International Economic Law and Policy Blog

The Second Seals Hearing-A Big Picture View

It is easy to be depressed and disgruntled after this hearing.  A panel Chair who is ignorant even of the most basic case law fundamental to the panel's own duties and jurisdiction, a Chair who manages to make a sexual and racial caricature in one breath, then a Canadian attorney who says seals are better off slaughtered in agony than dying a natural death.  A panel that badgers the EU with persistantly aggressiive, sceptical and often inscrutable questions, while hardly asking anything really probing of the complainants.  Every right to be enraged and dream of repeating Seattle 1999.

But as a teacher and a scholar, i have a duty to my students and my colleagues, and to my own ideal of the life of the mind, to try and take some distance and put what happened today in a broader perspective.  Before I post tomorrow the blow-by-blow of today's debacle, I would like reflect in such a broader view.

I remember the late 1990s.  The panel report in Shrimp/Turtle had come out and it had taken the completely anti-evnironmentalist line (like Tuna/Dolphin I) that, in essence, you could not under WTO law restrict trade to deal with an environmental problem that was not purely domestic.  I had an article to be published in the Journal of World Trade about the panel, "Another Environmental Disaster in Geneva."  I happened to be teaching that summer in the Academy of European Law at EUI, and so was Claus Ehlermann, at the time an Appellate Body Member.  We had a lunch at Carpe Diem, between San Domenico and Fiesole.  By the time the espresso came, my view of the trade and environmental issue at the WTO had changed.  Claus and I avoided completely the diiscussion of the case, as he was under a strict duty as a judge not to comment on such a matter.  But an hour and a half in the presence of this humane and wise being convinced me that the panel report in Shrimp/Turtle would be overturned-because I saw what kind of man Claus Ehlermann was (and is) and I  knew he would never sign a judgment that would make the WTO stand for the right to destroy endangered species.   After that I made the confident prediction that the AB would follow a different route on trade and environment, which led to good-natured skeptical laughter from friends like Arthur  Appleton. Ultimately, though, my intuitions after that lunch would prove to be right.

Fast forwarding to today, despite all the bluster and anti-animal welfare rhetoric by Canada in particular, it is remarkable that no one questioned the right of the EU to exclude from its markets, products from seals killed in an inhumane manner.  Norway even conceded that the EU could have standards that excluded products from seals killed with methods permitted in Norway.  In light of the history of the trade and environment debate this is not a trivial common ground.  

The second big picture observation, related to the first, is that the greatest bulk of the argument time of Canada and Norway focused on the exceptions in the EU ban-indigenous, marine management, personal, use, transit  (the latter two or even three utterly trivial in economic impact).  What is the story here?

The perspective we have to bear in mind is the recently-decided TBT trilogy, US-Cloves, US-COOL, and US-Tuna/Dolphin.  One of the common features of the AB rulings in all three cases is that the AB reversed all findings of violations of the panel other than those that could be characterized as "underinclusiveness".  In US-Cloves, clove cigarettes were banned, but not menthol, which on the basis of deference to bad fact finding by the panel, the AB considered to pose the same problems in terms of the public health objective, but not different public health challenges in implementing a ban (wrong, but the panel is the culprit).  In US-COOL, the AB held that the only violation of TBT was that the paperwork burden  on operators was not needed to insure the integrity of the information actually required to be placed on the label.  In US-Tuna/Dolphin II, the AB held that there was underinclusvieness, because the US government scheme for verifying the integrity of the label did nothing to adress the risk of dolphin-unsafe fishing outside the eastern tropical pacific.  In all these cases, the AB gave the respondent the opportunity to comply by extending its regulation, to cure the underinclusiveness.   And in two of the three cases (COOL and Tuna/Dolphin) the US has proposed just that.  

There is always a risk that a state will not achieve the political consensus to extend, and thus would be put in the position of retracting.-or simply being subject to suspension of concessions (which would be not large in the case of Seal Products).  But, in fact,, how hard would it be for Europe, if it had to, to eliminate the marine management exception to the ban of seal products?  There are only a small number of seals involved-nuisance seals-and those products could easily be used for products that could be destined for non-EU markets.  At least one panel member, the Australian, seemed to think the indigenous exception had a "persuasive basis." So eliminating the marine management exception (and the personal use exception ) would largely solve the concern with exceptions, at least one of the panelist's concerns.  And hard to imagine that it would in any way detract from seal welfare.  Of course, doing so won't give Canada or Norway any additional competitive opportunities, but that just shows why the effects, rather than the rhetoric, of the challenge to the expections is not really anti-seal.  Indeed,a panel ruling faulting the EU measure for underinclusiveness (i.e. impugning the sustainable marine management and personal use exceptions) would give animal welfare activists valuable support in trying to resist what might be regarded as loopholes or gaps in proposed bans on seal products that may be on the horizon in other WTO Members. 

A similar observation could be made about what seemed to be the obsession of the Chair but even more so the Australian panelist about the fact that the EU had not acted to impose animal welfare standards even where the product was permitted under an exception.  Playing philosopher-kings and philosopher-queens these panelists appeared to be thinking that a perfectly rational public-morals based measure would require that animal welfare be addressed even within the exceptions.  The EU made a common-sense, real-world response: there is a tension between the conditions of the traditional aboriginal hunt and an effective scheme to protect animal welfare, so in practice there is a trade-off between protecting socio-cultural practices and protecting seals.  But I suppose, in an ideal world, one would indeed say that the EU ought to try and make indigenous peoples make some compromises with what they see as tradition for the sake of animal welfare.  I think it is utterly misguided to believe that one imposes that through a legal regime like the WTO with any real legitimacy (the pluralism point that Langille and I make in our Yale piece). And I don't know any provison as interpreted by the AB under either GATT or TBT that could justify imposing that.  But from the animal welfare point of view, it isn't a terrible idea. I'm sure there are some forms of training or sensitization that could be undertaken by the EU (without even having to go back to the Parliament), which would exhibit that they have not entirely abandoned the public-morals animal welfare objective even while pursuing the equally public-morals based objective of vindicating indigenous rights.  Of course,this might be viewed as condescension since indigenous peoples may have other ways ofthinking about mediating their connection to nature, and it will do nothing to increase the access of Canadian or Norweigian imports to the EU market,  since Canada actually exempts indigneous peoples from the main animal welfare requirements, and Norway's hunt is not indigenous to any extent.  But, on the other hand, it is possible  to meet the panel's apparent obsession with perfect rationality without sacrificing seals (and maybe even saving a few more).  And again though without providing any economic benefits to Canada nor Norway.

Then there is less restrictive alternative.  I won't repeat what I've already posted.  Bottom line: both Canada and Norway appear to propose or at least countenace a scheme that would allow seals hunted inhumanely-at least according to Norway, based on the EU's own standards for what is inhumane-t be excluded from the EU.  By accepting this as a less trade restrictive alternative, they are atorning to the idea that were the EU to properly implement such a scheme as an alternative to the current ban, it could do so consistent with WTO law.  How could an alternative that itself violates WTO be reasonably available, to say nothing of whether it could be regarded as less restrctive in a meaningful sense.  Thus, by saying that the EU can operate an alternative scheme, banning seal products where the individual seal from  which the product is derived has not been convincingly established to be killed humanely according to the EU's own standards, Canada and Norway are basically admitting that much of their argumentation is irrelevant bluster,e.g.. the claims about the existing Canadian hunt being "humane" , about Norway's permissiveness of gaffing being okay etc.  The EU attorney responded in an honest, common-sense way to the proposed less-trade-restrictive alternative-because of the climatic and geographic conditions, the monitoring problems, etc. in reality under such alternative scheme very few seal products from Canada and Norway would ever get into the EU.  But if the panel sticks to its apparent obsession to have a Platonic ideal of a measure, well, it wouldn't make any difference from an animal welfare perspective, and maybe not from the overarching public morals perspective that encompasses animal welfare as well as other things.  The EU would simply impose a strict burden of proof to show that any given product coming in contained only matter from those seals that had been demostrably justified to have been hunted humanely.

Let me be clear.  I think the ban as is would be perfectly justifiable under WTO law. But like we see with the implementation of COOL and Tuna/Dolphin, there may be a window of opportunity to use what appears to be a negative (and legally wrong) decision to advance progressive values, making the meaure stricter and tighter. 

