International Economic Law and Policy Blog

Export Subsidies and Currency Undervaluation

Speaking of export subsidies, the U.S. Department of Commerce has rejected an argument that China's currency undervaluation should be considered an export subsidy under U.S. countervailing duty law:

Regarding Petitioners’ allegation that China’s currency regime confers a de jure specific export subsidy, the cited foreign exchange rules provide an indication of the extent of the GOC’s control over foreign exchange transactions, but they do not show that any possible subsidy that results from the regime is contingent on exportation or anticipated exportation. On the contrary, there does not appear to be a basis for the claim that the currency regime of China is de jure specific to exporters. For example, the scope of the governing legislation clearly includes all businesses and individuals within the territory of the People’s Republic of China.4 Similarly, Petitioners’ allegation that China’s currency regime confers a de facto specific export subsidy is insufficiently supported because assistance to an industry as evidenced, for example, by Five-Year Plans, is not necessarily indicative of a subsidy contingent on exportation or anticipated exportation. Any firm or individual exchanging foreign currency for RMB would receive the subsidy allegedly conferred by China’s foreign currency regime, not just those industries included in the State’s industrial plans.

DOC's focus was very different than the export subsidies standards I mentioned in the last post.  In part, that might be due to how the petitioners argued the point.  Scott Lincicome has more here.

More on Export Contingency

In this post, I'm going to explain what I meant in the last post.  No doubt a few people saw what I was getting at.  But I know that, with the beginning of the academic year, a lot of new students are reading this blog, and there's a good chance it was all lost on them.

The basic issue is the meaning of "export subsidies."  More specifically, the issue is how to determine whether subsidies are "contingent" "in fact" upon export performance, under SCM Agreement Article 3.1(a).  Of course, the first sentence of footnote 4 explains that: "This standard is met when the facts demonstrate that the granting of a subsidy, without having been made legally contingent upon export performance, is in fact tied to actual or anticipated exportation or export earnings."  But this just raises the question of how to determine whether the subsidy is "tied to" actual or anticipated exportation or export earnings.

I think it's safe to say, based on a couple past cases, that if export is a necessary or sufficient condition for receiving the subsidy, that would constitute a "tie" and, thus, "contingency."  But what else is covered?  What is the general standard to apply?  Here's what I said in the last post about the situation in EC - Aircraft:

 Did structuring the repayments in this way affect Airbus' thinking about whether to sell for export or on the domestic market?  Would structuring the repayments in the alternative ways suggested by the U.S. -- based on dates, or tying the repayments to smaller sales numbers -- have had an impact on the amount of exports relative to domestic sales? 

What I was getting at was the following.  One way to look at the relationship between subsidies and export is to ask whether the subsidies encourage companies to export, in the sense of providing an incentive to export rather than sell domestically.  If you want to put this in traditional GATT terms, perhaps you could refer to this as the "conditions of competition" as between exports and domestic sales.  By favoring export sales through a subsidy, this subsidy encourages producers to export instead of selling domestically.

But maybe this is too narrow.  An alternative approach might find that export subsidies exist even where the subsidy does not prefer exports over domestic sales.  Rather, it might be enough if the subsidy encourages more exports, even if it applies equally to domestic sales and encourages them as well.  If you have a subsidy that will, by its nature, result in more exports, maybe that is enough to demonstrate export contingency.

One of these might be what the U.S. had in mind in the parts of its submission I quoted in the last post.  On the other hand, the U.S. might have been thinking of something completely different.  There are a lot of possibilities for how this standard could work.

So that's what I meant in the last post.  I'll be curious to see what the EU has to say about this in its submission, and it would be great if the Appellate Body would clarify its previous statements on the issue.

Export Contingency in EC - Aircraft

In its other appellant submission in the EC - Aircraft case, the U.S. criticizes certain aspects of the Panel's reasoning under the SCM Agreement Article 3.1(a) export contingency standard.  In particular, the U.S. disagrees with what it says is the Panel's consideration of subjective motivations as a required element under this standard:

16.  ... The Panel’s own characterization of its reasoning thus reveals that the Panel effectively required evidence of specific motivation in order to find a tie between the subsidy and anticipated exports.

...

19. Thus, instead of considering evidence of the subsidy granting authority’s “motivation” as part of the “total configuration of the facts”18 relevant to discerning the existence of a tie between the subsidy and the anticipated exports, the Panel effectively established a requirement of specific motivation in order find such a tie.

The U.S. was concerned that making such motivations a requirement element would make it to easy to avoid these obligations:

21. As panels and the Appellate Body have recognized, divining the subjective motivation of a Member pursuing a particular policy may not always be possible, particularly given the multiple motivations that may underlie the adoption of a given measure.20 If, as the Panel’s approach reflects, subjective motivation were a necessary requirement for reaching a finding of de facto export subsidization, a subsidizing Member could tie the grant of a subsidy to exports and still avoid a finding of WTO-inconsistency, for example, simply by ensuring no public statements of motivation were made or included in the measure or discussion of it, or by publicly declaring additional motivations that did not relate to the desire to increase exports.

22. The Panel’s findings in respect of the German, Spanish and UK A380 launch aid reinforce this concern. In each instance, as discussed above, the Panel searched for evidence of subjective motivation of the member State, having concluded that the exchange of commitments in the launch aid contracts did not provide such evidence. The Panel found such evidence primarily in language from the launch aid contracts that reveals that the member States’ decisions to enter into these contracts were driven by, or in “contractual reliance”21 on, Airbus’ assurance that a substantial amount of sales would be exports.22 By explicitly making this language the determinative basis for finding the subjective motivation that the Panel considered necessary for a claim of de facto export subsidization, the Panel has essentially reduced compliance with Article 3.1 and footnote 4 to a semantic matter of deleting a few phrases from future financing agreements. Nothing in the SCM Agreement permits such a formalistic means of evading the prohibition against export subsidies.

We were also skeptical of this part of the Panel's reasoning in our DSC (although we didn't put it exactly like the U.S. did):

The role of intent has not previously been referred to by the Appellate Body under this standard, and it is not clear what the Appellate Body will think of its inclusion here. Intent has been controversial under GATT Article III, and it is likely to be contentious here as well. There are different kinds of intent, and it is generally agreed that intent can be difficult to discern. As a result, the Appellate Body might be concerned about this aspect of the Panel's reasoning.

So if intent is out (or at least, cannot be a required element), what does the U.S. argue that the focus of the export contingency standard should be:

26. Before the Panel, the United States established that the member States expected certain levels of export performance in return for the provision of launch aid. These expectations were based not only on the significant export-oriented nature of Airbus, but also on assurances provided by Airbus forecasts and existing orders for certain models at the time the member States committed to provide launch aid. These expectations, and Airbus’ commitment to meet or exceed them, were codified in the form of launch aid contracts signed by each member State for a particular model of aircraft. Without these contracts, launch aid would not have been provided.

27. As is the nature of most contracts, each of these launch aid contracts reflected a commitment by one party to perform an act in exchange for a commitment from the other party to perform another act. In the launch aid context, this exchange of commitments specifically meant the commitment of the relevant member State to provide launch aid in exchange for Airbus’ express commitment to repay that launch aid on a per sale basis over a specified number of deliveries that could not be made without exports. The repayment terms of these contracts were therefore an integral component of the obligation Airbus was required to undertake in order to receive the launch aid.

