International Economic Law and Policy Blog

Trump's Commerce Secretary

This is from CNBC:

Wilbur Ross, President-elect Donald Trump's choice for Commerce secretary, told CNBC on Wednesday he wants to overhaul "dumb trade" deals that the U.S. has with countries around the world.

"Believe it or not, Mexico has better treaties with the rest of the world than the United States has. We're going to fix that," Ross said as his nomination was being announced.

"Mexico has 44 treaties with other countries that make it very advantageous to do international shipping from Mexico rather than from the United States," Ross said in a "Squawk Box" interview.

"Protectionism is a pejorative term. It's not really something that's meaningful," he said. "There's trade. There's sensible trade. And there's dumb trade. We've been doing a lot of dumb trade, and that's the part that's going to get fixed."

Ross called the Trans-Pacific Partnership a "horrible deal."

"Everybody talks about tariffs as the first thing. Tariffs are the last thing. Tariffs are part of the negotiation," Ross said. "The real trick is going to be increase American exports. Get rid of some of the tariff and nontariff barriers to American exports."

So Trump's pick for Commerce Secretary doesn't like the TPP, but wants trade deals that get rid of the tariff and non-tariff barriers to U.S. exports.

And he admires Mexico's trade treaties with the rest of the world and thinks those treaties give Mexico an advantage over the U.S.

I'm having a hard time figuring out what all of this means for trade policy under Trump.

If you watch the video at the link, they keep up the Trump trade team's insistence that bilateral trade deals are the way forward.  I'm not sure where they got the idea that bilateral is the better approach.  I can't remember hearing this argument much before Trump came on the scene.  It will be interesting to see what happens when they sit down with the experienced U.S. trade negotiators and begin to talk strategy.

Bitcoin Subsidies

My Cato colleague Jim Harper is a bitcoin expert. He explained bitcoins to me once, and I think I understood it all briefly, but it has now escaped me. But now that international trade rules might be relevant, I may take another look.  Here he is explaining how there may be Chinese government subsidies to bitcoin production, and how trade rules might apply:

Something like dumping is recognizable in the world of bitcoin mining, where the advantages Chinese firms have in chip fabrication link up with access to deeply discounted, government-provided energy to produce an unusually strong mining industry. As a result, China's mining community has a high percentage of the world's hash power, and miners elsewhere, such as KnCMiner in Sweden, have gone bankrupt.

Bitcoin Magazine recently reported that chip maker and miner, Bitmain, is building a major data center complex in the northwest of China to focus on Bitcoin. Its location, Xinjang, is ideal because of its cold, dry climate and "access to government-supported, low cost wind and solar electricity."

The World Trade Organization's Agreement on Subsidies and Countervailing Measures (SCM) details what subsidies are subject to challenge by WTO members and on what terms. Cheap, government-supplied energy is a subsidy. According to the terms of the agreement it is: (i) a financial contribution; (ii) by a government or any public body within the territory of a member; (iii) that confers a benefit.

Subsidies must also be "specific." If a subsidy is widely available, it is presumed not to distort the allocation of resources. But if a government subsidy targets particular companies, sectors of the economy, regions or exports, that subsidy runs afoul of the rules.

China's hydropower glut almost certainly didn't originate to bolster a bitcoin mining industry that wasn't conceivable when the dams were built. But Chinese power subsidizes mining all the same, and it doesn't just cause economic dislocation. It undercuts Bitcoin's security. A blockchain system maintained by entities within a single government's jurisdiction is at greater risk of political manipulation and censorship.

The SCM delineates two types of subsidies: prohibited and actionable. Subsidies designed to directly affect trade and thus adversely affect other WTO members are prohibited. Actionable subsidies are those that may be shown to cause adverse effects to other WTO members. When goods are at issue, subsidies can be challenged either through multilateral dispute settlement, or through countervailing action. Subsidies for services are subject to "consultations," according to WTO rules. The Trade in Services Agreement now being hammered out in Geneva might be expanded to explicitly bar subsidies for digital currency mining, or data processing generally.

As a category buster, bitcoin and other digital currencies can be a poor fit with the traditional rules governing international trade. Anti-dumping law and the SCM apply only to trade in goods. The new bitcoins created with each block are arguably goods, even if they take digital form. The rest of the mining process is best thought of as providing transaction-inclusion services for digital currency users. When new bitcoins are no longer being created, mining will be a pure financial and data processing service.

Bitcoin transactions also don't generally have a "location." This means inclusion of any particular transaction on the Bitcoin blockchain is not easily proven to be a subsidized service to a consumer outside China, and Bitcoin transactions within China are subsidized to the same degree as transactions outside the country. Countervailing measures such as tariffs would be very hard to administer.

On the other hand, given the global trade and large proportion of Bitcoin transactions among users outside of China, bitcoins as goods and mining as transaction-inclusion services are clearly being provided to consumers outside China. These are exports, even though the precise place of purchase or location of service may be ambiguous.

Bitcoin's basis in math makes the case for wrongful subsidies much easier. The power consumption bitcoin mining requires and the hash power available to various mining groups is readily calculable, so it's quite easy to measure the substantial benefits Chinese bitcoin miners enjoy from being given cheap power.

If China were to build transmission lines that delivered energy more evenly across its economy, the argument that it was subsidizing its bitcoin mining industry would evaporate. The Chinese government may have international trade obligations that require it to withdraw the substantial benefit it now confers on its domestic bitcoin mining industry. Technological measures — such as, restraining blocksize limit, or fine tuning to reduce the amount of bandwidth it takes to propagate new blocks — are not the only tools in the Bitcoin community's toolbox.

The Use of Scholarship by the WTO Appellate Body

For all you scholars out there hoping to get cited by the WTO Appellate Body, here is the abstract of an interesting paper by Sondre Torp Helmersen, entitled The Use of Scholarship by the WTO Appellate Body:

This article examines the use of scholarship by the WTO Appellate Body. While it is not possible to say definitively how the Appellate Body views the legal status of scholarship in WTO dispute settlement, its use of scholarship will in practice determine its status. The article identifies three overall trends: the Appellate Body’s use of scholarship has declined, the Appellate Body uses scholarship mostly for matters of general international law (as opposed to WTO law), and the Appellate body has generally been careful in its use of scholarship. Possible explanations for these trends may include an increase in available precedents, the Appellate Body’s specialized role, criticism of the Appellate Body, and its members’ backgrounds.

India, US, and their WTO Dispute on Importation of Certain Agricultural Products

This is from Indian economist Natasha Agarwal:

In a turn of events, on 7^th July 2016, the United States made a request pursuant to Article 22.2 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) seeking authorization from the WTO’s Dispute Settlement Body (DSB) to suspend concessions or other obligations under the covered agreements in the amount of US$450 million in 2016, which will be updated annually.[i] The reason for resorting to retaliation being that the US considers that India has failed to comply with the recommendations and rulings of the DSB in the dispute India-Measures Concerning the Importation of Certain Agricultural Products from the United States (DS430) (India – Agricultural Products).

