International Economic Law and Policy Blog

The U.S. and the EU Sue China in WTO over Auto Parts Imports

The U.S. and the EU announced that they filed a complaint against China under the WTO dispute settlement system over China’s alleged unfair treatment of foreign auto parts. http://www.ustr.gov/Document_Library/Press_Releases/2006/March/United_States_Files_WTO_Case_Against_China_Over_Treatment_of_US_Auto_Parts.html

The U.S. and the EU claim that China’s "complex" tariff system functions as "local content rules" which run afoul of the WTO norms.

http://news.ft.com/cms/s/1ef9d3d6-c02d-11da-939f-0000779e2340.html

This complaint seems to have been driven, or at least influenced, by heavy political considerations. First, in general the fervor of protectionism/mercantilism has recently been rising both in the U.S. and the EU, often clad with "economic patriotism" and "national security." Second, the Bush Administration has diligently been responding to the mounting anti-China sentiments in the Congress concerning the record-high bilateral trade deficits with China as well as the Congress’ frustration over the slow pace of revaluation of renminbi. Last month, the USTR announced a comprehensive action plan to deal with China’s trade policies and hinted that it would use more aggressive options such as the WTO complaint. (See my blog below "Readjusting the U.S. Trade Policy on China") Perhaps, the Bush Administration wanted to appease the Congress by going tough on China. Third, considering the imminent China’s president Hu Jintao’s very first state visit to the U.S., this WTO complaint may seem embarrassing or even offensive to China. On the other hand, this awkward timing itself may attest the Bush Administration’s seriousness in responding to the Congress.

Legally, it does not seem to be a hard case. Although China has every right to schedule its own tariff schedule, local content rules would violate both GATT Article III:4 and TRIMs Article 2, subject to justifications under GATT Article XX and TRIMs Article 3, respectively.

Politically, this case might have devastating ramifications. China might retaliate by suing the U.S. and the EU over their recent treatment of China’s textiles and shoes imports. Regardless of legal merits of these politically-driven complaints, they would certainly be huge disservice to the WTO’s dispute settlement system, threatening its integrity. Any trade war among major economic superpowers would also cast dark clouds over the already fragile WTO Doha round talks. Granted, the U.S. and China might be able to defuse this tension during Hu Jintao’s visit to Washington in the dimension of "political theater." They have already settled away the first WTO complaint over semiconductors. However, if they fail to do so, this WTO dispute might be escalated into a full-blown political battle.

Economically, this complaint might make little sense. Most of car makers in China are joint ventures, and foreign car makers having factories in China are increasingly keen to use cheaper domestic parts to cut the manufacturing cost, rather than importing more expensive foreign parts.

http://news.ft.com/cms/s/8e3ca92a-c0a6-11da-9419-0000779e2340.html

Even if the U.S. and the EU prevail in the WTO and impose trade sanction against Chinese imports, such sanction would hurt their own economies immensely considering that so many staples are made in China.

Internet Filtering and the WTO

See the nice post by Roger Alford at Opinio Juris on this topic, discussing Tim Wu's paper. 

Panic in Geneva

On March 23, Pascal made the following statement:

It is a pleasure to be here with you today to discuss the progress that the WTO is making in completing the Doha Round. As you know, the end date for the Round is soon approaching — it is the end of this year as a matter of fact. This is not a date that our membership has picked out of the blue; it is not a date that has fallen out of a hat. Rather, it is a date that corresponds to the expiry of the Trade Promotion Authority of the United States.

With the U.S. running for the FTA door, and fast track running out, can we expect a significant Doha round deal, or will we see a face-saving but insignificant deal, or failure and a wait for renewed fast track authority?  Can the Bush administration obtain renewed fast track? 

For an interesting take on U.S. trade politics, see Daniel Drezner's article in "The American Interest."

Blogger Reception

From Opinio Juris--IELPB Bloggers and Readers are Invited

Opinio Juris Reception at the ASIL Annual Meeting

by Chris Borgen

For those of you who will be at the Annual Meeting of the American Society of International Law (or just in DC), Opinio Juris and the ASIL will sponsor a reception on Thursday evening, March 30th, from 7:30 pm to 8:30 pm in the Longworth Room of the Fairmont Hotel, 2401 M Street, NW (the location of the Annual Meeting).

Besides wine and cheese, we will also have an informal discussion on international law and blogging. We expect that bloggers from other law blogs will be joining us as well. We hope this will be a chance for many of us who know each other via the Internet to actually get together in person. Please note that you do not need to be registered for the Annual Meeting in order to attend the reception.

