International Economic Law and Policy Blog

Russian Aggression on Ukraine from the International Economic Law Perspective – Call for Papers

This is from Professor Marcin Menkes:

The Warsaw School of Economics and the University of Szeged, ELKH Center for Social Sciences, are organizing the ESIL-supported conference on the timely topic: “Russian Aggression on Ukraine from the International Economic Law Perspective“. The conference will take place online in a webinar format on 14 July 2022.

Further details are available in the call for papers. The deadline for submissions is  Sunday 3 July 2022.

SIEL Conversations: The Outcomes of MC12 and the Future of the Multilateral Trading System

From the SIEL:

SIEL Conversations: The Outcomes of MC12 and the Future of the Multilateral Trading System

27 June 2022 at 2pm Brussels time

Interested in the outcomes of the World Trade Organization MC12? Please join us next Monday on this SIEL Conversation, with present and former officials, negotiators and observers. We'll discuss what came out of MC12, what was missing, and what the WTO should - and could - become to address the challenges of 21st Century trade. With Anabel González, Bernard Hoekman, Victor do Prado, Peter Ungphakorn and Iryna Polovets.

 

Register here: https://lnkd.in/eaDc6pMk 

Guest Post: Consensus as the Hallmark of the WTO: Time to Change

This is a guest post from law professor Bashar Malkawi:

      Throughout much of GATT and then WTO history, consensus has been the norm. For example, article XXV (3) and (4) call for one vote per nation and decisions to be taken by majority vote, but in practice consensus was developed among parties. Panel reports may be appealed to the Appellate Body for review of legal issues. Establishment of panels and the Appellate Body and adoption of their decisions are to be achieved through inverted consensus. In other words, panel decisions are adopted unless all WTO members present at the meeting of the DSB decide by consensus not to adopt panel decisions. To join the WTO, a working party needs to be established to negotiate terms of accession, and the General Council, which operates by consensus, must agree to form the working party. These are a few examples where consensus by GATT/WTO members is needed.

    On June 17, 2022, WTO members secured several agreements and initiatives. These include the Ministerial Declaration on the Emergency Response to Food Insecurity, Ministerial Decision on the Agreement on Trade-related Aspects of Intellectual Property Rights, Decision on the E-commerce Moratorium and Work Program, and an Agreement on Fisheries Subsidies. The recent ministerial  conference produced what on the surface seemed to be progress, but  by examining  the details many of the key issues have been left for later negotiations (as with fisheries), negotiations which are not likely to be concluded in the five years specified or perhaps much longer. Nor was there any meaningful progress on WTO reform, which is crucial if the WTO is to remain relevant.

        But why is consensus important? When decisions are made, it makes sense to follow the majority. The general will of the public ought to govern. Consensus decisions are better and fairer decisions. These types of decisions take into account a broader range of relevant perspectives, and they would be fairer because they would reflect the views of different countries.

        Consensus ensures that we have a fair number of WTO members who participate in the decision-making process, and decisions and agreements are reached after careful discussions. The benefits of collective, consensus decision-making process after careful discussions are appreciated by democracy theory. When countries get together for a thoughtful exchange of ideas, they become more informed of the strengths and weaknesses of the opinions of others. As a result, WTO members make better decisions. WTO members benefit when legal rules reflect the perspectives of all sides of the argument as neither side has a monopoly on the truth. Better that the WTO bases its decisions and agreements on the understandings of all of the members rather than on views that are particular to only some countries.

       Any type of voting not based on consensus allows for decisions to be based on a narrower rather than broader range of perspectives, and thereby will reduce the quality of agreements. For example, Article IX of the Marrakesh Agreement requires super-majority voting whereby three-fourths of WTO members need to agree to adopt an interpretation of WTO agreement. In practice, though, departures from consensus are seldom.  Any system of voting, other than consensus, would divide the membership into several warring camps.

       When WTO members decide on the basis of consensus, the majority gives greater consideration to minority viewpoints. Those in the minority participate more in the discussions, and their perspectives play a greater role in shaping WTO decisions and agreements, though this means more time as negotiations last longer and painstaking process. Agreements are best accomplished when based on a broad range of perspectives rather than the perspectives of one side of the aisle. Agreements that are representative of the full WTO membership have another important virtue. Such agreements have greater legitimacy.

      Game theory provides reassurance that countries would choose cooperation over conflict. When countries work with a group of peers on a frequent basis to decide matters, they realize that they are better off developing collegial rather than oppositional relationships. The institutionalized policy of consensus decisions would permit WTO membership to speak with a unified voice. Consensus agreements do not create as great a need for change over time.

       However, understandably, there are problems with consensus. A few recalcitrant members can block any progress for long periods. WTO members who are in favor of majority decision-making think of efficiency. It is easier to assemble a majority than a consensus. A requirement of consensus would result in too much gridlock and not enough agreements or decisions. The WTO Appellate Body could step in in this case and decide cases in light of this vacuum, as the argument goes.

       Should we prefer a majority over consensus? One would think yes although it is by no means is certain. Going forward, the WTO should reflect the majority of its members or like-minded countries. WTO members should be willing to go to extraordinary lengths to modify their consensus style of negotiations and agreements to another system i.e. majority. The potential for a slow WTO process creates a sufficient basis for changing the requirement and practice of consensus. Decision-makers adjust their behavior to their decision-making rules. When majority is required, WTO members will look for positions that can generate the majority. Consensus runs the danger of making the WTO increasingly irrelevant. It is time to change course and adopt a majority system. 

BIICL Border Carbon Adjustment and MC12 Events

BIICL has sent information on two upcoming events:

22nd BIICL Annual WTO Conference: Climate Change: Border Carbon Adjustment Approaches and the WTO (July 15)

Conference Details

Why are Border Carbon Adjustment (BCA) Approaches being considered by an increasing number of countries? What are the factors to be accounted for to design a legitimate BCA in terms of both international trade and climate law? How can we utilize BCA as a means of pursuing legitimate interest such as responding to climate change while avoiding the risk of unilateralism?

To address these issues, the British Institute of International Comparative Law (BIICL) invites you to join the prestigious annual event in international trade law, the 2022 BIICL Annual WTO Conference.

At the conference, four eminent panels will explore the questions above featuring a wide range of speakers from government, international organizations, academia and legal practitioners.

Conference Organisers

This event is convened by Dr. Julinda Beqiraj, Maurice Wohl Senior Research Fellow in European Law and Munhee Jung, Senior Deputy Director of the Ministry of Trade, Industry and Energy, South Korea and a visiting researcher at BIICL with the kind assistance and support of Prof. Dr. Gabrielle Marceau, Senior Counsellor at WTO and BIICL Honorary Senior Fellow.

Programme

Panel 1. Rationale of BCA and Functioning

Panel 2. Approaches to BCA: EU CBAM and More

Panel 3. Design Consideration of BCA: Climate Perspectives, WTO Compatibility, Common but Different Responsibility

Panel 4. Carbon Club, Climate Alliance and More: Towards a Coalition of the Willing?

