International Economic Law and Policy Blog

Young Researchers Workshop on Science and Law: Call for Papers

The Institute for Advanced Interdisciplinary Studies (ISUFI) - University of Lecce and the Phd Programme in International Law and Economics - Bocconi University, Milan have announced a Young Researchers Workshop on Science and Law on Scientific evidence in International and European Law.  It will be held 31st May – 1st June 2007 – ISUFI, Lecce, Italy.  There is a call for papers:

Papers should focus on the controversial relationship between Science and Law and in particular on the role of scientific evidence in International and European Law (risk analysis and its main components, precautionary principle, role of experts, technical rules, etc.) with regard to both law making processes and dispute settlement experiences. Interested researchers should submit an abstract written in English or French by 25th March. A number of authors will be selected and asked to submit their papers and to present them at the workshop. Selected speakers will be notified by 30th March. Papers, written either in English or in French, shall be submitted by 15th May. Notification of acceptance or rejection and day, time and presentation format will be sent by email to the presenting author. For questions related to abstract or paper submission, please contact the organizing committee. ISUFI will take care of selected speakers' accommodation fees and will refund their travel expenses up to 200 € (150 € for Italian residents).

More information on the workshop is available here:  http://www.isufi.unile.it/news.htm

What's Behind the China Currency Valuation Issue?

We've had a number of discussions on this blog about China's currency valuation and possible U.S. WTO complaints in this area.  For example, see here and here.  Now, via Dan Drezner, I see this piece by James K. Galbraith, which, in the context of discussing the Democratic Party's trade views, expresses skepticism about the importance of the valuation issue:

Trade with China is another matter, for here is a fast-growing country that benefits hugely from US trade. China thus poses the question of trade without posing a question of trade agreements. And China has many people very worried.

On China the Hamilton Project--otherwise resolutely against interventions--has harnessed widespread anxieties to its own objectives. The Hamiltonians endorse the idea that China is a challenge. It is a challenge, they say, to be dealt with not via tariffs or quotas but by a massive revaluation of the Chinese currency, the renminbi (RMB), for which liberal senators like Charles Schumer and economists like Tom Palley also forcefully call.

Would a big RMB revaluation solve America's China-trade "problem"? Well, it might hit China's exporters (and also, inevitably, its workers) hard. Multinationals might migrate to other low-wage countries; American importers might seek other sources of supply, in other corners of the Third World. But this much is sure: Not a single low-wage job would return to the United States. So, American consumers could be harmed, while American workers wouldn't be helped. One has to ask: What gives? Why is this an issue for the progressive agenda?

Who really benefits from the pressure that our Treasury Secretary from Goldman Sachs, Henry Paulson, has been putting on Beijing? Well, speculators have flooded Chinese property markets in the past few years, contributing to a massive bubble in Shanghai and elsewhere. (China's trillion-dollar asset reserves come largely from sterilization of those investments--a central bank maneuver to insure that dollars do not circulate in China--and not just from its trade surplus.) If Paulson succeeds, they clearly would make out nicely. It may be that some of those speculators live in New York. That may explain Paulson's call--and Schumer's support--for an RMB revaluation. But it's not a reason for the rest of us to jump on board

Although making out a WTO legal claim on the valuation issue would, I think, be tough, I take the motivations of Schumer et al. at face value.  I think they really believe there is a harm, and that putting pressure on China could help solve it.  In the absence of evidence, I'm a little skeptical that this is all about "New York speculators."

Petersmann Times Three

Three new papers by Ernst-Ulrich Petersmann have just been posted at SSRN, and all look quite interesting.  They are as follows:

1. Multi-Level Judicial Trade Governance without Justice? On the Role of Domestic Courts in the WTO Legal and Dispute Settlement System

2. Justice in International Economic Law? From the 'International Law among States' to 'International Integration Law' and 'Constitutional Law'

3. State Sovereignty, Popular Sovereignty and Individual Sovereignty: From Constitutional Nationalism to Multilevel Constitutionalism in International Economic Law?

Click the links to read the abstracts and download the papers.

Undervaluation of the Yuan and the Big Mac Index

In any potential legal case against the Chinese Yuan, the measure of its alleged undervaluation is critical because of the necessary demonstration of the benefit criterion in a subsidy context. Moreover, in a CVD context, the countervailing duty must not be superior to the benefit inherent in the subsidy.

In this context, I have always wondered from where the US National Association of Manufacturers (NAM) takes its frequently quoted figure of a 40 percent undervaluation. Yesterday in my classroom, we were examining the Big Mac Index and it strikes me that the undervaluation for the Yuan according to this index turns around 40-50 percent in recent years.

As many know, the Big Mac Index is based on the theory of purchasing power parity (PPP) which says that a dollar should buy the same amount in all countries. Thus, in the long run, the exchange rate between two countries should move toward the rate that equalizes the prices of an identical basket of goods and services in each country. The Big Mac, as a homogenous product consumed in 120 countries, is just taken as a representative of this identical basket of goods.

My guess is that in a potential legal case or in diplomatic consultations, we will hear a lot about Big Macs and perhaps Ipods because there is now an Ipod Index based on the same philosophy as the Big Mac Index!

Labor Standards in Trade Agreements: A Minimum Wage?

Robert Reich proposes putting labor standards in trade agreements, which is nothing new, except for this part:

Encourage developing nations to raise their labor standards as their economies grow. The easiest way to do this is to require that they set a minimum wage that's half their median wage. With this "minimum half median" standard in place, more of their people will share the gains from trade.