But what is really lost in the path that the panel appears to be going down, individual panelists to difffering degrees or at differing speeds, is the value of parliamentary democracy.  No normative weight is accorded to the real world result of compromise in a democratic process, the equilibrium of principle and interest, where multiple objectives are reflected in a law, but balanced in a different way than would be done by a perfectly rational philosopher-king or queen, because the balance is struck not on Mt. Olympus but through passionate argument, shrewd lobbying, and often rough and imprecise negotiated trade-offs.  There was no evidence here, despite the smoke and mirrors, of any discrimination, any lack of due process, any targeting of foreign economic interests, any corruption of democracy.  Just hard trade-offs, Well,

Well, Norway's lawyer, and the Chair of the panel apparently agrees, thinks that the least inconsistency, any element of tension between or imperfect integration fo different aspects of public morality, of multiple objectives, is fatal-intolerable contradiction, scandalous hypocrisy.

Yet this very messiness is what many of us call instead representative democracy, and we think it remains the best hope for humanity of decent self-governance (even if some could argue a la Churchill that it is the best in being the least worst.)

Iura non novit curia (or: "no, we know no Bananas today")

As I tweeted earlier, a dramatic moment occured in the Seal Products hearing this morning, when the chair of the panel took the view that once a panel  has been approved by the DSB whether the original request is defective is merely a matter of academic interest and of no concern for the panel.  Now essentially 15 years of AB jurisprudence of course says the reverse.  Here is EC-Bananas III: '[a]s a panel request is normally not subjected to detailed scrutiny by the DSB, it is incumbent upon a panel to examine the request for the establishment of the panel very carefully to ensure its compliance with both the letter and spirit of Article 6.2 of the DSU."(Para. 142)(emphasis added)

Anyone can get the law wrong on a specific complex point, and we have appellate review:  but I still find it incredible that the Chair (!) of a panel would not know the fundamental requirement and duty that the panel establish that the basis for its jurisdiction is adequate.  This goes to the fundamental legality and legitimacy of the panel's very existence.  Not being aware of the basic requirements for the panel's jurisdiction brings in serious question whether the Chair has any credibility left to run the panel procedings and be responsible for its proper operation.   I would appreciate the reaction of readers of this blog (and especially anyone else who witnessed the episode this morning)-is it going too far to suggest that he should withdraw and be replaced in order to protect the credibility and integrity of the panel.

Day One, Second Round of Seals Hearings-II

Toward the end of the afternoon, the focus became the comparison of the non-indigenous non-marine management seal hunt in Canada with the indigenous seal hunt in Greenland.  Norway insisted that both hunts are really "commercial" since they are both on a significant scale, both involve the provision of a livelyhood to hunters, and both involve the trade in pelts or other seal products to some extent.  

Norway's strategem here was to portray the core distinction in the EU scheme as between permitted "non-commercial" hunting and impermissible "commercial" hunting, and suggest that this distinction was framed in a suspciously inconsistent way so as to protect Greenland's hunt while blocking products from Canada's.

There was a certain cleverness in Norway's rewriting of the EU seals regime.  Of course, the fundamental distinction is not commercial vs. non-commercial but between hunts that serve specific legitimate purposes that justify allowing some risk of seals being killed in a manner harmful to animal welfare (indigenous rights including to a traditional way of life and sustainable marine management) and hunts like the East Coast Canadian hunt that are based upon normal commercial activity and do not have these purposes.  Rightly, the EU scheme limits the extent to which the former, permissible hunts can result in commercial trading of seal products (the subsistence and own-use requirements in the case of the indigenous exception and the not-for-profit requirement for the sustainable marine management exception), to prevent abuse of the exceptions where hunts are conducted ostensibly for the purposes in question but are really a way of getting around the general ban and its morally-based animal welfare goals.  Because the fundamental distinction is not commercial vs. non-commercial but whether the hunt supports certain specific legitimate policy purposes or not, the EU scheme limits the extent to which the permissible hunts can be commercial, so that there is less incentive to try and abuse the exceptions to circumvent the main measure.  But in so doing it doesn't, and doesn't need to, eliminate all commercial activity flowing from the hunts for the permissible policy purposes; indeed eliminating all such activity would result in waste of products and thus be offensive to public morals since resources that could serve human needs would be thrown away. 

But rewriting the EU scheme as based on the commercial/non-commercial distinction served Norway's and Canada's purposes well.  Based on this distorting gimmick, wouldn't the fishers in Canada's East Coast hunt also be viewed as eaking a subsistence living out of sealing just as much as Greenland's indigenous peoples?  As the EU lead attorney reminded the panel, the all-important difference is that Greenland's hunt is indigenous and under international law, and indeed even under Canada's own constitution indigenous people are entitled to special treatment  when traditional activities like hunting and fishing are involved.

As someone whose origins are in the East Coast of Canada, I would add that the supposed "subsistence" nature of the non-indigenous East Coast hunt derives from a policy decision of Canadian governments to deal with economic decline on the East Coast of Canada not through worker adjustment or other pro-active industrial policies but through a mix of aids to prop up uneconomic fishing actvities and the seal hunt, as well as welfare-type payments to see the these individuals through in really tough times.  In other words, while seal hunting of indigenous peoples as a way of survival is an ancient cultural practice, resorting to seal hunting as a way of earning one's keep on the East Coast of Canada today is the result of a pathology of failed industrial and adjustment policies, as documented in numerous Royal Commission-type exercises, studies, reports and taskforces on economic underdevelopment in Atlantic Canada and what to do about it.

The other fallout from Norway's tactic of focusing the comparison on Greenland vs. the "commercial" hunts of Norway and the East Coast of Canada, was again being able (very repeititvely) to revert back to the attack on the idea of a measure with multiple objectives where to some extent the achievement of one involves accepting a lesser degree of fulfilment of another.  Thus, Norway and Canada would have it that the Greenland indigenous hunt  is as "cruel" (and they suggested, even more so) than the Canada East Coast non-indigenous hunt.  Yes, of course, regrettably, because the suffering of seals is being given less significance than respecting indigenous rights in this particular case.  But, it was asked by the chair of the panel in effect,, could not something still be done to minimize the suffering occuring during indigenous (or indeed marine management) hunts? The EU answered very honestly that there are real limits to that in the case of indigenous hunts, given the way in which traditional indigenous hunting is done and the EU also pointed out that Canada itself exempts indigenous hunting from its own animal welfare requirements.  Canada hemmed and hawed, said some things about the complexity of the exceptions, but in the end admitted it.  As for the marine management hunts, I would add that we musn't forget that such hunts are required to be conducted in a manner that doesn't undermine the main purposes of the EU measure.  Thus, arguably, animal welfare concerns cannot simply be ignored when this exception is invoked, even if, to some extent, they are being relativized to the sustainable marine management purpose.

Day One, Second Round of Seals Hearings-The State of Play (Detailed Legal Analysis to Follow Later into the Geneva Night)

If paranoid people can have enemies, then a cliche can be true.  So, today, a picture is worth a thousand words.  The hearing quickly broke out of the anachronistic ritual of exchanges of written texts read word for word as the EU screened graphic videos of seals writhing in agony while the sealers were unaware of, or indifferent to, their fate. 

At one level, these indignation-provoking images were a dramatic reminder of the power and authenticity of the moral sentiments that underpin the EU ban. 

But the videos disclosed much else about this case. The images refuted Canada's claim about a humane 3-step method, because they showed that the sealers can't afford or don't afford the attention to what's happening with a still-conscious seal.  They don't adminster the further steps in time to avoid unbearable suffering (and that is the whole hypothesis that that the 3-step method is humane). 

The images also are a graphic display of why aboriginal and marine management hunts are different from the non-aboriginal Canadian hunt-the commercial pressures of the latter mean that the sealers have little choice but to try and immobilize as many seals as possible at the same time, and thus cannot tend to what is needed to put individual still-conscious seals out of their misery quickly.  No aboriginal hunt involves this pattern.  

And the images show why Canada's and Norway's fantasy of a world of regulated humane killing is just that-for even without the commercial pressure, the risks created by climate and geographic conditions often create a tragic choice between the safety of the sealers and what is needed to attend to the wounded seals and insure there suffering is merely instantaneous. The EU was careful not to attribute callousness to the individual sealers, indicating that the cruelty is ultimately systematic, a product of the combined commercial pressures and natural realities.  This is why a humane hunt under entirely commercial motives is a delusion--even if an individual seal can be killed sometimes humanely and an individual hunter can be a humane human being.

Norway's opening statement mostly focused on responses to the EU legal arguments, based on various misreadings of WTO jurisprudence (I'll expand on that in a more doctrinally-focused post later). Norway suggested that the EU was required under Article XX to undertake negotiations prior to imposing a unilateral measure.  A common misreading of the chapeau analysis of Shrimp/Turtle. 

