International Economic Law and Policy Blog

Some Gambling Case Irony

From a gambling news web site:

Gary Loveman, CEO of Harrah's Entertainment, announced at the Global Gaming Expo in Las Vegas that the World Series of Poker may soon branch into online formats in Europe.

...

The irony of the move by Harrah's, and part of the reason the WTO ruled against the US over their Internet gambling laws, is that they are a US company that is allowed to make money from online gambling sites dedicated to European players, while foreign companies are not allowed to offer online gambling services to US citizens.

More on (Alleged) Tax and Trade Inequities

I posted a while back on the treatment of different tax systems (direct vs. indirect systems) under trade rules.  Here's an FT op-ed that makes the case that the current system is unfair to U.S. producers.  The authors argue as follows:

In 2005, 137 nations accounting for 94 per cent of trade with the US had some form of border-adjusted taxes on manufactured goods and services. By contrast, the US has direct taxes, such as the corporate income tax, which is precluded from being refunded on US exports or assessed on imports under World Trade Organisation rules.

The net effect is an unfair disadvantage for US companies and their staff, as the goods they produce and export are hit with taxes abroad, while foreign goods coming into the country are not. The additional embedded tax burden for US companies exporting goods is at least $100bn annually.

They then propose two steps to fix the problem:

First, the US must aggressively engage the Europeans to repeal the distinction between direct and indirect taxes. This distinction is a charade that was established in the 1960s and never challenged in a meaningful way.

...

Second, Congress should move our corporate code towards a consumption-based tax. ...

There was a nice discussion of this issue in reaction to my original post (see the comments section there).  I hear this argument raised every now and then, but I can't figure out whether it will gain traction any time soon or just fade away.

Coming Soon: The EC - Salmon Panel Report

It is being reported that the EC - Salmon WTO panel report, which deals with an anti-dumping determination, will be circulated this Friday.

According to Norway, the final report "is the same as the interim decision in August, which Norway considered a victory."

According to the EC, "no one wins on all points, but on the most essential points the EU has been upheld."

From the House Gambling Hearing

I decided I wasn't up for live blogging the House hearing on internet gambling, but here is a brief review of some points that were made.  (You can view the webcast here -- it's still ongoing, but they have taken a break). [UPDATE - here is a link to the webcast, now completed: http://judiciary.house.gov/oversight.aspx?ID=396]

Rep. Shelley Berkley of Nevada (Las Vegas) criticizes existing gambling laws for their "selective enforcement" and for the "hypocritical carve out for horse-racing."  She notes that the WTO has ruled against us and the Bush Administration has tried to withdraw our commitments, which, she says, is the "trade equivalent of taking our ball and going home."

Rep. Bob Goodlatte of Virginia says that "gambling is not a victimless activity" and says the current laws are reducing underage gambling.

U.S. Attorney Catherine Hanaway offers the views of the DOJ.  She says that all forms of internet gambling are illegal under federal law and should remain illegal, based on the unacceptable risk due to gambling by minors, compulsive gambling, fraud, money laundering and organized crime.

Now to the trade law parts, with Professor Weiler.  His testimony starts about 45 minutes into the hearing and lasts about 7 minutes.

First, Prof. Weiler noted that he expresses no views on gambling or internet gambling.  On the trade law issues, he says that the U.S. reaction to the WTO ruling has been "curious," in two respects: (1) despite a clear ruling that there is a WTO violation, the U.S. continues to prosecute people for internet gambling activities; (2) the U.S. has announced it will withdraw its commitments.  These two reactions, he says, are "damaging" to the U.S.  He notes that the U.S. is a world leader in trade matters and leads by example.  This, however, is not a good example to set.  He points out that the U.S. reaction in this case could be detrimental if other Members follow this example in the future.

His written testimony is here:  http://judiciary.house.gov/media/pdfs/Weiler071114.pdf  In it, along the lines of the Gary Kaplan WTO defense mentioned here, he says:

