International Economic Law and Policy Blog

Trade in Waste Products

In the ongoing retreaded tires dispute, part of Brazil's defense is that it should be able to restrict imports of used tires because of the environmental damage they cause.  But the problem seems to be a more general one, applying to other forms of waste products:

Devising measures to reduce the millions of tons of electronic waste generated each year by manufacturers of computers, mobile phones, and other consumer electronic products is the focus of a United Nations-sponsored conference this week in Nairobi, Kenya.

...

The U.N. estimates that up to 50 million metric tons of "e-waste" are generated worldwide every year, representing more than 5 percent of all municipal solid waste. In the United States alone, as many as 20 million PCs are thrown out every year.

A good chunk of that waste ends up in Africa and other developing countries, according to the U.N.

Every month, more than 100,000 discarded computers enter the Nigerian port of Lagos alone, said U.N. Undersecretary General Achim Steiner in a speech.

...

Local experts estimate that up to 75 percent of the used PCs, TVs, and phones sent from developed countries are unusable and end up in the landfills of developing countries, where the items are often burned, releasing toxic fumes and leaching chemicals.

It would certainly be nice if some action could be taken by governments and the companies involved, to prevent other trade disputes similar to the tires case from erupting

Evraz of Russia to buy Oregon Steel for $2.3 billion

Following up on Joel's post that the "Russians are Coming,"

Evraz Group SA, a steel maker partly owned by billionaire Roman Abramovich, agreed to buy Oregon Steel Mills Inc. for $2.3 billion, the biggest-ever purchase in the U.S. by a Russian company.

http://seattlepi.nwsource.com/business/293103_oregonsteel21.html

It will be interesting to see how this issue is addressed, if at all, by the new Congress, in terms of worries about national security, etc.

The Precautionary Principle

Over at Opinio Juris, Roger Alford has an interesting post on the precautionary principle.  Among other things, he notes:

Of course, there are mild and strong versions of the precautionary principle. As Cass Sunstein has noted in this article, a mild version rather benignly posits that "a lack of decisive evidence of harm should not be a ground for refusing to regulate." But a strong version would maintain that "when there is a risk of significant health or environmental damage to others or to future generations, and when there is significant uncertainty as to the nature of that damage or the likelihood of the risk, then decisions should be made so as to prevent such activities from being conducted unless and until scientific evidence shows that the damage will not occur." In essence, the strong version proposes a standard of "when in doubt, regulate."

There's a lot more in the post as well.

The Future of the Online Gambling Ban

In an earlier post, I optimistically predicted that the online gambling ban would be repealed or modified in a little over two years.  This article makes my prediction seem way off the mark:

Even if more libertarian minds prevail in the online gambling debate, Stewart says it could take at least a decade for Congress to legalize Internet betting - dooming a $12 billion industry that has earned a place in mainstream culture to black-sheep status.

"They don't have the appetite for it," he said of members' desire to pursue a debate.

Opposed by a few religious conservatives in Congress and supported by companies believed to be operating illegally, Internet gambling has been a fringe issue with complex ramifications and little to gain politically for proponents.

Online poker players sent hundreds of e-mails and letters to members of Congress opposing the prohibition bill but were no match for Republican conservatives and their allies. Online gamblers are growing in number but don't yet have the political clout to influence legislation, Stewart said.

Rather than legalizing online wagering nationwide, Internet gambling expert I. Nelson Rose said Congress may eventually pass a law allowing states to opt into a regulatory system enabling Internet betting for in-state residents. A similar system enables gamblers to bet on horse races from remote locations in their home states as well as other states that choose to participate.

Short of that, states will likely seek to regulate Internet betting within their borders.

The Russians are Coming

I suppose that the irony of the U.S. and Russia reaching agreement in Hanoi, of all places, on a bilateral agreement to move forward with Russia's accession, was lost on no one.  Does this move have geopolitical significance?  Putin thinks so:  "This creates a favourable background for all our activities, including solving complicated international problems," he told reporters." 

So, You Think You Can Waiver?

Advocacy and rhetoric aside, Oxfam's report on the implementation of the "Paragraph 6 Public Health" TRIPS amendment on patent protection is pretty damning. Much of the objection is against TRIPS-plus and political pressure preventing states with generic medicine production capacity from exercising rights under the December 2005 TRIPS amendment - essentially vacating the achievement of the waiver/amendment exercise. I'm not a TRIPS expert, and wonder if there is any literature that directly addresses this, but I'll tentatively mention two legal issues that I think might rise from this.

