International Economic Law and Policy Blog

Call for Papers: Midyear Meeting of the American Society of International Law

This is from the ASIL:

The American Society of International Law calls for submissions of scholarly paper proposals for the 2022 ASIL Research Forum. The Research Forum, a Society initiative introduced in 2011 which takes place during the Midyear Meeting, aims to provide a setting for the presentation and focused discussion of scholarly papers related to international law. All ASIL members are invited and encouraged to attend the Forum, whether or not presenting a paper. Graduate students and early career scholars and professionals are especially encouraged to submit proposals for the Forum and the David D. Caron Prize.

 The 2022 Research Forum will take place at the University of Miami School of Law. Given the intent to create active engagement around the presented papers, the focus will be on fully returning the Midyear Meeting to an in-person event. Accepted authors should plan to present their scholarship in person (barring a public health emergency). All authors, discussants, and attendees will be required to be vaccinated with booster, if eligible, to attend. 

Papers may be on any topic related to international and transnational law and must be unpublished (for purposes of the call, publication to an electronic database such as SSRN is not considered publication). Interdisciplinary projects, empirical studies, and jointly authored papers are welcome and encouraged.

Deadline: 5:00 PM EDT on Monday, May 30, 2022. Abstracts should be submitted online at www.asil.org/MYM and will be anonymized and considered via a blind review process.

For the full call and information: https://www.asil.org/midyear-meeting

Amicus Submission in EU - Palm Oil (DS600)

I'm posting here a long excerpt from an amicus submission in the EU - Palm Oil (DS600) case, co-authored by trade lawyers Stéphanie Noël and Clémentine Baldon. In my view, this submission sets out the correct way to think about GATT Article III, and I'm glad to see these arguments put before a WTO panel. I don't know what various governments believe these days about the proper approach to Article III, but I hope they will seriously consider the arguments that follow. (I haven't thought enough yet about how these arguments apply to the DS600 measures, but I support the arguments in the abstract):

B. Preliminary remarks on the ultimate purpose of GATT Article III

17. At the outset, the Applicant would like to recall the object of the whole Article III of the GATT (“National Treatment on Internal Taxation and Regulation”) as set out in Article III:1. In the Applicant’s view, it must inform any legal analysis relating to Article III – and in particular the concept of “treatment no less favourable”.

1. The object and purpose of GATT Article III

18. GATT Article III:1 reads as follows:

“The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.” (emphasis added)

19. The purpose of the national treatment obligation is to avoid internal measures being applied “so as to afford protection to domestic production”.

20. The Applicant submits that it is clear from this wording that what is prohibited is the application of measures whose intended result is protection of domestic production.

21. The Applicant considers that the terms of Article III:1 are neither obscure nor ambiguous. But in order to be systematic and precise, the Applicant will demonstrate that a textual interpretation in accordance with the customary rules of interpretation of public international law, codified in Article 31, and to the extent appropriate, Article 32 of the Vienna Convention on the Law of Treaties (hereinafter the “Vienna Convention”) supports its view.

22. Article 31(1) of the Vienna Convention provides:

“A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose”

23. Even if the ordinary meaning of a treaty text shall be ascertained by considering the context and object and purpose, its identification may start with the dictionary definitions of the terms to be interpreted.

24. According to the Oxford Dictionary of English (Third Edition), the phrase “so as to do something” means “in order to do something”. This clearly implies that the action to which the phrase refers (in the case at hand, applying a measure) is taken with a view to achieving an objective. This suggests the intention.

25. Had the drafters wanted to refer to a broader scope of measures, so as to include any measure having the effect – actual or potential – of protecting domestic production, they would have drafted Article III:1 so as to reflect this. For example, they could have used “such that it affords protection” “in a way that protects”, “which results in protection” or “which may have the effect of protecting”, etc. There are plenty of ways to indicate the mere consequences, regardless of the intention.

26. The general definition “protection” supplied by the Oxford Dictionary of English (Third Edition) is “the action of protecting”. The same dictionary provides several definitions of the verb “protect”. Obviously, the economic definition is the most relevant. It reads “shield (a domestic industry) from competition by imposing import duties on foreign goods”. Although the definition refers to the imposition of import duties, admittedly, shielding the domestic industry can be achieved by other means.

27. Context, object and purpose just serve to elucidate the meaning of existing treaty words and terms. In this case, they are clear. In any event, we will examine the immediate context, and the general object and purpose of the GATT.

28. Let us turn to the immediate context of Article III:1. It immediately follows Article II on Schedules of Concessions. This indicates the rationale behind Article III of the GATT, which aims at ensuring that Members’ internal charges and regulations do not frustrate the effect of their tariff concessions under Article II. Therefore, the main goal of Article III of the GATT is to prevent Members from resorting to internal measures in order to indirectly protect their domestic productions from competition boosted by their trade liberalization commitments.

29. In addition, Article III and the GATT in general must be read in conjunction with the WTO Agreement, as its Annexes (which include The Multilateral Agreements on Trade in Goods) are integral parts of the WTO Agreement. As such, the Preamble of the WTO Agreement informs the provisions of the GATT. And as the Appellate Body recognized in US – Shrimp, the Preamble “shows that the signatories to that Agreement were, in 1994, fully aware of the importance and legitimacy of environmental protection as a goal of national and international policy” (emphasis added). Therefore, even though the Appellate Body said that the sheltering scope of GATT Article III is not limited to products bound under Article II, the interpretation of GATT provisions should show deference to the policy space of WTO Members as long as their measures do not aim at shielding domestic production but have legitimate goals (especially environmental protection).

30. This interpretation is consistent with the Appellate Body’s reference to “protectionism”. As it has recognized in Japan – Alcoholic Beverages:

“The broad and fundamental purpose of Article III is to avoid protectionism in the application of internal tax and regulatory measures”. (emphasis added)

31. It is clear from the above that the purpose of Article III of the GATT is to strike down internal measures that are protectionist and shield internal measures that pursue a legitimate objective in good faith.

2. Determinations under GATT Article III

32. This entails that a determination under any of the provisions of Article III should be a determination about the application of the challenged measures so as to afford protection to domestic production.

33. The logical consequence of the above is that the starting point for making such a determination should be the domestic production that the country in question intends to protect through the application of this measure. It is all about protection of domestic production, not about merely disfavouring or even targeting certain products or products from certain countries (the latter case being dealt with by Article I:1).

34. Therefore, the claimant must identify the “domestic production” that the respondent seeks to protect. In the case at hand, Malaysia has identified two distinct types of domestic productions: i) “certain biofuel feedstocks, such as rapeseed, sunflower, and soybeans” and ii) “biofuels produced therefrom”.

35. The Applicant submits that the legal tests to be applied under the provisions of Article III and any legal interpretation thereof should be performed to determine whether the measures challenged in this dispute aim at protecting “certain biofuel feedstocks, such as rapeseed, sunflower, and soybeans” produced in the EU or “biofuels produced therefrom” in the EU, as the case may be.

36. This should be so if the Panel were to give full effect to the terms of Article III:1.

3. The terms of Article III:1 should be given full effect

37. The Applicant submits that the terms of Article III:1 should be given full effect. The Applicant would like to respectfully recall the principle of effective treaty interpretation “according to which all terms of a treaty must be given a meaning”. It involves that a treaty interpreter:

“… must give meaning and effect to all the terms of the treaty. An interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility.”

38. It follows that all the provisions of Article III should be interpreted in light of its fundamental purpose, which is to avoid protectionism in the application of internal measures.

39. Having recognized that the principle of effective treaty interpretation mandated such an approach, the Appellate Body said that the principles set forth in this paragraph shall inform the rest of Article III (including provisions on “treatment no less favourable”):

“Article III:1 articulates a general principle that internal measures should not be applied so as to afford protection to domestic production. This general principle informs the rest of Article III. The purpose of Article III:1 is to establish this general principle as a guide to understanding and interpreting the specific obligations contained in Article III:2 and in the other paragraphs of Article III, while respecting, and not diminishing in any way, the meaning of the words actually used in the texts of those other paragraphs. In short, Article III:1 constitutes part of the context of Article III:2, in the same way that it constitutes part of the context of each of the other paragraphs in Article III. Any other reading of Article III would have the effect of rendering the words of Article III:1 meaningless, thereby violating the fundamental principle of effectiveness in treaty interpretation.”

40. In practice, this entails that, as the Appellate Body ruled in EC – Bananas, in relation to Article III:4 (but it applies to all the provisions of Article III):

“In short, there must be consonance between the objective pursued by Article III, as enunciated in the “general principle” articulated in Article III:1, and the interpretation of the specific expression of this principle in the text of Article III:4”.

41. With these essential considerations in mind, we now turn to Malaysia’s claims and the correct tests and interpretations that, in the Applicant’s view, should be applied.

(footnotes omitted)

The amicus submission then applies this reasoning to Article III:2, first and second sentences, and Article III:4, concluding that the measures at issue do not violate these obligations. Pasting all of that reasoning here would be too much for one blog post, but here's a key part of the Article III:4 reasoning:

92. In our view, nothing prevents a panel from interpreting the term “treatment no less favourable” so as to take into account the protectionist purpose (or lack thereof). All the above indicates that such an interpretation is even mandated by the principle of effective treaty interpretation and necessary to render a ruling on Article III:4 consistent with the spirit of the GATT and the WTO Agreement. The Appellate Body itself ruled that panels could do so in interpreting the term “treatment no less favourable” in the context of Article 2.1 of the Agreement on Technical Barriers to Trade: where the measure at issue results in a de facto detrimental impact on competitive opportunities for imported products, it can still be found non-discriminatory if such a detrimental impact “stems exclusively from a legitimate regulatory distinction”. We do not see any reason why panels could not consider the regulatory purpose in making determinations of “treatment no less favourable”.

93. Moreover, the Applicant submits that the test applied to determine the presence of a “protective application” in the context of Article III:2, second sentence could be relevant in determining in determining “less favourable treatment” under Article III:4. If a disparate impact is observed, a panel could examine the design, architecture and structure of the measure at issue in relation to its declared objectives. This would allow the panel to determine whether the measure has been deliberately designed to protect the domestic production identified by the complainant.

In essence, I take this submission to argue that Article III:2, first and second sentences, and Article III:4 may have slightly different wording, but nevertheless they should all reflect in some way Article III:1 and its clear reference to protectionist intent. And a key part of the way to do that is to consider the "design, architecture and structure of the measure at issue in relation to its declared objectives."

ASIL Looking for Executive Director

The listing is here:

Summary:
The American Society of International Law ("ASIL" or "the Society") seeks an accomplished leader with vision, proficiency in international law, and proven management skills to serve as its next Executive Director starting (ideally) in mid-September 2022.

Responsibilities:
The Executive Director leads a diverse and accomplished 10-12 person staff, who facilitate the Society's programming, development, finance, fundraising, and membership activities, including by: 

1. convening the prestigious ASIL Annual Meeting in Washington, which attracts more than 1,300 participants each year;
2. organizing and sponsoring other meetings, conferences, and symposia;
3. publishing the leading journals American Journal of International Law, its open-access companion AJIL Unbound, International Legal Materials, and Proceedings of the ASIL Annual Meeting, as well as online publications;
4. maintaining a robust virtual presence through social media, an extensive website, and podcasting;
5. supporting over 30 ASIL member Interest Groups;
6. providing other educational and information resources, including career development opportunities in international law;
7. engaging in fundraising events to support the Society's goals;
8. conducting impactful policy-oriented discussion and research; and
9. engaging in outreach to non-members in the U.S. Government, the judiciary, the diplomatic community, international organizations, the media, and the public to promote a broader understanding of international law.

Apart from directing the Society's regular work, the Executive Director contributes to shaping the Society's vision and responses to the ever-more challenging global order.  In this regard, the Executive Director works closely with ASIL's President (elected every two years) and Executive Council (serving three-year terms), who govern the Society and determine its direction. 

The Executive Director also has an important outward-facing role as an ambassador for the Society and meets with important constituencies, including the judiciary; the White House and executive agencies such as the Departments of State, Defense and Justice; the U.S. Congress; international organizations and diplomats; local and international media; think tanks; academia; private practitioners; bar associations; professional organizations in law and other disciplines; and national and regional international law societies outside the United States.

Qualifications: 
The successful candidate for Executive Director will:

1. be proficient in international law;
2. possess strong managerial, administrative, and organizational ability and experience, overseeing ASIL's staff and an annual budget in excess of $3 million;
3. have effective fundraising skills, including through pursuit of grants, sponsorships, partnerships, and individual giving;
4. be adept at promoting ASIL's programing and advancing its mission through social media, the ASIL website, and other outlets;
5. be able to engage effectively with ASIL's diverse international membership;
6. be capable of facilitating dissemination of scholarly and informational output in print, electronic, and conference settings; and
7. be able to design and implement outreach programs and represent ASIL publicly before its many U.S. and foreign constituencies.

Terms: 
ASIL's Executive Council will appoint the new Executive Director to an initial term of three years, with the possibility of reappointment to a second term of up to five years, and a competitive reappointment to a final term up to a combined 12-year term limit, as prescribed by ASIL's constitutive documents.  The position is full-time and requires residence in the Washington, D.C. area and authorization to work in the United States.  ASIL offers a competitive salary and benefits package commensurate with experience and comparable to management-level public sector and NGO positions.  The Society is an Equal Opportunity Employer and does not discriminate on the basis of race, color, religion, gender, sexual orientation, gender identity or expression, age, national origin, marital status, citizenship, disability, veteran status, or any other basis prohibited by law.  The Society values a diverse and inclusive workforce and encourages all qualified individuals to apply.

How to apply: 
Please send a CV and cover letter to EDSearch@asil.org with the following subject line: "Attention: Lucy Reed, Chair, ASIL Executive Director Search Committee".  The cover letter should explain why you are interested in being ASIL's Executive Director, your compensation expectations, and your availability to start work as a Washington area resident, ideally by mid-September 2022.  To receive appropriate consideration, your application should be received by Monday, June 20, 2022.  All applications received will be acknowledged, but only finalists will be contacted further.  The identities of all applicants will be kept strictly confidential.

KU Leuven Looking for PhD candidate in International Economic Law

This is from KU Leuven:

Leuven Centre for Global Governance Studies, KU Leuven is looking for a doctoral researcher in international economic law. The position enables you to enrich your research skills and provides opportunities in pedagogy through teaching, coaching for moot courts, and supervising master theses at the University. Interested candidates may apply through this link: https://www.kuleuven.be/personeel/jobsite/jobs/60110891?hl=en&lang=en

Call for Applicants 2022/23 Edition of Master of Laws in International Trade in Turin

This is from the Master of Laws in International Trade Law | ITCILO programme in Turin:

A one-year, intensive post-graduate programme including a distance learning phase and a face-to-face phase at the UN/ITC-ILO Campus in Italy. A cross-disciplinary curriculum in international trade law covering contracts, institutions and dispute settlement. Focus on the latest research developments and on the frontiers of international trade law, including technology and sustainability. Teaching and guidance from leading scholars, trade experts, lawyers, legal counsels, officers of international organizations. A unique partnership between academia (University of Turin) and international organizations (ITC-ILO, Uncitral Unidroit). The opportunity to join a vibrant Alumni Network with over 1000 members worldwide.