This is the first time I've heard such a proposal, although perhaps it has been suggested before.  There are some obvious objections that might be offered, such as (1) many economists contend that minimum wage requirements increase unemployment and (2) including such a requirement could quite possibly scuttle any trade deal.  But it's certainly a bold thing to propose.

So New? The New Young New Haven School?

Yale Journal of International Law's fifth annual Young Scholars Conference will take place March 10 in New Haven.  The topic is The New New Haven School of International Law.   

They didn't have young scholars conferences when I was young.  Not that I'm jealous . . . .

Is the WTO Dispute Settlement System "Fair": A Debate

Dan Ikenson of the Cato Institute and Robert Lighthizer of Skadden debate the fairness of the WTO dispute settlement system at CFR's web site.  Some excerpts:

Ikenson:

... under what other international arrangements can a tiny country like Antigua and Barbuda win condemnation—and, in all likelihood, compel reform—of the offending policies of the largest economy in the world?

Lighthizer:

... WTO jurists have engaged in an all-out assault on trade remedy measures. Even legal experts hostile to these laws, as well as the Bush Administration, have expressed astonishment at the level to which panels are simply writing new requirements into the WTO agreements. In this same vein, the Safeguard Agreement has become a virtual dead letter—with every measure brought before the WTO struck down, and the legal hurdle set so high that few view the judicially established standard as achievable.

Globalization of NASCAR

This is likely to be my first and only post about NASCAR.

Reading my local paper today (the Palm Beach Post), I was struck by an article entitled "Toyota facing chilly reception in some NASCAR circles."  Apparently, Toyota has now entered some cars (they are a version of the Camry model) in the NASCAR racing series for the first time.  One of the biggest races of the year, the Daytona 500, was today, and it was Toyota's debut. 

I haven't followed NASCAR in a long time (I watched occasionally as a kid), so this was the first I heard of Toyota joining and the mild controversy that came with it. (There's a NY Times op-ed about it here.)  It's a bit reminiscent of last year's Dubai Ports controversy, although without the national security implications.

According to the Palm Beach Post article:

In Central Florida, an auto-parts store owner was so angry about [the driver] Dale Jarrett signing with a Toyota team (and taking his sponsor, UPS, with him), he vowed no UPS truck would ever again deliver parts to his store.

The driver in question, Dale Jarrett, had a pretty good response, though:

"Sure, the parent company is foreign," Jarrett says. "We could get into the argument about where the Ford Fusion is built - every one of them is built in Mexico. The (Chevrolet) Monte Carlos are built in Canada.

"We could go through all that stuff and see who is right and who is wrong, but there are a lot of Toyotas that are built in the United States. They employ a lot of people. But you're not going to get that across to some people, and I'm not going to try to."

Along the same lines, another article points out:  "officials and drivers have not-so-subtly noted that while the passenger-car version of the Toyota Camry is made in the United States, the street-going version of the model Ford races, the Fusion, is made in Mexico. The Chevrolet Monte Carlo and the Dodge Charger are made in Canada."  And one article notes:  "Toyota has been manufacturing vehicles in North America for 20 years, and last year built its 15 millionth vehicle here. It has 14 plants in North America, 13 in the U.S. It recently opened a new factory in San Antonio, where it will build the Tundra truck. In 2006, Toyota produced more than 1.55 million vehicles in North America. By 2008, it projects nearly 2 million."  (Of course, all the vehicles in the actual race will have been built from scratch in fabrication shops in the vicinity of Charlotte, N.C.)

Not everyone is convinced, though:

But even some longtime drivers don't buy Toyota's made-in-America argument.

"I don't know," Sterling Marlin said. "They make a lot of them over here now, but they're still a foreign company. And you never would have thought 15, 10 or even five years ago that they'd be in this sport."

So is Toyota "foreign"? One of my first thoughts on reading all this was, hey, this reminds me of GATS Article XXVIII(m) and the Canada - Autos case, which also dealt with foreign ownership in the car industry.  There, the panel found that the Canadian subsidiaries of DaimlerChrysler and Volvo were "juridical persons" of the United States because they were controlled by a U.S. parent (DaimlerChrysler Corporation and Ford Motor Co., respectively)  (The panel considered it irrelevant that DaimlerChrysler Corporation may in turn be controlled by another person).  See paras. 10.257, 10.259.

It's interesting to compare the GATS approach with the issues discussed in the newspaper articles quoted above.  In the newspaper articles, it was often mentioned that Toyota makes a lot of cars in the U.S. (and that Ford and Chevy make some abroad).  In the GATS, by contrast, issues of legal incorporation and control are key. There is some appeal to the less formalistic approach, though (focusing on questions like, where does the company operate?  Where are its employees?  Where are its sales?)

So who won the race? Kevin Harvick driving a Chevy.  Dale Jarrett drove the highest finishing Toyota, in 23rd place.

Health, Globalization, and Bargaining

My initial impression was that Indonesia was misbehaving, entering into a deal with Baxter HealthCare to provide Baxter with exclusive access to Indonesian avian flu virus samples, and declining to provide these samples to the World Health Organization. 

But let's think this through.  In formal terms, Indonesia happens to have a "property" right to these virus samples.  (I am assuming that no WHO treaty, the Biosafety protocol, or other legal obligation requires Indonesia to turn these samples over.  If anyone knows that they do, let me know.)  This property is more valuable than samples of germs for purely tropical or indigenous diseases.  Why?  Because of globalization.  Bird flu seems more mobile than other tropical diseases.  So Indonesia's property has a dual externality.  It can harm outsiders, and at the same time if others are given access to it in a timely way in order to allow production of a vaccine, it can help outsiders.  Actually, the most fascinating thing here is that the positive value is proportional to the magnitude of the potential negative externality.  So, in a sense, Indonesia has an incentive to grow this bird flu as virulent and mobile as possible, and to hold closely the formula for the vaccine.

