International Economic Law and Policy Blog

GSP and Climate Change

In the latest issue of the JIEL, Michael McKenzie discusses the interaction of climate change and the Generalized System of Preferences (GSP).  He notes two ways that preferences could help fight climate change:

The first way that preferential tariff treatment under a GSP scheme could be tied to the issue of climate change, is to make preferences under the scheme conditional upon a developing country taking certain actions to mitigate and/ or adapt to climate change.

...

The second way that preferential tariff treatment under a GSP scheme could be tied to the issue of climate change, is for developed countries to provide preferential tariff treatment to low carbon goods and services originating in developing countries.  The aim would be to encourage the production of low carbon goods and services in developing countries.

The first option is something I've heard of before with GSP programs:  Give tariff preferences to countries who adopt particular policies or take certain actions.  By contrast, the second is something I have not come across:  Tariff preferences are granted only where the products at issue are made in a certain way.  I suppose this is the intersection (or perhaps "collision" is a better term) of GSP and PPMs.  This may have been tried before, but it's the first I've heard of it.

He concludes:

Despite presenting a number of legal and practical challenges, it is an approach that has significant potential and merits further consideration by trade and climate change policymakers in developed countries.

Gender Discrimination through Tariffs

I'm a bit late to this, but it's an interesting case and I thought I should start following it.  As an old NY Times article explains, there are often tariff differences in the U.S. tariff schedule between men's and women's versions of clothing.  For example, a 14 percent tariff on women’s overalls as compared to a 9 percent tariff on men’s overalls.  Some clothing manufacturers challenged this treatment before the CIT, as a violation of the due process and equal protection clauses of the Constitution.  The first ruling came in July.  I'm not that familiar with the issues, so I'll just quote and refer to others.  Lawrence Friedman of the Customs Law blog explains the result as follows:

I'm going to read the case more carefully and will provide a fuller analysis, but here are the highlights I have gleaned this morning:

1. Because the tariff differential is implemented in a statute, review of its constitutionality is not precluded by the political question doctrine. In other words, this is not purely a questions of policy or negotiations, it is a tariff law that can be reviewed.
2. Totes, as the importer, has standing to pursue the case even though it is only indirectly affected because it is being used to implement the allegedly discriminatory measure.
3. Totes' claimed injury is a direct result of alleged express discrimination and, therefore, it falls within the zone of interest protected by the constitution.

However, Totes has a problem. In its complaint, Totes did not assert any facts showing a right to relief. Flipping this around, it seems to be a requirement for pleading real, as opposed to possible injury. What Totes apparently failed to do is assert that what appears to be express gender discrimination is not based upon some legally sufficient governmental justification. Having failed to allege a purpose or intent to disfavor one protected class (e.g., men), the Totes complaint is insufficient to state a claim on which relief can be granted. Another aspect of this is that there is no clear link between these tariff designation of products and the actual use of them. Totes has not asserted in its complaint that men buy men's gloves and women by women's gloves.

As a result, the Court of International Trade dismissed the case. Importantly, the dismissal was without prejudice meaning that Totes may be able to adjust its pleading and re-file. Of course, even if this case cannot be fixed, there are a large number of cases pending before the Court. That means, it appears this issues will get hashed out on the substance.

More here and here.

GATT Era Arguments We Are Not Likely To See Today

From the EEC - Import Restrictions case, adopted in 1983:

12. In the view of the European Community, in order to judge the compatibility of these restrictions with the provisions of GATT, it was not enough to limit examination to a purely legal exercise. All restrictions with which the Panel was concerned, were "residual restrictions", i.e. measures for which liberalization had not been possible in the OECD programme of liberalization of the 1950s. Account must be taken of historical and general factors as well as the specific economic and social situation in each sector, e.g. weak industrial structures and technological adjustment; threat of serious injury to domestic production and employment through increases in imports and competition with low-priced foreign products; sectorial trade imbalances and declining shares of the domestic market; in some cases also risk of circumvention of quotas established for similar goods. The EC submitted documentation to the Panel dealing with such factors as they affected each of the products in question. The EC maintained that judgement that would be isolated from any economic consideration and from the real factors of commercial policy, would be contrary to the pragmatic approach that was traditional in GATT. It was stated that any condemnation of the quantitative restrictions under reference on the basis of provisions of the General Agreement would not be justified and would be unfair given that these restrictions represented only a very small part of the overall problem of residual restrictions. In the light of this situation, the Community believed that it was more useful to pursue a case-by-case approach which would allow the economic implications of each restriction to be examined individually and thus to confirm that these restrictions were necessary to deal with problems at economic and social levels.  (emphasis added)

In essence, the argument seems to be, "let's not get all hung up on legal issues, let's think about the broader economic and social issues and take a pragmatic approach."  How times have changed!  (I should note that the panel rejected the argument, but it's hard to imagine the argument even being made today).

