International Economic Law and Policy Blog

WTO Financial Services Rules and Domestic Regulation

From a recent NY Times article about WTO financial services rules:

Back in the 1990s, when many in Washington — and virtually everyone on Wall Street — embraced the deregulation that helped lead to the recent crisis, a vast majority of W.T.O. nations made varying commitments to what’s called the financial services agreement, which loosens rules governing banks and other such institutions.

Many countries, for instance, said they would not restrict the number of financial services companies in their territories. Many also pledged not to cap the total value of assets or transactions conducted by such companies. These pledges also appear to raise trouble for any country that tries to ban risky financial instruments.

According to the W.T.O., 125 of its 153 member countries have made varying degrees of commitments to the financial services agreement. Now, these pledges could easily be used to undermine new rules intended to make financial systems safer.

What would happen if a country flouted the rules in an attempt to reduce risks in its financial system? Possibly nothing. Then again, that country could find itself subject to a challenge by the W.T.O.

So far, no countries have asked the organization to challenge rule changes like those made in the United States under the Dodd-Frank law. But rumblings of such an objection emerged in late December, in a comment letter sent to United States banking regulators. That letter criticized elements of the Volcker Rule, which is intended to prevent financial companies from making bets for themselves with deposits backed by taxpayers.

The letter was written by the Investment Industry Association of Canada. It called the proposal “an unprecedented reach of extra-territorial regulation.”

The letter went on: “As a result, the Volcker Rule may contravene the Nafta trade agreement,” a reference to the North American Free Trade Agreement, which has a broadly similar set of rules to the financial services agreement under the W.T.O. While countries must ask the W.T.O. to mount a challenge under its rules, companies can do so directly under Nafta.

Some countries that are trying to reregulate their financial systems worry that they may run afoul of trade commitments. The delegation for Barbados, for example, wrote last year about the trouble it might encounter imposing new rules while trying to abide by trade agreements.

 “The notion of ‘too big to fail’ has been a concern even prior to the crisis, but the financial crisis realized banking regulators’ worst fears,” Barbados wrote to a W.T.O. committee in early 2011.

Yet nations that committed to the agreement in the 1990s “may find restrictions on size are contrary to the commitments given to limit adverse affects on financial service suppliers,” the Barbados letter said.

Barbados suggested amending the agreement on financial services to provide more flexibility. Its proposal was rejected.

Last October, Ecuador asked that the W.T.O. review financial rules so that the country could preserve its ability to create regulations that ensure “the integrity and stability of the financial system.”

Sounds reasonable enough. But that proposal was rejected by trade representatives for the United States, the European Union and Canada before it could be discussed at a December meeting in Geneva. Through a spokeswoman, Ron Kirk, the United States trade representative, declined to comment.

Maybe nothing will come of any of this. But such trade agreements might well be read as an invitation to fight financial regulation.

Keith Rockwell of the WTO responded with the following:

The [WTO financial services] agreement is about opening markets, not tying governments’ hands when it comes to regulating their financial services sectors.

 The most important elements of the W.T.O. commitments on financial services pertain to nondiscrimination and national treatment, meaning that if you accept opening your market, you may not apply different regulations to banks from different foreign countries or to your local banks. Open trade in financial services does not mean greater risk to the system’s safety and soundness.

 The Barbados letter is here: www.wtocenter.org.tw/SmartKMS/fileviewer?id=115488  One thing it says is: "According to GATS Article XVI, governments cannot prohibit or limit the size or the total number of financial service suppliers in covered sectors.  However, under a Financial Reform Bill 2010, an oversight entity is to be set up to do exactly that in  one jurisdiction, that is, to make sure that the size of banks is reduced if they appear to be becoming too large."  GATS Article XVI says:  

2. In sectors where market-access commitments are undertaken, the measures which a Member shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory, unless otherwise specified in its Schedule, are defined as:

 (a) limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test;

 (b) limitations on the total value of service transactions or assets in the form of numerical quotas or the requirement of an economic needs test;

 (c) limitations on the total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test; ...

Of course, the Annex on Financial Services has this "prudential carve-out":

2. Domestic Regulation

(a)  Notwithstanding any other provisions of the Agreement, a Member shall not be prevented from taking measures for prudential reasons, including for the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier, or to ensure the integrity and stability of the financial system.  Where such measures do not conform with the provisions of the Agreement, they shall not  be used as a means of avoiding the Member's commitments or obligations under the Agreement.  