First, Norway (and as it turns out Canada) do not grasp the AB's fundamental holding that the chapeau goes to application of the measure, not the design features of the scheme itself (this is an innocent misunderstanding, as was demonstrated this afternoon, when neither Canada nor Norway could understand EU question to them about what elements go to application under the chapeau and which on the other hand relate to the design features or structure of the scheme itself, which would be the focus of analysis for example under Article III (see Chile-Alcohol etc). 

Second, as the AB clarified in its 21.5 ruling, there is no general duty to negotiate under the chapeau but rather non-discrimination in the chapeau requires providing negotiating opportunities that are comparable from one forum to another. The chapeau does not require negotiation in the abstract, because it would be impossible to determine an abstact standard for serious negotiating effort, i.e.without a benchmark comparing the effort already invested with some particular other group of countries.   If there were any doubt, the AB removed it in US-Gambling, where it categorically rejected the idea that the invocation of the GATS equivelent of Article XX could be conditioned on prior talks with a view to a negotiated settlement, regulatory cooperation (Para. 317).

The second big legal conjuring act by Norway was about the relation of 2.1 of TBT as interpreted by the AB in Cloves, Tuna/Dolphin, Cloves and Article I and III of the GATT.  Norway's non-sequitur:  the AB  says scope of I and III in GATT and 2.1 in TBT are not always identical;therefore the particular AB holding about permissible detriminal impact from legitimate regulatory distinctions cannot apply to GAT I and III.  This is the equivalent logical error to saying that a Rottweiler and a Spaniel are different; therefore, in no respect can laws about dogs be applied to both. 

Of course there are some differences between GATT I and III and TBT 2.1, but this is not dispositive of what differences might influence legimatelythe interpretation of the provisions in question.  What Norway cannot point to is any statement by the AB in the case law that says that because the text of GATT I and III are different from 2.1 the analysis about legitimate regulatory distinction in particular is inapplicable to I and III.  True, the AB says that the absence of Article XX exceptions is a factor to be considered in understanding the overall relationship between GATT and TBT.   But this goes to the determination of the AB that there is a need to preserve a similar balance between the right to regulate and trade liberalization both under TBT and GATT.  Such a general observation about a balance is consistent with the proposition that under GATT itself there are important reasons why one needs to take account of regulatory purposes in considering treatment no less favourable, not just under Article XX, for reasons that that the EU lead attorney explained today (e.g.list of regulatory objectives under GATT X XX is closed).  Anyhow, as I will likely elaboate, the language of the AB in EC-Asbestos para .100 on permissible regulatory distinctions between like products is so close as to be essentially identical to the language of the AB in EC-Cloves para. 169 that 2.1 should not be read so as to mean that "any distinction, in particular those based exclusvielyon particular product characteristics or their related processing or producting methods, would per se accord less favourable treatment...."     And then you would need to expain Dominican Republic-Cigarettes where there was a disparate impact and no discrimination-the AB held that it was crucial to consider whether factors unrelated to national origin of the products procued the impact, in which case there was no basis for a finding of treatment less favourable. And on Article I, we have Canada-Autos, Columbia-Ports of Entry and the Poultry case for the proposition that non-national origin based distinctions or condition are compatible in principle with treatment no less favourable under I:I..

The third legal canard (besides the one diiscussed in my earlier post on the abuse of the ECJ by Norway in particular) of Norway and to some extent Canada is really the notion that a measure is incoherent if it serves multiple policy objectives  in such a way as that the fulfillment of some of the objectives is limited by virtue of the need to address other objectives.  Norway in particular resorted to a crude rhetorical trick.  It suggested that on the one hand the limits on the marine management exceptiion-the size of the cull-could not be jusstified under marine management purposes, while the margine management exception seemed to belie the animal welfare/public morals concerns behind the ban as a whole.  But this is just a game.  In fact, all of this is explained by the basic observation of the AB in EC-Hormones that multiple objectives are normal in representative democracies. 

The scale of hunt and non-profit limitations in the SMS exception as well as the subsistance/use within the community  conditions in the indigenous exception reflect  the concern that these exceptions not be abused or circumvented to undermine the main purposes of the general ban.  thus,when one considers multiple purposes, one has to consider how a measure can prevent the pretextual invocation of one kind of purpose to undermine another.  Each element of an exception has to be considered not simply in terms of the objective of the main measure taken as a whole or other objectives taken individually but the balance between them.  The sleight of hand of Norway and Canda is to portray the EU scheme as incoherent, by judging certain elements solely in terms of one of the multiple purposes and others in light of another of the multiple purposes.  The idea is to show incoherences by saying that elements that relate to one purpose cannot have deviations from that purpose that are required by  other purposes that could be entirely justified by these other purposes.  This technique totally undermines the basic proposition in EC-Hormones that meaures normally serve multiple purposes.

The big Canadian red herring was about dear hunting.  Obviously, Canada and Norway never argued that deer products are like seal products.  Now Canada contends that animal welfare regulation of deer hunting is nevertheless relevant.to whether the EU seal products ban is WTO-consistent.  The idea here is that in order to be able to stop cruetly against seals the E uhas to prove that it has taken measures to stop cruelty against every other animal.  This is what Jo Langille and I refer to in our Yale article as basically the fanatical or totalistic view of public morals, which suggests that the only bona fide form of governemtal regulation of morals is one thaat encompasses every possible moral concern of the same generic kind.  Why this is bad philosohy is, I hope, well explained by Langille and I;in fact as we point out it would lead to an advantage under WTO law to totalitarianism and fanaticism over democratic pluralism and gradualism-totally perverse.  But forget us-the AB clearly ruled in Tuna/Dolphin II that a Member can have a different level of protection for different animals, indeed under TBT 2.2 even a different level for ETP and non-ETP tuna.

One of the intense moments in the hearing occured where the EU asked Norway what its evidence was that  hooking or gaffing the seal without afterwards checking if it is suffering i.e. conscious was an "exceptional" i.e. rare practice.  Norway couldn't answer, bought for time, and never did answer, instead suggesting that the EU didn't understand the difference between pick-hunting and hooking-sort of like justifying the Spanish Inquisition by saying that its opponents didn't appreciate the nuances of the different torture procedures. 

 

There were some important admissions by Canada and/or Norway.  The EU had argued that what Canada labeled detrimental impact based on the total numbers of Canadian non-indigenous non-marine management seal products could be attributed to the decision of Canada to artificially increase the quantity of non-indigenous, non-marine management seal products through subsidies.  Thus, the relative of quanitty of such products could not be attributed to anything the EU does to affect equal competitive opporutnities. 

Canada's answer was that equality of competitive opportunities shoud be determined based on the situation that prevailed before the measure was introduced. Canada argued that the hunt was not subsidized at the time which the EU  ban was introduced.  In sum, Canada accepted that if the quantity of non-indigenous, non-marine management seal products could have been affected by subsidies at the time the measure was introduced, the EU would have a case that there is no disparate impact because the relative quanitty of Canaadian seal products qualifying for entry to the EU, i.e. competitive opportunities, is determined by factors related to Canadian policies not EU ones..  Well, now is the time for the panel to ask the parties about subsidies-direct and indirect aids-to the industry and to sealers that existed at the time.  Canada says none, but I am deeply skeptical--one would need to cast the net wide and look at subsidies to the fisheries generally since these underwrite seal hunting by fishers.  Of course, there is an additional docrinal issue as to whether the benchmark is the time at which the measure was introduced or the subsequent evolution of the competitive environment.

 

Despite all the bluster about proving public morals, Norway basically admiteed that the EU could protect seals under WTO law as long as it adopted the least trade restrictive measure.  This was revealing.  Their case boils down to the fantasy that there is a humane certification scheme out there that will achieve the EU's sought level of protection to the same extent as the current measure.  Remember the AB judgment than even a "risk" that an alternative will fall short of the aspired level of protection will mean that the Member can justify its existing measure.  Consider the facts, and remember that the measure must be "reasonably available" and that it is up to the complainant not the responding party to prove its existing and reeasonable avalabilty.  First, several dozen countries have moved to address morally-based animal welfare concerns about seal hunts but not one of these countries-differing in levels of development, what region they are located, in culture, etc.--has considered that such a certification cheme is possible much less moved to implement it.  Consider that the international organization for animal health has in a report of experts indicated that geographic and climatic conditions of the hunt in locations like Eastern Canada would make effective monitoring and enforcement of international humane hunting  standards essentially imossible. Consider that neither  the Canadian government  nor the industry, despite the dramatically declining consumer market for seal products due to animal cruelty concerns, have ever tried to design, much less implement, a humane certification scheme, or even so much as produced  a consultant's report as to how the various challenges could be overcome or met so that it is a reasonably available alternative.  Consider all of this and it is evident that the certification scheme in question is a chimera, or to use the preferred expression of Norway's attorney,"illusory".  More soon.

