International Economic Law and Policy Blog

Rethinking the (CP)TPP As A Model for Regulation of Chinese State-Owned Enterprises

In a new paper, I critically evaluate whether the CPTPP SOE rules provide an ideal model for regulating Chinese SOEs. I argue that CPTPP does not provide such a model if the goal is to strengthen disciplines over Chinese SOEs. I offer a detailed analysis of the lack of development or deficiencies in the CPTPP SOE chapter when compared to China’s WTO-plus obligations using China’s current SOE reform for illustration. I show the CPTPP SOE chapter does not provide more rigorous or workable rules but rather has a narrower coverage and more carve-outs.

I also review some major post-CPTPP FTAs of the US and the EU (e.g. USMCA, EU – Japan FTA, EU – Vietnam FTA) and show that they are largely based on the CPTPP SOE chapter. While they seek to gradually address the deficiencies and expand the coverage of the subsidy/SOE rules, they have either maintained the extensive exceptions (i.e. USMCA) or created additional ones (i.e. the EU FTAs). Overall, other than the inclusion of services subsidies and the additional types of prohibited subsidies, they do not extend beyond China’s WTO-plus obligations. To the extent that they leave some deficiencies in the CPTPP SOE chapter unaddressed and maintain the extensive exceptions, they are not as rigorous as the existing WTO rules tailored to China.

However, I think the CPTPP and the post-CPTPP US/EU FTAs offer a more incremental and balanced approach that may facilitate multilateral negotiations. Essentially, this is because they allow governments the flexibility to develop preferred exceptions to counterbalance gradually expanded or tightened rules. To adopt this approach, however, WTO Members will need to be prepared to negotiate with China on replacing the potentially very broad and rigid China-specific rules with more balanced new rules that are applicable to all Members. The consequence is that we will have softer rather than stronger disciplines on Chinese SOEs.

This paper is the third in a series of papers that Prof Henry Gao and I explore the ways to apply/develop multilateral disciplines on Chinese SOEs: see here, here and here. I would be grateful for any comments via the blog or to my email [email protected].

The Lack of Transparency of FTA Commissions and Committees

The first USMCA Free Trade Commission meeting finished up last week. Here is the trilateral statement summarizing what happened:

During the [the first meeting of the U.S.-Mexico-Canada Agreement (USMCA) Free Trade Commission (FTC) on May 18, 2021], the Ministers reviewed the work already underway to advance our cooperation under the Agreement. Despite the challenges and hardships of the COVID-19 pandemic, committees established by the Agreement have convened virtually since entry into force on July 1, 2020, including the Committees on Origin and Origin Procedures, Textiles and Apparel Trade Matters, Trade Facilitation, Sanitary and Phytosanitary Measures, Technical Barriers to Trade, Transportation Services, Financial Services, Intellectual Property Rights, State-Owned Enterprises and Designated Monopolies, Small and Medium-Sized Enterprises (SMEs) Issues, Competitiveness, and Good Regulatory Practices. The Ministers took note of these committees’ progress and offered recommendations for future work to maintain progress. This work is critical to the Agreement’s continued implementation. 

So to sum up, the committees have convened, and the Ministers "took note of these committees’ progress and offered recommendations for future work to maintain progress." That doesn't tell us much.

To be fair, the next paragraph of the statement says:

Recognizing the important role that SMEs play in our economies, the Ministers announced that the Committee on SME Issues will convene the first-ever USMCA SME Dialogue on October 13-14, in San Antonio, Texas, where our governments will engage directly with a diverse group of small business stakeholders, including those owned by women, Indigenous peoples, and other underrepresented groups, to help ensure that everyone is included in, and can benefit from, the Agreement.

I don't know what might come out of this particular dialogue; perhaps it will be helpful to some SMEs. But that's not a substitute for informing the public about what is going on in inter-governmental meetings.

Beyond the trilateral statement, Mexico and Canada provided brief summaries of the discussions. And the Mexicans and Canadians both held press conferences. As far as I know, U.S. Trade Rep. Katherine Tai did not hold a press conference.

Taking all of this together, there wasn't a whole lot of information made available to the public about what was discussed at these meetings. The media did their best to report on what they could dig up, but what we really need here is more transparency from the governments.

USTR recently released some agency transparency principles, but the practices relating to FTA commissions/committees fall way short of any reasonable approach to transparency. If the public doesn't know much about what's happening, how are they supposed to contribute meaningfully to the government's implementation of trade agreements? At the least, USTR should circulate any non-confidential documents that were considered at the meetings, publish an official set of meeting minutes, and hold a press conference related to the meetings. 