The Barbados letter says the following on this language:

11. One might argue that there is a prudential carve-out.  However, the GATS Annex on Financial Services require that measures imposed must not be used as a means of "avoiding the Member's commitment or obligations under the agreement."  However, an obligation not to restrict financial services in a situation where a Member wishes to do so, could be interpreted as having the intention of avoiding that obligation.  It would seem that the wording of paragraph 2 of the GATS Annex on Financial Services may need to be amended.

...

23. It has been suggested that the prudential carve-out in the GATS permits Members to take action on the grounds that such action is prudentially required.  However, there are some aspects to this which bear further examination.  Firstly, when there is an increasing number of exceptions being introduced on prudential grounds, then this may be a sign that the basic rules need to be addressed.  Secondly, while the prudential carve-out may permit countries to breach their commitments; the fact is that they have breached their commitments, - albeit with permission.  It may be possible to argue that they are not in contravention of GATS, but they have reneged on the commitments given.  In the case of the Understanding, it is a little more difficult for Members, since there is a proviso that their actions must not be used as a means of avoiding commitments on obligations.  This may well be exactly what they wish to do in light of recent painful experiences caused by certain types of activities.

 I talked about the prodential carve-out here:  http://worldtradelaw.typepad.com/ielpblog/2010/05/global-trade-watch-on-the-prudential-carve-out.html  Is there a need to revise WTO rules in this area, either the obligations or the prudential "exception"?  How much of a problem would it be to undertake non-discriminatory financial regulation consistently with WTO rules?

The Upcoming TBT Decisions

Here are some dates for those waiting for the Appellate Body to explain key provisions of the TBT Agreement:

- The Clove Cigarettes report will be circulated on schedule by April 4.

- The Appellate Body will need a little more than the usual 90 days in the Tuna-Dolphin case, with the report to be circulated by May 16.

The Scope of TBT Agreement Article 2.2

From paras. 117-118 of the the U.S. appellant submission in U.S. - COOL, here are two views of the scope of TBT 2.2.  First, the view the U.S. doesn't like:

... In other words, the Panel finds that because the COOL measure does not contribute to its public policy goal enough – in a sense, perhaps, that it reflects ineffective public policy – the measure is inconsistent with the international obligations of the United States.  ...

This finding of inconsistency reflects a fundamental misunderstanding by the Panel of the obligation imposed by Article 2.2 of the TBT Agreement, which provides that “technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective . . .” Neither the text of Article 2.2, nor its relevant context, suggests that a WTO panel should step into the shoes of the Member to determine whether a measure is “good enough” at achieving the Member’s public policy objectives. 

Second, the view the U.S. prefers:

Rather, a measure’s consistency with Article 2.2 is to be judged with regard to two questions:  (1) whether the measure pursues an objective that is “legitimate”; and (2) whether the Member could have adopted a less trade-restrictive measure that fulfills the objective at the same level chosen by the United States.

Mexico-Brazil Auto Dispute

Long-time reader Daniel Vazquez offers some insights on the Mexico-Brazil auto trade dispute discussed by the WSJ a little while back:

After reading this article there are several issues that come to mind. First, why did Mexico give up the fight in the first round? It is understood that the auto industry is a powerhouse in Mexico and that exports to the Brazilian market are sizable. Yet, giving in to Brazil’s demands so soon and not trying to enforce those rules through all possible means just opens the door to so many other issues, such as potential new request for fixes from other countries. Argentina, in fact, already asked to revisit its trade agreement with Mexico in autos.

Second, why not include, along with withdrawal clauses, “fixing/rebalancing clauses”? Adding those clauses will at least bring more predictability to the framework, if they are clear and well structured. Opening and closing an agreement because of circumstances similar to those cited above, totally destroys the predictability that trade frameworks are suppose to provide.
 
Third, perceptions. More analysts will agree with the view that Brazil is a less reliable –more protectionist—trading partner, which does not like to play by the rules. This might create more problems for Brazil as they try to engage in other negotiations.
 
Mexico, on the other hand, will be seen as weak, budging easily. TPP countries are following this saga from the sidelines. I wonder how they are adjusting now their negotiating playbooks after seeing how Mexico has dealt with this issue.
 
This arrangement between Brazil and Mexico is just bad policy for both. 

Here's a brief excerpt from the article:

Mexico and Brazil reached a deal to limit the number of car exports from Mexico to Brazil for the next three years, ending a brewing trade spat between Latin America's two biggest economies.

