# Key takeaways - Countries categorization into LICs, LMICs, HICs, LDCs are created by WB, using [[GDP per capita]]. It has been criticised for its developmental bias that every country should follow the same political and economic path of industrialised nations and lack of relevancy in a multi-polar world. - WTO has 5 key principles to govern trade: 1) reduction of tariffs and barriers to trade, e.g. import quotas, 2) reduction of non-tariffs barriers to trade, 3) Elimination of discriminatory treatment, 4) Special treatment for developing countries, LDCs, and Regional FTAs. WTO uses developed and developing countries, and LDCs from UN but give no definition so countries can self-identify. This is significant because of the WTO treaties will treat them differently; lower levels of obligation to trade, and longer transition periods or preferential market access), 5) Progressive liberalisation - [[TRIPS Agreement]] is one of the hottest issue in health because as contradictory as it sound, TRIPS is protectionist rather than liberalisation, proving itself during COVID-19 pandemic caused the COVID-19 vaccine to be expensive. - There is also [[The Agreement on Trade-Related Investment Measures (TRIMS)]], but it might led to [[crony capitalism]] so it was not popular. More controversial than TRIMS is [[Investor-State Dispute Settlement (ISDS)]]. --- > [!NOTE] Third World, Developing or Income Group? > At the beginning of the modern liberalised trade era, countries were grouped into three categories: First World (liberal market economies aligned with the USA), Second World (Eastern bloc and socialist economies aligned with the Soviet Union) and Third World (the non-aligned nations, representing most of the countries in Latin America, Africa and South Asia and the loci of many proxy Cold War battles). Since the late 1960s countries came to be referred more commonly as 'developed' (industrialised and wealthier) and 'developing' (agrarian and poorer). Though still in common usage, this designation has been critiqued for its 'developmental' bias (that all countries should follow the same political and economic path of industrialised nations) and lack of relevancy in a multi-polar world in which there can be huge socio-economic differences between countries in the same category. Offsetting this somewhat, the World Bank created parallel designation using GDP/per capita: high-income countries (HICs), upper- and lower-middle-income countries (UMICs and LMICs), low-income countries (LICs) and least-developed countries (LDCs). This system, though now more commonly used than the other two, is also criticised for where it sets its income thresholds, its reliance on GDP as its evaluative metric and its lack of attention to within-country distribution such that most of the world's poor no longer live in LICs or LDCs. The WTO uses 'developed' and 'developing' country designations, along with the United Nations list of 'least developed countries' and so will be the terms most frequently encountered in this book. These designations have importance within WTO trade treaties, as developing nations, and especially LDCs, are often given 'special and differential treatment', meaning lower levels of obligation to trade rules, longer transition periods or preferential market access. The WTO has no definition for 'developed' or 'developing', allowing WTO member states to self-identify. Other WTO members, however, can challenge the decision of a country to make use of developing country provisions. # 2.3 Key Principles of Trade Agreements > ...the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development…[7] It is hard to find fault with the aspirational goal of the WTO expressed in its founding document, the Marrakesh Agreement. Were this preambular statement enforceable (it is not) it could require member countries to report on the extent to which these trade agreements actually produced these ends. But as the WTO itself notes, "the system's overriding purpose is to help trade flow as freely as possible' [8], [[WTO system is to help trade flow as freely as possible but WTO does not ensure growth trickle down to reduce poverty and improve health|leading some early critics to argue that rather than being the means, liberalised trade has become an end in itself]] [9]. The buttressing assumption is that increased international trade will automatically stimulate growth and trickle down to reduce poverty, thereby improving health [10]. We examine this assumption later in this chapter; it is first important to understand the key WTO principles which govern trade rules from which all are claimed to benefit, of which there are five: ## 2.3.1 Five WTO principles to govern trade 1. Reduction of tariffs and other border barriers to trade (such as import quotas), which continue to be part of new regional or bilateral free trade and investment agreements (hereafter FTAs) and accession requirements of new countries joining the WTO. 2. Reduction of non-tariff barriers to trade, the 'behind-the-border' non-tariff measures which are of greatest concern to most health analysts. 