International Economic Law and Policy Blog

What is an internal measure under Article III:4? And when does the Note apply?

In the course of writing a paper recently, I developed an idea that I would like to test in the epistemic community. It is to do with the definitions of  internal measures under Article III:4 and enforcement measures under the Note Ad Art III. Fundamental points, of course, and the idea might not be persuasive. But I'd be interested in an open discussion (if any) and a blog seems like a good way to do this.

Article III:4 GATT is a non-discrimination provision guaranteeing that imported products are accorded no less favourable treatment than ‘like’ domestic products. It applies to measures ‘affecting the internal sale, offering for sale, purchase, transportation, distribution or use’. It has long been understood that the word ‘affecting’ means that Article III:4 applies to measures affecting conditions of competition for imported products in the marketplace.[1] However, this cannot mean that Article III:4 applies to all measures with this effect: if it did, it would also govern quantitative restrictions. There must be another way to distinguish measures that are internal from those that are not.

I would propose that the correct test for determining this question is to ask whether a measure regulates (or most directly affects) an act involving products once they have been imported.[2] This is for several reasons. First, it respects the wording of Article III:4, which refers to measures affecting internal acts. Second, it parallels the Appellate Body’s test for taxes and charges, which are subject to Article III:2 only when they ‘accrue’ on the basis of an internal condition or event.[3] Third, it explains the jurisprudence on the point.

There are two Appellate Body Reports of importance. In the first, EC – Bananas III, the Appellate Body decided that a measure allocating import licences to domestic distributors is to be assessed under Article III:4.[4] The Appellate Body said that this was because the rules were intended to have an effect on the sales of competing domestic products. But this is not convincing. As already noted, the same can be said of any quantitative restriction. The better explanation is that the measure directly regulated an act (distribution) that was only relevant to imported products. The second, US – FSC (Article 21.5 – EC) involved a tax rebate contingent on the use (ie purchase) of domestic products. The Appellate Body decided that this was an internal measure because it affected ‘the “internal ... use” of imported products, within the meaning of Article III:4 of the GATT 1994, as compared with like domestic products.’[5] For the reasons given, it is suggested that the first part of this sentence is correct; the second - for these characterisation purposes - of secondary importance.[6]

Enforcement measures under the Note Ad Article III

Article III:4 also has an extended application to certain non-internal measures, by virtue of the Note Ad Article III. This Note states, relevantly, that a measure that is enforced at the time of importation is still to be treated as an internal measure.[7] It permits WTO Members to employ border measures, which need not have any formal correlation to the internal measure being enforced,[8] where this can be justified on the grounds of administrative efficiency as part of a domestic regulatory scheme.

Sometimes the Note Ad Article III is overlooked. This occurred, for example, in the Panel Report in China – Auto Parts, which, relevantly, involved administrative requirements imposed at the border on imported products, with a view to enforcing an internal charge. Citing EC – Bananas III and US – FSC (Article 21.5 – EC), the Panel considered these measures to be internal measures because they affected the conditions of competition of the relevant products once they had been imported.[9] For the reasons suggested here, it is suggested that the result was correct, but the reasoning flawed. The measures were internal measures, but because they enforced an internal charge.[10] This issue was not appealed, and the Appellate Body seems to have thought that the Panel’s approach was appropriate.[11]

PPMs, Tuna and Shrimp

This interpretation should also be tested against the Tuna and Shrimp disputes. US – Tuna (Mexico), DS21, unadopted, circulated 3 September 1991, concerned a measure prohibiting, inter alia, the harvesting of tuna by persons and vessels subject to US jurisdiction in a manner that harmed dolphins; it also prohibited the importation of commercial fish and fish products harvested in the same manner (see para 2.4). The GATT Panel held that Article III:4 did not apply because the measure did not affect tuna ‘as such’ (paras 5.1 and 5.14). This is generally, and correctly, considered to have been incorrect for ignoring the longstanding jurisprudence according to which Article III:4 applies to measures affecting conditions of competition in the domestic marketplace, which also covers indirect measures: eg Howse and Regan, [2] at 255.

However, the result may have been correct, for the reasons suggested here. The first measure would be seen as an internal act, namely, production by persons within US jurisdiction. It therefore falls within Article III:4. The ban on importation does not. It affects acts that are not internal. The question is whether it can be justified as a measure enforcing the internal measure (see infra). Most likely, it does not. A mere parallelism between the enforcement and internal measure is insufficient. There has to be some causal link. It is doubtful that a generic import ban is necessary to enforce a ban on fishing practices by  persons within US jurisdiction. It might be partly necessary insofar as it applies to those persons. But this does not make it wholly necessary insofar as it applies to other persons. This could well also explain why the US conceded that the measure in US – Shrimp, WT/DS58 which was similar, fell under Article XI:1.

A prohibition on the sale of products produced in a particular way would, however, fall under Article III:4, because it is focused on an internal act; and an import ban would be a valid enforcement of this measure. (Although  there is an interesting question concerning measures that are focused both on sales and on production. It is not certain that the former excludes the latter.)

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[1] GATT Panel Report, Italian Agricultural Machinery, L/833, adopted 23 October 1958.

[2] Robert Howse and Don Regan, ‘The Product/Process Distinction – An Illusory Basis for Disciplining ‘Unilateralism’ in Trade Policy’ (2000) 11 EJIL 249, 254-5, argue that all process-based measures fall under Article III:4 because they affect the sale of products – the view rejected here. They dismiss a reading of Article III:4 that focuses on the acts specifically mentioned in this provision, on the grounds that this would exclude regulations affecting internal acts not listed there, such as possession, storage, advertising, and so on. The interpretation suggested here would cover measures affecting these acts.

[3] WTO Appellate Body Report, China – Auto Parts, WT/DS339/AB/R, adopted 12 January 2009, paras 161-162.

[4] WTO Appellate Body Report, EC – Bananas III, WT/DS27/AB/R, adopted 25 September 1997, para 211.

[5] WTO Appellate Body Report, US – FSC (Article 21.5 – EC), WT/DS108/AB/RW, adopted 29 January 2002, para 213.

[7] This is different from the rationale for Article III:2(a), which permits charges to be levied at the border if they are ‘equivalent’ to non-discriminatory internal taxes.

[8] WTO Panel Report, EC – Asbestos, WT/DS135/R, adopted as modified by the Appellate Body Report on 5 April 2001, paras 8.94-8.95.

[9] WTO Panel, China – Auto Parts, WT/DS339/R, adopted as modified by the Appellate Body Report, 12 January 2009, para 7.249-7.258

[10] There is no reason to believe that an internal charge cannot be enforced, as well as collected, at the border. In this respect, China’s counter-argument was also misguided: it said that ‘what matters is whether the aspect of the measures under scrutiny is an element of administrating a valid border measure, which is therefore within the scope of Article II, or whether this aspect of the measure serves instead to affect the internal sale, distribution or use of the product’: ibid, at para 7.254. What mattered was whether the aspect of the measure was enforcing an internal measure.

[11] WTO Appellate Body, China – Auto Parts, above at n 45, para 196.

