International Economic Law and Policy Blog

COOL and TBT Article 2.1 Discrimination

A couple months ago in Cloves, the Appellate Body had the following to say about the "less favourable treatment" standard" of TBT Article 2.1: 

215. ... Where the technical regulation at issue does not de jure discriminate against imports, a panel must carefully scrutinize the particular circumstances of the case, that is, the design, architecture, revealing structure, operation, and application of the technical regulation at issue, and, in particular, whether that technical regulation is even-handed, in order to determine whether the detrimental impact on imports stems exclusively from a legitimate regulatory distinction rather than reflects discrimination against the group of imported products. 

Right after that, in Tuna, they used similar language:

284. .... The question before us is thus whether the United States has demonstrated that this difference in labelling conditions is a legitimate regulatory distinction, and hence whether the detrimental impact of the measure stems exclusively from such a distinction rather than reflecting discrimination.

Basically, first you look at whether there is a "detrimental impact," then you see whether such impact "reflects discrimination."  What kind of discrimination?  I wasn't completely sure then, but after today's COOL decision I'm even less certain:

271.  ... In contrast, where a regulatory distinction is not designed and applied in an even-handed manner —because, for example, it is designed or applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination—that distinction cannot be considered "legitimate", and thus the detrimental impact will reflect discrimination prohibited under Article 2.1.

So now it's not just discrimination we are looking at under Article 2.1, but "arbitrary or unjustifiable" discrimination, like with the Article XX chapeau.  At least, in this case it was.  The AB said this is an "example" of something not even-handed.   So is that just one kind of discrimination it might look for?  What are some other kinds?  Was the AB implicitly looking at "arbitrary or unjustifiable" discrimination in Cloves and Tuna?  

And what exactly is discrimination?  This is a question Rob and Joanna asked here.  I'm going to give a brief description of my views in an upcoming post.

The Seal Products Ban and "Non-Instrumental Public Morals" Measures

In the U.S., everyone is focused on today's health care ruling.  If you can tear yourself away (or if you are from somewhere else and/or just don't care), let me mention the Opinio Juris discussion of an article by Rob Howse and Joanna Langille.  Here is a snippet of their argument:

Our article examines the extent to which countries can use animal welfare concerns to justify placing restrictions on international trade, under the law of the World Trade Organization (WTO). We argue that noninstrumental moral and religious concerns are a legitimate source of trade policy. To make this claim, we examine a current WTO dispute between the European Union (EU), Canada, and Norway. The European Union has banned seal products from being sold in the European Union, because of animal welfare concerns regarding how the animals are hunted and skinned. Canada and Norway have challenged this regulation at the WTO, arguing that animal welfare is not a legitimate objective for restricting trade.

...

we set out the strong institutional reasons to avoid interpretations of WTO law that would deny countries the ability to regulate for moral reasons. If the WTO were to do this, it would risk attempting to impose a secular, materialist, instrumentally rational worldview on its member states. Instead, the WTO should permit pluralism—competing notions of righteousness—and allow countries to regulate for moral reasons (with the recognition of course that states are also bound by non-WTO norms, such as international human rights law, which also shape the limits of their prerogative to regulate morality). The WTO legal framework, moreover, must be read so as to accept that animal welfare measures may at the same time have both a utilitarian or instrumental aspect (improving animal welfare outcomes) as well as an expressive aspect, indicating moral opprobrium at the inhumane treatment of animals.

 I have a comment in which I say:

 I also wonder if there is perhaps a better solution to dealing with any controversy over non-instrumental measures. As I read the article, it seems to me that much of their focus is on refining the typical “exceptions”-type analysis (under which certain policies are explicitly “permitted” even where they violate the rules). Measures “expressing intrinsic moral or spiritual beliefs” are the focus here, but more generally they seem to accept the view that we should identify those domestic preferences or policy areas that are important, and provide explicitly for their use.

