Can China drag India to WTO for banning Apps and Cancelling existing Orders?

A Techno-Legal Analysis

Can China drag India to WTO for banning Apps and Cancelling existing Orders?

By:

Vijay SARDANA

Advocate, Delhi High Court

Techno-legal Expert on Agribusiness 

& Consumer Products Industries

& 

Priyanka Sardana, Advocate, Supreme Court of India

& 

Aastha Sardana, Researcher on Legal Matters

After the border conflict with China, India took various decisions to block the trading interests of China in India. Let us keep the following facts in mind:

• China encroached about 400-meters of the territory which is on the disputed border.
• In conflict, India lost 20 soldiers and there are reports that China lost around 40 soldiers.
• China refused to accept the previous agreements on border disputes and delaying in maintaining status-quo. 
• India took various retaliatory actions and blocked various commercial interests of the aggressor in the interest of national security.
• Now, China is treating to take India to WTO for dispute resolution mechanism under the pretext of MFN status is violated.

What is the WTO position on such matters? 
The World Trade Organization (WTO) regime is rules-based. Member States can only invoke exceptions that are expressly provided for. National measures based on these exceptions must comply with the stated conditions and such measures are justiciable. 

However, one of the GATT exceptions, the national security clause in Article XXI GATT, has always been in a category of its own, an exception among the exceptions.

What is Article XXI: on Security Exceptions?

Nothing in this Agreement shall be construed

(a)  to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests, or

(b)  to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests

i. relating to fissionable materials or the materials from which they are derived;

ii. relating to the traffic in arms, ammunition and implements of war and to such traffic, in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; 

iii. taken in time of war or other emergency in international relations, or

(c)  to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.

Now let us see what is the past experience at WTO on such matters.

Please note, the Dispute Settlement Body of the World Trade Organization (WTO) has never passed judgment on the validity of measures taken under this Article. It means there is no precedence before us.

What will happen if China approaches WTO on the trade restrictions in India on Chinese Products?

According to our assessment. the WTO regime is operating in a normal business environment with disputes related to trade. The Article XXI clearly makes Security Exceptions and no one can interfere in that. 

The UN Charter clearly says that Article 51 provides for the right of countries to engage in self-defence, including collective self-defence, against an armed attack (including cyber-attacks). 

This Article 51 of the UN Charter is particularly vague: it does not define what constitutes an attack. Is the seizure of ships or aircraft an attack? Is the accidental or intentional violation of another country’s airspace an attack? Is industrial espionage an attack? Is a spy satellite taking photographs of military installations an attack? It does not define what constitutes an armed attack. For example, is a cyber-attack an armed attack?

India China Border Conflict: 

The fact is War or other emergencies in international relations, like Indian-China border conflict leading to the death of security persons, “involves a fundamental change of circumstances which radically alters the factual matrix in which the WTO-consistency of the measures at issue is to be evaluated.”

Unlike the evaluation of measures are covered by the exceptions in Article XX, evaluation of measures under Article XXI(b)(iii) does not necessitate a prior determination that the measures would be WTO-inconsistent had they been taken in “normal times”. Therefor in the issues of national security, WTO cannot intervene.

Let us understand the disputes in the past and their outcomes at WTO:

In the GATT Analytical Index, the original thinking behind Article XXI has been explained as taking care “of real security interests and, at the same time, so far as we could, to limit the exception to prevent the adoption of protection for maintaining industries under every conceivable circumstance.”

Let us understand the intention behind the wording of Article XXI:

Paragraphs (a) and (b) of Article XXI, as mentioned above says, “it considers … essential security interests”

During discussions in the Geneva session of the Preparatory Committee, in response to an inquiry as to the meaning of “essential security interests”, it was stated by one of the drafters of the original Draft Charter that “We gave a good deal of thought to the question of the security exception which we thought should be included in the Charter. We recognized that there was a great danger of having too wide an exception and we could not put it into the Charter, simply by saying: ‘by any Member of measures relating to a Member's security interests,’ because that would permit anything under the sun. Therefore we thought it well to draft provisions which would take care of real security interests and, at the same time, so far as we could, to limit the exception to prevent the adoption of protection for maintaining industries under every conceivable circumstance.… there must be some latitude here for security measures. It is really a question of balance. 

We have got to have some exceptions. We cannot make it too tight, because we cannot prohibit measures, which are needed purely for security reasons. On the other hand, we cannot make it so broad that, under the guise of security, countries will put on measures which really have a commercial purpose”. The Chairman of Commission suggested in response that the spirit in which Members of the Organization would interpret these provisions was the only guarantee against abuses of this kind. 