Inu and I complained about this in a submission to the ITC here.

A Good Fortnight for the TRIPs Waiver: Building Momentum

In the last two weeks, United States Trade Representative Katherine Tai spoke with the trade ministers of India and South Africa, the leading co-sponsors of the original TRIPs Waiver proposal, providing encouragement to move forward on a revised text.  The new draft, released Friday, is a strong signal of momentum, reflecting a determination not to go down the rabbit hole of typically drawn out WTO negotiations and legal haggling (as many TRIPs Waiver skeptics had predicted would happen); I'll elaborate on  some of the key features of the new draft  in a separate post on this blog.

Tai has also used the last fortnight to press the issue in bilaterals with the head of the World Health Organization and with her Japanese and Swiss counterparts. Meanwhile Bolivia  has taken the step of notifying the WTO of its intent to use the existing access to medicines flexibilities in TRIPs for COVID-19 vaccines.      Whether Bolivia's move is to show up the red tape and onerous conditions involved in using the access to medicines amendment (that itself originated with an earlier Waiver), or to point to a potential alternative route to vaccine equity, through challenging WTO Members to bypass the roadblocks in existing law, is difficult to discern.  But The European Commission now seems to have taken up this last possibility; on Friday Commission chief Ursula von der Leyen tweeted that the EU would table at the WTO a proposal including "simplifying use of compulsory licenses in crisis times where needed," a grudging and stingy concession to the need to loosen TRIPs obstacles on vaccines.   This comes fast on the heels of the European Parliament backing a resolution in favor of the TRIPs Waiver.     

But the most important development in the geopolitics of the Waiver,is China's announcement of  support.  This has multiple layers of meaning. The European Commission having embraced China with an investment deal at Berlin's behest, the EU is now entangled in a fight with Beijing over human rights that has placed the investment agreement on ice. China's support for the TRIPs Waiver offers a contrast with Waiver-resistant Brussels putting ruthless capitalism ahead of lives-not a good look while lecturing Beijing about human values. 

More fundamentally, China's backing for the  TRIPs Waiver offers the possibility that, despite the apparent Cold War between Beijing and Washington,the deep cleavages over human rights and democracy as well as trade and security, the two great powers might be able to work together at a multlateral institution like the WTO-at least where human lives are a stake in a global emergency.      

Recommendation of "How the WTO Changed China" by Yeling Tan in March/April, Foreign Affairs

I recommend this terrific article "How the WTO Changed China" by Yeling Tan (Assistant Professor in the Department of Political Science at the University of Oregon) in the March/April 2021 issue of Foreign Affairs. https://www.foreignaffairs.com/articles/china/2021-02-16/how-wto-changed-china 

It reminds us that the WTO obligations have integrated China more into the world economy and have changed China and that to a large extent these changes would not have happened without the external pressure of WTO obligations. As with any other WTO Member, the precise way in which WTO obligations and opportunities affect domestic decision making depends on the politics inside the country and in the case of China it is complicated by the existence of different levels of government, national, provincial, city and country. There are different interests within China, some favouring protectionism some favouring trade liberalisation. Yeling Tan's main point is that it is a gross oversimplification to take the views that membership of the WTO has not changed China because the WTO rules don't work with China and therefore we should engage less with China. In fact, she suggests that is exactly what not to do because restricting trade with China and treating China as an adversary strengthens the political influence in domestic politics inside China in favour of the Chinese proponents of protectionism, isolationism and anti-Western positions. One could add that it also detracts from the political influence within China of those in favour of trade liberalisation, domestic reforms and friendly and constructive engagement with other countries that have differences with China. (Yes public choice theory can be used to analyse politics within China!) Just as the WTO has already changed China so will it be the case that further multilateral trade liberalisation in the WTO, even if slow and incremental, will change China some more. To read Professor Tan's article you might need to key in your email address to be sent the full text. It is worth a read.

