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Reflecting on ASEAN Members’ Disputes at the World Trade Organisation – Part 1: DS1, 1995 by Yvette Foo

12/04/2021 with [372 views] no comments

Reflecting on ASEAN Members’ Disputes at the
World Trade Organisation
Part 1: DS1, 1995

by Yvette Foo

The Association of Southeast Asian Nations (ASEAN) was established amid regional conflict and strained relations. ASEAN’s first five member states (Indonesia, Malaysia, the Philippines, Singapore and Thailand) in 1967 agreed to join together to increase regional solidarity in “uncertain and critical times.”[1] Even while being a political and security forum was of utmost importance, economic development was a concomitant priority. This is evident from the 1967 ASEAN Declaration itself.[2] Subsequently, this was manifest in the Agreement on ASEAN Preferential Trading Arrangements – the region’s first economic agreement in 1977 and forerunner of the Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area (AFTA) (1992).[3] Pursuant to the ASEAN Charter (2007), the longstanding regional desire to create the ASEAN Economic Community – as well as to conduct effective external trade relations – is impacted by compliance and enforcement issues.

Where intraregional trade disputes arise, ASEAN member states have recourse to ASEAN-based dispute settlement mechanisms. Article 9 of the Framework Agreement on Enhancing ASEAN Economic Cooperation (1992) (the Agreement) requires member states to resolve disputes concerning the interpretation or application of the Agreement. Article 9 is referred to in the Protocol on Dispute Settlement Mechanism (1996), which is ASEAN’s first formal mechanism for regional dispute resolution. More recently, under Chapter VIII of the ASEAN Charter on “Settlement of Disputes”, Article 24(1) provides that disputes under specific ASEAN instruments must be settled according to the mechanism provided for in the instrument.  Article 24(3) additionally states that if no dispute mechanism is specified in the treat, ASEAN economic agreements shall be settled in accordance with the ASEAN Protocol on Enhanced Dispute Settlement Mechanism (2004).[4]

Another avenue – and more often resorted to in the past – is the World Trade Organisation’s (WTO) Dispute Settlement Body (DSB).[5] The WTO’s dispute settlement process streamlines the adjudicative process into four stages: (1) mandatory consultation, (2) the panel stage, (3) the appellate stage, and (4) the implementation/compliance stage.[6] The adjudication process and its accompanying timelines are established to ensure disputes are handled efficiently, and through a stable legal framework instead of politics or power relations.[7] Additionally, not all disputes will undergo all four stages. Some disputes are solved before parties even enter the panel stage, while others may not involve appeals and move straight to implementation.

To date, the majority of ASEAN’s member states have been involved in WTO disputes, either as complainants, respondents, or third parties.[8] However, only three intraregional cases (i.e. disputes between ASEAN member states only) have ever been brought to the DSB:

  1. DS1, 1995: Malaysia — Prohibition of Imports of Polyethylene and Polypropylene (DS1)
  2. DS371, 2008: Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines
  3. DS496, 2015: Indonesia — Safeguard on Certain Iron or Steel Products

While these disputes at the WTO are between the individual ASEAN member states themselves, there are trends that reveal regional attitudes towards dispute settlement. This blog post is the first of a four-instalment series investigating the facts and proceedings of the three aforementioned intraregional cases. By examining one case per instalment, this series seeks to evaluate ASEAN’s attitude towards third-party dispute resolution by identifying common themes across the three cases. The series concludes with an analysis of ASEAN members’ journey with dispute settlement in general. It will also take a brief look at ASEAN’s own 2019 Protocol on the Enhanced Dispute Settlement Mechanism (2019 Protocol),[9] which is a signal of the region’s coming to terms with the importance of a structured legal framework to resolve trade disputes.

This first post provides an overview of the short history behind DS1. DS1 shows ASEAN’s initial apprehensions with formal dispute settlement procedures, but ultimately reveals the region’s inclination towards formal resolution of trade disputes.

