International Economic Law and Policy Blog

Implementing Cloves-US Intentions

From Rob Howse, who asked me to post this for him:

At the May 24 DSB meeting the United States made the following statement concerning implementation of the Cloves ruling:

This morning, as provided for in the first sentence of Article 21.3 of the DSU, the United States wishes to state that it intends to implement the recommendations and rulings of the DSB in a manner that protects public health and respects the obligations of the United States under the WTO Agreement.

• In this regard, the United States would emphasize the DSB finding that the U.S. measure reflects the overwhelming view of the scientific community that banning clove and other flavored cigarettes benefits the public health by reducing the likelihood that youth will enter into a lifetime of cigarette addiction.

• Accordingly, the DSB found that a ban on clove cigarettes meets the requirements of Article 2.2 of the TBT Agreement and is thus no more trade restrictive than necessary to fulfill a legitimate public health objective.

The United States will need a reasonable period of time in which to implement in this dispute.

By emphasizing that the ban on cloves was consistent with 2.2 of TBT and saying that the US will implement in a manner consistent with public health, the US seems to be making it pretty clear that it has no intention of lifting the ban on clove cigarettes.  The options therefore will be either to take steps to impose a ban on menthol cigarettes or (as I have suggested in earlier posts) to take additional steps to ensure that its different treatment of menthol cigarettes is in fact based on a legitimate regulatory distinction,   With respect to banning menthol,  I wonder whether, if the US can show that it is now making an effort to develop a political consensus for an effective ban on menthol at manageable regulatory cost that is equal to the effort it put into bringing about the cloves ban, and if it makes that equal effort within the reasonable period of time, it would satisfy the even-handedness demanded by the Appellate Body.  Even-handedness arguably refers to treatment rather than the requirement of the same outcome or result.  It would be quite useful for the AB to clarify in fact whether it sees what it calls even-handedness as an obligation of conduct or result or perhaps one or the other or both depending on the context.  This is also relevant to what implementation might entail in US-Tuna.  

Anti-Coercion in Tuna

There are a number of past GATT/WTO disputes where the issue of the "coercive" nature of the measure was raised. The old tuna/dolphin cases and the shrimp/turtle cases come to mind immediately, and I'm sure there are others. (I haven't done any research for this post!) In the recent Tuna Appellate Body report, the issue came up in the context of TBT Agreement Article 2.2. Here's what Mexico argued: 

335. With respect to its first claim, Mexico submits that the Panel erred in finding the United States' dolphin protection objective to be a legitimate objective.  Mexico maintains that the list of examples of legitimate objectives in Article 2.2 of the TBT Agreement informs the interpretation of the term "legitimate objective" in that provision and points out that none of the listed objectives include language similar to "by ensuring that the  US market is not used to encourage" or other language reflecting a "coercive and trade-restrictive objective".671  However, for Mexico, the United States' dolphin protection objective is a "coercive objective" because its purpose is to "coerce" another WTO Member to change its practices to comply with a unilateral policy of the United States.  Moreover, Mexico alleges that the dolphin protection objective is unnecessary, and constitutes a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade.  Mexico asserts that the situation in US – Gasoline is "closely analogous" to the situation in the present case, where the United States has disregarded a multilateral agreement that addresses the same subject matter as the measure at issue.672

The Appellate Body's response to the "coercion" part of this argument was interesting because it is somewhat of a non-response. As far as I can tell, the Appellate Body ignores the coercion point entirely:

337. At the outset, we recall that the United States' dolphin protection objective is phrased as follows:  "contributing to the protection of dolphins, by ensuring that the US market is not used to encourage fishing fleets to catch tuna in a manner that adversely affects dolphins".673  Mexico does not claim that "contributing to the protection of dolphins" is an illegitimate objective;  instead, Mexico argues that it is illegitimate to pursue this objective "by ensuring that the US market is not used to encourage" certain fishing practices.  It thus appears to us that Mexico does not take issue with the United States' dolphin protection objective per se, but with the means used in pursuance of this objective.

338. Article 2.2 of the  TBT Agreement  recognizes that a technical regulation shall not create "unnecessary obstacles" to international trade.  The provision thus envisages that some trade-restrictiveness may arise from a technical regulation.  However, the technical regulation would not be inconsistent with Article 2.2 unless it is  found to constitute an "unnecessary obstacle[] to international trade".  Hence, the mere fact that a WTO Member adopts a measure that entails a burden on trade in order to pursue a particular objective cannot per se provide a sufficient basis to conclude that the objective that is being pursued is not a "legitimate objective" within the meaning of Article 2.2. 

So what should we take from this non-response, if that's what it is? Has the Appellate Body rejected this argument completely?  That's what I thought at first, but then I saw the following in the less favorable treatment analysis under Article 2.1:

226. Mexico also faults the Panel for failing to find that the US measure is "discriminatory" in that it uses a market access restriction to "pressure" Mexico and the Mexican fleet to adopt essentially the same "dolphin-safe" regime as in force in the United States, thereby per se targeting the origin of the tuna products.484  As noted, technical regulations inherently establish distinctions between products according to their characteristics or their related processes and production methods.  Thus, Article 2.1 should not be read to mean that any distinction would per se accord "less favourable treatment" within the meaning of that provision.  At the same  time, we have noted that any adverse impact on competitive opportunities for imported products vis-à-vis like domestic products that is caused by a technical regulation may potentially be relevant for an assessment of "less favourable treatment".  It may thus have been pertinent for the Panel to consider, along with other factors, the question of whether the US measure had the effect of exerting pressure on Mexico to modify its practices.  This alone, however, would not be sufficient to establish a breach of Article 2.1.   

Here, then, the idea of "pressure" imposed on a foreign country or its companies was deemed relevant (although not sufficient to find a violation on its own).

I'm not sure what all this means for the future of anti-coercion arguments.  The issue doesn't seem to have been explored in great detail, so we may need to wait until there is a case where it is more of the focus.

I did have one thought about the discussion of "pressure" in the context of non-discrimination.  Couldn't exerting pressure on a trading partner's companies to change their practices, as part of an overall plan to encourage certain practices, be seen as evidence of a non-protectionist purpose?  That is, if your goal is to pressure all companies to act a certain way, doesn't that suggest that your goal is not to favor your own companies?  Here, the Appellate Body seemed to blur the distinction between "pressure" on the Mexican government and "pressure" on the Mexican fleet. Aren't these very different things? And here, who was the pressure on? Certainly the Mexican fleet could have adapted on its own. But yes, the US may have been hoping that the Mexican government took certain actions in response. Again, we may need to wait for future cases to develop this issue.

Is There an MFN Violation in Tuna?

This is from paragraph 299 of the Tuna report, where the Appellate Body sets out its conclusion on TBT 2.1:

We  find, instead, that the US "dolphin-safe" labelling provisions provide "less favourable treatment" to Mexican tuna products than that accorded to tuna products of the United States and tuna products originating in other countries and are therefore inconsistent with Article 2.1 of the TBT Agreement.  

The reference to "tuna products originating in other countries" makes it sound like there was an MFN violation (in addition to the national treatment violation resulting from more favorable treatment for US tuna products).

