International Economic Law and Policy Blog

Dani Rodrik on Free Trade and Lower Prices

Dani Rodrik has entered the blogosphere.  In one of his first posts, he questions whether free trade leads to lower prices.  At the risk of getting into issues that I don't know as much about as I wish I did, I'm going to offer a criticism of his views.

Rodrik acknowledges that free trade will mean lower import prices, noting that as a country liberalizes its trade, "the relative price of imports … comes down."

But, he says, the "relative price of its exports must go up."  He explains this result through two examples:

Consider your typical Argentinian for example, who consumes a lot of wheat and beef. Since these are export products for Argentina, free trade implies a rise in the relative price of the Argentine consumption basket. (The gains from trade are still there, of course, but they derive from the usual allocative efficiency improvements, not from lower prices across the board.) And in the U.S., the Wal-Mart effect has to be qualified to take into account the fact that the relative price of the goods that the U.S. exports (including for example agricultural commodities) is higher than it would have been absent trade.  Similarly, when the U.S. gets better market access abroad for its agricultural exports (a key demand under the Doha round), you can be sure that this will raise domestic prices for these goods, not lower them. 

I take his point about exports to be the following.  If export markets are opened up, the quantity of domestically produced goods sold in the domestic market falls, as they are exported instead.  This decrease in supply will lead to a rise in price.

This conclusion makes sense in the short run.  However, I'm skeptical that this price effect would last for long.  First off, assuming the domestic market was competitive, there would be new domestic production to make up for the supply lost to exports.  As prices go up, more producers should enter the market.

More importantly, though, given the assumption that trade has been liberalized, presumably foreign suppliers will now have the opportunity to sell in the domestic market.  In other words, to take his examples, Argentinians will now be able to buy foreign beef and wheat, and Americans will be able to buy foreign agricultural products.  This increased supply from abroad should bring prices back down.

A key point here is that there are two main reasons that free trade brings lower prices.  One is the increased overall supply that results from specialization. The other is more competition in every market as foreign suppliers are allowed in. It seems to me that these factors should eventually overcome any short term price rise that results from producers shifting production from domestic sales to exports.

On the other hand, my economics is a bit rusty, so maybe I've overlooked something.

ADDED: Of course, another reason for lower import prices is trade with countries that have lower costs.

Pro-Globalization Public Opinion, With Caveats

According to a recent announcement from the Chicago Council on Global Affairs, and WorldPublicOpinion.org, publics think globalization is helpful, but worry about the effects on labor and the environment:

Majorities around the world believe economic globalization and international trade benefit national economies, companies, and consumers.  But many think trade harms the environment and threatens jobs and want to mitigate these effects with environmental and labor standards. 

The Chicago Council on Global Affairs and WorldPublicOpinion.org, in cooperation with polling organizations around the world, conducted the survey in countries representing 56 percent of the world’s population:  China, India, the United States, Indonesia, France, Russia, Thailand, Ukraine, Poland, Iran, Mexico, South Korea, the Philippines, Australia, Argentina, Peru, Israel, Armenia—and the Palestinian territories.   

The Leading Democrats on Trade

There's little question that the 2008 U.S. Presidential election will have a significant impact on future U.S. trade policy and bilateral/multilateral trade negotiations in general.  Here's what the three leading Democratic candidates (listed alphabetically, to avoid any suggestion of favoritism) have had to say, or had said about them, recently.  I haven't come across much on the issue from the main Republicans, but will post on it if I see it.

Hillary Clinton:

[Clinton] also addressed the NAFTA agreement, saying President Bush has mishandled the economy, and that the nation needs a new approach to negotiating trade agreements, including the addition of labor and environmental standards.

John Edwards:

Edwards, who asserted himself as a strong union supporter, said repealing the North American Free Trade Agreement, or NAFTA, and strengthening negotiation rights for employees on strike will benefit American workers.