India has repeatedly argued that its measures conform to DSB’s recommendations and rulings in this dispute. [ii] The US, nevertheless, continues to have concerns on India’s efforts. In a DSB meeting on 26^th October 2016, the US notes that India’s measure may be substantially more trade restrictive than a measure based on OIE recommendations. As an example, it cites the removal of veterinary certificates from the website of India’s Department of Animal Husbandry. The content of the veterinary certificate that India would require upon the importation of products covered by this dispute, it argues, is an essential element in understanding India’s revised measure.[iii]

In the overall scheme of things, there appears to be no doubt that India has adopted necessary measures to comply with DSB’s rulings and recommendations. In a written communication dated 22^rd September 2016[iv], India notes that notification S.O. 2337 (E):

1. “allows imports of poultry and poultry products into India in accordance with the relevant international standard, i.e. the OIE Terrestrial Animal Health Code (“Terrestrial Code”);
2. recognizes the concept of disease-free areas; and
3. provides for the process to be followed for recognition of such disease-free areas, zones/compartments in conformity with the Terrestrial Code and the SPS Agreement.”

Yet an inquiry on these amendments suggest that they are at best poorly drafted lacking clarity, raising ambiguity, confusion and probably unjustified barriers to trade. For instance, Notification S.O. 2337(E) dated 8^th July 2016:

1. states that the surveillance carried out by a country, zone or compartment has to be in accordance with the Terrestrial Animal Health Code of World Organization for Animal Health. Nevertheless, the Notification fails to recognize whether the reference is to the general recommendations on surveillance approaches as laid out in Chapter 1.4 “Animal Health Surveillance” which is applicable to all diseases or infections and all susceptible species (including wildlife) or also includes reference to the complementary disease or infection-specific surveillance approaches as laid out, in this case, in Chapter 10.4 “Infection with Avian Influenza Viruses”. This is because, in addition to the general approaches as in Chapter 1.4, diseases or infections could have distinct surveillance approaches. For instance, Chapter 12.1 “Infection with African Horse Sickness Virus” of OIE Terrestrial Code lays out a surveillance approach which is different to the surveillance approach as laid out in Chapter 10.4 “Infection with Avian Influenza Viruses”. In addition to the general recommendations, diseases or infection-specific surveillance approach helps in gathering detailed disease or infection-specific information. Where detailed disease or infection-specific information is not available, suitable approaches are based on the recommendations laid out in Chapter 1.4. For example, Chapter 15.1 on “African Swine Fever” states that a country or zone maybe considered free from African swine fever without applying a specific surveillance programme if relevant articles in Chapter 1.4 is complied with.

It should be noted that ambiguity on surveillance approaches also has a trickledown effect raising questions on conformity of those clauses that rely on infections or diseases-specific surveillance approach. For example, paragraph 3 of the notification in question states that “.. provided that surveillance approach in accordance with the provisions of the Terrestrial Code of World Organization of Animal Health” which raises ambiguity on surveillance approaches given the explicit mention to “... Article 10.4.27 to  10.4.33” in Article10.4.3 of OIE’s Terrestrial Code.

2. states that “poultry means all domesticated birds, including backyard poultry, used for production of meat or eggs for consumption, for the production of other commercial products, for restocking supplies of game, or for breeding these categories of birds, as well as fighting cocks used for any purposes” which stands in non-conformity to OIE’s Terrestrial Code which in its definition of poultry also includes “birds that are kept in captivity for any reason other than those reasons referred to in the preceding paragraph, including those that are kept for shows, races, exhibitions, competitions or for breeding or selling these categories of birds as well as pet birds, are not considered to be poultry”.

Moreover, non-conformity to the definition of poultry also affects the conformity of those clauses that are based on the definition of poultry. For instance, sub-paragraph (f) of paragraph 1 of the notification in question states that “poultry products means produce of the poultry as defined in clause (e)..”. Given that clause (e) does not recognize “birds that are kept in captivity... , are not considered to be poultry”, produce of such “poultry” can then be considered as poultry products which stands in non-conformity of OIE’s Terrestrial Code.

Likewise, Notification S.O. 2998 (E) dated 19^th September 2016:

1. states that “avian influenza status of a country, zone or compartment shall be determined on the basis of most recent status of the exporting country, zone or compartment as reported by the country to the World Organization for Animal Health in accordance with the requirements in Terrestrial Animal Health Code of World Organization for Animal Health”. Yet, it does not provide information on two front ends:
   1. how does it intend to determine the “most recent status” of the exporting country, zone or compartment given that the list of countries affected with avian influenza is continuously changing as new countries are reporting avian influenza and certain other countries are declaring themselves free from avian influenza. This is of particular concern since India, unlike Canada, does not maintain a list or database that is updated on a daily basis recording the status of the exporting country, zone or compartment, making it difficult to determine the “most recent status”.[v] Therefore, in a given scenario where at time t, a country is reported as AI-free. However, at t+1, it notifies OIE of an AI outbreak. How does India tend to deal with such a situation where at t, it had identified the exporting country as AI-free?
   2. what “status” is India refereeing to? Without an explicit reference, the “status” is left to open interpretation. It would help if India explicitly mentioned the status it is refereeing is that of on “notifiable avian influenza”.

2. states that “the import of poultry and poultry products into India shall be allowed from the country, zone or compartment in accordance with product specific recommendations of Terrestrial Animal Health Code...”. Yet, it fails to recognize whether the reference is to the general product-specific recommendations in volume 1 or also includes reference to the complementary product-specific recommendation specific to infections or diseases as laid out, in this case, in Chapter 10.4 “Infection with Avian Influenza Viruses”.

The irregularities observed across and throughout both the notifications discussed above which rather make an attempt to regulate the imports of poultry and poultry products such that it is based on OIE’s Terrestrial Code and consistent with the WTO Agreements, particularly with the WTO SPS Agreement, does more harm than good. It not only questions India’s compliance but also provides support to the concerns of the US that India’s measures may be substantially more trade restrictive than a measure based on OIE recommendations, and at instances also appear to retain many of the features of the prior measure found to be inconsistent with WTO’s obligations.

While the US reiterates its view that there is nothing in the WTO rules that required its parties to enter into a sequencing agreement, India can only urge the US to enter the same such that a compliance panel be first established before arbitration on the US request for retaliation proceeds. If the US indeed enters into a sequencing agreement, India risks retaliation if the fact of non-compliance is established. Since the US remains open to engage with India to facilitate compliance with DSB’s recommendations and rulings in this dispute, India, at every cost, should constructively work with the US to reach a resolution. Besides conforming to international standards can only help India.

 

[i] “Recourse to Article 22.2 of the DSU by the United States”, WT/DS430/16 circulated 8^th July 2016.

[ii] WT/DS430/17, WT/DS430/18, WT/DS430/19.

