International Economic Law and Policy Blog

De Facto MFN Discrimination in Seal Products

From the first EU written submission in the Seal Products dispute:

257. Canada argues that the Indigenous Communities exception  de facto  violates Article 2.1 of the TBT Agreement since such exception effectively permits 100% of Greenlandic seal products to be placed on the EU market, but excludes virtually all Canadian seal products from the same market, thereby modifying the conditions of competition to the detriment of Canadian seal products and resulting in inequality of competitive opportunities.   Furthermore, Canada posits that the detrimental impact on Canadian seal products does not stem  exclusively from a legitimate regulatory distinction, but simply on the ethnicity ("indigenous") of the hunter.

The measure at issue here is the general ban on placing seal products on the market in the EU, in combination with an exception for seal products that result from "hunts traditionally conducted by Inuit and other indigenous communities and contributing to their subsistence".

So let's stipulate that there is a large disparate impact on Canada's products, as compared to Greenland's.

Does it matter whether the EU intended to favor Greenland's products over Canada's?  Does the existing jurisprudence allow the panel to take this into account?  Should they take it into account?  Is the "legitimate regulatory distinction" element a proxy for determining whether the EU officials were trying to favor Greenland over Canada?  Will the panelists secretly take the EU's intent into account even if they don't say so in the reasoning?

And to complicate matters, how should the same issues be dealt with under GATT Article I:1?  See paras. 546-563 for the EU's arguments there.  Here's the opening:

Whether the advantage granted to the group of products from other origin is granted "unconditionally" to the group of like imported products (less favourable treatment)

546. The European Union submits that, for the same reasons as those mentioned in the context of Canada's claim under Article 2.1 of the TBT Agreement, the EU Seal Regime, through the IC exception, does not provide for less favourable treatment to the group of imported products.

 What will the GATT Article I:1 standard look like in the context of the Seal Product case?  Disparate impact plus legitimate regulatory distinction?  Or something else entirely?

EU posts first submission in Seal Products dispute

The submission can be found here:

http://trade.ec.europa.eu/wtodispute/show.cfm?id=475&code=2#_eu-submissions

 

Canada appears to be still hiding its submission from the public.  The submission has been leaked to various individuals, however, and I have seen a copy.  Reading the EU submission gives a pretty good idea of what Canada is arguing.

One of the most unusual of Canada's arguments is that it is simply impermissible under the WTO rules to draw distinctions between aboriginal and non-aboriginal products or economic activity.  But aboriginal rights in Canada's own constitution, as interpreted by the Canadian Supreme Court, require differential treatment in certain cases. exempting aboriginal production from general regulatory restrictions, where traditional practices central to aboriginal culture are concerned. Is the Canadian government using the Seal Products case to make the WTO a basis for weakening aboriginal rights?

Yet More WTO Complaints?

Now that Russia is in. From Reuters:

Assuming WTO relations are set up quickly, the United States and Russia could file complaints against each other in the coming months.

Earlier in December, Russia banned imports of meat containing any trace of ractopamine, a feed additive widely used in the United States to make meat leaner.

Kirk and U.S. Agriculture Secretary Tom Vilsack have pushed Russia to lift the ban because they say it appears to violate Russia's WTO commitments.

The United Nation's food agency in July said ractopamine "had no impact on human health" if residues stay within recommended levels.

Meanwhile, Edward Verona, president of the U.S.-Russia Business Council, warned in the group's latest newsletter that Russia could file a WTO complaint against U.S. anti-dumping and countervailing duties on Russian steel.

