International Economic Law and Policy Blog

A Few Points About the Aircraft Decision

Nothing that important, but a couple things of note.

First, Boeing has provided a nice breakdown of the findings for each measure.  We often do this in our DSC, but they've saved us the trouble.  (I assume they got it right, but have not double-checked).

Second, I'm curious as to what was going on in fn. 7 of the report:

On 28 February 2006, the Panel had received an unsolicited communication from an individual. The communication addressed a question that is not an aspect of the matter within the Panel's terms of reference. The Panel therefore found it inappropriate to consider that communication and has rejected it.

Third, apparently things got a little testy between the parties:

6.4 The European Communities notes that the term "EC" is used in the Interim Report when referring to the European Communities, while the term "United States", which the European Communities describes as a "full reference", is used when referring to the United States of America. In light of this, the European Communities requests the Panel to replace the term "EC" by the term "European Communities" in all instances where the European Communities is mentioned or used as a noun, referring in support to a footnote in its answers to the Panel's questions filed 30 April 2007, which states "{t}he European Communities would also ask the Panel to avoid adopting the irritating US habit of systematically abbreviating the European Communities to "EC"."1464

6.5 The United States did not comment on this aspect of the European Communities' request.

Finally, if you're looking for some substance, the discussion of "pass-through" and related issues in paras. 7.178-289 is pretty interesting.  I'm not sure yet what I think of it all.

The WTO Aircraft Decision

It's out, and it's just about as long as they said it would be.  Here's the "abbreviated" version -- just the background and findings, with the parties' arguments and annexes taken out -- on our web site.  This version is "only" about 870 pages of text.  Here's the full version, if you don't want to miss any details:  http://www.worldtradelaw.net/reports/wtopanelsfull/ec-aircraft(panel)(full).pdf

Here's USTR's summary of the key findings:

Launch Aid

The WTO panel found that European governments have provided Airbus more than 15 billion euros (face value) in launch aid – subsidizing every model of aircraft ever produced by Airbus in the last 40 years. This preferential form of financing permitted Airbus to introduce new models by offsetting the enormous costs and extremely high risks that characterize the development of large civil aircraft.

Launch aid provided by Germany, Spain and the UK for the Airbus A380 was prohibited per se under WTO rules because it was conditioned on the export of aircraft.

Infrastructure-Related Subsidies

The WTO panel found that France, Germany and Spain provided more than one billion euros in infrastructure and infrastructure-related grants between 1989 and 2001, including the creation of land in Hamburg to allow Airbus to expand production facilities, extending an airport runway in Bremen to allow Airbus to transport wings to other facilities for aircraft assembly, and transforming agricultural land in Toulouse into industrial facilities for the assembly of the A380.

Share Transfers and Equity Infusions

The WTO panel found that France and Germany provided billions of dollars of share transfers and equity infusions to Airbus between 1987 and 1998.

Research & Development Funding

The WTO panel found that the EU, France, Germany, Spain and the UK provided over one billion euros in funding between 1986 and 2005for research and development directed specifically to the development of Airbus aircraft.

Adverse Effects for the U.S. Aircraft Industry

The Panel found that the above subsidies caused adverse effects to the interests of the United States, in the form of lost sales – involving purchases of Airbus aircraft by easyJet, Air Berlin, Czech Airlines, Air Asia, Iberia, South African Airways, Thai Airways International, Singapore Airlines, Emirates Airlines, and Qantas – and lost market share, with Airbus gaining market share in the EU and many third country markets at the expense of Boeing.

Here's Boeing's press release.  They have a broad interpretation of the impact of the findings:

"Under today's decision, Airbus must repay the $4 billion in illegal launch aid it received for the A380 or restructure the A380's financing to proven commercial terms. Likewise, Airbus must abandon its plans to finance the A350 through the use of illegal subsidies," ...

The point about future subsidies to the A350 is very important.  One issue I'll be looking for as I read through is the following:  Is there anything in this report that affects future aid to new Airbus models?  From the press reports I read after the confidential version was issued to the parties, it seemed that the panel did not find that aid to Airbus was part of a single, general subsidies program.  As a result, the U.S. would not be able to challenge future aid to Airbus for new aircraft types as a failure to comply with this panel's findings of violation.  But I want to see for myself exactly what the panel said on this point.

As for whether the A380 loans have to be "repaid," well, there is the Australia - Leather, Article 21.5 decision in support, but that view was pretty controversial.  It will be interesting to see what position the U.S. government (as opposed to Boeing) takes on this point.

On the other side, France was was happy with some parts of the ruling:

"France is already delighted by the conclusions of the WTO report, which confirm, once again, that the repayable aid is not in itself contrary to WTO rules," ...

Nevertheless, Airbus may push the EU to appeal:

"Airbus, the EU and the member states are closely analyzing the report in advance of a possible review by the WTO Appellate Body," Rainer Ohler, head of public affairs and communications at EADS (EAD.PA) subsidiary Airbus, said in a statement.

More on EU Biofuels Regulation

From SSRN, this is the abstract of "EU Biofuels Policy – Raising the Question of WTO Compatibility," by Stephanie Switzer and Joe McMahon:

This article examines the question of the compatibility of the new EU Biofuels regime with the disciplines established by the WTO. After an explanation of the evolution of the Biofuels regime, the authors consider whether that regime is compatible with the rules on subsidies established by the WTO Agreement on Agriculture and the Agreement on Subsidies and Countervailing Measures. Thereafter the authors assess the compatibility of the regime with the national treatment provision of the GATT, Article III. Concluding that there may be an incompatibility with the latter, the authors conclude by suggesting the need for international negotiations on the liberalization of trade in Biofuels and more especially on the issue of the sustainability of Biofuel production, an issue that lies at the heart of the changes made recently to the EU Biofuels regime.

From the paper:

Biofuels20 and bioliquids21 used to meet targets set out in Directive are required to adhere to certain sustainability standards.22 The core sustainability criterion established under the Directive requires biofuels to achieve a minimum level of 35% greenhouse gas savings.23

...

It is argued that while the existence of sustainability criteria does not in itself subject imported products to treatment which is ‘less favourable’ within the meaning of Article III:4, the 35% greenhouse gas savings criterion may be problematic. It is possible that this figure could favour biofuel production from domestically produced rapeseed oil over imported products such as biodiesel derived from palm oil.84 Indeed, the ‘default’ greenhouse gas savings for biodiesel produced from rapeseed set out in the Directive is listed as 38 %. This compares rather unfavourably with the default for biodiesel produced from palm oil which is listed as achieving greenhouse gas savings of only 19%.85 While a more detailed examination is required of both the impact of these default values and reasons behind the introduction of the value of 35% greenhouse gas savings, it is possible that their combined effect could result in less favourable treatment of imported biofuels as well as the raw materials used in their production. ...

They also talk about subsidies rules, GATT Article III:2 and GATT Article XX.

Outsourcing Legal Work

From The Economist:

RITU SOLANKI, a 28-year-old lawyer with a degree from Nottingham University, spends most of her time drafting contracts and legal memos for a telecoms firm in Britain. She, however, is in Gurgaon, a high-rise satellite city on Delhi’s edge, where she works for CPA Global, a legal-outsourcing company. A lawyer with similar experience at a London law firm might charge up to $400 an hour for the sort of work Ms Solanki does; her labour costs around $50 an hour. As law firms and corporate legal departments face mounting pressure to cut costs, an increasing number are choosing the Indian option.

Indonesia, Biofuels and the WTO

As the Clove Cigarettes WTO dispute (DS406) moves forward, Indonesia is likely to gain a lot of experience relating to de facto discrimination claims, GATT Article XX defenses and the TBT Agreement.  Can they use this experience to bring a claim against EU biofuel restrictions?  Writing in the Jakarta Globe, Fredrik Erixon of ECIPE argues that they should:

In recent weeks a war of words has been waged between diplomats representing Indonesia and the European Union over how Europe plans to treat the importation of Indonesian biofuel and other palm-based products. ...

The uproar is over a decision by Europe’s energy commissioner, Gunther Oettinger, and officials in the EU to add new environmental standards for biofuels to have full access to its market.

These new standards will discriminate against producers in Asia, Africa and Latin America, and make Europe’s biofuel policy even more protectionist than it already is.

The effect of new standards will be to limit the importation of foreign biofuels in the European market.

The stakes for Indonesia are high. The new standards run the risk of closing Europe’s market entirely for the nation’s biofuels exporters, jeopardizing both the economy and many jobs.

In an unintended irony, the global environment will also be a casualty of this protectionism as the main effect of Europe’s new move will be to slow down the shift from fossil fuels to cleaner biofuels.

...

But the Indonesian government could put an end to it. Europe’s new policy on biofuels production standards — known as the Renewable Energy Directive — almost certainly runs afoul of international law under World Trade Organization’s regulations.

WTO rules are especially attentive to discrimination and the principle that like products should be treated equally.

There is good reason for this: The architects of the trade group knew that domestic interests pressure governments to trump up bogus charges to keep foreign products out.

Thus a regulation that prevents biofuels from entering Europe’s market just because it has been produced in peat lands, for example, would be met with suspicion by WTO authorities.

And yet this is precisely what the RED intends to do — block Asian biofuel because it is produced in the tropics.

But the physical product characteristics of Indonesian palm-based biofuel will be the same as those for a biofuel produced in Europe, and in the eyes of the WTO, this is what matters.

In similar cases in the past, the Appellate Body, the highest court of the WTO, ruled that methodologies used in the creation of a product can only be the basis for treating product as unlike (i.e. discrimination) if they affect physical characteristics.

This is clearly not the case with Europe’s new land-based criteria for access to its market.

It’s true that the WTO allows members to deviate from its obligations, but rarely. A member country is justified to deviate if it can prove a measure is necessary to protect the environment, for example.

