A political or economic union for the EU?

Brexit has shaken our confidence in the European Union; the talks about the reforms are on the top of Juncker’s, Schulz’s and Tusk’s agendas. In which direction should the European project move? Due to the ghost of Brexit, the reform process is a race against the clock. If the UK performs better in the long run (it is always easier to solve problems in small countries, let alone international organisations) and Europe stays with its old problems by identifying ways forwards, one cannot be sure that the European project will survive the XXI century. It’s hard to imagine for many of us, but I remember during my studies in 2007 when a professor of law mentioned the possibility of Brexit. Nobody from the class believed him, among them me.

First of all, the EU needs to have a vision. What is the purpose of the European Union? What goals are to be achieved in the distance future, let say in 50 years? Do the politicians want to transform the EU into the United States of Europe, or rather retreat to the economic union?

The EU needs to reject all these half-measures, which are by their very nature insufficient. The EU cannot be half United States of Europe anymore (what it is for the time being and hence it generates many problems). In this scenario, Europe remains week inside and outside of the continent. The current project cannot solve internal problems, such as euro and external such as immigration. Furthermore, Europe is not an equal partner for the great powers of the 21 century.

The EU, as well as its Members States, need to admit, that the post-Maastricht political integration process was a mistake. Maastricht was a result of French (and British) fears over German reunification. The countries strived to this treaty (which started the EU current political integration) hoping that politically integrated it will be easier to overcome German hegemony in Europe. The leading child of the treaty has been the European currency – euro. However, the EU had not integrated economically enough the old continent. Besides, the 2004 adhesion of mostly the post communistic countries (except Malta and Cyprus) added fuel to the fire.  Most of them were in the economic and political transition. Neither the new states nor the old 15 club was ready for such enlargement. For many years the politicians wrongly believed that more countries could also meld the power of one nation (see Germany). It was an entirely wrong assumption.

There are two ways to overcome the post-Brexit challenges. Either the EU decides to go into deeper political integration with the objective to create the United States of Europe or return to the purely economic union. For the first scenario, it should be remembered that the process of integration of the USA lasted for more than a century (from 1776 to 1914). In that period the USA integrated new territories mainly with the use of economic tools. Oddly enough, the US suffered even a civil war in the middle of the 19 century. Thus, the political union is not something that can be achieved in ten or twenty years.

My suggestion is to go to the political union by the economic integration. The EU looks in Bulgaria and Nederland like chalk and cheese. However, in 30 years the EU can integrate the territories to a greater extent. The EU needs, however, one thing- a common language. After Brexit, the English language will remain a language not associated with any European countries (the official language in Ireland is Irish) will not bias any state.  The English language is also widely spoken among a young generation of the European (which one day will shape the future of the continent). Furthermore, English is the language of all relevant international organisations.

The EU shall put all its forces to create a European dialect of English, apart from American English and British English. For that, the EU needs resources to distribute at the European level. With two, three decades the EU can make European English a second language for everybody in Europe.

Could EU army threaten NATO?

The new European Army announced by J-C Juncker last year is a project which has generated lots of debate. The project being still only under discussions will be beyond doubt very to implement. The key issue is a potential relationship between European Army and NATO. The European Army should be a new structure, which regroups some units of the EU Member States. Continue reading Could EU army threaten NATO?

The scope of the likeness in Art III:4 – competitive relationship in the market place

As regard to the criteria of Border Tax the Appellate Body in the EC-Asbestos case hold that competitive relationship is highly relevant and both necessary and sufficient for determination of likeness standard under Art III:4 and therefore regulatory purposes are irrelevant. National treatment principle can be applicable only with respect to ‘like products’ being in a close competitive relationship in the marketplace. Consequently, protectionist measures can be possibly applied only with the purpose of affecting the significant situation in the market of such products.[1] The Appellate Body stated as following:

Continue reading The scope of the likeness in Art III:4 – competitive relationship in the market place

The scope of the likeness in Art III:4 – determination of relevant criteria

As previously pointed, the ‘like product’ terms of Article III:4, although broader than the first sentence of Article III:2, is certainly not broader than the combined product scope of the two sentences of Article III:2.

The EC-Asbestos case constitutes a guideline for the determination of the criteria of ‘like products’ within the meaning of Article III:4. First, the Appellate Body highlighted that the Report of the Working Party on Border Tax Adjustments outlined an approach for analysing ‘likeness’ standard under Art III:4. This traditional method has been developed ipso facto by several rapports of WTO Panels and the Appellate Bodies with regard to Art III:2. In analysing ‘likeness’ it should be taken into account the four general criteria such as:

Continue reading The scope of the likeness in Art III:4 – determination of relevant criteria

‘Likeness’ Standard under Article III:4 – relationship with ‘likeness’ standard under Article III:2

The Art III:2 and Art III:4 cover the prohibition of discrimination concerning similar imported and domestic products. The inadmissible discrimination exists if either the same products are treated dissimilarly or if goods beyond the product-related criteria are discriminately treated, so as to afford protection to domestic production[1]. The textual concept of ‘like product’ in Article III:2 may suggest a similarly narrow reading of ‘like product’ in Article III:4, since both provisions form part of the same Article. Hence, the question arises of what is the relationship between ‘like products’ under Art III:2 and Article III:4.

