International Economic Law and Policy Blog

Choosing an Appellate Body Member is Becoming Difficult

From the WTO:

The Chair of the DSB updated WTO members on the process for replacing the Appellate Body member David Unterhalter (South Africa) who ended his second four-year term in December last year. The DSB took note of the communication by the Selection Committee informing WTO members that the Committee was unable to recommend a candidate for the vacant position on the Appellate Body. The Committee recommended that the DSB commence as soon as practicable a new selection process, to be carried out by the Director-General and the 2014 chairs. Several members showed disappointment because of the lack of consensus in selecting a candidate, and the majority of those that spoke rejected a suggestion by Kenya to resolve the deadlock by resorting to a vote. Those members expressed support for the principle of consensus that governs the WTO's decision-taking.

TBT Negotiating History and the Boundaries of International Economic Law

I have a short article in the latest issue of the JIEL (subscribers only), in which I talk about the negotiations on TBT issues in the GATT era, and the implications for the scope of international economic law.  Here's a bit from the conclusion: 

Whether or not it is acknowledged or stated clearly, efforts to define legal standards for technical barriers to trade are an important part of the process of setting the scope of the trade regime. The question is, how do we craft these rules so as to define the boundaries of international economic law in an appropriate way? In the TBT context, many terms and concepts have been offered up in this regard. Are we looking for ‘obstacles’ to trade? Is it ‘barriers’, or ‘undue barriers’? Should the obstacles or barriers only be of concern if they are ‘unjustifiable’? Or should they be ‘unnecessary’? Does the purpose of the measure guide the inquiry? Or should the focus be on the effect of the measure? If it is the purpose, how do we determine that purpose? Should we look at the ‘legitimacy’ of the regulation? Should we look at whether the measure is ‘proportional’ to its objectives? Can we measure the ‘contribution’ the measure makes to these objectives? These concepts hover around in the negotiations and in the jurisprudence, but the precise role each does play and should play remains unclear, even after years of negotiating discussion and litigation experience. Which terms, and which interpretations, set the appropriate balance? What are the relative merits of each?

More on the Supreme Court and Software Patents

This is from Tim Lee of the Washington Post:

This spring, the Supreme Court will weigh in on the patentability of software for the first time in a generation. In the 1970s, the high court placed strict rules on software-related patents. But since then, a lower court has effectively overruled the Supreme Court's precedents, allowing hundreds of thousands of legally dubious software patents to be approved.

...

... rightly or wrongly, the Patent Office has issued hundreds of thousands of software patents since 1998. Those patents are worth billions of dollars to companies like IBM, Microsoft, and Oracle. The [Supreme Court] justices will be reluctant to write an opinion that could decimate the patent arsenals of some of America's wealthiest companies.

But Richard Stern, the Justice Department lawyer who successfully urged the Supreme Court to limit software patents in the 1970s, argues that these considerations shouldn't deter the Supreme Court from upholding the law. "When you make your business model on the basis of what is clearly a wrong interpretation of the law, you don't get a vested interest," he says.

I asked this before, but I'll ask it again: If the Supreme Court invalidates some or all software patents, will non-U.S. patent holders push for trade and investment claims in response?

The EU Tobacco Products Directive: More Trade and Investment Litigation Coming?

From the NY Times:

The regulation of e-cigarettes in Europe is part of a broader overhaul of the region’s tobacco rules, which have been in place since 2001.

The rules adopted on Wednesday go further than United States laws. Along with the e-cigarette changes, they will require that the top 65 percent of all cigarette packs be covered with health warnings and pictures of things like diseased lungs. They would ban all tobacco products specifically targeted at children, like chocolate cigarettes, as well as cigarettes that come in packages designed to look like lipstick or perfume containers. Menthol cigarettes would also to be prohibited, after a four-year delay.

...

“This is a victory,” said Linda McAvan, the British Labour Party member of the European Parliament who guided the legislation through the chamber in the face of determined opposition from the tobacco industry. “The original proposal was stricter, and I would have voted for that, but the new law is anyway a huge step forward in tobacco control,” she added.

The fight will probably continue as Big Tobacco and e-cigarette start-ups looks to protect their business. For example, the tobacco companies’ case has previously been taken up by countries like Ukraine, Cuba and Indonesia in a challenge to Australia’s rules at the World Trade Organization, arguing that the regulations constitute “technical barriers” to trade and violate the companies’ intellectual property rights.

“I’m totally confident that we’ll be taken to court by the tobacco companies,” Ms. McAvan said, adding that it was “worrying that they may try to abuse trade treaties.”

Drago Azinovic, president for European operations at Philip Morris International, said in a statement on Wednesday that the revision to European law “represents a worrying departure from the E.U.’s basic standards of proportionate, evidence-based policy making, which will further erode intellectual property rights and undermine the E.U. charter where these rights are protected.”

Georgetown International Trade Update

The Georgetown International Trade Update is this week: http://www.law.georgetown.edu/continuing-legal-education/programs/cle/international-trade-update/agenda/index.cfm

As usual, there's a lot on the agenda, but this one intrigues me the most:

Luncheon Address: A Conversation with Jan Woznowski on Trade Law, WTO Litigation, and the Future of Trade Remedies

As the longtime Director of the Rules Division in the GATT and WTO secretariats, Jan Woznowski had a ringside seat at the WTO and GATT negotiations on antidumping, subsidies and safeguards rules – and a unique window on the panel process for trade remedy disputes. Join us as he shares his insights on the future of negotiations in the WTO, in particular on trade remedy rules, and the WTO Appellate Body’s jurisprudence in trade remedy disputes.