But looking back to the "detrimental impact" findings, I'm not sure there ever was a comparison between Mexican and non-US foreign products. Here's the part where the Appellate Body describes the panel's factual findings, on which it relied for its own conclusions:

234. The Panel further found that:  (i) "the Mexican tuna cannery industry is vertically integrated, and the major Mexican tuna products producers and canneries own their vessels, which operate in the ETP"492;  (ii) "at least two thirds of Mexico's purse seine tuna fleet fishes in the ETP by setting on dolphins" and is "therefore fishing for tuna that would not be eligible to be contained in a 'dolphin-safe' tuna product under the  US dolphin-safe labelling provisions"493;  (iii) "the US fleet currently does not practice setting on dolphins in the ETP"494;  (iv) "as the practices of the US and Mexican tuna fleets currently stand, most tuna caught by Mexican vessels, being caught in the ETP by setting on dolphins, would not be eligible for inclusion in a dolphin-safe product under the US dolphin-safe labelling provisions", while "most tuna caught by US vessels is potentially eligible for the label".

These passages seem to talk only about US fleets and Mexican fleets.  Now, the relationship between country fleets and actual products of particular countries was not explored in great detail.  So, maybe I shouldn't get too hung up on the fact that the discussion was only about US and Mexican fleets. Nevertheless, I'm left with a bit of uncertainty as to the basis for the apparent finding by the Appellate Body of an MFN violation. Any thoughts from readers?

Smoke-Free New Zealand and Trade Rules

New Zealand is talking about getting rid of smoking entirely:

 There are smoke-free bars, smoke-free parks, even smoke-free college campuses. But a smoke-free country?

New Zealand's government on Thursday squeezed smokers more than ever by announcing a 40 percent hike in tobacco taxes over the next four years. Prices here are already among the highest in the world, and by 2016 they will top 20 New Zealand dollars ($15) a pack on average.

Officials hope higher taxes and new restrictions will bring the nation of 4.4 million closer to a recent pledge to snuff out the habit entirely by 2025. Other countries have lauded the idea of trying to wean their populace off tobacco, but few, if any, have been willing to put a date on it.

Health officials here are so serious they recently considered hiking the cost of a pack of cigarettes to 100 New Zealand dollars ($75). Although that idea was dismissed, another measure, which will force retailers to hide cigarettes below the counter rather than putting them on display, will come into effect in July.

Given the various complaints about plain packaging of cigarettes, requiring graphic images on cigarette packaging, and restrictions on flavored cigarettes, I wonder, will the tobacco industry come up with a theory of how New Zealand's actions violate international trade or investment rules?

Tuna: The End of the PPM distinction? The Rise of International Standards?

I enjoyed reading the discussions so far related to the latest AB report on Tuna.  Streamlining Tuna with Cloves, in both cases we now have:

 (1) a finding of discrimination (cloves v. menthols in Cloves; stricter labeling requirements in the ETP v. outside the ETP in Tuna) and

 (2) a finding that the ban on cloves / strict labeling requirements in the ETP are not more trade restrictive than necessary. 

 In both cases, implementation may not give anything to the complainant:  A stricter regulation of menthols will not help Indonesian cloves.  Additional requirements on tuna outside of the ETP will not open markets for Mexican tuna caught in the ETP. 

 Indeed, in Tuna, the AB (at para. 296) already acknowledged that certification by independent observers that no dolphins were killed for out-of-ETP tuna would rectify the discrimination, and even hinted at the fact that such “calibration” might already be achieved by simply asking the captain to provide such certification.  In addition, the AB explicitly rejected (at para. 330) the Mexican alternative for labeling tuna in the ETP as leaving more risks for both consumer information and dolphin protection.  

 These are the immediate effects of this AB report, building fully on the earlier Cloves report.  What interests me more here are the unique and longer term effects of Tuna, and I see two: 

(1) a complete sidelining of the old PPM debate, and

(2) an enhanced role in the TBT agreement for international standards combined with an increased willingness on behalf of the AB to double check the “quality” of such standards.

The End of the PPM Distinction?

 On PPMs, the US did not even appeal the Panel’s rejection of the US argument that “the US dolphin‑safe labelling provisions do not set out product characteristics for tuna products” (para. 7.66).  Completely sidelining the fact that the labeling requirements have to do with how the tuna was caught without leaving any trace in the tuna as a product (non-product-related PPM), the Panel simply found that “the labelling requirements laid down in the US dolphin‑safe labelling provisions "apply to" a product, namely tuna products ... We are therefore satisfied that the measures at issue lay down labelling requirements, as they apply to a product, process or production method and that the subject-matter of the measures therefore falls within the scope of the second sentence of Annex 1.1”. 

 So what matters is whether a label or regulation “applies to” a “product”, here, the US label “applying to” tuna as a product; for, e.g., a carbon footprint related tax or regulation whether the measure “applies to” imported steel or cement as a product (even if the carbon emitted in making the steel or cement was emitted abroad).  What does not matter, at least not at this stage of setting the scope of the TBT Agreement (and probably GATT Art. III) is the reason or purpose of the label or regulation (i.e. whether it regulates something physically in the product or how the product was produced). 

In addition, both the panel and the AB (at paras. 337-339 and 242) had no difficulty accepting the following US regulatory objective as “legitimate”, namely:  “contributing to the protection of dolphins, by ensuring that the US market is not used to encourage fishing fleets to catch tuna in a manner that adversely affects dolphins". 

In other words, WTO members can be legitimately concerned about the welfare of animals (here dolphins) outside of their own territory – even animals that are not endangered and that are not at any point present on US territory – at least to the extent their action is limited to avoiding that their own, domestic market is used to encourage adversely affecting those animals.  What many observers (and a few, unadopted GATT panels) would see as “extraterritorial legislation” thereby becomes legitimate/territorial legislation at least when it is limited to the sale of products (here tuna; in my other example, steel or cement) on the domestic market of the regulating country.

The Rise of International Standards?

The second fascinating development is the AB’s willingness to more closely examine when an instrument amounts to an “international standard”. 

 The AB, at one level, opens the door to international standards by broadly defining such standards, e.g. they do not need to be enacted by an “organization”, a “body” suffices, para. 355; a body can be a “standardizing body” even when it only enacted a single standard and principally does other things, para. 360. 

 Yet, at another level, the AB scrutinizes the “quality” of international standards more carefully before its gives them the powerful (offensive and defensive) effects under the TBT Agreement, e.g. by checking whether the body is “recognized” and therefore legitimate both “factually” and “normatively”, para. 361; whether it complies with principles of “transparency, openness, impartiality and consensus, effectiveness and relevance, coherence” and “addresses the concerns of developing countries” as reflected in the TBT Committee Guidelines in this respect, para. 376; and, most specifically, whether it is “open to all WTO Members”, the ground on which the AIDCP standard invoked by Mexico failed and was ultimately rejected by the AB as an “international standard”. 

 In other work, I have referred to this as the benchmark of “thick stakeholder consensus” prevalent in the standards-setting and informal lawmaking world.  Curiously enough, this benchmark for informal law or soft law standards is in many respects more demanding and normatively superior to the benchmark for formal international law, including WTO law (which I have referred to as “thin state consent”). 

Indeed, based on the AB’s own definition of “international”, even the WTO itself is not an open, “international” body:  Mexico (see para. 398) had to “prove that the issuance of an invitation [to join the AIDCP] occurs automatically once a WTO Member has expressed interest in joining” and failed to do so on the ground that “the parties to the AIDCP have to take the decision to issue an invitation by consensus”, very much the way WTO accession depends on a consensus of the existing WTO membership …

As always, written in my personal, academic capacity.