This exceptions-based approach, though, may not be the best way to deal with the problem of the intrusion of international rules into domestic policymaking. If we rely on exceptions for permitted policies, then we need them for all of the various policies that we want to make sure governments can pursue. This leads to a number of problems: identifying all of these policies, agreeing on what policies should be included, and deciding how each should be evaluated. The limited set of exceptions in GATT Article XX illustrates these problems, as the provision only lists certain policies, leading to strained efforts to fit other, non-listed policies into the designated categories. A better approach might be to focus less on what policies should be permitted through exceptions, and concentrate instead on what policies international trade rules should prohibit. ...

What I'm getting at here is that relying on necessity tests makes me nervous.  I would prefer to define the boundaries of trade law more clearly in the actual obligations (and where the obligation involves necessity -- as with TBT 2.2 -- we might need to re-think it).

In another comment, Isabel Feichtner wonders about the categorization of the measure and talks about rationality tests:

Howse and Langille put forward the thesis that WTO law should permit pluralism in the sense that it should not limit Members’ freedom to restrict trade in pursuit of “noninstrumental moral values”. I find the term “noninstrumental moral values” slightly misleading and would argue that at issue are rather noninstrumental trade measures to realize or express moral values. In the concrete case Howse and Langille consider the seal products ban to be non-instrumental in the sense that it might go beyond what is required to protect animal welfare. This “excess”, according to Howse and Langille, is justified as an expression of EU citizens’ moral disapproval of the seal hunt. Such regulation could also be interpreted as the collective choice of a society not to be complicit through consumption by individual citizens in what it considers a moral wrong. This collective choice may only fully be realized through a ban and not by enabling each individual to make an informed consumption decision, for example on the basis of information provided by a label.

...

Whilst I am sympathetic to the claim that WTO law should allow for noninstrumental measures that restrict trade I am rather skeptical of the view that such measures should not be submitted to a rationality test. ...

Tamara Perisin offers some details of how a seal products measure might be carried out consistently with WTO law:

... It should be especially stressed that this comment does not argue that WTO law prevents the EU or Member States from banning seal products. It merely argues that a trade ban must have a genuine legitimate aim, which it must achieve with coherent and necessary means. This also does not mean that the EU should do less to protect seals. If there are genuine concerns for animal welfare, then the EU can do even more to protect seals – it can ban seal products without any (incoherent) exceptions – i.e. it can require all seal products provided for in the exceptions to comply with humane hunting rules. The EU or its Member States could also ban many other animal products, particularly furs of animals not used for food, which are currently being imported into the EU, as well as being produced there.

 Rob and Joanna then respond to these comments here:  http://opiniojuris.org/2012/06/28/yjil-symposium-howse-and-langille-respond-to-comments-on-permitting-pluralism/

Foie Gras Bans and WTO Law

 Many years ago, Joel mentioned trade law issues related to Chicago's ban on foie gras.  Perhaps now that a bigger market (California) has passed its own ban, we may see the issue raised at the WTO:

TOULOUSE, France -- France's foie gras industry says legislation due to come into force in California on July 1 banning the sale of duck or goose liver pate over animal rights concerns contravenes international trade law.

"We asked for a meeting on Monday with the agriculture minister," said Marie-Pierre Pe, chief representative of industry committee CIFOG.

"Bulgaria and Hungary, the other countries of the European foie gras federation, have asked their governments to seek action from the World Trade Organization (WTO) as the California law infringes on WTO law," she added.

Californian lawmakers passed the legislation in 2004 that bans production and sale of foie gras, as it is made by what is deemed to be a cruel practice of force-feeding ducks and geese so their livers become enlarged.

Is this the kind of "non instrumental public morals" measure that I'll be talking about in the next post?

More on that U.S.-EU FTA

Pretty lukewarm on the EU side, too.  Here is EU Trade Commissioner Karel De Gucht:

"The announcement of Presidents Barroso and Obama welcoming the publication of the interim report on how to deepen the transatlantic trade relationship is extremely encouraging. We are now entering the last leg of mapping out how we should tackle any eventual negotiation to boost growth and jobs through our trade partnership. I look forward to continue working with my US counterpart to complete the final stage allowing us to present both leaders with the final report as quickly as possible.”

