International Economic Law and Policy Blog

Jon Huntsman on Free Trade

Former Utah Governor Jon Huntsman, a candidate for the Republican nomination, is not doing very well in the polls.  However, he does get support from "serious" circles.  In a recent speech, he had the following to say in support of free trade and trade agreements:

“As a former diplomat, trade official, Governor and business executive, I’ve witnessed firsthand the tremendous economic opportunities of free and fair trade. As President, I will work tirelessly to open more global markets for American businesses.”

 -Gov. Huntsman, 8/31/11

Free trade supports nearly 18 million American jobs, and establishing new lines of trade with international partners represents an enormous well of untapped economic and political goodwill.

95 percent of the world’s customers live outside our borders, and with the United States party to only 17 of the more than 300 trade agreements worldwide, opening markets and expanding a customer base for American businesses is a commonsense tool to spark growth.

America’s strength lies in our creative class, our entrepreneurial spirit, and in governance wise enough to allow our great companies to compete in the international marketplace. The countries that lead in defining the new trading system will be the countries that benefit the most. If we don’t assume the mantle of leadership, our economy will be relegated to competing in a marketplace defined by our competitors.

We won't remain the most productive economy in the world if we embrace the mistaken belief that we can prosper by selling and buying only among ourselves, while other countries seize the extraordinary opportunities for economic growth that the global economy offers.

A PROVEN RECORD

Gov. Huntsman has decades of experience, witnessing firsthand the benefits of trade to American businesses and consumers.

• Gov. Huntsman served as Deputy U.S. Trade Representative for President George W. Bush, and helped negotiate free trade agreements in Asia and Africa.

• As Ambassador to Singapore and Ambassador to China, Gov. Huntsman helped expand markets for American exports.

• In Utah, Gov. Huntsman aggressively pursued trade, led trade missions overseas, and helped double Utah’s exports.

TRADE PROPOSALS

• Approve Pending Trade Deals With South Korea, Colombia and Panama

 For more than 2.5 years, President Obama has failed to act on three trade agreements that would boost the nation’s exports by more than $10 billion and create tens of thousands of American jobs.

• Pursue New Trade Opportunities, Particularly Across the Pacific

It is in the strategic interest of the United States to reach trade agreements with the world’s largest economies that share our values.

Thus, the United States should take the lead in initiating free trade agreements with Japan, India and Taiwan, among others. We must begin to send a message to the world that we will once again lead on trade liberalization. 

• Support the Doha Development Round of World Trade Organization Negotiations

 Although discussions have stalled, the United States should urge completion of the multi-lateral negotiations aimed at promoting free trade between nations of varying prosperity, which will benefit both developed and developing nations.

• Lead in Reaching a Successful Conclusion of the Trans-Pacific Partnership (TPP)

Gov. Huntsman’s Administration will make completion of the TPP a priority. This framework would open the markets of Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam to U.S. goods.

Here's more from Huntsman in a blog post entitled "Take it From Me: Obama's Failed on trade":

Over the past few weeks, I've noted with interest that once again the President has been advocating free trade agreements as a key pillar of his absent job creation "plan." But this is another example where the President’s record fails to match his rhetoric. In fact, after 2.5 years in office the President still hasn't even submitted the free trade agreements to Congress.

From the day of his inauguration, President Obama has unnecessarily delayed America's recovery by stifling critical negotiated trade deals with South Korea, Colombia and Panama, which his own Administration acknowledges would boost the nation's exports by more than $10 billion and create tens of thousands of American jobs.

The President delivers fantastic speeches on free trade in the abstract, saying in last year's State of the Union address that "we will lose the chance to create jobs on our shores" if Washington fails to act. But the fierce urgency of the President's free trade pitch must have been lost, because for the last 2.5 years he has refused to submit the deals for legislative approval unless the measures were coupled with expanded funding for a union-backed entitlement program.

This is unacceptable.

As a twice-former diplomat, U.S. trade official and business executive, I've witnessed firsthand the tremendous economic opportunities of free trade. To say nothing of the nearly 18 million American jobs existing agreements already support, establishing new lines of trade with prospective international partners represents an enormous well of untapped political and economic goodwill.

Ninety-five percent of the world’s customers live outside our borders, and with the United States party to only17 of the more than 300 trade agreements worldwide, opening markets and expanding a customer base for American business should be a commonsense tool to spark immediate growth.

Other nations continue to reap the benefits of America’s failure to act. The European Union last month finalized a trade deal with South Korea, and have subsequently seen exports rocket 16 percent. Canada's trade deal with Colombia went into effect just last week. The result is jobs that should be coming to the U.S. going to Canada and Europe.

"Made in America" once meant something, but it now only serves as a reminder of the shuttered factories that litter our nation's landscape. The out-of-business and foreclosure signs that stretch from California to Florida are monuments to President Obama's failed leadership.

America needs an experienced leader with serious solutions; a leader who offers more results above rhetoric. One who has the will to put typical Washington politics aside and find long-term solutions that will turn our economy around.

I'm ready to do that. And you better believe it wouldn't take a President Huntsman 2.5 years to pass a free trade agreement.

My sense is that this will help him with those who already support him, but may not do much to convince his (many) skeptics.  

The U.S. Appellate Body Nominations: Graham and Greenwald

From the USTR press release (I added the links to their law firm profiles):

United States Trade Representative Ron Kirk today nominated Thomas Graham and John Greenwald to serve as members of the World Trade Organization (WTO) Appellate Body. Graham and Greenwald are acknowledged leaders in the field of international trade law. Each has distinguished legal and professional careers in public service, private practice and academia. The breadth of their backgrounds demonstrates their expertise in law, international trade, and subject matters that often come before the WTO Appellate Body. Accordingly, each possesses outstanding qualifications to serve on the Appellate Body, including the requisite experience, judgment and stature.

...

Thomas Graham began his career teaching law at the Catholic University in Caracas, Venezuela, on a teaching fellowship from Harvard Law School. He then spent three years in Geneva as a Legal Officer of the United Nations. He also served as Deputy General Counsel in the Office of the U.S. Trade Representative during a period that laid the foundation for the WTO and its system of dispute-settlement. Mr. Graham has taught at the Georgetown Law Center as an adjunct professor and has written extensively on international trade as a Guest Scholar at the Brookings Institution, and as a Senior Associate at the Carnegie Endowment for International Peace. Mr. Graham served in private practice at Skadden, Arps, Slate, Meagher & Flom and King & Spalding. Currently, Mr. Graham is senior counsel at that firm, where he continues to represent respondents in non-U.S. trade remedy cases, to negotiate the settlement of disputes, and to assist in WTO dispute-settlement proceedings.