Global Governance at a Crossroads: Finding Solutions to Challenges Facing the Multilateral Trade System (June 29)

Event Details

The 12th session of the WTO Ministerial Conference (MC12) took place on 12-17 June 2022 at WTO headquarters in Geneva, after being postponed twice, due to the COVID-19 pandemic. As the highest decision-making body of the WTO, attended by trade ministers and other senior officials from the 164 WTO members, the Ministerial Conference was surrounded by high expectations. In the words of lead officers at WTO:

"Members can deliver results at MC12 despite challenging circumstances" - DG Okonjo-Iweala, 04/05/2022

"This might well be our Bretton Woods moment. Let's not waste it." - DDG Angela Ellard, 10/05/2022

At the conclusion of the Conference, trade ministers from around the world adopted a historic package - including the reduction of fishery subsidies, a loosening of vaccine-production limits, and the mitigation of the impact of a global food crisis. The agreements break the WTO's seven-year negotiations downturn, after four years of attacks under former President Trump administration, the COVID-19 pandemic, drained supply chains, and the ongoing conflict in Ukraine.

This BIICL webinar will bring together experts at the WTO and in academia to discuss the results of the Conference and this historical alignment of the 164 WTO members (including Russia and Ukraine).

 

Non-Violation Arguments in the USMCA Auto Rules of Origin Dispute

In the ongoing USMCA dispute on United States - Automotive Rules of Origin (USA-MEX-CDA-2022-31-01), in addition to their arguments that the U.S. unilateral interpretation of the USMCA Rules of Origin provisions for passenger vehicles and light trucks violates USMCA rules, Mexico and Canada have made a non-violation nullification or impairment claim. As far as I am aware, if the panel decides to rule on this issue, it would be the first ruling on NVNI outside the WTO context.

In this post, I provide excerpts of the main arguments by the parties. Let's start with Mexico:

192. Even if the Panel were to find that the U.S. unilateral interpretation of the automotive ROO, as such and as applied, is somehow consistent with the provisions of this Agreement, Mexico asserts in the alternative that such U.S. interpretation and its current and future application, via the ASR Approval Letters (and other current or future actions), nonetheless nullify or impair benefits Mexico reasonably expected to receive as a result of the U.S. tariff concessions on automobiles under Chapters 2 (National Treatment and Market Access for Goods), 4 (Rules of Origin), and 5 (Origin Procedures) of the USMCA.

193. Before turning to the legal standard and its application to this case, Mexico recalls that so-called “non-violation, nullification and impairment” provisions appear in a number of free trade agreements and the WTO agreements, and have been considered an important means of safeguarding a Party’s rights, particularly when another Party adopts a measure that disturbs the careful “balance of rights and obligations” otherwise set out in the agreement, regardless of whether that measure constitutes a direct violation of the provisions of an agreement

1. Legal Standard

194. Article 31.2(c) (Scope) of the USMCA provides that a Party may make a claim in dispute settlement when it “considers that a benefit it could reasonably have expected to accrue to it under Chapter 2 (National Treatment and Market Access for Goods), [...] Chapter 4 (Rules of Origin), [and] Chapter 5 (Origin Procedures) [...] is being nullified or impaired as a result of the application of a measure of another Party that is no inconsistent with this Agreement.”

195. The text of Article 31.2(c) envisions that a complaining Party must prove the existence of three elements: (i) the application of a measure by another Party (ii) nullifies or impairs (iii) a benefit that the complaining Party could have reasonably expected under commitments made in the identified chapters. No NAFTA or USMCA Panel has ever fully considered the meaning or application of this provision. However, it is modeled after similar provisions in the WTO agreements, including Article XXIII:1(b) of the GATT 1994, under which panels have concluded that complaining Members must establish identical elements.

196. With respect to the first element, Article 1.5 (General Definitions) of the USMCA defines a “measure” to include “any law, regulation, procedure, requirement, or practice.” As noted above, under WTO law, the concept of a “measure” has generally been construed very broadly to encompass any act or omission attributable to a Member, including in the form of instruments that are binding or non-binding, written or unwritten, and that have either present or prospective application.

197. With respect to the second element, WTO panels have primarily considered whether the application of the measure upsets the competitive relationship of imported products, including with respect to tariff concessions. Panels have likewise required complainants to show “a clear correlation between the measures and the adverse effect on the relevant competitive relationships”, and that the measure has made more than a de minimis contribution to the nullification and impairment. Thus, a measure “nullifies or impairs” a benefit if it causes an upset in the relevant competitive relationships.

198. As to the third element, the term “benefit” includes “an advantage, a good”, and “pecuniary profit”. Tariff concessions have been found to give rise to a “benefit” in the form of an expectation of market access opportunities, subject to the conditions of competition inherently bound in the tariff concession. Finally, in assessing whether a measure could reasonably be anticipated by the complaining party, WTO panels have presumed that a complainant cannot reasonably anticipate the adoption of measures introduced after the conclusion of the negotiations at which the relevant commitment was crystalized.

2. Application

199. As noted above, the United States holds a new, unilateral and incorrect interpretation of the USMCA automotive ROO, which it presently effectuates through measures such as the ASR Approval Letters. With respect to the ASR Approval Letters specifically, they impose a legally binding obligation on certain North American automakers that received approval for an ASR to calculate the RVC of finished vehicles, pursuant to the “direction” from USTR and CBP therein in order to qualify for USMCA preferential treatment. The ASR Approval Letters thus clearly constitute a procedure, requirement, and practice within the meaning of Article 1.5 and Article 31.2(c) of USMCA.

200. Further, the U.S. unilateral interpretation, as applied in the ASR Approval Letters and other statements and prospective enforcement actions, constitutes a nullification or impairment within the meaning of Article 31.2(c). Specifically, the U.S. reinterpretation upsets the competitive relationship between (i) vehicles domestically produced in the United States that are exported to Mexico and (ii) vehicles imported into the United States from Mexico, by unilaterally decreasing the proportion of imported vehicles that are eligible for duty-free treatment by means of an artificially increased RVC threshold.

201. By contrast, Mexico applies the calculation method as set forth in the plain text of the Agreement at its border and grants preferential treatment under the USMCA to vehicles meeting the RVC requirement under the unified RVC calculation methodology. This necessarily results in a greater proportion of U.S.-made vehicles meeting the requirement compared to Mexican-made vehicles imported under like circumstances into the United States. By favoring its own domestic production and discriminating against Mexican and Canadian production in this manner, the United States upsets the conditions of competition in the auto market, causing a nullification or impairment of negotiated benefits.

202. Lastly, Mexico had reasonable and legitimate expectations of a benefit arising from the U.S. agreement to the USMCA text, its tariff concessions for finished vehicles, and the specific ROO negotiated under the Agreement. The unified RVC calculation methodology was designed and negotiated by the Parties to achieve a delicate balance between incentivizing greater domestic sourcing and maintaining North American competitiveness in the global auto market. It is certainly reasonable to expect that the United States would apply the automotive ROO as negotiated, written, and agreed to by the Parties, not by some later-in-time unilateral reinterpretation designed to restrict duty-free access for vehicles to the U.S. market for domestic political purposes and to provide a useless and contradictory interpretation of Chapter 4 and the Automotive Appendix, which Mexico could not possibly have foreseen.

203. Moreover, adopting the new U.S. interpretation would lead to manifestly absurd results. It simply cannot be the case that the Parties, in seeking to improve upon NAFTA and streamline compliance procedures while maintaining a robust and globally competitive automotive industry, would agree to a text that would visit harm upon that very industry by imposing commercially uncompetitive RVC thresholds and burdensome calculation requirements.