Can WTO Membership Be Used as a Bargaining Chip?

Perhaps not very effectively, if the country says they don't want it:

Prime Minister Vladimir Putin said on Monday that Russia saw no advantages from WTO membership and should freeze some commitments made during entry talks to the trade body, Interfax news agency reported.

"We propose continuing negotiations within the framework of the working group on WTO accession, but informing our partners of the need to exit some agreements which currently oppose the interests of the Russian Federation," the agency quoted Putin as saying.

"It turns out that we don't feel or see any advantages from (WTO) membership, if they exist at all. But we are carrying the burden ... We need to make this clear to our partners."

More Work for the WTO?

Just when the trade liberalization business was slowing down, Mattoo and Guasch propose some new fields of endeavor . . . .

"Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization"

World Bank Policy Research Working Paper No. 4668

AADITYA MATTOO, World Bank - Development Research Group (DECRG)
Email: [email protected]
JOSE-LUIS GUASCH, affiliation not provided to SSRN

Two aspects of global imbalances - undervalued exchange rates and sovereign wealth funds - require a multilateral response. For reasons of inadequate leverage and eroding legitimacy, the International Monetary Fund has not been effective in dealing with undervalued exchange rates. This paper proposes new rules in the World Trade Organization to discipline cases of significant undervaluation that are clearly attributable to government action. The rationale for WTO involvement is that there are large trade consequences of undervalued exchange rates, which act as both import tariffs and export subsidies, and that the WTO's enforcement mechanism is credible and effective. The World Trade Organization would not be involved in exchange rate management, and would not displace the International Monetary Fund. Rather, the authors suggest ways to harness the comparative advantage of the two institutions, with the International Monetary Fund providing the essential technical expertise in the World Trade Organization's enforcement process. There is a bargain to be struck between countries with sovereign wealth funds, which want secure and liberal access for their capital, and capital-importing countries, which have concerns aboutthe objectives and operations of sovereign wealth funds. The World Trade Organization is the natural place to strike this bargain. Its General Agreement on Trade in Services, already covers investments by sovereign wealth funds, and other agreements offer a precedent for designing disciplines for these funds. Placing exchange rates and sovereign wealth funds on the trade negotiating agenda may help revive the Doha Round by rekindling the interest of a wide variety of groups.

Taxing Big Engine Cars

I'm sure many of you remember the U.S. - Auto Taxes GATT dispute.  There were several U.S. measures at issue, one of which was a "gas guzzler" tax.  Car manufacturers were required to pay taxes on their automobiles based on the fuel efficiency, with higher taxes for less fuel efficient vehicles.  The EC claimed that because most automobiles subject to the tax were of EC origin, with very few of these of U.S. origin, "treatment under the measure was discriminatory."  Examining this claim under Article III:2, first sentence, the Panel used the "aim and effect" test to conclude that there was no violation.  (And no violation of Article III:2, second sentence either.) (See paras. 5.17-38)

Of course, in Japan - Alcohol, the Appellate Body abandoned the aim and effect test in the context of Article III:2, first sentence.  (While using some version of the test under Article III:2, second sentence.)  So how would Article III:2, first sentence be applied to this kind of measure today?   It's possible that we could find out.  The Economist reports that China has adopted its own version of the gas guzzler tax:

On August 13th the government announced a new “green” tax that will come into effect on September 1st. The new tax is meant to reduce fuel consumption and fight pollution. Rather than further raising the tax on fuel, which increased by almost 20% in June, the government is taxing gas-guzzling cars. By an amazing coincidence, most such cars are foreign-made.

Cars with engine capacities larger than 4.1 litres will now incur a 40% sales tax—twice the previous level. Cars with engines between 3 and 4.1 litres will be taxed at 25%, up from 15%. The tax on the smallest cars, with engines smaller than 1 litre, will fall from 3% to 1%. The 8% and 10% taxes on other cars will not change.

The government says the new tax will encourage a shift to more fuel-efficient cars. It will also help Chinese carmakers, as they tend to make cars with engines smaller than 2.5 litres. Foreign carmakers, which make most of the cars with larger engines, will suffer.

This would be a great case for helping to clarify the GATT's non-discrimination rules.   In particular, it could help answer the question of what role, if any, does an environmental purpose behind a measure play in the Article III:2, first sentence context; and what is the precise role of a discriminatory effect against foreign products.  (The same issues also arise under Article III:2, second sentence, although the answers are much clearer there).  And if a violation were found, we would then get into interesting issues under Article XX(g) and the chapeau.