It means every situation will be evaluated on its merit. India-China disputes if we go by the evidence and the merit of the case, it will be difficult for Chai to defend its position at international forums. In our view, China will not take the matter to WTO. 

Let us also evaluate past cases:

Portugal – Ghana Dispute

In 1961, on the occasion of the accession of Portugal, Ghana stated that its boycott of Portuguese goods was justified under the provisions of Article XXI:(b)(iii), noting that “… under this Article each contracting party was the sole judge of what was necessary for its essential security interest. There could, therefore, be no objection to Ghana regarding the boycott of goods is justified by security interests. At that time it was debated that it might be observed that a country’s security interests might be threatened by potential as well as an actual danger.

EU-Argentine Dispute:

During the Council discussion in 1982 of trade restrictions applied for non-economic reasons by the EEC, its member States, Canada and Australia against imports from Argentina, the representative of the EEC stated that “the EEC and its member States had taken certain measures on the basis of their inherent rights, of which Article XXI of the General Agreement was a reflection. The exercise of these rights constituted a general exception and required neither notification, justification nor approval. This procedure showed that every contracting party was - in the last resort - the judge of its exercise of these rights”.

The representative of Australia “stated that the Australian measures were in conformity with the provisions of Article XXI:(c), which did not require notification or justification”. 

The representative of the United States stated, “The General Agreement left to each contracting party the judgment as to what is considered to be necessary to protect its security interests. The CONTRACTING PARTIES had no power to question that judgement”.

Ministerial Declaration adopted 29 November 1982 at the Thirty-eighth Session of the CONTRACTING PARTIES provides that".. the contracting parties undertake, individually and jointly: ...to abstain from taking restrictive trade measures, for reasons of a non-economic character, not consistent with the General Agreement”.

The question of whether and to what extent the CONTRACTING PARTIES can review the national security reasons for measures taken under Article XXI were discussed again in the GATT Council in May and July 1985. 

It was concluded that this provision should be interpreted in the light of the basic principles of international law and in harmony with the decisions of the United Nations and of the International Court of Justice and should, therefore, be regarded as merely providing contracting parties subjected to aggression with the right of self-defence.

The action was taken by Arab League:

Article XXI(b)(iii) says…“taken in time of war or other emergencies in international relations” The 1970 Working Party Report on “Accession of the United Arab Republic” notes that in response to concerns raised regarding the Arab League boycott against Israel and the secondary boycott against firms having relations with Israel, the representative of the UAR stated that “the history of the Arab boycott was beyond doubt related to the extraordinary circumstances to which the Middle East area had been exposed. The state of war which had long prevailed in that area necessitated the resorting to this system. … Because of the political character of this issue, the United Arab Republic did not wish to discuss it within GATT.

It would not be reasonable to ask that the United Arab Republic should do business with a firm that transferred all or part of its profits from sales to the United Arab Republic to an enemy country”.

The Way Forward:

After careful assessment of the Article XXI and based on the previous disputes and issues raised by many countries at GATT meeting, we can conclude the following: 

1. India has not violated any commitment under GATT/WTO agreement.
2. UN Charter allows India to take necessary action in the interest of National security of India.
3. All evidences are against China and therefore China will not be able to defend its position in any forum.
4. India is free to take all possible action, which India feels in the national interest and no international law cannot force India to deal with the enemy state.

For updates, follow this blog and visit again, more analysis in upcoming articles. 

Follow us on Twitter and Linkedin for regular updates.

If any clarification is required you may contact the authors.

Do send your queries to us at email address: 

Email: technolegalsardana@gmail.com

Disclaimer: This article is for general information. For any specific techno-legal discussion, you may contact the authors.

Pesticide Regulations Part-6 - Pesticide Prohibition Order & Managing Obsolete Pesticides

Pesticide Regulations Part-6

Pesticide Prohibition Order & Managing Obsolete Pesticides: 

Options before Policymakers

By:

Vijay SARDANA

Advocate, Delhi High Court

Techno-legal Expert on Agribusiness 

& Consumer Products Industries

& 

Priyanka Sardana, Advocate, Supreme Court of India

& 

Aastha Sardana, Researcher on Legal Matters

Government has issued draft prohibitory order for 27 pesticides. After representations from various stakeholders and case-to-case evaluation, the government may decide to declare which molecules to be declared as obsolete or may decide to phase out.

