International Economic Law and Policy Blog

Todd Weiler on National Treatment in Investment Law

Todd Weiler has written a fascinating book on international investment law.  He has done extensive research on negotiating history, which I always enjoy.  It's the kind of book where you read each footnote carefully, because there are important nuggets of information in each one. 

As much as I am enjoying the book, though, Todd and I have different views on certain issues, and I wanted to challenge him on a couple issues related to national treatment.  Here are some passages from pages 434-444 of the book:

Nationality-based discrimination versus effective equality of opportunity

The most common formulation of an IIL TNLF provision calls for a comparison of "treatment no less favorable … in like circumstances." There is not even so much as a hint in such texts that the aim or intent of the State responsible for the impugned measure should be relevant in the determine of prima facie compliance. There is also no mention whatsoever of the concept of nativist protectionism. The obligation presumes that establishment has been or will be granted on a TNLF basis, focusing instead on whether anything has happened to upset the equality of effective opportunity legitimately expected by the foreign investor from the moment of establishment. The nationality of the investor is only relevant in so far as it is necessary to hold the correct nationality in order to qualify to the TNLF offered under the provision … . The plain and ordinary meaning of such provisions forecloses on any attempt to import the anti-cheating function of ITL TNLF provisions and the analysis. It is simply not necessary to determine whether prima facie less favorable treatment was accorded the foreign investors on the basis of his nationality.

It lies for the host state to demonstrate why its having accorded less favorable treatment was appropriate in the circumstances. … The pertinent question is whether there is a legitimate reason as to why the equality of effective opportunity promised in the TNLF measure has not been accorded a result. …

...

Despite the flurry of IIL arbitrations that have taken place over the past decade, there still have been relatively few awards issued on the construction of TNLF provisions. Most of the handful of cases decided this far has involved NAFTA article 1102 -- which is a good example of a typical IIL NT provision. In each of the NAFTA cases, the respondent State has taken the position that investor must prove discriminatory intent, on the part of the host state, in order to prove that it has received less favorable treatment under the provision. On its face, the provision provides no indication such a requirement could or should exist. … …

...

Yet another way to think about the spuriousness of the "treatment on the basis of nationality" problematique is to unpack it from the perspective of a practitioner. Should it be necessary to prove that the impugned measure was imposed on the basis of nationality? If the answer is yes, how should one go about identifying such evidence? In the ITL context, the WTO Appellate Body has cautioned against any attempts to "sort through the many reasons legislators and regulators often have for what they do and weigh the relative significance of those reasons to establish legislative or regulatory intent." It has observed how "subjective intentions inhabiting the minds of individual legislators and regulators [should] not bear upon the inquiry, if only because they're not accessible to treaty interpreters." …

In a nutshell, as I read it, Todd argues that national treatment provisions are not about looking for nationality-based discrimination, and should not look at intent as part of the prima facie case.

Let me talk about nationality and intent separately.

Starting with nationality, the first quoted paragraph concludes:  "It is simply not necessary to determine whether prima facie less favorable treatment was accorded the foreign investors on the basis of his nationality."  In response, let me ask the following question:  What is the purpose of this provision if not to root out nationality-based discrimination?  I've previously written about the issue of "class of one"-type discrimination.  Is that what Todd is after?  Any time an individual investor (who happens to be foreign) gets worse treatment than another investor, it should be able to file a claim with an international tribunal?  My sense is that "class of one" claims are somewhat controversial in U.S. law.  Do we want to elevate them to an international legal obligation? Or should international legal obligations be closely tied to more traditional class-based discrimination obligations such as nationality?  Obviously, I prefer the latter, but I'm happy to hear arguments for the former.

In addition, with regard to the proper legal interpretation, it seems to me that when a provision is labelled with "National Treatment", it is pretty clear that only nationality-based discrimination is covered.  This phrase indicates that nationality is the basis of comparing the treatment offered.  By contrast, if you are doing a "class of one" analysis, the treatment is not tied to nationality (except in the sense that only non-nationals can sue, but that's not tying nationality to treatment, but rather tying nationality to the ability to sue).

Moving to intent, Todd says, "There is not even so much as a hint in such texts that the aim or intent of the State responsible for the impugned measure should be relevant in the determine of prima facie compliance."  For me, as I have written previously, the word "treatment" offers a good textual basis for looking at intent.  I'll grant that you could also look at "treatment" as only about effect, but I think it's at least a close call.

Furthermore, it seems to me that Todd actually concedes that intent is relevant when he says:

It lies for the host state to demonstrate why its having accorded less favorable treatment was appropriate in the circumstances. … The pertinent question is whether there is a legitimate reason as to why the equality of effective opportunity promised in the TNLF measure has not been accorded a result.

Basically, he says that the the host state can show why the treatment was "appropriate in the circumstances," in the sense of looking for a "legitimate reason" for its impact.  But what is this inquiry about if not the intent of the measure?  It seems to me that this is nothing more than a call for the defending government to explain the non-protectionist basis for its actions.  Now, maybe his point is that intent is not part of the prima facie case, but rather a defense of sorts.  This softens his argument considerably, although I'm not sure why this is a better approach than making it part of the prima facie case.

My sense is that the debate about national treatment in trade law is becoming more settled.  However, it may be just about to heat up in investment law. 

