International Economic Law and Policy Blog

Ecuador Renounces Some Trade Preferences

From the Washington Post:

The leftist government of Ecuador, under pressure from the Obama administration for considering a request for sanctuary from the American intelligence leaker Edward Snowden, announced Thursday that it will back out of a preferential trade pact with the United States that top Ecuadoran officials say is being used to blackmail their country.

...

The Andean Trade Promotion and Drug Eradication Act has allowed Ecuadoran exporters of flowers, tuna, artichokes and many other products to ship tariff-free to the United States.

“The preferences were authorized for Andean countries as compensation for the fight against drugs but soon became a new instrument of pressure,” Alvarado said.

The pact was designed to help generate jobs in countries involved in the drug trade; although Ecuador does not produce cocaine, it is an important drug conduit and is vulnerable to organized crime groups because of its weak institutions, according to State Department counternarcotics officials.

It seems that those statements relate to the Andean drug measure preferences, not to GSP (according to Inside U.S. Trade).  A review of Ecuador's eligibility for GSP benefits is ongoing (and also involves consideration of the enforcement of investment arbitration awards).

Here's what I'm wondering. Challenges to GSP exclusions are difficult, because if you want to get those preferences eventually, it may be best to avoid aggravating the country granting them.  But let's say Ecuador were to give up on all U.S. preferences, including GSP.  Would it then be willing to bring a WTO challenge to the conditions often imposed on GSP beneficiaries?  A related question: If it renounces all benefits, can it claim any nullification or impairment?

Carrots vs. Sticks in Bangladesh

This is from Kim Elliott:

If President Obama and new U.S. Trade Representative Michael Froman were serious about improving working conditions in Bangladesh—and about “working to foster development through trade,” as Ambassador Froman said at his swearing in—they would do the opposite of what they are doing. They would offer to increase the paltry trade benefits that Bangladesh receives, contingent on serious and sustainable improvements in worker rights.

The administration could do this by signing on to an initiative to provide duty-free, quota-free market access for the world’s least developed countries (LDCs), including Bangladesh, that all the other industrialized nations long ago embraced. But that would require taking on the U.S. textile industry—and symbolic gestures are far more appealing than messy political fights.

Suspending Trade Preferences for Bangladesh

The big trade news from today is that President Obama has decided to exclude Bangladesh from the GSP program:

As part of this year’s review, the Administration also considered petitions to withdraw or suspend certain countries’ eligibility for GSP benefits based on statutory criteria, including whether a country is taking steps to afford internationally recognized standards for worker rights, whether a country acts in good faith in recognizing and enforcing arbitral awards in favor of United States citizens, and the extent to which a country adequately and effectively protects intellectual property rights (IPR). As described in a separate press release, the President has decided, drawing on the recommendation of the U.S. Trade Representative, to suspend the GSP benefits of Bangladesh based on that country's failure to meet the statutory GSP country eligibility criterion related to worker rights. 

More details here:

“Our GSP statute requires certain basic standards for worker rights and worker safety as a condition of eligibility. Over the past few years, the U.S. Government has worked closely with the government of Bangladesh to encourage the reforms needed to meet those basic standards. Despite our close engagement and our clear, repeated expressions of concern, the U.S. Government has not seen sufficient progress towards those reforms. The recent tragedies that needlessly took the lives of over 1,200 Bangladeshi garment factory workers have served to highlight some of the serious shortcomings in worker rights and workplace safety standards in Bangladesh,” said Ambassador Froman. “While taking this action today, the Administration is also initiating new discussions with the government of Bangladesh regarding steps to improve the worker rights environment in Bangladesh so that GSP benefits can be restored and tragedies like the Rana Plaza building collapse and Tazreen Fashion factory fire can be prevented. The Obama Administration is committed to reflecting American values in our trade policy, including with regard to the rights of workers worldwide.”

So is this U.S. action legal under WTO rules?  I've talked about similar issues before. The main legal obligations are in the Enabling Clause and the key case is the EC - Tariff Preferences dispute (the Appellate Body report is here).  An important legal question relates to para. 3(c) of the Enabling Clause, which states:

3. Any differential and more favourable treatment provided under this clause:

...