Phasing out is an essential part of the development and happens in every sector and in every country. Human life itself is a classic example of phasing out process. We all have to phase out someday and this will create space for a new and younger generation. With the development of new chemistry and better products, almost every developing country and economy in transition has stocks of obsolete pesticides. These pesticides may not have used in their current location or have become unusable for various reasons including regulatory changes.

Challenges due to Obsolete Pesticides:

By its chemical nature, even in normal practice, all pesticides are hazardous to some degree. If they are misused or overused can cause harm to human health and the environment. Obsolete pesticide stockpiles present additional hazards because they may include outdated chemicals that have been banned by regulatory actions because of their adverse toxic impact on health and environment or due to better and safe alternates or the pesticides may have deteriorated due to some reasons causing a particular danger to human beings and the environment.

Various factors may be responsible for the accumulation of obsolete pesticide stockpiles in many states or in many countries. These situation needs to be urgently addressed before these obsolete toxic products become a problem for society. Delays will aggravate current problems by incurring further deterioration of stocks, causing more harm to public health and the environment.

Dealing with Obsolete Pesticides:

Prevention of obsolete pesticide stockpiles is essential. It depends on the sensible collaborative efforts of governments, pesticide manufacturers and distributors, international organizations, non-governmental organizations (NGOs), donors and end-users themselves. No single entity can solve the problem on its own.

Appropriately dealing with Obsolete:

Pesticides is costly, technically complex and specialized assistance may be needed. Obtaining such assistance can be a complex and lengthy process.  As a country, we have experienced the challenges in clean-up operations during the Bhopal gas leak case.

In some situations, while the policymakers of the country may be seeking and awaiting this technical assistance, much can be done to prepare for the eventual cleanup operation by taking correct decisions in advance while passing the pesticide prohibitory orders.

How to manage obsolete pesticides?

Any prohibitory order must also gauge the size of the problem. It should be part of the preparatory work should. It also considers various factors to stabilize the situation so that any further environmental contamination and health hazards from prohibitory pesticides are avoided.

A country that takes appropriate action before approaching external help demonstrates a commitment to solve the problem of obsolete pesticides and preventing their recurrence.

Capability Building to Manage Obsolete Pesticides:

Besides, taking appropriate action early will reduce the costs of cleanup operations and help to build capacity in the country for the management of pesticides and hazardous waste.

Various measures should to be considered before requesting external financial and technical assistance in disposing of obsolete pesticide stocks.

Protection of Human Health:

Removing obsolete pesticide stocks will protect human health. Pesticides in their normal state are harmful to human beings in various degrees. People exposed to pesticides may suffer short-term acute health effects such as nausea, headaches, sore eyes, skin rashes and dizziness.

In some cases, exposure to pesticides may cause cancer, reduced fertility, nerve or organ damage, unconsciousness and even death. Obsolete pesticides often include outdated chemicals, which are highly toxic.

Many of these chemicals are banned in many countries because of their toxicity, yet are still found in large quantities in numerous countries. Obsolete pesticides with time also deteriorate and may sometimes generate decomposition products that are even more toxic that the pesticide itself.

Handling and storage of obsolete pesticides:

Handling and storage of obsolete pesticides have no commercial value hence often lead to careless handing and weak storage controls.

Stockpiles of obsolete pesticides differ from the normal application of pesticides in agriculture or health care, mainly because large quantities of these hazardous chemicals are located in one place. Any leakages or damage caused to the stockpile could result in serious acute local contamination.

Many obsolete pesticides are also kept in unguarded stores or out in the open where children, adults and animals can easily and frequently come into contact with highly toxic chemicals.

Stockpiles of obsolete pesticides often include leaking containers that allow the pesticides to be dispersed in the environment with the result that people living and working nearby may be exposed to these pesticides and suffer consequent health problems.

The leaked pesticides may also get into drinking-water supplies from rivers, lakes or underground aquifers. People drinking this contaminated water will suffer adverse health effects.

Similarly, food-derived from crops or livestock that have been contaminated by pesticides may be toxic for consumers.

Pesticides in the environment can have adverse effects on wildlife through direct exposure to chemicals, or through indirect exposure in feed or water. Animals may become sick or die, and there may be deleterious effects on the natural environment.

The economic impact should be evaluated:

Obsolete pesticide stockpiles are an economic burden as well as a danger to health and the environment. The money spent on buying the original pesticides – which then become obsolete – is effectively wasted, and the opportunity of buying other potentially useful goods with that money is lost.

