Small and Medium- Sized Enterprises in International Economic Law

i

INTERNATIONAL ECONOMIC LAW SERIES

Small and Medium-Sized Enterprises

in International Economic Law

ii

INTERNANTIONAL ECONOMIC LAW SERIES

International Economic Law series, established by the late Professor John

H Jackson, addresses a range of issues in international economic law, which

includes international trade law, international investment law, and the global

financial order. The series aims to encourage interest in the broad contours of

international economic law, heightening awareness of its significance across

the globe as well as its continuous interactions with other areas. The series edi￾tors encourage quality submissions from a wide range of perspectives, includ￾ing doctrinal, theoretical, empirical, and interdisciplinary viewpoints. Novel

and cutting edge research is particularly welcome, as are contributions from

both emerging and established scholars from around the world.

Series Editors

Andrew D. Mitchell

Professor at Melbourne Law School,

The University of Melbourne

Tania Voon

Professor at Melbourne Law School,

The University of Melbourne

recent titles in the series

Domestic Law in International Arbitration

Jarrod Hepburn

Treaty Shopping in International Law

Jorun Baumgartner

Good Faith and International Economic Law

Edited by Andrew D. Mitchel, M Sornarajah, and Tania Voon

Development at the WTO

Sonia E. Rolland

The BRIC States and Outward Foreign Direct Investment

David Collins

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iii

Small and Medium-Sized

Enterprises in International

Economic Law

Edited by

THILO RENSMANN

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iv

Great Clarendon Street, Oxford, OX2 6DP,

United Kingdom

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First Edition published in 2017

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v

Series Editors’ Preface

This impressive collection edited by Thilo Rensmann represents a long overdue

comprehensive analysis of the implications of international economic law for small

and medium-sized enterprises (SMEs). The focus is on international trade law and

international investment law, at the bilateral, plurilateral, and multilateral levels.

Despite the significant proportion and role of SMEs in the international economy,

they are largely ignored in the scholarly literature of international economic law.

Against that background, this volume offers crucial insights into how international

economic law does and should accommodate SMEs, given their special characteris￾tics, as well as how SMEs can best manage the current international economic law

framework as it affects their day-to-day business.

The volume investigates SMEs in the light of traditional institutions in inter￾national economic law such as the World Trade Organization, the United Nations

Conference on Trade and Development, the United Nations Commission on

International Trade Law, and the International Centre for Settlement of Investment

Disputes (part of the World Bank), and core areas of international economic

law, including trade in services, anti-dumping law, government procurement,

and dispute settlement. At the same time, it covers related areas of domestic and

international law, including human rights law, competition law, and sustainable

development. As Rensmann explains in the Introduction, SMEs may play a role in

‘generating more inclusive growth in a social sense’, including through ‘higher lev￾els of employment, as well as improving wages and working conditions’, especially

in developing countries.

Most of the authors in this volume are based in Europe, reflecting the hubs of

international trade law and international investment law in Brussels, Geneva, and

London. However, the analysis, discussion, and expertise extend beyond Europe

to countries such as the United States, South Africa, Brazil, Barbados, Malaysia,

and Australia, including through coverage of negotiations such as the Transatlantic

Trade and Investment Partnership (TTIP) between the European Union and the

United States, and the Trans-Pacific Partnership (TPP) signed by twelve Pacific

Rim countries, including jurisdictions as diverse as Canada, Chile, Japan, and

Viet Nam.

Even as uncertainty abounds regarding the entry into force of mega-regional

agreements such as the TTIP and TPP, the significance of SMEs to the global econ￾omy is only likely to increase. Dedicated discussions of the impact of international

economic law on SMEs in the context of such negotiations provide a valuable basis

for re-evaluating the role of international economic law in the life of an SME.

Developments such as the WTO’s Trade Facilitation Agreement can also improve

the integration of SMEs into global value chains, enhancing their potential contri￾butions to the international economy. By bringing together scholars, practitioners,

vi Series Editors’ Preface

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and policymakers, this volume offers wide-ranging insights on all of these issues,

beginning from the absence of even a universal definition of SME, and balancing

theory with pragmatism, the ideal with the feasible, to provide thoughtful recom￾mendations for the future.

Andrew D Mitchell and Tania Voon

November 2016

vi

Acknowledgements

This project was conceived and planned within the framework of the research

group Global TranSAXion at the University of Dresden, which was funded by a

research grant from the European Union and the Free State of Saxony. I would like

to thank all members of the Global TranSAXion team who, under the leadership

of Dr Heidrun Gross, made an invaluable contribution to formulating the research

agenda and laying the foundations for this publication.

I am most grateful to all authors for sharing our belief in the timeliness and topic￾ality of our project, for their effort, care, and attention in preparing their contribu￾tions, and their loyalty and patience throughout the entire genesis of this volume.

Special thanks are due to Rudolf Adlung, Alexander Gebert, and Joachim Karl, who

presented initial versions of their chapters as part of a lecture series at the University

of Dresden, which was generously supported by Hogan Lovells.

