International Economic Law and Policy Blog

Guest Post: What’s Sauce for the Goose is not Sauce for the Gander? On Discriminatory Export Quotas for Vaccines

This post is by professors Henrik Horn and Petros Mavroidis

The recent EU regulation restricting exports of vaccines [Commission Implementing Regulation (EU) 2021/111, 2021, O.J., (L 31I)] has caused much debate. One feature of the regime that has attracted less attention is the fact that the EU measure explicitly applies to exports to some, but not all, countries. Is this discrimination in line with the letter,  the rationale, and the objectives of the world trading regime?

The requirements for export restrictions on vaccines to be WTO legal

The legal issue is in a certain respects straight-forward. Article XI.2 GATT, which is a scope provision, provides an exemption for essential products from the prohibition of export restrictions in Article XI.1 GATT: “Export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party”. Life-saving vaccines are clearly essential products, so the exemption is applicable. But it also requires that the WTO member faces critical shortages, and the restrictions must be temporary as well. The recent export restrictions on vaccine seem to fulfil these criteria as well, although it is not yet clear how long they will remain in place.

However, it is also clear that both the wording of Art. XI.2 GATT, which states that the exemption applies to the prohibition in Art. XI.1 (“the provision of paragraph 1 of this Article”), as well as the context (Article XIII: Non-discriminatory Administration of Quantitative Restrictions), imply that export restrictions on vaccines must be non-discriminatory as per Art. I GATT.

This raises the question: how should export quantitative restrictions be allocated across WTO members to be non-discriminatory? Here the GATT is silent. Art. XIII.2 GATT provides an answer in case of import quotas--the shares should reflect the market shares observed during a pre-quota representative priod --but the agreement does not specify any principles for what constitutes non-discrimination in case of an export quota.  Since XIII.2 is irrelevant for the purposes of export quotas, MFN-applies. 

But the GATT is silent on what constitutes discrimination in the realm of export restrictions. A natural candidate for a definition of non-discrimination could be a proportional reduction in the volumes that would arise absent a restriction, both since this corresponds to a standard interpretation of non-discrimination, and since it applies to quantitative import restrictions in Art XIII.2. However, since export quotas have been left out of Art. XIII.2 GATT, where it could naturally have been included, had the Contracting Parties desired this to be the norm for non-discrimination, this is not necessarily an adequate definition of non-discrimination. One could further contemplate, that the MFN requirement could  be satisfied if quotas were not allocated at all, and either goods would be sold on “first come first serve”-basis, or an ad hoc agreement at the WTO between producers and consumers would be called for to address the issue. Similar agreements have been concluded in the past, and the MFA (Multi-Fibre Agreement) is a prime illustration.

Of course, discriminatory export restrictions could in principle be defended by invoking the public policy grounds embedded in Article XX. The chapeau of this provision imposes an even-handedness test, so the country discriminating will have to explain why, by serving one sauce to the goose (Switzerland) and another to the gander (Brazil), it still acts in non-discriminatory manner. In all likelihood the respondent will here face an uphill battle to persuade the WTO judges. But, a member could possibly claim for instance that by not excluding its neighbor countries, it contributes to the protection of its own public health, since most of the contacts are de facto with the neighbor countries, and not with remote places. The validity of a defense along these lines remains to be tested.

Hence, it is clear that export restrictions have to respect Art. I GATT, unless if they can be justified under Art. XX, but it is not clear what constitutes a non-discriminatory administration of export restrictions. The EU measure can still in all likelihood be said to be discriminatory, however, since, on its face, the export restrictions only apply to some WTO members.

Preferential Trade Agreements and Export Restrictions on Vaccines

The EU has exempted a few of its FTA partners from the scope of its export embargo on vaccine. This raises the question of whether export for such a product can lawfully be lifted vis-à-vis other members of a free-trade area (FTA) or even a customs union, as per Article XXIV.

Whether or not Germany, say, exports the vaccine to Italy, does not affect the legality of an EU export restrictions vis-vis the US. The EU is a member of the WTO on its own right, so the trade between Germany and Italy is an internal EU matter that falls outside the WTO. But the EU must treat all WTO members in even-handed manner, irrespective whether it has signed an FTA with them or not. It cannot, for example, treat Switzerland (an FTA partner of the EU towards who the EU continues to export vaccines) more favourably than say, the United Kingdom (another FTA partner, towards who the EU stopped exporting vaccines), or, China, a country with which the EU has no FTA. This is so, because FTA partners can give each other an advantage only with respect to tariffs and restrictive regulations of commerce, and not with respect to measures, like health policies, which were not meant to protect in the first place.

Health Policies and Trade Agreements

The discussion so far highlights the differential legislative treatment of the administration of import and export restrictions, and the ensuing problems.

Export restrictions on a vital vaccine are surely viewed by many as being morally problematic. While it is in the export restricting country’s national interest to ensure that its citizens get access to the vaccine, this presumably also apply to those countries that would have imported the vaccine. Hence, export restrictions on vaccines effectively constitute exportation of health problems. As such, it might seem a flaw in the WTO Agreement to allow for export restrictions on e.g. vaccines.

However, from the perspective of the Dismal Science, it is not necessarily a signal of a problem with the trade agreement that similar practices are permitted. For instance, if the export restriction only shifts a certain number of casualties from the export restricting country to trade partners, the export restriction will not affect the overall number of casualties from the virus, only the distribution of the casualties across countries. Trade agreements are not meant to solve such purely distributional problems.

But export restrictions on vaccines are likely to not only affect the distribution of a given number of deaths, but also the total toll.  If the (EU) objective is to contribute to minimize the total number of casualties, the vaccine should primarily go to those countries where the impact on health is the largest. One important factor here is presumably the level of development, since poorer countries have less ability produce their own vaccines, to treat those who become ill, etc. From this perspective, the discrimination should be in favor of those who are most severely hit by not having access to the vaccine. This seems to be largely the opposite of what the EU did, when it imposed its export restrictions.

It should be noted that the EU has taken certain actions that suggest it sees its export restrictions as problematic. On February 18, 2021, the EU and the so-called “Ottawa group” issued a communication[1] entitled “COVID-19 and Beyond: Trade and Health”, whereby they promised to eliminate export restrictions, adopt new ones sparingly and to the extent necessary to protect their essential interests, and always observe the WTO, while exporting vaccines to least-developed and developing countries with no access to them. But on February 25, Ursula von der Leyen stated again that the EU will ban vaccines leaving EU if suppliers fail to deliver, without specifying if future restrictions will be discriminatory or not. In the same vein, India seems to be contemplating the imposition of export restrictions on vaccines as well, and one cannot exclude that others might follows as well. If such measures proliferate during the pandemic, the effects risk reverberating on the trading system long after the pandemic is gone.

 

[1] WTO Doc. JOB/GC/251.

A Historical Perspective on India‘s and South Africa’s Threat to Block the Implementation of the Joint Statement Initiatives in the WTO, and a Potential Way Forward

Late last week, India and South Africa circulated a paper on the “Legal Status of ‘Joint Statement Initiatives’ and their Negotiated Outcomes” that was widely perceived as a threat to block the implementation of the four Joint Statement Initiatives in the WTO (Peter Ungphakorn has described it as “pouring cold water” on the talks; Inside U.S. Trade’s Hannah Monicken characterized it as “throwing a wrench in the plans for the WTO to become a plurilateral forum”). The paper was bound to cause some frustration among long-suffering observers of WTO negotiations who had hoped that the confluence of a new DG, a new US administration, and a new EU trade strategy would create the momentum needed to bring these negotiations to a successful conclusion.

A historical perspective can shed light both on the merits of the paper and its limits. There are parallels – and crucial differences – to the conclusion of both the Tokyo Round and the Uruguay Round (unless otherwise indicated, references for the quotes reproduced in this post can be found in my article on the “The Club Approach to Multilateral Trade Lawmaking”).

The Tokyo Round Debate Redux …

As is widely known, the Tokyo Round concluded with the adoption of several plurilateral ‘codes’ that were negotiated among small subsets of GATT contracting parties. What is less well known is that the developing countries attempted to make the adoption of these codes subject to a consensus decision by the Trade Negotiations Committee, or at least the consent of a “large majority” of contracting parties. At a meeting of the Trade Negotiations Committee in July 1978, Yugoslavia, speaking “on behalf of the developing countries”, stated:  

At this stage we are requesting that a rule be established for the decision-making process in the [multilateral trade negotiation] according to which no adoption of a negotiating document would be accepted unless the large majority of participants declared themselves in favour of it. We cannot proceed on the basis that a group of a few countries may consider it appropriate for others to be kept out of arrangements if they are not in a position to accept their conceptual approach.

Like India and South Africa today, Yugoslavia was concerned that the code approach circumvented the amendment provisions of the GATT. Thus, Yugoslavia noted that “whenever amendments are made in the General Agreement, the CONTRACTING PARTIES have to approve them according to the existing rules.” The developing countries attempted to amend the final drafts of the codes to the effect that they “should enter into force when two thirds of the participants in the MTN have accepted them” – a threshold that mirrored the amendment provisions of the GATT. An alternative proposal advanced at the conclusion of the negotiations was that the codes should only be opened for acceptance “after being adopted by the Trade Negotiations Committee” – a decision that would have to be taken by consensus, as was GATT practice.

The developed countries, by contrast, took the view that the multilateral trade negotiation …

… was not a general diplomatic conference, that no agreement was being forced on any government but that on the other hand the Committee could not prevent a number of countries from entering into an agreement if they wished to, unless the provisions of the agreement were contrary to the GATT. 

They argued that subsets of members who wished to enter into the codes were free to do so as long as they “were not imposing anything on other governments but simply moving to higher levels of discipline”.

Why were developing countries upset about the codes, and do those reasons apply today? A first reason was a lack of transparency and inclusivity in the Tokyo Round negotiations. In many instances, developing countries were not part of the negotiations until the basic outlines of the codes had been hammered out by the US and the EC; in fact, in some cases (specifically, the codes on anti-dumping and civil aircraft) the developing countries didn’t even find out that codes were being negotiated until the final stages of the Round.

As far as I can tell, we are in a very different world today when it comes to the transparency of negotiations. It is perhaps an indication of how the trade regime has changed in this respect that India and South Africa do not raise concerns about transparency in their paper.

