3RD ANNUAL AFRICAN TRADE MOOT
PROBLEM
Statement of Facts
Introduction to Azaria
1. The Republic of Azaria is a landlocked African country, nestled
between Berea, Kitan and Mozana.
It is a large country with a
population of approximately 70 million.
2. Since independence, Azaria has had the fastest growth in per capita
income in the world. Economic growth averaged over 9% per year from
1966 to 2004.
3. The economy is predominated by mining, especially bauxite and
copper. Bauxite consists of 45-60% aluminium oxide, 12-30% water,
and various other impurities.
4. Bauxite is typically mined in open-pits and either processed into
aluminium near the mining operation, or shipped to smelting markets
around the world for processing.
5. The main ores of copper are chalcopyrite and bornite. The ores are
extracted by either traditional mining (open pit or underground) as well
as leaching. The copper is then recovered using physical and chemical
techniques.
6. Whilst Azaria has vast forests it does not produce paper and imports
most of it.
7. Azaria is a member of the WTO and has also signed a number of
international environmental agreements.
8. Whilst Azaria is a newly industrialised country, the population of certain
geographic regions suffer severe poverty and underdevelopment.
The Soybo Initiative
9. About a decade ago the Minister of Trade and Development
announced a new initiative to support the country’s southern region,
Dudava, a particularly poor region of the country.
Dudava has
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historically not contributed to the import and export sector and most
inhabitants engage in subsistence farming. The goal of the programme
is, therefore, to spur the development of the area and to assist small
and upcoming Dudavian farmers.
10. Research has shown that over the last ten years the market for organic
herbal teas has grown exponentially and the new initiative will thus
focus on the development of an indigenously grown herbal tea, “soybo”
for the local as well as the export market. Soybo is a member of the
legume family of plants and is used to make a tisane (herbal tea). The
tea has been popular in Dudava for generations, but is not well-known
outside of the region.
11. The tea is marketed as a “wellness tea” and is said to be insecticide
and herbicide free, caffeine free, additive free, preservative free,
colourant free and very low in tannins.
Tea leaves are sold in
aluminium canisters whilst some of the tea is packaged into teabags
with a machine that ties string to teabags instead of using staples, thus
cutting down on the amount of staples that end up in landfills.
12. In addition to teabags, brewed tea is bottled, flavoured with honey and
marketed as “organic bottled soybo”.
13. Apart from the tea, a number of other products are being produced and
exported such as, for example, a skin care range made from soybo, as
well as healthy herbal tea sweets, “soybo sweets”.
14. The programme is proving to be very successful. The tea is doing very
well in European markets and Azaria’s consumers also now prefer the
indigenous herbal tea to other types of tea.
15. Soybo tea has also been praised for the fact that it is an
“environmentally friendly product” and in 2004 successfully applied to
be part of the International Green Grocers Association “green
stewardship” scheme for organic goods that are also environmentally
sustainable. It now carries their label and research has found that
Azarian consumers have a preference for goods wearing the “green
stewardship” label.
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The “Green Campaign”
16. In 2002, the Azarian Minister of the Environment and Forestry
embarked
on
a
campaign
to
promote
greater
environmental
awareness. This campaign was in part sparked by concerns about the
country’s waste problem. This is caused mainly by waste products
from copper smelting.
In 2002-2003, the copper mining industry
produced over 17 million tonnes of solid waste, comprised mainly of
waste rock, tailings and slag.
17. As part of this campaign the Minister announced a recycling plan to
put a tax on all packaged products that cannot be recycled. The tax is
in the form of a system of “advance disposal fees” (ADFs). Essentially,
ADFs are added to the cost of a product that incorporates the cost of
disposing of that product when it is thrown away.
18. The Minister also announced a labelling scheme to complement the
ADF scheme. The Government’s Standard’s Association, ASA provides
the necessary certification for the label. The labelling scheme requires
that all packaging material be labelled, indicating whether it can be
recycled and whether it has been made from recycled material. The
packaging material that can be recycled and/or are made from recycled
material will carry the ASA green label. Packaging material that cannot
be recycled or that are not made from recycled material must carry a
label indicating that it cannot be recycled and/or that it was not made
from recycled material. No provision is made for re-use.
19. New legislation Decree 5463 of 2002 has been passed to implement
these new initiatives. Part IV deals with ADFs, while Part V of the Act
deals with the labelling provisions. According to the Department of
Environment and Forestry the stated policy objective of the new law is
to “curb natural resource use, curb land, air and water pollution and
save the environment” and is designed to “meet Azaria’s commitments
in terms of International Environmental Law.”