Furthermore, the storage of obsolete pesticides incurs a cost in terms of space that cannot be used for other more productive purposes. Where the pesticides are guarded or the effort is put into maintaining the stocks, for example by transferring pesticides from leaking drums to new containers, more costs are incurred.

Replacing obsolete pesticides with new products to control pests (both chemical and non-chemical) again uses funds that could have been used for other purposes had these obsolete pesticides have still been available for use.

What authorities should do before issuing prohibitory order?

Suggestion 1: Prohibitory orders must be based on merit & logic of science and transparency to prevent unnecessary litigations.

Suggestion 2: In most developed countries and in most democracies of the world, all documents, which are related to public health and environment protection, are in the public domain. This also allows experts working with civil society and citizens to give their views on these sensitive matters. This is vital to win public trust in public policy.

Suggestion 3: Each pesticide or molecule should be evaluated based on its own merit and should not be clubbed with other molecules while doing a safety assessment. This will ensure merit-based decision-making process.

Suggestion 4: Before issuing final prohibitory order, the time required for phasing out of the existing stocks should be properly calculated. The timeline should be based on the production data available with the regulators and the policymakers. If required, the physical audit of the licensed facilities can be undertaken. This will avoid stocks of prohibited pesticides in the system.

Suggestion 5: Phasing out timeline should be based on Shelf-life of the pesticides, available current stock of the raw materials for making pesticides. This should ensure that no banned product should be manufactured once existing raw material is exhausted. This can be linked to the shelf-life of the products. Based on the times, the permission to manufacture should be revoked and after the shelf-life is over, permission to sell should be revoked. This will address the problem of the obsolete pesticide in society.

The government must plan for safer and better products under Atmnirbahr Bharat. 

Transition to newer and better chemistry is the need of the society under 'Atmnirbhar Bharat'. Like any other citizen of the developed world, Indian farmers and consumers deserve better and safer options. Use of obsolete chemicals is also also hurting Indian agriculture exports.

New Pesticide Management Bill'2020 is an opportunity, let it address this issue to avoid any controversy in future.

For updates, follow this blog and visit again, more analysis in upcoming articles. 

Follow us on Twitter and Linkedin for regular updates.

If any clarification is required you may contact the authors.

Do send your queries to us at email address: 

Email: technolegalsardana@gmail.com

Disclaimer: This article is for general information. For any specific techno-legal discussion, you may contact the authors.

Role of New "Farm Produce Trade and commerce Ordinance" and its benefit to Farmers & Economy

Role of New "Farm Produce Trade and Commerce Ordinance" and its Benefit to Farmers & Economy

Click on image:

Part-3: Agriculture Marketing Reforms - MSP formula of Swaminathan Committee hurting Indian Farmers and Economy

MSP Forumula of Swaminathan Commission hurting Farmers, investments and exports

"Income formula must have to Productivity per unit area and Quality, not just Cost of Production"

By:

Vijay SARDANA

Advocate, Delhi High Court

& Techno-Legal Expert

Current pricing policy will lead to the following problems: 

1. Cost of Production of any organic crops and crop from zero budget agriculture is less than the cost of production of intensive agriculture, according to Swaminathan Committee formula, organic produce should get the lower price if  MSP is just 1.5 time of cost of production.  

2. If all will get the same price, where is the incentive to learn and invest in better quality and better technology?

3. If MSP is higher than international price, then under free trade agreement like SAARC treaty and ASEAN FTA, imports will be cheaper than what is produced and sold as per MSP in India. Who will buy crop of Indian farmers?

4. Majority farmers never get MSP for their crops, what purpose we are serving by incasing MSP every year. Who is benefiting from MSP revision?

The country need farmers:

At the outset let me clarify, farmers are the backbone of any economy and they need proper support to ensure national food security and respectable lifestyle for their families. Unfortunately, since independence, our policymakers make a lot of promises to farmers but very little was done to improve their livelihood for various reasons. Farmers, due to their large numbers, were always treated as vote bank, agriculture all decisions were based on political considerations, and they rarely led to the economic welfare of the farmers. Everyone exploited the farmers for their political and commercial gains and farmers were crushed at the bottom of the pyramid to keep urban voters happy.

Recent Announcements are also not promoting good agriculture practices:

According to Press Information Bureau, on June 1^st, 2020, the Cabinet Committee on Economic Affairs (CCEA) chaired by the Hon'ble Prime Minister Shri Narendra Modi has approved the increase in the Minimum Support Prices (MSPs) for all mandated Kharif crops for marketing season 2020-21.