The First CPTPP Dispute: New Zealand vs. Canada on Dairy

New Zealand has just filed the first ever CPTPP consultations request, relating to Canadian measures "concerning the allocation of dairy tariff rate quotas (TRQs) under CPTPP (dairy TRQ allocation measures)." The request states:

2. Canada’s dairy TRQ allocation measures encourage chronic underfill of its dairy TRQs, reduce their commercial value for exporting CPTPP Parties, and undermine the market access that was negotiated under CPTPP.

3. Canada maintains 16 dairy TRQs under CPTPP.1 Canada’s dairy TRQ allocation measures allocate the entire quota available under each TRQ into up to three ‘pools’. These ‘pools’ can only be accessed by specific importer groups, in accordance with rules set out in Canada’s dairy TRQ allocation measures. Each importer group is defined under Canada’s dairy TRQ allocation measures, and importers that do not fall within a relevant pool are not eligible to apply for, or be allocated, quota. In addition, under Canada’s dairy TRQ allocation measures, retailers are not eligible to apply for an allocation under Canada’s dairy TRQs.

The claims of violation are as follows:

5. Canada’s measures appear to be inconsistent with several provisions of CPTPP, including Canada’s obligation to:

a. ‘progressively eliminate its customs duties on originating goods in accordance with its schedule to Annex 2D’ under Article 2.4(2), and Appendix A of Canada’s Schedule to Annex 2-D;

b. ‘ensure that its procedures for administering its TRQs … are fair and equitable’ under Article 2.28(2);

c. ‘ensure that its procedures for administering its TRQs … are no more administratively burdensome than absolutely necessary’ under Article 2.28(2);

d. ‘administer its TRQs in a manner that allows importers the opportunity to utilise TRQ quantities fully’ under Article 2.29(1);

e. not ‘introduce a new or additional condition, limit or eligibility requirement on the utilisation of a TRQ for importation of a good, including in relation to specification or grade, permissible end-use of the imported product or package size, beyond those set out in its Schedule to Annex 2-D (Tariff Commitments)’ under Article 2.29(2)(a);

f. ‘ensure that … any person of a Party that fulfils [Canada’s] eligibility requirements is able to apply and be considered for a quota allocation under the TRQ’ under Article 2.30(1)(a) and paragraph 3(c) of Appendix A of Canada’s Schedule to Annex 2-D;

g. ‘ensure that … it does not allocate any portion of the quota to a producer group’ under Article 2.30(1)(b);

h. ‘ensure that … it does not ... condition access to an allocation on the purchase of domestic production’ under Article 2.30(1)(b);

i. ‘ensure that … it does not ... limit access to an allocation to processors’ under Article 2.30(1)(b);

j. ‘ensure that … each allocation is made in commercially viable shipping quantities and, to the maximum extent possible, in the amounts that importers request’ under Article 2.30(1)(c); and

k. ‘ensure that … if the aggregate TRQ quantity requested by applicants exceeds the quota size, allocation to eligible applicants shall be conducted by equitable and transparent methods’ under Article 2.30(1)(e).

The official CPTPP text, with all of the relevant provisions noted above, is here.

We are tracking FTA disputes on WorldTradeLaw.net (still a work in progress, but see here and here -- the New Zealand complaint is not up there yet). There's an obvious parallel between this New Zealand complaint and the U.S. dairy complaint against Canada under the USMCA (that consultations request is here). The  U.S. complaint starts off this way:

Canada’s dairy TRQ allocation measures set limits on the quantity of certain dairy products1 that may be imported at a lower (within access) rate of duty. Furthermore, through the dairy TRQ allocation measures, Canada, sets aside and reserves a percentage of those within access quantities for particular importer groups. For all of its dairy TRQs, Canada sets aside and reserves a percentage of the quota for processors, and for ten of the TRQs2 an additional percentage is reserved for so-called “further processors.”3

And of course the USMCA panel found a violation. As I understand it, Canada and the U.S. are currently trying to work out a resolution, and I'm just going to speculate a bit here and note the possibility that New Zealand perhaps wants to put some pressure on Canada so as to make sure that the resolution does not hurt New Zealand exporters.

Alan Wolff Working Paper on "Restoring Binding Dispute Settlement"

Long-time U.S. trade lawyer, government official, and former WTO DDG Alan Wolff has a recent Peterson Institute working paper entitled "Restoring Binding Dispute Settlement." Here's the abstract:

Binding dispute settlement, meaning the ability to obtain a final judgment of whether a Member of the World Trade Organization (WTO) has acted inconsistently with its obligations, was the defining attribute of the WTO as created in 1995. Global commerce thrived on having the certainty provided by its taking place within this system. For well over a decade, the United States had complained that the dispute settlement system was undermining the trade remedies—antidumping, countervailing duties against subsidies, and safeguard actions against injurious imports—that were allowed under the WTO’s rules. When a populist US administration assumed office in 2017, it blocked appointments to the WTO’s Appellate Body. Today, the WTO dispute settlement system has become balkanized. The European Union and a number of other countries have banded together to put into place an alternative mechanism. Outside this system are the other two-thirds of the WTO Members, including the United States. For most WTO Members, no definitive result can be reached as to whether WTO obligations have been violated, as there is no assurance that WTO dispute settlement will be binding for them. The question addressed in this paper is how to reconstruct a system that the United States could join that would be broadly acceptable to others. The paper sets out a wide range of elements for negotiators to consider to rebuild the WTO dispute settlement system and make WTO agreements enforceable once again.

The paper has a good overview of the origins of the WTO DS crisis and the various issues that have been discussed as part of it. I thought Alan's table at the end of the paper with "a menu of elements for a possible negotiation leading to restoring an appellate stage to which all WTO Members might ultimately agree" was useful. The elements listed, he explains, are from the Walker Principles; his discussions with colleagues at the WTO, Ambassadors, members of their delegations, officials in capitals, past AB members and staff, and expert observers; and the current literature on this subject. 

I did want to clarify one point though. In footnote 54, he says:

Simon Lester suggested an alternative to the DSB addressing overreach. He would have the General Council or a Ministerial Conference vote (three-quarters of Members required to carry an issue) on whether the reasoning (not the result of an individual report) was in error, thus making law. The problem with voting is the difficulty or ease of getting enough votes—that is, an unpopular position might not carry, while a popular but erroneous position might do so. Nevertheless, this is a recognition that the Members have to rediscover their legislative (rulemaking) power and reassert it. The question is how best to do it. This approach could be combined with the DS Review Committee recommended above.

To be clear, I didn't really expect to see voting here. In the blog post of mine that he links to, I said:

Rather than have partial adoption of a panel or Appellate Body ruling, as suggested by the United States and Chile, parties to the dispute could identify reasoning in a report that they found problematic. Identifying this reasoning would not have any impact on adoption or implementation of the findings in the particular case. Instead, it would trigger a process of discussion for an Article IX:2 interpretation. Achieving such an interpretation would be a challenge, and cannot be expected to happen easily. However, in the meantime, the amended DSU would state explicitly that the particular reasoning that was identified as being of concern would not serve as persuasive authority for future disputes.

I don't object to voting in these circumstances, but I agree with Alan that it will be a challenge to take a vote of this sort. What I had in mind with this suggestion is that we allow adoption to take place, while notifying the membership that there is a disagreement on the interpretation, and put that disagreement up for discussion. If an interpretation can resolve that disagreement, that's great, but even if it cannot, the dispute itself has been passed to the next stage and the discussion of the disagreement is valuable (and flagging it as not persuasive in future cases could help alleviate concerns related to "overreach," "activism," etc.).

Alan also had some follow-up thoughts on all this here.

Arbitrators Selected in DSU Article 25 Arbitration Appeal

The WTO has announced that the Arbitrator in the DS583 arbitration appeal under DSU Article 25 was composed on April 28. 2022 "through a random selection from a list of candidates prepared and agreed upon by the parties." Here are the arbitrators in the case (with an indication of the basis for their inclusion in the selection process):

• Mr Seung Wha Chang (former Appellate Body Member)
• Mr Mateo Diego-Fernandez Andrade (MPIA list)
• Mr Guohua Yang (MPIA list)

Not that I think this will tell us much about how the arbitration appeal will be handled, but here's a little WTO adjudication history for each one.

Seung Wha Chang is a Korean academic who was on the Appellate Body for one term, from June 1, 2012 - May 31, 2016 (the U.S. objected to his reappointment to a second term). Copying and pasting from our WorldTradeLaw.net tables, here are the appeals he worked on (the dates are circulation and adoption):

India - Solar Cells (AB)	Sep 16, 2016	Oct 14, 2016	GATT	Van den Bossche, Chang, Graham
Argentina - Financial Services (AB)	Apr 14, 2016	May 09, 2016	GATS	Chang, Bhatia, Zhang
India - Agricultural Products (AB)	Jun 04, 2015	Jun 19, 2015	DSU, SPS	Zhang, Chang, Servansing
U.S. - COOL, Article 21.5 (AB)	May 18, 2015	May 29, 2015	GATT, TBT	Ramírez-Hernández, Chang, Van den Bossche
Argentina - Import Measures (AB)	Jan 15, 2015	Jan 26, 2015	DSU, GATT	Chang, Bhatia, Ramírez-Hernández
U.S. - Countervailing Measures (China) (AB)	Dec 18, 2014	Jan 16, 2015	DSU, SCM	Van den Bossche, Bhatia, Chang
China - Rare Earths (AB)	Aug 07, 2014	Aug 29, 2014	DSU, GATT, Accession	Chang, Ramírez-Hernández, Zhang
U.S. - Countervailing and Anti-Dumping Measures (China) (AB)	Jul 07, 2014	Jul 22, 2014	DSU, GATT	Bhatia, Chang, Zhang
EC - Seal Products (AB)	May 22, 2014	Jun 18, 2014	DSU, GATT, TBT	Graham, Chang, Zhang

Prior to his appointment to the Appellate Body, he served on the following WTO panels:

U.S. - FSC, Article 21.5 II (Panel)	108	European Communities	Sep 30, 2005	Mar 14, 2006	Agriculture, DSU, GATT, SCM	Denis, Chambovey, Seung Wha Chang
EC - Trademarks / GIs (Panel)(Australia)	290	Australia	Mar 15, 2005	Apr 20, 2005	GATT, TBT, TRIPS	Mendoza, Seung Wha Chang, Cheung
EC - Trademarks / GIs (Panel)(U.S.)	174	United States	Mar 15, 2005	Apr 20, 2005	GATT, TRIPS	Mendoza, Seung Wha Chang, Cheung
Canada - Aircraft II (Panel)	222	Brazil	Jan 28, 2002	Feb 19, 2002	SCM	Davey, Seung Wha Chang, Dwarka-Canabady
U.S. - FSC, Article 21.5 (Panel)	108	European Communities	Aug 20, 2001	Jan 29, 2002	Agriculture, GATT, SCM	C. Falconer, Chambovey, Seung Wha Chang
U.S. - FSC (Panel)	108	European Communities	Oct 08, 1999	Mar 20, 2000	Agriculture, SCM	C. Falconer, Chambovey, Seung Wha Chang

 

Mateo Diego-Fernandez Andrade is a Mexican government official who has served on the following WTO panels:

China - TRQs (Panel)	517	United States	Apr 18, 2019	May 28, 2019	Accession, GATT	Diego-Fernández, Jóhannesson, Conejos
Korea - Pneumatic Valves (Panel)	504	Japan	Apr 12, 2018	Sep 30, 2019	AD	Diego-Fernández, Blumberg, Francis
EU - Fatty Alcohols (Indonesia) (Panel)	442	Indonesia	Dec 16, 2016	Sep 29, 2017	AD	O'Connor, Tereposky, Diego-Fernandez
India - Additional Duties (Panel)	360	United States	Jun 09, 2008	Nov 17, 2008	GATT	Wasescha, Diego-Fernandez, B. McRae
EC - Customs Matters (Panel)	315	United States	Jun 16, 2006	Dec 11, 2006	GATT	Benjelloun-Touimi, Diego-Fernandez, Tschaeni
Argentina - Peach Safeguards (Panel)	238	Chile	Feb 14, 2003	Apr 15, 2003	GATT, Safeguards	Feldman, Castro Bernieri, Diego-Fernandez

 

Finally, according to his bio at the 2017 WTO public forum, Guohua Yang "is a professor at China Tsinghua University Law School. Prof. Yang participated in the negotiations on China WTO accession and drafting the Accession Protocol and Working Party Report; he led a group of experts checking Chinese laws and regulations against the WTO rules and China commitments; he was the first Director and later Deputy Director General for WTO Legal Affairs within the Ministry responsible for WTO cases related to China. Prof. Yang strongly advocated for the multilateral trading system represented by the WTO. He also has a rich background on trade policy making and international cooperation. He is Executive Vice Chairman, WTO Law Research Society of China Law Society; Member, Indicative List for dispute settlement panels, the WTO Secretariat; Associate Editor, Journal of World Trade. He was also IP attaché at Chinese Embassy in the United States, Washington, DC (2006.1-2008.9) and WTO Appellate Body member candidate (2016)." You can read his piece entitled "China in the WTO Dispute Settlement: A Memoir" here.

Petros Mavroidis on the Indo-Pacific Economic Framework

This is a post by law professor Petros Mavroidis

 

Is IPEF an Avatar of Things to Come (Or Just a Digression)?

Petros C. Mavroidis

1. What is IPEF?

The IPEF (Indo-Pacific Economic Framework) sounds like the APEC, three adjectives and a noun that denotes moderate commitment. It covers labor-, environmental- (including clean energy and de-carbonization) and digital standards; supply-chain resilience; tax and anti-corruption provisions.

Sometimes, mistakenly, IPEF is portrayed as a request by US to its Pacific partners to adhere to its standards, with no market access guarantees offered in return. This is wrong. Adhering to the IPEF standards is insurance policy against market exclusion: the US, by today’s WTO legal framework, can lawfully exclude from its market in the name of non-discrimination anyone who does not meet say its labor and/or environmental standards.

What matters though, is not what IPEF does, as much as it is what the IPEF signals.

2. IPEF like TPP (Biden like Obama)

IPEF conforms Obama’s policy in two ways: pivot to Asia, and excluding China. One might legitimately wonder why not simply re-join the CPTPP, the successor to TPP. The response lies probably in what follows.

