International Economic Law and Policy Blog

Guest Post: Update from ‘the Void’: Questions for the new Interim Appeal Agreement (IAAA)

This is a guest post by Mattijs Kempynck* & Akhil Raina**

Introduction: Learning how to say ‘I-A-A-A’

The recent Davos summit filled in the ‘void’ somewhat. Ever since the World Trade Organization’s (WTO) Appellate Body (AB) became non-functional in early December last year, commentators of all hues had been worried about the eventual demise of the entire dispute settlement system (DSS). Why? – because a panel report needs to be adopted by the dispute settlement body (DSB), in order to fully attain its ‘legal status’, and this cannot be done pending an appeal; everyone feared ‘appeals into the void’ – the losing party simply invoking an appeal to a now-non-functional AB; and for good reason, since this has already started to happen.

But then, like a stork through stormy skies, good news arrived. The European Union (EU) managed to expand its support-group for an ‘interim appeal solution’ from two (Norway and Canada), to sixteen. Thus was born the mouthful-y named ‘Interim Appeal Arbitration Arrangement’ (IAAA, though MIA or MIPA are also being used).[i] It bears note that the final text of the agreement is not released yet, but we can already see its significance First, it is a step forward; it shows willingness and determination by a part of the WTO Membership to not simply sit idly while the cookie crumbles - they have decided to take action. Second, it is encouraging to see the EU step up and take its role as a ‘leader’ in international economic affairs: as commentators in the past have chimed that the story of the GATT/WTO is, in large part, the story of the transatlantic relationship. And finally, and perhaps most significantly, some frequent users of the DSS are included in the list of signatories – most notably China. Given the calls for cracking down on subsidy issues concerning China (old ones like state-owned enterprises and new ones like extraterritorial subsidization), there was a risk that China would follow the US’ unilateral path. But it did not. This further points to the grudgingly accepted view that China is a rather civil participant in the DSS.[ii]

The IAAA intends to (re)establish a “binding, impartial and high-quality dispute settlement system among [the parties]”.[iii] It is, as is now well know, based on Dispute Settlement Understanding (DSU) Article 25. This method was initially proposed by Andersen et. al.[iv] and then strongly promoted by the EU.[v] Here, we do not seek to describe the precise modalities of the IAAA,[vi]  or explore its potential political effects. Rather, we seek to raise some questions (and give some answers) to potential conflicts arising out of a ‘plurilateral’ court interpreting multilateral agreements for (ostensibly) bilateral disputes.[vii] In this sense, we are concerned with – what happens next?

Peer into the (arguably, not so distant) future with us. Let us consider the time when the AB comes back online. Indeed, the DSS has evolved as a result of ‘trial by fires’ in the past: the ad hoc (and frequently criticized) GATT DSS (comprising of a myriad number of working parties, chairperson reports etc.) was streamlined in the 1970s/80s, leading to the creation of the legal affairs division (LAD).[viii] The very creation of the AB was one such ‘miracle’, resulting from contestation within the Membership and the hope of a better (more robust) legal future.[ix] So, let us say, the ‘void era’ will be (eventually and somehow) over. The Membership will be (and has always been) very interested in knowing exactly what their rights and obligations are under the WTO agreements, and how reports of the judiciary affect the same (notwithstanding the stipulation in DSU Art. 3.2 that the DSS will not “add to or diminish the rights and obligations provided in the covered agreements”). This has been at the forefront of US complaints against the AB. From a practical standpoint, there will undoubtedly be a case (or a Member) in the post-IAAA future that will raise the question of: what is the status of awards undertaken during the IAAA era? For example, if the EU and China engage in a dispute under the IAAA procedures on the crucial issue of ‘extraterritorial subsidisation’,[x] will the legal interpretations developed therein be applicable between, say, China and a non-IAAA Member in the resuscitated DSS order? Let us also remember that the IAAA system envisions a ‘legitimate’ judiciary: the judges will be ex-AB members,[xi] adding authoritative fuel to the fire. In such a situation, are we heading to a situation of parallel jurisprudences (jurisprudencii?)? This question is, of course, predicated on the assumption that the IAAA will be in force long enough to see a case go through a panel stage and be appealed by an IAAA Member.

Quick-Fixes, Fissures and Fragmentation

The irony is that the AB has ensured (regardless of whether this was ‘intended’) the creation of a single, consistent corpus of law. In effect, panels have a legal ‘star of Bethlehem’ to follow (we disregard the ‘precedent controversy’ in this post). Now, with the good intention of keeping appeals alive, the EU and others may, in effect, be creating two bodies of WTO interpretations.

In a typical WTO dispute, the rulings/recommendations of panel/AB interpret a ‘common legal reference point’: Annex 1 contains the agreements that all WTO Members are bound by (except plurilaterals). While the dispute is (ostensibly) bilateral, the report is adopted by the DSB, thereby ‘multilateralizing’ it. And while there is some disagreement about the exact effects that DSB decisions have on non-disputants,[xii] it is safe to say that these decisions, by virtue of DSB-sanction, become part of WTO’s ‘acquis’.[xiii] However, that would not be the case for IAAA awards. This is because DSU Art. 25.3 states that “arbitration awards shall be notified to the DSB and the Council or Committee of any relevant agreement where any Member may raise any point relating thereto.” Thus, there will be a notification, and perhaps some discussion in the DSB, but no formal adoption will be required. In this sense, the IAAA award will be a strictly inter partes affair, outside of the WTO acquis. This will create two sub-species of WTO case-law in the IAAA era: Inter partes IAAA awards outside of the acquis, and multilateralized panel reports contributing to it.

An asterisk is placed here seeing that Art. 25.4 states that “[a]rticles 21 and 22 of this Understanding shall apply mutatis mutandis to arbitration awards” and, in turn, DSU Art. 22.6 requires DSB sanction for retaliation. This is explored further below.

Now, while there may be legal basis for excluding IAAA from the WTO acquis, the matter, in all probability, will not end there. It would be naïve to think that a reinvigorated DSS will act as if nothing had happened. As Vidigal provides: “parties to such an agreement should be conscious that, in the absence of an operational Appellate Body, decisions of appeal arbitrators may have an impact on the broader development of WTO law, affecting the set of mutual expectations that constitute the trade regime.”[xiv] This will be especially true if there are a large number of IAAA awards to contend with; and if GATT/WTO history has taught us anything, it is that the Membership is a litigious bunch. This de facto contribution to the acquis of IAAA awards raises two questions: (1) what is the status of non-IAAA third parties? Can they participate in IAAA disputes?; and (2) how can the WTO Membership mitigate the risk and/or effect of parallel case-law?[xv] We address these in turn.

Third parties: In? Out? Somewhere in between?

The IAAA system is, as such, ‘open’ to third parties: i.e. others are welcome to join.[xvi] However, how open is the participation in IAAA arbitration for third parties that are not-IAAA Members? The general rule for third party participation in WTO disputes is contained in DSU Art. 10, which gives a ‘full right’ to make submissions to the panel. DSU Art. 25.3, however, is lex specialis. It states that, for arbitrations, “[o]ther Members may become party to an arbitration proceeding only upon the agreement of the parties which have agreed to have recourse to arbitration”. This is not a mandatory requirement; and original parties to the arbitration can reject third-party participation. Thus, in our aforementioned example, in an IAAA proceeding between EU and China, a request to participate by a non-IAAA Member could be rejected by either disputing party.

This could present a problem. Seeing the lack of clarity on the de jure contribution to the acquis (see the discussion on Art. 22.6 DSU below) and the probability of a de facto contribution, a non-IAAA Member has a logical interest in participating in the EU-China arbitration on a controversial issue such as extraterritorial subsidisation. The question thus rises whether it could invoke a right to participate as a third party. Firstly, and obviously, the non-IAAA Member could simply sign on. But no one can force a sovereign country to do anything. In this regard, Pohl has dug up the very interesting (and relevant) 1907 Hague I Convention[xvii], which states in Art. 84.2 that when the award: “concerns the interpretation of a Convention to which Powers other than those in dispute are parties [the SCM], they shall inform all the Signatory Powers in good time [the non-IAAA Membership, as foreseen in Article 25.2 DSU]. Each of these Powers is entitled to intervene in the case. If one or more avail themselves of this right, the interpretation contained in the Award is equally binding on them”[xviii] Pohl further points out that  108 out of the 164 WTO members are members to the 1907 Convention, and we now know that this includes the entire IAAA Membership. In so far as the relationship between the Convention and the Article 25.3 DSU as lex specialis is concerned, Pohl notes in a footnote that:

“It could be questioned if there is a norm conflict between Art 25.3 DSU and Art 84.2 of the Hague I Convention of 1907 in this respect, such that Art 30(3) of the Vienna Convention on the Law of Treaties, 1155 UNTS 331, (VCLT) would be applicable. However, it should be noted that, in contrast to the prevailing definition of norm conflict, the two provisions are fully capable of being applied at the same time (cf. Art 59(1)(b) VCLT) and are thus not mutually exclusive; and the disputants can comply with their obligations under the Hague Convention to permit a third participant to intervene by agreeing under the DSU to such participant becoming a party to the arbitration proceeding.” [xix]

All this might imply a duty on the IAAA parties to ensure that non-IAAA parties are allowed to participate in IAAA disputes, despite them being non-parties to the IAAA. However, on this point, the available EU documents are not entirely clear. The EU’s original agreements with Norway and Canada state that: “[o]nly parties to the dispute, not third parties, may initiate the arbitration. Third parties which have notified the DSB of a substantial interest in the matter before the panel pursuant to Article 10.2 of the DSU may make written submissions to, and shall be given an opportunity to be heard by, the arbitrator. Rule 24 of the Working Procedures for Appellate Review shall apply mutatis mutandis.”[xx] Of course, this excerpt allows non-IAAA parties interested in the EU-China dispute, to simply join the system, and file their own complaints or participate as a third parties. On the advanced question of non-IAAA third parties participating in IAAA arbitration without joining, the final text will have to clarify if ‘third parties’ in the excerpt above refers to ‘third parties to the original panel proceedings’, or is limited to ‘third parties to the original panel proceedings able (but not allowed) to initiate arbitration’. Only the former option concerns both IAAA Members and non-IAAA Members and thus meets the legal requirements in 84.2 of the 1907 Hague I Convention.

Also (and crucially), Article 84.2’s last sentence would imply that the intervening Members will be bound by the interpretation of the SCM contained in the award of the EU-China IAAA arbitration, while non-intervening Members will not. This further exacerbates the risk of fragmentation of the ‘common legal reference point’. Say the extraterritorial subsidization arbitration attracts 20 or so third parties (IAAA or non-IAAA Members). This could create a diverging interpretation of SCM law for a non-marginal minority of the Membership. Pohl is wise in suggesting that IAAA Members contract out of their obligations under Article 84.2 to avoid such a situation.[xxi]

What do we do now?

When the ‘AB crisis’ was in its heyday, everyone was concerned with questions of: what now? what comes next? what do we do? Progress notwithstanding, these questions seem to continue to stare us in the face. We suggest three ways out (in addition to those provided by others).

First, one could consider the DSS post-IAAA as analogous to the situation of the evolution from GATT to the WTO. The Membership could acknowledge the de facto contribution to the acquis of the IAAA awards and ‘grandfather’ them in some way. Whether limiting the effects of international decisions is even practically possible, is an altogether different debate. Secondly, one could promote dialogue between all relevant parties: the new DSS judges, the IAAA members, and the IAAA non-members. This is somewhat similar to what the US and EU suggested with respect to the original AB: that the Membership build additional ‘channels of communication’ between them and the judiciary, so that the desirability of certain interpretations can be discussed. A similar communication channel could be established in the post-AB, post-IAAA legal order deal with the question of its contribution to the acquis. Finally, the (lack of) de facto contribution to the acquis could be written into text, through an amendment of the WTO agreements/DSU. While it has been difficult to garner full support for such amendments, given that circumstances have reached a boiling point, the Membership may be willing to show collective pragmatism in the future.

Concluding Remarks and the ‘googly’ that is DSU Art. 22.6

In the world of cricket, a ‘googly’ is a deceptive, unexpected delivery by the bowler. As mentioned above, DSU Art. 25.4 is clear that arbitration (IAAA) awards do not require DSB sanction. However, what about DSU 22.6 which requires that for retaliation (in case of non-compliance), DSB sanction will be required? This is particularly relevant, given that one of the major reasons for the WTO DSS’s success has been its ability to allow for (and arbitrate on) retaliation/compensation.

To be sure, retaliation approval also follows ‘negative consensus’ so it will be nearly impossible for, say, the US, to interfere in retaliation procedures in the aforementioned EU-China dispute. However, the point is that from a strictly legalistic point of view, this creates a strange paradox, because the retaliation award will become ‘multilateralized’ while the underlining award will not. We take no position (though ideally someone should) on whether, legally, the retaliation award’s DSB sanction seeps into the original award. Does the former signify the latter’s approval?

In all, a lot depends on the final text of the IAAA. Still, as mentioned above, this is a big, positive step in the direction of a ‘rules-based’ system for economic dispute resolution. We sit in wait for further developments. The road ahead looks winding, but at least we’re in for an interesting ride.

