International Economic Law and Policy Blog

The U.S. View of Section 15 of China's Protocol of Accession

This is from a U.S. third party submission [CORRECTION - that link is to a "Legal Interpretation" submitted by the U.S.; the third party submission is here] in the European Union – Measures Related to Price Comparison Methodologies (DS516) WTO dispute:

8.6. Section 15 is not an exception to the GATT 1994 or the Anti-Dumping Agreement but confirms that in determining price comparability under those agreements, an importing Member may in certain circumstances reject an industry’s prices or costs. It likewise would be incorrect to characterize Section 15 as in the nature of an affirmative defense, which the responding Party must bring forward. Rather, Section 15 clarifies the obligations by which all Members have agreed to be bound. That is, Section 15 provides that Article VI:1 of the GATT 1994 and the Anti-Dumping Agreement continue to apply consistent with the terms of Section 15.

...

8.7. We are aware that the Appellate Body has stated that “the provisions of paragraph 15(a) expire 15 years after the date of China’s accession (that is, 11 December 2016).” However, the Appellate Body report does not interpret the legal text of Section 15(d), as explained above – in particular, the reference to expiry of “the provisions of subparagraph (a)(ii)” in the second sentence – to support that statement. Nor does the report consider the different text referring to “the provisions of subparagraph (a)” in the first sentence nor the text referring to the “non-market economy provisions of subparagraph (a)” in the third sentence. In fairness, the interpretation of Section 15, and subparagraph (d) in particular, was not at issue in the appeal before the Appellate Body. Therefore, those statements do not reflect a considered interpretive effort on this point.

8.8. Section 15(a) – which is compatible and in agreement with the GATT 1994 and Anti-Dumping Agreement – can be understood as a confirmation that the determination under those agreements of price comparability relates to whether there are comparable, market-determined prices.

I take the U.S. argument here to be that everyone is making too much of Section 15 of China's Accession Protocol in the context of the non-market economy debate, and that other GATT/AD Agreement provisions on their own can justify the use of surrogate values in anti-dumping calculations. I don't have any comment on that at the moment, but I'll post this just in case anyone else wants to weigh in. 

Call for Papers: "Economic Constitutionalism: Mapping its Contours in European and Global Governance"

This is from the European University Institute and the University of Portsmouth:

Call for Papers: "Economic Constitutionalism: Mapping its Contours in European and Global Governance"

The School of Law at the University of Portsmouth and the European University Institute (EUI) are organising a 2-day international conference to explore the function and nature of economic constitutionalism within broader constitutional processes in the European and global legal orders. The conference will be hosted by the European University Institute in Florence on 14th and 15th June 2018. The deadline for submission of abstracts is 28 February 2018. For more information please visit the conference webpage.

Unforeseen Developments in the Solar Safeguards Case

This is from Inside US Trade:

U.S. Trade Representative Robert Lighthizer has asked the U.S. International Trade Commission for additional information in the Section 201 probe into solar imports, focusing in his request on so-called “unforeseen developments” -- an issue that sources say has contributed to U.S. losses in previous safeguard challenges at the World Trade Organization.

In a Nov. 27 letter, Lighthizer asked ITC Chairman Rhonda Schmidtlein for a supplemental report that includes additional information on “any unforeseen developments that led to the articles at issue being imported into the United States in such increased quantities as to be a substantial cause of serious injury.”

...

Trade lawyers told Inside U.S. Trade Lighthizer’s request for more information suggests a desire to shore up an area in which the U.S. has encountered problems in previous safeguard challenges at the WTO.

Some sources said the “unforeseen developments” issue has been behind U.S. losses in those prior challenges.

“The U.S. has lost every [Section 201] safeguard investigation challenged at the WTO,” one source told Inside U.S. Trade.

This request is an unforeseen development (pun intended!), and perhaps is a sign that the U.S. will be engaging positively with the WTO dispute settlement system.

Call for papers, panels & posters for the 6th SIEL Biennial Global Conference has been extended to December 20

From the folks at SIEL:

The call for papers, panels & posters for the 6th SIEL Biennial Global Conference has been extended to December 20, midnight GMT.

The Conference will be held from 12-14 July 2018 at American University Washington College of Law, Washington, D.C. Please keep the date!

Further information is available here.

U.S. Concerns About AB Members Serving After Expiration of Their Term

This is from the U.S. statement at the November 22 DSB meeting: 

7. APPELLATE BODY MATTERS

A. STATEMENT BY THE CHAIRMAN

B. APPELLATE BODY APPOINTMENTS: PROPOSAL BY ARGENTINA, BRAZIL, CHILE, COLOMBIA, COSTA RICA, ECUADOR, EL SALVADOR, EUROPEAN UNION, GUATEMALA, HONDURAS, HONG KONG, CHINA; MEXICO, NICARAGUA, NORWAY, PAKISTAN, PERU, RUSSIAN FEDERATION, SINGAPORE, SWITZERLAND, SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU; TURKEY, URUGUAY AND VIET NAM (WT/DSB/W/609)

• The United States thanks the Chair for his continued work on these issues.
• We are not in a position to support the proposed decision.
• Mr. Ramirez continues to serve on an appeal, despite ceasing to be a member of the Appellate Body nearly 5 months ago.
• In the U.S. view, we cannot consider a decision launching a selection process when a person to be replaced continues to serve and decide appeals after the expiry of their term.
• As noted in past meetings, the DSB has a responsibility under the DSU to decide whether a person whose term of appointment has expired should continue serving. The United States considers that Members need to discuss and resolve that issue first before moving on to the issue of replacing such a person.
• As also noted previously, the United States would welcome Mr. Ramirez’s continued service on the remaining appeal to which he was assigned prior to June 30. In fact, we do not understand any Member to object to his service on this appeal. In that circumstance, it should not be difficult for the DSB to take up its responsibility to adopt an appropriate decision.
• Mr. Chairman, the United States has continued to convene meetings to discuss this issue informally with a number of delegations. This outreach has been productive in that we believe we have heard a general recognition that the DSB has the authority to set the term of an AB member under DSU Article 17.2; it follows that the DSB has a responsibility to decide whether a person should continue serving beyond that term.
• We have also heard agreement from several delegations that Rule 15 raises difficult legal questions that the DSB should address.
• In the course of our engagement, we have not heard delegations reject the importance of the issue we have brought to the DSB’s attention. To the contrary, we have heard a willingness of delegations to work together on this issue to find a way forward.
• We therefore will continue our efforts and our discussions with Members and with the Chair to seek a solution on this important issue.

The specific issue here is whether Appellate Body Members can continue to serve and decide appeals after their term expires. Here is Rule 15 of the Appellate Body Working Procedures:

Transition

15. A person who ceases to be a Member of the Appellate Body may, with the authorization of the Appellate Body and upon notification to the DSB, complete the disposition of any appeal to which that person was assigned while a Member, and that person shall, for that purpose only, be deemed to continue to be a Member of the Appellate Body.  

Under this rule, the Appellate Body is able to authorize this extended service on its own, and simply has to notify the DSB of its action. The U.S. concern here seems to be that the DSB is not playing a sufficient role in the extension of Appellate Body Member terms in these circumstances.

Is there some role the DSB could play that would satisfy everyone? Requiring a consensus at the DSB in favor of extending service could be a mistake, because a party facing an appeal it expects to lose would have a reason to object to the extension, in order to slow down the Appellate Body's work. Instead, perhaps the reverse consensus rule could be useful here: The Appellate Body Member's term would be extended by the DSB unless all WTO Members were opposed.

People on the ground in Geneva may have a better sense than I do of the discussions that are taking place. Is the U.S. making specific proposals, along the lines of this one or something else? How are other Members reacting to such proposals? It seems like there must be a reasonable resolution here.

Clarifying Some ISDS Confusion

I had a recent twitter exchange that baffled me at first, but eventually clarified something in the ISDS debate that I have come across before and found confusing.

Sometimes ISDS critics, including me, will say something along these lines: "Disputes between foreign investors and host governments can usually be handled in domestic courts." What I mean by this, and what I think others mean, is that many countries have domestic laws that offer something similar to some of the substantive protections in investment treaties, and foreign investors can rely on those domestic laws and bring a complaint in domestic court. For example, many countries have a domestic counterpart to international protections against expropriation without compensation, and also have due process-type standards that mirror the minimum standard of treatment. These laws could provide the basis for a domestic complaint.

