International Economic Law and Policy Blog

Maybe Purpose Can Be Part of Non-Discrimination After All

Reading further in the Argentina - Financial Services AB report, maybe I was getting all worked up over nothing.  After seeming to say that "regulatory aspects" of the measure cannot be considered as a separate step in the conditions of competition/treatment no less favorable analysis, the AB then says this:

6.127. Finally, we wish to point out that our analysis does not suggest that any evidence relating to the regulatory aspects must a priori be excluded. Consistent with the established approach to assessing "less favourable treatment" under the GATT 1994, an assessment of whether a measure modifies the conditions of competition to the detriment of like services or service suppliers of any other Member "must begin with careful scrutiny of the measure, including consideration of the design, structure, and expected operation of the measure at issue". In such assessment, to the extent that evidence relating to the regulatory aspects has a bearing on the conditions of competition, it might be taken into account, subject to the particular circumstances of a case, and as an integral part of a panel's analysis of whether the measure at issue modifies the conditions of competition to the detriment of like services or service suppliers of any other Member.

What is "design, structure, and expected operation" looking at if not the objective intent of a measure?

And what does the AB have in mind when it first says no to regulatory aspects, but later says yes to regulatory aspects?

Determining a Measure's Purpose

We had so much fun talking about discriminatory purpose last week, I thought I'd bring up the subject again.  This time, I want to focus on exactly how one might evaluate a measure's legitimacy, which you may or may not think involves a determination as to whether a measure has a protectionist intent.  Let's look at two examples from Appellate Body reasoning.

First up is Chile - Alcohol, with reasoning under the "so as to afford protection" element of GATT Article III:2, second sentence:

63. We turn, therefore, to the design, the architecture and the structure of the New Chilean System itself. That system taxes all alcoholic beverages with an alcohol content of 35° or below on a linear basis, at a fixed rate of 27 per cent ad valorem. Thereafter, the rate of taxation increases steeply, by 4 percentage points for every additional degree of alcohol content, until a maximum rate of 47 per cent ad valorem is reached. This fixed tax rate of 47 per cent applies, once more on a linear basis, to all beverages with an alcohol content in excess of 39°, irrespective of how much in excess of 39° the alcohol content of the beverage is.

64. We note, furthermore, that, according to the Panel, approximately 75 per cent of all domestic production has an alcohol content of 35° or less and is, therefore, taxed at the lowest rate of 27 per cent ad valorem.  Moreover, according to figures supplied to the Panel by Chile, approximately half of all domestic production has an alcohol content of 35° and is, therefore, located on the line of the progression of the tax at the point immediately before the steep increase in tax rates from 27 per cent ad valorem. The start of the highest tax bracket, with a rate of 47 per cent ad valorem, coincides with the point at which most imported beverages are found. Indeed, according to the Panel, that tax bracket contains approximately 95 per cent of all directly competitive or substitutable imports.

65. Although the tax rates increase steeply for beverages with an alcohol content of more than 35° and up to 39°, there are, in fact, very few beverages on the Chilean market, either domestic or imported, with an alcohol content of between 35° and 39°. The graduation of the rates for beverages with an alcohol content of between 35° and 39° does not, therefore, serve to tax distilled alcoholic beverages on a progressive basis. Indeed, the steeply graduated progression of the tax rates between 35° and 39° alcohol content seems anomalous and at odds with the otherwise linear nature of the tax system. With the exception of the progression of rates between 35° and 39° alcohol content, this system simply applies one of two fixed rates of taxation, either 27 per cent ad valorem or 47 per cent ad valorem, each of which applies to distilled alcoholic beverages with a broad range of alcohol content, that is, 27 per cent for beverages with an alcoholic content of up to 35° and 47 per cent for beverages with an alcohol content of more than 39°.

66. In practice, therefore, the New Chilean System will operate largely as if there were only two tax brackets: the first applying a rate of 27 per cent ad valorem which ends at the point at which most domestic beverages, by volume, are found, and the second applying a rate of 47 per cent ad valorem which begins at the point at which most imports, by volume, are found. The magnitude of the difference between these two rates is also considerable. The absolute difference of 20 percentage points between the two rates represents a 74 per cent increase in the lowest rate of 27 per cent ad valorem. Accordingly, examination of the design, architecture and structure of the New Chilean System tends to reveal that the application of dissimilar taxation of directly competitive or substitutable products will "afford protection to domestic production."

What I see here is a thorough consideration of how the measure is designed and operates with respect to its treatment of imported and domestic products.  The Appellate Body looks at the particular tax categories that were established, and says, in effect, that setting up those categories in such a way that imported products mostly get the high tax rate, and domestic products mostly get the low one, is good evidence of protection of domestic products. 

The second case is U.S. - COOL, with reasoning under TBT Article 2.1 

343. As designed and applied, however, the COOL measure does not impose labelling requirements for meat that provide consumers with origin information commensurate with the type of origin information that upstream livestock producers and processors are required to maintain and transmit. Rather, the origin information that must be conveyed to consumers is less detailed, and will often be less accurate. This is because the COOL measure requires the labels to list the country or countries of origin, but does not require the labels to mention production steps at all. If, for example, the relevant production steps took place in more than one country, the relevant label (B or C) will identify more than one country, but will not identify which production step took place in which of those countries. Under the labelling rules, labels for Category B meat may also list countries of origin in any order, such that the order of countries listed on the labels cannot be relied upon to indicate where certain production steps took place. Furthermore, due to the additional labelling flexibilities allowed for commingled meat, a retail label may indicate that meat is of mixed origin when in fact it is of exclusively US origin, or that it has three countries of origin when in fact it has only one or two. For Category D meat, the COOL measure requires only that the customs designation of origin be indicated. Given that the United States does not use the same definition of "origin" for customs purposes as it does for the COOL measure, a D Label will not convey information on the countries of birth or raising of the livestock from which the imported meat was derived. Even Label A, indicating "Product of the USA", which the Panel found to be the only label that provides "meaningful information for consumers", is not required to refer explicitly to the productions steps of birth, raising, and slaughter.

344. In comparing the origin information requirements imposed on upstream producers with the origin information conveyed to consumers, we also consider relevant the fact that the COOL measure exempts from its labelling requirements muscle cuts of beef and pork that are "ingredient[s] in a processed food item", or are sold in a "food service establishment" or in an establishment that is not a "retailer". As noted above, upstream producers do not, and likely could not, distinguish between livestock that will be used to produce a product exempt from the labelling requirements, and livestock that will be used to produce covered commodities that must be labelled when sold at retail. This is because "the ultimate disposition of a meat product is often not known at any particular stage of the production chain". This means that, generally speaking, information regarding the origin of all livestock will have to be identified, tracked, and transmitted through the chain of production by upstream producers in accordance with the recordkeeping and verification requirements of the COOL measure, even though "a considerable proportion" of the beef and pork derived from that livestock will ultimately be exempt from the COOL requirements and therefore carry no COOL label at all.

...

346. Taking account of the overall architecture of the COOL measure and the way in which it operates and is applied, we consider the detail and accuracy of the origin information that upstream producers are required to track and transmit to be significantly greater than the origin information that retailers of muscle cuts of beef and pork are required to convey to their customers. That is, the labels prescribed by the COOL measure reflect origin information in significantly less detail than the information regarding the countries in which the livestock were born, raised, and slaughtered, which upstream producers and processors are required to be able to identify in their records and transmit to their customers. Furthermore, upstream producers will be subject to the COOL measure's recordkeeping and verification requirements even when the meat derived from their animals is ultimately exempt from the labelling requirements of the COOL measure, for example, due to the type of establishment in which the meat is sold. Lastly, a processor's decision to use livestock of different origins rather than exclusively US origin livestock will not only be more costly, it will also lead to confusing information being conveyed to consumers.

347. For all of these reasons, the informational requirements imposed on upstream producers under the COOL measure are disproportionate as compared to the level of information communicated to consumers through the mandatory retail labels. That is, a large amount of information is tracked and transmitted by upstream producers for purposes of providing consumers with information on origin, but only a small amount of this information is actually communicated to consumers in an understandable manner, if it is communicated at all. Yet, nothing in the Panel's findings or on the Panel record explains or supplies a rational basis for this disconnect. Therefore, we consider the manner in which the COOL measure seeks to provide information to consumers on origin, through the regulatory distinctions described above, to be arbitrary, and the disproportionate burden imposed on upstream producers and processors to be unjustifiable. 

Here, it seems to me, the Appellate Body is doing something quite different.  Instead of thinking about the design and operation of the measure as it relates to imported and domestic products, it looks at the reasonableness of the measure itself, focusing on the proportionality of the information collected in relation to the information passed on to consumers.

As noted, the Chile - Alcohol analysis was done under GATT Article III:2, second sentence; the COOL analysis was under TBT Article 2.1. But let's put aside where you might do this kind of analysis (this provision or that provision; obligation vs. exception), and just think about what the analysis should look like.

To me, the Chile - Alcohol approach seems closely tied to the idea of nationality-based discrimination, as it looks deep into the measure and tries to determine, objectively of course, its intent. In that case, it seems pretty clear that the intent was protectionism: The higher tax rate appears to target imports.