"Benefit" in the Canada - Renewable Energy Case

As I said yesterday, it's not easy to summarize the "benefit" issue in the Canada - Renewable Energy panel report.  But just quickly, the dissenter puts the two sides succinctly.  The majority view (as desribed by the dissenter):

9.1 ... In essence, the Panel majority has found that the circumstances of ensuring a reliable supply of electricity that achieves certain objectives sought by the Government of Ontario justifies the rejection of the competitive wholesale electricity market as the relevant focus of the benefit analysis. The Panel majority has furthermore suggested that, in these circumstances, the existence of benefit could be determined by focusing upon the rate of return associated with the FIT and microFIT Contracts and comparing this with the average cost of capital in Canada for projects having a comparable risk profile.

Basically, electricity markets are so distorted that you can't examine benefit using those markets alone -- you have to look to other markets (but there wasn't enough evidence here to reach a conclusion).

The dissent view:

9.23 ... by contracting to purchase electricity produced from solar PV and windpower technologies under the FIT Programme at a price intended to provide for a reasonable return on the investment associated with a "typical" project, the Government of Ontario ensures that qualifying generators are remunerated at a level that allows them to recoup the entirety of their "very high" capital costs. As the complainants argue and Canada accepts, such levels of remuneration would never be achieved through the unconstrained forces of supply and demand in a competitive wholesale electricity market in Ontario. Nor could they be achieved within the constrained forces of supply and demand which actually do operate within the wholesale electricity market in Ontario, without an intervention which remunerates the facilities which generate power from solar PV and windpower technologies at a higher rate than is paid in respect of electricity generated by the other technologies663. It follows that by bringing these high cost and less efficient electricity producers into the wholesale electricity market, when they would otherwise not be present, the Government of Ontario's purchases of electricity from solar PV and windpower generators under the FIT Programme clearly confer a benefit upon the relevant FIT generators, within the meaning of Article 1.1(b) of the SCM Agreement.

Basically, buying energy from wind and solar producers at prices they could not have otherwise obtained in the market confers a benefit. End of story.

That leaves out a lot of nuance, of course, but it's a little taste of the issue.

More on those WTO Dispute Settlement Jobs

Amy Porges points me to more details on the WTO hiring in dispute settlement:

Vacancy Notice No.: EXT/T/12-07    Title: Dispute Settlement Lawyer    Grade: To be confirmed    Contract Type: Temporary appointment    Issued On: 14 November 2012    Original published date: 14 November 2012  (42 day(s) until closing date)    Republished (Currently accepting applications)    Application Deadline (CET): 31 January 2013    Division:   Legal Affairs, Rules Duration:  Maximum of two years, non-extendable

The Secretariat of the WTO is seeking to fill potential multiple positions of Dispute Settlement Lawyer to work in the Rules Division or Legal Affairs Division. The salary will be determined based on experience and qualifications.

General Functions  1. Deliver substantive legal advice and assistance to WTO panellists and assist other Secretariat lawyers working with dispute settlement panels. More experienced dispute settlement lawyers may serve as team leader or co-leader in disputes and supervise the work of other lawyers, paralegals and support staff. 2. Conduct research on legal issues including case law, prepare analyses of factual and legal issues in the context of disputes, and prepare legal opinions. More experienced dispute settlement lawyers will be assigned more complex legal issues and may direct or guide the research and/or analyses of legal issues conducted by more junior staff. Day to day supervision of junior lawyers and other staff may be required.

 

Note that it's a short-term appointment -- two years max.  But of course, you'd have the opportunity to get to know people and impress them, which could lead to something more.

 

 

The Renewable Energy / Feed-In Tariff Panel Report

From today's WTO panel report in Canada - Renewable Energy/Feed-In Tariff:

7.7 Throughout these proceedings, however, the complainants have emphasized that in contesting the WTO-consistency of the challenged measures, they do not question the legitimacy of the objectives pursued by the Government of Ontario through the FIT Programme of reducing carbon emissions and promoting the generation of electricity from renewable energy sources. In particular, Japan has explained that "Japan does not take issue with Ontario's stated goal of enhancing renewable energy generation"39 or "the government's intervention as such to internalize the positive externalities of renewable energy generation technologies"40. Likewise, the European Union does not "contest the general purpose of the FIT Program, as helping to promote electricity supply from renewable energy sources", highlighting that "[s]uch a purpose is legitimately valid and … WTO Members can and should actively support it"41 . What the complainants call into question is limited to the alleged trade-distortive element of the challenged measures, which they identify to be the "Minimum Required Domestic Content Level" given effect through  the FIT Programme and the FIT and microFIT Contracts. According to the complainants, this aspect of the challenged measures affords a form of WTO-inconsistent protection to producers of certain types of equipment used to generate electricity from solar and wind energy ("renewable energy generation equipment") that are based in Ontario to the detriment of competing industries in other WTO Members, and should therefore be eliminated42. Thus, as Japan has declared 43, these disputes cannot be properly characterized as "trade and environment" disputes, but rather, they should be thought of as "trade and investment" disputes.

I agree that this is not a "trade and environment" dispute.  But is it a "trade and investment" dispute?  Isn't it just a "protectionism" dispute?  Granted, there is some impact on investment, but doesn't protectionism always or often have that effect?

But the real highlight of the report is the discussion of "benefit," which led to a dissent. No quick summary of the issues at this point -- still trying to digest it. 

Flavoring Issues in the Proposed EU Tobacco Products Directive

From the proposed revision to the EU's tobacco products directive, mentioned in the last post:

(15) The likelihood of diverging regulation is further increased by concerns over tobacco products, including smokeless tobacco products, having a characterising flavour other than tobacco, which may facilitate uptake of tobacco consumption or affect consumption patterns. For example, in many countries, sales of mentholated products gradually increased even as smoking prevalence overall declined. A number of studies indicated that mentholated tobacco products can facilitate inhalation as well as smoking uptake among young people. Measures introducing unjustified differences of treatment between flavoured cigarettes (e.g. menthol and clove cigarettes) should be avoided ³⁶.

36  WTO Appellate Body, AB-2012-1, United States – Measures Affecting the Production and Sale of Clove Cigarettes (DS406).

Would this take care of claims about discrimination?  Seems likely that it would.  How about claims relating to such measures being "more trade restrictive than necessary"?

ADDED: That quote is from the Preamble. Article 6, paragraph 1 then sets out the following requirement: "Member States shall prohibit the placing on the market of tobacco products with a characterising flavour."

Plain Packaging and Flavored Cigarettes in the EU

From Reuters:

The European Union's executive Commission is to propose larger health warnings on cigarette packets and a total ban on flavorings such as menthol, a draft revision of EU tobacco rules seen by Reuters showed on Monday.

The proposals stop short of forcing all cigarettes to be sold in plain packets carrying graphic health warnings, as required in Australia from the start of this month. But individual EU governments will be free to insist on such packaging if they choose to do so.

...

Due be published on Wednesday, the proposals must be jointly approved by EU governments and the European Parliament before they can become law, a process that could take up to two years.

If this becomes law in the EU, will they face complaints related to both plain packaging and flavoring bans?  Will banning all flavors, including menthol, mean that the EU can succesfully defend a claim like the one Indonesia brought against the U.S. flavored cigarette ban (which exempted menthols)?

Can the WTO Handle All These Disputes?

A few months ago, I mentioned the surge in WTO disputes this year.  Well, they keep coming, and it may be starting to strain the WTO's resources.  Reuters reports:

A surge in trade disputes has forced the World Trade Organization to reallocate staff to cope with a flood of litigation in the pipeline for 2013, according to diplomats and documents at the global trade body in Geneva.

The WTO's 157 members have launched 26 trade disputes so far in 2012, the most since 2003 and three times more than the eight new complaints filed in 2011.

According to an internal WTO document seen by Reuters, the WTO decided to reallocate staff to the disputes team to deal with the increasing number and complexity of legal cases.

"We are seeking to reallocate resources from other divisions. It's happening already," said one WTO source.

