneficiaries (Bolivia, Colombia, Georgia, Guatemala, Honduras, Moldova,Nicaragua and Venezuela) needed to ratify one outstanding convention, and two (Mongolia and ElSalvador) needed to ratify two. I am extremely grateful to Gustavo Ribiero for sharing his data on this.21 Differential and More Favourable Treatment, Reciprocity and Fuller Participation of DevelopingCountries (‘Enabling Clause’), Decision of 28 November 1979, GATT Doc L/4903.22 WTO Appellate Body Report, EC – Tariff Preferences, para 90.23 Generalized System of Preferences, Decision of 25 June 1971, GATT Doc L/3545.24 WTO Appellate Body Report, EC – Tariff Preferences, paras 145-147.25 The case is discussed in Steve Charnovitz et al, ‘The Appellate Body’s GSP Decision (InternetRoundtable)’ 3 World Trade Review 239 (2004), Lorand Bartels, ‘The WTO Ruling on EC - TariffPreferences to Developing Countries and its Implications for Conditionality in GSP Programmes’,Gregory Shaffer and Yvonne Apea, ‘GSP Programmes and Their Historical-Political-InstitutionalContext’ and Jane Bradley, ‘The Enabling Clause and Applied Rules of Interpretation’, all published inThomas Cottier et al (eds), Human Rights and International Trade (Oxford: OUP, 2005), and GeneGrossman and Alan Sykes, ‘A Preference for Development: the Law and Economics of GSP’ 4 WorldTrade Review 41 (2005).4

discriminatory’ does not require identical treatment of all developing countries; rather,additional preferences may be made available to developing countries that share the same‘development, financial or trade need’. 26 Drawing on other provisions of the Enabling Clause,the Appellate Body also set out further conditions for any such differential treatment: first, theidentified ‘development, financial and trade need’ must meet an ‘objective standard’. TheAppellate Body added that ‘[b]road-based recognition [as] set out in the WTO Agreement orin multilateral instruments adopted by international organizations, could serve as such astandard’. 27 Second, the identified need ‘must by its nature, be such that it can be effectivelyaddressed through tariff preferences’. Third, on the facts of the case, ‘a sufficient nexusshould exist between, on the one hand, the preferential treatment provided … and, on theother, hand, the likelihood of alleviating the relevant “development, financial [or] tradeneed”.’ 28As it happened, it was unnecessary for the Appellate Body to determine whether the drugsarrangement at issue met these conditions, because this arrangement was operated through a‘closed list’. On this, the Appellate Body said as follows:We find that the measure at issue fails to meet this requirement for the followingreasons. First, as the European Communities itself acknowledges, according benefitsunder the Drug Arrangements to countries other than the 12 identified beneficiarieswould require an amendment to the Regulation … Secondly, the Regulation containsno criteria or standards to provide a basis for distinguishing beneficiaries under theDrug Arrangements from other GSP beneficiaries. 29Whether or not, aside from this administrative aspect, the drugs regime would have met theother conditions set by the Appellate Body is debatable. Even if the tariff preferences underthe drugs arrangement could, in principle, have been able to respond to the relevant‘development needs’ of the beneficiary countries by encouraging substitute crops, it seemsthat in fact they did not. As the EU’s European Economic and Social Committee observed,‘there is no evidence that the special incentive arrangements for combating the production andtrafficking of drugs … has had any impact whatsoever on the drug trade.’ 30III.Application of WTO rules to GSP+ arrangementThe argument in this article is that the GSP+ arrangement violates the conditions in theEnabling Clause, as interpreted by the Appellate Body. This is for the following reasons.26 WTO Appellate Body Report, EC – Tariff Preferences, para 165.27 Ibid, para 163.28 Ibid, para 164.29 Ibid, paras 187-8.30 Opinion of the European Economic and Social Committee on the ‘generalised system of preferences(GSP)’, adopted 25 February 2004 [2004] OJ C110/34, para 6.6.2. But overall benefits do apparentlyaccrue to GSP+ beneficiaries: see Maria Persson, ‘Everything but Drugs: Export Effects of theEuropean Union Trade Preferences for Drug Producing and Least Developed Countries’, WorkingPaper, Swedish Network for European Studies in Economics and Business, undated, available atwww.snee.org/filer/papers/251.pdf (visited 25 July 2007). By contrast, the benefits of general GSParrangements are far less certain: Persson, ibid, Grossman and Sykes, above at n 25; and Çaglar Özdenand Eric Reinhardt, ‘The Perversity of Preferences: GSP and Developing Country Trade Policies,1976–2000’ 78 Journal of Development Economics 1 (2005).5

