International Economic Law and Policy Blog

WorldTradeLaw.net

Many of you have probably noticed a new WorldTradeLaw.net web site.  Some aspects of the site are free for everyone, so I thought I'd mention one particular issue here on this blog:  How to link to PDF versions of WTO DS documents on the site.

On the old site, when you clicked on, for example, a link to a WTO AB report, the report would open in the browser, using Adobe Acrobat or the Reader.  The URL bar would display a link that looked like this: http://www.worldtradelaw.net/reports/wtoab/ec-sealproducts(ab).pdf  If you wanted to send someone that link, or create a link on your own web site or blog, you could just copy and paste that URL.

Things work a little differently now.  Because of various problems caused by using Adobe, we found our own PDF viewer.  So now when you click on a link on our site, you get a link that looks like this:  http://worldtradelaw.net/document.php?id=reports/wtoab/ec-sealproducts(ab).pdf  The document opens directly in our site's viewer, not in Adobe.  You can see what I mean here.

Some people may want to open a version in Adobe or some other viewer (like Chrome's built-in viewer).  You can still do that.  Just click on the red, Adobe Acrobat symbol on our viewer's toolbar.  That will open the document in the browser, using your default viewer, and give you a URL like this: http://www.worldtradelaw.net/reports/wtoab/ec-sealproducts(ab).pdf.download  Click here to see.

And if you want to link to an AB report or other document that is hosted on our site, any of those URLs will work.  But only the last one uses the browser viewer directly.

Was that all clear?  If not, feel free to contact us with questions, about this or any other issue. 

Regulatory Cooperation Needs the Cooperation of the Regulators

This is from Inside U.S. Trade ($):

Representatives of two U.S. regulatory agencies yesterday (June 24) expressed varying degrees of skepticism toward the idea of expanded regulatory cooperation with the European Union under a U.S.-EU trade deal, and raised fears that an agreement could slow down their rule making.

Robert Adler, acting chair of the U.S. Consumer Product Safety Commission (CPSC), said he worries including regulatory cooperation obligations in the Transatlantic Trade and Investment Partnership (TTIP) could make his agency even more hamstrung than it already is when it comes to issuing regulations.

Adler directly rebuffed the idea -- proposed by the European Commission -- that the trade deal should establish a new "Regulatory Cooperation Council" that would allow greater input from EU regulators and stakeholders in the U.S. regulatory process, and vice-versa.

Imposing such a procedure "could extend an incredibly cumbersome process that we face when we write regulations," Adler said. He explained that in 1981, Congress amended the CPSC's statute to require extensive cost-benefit analyses before publishing a rule. The consequence is that the agency has been able to issue only nine safety standards in the intervening 33 years, he said.

"The idea that we would then have to take a rule that we have spent so much time writing and go to an additional approval means that you're going to have many, many, many years of waiting for safety regulation. And I think that we all know that safety delayed is safety denied in too many respects," he said at an event in Washington hosted by the Transatlantic Consumers Dialogue (TACD).

...

Separately, William Jordan, deputy director in the office of pesticide programs at the Environmental Protection Agency (EPA), signaled skepticism toward TTIP regulatory cooperation efforts by saying it remains to be seen whether they will be "productive or a big waste of time."

Speaking on a different panel at the same TACD event, Jordan also acknowledged that evaluating the potential impact of a rule on trans-Atlantic trade would add to a pile of more than a dozen assessments the EPA must conduct for other areas in publishing a rule, potentially slowing it down further.

"The fact that there may be trade impacts from a regulatory decision doesn't necessarily mean that it changes the regulatory decision, but it might mean that you look for different ways of achieving or implementing a goal," Jordan said.

"The downside that I see is adding yet one more kind of analysis to develop when taking a regulatory action … There are usually about 17 sections that go at the end of every rule making the EPA does. To go to another one adds just a little bit more work and has the potential to slow things down. I think the serious question is, is it worth it?"

I think regulatory cooperation has real potential, but I'm not sure it can work if the regulators are not fully on board.

The Bali Deal on Food Security-Binding and Legally Secure (contra Christian Haeberli)

This morning in Florence I presented a very rough version of a paper I'm working on about food security post-Bali. As followers of this site will recall, thanks to India holding firm, the interim solution on food security contains a peace clause that precludes dispute settlement complaints concerning pubic stockholding programs for food security, where the government purchases food from farmers at official prices, and which is to be in effect until a permanent solution on policy space for food security is reached through negotiations in the Round. In a recent paper for the FAO, http://bit.ly/1pPkFpb Christian Haeberli--who is overall quite hostile to policy space for developing countries in this area (though often that is expressed between the lines) questions whether there is any legal effect to the peace clause. He suggests it is a mere "political commitment". I'll be dealing with other aspects of Haeberli's argument in the full paper, but this particular notion deserves some immediate attention. Frankly, it is rubbish. First of all, as Haeberli himself has to admit, the food security text is prefaced by a reference to Article IX of the WTO Agreement, which lists the means by which legal binding decisions are taken in the WTO system. Second, the instrument in question is called a decision and uses the expression "shall", which normally denotes hard law obligations. Haeberli's notion that in referencing Article IX, WTO Members would have had to use a different formula words than "having regard to" in order to create a binding decision is a complete invention unfounded in any textual provision of the WTO Agreement. Haeberli pretends that a peace clause of this nature, to have legal effect, would need to be done in the form of an amendment. But if we look at the DSU this is plainly wrong. Article 3.10 of the DSU requires good faith in the resort to the procedures of the DSU. A pretty obvious example of lack of good faith would be bringing an action that the Member in question, and indeed all other Members, have solemnly agreed not to bring. More generally one could easily understand the peace clause as an interpretation, in a specific context, of the provisions of Article 3 of the DSU that concern the need for a judgment that bringing a dispute would be fruitful, the obligation not to bring a dispute as a contentious act etc. Thus under the Vienna Convention on the Law of Treaties this would be a "subsequent agreement between the parties" concerning the interpretation of treaty. There is the issue that the reference to Article IX of the WTO Agreement is to paragraph 1 not 2. Paragraph 1 contains the general decision-making rule with respect to Decisions and Article 2 has some aspects of lex specialis with respect to authoritative interpretation. Even assuming that to accomplish an authoritative interpretation it was not enough to invoke the general provision in the food security instrument but rather one had to mention the lex specialis, paragraph 2, which I find doubtful, as a subsequent agreement under VCLT 31 the dispute settlement organs MUST take into account the food security instrument in interpreting the DSU.

Two Good ISDS Pieces

There are two new pieces on ISDS that are very good, one from UNCTAD and one from ECIPE.  Both have lots of good data on ISDS cases.  I'll let the data speak for itself, but I wanted to comment on the ECIPE piece, which is authored by Roderick Abbott, Fredrik Erixon, and Martina Francesca Ferracane.  I know Roderick reads this blog, and I'll tell Fredrik about this post, so perhaps we can get some dialogue going.  I'm going to quote a few of their statements, then offer a brief response.

