International Economic Law and Policy Blog

Gary Becker on Agricultural Subsidies by Rich Countries

Over at the Becker-Posner blog, Gary Becker says:

it is obvious that the present system of farm subsidies in rich nations is a lightening rod for conflict in trade talks with third world countries, while they help their own farmers in highly inefficient ways.

Here's the link to the full post.

Airbus v. Boeing: Some Early Discussion

For those following the Airbus-Boeing WTO dispute, AEI is holding an event titled "Boeing vs. Airbus: The Plot Thickens" on Thursday, July 6.  As stated in the event description:

Given the rapidly changing competitive situation, the slow pace of the WTO judicial process, and the increasingly hardened diplomatic position of the two sides, AEI has assembled a group of experts to assess recent economic and political developments, suggest likely scenarios for resolving the dispute, and discuss the chances that the situation will descend into an all-out trade war.

More information here. 

The event is at AEI's headquarters in DC, but for those located elsewhere the video will be made available soon thereafter.  Check here for the video in the days following the event.

A Silver Lining in Trade Talks

Today's FT reports on the flaring of textiles as an issue, with the U.S. partially backing Turkey's position that textiles should be a separate sector, while the EU argues the opposite.  Much of the rest of this article (p. 2) is consumed with the debate over where the liberalization from the Doha Round will take place, and who will benefit.  Developing countries benefit more from agricultural liberalization than from manufactured goods, and according to some studies, the LDCs will benefit from moving to 100% tariff and quota free market access in the developed world.  The U.S. apparently proposes 97%, which would allow it to maintain protection on textiles. 

What I find interesting about all this is the discourse.  While I have all along believed the Doha "Development Agenda" was cheap talk, I find it striking that the discourse seems to be focused on benefits to poor countries.  I am not so much of a rationalist/realist that I think discourse does not matter, especially when the current U.S. President has suggested the world ought to do more for poor countries.  Even cheap talk can matter at the margins.  I am curious as to what has caused the change.  Is this Oxfam's work, is it a change in developed country public opinion, or is it something else?  How significantly will it affect a final deal?  Will the WTO become a "development organization?" 

Accession Side-Deals

ILuke Peterson of IISD asks: 

My question relates to the bilateral negotiations which occur as part of the WTO accession process. I was wondering if there is any precedent for governments to demand non-trade-related concessions of prospective members? For example, might the EU demand that Country X sign on to a particular UN human rights intrument? Or an environmental treaty? 

Place Your Bets on Gambling Compliance Dispute

The Article 21.5 compliance dispute in the Gambling case has now begun.  Antigua's consultations request is available here.

According to the U.S., it has implemented properly.  As stated in the U.S. status report on the case:

On 5 April 2006, the US Department of Justice confirmed the position of the US Government regarding remote gambling on horse racing in testimony before a subcommittee of the US House of Representatives. The Department of Justice stated that:

The Department of Justice views the existing criminal statutes as prohibiting the interstate transmission of bets or wagers, including wagers on horse races. The Department is currently undertaking a civil investigation relating to a potential violation of law regarding this activity. We have previously stated that we do not believe that the Interstate Horse Racing Act, 15 U.S.C. §§ 3001-3007, amended the existing criminal statutes.

In view of these circumstances, the United States is in compliance with the recommendations and rulings of the DSB in this dispute.

The testimony in question is, I believe, found here, and is from Bruce Ohr, the Chief of the DOJ's Organized Crime and Racketeering Section, Criminal Division.

Antigua, of course, sees things differently.  In its consultations request, Antigua argues:

The DOJ Statement is, however, nothing more that a restatement of the position taken by the United States during the course of DS285 that was ultimately found unpersuasive by both the panel and the Appellate Body. Assuming, arguendo, that a statement by an unidentified government employee can constitute a "measure" for purposes of the DSU, Antigua and Barbuda does not believe that a simple restatement of a legal position taken by a party to a dispute during its regular course can be considered a "measure taken to comply with the recommendations and rulings" of the DSB within the meaning of Article 21.5 of the DSU.