Romney vs. Obama on Trade

Romney supporter (and former USTR) Senator Rob Portman says Romney will push harder for bilateral FTAs, and be tougher on China, than Obama:

Republican presidential candidate Mitt Romney would move aggressively to open up
more foreign markets for U.S. exports, while getting tougher with China on its trade and currency practices, Senator Rob Portman said on Tuesday.

The potential Romney vice presidential running mate said President Barack Obama has allowed the United States to fall "behind in a very significant way (on trade) because we are not engaging in opening up markets virtually anywhere."

...

He defended Romney's pledge to crack down on China's currency practices by quickly declaring them a currency manipulator, even though that worries some business groups who fear it would provoke Beijing to retaliate.

...

U.S. Trade Representative Ron Kirk has said the White House would ask Congress for trade promotion authority before submitting the Trans-Pacific pact to Congress for a vote.

Portman said he supported the proposed deal but believed it would be difficult to win significant new market-opening commitments in a negotiation with so many countries involved.

"Bilateral (trade agreements are) where you make the progress and we're not doing anything," Portman said.

Obama has not launched any bilateral free trade agreements since taking office in 2009, and only sent Bush-era free trade pacts with South Korea, Colombia and Panama to Congress in 2011 after negotiating a number of changes to make the agreements more acceptable to Democrats.

Of course, after the last election, I'm not sure how much to believe trade related campaign rhetoric.

I am curious, though.  What bilateral FTAs would he pursue?

About Me

I don't talk about myself much on this blog. It's not that kind of blog. But this seems worth mentioning: As of this past Monday, I am now a trade policy analyst at the Cato Institute.  My Cato webpage is here.

Don't worry (in case you were worried), I am not abandoning this blog or WorldTradeLaw.net. I'll still blog here about the technical trade issues that are probably not of much interest to the broader Cato
audience. And I'll still be working on WorldTradeLaw.net, reading all the WTO cases and writing commentary on them. Basically, we plan on shifting the responsibilities between Kara and me, with Kara doing more of the day-to-day work on the website.

If I write anything for Cato that might be of interest here, I'll be sure to mention it!

Guest Post on Iran Economic Sanctions

A guest post from GDB, who is looking for input but wants to remain anonymous:

The recent economic sanctions on Iran, culminating with UN SC Resolution 1929 (2010) and the UN Members’ implementing measures, pose some problems of WTO compatibility, to the extent the measures fall under the scope of WTO Law. Let us recall that Iran is not a WTO Member and that previously some of the measures taken by the US (with extraterritorial effects) were contested by another affected WTO Member (see the EU response to Helms-Burton, DS 38 and to ILSA in 1996).

For the implementing measures of the Resolution 1929 see:

- for the US: Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, P.L. 111–195
(H.R. 2194), I(L)SA , Executive Order (E.O.) 13599 etc

- for the EU: Council Regulation (EU) no 267/2012, Council Decision 2012/35/CFSP, Council Decision of 2010/413/CFSP

Briefly, the US and EU implementing measures of the UNSC Resolution 1929 may raise, inter alia,
the following questions:

1) Do the EU and US sanctions on Iran go beyond the UNSC Resolution 1929?

To answer this first question I will start by recalling that Resolution 1929 does not mention specific measures on energy issues, as Russia and China opposed this approach. Instead, a compromise was found by inserting in the preamble of the resolution: “noting the potential connection between Iran’s revenues derived from its energy sector and the funding of Iran’s proliferation sensitive nuclear activities”.

According to Kenneth Katzman, one of the most knowledgeable experts in US sanctions policy against Iran (rapporteur on ILSA for the Congress), “What was produced in Resolution 1929 was a formula under which very few new sanctions against Iran were made mandatory, but a great many new sanctions were authorized or called for by the Resolution. This structure enabled countries such as China and Russia to follow only the letter of the Resolution, while allowing the United States and its
allies to go far further in imposing sweeping new bilateral and multilateral sanctions against Iran.[…] Much of the U.S. intent of Resolution 1929 was to set up for further multilateral sanctions against Iran by like-minded countries, particularly in Europe. The preambular language of Resolution 1929 accomplished that objective […] Drawing that connection set the stage for a highly significant action by the European Union.” (Addendum U.S.-Iranian Relations: An Analytic Compendium of U.S. Policies, Laws, and Regulations, Atlantic Council, 2010, p. 2)

Do you agree with that? Is the resolution a “minimum standard of harmonization” for sanctions and the Members can go beyond, because of the mentioned language in the preamble?

