TRADE RULES AND ALCOHOL:
AN UNHEALTHY MIX
Prepared for the Pan American Conference
on Alcohol Policies
Brasilia 28-30 November, 2005
Prepared by:
Michelle Swenarchuk
Counsel and Director of International Programmes
CANADIAN ENVIRONMENTAL LAW ASSOCIATION
L’ASSOCIATION CANADIENNE DU DROIT DE L’ENVIRONMENT
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THE WEB OF INTERNATIONAL
TRADE AGREEMENTS
• GATT - GENERAL AGREEMENT ON TARIFFS AND
TRADE (1947)
– trade in goods, standard-setting
• WTO - WORLD TRADE ORGANIZATION (1994)
– goods, standard-setting, services, “traderelated” intellectual property
– 140+ countries
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THE WEB OF INTERNATIONAL
TRADE AGREEMENTS, continued
• NAFTA - NORTH AMERICAN FREE TRADE AGREEMENT
(1994)
– goods, standard-setting, services, “trade-related”
intellectual property, investment
– Canada, United States, Mexico
• CAFTA - CENTRAL AMERICAN FREE TRADE
AGREEMENT (2005)
– goods, standard-setting, services, “trade-related”
intellectual property, investment
– Costa Rica, Dominican Republic, El Salvador, Guatemala,
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Honduras, Nicaragua
THE WEB OF INTERNATIONAL
TRADE, continued
• BILATERAL AGREEMENTS
– Many in the Americas, including
•US-Chile
•US-Uruguay
•Canada-Chile
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2. FUNDAMENTAL INTERNATIONAL
TRADE RULES
• NON-DISCRIMINATION PRINCIPLES:
National Treatment: foreign products and
producers get “effective equality” with
domestic ones
Most Favoured Nation: all trading partnercountries get any trade advantage first
provided to one country
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Fundamental International Trade Rules
•State Enterprises and Monopolies
– must buy and sell without discrimination between
domestic and foreign
– must base purchases and sales solely on
commercial considerations
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QUANTITATIVE RESTRICTIONS
• Rules prohibit restrictions on quantities of
imports or exports by any means;
– duties;
– taxes;
– quotas,
– licences; or
– other measures.
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NAFTA extends this prohibition to services.
•In Canada, this applies to provincial
alcohol monopolies on imports of
foreign liquors to the province.
•Canada listed them in NAFTA negotiations
to preserve them.
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3. GENERAL AGREEMENT ON TRADE
IN SERVICES (GATS)
• A WTO Agreement
•Covers all measures affecting services,
meaning;
– laws, regulations, procedures, decisions,
administrative actions, “or any other” type
of government action.
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GATS (continued)
• GATS exemption for services provided under
government authority is weak.
• Most favoured nation and transparency must be
applied to all services.
• National treatment and market access provisions
apply to those services listed by each government in
1994.
• Currently the focus of negotiations in the Doha Round
of trade negotiations.
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4. INVESTMENT AGREEMENTS
• Several thousand bilateral investment agreements
exist.
• Also in NAFTA and CAFTA
• Broad definition of investment and investor.
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INVESTMENT AGREEMENTS, continued
•Powerful protection for foreign corporate
investors, including alcohol producers.
•Broad definition of “expropriation” allowing
direct investor-state lawsuits.
•Cases and threats have affected environmental
and tobacco-control strategies.
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5. HEALTH POLICY EXCEPTION
• Government may adopt measures “necessary”
to protect public morals and health.
• In 12 of 14 trade disputes over domestic
regulations, the challenged regulation was
found not “necessary” by trade panelists.
• Not a reliable defence when measure is
challenged.
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6. IMPLICATIONS FOR ALCOHOL
REGULATION POLICIES
STATE MONOPOLIES
• European integration treaties reduced alcohol control
options in Scandinavia.