Norway's Use and Abuse of the ECJ Judgment in Oral Argument (A Prelude)

My main posts on today's session of the Seals hearing are a few hours away, but there is one particular strategem of Norway that I thought I'd comment on right away—it concerns a question that Ruti Teitel and I have written on recently, the use of the jurisprudence of one tribunal by another, which we call "Cross-Judging".

 Norway invoked today the ECJ decision on the seal ban as a kind of "admission" by the EU that the objective of the ban was not public morals.  The moral dimension of the European public's concern with the treatment of seals was not dealt with by the Court of Justice.  This was for the reason that, as pointed out by the EU’s lead attorney, under the allocation of competences in the EU “constitution”, public morals simply does not arise as an issue. 

 

Norway’s move trades on a confusion between the classification or characterization of a measure for the purpose of determining under what level of competence it falls in a federal system, and the characterization of its objective for purposes of WTO provisions such as TBT 2.2 and GATT XX. 

 Different federal systems divide competences over subject matter or policy purposes in complex ways that correspond to the written "constitutional" texts at issue, but also the twists and turns of case law over decades, if not centuries-a jurisprudential acquis where categories and semantic articulation of objectives is influenced by history, political culture, and shifting coalitions of judges on high courts.

 Canada itself is a great example.  For a period of time the Canadian Supreme Court found the basis for federal regulation of certain health-related products standards in the criminal law competence in the Constitution.  But had Canada been involved in a GATT dispute it would legitimately have claimed under Article XX that the purpose, from a GATT point of view, was health.  How a 19th century constitutional text and the words it uses to classify different areas of competence and the ways in which the courts have attempted to adapt those classifications to shifting social, technological, economic realities could not logically determine how a policy purpose is articulated under the exceptions in WTO treaties, an objective process deeply related to the object and context of the WTO Agreements in question, as the Appellate Body has indicated.  The Canadian Supreme Court, in R v. Crown Zellerbach, sustained regulationof the marine environment under the "Peace, Order and Good Government" power in the Canadian constitution-that sounds like "public morals" in WTO law term (or public order in GATS).  But, given their specific aims and the case law on the meaning of XX(g), measures in question clearly fall within XX(g) of the GATT not XX(a), based on a reading of those provisions that follows Vienna Convention Article 31.  Just as it would be unacceptable for Canada to invoke "public morals" in the GATT because of the rubric in Canada's original 19th century constitutional provision refers to something that sounds like public morals, it would be unreasonable to insist that having justified the measure in those terms under municipal law, due to Canada's distinctive constitutional history, it would be barred from invoking XX(g) of the GATT, even though the design, structure and object of the scheme from a WTO law and jurisprudence perspective, would clearly sound in the conservation of exhaustible natural resources.

 The US should also pay attention to Norway's sleight of hand here:  the US courts have often sustained federal action under the commerce power where the motivation of Congress was for example the protection of civil rights or the environment-the courts nevertheless held that preventing barriers to commerce between the states was a legal basis for the measures, because they contributed to that objective.  The expression "public morals" does not appear in the US Constitution; the justification for the regulation of many matters that relate to public morals in the US would have to be found in competences defined in other terms in the US Constitution and the relevant case law.  Take for example internet gambling.  In a series of cases before the US courts, federal regulation of gambling including internet gambling was justified under the US Constitution as aimed toward the regulation of commerce under the Commerce Clause.  (United States v. Lee, 173 F.3d 809, 810-11 (11th Cir. 1999); United States v. Zizzo, 120 F.3d 1338, 1350 (7th Cir. 1997); United States v. Wall, 92 F.3d 1444, 1449 (6th Cir. 1996); United States v. Riddle, 249 F.3d 529, 537 (6th Cir. 2001); United States v. Boyd, 149 F.3d 1062, 1065-66 (10th Cir. 1998). Thanks to WikiLaw!)  Perhaps because Antigua and its attorneys were not as tendentious as Norway in the Seals dispute, they did not even bother to argue that the regulation of commerce basis for the US measures under the US Constitution precluded a “public morals” purpose under the very different scheme of the WTO I n any case, in US-Gambling the panel and the Appellate Body did not feel they even needed to consider how US courts had characterized the measure in under the constitutional allocation of competences:  they could have asked the US about the characterization in domestic constitutional litigation but, rightly, it was simply a non-issue.

 Understandably so.  It would be anomalous and contrary to the security and generality of the right to regulate contemplated in Article XX of the GATT and related TBT provisions, were a Member’s ability to make a defense of its regulations under the WTO provisions to depend on how closely the purposes it could invoke under its particular constitutional law (differing substantially from Member to Member) was calibrated with the purposes of regulation as they are classified and divided in the WTO treaties and case law.  This simply denies the basic proposition of the separation of the international and internal constitutional legal orders.

 It seems to me that the AB has at least acknowledged what I might call the general spirit of my remarks here in the Hormones ruling   In para. 244 of its ruling, the AB pointed out that legislation in representative governments normally-I repeat for the sake of Norway’s attorney, normally-reflects multiple objectives, and the AB went on the say that the existence of such objections should not be taken as an indicator of protectionism-the objective of harmonization of regulation within the EU was fundamentally compatible with the objective of protecting the lives and health of EU citizens, and the design features resulting from combining the two in no way provided even a prima facie basis for suspecting that the measure was incoherent in a manner that pointed to protectionism.

A Good Paper by Economists on Climate and Trade But Flawed Legal Analysis of Border Carbon Adjustment

The Peterson Institute has published an interesting paper by two very good economists, Aaditya Mattoo and Arvind Subramanian, about trade and climate mitigation.bit.ly/ZQLATw  While as a matter of economics I rather like the Joe Stiglitz conceptualization of the problem better than theirs, then again I am not an economist myself and so shouldn't be too much judging between them, I guess.  Mattoo and Subramanian make a strong case that liberalizating WTO rules on subsidies could be useful in facilitating climate mitigation.  This is an idea that I developed several years ago, in a study for IISD:  http://bit.ly/Y7F9e3.  Odd that Matto and Subramanian, though suggesting export restraints on fossil fuels, don't deal with the challenge of reducing or eliminating fossil fuel subsidies, the climate mitigation gains of which the IMF has recently shown to be dramatic.  

On border adjustment, they are simply confused about the law. They assert with respect to Article III:2  GATT: "Even if border tax adjustment is permitted on inputs that are consumed but not incorporated in the final  product, it is not clear whether it should be based on the carbon content of domestic production
or foreign production."  While they admit there is no WTO jurisprudence on this point, they mention the GATT Superfund case.  But the mere fact that the GATT Superfund case was about a situation where the inputs were incorporated into the final product, it is simply a non-sequitur to suggest that the case can stand for the idea that border adjustment is only permitted in that situation.  There is certainly no language in the decision to support such a limitation.  The panel obviously addressed the input as incorporated in the product because in that particular situation it was!  What is really important in Superfund for purposes of carbon border adjustment is the following statement of the panel, which implies opposite to what Mattoo and Subramanian suggest, that there are no intrinsic limits to the use of border adjustment for the policy purpose of addressing carbon externalities that occur in the production of the product:  “the tax adjustment rules of the General Agreement distinguish between taxes on products and taxes not directly levied on products they do not distinguish between taxes with different policy purposes. Whether a sales tax is levied on a product for general revenue purposes or to encourage the rational use of environmental resources, is therefore not relevant for the determination of the eligibility of a tax for border tax adjustment."  In sum, what matters is the purpose of the tax, internalizing carbon externalities, and it is irrelevant to that purpose whether the externalities are associated with the production of some input in the production process that stays in the product, or whether the burned fuel in the production process is itself considered as the basis for the tax. It is sometimes suggested that the emissions are on output rather than an input, and that taxes on outputs can't be border adjusted, but as I explain in a recent paper presented at a Yale conference on climate policy  (I'm now revising it), this is just semantics.  In all cases a border tax will in fact be on or applied to products, but addressed to the carbon externalities of the product, as noted, an entirely permissible purpose of a border tax adjustment under WTO law.

Finally for state-of-the-art economics that shows the very signficant carbon mitigation gains from doing border adjustment, see the article Joshua Elliott, Ian Foster, Sam Kortum, Todd Munson, Fernando Perez Cervantes, David Weisbach, “Trade and Carbon Taxes” American Economic Review 100 (2010). 