We hope to see you there.

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This volume of collected essays gathers the insights of Joel Trachtman who has been a leading commentator on this relationship. Over 25 years of law practice and academic study, the author has developed a comprehensive framework for understanding these pressing issues. These essays will be important to international policy-makers, to domestic regulatory officials seeking to assess the impact of international law on their work, to practitioners seeking a ready reference in this field and to students seeking a framework for understanding international economic law.

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For further details of this publication  other Cameron May international trade law titles please vist our website www.lexmercatoria.org

Rough treatment for EC constitutional law

I have just been reading the Art 21.3(c) arbitral award in EC – Chicken Classification (WT/DS269/13, 20 February 2006), which, in its robust attitude to EC law, provides an interesting counterpoint to the AB’s more deferential attitude to NAFTA in Soft Drinks.

The EC argued that it could not comply with the ruling until a WCO HS classification decision had been taken. Until then, it was argued, the Commission could not act in contradiction of earlier (allegedly different) ECJ interpretations of the relevant HS headings. To my mind, it does not appear to have been particularly convincing for the EC to hold up the implementation process to a contingency that was not even guaranteed to provide an outcome, or the desired outcome. But while the arbitrator recognised this (para 55), the thrust of his reasoning went in a quite direction, along the way making points which (in my opinion) are both a little questionable, and potentially problematic for the EC.

First, the arbitrator made a comment about ‘domestic legal orders’ that seems to leave the EC at a bit of a loose end. For him the key issue was that implementation was said to depend upon a decision made outside of the legal order of the implementing Member. This differed, he said, from the ‘ordinary’ situation where, because the challenged measures originates within the Member’s domestic legal order, implementation can be achieved within the same legal order (para 51). Consequently, even though normally an implementing Member has a discretion in selecting its means of implementation, in unusual cases such as this the Member ‘bears the burden of establishing that this external element of its proposed implementation is necessary for, and therefore indispensable to, that Member’s full and effective compliance ….’ (para 52)

Why is this problematic? First, because for the EC, at least, the situation described by the arbitrator happens all the time, inasmuch as the EC is responsible under WTO law for measures adopted by the Member States. This is true not only for the areas of shared competence (TRIPS/GATS) but also for internal measures involving trade in goods. Second, the arbitrator’s reasoning seems a little dubious anyway. In determining the reasonable period of time for implementation, why should it be more difficult for an implementing party to claim that it needs to go through a non-domestic process? Surely the important issue – and the weak point of the EC's case – is the contingent nature of the outcome of this process? And what about other federal systems?

The other interesting feature of this award, one with a bearing on Soft Drinks, is that the arbitrator expressly analysed a question of EC ‘constitutional’ law: namely, whether under EC law the Commission was able to implement DSB rulings without recourse to the WCO. Moreover, he expressly did so by treating this as a question of fact, challenging the EC to 'prove' its argument:  'I cannot just take their word for it; the European Communities must establish that it is so' (para 56).  

The arbitrator may have been tempted in this direction because the panel and AB made factual findings on the meaning of two ECJ judgments (Dinter and Gausepohl). Indeed, he relied on these findings in determining that these judgments were not inconsistent with the AB report. But these findings were made in the quite different context of ascertaining the ‘circumstances of the conclusion’ of the EC’s tariff bindings under Art 32 VCLT, which pointedly is a question of fact. It does not follow that the more profound question of EC constitutional law at issue - whether a WCO decision was required - should also have been treated as question of fact. At the very least, the arbitrator should have treated this as a mixed question of law (Commission powers to contradict ECJ judgment) and fact (meaning of the ECJ judgments at issue). The only alternative is to take the view that the EC, perhaps because it is a WTO Member, or perhaps because it insists on the 'sui generis' status of its legal order, has forfeited the right to have its legal system treated as international law.

But even if this is not the case, and some constitutional questions of EC law can be treated as questions of fact, would this still hold for all such questions? What about a question concerning the division of competences between the EC and its Member States (still WTO Members)? Would this square with the AB’s refusal in Soft Drinks to determine international rights and obligations outside the covered agreements? Would it square with the decision of MOX Plant Arbitral Tribunal, which suspended proceedings (on grounds of comity between international tribunals) until the issue of EC/MS competence could be decided by the ECJ (see www.pca-cpa.org/PDF/MOX%20Order%20no3.pdf, para 28)?

All in all, this serves to illustrate the very 'delicate' status of the EC within the WTO system.