...

31. To be clear, it is the particular structure of the launch aid contracts that provides the “conditionality” required under Article 3.1(a) and footnote 4. The member States could have structured these contracts in other ways more consistent with the central features of standard financing agreements, for example, by establishing a repayment calendar based on specific dates without regard to the deliveries made by Airbus. Alternatively, they could have insisted on repayment over much smaller numbers of deliveries than actually were set out in the contracts, that is, using numbers that could be reached without necessarily exporting. The member States, however, did not choose those options as commitments they would accept in exchange for the launch aid.27

Here's what I wonder:  Did structuring the repayments in this way affect Airbus' thinking about whether to sell for export or on the domestic market?  Would structuring the repayments in the alternative ways suggested by the U.S. -- based on dates, or tying the repayments to smaller sales numbers -- have had an impact on the amount of exports relative to domestic sales?  And do the answers to these questions have any relevance under the export contingency standard?

Duty Suspensions and GATT Article II

Here's something from the EC - IT Products case that I'm still thinking through.  The basic issue is this.  The EC is imposing a duty that the Panel found is in excess of its bound rate.  Thus, there is a violation of Article II:1(b), as the duty is in excess of that in the EC Schedule.  That part is pretty simple.

However, this duty has been suspended for some products, and therefore there is no violation of Article II:1(b) for those products.  Still not that complicated.

The Panel then turns to Article II:1(a) to see if there is less favorable treatment in situations where the duty has been suspended (and thus there was no violation of II:1(b)).  It finds that there is, as follows:

7.756 The Appellate Body in Korea – Various Measures on Beef stated that whether or not imported products are treated "less favourably" should be assessed by examining whether a measure modifies the conditions of competition in the relevant market to the detriment of imported products.986

7.757 While Article III:4 focuses on less favourable treatment between domestic and imported like products and Article II focuses on less favourable treatment, vis-à-vis what is in a Schedule, we find the emphasis on competitive opportunities relevant for our analysis, particularly as negotiated tariff concessions and the certainty thereof are important market access guarantees. Therefore, if a measure adversely affects the conditions of competition for a product from that which it is entitled to enjoy under a Schedule, this would be less favourable treatment under Article II:1(a).

7.758 We have found in paragraph 7.744 that, but for the duty suspension, the European Communities' measures are inconsistent with its obligations under Article II:1(b). It follows, in light of the Appellate Body decision in Argentina – Textiles and Apparel referred to in paragraph 7.99 above, that the European Communities' measures are also inconsistent with Article II:1(a). The question arises whether the duty suspension eliminates the inconsistency with respect to Article II:1(a) in the same way as it did with respect to Article II:1(b). The current suspension regime of Council Regulation No. 179/2009 has been in place since 1 January 2009, but was applicable retroactively for the period January-March 2009. It will automatically expire on 31 December 2010. The duty suspension is limited to the particular products specified therein.987 Council Regulation No. 179/2009 is the third in a succession of measures that have applied a suspension of duties on imports of particular LCD displays. The first of these measures, Council Regulation No. 493/2005, was published 31 March 2005 with effect from 1 January 2005 through 31 December 2006. Second, Council Regulation No. 301/2007 was published in 19 March 2007 with effect from the 1 January of that year. This latter regulation extended the identical terms of the prior suspension under Council Regulation No. 493/2005 to 31 December 2008. Most recently, Council Regulation No. 179/2009 was published in March 2009 with retroactive effect to 1 January of 2009. This measure is currently in force and forms part of the Panel's terms of reference.988 This measure enlarged the scope of application of the duty suspensions that were previously applied to certain LCD imports.

7.759 These earlier applications of the duty suspension reveal that the duty suspension regime currently in place has been renewed biannually, is set to expire automatically and is not extended automatically. The duty suspension has only been extended or amended, subject to formal actions taken by the EC Council, i.e., following the passage of a new Council Regulation. It appears that these measures do not take effect prior to their publication in the EU Official Journal. The suspension under all three measures was applied retroactively for periods between January and March in 2005, 2007 and 2009, respectively.

7.760 Thus, while a suspension on imports of certain LCD displays has formally been in effect for five years or more, the suspension is not permanent in nature, and is subject to a formal extension or amendment. In addition, we note that the measure at issue (as well as prior measures) implementing the autonomous duty suspension does not set out specific conditions for its withdrawal or nonrenewal. Thus the duty suspension in force at a particular time may expire, be repealed, or be amended to increase or decrease coverage.

7.761 We recognize that no amount of autonomous duty-free coverage can be assured in an absolute sense. The European Communities, for instance, sets forth its tariff bindings in the EC Schedule pursuant to annual amendments to the autonomous duty rate in the CCT, published in October of each year prior to its entry into force the following January. Notwithstanding this fact, tariff bindings set forth in the CCT autonomous duty regime remain in place until formal repeal by the Commission. Thus, tariff treatment under the CCT is not contingent on renewal or extension, unlike under the current duty suspension regime. In our view, this distinction is significant, in particular, in the sense that continuous tariff treatment provides forseeability for traders operating in the marketplace. Moreover, the tariff treatment established under the CCT is prospective, unlike under the duty suspension regime, where the application of the suspension has been applied retroactively on a number of occasions.989 For the foregoing reasons, we are of the view that the duty suspension measure does not eliminate the inconsistency with Article II:1(a) because there remains the potential of deleterious effects on competition.

The whole thing has a mandatory/discretionary/Section 301 feel to it.  Can you have a measure that imposes a duty above the bound rate, but then you suspend the excess amount of duty so that the actual applied duty does not exceed the amount in the Schedule?  Does the possiblity of removing the suspension, and thus imposing the excess duty again, affect the conditions of competition for the product?  Does it do so any more than would the possibility of simply imposing an additional duty above the bound rate through a new measure?

I see why the Panel said what it did, but I'll have to think about this one some more.

Textual Analysis in WTO Dispute Settlement: More Than Just Words

How do you interpret a colon?  This is from the EC - IT Products panel report:

The relevance of the colon to an understanding of the terms in the concession

Arguments of the parties

7.862 Japan and Chinese Taipei consider the relevance of the use of the colon in their assessment of the ordinary meaning of the concession. In particular, Japan argues that a device having the three characteristics appearing after the colon is a set top box with a communication function.1104 Chinese Taipei argues that the colon "breaks the sentence" into two parts, wherein the product is identified before the colon, and "a type of device (STB) that is able to perform a communication function is described" after the colon. In other words, according to Chinese Taipei, the terms after the colon merely provide for an example of a set top box which has a communication function.