WTO DG Candidate Blanco (Re-?)located on the Web

I think there is an end to my saga of not finding Blanco's website.  Late yesterday I found a different site than the one originally listed on his twitter page.  This is it.  http://bit.ly/168q9Bm.  But then I also discovered that the link on the Twitter page is now up and running.  bit.ly/17aBNtl So two different campaign websites?  Ever the man of mysterty (though his philosophy-or ideology-of globalization is pretty clear.

Blanking on Blanco: What is it with his website?

As I recently tweeted, over the last 24 hours I've tried to access WTO Director General candidate Herminio Blanco's website on 4 different devices (the last one an open computer in the Swiss lounge in JFK airport, so it's nothing to do with my own hardwear), and using 4 different browsers.  I'm trying the address on the Blanco campaign twitter feed, and literally drawing a blank each time.

Are there geeks out there who can help?  I can't figure out what I'm doing wrong.  Not plausible that the site is really down unless his IT people didn't design everything to handle the traffic that would result from his being in the final round. 

Now is the time of crucial choice.  The site needs to be available. 

Aftermath of the ECJ Seal Ban Judgment: Pro-hunt lobby angry and demoralized

It's pretty clear that the pro-seal hunt interests are hurting hard from their loss at the ECJ.  One spokesperson appeared to accuse the Court of being "self-serving" and lacking a "fair or just process."  That doesn't seem very consistent, to say the least, with continuing to pursue an appeal in the ECJ of the industry's first loss, or filing an appeal against yesterday's judgment.  See this news article:  http://bit.ly/17YN12H

But there are signs that the industry is also bracing itself for defeat at the WTO.  Having touted the WTO action as the possible salvation of the seal hunt, industry spokespeople now seem to be downplaying it.  In the same news article, one such individual implied that the WTO proceedings don't have any real legal effect, saying that the WTO tribunal is just a panel of experts giving their opinion.  Of course, legally inaccurate.  But what this really sounds like is that they are already preparing their press release in anticipation of a loss in Geneva.  But that's not a reason for friends of seals to feel overconfident as panel goes into its second round of hearings this coming Monday.

Discrimination in the Seal Products Dispute: The Role of Categories

This is from the second EU written submission in seal products:

199. Canada considers that the EU Seal Regime, through the IC exception, modifies the conditions of competition to the detriment of its imports when compared with imports of Greenland. Specifically, Canada suggests that, in the case of an origin-neutral measure, like the EU Seal Regime, a quantitative analysis of the treatment provided to the group of products in question as a whole shows de facto less favourable treatment.221 Canada thus considers that the detrimental impact is shown because most of its seal products cannot be placed on the EU market whereas most of Greenlandic seal products can be placed on the EU market through the operation of the IC exception.

200. The European Union considers that Canada's reliance on its "quantitative approach" to show de facto discrimination is manifestly incorrect.222 To illustrate Canada's arguments with the following drawing, Canada submits that where a measure is designed, is expected to result or indeed results in a specific data pattern (as the one shown in the drawing), such fact alone is sufficient to show detrimental impact.

[The EU has a nice graphic here, but it was not easy to reproduce in this post] 

...

204. In order to ensure that the comparison required at this stage of the analysis is not skewed towards finding less favourable treatment (i.e., by taking individual products in the group of imported products and comparing them with other individual products in the other group) and yet preserves the analysis of the group as a whole, it is necessary to compare the aggregate competitive opportunities afforded. This requires an analysis of the various categories within each of the groups of products at issue. Specifically, the Panel would have to compare the treatment accorded by the EU Seal Regime to Canadian seal products derived from hunts for commercial purposes with the treatment provided to "like" products derived from hunts for commercial purposes (e.g., Greenland/Norway). Such comparison leads to the result that all those products are subject to the same treatment, i.e., the General Ban. Further, the Panel would have to compare the treatment accorded by the EU Seal Regime to Canadian seal products derived from hunts for subsistence purposes with "like" products of other origins derived from hunts for subsistence purposes (e.g., Greenland/Norway). Such a comparison leads to the conclusion that all those products are subject to the same treatment, i.e., they are allowed to be placed on the EU market under the IC exception. The categories of "like" products used to make the above comparison are not "discretionary" or "arbitrary". They are based on the "regulatory distinction" embedded in the EU Seal Regime, specifically, in the IC exception, and thus are comparable.

205. Thus, when making a category-to-category comparison within the groups of products in each side of the comparison (i.e., Canada versus other origins, such as Greenland/Norway), it should be concluded that there is no alteration of the aggregate competitive opportunities in favour of those other origins' groups of products. Put in simple terms, this approach shows that there is no discrimination since each category in the same situation (by reference to the "purpose" of the hunt) is treated equally and has identical access to (or prohibition to access) the EU market.

If I understand all this correctly, the EU is saying that in order to determine whether detrimental impact exists, you cannot compare the distribution of imported and domestic products across the different regulatory categories that exist.  Instead, you have to compare only within an individual category.

I'm not sure how well that approach works, though.  If the argument is that imports disproportionately fall into the disfavored categories, how would you evaluate the issue without a comparison that looks across categories?

Also, in Chile - Alcohol, the AB said this:

51. Chile has argued that there is "similar taxation" of domestic and imported production under the New Chilean System because all beverages with a specific alcohol content are subject to identical ad valorem tax rates, irrespective of their origin. In making this argument, Chile invites us to focus exclusively on a comparison of the relative tax burden on domestic and imported products within each fiscal category and to disregard the differences of tax burden on distilled alcoholic beverages which have different alcohol contents and which are, therefore, in different fiscal categories. In other words, Chile asks us to disregard the comparison which the Panel undertook of the relative tax burden on domestic and imported products located in different fiscal categories.

52. It is certainly true that, as Chile claims, if we were to focus the inquiry under the second issue solely on a comparison of the taxation of beverages of a specific alcohol content, we would have to conclude that all distilled alcoholic beverages of a specific alcohol content are taxed similarly. However, as we stated at the outset, in our analysis we must assume that the group of directly competitive or substitutable products in this case is broader than simply the products within each fiscal category. Chile's argument fails to recognize that the Panel has found, and Chile has not appealed, that imported beverages of a specific alcohol content are directly competitive or substitutable with other domestic distilled alcoholic beverages of a different alcohol content. To accept Chile's argument on appeal would, we believe, disregard the objective of Article III, which is to "provide equality of competitive conditions" for all directly competitive or substitutable imported products in relation to domestic products, and not simply for some of these imported products. The examination under the second issue must, therefore, take into account the fact that the group of directly competitive or substitutable domestic and imported products at issue in this case is not limited solely to beverages of a specific alcohol content, falling within a particular fiscal category, but covers all the distilled alcoholic beverages in each and every fiscal category under the New Chilean System.

It seems to me the AB has already rejected a view that comparisons within a category would be appropriate in this part of the analysis.

Of course, this is all just about the initial step of the analysis.  Later, you get to the "discrimination" part, and there you can look at the legitimacy of the different categories.

The ECJ Finds EU Seal Products Ban Proportionate to Objectives

Further to Simon's post, I am not an EU law expert, but I do think that, in particular, the findings of the ECJ on proportionality are relevant to the WTO dispute.  Here they are:

Second, the applicants’ argument that the basic regulation goes beyond what is necessary to achieve its objectives must also be rejected. The proportionate nature of that regulation cannot be examined in relation to objectives other than those pursued by that regulation.

94      The applicants’ argument that a labelling measure would be less restrictive and more effective for achieving the objectives of the basic regulation cannot succeed either.

95      It is apparent from the basic regulation that the adoption of a measure allowing the placing on the market of only such seal products as respect animal welfare requirements and, in particular, a labelling requirement were examined and rejected by the legislature. In that regard, recitals 11 and 12 in the preamble to that regulation state that ‘[a]lthough it might be possible to kill and skin seals in such a way as to avoid unnecessary pain, distress, fear or other forms of suffering, given the conditions in which seal hunting occurs, consistent verification and control of hunters’ compliance with animal welfare requirements is not feasible in practice or, at least, is very difficult to achieve in an effective way, as concluded by the European Food Safety Authority on 6 December 2007’ and that ‘[i]t is also clear that other forms of harmonised rules, such as labelling requirements, would not achieve the same result [and that a]dditionally, requiring manufacturers, distributors or retailers to label products that derive wholly or partially from seals would impose a significant burden on those economic operators, and would also be disproportionately costly in cases where seal products represent only a minor part of the product concerned[, whereas c]onversely, the measures contained in this Regulation will be easier to comply with, whilst also reassuring consumers’.