Did TRIPS bring about these incentives?  In a way, it appears that it did.  By providing for global protection of intellectual property rights, it allows the creation of vaccines to be private goods instead of public goods.  This was hoped to promote production of vaccines, but interestingly it might also promote production of disease.  Furthermore, even if Indonesia is not ghoulishly interested in promoting the virulence and mobility of bird flu, it has demonstrated that it is interested in benefiting from the production of the vaccine.  The vaccine would be protected by TRIPS, so TRIPS has increased the incentives for Indonesia to withhold the samples. 

All Indonesia is asking for right now, apparently reasonably, is guaranteed access to affordable vaccines against bird flu.  Indonesia complained that "it and many other poor countries did not want their flu strains made into patented vaccines that only rich countries could afford."  NYT Article, today.

So, globalization results in a negative externality, and a potential positive externality that can reduce the negative externality.  By withholding the positive externality, Indonesia is exercising what may be its international legal jurisdictional rights.  So far, it is only asking that the benefits of work using "its" samples be shared freely with it.  Seems reasonable. . . .

Cassis de Dijon Redux

Nearly three decades ago, the European Court of Justice (ECJ) issued a celebrated decision, Cassis de Dijon, in which it established the principle of “mutual recognition.” The ECJ ruled in 1979 that “there is therefore no valid reason why, provided that they have been lawfully produced and marketed in one of the Member States, alcoholic beverages should not be introduced into any other Member State.”(para.14) At the same time, however, the ECJ also noted that “Obstacles to movement within the Community resulting from disparities between the national laws relating to the marketing of the products in question must be accepted in so far as those provisions may be recognized as being necessary in order to satisfy mandatory requirements relating in particular to the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defense of the consumer.” (para.8).

On February 14 2007, the European Commission proposed a Regulation reincarnating the Cassis de Dijon decision, together with three other initiatives on free movement of goods and harmonization. The proposed Regulation on “laying down procedures relating to the application of certain national technical rules to products lawfully marketed in another Member State and repealing Decision 3052/95/EC” requires member states to accept products from other member states unless the former (importing states) prove the necessity of their bans. This strong pro-market, pro-integration ethos is reminiscent of the GATT doctrine. Under GATT Article XI:1, trade restrictive regulations are prohibited in general. Under Article XX of GATT, a regulating (importing) state should prove that its restriction is necessary (or relating) to achieve certain regulatory goals, such as protection of human health or the environment. In contrast, under the SPS, which is a lex specialis to GATT Article XX (b), this burden of proof seems to be reversed because the SPS declares that members have a “right” to regulate in the sanitary or phytosanitary areas.

One might interpret the Commission’s proposal as yet another attempt to breathe a new life into the EU’s Common Market project. After all those years since Cassis de Dijon, European businesspeople are still complaining about additional production costs caused by diverging regulatory standards of member states, ranging from electrical equipments to clothing. See today’s article in Financial Times covering this issue. Who knows? This new proposal touching on everyday economic lives of European people might revive a sign of life of the EU Constitution, as neo-functionalists would maintain.

One caveat. This proposal, like the Cassis de Dijon (mutual recognition) principle itself, applies only to non-harmonized areas, i.e., where no EC Regulations and Directives apply. So, huge chunks of products, such as cars and pharmaceuticals, are excluded from this Proposal.

WTO and MEAs: The Puzzling Ambivalent Biotech Ruling

Even if there have been few observations on the Biotech ruling from the perspective of the WTO-MEAs (Multilateral Environmental Agreements) debate, the fact is that the MEAs aspect of this ruling has apparently added something to this debate, although the ruling is puzzling through its ambivalence.

1) On the one hand, this ruling does not hesitate to agree with the EU that " a treaty like the Biosafety Protocol would qualify as a rule of international law" in the sense of Article 31(3)(c) of the Vienna Convention. Therefore, instead of the usual tendency of panels to disregard public international law or to confine it simply to interpreting certain terms such as "natural resources", we have here a solid affirmation that public international law matters for interpreting WTO agreements.

Of course, the Biotech panel took great care to add that Article 31(3)(c) mandates a treaty interpreter only " to take into account" of the Biosafety Protocol and "thus no particular outcome is prescribed." The fact remains however, that the panel did not hesitate to affirm that if there is more than one permissible interpretation of a WTO agreement, then " Article 31(3)(c) in good faith would in our view [lead] to settle for that interpretation which is more in accord with other applicable rules of international law"

What would have been the consequence of this attitude if the Panel had found that the Biosafety Protocol and the Convention on Biological Diversity effectively apply because all parties to the Biotech dispute were bound by these treaties? We'll never know if the panel would then have been ready to call into question the " exclusive character of the DSU for WTO-related disputes". I suspect that the panel was very happy to see that not all the parties to the Biotech dispute were members of the MEAs , avoiding thus to rule on this point.