But here Europe runs into problems. A trade restriction against foreign biofuels will limit the supply in Europe and increase prices.

This makes the transition away from more polluting fuels such as oil and gas more difficult.

Indeed, slowing down the shift away from fossil fuels — which the planned European regulation would do — fails to advance broader ecological interests.

EU representatives say they welcome a WTO complaint over its new biofuels standards. Julian Wilson, the head of an EU delegation to Indonesia and Brunei, recently said, “We really hope to have a debate at the WTO on the matter and we welcome it.”

Indonesia should take Wilson up on that invitation.

Rather than retaliating by other means, it is better to solve disputes in a legal and structured form in the WTO. Indonesia also stands a good chance to win. Europe is erring on the side of protectionism.

A number of questions occur to me:

-- What role do Process and Production Methods (PPMs) currently play in WTO non-discrimination analysis?

-- Aside from certain differences in production, are the Indonesian biofuels "like" EU biofuels?

-- Does the EU regulation have any impact on EU biofuel production?  Would EU domestic production be affected by it?  What proportion of Indonesian (and other foreign) producers are affected by it?

-- Are biofuels cleaner than fossil fuels?  Sometimes?  Always?  By how much?  To what extent does the use of biofuels contribute to a cleaner environment?

-- Assuming biofuels are, generally speaking, cleaner than fossil fuels, how does the benefit to the environment of using biofuels compare to the harm from producing them in ways that damage the environment?

Overall, this seems like it could be one of the more difficult and contentious "trade and environment" cases.  I'm going to state the obvious here and say that it would be better for the trade regime if the countries involved could work out a solution outside the context of WTO dispute settlement.  But that may not be possible.

The Economist has a good article this week about the use and environmental impact of palm oil here.  Previous posts on this topic are here, here and here.
 

Book Review: Luca Rubini: The Definition of Subsidy and State Aid

I had been working on a book review of Luca Rubini's "The Definition of Subsidy and State Aid: WTO and EC Law in Comparative Perspective."  Among other reasons for doing so, this seemed like a good way to prepare for the EC - Aircraft WTO panel report, dealing with alleged subsidies to Airbus.  Unfortunately, I hadn't gotten very far with the review, and now news reports indicate that the report will be circulated to the public this week, which means I won't have time for much else for a while.  So, with the report on its way, I thought I would cut the review short and simply post what I had done so far.  It's not very well structured or thought out, and as I look it over I realize it doesn't get into many details about the book (it's a lot of setting up issues before I got to the book part), but perhaps it will be of some interest nonetheless.

The first thing to say about the book is, don't be fooled by the title.  While there's plenty of discussion about SCM Agreement Article 1 and the definition of a subsidy, the book is much broader than that.  It gets into many of the conceptual issues involved with determining how subsidies should be regulated internationally.

As everyone is probably aware, subsidies regulation is fairly big news these days, which makes the book particularly relevant.  For one thing, we've seen massive bailouts of the financial and auto industries in rich countries.  For another, the aforementioned Airbus subsidies panel report, which will elaborate on many aspects of WTO subsidies law, is coming out, and the interim report in the case against the alleged U.S. subsidies to Boeing is due to be issued soon as well.  As a result, conceptual thinking about how to define and regulate subsidies is a pretty topical issue.

I have a sense that subsidies are sometimes thought of as narrow, technical issues, separate from the broader issue of establishing a purpose for trade agreements.  It's easy to get bogged down in the details of countervailing duty calculations or interpretations of the SCM Agreement Illustrative List, and lose sight of the big picture as a result.  In my view, though, determining the proper scope of subsidies rules goes to the heart of defining a purpose for trade agreements.  Subsidies are measures that can easily be, and often are, used for a variety of legitimate public policy purposes.  If trade rules related to subsidies are defined too broadly, they can restrict the ability of governments to use subsidies for these purposes.  At the same time, subsidies can also be used as a substitute for protectionist tariffs and quotas.  The question is, how can we create the proper balance in the rules so that protectionism is constrained, but other policies are allowed?  It's this balance (well, not this exact balance, but something along these lines) that underlies the book.

Some have argued that we should err on the side of allowing subsidies.  A while back, I discussed an Alan Sykes paper which made the case for being more permissive with subsidies regulation.  And I know there are some libertarians and others who argue that foreign subsidies are good for domestic consumers, so we shouldn't worry about them.  As I think I've said, I take a somewhat different view, in that I believe strong disciplines on subsidies are useful.  But I think there are gaps and flaws in the current rules, and I don't have a simple and effective way to structure these rules better than what we have now.  For those who are looking for such a way, Luca Rubini's book is a good start in thinking about how to deal with these issues.

The G20 Gives up on Doha

For now, at least.  From Reuters:

World leaders dropped a commitment on Saturday to complete the troubled Doha trade round this year and vowed to push forward on bilateral and regional trade talks until a global deal could be done.

Reuters then sums up the problems nicely:

But the Doha round has been dogged by differences among trade powers who want more access to one another's markets but have struggled to lower their own trade barriers.

Russia and the WTO

A debate in Foreign Policy over Russia's WTO accession.  From Anders Aslund and Fred Bergsten

Russia has never been closer to WTO accession. The remaining hurdles are modest: sanitary rules for U.S. exports of chicken and pork, limits on future agricultural subsidies, rules for encryption, regulation of state-owned enterprises, and export tariffs for lumber. By and large, these issues can be settled bilaterally with the United States. If any query remains after the Obama-Medvedev summit, it can be concluded at the G8 and G20 summits in Toronto that follow on June 26-27. Russia is the only member of the G8 or G20 outside the WTO.

The real obstacle is the lack of mutual trust. Russian trade negotiators fear that the Americans will raise new concerns after they think they have settled all the outstanding issues. A year ago, American negotiators were thrown off balance by Prime Minister Vladimir Putin's assertion that Russia's customs union with Belarus and Kazakhstan had priority over its WTO accession, but Russia has now made clear that WTO entry comes first and should proceed on its own. Therefore, Russia's accession needs to be decided politically by the presidents, and the outstanding technicalities could then be sorted out in a few months.

...

Now is the right time for Obama and Medvedev to resolve the last obstacles on the way to Russian entry to the WTO. The resulting encouragement of Russia's modernization is very much in the interest of both countries. Russia urgently needs to modernize, and the United States, bogged down in Afghanistan and facing the prospect of a nuclear-armed Iran, needs Russian cooperation more than ever.

And a reply by David Christy:

Russia has managed to turn WTO accession on its head by acting as a deal maker, not a deal taker. Year after year, Russian negotiators have signaled that they have made more progress than is in fact the case and have refused to budge on key issues. They are playing a waiting game, counting on a variety of extraneous issues to make its set of proposed commitments (which WTO members would have rejected out of hand had any other country made them) more attractive. Compared with the accessions of China and Saudi Arabia, the reforms Russia has offered and implemented are far less extensive.

Russia might benefit from the major international players' preoccupation with other priorities, for which they require Moscow's help. The U.S. negotiating position has fluctuated as part of a larger dance relating to its effort to isolate Iran. The European Union has yet to place pressure on Russia, presumably because of the reliance of many of its member states on Russian energy. And there are also powerful institutional factors affecting the negotiations: The WTO, put simply, needs a win. The Doha Development Round, meant to lower global trade barriers, is still going nowhere. Russian accession would put a smile on everyone's face, at least for a while, and would help cement WTO Director-General Pascal Lamy's legacy.

These factors tilt the balance toward WTO members' acceptance of a very modest set of commitments for Russia's entry. Should this happen, Moscow's strategy will have succeeded brilliantly -- and in spite of a substantial list of open concerns. Medvedev's June 24 agreement to remove the ban on U.S. poultry imports is significant, but the open issues range from straightforward trade issues, such as high export duties on timber, to the Kremlin's leveraging of its energy sector to achieve political goals, such as during its dispute with Ukraine in January 2009. In addition, the impact of the customs union between Russia, Belarus, and Kazakhstan on all three members' accessions will be profound, but has yet to be fully assessed. One thing is certain: If the customs union requires changes to Russia's trade regimes, WTO negotiations which had closed will be reopened.

...

As Russia pushes for accession, time is on its side. Aslund and Bergsten's article was well-timed for Russia's charm offensive in Washington this week. But with each article like theirs, Russia's negotiating position grows stronger.

The International Law of Free Markets

In a field full of free market supporters (certainly not everyone, but a good number), I think I am one of the most free market oriented.  (I don't even mind being called a "free market fundamentalist," even though I realize it is meant as an insult!)  Nevertheless, as much as I like free markets, putting free market principles into international law makes me a little nervous.  I'm not quite sure people are ready for it, and I don't want to push too far and create a backlash.  As a result, I'm sympathetic to this paper, "Pro-Market Reform Sustainability and the Tool of 'Constitutionalization': Economic Rights as Fundamental Rights?," by Ioannis Glinavos, which is concerned about, among other things, international constitutionalization of free markets. Here's the abstract:

This paper explores the potential of the concept of 'constitutionalisation' of pro market policies to explain the contemporary nature of the state market relationship. The analysis in this paper shows that the contemporary legal framework offers opportunities to investors to challenge and control state action on the 'micro level' via what has been described as a 'regulatory freeze'. This means that it is not so much that courts and tribunals have adopted significantly expanded definitions of expropriation in order to fundamentally restrict state regulatory discretion. On the contrary, a regulatory freeze is the consequence of states' own reluctance to legislate/regulate in areas where challenges might be brought. The paper goes on to argue that the legal position is supplemented by an enforcement arm distinct from legal mechanisms. The market exercises 'macro level' control over state discretion through its ability to penalise states that challenge or seek to challenge the current, predominately pro market incarnation of the state market relationship. The paper begins by an evaluation of the role of private property rights in modern capitalism which shows the extent to which modern interpretations of market expectations are anchored on the protection of private property. The paper then proceeds with a comparative study examining definitions of expropriation internationally, aiming to define the outer limits of curbs on state discretion. This discussion inevitably addresses the work of private dispute resolution mechanisms (ICSID, Iran-US Claims Tribunal) and institutional mechanisms for dispute resolution contained in NAFTA, the EU and the ECHR. Finally, the paper reflects on the Greek sovereign debt crisis of 2010, showing the potential of international markets to influence policy directions consistent with global capital market expectations, creating an almost constitutional global system of restrictions on government discretion consistent with a liberal version of the state-market relationship. The paper concludes by suggesting that efforts to cement a liberal version of the state-market relationship, using national and supranational legal curbs on government discretion are politically dangerous and developmentally short sighted, especially when the enforcement mechanisms take extra legal paths.

