International Economic Law and Policy Blog

Interesting New Publication by the WTO: The History and Future of the World Trade Organization

For those of you who may have missed this interesting free new publication by the WTO, I point out " The History and Future of the World Trade Organization" by Craig VanGrasstek. It can be downloaded HERE for free as PDF.

I looked through it, and I was surprised to see that it reads like an (illustrated) novel. I was especially pleased to learn about the pivotal role played by Canada in the creation of the WTO!

Cecilia Malmstrom on ISDS

I've been watching the confirmation hearing for Cecilia Malmström as the next EU trade commissioner.  It was really very interesting.  Much more detailed questions and answers than we usually see in U.S. congressional hearings.

She suggested that she was open to the possibility of excluding ISDS from TTIP, but seemed mostly to be happy with the current state of ISDS in CETA (although I felt like a couple brief comments indicated she could accept some rethinking of these provisions).

My sense is that she is open to thinking deeply about the use of investor state dispute settlement, in the CETA, TTIP and elsewhere.  There are difficult questions, and she is looking for sensible answers.  She notes that there are thousands of investment treaties already out there; we need to think about the entire system.  She also mentions certain problem countries for foreign investment, including Venezuela, Argentina, Zimbabwe. More generally, she asserts that European foreign investment needs protection.

For what it's worth, here are two things she might want to consider when thinking about the future of international investment obligations.

First, what exactly is the scope of the problem of bad treatment of foreign investors?  In particular, which countries are the main source of the problem, and what exactly is the nature of this bad treatment?  As far as I know, there has never been an empirical study of this issue, which I think makes it very difficult to formulate appropriate international rules.  We seem to be operating under assumptions about how foreign investment is treated around the world.  However, these assumptions come from decades ago, when investment treaties were first drafted, and I'm not sure the assumptions reflect actual practices today.  In the current environment, subsidies to foreign investors may be a bigger concern than bad treatment.  It's true that there are some problem countries, as she mentions.  But it may not make sense to take the situation in Zimbabwe as the basis of a general system of investment treaties.

Second, as much as the European Commission and others have tried to clarify the scope of "fair and equitable treatment," it still seems very vague to me.  Looking at the CETA investment text, what does "manifest arbitrariness" mean?  What are some examples of a "fundamental breach of due process"?  What is the scope of the provision on "targeted discrimination" based on race, gender and religion?  If there are no clear answers to these questions, it may be worth reconsidering these provisions.

Do We Need More Appellate Body Members?

From WTO DG Roberto Azevedo:

Some years ago there was a proposal to increase the number of AB members.

Under the current situation the 7 member AB can handle around 10-12 appeals at most per year. That’s stretching the envelope. And this is with AB Members working almost full-time. This operational cap is thus simply not enough given the level of demand.

If, for example, Members decided to increase the number of members to 9, the maximum per year could be increased by approximately a third.

This could potentially address the bottleneck at the AB stage to some degree. ...

This is from a very interesting and detailed speech on WTO dispute settlement.  Read the whole thing.

The case for more AB members seems like a strong one.  But there's a problem: Who gets those extra slots?  If I recall correctly, at the start of the WTO, the U.S. and EU both wanted two AB member positions for their nationals. They eventually agreed to one each.  But with new positions up for grabs, which countries will fight to claim those spots?  Will the U.S. and EU renew their argument that they should each have two spots?  No doubt others will want a spot, and will make their own claim.

The politics of this sound daunting.

The Limits of Regionalism

From WTO DG Roberto Azevedo:

... there are many big issues which can only be tackled in an efficient manner in the multilateral context through the WTO.

Trade Facilitation was negotiated successfully in the WTO because it makes no economic sense to cut red tape or simplify trade procedures at the border for one or two countries — if do it for one country, in practical terms you do it for everyone.

And this is not the only issue that’s inherently multilateral.

Financial or telecoms regulations can’t be efficiently liberalized for just one trade partner — so it is best to negotiate services trade-offs globally in the WTO. 

Nor can farming or fisheries subsides be tackled in bilateral deals.

Disciplines on trade remedies, such as the application of anti-dumping or countervailing duties, cannot significantly go beyond WTO rules.

The simple fact is that very few of the big challenges facing world trade today can be solved outside the global system. They are global problems demanding global solutions. 

Maybe that's part of the reason why governments push bilateral and regional agreements? To avoid the big challenges?