Mexico agreed to limit car exports to Brazil to roughly $1.55 billion a year for three years, Mexico's Economy Minister Bruno Ferrari told reporters. After that, both nations would return to free trade in cars.

Mexico's car sales to Brazil last year totaled $2.1 billion. Mexico shipped 134,000 units to Brazil in 2011 compared to 53,000 units a year in 2009, leading to a trade surplus for Mexico of $696 million.

Mexico, long a steady exporter of cars to the giant U.S. market, has been sending an increasing number of cars 5,000 miles south, where a robust local economy and a high-flying currency have made imports attractive.

Anti-Dumping Duties on Photo Film?

I feel like I'm in a mid-1990s time warp.  From Xinhua:

 China's Ministry of Commerce imposed five-year anti-dumping duties of 16.2 to 28.8 percent on photographic paper and paperboard from the United States, the European Union and Japan in a final ruling on Thursday.

Prestowitz on Two Trade Games

Here's former U.S. trade negotiator Clyde Prestowitz writing in the FT:

As the director of President Reagan’s strike force against unfair trade, I targeted Airbus subsidies and a variety of Japanese trade barriers. Although we achieved positive results in specific cases, in a broader sense we got nowhere. Airbus still found ways to get subsidies and Japan remained largely impervious to imports.

My experience taught me that in today’s globalised world two different games are being played. One is suggested by the formal rules of the World Trade Organisation. The other is a silent mercantilism played by countries that use subsidies and domestic regulations to exploit ambiguities in the formal WTO rules – or that simply ignore them.

I have therefore been bemused by the recent filing of WTO complaints from Washington, Brussels, and Tokyo against China’s export restrictions on rare earths. Not that I think the filings unjustified. Indeed, I believe they are a step in the right direction. But they are a side show.

The WTO may well find against China. But so what? Will that actually result in a surge of unrestricted rare earth exports? I sympathise with the sentiments of complainants in this and other cases. But will they produce desired results? And it is not just China. Will Guido Mantega, Brazil’s finance minister, repent the recent manipulation of the real that most call protectionist but he calls “defensive”? I submit that the answer to these questions is “no”.

President Barack Obama keeps insisting that “everyone has to play by the same rules”. But the problem is not a matter of a few discrete instances of rule breaking. It is a much broader free-trade charade. It has long been the unspoken premise of globalisation that all the members of the WTO and other international organisations are playing the free- trade game – and that no systemic differences exist between the rules in different countries. Let’s call the game “trade rugby”, an international game played between everyone in the same way. In this view of the game, any difficulties are understood as discrete problems that can be resolved through application of the rules. But, as I know from experience and as we see in the case of China, the same problems keep returning. That means only one thing – not everyone is playing the same game.

Consider that China’s rare earth export restraints are not the action of some private monopoly. They are a policy decision that favours production of certain products in China. The recent GE deal to do avionics with China’s Avic was not the result of the invisible hand. Rather, GE understood from reading China’s Five Year Plan that if it wanted to sell avionics in China it had better produce them there.

This is a different game to trade rugby. It is a game adapted to suit particular countries, a bit like American football. Taking advantage of the rules’ ambiguity, it can be played in the shadows of the global institutions, but it cannot be disciplined by them because it is a game with its own very different rules and scoring system.

The basic argument is that "they" are playing a different trade game than "we" are, and their approach is unfair to us.

So who are "they"?  He mentions the EU (Airbus subsidies), Japan (general trade barriers), Brazil (currency manipulation), and China (export restrictions).

And what about "us"?  Well, we've certainly been accused of using "subsidies and domestic regulation" in ways that violate WTO rules, often to encourage production in the U.S.  There are a bunch of cases going on right now against such measures.  We've also been accused of currency manipulation recently; many governments believe that the U.S. applies its antidumping laws unfairly; and some argue that we support global intellectual property rules not because of any principled beliefs, but simply because we have a lot of intellectual property.

I do think it's likely that some countries are "worse" than others in terms of how protectionist they are.  However, I also think that offering a precise estimate of how the varying levels of protectionism compare across countries is difficult.

(And of course, let's not forget the view that we would all be better off if we stopped playing any version of these games!)

Further Thoughts on Plain Packaging

Two further thoughts on Australia's plain packaging legislation occurred to me.