7.863 The European Communities argues that the use of a colon divides the text into two parts: "Set top boxes which have a communication function", and "a microprocessor-based device incorporating a modem for gaining access to the Internet, and having a function of interactive information exchange". In its view, the text which follows after the colon is used to identify or explain the text before the colon, which requires not reading the two parts in absolute separation.1105

Consideration by the Panel

7.864 The Oxford Guide to English Usage explains that one function of a colon is to "[l]ink[] two grammatically complete clauses, but mark[] a step forward, from introduction to main theme, from cause to effect, or from premise to conclusion".1106

7.865 It is unquestionable that the colon provides a division between the antecedent text "Set top boxes which have a communication function", and that which follows it. A "link" or relationship between these clauses is implicit since the full text constitutes the concession at issue. Thus, the terms before the colon cannot be understood in isolation from the rest. Rather, all the terms together determine the concession. The text following the colon appears to inform and expand upon the description provided by the antecedent text "Set top boxes which have a communication function". Such a set top box is "microprocessor-based", and further "incorporat[es] a modem for gaining access to the Internet, and [has] a function of interactive information exchange". What remains is to determine the ordinary meaning of "a microprocessor-based device incorporating a modem for gaining access to the Internet, and having a function of interactive information exchange", which informs the meaning of "Set top boxes which have a communication function".

Protecting Citizens Who Work Abroad

When a country exports goods, it doesn't generally care what happens to those goods once they are sent abroad.  There may be some exceptions:  treatment of animals; nuclear materials; perhaps the use of guns and other weapons.  But for the most part, this is not a big concern.

By contrast, when you are trading services through Mode 4 (presence of natural persons), you do care how these workers are treated when they are abroad.  Here is something from the Philippines:

The Department of Labor and Employment (DoLE), through the Philippine Overseas Employment Administrations (POEA), released recently the implementing rules and regulations (IRR) of Republic Act 10022, the amended Migrant Workers and Overseas Filipino Act of 1995. The law aims to protect the welfare of Overseas Filipino Workers (OFWs) and the IRR intensifies such protection by defining the responsibilities of recruitment agencies.

With the IRR, several provisions of Republic Act (RA) 10022 are now in effect. These include the repatriation of OFWs if necessary at the expense of their recruitment agencies; prohibition of reprocessing or alteration on an OFW’s contract; and inspection of medical clinics before they are deployed. Foreigners are barred from owning the majority of the shares of a recruitment agency.

This makes me think of Tomer's paper explaining the shortcomings of the GATS on this issue:

In this article I have attempted to tease out the basic principles of an international labour
migration regime that could conform to competing theories of global justice on a pragmatic,
non-ideal basis, and address the multitude of problems associated with the international
labour migration debate. I have shown that these principles should include elements of
global distributive justice, human rights protection, immigration policy enforcement and
contingent emergency safeguards or 'escape clauses'. These principles reflect not only a
philosophical common ground between cosmopolitan and communitarian approaches to
this difficult area, but also a compromise among different political views.

However, the GATS Mode 4 spectacularly fails to meet any of these criteria. It is as
ineffective in the promotion of global distributive justice as it is in the strengthening of
migration policy enforcement, and as inadequate in the protection of human rights as it is in
the prevention of seriously detrimental effects of labour migration. The establishment of a
global labour migration regime that is morally permissible, politically possible and likely to be
effective (Rawls: 1999, 89) will no doubt require careful consideration, negotiation and time;
but the GATS Mode 4 does not appear to be the appropriate model, in too many senses.

The EC - IT Products Panel Sees Through the Parties

This is from the EC - IT Products panel:

7.421 Both the complainants and the European Communities have put forward competing interpretations of the motivations and effects of these modifications which, not surprisingly, support their respective positions regarding the key interpretative issue described above.

Global Trade Watch Calls for Trade Concessions!

Well, sort of.  Here's what Lori Wallach of Global Trade Watch says in relation to the Mexico Trucking dispute:

until the safety situation improves, Congress must not allow Mexico-domiciled trucks onto American roads. At the same time, Mexico is far from being able to meet key truck and driver safety standards. Yet, NAFTA provides Mexico a right of access and obligates the U.S. - thus the indefinite sanctions.

So what's to be done? Just around the corner from the irony of a trade pact leading to higher tariffs is the answer: negotiations to remove the trucking access obligation and swap it for something else. In trade terms, this is called negotiated compensation.

That is how USTR Kirk ended almost a decade and hundreds of millions of dollars in trade sanctions related to a U.S. WTO win against Europe's ban on artificial beef growth hormones. All those U.S. tariffs and years later, European politicians preferred to live with indefinite sanctions and avoid meeting sharpened forks and knives - and unfavorable election returns - from a European public opposed to what it considered unsafe food additives. So, the U.S. agreed to trade the sanctions against Europe for...more trade with Europe! (Better access for non-hormone beef.)

Congress and the American public are not going to budge on NAFTA trucks. So, let the NAFTA fixing begin. Members of Congress have been calling for that approach all year.

So it's just a call for compensation as an alternative to opening up the trucking services market, rather than actual additional trade liberalization.  But still, it's better than rolling back past liberalization, which they sometimes seem to advocate, so in that sense it's an improvement!

The U.S. Appeal in EC - Aircraft

At long last, here is the U.S. "other appeal" in EC - Aircraft.  It has two potentially interesting issues.

First up, the issue of whether certain subsidies constitute an "export subsidy":

1. The United States seeks review by the Appellate Body of the Panel’s legal conclusion that the United States failed to establish that the French A380, French A340-500/600, Spanish A340-500/600, and French A330-200 launch aid constituted prohibited export subsidies within the meaning of Article 3.1(a) and footnote 4 of the Agreement on Subsidies and Countervailing Measures ("SCM Agreement").1 These conclusions are in error and are based on erroneous findings on issues of law and legal interpretations, including an erroneous interpretation and application of Article 3.1(a) and footnote 4 of the SCM Agreement.2 To the extent that the Panel’s recommendation, pursuant to Article 4.7 of the SCM Agreement, that the subsidies found to be prohibited be withdrawn within 90 days, does not include the French A380, French A340-500/600, Spanish A340-500/600, and French A330-200 launch aid, the United States also requests that the Appellate Body review that recommendation.3

Next is the issue of when a series of (allegedly) related subsidy measures constitute a "subsidy program":

2. The United States seeks review by the Appellate Body of the Panel’s legal conclusion that the United States failed to demonstrate the existence of the Launch Aid Program.4 This conclusion is in error and is based on erroneous findings on issues of law and legal interpretations, including the failure to examine properly whether the Launch Aid Program is a "measure" subject to challenge in WTO dispute settlement proceedings.

Both of the legal standards at issue could benefit from some additional clarification.

The Role of Academics in International Courts

I said I wouldn't comment on the Vivendi separate opinion relating to the role of the ICSID Secretariat, and I won't, but I was struck by this part of the opinion, which makes a somewhat different point:

16. Another idea seems to be that the Secretariat is the voice of a jurisprudence constante which it is its task to advance and protect and which gives it an autonomous right of intervention. This is also profoundly mistaken and may be seriously prejudicial to the parties. In any event, it is far too early to assume the existence of such a jurisprudence and its status as law would be uncertain even if it existed. It may be recalled that in international law, there has never been a rule of binding precedent and this is so for very good reasons.

17. For the moment, the formulation of any such jurisprudence must be left to academics whilst it should be appreciated that to engage in a form of system creation in this manner or of thinking in academic models is not necessarily objective and free of intellectual prejudice or other bias. It is in any event not the allotted task of the Secretariat to assume the academic mantle and it is not, and could not be staffed for it.