3. IPEF unlike TPP

Mutz (2021) provided additional confirmation that the pre-existing fault lines across political parties in the US regarding trade policy, have been fading: Destler (2005), Irwin (2017), Nelson (2019) had reached similar conclusions. Romney and Obama in 2012 engaged in China bashing; Clinton and Trump dwelled on who dislikes trade most. In light of the prevailing agreement in US society that trade should be viewed in terms of competition and not cooperation (as per Mutz’s terminology), then the president who reduces the potential bite of trade agreements scores big with the US voters. Trade talk after all, is disruptive.

IPEF is not expressed in terms of legally binding language. It is one more expression of the various initiatives of USTR Katherine Tai, framed in terms of “engagement instead of dispute adjudication”. But maybe it is too early to sound definitive on this score. The IPEF opts for variable geometry, the inner circle (IPEF+) being reserved for those who can and are willing to integrate further, faster (maybe the three ‘Five Eyes’ of the Pacific region, Australia, Canada, New Zealand, and the likes of Japan and Korea), while the outer circle (IPEF) will be reserved to the remaining invitees. The conditions for moving from the outer to the inner circle have yet to be detailed. It could be that binding language combined with dispute adjudication is reserved for the inner circle.

4. IPEF, the World, and the World Trade Organization

Irwin et al. (2008) and Steil (2013) made a persuasive case to the effect that those defending national security interests were holding the pen in the last stages of the GATT negotiation. Even though the GATT did not serve the “containment” objective that Kennan (1951) had advocated towards the Soviet Union as it opened up to Soviet bloc countries, it did so in measured manner. The underlying thinking for opening the door to some small Soviet satellites was, as Hoekman and Kostecki (2009), and Zeiler (1999) have noted that, by realizing gains from participation, they would adhere to liberal markets and weaken the Soviet alliance. For a moment, when history ended briefly with the fall of the Berlin wall, this seemed to be the winning strategy. But history returned, and the WTO looks less and less sustainable as is. It is in urgent need for reform.

But who will invest in the reform? Kindleberger (1973), and Keohane (1980) would argue that only a hegemon, the undisputed hegemon that is. There is not much empirical basis for that, but there is even less of a reason to believe that a cartel of heterogenous players would agree to similar down-payment. IPEF, if at all, confirms this view. The US, one of the two modern superpowers, has recently undertaken two major initiatives in the trade sphere, both regional (TPP, IPEF), and none of them multilateral (revive the WTO). The superpower that put together the GATT and its successor the WTO, has turned its back to it. The most recent US initiative (IPEF) is antithetical to the spirit of binding language and compulsory third-party adjudication permeating the WTO. If TPP could be seen as correction for the negotiation with China that never happened, as we argued in Mavroidis and Sapir (2021), the IPEF is a signal to the world as it is to the US domestic constituency that the identity of trading partners matters. It remains to be seen whether we are headed towards IPEF-type initiatives next to, or in lieu of the WTO. This is probably why it should be taken with the seriousness that it deserves.

References

Destler, I. M. 2005. American Trade Politics, 4th Edition, Institute of International Economics:

Washington, D.C.

Hoekman, Bernard M., and Michel Kostecki. 2009. The Political Economy of the World Trading System, Oxford University Press: Oxford, United Kingdom.

Irwin, Douglas A. 2017. Clashing Over Commerce, Chicago University Press: Chicago, Illinois.

Irwin, Douglas A, Petros C. Mavroidis, and Alan O. Sykes. 2008. The Genesis of the GATT: Cambridge University Press: New York City, New York.

Kennan, George F. 1951. American Diplomacy, 1900–1950, University of Chicago Press: Chicago,

Illinois.

Keohane, Robert O. 1980. The Theory of Hegemonic Stability and Changes in International Economic Regimes, 1967-1977, pp. 124-156 in Ole R. Holsti, Randolph M. Siverson, and Alexander ae. George (eds.) Change in the International System, Westview Press: Boulder, Colorado.

Kindleberger, Charles P. 1973. The World in Depression: 1929-1939, University of California Press: Berkeley, California.

Mavroidis, Petros C. and André Sapir. 2021. China and the WTO, Why Multilateralism Still Matters, Princeton University Press: Princeton, New Jersey.  

Mutz, Diana C. 2021. Winners and Losers, Princeton University Press: Princeton, New Jersey. 

Nelson, Douglas. 2019. Facing Up to Trump Administration Mercantilism: the 2018 WTO Trade Policy Review of the United States, The World Economy, 42: 3430-3437.

Steil, Benn. 2013. The Battle of Bretton Woods, Princeton University Press: Princeton, New Jersey.

Zeiler, Thomas W. 1999. Free Trade, Free World, The University of North Carolina: Chapel Hill, North

Carolina.

 

The EUI Workshop on Sociological Perspectives on International Economic Law and Human Rights Law (May 13-14, 2022)

The European University Institute (EUI) Workshop on Sociological Perspectives on International Economic Law and Human Rights Law will take place on 13 - 14 May 2022 in the Robert Schuman Centre, Conference Room - Villa La Fonte, Via delle Fontanelle 18 - San Domenico di Fiesole (Fiesole, Florence).  This fifth workshop on the sociology of international law will focus on various sociological aspects pertaining to international economic law and human rights law, as well as to interrelationships between these two major legal fields.  Participants will explore diverse interactions between sociological concepts and broad range of legal rules and institutions in these spheres.  See the full program here.  Those interested in attending the workshop, please send email to Mia Saugman.

Katherine Tai on Protectionism, Environmental Goals, Peace, and U.S. Trade Policy

Speaking at an event hosted by the Technical University of Munich last week, U.S. Trade Representative Katherine Tai was asked a question about trade and the environment that prompted a broad response which touched on a number of important trade issues. Here was the exchange:

Question:

This has to do with the bipartisan support for US trade, and the rising problems of protectionism and export controls that we're seeing in various parts of the world, perhaps because of COVID and the war in Ukraine, even pressures to move more in the direction of protectionism. The question is, how can we assure that climate change doesn't become a pretext for even further protectionism? The title of your talk was economics versus the environment, and here I think the question is, how do we integrate environment and trade?

Tai:

This is certainly a provocative question, posed in a thought provocative way. Let me first engage on some of the premises baked into the question, and then let me come to your specific question and point on economics and environmental objectives.

So I am very, very careful, and generally, I do not use the term protectionism. The reason why is, I think that the way we talk about trade also needs to evolve, and the way we think about trade. For many, many years, I think in the post World War II era, we have thought about trade as something that needs to be liberalized maximally. And the premise to this is that the more that we trade with each other the more peace and prosperity will result. And in fact I do think that this is largely the premise that underlies the WTO and the multilateral trading system, as it has existed for the past many, many years. And I think that there was every reason to believe during those decades that we were right, that all we needed to do was just to trade a lot, trade more, and trade freely, in as unfettered a way as possible. And the more of these connections were generated, the more we would rely on each other, and the better off we would all be. That this was the path to a better, more secure world.

I think a number of things have happened, just say in the past five to seven, let's say even 10 years, that cause me to wonder whether this vision for globalization leading us to a better, more secure world has run its course, and if we don't need a course correction, to move us towards and take lessons from these past years, to move us towards a sense of more security, and more optimism and hope.

So a couple of the disruptions that I'd like to highlight. In 2016, for example, the first disruption will be a backlash against this version of globalization that we've started to see. One happened with respect to the European Union in 2016. In the United Kingdom, we saw the Brexit referendum vote that was very surprising to many people, including those of us in the United States watching the vote. I think that we expected, watching the polls, that it would be close, but I don't know that we expected that that referendum would succeed. And that has led to the multi year process for Brexit, which I know has been really affecting of the entire European Union. The process of losing one of the members, a little bit like a divorce, which here from London, and when I visit Brussels, I know actually continues to go on. Not all the issues are settled and the European Union and the United Kingdom continue to have to negotiate some parts of what it means for Brexit to happen.

Of course, in the United States in 2016, we also had a very consequential vote, and that was the election of President Donald Trump. Now, I work in trade policy, so I'm only going to address the implications of President Trump's election through American trade policy. But as all of us have seen, over the course of the Trump administration in those four years, President Trump took a very very different approach to trade. And in fact his trade policies were a hallmark of his campaign and his political brand. And that America First energy is something that we are also extremely mindful of in the Biden administration and having gone through those four years, in terms of being a lesson that we feel we need to learn from. We cannot just go back to the world in 2015 and pretend like these things didn't happen. We feel strongly that we have to take history as it's happened and we have to adapt.

The ... second set of disruptions around COVID, the pandemic and our supply chain disruptions. And the third set are more recent, and Russia's invasion of Ukraine, which according to our earlier theory about more trade leads to more peace and prosperity is something that simply should not have happened. One WTO member, on this basis, on this theory, should never have been incentivized to aggressively act out and invade another WTO Member.

But here we are, in a version of this globalized world, where I think we've got to think about things differently, and therefore, this "free trade equals good, protectionism equals bad" dichotomy is one that I think we need to revisit. So you know, on export controls, I think you have to examine the objectives of the policies we're talking about. Export controls are about controls on technology, it is a national security tool.

Let me move this over into the use of economic policy to advance environmental goals. The way our global economic system has been structured, based on the premises I just talked about, has allowed for the free flow of capital across borders to chase the lowest cost and what that has rewarded, the incentives of the system, are to reward lax environmental protections, and frankly, lax worker protections. Protecting and having high standards for workers and the environment mean higher costs, but they're critical to resilience and sustainability. So in this era that we're in, in refashioning globalization to a globalization 2.0, what we really need to think through is how can we adapt the rules of trade to incentivize firm behavior to take into account more than just efficiency, but to promote and reward decisions that are made to pursue sustainability for our people and for our planet.

Here are a few thoughts in response.

First, it's interesting that Tai is skeptical of the term protectionism, because later she talks about export controls as being a national security tool, which I take as a statement that they are not, in fact, protectionism. I feel like there may be some confusion and differences of opinion out there about what exactly protectionism means. Is it just about the effect of the measure, or is it also about the intent? Some people seem to take it as referring to any measure that has a negative impact on trade, regardless of the intent, and I can see how there would be a problem with the term if used that way. But I prefer a usage that includes intent as well, and it may be the case that under this definition, Tai would be OK with the term. (Next time I have the opportunity at one of her events, I'll try to put this question to her!) For me, the main purpose of the trading system is to adopt mutually agreed constraints on protectionism, by which I mean measures whose primary objective is to give domestic producers an advantage over their foreign competitors for commercial reasons. If, on the other hand, protectionism is not the target here, then I'm a little lost about what the trade regime is supposed to be doing. There are various possibilities, but I have doubts that any of them could provide the basis for a stable trading system.

Second, there may be a handful of people out there who believe that trade liberalization should be "liberalized maximally," but for the most part they have been kept far from the levers of power over the past few decades. During that time, U.S. trade policy has maintained a careful balance of liberalization and protectionism, with plenty of protectionism still allowed. We do have something referred to as "free trade agreements," but we have never been close to having free trade. In addition, a lot of the maximizing we have done under trade agreements is about intellectual property, which some people -- and I am sympathetic to this view -- believe is more akin to protectionism.

On trade and peace, I don't think anyone believes that trade can prevent all war, but I also think it's clear that trade can and does reduce the possibility for war. This can be difficult to prove empirically, but it's hard to imagine that it's not true to some extent. So, while having both Russia and Ukraine in the WTO won't prevent Russia from invading Ukraine, there are plenty of countries whose relationships have improved greatly due to closer economic ties (Western Europe is perhaps the best example of this).

As to the impact of the 2016 votes, I'll focus on the election of Trump. It is true that Trump used a lot of protectionist rhetoric during his campaign, which most presidential candidates do, of course, but his rhetoric was even more extreme than that of others. After all the protectionist talk, however, he lost the 2016 popular vote handily, 48% to 45.9%, to an extremely unpopular candidate, so I'm not sure the lesson we should draw is that protectionism is popular. And of course, he famously used other rhetoric during that campaign, and it's hard to say which one played a bigger role in him either getting the votes that he did or in losing the popular vote. My instinct is -- and public polling seems to show -- that trade doesn't play a big role in people's presidential choices, but it's hard to prove this definitively. Now, we do have the electoral college, so Trump became president despite losing the popular vote, which gave him the opportunity to implement protectionist policies for 4 years, after which he lost the popular vote even more handily, 51.3% to 46.8% (while also continuing to use that other rhetoric). Again, it's hard to know what role the protectionism played in his losing these votes, but the results call into question the potency of protectionism as a successful electoral strategy. (For what it's worth, I think there is a version of trade liberalization that can still work politically in the U.S., and my prediction is that the U.S. will eventually get back on board with trade liberalization after it falls behind the rest of the world far enough).

Finally, as to environmental goals, if we take these objectives seriously, and I don't think we often do in U.S. policymaking, there shouldn't be much of a conflict between trade and the environment. If you ratchet up domestic environmental standards and apply those standards equally to imported and domestic goods, it is unlikely that you will violate trade rules. (There are a couple obligations and dispute settlement decisions that call that principle into question, but even at their strongest, trade rules can't force countries to change course. See, e.g., EC - Hormones). And while the "race to the bottom" theory is popular in certain circles, I'm not sure the evidence supports it. To me, the issue of lax environmental standards is mostly about domestic politics. The United States (and other countries) could adopt taxes and regulations that promote a cleaner environment, but politicians have had a hard time making that happen. I don't know whether the problem is more on the political leadership side or on the voter side, but regardless, trade rules are not playing much of a role here. And of course, one way trade rules could play a role in a positive sense is through an agreement to lower tariffs on environmental goods, which would be a nice win-win for both trade and the environment. However, there is strong opposition from corporations/labor unions who don't want a broad win for everyone on either issue because of the losses they think they will suffer, which makes it hard to get this done.

Follow-Up on the First DSU Article 25 Appeal

Following up on my last post, the panel report in DS595, EU - Steel Safeguards, was circulated on Friday, which, by the terms of the Article 25 Agreed Procedures in the dispute, means that the parties will not appeal, either through the normal method or the Article 25 alternative. That leaves us with just the one Article 25 appeal for now, in DS583, which I have the following questions about.

1. How will the arbitrator selection process go and who will be the first Article 25 arbitrators? 

The DS583 Article 25 agreed procedures say this:

The arbitrators shall be three persons randomly selected, in the physical presence of representatives of the parties, from a combined list of former Appellate Body Members and appeal arbitrators.4 The random selection will be conducted at the same time as the random selection in DS595 European Union — Safeguard Measures on Certain Steel Products, so as to ensure that one randomly selected appeal is heard by two former Appellate Body Members and one MPIA appeal arbitrator whilst the appeal in the other dispute is heard by one former Appellate Body Member and two MPIA appeal arbitrators. If there is only one appeal it will be heard by one former Appellate Body Member, one MPIA appeal arbitrator, and the third person shall be drawn at random from the remaining persons on the combined list. The random selection shall be made immediately after the filing of any notice of appeal and the arbitrators informed immediately.