Burger Taxes

Trade law is famous for its "sin" tax cases, on products such as alcohol and tobacco.  But the list of "sins" out there keeps growing.  There is sugar, there is junk food in general, and yes, now we have hamburgers.  This is from the FT:

Anyone following events in Ecuador will know that Rafael Correa, the fiery president, is not one to avoid confrontation, as journalists, bankers and bondholders, among others, well know.

It seems he has found a new target: fast food, along with other threats to the nation’s health such as alcohol and cigarettes, on which he wants to raise taxes. According to the leftist president, with the proposed levy, “people will stop eating so many McDonald’s and Burger King hamburgers.” The move would also “favour the production of [Ecuadorian] food, our traditional gastronomy.”

I'm partial to the gourmet burger places myself, especially the ones that use grass-fed beef.  Would those fall within the tax?  The article doesn't say what Correa thinks about omega-3s.

It's interesting that he explicitly talks about favoring local products.  That's never a good thing to say for purposes of a potential trade dispute! 

And I wonder where the McDonald’s and Burger King franchises in Ecuador get their beef.  Is it local or imported?  Assuming some is imported, there may be a decent case for a GATT Article III violation.  Even if there is a violation, though, Correa seems to be laying the groundwork for a public health defense:

For Correa, a US-trained economist, there is a straight trade-off for users of Ecuador’s health services:

If you want to make yourself sick, that is your problem. We are in a free country. But, at least, then pay a little extra so we can take care of you later. We are talking of a tax on cigarettes, liquors, junk food to avoid people consuming those goods in excess that affect their health. If you deliberately affect your health, then contribute a little more to the healthcare system so to help you once you are ill.

They could probably structure such a tax in a way that it does not violate WTO rules, or at least falls within the health exception.  But if they implement the tax so that it only targets McDonald’s and Burger King, that will be a problem (assuming their beef is imported).

(I'm a little burned out on investment law issues right now, so I'm not going to discuss possible BIT claims.)

Trade in Everything: Prison Services

Apparently, there is not enough crime in the Netherlands to fill their prisons, so they are looking elsewhere for occupants.  At the same time, the Norwegians are facing a shortage of prison space due to "renovations." (Granite countertops in the kitchens?)  Luckily, international trade has come to the rescue.  This is from Reuters:

Norway plans to rent prison space in the Netherlands as the queue of convicts awaiting cells is growing and renovation work at Norwegian jails is expected to cut capacity, the justice ministry said on Monday.

"At the moment, the queue is at 1,300 custodial sentences, and there is a great demand for detention space," it said in a statement. "The Netherlands has already leased prison capacity to Belgium for several years."

...

A deal for several hundred prison places would allow Norway to avoid overcrowding and maintain its standards while prison renovation work costing up to 4.4 billion crowns ($700 million) is carried out.

...

"In Norway there is a capacity shortage, and right now we have a surplus," Fred Teeven, the Dutch state secretary with responsibility for prisons, said in a letter to the Dutch parliament.

The Netherlands already has a contract to house overflow prisoners from Belgium - roughly half of whose population speaks Dutch - in a prison near the Belgian border.

...

A deal would provide for Norwegian sentences to be carried out from 2015 in accordance with Norwegian law on Dutch territory.

How to Defend ISDS

Last week, I was complaining about an attempt to defend ISDS by someone who did not seem aware of how investment obligations work.  In contrast, here is someone who gets it right:

What investment treaties typically do is offer investors (in either direction) reciprocal guarantees of basic principles such as fair and equitable treatment, protection and security, non-discrimination both generally and by comparison with local investors, and against expropriation without compensation (also guaranteed by the European convention on human rights).

That's from a letter to the editor in the Guardian (the first letter at the link), in response to an op-ed criticizing ISDS in the TTIP.  The author of the letter is an investment arbitration lawyer.  He concludes the piece by saying:

There are many weighty arguments against the TTIP, as there are in its favour. But they deserve to be debated on their objective merits, not by mythological scaremongering.

That's exactly right, and this what I've been pushing for.  In particular, it is the content of these basic principles that needs debating.

I have no problem with non-discrimination.  We may quibble about its precise contours, but any reasonable definition works pretty well and is not too controversial.  No doubt there are some people who think we should discriminate against foreign investment, but it's a minority, from what I can tell.  The majority sees the benefits of foreign investment, and wants to liberalize in this area.