John Greenwald began his career in international trade law in the general counsel’s office of the Office of the U.S. Trade Representative where he was responsible for representing the U.S. in negotiation of Tokyo Round agreements on antidumping, subsidies/countervailing measures, and dispute settlement. Following the negotiations, he represented the Executive Branch in drafting the Trade Agreements Act of 1979, which implemented the Tokyo Round Agreements. He also served as the first head of the Import Administration at the U.S. Department of Commerce. Since leaving government, Mr. Greenwald has served in private practice, representing international trade matters in various foreign jurisdictions, before the WTO, and before the trade agencies of the U.S. government and courts. Mr. Greenwald has also taught international trade law courses as an adjunct professor at Catholic University, American University and, most recently, Georgetown University, and has written extensively on trade law and policy issues.

More on Ontario's Feed in Tariffs

Having talked to some people, and read some things, and looked at an old blog post, I think I now see a few of the legal issues that could arise in relation to the Ontario feed in tariff WTO complaint brought by Japan and the EU against Canada.

First, with regard to the GATT Article III:4 claim, it seems clear that there is a domestic content requirement.  However, as noted in the old blog post and the comments thereto, perhaps Article III:4 does not apply because the measure constitutes government procurement that falls under Article III:8(a), as the Ontario Power Authority is a government entity.  A key question would be whether all of the terms of Article III:8(a) are met here.  That provision states:  "The provisions of [Article III] shall not apply to laws, regulations or requirements governing the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or with a view to use in the production of goods for commercial sale."

Second, as to the SCM Agreement Article 3.1(b) claim, again it seems clear that there is a domestic content requirement.  But it still needs to be shown that there is a subsidy, one element of which is that there must be a "financial contribution."  Here's the SCM Agreement definition of financial contribution:

(a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government"), i.e. where:

(i) a government practice involves a direct transfer of funds (e.g. grants, loans,  and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees);

(ii) government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits);

(iii) a government provides goods or services other than general infrastructure, or purchases goods;

(iv) a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments;

So where does this measure fall?  As I understand it, the key "subsidy" part of the measure is that the Ontario Power Authority is buying clean energy from individuals at above market prices.  That sounds like it would be covered by the "government purchase" category in item (iii).  But that part only covers purchases of "goods."  Is energy a "good" or a "service"?  If it's a service, it would not be covered by this provision, and thus perhaps there is no financial contribution here.  Could it then be covered by (i) as a "direct transfer of funds"?  The U.S. - Aircraft panel said no: "transactions properly characterized as purchases of services are excluded from the scope of Article 1.1(a)(1)(i)." See paras. 7.949-970.  That issue is on appeal: http://www.worldtradelaw.net/na/ds353-8(na).pdf  See para. 3.

And finally, of course, as discussed in the last post, Canada could try invoking a GATT Article XX defense, certainly to the Article III:4 claim, but also to the SCM Agreement claim.

Those are the issues that came to mind.  Any others I've left out? Any other thoughts?  Anything I've misunderstood about how this measure works?

GATT Article XX, Environmental Measures, and the SCM Agreement

Can GATT Article XX be invoked to justify emissions trading schemes that violate the SCM Agreement? This is from Ingrid Jegou and Luca Rubini in an ICTSD issues paper:

Four aspects should be noted regarding the SCM Agreement. First, as noted above, this instrument is directly connected to the GATT by ‘increasing and improving’ the disciplines of both Articles  VI and XVI of GATT dealing with subsidies and countervailing measures.  This should be set in the context of the fact that the WTO is a single undertaking and its provisions are part of an ‘integrated’ legal system.  Second, there is no language in the SCM Agreement (or elsewhere) directly interfering with the application of Article XX of the GATT to subsidies. Third, as a general matter of interpretation, there is no need for an express reference to give way to the application of a provision, particularly if this has a general nature.  Fourth and finally, there are no indications in the negotiating history of the SCM Agreement that Article XX of the GATT should not apply.

Up to the end of 1999 there were specific provisions (Articles 8 and 9 of the SCM Agreement) recognizing that certain subsidies, including certain environmental subsidies, were overall beneficial and hence were non-actionable as well as sheltered from countervailing duty action.  The absence of an extension of these rules could be seen as a decision that exceptions should not exist under the SCM Agreement. However, one could equally argue that, with the expiry of this provisional category of subsidies, only the special discipline of exceptions of the SCM Agreement has disappeared, giving way to the applicability of the general exceptions of the GATT. The crux of this argument is that the general exceptions of the GATT should apply to rules that, as seen, find their origin within the GATT itself.

Another argument can be advanced. This counters the narrow scope of Article 8 of the SCM Agreement with respect to the environment. It could be contended that, even when Article 8 was in force, there was not really a common purpose and subject matter between the broad ‘environmental exceptions’ of Article XX and the confined remit of Article 8, with the result that Article XX could in principle have applied to subsidies not specifically permissible under the SCM Agreement. In other words, while it is clear that the SCM Agreement develops Articles VI and XVI of the GATT, it is not fully clear that Article 8 of the SCM Agreement was developing Article XX of the GATT in the context of subsidy discipline.

Whatever the merit of this argument, the expiry of Article 8 reinforces the legal and policy argument in favour of applying Article XX of the GATT to subsidies that are clearly contributing to tackling climate change. As noted above, the confirmation of the applicability of GATT Article XX to other WTO agreements via a judicial route may be politically troublesome; however, paired with the slow progression of negotiations in climate and trade, it may constitute the only alternative to tackle an undesirable lacuna in the system. The urgency of action is confirmed by recent developments in litigation.

 

Some WTO Members' Views on the AB's New Export Contingency Standard

From the June 1 DSB meeting, here are the views of Brazil, Canada and Australia -- three Members who have been involved in export subsidy cases -- on the Appellate Body's new export contingency standard, as set out in EC - Aircraft:

Brazil

15. Turning to export subsidies, and in particular to the issue of  de facto  export contingency, Brazil wished to highlight some of its concerns  with the interpretation developed by the Appellate Body and its application to the facts of this dispute.  Footnote 4 of the SCM Agreement provided that a subsidy was in fact contingent on export performance when the granting of the subsidy was in fact "tied to (...) anticipated exportation or export earnings".  The Appellate Body had stated in turn that, when the relationship of conditionality between the granting of a subsidy and anticipated exportation was not expressly or by necessary implication provided in the law, the "factual equivalent" of such conditionality could be established by recourse to the following test:  "is the granting of the subsidy geared to induce the promotion of future export performance by the recipient?"  The Appellate Body had explained that the standard for de facto export contingency would be met when the subsidy was granted "so as to provide an incentive to the recipient to export in a way that is not simply reflective of the conditions of supply and demand in the domestic and export markets undistorted by the granting of the subsidy".