As well as moving staff, the trade body also advertised for a senior dispute settlement lawyer, at a starting salary of around 161,900 Swiss francs ($175,300), and is seeking short term candidates to help deal with the caseload.

Investor-State Polling in New Zealand

A recent poll in New Zealand asked the following:

New Zealand is currently negotiating a free trade and investment treaty with ten other countries called the Trans Pacific Partnership. As part of the negotiations, there is a proposal to allow foreign investors to sue governments in private offshore tribunals if government actions threaten their future profits. The US advocates it while Australia says it would not sign a deal with this in it. Which one of the following statements do you most agree with:

Here were the possible responses, along with the percentages who chose each:

1 New Zealand should reject trade and investment treaties that would allow the government to be sued by foreign investors in private offshore tribunals - 64%

2 New Zealand should accept terms that would allow investors to sue the government in this way if that is what is required to get a Trans Pacific Partnership deal - 13%

3 No opinion / Can’t choose - 24%

So was that a fair poll question?  Is "private offshore tribunals" the best description?  Why not just "international tribunals"?  And is "government actions threaten their future profits" the best way to describe the litigation possibilities?

I've always been curious how investor-state would do in a poll.  I'm not sure this poll does the job perfectly, but it's interesting nonetheless.

Antigua Retaliates

You are forgiven if you have forgotten about the WTO Gambling dispute.  It has been a while since anything happened.  But apparently it is at long last on to the next stage, as Antigua announces (Word doc) that retaliation is coming:

On 21 December 2007, the Arbitrators determined in document WT/DS285/ARB (the "Award") that Antigua and Barbuda could request authorization from the DSB to suspend the obligations under Sections 1, 2, 4, 5 and 7 of Part II of the TRIPS at a level not exceeding US$21.0 million annually. During the course of the arbitration Antigua and Barbuda had withdrawn its request to suspend concessions or obligations under the GATS, as on further evaluation this was considered to be impractical, a conclusion with which the Arbitrators agreed.

 Since the release of Award, Antigua and Barbuda has been working in good faith to obtain a fair negotiated settlement to DS285 with the United States, but all efforts have proven fruitless. Article 22.7 of the DSU provides that "the DSB shall be informed promptly of the decision of the arbitrator and shall upon request, grant authorization to suspend concessions or other obligations where the request is consistent with the decision of the arbitrator, unless the DSB decides by consensus to reject the request". Accordingly, on the basis of and consistent with the conclusions and determinations of the Arbitrators in the Award and in accordance with Article 22.7 of the DSU, Antigua and Barbuda requests authorization from the DSB to suspend concessions or other obligations under the TRIPS, and in particular Sections 1 (Copyright and Related Rights), 2 (Trademarks), 4 (Industrial Designs), 5 (Patents) and 7 (Protection of Undisclosed Information) of Part II thereof at a level not exceeding US$21.0 million annually.

 Until such time as the United States brings its measures into compliance with the rulings and recommendations of the DSB in DS285, every year Antigua and Barbuda will notify the DSB of the suspension of concessions or obligations it intends to adopt and actions it intends to take with respect thereto prior to bringing those suspensions into force or taking those actions. The notice will also specify how Antigua and Barbuda proposes to ensure that, in applying the suspension of concessions and obligations, they will not exceed US$21.0 million per annum.

How will it proceed with the TRIPS retaliation?  This should be interesting.

Cheer Up, USTR!

This is from a Washington Post article on a recent survey of federal workers:

The Office of the U.S. Trade Representative ranks as the worst small agency, [with only 32.7 percent of employees saying they are satisfied]. Former employees said its sense of mission was eroded by an ambivalent attitude toward free trade early in the Obama administration and during the economic crisis. Views of the agency’s leaders plummeted 18.9 percentage points over 2011.

Maybe next year will be better for the folks at USTR, with the TPP progressing, and perhaps the US-EU FTA starting negotiations?