Did the China CVD panel open a Pandora's Box about the uniqueness of the outcome provided by the market benchmark?

It is now established in WTO case-law that, apart from certain limited situations, the existence of a  Benefit arising from a financial contribution is based on the comparison between for example the terms of a loan and the market based commercial benchmark for an equivalent loan. It is implicit in this case-law that such a benchmark, when not inconsistent with the SCM, produces a uniquely determined outcome. In other words, the result of the comparison process does not depend on the ability of the investigative authorities or the panel to manipulate such a benchmark. 

This is why I was surprised  to read in the recent United States: Definitive Anti-dumping and Countervailing Duties on Some Products from China panel report the following passage which could open a Pandora's Box, by suggesting that the outcome of the market based commercial benchmark is not uniquely determinable.

Finally, while we have not found that the benchmark used by the USDOC was inconsistent with the provisions cited in China's claim, this certainly does not imply that this is the only possible, benchmark that could have been or could be used, and another benchmark may have led to a different outcome in the investigations.

 

The disturbing aspect of this passage comes from the fact that the panel did accept the USDOC benchmark as valid, but nonetheless suggested that another valid benchmark could not only exist but it  may have led to a different outcome. This is tantamount to saying that two valid benchmarks could exist and provide a different outcome!

It seems that the panel considered that its job was only to evaluate the internal logic of the methodology employed by the USDOC  and the soundness and appropriateness of the data relied upon by the USDOC in constructing the proxy benchmark. However, given the previous passage, the panel should have gone to the end of its logic by asking  if this proxy was not arbitrarily chosen. In other words, the panel should have made sure that the resulting outcome of the comparison process was robust in the sense that another conceptually different reasonable commercial proxy (or average of reasonable proxies) would have produced nonetheless the same outcome. 

Since China did not raise  this topic in its appeal, the Appellate Body did not say a word about this disturbing passage and we do not even know if it noticed it. This is perhaps unfortunate.

More on Trade in Tobacco

Benn McGrady has more details on the US trade in tobacco proposal:

through questioning it was possible to get a better sense of what is being proposed. So, this is my (incomplete) understanding of the proposal:

1. There will be some language recognizing the uniquely harmful character of tobacco products.

2. There will be general exceptions in the TPP, along the lines of those in Article XX(b) of the GATT 1994.

3. The proposal would supplement these general exceptions with an exception specific to tobacco control measures. The general idea is that the specific exception should be easier to invoke than the general exception. This would be achieved by using a threshold lower than a necessity test.

4. It is not yet entirely clear what this specific tobacco exception would apply to. The exception would not apply to legislation. The exception would, however, apply to measures implemented by executive bodies, such as the FDA, under a delegated power.  The specific exception would apply to national treatment, but would not apply to investor protection obligations.

5. The specific exception would protect the adoption of regulations “that impose origin-neutral, science-based restrictions on specific tobacco products/classes in order to safeguard public health.”

...

In the briefing, I made the point that the scientific evidence requirements in WTO law are found primarily in the SPS Agreement and are concerned with whether there is scientific evidence of the existence of a risk (as shown through a risk assessment). Here, the proposal appears to suggest that a TPP member would have to show scientific evidence of the effectiveness of the measure, or of the contribution it makes to tobacco control.

Some thoughts:

-- Does it make sense to have a lower threshold for some exceptions than for others? Perhaps all exceptions should be unified around a clear and acceptable standard?

-- Before Tuna, I would have said that national treatment is probably less in need of an exception than investor protection obligations.  But regardless, why no exceptions for investor protection?

-- How much of a role should we be giving to the "effectiveness" of measures?  Is this just a way to root out protectionist measures?  Or is there a broader goal of achieving effective governance?

Call for Papers: Standard of Review in International Courts and Tribunals

Call for papers

Standard of Review in International Courts and Tribunals
Rethinking the Fragmentation and Constitutionalization of International Law
26-27 October 2012

Sponsored by:
COST Action IS1003, International Law Between Constitutionalization and Fragmentation
http://www.il-cf.eu
and
University of Seville, Faculty of Law

The fragmentation of international law is conventionally studied in terms of compartmentalization of different sets of norms created within specialized legal regimes. However, this phenomenon may be also approached from a different perspective, which concentrates not so much on substantive rules but on methodologies used by specific international courts, tribunals or other supervisory organs. One of the recurrent questions these bodies are confronted with regards the assessment of measures taken at the national level. These measures often involve highly political or scientific questions that are not always easily translated into the language of international law. By developing detailed testing methods for assessment of states’ conduct, supervisory organs can weaken (if their methods converge) or strengthen (if they diverge) the fragmentation effects. 

The crucial role in this context is played by the applicable standard of review. In practice, such a standard is rarely determined by the relevant legal provisions (e.g. a treaty constituting a particular court), and it remains a task of a specific court or tribunal to develop an appropriate methodology. The concept as such is understood as ‘the nature and intensity of review by a [international] court or tribunal of decisions [or other actions] taken by [national] governmental authority’ (Bohanes & Lockhart 2009). The applicable standard of review may concern either factual determinations (e.g. deciding whether a national measure is supported by sufficient scientific evidence) or political and legal determinations made at the national level (e.g. whether a measure is necessary to attain specific objective). Consequently, standard of review determines the extent of discretionary powers enjoyed by national authorities in making certain determinations. In theory, standard of review may range from restrictive (or de novo) review to full deference with many intermediate variations. In some international legal contexts, it may be also referred to as margin of appreciation that is defined ‘as the breadth of deference that the court is willing to grant to the decisions of national legislative, executive, and judicial decisionmakers’ (Burke-White & von Staden 2010).
The deference that is shown by some international tribunals is justified on different grounds. In general, it flows from the idea that national governments are better placed and have greater expertise (epistemic superiority) to make policy and factual determinations as compared to international tribunals. As far as the legal determinations are concerned, this approach also reflects the recognition that normative requirements in international treaty can be met by a range of measures that are still within the legal parameters of international obligations (normative flexibility).

Main questions
This workshop intends to analyze different approaches taken by international courts and tribunals when confronted with factual, political and legal determinations made at the national level.  The workshop will concentrate on two interrelated aspects: (i) standard of review applied by international courts to municipal measures (actions) that are based on prior complex factual determinations and (ii) standard of review applied by international courts to political decisions that involve trade-offs between different competing values (and corresponding legal determinations).
The specific questions that we would like to address include:
• To what extent different international tribunals operating in different functional regimes apply the same/similar standard of review when confronted with complex factual issues, political choices and normative flexibilities?
• If there are differences, what may explain them? Is specific institutional setting relevant? Political context? Values that are protected by particular functional system? Or maybe subject matter of a dispute?
• If there are similarities, can we identify some meta-norms of constitutional character? What can explain existing (if any) convergences?
• What are the consequences of differences (if any) in applicable standards of review used by various international tribunals? Do they contribute to fragmentation of international law?
• Is there uniformity or divergence between standards of review applied by international courts to factual and legal determinations? 
• What is the connection between applicable standard of review and legitimacy of decisions rendered by international courts and tribunals?

An non-exhaustive list of international tribunals or other supervisory organs that are of our interest includes: WTO panels and the Appellate Body, the European Court of Human Rights, the International Court of Justice, the Tribunal for the Law of the Sea, NAFTA panels, arbitration tribunals and ad hoc panels under investment treaties, the Court of Justice of the European Union, the EFTA Court and the Inter-American Court of Human Rights.