204. By forcing automakers to undertake two separate core parts RVC calculations, the United States thus creates a problem that the negotiators from all three Parties were originally trying to avoid. Indeed, the extra calculation will only substantially increase overall compliance costs and force automakers to prioritize sourcing minor parts over macro-level advancements in vehicle parts and technologies when trying to meet the USMCA’s RVC thresholds (not to mention the other requirements related to steel, aluminum, and LVC).

205. Failure to meet that requirement, which takes on greater likelihood under the U.S. unilateral interpretation, would result in an automaker’s entire North American production failing to qualify for preferential treatment. This development is particularly nonsensical as automakers have already begun to invest substantially in increased local sourcing in the region, based on prior representations and explanations affirming the proper interpretation of the USMCA by U.S. officials. A new, unilateral interpretation of the plain text of the Agreement, which will manifestly jeopardize the USMCA’s overall objectives, certainly could not have been the intention of the Parties.

Turning to Canada, its submission starts with some useful history of NVNI:

174. Should the Panel find that the United States' interpretation of the Rules of Origin for vehicles, as maintained and applied in the measures at issue described above, does not violate CUSMA, then the Panel should find that those measures nullify or impair benefits that Canada could reasonably have expected to accrue to it within the meaning of Article 31.2(c) of CUSMA.

175. Article 31.2(c)81 allows for non-violation nullification and impairment (NVNI) claims under CUSMA. It provides that a Party may have recourse to dispute settlement under CUSMA if it considers that a "benefit" it could "reasonably" have expected to "accrue" to it under Chapter 4 and 5 (amongst other chapters), is being "nullified or impaired" as a result of the application of a "measure" of another party that is not inconsistent with the provisions of CUSMA.

176. In the sections that follow, Canada first sets out a brief background of NVNI claims to explain why this Panel should give considerable weight to World Trade Organization (WTO) jurisprudence on the formulation of the test for making an NVNI claim. Canada then sets out the proposed test, followed by demonstrating to the Panel that each element of the test for Canada’s NVNI claim is satisfied in this case.

1. Background on NVNI

177. The concept of nullification and impairment in trade agreements can be traced back to a resolution approved by the League of Nations in 1933. At the time, the League of Nations had convened a Monetary and Economic Conference to identify measures necessary to solve the "economic and financial difficulties" responsible for the "world crisis" at the time.

178. One of the measures recommended by the Subcommittee on Indirect Protectionism was the inclusion in future or existing treaties of a clause protecting against nullification and impairment of "any object of the treaty" by measures that do not infringe on the terms of the treaty. This recommendation was made with a view "to the general application of the principle of equitable treatment and friendly co-operation".

179. Such provisions found their way into numerous FTAs and eventually into the General Agreement on Tariffs and Trade (GATT 1947). However, the language used in various trade agreements versus that which was finally agreed upon under the GATT 1947 were different. The use of the phrase "benefit accruing" was specifically conceived during the Geneva Round of negotiations of the GATT 1947, and is now found in many modern FTAs, including CUSMA.

180. Furthermore, the language in modern FTAs reflect considerations of panels, formed under the GATT 1947 and the WTO, of the NVNI provision. Specifically, the concept of "reasonable expectations" under NVNI claims was first discussed during the Havana round of negotiations of the GATT 1947. The notion then evolved under various dispute settlement panel reports under GATT 1947 and, under the Marrakesh Agreement Establishing the World Trade Organization (WTO), in relation to GATT 1994. Today, we see the phrase "a benefit the Party could reasonably have expected to accrue" (or a variation of it) in the NVNI provisions of various FTAs, including CUSMA.

181. The language of the NVNI provision of CUSMA is indeed very similar to the language of the NVNI provision of the GATT 1994.

182. Canada therefore considers that the language of the NVNI provision in CUSMA is inextricably linked to the rationale for, and language of, the NVNI provision in the GATT 1994 and to considerations of that provision by WTO panels. In evaluating Canada's NVNI claim, this Panel should therefore give considerable weight to interpretative findings by those panels.

The rest of the Canadian argument is in paras. 183-217. (For more on the history of the NVNI remedy, including who actually came up with the famous words "nullify or impair," see an old article of mine here.)

And then in response, we have the United States:

V. Recourse Under Article 31.2(c) of the USMCA is Not Available to Complainants Because Complainants Have Not Demonstrated that the Measures Imposed by the United States Nullify or Impair the Benefits Canada and Mexico Could Reasonably Have Expected to Accrue to It

146. Complainants spend pages asserting that the U.S. interpretation has nullified or impaired benefits that Canada or Mexico could have reasonably expected to accrue.99 However, Complainants have not demonstrated that the measures imposed by the United States nullify or impair benefits that Canada and Mexico could reasonably have expected to accrue to them. Therefore, Complainants cannot make out a claim under Article 31.2(c).

147. In relevant part, Article 31.2(c) of the Agreement provides that:

Unless otherwise provided for in this Agreement, the dispute settlement provisions of this Chapter apply: [. . . .] when a Party considers that a benefit it could reasonably have expected to accrue to it under [. . . .] Chapter 4 (Rules of Origin) [. . . .] is being nullified or impaired as a result of the application of a measure of another Party that is not inconsistent with this Agreement.

148. Accordingly, in order for the Complainants to make out a claim under Article 31.2(c) of the USMCA, Complainants must demonstrate (1) the application of a measure by a Party of the USMCA, (2) a benefit accruing under the USMCA, and (3) the nullification or impairment of the benefit as a result of the application of the measure.

149. The elements of an Article 31.2(c) USMCA are parallel to a nullification or impairment claim under Article XXIII:1(b) of the GATT 1994. The existence of a cause of action in relation to a measure that is not itself inconsistent with an agreement is extraordinary. The claim potentially permits countermeasures to be taken in a situation in which a party to the agreement is performing its commitments under that agreement. As WTO adjudicators have reasoned, such an exceptional claim “should be approached with caution” because “Members negotiate the rules that they agree to follow and only exceptionally would expect to be challenged for actions not in contravention of those rules.”

150. The requirements in USMCA in relation to a non-violation nullification or impairment claim are not extensively elaborated, but in light of the extraordinary nature of the claim, it is reasonable to require more than a mere statement that they enjoy a benefit and that the United States has adopted a measure that allegedly affects that benefit. For example, under Article 31.2(c), a party must consider “that a benefit it could reasonably have expected to accrue” is being nullified or impaired, and under Article 31.6.3, this forms part of the “legal basis of the complaint”. Canada and Mexico therefore must prove that it was reasonable to expect a benefit to accrue. Such a circumstance could conceivably arise if the challenged measure could not have been reasonably anticipated at the time the relevant benefit was negotiated.

151. Canada and Mexico have failed to demonstrate that the U.S. interpretation as expressed in its ASR approval letters have nullified or impaired any benefits – because they cannot reasonably argue that they could not have anticipated the United States would apply an interpretation of the core parts origination requirements and calculations consistent with the plain meaning of the text in the context of Chapter 4.