- Is American action under Special 301 reports WTO compliant? Couldn't this "bullying" system be challenged in terms similar to the US-301 panel jurisprudence? Well, the United States could say that Special 301 isn't intended to enforce WTO rights or obligations, only IP interests more generally, so no violation of Article 23 DSU exists, in any case. But then it would have no case in attempts on its part to promote its interests through WTO dispute settlement.

- Are TRIPS-Plus obligations in RTAs WTO compliant? The question is exacerbated if the obligation in question undermines the object and purpose of a TRIPS rule, like the Paragraph 6 amendment. Yes, Article 1.1 TRIPS allows for the implementation of more extensive IP protection, but only if it doesn't contravene TRIPS. Finding a TRIPS-Plus obligation as contravening TRIPS seems like a difficult hurdle, but not insurmountable. But think a bit further: a commitment not to export in terms compliant with the para. 6 amendment is an export restraint. Could it/need it be justified under Article XXIV GATT? And to the extent that it precludes trade with a third (ie, non-RTA) party, could it not actually contravene Article XXIV (I know Article XXIV has been typified as an "exception", but I believe that doesn't mean that it isn't necessarily violable in itself)?   

So this is a typically TRIPSian can of worms. Now, who should be complaining? Two possible fronts. Export-capable countries could argue against Special 301 (but not against their own TRIPS-Plus commitments). However, the same political pressure might prevent this. More importantly, medicine-hungry developing countries might argue against the TRIPS-Plus measures as well as political pressure. It's complicated, but I think that there is a case to be made (including as an alternative non-violation complaint - the para. 6 amendment precludes non-violation complaints against measures that are compliant with the amendment, not measures or agreements that cut against it).

If any TRIPS issue is worth taking to WTO dispute settlement, is it not this?

On this issue, see Columbia's cosmopolitan philosopher Thomas Pogge's remarkably L&E idea that would reward pharma companies in accordance with the actual health effect of their innovations and products.

T.

   

The U.S. Elections and Trade Policy (Again)

In an earlier post, I quoted the Economist taking the view that the new Democratic Congress would be more skeptical on trade issues.  Now someone has tried to quantify this point.  Simon Evenett and Michael Meier of the Swiss Institute for International Economics and Applied Economic Research at the University of St. Gallen have compared all of the new members of Congress with those they are replacing.  (Hat to Ben Muse for pointing me to this). They conclude as follows:

Here are the principal findings concerning the election campaigns of the newcomers to the
next U.S. Congress:

• Democrats raised trade-related matters far more often than Republicans.
• All of the new Democratic Senators had bad things to say about trade reform.
• The free trade agreements (FTAs) signed by the Bush Administration were prominent targets of Democrats' ire, with half of Democrats making the CAFTA agreement an election issue.
• In contrast, very few Democrats made critical references to the WTO or the Doha Round.
• Many Democrats campaigned on platforms to include labour and environmental standards in trade agreements.

Where possible, we compared the stance taken by a newcomer to Congress with the
member that they will replace. We found:

• In the Senate 6 seats held by "trade-friendly" Senators will soon be held by individuals who fought campaigns that are, at best, described as "trade-sceptic."
• In the House 16 seats held by "trade-friendly" Representatives will soon be held by individuals who fought campaigns that are, at best, described as "trade-sceptic."
• There were no cases of a "trade-sceptic" being replaced a "trade-friendly" member in either chamber.

What are the likely implications for U.S. trade policy? On the basis of the evidence presented here:

• Should any TPA extension go forward, labour and environmental strings are likely to be attached--a step that is almost certain to infuriate the developing country trading partners of the USA.
• Given the ire directed by newcomers towards U.S. FTAs in their election campaigns, one option available to the U.S. Administration may be to seek--when the timing is right--a TPA extension for the completion of the Doha Round only.
• Dark clouds must now loom over the approval of any FTA brought before the new Congress. Uncertainties over Congressional ratification may well cause U.S. trade negotiators to be even tougher on potential FTA partners, and those partners may well be discouraged by the extra concessions sought and the growing likelihood that any deal will never come into force.
• This constitutes a major blow to the U.S. Administration's trade strategy of "Competitive Liberalization." Far from building a domestic political consensus behind trade reform, as USTR Zeollick had originally hoped, this strategy has probably created the seeds of its own destruction.

