China Africa trade-investment links: international economic law perspectives

Transcription

1 China Africa trade-investment links: international economic law perspectives Professor Melaku Geboye Desta Leicester De Montfort Law School Leicester, England Presented at: China's new development model: Impacts on Africa and Latin America, March 25-26, 2014, Facultad de Ciencias Económicas - Universidad de Buenos Aires (UBA), Argentina

2 Background Facts: booming trade and investment relations between China and Africa Underpinned by a network of international legal arrangements Backed by multiple dispute settlement mechanisms Legal issues least understood

3 Trade and investment Trade and investment so closely linked so distinctly regulated

4 Trade and investment Trade: Multilateral Regulated bilateral/regional/preferential Investment: Bilateral Facilitated/implemented by multilateral treaty Commonalities Philosophy: liberalization of barriers to trade/investment History: Havana Charter (but different evolutionary paths) General principles but with variations: nondiscrimination, transparency, rule orientation, etc.

5 China and the WTO system Timeline 1947: China as original Contracting Party to GATT 1951: China withdrew from GATT July 1986: application for resumption of status Sep. 1986: Uruguay Round launched China as full participant in the Uruguay Round negotiations and a Signatory to the Final Act and the WTO Agreement 2001: China s accession concluded Doha Development Agenda launched

6 Terms of accession China: onerous terms willfully accepted WTO-plus obligations v WTO-minus rights selective safeguard non-market economy status, etc. Africa: mostly sponsored into GATT Nearly all sub-saharan African members of the WTO joined GATT via sponsorship GATT Art. XXVI:5(c): If any of the customs territories, in respect of which a contracting party has accepted this Agreement, possesses or acquires full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement, such territory shall, upon sponsorship through a declaration by the responsible contracting party establishing the above-mentioned fact, be deemed to be a contracting party. Hence little or no commitments

7 Africa: member or observer

8 Participation within the WTO WTO as member-driven organization Focus on two key roles: Legislative negotiations Adjudicatory dispute settlement

9 Participation trade negotiations China A RAM sitting in a corner? Less active than most anticipated/feared? Or a country that has moved from a rule taker to a rule shaker to a rule maker (Gao 2012) Or are negotiations simply a difficult area to succeed in? Africa: Lack of commitments as a double-edged sword Often on the margins: preferences, etc. Coalitions undermined by conflicting interests to many Africa s?

10 Participation: negotiations

11 Participation dispute settlement China in phases (Qi 2012) First five or so years: ready to settle US steel safeguards case 2002: one of a crowd learning by watching from a safe distance: participation as 3 rd party Since 2006: Increasing assertiveness Developing in-house skills 2011 Shrimp case: with fully in-house lawyers Early theories about culture, etc. disproved Economic interest is all that matters Trade remedies: fertile area for disputes with China

12 China as complainant: 12 cases

13 China as respondent: 31 cases

14 China as both

15 Participation dispute settlement Africa Even less of a player in dispute settlement Too small to be sued? Egypt and South Africa: respondents in four cases each

16 China-Africa cooperation in the WTO Significant potential in trade negotiations Less so in other areas China s recent DFQF scheme Not all African countries are LDCs Unlikely to matter in the short term: conformity between export capacity and import needs

17 China-Africa relations in the field of investment The investment regime Largely bilateral over 3000 BITs Some regional-sectoral NAFTA, ECT ICSID as multilateral framework investor-state dispute settlement (ISDS)

18 Bilateral Investment Treaties (BITs) China and Africa: Actively involved China: a total of 128 BITs (UNCTAD 2013) 32 BITs with African countries Only 13 in force: Cape Verde, Egypt, Ethiopia, Gabon, Ghana, Madagascar, Mali, Mauritius, Morocco, Mozambique, South Africa, Sudan, Zimbabwe Many natural resources-rich countries missing E.g. Angola, DR Congo, Nigeria or Zambia Can have significant implications

19 Evolving interests and positions Approaches: evolving with economic priorities Early days (1980s): China s interest to attract FDI BITs mainly with OECD countries and its neighbours E.g. with Norway (1984), Italy, Thailand, Denmark, Austria, Kuwait and Singapore (1985) mid-1990s: China discovers Africa First BIT with an African country: Ghana (1989) Egypt (1994), Morocco (1995), Mauritius and Zimbabwe (1996), Gabon, Sudan, and South Africa (1997), Cape Verde and Ethiopia (1998), Mozambique (2001), Madagascar (2005) and Mali (2009). Why is timing important? Differences in the content of first generation BITs (pre-1998) and second generation (post-1998) (Qi 2012)

20 Evolving interests Comparison Early days: Africa and China united by a shared mistrust of ICSID and BITs Limited substantive obligations in BITs Strict control on the flow of inward investment Keeping certain sectors totally closed to private capital (whether foreign or domestic), others closed to foreign investment, and still others restricted by mode of participation (e.g. joint venture only) or by degree of foreign control or equity participation (e.g. foreign ownership restricted to a maximum of 49%) Encouraging foreign investment in certain areas with tax concessions and other inducements

21 Evolving interests Gradually: China s shifting economic interests From capital-importer to capital exporter Rebalancing the state s interest against the foreign investor s China s position getting closer to traditional OECD positions Negotiations driven by economic interests rather than considerations of solidarity with other developing countries

22 Evolving interests Comparison right to compensation E.g. Article 4(2) of the China-Ethiopia BIT provides that 2. The compensation mentioned in Paragraph 1, (d) of this Article shall be equivalent to the value of the expropriated investments at the time when expropriation is proclaimed, be convertible and freely transferable. The compensation shall be paid without unreasonable delay. E.g. Art. 4(3) of China-Uganda BIT: The compensation shall also be made without delay, be effectively realizable and freely transferable. See Agreement between the Government of the People's Republic of China and the Government of the Republic of Uganda on the Reciprocal Promotion and Protection of Investments (27 May 2004, not yet in force)

23 Evolving interests Comparison right to go to arbitration E.g. Article 9(3) of the China-Ethiopia BIT: If a dispute involving the amount of compensation for expropriation cannot be settled within six months after resort to negotiations as specified in Paragraph I of this Article, it may be submitted at the request of either party to an ad hoc arbitral tribunal or arbitration under ICSID Article 8(2) of China-Uganda BIT (2004): explicitly permits the investor to take the host state to arbitration under ICSID without limiting the grounds of claim before the arbitration tribunal

24 What to make of this evolution Positive development: Increased use of int l treaties and dispute settlement mechanisms to protect its interests A turn towards rule of law? the notion of the rule of law has never been part of traditional Chinese culture. The relationship between the governments and the people has always been that of master to servants. The WTO accession has somehow forced the Chinese government to change the way it manages the country and, more fundamentally, it has actually helped to change how the Chinese people view their relationship with the government. This is an overturning of the traditional national consciousness. It makes possible a true understanding by the Chinese people of the meaning of the rule of law, forming the foundation to the possibility of democracy in China. (Huang Dongli)

25 What to make of this evolution The same can be said about China s increasing resort to BITs of the investor-protective variety China has become more and more confident and comfortable in the use of int l law to protect its interests The difference between China and the traditional capital-exporting western countries is looking increasingly negligible

26 A few general lessons Great opportunities: Competition for Africa s products, even primary goods, serves Africa s interests Chinese investment promises significant potential for Africa No illusions: China-Africa international legal relations increasingly resemble typical North-South arrangements Caution: African governments also need to remain vigilant Africa s institutional deficiencies expose it to serious risks The possible turn to rule of law is encouraging but neither side has the established traditions in this respect