International Economic Law and Policy Blog

CJEU AG Opinion on CETA ICS

The CJEU AG opinion on the compatibility of CETA ICS with EU law -- that's a lot of acronyms, but I'm sure this blog's readers can follow! -- was released earlier this week (my vague sense from EU law experts is that it is not at all clear whether the Court will come out the same way). Here is an excerpt that seems particularly important to the general debate about investment protection/ISDS:

201. As regards establishing whether the general principle of equal treatment is observed in the context of the establishment of the ICS, it must be recalled that, in accordance with the Court’s settled case-law, the principle of equal treatment requires that comparable situations must not be treated differently and different situations must not be treated in the same way, unless such treatment is objectively justified.

202. Most of the governments which submitted observations as well as the Council and the Commission are of the view that the Kingdom of Belgium wrongly assumes that Canadian undertakings investing in the European Union, on the one hand, and EU undertakings investing in the European Union, on the other, are in the same situation.

203. That is specifically not the case: one category of undertakings referred to above is making international investments, whereas the other is making intra-Community investments. The situation is not comparable. Intra-Community investments are inevitably, to some extent, subject to different rules than international investments. The only comparable situations are that of Canadian undertakings investing in the European Union, on the one hand, and that of EU undertakings investing in Canada, on the other.

204. The difference in the fact that Canadian undertakings investing in the European Union may bring disputes before the CETA Tribunal, whereas EU undertakings investing in the European Union will be unable to do so, cannot therefore be deemed discriminatory. In this regard, the abovementioned interested parties refer, by analogy, to the case-law of the Court, in accordance with which the difference in treatment between individuals who benefit from the rules laid down in an agreement concluded between Member States for the avoidance of double taxation, on the one hand, and individuals who do not benefit from such rules, on the other, does not constitute discrimination since the situations of those two categories of persons are not comparable. 

I don't have a view on whether this reasoning makes sense as a matter of EU law, but I'm interested in the implications for the broader investment protection/ISDS debate. To me, one of the fundamental questions in that debate is the following: Are foreign investors and domestic investors in comparable situations in terms of how they are treated when they make an investment in a particular jurisdiction? My instinct is yes, and I haven't seen much evidence to the contrary. And yet the AG opinion comes to the opposite conclusion, with reasoning that glosses over the issue very quickly. 

In the AG's defense, he was dealing with a lot of issues, and couldn't write a dissertation on just this one point. So how should we think about this question with the luxury of more time? The way I would approach it is to look at the universe of foreign investors and the universe of domestic investors in Canada, and see how each group is treated under Canadian law; and then do the same thing for EU law. I would be surprised if there were much of a difference, on balance, in the treatment of these groups under either Canadian or EU law, but I'm open to evidence to the contrary. In my view, however, one of the big gaps in this debate is that we don't have much in the way of evidence here.

Of course, there may be instances where a particular Canadian investor was treaty badly under EU law, or a particular EU investor was treated badly under Canadian law. But that kind of cherry-picking of data doesn't answer the question. Canadian investors are also treated badly under Canadian law sometimes, and EU investors are treaty badly under EU law. You need the overall picture to come to a conclusion here.

My sense has always been that the situation of foreign and domestic investors is comparable in most jurisdictions. Perhaps not identical, but certainly comparable. For those, like the AG, who want to argue that the situations are not comparable, what is your basis for this? The AG says the Canadian and EU investments are "subject to different rules." That's true, but how does that lead to the conclusion that the situations are not comparable? Investments can be subject to "different rules" for all kinds of reasons. Different products/services are subject to different rules; companies from different regions within a country can be subject to different rules. This doesn't seem sufficient to conclude that foreign and domestic investors are not in a comparable situation. Let's say Tim Hortons and Pret A Manger (or some better example you can think of!) both want to open a store in Copenhagen. Are their situations really not comparable?

I would love to see this point developed more by the Court.

The 6th Biennial Conference of the Asian International Economic Law Network

The 6th Biennial Conference of the Asian International Economic Law Network (AIELN) will be held by the Institute of Law for Science and Technology, National Tsing Hua University (NTHU) in Taipei from 26 to 27 October 2019.

This Conference is themed as "International Trade Regime for the Data-Driven Economy: How will Artificial Intelligence Transform International Economic Law".
The deadline for abstract submission is 31 March 2019. You can access the CfP here: http://www.sielnet.org/News/6972012

Panels Composed in the Section 232/Retaliation Cases

For the nine panels established to hear the complaints against the Section 232 measures, the panels have all been composed with the same panelists, as follows:

Elbio Rosselli (Uruguay)

Esteban Conejos (Philippines)

Rodrigo Valenzuela (Chile)

For DSC subscribers, you can click the link to see which past cases each has worked on.

For the five panels established to hear the complaints against the retaliation for the Section 232 measures, they have done something interesting that I've never seen before: All the cases have the same chairperson, but then each has different panel members.

William Ehlers of Uruguay is the chair of all the panels, but then the following are panelists on individual cases: DS566 - Petina Gappah and Syed Tauqir Hussain Shah; DS560 - César Montaño Huerta and Fabián Villaroel Ríos; DS559 - Olga Lucía Lozano Ferro and Anwar Zaheer Jamali; DS558 - Cristian Espinosa Cañizares and Mónica Rolong; DS557 - Darlington Mwape and Claudia Uribe.

The facts of each of these cases are a little different (because the measures are different), but the legal issues will be very similar. Will there be any divergence among these various panel members in how they would like to approach the legal reasoning? Will the chair be able to keep them all on the same page? Will there be some juicy dissents?

(It's hard to link to all the panel constitution documents, but you can try this link)

What Are Trade Rules on E-Commerce Supposed To Do?

Last week, over 70 countries announced that they will be moving forward with e-commerce talks at the WTO:

We confirm our intention to commence WTO negotiations on trade-related aspects of electronic commerce.

We will seek to achieve a high standard outcome that builds on existing WTO agreements and frameworks with the participation of as many WTO Members as possible.

We recognise and will take into account the unique opportunities and challenges faced by Members, including developing countries and LDCs, as well as by micro, small and medium sized enterprises, in relation to electronic commerce.

We continue to encourage all WTO Members to participate in order to further enhance the benefits of electronic commerce for businesses, consumers and the global economy.

Seems like a pretty tentative and vague announcement, but nevertheless, global trade rules on e-commerce would be a good thing, right?

I assume they could be. On the other hand, based on what I've seen so far of these e-commerce rules that exist, I'm not really sure what some of them are supposed to do. Which government actions are they designed to address, and will they be effective at doing so?

