International Economic Law and Policy Blog

Individual vs. Group Comparisons under Less Favorable Treatment

From the EU response to the Seal Products panel's first set of questions:

Question 23 (All parties) Based on Table 1 and specific cells comprising the table, please identify the groups of products to be compared for the purpose of the Panel's analysis of the complainants' claims under Articles I:1 and III:4 the GATT 1994. Should different groups of products be compared for each element of relevant provisions, such as 'like product' and 'less favourable treatment'?

80. With respect to the complaints' claim under Article I:1 of the GATT 1994, the European Union considers that the relevant groups of products to be examined are Norway's and Canada's seal products (B+E) and Other Foreign seal products (C+F). In order to determine whether the EU Seal Regime provides for "less favourable treatment" the treatment granted to products in B should be compared with the treatment of products in C (as the group of non-conforming products and the group of non-conforming like imported products). Likewise, the treatment granted to products in E (or more precisely E, H and K) should be compared with the treatment of products in F (or more precisely F, I and L) (as the group of conforming products and the group of conforming like imported products).53

81. With respect to the complainants' claims under Article III:4 of the GATT 1994, the European Union considers that the relevant groups of products to be examined are Norway's and Canada's seal products (B+E) and Domestic seal products (A+D). In order to determine whether the EU Seal Regime provides for "less favourable treatment", B should be compared with A (as the group of non-conforming imported products and the group of non-conforming like domestic products) and the treatment granted to E (or more precisely E, H and K) should be compared with D (D, G and H in the table provided by the European Union) (as the group of conforming imported products and the group of conforming like domestic products).54

82. That being said, the European Union observes that in order to determine whether there is a violation of Articles I:1 or III:4 of the GATT 1994, the Panel has to examine whether there is discrimination in the treatment granted to the group of imported products when compared to the group of like domestic/other origin products. This entails comparing the aggregate competitive opportunities afforded, on the one hand, to imported seal products that are derived from hunts conducted for commercial, subsistence and marine resource management purposes and, on the other hand, to domestic/other origin like seal products that are the result of these three kinds of hunts. This further requires an analysis of the various categories of the products at issue, i.e. by comparing imported seal products and domestic/other origin like seal products derived from seal hunts for commercial purposes, imported seal products and domestic/other origin like seal products derived from seal hunts for subsistence purposes, and imported seal products and domestic/other origin like seal products derived from seal hunts for managing marine resources purposes. When making a category-to-category comparison within the group of products, it should be concluded that there is no alteration of the aggregate competitive opportunities in favour of domestic/other origins group of products. Put in simple terms, such approach shows that there is no discrimination contrary to Articles I:1 and III:4 of the GATT 1994 since each category in the same situation (by reference to the purpose of the hunt) is treated equally and have identical access to (or prohibition to access) the EU market.

I couldn't copy the table referenced in this question; you'll have to look at the document itself.

I don't think it's any secret that I'm a big supporter of the group comparison.  In that regard, for me it's not relevant to compare individual cells in these kinds of tables as part of the less favorable treatment analysis.  See the EU response to Question 25 and the accompanying table on this point.

One issue that I didn't see addressed by the panel's questions was the relevance of the degree of disparate impact in the group comparison.  A situation where, say, 100% of imports get the worse treatment under the "regulatory distinction" at issue while 20% of domestic products get the worse treatment is very different from a situation where 60% of imports get the worse treatment and 50% of domestic products get the worse treatment.

The Relationship Between the GATT and TBT Non-Discrimination Obligations

From the EU response to the Seal Products panel's first set of questions:

Question 7 (All parties) Please explain your views on the relationship between the TBT Agreement and the GATT 1994 in terms of the non-discrimination obligations and policy justifications addressed in both agreements. For example, can a measure found inconsistent with Article 2.1 and/or Article 2.2 of the TBT Agreement be justified under Article XX of the GATT 1994? Or, vice versa (i.e. can a measure found unjustifiable under Article XX of the GATT 1994 be found consistent with Article 2.1 and/or Article 2.2 of the TBT Agreement)?

16. The European Union considers that the TBT Agreement and the GATT 1994 must be read together in a consistent manner. The TBT Agreement "further[s] the objectives of GATT 1994".9 In this sense, the non-discrimination obligations and policy justifications addressed in both agreements should be interpreted harmoniously. In the European Union's view, an interpretation of Articles 2.1 and 2.2 of the TBT Agreement that would provide for a different outcome in terms of the consistency of the measure at issue with the GATT 1994 would be illogical.