However, a second reason for the developing countries’ frustration in the Tokyo Round is still present today: if subsets of contracting parties are free to “go off to do business by themselves” (as Hudec memorably put it), the other contracting parties lose control of the agenda. In the Tokyo Round, the developed countries could focus on their priorities, and the developing countries had no leverage to force the developed countries to make concessions on those issues that were of most importance to them. This concern is echoed in India’s and South Africa’s paper, which highlights the “systemic implications” of the Joint Statement Initiatives, including that they

result in Members disregarding existing multilateral mandates arrived at through consensus in favour of matters without multilateral mandates

lead to the marginalization or exclusion of issues which are difficult but which remain critical for the multilateral trading system, such as agriculture, development, thereby undermining balance in agenda setting, negotiating processes and outcomes.

Both in the 1970s and today, there was and is a real frustration among some developing countries that plurilateral approaches allow their proponents to sideline the interests and priorities of developing countries (though it should be noted that many more developing countries are participating in the Joint Statement Initiatives than were involved in the code negotiations).

Finally, both the developing countries in the Tokyo Round and India and South Africa today were concerned not just about the negotiations at hand, but also about the precedential effect of a less-than-multilateral outcome of the negotiations. In 1979, Malaysia lamented that a “precedent” was being “set for various groups of countries to put up Agreements amongst themselves and to seek the umbrella of the [multilateral trade negotiation].” Similar, India and South Africa today warn against “creat[ing] a precedent for any group of Members to bring any issue into the WTO without the required consensus”.

… with a Twist

There is of course a crucial difference between the circumstances at the end of the Tokyo Round and the situation today: the legal default position has changed. In 1979, the developing countries were unable to prevent the adoption of the codes, because adding a consensus requirement for their adoption or a two-thirds majority requirement for their entry into force would have required a change to the codes. Today, by contrast, consensus for the addition of a new plurilateral agreement to Annex 4 of the Marrakesh Agreement is the legal default position. As India and South Africa correctly point out, a single WTO Member can even prevent the certification of other WTO Members’ schedules and hence frustrate the implementation of new plurilateral agreements through that route. In other words, the Marrakesh Agreement empowers developing countries to do exactly what they wished they could have done at the end of the Tokyo Round: to prevent subsets of WTO Members from concluding agreements among themselves within the framework of the multilateral trade regime. That does not mean, however, that India’s and South Africa’s position does not carry risks. And here the Uruguay Round potentially holds a lesson.  

A Lesson about Excessive Legalism from the Uruguay Round

Martti Koskenniemi once wrote that an “international lawyer is in part pleased, in part embarrassed when philosophers contemplating the international order put their hope in international law”. International trade lawyers might feel something similar when they see developing countries relying exclusively on legal rules to protect their interests. An anecdote from the Uruguay Round highlights the risks of excessive confidence in legal rules.

As is, again, well known, India was fundamentally opposed to the integration of substantive intellectual property rights into the multilateral trade regime for at least the first four years of the Uruguay Round. The 1988 mid-term ministerial in Montreal failed in part because India and other developing countries would not agree to continued negotiations on substantive intellectual property rights. How was this deadlock overcome? As the EC negotiators Hugo Paemen and Alexandra Bensch tell it (in their book From the GATT to the WTO, at 143), “the Community negotiator secretly told India and Brazil that the future agreement on TRIPs would not necessarily have to form part of the legal GATT texts. This represented a major concession …”. And here comes the money quote from Paemen and Bensch, which has stuck with me ever since I first read it (my highlights): “India, which tended to adopt a legalistic attitude in matters relating to the GATT, allowed itself to be persuaded.” The EC’s assurance was reflected in the following proviso in the document that recorded the mid-term compromise: “Ministers agree that the outcome of the negotiations is not prejudged and that these negotiations are without prejudice to the views of participants concerning the institutional aspects of the international implementation of the results of the negotiations in this area, which is to be decided pursuant to the final paragraph of the Punta del Este Declaration.” Clearly, India expected that the decision on the international implementation of the results would be taken by consensus, so that it would be free to decide whether to join the TRIPS Agreement or not.

However, it was not to be: once Richard Steinberg and his colleagues at USTR had come up with the ingenious device of creating a new treaty of which both a copied-and-pasted GATT and the TRIPS were an “integral part”, a refusal to join the TRIPS Agreement suddenly meant staying entirely outside of the multilateral trade regime; as a result, India’s leverage and ability to protect its own interests dissolved into thin air (for an account of the conclusion of the Uruguay Round that traces these dynamics in great detail, see pp. 165-181 of my Club Approach paper; for a different reading of these events, see Robert Wolfe’s JIEL article on the single undertaking).

Is the India-South Africa paper another example of a “legalistic attitude” that might give them and other developing countries a false sense of security? I can think of three reasons why that might be the case.

First, at some point the political pressure to concede may simply become overwhelming. Blocking a consensus is politically costly, even for the largest WTO Members: The US had to give up its resistance to the TRIPS waiver in 2003, and India had to concede on the Protocol of Amendment for the Trade Facilitation Agreement in 2014. In both cases, the WTO Member had the “right” to maintain their veto, but because their position was not perceived as substantively legitimate by the vast majority of the membership, it ultimately became too costly from a political standpoint. I suspect that India and South Africa will find themselves in a similar position if they try to block the adoption of the Joint Statement Initiatives: unless they articulate concrete substantive demands that could provide a basis for compromise (more on that below), their position will probably attract little sympathy, especially since they would be able to free ride on the commitments adopted by the participants of the Joint Statement Initiatives.

Second, I wonder whether India and South Africa overestimate WTO Members’ sense of urgency in seeing their schedules certified. Assuming that the proponents of the Joint Statement Initiatives decide to implement their new commitments by inscribing them into their schedules, and India and South Africa proceed to block the certification of those schedules, what would the proponents do? I think the most likely scenario is that they would simply treat the schedules as reflecting their obligations and act accordingly. Delays in the certification of schedules are not uncommon: for example, the EU’s revisions to its goods schedule after the 2004 expansion were not certified until 2017. During the GATT years, the contracting parties routinely observed commitments that were technically not in force (John Jackson notes in World Trade and the Law of GATT (at 217) that “It sometimes seems as if those parts of GATT that are not legally binding have a better record of compliance than those parts that are!” For theoretical background, see also Robert Wolfe’s pluralist account of the role of law in the trade regime). Of course, uncertified schedules would not provide the same legal certainty as certified schedules, but I doubt that the prospect of non-certification will dissuade the proponents of the Joint Statement Initiatives from pursuing that option. Blocking the certification of schedules is such an obscure tool that I cannot see it making a significant dent in the momentum of the Joint Statement Initiatives (such as it is).  

Finally, as others have pointed out and India and South Africa themselves highlight, the likely consequence of blocking the Joint Statement Initiatives in the WTO would be that they are implemented in the context of a preferential trade agreement. It is hard to see why it will be better for developing countries in the long run if these issues are addressed outside the WTO context than within it. If the issues are dealt with in the WTO, developing countries will be in a better position both procedurally and substantively: procedurally, because the participants in the Joint Statement Initiatives will presumably be subject to transparency obligations that they would not have if the agreements were addressed outside the WTO, and substantively because the non-participants would be able to receive the benefits of the Joint Statement Initiatives through MFN. Moreover, a failure of the Joint Statement Initiatives due to vetoes from non-participants would do even more damage to the WTO as a negotiating forum and will further accelerate the tendency to tackle new issues outside the WTO. Further weakening the WTO as a negotiating forum would undermine India’s and South Africa’s objective of reviving negotiations in areas of interest to them.

What Could Be a Way Forward?

Even if their position is not without risks, it is clear that India and South Africa have some leverage over the participants in the Joint Statement Initiatives. How could they use that leverage?

India’s and South Africa’s main objective appears to be to prod other WTO Members to re-engage in negotiations on issues that are of more interest to developing countries, such as agriculture, and to pursue negotiations on issues like services based on multilateral mandates. There are limited prospects that they will be able to employ their leverage to that end: there are complex reasons that those negotiations stalled, and the additional bargaining chip that India and South Africa now have will not be enough to overcome the deadlock. India has once before unsuccessfully attempted to use its blocking power to speed up negotiations on a substantively unrelated subject when it held up the adoption of the Protocol of Amendment for the Trade Facilitation Agreement with a demand to accelerate negotiations on public stockholding. There is no reason to expect that the dynamics will play out differently this time around.

A more promising option would be for India and South Africa to use their leverage to maximize the benefits of the Joint Statement Initiatives for non-participants. Bernhard Hoekman and Charles Sabel have proposed a “multilateral governance framework” for what they call open plurilateral agreements (OPA) (h/t Robert Wolfe), which includes the following principles:

1. Membership of an OPA is voluntary; WTO members that decide not to participate will not be pressured to join at a later date;
2. An OPA must be implemented on a nondiscriminatory basis, with benefits extending to non-signatories;
3. Openness to subsequent membership by WTO Members that did not join when an OPA was first agreed, and inclusion of a section laying out the requirements and procedures to be followed for accession by aspiring members;
4. Language stating that accession to an OPA cannot be on terms that are more stringent than those that applied to the incumbent parties, adjusted for any changes in substantive disciplines adopted by signatories over time;
5. An obligation to provide reasons to accession-seeking countries for decisions to reject membership applications;
6. A provision committing signatories to provide assistance to WTO members that are not in a position to satisfy the preconditions for membership in terms of applying the substantive provisions of the agreement but desire to do so;
7. Where feasible and in instances where capacities must be built for a country to meet OPA requirements, consideration be given to establish a stepwise schedule of compliance;
8. Provisions ensuring that nonparticipants have full information on the implementation and operation of the agreement. These should include:
   1. Compliance with WTO requirements pertaining to publication of information on measures covered by the OPA (along lines of Art. X GATT);
   2. Simple, robust notification requirements for OPA members regarding the implementation of the agreement, which could draw on recent proposals to develop augmented procedural guidelines for the operation of WTO bodies;
   3. Creation of a body to oversee implementation of the OPA that is open to observation by non-signatories, including mechanisms to engage stakeholders in an ongoing conversation about how the agreement is working and future needs;
   4. Annual reporting to the WTO General Council by the OPA on its activities;
   5. A mandate for the WTO Secretariat to assess the effects of implementing OPAs on the functioning of the trading system as part of the Director-General’s annual monitoring report of developments in the trading system.
9. Inclusion of consultation and conflict resolution procedures for non-signatories of OPAs in cases where they perceive that incumbents do not live up to the foregoing principles;
10. Provisions indicating whether the OPA envisages recourse to WTO dispute settlement mechanisms to enforce the agreement, and if so, specifying the standard of review as well as the criteria that will apply in the selection of arbitrators.