The EU press release on this gives the following details:

WTO rules on e-commerce will aim to enhance opportunities and address challenges of e-commerce in both developed and developing countries. The negotiations should result in a multilateral legal framework that consumers and businesses, especially smaller ones, could rely on to make it easier and safer to buy, sell and do business online. The new rules would for instance:

• improve consumers' trust in the on-line environment and combat spam
• tackle barriers that prevent cross-border sales
• guarantee validity of e-contracts and e-signatures
• permanently ban customs duties on electronic transmissions
• address forced data localisation requirements and forced disclosure of source code

The ban on customs duties is pretty straightforward, but much of the rest is hard to follow.

The TPP e-commerce chapter is supposed to do a lot of these same things, so perhaps that's a good place to start in deciphering all this. But when I read the TPP rules, I'm often left with more questions than answers.

Article 14.7 deals with online consumer protection and Article 14.14 addresses spam. These obligations are not about reducing trade barriers, but rather about encouraging governments to adopt particular domestic policies. Will the obligations have an impact on governments' efforts in these areas? From what I can tell, we have not been making much progress on either of these. Are international rules going to move us forward?

As for the "tackle barriers," "forced data localisation," and "forced disclosure of source code," these look like more traditional trade obligations, which are designed to constrain governments' ability to regulate in ways that interfere with trade. But when you consider the full scope of the TPP obligations and exceptions, will they do so? Take a look at the obligation/exception in Article 14.13 along with the exceptions in Chapter 29:

Article 14.13: Location of Computing Facilities

1. The Parties recognise that each Party may have its own regulatory requirements regarding the use of computing facilities, including requirements that seek to ensure the security and confidentiality of communications.

2. No Party shall require a covered person to use or locate computing facilities in that Party’s territory as a condition for conducting business in that territory.

3. Nothing in this Article shall prevent a Party from adopting or maintaining measures inconsistent with paragraph 2 to achieve a legitimate public policy objective, provided that the measure:

(a) is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; and 

(b) does not impose restrictions on the use or location of computing facilities greater than are required to achieve the objective.

****************

Article 29.1

3. For the purposes of Chapter 10 (Cross-Border Trade in Services), Chapter 12 (Temporary Entry for Business Persons), Chapter 13 (Telecommunications), Chapter 14 (Electronic Commerce)2 and Chapter 17 (State-Owned Enterprises and Designated Monopolies), paragraphs (a), (b) and (c) of Article XIV of GATS are incorporated into and made part of this Agreement, mutatis mutandis.3 ...

Taking all that into account, what exactly is the impact of these provisions on the "forced data localisation requirements" that exist in the real world? And more generally, what are the government actions that all of these rules are intended to act as a check on? What's an example of an existing measure in a particular country that trade rules on e-commerce, such as the TPP ones, would address? I don't feel like I have a good sense of this at all.

Part of the problem is that governments don't agree on what the international rules should be and which government actions are acceptable. In that situation, I'm not sure how you come up with an international regime. Governments who engage in particular practices will not want to sign on to rules that prohibit those practices. You can try to keep the rules vague so that people aren't sure exactly what is covered, but given the experience with the WTO system, many people now realize the implications of signing on to such rules. 

Perhaps we will have to wait for dispute settlement to resolve some of this uncertainty. But are disputes really coming? I have not heard of any in the works.

On the other hand, maybe the idea is not to replicate the system that applies to goods and services trade. Maybe it is not so much about obligations and enforcement. Instead, perhaps it is more about creating a forum to discuss these issues. If that's the case, I see some value here. But if that's what we are doing, binding obligations may be less valuable that a permanent forum that focuses on discussion.

Call for papers: The Legitimate Role for Investment Law and Arbitration in Protecting Human Rights

LEGINVEST and PluriCourts, in collaboration with Monash University and the Minerva Center for Human Rights at the Hebrew University of Jerusalem, are organizing an international symposium on the legitimacy and increasingly important role for international investment law and arbitration in the protection of international human rights.

The symposium will take place in Oslo, Norway on the campus of the University of Oslo on Wednesday and Thursday, September 4 and 5, 2019.

International investment law in general, and investor-state arbitration in particular, is primarily concerned with granting and enforcing rights to a particular class of entities – foreign investors – who are frequently multinational corporations and whose reputation regarding compliance with international human rights norms is often questioned. This has led to repeated critiques of the international investment regime as not only failing to balance investor rights against the public interests surrounding human rights protection among host state populations, but moreover claiming that investor-state arbitration is complicit in adjudicating claims by foreign investors who are themselves human rights abusers.

These critiques paint a picture of a system – whether true or not – facing serious legitimacy challenges. However, at the same time, we do see in recent years that there are examples of amendments to investment treaties as well as investor-state arbitration cases that potentially protect human rights rather than prevent their realization. Examples include cases initiated by vulnerable investors who have been subject to abuse of power, cases where tribunals examine and pass judgment on corrupt practices, cases where tribunals lend support to third parties that have suffered due to collusion between investors and public authorities, cases in which host governments have justified their actions through the protection human rights and even filed counterclaims against corporate investors, and cases where the investment in question aims at promoting human rights in the host country.

Even though there might be a long way to go, signs are emerging that human rights obligations can be addressed by investor-state arbitration tribunals and that with proper guidance, arbitrators may be capable of striking a proper balance. As reform efforts in regard to both treaty design and adjudicative mechanisms ramp up in the coming years, the time is ripe to explore how international investment law and arbitration can be more supportive in the protection of international human rights law.

This workshop/symposium invites papers from a wide array of perspectives and disciplines, focusing on the questions of synergetic linkages between investment law and human rights law and how that can be achieved. We are particularly looking for creative approaches and research, both theoretically and methodologically, that can move the intellectual debate on the relationship between these two fields forward. Comparative, empirical and cross-disciplinary work is especially welcome.

Submit an abstract (no more than 500 words) and a brief CV here by 1 March 2019. Notification of acceptance will be given in the beginning of April 2019. Accepted abstracts will be expected to submit a draft paper of approximately 8000-10000 words by 1 August 2019. We aim at publishing 5 to 6 selected papers in a special issue of the Leiden Journal of International Law.

Reminder: SIEL/JIEL/OUP Essay Prize Deadline Approaching

This is from the Society of International Economic Law, the Journal of International Economic Law, and Oxford University Press:

The deadline for entering the 2018-2019 SIEL/JIEL/OUP Essay Prize competition is fast approaching, and authors meeting the stated conditions are warmly encouraged to send their submission by 15 February 2019.

For further details see here.  

Communication from Honduras on the Functioning of the Appellate Body

This communication from Honduras on the functioning of the Appellate Body is very helpful:

1  INTRODUCTION

1.1.  In furtherance of the communication dated 23 July 2018 and reiterating the importance of the Dispute Settlement System within the broader WTO framework, Honduras would like to address the issue of timelines for the conclusion of appellate proceedings. Concerns have been expressed regarding the extension of appellate proceedings far beyond the stipulated period of 90 days provided in Article 17.5 of the DSU. Others have called for a revision of such deadline in order to be more realistic of todays' complex disputes and the Appellate Body's workload.