WTO Transparency Remains Poor

Although the WTO is more transparent than the GATT, there is still a great deal of insularity and secrecy.  One recent example are the accession negotiations.  Although there are apparently some negotiations going on regarding the Russian accession, and some brief news items on the WTO website, the most recent document available on the WTO website to the interested public dates back from 2000.  Another example is the accession of Vanuatu which was long overdue and had held up by the WTO for many years after Vanuatu applied in 1995.  For months I have been looking for current documents related to the accession.  The most recent document on the WTO website is dated 2001.  At the time that the WTO approved Vanuatu's accession, the Protocol and working party report were not posted on the WTO website. Even today, after Vanuatu has joined the WTO, these documents are not posted.  The WTO's lack of transparency on accession is due, I believe, to the WTO's desire to impose applicant WTO-plus conditions on applicant countries.  By keeping the WTO's demands secret before the WTO Council votes on accession, the WTO can more easily assure that the public does not become aware of any inappropriate demands by the WTO being made on applicant countries.  I predict that this will be a bigger problem on Russian accession.  Civic society should demand more transparency by the WTO on matters of accession.

More on Australian Plain Packaging and TRIPS

From a recent TRIPS Council meeting:

Australia’s plain packaging bill for tobacco products

The bill, first discussed in the last meeting, has passed the lower house and is now in the Senate, Australia reported. It is part Australia’s anti-smoking campaign. (See also this Australian government web page, which includes images of samples of the proposed packaging.)

Ukraine (represented by Economy Vice Minister Valery Pjatnitsky), and a number of developing countries (Dominican Rep, Mexico, Nigeria, Cuba, Nicaragua, Honduras, El Salvador, Zimbabwe) repeated their concern that the law will violate Australia’s obligations under the TRIPS Agreement by preventing cigarette and cigar companies from using their trademarks, ultimately hurting their poor farmers. Some argued that the plain packaging will make counterfeiting easier, and some said it will cut costs and lower prices, stimulating demand rather than inhibiting it.

Chile, China, Switzerland, India and the EU asserted countries’ right to use flexibilities in the TRIPS Agreement for public health purposes, including tobacco control, sought more information and some of them urged Australia to ensure that its measures do not conflict with the agreement. Brazil stressed all countries’ right to adopt measures to protect public health, which it consider an important general principle for the relationship between intellectual property protection and health.

Uruguay, New Zealand and Norway supported Australia, which described how serious a problem smoking is and assured members that the policy has been studied carefully to ensure it does not violate TRIPS provisions and that it will be effective in reducing smoking. The World Health Organization described the serious global picture and said plain packaging is part of its Framework Convention on Tobacco Control.

Server Farm Subsidies

From the AP:

Facebook will build a new server farm on the edge of the Arctic Circle — its first outside the U.S. — that will improve performance for European users of the social networking site, officials said Thursday.

...

Facebook didn't give the price of its investment, but Lulea officials have previously projected construction costs of up to 5 billion kronor ($760 million). The Swedish government said it was ready to pitch in with 103 million kronor ($16 million).

TPP's Regulatory Coherence Chapter

I feel like much of the talk about the Trans Pacific Partnership (TPP) relates to IP and health issues.  More interesting to me is the proposed (and recently leaked) "regulatory coherence" chapter.  Here's an excerpt:

1. Through its national coordinating body, process or mechanism, each Party, in carrying out responsibilities for reviewing covered regulatory measures, should generally encourage relevant regulatory authorities, consistent with domestic law, to conduct regulatory impact assessments (RIAs) when developing covered regulatory measures that exceed a threshold of economic impact established by a Party, to assist in designing a measure to best achieve the Party’s objective.

a. An RIA should identify, among other things:

(1) the problem and the policy objective that the regulatory authority intends to address, including an assessment of the significance of the problem and a description of the need for regulatory action;

(2) potentially effective and reasonably feasible alternatives to achieve the policy objective; and

(3) where appropriate, the grounds for concluding that the selected alternative achieves the policy objectives in a way that maximizes net benefits, including qualitative benefits, while also considering distributional impact. [FN 2]

b. An RIA should include the following elements:

(1) a consideration of whether, for all aspects of the planned regulatory measure, there is a need to regulate to achieve the policy objective or whether an objective can be met by non regulatory and/or voluntary means, consistent with domestic law;

(2) an assessment, to the extent feasible and consistent with domestic law, of the costs and benefits of each available alternative, including not to regulate, recognizing that some costs and benefits are difficult to quantify and monetize;

(3) an explanation why the alternative selected is superior to the other available alternatives identified, including, if appropriate, through reference to the relative size of net benefits of the available alternatives; and

(4) decisions based on the best reasonably obtainable scientific, technical, economic, and other information, within the boundaries of the authorities, mandates, and resources of the particular regulatory authority.                                                           

FN 2. “Net benefits” refer to the differences between a planned regulatory action’s anticipated benefits and costs.

I'm not aware of existing agreements having such provisions.  Will this one make it into the TPP (if there ever is a TPP)?  Will it spread to other agreements?

Section 337 and Extraterritoriality

From customs law blogger Larry Friedman, here is a brief summary of an interesting Section 337 case, Tianrui Group v. International Trade Commission:

The underlying issue in this case is interesting for two reasons. First, it relates to trade secrets. Second, it relates to activity occurring entirely in China. The facts are that Amsted, a U.S. manufacturer of cast steel railway wheels licensed a secret process to foundries in China. When TianRui tried to license the process, it was unable to strike a deal with Amsted. Instead, it hired nine employees from a licensed Chinese producer, some of whom knew the secret process. TianRui then began producing wheels using the process and exporting them to the United States. Amsted sought to exclude that merchandise via a 337 action.

In the ITC, TianRui raised the argument that because the alleged violation occurred entirely in China, there was no basis on which to bring a 337 case in the U.S. Rather, according to TianRui, the Chinese courts provide a more appropriate forum.

Trade secret misappropriation law is an entirely different animal than patent, copyright, and trademark law, all of which are implemented in federal statutes. Trade secrets, on the other hand, are based on state laws. The administrative law judge at the ITC applied trade secret law as found in Illinois, where Amsted and other parties have offices. As an issue of state trade secrets law, this raises the question of whether behavior that takes place entirely in China is subject to state trade secret law.

As an initial point, the Federal Circuit held that state trade secret law does not control the issue. Rather, the Court held that a single federal standard should determine what constitutes misappropriation of a trade secret in the context of Section 337. The reason for this is that Section 337 embodies Congressional policy to protect American intellectual property rights. That is not an issue of state law.

On the main point, TianRui argued that Section 337 does not make trade secret law have extraterritorial reach to cover activities that took place entirely in China. As a general principal, American law does not have extraterritorial application unless Congress specifically states that it does. The Court found that the presumption against extraterritorial application does not apply here for three reasons. First, the law explicitly addresses imports to the U.S., which inherently regulates products produced through foreign activity. Second, the law addresses unfair competition in the U.S. that results from the importation of the merchandise. Finally, the legislative history indicates Congressional intent to regulate foreign behavior. Thus, the Federal Circuit held that 337 has extraterritorial reach.