17. With respect to the non-discrimination obligations, both Article 2.1 of the TBT Agreement and Article III:4 of the GATT 1994 have been read together by the Appellate Body when interpreting the terms "less favourable treatment".10 The same should be concluded with respect to Article 2.1 of the TBT Agreement and Article I:1 of the GATT 1994.11 The same legitimate regulatory distinctions should be capable of showing that there is no discrimination regardless of whether the measures are examined under Article 2.1 of the TBT Agreement or under Articles I:1 or III:4 of the GATT 1994; otherwise, a public policy deemed legitimate pursuant to Article 2.1 of the TBT Agreement would fail to save a measure under GATT 1994 unless such public policy falls within Article XX's limited list of exceptions. Indeed, 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. Further, it would make no sense whatsoever to conclude that Articles I:1 and III:4 of the GATT 1994 prohibit what is consistent under Article 2.1 of the TBT Agreement, as this would make Article 2.1 of the TBT Agreement and the balanced interpretation of that provision carefully developed by the Appellate Body utterly useless. Given that the GATT 1994 also applies to all technical regulations, complainants would have an incentive to bring claims only under the GATT 1994, thereby limiting the possibilities of justifying regulatory distinctions to those grounds contained in the closed list in Article XX. Indeed, this is precisely the situation in this dispute. Norway has carefully avoided to argue its claim under Article 2.1 of the TBT Agreement (even though it is in its Panel Request) because, apparently, it believes that it cannot show that the measure is inconsistent with that provision, while claiming that it is inconsistent with Articles I:1 and III:4 of the GATT 1994.

18. Thus, the European Union considers that the contours of the basic nondiscrimination obligations in the TBT Agreement and the GATT 1994 should be understood as similarly crafted: both recognise a regulatory space in case of alleged de facto discrimination claims, in the sense that both permit a regulation that may result in detrimental impact in so far as the regulatory distinction causing such an impact is legitimate and does not reflect discrimination.

In terms of the justifications provided by Article XX of the GATT 1994 and Article 2.2 of the TBT Agreement, the European Union also considers that they should be read harmoniously, thereby providing for the same consistent results.

That's a great question by the panel.  I agree with the general principle articulated in the EU response; developing interpretations of all of the various provisions so that you get "consistent results" may be tricky, though.

The Relevance of International Law in WTO Law

This is from the U.S. response to a Seal Products panel question:

4. (All third parties) Please explain the extent of the relevance of the United Nations Declaration on the Rights of Indigenous Peoples and the ILO Convention concerning Indigenous and Tribal Peoples in Independent Countries to the analysis of the parties' claims under Article XX of the GATT 1994 and Article 2.1 and/or Article 2.2 of the TBT Agreement.

4. The United States does not believe the United Nations Declaration on the Rights of Indigenous Peoples or the ILO Convention concerning Indigenous and Tribal Peoples in Independent Countries have any relevance for the purposes of this dispute. The United States does not understand the EU to have put forth either document in support of its arguments under Article XX of the GATT 1994. With respect to the TBT Agreement, it appears the EU put forth the UN Declaration and ILO Convention to support its arguments with respect to Article 2.1, purportedly as evidence of what constitutes a “legitimate objective.” The United States notes, however, that the concept of “legitimate objective” is not one that appears in Article 2.1. To the extent that the Panel is called upon to consider the legitimacy of the objective under Article 2.2, the documents would seem to be unnecessary, as both Canada and Norway agree that the objective of protecting the interests of Inuit and other indigenous communities is legitimate. As such, the United States considers the United Nations Declaration on the Rights of Indigenous Peoples or the ILO Convention concerning Indigenous and Tribal Peoples in Independent Countries irrelevant to this dispute.

 And here's (part of) the EU response to that question:

Question 39 (All parties) Please explain what extent, if any, the United Nations Declaration on the Rights of Indigenous Peoples and the ILO Convention concerning Indigenous and Tribal Peoples in Independent Countries are relevant to the analysis of the parties' claims under Article XX of the GATT 1994 and Article 2.1 and/or Article 2.2 of the TBT Agreement.

128. The European Union considers that the United Nations Declaration on the Rights of Indigenous Peoples and the ILO Convention concerning Indigenous and Tribal Peoples in Independent Countries confirm the legitimacy of protecting the Inuit and indigenous communities' interest.76 Measures taken to protect the economic and social interests of those communities pursue a legitimate objective in the sense of Article 2.2 of the TBT Agreement. In the same vein, regulatory distinctions based on the protection of those interests are also legitimate for the purpose of Article 2.1 of the TBT Agreement.

129. The UN Declaration and the ILO Convention are relevant to the analysis in that they demonstrate:

• A widespread international consensus that protecting the livelihoods, social integrity and cultural identity (including a traditional way of life) of Inuit and indigenous peoples is a legitimate policy objective;

• A widespread international consensus that indigenous peoples are unlike other ethnic groups in that in their quality as indigenous peoples, as closely circumscribed by the definitions in the two instruments (and as reflected in the EU regulations), they require and deserve the special protection of the world community.