Somewhat surprisingly, the Economist concludes the piece by saying that this measure, in contrast to the current Chinese auto tax measures being disputed at the WTO, "prevents any more pesky calls from Geneva."  I wonder if they are right about that.  There are certainly legal claims that can be made, although the chances of success are not entirely clear.  On the other hand, the most likely complainants, the EC and the U.S., may be reluctant to start a new trade/environment dispute right now.

Carbon Labels

I love labeling as a solution to many trade-environment conflicts.  I think it can be done in a way that is consistent with trade rules, and can also have a positive impact on environmental problems.  So I was happy to read this piece in the Guardian:

Japan is to carry carbon footprint labels on food packaging and other products in an ambitious scheme to persuade companies and consumers to reduce their greenhouse gas emissions.

The labels, to appear on dozens of items including food and drink, detergents and electrical appliances from next spring, will go further than similar labels already in use elsewhere.

They will provide detailed breakdowns of each product's carbon footprint under a government-approved calculation and labeling system now being discussed by the trade ministry and around 30 firms.

The labels will show how much carbon dioxide is emitted during the manufacture, distribution and disposal of each product, the ministry said.

It is possible that I'm overestimating the benefits to the environment, and underestimating the extent to which labeling might lead to trade conflicts.  But I'm happy to see it tried nonetheless, to see where it leads.

More on International Antitrust and Pro Sports Leagues

It's probably clear to regular readers by now that I like sports.  I work sports issues into this blog whenever I can find a conceivable connection to IEL.  I recently came across two more such issues, both related to international aspects of antitrust, although it has taken me some time to put together a post on them.

First, over at Opinio Juris a while back, Kevin Heller talked about a high school basketball player who decided to play professionally in Europe rather than play U.S. college basketball.  He can't go to the NBA this year because of a rule that players must be 19 and a year removed from high school graduation in order to be drafted.

Heller's post referred to the constitutionality of the rule, but I'm going to focus on antitrust issues.  I just finished teaching a class on antitrust in which I talked about a similar NFL rule that was challenged by a college football player.  I'm not sure I like these rules as a matter of business strategy, but in terms of antitrust concerns, I think they should generally be allowed.  As I've said before, I subscribe to the single entity theory of sports leagues -- the leagues should be treated as single entities, and therefore any agreement among the teams cannot be challenged as a restraint of trade under Section 1 of the Sherman Act.  While there may still be a monopoly problem, the fact that European leagues are competing with the NBA for players indicates that the market for professional basketball players is becoming a global one, with the NBA's dominance being eroded.

On the other hand, this does concern me: "On July 15, the NHL and the KHL [Russia's hockey league] announced that the two leagues had come to an interim agreement to respect one another's contracts."  Now, what this agreement actually says was more complicated than I could quickly gather.  But regardless, I do think there are antitrust concerns when two competing leagues reach agreements like this one.

More on China-Vermont

For those interested in hearing more about the China-Vermont trade issues I mentioned the other day, here are some of the relevant documents:  http://www.worldtradelaw.net/chinavermont.pdf  They include: a press statement by the Vermont legislator involved; the original letter sent by the Chinese government agency; an analysis of the legal issues by the Forum on Democracy and Trade; and a letter from the Vermont legislator to the U.S. Department of Commerce.

This situations raises a few questions for me:

• How should these issues be dealt with:  Should foreign governments be able to lobby state governments directly, or should they go to USTR or the DOC instead?  If they are to go directly to state governments, are there special rules or procedures they should follow?
• Should USTR/DOC be offering assistance to state governments who are faced with these issues?
• Will China continue to go directly to state governments given the reaction here?
• Was the Vermont legislator correct to be so upset?  Couldn't Vermont just ignore China's letter entirely?
• More broadly, what is the role of sub-national governments in the international trading system?  GATT Article XXIV:12 is a little vague on this.

We've Got an Assignment

Over at Trade Diversion, Jonathan Dingel provides an excellent description of the information technology dispute, and then calls on us for guidance:

How will the WTO dispute panel evaluate the difference between a LCD monitor and a flat panel TV? Will the panel have to think hard about the meaning of "for"? I leave any further analysis to the good folks at the International Economic Law and Policy Blog, who may actually be qualified to predict where this case is going.

Any takers?  If no one else chimes in, I will try to look at the issues at some point.

More on EC GSP

Speaking of the EC GSP program, as I was in the last post, the Economist has an article this week in which they discuss Sri Lanka's access to the GSP Plus program.  The GSP Plus program requires compliance with various international labor, environmental and human rights standards, and grants additional preferences beyond those in the ordinary GSP program.  Having met these standards initially and, as a result, having been offered the Plus preferences, apparently Sri Lanka is now at risk of failing to comply with them, due in large part to the government's fight against a domestic rebel group.  An EC official suggested that in order for Sri Lanka to continue to meet the standards, and thus for its GSP Plus access to be renewed, it will have to take some action to resolve a couple specific complaints of government repression.  The article then states:

If the EU renewed the agreement without such progress, it might be challenged at the World Trade Organisation—as happened to an EU trade sop to Pakistan in 2004.