DS595 was not appealed, so there is only one appeal here and the DS583 appeal "will be heard by one former Appellate Body Member, one MPIA appeal arbitrator, and the third person shall be drawn at random from the remaining persons on the combined list." The random selection is to be made "immediately after the filing of any notice of appeal." That means it should happen soon, if it hasn't happened already. The MPIA list is here; I'm not sure which of the former Appellate Body Members are available to work on this appeal. 

2. What kind of award will the arbitrators write?

Different people are likely to have different approaches to appellate review, and what this first group does will set a precedent -- with apologies to those who don't like that word -- and will shape everyone's views of this alternative approach to appeals. How much summarizing of parties' arguments and past cases will the arbitrators do? How extensive will their reasoning be? What will they do with the DSU Article 11 allegation? How will they handle the substantive issues, which deal with some core GATT principles?

Related to this is the issue of how long they will take. The agreed procedures say:

12. The parties request the arbitrators to issue the award within 90 days following the filing of the Notice of Appeal. To that end, the arbitrators may take appropriate organizational measures to streamline the proceedings, without prejudice to the procedural rights and obligations of the parties and due process. Such measures may include decisions on page limits, time limits and deadlines as well as on the length and number of hearings required.

13. If necessary in order to issue the award within the 90 day time-period, the arbitrators may also propose substantive measures to the parties, such as an exclusion of claims based on the alleged lack of an objective assessment of the facts pursuant to Article 11 of the DSU.⁵

14. On a proposal from the arbitrators, the parties may agree to extend the 90 day time-period for the issuance of the award.

------------------------

⁵ For greater certainty, the proposal of the arbitrators is not legally binding and it will be up to the party concerned to agree with the proposed substantive measures. The fact that the party concerned does not agree with the proposed substantive measures shall not prejudice the consideration of the case or the rights of the parties.

As a general matter, I think arbitrators can finish their reports in Article 25 appeals in 90 days. However, given the circumstances here (i.e., the first such appeal ever) it could be a challenge, and it will require taking a particular approach on the questions I raised above, and not everyone wants to take an approach that can support a 90 day period. What will this group of arbitrators do here?

3. What kind of assistance will the arbitrators receive?

In WTO dispute settlement, the panelists, arbitrators, and Appellate Body Members are assisted by lawyers (and others) from the Secretariat. In the context of the MPIA, during the Trump administration, the U.S. sent a letter objecting to some aspects of Secretariat assistance to the MPIA (e.g., the U.S. argued: "Article 25 provides no basis for the use of WTO resources to support functions that are not part of the arbitration, such as for a 'pool of arbitrators' to 'stay abreast of WTO dispute settlement activities' or to enable the arbitrators to 'discuss among themselves matters of interpretation, practice[,] and procedure.'"). But that was a different administration, and this case is not under the MPIA, so perhaps the U.S. will not have concerns with the Secretariat providing assistance related to this arbitration.

If the Secretariat is going to provide assistance, who exactly would do it? Having former Appellate Body Secretariat staff, who are now in other divisions, play a role could generate U.S. objections (the U.S. letter noted that "the [MPIA] proposal would expend WTO resources to seek to recreate the Appellate Body"), so maybe everyone will try to avoid that. And the Legal Affairs division -- I assume, given the subject matter of the dispute -- assisted on the panel report, so perhaps those folks will be excluded as well. But there are other people in the building with experience in these matters, so it should not be too much of a challenge to find good people. (Thanks to Geraldo Vidigal for conversations about this issue).

The First DSU Article 25 Appeal

Last week, I said this in a post:

In the DS583 case, Turkey - Pharmaceutical Products, a communication from the Panel indicates that the Panel had issued its final report to the parties on November 11, 2021, with circulation to the Members (and public) scheduled to take place "as soon as its translation into French and Spanish was finalized, and that translation was expected to be finalized in mid-January 2022."

In the DS595 case, EU - Certain Steel Products, a communication from the Panel says that the panel report "was scheduled to be circulated on 21 December 2021."

In late December 2021, however, both disputes were suspended under DSU Article 12.12.

Then, as noted, on March 22, 2022, Turkey and the EU notified Article 25 procedures in both disputes. Both sets of procedures include the following language:

5. The arbitration shall be initiated by filing of a Notice of Appeal with the WTO Secretariat no later than 30 days after the suspension of the panel proceedings referred to in paragraph 4 has taken effect. The Notice of Appeal shall include the final panel report in the working languages of the WTO. The Notice of Appeal shall be simultaneously notified to the other party or parties and to the third parties in the panel proceedings. Rules 20-23 of the Working Procedures for Appellate Review shall apply mutatis mutandis.

The parties agree that, because the present panel proceedings have already been suspended, the time limit for the filing of a Notice of Appeal shall be no later than 30 days from the date on which this agreement is notified to the DSB.

I'm not totally sure what's about to happen here, and we'll find out for certain 30 days from March 22, but my sense is that notices of appeal are not coming, and the disputes will remain in permanent suspension. But the specific details of the documents are difficult to parse, and it's possible I've misunderstood what the parties are doing here. We'll find out soon enough.

Looks like I was wrong about DS583 (at least)! Turkey's DSU Article 25 notice of appeal in DS583, with the panel report attached, was posted on the WTO website today and is here. It starts this way:

Pursuant to paragraph 5 of the Arbitration Agreement, Turkey hereby notifies the Dispute Settlement Body of its decision to initiate an arbitration under Article 25 of the DSU to decide an appeal with regard to certain issues of law and legal interpretation covered in the Panel Report in the dispute Turkey – Certain Measures concerning the Production, Importation and Marketing of Pharmaceutical Products.

Pursuant to paragraph 5 of the Arbitration Agreement and Rule 20 of the Working Procedures for Appellate Review, Turkey simultaneously files this Notice of Appeal and its Appellant Submission with the European Union and the third parties in the panel proceedings and with the WTO Secretariat. The Notice of Appeal includes the final report of the Panel in the working languages of the WTO.

The Article 25 procedures in the case are here.

This should be interesting. We are in uncharted territory.

What Does Bob Lighthizer Think of the Trump Administration's Trade Policy?

On his TV show, former Trump administration official Larry Kudlow was talking to Trump's U.S. Trade Representative Bob Lighthizer about various trade issues, including whether Lighthizer thought the Trump administration's China trade policy was successful. Not surprisingly, Lighthizer thought this policy was quite good, even coming close to being historically great and Churchillian. Here was the exchange:

Kudlow: Was the US-China Phase One trade deal a success or a failure? ...

Lighthizer: ... So I'll take a half a step back. Was the President's China policy a success? I think it was a success. Probably the greatest success of his presidency, or at least arguably. I think it was the most impactful and successful policy of a modern American president.

And here's why I say that. You have to start with the proposition that China is an existential threat to the United States. They do not like us. They want to be the leader of the world. They do everything they can to hurt America. So you start with that. Then you go back and you think, where were we six years ago? People didn't understand that. Trump understood, but people did not understand that. And he basically changed the way the United States thinks about that, and in truth, the world, because everyone now understands that issue. ...

Kudlow: ... Trump rang the warning bell, big time. And that's really what you're referring to.

Lighhtizer: He convinced the world that we have a conflict. Think of it as a little bit like, and I don't want to draw too far on this analogy, but a little bit like the 30s with Winston Churchill, it's a little bit like that. ... he's now, the world's in a different spot. We understand we have a problem.

Now, to get to your specific question, was the Phase One deal a success? First of all, it was successful in helping to convince the world of the most important thing you need to know, that we have an existential threat, if you're on the West, if you're an American. So in that sense, it was a success.

Let's go back and look at the individual parts of it, because there's a lot of confusion about this. People say, was the agreement about buying stuff? No, that was a very small part of it. So the most important single part of that agreement was we kept the tariffs in place. The tariffs were very important, they reduced the trade deficit, which they did. They took away the advantage that was unfair, that China had as a result of its unfair practices and subsidies. So the most important single part of that was the tariffs are still in place, and they're still doing the right things. And if President Biden gets rid of them, in my judgment, that will be a betrayal of the American people. ...

...

Let me spend one more second on the trade deal. All right, so the trade deficits, I mean, the trade tariffs stay, and that's the most important part. The second part, there was systemic changes. This is Phase One I'm still talking about, and they did most of those. The third part, and we can talk about that, they introduced and changed the laws that they said they would, agriculture, a variety of other things. Now it wasn't perfect, but it was pretty good. On the purchases side, they were less successful, the agreement was less successful. Now, there were interventions, there was COVID. There were a lot of reasons, but that's not an excuse. But most importantly, the thing's enforceable, and if they're not following the agreement, we should raise tariffs to retaliate.

Kudlow: Forced transfer of technology?

Lighthizer: So the forced transfer of technologies, they have stopped it as a matter of policy. Whether it stops in practice is something that a USTR or an administration should take a case to the Chinese if they find the case. And if they do, retaliate against it.

Putting trade aside for a moment, what I'll always remember about Trump's China policy was that he appears to have endorsed, or at least not objected to, China's treatment of the Uighurs and the Hong Kong crackdown. It would be interesting to see the counterfactual with a U.S. president who cared about these issues and pressed Xi Jinping on them, but we'll never know what would have happened. 

On trade, I had the following reactions to Lighthizer's points.

First of all, it sounds like Lighthizer thinks China mostly complied with the substantive obligations in the Phase One agreement, which is an intriguing position for a China hawk to take, as most people with that perspective say that China doesn't comply with its agreements. (With regard to the cause of China's compliance, I'm not sure that the Chinese actions here went beyond what it was already planning to do on most of these issues, but I'm happy to hear from any China experts out there on this point.)

Second, Lighthizer emphasizes that the Phase One agreement is enforceable, but this opinion is not widely shared (and it's definitely not my view). Without some kind of independent arbitration mechanism that can provide a neutral ruling on complaints, all the U.S. can do is threaten tariffs when it is upset about something, which is what it can already do -- and which it did -- under Section 301.

Third, Lighthizer says the most the important thing the agreement did was to keep the tariffs in place. But without the agreement, the tariffs would still have been in place, so I'm not sure the agreement adds anything here.

Obviously, it's natural for people to want to promote a positive version of their legacy, so we can't really expect anything else from a Kudlow-Lighthizer exchange on this issue. What will be interesting is to see the legacy that develops when we've had more time to reflect, and when some of the key players are no longer active in the field and more people feel comfortable expressing a view.

Event: Sustainable Finance in European Jurisdictions

This is from the Ferenc Mádl Institute of Comparative Law:

Sustainable Finance in European Jurisdictions

April 29 @ 09:00 - April 30 @ 14:30

The necessary path to a carbon-free economy will only be achievable with a fundamental transformation of essential sectors. Above all, there is a need to channel private capital into sustainable enterprises. The acceptance of this epoch-making project depends on the coherence of the legal framework to be created. So far, there are mainly regulations that can be summarized under the catchword “sustainable finance”, they concern shareholder governance, fund governance and product governance issues.

The aim of the Conference „Sustainable Finance in European Jurisdictions” is to investigate the implementation of this regulatory program from a comparative law perspective in order to uncover inconsistencies and, if necessary, to identify any need for action on the part of the European and the national legislators.

The conference will be organized in a hybrid format at the Hungarian Academy of Sciences in Budapest and on Zoom. Please see the detailed schedule below.

Attending the conference is provided for free courtesy of the organizers, however it is tied to prior registration both for online and in person participants.

Those interested are able to register by filling out the following registration form:  https://forms.gle/FYzRULREac4Dzsjq9

Registration is open until April 28. Online participants will receive an email with the Zoom link a few hours before the start of the conference.

Please refer any questions to Bálint Kovács via email: conference@mfi.gov.hu.

The event is organized by the Ferenc Mádl Institute of Comparative Law, Justus Liebig University Giessen and Vienna University of Economics and Business (WU).

Friend-shoring

Friend-shoring.

Secretary Yellen’s remarks of April 13, 2022 spoke of “friend-shoring” – a commitment to work with countries that “have strong adherence to a set of norms and values about how to operate in the global economy and about how to run the global economic system.”

Friend-shoring is not new. A 2021 White House Report on “supply chain resilience” forecast resiliency strategies for semiconductors, large capacity batteries, critical minerals, and pharmaceuticals. To develop resiliency, the United States must “deepen” its economic ties with friendly, “like-minded” countries and develop “open” plurilateral agreements to foster “high standards with respect to labor, the environment, privacy protections, [and] digital [services].” For the White House, making “friends” is necessary due to the realization that it has become “increasingly difficult to separate economic issues from broader considerations of national interest, including national security.” Preserving globalization entails trust of geopolitical partners. Edward Alden describes how the White House presents “America First” 2.0 – an upgrade from the Trump administration that establishes “friendly relations” in trade and investment between Washington, Brussels, and Tokyo.

The implication is that in the globalized economy, the United States has “unfriended” China. The underlying logic of “friend-shoring” is that friends shall not harm United States national security interests. China’s trade and investment practices are seen to do exactly that: “unfairly damage” U.S. economic security. The United States’ consideration of friend-shoring may disqualify other countries’ efforts to develop equally resilient supply chains. Other countries risk the label of “unfriendly” based on their political and economic choices, making the discourse even more about the “bipolarity in the world”, thereby complicating more substantial consideration of the sustainability of globalization altogether.

Two elements build the supply chain resilience for the United States. First, is the effort to “modernize” trade multilateralism for free but secure trade. Considering one is the exception of the other (and nothing is free), this is already a puzzle. Second, the modernized trading system must be built not from multilateralism but “a network of plurilateral trade arrangements” that address topics especially important to the United States. This could be a reference to the ongoing work of the WTO, but there is no added detail to know whether the United States will seek to develop its policies through preferential trade or not. If the ambition is preferential, then Desiree LeClercq cautions that the United States needs to be careful about how to inject international rights law into trade agreements.

In contemplating a “new Bretton Woods” it also bears consideration how international institutions entangle aspirations of friendship and international trade. The post-WW2 International Trade Organization (not, in fact, negotiated at Bretton Woods) sought to universalize the commitment to friendship among its fifty or so signatories. In his memoirs, Secretary of State Cordell Hull remarks that “fair and friendly relations” were the opposite of “the injurious results and dangerous possibilities of economic warfare.” (1948: 82). The language of friendship was cited in preambles or primary provisions of many post-WW2 bilateral treaties of amity to set the right tone for the governance of trade and navigation. As Gerry Simpson aptly observes “international law is already a law of friendship albeit a thin friendship of merely living together.” A deeper and more problematic use of the language of friendship, Simpson observes, “is there to beef up the ethical underpinnings of empire.” (2021: 167). Thus, it is simplistic to suggest “friendship” automatically connotes an evenness of competitive opportunities between contracting states, or equality of economic relations. In many cases, these post-WW2 treaties were not signed by equal partners at all – for example, the US-Ethiopia treaty of amity and economic relations, entered into force October 8, 1953 (4 UST 2134).