So the formulation of international law jurisprudence is for academics. This made me think of Joost's long ago post wondering why trade law academics never get cited in WTO decisions.  Apparently, if you are an international law academic who wants to have influence on courts, you should keep this in mind: in some areas of international law you get to "formulate jurisprudence," whereas in trade law you get nothing!

The Role of International Court Secretariats

Here is a long excerpt from the recent annulment decision in the Vivendi case before an ICSID ad hoc committee, in which the role of the ICSID Secretariat is called into question:

Additional Opinion of Professor JH Dalhuisen under Article 48(4) of the ICSID Convention

1. Before ending the discussion, I should like to deal with the role of the ICSID Secretariat in this matter which has led to multiple complications and has delayed the final decision by many months.

2. It is clear that the Secretariat wants to obtain for itself a greater role in the conduct of ICSID cases and in the process also wants to involve itself in the drafting of the decisions. So also in this case. I believe this in general to be outside the Secretariat´s remit and undesirable.

3. The role of the Secretariat in ICSID is substantially defined in Article 11 of the ICSID Convention and in Chapter V of the Administrative and Financial Regulations. It is a role of administration and support; it is clear that the Secretariat has no original powers in the dispute resolution and decision taking process.

4. As a minimum, the Secretariat is keen to do the recitals, but as the recitals in this case also show, by accommodating the Secretariat’s involvement, they are becoming longer and longer. To do it properly, choices need to be made and it is hardly the task of the Secretariat to make them. What are the key facts and relevant arguments and how they should be presented in the final decision or award is for Arbitrators or ad hoc Committee Members to select and decide.

5. Any other approach leads easily to a disjointed expose of arguments, counter-arguments, and decisions, especially in cases like the present one in which virtually everything was contested. Moreover, getting some presentable text out of the Secretariat in these circumstances delayed the final result considerably.

6. Although summarising the arguments may well be helpful, it should ideally be done much earlier in the case before the hearing so that such a summary could be tested by Arbitrators or ad hoc Committee Members in the oral proceedings. If preparatory help of this nature is needed, Arbitral Tribunals or ad hoc Committees may be wiser to appoint their own assistant subject to their full control and direction. Any text tested in this manner might in appropriate cases then serve as part of the final award or decision.

7. For the Secretariat also to draft part or all of the decisions and reasoning would appear wholly inappropriate, even if following basic instructions of Arbitrators or ad hoc Committee Members whilst the final version would naturally still be left to them for approval. This would not appear to be sufficient to legitimize the text.

8. During cross-examination it was asked why and questioned how some arbitrators could do so many cases. One way is to farm out the drafting to others, in the case of ICSID to the Secretariat. There appears to be much appreciation for this by busy arbitrators but it is improper.

9. In this case, the ICSID Secretariat even took the view that on its own initiative it could intervene to “streamline” the texts earlier agreed by the present ad hoc Committee and senior Secretariat members approached individual Committee Members informally with a view to amending the text. This naturally caused great stress in the Committee, raising many fundamental issues of propriety, independence, open and direct communication between Committee Members, and confidentiality.

10. It is relevant in this connection to note that a practice appears to have developed in ICSID whereby all communications, also those between the Chairman and ad hoc Committee Members (or Arbitrators as the case may be) are conducted through the Secretariat, but this is not the system of the Convention, quite apart from the question whether it gives the Secretariat subsequently power to intervene.

11. Under Regulation 24(1)(b), the communication between ad hoc Committee Members (and Arbitrators as the case may be) is specifically carved out from intermediation through the Secretariat and this is so during the full pendency of the proceedings.

12. This ties in with Arbitration Rule 15 which makes the deliberations private and secret. Only Members of the ad hoc Committee (or Arbitrators as the case may be) shall take part and no other persons are admitted.

13. These rules stand to reason and are mandatory. It may be doubted whether they can be waived, which would at least require the consent of all Committee Members (or Arbitrators). It means that the deliberations and related exchanges cannot properly be conducted through the Secretariat. The role of the Secretariat in record keeping (to the extent records exist) does not distract from these rules; the deliberations are not part of the record in this sense.

14. The need for this system to be respected is especially clear in a case like the present one where serious reputational issues are at stake. Privacy and secrecy are here of the essence to promote free communication whilst protecting ad hoc Committee Members (or as the case may be Arbitrators) but no less the persons whose reputation may be affected. It should be noted in this regard that the Secretariat, whilst receiving any of this information, appears to be under no similar secrecy obligation.

15. However this may be, the ICSID Secretariat is not entitled to this information and can not act on it at will. On the basis of what it sees, it may well be able to take the initiative in alerting the Committee to clear mistakes or oversights but it should do so in writing, to all Members simultaneously, and not otherwise intervene in any way, except if formally asked to do so by the Committee for clearly defined purposes which should never affect the substance of the case, either directly or indirectly.

16. Another idea seems to be that the Secretariat is the voice of a jurisprudence constante which it is its task to advance and protect and which gives it an autonomous right of intervention. This is also profoundly mistaken and may be seriously prejudicial to the parties. In any event, it is far too early to assume the existence of such a jurisprudence and its status as law would be uncertain even if it existed. It may be recalled that in international law, there has never been a rule of binding precedent and this is so for very good reasons.

17. For the moment, the formulation of any such jurisprudence must be left to academics whilst it should be appreciated that to engage in a form of system creation in this manner or of thinking in academic models is not necessarily objective and free of intellectual prejudice or other bias. It is in any event not the allotted task of the Secretariat to assume the academic mantle and it is not, and could not be staffed for it.

18. The Secretariat should not have a policy or view in these matters but respect the authority and independence of the Arbitral Tribunals and ad hoc Committees which must find the law on the basis of the facts as they present themselves to them. This does not, of course, rule out that earlier cases may have persuasive value but it is for the relevant Tribunal or ad hoc Committee to decide in each instance, taking into account the submissions of the parties.

19. Submissions by the Secretariat, whatever the intention, are here legally irrelevant and no more than unsolicited opinion. Not being subject to examination by the parties, they cannot carry any weight.

20. Decisions of this nature are also not legal textbooks or preachers’ manuals and ad hoc Committees or Tribunals should not make them so in the reasoning. In any event, I do not believe that parties can be asked to pay for such exercises which make the opinions ever longer and more unmanageable or even muddled and do not do the international arbitration practice any favours. We are here primarily to solve a problem for the parties, not for others in the present or the future, and do not operate in this regard as ordinary judges.

21. In sum, the Secretariat is not the fourth member of ICSID Tribunals or ad hoc Committees and is not an interested party in any other way. It also does not have powers of scrutiny in the manner of the ICC Court. Although in practice it acts as appointing authority - in the case of ad hoc Committees of all Members - these Committees do not thereby become the extension of the Secretariat.

22. The potentially close interconnection in the present practices of the Secretariat between furthering its own role and its powers of appointment requires scrutiny and these practices themselves greater transparency. It lifts the question of the independence of ad hoc Committee Members and Arbitrators appointed by ICSID to the institutional level within ICSID. What is particularly necessary is that any semblance of collusion between the Secretariat and the Arbitrators or Committee Members it effectively appoints is avoided.