So, I guess the legal argument would be the following.  Having set out some objective criteria for access to GSP Plus, the EC must then apply these criteria when deciding who can participate in the program.  If the EC provides GSP Plus access to countries that do not satisfy the established criteria, they are not applying the criteria.  Here, this would mean that if Sri Lanka is not in compliance with the GSP Plus rules, it should not be in the program.  Countries who do not have access to GSP Plus and whose exports compete with Sri Lanka's would have an incentive to challenge Sri Lanka's inclusion.

WTO Consistency of the EC GSP Program

Lukasz Adam Gruszczynski, of the European University Institute, has posted a paper titled "The EC General System of Preferences and International Obligations in the Area of Trade - The Never-Ending Story" on SSRN.  From the conclusion:

This article argues that a part of the new EC GSP scheme (i.e. GSP Plus) contains elements which appear to be inconsistent with the obligations of the EC under WTO law. In particular the article questions whether different countries may be considered as similarly suited on the basis of their adherence to international treaties. In this context, it proposes to apply other criteria such as HDI. The article also submits that development needs as provided in the Enabling Clause should be understood in an economic sense. At the same time, the article recognizes that the EC as a party bearing the burden of proof in potential WTO proceedings, may have difficulties in providing evidence on the existence of a relationship between development and adherence to labour or environmental standards. Another feature of GSP Plus, which seems to be disputable from the perspective of WTO law, is the objectivity of the criteria used by the EC. The short application period and the selection of the conventions cast serious doubts as to the good faith of EC actions. Finally, the article also criticizes the inflexibilities which are built into the GSP Plus system (i.e. lack of procedure to allow for the immediate inclusion of new beneficiaries).

On the other hand, one also needs to realize that despite the above legal deficiencies of the GSP Plus scheme, it may be politically impossible for developing countries to bring a case to the WTO. As noted in the literature, such an action could endanger the existence of a different general system of preferences, since nothing in WTO law requires donor countries to maintain schemes that are no longer politically acceptable.  Moreover, it also seems that the current EC proposal addresses some flaws of the system in a manner which is compatible with the obligations of the Enabling Clause. This can also reduce a tension between the EC and potential beneficiaries.

The second sentence of the last paragraph has me wondering:  How big of a risk is it for developing countries to bring a claim against GSP-based discrimination?  Would developed countries ever withdraw their programs entirely in response?

Were the Doha Talks Actually a Success?

Ed Gresser says:

The Geneva talks, therefore, ended in failure -- but one that disguised broadening areas of consensus and growing demands for a speedy conclusion to the talks. At a time of generalized worry -- high energy prices, food spikes, inflation and slowing growth -- this is a rare good omen for the future.

More at the link.

Trade in Everything: Pygmy Hippoes

From the Economist:

The Caricuao zoo in Caracas, Venezuela’s capital, is a shadow of its former self. Its last giraffe, Napoleón, died 15 years ago. Ruperta, the last elephant, has been alone for over two years. Gone are the zebras, kangaroos and ostriches. Its director, Carlos Audrines, attributes the decline more to a “crisis of management” than lack of cash, like much else in Venezuela. But thanks to high oil prices and revolutionary solidarity, plans are now afoot to refurbish the rundown facilities and restock the zoo.

Cuba is to supply 19 animals from species of which it now has a surplus. They include a giraffe, two lions, four zebras, a rhino and a pygmy hippo. In what Mr Audrines describes as a barter arrangement (in which the Cubans seem to get the rough end), Caracas will trade them for eight macaws, two tapirs, a puma and four capybaras. Further swaps are planned. Negotiations are also under way with zoos in Moscow and Quito.

Reuters has a slighly different version of the story, involving the trade of pygmy hippoes and other zoo animals for medical equipment.

Oh, and for those who want to read a bit more about pygmy hippoes (as I did), see: http://nationalzoo.si.edu/Animals/AsianElephants/factpygmyhippo.cfm

Russia, Georgia and WTO Accession

From Reuters:

A top Bush administration official on Tuesday played down any connection between Russia's military action in Georgia and Moscow's long-term bid to join the World Trade Organization.

"We've worked with Russia in terms of the WTO accession and they still have a ways to go. So it's not as though they're close to it. They still have some work to do before they get to it," U.S. Commerce Secretary Carlos Gutierrez said in an interview with Reuters.

U.S. Democratic presidential candidate Barack Obama has called for a review of Russia's bid to join the WTO after Moscow took military action against Georgia in a conflict over South Ossetia, a breakaway region of Georgia.