By contrast, in the excerpted passage from COOL, the nationality issues are not there, at least not as clearly.  It seems more like an identification of arbitrariness in the measure:  Not all the information that is collected is made use of in the labelling.  This may be true, but it's not clear how that ties into the broader issue of discrimination.

Now, there is more to the reasoning in both cases, but I'm just trying to highlight certain parts, to illustrate what I see as particularly helpful analysis.  Broadly speaking with regard to discrimination, as long as the right kind of analysis will be done somewhere, I'm not too concerned about the scope of these rules being overbroad.  But I worry that this will not always happen when applying the exceptions, and that we will get distracted with arbitrary aspects of a measure, rather than trying to look at whether the measure's intent was protectionist or not. 

Regulating "Healthy" Cigarettes

From The Economist:

TOBACCO companies specialise in contradiction. They herald the decline of smoking among youngsters, for example, then flaunt their sales to callow puffers. The most skilled contortionist in the industry may be Philip Morris International, the world’s biggest tobacco firm. To date, any good news for shareholders has been bad news for lungs. But the firm now says it wants to improve profits and health alike.

It may seem an odd goal for a company that last year sold 850 billion cigarettes. But it boss, André Calantzoupolos, insists Philip Morris is on the verge of a revolution. He touts “reduced-risk products”: on April 19th the firm said its top offering in this category, iQOS, accounted for one in 30 cigarette sales in Tokyo, a test market.

The new product resembles a pen. A user inserts a cigarette-lookalike called a HeatStick; iQOS then warms the stick’s tobacco, but doesn’t burn it. That produces an aerosol that carries a traditional cigarette’s taste but, the company hopes, eliminates much of the nasty stuff that comes with combustion. “For the first time in history,” Mr Calantzoupolos declared recently, “we have products with the real potential to both accelerate harm reduction and grow our business.”

...

Philip Morris says that early evidence is promising. It reports that the vapour created by iQOS contains just one-tenth as much “harmful or potentially harmful” chemicals as a standard cigarette.

...

Sales could rise even further if Philip Morris can sway health officials. The company will soon ask American regulators to designate iQOS as a “modified risk tobacco product”. Such a title would let the firm’s partner in America, Altria, hawk iQOS’s claimed lower risks. ...

So if the evidence shows that this tobacco product is one-tenth as harmful as traditional products, should regulators allow for the marketing of the product to indicate that?  If not, will the producer have some credible legal claims it can bring?  If so, will its competitors have claims they can bring?  

And will this issue be litigated in the trade and investment world?  How will the tobacco carveout from the TPP apply here?  (If the TPP ever comes into force, that is).  If U.S. regulators allow this product to be marketed as having a lower risk, could other foreign companies who are investors in the U.S. market challenge this?  Or would the carveout prevent such a claim?

Section 337 Case on "Unfair and Illegal Practices Affecting Steel Sector"

This is a bold new case against steel imports:

USW Strongly Supports U.S. Steel’s Trade Case to Sanction Chinese Unfair and Illegal Practices Affecting Steel Sector: Bold Action is Absolutely Necessary

United Steelworkers (USW) International President Leo W. Gerard issued the following statement today in support of a new petition filed by United States Steel Corporation (U.S. Steel) under Section 337 of the Tariff Act of 1930. The petition was filed at the U.S. International Trade Commission (ITC) seeking relief from China’s unfair and illegal practices in the steel sector.

“America’s steel sector is under attack by China. Repeated illegal and predatory trade practices have devastated production and employment in steel and many others sectors. Last week, China made clear at the OECD steel meetings that it has no intention of cooperating with other countries to help manage the problems caused by overcapacity in the steel sector. As China pushed its chair away from the negotiating table, new data was released highlighting its steel shipments reaching a new record. China’s steel exports continue to swamp the world, jeopardizing the very survival of free markets.

“Today the USW stands with U.S. Steel in its effort to put a stop to China’s illegal and predatory acts targeting our country’s steel sector. The approach the company is taking is bold, but necessary. The USW has joined with the company on many antidumping and countervailing duty cases. U.S. Steel is now utilizing a provision of the law that has primarily been used to combat intellectual property rights violations. But the underlying law also provides broad authority to stop the kind of actions China is utilizing. When implemented, it will prohibit imports altogether from entering our market.

“China has made clear that it wants to reap the benefits of trade without abiding by the rules it agreed to follow. Repeatedly China has broken the rules – often with no response. This effort is adding a new arrow in the quiver to attack their actions. We will continue to do whatever it takes to ensure that America’s steel producers and workers can continue to support our national and economic security.

"In recent months, more than 13,500 steelworkers have received layoff notices. Facilities are being shuttered, some never again to resume production. Families are being devastated and communities are suffering as their tax bases decline.

“The case clearly lays out the array of actions China has taken to steal market share and jobs, including conspiring on pricing among producers; creating elaborate evasion schemes to make enforcement difficult; and using state-sponsored hackers to steal trade secrets and proprietary technologies. These technologies are vital to the production of lighter and stronger materials used in the auto sector, the single largest consumer of steel in the United States.

“In addition, U.S. Steel production is being undermined by the support and coordination of the activities of Chinese state-owned firms under its Five Year Plans and associated policies to dominate world steel production, while decimating competitors.

“The American people are sick and tired of business-as-usual trade policies. This case launches a new effort to restore stability to our steel sector and allow free market principles, not communist party goals, to guide our economy.”

So let's say the U.S. industry wins the case, and gets an import prohibition on Chinese steel. Presumably China will have an easy time proving a GATT Article XI:1 violation. Does the U.S. then defend the measure under GATT Article XX(d), as "necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement"? What are its chances of success?

And does China use this as an excuse to challenge Section 337 as such?

Guest Post: Treaty Interpretation Issues in Mesa v. Canada

This is a guest post from Mona Pinchis on the Mesa v. Canada NAFTA Chapter 11 decision

On March 24, 2016, a decision was rendered in the Mesa Power Group LLC v Canada dispute. The Government of Canada released the decision a few days ago, including a concurring and dissenting opinion of The Honourable Judge Charles N Brower (the claimant’s nominee).  In this opinion, Judge Brower dissented from the majority on its conclusions regarding Articles 1105 and 1108(7)(a) and (8)(b) of NAFTA.

In this post, I want to focus on a passage from Judge Brower’s opinion regarding the Chapter 11 tribunal’s interpretive approach to reflect on the tension between treaty parties and tribunals when interpreting treaty provisions.

In brief, the claimant alleged that Ontario (and hence Canada) had failed to meet its obligations established in NAFTA Articles 1102 (national treatment), 1103 (most-favoured-nation treatment) and 1106 (performance requirements) in its implementation of the Feed-in Tariff (FIT program). According to Canada, the FIT program was a procurement process designed by a NAFTA Party and implemented by a state enterprise. However, NAFTA Articles 1102, 1103, and 1106 did not apply to the claimant’s investment because the FIT program fell under NAFTA Articles 1108(7)(a) and 1108(8)(b).

NAFTA Articles 1108(7)(a) and (8)(b) provide:

7. Articles 1102, 1103 and 1107 do not apply to:

(a) procurement by a Party or a state enterprise; or […].

8. The provisions of:

(b) Article 1106(1)(b), (c), (f) and (g), and (3)(a) and (b) do not apply to procurement by a Party or a state enterprise; […].

Thus, the question became whether the FIT program was a ‘procurement by a Party or a state enterprise.’ Canada, supported by the other NAFTA parties, presented a broad assessment of the term ‘procurement’. The majority examined the ordinary meaning and context, as well as the object and purpose and followed the NAFTA parties’ interpretation, noting that ‘[a]ll three NAFTA Parties appear to support the broad notion of procurement’. (Award, para 410).

Judge Brower dissented from the majority on the basis that Articles 1108(7)(a) and 1108(b)(b) together immunize ‘procurement by a Party or a state enterprise’ – and not just ‘procurement’ alone. In addition to his assessment as to the ‘ordinary meaning’ of that phrase, Judge Brower reflected on the majority’s acceptance of the NAFTA parties’ interpretation. In doing so, Judge Brower engaged in a discussion about what are appropriate interpretive approaches under the Vienna Convention on the Law of Treaties (VCLT). Judge Brower explained that the interpretation of the relevant NAFTA provisions should not be ‘materially influenced by’ the Chapter 11 tribunal’s perception that ‘all three NAFTA parties appear to support’ a particular interpretation. (Judge Brower’s opinion, para. 30). It is worthwhile to quote the remainder of Judge Brower’s opinion in full:

I have never experienced a case in which the other Party or Parties to a treaty subject to interpretation, appearing in a non-disputing capacity, have ever differed from the interpretation being advanced by the respondent State. Inevitably, they club together. Moreover, the interpretation given by a State Party in actual litigation cannot be regarded as an authentic interpretation. In the end (Article 2001(2)(c)), only three Ministers of the States Party to NAFTA, convened as the Free Trade Commission, can “resolve disputes that may arise regarding [NAFTA’s] interpretation or application.” That does not mean that the Tribunal is in any way barred from interpreting NAFTA. To the contrary. It does suggest at least, however, that caution should be exercised, if not skepticism, when confronted by that with which the Tribunal is dealing in the Award’s paragraph 410.