When so many voices are complaining that it is too hard to cooperate with China, this scholarship is very important. The current difficult trade issues with China mean that we need more engagement not less. We have to see the objective as learning how to be travellers together not being adversaries. An essential part of that is to have dialogue on trade differences in WTO committees, to utilize WTO processes for transparency, and to engage China in negotiations for incremental, multilateral trade liberalization through the WTO in a non-discriminatory manner. It is a real fact of the modern world that every time nations embark on any multilateral negotiation, one of the critical issues is "What do the Chinese think?" (as I wrote some years ago. See Brett Williams ""Australia and China in the World Trade Organization" in Nicholas Thomas (ed) Re-Orienting Australia-China Relations; Ashgate, 2004, at p104) Other nations cannot pretend it isn't so. And where other countries allege that China is breaking WTO rules, or when China alleges other countries are breaking WTO rules, they should use the WTO dispute settlement system to resolve the disputes. Initiating WTO complaints should not be seen as an unfriendly act. It is the method of dispute settlement that all WTO members have agreed to use. It is designed for the maintenance of peace among nations.

Investment Treaties and a New Legal Imagination

From the Columbia Center on Sustainable Investment:

Investment Treaties and a New Legal Imagination

May 26, 2021

11:00 AM - 12:00 PM

ONLINE

Please register here.

Foreign investors have a privileged position under investment treaties, enjoying strong rights, no obligations, and the ability to rely on a highly efficient enforcement mechanism: investor–state dispute settlement (ISDS). This extraordinary status has made international investment law one of the most controversial areas of the global economic order.

In the recently published book Investment Treaties and the Legal Imagination, Nicolás M. Perrone examines the origins and evolution of the legal thinking underpinning the investment treaty regime and ISDS practice. He shows that our canon of imagination relating to adjustment and potential reform of ISDS, remains closely associated with the world-making project of a coalition of business leaders, financiers and lawyers who promoted international investment protection in the 1950s and 1960s. Common to both is what they protect—such as foreign investors’ legitimate expectations—as well as what they silence or make invisible. In recent years, there is increasing consensus that silenced topics and invisibilized actors should be part of this regime if it is to be recentered as a sustainable development field. We must shift the focus from investments to social relations. How to make this happen, however, remains an open question. A distinguished panel will discuss with Mr. Perrone the implications of these findings for the future of international investment law.

Introduction:

Jorge Contesse, Associate Professor of Law & Director, Center for Transnational Law, Rutgers Law School

Moderator:

Brooke Guven, Senior Legal Researcher, Columbia Center on Sustainable Development

Panelists:

Kathleen Claussen, Associate Professor, University of Miami School of Law

Mélida Hodgson, Partner and Head of International Arbitration in New York, Jenner & Block LLP

Chantal Ononaiwu, Trade Policy & Legal Specialist, Office of Trade Negotiations (OTN), CARICOM Secretariat

Nicolás M. Perrone, Research Associate Professor, Universidad Andres Bello, Chile; (Author, Investment Treaties and the Legal Imagination)

Addressing Trade and Climate Change through a ‘Simple Amendment’ in USMCA

Ambassador Katherine Tai is currently hosting Mexico’s Secretary of Economy Tatiana Clouthier and Canada’s Minister of Small Business, Export Promotion and International Trade, Mary Ng at the inaugural Free Trade Commission of the United States-Mexico-Canada Agreement (USMCA). According to the media advisory issued by Global Affairs Canada, the meeting “will address important trilateral trade issues, including …the importance of strong labour and environmental protections, and mitigating the economic effects of climate change to ensure that North America emerges from the COVID-19 pandemic stronger, through an inclusive, sustainable recovery that works for everyone.”

Since taking office, Ambassador Tai has made it clear that her mandate includes using trade policy to strengthen environmental protection in free trade agreements. Instead of looking at fixing the environmental exceptions at the World Trade Organization, Ambassador Tai’s first step should be to correct the “most glaring omission”  in USMCA by acknowledging the climate crisis through incorporation of the Paris Agreement in the Environment Chapter as well as in Chapter 1.

The lack of any serious consideration of greenhouse gas emissions resulting from North American trade in USMCA takes away from any achievements gained by a more robust environment chapter and a revamped Environmental Co-operation Agreement. USMCA only indirectly considers climate change in relation to the promotion of strategies and actions, such as areas of energy efficiency, alternative and renewable energy, and low-emission technologies.  As the USMCA fails to address our most significant environmental issue, Ambassador Tai’s comments on illegal logging and overfishing are a bit like fiddling while the forest fires rage and ocean temperatures rise.

Fortunately, there is an option to amend USMCA to reflect the importance of the climate crisis. Prior to the signing of USMCA, it was re-tooled by the Protocol of Amendments. This Protocol added a new article (24.8) to USMCA’s Environment Chapter. This Article recognizes the Parties’ existing commitments to implement their obligations under certain multilateral environmental agreements (MEAs) to which they are a party[1].  Article 24.8 is enforceable[2] under dispute settlement, and requires each Party to “adopt, maintain, and implement laws, regulations, and all other measures necessary to fulfill its respective obligations under the listed MEAs”.  Currently, the Paris Agreement is not a listed MEA in Article 24.8. However, Article 34.3 of USMCA providing a simple amendment procedure (at least from a legal perspective) which can be used by the Parties to add more MEAs in the future, including the Paris Agreement.