First, what if Australia had simply banned cigarettes?  Are there differences in relation to trademark protection between (1) a product ban and (2) a narrower ban on using trademarks on the product?

Second, let's say Ukraine's WTO complaint gets rejected.  What will the implications be for the Hong Kong-Australia BIT claim?  Recall that in its BIT claim, Philip Morris argued in part:  "[Plain Packaging] contravenes Australia's international obligations under TRIPS, the Paris Convention, and the TBT."  What if there is a WTO DSB ruling that the plain packaging measures do not violate those obligations?

Cigarette Packaging Regulation: The Intersection of Free Speech, Free Trade, Due Process, Property and Intellectual Property

There are at least five legal proceedings going on right now related to government regulation of cigarette packaging.  They are based on a variety of different, but sometimes overlapping, legal claims.  It's difficult to characterize some of these claims, but I am going to give it a shot:

Free Speech: Graphic Images Required on Cigarette Packages by the U.S. FDA, with litigation in U.S. court:  "in R.J. Reyolds v. FDA, Judge Leon of the District of D.C. ruled that the First Amendment prohibited new FDA regulations requiring the display on all cigarette packages of large graphic images, including photos of dead bodies and diseased lungs and mouths. The court held that the regs compel speech, do not involve purely factual commercial information (which would trigger lower scrutiny), and do not survive strict scrutiny." 

Takings:  Plain Packaging Required by Australia, with litigation in Australian court:  TOBACCO giant Philip Morris is opening a second front in its battle with the government over plain packaging.  The Marlboro manufacturer will today file a High Court challenge against the controversial laws, claiming they are unconstitutional. "We believe plain packaging violates the Australian Constitution because the government is seeking to acquire our property without paying compensation," Philip Morris spokesman Chris Argent said yesterday. "The government has passed a law that acquires our valuable brands and intellectual property, despite being unable to demonstrate that it will reduce smoking and ignoring the widespread concerns raised in Australia and internationally regarding the serious adverse ramifications associated with plain packaging." 

IP Protection and Trade Barriers:  Plain Packaging Required by Australia, with a complaint at the WTO: Ukraine is challenging Australia's plain packaging law under the TRIPS Agreement, as well as GATT/TBT National Treatment requirements and the TBT 2.2 "necessity" provision. 

Due Process and Takings:  Mandatory Warning Labels and Brand Restrictions by Uruguay, with a complaint under a BIT:  "The companies’ claims are based on a 1991 treaty between Switzerland and Uruguay, in which each country guaranteed certain minimum standards of treatment for the other country’s investors, and agreed to go to international arbitration over any alleged failure to live up to those commitments.  The companies contend that, as a result of Uruguay’s measures, they have been deprived of fair and equitable treatment, that the value of their investments has been taken without compensation, and that the use of their investments has been unreasonably impaired—all of which are violations of the Switzerland-Uruguay treaty."

Due Process and Takings:  Plain Packaging Required by Australia, with a complaint under a BIT:  "plain packaging legislation breaches Article 6 of the Hong Kong-Australia BIT. Article 6 protects investments from measures by a host State that have an effect equivalent to deprivation, except under due process of law, for a public purpose related to the internal needs of the host State, on a non·discriminatory basis and against compensation"; "Neither is plain packaging legislation (and for the same reasons the GHW regulation) fair and equitable, as required by Article 2(2) of the Hong Kong-Australia BIT"; "For the same reasons, plain packaging legislation and the GHW regulation each constitute an unreasonable impairment to the management, maintenance, use, enjoyment or disposal of PM Asia's investments in Australia in breach of Article 2(2) of the BIT."

It seems to me that a discussion of all of these cases would make for a very interesting conference!

The Plain Packaging WTO Complaint

... is here: http://www.worldtradelaw.net/cr/ds434-1(cr).pdf

Here are the legal claims:

Australia's measures, especially viewed in the context of Australia's comprehensive tobacco regulatory regime, appear to be inconsistent with a number of Australia's obligations under the TRIPS Agreement, the TBT Agreement, and GATT 1994, including but not limited to the following provisions of these agreements: 

• Articles 1.1, 2.1, 15, and 16 of the TRIPS Agreement and Articles 6quinquies, 7, and 10bis of the Paris Convention as incorporated in the TRIPS Agreement because the measures, which discriminate against tobacco-related trademarks based on the nature of the product, fail to give effect to the trademark holder's legitimate rights with respect to the trademark, fail to accord effective protection of the trademark "as is," and fail to prevent acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor; 