I'm not sure that everyone who supports the rules he talks about sees them as part of an effort to promote free market policies.  But regardless of the intent, I think it's fair to say that these restrictions on government regulation do have that effect to some disagree.

More On Dissents

This time dissents at the domestic level.  Here's a question from the Panel in the U.S. - Tyres Safeguards (DS399) WTO dispute:

Q8. What weight, if any, should the Panel give to the fact that there were two dissenting opinions within the USITC on causation?

As background, there are six ITC commissioners, and four voted affirmative, while two voted negative, in the tires case.

Here was the U.S. response to the question:

32. The Panel should give no weight to the fact that there were two dissenting Commissioners on the issue of causation. The separate views of any dissenting Commissioner are not part of the determination of the ITC majority that market disruption exists. It is the determination of the majority of Commissioners that forms the legally operative determination of the ITC, and the determination in front of this Panel. Accordingly, the United States submits that the dissenting views are not of legal consequence and, therefore, not pertinent to the Panel’s consideration of whether the determination of the ITC is consistent with the U.S. obligations under paragraph 16 of the Protocol of Accession.

33. We note in this regard that the Appellate Body has stated that WTO Members have considerable latitude in structuring the internal decision-making process of their competent authorities. The Appellate Body explained:

[W]e are not concerned with how the competent authorities of WTO Members reach their determinations in applying safeguard measures. The Agreement on Safeguards does not prescribe the internal decision-making process for making such a determination. That is entirely up to WTO Members in the exercise of their sovereignty. We are concerned only with the determination itself, which is a singular act for which a WTO Member may be accountable in WTO dispute settlement.44

34. The same reasoning applies to decisions under paragraph 16 of the Protocol of Accession. The Protocol also does not prescribe the internal decision-making process for making determinations of market disruption. Therefore, the Panel should address only the determination of the ITC, not the dissenting views.

35. Finally, the United States notes that China has cited the views of the dissenting Commissioners throughout its written submission on a number of issues. Although the majority and dissenting Commissioners may have come to different conclusions on certain issues, the fact that the majority and dissenting Commissioners both addressed these issues in detail only underscores that the Commission as a whole addressed the circumstances of the tires market in detail, and gave serious consideration to the arguments made by all parties before the Commission, including those parties who opposed any remedy.

The U.S. response seems right to me.  Here's a harder question, though.  Where the Commission vote is divided evenly (and thus there's no "majority" view), the determination is deemed to be affirmative.  See 19 U.S.C. §1677(11).  How would this situation be dealt with under WTO rules? 

Zeroing and the Role of Precedent

From the U.S. first written submission in the U.S. - Anti-Dumping Measures on Orange Juice (Brazil) (DS382) dispute (another "zeroing" case):

30. While prior adopted panel and Appellate Body reports create legitimate expectations among WTO Members,18 the Panel in this dispute is not bound to follow the reasoning set forth in any Appellate Body report. A panel is bound to adhere to its own objective assessment as to the interpretation of the covered agreements. The Appellate Body itself has stated that its reports are not binding on panels.19 While the reasoning in such reports may be taken into account, Members are free to explain why any reasoning or findings should not be adopted by a panel bound by Article 11 to make its own objective assessment.20

...

33. The United States recognizes that the panel in US – Zeroing II (EC), while acknowledging the reasoning of previous panels that there is no obligation to provide offsets outside of the context of the weighted-average-to-weighted-average comparison in investigations was “persuasive,” ultimately found that this interpretation was inconsistent with Article 9.3 of the AD Agreement and Article VI:2 of the GATT 1994 solely because it differed from an alternative interpretation developed in Appellate Body reports.25 However, Article IX:2 of the Marrakesh Agreement Establishing the World Trade Organization confers the authority to adopt interpretations of the covered agreements exclusively upon the Ministerial Conference and the General Council.26 Therefore, while the dispute settlement system serves to resolve a particular dispute, and to clarify agreement provisions in the context of doing so, neither panels nor the Appellate Body can adopt authoritative interpretations that are binding with respect to another dispute.

In terms of this specific dispute, it seems unlikely the U.S. argument will have much impact, given what the Appellate Body has said in the Stainless Steel case on the issue of precedent (not to mention what it has said in many cases about zeroing).  The Appellate Body was fairly clear on the point (although some nuances of its reasoning may be open to debate).  My guess is that the Orange Juice panel will take the Appellate Body's view of precedent and, as a result, follow the zeroing precedents.

But I am interested more generally in the U.S. view on this, as expressed above.  I would very much like to see the panel ask the U.S. some questions on this point (although more than likely, the panelists will just ignore it).  The U.S. says that such reports "create legitimate expectations," but panels are not bound to follow them.  Where would this leave things exactly in terms of the role of prior rulings?   How much weight should Appellate Body reports have?  It seems to me there is a continuum here, ranging from binding to very persuasive to somewhat persuasive to informative, but I can't figure out exactly where the U.S. thinks Appellate Body reports fall in this continuum.

As a systemic matter (outside the context of zeroing), I'm not sure why the U.S. wants to limit the role of precedent.  A more limited role is great if you lose a case as a defendant (e.g., with zeroing), and you get to reargue the law to a future panel; but it's not so great if you win as a complainant, as you may not win the next time.  The U.S. wins a good number of the complaints it brings, and it seems to me that the uncertainty of not knowing whether you could win a similar case the next time around would be frustrating.

ASIL Call for Papers

The ASIL's International Economic Law Interest Group (IEcLIG) has put out its Call for Papers for the 2010 Biennial Interest Group Conference.  The theme:  INTERNATIONAL ECONOMIC LAW IN A TIME OF CHANGE: REASSESSING LEGAL THEORY, DOCTRINE, METHODOLOGY AND POLICY PRESCRIPTIONS.  The conference will be at the University of Minnesota Law School on November 18-20, 2010.  Here are some details (the full document is here):

The start of the second decade of the twenty-first century is witnessing a confluence of events affecting international economic law that calls for re-evaluation. The international context has radically changed. Most analysts contend that we are shifting toward a multi-polar world in light of economic transformations in China, India, Brazil, and other developing and transitional countries, coupled with economic stagnation in the United States and Europe which are beset by a financial crisis and embroiled in foreign wars and security concerns. These developments have arguably complicated international economic governance, yet other factors–such as the current financial crisis–press consideration of new forms of international economic governance, such as the G-20. Global economic interdependence, exemplified by global production and supply chains, calls for sustained attention to international economic law and institutions.

II. Possible Topics for Papers and Panels

With this backdrop, the November conference will organize sessions that address the full range of international and transnational economic law. We encourage scholars to submit papers or panel proposals related to trade, investment, international financial regulation, transnational private law, and development law, as well as their intersection with social regulation such as over global warming, labor rights and consumer safety. This call for papers welcomes submissions that provide new analytic frameworks, reassess legal theory, evaluate developments in legal doctrine, engage in empirical analysis of the way international economic law operates, and provide guidance for policymakers, regulators and adjudicators in this time of international economic change.

The range of possible topics is wide—the list below is provided as a thought-starter of possible  topics identified by the conference committee. We welcome however quality proposals on any international economic law topic.

* Methodological approaches for studying international economic law and their implications;
* Interpretive approaches to international economic law: theory vs. practice;
* Reform of international economic governance institutions, such as the WTO, IMF, World Bank, the G-8/G-20; international standards organizations;
* The interaction of institutions in a fragmented international economic law system;
* The role of hard and soft law in international economic governance, such as financial regulation;
* The interaction of private transnational economic governance regimes with public law;
* The interaction of international economic law and domestic law and politics;
* Theoretical and empirical studies on how international economic law institutions work;
* Theoretical and empirical studies on the handling of trade and investment disputes;
* Accountability and legitimacy of international economic governance;
* Climate change and its implications for international economic governance;
* Handling food and consumer safety risks in international trade;
* International economic law and the reassessment of development policies;
* New governance techniques in international economic law: their prospects and limits;
* Teaching international economic law: using new technologies;
* The future of international economic law after the financial crisis;
* The rise of China and a new international economic order?;
* Proliferating regional trade and investment agreements: complementing or supplanting multilateralism?; and
* The implications of the Doha Round for international economic law governance

III. Proposal Submission, Selection and Paper Publication

We encourage proposals for papers from both young and established scholars and practitioners so that they may engage with each other. Paper proposals and all other program-related proposals must be submitted electronically by July 30 2010 to [email protected]. Proposals should include the author's name and full contact information, and an abstract of no more than 300 words.

Weekend Yuan Developments

As many people have probably heard already, China said over the weekend that it would allow some "flexibility" in the yuan's value.  Some key passages from the central bank's  announcement:

In view of the recent economic situation and financial market developments at home and abroad, and the balance of payments (BOP) situation in China, the People´s Bank of China has decided to proceed further with reform of the RMB exchange rate regime and to enhance the RMB exchange rate flexibility.

...

The global economy is gradually recovering. The recovery and upturn of the Chinese economy has become more solid with the enhanced economic stability. It is desirable to proceed further with reform of the RMB exchange rate regime and increase the RMB exchange rate flexibility.