2) On the other hand, after indicating clearly that other rules of international law which are "applicable in the relations between the parties" could matter in WTO disputes, the Biotech panel gave a heavy hint that the word "parties" could mean here all WTO members. In the words of the panel " Article 31(3)(c) does not refer to "one or more parties" [nor] to "the parties to a dispute ". Even if these affirmations were in fact obiter dicta, they would mean, if confirmed, that for all intents and purposes most MEAs are useless in WTO disputes. Here again the Biotech panel was certainly very happy to see that the Biotech case was not one in which "relevant rules of international law are applicable in the relations between all parties to the dispute, but not among all WTO Members." Therefore, the panel didn't have to take position on whether in such a situation it would be entitled to take the MEAs into account.

From the perspective of the MEAs debate, it is perhaps unfortunate that the Biotech ruling has not been appealed.

Japan-Switzerland EPA/FTA

Given Japan's stated criteria for selecting potential FTA partners (most notably geographical proximity, trade and investment volume and resource wealth) as well as its obvious prioritization of East Asian nations (ostensibly to counter China’s growing power in the region), its negotiations with Switzerland at first appear rather curious.

The trading relationship amounts to only approximately US$7 billion annually, with most goods subject to low or no tariff protection and no public trade dispute on the recent record, yet the recent joint study - Report of the Joint Governmental Study Group for strengthening economic relations between Japan and Switzerland (January 2007) - recommends launching negotiations "as soon as possible".

Thus, it would seem economics is not the most important reason for the negotiations. Instead, five mutually self-serving reasons come to mind (and, among others, are cited in the report):

1. Both nations are attempting to raise international standards through the proliferation of TRIPS-Plus standards. The report states" "the highest level of IPR protection such as in the field of anticounterfeiting and anti-piracy cooperation should be pursued in a possible FTA/EPA with a distinctive part, which would satisfy the standards suitable for advanced IP nations." (p 19)
2. Mutual interest in increasing and deepening the liberalisation of services (pp 15-16).
3. Mutual interest in expanding the multilateral regime to include investment (p 17)
4. As members of the G-10, both nations have an interest in proliferating FTAs which exclude or only marginally include agriculture (undoubtedly the agreement will contain clauses on non-trade concerns, such as "food security" and the seemingly indefinable "multifunctionality") [in fact, the report states at p 4: "Cooperation between Japan and Switzerland is particularly close also in the field of agriculture, as both countries attach a high importance to the multifunctionality of agriculture."]
5. In their attempt to thwart China's regional importance and bargaining strength, perhaps both Japan and Switzerland (for different yet equally self-serving reasons) are seeking to establish a template for East Asian-European negotiations in an attempt to cement strong IP and investment provisions.

Given the limited scope and depth of the trading relationship, as well as the closeness of positions on numerous controversial trade issues, I suspect Japan will have a much easier time negotiating this agreement with Switzerland than it will have negotiating with Australia, South Korea and even Vietnam. But will this agreement provide a useful template for future Asia-Europe negotiations?

European GMO and Related Regulations

Upon the request of the author, I'm linking to an article entitled Food or Filth? The European Paradox.  I don't mean to take sides in the debate by linking to it.  I just figure that it will give those for and against GMOs (as well as those who aren't sure) the opportunity to comment on the issue.

From what I can tell, the author's points are as follows:

While many in the EU express great concern with the use of GMOs in food, the EU does not regulate food ingredients which, in the US, would be considered "filth," in particular "extraneous matter, such as, for example, insect fragments, animal hair, etc." The author contends:  "... this can easily be explained in a European system which gives priority to free trade among its member states over food safety and the precautionary principle, and inverts these interests to defend trade interests against outsiders." This point can be illustrated, he says, by a recent announcement by the Soil Association that it might make "food miles" an element of organic certification. If there were "a true consumer-based concern about the impact of travel delays on freshness," he argues, "the Association would instead consider refusing certification for stale produce."

He concludes: "if European activists truly represent consumers, would European consumers truly prefer to eat insect fragments and animal hair, etc., instead of food that scientists have declared safe to the most extreme limits of detection?"

My brief excerpt probably does not do justice to the topic, so those who are interested can read the article itself (which is short) or the accompanying paper.  Anyone with comments should feel free to chime in (and the author should feel free to clarify if I've mis-stated things).

Is There a Glass Ceiling at the WTO?

It's not often that the internal workings of the WTO are discussed in the public sphere, so I'm always interested to read about it when they are.  Inter Press Service reports on the the success of women (or lack thereof) at moving up in the ranks of the WTO:

This week's election of the chairpersons of the main World Trade Organisation (WTO) bodies for 2007 went largely unnoticed, as part of the global body's routine procedures. But one aspect stood out: none of the appointed chairs are women.

Indeed, in its 12-year history, the WTO has not had a strong tradition of placing women in important positions. On the contrary, it is accused of inheriting the attitude of its predecessor, the General Agreement on Tariffs and Trade (GATT), which functioned as an exclusive old boy's club for a small group of powerful members.

However, a slight shift had been seen in recent years, especially with the appointment of a woman in 2005, Kenyan ambassador Amina Mohamed, as chair of the General Council, the WTO's highest-level decision-making body in Geneva.

A new trend seemed to be taking shape around that time, when current WTO Director-General Pascal Lamy designated businesswoman and diplomat Valentine Sendanyoye Rugwabiza from Rwanda as one of his four deputy director-generals.

But everything returned to zero this year as women disappeared from leadership positions in the global trade organisation's main bodies.

In 2006, only one woman, Colombian representative Claudia Uribe, had been named to chair one of these bodies, in this case the Trade Policy Review Body. But she was not reelected Wednesday.