23. In short, it is urgent that the Secretariat clarifies its own role, which under the Convention, Administrative and Financial Regulations, and Arbitration Rules can be no more than one of support, respects and reinforces the privacy and secrecy of the deliberations of the ad hoc Committees or Tribunals, separates itself entirely and meticulously from the substance of the proceedings, appreciates that in legal matters wording is substance, organizes itself accordingly, and seeks financial support for this limited role only.

24. To conclude, the key issue in this annulment case was foremost the issue of independence of Arbitrators in the Second Award, but it became also an issue of the independence of the Members of the Second ad hoc Committee and, in that context, of the privacy and secrecy of their deliberations and drafts.

25. What hovers over all of this is the potentially pernicious impact of the desire for (re)appointment in many, not least for financial gain, in which not only withholding from the parties relevant information, as was the subject of the decision of this ad hoc Committee, but also incurring the favour of the Secretariat, may be important issues in terms of independence. Recently, the world has been rightly dismayed at the complete lack of judgment in grasping senior bankers. Whatever the rights or wrongs in this case, it may serve as a serious warning, also for ICSID arbitrators.

26. If the self-cleansing forces in the international arbitration system are no longer sufficiently strong, and if there is thus a need for closer supervision of Arbitrators and ad hoc Committee Members, this would not be the task of the ICSID Secretariat, which itself should be properly supervised, but must come from a treaty change probably involving the creation and operation of a specialised international court which might also function as ultimate supervisor and referee in international commercial arbitrations (including challenges and recognition issues) where similar needs may increasingly exist.

As a former Secretariat person myself (the Appellate Body), I'm going to stay out of this, but if anyone else has an opinion, feel free to post it in the comments.

Export Quotas and Production Quotas

The WTO's World Trade Report 2010 is full of interesting trade tidbits.  To the extent I have time, I'll pull some out over the next few months.  This is from Chapter E of the report:

in the absence of domestic consumption, a domestic production quota is equivalent to an export quota. Yet, while an export quota is prohibited by Article XI of the GATT, most observers consider that a production quota is not subject to this prohibition. Instead, many consider that decisions concerning how much of a natural resource is extracted or harvested fall within the sovereignty of each state

This statement is true to some extent, but I'm not sure it gives a full picture of the issue.  One of the reasons for an export quota is to give domestic consumers greater access to the product.  With a greater supply on the domestic market, the price should come down for these consumers.  Such a policy can be used to give domestic producers who use the good in question as an input -- who are one type of consumer -- an advantage over their foreign competitors.  The domestic producers get it cheaper (due to greater supply); the foreign producers pay more (due to reduced supply).

By contrast, I don't think this can be the case with the production quota situation described above.  It is true that if there is a production quota, and no domestic consumption, a limit on production will mean a limit on exports.  So if production is 100 units, and all 100 are exported, a production quota set at 50 will bring exports down to 50.  However, the assumption is that there is no domestic consumption, and I don't see any reason to think that the production quota would lead to any.  As a result, it's not clear to me how this production quota could be used to help domestic producers in relation to their competitors, in the way that an export quota would.

So, yes, this kind of production quota is equivalent to an export quota in some sense.  But I don't think it can be used in quite the same way as a trade policy tool.

Now, it may be true that a production quota could be used simply to hurt foreign consumers of the product, even where there is no domestic consumption.  I don't know if this is ever the case in practice, but it is possible.  But it also may be that the government is concerned about overusing scarce resources, and the production quota is designed to address that problem.

Privatizing General Motors

From the AP:

 General Motors has filed the first batch of paperwork needed to sell stock to the public.

GM filed the paperwork for its initial public offering with the Securities and Exchange Commission on Wednesday.

The company says the U.S. government and other stakeholders will sell common shares worth $100 million. GM will sell preferred shares worth $100 million. Those numbers are rough estimates and the amount raised in the actual stock sale is expected to be much higher.

GM got a $50 billion government bailout last year to stay in business. In exchange, U.S. taxpayers now own 61 percent of the company. CEO Ed Whitacre says government ownership has hurt GM's sales and public image.

So will this privatization extinguish any benefit conferred by the government bailout?  DSC subscribers can see this post for a discussion of this issue in the context of the EC - Aircraft case.

Trade in Everything: Really Old Guns

This is from David Kopel at the Volokh Conspiracy:

According to The Korea Times, the Obama administration has blocked efforts by the South Korean government to sell over a  hundred thousand surplus M1 Garand and Carbine rifles into the United States market. These self-loading were rifles introduced in 1926 and 1941. As rifles, they are especially well-suited to community defense in an emergency, as in the cases of community defense following Hurricane Katrina in 2005 and Hurricane Andrew in 1992. Along with AR-15 type rifles, the M1 rifles are the quintessential firearms of responsible citizenship, precisely the type of firearms which civic responsibility organizations such as the Appleseed Project teach people how to use.  

According to a South Korean official, “The U.S. insisted that imports of the aging rifles could cause problems such as firearm accidents. It was also worried the weapons could be smuggled to terrorists, gangs or other people with bad intentions.”

...

Legally, it is indisputable that the guns are importable. Being over 50 years old, the rifles are automatically “Curios and Relics” according to federal law. 27 CFR section 478.11. Accordingly, they are by statutory definition importable. 18 USC section 925 (e)(1). Notwithstanding the law, the Obama administration has the ability to pressure the South Korean government to block the sale of the guns.

"French Industrial Patriotism"

Not very subtle:

Embattled President Nicolas Sarkozy's industry minister, Christian Estrosi, said he's taking action next month because major companies are "not behaving very well" in the face of chronically high unemployment.

"I will set up a new monitoring agency for French products to ensure . . . a percentage of the components for products that are put together here are made in France," he said.

"What is important is the number of components, to ensure that the large majority come from French suppliers. All this will lead me to think about a law on interindustrial relations, to better protect our suppliers."

Wasn't there a way to phrase this so it doesn't seem like such a blatant GATT Article III:4 violation?

Careers in International Arbitration

International Law Section / International Dispute Resolution Committee

And the

American Society of International Law/ Dispute Resolution Interest Group

Jointly Sponsor a Brown Bag Program

Careers in International Arbitration for Young Lawyers?

The International Dispute Resolution Committee of the DC Bar and the American Society of International Law jointly invite you to join us for a free brown bag lunch program -- “Careers in International Arbitration for Young Lawyers?” -- on Wednesday, September 22, 2010, at the offices of Arnold & Porter LLP, 555 12th Street, N.W., Paul Porter Room, 10^th Floor, from 12:30 p.m. until 2:00 p.m.

We are often asked by law students how to begin a career in international arbitration.  Representatives of a number of prominent law firms, agencies and arbitral institutions will join us for a hands-on session to offer practical answers to that question.  Experienced practitioners will sit down at lunchtime with J.D. and LL.M students, using an “open mic” format for an informal Q&A session.  This is not a “job fair;” participants will not make speeches or presentations about their organization's arbitration practice or prospects for entry-level positions.  Instead, expect an informal room-wide conversation with interventions from many participants.  Perhaps you will just want to sit and listen, or to talk quietly with colleagues and students at your table, or maybe you will pick up a microphone and make your own suggestions.