Pursuant to Article 31(3) VCLT, the treaty parties’ subsequent agreement and practice shall be taken into account in interpretation, recognizing the ongoing role of the parties in interpreting their treaties. Article 31(3) does not clarify what constitutes subsequent agreement or practice. There are several ways treaty parties may reach agreement on the interpretation of a provision after the conclusion of the treaty. One possible example of subsequent agreement and practice is non-disputing party interventions, where a treaty party makes submissions on the treaty’s interpretation and application, such as the process set out in NAFTA Article 1128. The danger in relying on the the treaty parties’ interpretations, as raised by Judge Brower, is that these interpretations are offered in the context of litigation. This means that the other NAFTA Parties are more likely to identify with the respondent State than with the claimant. This is because the NAFTA parties have a vested interest in trying to present a uniform interpretation of the treaty; presumably each party could face a similar issue in a future dispute as respondent.

At the same time, other scholars have observed that state submissions may be a ‘potentially importance source of practice’ and that ‘they may evidence agreement.’ In Canadian Cattlemen for Fair Trade v United States, the Chapter 11 tribunal agreed with the respondent that the ‘formal process of interpretation under Article 1131(2) is not the only means available to the NAFTA Parties of reaching a “subsequent agreement”. (Award on Jurisdiction, para 185). The Cattlemen tribunal then found that Mexico’s Article 1128 submissions in that arbitration and Canada’s statements in its counter-memorial in the SD Myers v Canada dispute constituted “subsequent practice” under Article 31(3) of the VCLT. (para 186).

Returning to Judge Brower’s opinion, to my knowledge, there have been two NAFTA cases where a non-disputing party endorsed the position of the claimant. In Metalclad Corporation v Mexico, the United States endorsed the claimant’s view that the actions of local governments, including municipalities, were subject to the NAFTA standards. (Metalclad Corporation v United Mexican States, Submission of the Government of the United States (ICSID Case No. ARB(AF)/97/1, 9 November 1999, paras 3-8). Similarly, in Marvin Feldman v Mexico, the United States submitted a view that benefitted the claimant’s claim that under NAFTA 1117(1), the NAFTA did not bar a claim against Mexico under Chapter 11 by a natural person who was both a citizen of the United States and a permanent resident of Mexico (Marvin Roy Feldman v United Mexican States, Submission of the United States of America on Preliminary Issues (ICSID Case No, ARB(AF)/99/1, 6 October 2000, paras. 2-12). These cases emerged from Professor Kaufmann-Kohler’s ‘Non-Disputing State Submissions in Investment Arbitration: Resurgence of Diplomatic Protection’, which provides detailed information as to when a non-disputing State endorses the position of the claimant (data up to date as of 31 March 2011). I am not aware of any detailed studies which demonstrate whether States are inconsistent in their statements on interpretation through non-disputing party submissions or pleadings. [H/T to Lise Johnson who pointed out to me that under the US-Peru FTA, the US recently weighed in on the side of the claimant.]

In addition to the methods discussed above, one option, which I believe is becoming more popular, is opting to draft focused, more detailed treaties (and moving away from ‘constructive ambiguity’ or an ‘incomplete contract’ view of treaty-making). This approach can be seen in the detail provided in CETA Article 8.10 (Treatment of investors and of covered investments). In the CETA Investment Chapter, ‘for greater certainty’ is used nine times. In the TPP Investment Chapter the words ‘for greater certainty’ is used thirteen times and ‘for the avoidance of doubt’ is used three times.

The NAFTA parties have a history of being concerned with the way the NAFTA is interpreted. As the line between interpretation and amendment is blurry, I am not too surprised that Canada has tried to improve its investment treaties, and I leave it to the blog’s readers to determine whether this effort likely is (at least a part of) the reason why it accepted the EU’s investment court proposal. It’s too early to see the future for CETA. However, it will be interesting to see whether an investment court would help States find their ‘voice’ in investment disputes, or lose it altogether.

For full disclosure, I worked at Appleton & Associates early on in the Mesa Power dispute.

 

Foreign Investment Opportunities for Marijuana

From the Washington Post:

The Canadian government announced Wednesday that it will introduce legislation next year to decriminalize and legalize the sale of marijuana, making Canada the first G7 country to permit widespread use of the substance.

Some Canadians are ready to make money off this:

Already, Ontario’s provincial premier, Kathleen Wynne, has volunteered that the provincially owned liquor monopoly would be happy to sell the drug. Canada’s major drugstore chains have said that they would like to get in on the business, too.

Some Americans are as well:

Brendan Kennedy, president of Privateer Holdings of Seattle, welcomed the Canadian announcement. His company owns Tilray, a medicinal marijuana facility in British Columbia, and he is looking to build a facility that would supply the market for recreational marijuana in Canada.

How will the Canadian legislation and regulations treat foreign investors such as this one? If the treatment discriminates based on nationality, or falls below a certain minimum standard, there is always NAFTA (and maybe the TPP) to come to the investor's rescue.

Trade will be more complicated. Could Colorado's marijuana companies export products like these to Canada? Maybe, but I haven't heard any suggestions that someone might be interested in doing this.

Hillary Clinton on ISDS

Todd Tucker picks apart Hillary Clinton's recent statements on ISDS ("With respect to the flawed ISDS provisions in TPP – which I even wrote about in my book – I think we need to have a new paradigm for trade agreements that doesn’t give special rights to corporations that workers and NGOs don’t get"), and then says this:

... unless Sanders can pull off double digit margins of victory there and in remaining states like California, Clinton is on track to win the Democratic nomination.

If she does, might we see investor-state dispute settlement morph into everybody-state dispute settlement? In other words, will human rights groups and non-investing individuals get new transnational legal forums to advance their interests? This could turn ISDS into something more resembling a cross-regional European Court of Human Rights, which allows suits by investors and non-investors over violations of property rights and broader human rights. There would be a lot of specifics to iron out, including what rights of non-investors get protected, and how exactly they can go about launching cases.

My guess is that broadening international law in this way would not play very well in the U.S. (or anywhere else) right now (or in the foreseeable future), and she doesn't have this in mind. Rather, she was trying for vague and mushy language that could allow for minor tweaks which could justify supporting a "reformed" TPP some time in the future.

Tobacco Regulation in India

First, there is the issue of health warnings:

India's health ministry has ordered government agencies to enforce a new rule for bigger health warnings on cigarette packs, stepping up a fight against the country's $10 billion cigarette industry that has shut down its factories in protest.

The health ministry's action highlights a growing conflict between the tobacco industry and the federal government which wants manufacturers to cover 85 percent of a cigarette pack's surface in health warnings, up from 20 percent.

India's biggest cigarette maker ITC Ltd, part-owned by British American Tobacco, has not implemented the government order, saying it contradicts a parliamentary committee's recommendation for warnings to cover half a cigarette pack.

And now there is a ban on chewing tobacco:

The Delhi government ordered the prohibition of the sale, purchase and possession of all forms of chewable tobacco, saying violators can be imprisoned for up to six months and fined up to 300,000 rupees.

Chewable tobacco products reportedly cause 90 per cent of all mouth cancers in India. Tobacco manufacturers won a court stay against earlier bans, but public awareness about the risks has grown and the New Delhi government has vowed to enforce the new ban, which was welcomed by health activists and doctors after it was announced last week.

The tobacco leaves are typically mixed with lime and betel nut, a mild natural stimulant that produces a bright red juice and has been used for centuries across the South Asian continent. Indians place the concoction inside their mouths for an extended period, increasing their oral cancer risk. Tobacco bits, perfumed betel nut powder and flavoring are sold in small plastic pouches, making it easy to carry and consume.

Presumably these actions will give rise to litigation somewhere; it remains to be seen if it is through international economic law agreements.

President Obama on Individuals Suing Foreign Governments

Here's something President Obama just said:

“If we open up the possibility that individuals and the United States can routinely start suing over governments, then we are also opening up the United States to being continually sued by individuals in other countries.”

Although having watched the video myself, I think he really said this:

“If we open up the possibility that individuals in the United States can routinely start suing other governments, then we are also opening up the United States to being continually sued by individuals in other countries.”

That kind of sounds like it could be a critique of ISDS. But actually, it relates to legislation that would allow victims of the 9/11 terrorist attacks to sue Saudi Arabia’s government.

Understanding Bernie:The New Politics of Expression (and the trade policy fallout)

What is the source of Bernie Sanders' ability to raise tens of millions of dollars, bring out to rallies supporters in the tens of thousands, and run neck-and-neck in national polls,having been an unknown but months ago?  To understand the consequences of the current political environment in the US for trade-and many other things-it is urgent to answer this question.  One typical response is to invoke Sanders as a diabolical demagogue, able to lure throngs of deluded, idealistic young people who, as Hillary Clinton would have it, didn't do their research.  Allegedly, Sanders has convinced them to shell out and turn out by promising to do the impossible, a magical solution to all of America's, or at least that generation's, problems. 

This view, is I believe, fundamentally misguided. As a professor, and a denizen of a huge student community-the neighborhood that encompasses  New York York University, the New School and other institutions-I can vouch that the young people in question are realists.  Their experiences of life and politics are not those of bourgeois revolutionary dreamers.  Few think that, either by presidential authority or sheer force of will, Sanders can directly achieve the central goals of his policy platform.  The basic reason they are funding him, marching with him, and working for him, is that they are practicing what I call the new politics of expression.  They have found someone who expresses their values, their anxieties, their hopes (on better days) and who is able to broadcast it day and night across the nation and the world, through a megaphone.