"In contrast to a mechanism to resolve disputes between states, like the World Trade Organisation’s dispute-settlement mechanism, [ISDS] is not an instrument that “puts on trial” laws and regulations in a host country, with the consequence that a government has to change a law or a regulation in the event they lose a case." 

A couple thoughts here.  First, the WTO's dispute settlement system is actually somewhat flexible, and governments have, on occasion, responded to adverse decisions by accepting trade sanctions or negotiating compensation.  So, it is a trial of sorts, but no one has to go to jail.

Second, even if ISDS does not require a government to change its laws or regulations, the financial penalties the government may face strongly encourage it to do so at times.

And finally, I believe there are a few ISDS decisions which suggest the possibility of forcing a change in national laws/regulations, although I can't give you a cite off the top of my head.

"Nor do investment-protection agreements demand that a country fully transpose the general principles of such an agreement into national laws and regulation."

I feel like their implication here is that it would be more intrusive to require these principles in national law than to impose them directly through international courts.  I'm not sure I see it the same way.  If a treaty established flexible standards that governments could then incorporate more concretely in domestic law (which would apply to both domestic and foreign investors!), using the traditional domestic law-making process, I think there might be fewer objections.  For example, would anyone have a problem with an obligation that governments incorporate due process standards in domestic law?  Expropriation is a bit more sensitive, but these days I think there is pretty wide support for rules in this area as well.  So, perhaps we would be better off with an international effort to convince everyone to create national standards in this regard, rather than rely on international courts.

"One wing of the argument [from critics] appears to entirely disapprove that states enter international agreements that constrain their flexibility to change policy in future."

I suppose there might be some people who make this argument, based on the view that governments should never delegate power to international institutions.  But my sense is this is a fairly small contingent.  The main criticism I see is that these agreements should not constrain good faith public interest regulation, such as for health or environmental protection.  These critics do not object to international constraints in general, but rather the specific constraints here, which they worry will get in the way of such regulation.  In fact, many of these people would be happy to see other constraints imposed, but in different policy areas.

The key here is the substance.  What have governments committed to in the international agreement?  National treatment and MFN are probably acceptable constraints.  Regulatory expropriation and fair/equitable treatment, by contrast, are perhaps too intrusive.

"Another wing goes even further and claims that courts, including national courts, have no legitimate role in defending companies against democratic decisions by a government. These views are not challenging because they undermine ISDS – they are challenging because they refute constitutional democracy, the principle that subjects of the state have rights, including legal recourse to defend against state actions, and because they make it impossible for a government to enter an international binding agreement."

I can't speak for what is going on in Europe, but I can say that in the U.S., you will be hard-pressed to find anyone who objects to constitutional democracy.  With only a handful of exceptions, it is pretty well accepted on both the left and right.

The criticism of ISDS is that the international courts at issue lack legitimacy. One point in this regard is that there is not enough democratic input in the process.  National constitutions have a well-developed set of checks and balances (e.g. appointment of judges), which is not the case with international investment obligations.  

Another point here is that constitutional protections for foreign investors only seems biased and unfair.  Many of those who object to ISDS would like to see an expansion of international protections to a number of other oppressed individuals and groups.  So it's not really an objection to courts defending companies, but to courts defending only companies.

“Corporate Welfare” and WTO Export Subsidies

The next House majority leader, Representative Kevin McCarthy, has recently shocked the U.S. business community by stating that he would oppose the U.S. Export-Import (Ex-Im) Bank being reauthorized in the fall.  He said that “one of the biggest problems of government is they go and take hard-earned money so others do things that the private sector can do.”  According to those in agreement with Mr. McCarthy, various export loans and guarantees provided by the U.S. Ex-Im Bank may be tantamount to “corporate welfare.”  Other U.S. lawmakers are against this position and called for the Ex-Im Bank’s reauthorization.  In a letter to the House Speaker, Mr. John Boehner, these lawmakers argued that “failure to reauthorize Ex-Im would amount to unilateral disarmament in the face of other nations’ aggressive efforts to help their exporters.”  

 Then, would these export loans and guarantees offered by the Ex-Im Bank (Note that many other countries have their own versions of the Ex-Im Bank.) violate the WTO Subsidy Code?  Well, the answer appears to be predictably unclear.  Here is what the relevant part of the Illustrative List of Export Subsidies says: 

(k)     The grant by governments (or special institutions controlled by and/or acting under the authority of governments) of export credits at rates below those which they actually have to pay for the funds so employed (or would have to pay if they borrowed on international capital markets in order to obtain funds of the same maturity and other credit terms and denominated in the same currency as the export credit), or the payment by them of all or part of the costs incurred by exporters or financial institutions in obtaining credits, in so far as they are used to secure a material advantage in the field of export credit terms.

 Provided, however, that if a Member is a party to an international undertaking on official export credits to which at least twelve original Members to this Agreement are parties as of 1 January 1979 (or a successor undertaking which has been adopted by those original Members), or if in practice a Member applies the interest rates provisions of the relevant undertaking, an export credit practice which is in conformity with those provisions shall not be considered an export subsidy prohibited by this Agreement.

 And, here is what the relevant part of the WTO Analytical Index says:

 632.     Rather than considering the terms of export credits available to a purchaser in the absence of the PROEX interest equalization payments, the Appellate Body in Brazil — Aircraft held that the determination of whether a payment is “used to secure a material advantage” implies a comparison between the export credit terms available under the measure at issue and some other “market benchmark”. The Appellate Body further viewed the second paragraph of item (k) as “useful context for interpreting the ‘material advantage’ clause in the text of the first paragraph”.(963) In this respect, the Appellate Body stated that the Commercial Interest Reference Rate (the “CIRR”), defined in the Arrangement on Guidelines for Officially Supported Export Credits (the “OECD Arrangement”), could be “appropriately viewed as … a market benchmark” for assessing whether a payment “is used to secure a material advantage”.(964)

 633.     The Appellate Body in Brazil — Aircraft (Article 21.5 — Canada)agreed with the Panel that a Member may under the first paragraph of item (k), as interpreted by the Appellate Body, establish that a payment is not used to secure a material advantage in the field of export credit terms, even if it resulted in a below-CIRR interest rate.(965) The Appellate Body then set forth the manner in which Brazil could prove that the PROEX interest equalization payments did not secure a material advantage to Brazilian exporters:

“To establish that subsidies under the revised PROEX are not ‘used to secure a material advantage in the field of export credit terms’, Brazil must prove either: that the net interest rates under the revised PROEX are at or above the relevant CIRR, the specific ‘market benchmark’ we identified in the original dispute as an ‘appropriate’ basis for comparison; or, that an alternative ‘market benchmark’, other than the CIRR, is appropriate, and that the net interest rates under the revised PROEX are at or above this alternative ‘market benchmark’.

 … Brazil contends … that the revised PROEX is not ‘used to secure a material advantage in the field of export credit terms’ within the meaning of the first paragraph of item (k) of the Illustrative List.