The case has a strong dissenting opinion arguing that Section 337 cannot regulate activity occurring entirely outside the United States. According to that opinion (by Circuit Judge Moore), the United States has "no right to police Chinese business practices." The dissent goes on to say that there are all manner of potentially unfair business practices occurring outside the United States including suppressed wages and forced labor. The dissent calls the breadth of the majority opinion "staggering."

The dissent notes that is is sympathetic to Amsted and that TianRui appears to be a bad actor. Nevertheless, the judge finds nothing in the statute or the legislative history to show a congressional intent to apply trade secret law extraterritoriality. That is distinct from patent law, which is specifically included in the statute. Lastly, the judge noted that Amsted had an opportunity to bring this conduct within the extraterritorial scope of 337 by getting a process patent to cover the trade secret. Of course, my IP lawyer friends will point out, that limits the lifetime of protection. If the folks at Coke had to do that to preserve their secret formula, it would only be a secret for 20 years.

The Interpretative Use of Object and Purpose in TRIPS Cases

A guest post from Henning Grosse Ruse - Khan:

"The TRIPS Agreement is probably the only WTO Agreement which contains explicit textual expression of its object and purpose in its Articles 7 and 8. At the same time, it has a lot of provisions with (constructive) ambiguities where a treaty interpretation focused on the ordinary meaning may not lead to satisfactory results. Given that all WTO Members stressed the role of Article 7 and 8 for interpreting TRIPS in the Doha Declaration on TRIPS and public health, one might expect these provisions to play a major role. Anyone familiar with IP related disputes in the WTO however knows that this is not the case.

In a recent paper (http://ssrn.com/abstract=1939859), I analyse whether and how WTO Panels and the Appellate Body have, in interpreting the TRIPS Agreement, relied on Article 7 and 8 as primary textual expressions of the object and purpose of TRIPS. My hypothesis is that Panels give insufficient, if any, role to the integration provisions of Art.7, 8 TRIPS in interpreting TRIPS. The empirical analysis confirms this. While there is only a comparable limited number of TRIPS cases (7% of all WTO complaints), the 12 decisions issued contain in total 60 instances where individual TRIPS provisions or terms where subject to interpretation. In only 14 cases WTO adjudicators have relied on ‘object and purpose’ – compared to 42 times where ‘ordinary meaning’ and 37 times where ‘context’ where utilised. Those 14 cases break down in only two cases were Articles 7 and 8 have been applied; another three where they have been merely acknowledged; and nine where other objectives (of TRIPS or its provisions) have been applied. In addition, there are 13 cases where treaty object and purpose are merely mentioned as being relevant for the interpretation exercise. This paints a picture of a quantitatively limited, and qualitatively rather arbitrary use of TRIPS object and purpose in the interpretation exercise.

In the paper, I try to offer some reasons for this (such as WTO members not raising those provisions in their pleadings) and I would be happy to hear any suggestions from IELP blog readers."

More on the SolarWorld AC/CVD Complaint

Following up on the last post, I was curious about the reference to "WTO-legal subsidies and WTO-illegal subsidies."  So I asked the SolarWorld people the following question:

In what way are the Chinese subsidies "WTO-illegal"? Does that mean that they violate the SCM Agreement in the sense that they are "prohibited" subsidies or "actionable" susbsidies that cause "adverse effects"? Or does it mean that they cause injury, as defined in U.S. CVD law (which follows the SCM Agreement), and thus the SCM Agreement permits the U.S. to take action?

I've wondered about this kind of thing before in the context of people talking about "illegal dumping."

Here's the response I got from one of SolarWorld's lawyers, Adam Gordon of Wiley Rein:

Because this is a CVD petition brought before US federal agencies, we are not claiming that the subsidies violate the WTO Agreement per se. However, some of the subsidies are actionable under the SCM Agreement and have adverse affects, such as the export restraint on silicon metal -- the primary input in polysilicon production. Nevertheless, all of the subsides are actionable under U.S. law because they cause injury and are therefore actionable pursuant to the SCM Agreement.

Anyway, this is probably all just semantics.  Here's a more interesting issue:  How will the DOC deal with the issue of properly carrying out a concurrent AD/CVD investigation in light of the Appellate Body's findings in U.S. - Antidumping and Countervailing Duties (China) (DS379)?

 

More on Responses to Foreign Subsidies

Yesterday brought news of an AC/CVD petition in the U.S. in relation to imports of Chinese solar panels.  Here's the FT:

A coalition of US solar panel manufacturers asked on Wednesday for retaliatory tariffs on imports of panels from China, the first such case filed in the renewable energy sector.

A group of seven companies led by Solarworld, an Oregon-based solar cell and panel manufacturer, asked for anti-dumping tariffs and countervailing duties, which are imposed on goods deemed to be priced unfairly low and receiving government subsidy. “Artificially low-priced solar products from China are decimating the domestic industry,” said Gordon Brinser, president of SolarWorld.

Timothy Brightbill, a lawyer with Wiley Rein, the law firm representing SolarWorld, said the case would seek anti-dumping tariffs of more than 100 per cent on solar cells and panels from a wide variety of Chinese manufacturers. “China has a system of pervasive and illegal subsidy payments,” he said, including government cash grants and subsidised loans to the industry and subsidised raw material inputs. China had gone from an 8 per cent to 45 per cent share of the US solar market since 2008, Mr Brightbill said.

I first heard about the case through an email I received from SolarWorld's PR firm:

On behalf of our client, SolarWorld Industries America, I wanted to send you a quick email about an announcement they plan to make today in Washington, DC. SolarWorld, a member of the newly-formed Coalition for American Solar Manufacturing (CASM), will announce a major trade action against foreign manufacturers.

 SolarWorld will allege illegal activities that have resulted in job cuts, losses in shipments and harm in operating margins. The surge in foreign solar cells imports has resulted in the elimination of thousands of jobs in Arizona, California, Massachusetts, Maryland, New York and Pennsylvania.

Gordon Brinser, President of SolarWorld Industries and CASM spokesperson, Senator Ron Wyden (D-OR) and Senator Jeff Merkley (D-OR) will speak at this press conference. We apologize for the late notice, but as a blogger that covers this issue, we would like to invite you to this event.

Just to see what would happen, I responded with the following questions:

How do you respond to the charge that American solar companies have been subsidized as well? Would you say that they have not been subsdized, or would you say that the foreign subsidies are higher?

Also, I assume you are planning to bring a countevailing duty case. Would you prefer a WTO complaint? If USTR were to bring a WTO complaint, would you forgo the CVD case?

Here's the response I got from Ben Santarris, Head of Corporate Communications and Sustainability for the Americas of SolarWorld:

1. First off, SolarWorld has not received any federal government subsidies. We have received some state and local government subsidies, but they are available to any manufacturing firm in the region and not specific to solar (they would also be available to any Chinese firm operating in Oregon). There are some U.S. subsidies, but they are small compared with the subsidies given by the Chinese government. Moreover, there are WTO-legal subsidies and WTO-illegal subsidies. In our case, we are targeting China's WTO illegal subsidies.