World Bank watchdog and trade

The Independent Evaluation Group of the World Bank has released a study of the Bank's advice on trade.  Part of the executive summary (pp xiv-xv) is worth quoting in full:

Bank clients that obtained loans to support trade reform experienced higher

economic growth rates in the medium term (3–6 years) following trade reform, and their growth rates exceeded those independent reformers that reformed without the financial support of the Bank. Both groups of reformers also experienced dramatic increases in import demand, although this effect lasted longer for Bank-supported reformers. However, Bank-supported reformers exhibited a modest supply response, suggesting that trade liberalization alone was not sufficient—a finding supported by recent research in this area. The gains in economic growth were often driven by domestic demand arising from improved resource allocation, rather than just export expansion. The employment and poverty outcomes associated with trade reforms were mixed, and the Bank did not conduct sufficient analysis to inform its policy advice and lending on this issue or systematically measure the outcomes.

The "IEG" also criticized the Bank for insufficient analytical attention to distributional outcomes. 

Durability of Politics

I suppose that I am an idealist, as I still find it surprising that Senators Charles Schumer and Lindsay Graham can be taken seriously as they threaten China with a 27.5% tariff on imports unless China revalues the renminbi.  Why doesn't China simply say, well you know, Senators, that would be illegal, and send them on a tour of the Great Wall?  Instead, China is reported to give these Senators higher access than usual.  Further, and only slightly unrelated, today's FT reports that Karan Bhatia, deputy USTR, juxtaposed the need for Chinese currency flexibility with a warning that China should expect to be the target of new complaints at the WTO. 

Trade, Poverty, and Philosophy

I have been struggling over a paper on distributive justice and international law, for a conference April 7 at Cornell.  This seems an example of failure of comparative advantage (why should I try to learn philosophy?), but it also occurs to me that the distributive justice issues cannot be answered by philosophers alone, because they require lots of practical (legal) and empirical (economic) inputs.  Fernando Teson has an interesting post on this at profsblawg.  The development economics of international trade is a bit of a moving target (literally, as one group, led by Rodrik, suggests it depends on the particular moment in the relevant state's economic development), although Teson has grasped on the Bhagwati view that liberalization pretty unambiguously promotes development.  I am also working on editing Hudec's 1987 book on developing countries and the GATT, and Hudec had a nice way of squaring the circle despite disagreement within the economics profession or among policymakers. 

The philosophers I have read on this subject, including Rawls, Walzer, Pogge, Singer, Beitz, and several others, seem to have a mixed understanding of the role of the WTO, basic trade economics, basic development economics, etc.  Rawls, writing in The Law of Peoples in 1999, referred to the GATT as the global trade organization.  I must confess to a mixed understanding, also, but my mix is somewhat different from theirs.  Teson's complaint calls for more interdisciplinarity, and here one can only agree.

We the Arabs

I thought this write-up by Jawad Anani in Beirut's Al-Hayat was interesting, giving a view that is external to US politics:

http://english.daralhayat.com/business/03-2006/Article-20060316-03ace06f-c0a8-10ed-0008-254d564638e0/story.html

The bottom line:

"Under these circumstances, "Dubai Ports" put forth many proposals to entrust the management to Americans only and to leave the security aspects for the US States and cities, where these ports are located. Amid the unwavering vociferous outcry, the corporation found itself obliged to withdraw and offer its shares for sale.

Even though the US President has understood the bad message such step will convey, especially to the so-called US friends and allies, the damage is already done and cannot be reversed. This lesson comes to remind us, we the Arabs, that the United States only wants us to deposit our funds at its banks or smoothly invest them in some hotels and real estates.

Adventurism and entrepreneurship characterizing Dubai's investments unveil the real intentions and double standards the US representatives adopt in dealing with the Arabs and their causes.

Still, such hardship may prove to be beneficial. It is time now to muster the political will to invest in Arab projects. By brandishing this slogan, we do not the least reject openness to the United States. But, in this vast world, we must give top priority to the neighbors. So must the United States".

T.

Welcome to Peter Van den Bossche

It is with great pleasure that I welcome Peter Van den Bossche, of Maastricht, to our group of contributors. 

Uruguayan Recourse . . . to Cash Remedies

Uruguay seems to have followed the four West African cotton producers in demanding cash compensation from the U.S. for the reduction in incomes of Uruguayan rice farmers due to U.S. rice subsidies.  The March 10 Inside U.S. Trade reports that the U.S. is considering how to respond to this demand.  On the possibility of cash remedies at the WTO, see my paper.   

New Bloggers: Don Regan and Francis Snyder

Hearty welcome to our excellent new bloggers:  Don Regan of Michigan and Francis Snyder of LSE. 

