International Economic Law and Policy Blog

Immigration

See the open letter  on immigration reform from economists and other social scientists at Marginal Revolution.  There is still a debate on the national welfare effects of increased immigration, based on empirical work by Borjas versus that by Card.  On the other hand, in at least some respects, from a welfare standpoint, free movement of workers is not very different from cross-border trade in services or trade in some types of goods.  There is wide agreement that free movement of workers could bring great aggregate welfare gains.  There is also wide agreement that temporary movement is a little less ambiguous in its effects, as it has less potential than permanent movement for adverse effects on the sending state.  So we would expect some incentives to move forward on GATS Mode 4 . . . .

Does the Doha Round Have a Future?

On May 23-24, 2006, the Sixth Annual WTO Conference was held in London, organized by the Institute of International Economic Law (in Georgetown Law Center) and the British Institute of International and Comparative Law. Many interesting, and pressing, issues, ranging from judicial economy to treaty interpretation to regulatory convergence to jurisprudential convergence between WTO and NAFTA Chapter 11 to the Doha Round negotiation. The last panel addressed the challenges of the current Doha Round negotiation. Some viewed that WTO litigations (challenging the rich countries’ agricultural subsidies) might give the rich certain incentives to reduce subsidies in the negotiation. Others argued that technical assistance (such as training) efforts should be more coordinated, avoiding unnecessary redundancy. One commentator observed that the label of a “development” round has unduly generated over-expectation of a big development package to developing countries, which complicated and impeded the negotiation process.

What do you think?

Does China need a Competition Law (Now)?

On May 23, 2006 an interesting workshop was held at East Asian Legal Studies, Harvard Law School to discuss China’s recent effort to enact an Anti-Monopoly Law. Despite some predicaments (such as an internal bureaucratic battle over the jurisdiction), some predict that the Law may be passed some time next year. (If you want to see the most recent draft (an unofficial translation), please email me.)

The keynote speaker, Prof. Wang Xiaoye from Chinese Academy of Social Science (CASS), who is the leading expert in this issue, emphasized that China should pass the Law sooner or later not only to promote market competition generally in China (and therefore benefit consumers) but also discipline widespread (and very serious) anti-competitive practices by none but the government itself! ("administrative monopoly").

The Law tends to raise a very profound question. China is a still transitional economy, moving from a once planned economy to a modern market economy. Yet, still the government controls (or interferes with) many aspects of everyday economic lives. Is the Chinese government ready (or willing) to defer such control to the market? Would that be politically acceptable (or even desirable) in the current Chinese political climate? (Note that Article I of the draft Law emphasizes that the Law should uphold a "socialist" market economy.)

Many foreign businesspeople fear that the Law might affect their business in a negative way in the name of competition policy. (Think of the recent Microsoft case in Europe. That might happen also in China!) In fact, in 2004 the Chinese State Administration of Industry and Commerce (SAIC) released a report condemning alleged anti-competitive practices by some big foreign multinational enterprises in China, such as Microsoft, Tetra-Pak, and Kodak.

It remains to be seen how China would address all these complicated issues and considerations in the course of passing its very first comprehensive competition law.

Just what the world needed . . . .

Another investment banker.  News reports have Robert Zoellick leaving the State Department for Merrill Lynch.  I was disappointed when he left USTR, but recognized that State had bigger fish to fry.  Forgive my venting, and apologies to my friends in investment banking, but it is painful to watch one of the competent top political appointee diplomats leave, just when Darfur, North Korea, Iraq, etc., etc., need intelligent management.  Sure, it's disappointing that he isn't getting the Treasury job, but for once could we let duty overcome resume-building and cashing out?  And forgive me for wondering, what has Zoellick got to offer investment banking besides connections?   Why don't the investment bankers hire Brownie and leave Zoellick alone? 

Blogfluential?

The U.S., in a document delivered to the WTO on May 9, cites our humble blog.  You can't buy this kind of publicity.  Of course, the U.S. cites the blog to underscore that even those (Sungjoon Cho) who don't like zeroing believe the decision against zeroing was not based on the text of the treaty. 

Lamy on Coherence, etc.