The same list of MEAs was also incorporated into USMCA by the Protocol of Amendment in a new Article 1.3. Article 1.3 is similar to Article 104 of the original NAFTA, although the rewritten language is an improvement and provides more scope for Parties to adopt measures that may be on their face inconsistent with USMCA, but are needed to comply with the obligations of the MEA.  This article acts as a de facto exception clause, and allows Parties to take actions to protect the environment under the listed MEAs and not worry about the measure being inconsistent with USMCA, with one caveat that the measure cannot be primarily a disguised restriction on international trade. This clause would be especially interesting for the development of trade policy for Border Carbon Adjustment measures. Again, Article 1.3 can be amended in a simple process by the Parties, to add the Paris Agreement or any other future climate agreement ratified by the Parties, to the MEA list.

Ambassador Tai made a second statement on Earth Day 2021 where she again emphasized the need to address climate change through trade policy by embracing “our responsibility to help solve one of the defining challenges of our time by leveraging trade tools to avert an unfolding economic crisis and protect our planet.” Amending USMCA to list the Paris Agreement in Articles 1.3 and 24.8, would be an important signal that the USMCA Parties are ready to make difficult decisions for environmental protection, which may include prioritizing climate obligations over trade rules, and potentially using binding dispute resolution in USMCA to enforce environmental obligations in MEAs.

 

[1] The MEAs currently listed in Article 24.8 are as follows: (a) the Convention on International Trade in Endangered Species of Wild Fauna and Flora, done at Washington, March 3, 1973, as amended;

(b) the Montreal Protocol on Substances that Deplete the Ozone Layer, done at Montreal, September 16, 1987, as adjusted and amended;

(c) the Protocol of 1978 Relating to the International Convention for the Prevention of Pollution from Ships, 1973, done at London, February 17, 1978, as amended;

(d) the Convention on Wetlands of International Importance Especially as Waterfowl Habitat, done at Ramsar, February 2, 1971, as amended;

(e) the Convention on the Conservation of Antarctic Marine Living Resources, done at Canberra, May 20, 1980;

(f) the International Convention for the Regulation of Whaling, done at Washington, December 2, 1946; and

(g) the Convention for the Establishment of an Inter-American Tropical Tuna Commission, done at Washington, May 31, 1949.

The Parties commit to implementing the obligations under those MEAs that they have ratified.

[2] Article 24.32: Dispute Resolution encourages Panels convened under Article 24.8 to seek expert technical advice

Biden’s Worker-Centered Trade Policy: Whose Workers?

As Simon mentioned in an earlier post, various labor-related complaints and requests under USMCA are “heating up.” This activity reinforces the Biden Administration’s new “worker-centered trade policy” that, according to USTR Ambassador Katherine Tai, “will foster broad-based, equitable growth, increase innovation, and give workers a seat at the table.” Specifically, she promised that “Our farmers, ranchers, fishers and food processors will benefit from our new approach and they are essential to meeting our climate and sustainability goals.”

On May 17, the USMCA Free Trade Commission is launching its inaugural meeting. It seems all the more appropriate for us to turn our thoughts to the Biden Administration’s new worker-centered trade policy. At the outset, there is cause for caution. The Biden Administration has inherited an agreement negotiated by the economic-centered Trump Administration. The new Administration also seems to believe that a trade policy protecting “farmers” and “ranchers” is the same thing as a policy that would protect the workers on those farms and ranches.

Without delving into the procedural details in depth (for those details, see this recent report), this post looks specifically at the recent activity that has arisen under USMCA’s Labor Chapter and Facility-Specific Rapid Response Mechanism (“Rapid Response Mechanism”). Examining the implications of the text and those activities, I explain how USMCA fails to give American workers a seat at the table.

USMCA Labor Chapter (Chapter 23)

USMCA’s labor provisions are contained in Chapter 23, which commits the Parties to “adopt and maintain in its statutes and regulations, and practices thereunder, the [fundamental labor] rights, as stated in the ILO Declaration on Rights at Work.” Those rights concern:

(a) freedom of association and collective bargaining;

(b) elimination of forced labor;

(c) abolition of child labor and the prohibition of the worst forms of child labor; and

(d) the elimination of discrimination in respect of employment and occupation.