From what I gathered in that twitter exchange, however, some ISDS supporters are interpreting "disputes could be handled in domestic courts" to mean that critics want to take out the procedural step of ISDS, but leave the substantive investment treaty protections in place and have them litigated in domestic court. In other words, the supporters think the critics are advocating domestic complaints based on treaty obligations such as expropriation, or minimum standard of treatment, or NT/MFN.  The response of ISDS supporters to this perceived argument is that international law in domestic courts doesn't work that way in most legal systems, and you could not effectively litigate treaties in domestic court in this way.

(Maybe that's not what ISDS supporters are saying, but that's how I interpreted my twitter exchange).

With that in mind, let me just clarify. I am not suggesting, and I've never heard any ISDS critic suggest, that we should leave current investment treaty protections in place and litigate them in domestic courts instead of litigating them through ISDS. Rather, my view is that we should remove the substantive protections relating to expropriation (direct and indirect) and the minimum standard of treatment from investment treaties entirely, and rely on the domestic law equivalents to handle these kinds of issues (if some countries do not have such laws, an arbitration clause in the investment contract is a good alternative, although it would be even better if the domestic legal system added those protections). As for non-discrimination obligations such as NT and MFN, we can leave them in place in the treaties, but litigate them under state-state dispute settlement through the treaty itself (not in domestic courts).

That may or may not clarify things for others, but I think it helped me understand this particular issue better (assuming I understood that twitter exchange).

ASEAN Law Conference, December 7-8, 2017, Singapore

Law professor Pasha Hsieh sends the following:

Singapore Management University (SMU) School of Law will hold the ASEAN Law Conference on December 7-8, 2017. Speakers and commentators include colleagues from various universities and governments, the ASEAN Secretariat, the World Bank and Sidley Austin LLP. The program is available at https://cebcla.smu.edu.sg/conference/asean-law-conference. Questions can be directed to Conference Organizer Pasha Hsieh ([email protected]).

Synopsis

The fast-growing Association of Southeast Asian Nations (ASEAN) has been attracting the attention of governments and business. ASEAN trade agreements are also critical to the prospect of the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership. The legalization of the ASEAN Economic Community (AEC) and ASEAN’s external agreements with major Asia-Pacific economic powers (China, Japan, Korea, India, Australia and New Zealand) provide a valuable case study of the New Regional Economic Order.
 
A comprehensive legal analysis of the concept of ASEAN law in national, regional and global contexts is urgent and necessary. The objective of the ASEAN Law Conference is to produce a detailed publication on ASEAN law under the new AEC Blueprint 2025 and its impact on conventional theory of regional integration. In particular, the conference focuses on the impact of regional agreements on the business and commercial aspect of laws. From a comparative law perspective, case studies on the laws of Indonesia, Myanmar and Vietnam will add to the existing literature. Moreover, the conference will examine the implications of mega-regionals and EU agreements for ASEAN law. Hence, this conference will offer a fresh view of the legal perspective of Asia-Pacific regionalism and bridge the gap between academia and practice.

Guest Post on Bilateral Agreements as an Option to Living through the WTO AB Crisis

This is a guest post from Brazilian trade lawyer Luiz Eduardo Salles

 

BILATERAL AGREEMENTS AS AN OPTION TO LIVING THROUGH THE WTO AB CRISIS 

The trade law community’s hottest topic these days has been the crisis stemming from the US’ persistent refusal to appoint new Appellate Body members. Indeed, the US’ tactic has the potential to paralyze the WTO dispute settlement arm, and more dramatically, the entire rules-based multilateral trading system (see, for instance, Shaffer, Elsig and Pollack here: https://www.huffingtonpost.com/entry/the-slow-killing-of-the-world-trade-organization_us_5a0ccd1de4b03fe7403f82df). It is thus brainstorming time, and a number of ideas are up for grabs. I would suggest that WTO members also consider using bilateral procedural agreements not to appeal specific panel reports. This could help alleviating the burden on the Appellate Body in the short to medium term, without requiring significant institutional change. 

From an institutional perspective, three main alternatives have been suggested to deal with the deadlock in WTO dispute settlement. These are (1) amending the Working Procedures of the Appellate Body to prevent new appeals (see Charnovitz here: http://worldtradelaw.typepad.com/ielpblog/2017/11/how-to-save-wto-dispute-settlement-from-the-trump-administration.html and the discussion in the comments section); (2) resorting to majority voting in order to appoint new Appellate Body members (see Kuijper here: http://worldtradelaw.typepad.com/ielpblog/2017/11/guest-post-from-pieter-jan-kuiper-professor-of-the-law-of-international-economic-organizations-at-the-faculty-of-law-of-th.html#comments and the discussion in the comments section); (3) establishing an agreement among like-minded WTO members (which would ideally mean every member but the US) replicating WTO dispute settlement without the US (see Kuijper, above link and discussions in the comments section).  Any of these institutional alternatives would require broad and consistent support, which seems implausible in the short to medium term. And, while the  forthcoming Ministerial in Buenos Aires might offer just the occasion for some action by the broader Membership (probably but for the US), each of the above alternatives also risk inflicting a lot of pain at the trade system and may be doing more harm than good.  Arguably, one should also consider less radical, more mundane procedural solutions that may help alleviate the burden on the Appellate Body while dust settles – and hoping that the dust will eventually settle. After all, it is brainstorming time. 

From a procedural perspective, the alternative that has been more forcefully suggested is resorting to arbitration under Art. 25 DSU as a proxy to appeal proceedings (see, for example, Andersen et al, here: http://graduateinstitute.ch/files/live/sites/iheid/files/sites/ctei/shared/CTEI/working_papers/CTEI-2017-17-.pdf). This alternative is attractive for several reasons. First, it avoids overburdening the Appellate Body at such difficult times. Second, it does not require any agreement beyond the specific parties to disputes. Arbitration can be employed in any case, provided that the disputing parties agree. In addition, because arbitration is a highly flexible mechanism that is embedded in the DSU itself, there would be no disruption within the WTO. From the parties’ perspective, they could move on with the proceedings while the Appellate Body remains impaired. More broadly, if enough parties accept to use this mechanism as a temporary scape valve, the US’ hijacking the Appellate Body loses much of its sense in the short term. The WTO should then be able to breathe until dust settles – at least if dust does not take too long to settle. (Of course, if, unfortunately, dust does not settle, more drastic solutions will be required.) 

Parties simply agreeing not to appeal would be an even simpler alternative compared to arbitration as a proxy to appeals. While using arbitration would reproduce the current system, dispensing with appeals would simplify the current system on a case-by-case basis. Procedural agreements would share much of the advantages of the arbitration mechanism: avoiding an overburden on the Appellate Body, not requiring any institutional change, being apt for use in any case upon agreement by the parties. 

Moreover, procedural agreements would have certain advantages compared to appeals. Firstly, they would significantly reduce costs for parties. Thus, procedural agreements would be suited especially for some developing and least developed countries concerned about the spiraling complexity of WTO litigation. Secondly, procedural agreements drafted at the panel stage could be made contingent on the impairment of the Appellate Body – for instance, an agreement may provide that the waiver only applies if the AB does not have a certain number of members by a given date. 

Procedural agreements not to appeal would be no novelty in WTO dispute settlement. For instance, in Automotive Leather (DS 126), as part of their sequencing arrangements, the US and Australia agreed that both “will unconditionally accept the review Panel report and there will be no appeal of that report”. Other procedural agreements have been used by the US and Ecuador and Thailand, for instance, after the US defeats in several of the zeroing disputes (see DS 335 and DS 383).

Waiving appeals could also shorten WTO dispute settlement timeframes, leading to faster resolution of disputes. This has certainly been a consideration in prior procedural agreements. On the other hand, in politically charged cases (which WTO disputes often are), taking longer to reach an outcome could be important, in particular for respondents. In those cases, procedural agreements could be more difficult to achieve. (Indeed, the present crisis could be aggravated if parties deliberately appealed taking into account that the Appellate Body is presently impaired and will take longer to decide appeals). Yet, procedural agreements may also address the expected period of time for implementation, where the parties’ concerns regarding timeframes could be negotiated. In this sense, there would be no disadvantage in procedural agreements compared to arbitration. 

A more obvious obstacle to procedural agreements could be that the parties simply value the chance to appeal. If that is the case, and if the crisis remains, then arbitration could be used as a proxy to an appeal. Indeed, the Appellate Body is a correcting mechanism to avoid mistakes by panels. And so it is. However, if panels can and do err, it does not take much to realize that the Appellate Body can and does err just the same. In fact, whether there has been an error is also a question to which there can be a wrong answer. While the Appellate Body is, indeed, the jewel of the crown and an essential legitimizing factor for WTO dispute settlement, living without it, at least in some cases, may be necessary to avoid a complete burnout.   

