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Legal Nature of ITA-I and its status under WTO Dispute Settlement Mechanism:Samuel George 1 The Information Technology

Agreement, 1997(ITA) as a treaty, was negotiated outside the institutional framework of WTO. The Agreement was arrived at a venue of the Ministerial Conference, summoned for decision-making on issues concerning WTO multilateral trade agreements.2 However the ITA Declaration of Ministers was not made under the auspices of the WTO Ministerial Conference, but the congregation of Ministers attending the said conference. 3 Hence ITA is neither a multilateral agreement nor a plurilateral agreement 4, in a strict sense of the WTO legal framework. ITA is a plurilateral agreement, in the sense that it intended to cover a substantial percentage of world trade in IT products, by considering as participants WTO Members and even those States who were still in the process of acceding to the WTO. 5 The major consequence of this particular negotiation structure is that it would not be considered as a covered agreement for the purposes of WTO dispute settlement, as per Article 1 and Appendix I of the Dispute Settlement Understanding. 6 Contracting Parties to the ITA have structured the treaty, in compliance with the g eneral framework of WTO law, undertaking to modify their commitments under WTO tariff schedules7 to give effect to their commitments under ITA. This enables the Contracting parties to access the Dispute Settlement Mechanism (DSM) on a contravention of scheduled tariff commitments, but on that ground alone. In EC- IT Products the relationship between WTO tariff schedules and ITA commitments was debated; it was clear that a measure-at-issue disputed should be on account of a commitments located in the WTO schedule of concessions, however considering ITA modalities (paragraphs 2, 3 and 5) atleast with respect to contracting parties therein, the product descriptions in ITA Annexes (Attachment B) informed the intent to liberalize notwithstanding the HS headings nomenclature. This would prevent participants from circumventing their commitments on a technical interpretation of the HS headings alone, contrary to the liberalization agenda of parties at the time of negotiation. 8

The author holds a Master degree in Laws (International Economic and Trade Law) from Brunel University, London and also is an Indian Chartered Accountant. Contact : casammy@gmail.com , 0091-9324443845 2 Article IV.1 of the Marrakesh Agreement, 1994 sets the agenda for Ministerial Conference to administer general functions of the WTO, and decision-making related to WTO multilateral trade agreements. Neither is there any reference in the ITA to indicate Ministerial Conference decision to include it as an Annex 4Plurilateral Agreement by consensus (Article X.9 of Marrakesh Agreement). 3 See South Centre, Geneva The legality of Creating Plurilateral Agreements within the WTO for Singapore Issues (Nov 2003) South Centre Analytical Note SC/TADP/AN/SI/3 at paragraph 9. 4 Annex 4 to Marrakesh Agreement, 1994 5 Article 9 of the ITA 6 Article 1 .1 and 1.2 of Understanding on Rules and Procedures Governing the Settlement of Disputes (Disputes Settlement Understanding) 7 Paragraph 1 and paragraphs 1 and 2 of modalities annexed to ITA. The Schedule of concessions and commitments and Article II of GATT Agreement,1994 8 See Panel Report EC- IT Products at 7. 385 7.411. First of all the Panel ruled that ITA should be considered as a relevant instrument to WTO agreement. Having decided this, the Panel informed that in case of product