A. The conventions1. ‘Development, financial and trade needs’In Recital 7 to the GSP Regulation, the EU gives the following rationale for its GSP+preferences:The special incentive arrangement for sustainable development and good governanceis based on an integral concept of sustainable development as recognized byinternational conventions and instruments such as the UN Declaration on the Right toDevelopment of 1986, the Rio Declaration on Environment and Development of1992, the ILO Declaration on Fundamental Principles and Rights at Work of 1998,the UN Millennium Declaration of 2000 and the Johannesburg Declaration onSustainable Development of 2002.Consequently, developing countries which due to a lack of diversification andinsufficient integration into the international trading system are vulnerable whileassuming special burdens and responsibilities due to the ratification and effectiveimplementation of core international conventions on human and labour rights,environmental protection and good governance should benefit from additional tariffpreferences. These preferences are designed to promote further economic growth andthereby to respond positively to the need for sustainable development. … (emphasisadded)In summary, the EU’s GSP+ preferences are designed to compensate countries for ‘assumingspecial burdens and responsibilities due to the ratification and effective implementation ofcore international conventions’ by ‘promot[ing] further economic growth and thereby …respond[ing] positively to the need for sustainable development’. This is more easilyunderstood when turned around: additional preferences will lead to ‘economic growth’ forcertain countries, this being compensation for the expense incurred by those countries when(voluntarily) they seek to improve their ‘need for sustainable development’ by ratifying andimplementing the listed conventions. It is not entirely easy to identify the ‘development,financial or trade need’ in this rationale. On the one hand, it seems to be consideredequivalent to the ‘need for sustainable development’, while on the other it seems more limitedto the expense involved in seeking to improve this ‘need’. Nonetheless, it is not necessary toattempt to parse these possibilities, as the EU’s rationale is in any case of secondaryimportance in determining the legality of the EU’s GSP+ arrangement.The proper approach to this question is to begin with first principles: to interpret the meaningof the treaty term ‘development need’ 31 in its legally relevant context. 32 This, as US – Shrimpmade clear, includes the acknowledgement, in the Preamble to the WTO Agreement, of theobjective of ‘sustainable development’, 33 and, as the Appellate Body did in that case, it seemsappropriate to look to other legal instruments to gain an understanding of the current meaningof the concept of ‘development need’. A good starting point would seem to be the 1986 UNDeclaration on the Right to Development, which stated that ‘development is a comprehensiveeconomic, social, cultural and political process, which aims at the constant improvement ofthe well-being of the entire population and of all individuals on the basis of their active, freeand meaningful participation in development and in the fair distribution of benefits resulting31 It is not necessary to discuss ‘trade’ or ‘financial’ needs.32 Art 31(3)(c) of the Vienna Convention on the Law of Treaties. The context includes the term‘sustainable development’, found in the preamble of the WTO Agreement, and somewhat oddlyomitted from the list of instruments in Recital 7.33 WTO Appellate Body Report, US – Shrimp, WT/DS58/AB/R, adopted 6 November 1998, paras 129-30. It is a matter of some curiosity that Recital 7 of the GSP Regulation omitted to mention this, whilelisting a variety of other instruments relevant to the concept of sustainable development.6