1.2.  First, Members need to decide what time-period they want to allocate to an appeal after the conclusion of the panel process. Second, Members may explore how to streamline the Appellate process. The right of appeal extends the period of the dispute settlement process and hence needs to be limited and subject to certain conditions. Better cooperation among disputing parties and the Appellate Body, and incorporating more stringent adherence to conditions of appeal may reduce unnecessary delays. Third, Members may have to decide on the nature of the time-period allocated to an appeal, whether such deadline is mandatory and the consequence of its non-respect.

1.3.  The issues and options presented here are not exhaustive, nor mutually exclusive, and they should not be read cumulatively. Furthermore, these options may be implemented through various means, to be discussed separately. Several other pertinent issues also need to be resolved to fully address the problems facing the Dispute Settlement System and the WTO.

2  PROPOSED OPTIONS

2.1  Timelines

2.1.  Adhering to the existing timeline?

a.  One option could be to require the Appellate Body to comply with the existing 90-day time-frame set out in the DSU.

b.  Could/should the methodology of calculating the 90-day time-frame be modified to refer to working days only, as opposed to calculations that include weekends and official holidays?

c.  Could/should the methodology be modified to exclude from the 90 days, the time required for the translation of an Appellate Body report?

d.  Could/should, parties agree to extend the time-period for filing an appeal in cases where the Appellate Body is seized with a large number of appeals and present an appeal when the Appellate Body is better equipped to receive it, and able to meet the 90-day time-frame?

2.2.  Another time-period?

a.  Could/should the existing time limit be replaced by a more generous one (e.g. 120 days) or even by a requirement that appeals be processed "as quickly as possible"?

b.  Could/should the Appellate Body itself set a time limit for each case depending on the estimated time it will require to consider it?

2.3.  Increasing the responsibility of the parties?

a.  In the DSU, the maximum period for conclusion of appellate proceedings is 90 days. In practice, the Appellate Body has not respected this period since 2011. In order to enhance the parties' responsibility and involvement in the appellate process, could/should the rule be modified to require disputing parties, in consultation with the Appellate Body, to agree upon a time limit for consideration of an appeal, failing which 90 days may be applied as a default time-frame?

b.  Could/should the rule be modified to require disputing parties to agree, in consultation with the Appellate Body, upon a time limit for consideration of an appeal, failing which the Appellate Body may decide the required time limit?

2.2  Efficiency of the AB process

2.4.  Procedural steps could/should be implemented to help the Appellate Body meet the 90-day or otherwise agreed time limit.

a.  Consultations could/should be called for prior to commencement of AB proceedings whereby disputing parties, in consultation with the Appellate Body, could agree whether to extend the 90-day time-frame or limit the scope of the appeal. This could be done as soon as a party expresses its intention to appeal and at the latest [30] [45] days after the circulation of the panel report.

b.  Failing agreement between the disputing parties, the Appellate Body could/should be empowered to suggest and eventually to impose measures to enable it to meet the stipulated deadline.

•  Such measures may include the Appellate Body's indication to delete issues from the scope of the appeal and/or to extend the time-frame. Parties would then need to either agree to limit the scope of the appeal or extend the time-frame.

•  The Appellate Body could be empowered to impose limitations on the length of written submissions, limitations on the number of hearings, etc. in order to enable it to meet the stipulated deadline.

•  Generally, the AB could/should be requested to issue shorter reports dealing with legal issues in as little detail as possible.

◦  This may be operationalized by narrowing the Appellate Body's consideration of issues, including the extent to which each issue is analyzed.

◦  Similarly, cutting out unnecessary or repetitive information from Appellate Body reports may be considered in order to promote efficiency. This could include removing references to past cases, removing summaries, lengthy descriptions of facts, reducing the extent to which party submissions are presented (as the AB has begun to do) (this would be facilitated if parties' submissions were public or at least accessible to the WTO Members from the WTO website) .

•  The Appellate Body may become subject to "mandatory judicial economy" in order to limit the scope and length of Appellate Body reports in general. The existing obligation to 'address all issues' could be modified such that the Appellate Body would be prohibited from making a finding or an inquiry into the merits of each issue where it is not necessary for the resolution of the dispute.¹ A prohibition on Obiter Dicta could work in tandem with such an approach.

c.  Remand could be introduced. This could reduce the amount of information under review by the Appellate Body. It is worth noting however, that such a procedure may contribute to an extended time-frame for the overall dispute settlement process.

d.  The practice of collegiality may be modified to the extent to which it increases delays.

e.  The capacity of the Appellate Body to deal with a greater caseload may be increased through various means.

2.3  Dealing with reports circulated after expiration of the time limit

2.5.  The consequences of expiration of the agreed or 90-day period depend on whether the said time-period is mandatory and whether its non-respect is fatal, leading to the automatic adoption of the prior panel report.

a.  Parties may enter into consultations prior to the expiration of the 90-day period to agree to extend the time-frame in light of the impending delay. Guidelines may be developed in this regard.

b.  The delay may be rectified by parties ex post-facto by way of deeming letters to the DSB recognizing the delivery of the Report as having been made within the stipulated time-frame.

c.  A report circulated after the expiration of the 90-day or otherwise agreed time-period may be subject to a positive consensus procedure for adoption. Such procedure may or may not include the disputing parties' votes in such positive consensus.

d.  The Appellate Body may be permitted, under certain conditions, to present a Report after the expiration of the stipulated deadline without losing jurisdiction. The Appellate Body may for instance, be required to demonstrate the existence of "exceptional or mitigating circumstances" that caused the delay.

2.6.  There may be several ways to operationalize such a provision. For instance:

•  the Appellate Body's justification may be considered sufficient;

•  the justification may require further review and approval by a higher authority.

For instance:

i.  the Director-General;

ii.  a group of the three Chairpersons of the DSB, the General Council and the Trade Policy Review; or

iii.  the Director General and the group of the three Chairpersons acting together.

2.7.  The time-frame for such a review would be [10 days] from the initially agreed or determined deadline.

__________

---

 

¹  We recognize that a dispute is not limited solely to the remedy or implementation of a solution dealing with the WTO-inconsistency of the challenged measure(s) but may also concern procedural issues regarding the manner in which the panel had handled the evidence, the process and considered the matter.

¹  We recognize that a dispute is not limited solely to the remedy or implementation of a solution dealing with the WTO-inconsistency of the challenged measure(s) but may also concern procedural issues regarding the manner in which the panel had handled the evidence, the process and considered the matter.

This communication provides a good basis for discussing these issues, and I hope there is broad engagement with it.