(c) shall in the case of such treatment accorded by developed contracting parties to developing countries be designed and, if necessary, modified, to respond positively to the development, financial and trade needs of developing countries.

Does suspension of trade preferences due to labor rights issues "respond positively to the development, financial and trade needs" of Bangladesh?  What exactly are those needs?  And what is it that must respond to those needs:  is it the preferences themselves as a general matter, or is it each individual decision to grant or not grant them to particular countries?

The more practical question may be, would Bangladesh bring a complaint on this issue?  Such a course of action may be problematic when you are hoping a trading partner will do something for you.  Is that a flaw in WTO DS rules?

Trade and Extradition

From the NY Times:

In recent months, Mr. Correa’s government has been in Washington, lobbying to retain preferential treatment for some key Ecuadorean products. But that favored status, which means keeping thousands of jobs in Ecuador and cheaper goods for American consumers, could be among the first casualties if Mr. Correa grants asylum to Mr. Snowden.

...

The most likely casualty of sheltering Mr. Snowden would be the trade preferences, which have been in place since the early 1990s. Originally designed for several Andean nations, Ecuador is the last remaining recipient. But the preferences, which applied to about $429 million in non-oil exports last year, expire at the end of July unless they are renewed by Congress.

That renewal was already in doubt, not least of all, officials said, because the oil giant Chevron has been lobbying hard against Ecuador. The campaign is part of Chevron’s response to an $18 billion penalty against the company ordered by an Ecuadorean court in a case over environmental damages related to oil drilling in the Amazon.

But Ecuador has begun its own campaign to keep the preferences, including a Web site called Keep Trade Going, that urges Americans to contact their legislators to ask them to vote in favor of the pact.

At the same time, Ecuador has staked out a fallback position, petitioning to include roses, frozen broccoli and canned artichokes in a separate trade program, the Generalized System of Preferences. That decision is controlled by the White House, so Ecuador is essentially asking President Obama’s help in getting around opposition in Congress.       

Mr. Obama must decide by Monday whether he will include those items — a move that becomes increasingly thorny as the standoff over Mr. Snowden continues.

 The Washington Post editorial board thinks using trade preferences this way is a good idea:

Some might find it awkward to be granting sanctuary to one country’s self-proclaimed whistleblower while stifling their own. Not Mr. Correa, who for years has been campaigning against the United States while depending on it to prop up his economy with trade preferences. Thanks to the Andean Trade Promotion and Drug Protection Act, Ecuador — which uses the dollar as its currency — is able to export many goods to the United States duty-free, supporting roughly 400,000 jobs in a country of 14 million people.

As it happens, the preferences will expire next month unless renewed by Congress. If Mr. Correa welcomes Mr. Snowden, there will be an easy way to demonstrate that Yanqui-baiting has its price.

 I really have no idea where any aspect of this story is going.  I hope some WTO legal issues arise, but I'm going to wait until the direction becomes more concrete before I start the public speculation.

Maybe Free Trade and the Environment Can Get Along

From a climate change speech today by President Obama:

And I'm directing my administration to launch negotiations toward global free trade in environmental goods and services, including clean energy technology, to help more countries skip past the dirty phase of development and join a global low-carbon economy.  They don’t have to repeat all the same mistakes that we made.

More details here:

Negotiating Global Free Trade in Environmental Goods and Services:

 The U.S. will work with trading partners to launch negotiations at the World Trade Organization towards global free trade in environmental goods, including clean energy technologies such as solar, wind, hydro and geothermal. The U.S. will build on the consensus it recently forged among the 21 Asia-Pacific Economic Cooperation (APEC) economies in this area. In 2011, APEC economies agreed to reduce tariffs to 5 percent or less by 2015 on a negotiated list of 54 environmental goods.

 The APEC list will serve as a foundation for a global agreement in the WTO, with participating countries expanding the scope by adding products of interest. Over the next year, we will work towards securing participation of countries which account for 90 percent of global trade in environmental goods, representing roughly $481 billion in annual environmental goods trade. We will also work in the Trade in Services Agreement negotiations towards achieving free trade in environmental services.