therefrom’. 34 To this an intergenerational dimension was added by the 1987 BrundtlandReport, which coined the term sustainable development as ‘development that meets the needsof the present without compromising the ability of future generations to meet their ownneeds’. 35 In recent years, the concepts of development, and sustainable development, havecome to be seen ever more holistically. The 2002 UN Johannesburg Declaration onSustainable Development referred to the ‘interdependent and mutually reinforcing pillars ofsustainable development – economic development, social development and environmentalprotection’. 36 And, strongly influenced by the work of Amartya Sen, 37 the HumanDevelopment Index (and the annual Human Development Reports) prepared by the UNDevelopment Programme (UNDP), defines human development as ‘expanding the choicespeople have to lead lives that they value’. 38Against this background, it seems inappropriate to understand the term ‘development needs’solely in economic terms. 39 Accordingly, one may suggest that perhaps the Appellate Bodymisspoke when it said that a ‘development need’, for purposes of the Enabling Clause, ‘mustby its nature, be such that it can be effectively addressed through tariff preferences’. 40 There isin fact no reason why a ‘development need’ for these purposes needs to be any narrower thanusually understood. On the other hand, this is very far from saying that tariff preferences willnecessarily be able to meet ‘development needs’ without any resource implications. In thissense, there is certainly an economic dimension to the preferences that are protected under theEnabling Clause. The point, however, is that this is ensured by focusing on the link betweenthe preferences and the stated ‘development need’. Thus, it would have been better to say – asindeed the Appellate Body said in the immediately preceding sentence in EC – TariffPreferences – that it is only those tariff preferences that can effectively address legitimatedevelopment needs that have the protection of the Enabling Clause. 41How, then, does this apply to the conventions listed in the EU’s GSP+ program? In general, itcan be said that the objectives of the listed conventions correspond to ‘development needs’,interpreted broadly, in the sense that achieving these objectives usually corresponds to agreater standard of development in those countries. 42 But to require ratification andimplementation of these conventions as a basis for granting additional tariff preferences risksnot granting preferences to countries which do have a relevant need, and granting preferencesto countries that do not have a relevant need.34 UN Declaration on the Right to Development, Adopted by General Assembly resolution 41/128 of 4December 1986.35 World Commission on Environment and Development, Our Common Future (Oxford: OxfordUniversity Press, 1987).36 Johannesburg Declaration on Sustainable Development, 4 September 2002, para 5, available atwww.un.org/esa/sustdev/documents/WSSD_POI_PD/English/POI_PD.htm (visited 25 July 2007). Seealso the very broad definition in set out in the ILA New Delhi Declaration of Principles of InternationalLaw Relating to Sustainable Development, available as UN Doc. A/57/329 (2002).37 See especially Amartya Sen, Development as Freedom (Anchor, 2000).38 ‘What is HD’, http://hdr.undp.org/hd/ (visited 25 July 2007).39 Sen notes that the average life expectancy of black US residents is lower than residents of certaindeveloping countries with a lower per capita GDP: Sen, above at n 37, at 21-3. In this sense, the UnitedStates has a ‘development need’ similar to, if not greater than, some developing countries, though as anon-developing country it remains excluded from GSP benefits under the Enabling Clause.40 WTO Appellate Body Report, EC – Tariff Preferences, para 164.41 Ibid.42 One might be more sceptical of certain extraterritorial aspects of some of the conventions, such asthe requirement in the Genocide and Apartheid Conventions to prosecute these crimes even if they arecommitted outside of the jurisdiction of the ratifying country. It is difficult, if not impossible, to seehow this requirement corresponds to a ‘development need’ of the beneficiary country, even if itcorresponds to a ‘development need’ of the country in which the crime took place.7