2. We filed an AD and CVD case.  We are concentrating on our petitions, but would welcome a continuation of USTR's ongoing investigation of Chinese subsidies. Finally, we are not going to speculate on what USTR may or may not do in the future. We are concentrating on the next steps in our case -- a preliminary ITC hearing on November 8. 

 It will be interesting to see how China responds.  No doubt they will contest the case vigorously in the trade remedy proceedings, the U.S. courts and at the WTO.  Will they also try to make an issue of whatever subsidies the U.S. industry has received? 

“Do Subsidies Justify Retaliatory Protectionism?”

From economist Don Boudreaux:

As an empirical matter ... the costs of subsidies are borne chiefly by citizens of the country whose government uses subsidies while the benefit of subsidies is enjoyed overwhelmingly by that country’s trading partners.

Still – because trade makes markets less and less national and more and more global – the possibility is real that, especially over the very long run, subsidies do reduce the net welfare not only of citizens of the countries that use subsidies but reduce also the welfare of citizens of other countries. And economists have long recognised that it is possible, in principle, for a home government to beneficially use retaliatory trade restrictions to pressure foreign governments to end their subsidies and other market-distorting policies.

Economists, however, have also long been sceptical of the ability of such retaliatory measures to work in practice. Because subsidies and protectionist tariffs typically result from successful rent-seeking by politically powerful interest groups, home-governments’ retaliations against these market-distorting policies are unlikely to end these policies. The reason is that retaliation seldom diminishes either the absolute or relative power of those interest groups whose political manoeuvres are responsible for the policies in the first place. As long as these rent-seeking groups remain disproportionately influential in determining the economic policies of their countries, these groups will continue to successfully exercise their influence over their governments to maintain the market-distorting policies.

Economists’ reluctance to endorse the use of retaliatory trade restrictions springs also from the recognition that home governments cannot be trusted to pursue retaliatory trade policies in welfare-enhancing ways. Home governments, after all, are subject to rent-seeking pressures just as are foreign governments. It is simply too tempting and too easy for a home government to falsely portray its own market-distorting policies – policies implemented for reasons no more noble than to create rents for powerful domestic producer groups – as being parts of a quest to cleanse the global economy (or at least the home economy) of subsidies and other market distortions introduced by dastardly foreign governments.

Economists’ realisation that – over the short and medium run – subsidies chiefly benefit, not the countries that impose them but, rather, their trading partners, combines with (1) economists’ scepticism of the ability of retaliation to end foreign-governments’ subsidies, and (2) with economists’ fear of home-economy rent-seeking, to cause economists, generally, to recommend treating foreign-government subsidies as facts of nature to be taken as given rather than as alterable variables that ought to guide a home-government’s policy-making.

It's a good piece, but Boudreaux seems very focused on the unilateral response.  I might ask a different question:  Do subsidies need international regulation?  I have an article coming out in the Melbourne Journal of International Law in which I argue that the purpose of international subsidies rules is to restrain the use of subsidies as a form of protectionism.  Implicit in that piece is the view that, yes, subsidies need international regulation.  More on that later.

Putting these issues in more concrete terms, here's someting from recent news reports:

The tight-lipped Fast opened the vault slightly when it came to a recently announced U.S. inquiry into allegations that the Canadian ports of Vancouver and Prince Rupert are unfairly swiping lucrative cargo traffic from American West Coast ports.

The five-member Federal Maritime Commission is holding the inquiry following complaints from American ports that Canada is unfairly subsidizing the diversion of cargo ships away from its U.S. competitors.

The agency will deliver its findings to U.S. Congress after it completes the inquiry amid concerns that American lawmakers are mulling over a US$143-per-container levy on cargo entering the United States from B.C. ports as a retaliatory measure.

"Canadian and Mexican ports are free to compete with U.S. ports for U.S. cargo, but they should do so on a playing field that is not artificially tilted by governments' policies," Richard Lidinsky, chairman of the commission, said recently.

...

Trade Minister Ed Fast must meet with his U.S. counterpart to head off talk of a new tariff for goods shipped through Canada and into America, the head of the Canadian Chamber of Commerce said Monday.

Fast says the attempt by the U.S. Federal Maritime Commission to add a tariff to cargo shipped into Canadian ports and across the U.S. border is in its infancy. He says it's too soon to say what could come of it.

Call for Papers: Australian and New Zealand Society of International Law

Call for Papers: March 2012 Symposium, International Economic Law Interest Group, Australian and New Zealand Society of International Law

Following the success of its inaugural symposium in February 2011, the International Economic Law Interest Group of the Australian and New Zealand Society of International Law (ANZSIL) is holding a research symposium in conjunction with the Sydney Centre for International Law on Friday 2 March 2012 at the University of Sydney School of Law. Paper proposals relating to any topic in international economic law are welcomed from ANZSIL members and non-members. Further details are available online here. If you have any questions not answered in the detailed call for papers, please contact Brett Williams at the University of Sydney on +61 2 9351 0312 or [email protected].  

Romney vs. Huntsman on Trade

From Tuesday's GOP debate:

ROSE: ... We also know here that there has been a paradigm shift in the world economic order. We know about China and we know about India.

Here is our next clip and we will respond from that. Here it is.

(BEGIN VIDEO CLIP)

ROMNEY: I will label China as it is, a currency manipulator. And I will go after them for stealing our intellectual property. And they will recognize that if they cheat, there is a price to pay. I certainly don't want a trade war with anybody. We are going to have a trade war, but we can't have a trade surrender either.

(END VIDEO CLIP)

ROSE: Karen.

TUMULTY: Governor Huntsman, you were also ambassador to China. And you say that this would risk a trade war. But if China is indeed keeping its currency low, that means that everything they sell in this country is artificially cheap and everything that our companies tried to sell in China is artificially expensive.

So what do you say to people who ask, aren't we already in a trade war with China?

HUNTSMAN: Well, first of all, I don't subscribe to the Don Trump school or the Mitt Romney school of international trade. I don't want to find ourselves in a trade war. With respect to China, if you start slapping penalties on them based on countervailing duties, you are going to get the same thing in return because what they are going to say, because of quantitative easing part one and part two, you are doing a similar thing to your currency.

And then you're going to find yourself in a trade war very, very quickly. And what does that do? That disadvantages our small businesses. It disadvantages our exporters. It disadvantages our agricultural producers.

So I say for the first and the second largest economies in the world, we have no choice. We have to find common ground. We have to, of course, use our trade laws and use them very, very aggressively.

But at the end of the day, we have got to find more market opening measures. We have got to get more governors from this country together with governors from provinces of China, mayors together with mayors, and exploit the opportunities that exist for exporters.

That is a job creator in this country. It is a huge job creator. And we have to get used to the fact that as far as the eye can see into the 21st Century, it's going to be the United States and China on the world stage.

TUMULTY: You know, Governor Romney, this issue does carry a lot of resonance, especially in the states like New Hampshire, which, as you probably know, has lost a greater percentage of its manufacturing jobs to China than any other state.

But voters have heard candidates talked tough on China before. George W. Bush did it, Barack Obama did it, only to see that once elected, the president takes a much more cautious approach because of the complexity of the relationship and the fact that this is our biggest creditor.

Why should voters believe that you would be any different?