[iii] India requires veterinary certificates for the importation of agricultural products. See http://www.dahd.nic.in/Trade/Sanitary-requirement-veterinary-health-certificate-import-various-livestock-products.

[iv] WT/DS430/19 circulated on 23^rd September 2016.

[v] Canada maintains a list of countries officially recognized by Canada as being free of the notifiable avian influenza. See http://www.inspection.gc.ca/animals/terrestrial-animals/diseases/status-by-disease/countries-recognized-as-free-from-the-disease/eng/1343108465347/1343108628931, last accessed 15^th November 2016.

Is Trump's TPP Withdrawal a Negotiating Tactic?

From the BBC:

President-elect Donald Trump says the US will quit the Trans-Pacific Partnership trade deal on his first day in the White House.

He made the announcement in a video message outlining what he intends to do first when he takes office in January.

I've never been much of a negotiator myself, but my understanding of negotiations is that, in order to get the best terms possible, you have to be willing to walk away from the deal.  For example, when negotiating over the price of a new car, you might walk out of the dealership in the hope that they follow you out and offer you a better price.

Is it possible that Trump, who prides himself on being a great negotiator, is doing something similar here?  Is he walking away from the TPP to see if other governments try to lure him back in with better offers?

Lighthizer on Trump's USTR Landing Team

According to Trump's transition web site, trade lawyer Robert Lighthizer is on the USTR "landing team" that is organizing the transition for USTR. Just to give everyone a sense, here is something Lighthizer wrote in 2011 (when Trump was also considering a Presidential run):

With Donald Trump getting more TV coverage than Charlie Sheen and rising in the polls among Republicans, it is not a surprise that the knives have come out for him. “He’s just another liberal,” screams the libertarian Club for Growth. “He’s not one of us,” echoes Karl Rove.

All of that may be true, but one piece of cited evidence is quite puzzling. Mr. Trump’s GOP opponents accuse him of wanting to get tough on China and of being a protectionist. Since when does that mean one is not a conservative? For most of its 157-year history, the Republican Party has been the party of building domestic industry by using trade policy to promote U.S. exports and fend off unfairly traded imports. American conservatives have had that view for even longer.

At the beginning of this nation, Alexander Hamilton and his followers were staunch conservatives who helped found American capitalism - and avowed protectionists. By contrast, Thomas Jefferson - the founder of the Democratic Party - was much more of a free trader. During the first half of the 19th century, pro-business politicians like Henry Clay were ardent supporters of an “American system” that would use tariffs to promote American industry. Clay’s political descendents - such as Abraham Lincoln - went on to form the Republican Party. Every Republican president starting with Lincoln - and for almost 100 years thereafter - generally supported tariffs, while Democrats tended to promote free trade.

Would anyone argue that presidents like William McKinley, William Howard Taft and Calvin Coolidge were not conservatives - or that free traders like Woodrow Wilson and Franklin D. Roosevelt were not liberals?

Skepticism toward pure free-trade dogma can be seen as well in more recent Republican leaders. The icon of modern conservatism, Ronald Reagan, imposed quotas on imported steel, protected Harley-Davidson from Japanese competition, restrained import of semiconductors and automobiles, and took myriad similar steps to keep American industry strong. The same can be said of Richard Nixon. In 1971, Nixon imposed a temporary tariff on all imports in response to what he perceived to be unfair foreign economic policies. No one would accuse Nixon of being a “liberal” - but his approach was in some ways even more trade-restrictive than what Mr. Trump has suggested.

In light of these facts, can anyone really think that getting tough with China is a “liberal” idea? Do you think that any of the conservatives and Republicans listed above would allow a foreign adversary to use currency manipulation, subsidies, theft of intellectual property and dozens of other forms of state-sponsored, government-organized unfair trade to run up a more than $270 billion trade surplus with us and to take U.S. jobs?

Another piece by him along the same lines, in the NY Times, is here.

Post-Brexit Britain in A World of Preferential Trade Agreements (PTAs)

Here is a Brexit conference organized by Luca Rubini at the University of Birmingham on Feb 24, 2017:

This conference has two goals. The first is to explore the important legal and political questions about the new role of the UK in the international trade context, and in particular with respect to the need to enter into several Preferential Trade Agreements (PTAs), that a possible Brexit raises. The second objective is to broaden the view and discuss the state of the art in the PTAs world by considering both horizontal issues and specific issues.

09:00-09:30 Registration

09:30-11:00 Part I: Britain, Brexit and Beyond

Key-note Speakers: Dr. Lorand Bartels (University of Cambridge) and Ms. Lilja Ólafsdóttir (Reykjavik University, Attorney at Law, former Legal Council at the EFTA Secretariat and negotiator for Iceland on FTAs and the EEA Agreement)

11:00-11:15 Coffee break

11:15-12:45 Part II: PTAs: The State of the Art

Horizontal issues: Legal Institutions, Disciplines, Political Economy

Dr. Rilka Dragneva-Lewers (Birmingham)
Sohyun Lee (LSE)
Rafael Lima Sakr (LSE)

12:45-13:45 Lunch

13:45-15:15 Specific issues (I): Subsidies, Investment and Energy

Dr. Luca Rubini (Birmingham)
Ira Ryk-Lakhman (UCL)
Andrea Rocco (Birmingham)
Natasha Georgiou (Reading)

15:15-15:30 Coffee break

15:30-17:30 Specific issues (II): Labour and Environment

Dr. Maria-Anna Corvaglia (Birmingham)
Dr. Billy Melo Araujo (Queen's University Belfast)
I-Ju Chen (Birmingham)
June Namgoong (UCL)

17:30-18:00 Closing session

With regard to the PTA horizontal issues, here are my thoughts.  If we get to the point where the UK is actually negotiating PTAs, the UK should keep these PTAs simple.  If they get bogged down with ISDS, IP, labor and environment issues, the agreements will be controversial and take a long time to negotiate. More here.

Carbon Tariffs and the Paris Agreement

This is from the NY Times:

Diplomats from around the world converged here this week with the plan to put details on last year’s Paris climate accord and move the globe closer to controlling the industrial emissions that are heating the planet.

Instead, with the election of Donald J. Trump — and his threat to withdraw the United States from the accord — shellshocked negotiators confronted potentially deep fissures developing in the international consensus on climate change. On the sidelines of the negotiations, some diplomats turned from talking of rising seas and climbing temperatures toward how to punish the United States if Mr. Trump follows through, possibly with a carbon-pollution tax on imports of American-made goods.

“A carbon tariff against the United States is an option for us,” Rodolfo Lacy Tamayo, Mexico’s under secretary for environmental policy and planning, said in an interview here. He added, “We will apply any kind of policy necessary to defend the quality of life for our people, to protect our environment and to protect our industries.”

Forcing United States industries to turn to cleaner energy sources with the hammer of an import tariff is not far-fetched. Countries imposing costs on their own industries to control carbon emissions could tell the World Trade Organization that United States industries are operating under an unfair trade advantage by avoiding any cost for their pollution.