Development Status at the WTO: A U.S. Critique

This is from a communication by the United States entitled "An undifferentiated WTO: self-declared development status risks institutional irrelevance":

1.8. There has been much discussion lately about staying committed to the "rules-based multilateral trading system." However, if you look behind the curtains, that system is hardly monolithic. All the rules apply to a few (the developed countries), and just some of the rules apply to most, the self-declared developing countries. The perpetuation of this construct has severely damaged the negotiating arm of the WTO by making every negotiation a negotiation about setting high standards for a few, and allowing vast flexibilities or exemptions for the many. These are not "reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations."

...

5.1. Defenders of the status quo approach by some WTO Members for determining development status — self-declaration — may argue that Members effectively agreed to it by consensus in 1995. They may even claim their authorities would never have sought WTO membership if they could not self-declare as developing. Unfortunately, clinging to this approach leads to a system that prevents true liberalization while anchoring all Members to a world that no longer exists. This contradicts the goals stated by Members in the preamble to the Marrakesh Agreement Establishing the WTO.

5.2. Self-declaration and its first-order consequence — an inability to differentiate among Members — puts the WTO on a path to failed negotiations. It is also a path to institutional irrelevance, whereby the WTO remains anchored to the past and unable to negotiate disciplines to address the challenges of today or tomorrow, while other international institutions move forward.

I think the U.S. makes some reasonable points here, but I have a couple questions.

First, what is the alternative the U.S. has in mind? The U.S. communication refers to the practices of other organizations, and discusses various criteria, but what exactly is the vision for how this should work at the WTO?

Second, what impact would any changes have on WTO negotiations? I can see how references to development status look like they are causing problems in negotiations, but I suspect that governments of the self-declared developing country governments will find ways to resist liberalization even without referring to this status, just as the wealthy countries have.

2 Year Post-Doctoral Fellowship at the National University of Singapore

From the Centre for International Law (CIL) at the National University of Singapore:

2 YEAR POST‐DOCTORAL FELLOWSHIP (INTERNATIONAL ECONOMIC LAW FOCUS) FOR ACADEMIC YEARS 2019‐21 (SEPTEMBER 2019 TO AUGUST 2021)

The Centre for International Law (CIL) at the National University of Singapore invites applications for a Post‐Doctoral Fellowship position with a focus on international economic law, commencing in Academic Year 2019/20. We seek applications from those with expertise in international investment law, international trade law, or other areas of international economic law. Applications are particularly sought from those with or interested in developing a research interest in interdisciplinary fields and those looking at the interaction of investment law and/or international trade with issues related to cybersecurity, development,  environment, or technology. Of special interest are applicants who are interested in the Asia‐Pacific region.

The selection committee will consider the following criteria in making appointments

1. The applicant must have a doctoral degree obtained since 1 January 2015 in a field of international  law or have submitted a doctoral thesis in a field of international law for examination by the date of appointment.

2. The principal selection criterion will be the applicant’s potential for excellence in research and his or her proposed programme of research. A proven record of publication and participation in research projects will be the primary evidence of such potential.

The successful applicant for AY 2019/20 will be expected to commence the Fellowship at the start of September 2019 and conclude at the end of August 2021.

More details here: https://cil.nus.edu.sg/wp-content/uploads/2019/01/Post-Doctoral-Fellowship-Intl-Econ-Law-2019_Job-Description.pdf

Call for Papers: 8th Conference of the Postgraduate and Early Professionals/Academics Network of the Society of International Economic Law (PEPA/SIEL)

This is from PEPA/SIEL in collaboration with the King’s Forum on International Dispute Resolution of King’s College London:

On May 30-31, 2019, PEPA/SIEL in collaboration with the King’s Forum on International Dispute Resolution of King’s College London, will be hosting a conference that offers graduate students (students enrolled in Master or Ph.D. programmes) and early professionals/academics (generally within five years of graduating) studying or working in the field of IEL an opportunity to present and discuss their research. It also provides a critical platform where participants can test their ideas about broader issues relating to IEL. One or more senior practitioners and academics will comment on each paper after its presentation, followed by a general discussion.

Submissions are due by February 8, 2019.

For details on the call for papers visit the website here.

U.S. Criticisms of the Tuna-Dolphin Rulings and Dispute Process

Here is an excerpt from some comments by the U.S. at the January 11th DSB meeting, focusing on the Appellate Body report in US - Tuna but also having broader implications:

• Although the United States agrees with and welcomes the conclusion of these reports that the U.S. dolphin safe labeling measure is consistent with U.S. WTO obligations, we are disappointed that it has taken more than a decade to resolve this matter.

• In the course of this dispute, the Appellate Body developed increasingly demanding legal standards under Article 2.1 of the TBT Agreement and Articles 1:1 and III:4 of the GATT 1994. These legal standards were not based on the text of the relevant provisions, and negotiators did not agree to them. In this dispute, the United States was forced to expend considerable resources over nearly a decade trying to defend successfully what was always an environmental measure with no element of protectionism.

• It is unclear how many other Members would have been able to invest such resources. Other Members faced with similar multiple, protracted dispute settlement proceedings might be forced to abandon their legitimate objective and withdraw their measures rather than face suspension of concessions by another Member.

• Indeed, under the standard the Appellate Body has developed, it seems likely that only Members with significant resources to devote to the effort will be able to defend legitimate public policy measures that have any effect on trade.

• At previous meetings addressing this dispute and others, the United States has expressed concerns with the Appellate Body's interpretations of the non-discrimination provisions of the TBT Agreement and the GATT 1994.⁸

• While welcoming the ultimate outcome in this dispute, the United States highlights the real cost to Members of these incorrect interpretations that narrow the policy space afforded to Members and increase the likelihood of protracted litigation over nondiscriminatory public policy measures.

A much longer explanation follows, and it is worth a read.

I have some thoughts on several aspects of this.

First, I think it's fair to say that most people have some objections to the Appellate Body's reasoning under either TBT Agreement Article 2.1 or GATT Articles III/XX. I certainly do. But that is to be expected, and the Appellate Body can't make everyone happy, especially given the confusingly worded text it has been handed. Whether, how, and when to look at the intent/aim/purpose and effect/impact of the measure is open to interpretation based on that text. Personally, I think the Appellate Body usually gets to the right result in these cases, although I think its specific legal standards are difficult to apply, and it does not always look at each element in the place that makes the most sense to me. But there are a wide range of views on this, and the Appellate Body's approach to these provisions is certainly within the scope of what is reasonable.

I'm not sure what to make of the U.S. criticism that the Appellate Body's legal standards "were not based on the text of the relevant provisions, and negotiators did not agree to them." Since 1947 (in the case of the GATT), there have been a number of interpretations that elaborate on the meaning of these provisions ("conditions of competition" under Article III is one of the most famous). There is no way around elaborating on the meaning of the words of the text by using other words. I'm not sure how dispute settlement can work any other way. 