In further proceeding with reform of the RMB exchange rate regime, continued emphasis would be placed to reflecting market supply and demand with reference to a basket of currencies. The exchange rate floating bands will remain the same as previously announced in the inter-bank foreign exchange market.

China´s external trade is steadily becoming more balanced. The ratio of current account surplus to GDP, after a notable reduction in 2009, has been declining since the beginning of 2010. With the BOP account moving closer to equilibrium, the basis for large-scale appreciation of the RMB exchange rate does not exist. The People´s Bank of China will further enable market to play a fundamental role in resource allocation, promote a more balanced BOP account, maintain the RMB exchange rate basically stable at an adaptive and equilibrium level, and achieve the macroeconomic and financial stability in China.

According to the NY Times:

The first sign of how much currency appreciation will be tolerated is likely to come Monday morning, when the Chinese government will set the initial trading band for the value of the renminbi in Shanghai trading.

Well, it's still Sunday night (where I am), so perhaps I should wait to see what happens tomorrow before I say this, but I think it's very possible that this action is intended to defuse tension before the upcoming G-20 meeting, and the back and forth between China and the U.S. will pick up again soon after.

[ADDED:  I just saw this:

China's central bank set the yuan's daily mid-point at 6.8275 against the dollar on Monday, unchanged from the mid-point on Friday, after announcing on the weekend that it would allow the yuan to trade more flexibly.

]

Here are some news links from over the weekend:

» China: Yuan can float, but it's not expected to go far - USATODAY.com The impact of China's decision to allow its currency to likely appreciate will be driven by how fast and how big the changes are.

» Chinese say they intend to free up their currency BEIJING -- Facing growing pressure from around the world, China's central bank announced Saturday that it is prepared to allow the country's currency to float more freely against the dollar and other foreign currencies, potentially raising the cost of Chinese goods.

» BBC News - Obama welcomes China's move towards flexible yuan US President Barack Obama has welcomed China's announcement that it will allow the exchange rate of its currency, the yuan, to become more flexible.

» Japan welcomes China's currency move Japan welcomed China's announcement that it would make its exchange rate more flexible, expressing hopes that the move will encourage the stable growth of the global economy.

» China forex move could thwart U.S. hopes - Roubini | Reuters June 19 (Reuters) - China's decision to move away from its currency peg might mean the yuan weakens against the dollar instead of strengthens as Washington wants, Nouriel Roubini, one of Wall Street's most closely followed economists, said on Saturday.

» FT.com - Study to stir dollar-renminbi debate China’s currency is considerably less undervalued against the US dollar than it was six months ago because of the cut in the Chinese current account surplus, according to research by two US-based academics.

» US current, proposed law on currency manipulation | Reuters (Reuters) - China's central bank said it will gradually make the yuan's exchange rate more flexible, signaling a resumption of its rise in value and an end to a nearly 2-year-old peg to the dollar.

» U.S. Senator Schumer Calls China Yuan Statement Vague, Limited - BusinessWeek June 19 (Bloomberg) -- U.S. Senator Charles Schumer said he will continue to press for trade sanctions against China unless the country soon offers details about when and how it will allow its currency to rise.

» China currency move overdue, more needed -Grassley | Reuters June 19 (Reuters) - The top Republican on the U.S. Senate's tax-writing committee on Saturday called China's yuan move overdue and said the United States should continue pressing for the currency to appreciate in value.

» China Signals End to Yuan’s Two-Year Peg to Dollar Before G-20 - BusinessWeek June 20 (Bloomberg) -- China said it will allow a more flexible yuan, signaling an end to the currency’s two-year-old peg to the dollar a week before a Group of 20 summit.

» China Says It Will Increase Yuan's Flexibility - WSJ.com BEIJING—China's central bank moved Saturday to head off resurgent international criticism of its currency policies with a pledge to make its tightly-controlled exchange rate more flexible, a surprise announcement that was quickly welcomed by the U.S. and others even though the central bank also ruled out a big rise in the yuan.

» China Signals a Gradual Appreciation of Currency - NYTimes.com HONG KONG — China’s central bank announced on Saturday evening that it would allow greater flexibility in the value of the country’s currency, in the clearest sign yet that China will allow the renminbi to appreciate gradually against the dollar.

» China currency move 'encouraging development' -Hoyer | Reuters June 19 (Reuters) - China's decision to make its exchange rate more flexible is an "encouraging development" that hopefully will lead to further changes, U.S. House Democratic Leader Steny Hoyer said on Saturday.

» China to allow more exchange rate flexibility - Yahoo! News BEIJING – President Barack Obama welcomed China's announcement Saturday that it will allow a more flexible exchange rate for its currency, saying it would help protect the economic recovery

Mitchell and Voon on the WTO and Health

From Andrew Mitchell and Tania Voon, Implications of the World Trade Organization in Combating Non-Communicable Diseases, on SSRN.  From the abstract:

The World Health Organization (WHO) has proposed a number of strategies to combat non-communicable diseases such as cancers, cardiovascular diseases, chronic respiratory diseases, and diabetes, by targeting the risk factors of tobacco use, harmful use of alcohol, and poor diet. A number of the domestic regulatory responses contemplated by the WHO and individual countries have the potential to restrict or distort trade, raising the question whether they are consistent with the obligations imposed on Members of the World Trade Organization (WTO). In this article, we demonstrate that WTO rules do limit Members’ flexibility in implementing public health measures to address these diseases. However, the focus of WTO provisions on preventing discrimination against or between imports and the exceptions incorporated in various WTO agreements leave sufficient scope for Members to design carefully directed measures to achieve genuine public health goals while minimising negative effects on international trade.

And from the paper:

Using WTO Subsidies Disciplines to Combat Unhealthy Food

Enhancing consumer information through labelling and providing price incentives through taxation or related schemes may become all the more important as global food prices rise while the cost of choosing healthy over unhealthy food appears to increase.52 However, WTO rules are also relevant in understanding why the price of certain (often unhealthy) foods is low or falling. While the rest of this article has explored how to ensure that trade‐related health measures comply with WTO law, we now wish to emphasise that WTO disciplines on agricultural and other subsidies may themselves be used to support health policies.

Domestic politics may explain why WTO Members, far from using subsidies as a tool to promote healthy eating habits, have instead often chosen to directly or indirectly subsidise culprits in the fight against non‐communicable diseases53 such as sugar,54 butter,55 and high fructose corn syrup.56 Subsidies are permitted in the WTO, subject to compliance with stringent conditions set out in the Agreement on Subsidies and Countervailing Measures (SCM Agreement) and (in the case of agricultural products) the Agreement on Agriculture.57 The disciplines established in these agreements can and should be brought to bear on massive subsidies of unhealthy food products, particularly where they fall within the categories of export subsidies (contingent on export)58 or import substitution subsidies (contingent on the use of domestic over imported goods).59 In addition to undermining health policy goals, these subsidies are often counterproductive from an economic perspective, shielding non‐competitive domestic industries from foreign competition, while simultaneously driving those foreign competitors (frequently from developing countries) out of business.

This kind of policy has always aggravated me.  Governments often take a variety of actions to promote public health.  But then they undermine these actions by using subsidies that worsen public health, and also lead to trade disputes.  One of the best ways to promote public health would be to stop using subsidies that encourage the consumption of unhealthy products, which would have the added benefit of reducing trade friction.

Colares on International Monetary Reform

From Juscelino Colares, Global Imbalances and Liquidity-Induced Bubbles: The Need for International Monetary Reform, posted on SSRN. Here's the abstract:

Economic analyses vary with respect to the extent to which deregulation contributed to the financial crisis of 2008-2009, but coalesce on one major cause: excessive leverage and risk-taking. Yet, excessive risk-taking was nearly ubiquitous and occurred despite different levels of regulatory stringency across nations, suggesting that regulatory failure, though a contributing factor, ought not to be singled out as the sole cause of the current crisis. This commentary discusses how some features of the international trade and monetary regime have played a major role in producing the recent crisis. It maintains that persistent underlying global imbalances in exchange rates, trade, savings and consumption create the liquidity conditions ideal for the development of bubbles in several countries. Because the existing WTO/IMF legal infrastructure was designed to address balance-of-payment crises in narrow contexts, only a set of cooperative, multinational exchange rate adjustments would prevent the destabilizing effect that accumulation of massive currency reserves can have on world trade flows and national economies. Such global macroeconomic coordination would require surplus and deficit countries to accept monetary, budgetary and geopolitical trade-offs if they wish to forestall the rise of protectionism and promote a stable international economic environment.

From the paper, here's more about his suggestion for "cooperative, multinational exchange rate adjustments":

A multilateral international monetary agreement that creates a new forum for macroeconomic coordination with some enforcement mechanism would be an alternative to the current rhetoric-based method of discussing currency adjustments. For example, the current bilateral approach to "talking currency" between the United States and China—they hold meetings every six months to discuss currency and other economic matters—has not produced results.19 A new multilateral agreement could, for example, bestow the authority to recommend adjustments in the exchange value of national currencies on a new or existing multilateral institution. In cases of persistent trade imbalances, this international monetary authority could tax a portion of a country's excess reserves (held in deposit) so as to provide incentives for countries not to run trade surpluses for a number of years. Such a mechanism would promote a perennial state of international trade balance, characterized by smoother fluctuations in global liquidity conditions, resulting in a "less interesting" (some would say less innovating) financial world. More importantly, it would be a welcome departure from an as-yet ineffective bilateral system that produces little result and creates trade tensions and resentment on both sides. This institution could also serve as a permanent forum for negotiations concerning future global macroeconomic issues requiring multinational coordination.