So much of what goes on behind the scenes with WTO trade remedies decisions is not generally accessible, and this is the guy who probably knows more than anyone about it.  Not sure how much he is willing to divulge, but even a few tidbits would be cool.

Marketing Junk Food in Schools

From Politico:

First lady Michelle Obama will unveil a proposal Tuesday that would ban marketing junk food and sodas in schools — an unusually aggressive position for the administration that could draw the ire of school districts, food companies and conservatives.

Schools would no longer be able to house vending machines that sport images of their flagship sodas, have posters promoting unhealthy food and drinks or use cups in cafeterias that market high-calorie beverages, among other forms of promotion, according to administration officials.

...

The updated standards for foods sold in schools, which have yet to be finalized, would require snack foods, including those in vending machines, to meet at least one of the following requirements: be a whole-grain-rich grain product; have as the main ingredient a fruit, a vegetable, a dairy product or a protein food; be a combination of food that contains at least one-quarter of a cup of fruits or vegetables; or contain 10 percent of the Daily Value of nutrients like calcium, vitamin D or dietary fiber.

The foods also would have to meet calorie, fat, sodium and sugar limits.

There's a lot going on here, but I want to focus on one point: Companies that make junk food/soda can no longer use their images in schools.  This kind of has a "plain packaging of cigarettes" feel to it, although there are differences.  One is that this law is only for schools, and the "think of the children" defense is always pretty strong.  Still, though, isn't some of the value of companies' logos/trademarks being taken away by such a measure?

Symposium on New Approaches to International Regulatory Cooperation

Regulatory cooperation is a hot topic these days, one that I've mentioned a few times on this blog.  Next week at NYU they will be talking more about it:

NYU's Global Administrative Law Project will be hosting a symposium at the end of next week, Feb 27-28. Prompted by the discussion surrounding ACUS Recommendation 2011-6, and the subsequent Executive Order 13609, the symposium will be looking at the topic of international regulatory cooperation especially through the lens of current TTIP negotiations. Traditionally more the province of trade lawyers, agreements like the TTIP and also the TPP now seem especially to implicate administrative law questions with their focus on "next generation" regulatory cooperation issues. The symposium will get at these issues from both academic and more practical in-the-trenches perspectives.

On the latter, of particular interest may be the kickoff panel on Thursday, February 27, from 4 to 6 pm, that features C. Boyden Gray, who most recently served as US Ambassador to the European Union, two recent OIRA Associate Administrators who both worked on advancing greater regulatory cooperation from therein (Jeff Weiss and Michael Fitzpatrick), the senior EU negotatior for the TTIP (Iganacio Garcia Bercero), and a Labour member of the European Parliament (Peter Skinner).

Full details, also regarding the more academic discussions the following day, are here https://its.law.nyu.edu/eventcalendar/index.cfm?fuseaction=main.detail&id=29874, and the registration link is here http://www.eventbrite.com/e/nyu-symposium-on-new-approaches-to-international-regulatory-cooperation-tickets-10514070869.

What is the Functional Effect of the Investment Arbitration System?

From a new paper by Thomas Schultz and Cedric Dupont:

We consider three main hypotheses about the functional effects of investment arbitration. They form three models or candidate-theories of the functions that investment arbitration may empirically have: (1) investment arbitration serves to champion and strengthen the interests of economic powers of developed states to the detriment of political powers of developing states, in a form of neo-colonialism; (2) investment arbitration serves to strengthen or impose the domestic rule of law in the host state of the investment when such rule of law is weak; and (3) investment arbitration serves to strengthen the international rule of law.

Our data tend to support the following hypotheses: Investment arbitration appears to have been used to impose or strengthen the domestic rule of law in host states until the midto- late nineties, but since then it seems to serve this function increasingly less; in parallel, investment arbitration appears to have been used, until the mid-to-late nineties, as a sword in the hands of the economic interests of investors from rich countries against governments of poorer countries, but has since then also been used significantly by investors from rich countries against other rich governments. And so the overall picture of investment arbitration seems to have changed in the mid-to-late nineties, when the system shifted from what may best be described as a neo-colonial instrument to an instrument that on the whole appears (appears, hedging is apposite here) to promote the international rule of law. Reservations, however, are appropriate about the extent to which this latter function is really carried out.

...

... However, it still serves this function to a relatively limited extent, given that it favors the “haves” over the “have-nots”, allowing or making the international investment regime to be harder on poorer countries than on richer countries.

Notice and Comment: Formalizing the Lobbying Process?

From the FT:

The US has proposed that EU regulators be required to publish the proposed texts of regulations and open them to public comment. It also wants regulators to be required to consider comments and explain why they had adopted – or failed to adopt – outside suggestions when they finalise regulations.

US officials argue that there is a growing emphasis on transparency in regulation and greater public consultations are increasingly important.

The proposal is facing some resistance in Brussels. Karel De Gucht, European trade commissioner, said adopting a US-style “consult and comment” regulatory system was “impossible”.