3. Elimination of discriminatory practices among countries through two foundational rules: a) Most Favoured Nation (MFN)—The most favourable tariff or regulatory and foreign investment treatment given to any one country that is part of the agreement must be given to all other member countries of that agreement. b) National Treatment (NT)—Countries must treat all 'like' imported products and services from other member countries no differently than they treat their own domestic products and services 4. Special and differential treatment under three conditions: 1. Developing countries should have lesser obligations until they catch up—such as ongoing extensions for least developed countries (LDCs) to obligations under the WTO's [[TRIPS Agreement]] 2. Developing countries with a historic and political relationship to a developed country can be granted more favourable tariff or regulatory treatment that is not offered to other member countries, an exception to the MFN rule. This principle is embodied in the WTO as a '[[Generalised System of Preferences]]'. An example of this is the 'Everything But Arms' initiative of the European Union (EU) that grants tariff- and quota-free imports of all commodities (except weaponry) from least developed former colonies. 3. Regional FTAs, such as the recently completed [[Trans-Pacific Partnership Agreement (TPP)]] since renamed the [[Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)]], can also provide preferential market access to other countries in the agreement without having to extend such benefits to other WTO members; another exception to the MFN rule and one reason for the rise in the number of new FTAs in recent years. 5. Progressive liberalisation, requiring member states to deepen and expand their liberalisation commitments through subsequent negotiating rounds; governments cannot (without penalty) decrease their existing levels of trade openness. # 2.4 From Principles to Practice: Key health-related WTO Treaties ## 2.4.1 [[General Agreement on Tariffs and Trade (GATT)]] 1994 The GATT 1994 (as it is referred to in the WTO system) is a continuation of the earlier GATT negotiations. ==It commits governments to progressively lower their tariffs on, and reduce other border barriers to, imported goods.== This can reduce the price of goods available to consumers which, depending on the health merits of such products, can improve health directly or indirectly through an increase in overall living standards. ==Local manufacturers can also increase their exports due to greater market access, creating new employment and poverty-reducing opportunities==. Conversely, consumption of unhealthy commodities could increase and tariff reductions in LMICs could lead to a loss in public revenues, affecting funding for health, education, water/sanitation and other key health-determining public investments. ## 2.4.2 [[General Agreement on Trade in Services (GATS)]] One of the focal agreements discussed in the next chapter, ==General Agreement on Trade in Services (GATS) provisions can increase foreign investment in health systems that can lead to new facilities and access to new medical technologies.== But ==GATS commitments also 'lock in' country's existing privatisation levels in committed service sectors, several of which (health care, education and environmental services) are important to promoting public health and are frequently prone to market failure== (i.e. private provision often excludes access to the poor). Once a service sector is committed, there is no cost-free way to extend the public provision of that service in the future. ## 2.4.3 [[TRIPS Agreement]] TRIPS has been described as a 'protectionist' rather than 'liberalising' agreement since it entrenches, and in some cases, extends [[Intellectual Property Rights (IPR)]], with particular bearing on patented drugs. On the one hand, pharmaceutical firms argue a need for strong IPRs to finance the high cost of new drug discovery and development. On the other hand, patent protection and other IPR provisions can increase drug costs for consumers and governments alike and delay generic drug price competition. ## 2.4.4 Agreement on [[Technical Barriers to Trade (TBT)]] One of the treaties that aimed to reduce trade-related (non-tariff) measures affecting the flow of goods, the Technical Barriers to Trade (TBT). Agreement has the same potential to improve health as the GATT 1994. However, in doing so the ==TBT requires that any new policy or regulatory barrier to the free flow of goods introduced by a member state must be the 'least trade restrictive' possible==. New health and safety regulations and environmental protection measures proposed by WTO members have frequently been challenged under rules in this agreement. We return to the TBT in the discussion in Chap. 4 of trade in unhealthy commodities. ## 2.4.5 Agreement on Sanitary and Phytosanitary Measures ==The Agreement on Sanitary and Phytosanitary Measures (SPS) sounds like a health treaty, but it is not. It is a commercial treaty designed to ensure that the sanitary and phytosanitary (food safety and animal/plant health) measures adopted by the member states do not constitute unnecessary burdens to trade==. The SPS defers to international standard setting in determining