WTO spokesman Keith Rockwell defended the WTO's record, while acknowledging that more needs to be done:

The dearth of women in top-level positions raises doubts as to whether the gender dimension is an issue in the WTO. Keith Rockwell, director of the WTO Information and Media Relations Division, told IPS that "You are right. I don't see a woman here."

"In terms of what may be discussed in the consultations over the chair, the answer (with regard to gender) is I don't know," he said. With respect to "gender issues generally speaking I think what they would try to do is to be sure the best person would be put in charge of any particular negotiation," he added.

Rockwell cited the cases of Mohamed and Rugwabiza, although he admitted that "There have not been enough women in senior positions in this organisation -- and in others as well, I may add. But that is something I think that members are aware of."

Women abound lower down on the hierarchy. There is a relative balance among the 630 professional, technical and administrative staff of the WTO secretariat.

Rockwell even noted that "there are more women than men in the WTO, by a rather significant margin," although he acknowledged that among senior managers, "there are much fewer women than men."

However, "we have a woman as chief of staff to the director general, Arancha González. She has great authority," he added.

The spokesman said that in the secretariat "there is a strong effort to ensure that women are given every opportunity to move up the ladder."

He mentioned the cases of two women, Anabel González and Carmen Luz Guarda, who head the agriculture and market access divisions, respectively, in the WTO secretariat, "two groups that are right now front-centre in terms of negotiations."

For the past five years, the WTO has been bogged down in the Doha Round of multilateral trade talks, launched in November 2001 in the Qatari capital, whose biggest obstacles are precisely agriculture and market access for industrial goods and services.

In summary, Rockwell said "So progress has been made. It is enough? No."

One senior female WTO delegate had a different take:

Uribe, the former head of the Colombian mission to the WTO, took a different view, saying she was perhaps not the best person to ask about the issue because "I'm not enthusiastic about the defence of minorities; what I am in favour of are abilities and skills."

"I come from a country where women really do have opportunities," she told IPS. "That's why I can speak in such an open and uninhibited manner."

"In my country, if a woman or a man has the ability, they move up the ladder. I'm an example of that. My success is solely based on my professional performance. I am not the daughter of influential figures or politicians, but I have had the best opportunities anyway," she said.

Uribe pointed out that in Geneva there are few female members of missions to the WTO. "So how could strict proportionality be achieved if there are so few of us?" she asked.

"I know there are two female negotiators from African countries who were consulted in the process of naming new chairpersons. But the few women on the missions are very busy or are not interested in those responsibilities," said Uribe.

The China Subsidies Case: From Julia Qin

From Julia Qin:

USTR targets FDI Incentives in China

The US consultation request in the China subsidy case is now available on the WTO website (DSU358). Of the nine measures cited by the US as evidence of illegal subsidies, seven are incentives offered to foreign-invested enterprises (i.e., companies with foreign equity investment from 25%-100%). The Chinese laws and regulations cited in the document are mostly pre-accession legislation (from 1986 to 2000) that have passed the massive legislative clean-up in connection with China's accession. I suspect the Chinese government either did not believe FDI incentives would run afoul of WTO subsidy disciplines or did not expect that major investor countries would ever challenge them at the WTO.

The specifics of the nine Chinese measures are:

• Circular of the State Administration of Taxation Concerning Transmitting the Interim Measure for the Administration of Tax Refunds to Enterprises with Foreign Investment for Their Domestic Equipment Purchases;

• Circular of the Ministry of Finance and the State Administration of Taxation Concerning the Issue of Tax Credit for Business Income Tax for Homemade Equipment Purchased by Enterprises with Foreign Investment and Foreign Enterprises, read in conjunction with Circular of the State Administration of Taxation on Printing and Distributing the Measures Concerning Business Income Tax Credit on the Investment of Enterprises with Foreign Investment and Foreign Enterprises by Way of Purchasing Homemade Equipment;

• Circular on Distribution of Interim Measures Concerning Reduction and Exemption of Enterprise Income Tax for Investment in Domestically Made Equipment for Technological Renovation;

• Articles 75(7) and 75(8) of the Rules for Implementation of the Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises, read in conjunction with Articles 8 and 9 of the Provisions of the State Council on the Encouragement of Foreign Investment and Articles 6 and 8 of the Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises;

• Article 73(6) of the Rules for Implementation of the Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises, read in conjunction with Articles 6 and 7 of the Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises and Section XIII of the Catalogue for the Guidance of Foreign Investment Industries;

• Article 81 of the Rules for Implementation of the Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises, read in conjunction with Articles 6 and 10 of the Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises and Article 10 of the Provisions of the State Council on the Encouragement of Foreign Investment;

• Article 3 of the Provisions of the State Council on the Encouragement of Foreign Investment;

• Articles 3 and 6 of the Circular of the People's Bank of China, the State Administration of Foreign Exchange, the Ministry of Foreign Trade and Economic Cooperation and the State Administration of Taxation Concerning Printing and Distribution Detailed Rules on Rewarding and Punishment Concerning Provisional Regulations over Examination of Export Collections of Foreign Exchange;

• Circular of the State Council Concerning the Adjustment in the Taxation Policy of Imported Equipment, read in conjunction with Section XIII of the Catalogue for the Guidance of Foreign Investment Industries.

Is Doha a "Development" Round? Can it be?

How important is "development" to the Doha Round, which is officially titled the "Doha Development Agenda"?  In a recent Q & A, Charlene Barshefsky says that the reference to development was a "false pretense" for the round:

[Daniel Altman]: Will the conclusion of the round live up to any of the original expectations?

[Charlene Barshefsky]: The round was launched on essentially false pretenses, in two respects.