 ...

Alberto Alemanno, an expert on EU regulation at HEC Paris and the New York University Law School, said the US push for greater consultation would allow consumer and other civil society groups a louder voice as well.

But he said it nonetheless risked giving ammunition to critics, many of whom would see it as a ploy to open the door to more lobbying by US companies in Brussels.

While greater public consultations were required by the EU’s 2009 Lisbon treaty it was not clear whether the publishing of draft regulations would actually be allowed by the EU’s constitution, Mr Alemanno said.

“I am not very optimistic that the Americans can convince the Europeans to do this,” he said.

Alberto makes an interesting point.  Is public comment on draft regulations just a way to formalize the lobbying process, by giving special interests (and their lawyers) a way to make their views known to the government?  Yes, technically, the process is open to everyone, but presumably well-resourced groups can make better use of it than others.

At the same time, even if this is just formalized lobbying, perhaps that is an improvement over the informal lobbying that already takes places.  The big companies already have access to the regulators; this gets things out in the open, and at least gives the little people a chance.

I would love to see some empirical studies of the notice and comment process, although I suspect it is a difficult thing to evaluate.

Should Trade Policy be "Values-Driven"? If So, Which Values Should Drive It?

U.S. Trade Representative Michael Froman recently gave a speech at the Center for American Progress, a liberal think tank. One of his goals seemed to be to convince people on the left of the political spectrum that trade is not something to be feared. In doing so, he focused on the "values" that are wrapped up in trade, with a speech entitled "A Values-Driven Trade Policy."

At the risk of not getting invited to any USTR holiday parties in the near future, I'm going to comment on a few aspects of his speech.

America vs. the World on Trade Barriers

“America already has one of the most open economies in the world.

“Our average applied tariffs are 1.3 percent and we don’t use regulation to discriminate against foreign goods.

“Whether we pursue trade agreements or not, the U.S. will continue to see foreign imports because our consumers demand them and we have virtually no barriers to imports.

“The same is not true for the rest of the world.

“And that’s what the trade agreements we are negotiating are all about: lowering tariffs on Made in America products, breaking down barriers to our goods and services, and setting standards higher to level the playing field for American workers and firms, American farmers and ranchers, American entrepreneurs and investors.

I think I agree that it's probably fair to say that America is one of the more open economies in the world. I'm not sure that there is an authoritative ranking on these issues, although some have tried to measure it, but America is probably in the top group of open economies.

However, I'm skeptical of the suggestion that we don't use regulation to discriminate against foreign goods. That's not just because we recently had several WTO dispute settlement rulings which found that we do use regulation to discriminate against foreign goods (COOL, Cloves, Tuna, etc.). It goes beyond that. I suppose there is some question as to the meaning and scope of the term "regulation," but taking a broad view, it seems to me that long-standing policies such as Buy America provisions in government procurement clearly fall within the idea of discriminating against foreign goods. Thus, I would say that we discriminate against foreign goods pretty regularly.

Similarly, saying we have "virtually no barriers to imports" seems like an exaggeration. There are antidumping duties; countervailing duties; tariff peaks with regular duties; farm subsidies; rules of origin; customs procedures; and probably many others.

And finally, there's an issue here as to what trade agreements "are all about." To me, trade agreements are mostly about a mutual agreement to rein in economic nationalism. That includes "our" economic nationalism, and also "their" economic nationalism. By contrast, they are not about increasing exports for the benefit of American interest groups. I can see why, for political purposes, you might try to sell them that way. But even in terms of politics, I'm not sure this is a good approach, because it paints a picture of "bad" foreigners and "good" Americans, which gives people the wrong impression of what is really going on in the world and makes negotiating trade agreements more difficult.

The Importance of Values

“The question we face is not whether we can roll back the tide of globalization.

“It is whether we are going to shape it or be shaped by it, whether we are going to do everything we can to ensure that it reflects our values or let the values of others define it.

…

“Today, I’d like to focus on trade policy’s role in furthering three of our core values: Standing up for workers, protecting the environment and promoting widely shared innovation.

…

“Rest assured, other countries are not standing by and waiting for us to act.

“They are busy negotiating their own deals, trying to gain preferential market access to countries, setting rules of the road that do not reflect our values.

…

“With each negotiation, we have an opportunity to make progress toward a global trading system that increasingly reflects our values, ensures that the benefits of trade are broadly shared, and is more fair.

…

“We are a nation of values.

“Values born of history, tradition, and a shared understanding of what is right.

“Values that underpin our laws, direct our relations with other countries and define who we are as a people.

“The Obama Administration is setting a new standard, insisting that our values undergird our trade policy today and in the future.

Values are certainly important. We all have values that we like, and perhaps we would like others to share our values. But which values do we push on others?  There are lots to choose from, and sometimes they change over time. Here's something I wrote a little while back in a more general context:

if we are going to try to change the world to be “more like us,” we need to think about how we want to change it: More death penalty, free markets, and gun rights? Or more Keynesianism, abortion rights, and protection for minorities? If it is just more of the views of whichever party is currently in power, we may wear out our welcome with ever changing demands for how the world should behave.

Today, one of the "values" that we want to export is stronger intellectual property protection. However, as the relative balance of intellectual property changes over time, I can imagine that others might be pushing for stronger protections in the future, whereas we might push for weaker protections.