EC-Biotech: a true hidden gem, if not the jewel in the crown (of thorns)---"treatment no less favourable"

As I recall Joost's excavation of the gems in EC-Biotech may not have included the panel's analysis of Art. III:4 of the GATT, National Treatment.  As I understand it, fleshing out the meaning of what the AB said about "treatment no less favorable' in EC-Asbestos (para 100), as well as DR-Cigarettes,  the panel concluded that only differences of treatment between "like" products that are based on national origin as opposed to legitimate, neutral regulatory concerns constitute "treatment no less favorable" within the meaning of III:4.  Aims-and-effects redux?  Para. 7.2505.

   

More Soft Drinks (by Guest Blogger Don Regan)

Thank you, Joel, for letting me join the discussion of Mexico – Soft Drinks.  It seems to me that if one simply picks up XX(d) and reads it as a piece of natural language, taking it all together and attending to the illustrative examples, the picture one gets is of a relatively narrow provision (as compared to what many people are suggesting).  It seems that the illustrative examples, while they are not exhaustive, are meant to illustrate fairly comprehensively a type of “laws and regulations” that XX(d) is about, a type that does not include such laws as the Alien Tort Claims Act, or Rob’s Mexico 3001 Act, and so on.  So I want to offer a text-based argument for such a narrow approach (and incidentally to define the type of laws that XX(d) is about).  Many people seem to want to use XX(d) to justify trade sanctions in defense of human rights or labor rights; or alternatively they want to use XX(d) to guarantee that there is room within the WTO system for, say, NAFTA-authorized retaliation for NAFTA violations, or MEA-authorized trade sanctions (against signatories) for MEA violations.  These are laudable interpretive goals, which I think should be achieved by other interpretive means than what seems to me an overbroad reading of XX(d).  For what it is worth, I think my approach to XX(d) reflects the Appellate Body’s general thinking, although not their reasoning.

XX(d) allows a defense when the measure is “necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement [followed by examples].”  I want to focus on the phrase “which are not inconsistent with the provisions of this Agreement,” a phrase that everyone else has been ignoring (including the AB, I forget about the Panel).  It is easy to ignore this phrase.  It is obvious that we cannot allow a defense for measures designed to secure compliance with GATT-inconsistent measures; that would undermine the entire agreement.  So it can seem that this phrase merely records that obvious idea, and no more.  But I think it does more.

         The basic move in my argument is this:  First, I suggest that there are some types of laws [I shall hereafter use both “laws” and “regulations” indifferently to mean “laws or regulations”] that can be inconsistent with the GATT, and there are other types of laws that cannot be inconsistent, because they are simply not the sort of thing the GATT addresses at all.  (Examples of these types will be given presently.)  Then I suggest that the phrase “which are not inconsistent with the provisions of this Agreement” refers to laws that (i) are of such a type that they could be inconsistent with the GATT, but that (ii) are not in fact inconsistent.  The crucial move here is (i), which restricts the “target regulations” under XX(d) (that is, the laws compliance with which we are trying to secure) to laws of those types that could be GATT-inconsistent.  It might be objected that this move is illogical.  After all, if a law is of a type that cannot be GATT-inconsistent, then necessarily it is not itself GATT-inconsistent; and so it may seem that “laws which are not inconsistent with the provisions of this Agreement” must include all laws which are of such a type that they cannot be GATT-inconsistent, and in addition all laws which are of such a type that they could be GATT-inconsistent, but which are not.  That is indeed where we are led by standard formal logic that includes material implication.  But all speakers of natural languages (that is, all of us) know at least implicitly that natural language often does not live up to the rules of material implication, that it often embodies some version of “relevance logic” (which also has its formalizations).  In this case it is a “relevance” idea that suggests that the phrase “which are not inconsistent with the provisions of this Agreement” naturally refers, in this context, only to laws that could be GATT-inconsistent but are not.  So worries about formal logic need not deter us.  The question is what is the most plausible reading of the text.