if the level of protection is excessive, relying upon standards agreed set by the [[Codex Alimentarius]], an intergovernmental organisation operating under the auspices of the WHO and the Food and Agriculture Organization. Although both Codex and the SPS emphasise the importance of science-based standards, Codex sets a level below which countries should not fall and which, if there is no consensus on actual risk, countries can exceed with justification. In the SPS the Codex floor becomes the trade barrier ceiling which countries cannot exceed without providing rigorous scientific proof. ## 2.4.6 Agreement on Agriculture ==One of the more contentious treaties within the WTO, this agreement requires countries to reduce most, but not all, subsidies for their domestic producers.== Continuing export and producer subsidies in developed countries (while slowly declining) can depress world prices and cost developing countries lost revenue which could otherwise be used to fund health, education and other health-promoting services. Imports of subsidised food products from wealthy countries can undermine domestic growers' livelihoods in poorer nations unable to afford the same scale of producer support. Developing countries reliant on food imports, however, can benefit through lower subsidised food prices. As of 2018, despite almost two decades of discussion, WTO members have failed to agree on measures that would allow countries to subsidise or stockpile food for purposes of food security. There are other WTO agreements that can have indirect impacts on health. [[The Agreement on Trade-Related Investment Measures (TRIMS)]], for example, prohibits government actions that place domestic purchase requirements on foreign investment. [[Interesting Phrase]] Although such requirements can increase domestic employment, which can be important to improving population health, they can also lead to '[[crony capitalism]]', in which investors are required to finance companies owned by politicians or their families of little or no health benefit to the majority of the population. More controversial than TRIMS, however, are agreements containing [[Investor-State Dispute Settlement (ISDS)]] provisions, discussed later in this chapter. Another WTO agreement with indirect health implications is the Agreement on Government Procurement (AGP). The AGP is presently a 'plurilateral' treaty, meaning it is optional for the member states. To date, 47 WTO member countries are party to this agreement with another 20 planning to accede [12]. The AGP opens bids on government contracts to providers from other countries that are party to the treaty. This can lead to lower public costs for goods or services tendered under the AGP, but payments to foreign providers also reduce the amount of capital that remains within the country, functioning as a fiscal multiplier. # 2.5 Health in Dispute One of the innovations of the WTO system, largely exported to newer FTAs, is the establishment of binding rules for resolving trade disputes. ==WTO members can challenge new measures undertaken by another member if they think it might violate trade rules, including new public health or environmental protection measures proposed by the member states. Challenges are often informal, expressed during WTO committee meetings (such as the Committees on the TBT and SPS agreements) and resolved before becoming a formal dispute. Informal challenges, however, can lead to weaker government measures or delay their implementation and are often indications of potential formal disputes==. Formal disputes, of which there have been 500 since the WTO's founding in 1995, are heard by an ad hoc panel of three to five trade lawyers mutually agreed upon by the disputants. Panel rulings can be appealed to an Appellate Body consisting of seven members serving fixed four-year terms. The Appellate Body has the power to uphold, modify or reverse a dispute panel decision. If the violating country does not comply with the final ruling, the complainant country can request retaliatory measures equivalent to the estimated value of trade losses due to the violation. Notably, WTO agreements allow exceptions for non-discriminatory measures that might otherwise violate trade rules, if such measures are found to be 'necessary to protect human, animal or plant life or health' (such as the 'general exception' in GATT 1994 Article XX(b)). These exceptions can be invoked by countries facing a formal trade challenge, but there are ==three criteria that must be met in order for an exception to apply to a health measure==: 1. The policy goal must be designed specifically to protect health. 2. It must be legitimate, the measure in question must be applied to the goal and it cannot be more trade restrictive than necessary. 