 It's hard to imagine all of this happening given the battles going on right now over AD/CVD tariffs on certain environmental goods, but I wish them luck!

A Developing Country Defends Investor-State

It's not just rich countries who defend investor-state.  This is from the Malaysian Ministry of International Trade and Industry, in the context of the TPP: 

I. Investor – State Dispute Settlement (ISDS) and Sovereignty 

• On the issue of ISDS, foreign investors are drawn to Malaysia not only by economic incentives, but also a transparent and predictable investment regime which allows recourse in the event of disputes. Likewise, we now have many private Malaysian companies who have become active overseas investors, driven by reasons such as securing market access, gaining access to raw materials, gaining strategic assets, brand and technology as well as decentralising of operations to diversify risks and improve returns, as Malaysia has relatively a small economy.
• Thus, ISDS is not only for foreign, but also Malaysian investors which are increasingly looking outwards. Furthermore, ISDS is not new to Malaysia as we have signed and ratified 64 Investment Guarantee Agreements (IGAs) since 1963 which also have provisions on ISDS.
• To date, only two cases have been taken against Malaysia under the ISDS, one of which has been decided in favour of the Government and the other is annulled. ISDS provisions have been used by Malaysian companies on two occasions to protect their investments abroad. In one case, the decision was in favour of the Malaysian investor and in the other, there was a settlement between the disputing parties.
• There are adequate provisions in the TPP that gives countries the policy space to adopt measures to fulfil specific purposes, including for environment, health and other regulatory objectives.
• Investor State Dispute Settlement (ISDS) mechanism is meant to give assurance to investors that in the event of a dispute, investors have recourse to international arbitration in addition to domestic courts. ISDS in no way infringes the policy freedom of a Government, it merely outlines the process by which a dispute over the underlining substantive principles in the Agreement will be arbitrated.

I wonder how important that third bullet point is for their view: Malaysia has not had to pay anything in these cases, while Malaysian investors abroad have used investor-state succesfully.

Maybe We Should Discriminate with Patents Based on Field of Technology

A couple months ago, I quoted Article 27.1 of the TRIPS Agreement, and then asked:

Why shouldn't countries discriminate in relation to patents based on the field of technology?  Aren't some patents more valuable to society than others?  Aren't patents for pharmaceuticals more valuable than patents for, say, pumpkin carving tools?  Why not give longer patent terms for life-saving drugs than for less important things?

After some good comments to the post, I noted that I had abandoned the idea as impractical.

But after coming across some intellectual support for differentiated patent terms, I think maybe I should revive the idea.  Economist Alex Tabarrok has talked about the "Tabarrok Curve," under which "beyond a certain point, greater protection for intellectual property causes less innovation."  A WSJ article summarizing his research notes:

Patents are supposed to prevent imitation, but in practice, imitation is often more costly than innovation. Most patent disputes are not about firms copying each other's inventions but about two companies discovering simultaneously the next step in an innovative process. Yet patent law can't easily handle that type of situation.

The glaring exception is pharmaceuticals, where testing for safety and efficacy makes innovation extremely costly, but where imitation can be cheap. In these circumstances, patents are not only necessary but might be strengthened. Elsewhere they should be weakened and shortened.

I think maybe I see a bandwagon for differential patent terms. I'm going to jump on it.

Who Was the Real Loser in the FIT Case?

I'm a little fuzzy on the details, but seems like maybe it was Samsung. This is from Wind Power Monthly:

The green energy deal between Ontario and the South Korean  manufacturer was signed in 2010 but has been subject to a number of  revisions since. The contract has been cut from 2.5GW to 1.369GW.

In  May, Ontario dropped its feed-in tariff programme and made changes to  its local content regulations for wind farms following a World Trade  Organisation (WTO) ruling that they contravened international trade law.

Under the terms of the revised deal, Ontario will now buy C$6 billion  worth of electricity from Samsung, a cut of C$3.7 billion.

What is "Market Access"?

There are a number of terms in the trade field that bug me because of their lack of clarity.  Different people use terms in different ways, and that makes for an ambiguous public discussion of the issues.  One example of this problem is the term "market access."