Gus Van Harten on Investment Treaties

From Gus Van Harten, Five Justifications for Investment Treaties: A Critical Discussion, posted on SSRN.  Here's the abstract:

The article examines five common justifications for the investment treaty system in order to highlight aspects of the system that give cause for concern. First, it examines whether investment treaties are a means to encourage foreign direct investment and concludes that this expectation is contradicted by common provisions in investment treaties and is unsupported by the preponderance of empirical evidence. If this justification was a factor in the decisions of states to conclude investment treaties – or of international organizations to promote them – then these decisions appear to have been based on incomplete knowledge and analysis of the anticipated benefits. Second, the article examines the claim that investment treaties respond to the bias and unreliability of domestic courts and criticizes investment treaties in this respect for being both under-inclusive (by extending access to international adjudication to a narrow class of private actors only) and over-inclusive (by failing to account for situations where domestic courts offer justice to a foreign investor). Third, the paper examines the claim that investment treaty arbitration advances the rule of law in the resolution of investor-state disputes and questions this claim after considering how investment treaty arbitration fails to incorporate key institutional safeguards of judicial independence that are present in other adjudicative systems that resolve public law claims. Fourth, the paper examines the argument that investment treaties affirm the sovereignty and bargaining strategies of states and outlines tentative evidence that governments did not test carefully the anticipated benefits of the treaties, did not appreciate fully the risks of investor-state arbitration, and did not carry out sophisticated cost-benefit analyses prior to committing themselves to the investment treaty system. Finally, the paper examines the justification that investment treaties were endorsed by the democratic processes of states and draws attention both to the role of arbitrators in giving meaning to the treaties and to certain aspects of investment treaties that appear to undermine democratic choice. Based on this analysis, it is recommended that governments exercise greater care when considering entry into the system or, more likely, the maintenance or renewal of existing treaties, and that governments consider options for reform.

And from the paper:

One avenue for reform lies in the renegotiation or abrogation of investment treaties.  Another lies in reform of the institutional mechanisms and, specifically, in the creation of alternative forums and processes for the resolution of investment disputes. It would be beneficial to their perceived neutrality if such alternatives were based outside of the conventional arbitration centres of Western Europe and North America and if they surpassed the current system in terms of their incorporation of institutional safeguards of judicial independence. However, while all states should strive for a system that is consistent with values of fairness independence in adjudication, it is just as critical for developing and transition countries to formulate appropriate strategies on the investment treaty system after careful assessment of its costs and benefits alongside those of the alternatives.

An EU Model BIT?

From a recent EU DG Trade civil society meeting on trade and investment:

Jean François Brakeland debriefed on the state of play of the preparatory work conducted by the Commission in order to implement the EU exclusive competence on FDI, as conferred by the Lisbon Treaty. He started his presentation with an overview of the scope of the draft Regulation establishing transitional arrangements for Bilateral Investment Treaties (BITs) between Member States and third countries, focusing on its main features such as authorisation to maintain BITs in force and to amend or conclude new BITs.

Subsequently, he presented Commission thinking on how it intends to use the EU competence on investment in the future, referring to the draft Communication which would lay down foundations for the orientation of EU investment policy, as well as its future operationalisation in negotiating directives specific for each negotiating partner. He shared general intentions with respect to the EU investment policy coverage, standards of protection, dispute settlement mechanism, as well as a selection of potential partners for negotiating investment protection, but at the same time highlighted the need for a wider debate that should involve all stakeholders including the European Parliament and the Council.

And from some Q & A that followed:

European Services Forum requested clarification on the scope of the competence on investment, including whether the shift in competence might be questioned, and how new Member States BITs will be covered.

...

The Coalition of Flemish North-South Movement questioned the rationale of re-delegation of
power to negotiate investment agreements back to Member States, claiming that Foreign Direct Investment being part of the Common Commercial Policy should be considered in a broader context of EU foreign policy, and thus could not be limited to investment protection objectives. It called upon the Commission to stop Member States continuing their BITs negotiations. It also raised concerns related to the conflict between Member States' demands for more investment protection at the cost of limited policy space and referred to the social and labour rights chapter of EU trade agreements, which should be equally applicable to protection provisions of EU investment agreements.

M-Lex raised the issue of investor-to-state dispute settlement, enquiring about the availability of ICSID as an arbitration forum and the coverage of portfolio investment by the new EU competence.

...

Several participants asked about the review clauses of already concluded agreements, including the Cariforum EPA and EU-Korea FTA that would allow for negotiating investment protection.

...

Responding to these comments and questions, the Commission (J.F. Brakeland and C. Brown) explained the justification for the empowerment mechanism offered by the draft Regulation, in particular its relevance for curing BITs' incompatibilities with EU rules on capital movement, and gave assurances that the exercise of re-delegated power to negotiate BITs would be conditional and closely followed by the Commission as an observer.

As for ongoing negotiations, it referred to Member States' legitimate expectations relating to grandfathering and empowerment as a justification for the continuation of BITs' negotiations with third countries after entry into force of the Lisbon Treaty, although a legal risk was involved.

With respect to portfolio investment, the Commission explained the rationale for all-encompassing definition of investment as the economically justifiable option, even if portfolio investment was not explicitly mentioned as a part of the EU Common Commercial Policy. Referring to optimal standards of protection, the Commission emphasised the need to compromise the EU's divergent interests in order to find the acceptable balance, and finally to confront it with our partner's interests.

On the choice of negotiating partners, the Commission suggested that it would depend not solely on the EU interest, but also on our partners' willingness to engage. It would have implications on the form of any prospective investment agreement, being a part of a wider trade agreement or stand-alone BIT-like agreement. There is no one-size-fits-all solution.

Referring to the scope of commitments deriving from the existing BITs, the Commission explained that the draft Regulation would set a mechanism for notification of all existing BITs, as well as all disputes launched on their basis.

On arbitration, the Commission admitted that there were a number of issues that could be improved, including transparency of procedure but also clarity of provisions, although it excluded the European Court of Justice as an option for international arbitration.

Here's some commentary on the issue.  Professor Armand de Mestral asks, "Is a model EU BIT possible—or even desirable?"  His conclusion: 

Surely a common legal standard regulating FDI in the EU is an eminently sensible goal: it would replace 27 competing jurisdictions with one high standard of protection; it would allow the EU to present a common face to the world on FDI issues; and it would serve as a powerful incentive to promoting global standards. But it would be foolish to minimize the obstacles that lie in the path of this laudable goal.

And from David Muller, a PhD. law student at Charles University, Prague:

...  Would the European Model BIT provide significant enhancement of current regulations and would the EU really use it? Indeed, there are at least several profound obstacles to be analyzed. First, it may prove to be difficult to identify partners willing to negotiate BIT. Taking into account that the provisions of the model BIT are about the same, it would nevertheless probably always need some minor adjustments. However, the nature of partners in negotiations and the need for complex investment protection is diverse. For instance, imagine the specific needs of particular BIT with e.g. Russia, Canada and ASEAN. Second, it may be demanding to persuade Member States to support the new model with the assumption of an all-round approach, conclusion of EU BIT and consequent termination of their own BITs. Indeed, Member States must be able to identify explicit added value of model compared to their bilateral agreements. Third, the process of negotiation and conclusion of BIT is time consuming. For the most of Member States, it has taken decades to create their BITs networks – it would be vain to believe that the EU BITs, even using a well processed template, might by concluded in a few upcoming years. Fourth, negotiating capacities of the EU are definitely not unlimited. Having a model BIT would probably mean an improvement on condition that it is to be really carried out. Anyway, investment promotion and protection are nowadays covered sufficiently by the mix of the Member States BITs and FTAs provisions. Furthermore, the EU sources are supposedly too limited to anticipate major efforts of the EU to develop its own exclusive network of BITs in following years. In line with these concerns, the Model BIT is to be considered as a useful exercise and practice, but its scope of application seems currently to be dubious and limited.  

The full piece is here.

 

BP and Investor-State Dispute Settlement (or Lack Thereof)

From Carl Pope, Chairman of the Sierra Club:

As we wait for President Obama's speech tonight on the oil catastrophe in the Gulf, it's important to understand that many of the options he has discussed -- from requiring BP to set funds aside in escrow for cleanup to asking Congress to raise the liability limit on oil companies -- are possible only because BP is a British, as opposed to a Canadian or Mexican, company. That's because under the North American Free Trade Agreement (NAFTA) the so-called "investor-protection clauses" would allow a Canadian or Mexican oil company that caused a gusher on the floor of the Gulf to appeal any change in the liability or responsibility it faces to a trade tribunal. Such a tribunal would likely overturn, for example, an after-the-fact raise in the liability limit (or in the royalties companies had to pay). 

But since the U.S. does not have a free-trade agreement with Britain, BP can't hide behind these trade tribunals. 

He said this in the context of arguing that the TPP should not include investor-state.

So is there anything to this?  It is true, of course, that if BP was from a country that had a BIT or FTA investment chapter with the U.S., it could bring an investor-state claim.  So, yes, "a Canadian or Mexican oil company that caused a gusher on the floor of the Gulf" could "appeal any change in the liability or responsibility it faces to a trade tribunal."  But could it win?  In particular, is it true that a tribunal would "likely overturn ... an after-the-fact raise in the liability limit (or in the royalties companies had to pay)"?  That seems like wild speculation to me.  I can't see how anyone could possibly state such a conclusion with any certainty.  If I had to guess, based on the little bit I know of the facts here, I would say there is, at best, a very, very slim chance of success on such a claim.  But I really don't know enough to come to any firm conclusions, and I can't see how the author knows enough about his theoretical legislation either.

I think this is a good example of why trade critics are often ineffective in pushing their views.  There are arguments you can make against the existing investor-state rules (both the procedural and substantive aspects).  But when you say things like this, the people in power tend not to take you seriously.

Competing IEL Visions of Football/Soccer

From Marcus Cole:

To the true football fan, the World Cup itself is part of an ideological struggle between two competing corporate goliaths, the Fédération Internationale de Football Association (“FIFA”) and the Union of European Football Associations (“UEFA”). Even the names of the two organizations are themselves indicative of the ideological divide. The stakes are high – in the hundreds of billions of the currency of your choice. The goal is nothing short of world domination. And the time for choosing sides is closing in upon us.