Putting aside the substantive question of whether the U.S. is in compliance, which could depend on factual issues such as whether DOJ has enforced the law in a non-discriminatory manner, the question of whether any measure has been taken to comply is an interesting one.  Is the "view" of the Department of Justice a measure that has been taken?  Is the U.S. just re-arguing the evidence in the original dispute, or is there something new here? Is a court decision, or some other formal action, supporting this "view" required before any measure can be said to exist?  Odds are that these issues will be hotly contested in the proceedings.

Soft Wood or Soft Drinks ?

Thank you, Tomer, for informing us about the Softwood Lumber award issued on June 6 under NAFTA Chapter 11. http://worldtradelaw.typepad.com/ielpblog/2006/06/the_sound_of_a_.html

The (170+ pages!) NAFTA award offers an interesting contrast to the WTO Appellate Body's recent ruling in Mexico - Soft Drinks.

In Soft Drinks, the AB bluntly refused to check whether the US had violated NAFTA (even if only to check whether Mexico could invoke GATT Art. XX(d) or a general principle allegedly set out in the PCIJ Chorzow Factory case). For the AB, deciding on such NAFTA question fell outside its jurisdiction (see AB report paras. 56 and 78).

In Softwood Lumber, however, the NAFTA Chapter 11 tribunal saw no problem with deciding that the US Byrd Amendment failed the notification and other requirements (including a requirement of WTO consistency!) in NAFTA Art. 1902(2)(d) (see award, para. 301). It was on that basis that the tribunal found that the Byrd Amendment was NOT part of "a Party's antidumping law" and, as a result, NOT carved out from Chapter 11 disciplines (pursuant to NAFTA Article 1901(3)). In contrast, all other claims were found to be so carved out. As a result, the tribunal accepted jurisdiction ONLY for the Byrd amendment.

Now, even though breach of a Chapter 19 provision (here Article 1902(2)(d)) rests exclusively with a Chapter 19 bi-national panel, and not with a Chapter 11 investment tribunal, the Chapter 11 tribunal went ahead with its decision under Art. 1902(2)(d) because, in its view, it was required to do so in order to interpret the carve out in Article 1901(3). In para. 333, the tribunal even confirmed that Byrd violates WTO law in support of dis-applying the Article 1901(3) carve-out (see also para. 327 in this respect).

In other words, to decide on ITS OWN jurisdiction, the NAFTA tribunal felt compelled (and empowered) to decide on whether or not certain rules OUTSIDE its jurisdiction (here Art. 1902(2)(d) and, to some extent, WTO law) were complied with.

Even if this tribunal largely made the jump only from one NAFTA chapter to the other (ie from NAFTA Chapter 11 to Chapter 19), in strict jurisdictional terms, it is the same as the AB deciding on NAFTA compliance (NAFTA being OUTSIDE its jurisdiction) in order to decide a question of WTO law (which is, obviously, WITHIN the AB's jurisdiction, such as, in Soft Drinks, GATT Art. XX(d)).

Some will be quick to point out that the applicable law in NAFTA explicitly includes all of NAFTA and other international law (see NAFTA Arts. 102(2) and 1131(1)). Yet, what matters here is the question of whether a limit on jurisdiction (as in NAFTA Arts. 1116-7, or in DSU Art. 7) categorically prevents a decision on violation of rules outside one’s jurisdiction. The AB answered: yes. The NAFTA Chapter 11 tribunal in Softwood Lumber answered: no.

Remember, however, that in another Chapter 11 case, Metalclad v. Mexico, the award was partly set aside (by a Canadian judge) because it referred to transparency in NAFTA Article 1802, a provision which, according to that judge, fell outside the jurisdiction of a NAFTA Chapter 11 tribunal.

Perhaps the US will want to seek review of the Softwood lumber award on similar grounds?

Love Can't Change the World, But It's a Start

The G8 has just finished another meeting, and reaffirmed its commitments to the Millennium Development Goals--or at least its commitment to encouraging others to meet their commitments.  This reminded me of a refreshing film that I almost saw once, "The Girl in the Cafe."  It is a HBO production, about--believe it or not--an outsider at a G8 meeting.  I only saw a part of it, but it looked pleasant, if a bit naive.  The film's tag line--"love can't change what's wrong in the world, but it's a start"--gives it all away. 