First, it was launched almost immediately in the aftermath of 9/11. I believe that but for 9/11, it almost certainly would not have been launched. As the six-year delay since then shows, but for 9/11 there was almost no enthusiasm for the round. 9/11 changed that. Countries believed that they needed to show solidarity with the United States and make a statement about the global economy and the importance of economic growth. So the round was launched.

Second, the round was called a development round. Again, as the six-year delay shows, there may have been the broad “intention” on the part of the wealthy nations to make this a development round, but their ability to execute has always, in important respects, been absent – something clear from the outset, rhetoric aside. At the end of this process, what will undoubtedly be portrayed as an important victory will, I believe, be far less than what it should have been had the wealthy nations genuinely pursued a development round. (emphasis added)

While development issues have been addressed in a number of ways in the negotiations, naming the round the "Doha Development Agenda" does seem to overstate the case a bit.  For the most part this round has been like any other, with the focus being on the market access concerns of the major trading powers.  While large developing countries like Brazil, China and India now play a greater role in trade talks, the interests of the poorest countries still seem to be an afterthought in many ways.

What I've been wondering recently is whether and how the development component could be expanded. I was prompted to think about this by an invitation to this conference at Berkeley law school.  They have since changed the title of the panels slightly, but the original panel I was on was called "The Road Ahead ... Proposals for Achieving the Doha Round's Development Goals."  In preparation for the panel, I came up with one idea that I thought might help, although it is admittedly only one small step (and it may be a bit unrealistic to think it will actually happen).  I'm going to talk about it at the Berkeley conference, but I thought I'd describe it briefly on this blog first to see if people have any reactions.

Currently, the WTO is taking on a role in pushing for and administering "aid for trade."  While this type of aid is useful, I think the WTO should broaden its efforts and promote develoment aid more generally. My suggestion is for the WTO -- specifically, the Director-General and the key government ministries who represent the Members at the WTO -- to lobby for more development aid for poor countries.  While the WTO should not become a development agency, it should use the "bully pulpit" to persuade the relevant domestic government agencies and international organizations, and even private citizens, to give more money for things like education and public health in poor countries.  By taking on these issues, the WTO will be promoting good policy (i.e., encouraging more development aid) in a way that  has the benefit of being good politics, in terms of enhancing developing countries' faith in the multilateral trading system and encouraging them to support the completion of the Doha Round.

I'll post more details once I've had a chance to flesh things out a bit more (in the presentation at Berkeley and a later article for an Australian law journal), but if anyone has any comments in the meantime I'd love to hear them.

Lamy and Environment: What "Major Break"?

In a recent  previous post, Joel Trachtman suggests that the recent speech by  Pascal Lamy constitutes a "major break" in the trade-environment debate at the WTO. Frankly, I see nothing breaking nor major in this speech. All what Lamy says is that some trade issues negotiated in the Doha Round would incidentally have some positive side effects on environmental issues. For example, less trade distorting subsidies would have  as side effects  less pressure on resources. In the same vein, lowering tariffs would have as side effects the facilitation of trade in clean technologies.

The real doctrinal shift would be for example to discipline all subsidies (and not only certain  limited fisheries subsidies) on the basis also of their "adverse environmental effects". At the moment, only "adverse trade effects" (price suppression, lost market shares, etc...) are the rules of the game in the WTO. Unless the normative monopoly of "adverse trade effects" is challenged in the future, one cannot in my view really speak of  a "major break". As for the role of MEAs in the future, it is only a promise depending on the will of Members. The reality, as demonstrated by the Biotech panel and its treatment of the Carthagena Protocol is much less glorious.

First it refused to consider the protocol  as an applicable rule of international law in the biotech dispute because not all parties to the dispute were members of the protocol. Second, while not taking position on this issue, it did not exclude the idea that, even if all parties to the biotech dispute were members of the Carthagena protocol, that would not be enough since perhaps ratification by ALL members of the WTO would be necessary! Third, it refused to consider the precaution principle as a customary norm of international law. The only thing that the biotech panel accepted is to "take account" of the carthagena protocol "as context" for interpeting certain terms, exactly what the AB did in Shrimp-Turtle.

Lamy on Trade and Environment

Pascal Lamy has made a major break with past WTO positions, and suggested that the WTO should include a chapter on trade and environment.  The doctrinal core of his speech seems to be the following:

But it [the Doha Round's promise for the environment] also includes a promise to ensure greater harmony between the WTO and MEAs: a promise to tear down the barriers that stand in the way of trade in clean technologies and services; as well as a promise to reduce the environmentally harmful agricultural subsidies that are leading to overproduction and harmful fisheries subsidies which are encouraging over-fishing and depleting the world's fish stock.

The MEA problem may not be so great after Shrimp-Turtle, and agricultural subsidies is an important part of the trade agenda already--it was earlier called a trade-environment "win-win".  Emphasis on freeing trade in clean technologies and services is perfectly consistent with the WTO free trade agenda also.  So, this appears to be a speech that looks at areas where there is little conflict between free trade and environmental protection.  Of course, the big issue that Lamy does not address is Kyoto and the possibility of a trade response to the U.S. failure to reduce greenhouse gases.  This is an area where the goal of internalization of externalities (posited by Lamy in his speech) is inconsistent with free trade. 

Plug

The Research Handbook in International Economic Law, edited by our own Andrew Guzman, and Alan Sykes, has now been published.  Aside from the chapter on regionalism, it looks pretty good. 

World Environmental Organization: Why the World Health Organization and not the WTO as a Model?