ROMNEY: I'm afraid that people who have looked at this in the past have been played like a fiddle by the Chinese. And the Chinese are smiling all the way to the bank, taking our currency and taking our jobs and taking a lot of our future. And I am not willing to let that happen.

I'm in this race to try to get America to make sure we're strong again and we're creating jobs where the best place in the world to be middle class again. And for that to happen, we have to call cheating for what it is.

And people say, we might have a trade war with China. Well, now, think about that.

We by this much stuff from China, they buy that much stuff from us. You think they want to have a trade war?

I mean, this is a time when we are being hollowed out by China, that is artificially holding down their prices, as you just said a moment ago, and that's having a massive impact on jobs here. It is the wrong course for us.

When people have pursued unfair trade practices, you have to have a president that will take action. And on day one, I have indicated, day one, I will issue an executive order identifying China as a currency manipulator. We'll bring an action against them in front of the WTO for manipulating their currency, and we will go after them. If you are not willing to stand up to China, you will get run over by China, and that's what's happened for 20 years.

Passage of the U.S. Trade Agreements

As everyone has probably heard at this point, yesterday the U.S. Congress approved trade agreements with Korea, Colombia and Panama.  They will now be signed into law by President Obama.

I feel obligated to say something about this.  But I'm not quite sure what to say.

If you're a free trader (as I am), clearly it's good that some "free trade" agreements were passed.  And the vote wasn't even close (unlike with CAFTA in 2005):

The Senate voted 83-15 to approve the South Korea deal and the House 278-151. The Panama agreement cleared the Senate by a vote of 77-22 and the House 300-129.

The Colombia agreement, reflecting Democrats' concerns about labor conditions, garnered the least support but still was approved by margins of 66-33 in the Senate and 262-167 in the House.

In a sense, then, this is a ringing endorsement of free trade.

But of course, there's the question of whether this is really free trade.  Under these agreements, the situation is that some countries get lower tariffs than other countries, which is discriminatory/preferential trade.  Ideally, all of these bilateral tariff cuts would eventually be multilateralized.  Will that ever happen?  Until it does, it feels a bit like all those loopholes in the tax code.

And along the same lines, while it's nice (if you're a free trader) to see tariffs cut, what about protectionist measures that can only be dealt with multilaterally, like subsidies?  Those issues tend to get ignored in bilateral agreements.  And instead of those issues being dealt with, there's more and more focus on intellectual property, which certainly has an impact on trade but isn't, in my view, a "free trade" issue.

Also, the jobs commentary about these agremeents seemed odd to me.  I've mentioned this before.  I know that given the state of the economy jobs are a very important issue, but I'm not sure I buy any of the numbers being thrown out:

A study by the labor-backed Economic Policy Institute estimated the agreement will cost about 159,000 jobs over seven years. The White House says it will help create or maintain more than 70,000, while congressional Republicans see as many as 250,000 new jobs.

Is it really possible to measure these job numbers accurately?  I'm with economist Don Boudreaux on this one:

Politicians have used jobs to sell these trade agreements from the get-go. And that drives economist Donald Boudreaux crazy. He teaches at George Mason University.

DONALD BOUDREAUX: Freer trade doesn't create jobs or reduce jobs.

Freer trade rearranges jobs, Boudreaux says. The U.S. beef industry could grow if South Koreans like our beef better than theirs. But if American carmakers can't compete with South Korean auto imports, then the U.S. may lose some jobs in that sector. Boudreaux says free trade is guaranteed to do one thing.

BOUDREAUX: It makes us richer in the long run, is what it does.

Finally, there's the question of the future of these agreements.  In the U.S., it seems that all hopes are on the Trans Pacific Partnership (note the absence of "free trade" from the title).  But does that agreement really have a chance?  There are already more countries involved than with the bilateral deals that just passed, and if Japan joins the talks, things will get very complicated.

So, my apologies for being insufficiently excited by all of this, but I can't help thinking that policy-makers are focusing on the wrong things and overall progress with free trade is slowing.

ADDED: Larry Friedman has similar thoughts:

I feel as if I should have something insightful to say and that I should take a position on the economic impact these deals will have on the U.S. as a whole, on jobs in particular, and possibly on compliance professionals. The truth is, I am somewhat numb to trade deals.

... I also know that adding additional trade deals adds exponentially to the compliance difficulties. For this, I blame the WTO's inability to get a comprehensive trade deal done during the Uruguay Round. As it is, the NAFTA was used as a model for that agreement and for the TRIPS agreement that followed. But, without comprehensive (meaning global) trade liberalization, the U.S. and other countries have fallen into the somewhat random chaos of bilateral and multilateral regional deals and topic-specific agreements (e.g., the new anti-counterfeiting agreement).

The problem with the trade deals is that each one of them is intended to promote trade within their region. That means that the NAFTA is intended to encourage trade between the North American neighbors. As a result, NAFTA goods may not qualify for duty-free export to Australia because of excessive Canadian or Mexican content. Goods I can certify under the U.S.-Chile FTA may not qualify under the agreements with Singapore, Bahrain, or Morocco. And, the paper work and records for each are similar but distinct. If a company tries to qualify goods under both the U.S.-Central America-Dominican Republic Agreement and the NAFTA, it will likely need to gather two sets of origin certifications from suppliers because the rules of origin for the materials used to make the finished goods differ.

...  In the long term, the best approach is to scrap these deals in favor of a global approach to trade that lets countries benefit from their comparative advantages while preventing the so-called race to the bottom. Of course, that is much easier said than done, which is exactly why we are now getting three new trade deals.

SIEL Conference in Hamburg

1st Conference of the Postgraduate and Early Professionals/Academics of the Society of International Economic Law (PEPA/SIEL)

Hamburg, 27 and 28 January 2012

Organized by SIEL in cooperation with the Institute of Law and Economics of the University of Hamburg and Leiden University

SIEL was founded in 2008 to act as an umbrella organization to foster coordination, collaboration and debate between IEL scholars and practitioners and national or regional IEL organizations around the world. SIEL’s Post-graduate and Early Professional/Academics Group (PEPA/SIEL) is, among other things, interested in fostering collaboration and mentoring opportunities for emerging academics and professionals in IEL. PEPA/SIEL will seek to fulfil these goals through various activities such as by providing a forum where emerging IEL academics and professionals can present and discuss their research in a supportive and welcoming environment. We are pleased to announce our first such event, with others anticipated in the future, especially in other regions of the world.

Call for papers

This conference offers post-graduate students (students enrolled in Masters/PhD) and early professionals/academics (generally within five years of terminal degree) studying or working in the field of International Economic Law (IEL) an opportunity to both present and discuss their research, as well as providing a critical platform to test their ideas about broader issues relating to IEL. Invited speakers will be asked to prepare and present a paper, on which a senior practitioner or academic will comment, followed by a general discussion.

We invite submissions on any IEL topic including but not limited to:

• trade, investment and monetary/financial policies;

• the interaction of, for example, international trade law and investment law with other branches of law governing, for example, intellectual property, human rights, environment and sustainable development;

• regional economic integration;

• comparative economic law, focussing on how international economic law interacts with laws, institutions and actors at the domestic level;

• the roles of law and legal practices in international economic governance and international organizations; and

• the philosophy, sociology and economics of international economic law.