To sum up, there are plenty of values out there to choose from, and exporting them is something we should do with some humility. Other countries appear less likely to use trade agreements to export their values. That doesn't mean what they are doing does "not reflect our values". It may just mean they have a different approach to communicating their values with others.

Trade Agreements as Global Governance

“Commitments to protect endangered species, for example, must be taken just as seriously as commitments to lower tariffs and protect intellectual property, including being subject to enforceable dispute settlement.

“We are asking our trading partners to commit to effectively enforce environmental laws, including those laws implementing multilateral environmental agreements – and we are committed to making sure our partners follow through.

I understand that many people have strong feelings about protecting the environment, and would like to use international agreements to help support this cause. But it's not clear to me why this needs to be done through trade agreements. If there is enough support for it, you can have environmental agreements that are binding and enforceable on their own. Why do we need to bring these issues into trade agreements? If we go down this road, trade agreements can get bogged down with all of the various "global governance" issues they now handle, and thus become much more difficult to complete.

Ever Stronger Intellectual Property Protection

“Just as our interests and our values intersect on labor and environmental issues, our position as the world’s oldest democracy and most innovative economy, calls for us to cultivate global norms rooted in promoting commerce, scientific progress and the freedom of expression – norms reflected in our Constitution that encourage innovation and creation.

“Intellectual property-intensive industries account for nearly 30 million American jobs and drive growth in manufacturing, services and agriculture.

“The American view, as enshrined in the Constitution and reflected in over two hundred years of practice, is that inventors should be able to patent their inventions and creators should be able to copyright their works. That view is also informed by a sense of balance, of the importance of matching incentives for innovation with mechanisms to assure access and dissemination as well.

I'm not aware of too many people who think we should abolish all intellectual property protection. But there is disagreement over how much protection we should be giving. At a certain point, isn't excessive protection just a subsidy for industry?

Ambassador Froman talks about these issues as being "enshrined in the Constitution." But when you go back to the origins of intellectual property protection in the U.S., it becomes clear that the protections offered back then were far less than what we offer now. For example, with regard to the length of copyright terms:

It is worth noting that in the United States, the copyright term has evolved over time. Terms for individual authors went from fourteen years (with the possibility of a fourteen-year renewal) as set by the first Congress, to twenty-eight years (with a twenty-eight-year renewal) in 1909, to life of the author plus fifty years in 1976, to life of the author plus seventy years today. …

My sense is that this issue would benefit greatly from more public debate and discussion than we currently see.

Digital Information Flows

“And we will continue to press our partners to allow digital information to cross borders unimpeded. We are working to preserve a single, global Internet, not a Balkanized Internet defined by barriers that would have the effect of limiting the free flow of information and create new opportunities for censorship.

“Indeed, fundamental to TPP is the priority of ensuring freedom of the Internet and an open digital environment that will benefit consumers around the world.

“Cross-border information flows are important to spurring innovation, incorporating small and medium-sized businesses into the global economy and laying the foundation for the next generation of economic drivers.

“These issues get at values more profound than economics. They have ethical foundations built on the most basic concepts of freedom and individual expression.

“These are values that are under challenge in some countries and they are values that we must protect, including the privacy of our citizens.

Going back to the issue of whether America has trade barriers, one of the most famous WTO disputes is over online gambling, and discriminatory U.S. laws that keep foreign online gambling service providers out of the U.S. market. Froman's argument here might be more convincing if the U.S. were willing to act consistently with existing WTO rules on this issue.

One way to show good faith on this issue would be to make sure the emerging U.S. market for online education is open to foreign competition.

The point about protecting "privacy," of course, is in the news a lot these days, and I don't think any further comment is needed.

*******************************************

So what does everyone make of a "values-driven" trade policy?  It's the first time I can remember hearing this term.  Is this going to catch on, and will other countries adopt a similar approach?  Or is this just something peculiar to U.S. politics?

TDM Call for Papers "The Pacific Rim and International Economic Law: Opportunities and Risks of the Pacific Century"

From Transnational Dispute Management:

The formidable scale and pace of economic and legal development in the Pacific Rim region offers considerable opportunities, but also carries certain risks. The forthcoming Pacific Rim TDM Special Issue will collect views of experienced practitioners, academics, and policymakers on key economic and legal opportunities and risks in the Pacific Rim region today. Topics to be addressed could include, but are not limited to, the following:

1. TPP and RCEP: Competition, Coordination, or
2. A U.S.-China BIT as a 21st Century Model BIT?
3. Pacific Rim Investment Treaty Practice: Regional Considerations
4. Pacific Rim Approaches to Key Legal Issues

The editors of the Pacific Rim TDM Special Issue are Wenhua Shan (Xi'an Jiaotong University School of Law) and Mark Feldman (Peking University School of Transnational Law). See http://www.transnational-dispute-management.com/news.asp?key=510 for more details and contact information.

NAFTA and the TPP

A while back I asked:

 if NAFTA gets subsumed in the TPP, would that satisfy Obama's campaign pledge to renegotiate NAFTA?

It appears that maybe U.S. Trade Rep. Froman is thinking along the same lines:

“As a candidate for President, then-Senator Obama said he would renegotiate NAFTA, put labor and environmental standards at the core of trade agreements and make those standards enforceable like any commercial commitment. 