This Committee is not a court of law so I will spare it a lengthy legal analysis concerning the question whether or not individuals may rely in their defense against the indictments brought against them on the fact that the Acts on which such indictments have been brought have been found to be in violation of the US legal obligations when applied to individuals supplying remote betting services from other WTO Members.  Some language in the Uruguay Round Agreement Act notwithstanding I think there are weighty legal arguments that individuals should not be denied, in defending themselves, the ability to argue that Congress did not intend in approving US participation in the WTO, that prosecutorial discretion should be exercised in a manner which would bring the United States into violation of its international legal obligations.  There is, however, one crucial point which should be of interest to this Committee. In many of its utterances the Executive Branch has taken the position that it is defending the “sovereignty” of the United States as a whole, and that in its conduct in this matter it is executing the will of Congress. I respectfully and vigorously dispute both these propositions. When  a country solemnly adopts an international legal obligation and then honors that obligation it does not compromise its sovereignty – it manifests its sovereignty. For generations the United States has taken the view that all Congressional Acts should, if at all possible, be interpreted and applied in such a way as to respect international obligations solemnly undertaken by this Country. This is called the Charming Betsy doctrine. We expect the same from all other countries. It is possible to interpret both the Uruguay Round Agreement Act (taking the US into the WTO) and the Statutes under which the Executive Branch is seeking to ban remote betting from service suppliers located in our WTO partners, in a manner which would respect American international legal obligation and commitment to the rule of law. The Executive Branch is doing no service to the US by violating these obligations, and laying the responsibility at the feet of Congress. Congress should not allow such.

After a few more witnesses testified, the Chairperson then asked the witnesses for any general views they wanted to offer.  Prof. Weiler's response is around one hour and 22 minutes into the hearing.  Prof. Weiler says he was struck by the absence of mention in the DOJ statement anything about the prosecution issue.  He wonders what the DOJ position would be if China were to prosecute a U.S. citizen in violation of international legal obligations owed to the U.S.?

In response, Ms. Hanaway said it would be unwise for her to address a hypothetical situation that does not exist.  She notes that the DOJ is currently prosecuting some of the BetonSports executives, and that motions have been made in that case that the prosecution violates the WTO treaties.  She points out that (1) Congress made clear that WTO treaties do not overturn existing U.S. laws and (2) the defendants are private citizens and thus don't have a right to make challenges under the WTO treaties.

The Chairperson then asks Prof. Weiler whether he is "mildly satisfied" by that answer?  He responds that it is an unfortunate position for the U.S. in terms of the rule of law.

ADDED: At around 2 hours 54 minutes of the hearing, Rep. Goodlatte discussed the WTO issues, and asked Prof. Weiler some additional questions.  There was talk of situations involving cocaine or shoulder-fired weapons.  At around 3 hours into it, Prof. Weiler responded that this is not national security; this is not cocaine; and there is no vital national interest.

House Judiciary Committee Hearing on Internet Gambling

Tomorrow, the House Judiciary Committee will hold a hearing on "Establishing Consistent Enforcement Policies in the Context of Online Wagers."  The Committee's press release says: "Famed poker player Annie Duke will testify at the hearing."  But from a trade lawyer's perspective, the most famous person testifying will be Professor Joseph Weiler of NYU Law School.  If the hearing is televised or broadcast on the internet, I might try my first "live blog," or at least give a short summary of what was said.

Two WTO Related Blogs

I wanted to mention two WTO-specific blogs that might be of interest to readers of this blog:

• WTO and China, by Henry Gao, a contributor and frequent commenter on this blog.
• India in the WTO, by Seema Sapra, a frequent commenter on this blog.

Check them out when you have a chance.

No News is Bad News at the WTO?

Another China WTO dispute on the horizon:

China was criticised at the World Trade Organisation on Monday for its restrictions on foreign news agencies who are unable to sell their information to local media, trade sources said.

Canada, the United States, Japan and the European Union all requested more information from China over the measures it introduced last year, during a meeting on financial services at WTO headquarters here, the sources said.

In September 2006, China renewed the monopoly held by the state news agency Xinhua, which precludes foreign providers of news financial information services from dealing directly with Chinese clients, but instead have to go through a Xinhua affiliate.

China said in response that it did not make any commitments on news agency services during its WTO accession talks in 2001.

"Although some foreign news agencies are providing 'financial information services' for their Chinese users and claim themselves to be 'financial information providers' or 'financial services companies', their identities as 'news agencies' remain unchanged," China's delegate told the meeting.

"Therefore, the foreign news agencies releasing news and information in the territory of China shall comply with the measures," the Chinese representative added.

I don't know exactly which companies are behind this, but the reference to "financial information services" sounds like it could be companies like Bloomberg.  Maybe Michael Bloomberg should run for President so that he can push this issue himself.