 To prove this argument, Brazil must establish both of two elements: first, Brazil must prove that it has identified an appropriate ‘market benchmark’; and, second, Brazil must prove that the net interest rates under the revised PROEX are at or above that benchmark.”(966)

 

The U.S. View of the AB Seal Products Report's GATT Article I and III Findings

From Wednesday's DSB meeting:

• With respect to the non-discrimination claims under Articles I and III of the GATT 1994, the findings by the Panel and Appellate Body are more troubling. 

• In particular, we are not fully persuaded by the Appellate Body’s finding that the national treatment provisions of the TBT Agreement are to be interpreted differently from the national treatment provisions of the GATT 1994 in light of the fact that these two provisions contain identical wording.

• These findings appear to ensure that a measure could be found consistent with Article 2.1 of the TBT Agreement, yet inconsistent with the identically worded in GATT Article III:4. 

• Indeed, these findings raise the very real possibility, as demonstrated in this dispute, that Article 2.1 of the TBT Agreement will become superfluous, and the legal approach developed in the recent TBT disputes will become just an historical footnote. 

• The Appellate Body report seeks to respond to this concern in part by stating that “the European Union has not pointed to any concrete examples of a legitimate objective that could factor into an analysis under Article 2.1 of the TBT Agreement, but would not fall within the scope of Article XX of the GATT 1994.” 

• However, there were such examples that were provided during the appeal. One such example is provided by the TBT Agreement text itself and that is – the preamble refers to “measures necessary to ensure the quality of” a Member’s exports. There is no parallel provision in Article XX of the GATT 1994.

• It is also difficult to understand how a “detrimental impact” on imports from one Member compared to another Member can by itself be sufficient to find that those imports are being treated less favorably. One would expect that any measure will affect some products differently from others. Yet that different treatment would not amount to discrimination unless one also looks at the reason why there was such a difference in treatment.

WTO Disciplines on Subsidies and Countervailing Measures - Balancing Policy Space and Legal Constraints

From my friends at Sidley:

Sidley Austin LLP cordially invites you to a book launch seminar and reception on the occasion of the publication of

WTO Disciplines on Subsidies and Countervailing Measures - Balancing Policy Space and Legal Constraints (Cambridge University Press, 2014)
by Dr. Dominic Coppens

More information on the book can be found here.

Please join us to discuss with eminent speakers whether the WTO subsidy disciplines leave appropriate policy space for WTO Members to pursue legitimate objectives such as conversion to a greener economy or economic development.

PANELISTS

James Flett
Legal Adviser, WTO & Trade Policy Team
European Commission

Prof. Petros Mavroidis
Edwin B. Parker Professor of Law at Columbia Law School, NY (on leave at the European University Institute)

David Unterhalter SC
Former Chairman, WTO Appellate Body; Professor of Law: University of Cape Town and practicing Barrister in London and South Africa 

Tuesday, July 8, 2014 

World Meteorological Organization (WMO) - Conference Room B 
Avenue de la Paix 7 bis, 1202 Geneva, Switzerland

4:00 - 4:15 p.m. Welcome and Introduction by Dominic Coppens

4:15 - 5:00 p.m. Panel Discussion

5:00 - 6:00 p.m. Reception

For more information or questions, please contact us at [email protected] or call +32 2 504 64 53.

Third Parties and Sequencing

The other day I mentioned the EU WTO complaint regarding "sequencing" of DSU Article 21.5 and 22 in the Clove Cigarettes case.  The EU consultations request is here.

The EU is upset that Indonesia pursued the case by going directly to DSU Article 22.2 for suspension of concessions, instead of asking for a compliance panel first under DSU Article 21.5.  By taking this route, compliance issues were dealt with in the Article 22.6 arbitration process.

Beyond any systemic concerns with this approach, the EU was specifically irritated that it was not allowed to participate in the Article 22.6 process as a third party:

By communication dated 18 December 2013 the compliance/arbitration panel informed the European Union of its decision, taking into account the views expressed by Indonesia, not to accord the European Union third party rights in the compliance/arbitration panel proceedings.

Now, you might say, and the EU argues, that the AB already decided the issue of sequencing in the Hormones suspension cases, when it stated the following in U.S. - Hormones Suspension (para. 374):

… before obtaining the DSB's authorization to suspend concessions, a Member must initiate a dispute settlement process in which it challenges the consistency with the covered agreements of a measure taken by another Member. The Member initiating the process will only be authorized to suspend concessions when the measure is found by the panel (and the Appellate Body, if appealed) to be inconsistent with the covered agreements and the Member taking the measure fails to implement the panel's (or Appellate Body's) findings within a reasonable period of time or, if it takes a measure to comply, that measure is found by the panel (and the Appellate Body) in compliance proceedings not to have brought the Member concerned into compliance. In other words, the Member will only be able to suspend concessions pursuant to the DSB's authorization after having had extensive recourse to, and abided by, the rules and procedures of the DSU, consistent with the requirements of Article 23.1.

But there's a key difference between that case and the Clove Cigarettes one.  There, it was the parties arguing about the proper procedures.  Here, by contrast, it is a third party in one dispute (DS406) bringing a new dispute (DS481), asserting that one of the parties' actions in the original dispute affected third party rights in that dispute.  So, there is a question that goes beyond the substance of the "sequencing" issue:  Can third parties have recourse to an adjudicator other than the panel/arbitrator in the dispute at hand?  In its complaint, the EU blames Indonesia for its arguments to the arbitrator that the EU should be excluded, but ultimately it was the arbitrator that made the decision.

It seems to me that a practical solution would be to find a way to offer typical third party rights in Article 22.6 arbitrations.  I can see how the DSU provisions might get in the way, but it's not clear to me what the policy objection to this is.  Why shouldn't third parties have their say in Article 22.6 proceedings, especially ones that deal with compliance issues?

Secretary Vilsack on Labelling

From Inside U.S. Trade, this is Agriculture Secretary Tom Vilsack talking food labelling in the EU and U.S.:

Vilsack also seemed to urge a rethink of an EU law that requires food containing more than 0.9 percent GMO-derived product to be labeled as such. While hinting that he believes the EU should change its approach -- a longstanding U.S. position -- he did not explicitly suggest that the U.S. is seeking such an outcome in TTIP. Abolishing the labeling requirement would certainly entail altering EU legislation and therefore be unacceptable to the commission.

"Labeling in the U.S. is different. The philosophy is different. Labeling in terms of the U.S. historically has been for nutrition information -- how many calories, how much sodium content, and so forth," Vilsack said. "Our view is that in the U.S. when you label something you are essentially conveying the message that there may be something that you need to know about with reference to this product that may be harmful to you if you don't know," he said.

This makes me wonder about the message with country of origin labelling (COOL):  Are we saying that there is something harmful in foreign food?

The Redskins Trademark and NAFTA

From the Washington Post:

The United States Patent and Trademark Office has canceled the Washington Redskins trademark registration, calling the football team’s name “disparaging to Native Americans.”

The landmark case, which appeared before the Trademark Trial and Appeal Board, was filed on behalf of five Native Americans. It was the second time such a case was filed.

The decision is subject to appeal.