***

 

* Blue Book Trainee, DG Trade, European Commission; LL.B. LL.M (KU Leuven). The views expressed are those of the author and do not reflect an official position of the European Commission.

** Marie S. Curie Fellow and PhD Candidate at the Leuven Centre for Global Governance Studies (GGS), KU Leuven. The author is a part of the Horizon 2020 ETN project, ‘Global India’, and is a teaching assistant for WTO law.

[i] For the Commission press release, see: https://ec.europa.eu/commission/presscorner/detail/en/IP_20_113.

[ii] See: M. Harpaz, “Sense and sensibilities of China and WTO dispute settlement” Journal of World Trade 44(6) (2010) 1155–1186.

[iii] See fn. 1.

[iv] S. Andersen, T. Friedbacher, C. Lau, N. Lockhart, J. Y. Remy and I. Sandford, “Using arbitration under Article 25 of the DSU to ensure the availability of appeal” CTEI Working Paper 17/2017, 10 p., online at <https://repository.graduateinstitute.ch/record/295745 >.

[v] See: Interim Appeal Arbitration pursuant to Article 25 DSU, JOB/DSB/1/Add.11 (25 July 2019).

[vi] For commentary, see: A. Hazarika and P. Van Vaerenbergh, “’One Rule to Rule Them All’: Rules for Article 25 DSU Arbitration” Journal of International Abritration 36(5) (2019) 595-628.

[vii] See also G. Vidigal, “Living Without the Appellate Body: Multilateral, Bilateral and Plurilateral Solutions to the WTO Dispute Settlement Crisis” Journal of World Investment & Trade 20 (2019) 886 for the distinction on why this is not a plurilateral agreement à là GPA and Jens Hillebrand Pohl, “Blueprint for a Plurilateral WTO Arbitration Agreement under Article 25 of the Dispute Settlement Understanding” in Prévost, Alexovicovà and Pohl (eds.) Restoring Trust in Trade: Liber Amicorum in honour of Peter Van Den Bossche (Hart Publishing, 2019) 139-156 for more usage of the term plurilateral.

[viii] See: A. Porges, ‘The Legal Affairs Division and law in the GATT and the Uruguay Round’ in G. Marceau (ed.) A History of Law and Lawyers in the GATT/WTO (WTO, 2015) 225 – 226.

[ix] See: C.-D. Ehlermann, “Some Personal Experiences as Member of the Appellate Body of the WTO” EUI Working Paper No 02/9 (2002) 44 p.

[x] For more on this topic Victor Crochet and Vineet Hegde on this blog back in November, online at <https://ielp.worldtradelaw.net/2019/11/guest-post-chinese-financial-contributions-to-producers-abroad-a-subsidy-looks-quacks-but-probably-i.html>.

[xi] See fn. 5, para 7.

[xii] For a brief take see: N. McNelis, “What Obligations are created by WTO DS Reports”  Journal of World Trade  37(3) (2003) 647. For the opposite view, see also: D. Regan, Do WTO DS Reports Affect Obligations of Non-Parties – Response to McNelis, Journal of World Trade 37 (5) (2003) 883.

[xiii] Pohl (note 7) 147; Hazurika and Van Vaerenbergh (note 4) 606; Without straying off into discussions on the precise meaning of the word acquis (see: G. Marceau, “Transition from GATT to WTO”, 29 J.W.T.147 29:1 (1995) 147, who disputes the use of the term 'GATT acquis,' as understood in the wider European law sense since, in her view, GATT case-law does not form part of the GATT 1994. However, see E.-U. Petersmann, “The Dispute Settlement System of the World Trade Organization and the Evolution of the GATT Dispute Settlement System Since 1948” Common Market Law Review  (1994) 1157-1207), we use the working definition of ‘the covered agreements plus the body of multiliateralized/ adopted dispute settlement reports’.

[xiv] Vidigal (note 7) 886.

[xv] To be sure, this is the same fear that is associated with DSS under Preferential Trade Agreements (PTAs), though more in the context of the problem of ‘forum shopping’. see: Tradecraft: <https://soundcloud.com/user-885686084/ep-33-dispute-settlement-forum-shopping-and-the-centrality-of-the-wto>.

[xvi] See: Statement by Ministers, Davos, Switzerland, 24 January 2020; see further, Pohl (note 7) 153. Note that the EU’s recent amendment of its Enforcement Regulation (https://ec.europa.eu/commission/presscorner/detail/en/ip_19_6748) shows that it gives priority to the IAAA structure over unilateral measures as an ultimate option, therefore indicating its openness.

[xvii] See the 1907 Convention For The Pacific Settlement Of International Disputes, Permanent Court of Arbitration, online at <https://pca-cpa.org/wp-content/uploads/sites/6/2016/01/1907-Convention-for-the-Pacific-Settlement-of-International-Disputes.pdf >

[xviii] See: Pohl (note 7) 147.

[xix] See: Pohl (note 7) fn. 34.

[xx] Interim Appeal Arbitration pursuant to Article 25 DSU, JOB/DSB/1/Add.11 (25 July 2019), §11.

[xxi] Pohl (note 7) 153.

**Job Advert** Stanford Law School Teaching Fellowship

STANFORD LAW SCHOOL seeks to hire a teaching fellow for the LLM Program in International Economic Law, Business & Policy. The appointment is for a two-year position with the possibility of a third year by mutual agreement, beginning In August 2020.

The fellow will assume significant academic, advising and administrative responsibilities. The principal functions of the teaching fellow are to prepare and lead a colloquium on international business issues for the 15-20 students who enroll in the program annually, to advise students on their curricular choices, and to assist in the admissions and orientation process for the incoming class.

The fellow will also organize and facilitate informal workshops, outside speakers, and academic and social events, be responsible for day-to-day administrative management of the LLM program, advise and counsel LLM candidates on academic and personal issues, respond to inquiries from prospective LLM applicants, and interact with our faculty in support of the LLM program goals and needs.

The ideal candidate will be an aspiring academic with a strong interest in one or more of the core subject areas spanned by the program (including international trade, international investment law, international dispute resolution and arbitration, international business transactions and international antitrust). It is expected that the responsibilities of the teaching fellow will occupy approximately half of his or her time, with the remaining time available to pursue the fellow’s own research agenda. The fellow will have full access to the research resources of Stanford University and access to faculty workshops.

 

Candidates for this position are expected to have strong academic records and references. Professional experience in the area is also valuable. This position is ideally intended for an individual who expects to pursue an academic career in the field, although a firm commitment to academia is not mandatory.

 

The program director, Prof. Alan Sykes, will screen and interview applicants. Applicants are encouraged to contact Prof. Sykes directly with an indication of interest and a CV – mail to:[email protected]. Informal questions may be sent to the current Fellow, Mona Pinchis-Paulsen mail to: [email protected]

**In addition, applicants should also complete the Stanford application form found here: http://m.rfer.us/STANFORDOhgAK7

 

UPDATE!

Deadline to apply is MARCH 15, 2020.

Full details are available here: http://m.rfer.us/STANFORDp.SAKH

Deadline for SIEL / JIEL / OUP Essay Prize Approaching: 14 February 2020

Deadline for SIEL / JIEL / OUP Essay Prize Approaching: 14 February 2020 

 

The annual SIEL / JIEL / OUP Essay Prize is awarded to the best essay submitted on any topic in the field of international economic law. It is open to all current undergraduate and graduate students of any university or other tertiary education institution, and those who have graduated from a university or other tertiary education institution no earlier than five years before the submission deadline.  

 

More information at  https://www.sielnet.org/prizes/siel-jiel-oup-essay-prize/  

ISDS Reform: Designing Permanent Institutions at Working Group III

Last week, the United Nations Commission on International Trade Law (UNCITRAL) Working Group III (WGIII) turned squarely to designing permanent adjudicative institutions for the resolution of investment disputes. As readers of this blog may be aware, WGIII is charged with developing multilateral reforms to the current ad hoc system of investor-state dispute resolution (ISDS). This government-led process involves delegations from around a hundred States, with active participation by dozens of observer delegations from international organizations, arbitral institutions, NGOs, business associations, and learned societies. Beginning in WGIII’s 34^th Session in 2017, this work has continued through biannual sessions in Vienna and New York. From 2017 to 2018, delegations registered substantial concerns with ISDS, relating to fragmented arbitral outcomes; arbitrator independence, impartiality, and diversity; duration and cost; multiple proceedings; and third-party funding (Phase 1). In the fall of 2018, WGIII decided to work multilaterally to reform such concerns within UNCITRAL (Phase 2). As of its 37^th Session in 2019, WGIII has moved firmly into working on concrete reform options (Phase 3) (discussed here).

WGIII’s 38^th Session in Vienna marked a key transition into detailed discussion of reform options. Meeting initially in October 2019, the Working Group held discussions on a series of reform options according to a pre-determined project schedule. This work was grounded in proposals by over forty-five governments, across twenty-three submissions (here); complemented by several Secretariat papers (here); submissions by observer delegations (here); and concept papers by the Academic Forum on ISDS Reform (here). In this initial meeting, WGIII focused on (i) developing a multilateral advisory center; (ii) a code of conduct; and (iii) reforms to third-party funding (discussed here). Discussions centered on high level values, trade-offs and prioritization, with the goal of guiding the Secretariat as it turns to developing more concrete reform options.

Resuming its 38^th Session in Vienna last week (January 2020), WGIII turned squarely to designing permanent institutions: (iv) a standing appellate mechanism; and (v) a multilateral investment court (MIC); as well as the cross-cutting question of (vi) selecting and appointing adjudicators. As with the discussions last fall, the goal was to discuss each reform option at a high level, to provide guidance to the Secretariat. The Working Group is not yet taking firm decisions on the desirability or ultimate form of any reforms, although some States are already revealing their preferences. Later this year, WGIII will develop a new project schedule and begin circling back to each topic, seriatim, with the benefit of new responsive work by the Secretariat, the Academic Forum, and other organizations (such as the OECD, ICSID, the PCA, and several NGOs).

 

Appellate Mechanism and MIC

A large number of delegations expressed support for developing a standalone appellate mechanism. The basic idea would be to create a treaty-based standing tribunal to hear appeals from arbitral awards decided under its member states’ network of inter se bilateral and multilateral investment treaties. This approach would leave the fragmented ecology of ISDS in place for first instance decisions, but systematize adjudication through a centralized appellate body. A smaller group of States (led by the European Union) were committed to developing a more fully integrated MIC, combining centralized appellate review with a centralized court of first instance. The two-instance MIC approach would replace ISDS altogether among members. For now, WGIII focused on matters common to both types of permanent institution, and mostly considered them together.

(a) Values. Among States supporting appellate review, there was broad agreement that the objective is to secure better correctness, consistency, and coherence in investment adjudication, and hopefully thereby enhance the legitimacy of the system. At the same time, several delegations recognized that these values were in tension with other concerns like reducing cost and duration.  

(b) Nature and Scope of Appeal. Recognizing the tension between the values of appeal and reducing costs, most delegations did not favor complete de novo appellate review. Many coalesced instead around de novo review for errors of law, and limited review for manifest errors of fact. Several delegations stressed that the grounds for appeal should also include the grounds for annulment (ICSID) or set-aside (New York Convention), to avoid the proliferation of proceedings. Most agreed that only final decisions should be subject to appeal, though views varied on whether this should include only awards, or also interim decisions (e.g. jurisdiction or provisional measures) and when any interim appeals might be filed (noting trade-offs for cost and duration).

(c) Effect of Appeals. Key questions arose about what powers an appellate instance would have, vis-à-vis the first instance arbitral tribunal, the parties to the dispute, the States parties to the underlying treaty, and non-parties.

• Powers vis-à-vis first instance tribunals. It was broadly accepted that an appellate instance should have the power to reverse, vacate, or modify an arbitral award. Views varied on the question of remand. Some argued against remand power, inter alia out of concern for extending cost and duration. Others advocated strongly in favor of remand, emphasizing the challenges confronting other international jurisdictions lacking remand power (particularly the WTO, where the absence of a sufficient factual record requires the Appellate Body to either do its best to “complete the analysis,” or dispose of appeals on the potentially arbitrary basis of burden of proof). Of these delegations, several favored broad, discretionary powers of remand, while others suggested limiting remand through soft or hortatory guidance (e.g. “only when necessary”). States also expressed varied views on whether appeals of interim decisions should suspend the underlying arbitral process.

• Effects on future tribunals. States disagreed on the desirable precedential effect of appellate decisions (among parties), with some advocating strong stare decisis, and others preferring weaker persuasiveness norms. Others expressed concern about informal precedential effects for third States.

• Participation of parties and non-parties. Finally, States agreed on the importance of mechanisms for participation by treaty parties, including non-disputing party submissions and binding interpretations of underlying treaties. Some also suggested allowing amicus submissions by States party to investment treaties with terms similar to those under dispute.