But we can and should debate these specific legal interpretations. On an issue like this one, I would say to the U.S. trade officials: What exactly do you think the standard should be under each of these provisions? It would be helpful to offer up the clearly worded interpretation that you want, and try to convince everyone. Perhaps in this regard, the U.S. says this in its DSB statement:

As the United States has expressed in the past, Articles I:l and III:4 of the GATT 1994 and Article 2.1 of the TBT Agreement are, in fact, concerned with origin based discrimination, not with achieving a perfect fit between a measure's effect and its objectives.

I'm not completely sure what they mean here, but the reference to "origin based discrimination" sounds like perhaps they mean that only measures that discriminate against foreign goods on a de jure basis could violate these provisions. Now, if that's really what they mean, they could try to convince everyone else that this is the right standard, but I have trouble believing they really mean that, because that goes against everything that everyone understands about non-discrimination, including the negotiating history and U.S. arguments in past cases, such as the various alcohol cases. If that's not what they mean, though, they should clarify exactly what they do want to see in these standards. Later in the DSB statement (p. 13), the U.S. seems OK with de facto findings of violation, which leaves me even more confused about what they think the Appellate Body is doing (I would have said the Appellate Body was making findings of de facto discrimination in Tuna) and what they want done instead. Along the same lines, if they don't want to examine the fit between a measure's effect and its objectives, what do they want? How exactly should this kind of analysis be done? Walk us through it, perhaps using a U.S. measure and a non-U.S. measure as examples. In my view, there is a continuing lack of clarity about what exactly the legal standard is and should be under the various GATT Article III/TBT Article 2.1 legal standards, and a discussion of all this would be helpful.

And my suggestion is not just for the U.S. Other governments should do this as well. These are foundational provisions and principles, and governments should continuously advocate for their view of the scope, even -- and perhaps especially -- outside the context of cases they are working on. Should the non-discrimination standard be based on "aim and effect," or "design, structure, and architecture," or "detrimental impact that stems exclusively from a legitimate regulatory distinction," or something else entirely? And how exactly do these standards relate to one another? And where does the burden of proof lie? I'm surprised governments do not have more to say about all this. Perhaps they prefer a vague standard, which they can then bend in a particular direction depending on whether they are on offense or defense in a case?

In terms of the tuna measure that was at issue here, I have always supported the U.S. view of this case, and I would say that, taking into account the design, structure and architecture of this measure -- or whatever standard you want to use -- over its entire history, this measure should not have been found in violation of the non-discrimination provisions. But I would not say there is no "element of protectionism." There were definitely hints here and there that part of the reason this was done was to favor domestic industry. Looking at all aspects of the measure together, however, my view has been that the measure should not be found in violation.

As for the resources needed to defend the case, as I watch how other governments defend their own measures in WTO dispute settlement, it doesn't seem to me that any Members who participate in WTO disputes would have had much trouble. Maybe some least developed countries would struggle, but no one brings complaints against them.

Finally, with regard to "policy space" and "litigation over non-discriminatory public policy measures," TBT Agreement Article 2.1 and GATT Articles III/XX are somewhat marginal issues here. In the vast majority of these cases, there is not much threat of a "non-discriminatory public policy measure" being found in violation. The real concern in relation to "policy space" is provisions such as TBT Agreement Article 2.2 and the SPS obligations that require a scientific-basis for measures. At least on their face, these provisions are very likely to lead to findings that non-discriminatory public policy measures violate WTO obligations, although I would argue that the Appellate Body has bent over backwards to ensure that TBT Agreement Article 2.2 does not lead to this (and in doing so, it has preserved domestic policy space -- in this regard, note that the original tuna panel found that the U.S. measure was in violation of Article 2.2, and the Appellate Body reversed this finding). Along the same lines, there was some panel reasoning under GATT Article III that relied on individual product comparisons, which were extremely broad and of great concern for governments' policy space (I'm thinking here of Asbestos), and the Appellate Body's reversal helped ensure appropriate policy space. So yes, policy space is an important issue, and we should talk about it. But when you look beyond the non-discrimination provisions, I would say the U.S. has been pushing pretty hard to limit policy space (for example, in its pursuit of certain SPS cases and by supporting SPS-plus obligations in its bilateral trade agreements). As with the interpretation of the non-discrimination provisions, I would say to the U.S. and other governments, yes, "policy space" is an important topic and we should talk more about it. The question for all of these governments is: What exactly is your view of how trade agreements should constrain certain trade practices while preserving policy space?

Guest Post: Venezuela Challenges US’ blockade of its National Cryptocurrency at the WTO

This is a guest post from Sandeep Thomas Chandy, Research Fellow, Centre for Trade and Investment Law (All views expressed here are personal)

On December 28, 2018, Venezuela initiated a WTO dispute against the economic blockade instituted by the United States.[1] Among the various claims, one of special interest is the challenge against the US Executive Orders banning Venezuela’s national cryptocurrency (Petro). According to the Request for Consultations:

4. Discriminatory coercive trade-restrictive measures with respect to transactions in Venezuelan digital currency, adopted pursuant to Executive Orders 13808, 13827 and 13835

(xi) The coercive trade-restrictive measures of the United States to which Venezuelan financial services and financial service suppliers are subject, under which suppliers receive treatment less favourable than that accorded to like services and service suppliers of WTO Member States not subject to the measures, are in violation of Article II:1 of the GATS. Furthermore, inasmuch as digital currencies originating in the United States are not subject to the same prohibitions as Venezuelan digital currencies, the United States is according less favourable treatment to Venezuelan financial services and service suppliers than to like domestic financial services and service suppliers, in violation of Article XVII:1 of the GATS.  

If this claim proceeds to the Panel stage, the WTO would be dealing with a dispute involving cryptocurrencies for the first time.

Venezuela’s National Cryptocurrency

In late 2017, President Maduro launched Venezuela’s national cryptocurrency – Petro. Like almost all cryptocurrencies, Petro is also reported to be based on distributed ledger technology.[2] However, unlike popular cryptocurrencies like Bitcoin and Litecoin, Petro was stated to be backed by Venezuela's reserves of oil, gasoline, gold, and diamonds.[3]

Challenge before the DSB

Venezuela has challenged the US Presidential Order banning Petro under Article II (MFN) and Article XVII (National Treatment) of the GATS. While an MFN violation would be relatively easy to establish, the National Treatment violation would require Venezuela to identify the sector/sub-sector in the US’ Schedule of Commitments which can include cryptocurrencies and then establish that the US is acting inconsistently with its commitments.