Authors of selected papers will be invited to publish their works in an edited volume with a renowned international publisher. Invitations to contribute to the edited volume will depend on the quality of the work presented at the conference.

Venue 
The workshop is organized by Prof. Dr. Daniel García San José and it will be held at the Faculty of Law of the University of Seville.

Applications
Applicants should send in a 250-500 words abstract no later than 15 June 2012 to:

Dr. Lukasz Gruszczynski, [email protected]
or
Prof. dr. Wouter Werner, [email protected]

Reimbursements
Participants from countries participating in COST Action IS1003 can apply for funding for this workshop. As a rule, COST reimburses a flat rate of €120,- per night for accommodation and travel costs for two participants per participating country.  For more information on COST Action IS1003, please check the website: http://www.il-cf.eu. If you would like to receive COST funding, please attach a short request (max 150 words) to your paper proposal.

For a pdf document of the call for papers please click here.

 

GATT Article XX as an Exception to the SCM Agreement

In an amicus brief in the Canada - Renewable Energy case (DS412), several NGOs make the argument for GATT Article XX to be treated as an exception to the SCM Agreement.  Here's an excerpt:

1.3 The reference to ‘this Agreement’ in Article XX does not foreclose its applicability to the SCM Agreement

The term ‘this Agreement’ in the chapeau of Article XX of the GATT 1994 has no clear ‘ordinary’ meaning of its own. This term was contained in the GATT 1947, prior to the Uruguay Round, when the GATT 1947 itself constituted the primary multilateral trade agreement. The GATT 1947 was carried over into the WTO Agreement essentially as it is, without being rewritten to take into account its new place as one of many related ‘goods’ agreements, bound together in an annex. The reference to ‘this Agreement’ must, therefore, necessarily be interpreted in the light of today’s placement of this provision and the link of the GATT 1994 to other Annex 1A agreements, as discussed above.

In China – Audiovisuals, the Appellate Body did not interpret the reference to ‘this Agreement’ as limiting the application of Article XX to the GATT 1994. In the earlier Brazil — Desiccated Coconut case, the Appellate Body found that the meaning of ‘this Agreement’ in Article 32.3 of the SCM Agreement refers to the SCM Agreement and Article VI of the GATT 1994. Accordingly, the meaning of ‘this Agreement’ is not inherently limited to the covered agreement that it is used in.

U.S. Policy on Trade and Tobacco

From USTR:

TPP TOBACCO PROPOSAL

We are currently consulting with stakeholders and Congress on our draft proposal. Below is a detailed summary of the current draft proposal, which we have prepared in order to facilitate meaningful engagement on its contents. The draft proposal has three elements:

• It would explicitly recognize the unique status of tobacco products from a health and regulatory perspective.

• As in the past, the proposal would make tobacco products (like other products) subject to tariff phase-outs, thus avoiding putting U.S. tobacco products at a competitive disadvantage and avoiding a precedent for excluding tobacco or other products from future U.S. tariff negotiations. The United States will engage in discussions regarding the elimination of tariffs and tariff rate quotas with the four countries with which the United States is negotiating bilaterally—Brunei, Malaysia, New Zealand and Vietnam. Tariffs and tariff rate quotas on tobacco and tobacco product trade with Australia, Chile, Peru and Singapore have already been eliminated or are being phased out under the provisions of our existing bilateral FTAs with those countries.

• The proposal would include language in the “general exceptions” chapter that allows health authorities in TPP governments to adopt regulations that impose origin-neutral, science-based restrictions on specific tobacco products/classes in order to safeguard public health. This language will create a safe harbor for FDA tobacco regulation, providing greater certainty that the provisions in the TPP will not be used in a manner that would prevent FDA from taking the sorts of incremental regulatory actions that are necessary to effectively implement the Tobacco Control Act, while retaining important trade disciplines (national treatment, compensation for expropriations, and transparency) on tobacco measures.

I can understand the parts about tariff phaseouts and requiring origin-neutral tobacco regulation. Protectionism is unlikely to help with public health goals, and may very well undermine them.

But there are two parts to this proposal that I wonder about.  First, they talk about requiring any regulations to be "science-based." But if the regulations are origin-neutral (and I'm including de facto discrimination here), why should trade rules be concerned if they are not science-based?  Is that too much of a burden to impose on regulators?

Second, the proposal refers to "compensation for expropriations" as an important trade discipline. I'm not aware of actual expropriation being a big issue in the tobacco industry. So, if we are talking about "regulatory" expropriation, it might be worth spelling out in more detail exactly what trade rules are envisioned here.

The TBT 2.1 and GATT III:4 Relationship

From today's Tuna decision:

405. To us, it seems that the Panel's decision  to exercise judicial economy rested upon the assumption that the obligations under Article 2.1 of the TBT Agreement and Articles I:1 and III:4 of the GATT 1994 are substantially the same.  This assumption is, in our view, incorrect.  In fact, as we have found above, the scope and content of these provisions is not the same.  ...

Maybe Joost was right when he suggested that the Appellate Body was going to treat GATT III:4 differently from TBT 2.1. But I still have a hard time imagining that, in practice, detrimental impact will be enough for a violation of III:4.

Quick Thoughts on Tuna

Following up on my post from yesterday, here are a couple quick thoughts on the tuna decision (http://www.worldtradelaw.net/reports/wtoab/us-tunamexico(ab).pdf ).

First, the Appellate Body upheld the finding that the measure is a "technical regulation". Second, they reversed the finding of violation under TBT 2.2. I haven't read those sections yet, though, so I have no thoughts on the reasoning there.

But I did read quickly through TBT 2.1.  Here, the Appellate Body reversed the panel's finding of no violation, and instead found a violation.  I have to admit that I did not expect this result.  Here's one thing in particular that surprised me. In paragraph 206, the Appellate Body explains the panel's findings as follows:

The Panel explained that, as of 1990, when the first version of the DPCIA was enacted, "the United States and Mexico were in a comparable position with regard to their fishing practices in the ETP, in that both of them had the majority of their fleet operating in the ETP composed of purse seine vessels potentially setting on dolphins".432  While US vessels "gradually discontinued setting on dolphins to catch tuna, and abandoned the practice entirely in 1994, four years after the enactment of the measures"433, the Mexican fleet "concentrated its efforts on complying with the AIDCP requirements on observer coverage and fishing gear and equipment" rather than abandoning setting on dolphins.434  As a result, the Mexican fleet and other fishing fleets that chose to continue to set on dolphins "were not eligible for dolphin-safe labelling under the existing US measures, while tuna caught without setting on dolphins remained eligible."435  The Panel was therefore not persuaded that "any current discrepancy in the[ ] relative situations [of the Mexican and other fishing fleets]" was a result of the US "dolphin-safe" labelling provisions rather than the result of the choices of private actors.

To me, this emphasis on the situation at the time of enactment was an important part of the panel's reasoning.  But I don't see that the Appellate Body addressed the issue anywhere.  I'm not sure why they did not.  They do talk about private actors, but that's a separate issue, I think.

The Tuna Decision

... is coming tomorrow (May 16). It is almost certain to have a lot of interesting things in it. Some possible issues:

– Is the measure at issue a technical regulation? And more generally, what exactly is the scope of "technical regulations"?  We have discussed this here on this blog several times.  See here, here, and here.

– How will the Appellate Body apply the TBT Article 2.1 national treatment standard that it developed in Clove Cigarettes to the measure at issue in Tuna?  Will we learn anything more about how the standard might be applied to GATT Article III:4?