More on Mitt Romney's Trade Vision

Ben Muse's post on Mitt Romney reminds me that there is more to Mitt Romney's trade views than I mentioned in my earlier post.  Picking out some of the aspects I found most interesting, Romney would like to see the following:

• U.S. and multilateral efforts to stop currency manipulation by China and others

This could mean a WTO complaint, or something less confrontational, such as tougher negotiations.  At a recent campaign stop, he called for a "crackdown" on China's alleged currency manipulation.  I'm not sure if "crackdown" is code for "I would support a complaint," but it does sound fairly strong.

• building food, safety and other standards to protect Americans but stop illegitimate efforts to stop U.S. farm and other exports.

This is a tricky one.  He wants strong food and safety standards for Americans, but wants to make sure that other countries' standards do not act as barriers to U.S. exports.  He is trying to draw a very fine line here.  It's not clear whether he thinks existing rules (like SPS and TBT) draw the line in the right place, or whether he thinks we need to take another look at the rules.

• Starting with a core of U.S. free trade agreement partners, Governor Romney would seek to bring together nations committed to open markets and playing by the rules in the largest ever Free Trade Area.  … [It] would act as an alliance working together internally, in the World Trade organization and elsewhere to push reforms and work cooperatively in areas like labor and the environment. Governor Romney would seek to expand these efforts to include the European Union and other nations that agree to meet these standards, while challenging China and others advancing agreements that exclude America.

Who exactly would be in this Free Trade Area?  He seems to make an overture to the EU, while placing China on the outside.  There are certainly risks to taking this approach.  It's kind of an "us versus them" mentality.

Finally, like Hillary Clinton, he has concerns about the U.S. - South Korea FTA based on the perceived lack of access it provides U.S. car makers to the Korean auto market; on the other hand, he does support the Panama and Colombia FTAs, which she opposes out of concern for actions by certain political leaders in those countries. 

A Short Note On Blog Comments

One of the things I enjoy most about this blog is the comments and discussion that take place.  To help promote this, I wanted to mention that comments can be made anonymously.  While it's true that the comment form requires that a name and email address be entered, it does not have to be YOUR name and email addresss.  Thus, an entry with the name "me" and the email address "[email protected]" will work fine.  Hopefully this will encourage people whose employers may frown upon expressing personal views to join the discussion.

Of course, the ability to post anonymous comments could be abused, so please act appropriately.  For example, do not post a comment as "Pascal Lamy" unless you actually are Pascal Lamy (either the WTO DG or some other Pascal Lamy).

Trade in Everything: Football (Soccer) Playing and Watching

The Economist reports:

As in Somalia, so it is across the rest of Africa. Every week, far from England's freezing winter drizzle, tens of millions of Africans settle down in video shacks, bars and homes to watch the latest matches between England's top 20 football clubs. Julian McIntyre, head of GTV, an African satellite broadcaster, says that most of his customers sign up to watch sport; 95% follow football. So he decided to buy the rights to English football, then build an African television network around it.

...

Africans tend to support either Arsenal, Chelsea, Liverpool or Manchester United. Arsenal is probably Africa's most popular club, Man Utd dominates in southern Africa, Chelsea is gaining ground in west Africa, while Liverpool is the team most Googled.

Why are the English matches more popular than Spain's and Italy's, which are just as skilful? Perhaps England's pedigree as the home of football helps. So does the hectic pace and larger input of foreign, especially African, talent; at least 50 footballers from the continent play in the premiership. Indeed, some Africans say their footballers have been plundered much as Africa's raw materials have been. The premiership has certainly harmed the popularity of Africa's own leagues. Some, such as Kenya's, have all but collapsed.

So, you have African citizens going to England to play football (soccer).  I think this would be services provided through GATS Mode 4, movement of natural persons, and could fall under CPC Ver. 1.1 category 96610 - Services of athletes ("services provided by individual own-account sportsmen and athletes").

Then you have the English Premier League selling the rights to broadcast the games to an African company, so that Africans in Africa can watch Africans in England play in England.  (I suppose that sale could be a good or a service, depending on how the contract was written.)

And just like with trade in goods, there have been suggestions that there are losers from this trade:  Africa's football leagues are struggling to compete with the Premier League for viewers.  Who are all the winners and losers from the trade?  I don't know if this is all, but here are some.

English consumers are better off through being able to view higher quality football.  And the English Premier League is better off through the increased revenue from selling to Africa.  On the other hand, some English football players lose due to the lower number of slots for them on Premier League teams.

As for Africans, the players who go to England are better off based on the high salaries they get, and some of this money is presumably repatriated.  In addition, African consumers get to watch high quality football on TV.  But, as noted, the African football leagues will suffer in the face of TV competition from the English leagues.