How Members can use arbitration under Article 25 of the DSU as an alternative means for seeking appellate review of panel reports at the WTO

Some of my old friends and colleagues from Geneva have a new paper (available as a CTEI Working Paper here) in which they explain that DSU Article 25 is drafted in terms that are sufficiently flexible to allow an appellate process that replicates closely the essential features of the process under DSU Article 17.  Further, Article 25 decisions are binding on the parties to the dispute, and enforceable in the same way as adopted panel and Appellate Body reports, including through recourse to DSU Articles 21 and 22.  They conclude Article 25 could be used to allow Members, who so wished, to continue to enjoy the benefits of WTO appellate review.

For those in Geneva, on Monday, 27 November 2017, from 12:30-13:30, the Graduate Institute is hosting a discussion on the topic of “Deadlock at the WTO: pathways to maintaining an effective system for appellate review”, which will include a presentation of the paper.  An invitation to this event can be found at: http://graduateinstitute.ch/lang/en/pid/11764/_/events/psig/2017/deadlock-at-the-wto-pathways-to.

2017-2018 SIEL/JIEL/OUP Essay Prize

This is from the SIEL, JIEL & OUP:

A prize has been established by the Society of International Economic Law (SIEL), Journal of International Economic Law (JIEL) and Oxford University Press (OUP) for the best essay submitted on any topic in any field of international economic law. The 2017-2018 SIEL/JIEL/OUP Essay Prize competition is now open, and authors meeting the stated conditions are warmly encouraged to send their submission by 16 FEBRUARY 2018. For further details: http://www.sielnet.org/essayprize.

Social and Environmental Protection in EU Anti-Dumping Calculations

This is from the provisionally adopted text of the amended EU AD/CVD regulation (I think I'm stating that correctly, but someone please correct me if I have it wrong!), relating to the use of analogue countries in constructing a normal value:

Article 1

Regulation (EU) 2016/1036 is amended as follows:

(1) In Article 2, the following paragraph is inserted:

“6a. (a) In case it is determined, when applying this or any other relevant provision of this Regulation, that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions within the meaning of point (b), the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks, subject to the following rules.

The sources the Commission may use include:

– corresponding costs of production and sale in an appropriate representative country with a similar level of economic development as the exporting country, provided the relevant data are readily available; where there is more than one such country, preference shall be given, where appropriate, to countries with an adequate level of social and environmental protection;

(emphasis added)

Note that the regulation says "may use," and also that "where appropriate" leaves a lot of scope for discretion in the application of the regulation. As a result, an "as such" challenge could be difficult here. WTO Members may have to wait for the provision to be applied before bringing a complaint.  

So how will this provision be applied so as to give "preference" to "countries with an adequate level of social and environmental protection" as analogue countries? In what situations is it "appropriate" to do so? And can this be done consistently with the AD Agreement? I'm really not sure what the EU authorities have in mind here, so we'll just have to wait and see. I imagine they are hoping that WTO panels and the Appellate Body will give them a fair amount of deference, otherwise there is a good chance they will be found in violation. It's hard to see how such a methodology makes any sense in the context of a calculation of dumping.

(If they changed the regulation to say that social and environmental protection will be a factor in determining whether countries are at a "similar level of economic development," that might make more sense.)

Addressing Panel Errors in the New NAFTA

This is from the updated USTR NAFTA negotiating objectives:

Dispute settlement: "Provide mechanisms for ensuring that the Parties retain control of disputes and can address situations when a panel has clearly erred in its assessment of the facts or the obligations that apply."

One way to address panel errors would be some sort of appellate review mechanism ... oh, right, never mind.

So how about this instead. There could be a formal mechanism under which parties can, in response to a panel ruling, register a specific objection to a panel's interpretation or application of a legal obligation, and propose an amendment (Article 2202) or an interpretation by the Free Trade Commission (Article 2001) in response. The other NAFTA parties would be required to participate in meetings to discuss the proposals.

This doesn't guarantee a reversal of the panel's approach for future cases, but it encourages parties to pursue their concerns by establishing a process to discuss them. 

Will There Be a Lighthizer-Liberal Alliance on Trade?

This is from the Daily Beast:

During his first six months in office, Donald Trump’s top trade official met with a host of companies, trade associations, and industry groups. He also carved out a little time for an unsuspected visitor: an employee of Ralph Nader’s former progressive nonprofit.

Lori Wallach, the director of the group Public Citizen’s global trade arm, met with U.S. Trade Representative Robert Lighthizer in May and June, according to a copy of his schedule released through the Freedom of Information Act. In fact, she was one of the very few individuals with whom Lighthizer had multiple sit-downs during that time period.

...

“I’ve known Bob Lighthizer for a long time because there are not a lot of people who are trade experts and who know the substance of the agreements and the laws very well,” Wallach said in an interview on Monday. “I have closely followed his work. I’ve learned stuff from his perspective.” 

Can Lighthizer make enough changes to the U.S. trade agreement model to bring liberals/progressives on board? Phil Levy sees some possibilities here, but in the end is skeptical:

... So however much Lighthizer declares that he is solely concerned with pleasing the president, he would ultimately need to build a congressional majority to get any trade deal passed.

Could he draw substantial Democratic support? There are a number of reasons one might think so.

First, many of the criticisms that President Trump has lodged against trade agreements and NAFTA sound much closer to traditional Democratic complaints than to Republican stances. As one example, the administration’s opposition to Investor State Dispute Settlement fits well with the thinking of Sen. Elizabeth Warren (D-MA) and Lori Wallach of Public Citizen, two ardent critics of the TPP. Sen. Sherrod Brown (D-OH), another inveterate trade critic, explicitly spoke of a new trade coalition with “a lot of Democrats and some Republicans.”

Second, the president has shown an openness to working with Democrats, at least when it came to the debt ceiling; an immigration deal has proven more problematic. But if the administration does decide to cross the aisle for support, here are four questions to consider:

1. Can Democrats join a pro-trade coalition piecemeal? The coalition of critics of recent trade deals brings together groups with diverse interests, from labor matters to investment regulation, environmental issues and beyond. If one group gets what it wants, will it back an agreement? Or hold out in solidarity with its coalition partners?
2. Is there any overlap between what critics want and what the other countries would accept? While winning congressional majorities in support of trade deals has been a Herculean task, it is only half the battle. First, there must be a deal. Mexico and Canada have each set out their own “red lines” in the NAFTA renegotiation. Their demands are much more in line with the stances of traditional trade supporters than the critics'.
3. Will Democrats be able to separate trade from other issues? While President Trump’s trade critiques may hold a certain appeal to fellow critics, Democrats in general have been less than enamored of the 45th president. In one recent poll of 900 adults, 89% of Democrats disapproved of the president while 7% approved. Congressional Democrats have stood in opposition to the president on key issues such as health care and tax reform. Would they really be eager to deliver him a victory on trade?
4. Does an alliance with Democrats gain more votes than it loses? One reason the “deal” on immigration ran into trouble was that Republicans control both chambers of Congress. If they disapprove of a deal, it likely will not come to the floor. Many of the trade critics’ stances – and some of Lighthizer's – are antithetical to those of key Republican leaders on trade, such as Kevin Brady, a Texas Republican and the chairman of the House Ways and Means Committee. This is at least as true of key constituencies, such as the business and agricultural communities, whose support is essential to getting trade legislation through.

...

None of this is to reject the goal of restoring bipartisan support for trade agreements. It just seems unlikely that such a coalition will emerge from the starting point of extreme trade skepticism that President Trump and Lighthizer bring to the table. 

Shaffer, Elsig and Pollack on the Appellate Body Reappointment Crisis

This is from Gregory Shaffer, Manfred Elsig and Mark Pollack: 

The Trump administration threatens to end the world’s trade court, the Appellate Body (AB) of the World Trade Organization (WTO), by blocking the appointment of new AB judges. In doing so, it risks destroying the rules-based trading system that the U.S. constructed after the end of the Cold War.

The U.S. cites two reasons for its actions. ...

The second argument—that AB members should cease working on cases after their term expires— may seem defensible at first impression. Yet, there are strong counter-arguments against it, based on law, practice, and policy.

First, the Working Procedures of the WTO Appellate Body, created in 1996, provide for the practice: “A person who ceases to be a Member of the Appellate Body may, with the authorization of the Appellate Body and upon notification to the DSB, complete the disposition of any appeal to which that person was assigned while a Member.” This procedure is normal for judges with fixed terms, as reflected in the Rules of the International Court of Justice (Article 33), as well as those of the United States own International Trade Commission (Section 1330 of the U.S. Tariff Act).