The United States’ seeming rejection of a “bipolar” global economy raises questions – is the United States seeking unipolarity, or multi-polarity? A return to Bretton Woods speaks to a time of unipolar power, for the United States. What about other countries seeking development? Is the problem that the rules failed in our ability to achieve equal competition across borders, or that we are at different positions on global threats? Who decides which governments earn greater policy space? Is the United States suggesting a world government? Why not consider how institutions can help the United States compete with China, such as reforming rules on state-owned enterprises and industrial policies?

Perhaps this is not about unwinding bipolar centres of economic power but strengthening the US pole. Is the United States seeking to develop (or perhaps regain) control over the globalized economy by competing with China’s Belt and Road Initiative with its own “friendly” version? What happens if the European Union’s economic power outpaces the United States? Will the friendly relationship sour? As Hugh Grant’s Prime Minister told Billy Bob Thornton’s US President in Love Actually: the word relationship covers all manner of sins.

 

Two Recent Developments in DSU Article 25 Arbitration Arrangements

Are we getting closer to the day when DSU Article 25 arbitration is used for WTO dispute settlement appeals, either through the MPIA or outside of it? I have a theory that a successful use of this alternative appeal mechanism could create the incentive for Appellate Body reform, but that's very speculative. And anyway, I'm not sure how close we are to actual Article 25 usage.

Nevertheless, there are two recent developments in this area worth noting.

First, the panel report in the Costa - Rica Avocados dispute (DS524) was circulated last week. On this dispute, let me first reiterate a point I've made before: This report is 474 pages long, which makes me wonder whether the SPS Agreement is the best way to adjudicate these disputes. Could we get to the same result more quickly using basic GATT provisions such as GATT Articles I, III, XI and XX? The issues would be the same, but with fewer legal provisions to parse, it might all go more quickly.

But turning back to DSU Article 25, Costa Rica and Mexico are both parties to the MPIA and had agreed to use the MPIA for appeals in this dispute. But under the procedures they agreed to, an appeal would have had to come prior to circulation of the panel report, so the normal circulation of the report indicates that the parties decided not to appeal. I think the next dispute to keep an eye on for a possible MPIA Article 25 appeal is Colombia - AD Duties on Frozen Fries (DS591).

The second development relates to the DS583 and DS595 disputes between the EU and Turkey. Turkey is not a party to the MPIA, but in both cases the EU and Turkey agreed on March 22, 2022 to Article 25 procedures for appeals (DS583 and DS595). I confess that I'm having a little trouble following what exactly the parties did here.

In the DS583 case, Turkey - Pharmaceutical Products, a communication from the Panel indicates that the Panel had issued its final report to the parties on November 11, 2021, with circulation to the Members (and public) scheduled to take place "as soon as its translation into French and Spanish was finalized, and that translation was expected to be finalized in mid-January 2022."

In the DS595 case, EU - Certain Steel Products, a communication from the Panel says that the panel report "was scheduled to be circulated on 21 December 2021."

In late December 2021, however, both disputes were suspended under DSU Article 12.12.

Then, as noted, on March 22, 2022, Turkey and the EU notified Article 25 procedures in both disputes. Both sets of procedures include the following language:

5. The arbitration shall be initiated by filing of a Notice of Appeal with the WTO Secretariat no later than 30 days after the suspension of the panel proceedings referred to in paragraph 4 has taken effect. The Notice of Appeal shall include the final panel report in the working languages of the WTO. The Notice of Appeal shall be simultaneously notified to the other party or parties and to the third parties in the panel proceedings. Rules 20-23 of the Working Procedures for Appellate Review shall apply mutatis mutandis.

The parties agree that, because the present panel proceedings have already been suspended, the time limit for the filing of a Notice of Appeal shall be no later than 30 days from the date on which this agreement is notified to the DSB.

I'm not totally sure what's about to happen here, and we'll find out for certain 30 days from March 22, but my sense is that notices of appeal are not coming, and the disputes will remain in permanent suspension. But the specific details of the documents are difficult to parse, and it's possible I've misunderstood what the parties are doing here. We'll find out soon enough.

Some Questions about the U.S. Law Suspending Normal Trade Relations Treatment with Russia and Belarus

On Thursday, both the House and the Senate voted to pass the "Suspending Normal Trade Relations with Russia and Belarus Act" (HR 7108), and President Biden signed it into law on Friday.

It looks to me, but correct me if I've missed something in the fine print, as though the normal trade relations provisions of the version of the bill that became law are the same as those in the earlier version I described here. The key language on raising tariffs on Russia and Belarus is as follows:

SEC. 3. SUSPENSION OF NORMAL TRADE RELATIONS WITH THE RUSSIAN FEDERATION AND THE REPUBLIC OF BELARUS.

(a) NONDISCRIMINATORY TARIFF TREATMENT.—Notwithstanding any other provision of law, beginning on the day after the date of the enactment of this Act, the rates of duty set forth in column 2 of the Harmonized Tariff Schedule of the United States shall apply to all products of the Russian Federation and of the Republic of Belarus.

(b) AUTHORITY TO PROCLAIM INCREASED COLUMN 2 RATES—

(1) IN GENERAL.—The President may proclaim increases in the rates of duty applicable to products of the Russian Federation or the Republic of Belarus, above the rates set forth in column 2 of the Harmonized Tariff Schedule of the United States.

(2) PRIOR CONSULTATION.—The President shall, not later than 5 calendar days before issuing any proclamation under paragraph (1), consult with the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate regarding the basis for and anticipated impact of the proposed increases to rates of duty described in paragraph (1).

(3) TERMINATION.—The authority to issue proclamations under this subsection shall terminate on January 1, 2024.

Section 4 then has a long and detailed set of provisions on resuming application of the lower column 1 duty rates and restoring normal trade relations if Russia/Belarus withdraws forces/ceases hostilities, poses no immediate threat to NATO allies/partners, and "recognizes the right of the people of Ukraine to independently and freely choose their own government." 

And Section 5 addresses some WTO issues:

SEC. 5. COOPERATION AND ACCOUNTABILITY AT THE WORLD TRADE ORGANIZATION.

The United States Trade Representative shall use the voice and influence of the United States at the WTO to—

(1) condemn the recent aggression in Ukraine;

(2) encourage other WTO members to suspend trade concessions to the Russian Federation and the Republic of Belarus;

(3) consider further steps with the view to suspend the Russian Federation’s participation in the WTO; and

(4) seek to halt the accession process of the Republic of Belarus at the WTO and cease accession-related work.

This all raises a few questions for me:

- My understanding, based on Ed Gresser's work, is that tariffs on the main products that the U.S. imports from Russia will not rise very much when the column 2 rates are applied to them. To maximize the impact of withdrawing normal trade relations, will President Biden use the power set out in Section 3(b) of the legislation to increase tariffs on these products above the column 2 rates?

- If the war ends, what political circumstances would allow for the restoration of normal tariff treatment for Russia and Belarus? To illustrate this point, what circumstances would demonstrate that Russia "poses no immediate military threat of aggression to any North Atlantic Treaty Organization member"? Peace would be great, but my sense is that peace alone might not be sufficient for Congress to want to grant normal trade relations, permanent or otherwise, to Russia and Belarus again.  

- What "further steps with the view to suspending Russia's participation in the WTO" will be taken? I'm not sure there is much chance of this suspension happening, because many WTO Members would object, but nevertheless I'm interested in seeing what people come up with here.

Katherine Tai on the Critics

This is from a Katherine Tai interview with Bloomberg TV anchor Haslinda Amin:

Amin: You've been criticized for your trade policy, some say that it lacks ambition, some say you've not done enough to bring cost down for American companies. What do you make of those criticisms and what can you do to allay some of those concerns?

Tai: Well, I think that for the people who are criticizing our trade policy, it is either because they are not hearing us when we describe what our objectives are, which is to bring a new approach to trade that ensures that trade policy can be and is a force for good. And I think that some of the other critics are impatient. So what I would say is, we are very much focused on the vision for trade, and the vision for America's leadership in trade and global economics, that is focused on ensuring that trade is a tool for moving us into a better world.

I think patience is important, and it does take a while to get people in place and come up with a strategy. It all seems very easy from the outside, but trying to take into account all the interest groups and the various people with opinions must be overwhelming. USTR career staff, officials at other agencies, congressional staff and members of Congress, pro-trade interest groups, trade skeptic interest groups, etc. all have views here, and they somehow need to be synthesized. And then trying to apply a combination of your own view and these other views to the wide range of long-standing and Trumpian trade actions out there is complicated, to say the least.

But eventually, there does need to be some clarity on an administration's trade policy vision, and I think we have it in some areas but perhaps not yet in others.

I think one of Tai's big ideas is to pull back on the fights with the EU, and I see some clarity in this area. While China has been the focus of recent trade concerns coming from the U.S., trade fights with the EU have been around longer and many have lingered on. I get the sense from some people in the U.S. trade policy world that they are madder at the EU than they are at China. Tai seems determined to tone down many areas of U.S.-EU conflict, and in my view that is a positive development. We have to set priorities, and even many of those who are most critical of the EU would probably acknowledge that there are bigger issues with China than with the EU (despite what the interest groups pushing particular EU issues might say).

Another area of clarity is with the idea of market access achieved through new trade agreements. Here, I think Tai has been very clear that the Biden administration will not be pursuing this. In her testimony to the House Ways and Means Committee last week, she said:

... when we talk about market access in trade speak, generally what we are talking about is tariff liberalization, tariff reductions, and it is true that we are not talking about tariff reductions in the context of the Indo-Pacific Economic Framework. ... We're actually living in a pretty tariff liberalized world as it is. That's not to say that there aren't further gains that could be made or more tariffs that could be brought down, but we're in a pretty fluid world for the movement of goods. The concern that we've run into, over the course of this version of globalization is, especially here in the US, a real concern about the offshoring and the erosion of our jobs and our industries.

I would say it's pretty clear from this statement that traditional market access in the form of tariff liberalization through trade agreements is not something Tai wants to pursue. Instead, the focus will be on issues like labor and the environment through less enforceable instruments such as the Indo-Pacific Economic Framework.

On this issue, I think the critics are actually hearing the Biden administration very clearly, but simply disagree with the objectives that have been stated. In terms of what would make trade policy a "force for good," many people, including me, think that when you balance out the benefits and costs, trade liberalization is a force for good. Protectionism, by contrast, is a force for bad when you do that same balancing. You can impose dispersed costs on everyone for the benefit of a favored few, but you really shouldn't. 

To the extent Tai is doing some political calculations here, I suspect one of her concerns is that traditional trade agreements are political losers for Democrats right now. My own view is that rather than abandon trade agreements entirely, we should come up with a better approach to them, including both the substance involved and the choice of negotiating partners. I think there is a package that could work politically, although it would mean standing up to some interest groups, and that won't be easy. One thing I'd really like to see is how much tariff liberalization the U.S. could get from foreign governments if it focused trade negotiations on that instead of issues such as labor, the environment, and IP protection.

In contrast to these areas of clarity, I think the Biden administration's trade policy vision still needs to be fleshed out in a few areas. Two big ones are WTO dispute settlement and China.

On WTO dispute settlement, as I've said before, I think there are a number of packages of reforms to restore the Appellate Body that are politically achievable. The administration just needs to settle on something and make the case for it to other WTO Members, in order to get the negotiations started.

As for China, while Tai has stated that the administration has not given up on changing China's trade practices, nevertheless there does seem to be a shift in priorities here. In a hearing at the Senate Finance Committee last week, Tai said:

... it is high time for us to turn the page on the old playbook with respect to China. That old playbook had us focused exclusively on changing China's behavior. We must now expand our work to include a strategy to vigorously defend our values and economic interests.

Along the same lines, she said:

... it is the time to turn the page on the old playbook, which focused exclusively on pressuring China and seeking China to change its ways or ... pressing China for compliance. We are not giving up on pressing China on compliance or on changing its ways. And yes, all tools remain on the table with respect to dispute settlement and enforcement. But my main point is that that's not the only thing we can do now and we have to expand our strategy to include developing the tools that we need to defend the interests of our economy.

In terms of defending values and economic interests, if trade remedies falls into this category, it seems to me we have been doing a lot of that for a long time. It looks like new rules on imports of forced labor are now getting thrown into that mix as well, and I guess the industrial policy-type actions people are pushing in Congress are also part of that category. But I worry that pressing China for change could get lost in this new mix, which is a shame. In my view, a lot could be achieved in this regard through the WTO dispute process (if restored, as noted above). China is unlikely to take seriously unilateral demands from the United States (this was clear before the recent Section 301 actions, but is even more so now), but it does seem to respond positively to rulings from neutral international trade adjudicators. Political scientists and China experts can debate why exactly that is the case, but it seems to be true, so why not take advantage of it?

Misunderstandings on the Nature of Today's Globalization

I'm always up for a good debate about trade and globalization, so when the folks at American Compass asked me to comment on some of their recent work, I agreed to do so. American Compass is run by Oren Cass, a former Mitt Romney adviser who has moved in a protectionist and interventionist direction on economic issues. Robert Lighthizer is on their board of directors, which help makes their perspective clear.

The problem I had with engaging in this particular debate, besides a word limit which constrained me like a tariff quota, was that I feel as though some critics of the system are not completely clear about how the system works. I'm a critic of some parts of the system myself (get rid of the TRIPS Agreement!), but it seems to me that many critics are putting forward arguments that don't really match the system as it exists today. So, in this case, I focused all my comments on the larger issue of properly understanding the trade regime. We all need to have a similar understanding in order to have a productive debate.

My three main points were: 

• I know there's lots of talk about "free trade agreements," but actual trade agreements result in mutually agreed constraints on protectionism rather than the "unfettered" free trade that Cass is concerned about.
• Some people worry about power being shifted from governments to international bureaucrats, but having been one of those myself, I feel confident in saying there's not much power over at the WTO headquarters in Geneva (smart people, but they are hardly running the world!).
• People complain about various aspects of China's behavior, but there are tough China-specific WTO rules that are designed to address just about all the things people complain about, and I wish governments would make better use of them.

I concluded my comment this way:

In practical terms, the globalization debate is not an all-or-nothing proposition between pure free trade and total autarky. Rather, it is about achieving a sustainable political balance that trades off the protectionist demands of corporations and other interest groups against the broader economic interests of the American people. The current global trading system reins in those protectionist demands to some extent, but it also accommodates many of them, leaving us with a particular balance of free trade and protectionism.

Whether we should shift towards the free trade side or towards the protectionist side is an important debate, but in order to have that debate, it is necessary to understand the carefully constructed balance that currently exists and where exactly we lie on the free trade-protectionist continuum.