That millions would pay a price to have their political views and values expressed in this way by leader, with little attention to the real world chances of getting results, is a phenomenon that deserves close attention.  This is a a decidedly non-Marxist concept of revolution.  Like Marxism itself, the mainstream social sciences are dominated by instrumental and materialist accounts of social, economic and political behavior.  Religion and ideology factor into the analysis primarily as forms of illusion or means by which people can be manipulated.  Democratic politics has been built on the idea that people usually care most about their private interests, and that mobilizing individuals to come out, work on campaigns, and even to vote is a huge chore.  Thus political parties must be able to give rewards-offices, handouts like subsidies, whatever-to those who devote significant amounts time and effort to making all this happen.  This is why the creation of new, non-mainstream political parties has been very difficult-their candidates are unlikely to take power in the short term at least in any great number and therefore will not be in much of a position to hand out rewards. The 99% of those contributing to or volunteering in Bernie Sanders campaign have no expectation of rewards (at least not in this life) not even a celebrity handshake or autograph.  The valuable good they receive is expression itself. The Sanders campaign is full of evocative imagery and words.  The bird landing on the podium; the shots of Bernie from the back facing the huge crowd, the tee-shirts and button of multiple sizes, shapes, designs, messages.  What a huge contrast to the clipped and corporate look of the Hillary effort. Bernie even inspired a whole exhibition of art, which closed tonight in New York's Bowery.

The politics of expression is not new-indeed, it is very familiar international trade law experts: the campaigns to save dolphins, end the cruelty of the seal hunt, stop trade in goods made with child or slave labor: these have been powerful and disruptive forces, driven by of course a wish or desire to reduce the suffering and injustice in question, but above all, to express it in some forceful way.  Trade experts typically have talked down to the activists, using instrumentalist arguments suggesting that these campaigns are not likely to achieve the real world effects intended, certainly not to move the planet to a significantly better place overall.  I am not surprised at the zero impact of this strategy of talking down. As the success of the public morals argument to defend a ban on seal products at the WTO illustrates, this once vanguard organization of economic globalization has itself had to yield to the legitimacy of the (non-instrumental) politics of expression.    While a slew of empirical studies on the effects of the boycott movement on the end of Apartheid in South Africa suggest few real world impacts, this movement is nevertheless regarded as a model for the anti-Israel BDS movement and also the fossil fuels divestment movement.Again the power of these movements is the extent to which they reflect the power of  the politics of expression-its practitioners derive a large enough good from the expressive value of participation despite considerable uncertainty as to whether, when and to what extent the movement will achieve its real world ends. 

The ascendancy of the politics of expression is greatly bolstered by other related trends.  Many of the young people who participate in it are secular or have moved far away from traditional religious values.  They are quite hardheaded and have few illusions (some would wrongly say few ideals) about matters such as sex and money. Yet the longing for the righteous city, and the idea that a cause deserves support even if faith alone underpins the notion that it will triumph, do not simply disappear with traditional forms of reverence and moralism. These are part of human moral economy, and so they morph or go underground and then resurface in new ways. Second and related to another notion with ancient ethical and religious origins-"the truth shall set you free"-is a rise in the intrinsic value placed on all forms of truth-telling.  As Ruti Teitel has shown in her scholarship on transitional justice, the demand for truth commissions has spilled over into situations with little if anything to do with the kind of political transition or regime change that characterized their origins in places like South Africa.  Instead of truth and reconciliation, truth telling in itself is valued-the exposure of injustices and oppression is worthwhile and cathartic even if the solutions for repair seem controversial and distant.  For many Sanders supporters, Bernie tells it like it is, dispensing with the normal lies and dissimulation of mainstream politicians and this is a good in itself  and  perhaps a necessary stage in the transformation of politics even if the actual blueprint for systemic reform, and how it will be realized, seem unclear and distant. To my mind, this political outlook was early and perhaps best captured in Vaclav Havel's book, Living in Truth. The logic is outlined in the most famous essay of that volume, "The Power of the Powerless": "By breaking the rules of the game, [the citizen living within the truth] has disrupted the game as such. He has exposed it as a mere game. He has shattered the world of appearances, the fundamental pillar of the system. He has upset the power structure by tearing apart what holds it together. He has demonstrated that living a lie is living a lie. He has broken through the exalted facade of the system and exposed the real, base foundations of power. He has said that the emperor is naked. And because the emperor is in fact naked, something extremely dangerous has happened."   The politics of expression is in many ways the politics of living in truth: Snowden, the Panama Papers, Anonymous etc. are at its center not its periphery (Consider the title and concept of the on-line publication, The Intercept). In vain do Sanders' enemies whine that his supporters care about the release of Hillary Clinton's Wall Street speeches but have little interest in Sanders' own tax returns.  Whatever personal foibles the tax returns might disclose are irrelevant, but the highly-paid Goldman Sachs speeches have the potential to disclose what is suspected as part of the lie of the system. As early as the failure of the Multilateral Agreement on Investment in the 1990s we had an indication of the power of the demand for truth, for transparency and openness. The very negotiation in secret of the TPP and TTIP is likely to spell their doom, whatever arguments there are about the substance. The courage to defy the system, and the ability to convey the message, and unite others with one's voice, are more important than the personal purity of the leader-Havel himself, Mandela too, had (at times) quite chaotic private lives.       

Until recently, the politics of expression has remained largely what Havel called "anti-political politics"; while convinced of the lie of the system, its practitioners would focus on a single issue or cause at a time: the seal hunt, GMO foods, the Keystone pipeline, often with a largely "anti-" agenda of stopping something or, true to the expressive core, if not stopping it showing powerful resistance.  This often led to the politics of expression being criticized as irresponsible, imposing unreasonable demands on real-world democratic politicians who must balance and trade off daily many constituencies, interests and worthy goals.  As the example of of Havel illustrates, one of the deepest roots of the politics of expression is to be found in dissent or resistance in contexts where changing the system is widely viewed as impossible in the short or even medium term.  This is why the "establishment" media is so wrong to understand the Sanders attraction as based on magical revolutionary thinking; rather it is much more "hope against all hope", yet again a Biblical formula, said by a New Testament figure of an Old Testament one.   But the dismissal of Sanders as a "one issue" candidate has blinded many commentators to what Sanders has really done in transforming the politics of expression:  he has put together a wide-ranging, positive political program that has broken this kind of politics from the "anti-political" model.  And he has shown how the politics of expression is compatible with the scale of fund-raising and organization needed to to compete for high public office, despite a system that purports to exclude challenges to itself through a toxic relationship between politics and money.   As noted above, he has found a way out of the vicious circle that a new political party or movement cannot provide plausibly the material rewards expected of those who make sacrifices for political participation, and therefore the system closes challenges to its own ways.This way out is what is most dangerous and destabilizing to the system, because it is not dependent on Sanders' personal appeal; if expression is a political good people will pay for, and on-line donating, phone banking etc. makes it easy, then the same model can be used by others, as it is already for instance to some degree by Sanders-supporting Congressional hopeful Zephyr Teachout. 

But can it be that there are so many in America who feel so alienated and badly done by that they think the "system", comprising the major institutions of democracy and capitalism, is fundamentally rigged, or lacks even basic justice and decency?  Contemporary America is hardly Communist Czechoslovakia or Apartheid-era South Africa. Yet it was Tocqueville, that unique blend of Catholic aristocrat and liberal political reformer, who already saw the danger of a kind of soft tyranny in democratic societies, where the ordinary individual feels powerless and alienated from any kind of active shaping of the whole.  Tocqueville also grasped that Americans, who appeared to his European confreres as drearily practical and pragmatic, would not settle for materialism, or cynicism; that was a streak from non-conformist religion that would forever play a role in otherwise hard-headed real-world economic and political life in America, depending on one's point of view either a destabilizing role or a check on free fall into decadence.                           

But the velocity of the Sanders movement owes much to the good luck of having the foil of a perfect adversary-one who embodies many of the features of the system being challenged, especially the connections to big money and (in their eyes) a corrupt establishment suppressing alternative forms of political life and expression.If there is any candidate poorly equipped to handle this sort of challenge it is Hillary Clinton.  Her campaign lacks any real message, the slogans "I'm with her" and "She's for us" almost announce with a loudspeaker the politics of clientism.  What can set off more starkly the moral superiority of an alternative politics of expression? Indeed, saying to every relevant constituency what they want to hear cheapens the value of expression to close to zero, or perhaps even negative-whereas for the practitioners of this kind of politics of expression is a highly valuable political good in itself.  It just requires "authenticity" to have that value.