Representatives attending the environmental conference held in Paris past Saturday called for a stronger and more genuine international environmental organization to better deal with the climate challenges. "We hope to establish a new world environmental organization which goes along the lines with the World Health Organization. It should be more powerful and recognized by the whole world," said the "Paris Appeal" released by the "Citizen of the Earth" summit.  President Chirac and 40 countries support the proposal.

I wonder why the model here is the WHO and not the WTO? Are Countries afraid to treat "adverse environmental effects" in the same way that they treat "adverse trade effects" in the WTO,  even though climate change  is the "biggest market failure " of our time according to Nicholas Stern ?  It is interesting here to note that  key world polluters, including the US, China, India and Russia, are missing from the list of 46 countries that will be meeting in Morocco this spring to take the plan forward.

More Trade and the Environment Controversies

We may not have seen the last of the carbon import tax controversy mentioned in the last post, but a more traditional trade/environment conflict is also brewing.  The Independent reports:

The [UK] Government has claimed that World Trade Organisation (WTO) rules prevent it from banning the controversial use of biofuels that do more harm to the environment than good.

Later this month, officials from the Department for Transport (DoT) will start a consultation on new rules being introduced next year requiring petrol stations to sell petrol and diesel that have been blended with oil from crops such as corn, sugar or palm.

Under this DoT scheme, most stations will have to sell only biofuels, rather than conventional petrol or diesel, by 2010. Because crops can be regrown and absorb carbon, unlike fossil fuels, governments are increasingly turning to biofuels as a way of reducing emissions from cars.

But The Independent on Sunday has learnt that despite protests from environmental groups, fuel suppliers will not have to prove that the biofuels they have bought are from "sustainable" sources.

There is mounting concern in particular over the harmful effects of the cheapest source of biofuel, and one of the most plentiful, palm oil. Huge tracts of rainforest in Indonesia have been cleared and burnt to make way for palm plantations. A recent report blamed the burgeoning demand for biofuels and the resulting deforestation for making Indonesia the third-biggest producer of greenhouse gases.

D1 Oils, the company that makes biofuel using the inedible plant jatropha curcus, said the DoT scheme should reward sustainable biofuels that are made using land which is already in agricultural use.

A DoT spokeswoman said: "There is currently no internationally agreed definition of a 'sustainable biofuel'. If the UK were to invent one, it would be vulnerable to challenge under WTO rules."

It sounds like the government agency is saying that it cannot ban some kinds of biofuels based on the harm they cause to the environment, because by doing so they would be discriminating against some like products in favor of others.

I've always been skeptical of this strict interpretation of the National Treatment principle.  To me, drawing such a distinction between biofuels would not necessarily lead to a violation, depending on how the measure was written and also the particular facts related to the distribution of imports and domestic production over the range of products.  Also, there is still the Article XX defense.

Has Stiglitz Been Talking to Chirac?

Perhaps following the advice of Joe Stiglitz, French President Jacques Chirac is talking about some sort of sanction on countries who are not taking sufficient action to protect the environment:

President Jacques Chirac has demanded that the United States sign both the Kyoto climate protocol and a future agreement that will take effect when the Kyoto accord runs out in 2012.

He said that he welcomed last week’s State of the Union address in which President Bush described climate change as a “serious challenge” and acknowledged that a growing number of American politicians now favor emissions cuts.

But he warned that if the United States did not sign the agreements, a carbon tax across Europe on imports from nations that have not signed the Kyoto treaty could be imposed to try to force compliance. The European Union is the largest export market for American goods.

“A carbon tax is inevitable,” Mr. Chirac said. “If it is European, and I believe it will be European, then it will all the same have a certain influence because it means that all the countries that do not accept the minimum obligations will be obliged to pay.”

Trade lawyers have been divided over the legality of a carbon tax, with some saying it would run counter to international trade rules. But Mr. Chirac said other European countries would back it. “I believe we will have all of the European Union,” he said.

With regard to the legality, I can see how, in theory, someone could come up with a WTO-consistent measure that would penalize companies who cause a great deal of pollution.  But I think that the measure mentioned here -- "a carbon tax across Europe on imports from nations that have not signed the Kyoto treaty" -- might be difficult to justify, although no final judgement can be made until after seeing the actual wording of the measure.

More on the China Subsidies Case

Following-up on Joel's post, here are some details on the U.S. case against Chinese subsidies, gathered from around the web.

First, there is USTR's press release, which explains that:

Several of the subsidy programs at issue appear to grant export subsidies, which provide incentives for foreign investors in China and their Chinese partners to export to the United States and other markets.  These subsidies offer significant benefits and are available for all products made in China, including, for example, steel, wood, paper, and other manufactured products.  The companies targeted for many of these subsidies, i.e., companies with some foreign participation, accounted for nearly 60 percent of China’s exports of manufactured goods in 2005, according to a WTO report.  Other subsidy programs at issue provide incentives for companies in China to purchase domestic equipment and accessories, instead of buying from U.S. exporters.

...

China applies a series of measures that, by allowing for refunds, reductions, or exemptions from taxes and other payments owed to the government, appear designed to subsidize exports of manufactured goods or to support the purchase of domestic over imported equipment and certain other manufacturing inputs.  These measures appear to be contrary to a number of WTO rules, including the explicit prohibitions against export subsidies and import substitution subsidies set forth in the WTO Agreement on Subsidies and Countervailing Measures.