Read the whole paper to see all the details.

It looks like Global Trade Watch has done a similar study, with similar results: http://www.citizen.org/trade/articles.cfm?ID=15907

More on the Hormones Dispute

A few weeks ago, I did a post relating to a summary of the recent Hormones panel meetings, by Anna-Emilia Autio and Petko Kantchevski:

• Wednesday, September 27, 2006, meeting of Panel with parties and scientific experts (notes of Petko Kantchevski)
• Thursday, September 28, 2006, meeting of Panel with parties and scientific experts (notes of Petko Kantchevski)
• Monday/Tuesday, October 2-3, 2006, meeting of Panel with parties (notes of Anna-Emilia Autio)

As mentioned there, Anna and Petko were also going to reflect on issues of the case and offer some further thoughts.  Petko now has his ready -- click the link below to read them. 

OPEC , WTO and HOTELLING'S RULE

The report of Senator Lautenberg mentioned by Simon Lester in a recent post, does not say a word about two important legal points in the context of this issue (See "OPEC, the WTO, Regionalism, and Unilateralism”, Journal of World Trade, Vol. 37 (2003), by Melaku Desta).

1. Four important OPEC countries -Algeria, Iraq, Iran, Libya- still remain outside the WTO system. Russia, although not a member of OPEC, is known to collude with OPEC quite often. However, Russia is still not a WTO Member.

2. In principle, trade in petroleum products among WTO Members is governed by the rules of the trading system just like other products. Therefore, decisions to restrict supplies on the basis of falling prices below the OPEC-approved price range or any other threshold, could well qualify under Article XI of GATT as quantitative export restrictions through minimum export price requirements. However, the real legal issue is whether these restrictions could qualify in the context of Article XX exceptions as measures relating to the conservation of petroleum. Senator Lautenberg suggests in his report that OPEC’s stated goal is obviously a price target, not conservation, and there is thus no shelter under Article XX because any reference to conservation in such a context is simply a “disguised restriction on international trade” in violation of the Chapeau of Article XX. However, according to Desta it is also plausible to argue that conservation of a mineral resource such as oil cannot be seen in isolation from the financial return of its exploitation for its owners and production restriction decisions caused by falling market prices could be construed as “relating to the conservation” of the resource.

3. Although Desta does not mention the famous Hotelling's rule relating to the optimal exploitation of non-renewable natural resources such as petroleum, it is very likely that all the legal debate in such a case would be centered about this rule. Hotelling's rule and all economic models derived from its perspective deal with the issue of how much of a non-renewable resource must be extracted today and how much must be saved for the future, depending on present and expected economic conditions. If OPEC Members could demonstrate that their behavior is justified under this rule or one of its variants, then a panel may conclude that this behavior is related to the optimal exploitation of a non-renewable resource and thus to its conservation. If they fail in this demonstration, then a panel would conclude that their behavior is an export restriction and that any reference to conservation is simply a disguised restriction of international trade. Once again, we have here a striking example of how legal interpretation could become embedded with economic theory.

4. The rationale behind Hotelling' rule is that someone who sells a disappearing resource today is thereby surrendering the opportunity to sell that commodity in a future market in which it might be more highly valued. The legal challenge for OPEC Members would then be to demonstrate that their announced intention to cut back production as prices go below 60 dollars might be most naturally interpreted from an Hotellig's perspective: producers don't see it as being in their interests to sell for less, given what the oil will be worth in the future (given China's rising demand and the geological availabity of oil).

Why Did the U.S. Ban Online Gambling?

In a draft paper posted on SSRN, someone argues that the U.S. online gambling ban was not about public morals-type issues at all, but solely about keeping gambling revenues in the U.S.  (The author is Dana Gale -- I'm not sure who that is, and SSRN provided no identifying information.)

The abstract for the paper states:

While the Act's proponents cite protecting family values and preventing money laundering and terrorism as the motivation for the legislation, the actual purpose of the Act seems to be economic in nature.  [...] legislators promoting the Act recognize the profit that is made from Internet gambling outside of the U.S. and want to keep that money in the country to stimulate our economy. If the Act were truly about protecting the morals of society, it would have banned all gambling; instead, the Act carves-out exceptions for State lotteries, horseracing, gambling on Tribal land, and fantasy sports. Gambling is gambling, whether in the U.S. or abroad, and underage gamblers have just as much access to U.S. casinos and lotteries as they do to online gambling sites. This Act has one purpose: to exclude foreign gambling entities while allowing domestic gambling to continue.