That last paragraph was extremely abstract.  (Trying to start more concretely created its own problems.)  What does the argumentative move I am suggesting – limiting the target regulations to laws that are of types that could be GATT-inconsistent – actually get for us?  Well, for a start, it generates quite straightforwardly the conclusion, which we all seem to find intuitive, that the target regulations must be domestic law (including domestic law implementing international law, or even treaties with direct effect in their “domestic law” guise).  Here’s the argument:  (1) The only types of law that can be inconsistent with the GATT are measures by Members; that is simply all that any of the prohibitory provisions addresses.  (2) But no bit of international law is a measure by a Member; every bit of international law results from the joint law-making activity (explicit or implicit) of at least two nations.  Of course, each contributing nation engages in legally significant action when it makes its contribution to this joint law-making activity; but still, the international law as such is not a measure of any Member.  (3) International law is therefore not the type of law that could be inconsistent with the Agreement.  (4) International law is therefore not a possible “target regulation” for XX(d).  (5) So, the only possible target regulations are domestic law.  QED.  (If a treaty has direct effect, then the domestic-effect aspect is the result of unilateral lawmaking, perhaps implicit; it therefore is, for all we have yet said, the sort of thing that could be inconsistent with the Agreement; and thus it might be, for all we have yet said, a target regulation.)

We now have a new argument for the proposition that only domestic regulation can be a target regulation under XX(d).  Of course, most of us seemed to accept that already, so have we made any progress?  I think so.  First, we have seen how the argument form works; we will use it in a moment to deliver a much more interesting conclusion.  Second, the new argument for the already-accepted conclusion seems to me stronger than the other arguments that have been suggested.  Finally, the fact that the argument form neatly delivers this already-accepted conclusion may provide some validation of the argument form itself, for those who are suspicious of it. 

            So, what else might we learn from the insight that target regulations must be of such a type that they could be GATT-inconsistent?  We have already seen that this limits the field of target regulations to domestic law.  But in fact it limits the field still further.  Again, if we look at the basic prohibitory  provisions of the GATT, we see that all the prohibited measures are of two types: border measures (Art. I in part, Art. II, Art. XI) or internal regulation (in which I include including taxation) (Art. I in part, Art. III).  [The proper classification of Art. V, Art. XVI re export subsidies, and Art. XVII is an issue I ignore; none of these threatens my general thesis.]  In other words, only border measures and internal regulations can be GATT-inconsistent.  So even domestic laws that are neither border measures nor internal regulations cannot be GATT-inconsistent.  Hence, domestic laws that are neither border measures nor internal regulations cannot be target regulations under XX(d).  Or conversely, target regulations under XX(d) must be domestic-law border measures or internal regulation.  (This is confirmed, so far as examples can confirm such a proposition, by the illustrative examples to XX(d).)  But the Alien Torts Claims Act (at least in its most characteristic applications – I confess I do not know its precise scope), and the Torture Victims Prevention Act (ditto), and Rob’s Mexico 3001 Act (the primary provisions that condemn foreign behavior), and even a directly-effective NAFTA (insofar as it creates “domestic” obligations for foreign governments not to erect illegal trade barriers, for example) are neither border measures nor internal regulations.  One might have been forgiven for thinking in 1947, if one asked oneself the question, that virtually all domestic laws were either border measures or internal regulation.  That is less true today.  But my fundamental argument is, in effect, that the expansion in what governments feel free to legislate about “domestically” does not ipso facto broaden the scope of XX(d).

            I may be accused of “teleological interpretation”.  My response is, “Of course, but no more than the inevitable minimum.”  I freely concede – I would insist – that I did not reach this interpretation in the first instance by an attempt to construe each word or phrase of the text all by itself and then build up the meaning of the whole from those separate bits.  That’s no way to read.  But I absolutely started from the text.  I started from what the whole thing seemed to mean, and I then looked to see if the most plausible meaning for the whole could be constructed out of plausible readings of the bits.  If it could not, I would have had to start over.  (This is the search for “reflective equilibrium” in text-construction.)  But I think it can.

Don Regan

Direct effect of investment treaties and the exhaustion of local remedies rule?

In a post on opinio juris, Bill Dodge writes as follows:

In an article about to be published, I analyze the different approaches of NAFTA (which allows direct investor claims) and AUSFTA (which does not) and suggest a third approach. Specifically, I argue that because developed countries have developed legal systems, it is possible to combine the advantages of direct investor claims with those of the local remedies rule, allowing investors to enforce their own rights under a treaty but requiring them to do so in domestic court first. This approach would do a better job of preserving sovereignty and correcting errors and would benefit investors by allowing them to bring their international and domestic claims in a single forum.

I have not read Bill's article yet, but one interesting aspect of the proposal would seem to be the possibility that local courts would of course apply a full range of local law.  Recourse to investment arbitration would presumably take place after exhaustion, and would presumably be predicated on a finding that the local courts got it wrong as to the application of the investment treaty. 

Welcome to Lorand Bartels

I am very pleased to welcome Lorand Bartels, of University of Edinburgh School of Law, to our group of contributors.  I look forward to his insightful contributions. 