Transparency and Language

From USTR:

United States Trade Representative Michael Froman and Mongolia's Minister for Foreign Affairs, Luvsanvandan Bold, today signed an Agreement on Transparency in Matters Related to International Trade and Investment between the United States of America and Mongolia at a ceremony in New York. The U.S.-Mongolia Transparency Agreement applies to matters relating to international trade and investment and includes joint commitments to provide opportunities for public comment on proposed laws and regulations and to publish final laws and regulations. This publication commitment includes the obligation to publish final laws and regulations in English, which should make it easier for U.S. and other foreign enterprises to do business in, and invest in, Mongolia. ...

So Mongolia has agreed to publish its laws and regulations in English.  Can we assume that the U.S. will publish in Mongolian?

Joking aside, I'm curious about readers' take on an issue.  One of the big things the U.S. seems to be pushing is that other countries change their regulatory process to be more like ours (e.g., here, "provide opportunities for public comment on proposed laws and regulations"; but it could also involve things like cost-benefit analysis).  What do people think of this idea in general? Is the U.S. regulatory process a model for others?  Do other countries do some things better, and the U.S. should make changes of its own?

A Chinese Hollywood?

From USA Today:

China's richest man plans to spend 50 billion yuan ($8.2 billion) to build the country's version of Hollywood in the northeastern city of Qingdao.

In a glitzy, star-studded red carpet event on Sunday, Wang Jianlin said his company, Dalian Wanda Group, will build a state of the art film studio complex in a bid to dominate China's rapidly growing movie market.

The Qingdao Oriental Movie Metropolis's 20 studios will include a permanent underwater studio and a 10,000 square-meter (108,000 square-feet) stage that Wang said would be the world's biggest. The facility will also include an Imax research and development center, cinemas and China's biggest film and celebrity wax museums. The first phase is planned to open in June 2016 and it will be fully operational by June 2017.

Trade discussions relating to movies have mostly involved the U.S. industry complaining about copyright and market access issues in China.  Is this about to change?  Will we begin to see a more traditional type of trade battle here, along the lines of Airbus and Boeing?  My guess is there will be plenty of subsidies to complain about on each side.

Barriers to Dealing with Regulatory Trade Barriers

Inside US Trade spells out the different approaches by the EU and U.S. to dealing with regulatory trade barriers in the T-TIP.  The EU:

The emphasis of the European Commission is on an approach that would entail mutual recognition and other commitments on existing regulations affecting specific industry sectors like automobiles and chemicals, in addition to horizontal obligations for regulators to discuss future rules, according to an EU official.

The U.S.:

Separately, a private-sector source said the U.S. is clearly placing more emphasis on negotiating rules that would be horizontal, and specifically is interested in improving the transparency of the EU rule-making procedure. Sealing a deal on transparency would be considerably easier politically than committing independent U.S. regulators to increased international cooperation, this source noted, although he argued that these approaches are complementary.

U.S. officials have complained that the European Commission does not follow the same procedures as the U.S. in developing new regulations -- such as issuing proposed rules for public comment -- and that the process overall is less transparent. The commission seeks public input before it begins working on a regulation by issuing concept papers, but does not offer further opportunity for comment once it has drafted a regulation, the private-sector source said.

These are very different visions.  If I'm reading this correctly, the EU is more interested in outcomes, in the sense of aligning regulations across the U.S. and EU; whereas the U.S. is more interested in making changes to the EU regulatory system.  Can these differences in approach be reconciled?

A GATT for Investment: 1970s Flashback

The State Department's Office of the Historian just released some interesting archives as part of the FRUS series, 1977-1980.  Here's someting from a Memorandum From the Assistant Secretary of the Treasury for International Affairs (Bergsten) to Secretary of the Treasury Blumenthal on a GATT for Investment (see p. 175):

The various possibilities for topics which could be included in the GATT for Investment fall into three general categories: investor protection, government intervention, and regulation of MNE activities. The specific topics include the following:

1. Investor Protection

—A judicial remedies convention could be negotiated which would be designed to ensure that goods produced from expropriated mines and factories can be judicially seized if shipped to the markets of the signatory countries.

—We can strengthen the International Center for the Settlement of Investment Disputes or other similar panels.

—We would face the question of to what extent and in what form we should press for inclusion of the principles of national and most favored nation treatment and treatment according to the minimum standards of international law. These are sticking points particularly with the IDCs [LDCs?], who argue that only local remedies should be available to a foreign investor.

—Consideration could be given to several possible approaches for establishing investment insurance on a multilateral basis, but the history of negotiations on such proposals does not give grounds for optimism.

Speaking of the history of international investment law, I've been reading this book by Todd Weiler: The Interpretation of International Investment Law: Equality, Discrimination and Minimum Standards of Treatment in Historical Context.  It's a fascinating book; I'll try to blog about it soon.

Another Trade and Tobacco Editorial

This time from the Washington Post.  I have some quibbles with it.

They say:

What to do, however, when free trade and tobacco control seem to be in tension?

I'm not sure how "free trade" and "tobacco control" are in tension.  It may be true that some trade agreement provisions are in tension with tobacco control, but I think it's pretty clear that today's trade agreements go beyond free trade.  It's the provisions that go beyond free trade that lead to the tension.  So, perhaps some parts of trade agreements are in tension with tobacco control, but free trade is not.