My first thought was to compare this to the plain packaging cases.  Just for fun, let's say that the owner of the team was Canadian (he's not).  Would he have a decent NAFTA Chapter 11 claim, based on various NAFTA (and perhaps TRIPS) provisions, in combination with the substantive investment obligations, that his trademark was improperly taken away?

But then I saw this in the NAFTA IP chapter, in Article 1708, para. 14:

Each Party shall refuse to register trademarks that consist of or comprise immoral, deceptive or scandalous matter, or matter that may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs or any Party's national symbols, or bring them into contempt or disrepute.

It seems that this provision is based on U.S. law.  Here's an excerpt from the decision:

[T]hese registrations must be cancelled because they were disparaging to Native Americans at the respective times they were registered, in violation of Section 2(a) of the Trademark Act of 1946, 15 U.S.C. § 1052(a) [which bars, in relevant part, registrations of marks that "may disparage ... persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute"]. ...

At least in theory, it appears that Canada and Mexico could have brought a NAFTA claim on the same basis as the claim made before the U.S. trademark board!

Grant Money to Promote the TTIP

From the American Embassy in Berlin:

The U.S. Mission to Germany Public Affairs Section (PAS) is soliciting proposals from not-for-profit, non-governmental organizations, think tanks, and academic institutions that focus on the Transatlantic Trade and Investment Partnership (T-TIP).  The goal is to keep our publics informed about the negotiations and offer meaningful opportunities to shape the respective negotiating objectives. 

What are the facts behind T-TIP, and how will it impact you? What are some of the concerns in the European Union and the United States?  What are some of the benefits? What impact will T-TIP have on everyday life?  Facts and figures are needed, and we look forward to working with partner institutions to develop a final product which informs about the agreement and which combats misinformation.

The activities funded with a Federal Assistance Award (Grant) ranging from $5000 to $20,000 might include the following innovative ideas:

- short documentaries on T-TIP

- Expert Speaker Tour with proposed names(s) for travel (including per diem and honoraria)

- creation of a Twitterfall wall during a conference

- digital posters in German with QR codes to inform about T-TIP objectives

- a T-TIP conference with a broad swath of stakeholders that can be live-streamed

- online discussion forums on T-TIP

- website devoted to T-TIP

I confess that I had to look up "Twitterfall wall"!

Position Open for Professor of European and International Economic Law at University of Bern

For you academics out there:

University of Bern, Department of Economic Law
Professorship in European and International Economic Law (100%, open rank)

The Department of Economic Law at the University of Bern is seeking to fill the position of a professor of European and International Economic Law as of the fall semester 2015 (to succeed Prof. Dr. Thomas Cottier).

JOB DESCRIPTION/QUALIFICATIONS: The core duties of the professor consist of furthering the general foundations of European law (including the legal relations between Switzerland and the European Union) and international economic law (in particular WTO law), of managing the Institute for European and International Economic Law, and of representing the aforementioned fields in research and teaching in coordination with the other institutes within the Department of Economic Law; cooperation with the World Trade Institute (WTI) in the field of international trade law is strived for.

The professorship can be structured as a tenured position (Ordinariat or Extraordinariat) or as an assistant professorship with tenure track; in each case, a completed habilitation or an equivalent academic qualification as well as extraordinary academic performance and a stay of at least one year at another, preferably foreign, university or a multi-year, highly qualified professional experience are required. The successful candidate should start on 1 August 2015.

APPLICATION PROCEDURE: Applications including a CV, a list of publications, a list of acquired funding, information regarding teaching experience, teaching evaluations and information regarding participation in academic committees are to be submitted by 22 August 2014 to the following address:

Universitat Bern
Dekanat der Rechtswissenschaftlichen Fakultat
Schanzeneckstrasse 1
Postfach 8573
CH-3001 Bern

The University of Bern strives to increase the number of women in leading academic positions and therefore expressly encourages women to apply.

Professor Cottier's shoes are some big ones to fill!

The EU Complaint about Indonesian Clove Cigarettes

"Wait, what?", you might be saying. "I thought Indonesia was complaining about the U.S. clove cigarettes measure.  Why is the EU complaining against Indonesia now?" The full consultations request is not public yet, but here is the WTO news release:

The EU considers that Indonesia has acted inconsistently with the procedures of the Dispute Settlement Body (DSB) in unilaterally requesting “sanctions” against the US (for failing to comply with the recommendations and rulings of the DSB in the dispute) without requesting a “compliance panel” to consider whether the measures taken by the US were in compliance with what was recommended by the DSB.

The EU also complains that Indonesia rejected the participation of the EU, as a third party, at the compliance/arbitration panel procedures, preventing the interests of the EU from being taken into account.

Both issues, the “sequencing” problem (the possibility of applying sanctions without waiting for the results of a compliance panel) and the participation of third parties at compliance/arbitration procedures, have been a subject of systemic concern by WTO members for a long time and are part of the current negotiations to improve the Dispute Settlement Understanding.

There was disagreement between the United States and Indonesia over compliance, and the matter was referred to arbitration. Indonesia requested “sanctions” against the US for US$ 50.5 million to which the US objected. It was not possible to reach a “sequencing” agreement between both parties and Indonesia claimed it was not necessary to request a “compliance” panel because the US had taken “no action”.

In a nutshell, the core EU claim is that Indonesia violated the DSU by suspending concessions under Article 22 without first going through the Article 21.5 compliance process.  That systemic issue has been around for a while.  The third party participation claim is, I believe, a new one.

More Investment Exceptions in FTAs

Recall that the Australia - Korea FTA had a general exception to the investment obligations.  Now here's the one in the just released Canada - Korea FTA:

3. For the purposes of Chapter Eight (Investment), subject to the requirement that those measures are not applied in a manner that would constitute arbitrary or unjustifiable discrimination between investments or between investors, or a disguised restriction on international trade or investment, this Agreement is not to be construed to prevent a Party from adopting or enforcing measures necessary:

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

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

(c) for the conservation of living or non-living exhaustible natural resources.

There are a few subtle differences between the Canada-Korea and Australia-Korea texts, but the general impact is the same.  Interestingly, neither agreement makes reference to public morals.

The Canada-China FIPA text has a similar provision, but my understanding is that the CETA does not. I'd be curious to hear about any internal discussion in Canada about the merits of including such exceptions.  Does this issue make it into the public debate, or is it too technical?

Non-Violation Complaints under TRIPS: Opening the Pandora’s Box?

The United States has recently made an emphatic argument that “non-violation” complaints should be allowed under TRIPS (IP/C/W/599).  These complaints have been under a moratorium since the creation of TRIPS.  Traditionally, non-violation complaints were tied closely to tariff concessions (trade in goods) and subsequent legitimate expectations flowing from those concessions.  (I wrote a piece on non-violation cases a long time ago.)  As the WTO ushered in the era of “violation” complaints (thanks to a number of new agreements and provisions), traditional non-violation complaints have nearly been extinct.