2) If the EU and US sanctions exceed the UN mandate, can one still justify the measures in their entirety under WTO law?

As we know, under XXI(c) GATT and XIVbis:1 (c) GATS:

“Nothing in this Agreement shall be construed […] to prevent any Member from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.”

So far so good. Multilateral measures authorized by the UN are virtually immune, due to the specific place of the UN Charter and the UN SC in the international architecture.

But if we find that the measure exceeds the UN mandate, is it a violation of WTO law?

The reference I could find in the existing literature is in Cottier & Delimatsis (WTO Trade in Services, Max Plank Commentaries in world trade law, p. 345, partially relying on Schloemann & Ohlhoff): "Jurisdictions of panels and Appellate Body, however, exists to review whether measures adopted by Members exceed the severity of the measures approved by the multilateral decisions taken under Chapters VII and VIII of the Un Charter. […] Such authority exists for an examination of whether the measure is more infringing than what is required by the relevant resolution adopted. It is commensurate with the claim to be responded to that the measure is not sufficiently founded in Art. XIVbis :1 lit. c and therefore incompatible with WTO obligations."

So, if a measure is found in breach of GATT principles, it follows that the measure can be justified under XXI (c) only to the extent it does not exceed the UN mandate. Do you agree with that?

3) Is it still available to Members a unilateral defense (e.g. XXI (b) GATT) after the adoption of a multilateral defense, based on a UN SC Resolution (e.g. XXIc)?

To recall, Article XXI (b) GATT provides that:

“Nothing in this Agreement shall be construed […] (b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests

(i) relating to fissionable materials or the materials from which they are derived;

(ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;

(iii) taken in time of war or other emergency in international relations;”.

Once the multilateral negotiations are exhausted, in good faith (see Nicaragua’s proposal on reform of the security exceptions) and a solution is adopted (in the UN SC), can one still go beyond the multilateral framework and act unilaterally? Can that measure in excess be justified by a unilateral defense? Can one say that the Members can go beyond the UN mandate, provided that, according to their own assessment, there is an “essential security interest” at stake?

Thank you very much for sharing your thoughts! GDB

The Coming U.S. - EU FTA

Based on this statement by President Obama, I'm not holding my breath:

"Today, the United States and the European Union agreed to take the next step in our work towards the possible launching of negotiations on an agreement to strengthen our already very deep trade and investment partnership," Obama said.

Implementing Cloves: The Reasonable Period of Time

I can't tell you what the U.S will do to implement the Cloves rulings, but I can tell you the date by which they must do it: 15 months from adoption (July 24, 2013), pursuant to this Article 21.3(b) agreement.  Mark your calendars.

Do All "Buy National" Provisions Result in a "Benefit"?

This is from Friday's China – GOES WTO panel report:

7.363 In the Panel's view, the United States has not made out its claim under Article 22.3 of the SCM Agreement. The United States argues that MOFCOM did not explain why a price derived from a competitive bidding process would not be equal to the market price. However, in its explanation in the final determination, MOFCOM set forth the factual findings that it considered supported its legal conclusion that the United States Government purchased domestically produced GOES for more than adequate remuneration. In particular, MOFCOM found:

(i) the scope of foreign products competing in the bidding process is restricted. The import volume of excluded foreign products accounts for 15% of steel consumption in the United States;

(ii) although, in accordance with the Government Procurement Agreement, there may be some competition from foreign products, in certain states, including Pennsylvania, foreign products are completely excluded; and

(iii) the North American price for steel is 10% higher than non-North American prices.