16. The Appellate Body had explained that the  assessment could be based on a comparison between, "on the one hand, the ratio of anticipated export and domestic sales that would come about in consequence of the granting of the subsidy and, on the other hand, the situation in the absence of the subsidy.  The situation in the absence of the subsidy may be understood on the basis of historical sales of the same product by the recipient (...) before the subsidy was granted.  In the event that there are no historical data untainted by the subsidy,  or the subsidized product is a new product (...), the comparison could be made with the performance that a profit-maximizing firm would hypothetically be expected to achieve in the export and domestic markets in the absence of the subsidy.  (...) The granting of the subsidy will not be tied to anticipated exportation if, all other things being equal, the anticipated ratio of export sales to domestic sales is not greater than the existing ratio".   In  Brazil's view, there were a number of problems with those statements.  Brazil noted that, according to the standard formulated by the Appellate Body in this dispute, in order to demonstrate that the granting of a subsidy was in fact "tied to" anticipated exportation, it was not sufficient to establish a "tie" between the granting of the subsidy and expected exports.  Rather, one would have to demonstrate that the subsidy provided an incentive to export, and more than that, an incentive to export in a way "that is not simply reflective of the conditions of supply and demand in the domestic and export markets undistorted by the granting of the subsidy".  That, however, could be an unwarranted requirement, and one that was likely to lead to incongruous results.  The text of the SCM Agreement did not only prohibit subsidies "contingent upon the substitution of domestic sales by export sales", as seemed to have been the new test introduced by the Appellate Body.  Nor was there any basis in the text of the SCM Agreement or in the jurisprudence developed  by the Appellate Body for imposing a different legal standard for de facto export contingency.

17. It was not clear whether the findings of the Panel and the Appellate Body in the "Canada - Aircraft" dispute, for instance, would stand in light of the test now set out by the Appellate Body.  The evidence in that dispute had revealed that "funding in the regional aircraft sector is expressly designed and structured to generate  sales of particular products, and that the Canadian government expressly takes into account, and attaches considerable importance to, the proportion of those sales that will be for export, when making TPC contributions in the regional aircraft sector".  The Panel had not sought to elucidate what would be the proportion of exports to domestic sales that would come about as a result of the subsidy, nor what that proportion would have been had the subsidy not been granted.  Those proportions might well not have been different, in which case the original TPC, which had been found to be an export subsidy in that dispute, would not have been an export subsidy according to the standard articulated by the Appellate Body in this dispute.  Furthermore, this new standard appeared to imply that, by definition, subsidies provided to enterprises that only exported could never be found to be in fact contingent on export performance, no matter how much factual evidence a complainant amassed to challenge those measures.  That was because the ratio of domestic to export sales would always be the same, zero, with or without the subsidy because the firm only exported.  Thus, even where a subsidy worked in such a way that its provision was conditioned, for example, on a showing of growing export sales, thus being by any reasonable standard "contingent on export performance", such a demonstration would not meet the Appellate Body's new test for de facto export contingency. 

Canada

Canada welcomed the Appellate Body's adoption of a rigorous test to demonstrate de facto prohibited export subsidization under Article 3.1(a) of the SCM Agreement.  Under that test, a subsidy was export contingent if the granting of the subsidy was geared to induce the promotion of future export performance by the recipient.  In Canada's view, such a test appropriately shifted the focus of the export contingency analysis away from an examination of the granting authority's motivation for providing the subsidy, which was the approach adopted by the Panel, to an examination of whether the subsidy provided the recipient with an incentive to favour exports.

Australia

Australia had a keen interest in the interpretation of Article 3.1(a) and footnote 4 of the SCM Agreement, which pertained to export subsidies.  The interpretation of Article 3.1(a) and footnote 4 must avoid any potential discrimination against small or export-dependent economies, the firms of which may have a higher export orientation than firms operating in economies with large domestic markets.  Where a firm had a high export orientation because of the market conditions it was operating under, and this was particularly likely for small and export-dependent economies, that "export propensity" should not contribute to a finding of export contingency.  Export subsidies were prohibited because of their potential to directly distort international trade.   It was, therefore, imperative that Members, when designing public programmes, were clearly aware of the rules that determined whether a particular programme would amount to an export subsidy.  In its findings, the Appellate Body had developed the test for determining export contingency, and thus the test for determining whether a particular subsidy amounted to a prohibited export subsidy.  The Appellate Body stated that the following question should be asked:  "Is the granting of the  subsidy geared to induce the promotion of future export performance by the recipient?"  Australia hoped that this test, expanding as it did on the guidance provided by the Appellate Body in the "Canada - Aircraft" dispute, would assist Members and panels in their consideration of whether the granting of a subsidy was, in fact, "tied to" anticipated exportation and, further, that the application of this test would not discriminate against small or export-dependent economies.   

Presumably each of these countries has been thinking about how the Appellate Body's new standard would affect their interests, both in defending their own measures and in challenging the measures of other Members.

Some Very Old "Likeness" Arguments

I'll tell you how old at the end of the post.

The issue was whether Russia hemp was a "like article" to Manila hemp, in the MFN context.  Here's one side of the argument:

The turning point in the treaty will be found in the meaning of the words, "the like article," and we must accept the ordinary technical sense of like, or the sense in which it is invariably used when employed in the language of treaties, and as defined by Webster: "Equal in quantity, quality, or degree; exactly corresponding." Again: "That which is equal or similar to another; the counterpart; an exact resemblance; a copy." Neither party could have attached any other meaning to the words than such as is here given. Any other interpretation would unfix the boundaries of every treaty in existence, and throw, everything into dispute and confusion. The words do not mean almost the like articles, nor nearly the like articles, but like articles, or absolutely the same articles. No matter if the word "like," in some exceptional cases, is used in qualified sense, as nearly equal. Here it is used as absolutely "like," or the same, and nothing less nor more. ..

...

Russia hemp and Manila hemp are quite unlike in appearance, Russia hemp being of a dull yellowish-green color, while Manila hemp is much brighter and lighter, or almost a cream color. The latter is rather sharp and stiff to the touch, and the former comparatively soft and more yielding. Botanically they are distinct, and differ totally. Manila hemp is found only in equatorial regions. Russia hemp is cultivated in more northern latitudes. Manila is from the leaves of plants, chiefly the musa textalis, a plant allied to the banana, and known by the local name of abuca, a shrub or tree, both wild and cultivated, growing abundantly in the Indian Archipelago. The fiber is the petioles of the leaves, and sometimes the inner layers of the smallest fibers are used for very fine fabrics, but only the larger layers for cordage. Russia hemp is a plant of the genus cannobis sativa, whose fibrous skin or bark is utilized like that of flax, and is used, not only for cables and cordage, but for common table·cloths, huckaback towels, and especially for sail cloth, though, in some measure, superseded by iron cables and cotton sail cloth. It will be seen that the two articles are no more alike or akin in the vegetable kingdom than are foxes and dogs, or horses and asses, in the animal kingdom, and nothing but some kin of the latter could ever confound them commercially.