They also argue for the earlier version of the USTR tobacco proposal:

Initially, the Obama administration favored a TPP provision exempting individual nations’ tobacco regulations — such as those banning advertising or requiring warning labels — from legal attack as “non-tariff barriers” to the free flow of goods. The idea was that, when it comes to controlling a uniquely dangerous product, there’s no such thing as “protectionism.”

That's not my impression of what this USTR proposal (see the link) would have done, although there was some uncertainty about its scope.  I don't think it would have been a full carve-out.

They seem to like Tom Bollyky's approach to the issue:

Tom Bollyky of the Council on Foreign Relations suggests that the office of the trade representative could formally reassure U.S. businesses that supporting tobacco control in the TPP cannot serve as precedent under other circumstances. It could also make an exemption from legal challenge for tobacco-control measures applicable only to those measures that treat domestic and imported products equally. ...

So, no exemption from national treatment provisions, but exemption from other provisions.

I find parts of this argument perplexing.  If I understand it correctly, the argument is that certain trade agreement provisions (IP, fair and equitable treatment, etc.) may interfere with domestic regulation, including public health regulation in general and public health regulation related to tobacco in particular.  Therefore, the argument goes, we need to exclude tobacco from these provisions.

But if these provisions are such a problem for all of this domestic regulation, why just exclude tobacco?  Why not deal with the more fundemental problems with these rules?

Finally, there's the "tobacco is unique" point:

Tobacco sickens and, eventually, can kill if consumed as intended. ...  Tobacco is unique, and everyone knows it. 

Is tobacco really that unique?  Aren't there lots of products like this?  When I walk around the grocery store/pharmacy, I see plenty of them.

Feel free to argue with me in the comments about this, or come by our Cato TPP event on Friday -- where I'll bring all this up -- and yell at me in person!

Global Chicken Pricing

From this week's Economist:

Trading chicken is far more complicated than merely plucking, freezing and dispatching the birds. Chickens don’t get sold whole; exporters have to optimise the “break-up value” of their fowl. The Western palate much prefers white breast meat. Asian consumers prize the more flavoursome brown meat from the thigh and leg. White meat may fetch four times more than brown in the West but costs much the same in China. Europe, a net exporter of chicken, sends legs and feet to Asia but imports white meat.

What this tells me is that trade in chicken products is a ripe for area for anti-dumping cases.  Regardless of whether there is dumping in any meaningful economic sense (if that even exists), there is likely to be price discrimination, which could lead to anti-dumping allegations.

And of course, we just had a related issue in the recent China - Broiler Products WTO dispute.  This is from our DSC for the case:

An additional element here is that chicken feet are of little value in the U.S. market. They are considered to be waste, or sometimes used in animal feed products. In China, by contrast, they are a delicacy, and command higher prices. The higher price of chicken feet in China than in the U.S. might suggest that there is no possibility of dumping being found, as any price discrimination that exists results in lower prices in the home market, not lower prices in the export market. But dumping can also be based on comparing the sale price to the cost of production, so even though a straightforward price comparison suggests no dumping, a dumping margin might be found nevertheless.

In this case, the price discrimination at issue suggested no dumping, but cost of production was used instead as the basis for the dumping finding, offering up another way to find dumping here.  (The Panel found China's actions to violate the AD Agreement, and there are still some open questions as to the proper cost allocation methodology.)

One other point about chickens.  Recall this recent post about a farm bill provision that would limit the ability of U.S. states to regulate the treatment of chickens in other states.  It appears that you can go the other way as well, pampering them rather than treating them cruelly:

these chickens are not dining on stale loaves from grandmother’s breadbox. On a recent afternoon at the farm, where a few hundred creatures inhabit a peaceful, 15,000-square-foot coop that would dwarf the size of most New York apartments, they clucked and ambled around pans of bread soaked in fresh milk, and white buckets full of leafy trimmings that would make a tremendous tossed salad.

“Some of this is nicer stuff than I have to eat when I get home,” said Mike Charles, a local poultry expert involved in the project.

Perhaps some day this will all be required by law.  (But don't get too jealous of the chickens: "No matter what they eat, all these one-percenters of the poultry realm will meet the same fate. After 60 days, almost double the life span of a regular commercial bird, they’ll be trucked off to be slaughtered and air-chilled.")

The Eli Lilly NAFTA Chapter 11 Claim

We talked about it here and here.  It now appears to be going forward:

U.S. pharmaceutical giant Eli Lilly has filed a $500 million international lawsuit against the Canadian government, saying it unfairly shortened the life of patents for its best-selling drugs.

The case, filed Thursday under the rules of the North American Free Trade Agreement, threatens to shed a negative light on a dispute resolution mechanism also being proposed by the U.S. as part of the Pacific trade deal.

Eli Lilly has been arguing with Canada for almost a year over the patents for its best-selling drugs Straterra, used to treat Attention Deficit Hyperactivity Disorder, and Zyprexa, used to treat schizophrenia. The pharmaceutical company says Canadian courts unfairly threw out these patents when challenged by generic drug manufacturers, using a legal doctrine that requires a company to provide an unreasonable amount of scientific data in order to secure the patent.