 

 

The WTO must deliver on PM Mottley’s message … and on the next-generation version of itself! Post by Jan Yves Remy

This post is by Jan Yves Remy, Director of the Shridath Ramphal Centre

At a time when all is not well with international economic relations, a message of inclusiveness, equity and morality in trade appears to have resonated strongly in a room at the World Trade Organization (WTO) packed to capacity with trade negotiators, dignitaries, WTO staff, students and academics.  Assembled to hear the thoughts of Barbadian Prime Minister Mia Amor Mottley at the WTO’s Inaugural Presidential Lecture on the theme “Re-inventing the Global Order” – the audience showed their appreciation for her hard-hitting speech with their rapt attention and a thunderous applause of appreciation when it came to an end after an hour and a half.  It was an especially defining and prideful moment for those of us who work in the field of Trade to hear an erudite, charismatic and clear message about the problems of the WTO from the perspective of one of its smallest and most vulnerable Members.

While the PM made many eyebrow-raising points and posed as many questions as she did answers about the morality and equity of the trading system – befitting of a Presidential Lecture series that seeks to generate new and even controversial ideas – what lingers on for me were her ideas of how this multilateral body, characterized by inertia and lack of progress in the past 20 years, might rise to the occasion … and the times.

PM Mottley’s substantive contributions focused on two areas where trade might play a more meaningful role:  the digital economy and climate change.  Starting with the digital economy, she noted the complete concentration of the ten biggest digital platforms in the US and China.  Highlighting that trade intersects with digital commerce since it affects the ability of consumers and producers to access these platforms and consent to their rules, she noted that the current global landscape is distortionary and discriminatory and beyond WTO scrutiny.  In the case of climate change, the Prime Minister used this new pulpit to repeat calls she has made at Glasgow and the United Nations General Assembly for greater action on climate change – especially on behalf of countries with high debt. Her message was that the WTO should complement action taking place in other fora and should provide almost a global assembly line for investment, production and ultimately trade of renewable products.  Noting that the global energy transition costs around $ 3 trillion dollars per year, she repeated her idea that the IMF should serve as a trustee for a new Climate Mitigation Fund valued at $500 billion and backed by new issues and used Special Drawing Rights.  That Fund could then lend to skilled and experienced green investors in one country, who could then use those low-cost funds to raise further capital in another country, buy technology somewhere else and then invest where there is greatest need for the technology and climate mitigation. 

The speech highlighted these and other issues that ultimately affect the competitiveness of certain economies and sectors.  For her then, the biggest challenge for the current trade system is not high tariffs so much as other rules and practices that stifle the growth and increase the debt of some.  That unfairness is being perpetuated by the uneven application of global money-laundering rules on developing countries; prohibition of tax incentives for research and development; prohibitions on subsidies for developing green technologies, unfair accreditation and standards processes, to name a few.

These are not new criticisms levelled at the WTO but they certainly have not been so directly and eloquently made in the bosom of an institution that seems less concerned about morality and justice as it is with detailed technical trade rules for negotiating access to markets; less about the relative circumstances of those sitting at the negotiating table and more about the overall negotiated outcomes being applied on a Most Favoured Nation or “MFN” basis.  Her thoughts might serve as a basis for negotiators to take their heads out of the minutiae of legal provisions and imagine what might be possible if equity and moral justice were the main metrics of success. 

This brought me to wonder:  how would the WTO even conceive of implementing solutions to these problems within its existing structure? Could we imagine a WTO that would gravitate more from the periphery to the centre of the universe on these core issues?   Could the WTO really curb the growing tendency towards unilateral approaches to achieving equitable solutions to problems – whether on carbon adjustment, health equity, workers’ and labour rights – and instead forge a multilateral approach?  The current negotiations on the environment, e-commerce, and MSMEs touch on some of the points raised by the PM, but as currently constituted, they seem a long way away from her market-based equitable solutions. 

In what might be her most tangible proposal, I heard the PM call for a WTO that is a representative, countervailing, and strong voice that monitors and values the impact of international trade and speaks up in defence of an international trade system.  She proposed the creation of a High-Level Committee that could consider for instance whether the war on money laundering, on tax evasion, on climate or any of these campaigns might not have inadvertently become a war on developing country exporters or small exporters. To that list of issues, I would add what is the (economic and legal) cost of the absence of a two-tiered dispute settlement system; how does the absence of revised rules on subsidies and investment affect competitiveness; and how does debt affect the ability of many countries to trade. 

I would endorse the creation of such a Committee to advise the Director-General (DG) – and ultimately WTO Members – on what a next-generation WTO could look like.  The Committee would help in defining exactly which areas for attention and priority would fall within its scope.  It would have a mandate much like the Caribbean Commission on the Economy on which the current DG served before she became the DG, together with other internationally recognized experts including former DG – Pascal Lamy – to advise Heads of Government of the Caribbean Community (CARICOM) about how they should assist with structural and economic reform of that regional bloc.  The next generation Committee would have to be representative and act as a reforming force against the tendency of WTO Members to look internally for answers.  Serious thought should be given to how the Committee is constituted with a healthy mixture of insiders and outsiders to avoid insiders’ bias.  Diversity would be achieved through the inclusion of policy makers and academics from all over the globe drawn from the WTO’s Chairs Programmes as well as other cohorts of academics dedicated to trade that do not get enough opportunities to actually contribute, but are among its most enduring and committed proponents of the WTO. These associations like SIEL, ASIL, AfIELN and others are teeming with ideas and ripe for picking.  The WTO next generation committee would not only breathe some new life into the WTO, but might also dislodge some of the reticence of countries – including those in the Caribbean – to actively engage on the plurilateral issues being debated at the WTO today.

Waiving Russia Adieu in the WTO? Post by Tomer Broude

This post is by law professor Tomer Broude of the Hebrew University of Jerusalem

With the Russian Federation’s invasion of Ukraine now about to enter its second month, concerns not only for the fate of civilians are rising, but also for democracy and the international rule of law. There is a severe disruption of international law across the board – multilateralism, collective security, human rights law, humanitarian law, refugee law, international criminal law, sanctions, even civil aviation law – are all involved. In the eyes of many, this is not a passing event but a systemic challenge, to international law and the international order. If not treated accordingly, it may not remain unprecedented.

The global response has been remarkable, but not sufficient, and its effectiveness is (and will remain) unclear. In this blogpost there is no need to survey the extent of condemnation, as by the UNGA’s sweeping Resolution from March 2, 2022 - in emergency session and invoking the almost forgotten “Uniting for Peace” practice - for which 141 states out of 193 UN Members voted in favor. Reasons for the abstaining votes are geopolitically complex; nevertheless this is an impressive critical mass. Likewise, the state of play regarding unilateral state-imposed as well as private divestment and sanctions is relatively clear and broad.

Turning to the WTO, additional responses have arisen, such as condemnations of Russia, and a joint statement by 40 WTO Members that Belarus, complicit in the invasion, cannot expect to continue with accession procedures.

Other steps have included withdrawal of MFN treatment in trade with Russia (that should ideally cover not only tariff treatment but all market access issues, non-tariff barriers and services). Economic sanctions and withdrawal of MFN clearly implicates domestic legal measures, as in the US, EU and other states; and relies, quite justifiably, on WTO security exceptions. Indeed, this has been the path pursued so far, since early March.

Some (e.g., former WTO Appellate Body Member James Bacchus)  have advocated taking the severe and indeed unprecedented step of expelling Russia from the WTO or suspending its Membership, on the (somewhat acrobatic) basis of the institutional voting procedures under Article X of the Agreement establishing the WTO. But as Peter Ungphakorn and others have explained, this is not really possible, legally, under the Agreement. It is also highly improbable, given the WTO’s adherence to consensus decision-making, and Members extremely low appetite for voting. Amendments would also require acceptance and ratification, which could take years (as in the case of the TRIPS amendment on public health, which took 14 years until adoption). Indeed, in the long run, it is also not desirable. The expulsion/suspension option, which would directly address not only trade relations, but Russia’s participation in the WTO, is essentially off the table.

Russia, in its response to Ukraine in the WTO, was quick to note that the “non-application” clauses in Article XXXIII GATT and Article XIII of the Agreement establishing the WTO apply only at the time of accession. This is of course true, and enabling non-application would require, similarly to expulsion, a super-majority vote. Given that amendments to multilateral treaties should be of general application to all Members, this path is highly problematic, as it is a large stone that would expose many Members to be living in glass houses, in the sense that there would be grounds for non-application towards them as well. This would potentially severely fragment the system, if post-accession non-application became a matter of ‘free-for-all’ practice.

Hence the suggestion here to take another path: adopting a waiver for withdrawal of concessions, including MFN, export/import bans etc. – in essence a waiver from obligations vis-à-vis Russia, adopted under Article IX:3 of the WTO Agreement. To be sure, the waiver authority is originally granted to the Ministerial Conference (as are amendments under Article X); and yes, voting and a three-quarters majority would still be necessary, on the reasonable assumption that consensus is unreachable. However, this approach has distinct advantages over what has been done and proposed so far. First, although based on the exceptional circumstances of the Russian invasion, it would bypass the messy questions of legal interpretation and application with respect to security exceptions. Although it is more than plausible that most, if not all, sanctions are covered by security exceptions (not least because of the UNGA Resolution mentioned above), a waiver would grant a watertight defense. Second, a waiver would leave Russia’s status as a WTO Member intact, including its obligations, subject to the terms of the waiver. Third, a waiver would not impose any obligations on Members, but give them a right to act and grant them the flexibility to take their measures of choice, taking into account such measures’ effectiveness and the Members’ bilateral concerns vis-à-vis Russia. Fourth, a waiver, in contrast to an amendment, need not be of general application, but can be Russia-specific. Fifth, waivers are in principle limited in time (e.g., one-year) subject to renewal and review. Thus, contingent on developments in the conflict over time, the waiver could expire or be rescinded, returning Russia to the fold. Indeed, a waiver should be adopted with retroactive effect, covering sanctions and measures taken since the invasion commenced. Sixth, a waiver could be adopted much more quickly than an amendment. Seventh, a waiver would have not only symbolic value, but provide a broad base for excommunicating Russia in the WTO, short of formal expulsion.   

Perhaps most importantly, the accumulation of the above should make it easier to garner the necessary three-fourths majority for the adoption of a waiver. This would be unprecedented in its scope (although there are conflict-related waivers, such as the waiver relating to the Kimberley process regarding trade in conflict diamonds, and Cuba’s waiver regarding article XV:6 GATT).

Surely in this proposal I am underestimating the procedural technicalities and political sensitivities in a Waiver approach, but it is a path worth closer – and urgent – examination. Moreover, these truly exceptional circumstances may be an opportunity. As Isabel Feichtner wrote more than a decade ago, WTO waivers may contribute to the adaptability, legitimacy and effectiveness of the WTO. Voting, paradoxically, may be what is needed to save multilateralism from itself.

Prospects for the Green Steel Deal

The Roosevelt Institute held a webinar on Tuesday entitled "Green Steel Deal: A Transformative Trade Policy for Our Economy & Environment." I remain skeptical about this approach to reducing carbon emissions, but nevertheless I am following it with interest.

U.S. Trade Rep. Katherine Tai offered remarks at the outset. She referred to the Green Steel Deal as the "global arrangement" and said it is intended to be "the world's first carbon based sectoral agreement on steel and aluminum trade." She later stated:

... the Biden administration has transformed a deep rift in transatlantic trade relationships into a collaborative and innovative partnership between the US and EU to craft what will be the world's first carbon based arrangement on steel and aluminum trade.

Trade agreements have traditionally been driven by a sole focus on lowering costs, often with little attention paid to the resulting impact on greenhouse gas emissions. Without a way to account for those emissions. environmental harm is neither captured nor paid. Our current trade frameworks incentivize and reward cheap and dirty production, the definition of the race to the bottom.

The agreement that we are negotiating will be powerful because it will drive demand to reduce these costs and create a race to the top. By increasing demand for less carbon intensive steel and aluminum produced by American and European companies, we can account for the cost of high carbon steel and help clean industries succeed. To create positive and durable environmental change, our vision requires that other leading countries and economies participate too. Critically, this advances President Biden's climate agenda and demonstrates that trade can and must be both a tool in tackling the climate crisis and a tool for promoting fair competition.

This deal will enable us to work with the EU to address a common challenge and global overcapacity issues, while also pushing back the costs of dirty non-market steel and aluminum onto China.

During the Q & A, I submitted the following question about incentives for China, India and others to participate:

Under the Green Steel Deal, if China or India were to switch to electric arc furnaces and reduce their carbon emissions from steel production to US levels, could they sell their steel in the US duty-free (i.e., no ordinary tariffs, no Section 232 tariffs, no AD/CVD/Safeguards tariffs)? If not, what incentive will these and other countries have to participate?

Todd Tucker of Roosevelt took this question and merged it with another as follows:

Tim, we've gotten a few questions in the chat about how other countries will react to this ... new global arrangement. And in particular, we've heard from Simon Lester from WorldTradeLaw.net, asking ... if China and other sort of major producers of steel and aluminum adopt clean production techniques, how can they expect to be treated? And then we've also gotten a question from Stephen Huddart from the Transition Accelerator, which is a Canadian nonprofit, asking what provisions can Canada expect, and how will Canadian steel be treated ... wondering if you could address some of those questions.

Panelist Tim Meyer offered the following response:

So the administration has indicated that ... it's open to countries that are going to pursue high ambition, decarbonization policies, to participate in this global arrangement. That was part of the discussion with Japan that ultimately led to a replacement to the 232 measures with Japan, but Japan is taking a slightly more wait and see approach, I think than some of these negotiations. But I think with respect to the question about Canada, I think ... Canada has obviously been one of the US's closest allies, and ... I imagine that there is a role for Canada to participate within this system, if ... Canada's willing to engage in these kinds of negotiations.

Simon's question is a little bit trickier. So in principle, I think the answer should be yes, that if China were to pursue decarbonization methods, if it were to pursue the same kinds of high ambition policies that we see in the US, in Europe, and hopefully accelerating in the US and Europe, then in principle, yes.

Now there's a couple of things that are going to have to be worked out in the development of a global arrangement. One of those things, the US-EU are going to convene a technical working group on this, it's just basically, how you account for emissions in the sector, in order to sort of figure out, how are we doing, how do we measure progress within the global arrangement. And so there would be a question, of course, about how that intersects with the Chinese model of production.

The second issue is what you do with state subsidies and the market-oriented nature, because quite an important part of the global arrangement is that, not only that you pursue decarbonization policies, but also that you pursue market oriented reforms. And in particular, again, we saw in the agreement with Japan, that there was some indication that Japan was going to pursue reforms that were designed to essentially protect the market oriented structure of its steel industry.

And so, ... I think that that's a pretty significant challenge for China. It's also a challenge, as Saule and Erin were just talking about, it's also a challenge, I think, for the US and the EU to figure out what kinds of subsidies are going to be permitted under the global arrangement, and what kind of subsidies are going to lead to, or what kind of state support are going to lead to, the concerns about an excessively state interventionist model in the steel sector. And I think that's a problem the US, the EU and any countries that choose to join them are going to have to think through carefully, and clearly would have application to countries like China.