USMCA adds an additional right concerning “acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health.”

Disputes under the Labor Chapter fall under the general state-to-state dispute mechanism in Chapter 31.

USMCA Rapid Response Mechanism

One of USMCA’s most significant innovations is the “Faculty-Specific Rapid Response Labor Mechanism” (Rapid Response Mechanism), a new form of dispute settlement contained in Chapter 31 (Dispute Settlement) under Annex 31-A, and further described in the USMCA Implementation Act.

Importantly, the Rapid Response Mechanism is not the same thing as the state-to-state dispute settlement mechanism under Chapter 31. Whereas the state-to-state dispute settlement mechanism involves State failures to uphold USMCA obligations, the Rapid Response Mechanism applies to individual facilities within a country that are allegedly infringing upon workers’ freedom of association or collective bargaining rights.

Under the Rapid Response Mechanism, members of the public can file a petition or use a confidential hotline to report information regarding labor issues at those facilities. The Interagency Labor Committee may invoke the Mechanism:

“whenever a Party (the “complainant Party”) has a good faith basis belief that workers at a Covered Facility are being denied the right of free association and collective bargaining under laws necessary to fulfill the obligations of the other Party (the “respondent Party”) under this Agreement (a “Denial of Rights”).”

Finally, the Rapid Response Mechanism may impose financial penalties onto private facilities, such as “suspension of preferential tariff treatment for such goods; the imposition of penalties on such goods or services; or the denial of entry of such goods.”

The Limited Scope of the Rapid Response Mechanism in the United States

The Rapid Response Mechanism does not apply to all facilities in the State Party territories. Indeed, its scope of application, particularly in the United States, is extremely limited.

First, the facilities must satisfy the conditions of the “Covered Facilities,” which are facilities “in the territory of a Party” that involve a “priority sector,” currently defined as “a sector that produces manufactured goods, supplies services, or involves mining”; and that produce goods or supplies services traded between the parties or that compete in the territory of the other party.

Second, under footnote 2 of Annex 31-A, the Trump Administration further limited the Rapid Response Mechanism’s scope of application as follows:

“With respect to the United States, a claim can be brought only with respect to an alleged Denial of Rights owed to workers at a covered facility under an enforced order of the National Labor Relations Board.”

On its face, this footnote makes sense. The Administration wanted to limit the application of the Rapid Response Mechanism to U.S. facilities (cynics might say full stop) only after domestic legal processes had been exhausted. However, by adding the term “enforced order,” which is not defined in national legislation, the Trump Administration effectively shielded U.S. facilities from the scope of the Rapid Response Mechanism.

In the United States, the National Labor Relations Board (NLRB) adjudicates complaints against employers (and unions) for violating the National Labor Relations Act (NLRA). The Board’s decisions are not automatically enforceable. Rather, either the Board or an aggrieved party must appeal the Board’s decision to an appropriate U.S. Court of Appeals.

In practice, footnote 2 shields nearly all U.S. factories from the application of the Rapid Response Mechanism. According to the NLRB, only around 65 cases per year are appealed to Circuit Courts. Of those 65 cases, the Court enforces only 80 percent, or 52 orders. Those statistics do not indicate whether the 52 enforced orders were directed against employers or unions. They also do not mention whether those enforced orders dealt with repeat offenders.

A glance at the Board’s public registry of appellate court briefs and motions shows that these numbers, however dismal, are significantly higher than recent practice. In Fiscal Year 2020, the Board only brought 24 of its cases to the Circuit Courts. Out of those 24 cases, 21 cases were brought against employers (three were brought against unions). Accounting for repeat offenders, only 16 different employers faced a potential enforced order. If the Board’s 80 percent track record holds up, we are looking at about 12-13 facilities facing enforced orders, of which only a minority will satisfy the definition of “Covered Facilities” described above. Consequently, in 2020, less than 12-13 employers in the United States became vulnerable to enforcement action under the Rapid Response Mechanism.

By contrast, the scope of application for Mexico is incredibly broad. It specifies that “a claim can be brought only with respect to an alleged Denial of Rights under legislation that complies with Annex 23-A (Worker Representation in Collective Bargaining in Mexico).” In other words, it applies to all employers and factories subject to applicable labor legislation.