“That’s exactly what we’re doing in TPP, upgrading our trade relationships, not only with Mexico and Canada, but with nine other countries as well. 

More on Comparative Regulation

It's always nice when I run across a piece of scholarship that appears to confirm my instincts (in this case, that U.S. and EU regulation are not really all that different):

The regulation of health and environmental risks has generated transatlantic controversy concerning precaution and the precautionary principle (PP). Conventional wisdom sees the European Union endorsing the PP and proactively regulating uncertain risks, while the United States opposes the PP and waits for evidence of harm before regulating. Without favouring either approach, this paper critically analyses the conventional depiction of transatlantic divergence. First, it reviews several different versions of the PP and their different implications. Second, it broadens the transatlantic comparison of precaution beyond the typical focus on single-risk examples, such as genetically modified foods. Through case studies, including hormones in beef and milk production and mad cow disease in beef and in blood donations, as well as reference to a wider array of risks, the paper demonstrates that relative precaution varies enormously. Sometimes the EU is more precautionary than the US (such as regarding hormones in beef), while sometimes the US is more precautionary than the EU (such as regarding mad cow disease in blood). Thus, neither the EU nor the US can claim to be categorically 'more precautionary' than the other. The real pattern is complex and risk-specific. Third, the paper seeks explanations for this complex pattern in five sets of hypotheses: optimal tailoring on the merits, political systems, risk perceptions, trade protectionism, and legal systems. None of these hypotheses fully explains the observed complex pattern of relative transatlantic precaution. The paper concludes that differences in relative precaution depend more on the context of the particular risk than on broad differences in national regulatory regimes. 

An ungated version is here: http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=1985&context=faculty_scholarship

And here is the latest from EU trade commissioner De Gucht on regulatory issues in the TTIP:

If we want a [TTIP] result that makes a difference, we need to look at the way we produce regulation. Can we make the processes more transparent so that we can give useful feedback at the early stages of the regulatory process? Can we encourage the regulators to deepen their relationships so that they brainstorm solutions to new challenges together?

At the same time, if we want to be credible we need to find a critical mass of regulatory solutions for specific sectors.

If – just to give some examples – we can make our car safety standards fit together better…

If we can get rid of double inspections at our pharmaceutical or medical devices plants…

If we can make sure that we implement agreed international rules on finance in a compatible way…

If we can simplify the procedures for approving food products and avoid duplication of inspections in areas where our product safety rules are equivalent…

… then TTIP will have a positive impact on our economies straight away.

An Alternative Approach to Environmental Rules in Trade Agreements

One of the criticisms of the TPP from some U.S. groups is that its rules on the environment might not be strict or enforceable enough.  (See, e.g., this NY Times article).

But not everyone thinks trade agreements should take on this task.  Here's an example from the environment chapter of the just released Australia - Korea FTA text:

ARTICLE 18.9: DISPUTE SETTLEMENT

Neither Party shall have recourse to dispute settlement under this Agreement for any
matter arising under this Chapter, including such matters as referred to in Article 18.5.

Short-Term Funding Opportunity for Researchers on Law and Economics of Trade Dispute Settlement

From my friends at the Graduate Institute:

The Graduate Institute of Geneva is offering up to 5 research fellowship for short-term period (3 months) in the context of the EU-funded Marie-Curie Initial Training Network “DISSETTLE” (Dispute Settlement in Trade: Training in Law and Economics). The basic gross salary is in the region of 3,000€/month, plus travel allowance. Fellows would start ideally in April or May, with the exact date being negotiable. More information can be found at http://ec.europa.eu/euraxess/index.cfm/jobs/jobDetails/33902653

As part of the contract, fellows would get specialized training, including by attending the DISSETTLE Summer School in Geneva from June 16^th to June 27^th, 2014. Please find below  a preliminary programme of the Summer School, which is open also to other students, researchers and practitioners for a discounted rate in its first edition this year (1000 CHF for students, 1500 CHF for professionals). Please write to [email protected] and [email protected] for further information and registration.

An Investment Exception in the Australia - Korea FTA

This is from Article 22.1 (general exceptions) of the just released Australia-Korea FTA:

 3. For the purposes of Chapter 11 (Investment), subject to the requirement that such measures are not applied in a manner which would constitute arbitrary or unjustifiable discrimination between investments or between investors, or a disguised restriction on international trade or investment, nothing in this Agreement shall be construed to prevent a Party from adopting or enforcing measures:

(a) necessary to protect human, animal or plant life or health;

(b) necessary to ensure compliance with laws and regulations that are not inconsistent with this Agreement;

(c) imposed for the protection of national treasures of artistic, historic or archaeological value; or

(d) relating to the conservation of living or non-living exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.

The Parties understand that the measures referred to subparagraph (a) include environmental measures to protect human, animal or plant life or health, and that the measures referred to in subparagraph (d) include environmental measures relating to the conservation of living and non-living exhaustible natural resources.

Let me start off with this question:  Have any previous investment treaties/chapters had an exception along these lines?  As I often point out, I haven't read all of the thousands of investment treaties/chapters that are out there, so I may have missed something.  But I am not aware of one.