3. The measure must not constitute a 'disguised restriction on international trade'. ## 2.5.1 Asbestos Versus Glass Fibers > Key message: French vs Canada on asbestos ban. Canada argued that the ban violates [[General Agreement on Tariffs and Trade (GATT)]] non-discrimination rules and [[Technical Barriers to Trade]]. The Appellate Body supported the dispute ruling and uphold the ban. (French won) Early WTO dispute (1998-2001) involving a French (EU member) ban on imports of asbestos from Canada is one of the few clear-cut cases in which health concerns predominated over trade treaty obligations. France had been a major importer of Canadian chrysotile asbestos, but concerns over its health risks led the country, along with other EU member states, to ban most uses of asbestos in 1991, leading to the French ban on asbestos imports. ==Canada argued that such a ban violated non- discrimination rules under both GATT 1994 and TBT rules since asbestos was 'like' the glass fibres permitted for insulation use in France and the rest of the EU. The dispute panel agreed with Canada on this point, further ruling that asbestos health risks (known to be much greater than those posed by glass fibres) should not be a concern when comparing 'like' products. However, given the known health risks of asbestos, the panel did find that the GATT 1994 health exception was justified; the French ban passed the necessity test and was not considered to be a 'disguised restriction on international trade'.== Canada appealed the ruling to the Appellate Body, arguing that asbestos health risks were sufficiently mini- mal and that the ban should have failed the necessity test [19]. The Appellate Body disagreed and supported the dispute ruling, upholding the ban. It also ruled that the panel erred in finding that different health risks of 'like' products should not be a consideration in a trade dispute [20], creating more space for future health arguments in trade disputes. Although past dispute rulings are not binding, they are normative and are often cited by disputing parties in support of their arguments and by Appellate Body reports in their final rulings. ## 2.5.2 Brazil's Retread Tyes > Brazil wanted to ban import retread tyres, which Appellate Body granted. However, it also found that Brazil violated the non-discrimination rules of [[General Agreement on Tariffs and Trade (GATT)]] since imports of used tyres were entering the country through other means, i.e. in this case, through regional trade agreement (MERCOSUR). If, and when, an import ban on all used or retread tyes was enacted, the EU tyre ban would be fully compliant with trade rules. This suggests that even if justified as necessary to protect health, certain measures will fail if there is any evidence of discrimination that favours some WTO member (in this instance countries that were also part of the MERCOSUR agreement) states over others (EU member states). ## 2.5.3 Turkey Tails and Health in the Pacific Islands >The Samoan government effort to ban turkey tails violated non discrimination rules because the Samoan govt only targeted a single imported food item while it did not ban other high-fat foods. To move forward on its membership application, Samoa agreed to remove its ban within 12 months of joining the WTO. To give it time to launch education campaigns promoting healthier lifestyle choices, it would be allowed to ban domestic sales of turkey tails for two years and apply a tariff of 300% for further two years, after which time, the tariff had to be reduced to no more than 100%. In 2007, the Samoan government banned the import of turkey tails (a low quality, high-fat meat product) out of concern with rising rates of non- communicable disease associated with consumption of such products [23]. When Samoa applied to join the WTO, the working party reviewing its application expressed concern over the necessity of the ban, question- ing its effectiveness compared to other less trade restrictive options that might lower the risk of obesity. The working party also complained that the ban was discriminatory insofar as it a targeted a single imported food item while other high-fat foods remained available in the country [24]. To move forward on its membership application, Samoa agreed to remove its ban within 12 months of joining the WTO. To give it time to launch edu- cation campaigns promoting healthier lifestyle choices, it would be allowed to ban domestic sales of turkey tails for two years and apply a tariff of 300% for further two years, after which time, the tariff had to be reduced to no more than 100% [25]. ==The government was also advised to adopt a series of measures to replace the ban (health education programmes, subsidies for healthier foods and use of non-discriminatory excise taxes) that would be compliant with trade rules. These measures may be helpful over the longer term, but individual consumer choices are often dictated more by product cost, availability and promotion than by health knowledge or its lack.