The tax would be calculated based on the amount of carbon pollution associated with the manufacturing of each product. That would impose a painful cost on the heaviest industrial polluters, particularly on exporters of products containing steel and cement.

“The Paris Agreement is meant to get everyone on board in one structure where you can address climate change together,” said Dirk Forrister, the president and chief executive of the International Emissions Trading Organization, a nonprofit organization that consults with governments and companies. “But if one big country backs out it could trigger a whole wave of trade responses.”

He added: “There is no need to start a trade war over climate change. But it might happen.”

...

... diplomats are quietly going off their agendas to begin planning how to react if Mr. Trump chooses to reject the Paris Agreement. The pact, as it stands, contains no enforcement measures, such as economic sanctions, for countries that do not comply. But individual governments could put trade sanctions in place on their own or in concert.

In Mexico, which is already preparing for a newly adversarial relationship with an American president who has threatened to build a wall along the border, government officials said they have begun considering the idea of a carbon tariff.

Canada, the United States’ largest trading partner, is also discussing a tariff. Some Canadian provinces, including Ontario and Quebec, already have carbon tax policies that include fees imposed on fossil-fueled energy generated across provincial borders.

“I see that extending across the Canadian border if the U.S. pulls out of Paris,” said Lisa DeMarco, a senior partner with DeMarco, Allan, a Toronto-based climate law firm that advises Canadian provinces and international businesses.

“If you want to sell your goods in Canada, you’d have to meet the same emissions standards,” she said.

I've always thought that it is possible to impose a carbon tax on domestic and imported goods in a way that is consistent with WTO obligations. At the same time, though, actual attempts to construct such a tax in the real world of legislation and regulation are likely to end up with one or more aspects that violate these obligations.

And while the discussion in the NY Times article is preliminary and cursory, so we don't know what precise measures might be used, I have doubts that a carbon tariff imposed in response to Trump pulling the U.S. out of the Paris Agreement would be consistent with WTO obligations.  Here's one reason why: Taking action against only the U.S., and not all the other countries whose carbon emissions regulation fails to meet someone's standard, would be a problem under various GATT/WTO provisions.

Of course, that's just the legal aspect. There's also the political dynamic here. I suspect that if the Trump administration were faced with such tariffs, it would not wait for a WTO ruling, but would press ahead with retaliation right away. So any government considering this has to be ready for a trade war.  Note that the people quoted above suggesting carbon tariffs are from the environmental field.  The trade diplomats and lawyers may have a different view.

Will NAFTA Chapter 19 Survive a NAFTA Renegotiation?

This is from a letter from trade critic Senator Sherrod Brown to President-elect Donald Trump, offering advice on general trade policy and specific thoughts on a NAFTA renegotiation:

... American manufacturers have been harmed by provisions that allow antidumping and countervailing duty determinations to be reviewed.

Presumably this refers to NAFTA Chapter 19's bi-national panels, which review AD/CVD measures for consistency with domestic law (taking the review process out of domestic courts). Will NAFTA Chapter 19 be a casualty of any NAFTA renegotiation?  U.S. industry has disliked Chapter 19 for quite a while. Do Canada and Mexico feel strongly enough about it to fight for it?

Freelance Analyst Wanted for Investment Arbitration Reporter

This is from my friend Luke Peterson of Investment Arbitration Reporter:

Freelance analyst wanted

Investment Arbitration Reporter is looking for one or more persons to join our team of freelance contributors.

Since 2008, our publication has offered specialized reporting on developments in the field of international investment law. We read and digest legal pleadings and decisions, and we also engage in more traditional investigative reporting work to identify and uncover developments that are otherwise confidential.

We are currently seeking contributors with international law backgrounds who can review and write about legal and policy materials at a high level of technical accuracy, and in the existing style of IAReporter. (Prior familiarity with our publication and its reports is a necessity.)

Your work with IAReporter would be on a remote consultant basis (i.e. you would work from wherever you are otherwise legally resident and authorized to work.) You will be remunerated for your work.

We value those contributors whose flexible work-life schedules permit them to take on last-minute assignments (at least some of the time), and to assist us in our efforts to be exceedingly timely in our coverage of the latest developments.

The ideal candidates will be persons who are engaged in long-term academic research (junior academics or doctoral students) or those who are taking leave from legal practice.

For conflict-of-interest purposes, we ask our contributors to not practice in the field of investor-state arbitration while they work with us.

Desired qualities include:

• Fluency in English and at least one other language.

• International work or study experience.

• An academic background in international law, or a related field.

• Demonstrated writing skills in English, preferably journalistic in nature.

Interested candidates must complete a trial assignment for IAReporter: a summary of the Metalclad v. Mexico arbitral award of August 30, 2000 in the style of IAReporter. The summary should include a review of the essential facts, key legal holdings, and a small amount of analysis that puts the award in light of later developments in the field of investment treaty arbitration. The assignment should be no longer than 2000 words and should take fewer than 10 hours to complete. The assignment, along with your CV and short cover letter (not more than 500 words), must be submitted to [email protected].

The Metalclad v. Mexico award can be found here.

The deadline for applications is December 10, 2016.

Trade Policy Reactions to Trump from Around the World

From China:

US president-elect Donald Trump would be a “naive” fool to launch an all-out trade war against China, a Communist party-controlled newspaper has claimed.

During the acrimonious race for the White House Trump repeatedly lashed out at China, vowing to punish Beijing with “defensive” 45% tariffs on Chinese imports and to officially declare it a currency manipulator.

“When they see that they will stop the cheating,” the billionaire Republican, who has accused Beijing of “the greatest theft in the history of the world”, told a rally in August.

On Monday the state-run Global Times warned that such measures would be a grave mistake.

“If Trump wrecks Sino-US trade, a number of US industries will be impaired. Finally the new president will be condemned for his recklessness, ignorance and incompetence,” the newspaper said in an editorial.

The Global Times claimed any new tariffs would trigger immediate “countermeasures” and “tit-for-tat approach” from Beijing.

“A batch of Boeing orders will be replaced by Airbus. US auto and iPhone sales in China will suffer a setback, and US soybean and maize imports will be halted. China can also limit the number of Chinese students studying in the US.”

From France:

Former French President Nicolas Sarkozy has proposed that Europe should impose a carbon tax on American imports if Donald Trump pulls the United States out of the Paris climate pact.

More than 100 countries have ratified the Paris global emissions deal, which was inked in December after marathon talks to cap greenhouse gases that cause global warming.

"Donald Trump has said – we’ll see if he keeps this promise – that he won’t respect the conclusions of the Paris climate agreement,” Sarkozy, who is a French presidential candidate told the TF1 television channel on Sunday.

“Well, I will demand that Europe put in place a carbon tax at its border, a tax of 1-3 per cent, for all products coming from the United States, if the United States doesn’t apply environmental rules that we are imposing on our companies,” he added.