Again, there is a historical precedent for non-participants in plurilateral agreements using their leverage in this way: after the conclusion of the Tokyo Round, the non-participants in the codes used the fact that the participants needed their consent to allow the GATT Secretariat to administer the codes to extract important concessions, including a commitment (a) that the codes (with the exception of the Government Procurement code) would be applied on an MFN basis, (b) that the Contracting Parties would receive “regular reports” about the operation of the codes, and (c) that non-signatories would be able to follow the proceedings of the Committees overseeing the codes “in an observer capacity”.   

If India and South Africa were to employ their leverage in this way, the WTO as a negotiating forum would benefit twice over: it would show that it can accommodate plurilateral initiatives, and would build a governance framework that ensures that the WTO Membership at large benefits to the maximum extent possible from those initiatives. Admittedly, however, this solution would do little to address what appears to be India’s and South Africa’s main concern – that control of the agenda of the multilateral trade regime appears to be slipping away from developing countries yet again.

Developing country status and trade remedies

As recently discussed by Inu Manak in this blog, the US and the EU have both proposed using objective criteria to clarify the term "developing Member" in the WTO. Of course, these are simply proposals. Developing Members will certainly resist strongly, and insist on the principle of self-selection, so any immediate outcome to such discussions is unlikely at best.

There is however one area where the initial determination does not rest with the invoking country: trade remedies. Under the SCM Agreement (Article 27.10), an imposing Member must apply a higher (2%) de minimis subsidy rate, and a higher negligible import volume, to developing Members. And under the Agreement on Safeguards (Article 9.1), small developing Member suppliers must be excluded from the scope of a measure. Accordingly, I though it might be interesting to see what approaches were taken by users of trade remedies when defining who is (and is not) a developing Member. Here is what I came up with. 

The United States position is well known. For CVD purposes, it excludes from its list World Bank “high income” countries (such as Barbados), countries with greater than 0.5% of world trade (such as Brazil, India, Indonesia, Malaysia, Thailand & Viet Nam), OECD members and applicants (such as Chile), G20 members (e.g., Argentina and South Africa), former NMEs (e.g., Armenia & Ukraine) and EU member States (e.g., Romania and Bulgaria). 

According to a recent CVD determination on Trout from Turkey (para. 61),  the European Union uses its GSP eligibility list (Annex II to Regulation No 978/2012). That list excludes both “high” and “upper-middle” income countries, and in that respect is more restrictive than the US (“upper middle income” countries include Argentina, Brazil, China, Mexico, South Africa, Thailand & Turkey). But it does not use trade shares, G20 or OECD member status as a basis to exclude. Notably, the EU also excludes countries with which it has a “preferential market access arrangement”. Since the EU has a growing number of FTAs with developing countries (such as Vietnam), this exception is significant.

For safeguard purposes, India has its own list of developing countries. Although the list does not explain how the countries were selected, World Bank “high income” countries (such as Barbados, Chile, Equatorial Guinea, Oman, Trinidad & Tobago and Uruguay) are excluded. By contrast, upper-middle income countries like Brazil and Mexico still qualify. It thus appears that this list is based upon World Bank classifications, although the exclusion of Argentina, for example, leaves me a bit perplexed. Perhaps this reflects the fact that the World Bank categories shift over time?

According to the SIMA Handbook (p. 189), Canada "will regard any country as “developing” for trade remedy purposes if it is listed as a least developed country, other low income country or lower middle income country or territory in the OECD DAC (Development Assistance Committee) List of ODA (official development assistance) Recipients."  Since the OECD list is based upon World Bank classifications, Canada's approach, like that of the EU, focuses on GNI per capita, and excludes "upper middle income" countries like Argentina, Brazil, Mexico, and South Africa from the list. (Information on Canada updated to reflect helpful input from a reader).  

There is certainly a great deal of diversity here.  To date, the dispute settlement system has not been required to resolve a debate about developing Member status in order to resolve a dispute, nor is it clear how it could. Hopefully it will never be faced with the issue.  It is however clear that the current ad hoc approach is a source of legal uncertainty.

USTR's View of GATT Exceptions in Relation to Non-GATT Goods Agreements

At today's DSB meeting, the U.S. - Origin Marking Requirement (DS597) dispute was on the agenda. This dispute involves a complaint by Hong Kong against various U.S. measures requiring that goods produced in Hong Kong must be marked to indicate that their origin is "China." Hong Kong made claims under the GATT, the Rules of Origin Agreement, and the TBT Agreement. At the meeting, the U.S. invoked the GATT Article XXI national security exception as follows:

• The United States regrets that Hong Kong, China, has chosen to move forward with a request for panel establishment.

• In the U.S. reply to Hong Kong, China’s consultation request, the United States made clear that the Executive Order identified by Hong Kong, China, suspended the application of section 201(a) of the United States-Hong Kong Policy Act of 1992 to section 1304 of title 19 of the United States Code. The Executive Order further determined that the situation with respect to Hong Kong, China, constitutes a threat to the national security of the United States.

• The clear and unequivocal U.S. position, for over 70 years, is that issues of national security are not matters appropriate for adjudication in the WTO dispute settlement system. We therefore do not understand the purpose of this request for panel establishment, seeking WTO findings that the United States has breached certain WTO provisions. The WTO cannot, consistent with Article XXI of the General Agreement on Tariffs and Trade 1994, consider those claims or make the requested findings.

• No WTO Member can be surprised by this view. For decades, the United States has consistently held the position that actions taken pursuant to Article XXI are not subject to review in GATT or WTO dispute settlement. Each sovereign has the power to decide, for itself, what actions are essential to its security, as is reflected in the text of GATT 1994 Article XXI.

• Infringing on a Member’s right to determine, for itself, what is in its own essential security interests would run exactly contrary to the efforts to revitalize and reform the WTO that are necessary to ensure that it lives up to its potential.

• There is no basis for a WTO panel to review the claims of breach raised by Hong Kong, China. Nor is there any basis for a WTO panel to review the invocation of Article XXI by the United States. We therefore do not see any reason for this matter to proceed further.

Given its prior invocations of, and stated position on, GATT Article XXI, today's statement isn't too surprising. But what's intriguing here is the apparent U.S. position that Article XXI can apply to non-GATT goods agreements. Hong Kong's complaint included claims under the Rules of Origin Agreement and the TBT Agreement. Is the U.S. really saying that Article XXI applies beyond the GATT?

If they are, I'm fine with that. I have been making a lonely case that GATT Article XX should apply to non-GATT goods agreements, based on the logic that the non-GATT goods agreements are all derived from some part of the GATT, so it makes sense that the GATT exceptions should apply. But no one seems convinced.

Is it possible that USTR sees it the same way I do? Or would they distinguish Article XXI from Article XX? Or perhaps they didn't really mean what they seemed to be saying today to be taken to its logical conclusion? Not that there's any hope of this happening, but maybe some Congressional staffer reading this post can ask Katherine Tai about this on Thursday!

The EU Crafts a Compromise on SDT Reform

On February 18, 2021, the European Union (EU) released an annex to the new trade strategy produced by its internal trade policy review, focused on WTO reform. While there are many issues raised in the document, I would like to focus on a few notable changes to the EU’s reform proposal on special and differential treatment (SDT) from that expressed in a 2018 concept paper. The EU appears to have struck a compromise between a number of proposals that have been made to date—including the most controversial proposal put forward by the United States. This should be a welcome development, and I think it sets forth a pragmatic way forward on this issue.

The EU seems to have offered a significant compromise to the U.S., coming out in support of some “crosscutting criteria” to determine the grant of differential treatment. In February 2019, the United States proposed a draft general council decision that outlined four criteria, which if any are met, would not allow Members to avail themselves of special and differential treatment “in current and future WTO negotiations.” It included the following:

i. A WTO Member that is a Member of the Organization for Economic Cooperation and Development (OECD), or a WTO Member that has begun the accession process to the OECD;

ii. A WTO Member that is a member of the Group of 20 (G20);

iii. A WTO Member that is classified as a "high income" country by the World Bank; or

iv. A WTO Member that accounts for no less than 0.5 per cent of global merchandise trade (imports and exports).

Comparing this to what the EU just released, there are some clear overlaps:

… the EU expects full commitments in ongoing negotiations and future agreements from a) OECD members (including OECD accession candidates); b) countries classified as ‘high income’ by the World Bank; and c) countries that represent a sufficiently high share of global exports in general or in the sectors concerned by a particular negotiation. Due to its weight in the system, China should lead by example and not claim SDT in any ongoing negotiation.

By singling out China, the EU is the first to make explicit its unique position in the WTO and the world trading system more generally. Previous proposals have hinted at this, and even used China as an example in some cases, but not gone so far as to say China should no longer claim SDT. The U.S. proposal from February 2019 mentions China 51 times, with India coming in at a distant second with 23 mentions. So while the United States uses these two countries as frequent examples, its proposal never explicitly calls on them to give up SDT. Furthermore, the former U.S. Ambassador to the WTO, Dennis Shea, stated at a May 2019 General Council meeting: “I want to be clear that the US proposal does not require any Member to change its declaration of its development status.” However, the practical implications of the criteria in the U.S. proposal would de facto lead to a change in status in future negotiations.

The one criteria that the EU omits from its proposal is membership in the G20, something that can likely be explained by the fact that this would also include India. Another section of the document focuses on the importance of engaging in discussions with China and India to move WTO reform forward. There, the EU states that “India has a highly dynamic economy and is a leading player in the G20, although its overall level of development and competitiveness cannot be compared to that of China.” This was an early critique of the U.S. proposal by Anabel González, who pointed out that “it would disallow India, Indonesia, and Vietnam, for example, to self-declare, even though they are certainly developing countries.” As others have noted, the G20 criteria is a blunt one, and doesn’t help differentiate better among developing countries. The EU’s exclusion of it is a positive development.

The elaboration of the United States’ fourth criteria to highlight the importance of sectoral trade in particular negotiations is also a notable addition, with the EU acknowledging that the practical way forward is through an “agreement-by-agreement” approach. Jim Bacchus and I highlighted this issue as well in our “alternative approach” to SDT, which emphasizes the need for an evidence-based, case-by-case approach to SDT, so that the development of the poorest countries can best be advanced, while at the same time ensuring that advanced developing countries carry their weight in the organization. This means that some countries could be considered “developing” in some negotiating contexts, and “developed” in others. Take the fisheries negotiations, for example, where China is counted among the five main providers of fisheries subsidies (also including the European Union, the United States, South Korea, and Japan) who together account for 58 percent of all global fisheries subsidies. China has also been the top exporter of fish and fish products since 2002. If it’s a developing country for the purposes of this negotiation, then that status has lost all meaning.