Barack Obama:

In the biggest trade vote during his Senate tenure, Mr. Obama voted against the 2005 Central American Free Trade Agreement, along with many other Democrats. But aides said Mr. Obama isn't planning to campaign on antitrade rhetoric, as some Democrats did in the 2006 congressional elections.

Developing Countries in the WTO Legal System

Chantal Thomas of Minnesota and I are organizing a conference on Developing Countries in the WTO Legal System.  The conference is inspired by Bob Hudec's 1987 book, and the manuscript updated edition that I have been working on.  For conference information see the site:  http://www.law.umn.edu/facultyprofiles/trade_development_program.html

Should there be a "Healthy Foods" Subsidies Exception?

A NY Times article reports that U.S. farm subsidies are mainly for corn, soybeans, wheat, rice and cotton, and says that "U.S. agricultural policy has been designed in such a way as to promote the overproduction of these five commodities, especially corn and soy."  The result, the author argues, is "[a] food system awash in added sugars (derived from corn) and added fats (derived mainly from soy), as well as dirt-cheap meat and milk (derived from both)."  By contrast, "the farm bill does almost nothing to support farmers growing fresh produce. A result of these policy choices is on stark display in your supermarket, where the real price of fruits and vegetables between 1985 and 2000 increased by nearly 40 percent while the real price of soft drinks (a k a liquid corn) declined by 23 percent. The reason the least healthful calories in the supermarket are the cheapest is that those are the ones the farm bill encourages farmers to grow."

This article made me realize that I've never heard of the healthiness of particular foods being mentioned as part of the agriculture subsidies debate in trade negotiations.  Should it be added as a relevant concern?  Should subsidies that promote healthy foods be treated differently under trade rules?  Are they already treated differently under existing rules somehow -- how does the SPS Agreement relate to the Agriculture Agreement?  This is the first time I've thought about this, and there may be some obvious answers out there which I am not aware of.

Human Rights and Welfare

Eric Posner has an op ed in yesterday's WSJ, saying that human rights don't do any good, and suggesting that the whole project be abandoned.  While there is lots to argue with, I wanted to note one point here. 

Posner suggests that the advancement of well-being has come only from other factors, with no contribution from human rights.  Hayek hypothesized that human rights and property rights have a positive effect on welfare and growth.  And of course, property rights are related to other human rights:  if I can be tortured or falsely imprisoned, my property will be available to those who command the courts.  Posner suggests that the role of human rights in betterment has been “minimal or nil.”  Yet he has no data to back this up.  Indeed a recent paper by Lorenz Blume and Stefan Voigt¹ finds that basic human rights have a strong positive influence on the accumulation of physical capital, and that civil and emancipatory rights positively influence total factor productivity.  Posner purports to know that human rights do not contribute to economic betterment, but it just ain’t so.

[1] Lorenz Blume and Stefan Voigt, The Economic Effects of Human Rights (2004), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=652701#PaperDownload.

Where they burn books...

"China sets fire to pirated goods in latest crackdown".

Censorship is usually thought of as conflicting with trade rules. Here we see a trade rule (IP protection) that potentially goes hand in hand with censorship. An incendiary combination.

This supports my speculation about the legal link between the US complaints against China on IP protection enforcement and market access. Legally, burning books strengthens China's position in both cases.

It would, however, be interesting to receive a list of the book titles burned (I would skip the DVDs). I wonder if  Voltaire and Vonnegut, or Milton Friedman and Amartya Sen, for that matter, would be on the list.

T.

Transatlantic Geometry

A new report from the Atlantic Council, prepared under the chairmanship of Stuart Eizenstat and Grant Aldonas, and with members including John Jackson, Claude Barfield and Kenneth Dam, is calling for significant changes in the international trade "regime."  An end to the "round" system, moving forward on a U.S.-EU transatlantic market, and most interestingly, more "variable geometry."  By this, they mean moving forward with "coalitions of the willing" (one might call them "coalitions of the wealthy") to make new accords in WTO-plus areas, such as competition.  They also suggest something that might be modeled on APEC "open regionalism":  like-mined countries agreeing on deeper liberalization, but extending it on an MFN basis. 