This side's conclusion:  The "articles" are not "like" and there is no discrimination against Russia hemp here.

Here's the other side:

2. The present report of the majority gives a construction to the term "like articles" so restricted that it would, if adopted and acted upon by foreign nations baving this kind of treaties with us, reduce such treaties to a practical nullity. Dictionary meanings of terms used in public instruments are not the only or the principal means of determining the sense.  The great object of the provision must be regarded as the principal guide to the meaning of the terms. If the term "like" means in this treaty, as is contended in the report of the majority, absolutely identical, a case of absolute identity in any botanical production, the growth of one country, soil, and climate, could never arise, and the treaty would have no meaning. ... While we do not admit that the lexicographical meaning of the English word "like," and of the French word "meme," is confined to things that are identically the same, it is quite obvious that eyen if the words of the treaty had been "the same articles," there would still be an equally strong necessity for interpreting the words by the great purpose of the provision. ... [We are satisfied with a definition of "like articles" that means] articles which, being known in trade and commerce by the same name, are so far alike that one can come into injurious competition with another, for any of the purposes of trade or manutacturing, so as to work an unfavorable discrimination against the eountry with which the treaty subsists.

3. It is not necessary that the unfavorable discrimination should appear to have been designed, in order to give rise to a complaint of infraction of the treaty.  The presumption in furtherance of good faith should be and always is, unless the contrary expressly appear in some reason or reasons of state, or from some express declaration, that the unfavorable discrimination was inadvertent and unintentional. Whether there is, in truth, a practical discrimination against the interests of the nation with whom we have formed the treaty, is always a question of fact.  In the present case, the affidavits, which are treated with so much levity in the report, clearly establish the facts that "Russia hemp" and "Manila hemp", are articles that are both known in trade and commerce as hemps; that for some purposes they may be and are used in the same kind of manufacture; and that, consequently, to put a higher duty on Russia hemp, when it is "the produce of Russia," than is put upon Manila hemp, is an injurious discrimination against a "production of Russia," in favor of the production of some other country. This is all that needs to be shown in order to establish that these two things are "Iike articles," in the sense of such a treaty.

So for this side, it's the discriminatory effect on products that are in competition with each other that is key.  Intent can also play a role.  On the facts here, this side would have found that discrimination against Russia hemp exists.

Where is all this from?  An 1872 report from the U.S. Senate finance committee.  Here is the document: http://www.worldtradelaw.net/hemp_likeness_case.pdf  It's a complicated set of facts, but briefly, the U.S. was charging a higher duty on Russia hemp than Manila hemp, despite a treaty with Russia that guaranteed MFN treatment.  The importers of the Russia hemp wanted a refund on the higher duties they had been paying.  There were some judicial proceedings on the issue as well, but I guess they didn't go favorably for the importers, who then turned to Congress.  The first side noted above is the majority report of the Senate finance committee, the second side is the minority report.

It's amazing how the arguments from 140 years ago continue on today.

For those with an interest and some free time, there are some other good issues in there as well.  What are the implications of Congress acting in violation of a treaty?  Do individuals acquire personal rights under treaties?

This wasn't something I was looking for.  I stumbled on it while researching something else.  But it turned out to be quite interesting!

More NAFTA Chapter 19 Zeroing

Last year, a NAFTA Chapter 19 panel found that zeroing violates U.S. law.  See this post for details.  The panel thus remanded the matter back to Commerce to re-calculate the dumping margins without zeroing.

Commerce did take some action, but the respondents felt that it was insufficient, and went back to the NAFTA Chapter 19 panel.  Here's a bit from the NAFTA Chapter 19 panel's new decision, which was issued last week.  First, here's what was at issue:

This Panel will not entertain the relitigation of issues pertaining to zeroing.  The issues of zeroing were addressed and concluded in our previous opinion.  This Panel determination will only address the issue of whether Commerce followed the Panel’s instructions.  That is, did Commerce follow the Panel’s Remand Order not to zero or should it be remanded accordingly. 

Next, here's what Commerce did in its "remand determination":

The Remand Determination employs a new methodology which Commerce contends is both compliant with the remand and comports with the antidumping statute.  The Remand Determination claims that Commerce did not use zeroing in recalculating Mexinox’s dumping margins.  It argues that zeroing occurs at the aggregation stage when Commerce calculates a rate for cash deposit purposes or a rate for assessment purposes.  Commerce reasons that absent the aggregation of dumping margins, it is conceptually impossible to zero.

The Remand Determination contends that this methodology is consistent with the antidumping statute.  It holds that the antidumping statute defines “dumping margin” as the “amount by which the normal value exceeds the export price or constructed export price of the subject merchandise”. 19 U.S.C. 1677(35)(A).  It notes that this term is distinct from the definition of the “weighted-average dumping margin” under 19 U.S.C. 1677(35)(B).  In keeping with the definition of dumping margin, the Remand Determination explains that it calculated dumping margins pursuant to 19 U.S.C. 1677(35)(A) by comparing normal value (“NV”) with constructed export price (“CEP”).  Where NV was not greater than CEP, Commerce did not assess antidumping duties.  For U.S. sales, where NV was greater than CEP, Commerce calculated the duty owing on each sale as the absolute dollar amount by which the CEP of the U.S. sale was lower than NV.  Since there was no aggregation of comparisons, the Remand Determination states that, by definition, there could not be zeroing.  Rather, it merely examined individual sales separately and determined the duty for each sale.

And here's an excerpt from the Panel's reasoning:.

The Remand Determination goes to great lengths to liken this methodology to the prospective normal value system operated by Canada and other WTO members.  It also notes that this is the same methodology for calculating dumping margins that the Treasury Department used in the past before zeroing was in use. 

... While most other countries have adopted a prospective system, there are many variations in the application of the systems.  There is, in fact, no single unitary antidumping duty collection system used by other WTO member countries.  Prospective systems fall into three general categories-prospective ad valorem systems, prospective per unit systems and prospective normal value systems. In fact, many incorporate a mixture of systems. Given the variation in the application of these systems, references to the prospective system utilized by other WTO member countries is more likely to engender confusion than serve as useful reference points.

Importantly, the Panel did not remand on the basis of WTO jurisprudence.  The Panel remanded strictly on the basis that the application of the original methodology was contrary to U.S. law.  As such, to now suggest that this new methodology is comparable to that used by other WTO countries is not responsive to the Panel’s concerns.  The fact that Commerce made much of the fact that Canada is one such country is equally not compelling.  Similarly, the fact that the United States used a similar methodology some time ago does not justify the departure.