• That traditional practices undertaken by Inuit and indigenous peoples (e.g. seal hunting for subsistence purposes) can and should be viewed through a unique moral perspective vis-à-vis the same practices undertaken by others (e.g. seal hunting for purely commercial purposes).

...

I've never been one to push hard for more international law in WTO disputes, but is the U.S. approach too restrictive?

Q & A in the Seal Products Dispute

The Panel's questions and parties'/third parties' responses in the Seal Products dispute are very interesting.  The U.S. has posted its responses here; the EU's responses are here and here.  (I'm not aware of other parties/third parties posting their responses, but let me know if I've missed it).  Over the next few days, I'll try do some posts highlighting issues that I found to be of particular note.

Argentina and Foreign Investment

Recently, Argentina's economic nationalism has caused consternation in both trade and investment circles, and there have been a number of trade and investment complaints brought in response to various Argentine government actions.  The trade cases at the WTO are just getting underway; many investment arbitration awards have already been issued, but enforcement of these awards has been challenging.

In the area of foreign investment, one particular problem was the nationalization of YPF, an oil company owned by Spain's Repsol, and the failure of the Argentine goverment to provide compensation.

With all of these issues, you might think that foreign investment in Argentina would be drying up, especially in industries which have experienced these problems directly.  But that doesn't seem to be the case.  The Economist reports:

"on July 16th, after a year in which YPF’s oil and gas production continued to disappoint, the government announced that it had agreed on a big joint venture between YPF and a different foreign oil giant, Chevron.

...

Chevron has promised an initial investment of $1.24 billion in Vaca Muerta as part of its joint venture with YPF. The deal was announced after Ms Fernández issued a decree seemingly tailor-made for Chevron, which states that energy companies that invest over $1 billion will, after five years, be allowed to sell 20% of their production abroad without paying export taxes or being forced to repatriate profits."

Not only is foreign investment still flowing, it's flowing to the very same company that was already nationalized!

I'm not sure what to make of this.  You might say that the existence of investment treaties has reassured investors that they can get their money back even if the government interferes. But the investment arbitration system hasn't really been effective so far in the Argentina cases, so that seems like a stretch.

Another possibility is that investment treaties don't really matter to the calculation, and foreign investors simply decide that the potential profit is worth the risk.

I would love to hear more about how Chevron decided to make this investment ...

Clarifying WTO Rules Relating to FITs

Liesbeth Casier and Tom Moerenhout of IISD have written a short paper on the Renewable Energy/FIT case (DS412,426).  Basically, they are critical of the AB's "benefit" findings, and think the WTO Members should step in to clarify how WTO rules apply to feed-in tariff programs.

Here's their criticism of the AB:

We do not believe the AB should try to avoid the determination of a subsidy in order to have a “green reading” of WTO law—if that was one of its objectives in the first place. An FIT should be recognized as a subsidy by the AB, and WTO members should guarantee that appropriate policies that encourage a shift to the green economy are safeguarded under WTO law. This is particularly the case as long as carbon is not properly accounted for in electricity generation. The lack of carbon pricing remains the principal obstruction to the uptake of renewable energy and should be addressed as such.

...

The aforementioned potential carve-out of the subsidy definition created by the AB in its reasoning could very well affect other markets and lead to an increase in inefficient state support for other non-green markets.

I think perhaps their argument could be summarized as follows: FIT programs are important and vital for supporting renewable energy, but the AB's attempts to make sure they could be used were overbroad. The WTO Members should look closely at whether there is a better way to ensure that these programs are permitted.

Pascal Lamy's Final Speech as WTO DG

I have greatly enjoyed blogging about Pascal Lamy's speeches over the years. He gets into real substance far more than most public officials.  Here are some snippets from his final speech as DG.

First, some skepticism on the trend towards regionalism:

We also know that behind the headlines of the launching of mega regionals, as some refer to them, lie tremendous difficulties and sometimes even no final deal at all, as was the case of the Free Trade Area of the Americas.

I agree with him here. I know there is a lot of excitement about the TPP and TTIP, but I have doubts about whether we'll ever see completed deals.  The next two years should give us the answer, one way or the other.

Then there are questions about the scope of trade agreements:

But I do think we would do well to recognise that the issue is not trade opening IN the WTO as opposed to trade opening OUTSIDE the WTO. The issue today is with the difficulties involved in trade opening. Domestic trade politics have become more difficult and trade deals have become more complex because the nature of obstacles to trade has evolved. We are no longer negotiating just the reduction of tariffs, but also of non-tariff barriers, which have gained enormous importance.