DS1: The First WTO Trade Dispute

DS1 was the first dispute brought under the WTO dispute settlement process and, incidentally, also the first case involving two ASEAN members.[10]

DS1 concerned Singapore’s objections against the Malaysian Government’s prohibition on imports of plastic resins – namely, Customs (Prohibition of Imports) (Amendment) (No 5) Order 1994 which came into force on 7 April 1994. Under this Order, the Malaysian Government implemented a new permit system requiring Malaysian plastic makers to buy raw materials from Malaysia, and obtain permits from the government if they wanted to import more. Singapore asserted that its benefits under the WTO Agreement and GATT rules were significantly reduced, nullified, and/or impaired, given that their exporters and manufacturers of polyethylene and polypropylene were “adversely affected”[11] and had suffered “considerable trade damage”.[12]

Singapore had concerns with Malaysia’s prohibition even before DS1.[13] In 1991, Singapore shared its “deep concerns” over Malaysia’s protectionist policies for plastic resins.[14] The two countries engaged in negotiations and discussions that “did not… progress”.[15]

Singapore’s decision to go to WTO to resolve the trade dispute was a “last resort” move.[16] It made a request for consultations on 10 January 1995. Consultations took place on two occasions, the first between 13–15 February 1995 and the second between 8–9 March 1995.[17] Malaysia turned down a third request for consultations.[18] The dispute then progressed to the next stage, with Singapore requesting for a panel on 16 March 1995.

Settling through Bilateral Negotiations

 The panel was never established. The DS1 dispute was put on hold when Singapore withdrew its case against Malaysia after “the underlying cause of complaint”, i.e. Malaysia’s Order on plastic resins, “was addressed.”[19] This was accomplished through bilateral negotiations, during which Malaysia promised to align its import restrictions with GATT/WTO rules. [20]

A Mutually Agreed Solution, a document notifying the DSB and other WTO members of the disputing parties’ settlement terms, was submitted to the WTO on 23 March 1995. On 29 March 1995, the Malaysian Government informed all parties that Malaysia had modified its import licensing measures for plastic resins.[21] A few months later, on 19 July 1995, Singapore formally withdrew its complaint. From the minutes of the DSB Meeting on 19 July 1995, Malaysia expressed its appreciation of Singapore’s “cooperative spirit and understanding” and willingness to reach an amicable solution.

On one hand, this resolution was somewhat unexpected since DS1 appeared to be steadily escalating to a full trade dispute – the parties had already gone through two failed consultations and were entering the panel stage. On the other hand, this was unsurprising as, prior to DS1, Singapore and Malaysia had resolved their disputes primarily through bilateral negotiations. Both countries were known to prefer settling matters with diplomacy[22] and “rarely sought to handle their relations with each other on the basis of bilateral legal institutions or by way of international litigation.”[23]

How the WTO’s Dispute Settlement Process Played a Role

 Although the dispute was resolved before Singapore and Malaysia entered the panel stage, some preliminary conclusions can be made of how DS1 showcases certain regional tendencies towards formal dispute settlement. Even though the parties were unable to settle through negotiations before approaching the WTO, the availability of the WTO dispute settlement mechanism afforded them this option. One benefit of compulsory consultation as a “milestone” in the dispute settlement process is how it “serve[s] as ‘action forcing events’”, which gave Singapore and Malaysia time to “rethink the merits of their cases and the desirability of moving forward”.[24] Negotiation seemed to only progress after Singapore requested for a panel. It is likely that the possibility of having to engage in a costly and lengthy legal dispute convinced the parties go back to simpler, more familiar and informal ways of resolving their trade dispute. Indeed, many disputes are solved in exactly this way: a diplomatic settlement through negotiations after someone triggers the litigation procedure.[25]

Lastly, even though the trade dispute in DS1 was resolved through bilateral negotiations, this does not mean that Singapore and Malaysia are averse to dispute settlement mechanisms.  Positive signs can be found from the 28 February 1995 and 29 March 1995 meeting minutes of the WTO DSB. In the former, the representative of Malaysia stated emphatically that “ASEAN remained committed to one common bond, namely the confidence and belief in the multilateral Dispute Settlement System.”[26] In the latter, Malaysia informed the DSB it would not object to the establishment of a panel even after it changed its import licensing measures,[27] thereby demonstrating its willingness to follow the WTO process. The two statements show the region’s commitment towards formal dispute settlement, even at such an early stage of the WTO’s dispute settlement process.