A. Complainants Have Failed to Prove That They Could Not Have Reasonably Anticipated the United States Would Apply an Interpretation Consistent with the USMCA Text

152. Complainants are seeking to demonstrate that they had a legitimate expectation for certain market access – namely, that it was reasonable for them to expect that the United States would provide market access for their passenger vehicles and light trucks based on an interpretation of the core parts calculations that was inconsistent with the Agreement. Put differently, Complainants must demonstrate that they could not have reasonably anticipated during the negotiation that the U.S. would implement the core parts origination requirement consistent with the correct interpretation of the Agreement.

153. Canada states that communications from the United States during the negotiations that were sent to Canada and vehicle producers directly contract the U.S. interpretation. As we detail in section III.D above, this is not true. As an initial matter, negotiations for the USMCA concluded on September 30, 2018, and the USMCA was signed on November 30, 2018. None of the communications submitted by Canada or Mexico, which provide a conflicting and incorrect interpretation, took place before the conclusion of the negotiations on September 30, 2018, or prior to the signature of the Agreement on November 30, 2018. In fact, we have no record of any communications between U.S. officials and any foreign government officials or vehicle producers before negotiations concluded, which provide this conflicting and incorrect interpretation. As explained in section III.D.4 above, the unilateral communications from certain U.S. officials to Canadian officials and to industry representatives that communicated the apparently conflicting and inconsistent interpretation, took place after negotiations concluded. Therefore, due to the timing of these communications, Complainants could not have reasonably anticipated that the United States would have implemented Canada’s and Mexico’s interpretation because this interpretation was not communicated with Canada and Mexico at the time the rules of origin provisions were negotiated.

154. Second, as discussed in section III.E.4 above, the negotiating documents submitted by the Complainants support the U.S. interpretation, and do not support the Complainants’  interpretation. Mexico asserts that it was “reasonable to expect that the United States would apply the automotive ROO as negotiated, written, and agreed to by the Parties.” As demonstrated in this submission, including support from negotiating history, the U.S. interpretation does just that. Complainants do not demonstrate otherwise, and accordingly, the materials submitted by Complainants are not evidence that Complainants could have reasonably relied on in support of their interpretation.

155. And third, as we detail in section III.D above, the U.S. interpretation does not run counter to the object and purpose of the Agreement – rather, it is Complainants’ interpretation that runs counter to the object and purpose of the Agreement. Complainants do not demonstrate otherwise.

156. Finally, the U.S. interpretation is not, as Mexico asserts, “designed to restrict duty-free access for vehicles to the U.S. market for domestic political purposes and to provide a useless and contradictory interpretation of Chapter 4 and the Automotive Appendix”. Rather, the U.S. interpretation, which is consistent with the terms of the USMCA, strives to increase the RVC of vehicles, investment, and jobs in the North American market. Mexico offers no factual support to the contrary.

157. Accordingly, Canada and Mexico have not demonstrated they could not have reasonably anticipated that the United States would apply interpretations of the vehicle RVC requirement and of the core parts origination requirement that are consistent with the Agreement. Consequently, Complainants’ Article 31.2(c) claim must fail.

It's very hard to say what the panel will do with this issue. Sorting out what the NVNI standard should be in the USMCA context, and using WTO jurisprudence to do so, will be a challenge.  If the panel finds a violation, it can exercise judicial economy and avoid NVNI entirely. If there is no violation, however, avoiding the NVNI claim may be difficult.

Katherine Tai on Fixing WTO Dispute Settlement

At the WITA event I mentioned previously, former USTR official Wendy Cutler spoke with U.S. Trade Rep. Katherine Tai about WTO dispute settlement reform. Here was their exchange:

Cutler:

You've mentioned, and I've heard others talk about, ... we should think post MC12, and particularly about the reform discussion going forward. For a lot of countries, when they talk about reform, they're really focused on fixing the dispute settlement system as a first step. And it seems to me that this is an area where the US has been under a lot of criticism, but perhaps in recent months there has been a change in tone, and countries are beginning to sense that we are interested in fixing the system. And you were a USTR litigator, you know the value of the system, but you know the ugly parts too, very well. So how are you approaching dispute settlement? Are you going to give your team kind of the leeway to explore solutions and a way to fix the dispute settlement system?

Tai:

I love this question, Wendy, because obviously, you're no stranger to the WTO or the dispute settlement system either. And you're no stranger to the conversations, and I absolutely agree with you, that the conversations from when I started at USTR to today, in these 15 months, has really evolved.

I would go a step further and say that when I started a lot of the focus on WTO reform was not about fixing the dispute settlement system or addressing it. It was about, "restoring the Appellate Body," which is a very, very narrow way of approaching this particular issue. And I think we've been quite successful in orienting people to the fact that the Appellate Body problem is a symptom of a larger challenge that we have, and it is around the dispute settlement system, and whether or not it is doing the thing that it was designed to do, which is literally to help settle disputes between the Members at the WTO.

And I gave a speech in Geneva last October where I talked about, first, reaffirm the Biden administration's commitment to the WTO. And then to go through some of the areas of reform that we think really need robust engagement from the WTO membership.

At the top is the dispute settlement system. I think that over time, it has become this very, very unwieldy and expensive mechanism for litigation that not all WTO Members can access. There's actually a very high threshold to accessing the system. If you think about it, how effective is a dispute settlement system that only a small part of the Membership feels like it can use?

And that's without even going into to, right, the ins and outs of how that litigation system works. So over time dispute settlement has kind of become synonymous with litigation. That's the challenge, that's a problem, especially because we also have this issue where the last truly multilateral agreement that came out of the WTO was accomplished in 2014, it was the Trade Facilitation Agreement, which if you get into the ins and outs of the TFA is a no brainer. It really is something that is good for the system, and it's about upgrading to reflect the realities of today's trade in goods. And yet that required a small miracle, and I think ... the personal charm and relationships that Ambassador Michael Punke had built up in Geneva. So if you look at it that way, the negotiation function at the WTO is also significantly broken down and I'm interested to engage at MC12 to see as of 2022, has it started to heal itself in a time of great global economic need? Are we able to come together? Or, is the system still going to be stymied by all the dynamics that we've seen?

And I think that the reason why I raised this is because the ability of WTO Members to obtain findings through litigation that effectively create rules that did not need to go through the negotiation process is part of the significant challenge that the WTO has had as an institution and I think that that larger issue needs to be surfaced and dealt with if we truly are committed to the WTO.

And so to get to your specific question, yes, absolutely, I have asked my team to engage on dispute settlement as part of this larger vision for reinvigorating the WTO.

Let's start with the last point: "I have asked my team to engage on dispute settlement as part of this larger vision for reinvigorating the WTO." This is great to hear! I hope the discussions are going well.

Going back to the beginning of her remarks, she mentioned the difficulty certain Members have with accessing the system. Here I'll just note the great work of the Advisory Centre on WTO Law. I'm not sure how to measure degrees of accessibility, but the ACWL probably makes it easier for developing countries to participate in WTO dispute settlement than it is for them in many areas of international or domestic law.

As to whether dispute settlement is synonymous with litigation, that's not how I think of it. It's true that litigation generates headlines (and revenue for law firms), but there are lots of formal disputes that don't get litigated for one reason or another. And responding parties have the option of avoiding litigation by negotiating resolutions to disputes. They often choose not to do that, but I think people would generally agree that in many cases that would be a good outcome.