The Panel remains concerned that the dumping margin is not accurate.  The Panel is mindful of the statute’s direction that as accurate a dumping margin as possible be calculated.  This new methodology ignores the bulk of the transactions and sets a dumping margin on the basis of a fraction of the transactions.

Based on the foregoing and after review and consideration of all arguments raised by the participants, this Panel finds that Commerce failed to follow the Panel’s remand order to recalculate Mexinox’s dumping margins without zeroing, since such re-calculation excluded positive value sales.

Domestic Content Requirements under the Ontario Feed-In Tariff

As reported last week, the EU has joined Japan in its WTO challenge to domestic content requirements in Ontario's feed-in tariff measure.  The EU consultations request is here.

I wish I had more to say about the substance of this case.  It would help if I knew what arguments Canada might make in response.  Are they going to argue that the measure is not a domestic content requirement?  Do they have some defense in mind?  If anyone knows something, feel free to leave it in the comments.

More generally, I thought this comment from Ontario's energy minister was interesting:

Under the program, wind and solar developers are offered generous incentives if they abide by the domestic content provisions.

Energy Minister Brad Duguid portrayed the EU trade challenge as a sign of Ontario's success with the offering.

"Japan wasn't the only nation to notice the thousands of jobs being created here and the billions of dollars of investment flowing into Ontario," he said. "I suspect there's a little bit of envy there."

So his view is that domestic content requirements are good job creators.  I don't doubt that this could be the case in the short term.  But let's say Ontario's program is very successful, and Ontario develops a thriving wind and solar energy industry.  Perhaps then other countries will decide to copy the model, so as to develop their own industries.  Here's my question:  If that all happens, what will Ontario's position be on the domestic content requirements that discriminate against products from Ontario?  And what impact will such requirements have on jobs in Ontario?

One final thing:  Have other provinces raised concerns under Canada's Agreement on Internal Trade?

Coals to Newcastle, Chopsticks to China?

From the Economist:

ASK someone to write down all the differences between China and rural Georgia and his hand will fall off before he’s halfway done. So let us restrict ourselves to the vista: cranes, skyscrapers, spanking new rail networks and smog: China. Barbecue restaurants, red clay and trees: Georgia. And whereas most rural Georgians are surviving quite well, thank you, without skyscrapers and subways, Chinese diners, who go through billions of disposable wooden chopsticks each year, could use a few more trees.

Enter Georgia Chopsticks. Jae Lee, a former scrap-metal exporter, saw an opportunity and began turning out chopsticks for the Chinese market late last year. He and his co-owner, David Hughes, make their chopsticks from poplar and sweet-gum trees, which have the requisite flexibility and toughness, and are abundant throughout Georgia.

In May Georgia Chopsticks moved to larger premises in Americus, a location that offered room to grow, inexpensive facilities and a willing workforce. Sumter County, of which Americus is the seat, has an unemployment rate of more than 12%. Georgia Chopsticks now employs 81 people turning out 2m chopsticks a day. By year’s end Mr Lee and Mr Hughes hope to increase their workforce to 150, and dream of building a “manufacturing incubator” to help foreign firms take advantage of Georgia’s workforce and raw materials.

But that is some way off. For now Messrs Lee and Hughes, and their workers, keep busy shearing, steaming, shaving, cutting and drying huge logs into rough chopsticks. They still need to be finished—to eat with a pair of Georgia Chopsticks right off the Americus line you would need tweezers in your other hand and a high pain tolerance. For that they are shipped via the Port of Savannah to China (later this year they will start sending them to Korea and Japan) in boxes with a rare and prestigious stamp: Made in the USA.

I'm curious if there is any outrage in China that chopsticks are being imported from the U.S.!

The International Economic Law of "Seasteading"

I stumbled across this very interesting news article:

Pay Pal founder and early Facebook investor Peter Thiel has given $1.25 million to an initiative to create floating libertarian countries in international waters, according to a profile of the billionaire in Details magazine.

Thiel has been a big backer of the Seasteading Institute, which seeks to build sovereign nations on oil rig-like platforms to occupy waters beyond the reach of lat-of-the-sea treaties. The idea is for these countries to start from scratch--free from the laws, regulations, and moral codes of any existing place. Details says the experiment would be "a kind of floating petri dish for implementing policies that libertarians, stymied by indifference at the voting booths, have been unable to advance: no welfare, looser building codes, no minimum wage, and few restrictions on weapons."

One question that occurred to me was:  Will these new countries accede to the WTO?  In search of information, I looked at the Seasteading Institute's web site, where I found this:

Would the seastead city-states eventually seek international recognition?

In short, yes. But we do not expect this to happen for several decades. In the interim, seasteads will first operate using flags of convenience. Eventually they will create alliances and negotiate treaties with other nations. When there are enough seasteaders—as well as mutual respect among the various seasteads and major world powers—seasteads are likely to seek recognition from the United Nations, and ultimately recognized sovereignty.

In addition, there were some interesting details related to trade:

In what ways will seasteads be autonomous? Will seasteads provide their own food/power?

Seasteads will be autonomous in that they will set their own local policies. We don't think achieving material self-sufficiency is desirable or necessary. Diesel fuel costs are reasonable to operate generators for electrical power. Importing meat will cost less than raising cattle on a seastead. Rather than seek material self-sufficiency by producing everything themselves, we expect seasteads to specialize in industries where they have a competitive advantage (such as fish farming) and trade for goods that can be produced more efficiently elsewhere.

Could seasteading be self-sustaining?

Eventually a seastead could be designed which can be completely self-sustaining, but early seasteads will rely on trade for most of their goods. It will be more efficient to import foods and fuel than it will be using today’s technologies to try to farm and create one’s own power sources.

So, nothing specific on WTO accession, but clearly trade is important to them, and thus I would think trade agreements might be a priority (along with protection from pirates).  Of course, while libertarians are generally free traders, there are different libertarian views on trade agreements:  Ron Paul opposes them, but the Cato Institute supports them.  So we'll have to wait and see what kind of libertarians these are.

Seals vs. Sardines

From Namibia's statement at the DSB meeting where the Seal Products panel was established for the Norwegian compaint (DS401):

68. Namibia also wished to turn to some specific seals concerns, which highlighted the importance of trade in seal products for Namibia.  The seal population in Namibia had grown to enormous numbers over the years and consumed high qualities of fish, such as hake and sardines, which were of high commercial importance to the fishing sector. ...