Bring your own lunch or pick it up at the A&P cafeteria before the program.  Please let Camila Valenzuela ([email protected]) know if you plan to attend.  For further information about the activities of the D.C. Bar International Dispute Resolution Committee, please contact Committee Chair Mark Kantor at [email protected]or on the web at http://clik.to/kantor,or Committee Co-Chairs Jean Kalicki at [email protected] or Marsha Echols at [email protected]

Presidential Discretion to Lower Tariffs

In the comments, Susan Aaronson asks:

Can your readers please answer this question. Could the US President temporarily lower tariffs (to all countries) on his own without Congressional approval (under executive order). Perhaps he could justify it as a means of stimulating exports or to encourage development.

I am not aware of anything that would give the President the authority to do this.  Anyone else have any comment on this?

More on the Indian Visa Fee Issue

I mentioned the other day a U.S. Senate bill that funded border security by taxing visa applications for skilled workers coming to the U.S.  Well, now the bill has been signed into law, so maybe it's worth a little more detailed discussion.

In my earlier post, I suggested there might be a GATS violation, either through MFN (Article II) or NT (Article XVII).  I still think there might be, but just to be clear, it's not an easy case to make.  With de facto discrimination claims, as this would be, there are a lot of facts that need to be fleshed out.  You really have to get a good understanding of how the particular industry works.

For example, with regard to the services at issue, it's not completely clear to me what exactly these services are.  Are we talking about the service of bringing skilled workers to the U.S.?  Or is it the services provided by these workers?  If the latter, what is the range of services they are providing?  And, importantly, who are the domestic competitors of the foreign service providers?

As to "less favorable treatment," there have been suggestions that only 4 Indian companies would be affected by this law.  If that's true, that seems like good evidence of discrimination against Indian companies.  But, getting back to the issue of identification of the services, who are all the other service providers?  I don't think it's enough to just say, here are 4 Indian service providers being hurt.  For MFN, there would need to be some evidence of how the rest of the world is being treated, and that other countries received better treatment in relation to "like" services.

I have not heard anything definite about whether India plans to challenge the law at the WTO.  If it does, I think there is a good potential case there, subject to digging up evidence on these and other points.  Also, other GATS provisions might come into play (Article VI, perhaps?), but I would need a better sense of the facts before saying anything specific.

Finally, over at the Volokh Conspiracy, Stewart Baker writes:

But there could easily be a WTO challenge to the new fee.  In a dumb move that hasn’t recently been repeated, the US long ago agreed at the  WTO that it would always allow at least 65,000 H-1B visa holders to enter the country.  I would not be surprised to see India challenge the new fee on a couple of WTO grounds – that it discriminates in practice against foreign companies and that it effectively withdraws – or at least improperly burdens — the binding US commitment to admit 65 thousand workers (after all, India will argue, no one would think the US was living up to its WTO commitment if it raised H-1B visa fees to $1 million apiece).

Raising the fee to $1 million on every application could be a problem under the commitment, although that seems more extreme than what's going on here.  But again, I'd want to know a little more about the underlying facts before saying anything definitive on how the GATS commitment in question applies.

Scott Lincicome on Concurrent AD/CVD Cases and Double Counting

I was thinking of posting something on the recent U.S. Court of International Trade decision in the GPX case, which deals with the issue of concurrent AD/CVD cases related to non-market economies, and problems that arise with double counting the remedy.  I couldn't quite face trying to put something coherent together on this complex issue, though.  Luckily, Scott Lincicome has taken the time.  Check out his post here:  http://lincicome.blogspot.com/2010/08/china-cvd-mess-just-keeps-getting.html

I do have a question about the following sentence in the CIT decision:

Thus, any resulting NME AD margin in theory also captures the competitive advantage that subsidies may provide because the constructed NV is subsidy-free, and presumably higher than a subsidized NV, while the U.S. price presumably reflects in some way the price-lowering benefits of the subsidies.

If the U.S. price reflects the price-lowering benefits of subsidies, what does this say about concurrent AD/CVD measures in general?

Coming Soon: Treatment of Non-Market Economies under WTO AD Rules

Reuters reports on the interim report in DS397 (EC - AD Measures on Fasteners):

In particular [the Panel] rejected the EU's approach to non-market economies, which effectively applies a single anti-dumping duty to the whole country rather than for individual firms, unless they can prove that they are independent of the state.

It means that the EU must now set individual duties on companies that want them, without unnecessary obstacles, instead of imposing a blanket duty for the whole country.

I'm looking forward to hearing more about what the Panel had to say on non-market economies, but it may be a while before this report is circulated publicly.

Australia to Appeal the Apples Panel Report

That was quick:

Australia will appeal a World Trade Organisation (WTO) ruling that tough restrictions on the importation of New Zealand apples are unduly restrictive on trade.

A decision by the WTO's panel of independent arbitrators recommended overnight "that the dispute settlement body request Australia to bring the inconsistent measures ... into conformity with its obligations".

But Agriculture Minister Tony Burke said on Tuesday Australia would appeal the decision to the WTO's appellate body.

"We are disappointed that the WTO panel found that the import risk analysis underpinning Australia's requirements for New Zealand apples is not sufficiently supported by scientific evidence and also that the requirements are unduly trade-restrictive," Mr Burke said in a statement.

"The relevant import requirements are aimed at addressing the quarantine risks associated with New Zealand apples in relation to the diseases fire blight and European canker, and the insect apple leafcurling midge."

Mr Burke said: "There are adequate grounds to appeal the panel's decision."

If you're looking for a quick glance at what happened, but don't want to slog through hundreds of pages, here's a brief excerpt from the report that shows the kind of thing the Panel found problematic with Australia's Import Risk Analysis (IRA):

(a) Alleged overestimation for importation step 1

7.247 Importation step 1 represents the likelihood that the relevant pest is present in the source orchards.

(i) Summary of the Parties' arguments

7.248 Regarding importation step 1 for fire blight, New Zealand argues that the IRA's estimation that Erwinia amylovora would be present in 100 per cent of source orchards in New Zealand is incorrect and constitutes a "significant overestimation". In New Zealand's view, this conclusion is "based on a misreading of scientific literature and incorrect assumptions [and is] not supported by the scientific evidence".

...

(ii) The Panel's analysis

...

7.259 In conclusion, the Panel finds that the IRA's estimation that Erwinia amylovora will always be present in the source orchards in New Zealand is not sufficiently supported by the scientific evidence that the IRA relied upon and, accordingly, is not coherent and objective.

Treatment of Workers Supplying Services Through Mode 4 Trade

Trade in services through mode 4 -- movement of natural persons -- can be complicated.  It's not just about convincing countries to open up to trade.  Once they have opened up, there are issues related to the treatment of workers.  Sometimes the government of the exporting country takes these issues on; sometimes it's the workers themselves.  Here are some recent stories involving various issues related to the treatment of these workers:

Wage levels:

Malaysia said Sunday it could not accept an Indonesian proposal on a minimum wage for its maids amid delays on a working conditions deal following a series of shocking abuse cases.

Both countries have been working on a deal for maids after a flood of complaints of mistreatment of domestic workers strained ties between Malaysia and Indonesia, leading Jakarta last June to ban maids from working there.

Human resources minister S. Subramaniam told AFP his country would not agree to an Indonesian minimum wage plan of 800 ringgit (254 dollars) a month for maids who are currently paid between 300 to 400 ringgit monthly.