International Antitrust

Most people will be happy with a very limited agreement in the Doha Round at this point, so pushing for multilateral rules on antitrust/competition policy seems pointless.  Nevertheless, antitrust law has become global, with both the U.S and EC regulatory regimes overlapping in a number of ways, and other nations' laws relevant as well.  For those interested in teaching/studying antitrust in an international way, there is this new book: Global Antitrust Law and Economics. The authors are Einer Elhauge and Damien Geradin.

Is IMF on the Firing Line?

In previous posts and comments on this Blog, it was underlined by many that, on the issue of currency manipulation, international trade law cannot be seen in "clinical isolation" from the role of the International Monetary Fund (IMF). Article XV of GATT 1994  makes this clinical isolation difficult and it is not obvious that the definition of a subsidy in the SCM Agreement can do the job alone . It seems by now that this connection has became clear for policy makers.

Here are some significant excerpts from a statement delivered by U.S. Treasury Secretary Henry Paulson in Washington April 14 at the spring meeting of the IMF and World Bank:

"For the IMF to remain modern and relevant, it must re-invent itself,"

"For us, reform of the IMF's foreign exchange surveillance is the linchpin on which other reforms depend, and we look forward to action in this important area very soon after these meetings,"

"IMF staff must do a better job in addressing foreign exchange surveillance on a day-to-day basis."

Finally, and this may please emerging nations, Paulson said the IMF's modernization process also must involve a complete overhaul of its structure of governance, with a greater role for developing nations:

"The fund no longer looks like the world economy in which we live, and marginal reforms that do not fundamentally alter relative quota shares are insufficient - bold action is needed to boost the share of dynamic emerging market countries."

The China Complaints: Hot off the Electronic Press

The WTO has now made the two recent U.S. complaints against China available.  Here they are on WorldTradeLaw.net (the free part), in PDF format:

DS362: China - Measures Affecting the Protection and Enforcement of Intellectual Property Rights

DS363: China - Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products

Academy of International Trade Law in Macau

I am happy to let you know that the Academy of International Trade Law will be offered again in Macau this summer. I would greatly appreciate it if you could kindly spread the news among your students. If any of your students are interested, please feel free to have them contact me so I can ask the organizer to reserve the seats for them. In addition, some scholarships have been made available for exceptional candidates from developing countries. The deadline for the scholarship application is May 11.

More information about the Academy can be found here. Below is some brief introduction of the course from the website:

The Academy of International Trade Law, based in Macau and organized by the Institute of European Studies of Macau since year 2000, aims at providing education and training at the highest international standard on the law of international trade, the WTO and selected issues of regional integration regimes such as the NAFTA, EU, Mercosur and ASEAN. The course takes place during two weeks in July and follows a model similar to the Academy of European Law, in Florence, and to the Academy of International Law , in The Hague . Its teachers are invited from the leading experts in the world. The Academy fills a gap in international legal education and, although especially devised for governmental staff, particularly in Asian countries, it also provides a unique opportunity of high-level training in the law of international trade to young scholars and lawyers at large.

Trade in Biofuels

There's a new paper posted on SSRN by Stephanie Switzer, a regular commenter on this blog, entitled "International Trade Law and the Environment: Designing a Legal Framework to Curtail the Import of Unsustainably Produced Biofuel."  Here's the abstract:

"Discussions on the appropriate international regime to govern trade in biofuels are in their infancy. However, a large number of countries have set minimum blending targets for biofuels in their transport fuels sector. Meeting these targets will require greater production and increased international trade in biofuels. Concerns exist with regard to whether unsustainable practices will be used to satisfy this growing demand. There is currently no multilateral agreement governing sustainable production and trade in biofuels. In the absence of an international framework, this paper will seek to demonstrate that concerned countries may unilaterally regulate imports of unsustainably produced biofuels in a way that is consistent with international trade rules. Unilateral regulation is to be understood as a stop gap until multilateral agreement can be reached on the interaction between trade in biofuels and issues of sustainability."