Call for Papers for International Arbitration Conference

The Institute for Transnational Arbitration has issued a call for papers for its First Annual Winter Forum, to be held February 2-3, 2012, in San Francisco:

THE INSTITUTE FOR TRANSNATIONAL ARBITRATION

1st Annual Winter Forum

SAN FRANCISCO, CALIFORNIA

INTERCONTINENTAL MARK HOPKINS SAN FRANCISCO

February 2-3, 2012

CALL FOR PAPERS

In collaboration with the Academic Council, the Executive Committee and the Young Arbitrators Initiative of the Institute for Transnational Arbitration (ITA) are proud to announce the creation of a new annual Winter Forum. Building on the Academic Council’s tradition of biennial exploration of scholarly papers and the format of the Friday Forum in Dallas, the Winter Forum will provide a unique opportunity for academic and scholarly debate – with a practical twist – for topical issues in international arbitration.

The first half of the Winter Forum will showcase several works-in-progress, including presentations by authors, commentary by internationally recognized academics and practitioners, and interactive discussions among all participants. Our objective is to integrate the unique insights of academics and practitioners, encourage collaboration, and promote the evolution of international arbitration during a time of global transition. After lunch and a keynote address by Professor George A. Bermann of Columbia Law School, the Winter Forum will conclude with a Tylney-Hall-style discussion forum.

Possible Topics for Works-In-Progress

In connection with this initiative, we now initiate a call for works-in-progress. Keeping in mind ITA’s objective to provide "leading educational and professional activities for legal counsel, arbitrators, business executives, government officials, academics and other professionals through programs that examine, critique and seek to improve the practice and study of international arbitration and provide opportunities to enhance the arbitration community," we encourage authors to consider a broad variety of topics. Possibilities might include exploration of:

• Emerging issues of substantive law in international commercial arbitration or international investment law;
• Consideration of procedural issues, including issues related to arbitrator selection and challenge, evidentiary considerations, preliminary measures, concurrent proceedings, and enforcement and review;
• The relationship between international commercial arbitration and investment law, as well as between these two pillars and other branches of law, such as intellectual property and environmental law;
• The recent jurisprudence of national courts related to international arbitration, either domestic or comparative, and the implications for basic concepts of jurisdiction, arbitrator competence and independence;
• Innovative research methodologies for the exploration and consideration of international arbitration and transnational dispute resolution;
• The interactions among scholars, practitioners, government officials and civil society groups active in international arbitration;
• The consideration of international arbitration’s commercial impact, including implications of cost, the net value of arbitration and the opportunities to build sustainable dispute resolution into international business and investment.

We encourage works-in-progress that are from both established and junior scholars and practitioners. The Winter Forum is intended to integrate the scholarly insights and perspectives of both academics and practitioners. Previous explorations of scholarly works-in-progress during Academic Council events have included presentations by international arbitration luminaries such as David Caron ("The Design and Operation of International Courts and Tribunals: A Theory of Bounded Strategic Space and Positional Logics"), José Alvarez ("The Once and Future Investment Regime") and Jan Kleinheisterkamp ("The Impact of Internationally Mandatory Laws on the Enforceability of Arbitration Agreements"). We anticipate that the works-in-progress and commentaries presented in the Winter Forum will follow this tradition of excellence, and we intend to reserve one presentation for work by a junior scholar or practitioner.

Paper Submission and Selection

All proposals must be submitted by October 15, 2011, via email to [email protected] in accordance with the following conventions. First, proposals should be made in a Word document that is no longer than 1,000 words. Second, your cover email should indicate your affiliated institution, your contact details and whether your paper has been submitted or accepted for publication elsewhere. In evaluating proposals, please note that priority will be given to unpublished papers and works-in-progress. Every paper proposal will be reviewed on a blind basis by at least two members of the Conference Committee (identified below).

We anticipate announcing the selected papers by November 15, 2011. Authors selected for the Winter Forum must be prepared to circulate a substantially complete draft of their paper no later than Wednesday, January 18, 2012.

While ITA cannot reimburse all travel expenses, selected authors will receive a waiver of the conference fee for the Winter Forum and two nights’ accommodation at a comfortable hotel in the Bay Area.

Paper Publication

Papers and commentary from previous scholarly events from the Academic Council have been published in the World Arbitration and Mediation Review (WAMR). While not required, publication in WAMR is encouraged for presentations at the January Forum.

Enquiries

Please submit enquiries to either of the ITA Winter Forum Co-Chairs, Susan Franck ([email protected]) or Leah Harhay ([email protected])

Is China's Currency Policy Protectionist At All?

The Economist isn't so sure:

A beefed-up version of the Big Mac index suggests that the Chinese yuan is now close to its fair value against the dollar.

More from Scott Lincicome here.

Is China the Biggest Protectionist in History?

From Fred Bergsten:

But China and some other emerging markets, especially in its immediate neighborhood, are also violating some of the most fundamental rules of the international economic system, to the great detriment of the United States and many other countries. A cardinal goal of the International Monetary Fund, which was created to avoid replication of the beggar-thy-neighbor policies that deepened the Great Depression, is to prevent competitive currency devaluations through which countries keep their currencies cheap to provide large price advantages for their exporters and their firms that compete with imports. Yet China has intervened massively in the foreign exchange markets for at least five years, buying at least $1 billion every day to keep the dollar strong and its own renminbi weak. The result is an undervaluation of the renminbi of at least 20 percent, which is the equivalent of a subsidy of 20 percent on all China’s exports and an additional tariff of 20 percent on all China’s imports. This is by far the largest protectionist measure adopted by any country since the Second World War—and probably in all of history.

Jonathan Dingel sounds skeptical:

All of history? What about periods of autarky?

I'm not sure how you would measure which measures are the "most protectionist," but it would be interesting to see someone try.

Back to Bergsten:

We will also have to get much tougher with some of our foreign partners. The Treasury Department, for example, has never been willing to label China a "currency manipulator" despite its blatant manipulation and the law of the land that directs Treasury to do so and then launch negotiations to remedy the situation. We could take China to the WTO for violating that organization’s proscription (like that of the IMF) of competitive undervaluation and sharply limit its access to our market if the case prevailed. We could initiate "countervailing currency intervention," buying Chinese renminbi to offset the effect on our exchange rate of their massive purchases of dollars. 

 The last suggestion, "countervailing currency intervention," should probably be avoided at all costs.  But it would be fascinating to see it play out!

Protectionism and Japan's Tsunami Relief Effort

From USA Today:

Almost four months after the March 11 tsunami destroyed their home, Kazuko Abe moved her family of four into temporary housing in July.

"It doesn't matter to me who built the houses, I just wish they could have been quicker," said Abe, 66, who fell ill from stress while living in a crowded evacuation shelter in the coastal town of Minami-Sanriku.

Just who is providing accommodation for more than 100,000 evacuees across Japan remains a sore point for several would-be suppliers from the USA, and raises serious questions about Japanese protectionism.