Not everybody in the electorate likes the politics of expression or identifies with it, to be sure.   People who have worked hard within the system to grab their little morsel of progressive change, or some kind of access to power, really resent those who believe that a $27 contribution, wearing a button and attending a rally gives them a serious claim to pursue more transformative kinds of political change.  Also, while expression need not be a luxury good, and Sanders has done well by underlying this and pursuing small donations, those who are so poor and overburdened in daily life that they cannot afford what seems like even a modest price to college students aren't likely to have a big place in the politics of expression, even if the movement wants most of all to break down the systemic barriers that produce their plight.  People with day-to-day dependency on existing governmental programs know better than anyone the inadequacies but are understandably prone to fear that a sweeping agenda of creating something new or better could backfire, threatening what they already have, and could not live without.  This is a constituency to which Hillary Clinton has been able to appeal, by, for example, presenting Sanders as wanting to tear up the Affordable Care Act, rather than transition to a more adequate, comprehensive and just system.              

One of the easiest areas on which to make concessions to the politics of expression is on trade policy because major redistributive programs don't have to be changed.  Bill Clinton spoke to labor and environmental standards for trade agreements, and demanded transparency in the WTO.  He was a free trader but grasped the politics of expression as they were emerging at the time.  Bill Clinton though was sincere, and perceived to be at least for a time (I'm told he was indeed genuinely committed to the agenda of transparency and inclusiveness in the WTO, though on environment and labor very prepared to accept window-dressing)     Hillary Clinton's opposition to TPP is perceived as too late, and probably not sincere, and thus of little value as a compromise with the politics of expression.

If Sanders is nominated, his movement will be confronted almost immediately with the challenge of political responsibility. An enormous potential threat to America's basic political and economic institutions will be channeled into the tall task of designing a workable reform agenda.  The effort will go into the old fashioned approach of reworking taxes and regulations not carrying out angry vendettas against Wall Street bankers.  Most in the movement will compromise-some will take the path of a Yannis Varoufakis, break off and remain faithful to the original posture of the politics of expression, the "anti-political politics" of resistance, disturbance and dissent.  

But what if the establishment does manage, in the coming weeks and months, to crush Sanders?

Look at his numbers, at the demographics.  He leads a large majority of younger people who seem to believe that America's basic institutions are rotten and corrupt to the core.  Having demonstrably been able to raise multiple millions and pack rallies, is it likely that he is going to go back in his hole as it were, an eccentric US senator whose specialty is roll-call amendments?  Hardly, He and his supporters are already building a powerful narrative of voter suppression, rigged primary rules, and egregious violations of campaign finance rules that they think favor "establishment" candidates already, even to the point of corruption.  Defeating Sanders will give him the status of Socrates or Jesus, maybe a combination of both, among the ascendant generation.  What will be the impacts on major corporations and banks, which need these people as faithful consumers and even more trusted employees?  Using the financing and organizing techniques of the Sanders campaign, the practitioners of the politics of expression will disrupt elections, fielding ant-establishment candidates in Congressional districts and other political fora, armed with war chests funded by a national movement.Sometimes they will lose, and sometimes they will win.    They will force pension funds and related institutions not to invest on Wall Street and they will break up the big banks by refusing to use them for their own personal needs, cutting them down to size.  If you think this is exaggerated just look again at Sanders' numbers, and how they have held or expanded.  

But all of this will remain contained, though very disruptive and challenging-until there is some mega-event, a game changer. A meltdown on Wall Street or of a nuclear reactor, the equivalent  for the left of what 9/11 was for the right.  A that moment a new Sanders will harness all of the negative as well as positive energy of the politics of expression, and possibly sweep to power.  The establishment" call to order will not work, because they will have no fund of trust to draw on; the mainstream media, none of the traditional authority figures, will have the credibility to calm things down. 

The Sanders folks hold meetings 27000 strong without a single incident of violence-the politics of expression inherently values persuasion and protest over any form of non-peaceful disruption (Velvet Revolution, again Havel).  But their are darker forces out there with their own challenges to the system, and a huge negative energy.  The frightening thing is that the ability of such forces to construct a system-shaking mega-event is rising considerably.  Last summer, the trading platform of the New York Stock Exchange went down for some hours-it turned out to be an internal glitch. But the speculation was, immediately, about hackers.  Imagine a collapse that took days and weeks to sort out, paralyzing international not just domestic capital markets.  And these are among the more modest forms of possible chaos-producing events-see the chilling tale told by Harvard Law Professor Gabby Blum and co-author journalist Ben Wittes, The Future of Violence: Robots and Germs,Hackers and Drones-A New Age of Threat.  If I were in the "establishment", and I sort of am in the 1%, I would want Bernie Sanders and his followers on my side, and want the new politics of expression to be tamed by the discipline of real political responsibility.  To those of my fellow Manhattanites who are hoping today to shut him down as a political candidate I would only say: beware what you wish for.                  

Purpose in Non-Discrimination Obligations and Exceptions

In the Argentina - Financial Services Appellate Body report, circulated last Thursday, the Appellate Body has continued its push to keep certain non-discrimination obligations focused on the impact (or effect) of the measure, with any examination of the purpose (or objective or aim or intent) of the measure carried out separately, as part of the exceptions. In this case, the obligations in question were GATS Article II (MFN) and Article XVII (National Treatment).  The Panel had seemed to allow a consideration of purpose to some extent (using the term "regulatory aspects" of the measure). The Appellate Body explicitly rejected that.  A key part of its reasoning was that purpose is best left for the exceptions provisions (see paras. 6.97-127, in particular paras. 6.113-117).

In recent years, the Appellate Body has been fairly consistent in this approach, under both the GATT and the GATS. On the other hand, with TBT Agreement Article 2.1, the Appellate Body has famously allowed the purpose of a measure to be considered (through the "stems exclusively from a legitimate regulatory distinction" element), in large part because the TBT Agreement has no exception provision that can be used in this regard.

So it's all set, right? The issue is settled. Purpose is never going to be considered in a GATT or GATS NT or MFN provision.

Well, I'm not so sure. There is a potential case out there that could undermine what the Appellate Body has been doing recently, and cause it to rethink all this.

Recall that GATT Article III has several provisions. The recent cases have been under Article III:4. But there is also Article III:2, second sentence, which, when you consider other provisions incorporated by reference, includes the "should not be applied to imported or domestic products so as to afford protection to domestic production" element. Based on that phrase, the Appellate Body has been clear that you can take into account the measure's purpose when considering this non-discrimination obligation. As it said in Chile - Alcohol, "a measure's purposes, objectively manifested in the design, architecture and structure of the measure, are intensely pertinent to the task of evaluating whether or not that measure is applied so as to afford protection to domestic production." (Para. 71)

In the Article III:2, second sentence cases that have arisen so far, Article XX was not invoked. But in a future case, it could be, which might force the Appellate Body to think about the Article III - Article XX relationship in that context.  If purpose can be considered under Article III in a case involving Article III:2, second sentence, what would that mean for the consideration of an Article XX defense?

If such a case were to arise, the Appellate Body would have several options:

• First, it could say that Article III:2, second sentence is special, and not like the other Article III provisions, because of its unique language. It thus demands its own approach, and you can take purpose into account for that provision, but not for the other Article III provisions. But there are some problems with that reasoning.  For one thing, the text isn't as different as suggested, and I don't think it's too difficult to justify the consideration of purpose based on the text of other Article III provisions, such as Article III:4. In addition, if you acknowledge that it's fine to look at purpose for Article III:2, second sentence, you undermine the argument that it can't be done in other Article III provisions because of the Article III-XX relationship. As a result, the logic applied to those other provisions, to keep purpose out, collapses.
• A second option for the Appellate Body would be to overturn its clear precedent under Article III:2, second sentence, and say that you can no longer take into account purpose there. That would be bold, because long-standing precedent is rarely overturned so clearly, and the text strongly suggests that purpose should be considered.
• Finally, a third option would be to rethink all of the recent jurisprudence suggesting you cannot look at purpose in the context of certain GATT and GATS non-discrimination obligations. That's a fairly recent development in the case law, without much basis in the text, so changing direction would not be as big a deal.

Sometimes I'm accused of being too subtle, so I'll state my view very clearly: Let's look at purpose as part of all of the non-discrimination obligations!

(And in case you are worried about GATT Article XX and GATS Article XIV being made redundant, keep in mind they will still get plenty of use as exceptions to other obligations). 

Trade & the Democratic Nomination Contest:Why Bernie Sanders is LESS protectionist than Hillary Clinton

On trade, Bernie Sanders is usually portrayed as an arch-protectionist who, like Donald Trump, seeks to trash existing trade agreements and erect new walls against imports. The truth is much more complex.  Of course, Sanders has faulted recent trade agreements, and the normalization of trade relations with China under the WTO, with leaving US workers highly vulnerable to import competition, suffering losses in jobs and income. But his solution to getting jobs and middle-class prosperity back to America is not focused on re-establishing barriers to imports; rather redistribution and rebuilding America's infrastructure are the main tools for enhancing the competitiveness of America and its workers.  Indeed by emphasizing general redistributive programs and investment in infrastructure, and rejecting subsidies and incentives to businesses ("corporate welfare"), Sanders avoids the protectionism of picking winners and giving particular firms and industries a leg up, and here he follows more closely the prescriptions of liberal economics than Hillary Clinton, who is enamored of programs that supposedly serve public goals but do so by handouts to the private sector.    Clinton's trade policy platform emphasizes on the one hand discriminatory and protectionist policies like "domestic sourcing", which-ironically-the United States has been challenging vigorously as violations of WTO rules, and on the other greater enforcement against other countries, presumably including more "fair trade" type remedies such as anti-dumping actions, which she suggests will bring competitiveness and jobs back to the US.  While Sanders is often (and sometimes quite unfairly) criticized for lack of realism in his policies, Clinton's notion that punishing our trading partners with enforcement actions will help US workers is largely a pipe-dream.     