In terms of whether governments litigate to get favorable rulings that they could not get in negotiations, and that this has made it difficult to conclude trade deals at the WTO, the U.S. has been making this point for a while, but just about everyone I've spoken to about it has a different view. Could litigation have an impact at the margins? I guess it's possible. But from what I can tell, the main reason there have been no big WTO deals in recent years is because governments simply can't agree on the issues and aren't willing to make concessions in areas that are sensitive for them.

As to "findings through litigation that effectively create rules," that goes to the design of the dispute settlement system. The precise role you give adjudicators in interpreting and applying the rules is key here, and I'm curious to hear suggestions from the U.S. as to exactly how they want the system to operate in this regard.

Katherine Tai on IPEF Enforceability

At a WITA event yesterday, former USTR official Wendy Cutler had a conversation with U.S. Trade Rep. Katherine Tai about various trade issues. One thing they touched upon was the enforceability of the IPEF. Here was their exchange:

Cutler:

How about enforcement and the IPEF? It's not a traditional trade agreement. I've seen comments from you and your staff that, ... maybe we shouldn't expect a traditional dispute settlement mechanism, but other creative thinking is being given to this. And in that vein, I've heard this term of maybe including a corporate accountability element into the IPEF. What does that mean?

Tai:

Look, I think that traditional mechanisms still do have their place. We're not going to invent the IPEF out of whole cloth. So what still makes sense, we will work from there.

You know, I think that part of the challenge for folks to wrap their minds around is, if you're not doing tariff reductions, usually a traditional dispute settlement mechanism at the very end of it, if you lose a case, if ... on the winning side, if you win a case, the right that you win is to suspend your concessions. At the WTO that often means, well, ... that you get to suspend your tariff concessions and you can lay down some tariffs. I think over the course of this negotiation, there will be concessions, there will be commitments that we make to each other. Those also if they make sense can be suspended through a traditional dispute settlement mechanism. Let's think that through and ... design something that makes sense.

But I did want to raise awareness around some of the ways in which our US trade practice is already pushing the envelope on the dispute system, as it's traditionally been framed. And it really goes to just the fundamental issue of, what is the point of a dispute settlement mechanism? Well, ... you could think about it as it's a forum for us to fight each other. But ultimately, when you take it to what the point of an agreement is, it's a way to ensure that what's been negotiated has meaning, that you can't just promise something, say that you are going to do something, and then go do something completely different. It's an accountability mechanism.

And if we look at our trade practice -- starting with the Peru Free Trade Agreement, which has this very built out, very detailed logging annex, that's tailored to the deforestation concerns in Peru when we passed that agreement, to the USMCA's rapid response mechanism, which is looking at creating a mechanism for ensuring compliance with Mexico's labor reform and labor laws -- you see this evolution of our dispute settlement mechanism that flows into more cooperative modes, and is looking at holding accountable not just the other country, but also what is happening within the economic ecosystem and whether or not the participants, whether they are logging companies, or facilities that have set up operations, or operating in Mexico, that they also are abiding by the requirements, and the expectations, of the agreement itself.

So again, just highlighting that in our own practice, we have started to evolve away from a traditional dispute settlement mechanism to thinking about new ways of holding the different participants in a trade agreement accountable for creating integrity in the promises that are made and in the vision that's incorporated into the agreement.

This all raises a number of questions for me.

First, what Tai is focusing on here with "pushing the envelope" seems to be enforcement of social policy issues such as environment and labor. What I wonder is, would the U.S. agree to these sorts of provisions if they were designed to hold the U.S. government, and U.S. actors, accountable in these areas? Climate change would be an example where perhaps some other countries would be pushing the U.S. to do more than has been done so far; and "right to work" laws in certain states have been raised by trading partners in the past. If this kind of enforcement is a good model in general, does the Biden administration think it is a good model to apply against the U.S.? Or is it only to be used against others?

Second, if this applies mostly to other countries and not the U.S., what exactly is the incentive of these other countries to sign up for the IPEF? What are they getting out of it? My best guess at this point as to what the Biden administration has in mind is private sector investment backed by U.S. government lending. But can they deliver that, and will it be enough?

And third, with regard to more traditional trade issues, would these types of enhanced accountability provisions apply, or would those issues utilize traditional DS? In the case of the IPEF, there may not be a lot of traditional trade obligations, but the digital trade rules might fall into this category. Would enforcement of digital trade rules involve this new kind of accountability, or will there be traditional DS here instead? And if there will be traditional DS, is that something Congress will need to sign off on, given that U.S. laws will now be subject to international adjudication/enforceable dispute settlement?

Journal of International Economic Law Announces Second Junior Faculty Forum

The Journal of International Economic Law (JIEL) is pleased to announce its second annual Junior Faculty Forum to be held in hybrid or virtual format on September 23-24, 2022, on the sidelines of the American Society of International Law International Economic Law Interest Group Biennial Conference. 

Junior scholars are encouraged to submit their abstracts for consideration by no later than July 8, 2022. 

For more information on eligibility and how to submit, go to tinyurl.com/ys3jatzh.  

Free Trade's Critics Are Declaring Victory, But I Think the Contest Is Mostly the Same As It Ever Was

A recent review of The Neomercantilists: A Global Intellectual History, a new book by political scientist Eric Helleiner, makes the book sound very interesting. Here's how the review describes the book: "A sweeping account of the men and women who argued for strategic protectionism and other forms of government economic activism to promote state wealth and power—an ideology he calls 'neomercantilism'—between the publication of the Wealth of Nations in 1776 and World War II, it offers the first comprehensive global study of this discourse’s diverse origins and political valences."

There has been plenty written about economic nationalism, and by economic nationalists, over the years, so it's not really a new subject. But obviously there has been a resurgence in this type of rhetoric and policy recently, especially in the U.S., so perhaps it's a good time to take a broad historical look at these views.

I haven't read the book yet, but the review triggered some reactions that I wanted to raise here. In a nutshell, it seems to me that the review reflects a triumphalist take I see from various people, asserting that their long fight against something -- "free trade"? "neoliberalism"? -- has finally been won, and now we can move on to a new and better period of economic policy-making. As you can imagine, I'm skeptical.

A bit of trade policy history

To start this off, let me examine a few statements from the review.

First up, there was this:

"On or around 1939 debates about international political economy changed. Over the course of the Cold War, economic nationalism—the attempt to use the state to advance a country’s economic interests—was crowded out of official discourse by two competing universalisms, communism on one side and liberalism on the other."

...

"Both sides of the so-called “new Cold War” between China and the West thus appear to be converging on a distinct but largely forgotten third tradition of political economy. This return of economic nationalism has troubled acolytes of the old religions. "

I have a hard time getting my head around these claims. Economic nationalism ended in 1939? It has been largely forgotten? Then how are all these trade lawyers buying multi-million dollar Palm Beach condos with the money they earn from lobbying for protectionism and from litigating trade disputes?

Now, it is true that over the past few decades, trade institutions were established, trade was liberalized to some degree, and there has been plenty of talk about free trade in the political arena. But I think it's fair to say (and some political scientists may have studied this), that there has been at least as much economic nationalist talk as trade liberalization talk from U.S. politicians and policy-makers over this period. For one thing, free trade is often qualified by "and fair trade," and what that qualifier often (but not always) means is protectionism. And for another, much of the trade conversation is just blatantly economic nationalist: What are Buy American laws if not economic nationalism?