But the other principles are trickier.  In particular, fair and equitable treatment remains extremely unclear to me, no matter how much people try to clarify it.  I still look at a wide range of domestic law and policy and think, couldn't that be challenged as treatment that is not "fair and equitable"?  To take one example: the entire U.S. tax code!

So for me, one of the keys to the debate is whether anyone can offer clear explanations of these basic principles, and whether politicians and voters would be OK with these explanations.  That's where the debate should be, in my view, if we are ever going to get this issue resolved.  (There are other issues, too, of course, such as:  If these are such good principles, why do they only apply to foreign investors and investments?)

Is the First Trade/Labor FTA Panel Report Finally Coming?

The U.S. has been threatening to pursue complaints under labor chapters of trade agreements for a while now.  USTR's announcement yesterday may indicate that we will soon see an actual panel process completed:

United States Trade Representative Michael Froman today announced that the United States is proceeding with a labor enforcement case against Guatemala under the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR).

“Our goal in taking action today remains the same as it has always been: to ensure that Guatemala implements the labor protections to which its workers are entitled.  Litigation is a means toward that goal, not an end in itself,” said Ambassador Froman in his remarks. He added, “We remain hopeful that Guatemala can succeed in producing concrete improvements for workers on the ground, which would send a positive signal to the world that would help attract investment, expand economic activity, and promote inclusive growth. This is also critical to demonstrating to the Guatemalan people that there are opportunities for their children in staying and working at home rather than embarking on a dangerous journey of migration.  We remain committed to helping Guatemala achieve these outcomes and earn the benefits that come with enforcing laws to uphold internationally recognized labor rights.”

But note that it just says they are "proceeding" with a case.  Has the panel already been composed?  Will it be composed now?

And does the U.S. really plan to pursue this all the way to a final panel report, or is the announcement just about putting political proessure on Guatemala to make the desired changes?

ADDED:

As it often does, Inside U.S. Trade has the details:

The [U.S. trade] official said the panel will consist of the same members selected before it was suspended, and will follow the same timelines. He noted that panel report should be issued approximately four months from the panel's resumption on Sept. 18 -- sometime in the first quarter of next year.

...

The panelists in the dispute are: Ted Posner, a Washington-based lawyer with Weil, Gotshal & Manges; Mario Fuentes Destarac, a Guatemalan lawyer; and Canadian law professor Kevin Banks, who will chair the panel. ...

There's also this:

The [U.S.] official held open the possibility that the panel's work could be suspended again under the right circumstances. 

How Not to Defend ISDS

Investor-state dispute settlement is a complex, difficult issue. Reasonable people can disagree on it. I've come out against it, but I see why people would be for it.

However, when people do support it, I wish they would get the law and the facts right.  It doesn't bother me when business groups and NGOs put out their spin; I expect that. But when there is an op-ed by an economics professor that gets things wrong, I feel compelled to respond. This piece in the Canadian magazine Maclean's drove me nuts. I'll try to keep from ranting as I address various points.

First off, here is the sub-title: "Excitable nationalists and their wild imaginings about the Canada-China foreign-investment deal have led to all manner of silly arguments." It seems to me that if you want to debate an important policy issue, you should set the right tone. This is not it.

Second, as part of the author's attempt to address criticisms of investor-state (in italics), there's this mis-statement of investment law (following the italics):

2. Foreign-owned corporations can sue Ottawa if a new policy reduces their profits. As we’ll see shortly, that’s not true. Foreign firms have to show that they’ve received different treatment than their Canadian-owned competitors.

As every reader of this blog knows, discriminatory treatment is one basis for a complaint, but it's not the only one.  Importantly, it's not the one people generally criticize.  There may be someone, somewhere who objects to national treatment obligations in investment treaties, but for the most part, that's not what critics focus on.  The biggest problem area is "fair and equitable treatment", which, noticeably, does not appear at all in the op-ed.

Later, the author blurs together non-discrimination and expropration in a way that leaves me confused:

It’s not enough to simply promise to treat foreign-owned firms the same as domestically owned firms. Even if discriminatory regulations and/or fees are subsequently overturned, the lost revenues—not to mention the legal costs—still amount to an effective expropriation. What FIPAs do is ensure that governments can’t expropriate foreign-owned assets without compensation. 