Interestingly, the Declaration (Paragraph 6 of modalities) has mentioned causes of action under non-violation clause, Article XXIII of the GATT Agreement, which inter alia does not restrict the residuary rights of WTO participating members only to the scheduled concessions but also impairment of benefits under any other agreements annexed to the GATT. 9 The question immediately arises if ITA is not a WTO instrument per se, any right or obligation under WTO agreements should not be affected notwithstanding the ITA treaty. On the other hand, a WTO member not being a participant to the ITA treaty can invoke a non-violation clause, without being a treaty participant under ITA but qua rights under WTO agreement. The canon of interpretation posits the ITA treaty creating separate rights under treaty law (Vienna Convention on Law of Treaties and Customary International law) for treaty violation betwixt treaty participants, notwithstanding unilateral modification of tariff bindings under WTO framework.10 However disputes invoking the non-violation clause have not been successful under WTO DSM till date. 11 The structuring of ITA as a hybrid instrument 12 has created a range of complexities in the matter of dispute settlement or an expansion of the ITA-I agenda. The starting point should be the legitimacy of plurilateral agreement s, within the WTO framework. The Preamble to the WTO Agreement provides the principle terms of reference for its objective, the development of an integrated, more viable and durable multilateral trading system. It also encourages reciprocal and mutually advantageous arrangements directed at substantial reduction of tariffs and other barriers to trade.13 ITA has endeavoured for a plurilateral agreement which has promulgated a zero for zero regime reducing trade barriers for IT products. However substantial reduction of barriers to trade has been limited to tariff elimination alone and not to other Non-Tariff barriers (NTBs). 14 It needs to be pointed out that the ITA has achieved what perhaps a multilateral trade agreement could not achieve in such a short span of time. But it is the
description under Attachment B, the parties could not agree on HS headings and included product descriptions. It was considered that ascribing HS heading was to be an on-going process (paragraph 3) in light with technological developments, indicating the finality of HS heading descriptions on its own is not tenable. Each ITA participant included Identical head notes to their Annexes in the ITA, clearly meant that their intention to incorporate the ITA commitments as closely as possible into their WTO schedule of concessions. 9 nd See Peter Van Den Bossche The Law and Policy of the World Trade Organization 2 edition (2008) Cambridge University Press, at 183-185. Non-violation clause implies a cause of action not on account of violation of a WTO agreement but still nullifies the benefits or an objective anticipated under a WTO Agreement. In Japan- Films case the Panel observed that non-violation causa arises when competitive position of a product subjected to a concession/benefit under the WTO is upset by an unanticipated measure. 10 See EC- IT Products at note 463 and 524, there were conflicting views whether ITA is an international treaty or a political declaration. The Panel however avoided on ruling whether the ITA is a full-fledged treaty or another instrument, but considered the fact that it was an instrument related to a WTO Agreement hence relevant as context for interpretation under VCLT 31(2), at 7.372-7.384 11 See Bossche at 185-2 12 Hybrid instrument in the sense that it some features of plurilateral-ism and to some extent affecting multilateral agreements 13 See Preamble to Marrakesh Agreement, 1994 14 See Barbara Fleiss and Pierre Sauve Of Chips, Floppy Disks and Great Timing: Assessing the Information Technology Agreement (1997) Paper prepared for IFRI and TCFGS at 30-33. However there are no direct evidences for the extent of NTBs in the sector that has prevented the substantial reduction of barriers to trade. The only thing evidences suggest, that there has been a substantial coverage that ITA has in world trade of IT products and growth over the last decade, which in itself cannot imply reduction of barriers to trade.

ambit of WTO legislative framework that is being discussed here. There exists a school of thought which suggests the plurilateral agreements should be limited to the Annex 4 agreements finalized during the Uruguay Round. 15 Both the scope of WTO (Article II) and functions of WTO (Article III) mention plurilateral agreements, but it could limit its focus only to mean the Annex 4 agreements. This argument is debatable. For instance WTO agreement does not define multilateral trade agreements either other than giving a reference to the Uruguay Round Agreements from Annex 1-3. This cannot imply that the Members anticipated there will be no further multilateral agreements in the future. It can be presumed on plain meaning multilateral meant involving all members of the WTO, while plurilateral meant a plurality of members engaging in negotiation of an agreement. Anyhow it is clear that plurilateral agreements are generally not prohibited under WTO law, since it has been provided decision-making framework for Ministers to include a trade agreement as Annex 4 agreement (Article X.9 of Marrakesh Agreement). A support for the critics of ITA is that it was negotiated out of the consensus system stipulated under WTO law. 16 This may not be in the best interests of multilateralism formulated in WTO law, where rules for decision-making and reciprocity were created to enable a level playing field on account of trade liberalization.