National Treatment, GATS Schedules of Commitments & Cryptocurrency

One way for Venezuela to establish the violation of National Treatment would be by stating that the underlying technology (distributed ledger technology) is being given treatment “no less favourable than that [the US] accords to its own like services and service suppliers”. For this, Venezuela would have to identify the specific sector/sub-sector involving blockchain technology in the US’ Schedule of Commitments. However, the dinosaur-era 1991 Central Product Classification (CPC) does not have any specific sector/sub-sector which can include cryptocurrencies or the technology running it. The closest sector/sub-sector would be “Computer and Related Services” and “data” related commitments under the Telecommunications sector (distributed ledgers are essentially a computer database).[4] Both these sectors/sub-sectors have been marked as “None” by the US. For stating that distributed ledgers are included in these sectors/subsectors, the holding of the Appellate Body in China – Audiovisual would be pertinent[5]:

In this respect, we note that GATS Schedules, like the GATS itself and all WTO agreements, constitute multilateral treaties with continuing obligations that WTO Members entered into for an indefinite period of time, regardless of whether they were original Members or acceded after 1995.

…

interpreting the terms of GATS specific commitments based on the notion that the ordinary meaning to be attributed to those terms can only be the meaning that they had at the time the Schedule was concluded would mean that very similar or identically worded commitments could be given different meanings, content, and coverage depending on the date of their adoption or the date of a Member's accession to the treaty.

According to this holding, new services and technological developments can be read into the generic terms in the Schedules.

Another way for Venezuela would be to argue that Petro is a digital security in the form of a cryptocurrency because it is backed by assets.[6] This argument will depend on whether a suitable sector/sub-sector is available under the Financial Services Commitments. One plausible sub-sector could be “Trading of Securities and Derivative Products and Services Related Thereto” on which US has taken full commitments. Venezuela can then state that the Executive Order banning Petro is inconsistent with US’ commitment.

It remains to be seen if Venezuela will take this dispute to the Panel stage and if they retain this claim to that stage. If they do, it would be interesting to see how the Panel would interpret the outdated Schedule to state that Petro/distributed ledgers are part of the Schedule.  

 

[1] Request for consultations by Venezuela, United States - Measures relating to trade in goods and services, WTO Doc. WT/DS574/1.

[2] https://cryptoinsider.21mil.com/whats-really-happening-with-el-petro/

[3] https://www.nytimes.com/2017/12/03/world/americas/venezuela-cryptocurrency-maduro.html  

[4] For the sub-sectors that fall under “Computer and Related Services”, refer WTO Doc. S/C/W/45.

[5] Appellate Body Report, China — Publications and Audiovisual Products, ¶396-397.

[6]https://in.reuters.com/article/us-venezuela-economy/venezuelas-congress-declares-petro-cryptocurrency-illegal-idINKBN1EY2H2;https://theconversation.com/dont-be-fooled-venezuelas-petro-is-not-really-a-cryptocurrency-92310

New Blog: AfronomicsLaw.org

This is from law professor James Gathii:

I am pleased to announce the launch today of http://afronomicslaw.org/, a blog specializing on international economic law matters as they relate to Africa. The blog will complement the growing and important voice of scholars interested in international economic law with a focus on Africa. It will also offer policy makers, practitioners and others interested in these issues a forum to insightfully engage and reflect on developments on international economic law more contemporaneously.

The blog will host featured symposiums on topical themes and on books. It will also highlight relevant news and forthcoming events.

The first feature symposium on the blog is on a new trade treaty in Africa - the African Continental Free Trade Agreement (AfCFTA). The inaugural contributor to the AfCFTA symposium is Dr. David Luke, the Coordinator of the African Trade Policy Center of the Economic Commission, (ECA), in Addis Ababa. The ECA provides support for AfCFTA negotiations at the request of the African Union Summit. David Luke’s post makes the case for the AfCFTA.

With the launch today, two additional blog posts have been posted. One relates to the implications of AfCFTA on ongoing reforms of international investment law in the SADC region. The other examines the extent to which the AfCFTA addresses informal cross border trade. Informal cross border trade comprises a large proportion of intra-African trade. Every day for the next week and a half a new blog post on the AfCFTA symposium covering a discrete issue will be posted.

Kindly help us spread the word about the blog to those who might be interested in contributing to or reading Afronomicslaw.org. Our social media handles are:

Twitter: @afronomicslaw

Facebook: Afronomics Law

Doctoral Forum on International Law at EUI

Call for papers
EUI Doctoral Forum on International Law
European University Institute (Florence, Italy), Villa Salviati, 10 June 2019

The Law Department of the European University Institute (EUI) is delighted to share this call for papers for an intensive one-day Doctoral Forum on international law, taking place in Florence on 10 June 2019, and sponsored by the European Society of International Law (ESIL). 

The Forum allows PhD candidates to present their research and receive feedback from peers and EUI faculty members. The Forum welcomes submissions on any sub-field of international law, especially human rights, international economic law, and international dispute settlement. Researchers performing multidisciplinary or interdisciplinary analysis are in particular encouraged to apply. 

To apply, please send an abstract of maximum 600 words and your CV to [email protected] by 15 February 2019. 

If selected, we will ask you to submit a short paper of maximum 6000 words by 15 May 2019. The paper may be a partial draft of the final paper. Please note that failure to share a short paper with the Forum organisers may result in exclusion from the Forum. All participants will receive the papers in advance and will be expected to have read them prior to the start of the Forum. 

Unfortunately, the Forum cannot cover expenses related to travel and accommodation for all participants. However, the Forum will offer a limited number of scholarships to contribute to the travel expenses of participants who do not have access to sufficient funding. An important objective of these scholarships is to ensure a balanced group of participants in terms of nationalities and home institutions. To apply for a scholarship, please include in your application, in addition to your abstract and CV, a short motivational letter stating why you are not able to cover your travel expenses, how much funding you would need, and how participation in the Forum fits your research plans. 

A presentation on the post-doc opportunities offered by the Max Weber Programme of the EUI will take place on 10 June 2019. 

The Forum will provide lunch and coffee breaks on the day of the conference; social activities will be organized on the evenings of 9 and 10 June. 

Please take note of the following timeline: 
15 February – deadline for submission of abstracts and scholarship applications
1 March – applicants will be informed of the results of the selection process
15 May – deadline for submission of short papers
10 June – forum event 

Confirmed EUI faculty participants: Prof. Jürgen Kurtz and Prof. Martin Scheinin.

Organisers: Martin Christensen, Margherita Melillo, and Mike Videler (researchers at the EUI Law Department). 

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Location:

Sala degli Stemmi 1st Floor, V.Sa.