And actual policy clearly reflects the strong position economic nationalism has held during this time. If you look through the WTO's tariff profiles publication, you see plenty of high tariffs in there. And while ordinary tariffs came down in the U.S., anti-dumping tariffs popped up to take their place. And then there's all the regulatory protectionism, the Jones Act, etc.

Of course, the economics profession mostly criticizes protectionism, but economists are not as influential on policy-making as some people seem to think. When it comes down to, say, professional economists vs. the domestic steel industry in terms of giving policy advice to the government, the domestic steel industry usually wins. Economists make powerful arguments, but the industry makes ones with a bigger financial payoff to politicians.

Thus, the reality here is that policy and the political discourse has never been all or nothing in this area. We never came close to reaching free trade, and have always had a mix of protectionism and liberalization. Protectionism may have been slightly moderated during the post-WWII period, but it was far from forgotten.

Going back even further in history, the book and the review spend some time highlighting the work of Henry Carey as an advocate of economic nationalism in the 19th century. At that time, the U.S. was the developing country, and was trying to catch up to the UK:

"In Carey’s eyes, it was therefore not a coincidence that Britain was simultaneously at the forefront of both free trade and “the power for oppression” of the domestic workforce. Since free trade benefited only the traders, impoverishing producers and consumers alike, implementing protectionist policies could achieve an internal “harmony of interests” within each country, aligning the incentives facing farmers, manufacturers, and consumers, allowing each to prosper without impoverishing the others. ... Protectionism was the anti-imperialist policy par excellence. Contrary to liberal expectation, it was free trade that ushered in militarism and violence: “look where we may, throughout history the trader and the soldier are found marching by each other’s side.”"

I think an important point here that gets overlooked sometimes is that the UK was a free trader in some narrow areas (repeal of the corn laws), but perhaps more importantly for this discussion, it was an imperial power. I'm having trouble plotting out in my head exactly how protectionism, free trade, and imperialism relate, but I think of imperialism and protectionism as two forms of state-led economics. The colonies that the UK traded with did not do so freely; the state was a key player here. Free trade, in contrast to those other two, limits the role of the state, and creates conditions by which individuals can engage in exchange across borders without facing state-created obstacles.

But putting those abstract points aside for a moment, I think the practical issue here is that the United States was playing industrial catch-up at the time, and was doing so against a country it had fought wars with in the not too distant past, and which was the most powerful empire in the world. In that context, it's not really surprising that there would be a push in the U.S. to manufacture its own versions of products with military implications. That's helpful in explaining the support for these policies at the time, but I'm not sure the "UK as free trader" and "U.S. as protectionist" distinction tells the full story here.

Did we lose the free trade debate? Or is there less here than meets the eye?

Shifting from the historical discussion to the current debate, to me the review comes across as part of the victory lap some people are taking because, in their view, we are finally moving on from a terribly unfair period of cruel and calculating economic policy, focusing on heartless and unfeeling concepts such as "efficiency," that has been dominant for decades now. In this regard, the title of the review includes the phrase "After Free Trade," and says "As the neoliberal order unravels, the international economic system can and must make room for cooperative forms of state-driven development." And I see plenty of other people out there declaring that "neoliberalism" is dead. For example, this NY Times article by David Leonhardt says: "As one Biden adviser told me, the new [Indo-Pacific Economic] framework is central to the Biden administration’s 'post-neoliberal foreign policy.'"

(At the same time, there are also people declaring that neoliberalism is alive and well, that they are neoliberals, and that neoliberalism is the best way forward to improve the economic well-being of people from all income levels. I tend to think that many political labels are unhelpful, and neoliberal is a particularly unhelpful one. But no matter how much I make fun of the term over on Twitter, people seem to want to keep using it, so we are probably stuck with it.)

One of the things I think the people taking victory laps are getting wrong here is that, to me, none of this seems new. State-oriented approaches to economic policy have been here the whole time. I remember when I was in college -- probably some time around 1992, so right smack in the middle of "neoliberalism" -- I read "Manufacturing Miracles" by Robert Wade in a Georgetown class about government-business relations. It was an interesting book and I learned a lot from it about the views of those who believe in state-oriented economics. And there were plenty of cites to Carey, as well as to Alexander Hamilton and Friedrich List, although I don't recall if that was in Wade's book or something else from the class.

So we've been through all this before, and I don't see what's going on today as some kind of big resurgence of intellectual activity around protectionism and mercantilism. That way of thinking has always been there, and in each generation, some people get excited to write articles about how it is being rediscovered. The United States had high tariffs in the 19th century? Wow, who knew! The answer is: Everyone. But nevertheless, there are periodic recurrences of books and articles excitedly telling everyone about this.

To be fair, Trump did give 19th century U.S. tariff policy a new prominence in recent years. But as I like to point out, Trump wasn't and isn't particularly popular. That may or may not be because of his protectionism, but regardless, I don't see any reason to think we have turned some corner and economic nationalism is about to rise to a new prominence.

Of course, as I said, economic nationalism is here and has always been here to a substantial degree, so I'm not trying to carry out my own celebration of free trade winning this battle. Rather, I'm just pointing out that we are pretty much where we have been for a while: A carefully constructed domestic balance of protectionism, subject to modest international constraints. There's no eye-catching headline in that, but as far as I can tell, that's where things stand.

David Gantz: UK, Texas and Other US States Should Proceed Carefully, but Not Abandon, Trade Deals

This is a post by law professor David Gantz:

I. Introduction: Economic and Political Motivations

The United Kingdom, presumably frustrated by the reluctance of the Biden administration to conclude the free trade agreement negotiations begun by the Trump administration, or even to seek the essential congressional authorization to do so,  has announced through its trade policy/international development minister Penny Mordaunt that it will pursue commercial arrangements with up to 20 individual US states, including Texas, Indiana and California. (Farouq Suleiman, William James, and Chris Gallagher, “Britain Targets First State-by-State U.S. Trade Deals Next Month,” Reuters, April 21, 2022, https://www.reuters.com/world/uk/britain-targets-first-state-by-state-us-trade-deals-next-month-2022-04-21/) An arrangement could be concluded with Texas by October 2022. Other states, such as Indiana, have moved more quickly; Indiana and the UK signed an MOU on May 27, 2022. (https://www.gov.uk/government/publications/uk-and-indiana-trade-and-economic-memorandum-of-understanding/memorandum-of-understanding-on-economic-cooperation-and-trade-relations-between-indiana-and-the-united-kingdom.) More will likely follow. The eight states currently targeted combined account for 20% of the US economy, and based on recent events, the Texas state government among others evidently sees few downsides to moving forward.

It is no surprise that UK officials have included  Texas among the initial targets for a trade MOU.  If Texas were a sovereign nation, it would be the ninth largest economy in the world, just ahead of Brazil, and California’s GDP is even larger.

The UK is still suffering from an economic downturn largely caused by its withdrawal from the European Union at the end of 2020, making enhanced international commercial relationships, however circumscribed, attractive. According to UK data, Texas (in 2001) exported $9.4 billion worth of goods to the UK (including oil and gas, aerospace products, petroleum and coal products, basic chemicals, and computer equipment) and $5.5 billion worth of services (including business management and consulting, travel and tourism, passenger fares, equipment installation, maintenance and repair, and industrial royalties). This made the UK one of Texas’ largest export markets, partly as a result of excellent air transportation to the UK, the absence of corporate and personal income taxes, and high economic security, along with the expanding Port of Houston and Texas’ excellent rail and road infrastructure. Moreover, UK subsidiaries in Texas reportedly accounted for nearly 120,000 jobs, and exports to the UK supported more than 63,000 jobs.