Government has increased the MSP of Kharif crops for marketing season 2020-21, to ensure remunerative prices to the growers for their produce. The highest increase in MSP is proposed for nigerseed (Rs 755 per quintal) followed by sesamum (Rs 370 per quintal), urad (Rs 300 per quintal) and cotton (long staple) (Rs 275 per quintal). The differential remuneration is aimed at encouraging crop diversification.

MSP for all Kharif crops for marketing season 2020-21 will be as follows::

Sl. No	Crops	Projected Cost* KMS 2020-21 (n Rs./ quintal)	MSP for Kharif 2020-21 (n Rs./ quintal)	Increase in MSP (Absolute) (in Rs.)	Return over Cost (in %)
1	Paddy (Common)	1,245	1,868	53	50
2	Paddy (Grade A)^	-	1,888	53	-
3	Jowar (Hybrid)	1,746	2,620	70	50
4	Jowar (Maldandi)^	-	2,640	70	-
5	Bajra	1,175	2,150	150	83
6	Ragi	2,194	3,295	145	50
7	Maize	1,213	1,850	90	53
8	Tur (Arhar)	3,796	6,000	200	58
9	Moong	4,797	7,196	146	50
10	Urad	3,660	6,000	300	64
11	Groundnut	3,515	5,275	185	50
12	Sunflower Seed	3,921	5,885	235	50
13	Soybean (yellow)	2,587	3,880	170	50
14	Sesamum	4,570	6,855	370	50
15	Nigerseed	4,462	6,695	755	50
16	Cotton (Medium Staple)	3,676	5,515	260	50
17	Cotton (Long Staple)^	-	5,825	275	-

 ^Cost data are not separately compiled for Paddy (Grade A), Jowar (Maldandi) and Cotton (Long staple)

 The logic behind the increase in MSP is dangerous:

The increase in MSP for Kharif Crops for marketing season 2020-21 is in line with the Union Budget 2018-19 announcement of fixing the MSPs at a level of at least 1.5 times of the All-India weighted average Cost of Production (CoP), aiming at reasonably fair remuneration for the fanners. The expected returns to farmers over their cost of production are estimated to be highest in the case of Bajra (83%) followed by urad (64%), tur (58%) and maize (53%). For the rest of the crops, return to farmers over their cost of production is estimated to be at least 50%.

Let us do a critical analysis of the announcements made:

1.  This may be the only case in the world where inefficiency is rewarded. Higher the cost of production, higher is the margin and hence higher is the MSP. Whoever suggested this formula, in fact, discouraged the concept of efficiency and productivity.

2.  My question is, if with the application of new technologies, the cost of production goes down by 20%, MSP will go down. Is there any incentive among farmers to adopt efficient technologies?

3. Live Case Study: Let us understand the whole case of this announcement with just one example and the same logic one can build for other crops. For better understanding let me build all my arguments with one specific example called “Maize”.

So, what is the implication:

a. Cost of production of maize is Rs.12.13 per kg.

b. The revised MSP is Rs.18.50 per kg., last year MSP was Rs. 17.75 per kg.

c. The current Mandi price in the month of May 2020 of maize is around Rs. 11 to 12 per kg,

d. Before the coronavirus, the lockdown was Rs. 22 to 24 per kg.

e. Poultry farmers are the biggest buyer of the maize for feed use.

f. The international price of maize was around Rs. 13 per kg.

g. When prices started shooting beyond Rs. 18 per kg, they stared demanding import of maize to reduce the cost of production. It means, one side maize farmers was benefitting on the other side poultry farmers were suffering.

h. Now, the poultry sector is ruined during the lockdown, the maize prices crashed to Rs. 10 to 11 per kg and there are no buyers. Who will pay MSP for maize now?

i. Exports: Once India was exporting about 5 million tons a few years ago, today with incased MSP and higher cost of production, we are outpriced in maize and there is no demand from the world market. Hence no exports from India.

j. Now maize prices are low, alternate crops which go into feed production will also face price crash and farmers will face the crisis. Example millets, etc.

So, who benefitted from this MSP Formula?

> Only Middleman, They charge a commission on percentage basis. When MSP goes up, the commission goes up for middle man those who supply to FCI or any government department.

Time to Change:

The fundamental problem with this approach is more the cost production, higher is the MSP. This is a disaster not only for farmers but also for industrial use and export trade.

It is high time we should move away from MSP and work on a better option, which improves productivity and farmers income based on the market economy. The dependency on subsidy or direct cash transfer should be carefully calibrated to ensure food security and discourage surplus production.

In the next article I will discuss what should be alternate approach the MSP.