(d) Enforceability. Delegations further discussed how to ensure and maximize enforceability for appellate or MIC decisions, both among States parties and in non-party jurisdictions. Most delegations favored imbuing any permanent institution with its own “inherent” mechanism for enforcement among parties (potentially modeled on Article 54 of the ICSID Convention). More vexing was how to ensure enforceability in third States. Several delegations proposed ways of piggybacking on the ICSID Convention (through a proposed inter se modification of that treaty), or the New York Convention (interpreting the concept of a “permanent arbitral body” in Article 1(2) to include an appellate mechanism or MIC, and using “deeming language” to make clear that parties to a MIC or appellate mechanism viewed these institutions’ decisions as “arbitral awards”). Some States expressed uncertainty about these strategies, and questioned whether domestic courts would ultimately enforce appellate or MIC decisions as readily as typical arbitral awards. It was also voiced, however, that it was not clear whether (or why) non-parties would object to member states of an appellate mechanism or MIC interpreting the New York Convention in this fashion, given that their own outbound investors may wish to make use of those institutions down the line.

(e) Financing. Most delegations agreed that financing should be scalable, equitable, and should ensure the independence of adjudicators. States invoked numerous models from how other international courts are financed, including member contributions, trust funds, user fees, and hybrid models. Some delegations preferred funding by member States, but others questioned whether this might undermine adjudicator independence. Others stressed the advantage of user fees in disincentivizing frivolous claims and long shot appeals. It was also suggested that user fees might help avoid paralysis if member States cut off contributions (particularly in view of the WTO Appellate Body standoff). Many considered that a hybrid model could strike the right balance, by combining member contributions and user fees. States also considered the viability of graduating member rates by level of development, with a trade-off between reducing costs for less developed states and (potentially) inflating the voice and influence of larger contributors.

Looking Forward: the Chair closed the discussion on permanent institutions by proposing eleven sets of issues to guide further work by the Secretariat in preparing reform options and draft language: (1) elaboration of key terms (e.g. “de novo” review, or “manifest” error); (2) developing options for managing an appellate case load; (3) options on which kinds of decisions can be appealed, and when; (4) elaboration of how appeals might work beyond of treaty-based arbitration (including contract-based and investment-law-based arbitration); (5) how appeals would work in the context of ad hoc arbitration; (6) how to limit any impact of permanent bodies on third parties; (7) options for remand authority, with sensitivity to costs and duration; (8) options for ensuring participation by non-treaty parties; (9) further analysis for how the arbitral seat might affect appeals; (10) further work on enforceability; and (11) further work on hybrid financing models and ways to avoid undue influence by those who pay (or those who pay more).

 

Selection and Appointment of Adjudicators

Several delegations recognized that selection and appointment ranked among the most central questions on WGIII’s agenda. It was acknowledged, however, that the trade-offs might not be the same in different institutional contexts, and thus different options might be desirable in relation to ISDS and permanent mechanisms. Here too, the goal of these initial discussions was to provide the Secretariat with information and guidance toward developing draft options.

Qualifications. Delegations broadly agreed that adjudicators must be competent, but expressed widely varied views on what competence entailed. Many stressed expertise, though emphases ranged across public international law, international investment law, sectoral expertise, dispute resolution in general, and the domestic law of the particular Respondent State. Not all delegations agreed how to (or whether to) prioritize expertise in these various fields. Delegations also broadly agreed that adjudicators must be neutral, independent and impartial, with high moral character. There was also a widely shared view that the body of adjudicators should be diverse according to a range of metrics, including gender, region, language, culture, socio-economics, and legal system. Proponents emphasized that diverse decisionmakers can result in higher quality decision-making. Some delegations cautioned against prioritizing diversity over excellence, and that overemphasis on diversity might restrict the pool of available adjudicators. However, others contended that these concerns were overblown, arguing that diversity and excellence must be pursued in tandem.

Reforming appointment in ISDS. Given the above values, much of the discussion focused on how to structure appointments. Some stressed party autonomy, and suggested that party appointment was the best way for States to ensure representation of qualifications they deemed most important in their own disputes. These delegations also emphasized the need for independence, and cautioned that State-appointed judges might not feel comfortable voting against the government. These delegations sought to pursue the above values while preserving party appointment, through clauses requiring diversity, flexible adjudicator rosters, or with a greater role for institutions. Other delegations considered that such reforms would be insufficient to mitigate existing biases – preferring to utilize more rigid arbitrator lists. It was generally agreed that the process should be more transparent. And delegations considered whether various other tools may be helpful, such as screening mechanisms, renewable or non-renewable roster terms, and cooling off periods.

Selection and appointment in permanent institutions. In the context of permanent bodies, delegations argued for member-driven adjudicator selection on a standing basis. The European Union stressed that adjudicators should be selected by election, rather than consensus, stressing the singular role of vetoes in the ongoing crippling of the WTO Appellate Body. It was suggested that permanent adjudicators should serve on a full-time basis, with non-renewable terms to enhance their independence. However, a potential trade-off might be reduced accountability, and care would have to be taken to control perverse incentives relating to future employment prospects. Several delegations contended that member-driven appointments would result in a pro-State bias. Proponents argued, however, that these concerns were misplaced. In their view, States would appoint standing adjudicators with long term mixed interests in view, including protecting their outbound investors. Some States, finally, considered whether other appointment mechanisms were available for standing bodies, including appointment by a neutral United Nations entity, independent and representative nominating committees, or existing arbitral institutions.

Looking forward: the Chair closed the discussion on selection and appointment by proposing that the Secretariat further analyze three issues relating to adjudicator qualifications: (1) which specific qualifications to prioritize, with attention to unintended consequences and possible biases in the selection of qualifications; (2) options for how qualification requirements can be incorporated in a treaty reforming ad hoc ISDS (e.g. in hortatory or binding form); and (3) options relating to nomination and selection in a permanent institutional context.

 

Conclusion and Preview

WGIII is now fully engaged in the design phase. More work remains to be done on all aspects, and discussions continue. Yet the process has already taken remarkable strides, with particularly notable progress toward thinking through the contours of a future appellate mechanism. It remains surreal to watch these collegial and fruitful multilateral discussions about designing permanent institutions for the adjudication of investment disputes in parallel to the dispute settlement crisis in the WTO. Yet one encouraging aspect is that WGIII delegates are clearly learning from the challenges that have beset the WTO Appellate Body. For more on the dynamics of the resumed 38^th Session, stay tuned for a coming post on EJILTalk! (and this blog) by Anthea Roberts and Taylor St. John.

WGIII will next meet in its 39^th Session in New York in April 2020. By way of preview, delegations will turn to a wide range of cross-cutting reform options relating to: (vii) dispute prevention; (viii) treaty interpretation; (ix) security for costs; (x) frivolous claims; (xi) multiple proceedings and shareholder claims for reflective loss; and (xii) counter claims. These matters may seem technical, but several are critically important and bear close watching. For example, reforming the availability of reflective loss claims would have wide-ranging, positive systemic effects addressing many of the major concerns on WGIII’s agenda (as I have argued in an Academic Forum paper on Reforming Shareholder Claims in ISDS, with Kathleen Claussen, Jaemin Lee, and Giovanni Zarra).[1] At the end of the session, WGIII will begin considering questions of form, with particular focus on the possibility of developing (xiii) an omnibus treaty on procedural reform, with flexibility for states to opt-in to particular reforms on an a la carte basis. Secretariat papers on all of these matters are available on the UNCITRAL website, here.

The conversation continues. Onward to New York!

 

[1] See further Julian Arato, The Private Law Critique of International Investment Law, 113 Am. J. Int’l L. 1 (2019).

Blog Review of Quinn Slobodian's "Globalists"

I wish the trade wars would slow down a bit so I could do more reflective thinking about big picture issues, rather than constantly monitoring twitter for the latest trade emergency. That doesn't look it will happen any time soon, but I was able to fit in a quick read of Quinn Slobodian's "Globalists: The End of Empire and the Birth of Neoliberalism." I will say that I learned a lot and it was kind of a gripping read. At times I was excited to turn the page and find out what happened next! I probably should have known more about things like the Mont Pelerin Society, but I didn't, so the story was fascinating. Slobodian's tracing of the transition of global and regional economic and political integration from past empires to the modern day international economic order is an extremely valuable exercise. The system as it exists today makes more sense when you understand where it came from.

I do have some criticisms of the book, though, and this blog review will highlight those. Nevertheless, I highly recommend the book.

My first concern went away after I understood the history of the book. When I saw the title, I thought Slobodian was trying to capitalize on the political fad of "nationalists" complaining about how "globalists" are ruining the world (or something). In my view, the power of "globalists" is vastly overstated, and the whole debate is kind of silly. Sure, we need to talk about how power should be allocated at the local, national, and global level, and have a discussion of the proper role of global governance and institutions. But the suggestion that too much power has shifted to the global level does not match the reality of the very limited power held there. And, of course, sometimes the accusations about "globalists" seem a bit more nefarious.

But then I learned that Slobodian had written the book before this debate picked up, and his choice of title was either fortunate or unfortunate, depending on how you look at it. It was fortunate in terms of books sales and attention. It was unfortunate in the sense that people might associate the book with Steve Bannon and therefore take it less seriously. A more sober title would have been "Balancing State Power with Economic Interdependence," a phrase he uses on p. 9. But even with "globalists" in the title, we should take it seriously, despite the flaws, which I will now get to.

The first flaw is the emphasis on the term neoliberal without a good explanation of what he means by it. In my view, this term is thrown around so carelessly that it's of virtually no use in the political debate. Slobodian acknowledges this criticism on p. 2, but blows right by it and keeps using the term, with only a vague explanation. It seems to me, however, that when Reagan, Bill Clinton, and Obama are all referred to as neoliberals, the term harms the debate more than it helps. It may be true that each of these presidents presided over, and to some extent supported, a market-oriented system that involves some degree of "privatization, deregulation, and liberalization." But the extent of their support varied greatly, and lumping them together does not make sense. As a historian, Slobodian may not be using the term neoliberal with the current political climate in mind, focusing instead on a group of thinkers from decades ago. But many readers are likely to associate the term with recent political discussions, and Slobodian should clarify a bit more who exactly he is referring to when he talks about neoliberals. There is a lot of space between complete socialism and a pure free market, and the vast majority of people are somewhere in that space. Are they all neoliberals? What level of support for markets justifies the use of that term? There is probably a range of views on this, but I would have liked to hear more about what Slobodian thinks. I took the tone of the book as skeptical about free markets, which is fine. People all have their biases and we should read everything -- including this blog post! -- with an eye for the political views of the author. But given the current political usage, I think it would have been helpful if he had articulated these issues more clearly.

But that's enough about word choices. One of Slobodian's main points in the book (p. 2) seems to be the following: A group of "neoliberals" had a project to design international institutions "not to liberate markets but to encase them, to inoculate capitalism against the threat of democracy, to create a framework to contain often-irrational human behavior ... ." Along the same lines, he talks about a "project of thinking in world orders ... to defend the world economy from a democracy that became global only in the twentieth century ... " (p. 4)

I feel like this argument falls within a broader one I've come across. I see a trend among some people on the left to view constitutions -- domestic ones or the international agreements that have constitution-like features -- as a plot by conservatives or free market-types to undermine majoritarian democracy. "The people" prefer more government intervention in the economy, the argument seems to go, and therefore the right can only get its way on economic policy if it undermines democracy with courts or treaties.

This view puzzles me. Are these folks not aware of how people on the left have used constitutions to thwart the will of the majority in order to promote progressive causes? Certainly we should debate the majoritarian vs. countermajoritarian approach to governing, but this isn't some right wing plot. It can and has been used by both sides.

To illustrate this in the international arena, let's move away from the "economic constitutions" that are the focus of this book. Imagine a treaty under which states agree not to fight wars or produce nuclear weapons. But then the majority of people in a particular country wants to fight a war or have a nuclear weapon. Could you say that an international treaty or institution that was created to prevent war and nuclear weapons was intended to "inoculate international relations against the threat of democracy"? I guess you could, but it would be a strange thing to say.

Now imagine it's not a majority that wants war and nuclear weapons, but just a group of powerful defense contractors. Is the international treaty/institution really threatening democracy? That's the logical implication of Slobodian's suggestion: Because the WTO acts as a check against special interests, it "encases" and constrains democracy. In some very limited sense, I suppose that it does. But putting that fact in its broader context, and noting the limited nature of the constraints, makes it a lot less compelling and an odd way to characterize things. If someone is pro-tariff and pro-protectionism, I can understand why they would use this language as a tool of persuasive political argument. But if you are aiming to be objective about things, pretending to be concerned about democracy in this context seems excessive to me. (Somehow I don't expect a similar book from folks on the left about how international climate change agreements are "encasing" environmental policy "against the threat of democracy" in situations when domestic majorities do not vote for policies to fight climate change.)

And finally on the point about "encasing democracy," it's worth noting that many WTO Members are not democracies in a meaningful sense, and in those circumstances at least democracy is not being encased. (If authoritarianism is being encased, is that a reason for critics coming from Slobodian's perspective to support the WTO?) And even in the most democratic of democracies, sometimes the decision-making process is influenced by interest groups who themselves are trying to thwart the will of the majority. If the WTO can support the majority against those interest groups, isn't that a good thing? (Thanks to Sarah Bauerle Danzman for these last points).

Let me turn now to the GATT/WTO issues. My main criticism of the book is that while it may be very relevant to a number of policy areas, with regard to the WTO it gets many things wrong and undermines its overall persuasiveness. Slobodian tried really hard to fit the WTO into his narrative, and it just doesn't work. 