From Mexico:

Business leaders south of the border say the U.S. presidential campaign has underlined Mexico's need to reduce its dependence on the United States and the Mexican government sees TPP as a crucial part of efforts to trade more with Asia.

[Economy Minister Ildefonso] Guajardo said he expected as many as seven signatories to have ratified TPP by the end of 2016, mentioning Japan, Mexico, New Zealand, Australia, Singapore, Vietnam and Malaysia.

Japan's lower house approved the deal on Thursday.

If the U.S. Congress does not ratify the deal, Guajardo said consideration should be given to whether the remainder could put into effect without the world's biggest economy.

"We'll need to talk with the others to change the limiting clause that meant us having to wait until the United States had completed the approval process," Guajardo said.

And from Canada, of course, politeness:

Canadian Prime Minister Justin Trudeau said Thursday he is willing to renegotiate the North American Free Trade Agreement (NAFTA), which US President-elect Donald Trump has said he wants to change or scrap.

During the campaign, Trump called NAFTA the worst trade deal the United States has ever signed, while proposing protectionist measures to repatriate American jobs lost to free trade.

"I think it's important that we be open to talking about trade deals," Trudeau -- a fierce defender of free trade, which helps bolster the Canadian economy -- told reporters.

"If the Americans want to talk about NAFTA, I'm more than happy to talk about it," he said, adding that it was important to periodically reassess trade deals to ensure that they continue to be of benefit to Canadians.

Clarifying EU Competence over Trade and Investment Policy

This is from David Kleimann and Gesa Kübek, who attended the CJEU hearing on the EU-Singapore FTA, the case which will address issues of EU competence over trade and investment policy:

In the wake of the CETA-crisis, some commentators were quick to advocate for ‘EU-only’ treatymaking as the appropriate alternative to ‘mixity’ in order to mend the second category of problems we outlined above. ‘EU-only’ agreements, indeed, would do away with the political unanimity requirement for EU member states governments and subject national democratic deliberations and decisions on the approval of EU external treaties to qualified majority voting in the Council. As we have demonstrated in this article, however, treaty-making in the ‘EU-only’ procedure is, in the first instance, not a question of political preference, but a question of legal competence. It is the exact delineation of EU exclusive competences – codified in EU primary law and mirrored in constantly evolving EU secondary legislation - that determines whether the content of a treaty mandates ‘EUonly’ conclusion, or not.

The CJEU is set to clarify this delineation in its Opinion 2/15 judgement next year. In light of the Lisbon treaty expansion of the scope of the EU’s Common Commercial Policy, the Court will find a considerably broadened scope of EU exclusivity and hence facilitate the mandatory ‘EU-only’ conclusion of external agreements that, in their substance, fall within the scope of EU exclusive treatymaking powers. How far EU exclusive competences reach, in view of the Court, remains to be seen. After the publication of the judgement, in any case, EU institutions and member states will have clear guidelines for the design of mandatory or facultative ‘EU-only’ agreements. Political will permitting, this circumstance could greatly facilitate a more effective, reliable, and efficient external economic governance in the EU. Moreover, the judgement will clarify whether and which policy areas remain within the ambit of member states’ exclusive competences. Such clarity can render the legally viable limitation of the applicable scope of member states’ veto powers in regard of the signing and conclusion of mixed agreements, such as CETA, feasible in practice. A legally mandatory - or politically discretionary - shift from mixed to ‘EU-only’ treaty conclusion would certainly help mending second category governance failures.

Such a significant change of formal institutional practice, however, must not come at the expense of democratic accountability and representation. To the contrary, EU 2020 institutional practice needs to strengthen democratic governance of EU external trade and investment policy and reconnect to citizens’ concerns over economic policies in a representative, visible, and functional manner.

The achievement of this objective, however, requires a considerable re-think, adaptation, and a sense of ownership of national parliaments regarding the economic policy-making process in the EU. In pre-Lisbon institutional practice, national parliaments often only engaged in the political process long time after a respective mixed agreement was signed by national governments and, essentially, rubber-stamped agreements that were put before them for ratification. The run-up to the CETA signature has, somewhat ironically, shown early signs of the necessary and desirable shift of member states’ parliaments political engagement to the phase of the process where it is most needed for EUonly treaty-making. Prior to the signing of CETA, indeed, national parliaments have now made more extensive use of their constitutionally guaranteed role in national decision-making processes in a visible fashion. In context of ‘EU-only’ agreements, national parliamentary deliberation, scrutiny, and control of executive decisions ought to shift to this stage of the treaty-making process in order to endow QMV Council decisions on the signature and provisional application of EU economic agreements with democratic legitimacy. Vertical inter-parliamentary co-operation can help to build trust in EU commercial policy making. The EP INTA committee, for instance, is frequently informed about on-going policy and negotiation developments, holds similar information rights to those of the Council, has built an intra-institutional infrastructure for an efficient division of labour, and has greatly improved its informational capacity over the last years. The development of vertical - formal or informal - links between the economic affairs committees of national parliaments and the INTA committee in the EP can facilitate issue specific problem-solving, build mutual trust, and function as an early warning system in regard of potential political or technical roadblocks.

Are E-Cigarettes "Like" Traditional Cigarettes?

This is the abstract of a paper by Marina Foltea and Anna Markitanova:

The regulation of e-cigarettes is a relatively new topic and the optimal regulation of these products is not yet fully understood. Evaluations are underway on many aspects linked to these products, for example: their safety, potential health risks, illicit trade, and advertising. Given the WHO-promoted regulatory option to ban e-cigarettes, this paper examines another topic, emerging at the intersection of international health and trade law, that is the legal challenges which may arise under the WTO following a complete ban of e-cigarettes (herein forth called new products).

In particular, the analysis considers the consistency with WTO law of a hypothetical ban on the importation, distribution, sale and offering for sale of these products – a measure that is either being contemplated or already implemented in some domestic jurisdictions. In this context, the paper assesses the ‘likeness’ of new products and regular cigarettes and examines such a measure under other standards developed within the GATT 1994 and TBT Agreement (e.g. the aim-and-effect test, necessity and legitimate regulatory distinction). It finds that new and conventional tobacco products may be ‘like’ under WTO law and in the event no justification is found by the regulating Member under the GATT Article XX General Exception provisions, an importation ban on new products risks being found WTO inconsistent.

A trade case on e-cigarettes may not be too far off. I see plenty of vaping going on these days, and presumably there are potential trade conflicts out there.

Conference on EU Policy on International Investments: Uncertainties, Challenges and Opportunities

This is from Professor Katia Fach Gomez:

EU Policy on International Investments: Uncertainties, Challenges and Opportunities

 We are pleased to announce the holding of the “EU Policy on International Investments: Uncertainties, Challenges and Opportunities” international conference on the 20^th and 21^st March 2017 at the  University of Zaragoza Law School. Confirmed key speakers include Javier Díez Hochleitner (University Autónoma of Madrid and Baker & McKenzie), Julio González García (European Law and Regional Integration Institute, University Complutense, Spain); Luis Hinojosa (University of Granada), Jan Kleinheisterkamp (London School of Economics, UK), Catharine Titi (CNRS and CREDIMI, University of Bourgogne, France) and José Antonio Zamora Rodríguez (MiNECO).