(a) Objective standardAccording to the Appellate Body, legitimate ‘development, financial or trade needs’ must alsoconform to an objective standard. As mentioned, the Appellate Body considered that ‘broadbasedrecognition [as] set out in the WTO Agreement or in multilateral instruments adoptedby international organizations, could serve as such a standard’. 43 In saying this, the AppellateBody is likely to have been referring to such instruments as evidence of a standard. This iswholly different from giving any importance to the formal act of ratifying such conventions(this being an independent condition for receiving the preferences). 44 In fact, a country thathas not ratified a convention may have precisely the same development needs as one thathas. 45 Furthermore, at least one developing country WTO Member (Macao), which receivesgeneral EU GSP preferences, 46 lacks the international legal personality required to ratify theconventions, and is therefore ipso facto ineligible for GSP+ preferences For these reasons, theEU’s GSP+ arrangement must be considered to be in clear violation of the condition set outby the Appellate Body that all would-be beneficiaries in a similar situation be granted thesame preferences. 47(b) Selective ‘needs’It is perhaps also appropriate at this point to make some remarks on the EU’s choice ofconventions, and in particular on the ‘core’ human rights conventions in Part A. Somewhatsurprisingly, this list includes the Apartheid Convention, which two-thirds of EU MemberStates have not ratified, 48 and the Genocide Convention, which one EU Member State (Malta)has not ratified. On the other hand, it does not include the UN Migration Convention, whichthe UN considers a ‘core’ human rights convention, 49 perhaps because it has not been ratifiedby any EU Member State.This selectivity in the choice of conventions designed to serve as evidence of ‘developmentneeds’ is not in itself legally problematic. The Appellate Body never required that all possible‘development, financial or trade needs’ be identified in a differential tariff. It alsoacknowledged that ‘certain development needs may be common to only a certain number of43 See above at n 27.44 As the GSP Regulation requires ratification and implementation it is not necessary to consider theactual results of ratification alone. On this question see Oona Hathaway, ‘Do Human Rights TreatiesMake a Difference?’ 111 Yale Law Journal 1935 (2002).45 Indeed, logically speaking, it is tempting to suggest that a country that has ratified and properlyimplemented a convention is less likely to have the relevant development need than one that has not.46 Macao also receives GSP preferences from Canada, New Zealand, Norway, Turkey and Switzerland.Hong Kong, another non-State WTO Member, does not receive GSP benefits from the EU, but doesfrom Canada and Norway (and the non-WTO Member Russia): see UNCTAD, Generalized System ofPreferences – List of Beneficiaries, UNCTAD/ITCD/TSB/Misc.62/Rev.1, 2005, at 5.47 Ironically, this very same point has been made by the EC Trade Commissioner, Peter Mandelson,when criticizing a proposal of an eco-tax on products produced by countries not party to the KyotoProtocol. He pointed out that ‘China has ratified Kyoto but has no Kyoto targets because of itsdeveloping country status. The US has not, but states like California have ambitious climate changepolicies’. See Larry Elliott, ‘Mandelson Calls for Open Markets in Green Products’, The Guardian, 18December 2006.48 Among EU Member States the Apartheid Convention has only been ratified by Bulgaria, CzechRepublic, Estonia, Hungary, Latvia, Poland, Romania, Slovakia and Slovenia: see www.unhchr.ch/html/menu3/b/treaty8_asp.htm (visited 25 July 2007).49See www.ohchr.org/english/law/ (visited 25 July 2007). Some of the previously capturedbeneficiaries (Costa Rica, Georgia, Moldova, Mongolia, and Venezuela) have also not ratified thisconvention.8

developing countries’. 50 However, this example also underlines how ineffective the AppellateBody’s test is in preventing ‘development needs’ from being selected illegitimately. TheAppellate Body sought to protect against such a result in two ways. First, it stated that alegitimate ‘need’ could not simply be ‘based merely on an assertion to that effect by, forinstance, a preference-granting country or a beneficiary country’ but ‘must be assessedaccording to an objective standard’. 51 But ‘objectivity’ means little in a case of de factodiscrimination. After all, the classic example of such discrimination, the 1904 German tariffpreferences in favour of Switzerland to cows grazing at 800m above sea level, was equally‘objective’. 