Trade Agreements and American Jobs

Is it protectionist of Sanders to claim that American workers have been seriously hurt by trade agreements? At least since the NAFTA economists have been arguing about the effects of trade agreements on jobs, and some studies have shown serious negative effects. I'm not an economist, and I'm not going to wade into this deeply. An article earlier this month in the Economist provides a reasoned, up-to-date overview of the evidence from a publication that has historically been strongly on the free trade side of things.  What's very clear is that the notion of significant job losses and greater inequality from trade liberalization, particularly following China's entry into the WTO, can't be dismissed any longer as populist rhetoric playing on people's ignorance of how the global economy really works. Many have challenged Sanders' figures as exaggerated, but the preponderance of competent economic analysis suggests that he is identifying and channeling a disturbing reality, not a protectionist myth.  Moreover, as the Economist notes, trade-induced job losses, even where small in number,  are "particularly painful" because of the difficulty for workers of finding new jobs of quality.  Of course, the Economist also sensibly notes that trade alone is not a determinant of the problem, technology, education, and skills matter a lot.  As they write "the economy is now an unwelcoming place for jobseekers without a university degree." It is arguable that Sanders' most important trade policy is making public colleges and universities accessible to all, free of charge.   But we'll get to that.

Is opposing trade agreements like NAFTA or TPP anti-free trade?

In the current election discussions about trade, opponents of post-GATT trade agreements often get tarred with the brush of Donald Trump-like xenophobia. It is worth remembering that these agreements, while admittedly taking further the kind of tariff-cutting begun with the GATT, are not primarily about non-discriminatory free trade. They reflect neo-liberal ideas about optimal economic governance and public policy that have been, rightly challenged, both from the perspective of national sovereignty, but also from a more cosmopolitan point of view (particularly the protection of monopoly rents from intellectual property).  Among the clearest explanations of the difference is to be found in Dani Rodrik's The Globalization Paradox: the "deep integration" to which post-GATT trade agreements seek is not really based in classic free trade theory but a more recent and more questionable (and questioned) economic orthodoxy. In a Guardian oped last year, Sanders displayed an understanding of this difference.  While as always his main focus was on the fate of American workers, his critique of TPP was broader: it included turning a blind eye to slave labor in Malaysia, one of the world's worst offenders, and concerns about the effects of the intellectual property provisions on access to medicines in developing countries. This is not the place to debate the full costs and benefits of the TPP-Clinton opposes it too;the point is simply that one can be against such agreements and it doesn't mean that one stubbornly refuses to see the basic economic logic driving earlier arrangements like the GATT. I should add here that the issues of transparency and inclusiveness that Sanders sometimes raises-that these agreements have largely been negotiated in secret and bear the imprint of particular corporate lobbies in some of their features-are genuine ones (the case of intellectual property being perhaps the most egregious).The Obama Administration offered more transparency in negotiating a sensitive nuclear security deal with Iran than has been the case with recent trade agreements.

What Is to be Done?

In the past, as a legislator, Sanders has called for what might be considered radical, Trump-like solutions, such as the US withdrawing from the WTO.  If one looks carefully at the explanations for these rather wild initiatives, Sanders almost tells you he knows they won't succeed but are intended to focus minds on the problems of these agreements, and to get Americans thinking about an alternative, more progressive trade policy.  If we turn to Sanders' current platform on trade the way forward is very different than a crude repudiation of America's existing international commitments.  While Sanders may attribute the problem of lost jobs to past trade agreements, his answer to keeping jobs in the US is primarily about rebuilding America's infrastructure, and other domestic policies.  To my mind, this is fundamentally sound.  Second, Sanders believes that "trade agreements can be successful"; new agreements on trade should be reoriented from neoliberal pro-corporate agendas to a progressive agenda, and emphasize real labor and environmental standards.  Opportunities to renegotiate existing agreements should also be pursued.  Here Sanders actually tracks the unanswered demands of many developing countries in the now defunct Doha Round, who insisted that a development round should rebalance and rewrite the Uruguay Round deal in a more development friendly way.  Boosters of neoliberal globalization have often presented existing trade agreements as constitutional documents that can't be opened up and revised but can only be extended and supplemented by ever deeper integration in new agreements.  That's nonsense. Imagine trade agreements of the future that put front and center combating climate change (for example limiting fossil fuel subsidies), tackling slave labor and human trafficking, or smuggling in endangered species?  Boosters of neoliberal free trade will tell you all that is not really about trade.  But of course it is just as much or more so as protecting monopoly rents of intellectual property holders or the interests of the financial industry through curbing policy instruments like capital controls.  While Sanders sometimes appear to put in question whether normalized trade relations with China should continue, the emphasis of his platform suggests a new kind of relationship where cooperation on climate, other environmental and labor issues would be linked to our economic relations with China. That of course is bold, but it isn't unrealistic given China's own emerging challenges in these areas, including increasing labor unrest. When the US supported China's WTO membership, it was supporting in part the use of trade negotiations by China's leadership to advance one domestic reform agenda.  Linking trade with some of China's greatest reform challenges today is at least equally sensible.             

 The Best Trade Policy for American Workers is Domestic Policy

The vulnerability and pain that American workers have felt from being exposed to globalization have a lot to do with being exposed without the tools to adjust to a new world of competitiveness.  The best way of keeping our borders open to trade and defeating the xenophobic demagoguery of Donald Trump is to restore the ability and the confidence of American workers to thrive in a changing dynamic world economy. A single-payer health care  system, where health insurance is no longer tied to a job, and above all, making a college diploma the new normal for opening the doors of the labor market, are policies designed to do just that.  Sanders' infrastructure plan will make America a more attractive place to invest, while helping to put the unemployed to work, giving them  a chance to re-skill and and the psychological boost that comes from the dignity of a real job.  To return to the Economist article discussed above, there is no single factor that sets apart American workers who can withstand and thrive on the challenges of globalization than college education.  The numbers are dramatic, indeed astounding.  This is why for me Sander's plan of universal accessibility to public colleges and universities is the best trade policy of any candidate in this election-by far.

The Hillary Clinton Alternative

Now, by way of comparison, we should turn to Hillary Clinton's platform on trade. But first a general observation on how Sanders has been presented in relation to Clinton on global issues.  The typical view, exemplified by this Brookings piece, is that Clinton is an active globalist while Sanders is an isolationist who seeks to separate America from the world.  Not so. In Clinton's platform, foreign policy is essentially covered by "national security." There's little role for global cooperation, except where military or other threats are involved. One notable and laudable exception is women's rights where Clinton does give prominence to the global dimension. As for general human rights, that's tellingly buried under "National Security", as if it were little more than a pretext for US military intervention. On climate, she seems to think that after the Paris deal the international piece has been done, and addressing climate change going forward is just about domestic policies (apart from some cooperation with Canada and Mexico, where Obama has already taken the lead, and bullying China:see below). One searches in vain in Clinton's platform for any general positive statement of the need for global engagement beyond the security context. In Latin America, she sees US partnerships as based upon the countries concerned being committed to "free markets" American style-that's not openness to others, it's old-style US economic imperialism in the region. Instead of cooperating with China on climate issues, which is what Sanders proposes, Clinton sees the US role as disciplinarian,territorial disputes and cyberspace being lumped in with climate as areas where the US needs to keep China in line.   Sanders' platform on "war and peace" emphasizes diplomatic engagement, not unilateralism and isolationism. Whether its terrorism or other issues defined by Clinton as "national security", Sanders stresses the limits of what can be done with guns and jails and importance of a broader focus for global cooperation.

Now let's look at what Clinton has to say specifically about trade and jobs.The platform has 2 main planks: 1) protectionist policies such as "domestic sourcing" and "Buy American"; 2) greatly enhanced enforcement of trade rules against other countries.   While Sanders is often attacked (quite unfairly) for poorly worked out policy ideas, Clinton's championing of "domestic sourcing" as a way of keeping jobs in America could take the prize for that.  There is not a word of explanation of how this policy can overcome the inconvenient reality that "domestic sourcing" is one of the clearest violations of WTO rules (and indeed also other trade agreements like NAFTA).  Indeed, the Obama Administration has been aggressively attacking at the WTO domestic content policies of other countries in the renewable energy area, most recently India; India has already indicated it will respond by challenging existing state-level domestic sourcing rules.  In the circumstances, Clinton's suggestion that ramping up these protectionist policies is a feasible means of saving or re-gaining jobs in the US appears utterly unrealistic.  