On April 15, Tokyo made a plea for international help with housing. By late May, it had rejected almost all the 322 foreign proposals, from 23 countries, that were listed for consideration.

Like the town's other 9,000 homeless residents, more than half of Minami-Sanriku's surviving population, Abe had to wait until a lottery system allocated her space in the pre-fabricated housing still being assembled here. American Ray Kovitz said his Illinois company could have met needs quickly but they faced a bidding competition he says was rigged against foreign companies.

"We really wanted to help," said Kovitz, director of sales for Heartbilt Homes, one of 25 U.S. bidding companies, who reduced his normal profit margins from 30% down to 8% on 16-person temporary housing units.

"We didn't care if we made money, so we were very disappointed to find that Japan wasn't playing fair," said Kovitz, who also criticizes U.S. government agencies for failing to support U.S. export business in an aggressive manner.

Japan's Ministry of Land, Infrastructure, Transport & Tourism was overwhelmed by the overseas offers of help that followed the tsunami, especially as most came in English, said Shinji Takami, deputy director of the housing production division.

"We received so many offers, we thought it would cause chaos," so his office set a time limit for formal bids and warned that local authorities would ultimately decide all contracts, Takami said.

And why did they prefer Japanese companies?

"At that time, domestic production of temporary housing was functioning and could meet the needs," said Takami, who voiced concerns that imported U.S. housing materials would require adjustments to gas, water pipes and other amenities.

"So what was the purpose of putting out the request for proposals? It was crazy," said Brian Ellsworth, owner of Idaho-based EKC Construction. Alerted to Japan's call by the Idaho commerce department, Ellsworth spent about $10,000 to assemble his bid and the required Japanese project partners in just five days.

"We never heard anything back from the Japanese government," he said, only learning from blogs that hardly any foreign suppliers succeeded.

"If 200 to 300 foreign companies had done 100 houses each, it could have been a transformation in Japanese business culture to open up and do business with foreign firms," Ellsworth said. "My next car will not be a Toyota."

In Minami-Sanriku, one of Japan's hardest-hit towns, Jun Matsuura, a government housing official, is trying to meet the prime minister's promise to house every evacuee nationwide by mid-August, when families gather for annual prayers for the dead. The deadline has spurred a flurry of construction; Matsuura does not regret the lack of foreign involvement.

"It was important and necessary to order houses domestically, as we want to revitalize the local economy and businesses," he said, though he wished local Minami-Sanriku companies had won more than just the 50 homes they will build of the 2,195 total. The greatest cause of delays has been finding suitable land, away from the coast, in this hilly region, Matsura said.

Japanese orders could have lifted the USA's depressed housing sector, too. Employee numbers at Heartbilt Homes have dropped from 200 four years ago to 30 today, Kovitz said. At EKC Construction, business is down 50% in the past five years, Ellsworth said.

At least one U.S. home provider did win business. Airstream Japan imported 20 U.S.-made trailers, at a price of $39,000 each, for a Japanese non-profit, company representative Nakajima Michiko said. The trailers now support relief efforts by medical staff and other workers.

"They've been really helpful," physical therapist Izawa Kenichi said.

Would it help to have a special set of international trade rules to guide disaster relief efforts?

Junior IEL Scholars Forum

From the IELIG:

The International Economic Law Interest Group (IELIG) is pleased to announce its inaugural "Safe Spaces Roundtable" for junior scholars. The Safe Spaces Roundtable will provide junior scholars with detailed feedback from more senior colleagues on early drafts of their work. The Roundtable will be closed to all but the immediate participants and will be a confidential, constructive forum to develop ideas.

Junior scholars (teaching less than 4 years) and practitioners are encouraged to submit abstracts of works in progress for consideration by a panel of senior scholars by August 15th, 2011. Please email your submission to [email protected]  and [email protected]. Your submission should have a cover page with your name, the title of your piece and your contact information as well as a second page that contains only the title and abstract. The panel will consider any topic in the field of international economic law but works must be works in progress and should not have been submitted for publication. The panel will choose 2 proposals and inform those chosen by September 12, 2011. Once abstracts are selected, scholars will be expected to provide a working draft to the organizers by October 1. The Roundtable will meet at Brooklyn Law School on October 21, 2011. The IELIG will not be able to fund travel to Roundtable.

Using Trade Law to Enforce Investment Law

From Reuters:

A U.S. company plans to ask the Obama administration for help in recovering more than $230 million it says it is owned by the government of Argentina, an attorney for the company said on Monday.

Stephen Kho, a lawyer with the Akin Gump law firm, said it would be the first time a U.S. company has used the "Section 301" trade law to pressure a foreign government to pay an award decided by an arbitrator in an investment dispute.

"I know there's other bigger fish to fry, but this is something I think is the beginning of a slippery slope," Kho said, referring to the possibility of other countries refusing to pay awards in investment spats unless the United States takes a hard line on Argentina.

...

Azurix's decision to file a Section 301 petition follows an earlier attempt to pressure Argentina by asking the office of the U.S. Trade Representative to withdraw the country's benefits under the Generalized System of Preferences (GSP), which lets developing countries export many goods to the United States without paying duties.

That effort looked promising but stalled when the entire GSP program lapsed in February as a result of political wrangling in Congress, Kho said.

The Section 301 petition would go further by asking the U.S. government to withhold support for Argentina's request to restructure about $7 billion in international debt in the Paris Club of creditor nations, Kho said.

It would also urge the Obama administration to block disbursements of credit and loan facilities to Argentina at the World Bank and the Inter-American Development Bank.

The Environmental Kuznets Curve and GATT Article XX

From last month's China - Exportation of Raw Materials panel report:

7.551 We now turn to analyse the second step in China's argument about the long-term benefits of export restrictions on EPR products, namely that there is a strong link between higher growth and environmental benefits.  China argues that "[e]conomic growth, if supported by the adequate regulatory framework, can then be translated into long-term environmental protection". China argues that this relationship is supported by the empirical evidence of the so-called "Environmental Kuznets Curve" (EKC). This is an empirical correlation between income per capita and environmental degradation whereby, while at relatively low levels of income pollution increases with income, beyond a certain income level, pollution  declines. Reasons for this relationship are hypothesized to include income-driven changes in: (i) the composition of production and/or consumption that moves away from natural resources goods; (ii) the preference for environmental quality; (iii)  the development of institutions introducing the proper regulatory measures to address environmental problems; and/or (iv) the arising economies of scale associated with pollution abatement technologies.

7.552 Parties agree that in general the EKC does  not imply a causal relationship from economic growth to environmental quality. A higher level of wealth can  strengthen public demand for a cleaner environment, but unless the government responds with policies that enhance environmental protection, the improvements are unlikely to come. China argues that, even if this is not done automatically, higher levels of income make the link between economic development and environmental protection more likely, and China contends that it has provided evidence of an EKC in China for some of the pollutants at issue in this dispute. 