Slobodian focuses on three GATT Secretariat folks and their role in adapting the neoliberal thinking of people such as Hayek and applying it to the creation of the WTO: Jan Tumlir, Frieder Roessler, and Ernst-Ulrich Petersmann. I didn't know Tumlir, but as I was entering the field Roessler and Petersmann were two names that I had heard many times. I idolized both of them, and I can recall being in awe when meeting them for the first time. It was amazing to me that I was able to get to know them and have normal conversations where I was no longer nervous about talking to such eminent people!

In spite of the esteem in which I hold them, I'm pretty sure Roessler and Petersmann would both agree that any discussion of the creation of the WTO should look far beyond them and Tumlir (Roessler and Petersmann reviewed Slobodian's book here and here). Yes, they each played an important role. But as we know, the WTO is a member-driven organization. When thinking about how the system came to be, we need to look first at the governments themselves, and the wide range of people involved. The modern trading system was created through the leadership of people such as Cordell Hull in the 1930s and 1940s, and credit should also be given to the long list of names that show up in the GATT negotiating history documents. Similarly, with the WTO, there are many government officials who deserve credit for drafting the overall framework and specific details of the agreement. Yes, Tumlir, Roessler, and Petersmann played a role, but as I am sure they would agree, elevating those three into a special category that is responsible for the WTO is a wild distortion of how we got here. There are probably hundreds, if not thousands, of important voices who have had input over the years, and the rules of the WTO are an amalgam of all of their efforts. 

The result is a WTO that involves a modest amount of liberalization (you can still use tariffs, and governments do so quite a bit!), and perhaps a tiny amount of deregulation and privatization (although mostly indirectly). The best description I've heard of the main purpose of the WTO is "mutually agreed constraints on protectionism." When you put it that way, accusations about "globalists" seem over the top. (Especially when you consider the budget and number of employees at the WTO.)

Slobodian's description of the GATT/WTO is also filled with errors and omissions. For example, Slobodian seems to really want the WTO to be seen as the global equivalent of the EU. He says that the "[t]he template adopted by the GATT reformers was the European model of multilateral governance and the 'economic constitution.'" For "Tumlir, Petersmann, and others," he says, "the goal was to scale up the 'European idea' of neoliberal constitutionalism from the continent to the world economy, making the WTO into a 'trade constitution' in which the Dispute Settlement Body and the Appellate Body would act as equivalents to the European Court of Justice." (pp. 256-257) Was that really their goal? I don't know, but if so, they failed miserably! The DSB, panels, and the Appellate Body have nothing close to the kind of power that the ECJ has.

On this same point, Slobodian appears to misunderstand a key distinction between EU law and WTO law. He says that what makes EU law special is that it is "directly effective" in nation-states. That means, he says, "that individual citizens ... could appeal to European law within their domestic courts." While he acknowledges that the WTO "was not exactly as the reformers envisioned," it achieved some of their goals "by allowing some directly effective rights (in the case of intellectual property) and moving from enforcing the 'at-the-border" issues of GATT to 'beyond-the-border' issues including services, intellectual property rights, and labor, environmental and health standards." (p. 257) Later he says, the EEC and WTO "sought to create legitimacy through offering direct private rights to citizens beyond the nation." (p. 266)

However, as we all know, there is no "direct effect" for WTO rules in general, or intellectual property rules in particular. I suspect what he means is that the TRIPS Agreement has positive rather than negative obligations, but that's a completely different -- and much less significant -- thing. It certainly would be significant if people could make claims based on WTO legal obligations in domestic courts. But they can't (a couple historical anomalies aside).

In addition, he makes the error common among many trade critics of thinking that GATT only dealt with border measures, which obviously is not the case. Even the League of Nations economic discussions and the 1930s-era reciprocal trade agreements spent a fair amount of time sorting out how to deal with internal measures.

Summing up, there is a way to describe how the power of the GATT expanded a bit with the creation of the WTO, but Slobodian's efforts here are misleading and overstate the case considerably.

Let me close with a few other points. In Chapter 3, he makes reference to the views of neoliberals on the prospect of "world government." He suggests that at one point, they were for a "supranational government." (pp. 91, 95) But I think it's important here to distinguish between "government" and "governance." The word "government" sounds like we would be taking domestic political systems and replicating them at the global level (parliament, presidents, etc.). But there aren't many people who would go anywhere near this far. Instead, what most people have in mind is a very loose set of institutions and rules that provide a limited set of constraints on national governments, who will retain most of the governing power.

He also brings up "economic nationalism" as the principle that neoliberals saw as the enemy, explaining that the term "is often aimed by Northern verbal proponents of free trade at Global South countries that are seen, fairly or unfairly, as only recalcitrant participants in the global economy." (p. 93) I suppose the term is used that way on occasion. But I would say that it is more often used -- and this is how I normally use it -- to refer to interest groups and politicians in industrialized countries who mistakenly believe they can make their country wealthier by imposing protectionist trade barriers to give an advantage to domestic industries.

And he almost completely misses what I think is one of the biggest points about the construction of the trading system: The role of business and other lobbyists. At one point he refers vaguely to "[t]he focus of neoliberals and big business." But this distinction needs to be fleshed out. How much of the existing system is just business lobbying as opposed to someone's principled beliefs? Taking intellectual property as an example, it's true that there are people who have tried to play up intellectual property protection as a "right" that needs to be protected. But arguably, that's an after the fact justification. These obligations exist at the WTO because powerful business groups pushed for them. Talking about the value of these protections as "rights" is a way to offer an ostensibly coherent explanation for the existing regime, but it ignores the true reason for their inclusion.

Overall, it seems to me that Slobodian was trying too hard to fit the WTO into the broader narrative. He may well be right about much of his argument as it relates to the EU or to international investment law. (I would like to hear the counter-arguments, though. With regard to international investment law, I'm a skeptic on the whole enterprise, but nevertheless I'm not sure those who set it up were "encasing democracy," as their main target was undemocratic countries whose arbitrary actions undermine investment flows.) But as the book relates to the WTO, it relies on some flimsy and selectively chosen evidence. Slobodian would have benefited greatly from talking to people with greater knowledge of the WTO. (People such as Roessler and Petersmann, for example!)

It is possible that we are at a crossroads with the trading system, although I don't really think so and my guess is that most of the apparent political difficulties of the moment are being overstated. But if there is a choice as to which direction we should be going, I'll be interested to see what left wing critics choose. There is a group on the left that seems to really want to dislike trade liberalization and trade agreements. And there are some issues (e.g., IP, ISDS) where I think they have a point, and I've said so publicly many times. But do they really want to support an anti-"globalist"/economic nationalist alternative? There's a lot of baggage that comes with that. I would have thought that self-proclaimed "progressives" would be looking for ways to promote a different version of international economic integration, rather than completely dismantle the system, and some of them are doing so. As for others who may feel inclined to reject trade liberalization and trade agreements, I would just encourage them to take a more nuanced look at the existing trading system before they decide what they think of it.

Joe Biden on Trade Policy

This is from a Joe Biden interview with the NY Times editorial board: 

BA: You’ve talked about the urgency of the climate change. The new NAFTA agreement includes no measures aimed at dealing with climate change. At what point should Democrats stop voting for international agreements that fail to deal with climate change?

Well, first of all, the two things that the new NAFTA agreement has, is they have enforcement mechanisms. I’ve not read them yet. O.K.? I’m told by staff. Enforcement mechanisms that have environmental protections, as well as, not talking for fundamental climate change, but though you cannot compete and disregard existing climate regulations that exist. So environmentalists are at the table, I’ve been told, and labor’s been at the table and they should be. They should be.

Now, if in fact what I propose is as president, I’m, by the way, I’m not joking. I did. I’m the guy that came back and said, we can embarrass Xi Jinping to join the Paris accord. And everybody looked at me like I was nuts. Well, it did. But what happened was that only works if in fact we are the aggressive leader. So number one, I would immediately rejoin the Paris accord, number one. And number two, I would do what the accord calls for. Upping the ante as circumstances change and more science becomes available that we have less time. For example, think of what we should be doing now in the biggest carbon sink in the world, the Amazon. Instead of talking about $2 billion, I’d be organizing, not a joke, organizing the world as I did in Latin America on other issues, like Colombia and so on. Anyway, to make sure that they in fact either, and we would provide, the world would provide, $20 to $30 billion for them to be able to make up for what they’re going to lose by not having agriculture.

BA: Those are good programs, but do you think Democrats should vote for an agreement that does not affirm the Paris accord and does not contain any binding commitments to deal with climate change?

Look, it’s like saying would you sign an agreement with Turkey on a base closure because it didn’t have that in it? It depends on if it’s related to climate. Absolutely they should be part of it.

BA: But this is not a hypothetical. This is a deal that exists and is coming before the House ——

It is, but the deal relates to matters of trade, that in fact, there is no circumstance where we are saying anything that we’re going to do more or less relative to what we’re selling back and forth across the border. Here’s an example that would matter. China. China, in fact, in their “Belt and Road” proposal is in fact exporting more dirty coal around the world and is subsidizing more than anybody in the world. The answer is, what we should be saying to them is, you keep your agreement on the climate accord, which you signed up to. If you don’t, you will pay a price for it. You will not be able to sell product here. And organize the world to make sure that no, they couldn’t sell product anywhere. To make sure that they in fact have a requirement to stick to what they committed to. They’ve already signed it, so I don’t know. It’s a little bit like saying to me, should we ——

BA: Why wouldn’t you apply that standard to Canada, which is a larger energy exporter than China?

Well, no, by the way, I would. That’s what we should be doing to everybody in the world. I’m basically giving you one example. That’s why I oppose what China’s, what Canada’s doing in terms of the pipelines and the dirty crude they’re sending south on us, letting it go forward. We have to do that. We have to. But we can’t do a damn thing if we don’t meet our responsibility. We make up 15 percent of the problem in the world. We walk away from it all and the rest of the world says, what the hell are you holding me accountable for? You’re not doing anything. That’s why this president’s does such incredible damage, incredible damage to our effort to deal with climate change.

Call for Papers - Rethinking the Role of Institutions in Economic Integration

The law journal Legal Issues of Economic Integration will be holding a conference to assess the changing role of institutions in economic integration, including proposed, contested and new institutions in bilateral, regional and global settings. The conference will take place at the Amsterdam Law School on 8 May 2020.  Proposals including abstracts of no more than 500 words and the speaker’s contact details and CV (including affiliation, relevant experience and publications) or inquiries regarding the Conference should be sent to [email protected]. Given the 15 January 2020 developments that relate directly to institutionalization and de-institutionalization of economic agreements, the deadline for the submission of paper proposals, originally set for that date, has been extended to 27 January 2020. Selected papers will be included in a special Issue of Legal Issues of Economic Integration. Successful applicants will be informed by 31 January 2020 and must submit papers (between 5,000 and 8,000 words, including footnotes) by 20 April 2020. Applicants should in principle be able to cover their own expenses.

Detailed information and proposed areas of particular interest can be found here.

The Uniqueness of WTO Court Elections as Compared to other Multilateral Courts

The Uniqueness of WTO Court Elections as Compared to other Multilateral Courts

Alexandra Dobre* and Steve Charnovitz

            The process and structure of multilateral court elections differ across courts in criteria such as judges’ term lengths, nomination and appointment procedures, possibility for reappointment, desired qualifications, and more. In analyzing the International Criminal Court, International Court of Justice, the World Trade Organization Appellate Body, and the Law of the Sea Tribunal, we explore the differences between these courts across the dimensions listed above. Though the procedures vary slightly across the courts, most notably, the World Trade Organization Appellate Body is the only international court where the election of a judge is dependent on a consensus voting rule. This has important implications for the nomination and selection of judges on the WTO Appellate Body and explains why a single country can disrupt the WTO court in a way that the country would not be able to do to other leading international courts. 

The International Criminal Court

            The International Criminal Court sets out its nomination procedures in the Rome Statute, a multilateral treaty that serves as the Court’s governing document.¹ Currently, the judicial division consists of eighteen judges, all housed within one of three chambers: Pre-Trial, Trial, and Appeals Chambers. In the event of a vacancy, individuals may be nominated to fill the court. The Rome Statute outlines individuals “...shall be chosen among persons of high moral character, impartiality and integrity who possess the qualifications required in their respective States for appointment to the highest judicial offices”.²  Nominees must be well-versed in criminal law, international law, and/or humanitarian law. Any of the 123 State Parties can submit a nomination by submitting a statement outlining how the candidate fulfills the previously mentioned requirements. The individual need not be a national of that country’s state party but must be a national of a party on the Court.

            After the nominees have been proposed, the Assembly of States Parties proceeds in electing the judges from two candidate lists. The first list contains candidates with criminal law qualifications, while the other with candidates possessing humanitarian and/or international law qualifications. These lists are necessary in the election, where at least nine judges must be selected from the first list and at least five from the second. The candidates are then elected by a secret ballot at an Assembly meeting, where the 18 candidates who obtain the highest number of votes with a two-thirds majority of States Parties present and voting are elected. There are certain geographical distribution requirements of judges selected; per the Rome Statute, there cannot be two judges with nationalities from the same member State. This is to ensure equitable geographical representation and principal legal systems of the world. Upon being elected, judges are permitted to hold office for nine years. However, in the event of a vacancy, the judge that fills the seat on the court may run for re-election given that the period was three years or less.