– How will the Appellate Body interpret and apply the TBT Article 2.2 "necessity" standard?

China and Market Economy Status III

Trade lawyer Bernard O'Connor has more to say about China and market economy status:

Introduction

In a first note (published on VOXEU and re-posted on WorldTradeLaw net) I looked at whether China was automatically entitled to Market Economy Status (MES) in 2016 on the basis of the Accession Protocol of China to the WTO. This note concluded that there was nothing in the Protocol which entitled China to automatic recognition as a market economy. In a second note (published on WorldTradeLaw net) I examined the thesis that the expiry of Article 15(a)(ii) of the Protocol would de facto oblige WTO members to consider China as a market economy. The note concluded that the de facto argument had many flaws given the extent to which other substantive elements of Article 15 remained and were required to be implemented. 

This third note speculates on the approaches that the EU Commission would be entitled to take in relation to China given the text of Article 15 of the China Accession Protocol. 

How to determine normal value if market economy conditions prevail

Article 15(a)(i) of the China WTO Accession Protocol provides: 

If the producers under investigation can clearly show that market economy conditions prevail in the industry producing the like product with regard to the manufacture, production and sale of that product, the importing WTO Member shall use Chinese prices or costs for the industry under investigation in determining price comparability;  

This provision seems rather straight forward. An entitlement to have Chinese prices used is dependent on the producers showing that market economy conditions prevail in the industry producing the like product with regard to three activities: manufacture, production and sale. The text clearly indicates that the market economy conditions must prevail in all three activities. Thus, market economy conditions in relation to sales alone would not be sufficient. The difference between manufacture and production is not clear but both concepts seem to cover the costs of inputs. Therefore, it would seem that the market economy conditions must prevail in all aspects of the industry's activities. 

How a single producer or group of producers is required to establish that market economy conditions apply in a particular industry is not clarified. As is often the case the WTO rules allow a degree of discretion to the Competent Authority to implement the provision and thus set the standards.

A key consideration is the meaning of the word 'prevail'. Prevail means something less than universal. But would 90% of producers operating in market economy conditions (across the full range of the industry's activities) be sufficient or would some other threshold be appropriate. And how would State Owned Enterprises (SOEs) operating within national economic development plans be considered for the purposes of this exercise. Could it be argued that the very presence of SOEs (or that the SOEs had a particular market share of the like product) in a sector means that market economy conditions could never be found for that industry? In this regard, the US considers that the presence of SOEs does not necessarily exclude the findings of market economy conditions to the extent that state ownership in the industry under investigation is not “substantial”. This is probably the correct approach as the WTO does not consider ownership in and of itself an issue for trade defence purposes. However, given the specific circumstances of state capitalism in China, it would seem difficult to find MES in a sector in which SOEs operate.

A second element to be considered is that the producer will have to show that the prices or costs are those 'for the industry under investigation'. This triggers the question whether the producers' own costs and prices must be used for price comparison or whether some sort of blended industry wide prices must be used. If a producer or producers can show that market economy conditions do prevail in the particular industry, an individual producer might argue that its own costs and prices reflect the industry-wide costs and prices. However some proof of this would be necessary. Thus the producer might be required, on the basis of the text, to provide in any event the industry wide costs and prices. This might or might not be a difficult task. If the market provides benchmark prices for inputs as in most market economies it won't be a problem. If these don't exist then it is probably indicative that market economy conditions don't prevail for that industry. In fact this could be a threshold test for the finding of a market economy for an industry or sector. 

A possible difficulty with the requirement to use industry wide prices is that an individual producer might lose or gain in the calculation of its normal value. Depending on whether the producers’ costs and prices are higher or lower than the industry average there might be a benefit or a loss. A similar issue currently arises when sampling is used: non-sampled cooperating exporters get, at most, the weighted average dumping margin of the sampled exporters. If their individual prices and costs are to be considered, they would obtain a higher or lower margin. This difficulty is equally inherent in the use of industry-wide data but it does not cause problems in the law.  In any event, the requirement to use the industry average costs and prices is enshrined in the Accession Protocol.

That being said, it cannot be totally ruled out that the Competent Authority could allow for the individual producer to show that its costs and prices are legitimately below the industry average thus introducing a sort of lesser costs and prices rule (mirroring the EU's lesser duty rule) and a rule ignoring the producer’s costs and prices if they are higher in favour of the industry average. This could be a sort of WTO double plus, the use of which could be conditional as the EU Commission is currently considering for the lesser duty rule.

Another difficulty concerns the determination of the average industry costs and prices for the purposes of comparing prices: how is any one producer going to show what those prices are. And how is a Competent Authority going to verify those averages? Would, on both sides, desk research into Chinese industry publications (if available) be sufficient?

Currently, the EU does not require that individual producers show that market economy conditions prevail in the industry as a whole. They are only required to show that MET applies to them individually. This seems to be out of line with WTO law and causes all sorts of administrative difficulties when sampling is used (as is often the case in TD actions against China) as has been seen in the recent Brosmann case before the EC Court of Justice. In addition, in determining normal value the EU does not take the industry costs and prices but the individual producer costs and prices. It is probable that the EU will have to change its practice of treating all producers individually so as to be in line with the Protocol and WTO law in general. Thus some change to the current practice in relation to Chine appears to be necessary.

What if market economy conditions do not prevail?

The real problem arises for a Competent Authority if the producer cannot show that market economy conditions prevail in the industry in question. In these circumstances the producer is not entitled to have the industry-wide costs and prices used and the Competent Authority is not obliged to use them. So what costs and prices can be used?

Currently, competent authorities use a methodology based on Article 15(a)(ii). For the most part, competent authorities interpret this to allow the analogue country method. However, as has been seen in the previous notes, this subparagraph will expire in December 2016.

In the absence of Article 15(a)(ii) but the continuation of Article 15(a)(i), the Competent Authority could consider using the costs and prices of the producer in question. But these prices are by definition not market prices because the producer has not been able to show that market economy conditions prevail in the industry within which it operates. To use those prices would distort the very purpose of the general AD rules which is to make a fair comparison between a 'market based' normal value and the export price.  

Allowing the use of individual costs and prices does not seem to be in line with the object and purpose of the Accession Protocol. It is clear from Article 15(d) that this subparagraph (and, in extension, the Article as a whole) is concerned with economy wide (first sentence) or industry wide (third sentence) conditions and not the conditions of an individual producer. And in fact this economy or industry wide approach is more logical. If market economy conditions do not prevail in the economy or in the industry how can it be reasonably sustained that one individual producer within that context stands out alone as a true market economy player. This seems implausible. And, if found, is likely to be very rare.  

Where market economy conditions do not prevail for the whole economy or the relevant sector and where an individual producer cannot obtain MET, the current practice is to use the costs and prices of one or more producers in an analogue country to determine what the 'market based' normal value would be and to impute it to the individual exporters from the non market economy. The objective of using the analogue country is to be able to make a fair comparison in a market economy context. 

Does the expiry of Article 15(a)(ii) preclude that approach in the future (as has been claimed by a number of commentators)? This issue was addressed to some degree in the second note. However that article did not speculate on approaches that a competent authority might take. 