So, past discrimination should be counted as expropriation?  I thought past discrimination just gave rise to liability on its own.  This goes beyond my expertise, but it seems a bit off in terms of explaining how the obligations work.

Then the author points to some exception provisions, one in NAFTA and one in the Canada-China FIPA.  He seems to think these are general exceptions, although he doesn't really make clear what their significance is.  The one in NAFTA (Article 1106(6)), however, is not a general exception; it's only an exception from the performance requirements provisions.  This undercuts the point quite a bit.

On the other hand, the Canada - China FIPA exception (Article 33(2)) is a general one, presumably applicable to all obligations, although only for the limited policy purposes set out there.  How this would work in practice for an FET claim or an indirect expropriation claim is unclear at this point.  As I've said before, I'd like to see how this plays out.  Can general exceptions save investor-state?  Maybe, but it's not a standard provision yet.

I'd really like there to be a good debate on ISDS. I've put a lot of criticisms out there, and I'm always eager to hear responses.  I know it's difficult to talk about these issues, because they are quite complex.  NGOs and business groups keep up an endless stream of spin, but hopefully everyone else can get beyond that and do some deep thinking about it all.

(Was that too much of a rant? Maybe I need to take a break from ISDS and get back to the calm and relaxed world of WTO disputes!)

ISDS in CETA

CETA, the Canada-EU trade deal under negotiation, is well ahead of the TTIP in terms of its progress towards a final text.  How is it faring in terms of politics?  The European Parliament was debating it yesterday.  Here's what they report:

Hopes and fears for the EU-Canada Comprehensive Economic and Trade Agreement (CETA), which has been negotiated but still needs Parliament’s backing to enter into force, were aired in a debate with EU trade Commissioner Karel De Gucht on Tuesday.

EU trade negotiators’ achievements in securing access to the Canadian public procurement market and protecting 145 EU geographical indication marks were.warmly welcomed by MEPs. Many stressed the need to win access to new markets for EU firms so as to offset their loss of business with Russia.

The key fear voiced was to do with the investor-to-state dispute settlement clause, which could enable investors to sue governments over policies perceived as harmful to business. Some political groups called for it to be removed, arguing that it should not be needed in a deal between two mature judicial systems and could be abused by multinationals seeking to sue governments over legitimate policies, such as smoking bans or cutting down on nuclear energy.

So it's all about investor-state.  I wonder what the polling would be like for CETA with investor-state, as compared to CETA without investor-state?

Commissioner de Gucht (who will be replaced soon) had this to say:

On investment, the agreement establishes a system that sets a new standard for investor-to-state dispute settlement procedures. We are well aware of the concerns that exist. This agreement directly addresses all the concerns that have emerged so far.

It is debatable whether concerns have actually been addressed, but more relevantly, the question is whether Parliament is satisfied with the way the issue has been dealth with.  As the first link notes, "The European Parliament will be asked for its consent to the deal in mid-2015," so we will find out then.  You can watch the whole parliamentary debate at the link.  I didn't watch, but my sense from twitter is that there was lots of opposition expressed.

What would the debate over CETA look like if TTIP were not on the agenda?  Is ISDS only such a big deal for CETA because of what it would mean to have ISDS in TTIP?  We'll never know, but CETA/TTIP definitely seems like a big test for the future of ISDS.

Questions about Telemedicine, CETA, and TTIP

I've been watching the telemedicine industry with great interest.  As with online education, I think there is great potential to offer medical services online.  Not all of them, of course, but certainly many types of consultations could take place this way.  If governments allow it, that is.

If they do allow it, there is the possibility of cross-border trade in services that were not previously tradable.  Which makes me wonder, what do existing trade rules say about this, and what will future ones say?

Skimming through the CETA again recently, I came across this interesting nugget on the issue:

Telemedicine may only be provided in the context of a primary treatment involving the prior physical presence of a doctor.

This is from Germany's Annex I "Reservations for Existing Measures and Liberalisation Commitments," in the context of three kinds of services: (1) Medical and Dental Services, Midwives services, Services provided by nurses; (2) Human health and Social Care services, hospitals, ambulance services, rescue services; and (3) Veterinary services.  This reservation would be a very strong restriction on Canadian telemedicine services offered in Germany.

Having come across this reservation, I searched for the word "telemedicine" in all of the CETA documents, but did not see any other instances.  So does that mean it is allowed in places other than Germany?