The International Court of Justice

            The International Court of Justice is the principal judicial body of the United Nations with a focus in international law. The Judicial Body of the Court consists of 15 judges, each serving nine-year terms and are eligible for reappointment to the Court.

            State Parties belonging to the Statute of the Court may nominate candidates for a judgeship. However, it is not the state governments themselves that propose the individual, but the Permanent Court of Arbitration (PCA) that makes the selection. The PCA is made up of different National Groups, each representing one country in the organization, and each group may nominate up to four persons. To be elected to the ICJ, at least one National Group must have nominated the candidate at hand. The selection process typically begins nine months before the election (with a minimum of three months in advance) or, in the case of a special election, within one month of a new vacancy.³ Each National Group is expected to consult its highest court of justice, legal institutions, and academies within their country with the decision. Once each National Group has proposed their candidates, the Secretary-General of the U.N. drafts a list with the candidates and submits it to both the General Assembly and the Security Council.

            In order to be elected, judges must win absolute majority in two different bodies—the General Assembly as well as the United Nations’ Security Council. If there is not a sufficient number of candidates that reach the threshold, the election may continue in subsequent rounds.  The nomination and election processes happen every three years, where five judges are up for election each time. In the event of a sudden vacancy, a special election takes place to replace the seat with an individual that will fulfill the rest of the term.

            Judges are nominated for their high moral characters and their qualifications, which are expected to be consistent with “the highest judicial office in their home states” or with competence in international law.⁴ Up to four candidates can be recommended conditional on the fact that no more than two of these candidates are of the country’s nationality. Additionally, there exists quotas in the breakdown of seats by nationality: five seats are reserved for Western countries, three for African states, two for Eastern European states, three for Asian states, two for Latin American states, and two for Caribbean states.

The World Trade Organization Appellate Body

            The Appellate Body of the World Trade Organization was established in 1995 under Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). The Appellate Body, composed of seven individuals, hears appeals from panel cases surrounding disputes by WTO member states.⁵

            Judges in the Appellate Body are experts in their fields of law and international trade and are unaffiliated with any government entity. They are selected for four-year terms to the body through an appointment process conducted by the Dispute Settlement Body (DSB), as outlined in the Dispute Settlement Understanding (DSU). Notably, the judges are permitted to be re-appointed one time at the end of their term. In the event of a vacancy, new members will be appointed as needed to hold the office for the remainder of the term. Given that the body undergoes the appointment process rather than a formal nomination and election process, there are less procedures that structure the Appellate Body’s judicial makeup.

            Notably, the DSU does not outline many detailed procedures to nominating and appointing members to the Appellate Body. In practice, nominees are pre-selected by their nominating governments, and then, the DSB appoints the judge via a consensus decision. According to close observers, the most important process is the pre-selection stage–nominating governments seek potential candidates that have a demonstrated knowledge of the WTO system, share concerns of the nominating country, and have the ability to influence other members on the Appellate Body.⁶ Additionally, candidates’ views on DSU reforms are considered important in determining DSB likelihood for appointment.⁷

            As mentioned earlier, Appellate Body judges have the ability to be reappointed up to one time at the end of their four-year terms. Commentators have observed in the past how  governments’ decisions to re-nominate their candidates have been dependent on behaviors of their members on the bench. If a member does not fulfill the interests of the nominating country, the government may choose to not re-nominate the judge at the end of their term.⁸

The International Tribunal for the Law of the Sea

            The International Tribunal for the Law of the Sea, created by the mandate of the Third United Nations Conference on the Law of the Sea, consists of 168 signatories and 167 states plus the European Union. The judicial body of the Tribunal is made up of 21 that serve from different States’ Parties.

            In the nomination process of judges, each State Party may nominate up to two candidates. These individuals are expected to be the top tier of excellence in terms of “fairness and integrity and of recognized competence in the field of the law of the sea”.⁹  Once nominated, candidates are elected via a secret ballot by the States Parties to the Convention. In order to be elected, the candidates must receive that largest number of votes with two-thirds of the States Parties present and voting.¹⁰  Like other multilateral courts, no two members may be nationals of the same state “...to assure an equitable geographical representation”¹¹ within the judicial body. Each judge is elected for nine years and one-third of the court’s seats expire every three years. The judges are eligible for re-election.

Summary

        In summary, as shown in the Chart below, the WTO Appellate Body is the only major international court that follows a consensus rule for appointing new judges to the bench.  This reliance on a non-robust consensus process goes a long way toward explaining the WTO court can be vulnerable to the volitions of a single government. 

_______________________________________________________

*Ms. Dobre is an economics student at George Washington University. The research in this study was supported by the GWU Institute for International Economic Policy.  

^[1] “Rome Statute of the International Criminal Court” (International Criminal Court, January 1998), https://www.icc-cpi.int/nr/rdonlyres/ea9aeff7-5752-4f84-be94-0a655eb30e16/0/rome_statute_english.pdf.

² Ibid, 17.

3 Article 5-1, Statute of the International Court of Justice, https://www.icj-cij.org/en/statute.

⁴ “Members of the Court,” International Court of Justice, https://www.icj-cij.org/en/members.

⁵ “Dispute Settlement: Appellate Body,” World Trade Organization, https://www.wto.org/english/tratop_e/dispu_e/appellate_body_e.htm.

6 Manfred Elsig and Mark A. Pollack, “Agents, trustees, and international courts: The politics of judicial appointment at the World Trade Organization”, European Journal of International Relations, 31-34.

7 Ibid, 31.

8 Ibid, 35.

¹⁰ Article 2: Composition, Statute of the International Tribunal of the Law of the Sea, https://www.itlos.org/fileadmin/itlos/documents/basic_texts/statute_en.pdf.

1¹Article 4: Nominations and Elections, Statute of the International Tribunal of the Law of the Sea,https://www.itlos.org/fileadmin/itlos/documents/basic_texts/statute_en.pdf.

^[1]2Article 2: Composition, Statute of the International Tribunal of the Law of the Sea, https://www.itlos.org/fileadmin/itlos/documents/basic_texts/statute_en.pdf

Multilateral Court Elections: A Summary
	International Criminal Court	International Court of Justice	World Trade Organization Appellate Body	International Tribunal for the Law of the Sea
Number of judges	15 judges	15 judges	7 judges	21 judges
Length of term	9 years	9 years	4 years	9 years
Reappointment?	Not eligible for reappointment	Eligible for reappointment	Can only be reappointed once	Eligible for reappointment
Desired qualifications	·  Experience in criminal law and/or international law ·  Experience as a judge in criminal proceedings ·  Fluent in one language of the Court	·  Experience in criminal law and/or international law	·  Expertise in law and international trade ·  Broadly representative of membership (geography, development, legal systems) ·  Unaffiliated with government ·  Share concerns with nominating countries on key issues.	·  Expertise in law of the sea
Nomination process	·  Nominated by State Party ·  Follow nomination procedure used for appointing highest judicial offices of the respective State ·  Statement of how candidates fulfill requirements	·  Nominated by national groups within Permanent Court of Arbitration ·  National groups consult high courts of justice, legal institutions, and academic institutions within their countries ·  3-9 months before an election ·  No more than 4 nominees per national group ·  List is submitted to the General Assembly and the Security Council	·  Nominated by the Dispute Settlement Body ·  Intense screening and strategic screening process by each country	·  Each State Party may nominate up to 2 candidates
Election/appointment process	·  Elected by the Assembly of States Parties via secret ballot ·  One representative from each State Party cast a vote for one candidate from List A and one from List B ·  At least 9 judges selected from List A (criminal law candidates) ·  At least 5 judges from List B (humanitarian law candidates) ·  Two-thirds majority of States Parties must be present and voting ·  The 18 candidates who obtain the highest number of votes are elected to the Court	·  Both the General Assembly and the UN Security Council hold their own independent election	·   DSU members appoint judges from the nominated list ·   Consensus vote	·  Elected by secret ballot by the States Parties to the Convention ·  There must be a two-thirds majority of the States Parties present and voting
% of vote required	18 candidates with the highest number of votes	Absolute majority of votes in both elections	Consensus vote required	Candidates with the largest number of votes

CfP: International Investment Law & State Capitalism Colloquium

This is an announcement by the joint organizers of the International Investment Law & State Capitalism Colloquium from Athens PIL; the Tilburg Law and Economics Center (TILEC) at Tilburg University (the Netherlands); and Hamad Bin Khalifa University (HBKU) College of Law (Qatar):

The Athens Public International Law Center (Athens PIL) of the National and Kapodistrian University of Athens School of Law is hosting a Colloquium on ‘International Investment Law & State Capitalism’ which will take place on 15 and 16 October 2020 in Athens, Greece.

The organizers of the Colloquium invite scholars working in the relevant fields to submit abstracts of a conceptual, theoretical and empirical nature on the following, broadly defined areas:

A. The Foundations of International Economic Order in the Age of State Capitalism
B. Sovereign Investors in the Age of State Capitalism
C. Inward and Outward Sovereign Investments in the Age of State Capitalism
D. Arbitrating Sovereign Investment Disputes in the Age of State Capitalism: procedural issues
E. Arbitrating Sovereign Investment Disputes in the Age of State Capitalism: merits issues

Please see the detailed call for papers here.

Authors are invited to submit abstracts of original papers which are neither published nor accepted for publication when the Colloquium takes place, by 15 March 2020. Abstracts must not exceed 800 words, must be anonymous and not identify the name or affiliation of the author(s) in the abstract, the title, or the name of the document, and must be submitted to the following email addresses: [email protected]; [email protected]; and [email protected].

So Many Questions About the U.S.-China Trade Deal

Having had the text of the U.S. - China "Phase One" trade deal for almost 48 hours, I have so many questions. Here are a few of them:

1. What exactly did China agree to? There are a lot of obligations in here, and many of them are specific and technical. Only experts in a particular area may fully understand them. Here's an example from Chapter 3, Annex 4 (Beef):

5. Within one month of the date of entry into force of this Agreement, China shall adopt maximum residue limits (MRLs) for zeranol, trenbolone acetate, and melangesterol acetate for imported beef. For beef tissues for which Codex has established MRLs for these hormones, China shall adopt the Codex MRLs. For beef tissues for which Codex has not established MRLs for these hormones, China shall adopt its MRLs by following Codex standards and guidelines and referring to MRLs established by other countries that have performed science-based risk assessments.

They are talking about hormones in the context of beef, which leads to an obvious question: Is China going to allow sales of hormone-treated beef? That's kind of a big deal! But I don't know enough about Codex MRLs to have a sense of the significance of this paragraph. It sounds like some hormone-treated beef sales are coming, but exactly how many is unclear to me.

2. By how much will U.S. exports to China increase? Presumably at least a little bit, but will it be the full $200 billion over two years that China promised? That would be a lot. Is there some more realistic, lesser amount that would be enough to make the Trump administration happy?

3. Is the deal enforceable? I questioned that in a previous post. Let's say China and the U.S. are fighting over Annex 4, para. 5 and whether China has properly complied in terms of allowing hormone-treated beef sales. The U.S. thinks China is violating the provision; China disagrees. If the U.S. decides to impose tariffs, would that induce to China comply? It's a little hard to imagine that it would.

4. Will the U.S. loosen up some export controls in order to increase exports to China? Article 6.2, para. 4 says: "The United States shall ensure to take appropriate steps to facilitate the availability of U.S. goods and services to be purchased and imported into China." If the U.S. is too restrictive, will China make a formal complaint?

5. How much did the U.S. agree to do? I haven't read every word yet, but so far I don't think I've come across many issues where the U.S. has to take action.

6. What will the rest of the world think? It seems like the rest of the world could benefit from some of the provisions (e.g. Canada, if hormone-treated beef sales are allowed), but may be harmed by others. The purchase commitments seem particularly problematic. Will China increase its purchases of U.S. goods/services by reducing its purchases of goods/services from other countries? Is there an MFN violation in there somewhere? That may depend on the specific implementing actions China takes. And if there is an MFN violation, is there a GATT Article XXIV defense? This certainly doesn't feel like a "free trade area." Mostly it feels like an "orderly marketing arrangement" or "other similar measure on the export or the import side" under Safeguards Agreement Article 11.1(b).

7. What's the constitutional/statutory authority for this trade deal? Presumably, in part it is being done pursuant to Section 301, which was the procedure under which the U.S.-China tariff battle was launched. But the agreement is broader than I expected and addresses many issues that don't seem related to the Section 301 concerns. Shouldn't we know what all the various constitutional/statutory authorities being relied on are?

8. What will Congress think of all this? Will they try to assert some authority over this deal or future deals like it? (Stop laughing, I'm serious!)

9. What will the 2020 Democratic nominee think of it? How permanent will it be? If Congress is not involved, then in theory the next president could just withdraw. But would he/she do that? Politically, would that make sense? Hard to say right now. You would think there would have to be some alternative China trade strategy in place in order to make withdrawal from this deal possible. Thus, even if the next president wanted to undo all of this, it could be difficult. 