Recent Labor-Related Activity under USMCA Labor Chapter

On March 23, 2021, migrant women from Mexico filed a petition under the USMCA Labor Chapter. They alleged that the United States violated Article 23.3 (elimination of discrimination in respect of employment) and Article 23.8 (ensuring migrant workers are protected under labor laws) by allowing sex-based discrimination in recruitment and hiring practices of migrant workers, and consequently also failing to enforce Title VII and U.S. labor laws.

Their complaint is not new. Mexican women attempting to secure and work under H-2A visas repeatedly submitted similar complaints under the NAFTA labor side agreement. Those attempts were all unsuccessful. According to the most recent complaint, despite years of drawing attention to these labor-rights abuses, migrant women continue to suffer from sex discrimination during the recruitment process and are “excluded from H-2 visa programs as a matter of course.” Those who make it into the program in the United States are assigned to “less favorable and lower-paid positions than their male counterparts, despite having equal qualifications as men.”

Only State Parties to USMCA may bring a dispute under the Labor Chapter. Consequently, the migrant workers’ petition is directed to the Mexican government in hopes that Mexico will “encourage the United States to make [certain recommended] policy and regulatory changes.”

Mexico has not fully taken up the baton. Instead, on May 12, the Mexican Ambassador to the United States, Esteban Moctezuma, sent a letter to Secretary of Labor Marty Walsh, complaining of certain violations under the Labor Chapter. Note that this is a letter, not a formal complaint under the Agreement. Furthermore, while the letter details alleged violations of the rights of Mexican workers in the United States, it fails to reiterate the specific allegations of sex discrimination. It instead details violations of occupational health and safety standards for agricultural workers, interference with the workers’ rights to collectively bargain, and obstacles that prevent undocumented workers from recouping unpaid wages, to name a few.

Migrant women who are working in the United States, meanwhile, continue to wait for an answer or protective action.

Recent Labor-Related Activity under the Rapid Response Mechanism

On May 10, the AFL-CIO and other groups filed a petition with the Biden Administration alleging labor violations at a group of auto parts factories in Mexico across the border from Brownsville, Texas. Specifically, they allege that Tridonex auto parts factories harassed and fired workers for attempting to organize an independent union in violation of their freedom of association rights.

According to the USMCA Implementation Act, after receiving a petition such as this, the Interagency Labor Committee has 30 days to decide whether a petition contains sufficient, credible evidence of a Denial of Rights enabling the good-faith invocation of enforcement mechanisms. If it accepts the petition, USTR will request Mexico to conduct a review. Assuming Mexico agrees to conduct a review, Mexico will have 45 days to remediate.

Although folks are excited about the prospect of seeing the Rapid Response Mechanism put into action, it is unlikely that this petition will mature to a panel. The odds are that the Interagency Labor Committee will either not accept the petition or, if it does, that Mexico will agree to mutually-acceptable remedial action.

Far more interesting, in my opinion, is the activity that took place two days later under Art. 31-A.4(2) of the Rapid Response Mechanism. On May 12, 2021, responding to a tip on the hotline, USTR self-initiated a request that Mexico conduct a review of the General Motors de México facility in Silao, State of Guanajuato (“GM”). In its request, USTR noted its concerns that workers at the facility were denied their right to free association and collective bargaining. In support, USTR points to an April 2021 contract-ratification vote where workers were asked to reaffirm the bargaining authorities of a company-controlled union. The company had allegedly destroyed ballots and threatened workers to control their votes.

Here’s the rub. According to its request, USTR acknowledges the efforts of the Secretaría de Trabajo y Previsión Social (STPS), the Mexican federal department in charge of labor policies, in suspending the election and taking follow up action. In other words, Mexico had initiated its domestic processes to protect the voting conditions and to follow up with the employer. Despite that ongoing process, USTR instigated its own action under the Rapid Response Mechanism.

One potential interpretation of this parallel action is that USTR believes remedial action will be stronger under the Rapid Response Mechanism than it would be under Mexico’s domestic labor laws. As a worker rights advocate, I salute efforts to strengthen protections for workers and sanctions for disobedient employers.

Nevertheless, there are at least two issues here, one specific and one more general. Specifically, USTR is invoking the Rapid Response Mechanism process before Mexico’s domestic processes have been exhausted, leading to potential fragmentation. More generally, the disparate scope of the Rapid Response Mechanism makes it possible for facilities like GM to be held accountable when they are located across from Brownsville, Texas but shields those facilities when they are located in Brownsville, Texas. I explain those concerns below.