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Affiliation:

Department of Law

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Type:

Working group

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Organiser:

International Law Working Group

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Video & Presentations: International Colloquium on Restoring Trust in Trade in Honour of Peter Van den Bossche

This is from the Law Faculty of Maastricht University:

On 17 December the Law Faculty of Maastricht University hosted an international colloquium entitled “Restoring Trust in Trade” in honour of Professor Peter Van den Bossche, former Appellate Body Member (2009-2017).

This colloquium focused on a key challenge facing the international trading system, namely the rapidly eroding trust in trade liberalisation and economic integration, as embodied in the rules of the World Trade Organization and the European Union.

The well-attended colloquium brought together friends of Peter Van den Bossche, including his mentor, colleagues and students to pay tribute to his invaluable contribution to the evolution and understanding of WTO law as a rules-based system eliciting trust. Slides and video recordings of the presentations are available here The contributions are compiled in a Liber Amicorum published by Hart. 

The organizers Denise Prevost, Iveta Alexovicova and Jens Hillebrand Pohl, warmly thank the speakers and participants for their contribution to the success of the event.

The Resiliency of the WTO Dispute Settlement Mechanism (Or Not)

Many worry that the current United States–China trade wars, and negotiations therefrom, might undermine the WTO dispute settlement mechanism (DSM).  Curiously, however, both the United States and China have not completely bypassed the WTO DSU.  In fact, both countries have invoked the WTO DSM in tandem with their unilateral/bilateral engagements outside of the WTO.  For example, China sued the United States for the latter’s punitive tariffs against the former (here and here).  The United States also filed a complaint against China regarding the latter’s alleged violation of TRIPS, in addition to its execution of the Section 301 procedure on the same complaint.  One might surmise that the U.S.’ such actions are in contrast to its recent blocking of new Appellate Body members.  So, can we say comfortably that the WTO DSM is resilient?  Or, are these all about merely anteing up political rhetoric?

Country-Specific Withdrawal from a Plurilateral Trade Agreement

The McClatchy news service reports the following:

Now that the Trump administration has revamped the North American Free Trade Agreement, it is taking a look at kicking key countries out of its sister pact, the Central American Free Trade Agreement.

Trump officials are taking a very close look at the 2005 pact signed with six Latin American nations to see if they can block Nicaragua, the Dominican Republic and El Salvador from keeping preferential access to U.S. markets without disturbing the rest of the agreement.

“We are very concerned with Nicaragua’s move toward authoritarianism, and El Salvador’s and Dominican Republic’s questionable ties with China,” the official said. “As the United States has made clear, we will not allow our trade agreements, including CAFTA-DR, to become back doors to benefit non-market economies and repressive actors in the region.”

I haven't seen this confirmed by other sources yet, but it does seem to fit with the worldview of some people in the Trump administration.

So how would this work? Is there a mechanism for one country to stop applying a trade agreement with respect to some countries but not others? It makes me think of the "non-application" provisions of the GATT/WTO (see, e.g., Article XIII of the WTO Agreement), but applied retroactively. CAFTA does not have any such provision as far as I know.

CAFTA's withdrawal provision says:

Article 22.7: Withdrawal

1. Any Party may withdraw from this Agreement by providing written notice of withdrawal to the Depositary. The Depositary shall promptly inform the Parties of such notification.

2. A withdrawal shall take effect six months after a Party provides written notice under paragraph 1, unless the Parties agree on a different period. If a Party withdraws, the Agreement shall remain in force for the remaining Parties.

On its face, this provision does not offer a way to engage in a country-specific withdrawal, but I suppose the Trump administration could send a notice of withdrawal from the Agreement with regard to just certain countries (a partial withdrawal).

The article suggests that "national security," which has taken on an important role under the Trump administration, could be invoked here:

Miller sees no easy mechanism to kick out the three countries out, but said it can be done. One way, he said would be for officials to suspend them based on national security concerns.

CAFTA's security exceptions are similar to those of other trade agreements, and the Trump administration could invoke those provisions to justify not applying CAFTA to these particular countries. That could work (sort of) for the purposes of international law, although I'm not sure how the administration would justify raising tariffs on these countries under domestic law.

Of course, there is also the political reality that these countries would respond by raising tariffs on U.S. exports. I'm not sure how big those markets are and whether U.S. industries would be affected enough to put up a fight.

RIP ITR

R.I.P. BNA's International Trade Reporter

Steve Charnovitz

For as long as I can remember, the best source for current international trade news as well as archival trade news, was the International Trade Reporter published by BNA, once known as the Bureau of National Affairs.  At the same time, other BNA products, like the Daily Labor Reporteror the International Environment Reporter were similar intellectual gold mines for practitioners, government officials, and scholars in those fields. Often when my students sought a paper topic, I would suggest to them that a short perusal of the latest BNA publication would ineluctably lead to an idea for a paper. The flagship BNA publication was the Daily Report for Executiveswhich, 30 years ago, was regularly the first document opened up when one arrived at the office in the morning. 

Sadly, BNA was acquired by Bloomberg in 2011 and the once proud BNA publications have gradually atrophied or been dismantled. In part, this development was caused by technology as paper newsletters have been replaced by less cohesive screen-based services.  But there is more going on because the broad, carefully written coverage provided by BNA has not survived into the Bloomberg era. BNA was an employee-owned company and the employees seemed to see their role as communicating information about current events.  From my perspective, the offerings from Bloomberg are more political and less factual. The Bloomberg website is flashy and has some good commentary, but for current news in a particular field, it lacks utility. For research purposes, I find it useless.

Over the 2018 holiday period, the BNA International Trade Reporterceased publication. There are still articles on international trade on the Bloomberg website, but they are hard to find and hard to print.  At a time when international trade law and policy has expanded in importance, the poor coverage of it by Bloomberg is all the more lamentable.

Call for papers: Polish Yearbook of International Law 38/2018

From the Polish Yearbook of International Law (PYIL):

Polish Yearbook of International Law (PYIL) is currently seeking articles for its next volume (XXXVIII), which will be published in July-August 2019. Authors are invited to submit complete unpublished papers in areas connected with public and private international law, including European law. Although it is not a formal condition for acceptance, we are specifically interested in articles that address issues in international and European law relating to Central and Eastern Europe. Authors from the region are also strongly encouraged to submit their works.

Submissions should not exceed 10,000 words (including footnotes) but in exceptional cases we may also accept longer works. We assess manuscripts on a rolling basis and will consider requests for expedited review in case of a pending acceptance for publication from another journal.

All details about submission procedure and required formatting are available at the PYIL’s webpage (http://inp.pan.pl/pyil).

Please send manuscripts to [email protected]. The deadline for submissions is 28 February 2019.

An Apple Thrown at the Golden Pig

The Year of the Golden Pig has begun with the ostensible reckoning of the U.S. – China trade wars.  Apple shocked its investors by releasing a gloomy sales forecast in China.  Apple’s CEO, Tim Cook, said that “while we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China.”  This bad news precipitated a flash clash of the Australian dollar.