Chinese Muscle, or, No More Mr. Nice Guy

This recently reported development in NAMA negotiations is noteworthy, because it is as far as I can tell a first really overt break from China's so-far rather accommodating diplomacy in the WTO. The repeated reference to veto rights is worryingly reminiscent of the UN Security Council, where China knows all about veto ploys. My sense is that what can be interpreted as aggressiveness is an expression of defensiveness derived from the feeling that China is becoming a dispute settlement and press punching bag (and a rather large one, at that).

T.

Invisible No More

Prof. Jose Alvarez, President of the American Society of International Law, has posted an incisive presidential column celebrating the new (at least relative) inclusiveness and transparency of international legal discourse afforded by the access of academics and practitioners (and usually, everybody else) to the internet with its blogs. He notes this blog as one of the specimens of the new visibility. In international economic law, this is nothing short of a slow revolution, and it is good to see that Worldtradelaw.net is counted as one of its catalyzers.

T.

Hillary Clinton's Trade Vision

Hillary Clinton had this to say about trade in relation to various trade agreements coming before Congress:

"I have long said that we need smart trade policies that advance labor rights, the environment, and our economic standing in the world.

"I support the trade agreement with Peru. It has very strong labor and environmental protections. This agreement makes meaningful progress on advancing workers' rights, and also levels the playing field for American workers. Most Peruvian goods already enter the U.S. duty free, but our exports to Peru have been subject to tariffs.

"However, I will oppose the pending trade agreements with South Korea, Colombia, and Panama. The South Korean agreement does not create a level playing field for American carmakers. I am very concerned about the history of violence against trade unionists in Colombia. And as long as the head of Panama's National Assembly is a fugitive from justice in America, I cannot support that agreement. Accordingly, I will oppose the trade agreements with these countries.

"We need to vigorously enforce our trade agreements. As President, I will appoint a trade enforcement officer and double the enforcement staff at the office of the United States Trade Representative. I will also systematically review every trade agreement to ensure that it is delivering benefits to American workers. I will also expand the Trade Adjustment Assistance program so that workers negatively affected by the global economy get the help they need. And as President, in my first months in office, I will take a time out from new trade deals to assess their impact before going forward."

(HT to Eyes on Trade).

I take her statement to mean that she feels the U.S.-Peru FTA gets the substance just about right, in terms of balancing traditional trade issues with enforcing labor and environment provisions through trade agreements.  (Although she does want to take a "time out" to think through the issues a bit more.)

In addition, she makes clear that there are other factors she will consider as well.  First, she wants to make sure that the U.S. negotiates a good deal, and she thinks the U.S.-Korea FTA is not a good deal (because of autos).  And second, there are some countries she does not want trade agreements with, based on objections to their non-trade policies or political leaders.  Colombia and Panama are two examples; there may be others as well.

Finally, it's also worth noting that she wants to beef up USTR, rather than bring in the Justice Department for enforcement, as suggested by John Edwards.

Appellate Body Bios

Following-up on Joost's post below, here are some fairly recent bios of the four new AB Members:

Lilia Bautista (Philippines)

Jennifer Hillman (US)

Shotaro Oshima (Japan)

Zhang Yuejiao (China)

New Appellate Body Members

Wednesday's recommendations by the AB selection committee leaked on "WTO Reporter" http://www.bna.com/products/corplaw/wtor.htm.

Here are the reported results:

Janow (US) and Tanaguchi (Japan) to be replaced by Hillman (US) and Bautista (Philippines) in December, 2007

Abi-Saab (Egypt) and Ganesan (India) to be replaced by Zhang Yuejiao (China) and Oshima (Japan) in June, 2008

So far, the recommendations by the selection committee have always been approved by WTO members.

Some interesting consequences:

1. China has its first AB member
2. Three of the four newcomers are women, meaning that 3 out of 7 AB members will be female, a record in the AB's short history
3. Although 3 of the 4 retiring AB members were academics (Janow, Tanaguchi and Abi-Saab), none of their replacements are (the only remaining professors on the AB will soon be: Sacerdoti and Baptista; all 4 new AB members were previously in government, two of them are former ambassadors)
4. Japan keeps its seat (confirming that there are 3 de facto reserved seats on the AB: US, EC and Japan)
5. Egypt will not have an AB member for the first time in AB history
6. The Philippines re-gain their seat (originally occupied by Feliciano) and India loses its seat (not replaced by the Pakistani candidate)
7. Africa falls from two (Egypt, South Africa) to one AB member (South Africa)
8. The AB still awaits its first black member (Benin's candidate was not selected)

John Edwards' Trade Vision

In the context of opposing the U.S. - Peru FTA, John Edwards said the following:

I believe we need to follow four principles to make sure that globalization works for everyone, starting right here at home.