In the search for a solution reference should be made to the Chapeau of Article 15(a) which provides that a methodology other than a strict comparison can be available. Does this have any meaning once 15(a)(ii) has expired? Given the impossibility of the situation that a competent authority faces if a producer has not been able to show that market economy conditions prevail, should some meaning be given to this? The Chapeau says that that the Competent Authority 'shall use' one method or another. Further reference must be made to Article 15(d) which, as has been seen above, deals with economy-wide and industry-wide market economy conditions. It does not provide for individual MET. The solution must be found by looking at Article 15 as a whole. 

Currently the EU examines dumping for Chinese producers on an individual basis. Sampling does allow the Commission to group producers together but this is an administrative convenience rather than a change to the fundamental approach taken (and confirmed by Brosmann). When an individual producer cannot show MET then the costs and prices of one or more individual producers in an analogue country is used. So the costs of these producers replace an individual Chinese producers costs and prices. Again the fact that the same costs and prices might be attributed to a whole series or even all of the individual Chinese producers does not change the EU's individualistic approach. 

One solution for the competent authority in 2017 is to move away from an individualistic approach and to fall in line with the economy-wide and industry-wide approach found in Article 15. The text of Article 15 clearly obliges this approach. The test in Article 15(a)(i) is not individualistic. It is not an individual producer that must show market economy conditions. The word used is 'producers' in the plural. And the test is industry-wide. This is also reflected in Article 15(d). 

A non individualistic approach would mean that when the EU finds that market economy conditions do not prevail in the industry in question (on the basis of Article 15(a)(i)) and yet must determine market based costs and prices so as to find a true market based comparator for the determination of dumping, it should look to the costs and prices of the like product industry in the global or another market. Thus the EU should not use one or more individual producers in an analogue country but industry-wide costs and prices in a regional or global market in which market economy conditions prevail. This means in practice that the EU will still be able to use an external benchmark for costs and prices. The difference between the current practice and the post 2106 practice is that the examination will be industry wide and not based on the prices of one or more individual producers.

Article 15(a)(ii) provides that when the producers cannot show that market economy conditions prevail competent authorities can use a methodology not based on a strict comparison of domestic costs and prices in China. The lacuna created by the expiry of that provision needs to be filled within the context of the general WTO anti-dumping rules and the whole of Article 15 of the Protocol of Accession. Abandoning an individual producer approach, both when determining if market economy conditions prevail in China and in choosing an appropriate alternative normal value when MET does not prevail, allows the gap to be filled in line with the theory of anti-dumping law and the text of the Protocol. 

The TPP Transparency Debate is Heating Up!

As mentioned in this post, a group of law professors wrote a letter criticizing the transparency of the TPP negotiating process. They received a reply from USTR Ron Kirk, and have posted it:

I look forward to reviewing your letter, and will provide a more detailed response later.   In the interim, you may be surprised to know that USTR has conducted the most, active outreach to all stakeholders relative to the TPP than in any FTA previously, including, the proposed disciplines on intellectual property.

I do not quarrel with any assertions that our work may not reflect the exact wishes of your colleagues, but, I am strongly offended by the assertion that our process has been non-transparent and lacked public participation.   USTR has conducted in excess of 400 consultations with Congressional and private stakeholders on the TPP, including inviting stakeholders to all of the twelve negotiating rounds.

I trust that after you have received my more formal response you will make every effort to educate your colleagues as to the extraordinary efforts our staff has engaged in relative to drafting our proposed texts for the TPP.

Is it just me, or does this line come across as seeming pretty annoyed:  "I do not quarrel with any assertions that our work may not reflect the exact wishes of your colleagues, but, I am strongly offended by the assertion that our process has been non-transparent and lacked public participation."

So then the law professor group fires back:

We are thankful that the Ambassador took the opportunity to engage us directly, even if he did not have the time to read the letter itself. While waiting for his full response, we take this opportunity to make a few notes on his reply thus far.

Ambassador Kirk makes reference to TPP being more transparent and participatory than “any FTA [Free Trade Agreement] previously,” whereas our argument makes comparisons to different, and far more open, processes – at WIPO, at the WTO and in domestic legislatures. So the question is which comparison is better from the perspective (we would posit) of the legitimacy of the institution for its purpose.

FTAs are indeed even more secretive than TPP (or ACTA). Unlike in the TPP negotiations, FTAs are often negotiated in unannounced locations and at unannounced times, prohibiting most of the public from even knowing when, much less what, is being negotiated. ACTA sometimes followed the same course, meeting with no, or 24 hours, notice to the public when a meeting would take place. Some rounds of the TPP have been similar. For example, the USTR refused to confirm to some stakeholders the location and time of the meeting of the intersessional meeting of IP negotiators in Los Angeles, California, earlier this year, even as it was working with the movie industry to hold a reception for the negotiators at a film studio that same week. But for the next intersessional, held in Santiago, Chile, last month — the USTR posted its location on its website. That is an improvement in process, certainly in comparison to FTAs.

Our argument is not that TPP is worse than FTA negotiations, but rather that FTA processes are the wrong standard for assessing the legitimacy of the TPP intellectual property chapter negotiations. This is because the IP chapter in the TPP, like ACTA, is not a trade agreement. It does not adjust tariffs and quotas – it sets new international limits on domestic regulation, regardless of whether such regulation discriminates against, or even affects, trade. It may be thought that tariff schedules primarily affect the industries covered by those schedules, and therefore those affected industries are the only ones who need to be closely consulted. Industry Trade Advising Committees serve that purpose. But it is certainly not true that the only parts of society affected by international minimum standards on intellectual property legislation are the narrow groups of industries reflected in the ITAC system. Intellectual property laws affect us all.

The better comparison for the legitimacy of the international intellectual property law making occurring in the TPP (as was the case in ACTA) is institutions like WIPO, the WTO or domestic legislatures where such regulations are normally crafted. In such forums, the texts of the US proposals in the policy forum would be open for inspection to all, not closed to a select few. If we can follow that model in WIPO, in the WTO, in our own Congress, and with all the industry representatives in the ITAC system, and even in select areas like the recently published Bilateral Investment Treaty model text — why can’t it be done every time the US proposes a new international law standard on intellectual property in any binding international law making forum. This would apply equally to the IP chapter negotiations within the TPP, ACTA and in FTAs.

As for the comment that “USTR has conducted in excess of 400 consultations with Congressional and private stakeholders on the TPP,” this seems precisely the point. USTR’s consultation process consists of it choosing with whom to share its international legislative proposals and leaving the rest of the country in the dark until the deal is done. This is, as we explained in our letter, no way to engender trust and faith in international law making with such a  broad impact.

I think they make some good points. But here are two questions.

1. Is there a reason to distinguish, in terms of the importance of public participation, between matters of trade discrimination, on the one hand, and matters that go beyond discrimination, on the other hand?

2. How much of their complaint is about the secrecy of the process, and how much is about a view that the IP policies being advocated by the US make no sense? If USTR had secretly decided to abandon an expansion of IP protection through international agreements, would we be hearing complaints about the lack of transparency?

More on the Lack of TPP Transparency

A group of law professors has written a letter criticizing the lack of transparency in the TPP negotiations. Here's an excerpt:

Our concerns flow from the now-established observation that “trade” agreements no longer focus exclusively, or perhaps even predominantly, on the regulation of trade. Rather, the agreements increasingly propose international law standards that bind the legislative branch to change, or lock in place, domestic regulatory decisions. Democratic values demand that, at minimum, the promulgation of such restrictions on domestic law making processes afford the full range of participatory inputs as similar initiatives at the domestic level.