7.364 On the basis of the partial or complete exclusion of lower priced foreign products from the "competitive bidding"354 process, MOFCOM concluded that the bidding would not result in a market price. The United States argues that there is a step missing in this logic, namely an explanation of how this exclusion could result in a non-market price, despite the existence of a "competitive bidding process". However, MOFCOM explained that, in its view, the lower prices of the excluded goods would result in a non-market price even despite its conclusion that a "competitive bidding process" of some sort existed. The United States does not agree with this conclusion. It refers to the "flawed logic" and "flawed discussion" proffered by MOFCOM. 355 It also argues that "[t]he fact that one foreign company may have been excluded from what China admitted was a competitive bidding process does not mean that a given transaction was not conducted based on prevailing market conditions". 

If I'm reading this correctly, and I confess I've only looked at it quickly, the MOFCOM decision says that  purchases under Buy National procurement laws are almost certain to result in a "benefit," because excluding foreign goods leads to an above market price.  If they are "specific" as well, this will mean that Buy National purchases constitute subsidies.

The United States only challenged  MOFCOM's approach under Article 22.3 of the SCM agreement, which is a procedural provision.  It did not make a substantive challenge under Articles 1.1(b)  or 14(d). As a result, we are left with a bit of uncertainty as to what a WTO panel would think of this as a "benefit" issue. But if it is accepted that Buy National always leads to "benefit," there could be some WTO cases coming. (Others may have been aware of this issue already; I hadn't heard of it before.)

ADDED:

In the comments, Srikar points out Article 14(d) of the SCM Agreement, which states:

the provision of goods or services or purchase of goods by a government shall not be
considered as conferring a benefit unless the provision is made for less than adequate
remuneration, or the purchase is made for more than adequate remuneration. The adequacy of remuneration shall be determined in relation to prevailing market conditions for the good or service in question in the country of provision or purchase (including price, quality, availability, marketability, transportation and other conditions of purchase or sale).

So, when it comes to government procurement, the relevant legal standard for benefit is "adequate remuneration," and the issue was whether "the United States Government purchased domestically produced GOES for more than adequate remuneration."

AND YET MORE:

This is from the interim review:

6.16 China submits that the first sentence of paragraph 7.365 should be struck from the Report. The sentence in question states: "[a]rguably, if the United States' claim were one of substance, regarding for example the benefit determination under Articles 1.1(b) or 14(d) of the SCM Agreement, we may find certain problems with the reasoning used by MOFCOM".

6.17 The United States does not comment upon China's request.

6.18 The Panel has removed the sentence from the Report, on the basis that it is not strictly necessary to its reasoning. The Panel has also added a new footnote to paragraph 7.365 (footnote 357) to emphasise that the United States' claim was not one of substance and Article 22.3 of the SCM Agreement does not discipline the substantive adequacy of an investigating authority's reasoning.

For whatever reason, the substance was not the focus of the claim, so we didn't get to hear much about it, but the Panel apparently had some doubts about MOFCOM's approach.

What Does Fair and Equitable Treatment Mean? What Does Anything in Trade Law Mean?

Benn McGrady says the following about the fair and equitable treatment standard in international investment law:

Older cases from the days of diplomatic protection (when a state would bring a claim on behalf of its nationals) suggest that it is very difficult to establish a violation by the host state. However, some argue that the standard evolves over time and that it is now easier to establish a violation. At one extreme, Neer v Mexico is often cited as the customary standard. In that case it was stated that “the treatment of an alien, in order to constitute an international delinquency, should amount to an outrage, to bad faith, to willful neglect of duty, or to an insufficiency of governmental action so far short of international standards that every reasonable and impartial man would readily recognize its insufficiency.” At the other extreme, in the claims Philip Morris has brought against Uruguay and Australia, investors argue that any form of unreasonableness in the treatment accorded to them, or a violation of their legitimate expectations, violates the fair and equitable treatment standard. To be clear, these arguments are made first on the basis that the treaties relied on incorporate a standard above and beyond that found in customary international law. However, in the alternative, the argument might be made that customary international law has evolved since Neer v Mexico to hold host states to a more demanding standard of treatment. There is some case law, such as Mondev v United States, to support the theory that the standard may be an evolving one.