== Excise taxes that use price hikes to discourage consumption of unhealthy commodities are unlikely to violate trade rules, but could still be (and have been) challenged for being a disguised restriction on trade. Faced with a continuing rise in diabetes, high blood pressure and heart diseases, Samoa in 2018 introduced a bill to increase modestly both import and excise taxes on turkey tails [27], a decision which could make it vul- nerable to a future trade challenge. ## 2.5.4 Alcohol Product Labelling > WHO recommends that member countries label alcohol containers to warn consumers about the harms of alcohol consumption. Thailand wants to implement it, but alcohol exporters opposed it: NZ, Australia, EU, USA. Even before Thailand notified the TBT Committee of its proposal, the alcohol industry in the USA had raised objections about the size and graphic nature of the warnings, questioning the evidence based underpinning the proposal. WTO members' objection argument was that it was more trade restictive than necessary, and urged health education programmes instead. There was also concern that there was insufficient evidence that the labelling policy would achieve its stated health goal, which de facto chills new regulatory measures since, by definition, these would need to be implemented first in order to create an evidence base. These four cases suggest that, although [[health is]] given consideration in WTO disputes and challenges, including greater attention to prevailing public health norms such as the World Health Organization Framework Convention on Tobacco Control, ==WTO rulings remain based on arguments over whether health regulations impede or violate trade rules and not on whether liberalised trade contributes to improved health==. Instead, the assumption is that liberalised trade, by 'raising living standards' through greater economic growth, will indirectly benefit health. [[Open Question]] Free trade agreements are routinely defended as being essential for economic growth and creating 'win/win' outcomes for all countries concerned, but how robust is the evidence for such claims? # 2.6 Trickle-Down Health or Trickle-Up Wealth? > With one simple policy--more free trade-we could make the world $500 trillion better off and lift 160 m people out of extreme poverty. If there IS one question we have to ask ourselves, it is: why don't we? [34, para 1] — Bjorn Lomborg, controversial Danish climate change sceptic, contends that economic growth through free trade is the only way to reduce extreme poverty and to combat such global health scourges as HIV/AIDS, malaria and malnutrition. [[Trade liberalisation and economic growth is not automatically guaranteed nor universally observable. It is associated, at best]] Even World Bank's review of trade's impact on growth in which 'half of the countries [studied] experienced zero or even negative changes in growth post-liberalisation'. OECD paper further concluded that empirical studies have failed to establish a systematic relationship between trade liberalisation and economic growth. Even in the G20 countries, finding that increased trade was associated with modest economic growth in 5 of the 20 nations and the reverse true for only 2 of the group, reinforcing the lack of any consistent relationship. ==Even as the prevailing opinion is that open economies grow more rapidly than closed ones, the outcome will depend on how well governments manage their integration into a global economy.== [[Extreme poverty rates have fallen substantially over the past 40 years is attributable to China before it opened itself to global trade and investment. Remove China, the global headcount actually increased in 1980s-1990s due to structural adjustment programs by WB and IMF.]] A similar caveat surrounds claims of trade and growth's impacts on poverty reduction. ==Although extreme poverty rates have fallen substan- tially over the past 40 years, most of this decline is attributable to one country (China) where much of its poverty reduction occurred before it opened itself to global trade and investment. Removing China from the calculations, the global headcount of extreme poverty actually increased in the 1980s and 1990s, attributed in large part to World Bank and IMF structural adjustment programmes that prematurely opened developing economies to global competition== [13]. In 2010 the number of people living in extreme poverty was the same as in 1981: over 1 billion people [44]. As one senior World Bank development economist concluded, 'It is hard to maintain the view that expanding external trade is...a powerful force for poverty reduction in developing countries' [45]. At the same time, other studies were finding that trade liberalisation was associated with rising income inequalities within nations [46]. Globally, most of the increases in income since the 1980s have been captured by the '1 percent', leading to wealth inequalities not seen since the early 1900s [47]. In rela- tive terms, international trade and outsourcing has led to greater income gains for people around the median of global income distribution, primar- ily in developing countries. At the same time, global trade and technology change have combined to stagnate income gains for all but the top 10% in most Anglo-American and European countries [48, 49], with wealth gains rising most rapidly for the top 0.01%. In absolute terms, global inequality (as measured by the Gini coefficient) since 1988 has increased by almost 30% [50]. # 2.7 Enter the 'Spaghetti Bowl' With unfinished Doha Development Round since 2001, many high-income countries argued that it should be declared 'over' and that the WTO is about trade, not development. Developing countries, led by India, counter that this would be a