52 The Appellate Body’s second condition was that a legitimate ‘need’ must be‘widely-recognized’. 53 The problem with this condition is that, as the EU’s GSP+arrangement shows, it can be manipulated by a requirement that beneficiaries have more thanone ‘widely-recognized’ needs. In the EU’s GSP+ arrangement, beneficiaries must have nofewer than twenty-seven ‘widely-recognized’ needs – and these all simultaneously. It istempting to speculate whether this is in any way connected with the almost perfect identity ofbeneficiaries under the EU’s old and new arrangements.The failure of the Appellate Body to prevent a GSP+ arrangement being targeted at selectedbeneficiaries is also somewhat ironic from a historical perspective, given its similarity to theill-fated ‘Brasseur Plan’ of the early 1960s, according to which developed countries wouldgrant selective GSP preferences on the basis of individual negotiations with each beneficiarycountry. The author of the proposal offered this explanation: ‘[i]n this way, true nondiscriminationwould be brought about, for each developing country would be free to ask forthe negotiations it thought useful’. 54 Aside from doubts as to this understanding of theprinciple of non-discrimination, it was also obvious that such a system would enable the EECto protect existing preferences to European ex-colonies under the Yaoundé Convention. 55 Inthe event, the Brasseur Plan was soundly rejected on the grounds that it would be open topolitical manipulation, would fragment the bargaining power of developing countries, wouldbe impossible to negotiate, and would complicate the world trading system, and the presentsystem of non-discriminatory preferences was established in its place. 56 The resurrection ofselective preferences, even if limited to GSP+ preferences, is therefore not just dubious from anormative perspective, but seems to contradict the very purposes of the original system.(c) Positive responseA further problem with the EU’s GSP+ arrangement is presented by the Appellate Body’srequirement that there must be a causal link between the additional tariff preferences grantedin a GSP+ type program and the improvement of a legitimate ‘development, financial or tradeneed’. The Appellate Body said that:50 WTO Appellate Body Report, EC – Tariff Preferences, para 160.51 Ibid, para 163.52 Report of the International Law Commission on the Work of its Thirtieth Session, 8 May-28 July1978, Doc A/33/10, II(2) YBILC 1 (1978), at 31-2. This document contains an interesting gloss on thestory from an (unreferenced) Food and Agriculture Organization document stating that ‘the specializedtariff may have been technically justified because of the genetic improvement programme which wascarried out in Southern Germany at that time’.53 WTO Appellate Body Report, EC – Tariff Preferences, paras 164 and 179.54 Statement by Mr Maurice Brasseur, in Proceedings of the United Nations Conference on Trade andDevelopment, Policy Statements, Vol II (New York: United Nations, 1964), 108 at 111.55 For more on this, see Lorand Bartels, ‘The Trade and Development Policy of the European Union’18 European Journal of International Law (2007) forthcoming.56 John Huhs, ‘Trade Preferences for Developing Countries: Options for Ordering InternationalEconomic and Political Relations’ 20 Stanford Law Review 1150 (1968), 1175. See also GardnerPatterson, Discrimination in International Trade: The Policy Issues 1945-1965 (Princeton: PrincetonUniversity Press, 1966), 360-64.9

… the response of a preference-granting country must be taken with a view toimproving the development, financial or trade situation of a beneficiary country,based on the particular need at issue. As such, in our view, the expectation thatdeveloped countries will ‘respond positively’ to the ‘needs of developing countries’suggests that a sufficient nexus should exist between, on the one hand, thepreferential treatment … and, on the other hand, the likelihood of alleviating therelevant ‘development, financial [or] trade need’. 