Volume 5, Issue 2

Introduction to 2012 LDR Special Issue (No. 2). The second Law and Development Review (LDR) special issue this year features articles presented in the second part of the 2011 Law and Development Institute Conference held in Seattle, USA.

In current negotiations on both climate change and international trade, there is debate over the obligations of developing countries. The author argues that whatever the outcome of those general discussions, special status must be carefully retained for the protection of the least-developed countries in the intersection of trade and climate change policies. The paper examines the position of LDCs on three trade-related topics: environmental goods and services, border adjustments, GSP tariff preferences.

This paper discusses the major policy initiatives that have been developed to combat chronic food shortages in the world’s least developed nations. The United States has taken the world’s leadership position in trying to address chronic hunger and under-nutrition as part of its Feed the Future initiative, an effort that is linked to the G8’s L’Aquila Food Security initiative. Both initiatives focus on activities and outcomes that are intended to reduce food insecurity in the medium and long terms. Both initiatives operate in the context of the immediate food relief policies and practices that most nations subscribe to as part of the United Nations food security initiatives.

Liberalization of merchandize trade has brought forth extraordinary gains to world economy in recent decades. Available research, however, suggests that even greater benefits can result from the liberalization of global trade in services. Currently only about 20 percent of services are traded internationally although this sector accounts for more than half of global outputs, and exceeds 75 percent of GDP in high-income countries. Temporary movement of natural persons as service suppliers—as envisaged by GATS-Mode 4 of WTO—is one such services area which promises great benefits to both labor sending and receiving countries, but remains mired in a complex quagmire of trade and non-trade barriers as well as widespread misapprehensions. This paper argues that a basic convergence of economic interests seem to exist between the labor sending and receiving countries for liberalizing temporary movement of natural persons as service suppliers, and that, despite growing anti-immigration sentiments in developed countries, GATS-Mode 4 may be capable of spurring greater cross-border labor mobility.

The large volume of literature and commentary on resolution of investor-state disputes tends to focus primarily on the rights of the foreign investor and the process through which the investor may protect her interest through investor-state arbitration, either at the World Bank’s ICSID or in some other forum. Where issues relating to governments-as-respondents have been addressed, the emphasis has often been on nations such as the three NAFTA Parties and other relatively large and affluent nations such as Argentina. Until relatively recently, much less attention has been paid to challenges facing small developing respondents, such as the member nations of CAFTA-DR, Chile, Colombia or Ecuador. How, for example, should such governments respond to and manage claims, some of which in magnitude may represent a significant portion of the annual budget of the respondent government, when there is relatively limited in-house legal expertise and experience in such dispute resolution? Fortunately, UNCTAD and others have begun to take such challenges into account and to provide training for respondent government officials. Still, further actions are needed, including educating policy makers and the public as to the risks that arise in the investor-state dispute context and how best to address them. Changes in BITs and FTA investment provisions are also warranted. This article identifies the nature of the challenges presented to such governments and suggests practical means of dealing with them more effectively. It addresses, inter alia, coordination issues for the national administering authority; means of identifying and resolving such disputes before they reach the arbitration stage; effective use of outside legal advisers at various stages of the process; factors relating to the selection of arbitrators; administration of the arbitral process; and making current and future bilateral investment treaties more responsive to the procedural needs of respondent government. The article also draws on the history of a number of nations with experience in responding to and/or litigating investor state disputes.

African countries do not have an effective legal framework to address the environmental damage that would be caused by the mining activities and oil exploitation of the transnational corporations. To resolve the issue, the paper proposes the modified bonding requirements under a tripartite agreement whereby the corporations’ home governments are involved. Conducting the discussion in the context of the Chinese investment in Africa and the environmental concerns that arise, the paper shows that such a scheme offers many advantages over the conventional bonding requirements and that it benefits both the local and the Chinese governments. Further, it proposes that the scheme should be made mandatory for any investors and governments in respect of their investments in the mining and oil industries in Africa.

For decades, the Commonwealth of Puerto Rico relied on tax incentives to promote itself as a manufacturing hub for pharmaceutical and medical devices. These tax policies, coupled with a well-trained work force, turned Puerto Rico into one of the most vibrant manufacturing centers in the world. More than 40 companies operating in Puerto Rico created over 26,000 direct jobs and contributed another 50,000 indirect employments. Many of the top-selling prescription drugs in the market are manufactured in Puerto Rico. Lipitor, Viagra, Zocor, Zoloft, and many of the well-known blockbuster drugs came from the Island. As it encountered the tensions of the 21st Century, Puerto Rico realized that manufacturing alone cannot secure future economic success. Competition from the world’s emerging economy in Asia and Latin America was becoming stronger every day. China and India are capable of producing drugs with the same level of proficiency and at lower costs. Further, the pipeline for big blockbuster drugs is rapidly drying down. To maintain its role in the global health market, Puerto Rico realized that it must use its trained people not only to manufacture, but to research, design, develop and test products. Through clinical trials for emerging medicines, complex cell analysis and clinical diagnostic projects, Puerto Rico planned to play a role in creating the next generation of scientific discoveries; that it must move into the value line of its industrial base from manufacturing to drug development and testing. From the 1970’s on, in positioning itself as manufacturing hub, Puerto Rico relied on the fiscal autonomy that its current political status grants to the Island, and aggressively exempted from income and other taxes the profits that the pharmaceutical and medical devices companies generate in Puerto Rico. As the Island seeks to emigrate from manufacturing to research and development, the tax issues are different. Simply said, income tax incentives are not relevant for research centers, since research centers are cost centers, not profit centers. Puerto Rico then turned to a new experiment in tax policy: tax exemptions for the personal income of highly competitive researchers living and working in the Island. Thus, Puerto Rico moved to attract and retain in Puerto Rico competitive researchers and to create incentives for non-competitive scientists already living in Puerto Rico to move into more competitive projects. This article will explain the process, and the tax measures adopted by the Commonwealth Puerto Rico towards that end, and explore the potential developments in such policies as they are implemented in the years ahead.

Discussions of aid effectiveness have, since 2005, been dominated by the Paris Declaration process. The Paris principles were revisited in Accra in 2008 and, most recently, in Busan in December 2011 at the fourth High Level Forum on Aid Effectiveness. While it is too early to say what Busan’s significance will be, it is timely to take stock of the progress and shortcomings of the entire Paris Declaration process, of which Busan is a part. This paper contributes to that inquiry by considering aid-effectiveness principles and processes in a specific context: the law and justice sector in Cambodia. The evidence for our analysis comes from interviews with Cambodians and non-Cambodians - donors, government officials, aid workers, academics, and private citizens - conducted from 2008 to 2011. We find very limited success in the Paris Declaration process, confined mainly to a lessening of duplication and ‘donor chaos’. We explore the reasons for these modest results, including the fundamental flaw in aid-effectiveness discourse and activity of a too polite, if not naïve or even cynical assumption that donors and developing country governments are speaking the same political language. We identify and explore two challenges for the law and justice sector in Cambodia. The first is for donors to think about how to change the way they ‘do business’ and the second is how to achieve this in circumstances of weak local governance, institutions and political will. We conclude that, as donors regard the law and justice sector as high risk, most will be sorely challenged to live up to their Busan commitment to try to manage risk rather than avoid it.