Early concerns with the Rapid Response Mechanism

The first issue raised by the May 12 request for review is that, based on its terms, the Rapid Response Mechanism requires respect for U.S. domestic processes (i.e., after an enforced order) but allows the U.S. to interfere with ongoing domestic processes in other countries. Double standards aside (welcome to trade negotiations), the implications could be significant and harmful if the conclusions of the domestic and international bodies differ.

The second issue is the disparate scope of the Rapid Response Mechanism, which imposes greater penalties on Mexican employers than on American employers. If Mexican labor laws fail to enforce international labor standards, Mexican employers face financial penalties under the Rapid Response Mechanism. If U.S. labor laws fail to enforce international labor standards (which they sometimes do), American employers and workers at their facilities will likely fall outside the application of the Rapid Response Mechanism.

Some might be tempted to argue that workers in the U.S. do not need a mechanism like the Rapid Response Mechanism because they are already protected by federal labor laws. Granted, the NLRA prohibits things like company-controlled unions and election interference. However, the NLRA lacks financial penalties for disobedient employers. USTR and Congress had the opportunity to supplement the NLRA’s weak enforcement scheme by exposing U.S. employers to possible financial penalties under the Rapid Response Mechanism. Instead, they limited the scope of the Mechanism’s application. Now, Mexican employers have a greater incentive to respect international labor rights than their American counterparts.

As an aside, it will be interesting to see whether this development impacts the frequency in which the NLRB brings cases to the Courts of Appeals (I could see arguments cutting both ways). I imagine it will deter employers from doing so.

Conclusion

The Biden Administration is advancing a worker-centric trade policy but it has inherited a trade agreement designed for other purposes. To strengthen protections for American workers, Congress will need to make difficult decisions and compromises that it has thus far been unwilling to make. Meanwhile, if Ambassador Tai is sincere in her pledge to give all workers a seat at the trade table, she must work with Congress to broaden the scope of application to provide the same protections for workers in the United States as in the other USMCA countries.

Additional Katherine Tai Exchanges on Vaccine Production/TRIPS Waiver

Following up on my last post, here are two more good exchanges between members of the House Ways and Means committee and U.S. Trade Rep. Katherine Tai on vaccine production/TRIPS waiver:

Congressman Wenstrup:

... So I'm concerned about the intellectual property rights and, but at the same time sharing the goal of getting everyone vaccinated. And I worry that a waiver could do more harm than good. And, you know, Pfizer, for example, recently said that their vaccine utilizes 280 different materials supplied from 19 different countries, and an IP waiver could severely disrupt those supply chains to them, if others could just get it because they're producing basically a generic. And I'm worried about unlicensed producers who may not be able to replicate with the same safety and quality, which really, if they say oh this is the Pfizer vaccine that we're making here now, and the quality is not good and it's not working or there's some kind of contamination or whatever the case may be, it's really going to increase vaccine hesitancy, around the world. And I worry that, you know, waiver could could lead to innovators being less likely to engage in public private partnerships, what we saw with Operation Warp Speed so successfully. And that would leave us less, I think, a little more exposed and unprepared for the next pandemic, which probably will happen.

So I think we have to consider the future safety and health security, not only of Americans, but maintain those protections for good reasons for health reasons, safety reasons, and it's important as we move forward with further vaccines, and especially with this vaccine.

I know many of my colleagues are raising the issue about this, and asking about it, so I'll somewhat leave it there, but I do want to question whether there's any analysis being done by USTR about the potential impact of waiving IP rules, and what effect that may have on the supply of vaccines, and how you can ensure that any agreement to weaken the IP rules will not have a disastrous effect somewhere else where we don't have the same safety margins, we don't have the same oversight, regulatory effects, you know, so how do we assure that it's the same capabilities and we have a product that's capable of quality, safe, and one thing that crosses my mind is, you know, if countries are in need, if they could make it very simple for a company like Pfizer to manufacture in their country, that may be a solution rather than a waiver, and then, we would be, of course, hoping, they would want to make sure that it's the same quality and oversight.

Ambassador Tai:

Congressman, thank you so much for your comments and your engagement here. I appreciate you raising your concerns about unintended consequences and you're very very clear affirmation that, as a doctor, you care, you care about saving lives, and saving lives outside of our borders. It really is going to help us save lives inside of our borders because we are all interconnected and this virus knows no borders, right.