• Article 20 of the TRIPS Agreement because the measures constitute an unjustifiable encumbrance on the use of trademarks; 

• Article 1 of the TRIPS Agreement because Australia has failed to give effect to Article 20 of the TRIPS Agreement in Australia's domestic laws and regulations; 

• Article 27 of the TRIPS Agreement because by regulating the physical features of the patented packs, the measures prevent the normal exploitation and thus the enjoyment of the patent rights for tobacco products in a manner that discriminates based on the field of technology; 

• Article 2.2 of the TBT Agreement because the measures constitute an unnecessary obstacle to trade and are more trade restrictive than necessary to achieve the stated health objectives; and 

• Article III:4 of the GATT 1994, Article 3.1 of the TRIPS Agreement, and Article 2.1 of the TBT Agreement because the measures fail to respect the national treatment requirement set out in these provisions by not providing equal competitive opportunities to imported tobacco products and foreign trademark right holders as compared to like domestic tobacco products and trademark right holders.

TRIPS seems to be the main focus, but let's not overlook the TBT and GATT claims.

More USTR Positions

Presumably this is part of the recent push for more trade enforcement:

Job Title:Director of Trade Research

Department:Executive Office Of The President

...

Serves as the Director of Trade Research responsible for developing plans and strategies in support of litigation before the World Trade Organization (WTO) and in support of international negotiations. 

• Develops positions and strategies for consultations and negotiations with foreign governments on trade issues. Works with attorneys and senior officials to understand and identify research needs. Monitors, researches, analyzes, and prepares papers in support of litigation or regarding various issues, including industrial sectors, legal and regulatory regimes, market access and competitive issues in foreign markets. 

• Obtains, translates, and catalogs foreign language documents for use in legal proceedings and/or negotiations with governments and industries. Works with foreign language source material (especially foreign language legal documents), translators, and translation processes. 

• Plans, conducts, and/or leads others in conducting economic and other analytical studies and developing reports and recommendations in support of litigation or other legal disputes and in support of negotiation and administration of trade agreements with foreign governments.

Who "Won" the Beef Hormones Dispute?

The BBC reports:

The European Parliament has backed a deal that will increase EU imports of beef from the US and Canada and help European food exporters.

A row over growth hormones used on North American cattle ranches led to a trade war lasting more than 20 years.

The new deal sets an annual EU quota of 48,200 tonnes for high-quality North American beef from cattle that have not been treated with growth hormones.

North America will lift import tariffs on a range of European farm produce.

An EU ban on hormone-treated meat and meat products remains in place, even though the World Trade Organization (WTO) ruled in 1997 that it was illegal.

The EU ban, dating back to 1988, was based on concerns about the addition of six hormones to more than 90% of American beef.

But now, US farmers are no longer using the hormones, according to Robert Sturdy MEP, a UK Conservative and Vice-President of the European Parliament's Trade Committee.

So who "won" this WTO dispute?

Was it the EU, because it gets to keep the ban on hormone treated beef?

Was it the U.S. and Canada, who now get to export more non-hormone treated beef?  (And by the way, is it true that "US farmers are no longer using the hormones"?  I was not aware of that.)

Was it the WTO dispute settlement system, which (after quite some time) encouraged the parties to find a trade liberalizing compromise?

 

Plain Packaging Complaint at the WTO

Bloomberg reports:

Ukraine complained at the World Trade Organization over Australia’s decision to prohibit trademarks and logos on tobacco products, saying the ban violates global rules on intellectual property.

Australia is the first country to require plain, identical cigarette packaging. As of Dec. 1, 2012, cigarettes there will have to be sold in dark brown packets, with no company logos or images and the same font for all brands. Imperial Tobacco Group Plc (IMP), British American Tobacco Plc (BATS) and Japan Tobacco Inc. (2914) are among companies that have challenged the law, which Australia is extending to include cigars and loose-leaf tobacco products.

Ukraine says the scientific evidence on which the law is based was insufficient and that the plain-packaging rules will unnecessarily curb trade because Australia’s public-health goal can be met by other means.

“The government has consistently engaged with World Trade Organization members with regard to the plain-packaging measure, and will participate in consultations in a constructive manner,” Australian Trade Minister Craig Emerson said in an emailed statement today. “Australia is prepared to defend any challenge that might result from the consultations.”