First, our multilateral and bilateral trade deals and unilateral trade preferences must help America. They must benefit American workers and their communities. This means they must:

• Stick to trade and not meddle with our domestic Buy America laws, our nation's investment policies, and our food safety and health laws;
• Have at their core strong protections for the global environment and basic labor standards, such as prohibiting sweatshops and child labor and protecting the right of workers to join unions; and
• Include prohibitions against illegal subsidies and currency manipulation and other trade cheating of the sort that is in fact encouraged under most of our current trade deals.

Second, our trade policies must also lift up workers around the world. Making sure that workers around the globe are treated fairly and share in the gains of trade is the right thing to do morally, it's the right thing to do economically, and it will make us here in America safer and more secure. We can never again condone trade agreements with countries where there is violence against workers or they are denied just wages and working conditions.

Third, we must understand in negotiating trade agreements that "one size does not fit all". We need to be realistic about global differences in form of government, in the rule of law, in the relative state of countries' economies, and in the day-to-day trade and business practices of potential trading partners. How utterly foolish is it that we treat China with its massive controlled and manipulated economy, Mexico with its porous three thousand mile-long border with the U.S., and developing countries in South America and Africa, as all the same when it comes to trade?

Fourth, our trade deals must be fairly and fully administered. For free trade to be fair, it must be based on rules, and then those rules must be followed. The top prosecutors at the Department of Justice should be responsible for enforcing our trade agreements, and when I am president I will insist that they prosecute all cases of illegal foreign subsidies, currency manipulation, and unfair trade practices.

There are a few points in there that I don't understand.

First, how can we both "stick to trade" and "not meddle with our domestic Buy America laws"?  What could be more trade related than discriminating against foreign products in government purchasing?

Second, why should we "not meddle with" investment policies and food safety and health laws, but include "core strong protections" (i.e., meddle with) environment and labor policies?

Third, with regard to not having trade agreements "with countries where there is violence against workers or they are denied just wages and working conditions," which countries would be included in this category?

Fourth, why are the "the top prosecutors at the Department of Justice" preferable to the trade experts at USTR, the ITC and the DOC?

"I don't want this party to be viewed as an anti-trade party"

... said House Speaker Nancy Pelosi, in support of the U.S. - Peru FTA, which passed the House by a wide margin.  Other Democrats supporting the deal had the following to say:

"This is the first step toward a new trade agreement," said Rep. Sander M. Levin of Michigan, chairman of the House and Ways and Means subcommittee on trade.

...

"This was not Bush's Peru deal," Rep. Xavier Becerra (D-Los Angeles) said. "This is a different deal now. This is a deal that takes into account the insecurities of working men and women, not just in the U.S. but also in Peru."

Asked about the friction within the Democratic Party over the agreement, Rep. Jane Harman (D-Venice), who supported the measure, said, "Sometimes, our party can't take yes for an answer."

Citing the labor and environment standards, she explained, "This is what we have defined as fair trade for years. So I think we should be declaring victory."

Todd Tucker of Global Trade Watch (which did NOT support the agreement) live-blogged the House debate.  Better him than me.

Two PhD Positions at the University of Maastricht

The Faculty of Law of Maastricht University is offering two Ph.D. positions in the field of International Economic Law.   The Ph.D. projects will be carried out in the framework of the Institute for Globalisation and International Regulation.

One Ph.D. project concerns the tension between private-sector standards reflecting consumer concerns and developing country market access under WTO law.

One Ph.D. project concerns the conflict between the liberalization of trade in services and the protection of core societal values under the General Agreement on Trade in Services.

For more details, click here.

Dennis Kucinich's Trade Vision

It seems very unlikely that we will ever see a Kucinich Presidency, but nonetheless I found this statement of Kucinich's thoughts on trade interesting:

The first act in office is going to be to cancel NAFTA [North American Free Trade Agreement] and withdraw from the WTO [World Trade Organization]. The president can do that. Then I will establish trade with other nations that’s based on workers’ rights, meaning the right to organize, the right to collective bargaining, the right to strike, the right to a decent wage and benefits, the right to a safe work place, the right to be able sue your employer if you are working on a job that is unsafe and the employer hasn’t corrected it, the right to a secure retirement, the right to participate in the political process. These are basic rights that will be written into the trade agreements. Other countries who want to trade with the United States have to guarantee the workers that. That way there’s no race to the bottom. That way we don’t lose factories to countries that don’t provide workers with any protections. I see trade as being this marvelous mechanism that can lift up the human condition. That is one of the things I can do immediately.