Second, this is longstanding WTO practice, and occurs regularly in the years when there is AB turnover. In total, AB members have completed work on panels in fourteen cases after their terms expired. If normal timelines are kept, the extension is for a matter of days or weeks.

Third, there is a reason for the practice. The WTO Dispute Settlement Understanding provides that AB members shall complete appeals in 60 days “as a general rule,” and “in no case shall proceedings exceed 90 days.” The timelines are tight, much tighter than for other courts, and it was the U.S. that insisted on them. If an AB process has already started, there is simply no time for a new judge to step in.

In short, the AB practice is neither irregular, nor new, nor unfounded. It has been in operation for over twenty years, with no complaint from the US or other members.

Things I Noticed in USTR's Updated NAFTA Negotiating Objectives

USTR's updated NAFTA negotiating objectives are here.  These are a few new additions that jumped out at me, with some brief comments:

---------------------------------------

Government procurement: "Ensure reciprocity in market access opportunities for U.S. goods, services, and suppliers in Canada and Mexico."

I'm not sure reciprocity means what they think it means: https://www.cato.org/blog/use-abuse-reciprocity-trade-policy

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Dispute settlement: "Establish procedures to ensure that panels are composed in a timely manner and with the appropriate expertise."

Some suggestions on panel composition are here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3047876

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Dispute settlement: "Provide mechanisms for ensuring that the Parties retain control of disputes and can address situations when a panel has clearly erred in its assessment of the facts or the obligations that apply."

This one worries me, as it may be part of a push for "softening" dispute settlement.

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General provisions: "Provide a mechanism for ensuring that the Parties assess the benefits of the Agreement on a periodic basis."

As long as there is no automatic sunset, this seems fine.

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Investment: There were reports that the U.S. wants indirect expropriation and minimum standard of treatment out, but I still see something in this area:

"Establish rules that reduce or eliminate barriers to U.S. investment in all sectors in the NAFTA countries, including the following rules: ...  Prohibition on expropriation without prompt, adequate and effective compensation, consistent with U.S. legal principles and practice; and A minimum standard of treatment under customary international law, consistent with U.S. legal principles and practice."

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Trade in services: "Retain flexibility for U.S. non-conforming measures, including U.S. non-conforming measures for maritime and long-haul trucking services."

That's a very polite way of saying "more protectionism"!

Guest Post from Pieter Jan Kuijper: The Standard of Review in Anti-Dumping Disputes: An Un-American View

One of the important recurring issues among the US problems with the case law of the Appellate Body is the standard of review in anti-dumping disputes. The relevant text was changed at a very late stage of the Uruguay Round negotiations, after most of the texts were closed. Belatedly a group of US congressional assistants, mostly from the House Ways and Means Committee, descended on Geneva, demanding the reopening of certain texts and issues, since otherwise the US Congress would not agree, or so the other delegations were told. One of their main demands was modification of Article 17(6) of the Anti-Dumping Agreement (ADA). Simon Lester recently gave what amounts to an American take on this issue in his IELP blog.

What is now Article 17(6)(i) ADA was relatively uncontroversial, as it represented the “non-de-novo-review” rule, also known as “broad margin of appreciation” in European administrative law systems, although written in a typical US legislative style.  Subparagraph (ii) of Article 17(6) was more contested.[1] Originally the US proposed only what is now the second sentence, which came straight from a 1984 US administrative law case, the so-called Chevron case. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), discussed in John H. Jackson and Steven P. Croley, ‘WTO Dispute Settlement Procedures, Standard of Review and Deference to National Governments’, 90 AJIL 1996, 193 – 213.( Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), discussed in John H. Jackson and Steven P. Croley, ‘WTO Dispute Settlement Procedures, Standard of Review and Deference to National Governments’, 90 AJIL 1996, 193 – 213.) It is obvious that the other delegations were less than enthusiastic about importing a principle of US administrative law into a treaty text; a principle, moreover, that seemed needlessly to conflate principles of interpretation with the question of granting discretion to the administrative authorities in the application of the law. What was more: a US attempt to have the application of Chevron deference accepted in a GATT anti-subsidy case had been rejected by a GATT panel report that was subsequently blocked by the US. (GATT panel report, doc. SCM/185 US – Countervailing Duties on Lead and Bismuth Carbon Steel Products, 18 November 1994, paras 368-371). To cut a long story short, after furious negotiation under enormous time pressure, the compromise was the present text of Article 17(6) (ii) ADA: a reference back to the “customary rules of interpretation of public international law” (also mentioned as the general rule of interpretation in Article 3(2) of the DSU), followed by the US text representing Chevron deference.

Why could both the US and other parties agree to this compromise? The US certainly believed that it had won something and has been very frustrated for a long time that the Appellate Body has never found reason to apply the second sentence, which embodies the US Chevron principle. The others, however, had hoped precisely for this result, and some even expected it. They realized that the customary rules of interpretation of international law as laid down in Articles 31 and 32 of the 1969 Vienna Convention on the Law of Treaties in principle laid down a complete recipe for interpretation of treaty provisions. (A direct reference to Arts. 31 and 32 could not be agreed during the Uruguay Round, as France and the US among others had not (and have not) ratified the 1969 Vienna Convention). Hence, any tribunal that applies this recipe, in principle should always arrive at one, and only one, possible interpretation (perhaps with very, very rare exceptions). Thus, the risk of an application of the deference doctrine of one particular Member State (the US) in WTO litigation would be minimal.

The others’ expectation about the (non)- recourse to the second sentence – which they so much disliked – has been proved right, because the Appellate Body has clarified the WTO agreements, including the ADA, in conformity with the customary rules of interpretation and thus has seen no reason so far to have recourse to the second sentence of Article 17(6)(ii) ADA. That is entirely in conformity with what the others believed they bargained for, namely at most a very minimal possibility to apply the second sentence. Given their disgruntlement at these late stage negotiations, they did not want to make the US any the wiser about their reasons for accepting the compromise. The US simply made a bad judgment during this hurried negotiation, probably for want of understanding of interpretation in international law in the new negotiating team sent from Congress. Should the US now, after over 20 years, be helped by other WTO Members to repair their negotiation error, after having taken the Appellate Body hostage? That would be decidedly an un-American thing to do, especially under the Trump administration.

 

[1] The full text of Art. 17(6)(ii) ADA reads as follows: “the panel shall interpret the relevant provisions of the Agreement in accordance with customary rules of interpretation of public international law. Where the panel finds that a relevant provision of the Agreement admits of more than one permissible interpretation, the panel shall find the authorities' measure to be in conformity with the Agreement if it rests upon one of those permissible interpretations.”

My two cents on the US notifications proposal

The posts by Simon and Inu on the US notifications proposal help to bring to light the important but often ignored issue of notification in WTO agreements. As I've just finished an article on the implementation of the WTO transparency obligation by China, I'd like to provide some observations based on the Chinese experience:

1. In the day-to-day implementation of the notification obligation, you need not only the trade ministry but also the cooperation of many other government agencies. Often, the trade ministry does a good job of notifying matters under its purview, while the other ministries tend to be lacking in their notifications for various reasons. In many cases, even the trade ministry might not be aware of trade-related measures by other agencies, let alone notifying them. Thus, having a stricter notification requirement could give the trade ministry the leverage to gather information from the other agencies, but it could also hurt its relationship with the other agencies;
2. Another reason for the lack of notifications could be due to the low priority attached to such issues by officials. For example, while officials in the trade-related ministries such as MOFCOM have higher levels of sensitivities of WTO obligations, they are often too busy to focus on the transparency obligations. For them, the more important work is often to ensure the consistency with the substantive obligations of the WTO. Thus, the implementation of procedural obligations such as transparency is often pushed to bottom of the to-do list. Moreover, as obligations such as translations and TRM only benefit foreigners, they are often side-lined by the officials who have to give priorities to serving their domestic constituencies.  
3. The US insistence on concretizing the timeline for notifications could well be a reflection of its frustrations over China's alleged failure to meet its notification requirements under the Transitional Review Mechanism, as I noted in my article,

"After the timing issue was resolved, another battle was fought over the timetable for the submission of the information required in the review. The Accession Protocol only specifies the timetable for the review by the General Council by noting, in Annex 1B, that China “shall submit any information and the documentation relating to the review no later than 30 days prior to the date of the review.” As to the reviews by the subsidiary bodies, there is no such explicit requirement and China is only required to “provide relevant information, including information specified in Annex 1A, to each subsidiary body in advance of the review.” The US again took an expansive interpretation by proposing the following: first, China should submit the relevant information set out in Annex 1A 90 days before the respective meetings; second, other Members shall submit their specific questions for China 60 days before the meeting; and three, China should submit its responses to Members' questions 30 days before the meeting. This proposal was again rejected by China, which insisted that no specific time-frame or procedure may be imposed as they go beyond the stipulated obligation under Section 18. In the end, China only submitted the relevant information, on average, three days before the scheduled meeting. Such late submission made it very hard for the other Members to react to China’s submissions.