I know this issue has been talked about at meetings related to TRIPS and TBT, but I was still a bit surprised to see a complaint.  I wonder if other others will bring complaints as well.

An old blog post on these issues is here: http://worldtradelaw.typepad.com/ielpblog/2010/04/plain-packaging-of-tobacco-products-under-trips.html

The Appellate Body's Ruling on Boeing Subsidies: Everybody Wins!

From USTR:

 United States Trade Representative Ron Kirk announced today that the United States has prevailed in a World Trade Organization (WTO) dispute over claims by the European Union (EU) related to The Boeing Company. ...

“This decision is a tremendous victory for American manufacturers and workers – and demonstrates the Obama Administration’s commitment to ensuring a level playing field for Americans,” Ambassador Kirk said.

 From the EU:

The European Commission today welcomes the WTO appeal ruling in the "Boeing case" which confirms that billions of dollars in US subsidies granted to Boeing are illegal under WTO rules. The WTO’s Appellate Body rejected the US appeal and found that US Federal and State governments granted between US$ 5 and 6 billion WTO-incompatible subsidies to Boeing between 1989 and 2006. ...

"Today's ruling vindicates the EU's long-held claims that Boeing has received massive US government hand-outs in the past and continues to do so today", said EU Trade Commissioner Karel De Gucht. ...

In terms of the substance, at first glance it seems that the Appellate Body upheld many of the Panel's findings, but I think that a first glance is probably insufficient here.

Chinese Foie Gras Production

Via a Scott Lincicome tweet, I see all kinds of possibilities for trade conflict here:

The world's biggest goose farm and foie gras factory will soon be established on the banks of Poyang Lake, in China's Jiangxi Province. The American investment company Creek Project is said to be investing $100 million into the venture.

...

Along with caviar and truffles, foie gras is often considered to be one of the "top three" Western gourmet items. However, the forced feeding of geese in order to fatten up their livers has been plagued with controversy internationally. Countries like Germany and Poland outlaw the "gavage" method of feeding, while California prohibits the sale of foie gras. A similar procedure was believed to have first been performed by Egyptian farmers nearly 5,000 years ago.

Under strong condemnation from animal protection groups, the European Union has planned to stop, from 2019 onward, the production of this traditional cuisine. Currently, Hungary, which used to be the second-biggest producer, has gradually decreased its output. Israel, another major producer in the past, has also discontinued its production. And so it is not altogether surprising that production is shifting eastward to China.

The planned Poyang Lake project will raise around two million geese and eight million ducks annually. China already produces an estimated 1,000 tons of foie gras per year, double its output in 2006. France still remains No. 1 in this market with about 20,000 tons a year. 

Last year, some French foie gras producers were shut out at the Cologne International Food Fair, triggering some Franco-German tension. "In international trade, the lack of respect of animals' welfare could create barriers, as well as damage a country's image," says Zhang Dan, co-founder of China's Animals Protection Reporters Salon.

Restricting Added Sugar in Fruit Juice: Health Measure or Trade "Barrier"?

From an EU Council decision from last week:

The new directive incorporates the current industry practice of not adding sugars to fruit juices. As from the date of application of the new rules (i.e. 18 months after their entry into force), the addition of sugars to fruit juices will no longer be authorised.  

Since the addition of sugars was previously allowed, it was common that food business operators labelled the absence of added sugars in the fruit juices for commercial reasons by means of nutrition claim "with no added sugars". The use of such a claim will be no longer allowed after the end of the transitional period (18 months after the date of application of new rules), when all fruit juices present on the market are not allowed to contain added sugars any more. ...

Will there be trade concerns raised here?  The decision notes:

The new rules will apply to all fruit juices marketed in the EU, irrespective of their origin. This ensures an equal treatment between fruit juices produced within the EU and imported from third countries.

 But there may still be a disparate impact, and it may affect trade more generally.

CVDs and Double Counting

So now that the CVD-NME bill has passed the House and Senate, and presumably will become law soon, I have a question about CVDs and double counting in relation to market economies.

As explained here, under the legislation, there is a procedure for how respondents can get AD duties reduced in a situation where simultaneous AD and CVD cases have been brought against the same product imported from an NME. Basically, an adjustment to antidumping duties, so as to avoid the double remedy problem, will be made where the subsidy reduces the price of imports, in a way that increases the dumping margins (it's a little more complicated than that when you take into account burdens of proof and other elements of the provision).  It may not be easy to show this import price decrease and dumping margin increase, but presumably the very clever economists and lawyers working for foreign exporters and producers will give it a try.  Perhaps they will even succeed now and then.