A few other observations from the EU’s recent proposal are also worth mentioning. Borrowing from proposals led by Norway and another from Canada, the EU also pays attention to the challenge of “capacity constraints.” The issue of capacity was also raised by Bolivia and several other developing countries, who rightly argued that “non-compliance is not willful” due to a lack of human resources and capacity constraints. Notably, the EU doesn’t emphasize the Trade Facilitation Agreement as a good model to follow, like the Norway and Canada proposals do, which the United States has criticized for allowing self-selection of development status and the categories in which obligations are placed (that confer different timelines for implementation). Whether the general TFA approach is the preferred model is almost irrelevant though, because the important innovation for development was tying a category of obligations to the receipt of technical assistance. I think the EU proposal leaves room for that.

There are also a few omissions from the document. First, there’s no mention of LDCs, who were identified as a category of Members that warranted “particularly flexible treatment” in the concept paper. It’s an odd omission, but perhaps not a deliberate one. The concept paper also was more specific on how SDT could be granted on a case-by-case basis, noting, in particular, “a clear identification of a development objective.” Considering that the new proposal at length discusses the possibility of the Sustainable Development Goals providing a common cause for cooperation at the WTO, it seems like a missed opportunity to not restate how the SDGs can also be tied to the grant of SDT, as Jim and I have written elsewhere. Finally, on the issue of graduation, the EU concept paper put forward an interesting idea to make graduation a part of WTO Members’ trade policy review process, whereby they would be “encouraged to clarify in which areas they actually use existing flexibilities and to present roadmaps detailing when they would expect to be able to assume all the obligations.” I hope this idea doesn’t get abandoned, because it actually helps support another important aspect of WTO reform, increasing transparency. Members would certainly benefit from going through such an exercise, not least because it would allow for an assessment for where capacity is lacking, so that resources for technical capacity can effectively be deployed.

While SDT reform may not be at the top of the agenda on the WTO to-do list, it does make up an important component of the overall reform package. The world has dramatically changed since 1995, but many aspects of the WTO remain frozen in the past. It’s time to seriously tackle the development dimension, and the latest EU proposal could serve as the basis for a much needed compromise.

The EU's Outreach to the U.S. on WTO DS

The EU announced a new "open, sustainable and assertive EU trade policy" today. The press release is here; a Q & A is here; the main communication from the Commission is here. The most interesting details seem to be in this Annex. In this post, I'm going to focus on what they say about WTO dispute settlement. There is a section entitled "Restoring a fully functioning WTO dispute settlement system with a reformed Appellate Body." Let's go through the text piece by piece. 

First up, there's this:

Binding dispute settlement is not only critical to protect the interests of WTO members against measures that limit market access rights. It also provides the stability for companies to be able to invest and export in the knowledge that rules will be respected and that there are remedies in case of breach. It protects big and small WTO members alike against unilateral actions and prevents trade disputes escalating into political conflicts. While certain aspects of the Appellate Body’s operation and jurisprudence have been criticised, it is also important to recognise that the Appellate Body has greatly enhanced legitimacy and predictability of the dispute settlement system, including through its careful attention to the protection of the right of WTO members to regulate for health, environmental or other legitimate policy objectives.

This part shouldn't be too controversial. I think most people agree that the AB's legal standards under GATT Article XX and similar provisions created more policy space than what some GATT/WTO panels had offered.

 

Next:

The most urgent of WTO reforms is finding an agreed basis to restore a functioning dispute settlement system and to proceed to the appointment of the members of the Appellate Body. This task should be addressed as a priority and not be linked to the others aspects of WTO reform. In the absence of a functioning dispute settlement system, it is difficult to see what could be the motivation for countries to modernise and fill gaps in the rules.

I agree that the AB crisis should not be linked to other WTO reform issues. If it is, there is a good chance none of it will be resolved.

 

Now we get to some more concrete ideas:

The United States has raised a number of valid concerns about certain adjudicative approaches of the Appellate Body as well as about specific rulings in certain cases. The European Union agrees that adjudicators should exercise judicial economy and are not bound by “precedent” but should take into account previous rulings to the extent they find them relevant in the dispute they have before them. In the WTO dispute settlement system, the panels are the triers of fact, and the role of the Appellate Body should be strictly limited to addressing legal issues raised on appeal to the extent this is necessary to resolve a dispute. The independence of panels and of the Appellate Body is essential so that cases are decided exclusively on their merits. This is compatible with a strengthening of accountability to Members as regards the fulfilment of its duties. Mandatory timelines should be strictly respected both at the Panel and Appellate Body stage of disputes – justice delayed is justice denied – and appropriate measures should be adopted in order to make this possible. The European Union therefore agrees that a meaningful reform is needed. Such reform should maintain the negative consensus rule, the independence of the Appellate Body and the central role of dispute settlement in providing security and predictability to the multilateral trading system.

Here I see a politically useful public acknowledgement that the U.S. has "valid concerns." The point about exercising judicial economy suggests that the AB sometimes has said more than it should; and an explicit statement that adjudicators are not "not bound by 'precedent' but should take into account previous rulings to the extent they find them relevant in the dispute they have before them" is useful, in order to make clear that everyone is on the same page about the role of past cases. And the statement that "the role of the Appellate Body should be strictly limited to addressing legal issues raised on appeal" perhaps opens the door to changes in how factual issues are treated on appeal.

 

I really liked this part: "Mandatory timelines should be strictly respected both at the Panel and Appellate Body stage of disputes – justice delayed is justice denied – and appropriate measures should be adopted in order to make this possible." I'm not going to complain too much that they borrowed my line, and instead I'll just recommend looking at these suggestions for tightening up the DS timelines.

 

Finally, there was this:

In particular, while many of the issues above are reflected in principles developed in the Informal Process on matters related to the functioning of the Appellate Body led by the Chairman of the Dispute Settlement Body, the EU is open to consider how to give them a stronger legal formulation, as well as to consider additional improvements. An early signal by the United States of their readiness to enter into good faith negotiations to find a multilateral agreement on dispute settlement reforms would greatly enhance confidence and should enable reaching an agreement to restore binding dispute settlement and a functioning Appellate Body.

This is a useful statement that the EU is willing to go beyond the Walker Principles. It also indicates that, having offered up these positive statements, it would like to see the U.S. reciprocate with something positive now ("An early signal by the United States of their readiness to enter into good faith negotiations to find a multilateral agreement on dispute settlement reforms would greatly enhance confidence"). The ball seems to be in the court of the new USTR trade policy team now. Let's see what they do with it.

Exceptions Proposals in the WTO E-Commerce Negotiating Text: Part 2

In my last post, I offered a quick take arguing that, in the context of the WTO e-commerce negotiations, governments should rethink necessity tests in exceptions clauses. I was hoping to make the point as broadly as possible, so I focused on the general exceptions clause in the consolidated e-commerce negotiating text, rather than the exceptions clauses related to specific obligations. What I missed was that one of the exceptions provisions I quoted was an extremely broad one. I think it was the one put forward by China, although I'm not 100% sure (maybe someone can clarify). Quoting this particular exception provision may have distracted a bit from my main point, so let me try to make it again, this time using some of the exceptions put forward in the context of the proposed cross-border data flow obligations.

After various formulations of the cross-border data flow obligation in Section B.2(1), para. 5 of the consolidated text, there are several alternative exceptions provisions set out in para. 6, as follows:

B.2. Flow of information

(1) [Cross-border transfer of information by electronic means / Cross-border data flows]

....

6. [Alt 1:

[This Article does not/Nothing in this Article shall] prevent a [Party/Member] from adopting or maintaining a measure inconsistent with paragraph 5 [that is necessary] to achieve a legitimate public policy objective, provided that the measure:

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

(b) does not impose restrictions on transfers of information greater than are [necessary/required] to achieve the objective.]

[Alt 2:

Nothing in this Article shall prevent a [Party/Member] from adopting or maintaining measures inconsistent with paragraph 5 to achieve a legitimate public policy objective, provided that the measure is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised [restriction on trade/barrier to the transfer of information and to trade through electronic means]].

[Alt 3:

Nothing in this Article shall prevent a [Party/Member] from adopting or maintaining:

(a) measures inconsistent with paragraph 5 to achieve a legitimate public policy objective, provided that the measure is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; or

(b) any measure that it considers necessary for the protection of its essential security interests.

For greater certainty, a legitimate public policy objective includes the protection for privacy.]

[Alt 4:

[Parties/Members] may adopt and maintain the safeguards they deem appropriate to ensure the protection of personal data and privacy, including through the adoption and application of rules for the cross-border transfer of personal data. Nothing in the agreed disciplines and commitments shall affect the protection of personal data and privacy afforded by the [Parties'/Members'] respective safeguards.]

The document explains the source of each alternative as follows:

Paragraph 6:
• Alt 1 based on text proposals by JP, US, CT, CA and UK.
• Alt 2 based on text proposals by SG and BR.
• Alt 3 based on text proposal by KR.
• Alt 4 based on text proposal by EU.

What we have then is Alt 1, which includes a necessity test; Alt 2 with no necessity test; Alt 3 with no general necessity test but a "considers necessary" (with "considers" meaning lots of deference) for security interests; and Alt 4 with no necessity test, but only a narrow range of policies covered. It appears, then, that there are a number of different conceptions of the proper scope of exceptions to a cross-border data flow obligation, and thus perhaps a chance for WTO Members to discuss the implications of different exceptions language.

One reason I'm raising all this right now is that the text just got leaked. But another is that there is a new team at USTR being put into place, and some of that team is made up of progressive-ish types who are interested in policy space, so I thought this might be a good time to raise fundamental questions like this one. One of USTR's criticisms of the Appellate Body has been the legal standard under GATT Article III:4 and its impact on policy space (see, e.g., p. 10 here). But the necessity test is also relevant to these issues. So here's my question for the progressives recently appointed to positions at USTR (and to any others who are sympathetic to these concerns): How sure are you that the necessity test is what you want in the context of e-commerce rules? When I read WTO cases analyzing necessity, I'm not convinced that this standard achieves the proper balance between removing trade barriers while preserving policy space.

Based on the above e-commerce proposals, it seems like the official U.S. position is that necessity tests work in exceptions provisions. Perhaps it is worth taking another look at this.

