TRANS-PACIFIC PARTNERSHIP. Free Trade Architecture to Boost Global Growth

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1 TRANS-PACIFIC PARTNERSHIP Free Trade Architecture to Boost Global Growth October 2014

2 ABOUT ITS GLOBAL ITS Global is a consultancy that specialises in public policy in the Asia Pacific region. Its expertise encompasses international trade and economics, direct foreign investment, environment and sustainability, international aid and economic development, and corporate social responsibility and management of strategic risks. ITS Global Level 1, 34 Queen Street, Melbourne VIC 3000 AUSTRALIA Tel: (61) Fax: (61) Commercial-in-confidence. The views expressed in this publication are those of its authors. The consultant takes no liability for commercial decisions taken on the basis of information in this report. The information is accurate to the best of the consultant s knowledge, however the consultant advises that no decision with commercial implications which depends upon government law or regulation or executive discretion should be taken by any person or entity without that party s having secured direct advice.

3 PAGE 3 INTRODUCTION Trans-Pacific Partnership - Free Trade Architecture to Boost Global Growth is a report published under ITS Global's TPP for Business program. The Trans Pacific Partnership Agreement (TPP) is a unique free trade agreement, in scope, coverage and content. TPP is an agreement that will shape open markets and promote economic growth in the Asia Pacific region. The impact will be greater as time passes. The impetus Asia Pacific economies already give to global growth will expand. It is highly likely that TPP will evolve into a free trade area covering all major Asia Pacific economies. This will spur global growth for several decades. ITS Global has drawn on global resources and its own extensive global contacts to advise business on general and specific aspects of the negotiations and the Agreement. This paper has been published in cooperation with the European Centre for International Political Economy.

4 PAGE 4 EXECUTIVE SUMMARY The Trans Pacific Partnership Agreement (TPP) can do more than support economic growth among its 12 negotiating members who account for 37 percent of the world's GDP. 1 It can evolve into an arrangement that will drive global growth well into the second half of this century. The most beneficial free trade arrangements are those utilized by members to complement or drive domestic economic reform. China used its accession to the World Trade Organization (WTO) for this purpose. Japan has joined the TPP negotiations for the same purpose. Korea is negotiating free trade agreements (FTAs) and will eventually seek TPP membership for the same reason. Growth is slowing in East Asia's mature economies. Tepid global growth is the primary cause, but sclerotic services sectors (major contributors to GDP in advanced economies), restrictions on investment and impediments to competition in domestic markets are the key drag. A trade agreement between the world's more dynamic economies is the catalyst for economic reforms that will promote global growth. China also recognizes this. The Xi Administration has signalled the need for domestic economic reform and is now openly espousing the case for regional free trade arrangements. It is inevitable that China will join the TPP or an evolution of it. This could occur within a decade. The TPP therefore offers a strategy of bringing the US, Japan, and China into an FTA with growth economies in East and Southeast Asia and the Pacific in a process that will stimulate economic reform. To succeed, this agreement must focus on areas that will drive growth and stimulate economic reform opening services sectors, removing barriers to investment, and generating pressure to de-regulate domestic markets to enhance competitiveness. The Agreement must also shun efforts by selfinterested and special interest groups to hijack the agreement to the detriment of the overall gains in economic and social development that it has the potential to foster. Anti-free trade activists, environmental and public health activists, protectionist industries and organized labor are currently lobbying TPP governments to insert special interest components to advance non-trade objectives for which there is already ample provision under the existing trading system. The consequences would be to reduce the liberalizing impact of the TPP. This drive must be resisted. These actions would undermine the capacity of the TPP to realize its primary purpose. It is common for anti- free market Non- Governmental Organizations (NGOs) to contend that the international trading system creates obstacles or barriers for regulation in the public interest. In fact, the system already provides ample scope for governments to regulate to meet public policy objectives. There is, therefore, no need to exclude or to provide differential treatment for specific products or sectors. Instead, the WTO s regulatory model which permits limited controls on trade if specified and adverse impacts occur should be followed in the TPP. Failure to do so would set a bad precedent. Removal of restrictions on enterprises in TPP economies to supply services in domestic and foreign markets is essential for promoting and sustaining economic growth. Liberalizing them is essential to improving competitiveness. As economies industrialize, services industries contribute more and more to growth. They are also an increasingly important input to manufactured goods. Liberalization of investment is now recognized as an essential