Notification of a Decision To Appeal vs. Notice of Appeal

As I've mentioned a couple times already (sorry, but this intrigues me!), the U.S. filed a notification of appeal in relation to the DS436 Article 21.5 panel report. The U.S. notification said this: 

the United States hereby notifies the Dispute Settlement Body of its decision to appeal issues of law covered in the report of the Panel in United States – Countervailing Duty Measures on Certain Hot-Rolled Carbon Steel Flat Products from India: Recourse to Article 21.5 of the DSU by India (WT/DS436/RW & WT/DS436/RW/Add.1) and legal interpretations developed by the Panel.

However, in its notification, the U.S. did not identify any "alleged errors in the issues of law covered in the panel report and legal interpretations developed by the panel."

Now I see that the U.S. and India have posted a joint communication for this dispute, which states in part:

... On December 18, 2019, the United States notified the Dispute Settlement Body of its decision to appeal the report by the compliance panel. The United States did not file a notice of appeal or an appellant submission because at this time no Division of the Appellate Body can be established to hear this appeal.

The parties understand that the United States will submit a notice of appeal and an appellant submission once a Division can be established and that India may file its own appeal on alleged errors in issues of law covered in the panel report and legal interpretations developed by the panel at that point of time. ...

So the U.S. "notified the Dispute Settlement Body of its decision to appeal," but it "did not file a notice of appeal"? How does a notification of a decision to appeal differ from a notice of appeal? What is the basis for this distinction?

UPDATE:

Rule 20(1) of the Working Procedures for Appellate Review says:

An appeal shall be commenced by notification in writing to the DSB in accordance with paragraph 4 of Article 16 of the DSU and simultaneous filing of a Notice of Appeal with the Secretariat.

So I guess the U.S. is saying that it notified the DSB of the appeal, but it has not filed a notice of appeal. I always thought of those two notices as identical, and that you didn't separate the two. But I see now that the description in the U.S. notice in this case differs from those in past cases. It says:

NOTIFICATION OF AN APPEAL BY THE UNITED STATES UNDER ARTICLE 16 OF THE UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES ("DSU")

Compare that to a past appeal:

NOTIFICATION OF AN APPEAL BY THE UNITED STATES UNDER ARTICLE 16.4 AND ARTICLE 17 OF THE UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES (DSU), AND UNDER RULE 20(1) OF THE WORKING PROCEDURES FOR APPELLATE REVIEW

The U.S.-China Trade Deal Dispute Chapter: Effective Enforcement or Just More Tariffs?

As I first talked about here, it appears that the Trump administration has convinced China to sign on to a new kind of "unilateral" dispute resolution process as part of the the Economic and Trade Agreement between the U.S. and China, which was released today. Here's the key text from Chapter 7, Bilateral Evaluation and Dispute Resolution:

Article 7.4: Dispute Resolution

1. Appeal. Where one Party (the “Complaining Party”) believes that the other Party (the “Party Complained Against”) is not acting in accordance with this Agreement, the Complaining Party may submit an appeal (“Appeal”) to the Bilateral Evaluation and Dispute Resolution Office of the Party Complained Against. An Appeal shall be in writing and shall contain sufficient information to allow the Party Complained Against to make a proper assessment of the matter. The Appeal may, but need not, include information that could identify any company at issue or business confidential information. The Appeal and any information and matters related to it are confidential and shall not be shared beyond the Bilateral Evaluation and Dispute Resolution Office, absent the agreement of the Parties.

2. Scope of Appeal.

(a) The dispute resolution process covers all matters that occur after the date of entry into force of this Agreement.

(b) Any measure, including an action, of a Party taken prior to the date of entry into force of this Agreement, which is maintained or continues to have effect after that date, is also subject to the dispute resolution process. For an Appeal of such a measure, the Complaining Party shall provide to the Party Complained Against an explanation of the continuing effect of the measure.

3. Assessment. The Party Complained Against shall carry out and complete an assessment of the Appeal. The Party Complained Against shall consider the facts, nature, and seriousness of the issues presented by the Appeal. After the assessment is completed, the designated officials shall begin consultations.

4. Dispute Procedures. Both Parties will attempt to resolve the Appeal in the most efficient manner using the following procedures:

(a) If the Appeal cannot be resolved by the designated officials, the concerns may be raised to the designated Deputy United States Trade Representative and the designated Vice Minister. If the Appeal is not resolved at the deputy or vice-ministerial level, the Complaining Party may present the issue to the United States Trade Representative and the designated Vice Premier of the People’s Republic of China.

(b) If the concerns of the Complaining Party are not resolved at a meeting between the United States Trade Representative and the designated Vice Premier of the People’s Republic of China, the Parties shall engage in expedited consultations on the response to the damages or losses incurred by the Complaining Party. If the Parties reach consensus on a response, the response shall be implemented. If the Parties do not reach consensus on a response, the Complaining Party may resort to taking action based on facts provided during the consultations, including by suspending an obligation under this Agreement or by adopting a remedial measure in a proportionate way that it considers appropriate with the purpose of preventing the escalation of the situation and maintaining the normal bilateral trade relationship. The Party Complained Against can initiate an urgent meeting between the United States Trade Representative and the designated Vice Premier of the People’s Republic of China before the effective date of the action to be taken by the Complaining Party. If the Party Complained Against considers that the action by the Complaining Party pursuant to this subparagraph was taken in good faith, the Party Complained Against may not adopt a counter-response, or otherwise challenge such action. If the Party Complained Against considers that the action of the Complaining Party was taken in bad faith, the remedy is to withdraw from this Agreement by providing written notice of withdrawal to the Complaining Party.

I'm not sure what to make of the elaborate consultations process they have in mind. Maybe spelling out so much detail will help, maybe not. But the big story is that there is no neutral adjudication mechanism as part of this dispute procedure. Instead, each party can ultimately decide on its own whether the other is in violation, and then suspend obligations, impose tariffs, etc.: "If the Parties do not reach consensus on a response, the Complaining Party may resort to taking action based on facts provided during the consultations, including by suspending an obligation under this Agreement or by adopting a remedial measure in a proportionate way that it considers appropriate with the purpose of preventing the escalation of the situation and maintaining the normal bilateral trade relationship." The response is then governed by whether the Party Complained Against considers that the action of the Complaining Party was taken in good or bad faith.

It's not clear to me what the point of including this provision is. By now, we know that if the Trump administration is not happy about China's trade practices, it will impose tariffs. What does it add to put in a provision to this same effect? Without a neutral ruling as to whether China is in violation, it's hard to see China responding any differently under the deal than it has responded to the previous tariffs imposed outside of the deal. As a result, I'm not sure how enforceable this deal is. That's kind of a shame, because the provisions on technology transfer in Chapter 2 seem pretty useful (and more detailed than the similar ones in Section 7(3) of China's accession protocol). I think it would be helpful if these obligations were subject to normal trade agreement dispute settlement.

But we'll see how it all plays out. I've never seen anything quite like this before, so it's hard to say anything with too much certainty at this point. Ideally, the parties would be transparent about all of their disputes under this provision, but that may not be how this works in practice, as the text states: "The Appeal and any information and matters related to it are confidential and shall not be shared beyond the Bilateral Evaluation and Dispute Resolution Office, absent the agreement of the Parties." Thus, it may be difficult to evaluate the effectiveness of the process.

Trade in Last Night's Democratic Debate

All the candidates on the stage got a chance to weigh in on trade in last night's Democratic debate. Here's what they said:

PFANNENSTIEL: Thank you, Mr. Steyer. Let's stay with the theme of America's role in the world and talk about trade. Tomorrow, President Trump is expected to sign phase one of a trade agreement with China. And the Senate will likely soon approve a new trade deal with Mexico and Canada, Iowa's largest trading partners. 

Sen. Sanders, you have said that new deal, the USMCA, quote, "makes some modest improvements," yet you are going to vote against it. Aren't modest improvements better than no improvements...

SANDERS: No, we can do much ...

PFANNENSTIEL: ... for the farmers and manufacturers who have been devastated here in Iowa?

SANDERS: The answer is we could do much better than a Trump-led trade deal. This deal — and I think the proponents of it acknowledge — will result in the continuation of the loss of hundreds of thousands of good-paying jobs as a result of outsourcing.

The heart and soul of our disastrous trade agreements — and I'm the guy who voted against NAFTA and against permanent normal trade relations with China — is that we have forced American workers to compete against people in Mexico, in China, elsewhere, who earn starvation wages, $1 or $2 an hour. 

Second of all, every major environmental organization has said no to this new trade agreement because it does not even have the phrase "climate change" in it. And given the fact that climate change is right now the greatest threat facing this planet, I will not vote for a trade agreement that does not incorporate very, very strong principles to significantly lower fossil fuel emissions in the world.

PFANNENSTIEL: But, Sen. Sanders, to be clear, the AFL-CIO supports this deal. Are you unwilling to compromise?

SANDERS: The AFL-CIO does. The Machinists Union does not. And every environmental organization in this country, including the Sunrise Organization, who are supporting my candidacy, opposes it.

So I happen to believe — and I hope we will talk about climate change in a moment — if we do not get our act together in terms of climate change, the planet that we're going to be leaving our kids and our children — and our grandchildren will be increasingly unlivable and uninhabitable.

PFANNENSTIEL: We're going to get to climate change, but I'd like to stay on trade. Sen. Warren ...

SANDERS: Well, they are the same in this issue. 

PFANNENSTIEL: Sen. Warren, you support the USMCA. Why is Sen. Sanders wrong?

WARREN: I do. I wasn't here. I haven't been in Congress long enough to have voted against NAFTA, but I led the fight against the trade deal with Asia and the trade deal with Europe, because I didn't think it was in the interests of the American people, the American workers, or environmental interests.

But we have farmers here in Iowa who are hurting. And they are hurting because of Donald Trump's initiated trade wars. We have workers who are hurting because the agreements that have already been cut really don't have enforcement on workers' rights.

This new trade deal is a modest improvement. Sen. Sanders himself has said so. It will give some relief to our farmers. It will give some relief to our workers. I believe we accept that relief, we try to help the people who need help, and we get up the next day and fight for a better trade deal. 

We need a coherent trade policy. We need a policy that actually helps our workers, our farmers. We need them at the table, not just to trade policy written for big, international companies. I'm ready to have that fight, but let's help the people who need help right now.

PFANNENSTIEL: Thank you. Sen. Sanders, can you please respond to Sen. Warren?

SANDERS: Well, I think that it is not so easy to put together new trade legislation. If this is passed, I think it will set us back a number of years.

Sen. Warren is right in saying we need to bring the stakeholders to the table, that — it is the family farmers here in Iowa and in Vermont and around the country. That is the environmental community. That is the workers. Bottom line here is, I am sick and tired of trade agreements negotiated by the CEOs of large corporations behind doors.

PFANNENSTIEL: Sen. Klobuchar, I'd like to bring you in here. 

KLOBUCHAR: Brianne, I want to hit reality here. I serve on the Agriculture Committee, and I will never forget going to Crawfordsville here in Iowa — and thank you for bringing up Iowa, Brianne, since that is where we are — and I went to this plant and there was one worker left in that plant. That plant had been shut down because of Donald Trump's trade policies and because of what he had done to those workers with giving secret waivers to oil companies and ruining the renewable fuel standard. That worker brought out a coat rack of uniforms and he said, these are my friends, they don't work anymore. And their names were embroidered on those uniforms, Derek, Mark, Salvador. And that guy started to cry.

These are real people hurt by Donald Trump's trade war. So what we should do, and I support the USMCA, I am glad that these improvements were made that are supported by people like Richard Trumka and Sherrod Brown on labor and environment and on pharma, the sweetheart deal...

PFANNENSTIEL: Thank you. 

KLOBUCHAR: ... because I think we need a big trading block... 

PFANNENSTIEL: Thank you, Sen. Klobuchar. 

KLOBUCHAR: ... with North America to take on China. And the way you are stronger...

PFANNENSTIEL: Sen. Klobuchar, your time is up. 

KLOBUCHAR: ... China is with our allies. 

PFANNENSTIEL: Mayor Buttigieg, do you support the USMCA, yes or no? 

BUTTIGIEG: Yes, it has been improved, it is not perfect. But when you sit down with the people who are most impacted, they share just how much harm has been done to them by things like the trade war and just how much we can benefit, American consumers and workers and farmers, by making sure we have the right kind of labor and enforceability, as Democrats ensured we got in this USMCA.

But let's acknowledge why there is such fear and frustration. You know, my part of the country, in the industrial Midwest, I remember when they came around in the '90s, selling trade deals, telling us, don't worry about your slice of the pie, the pie will get so much bigger that everyone will be better off. And that promise was broken.

The part about the pie getting bigger happened. It's just that the part about it getting to most people where I live did not. That is why there is such frustration, the sense that these decisions in boardrooms...

PFANNENSTIEL: Thank you. 

BUTTIGIEG: ... and in committee rooms in Washington are being made not based on what's best for us...

PFANNENSTIEL: Thank you, Mayor Buttigieg. 

BUTTIGIEG: ... but based on their own gain.

PFANNENSTIEL: Vice President Biden, Sen. Sanders has said that Donald Trump will, quote, “eat your lunch” for voting yes on what he calls terrible trade agreements. When it comes to trade, why are you the best candidate to take on President Trump?