Eli Lilly argues that the Canadian courts are creating too high of a standard for companies to prove the “usefulness” of their products when their patents are challenged by other firms seeking to produce their own versions of drugs. Usefulness is a common benchmark for establishing or maintaining a patent.

I'm quoted in the article:

But Simon Lester, a trade policy analyst at the Cato Institute, said for Eli Lilly to secure a favorable ruling, it would require Canada to change its own laws. It’s unlikely that the government of Canada can order its courts to cease their approach toward testing pharmaceutical patents because the courts, as they are in the U.S., are independent in Canada.

“It’s not easy to tell courts what to do,” Lester said.

To clarify, I just meant that it won't be easy, politically, for Canada's parliament to act here.

One interesting point is that the national treatment claim (mentioned here), which was in the notice of intent, seems to have been dropped from the notice of arbitration (from Inside U.S. Trade).

Libertarians and Investment Treaties

Todd Tucker, formerly of Global Trade Watch and now studying at Cambridge University, recently did a post about my international investment regime paper.  Thanks to Todd for the publicity!  Read his whole post to get a full flavor; I just wanted to respond to a few specific things he says.

First off, his post is titled "Libertarians against investment treaties."  To be clear, I'm not against these treaties per se. It's more that I think they should say something different from what they typically say now.

Todd starts by saying:

In the standard libertarian telling, governments don’t do much right and more government functions should be left to the private sector. Investment treaties allow private companies to sue governments to rein them in and may even chill regulation. Why wouldn’t a libertarian like this?

It is possible that investment treaties could serve the function of reining in government.  But I think it's also possible that they might require more/better regulation from government.  So I don't think libertarians should just accept that investment treaties will be part of the anti-government arsenal.  And also, keep in mind that there is an international vs. national government distinction here.  When treaties rein in national governments, this really means that international courts are reining in national governments, and courts are just another branch of government.  So, in a sense, the real question is, should governmental decision-making power be shifted from national law-makers to international courts?  That's a more complex question, and goes beyond the simple idea of reining in government.  There are a range of libertarian views on the national vs. international balance of power.  Some libertarians are fairly nationalist, others are more internationalist.  Later, Todd says:

There probably aren’t many Cato Institute publications worrying that international treaties might undermine sovereignty and regulation. Likewise for the argument that diplomatic corps perform a useful filtering role. Many libertarians would not particularly care about or agree with these (reasonable) points. Apparently when we bleed the government dry, the State Department’s investment dispute filtering arm is one agency we’ll keep. I want to know more about how certain government functions get the libertarian stamp of approval.

It's definitely true that Cato people don't worry too much about undermining regulation.  But as I said, sovereignty is more difficult.  There isn't a uniform libertarian view on this, as far as I can tell.  Same thing for the role of the State Department.  I can imagine a range of views here.

(And by the way, I'm no leading expert on libertarianism.  I was quietly a libertarian on my own for years; but now I'm here at Cato, so I have some sense of what a handful of libertarians think, but that's it.  So please don't think I'm speaking on behalf of all libertarians here!)

Moving on to another point, Todd says:

Simon indeed likes the national treatment rules in investment treaties that can limit anti-foreign discrimination, and suggests that this is the main problem encountered by businesses operating abroad.

On this point, I'm not sure that anti-foreign discrimination is the main problem encountered by businesses.  However, it is the problem that I think we should mainly care about.  Also on this point, Todd says:

The breadth of claimed violations among successful investment arbitrations suggest that companies don’t cling nostalgically to national treatment rules alone. Maybe companies shouldn’t get protection from other types of arbitrary treatment for other (normative) reasons, but I don’t know that we can say they don’t care about such treatment when they make their investment decisions.

This helps emphasize my point about what we should care about: It may be that businesses care about this, but in thinking about appropriate government policy, I don't focus too much on what businesses want.  If we did that, no doubt we would end up giving them massive subsidies, which they constantly demand!  Instead of worrying about what business wants, my focus is on how to craft sensible policies that balance all relevant considerations.

Todd also talks about the possibility of frivolous claims, saying "how different is frivolity internationally than domestically?"  To me, the better comparison may be with other forms of international law.  For example, I don't hear much about frivolous claims at the WTO.  That suggests to me that state-state dispute settlement offers a good filtering mechanism.

Finally, in terms of the scope of investment rules, Todd says:

it is not clear to me that national treatment and non-discrimination rules are so narrowly tailored or clearly drafted that exactly the same types of regulation couldn’t be challenged under these or FET-type rules. 

That's a fair point, one I have blogged about here before (and will again pretty soon -- stay tuned).  We need to keep non-discrimination from expanding in such a way that it is no longer about nationality-based discrimination.  On a related point about scope, Todd says:

 there is a major argument as to whether expropriation and FET rules are really so different than the takings and due process rules that one finds under some national constitutions and legal systems. Simon acknowledges and seems to hedge on this point, suggesting that these rules are not bad at the domestic level, and may even be desirable at the international level. 

Here, let me just note one important distinction.  I can see there being room for international legal obligations related to actual expropriation.  However, it seems to me that regulatory expropriation and FET are so broad and vague, with so little consensus on what they should mean, that they don't work at the international level.  They are fine at the domestic level, but creating enforceable international legal obligations here goes too far.