Unfortunately, there is little about the TPP negotiating process that is open to the broad range of inputs that would be reflected in domestic policy making. There has been no publicly released text of what USTR is demanding in these negotiations, as there would be in policy making by regulation, in Congress or in multilateral forums. Reviews of leaked proposals show that the US is pushing numerous standards that are beyond those included in any past (i.e. publicly released) agreement and that could require changes in current US statutory law. Reviews also show that the US proposal is manifestly unbalanced  – it predominantly proposes increases in proprietor rights, with no effort to expand the limitations and exceptions to such rights that  are needed in the US and abroad to serve the public interest. Yet, we only know these things because the highly secretive law making process USTR established, including a ban on the release of all negotiation proposals until four years AFTER the conclusion of the agreement, has failed to prevent the US proposals from leaking to the public.

The unbalanced product results from an unbalanced process. The only private individuals in the US who have ongoing access to the US proposals on intellectual property matters are on an Industry Trade Advisory Committee (ITAC) which is dominated by brand name pharmaceutical manufacturers and the Hollywood entertainment industry. There is no representation on this committee for consumers, libraries, students, health advocacy or patient groups, or others users of intellectual property, and minimal representation of other affected businesses, such as generic drug manufacturers or internet service providers. We would never create US law or regulation through such a biased and closed process.

Let me say a couple things here:

1. I agree that the expansion of "trade" agreements far beyond traditional issues of protectionism creates a lot of problems and concerns in relation to transparency in trade negotiations.
2. I think domestic policy-making is somewhat of a mixed bag in terms of opportunities for participatory input. Sometimes the public has an important say in laws and regulations, but other times things just happen and it's not really clear why.
3. Giving special access to US proposals to members of ITAC seems like a bad idea, for many reasons, in terms of both the substantive result and the perception it creates.

ASIL IEcLIG Call for Papers

From the ASIL/IEcLIG:

2012 Biennial Interest Group Conference: 

 Re-Conceptualizing International Economic Law: Bridging the Public/Private Divide

 George Washington University Law School

 Washington D.C., USA 

 November 29-December 1, 2012

 I.         Conference Theme

 

The ASIL International Economic Law Interest Group will hold its next biennial conference on November 29- December 1, 2012 at the George Washington University Law School in Washington D.C.  The title of the conference is “Re-Conceptualizing International Economic Law: Bridging the Public/Private Divide.”

International economic law purports to regulate and facilitate various cross-border business activities, such as exports and imports, financial transactions, and foreign direct investment.  Its architecture, which the Bretton Woods consensus established six decades ago, is based largely on a “state-to-state” framework.  However, as both the nature and modalities of the underlying international business transactions transform, the conventional statist model of international economic law needs adjustment, or at least re-examination.  For example, widespread global supply chains increasingly challenge the wisdom of traditional customs regulations that were created against the backdrop of a mono-location production model.  In the area of foreign direct investment, a host government is often viewed as a mere party to a contract, not necessarily as a sovereign regulator.  As was seen in the making of Basel III, private actors (such as bankers) play a critical role in shaping regulations. 

These recent trends compel us to break away from long-standing principles that separate public actors from private actors.  It is fruitless to consider the work of public actors without considering the efforts of the private sector.  In this regard, it is high time that scholars, practitioners and policymakers develop new ideas, doctrines, research agendas, and policy proposals to re-conceptualize international economic law to keep abreast of the new regulatory environment. 

II.       Possible Topics for Papers and Panels

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

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

     * The role of epistemic communities in financial law: closed clubs v. continually evolving centers of change;

     * The legitimacy and accountability of private norm-setters;

* Room for private actors in international organizations: how the Bretton Woods institutions and the G20 can (or should) reach out beyond states;

* Are developing countries’ interests advanced by a shift away from state-centered law making?;

* Is soft law an end in itself? Can soft law be the preferred method of operationalizing international standards?;

* Climate change norm-setting: does it lend itself to a non-statist approach?;

* The new dangers of capture outside the statist model;

* Methodological approaches for studying private actors in international economic law and their implications;

* The role of private actors in a fragmented international economic law system;

* The transnational/transgovernmental link between international economic law and domestic law and politics;

* The changing legal and institutional terrain for the investor-State dispute settlement mechanism;

* Global supply chains and the role of private businesses in food and consumer safety regulations;

* International economic law and the reassessment of development policies;

* The rise of the BRICs and a new international economic order?;

* Regional trade and investment agreements and their role in breaking the public/private divide;

* The implications of the Doha Round’s collapse for international economic law governance;

* The role of domestic administrators and courts in the operationalization of international standards;

* The interaction of public and private international institutions;

* The increasing influence of private actors on the development of international legal norms; and

* The role and maturation of civil society's interaction with international economic law.

The full details are here.

 

Transparency in Trade Negotiations

Some folks are complaining about the lack of transparency in the TPP negotiation process:

Despite claims by the U.S. government of considerable transparency in the process, the talks, being held in Dallas, are covering material that has remained almost completely out of the public's eye.

'Because the negotiations have been conducted in extreme secrecy, we have no idea yet what is in the text,' says Rashmi Rangnath, a director with Public Knowledge, an advocacy group here in Washington. 'What we do know is that lack of transparency tends to skew the text of such agreements in favour of large corporations.'

I'm not a trade negotiator. I've never been a trade negotiator. I probably never will be a trade negotiator. So I'm a little uncertain how this all works. Nonetheless, let me say this. As much as I like the idea of transparency in the abstract, I'm not sure I see how it would work in practice in the context of trade negotiations. When you are negotiating something, in order to get the best deal possible, you need to keep a lot of things confidential. You don't want to let on about your objectives. How transparent can these negotiations be? What kind of documents should be put out there? How much can each party say about what it is trying to achieve?

Also, for comparison's sake, how transparent is legislation? This makes me think of the US statute banning clove and other flavored cigarettes, but not menthol. I've been trying to figure out what the objective of the legislators in that situation was. But I can't find anything that tells me what anyone was thinking as they drafted the statute. Are trade agreements any less transparent than the usual legislative process?

Geneva Trade Lawyer Position

King & Spalding is looking for a trade law associate in the Geneva office:

GENEVA

International Trade
# of Positions: 1 | Years of Experience: 2-5
Type of Experience: King & Spalding seeks a junior to mid-level associate for its International Trade practice group in Geneva. Qualified candidates will have experience in WTO litigation and market access issues. Applicants should have at least two years of relevant practice experience, excellent research and writing (in English) skills and the desire to be part of a hard-working, fast-paced environment. Send resume and law school transcript to [email protected]. No search firm submissions, please.

Canadian Zeroing

Have you had enough of U.S. zeroing litigation at the WTO?  For a change of pace, perhaps there is a case related to Canadian zeroing on the horizon.  Trade expert Peter Clark points me to a decision by the Canadian International Trade Tribunal (CITT), relating to the use of zeroing in duty assessment proceedings:

Did the CBSA Improperly Apply Zeroing?

Legal Framework

36. In the context of duty assessment, section 3 of SIMA requires that an anti-dumping duty equal themargin of dumping and, in turn, subsection 2(1) defines “margin of dumping” as “. . . the amount by whichthe normal value of the goods exceeds the export price of the goods”. By comparison, in the context of adumping investigation, subsection 30.2(1) provides that “. . . the margin of dumping in relation to any goodsof a particular exporter is zero or the amount determined by subtracting the weighted average export price ofthe goods from the weighted average normal value of the goods, whichever is greater.”