5 PAGE 5 part of modern trade agreements, such as NAFTA (North American Free Trade Agreement), AANZFTA (ASEAN-Australia-New Zealand Free Trade Agreement), the Maastricht Treaty, and the ASEAN Comprehensive Investment Agreement (ACIA). TPP must take investment liberalisation further. Inclusion in the TPP of an Investor State Dispute Settlement (ISDS) mechanism, which grants a foreign investor the right to initiate dispute settlement proceedings against a foreign government for failing to honour commitments to liberalize investment in the agreement, is critical. Such measures give vital protection to Australian businesses investing abroad. If it is thought certain areas should be exempted from the scope of an ISDS mechanism, the approach adopted for the general exceptions under the General Agreement on Tariffs and Trade (GATT) should serve as the model. The practicability of this approach is demonstrated in the terms of the FTA between Korea and Australia (KAFTA). The TPP should also improve the functioning of markets by encouraging domestic laws to enhance competition in internal markets. In sum, TPP has the potential to improve market access opportunities, as well as to advance interests in the areas of services, investment and competition, while fomenting much needed domestic economic reforms and promoting sustained economic growth. In order to do so successfully, the TPP should build upon and enhance existing disciplines and the underlying principles of the multilateral trading system, avoiding solutions that would undermine these principles and prevent the TPP from achieving its full potential.

6 PAGE 6 CONTENTS About ITS Global 2 1. The Importance of TPP 7 2. Embedding the essential dynamics for growth 9 3. TPP must not be misrepresented by non-trade interests TPP must open services markets TPP should foster more efficient domestic markets TPP must expand investment A strategy for business 16 Annex A. Relevant provisions of Article XX of the GATT 17 References 18

7 PAGE 7 1. THE IMPORTANCE OF TPP The Trans Pacific Partnership Agreement (TPP) 2 is the most important international trade initiative today for driving long-term global growth. The TPP will commit a group of economies, which between them generate 37 percent of global GDP, to new measures to liberalize trade and investment. In addition, the TPP will lay the foundation for other regional economies, including Korea and Taiwan, and most importantly China, to adopt similar policies, probably within a decade. Nothing locks in policies to promote global growth better than state-of-the-art FTAs. If negotiated properly, the TPP could be such an agreement. Like all effective FTAs, it would create regulatory frameworks to open markets for trade and investment. When implemented hand in hand with domestic economic reform, the result is sustained economic growth. Very significant global supply chains across the Asia Pacific region have developed. All rely on freedom to invest and trade in goods and services. Today, the major Asian economies have come to realize that domestic economic reform is essential if growth is to be recharged (Japan) sustained (Korea) and built on domestic consumption rather than demand in foreign markets (China). All recognize that opening markets to freer trade is vital to advance domestic economic reform. The agreements managed by the World Trade Organization (WTO) still create the architecture and lay down the basic rules and principles which guide international trade in goods. The substantial majority of regional and bilateral FTAs are based on that policy architecture. That includes, among others, those establishing free markets in the European Union (EU) and the North American Free Trade Agreement (NAFTA). For good reasons, the WTO remains the global free trade police force. The most important regional agreements - the EU agreements, NAFTA, and the ASEAN (Association of Southeast Asian Nations) regional agreements - all recognize the importance of the wider strategy today of liberalizing services and investment for sustaining and increasing economic growth. The WTO agreements are also the most significant instruments of global international law. They offer opportunities for politicians and officials, particularly in developing countries where trade barriers in general remain higher than in industrialized economies, to make their own economies more productive and raise living standards. Regretfully, a large number of the 160 members of the WTO have not fully grasped this opportunity. These are the economies that have declined the opportunity to expand global commitments under WTO rules to liberalize trade in services and set rules to liberalize investment. In today's globalized economy, these measures are as important as removing tariffs on imported goods. In the last thirty years, the leading drivers of growth in global trade have been Asian economies (Figure 1), which have embraced the rules and principles of the multilateral trading system. Japan, Korea and Taiwan and then China charged economic growth in Asia and the world by expanding trade, particularly in manufactures of electronics and information and communications technology (ICT) (Figure 2). The TPP can be an important vehicle serving that purpose. Once completed, most members anticipate its expansion to include other economies in the Asian Pacific region, particularly the members of the Asian Pacific Economic Cooperation (APEC) 3 group.