From the paper itself, here is a key bit related to using GSP schemes to promote clean biofuels:

"It is contended that one option open to developed country policy makers would be to institute a scheme of additional tariff preferences in favour of developing countries adhering to certain sustainability standards in the production of biofuel feedstocks. Numerous multilateral conventions could be referred to in the promulgation of any such scheme such as to provide ‘broad based recognition of a particular need.’ Examples include the Kyoto Protocol which denotes international concern for GHG emissions and could be used as a reference base for possible sustainability standards which look to emissions levels over the life cycle of the biofuel, including issues such as land clearance and deforestation. The Convention on Biological Diversity and CITES may also be relevant."

Casting the First Pod

Shameless self-promotion, yes.  Here is my recent podcast from the Fletcher School.  The subjects are Doha and migration. 

What do Trade Negotiators Negotiate About

Interesting new paper from Bagwell and Staiger:

"What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization"

Full Text: http://ssrn.com/abstract=948189

ABSTRACT: What do trade negotiators negotiate about? There are two distinct theoretical approaches in the economics literature that offer an answer to this question: the terms-of-trade theory and the commitment theory. The terms-of-trade theory holds that trade agreements are useful to governments as a means of helping them escape from a terms-of-trade-driven Prisoners` Dilemma. The commitment theory holds that trade agreements are useful to governments as a means of helping them make commitments to the private sector. These theories are not mutually exclusive, but there is little direct evidence on the empirical relevance of either. We attempt to investigate empirically the purpose served by market access commitments negotiated in the World Trade Organization. We find broad support for the terms-of-trade theory in the data. We claim more tentatively to find support in the data for the commitment theory as well.

KORUS--Second Best?

Chad Bown has an interesting piece in the Washington Post's "Think Tank Town".  Bown argues that KORUS is not about free trade, but about discrimination: 

"This discrimination is apparent when you examine how the free trade agreement proposes to grant Korean automotive and parts manufactures (think Kia and Hyundai) preferred access to the U.S. market vis-a-vis U.S. imports from the imminently competitive Chinese auto industry. What's the harm in this? Plenty."

He argues that

The KORUS-FTA is also problematic because it will likely retard progress in the more economically important multilateral negotiations under the Doha Round of World Trade Organization (WTO) negotiations.

FT Editorial: Wolfowitz must be told to resign now

See here. The lead line:

"The president of the World Bank has one asset: his credibility. The Bank’s capacity to make a difference lies not in its money and ideas but in its ability to be the world’s voice for development. This includes, as Paul Wolfowitz, the current president, has insisted, being the voice for good governance. Recent revelations have, however, demonstrated such serious failures that the Bank’s moral authority is endangered. If the president stays, it risks becoming an object not of respect, but of scorn, and its campaign in favour of good governance not a believable struggle, but blatant hypocrisy".

Dissent, anyone? I don't necessarily believe in the merits of good governance as preached, but surely one must practice what one preaches?

A Puzzling 90 per cent "Win Rate" for Complainants at the WTO?

I was puzzled recently by an affirmation in a newspaper that a complainant country has some 90 percent chances of winning its case at the WTO. Since no domestic legal system has such a tendency, I tried to see if this figure could be confirmed. Unfortunately, in their interesting new statistical analysis about WTO cases (JIEL, vol 10,  2007), Simon Lester and Kara Leitner do not seem to give information about "win rates." Finally, all I have found is this footnote (!) in an article by Greenwald (JIEL, 2003, 113-124):

Countries that complain about other countries’ trade barriers have a ‘win rate’ of between 80-90 percent before WTO panels and the Appellate Body (and nearly 100 percent in cases challenging anti-dumping, countervailing and safeguard measures) . . . The complainant has won all but one of the anti-dumping, countervailing duty, safeguard measure challenges.