On this issue, let me just reiterate something I've said a number of times: I don't think "non-tariff barriers" is  a meaningful category.  We have been beyond tariffs since the 1930s, so that is nothing new.  What we need to do here is break down "non-tariff barriers" into its components.  One component is protectionist laws and regulations, and addressing those in trade agreements has a long history and is not too controversial.  The other component is measures that have an effect on trade but are not protectionist (e.g., IP rights).  That part is very controversial.

 And finally a bit about regulation:

The WTO is not a regulatory agency for the vast majority of non-tariff measures, but it is well placed to become a platform where the convergence of these measures could be monitored, along the lines of what we have done for Aid for Trade.

I'm not sure exactly what he has in mind here, but convergence of regulations is a big topic in the TTIP talks.  Ideally, these convergence issues would be multilateralized at some point. I think there is potential here, although some of the claimed benefits are probably overstated.  This is something I'm writing about right now.

Japan, the TPP, and a Time Warp

Congressman Sander Levin wants to get tough on Japan if they are going to be part of the TPP talks.  He gets into some details here (from Inside U.S. Trade):

III. Current and Future Non-Tariff Barriers (Other than Currency Manipulation)

Existing Barriers. Japan will agree to eliminate all existing non-tariff barriers in the auto sector, including auto parts.3 These barriers have included: a discriminatory system of taxes; onerous and costly vehicle certification procedures for imported automobiles; a complex and changing set of safety, noise, and pollution standards, many of which do not conform to international standards and add significant development and production costs for automobiles exported to Japan; an unwillingness by Japanese dealerships to carry foreign automobiles and insufficient enforcement of competition laws to address anti-competitive practices; zoning restrictions that make it difficult, if not impossible, to establish new dealerships in important markets; and exclusionary consumer preferences shaped by decades of government policies directed at promoting the national car companies.

Future Barriers. Japan will agree to effective mechanisms to avoid adopting new non-tariff barriers, and to immediately address new concerns with existing measures.4 For example:

- Proposed Measures. If the United States objects to a proposed measure5 and establishes prima facie evidence to a dispute settlement panel6 that the measure is either inconsistent with the TPP agreement or otherwise nullifies or impairs any benefit accruing to the United States directly or indirectly under the agreement, Japan will not implement the measure until the matter is resolved either through negotiations or dispute settlement.

- Non-Violation Nullification and Impairment. If a proposed measure is implemented and, although not inconsistent with the agreement, results in the nullification or impairment of the benefits of the agreement to the United States, the United States would be authorized to suspend its concessions in an amount equivalent to the level of nullification or impairment, or to utilize the “snapback” provision (or, if the snapback provision cannot be implemented because the U.S. tariff has not been eliminated, to extend the period of time before the auto/truck tariff is eliminated).

He also wants the U.S. tariff phaseout schedule to be tied to Japan's "import penetration rate."

Conceptually, some of this is quite interesting.  How can trade rules deal with the private actions of Japanese car dealers or consumer preferences?  What about zoning restrictions?  Is it possible to have challenges to proposed measures, with some sort of "injunction" imposed?  Do we really want to toughen the non-violation remedy?

Beyond any theoretical discussion, though, this has the feel of 1980s and 1990s trade rhetoric regarding Japan.  As I recall the 1990s version of these issues, not much came of the U.S. claims (but I'm biased, having worked for a law firm representing Japanese clients on these issues, so feel free to ignore what I say).  It will be interesting to see what, if anything, happens this time. 

Implementing the Clove Cigarettes Case

From the U.S. statement at today's DSB meeting:

• To come into compliance with the DSB’s recommendations and rulings, the United States has taken and is taking a number of actions in relation to menthol cigarettes. Today, the United States is announcing several actions by U.S. health authorities.

• First, the U.S. Food And Drug Administration is publishing an Advanced Notice of Proposed Rule Making concerning menthol cigarettes. The Notice initiates a process to receive public comment on potential regulatory options that the Food and Drug Administration might consider and seeks additional information. The Notice will be published in the U.S. Federal Register.

• Second, the U.S. Food and Drug Administration is releasing its Preliminary Scientific Evaluation on the Possible Public Health Effects of Menthol Versus Nonmenthol Cigarettes. The Preliminary Scientific Evaluation addresses the association between menthol cigarettes and various outcomes, including initiation, addiction, and cessation. The Preliminary Evaluation includes a finding that the presence of menthol in cigarettes negatively affects cessation and attempts of smokers to quit smoking. The Preliminary Evaluation will be available for public comment.

• Third, the U.S. Food and Drug Administration is announcing the development of a youth education campaign that is designed to prevent and reduce demand for tobacco products and menthol cigarettes.