    4. One way of solving the notification problem could be outsourcing the translation work required for the notifications. This is what China did

"The MOFCOM has been outsourcing its work since Feb 2015, when the Department of WTO Affairs issued a call for tender for the translation of the documents used in China’s WTO notification and review process. In March 2015, two contractors won the bid, with the top choice being Zhonglun, a leading Chinese law firm.While the scope of this tender covers only the documents used in China’s WTO notification and review processes, there is no reason why the same approach could not be adopted for the translation obligation as well."

Interested readers can download the full paper here. 

 

 

 

Guest Post from Pieter Jan Kuijper on the US Attack on the Appellate Body

Guest post from Pieter Jan Kuiper, Professor of Law at the Faculty of Law of the University of Amsterdam:

What to do about the US Attack on the Appellate Body?

Recently Steve Charnovitz has advanced the idea (IELP blog 3 Nov 2017) that the Appellate Body should use its power to amend or redraft the Working Procedures for Appellate Review without the approval of the Members by closing itself to further appeals, once the number of its members falls to four. This should be done in such a way that instituting an appeal from a panel report would at the same time trigger the completion of the appeals procedure. This would have the effect of rendering the panel report final unless rejected by a negative consensus. This solution – which skirts the edges of the law - would demand great unity and decisiveness inside the Appellate Body and support from a large majority of the Member States of the WTO.

It is probably much better – and fairer to the remaining members of the Appellate Body - to find a solution in the political organs of the WTO or among a large group of Member States, excluding the US, outside, but close to the WTO. A solution, moreover, that should recognize that the WTO is about to lose one of its two main functions so carefully constructed in the ‘nineties: the dispute settlement function that guarantees a peaceful solution to trade disputes and helps to prevent them from ballooning into political disputes that might well contribute to violent conflict between states further down the road. If this capacity of the WTO is destroyed, we will not be able to reconstruct it for at least a generation.

This is no small matter, it is a true emergency. Times of emergency justify emergency measures, also in the law of international organizations. An old example is the Uniting for Peace Resolution of the General Assembly of the UN (GA Res. 377(V), of 3 November 1950), which empowered the General Assembly to act in cases of threat to the peace or breach of the peace when, due to the veto of one of its permanent Members, the UN Security Council failed to exercise its ‘primary responsibility’ for maintaining international peace and security. Emergencies also allow states to invoke the clausula rebus sic stantibus in treaty law (Art. 62 Vienna Convention on the Law of Treaties). They allow states and organs of international organizations to take measures to take decisions that are arguably legal, but that they would not take under normal circumstances. The ambush killing of the Appellate Body by the US clearly falls outside “normal circumstances.”

The WTO itself offers the opportunity of a simple solution, which can be temporary and proportionate, only for as long as the US continues to obstruct the replenishment and functioning of the Appellate Body. This is the recourse to majority voting. Often referred to as “the nuclear option” in the WTO Secretariat, it has hardly ever been used. Nevertheless recourse to majority voting is perfectly legal, once it is clear that consensus cannot be reached (Art. IX:1 WTO Agreement).

Members of the Appellate Body are appointed by the DSB and Article 2(4) DSU determines that the DSB decides by positive consensus (except in the case of adoption of panel reports). However, the consensus rule of the DSU has to be interpreted in the light of Article IX:1. All the more so because Article XVI:3 WTO clearly creates a hierarchy between the WTO Agreement and the other Multilateral Trade Agreements, including the DSU. In the end, therefore, the DSU can have recourse to majority voting. Moreover, the (re)appointment of Appellate Body Members could be placed directly on the agenda of the General Council of the WTO, as has happened in the past, when Members wanted to censure the Appellate Body for making rules related to the handling of amicus curiae briefs (Special Session of the General Council of 22 November 2000, see WTO doc. WT/GC/M/60).

Direct appointment of AB members by the General Council applying majority vote, under the strict limitation that this is an exceptional one-off measure connected to the threat of malfunctioning of the Appellate Body, and accompanied by explicit openness to further discussions with the US, seems to be the best possible option for action inside the WTO. Ideally, merely the threat of majority voting may create leverage to arrive at consensus. For example, when the accession of Russia to the WTO was taken hostage by Georgia to resolve its bilateral conflict with Moscow, a clear hint to the effect that Georgia might well be outvoted in the WTO if need be, made the Georgian government rethink the issue.

It might be important not to single out the US too much. In that case, the General Council could take a decision, obviously needing the support of a very large majority, identifying certain categories of decisions that in future could be taken by such a super-qualified majority. The nomination of Appellate Body members would have to be one of these categories. This is a technique of simplifying decision-making in international organizations without amending their founding treaties that has been tested to good effect in the OECD, another organization seemingly stuck in the straightjacket of consensus, but in need of increased effectiveness of decision-making after its membership nearly doubled in the last two decades (OECD doc.C(2006)/78/Rev. 1, 10 Feb 2011).

However, if WTO Members are so strongly opposed to majority voting as to shy away from action inside the WTO, they will have to seek a solution outside the WTO. Such a solution requires a large number of Member States (which should at least include the major trading powers) immediately to start a negotiation group called “The Real Friends of Dispute Settlement”, from which the US would be excluded. As soon as the US would have caused the membership of the Appellate Body to fall to a number, which would make it obviously impossible to deliver AB reports within or near the deadline of 90 days, this group would already have drawn up a new treaty. It would contain a procedure for appellate review only, or even a complete dispute settlement procedure, based on existing provisions of the DSU with the fewest changes possible, as otherwise the drafting would take too long. Provisional application of this treaty should be possible in order to ensure that it would become operational very quickly. The sitting members of the Appellate Body would resign and be taken over as members of the Appellate Tribunal of the new treaty, to be joined by newly selected members. On a voluntary basis, the Members of the Appellate Body Secretariat could leave the WTO as well and join the new Appellate Tribunal. Moreover, this new Tribunal could be opened up as Appeals Tribunal from decisions of the dispute settlement mechanisms of regional FTA agreements. The costs of this new Tribunal could be defrayed by member contributions, which would not be too onerous for the members, since their contributions to the WTO budget should drop, as the expenses for the Appellate Body (and perhaps also the panel procedures) would become redundant. Insofar as having recourse to this treaty and its dispute settlement mechanism were to imply a breach of obligations under the DSU, and notably of the compulsory nature of the procedure to seek redress of a violation of obligations under the WTO Agreements (art. 23 DSU), this could be justified by invoking the rebus sic stantibus doctrine.

On balance the majority vote solution is probably the best because it permits an exact dosage of the “emergency measures” and it keeps the Appellate Body anchored inside the WTO. It may lead to the US leaving the WTO in a huff, but that may be repaired under a future administration. Moreover, an impulsion to walk away from the WTO may confront the US with the reality that leaving will make it into an international trade pariah that can be treated in trade matters as other countries please. It might finally dawn on even the Trump administration that such is not a pleasant perspective even for what now is still the second trading nation in goods and services in the world.