The EU press release relating to the beginning of the TTIP negotiations describes the main elements of the negotiating mandate as follows:  "The negotiating directives set out in very broad terms the topics and the objectives to be achieved in the negotiations. There are essentially three main elements in the mandate: market access, regulatory convergence and trade rules addressing shared global challenges."  These three elements then get broken down a bit.  "Market access" covers:  Tariffs, Rules of origin, Trade defence measures, Services, Investment, Public procurement.  So in this context, "market access" is mostly about protectionism, aside from investment rules, which go far beyond that.  Taking out investment, I can sort of see how all of this fits together as part of a general category, so I'm not too bothered by it.  But then the second category, "regulatory divergence" -- later referred to in the document as "Regulatory Issues and Non-Tariff Barriers" -- comes along.  Here, we are talking about differences in regulation across countries, but it also seems to cover regulations that affect trade in some broader way (possibly protectionist, but possibly not).  The press release notes that "both sides aim to negotiate an ambitious agreement on sanitary and phyto-sanitary (health and hygiene standards, for example for food products) as well as technical barriers to trade."  So wait: SPS and TBT measures are not part of the "market access" category, and instead fall under "regulatory issues"?  That seems odd (don't protectionist regulations affect market access?) and makes me want to look into this further.  How do others use this term?

On the WTO web site, they say: "Market access for goods in the WTO means the conditions, tariff and non-tariff measures, agreed by members for the entry of specific goods into their markets."  It is then noted that: "Market access on specific subjects is dealt with directly under the relevant gateways": Agriculture, Anti-dumping, Balance of payments, Customs valuation, Import licensing, Information technology agreement, Rules of origin, Safeguards, Sanitary and phytosanitary measures, State trading enterprises, Subsidies and countervailing measure, Technical barriers to trade, Textiles, Trade facilitation.  So all of these agreements (but not TRIPS, interestingly) have something to do with market access?  Is "market access" just whatever WTO rules say?  If so, that's not all that helpful in understanding the term.

Then of course there is GATS Article XVI, titled "Market Access", which says

1. With respect to market access through the modes of supply identified in Article I, each Member shall accord services and service suppliers of any other Member treatment no less favourable than that provided for under the terms, limitations and conditions agreed and specified in its Schedule

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

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

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

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

(d) limitations on the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test;

(e) measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service; and

(f) limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment.

It's hard to know how to summarize what's going on with these examples.  I can't think of much to say other than "market access" is what is in items (a) through (f).

Let's move now to an article by Bagwell, Mavroidis, and Staiger entitled "It's a Question of Market Access."  They say:  "In general terms, the GATT/WTO offers a forum within which its member governments may negotiate over market access. Market access is interpreted in the GATT/WTO as reflecting the competitive relationship between imported and domestic products."  This sounds a little like non-discrimination, and my 1998 copy of the Dictionary of Trade Policy Terms takes things further in that direction.  It talks about competition between imports and domestic goods, and says that "market access" is a term that outlines "the government-imposed conditions under which a product may enter a country under non-discriminatory conditions."  So is this just about discrimination?  Maybe, but I've heard the argument that the competitive relationship between imported and domestic products is broader than just discrimination.  You could have a situation where conditions were altered so that they favored imports less then they did before, but still on the whole favored imports (i.e., there is no discrimination against imports).  Perhaps there is something here, although I've never been completely convinced.  If you have a measure that makes imports worse off than they were before, that sounds pretty close to discrimination.

So, with all of that in front of us, can we say with much certainty what "market access" means?  It seems like it is being used in different ways by different people.  It reminds me a lot of "trade barriers," a general term which could cover a range of different measures and behavior.  Is "market access" just about discrimination?  Does it go slightly further than that, covering the altering of competitive conditions which goes beyond discrimination in some way that is hard to define?  Does it cover broad investment obligations such as "minimum standard of treatment"?  Does it cover SPS and TBT issues?  And if we can't answer those questions, should we abandon "market access" and use other terms instead? 

More on Consumer Opinion on COOL

By the way, it turns out some blog comments are being sent to a "comment spam" folder. My apologies if that has happened to you.  A comment I just discovered mentions a 2012 study about consumer opinion on mandatory country of origin labeling, a summary of which is available here.  Here is one of the findings:

3. Consumers regularly indicate they prefer meat products carrying origin information. However, consumers reveal similar valuations of alternative origin labels.