Call for Submissions: Trade, Law, and Development

This is from the Managing Editor of Trade, Law, and Development, a student edited journal based in the National Law University, Jodhpur, India:

The Journal is now inviting unpublished manuscripts for publication in its Special Issue on "Trade and Technology: Rebooting Global Trade for the Digital Millennium" (Vol. 12 No. 2, Winter ’20 Issue) in the form of Articles, Notes, Comments and Book Reviews.

Last date for submissions is March 31, 2021.

For full details, please see the call for submissions here. 

ISDS Reform: From the Forest to the Trees of an Appellate Mechanism

Last week, the United Nations Commission on International Trade Law (UNCITRAL) Working Group III (WGIII) made substantial progress toward designing an appellate mechanism for 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 scores of 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).

The design phase is complex, because WGIII is actively considering at least twelve different reform projects (which may be ultimately integrated in a unified multilateral instrument). Juggling these projects involves an iterative winnowing process. The idea is that delegations initially consider each project at a high level. After each discussion, WGIII would request that the Secretariat work up more detailed, modular reform options. It would then rotate to the next topic. As the carousel cycles, the WGIII returns to each topic with increasing granularity. Eventually, the Secretariat would produce draft text on each project, to be considered in plenary over multiple rounds (first reading, second reading, and so on), prior to final decisions and possible adoption.

WGIII completed initial high concept debates on each reform option over three sessions from 2019-2020 (its bipartite 38^th Session and its 39^th Session).  In the first week of its 38^th Session, it had initial deliberations on (i) developing a multilateral advisory center; (ii) a code of conduct; (iii) reforms to third-party funding. (See further here). At its resumed 38^th Session, delegations considered (iv) a standing appellate mechanism; (v) a multilateral investment court (MIC); and reforms to (vi) selecting and appointing adjudicators. (See further here). In its 39^th Session, WGIII wrapped up first round discussions on: (vii) dispute prevention; (viii) multiple proceedings and shareholder claims for reflective loss; (ix) counter claims; (x) security for costs; (xi) frivolous claims; (xii) treaty interpretation; and began discussing (xiii) an omnibus multilateral instrument on ISDS reform that might house some or all of the above reform options. (See further here).

Where are we now? Last weeks’ 40^th Session marked a first real shift from the forest to the trees. The Working Group turned to far more specific reports by the Secretariat focused on designing an appellate mechanism or MIC (per a longstanding compromise dividing time equally between designing permanent institutions and other building blocks for reform, see here). The Working Group engaged with specific text-based reform options on (iv) the design of an appellate mechanism (here); and on (vi) selection and appointment in relation to the appellate mechanism or MIC (here). Delegations were also invited to submit written comments on these texts, which were published in advance of the session (here). These materials were complemented by three concept papers by the Academic Forum on ISDS Reform on selection and appointment (here).

Reform Options for an Appellate Mechanism

WGIII made substantial progress toward developing the musculature of an appellate mechanism for ISDS. The discussions focused on a Secretariat paper setting out twelve tentative “rules,” demarcating the core features of an appellate instance—each with a number of options responsive to delegations’ suggestions in the previous session. These covered the scope and standard of review (Rules 1-3); appealable decisions (Rules 4-5); effect of appeal / powers of appellate instance (Rules 6-10); timelines (Rule 11); and security for costs (Rule 12).  Options in the draft reflected different ways of balancing the tradeoffs. In most instances, the basic tradeoff involved weighing values like promoting consistency, coherence, correctness, and justice, against reducing costs and duration. The Working Group settled on preferred options on some of questions, and narrowed the range of options on others—providing the Secretariat with instructions for proceeding with drafting more concrete draft text for the next go around.

Scope and standard of review (Rules 1-3):

Rule 1(a) review of law: the Working Group found early consensus that, should an appellate mechanism be adopted, it would have to be competent to review for errors of law without deference to the lower instance. Delegations tentatively settled on a formulation authorizing review of “errors in the application or interpretation of applicable law.”

Rule 1(b) review of fact: delegations were more divided on errors of fact. In the Chair’s count, a large majority supported limited review for “manifest errors in the appreciation of facts.” But a substantial minority preferred prohibiting factual review, noting that it would drive up costs by encouraging dilatory tactics—even potentially leading to rehearing every case on appeal. WGIII instructed the Secretariat to tentatively proceed with a “manifest error of fact” standard, on the understanding that no decision had yet been made whether factual review was worth the cost

Rule 2 review for grounds of annulment and set aside. The Secretariat’s proposed text included an option to incorporate the ICSID Convention grounds for annulment and NY Convention grounds for set aside in the scope of appeal. The idea was to avoid a tripartite review process, by funneling all review and annulment processes into the appellate mechanism – potentially coupled with waivers requiring that appellants forgo other review mechanisms. While most shared a desire to avoid fragmented system of review, some expressed concerns about how these different treaty regimes might interact – not just here but even more importantly with respect to enforcement. Several delegations resisted simply incorporating the ICSID and NY Convention grounds by reference. WGIII instead requested that the Secretariat provide more specific information about why individual grounds in those conventions might or might not be appropriate for inclusion here.

Rule 3 exceptional grounds for appeal. The Working Group tentatively rejected including a catch-all provision allowing for review of errors of law or fact not covered by Rule 1 on an exceptional basis. The shared concern was that such a vague device would open the door to discretionary review on any issue, driving up both uncertainty and costs.

Appealable decisions (Rules 4-5)

Rule 4 basis of claim. There was some debate about whether to limit an appellate mechanism to treaty-based ISDS claims, or to extend to ISDS claims based on contracts or domestic investment laws. There was also debate as to whether to make appealable contract disputes between investors and state-owned entities (to which China notably objected). The Working Group decided to defer these questions now, but requested options that might afford States the flexibility to opt in to hearing different disputes with different bases through signing declarations or reservations.

Rule 5 appealable decisions. Delegations mostly agreed that only final decisions should be appealable. All accepted that final awards could be appealed, and most seemed to agree that decisions on jurisdiction could also be appealed. The main questions concerned timing and effect. The Working Group requested that the Secretariat explore options for when jurisdictional appeals must be made (immediately, or only after the final merits award), and whether or not any interlocutory appeal would stay first instance proceedings. 

Effect of appeal / powers of appellate instance

Rule 6 notice of appeal. Most delegations supported an automatic “right of appeal,” and WGIII instructed the Secretariat to proceed on this basis for now. Some were open to a more mediated model, requiring parties to request “leave to appeal.” This would allow screening for frivolity up front, allowing cost control at some potential expense to access to justice. The Chair suggested considering control mechanisms alongside other possible filtering devices in a future session.

Rule 7 confirmation, reversal, modification. Delegations generally accepted that an appellate mechanism should be able to confirm, reverse, or modify decisions of the first instance tribunal.

Rule 8 annulment. Delegations were open to endowing the appellate mechanism with the power to annul the underlying award, but this might depend on whether grounds for annulment fell within the scope of review (see above). Moreover, some expressed that the need for annulment might turn on whether the appellate instance had a power of remand (see below).

Rule 9 remand. Delegations were more split on the possibility of remand. All agreed that an appellate instance should decide the case where it can (“complete the analysis” in WTO parlance). Where this was not possible, several delegations supported endowing an appellate instance with an exceptional power to remand a case to the first instance tribunal. Others, however, continued to express reservations about remand driving up costs. The core question was what to do about situations where the first instance tribunal simply failed to develop sufficient facts to decide the case on appeal. Without a power of remand, an appellate instance would be forced to either resolve such cases on the basis of burden of proof (leading to potentially absurd and unjust results), or resort to annulling the entire annulment (potentially ballooning costs). Readers of this blog may recall that such problems are endemic in the WTO system, which does not provide for remand—but note that the sting would be worse here given ISDS’ compensation-based remedial structure.  The Working Group instructed the Secretariat proceed with a remand option for now, and work on ways to reduce costs, including clear language for providing instructions to first instance tribunals.

Rule 10 rectification. Delegations generally supported giving an appellate mechanism the capacity to correct errors in its own decisions within a short time frame (currently 30 days). 

Timelines

Rule 11. Many delegations preferred setting timelines in which parties might file for appeal, and in which appeals should be decided. Drawing on the experience of the WTO, delegations debated whether to make timelines hortatory or rigid, and how they might be enforced. WGIII requested options for giving timelines teeth without overly restricting the working of the adjudicative body. 

Security for costs

Rule 12. Some supported requiring appellants to post security as a way to deter frivolous claims. However others raised concerns of access to justice for impecunious appellants. Here, the Working Group requested that the Secretariat develop more information on options and tradeoffs.

Selection and Appointment of Adjudicators to Standing Bodies

WGIII also made progress on developing rules for selecting and appointing adjudicators to a standing body (appellate or MIC), working from a separate Secretariat paper (here) that posed discrete questions to delegations (rather than draft rules). Here the tradeoffs involved choices about how to prioritize representation, diversity, costs, and control.

Selective Representation. The Working Group instructed the Secretariat to focus on a selective representation model for appointments, rather than a perfect or “mirror” representation model. Delegations mostly accepted that it might be unwieldy to require representation of every member state in the adjudicator pool. The Working Group asked the Secretariat to produce options for a smaller, flexible number of (possibly full-time) adjudicators, tied to case load, or for a larger pool of (likely part time) adjudicators on a “roster” model.

Qualifications. Delegations tended to agree that expertise in public international law and international investment law were crucial to include. Others suggested further areas of expertise, including facility with basic economic issues, and competence in calculating damages. Some stressed competence in domestic law, but others questioned how far this should be emphasized. WGIII requested that the Secretariat draft options enumerating the required qualifications of adjudicators, balanced against the need to avoid formal qualifications becoming too numerous or onerous to allow a diverse pool of adjudicators from which to choose.

Nominations procedure. Delegations requested that the Secretariat prepare options for several possible procedures, including nominations by member states; by independent commission; through direct applications by interested individuals; or some combination thereof. The Working Group further requested options for including non-state actors in the process, including civil society and investor groups. WGIII stressed that these options should respond to the goals of transparency, openness to stakeholders, and ensuring diversity.

Term of office and removal. The Working Group requested draft treaty text reflecting different options, including non-renewable and renewable terms on various time frames. The Secretariat was further requested to draft options on rules and procedures for removing adjudicators.