FIFA represents the distinctly twentieth century notion that nationhood is the most important and powerful bond between humans. While nations are free to define themselves, individuals, for the most part, are not. FIFA insists upon a competition between nations qua nations, but FIFA does not demand that nations define themselves in a particular way. There is no requirement that “a national,” or what we Americans commonly refer to as “a citizen,” be defined in same way that Germany, Serbia, Italy, or Spain choose to define those terms, namely, by ethnicity. Nationality, under these ethnic conceptions of it, is “closed” to those born outside the required genetic boundaries. As in race-horses, it is a matter of breeding.

...

UEFA, on the other hand, represents a distinctly different ideal, one that is timeless. It is also one with which Americans ought to sympathize, namely, freedom of contract. To be sure, UEFA also satisfies some of the thirst for nationalism, sponsoring its own competition between national teams every four years, the European Cup, in the interstices of the World Cup. But UEFA’s real claim to fame is its sponsorship of club competitions, the UEFA Champions League and the UEFA Europa Cup. These two competitions are between club teams, not nations. These clubs are organized, for the most part, on free association and freedom of contract.

...

... UEFA understands what FIFA does not, namely, that freedom works. National teams will never be as good, as entertaining, or as compelling as teams composed of free individuals willingly and contractually cooperating toward one common purpose. Open systems of nationality come closer to the ideal of freedom than closed systems, and the national teams themselves recognize this. Germany, for example, is a successful national team drawn from a “closed” conception of nationhood. But Germany fields players born outside the formal genetic constraints applied to mere mortal would-be citizens. The German national team boasts Cacau (a native of Brazil) and Jerome Boateng, one of the two Boateng brothers playing in the 2010 World Cup; the other is a member of the starting line-up for their native Ghana. In other words, if you are good enough, even closed nationalities can be open to you.

FIFA and its World Cup, like nationalism, will persist as long as we have nations and nationalists, ethnic pride and prejudice, to perpetuate them. These ideas that destroyed so many lives on so many occasions throughout the twentieth century are the not-so-beautiful underside of the beautiful game. The game is unquestionably more beautiful without them.

The Clove Cigarettes Panel Request

Indonesia has now requested a panel in the U.S. - Clove Cigarettes (DS406) dispute.  The request is here:  http://www.worldtradelaw.net/pr/ds406-2(pr).pdf  It's not much different from the consultations request, but does add some more specific TBT claims.

I don't think I have anything to add at this point to what I said about the consultations request, where I talked a bit about GATT Article III:4.  But I will note that the next couple years could provide some great insights into the meaning of Article III:4 (and TBT 2.1) national treatment, as well as the "necessity" provisions of TBT 2.2.  There are several cases going on right now that could give panels and the Appellate Body the opportunity (which they may not take, of course) to clarify a lot of points.  The Tuna Labeling (DS381) case is furthest along, and there is also the COOL dispute (DS384, DS386) just starting up.  Now we have Clove Cigarettes, and perhaps soon the Seal Products dispute (DS400, DS401).  It will be very interesting to see where the jurisprudence stands at the end of all this.

Krugman on Currency Undervaluation and WTO Law

From Paul Krugman:

China says that accusing it of subsidizing its exports via its exchange rate policy — and imposing a countervailing duty — would violate WTO rules. Hmm.

Before we talk legalese, let’s focus on the essentials. An export subsidy is WTO-illegal. An import tariff is WTO-illegal. A deliberately undervalued currency, maintained by massive foreign exchange intervention over a period of years, is in effect a combination of an export subsidy and an import tariff.

So how can China’s actions be legal, and a US response illegal? Well, the rules on currency manipulation are written in a confusing fashion, and seem to pass the buck or maybe the yuan — back and forth between the WTO and the IMF.

But I basically can’t believe that the fine points here can override the clear merits of the case. If China’s currency policy were two separate policies, the US would have every right to respond; arguing that by combining the policies China somehow acquires immunity is just too tricky.

In essence, he seems to be saying, "the rules may not cover this, but they should, so let's just make them apply here."

I can't decide whether his take on all this is blissfully ignorant about how law and legal interpretation actually works, or if it has great insight into how law and legal interpretation actually works.  I suppose it depends on your view of how law and legal interpretation should work in these situations.

 

Gambling Dispute Update

Have you been wondering what has been happening with the U.S.-Antigua WTO Gambling dispute?  Is the U.S. ever going to implement?  Is Antigua going to push for implementation?   This article perhaps provides some insights about what the commercial interests involved have been up to:

Atlantic City's 11 casinos have come out against proposed state legislation that would let them offer sports betting and give customers access to online gambling.

The Casino Association of New Jersey says the proposals would violate existing federal bans on sports and online betting. The group also says the plans would primarily benefit offshore gambling websites, not New Jersey's casinos.

Association president Joe Corbo says the proposals would hurt the casinos by further expanding legalized gambling beyond Atlantic City and the state's racetracks.

...

Measures being considered in the state legislature would allow the casinos to offer betting on professional sports events, and would let people in locations around the state go online to bet on Internet versions of poker, blackjack and other games.

...

Corbo also said the primary backer of the measures is a group called iMEGA, the Interactive Media Entertainment & Gaming Association, which represents offshore Internet betting websites, among others.

"New Jersey, which has set the gold standard for its gambling laws, should not now have its gambling laws driven by a group like iMEGA that is made up of offshore Internet gambling sites that are not permitted to accept wagers in the United States and are thumbing their nose at the United States Department of Justice," he wrote.

Joseph Brennan Jr., iMEGA's chairman, said its members would form partnerships with Atlantic City casinos to offer online gambling and would undergo the same rigorous licensing process casino operators face.

"We sought out New Jersey because they have the toughest gaming regulators on the planet, and they'll probably be even tougher on anyone that wants to fill this space," he said. A company that qualifies for a New Jersey license will be seen as squeaky-clean and more valuable to investors, he added.

Nevada casinos accept sports wagers on popular professional and college sports, as well as horse and dog racing, as allowed by Nevada gambling laws.

Regulators, however, recently warned casino operators about their business dealings with Internet gambling companies that have accepted wagers from American customers. The Nevada Gaming Control Board says it doesn't sanction, endorse or approve any Internet casinos.

The control board told casinos in a letter posted to its website last week that it recently increased its efforts to assess specific relationships between casinos and Internet gambling companies.

Las Vegas casino operators are split on the issue — with Harrah's Entertainment Inc. most vocally in favor of Internet gambling. The world's largest casino company, it launched a Montreal-based subsidiary last year to focus on online gambling, and it takes online wagers from customers in the United Kingdom with hopes to expand.

Brennan said the Atlantic City casinos would directly benefit from online gambling.

"We advocated all along for the existing Atlantic City casinos to be the apex of this industry and this effort," he said. "The revenue would flow through them. The opportunity for Internet operators is to ink partnerships with casinos, which don't currently have the expertise, the technology or the manpower to get this business up off the ground."

Brennan estimated that New Jersey could see 57,000 new jobs, $7 billion in annual gross gambling revenue, and up to $472 million in annual state gaming taxes if it establishes itself as the dominant hub for the online gambling industry.

None of this can happen unless a federal ban on sports betting (in all but four states) and Internet gambling is lifted. Democratic state senator Ray Lesniak is suing the Justice Department to overturn the ban.

In a nutshell, they are busy lobbying and negotiating, rather than litigating.

The Intersection of Investment Treaty Law and WTO Law

I think it has been pretty obvious from my blogging that I've developed an interest in investment law and disputes over the past year or so.  As a result, this looks quite interesting to me:

Call for papers: TDM Special Issue covering intersections between investment treaty law and the WTO world

Walid Ben Hamida and Todd Weiler, will be editing a TDM Special Issue covering intersections between investment treaty law and the WTO world.

Contributions are invited from prospected authors with unpublished or previously published articles, conference papers, research papers, case studies dealing with this issue.

Here are some issues that could be examined:

• The TRIMs agreement: a comment
• The relationships between GATS and investment agreements
• The GATS Agreement: A comment
• Telecommunication in WTO law and in investment law
• MFN in WTO law and in investment law
• National Treatment in WTO law and in investment law
• Transparency in WTO law and in investment law
• Concurrence between WTO dispute settlement body and investment arbitration
• Breach of WTO Obligations as Breach of Investment Treaties
• BITs, “Safeguards” Clauses, Health and Safety Measures, and the Relevance of GATT Article XX Jurisprudence
• Performance Requirements in Investment Arbitration and before WTO dispute settlement body
• Does MFN pick up the GATS, especially Arts. VI and VIII, the Basic Telecommunications Agreement and the Telecoms Reference paper, and/or market-opening commitments
• GATS MFN clause and investment arbitration
• The Doha round and investment matters
• Trade measures before investment arbitration
• Relationships beween TRIPs and investment agreement
• The relevance of WTO law in interpreting BIT rules
• State trading entreprises in WTO law and in investment law
• Subnational entities in WTO law in investment Law
• Amicus before WTO and before investment arbitration
• Energy and WTO Law
• The Use of ICSID Jurisprudence in a Recent Ruling of the WTO Appellate Body: The US-Final Anti-Dumping Measures on Stainless Steel Report WT/DS344/AB/R (Apr. 30, 2008)
• Energy charter Treaty and WTO law
• NAFTA and WTO Law
• Financial crisis measures, BITs and the WTO – are there real claims based on the measures taken by the US, the UK and others in response to the crisis that began in 2008 (or just hyperbole) and, if so, how are they affected by the presence or absence of safeguards clauses and prudential measures exceptions?
• Why are there so few WTO disputes related to services measures but so many BITs disputes related to services investments?
• A comparative consideration of the role of the WTO Secretariat and the role of the ICSID Secretariat with respect to disputes.
• Investment and Doha – does the probable failure of the Doha Round to open investment access (and indeed the probable failure of Doha itself) have an impact on the growth of investment agreements and investment chapters of FTAs?
• Capital Controls, Restrictions on FX Convertibility and Transfer Restrictions, and Sovereign Debt Defaults – Comparison of WTO and BIT treatment
• Why were there no WTO complaints against Argentina?
• Chinese BITs and WTO Obligations – Consistency, Growing Liberalization or Paper Tigers?