mockery of the WTO's founding principles (the Marrakesh Agreement). As early as 1999, USA and EU began to prioritise bilateral and regional FTAs in which their larger economies could allow them to more easily dominate negotiations with poorer nations to rapidly conclude deals with other upper-middle- or high-income countries. This has resulted in what is described as a [[spaghetti bowl|spaghetti bowl]] of overlapping trade agreements, adding to the challenge of government regulators to assess the implications of new measures vis-a-vis the multiplicity of differing trade or investment obligations. Six FTAs figure quite prominently in current and recent trade negotiations: 1. The [[Trans-Pacific Partnership Agreement (TPP)]] was the first 'mega-regional' FTA to be concluded and signed, originally involving 12 countries that accounted for over 40% of the global economy. US withdrawal from the agreement in 2017 before it entered into force rendered it technically dead, but it quickly became a 'zombie' treaty with the 11 remaining countries resurrecting it as a re-branded [[Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)]]. It incorporates almost all of the originally signed treaty, apart from some of its more contentious provisions (many of which pertain to intellectual property rights) being temporarily suspended. The current (Trump) administration has hinted that the USA may rejoin the CPTPP at a later date if it is amended to reflect 'America First' interests. In the meanwhile, several other Pacific Rim nations have indicated a desire to join the CPTPP. The CPTPP has been signed and ratified by seven countries at the time of writing. It came into force for the first group of countries to ratify the agreement on 30 December 2018. 2. The [[Comprehensive Economic and Trade Agreement (CETA)]] between Canada and the European Union, is widely seen as the template for an eventual US/EU [[Transatlantic Trade and Investment Partnership (TTIP)]] accord, on hold since 2017 but with the USA reportedly poseid to recommence negotiations. Most of CETA's provisions are provisionally in force, including its TRIPS-Plus IPR rules described in the next chapter. Its contentious investment chapter remains 'on hold' since EU law requires that it be individually ratified by all 28 European parliaments. The European Court of Justice in April 2019 completed its review of CETA's proposed 'Investment Court System' (ICS) to determine if it is consistent with European law, deciding that it was. The ICS and investment rules in CETA still requires ratification by the European member states before this provision enters into force [56]. 3. The [[Regional Comprehensive Economic Partnership (RCEP)]], under negotiation since 2012, originally involved 16 countries in the Asia-Pacific region, including the Association of Southeast Asian Nations (ASEAN) members and the six countries that have existing trade agreements with ASEAN (Australia, China, India, Japan, the Republic of Korea and New Zealand). India withdrew from negotiations in 2019, although whether it may return remains moot. Often portrayed as competition to the more American-centric original TPP, the REP began as an 'ASEAN-centred' trade agreement that was intended to reflect the diverse needs of its member states, which include a significant number of LMICs. Over time, however, the RCEP has reportedly grown to more closely resemble the CPTPP, largely due to the overlap between the CPTPP and REP membership (seven of the countries negotiating RCEP are also members of the CPTPP). 4. The [[Pacific Agreement on Closer Economic Relations (PACER) Plus]] was finalised in 2017 by Australia, New Zealand and Several Pacific island countries (PICs) after almost eight years of negotiations. Papua New Guinea and Fiji, the two largest Pacific island economies, were initially involved but withdrew from negotiations prior to their conclusion. PACER Plus involves a large number of small island states (many of which are geographically isolated, heavily reliant on tariffs and development assistance as sources of government revenue and have little to export) along with two high-income countries (Australia and New Zealand) which provide aid funding in the region but which are also headquarters to businesses seeking access to Pacific island markets. The agreement, which has not yet come into force, aims to liberalise trade in services and investment as well as goods, with many obligations at a similar level to those in the WTO agreements--markedly deepening liberalisation for those PICs which are not yet WTO members. 