57Thus, even if the ‘development needs’ are broad and (according to the suggestion madealready) non-economic in nature, but this does not mean that all forms of preferentialtreatment will necessarily be protected by the Enabling Clause.One situation in which preferential treatment would clearly not be permitted is when abeneficiary country does not, in fact, have the need at issue. There can be no ‘positiveresponse’ to a non-existent need. This has some clear implications for the EU’s existing GSP+arrangement, which grants preferences at least partly to compensate beneficiaries for needsthat they do not necessarily have. This applies in particular to the ratification andimplementation of the Genocide and Apartheid Conventions. In a general sense, alldeveloping countries have an interest in preventing genocide and apartheid; indeed, they havean immediate and unconditional erga omnes obligation to do so. But this does not mean thatthey also have a ‘need’ to prevent genocide or apartheid, in the sense of the Enabling Clause.The Appellate Body’s references to ‘improving … the situation’ and to ‘alleviating the …need’ are clearly linked to material situations, most likely with resource implications.Arguably, there would be some flexibility in the degree of risk that a situation will be presentin any given country. Some countries clearly have a ‘need’ to prevent damage fromforeseeable natural disasters. But this does not mean that every possible risk, no matter howremote, can be considered a ‘development need’ of any given country. Bolivia is at no risk ofsustaining direct damage from a tsunami; nor, fortunately, does it appear to be at any risk ofsuffering apartheid or genocide. This is not to say, of course, that no countries have a relevant‘need’ to prevent genocide or apartheid, nor that tariff preferences would necessarily be aninappropriate means of meeting such a need. 58 But in the concrete case, it does appear that theEU is granting GSP+ preferences to compensate countries for ‘development needs’ that theydo not have. Consequently, these preferences are, at least in this respect, not authorized by theEnabling Clause.The situation is different where a country does have a legitimate development need. In thiscase, the question is one of causation: is the preferential treatment likely to alleviate this‘need’? Conceivably, there are two different ways in which this might occur. First, one mightimagine a specific tariff preference targeted at products related to the ‘need’ at issue. A goodexample of such a preference (ignoring its actual effects) would be the EU’s former drugsarrangement, which was designed to create incentives for non-drug substitute crops. A secondpossibility is that identified in Recital 7 of the GSP Regulation, which is to increase revenueand possibly general welfare, which can then be used to contribute to the alleviation of therelevant ‘need’. 59 In both cases, evidence that the preferences are not in fact alleviating theidentified ‘need’, and are not likely to do so, would break the necessary causal link. Thiscould be either because the preferences are not generating any benefits, or because the ‘needs’are not being addressed. In the first case, it is difficult to imagine why there would be acomplaint, so in this sense the argument resolves itself. Most likely, argument would bedirected to whether the identified ‘needs’ are being improved. Such an argument would be57 WTO Appellate Body Report, EC – Tariff Preferences, para 164.58 Bosnia-Herzegovina is an obvious example. I am grateful to Nathalie Bernasconi for this comment.59 This assumes that the additional preferences do generate increased economic growth. On this, seePersson, above at n 30.10

developing states 66 or landlocked developing countries. 67 Both of these categories figure inthe UN Millennium Development Goals 68 and are taken up in the UN Secretary-General’s2001 ‘Road Map’ on the implementation of these goals. 69 Though the ‘Road Map’ does notmake specific reference to trade preferences, it does consider one means of ‘moving forward’to be ‘[e]nsuring progress towards a special and differential treatment of small islanddeveloping States in the financial and trade-related spheres’. 70 Indeed, even the originalEuropean Commission Communication setting out the guidelines for the new GSP regimerecognised this as an appropriate distinction between developing countries. It stated that ‘theGSP should focus on the countries most in need, such as the LDCs and the most vulnerabledeveloping countries (small economies, land-locked countries, small island states, and lowincome countries) in order to help them play a greater role in international trade’. Havingacknowledged this, however, the Commission’s solution was, somewhat illogically, tograduate other countries from the normal GSP program, rather than by adding the speciallyaffected countries to a more favourable GSP+ arrangement. 