 Yet the TRPS provides a ground provision (Article 64) for non-violation claims, although it suspends the effectuation for five years from the date of entry into force of the WTO Agreement and leaves all the details (scope and modalities) to the TRIPS Council.  Now, the United States argues that “time has come to allow the moratorium on non-violation complaints to expire.”  Obviously, the U.S. proposal is highly controversial.  Developing countries, such as India, China and Russia, has expressed a strong objection to the proposal.

 Would allowing non-violation complaints under TRIPS open the floodgate of TRIPS litigation?  Theoretically, any TRIPS measure allegedly nullifying or impairing benefits under TRIPS may be subject to non-violation claims under certain conditions (breach of legitimate expectation etc.).  How would these new types of complains fare in relation to some exceptions or flexibilities under TRIPS (such as fair use, public health emergencies etc.)?  

Does Plain Packaging Work?

Whether plain packaging is effective at discouraging smoking could be an important issue in the WTO plain packaging dispute.  What does the evidence show?  Not surprisingly, there is some disagreement.

On the "it works" side, there's this:

Australia’s landmark cigarette legislation banning logos and putting dire health warnings and graphic images of sick or dying smokers on packs seems to be working, data shows, even as tobacco companies argue business is better than ever.

The country’s Bureau of Statistics says household consumption of tobacco fell 4.9 percent during the year that ended in March and clipped a small but still noteworthy 0.1 percentage point from Australia’s gross domestic product in the first quarter of this year. Consumption of cigarettes and tobacco dropped 7.6 percent in the first quarter, Commonwealth Bank economists said in a research note.

Although the data, released last week, does not show the rate of change, it illustrates that total consumption fell, according to the statistics bureau, which warned that the figures could be subject to seasonal revisions.

“We are seeing a very encouraging trend,” said Mike Daube, professor of health policy at Curtin University in Perth, Western Australia. “The numbers are heading in the right direction.”

Stephen Koukoulas, managing director of the Canberra-based Market Economics, agreed that tobacco consumption seemed to have dropped in the 15 months since the packaging law, the world’s most restrictive, went into effect.

But then there's also this, from the same article:

But British American Tobacco Australia said that industry sales volumes were up, and that the decline in the rate at which smokers start had slowed.

“A year after plain packaging was introduced, industry volumes had actually grown for the first time in over a decade,” a company spokesman, Scott McIntyre, said in a news release. Tobacco industry data shows the decline in the number of people smoking “has slowed by more than half to 1.4 percent” since plain packaging was introduced, he said in a telephone interview.

It's difficult to know what to make of the tobacco industry data.  What's the theory behind why sales would go up after plain packaging?  Maybe because there was so much talk of cigarettes in the news that everyone started craving a smoke?   Are kids attracted to the gruesome images on the new packaging?  

I think we need more evidence and data here.  Because if plain packaging means increased smoking, tobacco companies will start pushing for plain packaging so as to get more people smoking, and then everyone's heads will start to spin.

GATT Consistency of a Commercial Fishing Ban

For you law professors out there searching for a good exam question, take a look at this fact pattern from an Economist article:

IN PALAU, the traditional prescription for an ailing reef is a fishing ban called a bul. Local chiefs may declare a bul to rest a busy fishing spot or protect endangered sea turtles. Now Palau’s president has a more drastic plan. He proposes a complete ban on commercial fishing—a bul to turn the 600,000 square kilometres (232,00 square miles) of Palau’s Exclusive Economic Zone (EEZ) into a marine reserve the size of Ukraine. Locals could still fish close to shore, but not for export.

The ban would last until world leaders implement programmes “to reverse the devastation to our oceans and seas”, Palau’s president, Tommy Remengesau, recently told the United Nations. Environmentalists have rallied to his cause. ...

So it all sounds pretty clear so far: an almost total ban on fishing, with exceptions for local fishers but no export permitted. 

 

In terms of GATT obligations, it's pretty clear there is an export restriction, and thus a GATT Article XI violation.  For one thing, local fishers are not allowed to export.  In addition, is the ban on commercial fishing an export restriction, maybe on a de facto basis?

Though small, its waters are full of bigeye and yellowfin tuna. Japanese and Taiwanese boats pay to fish there, helping Palau earn $5m in revenue from fishing taxes and licensing fees in 2013.

I'm guessing those Japanese and Taiwanese fishers are selling for export.

 

Then you get into Article XX.  Surely this measure "relates to the conservation of exhaustible natural resources" under Article XX(g), right?  Probably, but there's this:

Palau’s bet, however, is that its fish are worth more in the water than out. Mr Remengesau doubts that small islands will ever capture more than “a drop” of a tuna fishery worth billions but dominated by foreign fleets. Ecotourism, meanwhile, accounts for about half of Palau’s GDP.

Palau’s leaders hope that a national marine reserve will lure enough tourists to offset lost fishing revenue. ...

However, even if Palau's plan is, in a sense, all about money, I'm not sure how that undermines the conservation effect.

Then you've got the Article XX chapeau to deal with.  What about those exceptions for local fishers?  Are they "arbritary" or "unjustifiable"?

Anyway, there's a lot more to say, but I'll leave it up to others to fill in the details.  (It's also worth noting that Palau is not a WTO Member, and is one of the few nations not to have applied).

Fun With Plain Packaging

A while back, I was thinking about the Australian plain packaging law, and it occurred to me that people were saying "plain package" and "cigarettes" together quite a lot, and the terms are now associated closely with one another.  With that in mind, wouldn't it make sense, then, to start a cigarette brand called "plain package", so that people could go into a store and ask for "plain package" cigarettes and buy your product?

I realized that trademarking generic terms is difficult, and my chances were slim, but just for fun I paid the AUS $90 to apply for a trademark with the Australian IP agency.

Not surprisingly, they rejected me.  Here are the key excerpts from their response: 

This is my response to your application to register a trade mark. I have explained some very significant problems which mean that at present your application cannot be accepted. It is likely to be difficult for you to overcome these problems. 

... 

What are the problems with your trade mark?

 Your trade mark is PLAIN PACKAGE.  

Plain package indicates the nature of the packaging your goods are sold in, being packaging with little or no embellishment, decoration, or enhancing elaboration.

Other traders should be able to use PLAIN PACKAGE in connection with goods or services similar to yours. 

What would I have done with the trademark if I had gotten it?  Most likely nothing, except blog about it, but I did see several intriguing options for the "plain package" trademark: (1) Start my own cigarette company; (2) sell the trademark to an existing cigarette company; or (3) donate it to a public health group.  But alas, with the rejection, the decision has now been made for me.

The Next WTO Moot Court Case

Many of you have been involved in some capacity in the ELSA WTO Moot Court competition. It may have occurred to you that it would be fun to write up a case that would drive students completely nuts teach students a lot about WTO law.  If so, here's your chance:

ELSA International invites proposals from prospective case authors to write the Moot Court Case for the 13^th edition of the EMC² Moot Court Competition on WTO Law. 