How and when to submit

Submissions should include a brief biography (150 words max.) and a research abstract (no more than 400 words) to be sent no later than 30 October 2011 to [email protected]. Papers will be selected based on a double blind review conducted by a senior practitioner or academic and a conference organizer. Successful applicants will be notified by 30 November 2011; after which they are expected to submit a conference paper (no more than 4000 words) by 31 December 2011. Papers will be made available online in a special section at the SIEL website (www.sielnet.org).

General practical information about participating and attending the Conference

The deadline for registration is 10 December 2011, and it should be done online at the SIEL website (the registration page will be available shortly). Registration costs 45 Pounds for non-SIEL Members, and 35 Pounds for SIEL Members. SIEL Membership details may be found at the SIEL website (student membership is 5 Pounds). The Registration fee covers conference materials and coffee breaks on both days.

A limited number of conference fee waivers is available for applicants facing financial hardship. Applicants for a conference fee waiver are kindly invited to add a short letter to their conference application, stating the reason for their waiver request. Successful applicants will be notified by 30 November 2011.

Unfortunately, the organization cannot cover travel, accommodation and any other expenses.

Subject to space availability, registration of participants not presenting a paper will be accepted, for which the regular fee will apply. For more information, please write to José Caiado at the email address below.

If you are interested in participating in this conference but have remaining questions, please contact José Caiado ([email protected])

 

Tokyo Round Thoughts on Mandatory Labelling

For those who have been following the technical regulations vs. standards debate here, let me add something else to the mix.  Here's something from a Secretariat note from early in the Tokyo Round:

4. With regard to labelling it was pointed out that in some cases labelling was mandatory as such; in other cases it was not mandatory to label products but if labels were used they had to conform to certain requirements (conditional labelling); in yet other cases labelling was not subject to regulations (voluntary labelling). There were two types of mandatory requirements; in the first it was mandatory to show certain information and in the second it was mandatory to present information in a certain way.

This note is along the same lines:

37. Requirements in the field of packaging and labelling may be mandatory or voluntary. For example, in the case of some products, it is mandatory to label a product. The mandatory obligation may be of two types; it may be obligatory to show certain information on the label; it may be obligatory to present information in a certain way. In other cases it may not be mandatory to label a product, but if labels are used they are required to conform to certain requirements (conditional labelling); in some other cases labelling may be purely voluntary, inasmuch as it is not required under any regulation.

So now we've got a third category, "conditional labelling," that seems to be neither mandatory nor voluntary.  Does this affect the analysis of whether measures like the tuna labelling one are "technical regulations"?

Of course, the "conditional labelling" discussion deals with whether the labelling requirement is mandatory, not whether compliance with the "document" is mandatory as set out in TBT Annex 1, so it's a little different.

EU Aviation Emissions Scheme Opinion

The BBC reports:

Plans to include any airline landing or taking off on EU territory in an emissions trading scheme are legal, an adviser to Europe's top court has said.

European Court of Justice Advocate General Juliane Kokott said this in response to a legal challenge to the scheme by North American airlines.

Though the court will not rule until next year, it follows the advocate-general's opinion in most cases.

Here's an excerpt from the opinion:

On the absence of any extraterritorial effect of the EU emissions trading scheme

145. As many of the governments and institutions involved in the proceedings have correctly concluded, Directive 2008/101 does not contain any extraterritorial provisions. The activities of airlines within the airspace of third countries or over the high seas are not made subject to any mandatory provisions of EU law by virtue of this directive. In particular, Directive 2008/101 does not give rise to any kind of obligation on airlines to fly their aircraft on certain routes, to observe specific speed limits or to comply with certain limits on fuel consumption and exhaust gases.

146. Directive 2008/101 is concerned solely with aircraft arrivals at and departures from aerodromes in the European Union, and it is only with regard to such arrivals and departures that any exercise of sovereignty over the airlines occurs: depending on the flight, these airlines have to surrender emission allowances in various amounts, (131) and if they fail to comply there is a threat of penalties, which might even extend to an operating ban. (132)

147. The fact that the calculation of emission allowances to be surrendered is based on the whole flight in each case does not bestow upon Directive 2008/101 any extraterritorial effect. Admittedly, it is undoubtedly true that, to some extent, account is thus taken of events that take place over the high seas or on the territory of third countries. This might indirectly give airlines an incentive to conduct themselves in a particular way when flying over the high seas or on the territory of third countries, in particular to consume as little fuel as possible and expel as few greenhouse gases as possible. However, there is no concrete rule regarding their conduct within airspace outside the European Union.

148. It is by no means unusual for a State or an international organisation also to take into account in the exercise of its sovereignty circumstances that occur or have occurred outside its territorial jurisdiction. The principle of worldwide income thus applies in many countries under income tax law. Under anti-trust law as well as in merger control it is normal worldwide practice for competition authorities to take action against agreements between undertakings even if those agreements have been concluded outside the territorial scope of their jurisdiction and may perhaps even have a substantial effect outside that scope of jurisdiction. (133) In one fisheries case, the Court of Justice even ruled that fish caught in the high seas could be confiscated as soon as the vessel concerned, flying the flag of a third country, reached a port within the European Union. (134)

149. The decisive element from an international-law perspective is that the particular facts display a sufficient link with the State or international organisation concerned. The particular connecting factor can be based on the territoriality principle, (135) the personality principle (136) or – more rarely – on the universality principle.

b)      On the existence of an adequate territorial link

150. The European Union can rely on the territoriality principle in the present case.

151. In general, the European Union may require all undertakings wishing to provide services within its territory to comply with certain standards laid down by EU law. Accordingly, it may require airlines to participate in measures of EU law on environmental protection and climate change (137) – in this case the EU emissions trading scheme – whenever they take off from or land at an aerodrome within the territory of the European Union.

152. Take-off and landing are essential and particularly characteristic elements of every flight. If the place of departure or destination is an aerodrome within the territory of the European Union there will be an adequate territorial link for the flight in question to be included in the EU emissions trading scheme.

153. Under the EU emissions trading scheme a particular airline may be required, when departing from or arriving at a European aerodrome, to surrender emission allowances that are higher the further the point of departure is from the destination. Taking account of the whole length of the flight is ultimately an expression of the principle of proportionality and reflects the ‘polluter pays’ principle of environmental law.

154. The territoriality principle does not prevent account also being taken in the application of the EU emissions trading scheme of parts of flights that take place outside the territory of the European Union. Such an approach reflects the nature as well as the spirit and purpose of environmental protection and climate change measures. It is well known that air pollution knows no boundaries and that greenhouse gases contribute towards climate change worldwide irrespective of where they are emitted; they can have effects on the environment and climate in every State and association of States, including the European Union.