The conference focuses on the many legal issues that have arisen following the inclusion of foreign direct investment in Article 207 of the Treaty on the Functioning of the European Union. Among the topics to be addressed at the conference are: the controversial nature of EU competence on commercial policy; the impact that the exercising of this competence through the creation of an investment  court may have on the principle of autonomy of EU law and the ECJ’s exclusive jurisdiction in the area; the financial responsibility linked to investor-to-state dispute settlement tribunals established by international agreements to which the European Union is party; the EU proposal to create a multilateral investment court; recent legal developments regarding CETA, the future of TTIP and other negotiations in which the EU is currently immersed, and the important role played by civil society in these matters.

• Submission of proposals:

Academics and practitioners at all stages of their careers are invited to participate, including pre- and post-doctoral students. Extended abstracts of a minimum of 600 words and unpublished full papers with the author’s name, affiliation and an updated CV including contact details should be submitted to the conference director ([email protected]). All submissions and complete papers may be written either in English or in Spanish.

Abstracts for presentation at this forum will be assessed and selected by the scientific committee. We regret that we are unable to cover selected speakers' travel and accommodation expenses.

• Timeline:

-The deadline for submitting proposals is December 31st 2016.

-Applicants will be informed of the committee’s decision by January 8th 2017.

-The deadline for submitting papers (2,000-4,000 words) is March 1st 2017.

-The conference will be held at the University of Zaragoza on March 20^th and 21^st 2017.

- The Research Group DER2016-76986- (“EU in the context of the new generation Treaties: between institutional reform and social protection”) is planning to publish an edited volume containing the most relevant papers presented in the conference.  The deadline for submitting the final version of the selected papers (4,000-7,000 words) will be April 30^th 2017.

 

Participants should register for the conference under http://eventos.unizar.es/event_detail/6973/detail/la-politica-de-la-union-europea-en-materia-de-inversiones-internacionales_-incertidumbres-retos-y-o.html

                                                      

Why Not Renegotiate the TPP Instead of NAFTA?

There has been lots of talk by Trump and his advisers about renegotiating NAFTA, or if that doesn't work withdrawing from it.  With TPP, by contrast, they mostly just talk about abandoning it.

In terms of the substance of NAFTA, they seem to be focused on issues such as VAT rebates. But as I said here, that's not really a NAFTA issue -- it's much broader.

So, if they want their proposed changes to trade rules to have a real impact, why not raise them as part of a renegotiation of the TPP? (And keep in mind that the TPP itself was, in part, the renegotiation of NAFTA.)

Trump's Trade Team

This is from Inside US Trade:

Dan DiMicco, former chief executive of steel producer Nucor and senior trade adviser for President-elect Donald Trump's campaign, will lead the Trump administration's transition efforts for the Office of the U.S. Trade Representative, according to a document obtained by Inside U.S. Trade.

...

DiMicco's role of managing the USTR transition falls under that category, along with other agencies, according to a chart laying out the structure of Trump's transition team by agency. 

...

During the campaign, DiMicco -- much like Trump -- said trade agreements like NAFTA eliminated jobs and hollowed out the American manufacturing base. He also has blasted China for dumping steel into global markets and allegedly manipulating its currency.

One source said that heads of agency transitions have a higher chance of being nominated for the analogous cabinet position once the new president is sworn in, and that DiMicco would likely be interested and willing to serve as USTR in a Trump administration.

One of DiMicco's big issues is the use of a VAT by some countries, which he views as unfair for the following reasons:

In addition, Mr DiMicco cited Team Trump’s concerns about firms that export goods from Mexico to America enjoying an unfair advantage when the Mexican government rebates value-added taxes paid to Mexican suppliers. American firms enjoy no such tax refunds from American authorities, which collect revenues from corporate income. “One thing that will be dealt with is border adjustment taxes,” Mr DiMicco said. “That’s not something we will allow to continue.”

Some of you may recall that I had a twitter exchange with DiMicco on this very issue.

There are two things I don't understand here. First, why does he keep citing this as a NAFTA/Mexico issue? I would have thought it was a bigger deal in other countries. If there is a concern here, why not try to deal with it at the WTO?

And second, what is the proposed solution? I am going to try to take the Trump trade proposals seriously, but I don't understand what they have in mind.

What To Expect from President Donald Trump's Trade Policy

The next four years are going to be rough.

Trade is one of many areas where Donald Trump has said some things that are far out of the mainstream. Some of his statements just carry on current policy ("I am going to instruct the U.S. Trade Representative to bring trade cases against China, both in this country and at the WTO"), but others push the boundaries ("I will use every lawful presidential power to remedy trade disputes, including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962"). The question is, to what extent will he try to, or be able to, follow through on his statements?

One part of the uncertainty is that neither he nor his advisers seem to know much about trade economics or trade law (Trump has some people who know a bit more, but I'm not sure he's listening to them). They are obsessed with trade deficits, but don't have an understanding of what's in trade agreements. As a result, it's not clear to me that we can take their campaign statements very seriously. Ultimately, they will have to hire someone who knows the details in order to implement their trade policies. Who will they be able to find to do this work for them? Which new high-level people will agree to come on board? Will the existing trade policy folks and trade negotiators stay on? How long will it take them to hire these people and sort out a clear policy? 

In terms of the substance, they have proposed taking various unilateral actions, many of which may be challenged in court and at the WTO. How far will they go with this? There are some minor things they can do (e.g. tougher anti-dumping enforcement). Will that be enough for them, or will they try to use avenues such as Section 232?

They have also emphasized some long-standing, complex issues such as exchange rates and VAT taxes. Can they come up with responses that U.S. government agencies will agree on, and that our trading partners will accept?

On trade negotiations, they clearly want to abandon existing talks such as the TPP. They have talked vaguely about focusing on bilateral trade agreements, perhaps with the UK. Is that a real possibility? What would be in their trade agreements? Are there any countries who would want to engage in these negotiations?

And they suggest renegotiating, or withdrawing from, existing trade agreements such as NAFTA. Will they really pursue this? What parts of NAFTA do they want renegotiated?

Can Congress act as a check on this?

And can the world trading system survive all of this?

To repeat: The next four years are going to be rough.

Appellate Review of a Panel's Examination of a Measure

This is from the recent U.S. DSB statement related to the EU - Biodiesel Measures Appellate Body report:

The United States, however, would like to draw the DSB’s attention to an important systemic issue with implications for the operation of the dispute settlement system.

The issue is how the Appellate Body should approach appeals from panel findings on the meaning of municipal law, as well as how the Appellate Body approached Argentina’s particular appeal in this dispute on the meaning of the EU law being challenged. In the WTO system, or in any international law dispute settlement system, the meaning of municipal law is an issue of fact. In contrast, the interpretation of the WTO Agreement, or other relevant international law, is the issue of law for that system.