Jane Flegal (Senior Director for Industrial Emissions, White House Office of Domestic Climate Policy) then offered comments on the broader issues here, including the following:

... I think as others have said, we see a really important role for trade regimes to help align real material incentives to cultivate a race to the top, domestically and globally. And that includes ... expanding market access for clean products in aluminum and steel and restricting market access for those dirty products, and that's, I think, a really important way to think about international climate cooperation actually.

... the third thing I'll say, which we haven't talked about that much yet, but given the conversation about WTO, I just want to raise here. I think one of the things that we see as central to the global arrangement is that it helps to establish a kind of new norm and climate and trade, of measuring what matters, which is the emissions embedded in these goods. Much of the conversation about climate and trade to date has focused on the sort of requirement of explicit carbon pricing. And in our view, that's not and really cannot be the case. The climate issue is just far too urgent to require uniform global policy instruments to make progress, and I think that's consistent with the Paris agreement, but I just want to flag that here as something we haven't discussed very much, but I think it's worth highlighting.

And then in response to another question, Tim offered the following thoughts on how to address the needs of developing countries:

I think the question of how this affects developing countries is an incredibly important one, both for the long term success of the decarbonization enterprise. I mean, one of the things we know is that ... we in the United States need to decarbonize, the Europeans need to decarbonize, it's critical that you see decarbonization in places like China, if we're going to successfully tackle the climate change problem. But the developing world more generally has an interest in developing its economies. And so it really is both in our own interest, as well as sort of a moral imperative, I think, to help them do so in a way that is going to respect the environmental imperative, which is to do so on the sort of decarbonize path. And so, ... I think the possibility of asking developing countries to basically adopt ... as part of the common external trade policy, these sort of trade policies, say look, keep out carbon intensive steel and aluminum products, and in exchange, we will help you decarbonize, and develop in a decarbonized way. That kind of approach makes a ton of sense to me. It's a way to build the club. It's a way to basically, sort of spread, I think, US values with respect to both trade and the environment.

And I guess just by way of closing, ... Felicia and Ambassador Tai both started off by talking about Russia's invasion of Ukraine, and I think ...this has really, I think, changed the conversation here in ways that we're going to see a much greater emphasis on a trading system in which countries are thinking about what kind of shared values do we have with the countries that we are are trading with, and what are the threats beyond the trading system that countries with whom we do business pose to peace and security and the environment. And in that vein, ... the idea that we would basically reach out to developing countries and help them decarbonize or help them develop on a decarbonized path really makes a lot of sense in a world in which those shared values are becoming increasingly important to how we define economic relationships.

I appreciate the additional clarifications from the government officials and Green Steel Deal advocates who were part of the webinar. But I still see the same problems with this exercise that I've seen from the outset.

First, as dirty as the steel and aluminum industries might be, I'm not sure it makes sense to look at emissions from these industries separately from other emissions. The Indians in particular have pointed out that in terms of per capita carbon emissions, the United States is worse than most other countries. Cherry-picking the steel and aluminum sectors as the sectors to emphasize in the fight against carbon emissions doesn't change that fact.

Now, it's not surprising that a particular country would focus on the area of carbon emissions where it is good and others are bad, but I'm not sure that's a recipe for negotiating success. While it's fair for the United States to put forward steel and aluminum as a place to start, it's going to have to talk about other areas as well, including those many areas where it is worse than others. As of this moment, I'm not sure it is ready to do so.

Second, the problem with trying to tackle "dirty" and "non-market" products together is that under current AD/CVD law, most steel and aluminum is considered to be "unfairly" traded and in that sense would be considered by some people to be "non-market." Thus, no matter how cleanly these products are produced, they can be subject to high U.S. duties, and as a result I'm not sure what incentive foreign governments will have to push for cleaner production. They could shift their production to electric arc furnaces and make them squeaky clean, but that won't give them better access to a U.S. market in a sector that is one of the main users of AD/CVD laws.

Along the same lines, Tim talked about helping developing countries decarbonize. That's great to hear, but how exactly would the U.S. government do that as part of the Green Steel Deal? It's hard to imagine the Biden administration accepting greater market access for developing country steel and aluminum products in the U.S. market, so what help would the Biden administration offer to these countries? One option is to provide U.S. government financing for a shift to cleaner production, and I can imagine that some people in the Biden administration would support this. But I can also see that approach getting lots of pushback from Congress, so I'm not sure it's politically viable.

Ultimately, I see the "non-market" component of this effort as a poison pill that will doom the enterprise. I think it would be possible to pursue a Green Steel Deal that provides incentives for cleaner production as part of a broader effort to lower carbon emissions. But once you bring in "unfair trade" issues, the progress is going to quickly grind to a halt.

USMCA Panel Composition in Autos ROO Dispute Announced

A third USMCA Chapter 31 state-state dispute is underway, with the panel having been composed in the Autos Rules of Origin dispute on March 22. There are five panelists on this one (which differs from the three panelists on the previous two cases):

• Mr. Elbio Rosselli – Chairperson;
• Ms. Kathleen Claussen – appointed by Canada;
• Ms. Ann Ryan Robertson – appointed by Mexico;
• Mr. Jorge Miranda – appointed by the United States; and
• Mr. Donald McRae – appointed by the United States.

As I explained here, USMCA carries over from NAFTA an approach under which parties select citizens of the other party(ies) as panelists.

This case differs from the earlier ones because it involves two complainants, with Mexico having filed the initial panel request and Canada joining as a complaining party soon after. That took the panel composition process into Article 31.9, para. 2 for the first time.

With regard to the people selected as panelists in the Autos ROO dispute, we know for sure who the U.S. put on the roster because the U.S. provided a list. The only panelist selection from that list is Ann Ryan Robertson.

As for the other panelists appointed by the parties from the roster, Elbio Rosselli has a lot of experience with WTO panels and was the chair of the USMCA Dairy TRQ panel. Kathleen Claussen is a first-timer as a panelist (congrats to her!). There is no public information I have come across as to whether it was Canada or Mexico who put these two on the roster.

Finally, as for Jorge Miranda and Donald McRae, they are not on the roster. Recall that Article 31.9, para. 3 says:

3. A panelist shall normally be selected from the roster. A disputing Party may exercise a peremptory challenge against an individual not on the roster who is proposed as a panelist by a disputing Party within 15 days after the individual has been proposed, unless no qualified and available individual on the roster possesses necessary specialized expertise, including as required by Article 31.8.3 (Roster and Qualifications of Panelists), in which case a disputing Party may not exercise a peremptory challenge but may raise concerns that the panelist does not meet the requirements of Article 31.8.2 (Roster and Qualifications of Panelists).

McRae is a Canadian law professor who was a panelist in the USMCA U.S. - Solar Safeguard dispute, a NAFTA Chapter 20 dispute, and on five WTO panels. Jorge Miranda is from Mexico, and has worked at the WTO Secretariat and served on a number of NAFTA Chapter 19 binational panels (most recently this one).

Katherine Tai on Beating Regulatory Systems Into Submission

During a press conference at the conclusion of the Dialogue on the Future of Atlantic Trade today, U.S. Trade Rep. Katherine Tai said this:

Let us talk through and ask ourselves new sets of questions, not how do I beat your regulatory system into submission, or ... fend off your attempts to beat mine into submission, but how can we align and how can we actually harness the energy of our people, of our economies to address these very real challenges that we're facing?

I think this is a good point, and I would very much like to see the sentiment take hold. In my view, there has been too much effort spent by the U.S. government and other governments on attacking non-protectionist domestic regulations that are inefficient, or ineffective, or too burdensome in some way. Regulations usually reflect sensitive domestic policies, and as much as I think many of them harm more than they help, I don't think trade agreements should constrain non-protectionist ones (other than transparency obligations).

At the same time, I should note that it is possible I am interpreting the point a little differently than Tai meant it. She may be thinking about protectionist regulations as well, although I hope that's not the case. For me, when thinking about how much we want to interfere with domestic regulations, drawing the line between protectionist and non-protectionist regulations is the key.

Guest Post: Transforming World Trade and Investment Law for Sustainable Development?

This is a guest post from Prof. Ernst-Ulrich Petersmann, European University Institute Florence

The geopolitical conflicts and related trade wars (eg against China and Russia), climate change and other environmental disasters, global health and food crises, Russia’s military invasions and war crimes in Ukraine confront the UN and WTO legal systems with trade, investment, environmental, security, human rights and international criminal law conflicts of existential importance for humanity. Why do most UN and WTO diplomats and their international legal advisors fail to protect international rule-of-law in UN and WTO governance? How should reasonable citizens and democratic institutions respond to human disasters like the UN prediction of more than 140 million climate change refugees by 2050? The new monograph by Prof E.U.Petersmann on TRANSFORMING WORLD TRADE AND INVESTMENT LAW FOR SUSTAINABLE DEVELOPMENT (OUP March 2022, 360 pages) explores answers to these and related economic, political and legal questions (the book and its summary are available on the OUP website). As Russia’s wars against the liberal order further undermine UN and WTO governance, reasonable citizens, democratic institutions and also lawyers must no longer neglect the ‘constitutional challenges’ facing humankind as discussed in the 9 chapters of this book.

UN law and the UN Sustainable Development Agenda (SDA) prescribe human rights, democratic governance, rule of law and other constitutional principles for multilevel governance of the universally agreed sustainable development goals (SDGs). Yet, in legal practices, these constitutional principles remain ignored by many authoritarian governments, as illustrated by Putin’s imperial wars. This lack of legislative, administrative and judicial implementation of UN and WTO treaty rules on human rights, rule of law and the SDGs explains the ubiquity of ‘market failures’, ‘governance failures’ and ‘constitutional failures’ undermining the SDGs. It also illustrates the ’constitutional nature’ of the regulatory challenges. The necessary changes in the output-legitimacy of UN/WTO governance require corresponding changes in the input-legitimacy by more inclusive, participatory and deliberative democracy, as it has emerged in citizen-driven economic, environmental and multilevel democratic and judicial European governance of public goods.

The overview and summary of the book in Chapter 1 explain why the UN and WTO rules on protecting human rights, rule-of-law and sustainable development cannot be realized without strengthening democratic and republican constitutionalism in multilevel governance of public goods. Chapter 2 on ‘governance failures’ documents how UN and WTO law and governance fail to protect sustainable development effectively. Chapter 3 relates the destruction of the WTO dispute settlement system by the US Trump administration, and the geopolitical conflicts and trade wars caused by authoritarian abuses of powers, to the decline of democratic constitutionalism, the increasing authoritarianism (eg in China and Russia) and regulatory competition between state-capitalism, business-driven neo-liberalism, Europe’s ordo-liberal constitutionalism and third world conceptions of regulation. Chapters 4 and 5 explain the ‘constitutional economics’ and multilevel, ordo-liberal constitutionalism underlying Europe’s common market constitution, monetary constitution and ‘foreign policy constitution’, which have enabled EU leadership for multi-party interim appellate arbitration in the WTO and for the European climate legislation providing for the decarbonization of economies and carbon border adjustment mechanisms. Chapter 6 demonstrates why the more than 380 WTO panel, appellate and arbitration findings – by complying with the customary rules of treaty interpretation and with judicial administration of justice – successfully avoided violations of UN human rights obligations of WTO member states. Chapters 7 and 8 discuss investor biases in investor-state arbitration and the multilevel judicial comity among national and European courts in avoiding ‘judicial overreach’ through ‘proportionality balancing’, judicial deference and ‘administration of justice’. Chapter 9 describes the European Green Deal and rights-based, multilevel climate litigation as examples for how the input- and output legitimacy of UN climate governance should be improved by strengthening democratic and republican constitutionalism.

In a globally integrated world, path-dependent national ‘constitutionalism 1.0’ and functionally limited ‘treaty constitutions 2.0’ constituting multilevel governance institutions for protecting public goods (like the UN and its 15 Specialized Agencies, the WTO) can no longer effectively protect human rights and the SDGs without multilevel legal and institutional safeguards protecting human rights inside and beyond state borders. Constitutionalism – as a reasonable self-limitation of ‘bounded rationality’ of human beings and of their domination by passions, rational egoism and animal instincts – offers the most effective ‘political invention’ against abuses of power at home and abroad. But constitutional democracies cannot survive unless citizens and their democratic and judicial institutions assume democratic and cosmopolitan responsibilities beyond constitutional nationalism  (based on constitutional contracts, national Constitutions, democratic legislation, administrative and judicial protection of rule-of-law). Citizens must defend their constitutional and democratic rights also through multilevel constitutionalism constituting, limiting, regulating and justifying multilevel governance of the SDGs, for instance by holding governments legally and democratically accountable for legislative, administrative and judicial (non)implementation of UN/WTO guarantees of equal freedoms, non-discriminatory competition, rule of law, human rights and related SDG commitments. Democratic constitutionalism is about protecting reasonable disagreements by means of a limited ‘overlapping consensus’ among citizens with diverse worldviews and moral convictions. Hence, constitutional pluralism and regulatory competition among diverse neo-liberal, state-capitalist and European ordo-liberal regional economic systems remain the inevitable future. Yet, authoritarian wars on the liberal order require democratic alliances defending human rights at home and abroad. Even if the myth of Sisyphus rolling stones uphill may appear absurd, we know from Albert Camus’ interpretation of this myth - and from the history of democracies - that ‘struggles for justice’ remain a necessary part of defending liberty against tyranny at home and abroad. Citizens must overcome their ‘rational ignorance’ vis-à-vis multilevel governance of public goods and learn why reforming trade and investment law must become part of their democratic struggles for sustainable development.

House Passes Bill Suspending Normal Trade Relations Treatment for Russia and Belarus

After a brief floor discussion, today the House of Representatives passed the "Suspending Normal Trade Relations with Russia and Belarus Act" (H.R. 7108) with a vote of 424-8. The full text is here. A summary is here.

In terms of comparisons to previous legislation in this area, this bill seems pretty similar to the Senate legislation described here. That may indicate the bill could become law soon as the House and Senate are coordinating their efforts.

The key parts of the text are as follows.

First, this is the suspending normal trade relations part:

SEC. 3. SUSPENSION OF NORMAL TRADE RELATIONS WITH THE RUSSIAN FEDERATION AND THE REPUBLIC OF BELARUS.

(a) NONDISCRIMINATORY TARIFF TREATMENT.—

 Notwithstanding any other provision of law, beginning on the day after the date of the enactment of this Act, the rates of duty set forth in column 2 of the Harmonized Tariff Schedule of the United States shall apply to all products of the Russian Federation and of the Republic of Belarus.