"We should ... convene other international forums to condemn this aggression, to call for an immediate halt to the violence and to review multilateral and bilateral arrangements with Russia -- including Russia's interest in joining the World Trade Organization," Obama said.

...

Gutierrez's comment that Russia was not close to finishing its WTO membership bid was at odds with other recent Bush administration statements.

The full Obama statement is here:  http://my.barackobama.com/page/community/post/laurinmanning/gG5bh2

A China-Vermont Trade Dispute?

From a Vermont TV station's web site:

A state senator from Chittenden County said a letter received from a Chinese official criticizing legislation she has pending in Montpelier "flies in the face of state sovereignty and democratic principles."

Sen. Virginia Lyons of Chittenden County chairs the Natural Resources and Energy Committee. Lyons held a news conference Tuesday to discuss the implications of the undated letter she said she received in April.

The three-page communication, in both English and Chinese, was signed by "Wang Ni Ni" who identified himself as director general for the "China WTO/TBT National Notification & Enquiry Center" and listed an address in "Hai Dian District, Beijing."

The letter opened by saying "we appreciate the opportunity to submit comments on the regulation under the notification proposed by the State of Vermont."

Wang then outlined objections to Lyons' bill that would impose fees on manufacturers of electronic goods sold in Vermont. The fees, which would be calculated based on the weight of an item, would establish a fund for eventual recycling of e-waste. Wang suggests the mechanism would affect manufacturers unevenly and amount to an "unfair restriction of trade."

Lyons said her bill would effectively reduce the volume of electronic waste now winding up in Vermont landfills. Her proposal has yet to see debate at the state capital. But most of her ire focused on what she considers an unwelcome intrusion.

"It's simply not OK for other governments, foreign national governments, to feel they have a right to intervene in our state legislative process in the way China has," Lyons said.

It seems that this kind of direct contact between a foreign government and a state government did not go over well.  I recall reading about something similar in Maryland recenty.  I wonder if we'll see more of this in the future, or if China (and others) will go to USTR about these issues instead.

A Novel Application of Non-Violation

Speaking of WTO legal claims that are a bit of a stretch (which I feel like I've been offering quite a bit of recently) ...

Typically, the "benefits" at issue in a non-violation claim are those resulting from a trading partner's tariff concessions.  So, for example, when one country makes a concession on a product, other countries benefit because their exports of the product can now be sold there at lower prices.

But are there benefits that accrue to the conceding country itself from making tariff concessions, and could these benefits provide the basis for a non-violation claim?  What I have in mind specifically as a benefit is lower import prices.  When you cut tariffs, prices for the imported products in question are likely to fall.  For non-violation purposes the question would then be, could the benefit of these lower prices be undermined by actions of your trading partners, and therefore lead to nullification or impairment?

The reason I thought of all this was OPEC.  Is there an argument that OPEC's actions to restrict oil supply, which presumably raises prices, undermine the benefits of tariff concessions (and the hoped for lower prices) on oil?  (Assuming there are any concessions.  I haven't checked).

Any thoughts?

Another Open Panel Hearing

We can add Australia and New Zealand to the club of Members requesting open panel hearings in their disputes:

At the request of the parties in the dispute “Australia — Measures Affecting the Importation of Apples from New Zealand (WT/DS367)”, the dispute panel has agreed to open its first substantive meeting with the parties and third parties on Tuesday 2 and Wednesday 3 September 2008 to public viewing.

The Democratic Party's Trade Platform

From the draft Democratic party platform:

Smart, Strong, and Fair Trade Policies

We believe that trade should strengthen the American economy and create more American jobs, while also laying a foundation for democratic, equitable, and sustainable growth around the world. Trade has been a cornerstone of our growth and global development but we will not be able to sustain this growth if it favors the few rather than the many. We must build on the wealth that open markets have created, and share its benefits more equitably.

Trade policy must be an integral part of an overall national economic strategy that delivers on the promise of good jobs at home and shared prosperity abroad. We will enforce trade laws and safeguard our workers, businesses and farmers from unfair trade practices–including currency manipulation, lax consumer standards, illegal subsidies, and violations of workers’ rights and environmental standards. We must also show leadership at the World Trade Organization to improve transparency and accountability, and to ensure it acts effectively to stop countries from continuing unfair government subsidies to foreign exporters and non-tariff barriers on U.S. exports.

We need tougher negotiators on our side of the table–to strike bargains that are good not just for Wall Street, but also for Main Street. We will negotiate free trade agreements that open markets to U.S. exports and include enforceable international labor and environmental standards; we pledge to enforce those standards consistently and fairly. We will not negotiate free trade agreements that stop the government from protecting the environment, food safety or the health of its citizens, give greater rights to foreign investors than to U.S. investors, require the privatization of our vital public services, or prevent developing country governments from adopting humanitarian licensing policies to improve access to life-saving medications. We will stand firm against agreements that fail to live up to these important benchmarks. We will work with Canada and Mexico to amend the North American Free Trade Agreement so that it works better for all three North American countries. We will work together with other countries to achieve a successful completion of the Doha Round Agreement that would increase U.S. export, support good jobs in America, protect worker rights and the environment, benefit our businesses and our farms, strengthen the rules-based multilateral system, and advance development of the world’s poorest countries.