So, Kucinich would only trade with nations that meet certain labor and political standards.  My first question is, with whom would we be trading under such an approach?  I'd like to see a list of who is in and who is out.  And are there countries out there who would refuse to trade with us if they applied the same standard?

I would very much like to see the details of this proposal spelled out, but I suppose that would only happen if Kucinich stood a chance of winning.

Notes from the Bananas 21.5 Panel Hearing

As announced by the WTO, the recent panel hearings in the EC - Bananas, Article 21.5 dispute brought by the U.S. were open to the public.  Unlike some other recent open panel hearings, for this one the public could view the questions from the panel and the parties' answers.  Christine Hohl of HEI attended the hearing and took notes, focusing on these questions and answers and other aspects that were not otherwise made public (as the U.S. and EC oral statements usually are through their respective web sites).  Here are her notes:  http://www.worldtradelaw.net/panelmeetings/bananas215hearing.pdf

Paul Rubin on Evolution and Trade Policy

I just saw this on SSRN and thought others might find it interesting:

Paul H. Rubin - Evolution, Immigration and Trade - washingtonpost.com http://www.washingtonpost.com/wp-dyn/content/article/2007/05/07/...

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Evolution, Immigration and Trade

By Paul H. Rubin

Special to washingtonpost.com's Think Tank Town

Monday, May 7, 2007; 12:00 AM

It was once thought that humans are born as "blank slates" to be programmed by our

families, culture and society. While those forces play an important role, evolutionary

psychology teaches us that human behavior is also the product of the environment in which

humanity evolved -- that many of our intuitions are ingrained because they contributed to our

primitive ancestors' survival.

Public policy pays surprisingly little attention to evolutionary psychology. Yet there are

many human intuitions and behaviors that influence contemporary policy issues -- sometimes

in ways that are no longer useful or perhaps even harmful to humans flourishing. These

intuitions are sometimes referred to as "folk economics," and one area in which they often

emerge is the international economy.

Our primitive ancestors lived in a world that was essentially static; there was little societal or

technological change from one generation to the next. This meant that our ancestors lived in

a world that was zero sum -- if a particular gain happened to one group of humans, it came at

the expense of another.

This is the world our minds evolved to understand. To this day, we often see the gain of

some people and assume it has come at the expense of others. Economists have argued for

more than two centuries that voluntary trade, whether domestic or international, is positive

sum: it benefits both parties, or else the exchange wouldn't occur. Economists have also long

argued that the economics of immigration -- immigrants coming here to exchange their labor

for money that they then exchange for the products of other people's labor -- is positive sum.

Yet our evolutionary intuition is that, because foreign workers gain from trade and immigrant

workers gain from joining the U.S. economy, native-born workers must lose. This zero-sum

thinking leads us to see trade and immigration as conflict ("trade wars," "immigrant

invaders") when trade and immigration actually produce cooperation and mutual benefit, the

exact opposite of conflict.

Conflict was common in the environment in which humans evolved. As primates, which are

a very social order, our ancestors lived in relatively small groups in which everyone knew

everyone else. Our minds are adapted to deal with populations of that size. Our ancestors

made strong distinctions between members of the in-group and outsiders, and we still make

such distinctions today -- social psychologists can create in-group and out-group feelings

based on virtually any arbitrary difference between populations.

Electronic copy available at: http://ssrn.com/abstract=986314

Paul H. Rubin - Evolution, Immigration and Trade - washingtonpost.com http://www.washingtonpost.com/wp-dyn/content/article/2007/05/07/...

2 of 3 5/12/2007 5:29 AM

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The in-group and out-group intuitions help fuel opposition to expanded trade and

immigration. The public intuitively believes that the beneficiaries of such policies will be

foreigners, and it is easy to arouse suspicion about those who are not part of our in-group.

When coupled with zero-sum thinking, this is a powerful political tool. For instance, a

domestic industry or collection of domestic workers, when having difficulty competing with

foreign or immigrant competitors, can use innate dislike of outsiders when advocating for

increased barriers.