96      It must be concluded that, having analysed the question of the scope of such measures in practice, the legislature took the view that they did not allow the objective pursued to be met and that a general prohibition on the placing on the market of seal products was the best means of guaranteeing the free movement of goods. None of the arguments put forward by the applicants is capable of establishing that those findings are erroneous.

The Seal Products Ban: No Problem under EU Law

From CTV:

A court has upheld the European Union's three-year-old ban on seal products, dealing another blow to Canada's embattled sealing industry.

The General Court of the European Union issued a statement today saying it has rejected a challenge from a group that included the Canadian Fur Institute and the Inuit.

The Luxembourg-based court says the existing ban is valid because it fairly harmonizes the EU market while protecting the economic and social interests of Inuit communities.

If any EU law specialists out there want to explain the reasoning to us all, let me know (or just comment on this post). The decision is here.

Trade Facilitation: The WTO Negs Deserve More Attention from Civil Society

These days trade faciltiation is an oft-repeated mantra in WTO circles, including by the DG candidates.  But there is little commentary to be found by civil society groups on these negotiations or the draft texts (the latest, from the end of March can be found here:  http://bit.ly/XXyaEA.) One of the few studies is an IISD paper on trade facilitation and timber and wildlife. it is available here http://bit.ly/17XMMaX.

Trade facilitation sounds like a nice idea.  Hard to be against streamlining customs procedures and preventing their protectionist abuse.  On the other hand, effective control of the border is vital to the effectiveness of regimes such as the news arms trade treaty and CITES, to name two examples.  Through technological innovation (IT and new scanning/inspection methods), regulatory cooperation and exchange of information, and improved training and professionalism of customs personnel, one could imagine a win-win, where innocent goods move more smoothly through the border allowing more attention to be paid to stopping bad ones.  But many of these initiatives cannot easily be commanded through legal rules enforced in dispute settlement.  In the case of developing countries, they seem more in the remit of multilateral development banks and other agencies concerned with development, state-building and the rule of law rather than that of the WTO.

As for protectionist abuse, the existing rules of the GATT, TBT and SPS already provide significant disciplines.  The question then is whether trade facilitation is going beyond those such as to open a new front of attack against domestic policy place (after all, many of the measures where the demand for policy space is hard-fought depend signficantly on effective enforcement at the border.)

I've only begun to study the most recent negotiating draft, but it seems unclear on the overall relationship between the trade facilitation text and the GATT, including Article XX.  Some provisions make it clear that they are subject to the right to regulate in the existing WTO Treaties including Article XX-and others don't. One provision that deserves following carefully concerns risk management and the way in which Members may determine that goods are "high risk" and therefore apply more intense or extensive customs controls to such goods.  The criteria in the current draft seem to make sense and allow for appropriate poilcy space, but the provision also seems to open up the possibility of claims of discrimination (which could include de facto discrimination) in the way that Members operate risk management.   It will be important to see how this part of the draft evolves.  I would say the same about the language on "alerts", which governs the ability of Members to impose emergency controls to address urgent food safety risks, for example.  The least-trade-restrictiveness requirement here are the role of science deserve scrutiny, and the relationship to the existing provisions in SPS. 

Also I wonder about the requirement that technical regulations or quality controls not be applied to goods in transit.  Would this interfere with the ability to intercept goods in transit the trade of which is restricted or prohibited under international agreements?  And what of goods that present high health, safety, enviornmental risks even by virtue of their being transported through the territory of a Member?  Some of the provisions in the section of the draft text on freedom of transit are subject to the exceptions in the GATT, but it is unclear to me at least that Article XX could be invoked in respect of the provision on non-application of technical regulations or quality controls.  

More generally, there is a lack of balance in the current draft, in that it does not address at all the responsibilities of both exporting and importing states for having proper controls to stop trade in dangerous goods, or goods that trade of which is prohibited or restricted under international agreements (CITES, etc). Some years ago, developing countries were raising in the WTO the issue of domestically prohibited goods, and substandard goods being sent to developing countries without notice.  Could not the trade facilitation agreement include a clause that requires a system of notification or warning such that where the exporting country's authorities is aware of such shipments, they would place the authorities of the importing country on alert?   Such a provision could be added to the information exchange provisions in the section on customs cooperation. 

In addition, there could be a clause in the trade facilitation agreement that requires WTO Members to take effective measures in their customs systems to prevent or control the export or import of goods the trade in which is prohibited or restricted under multilateral agreements.  A list of such agreements could then be annexed (including CITES, the new arms trade treaty, the Basel Convention on hazardous wastes, etc.)

These are just some thoughts based on a quite preliminary examination of the current draft text.  I'll be doing some research and writing on trade facilitation over the next few months.  Look forward to reactions.  

 

Are SPS Measures Protectionist?

A recent article argues that a lot of them are:

we hypothesize that SPS notification activity is correlated with the amount of protectionism afforded traded agricultural products and with the level of demand for protectionism by agricultural producers. To test our claims, we assemble a dataset recording the annual number of SPS notifications by each member of the SPS agreement between 1996 and 2005. The evidence supports the hypotheses proposed in this paper. Specifically, as the relative rate of assistance to agriculture increases, the number of SPS notifications by the country decreases. In addition, increases in the productivity of agriculture are associated with decreases in the number of SPS notifications.
...
The empirical evidence shows that WTO members may be substituting SPS rules for traditional forms (i.e., tariffs, subsidies, etc.) of agricultural protectionism. Even controlling for both consumer awareness and a government’s institutional capacity, SPS regulations are more likely to be altered when agricultural protectionism is lower and when the demand for protectionism by agricultural groups increases. The pattern observed in our data is that regulatory barriers on agricultural trade may also be protectionist policies substituted for more transparent trade restrictions

I wonder if another approach to this issue would be to ask scientists to go through the SPS notifications, to determine whether the measures are based on sound science.

Trade in Online Services: Education and Health

This is from a new Peterson Institute paper:

In a recent book, The Cost Disease: Why Computers Get Cheaper and Health Care Doesn’t, William Baumol reports some arresting numbers to illustrate the spiraling cost of key services which are plagued by slow productivity growth. Since the 1980s, the price of US university education is up by 440 percent and health care by 250 percent, while the consumer price index has only increased by 110 percent. Projecting these numbers, and taking into account demographic aging, Baumol warns that the United States could be spending 60 percent of its GdP on health care by 2105. One answer to this arithmetical juggernaut is dramatically liberalized trade in education and healthcare, taking advantage of every technology on the horizon: distance learning, medical tourism, diagnosis and record-keeping from abroad, and more.

I've written about trade in online education here; I've just started researching online trade in health care services.  I agree that these are two areas where more international trade could have enormous benefits, to help get these high costs down, and it would be great if trade negotiators were able to make some progress on liberalizing here.

Do We Need a Multilateral Investment Agreement?

A couple months ago, I mentioned a new proposal for a Multilateral Investment Agreement.  Axel Berger of the Deutsches Institut für Entwicklungspolitik (DIE) has a skeptical response here.  An excerpt:

The shortcomings of the current investment regime can be better dealt with in the context of regional negotiations; these should, however, be accompanied by a political dialogue on the global level.

...

The G-20 is the natural candidate to be the initiator of a concomitant process of coordination. The G-20 comprises not only the industrialised countries but also the most important of the emerging countries and takes into account – even though inadequately up to now – the interests of the developing countries via the participation of regional organisations such as the African Union. Orchestrated by the G-20, these discussions should be conducted with the inclusion of international organisations like the OECD, the WTO, and UNCTAD, along with that of business and civil society stakeholders.

The discussions should include new topics that have not been dealt with in IIAs. In particular, the discussions should include the balance between liberalisation and regulation of investment policies, the financial incentives of host countries, the investments of state-owned companies, the integration of voluntary sustainability standards, and the consolidation of the existing system of bilateral IIAs. In view of the current dynamic changes in the investment, these processes should be set in motion as quickly as possible.

Know Your Negotiating Partner: the Case of Karel De Gucht

The United States is now entering into the negotiation of an ambitious agreement on trade and economic cooperation with the  EU.  But do the Administration and Congress really know the man who will be sitting on the other side of the negotiating table, Karel De Gucht? Searching for more clues about the rumors that the EU might have played a central or important role in the exclusion of African candidates from the WTO DG race, I did a bit of digging about De Gucht.

For starters, he has managed to achieve a very unusual (dis)honor: he made the Simon Wiesenthal Center List of Top Ten Anti-Semitic Slurs in 2010.  I feel too squeamish about actually reproducing what he said on this blog, but if you look at the Wikipedia article on De Gucht you will get the details and a link to the Simon Wiesenthal Center, which itself didn't reproduce the most vile of his anti-Jewish comments 

Earlier,as a Belgian politician, De Gucht was forced to resign from a party leadership role because of anti-migrant views (concerning voting rights, according to Wikipedia).   