At first glance, I don't think so.  Generally speaking, there is a broader exemption from liberalization in this sector based on residency and/or citizenship.  That is, only residents/citizens licensed locally can provide these services.  So you won't be able to trade these services across borders via telemedicine very easily.  

(That may not be the final word on this -- I was just skimming through quickly. It's not clear to me if all governments involved have excluded all medical services.)

So that's the CETA, which looks like it has "carved out" most medical services from trade liberalization. I suppose the domestic lobby is pretty strong here, and doesn't like competition.  Then, of course, there's the question of how the TTIP will treat the issue.  There is some misguided talk that the UK's NHS would be privatized under the TTIP, which is completely off base.  But what will the TTIP do with telemedicine?  Will there be any liberalization commitments in this sector as part of the TTIP?

New Website

I thought I'd announce that I have a new website, which makes many of my publications available for downloading at one place, including selected forthcoming publications.  From the menu you can find these under various topics, which include "Globalization and Governance" and "International Law." In the future, I hope to develop the site further, with announcements of conferences and other events, as well as links to key texts and documents.  Any comments on the site most welcome.  The address is: www.howseabout.com 

Scotland and International Economic Law

Is it time to talk about the possibility of Scotland leaving the UK, and the implications for international economic law?  Polls are showing that it could really happen.  Maybe it will, maybe it won't.  But I figure I should do this post now, because if the vote is against independence, no one will care about this anymore.

I see two main issues: Scotland's membership in the WTO, and its role in the investment treaty system.  (Are there other issues?)

For both, its membership in the EU will be of great relevance.  An independent Scotland will try to accede to the EU, and eventually be permitted to do so, presumably.  Thus, as an EU member state, it will be part of any investment obligations the EU takes on (e.g., in the CETA and TTIP) and be part of the WTO through the EU.

But EU member states are also part of the WTO as individual nations, so we should expect Scotland to negotiate that as well.  Does that mean it has to go through a full WTO accession process?  It's hard to believe there are too many issues that would hold up that process, given that it's already in the WTO right now through the UK membership.  Or are there lingering issues out there, and other Members will try to extract more concessions?

And what about all those UK investment treaties Scotland will no longer be a part of?  Will Scotland start to negotiate its own set of treaties?  Will it come up with its own model BIT?  Perhaps this depends in part on Scotland's investment situation.  Are there big Scottish companies with foreign investment they want protected?  Is Scotland concerned with being sued by foreign investors it is hosting?

If you have thoughts, post them now, because as I said, if the vote is no this issue will be gone from the public spotlight forever.

TTIP, Financial Services, and the Prudential Exception

I've always been a little confused by the controversy over including financial services in the TTIP.  The EU wants it in; the U.S. is resisting.  But why is the U.S. resisting?  If they want to protect U.S. industry from competition, I don't have much sympathy.  On the other hand, if they are worried about TTIP rules undermining domestic regulation, I think that's a valid concern, but one that can probably be dealt with in the drafting.

I don't know the financial services sector well enough to understand all the issues here, but one area critics have cited is the prudential exception.  As currently drafted in the GATS and other agreements, it has been alleged, the exception is not sufficient to allow for the use of prudential measures when needed.  It seems to me this could be fixed with clearer language.  

In this regard, I have a short law journal article which suggests some new wording for the exception, emphasizing non-discrimination as a guiding principle (i.e., making it more like the GATT Article XX chapeau).  Here's the conclusion:

The EU has continued to push for liberalization of financial services through the TTIP. There are many complex issues in this regard, but to the extent that the prudential exception raises concerns for the U.S. negotiators and regulators, simple drafting fixes should make it clear that liberalization will not interfere with appropriate prudential regulation. Abuse of the exception can be avoided by requiring that measures be made for well-defined prudential reasons and that they not discriminate against trading partners.

Of course, as I mentioned recently, over in the CETA the drafters have come up with their own fix for the prudential exception.  Theirs is definitely a little more complex than ours, but I'm glad trade negotiators now seem willing to move away from the GATS language and try something new.

The Substance of Investment Treaties

It has always seemed to me there is insufficient study of the substance of investment treaties, i.e., what do the obligations mean, what is their impact, etc.  I often hear that the principles are no different from what is found in domestic law, but that doesn't satisy me.  If "fair and equitable treatment" is, to some extent, about "due process," what are the implications of having an enforceable international due process obligation?