P.J.Kuijper

The U.S. Pushes for Penalties on Failure to Notify at the WTO

In an earlier post, Simon mentioned that the United States has put forward a new proposal ahead of the MC-11 meeting to “strengthen notification requirements.” The proposal lists a number of Agreements where notification requirements “constitute fundamental elements,” including:

Agreement on Agriculture
Agreement on Implementation of Article VI of the GATT 1994 (Anti-Dumping)
Agreement on Subsidies and Countervailing Measures
Agreement on Safeguards
Understanding on the Interpretation of Article XVII of the GATT 1994 (State Trading)
Agreement on Implementation of Article VII of the GATT 1994 (Customs Valuation)
Agreement on Import Licensing Procedures
Agreement on Rules of Origin
Agreement on Preshipment Inspection
Decision on Notification Procedures for Quantitative Restrictions (G/L/59/Rev.1)
Agreement on Trade Related Investment Measures
Agreement on the Application of Sanitary and Phytosanitary Measures
Agreement on Technical Barriers to Trade

My research focuses on the TBT and SPS Agreements, so I was curious about the contents of this proposal as it relates to these agreements. Though the document does not outline anything specific with regard to SPS, it does offer some detailed explanations on TBT (in addition to Fisheries Subsidies and Agriculture). On TBT it says the following:

Technical Barriers to Trade

15. The WTO Agreement on Technical Barriers to Trade has four main notifications requirements. Members inform the Committee of measures in existence or taken to ensure the implementation and administration of the agreement, under Article 15.2. Member 15.2 notifications include laws governing the transparent development of regulation and laws governing standardization, conformity assessment and metrology. Members also notify central government standardization bodies' acceptance and adherence to the Standards Code of Good Practice to the ISO/IEC Centre, according to Article 4.1. Members' bilateral and regional agreements are notified to the TBT Committee under Article 10.7. Last, Members notify proposed technical regulations and conformity assessment procedures, under Articles 2.9.2, 3.2 and 5.6.2 to the TBT Committee for WTO Member comment.

16. With regard to regular notifications of new laws implementing the TBT Agreement, acceptance of the Code of Good Practice, and notification of Agreements between Members, activity could be improved. While the total number of annual notifications of proposed technical regulations and conformity assessment procedures has gradually increased to over 2000 notifications and that trend is encouraging, there is still room for improvement given the disparity between those Members notifying and those that do not, with 83 Members not notifying any proposals in 2016.

First, I do agree that notification is an important element of the TBT Agreement, and improving it would likely be beneficial to addressing regulatory trade barriers, and fostering regulatory cooperation. However, I am a little puzzled as to how the specific proposal put forth by the U.S. would apply to this Agreement in particular. The annex of the proposal outlines ways in which the U.S. thinks notification can be improved. The section titled “Improvements to Specific Notification Requirements,” notes that for the TBT:

14. In order to strengthen the notification of proposed technical regulations and conformity assessment procedures, Members are strongly encouraged to use the WTO TBT Committee's recommendation on Coherent Use of Notification Formats.

The recommendation it is referring to can be found here. If this were it, I would find the proposal to be relatively uncontroversial because the U.S. has raised the issue of the format and clarification of past notifications for many years in the TBT Committee. But the rest of the proposal goes much further in laying out penalties for failure to notify. But what exactly constitutes failure to notify? I would like to highlight one point of the proposal in particular, which states the following in the Draft Ministerial Declaration annexed to the document:

5. That beginning in 2018, a Member that fails to provide a required notification under an agreement listed in paragraph 1(b) by the relevant deadline or has failed to provide any prior required  notification shall submit to the relevant committee by 1 November 2018 and by 1 November of each subsequent year an explanation for the delay, the anticipated time-frame for its notification, and any elements of a partial notification that a Member can produce to limit any delay in transparency. If a Member fails to provide the complete notification within one year of the deadline, the Secretariat shall research the matter and, in consultation with the relevant delinquent Member, provide a notification on its behalf.

The problem is, in the TBT Agreement the relevant deadline is not very clear cut (and I’m interested to hear comments from those who know the other Agreements better than I do to see if it’s the same). For instance, I am particularly concerned about the proposal identifying Article 2.9.2, which states:

2.9.2   notify other Members through the Secretariat of the products to be covered by the proposed technical regulation, together with a brief indication of its objective and rationale.  Such notifications shall take place at an early appropriate stage, when amendments can still be introduced and comments taken into account;

As someone who spends all her free time reading the meeting minutes of the TBT and SPS Committees, this brought up a red flag for me. What is “an early appropriate stage” in the proposal for a new technical regulation? This has certainly been a bone of contention for the U.S., which, if we remember not too long ago was pushing for the EU to adopt a similar “notice and comment” procedure in the TTIP talks. Delays or confusion in notifications is also a persistent issue raised by the U.S. as specific trade concerns in the TBT and SPS Committees. If you look at the data on notifications in just the TBT Committee for 2016, it is not surprising that the U.S. sees this as a problem as it is the clear leader in notifications.

The U.S. also pushed for enhancements in regulatory process in the TPP, but now that it’s out of that Agreement, one has to wonder whether this proposal is an attempt to salvage this agenda, and to give it broader application. I’m looking forward to seeing how other WTO Members react.

Pakistan Challenges the "Break the Causal Link" Approach as inconsistent with Article 15.5 of the SCM: Unlikely to succeed?

In EU – PET (Pakistan), the EU Commission began, as expected, its causation analysis by considering  that a causal link existed between subsidized imports and injury to the domestic industry. The Commission then assessed the “effect of other factors” and found that none broke this link. Thereafter, the Commission concluded that the imports from Pakistan have caused material injury to the EU industry.  

Before the Panel, Pakistan argued that the  EU Commission should have adopted the reverse approach. Namely, ensuring in  a  first stage that “the injurious effects caused to the domestic industry by increased imports are distinguished from the injurious effects caused by other factors” and then in a second  stage, determining that subsidized imports cause injury to the domestic industry.

For this purpose, Pakistan relied on the following observation of the Appellate Body in US – Wheat Gluten: 

[A]s a first step in the competent authorities' examination of causation, … the injurious effects caused to the domestic industry by increased imports are distinguished from the injurious effects caused by other factors. The competent authorities can then, as a second step in their examination, attribute to increased imports, on the one hand, and, by implication, to other relevant factors, on the other hand, “injury” caused by all of these different factors, including increased imports. 

The EU – PET (Pakistan) Panel disagreed with Pakistan on the basis that the Appellate Body clarified in US – Lamb, that the steps identified in US – Wheat Gluten “simply describe a logical process for complying with the obligations relating to causation”, and “are not legal 'tests' mandated by the text of the Agreement on Safeguards”. The Appellate Body stressed that “the method and approach WTO Members choose to carry out the process of separating the effects of increased imports and the effects of the other causal factors is not specified” in the Agreement on Safeguards, but that whatever methodology is followed “the final identification of the injurious effects caused by increased imports must follow a prior separation of the injurious effects of the different causal factors”.  Moreover, later cases concerning Article 4.2(b) of the Agreement on Safeguards , Article 3.5 of the Anti-Dumping Agreement  and Article 15.5 of the SCM have established that no method is prescribed in these provisions for satisfying the requirements of the causation analysis of the type contained in Article 15.5 of the SCM.

The EU – PET (Pakistan) Panel concluded that there was “nothing in either the SCM Agreement or jurisprudence indicating that the three-step methodology described in US – Wheat Gluten is mandatory in any circumstances presented in this case”. It  therefore rejected Pakistan's argument that the Appellate Body report in US – Wheat Gluten prescribes a methodology regarding causation analysis to which the Commission improperly failed to adhere.

There is a pending appeal ( WT/DS486/7, 5 September 2017)  by Pakistan relating to this issue. In this appeal, Pakistan does not hesitate to claim that  the “break the causal link” approach is inconsistent with Article 15.5 of the SCM. According to Pakistan:

the Panel erred in its interpretation and application of Article 15.5 of the SCM Agreement when rejecting Pakistan's claim that the European Commission's approach of finding a causal link between the subject imports and the observed injury and then inquiring whether any injury attributable to other factors ‘breaks the causal link’ previously found (the “breaking the causal link” approach) was inconsistent with Article 15.5.

It is likely that the Appellate Body would reject this claim after noting with the Panel that:

It was only after the analysis of other known factors revealed that they did not do so did the Commission “conclude[] that the imports from the countries concerned … caused material injury to the Union industry”.  It is therefore evident that the Commission allowed for the possibility that the analysis of other known factors could have negated its initial consideration that a causal link existed between subject imports and the observed injury to the domestic industry, as the Commission only made its final identification of the injurious effects caused by subject imports after separating and distinguishing the injurious effects of the other known factors.

In other words, the Panel considered that the EU  Commission sufficiently separated and distinguished the effects of other factors and did not simply “dismiss” the role of these other factors. In fact, the Panel agreed with Pakistan that there were  certain deficiencies in the Commission's analysis of specific other known factors. However, the Panel saw “ no reason to think that the use of the overall ‘break the causal link’ framework necessarily compelled their occurrence or would preclude their remedy”.

The Appellate Body would likely consider that this issue falls with the discretion of investigative authorities to adopt their own causal methodology since it is not specified in the SCM. For the Appellate Body, the decisive criterion is that the final identification of the injurious effects caused by subsidized imports must follow a prior separation of the injurious effects of  any other  known factors. Since the  Commission allowed for the possibility that the analysis of these other known factors could have negated its initial consideration, this decisive criterion seems satisfied.