Thanks to Todd for pushing the discussion forward!

TPP "Questions to Avoid"

For the Obama administration, from Global Trade Watch:

1. Is the fact that there is no intellectual property chapter text to even negotiate over – even a heavily bracketed text – related to unwavering multi-year opposition to U.S. patent and copyright text proposals?

2. Is the multi-year deadlock over the TPP’s state-owned enterprises chapter going to be resolved in Brunei by the four nations in absolute opposition to the U.S. suddenly changing its position, or by the U.S. giving up on state-owned enterprise disciplines?

3. And what about the labor rights chapter, which is “done”… except for staunch opposition by many TPP countries to it being enforceable. Given that the Obama administration has pledged to Congress that the pact will have labor rights enforceable on par with the pact’s commercial provisions, what will happen to the non-undecided enforcement section of the TPP chapter?

4. And what about the environment chapter? There is a deadlock over not only the chapter’s enforceability but also the key rules such as enforcement of countries’ obligations in environmental treaties.

5. Has the U.S. now conceded to Vietnam the right to have duty-free treatment for apparel products assembled from Chinese textiles and other inputs so that Vietnam is now participating in closing up negotiations on other chapters, which it has not done to date?

6. Given united opposition by the other TPP countries that has thwarted closure to date of several TPP chapters, has the U.S. relented in its insistence that the TPP forbid any signatory country from using capital controls, speculation, or transaction taxes and other common macroprudential financial measures?

7. Have other countries dropped unified opposition to the U.S. proposal in the investment chapter to extend the controversial investor-state system to procurement and private-public-partnership utility management and natural resource contracts through an “umbrella clause”?

8. Will the United States allow Japan to exclude the five “sacred” commodities – rice, wheat and barley, beef and pork, sugar and dairy – from the TPP tariff zeroing, which is the condition for participating in the TPP that was set by the majority LDP party? 

 

SIEL 2014 Bern Conference Call for Papers/Panels/Posters

The Society of International Economic Law (SIEL) biennial global conference will be hosted by the World Trade Institute (WTI) in Bern, Switzerland, on 10-12 July 2014.  The Call for Papers/Panels/ Posters was just released (with a Monday 4th November 2013 final submission date).  It can be found at http://www.sielnet.org/Default.aspx?pageId=1503410.

Cato Events: TPP and WTO

Last week, I mentioned a Cato event on the TPP, on Sep 20 (register here: http://www.cato.org/events/trans-pacific-partnership-race-finish-or-long-slog-ahead).  Well, we also have an event on Oct 2 called "The WTO and the Uncertain Future of Multilateralism."  It features former WTO DG Michael Moore; former WTO AB Member Jennifer Hillman; and Craig VanGrasstek, who has just written a book called The History and Future of the World Trade Organization.  Some details on the event:

The World Trade Organization has been a pillar of the global trading system since its inception in 1995, serving an especially important role in the adjudication of trade disputes and, ultimately, helping to subdue protectionism. But the failure of multilateral negotiations to achieve broader and deeper reductions in global trade barriers, while bilateral and regional agreements have flourished, raises important questions about the WTO and its future. Will large agreements that establish new rules in new areas, such as the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, relegate the WTO to insignificance, merely lower its profile, or provide a much-needed jolt by suggesting best practices that will ultimately strengthen the multilateral system?

You can register for the WTO event here: http://www.cato.org/events/wto-uncertain-future-multilateralism

In a sense, these two events go together.  What is the future of trade negotiations?  Multilateral at the WTO? "Mega-Regional" at the TPP and T-TIP?  It seems like we are at a crossroads of sorts right now in the trade negotiating world.

WTO Academy 2013

From my friends at Georgetown's Institute of International Economic Law (IIEL), here is some information about their WTO Academy, a week long course that runs from Nov 18 to 22 this year:

The Academy is an intensive professional development program on the law and policy of the World Trade Organization (WTO).  It examines the legal obligations and policy underpinnings of the WTO and its agreements, in the context of how the WTO operates and how it relates to national governments.  It strengthens participants’ critical thinking about the role of the WTO in solving commercial problems and addressing fundamental policy challenges.

This non-degree program is designed to build capacity to take advantage of the multilateral trading system, by training legal professionals, trade policy officials, members of the international business, IGO and NGO communities, academics, and others – including those from developing countries and transition economies.  A law or economics degree is not necessary to attend the Academy.  Academy presenters are international trade law experts, many of whom negotiated the WTO Agreements at issue.

Additional information about the Academy can be found at http://www.law.georgetown.edu/academics/centers-institutes/iiel/wto-academy/index.cfm 

 

Trade Law Work for China MOFCOM

From the folks at MOFCOM, here is a Bidding Announcement for MOFCOM's Law Firm Pool for WTO and RTA work:

As required by Government Procurement Law of P.R.China, Ministry of Commerce will establish Candidate List of Law Firms by public bidding. And MOFCOM will select the law firm from the candidate list to provide legal service for the project that must been undergone public bidding required by law. We do hope that your law firm could bid for Ministry of Commerce’s Candidate List of Law Firms —sub-list for World Trade Organization (WTO) and Regional Trade Agreement (RTA) dispute resolution .