Congratulations to Greg

I was just reading the Leiter gossip about law professor moves (yes, I really do have better things to do), and read that Greg Shaffer has been appointed to be the first holder of the Wing Tat Lee Chair in International Law at Loyola Chicago.  Congratulations. 

Bloggership Scholarship

For those who doubt that blogging has anything to do with legal scholarship, there is now a conference planned at Harvard on the topic. 

Are we missing the real bottom line of Mexican sodapop?

There are many problematic things that the AB says in its ruling concerning the relationship of different international legal regimes and fora.  Some of those things have been discussed in the various posts on this case.  And I may address them as well in a future post.  But it seems to me the critical bottom line of the decision is as follows (para. 79):  "laws and regulations" in XX(d) includes any laws and regulations in the domestic legal system that have been incorporated from international agreements or have "direct effect" in the domestic legal system.  So it is all a matter of form:  the proper incorporation into domestic law will allow a WTO Member to use a XX(d) defense when it wants to resort to trade restrictions as an enforcement device.   Now what if the trigger that determines the sanctions is (according to the domestic    statute or regulation), a violation of an international norm?  In other words, the WTO Member is enforcing a domestic law that makes it a domestic offense to violate an international norm.  Clearly, assuming that there is in form a valid domestic law being enforced, there is no problem here invoking Article XX(d).   In adjudicating such a defense, would, however, the Appellate Body have to determine whether, in fact, there has been a violation of some other, non-WTO  international obligation?  Of course they would "en passsant"  because how could the trade measure be "necessary" to enforce the domestic law if, in fact, what triggers the violation of the domestic law, namely the violation of an international norm, has not occured?  So all this business about the problem of having to determine certain rights and obligations under non-WTO law to decide a WTO dispute can't be so important; and, after all, under TRIPs for instance, the AB is having to essentially decide the rights and obligations under other non-WTO treaties to decide WTO disputes, because the terms of the relevant WTO treaty require it to do so.  This is why the AB's advancing of the consideration that one might have to decide rights and obligations under non-WTO treaties to interpret Art. XX(d) is question-begging or tautological.  IF   the correct reading of XX(d) is that the AB has to resolve whether some other non-WTO obligations have been violated, THEN it is perfectly appropriate and legitimate that the AB do so.  the non-WTO law becomes a "fact" that must be resolved to apply the WTO norm--as the AB had quite properly suggested for example in discussing Lome Convention in Bananas, and in discussing even Indian municipal law in India-Patents.    Not to mention TRIPs in general.   I simply then do not think the AB advancing as a consideration of what XX(d) means that it must avoid deciding on whether non-WTO oblgations have been violated is consistent with the previous jurisdprudence of the AB.  And in the end, as I suggest, it matters only formally, since a prospective defendent country can always go through the formalities of creating domestic legal rules that embody the international obligations they want to enforce, so as to be seen by the AB as enforcing domestic laws and regulations, not international ones.

So we see what Mexico should do now, right? 

             

 

Has anyone done an edit of the leaked GMO decision?

I'm going to be teaching the EC-Biotech interim report next week, and was wondering whether anyone out there had done an edit for classroom purposes?  If not  I guess my  work will be cut out for me in the next few days.  Obviously, the report as it stands, given its utterly absurd length, is not a useable document by the public, the media, the scientific community etc.  So a good edit will serve the public interest.  If no one has done it, I'll be happy to share my own edit, and perhaps it could even be posted on the blog or in some other way by Simon.

best,

Rob

Soda Pop!

The Appellate Body has issued its (delightfully brief) report in Mexico — Tax Measures on Soft Drinks and Other Beverages” (DS308). The report will merit further study, but it appears on first glance that the Appellate Body has definitively rejected the possibility that panels or the AB would apply non-WTO international law.

Mexico argued, based on language in the Chorzow Factory Case (the AB expressed no opinion on the application of this principle), that the U.S. might be precluded from relying on its WTO rights due to its alleged non-compliance with NAFTA. The AB stated that the determination of the application of this principle would "entail a determination whether the United States has acted consistently or inconsistently with its NAFTA obligations." (footnote omitted) In para. 56, the AB stated:

"We see no basis in the DSU for panels and the Appellate Body to adjudicate non-WTO disputes. Article 3.2 of the DSU states that the WTO dispute settlement system "serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements". (emphasis added) Accepting Mexico 's interpretation would imply that the WTO dispute settlement system could be used to determine rights and obligations outside the covered agreements."