• Fourth, the U.S. Department of Health and Human Services will be sharing information through the U.S. online hub for tobacco information and cessation tools, called BeTobaccoFree.gov, which was initially launched in November 2012. This online hub will provide information on the health risks posed by menthol cigarettes to raise awareness of those risks.

• Fifth, the National Cancer Institute will be educating the public on the health risks posed by menthol cigarettes through its website designed to help persons quit smoking, which is SmokeFree.gov.

• The health risks posed by using tobacco are well-documented, and the public health challenges posed by menthol cigarettes in particular are significant. In the United States, approximately 30 percent of adult smokers and 40 percent of all youth smokers report smoking menthol cigarettes. Raising awareness and educating about the health risks of tobacco can be a very important means to discourage its use.

• In light of the significant health challenges posed by menthol cigarettes, these actions by U.S. health authorities bring the United States into compliance with the DSB’s recommendations and rulings in this dispute within the reasonable period of time for compliance, which expires on July 24.

I suspect Indonesia will not be entirely happy with this approach.  I'm less certain how anti-tobacco groups will react.

Direct Car Sales and GATT Article III:4

Some of you may have heard of Tesla, a car company that makes high-end electric cars (if you are thinking of this 1980s band, you have the wrong Tesla).  What you may not have heard is that they are using a novel sales method, under which they bypass dealers and sell directly to consumers.  They have showrooms, but you can't actually buy cars there.  You just look at the cars in the showroom, and then order online from the company, which ships it to you.  (It may be more complicated than all that, but I think that covers the basics).

This approach is controversial, due to long-standing restrictions designed to give car dealers the exclusive right to sell cars to consumers (i.e., direct sales from the producer are banned).  There are some political and legal battles being fought right now in the U.S. over this.  It will be interesting to see how these turn out.

But it occurs to me there might be trade law issues here as well.  I suspect that other countries have similar laws that prevent direct sales.  For the sake of argument, let's say Canada does.  If Tesla wants to make direct sales to Canadian consumers, it would be prohibited from doing so.  Would such a measure violate GATT Article III:4?  This provision states:

The products of the territory of any Member imported into the territory of any other Member shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.

The argument would be that, in practice, only the foreign company Tesla is seeking to use direct sales to distribute its product. Thus, these laws have, in practice, a disparate impact on foreign goods, as only foreign goods are affected. As a result, on a de facto basis, foreign goods are treated less favorably when these direct sales are not allowed.

Perhaps I'm stretching too far on this one to find a claim, but I thought maybe there could be something here ...

A “WTO Remedies Implementation Committee” in the Gambling Dispute

This is from a press release I just received from the Antigua Gambling case team:

The Government of Antigua and Barbuda today announced the formation of a select committee charged with overseeing the implementation process as the nation seeks to suspend certain concessions and other obligations relating to United States intellectual property rights as sanctioned by the World Trade Organisation (the “WTO”) at a session in January of this year.

The seven-member “WTO Remedies Implementation Committee” (the “RIC”), chaired by Antiguan Attorney General Mr Justin Simon QC, is responsible for directing the government’s plan to build the framework necessary to suspend selected US intellectual property rights to the tune of US $21 million per year, effective from April, 2006.

The newly formed committee also includes Permanent Secretary in the Department of Trade, Industry and Commerce, Ambassador Colin Murdoch, Magistrate and Deputy Registrar of Intellectual Property, Conliffe Clarke, Legislative Drafter in the Department of Legal Affairs, Ayesha Baisden, Deputy Financial Secretary in the Department of Finance, John Edwards and two additional persons who will be designated by the Ministry of Telecommunications, Science and Technology and by the Antiguan Intellectual Property office, along with legal counsel, Mark Mendel.

“I am very pleased with the composition of our implementation committee”, said Attorney General Simon, “as it clearly has the expertise that we will need to cover all the bases in the development and implementation of our WTO-approved remedies. I am asking the committee to work with me expeditiously to ensure prompt and proper use of this valuable right”.

Mr Simon further observed that “in addition to devising the implementation scheme, the RIC will also ensure that Antigua and Barbuda will do so in full compliance with all applicable international and domestic laws that might relate to the suspension of the intellectual property rights. As the Antiguan government had announced in the Spring, events have made it clear that recourse to the WTO remedy is at this time necessary if the nation is to progress towards a swift and equitable resolution in the decade long trade dispute with the United States”.

“We have been seeking a fair and reasonable compromise of this matter since the day we brought the case” added Attorney General Simon, “but unfortunately the United States has not yet put a fair settlement offer on the table. Whether or not recourse to these remedies will convince it otherwise, in any event at least there will be some substantial compensation to Antigua and Barbuda as the IP suspensions are implemented”.