BIDEN: There will be no trade agreements signed in my administration without environmentalists and labor at the table. And there will be no trade agreement until we invest more in American workers. We should be putting our money and our effort and our time in preparing American workers to compete in the 21st Century on the high-tech side, dealing with all artificial intelligence. We should be focusing on equipping American workers to do that.

And by the way, the idea — I don't know that there's any trade agreement that the senator would ever think made any sense, but the problem is that 95 percent of the customers are out there. So we better figure out how we begin to write the rules of the road, not China. 

PFANNENSTIEL: Sen. Sanders? 

SANDERS: Joe and I have a fundamental disagreement here, in case you haven't noticed. And that is NAFTA, PNTR with China, other trade agreements were written for one reason alone. And that is to increase the profits of large multi-national corporations. And the end result of those two, just PNTR with China, Joe, and NAFTA, cost us some 4 million jobs, as part of the race to the bottom.

I am sick and tired and will not tolerate, and we will use the power of the federal contracting system. If a corporation in America wants to shut down in Iowa or Vermont or any place else, and then they think they're going to get on line for our generous federal contract, they've got another thing going. 

We need some corporate responsibility here and we need to protect good-paying jobs in America, not see them go to China, Mexico, Vietnam, and all these other countries.

PFANNENSTIEL: Mr. Vice president, what's your response? 

BIDEN: We need corporate responsibility and I agree with that completely. But we also need to have enforcement mechanisms in the agreements we make. Enforceable agreements. That's one of the things that has been improved with the trade agreement with Mexico. And that's what we should be doing in any agreement we have. 

But let's get back to the basics here. If we don't set the rules of the road by going out to our partners, instead of poking our eye — excuse me, poking our finger in the eye of all of our friends and allies, we make up 25 percent of the world's economy. We've got to bring the other 25 percent of our allies along with us to set the rules of the road so China cannot continue to abuse their power by stealing our intellectual property and doing all the other things, using their corporate state system to our significant disadvantage. 

PFANNENSTIEL: Sen. Warren? 

WARREN: You know, our problem is not just that we need corporate responsibility. It has been the structure of how these trade deals have been negotiated. The United States has had this strategy for decades. And that strategy has been to have government trade negotiators, a small number, and then surround them with giant multi-national corporation lobbyists and corporate executives, who whisper in the ears of our negotiators and then get deals cut that are great for the giant multi-national corporations, not good for America, not good for American workers, not good for the environment. 

We need a different approach to trade and it starts by calling out the corruption of these giant corporations that have cut our trade deals. Everybody wants to get to the American market. And we need to put some standards in place. You want to be able to sell your goods here, then you've got to meet some environmental standards. You've got to meet labor standards.

PFANNENSTIEL: Thank you, Sen. Warren. 

WARREN: We need a...

(CROSSTALK)

WARREN: ... approach. 

PFANNENSTIEL: I would like to bring in Mr. Steyer here. 

Mr. Steyer, even though farmers and manufacturers here in Iowa and around the country could see some relief from the China deal, they've been crushed by the current administration's trade war. What will you do as president to help them get back on their feet? 

STEYER: Look, on the first day, I would undo Mr. Trump's tariffs. On the first day, I would get rid of his waivers that Sen. Klobuchar was referring to, to oil refiners, so that not having to use corn-based ethanol.

In fact, these trade deals have been exactly what Sen. Sanders and Warren have been saying, which is that they've been designed to grow the American GDP for the corporations of America, not for the working people of America, and not to protect the climate.

So let me say this. I'm the only person on this stage who says climate is my number one priority. I would not sign this deal, because if climate is your number one priority, you can't sign a deal, even if it's marginally better for working people until climate is also taken into consideration. 

Look, I've got four kids between the ages of 26 and 31. I cannot allow this country to go down the path of climate destruction. Everybody in their generation knows it. Frankly, Mayor Buttigieg, you're their generation. I think you would be standing up more — look, that's why I'm standing up for it. 

We cannot put climate on the backseat all the time and say we're going to sign this one more deal, we're going to do one more thing without putting climate first. That's why it's my number one priority. We can do it in a way that makes us richer, but we have to do it. 

As I said yesterday, Sanders is very blunt about these issues, but at the same time he is quite vague. He seems to oppose competition between American  workers and workers in countries with low wages. Does that mean he would block all competing imports from those countries? There's a (small) part of me that wants to see him become president just to understand what his policies would look like!

Sanders and Warren Talk Trade with the NY Times

Bernie Sanders and Elizabeth Warren both talked to the NY Times editorial board recently, and trade was one of the issues raised (a tiny bit with Sanders, a lot with Warren). This is from the interview with Sanders:

AK: I’m wondering if you could explain how your approach to dealing with China would be different from the president and how it would elicit better outcomes.

China is one of the most powerful and important countries in the world, and it’s a country that we have got to work with and live with. It is a country I voted against permanent normal trade relations with China, which was the right vote because between Nafta and P.N.T.R. [permanent normal trade relations] with China, this country has lost some four million decent paying jobs.

So I’ll get to your question, but in terms of trade, I believe in trade. But it’s got to be based on principles that are fair, not unfettered free trade. So if companies want to shut down in America to find cheap labor in China or Vietnam, I’m against that and that’s how I have voted.

Bernie's answers to policy questions are often blunt and definitive, but then leave me confused as to what he means. He starts by saying he believes in trade, which is reassuring. He then says trade should be "fair" rather than "unfettered free trade," which I could take as concerning, but since currently trade is far from unfettered and free, maybe it's not as worrying as it wounds. Then he gives a very specific example that sounds clear but really isn't: He doesn't want companies "to shut down in America to find cheap labor in China or Vietnam," and he votes against trade deals that lead to that. But obviously it's possible that moving a factory to another country is the only way to stay in business. If the company keeps the factory open in America and a few years later has to declare bankruptcy and shut down completely, that doesn't help American workers. And what if a company is thinking of opening a factory, and has a choice between the U.S and China/Vietnam. Is it OK to choose China/Vietnam in those circumstances, where there is no shutdown? And more generally, is he saying that he is OK with tariff liberalization through a trade agreement where it doesn't lead to factories moving broad?

The conversation with Warren went into much greater detail:

SS: Well, speaking of using leverage, you’ve argued that nations that want to trade with the United States should be held to higher standards.

Yeah.

SS: The Obama administration tried that, Trump administration tried that in different ways, but no results. What kind of leverage would you use? What would you do?

Well, I’m not sure I accept the premise of the question, that they actually tried what I was talking about. Look, our No. 1 leverage is everybody wants the American consumer. They want access to the American consumer. They want to be able to sell us all of their stuff because the American consumer is not only the engine of about 70 percent of our economy; it’s a worldwide engine. So I think it’s perfectly reasonable to say, if you want to be able to trade with United States on the best possible terms, then everybody needs to raise their standards just a little. Who wants to do that?

And you may start out with modest increments and increase them over time, but there’s no reason that we should be treating a country that is producing goods through prison labor or child labor or unsafe working standards or by polluting the earth, that we should treat a country that produces goods in that way the same way we’re treating a country that produces goods with standards that are much closer to ours. We simply put our own businesses and our own workers at a competitive disadvantage, so we end up doing things like exporting pollution. Can’t pollute here in the United States, but move this polluting industry. This way that you’re going to paint dolls or produce chips, move it somewhere else where they have no environmental standards and then resell, and then sell those goods back in the United States.

Binyamin Appelbaum: Would you reduce existing —

We just undercut ourselves when we do that.

BA: Would you reduce existing access in order to achieve that goal?

Yeah.

BA: So you’d put tariffs on existing foreign imports?

It’s that you don’t get the tariff benefit. This is what it’s really about. Where’s the baseline? Right? And is the baseline one that says, across the board, you’ve got to give plenty of notice. You’ve got to work through, make sure you’ve got something that’s achievable for countries we trade with. But this is not like trying to institute a trade war. This is not like saying we’re mad at you and therefore we’re going to impose all these tariffs on you, and doing it as Donald Trump has done by tweet.

But it’s to work with nations and say, you want access to the American consumer, you’ve got to start raising your standards in a meaningful way. And here’s where the long-term goals are, here’s where you are, here’s what constitutes moving toward those. And I think that’s where a lot of folks would like to go, and frankly we should be working with other nations on helping, not just those who lag way behind, but those who have good standards to be using the same kind of approach to trade. The idea that trade is just about tariffs is just old 20th century. Trade today in the 21st century is about regulation. It’s about who’s going to have to meet what regulatory standards.

Whether we’re talking about workers or we’re talking about the environment, who has to meet what standards? And there are big corporations who figured out how to game the system. Where standards are high, then move that part of the operation somewhere else where standards are low and save a nickel. Because these corporations, they don’t have any loyalty to a country, they just have loyalty to their own bottom line. And they play this all around the world.

BA: Are tariffs the leverage that you use to secure those types —

Tariffs are one of the tools. Economic agreements across countries, that many countries join together, and say, we’re not going to let anyone import if they’re using prison labor, for example, or if they’re dumping dangerous chemicals into the water. There are lots of ways to do this, but we can’t simply think of this as a tariff, no tariff protectionism barrier. It’s not. It’s about regulations. Look at the dang NAFTA 2.0, look at what we were negotiating for T.T.I.P. T.T.I.P. was about financial regulations, not about goods that were moving, in a sense, the old way that people think about, that you put a bunch of stuff on a barge and you ship it across the Atlantic Ocean. And we just need to tune into the fact we know what our advantage is and we need to use it, not to try to lock others out, but to try to encourage others to come in.

Nick Fox: What did you think of the standards in the Trans-Pacific deal?

I disagreed with them. So for example, the Trans-Pacific Partnership had a robust investor state dispute resolution mechanism, which multiple of our trade treaties have had for decades now. And I just think that’s fundamentally wrong. It’s a two-tier system that says, in effect, we’ll make a bunch of promises in a trade deal on the environment, on use of prison labor, child labor and on anything else, and then we’ll give two entirely different enforcement mechanisms.

If you are a giant multinational corporation and any regulation comes along that you don’t like, the local country raises the minimum — we’ve actually seen this — raises its environmental standards, you get to sue them to get them to drop those standards. And who will your case be heard by? It’ll be heard by a handful of corporate lawyers, who when they’re not sitting on this arbitration panel are working for big law firms that are doing work for you or other multinational corporations like you. That’s one set of how the path will run.

But the other half, let’s say you have a complaint because the trade agreement had said that some other country would permit unionization or would not use low-wage workers beyond a certain point. Do you get a path like that? A quick resolution? And by the way, I should point out: That quick resolution? There’s no appeal from it. It is immediately enforceable against a government. So you can go straight against Canada for raising its environmental standards. You can go straight against a South American country for raising its standards to protect its children’s health from smoking.

But if your complaint is a labor complaint, that is, gee, here I am in America and I’m trying to compete against workers in a foreign country who are getting paid a dollar a day. What’s your path? Well, first you’ve got to go to the U.S. government and persuade the U.S. government that they should go after this country, for which we know what has happened. U.S. government has repeatedly — and this is not just by — well, yeah, we get your point.

But on the other hand, we have other diplomatic initiatives and it’s really important that we’re trying to work with this country, and they’re important to us strategically for this reason and we have this ongoing negotiation in that political thing. Drag your heels, drag your heels, drag your heels, until the jobs have disappeared here. And then once you go forward, you’ve got to go forward through a different kind of court that’s much slower.

So the effect is that the promises that are put into trade agreements like T.P.P., they may all look the same on paper, but man, they are nowhere close to each other in terms of what happens with enforcement. Multinational corporations are given the opportunity basically to opt out of laws they don’t like, where protections that are supposed to be written for our workers, for the worldwide environment, for human rights standards, just get left by the curb.

Warren says she wants to use tariffs and other leverage to induce other countries to raise their regulatory standards. We already do this to some extent. But as she describes things above, it seems like a major expansion of that policy, although it's hard to get a sense of what exactly this policy would look like in practice. Is she talking about withdrawing from existing trade agreements? Using domestic statutory power to impose new tariffs?

9th Conference of the Postgraduate and Early Professionals/Academics Network of the Society of International Economic Law (PEPA/SIEL) 2020 Jerusalem, 17-19 May 2020

The conference is organised by the Postgraduate and Early Professionals/Academics Network of the Society of International Economic Law (PEPA/SIEL) in collaboration with the International Law Forum and other sponsors at the Hebrew University of Jerusalem.

SIEL’s Postgraduate and Early Professionals/Academics Network (PEPA/SIEL) is, among other things, interested in fostering collaboration and mentoring opportunities for emerging academics and professionals in International Economic Law (IEL). PEPA/SIEL fulfils these goals through various activities such as organising conferences at which emerging IEL academics and professionals can present and discuss their research in a supportive and welcoming environment.

We are pleased to announce that the 9th PEPA/SIEL conference will take place on 17-19 May 2020 at the Hebrew University of Jerusalem Faculty of Law, in Jerusalem.