Various news reports are here, here, here and here.  The FT (the first link) answers Joel's question in the affirmative:  "The action by the Bush administration was viewed as part of a strategy to win Congressional approval for the renewal of the president’s fast-track trade negotiating authority when it expires on June 30."

Congressional reaction to the filing of the complaint was, not surprisingly, positive.  See the House Ways and Means statement and Senate Finance Committee Chairman's statement.  The National Association of Manufacturers is also pleased.

ADDED:  More from USTR: remarks of Susan Schwab and USTR Fact Sheet on the case (based on the Fact Sheet, it looks like this case is exclusively about prohibited subsidies, with some GATT and TRIMs Agreement claims also included in relation to the import substitution subsidies).

Also, steelmaker Nucor and the US-China Business Council are happy with the filing.

ADDED #2: NPR's report is here.  I haven't seen a reaction from Chinese officials yet.  The only item is this from Xinhua:  "The Chinese mission to the WTO in Geneva confirmed the case on Friday, but declined to give any comments."

ADDED #3: China expresses its view of the complaint:  "It's a pity for the United States to seek consultation process at the World Trade Organization (WTO) over China's industrial subsidies, a spokesman for the Chinese Ministry of Commerce said Saturday."

ADDED #4: Attempts to resolve this are already starting: "China is considering removing or reducing value-added tax (VAT) rebates on some steel products, government sources said on Monday, apparently accelerating the timetable for changes following a U.S. complaint to the WTO over the country's export subsidies."  The same article mentions the EU's views on the case:

In Brussels, a European Commission spokesman said the European Union was not planning to bring a case against Beijing at the WTO at this stage but would join the WTO consultations called by the United States as a third party.

Spokesman Peter Power said the EU executive, which has acted jointly with Washington against China on auto parts, was still looking into the WTO-compatibility of certain subisidies granted by the Chinese authorities.

"We will not bring a case to the WTO at this stage," he said.

ADDED #5: Japan mulls joining the U.S. in the complaint.  Peter Morici says the U.S. would have been better served pursuing a CVD complaint unilaterally.

ADDED #6: Here's a link to the U.S. consultations request.

Peking Opera in Washington

The U.S. has begun another dispute settlement proceeding against China--this one over export subsidies implicit in China's tax and other regulations.  Is this intended to help win congressional support for a new limited fast track authority? 

The Chinese Anti-Monopoly Law: U.S.-China Legal Exchange - DC Presentations

The draft of the first Chinese Anti-Monopoly (AM) Law has recently been submitted to the Standing Committee of the National People’s Congress (NPC) where the draft will be reviewed and commented several times before the final enactment. The current Chinese anti-competition (anti-trust) regime is not comprehensive and rather fragmented into several different statutes, such as Price Law and Anti-Unfair Competition Law. For a more effective administration and enforcement in this area, especially in the course of its active transition to the market economy, the Chinese government wrote the first AM draft in 1994. Ever since, both Western governments and business organizations have frequently commented on the draft. Understandably, they have tried to persuade the Chinese government to emulate their time-honored anti-competition (anti-trust) policies. In fact, it would serve the interests of the Chinese government to modernize its economic governance by incorporating these advanced foreign anti-competition policies.

Yet, the Chinese government and the Western observers have recently revealed somewhat different “fears” with regard to the rationale of enacting the AM Law. The Chinese government seems to fear that large foreign multinationals would invade the Chinese market, abuse their dominant positions, exploit Chinese consumers and wipe out small indigenous businesses. In contrast, Western governments and businesses seem to fear that the Chinese government might use the new AM Law to check and block foreigners’ access to the lucrative Chinese market as well as justify the government’s heavy market intervention. In the same vein, they might fear that China would use the AM Law as a shield against mounting foreign pressure to enforce its intellectual property rights. Article 48 of the draft which illegalizes any abuse of intellectual property rights is reminiscent of the recent Microsoft anti-competition case in Europe.

For those who are interested in this issue, here is a web link to an interesting event (The U.S.-China Legal Exchange) held in the December 8, 2006, in Washington, DC, hosted by the U.S. Department of Commerce, and supported by the U.S. Chamber of Commerce.

ALI Principles of Trade Law Project

Following is the text of a message that I just received from the American Law Institute.  This is an excellent project, and Petros Mavroidis and Henrik Horn are to be congratulated, along with the ALI, for undertaking it.

We wish to inform you that the case analyses thus far resulting from the American Law Institute’s project on world trade law are now accessible on our website (www.ali.org) for free download. In these papers, the WTO decisions from 2001, 2002, and 2003 are each jointly evaluated by an expert in trade law and an expert in international economics. According to our records you are or have expressed interest in this Institute project. The papers are located in the “Projects” section of ALI’s new website; or you can use this direct link to the page for the WTO project.

The documents on our website are in the form in which they were submitted to Cambridge University Press, and thus the final published texts may contain editing or additional material not found in the online manuscripts. The CUP books – which in the spring will include a single softcover volume containing all three books – are available for purchase from CUP’s website. Cambridge University Press

Many of those receiving this email are on the ALI Members Consultative Group for the project. That group will likely have its initial meeting when the Reporters are further along in the drafting of Principles of Trade Law; that work is just now beginning. We are at the same time continuing to produce papers on the WTO cases and anticipate publication of the next set of case analyses, on selected cases from 2004 and 2005, by the end of this year.

We hope that the free online availability of the 2001, 2002, and 2003 case analyses will give the project more visibility and prominence. The work is excellent and deserves to reach all corners of the globe. You are encouraged to share the direct link to the papers with colleagues and others whom you think will be interested in them.