The RIC will convene its first organisational session within a week and is expected to deliver its first progress report to government no later than two weeks thereafter.

Will TTIP Raise or Lower Regulatory Standards?

Some people worry that the TTIP will cause governments to engage in more regulation. Here is Fred Smith of the Competitive Enterprise Institute:

the EU’s economic and political weight is comparable to that of the United States, and in many areas, existing EU regulations are more burdensome than America’s. If the EU were to impose them on the US via “harmonization” sections of a trade treaty, it would do great damage to our economy.

Examples of this risk abound. The EU Constitution subscribes to the Precautionary Principle, an over-cautious approach to product approval, championed by powerful U.S. environmental groups, that makes the FDA appear innovation-friendly. American labor unions have long admired European rules that limit worker mobility and business rights. And TTIP might even drag the U.S. into adopting some form of energy suppression policies in the name of fighting global warming

Others are concerned that it will be used to lower regulatory standards:

A transatlantic agreement that is little more than a vehicle to facilitate deregulation would not only threaten to weaken critical consumer and environmental safeguards, but also conflict with the democratic principle that those living with the results of regulatory standards – residents of our countries – must be able to set those standards through the democratic process, even when doing so results in divergent standards that businesses may find inconvenient.

Thus, we are highly skeptical that an agreement focused on regulatory “harmonization” will serve consumer interests, workers’ rights, the environment, and other areas of public interest. Rather, it could lead to lower standards and regulatory ceilings instead of floors. A “free trade” deal must not limit the United States or the EU (or its member states) from adopting and enforcing standards that provide higher levels of consumer, worker, and environmental protection.

Another possibility, of course, is that it will do neither, leaving national regulations as they are.

Reading the Tea Leaves on Investor-State in the TTIP

During the closing press conference at the TTIP last week, someone asked the lead negotiators a question along the lines of, "Will there be investor-state in the TTIP, and how will you address concerns with subversion of democracy?"  You can see their answer at 29:08 of this video.  I'm not sure their answer tells us much, but it's all we have for now.

The Number of WTO Disputes: Regression to the Mean

Last year about this time, I was talking about how many more WTO disputes there were than normal. We ended up with the most WTO disputes in a long time: 27.

With the latest WTO complaint (the EU's complaint against Russia's car recycling fee), I thought it was time for another count.  So far this year, there have been 8 complaints:

Russian Federation - Recycling Fee on Motor Vehicles	462	European Union	Russia	Jul 09, 2013	GATT, TRIMs
Colombia - Measures Relating to the Importation of Textiles, Apparel and Footwear	461	Panama	Colombia	Jun 18, 2013	GATT
China - Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes ("HP-SSST") from the European Union	460	European Union	China	Jun 13, 2013	AD, GATT
European Union and Certain Member States - Certain Measures on the Importation and Marketing of Biodiesel and Measures Supporting the Biodiesel Industry	459	Argentina	European Union	May 15, 2013	GATT, SCM, TBT, TRIMs, WTO
Australia - Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging	458	Cuba	Australia	May 03, 2013	GATT, TBT, TRIPS
Peru - Additional Duty on Imports of Certain Agricultural Products	457	Guatemala	Peru	Apr 12, 2013	Agriculture, Customs, GATT
India - Certain Measures Relating to Solar Cells and Solar Modules	456	United States	India	Feb 06, 2013	GATT, SCM, TRIMs
Indonesia - Importation of Horticultural Products, Animals and Animal Products	455	United States	Indonesia	Jan 10, 2013	Agriculture, GATT, Licensing

That puts us on pace for about 16 complaints this year.

Over the last 6 years, the figures for complaints are:

2012	27
2011	8
2010	17
2009	14
2008	19
2007	13

 

Which averages out to about 16 complaints per year.

The Plain Packaging Dispute: A Mock Trial

This sounds like it was a lot of fun:

In a dry run of one of the biggest legal battles in public health, an advocate for Australia's tobacco policies has delivered seemingly strong rebuttals of objections likely to be mounted in a landmark case at the World Trade Organization.

Two top academic lawyers presented the arguments at the Graduate Institute in Geneva, a stone's throw from the WTO, where Ukraine, Cuba, Honduras and the Dominican Republic are trying to overturn Australia's radical tobacco packaging law.

Australia introduced the law late last year, requiring cigarette packs to be uniformly dark brown, emblazoned with health warnings, and with the name of the product printed in a standardized small font, with no colors or logos.

Its defense at the WTO is widely seen as the crucial battle that the tobacco companies must win if they want to halt the advance of anti-tobacco laws globally, which the World Health Organization says will result in a "brave new world of tobacco control".