Assignment to panels. The most controversial question related to the assignment of adjudicators to panels for hearing particular disputes. On the one hand, delegations like the EU and its Member States strongly preferred rotational assignments such that disputing parties could not affect or predict which adjudicators would decide their disputes. On the other hand, many delegations prioritized leaving disputing parties some immediate control over appointments. Several favored sticking with the party appointment model standard in current ISDS. Here the division lines were relatively deep, although some compromise options seemed open. At the Chair’s suggestion, WGIII requested options for hybrid models, including ad hoc judges (on the model of the ICJ); mixed panels with a limited degree of party appointment (including panels of either three or five members); and allowing party appointment within the bounds of larger roster appointed by the member states in advance.  As with initial nominations, the Working Group stressed that such rules should be drafted to ensure representativeness, diversity, and impartiality on any particular panel.

Conclusion

All in all, the structure of a possible appellate mechanism for ISDS is starting to take shape. As the project undergoes gradual refinement, the key tradeoffs are coming into focus. The main concerns with permanent institutions relate to cost and duration, and loss of control. The costs issue arises with almost all of the above design questions. But it is becoming increasingly clear that cost control cannot always be prioritized to the same degree across all issues. At the end of the day, if an appellate mechanism is established – a big if! – it must be possible to ensure that justice is done. Justice has to come first, even if costly. It may not always be possible to thread the needle between justice and cost, and/or other goals and values like ensuring consistency and coherence,  sovereign control, and party autonomy. Sometimes there are no silver bullets; as Puig and Shaffer put it, the task is often to identify the best institutional choices among imperfect alternatives. Here, the Working Group has been making steady process. At least with designing an appellate mechanism, WGIII and the Secretariat have already done remarkable work in identifying the tradeoffs across a range of approaches, winnowing the field of options, and identifying some initial sites of consensus.

The Working Group meets again in November, in Vienna (potentially again in hybrid format, with some digital participation). The next topic will likely be the code of conduct (currently being developed in coordination with ICSID), although the Working Group will likely also get to other topics in November. The draft work and resource plan is available here.

Exceptions Proposal in WTO E-Commerce Negotiating Text

The website bilaterals.org has posted the WTO E-Commerce consolidated negotiating text from December 2020. (This text is still officially restricted on the WTO website as far as I can see). I was intrigued by one of the formulations in the general exceptions provisions (see Annex I, section (6) on p. 85), which states:

For the purposes of this Agreement, Article XX of GATT 1994 and its interpretative note and Article XIV of the General Agreement on Trade in Services in Annex 1B to the WTO Agreement shall apply [to the extent applicable. To this end, the provisions above shall be incorporated into and made an integral part of this Agreement], mutatis mutandis.

[[Parties/Members ]further agree that, in view of the challenges brought by the global nature of the internet, this Agreement shall not prevent Members from adopting or maintaining any measures for the purposes of guaranteeing cybersecurity, safeguarding cyberspace sovereignty, protecting the lawful rights and interests of its citizens, juridical persons and other organizations and achieving other legitimate public policy objectives, provided that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade, and are no more than necessary to achieve the objectives.]]

That last clause is a little confusing. Is it supposed to read "no more restrictive than necessary"? Does "no more than necessary" stand on its own? What exactly would that mean?

Regardless of that issue, I'm going to use this as an opportunity to raise something that does not seem to be on the radar of many trade insiders, and when I do mention it every now and then, most people look at me like I'm crazy. In my view, necessity tests don't work very well as a way to connect measures to their policy goals, and we should consider drafting exceptions provisions with some alternative language. "Related to" is a good option, and perhaps so is something like "for the purposes of" all by itself. In theory, necessity tests can be applied in such a way that they are really no different than "related to" tests, but there is no guarantee they will be applied that way, and I worry that in practice they will be applied too strictly and make it difficult to adopt non-discriminatory regulations.

Revising existing agreements is difficult, and I don't have great hopes for making changes to existing WTO agreement texts. But with e-commerce, we are starting fresh, and we have an opportunity to think about everything from scratch. That last clause in the quoted text should be looked at closely by the drafters, with the following question in mind: Is the necessary clause really necessary here?

SIEL Conversation on RCEP

This is from the SIEL:

The Society of International Economic Law (SIEL) is pleased to invite you to its February Conversation entitled ‘The RCEP Agreement’ with Dr Deborah Elms (Asian Trade Centre), Prof. Manjiao Chi  (University of International Business and Economics), Prof. James Nedumpara (Centre for Trade and Investment Law, Indian Institute of Foreign Trade, Jindal Global Law School), Dr Mira Burri (University of Lucene, Switzerland), chaired by Prof. Pasha Hsieh (Singapore Management University).

25^th February 2021, 9am CET time. Zoom registration available here. For more information see here.

USTR Announces Key Staff Appointments

As they say, "personnel is policy," so let's talk about the personnel recently appointed to key staff positions at USTR, and think about what it might tell us about a Biden administration trade policy. The top position, of course, is Katherine Tai, and we don't know yet about her key Deputies, but nevertheless these staff positions could be informative.

Just to be clear, I don't know most of these people at all, and I'm mostly going to be trying to draw out some information based on their bios. I'm assuming that where they worked previously tells us something about their views. Also, I may do some general categorizing of people as, e.g., "trade critics" or the "trade establishment," but there are a range of views within each of these categories.

With those caveats in mind, here's a table of the USTR staff appointees who seemed most relevant for trade policy-making:

 

Person	Background
Sirat K. Attapit, Assistant U.S. Trade Representative for Intergovernmental Affairs	Director of Legislative Affairs for California Attorney General Xavier Becerra. For whatever it's worth, some background on Becerra's trade views in a 2008 blog post I did is here. A lot of people seemed to think he was a protectionist; I wasn't so sure. He was clearly a critic of existing trade policy, but so was Obama, and it wasn't clear to me how far Becerra's criticism went.
Jan Beukelman, Assistant U.S. Trade Representative for Congressional Affairs	Legislative director for Senator Tom Carper. Carper seems relatively pro-trade based on this rundown.
Ethan Holmes, Special Assistant to the United States Trade Representative	Served in the office of Representative Ron Kind in a variety of positions, most recently as his Economic Policy Advisor. Kind is relatively pro-trade based on this rundown.
Ginna Lance, Deputy Chief of Staff	Previously worked in the Office of then-Vice President Joe Biden, where she served as the Director of Scheduling and Deputy Director of Operations. Began her career at the Department of Commerce in the International Trade Administration.
Samuel Negatu, Director of Congressional Affairs	Legislative Director for Representative Jimmy Gomez (CA). Served as a staff negotiator for the U.S.-Mexico-Canada Agreement (USMCA) working group, addressing labor issues in negotiations between USTR and House Democrats. I quoted Gomez here as saying: “To the Biden campaign directly I said ‘Do not run away from trade; lean in to trade. Leaning into trade is not only a way to build the economy but also, how do you protect workers’ rights? How do you protect the environment? How do you advance other goals instead of just looking at how much you grow the GDP of the country?”
Greta Peisch, General Counsel	Served as Senior International Trade Counsel on the Senate Finance Committee for Chairman Wyden since 2015. Previously, she served in USTR’s Office of the General Counsel, including as Chief Counsel for Negotiations, Legislation and Administrative Law. Wyden is relatively pro-trade.
Brad Setser, Counselor	Previously served in the Obama-Biden Administration as the deputy assistant secretary for international economic analysis in the U.S. Treasury from 2011 to 2015, after having started the administration as the director for international economics on the staff of the National Economic Council and the National Security Council. I've never met Brad, but we've had some interesting twitter discussions, including a three day long marathon mainly focused on WTO litigation against China and non-violation claims. I don't remember all the details, but you can look it up if you are interested!
Shantanu Tata, Executive Secretary	Senior Policy Advisor to Representative Suzan DelBene and served as her primary advisor for trade issues on the Ways & Means Committee. Worked at USTR during the second term of the Obama Administration. DelBene is pro-trade.
Jamila Thompson, Senior Advisor	Served as deputy chief of staff for U.S. Representative John Lewis (D-GA) and a legislative assistant for Representative Barbara Lee (D-CA). Lewis' voting record suggests a bit of skepticism about trade.
Nora Todd, Chief of Staff	Chief Economic Advisor for Sen. Sherrod Brown (D-OH) and Legislative Director for Representative Mike Michaud (D-ME). Brown and Michaud are, I would say, fairly protectionist.
Mark Wu, Senior Advisor	Previously served as Director for Intellectual Property at USTR. Mark is the only one on the list I actually know, and I'm sure many of this blog's readers know him as well. I see him cited most for this article on China, but he has written a lot more about trade, so anyone wanting to discern his precise views has a lot of material to go through. My sense is that Mark is an establishment person with a number of specific criticisms of existing rules.

 

What to make of all this? It seems to me that this list leans a bit more to the trade establishment side than to the trade critic side. However, trade establishment people have plenty of their own criticisms of existing trade policy, so I wouldn't necessarily expect the status quo from them. I don't have a sense of which direction the "establishment critics," if I can call them that, will go on most of the trade issues they will face.

The key Deputy positions are still to come, and they will probably tell us a bit more about the direction of trade policy under Biden.

Guest Post: The Panel Report under the EU-Korea Trade Agreement Concerning Labor Practices: What are the Purposes of Trade Agreements as they Relate to the ILO’s Fundamental Labor Rights?

This is a guest post from Cornell professor Desiree LeClercq:

In recent years, workers’ rights advocates have increasingly urged the US and the EU to strengthen the commitments under the labor chapters of their trade agreements. Following up on the innovative labor mechanisms in the U.S.-Mexico-Canada Agreement (USMCA), the Biden Administration has recently nominated several pro-labor officials to various positions throughout its Cabinet, including key positions at the Office of the United States Trade Representative (USTR). Doing so has reinvigorated the trade and labor conversation in the United States.

On January 21, 2021, a Panel of Experts published its Report on the Proceeding Constituted under Article 13.15 of the EU-Korea Free Trade Agreement (“panel report”). The  panel’s report interpreted the meaning and import of the EU’s labor chapter that, like the labor chapters in US agreements, incorporates the fundamental labor rights included in the ILO’s 1998 Declaration on the Fundamental Principles and Rights at Work (“1998 Declaration”). The United States discourse should pay attention to this development.

Along with the panel report in the CAFTA-DR dispute between the United States and Guatemala (CAFTA panel report), which was issued in 2017, this EU panel report is only the second attempt to interpret and discern the labor-standards commitments in trade agreements. It is therefore alarming that the recent panel report raises significant questions and concerns as regards its interpretation of the meaning and significance of the 1998 Declaration and the requisite nexus between labor derogations and trade. Given that we only have the (imperfect) CAFTA report to supplement or counter this report, in my view, things do not bode well for future dispute settlement under labor chapters.