- In both online and in-person assessments, research participants regularly select meat products carrying origin information over unlabeled alternatives consistent with previous research. However, in an online assessment, consumers revealed valuations of meat products labeled “Product of North America” to be approximately the same as “Product of United States.”

Trade in Ship Recycling

I feel like there's a trade complaint in here somewhere, but I'm not sure exactly what it is (it probably involves looking closely at GATS commitments):

A European effort to bar the use of potentially hazardous ship recyclers in India, Pakistan and Bangladesh has run aground, stalled by an outcry from the South Asian countries.

The proposed legislation would bar ships flying European Union flags from "beaching" old ships, that is, steaming them onto shore, where they are dismantled by hand at informal shipyards. The low-cost, ship-scrapping industry of India, Pakistan and Bangladesh is a multibillion-dollar business employing about a million workers, and the three countries account for more than 70% of the global ship-recycling industry.

The European Parliament has approved measures that would ban beaching and fine EU shipowners for violations. Advocacy groups have criticized beaching for its poor safety and environmental record, preferring that ship breaking, as the broader vessel-recycling industry is known, be conducted in dry dock or at piers so that waters aren't exposed to toxic spills.

More TPP Secrecy Issues

Here's an excerpt from a letter by Senator Elizabeth Warren to USTR nominee Mike Froman:

While I have no doubt that the President's commitment to openness is genuine, I am concerned about the Administration's record of transparency regarding the Trans-Pacific Partnership. Specifically, I am troubled by the Administration's unwillingness to provide to the public the composite bracketed text relating to the negotiations. ... The lack of transparency in this area is troubling because, as you know, the bracketed text serves as the focal point for actual negotiations. I appreciate the willingness of the USTR to make various documents available for review by members of Congress, but I do not believe that is a substitute for more robust public transparency.

In 2001, as part of the Free Trade Area of the Americas (FTAA), President George W. Bush made public a draft agreement that included bracketed text. ...

...

Although the Bush Administration released a scrubbed version of the bracketed text that did not reveal which nation had authored which text and preserved anonymity, the disclosure nonetheless allowed outside observers to track the text under consideration and provide detailed feedback. There is no reason why the half-measure toward transparency taken by the Bush Administration should not be replicated with regard to the TPP.

I have heard the argument that transparency would undennine the Administration's policy to complete the trade agreement because public opposition would be significant. This argument is exactly backwards. If transparency would lead to widespread public opposition to a trade agreement, then that trade agreement should not be the policy of the United States. I believe in transparency and democracy, and I think the U.S. Trade Representative (USTR) should too.

...

In that context, I would appreciate answers to the following questions as soon as possible:

1. If you are confirmed to the position of USTR, would you be willing to immediately make fully public the bracketed text of the TPP?

2. If not, would you be willing to immediately make public a scrubbed bracketed text -- the half-measure toward transparency adopted by the Bush Administration during the FTAA negotiations?

3. Would you please provide me with a complete accounting of the level of detail in the negotiating text that is available to the appointed members of the statutory advisory committees, including whether they have complete access to the negotiating proposals of the U.S., counter or original proposals of our trading partners, bracketed text and any other supporting documents that would enable them to provide complete and accurate input and advice to assist the Administration in the development and negotiation of the TPP?

Some thoughts:

-- I've previously expressed doubts about the possibility of more transparency in trade negotiations, but I confess that I am rooting for Senator Warren on this one.  This is partly out of personal interest: I'd love to see those texts!

-- Using the FTAA as an example might not be a great idea.  After all, as we know, the FTAA failed.  Perhaps that's part of the reason why texts are not released these days.

-- I'm very interested in the answer to question 3. I've often wondered about that myself.

Privacy as a Reason for Discriminating Against American Service Providers

I think I can safely assume that everyone has heard about the U.S. government program which uses American internet companies to access the online activities of non-Americans, so I won't get into the details.  Not surprisingly, there have been some concerns expressed by law-makers outside of the United States. (As well as some concerns from Americans).  Here is one example:

Peter Schaar, Germany's federal data protection commissioner, told the Guardian that it was unacceptable for the US authorities to have access to EU citizens' data and that the level of protection was lower than that guaranteed to US citizens.