The ELSA Moot Court Competition is a simulated hearing of a World Trade Organization dispute settlement panel. Teams of interested students from all over the world prepare written submissions for the complainant and the respondent of a fictitious case involving WTO law. After the written preliminary round, the teams have the opportunity to present oral submissions for both the complainant and the respondent before a WTO dispute settlement moot court panel composed of WTO and trade law experts. Further information about the EMC² Moot Court Competition on WTO Law can be found on the ELSA website: http://www.elsamootcourt.org/

Case proposals will be evaluated by an Academic Board composed of WTO law academics, practitioners and staff of the WTO Secretariat. After acceptance of the case proposal by the Academic Board, the case author will work with the Academic Board to refine the issues presented in the proposal before the launch of the competition with the publication of the case in September 2014. In addition to the initial moot case, the case author is also required to prepare written clarifications addressing questions raised by students on the case (due in November 2014) as well as a bench memorandum that includes the best arguments and counter arguments to legal and factual issues arising in the dispute (due in December 2014). The bench memorandum is used by all moot court panelists in the regional and final round to mark and grade the participants' written and oral submissions. The case author would be invited to the WTO Secretariat in Geneva to judge the final oral round of the competition, along with distinguished WTO scholars and practitioners, in May 2015.  Throughout this Moot Court Competition, the case author will work in close collaboration with experts of the WTO Secretariat, in particular Kaarlo Castren and Carlo Gamberale, Academic Co-Directors for the ELSA Moot competition.

The purpose of the EMC² Moot Court Competition is to teach students about WTO law and the WTO dispute settlement system. The Moot Court Case should enable students to engage with a realistic trade dispute raising legal issues under the WTO covered agreements. The case proposal (between 1,000 and 2,000 words in length) should present a factual scenario and identify approximately three to four WTO legal issues (which may include procedural issues) that arise from the scenario. The Moot Court Case should provide a relatively balanced opportunity for legal arguments in favour of both the complainant and the respondent. Ideally, the Moot Court Case would address legal issues raised but not resolved in the jurisprudence to date and provide the opportunity to study and argue existing case law. The resolution of the legal issues should not depend on an evaluation of complex evidence or data. The proposals will be evaluated on the basis of the novelty of the issues raised, along with the opportunities provided by the case for students to engage with the existing WTO jurisprudence. 

The 2014 Moot Court case, written by Professor Markus Krajewski of the University of Erlangen-Nuremberg, is available here: http://www.elsamootcourt.org/the-case 

Case proposals should be made to [email protected] by 6^th of July 2014. The case author would be notified on 15^th of July 2014 and begin work with the Academic Board to develop the case over the summer of 2014, before the case is launched on 15^th of September 2014.

WTO Seals: migrating from this blog to ASIL Inisghts

ASIL Insights has just posted a preliminary assessment of the AB ruling in Seals co-authored by Jo Langille, Katie Sykes and me.bit.ly/1uiYXcx The exchanges on this blog were very helpful to us in the deliberations that led to our joint piece.  So many thanks to Simon, our host and impresario.

The blog exchanges were also mentioned in an on-line article by Peter Clark, bit.ly/1oX1ZTY posted today as well, with an absurdly misleading title:  "Europe won small battle on seals, but is losing the war."  

Mr. Clark calls the ruling a "win" for Canada   His basis for doing so is that the Appellate Body, while having found the EU ban provisional justified as necessary for the protection of public morals, held that under the chapeau of Article XX a few aspects of the way in which the indigenous hunting exception is implemented need to be changed.   So what did Canada "win" as a result of these findings under the chapeau.  It is very hard to see the first two changes sought by the Appellate Body, that the EU must pay attention to inhumane pracatices in indigenous hunts and that it must close any loopholes in the exception that might allow commercial sealing operates to circumvent the ban, as in any way helpful to Canada's commercial sealing industry.  How do those changes in any way lead to greater market access to Europe for Canadian seal products?   The third change goes to the AB's concern that not enough is being done by the EU to facilitate access for Canadian indigenous seal products to the EU market.  Since Canada's Inuit insist that with a general ban in place there isn't enough of a market to make it worth their while to sell to Europe, even if they have an exception, this could only be described as the most pyrrhic of victories.

The fact is that the market in the EU for seal products has largely dried up, due to the very moral beliefs of its citizens and consumers that are reflected in the ban itself and which the WTO AB held to justify it.  One of Canada's main arguments in the WTO proceeding was that the ban combined with the indigenous exception favoured Greenland, because it had large-scale indigenous sealing.  But Greenland's own seal products are an increasingly hard sell:  despite the exception, its exports have declined 90% since the EU ban was put in place.bit.ly/UczODZ

These statistics suggest that Canada wasn't pursuing its WTO complaint primarily to compete with Greenland over the dwindling EU market for seal products. No, Canada's interest was in fighting the global trend toward prohibiting products from the inhumane hunt.  It hoped the WTO would set a precedent that would help Canada in its global battle to protect this dying, cruel business.  From this perspective, Canada's strategy has totally backfired.  First of all, having defamed activists and citizens alike as irrational, sentimental fools for being concerned for seals and having insisted there is no basis in fact or science to be concerned that the hunt is inhumane, Canada now has to reckon with the ruling of an independent international tribunal, which found on the basis of extensive expert evidence, that the commercial seal hunt produces signficant instances of poor animal welfare outcomes, as defined by veterinary science.      Second, while the Appellate Body gave a wide bearth to WTO Members to ban seal products on public morals grounds, the only flaws they found under WTO law were not with the ban itself, but with the very specific way that the EU operated its exception for indigenous peoples.  These are concerns that are particular to European administration and do not affect in any way the global trend towards prohibition.

Thus if one replaces "Europe" with "Canada", the title of Mr. Clark's piece begins to describe the reality:  "Canada won a small battle but lost the war"

 

 

 

Are the WTO “Teeth” Working?

Maybe.  Here go some excerpts from a recent report by the U.S. House Appropriations Committee. 

     Mandatory Country of Origin Labeling (COOL).—The Committee is aware that the governments of Canada and Mexico have challenged a final rule published in the Federal Register on May 24, 2013, (78 Fed. Reg. 31367) claiming that it violates the United States’ international trade obligations in cases WT/DS384 and WT/ DS386, which are pending before a compliance panel of the World Trade Organization (WTO). It is estimated that U.S. exports to the two countries will suffer an economic impact of approximately $2,000,000,000 in retaliatory actions should the final adjudication of this matter by the WTO determine the COOL requirements are inconsistent with U.S. international trade obligations under the General Agreement on Tariffs and Trade annexed to the WTO agreement, the WTO agreement, or the Agreement on Technical Barriers to Trade referred to in section 101(d)(5) of the Uruguay Round Agreements Act (19 U.S.C. 3511(d)(5)). Additionally, the USDA Chief Economist noted at a House Agriculture Committee hearing on April 30, 2014, that USDA has found that COOL has little impact on consumer meat choices based on survey data. The Committee directs USDA not to implement or enforce the COOL final rule should the WTO issue a final ruling against the United States. Furthermore, the Secretary is directed to promptly issue a notice in the Federal Register announcing that the COOL rule is suspended until further notice if the final ruling is against the United States.