Obviously, trade conflicts are only part of the reasons behind Apple’s declining sales in China.  The Chinese economy has recently been in a downturn, and Apple has been facing fierce competition in the Chinese market.  Nonetheless, this is a strong demonstration that national economies are intertwined, perhaps more than we could fathom.  This bad news at the inception of the New Year must send stern warnings to both politicians and businesspeople.  Could this sign pressure both American and Chinese trade negotiators into sealing a deal before the March deadline?  Are there any roles to play for multilateral organizations, such as G20 and WTO, in defusing trade tensions in the face of yet another global recession, which seems increasingly possible?  Incidentally, central banks (both in the United States and Europe) are likely to squeeze monetary supplies in varying degrees.

USTR's US-Japan Trade Negotiating Objectives

USTR has released its negotiating objectives for the US-Japan Trade Agreement (USJTA) negotiations. Here are a few thoughts.

First, the Trump administration seems determined to come up with names for their trade agreements that are hard to remember and not at all catchy. USMCA and USJTA? They don't exactly roll of the tongue. Perhaps this is designed to make it difficult for critics to generate opposition to these agreements? It's not a bad idea, but it's a bit of a pain for people in the field who use these terms.

Second, not surprisingly, there is some America First language in there:

Rules of Origin:
...
- Ensure that the rules of origin incentivize production in the Parties, specifically in the United States.

As we learned from the new NAFTA, rules of origin can be used in a way that tries to limit the amount of trade that qualifies for the lower tariffs negotiated in trade agreements. If that approach is taken in the USJTA, the amount of liberalization could be less than some may be hoping for.

Third, the investment language is kind of vague:

Investment:
- Secure for U.S. investors in Japan important rights consistent with U.S. legal principles and practice, while ensuring that Japanese investors in the United States are not accorded greater substantive rights than domestic investors.
- Establish rules that reduce or eliminate barriers to U.S. investment in all sectors in Japan.

Given what we saw in the new NAFTA, what direction will the Trump administration go with investment protection/ISDS in the Japan negotiations?

Fourth, the Trump administrations seems ready to keep pushing its agenda on dispute settlement:

Dispute Settlement:
...

- Establish a dispute settlement mechanism that is effective and timely, and in which panel determinations are based on the provisions of the Agreement and the submissions of the
parties and are provided in a reasoned manner.

...

- 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.

I'm not exactly sure what they have in mind, but I can imagine we will see some of the same fights we are seeing now at the WTO and that took place in the new NAFTA negotiations. One obvious "mechanism" to address panel errors would be an appellate body, but presumably they don't mean that. Maybe a more limited "annulment" procedure"? Or perhaps they are thinking of some sort of adoption procedure, where a party can block all or some of the report? What will Japan think of this? (And how much does it matter given the rarity of FTA disputes?)

Fifth, some of the innovations that I liked least in the new NAFTA show up here as well:

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

- Provide mechanisms for terminating the Agreement under appropriate circumstances.

- Provide a mechanism to ensure transparency and take appropriate action if Japan negotiates a free trade agreement with a non-market country.

The first and second one, looked at together, sound sunset clause-ish, although if they do not tie the reviews to termination, there is no problem. And the third one is the same China-constraining clause we saw in the new NAFTA.

More generally, here are some questions I have about these negotiations:

-- There's a lot to cover in these talks. Can they really get all this done before the end of Trump's first term? Or is this going to be left for a future administration, which might have different objectives?

-- On the other hand, with all the negotiating work done by Japan and the U.S. in the context of the TPP, has a lot of progress already been made and this negotiation will go more quickly than might be expected?

-- With the TPP now in effect, and the EU-Japan FTA going into effect soon, will U.S. interests feel pressure to get this done, weakening the U.S. bargaining position?

-- The Trump administration is still talking about Section 232 auto tariffs. Will that get in the way of a U.S.-Japan trade deal?

-- How eager will Japan be to engage? It has shown some reluctance so far.

Guest Post: Trade Facilitation in USMCA: De Minimis Importation

This is a guest post from Bashar H. Malkawi, Dean and Professor of Law, College of Law, University of Sharjah

Free trade agreements (FTAs) use several rules of origin (ROO) - such as change in tariff category, value-added, and certain process requirements - to determine origin. ROO should have four characteristics: consistency, uniformity, objectivity, and reasonableness. However, achieving such objectives is important, but unfortunately this has not been always the case given the complicated nature of ROO and the other varied rules. ROO are confusing to traders, producers, and even lawyers. No single rule used is better than the other. Each origin determination under any FTA has its own set of advantages and disadvantages. It is noted that there are elements of unpredictability and restrictiveness in each method thus limiting the benefits of tariff reduction or elimination.

The United States-Mexico-Canada Agreement (USMCA) includes several provisions concerning trade facilitation such as advance ruling, duty drawback, use of information technology, post clearance audit, and single window. While certificates of origin are necessary, they also generate cost and delays for businesses and may be a source of risk and uncertainty. Some enterprises may decide to export under the normal MFN tariffs (which can be relatively low) thus foregoing FTAs benefits. These enterprises – especially small and medium-size companies - are doing so because they believe that their costs of complying with FTAs requirements, as reflected by change in tariff category, or value content calculations, the anticipated administrative costs of preparing documentation such as certificates of origin, and subsequent customs verification, are greater than the import duties that would be saved. These costs may require accounting and customs specialists who small and medium-size companies do not have. This may discourage new exporters and importers from participating in the anticipated benefits of free trade.

One important aspect of USMCA is the inclusion of de minimis threshold for imports. De minimis is a valuation ceiling for goods below which no duty or tax is charged and clearance procedures, including data requirements, are minimal. The focus in the de minimis threshold is not on value or size or weight of imports. These goods are usually low in value and involve low risk thus justifying the exemption from ordinary customs procedures.

There are times when certificate of origin is not required and customs procedures are minimal. For express shipments, importers do not need certificates when the value of an imported good does not exceed US $800 (for the U.S.), US $117 (for Mexico), and C$150 (for Canada). For other shipments, the de minimis threshold is CAD$3,300 for Canada and US$2,500 for the U.S. and Mexico. Of course, to benefit from this exemption, importation should not be part of a series of importations since this may reasonably be considered to have been arranged for the purpose of avoiding the certificate requirement.

There are no data available on the volume of de minimis postal shipments. Parties to the USMCA – especially Mexico and Canada - could have increased the de minimis threshold which could have led to higher trade volume for medium and small enterprises through lower trade costs. Studies indicate that increasing baseline de minimis threshold generates net economic benefits. Enterprises could benefit from not paying tariffs and avoiding time-consuming import procedures.