8 PAGE 8 A number of them, including South Korea and Taiwan, have already registered interest. So has China; although its formal focus is on the concept of a Free Trade Area of the Asia Pacific (FTAAP), that should eventually comprise all APEC members, as well as the countries that will be part of the Regional Comprehensive Economic Partnership (RCEP) 4 an ASEAN-driven Asia Pacific trade initiative which is less ambitious in scope than the TPP. In the same way East Asian economies were the drivers of global trade and economic growth in the global economy in the last three decades, the TPP and its evolution can continue to be the driver of global growth in the next half century. Figure 1: The Changing Share of Global Trade (%) 5 20% 18% 16% 14% 12% 10% 8% 6% East ASIA Germany United States Figure 2: Global ICT Exports 6

9 PAGE 9 2. EMBEDDING THE ESSENTIAL DYNAMICS FOR GROWTH The principles to achieve free trade were enshrined in GATT in 1947 as part of a strategy to rebuild economies devastated by World War Two and to foster global economic growth and prosperity. The GATT entered into force initially with 23 parties. In 1994, following the completion of the Uruguay Round of negotiations, the WTO was established, adding to the GATT major agreements on services and intellectual property, as well as several other agreements expanding on provisions of the GATT. Today, the WTO has 160 Members. The initial beneficiaries were in Europe, where record rates of growth and increases in prosperity were achieved. Growth in Japan, based on manufacturing and expansion of exports, and then the Asian Tiger economies followed suit. In order to sustain continuing collaboration among governments to reduce barriers to trade and investment with the aim to advance mutual benefits, the TPP must enshrine the classical principles which were laid down in the GATT and constitute the cornerstone of the multilateral trading system to this day. 2.1 Freedom to trade in goods is the fundamental principle Accession to the GATT required adherence to legally-binding controls on how trade should be managed: Parties could use only tariffs to restrict trade in goods. These tariffs had to be legally bound once the level of tariff was lodged in each country's schedule of tariffs, it could not be raised without paying compensation to trading partners who might be disadvantaged by the rise. The same tariff had to apply to every import of a given product, regardless of its country of origin. The level set for any imported product had to be the lowest tariff imported from the "most favoured nation". Once the product entered the market it had to receive "national treatment" - i.e. be treated in the same way as identical domestic products. Payment of subsidies to domestic products (a common alternative method of protecting industries) was strictly limited. There was an unwritten understanding among GATT parties that at regular periods they would negotiate to reduce tariffs. As a result tariffs were rapidly reduced among industrialized economies in the 1950s and 1960s. Today the WTO reports the average tariff in global trade in goods among major trading partners is around five percent. 7 These rules applying to trade in goods are followed in most FTAs to reduce tariffs. There are around 180 FTAs worldwide. Most are closer to political declarations to co-operate in trade rather than agreements to regulate legally binding commitments to reduce trade barriers. However, among economies that consider the capacity to trade as important, they are closer to the latter. These agreements rely heavily on WTO principles and precedents governing trade in goods. All international agreements make provision for exceptions to the basic rules, to give scope for regulation of matters of public interest. The principle in the GATT generally is not to state which products were expressly included or excluded, but rather to focus on identifying policy objectives that justify exemptions from