What about enforcement of existing trade rules against other countries? Clinton suggests that we triple the number of enforcement officers and create a prosecutor in chief for international trade violations.  This notion is almost comical.  It's a kind of absurd extension of Clinton's military intervention mindset to international trade-if only we have enough firepower targeted at other countries, we will make the rules of the game work for American labor.  Is there any evidence that the US is sub-optimally "enforcing" trade rules now? As for China, in a path-breaking paper that will be published in the Harvard Journal of International Law, Harvard professor Mark Wu shows how the idea that China can be effectively disciplined under WTO rules is a chimera-the non-transparent hard to identify links between government and bureaucratic, and private sector decision-making simply defy the architecture of WTO disciplines that generally depend on being able to clearly identify and trace to a government decision the offending measures.The limits of what the US can and should do on "enforcement" are set by having to play by WTO norms in areas like dumping and countervailing duties, and also concern that aggressive enforcement will result in a strong reaction by the targeted countries, including more challenges to US policies.  Even if we do end up slapping more retaliatory duties on imports, are workers likely to benefit? Corporations can take advantage of these trade barriers to give shareholders a break while all along continuing to outsource and replace workers with technology.

When it comes to jobs policy and general economic policy, Clinton prefers handouts to corporations to general redistributive programs.Almost every idea she has whether about infrastructure or re-training or investment involves "crony capitalism", such as the private/public infrastructure bank that she proposes, and the multiple tax incentives, "rewards", subsidies to firms that she proposes in order to get them to behave in a way that is positive for workers and the economy.  Few of these proposals are worked out in any detail, but if they were ever realized they would likely give our trading partners a field day challenging them under the WTO Subsidies and Countervailing Measures Agreement, or simply countervailing them directly. One of my favorites is a plan to relieve companies from workers' wage demands by providing a 15% tax credit to allow them to pay non-salary amounts to employees based on share profits.In the guise of better compensating workers, Clinton actually proposes to have the taxpayers help companies that are making significant profits contain their labor costs!

But Isn't Bernie A Socialist?

As just indicated, it is Clinton's not Sanders' jobs and industrial policies that most resemble the kind of "state capitalism" that many people associate with negative features of "socialism"-whereas Sanders emphasizes general redistributive programs that provide workers with the tools to compete rather than picking winners and rewarding favorites among firms and industries.   But I close on a historical note.    It isn't widely known but one of the GATT's chief architects was a socialist (some said communist) the French-Russian philosopher Alexandre Kojeve, who was chair of the GATT's legal drafting sub-committee. In the 1950s, Kojeve wrote to his friend Leo Strauss that the battle between socialism and capitalism would be resolved either by socialism reforming itself in a capitalist direction or the capitalists saving themselves from the consequences of their own excesses through adopting some of the socialist ideas. Kojeve saw that while socialism would not be able to adapt, capitalism already was doing so by embracing a social welfare state, wage laws, worker protections etc. that would allow workers to afford to buy the products that they were making, and share in the gains of increased productivity and growth.  Periodically, a dose of social democratic redistribution is needed to save capitalism from itself; this is the kind of socialism that Bernie Sanders offers, one that isn't ideologically triumphalist but offers the possibility of another "New Deal" as the outcome of the suffering and anger that so much of America has felt over the last decade. If Democrats do not take this offer, they are apt to learn that this suffering and anger will find darker, more dangerous outlets, ones truly destructive of openness, tolerance and the other goods that liberals at least since Montesquieu have associated with freer commerce.              

Tuna Compliance Update

A couple weeks ago, I asked this question:

What steps will the U.S. take now to prove its compliance [in Tuna]? Note that Mexico has already proposed suspension of concessions, and the U.S. has objected to the level of suspension, so the matter has been referred to arbitration.  Is the U.S. hoping the arbitrator will look into whether compliance has been achieved?  Or will it request another Article 21.5 panel to examine this issue?

Here's the answer:

On 11 April, the United States submitted a request for a compliance panel under Article 21.5 of the Dispute Settlement Understanding (DSU) to examine measures adopted by the US in March 2016 with a view to bringing itself into conformity with the recommendations and rulings in “US – Tuna II (Mexico)”, DS381.

The compliance panel will determine whether these measures are consistent with the WTO agreements and if they bring the United States into compliance with its obligations under the Technical Barriers to Trade Agreement and the General Agreement on Tariffs and Trade (GATT) 1994. This follows a request filed by Mexico on 10 March 2016 seeking authorization from the Dispute Settlement Body to suspend tariff concessions and other obligations in the goods sector for an amount of USD 472.3 million annually. After the United States objected to the level of suspension of concessions proposed by Mexico, Mexico's request was referred to arbitration under Article 22.6 of the DSU.

I'm assuming it will be the same people serving on the 21.5 compliance panel and the 22.6 arbitration panel. How will they coordinate these processes in terms of timing?

A Daily Double of WTO Complaints

The latest two WTO consultations requests were both filed by Brazil: 

Thailand - Subsidies on Sugar	507	Brazil	Thailand	Apr 04, 2016	Agriculture, SCM
Indonesia - Measures Concerning the Importation of Bovine Meat	506	Brazil	Indonesia	Apr 04, 2016	Agriculture, GATT, Licensing, SPS, TBT

They were filed on the same day, against different respondents, and on different products. That struck me as odd, so I looked up Brazil's history of complaints, and was surprised to see a number of similar instances of multiple, unrelated consultations requests filed within a couple weeks of each other:

European Communities - Customs Classification of Frozen Boneless Chicken Cuts	269	Brazil	European Communities	Oct 11, 2002	GATT
United States - Subsidies on Upland Cotton	267	Brazil	United States	Sep 27, 2002	Agriculture, GATT, SCM
European Communities - Export Subsidies on Sugar	266	Brazil	European Communities	Sep 27, 2002	Agriculture, GATT, SCM

 

Argentina - Definitive Anti-Dumping Duties on Poultry from Brazil	241	Brazil	Argentina	Nov 07, 2001	AD, Customs, GATT
United States - Anti-Dumping Duties on Silicon Metal from Brazil	239	Brazil	United States	Nov 01, 2001	AD

 

United States - US Patents Code	224	Brazil	United States	Jan 31, 2001	GATT, TRIMs, TRIPS
Canada - Export Credits and Loan Guarantees for Regional Aircraft	222	Brazil	Canada	Jan 22, 2001	SCM

 

European Communities - Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil	219	Brazil	European Communities	Dec 21, 2000	AD, GATT
United States - Countervailing Duties on Certain Carbon Steel Products from Brazil	218	Brazil	United States	Dec 21, 2000	SCM
United States - Continued Dumping and Subsidy Offset Act of 2000	217	Australia, Brazil, Chile, European Communities, India, Indonesia, Japan, Korea, Thailand	United States	Dec 21, 2000	AD, GATT, SCM, WTO
Mexico - Provisional Anti-Dumping Measure on Electric Transformers	216	Brazil	Mexico	Dec 20, 2000	AD, GATT

 

European Communities - Measures Affecting Soluble Coffee	209	Brazil	European Communities	Oct 12, 2000	Enabling, GATT
Turkey - Anti-Dumping Duty on Steel and Iron Pipe Fittings	208	Brazil	Turkey	Oct 09, 2000	AD, GATT

 

Canada - Measures Affecting the Export of Civilian Aircraft	71	Brazil	Canada	Mar 10, 1997	SCM
Canada - Measures Affecting the Export of Civilian Aircraft	70	Brazil	Canada	Mar 10, 1997	SCM
European Communities - Measures Affecting Importation of Certain Poultry Products	69	Brazil	European Communities	Feb 24, 1997	GATT, Licensing

I haven't yet checked any other countries to see if there is a similar pattern.

What's the explanation for this? Is it more cost-effective to prepare for multiple claims at the same time? I never noticed this behavior before, but with so many examples, it seems like it might be a conscious decision rather than a random occurrence.

More WTO Cases on Domestic Content Requirements for Solar Energy?

Last time, it was the U.S. challenging India. This time, it may be India challenging the U.S.:

Charging Western nations with adopting double standards in their approach to climate change, Power Minister Piyush Goyal has said India file 16 cases against the US for giving protection to solar panel producers in violation of World Trade Oragnsiation (WTO) norms.

"The US, which is articulating the inconvenient truth, while India is doing convenient action, uses seven times more coal per capita than India. Even on clean energy finance, the developed world has spoken a lot and done zilch," Goyal said on Saturday evening at a lecture here jointly organized by the Mahratta Chamber of Commerce and Pune International Centre.

"I am going to file 16 cases against the US for their violation of the WTO norms. Our international solar alliance rests on this. If a large country like India is subjected to this, then imagine what happens to the country in the underdeveloped world," he said.

...

In the US, there are 16 programmes in different states giving protection to solar panel producers, which are completely in violation of WTO norms, Goyal added.

Could a removal of domestic content requirements related to clean energy be folded into the Environmental Goods Agreement?

Trade Enforcement Advisory Opinions

This is from trade lawyers John Veroneau and Shara Aranoff: 

Congress should expand its use of Section 332 beyond general investigations by enabling the ITC to issue Trade Enforcement Advisory Opinions regarding specific allegations of trade violations. The process would work like this: A qualified U.S. company would file a detailed petition with the Senate Finance Committee and the House Ways & Means Committee requesting the ITC to determine whether a foreign country has violated a trade agreement in a specific way. The committees would review the petition and, upon agreement between the chairs and ranking members, would send the petition to the ITC to determine whether there is a “reasonable basis” to conclude that such a violation occurred. The ITC would review the claim, including providing opportunity for comment by the foreign government and other stakeholders and issue a determination within 120 days. All submitted materials and ITC determinations would be public, and the ITC’s determination would be advisory only, so it would not obligate the administration to initiate an enforcement action against a trading partner. 