Any argument that this holding is limited to actual settlement of non-WTO disputes (most would agree that a panel cannot actually decide a non-WTO cause of action), as opposed to a determination in order to evaluate the relationship of the non-WTO rule to WTO law, is foreclosed by the context in which this language appears, as well as rather explicit language in paragraph 78:

". . . Mexico's interpretation would imply that, in order to resolve the case, WTO panels and the Appellate Body would have to assume that there is a violation of the relevant international agreement (such as the NAFTA) by the complaining party, or they would have to assess whether the relevant international agreement has been violated. WTO panels and the Appellate Body would thus become adjudicators of non-WTO disputes.[1] As we noted earlier[2], this is not the function of panels and the Appellate Body as intended by the DSU.[3]"

Thus, a panel would not be permitted to evaluate other international law in order to determine whether that other international law constitutes a defense to claims of non-compliance with WTO law.

-------------------------------------------------------------------------------- [1]Article 3.2 of the DSU states that the WTO's dispute settlement system "serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements". (emphasis added) [2]See supra, para. 56. [3]We note that, in its analysis, the Panel also referred to the negotiating history of the GATT 1947, and particularly to the rejection of a proposal presented by India during the negotiations on the International Trade Organization (the "ITO") Charter according to which Members would be permitted to justify, on a temporary basis, retaliatory measures under Article XX. (See Panel Report, para. 8.176 (referring to ITO Doc. E/PC/T/180 (19 August 1947), p. 97; and "Havana Charter for an International Trade Organization", United Nations Conference on Trade and Employment, Final Act and Related Documents (Lake Success, New York, April 1948), pp. 33-34)

More on Ports

In Today's FT (free access this week), Alan Beattie reports that 13 countries have asked the U.S. to liberalize in the area of maritime transport "auxiliary services," which includes port management.  USTR Portman is reported to respond as follows:

“The United States is not offering any commitments in the WTO services negotiations involving maritime services that involve port activities,” said a spokeswoman for Rob Portman, US trade representative. “Nothing in the services negotiations will impact the US ability to protect our national security interests.”

While Article XIV bis might render this quote a non-sequitur, it is clear that Portman is steering clear of accusations of compromising U.S. security through the WTO (as opposed to through the Exon Florio process).

New Jewels Buried in 1000+ Pages GMO report

Thank you, Simon, for the link to the full GMO interim report.

One really has to read the full report to appreciate the Herculian job performed by this panel, and the WTO staff advising it. The report is amazingly well-written.

Given, in particular, our earlier discussions, I want to stress five findings that were not easily detectable in what was publicly available so far.

1. Relevance of non-WTO treaties

In response to EC claims that the panel look at the Biosafety Protocol and other non-WTO treaties to interpret the SPS agreement, the panel – for the first time ever -- defined head-on what rules are covered under Article 31.3(c) of the Vienna Convention on the law of treaties. For the panel, only treaties binding on all WTO members can be “relevant rules of international law in the relations between the parties” (para. 7.68). Treaties binding as between the disputing parties only do not qualify. Yet, and very importantly, other non-WTO treaties can still impart meaning, even if such treaties are not binding on all WTO members, not even on all disputing parties, if they – much like the Oxford dictionary -- shed light on the ordinary meaning of WTO terms pursuant to Article 31.1 (para. 7.92). (This is, by the way, a position I defended in my 2003 book on Conflict of Norms in Public International Law, p. 260, although I would thereafter open the door much wider when it comes to applicable law).

In passing, the panel also declined to find that the so-called precautionary principle is a principle of general or customary international law (para. 7.88).

2. A measure with multiple objectives (SPS and other) can in effect be two measures

If one and the same requirement has two objectives – say, first, the protection of human health and, second, consumer information or public morals – the panel is of the view that this can transform the requirement in effectively two measures. With reference to the first objective (health), the requirement can then be an SPS measure. With reference to the second objective (consumer information or public morals), the requirement can then be a TBT or GATT measure (para. 7.165).

This means that if a GMO restriction is enacted for health or certain environmental purposes, it needs justification under SPS. If, in contrast, it is enacted for other, non-SPS reasons (as well), it can be justified (independently) under TBT or GATT Art. XX.

As the panel noted, this may be important for how the EC can implement this ruling (para. 7.173). The EC could, in principle, reframe its entire GMO scheme on the basis of public morals or consumer information and claim that it thereby implemented the adverse DSB recommendations under SPS.

Later, the panel finds that one of the EC regulations (Regulation 258/97) was based on two non-SPS objectives (namely, avoid misleading consumers and avoid nutritional disadvantages). Yet, having found that there were SPS violations, the panel never reached the stage of examining whether these violations could be “cured” under TBT/GATT with reference to these other objectives.