10 PAGE 10 the basic rules, such as the protection of public health and the environment. These provisions were designed to allow governments to adopt regulation necessary to protect legitimate policy objectives. The GATT and case law of the WTO Appellate Body in a number of international disputes set specific tests to qualify for those exceptions and regulate their use. 8 In simple terms, the relevant provision of the GATT (Article XX) requires measures not to be disguised obstacles to trade, nondiscriminatory and necessary (i.e. to be effective and the least trade restrictive as possible to achieve the desired objective). The best FTAs today invariably reflect the WTO standard of what is an allowable exception. Embedding the liberalizing dynamic in the TPP requires following the essential values which achieve liberalisation in the WTO agreements. This is very important to ensure the agreements promote free trade and do not create protected enclaves. The ideal success criteria of TPP for reducing barriers to trade in goods accordingly should be: coverage of all industries and all products; commitments to reduce all barriers to zero over time; exceptions to follow the standards set by the WTO Agreements. To make today's global markets more open and competitive, the TPP also needs to ensure it includes measures to liberalize trade in services and remove barriers to investment. The TPP must be first and foremost an instrument to secure freedom to trade and investment the primary function of FTAs is to expand markets. 3. TPP MUST NOT BE MISREPRESENTED BY NON- TRADE INTERESTS Today, the near universal membership of the WTO and the proliferation of bilateral and regional trade agreements demonstrate that governments accept that free trade and free markets should be the primary medium for exchange of goods and services. In addition, there is no inherent conflict between international trade and investment agreements and the protection of public health or the environment. Yet there are a number of non-governmental organizations (NGOs) which aim to have the TPP serve purposes other than opening markets for trade and investment or misrepresent its purposes and provisions as undermining other public policy interests. First, there are the traditional protectionist interests which find FTAs disagreeable because they want governments to protect their industries from competition. In most economies there are businesses or unions which lobby governments not to open markets. Second, there are interest groups, particularly some environmental groups in the United States which propose inclusion in the TPP Agreement of measures which provide for or strengthen enforcement measures in other, free standing environmental agreements. Of greater moment is a determined effort by a number of NGOs to misrepresent the impact and scope of WTO Agreements and FTAs. There is a general contention that both restrict the capacity of Governments to regulate in the public interest. This is pronounced in environment, health and some intellectual property areas.

11 PAGE 11 But this is simply not the case. When the GATT was first negotiated in 1947, it was recognized that space had to be provided for Governments to regulate according to important public policy interests. These are the provisions in Article XX of the GATT which is referred to in the previous section. Food activists in the US have traditionally argued WTO rules obstruct the setting of high standards to limit contaminants in food. That is not the case. The trade rules recognize the right of governments to regulate such standards when demonstrated as technically sound and proven. Environmental groups contend trade rules in FTAs and the WTO allow trade in products which have adverse effects on the environment. But it is important to highlight that the problem is not created by the rules governing trade in products that cause pollution; rather, it is the failure of authorities to regulate the source of the pollution. Nothing in trade agreements inhibits that. Almost all trade agreements follow the model set in the GATT where scope is provided to allow authorities to regulate to protect human and animal health and safety. Most of the solutions NGOs are pushing for: i. are unnecessary to address legitimate policy objectives, ii. iii. would break and undermine the pillars of the system, and if adopted, they would set a legal precedent that would have many unintended consequences going forward for a broad range of sectors. These solutions include dispute settlement for environmental provisions already covered by multilateral environmental agreements. Public health and environmental objectives can and should be addressed in specific frameworks either in domestic law or in purpose-designed international agreements. It is telling there are very few of the latter. This suggests there is not the domestic or global support for the sorts of measures these NGOs advance. The approach to providing for and managing exceptions in the WTO Agreements strikes the right balance and has stood the test of time. If the TPP is to be effective it should follow them. Efforts by opponents of free trade to use non-trade issues to disguise protectionist intentions should be disregarded.