Enabling the ITC to issue Trade Enforcement Advisory Opinions would serve several purposes. First, it would provide Congress with an enhanced but still appropriately limited role in trade enforcement. Lawmakers would still not be able to force the administration to undertake enforcement proceedings, but they would be able to petition the ITC to investigate specific allegations of trade violations. Since the ITC is an independent agency that would conduct its proceeding in a transparent manner, any finding of a “reasonable basis” for asserting a trade violation would pressure USTR to take action, even if it is politically damaging to the administration. Furthermore, the ITC’s reputation for neutrality would enhance USTR’s authority to press our trading partners over alleged trade violations.

Second, it would provide U.S. companies with an opportunity to obtain timely and independent assessments of whether there is a credible claim of a trade violation, so that they can make more informed decisions about how to respond to trade problems.

Finally, even if the ITC finds no reasonable basis to support a trade violation claim, such findings will help identify where trade agreements could be strengthened. For instance, if a foreign country denies U.S. companies access to its market in ways that are discriminatory but not in violation of an existing trade obligation, an ITC finding could help identify a hole in the current agreement to be addressed in a future negotiation.

Here's one potential flaw with this approach.  By setting out publicly the basis on which you think a foreign government's measures violate a trade agreement, you give that government extra time to put together a defense in any litigation that results. 

Legitimate Regulation or Disguised Protectionism: Lobster Bans

Clearly, this Swedish ban on certain U.S. lobsters is a legitimate regulation, right?

Oversexed, overfed and over here: that, in a nutshell, is what the Swedes think of the American lobster from Maine, New England. It may be much sought after in restaurants but Sweden does not want the American crustacean to darken EU waters in case it spreads diseases and kills off its smaller cousin.

The Swedish environment ministry on Friday asked the EU to list the Maine lobster as an invasive species and ban the import of the live creatures.

...

“They pose several potential risks for native species, competing for space and resources, they can interbreed with local species and produce hybrid species, which we don’t know will be viable or not,” said Dr Paul Stebbing of the Centre for Environment, Fisheries and Aquaculture science.

The Swedish environment ministry says more than 30 American lobsters have been found along Sweden’s west coast in recent years and that they can carry diseases and parasites that could spread to the European lobster and result in extremely high mortality.

Or is it actually a case of disguised protectionism:

Robert Bayer, executive director of the University of Maine’s Lobster Institute, said there is no scientific basis for Sweden’s proposed ban.

“I think what they’re saying, for the most part, is incorrect,” he said.

Bayer said Swedish officials have expressed concerns about the spread of three diseases: epizootic shell disease, gaffkemia or “red-tail,” and white spot syndrome.

Shell disease, a bacterial infection that causes black lesions on lobsters’ shells and can be fatal, has been shown in scientific studies not to be contagious, he said. In fact, no one has been able to make it spread from one lobster to another under controlled conditions.

Red-tail, a bacteria-caused infectious disease, is no longer present in the American lobster population, Bayer said. “I haven’t seen that for about 10 years, so it’s gone.”

White spot syndrome, a highly lethal and contagious viral infection, does not affect lobsters, he said. Only shrimp can catch white spot syndrome.

...

There is a sentence in the Swedish marine agency’s risk-assessment report that suggests a possible ulterior motive for the proposed ban, according to Annie Tselikis, executive director of the Maine Lobster Dealers’ Association. A ban on American lobster could boost sales of European lobsters.

“Finally, it should be stressed that a ban on live imports would potentially be beneficial in terms of profits and jobs if the commercial fishery of Homarus gammarus (European lobster) is positively affected by the ban,” Tselikis quoted the report as saying.

Trade in Everything: Used Clothing

From The Economist:

GIKOMBA market, just north of Nairobi’s downtown, is a place to buy just about anything. At its entrance, where ragged minibuses push their way through rutted red mud, stalls sell piles of pillows, plastic toys, cutlery and soap. But the most common wares are second-hand clothing. Piles of old T-shirts and jeans; winter jackets, incongruous in the equatorial heat; dresses and leather shoes; all are watched carefully by stallholders. This market is the biggest wholesale centre of the mitumba, or used-clothing, trade in east Africa. The clothes worn by the bulk of Nairobi’s population are sourced here.

Yet if the governments of the East African Community, the regional trade bloc which comprises Kenya, Tanzania, Uganda, Rwanda and Burundi, get their way, all will change. By 2019 the EAC wants to outlaw imports of second-hand clothes. The idea is that ending the trade in old clothes—mostly donated by their former owners in rich countries—will help boost local manufacturing. On March 10th Uhuru Kenyatta, Kenya’s president, met market traders upset by the idea, and defended the need for “Kenyan manufactured apparel”. Yet the ban seems sure to fail.

Mitumba trading is a big employer for Kenyans, most of whom work in the informal labour market. By one estimate, there are 65,000 traders in Gikomba alone. Imports have increased massively over the past two decades. In 2015, according to UN data, Kenya imported about 18,000 tonnes of clothing from Britain alone. Whole-salers buy bundles for anything up to 10,000 shillings (about $100), and sort the contents by type and quality. Retail traders then come and source stock for their own stalls elsewhere in the city, to be sold on to ordinary Kenyans.

Few traders are happy with the idea of a ban. “Just let them dare,” says Elizabeth in front of her stall in a dark corner of Gikomba, piled high with women’s dresses, on being informed of the proposal. “How could they! We will remove our clothes, we will demonstrate in the streets, we will take our children.” Selling clothes is a relatively lucrative activity. A trader can make 1,000 shillings in profit a day in a part of Nairobi where many people get by on a tenth of that. And it is skilled work: traders have to put their own capital at risk, assessing how likely each item is to sell.

This has the feel of the food aid debate, and also more generally the issue of "dumping."  It's clear that there is a domestic interest group that is opposed to any trade barriers here. Are there foreign export interests who are willing to bring a trade complaint?

Legitimate Regulation or Disguised Protectionism: Plastic Bag Bans

Clearly, this French ban on single use plastic bags is a legitimate regulation, right?

As of 1 July this year, the distribution of “single-use plastic bags”, defined as bags thinner than 50 microns (0.05 millimetres), will be banned at shop tills. “And on 1 January 2017 the second stage of the measure will come into operation, with a ban on the use of these bags elsewhere in supermarkets, for weighing fruit and vegetables, at the cheese counter, the butcher or the fishmonger,” said Baptiste Legay, a director in the French Ministry of the Environment’s waste and circular economy department.

...

Officially, the rationale behind the new rules on plastic bags is strictly ecological: to reduce the number of plastic bags that pollute the environment and end up in the oceans by making them compostable. “These new biosourced bags will be compostable at home, which will place France on the right tracks towards a circular economy: what comes from the earth returns to the earth,” said Christophe Xavier Doukhi de Boissoudy, the director-general of Novamont France, a bioproducts company.

Or is it actually a case of disguised protectionism:

But behind this drive for home composting hides another agenda: 90% of the single-use plastic bags currently distributed in France are imported from Asia.

The make-up of the bags that will be permitted, once this decree comes into force, will mean they will start to decompose at around 26°C. In other words, cargoes of biosourced plastic bags from Asia that meet the new French requirements would not arrive unscathed from a journey of several weeks in a sun-heated shipping container.

John Persenda, the owner of Sphère, the European leader in plastic films and bags, could not disguise his pleasure. “We just know our Asian competitors are going to kick up a fuss,” he said.

A Modest Proposal: Trade Related Interests in Gun Rights

This seems like the appropriate day* to unveil a proposal I have for a new WTO agreement on trade and gun rights.  Given what is already covered by WTO rules, I don't see why it should be controversial.

Recall that the TRIPS Agreement protects intellectual property rights, but only the "trade-related aspects" of those rights, according to its title.  Similarly, my agreement is not about gun rights per se.  Rather, it is only the trade-related aspects of those rights.  Clearly, the amount of gun imports and exports would increase if there were stronger rights protections.

The preamble to the TRIPS Agreement says: "Desiring to reduce distortions and impediments to international trade, and taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade."  The equivalent for my trade and gun rights agreement would be something like this:  "Desiring to reduce distortions and impediments to international trade, and taking into account the need to promote effective and adequate protection of gun rights, and to ensure that measures and procedures to enforce gun rights do not themselves become barriers to legitimate trade."  So you can see, my agreement is clearly just about the trade-related aspects of gun rights.  It takes no position on the importance of gun rights themselves.  (Although it should be noted that many people say that intellectual property is not really "property" or a "right," but rather, a "privilege."  By contrast, the right to a gun is one of the core individual rights of the leading rights promoting country in the world.) 

In terms of the substance, I don't think you can get any clearer than what's in the second amendment of the U.S. Constitution:  "A well regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed."  That language could be adopted directly in my agreement.  Or the agreement could just incorporate the second amendment by reference. 

Finally, it's always good to have an acronym that rolls off the tongue.  If we call the agreement, "The Agreement on Trade Related Interests in Gun Rights," that gets us to TRIGR, pronounced just like "trigger" (you know, the part of the gun you pull to make the bullet come out). 

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* Oh, is it April 1? I hadn't noticed!