Secondly, as to the question why ITA been negotiated in a unique manner outside the framework of plurilateral agreements under Annex 4 to the WTO Agreement? Could inclusion in Annex 4 restrict the rights of participants to invoke DSM under the WTO multilateral agreement and its schedule of concessions? If ITA was a plurilateral agreement generis Annex 4 agreements, the rights and obligations will be limited to that which was provided in the plurilateral agreements. 17 This would have affected the purported mechanism under ITA for modification of tariff bindings unde r Article II of the GATT Agreements. The legitimacy of such modification, can be ascribed to the modalities undertaken for modification as per under 1980 model procedures.18 Article XXVIII, XXVIII bis of the GATT Agreement provides the framework for modification and renegotiation of tariffs to be involving: members who originally negotiated tariff bindings (initial negotiating rights); and, members with principal and substantial interest; in a reciprocal and mutually advantageous manner and with adequate compensation on other products (Article XXVIII: 2). Though duly certified, it has to be examined from the implementation history whether this procedure was followed, especially where interests

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See supra South Centre (n3) Article X.9 of the Marrakesh Agreement, considering procedures for consensus of Ministerial Conferences for Annex 4 plurilateral agreements 17 Perusal of Articles II.3, IX.5, X.10, XII.3, XIII.5, XIV.4, XV.2, XVI.5 of the Marrakesh Agreement; clearly indicates plurilateral agreements were meant to govern the relationships between Contracting parties alone; The ITA participants wanted MFN tariff bindings which would not have been possible under a plurilateral agreement 18 Paragraph 2 of annex on modalities in the ITA Agreement; More details on modification and renegotiation history can be accessed on http://www.wto.org/english/tratop_e/schedules_e/goods_schedules_table_e.htm (20 September 2012)

on non-participating WTO members were involved. 19 Sectoral-ism has been a part of the Uruguay rounds negotiations to liberalize substantial trade within a particular industry or group of industries. Though there may little evidence to suggest to the contrary, history of negotiations show that ITA in some respects went beyond sectoral negotiation. 20 The EC needed more than a carve out of consumer electronics, for opening up their markets to the US; and, other developing countries demanding concessions for their export interest; one of the EC officials quip suggested that ITA should stand for Information, Textile and Alcohol Agreement. 21 The renegotiation across other sectors may be legitimate under the Article XXVIII bis. 1 and 2 within the meaning of multilateral procedures, but the manner in which consensus was obtained among a few parties leave some doubt. Hence it conforms to WTO black letter of law, but maybe not in spirit.

Thirdly, should ITA expansion [2012] 22 be changed to take into account a broader coverage of trade liberalization? It has proposed for an expanded list of products, related to the IT Industry. However ITA in its present form does not adequately tackle issues of non-tariff barriers (NTBs) and trade facilitation issues. In the case of IT products nontariff barriers inter alia include mutual recognition on conformity of products standards; government procurement; and, protection of intellectual property. 23 The ITA paragraph 3 did propose consultation on NTBs in the context of determining products coverage, where HS headings do not give an accurate representation in the light of technological advancements. Even if the ITA is expanded in express text to include NTBs, how can WTO member participants approach DSM in case of a contravention? A broad agenda within an ITA expansion treaty will not fully resolve the problem. This would also skew the principle of common expectation 24 of WTO members, across all multilateral trade agreements. A
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Cf. Panel Report EC- IT Products at 7.18: *I+n accordance with paragraph 2 of the ITA Annex and the Decision of 26 March 1980 on Procedures for Modification and Rectification of Schedules of Tariff Concessions (the "1980 Procedures"), each ITA participant submitted a proposed modification to its own Schedule for review by all WTO Members. Each participant's schedule was certified following a three month review period for that particular schedule... 7.20[D]ue to the informal nature of the plurilateral technical discussions that took place during the negotiation and implementation of the ITA, there is no formal record of ITA participants' discussions on how modifications would be incorporated into Members' WTO Schedules. Almost all ITA participants included an identical or similarly worded headnote in their WTO Schedules but there is no express requirement in the ITA itself or elsewhere to do so. The origin of the idea for including a headnote as an aspect of the implementation of the ITA is not clear. 20 In the case of IT products, while the basis for product coverage was the main issue under negotiation, the boundaries for sectoral negotiation is highly disputable. ITA may have encompassed more than one sector by involving products for data processing, semi-conductors, telecommunications and their parts &accessories. See Attachment A and Attachment B of the Declaration of Ministers on Information Technology Agreement. 21 See supra Fleiss and Sauve(n13) at 39 22 The agenda at the ITA Committee held on 15 May 2012,to begin negotiations for expansion of product coverage under ITA, see http://wto.org/english/news_e/news12_e/ita_15may12_e.htm 23 See supra (n21) at 30-33 24 Cf. Bossche at 201; In an interpretation of multilateral treaty common expectation or intentions of all parties to all such related agreements are to be considered. Members negotiate on a request-offer negotiation (tree structure) or sectoral basis (forest structure) as in ITA, but in a multilateral forum all parties accept the package as a consolidated whole or single undertaking basis. This signifies common expectation of all parties to the whole package. Though modification/ renegotiation can be done on a party-to-party basis, compensation can be done by