Then there's this question: How would such an exception apply in the investment context?  Generally speaking, with investment law you don't have to withdraw a measure that violates.  You just have to pay compensation.  So let's say a government measure/action violates the rules, and the government has to pay compensation.  Would that "prevent" a party from adopting or enforcing measures?  Presumably the answer is yes, or else the provision would have no meaning, right?

So let's say this is a real, GATT Article XX-like exception.  How will this be applied to situations involving fair and equitable treatment/expropriation?  That should be interesting to watch.

Other questions: Are there additional policy reasons that might eventually be included in such an exception, beyond the four sub-paragraphs listed here?

Also, will the U.S. consent to such an exception in its own agreements?

ADDED:  A couple web searches on this issue made clear that such a provision is not unique, although it is rare.  See pages 358-360 of this book. 

WTO Panel/AB Rulings as RTA Precedent

From the Australia-Korea FTA:

ARTICLE 20.5: RULES OF INTERPRETATION 

... Where an obligation under this Agreement is identical or substantially identical to an obligation under the WTO Agreement, the panel shall adopt an interpretation which is consistent with any relevant interpretation established in rulings of the DSB. ...

So what happens if there are two panel rulings, but no AB rulings, and the panel rulings are not entirely consistent?  

Or what if there has been a dissent?  The provision says "any relevant interpretation."  Could there be multiple relevant interpretations?

Register Now for the Appellate Hearing in Seal Products

From the WTO:

Following a request from the participants in the disputes European Communities — Measures Prohibiting the Importation and Marketing of Seal Products (EC — Seal Products)(WT/DS400 / WT/DS401), the Appellate Body in these appellate proceedings has decided to open the oral hearing to public observation by delegates of the WTO Members and members of the general public via simultaneous closed-circuit broadcast to a separate viewing room. The oral hearing will take place from Monday, 17 March to Wednesday, 19 March 2014.

In the light of limited seating capacity, the places reserved for the public will be allocated on a first come, first served basis upon receipt of a completed Registration form. Completed forms should be sent by e-mail only to the following address: [email protected]. Applications will be accepted until 5 p.m., Geneva time, on Friday, 7 March 2014. Duly registered delegates of WTO Members and members of the general public will be provided further information regarding the hearing on Thursday, 13 March 2014. Those attending will need to present a valid passport to access the viewing room. Please note that no audio / video recording will be permitted. Portable phones must be switched off throughout the hearing. Security checks may delay access to the viewing room.

Spying on Trade Lawyers

From the NY Times:

A top-secret document, obtained by the former N.S.A. contractor Edward J. Snowden, shows that an American law firm was monitored while representing a foreign government in trade disputes with the United States. ...

The government of Indonesia had retained the law firm for help in trade talks, according to the February 2013 document. It reports that the N.S.A.’s Australian counterpart, the Australian Signals Directorate, notified the agency that it was conducting surveillance of the talks, including communications between Indonesian officials and the American law firm, and offered to share the information.

The Australians told officials at an N.S.A. liaison office in Canberra, Australia, that “information covered by attorney-client privilege may be included” in the intelligence gathering, according to the document, a monthly bulletin from the Canberra office. The law firm was not identified, but Mayer Brown, a Chicago-based firm with a global practice, was then advising the Indonesian government on trade issues.

...

The N.S.A. declined to answer questions about the reported surveillance, including whether information involving the American law firm was shared with United States trade officials or negotiators.

Duane Layton, a Mayer Brown lawyer involved in the trade talks, said he did not have any evidence that he or his firm had been under scrutiny by Australian or American intelligence agencies. “I always wonder if someone is listening, because you would have to be an idiot not to wonder in this day and age,” he said in an interview. “But I’ve never really thought I was being spied on.”

...

Mr. Layton said that if his emails and calls with Indonesian officials had been monitored, the spies would have been bored. “None of this stuff is very sexy,” he said. “It’s just run of the mill.”

Revelations of this sort could lead to this: http://www.reuters.com/article/2014/02/15/us-germany-france-idUSBREA1E0IG20140215

The Precautionary Principle vs. Cost-Benefit Analysis

Should the U.S. adopt the precautionary principle?  Should the EU rely more on cost-benefit analysis?

Or maybe this is a better question: Does U.S. and EU regulation rely on anything that could reasonably be called cost-benefit analysis or the precautionary principle?

These are questions that come to mind after reading a very informative paper on regulatory convergence in the TTIP, called "Trade, the Precautionary Principle, and Post-Modern Regulatory Process."

Often I read how the U.S. regulates much less due to its use of cost-benefit analysis, whereas the EU regulates more due to its reliance on the precautionary principle.  But I keep coming across examples that show the opposite, that is, the U.S. regulators being much more likely to regulate:

-- fancy new headlights on cars

-- bans on raw milk

-- bans on certain cheeses

On all of these, the U.S. regulation has been more active, for reasons that are not clear.  To some extent, "science" has been invoked, but it seems more like an abundance of "precaution" than anything else.

And what made the EU not regulate in these areas?  Was it a cost-benefit analysis?  Why didn't precaution lead to regulation here? 

I'll be surprised if the TTIP talks can resolve the U.S.-EU differences in fundamental approach, but I think it would be useful if each side could explain how it came to regulatory conclusions on particular issues like these, so we could get a better sense of how the regulatory process actually works.