71None of this is to say that it is necessarily simple to devise a GSP+ program that wouldrespond appropriately to the particular needs of such countries (though market accessequivalent to that granted to least developed countries would be a useful starting point). Inprinciple, though, it would seem that such an approach would be more likely than the EU’scurrent arrangement to conform to the Appellate Body’s ruling in EC – Tariff Preferences.AnnexConventions referred to in Article 9 of the EU GSP RegulationCore human and labour rights UN/ILO Conventions1. International Covenant on Civil and Political Rights2. International Covenant on Economic, Social and Cultural Rights3. International Convention on the Elimination of All Forms of Racial Discrimination4. Convention on the Elimination of All Forms of Discrimination Against Women5. Convention Against Torture and other Cruel, Inhuman or Degrading Treatment orPunishment6. Convention on the Rights of the Child7. Convention on the Prevention and Punishment of the Crime of Genocide66 For a comprehensive discussion, though without linking this to GSP programs, see Barbara vonTigerstrom, ‘Small Island Developing States and International Trade: Special Challenges in the GlobalPartnership for Development’ 6 Melbourne Journal of International Law 402 (2005).67 The United Nations Office of the High Representative for the Least Developed Countries,Landlocked Developing Countries and the Small Island Developing States (UN-OHRLLS) wasestablished by the UN General Assembly in 2001: see http://unohrlls.expressiondev.com/en/about/(visited 25 July 2007).68 UN Millennium Declaration, UN Doc A/RES/55/2, adopted 18 September 2000, paras 17-18.69 United Nations, Road Map towards the Implementation of the United Nations MillenniumDeclaration, Report of the Secretary-General, UN Doc A/56/326, 6 September 2001, Goal 8 Target 14.70 Ibid, para 155. The Road Map makes no similar recommendation for landlocked developingcountries (paras 156-7). This is not entirely easy to understand, given that the increased transport costsof these countries, which is mentioned by the report, affects their development, and would seem to beappropriately addressed by trade preferences: see eg WTO Cancun Ministerial Conference, Paragraph18 of the Draft Ministerial Text (JOB(03)150/Rev.2), Small Economies, Joint Proposal by LandlockedDeveloping Countries, WT/MIN(03)/W/23, 14 September 2003; and Third Party Written Submissionof Paraguay to the Appellate Body in EC – Tariff Preferences, 30 April 2003, para 26, available atwww.acwl.ch (visited 25 July 2007).71 European Commission, COM (2004) 461, above at n 4, para 6.213

8. Convention concerning Minimum Age for Admission to Employment (No 138)9. Convention concerning the Prohibition and Immediate Action for the Elimination ofthe Worst Forms of Child Labour (No 182)10. Convention concerning the Abolition of Forced Labour (No 105)11. Convention concerning Forced or Compulsory Labour (No 29)12. Convention concerning Equal Remuneration of Men and Women Workers for Workof Equal Value (No 100)13. Convention concerning Discrimination in Respect of Employment and Occupation(No 111)14. Convention concerning Freedom of Association and Protection of the Right toOrganise (No 87)15. Convention concerning the Application of the Principles of the Right to Organise andto Bargain Collectively (No 98)16. International Convention on the Suppression and Punishment of the Crime ofApartheid.Conventions related to the environment and governance principles17. Montreal Protocol on Substances that Deplete the Ozone Layer18. Basel Convention on the Control of Transboundary Movements of Hazardous Wastesand Their Disposal19. Stockholm Convention on Persistent Organic Pollutants20. Convention on International Trade in Endangered Species of Wild Fauna and Flora21. Convention on Biological Diversity22. Cartagena Protocol on Biosafety23. Kyoto Protocol to the United Nations Framework Convention on Climate Change24. United Nations Single Convention on Narcotic Drugs (1961)25. United Nations Convention on Psychotropic Substances (1971)26. United Nations Convention against Illicit Traffic in Narcotic Drugs and PsychotropicSubstances (1988)27. United Nations Convention against Corruption (Mexico)14