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The next instalment in this series will focus on DS371, 2008: Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines (DS371). As far as intra-ASEAN disputes at the WTO go, DS1 is the shortest dispute. To compare and contrast, DS371 is a long, eventful, and ongoing dispute, but as the second post will discuss, it also illustrates the growing regional assiduity with third-party dispute settlement.
[1] ASEAN Secretariat, ‘History, The Founding of ASEAN’, <https://asean.org/asean/about-asean/history/> accessed on 23 March 2021.
[2] See the aims and purposes, the first of which is to “accelerate the economic growth, social progress and cultural development in the region through joint endeavours in the spirit of equality and partnership …”.
[3] Michael Ewing-Chow, Ranyta Yusran, ‘The ASEAN Trade Dispute Settlement Mechanism’ in Robert Howse, Hélène Ruiz-Fabri, Geir Ulfstein and Michelle Q Zang, The Legitimacy of International Trade Courts and Tribunals (Cambridge University Press 2018), p 365.
[4] See also Article 25 of the ASEAN Charter, which states generally for “appropriate dispute settlement mechanisms” to be established for disputes concerning the Charter or other ASEAN instruments.
[5] World Trade Organisation Secretariat, A Handbook on the WTO Dispute Settlement System (Chapter 1: Introduction to the WTO Dispute Settlement System, 2nd edn, Cambridge University Press 2017), p 5.
[6] Bruce Wilson, ‘The WTO dispute settlement system and its operation: a brief overview of the first ten years’ in Key Issues in WTO Dispute Settlement: The First Ten Years (Cambridge University Press 2005).
[7] Supra note 5, p 15.
[8] World Trade Organisation, ‘Disputes by member’, https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm> accessed on 23 March 2021.
[9]  The 2019 Protocol has not entered into force. Until it does, regional trade disputes are governed by the ASEAN Protocol on Enhanced Dispute Settlement Mechanism (2004).
[10] See World Trade Organisation, ‘Chronological list of disputes cases’ <https://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm> accessed 29 March 2021.
[11] Ibid.
[12] World Trade Organisation, ‘Minutes of Meeting WT/DSB/M/2’ (21 April 1995), p 3.
[13] World Trade Organisation, ‘Request for Consultations under Article XXIII:1 of the GATT 1994 by Singapore WT/DS1/1’ (13 January 1995).
[14] World Trade Organisation, ‘Minutes of Meeting WT/DSB/M/1’ (28 February 1995), p 6.
[15] Ibid.
[16] Reuters, ‘Singapore Asks WTO to Settle Malaysian Chemical Dispute’ JOC (11 January 1995) <https://www.joc.com/singapore-asks-wto-settle-malaysian-chemical-dispute_19950111.html> accessed 29 March 2021.
[17] World Trade Organisation, ‘Request by Singapore for Establishment of Panel under Article XXIII:2 of the GATT 1994 and the Understanding on Rules and Procedures Governing the Settlement of Disputes WT/DS1/2’ (17 March 1995).
[18] Supra note 12.
[19] Walter Woon, The ASEAN Charter: A Commentary (NUS Press 2015), p 197.
[20] Knight-Ridder Financial, ‘Malaysia and Singapore Settle Plastics Dispute Without WTO’ JOC (19 July 1995) <https://www.joc.com/malaysia-and-singapore-settle-plastics-dispute-without-wto_19950719.html> accessed 29 March 2021.
[21] World Trade Organisation, ‘Communication from Malaysia WT/DS1/3’ (31 March 1995).
[22] Chin Leng Lim, ‘The Uses of Pacific Settlement Techniques in Malaysia-Singapore Relations’ (2005) 6(2) Melbourne Journal of International Law 313, p 328.
[23] Ibid, p 314.
[24] Gary N Horlick, ‘The Consultation Phase of WTO Dispute Resolution: A Private Practitioner’s View’ (1998) 32(3) The International Lawyer 685, p 690.
[25] Supra note 22, p 329.
[26] Supra note 14.
[27] Supra note 12.