few members or even majority participation cannot undermine multilateralism by negotiating outside the WTO framework albeit in general compliance with WTO laws. This exception was allowed for plurilateral agreements alone, it is not clear a hybrid structure is will be in the best interests of an efficient DSM and compensatory measures. This shows that the ITA-I had certain defects and without being cured it may inappropriate to launch straightaway into the next expansion agenda.

Fourthly should interactions of WTO institution with ITA institution (CITA)25 should be that as with inter-governmental organisation,26 and to be governed by Article V of the WTO Agreement which requires collaborative efforts with such bodies? The legislative mandate of the WTO under its founding Agreement (Article III.1) provides *T+he WTO shall facilitate the implementation, administration and operation, and further the objectives, of this Agreement and of the Multilateral Trade Agreements, and shall also provide the framework for the implementation, administration and operation of the Plurilateral Trade Agreements. Since ITA is strictly not multilateral or plurilateral agreement within the meaning of Article II. 1 and 2, it questions the whether there was a legitimate authority to involve the Council for Trade in Goods. However there is a general obligation to facilitate negotiations for trade liberalization or renegotiation of tariffs (Article XXVIII Interpretation)27 using its good offices.

The success of ITA negotiation has led to the successful negotiations of other sectoral agreements in telecommunications and financial services. Can the ITA model be a successful model for future negotiation in lieu of the multilateral rounds across sectors? This question may be relevant in current stalemate situation of Doha Round to encourage further trade liberalization. The demerit of sectoral negotiation lies in the oligarchical format of negotiations, where major players win more and minor players lose much. The ITA has cured some of this ill by giving MFN effect to ITA commitments to non participants also, by virtue of amendment of WTO MFN tariff bindings. But to circumvent free-riders on account of this MFN tariff to participants and non-participants, the States had to negotiate outside the IT sector as well, undermining the multilateral procedures set by WTO28.

including other sectors (horizontal sectoral-ism), also see Mann and Liu The Information Technology Agreement: Sui Generis or Model Stepping Stone? WTO-HEI Conference Geneva September 10-12, 2007 25 Committee of Participants on the Expansion of Trade in Information Technology Products (CITA) 26 Article V of Marrakesh Agreement 27 Article XXVIII Interpretation 28 The argument being if a negotiation is across sectors then the consensus should be obtained under the process set under the WTO framework. ITA became more than sectoral negotiation to gain more participants to achieve critical mass and sufficient product coverage.

To conclude, the submission is for broadening the agenda for trade liberalization to the benefit to all participating members. The structure of the agreement should be either multilateral or plurilateral to enable a broad based agenda to be aligned to WTO DSM. It is expected that ITA expansion [2012] negotiation will focus more on product coverage than other tariff barriers. There is evidence to suggest IT as a general purpose technology has improved productivity for all sectors of industries. 29 However ITA has been limited to IT products as such and not IT technology (TRIPS), which contradicts the very premise for liberalization, in todays context of pervasiveness of IT Technology. If IT products should be allowed market access, so should the technology protecti on be liberalized to enable productivity to percolate to downstream levels. This argument however can be a deal-breaker.

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See generally WTO, 15 Years of the Information Technology Agreement Trade, innovation and global Production networks (2012) ISBN 978-92-870-3826-5

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