New Chairs and Vice Chairs of the ASIL-IEcLIG

From the ASIL-IEcLIG:

Elizabeth Trujillo from Suffolk University Law School and Jason Yackee from University of Wisconsin School of Law have been elected to be Co-Chairs of the International Economic Law Interest Group for ASIL.   Jason and Elizabeth are stepping in after 2 years as being Co-Vice Chairs under the wonderful leadership of Sungjoon Cho and Claire Kelly.  New Co-Vice-Chairs are David Zaring and Sonia Rolland.  The election took place at the ASIL-IEcLIG Biennial conference held at George Washington Law School in Washington DC on Nov. 29-Dec. 1, 2012.  The new leadership will be assuming their positions at the ASIL 2013 Annual Meeting in April.  The ASIL-IEcLIG Biennial, in cooperation with George Washington University School of Law and the Federal Trade Commission, was on "Re-Conceptualizing International Economic Law: Bridging the Public/Private Divide."  Keynote speakers included Professor Ralph Steinhardt from GW Law School, the Honorable Donald C. Pogue, Chief Judge United States Court of International Trade, and Amelia Porges from the Law Offices of Amelia Porges.  There were over 100 registered participants from all over the world including the U.S., Europe, Latin America, New Zealand, and Asia.

Eli Lilly NAFTA Chapter 11 Claim - Part 3

One last post on the Eli Lilly NAFTA Chapter 11 complaint (unless someone else has something they want to add).  Eli Lilly's national treatment argument is as follows:

106.  The  measures  in  issue  de  facto  discriminate  against  Lilly,  a  U.S.  investor,  when compared to domestic investors, by requiring the Strattera patent (which was filed on the basis of an international application) to meet elevated and additional standards for utility and  disclosure  that  are  not required  by  the  laws  of the United  States  of America,  the European  Union,  or  the  harmonized  PCT rules.  The  measures  in  issue  disadvantage foreign nationals and render their patents  especially vulnerable to  attack by insisting on proof of utility and disclosure of evidence that is  not required by the foreign applicants' own national jurisdictions or international rules.

107.  The  measures  in  issue  also  de  facto  result  in  less  favourable  treatment  to  Lilly  as compared  to  domestic  generic  competitors,  who  by  virtue  of the  application  of the measures are able to reap the economic benefits associated with Lilly's investments, thus destroying Lilly's market share and associated profits.

Do either of these arguments demonstrate less favorable treatment?  The first compares Eli Lilly's treatment in Canada with that given to Eli Lilly under U.S. or international law.  The second compares Eli Lilly's treatment with that given to domestic generic competitors.  But is the comparison between Eli LIlly and similarly situated Canadian patent holders (i.e., non-generic companies) the real key?

Eli Lilly NAFTA Chapter 11 Claim - Part 2

In the last post, Henning provided an excellent summary of the key substantive parts of the Eli Lilly NAFTA Chapter 11 complaint as it relates to IP law.  Let me just make a more general point here (and another more specific point in the next post).

In Eli Lilly's view, Canada has done something outrageous in its patent law.  I'm not enough of a patent law expert to know whether that's true, but I see the argument.  But stipulating for the moment that Canada has done someting outrageous, let me ask this:  Does it make sense to have a system where foreign investors can try to get compensation for outrageous patent treatment, but domestic investors get nothing?  If a country's law is deficient in some way, should we focus on trying to get that law fixed, rather than create an international rule that gives only foreign investors compensation for the deficiency?

Guest Post by Henning Grosse Ruse - Khan: Investor–State Arbitration to Challenge Host State Compliance with International IP Treaties?

A Guest Post by Henning Grosse Ruse - Khan:

Last week, Luke Peterson reported that the U.S. based pharma corporation Eli Lilly has put Canada on notice of its intent to submit a claim to arbitration under NAFTA Chapter 11 following the invalidation of some of its patents by Canadian courts (http://www.iareporter.com/articles/20121203_2). The Notice of 7 November 2012 is now available on Andrew Newcombe’s website (http://italaw.com/cases/1625). It reveals an interesting new interface between international IP and investment law.