This brings us to Africa.  In a 2012 interview with "This is Africa", http://bit.ly/14KC88T, de Gucht suggested that Africans were "pupils"-that "one way or another ...will have to come to us" for "knowledge."  Indeed. Perhaps Amina Mohamed will end up teaching De Gucht-and the EU-a thing or two. 

 

.

 

 

PPMs in Seal Products

From the EU second written submission:

189. In response to Question 21 both Canada and Norway further submit that the EU Seal Regime establishes process or production methods within the meaning of Annex 1.1 of the TBT Agreement. Canada considers that a process and production method is laid down through the IC exception; Norway alleges this both with respect to the IC and MRM exceptions.

190. The EU does not agree with Canada and Norway and submits that the EU Seals Regime does not regulate any processes and productions methods. The ban read together with the exceptions allows the placing on the market of seals products depending on the "purpose" of the hunt, which has nothing to do with methods for the production of seals products.

191. Even if the Panel were to consider, quod non, that the EU Seal Regime through its IC exception and/or MRM exception lays down a process or production method, the European Union submits that such processes and production method cannot be considered to be "related" to product characteristics, as required by the first sentence of Annex 1.1 of the TBT Agreement.

There's a policy issue here which may not have been in the drafters' minds when they wrote the definition of "technical regulation".  When you ban an input product, are you therefore regulating all finished products that use the input?  

Here, the question is, does a ban on the use, in some final products, of inputs of products derived from seals (e.g., seal fur in hats or coats, seal oil in Omega-3 capsules, etc.) mean that the production of the final product is being regulated?

In some sense, such a ban means that those final products cannot contain seal inputs, and thus has an impact on the method of production. For example, Omega-3 capsules cannot be produced using seal oil.  But is this different from a measure that says, e.g., "Omega-3 capsules must be made in the following way," and then specifies a production method?  Should these two situations be treated differently under the law?

Non-Harmless Error: A Response to Rod Abbott on the DG Selection Irregularities

Thank you for your response to my post. Let's start with the facts.  The Chair himself has said that there was a "deviation" from the procedure agreed.  You, however, begin rhetorically, by referring to "conspiracies."  I never used that word.  Instead I offered a hypothesis from a well-informed person as to why the EU might have engaged in a certain course of conduct, and even stooped to something like engaging in a procedural violation.  To the extent that the EU has a common commercial policy, every time it does something as a bloc in the WTO I suppose it is a "conspiracy".  But I did not suggest that this aspect of the EU acting together was in any way in itself improper, as it seems to be a necessary implication of the EU's internal "constitution". (Whether as a single entity they deserve all those votes is another matter but not directly related).  Of course, there is also the question of why the leadership of the WTO, including the Troika went along with it...

In the end, you don't offer any reasons or positive evidence as to why the account that I reported in my posts is not true.  Nor has there been, to my knowledge, any denial from the EU that it participated in the procedural irregularity, i.e.that it (all the states Members and the EU) gave five preferences. As you in fact admit, "what was going on inside the EU is anyone's guess." And I am merely reporting one educated "guess."

Your second point is that not all African states supported African candidates.  But there is no principle I am aware of that a candidate should need unanimous support from their region or continent in order to stay in the race. I don't think that would be a legitimate selection principle, because it would mean that a candidate that was great for the WTO and had some regional support would never get through the first cut, just because one state in their region, for whatever reason, did not support them.

Ultimately the persuasive force of your response depends upon the plausibility of what is sometimes called "harmless error"-the notion that a procedural error should not lead to the reversal of an outcome, if the same outcome would have occured even if correct procedures were followed.  This was the excuse of the Chair Mr. Bashir and I accept that the counter-factual might be true.  But we are not dealing here, say, with appellate review of a criminal conviction but rather a selection process where, because of the consensus rule, those who lose can veto the final outcome. That correct procedure was followed, and all acted in good faith, are important considerations in convincing the losers to accept as legitimate an outcome that they didn't want.   In the bad old days, what often substituted for legitimacy was, I suspect, arm-twisting, Green Room-type tactics.  But how many Members are going to put up with that anymore? Remember what happened in the DG selection the time before last. As Kalypso Nicolaidis and I argue in recent and on-going scholarship, if a consensus-based  WTO is to survive, the WTO needs to have a political ethics to guide its decision--making. Proceduralism is one part of that ethics.

Atavists or Come-Back Kids? The Neo-Liberals Talk Trade in Qatar (Not All Bad)

Tomorrow (April 22) the International Chamber of Commerce will hold its World Trade Agenda Summit in,of all places, Doha, Qatar. A key document for the Summit is a report produced under the auspices of the Peterson Institute, a kind of updated catechism of neo-liberalism, "Payoff From the World Trade Agenda 2013." http://bit.ly/12z2KWG.  It is an apology for the Doha Agenda, and more broadly for the approach taken by Pascal Lamy during his tenure as WTO DG.  Big on services trade liberalization, as if the financial crisis and the water privatization disasters had never happened; high about Aid for Trade, although the evidence is that there's been little gain in poverty reduction; but on the positive side, advocating multilateralization of the APEC deal on liberalized trade in green goods; aware of the dangers of ag export restrictions to food security; and, very good,  proposing that all panel and AB procedings be webcast.

The high point of the report is the brilliant idea that the Appellate Body could become, in effect, a world court of international trade, open to disputes under RTAs-this reflects the insight that the WTO's own comparative advantage, at least for now, is in dispute settlement not negotiation.  The low point is, for me, the illogical suggestion that we have to deal with the outdated Doha agenda before we can address the real agenda of today, the 21st century (p. 47). The authors of the report attribute the view that the WTO should fast forward to the 21st century agenda to "extreme voices within the pundit class." Now the idea of fast-forwarding was one Sue Esserman and I had already advanced several years ago in opeds.  Could the authors of the report be referring to us?  Extremists?    Oh well, Carly Simon probably got it right-you're so vain I'll bet you think this song is about you....

Bottom line:  this report shows the ability of the old insider trade policy community to regroup, mixing apoletics for the non-results and legitimacy failures of the last years with some creative, forward-looking proposals (like the webcast of panel and AB hearings and the idea of opening the DS system to RTAs). 

Take note that at least two of the five WTO DG candidates remaining (based on the flawed process) are essentially unreformed neo-liberals:,Blanco and Groser.  Civil society should give this report and the Qatar procedings a close look, and engage sooner rather than later.

A Response to Annon's Comment on the Irregularities in the DG Selection Procedure

Thank you for your comment in response to my post.

Here is my reply.

First of all, according to this news article  http://bit.ly/ZEQiAs the Chair Mr. Bashir has admitted that some Members gave five preferences.  Secondly, the EU has, to my knowledge issued no denial that it did not do this or encourage other Members to do so, although it is now some days since the allegations emerged.

As to your comment about the Troika using the language imploring rather than requiring, this simply reflects the fact that the Troika is the servant of the Members and has no authority to sanction, only to censure (which it should have done).  But this in no way means that the underlying agreement or understanding between Members reflected in the Troka document is that the limit of four preferences is a mere wish or desideratum rather than a norm which gives rise to a significant reliance interest. In fact, according to the same news story, Mr. Bashir himself refered to giving five preferences as a "deviation":  one does not describe conduct as deviant, if it does not break or transgress a rule or norm.

Then there is the related matter of prohibition on negative preferences.  If you don't have a real limit on positive preferences than the prohibition on negative preferences becomes meaningless.  In a selection round where you go in with nine candidates and five are meant to remain standing afterward, if you express five positive preferences, you are in effect issuing four vetoes or negative preferences.  This is why the number four was chosen, not for mystical or cosmological reasons.

In any case, Kenya has a remedy that does not require it to prove a violation of "hard" international law before a court or tribunal.  It can simply block the process.  Entirely legitimately, in my view.  A hard rain's a-gonna fall... 

Puzzling Out Troika Complicitly in EU Manipulation of DG Selection Process

Here also I have no really strong theory (and no leads this time).  Though I wonder how close Blanco and Jonathan Fried became when they were negotiating NAFTA.  Each was the chief negotiator for their own country-strong loyalties can be cemented that way, especially when the talks are successful.  I don't have any hard evidence and they could have come out of it very sore instead-perhaps some NAFTA historians out there would know. All theories and leads welcome!