Continue reading ‘Likeness’ Standard under Article III:4 – relationship with ‘likeness’ standard under Article III:2

‘Likeness’ Standard under Article III:4 – Absence of separate examination under Article III:1

Article III:4 of the GATT is considers to be a cornerstone of the multilateral trading system, defining the approach of the system to domestic regulation which may have an effect on trade[1].

The national treatment obligation of Article III:4 dealing specifically with internal laws and regulations provides that:

Continue reading ‘Likeness’ Standard under Article III:4 – Absence of separate examination under Article III:1

‘Likeness’ in Art III:2, second sentence: Determination of ‘directly competitive or substitutable products’

The notion of ‘directly competitive or substitutable products’, similar to ‘likeness’, raises considerable interpretation difficulties. There is neither systematic definition nor guidance to determinate the term. In the Japan-Taxes on Alcohol II case, the Appellate Body held that the specification of directly competitive or substitutable products must be made on a case-by-case basis taking into account all the relevant facts.

It is important first to note that the notion of ‘directly competitive or substitutable products’ is broader than the category ‘like products’ in Article III:2, first sentence. In effect, ‘all like products are, by definition, directly competitive or substitutable products, whereas not all directly competitive or substitutable products are like’.[1] In addition, in the of Canada – Periodicals case, the Appellate Body state that products must not to be perfectly substitutable in order to be ‘directly competitive or substitutable’, because a case of ‘perfect substitutability’ falls only under Article III:2, first sentence.[2] This imperfect substitutability is a sufficiently strong relationship for the broader prohibition of the second sentence.

In the Japan-Taxes on Alcohol II case, the Panel emphasized the need to look not only at such matters as physical characteristics, common end-uses, and tariff classifications, but also at the ‘marketplace’, which constitutes the relevant criterion since what was at issue was the responsiveness of consumers to the various products offered in the market[3].

In the Korea – Alcoholic Beverages case the criteria of directly competitive or substitutable products’ played a crucial role. First, the Appellate Body confirmed that by determination of the term it is important to take into consideration the ‘marketplace’ factors. For this standard, the question of substitutability from the consumers’ perspectives is given considerably more weight than the factors of physical characteristics and tariff classifications.[4]

Such interpretation of the criteria evoked a considerable discussion in the literature since the national treatment obligation finally reaches even those product relationships, in which the two products can share absolutely no physical similarity with each other, as long as they appeal to the consumers as ‘directly competitive or substitutable’.[5]

The Appellate Body considered that the products fall under the definition if they are interchangeable or if they offer alternative ways of satisfying a particular need or taste.[6] Furthermore, the Appellate Body held that when analysing whether products in question are ‘directly competitive or substitutable’, an analysis of latent as well as extant demand is required, because ‘competition in the market place is a dynamic, evolving process’ and therefore consumer behaviour could be influenced by protectionist internal taxation.[7]

To establish ‘directly competitive or substitutable products’ the Appellate Body proposed as well an examination of the cross-price elasticity of demand in that market. Cross-price elasticity analysis assumes to predict the change in demand that would result from a change in the price of a product following from a change in the relative tax burdens on domestic and imported products.[8] Both criteria ‘present direct competition’ and ‘a strong potentially direct competitive relationship’ are significant to determinate the likeness standard under Art III:2 second sentence.

As a consequence to show whether two products are directly competitive or substitutable, the WTO Panel and Appellate Body can look at factors like cross-price elasticity, elasticity of substitution, end-uses, consumers’ tastes and habits, and the products’ properties and nature. The list of relevant criteria is not exhaustive and other factors might be added.

This approach has meet considerable critic in the doctrine. Many commentators argue that consumer perceptions of differences between products cannot be dismissed just because they are created through advertising, even if the products at hand are physically identical, because there will be no protective effect of lower taxation of domestic products if consumers, for whatever reason, do not see a product as similar.[9]

[1] Appellate Body Report, Korea – Alcoholic Beverages, para. 118.

[2] Appellate Body Report, Canada – Periodicals, p. 28.

[3] Appellate Body Report, Japan – Alcoholic Beverages II, p.24

[4] Diebold N. F., Non-Discrimination in International Trade in Services, ‘Likeness’ in WTO/GATS,p. 108

[5] Choi W.-M.,‘Like Products’ in International Trade Law: Towards a Consistent GATT/WTO Jurisprudence p. 109.

[6] Appellate Body Report, Korea – Alcoholic Beverages, para. 114-116.

[7] Ibid. para. 120.

[8] Ibid. para. 137.

[9] Horn H., Mavroidis P.C., Still hazy after all these years: the interpretation of national treatment in the GATT/WTO case law on tax discrimination, p. 45