Here is another:

 European Union lawmakers took aim at the United States Tuesday for its recently revealed data snooping program, attacking Washington for treating its European allies as “foreigners” who are legitimate targets for surveillance.

The four major groups at the legislature all condemned the U.S. programs and the EU’s top justice official said she will confront U.S. Attorney General Eric Holder on whether U.S. services are vetting data of EU citizens and companies, and will insist on the fundamental respect of rights.

EU Justice Commissioner Viviane Reding she will be seeking clear commitments during Friday’s trans-Atlantic ministerial that EU citizens will be granted the same rights as U.S. residents when it comes to data protection.

Imagine if the EU or a particular European government was so bothered by the U.S. government actions, and did not get sufficient assurance of a change in policy, that it decided the only option was to promote a competing internet company that respected privacy. One possibility might be Opera, which is based in Norway and has offices around the world.  Let's say the EU and European governments pushed the use of Opera rather than its American rivals, using various discriminatory preferences and requirements.

Let's also say that in its GATS services schedule, the EU and its member states had made national treatment commitments on the services that these companies provide, and thus let's assume that the measures violate GATS Article XVII.

Here's my question.  Would European efforts to promote a domestic competitor be justified by GATS Article XIV(c)(ii), which refers to measures that are:

necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement including those relating to: ...   (ii) the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts;

The basic argument would be that the EU and its governments have to secure compliance with data privacy laws, and the only way to do that is if they can be sure that internet companies used by EU citizens are protecting individual data. As a result of the U.S. spying programs, they can't be sure that American companies are protecting this data, so they need to encourage their citizens to use non-American internet companies. 

Any thoughts from readers?

How Did USTR Define "In Like Circumstances" During the FTAA Talks?

That's the subject of a long-running court battle.  Apparently, during the FTAA talks, USTR wrote a "white paper" in which it offered commentary on the interpretation of the phrase "in like circumstances" in the context of the investment chapter.  The Center for International Environmental Law has been trying to get this paper for years, but a U.S. appeals court opinion from last Friday seems to have put an end to the fight.  It's a fairly short opinion, and interesting even if you don't know much about FOIA issues (which I don't).  I had the following thoughts:

-- USTR is doing white papers on issues such as the meaning of "in like circumstances"?  Are other governments doing this as well?  What I'd really like to see is a trade negotiating round where all we did is clarify the many and varied legal provisions for which the meaning is uncertain, and hash out a clear, agreed interpretation.

-- One of USTR's concerns seemed to be that foreign investors could use this paper in a case against the U.S. to influence a tribunal's interpretation.  The U.S. defends many investment cases, and in doing so offers up interpretations of this and other provisions.  Was the FTAA commentary different from what it argues in cases now?  Why?  What changed over time?

-- Another concern was the impact on current negotiations. I'm not a negotiator, I've never been a negotiator, and I have very little idea how negotiations work.  But does what USTR said about this provision in 2000 really have much impact on its ability to push particular views in negotiations today?  Can't they just say, we said X then, but we think Y now?

And speaking of court decisions on secrecy in trade negotiations, this comment points to an EU decision on a similar point (issued on the same day!): http://curia.europa.eu/juris/document/document.jsf?text=&docid=138132&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=665977

 

Two Big WTO Jobs

... are posted here:

The Secretariat of the WTO is seeking to fill the position of Director, Trade and Environment Division. Serving staff members interested in the position are also invited to apply. 

and here:

The Secretariat of the WTO is seeking to fill the position of Chief Economist and Director, Economic Research and Statistics Division. Serving staff members interested in the position are also invited to apply. 

Application deadline for both is June 27.

Do We Need Investor-State in TTIP?

I don't have a link or an exact quote, but I was watching the confirmation hearing for USTR nominee Mike Froman, and Sen. Sherrod Brown (a trade critic) asked something along these lines:  Given that EU property rights protection is pretty good, do we need investor-state in the TTIP?  Mr. Froman's answer was basically, we're still consulting on this and haven't made a decision.  Brown followed up with more on this, trying to prod Froman a bit on why investor-state was needed in this context, and Froman then said something like, we need to be aware of what excluding investor-state in this agreement would mean for the system as a whole.