 

Azevedo's Funeral Oration for the WTO

True, by billing Roberto Azevedo's speech today as a "vision speech," high expectations were set.  Yet even against modest expectations, the result was dismal.  I like Azevedo and I admire his statements about transparency and inclusiveness.  I feel the sincerity of his commitment.  But he has completely failed to sketch a broad vision for the WTO beyond Doha and give any real substantive case for its future relevance to the things that matter:  climate change, agricultural security, human rights, the future of human security generally.   By taking the route of putting so much on what is of so little concern to so few-the narrow issues of Bali and indeed Doha as it is conceived inside the WTO these days-he has diminshed rather than enhanced the credibility of the WTO as a negotiating forum. 

Why not admit that what is on the table now is peripheral-certainly in comparison with what is being bargained regionally and bilaterally day by day?  If the WTO has a future as a negotiating body it is in reconstructing a true agenda for tomorrow, one not based on the Singapore Declaration obsessions of a senescent and self-satisfied elite.  We need a deal to scrap dirty fuel subsidies, which the IMF  convincingly condemned as disastrous for climate, and which some brave countries are reducing unilaterally.  We need a sectoral accord on Green Energy, an alternative to the destablishing trade remedy disputes that have been seen in recent months.  And after the Bangladesh fadctory collapse we need efffective norms and instruments to make sure that global value chains are held responsible for basic standards of humanity. We need to deal with food security and the struggle for access to natural resources. These are the real trade issues, and hardly a word about them emerged from Azevedo's speech.

Maybe it is sheer romanticism but I still feel there is a place for multilateralism in trade.  And the WTO AB is an important and vital institution, as close as we have to a real world trade court.  But maybe the negotiating function needs to move, finally, to UNCTAD.  Its new head should seize the window of opportunity provided by the WTO's self-absorbed self-destruction.     And certainly after today's performance, the Obama Administration can rest confident that putting its trade negotiating focus elsewhere is fully justified-until (as I hope) a new multilateral forum emerges.

More on Free Trade in Environmental Goods

This proposal related to free trade in environmental goods, from Sweden's National Board of Trade, may be more politically palatable than the one I recently put forward:

The EU’s TDI measures on renewable energy sources are clearly acting in opposition to the goals of the EU’s climate policy, which recognizes the potential in creating an open, competitive and demand-driven renewable energy sector.

At present, environmental aspects are not taken into account in the EU’s TDI investigations. This implies that the negative externalities of the imposition of TDI measures on renewable energy sources, i.e. the negative environmental impact, will technically be considered as not against the interests of the EU in TDI investigations. Accordingly, the measures will be imposed without considering the climate.

In the ‘modernization review’ of the EU’s TDI system, that is currently taking place, there may be the opportunity to include environmental aspects in the EU’s TDI investigations as part of the ‘Union interest test’ analysis.11 In addition, the requirement for the Directorate-General for Trade to consult internally with, for example, the Directorate-General for Climate Action, should be compulsory.12 It is vital that the EU has policies that are coherent in all fields.

Email Wars?

Last week, I mentioned Brazilian requirements for local data storage.  What does everyone think about this new proposal out of Brazil to create an email competitor to the major U.S. email providers:

The Brazilian government is planning to develop a national email system that is protected from the sort of espionage that the US National Security Agency carries out.

The government has already been working with the national postal agency Correios to develop the new commercial email system, providing an alternative to the likes of Gmail and Hotmail, which would guarantee the veracity of documents and offer functions such as a delivery certification showing when an email has been read by the recipient.

However, in the wake of whistleblower Edward Snowden's revelations about the extent of US government digital surveillance, Brazil's Communication Ministry has requested to extend the project into a national service.  The new system would include encryption and have servers based in Brazil.

American companies such as Google and Microsoft are obliged to share their users' data with the NSA. In fact, in the last eight months of 2012, Hotmail, Google, Facebook, and Twitter provided law enforcement agencies with information on 64,000 users. The NSA can reportedly also tap into three-quarters of the data flowing through the US internet and has legal power to subpoena international communications.

This has led Germany's Minister of the Interior to tell companiesnot to use services that go through American servers if they are concerned about privacy. The French government is also working to build a domestic cloud infrastructure to compete with the dominant US companies.

As with data storage, we are talking about services here, so the existence of GATS commitments will be important.  And there is the question of whether any government actions could be justified under GATS Article XIV(c)(ii) as necessary for "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".

Azevedo's vision for the WTO-We'll know soon.

On Monday, at 1030 am Geneva time, Roberto Azevedo is apparently going to set out his vision for the WTO in a live webcast from headquarters.    Even if I don't manage to get up that early (430 am in NYC) to hear the whole thing live, I'm planning to blog about it here during the day, and also tweet @howserob.  

Though the WTO website is a mine of useful information, I've never found the home page that user-friendly.  This is an example.  After playing hide-and-seek with the website for a bit, I still couldn't find any announcement of the speech, or instructions for following the webcast.  If someone can find the right icon or link that I'm missing, I'd love to hear about it.

 

Requirements for Local Data Storage

From the Washington Post:

The [Brazilian] government is now introducing changes in the project that are quite problematic. One of them mandates that companies that store any type of Brazilian data have their servers physically located in Brazil. The idea of the government is that having the servers here will make them available for the Brazilian courts. But this is a bad idea because it will create huge costs for companies.