In Eli Lilly and Company v. The Government of Canada, the US pharmaceutical complains about too strict
patentability requirements as applied by the Canadian Courts since 2005. In a nutshell, Eli Lilly alleges that the courts interpret the utility (or industrial applicability) standard for patent protection – one of three
criteria an invention must meet to be patentable – and the requirement to disclose the invention so that it can put into practice in a way that leads to frequent invalidation of pharmaceutical or bio-pharma patents in Canada. As for the utility criterion, the notice alleges that since 2005, federal Canadian courts have created a so called promise doctrine ‘whereby utility is assessed not by reference to the requirement in the Patent Act that an invention be “useful”, but rather against the “promise” that the courts derive from the patent specification’ (p.10). Eli Lilly argues that this doctrine has led to ‘a dramatic increase in the number of patents invalidated for the lack of utility’ – 17 in the last 7 years (all in the area of bio-pharma patents), as compared to 2 in the 15 years before (p.15). The US company also complains about ‘a new, non-statutory disclosure obligation’ imposed by Canadian courts which interacts with the enhanced utility standard ‘in a manner that is fatal to valid pharmaceutical and biopharmaceutical patents’ (p.16, 18), such as those for its drugs ‘Strattera’ (for treating attention-decifict hyperactivity disorder, ADHD), Zyprexa and Evista.

For me, the most interesting aspect is that Eli Lilly claims expropriation and a breach of the fair and equitable treatment (FET) standard because the Canadian court decisions which invalidate its patents ‘are contrary to Canada’s international treaty obligations’ (p.24); in particular those deriving from the WTO TRIPS Agreement, NAFTA Chapter 17 on IP rights and the Patent Cooperation Treaty. In essence, the company argues that (1) the “promise doctrine” imposes an utility standard which violates Art.27:1 TRIPS to make available patents for inventions which are new, non-obvious and useful; (2) the judicial decisions amount to a de facto discrimination of biopharma patents contrary to the Art.27:1 TRIPS obligation not to discriminate among different fields of technology; and (3) infringe the Patent Cooperation Treaty (PCT) by imposing additional form and content requirements relating to international patent applications. These breaches on international IP treaties are argued to violate investment protection standards because Eli Lilly claims to have a reasonable expectation that Canada complies with these IP treaties (pp.25-26).

Leaving aside the merits of the claims of inconsistencies with international IP treaties (especially the absence of any further definition of the patentability criteria in TRIPS is generally understood as conferring flexibility on WTO Members to define these criteria in their national laws), there are systemic implications: Should investor – state arbitration function as a new venue to litigate compliance with international IP treaties? Can it serve as an alternative forum for rightholders to challenge TRIPS consistency (instead of lobbying their governments to bring a WTO dispute)? And if we end up with parallel proceedings (as in the challenges to Australia’s plain packaging measures where Phillip Morris equally claims a BIT violation based on alleged inconsistencies with TRIPS and the Paris Convention), will investment arbitration come up with its own assessment or wait for a WTO decision?

Unilateralism vs. Multilateralism in Currency Disputes

Brazil has put forward a conceptual note (Word doc) on the issue of exchange-rate misalignment.  Its focus is on developing trade remedy procedures to deal with the perceived problem:

IV. IS THERE A NEED TO CRAFT TRADE REMEDIES THAT SPECIFICALLY ADDRESS CURRENCY MISALIGNMENTS?

Existing provisions related to exchange-rate movements in the WTO agreements as well as the three Agreements providing for trade remedies at the WTO were created to deal with situations unrelated to the dynamics of exchange-rate movements in today's volatile international monetary system. The WTO seems to be systemically ill-equipped to cope with the challenges posed by the macro and microeconomic effects of exchange rates on trade. 