I haven't read it yet, but based on the web site summary and table of contents, this book looks like it will help fill the gap:

Substantive Protection under Investment Treaties provides the first systematic analysis of the consequences of the substantive protections that investment treaties provide to foreign investors. It proposes a new framework for identifying and evaluating the costs and benefits of differing levels of investment treaty protection, and uses this framework to evaluate the levels of protection for foreign investors implied by different interpretations of the fair and equitable treatment and indirect expropriation provisions of investment treaties. The author examines the arguments and assumptions of both supporters and critics of investment treaties, seeks to test whether they are coherent and borne out by evidence, and concludes that the 'economic' justifications for investment treaty protections are much weaker than is generally assumed. As such, the 'economic' objectives of investment treaties are not necessarily in tension with other 'non-economic' objectives. These findings have important implications for the drafting and interpretation of investment treaties.

• Proposes a new framework for understanding the costs and benefits of investment treaty protections
• Challenges the view that arbitral jurisprudence can be explained and rationalised by a coherent set of legal principles by demonstrating that arbitral tribunals have interpreted common investment treaty protections in different ways
• Provides practical recommendations for the drafting and amendment of investment treaties which are directly relevant to treaty negotiators and policy-makers

Table of Contents

1. Introduction
2. The structure of existing debate
3. A framework for evaluating different levels of investment treaty protection
4. Fair and equitable treatment
5. Indirect expropriation
6. Application of the framework and conclusions
7. Implications of the conclusions
8. The future of debate about investment treaties.

I don't know if I'll agree with everything the author says, but I like this line of inquiry.  Here's a free paper by the author on what looks like a similar topic: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2138235

Implementing the Seal Products Ruling

The parties have agreed to an implementation deadline of October 18, 2015.  This is from the Canada-EU agreement:

We wish to inform you that, with reference to our previous communication from 24 July 2014 and pursuant to Article 21.3(b) of the Understanding on Rules and Procedures Governing the Settlement of Disputes, Canada and the European Union have agreed that the reasonable period of time for the European Union to implement the recommendations and rulings of the Dispute Settlement Body (DSB) in the dispute European Communities – Measures Prohibiting the Importation and Marketing of Seal Products (DS400) shall be 16 months from 18 June 2014, i.e. the date of adoption of the DSB’s recommendations and rulings. Accordingly, the reasonable period of time will expire on 18 October 2015.

History of TBT Article 2.2

Some of you may have seen this short article I wrote for the JIEL, which looks at the GATT negotiating history of the precursor provisions to TBT Agreement Articles 2.1 and 2.2 (there's a little more technical detail in the piece here), in the period 1969 to 1979.  For reasons I can't recall, I stopped at the end of the Tokyo Round, and never bothered to look at the continued evolution of the language during the Uruguay Round.  But in writing something else, it occurred to me that the Tokyo Round Standards Code provision, Article 2.1, doesn't quite match what is in TBT Agreement Articles 2.1 and 2.2, and I wondered how that language evolution took place.  I took a quick look, and here's what I found.

In May 1990, Canada was looking for "more precise disciplines" in this area.  To this end, it proposed the following amended text:

2.1 Parties shall ensure that technical regulations and standards are not prepared, adopted or applied with a view to creating obstacles to international trade. Furthermore, products imported from the territory of any Party shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country in relation to such technical regulations or standards. They shall likewise ensure that neither technical regulations nor standards themselves nor their application have the effect of creating unnecessary obstacles to international trade. In so doing, Parties shall, inter alia, ensure that technical regulations and standards including changes thereto:

2.1.1 do not contain requirements that are greater than necessary to meet objectives consistent with this Article and the specific circumstances giving rise to their adoption;

2.1.2. are based on an acceptable degree of risk associated with their objectives by taking into account, inter alia, scientific and technical evidence, consumer applications, relevant processing technology; 

2.1.3. are not maintained if the circumstances giving rise to their adoption no longer exist or if the changed circumstances can be addressed in a less trade-restrictive manner; 

2.1.4. are not applied in such a way as to affect imported products either originating in geographic areas where the problem being addressed does not occur or destined for industrial or consumer applications where the problem does not exist; 

2.1.5. are consistent with provisions of this Article when adopted to secure compliance with international agreements or standards; 

2.1.6. are consistent with provisions of this Article if different from international standards for reasons given in Article 2.2.