Imagine if Brazil required every company that has Brazilian data in storage to have a server located physically here. That breaks the Internet because you remove from companies the ability to make these decisions based on efficiency. When you’re deciding where to have your servers, you’re doing it in a way that’s cost-effective. Imagine if other countries reciprocate, if [every country says] you have a Brazilian Internet company, they have to have servers in my country. The potential for balkanization is very high.

Is this allowed under WTO rules?  Data storage sounds like a GATS issue, so perhaps it depends in part on what commitments have been made.  If it violates the GATS, could it be justified under GATS Article XIV(c)(ii) as necessary for "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"?

Some TPP and Tobacco Articles: Should There be a "Carve-Out"?

-- The WSJ:  "The entire point of free-trade negotiations is to remove these political obstacles to investment and the movement of goods across borders. The tobacco carve-out is especially counterproductive because its economic importance is so small. The Obama Administration shouldn't let anti-smoking activists interfere with America's larger economic interest."

-- The NY Times: "On public health grounds, tobacco ought to be excluded from whatever rules are designed to increase trade in agricultural products. ... American trade officials need to toughen their stance when Trans-Pacific Partnership negotiations resume. They should be siding with the public and those concerned about public health, not the makers of products known to be lethal and highly addictive."

-- Former USTR official Tom Bollyky (now at CFR): 

"the administration should exempt tobacco control measures from legal challenge under the TPP in three ways:

• This exception must explicitly encompass the full range of tobacco control measures addressed under the Framework Convention on Tobacco Control and permitted under U.S. laws.
• This exception should be limited to nondiscriminatory tobacco control measures. An exemption from legal challenge cannot serve as a pretext for TPP countries to favor domestic cigarette producers. This condition is consistent with overall U.S. trade policy and the terms of the 2001 U.S. executive order on tobacco and trade.
• This exception must not include the cross-reference that exists in most U.S. trade agreements to the health exceptions in World Trade Organization agreements. Such references might inappropriately interfere with tobacco litigation already filed under those other agreements against Australia and other TPP countries."

-- Me: There's no need for a carve-out from anti-protectionism rules (such as tariff elimination), because protectionism doesn't make any more sense for tobacco than it does elsewhere; and there's no need for a carve-out from other rules (such as IP and investor-state), because any problems with those rules are broader than just tobacco.

TPP Event on September 20

As you may have heard, we are now in the TPP "end game."  What does that mean exactly?  Will we have a completed TPP by the end of the year, as some have indicated?  Or will the pace be more Doha-like?

For those of you in the DC area, Cato will host a policy forum on the TPP on September 20, at 11:30 a.m, featuring Jason Kearns (Chief Trade Counsel, House Ways and Means Committee (Democratic)), Meredith Kolsky Lewis (Associate Professor, SUNY Buffalo Law School), and myself.

Meredith wrote one of the first law journal articles on the TPP (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1908411); I've just written some shorter pieces (see here and here); Jason can't do much writing on these issues because he works for the government, but because he works for the government, he knows what's actually going on behind the scenes.  (If all of that's not enough to tempt you, there's also a free lunch afterwards!)

To register to attend the event, go here: http://www.cato.org/events/trans-pacific-partnership-race-finish-or-long-slog-ahead

The Return of Zeroing

I hope everyone enjoyed a nice break from zeroing cases.  But you didn't think they were gone forever, did you?  There's a whole category left to deal with!  This is from the DS464 consultations request, dealing with AD measures on washers:

II. THE UNITED STATES' METHODOLOGY OF "ZEROING" AS SUCH WHEN USING THE WEIGHTED AVERAGE-TO-TRANSACTION COMPARISON METHODOLOGY IN ANTIDUMPING INVESTIGATIONS, ADMINISTRATIVE REVIEWS AND OTHER SEGMENTS OF ANTI-DUMPING PROCEEDINGS

Korea wishes to consult with the United States with regard to the methodology by which, upon determining that, consistent with the second sentence of Article 2.4.2 of the Anti-Dumping Agreement, the W-T comparison methodology is appropriate, the USDOC treats some or all transactions with negative dumping margins as having margins equal to zero (i.e., applies the methodology of "zeroing") when determining weighted average dumping margins in anti-dumping investigations, administrative reviews and other segments of anti-dumping proceedings, including but not limited to the aforementioned anti-dumping proceedings pertaining to Large Residential Washers from Korea. Korea considers that, pursuant to, inter alia, the measures set forth below, application of the "zeroing" methodology to the intermediate results of comparing a weighted average normal value to the price of an individual export transaction in anti-dumping investigations, administrative reviews and other segments of anti-dumping proceedings is required in U.S. calculation of dumping margins in proceedings and segments of proceedings where the second sentence of Article 2.4.2 is applied. ...

How will all the previous WTO jurisprudence apply here?  Keep in mind that we are dealing with a new provision (the second sentence of Article 2.4.2).

Call for Papers: Sociological Inquiries into International Law

From Sungjoon Cho:

The aim of this workshop is to help bring contemporary international law scholarship into a closer conversation with a number of inspiring and theoretically rich literatures on law and markets deriving from traditions of thinking within sociology and anthropology. We are convinced that, particularly within the field of international economic law, a deeper and more informed engagement with a range of sociological and social theoretic modes of thinking is necessary for intellectual renewal. We seek innovative and original contributions from scholars whose work is situated at those disciplinary boundaries, broadly understood.  