I have no further comments on this right now -- just interesting to watch this unfold.

ADDED: I think you can view the exchange here starting at 1:27:08 if you click "watch now".

Feed-In Tariffs as Subsidies

Recall that Japan was one of the complainants in the Ontario feed-in tariff WTO case.  As the Washington Post explains, Japan has a similar program:

The tariff, launched in July, obligates utility companies to buy electricity from renewable sources — solar, wind and geothermal, for example — at fixed prices. In most cases, the utility companies are buying the renewable-generated power from private individuals and companies.

...

The feed-in tariff is fixed at an artificially high price to encourage start-up investment. The investors, in many cases, aren’t cutting-edge technology firms, but farmers, lumber companies and local governments. Once they install solar panels, they also moonlight as power-generation companies.

Under the terms of the feed-in tariff, they sell their renewable-generated energy to the local utility company at rates guaranteed for 20 years. The rates vary depending on the source, but solar is the most generous. When the tariff was unveiled, sellers could get about twice the rate in Germany and France.

Japan recently cut that rate by 10 percent, a change that applies to new projects, not those underway. But analysts say that the reduction is unlikely to slow interest among solar developers.

Of course, Japan's program does not have a local content requirement, which is what everyone found problematic about Ontario's measure.

But what about the question of whether there is a subsidy here?  The way the program is described above ("an artificially high price to encourage start-up investment"), it sure seems to be.  How about under the AB's "benefit" analysis?  Well, the rate is high compared to the rates in other countries, according to the article, so perhaps even under the AB's recent reasoning it would qualify as a subsidy.

As we know, however, that doesn't necessarily means it violates WTO rules.  And I haven't heard any suggestions that someone might challenge Japan's program at the WTO.   All of which makes clear, it could be argued, that clean energy programs can be run consistently with WTO rules.

Summer IP Course

From my friends at the Chinese University of Hong Kong and the World Trade Institute:

The Law Faculty of the Chinese University of Hong Kong and the World Trade Institute of the University of Bern in Switzerland (WTI), are jointly organizing the second edition of the Summer Programme on International Intellectual Property from 8 – 19 July 2013 at the Graduate Law Centre in Hong Kong.
The course brings together government representatives, scholars and practitioners from all over the world who wish to deepen their knowledge of the law and economics of international intellectual property (IP) protection. 
Taught by distinguished academics and practitioners, the Summer Programme equips you with an insight into today’s and tomorrow’s challenges in the field of IP. It is also a unique opportunity for you to establish valuable contacts with like-minded professionals and lecturers. The programme can be attended during one or two course weeks depending on your needs and interests.

More course information and application documents can be found on the following WTI website:http://www.wti.org/courses/wticuhk-summer-programme-on-ip/

Maybe they will talk about the issue noted in the last post:  Is the copyright policy being pursued in trade agreements a good one?

Are Trade Negotiations Too Secret?

I'm hearing a lot of complaints these days about trade negotiations not being transparent.  Here are some Global Trade Watch folks writing in the NY Times:

THE Obama administration has often stated its commitment to open government. So why is it keeping such tight wraps on the contents of the Trans-Pacific Partnership, the most significant international commercial agreement since the creation of the World Trade Organization in 1995?

And here's a Washington Post columnist:

What’s in the [TPP] isn’t clear, as the administration has clamped a tight lid on the proceedings.

I feel like I've addressed this issue before.  How much transparency can we expect on these issues?  Don't trade negotiators have to keep some of their objectives secret, in order to be able to negotiate successfully?  And isn't this all much more transparent than what happens in the U.S. Congress (and probably other legislative bodies as well)?