Then in July 1990, the following draft text was circulated:

2.2 Parties shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. In so doing, Parties shall, inter alia, ensure that technical regulations:

2.2.1 do not contain requirements that are more stringent or are applied more strictly than necessary to meet legitimate objectives of general public interest taking into account risks that would be created by not meeting those objectives. Such legitimate objectives are inter alia national security requirements; prevention of deceptive practices; protection for human health or safety, animal or plant life or health, or the environment;

2.2.2 take into account an acceptable level of protection from risks mentioned in paragraph 2.1.2, as identified through appropriate risk assessment procedures, which would allow the maximum trade opportunities while ensuring the fulfilment of legitimate objectives of general public interest; risk assessment would be based on, inter alia, scientific and technical evidence, consumer applications and relevant processing technology;

2.2.3 are not maintained if the circumstances or objectives giving rise to their adoption no longer exist or if the changed circumstances or objectives can be addressed in a less trade restrictive manner;

2.2.4 are not applied in such a way as to affect products either originating in geographic areas where the problem being addressed does not occur or destined for industrial or consumer applications where the problem does not exist;

2.2.5 are formulated in such a way that the necessary requirements are based on the least trade restrictive alternatives which are reasonably available and are consistent with other provisions of this Agreement;

2.2.6 are consistent with provisions of this Agreement when adopted to comply with international agreements;

A subsequent draft from October 1990 uses language that is along the lines of the existing TBT Agreement.

There may be more on this somewhere, either on the WTO's web site (where these docs are), or buried in a former negotiator's files.

So what, if anything, does this alternative language for what became TBT Agreement Article 2.2 tell us about its meaning?  I don't have any strong opinions at this point, but I'm eager to see others arguing about it.

Polling on ICSID

A little while back, I wondered about public opinion on investment obligations.  In this regard, my friend Luke Peterson points me to some data on Americans' views of ICSID.  It's such awful data, though, that I should probably just ignore it.  I only highlight it to make suggestions for how a better job could be done in the future.

The approach is described in this Columbia FDI Perspectives paper.  The authors note that "1,000 individuals were asked nine foreign policy questions, including questions about support for the WTO, the ICC and ICSID.  Approximately a quarter of the sample received a control version consisting of a brief introduction and the question concerning support for ICSID."

Here is the ICSID question:

“[ICSID] was established in 1965 to facilitate the settlement of disputes between countries and foreign investors. Use of ICSID courts is voluntary but binding when a provision for ICSID arbitration is written into investment contracts. Should U.S. citizens and corporations be subject to international court rulings from the ICSID?”

This tells you so little about what's involved with ICSID that it's just not worth asking!  For what it's worth, "[l]ess than a third (32%) expressed support for ICSID, with 28% directly rejecting the idea that US citizens and corporations should be subject to ICSID rulings. ... less than 40% answered “Don’t know.”"  But given the vagueness of the question, I don't think the data are worth anything.

The authors note that "the remaining respondent pool received additional information concerning the economic benefits of ICSID, as well as the actors that helped establish ICSID. The establishment process was attributed to one of three randomly assigned groups: bipartisan Congressional action, Congressional Democrats and Congressional Republicans."  Here is the additional information:

“To dispel any concern that ICSID awards would be overridden in the U.S. court system, [Congress enacted, on a bipartisan basis | Congressional Democrats helped to enact | Congressional Republicans helped to enact], a statute obligating U.S. courts to give ICSID awards "the same full faith and credit" as if the award was a judgment of a court in the United States. Ensuring compliance with ICSID awards reduces uncertainty for foreign companies. This agreement to abide by common rules makes the U.S. more competitive for foreign direct investment dollars, which create jobs in the United States. Should U.S. citizens and corporations be subject to international court rulings from the ICSID?”

It's great that people try to do this kind of polling.  But it just seems to me that they should put a little more effort into the process.  You can't just ask about ICSID as if its role is well-understood!  Explain the substantive law; explain any benefits to U.S. companies; explain that U.S. laws can be challenged.

Also, don't make things up, like the suggestion that this "creates jobs in the United States"!

I've rarely seen a poll on trade issues that was well designed and useful.  I'm convinced it can be done, though.  Anyone reading this, please feel free to take a shot at it in the investment law context!