This proposition is not controversial. For example, one of the standard treatises on international law (Brownlie) states that “municipal laws are merely facts which express the will and constitute the activities of States.”

The Appellate Body, however, has treated panel findings on the meaning of municipal law as a matter of WTO law, to be decided by the Appellate Body de novo in an appeal under Article 17.6 of the DSU. The Appellate Body has given no rationale – based in the text of the DSU or in any other source -- for this fundamental departure from the principle that the meaning of municipal law is an issue of fact in international dispute settlement.

In its report in this dispute, the Appellate Body’s explanation for the proposition that the meaning of municipal law is an issue of law under DSU 17.6 is a single sentence: “Just as it is necessary for the panel to seek a detailed understanding of the municipal law at issue, so too is it necessary for the Appellate Body to review the panel's examination of that municipal law.”

The only basis given for this assertion is a citation to the Appellate Body’s own report in India – Patents (US). That report, however, provides no meaningful explanation for this proposition. Ironically, India – Patents cites the very same international law treatise quoted above, which states that municipal law is an issue of fact for the purpose of international dispute settlement. That is, the India – Patents report cites a treatise that stands for the opposite of what the Appellate Body cites it for.

Further, the Appellate Body’s stated rationale – that a “detailed understanding” is important – says nothing about the proper role of the Appellate Body in reviewing a Panel’s findings. Indeed, many factual issues in WTO dispute settlement require “detailed understanding.” But that provides no basis for treating those factual issues as issues of law to be decided de novo by the Appellate Body on appeal.

The relevant provisions of the DSU reflect this straightforward division between issues of fact and law. As Members know, DSU Article 6.2 requires a complaining party to set out “the matter” in its panel request comprised of “the specific measures at issue” – that is, the core issue of fact – and to “provide a brief summary of the legal basis of the complaint” – that is, the issue of law. DSU Article 11 similarly distinguishes between the panel’s “objective assessment of the facts of the case” and its assessment of “the applicability of and conformity with the covered agreements” – that is, the issue of law. And DSU Article 12.7 makes the same distinction in relation to the findings of fact and law in the panel’s report. Thus, the DSU makes clear that the measure at issue is the core fact to be established by a complaining party, and the WTO consistency of that measure is the issue of law.

The lack of coherence in the Appellate Body’s approach has been noted by other commentators. For example, an entry in The Oxford Handbook of International Trade Law states:

“[T[he logic of the Appellate Body’s finding [that panel findings on municipal law are issues of law under DSU Article 17.6] is difficult to understand. Just because a panel assesses whether a domestic legal act – which represents a fact from the perspective of WTO law – is consistent or inconsistent with WTO law does not suddenly turn the meaning of the domestic legal act into a question of WTO law. . . . [T]here must . . . be a discernable line between issues of fact and issues of law. After all, the Appellate Body’s jurisdiction is circumscribed precisely by this distinction.”

The problems with the Appellate Body’s approach is highlighted by this very appeal. One of Argentina’s claims was that a provision of EU law, the Basic Regulation, was inconsistent “as such” with the AD Agreement. On appeal, Argentina claimed that the panel erroneously construed that EU law. Argentina’s argument was based on the text of the EU provision, legislative history, a supposed EU practice in several other investigations, and certain EU court decisions. On appeal, Argentina claimed both that the Panel’s interpretation of EU law was wrong as a matter of law (although under what provision of the AD Agreement or the DSU remains unclear) and that the Panel failed to make an “objective assessment of the matter” under Article 11 of the DSU.

Especially given the panel’s alleged error in examining all of the different types of evidence introduced by Argentina, the Appellate Body could have, and should have, handled this matter as an appeal under Article 11 of the DSU. In an Article 11 appeal, of course, the Appellate Body would not have conducted a de novo review of EU law, but rather would have examined whether the panel had exceeded its “margin of appreciation” as the trier of fact.

The Appellate Body, however, examined the meaning of the EU law both as a de novo legal issue, and then proceeded to conduct a separate examination of whether the Panel made an objective assessment.  Frankly, this approach does not make sense. It departs from the Appellate Body’s frequent admonition that a party should present an issue as an error of law or an error under Article 11, but not both types of claims with respect to the same issue. Furthermore, it raises the prospect that the Appellate Body might find that the Panel made an objective assessment of a complex factual record, and at the same time might find that precisely the same panel finding was incorrect simply because the Appellate Body made a different factual determination based on its own de novo review.

This type of outcome – which follows from the Appellate Body’s finding that it can conduct its own de novo review of the meaning of domestic law – is inconsistent with the appropriate functioning of the dispute settlement system. It departs from the basic division of responsibilities where panels determine issues of fact and law, and the Appellate Body may be asked to review specific legal interpretations and legal conclusions.

It also represents a serious waste of the limited resources of the WTO dispute settlement system, adding complexity and delay to the process. No purpose is served by having a panel engage in a detailed review of a factual record related to the meaning of a domestic measure, and then to have the Appellate Body engage in its own de novo review of the exact same factual issues, so that the parties have to argue all the same factual issues a second time.

For reference, here is the key passage from the AB report:

6.155. Where a Member's municipal law is challenged "as such", a panel must ascertain the meaning of that law for the purpose of determining whether that Member has complied with its obligations under the covered agreements. Accordingly, "[a]lthough it is not the role of panels or the Appellate Body to interpret a Member's domestic legislation as such, it is permissible, indeed essential, to conduct a detailed examination of that legislation in assessing its consistency with WTO law."430 In this regard, a panel must conduct an independent assessment of the meaning of the municipal law at issue, and should not simply defer to the meaning attributed to that law by a party to the dispute.431 A panel's assessment of municipal law for the purpose of determining its consistency with WTO obligations is subject to appellate review under Article 17.6 of the DSU.432 Just as it is necessary for the panel to seek a detailed understanding of the municipal law at issue, so too is it necessary for the Appellate Body to review the panel's examination of that municipal law .

I tend to agree with the U.S. on this one. Here's something I wrote a while back:

As a matter of policy, it may be desirable to give the Appellate Body a good deal of leeway in reviewing a panel’s examination of the measures that are being challenged. However, Article 17.6 explicitly narrows the scope of appellate review to ‘issues of law’ and ‘legal interpretations’. Arguably, the Appellate Body’s decision to consider the panel’s construction of the challenged measures, outside the context of WTO obligations, as a law application issue stretches the boundaries of this provision, as the Appellate Body seems to have taken a very broad view of what constitutes a law application question. The result of this interpretation is an expansion of the scope of issues over which the Appellate Body can exercise a review. For those who think that appellate review is a good idea, this development may be a positive one. On the other hand, to the extent that the Appellate Body’s interpretation goes in a direction different than what the drafters intended, it may cause concerns. 