More on the ECJ's "Right to be Forgotten" as a Trade Barrier

From a recent op-ed:

This month’s bombshell decision from the European Court of Justice pronouncing a “right to be forgotten” on the Internet was couched as a principled stand for digital privacy. Looking closer, however, one could see a double standard at work:

The enormously expensive effects of the decision fall squarely on the shoulders of search engines based mostly in the United States, while the European players left the courtroom free of obligation. The courage of the court’s convictions, it seems, applies only outside the borders of the European Union — a result that, while convenient in the short term, carries ominous implications for Europe’s future.

...

Most glaring is the illogical selectivity of the ruling. While the court required Google to remove the link, it let the Spanish newspaper off the hook, meaning the material that actually violates the lawyer’s right to be forgotten is allowed to remain on the Internet. The result makes no sense. If a store at the mall is selling banned products, the problem isn’t cured by removing the mall directory.

By handing down different fates to Google and the newspaper, the court is having its cake and eating it, too — standing up for privacy, only so long as the burden of that stand lands outside the continent.

In the long term, however, the court’s approach could cost Europe severely in lost investment and innovation.

Investors and tech entrepreneurs will surely take note that the cost of providing information over the Internet in Europe has just skyrocketed. Google and other search engines not only face difficult removal decisions, but they must also build massive systems to handle removal demands. If foreclosure notices qualify for deletion, that alone could account for millions of requests, to say nothing of unfortunate karaoke performances and Halloween costumes.

While Google may have the resources to forge on in Europe, tomorrow’s Google or Facebook or Tumblr may not. It isn’t difficult to imagine start-ups simply forgoing a European presence, given the high cost of doing business there. It’s a dire consequence, but by creating special rules that apply only within the European Union, the continent has set itself on a path toward cutting itself off from the global community.

So there's a disparate impact on U.S. service providers.  Is that enough to find a violation?  (Presumably we are in GATS-territory here -- I'm not sure what the relevant commitments are).

And if there is a violation, is there some justification for it?  Public morals, perhaps?

The Relationship between China’s Protocol of Accession and the GATT 1994: China – Rare Earths and the Incorporation Theory ― Off with its Head! (Part 1)

by André de Hoogh, cross-posted from the GUILD-blog

Introduction

Last March, a WTO panel issued its report on a dispute between the European Union, the United States and Japan on the one hand and China on the other concerning export duties imposed on certain rare earths, tungsten and molebdynum (here ; China – Rare Earths). The export duties were, quite unsurprisingly, found to be inconsistent with paragraph 11.3 of China’s Protocol of Accession (China – Rare Earths, para. 7.48; Protocol, here ). The crucial legal question was whether China could invoke article XX GATT 1994 (GATT) to justify its violation of obligations under the Protocol.

Various complex and detailed issues arise with respect to the relationship between the Protocol and the GATT, many of which lie beyond the scope of a short contribution. It is proposed therefore to limit the first part of this comment to what may be called, in essence , the incorporation theory . This theory entails that a textual reference to the GATT in the specific, substantive provisions of the Protocol or Working Party Report (WPR, here ) is required to justify recourse to article XX GATT. This contribution will critically investigate the interpretative method and interpretations adopted by the Appellate Body (AB) and the panel .

The state of jurisprudence

The question of the relationship between the Protocol and the GATT first came up regarding certain measures of China leading to the AB report in China – Publications and Audiovisual Products ( here ). The AB held, upon a claim of China to that effect, that the introductory phrase of paragraph 5.1 Protocol – ‘[w]ithout prejudice to China’s right to regulate trade in a manner consistent with the WTO Agreement …’ – allows China to invoke the general exceptions of article XX GATT in relation to its violation of obligations pertaining to trading rights (para. 233).

Another dispute over the imposition of export duties on raw materials led to China’s claim that article XX GATT could also be invoked in relation to a violation of obligations under paragraph 11.3 Protocol . On appeal the AB, in China – Raw Materials ( here ), drew upon the language of paragraph 11.3 and rejected the argument that China could invoke article XX GATT. As no reference is to be found in paragraph 11.3 to the GATT generally or article XX in particular, nor any language similar to that of paragraph 5.1, the AB concluded that paragraph 11.3 provided no textual basis for China’s claim (para. 291). The reference to article VIII of the GATT in paragraph 11.3 of the Protocol also provided no relief to China, since that provision deals with fees for services rendered and excludes export duties from its scope (para. 290). The AB found further support for its conclusion based on context in paragraphs 11.1 and 11.2 and the WPR (paras. 293-299), discarded arguments based on the object and purpose of the WTO agreements (paras. 300-306), and held that China could not invoke article XX GATT (para. 307).

Having lost the battle, China nevertheless proceeded in the next case to press its point in relation to its export duties on rare earths. Pointing out, inter alia, that the Protocol constitutes an integral part of the WTO Agreement pursuant to paragraph 1.2, it argued that paragraph 11.3 of the Protocol is intrinsically related to the GATT and is therefore made part of the GATT (China – Rare Earths, paras. 7.73-7.89). It further argued a similar point in relation to article XII.1 of the WTO Agreement, contending that accession operates in relation to the WTO Agreement and the annexed multilateral trade agreements (paras. 7.90-7.93).

The panel, fully aware of the AB’s earlier rejection of China’s claim, did consider whether cogent reasons might justify a departure from that position. Finding against China, the panel concluded that the exceptions of article XX GATT could not be invoked to justify a violation of paragraph 11.3 Protocol (para. 7.115). However, one panellist disagreed and argued that the defences of the GATT are available to GATT - related obligations established under the Protocol unless a contrary intention were to be established (paras. 7.118-7.138).

The incorporation theory

A preliminary, critical comment relates to the method applied to determine the common intentions of the parties to the Protocol. The AB points out that if the parties had so intended they would have introduced wording in the Protocol allowing, by way of cross-reference, recourse to article XX GATT (China – Raw Materials, paras. 293 and 303). Boiling down to a contrario reasoning – there is no express language, thus recourse is excluded (inclusio unius est exclusio alterius) –, this argument is flawed due to the nature of the inclusion: silence (see Baroncini 2013). The fact that the parties could have made something clear in the text of a document (panel report in China – Raw Materials, para. 7.140,here ; China – Raw Materials, para. 293) is not proof (dis)positive of an intention to exclude, especially since the issue here is not the ordinary meaning of an express term. To interpret a specific term will necessarily, if words are to have meaning at all, require some determination of inclusion and exclusion, but the same cannot be said for silence or absence of specific language.

The AB and the panel do examine the language of the specific provision under scrutiny (paragraph 11.3 Protocol) and more general provisions (paragraph 1.2 Protocol and article XII.1 WTO Agreement) to determine whether recourse to article XX GATT may be available, but in essence their inquiry is already grafted upon their theory that incorporation is required. Thus they are not looking for evidence of a common intention as to the specific issue at hand, but for arguments in support of their theory and rejecting viable arguments against such a theory. Indeed, one may wonder whether any common intention of the parties can realistically be established in relation to this issue in the absence of language addressing it. In this, both bodies appear to adhere to yet another theory, that texts are complete, logically and legally coherent, and consequently sufficient in and of themselves to answer any question of interpretation.