Legal experts present at Tuesday's academic debate said the arguments were likely to be similar to the ones deployed when the case is litigated behind closed doors at the WTO.

"What is the core of this dispute is banning all trademarks on the pack," said Joost Pauwelyn, a leading expert on WTO disputes, who has advised Ukraine in the WTO dispute but said he was speaking in his own capacity.

"Do you really believe that this will stop young people starting to smoke? Will it make it easier for people to quit smoking? The trademark on the pack, is that something that starts people smoking?" asked Pauwelyn.

His opponent, Benn McGrady, a Georgetown professor who has advised the World Health Organization on plain packaging, said Australia had not in fact banned the use of trademarks.

"Trademarks are permitted on these packs. What is not permitted is a trademark other than a word. So for example a sign, a symbol, a color, some other design element."

But how about a bit of transparency? Why no webcast?  Joost and Benn: Show us the video!

U.S. Compliance in the Tuna-Dolphin Case

The final U.S. regulation related to labelling of dolphin-safe tuna, taken in response to last year's DSB ruling, is now out: https://www.federalregister.gov/articles/2013/07/09/2013-16508/enhanced-document-requirements-to-support-use-of-the-dolphin-safe-label-on-tuna-products

If anyone wants to parse through it and offer an opinion as to whether this brings the U.S. into compliance, I'd love to hear it.

Why Is Global Trade Watch Protectionist?

I understand why Global Trade Watch is concerned that some trade rules interfere with domestic policy autonomy and the ability to regulate.  I don't agree with everything they say in this regard, but I have some sympathy for some of their views.  (As seen in the last post).

But I don't get why that would lead them to avocate protectionism. You can be for the ability to regulate, but against protectionism, as many people are.

I've often wondered if they were protectionist, as sometimes their views have been stated vaguely.  But here's a recent tweet of theirs:

Great letter in MN newspaper: #TPP poses a potential threat to American jobs & it's not getting enough attention. bit.ly/12Zl7Ae

And the letter says:

As our economy continues to recover, our elected officials should do everything they can to safeguard American jobs.

The Trans-Pacific Partnership negotiations pose a potential threat to hundreds of thousands of American jobs, and this fact is not getting enough attention. Vietnam, which is part of the free-trade negotiations, is pushing to get rid of a long-standing textile rule that generates revenue and jobs for the U.S.; specifically, they are trying to discard the yarn forward rule of origin.

The yarn forward rule states that for a garment to be duty free, it must originate — from the yarn stage forward — in a country that is part of the free trade agreement. If Vietnam is successful in getting this rule dropped from the Trans-Pacific Partnership agreement, they will be able to flood the U.S. market with cheap garments made from textiles they sourced from China. This would endanger over 500,000 American textile jobs.

I hope that our representatives will not support a Trans-Pacific Partnership agreement unless it includes the yarn forward rule and preserves American jobs and industry.

That's a pretty clear statement that protectionism, at least this particular instance of it, is good for the economy.

I don't know the Global Trade Watch people very well.  I've had some email exchanges with Todd Tucker, who used to work there, but I've never met Lori Wallach, who is the head.

But I have met a number of people who are sympathetic to their regulatory autonomy concerns, and most of them are not protectionists.  Furthermore, these people are often very interested in the plight of workers in poor countries, and would favor giving them access to the U.S. market, rather than closing that market.

So why did Global Trade Watch take this approach?  Are they strong believers in protectionism?  Was it just a marriage of convenience with particular allies in the fight against trade agreements?  It surprises me that they have gone this particular route.  Would they support any international constraints on domestic protectionism?

I don't mean to antagonize Global Trade Watch.  They are free to believe whatever they want. I'm just perplexed.

I Take a Side in the International Investment Law Debate

Most of this blog's readers are probably aware that the debate over international investment rules can get pretty heated.  The supporters fight hard to beat back any criticism; the critics get very frustrated over perceived corporate influence and bias.

I'm a bit of an outsider to all of this, and I have found the state of the law, and the debate, a bit surprising.  I have what could be called a reasonable and centrist view that searches for a middle ground (as I like to think), or, alternatively, could be seen as a view so "radical" that even some investor-state critics will be skeptical (as an investment law friend told me).

I'll let you be the judge -- feel free to tell me in the comments why my Cato paper on this subject is heretical and awful, or brilliant and visionary (or something in between).  In this paper, I take a side in the debate, although to be honest, I feel like perhaps I've created a third side, and I'm not sure to what extent anyone will agree with me.  (But then, I work at the Cato Institute, so I'm used to that.)