In an unusually law-intensive and wonderfully bilingual speech (evidencing a great command of the WTO jurisprudence) given at an ESIL meeting at the Sorbonne, Pascal Lamy  made the following comments

The lack of coherence of our international legal system is amplified by the relative power of the WTO and in particular its dispute mechanism. This shows the discrepancy between the WTO's very powerful enforcement mechanism and the traditional decentralized system of counter measures still used in several legal orders. I do not think that the solution lies in weakening our dispute system. Many aspects of the WTO need to be improved but I believe that the WTO dispute settlement system works well. The solution to the potential imbalance I alluded to lies, I believe, in strengthening the enforcement (the effectiveness) of other legal orders so as to rebalance the relative power of the WTO in the international legal order.

This call will remind many readers of Renato Ruggiero's call for a World Environmental Organization to balance the WTO.  The same question needs to be asked of Lamy as was asked of Ruggiero:  assuming there are two organizations, and two courts, what will the choice of forum and choice of law rules be?  One may understand that the world community is not comfortable with an assignment to the WTO dispute settlement body of jurisdiction to apply all international law, as there may be concern about an alleged trade-centric perspective of panels and the Appellate Body.  But merely creating another court, with another set of potential or alleged biases, does not solve the problem of coherence.   

More on the Regulatory Clash of Titans

In its Archer Daniels Midland decision yesterday, C-397/03 P,on appeal from the Court of First Instance, the ECJ decided that there is no obligation on regulators to avoid "double-fining":

50     Next, referring to paragraph 11 of Wilhelm and Others, the Court of First Instance held in paragraph 99 of the judgment under appeal that it was in view of the particular situation which arises from the close interdependence between the national markets of the Member States and the common market and from the special system for the division of jurisdiction between the Community and the Member States with regard to cartels on the same territory, namely the common market, that the Court, having acknowledged the possibility of dual sets of proceedings and having regard to the possibility of double sanctions flowing from them, held it to be necessary, in accordance with a requirement of natural justice, for account to be taken of the first decision imposing a penalty.

51     In paragraph 100 of the judgment under appeal, the Court of First Instance held that such a situation did not exist in the present case and that, given that the appellants point to no express provision of a convention requiring the Commission, when determining the amount of a fine, to take into account penalties already imposed on the same undertaking in respect of the same conduct by the authorities or courts of a non-member country such as the United States of America or Canada, they cannot validly complain that, in the present case, the Commission failed to fulfil any such alleged obligation.

52     Even if that reasoning were erroneous and the sanction imposed by the authorities of a non-member country was a factor to be taken into account in assessing the facts of the present case in setting the amount of the fine, the plea alleging that the Commission failed to take account of the fines already imposed in non-member countries can only succeed if the actions of ADM complained of by the Commission on the one hand and by the authorities of the United States and Canada on the other were identical.

Interestingly, the court distinguishes between intra-EC coordination, and extra-EC coordination.  As Sungjoon suggested in an earlier comment, it may develop that states determine to coordinate on jurisdiction to fine.  While it might not be exactly double jeopardy to fine someone twice for the same conduct, it seems like double punishment.   

China-Australia FTA Immigration

Today's WSJ reports that within the context of its FTA negotiations with Australia, China is negotiating for commitments regarding market access for unskilled labor.  This may be understood as the bilateralization of current Mode 4 negotiations in the WTO GATS.  The U.S. has addressed labor market access in its FTAs with Chile, Australia, and Singapore.  Will the growth of FTA provisions interfere with Mode 4 negotiations, or provide an impetus, based on the desire for MFN?  There may be some interesting legal issues under the MFN requirements of GATS, although there are possible (but limited) exceptions under Article V and Vbis of GATS.  Article V requires "substantial sectoral coverage," while Vbis requires "full labor market integration."   

History Recommences in Ecuador

As much of Latin America moves to the left (albeit in varied ways), the latest action is in Ecuador.  The government has purported to cancel its contract with U.S. multinational Occidental Petroleum in response to an alleged breach by Occidental.  The USTR has said this appears to constitute a "seizure", and has terminated bilateral FTA negotiations. 

Ecuador does have a BIT with the U.S., and Occidental's contractual rights appear quite valuable.  So it is unlikely that this will end easily for Ecuador.  In April, the U.S. claimed that Ecuador's newly enacted oil tax violated the BIT. 

Closing Softwood Loopholes?

Inside U.S. Trade reports that part of the softwood lumber settlement requires the U.S. and Canada to suspend the application of NAFTA Chapter 11 (the investment chapter, giving private rights to investors).  Apparently the idea is that two parties (the U.S. and Canada) can suspend this part of their treaty, given that the conditions of Art. 58 of the Vienna Convention on the Law of Treaties are satisfied:

(b) the suspension in question is not prohibited by the treaty and:
    (i) does not affect the enjoyment by the other parties of their rights under
    the treaty or the performance of their obligations;
    (ii) is not incompatible with the object and purpose of the treaty.