Texas and other targeted US states are well aware that the UK despite its withdrawal from the European Union is the fifth largest economy in the world. For the UK, it is economically difficult to reject the idea of agreements with selected US states, particularly when the Biden administration has effectively taken itself out of the business of negotiating trade agreements. (Although the concept of the “Indo-Pacific Economic Partnership” was formally unveiled by  President Biden recently, it would explicitly not include any market-opening measures on the part of the United States, which, in the opinion of many observers, could doom it to failure.)

Thus, even if no political considerations were motivating either the UK or Texas or Indiana, the prospect of enhancing an already robust commercial relationship is attractive (even to blue states such as California).  

II. US Legal and Constitutional Constraints

In an interesting historical footnote, in 1838 England and the then-independent Republic of Texas concluded three treaties, one of which was a “treaty of commerce and navigation” that entered into force in 1842. (https://tarlton.law.utexas.edu/treaty) Unfortunately for the UK and Texas, today’s legal and constitutional issues are much more complicated than 180 years ago. Most significantly, the Commerce Clause of the Constitution (Article I, sec. 8, clause 3) gives Congress the exclusive power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” With regard to agreements with foreign nations, Article I, sec. 10, clauses 1 and 2 of the Constitution are also restrictive:

No state shall enter into any treaty, alliance, or confederation ...

No state shall, without the consent of Congress ... enter into any agreement or compact with another state, or with a foreign power.

Still, there have been multiple instances where US states have entered into less formal arrangements, often termed “memoranda of understanding” (MOUs), with foreign states or governments that appear to have been generally accepted if they are considered non-binding. For example, after the Trump administration withdrew from the Paris climate accord, California, among other US states, concluded widely publicized MOUs with other nations, e.g., with China in November 2018 and April 2022, effectively promising to follow the requirements of the Paris accord. (https://www.gov.ca.gov/wp-content/uploads/2022/04/4.18.22-China-CA-MOU.pdf) Both the 2018 and the 2022 MOUs specifically note that they are voluntary, not legally binding, as was the Paris accord, and must comply with “all applicable laws.”)

Some eyebrows were raised in mid-April 2022 when Texas Governor Greg Abbott concluded MOUs with each of the four Mexican states bordering Texas, including Nuevo Leon, with the alleged intention of reducing illegal immigration, drug trafficking on their highways, and potential terrorism. (https://gov.texas.gov/uploads/files/press/EL_GOBIERNO_DEL.pdf) Still, the governor’s office, if pressed, could have reasonably argued  that they are only MOUs and not international agreements (suggesting form is more important than substance) and are not legally binding. Most of the criticism of these actions—including from the White House and many Republicans as well as Democrats in Texas—focused on the enormous disruption of cross-border trade that cost businesses hundreds of millions of dollars and further encouraged inflation. Critics also pointed to the fact that immigration law and policy is the exclusive province of the US federal government but chose not to mention the alleged constitutional violations of such agreements.

Less controversial arrangements have been concluded as MOUs between adjacent border states in the past. For example, the states of Arizona and Sonora (which have cooperated on a variety of issues of mutual interest since the Arizona-Mexico Commission was founded in the 1950s) have concluded a series of non-binding MOUs. For example, the Arizona Department of Commerce and the Secretariat of the Economy of the State of Sonora formed a partnership in  2018 to “drive innovation, entrepreneurship and technological advances in the region.” (https://www.azmc.org/media/1432/economic-development-mou.pdf) That agreement is also termed an MOU and specifically states that “it is non-binding and does not create any legal or binding obligations between the states.” The MOU also states that “Nothing in this Memorandum of Understanding should be read to conflict with the laws and regulations of the United States of America or the United Mexico States (or any state or local jurisdiction), or with any relevant international agreements.”

III. What Could a UK-Texas (or Indiana or California) MOU Lawfully Address?

It seems likely that the UK and the US state governments are well aware of the legal constraints and will seek to conclude MOUs that do not violate any US federal constitutional or legal regulations, particularly those relating to tariffs and dealing with standards that are currently addressed at the federal level in the United States, but they could inter alia treat areas such as the mutual recognition of professional qualifications and the elimination of existing barriers to doing business in each other’s territories.

One approach that could be considered would be to draw on the failed negotiations between the United States and the European Union aimed at a mammoth free trade agreement in 2014-2016, the “Transatlantic Trade and Investment Partnership” (TTIP), and certain provisions of the USMCA, limiting the discussion in each case to areas that are not reserved for the US federal government. While the majority of the chapters of both accords are related to matters within the exclusive control of the US federal government—such as customs and competition policy—many other areas are ripe for closer cooperation.

As the first of the MOUs (with Indiana) is now public one can reasonably assume that an MOU with Texas and other US states will contain many similar provisions, with a similarly wide range of objectives and issues to be addressed. In this first MOU, the Participants endorse sustainable growth and the importance of research, technology and innovation, mentioning in passing an effective recovery from COVID-19. Substantive section headings include enhancing cooperation; accelerating development of low emissions technology; removing barriers to trade and investment; cooperation in economic development, investment, workforce development, innovation and regulatory cooperation; and academic cooperation. Priority is to be given to advanced manufacturing and materials, aerospace and aviation, life sciences, agriculture and agbioscience, the automotive industry including low emissions technology, energy and infrastructure. Interestingly, after the the UK reaffirms its obligations under the WTO’s Government Procurement Agreement, Indiana commits to MFN treatment of UK suppliers (other than with states bordering Indiana), with both agreeing to maintain an open dialogue and to prioritize bilateral opportunities in government procurement.

In the key Section 5, “forms of cooperation,” elements include the expected development missions and public sector visits, information sharing, promoting cooperative research, joint symposia and seminars along with other consortia and summits.  Participation from municipalities, research institutions, universities and NGOs is to be encouraged. Another key section (6) focuses on implementation, with the commitment to form a joint working group, a tracking mechanism, information sharing and confidentiality. Intellectual property rights arising out of the MOU are be protected in accordance with national law.

Perhaps significantly, “This MOU is not legally binding and does not create any legal, equitable, or financial rights, obligations, or liabilities for the Participants.” There is no dispute settlement mechanism other than consultations and negotiations, with third party mechanisms barred; the Participants are “committed to acting in good faith.” The UK-Indiana MOU became effective when signed on May 27.

IV. Conclusion

One obvious question is whether UK MOUs with Texas, Indiana, California and ultimately many other states  along these lines would have economic significance. The answer may be probably “not a great deal” but ultimately depends on the effectiveness of implementation in each case. Inevitably, some provisions might be useful to individual stakeholders. In an era when the US federal government is unwilling or unable to conclude trade agreements, US state-to-foreign-government arrangements, if structured to avoid  violating the US Constitution and US. law, are worth considering. After all, for many government officials  and other stakeholders, some freer trade is better than none.

11th Conference of the Postgraduate and Early Professionals/Academics Network of the Society of International Economic Law (PEPA/SIEL)

More details at this link:

Birmingham Law School is pleased to be hosting the 2022 Conference of the Society of International Law (SIEL) Postgraduate and Early Professionals/Academics Network (PEPA/SIEL) on June 8-10, 2022.