3. Article 5.7 (provisional measures) is not an exception but a conditional right

As an important concession to the EC, the panel found that Article 5.7 is not an exception to either Article 5.1 (risk assessment) or Article 2.2 (sufficient scientific evidence). Rather, Article 5.7 is a conditional right that carves out the scope of application of both of these provisions (in the same way that 3.3 carves out 3.1).

This means that complainants -- here the US, Canada and Argentina -- have the burden of proving that the conditions under 5.7 are not met. It is not for the EC to prove that it does meet the four conditions in 5.7 for a provisional measure.

This raises the question, however, of whether, as a result, the complainants should have raised or claimed violation of 5.7 in their panel request. If 5.7 is a conditional right, not an exception, it is, in theory, up to the complainant to claim violation of it. The US, for example, did not mention 5.7 in its panel request. Remember, in this respect, that in EC – GSP the AB found that even if the Enabling Clause really is an exception (not a conditional right) it was still for India, the complainant, to raise it (whatever that means). When faced with a conditional right – as here in GMOs – this should, all the more, be a requirement. In the end, however, the panel finds a violation of 5.1 (not, strictly speaking, of 5.7) (see para. 8.23(a)), so this technical argument may be moot (surely, now that the panel found that 5.1 and 5.7 are self-standing alternatives, they cannot ever be both violated at the same time).

4. Once a 5.1 risk assessment can be made, provisional measures under 5.7 become unavailable

Heavily relying on the AB report in Apples (at para. 179), the panel concludes that once (the EC) makes a risk assessment, (EC member states) can no longer rely on 5.7 and enact provisional measures. To deviate from EC policy, EC member states must present their own (new) risk assessment in line with 5.1 (para. 7.3057 and 7.3224). Sufficiency of evidence under 5.7 is, in other words, linked only to the possibility to make a 5.1 risk assessment. Sufficiency of evidence has, according to the panel, no relation whatsoever to a country’s tolerance of risk or appropriate level of protection (para. 7.3234; a finding, in my view, in tension with the AB report in hormones, para. 124).

As noted in my earlier comment, this is, I think, the most vulnerable part of the report. Surely, if Austria were to find new scientific evidence tomorrow that GMOs are really deadly, it must have the right to provisionally ban GMOs, even in the face of a previous EC risk assessment and without yet having completed a full, new risk assessment of their own that incorporates the new evidence. Yet, according to the panel, Austria would, in that case, not ever be able to impose provisional measures under 5.7 as, before that, a risk assessment (by the EC) was possible which, in turn, means that there is, for ever after, “sufficient scientific evidence” and, hence, no longer any right to impose provisional measures. To do anything different from the EC, Austria must, according to the panel, complete a full risk assessment and only then would it be able to restrict the GMO. This would be absurd.

Instead, the panel could have found that even if there were insufficient evidence, EC member states did not complete a more objective risk assessment within a reasonable period of time (fourth condition under 5.7). To fault WTO members on such procedural requirements makes, in my view, much more sense than to fault them on substantive points.

In para. 7.1525, in respect of the “undue delay” in EC processing, the panel seems to admit that new evidence itself (not necessarily a full new risk assessment) can justify a decision “to suspend all final approvals pending an appropriate assessment of the new evidence”. In later parts of the report, however, a 5.1 consistent risk assessment – and not just new pieces of evidence – are required.

Finally, for the panel, the lack of a risk assessment automatically means insufficient scientific evidence (5.1 violation necessarily violates also the third condition in 2.2). It did so relying on the AB in Salmon (para. 137) even though there the AB never specified which of the three elements in 2.2 it was talking about. In my view, lack of a risk assessment implies a measure not based on scientific principles (which seem to include risk assessments). Yet, it may well be that a country does not have a procedurally correct risk assessment (in violation of 5.1), but still has sufficient scientific evidence (in some other form) in support.

5. Relevant Date for Evidence is Establishment of the Panel

Note, finally, that the panel refused to look at scientific evidence that came up after 29 August 2003, that is, the date of the panel’s establishment. In other words, even if some crucial new piece of evidence had turned up during the panel process, it would not have counted. Actually, when it comes to Austria’s safeguards, Austria did supply new studies that look quite important – on allergenicty, toxicity, gene transfer etc. – but since out of time, the panel refused to consider them. Unlike trade remedy cases, should not SPS panels look at all evidence submitted to them up to the date of its decision, or at least, up to the closure of debates?