Having said that, I think there is a more fundamental criticism lurking underneath the talk of secrecy:  Governments haven't really engaged with the people about many of the issues that are covered in trade agreements.  There is vague talk about the benefits of trade, but not much detail about what is actually in trade agreements and what the impact will be.  I think that's what Global Trade Watch is getting at when it says:

Remember the debate in January 2012 over the Stop Online Piracy Act, which would have imposed harsh penalties for even the most minor and inadvertent infraction of a company’s copyright? The ensuing uproar derailed the proposal. But now, the very corporations behind SOPA are at it again, hoping to reincarnate its terms within the Trans-Pacific Partnership’s sweeping proposed copyright provisions.

If copyright policy is going to be part of trade agreements, someone is going to have to explain why the copyright policy being pursued makes sense.  My sense is that many people are not convinced that it does.

More Tit-for-Tat Trade Remedies

I know some of you are keeping track of the various tit-for-tat trade disputes going on these days.  Here's another, from the NY Times:

China’s nouveau riche millionaires, wealthy princelings and bribegiving business executives may soon find their wallets a little thinner: The price tag for French Champagnes and Burgundies, Italian Barolos and Pinot Grigios and other European wines may soon rise in mainland Chinese stores.

Acting less than a day after the European Union said it was imposing preliminary import tariffs on Chinese solar panels, China’s Ministry of Commerce announced Wednesday that it had begun an anti-dumping and anti-subsidy investigation of wines imported from the European Union. The investigation could lead to the imposition of steep tariffs by China on these wines.

More GM Food Controversies

By now, most of you have probably heard about some rogue GM wheat in Oregon (hopefully any of you who live in that area are staying safe -- keep your head down, and stick to corn-based cereals for a while).  Basically, as I understand it, some genetically engineered wheat was found on an Oregon farm, but no such wheat has ever been approved by the FDA.  Now Japan and South Korea are concerned, and there has been talk of suspending U.S. wheat exports.

This is one of those issues where I have more questions than answers.  Here are some questions:

-- My understanding is that there are plenty of GM foods out there.  As a Seattle Times article notes:  "Although Japan does not want genetically modified wheat, it does import genetically engineered papayas, resistant to a devastating plant disease. It also imports genetically modified corn, soybeans and canola, though it is unclear how much of that is used for human consumption."  Why such a concern about GM wheat?  Is human consumption really that important?  If you are putting it in animal feed, doesn't it eventually get to humans?

-- Who exactly is halting purchases?  Is this the private sector deciding not to buy, or the government blocking U.S. imports?  Obviously, it is the latter that it most important for trade law.

-- If this is a situation where there is a government ban, what are the trade law implications?  I assume we can go straight to the SPS Agreement on this one.  What is the science here?  Apparently, no FDA approval was ever sought (although the FDA says it's safe).  So what exactly are the potential harms?  I don't feel like I've gotten any good information from either side of the debate on this issue.

Investment in the TTIP

This is from a draft of the EU TTIP negotiating mandate (available from Inside US Trade):

21. The aim of negotiations on investment will be to negotiate investment liberalisation and protection provisions, including areas of mixed competence, such as portfolio investment, property and expropriation aspects, on the basis of the highest levels of liberalisation and highest standards of protection that both Parties have negotiated to date. The inclusion of investment protection and investor-to-state dispute settlement will depend on whether a satisfactory solution, meeting the EU interests concerning the issues covered by paragraph 22, is achieved.

22. As regards investment protection, the objective of the respective provisions of the Agreement should:

– provide for the highest possible level of legal protection and certainty for European investors in the US,

– provide for the promotion of the European standards of protection which should increase Europe's attractiveness as a destination for foreign investment,

– provide for a level playing field for investors in the US and in the EU,

– build upon the Member States' experience and best practice regarding their bilateral investment agreements with third countries,

– and should be without prejudice to the right of the EU and the Member States to adopt and enforce, in accordance with their respective competences, measures necessary to pursue legitimate public policy objectives such as social, environmental, security, stability of the financial system, public health and safety in a non-discriminatory manner. The Agreement should respect the policies of the EU and its Member States for the promotion and protection of cultural diversity.

What are the authors saying here?  Are they saying:

1. Investment protection and investor-state will only be included if high EU standards for investment protection, as opposed to the weaker U.S./Canadian standards, are met?

or are they saying:

2. Investment protection and investor-state will only be included if the usual provisions are weakened so as to ensure that public policy objectives can be pursued?