Hell Hath No Fury Like Europa (or Lamy) Scorned: Why the EU May Have Subverted the DG Selection Process

One of the issues I didn't address in my previous posts on the irregularities alleged by Kenya in the WTO DG selection process, is why the EU would want to subvert the process to keep African candidates out of the race.  The reason is that I didn't really have a robust theory or hypothesis.  However, a European who has read my posts (pro-EU, an expert in EU external relations, and a policy adviser at the highest levels on EU issues) has suggested to me that what is likely going on is that the EU is punishing Africa for being recalcitrant in relation to the Economic Partnership Agreements that Europe has been trying to conclude on the continent. The individual in question said that one cannot underestimate the fury in Brussels as a result of African states not wanting to go along with these initiatives.  Another angle the expert mentioned was that the EPAs were a pet project of Pascal Lamy when he was DG Trade, and that he had a lot of credibility invested in them.  In sum:  the revenge of a scorned suitor.  How awful if it really did come down to this.

WTO Document Reveals that Kenya has Clear Case of Procedural Violation

An examination of the relevant WTO document http://bit.ly/16SQhPy shows that Kenya has a pretty clear-cut case that procedures were violated when the EU was allowed to express five preferences in the first round of DG selection, such that it could effectively ensure the elimination of African candidates from the race.  The document in question refers to the importance of strict compliance with procedure and clearly states that Members are to submit four positive preferences.  It also prohibits strictly and without qualification "negative preferences".  This shows the importance of limiting positive preferences to four, since if there were no effective limit on positive preferences a Member could circumvent very easily the rule against "negative preferences."  That seems to be just exactly what the EU was doing in effect.

 

 

The Relationship of GATT Article III:4 and TBT Article 2.1

This is from the second EU written submission in the Seal Products case:

The legal standard under Articles I:1 and III:4 of the GATT 1994 and Article 2.1 of the TBT Agreement with respect to their non-discrimination obligations is fundamentally the same

339. Both Canada and Norway argue that the legal analysis under Articles I:1 and III:4 of the GATT 1994 is fundamentally different from the analysis that the Panel has to make under Article 2.1 of the TBT Agreement. They argue that where de facto discrimination is claimed, the non-discrimination obligations under Articles I:1 and III:4 of the GATT 1994 and Article 2.1 of the TBT Agreement require an analysis of whether the measure at issue modifies the conditions of competition to the detriment of imported goods, in particular the complainant. For both this is the case where the origin-neutral regulatory criteria disproportionately advantage, in terms of competitive opportunities, products from certain sources over like products from other sources (what the European Union refers to as the "quantitative approach"). Both Canada and Norway consider that under Articles I:1 and III:4 of the GATT 1994 no further analysis is required in order to find a violation of these provisions. In Canada's and Norway's views, the defendant may seek to justify the violation of Articles I:1 and III:4 of the GATT 1994 by showing that the detrimental impact results exclusively from a legitimate regulatory distinction covered by Article XX of the GATT 1994. In contrast, under Article 2.1 of the TBT Agreement, both Canada and Norway opine that the consideration of whether a detrimental impact results exclusively from a legitimate regulatory distinction is part of the analysis under Article 2.1 itself. Both seem to rely on the Appellate Body's statement in US – Tuna II (Mexico) that the "scope and content of [Article 2.1 and Articles I:1 and III:4 of the GATT 1994 are] not the same".

340. The European Union respectfully disagrees with those assertions.

In support of this view, the EU says:

345. Therefore, the national treatment obligations of Article 2.1 and Article III:4 are "built around the same core terms". The contours of the basic nondiscrimination obligations in Article 2.1 of the TBT Agreement and Article III:4 of the GATT 1994 are similarly crafted as there would be no point in recognising the regulatory space in the TBT Agreement if then the same regulatory autonomy were to be undermined under Article III:4 of the GATT 1994.

...

350. ... the list of exceptions under Article XX of the GATT 1994 is exhaustive whereas the list of objectives that may be legitimately pursued by technical regulations is merely illustrative. If both the GATT 1994 and the TBT Agreement are intended to strike a balance between trade liberalisation and regulatory autonomy, then it makes little (if any) sense for technical regulations to enjoy a much broader scope of policy space than all other types of internal regulations.

The EU acknowledges the Appellate Body's statement in US – Tuna II (Mexico) that the "scope and content of [Article 2.1 and Articles I:1 and III:4 of the GATT 1994 are] not the same."  What did the Appellate Body mean by this?  How different are these provisions?  What further clarification will the Appellate Body offer us in the event of an appeal in the Seal Products case?

Kenya Letter to Chair of WTO General Council: Specific Claims of EU Subversion of DG Selection Process

According to this news article http://bit.ly/14zrBNB, Kenya has sent a strongly worded letter to the Chair of the WTO General Council alleging specific irregularities in the round one selection process that resulted in both African candidates, including the impressive Kenyan Amina Mohamed, being eliminated from the race.  Kenya claims:  "By allowing a member, whether a bloc or an individual State to deviate from expressing four preferences, you contravened the guidelines and procedures that you outlined to members.” “Furthermore, any member who expressed more than four preferences, not only displayed a lack of respect for the troika and the rules adopted for the consultations but also undermined the troika’s integrity and the trust members bestowed on you.” Basically, Kenya is saying that, by breaking the agreed norm that only four preferences could be expressed, the Chair made it easy for the EU to ensure that no African candidate went forward. 

Kenya has also threatened to veto the final outcome of the selection process if its due process concerns are not addressed.  I would not be surprised if other African countries followed suit.  Even if a new DG appointment were somehow shoved through despite a tainted process, what kind of legitimacy would that person then have?   This may be a rare opportunity for President Obama, who has Kenyan roots, to intervene, indicating that the US would have little interest in cooperating with a WTO DG whose selection was based on improper exclusion of African candidates from the race. 

Amina Mohamed deserves to be there.  

 

What Are Local Content Requirements?

I always thought of a "local content requirement" as a requirement that a producer ensure that a certain percentage of inputs in the production process come from local sources.

But USTR seems to be using the term differently:

APEC Breaking Ground on Local Content Requirements Ahead of High-Level Meetings

As part of its global initiative to address localization barriers to trade, the Office of the United States Trade Representative (USTR) is leading efforts to consider the impacts of local content requirements (LCRs) on regional integration and economic growth at the Asia-Pacific Economic Cooperation (APEC) forum’s Committee on Trade and Investment (CTI). The CTI, meeting last week in Surabaya, Indonesia, held an in-depth discussion on LCRs, which require businesses to produce a certain level of content (materials, parts, etc.) within the country where the end product will be sold. Last week’s CTI meeting marked the first time the economies of APEC collectively addressed LCRs to gain a better understanding of how they distort trade and investment flows and decrease the competitiveness of domestic industries.

Here, they are talking about a requirement to produce locally.  Isn't that a local production requirement, not a local content requirement?  They are related, but slightly different.  Although maybe local production requirements, depending on how they are worded, are a sub-category of local content requirements.

Very nit-picky, I know, but I just like to make sure I have my terms straight.  Also, there may be different implications for the legal analysis under various WTO provisions.

Director of the Mandela Institute

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Applications are sought for the position of Director. The Director heads the Mandela Institute and reports to the Head of the School of Law. The successful candidate will offer intellectual leadership,a vision for the MI, managerial competence, a demonstrated ability to relate to donors, raise funds and have the stature to represent the MI both within the University and in the outside world. The Director will occupy an endowed chair, the Issy Wolfson Chair of Law.

More details here: http://jobs.mg.co.za/viewprofile.php?sel=profile&id_vac=13635

 

One of the Goals of the UN Arms Trade Treaty: Helping American Business

This is from a supporter of the UN Arms Trade Treaty:

Importantly, the treaty would not force anything new upon the United States or upon American companies, because federal laws and regulations already require United States arms manufacturers to comply with a comprehensive export control system, one designed to keep American weapons out of the hands of human rights abusers and other bad actors. The treaty would simply level the playing field for our defense industry in the international marketplace by making other countries follow the same rules. This is good for American businesses.

Is it strange for a country to sign a treaty that doesn't require it to do anything?  Is it OK to use treaties to help your industries in their battle with foreign competitors?

Private Rights of Action in FTAs

This is from the recently completed Iceland-China FTA:

Article 122

Private Rights

Neither Party may provide for a right of action under its domestic law against the other Party on the ground that a measure of the other Party is inconsistent with this Agreement.

The suggestion is that there is a possibility that one government party might provide a right of action under domestic law for private entities to sue the other government party, on the basis that a measure of the other government violates the agreement.

Has such a domestic law ever been proposed or adopted?  Is this a real worry?  It's a common provision in trade agreements, but I'm not sure why.