•Requirement to operate on a commercial basis
restricts monopolies’ attempts to limit alcohol supply
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NATIONAL TREATMENT AND TAXATION
•Trade disputes have required three countries (Chile, Korea,
Japan) to tax foreign products like domestic ones.
•Not only for “like” products, but for “directly competitive or
substitutable” products.
Japan: shochu - gin, rum, brandy, whiskey
Chile: pisco - other foreign spirits with higher alcohol content
Korea: soju - imported spirits
A problem for “grandfathering” domestic practices
and regulating foreign ones.
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QUANTITATIVE RESTRICTIONS:
Policies countries were required to abandon
Germany:
•minimum alcohol rule (to prevent increase of low alcohol
beverages
•Ban on beers not meeting purity requirements
Holland:
•minimum price for gin
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Canada (Beer 1):
•Domestic beer sales in locations not available to imported
beers;
•Domestic brewers (only) could deliver;
•Differential price mark-ups not due to additional selling costs to
sell imports;
•Minimum prices for beer if they prevented imported beers from
being sold more cheaply than domestic ones.
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United States (Beer II):
•Lower taxes on some US producers;
•Imports to be sold via in-state wholesalers;
•Higher licensing fees on imports than on domestic beer and wine;
•In-state wine sales permitted, but not imported wine;
•No selling imports at lower prices than “like” products from other
US States;
•Listing practices giving imports less favourable treatment than
local products.
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GATS SECTORAL COMMITMENTS
• Alcohol related services:
– distribution (commission agents services, wholesale
trade, retailing, franchising and other services;
– advertising;
– retail and wholesale sales.
• GATS market access rules prohibit limits on:
– Numbers of service suppliers;
– Numbers of service operations;
– Participation of foreign capital.
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GATS SECTORAL COMMITMENTS
• Affects alcohol-control strategies of limits on:
– retail outlets;
– volumes of sales; or
– total sales, even if the limits are applied to both domestic and
foreign sellers.
• Distribution services commitments by countries in the
Americas:
– Argentina, Brazil, Mexico, Panama, Peru, US, Canada
– Some limits on alcohol coverage by Canada and the United
States.
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• Advertising services commitments by countries in
the Americas:
– Argentina, Brazil, Dominican Republic, El Salvador,
Honduras, Jamaica, Mexico, Panama, Peru, US,
Venezuela.
– Five European countries exempted advertising on
alcohol from GATS coverage:
•Poland, Slovenia, Liechtenstein, Switzerland,
Bulgaria.
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Current GATS Negotiations
• Priority objectives for the World Spirits Alliance:
– Significant liberalization and, where possible, elimination of
tariffs including the removal of ‘peak’ tariffs;
– Liberalization of non-tariff trade barriers;
– Liberalization of restrictions on services, including distribution
and advertising;
– Enhanced measures to facilitate trade in distilled spirits;
– Improved certainty of legal protection for spirits with geographical
indications.
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•The EU is pressing countries to remove alcohol controls and
restrictions.
• GATS, domestic regulations and pressures for a
“necessity test:”
– GATS negotiators suggest “restrictions/prohibitions on
marketing and advertising” could be subjected to the “necessity
test.”
• Other alcohol-control regulations which could be affected:
– licensing of alcohol facilities;
– limits on the numbers of alcohol outlets in a particular area;
– regulations on hours of operations; and
– training or qualifications of alcohol managers and staff.
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SUGGESTED RESPONSES FOR HEALTH
OFFICIALS
•Become involved in trade policy formation.
•Research international trade constraints and your country’s
position in current negotiations.
•Intervene in current GATS negotiations to prevent
liberalization that undermines alcohol controls.
•Promote increased political oversight of trade negotiators to
introduce balance in trade policy goals.
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SUGGESTED RESPONSES FOR HEALTH
OFFICIALS
•Ally with the global organizations of people and governments
working for trade policy reforms.
•Consider the negotiation of an international convention on
alcohol control to bolster domestic protections in the event of
trade-based challenges.
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