Here's my question.  With the experience they gain in making this argument in the NME context, will they apply the same logic to the market economy context?  I know that NME and ME are thought of as completely separate, but I wonder if the situations are really all that different.  Maybe the argument about subsidies leading to dumping, and thus resulting in double-counting, can apply more generally.  As SCM Agreement Article 15.5 explains, subsidized imports must be causing injury "through the effects of subsidies."  Article 15.2 elaborates by talking about "the volume of the subsidized imports" and "the effect of the subsidized imports on prices."  So, at least in part, the theory behind CVDs is that subsidies might lead to import prices being lowered, which causes injury.  But of course, when you talk about lower import prices, you also think about dumping.  Couldn't the lower import prices that result from subsidies lead to a finding of dumping as well?  And, therefore, shouldn't there be an effort to make sure that CV and AD duties are not addressing the same issue (i.e., lower import prices), even in market economy situations?

Of course, all of this may be moot if respondents cannot meet the standard for showing lower prices/higher margins in the NME context.

Australia, Investor-State and the TPP

From the Sydney Morning Herald:

[TPP] talks have entered troubled waters over investor-state dispute settlement (ISDS) clauses.

These typically give businesses from one country power to take international legal action against the government of another, over agreement breaches.

The clauses are included in many multilateral and bilateral free-trade agreements.

But the [Australian] federal government last year issued a new trade policy, in which it ruled out supporting such clauses, arguing they ran the risk of giving foreign business greater legal rights than domestic businesses.

The government believes such clauses could also constrain its ability to make laws on social, environmental and economic matters.

Trade Minister Craig Emerson yesterday said the government would not change its position.

''We do not and will not support investor-state dispute settlement provisions,'' Dr Emerson told reporters.

''This is government policy. It's the result of a cabinet decision in April last year, reaffirmed at the [ALP] national conference.''

What Will the Interagency Trade Enforcement Center Be Enforcing?

A couple weeks ago, Reuters had this to say about the proposed Interagency Trade Enforcement Center:

Acting Commerce Deputy Secretary Rebecca Blank said $24 million of the new funding would go to the Commerce Department's International Trade Administration (ITA) and the remaining $2 million to the U.S. Trade Representative's office.

The ITA houses the Foreign Commercial Service, which gathers intelligence on foreign markets and promotes U.S. exports around the world, and the Import Administration, which handles anti-dumping and countervailing duty cases.

There was a point I wanted to make about enforcement, but didn't get around to it, and now I see that Dan Ikenson of Cato has said something along the same lines (in the context of short paper on U.S.-China trade relations):

There are important distinctions to draw between enforcement efforts geared toward opening closed markets and protectionist measures designed to close opened markets. But media tend to conflate them and, in the process, obscure important nuances about the U.S.-China economic relationship.

U.S. WTO challenges of discriminatory Chinese policies are not equivalent—economically or morally—to U.S. antidumping, countervailing duty, or safeguard measures imposed on Chinese products. The first is about opening markets; the second is about closing them. The first is about holding China accountable to its commitments; the second is about claiming exceptions to our own commitments. The first is about enforcement; the second is about bestowing favors on some domestic industries at great cost to others.

The United States has filed 12 formal complaints against China, and China has filed 6 formal cases against the United States in the WTO. Those measures have all been about opening markets. Meanwhile, the United States has in place 113 trade remedy measures restricting access of Chinese goods to the U.S. market, and China has in place 20 such measures against the United States. Those measures are all about closing markets.

GSP and Investor-State

Via a Luke Peterson tweet, I see this from Reuters:

The United States could soon suspend trade benefits for Argentina because of that country's failure to pay awards in two long-running investment disputes with U.S. companies, a U.S. trade official said on Monday.

"We hope to make a recommendation to the president (Barack Obama) in the near term," a U.S. trade official told Reuters in response to an Argentine newspaper report that Argentina could soon lose the U.S. trade benefits.

The United States currently waives duties on some imports from Argentina under the Generalized System of Preferences program, a trade program aimed at helping create jobs in developing countries.

"USTR accepted two petitions in June 2010 seeking withdrawal of Argentina's GSP benefits due to the Argentine government's non-payment of two separate ICSID (the World Bank's International Center for Settlement of Investment Disputes) arbitral awards," the U.S. trade official said.