12 PAGE THE TPP MUST OPEN SERVICES MARKETS Opening markets for services industries is now also vital. The WTO estimated last year that exports of services account for 22 percent of global trade. In the same way lower tariffs enhance competitiveness, so does opening markets for providers of services. Transport, finance, and, telecommunications are vital industries for competitive economies. The competitiveness in global markets of many traded goods today also depend on competitively priced "embedded services", typically those immediately aforementioned. In addition, global manufacturing supply chains, particularly for electrical and electronic products such as those in the Asia Pacific region, now also critically depend on competitively priced services. Removing restrictions on enterprises in TPP economies to supply services in domestic and foreign markets is essential for promoting and sustaining economic growth. As economies industrialize, access to globally competitive services to maintain competitiveness increases. This is much more obvious today than when tariffs were higher. The concept of multilateral liberalization of services emerged 40 years after the concept of multilateral liberalization of trade in goods was institutionalized in the GATT. A "General Agreement on Trade in Services" (GATS) was negotiated in the Uruguay Round ( ). This was a radical, but logical, development. Recognizing that among industrialized economies at least, tariffs were no longer a major impediment to trade, it was appreciated that the same liberal benefit of allowing competition for trade in goods was achievable for trade in services if competition across markets were enabled. The GATS was modelled to a degree on the GATT, but with an important exception. While GATT obligations extended to all trade in goods, the GATS agreement only applied to services which members agreed should be covered. The commitments to liberalize were also relatively modest. The expectation in the WTO was that another round of negotiations would be held just a few years later to extend commitments. That was to be a key outcome of the Doha Round. This did not happen because the Doha Round stalled. In East and Southeast Asia, there has been reluctance to liberalize services sectors and controls on investment. Failure to do so will mean economic growth will slow and economies will lose competitiveness. As the cost of labor costs rise as economies grow, the global competitiveness of these economies will flag. This is recognized in Japan, Korea and China, but less so in ASEAN. Around 80 percent of GDP in advanced economies is generated by services industries. In developing economies they generate around 40 percent. FTAs can produce more superior results on services than the WTO if they start with the assumption that all services are covered, even if no immediate commitments to reduce restrictions on delivery of services are made. The major liberalisation of services has accordingly been achieved through FTAs. The TPP must advance liberalization of services and set new benchmarks.

13 PAGE TPP SHOULD FOSTER MORE EFFICIENT DOMESTIC MARKETS As has been very recently demonstrated in East Asia, there is increasing recognition among regulatory authorities that increasing competition in domestic markets is a natural regulatory partner to opening markets to foreign competition. There have been occasional calls for inclusion in trade liberalization agreements of measures to increase domestic competition. Most analysts consider it impracticable to provide for cross linkage in a FTA of commitments to open domestic markets to competition in one economy with similar commitments in another. However, FTAs like TPP are good vehicles for demonstrating to politicians, policy makers and officials the importance of expanding competition in domestic markets through domestic de-regulation. The TPP should include provisions to encourage parties to undertake domestic action to encourage competition. This is particularly relevant to state-owned enterprises (SOEs). Several US groups such as the US Chamber have proposed including competitive neutrality within the competition chapter, drawing from the experience of Australian competition authorities. 6. TPP MUST EXPAND INVESTMENT The global reduction of tariffs has also revealed how restrictions on foreign investment now impede the free flow of capital. Both are essential if the full benefits of open markets are to be secured. In low-tariff economies today, it now is just a business decision in many industries to decide to supply goods or services direct from a locally-established enterprise in foreign markets or from a plant in a domestic market, provided investment regimes so permit it. Global investment flows are growing strongly as a result. The United Nations Conference on Trade and Development (UNCTAD) annual investment report consistently demonstrates this. Liberalizing foreign investment controls is now recognized as an essential part of modern trade agreements. This is demonstrated in NAFTA 9, AANZFTA 10, the Maastricht Treaty 11, and the ASEAN Comprehensive Investment Agreement (ACIA), although some ASEAN members seem reluctant to implement its provisions. 12 This is also recognized in the GATS, but not in the rest of the suite of WTO Agreements. Investment as a general issue was part of the original mandate for the Doha Round of negotiations in the WTO which began in 2001, but was dropped at the insistence of developing countries. Given the recognition today in business and government of the importance of greater investment for fostering growth in Asian Pacific economies, investment provisions in the TPP should be based on the most liberal provisions among current TPP negotiators as starting points, with commitments to exceed them.