(And by the way, the WTO questions were not much better).

CETA and the Prudential Carve-Out

We talked about the "prudential exception" here, here, and here, and then just recently here.  In the last link, I mentioned that I had a short article coming out arguing for revised language for this exception.  But the CETA negotiators beat me to it.  Here's what they have come up with:

ARTICLE 15: PRUDENTIAL CARVE-OUT

1. Nothing in this Agreement shall prevent a Party from adopting or maintaining reasonable measures for prudential reasons, including:

(a) the protection of investors, depositors, policy-holders or persons to whom a fiduciary duty is owed by a Financial Institution, or cross-border financial service supplier or financial service supplier;

(b) the maintenance of the safety, soundness, integrity or financial responsibility of a financial Institution, cross-border financial service supplier or financial service supplier; or

(c) ensuring the integrity and stability of a Party's financial system.

2. Without prejudice to other means of prudential regulation of cross-border trade in financial services, a Party may require the registration of cross-border financial service suppliers of the other Party and of financial instruments.

3. Subject to Article X (National Treatment) and Article Y (Most Favoured Nation Treatment), a Party may, for prudential reasons, prohibit a particular financial service or activity. Such a prohibition may not apply to all financial services or to a complete financial services sub-sector, such as banking.

That's from page 264 of the text.  For those concerned with policy space, is it any better than the existing provision used in the GATS and elsewhere?  Note that the problematic second sentence is not in there.  The main constraint seems to be that measures must be "reasonable."  How constraining will that be in practice?

But there's more.  On page 277, there's an "Understanding between Canada and the EU Guidance on the application of Article 15.1 (Prudential Carve-out) and Article 20 (Investment Disputes in Financial Services)."  Among other things, it establishes certain "high level principles" to be applied in this context, such as:

4. (a) Except as provided in paragraph (b), a measure is deemed to meet the requirements of Article 15.1 where it:

(i) has a prudential objective; and

(ii) is not so severe in light of its purpose that it is manifestly disproportionate to the attainment of its objective.

(b) A measure that otherwise meets the requirements of paragraph (a) does not meet the
requirements of Article 15.1 where it is a disguised restriction on foreign investment or an
arbitrary or unjustifiable discrimination between investors in like situations.

5. Provided that a measure is not applied in a manner which would constitute a means of
arbitrary or unjustifiable discrimination between investors in like situations, or a disguised
restriction on foreign investment, that measure is deemed to meet the requirements of Article
15.1 where that measure is:

• In line with our common international prudential commitments; or
• In pursuance of the resolution of a financial institution that is no longer viable or likely to be no longer viable;
• In pursuance of the recovery of a financial institution or the management of a financial institution under stress; or
• In pursuance of the preservation or the restoration of financial stability, in response to a system-wide financial crisis.

How exactly, as an interpretive matter, do these "high level principles" interact with the general legal obligations?  In their efforts to clarify, the drafters have added some new layers of complexity.

Todd Tucker has additional thoughts here.

Dresden Conference on Mega-Regionals

Some details on an upcoming conference on mega-regionals:

On 23rd and 24th October 2014 the Research Centre for International Economic Law at the University of Dresden led by Professor Thilo Rensmann and the affiliated research project “Global TranSAXion” will be hosting a conference on “Mega-Regionals and the Future of International Trade and Investment Law”.

The conference offers a forum to discuss the content and structure of the preferential trade agreements currently under negotiation between some of the world’s major trading partners. The main focus is on the Canada-EU Comprehensive Economic and Trade Agreement (CETA), the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP).

CETA, TTIP and TPP reflect a novel approach to global trade relations by virtue of their economic impact, broad sectoral coverage and provisions on investor-state dispute settlement. International scholars and practitioners will discuss these developments and their policy-implications from both an international trade and investment law perspective. Issues addressed by the panels include: 

• Structural implications for the international economic order
• Democratic legitimacy
• Investment protection
• Energy governance and the Green Economy
• Innovation and IP protection
• Novel regulatory areas 

The conference language will be English. For a detailed programme, see here. 

Further information about the conference, the registration and the venue can be found at

www.tu-dresden.de/globaltransaxion/conference2014.

Speaking of mega-regionals and the future of trade law, this seems like a good opportunity to plug my recent article entitled "The TPP and the Future of Trade Agreements".