"Our review of the two petitions is at an advanced stage, and the matter is being discussed at senior levels of the administration. The administration takes the two petitions very seriously and has engaged with the Argentine government at the highest levels on the underlying issues," the official added.

Is suspending GSP benefits on this basis consistent with WTO rules?  Would Argentina bring a complaint?

Reporting on Investment Arbitrations

Speaking of part-time jobs for grad students (and others), as I was in the last post, my friend Luke Peterson is also looking for someone:

Freelance researchers/reporters wanted

Investment Arbitration Reporter is looking for one or more individuals to join our small team of specialized journalists.

Our contributors are located in different geographic locations, and are self-motivated individuals who enjoy digging for information, interviewing sources by telephone or other means, and taking on sometimes challenging research assignments.

We value those contributors whose flexible work-life schedules permit them to take on last-minute assignments, and to deal with the ebb and flow of breaking news developments. Contributors should be able to devote an average of 8 to 10 hours per week over a long time horizon (at least one year). Depending upon a contributor’s aptitude and interest, there is a possibility of fuller employment over the longer term and/or during the summer period.

The ideal candidates will be persons who are engaged in long-term academic research (doctoral or post-doctoral) or other forms of non-conflicting part-time employment. Contributors should not be engaged in simultaneous practice as an advisor in the field of foreign investment law and arbitration. 

Other desirable qualities include:

•    Fluency in English and at least one other language;

•    Demonstrated writing skills in English, preferably journalistic in nature.

•    International work or study experience;

•    An academic background in international law, or a related field;

We pay our contributors fees that are generous by journalism standards, but woe-inducing by the standards of “Big Law” firms. 

Interested candidates can send their cv’s and a short (500 word or less) cover note to [email protected]. Please include the words “Freelance Reporter/Researcher” in the subject header of your email message.

Editorial Assistant Position with the Journal of International Economic Law (JIEL)

From the JIEL:

Editorial Assistant Position with the Journal of International Economic Law (JIEL)

Professor John H. Jackson, University Professor of Law at Georgetown Law Center, is currently collecting recommendations or applications from persons who might wish to take on the position of Editorial Assistant to the Journal of International Economic Law (JIEL).  JIEL is a highly influential academic and professional journal dedicated to encouraging thoughtful and scholarly attention to a broad range of subjects which concern the relation of law to international economic activity.  The Journal is published on a quarterly basis by Oxford University Press.

The position of Editorial Assistant is half-time (generally, 15-20 hours/week) for approximately one year, beginning in August (or earlier, subject to individual circumstances).  Individuals who have undertaken this role have usually pursued their own research (such as a thesis), or performed the role in conjunction with work towards an LL.M. degree at Georgetown University Law Center or another institution, with part-time devoted to the Editorial Assistant position.  There is no rigid policy concerning these formats.

Compensation is provided at the prevailing rates established for Research Assistants by Georgetown University Law Center.

Professor Jackson would be grateful to receive recommendations or indications of interest from outstanding students or professionals with exceptionally good English writing and comprehension abilities, including knowledge and background in international economic law subjects, particularly the World Trade Organization (WTO).  A letter of inquiry or application (with references) including a C.V. can be sent directly to Professor Jackson at the JIEL’s e-mail address: [email protected].

Further background information concerning the Journal of International Economic Law may be found at http://jiel.oxfordjournals.org/

 

The CIT and Inconsistent Zeroing

Recall from these two posts that the U.S. Court of Appeals for the Federal Circuit (CAFC) ruled last year that the Department of Commerce can't take an inconsistent approach to zeroing -- no zeroing in investigations, but zeroing in administrative reviews -- without a good reason. The CAFC remanded to the DOC, with instructions to provide its reasoning.  DOC did so, and its redetermination pursuant to the remand was appealed to the Court of International Trade (CIT).  The CIT opinion (by Judge Restani) was issued Monday, and is here.  The key conclusion:

Commerce did not abuse its discretion in changing its investigation methodology, but not its review methodology, in the Final Modification in response to WTO decisions. Commerce acted reasonably in applying the antidumping statute to conform to the different purposes of investigations and reviews.  Commerce’s practices are not arbitrary in this regard. 

I'm not sure I can provide a good summary of the opinion, but let me just say that if you have been following the zeroing saga, it is worth a read.  Lots of good discussion of particular aspects of the issue.

And, of course, I look forward to the likely appeal back to the CAFC!