During the editorial process I received valuable and indefatigable support from

the entire Global TranSAXion team, as well as the staff at my former and current

chairs in Dresden and Augsburg. I am very grateful to Johannes Baier, Paul Huber,

Moritz Krause, Anne Lorenzat, Luise Seifert, Thomas Strehler, Natasha Thomson,

and Marie-Theres Überlein, as well as my secretary Eleonora Hummel, for their

assistance in preparing the manuscript for submission.

My assistants Johanna Stahlmann and Ulrike Will played a key role in bringing

the project to a successful conclusion by managing and supervising the decisive

stages of the editorial process. I am deeply indebted to them for their unfailing

enthusiasm and dedication.

I would also like to express my thanks to our publisher Oxford University Press.

We are particularly grateful to Merel Alstein, John Louth, and the series editors

Tania Voon and Andrew Mitchell, as well as Emma Endean-Mills and Natasha

Flemming for their encouragement, advice, and support.

Thilo Rensmann

January 2017

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ix

Table of Contents

List of Figures  xxi

List of Tables  xxiii

List of Boxes  xxv

Table of Cases  xxvii

Table of Legislation  xxxi

Table of Treaties  xxxiii

List of Abbreviations  xxxv

List of Contributors  xli

Introduction  1

Thilo Rensmann

PART I INTERNATIONAL TRADE LAW

1. Trade Policy for SMEs from a GATS Perspective  13

Rudolf Adlung and Marta Soprana

2. Leveraging Trade Facilitation Reforms for Increased SME

Competitiveness  38

Arancha González

3. Rediscovering the Forgotten Article of the WTO Anti-Dumping

Agreement: How Article 6.13 Protects SMEs  61

Karsten Pötschke

4. The South African Walmart/Massmart Case: SME-Friendly Domestic

Competition Laws in the Light of International Economic Law  93

Tilman Michael Dralle

5. SME Participation in Government Procurement Markets: Legal and

Policy Considerations under the WTO Agreement on Government

Procurement and the UNCITRAL Model Law on Public Procurement  123

Caroline Nicholas and Anna Caroline Müller

PART II REGIONAL AND TRANSREGIONAL TRADE LAW

6. SME Provisions in Trade Agreements and the Case of TTIP  165

Martina Lodrant and Lucian Cernat

7. An Asian Perspective on SMEs in International Economic

Law: Opportunities and Challenges Arising from the TPP  189

Heng Wang

x Table of Contents

x

8. Support of Small and Medium-Sized Enterprises under

European State Aid Law  216

Ilan Sherr, Katrien Miclotte, and Rebecca Fawcett-Feuillette

PART III INTERNATIONAL INVESTMENT LAW

9. The Treatment of Small and Medium-Sized Enterprises

in International Investment Law  241

Joachim Karl

10. Microinvestment Disputes 267

Perry S Bechky

11. Legal Protection for Small and Medium-Sized Enterprises through

Investor-State Dispute Settlement: Status Quo, Impediments,

and Potential Solutions  291

Alexander Gebert

PART IV HUMAN RIGHTS, DEVELOPMENT,

AND ENTREPRENEURSHIP

12. Business and Human Rights and the Challenges for Small and

Medium-Sized Enterprises  311

Michael K Addo

13. Promoting Entrepreneurship for Development  339

Fiorina Mugione and Fulvia Farinelli

Annex: How Small Are Small and Medium-Sized Enterprises? 357

Rudolf Adlung and Marta Soprana

Index  361

xi

Detailed Table of Contents

List of Figures  xxi

List of Tables  xxiii

List of Boxes  xxv

Table of Cases  xxvii

Table of Legislation  xxxi

Table of Treaties  xxxiii

List of Abbreviations  xxxv

List of Contributors  xli

Introduction 1

Thilo Rensmann

A. The Internationalization of SMEs as a Challenge to International

Economic Law  1

B. Sustainable Development and the Internationalization of SMEs  2

C. Recalibrating International Economic Law in Response to the

Internationalization of SMEs  3

I. Regulatory developments at the multilateral and regional levels  3

II. SMEs as a new cross-cutting issue on the research agenda

of international economic law  6

1. Identification and definition of SMEs  6

2. International economic law as cause and remedy for the

underrepresentation of SMEs in international trade and investment  7

3. The difficulty of SMEs being on both sides of the liberalization

equation  8

D. Conclusion  9

References  10

PART I INTERNATIONAL TRADE LAW

1. Trade Policy for SMEs from a GATS Perspective 13

Rudolf Adlung and Marta Soprana

A. Introduction  13

B. SME Involvement in International Trade  15

C. Policies Affecting SMEs—Their Status under the GATS  18

I. General framework  18

II. SME-related policies as reflected in schedules of commitments  20

1. Sector column  20

2. Market access  20

3. National treatment  21

III. Scheduling patterns across countries and sectors  22

xii Detailed Table of Contents

xi

IV. Policy discretion in liberalized sectors and modes  23

1. Market regulation and control  23

2. Investment- and production-related support schemes  24

3. Export assistance  25

4. Recognition measures under Article VII GATS  25

5. Preferences in government procurement  26

V. Policy discretion under ill-specified commitments?  27

VI. Transparency disciplines  28