This long-established conference aims at fostering collaboration and mentoring opportunities for emerging academics and professionals in International Economic Law. SIEL fulfils these goals through various activities, including organising conferences at which emerging academics and professionals in the field of international economic law can present and discuss their research in a supportive and welcoming environment.

This conference offers graduate students (students enrolled in Masters’ or PhD programmes) and Early Career professionals and academics, studying or working in the field of IEL, an opportunity to present and discuss their ongoing research. It also provides a welcoming platform where participants can critically discuss and test ideas about broader issues relating to IEL. Every panel will include on average three papers. One or more senior practitioners and academics will comment on each paper, which will then be followed by a general discussion.

This hybrid conference will take place both online and in-person at the University of Birmingham over three days. Papers to be presented during the conference will be made available to panellists and discussants one week prior to the conference to facilitate maximum engagement with presentations. The attending audience will also be provided with access to the abstracts in due course.

1st edition of the Baetens-Caiado Prize

We are also pleased to announce that this year’s conference will launch the 1^st  edition of the Baetens-Caiado Prize. This essay prize, sponsored by Dr. Suresh Nanwani, Professor of Practice at Durham University (UK), will be awarded to the best essay submitted at the 2022 PEPA/SIEL conference on any topic in the field of international economic law. The winning essay will be submitted to the African Journal of International Economic Law (AfJIEL) for publication, subject to its standard peer-review and decision procedures. The Prize also entails a £100 for the best essay (distributed accordingly in the event of more than one author), and it will be awarded by SIEL on the recommendation of a prize committee drawn from the host organizer of the 2022 PEPA/SIEL and two members from the SIEL Executive Council Committee. The prize award will be announced in the SIEL Newsletter.

Interested accepted presenters are encouraged to submit an essay to Dr Mariela de Amstalden and Dr Henok Asmelash (co-chairs from Birmingham Law School, UK) by July 10, 2022 (5pm UK time) to pepesiel2022@contacts.bham.ac.uk. Please note the following guidelines:

• Length of essay: between 8,000 and 9,000 words (excluding footnotes)
• Citations: Citations in the manuscript must conform to the Twenty-First Edition of The Bluebook: A Uniform System of Citation. For example, see the Inaugural Issue of the AfJIEL.
• Abstract: Please include a short abstract with your submission (150 words maximum).

Conference Co-Chairs

• Mariela de Amstalden
• Henok Asmelash
• Freya Baetens
• Ilaria Espa
• Suresh Nanwani

Registration

Registration is now available.

Registration costs £60 for non-SIEL Members, and £40 for SIEL Members. The registration fee for non-SIEL Members includes a one-year SIEL Membership fee. SIEL Membership details may be found at the SIEL website. The registration fee covers conference materials, coffee breaks and lunch on both days.

Registration of participants not presenting a paper are also welcome. The regular fee will be applied. 

Compliance with USMCA Chapter 31 Panel Rulings

Recently, as I heard the U.S. express concerns that Canada has not complied with last December's USMCA Dairy TRQs panel ruling, I wondered how compliance proceedings worked under USMCA Chapter 31. The relevant provision states:

Article 31.19: Non-Implementation – Suspension of Benefits

1. If the disputing Parties are unable to agree on a resolution to the dispute under Article 31.18 (Implementation of Final Report) within 45 days from receipt of the final report, the complaining Party may suspend the application to the responding Party of benefits of equivalent effect to the non-conformity or the nullification or impairment until the disputing Parties agree on a resolution to the dispute.

2. In considering what benefits to suspend pursuant to paragraph 1:

(a) a complaining Party should first seek to suspend benefits in the same sector as that affected by the measure or other matter that was the subject of the dispute; and

(b) a complaining Party that considers it is not practicable or effective to suspend benefits in the same sector, may suspend benefits in other sectors unless otherwise provided for elsewhere in this Agreement.

3. If the responding Party considers that:

(a) the level of benefits proposed to be suspended is manifestly excessive; or 

(b) it has eliminated the non-conformity or the nullification or impairment that the panel has determined to exist,

it may request that the panel be reconvened to consider the matter. The responding Party shall deliver its request in writing to the complaining Party. The panel shall reconvene as soon as possible after the date of delivery of the request and shall present its determination to the disputing Parties no later than 90 days after it reconvenes to review a request under subparagraph (a) or (b), or 120 days after it reconvenes for a request under both subparagraphs (a) and (b). If the panel considers that the level of benefits the complaining Party proposes to suspend is manifestly excessive, it shall provide its views as to the level of benefits it considers to be of equivalent effect.

4. If the panel’s views are that the responding Party has not eliminated the non-conformity or the nullification or impairment, the complaining Party may suspend benefits up to the level the panel has determined under paragraph 3.

I read all this to say that if the U.S. had a concern about Canada's implementation of the Dairy panel report, it could undertake tariff retaliation 46 days after the panel report is issued, without a compliance panel ruling (although domestic procedures probably would mean that it takes longer than 46 days). In addition, though, if Canada thought its new measures had brought it into compliance, it could request a panel to examine those measures and try to get a ruling to that effect.

I wasn't totally sure what would happen if the panel couldn't rule before the tariffs were ready to go into effect. Can a complainant impose tariffs before there is a ruling that the new measures are not in compliance? I'm not sure I like that idea, and these procedures seem a bit odd to me.

But regardless, USTR has now taken a new action in the case, and I'm trying to figure out what it means. Today it requested consultations on the Canadian Dairy measures that exist right now, alleging that they violate USMCA obligations. The request states:

The United States has previously raised concerns about Canada’s then-extant dairy TRQ allocation measures, and in December 2021, a USMCA dispute settlement panel found those measures to be inconsistent with Canada’s USMCA obligations.1 Subsequently, Canada introduced changes to those measures in response to those adverse findings,2 but, as discussed below, it appears that Canada’s current dairy TRQ allocation measures are inconsistent with Canada’s obligations under the USMCA.3

Footnote 3 says: "This request for consultations is without prejudice to U.S. rights under the USMCA relating to the prior USMCA dispute settlement proceeding or the Final Report of the Panel, dated December 20, 2021."

So, instead of moving forward with tariff retaliation now pursuant to the earlier panel ruling, as it seems like the rules permit, USTR is bringing a complaint against the new measures. 

Why is USTR taking this approach? I speculated on Twitter that maybe in this economic climate, with all the concerns about inflation, and the calls to scale back the Section 301 tariffs to help bring down prices, USTR is wary of proposing new tariffs, even ones taken pursuant to enforcing compliance with a trade agreement. However, at the Georgetown Law International Trade Update today, a USTR official's answer when asked about their strategy here, if I understood it correctly, seemed to emphasize the fact that the USMCA panel ruling focused on one particular issue and the panel had exercised judicial economy on other issues, and also there were some other policy changes of concern in the new Canadian measures. Therefore, USTR filed a new complaint. Nonetheless, I still wonder whether, under the USMCA rules, USTR could just argue that the parties have been "unable to agree on a resolution to the dispute" here and therefore they are going to impose the retaliation now. (To be clear, I'm not saying I think they should approach it that way. Maybe I'm just used to everything being ratcheted up to 11.)

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.