As the evolutionary inheritors of small-group societies, our minds sometimes have difficulty

appreciating risks, harms and benefits experienced by a large population. In a group of 100

people, when we observe something that has happened to someone, it is a reasonably likely

event. In a society of 300 million, when we learn about something happening to one person,

it may be an extremely unlikely event, but we often perceive it as likely when we see it on

the news. This instinct also shapes our perspective on trade and immigration. We

understandably have great sympathy for workers who lose their jobs because they can't

compete with foreign workers, but we have difficulty appreciating the benefit that our nation

of consumers gains from the products of foreign laborers.

As products of evolution, humans cannot help but be born with certain biases. But we are not

condemned to this evolutionary programming; we can identify the biases and recognize when

they lead us astray in the modern world. American history is marked by many periods of

openness to trade and immigration, and those periods have often featured strong economic

growth and human prosperity. However, American history has also seen many instances in

which our zero-sum and anti-outsider intuitions reemerged, whether in the form of

prohibitions against "dogs or Irishmen" or policies against "outsourcing."

A useful analogy is between speech and reading. All humans growing up in a normal

environment learn to speak, but reading must be taught because it does not come naturally.

Folk economic beliefs are like speech -- we get them without trying. A deeper understanding

of economics is like reading -- it must be taught.

America's success in lowering its barriers to outsiders shows that we can and do learn. But

like reading, we must teach each generation anew.

Paul H. Rubin

University and the author of Darwinian Politics: The Evolutionary Origin of Freedom

(Rutgers University Press, 2002). He has been writing a series on evolution and economic

behavior for the Cato Institute's journal Regulation.

is the Samuel Candler Dobbs Professor of Economics and Law at Emory

Call for Submissions: ASIL Insights, International Economic Law Edition

The International Economic Law Interest Group (IELIG) of the American Society of International Law (ASIL), in cooperation with the ASIL, is pleased to announce the launch of “ASIL Insights - International Economic Law Edition.” The IELIG promotes academic interest, discussion, research and publication on subjects broadly related to the transnational movement and regulation of goods, services, persons and capital. ASIL Insights provide decision makers, the general public, and members of the legal profession around the world with brief, balanced accounts and analyses of significant legal developments and newsworthy events involving international law. We call for submissions from both scholars and practitioners relating to developments in international economic law topics, including international trade law, international investment law, international commercial arbitration, economic integration law, international business transactions, international financial law, international tax law, international intellectual property law and the role of law in development. ASIL Insights – International Economic Law Edition will be posted on the ASIL website and will be distributed to ASIL Insights subscribers.

Proposals for ASIL Insights – International Economic Law Edition will be accepted on a rolling basis. Proposals including a proposed title and abstract of 150-200 words should be e-mailed to the IELIG Co-Vice Chair Sungjoon Cho ([email protected]). The full Insights completed on the basis of accepted proposals should conform to the Insights style guide (http://www.asil.org/documents/InsightsDraftingandProductionGuidelines070205.pdf) and must be shorter than 2000 words. IELG and the Insights board are committed to the timely publication of accepted material.

Coming Soon: The Gambling Arbitration Ruling

One of Antigua's lawyers says the Arbitrator's ruling in the Gambling case will be out on November 30.  I will be very impressed if they can reach a decision by then -- they have a lot to sort through.

He also said that any IP sanctions might not come right away in the event of a ruling in Antigua's favor:

He noted that the government of Antigua and Barbuda has made it clear that it is prepared to impose sanctions once permission is granted, but he told the SUN that this will not be immediate. “We haven’t fully and completely flushed out precisely what we’re going to do or how we’re going to do it. There is no rush to do it. I think once we get it, it’ll be a pretty big weapon in our hands and we can take our time in deciding how to apply it,” Mendel said.

Trade in Everything: North Korean Tourism

The Economist provides the details:

GLOBAL capitalism has worked many wonders, but where in the free world can one see 10,000 children dancing in synchronisation, dressed as eggs? Such weirdness makes North Korea, a basket-case state, a must for a certain sort of backpacker. Tourist visas have been available for years; there is even a Lonely Planet chapter on the country. Some 2,000 Westerners will visit in 2007—a tiny number, but about four times the total in 2002.