Members may wish, against this background, to consider the need for exchange-rate trade remedies and to start some analytical work to that effect. A non-exhaustive list of key elements that will necessarily have to be considered in this analytical work is provided below:

(a) Measuring currency misalignment

It will be necessary to define methodologies to assess currency misalignments and to establish triggers/benchmarks for specific action. Cooperation with the IMF could be explored. The purpose would not be to establish optimal or equilibrium exchange rates for particular currencies, but rather to detect significant departures from historical or reasonable levels. Issues such as the basis for comparison - against other individual currencies; basket of currencies; both - and time-frames would be part of this evaluation.

(b) Product-specific/sector-specific or economy-wide scope

Should corrective measures be applicable only to a specific product or sector in the country affected or to its entire economy? What are the implications of either choice? The three agreements on trade remedies do not contain any provision on sector specific or economy wide corrective measures. A sector-specific approach would need a definition of and/or a classification of sectors.

(c) Time-frame

An appropriate time-frame for the application of corrective measures. The argument could be made that sustained long-term misalignments would no longer be a misalignment; rather, they would become a new structural point of equilibrium. The discussion on time-frames would equally touch on review and extension/termination of corrective measures.

(d) Origin of covered products

Should corrective measures be applied on an MFN basis or specifically for currencies against which the misalignment is found? As exchange rate misalignments may not necessarily occur against a large number of key trading partners and may have a focus on bilateral trade (or on a wider volume of world trade representing in any case the sum of a certain number of bilateral trade flows), it may be the case to consider a non-MFN approach.

(e) Injurious effects

Corrective measures could be crafted to be triggered automatically or, alternatively, following the finding of injury or threat of injury to the domestic industry. The automatic format would probably demand more stringent requirements.

(f) Investigation procedures

The need for investigation procedures would depend largely on the automaticity of the mechanism adopted. The more automatic, the less need for such procedures. In case these procedures are necessary, work could be inspired by the parameters found in the ADA, ASCM and AS.

With trade remedies, a government acts on its own, but subject to WTO rules. In a sense, the government action is unilateral in nature, but still subject to multilateral oversight.  Is this the best model for actions against currency measures? Or would a pure multilateral model work better, with explicit WTO rules developed (e.g., on "measuring currency misalignment"), and any concerns brought directly to the DSU?

Is It Time to Regulate U.S. State Subsidies?

I've talked about sub-federal state subsidies before on this blog. The issue is suddenly in the news, due to a long NY Times article today. CFR's Edward Alden proposes reining them in as follows:

... There are three basic requirements: a legislative framework, an adjudication body, and penalties.

Legislation:  The U.S. Congress should pass legislation that puts in place domestically many of the rules of the WTO’s “Agreement on Subsidies and Countervailing Measures.”The bill would distinguish between prohibited “specific” state subsidies to companies – such as tax refunds or reductions, cash grants, loans or loan guarantees – and permitted government expenditures such as infrastructure, job training, or across-the-board corporate tax reductions that are broadly beneficial to business.

Adjudication:  The federal government should establish dispute settlement panels, under the authority of the Federal Trade Commission. States would be allowed to bring complaints in cases where they believe they have been harmed by prohibited subsidies offered by other states. Much as in the WTO, panel decisions would be binding, though an appeal mechanism to domestic U.S. courts would need to be created.

Penalties:  The most obvious remedy is that the tax break or other prohibited subsidy would need to be withdrawn immediately. In the EU system, there is also a provision that can require the companies to pay back the subsidies. Another possibility could be a cash penalty that the offending state must pay to other states that were harmed by its actions.

Is there a chance of success here?  I wasn't aware of any momentum for action.  Will the NY Times piece get people thinking about the issue?  Is Alden's approach a good one?  Does Canada's Agreement on Internal Trade offer any guidance?