While I'm not convinced that this was the only reason for its passage, it's certainly possible that it was a contributing factor.

UPDATE:  At least some U.S. gambling interests say they oppose the ban.

Lamy, Governance, and Economic Colonialism

Pascal Lamy was in the U.S. last week, and spoke in a number of academic and other settings.  (He also completed the NY Marathon on Sunday--practice for the Doha Round, perhaps.)  See the story and pictures about his visit to Fletcher.  Lamy spoke quite a bit about governance, and responded to student papers and questions on governance of the WTO.  He emphasized the "member organization" quality of the WTO.  A colleague pointed out in response that Lamy had much more power as EC trade commissioner than he does now.  Of course, for the EC trade commissioner, the member states also loom quite large. 

When he spoke at the Kennedy School, protestors shouted that he was a "feudalist."  I found this poignant, as Lamy had argued that the world has left behind political colonialism, but still suffers from what he termed "economic colonialism."  This phrase, the meaning of which was not explicated, obviously will be somewhat inflamatory for wealthier states, but it shows something of Lamy's concerns.  However, in response to a question about the effect of the WTO on sub-Saharan Africa, Lamy asked "show me the sub-Saharan African state that is charging its bound tariff in a way that results in damage to domestic producers."  The implication was that few African states have many bound tariffs, that many of them charge rates lower than their bound tariffs, and that where they charge a bound tariff it does not injure a domestic industry--that is, that WTO rules, at least on tariffs, do not impair livelihoods in Africa.  Of course, there is a lot more to say about the adequacy of WTO rules allowing subsidies, allowing trade barriers in markets that are important to African producers, etc.  But these are arguments that the WTO needs more rules, not fewer. 

OPEC and the WTO

I've heard it suggested that OPEC's actions to limit oil supply violate WTO rules.  See, for example, this recent press release and report from Senator Frank Lautenberg.  After running through the legal arguments, the report concludes:

OPEC’s practices are in violation of WTO rules prohibiting quantitative restrictions on exports [under GATT Article XI]. Although there are exceptions that OPEC could attempt to cite, the applicability of these exceptions is tenuous. A WTO case against the six WTO members of OPEC could have immediate, large and lasting benefits to the US consumer and economy by driving down oil and gas prices.

In the press release, the Senator "called on President Bush to file an action in the World Trade Organization against the cartel’s plan to limit crude oil production, which violates Article XI of the General Agreement on Tariffs and Trade (GATT)."

So, is OPEC taking this as a serious threat?  Well, it's hard to say for sure, but today as I was reading the Economist I happened to flip through their job advertisements.  There I saw an ad from OPEC seeking a "Senior Research Analyst for WTO Matters."  I checked the OPEC web site, and here's the position: http://www.opec.org/home/vacancies/Other_vacancies/WTOSenResAnalyst.htm .  It's hard to say if the two are related, but perhaps somebody at OPEC took notice of the report.

The U.S. Elections and Trade

There are no doubt many important issues that will be affected by tomorrow's elections in the U.S.  According to the Economist (subscriber only), though, trade policy could experience some of the most noticeable effects:

The stalemate of divided government might well lead to better policy, particularly on the budget. But in one area Democratic control of one, let alone both, parts of the legislature would mark a clear change for the worse. Mr Bush's trade agenda would be stalled. And as the economy slows, the White House might then find it harder to hold off protectionist pressure from Capitol Hill.

Later, they get more specific:

The reason to worry is that Democrats' aversion to trade deals goes beyond thumbing their noses at Mr Bush. Lawmakers in both parties have become more sceptical about trade, but the Democrats are clearly the more protectionist party. A generation ago both the House and Senate contained large bipartisan groups of free-traders. In the House of Representatives, that coalition has long since fallen apart as the ranks of free-trade Democrats have dwindled. Democratic success in the Senate on November 7th may push the chamber in the same direction.

The Economist's view on the Republican-Democrat split on trade policy is probably the conventional one.  However, it is unclear exactly how big the difference between the parties is.  If the Democrats win big tomorrow, we may get a better sense.