Contributions are particularly welcome in the following areas:

(1)   International law and the sociology of knowledge: what frameworks of knowledge circulate in and around institutions of international economic governance? By what complex set of practices are such frameworks produced, contested, and institutionally embedded? What are the sociotechnical forms in which they are constituted? In what senses is law a ‘knowledge practice’, and what might be the implications of conceiving legal practices in this mode? Work which draws inspiration from the concepts, questions and methodologies of science and technology studies, the sociology of knowledge, and social studies of science may be of particular promise in investigating such questions.

(2)   International law and economic sociology: if the classic insight of economic sociology is that markets and law are mutually constituted, how might this insight be deployed, illustrated and developed in the context of contemporary international economic law? In what sense, if any, do contemporary practices in international economic law constitute global markets in the classical Polanyian (or any other) sense? In what sense might the rational economic actor herself be socially constituted in international economic relations, and what role do legal and other institutional infrastructures play in those processes?

(3)   Sociologically inspired scholarship in international relations: to what extent is the practice and operation of international legal governance shaped by social and idealist factors (such as culture, norms, and values)? How might traditional sociological concepts such as socialization and collective identity formation be productively redeployed in the context of contemporary legal governance? What might the notion of the ‘collective memory of groups’ bring to our understanding of how global problems are constituted and addressed through law? This burgeoning literature often employs sociological tools, emphasizing the influence of social processes and factors (such as socialization and collective identity) on the development  of international legal rules as well as actors' behaviour in the legal sphere.

(4)   Anthropologically inspired work examining the microlevel of global economic governance, including documentary practices, microsocial interactions, and spatial/architectural relations. How do these practices and processes problematise the boundaries between public international law, private international law, and transnational law? To what extent and in what ways are professional practices in fields of international economic governance constituted and contested at the microlevel of day to day interaction, through the routine and mundane work of rulership in the ‘background’?

Details

 

The workshop will take place at the London School of Economics, on 16 May 2014. Abstracts of no more than 300w should be sent to Sungjoon Cho [email protected], by 1 November 2013, and should include the author's name and full contact information. Decisions regarding inclusion in the workshop program will be sent by 1 January 2014. Those presenting will be expected to provide short discussion papers (3,000-4,000 words) by 25 April 2014.

We regret that we are unable to cover participants’ full travel and accommodation expenses. Limited assistance will be available for young scholars who are unable to secure funding from other sources.

Steering Committee:

Sungjoon Cho, IIT Chicago-Kent College of Law

Moshe Hirsch, Hebrew University of Jerusalem

Andrew Lang, London School of Economics

Do WTO Disputes Increase Trade?

It seems obvious that a successful WTO complaint, properly implemented by the responding party, would bring down trade barriers and increase trade.  But a recent paper by some political scientists calls that into question:

To assess whether disputes increase trade, we analyze detailed data on imports values at the country-product-year level from 1995-2010. Since disputes are most often about specific products, as opposed to broad sectors, we use the most disaggregated product-level data available for all countries in the sample—6-digit Harmonized System (HS) level. We then code data describing the occurrence of a dispute against that particular country (the respondent) over that particular product. We also code relevant characteristics of the dispute, such as its outcome, issue area, as well as characteristics of the respondent. We analyze monadic, rather than dyadic data, since our question relates to whether disputes increase total trade flows across the membership, regardless of participation in the dispute. In other words, we are interested in whether dispute settlement increases the size of the pie, not in who gets a bigger slice.

Our analysis yields little evidence that the occurrence of a dispute increases trade, on average. In models that account for unobserved country-year and country-product heterogeneity, the value of the respondent’s imports of the disputed products is only modestly higher after a dispute, compared to the value before the dispute. Specifically, a dispute increases import values by less than 10% and this effect is not statistically significant. These null results are also apparent in non-parametric analysis of import values before and after disputes.

...

In the aggregate, disputes are not associated with a statistically significant increase in imports. Looking at particular dispute outcomes and issue areas, only certain types of disputes have been associated with increased trade, and many have resulted in decreases. Moreover, certain respondents are more “responsive” to disputes than others. Disputes against some countries have resulted in increased imports, while disputes against others have failed to do so. We do not find strong evidence of a systematic explanation for this variation.

I have a hard time figuring out what to make of their conclusions.  I think it would help to look at a few case studies.  What are some of the disputes that did not lead to more trade?  It seems to me that if you had, say, an anti-dumping tariff or an SPS-based import ban, and that measure was completely removed, trade should clearly rise in most or all cases.  Is this really not happening?  They found that:  "Looking at dispute issue-areas, disputes over safeguards appear to result in greater trade ex post, while disputes over SPS, antidumping, and agriculture do not."  I can't think of an explanation, but as noted, I'd like to see the cases in question to help understand what's going on.  Are they just looking at the existence of a dispute, rather than looking at successful disputes in which the ruling is implemented? (Apologies to the authors if they answered this in the paper.  When I see lots of equations, I tend to start skimming an article, and may miss some things.)