Just as important, we will invest in a world-class infrastructure, skilled workforce, and cutting-edge technology so that we can compete successfully on high- value-added products, not sweatshop wages and conditions. We will end tax breaks for companies that ship American jobs overseas, and provide incentives for companies that keep and maintain good jobs here in the U.S. And, we will also provide access to affordable health insurance and enhance retirement security, and we will update and expand Trade Adjustment Assistance to help workers in industries vulnerable to international competition, as well as service sector and public sector workers impacted by trade, and we will improve TAA’s health care benefits. The United States should renew its own commitment to respect for workers' fundamental human rights, and at the same time strengthen the ILO's ability to promote workers' rights abroad through technical assistance and capacity building.

Tariff Discrimination that Hurts the Poor

Via Jonathan Dingel, I see that Ed Gresser of the Progressive Policy Institute is talking about how a large percentage of tariff duties are paid by the poor:

It is only a slight exaggeration to argue that the tariff system has essentially evolved into a tax on clothes and shoes, which generate most of the government's revenue from tariffs. In 2007, clothes alone accounted for $9.5 billion of the $26 billion in U.S. tariff revenue, shoes added $1.9 billion, luggage and handbags another billion. The cost to the public, magnified by retail markups and sales taxes, is likely about $40 billion a year. It is a burden that disproportionately affects poor and working-class Americans.

Though the tariff system is smaller than other taxes, it is far more regressive. This is because poor people spend a greater share of their income on clothes and shoes than do wealthy or middle-class people. The cheap and simple goods made in poor countries and bought by low-income Americans are subject to far higher tariffs than luxury goods. An acrylic sweater attracts a 32 percent tariff, while a cashmere sweater gets only 4 percent; a polyester bra is tagged with a 17 percent tariff, while one made of silk gets less than three percent; and a cheap stainless steel fork is hit with a 19 percent tariff, while a silver-plated spoon has none at all.

A while back I referred to another study by the same group, and suggested a somewhat far-fetched WTO claim.  Here, there may be a simple MFN claim (or claims) to be made.  There seem to be a few products mentioned above that are perhaps something close to "like."  Could this be used as the basis for an argument that there is discrimination against specific countries, if the product of one country gets worse tariff treatment in comparison to the like product of other countries?  Is it worth combing through the tariff schedules to look for tariff distinctions among like products, combined with a discriminatory effect on certain countries?  Although perhaps people have already done that, and if there was a claim to make, they would have made it by now.

Policy Space

From a letter to the editor in the Economist, written by Robert Wade of LSE, commenting on the Doha negotiations:

Several developing countries now have big enough markets to give them leverage over rules of access to their markets, and their governments could take the lead in revising current rules on terms more favourable than those they agreed to in the Uruguay round of trade talks.

These governments should sculpt new multilateral agreements aimed at reshaping domestic economic space, including softening the handicaps imposed on them by rules on intellectual property and the protection of nascent industries.

In the past, I have often been unsure about the scope of the policy space argument, which I hear quite a bit these days.  Sometimes I have the impression its advocates just want more flexibility on issues like IP; other times I get the sense it is simply about using protectionism for development.  This letter by Wade clarifies things a bit for me (at least in terms of his views), by explaining that he wants both.

It seems to me that arguments for and against the two (IP rights and protecting domestic industries) are very different, and I think it is useful to separate them.  (Or at least make clear, as Wade does, that he supports more policy space in both areas.)   If you want to argue for infant industry protection, that's fine.  We have been arguing about this issue for hundreds of years, and will likely continue to do so.  (My views have changed on this one -- borrowing from John Kerry, I was for it before I was against it).  But I do think clarity on the issue of policy space is important if it is to go anywhere.

Gambling Updates

My favorite source for Gambling case news, the Antigua Sun, has this update:

A new deadline has been put in effect for Antigua and the US to reach an agreement concerning the ongoing online gaming dispute.

The date of 1 Oct., has been set as the time the two countries will have yet another opportunity to reach a resolution to the issue, which has gone on for years.

And in news related to the EU-U.S. part of the dispute:

Two Representatives, Robert Wexler and Steven Cohen have warned the U.S. Justice Department that continuing to investigate European online gambling companies could put the United States in danger of ruining trade relations with the European Union at the World Trade Organization.