“The proposal is unacceptable as Malaysia does not have a minimum wage structure and we feel that wages should be based on market forces,” he said.

“It is unfair to set a minimum wage for domestic workers from Indonesia if it is not done across the board for other industries also,” he added.

“If the maids have attended courses and have more skills, they can definitely demand a greater salary but we will not set a minimum salary.”

Subramaniam said talks were ongoing between the two governments despite delays in reaching an agreement that was supposed to have been inked last month.

Protections against abuse:

After a series of delays, a key agreement between Indonesia and Malaysia on protecting migrant workers could be signed as early as this month, a top Indonesian official said. 

Manpower and Transmigration Minister Muhaimin Iskandar said on Wednesday there was only one issue left to wrangle over before the deal was finalized.

“The only problem left now is the cost of sending Indonesian workers to Malaysia,” he said. 

Ties between the countries have been strained after a string of alleged abuses against Indonesian domestic workers came to light, prompting Indonesia in June 2009 to impose a moratorium on sending more workers to Malaysia pending a new agreement on their protection. 

Unfair testing requirements:

 Japan allows hundreds of Southeast Asian nurses to work on short-term contracts, but the health-care workers say the exams they must pass for the right to stay longer are so tough that almost all flunk them.

Nurses and care-givers from Indonesia and the Philippines are now asking their host country to relax the requirements that force them to quickly learn thousands of Japanese characters and medical terms on top of their work duties.

“It’s really a challenge for us to pass the exam, with only one chance, after working full-time for three years,” Indonesian nurse Wahyudin, 28, said in Japanese at a Tokyo press conference on Tuesday.

“I think the current exam is more a test of the Japanese language, rather than a test of the qualifications of the caregiver,” said Wahyudin, who said he was speaking for scores of fellow foreign nurses in Japan.

 

Accepting an Amicus Brief at the WTO

More on the substance of the dispute later (possibly much later -- it's a long report), but here's something interesting from today's Australia - Apples panel report:

6. Unsolicited letter from an Australian private entity

1.17 On 26 August 2008, the Panel received an unsolicited letter from an Australian private entity (Apple and Pear Australia Ltd, APAL).41 On 27 August, the Panel invited both Parties, as well as Third Parties, to express their views on how the Panel should deal with this unsolicited communication in their statements during the course of the first substantive meeting to be held on 2-3 September 2008.42 During the substantive meeting, the Parties expressed no objection to the Panel accepting the unsolicited letter.43 On 8 September, the Panel notified the Parties that it had decided to accept the unsolicited communication received from APAL, and would inform that entity accordingly. The Panel also told the Parties that it would include in the list of written questions after the first substantive meeting an invitation for the Parties to comment on the substance of that unsolicited communication.44 On 18 September, APAL was informed by the Panel that its communication had been accepted by the Panel, noting at the same time that this decision did not prejudge on the content of the communication.45

Law and Development Conference in Sydney

The Law and Development Institute is hosting its Inaugural Conference in Sydney, on October 16, 2010.  Here's the program, which looks excellent.  I can't seem to copy it into this post in nice formatting, so check it out at the link.

 

A New Link Between Trade and Immigration

Reader Daniel Crosby points me to this article from the NY Times, which discusses a proposed U.S. law that takes the trade and immigration linkage in a new direction:

A Senate bill approved Thursday night by unanimous consent would pay for more security along the Mexico border by raising fees for companies from India that operate in the United States and hire so many Indian workers that they have been criticized for violating the spirit of American immigration law.

The $600 million spending bill would send 1,500 more Border Patrol agents, customs inspectors and other law enforcement officials to the Southwest border, finance additional aerial drones to monitor remote desert regions and build two operating bases close to the border to help reduce illegal immigration and drug smuggling.

...

Republicans had proposed paying for the beefed-up security by tapping into stimulus money. But Senator Charles E. Schumer, Democrat of New York, said his staff had come up with an alternative that would not hurt American workers: raising the visa application fees paid by any companies with more than 50 people in which more than half the work force has H-1B or L visas that are intended for skilled foreign workers.

Senate aides said four Indian companies would qualify for the significantly higher fees: Tata, Infosys, Wipro and Mahindra Satyam, all of which operate in the United States and are criticized as “body shops” because they provide outsourcing of Indian professionals to American companies. Large American high-tech corporations, which bring the bulk of the skilled immigrants into the United States, would not be affected since the vast majority of their work forces are made up of Americans.

Basically, there is a higher fee imposed for visa applications where the companies involved have a high percentage of workers who have special visas given to skilled foreign workers.  That extra fee money would be used to help pay for border enforcement related to illegal immigration and drug smuggling.

It sounds like the law would not explicitly target India, so there is no de jure discrimination.  But it's pretty clear there will be de facto discrimination against Indian companies.  I'm not sure the Senate aides quoted meant the four Indian companies would be the only ones affected, but regardless, it seems likely there will be a disproportionate impact on India.

Of course, that's just "discrimination" in the general sense.  Is there discrimination that would violate the GATS, either MFN (Article II) or National Treatment (Article XVII)?  At first glance,  it certainly sounds like there will be "less favorable treatment" for Indian companies, as there is an extra cost imposed on Indian service suppliers.  But before there is a definitive conclusion on the GATS obligations, we would have to get into the scheduled U.S. National Treatment commitments and MFN exemptions.   Off the top of my head, I'm not sure what's in there in relation to trading services through Mode 4; if any readers know, I'd love to hear about it.

I can't see how any exceptions would apply, so it's really just about what the obligations are.  I suppose the U.S. could argue under GATS Article XIV(c) that this is necessary to secure compliance with GATS-consistent laws, but that seems like a stretch.

WTO Gambling Case Predictions

This is from gambling writer Hartley Henderson:

Consequently the following is my prediction with regards to the WTO issue and Antigua. The U.S. will remove its decision to rewrite its commitments, thereby eliminating the need to offer concessions. The country will provide opportunities for EU based companies to compete for online poker licenses when the UIGEA is amended and with Party Poker, Betfair etc. offering products in the U.S. they will be able to state that they are now in compliance because they are allowing foreign entities to offer remote gambling products in the U.S. At the same time the U.S. likely won't do anything with Antigua but they probably won't press the issue either meaning that Antiguan companies will be able to operate as always without U.S. threats. It's also possible, but not likely, that Obama will actually agree to send one of his trade representatives to talk with Antiguan officials (as Antigua has requested) to see if they can come to some sort of agreement which will convince Antigua to abandon their plan to use the $21 million per year award given to them by the WTO and in turn the U.S. may lift their current ban which effectively is treating Antiguan banks as a rogue entity. The Sir Allen Stanford scandal makes that less likely though.

Looking for KORUS FTA Investor-State Business?

Public Citizen's Global Trade Watch notes:

If the [Korea-U.S. FTA] were to go into effect, at least 79 Korea-based corporations with 270 establishments across the United States would obtain new rights to demand taxpayer compensation through challenges of U.S. federal, and state laws in foreign tribunals.