155. A comparison with the aforementioned fisheries case is also worthwhile in this context. If it is permissible under the territoriality principle for fish caught outside the European Union to be confiscated from a vessel sailing under the flag of a third country whilst at a port within the European Union, (138) there cannot be any prohibition against exhaust gases from an aircraft emitted outside the airspace of the European Union being taken into account on its departure from or arrival at an aerodrome within the European Union for the purposes of calculating the emission allowances to be surrendered.

c)      On the absence of any adverse effect on the sovereignty of third countries

156. Contrary to the view taken by the claimants in the main proceedings and the associations supporting them, Directive 2008/101 does not, either in law or in fact, preclude third countries from bringing into effect or applying their own emissions trading schemes for aviation activities.

157. Admittedly, if sections of flights that take place over the high seas and within the territory of third countries are included there is a risk of ‘double regulation’, that is to say, a risk of one and the same route being taken into account twice under the emissions trading schemes of two States. This might be the case, in particular, if an emissions trading scheme applicable at the place of departure of an international flight and the scheme applicable at its place of destination were both – like Directive 2008/101 – to take account of the whole flight.

158. Nevertheless, however onerous it might be for the airlines concerned, such double regulation is not prohibited under the principles of customary international law at issue here. It is indeed accepted under customary international law, just as the widespread phenomenon of double taxation is accepted in the field of direct taxation. (139)

159. The double inclusion of a single flight in two different emissions trading schemes can only be avoided by unilateral measures or by agreement between the States and international organisations concerned. Even though customary international law does not impose any such obligation, the EU legislature expressly mentioned its willingness in that respect in Directive 2008/101 and also included a specific saving clause. (140)

It's Case C‑366/10 on the ECJ web site: http://curia.europa.eu/jurisp/cgi-bin/form.pl?lang=en

 

A WTO Prosecutor?

Here's the abstract of a new article from Claus Zimmerman in the Journal of World Trade, entitled 'Rethinking the Right to Initiate WTO Dispute Settlement Proceedings':

This article analyses the economic merits of the factual right of governments to interpose themselves as political filters ex ante of potential World Trade Organization (WTO) disputes. As analysed in this article, the current state of WTO law regarding the initiation of dispute settlement proceedings undermines the longterm objectives in pursuance of which states join trade agreements like the WTO Agreement in the first place. This article proposes the creation of an independent prosecution department within the WTO Secretariat, with an exclusive right to initiate dispute settlement proceedings. Without the existing discretionary filtering power, WTO membership would constitute a more credible commitment by governments that they wish to tie their hands in order to better resist domestic lobbying from powerful, importcompeting, industries, giving in to which might maximize the government's short-term political welfare but would be contrary to society's long-term interest in free trade.

Is ACTA Enforceable?

Over the week-end, some steps were taken to bring the Anti-Counterfeiting Trade Agreement (ACTA) into force.

I'm going to get myself in trouble here with international law folks, but let me ask this:  Is there a difference between international agreements that have an enforcement mechanism and those that do not?  I ask because it's not clear to me that ACTA is going to have a dispute procedure that makes it enforceable. 

In the draft text released in April of 2010, there was the following bracketed language in Article 5.1.2(c), stating that an ACTA "Committee" shall:

[[resolve][facilitate the avoidance of] disputes that may arise regarding [its][the] interpretation or application[74] [of this Agreement];

But in the consolidated text released in October of 2010, I don't see anything similar.

There are vague statements like this one in 5.1.2(e):

[the ACTA Committee shall] consider any other matter that may affect the implementation and operation of this Agreement.

This was 5.1.2(d) of the April 2010 draft text.  In theory, this could provide an avenue for dispute resolution, but it certain doesn't do that explicitly, and does not provide any guidance in this regard.  The final text released in December of 2010 is the same on these issues.

And there's also this consultations provision in Article 38.1 of the final text (which was present as Article 5.5 in the draft text, and Article 5.3.1 of the consolidated text):

1. A Party may request in writing consultations with another Party with respect to any matter affecting the implementation of this Agreement.  The requested Party shall accord sympathetic consideration to such  a request, provide a response, and afford adequate opportunity to consult.

But there is nothing that looks like binding dispute settlement.

Does this mean that the signatories are free to ignore ACTA?  Not that they necessarily would, of course.  Presumably, they signed it because they believe in the substance of it.  But let's say a country changes its mind and decides to go a different direction in IP protection.  Are there any consequences?  Could its obligations be enforced?  Are there plans to add enforcement provisions at some point?

Approaches to Investment Protection: Hardliners, Caution, Abandonment

Luke Peterson reports on three different approaches to invesment protection treaties:

While Canadian officials are still hopeful that a Canada-EU trade deal can be finalized by next year, some EU member-states would like nothing better than to shunt talks onto a slow-track.

A particular sore point emerging in the Canada-EU Comprehensive Economic and Trade Agreement, which sees its ninth round of talks take place this month in Ottawa, is the politically-incendiary topic of foreign investment protection.

In principle, a Canada-EU pact should include protections like the ones that were written into the North American Free Trade Agreement that aim to protect foreign-owned assets from various forms of government mistreatment.

But those protections proved controversial when foreign investors attempted to use them to fend off new regulations or public policy measures. After a barrage of arbitration claims, the NAFTA governments circled the wagons and moved to clarify that such protections should not immunize foreign investors from every risk and cost of doing business in a foreign country.

While a lot of thought in Ottawa goes into striking this balance between legal security to foreign investments and giving governments the elbow-room to make public policy decisions, this cautiousness on the part of the NAFTA governments has not sat well with pro-business elements in Europe—including certain European government officials that handle trade and economic portfolios.

In a series of recent closed-door meetings in Brussels, several "Friends of Investment" have spoken bluntly about their fears of "NAFTA-contamination". Accustomed to pushing for high levels of security for European companies investing in the developing world—and not yet having suffered the legal blowback which has buffeted the NAFTA countries—they are on guard against any attempts to dilute the international legal protections given to foreign investors.

...

... Canada's more cautious approach—with multiple caveats and limits written into agreements—is scorned by some European hardliners. Yet, it's not as if Canadians are throwing the baby out with the bathwater.

Australia, by contrast, has recently thrown its own treaty ambitions into reverse after being hit by threats from Chinese coal companies and foreign tobacco companies. When Australian health and environmental policy initiatives were targeted by litigious foreign investors, Australia decided that it would no longer pursue treaties that give investors broad legal protections and the ability to sue governments when those protections are endangered.

Instead, in a policy reversal announced earlier this year, the Australian government is urging companies that do business abroad to buy insurance to guard against the risk of nationalization or other misfortune.

By comparison, Canada's reaction to being sued by a string of NAFTA-waving U.S. investors has been positively restrained. Nevertheless, in certain parts of Europe, any roll-back of legal protections for cross-border capital flows is viewed dimly.

Trade and Jobs

From the FT:

The US Chamber of Commerce has claimed that the South Korea deal alone will create 280,000 jobs, while the White House has more modestly suggested a net 70,000 gain.

However, the Economic Policy Institute, a left-leaning think-tank partly funded by labour unions, has said that 159,000 manufacturing jobs will be lost.

So there's a business group claiming that the U.S.-Korea FTA will create 280,000 jobs, and a liberal think tank arguing that it will cause a loss of 159,000 jobs.  The number in the middle of these two figures is a 60,500 job gain, which is not far from the White House estimate of a 70,000 gain.  Did the White House just split the difference between the two, and add a few jobs for good measure?