To whet your appetite, here's the conclusion:

If the major economic powers that have pushed for the current international investment system were to re-evaluate these issues, they might consider the following. Many of the rules in the existing regime seem positive in and of themselves. A wide range of countries have domestic laws that deal with expropriation and regulatory expropriation. And due process–type requirements are also common. Taking these domestic principles and elevating them to international legal status is not inherently objectionable.

But there are important implications from doing so, as these rules have a real impact on domestic policymaking. To some extent, these implications are obscured when the principles are made part of an international investment regime. It makes the rules seem limited to “foreign investment” matters, whereas in reality they are much broader. This is domestic law being pushed to the international level. If this is going to be done, it should be discussed more explicitly. A global agreement on rules for expropriation, in which governments gather with the explicit task of developing common rules on compensation for expropriation, would be one thing. Applying these principles only to foreign investors, and doing so as part of what is characterized as an investment treaty, is another thing entirely.

The current set of international investment rules was created to deal with problems faced by Western companies investing in the developing world decades ago. But what rules are appropriate in today’s more balanced world of investment, where companies with multiple national affiliations invest in multitudes of countries around the world? What rules are appropriate in a world where the nationality of companies is increasingly irrelevant, as companies operate globally and have little allegiance to particular governments? Liberalizing foreign investment is an important goal. But we need to make sure that any international rules in this area take on this task in an appropriate way, and it is worth examining how the existing system is performing. In this regard, this paper has proposed the following reforms to the system: any rules in this area should be multilateral, not bilateral or regional; the core principle should be nondiscrimination, with some of the broader principles currently in effect taken out; and state-state dispute settlement should be used, rather than investor-state. Rules along these lines would better reflect the current state of foreign investment flows, promote foreign investment, and maintain domestic regulatory autonomy.

Investor-State Reform

UNCTAD has a recent paper which discusses options for reform of the investor-state system. Here's one possible path they set out:

3. Limiting investor access to ISDS

This option envisages narrowing down the range of situations in which investors may resort to ISDS. This could be done in numerous ways, including: (i) by reducing the subject-matter scope for ISDS claims; (ii) by restricting the range of investors who qualify to benefit from the treaty, and (iii) by introducing the requirement to exhaust local remedies before resorting to international arbitration. A far-reaching version of this approach would be to abandon ISDS as a means of dispute resolution altogether and returns to State-State arbitration proceedings, as some recent treaties have done.27

Some countries have adopted policies of the first kind, for example, by excluding certain types of claims from the scope of arbitral review.28 In the past, some countries used this approach to limit jurisdiction of arbitral tribunals in a more pronounced way, for example, by allowing ISDS only with respect to expropriation disputes.29

To restrict the range of covered investors, one approach is to include additional requirements in the definition of “investor” and/or to use denial-of-benefits provisions.30 Among other things, this approach can address concerns arising from “nationality planning”/“treaty shopping” by investors and ensure that they have a genuine link to the putative home State.

Requiring investors to exhaust local remedies, or alternatively, to demonstrate the manifest ineffectiveness/bias of domestic courts, would make ISDS an exceptional remedy of last resort. While in general international law, the duty to exhaust local remedies is a mandatory prerequisite for gaining access to international judicial forums,31 most IIAs dispense with this duty.32 Instead, they allow foreign investors to resort directly to international arbitration without first going through the domestic judicial system. Some see this as an important positive feature and argue that reinstating the requirement to exhaust domestic remedies could undermine the effectiveness of ISDS.

These options for limiting investor access to ISDS can help to slow down the proliferation of ISDS proceedings, reduce States’ financial liabilities arising from ISDS awards and save resources. Additional benefits may be derived from these options if they are combined with assistance to strengthen the rule of law and domestic legal/judicial systems. To some extent, this approach would be a return to the earlier system, in which investors could lodge their claims only in the domestic courts of the host State, negotiate arbitration clauses in specific investor-State contracts or apply for diplomatic protection by their home State.

In terms of implementation – like the options described earlier – this alternative does not require coordinated action by a large number of countries and can be put in practice by parties to individual treaties. Implementation is straightforward for future IIAs; past treaties would require amendments, renegotiation or unilateral termination.33 Similar to the “tailored modification” option, however, this alternative results in a piecemeal approach towards reform.

In response to this paper, the TDM journal has a call for papers on this issue: http://www.transnational-dispute-management.com/news.asp?key=490

I'll post some further thoughts on all this later this week.

Comparing the KORUS and Korea-EU FTA Texts

A number of people have suggested that a good way to approach the US-EU trade talks is to use the texts that each side has recently completed with Korea, in order to see where the similarities and differences are.  In that regard, my friends at Sidley have prepared a comparison of those texts using side-by-side charts, and posted them online here.

The talks start this week in DC.  Hopefully they will make some progress and give us some issues to discuss here, although actual TTIP texts may be a ways off ...