Panel Report

The report specifically addressed the EU’s allegations that the Republic of Korea (ROK) failed to satisfy its commitments under the agreement’s Trade and Sustainable Development Chapter. The text at issue, contained in Article 13.14.3 of the agreement, reads as follows:

The Parties, in accordance with the obligations deriving from membership of the ILO and the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up, adopted by the International Labour Conference at its 86th Session in 1998, commit to respecting, promoting and realising, in their laws and practices, the principles concerning the fundamental rights, namely:

1. Freedom of association and the effective recognition of the right to collective bargaining;
2. The elimination of all forms of forced or compulsory labour;
3. The effective abolition of child labour; and
4. The elimination of discrimination in respect of employment and occupation.

The Parties reaffirm the commitment to effectively implementing the ILO Conventions that Korea and the Member States of the European Union have ratified respectively. The Parties will make continued and sustained efforts towards ratifying the fundamental ILO Conventions as well as the other Conventions that are classified as “up-to-date” by the ILO.

The EU’s complaint was twofold. First, it alleged that the ROK failed to satisfy its commitments to “respecting, promoting and realizing, in their laws and practices, the principles concerning the fundamental rights,” namely freedom of association and the recognition of the right to collective bargaining. Second, the EU alleged that the ROK failed to satisfy its commitment to “make continued and sustained efforts towards ratifying the fundamental ILO Conventions” because the government had not “resorted to all the appropriate measures that could allow it to attain the objective.”

Jurisdiction

As a critical preliminary matter, the panel first addressed the ROK’s defense that the panel lacked jurisdiction over the matters in the complaint. Article 13.2.1 of the EU-ROK agreement, entitled Scope, states: “Except as otherwise provided in this Chapter, this Chapter applies to measures adopted or maintained by the Parties affecting trade-related aspects of labour, and environmental issues in the context of Articles 13.1.1 and 12.1.2.” The EU made no effort to demonstrate that the ROK’s labor laws were trade-related. Instead, it argued that the Scope provision “comes into play only where the scope of application of another provision of Chapter 13 cannot be ascertained in accordance with customary treaty interpretation.” Remarkably, the panel agreed.

In dismissing the ROK’s objection and finding that it had jurisdiction over the EU’s complaint, the panel examined the “ordinary meaning” of the commitments’ terms and the “object and purpose of the Agreement as a whole.” It found that the object and purpose of the agreement were to ensure that the trade partners' domestic laws and practices, outside of the trade context, comport with the ILO’s “universal” labor principles. Because Korea had decided to “join the ILO,” the obligations stemming from its membership as enshrined in Article 13.4.3 (“in accordance with the obligations deriving from membership of the ILO”) “relate to purely domestic responsibilities in relation to fundamental principles and rights.” Accordingly, reference to those obligations and to the 1998 Declaration “indicate that any obligation arising from the first sentence has been defined by the Parties to the full extent of their internationally accepted meaning.”

Trade-Related

Turning to the internationally-accepted meaning of the ILO’s fundamental rights, the panel decided that the “universality” of those rights necessarily foreclosed the ROK’s attempts to limit its labor commitments to trade-related matters. To rule otherwise, the panel mused, would allow countries to violate the ILO’s fundamental labor rights of workers in non-trade sectors with impunity. 

Going even further, the panel decided that the ROK could not have limited the scope of its labor commitments to trade-related sectors even if the text had expressly done so. Drawing from the ILO’s constitutional procedures that prohibit governments from making reservations at the time they ratify ILO Conventions, the panel concludes that “it is not legally possible for a Party to aim to ratify ILO Conventions only for a segment of their workers.”

The panel does not stop there, although it should have. Instead, it argues that its “finding that complaints about measures based on Article 13.4.3 are not limited to trade-related aspects of labour does not mean that the Panel has concluded that the EU’s Panel Request refers to matters which have no connection to trade.” In case you, too, struggled with that string of negatives, the panel is essentially declaring that the ROK’s labor laws, which the EU has not alleged to be trade-related, are in fact trade-related. The panel then surveys the “hortatory” commitments made under the chapter’s Preamble to several various, nonbinding international declarations and statements. It decides that the Parties must have intended to create a “floor” of labor rights as “an integral component of the system they commit to maintaining and developing.” Consequently, the panel finds that all “national measures implementing [labor] rights are therefore inherently related to trade as it is conceived in the EU-Korea FTA.”

Comments

Where to begin.

First, the panel assumes that labor chapters in trade agreements, so long as they incorporate the 1998 Declaration, evidence that the trade agreement’s overarching object and purpose include realizing the ILO’s fundamental rights in domestic laws and practices. That decision stands in stark contrast to the conclusion of the CAFTA panel report. The CAFTA panel also examined the object and purpose of the trade agreement in question, which contained a labor chapter also incorporating the 1998 Declaration, and came to the opposite conclusion. It found that the trade agreement as a whole sought to regulate the conditions of fair competition and concluded that the United States had failed to demonstrate that Guatemala’s labor derogations had the effect of profiting competitors in tradeable sectors in Guatemala. How is it that two panels, examining the same incorporation and the same type of agreement, could come to two entirely different conclusions regarding the agreement’s overall objective and intent? Could US and EU trade agreements serve entirely different purposes?

These two panel decisions illustrate the extremes on both sides of the equation. Taken together, they also paint a clear picture of the dangers of opaque labor provisions in trade agreements. If the incorporation of the ILO’s fundamental rights means a priori an overall objective to regulate domestic, non-tradeable sectors of employment, then the concerns raised by developing countries of imperialism and potential protectionism ring valid. By contrast, if the incorporation of the ILO’s fundamental rights is limited to the demonstrable nexus between labor derogations and competitive advantage on trade-sector enterprises as interpreted by the CAFTA panel, then the concerns raised by developed countries and worker-rights advocates of inefficacy ring valid given the impossibly high evidentiary bar.

USMCA may present a way out of this interpretive conundrum by shifting the burden of proof for the “manner affecting trade” criterion to the defendant Party to demonstrate that labor derogations were carried out in non-trade sectors. In doing so, USMCA maintains the requisite link between labor-rights derogations and the trade relationship. While imperfect, this criterion protects against the overextension of rights prescription in foreign countries while ensuring fair competition.

Second, the panel has mistaken its role as arbiters under trade agreements as ILO enforcers. It assumes that, should trade agreements not encompass purely domestic labor sectors, labor-rights derogations in countries will continue without penalty. The weaknesses of the ILO’s supervisory bodies, including its toothless system of reprisal, have long been documented and scorned by the labor community. Nevertheless, trade agreements have never been intended to replace the functions of international organizations. It is one thing to reimagine how the ILO’s internal mechanisms may be strengthened. It is quite another to presuppose that the ILO’s internal mechanisms have now been entirely outsourced to the government-to-government trade regime and ad hoc panelists.

Third, as with the prohibition on reservations, the panel frequently confuses the ILO’s constitutional procedures, the ILO’s Conventions, and the obligations enshrined in the 1998 Declaration. These are, after all, entirely different legal instruments with their own procedures. That is, simply because the 1998 Declaration enshrines certain fundamental principles does not mean that governments are bound, outside of the ILO’s context, to follow the ILO’s constitutional procedures as they relate to ratifying the ILO’s Conventions. Should governments incorporate part of the 1998 Declaration, or a portion of a fundamental right, through express agreement and a meeting of the minds, that is their prerogative. It is not up to panelists to override the express terms of a trade agreement. If that were the case, the United States’ limitation of those rights to “a manner affecting trade” would be equally invalid. Also invalid would have been the United States’ longstanding omission of one of the ILO’s four fundamental labor rights – nondiscrimination – in its trade legislation. Either labor rights inherently extend to all workers, trade-related or not, or they can be limited in the trade context through express agreement.

Moreover, even the panel’s argument that Conventions must extend to all employment sectors is wrong. The ILO’s standards, including its Conventions, are process-oriented. They do not prescribe the exact manner in which governments should apply those rights domestically; only governments may make that determination in consultation with national workers and employers. For example, following national consultations, the ILO permits governments to exclude categories of workers such as armed forces and the police at the time of ratifying the fundamental Conventions concerning freedom of association and collective bargaining. It also permits governments to include categories of workers (and thus exclude others) at the time of ratification for certain greater protections under the fundamental Convention on the elimination of child labor.

Fourth, the panel’s decision that all domestic violations of labor matters were trade-related is alarming. It also again deviates from the CAFTA panel, which had the same arsenal of hortatory international commitments had it wanted to establish some form of universal social floor of rights throughout the agreement. The CAFTA panel did not take the bait and instead emphasized the objectives of the trade agreement to regulate fair competition. If US and EU trade agreements have entirely different objectives, then the panel’s recent decision may remain confined to the EU space. Nevertheless, it suggests significant hurdles in future US-EU trade negotiations.

Fifth, the deviations across panel interpretations and application of the 1998 Declaration to trade illustrates the very type of incoherence and dangerous external application of international norms that some of us have been cautioning for some time. While working as a lawyer for the ILO’s supervisory bodies, I joined two other ILO officials to research the intention and significance of the incorporation of the 1998 Declaration in trade agreements. We interviewed the ILO Legal Advisor who drafted and negotiated the terms of the Declaration in 1998 (Francis Maupain) and dissected every word in the preparatory works. Our findings (set out in this report and this report) were less than reassuring.

First, we learned that the ILO never intended for the 1998 Declaration to be interpreted and applied by governments outside of the ILO’s uniquely tripartite environment. For those unfamiliar with the ILO, its system of supervision and standard-setting are based on international consultations between representatives of governments, employers, and workers. Even when the ILO adopts Conventions or makes recommendations to ratifying member governments, it leaves it to national governments to implement its fundamental labor rights through consultations with national workers and employers. Prescription of those standards through trade agreements is antithetical to that process. Second, we learned that there is absolutely no agreement on the meaning of the 1998 Declaration in the trade context. For instance, the EU and US both incorporate the 1998 Declaration but do so differently. Whereas the US refers to the “rights as stated in” the 1998 Declaration, the EU refers to the “principles concerning the fundamental rights” in the 1998 Declaration. Does the 1998 Declaration enumerate “rights” or “principles,” and is there a difference between those two standards? No one knows. Our work, therefore, concluded that the residual ambiguities in the 1998 Declaration and its opaque use in the trade context would inevitably lead to incoherence and litigation. And here we are.