Of course, complainants do not prevail on all counts in their complaints and it might be that the consultation process weeds out bad cases. The fact remains however that this figure is unbelievable from the perspective of a domestic legal system. In fact, according to Greenwald, the only "frighteningly" similar figure could be found only in the US Department of Commerce which finds for complainants about 90 percent of the time.

Is the 90 percent "win rate" for complainants at the WTO something that could be confirmed, and if yes, what could be the cause of such a surprising figure? Does this figure mean for example that the United States has a 90 per cent chance of winning its piracy cases against China?

Happy Birthday to GATT

Doug Irwin has a nice encomium to GATT in today's WSJ.  Here are the last few paragraphs:

Over its 60-year history, the GATT has had many shortcomings. Agricultural trade has largely eluded liberalization. The current spread of preferential trade arrangements, in the form of bilateral and regional so-called free trade agreements, have reintroduced discriminatory trade practices in a way that weakens the multilateral system built on the MFN clause.

The GATT has also gone through many difficult phases. The world economy went through a particularly dangerous period in the late 1970s and early 1980s, when sluggish growth and painful structural adjustments led many countries to ignore the GATT rules altogether. Trade barriers in the form of voluntary export restraints and orderly marketing arrangements proliferated, restricting trade in sectors such as automobiles, steel and textiles. In this environment, the prospect for new trade negotiations seemed so dismal that some suggested "the GATT is dead."

Despite these shortcomings and difficulties, the GATT framework has survived as a durable code of conduct for commercial policy and dispute resolution. Tariffs have been ratcheted down, the penchant for voluntary trade restrictions has been put to rest, and potential trade wars have been peacefully defused. The relevance of the GATT is reflected in the WTO's ever-growing membership, now up to 150 countries.

The prosperity of the world economy over the past half century owes a great deal to the growth of world trade which, in turn, is partly the result of farsighted officials who created the GATT. They established a set of procedures giving stability to the trade-policy environment and thereby facilitating the rapid growth of world trade. With the long run in view, the original GATT conferees helped put the world economy on a sound foundation and thereby improved the livelihood of hundreds of millions of people around the world.

The task for statesmen today is to look beyond short-term political considerations, arising from the complaints of special interests that fear market competition and the parsing of subsidies, and bring the ongoing Doha Round to a successful conclusion. If immediate steps cannot be taken to liberalize trade, then the phasing in of reforms and the phasing out of subsidies over many years is perfectly consistent with the long-term objectives of the GATT. We should remind ourselves how much poorer the world would be today without the politically courageous decisions made by visionary diplomats meeting in Geneva 60 years ago this month.

Even as the World Bank and International Monetary Fund struggle to rethink their role in the modern world economy, the role of the GATT and WTO is secure. The postwar expansion of world trade fostered by the GATT has made a lasting contribution to world prosperity and, as Cordell Hull suggested, to world peace as well.

US v. China, Rounds 4&5

The US has indicated that two cases on TRIPS and distribution rights will be brought against China. Here are my two cents on the two cases:

1st case: According to TRIPS Article 61, Members must provide remedies for IPR violation, which shall include imprisonment and/or monetary fines sufficient to provide a deterrent, but this is only supposed to be "consistent with the level of penalties applied for crimes of a corresponding gravity". The question is what are "crimes of a corresponding gravity" with being caught with 500 CDs in hand. This is where the US will have to come up with some really good argument.

2nd case: With regard to the importation of books, newspapers, periodicals, electronic publications and audio and video products, China has not reserved them for state trading. Thus the US should have a case. China can, however, raise a defense for the protection of the public morals under GATT Art. XX, but the big question will be whether the measures China take are "necessary" to achieve such goal. This will drag the WTO into sensitive political issues and I think WTO probably will be very cautious here.

To summarize, if the US win both cases, people in China might no longer be able to buy a pirated copy of the "Red Dragon" off the street corner 10 days after its release, but they will instead be able to go into the cinema to watch "Red Corner" 10 years after it was released.