The "Ardern Clause" in TPP: A Novel Approach to Curbing Investor-State Dispute Settlement

New Zealand's impressive new Prime Minister, Jacinda Ardern, is on the record as stating that investor-state dispute settlement (ISDS) must not be a part of any future trade agreements signed by New Zealand.  In the case of the Trans-Pacific Partnership (TPP, which is apparently now renamed clumsily CPTPP) Ardern has been caught in the difficult situation that New Zealand's partners have already agreed, more or less, to ISDS, as reflected in the detailed text of the draft provisions on investment.  Ardern and her advisers (or someone!) have come up with a truly ingenious solution-a way for New Zealand or effectively any TPP country that takes certain domestic legal steps to opt out of ISDS. 

According to the agreement announced yesterday ISDS will be suspended in TPP with respect to investment authorization, and also with respect to investment agreements between the host state government and the investor.    New Zealand already has a investment screening mechanism for all investments worth more than NZ $100,000,000.  It is possible to block or impose conditions on such investments.  In the case of investment agreements between the investor and the host state, New Zealand will have the policy of requiring the applicability of domestic law and domestic settlement.

If one takes together the carve out from ISDS both for investment authorization and for investment agreements, the result is that New Zealand, in any given case, could, without risking an ISDS claim against it for the very act of doing so, impose as a condition for authorization for an investment that the would-be investor sign an investment agreement with New Zealand that waives ISDS altogether, stipulating that all disputes between the investor and the host state be resolved under domestic law and through domestic courts.  New Zealand could adopt that approach for investments in areas that are sensitive from a pubic policy point of view, i.e. where the government doesn't want to risk an attack on its regulatory autonomy through ISDS.  Or it could adopt it as a general policy on investment authorization  On the other hand, in instances where it is particularly important to the investor to be protected by ISDS, I would think rather rare in the New Zealand context particularly, New Zealand would simply authorize the investment without any such conditions.

I'm by no means an expert in New Zealand law, and I don't know whether New Zealand would need to change its legislation on foreign investment, or regulations, in order to have a viable means to use the Ardern Clause to protect against ISDS in the way I'm describing.  These are doubtless matters that will be widely discussed and debated in the country in the coming weeks and months.  Other TPP countries might in the future, if ISDS skeptic politicians come into power, find that they can set up a similar approach to conditional investment authorization.   And, even above and beyond this, New Zealand has suggested it may seek collateral letters of understanding with specific TPP counterparties, curbing consent to ISDS.   In any case, with her "Ardern Clause" on ISDS, New Zealand's Prime Minister may well be entitled to her claim that now TPP is "a damned sight better." 

(Thanks to Mona Pinchis-Paulsen for pointing to useful sources for this blog post.)

   

Investment in the New TPP

This is from the Japanese government's list of "Suspended Provisions" in the TPP:

2. Investment Agreement and Investment Authorisation (ISDS applies to these)

9.1 Definitions - suspend “investment agreement” and “investment authorisation” and associated Footnotes (5 - 11)

9.19.1 Submission of Claim to Arbitration - a(i) B and C; (b)(i) B and C (investment authorisation or investment agreement), chausette, footnote 31

9.19.2 Submission of Claim to Arbitration, footnote 32

9.19.3 Submission of Claim to Arbitration - (b) delete investment authorisation or investment agreement

9.22.5 Selection of Arbitrators

9.25.2 Governing Law

Annex 9-L Investment Agreements

What does it mean that these provisions are suspended? Here's what New Zealand Prime Minister Jacinda Ardern says it means:

"There has been a narrowing of [investor-state dispute settlement clauses (ISDS)] provisions in three areas. One, ISDS no longer applies to investor screening. The second, anyone who takes up a contract with a Government is no longer able to sue through ISDS, but must go through domestic procedures instead. The third relates to financial services.

"New Zealand advocated strongly and managed to narrow those provisions around ISDS to a place where they now are similar to previous agreements New Zealand has signed, including the China FTA and the Malaysian FTA.

...

She says the most important concession New Zealand has won is making the Overseas Investment Act immune to ISDS challenges.

"The [Overseas Investment Office] and that process is exempt from ISDS clauses. That is probably one of the most important suspended clauses that we managed to negotiate."

Beyond that issue, New Zealand might try to get out of ISDS in the TPP altogether:

And there's the chance New Zealand could negotiate individual agreements with different countries around ISDS clauses.

"We've had talks with a number of other countries who in principle have agreed to side letters as well. Those will not be released until final ratification."

Suspended Provisions in the TPP

The Japanese government has posted a list of "Suspended Provisions" in the TPP. As I understand it, this means the provisions will be suspended if the TPP-11 go forward with the agreement, but could be restored if the U.S. decides to join later. Some of the most important suspended provisions relate to intellectual property:

9. Patentable Subject Matter - Article 18.37.2 and 18.37.4 (Second Sentence)

10. Patent Term Adjustment for Unreasonable Granting Authority Delays - Article 18.46

11. Patent Term Adjustment for Unreasonable Curtailment – Article 18.48

12. Protection of Undisclosed Test or Other Data- Article 18.50

13. Biologics - Article 18.51

14. Term of Protection for Copyright and Related Rights - Article 18.63

15. Technological Protection Measures (TPMs) - Article 18.68

16. Rights Management Information (RMI) - Article 18.69

These are a big deal, and should make some TPP critics happy (although I'm not sure if it will make them happy enough to support the TPP).

There are also a number of investment provisions that were suspended, but as far as I could tell, none of those relate to systemic issues about ISDS/investment protection.

More on Judicial Review of AD/CVD Measures

In response to my post of the other day, Müslüm Yilmaz of the WTO (and also a commenter on the post) point me to this book:

Domestic Judicial Review of Trade Remedies: Experiences of the Most Active WTO Members

Trade remedies, namely anti-dumping, countervailing measures and safeguards, are one of the most controversial issues in today's global trading environment. When used, such measures effectively close the markets of the importing countries to competition from outside for a certain period of time. Exporters that are faced with such measures can either try to convince their government to bring a case against the government of the importing country in the WTO or to use, themselves, the judicial review mechanism of the importing country. This second path has been, until now, largely unexamined. Domestic Judicial Review of Trade Remedies is the first book of its kind to examine in detail how the judicial review process has functioned and considers the experiences in the domestic courts of the twenty-one WTO members that are the biggest users of trade remedies.

The book has the following chapters:

• 2 - Canada: high deference, stark reality
  pp 11-34
• By Andrew M. Lanouette, Christopher J. Kent

• 3 - United States: judicial review: a cornerstone of trade remedies practice
  pp 35-54
• By John D. McInerney, Michele D. Lynch
• 
  4 - Mexico: quasi-judicial review of trade remedy measures by NAFTA panels
  pp 55-82

• By Jorge Miranda, Juan Carlos Partida

• 5 - Colombia: a complex court system with the possibility of three instances
  pp 83-106
• By María Clara Lozano

• 6 - Brazil: the need for enhanced effectiveness
  pp 107-128
• By Rabih A. Nasser, Luciana B. Costa
• 
  7 - Argentina: a well-structured but unsuccessful judicial review system
  pp 129-152

• By Mercedes de Artaza
• 
  8 - Peru: a sophisticated but underused judicial review system
  pp 153-172

• By Luis Alberto León, María Antonieta Merino
• 
  9 - The European Union: an imperfect and time-consuming system
  pp 173-196

• By Edwin Vermulst, Juhi Sud

• 10 - Turkey: a judicial review system in need of change
  pp 197-220
• By Müslüm Yilmaz

• 11 - Israel: a comparative study of two models
  pp 221-246
• By Arie Reich, Gill Nadel

• 12 - South Africa: a complicated, unpredictable, long and costly judicial review system
  pp 247-268
• By Gustav Brink

• 13 - Pakistan: an evolving judicial review system
  pp 269-286
• By Faizullah Khilji, Mazhar Bangash

• 14 - India: a three-tier judicial review system
  pp 287-312
• By Madhurendra Nath Jha

• 15 - China: an untested theoretical possibility?
  pp 313-336
• By Gao Henry

• 16 - Korea: increasing attention and new challenges
  pp 337-360
• By Jaemin Lee

• 17 - Indonesia: a judicial review system in dire need of restructuring
  pp 361-378
• By Erry Bundjamin

• 18 - Australia: judicial review with merits review
  pp 379-398
• By Stephen Gageler

• 19 - Countries with insufficient judicial review activity
  pp 399-422

I don't know how far the authors went with the data collection I had in mind, but this book seems like a great place to start!