An Equal Protection Clause for Investment?

This is from the draft CETA investment chapter I mentioned yesterday:

2. A Party breaches the obligation of fair and equitable treatment referenced in paragraph 1 where a measure or series of measures constitutes:

... d. Targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief;

This provision was new to me, although I've only read a small percentage of the thousands of investment treaties out there, so maybe it's more common than I realized.

I can imagine this being pretty controversial.  National courts have had a hard time with these issues.  Are racial quotas a form of discrimination, or are they necessary to fight discrimination?  Should governments require a minimum number of women on corporate boards? What if Germany bans Scientology, on the grounds that it is not really a religion?  Do the Scientologists have a good investment claim? 

A Draft CETA Investment Text

... is here: http://www.tradejustice.ca/wp-content/uploads/2013/08/CETA-Draft-Investment-Text-Nov21-2013-203b-13.pdf

It's fascinating, in a lot of different ways.  Read it and enjoy, if you like this sort of thing.  I'll mention some personal highlights based on a quick skim:

-- it doesn't apply to financial services (Article X.2)

-- it has a whole "market access" section that looks like GATS XVI (Article X.4). Do other investment treaties have this?

-- its fair and equitable treatment provisions are very detailed and specific, but seem to leave things open for the broad, traditional coverage (although I may be missing some nuance here) (Article X.9)

-- it has GATT Article XX-type exceptions (see Article X: General exceptions, on p. 20).  But the EU bracketed comment suggests they would not apply to "treatment of investors" and expropriation.

More later, perhaps.

Luca Rubini on the Canada - Renewable Energy/FIT Case

I think we are all still puzzling over what to make of the Appellate Body's reasoning in the Canada - Renewable Energy/FIT case.  Luca Rubini has some thoughts in a new paper.  Here's an excerpt:

the fact that the market is even fundamentally distorted, to the extent that the public hand artificially creates it, does not represent an obstacle to – but rather evidence for – the determination of the existence of a benefit. It is still the market standard that is at work, albeit in an extreme setting. From another perspective, the fact that a ‘competitive market’ producing the desired outcome does not exist (or even that it could not possibly exist), and that it is only because of government intervention that the desired ‘public goods’ are supplied, is in itself evidence of a subsidy scenario. With the risk of appearing paradoxical, and despite the obvious intricacies of Ontario’s FIT Programme and the relevant energy market, this case is a textbook example of the existence of a benefit and hence a subsidy

Luca is questioning the Appellate Body's approach, and I have my doubts as well.  But putting that aside, another question is, now what?  Given that this jurisprudence exists, where do we go from here?

Plain Packaging of Marijuana?

In the comments, Tom Miles of Reuters asks a great question, one that I had been wondering about:

I've been thinking about the question of tobacco control legislation from the perspective of a nascent marijuana industry, and would be interested to know if any of your readers think there are lessons for plain packaging here.

I mean, I wonder if any of the arguments for/against plain packaging can be shown to be valid/invalid by applying them to the blank slate of marijuana advertising? And if so, does that affect their value in the tobacco case?

I don't know what the rules are regarding marijuana advertising, if there are any, but presumably if the legality spreads, such rules will need to be put in place. Would the same rules be applicable for marijuana, starting from zero, as for tobacco, with a century or so of advertising history?

I don't know what the rules are for marijuana sales in Colorado either, but let's say that from the moment of legalization, the law required plain packaging.  Is that situation different from cigarettes, where logos/trademarks were allowed for many years, then suddenly prohibited in Australia?  It kind of feels different, sort of like an expropriation, in the cigarettes case.  But the TRIPS rules on trademarks aren't about expropriation, as far as I can tell.  So why should this distinction matter?  (Investment rules have an expropriation component, of course.) 

Beer vs. Pot in Trade Law

From the FT:

A marijuana hangover is starting to hit the beer industry.

At the beginning of last month, Colorado became the first US state to allow the sale of pot for recreational use. The end of pot's prohibition has rattled the beer industry for years, raising fears that consumers will be able to - legally - get their buzzes from new places.

New data from GuestMetrics, which tracks US beer sales, confirms these fears by offering evidence that pot appears to have eaten into Colorado beer sales in January.

Beer sales fell 4.9 per cent across the US last month, but 9.2 per cent in Colorado. Moreover, beer's share of total alcohol sales also fell more in Colorado than in the rest of the country.

Bill Pecoriello, of GuestMetrics, says that pot legalisation is the likely culprit:

There are obviously a lot of ways to look at the data but the below (see chart) tells the story in a fairly simple/clear manner, and makes a case that during the first month of pot legalisation in Colorado taking place, that there does indeed appear to be an impact on beer trends relative to the rest of the country.

Mr Pecoriello said that last January's beer sales were not affected by weather or other factors, suggesting that the data does in fact tell the story.

Recent research focused on the impact of alcohol taxation and variation of legal drinking ages supports Mr Pecoriello's findings.

A study by Mark Anderson, of Montana State University, and Daniel Rees, of University of Colorado-Denver, finds that marijuana tends to serve as a substitute for alcohol and suggests "legalisation of recreational marijuana in Colorado and Washington will lead to increased marijuana consumption coupled with decreased alcohol consumption".

