Barbados: Blacklisting fight to the WTO?

Barbados Today – There are still options on the table for Barbados to fight blacklisting by the European Union, which has branded the island non-compliant for tax purposes, exposing its global business sector to sanctions and exclusions.

Trade experts with the Shridath Ramphal Centre for International Trade Law, Policy & Services (SRC) of the Cave Hill Campus of the University of the West Indies, Dr. Jan Yves Remy, an international trade lawyer and Deputy Director of the SRC and Alicia Nicholls, a trade researcher with the SRC, have suggested that Barbados was not helpless in the situation.

“The dispute settlement system of the World Trade Organisation (WTO), even with the ongoing political crisis, still represents the epitome of state-to-state dispute settlement at the international level, in no small part due to its relatively strong “enforcement” or compliance mechanism . . . . While there are less contentious options like good offices, arbitration and mediation at the WTO, without the power of compliance, they are unlikely to compel the EU to do anything more than it has done to date,” they noted.
In a blog post, the regional trade experts added: “Were CARICOM member states to consider initiating a dispute against the EU, they would likely do so under the General Agreement on Trade in Services (GATS), which regulates government action that affects international trade in services. “Without doubt, the practice of blacklisting “affects” the ability of affected CARICOM member states to deliver their tax and other related financial services globally through any of the “modes” for supplying services internationally, that is, whether remotely, in person, or by setting up a physical commercial presence in the EU.”
The two said the EU’s actions were even more dire considering the COVID-19 pandemic’s “economic pain” being suffered by debt-strapped Caribbean countries.

Importantly, Remy and Nicholls argued that EU treatment was unfairly applied to countries.
“We could envisage an argument by CARICOM that blacklisting violates the Most-Favoured Nation Treatment (MFN) clause of the GATS, an anti-discrimination provision that obliges WTO members not to treat “like” services or service suppliers of one WTO member more favourably than another.

“Here, CARICOM could argue that the EU does not apply the same favourable treatment to all like WTO service suppliers, and that by targeting primarily small developing countries with international financial centres, it discriminates against some members based on their tax cooperation status.

“If the EU uses lack of ‘international cooperation’ as a blacklisting criterion, it is unclear why, for instance, the United States – which has not signed on to the Common Reporting Standard (CRS) on the ground that it has passed the Foreign Account Tax Compliance Act (FATCA) – was not also blacklisted.”

Remy and Nicholls, however, noted that affected CARICOM countries were less likely to choose a WTO dispute settlement process because of the high costs involved and inability to enforce compliance of a ruling.

“There is the reality of the power dynamic between the EU and CARICOM, with the EU being not only an important trading partner for the region, but also the region’s main source of development assistance. This raises the spectre of possible reprisal should CARICOM decide to pursue this matter before the WTO,” they observed.

The two also pointed out that when Antigua and Barbuda lodged a successful case against the US over its online gambling stand, “the allegedly strong enforcement mechanism of the WTO proves illusory where a small state, like Antigua and Barbuda, must compel compliance by a larger one, like the United States, even where it actually wins a case”.