What's In a Name? The new CPTPC3P0 Trade Agreement

It seems as though the TPP may be going forward, but is being rebranded slightly:

Countries in the Trans Pacific Partnership (TPP) trade deal have agreed on the core elements to move ahead without the United States, officials said on Saturday, after last-minute resistance from Canada raised new doubts about its survival.

...

The agreement, which still needs to be finalised, would now be called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), he said.

That's quite a mouthful! Do the new words add anything useful?

Sure, the TPP is "comprehensive," in the sense that it covers a lot of issues, but don't all trade agreements these days do so? What does it add to use this word? Canada and the EU used it in CETA, and maybe Canada liked it so much there that they want to continue with it, but I'm not sure how crucial it is.

As to "progressive," will every trade agreement from here on out be "the most progressive trade agreement in history"? Most high-profile, self-proclaimed American progressives seem to oppose trade agreements, and referring to trade agreements as "progressive" hasn't seemed to help with that. But maybe things are different in other countries. I will note, though, that putting "progressive" in the title may make it harder for the U.S. to join at some later date, if anyone is still hoping for that.

Freelance Analyst 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

We offer 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.)

We value those contributors whose flexible work-life schedules permit them to take on last-minute assignments (at least some of the time). Ideally, you will be able to take on multiple assignments per month, and spend 30-40 hours per month on average. You will be paid an hourly rate for your work.

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. Thus, if you intend to be working with a law firm or clerking for an arbitrator in the near term, we politely discourage you from applying.

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: a summary of the GAMI v. Mexico arbitral award in the style of IAReporter - with a run-down of the essential facts, key legal holdings, and a small amount of analysis that puts the award in light of other developments in the field of investment treaty arbitration.

The assignment should be no longer than 2000 words and should take less than 10 hours to complete. The assignment, along with your cv and short cover letter (less than 500 words please) can be submitted to [email protected].

 

The deadline for applications is December 11, 2017.

Judicial Review of AD/CVD Measures

That last post has me thinking about domestic judicial review of AD/CVD measures. AD Agreement Article 13 says: "Each Member whose national legislation contains provisions on anti-dumping measures shall maintain judicial, arbitral or administrative tribunals or procedures for the purpose, inter alia, of the prompt review of administrative actions relating to final determinations and reviews of determinations within the meaning of Article 11. Such tribunals or procedures shall be independent of the authorities responsible for the determination or review in question."  SCM Agreement Article 23 has a similar provision.

But these provisions don't say anything about the standard of review that must be applied, and it appears there may be some differences between countries on this. I sense there are a number of enterprising grad students reading this blog, some of whom may be looking for research projects. This might be a good one. What are the different standards of review, and what are the outcomes, in judicial review of AD/CVD measures in domestic courts/tribunals around the world?

Gathering this data could be challenging, as you might have to navigate different languages and different levels of online availability of the decisions. What might help is if WTO rules were adjusted to include a notification/publication requirement for these decisions. There are a lot of contentious issues out there related to trade remedies, but such a change seems like something everyone should be able to get behind. 

NAFTA Chapter 19 Data

A couple of my Cato colleagues and I are working on some data on NAFTA Chapter 19 disputes, but it has been slow going. In the meantime, a trade lawyer who prefers to remain anonymous put together some data and sent it to me. Taking into account NAFTA Chapter 19 decisions from 1995 until today, and excluding those related to remand redeterminations, the results of NAFTA Chapter 19 appeals look like this for each responding country:

• US:
• won 14
• lost 18
• split (partial win, partial loss) 12
• Canada:
• won 11
• lost 0
• split (partial win, partial loss) 5
• Mexico:
• won 8
• lost 8
• split (partial win, partial loss) 0

To clarify, this means that, taking the US as an example, for AD/CVD decisions by US investigating authorities, the US government won the NAFTA Chapter 19 appeal 14 times, the foreign respondent won 18 times, and there was a split 12 times. A split happens when there are multiple issues appealed, and each side wins some and loses some.

Symposium: Nationalism, Regionalism & Globalism: The Future of Economic Integration

I'll be at a trade law conference at Brooklyn Law School on Friday (along with a few others from this blog). Here are the details:

On November 10, 2017, the Dennis J. Block Center for the Study of International Business Law at Brooklyn Law School will host a symposium on “Nationalism, Regionalism & Globalism: The Future of Economic Integration.” The program is here.

Not long ago, globalization seemed to have a veneer of inexorable progress. Despite long-simmering controversies and moments of backlash, economic integration and its institutionalization was on the rise – in trade in goods, services, data, finance, and investment alike. By the early 2000s, multilateral organizations, ever-proliferating regional institutions, bilateral arrangements, and informal networks were struggling to keep the pace and mark their space in a globalized economy. But the picture looks very different today. After the financial crisis of 2008, and, more recently, the nationalist waves cresting in Europe and the U.S. since 2016, the future of economic integration is subject to considerable doubt. This conference will consider the shape of integration to come, focusing on the varying strategies and instruments by which States might pursue (or resist) global economic integration – at the multilateral, regional, bilateral, and even national levels – and what political and distributional effects these choices may entail.

The moment provides a rare opportunity to reconsider our path. Most abstractly, the time is ripe to revisit the normative case for ever-deepening globalization. Who have been the winners and losers of integration processes to date, and what do we know about how novel solutions might lead to different distributional results? Is there new reason to question whether aspects of integration have gone too far – e.g. in finance, regulatory standards, or foreign investment? Or has integration not gone far enough? Can supplementing deep economic integration with mechanisms for deeper political integration and social solidarity alleviate concerns? And what ought be the locus (or loci) of new integration projects? What are the implications, trade-offs, and political realities of multilateral, regional, or even bilateral strategies? On the one hand, the Trump administration has withdrawn the United States from its signature mega-regional arrangement (the Trans-Pacific Partnership (TPP)), and placed negotiations on another on hold (the Trans-Atlantic Trade and Investment Partnership (TTIP)) – all supposedly in favor of a nationalistic bilateral approach. On the other hand, the European Union, Canada, China, Japan, and others have signaled a willingness to pursue regional and mega-regional integration strategies with or without the United States. What are the prospects for such national, bilateral, and regional strategies? And whither multilateralism?

Participants 
Julian Arato, Brooklyn Law School
Eyal Benvenisti, University of Cambridge, Faculty of Law
Sungjoon Cho, Chicago-Kent School of Law
Kathleen Claussen, University of Miami School of Law
James Thuo Gathii, Loyola University Chicago School of Law
Robert Howse, NYU School of Law
Joanna Langille, University of Toronto, Faculty of Law
Simon Lester, Herbert A. Stiefel Center for Trade Policy Studies, Cato Institute
Paul Mertenskötter, Institute for International Law and Justice, NYU School of Law
Thomas Streinz, Institute for International Law and Justice, NYU School of Law
Joel P. Trachtman, The Fletcher School of Law and Diplomacy, Tufts University
Joseph H. H. Weiler, NYU School of Law

---

RSVP online before November 8:
www.brooklaw.edu/ibl-symposium

New ICC Book: Business Guide to Trade and Investment

From the esteemed Arthur Appleton / Patrick Macrory trade law book editing partnership, here is a new book published by the ICC:

2017 Business Guide to Trade and Investment

Volume 1 - International Trade 
Arthur E. Appleton and Patrick F.J. Macrory

his first volume on International Trade edited by Arthur Appleton and Patrick Macrory, is a most welcome addition to the publications on international trade law and policy. 

Volume 1 of this series introduces business interests to the international and regional rules applicable to trade in goods and services, as well as to aspects of trade such as intellectual property rights and dispute settlement. Businesses that have an understanding of the history of the General Agreement on Trade and Tariffs (GATT) and the World Trade Organization (WTO) will find it easier to appreciate how they can benefit economically from the international trade regime. 

Volume 1 covers the following subject areas:

• Introduction to the world trading system, economic and political benefits of trade, structure and functioning of the WTO
• Fundamental rules governing international trade
• Customs issues including how customs authorities determine the amount of duties due on imports
• Non-tariff barriers
• WTO rules relating to subsidies
• How industries can obtain relief from imports causing them harm
• Rules applicable to trade in agricultural goods
• Government procurement
• Export Controls and Sanctions
• Rules applicable to Trade in Services, IP rights
• How disputes are settled in the WTO and regional trade agreements

The book also includes case studies showing how particular industries have used the rules to open foreign markets or to protect themselves from injurious imports.