Mitt Romney's Trade Vision

Republican Presidential candidate Mitt Romney has put forward the outlines of his vision for trade, which he calls the "Reagan Zone Of Economic Freedom" (hat tip to Eyes on Trade).  One aspect is the following:

Starting with a core of U.S. free trade agreement partners, Governor Romney would seek to bring together nations committed to open markets and playing by the rules in the largest ever Free Trade Area, and go beyond traditional trade to promote high standards in areas critical to U.S. competitiveness.  (emphasis added)

This idea of "going beyond traditional trade" and promoting international standards strikes me as walking a fine line.  While business groups might like this, I wonder how it will play to conservatives more generally, who are often concerned with the impact of trade on sovereignty.  It's hard to say too much based on these very general statements, but it will be interesting to see if Romney gives some more details on his proposal at some point.

Trade in Everything: Mercenary Services

I found this Bloomberg article on Fijian mercenaries very interesting from a trade perspective:

Since the 1970s, this impoverished and remote remnant of the British Empire has positioned itself as a discount-soldier surplus store. Its best customer has been the United Nations' peacekeeping operations. Today, on the post-Sept. 11 battlefield, Fiji is marketing for hire its 3,500 active soldiers, 15,000 reservists and more than 20,000 unemployed former troops.

"Private armies became a viable commercial enterprise the moment America invaded Iraq," said Sakiusa Raivoce, a retired Fijian colonel and director of Security Support, the biggest of the country's six mercenary employment agencies. "The time is right, and our price is right."

...

"We made a conscious decision to create an army bigger than we need to generate foreign currency," said Lieutenant Colonel Mosese Tikoitoga, 46, senior officer and private army sales liaison in the junta led by Commodore Voreqe Bainimarama, a former UN peacekeeper.

"Our economy has no choice but to build armies, and it's a good business. There are few other foreign investments. If we didn't do this, our people would be in the street creating havoc."

...

Those wages from returning soldiers, money from the UN for leasing peacekeepers - an estimated $300 million over almost 30 years - and fees from private security firms that hire active soldiers have helped the anemic economy, according to junta leaders.

Pulling a pen from the pocket of a lime-green shirt embroidered with banyan leaves, Tikoitoga makes some quick calculations:

Since 1978, Fiji has outsourced more than 25,000 troops to the UN, the British Army and independent mercenary contractors. In 2003, the mercenaries brought home about $9 million in wages.

Are mercenary services covered by the GATS?  The provisional UN CPC does have a category for investigation and security services, and it might fall somewhere there.  See http://unstats.un.org/unsd/cr/registry/regcs.asp?Cl=9&Lg=1&Co=8730  If so, is it possible that any Member made commitments in this area, intentionally or otherwise?  Perhaps Fiji's trade officials should look into this, if they have not already.

(For those who follow these things, the "trade in everything" title is a take off on Tyler Cowen's frequent "markets in everything" posts at Marginal Revolution)

The Return of PPMs

In defense of a proposed measure that would penalize production processes according to the amount of greenhouse gases they emit, to be imposed on both domestic and imported products, a French Minister says:

... France would press for an EU-wide surcharge that would ensure that the price of both domestic and imported products reflected "the true environmental costs of production and transport."

"When you are competing in a global market with big emerging economies or the United States it only makes sense that everyone respects environmental norms," Jouyet said. "We need to be able to use the trade instruments and commercial bodies to protect European products from competition with products that do not take into account the true ecological cost."

It's hard to say how such a measure would fare under WTO rules, but a challenge seems very possible:

Along with similar legislation being contemplated in the United States, it could set the scene for a major confrontation between wealthy regions like Europe and the United States and emerging powers like China, India and Brazil, which have less stringent environmental standards.

"It's not clear how they can do this in compliance with the WTO rules," said Paolo Mesquita, deputy ambassador to Brazil's permanent mission at the World Trade Organization in Geneva.

More From The Gambling 22.6 Arbitration

In earlier posts on the Gambling arbitration, I focused on the figures involved, but there is an underlying interpretive issue that is very interesting which, as far as I know, has not been addressed before.  Antigua argues that the amount of nullification or impairment should be based on the failure of the U.S. to provide market access for gambling and betting services, pursuant to GATS Article XVI and the U.S. commitments.  In response, the U.S. says that the nullification or impairment should not be based solely on the Article XVI violation, but rather should take into account the U.S. defense under GATS Article XIV.  Because this defense failed only on the basis of discrimination relating to betting on horseracing, the U.S. contends, it is only this horseracing discrimination that should be taken into account.  (See paras. 13-26 of the U.S. oral statement to the Arbitrator, the most recent document to be posted).

So, the question is, should nullification or impairment be determined based on the violation or on the failed defense?