All of this suggests to me that calculating the employment effects of trade agreements is not particularly scientific.

The Seal Product Ban under EU Law

Following up on this post, blog reader Laurens Ankersmit points me to an EU General Court order deciding that the action brought against the seal product ban under EU law was inadmissible because the applicants did not have standing, on the basis that they were not directly and individually concerned by the Regulation. So, nothing substantive was said about the compatibility of the regulation with primary EU law.

He notes that there might still be a challenge of the Regulation through a reference for a preliminary ruling by a national court, but the direct action failed.

The EU court web site does not make the order easy to link to, but go here, then click on "submit", and it's the most recent document. 

ADDED: More details from Laurens Ankersmit:

There is a second case before the General Court. This is a direct action brought by partly the same applicants on the validity of a Commission Regulation implementing the Regulation of the European Parliament and the Council.

So there are two cases:

- The first is case T-18/10, the challenge of the ‘parent’ measure, Regulation 1007/2009. This action was held to be inadmissible.

- The second is case T-526/10, where the Commission regulation 737/2010 implementing Regulation 1007/2009, is challenged. This case is still pending…

If the applicants do have standing in the second case, there might be a plea of illegality in which the parent measure (Regulation 1007/2009) can be challenged.

Again, if subsequently a national court decides to make a reference for a preliminary ruling to the Court of Justice and poses questions on the validity of one of the regulations or both, the Court can declare the regulations invalid. That is, if also in the second case the applicants lack standing. I think that their chances are better in the second case, but we will have to see how it plays out.

PPMs in the Tuna Panel Report

There's still lots to uncover in the Tuna panel report.  Here's something on PPMs:

7.369 Finally, Mexico contends that the US measures unilaterally exert pressure on the Mexican fleet to change fishing areas and/or fishing methods, which Mexico argues is evidence of the de factodiscriminatory effect of the measures.  For Mexico, the fact that the US measures are aimed at encouraging foreign fishing fleets such as those of Mexico to change either their fishing areas or their methods is further evidence of the link between the US measures and the WTO-inconsistent discrimination. In its view, such an attempt at  extraterritorial regulation by the United States is inconsistent with the national treatment and most-favoured nation obligations and the obligations in the WTO Agreements must not be interpreted so as to allow a WTO Member to condition access to its domestic market based on compliance with that Member's unilateral policy relating to actions outside its territory, including unincorporated processes and production methods (PPMs).

...

7.371 In considering Mexico's arguments on this point, we recall the Appellate Body's observation,  in US – Shrimp, that:  

"It is not necessary to assume that requiring from exporting countries compliance with, or adoption of, certain policies (although covered in principle by one or another of the exceptions) prescribed by the importing country, renders a measure  a priori incapable of justification under Article XX.  Such an interpretation renders most, if not all, of the specific exceptions of Article XX inutile, a result abhorrent to the principles of interpretation we are bound to apply."

 Although this statement was made in the context of an analysis under Article XX, it implies that the fact that the measures at issue reflect a certain choice of policy or standard is not in itself a reason to assume that a measure is WTO-inconsistent.  The same considerations are pertinent, in our view, in the context of Article 2.1 of the TBT Agreement.

7.372 We also note that the US dolphin-safe labelling provisions do not require the importing Member to comply with any particular fishing method (these measures do not state, for example, that no tuna may be imported if it originates in a country where tuna is caught by setting on dolphins).  Rather, it is the products themselves that need  to comply with the requirements of the labelling scheme, if they wish to benefit from the label and make dolphin-safe claims on the US market.   

Trade in Everything: Flying Pigs

From the Daily Mail:

An entire Boeing 747 has been hired at £330,000 per trip to fly pigs in more comfort on the 5,500-mile journey than humans often have in economy class.

It is an extraordinary turn of events for a country of 1.3 billion once known for eating everything and anything.

Thanks to decades of sophisticated breeding programmes, an average British-bred sow gives birth to 22 piglets a year, compared with 14 for a Chinese one. 

The initial price for a breeding sow in Britain is between £400 and £500, but with transportation the cost of exporting one rises to £2,000.

A total of 1,239 pigs left the UK before the summer and a further 900 are flying out this month.

By the end of the year, about 4,500 pigs from farms across Britain, from Oxfordshire to Cheshire and Scotland, will be living in China after a new livestock trade agreement.

Before the flight, the pigs are loaded on to the aircraft in slatted pallets in groups of 15 to 20. Each pig, which weighs an average 11st, can then relax in an area measuring 3.5ft by 3.5ft where they can stretch out, roll, stand or lie during the 111⁄2 hours in the air.

In contrast, an economy-class human traveller is typically confined to a seat 18in wide with no more than 32in legroom. The pigs can help themselves to food and water throughout the trip.

US Tuna Panel report again: technical regulations and int'l standards

Dear all,

I am intrigued by the US Tuna Panel’s approach to the question of whether the US used the AIDCP standards (which incidentally are resolutions passed by contracting parties to the Agreement on International Dolphin Conservation Program) as a basis for its dolphin-safe labelling provisions. At one point, the panel observed that in its view “the US legislator has constructed the US dolphin-safe labelling scheme building on the AIDCP foundations.” (para. 7.712) This observation appears to show that the panel was following a procedural approach to the interpretation of the phrase “as a basis for” in which it was considering only the process by which the US lawmaker put its technical regulations together.

But the panel went further and added the following in a language that sounds as if it itself was not convinced by what it was saying: “However, the strong relationship between the two bodies of rules appears to be insufficient to infer that the AIDCP standard was used as a basis for the technical regulation.” (para. 7.712)

The panel then quotes the AB’s ruling in EC Sardines where it introduced the contradiction test – i.e. that a member cannot have used a relevant international standard if its regulations in any way contradict that standard. This is a substantive test which goes beyond the process of lawmaking and effectively compares the actual requirements set by the law against those contained in the relevant international regulation.

But what I find most intriguing is the way it disposed of the issue merely referring to the US domestic court decision that was considered part of the challenged US measures. Here is how the panel put it in paras 7.716-717:  

“In the case at hand, the departure from the AIDCP standard was formally stated by the Court rulings, and in particular the Hogarth ruling which describes it as an explicit refusal to adopt the standard:

‘The program was formalized into a legally-binding agreement known as the Panama Declaration, pursuant to which the United States' delegation agreed to seek a weakening of the dolphin-safe labeling standard and allow such a label to be affixed to tuna caught with purseseine nets as long as no dolphins were observed to be killed or seriously injured during the set. ...

When the delegation asked Congress to change the standard, however, Congress refused to relax its strict requirements without affirmative evidence that the tuna fishery was not significantly contributing to the slowness of the recovery rate of already depleted dolphin stocks.’

In light of this evidence, we conclude that the United States failed to base the US dolphin-safe labelling provisions on the relevant international standard of the AIDCP.”

I am surprised to see no attempt to compare how the requirements of the challenged US measures actually differ from the relevant AIDCP standards.

Apart from the substantive questions here, my question also is whether the panel’s reliance solely on what the domestic court had said on the matter meets its duty to make “an objective assessment of the matter before it”.