7.553 For the Panel, even if growth makes environmental protection statistically more likely, this does not prove that export restrictions are necessary for environmental gains. For example, to the extent that a higher income per capita generates citizens' preferences for a better quality of environment, income redistribution policies may serve the environmental objective just as well as it is claimed that export restrictions do.   

Here's more on the idea of an Environmental Kuznets curve:

Pollution often appears first to worsen and later to improve as countries’ incomes grow. Because of its resemblance to the pattern of inequality and income described by Simon Kuznets, this pattern of pollution and income has been labelled an ‘environmental Kuznets curve’. While many pollutants exhibit this pattern, peak pollution levels occur at different income levels for different pollutants, countries and time periods.  This link between income and pollution cannot be interpreted causally, and is consistent with either efficient or inefficient growth paths.  The evidence does, however, refute the claim that environmental degradation is an inevitable consequence of economic growth.  

Does economic growth eventually lead countries to promote a cleaner environment?  If so, should this be considered as a factor in relation to defenses to WTO violations?  What are the implications if it were considered?

Sea Turtles, Dolphins, Seals ... and Sharks?

Marine life has played an important role in GATT/WTO dispute settlement.  Here's an argument for bringing sharks into the mix:

Oceana, the largest international advocacy group working solely to protect the world’s oceans, called on the United States government today to ban the import of shark products, including fins, cartilage and meat, from countries with insufficient shark protections. Specifically, the group is urging the U.S. to use its power under the Shark Conservation Act of 2010 to take action against countries with weaker shark conservation measures, including China, Japan and Indonesia.

In a letter to the National Marine Fisheries Service, Oceana identified 15 countries that; 1) catch sharks in international waters; 2) exported shark products to the U.S. in 2011; and 3) have weaker shark protection measures than the U.S. The list includes: Australia, Brazil, Canada, China, Chinese Taipei, Costa Rica, Hong Kong Special Administrative Region, Indonesia, Japan, South Korea, Mexico, New Zealand, Panama, Peru and Spain.

“Although shark finning is banned in the U.S., we import fins from countries with little or no protection for sharks,” said Rebecca Greenberg, marine scientist at Oceana. “By taking action against countries like these, the U.S. can help reduce the demand that leads to shark finning – encouraging improved shark conservation worldwide.”

 This seems like it would be a particularly contentious trade measure, as it would be one that tries to coerce other countries to follow U.S. policies.

Investor-State: Learning as We Go

On SSRN, here's the abstract of a paper entitled "When the Claim Hits: Bilateral Investment Treaties and Bounded Rational Learning," by Lauge Skovgaard Poulsen and Emma Aisbett:

Using the international investment regime as its point of departure, the paper introduces notions of bounded rationality to the study of economic diplomacy. Through a multi-method approach, it shows that developing countries often ignored the risks of bilateral investment treaties (BITs) until they themselves became subject to an investment treaty claim. Thus the behavior of developing country governments with regard to the international investment regime is consistent with that observed for individuals in experiments and field studies: they tend to ignore high-impact, low-probability risks if they cannot bring specific ‘vivid’ instances to mind.

They have developing countries in mind, but perhaps the same argument would apply to developed countries?

Delineating the Outer Limits of Investment Treaties

In an ASIL Insight entitled "The Australian Trade Policy Statement on Investor-State Dispute Settlement," Jürgen Kurtz writes:

States can protect domestic policy space in an investment treaty by clearly delineating the outer limits of substantive obligations and/or crafting exceptions for state conduct. For instance, the investment chapter of an Australian FTA could include exceptions modeled on the carve-outs in WTO law for, inter alia, public health and environmental regulation.

With regard to policy space, should there be a general exception to all investment treaty provisions along the lines of:  "Except in rare circumstances, non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, and the environment, do not constitute violations of this agreement."  I don't have all the details here, but provisions of this sort have been included to a limited extent in some agreements, in particular in the context of indirect expropriation.  But perhaps it could apply as an exception to all provisions?

The Purpose of International Investment Agreements

From a paper by Anne Van Aaken and Tobias A. Lehmann, entitled "Investment and Sustainable Development: Developing a New Conceptual Framework":

It is already questionable whether the only purpose of [International Investment Agreements] IIAs is the protection of investment.  Rather, as most preambles reveal, protection of investment is rather a means to an end, i.e.,welfare, development, or prosperity (of home and host states). ...

Why would a state conclude a treaty to protect foreigners for the sake of protecting foreigners?  The purpose of IIAs must be seen as contributing to the welfare or prosperity of home and host states by means of investment protection and promotion.

So what happens in the situation where there are multiple purposes to such an agreement?  One government has one purpose in mind, another government is thinking of a different purpose.  And what about the views of the interest groups who are the real force behind the agreement, who have their own purposes in mind?  How does a tribunal weigh and balance all of these to determine an official purpose?   I suppose one answer is to just focus on the text, and avoid talking about the actual purposes.  But even when taking that approach, don't the tribunal members have in the back of their minds these actual purposes?

The Debt Deal and Farm Subsidies

Jim Bacchus recently called for cutting farm subsidies as a way to reduce the U.S. budget deficit and give a boost to the Doha Round.  So what happened with farm subsidies in the debt deal?  Well, it remains to be seen, from what I've read so far.  Here's Reuters:

Congress could rewrite U.S. farm policy, from crop subsidies to land stewardship and new-generation biofuels, this year under the deficit reduction plan agreed by lawmakers and the White House.

The plan, which faced key votes on Monday, would create a 12-member "super committee" to find $1.5 trillion in savings from the tax code and entitlement programs, which include crop supports.

"The farm bill rewrite may occur this year," said Rep Michael Conaway, chairman of a key House Agriculture subcommittee, in an assessment shared by officials at two farm groups.

...

Lawmakers would not be allowed to amend the committee package, which would face a vote by Dec 23. Far-ranging automatic cuts would be made in federal spending if the plan is rejected, although programs for the poor would be shielded.

...

"Nutrition programs will be on the table along with everything else," said Conaway. Public nutrition programs, such as food stamps, account for the bulk of Agriculture Department spending. A farm subsidy known as the direct payment, costing $5 billion a year, was cited frequently as a target for deep cuts or elimination.

Leaders of the farm panels have planned to draft the farm law next year, just ahead of expiration of the 2008 law. Written every few years, farm bills are panoramic legislation that cover farm subsidy, export promotion, agricultural research, renewable energy and public nutrition programs.

Farm-program cuts would not take effect until 2013 under the deficit reduction plan, so lawmakers still might draft a farm bill next year. Congressional staff workers said there were few details of how the deficit plan would affect agriculture.