20. Part V defines “packaging” as “all products made of any materials of any
nature to be used for the containment, protection, handling, delivery and
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presentation of goods, from raw materials to processed goods, from the
producer to the user or the consumer.”
It defines “recycling” as
“reprocessing in a production process of the waste materials for the
original purpose or for other purposes including organic recycling”.
Article 21 states the following requirements for certification:
a) “in order to qualify for the label packaging must be
recyclable”, and
b) “in order to qualify for the label, recycled packaging
material should contain at least 30% low grade and
medium grade waste.”
21. Soybo tea leaves produced by Azaria’s new herbal tea industry is sold
in recyclable aluminium cans, which are not subject to the tax and
carries the “recyclable label”. The “organic bottled soybo” is made from
glass, which can also be recycled. However, the “healthy herbal tea
sweets” are sold in non-recyclable paper wrappers and the tea bags
are packaged in non-recyclable paper cartons. These are taxed and
do not carry the “recyclable label”.
The Kingdom of Berea
22. The Kindom of Berea is a small landlocked country, neighbouring the
Republic of Azaria. The total population of Berea is 23 million. Berea’s
exports are based on agriculture and the majority of Bereans rely on it
for their livelihood. About 67% of the population lives in rural areas,
and 33% in cities. Berea is a member of the WTO.
23. Berea is classified as a least-developed country and has received
economic aid from a variety of sources, including the United States, the
World Bank, Ireland, the United Kingdom, the European Union and
Germany.
24. It is a major producer of tea, and Azaria is its biggest market.
Traditionally, Berea packages its tea leaves in plastic pouches and its
tea bags in paper cartons. Neither the plastic pouches nor the paper
cartons are recyclable but the plastic pouches can be re-used.
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25. Berean tea producers have not been able to meet the requirements for
the labelling scheme since it would require considerable capital outlay
including creating new production methods solely for use in the Azarian
market. In addition, the ADF scheme of Azaria means that Berea’s tea
now costs considerably more than Azarian tea since Berean tea
producers have to pay the advance disposal fee. Berea believes that its
tea is at a competitive disadvantage since their packaging material does
not meet their buyers’ domestic standards.
26. A look at Berea’s export volumes for the period 2001 to 2005 indicates
that while global tea exports showed an upward trend, exports to Azaria
declined markedly. One of the possible causes of this is the use of
environmental labels in Azaria and the ADF scheme.
Percentage Change in Volume of Tea Exports from Berea
Tea Exports from Berea to Azaria 2001-2005
Volume
Global
To Azaria
2001-2002
4.32%
4.93%
2002-2003
5.15%
-1.85%
2003-2004
6.53%
-4.15%
2004-2005
6.47%
-21.80%
27. The Berea Tea Producers Association has approached their Department
of Trade and Development complaining that the Azarian measures were
trade restrictive, discriminatory and contradictive to WTO rules and
asked the Department to file a complaint with the WTO.
Procedural Background
28. The government of Berea requested consultations with Azaria on 3
March 2006 pursuant to Article 4 of the DSU, Article XXII:1 of GATT and
Article 14:1 of the TBT Agreement regarding Decree 5463 of 2002 Part
IV and V. Consultations were held in Geneva on 17 April 2006. During
the consultations Berea argued that Azarian measures were inconsistent
with its commitments under GATT and the TBT.
Azaria argued in
response that their measures were consistent with their obligations
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under the GATT and the TBT and if they were not consistent that they
were excepted under Article XX(b) and (g) of the GATT.
29. The two Parties failed, however, to settle the matter in consultations and
on 1 June 2006 Berea requested the establishment of a panel pursuant
to Article 4.7 and 6 of the DSU, Article XXII:2 of GATT and Article 14:2
of the TBT Agreement. Berea asked that the panel find nullification and
impairment of benefits accruing to Berea as a result of the violation of
Azaria of Article III:4 of the GATT1994 and Article 2:1 and 2:2 and 2:8 of
the TBT Agreement. The specific measures at issue as indicated by
Berea are Part IV and V of Decree 5463 of 2002.
30. A Panel was established on 20 June 2006 with standard terms of
reference and was composed on 4 July 2006. According to the Panel’s
timetable for the proceedings, the first written submissions of the Parties
are due on 30 September 2006. The Panel will hold its first substantive
meetings with the Parties 30 October to 3 November 2006.
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