Call for Papers

The scope of the conference is broad, and we invite submissions on any IEL topic including, but not limited to:

• Law and practice in international economic governance and international organisations and tribunals such as the World Trade Organization, regional trade agreements and investor-state dispute settlement;
• International trade, investment, development, competition, intellectual property, monetary and financial law, including dispute resolution;
• The interaction of IEL branches with other branches of public policy and law relating to public health, gender, inequality, human rights, environment, sustainable development and food safety;
• Bilateral and regional economic integration and the multilateral trading system;
• Comparative economic law, focusing on how international economic law interacts with laws, institutions and actors at the domestic level;
• Interdisciplinary research incorporating economics, international political economy, history, philosophy, psychology or sociology, as well as empirical methods, both qualitative and quantitative;
• International developments and economic law, which may inter alia, refer to current disputes, ongoing negotiations, ‘trade wars’, the Appellate Body crisis, ongoing reform of the international investment system, Brexit and the EU, and the Belt Road Initiative.
• Digital trade, international financial regulation, cryptocurrencies, and monetary affairs.
• IEL issues relevant especially to corporations including, but not limited, to supply chains, trade compliance programs, export controls and corruption
• Educating and teaching IEL in turbulent times.

Submission Guidelines

Submissions should include (1) a CV (no more than 2 pages); (2) an anonymized research abstract (no more than 400 words), to be sent no later than 31 January 2020 as attachments to [email protected], in a single email, including the submitter’s surname in the message title.

Selection Process

Papers will be selected based on a double-blind review conducted by members of the Conference Committee. Successful applicants will be notified by 1 March 2020, after which they are expected to submit a conference paper (no more than 4000 words) and an updated abstract, by 15 April 2020, to the same e-mail. Abstracts will be made available online, and papers will be made available to conference speakers and discussants.

Should you have any questions regarding application or participation, please feel free to contact [email protected].

DO APPELLATE BODY MEMBERS HAVE BIASES WHEN CHOOSING A CONTEXTUAL ANALYSIS TO CLARIFY UNDEFINED RIGHTS AND OBLIGATIONS?

The state of Washington has sworn in its first Native American Supreme Court justice, Raquel Montoya-Lewis. At a press conference announcing her appointment, a reporter asked Montoya-Lewis, “What do you see as the biggest problem with implicit bias in the courts right now?” She replied:

The biggest hurdle is getting people to understand that we all bring biases to our decision-making, that it’s across the board — I do it, you do it, we all do” ... the first place we have to start: to recognize that it’s not something to be embarrassed about, but something to recognize.

The most perilous moments for Appellate Body Members to display their biases are when they have to interpret clauses where rights and obligations are not clearly spelled in the WTO Agreements. Although they are aware that their interpretations “cannot add to nor diminish the rights and obligations” agreed by the Members, they have to clarify through a contextual analysis rights and obligations that are sometimes left undefined in the WTO Agreements. For example, zeroing is not explicitly forbidden but it is also not explicitly allowed, the expression "public body" is not defined in Article 1 of the SCM, etc.

As we all know, this contextual analysis is the ideal situation for displaying biases. Every clever lawyer can easily find two or three contextual analyses leading to different outcomes and will chose the one leading to an outcome comforting his/her bias. 

In the context of the next DSU reform, it is important that AB members recognize that they, too, have biases that lead sometimes to choosing a "bad" (from the perspective of the party unhappy with the ruling) contextual analysis reflecting these biases. 

What are possibly these biases? I see two theoretical candidates: 1) a bias against the Member using trade defense tools  2)  a bias favoring developing countries. I am sure that readers would have noticed other candidates.  Let me underline that these biases play a role only in situations with undefined  rights and obligations in WTO Agreements. When rights and obligations are clearly spelled, the biases do not manifest themselves. 

NB: The role of the Secretariat could also manifest itself in theses biases.The "faceless" Secretariat is certainly concerned to satisfy the majority of Members.

Another Economic Defense for the Multilateral Trading System

Stephen Roach (Yale) has recently published a must-read (“US, China and the Myth of Global Decoupling”), which refutes the logic of trade wars.  Here are main observations.

Today’s global economy is far more integrated than ever before. (…) The tighter that trade is woven into the fabric of global commerce, the tougher it will be to disentangle those linkages (…). —and the lower the odds of a more pervasive and disruptive decoupling. (…)

This diffusion of bilateral trade through multi-country supply chains would dampen the effects of a bilateral decoupling of any two economies, no matter how large.

Without addressing the US saving shortfall, raising tariffs and other barriers on China will simply divert trade away from Chinese sourcing toward America’s other trading partners. Bilateral decoupling does not mean global decoupling; it means trade diversion.

The trade diversion arising from bilateral decoupling would mean that US sourcing would migrate from low-cost Chinese production platforms to a broad constellation of foreign producers. (…) The bottom line is a likely shift to higher-cost production platforms. Ironically, that would be the functional equivalent of a tax hike on US companies, workers, and households.

These observations offer yet another powerful defense for “an integrated, more viable and durable multilateral trading system,” as stipulated in the WTO Charter.  As the WTO panel report on Section 301 highlighted, any unilateralist policy, such as a trade war, has “indirect effect (…) on individuals and the market-place, the protection of which is one of the principal objects and purposes of the WTO.” (para. 7.86).

Slaying Concerns about the WTO’s Faceless Bureaucrats

This is a guest post by Philippe de Baere, Henry Gao, Todd Friedbacher, Iain Sandford, Nicolas Lockhart, Isabelle Van Damme, Tania Voon, Alan Yanovich[1]

Ever since countries first agreed rules to regulate international trade, they have disagreed about what the rules mean.  International trade disputes raise sensitive political and economic issues that touch vested interests in the disputing countries.  The resolution of these disputes has long since been handed by countries to an independent arbiter, who decides based on the agreed trading rules.  Countries accept that they will not always agree with the arbiter’s decision, but they see value in an independent person resolving trade tensions amicably.

Since 1995, the WTO dispute settlement system has played an important global role in resolving trade disputes.  However, the WTO dispute settlement system has been thrust into crisis, just as trade tensions have flared around the world.  The United States has blocked the appointment of new decision-makers to the WTO’s top adjudicator, the Appellate Body.  The WTO has also capped its budget.  The Appellate Body’s work is now officially paralyzed.

The Director General has taken a step in the right direction with the announcement of “intensive consultations” with Members to find a way forward.  The vast majority of Members – if not all – still want dispute settlement that delivers binding, timely, and independent decisions.  Temporary solutions are available to unblock the impasse, at least for the vast majority of Members.  A pathway to a long-term solution for all Members should also be found.

At the end of last year, the debate on the future of WTO dispute settlement took on a distinctly personal tone.  Several media reports tried to lay the blame for the crisis on the current director of the Appellate Body Secretariat.  At the same time, several past and present Appellate Body members defended the director’s role.

The premise of the criticism is that, over the past 13 years, 18 Appellate Body members have been unable to exercise independent judgment, in deciding the 70 appeals that they – and not the director – signed in that time.  Instead, they have simply succumbed to the director’s powers of persuasion.  This is an unlikely explanation.

Over the years, WTO Members have consistently appointed capable and independent individuals to serve on the Appellate Body.  Indeed, anyone who has appeared at Appellate Body hearings knows that its members show a formidable and tenacious grasp of the issues.

More importantly, personal attacks on Secretariat staff – who are prohibited by WTO rules from defending themselves – are an unhelpful distraction.  The Director General’s decision to launch consultations should mark a shift to the substantive debate about the future of WTO dispute settlement.

Part of that debate should be about the support provided to WTO adjudicators.  Currently, the WTO’s Secretariat staff administer the dispute process and advise adjudicators on substantive issues.  Some commentators have challenged this support role as a threat to independent adjudication.  However, the WTO is like many other jurisdictions, in which adjudicators have similar administrative and substantive support.  Support staff typically take on the drafting burden, while the adjudicators make the decisions and direct the drafting.  This allocation of tasks between support staff and decision-makers is common in all walks of professional life.

In the case of the Appellate Body, our own experience, including in the Secretariat, confirms that the Appellate Body members make their own decisions, and the Secretariat implements them.  Indeed, Appellate Body members argue vigorously about appeals – everything from important systemic questions to the choice of particular words.  Disregarding the Secretariat’s position is routine.

Of course, if WTO Members are unhappy with the balance between the Secretariat and the adjudicators, they can change the Secretariat’s role.  In that case, though, the Members would have to enhance the adjudicators’ role to cover the considerable support provided by the Secretariat.  Serving as an adjudicator would become a full-time occupation for extended periods, which would need to be recognized in the terms of appointment, and could exclude many candidates for the role. 

Whatever role the WTO Secretariat plays in dispute settlement, its staff – individually and collectively – must remain faithful to the principle of neutrality.  The independence of the system is the very feature that makes it valuable to all Members.

The WTO dispute settlement system that emerges from this crisis will be different, and there is an opportunity for WTO Members to make a two-tiered system more efficient and streamlined to meet 21st century needs.  Members should seize that opportunity.

 

[1] We are WTO academics and practitioners, many of whom have served as staff of the Appellate Body Secretariat.

Senator Toomey on the USMCA Sunset Clause

This is from the Q & A at a recent AEI event with Senator Pat Toomey, hosted by Derek Scissors:

Derek Scissors: ... Let’s not talk about what we agree on. Let’s talk about what we might disagree on, or at least disagree partly on. And I’ll start with a key element of this for you, and I’m not sure it is for me.

As you probably know, the administration, the president originally wanted a much shorter review period. In fact, he wanted a review period in his second term so he could have the option of bailing out of USMCA while he was still president if he won reelection.

I don’t find 16 years to be a problem. Trade agreements change in 16 years. We should have — be evaluating almost every trade agreement after a while to see, as you mentioned correctly with digital trade, you know the situation has changed. There are new technologies. There are new trade patterns. There are new issues to come up. And actually I find a review period at 16 years to be an excellent kind of enforcement. You know, don’t start cheating because we will be looking at this 16 years later in this case, 16 years later, a lot better kind of enforcement than some of the other things you mentioned, which I would also object to.

So let me come back at you about the review mechanism and say 16 years isn’t six years, which is where we started. It’s a reasonable amount of time. Yeah, it creates some uncertainty at the end of the cycle, but there’s going to be uncertainty anyway because the world changes, politics change in the participating countries. And I’d prefer to have a review mechanism that’s general rather than some of the enforcement mechanisms that I know that you and I both have problems with in the agreement.

Pat Toomey: Yeah. So I would disagree with that, but look, the point about the fact that the world changes and you need to be able to reflect those changes in a trade agreement I think is a valid point. The way I think about it is you can always revisit a trade agreement any time you get the three parties together at any day of the week. Any year, you can revisit it for really any reason if you have a collective will to do so.

The question for me is: What’s the presumption? You know, what is the default setting? Is the default setting that it all goes away unless and until you get all three to agree? Or is the default setting that we'll continue this, what I would hope would be a liberalized free trading environment and we’ll make changes when we all agree on what those changes should be? So I think it’s a question of what’s the better default setting to have

Derek Scissors: Do you — and this is a little bit of a nerdy question — but do you read this particular — so I agree with that. I think that’s the right way to have a review mechanism. But do you think that this particular one with regard to USMCA is the default setting is to rip it up in the text, or do we feel like the default setting is to rip it up because there are protectionists both in the administration and the Congress who support it? So if they’re still around in 16 years, their default is to rip it up. In other words, is that the agreement that’s doing this wrong, or is it the political supporters of the agreement who are really thinking about the review mechanism in a harmful fashion?

...

Pat Toomey: I think it’s both. Yeah, I think the administration would have taken this in an even more protectionist direction if they thought they could and still hold Republicans. So I think that’s part of their motivation is to create an opportunity to do that. But yeah, but I think it’s both. I think it’s just — it’s fundamentally a mistake to have it in there.

I think Senator Toomey has this exactly right. Some key points: (1) You can always revisit agreement (lots of evidence of that recently!), and furthermore you should do it regularly rather than after 6 years; (2) setting things up so that termination happens unless all the parties affirmatively agree to extend is a mistake (having it expire if all the parties affirmatively agree not to extend would be better).

Does Hiring Strikebreakers Violate the USMCA?

This is from Lance Compa of Cornell Law School:

... a more than two-months-long strike provoked by a multibillionaire Mexican business tycoon has cast a cloud over the new trade pact’s provisions to strengthen workers’ rights. Citing management’s bad-faith bargaining, nearly 2,000 workers have walked picket lines since early October at Asarco, the Tucson-based subsidiary of the giant Mexican conglomerate Grupo México.

Now, the company has begun hiring strikebreakers. This move defies the new trade agreement’s requirement of adherence “in law and practice” to the International Labour Organization’s core labor standards. The labor chapter in the new NAFTA declares that “the right to strike is linked to the right to freedom of association, which cannot be realized without protecting the right to strike.”

Here is the relevant USMCA provision (some footnotes omitted):

Article 23.3: Labor Rights

1. Each Party shall adopt and maintain in its statutes and regulations, and practices thereunder, the following rights, as stated in the ILO Declaration on Rights at Work: (a) freedom of association⁶ and the effective recognition of the right to collective bargaining;

^{6 For greater certainty, the right to strike is linked to the right to freedom of association, which cannot be realized without protecting the right to strike.}

Does hiring replacement workers violate the right to strike? My instinct is that it does not, but my only experience with this issue comes from the sports world, and I'm sure there has been an extensive debate about this somewhere.