Clearly, there is an issue of legal uncertainty here. That uncertainty is likely to benefit investors to the detriment of host states. Investors can threaten or bring claims on the basis of a contested standard and host states are left to make an informed guess about the applicable standard to which they will be held. If the customary standard were clear it would be easy enough to elaborate that standard in the text of the agreement. In this context, one possible explanation for the draft is that the states negotiating the TPP cannot agree on the standard. Another explanation, which is credible given that this clause comes from the US model bilateral investment treaty, is that US firms would prefer ambiguity to clarity.

He may have a point there about the preference for uncertainty.  But this makes me wonder about the meaning of important trade law principles more generally. What do any of them mean? What is non-discrimination? What does "necessary" mean? How about "less favorable treatment"? With these and other terms, there is a lot of ambiguity, and I'm not sure it is always intended. If I were in a position of official power within the trade law regime (not likely!), one of my first acts would be to convene a conference in which high-ranking government officials would talk about some of these basic principles of trade law. They might not reach agreement, but nevertheless I think it would be of great value for them to have a discussion of these kinds of issues outside the context of particular disputes.

The Leaked TPP Investment Chapter

 Yesterday the investment chapter of the TPP was leaked to the public. I don't have any particular thoughts on this at the moment (except, how do these things get leaked?), so I'll just quote from some others.

Global Trade Watch says:

“The outrageous stuff in this leaked text may well be why U.S. trade officials have been so extremely secretive about these past two years of TPP negotiations,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Via closed-door negotiations, U.S. officials are rewriting swaths of U.S. law that have nothing to do with trade and in a move that will infuriate left and right alike have agreed to submit the U.S. government to the jurisdiction of foreign tribunals that can order unlimited payments of our tax dollars to foreign corporations that don’t want to comply with the same laws our domestic firms do.”   

In response, Julian Ku sees a left-wing version of sovereignty concerns:

 What I find interesting is how many of its objections (from the anti-free trade left) echo the type of arguments often made by what Peter Spiro would call the sovereigntist right.

On this point, I do wonder what Global Trade Watch thinks about sovereignty in other areas. For example, do they support the idea of binding international rules on labor and the environment? Is there really a sovereignty concern here, or is it just about the substance of the law that is at issue?

Kevin Gallagher is a skeptic on investor-state, but sees a bright spot in one aspect of the leaked chapter:

Tired of waiting for the US to reflect current thinking and practice, the leaked text reveals two proposals by TPP negotiating teams that are a step in the right direction when it comes to granting nations the flexibility to regulate capital flows under the TPP. 

Benn McGrady wonders whether other countries are thinking about opting out of investor state, like Australia has done:

Footnote 20 also indicates that Australia will not submit to investor state dispute settlement. Contact addresses have already been inserted into the draft for Chile, Malaysia, New Zealand and the United States. Brunei, Peru, Singapore and Vietnam are listed in the annex, but the address details are not yet listed. Does this suggest that Brunei, Peru, Singapore and Vietnam are not yet on board with the draft?

Is he reading too much into this? Or are others possibly having second thoughts?

Chances of Success in the Plain Packaging WTO Complaint

From Australian law professor Matthew Rimmer:

The Ukraine would have more chance of winning the UEFA (Union of European Football Association) football competition then they would of winning this WTO action. 

Is that an accurate assessment? Is he underestimating the chances? Or is that just about right?

How do the chances of success at the WTO compare to those under the investment treaty claim brought by Philip Morris? My sense is that the outcome of investment treaty claims is a lot less certain.  If the WTO complaint is rejected, but Philip Morris wins its claim, it will be interesting to compare the different approaches.

ADDED:

For added context, if I'm reading this correctly, Ukraine's odds of winning the football are about 40-1.

Economic Nationalism As a Marketing Tool

From Reuters:

Starbucks Corp (SBUX) on Tuesday will debut the first products in a line of U.S.-made mugs and other merchandise that will be sold in its roughly 7,000 U.S. cafes to support domestic manufacturing and raise money for its Create Jobs for USA fund.