This reminds us of the interesting overlap between trade and investment.  Foreign investors deprived of rights to trade may argue that their investment has been impaired in a way cognizable under Chapter 11.  There is also some important uncertainty as to whether the conditions for an effective suspension are met. 

The possibility of suspension may actually impair the utility to Mexico, or other capital importing countries, of agreements such as NAFTA Chapter 11 or BITs.  That is, the value of entering into these treaties is that they are commitments upon which private persons can rely.  If they can be suspended bilaterally, they may serve less well to induce investment. 

Good Morning, Vietnam

Today's WSJ reports that Vietnam has finally reached a bilateral agreement with the U.S., its largest export market.  This agreement should pave the way for Vietnam's accession to the WTO, as Vietnam's bilateral negotiations are incorporated in a protocol of accession.  It will be interesting to compare Vietnam's protocol of accession with China's.   

The (Regulatory) Clash of Titans?

There has been a growing tenstion between the U.S. and the EU over their diverging regulatory stances over various issues, such as GM food, which have negatively affected the transatlantic trade. This tenstion is likely only to be intensified as the EU is enlarged. See Washington bridles at EU urge to regulate, Financial Times, May 12, 2006 (http://news.ft.com/cms/s/2cc9a068-e11b-11da-90ad-0000779e2340.html) Interestingly, the new U.S. Ambassador to the EU (Boyden Gray) is a top regulatory lawyer, not a typlical diplomat. Perhaps, the U.S. is trying to prepare for a futurte regulatory warfare with the EU.

At the center of this tension lies the recently proposed new EU regulatory framework for the Registration, Evaluation and Authorisation of Chemicals (REACH) (http://ec.europa.eu/comm/environment/chemicals/reach.htm The aim of this new regulatory scheme is understandable, i.e., to protect human health and the environment. But, this new regulation, the U.S. fears, will put non-EU companies at a serious competitive disadvantage in terms of trade. Maybe, we can see yet another big case in the WTO in the near future.

Justice and Growth

I've been attending a conference at the Kennedy School at Harvard on Equality in the New Global Order.  Most of the other attendees are philosophers, with a few economists and a couple of lawyers.  Dani Rodrik spoke yesterday, focusing on growth.  His main argument, as is well known, is that the most important determinant of growth is the extent to which states have "policy space" to engage in industrial policy.  The only kind of subsidy Rodrik dislikes is subsidies of FDI.  Policy space to subsidize (including export subsidies), to protect, to impose conditions on FDI, and to appropriate intellectual property.  He believes that the opening of developed country markets in agriculture and other products will contribute little to developing country growth.  He believes that foreign aid will contribute little to growth.  The question some of us asked is whether, given a political economy critique of the degree to which governments are concerned about the public interest, unconstrained policy space is the right way to achieve Rodrik's prescription of optimizing domestic industrial policy. 

This morning there will be an interesting paper by Kaushik Basu, justifying international labor rights standards from a neo-classical perspective. 

Export Restrictions: The Missing Disciplines

A student of mine has just submitted an interesting paper on the economic effects of, and legal disciplines on, export restrictions.  The case he has in mind is Chinese coke.  It appears that export restrictions have trade distorting effects symmetric with import restrictions. Of course, export prohibitions are illegal under Art. XI of GATT.  But, strangely (at least from an economic standpoint), export taxes are not illegal and are generally not disciplined.   There might have been an argument at one time that export taxes amount to a subsidy of the users of the input, but softwood lumber seems to have put an end to that.  On April 27, the EU proposed negotiations toward curbing export taxes.  See TN/MA/W/11/Add.6. 

Blog, Blog, Blog

Remember "Bob Loblaw's Law Blog?"  Well, there was a real world conference about blog scholarship last week at Harvard Law School.  For blogs about it, see Ian Best's site. 

The perfect exam question

Comes to us from Chicago, via Joseph Epstein in today's WSJ.  The city of Chicago has banned foie gras.  Epstein writes:

"A Chicago alderman named Joe Moore, who sponsored the ban on foie gras, after its passage declared that it sends "a powerful message that we [in Chicago] uphold the value of a civilized society." All too easily can I hear one of the red-faced, pot-bellied Chicago aldermen of my youth, reply, "What's he, [epithet deleted] nuts!?""

As a trade law instructor, one is tempted to just add to the bottom, "Discuss."