The two Representatives sent letters warning that if the investigations do not cease, the U.S. risks much bigger trade sanctions then what has already been approved for Antigua. The issue of the U.S. continuing their investigations could lead to major problems in the future.

"In all likelihood, this issue will escalate and I understand could result in WTO action focused specifically on how the U.S. government enforces its laws. I cannot see how that can be in the interests of this country," said Wexler in a letter to U.S. Attorney General Michael Mukasey.

Tariff Preference Discrimination

Via Eyes on Trade, I came across an article in Newsweek about a request by Chevron that the U.S. stop giving certain tariff preferences to Ecuador:

Few legal battles have been more exotic than the lawsuit tried over the past five years in a steamy jungle courtroom in Ecuador's Amazon rain forest. Brought by a group of U.S. trial lawyers on behalf of thousands of indigenous Indian peasants, the suit accuses Chevron of responsibility for the dumping (allegedly conducted by Texaco, which Chevron bought in 2001) of billions of gallons of toxic oil wastes into the region's rivers and streams. Activists describe the disaster as an Amazon Chernobyl. The plaintiffs—some suffering from cancer and physical deformities—have showed up in court in native garb, with painted faces and half naked. Chevron vigorously contests the charges and has denounced the entire proceeding as a "shakedown."

...

Chevron is pushing the Bush administration to take the extraordinary step of yanking special trade preferences for Ecuador if the country's leftist government doesn't quash the case. A spokesman for U.S. Trade Representative Susan Schwab confirmed that her office is considering the request.

My first reaction was, taking into account the guidance provided by the Appellate Body in the EC - Tariff Preferences decision, can the U.S. take away preferences from Ecuador on this basis?  That is, would the resulting discrimination against Ecuador be permitted under the Enabling Clause?  But then I realized the preferences at issue might not be under the GSP, but rather under the Andean preference program (which currently has the acronym of ATPDEA, but used to be the ATPA).  I asked the Eyes on Trade person who reported on this, and he confirmed that his understanding is that it was, in fact, under ATPDEA.

I then looked at the ATPA/ATPDEA WTO waiver, to see if there was anything interesting or informative in there.  From what I could gather, currently there is no waiver in place for the ATPDEA.  The U.S. has requested one, but it has not yet been granted.  So, I turned to the old ATPA waiver [WordPerfect file], which expired in 2001.  I noticed that there were several cross-references to the Enabling Clause rules, or key parts of the Enabling Clause language, in the preamble to the waiver:

Bearing in mind the 1979 Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries;

...

Considering also that the duty-free treatment provided under ATPA is designed to promote the expansion of trade and economic development of beneficiaries in a manner consistent with the objectives of the GATT 1994 and with the trade, financial and development needs of the beneficiary countries, and not to raise barriers or to create difficulties for trade of other Members;

...

Considering, furthermore, that the tariff preferences provided under the ATPA by the Government of the United States shall not adversely affect the maintenance, operation and improvement of the Generalized System of Preferences of the United States;

Are these references in the preamble enough to make the Appellate Body's interpretations in the GSP case apply to the ATPA waiver?  (It has expired, of course, but assuming it was still in force).  My initial inclination is that this argument would probably fail.  But I do wonder if perhaps there are other WTO rules that might apply here.

Blaming Lamy

Some people are now blaming Pascal Lamy for the recent failure to conclude the Doha Round:

Observers say a big share of the blame for the failure should also be borne by Lamy, for he convened the mini-ministerial when even he was doubtful about its success.

I'm not sure I agree.  I'm reminded of this quote from the great philosopher/hockey player Wayne Gretzky:  "You miss 100 percent of the shots you never take."  Even with low odds of success, I think it was worth taking the shot in this situation.  To continue the hockey metaphor, it was from a bad angle, and there were a couple defenders in the way, but sometimes they still go in.

McCain On NAFTA "Harmonization"

More from the WSJ trade discussion between Obama and McCain advisers.

Question #4: ... For the McCain camp: Nafta came into effect 14 years ago. What parts aren’t working well? Would you look to remake parts of the pact?

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Philip I. Levy advises the McCain campaign on international trade and development issues. Click here for Levy’s full bio.

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Going forward, the U.S., Canada, and Mexico can build on Nafta — perhaps even in as large a multilateral context as that proposed by President Clinton’s Free Trade Area of the Americas — to achieve needed harmonization, while continuing on a bilateral basis to address border security.

I'd like to hear more about the "harmonization" that McCain might have in mind here.  Harmonization is something that liberal groups like Global Trade Watch are up in arms about, but NAFTA can be controversial on the right as well in relation to its impact on sovereignty, and I supect that proposals for harmonization could cause concerns there.