The move from the world's biggest coffee chain follows Chief Executive Howard Schultz's call to fellow executives to step up hiring and take a bigger role in the country's economic revival.

Domestic manufacturing, once a pillar of the economy, has been hard-hit by globalization. The industry now employs about 12 million people, down from a peak of nearly 20 million around 1980, according to data from the U.S. Department of Labor.

The new line of U.S.-made merchandise includes a 16-ounce acrylic tumbler made in Chicago, whole bean coffee that is blended, roasted and packaged in the United States and a 16-ounce ceramic mug made with domestically sourced raw materials at the American Mug & Stein factory in East Liverpool, Ohio.

That formerly struggling factory in what was once known as the pottery capital of the United States expanded its workforce from 14 to 22 after the Starbucks order, the coffee chain said.

While that does little to offset the jobs lost when Starbucks closed roughly 600 U.S. cafes during its ultimately successful turnaround in 2008 and 2009, the move signals growing corporate interest in bringing back U.S. factory jobs.

The company partnered with the Opportunity Finance Network, a group of private lenders, to start Create Jobs for USA late last year. Starbucks will make a donation to the fund for each U.S.-made product sold.

Putting aside all the policy issues, is playing up economic nationalism a good corporate strategy?  Will it help the image of Starbucks with US consumers? Conversely, will it have the reverse impact on foreign consumers? Or is Starbucks promoting domestic manufacturing jobs in all of its markets?

The US View of the Role of Precedent

 This is from Friday's Shrimp and Saw Blades WTO panel report:

6.7 The United States considers that the quotations to two Appellate Body Reports contained in paragraph 7.29 do not adequately reflect the role that each panel  plays in the dispute settlement process.  The United States submits that the rights and obligations of WTO Members flow, not from panel or Appellate Body reports, but from the text of the covered agreements.  The United States adds that while prior reports have an important place in the dispute settlement process, Article 11 of the DSU defines a panel's responsibility to carry out its own objective examination of the matter before it, including the "applicability of and conformity with the covered agreements".  Further, Article 3.2 of the DSU directs a panel to make that examination  through an interpretation of the relevant treaty provisions in accordance with the customary rules of interpretation of public international law.  The United States considers that a concern over consistency with a prior report adopted by the DSB should not and cannot override these provisions, which do not direct a panel to apply or defer to previously adopted reports.  The United States adds that paragraph 7.29 is, in any event, not essential to the Panel's analysis.  The United States therefore requests that we delete paragraph 7.29.  China does not comment on this request for review.  The United States has not convinced us that the reference to the two Appellate Body statements at issue in paragraph 7.29 is inappropriate or that the Appellate Body has erred in making these statements.  In consequence, we decline the United States' request and have not deleted paragraph 7.29.

Here's what was in paragraph 7.29:

7.29 Moreover, while prior panel or  Appellate Body reports are not, strictly speaking, binding upon panels, the Appellate Body has indicated that "[f]ollowing the Appellate Body's conclusions in earlier disputes is not only appropriate, it is what would be expected from panels, especially where the issues are the same" and that "[t]his is also in line with a key objective of the dispute settlement system to provide security and predictability to the multilateral trading system".  In addition, the Appellate Body has in the past cautioned that the failure by a panel to follow previously adopted Appellate Body reports addressing the same issues undermined the development of a coherent and predictable body of jurisprudence clarifying Members' rights and obligations under the covered agreements as contemplated under the DSU.

This all sounds like an interesting debate, but I'm not sure exactly what it is we are debating. In particular, I don't fully understand the US position. Under the US view of things, what is the role of precedent? They say that prior reports have an "important place". But what is that place? It seems to me that if panels do not "apply or defer to previously adopted reports," we will end up with multiple conflicting reports. In that situation, WTO litigation will be subject to a great deal of unpredictability.  Having said that, though, I'd like to hear more about how the US thinks that precedent should work in WTO dispute settlement.

Export Credit Financing and Negotiating Priorities

Reuters reports that the Ex-Im bank has been reauthorized. In this context, President Obama said:

As long as our global competitors are providing financing for their exports, we've got to do the same. So I'm glad that Congress got this done.