Beer industry insiders have quietly worried about this dynamic and the possibility that it could worsen as pot sales begin in Washington state and in other states as they consider legalisation for some time.

Some day we may have marijuana-related trade disputes, although they may be a long way off.  Here's one possibility: Does legalizing marijuana nullify or impair the benefits of tariff concessions on beer?

GATT Articles III:4/I:1 vs. TBT 2.1

From the EU's other appellant submission in EC - Seal Products: 

284. The European Union appeals the Panel's finding that it "do[es] not consider that the legal standard with respect to the non-discrimination obligation under Article 2.1 of the TBT Agreement 'equally applies' to claims under Articles I:1 and III:4 of the GATT 1994"356. The European Union submits that the Panel's finding constitutes an erroneous interpretation of Articles I.1 and III:4 of the GATT 1994.

...

288. The Panel suggests in essence the following diverging test for de facto violations of the non-discrimination provisions in the TBT Agreement and the GATT 1994: Under Article 2.1 of the TBT Agreement, "treatment no less favourable" requires (a) a detrimental impact on competitive opportunities of imports which (b) does not stem exclusively from a legitimate regulatory distinction. Under Articles I:1 and III:4 of the GATT 1994, on the other hand, the first element, i.e. the detrimental impact on imports, is sufficient to find discrimination.

...

290. First, the interpretation of the Panel is contrary to established Appellate Body jurisprudence relating to Article III:4 of the GATT 1994.

...

295. Second, the mechanical approach of the Panel to deduce de facto "less favourable treatment" from a detrimental impact on imports alone also disregards the context this term finds in Article III:1 of the GATT 1994.

...

301. Third, the interpretation of Articles III:4 and I:1 which the Panel suggests is also wrong in that it is incoherent with the interpretation of Article 2.1 of the TBT Agreement. This divergence in the interpretation of de facto discrimination, which the Panel explicitly intends, fundamentally misunderstands the contextual relationship between the GATT and the TBT Agreement. ...

308. Fourth, the interpretation suggested by the Panel would render Article 2.1 of the TBT Agreement irrelevant. With the view to the divergent legal standards for de facto discriminations, complainants would have a strong incentive not to invoke Article 2.1 of the TBT Agreement, even if the measure qualified as a technical regulation, but instead to bring complaints under Articles I:1 and III:4 of the GATT 1994. ... It cannot be in the interest of the WTO dispute settlement system to render Article 2.1 of the TBT Agreement, and its interpretation in three recent Appellate Body rulings, irrelevant.

309. Finally, the European Union would note that the correct interpretation of Articles I:1 and III:4 of the GATT 1994, which requires for de facto claims both a detrimental impact on imports and the determination that it does not stem exclusively from a legitimate regulatory distinction, also leaves significant space for Article XX. The proposed correct interpretation would only concern de facto violations of discrimination prohibitions, in particular under Articles I:1 and III:4, and would not affect the relevance of Article XX for any other claims under the GATT 1994. Thus, Article XX would, first, remain applicable for the many provisions not relating to discrimination, for example Article XI. Secondly, the proposed correct interpretation does not extend to de jure discrimination claims. ...

Just three points (for now) on this issue.

First, I think we are all eagerly awaiting clarification from the AB on this issue.

Second, the implications are pretty big here. Is detrimental impact alone enough to find a violation of GATT Articles III:4/I:1?  If so, how many thousands of violations are out there that we weren't aware of?

And third, I'm not sure the de facto/de jure distinction the EU makes is necessary for its argument.

Dealing with Frivolous Investor State Claims

This is from what looks like a fairly recent (November 2013) leaked draft of the CETA text: 

Article x-14: Claims Manifestly Without Legal Merit

1. The respondent may, either no later than 30 days after the constitution of a tribunal pursuant to Article x- (Constitution of Tribunal) and in any event before the first session of the Tribunal, EU [or 30 days after the respondent became aware of the facts on which the objection is based,] file an objection that a claim is manifestly without legal merit.

2. The respondent shall specify as precisely as possible the basis for the objection.

3. The Tribunal, after giving the disputing parties an opportunity to present their observations on the objection, shall, at its first session or promptly thereafter, issue a decision or award on the objection, stating the grounds therefor. In doing so, the Tribunal shall assume the alleged facts to be true, and may also consider any relevant facts not in dispute.

4. This procedure and any decision of the Tribunal shall be without prejudice to the right of a respondent to object, pursuant to article x-15 (Claims unfounded as a Matter law Law) or in the course of the proceeding, to the legal merits of a claim and without prejudice to a Tribunal's authority to address other objections as a preliminary question.

[Canada Note: The phrase “or 30 days after the respondent became aware of the facts on which the objection is based” does not work with paragraph 3 in that it is envisaged that a decision will be rendered only at or shortly after the first procedural meeting. In addition, since the Parties have agreed to include the companion Article x-15, it appears to be unnecessary. As such, we propose to remove it.]

[Note: EU to consider redrafting at paragraph 3 : “at its first session or promptly thereafter”]

I assume this is what the EU had in mind when it talked about addressing frivolous investor-state claims.

So, would this provision deal with the problem?  How would it work in practice?  Seems to me it will take a bit of litigation to develop these concepts and provide clarity about when claims are "manifestly without legal merit."