Obama's Views on NAFTA Investment Rules

The WSJ has a nice question and answer / debate on trade issues between leading Obama and McCain advisers.  Here's Obama adviser Dan Tarullo's response to a question about what exactly Obama does not like about NAFTA:

Question #4: Sen. Obama has said he would renegotiate Nafta. For the Obama camp: What specifically would you like changed? Are you concerned that the talks will worsen relations with America’s two neighbors? ...

* * *

Daniel K. Tarullo:

Sen. Obama supports adding binding labor and environmental standards to Nafta. As he has said on numerous occasions, he would work with the governments of Canada and Mexico to achieve this objective. These provisions will benefit workers and the environment in all three North American countries by ensuring that workers are not mistreated, and the environment not despoiled, by firms seeking a trade advantage. As demonstrated by experience with the changes made in the Peru trade agreement, the inclusion of basic labor and environmental standards is eminently feasible.

There is also a broader cooperative agenda that the three countries should pursue in the economic area, including such matters as energy management. As he explained in his speech setting forth his plan for renewing U.S. leadership in the Americas, Sen. Obama is committed to policies that will promote opportunity and bottom-up growth with equity.

What struck me about this answer was that there is no mention of investment.  In the primary, the Clinton team expressed a lot of concern about investment rules; Obama mentioned it as well, but to a lesser extent, and thus I wondered what his full views were.  Now, in response to a direct question as to what Obama dislikes about NAFTA, his adviser did not even refer to it, which perhaps suggests that it is not something they plan to pursue strongly.

Trade in Everything: School Teachers

From the Washington Post Magazine:

This was the fourth year that the county had hired teachers from the Philippines, an increasingly popular source of manpower for U.S. school systems. In Prince George's, the Filipinos were scattered throughout the county, teaching pre-kindergarten through high school, and all topics, from special education to math, science and gym. Mabel, a 46-year-old petite mother of three, was assigned to teach first grade at Samuel P. Massie Elementary in Forestville, where six other Filipino teachers -- one-fifth of the school's classroom instructors -- were posted.

To many school officials, Filipino teachers are ideal job candidates. The mostly female recruits speak English, hold advanced degrees and pass internationally recognized teaching exams. And they see the salaries offered here as small fortunes. ...

The Doha Round's Revenge?: The Return of WTO Litigations

Brazil decided to sue the U.S. in the WTO for the latter’s alleged illegal farm subsidies as well as import tariffs on the Brazilian ethanol (54 cents per gallon). See Financial Times, Aug 3, 2008, Brazil to dispute US subsidies.

A PROPOSAL TO BREAK THE STALEMATE IN THE DOHA ROUND

As we know, the stumbling block in the Doha Round has been the Special Safeguard Mechanism in Agriculture. The first impression is that the stalemate is a result of a conflict between those who would like to sacrifice poor peasants in developing countries and those who want to protect these poor peasants.

In fact, this impression is misleading because everybody agrees that poor peasants in developing countries must be protected. The real issue however is about who must pay for this protection. My proposal is thus simple. Let’s protect the world poor peasants in developing countries but through a different mechanism than the one advocated by India and China.

To this end, developing countries governments would be allowed in case of a threatening surge of agricultural imports to grant direct payments to their peasants plus a reasonable adjustment of tariffs at the border as they claim now.

These direct payments would be completely shielded not only from any reduction commitments and inclusion in the total amount of  agricultural support but most importantly from any multilateral action or countervailing duties under the SCM Agreement or any other agreement.

As a result, poor peasants in developing countries would be protected for their livelihood but the payers would be different from what developing  countries want now. A certain  reasonable adjustment through tariffs would be allowed but at least half of the protection of poor farmers would come from developing countries' government budgets and the urban elite of developing countries as taxpayers. This urban elite would in any case be partially compensated by the lower prices of food resulting from a moderate adjustment of tariffs at the border in this new version of the Special Safeguard Mechanism.

It is also possible to use this opportunity for a collaboration between the World Bank and the WTO for countries who do not have the money for these complementary transfer payments.

Thank You For Smoking (Certain Kinds of Cigarettes)

The issue of a ban on clove cigarettes is still lingering.  In an article on legislation that would give the FDA authority to regulate tobacco, the NY Times notes:

The bill would ban candy, fruit and spice-flavored cigarettes, including clove cigarettes, but menthol cigarettes would be exempt from the ban. Menthol cigarettes make up 28 percent of the United States cigarette market.

Indonesia, which exports a clove-flavored cigarette called kretek, has objected to the favorable treatment of menthol over other flavorings, Mr. Leavitt said. “The government of Indonesia has repeatedly objected to the bill on the ground that this disparate treatment is unjustified and incompatible with W.T.O. trade rules,” Mr. Leavitt wrote, in reference to the World Trade Organization.

But the article also says that a veto is likely, so Indonesia may not need to worry just yet.