14 PAGE Why ISDS should be included It has become more common practice to include "Investor State Dispute Settlement" (ISDS) provisions in FTAs. These create rights for investors in one party to initiate complaints in international tribunals that rights established in an FTA to invest in a partner have been denied. These provisions were first included in the NAFTA between Canada, Mexico and the United States in They created a right for a foreign investor in one party to initiate a dispute against one of the agreement partner governments for failing to remove restrictions on their investment. Opposition to including these measures in the TPP comes principally from anti-free trade interests 13 and environmental activists. They actively opposed inclusion of ISDS in the NAFTA Agreements and have consistently opposed them in FTAs since then. Organized labor does not want foreign-owned enterprises to invoke rights to invest and operate in the US market. Similarly, environmental activists see the measures as limiting their strategy to keep all avenues open to pressure foreign investors to adopt higher environmental standards. Some commentators have questioned the need for ISDS provisions since they have been covered in Bilateral Investment Treaties (BITs) for several years. Governments and business do not agree. There are also objections to ISDS that it is unnecessary on regulatory grounds. One is that ISDS creates more favourable rights for foreign investors to challenge investment decisions and regulations than for domestic investors. The contention is that once foreign investors establish a domestic presence in a foreign market, they should be treated in the same manner as domestic investors. Another objection is that ISDS provisions are framed in loose terms which can result in variations in determinations by arbitral bodies, thereby creating inconstant and uneven decisions and rulings. Without judging the legitimacy of these type of concerns, to the extent that they are voiced in negotiations, they should trigger a mature, technical debate to assess real solutions that would address those concerns, avoiding alternatives that: fail to provide real solutions; and it would create additional problems going forward. 6.2 The Benefits of ISDS ISDS is considered advantageous by many Governments, as well as investors for the following reasons: While national authorities are expected to regulate in accordance with investment rules in an FTA, it is not uncommon for national, regional and local governments in foreign jurisdictions to disregard them. ISDS provisions "de-politicize" dispute settlement processes in trade agreements. It is not uncommon for governments to take political considerations in a bilateral relationship into account in deciding whether or not to trigger a disputes process in an FTA. This is more likely to occur if the issue is controversial. Giving commercial entities the right to trigger a complaint that obligations under the FTA are not being honoured removes the risk that a Party may decide not to lodge a complaint because of unrelated considerations. Under ISDS processes, an independent arbitrator brings about a final result. In some FTA processes, the