5. The [[Trade in Services Agreement (TiSA)]] is a proposed plurilateral agreement covering trade in services, currently involving 50 mostly high- or middle-income WTO member states. Negotiations were initiated in 2013 by a handful of HICs responsible for over half of all global services trade [57] (primarily the USA, the EU and Australia) and which were unhappy with lack of progress in further liberalisation commitments under the WTO [[General Agreement on Trade in Services (GATS)]]. Services now account for 60-70% of a country's economic activity and GATS-type or GATS- Plus chapters are now routine in post-WTO FTAs. Leaked drafts show that the now-stalled TiSA is complex agreement that applies to all sectors except those which governments explicitly exclude, and includes multiple annexes, all intended to create an ambitious treaty that could pose risks to public services, especially if governments choose to rescind privatisation experiments that prove to be too costly or inequitable [58]. # 2.8 [[Investor-State Dispute Settlement (ISDS)]]: Empowering Investors (Corporations) at the Expense of Governments? > Countries all over the the 6 examples above are trying to reform ISDS. EU and Canada are promoting the [[Investment Court System (ICS)]] as as alternative to existing ISDS rules. Governments want reassurances that they retain the right to regulate for health, environment or other regulatory purposes. [[Regional Comprehensive Economic Partnership (RCEP)]], which includes Indonesia, was originally expected to include an ISDS mechanism, but recent reports indicate this may no longer be the case. In more recent decades, the text of investment treaties has become more complex, including '[[indirect expropriation]]' (the loss of investment value due to legal, policy or regulatory changes governments make subse- quent to the initial investment&), the inclusion of [[Intellectual Property Rights (IPR)]] as an investment (hence liable to claims of lost value due to policies restricting monopoly rights over drugs or other important health technologies) and use of 'fair and equitable treatment' (FET) as a basis for challenging government measures. FET is often expansively worded and the most likely provision to be used by an investor claiming damages against a state. Initially few, the number of disputes rose dramatically over the 1990s, partly encour- aged by trade and investment lawyers who earn considerable fees for their tribunal work [62]. As well, the emphasis has shifted from direct to indi- rect expropriation and from disputes initiated by investors in HICs against those in LMICs to disputes increasingly involving governments of HICs. Althought investor-state disputes will continue, there is momentum building for three differing, and somewhat contradictory, reform options: 1. The first option holds that incremental change in existing rules (much as the CPTPP proposed) would be sufficient. 2. The second option, now favoured by the EU and Canada, is systemic change in which an ICS-styled dispute system becomes a basis for creating, first, a broader plurilateral investment within the [[World Trade Organization (WTO)]]. 3. A multilateral agreement could prevent investors from 'treaty shopping' amongst the thousands still in force to find one they might leverage. But a multilateral treaty would also need to exclude all non-discriminatory government measures related to health, social, fiscal and environmental conditions; a==llow governments to make counterclaims against foreign investors violating the terms of their investment agreements or the country's labour, human rights and environmental laws or regulations==; and allow governments to require new investments to conform to their country's economic, human and sustainable development goals. This paradigmatic, or third option, reform is promoted by some analysts with the United Nations Conference on Trade and Development (UNCTAD), the UN agency that keeps records of investor-state disputes and which provides technical assistance to developing countries on matters related to trade, investment and development. > Given that an increasing number of developing countries are notifying their intent to withdraw from (or not renew) investment treaties under the present system (they are not gaining much by way of increased [[Foreign Direct Investment (FDI)]] and risk losing considerably in disputes) there is considerable pressure for ISDS reform, whether systemic or paradigmatic. # 2.9 Conclusions This chapter identified key liberalisation principles of reduction in tariffs and non-tariff barriers to trade, non-discrimination (national treatment and most favoured nation), and differential treatment for developing countries. These principles were embedded first in the WTO and are found in subsequent bilateral and regional trade agreements. Although the global trade policy environment is dynamic and is driven by shifting economic orientations and geopolitical power shifts (witness the current 'trade war' of escalating tariffs between the USA and China), these trade principles are likely to endure. WTO-Plus agreements, however, build upon these principles by adding deeper liberalisation or intellectual property protection commitments and imposing restrictions on [[behind-the-border government measures]], affecting current and future policy space for public health regulations. Although the controversial use by foreign investors and transnational corporations of ISDS rules continues to pose health risks (particularly where new environmental regulations are challenged) there is increasing evidence of reform measures to mitigate some of these risks. As the cliché expresses, however, 'the devil is in the details' and it is these devilish details that are the subject of our subsequent chapters.