Gambling Compliance Report

All WTO gambling dispute reports are filled with perplexities and the latest one, the Article 21.5 in US - Gambling dated 30 March, contains many. One that I will call the trade community's attention to comes in para. 5.9 wherein the panel laments the pre-publication of information from its interim report.  Apparently, the US government had offered an observation to the panel that the leak originated in Geneva (see para. 5.8).  To this, the panel responded (in para. 5.9) that "The Panel wishes to assert forcefuly that neither the Panel nor the Secretariat has done so." 

I presume that this forceful assertion of the panel is a finding of fact pursuant to the panel's role under DSU Article 11.  If so, I wonder how the panel reached that conclusion vis-a-vis the Secretariat.  The panel does not explain how it did so.  Perhaps it commissioned an independent investigation pursuant to Article 13.  Perhaps the Panel held an additional hearing in which it interrogated all of the WTO staff who had access to the report and heard denials of leaking by all of them.

I hope that one of the above explanations is correct and the panel was not simply jumping to an unjustified conclusion.  Like the panel, I too am concerned about the "credibility and integrity of the WTO dispute settlement process."

How Do You Envision the Future of the Trade Regime?

In June 2003, WTO Director-General Supachai Panitchpakdi organized a Consultative Board of eight eminent persons to study institutional challenges facing the WTO and to consider how best to meet those challenges. The resulting report generated a flurry of academic commentary (see here and here); whether it will have a substantial impact on debate over the future of the WTO remains to be seen.

One criticism of the Consultative Board was that it consisted entirely of "trade insiders" who operated in a closed manner (see here). Indeed, in sharp contrast to a UN High-Level Panel on Threats, Challenges and Change that held numerous regional consultations and issue workshops, the Consultative Board engaged in no formal outside consultation. While this critique is descriptively accurate, it begs the question of what would have been gained by outside consultation. In short, what would you have told the Consultative Board if they had asked?

Readers of this blog and others interested in trade now have the opportunity to add their voice to a high-level commission examining the future of the Multilateral Trade System after the Doha Round. Chaired by former Canadian Trade Minister Pierre Pettigrew, the so-called Warwick Commission consists of a number of former diplomats, economists, academics, consumer advocates, and a trade lawyer (yours truly). The Commission seeks to contribute to the ongoing dialogue among policymakers, and seeks to generate concrete, tangible proposals for change or reform related to the WTO. The Commission has generated a questionnaire that has been distributed to a limited number of practitioners, interest groups, politicians and others. However, the Commission is very interested in the reactions of others who have opinions about the future shape of the trade regime. You can download the questionnaire and return it to the Commission here.

I believe that the interested and involved readership of this blog have much to contribute to this exercise. I strongly urge you to add your voice to the conversation.

Jeff Dunoff

The Problem of Subsidies

There have been a lot of news reports regarding the decision by the Department of Commerce to change gears and apply countervailing duties to non-market economies like China (on certain paper imports right now, but possibly many new products in the future).  There are a number of specific legal issues that arise in response to this action, but there is also the broader question about why subsidies are regulated at the WTO and countervailable domestically.  Greg Mankiw argues that some of the concerns about subsidies are misplaced:

Industrial subsidies are bad policy, but they are bad policy for the country paying for the subsidy. The country buying the subsidized goods benefits from cheaper imports. Think of these subsidies as the opposite of OPEC--another country conspires to sell goods below competitive prices. For the same reason that high prices from a cartel hurt us, low prices from a subsidy help us. It is common sense that when you buy something, you would rather pay less than more for it. That is as true for a nation as it is for a household.

Thus, instead of complaining about foreign subsidies, he appears to say, we should thank the subsidizers.

I can see his point that the overall impact of foreign subsidies can be beneficial to the importing country (even if there may be harm to specific groups within that country).  But aside from these trade effects, isn't it better if everyone stops subsidizing?  It seems to me that the distortions to production decisions could overcome any benefits derived from lower-priced imports.  In other words, if the subsidies cause less efficient companies to produce the goods, consumers could actually be worse off.