D. Overview of Size-Related Commitments—GATS and RTAs  29

I. GATS commitments  29

1. Horizontal limitations  29

2. Sector patterns  31

3. Prospects for change  31

II. Regional Trade Agreements  32

III. Size-related effects of scheduling patterns—GATS vs RTAs  33

E. Summary  34

References  35

2. Leveraging Trade Facilitation Reforms for Increased SME

Competitiveness 38

Arancha González

A. Introduction  38

B. New Opportunities for SMEs to Go Global  40

I. SME characteristics  40

II. The globalization of SMEs hinges on trade in intermediate goods  42

C. Trade in Intermediate Goods Expands as Transaction Costs Shrink  44

D. Binding TFA Commitments Will Jumpstart a Virtuous Cycle for

Long-Term SME Growth  45

I. Reducing information asymmetries allows SMEs to export with

confidence  48

II. Simplifying regulatory requirements preserves the value added by the SME  50

III. Diversifying market participation through exports  51

IV. Limiting export cost uncertainty allows smaller shipments to be more

competitive  52

E. Good Domestic Policy Will Enhance TFA Benefits  53

I. Competitive trade logistic services further enhance export

competitiveness  54

II. Public–private partnerships engender innovative

and efficient solutions 54

III. Targeted fiscal policies provide renewed FDI to fuel SME growth  55

F. Conclusion  56

References  57

3. Rediscovering the Forgotten Article of the WTO Anti-Dumping

Agreement: How Article 6.13 Protects SMEs 61

Karsten Pötschke

A. Introduction  61

B. An Overview of the WTO Anti-Dumping Agreement  66

Detailed Table of Contents xiii

xi

C. Discovering the Meaning of Article 6.13 ADA  67

I. The dual obligation  67

II. The genesis of Article 6.13 ADA  69

III. The limits of Article 6.13 ADA  71

1. The term ‘interested parties’  71

2. The term ‘in supplying information requested’  72

3. The positioning of paragraph 13 at the end of Article 6  73

IV. The effect of Article 6.13 ADA  74

D. The Specific Interpretative Effects of Article 6.13 ADA  77

I. Relaxing submission requirements  77

1. Quality and quantity of information  77

2. Time criterion  82

3. Form criterion  84

II. Calling for proactive support  85

III. Prohibiting negative discrimination  87

E. Conclusion  88

References  90

4. The South African Walmart/Massmart Case: SME-Friendly

Domestic Competition Laws in the Light of International

Economic Law 93

Tilman Michael Dralle

A. Introduction  93

B. The Walmart/Massmart Case—Background  94

C. World Trade Law  97

I. Application of WTO law to domestic competition laws and decisions  98

II. Market access rights for Walmart  99

III. Imposition of performance requirements  101

1. Introductory remarks  101

2. Local procurement condition  103

3. Establishment of an SME fund  108

D. International Investment Law  113

E. The Indian and Malaysian Cases  114

F. Conclusions  116

References  118

5. SME Participation in Government Procurement Markets: Legal and

Policy Considerations under the WTO Agreement on Government

Procurement and the UNCITRAL Model Law on Public Procurement 123

Caroline Nicholas and Anna Caroline Müller

A. Introduction  123

B. The GPA and the UNCITRAL Model Law as International

Instruments Shaping Procurement Policies and Legislation

Worldwide  129

I. The GPA  129

II. The UNCITRAL Model Law  133

III. Harnessing the potential for international trade in the public

procurement market  135

xiv Detailed Table of Contents

xiv

C. Encouraging SME Participation under the GPA and the

UNCITRAL Model Law  136

I. Improving procurement legislation and systems: Lack of

transparency, integrity, and inclusiveness as potential barriers

to SME participation  137

1. The GPA  139

2. The UNCITRAL Model Law  141

II. Reforming procurement practices and systems to enhance

SME participation 142

1. The GPA  143

2. The UNCITRAL Model Law  144

III. Preferential programmes 148

1. Preferential programmes under the GPA  150

2. Preferential programmes under the UNCITRAL Model Law  152

D. Conclusions  154

References  157

PART II REGIONAL AND TRANSREGIONAL TRADE LAW

6. SME Provisions in Trade Agreements and the Case of TTIP 165

Martina Lodrant and Lucian Cernat

A. Introduction  165

B. SMEs and Trade Agreements: A General Framework  166

I. Barriers to trade for SMEs  166

II. Policy responses: Cross-cutting linkages  168

III. SME-specific provisions in trade agreements: Economic needs and

legal challenges  169

C. SME-Specific Provisions in EU and US Free Trade

Agreements: Practice to Date  170

D. SMEs and TTIP  174

I. Potential and barriers for SMEs in transatlantic trade  174

II. The role of TTIP negotiations  177

1. Tariffs, rules of origin, and customs procedures  179

2. Services  180

3. Standards and regulatory issues  181

4. Public procurement  182

5. IPR provisions  183

6. Transparency  183

7. Support schemes  184

8. Investment protection  184

E. Conclusion  185

References  187

7. An Asian Perspective on SMEs in International Economic

Law: Opportunities and Challenges Arising from the TPP 189

Heng Wang

A. Introduction  189