But here's a question. Even if it agreed with the criticism it is getting, how difficult would it be for the Appellate Body to change its position on this? It's view of the issue seems pretty entrenched in the case law, and thus it might be difficult to reverse itself.

Is ICS compatible with EU Law?

This is from Laurens Ankersmit:

The autonomy of the EU legal order and the preliminary reference procedure as the keystone of Europe’s judicial system

 So what are the main legal issues underlying ICS and EU law? It is clear that the Treaties in principle permit international agreements providing for state-to-state dispute settlement between the EU and third countries (such as the WTO’s dispute settlement body). Such state-to-state dispute settlement mechanisms do not encroach on the powers of the ECJ, because TFEU Part Six, title 1, chapter 1, section 5 does not grant the EU courts the power to hear such disputes.

However, when it comes to claims by individuals involving questions of EU law, the situation is radically different. The preliminary reference procedure in article 267 TFEU gives the courts of the Member States and the European Court of Justice important powers to resolve such cases. In fact, the ECJ itself refers to this procedure as the ‘keystone’ of the EU’s judicial system. It is perhaps important to recall that Article 267 TFEU was central to the ECJ’s reasoning when it found that the Treaties constituted ‘a new legal order’ that gives individuals, not just the Member States, rights and obligations whose uniform interpretation the European Court of Justice oversees.

The ECJ has made clear in no uncertain terms that it has the exclusive power to give definitive interpretations of EU law and therefore ensure the uniform interpretation of EU law across Europe (See Opinion 2/13, paras. 244-248).However, as a fundamental purpose of ICS in CETA is to enable investors to challenge not only EU acts and decisions based on these acts, but also national acts which might involve EU law somehow, an ICS tribunal would have to interpret and give meaning to EU law. Similarly to the context of human rights law, ICS will therefore encroach on the powers of the EU courts to rule on questions of EU law. Furthermore, ICS in CETA does not require the exhaustion of domestic remedies, which would soften the risk of divergent interpretation as well as respect the powers of the courts of the Member States to hear claims by individuals involving questions of EU law. ICS in CETA also does not require prior involvement of the ECJ for questions of EU law faced by these ICS tribunals.

Canadian Constitutional Challenge to CETA

First it was some groups in Germany. Now someone in Canada is filing a constitutional challenge to CETA. The key documents are here.

This is from the press release:

The Plaintiffs central challenge is four-fold, namely that: (1) that the federal government does not have the constitutional authority to sign, execute and implement treaties without the express prior authority or Parliament through an Act of Parliament; (2); the vast majority of the CETA articles and their impact encroach on exclusive Provincial spheres of jurisdiction protected by the division of powers under the Constitution Act, 1867; (3) the CETA guts and extinguishes the constitutionally protected Judiciary in Canada by creating foreign tribunals to determine property and legal issues in canada without any judicial oversight or jurisdiction of the Canadian Courts over the disputes; and (4) various articles of the CETA violate constitutionally enshrined rights in the Charter of Rights and Freedoms, and over-ride Charter guarantees that ground Canada's ability to mount public programs on Health, Education, Social Services, and public utilities including the elimination of subsidies, monopolies, and state enterprises for the public welfare. In short, the treaty places the rights of private foreign investors over those of the Canadian Constitution and Canadian citizens.

Here's an excerpt from the statement of claim:

the treaty is further unconstitutional for the reasons set out in the prayer for relief herein in that it:

(i) Relinquishes effective control and jurisdiction over property and civil rights in the provinces to foreign investors and international tribunals;

(ii) Grants primary rights to foreign investors and corporations over those of Canadian citizens particularly natural (biological) citizens;

(iii) Renders the treaty and investor rights superior to that of the Canadian and provincial governments and removes the jurisdiction for disputes out of Canada from the Canadian courts to an international ( ISDS) tribunal;

(iv) Circumvents established and pending treaty rights of aboriginal peoples contrary to, inter alia, to s. 35 of the Constitution Act, 1982;

(v) In its implementation, threatens to supersede the impact on all other treaties, ratified and implemented, accruing to the benefits of natural persons;

Any Canadians with thoughts on any of this, please feel free to weigh in!

Interpreting the CETA Joint Interpretative Instrument

CETA has now been signed, although perhaps not yet sealed and delivered. The Joint Interpretative Instrument that helped CETA reach the provisional application stage (ratification is still a ways off) is here. I've been curious about what impact this instrument of interpretation will have on the interpretation of the CETA text. Let's look at a couple examples of the interpretative guidance and the corresponding text it interprets.

First up, the right to regulate. The interpretative instrument says:

2. Right to regulate

CETA preserves the ability of the European Union and its Member States and Canada to adopt and apply their own laws and regulations that regulate economic activity in the public interest, to achieve legitimate public policy objectives such as the protection and promotion of public health, social services, public education, safety, the environment, public morals, social or consumer protection, privacy and data protection and the promotion and protection of cultural diversity.

Let's compare that to Article 8.9, para. 1 of the investment chapter:

1.    For the purpose of this Chapter, the Parties reaffirm their right to regulate within their territories to achieve legitimate policy objectives, such as the protection of public health, safety, the environment or public morals, social or consumer protection or the promotion and protection of cultural diversity.

To me, the interpretative instrument, at least in relation to the investment obligations, seems to just restate the language of the text. Assuming the interpretative instrument were invoked to help with treaty interpretation on this issue, would the interpretation be affected in any way?

OK, let's try another. How about the issue of water rights? The interpretative instrument says:

11. Water

CETA does not oblige Canada or the European Union and its Member States to permit the commercial use of water if they do not wish to do so. CETA fully preserves their ability to decide how to use and protect water sources. Furthermore, CETA will not prevent the reversal of a decision to allow the commercial use of water.

And here's the CETA text on water rights:

ARTICLE 1.9

Rights and obligations relating to water

1.    The Parties recognise that water in its natural state, including water in lakes, rivers, reservoirs, aquifers and water basins, is not a good or a product. Therefore, only Chapters TwentyTwo (Trade and Sustainable Development) and TwentyFour (Trade and Environment) apply to such water.

2.    Each Party has the right to protect and preserve its natural water resources. Nothing in this Agreement obliges a Party to permit the commercial use of water for any purpose, including its withdrawal, extraction or diversion for export in bulk.

3.    If a Party permits the commercial use of a specific water source, it shall do so in a manner consistent with this Agreement. 

Among other things, the interpretative instrument states that "CETA will not prevent the reversal of a decision to allow the commercial use of water." Here's my question: Was that not clear from the text itself? Could the text have been interpreted to mean that "the reversal of a decision to allow the commercial use of water," on its own, would violate CETA?  Will the interpretative instrument have any impact on the actual interpretation of the CETA text?

(As a side note, paragraph 1 of the text is also interesting. Assuming water in its natural state is not a good or a product, why does that mean only chapters 22 and 24 apply? How about the investment chapter?)

So that's two examples. Are there other issues where people see an impact from this interpretative instrument?