Here's the link:  http://www.transnational-dispute-management.com/news/news_detail.htm?v0=345  All of these topics look interesting, and I'm eager to see the final result.

Speaking of Dissents

Speaking of dissents, as we have been, I just noticed something from the U.S. China - Exportation of Raw Materials submission.  As mentioned in the last post, the U.S. made the following argument:

363. The reasoning of a General Agreements on Tariff and Trade 1947 (“GATT 1947”) panel supports this analysis. In EEC – Fruits and Vegetables, that panel examined a minimum price requirement imposed on the importation of tomato concentrates by what was then the European Economic Community (“EEC”). The minimum import price requirement at issue in that dispute consisted of a regulation providing for the annual establishment of a minimum import price for tomato concentrates, which was enforced by an associated security system. The associated security system conditioned the issuance of import certificates for tomato concentrates on the lodging of an additional security in order to guarantee that the free-at-frontier price of imports plus the customs duty for the good together equaled or exceeded the minimum price that had been set for that year. In any case where tomato concentrates were imported at a price lower than the established minimum import price, the security would be forfeited.446 The EEC – Fruits and Vegetables panel found that “the minimum import price system, as enforced by the additional security, was a restriction ‘other than duties[,] taxes or other charges’ within the meaning of Article XI:1.”447

Fn 447 states in relevant part:

GATT Panel Report, EEC – Fruits and Vegetables, para. 4.9 (“the Panel considered that the minimum import price system, as enforced by the additional security, was a restriction ‘other than duties taxes or other charges’ within the meaning of Article XI:1.”) ...

The Fruits and Vegetables panel report is here.  What's interesting for the purposes of this discussion is that right after the quoted finding from the Fruits and Vegetables panel (i.e., in the last sentence of para. 363 and in the footnote), there is, yes, a dissent:

One member of the Panel considered that the minimum import price system, as enforced by the additional security, could well be applied in a way which would qualify it as a restriction "other than duties, taxes or other charges" within the meaning of Article XI:1. However, having noted the explanations given with respect to the functioning of the system, this member considered that importation of tomato concentrate at a price lower than the minimum price could still be carried out by importers who had an interest in doing so. He further considered that the system operated in a way to levy an additional charge which raised the price of tomato concentrate imported at a price lower than the minimum price. Therefore, he concluded that the minimum import price system was not being enforced in a manner which would qualify it as a restriction within the meaning of Article XI.

See para. 4.9.  Perhaps, then, in addressing the Article XI minimum price issue, the China - Exportation of Raw Materials case will provide some insights as to the value and role of dissents.  (I'm not familiar enough with the facts of the two cases to come to any conclusions on the substance at this point).

China - Exportation of Raw Materials: The Dispute Gets Under Way

A couple weeks ago, former Appellate Body Member Jim Bacchus had an op-ed in the W$J, talking about China's export restrictions on raw materials:

The international trading system is about to encounter an entirely new challenge. The global hunger for natural resources is inspiring a surge in restrictions on exports of crucial raw materials.

As with so much else in trade nowadays, the focus of this emerging conflict is on China. The Chinese stand accused by some trading partners of hoarding rare elements and other raw materials that are essential to many globally traded products.

...

The first test will likely come from a pending lawsuit in the WTO by the United States, the European Union and Mexico, challenging alleged Chinese export restrictions on nine key raw materials such as coke, bauxite, fluorspar and magnesium. These are vital to the production of steel, aluminum and certain chemicals. China produces 60% of the world's coke, and is a major producer of the other raw materials.

...

The General Agreement on Tariffs and Trade prohibits all measures that restrict the quantity of exports of a product unless they are applied as export duties, taxes or other charges. Thus, WTO member states are free under the current rules to impose export taxes instead of bans, quotas or other quantitative export restrictions.

However, as a condition of membership in the WTO, China agreed to eliminate taxes and other charges on all exports except those on a list of 84 products included in its WTO accession agreement. Neither the nine raw materials in the current WTO case nor the 17 rare earth elements are among the products that China listed.

The GATT permits measures that would otherwise violate WTO rules if they are "relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption," and if they are not applied as a means of "arbitrary or unjustifiable discrimination." This is likely to be China's defense in the raw materials case, and, should there be one, a rare earth elements case as well.

The WTO dispute is now under way.  The first U.S. submission is here.  I had thought about summarizing the legal arguments, but many of them are a bit technical, and perhaps not good blog material.  I'll just mention two things from the submission.

First, I thought this argument under GATT Article XI:1 was interesting, in that it illustrates how this provision is broader than it may appear at first glance:

1. China’s Minimum Export Price Requirement Is Inconsistent with China’s Obligations under Article XI:1 of the GATT 1994

349. ... China effects a minimum export price requirement for bauxite, coke, fluorspar, magnesium, silicon carbide, yellow phosphorus, and zinc through: (1) a system of “self-discipline” among exporters; (2) penalties imposed by MOFCOM; (3) China’s export license issuing entities; and (4) Customs. This requirement prohibits the exportation of bauxite, coke, fluorspar, magnesium, silicon carbide, yellow phosphorus, and zinc below the price coordinated by the CCCMC and its Branches. The minimum export price requirement thus restricts the exportation of these products and is inconsistent with Article XI:1 of the GATT 1994.

...

f. Conclusion

362. As a result of China’s minimum export price requirement, the exportation of coke, bauxite, fluorspar, magnesium, silicon carbide, yellow phosphorus, and zinc are prohibited if the export price does not meet the industry coordinated export price. This constitutes a restriction on the exportation of these materials in contravention of China’s obligations under Article XI:1 of the GATT 1994.

363. The reasoning of a General Agreements on Tariff and Trade 1947 (“GATT 1947”) panel supports this analysis. In EEC – Fruits and Vegetables, that panel examined a minimum price requirement imposed on the importation of tomato concentrates by what was then the European Economic Community (“EEC”). The minimum import price requirement at issue in that dispute consisted of a regulation providing for the annual establishment of a minimum import price for tomato concentrates, which was enforced by an associated security system. The associated security system conditioned the issuance of import certificates for tomato concentrates on the lodging of an additional security in order to guarantee that the free-at-frontier price of imports plus the customs duty for the good together equaled or exceeded the minimum price that had been set for that year. In any case where tomato concentrates were imported at a price lower than the established minimum import price, the security would be forfeited.446 The EEC – Fruits and Vegetables panel found that “the minimum import price system, as enforced by the additional security, was a restriction ‘other than duties[,] taxes or other charges’ within the meaning of Article XI:1.”447

Second, there was no mention in the U.S. submission about a possible GATT Article XX(g) defense by China.  Such a defense is referred to in the Bacchus article, and hinted at by China itself at the DSB meeting where the dispute was first discussed:

82. ... During the consultations, China had clarified relevant Chinese administrative measures and had specified that its policy objectives were to conserve the environment and exhaustible natural resources, which were recognized by the United States, the EC and Mexico.

Presumably the U.S. wants to see China's legal arguments before addressing the issue itself.  This is the issue that strikes me as the part of the case with the broadest appeal, so I think I'll wait to see that discussion before getting into more substance from the case.

More USTR TPP Chatting

Next week USTR will be doing more online chatting about the TPP.  Here's the question I submitted this time:

When do you anticipate that draft negotiating texts for specific topics will be completed?  When will they be released to the public?

You can submit your question here: http://www.ustr.gov/tpp/comment

Thank You for Smoking (Domestic Cigarettes)

From a book review in the Economist:

the Chinese Communist Party ordered local officials in Hubei province to smoke nearly a quarter of a million packs of Hubei-branded cigarettes in order to boost the local economy and stave off lay-offs. Official cigarette monitors roamed the province making sure that people hit their cigarette targets and fining those who dared to smoke other brands.

Ordering people to smoke only locally produced cigarettes certainly seems like "less favorable treatment" under GATT Article III:4.  Here's my question, though:  Does this kind of action constitute a "measure" that can be challenged in WTO dispute settlement?  In particular, does it constitute a "requirement" under GATT Article III:4?

Meredith's Response to James's Opening Dissent Post

I agree with Henry’s comment that dissents are more easily justified at the panel stage, when they have the potential to provide additional information/arguments for the Appellate Body to review.  However, I don’t agree that they should be forbidden at the Appellate Body level.  While I think divisions of the Appellate Body should try to reach agreement, and AB members should not write separately lightly, if there is a true difference of opinion on an interpretive issue, I don’t see the harm in voicing the minority opinion along with the majority one.

James argues that it is not necessary to have a dissenting opinion, for the dissenting view can be set out in the report.  However, I don’t think this is the same as stating in the panel or AB report that a member  is writing separately/dissenting.   There is a difference between a unanimous opinion which addresses rejected arguments (which may well have been, or appear to have been, raised by one of the parties rather than one of the adjudicators) and a divided opinion.

But does the difference matter?  If interpretation of the covered agreements was always clear-cut, with “right” and “wrong” answers, perhaps the answer would be no.  Indeed in James’s article, he categorizes the separate opinions to date as “correct” or “incorrect” and as “necessary” or “unnecessary”.  This to me suggests a higher level of determinacy than I think exists in WTO treaty interpretation.  Some cases as easier than others, but there aren’t always clearly “right” answers or “wrong” ones.