(b) AUTHORITY TO PROCLAIM INCREASED COLUMN 2 RATES.—

(1) IN GENERAL.—The President may proclaim increases in the rates of duty applicable to products of the Russian Federation or the Republic of Belarus, above the rates set forth in column 2 of the Harmonized Tariff Schedule of the United States.

(2) PRIOR CONSULTATION.—The President shall, not later than 5 calendar days before issuing any proclamation under paragraph (1), consult with the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate regarding the basis for and anticipated impact of the proposed increases to rates of duty described in paragraph (1).

(3) TERMINATION.—The authority to issue proclamations under this subsection shall terminate on January 1, 2024.

Section 4 has a long and detailed set of provisions on resuming application of Column 1 rates and restoring normal trade relations if Russia/Belarus withdraws forces/ceases hostilities, poses no immediate threat to NATO allies/partners, and "recognizes the right of the people of Ukraine to independently and freely choose their own government." A lot of the power is with the president, but the legislation gives Congress a say in the process as well.

Section 5 then addresses WTO issues:

SEC. 5. COOPERATION AND ACCOUNTABILITY AT THE WORLD TRADE ORGANIZATION.

The United States Trade Representative shall use the voice and influence of the United States at the WTO to—

(1) condemn the recent aggression in Ukraine;
(2) encourage other WTO members to suspend trade concessions to the Russian Federation and the Republic of Belarus;
(3) consider further steps with the view to suspend the Russian Federation’s participation in the WTO; and
(4) seek to halt the accession process of the Republic of Belarus at the WTO and cease accession related work.

Lastly, Section 6 has some updates to the Magnitsky human rights sanctions.

Guest Post: The Imitation Game: Recent Developments on Transnational Subsidies and Anticircumvention in Europe and the United States

This is a guest post by Victor Crochet* (trade lawyer and PhD candidate at Cambridge University) & Vineet Hegde (Doctoral Researcher at the Leuven Centre for Global Governance Studies, KU Leuven)

Over the past few years, Western countries, and in particular, the European Union (“EU”), have been trying to rein in the foreign expansion of Chinese manufacturing entities under the Belt and Road Initiative (“BRI”) through the use of trade defence instruments. In this regard, several interesting developments have taken place since we last reported on the issue.

Today, the European Commission (“Commission”) adopted a regulation countervailing, yet again, cross-border subsidies granted by Chinese public bodies to producing entities located in another country. This time targeting stainless steel cold-rolled flat products from Indonesia. The Commission followed a similar reasoning as it did in two prior investigations (Regulations 2020/776 and 2020/870) where it decided that financial contributions granted by Chinese public bodies to the subsidiaries of Chinese State-owned enterprises in Egypt could be attributed to the Government of Egypt. While these two regulations are currently being challenged before the EU Courts, in Regulation 2022/433, the Commission similarly decided to interpret the terms a financial contribution by the “government in the country of origin or export,” found in the EU Basic Anti-Subsidy Regulation, in light of Article 1.1 of the SCM Agreement, with the latter interpreted in accordance with Article 11 of the ILC Articles on State Responsibility. Based on this reasoning, the Commission concluded that the terms “government in the country of origin or export” should also cover situations where the government of the country of origin or export “acknowledges and adopts” financial contributions granted by governments or public bodies of third countries.

The Commission’s reasoning seems to have inspired the United States (“US”) to follow suit. Since the 1980s, the US excludes transnational subsidies from the ambit of its countervailing duty law. However, in April 2021, a bill was introduced in the US Senate to, among other things, countervail transnational subsidies. The bill aims to extend the scope of countervailable financial contributions to also include contributions by a third country’s government. The bill provides that, if the government of the subsidized country “allows, implicitly or otherwise, another authority provide a financial contribution”, the US authorities can countervail the financial contribution provided by the third country. A companion bill was introduced in the House of Representatives in December 2021, which uses a similar language. The bill aims to treat a financial contribution by a third country government as the subsidized country’s own subsidy if the latter “facilitates the provision of such subsidy”. Although similar in spirit, these standards may be looser than that of “adoption and acknowledgment” used by the Commission.

Another interesting development is the increasing use of the anti-circumvention instrument by the Commission to target foreign subsidiaries of Chinese producers using inputs from China when the final products originating in China are covered by trade defence duties. The Commission’s use of the anti-circumvention instrument to target companies attempting to dodge trade defence duties through slight modifications of a product or assembly of parts in a third country is not new. However, the Commission has recently used the instrument to go a step further. It now targets entirely new production plants established by Chinese companies abroad when such plants use inputs originating from China even when these inputs are not only mere parts or intermediate products. For example, the Commission extended the duties on imports of aluminium foil from China to imports from Thailand after a Chinese producer built a rolling plant there using imported aluminium foil stock from China. Similarly, it extended the trade defence duties on imports of glass fibre fabrics from China to imports from Morocco, after a Chinese producer set up a new plant in Morocco but imported the necessary glass fibre rovings (which have been targeted by separate trade defence investigations by the Commission in the past as a distinct product from the fabrics) from China. In this regard, two years ago, we warned that Egyptian workers might be the ones paying the price for the countervailing duties imposed on Egyptian subsidiaries of Chinese fabrics producers as the producers in Egypt might simply decide to move shop somewhere else along the BRI. This prediction seems to have become a reality as these producers appear to have now built plants in Turkey. Indeed, in a recently initiated anti-circumvention investigation, the Commission now targets a new glass fibre fabric production line established in Turkey owned by the same group as that targeted by the Commission in Egypt.

The US may be following a similar path to that of the Commission. In 2021, the US extended trade defence duties on import of oil country tubular goods (“OCTG”) from China to imports from the Philippines and Brunei. The US authorities found out that the main input, hot-rolled steel sheet and strip, is manufactured in, and exported from, China to these countries to be processed into OCTG. As a result, the US concluded that the exports from the Philippines and Brunei were circumventing the US duties on exports of OCTG from China and, thus, extended the duties to exports from these countries. A similar pattern can be seen in the case of corrosion-resistant steel products from BRI countries, like Malaysia. Furthermore, in February 2022, a US producer requested the US authorities to investigate solar cells and modules manufactured in Malaysia, Thailand, Vietnam and Cambodia using inputs from China. The petition states that the production process was shifted to these countries with all the inputs, including research & development as well capital investment, coming from China. The US authorities now have until 25 March 2022 to decide whether to initiate an investigation or not.

Using the anti-circumvention instrument to target production subsidiaries of Chinese companies abroad using inputs originating in China is tempting for investigating authorities. The investigation is shorter and less complex than conducting a fully-fledged anti-dumping or anti-subsidy investigation. Furthermore, it may lead to the extension of the typically higher duties imposed on Chinese products as compared to the duties that could be  imposed in an initial anti-dumping or anti-subsidy investigation against the new plant in a “market economy” country.

As Western governments grapple with how to address the going out of Chinese manufacturing entities, it seems that the practices of the US and the EU are converging to a certain degree. While the US seems to be walking in the footsteps of the EU with respect to transnational subsidies, the EU and the US may be moving in parallel when it comes to using the anti-circumvention instrument.

* Victor regularly works for governments, exporting producers, importers and users in investigations initiated by the Commission, including in some of the proceedings mentioned in this post. All opinions expressed are personal.

U.S. Legislation on MFN Withdrawal for Russia (and Belarus) May Finally Be Moving Forward

After lots of fits and starts, it looks like the U.S. (and others) will join Canada and withdraw MFN treatment for Russian and Belarusian imports. President Biden discussed this at a press conference today. Here are some of the key points he made:

As Putin continues his merciless assault, the United States and our allies and partners continue to work in lockstep to ramp up the economic pressures on Putin and to further isolate Russia on a global stage. Later today, together with other NATO allies and the G7, Canada, France, Germany, Italy, Japan, United Kingdom as well as the European Union, we're going to jointly announce several new steps to squeeze Putin and hold him even more accountable for his aggression against Ukraine. I want to speak to a few of those points today.

First, each of our nations is going to take steps to deny most favored nation status to Russia. A most favored nation status designation means two countries have agreed to trade with each other under the best possible terms, low tariffs, few barriers to trade, and the highest possible imports allowed. In the United States, we call this permanent normal trade relations, PNTR, but it's the same thing. Revoking PNTR for Russia is going to make it harder for Russia to do business with the United States, and doing it in unison with other nations that make up half of the global economy will be another crushing blow to the Russian economy. It's already suffering very badly from our sanctions.

I want to thank Speaker Pelosi, Leader McCarthy, Leaders Schumer and McConnell, and Senators Wyden and Crapo, Representatives Neal and Brady, for their bipartisan leadership on this in the Congress. I would like to offer a special thanks to Speaker Pelosi who's been a strong advocate for revoking PNTR and who agreed to hold off on that in the House until I could line up all of our key allies to keep us in complete unison. Unity among our allies is critically important as you all know, from my perspective at least.

... The free world is coming together to confront Putin. Our two parties here at home are leading the way. With that bipartisan cooperation, I'm looking forward to signing into law the bill revoking PNTR, which is again, most people think of it as most favored nation status.

We're also taking the further step of banning imports of goods from several signature sectors of the Russian economy, including seafood, vodka and diamonds.

A White House fact sheet on this issue is here. On MFN withdrawal and the import ban, it says:

Revoking Russia’s Most-Favored Nation Status. President Biden will work closely with Congress to deny Russia the benefits of its WTO membership and ensure that Russian imports do not receive most favored nation treatment in our economy. The United States Congress has demonstrated bipartisan leadership to revoke Permanent Normal Trade Relations for Russia, and President Biden looks forward to signing a bill into law. Together with similar actions by the G7, following our respective national processes, this collective action by more than half of the global economy will deliver another serious economic blow to Russia.

...

Ban U.S. Import of Goods from Several Signature Sectors of Russia’s Economy. President Biden’s E.O. will also prohibit the import of goods from several signature sectors of Russia’s economy – including seafood, spirits/vodka, and non-industrial diamonds. This will deny Russia more than $1 billion in export revenues and ensure U.S. citizens are not underwriting Putin’s war. The United States retains the authority to impose additional import bans as appropriate.

The basis for the U.S. legislation going forward could be the Wyden/Crapo bill described here. The full text is here (and eventually will be posted here). I'm going to go through some of the key provisions.

Let's start with the provision on the suspension of normal trade relations:

SEC. 3. SUSPENSION OF NORMAL TRADE RELATIONS WITH THE RUSSIAN FEDERATION AND THE REPUBLIC OF BELARUS.

(a) NONDISCRIMINATORY TARIFF TREATMENT.—

Notwithstanding any other provision of law, beginning on the day after the date of the enactment of this Act, the rates of duty set forth in column 2 of the Harmonized Tariff Schedule of the United States shall apply to all products of the Russian Federation and of the Republic of Belarus.

(b) AUTHORITY TO PROCLAIM INCREASED COLUMN 2 RATES.—

(1) IN GENERAL.—The President may proclaim increases in the rates of duty applicable to products of the Russian Federation or the Republic of Belarus, above the rates set forth in column 2 of the Harmonized Tariff Schedule of the United States.

(2) PRIOR CONSULTATION.—The President shall, not later than 5 calendar days before issuing any proclamation under paragraph (1), consult with the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate regarding the basis for and anticipated impact of the proposed increases to rates of duty described in paragraph (1).

(3) TERMINATION.—The authority to issue proclamations under this subsection shall terminate on January 1, 2024.

I think it's useful that instead of just saying normal trade relations are withdrawn, as some previous versions of this legislation did, they spell out that Column 2 rates apply. That offers some added clarity as to what the impact of the legislation is.

At the same time, as explained here, based on the actual mix of products we import from Russia, it's not clear how much impact applying Column 2 rates would have on U.S. tariff levels for Russian imports. As a result, there might need to be additional measures taken to raise those tariffs, and Section 3(b) of this legislation provides for that.

Also, as a general matter, I've been concerned with Congress delegating power to the president over the years to raise tariffs. The delegation here has a termination provision, though, which seems like a good approach.

Section 4 then deals with a prohibition on Russian energy imports. 

And Section 5 has a long and detailed set of provisions on resuming application of Column 1 rates and normal trade relations if Russia/Belarus withdraws forces/ceases aggression, poses no immediate threat to NATO allies/partners, and "recognizes a free and independent Ukraine." A lot of the power is with the president, but the legislation gives Congress a say in the process as well.

Finally, as with previous versions of this legislation, there is something on actions at the WTO itself:

SEC. 6. COOPERATION AND ACCOUNTABILITY AT THE WORLD TRADE ORGANIZATION.

The United States Trade Representative shall use the voice and influence of the United States at the WTO to—

(1) condemn the recent aggression in Ukraine;
(2) encourage other WTO members to suspend trade concessions to the Russian Federation and the Republic of Belarus;
(3) consider further steps with the view to suspend the Russian Federation’s participation in the WTO; and
(4) seek to halt the accession process of the Republic of Belarus at the WTO and cease accession related work.

The "consider further steps" part of (3) seems weaker than previous legislation on this point, but regardless, I'm not sure they will get very far with suspending Russia from the WTO because of the heaving political lifting required. But maybe they will give it a shot and we'll see how it goes.

Questions about the 1982 Decision and Article XXI of the GATT

In 1982, the contracting parties adopted a Ministerial Declaration to take seriously the consideration of 'non-economic' trade measures. On 30 November 1982, the contracting parties adopted the Decision Concerning Article XXI of the General Agreement (the 1982 Decision) which set out some basic procedural guidelines for the application of Article XXI of the GATT.

The relevant text is, as follows:

The CONTRACTING PARTIES decide that:

1. Subject to the exception in Article XXI:a, contracting parties should be informed to the fullest extent possible of trade measures taken under Article XXI.

2. When action is taken under Article XXI, all contracting parties affected by such action retain their full rights under the General Agreement.

3. The Council may be requested to give further consideration to this matter in due course.

The Russia-Traffic in Transit dispute did not explicitly interpret the 1982 Decision. Ukraine raised Russia’s compliance with the first paragraph (DS512 report, note 210 on Ukraine’s second written submission). Inevitably, the panel declined Russia’s request to further examine the arguments pertaining to Article XXI(a) of the GATT 1994.[1]

I have a few questions regarding the second paragraph. The simplest interpretation is that Article XXI only refers to the rights under the GATT 1994. What does this mean in the context of the Russian invasion of Ukraine, and Ukraine’s invocation of the security exceptions in the GATS and the TRIPS Agreement?  In other words, if WTO Members are invoking essential security more broadly, or at a minimum every security exception provision in the relevant trade agreements, is it assumed Members should construe this second paragraph more broadly? This question did not arise in the Saudi Arabia – Measures Concerning the Protection of Intellectual Property Rights panel report.

What is the scope of 'all contracting parties'? Does 'affected' only refer to those invoking Article XXI to take necessary actions to protect their essential security interests? 

Curious to know people's thoughts, thanks.

 

[1] WT/DS512/R/Add.1, para. 2.70, p. 123.