Pallets and Standards

This article in the current issue of The World Economy looks interesting: 

How Do Differing Standards Increase Trade Costs? The Case of Pallets

• Gaël Raballand ¹¹The World Bank and
• Enrique Aldaz-Carroll ¹¹The World Bank

• ¹The World Bank

Abstract

The pallet is a platform used for storing, handling and transporting products. There are hundreds of different pallet sizes around the world. The case of pallets is examined to illustrate the impact of multiplicity of standards on trade costs. We select this case because pallets are used all over the world, pallet standards are not too sophisticated, and data on pallet standards and costs are to some extent available. The paper examines why there are so many different pallet standards, the associated trade costs and the reasons why countries have not harmonised pallet sizes to eliminate such costs. It then presents options for exporters to mitigate the adverse effects of standards multiplicity while complying with destination markets’ standard requirements. The range of options is limited for exporters from less developed countries because of the lack of rental and exchange pallet markets. To mitigate the costs of this multiplicity of standards, the international community's strategy should focus on developing awareness of the cost of multiplicity of standards and actively supporting standardisation.

KORUS FTA

Korea and the U.S. have agreed to an FTA.  Ben Muse has a useful post here detailing the history of the negotiations.  USTR's press release about the agreement is here.

Based on news reports, key issues in the negotiations were resolved as follows.  From the AP:

South Korea, under pressure from farmers who were worried that eliminating protections for rice would destroy the domestic industry, succeeded in keeping the staple food out of the deal.

But Seoul agreed to lower tariffs on other agricultural goods, including American oranges.

The two sides also agreed to eliminate and phase out tariffs on automobiles, with South Korea also agreeing to change its auto tax structure for larger vehicles, which the Washington claimed was discriminatory.

The issue of American beef imports, absent from South Korean markets for more than three years after mad cow disease was discovered in the U.S. in 2003, was not an issue in the free trade talks. Still, Washington apparently came away with expectations it may be on the way toward resolution.

From Reuters:

Seoul agreed in the end to phase out its 40 percent tariff on U.S. beef over 15 years, but did not budge on the most sensitive, and heavily protected, farm product -- rice,

In the talks' big surprise, the United States agreed in principle to give certain products from North Korea preferential treatment, South Korean officials said.

That was a concession to South Korea, which wanted the goods it makes in an industrial park just inside North Korea to be treated the same as those made at home.

Unfairness in International Trade: An Elephant Easy to Recognize but Hard to Define?

Joan Robinson, criticizing false rigor, was fond of saying that "an elephant is hard to define but easy to recognize! " I wonder if this metaphor applies to the issue of "unfairness" in international trade. I say that because I have noticed that many recent posts on this blog were, one way or another, in relation with the theme of unfairness. People criticizing China's currency policy invoke its "unfair" nature. As for the debate about the integration of labor and environmental standards in bilateral agreements, it is practically a disguised debate about the notion of unfairness in international trade.

Most people intervening in these debates seem to know "intuitively" what is unfairness. For my part, I have always implicitly adopted this intuitive  perspective and following my research on the law of subsidies, I have implicitly adopted the notion  that unfairness is an artificial distortion of the principle of comparative advantage between nations. I have tried recently to apply this perspective to  the china's currency issue and to labor standards in bilateral agreements and my feeling is that this notion is too simplistic for such a complex reality. I am more and more convinced that every trade lawyer has his or her implicit individual definition of unfairness in international trade. I have also noticed that in one of her comments, Julia Qin thinks that fairness in international trade is a "myth" created for political conveniency.  Is it possible that a myth is so  frequently invoked by so many persons , organizations and panel and AB reports ? However, it is true that most of the time people and organizations invoking unfairness avoid at any cost to define it.  In fact,  when forced, they adopt implicitly the  definition of unfairness as an "artificial" distortion of comparative advantages between nations. This definition is in fact a tautology since the real issue is  to know the meaning to be given to the adjective "artificial" in this definition.