Not only aren’t there always determinable rights or wrongs, but interpretations may change over time.   In the China – Audiovisual Products case, the Appellate Body rejected China’s argument that there was a single interpretation of its GATS commitments, and that determination had to be based on an interpretation of the commitments as they would have been understood at the time of accession.  The AB stated (at para. 397): “We further note that interpreting the terms of GATS specific commitments based on the notion that the ordinary meaning to be attributed to those terms can only be the meaning that they had at the time the Schedule was concluded would mean that very similar or identically worded commitments could be given different meanings, content, and coverage depending on the date of their adoption or the date of a Member's accession to the treaty.  Such interpretation would undermine the predictability, security, and clarity of GATS specific commitments, which are undertaken through successive rounds of negotiations, and which must be interpreted in accordance with customary rules of interpretation of public international law.” (references omitted). 

Because, as the AB has explained, interpretation of the WTO agreements may evolve, panels and the AB may be faced with the same question numerous times, over many years.  In such circumstances, airing differences of opinion may assist the AB in ultimately deciding the time has come to change its previous views.  It is presumably an easier transition for an adjudicatory body to move from a previous 1-2 decision to a 2-1 decision on the same issue, than from a previous 0-3 decision to a 3-0 decision.  An example when this could occur is in revisiting whether the precautionary principle has achieved the status of customary international law.  The answer to this question may well be different in the future than it was in the original EC – Hormones case.  Assume that each time the AB is faced with the question, the determination becomes a little harder because there is increasingly better support for the argument that the precautionary principle is now CIL.  Perhaps there will be a time when one member feels it is CIL, but two don’t. And perhaps the time after that, two members will determine the precautionary principle has achieved the status of CIL, but one disagrees.  It seems to me that in such circumstances, a dissent in the first instance would help the AB later reach the decision that times have changed, and that the treaty must now be interpreted differently. 

Finally, I note that the WTO has sometimes been criticized for being insufficiently transparent.  An honest airing of disagreements via the occasional separate opinion or dissent is more transparent – and frankly, honest – than presenting an illusion of perpetual unanimity.  As disputes grow more complicated, it is foreseeable that panellists may disagree more than they did in earlier, easier disputes.  The Appellate Body can benefit from seeing the different views expressed by the panellists themselves, rather than just by the parties.  If the AB happens to disagree with such a panel, it would also appear somewhat less arbitrary if the panel had found 2-1 and been reversed, rather than 3-0.  I therefore believe that dissents, when reflecting true and significant differences of opinion, can enhance rather than undermine legitimacy.  Should there be frequent dissents?  No.  But we should not fear that when they occasionally occur, they will damage the dispute settlement system.  To the contrary, they just might do some good.

 

A debate on dissents - James' opening post

Thanks to Meredith for suggesting this and Simon for setting it up.

The basic idea – expressed in a purely personal capacity - is in the article on the JIEL website and Simon has already summarised it, and I will not here repeat the details.

I think that Meredith and I agree on almost everything – there are considerations cutting both ways.

The essential point on which we may differ is that, in the particular circumstances of the WTO, I have difficulty seeing the value added of dissents, and given the damage to the system, on balance I conclude that dissents may not be such a good thing.

The starting point for the proposition that a dissent may have some value added would appear to be the notion that the dissent may have an inherent merit (on the substance). However, the dissenting view is already in the report (often a cut-and-paste of an executive summary directly prepared by the dissenting Member itself) and because, unusually in judicial systems, the report is adopted by a political body (the DSB) and the dissenting Member has the opportunity to explain its disagreement in the minutes, and often does. In some cases, the dissenting Member's views have even been disseminated in the same official DS document series (although one may question whether or not this is really consistent with the DSU). Thus, the dissent, whether or not merited, is already in the public domain. On the other hand, if the value of the dissent is its inherent authority (because it is authored by an adjudicator) as opposed to its inherent merit, then that would seem to confirm that there is also value – and indeed more value - in the authority of a unanimous judgment (which is authored by all three adjudicators).

Another consideration influencing my conclusion is undoubtedly the experience of building consensus within large organisations encapsulating very different views. Experience suggests that rational and reasonable exchanges of views almost always eventually lead to agreement – and not necessarily compromise. That must particularly be so in a judicial context like the Appellate Body, where the facts, evidence, claims and arguments are procedurally circumscribed (thus one cannot talk about everything indefinitely) and where one applies an agreed interpretative cipher (essentially, Articles 31 to 33 of the Vienna Convention). It also reflects the view that a great many WTO disputes are something of a foregone conclusion. The real dispute is not between the Members, but between constituencies within one Member, one domestic constituency having been "sold out" in the Green Room at the time of the negotiation, having swallowed an ambiguous text that an informed observer could have told them meant something else. This is not a bad thing – just an unavoidable part of using a legal process of legislation and adjudication to develop economic integration. Thus, from a rules based perspective, it is really not surprising that three adjudicators in the Appellate Body should systematically reach agreement.

If one does not see it in terms of rules, but rather in terms of power, then perhaps another way of looking at the problem is through the prism of Robert Axelrod's work on the Prisoners' Dilemma (The Evolution of Co-Operation, Robert Axelrod, Basic Books, 1984), which also chimes with the notion of comparative advantage in the context of trade. He describes how, over sustained periods, co-operation emerges, thrives and persists amongst self-interested actors without central authority. From this perspective, if benefit is measured in terms of the authority of pronouncements, a unanimous judgment corresponds to mutual co-operation and delivers the maximum "authority" benefit over time both for the system and for the individuals in their official capacities as WTO adjudicators. At the other extreme, three dissents (a prospect discussed in the article) corresponds to minimum benefit, and indeed would eventually imply the collapse of the DSU, the rules based system and the WTO. Finally, a single dissent might deliver a temporary personal pay-off for the dissenter, but is likely in the long term to lead to reduced benefits for the system as a whole, as well as the dissenter. I am not suggesting that the apparently optimal strategy of tit-for-tat is appropriate for a WTO adjudicator, but I do think that without the "forgiveness" feature of the tit-for-tat strategy unwarranted dissents risk to put the system into a downward spiral, and that this would likely stress intensely the process by which adjudicators are selected. I think there is already some evidence of this in the current difficulties surrounding panel composition. Thus, I don't see these developments as a sign of maturity – more as a nasty rash to be cured by abstaining from gratuitous dissent, in favour of faithful co-operation with one's long term partners.

 

A Debate on WTO Dissents - Meredith's Opening Post

First I’d like to thank Simon for suggesting this dialogue, and also James, who was kind enough to share his article with me before it went to print.  In keeping with the format agreed to with James and Simon, in this post I will make some opening remarks, and in a second post will respond to James’s opening remarks.

When I conducted the research for my original article, it was 2005 and there had been very, very few separate opinions or dissents at either the panel or Appellate Body level of WTO dispute settlement.  In addition, the writings of former members of the Appellate Body suggested that members worked exceptionally hard to achieve consensus.  Indeed, the impression I came away with was that writing separately, while technically allowed, was being discouraged.  In the article, I argued that there might be good reasons at the inception of a new dispute settlement system to discourage dissent because unanimity would help cement the legitimacy of the new mechanism, while dissent might undermine it.  However, I went on to argue that after (at that time) 10 years of existence, the WTO dispute settlement system was no longer in any serious jeopardy of being undermined as a result of a few shows of disagreement amongst panelists.  I therefore said that while writing separately should not be done lightly, it should no longer be affirmatively discouraged.  I argued that there were various positive aspects to the occasional dissent, including that for the majority, having to contend explicitly with the minority’s view leads to better, sharper majority opinions.

Fast forward to 2010, and there have now been far more dissents and separate opinions than there were in 2005.  I am therefore less concerned now than I was in 2005 that panelists are being pressured not to write separately.  I do still believe, however, that writing separately should not be discouraged.  To be sure panelists should try to reach agreement, and often will be able to.  However, when there is a genuine disagreement over treaty interpretation, I believe that sometimes compromise may not be feasible.  In such instances, when there are strongly held views that result in different interpretations of the treaty, I think the minority viewpoint should be expressed.  This gives the parties and the Appellate Body more information to consider in determining what the better approach is, and should lead to better reasoned Appellate Body reports.  I don’t see any harm in airing these differing viewpoints, and indeed I think it is important to do so in the rare cases when agreement cannot be reached.   I’ll offer a couple of examples of instances where I think writing separately has served a valuable function.

First is the evolution in the AB’s reasoning in the Zeroing cases.  Its logic has evolved quite substantially since EC – Bed Linen.  The AB’s reasoning in the US – EC Zeroing case was viewed by some as not particularly compelling, particularly as it did not seem to be applying the VCLT in interpreting the ADA but rather to be relying primarily on its own prior decisions.  Subsequently, the US - Japan Zeroing panel conducted a thorough analysis of the issues, applying the VCLT.  And thereafter in the appeal of that report, the AB employed more persuasive reasoning than it had in the US - EC case.  Thus the panel’s suggestion that there was a better way to conduct the legal analysis did lead the AB to improve its legal analysis.  Therefore even though the AB didn’t adopt the result of the panel, I’d argue that the panel’s disagreeing positions were still of value.  

Second, even if a separate opinion is issued by an AB member – and therefore won’t be used as a data point again in that dispute – it can still have value.  An example is the concurring opinion in the AB’s US-EC Zeroing II/Continuing Suspension case, which James identifies in his article as “unnecessary”.  But the concurrence served an important function.  It is highly likely that it was written by David Unterhalter, who had sat on one of the panels that found zeroing permissible prior to his being appointed to the AB.  In his concurrence in the second US-EC Zeroing case, Unterhalter says, essentially, the two camps on zeroing will not agree with one another but it’s time to go with the AB and its precedents for the sake of the system.  I suspect this will serve a better signal to future panelists that they should not re-fight the zeroing fight than if there hadn’t been that separate statement.