It sounds to me like Obama is a bit skeptical of this kind of export financing, but feels compelled because others are doing it as well. Is there an opening here for multilateral disarmament of export financing?  Could we convince our trading partners that we should all stop?  As it happens, the reauthorization statute says we have to try to do just this:

SEC. 11. NEGOTIATIONS TO END EXPORT CREDIT FINANCING.

(a) In General- The Secretary of the Treasury (in this section referred to as the `Secretary') shall initiate and pursue negotiations--

(1) with other major exporting countries, including members of the Organisation for Economic Co-operation and Development (OECD) and non-OECD members, to substantially reduce, with the ultimate goal of eliminating, subsidized export financing programs and other forms of export subsidies; and

(2) with all countries that finance air carrier aircraft with funds from a state-sponsored entity, to substantially reduce, with the ultimate goal of eliminating, aircraft export credit financing for all aircraft covered by the 2007 Sector Understanding on Export Credits for Civil Aircraft (in this section referred to as the `ASU'), including any modification thereof, and all of the following types of aircraft:

...

(b) Annual Reports on Progress of Negotiations- Not later than 180 days after the date of the enactment of this Act, and annually thereafter, the Secretary shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives--

(1) a report on the progress of any negotiations described in subsection (a)(1), until the Secretary certifies in writing to the committees that all countries that support subsidized export financing programs have agreed to end the support; and

(2) a report on the progress of any negotiations described in subsection (a)(2), including the progress of any negotiations with respect to each classification of aircraft set forth in subsection (a)(2), until the Secretary certifies in writing to the committees that all countries that support subsidized export financing programs have agreed to end the support of aircraft covered by the ASU.

According to the Reuters article, though, these negotiations are unlikely to accomplish much:

Delta's complaint led to language in the reauthorization bill requiring the United States to initiate negotiations with other major exporters aimed at eliminating government-subsidized financing of aircraft and other goods.

Hochberg said he expected the U.S. Treasury Department to make a good-faith effort to reach a deal, but personally has not seen much foreign appetite for the talks.

"That is generally not a view that I have seen shared by our counterparts around the world. They are, as we are, looking to create jobs and will do (that by) any means they can," Hochberg said.

I don't have much sense of how other governments see this. It is possible that the chances of success are slim. Here's what I wonder, though. The US pushes hard on a number of issues in trade negotiations.  It's not always clear to me how they decide what to push for, but however they make the decision, I assume it is based on some internal deliberation of what is important and what we want to accomplish. As far as I can tell, it does not appear that reducing or eliminating the use of export credits is currently a high priority.  But when you compare the importance of the various issues that are being negotiated as part of trade agreements, there may be a strong argument that export credit financing talks should be given a more prominent role than they are now. Perhaps if we made reducing the use of export credits a negotiating priority, replacing a number of other issues that have less of a connection to core trade issues, there might be a better chance that something could be achieved.

Are Tuna Trade Restrictions Unavoidable?

Is there any way for the US not to discriminate against foreign tuna with its dolphin safe labeling laws? In the context of the WTO Tuna decision and possible implementation alternatives, some members of Congress seem to think this will be difficult:

The WTO decision, in contrast, would require the US, in order to avoid alleged unfairness to Mexico, to enforce requirements in other tuna fisheries outside the eastern tropical Pacific that are not needed, since Dolphins practically never associate with tuna schools in these other areas. This absurd requirement would push other tuna fishing nations to object in the WTO against the US that this regulation is more trade restrictive than is warranted. ...

... The implication of the recent WTO ruling, in contrast, is that the US should expend significant regulatory resources around the globe in an untargeted fashion, or alternatively, that imports from Mexico could utilize dolphin safe labels without having to meet the same requirements as tuna caught by US or other nations' fleets. Neither result is acceptable, and "complying" in either way simply invites further costly WTO litigation from other nations, not to mention serious disruption of the canned tuna market in the US and loss of consumer confidence in environmental laws and labels.

Will any implementation action taken by the US be challenged by another WTO member?