The panel acknowledged our 2015 work but dismissed it (our conclusions would have contradicted its efforts to conflate the ILO’s legal instruments into a package of trade commitments). To do so, the panel relied on a disclaimer we had made in which we noted that, although we were all ILO officials, we were writing in our personal capacities. Fair enough. Except that the panel goes on to base its other substantive conclusions on “research by the ILO,” a 2017 document written by a research team in the ILO that, of course, contains the exact same disclaimer text as ours did.

Despite numerous flaws, the panel did get some things right. The ROK’s labor laws do significantly fail to protect workers. Had the EU tried, I am also fairly confident that it could have established a trade-related link to the ROK’s labor derogations. That evidence would have spared the panel from formulating some illogical conclusions that, unfortunately, could guide future panel reports.

The panel also correctly dismissed the EU’s claim that the ROK violated the labor chapter for failing to “make continued and sustained efforts towards ratifying the fundamental ILO Conventions.” Finding that the clause was a “best endeavors” standard, the panel decided that the ROK had committed to taking “an on-going obligation” that afforded it “leeway…to select specific ways to make continued and sustained efforts.” Consequently, the fact that the ROK had not yet ratified the Conventions was not, itself, “evidence of its failure to comply” with that obligation. Had the panel ruled otherwise and found that the commitment was outcome-determinative, its finding would have arguably raised serious questions of consent and sovereignty.

There are many other observations, but those tend to become more granular and appropriate for those in the weeds of international labor law. I would be happy to discuss the panel’s substantive findings with those interested. I would also love to hear others’ impressions on the above.

Undoing the Trump Administration's Trade Legacy: Part One of a Series (I Hope)

From USTR:

The United States takes note of today’s decision by the Republic of Korea’s Trade Minister Yoo Myung-hee to withdraw her candidacy for Director General of the World Trade Organization (WTO).

The Biden-Harris Administration is pleased to express its strong support for the candidacy of Dr. Ngozi Okonjo-Iweala as the next Director General of the WTO.  Dr. Okonjo-Iweala brings a wealth of knowledge in economics and international diplomacy from her 25 years with the World Bank and two terms as Nigerian Finance Minister.  She is widely respected for her effective leadership and has proven experience managing a large international organization with a diverse membership.  

The Biden-Harris Administration also congratulates Minister Yoo Myung-hee on her strong campaign for this position.  She is a trailblazer as the Republic of Korea’s first female trade minister and the first candidate from Korea to advance this far in the Director General selection process.  The United States respects her decision to withdraw her candidacy from the Director General race to help facilitate a consensus decision at the WTO.

It is particularly important to underscore that two highly qualified women made it to the final round of consideration for the position of WTO Director General -- the first time that any woman has made it to this stage in the history of the institution.  

The United States stands ready to engage in the next phase of the WTO process for reaching a consensus decision on the WTO Director General.  The Biden-Harris Administration looks forward to working with a new WTO Director General to find paths forward to achieve necessary substantive and procedural reform of the WTO.

 

How Biden Treats Trade in His First Foreign Policy Speech

US President Biden gave his first foreign policy address today -- suitably at the State Department.  Here is the link for it: https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/02/04/remarks-by-president-biden-on-americas-place-in-the-world/.

In general, the speech was well formulated and realigns the United States with its foreign policy of the post World War II era.

Trade was mentioned briefly and not in a particularly constructive way.  

To me, the most disturbing line is "...if the rules of international trade aren’t stacked against us, if our workers and intellectual property are protected, then there’s no country on Earth — not China or any other country on Earth — that can match us."  Leaving aside the ill-timed smug rhetoric, the implication of the sentence is that the rules of international trade ARE stacked against the United States.

Nothing could be further from the truth. No country in the world has more influenced the rules of international trade than the United States.  China had very little role in writing the general law of the WTO because it had not been allowed to rejoin the GATT to take part in the Uruguay Round.  China was an original contracting party to the GATT but its contribution to the GATT was minimal.  When China joined the WTO, it did so under lopsided applicant plus WTO rules that imposed more burdens on China than any other WTO Member.  If the Biden Administration stays married to the Trumpian policies which presumed that the rules of international trade are stacked against the United States, then the Administration will be missing an opportunity to improve US trade policy which has been a disaster for many years.

Another of Biden's troubling statements is: "And that’s why I immediately put forth the American Rescue Plan to pull us out of this economic crisis.  That’s why I signed an executive order strengthening our Buy American policies last week"  Yet the idea that buy-national policies are part of any rational competitiveness or rescue policy for the United States is pure fantasy.  Engaging in more protectionism is not a path to prosperity for any country. 

 

 

Making COOL WTO-Compliant

At today's confirmation hearing for Tom Vilsack as Agriculture Secretary, there were a couple questions on country of origin labelling for beef products, as farm state Senators pressed Vilsack on working on a new COOL measure that would be WTO-compliant:

Senator Fischer:

As you know the U.S. is a global leader in the production of high quality, sustainable beef because cattle producers worked hard for decades to improve the quality of our cattle and build the brand that consumers love and trust. I think there is a general agreement that the USDA's generically approved product of the U.S.A. label has failed to keep up with evolving consumer expectations. Many are of the mindset that USDA already has the necessary tools and regulatory power to improve this dated generic label. Do you believe that the current labeling policy adequately informs consumers?

Tom Vilsack:

If it's the same policy as it was four years ago when I left, the answer is no. We made every concerted effort to try to create better transparency, better information for consumers, because we understand and appreciate that consumers want to know where their food comes from. They want to know when they are buying U.S. or not buying, when they are buying from someplace else. We attempted on three occasions to strengthen the country of origin labeling, unsuccessfully because of the WTO challenges by our Canadian friends which would have resulted in retaliation. I am absolutely willing to listen to anybody and everybody who has an idea how we can circumvent, or how can get to a point where the WTO doesn't necessarily slap it down. That creates retaliatory impacts on American agriculture. I'm frank to say I need help in that respect. We can ignore the WTO, but then we got the retaliation.

...

Senator Thune:

If you could segue into country of origin labeling, an issue which has already again been covered, but one that continues to be an incredibly important issue to many producers in South Dakota. Your views on the COOL rulings, if confirmed, whether you would be willing to work with us on -- and my staff -- on finding a path forward, preferably a WTO-compliant path to help address the concerns of South Dakota producers. …

Tom Vilsack:

Happy to work with you and your staff on anything that would allow us to advance country of origin labeling. As you know, we tried, and the WTO basically suggested we hadn't succeeded. If there is a way to get it to be WTO-compliant, I would be more than happy to work with you and I look forward to that.

I always saw the fundamental problem with the U.S. COOL measures as being the costs they impose on meatpackers using foreign products by, in general terms, requiring them to segregate their products by country of origin, in order to be able to gather information on origin at different stages of production. If you are looking for a WTO-compliant approach, I think you could have a more flexible labelling requirement that still provides consumers with country of origin information, while allowing meatpackers to avoid these segregation costs. For example, taking the case of meatpackers who only use cattle that could be classified as either U.S. or Canadian at some stage of production, you could have a label that said "Product of U.S. and/or Canada," without identifying the particular country or stages of production any further. That would let meatpackers commingle from different countries of origin as much as they wanted. This approach to COOL for these kinds of products would narrow down the country of origin for consumers, and the products in question could be distinguished from products where the retailer knew the products were of exclusively U.S. origin (and therefore could be labelled as "Product of the USA"). Consumers could determine which beef is 100% a product of the U.S., and meatpackers could avoid the costs of segregation and still use a label that conveys a good amount of information on origin. And if it turns out "Product of U.S. and/or Canada" makes consumers reluctant to buy the meat (that seems unlikely for most consumers), the meatpackers can think about whether to change their approach to production and sourcing.

Member of the Administrative Tribunal of The Inter-American Development Bank Group

The Inter-American Development Bank is looking for a new Member of the Administrative Tribunal:

Members of the Tribunal

The Tribunal has the authority to conduct hearings, examine evidence, make decisions and render judgments on controversies and disputes between the Bank or IDB Invest and their respective employees. In carrying out its functions the Tribunal shall not be subject to the laws or jurisprudence of any of the Bank’s or IDB Invest’s member countries or any of their political or administrative subdivisions.

Members will be bound by the Statute of the Administrative Tribunal and its Rules of Procedure.

Key Responsibilities

• Make decisions and pass judgments based on the Agreement Establishing the Bank or, for IDB Invest, the Agreement Establishing the Corporation, as applicable, and the respective written and approved policies, the rules and regulations of their respective boards of governors and boards of executive directors, the staff retirement plans, and the personnel and administrative policies in force at the time of the alleged non-observance.
• Protect the confidentiality of information taking into account the policies of the Bank and IDB Invest.
• Promote the efficient functioning and the expeditious adjudication of matters within the Tribunals’ jurisdiction.
• Decide on the admissibility of applications presented by employees based on the Rules of Procedure of the Administrative Tribunal.
• Interpret the terms of the employment agreements between the Bank or IDB Invest and their respective employees, and the terms and conditions of appointment.
• Review and decide the request to suspend contested decisions.
• Conduct oral hearings where the Tribunal concludes that such hearings are deemed appropriate to the resolution of the cases.
• Conduct the discovery process of the cases.
• Consider cases and the conduct of the discovery process through technological means such as videoconferencing and teleconferencing, as determined by the president of the Tribunal.
• Participate in the Administrative Tribunal’s sessions at the principal office of the Bank or elsewhere, as requested by the president of the Tribunal.
• Work in panels of three judges appointed to each case by the president of the Tribunal, unless exceptional circumstances of the matter merit the consideration by the full Tribunal (seven judges).

Qualifications

• Citizenship: You must be a citizen of one of our 48 member countries.
• Consanguinity: You may not have family members (up to the fourth degree of consanguinity and second degree of affinity, including spouse) working at the IDB or IDB Invest.
• Previous IDB or IDB Invest Employment: Candidates may not be current or former IDB or IDB Invest employees.
• Education: Advanced degree (Master’s degree, J.D., or Licenciatura) in Law.
• Experience:
  • 15+ years of professional experience is required. 10+ years of substantial relevant professional experience is preferred.
  • Candidates must hold the necessary qualifications to occupy a similar position in the highest judicial courts of their countries or be jurisconsults of recognized competence.
  • Demonstrated familiarity and experience in administrative law and conflict resolution mechanisms in the context of international development organizations is preferred.
  • Recognized professional competence and integrity is required.
• Languages: Full command of Spanish and English is required. Advanced proficiency in Portuguese is highly desirable, as is proficiency in French.