15 PAGE 15 concurrence of the violating party is required. These processes can stall. 6.3 ISDS in Australia Australian policy on ISDS has been pragmatic. It was not included in the US Australia FTA, but Australia included it in FTAs with Singapore and Thailand. The position of the current Australia Government is to include it if a trading partner seeks it, and it is considered on a case-by-case basis. So it is included in the FTA with South Korea, but not in the FTA with Japan. The case made against ISDS in Australia is twofold one a general objection to conceding a right to enterprises in the other leg of an FTA to initiate a complaint the Australian Government has not honoured a commitment in the Agreement to liberalize terms for foreign investment; and two, the legal proceedings used to consider such a complaint might produce decisions which may not be legally consistent. The first complaint is from NGOs who are typically anti-free market. Their complaint a measure might prevent governments from regulating foreign investment to advance some public good in the future is no different to a complaint a government has agreed to remove a tariff. In the WTO, if a member decides to restore a level of protection previously reduced, compensation can be negotiated, usually reducing a trade barrier on another product. Most FTAs have provisions for settling disputes and capacity to re-negotiate provisions if there is a need to do so. The complaint is also made that the ISDS can inhibit in the future introduction of measures to advance a public interest. Australia has innovated a procedure in its FTA with South Korea which addresses this point. The FTA provides the same right in the ISDS provisions to regulate in the public interest which is specified in Article XX of the GATT. Canada has also adopted a similar approach in its latest BITs and FTAs, including the Canada- EU FTA. 6.4 Coverage of ISDS Consistent with their negative approach to free trade and the TPP agreement, activists and special interest groups want the same interests and products they propose for exemption from the agreement at large, also specifically exempted from the ISDS provisions. As with the Agreement at large, the same approach for providing exemptions to the provisions at large in the TPP, should also apply to ISDS provisions, namely to replicate the model used in the GATT and other WTO agreements.

16 PAGE A STRATEGY FOR BUSINESS Business should urge Government to ensure that the TPP sets the highest standards for achieving liberalization of trade in goods and services and investment. Specifically, it should urge Government to ensure that the TPP: Includes commitments to reduce barriers to trade in all goods to zero, leaving flexibility for different time lines for sensitive products; Reject proposals for any specific products to be excluded; and instead follow the principles and model in the GATT for allowing exceptions from commitments to liberalize according to specified and delineated impacts of trade in products. Sets high targets for reducing barriers to services, ideally endorsing as a long term concept removal of all restrictions; Sets ambitious targets for the removal of restrictions on investment; Includes "Investor State Dispute Settlement" provisions, and applies the same approach to exceptions as those for the trade in goods. Opposes proposals by protectionist and anti-free trade groups to include measures that undermine the liberalizing purpose of the FTA and seek to turn the TPP into an agreement to advance objectives unrelated to the removal of barriers to trade and investment; and Encourages parties to liberalize internal markets.

17 PAGE 17 ANNEX A. RELEVANT PROVISIONS OF ARTICLE XX OF THE GATT Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: (a) necessary to protect public morals; (b) necessary to protect human, animal or plant life or health; (c) relating to the importations or exportations of gold or silver; (f) imposed for the protection of national treasures of artistic, historic or archaeological value; (g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.

18 PAGE 18 REFERENCES 1 World Bank (2014), GDP Ranking, [accessed at: 2 Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, NZ, Peru, Singapore, Vietnam, USA. 3 The Other APEC member economies are China, Hong Kong, Indonesia, Papua New Guinea, Philippines, Thailand, Russia, and Taiwan. 4 The RCEP is an FTA under negotiation between the 10 ASEAN member countries and Australia, NZ, Korea, China, Japan and India. 5 Note: East Asia includes China, Japan, South Korea and Taiwan. Shares of global trade have been calculated on the basis of total merchandise imports and exports as a share of global merchandise trade. See WTO (2014), International Trade Statistics Database, for complete data set. Accessed at: 6 Source: WTO Secretariat based on UN Comtrade and WTO estimates. See: Relevant provisions of Article XX (g) of the GATT are set out in Annex A 9 The North American Free Trade Agreement - Canada, Mexico, USA 10 The FTA among ASEAN, Australia and NZ 11 This established the European Union 12 The provisions in ACIA are comprehensive, but few commitments to implement them have been made. 13 In the US this notably included Public Citizen and in Canada the Council for Canadians. In Australia it is from advocates of protectionism and unions.