It's the End of the World as We Know It

From the relative safety of the shadow cabinet, William Hague advocates a transatlantic free trade zone (see BBC report).

For the sake of counterfactual argument, what might such an arrangement imply in terms of legal policy? A few basic suggestions for discussion:

- The WTO dispute settlement system, which some see as maintained primarily for settling EC-US disputes, would significantly lose importance.

- Incentives to the EC and US to make concessions towards emerging developing country trading powers in the multilateral system would be reduced.

- US-EU FTA rules would become the benchmark for all/most third party FTAs, a model FTA of sorts.

Feel fine?

Academic Position in IEL

The Graduate Institute of International Studies, Geneva, is looking for a "Professor/Associate Professor of International Economic Law." Applications are due by 15 August 2006. See their vacancy notice here. It's hard to think of a better place to be for international economic law than Geneva.

The Sound of a Tree Falling in the Forest

Reportedly, the NAFTA Chapter 11 claims filed by Canadian softwood lumber exporters have been dismissed by the tribunal at a preliminary stage following jurisdictional arguments based on Article 1901(3) NAFTA which reads:

"Except for Article 2203 (Entry into Force), no provision of any other Chapter of this Agreement shall be construed as imposing obligations on a Party with respect to the Party's antidumping law or countervailing duty law".

In other words, the tribunal accepted the argument that AD/CVD measures are out of bounds for Chapter 11. Policywise, the outcome seems to make a lot of sense. AD/CVD being such a specialized area, NAFTA parties took care to subject it to an exclusive dispute settlement regime. And after all, private parties do have access to national investigative authorities, and can challenge their decisions through governmental channels (and have done so abundantly). Allowing subsequent investment arbitration smacks of forum shopping at its worst.   

But is/was this really a jurisdictional issue? In the alternate, the tribunal could have allowed the claim, and then restricted its examination on the merits to Chapter 19 obligations. The investment-based challenge, subjecting the dispute to an investor-state procedure, does not necessarily in itself "impose obligations ... with respect to..." US AD/CVD law.

And this is when the entire issue might be moot once the US-Canada deal is finalized.

Judging by conference time, marketing, publications and web hype, the investment arbitration industry is mushrooming. And yet legal developments like this, and political ones (particularly in Latin America) seem to significantly restrict the potential of investment arbitration to become an important field of international law. Investment protection might be the legal parallel of the high-tech bubble of the '90s...

PS - Apparently, the tribunal did seize jurisdiction over claims relating to the Byrd Amendment, so this should not be read as a general bifurcation of trade/investment issues. But it might be more prudent to wait until the decision is made available, hopefully soon.

IEL of the World Cup

As the world's most exciting sports event begins, I was hoping to conjure up a link to IEL.  How about this.  National teams are limited to nationals.  The team administrators obviously discriminate in the national treatment sense against foreign players.  Would this violate a GATS commitment in the relevant sector, assuming for a moment that the players are service providers under Mode 4?  The first answer is, "it's not a measure," at least to the extent that the teams are private.  But would it be a measure to decline to enforce otherwise applicable national laws against employment discrimination on the basis of nationality?  Would it be a measure to carve out an exception to those laws?  The second answer is that it does not violate national treatment, or that it is not "less favourable," if there is a a non-protectionist type of reason for the differential treatment. 

I don't want to be a spoil-sport (so to speak), but just thought the blog should get it on the World Cup hype.  For some international relations-soccer links, see this Council on Foreign Relations site. 

Airbus Plays Hardball

Airbus has filed a motion to enjoin Wilmer Hale and Marco Bronckers from representing Boeing, in light of Bronckers' earlier work for Airbus.    Interestingly, the basis for Airbus' claim is the Washington DC Rules of Professional Conduct, which I suppose are being applied to the Wilmer Hale firm.  There may be some questions about the applicability of these rules to a Brussels lawyer involved in Geneva litigation.  From the Wilmer Hale website, it does not look like Bronckers is admitted in DC.