In particular, t wo arguments relating to the incorporation theory may be examined: first, that the parties to the multilateral trade agreements other than the GATT have at times incorporated article XX by way of cross-reference; and second, that the references in the Protocol and the WPR to the WTO Agreement or the GATT can be seen as cross-references to article XX GATT.

As to the former, it stands to reason that other agreements would either include a self-standing provision allowing the balancing of free trade with the pursuit of legitimate objectives (i.e. article XIV GATS), or would make a cross-reference to article XX of the GATT (i.e. article 3 TRIMs). The necessity of a self-standing provision or cross-reference to article XX GATT is a given because article XX GATT is limited to the scope of the GATT itself (‘nothing in this Agreement’). Absence of such language in another multilateral trade agreement would not simply lead to an absurd or unreasonable result as a matter of interpretation, but to an absurd or unreasonable result tout court. This absence of cross-references has precisely led to queries as to the applicability of article XX to the SPS and SCM Agreements, which are linked to the GATT but do not contain any exceptions or cross-reference (Shapiro 2007; Lester, Mercurio and Davies 2012).

As to the latter, references to the WTO Agreement or to the GATT in the Protocol , the AB interprets language such as ‘shall conform to the obligations undertaken under the WTO Agreement’ (paragraph 2.3 Protocol), ‘the right to regulate trade consistent with the WTO Agreement’ (paragraph 5.1 Protocol), ‘in conformity with the GATT 1994’ (paragraphs 11.1-11.2 Protocol), ‘in conformity with article VIII of the GATT 1994’ as references to article XX of the GATT (China – Raw Materials, paras. 291, 293, 303-304). The validity of this claim may very much be doubted, if only because no explicit reference to article XX can be found in the Protocol and only once in the WPR (para. 160). Thus, contrary to what the panel suggests in China – Rare Earths, there is no ‘explicit language throughout the Accession Protocol and the Working Party Report specifically making Article XX exceptions applicable in the case of certain WTO commitments’ (para. 7.86; emphasis added). Such references as may be found do not address the applicability of the GATT to the specific provision of the Protocol, but rather provide clarification as to the scope of obligations undertaken or the interaction between trade instruments. Hence, they are similar in character to the interpretative notes or understandings to the GATT.

Moreover, in many instances the references are redundant, since they simply restate the obvious fact, or rather the obvious norm, that all China’s laws, regulations, restrictions, measures, and conduct must comply with the obligations undertaken in the WTO Agreement. However, this is already given by articles II.2, XVI.4. XVI.5 of the WTO Agreement, and by the rules of customary international law reflected in article 27 of the 1969 Vienna Convention on the Law of Treaties and articles 3 and 32 of the ILC Draft on State Responsibility.

Although quite a few provisions of the Protocol contain the words ‘except’, ‘exceptions’ or refer to ‘exceptional’ cases or circumstances, these tend to constitute a limit to the scope of the substantive obligations undertaken. In only a few cases do they suggest an affirmative defence similar to the exceptions of article XX GATT (i.e. paragraphs 2.(C).2, 2.(C).3, 8.1.(d), 9.2 Protocol). The position of the panel that paragraph 11.3 Protocol lists the exceptions applicable to the obligation to eliminate export duties, to the exclusion of others, ignores the distinction between limitations to or exclusions from the substantive scope of an obligation and the invocation of exceptions as an affirmative defence to the breach of that obligation (see China – Publications and Audiovisual Products, paras. 223, 228 and also 230). Moreover, even when a provision mentions exceptional circumstances, suggesting the presence of an affirmative defence, it does not refer to the GATT and its general exceptions. The Protocol does once use ‘justified under the WTO Agreement’ (paragraph 7.2; arguably also Annex 1A, paragraph IV.5.(a)), which might more appropriately be seen, by implication, as a reference to exception provisions. The WPR more often uses ‘justified under’, but almost always by reference to the WTO Agreement (paras. 122, 128, 165, and 217; see also paras. 37, 113, and 124, which however concern statements by WTO members and not China) and only once to the GATT (para.162).

Pursuing this line of thought further, the AB’s and the panel’s argument in relation to the absence of language similar to that of paragraphs 11.1 and 11.2 Protocol – ‘China shall ensure that … shall be in conformity with the GATT 1994’ – suggests that the exceptions listed in paragraph 11.3 are exhaustive (EC – Raw Materials, para. 293; China – Rare Earths, paras. 7.89). Yet this is a non sequitur. A perfectly valid explanation for the absence of such language is that there are no taxes or charges to exports that may legally be applied under the GATT because China has agreed to eliminate all such taxes or charges (unless in relation to products set out in Annex 6 or applied in conformity with article VIII GATT , which concerns fees for services rendered and excludes export duties). Thus paragraph 11.3 establishes an absolute obligation (with exceptions that limit its scope) that does not allow for any application in conformity with the GATT. The references to ‘in conformity with’ the GATT relate to substantive obligations under the GATT and not to its affirmative defences. Additionally, as has been noted (Qin 2012; Baroncini 2013; Liu 2014), when it comes to the elimination of export duties no specific obligation can be found in the GATT (though export duties may be included in a member’s Schedules of Concessions) and this too may explain the absence of reference to the GATT.

Provisional conclusion

The incorporation theory adopted by the AB in China – Raw Materials and the panel in China – Rare Earths lacks coherence. As it is, no specific references to article XX of the GATT can be found in the Protocol and only one in the WPR. In general, references to the WTO Agreement, the GATT or its specific provisions in the Protocol relate to substantive provisions and not to affirmative defences, and thus do not evidence a common intention of the parties to incorporate article XX.

ISDS Forum

For those of you who could not attend, here's the video of our ISDS policy forum at Cato: 

http://www.cato.org/events/investor-state-dispute-settlement-mechanism-examination-benefits-costs 

I think we had a pretty good back and forth, with reasonable people on all sides.

My favorite part, though, was Lori Wallach of Global Trade Watch speaking in support of free trade (sort of).  At 1:30:57 of the second panel, she says, "We don't have a problem with a rule of non-discrimination."  I was very happy to hear it, and I'm going to hold Lori to her word if there is ever a trade agreement that focuses on non-discrimination!

What Did the AB Mean in Seal Products?

We've had some good discussions of the Seal Products AB report here on this blog over the past week or so.  There are definitely some differences of opinion as to what the AB meant in relation to the GATT non-discrimination obligations.  When will we get some clarification?

It may not be too long.  In several ongoing cases -- COOL, Tuna, and Plain Packaging all come to mind -- the parties will be arguing about claims related to these provisions, and will have to explain their idea of what the AB meant.  So the first place to look will be the submissions in those cases, some of which will be posted online.  It will be interesting to see how governments view this issue.

Then the panels in those cases will have to make some interpretations of their own.  Trying to interpret the AB, while knowing your views are subject to the AB's review, is a tough task.

And then finally back to the AB for, hopefully, a more definitive explanation.