Positions of Parties

37. Aluminart complains that the CBSA improperly relied on zeroing to calculate the margins ofdumping, with the effect that the resultant anti-dumping duties were inflated. In particular, the CBSA took the transactions listed in the detailed adjustment statements, treated the non-dumped products as having a margin of dumping of zero and then established the duties payable on the basis of the dumped products only. Aluminart argues that the CBSA should have offset the dumped imports to the extent that the other imports were not dumped.

38. Aluminart claims that it was improper for the CBSA to rely on zeroing because the CBSA has stated that it has discontinued the practice of zeroing, that the practice has been criticized by the World Trade Organization (WTO) and that domestic aluminum extruders are not entitled to protection beyond what is necessary to offset injurious dumping.

39. In reply, CBSA says that it has discontinued the practice of zeroing when determining margins of dumping in dumping investigations, but not when assessing anti-dumping duties. The CBSA explains that it stopped zeroing in investigations because subsection 30.2(1) of SIMA specifies that the margin of dumping in an investigation is determined by subtracting the weighted average export price from the weighted average normal value. By contrast, for duty assessment purposes, subsection 2(1) and section 3 simply require that the margin of dumping be determined by subtracting the export price from the normal value. The CBSA says that this difference in language means that the CBSA need not offset import transactions when assessing anti-dumping duties.

40. Moreover, the CBSA contends that it would be unworkable to offset transactions for duty assessment purposes because there is no guidance in the legislation on whether the CBSA is to take into account each invoice or a particular period.

41. The CBSA also contends that the elimination of zeroing would undermine the primary purpose of SIMA, which, it says, is to protect Canadian producers. Importers could import dumped goods that injure domestic producers without attracting anti-dumping duties if they also import the same goods at prices that are not dumped.

Determination

42. It is evident that Aluminart’s position on zeroing is premised in large part on a misunderstanding that, while it does not apply this methodology in the course of dumping investigations any more, the CBSA did not say that it was completely abandoning zeroing.

43. Whereas the wording of subsection 30.2(1) of SIMA, insofar as it refers to weighted averages, reasonably lends itself to an interpretation that is consonant with Canada’s international obligations, as expressed in the zeroing decisions of the WTO Appellate Body, the wording of the provisions of SIMA that apply in the context of the enforcement of a resultant injury finding does not. Specifically, these provisions do not refer to weighted averages.

44. On a plain reading, the effect of subsection 2(1) and section 3 of SIMA is that the CBSA shall levy, before releasing a shipment of imported goods which are of the same description as goods in respect of which the Tribunal has made an order or finding, an anti-dumping duty equal to the extent by which the normal value of these goods exceeds the export price. Thus, when assessing duty, the customs official is obliged, by statute, to take into account the export price of the goods that are before him, not the prices ofthose goods and of earlier or future shipments of such goods.

45. There is no basis in Canadian legislation for allowing individual import transactions of goods that are covered by an order or finding of the Tribunal and valued at dumped prices to escape the imposition of anti-dumping duties.

Everyone is Talking about Investment

With the new model BIT in place, everyone is talking about investment.  First up, over at the Cato Institute, on May 17 they'll be talking about "investment protectionism and what to do about it":

Like international trade, cross-border direct investment drives economic growth. The value of cross-border investment flows has increased dramatically worldwide in response to liberalization of investment rules over the past couple of decades. But the trend toward liberalization has slowed, even reversed, in recent years. In April, the International Chamber of Commerce published the first revision in 40 years to its International Investment Guidelines, and the Obama administration published long-awaited revisions to its template for international investment agreements—the so-called model bilateral investment treaty. Will these developments help rein in investment protectionism. How will they influence cross-border investment flows? Can they help achieve the vaunted macroeconomic rebalancing?

Then on May 31, the DC Bar and ASIL will be holding an event specifically on the model BIT:

Jonathan (Josh) Kallmer, Deputy Assistant US Trade Representative for Investment, and Michael Tracton, Senior Negotiator for Investment Treaties, US State Department, will explain and discuss the newly revised US Model Bilateral Investment Treaty on May 31, 2012 at a lunch presentation.  ...

The EU Emissions Trading Scheme under WTO Rules

Lorand Bartels analyzes the issues for ICTSD here.  The abstract:

The following questions are addressed in this paper: is it possible to design a carbon trading scheme that is both administratively feasible and justifiable under WTO law? Does the inclusion of aviation in the EU ETS violate the unconditional most-favoured nation obligation in Article I:1  GATT?  Is  the  scheme  exempt  from regulation  because  of  the  GATS  Annex  on  Air  Transport  Services? Does the scheme violate the most favoured nation and national treatment obligations under Articles II and XVII GATS? And can the scheme be justified under the environmental exceptions of Article XX GATT and Article XIV GATS, respectively?

And an excerpt from the conclusion:

The foregoing analysis has illustrated the complexities of the WTO aspects of the EU’s aviation scheme, with the result that, except in certain limited cases, any discriminatory effects of the measure are likely to be justified on environmental grounds. However, this analysis has also shown up some more longterm structural issues for the WTO, which are of particular relevance to climate change issues, but not limited to these. One of the more surprising points to emerge from this case study is the fact that a WTO member cannot justify discrimination under the Chapeau to Article XX GATT and Article XIV GATT on the basis that it needs to comply with its international obligations. This rule, which was stated in Brazil – Retreaded Tyres, has one obvious merit, which is to prevent WTO members from seeking to circumvent their WTO obligations by entering into contradictory international agreements. However, it also has less than salutary effects on the coherence of WTO law with the remainder of the international legal system. One wonders whether perhaps another solution might not be found such that WTO members are able to avail themselves fully of the general exceptions in the WTO Agreements while still remaining in compliance with their international obligations.

There is also a comment by Rob Howse.

And here's a working paper on the same subject by Henri Joel Nkuepo:

The EU did not assess the implications for developing and developed countries’ airlines before extending the Emissions Trading System (ETS) to all foreign airlines. It decided to apply the regulation to all airlines flying from and to airports situated in the EU with an exception written in a very technical language. This paper aims to show how the negligence of the EU to assess the implications for developing and developed countries’ airlines contributed in adopting a discriminatory policy and, therefore, constitutes a violation to the World Trade Organization (WTO) discrimination principles. The paper concludes that the EU Directive 2008/101/EC of 19 November 2008, as currently written, can be successfully challenged by developing countries under the WTO law. It does not call on the European Parliament to remove the Directive but to amend it accordingly so that developing and developed countries' airlines benefit equally and inequality not perpetuated.

I tried to think through these issues at one point.  I found them impossibly complex, and a small part of me is hoping no litigation ever arises. ;)

Selling Corvettes in Korea?

This article doesn't sound all that hopeful:

The revised bilateral free trade agreement between Korea and the US has made favorable the import for the Chevrolet Corvette Coupe into Korea. This will be initiated by General Motors Korea Co., the South Korean unit of General Motors from Friday, 4th May 2012. The pact which was signed in March this year decreased import tax by 50% making such imports feasible and more economical. Chevrolet Corvette Coupe will be among the first to be imported and sales will commence this month.

Chevrolet Corvette Coupe will compete with Porsche 911 Carrera and BMW Z4. Though GM Korea Co is not expecting resounding success for a start they do hope that the luxury sports car will increase its brand image among Koreans in due course.