They provide a nice Google map (follow the link to see), with locations and contact details for each of these companies:

Above is a map of the U.S. locations of multinational corporations that would gain new rights to sue the U.S. government under the Korea FTA.  These corporations could challenge the local zoning and environmental laws of your community, so zoom in using the "+" button to to see which corporations are in your city.  Click on the dots to see the names of the corporations and their industry.  Blue markers are corporations based in Korea and red markers are corporations based in third countries that have operations in both countries. The red lines on the map are the borders of the districts of the U.S. House of Representatives. Click here for a full list of companies based in Korea that operate in the United States. 

They have a similar map for companies in Korea.

They explain that "the maps are a wonderful tool to explore which corporations could challenge laws in your community whether you're in the U.S. or Korea!"

I take it their point is that there is a great threat that these companies will bring lawsuits that threaten U.S. laws, and thus concerned citizens who live near these companies should contact their representatives to lobby against approval of the FTA.

At the same time, it also occurs to me that this is a great tool for investment lawyers to locate potential clients!

That's probably not what Global Trade Watch had in mind, of course.  Or is it?  Could it be a clever plan to bring about controversial cases, which they can then use as the basis to argue against the investor-state dispute system?  Hmm.

Harley-Davidson Plays the State Competition Game

From the AP:

It's the roar that made Milwaukee famous — the distinctive throaty rumble of a Harley-Davidson motorcycle. But that much-loved racket could be rumbling away to another state if the company cannot bring down its labor costs.

Harley-Davidson warned employees in April that it will move its Wisconsin manufacturing operations elsewhere if it cannot cut millions of dollars at the factories that build the bikes known as "Milwaukee Iron."

...

Harley chief executive Keith Wandell said the company will make its decision on whether to move in the next two months. Harley executives are already scouting out other states, though Wandell will not say which ones.

The company, he said, would also be open to incentives to keep the 1,630 manufacturing jobs in Wisconsin. But the idea that it could move production elsewhere stuns many Harley loyalists.

...

Company spokesman Bob Klein said Harley wants to remain faithful, but its production schedule needs to be more closely aligned with seasonal demand, a change that would require approval from labor unions.

Negotiations with the unions began in late July. The president of Harley's largest union did not return multiple messages seeking comment.

So, they need to cut labor costs, or get some subsidies to make up the difference.

Interesting that there is no mention of looking at any foreign locations.  Perhaps that would undermine the American brand too much.

Two Takes on the Enron ICSID Annulment Decision

Luke Peterson provides the basic details:

A review panel at the International Centre for Settlement of Investment Disputes (ICSID) has annulled a 2007 arbitral award rendered in favour of the Enron corporation and Ponderosa Assets L.P. (hereinafter Enron”) in a dispute arising out of the Argentine financial crisis.

The July 30, 2010 ruling by a three-member ad-hoc annulment committee is the second in recent months to find serious fault with the work of a prior arbitration tribunal in a case involving the Republic of Argentina.

He then offers some context:

At first glance, the annulment of the Enron award marks the latest in a string of upheavals which have lent some uncertainty to the resolution of disputes between Argentina and foreign investors.

The June 29, 2010 annulment ruling*** in the Sempra v. Argentina case came as a particular shock to many observers, not least as the ICSID’s review process is touted as a limited one which does not subject awards to a full appeal or provide for mere errors of law to be overturned.

However, viewed in context, the annulment of the Sempra award, as well as the sharp criticism (but non-annulment) of an earlier award in the CMS v. Argentina case, both pertained to a legal approach spearheaded by a single tribunal chairman: Prof. Francisco Orrego Vicuna. What’s more, annulment committees took issue (to different degrees) with a failure of Prof. Orrego Vicuna and his co-arbitrators to take seriously Article XI of the US-Argentina BIT as a stand-alone defence separate from the necessity defence under customary international law.

In this sense, criticism of the Sempra and CMS awards seemed of less relevance to the myriad of other claims against Argentina, a number of which arise out of differently-drafted investment treaties.

While it might be tempting to view the annulment of the Enron v. Argentina award, as yet another instance where an annulment committee has simply found problems with Prof. Orrego Vicuna’s approach to the US-Argentina BIT, it should be stressed that the recent Enron annulment decision hinges on the interpretation and application of the customary international lawdefence of necessity – a defence which is relevant to the full cross-section of Argentine crisis arbitrations.

Todd Tucker of Global Trade Watch has this take:

In the Sempra case from earlier this summer, however, the annulment committee, in an apparent last-ditch effort to save the dying legitimacy of the BIT system, sided with Argentina and annulled the $128 million award. And now, with this Enron annulment committee decision earlier this week on the $106 million award, we have a similar tactic occurring.

Is that right?  Would the annulment committee really be thinking like that?  I can't find a quote, but I feel like I've heard the same thing said about the Methanex and Loewen NAFTA Chapter 11 tribunals:  they rejected the claims because they were trying to perserve the system.  I don't know how to prove or disprove that kind of theory, though.

ADDED:  Here's a Loewen quote:

Loewen was widely panned in the arbitration community as a mistake and an accommodation of anti–NAFTA sentiment in Congress ["A 'Completely Appalling' Decision," Focus Europe , Summer 2004]. " Loewen was just a travesty," says Potter. "I think there's a very broad consensus on that." Another leading figure in investment arbitration comments: "I think the outcome would have been very different if the U.S. had not been the respondent in that case. [But] if Loewen had won, we might not have a Chapter 11 today, and maybe that's why the tribunal decided the way it did."

 

Defining the Boundaries of International Economic Law

Regardless of which side of the debate you are on, I think this op-ed by Canadian political science prof Adam Harmes states the issues quite well:

As premiers gather for their annual conference in Winnipeg this week, the issue of reducing interprovincial trade barriers will no doubt be a topic of discussion.

However, for one conservative think-tank, interprovincial trade is an issue best left to the federal government.

In fact, rather than waiting for the premiers to reduce trade barriers on their own, a recent report by the Macdonald-Laurier Institute argues that Ottawa should impose a solution by creating an “economic charter of rights.” While Canadians should say Yes to promoting interprovincial trade, they should voice a resounding No to an economic charter.

...

Proponents of an economic charter argue that it would not affect ... legitimate and necessary regulations. Instead, it would only target the purely protectionist and “silly” regulatory differences between provinces that create red tape for business and provide no real benefits for Canadians. An oft-cited example is the way that different provinces mandate different sizes for the small cream containers we get with our coffee.

While such regulations should clearly be removed, history shows us that there’s no real way to legally distinguish the silly and protectionist regulations from those that genuinely protect Canadians. The closest thing we have to a precedent for an economic charter is Chapter 11 of the North American Free Trade Agreement, which was designed to prevent governments from the outright expropriation of businesses, without compensation, as was done by Fidel Castro in Cuba and Hugo Chavez in Venezuela.

However, clever lawyers were able expand the application of Chapter 11 and use it to force governments to abandon legitimate environmental regulations. Because Canada still has many clever lawyers, there is every reason to believe that the application of an economic charter would be similarly expanded and create similar problems.

He is focused on the Canadian internal trade context, but the same issues apply more generally to international agreements.

Is he correct to say there is no way to distinguish the "silly and protectionist" from "those that genuinely protect Canadians"?  I don't think he is, but it is these distinctions that define the boundaries of international economic law, and there's a good deal of disagreement on where those boundaries should be.