So, I want to say this. I have also heard the concerns of industry and directly from the manufacturers themselves, and I take them very seriously. I think that because a possible waiver of intellectual property protections at the WTO could lead to negative consequences or unintended consequences, is actually a reason for us to engage at the WTO. I think that the dynamic that had developed in Geneva, prior to last week, with us leaning in to say let's all roll up our sleeves and talk about this and figure out a solution, was that you had WTO members like ourselves sitting on the sidelines, saying, well, we're not quite sure that, you know we need to know more about the waiver, are there unintended consequences, and then factors leading to complete paralysis. I don't think that's tenable and I don't think that's the role that the United States should play in the world. I think that we should be part of the solution, always.

And so I want to say there is room to have these conversations and I also want to urge industry, the manufacturers, don't be so nervous and afraid about what this means. This is actually an opportunity for them to lean in and build on the incredible work that they've done in research and development and developing these vaccines, to really also becoming part of the solution. And I've invited them to seize this opportunity for leadership, to join us. There is a lot that they could do voluntarily that would obviate what we would need to do at the WTO, but because we are not there, we have significant portions of the global economy telling us that they are in trouble, that they need access, and that they need to do something through the rules, because otherwise they're not getting any progress and their hopes and dreams and their recovery are really held back because of it. So that's what I'd like to convey is that, we're going to have a process, we will talk through these issues, and that is what I really am going to lean into having the WTO produce.

Congressman Wenstrup's comments about possible manufacturing in factories in developing countries ("if countries are in need, if they could make it very simple for a company like Pfizer to manufacture in their country") could be taken as a subtle nudge in the direction he thinks this all should go. Tai's response was perhaps a little less subtle as a nudge to the pharmaceutical industry to go in that direction ("There is a lot that they could do voluntarily that would obviate what we would need to do at the WTO").

Congressman Smucker:

... I share some of the concerns on the intellectual property, and for me it's sort of a fundamental question, and I'm somewhat new to trade, being new to the committee, but like, I think it's a fundamental property rights question. How is it not, how can we give away the property of a company that has developed it on its own without consideration?

Ambassador Tai:

Well, thank you for your question. ... You know, it will be helpful to unpack a little bit. What this waiver means, and one point that's occurred to me that is important for me to get on the record here is that a temporary suspension of intellectual property protections at the WTO is because of a global pandemic, because of a very critical public health situation, is actually something that we have precedent for in the early 2000s. We did just that. We were able to agree at the WTO to temporarily suspend IP protections for AIDS and HIV drugs because of what was happening on the African continent with respect to populations of patients facing the dire consequences of the disease, but not being able to afford the medicines, and the technology that we had actually already developed and were available here in the United States. We're not, we're not talking about giving away intellectual property what we're saying is that we are allowing for. This is what the, ..

Congressman Smucker:

Why wouldn't that be done ... why wouldn't we do that in conjunction with a company and provide consideration for that, I guess, we're maybe not giving it away but we're giving away future earnings based on investments that they made.

Ambassador Tai:

Well I think that these are parameters for discussion, absolutely. But I think that you know in terms of what's been proposed at the WTO it's been this serious cry for help that's been met with silence for months.

Tai's response here may be an indication that what many of us have been saying about offering Pharma money to do more licensing deals is on the table and is a realistic possibility.

Nunes-Tai Exchange on Vaccine Production/TRIPS Waiver

At yesterday's House Ways and Means committee hearing on the Biden administration's trade policy agenda, Congressman Nunes and U.S. Trade Rep. Katherine Tai had the following exchange on the TRIPS waiver and vaccine production:

Congressman Nunes:

.. I want to turn to this agreement on TRIPS that many people have talked about, the trade related aspects of intellectual property rights. It would force the American developers of COVID-19 vaccines and therapeutics to relinquish their intellectual property rights to these medicines and essentially show foreign nations how to produce these drugs themselves. Now, I understand your point about, we really want these vaccines to get out, but at the same time this is American technology that we spent billions of dollars developing. And one of the concerns I have is, really the only country that could quickly make these types of vaccines, that could implement this, would be China. I know that India and others are saying that, but it really seems like they want to steal this very new technology, especially as it relates to the Moderna and Pfizer vaccines. So did you conduct any analysis on this front, of what would happen, who could actually make these vaccines?

Ambassador Tai:

Thank you, Congressman Nunes. Yes, this decision was made after a lot of deliberation. And we have adopted, what I think is an unusual practice, at least for USTR, starting in mid-April I began consultations with interested parties, labor organizations, civil society, public health advocates, public health experts, both inside and outside of the government, and also the manufacturers themselves.

We take policymaking extremely seriously, and so my short answer to you is, yes, we are thinking through, we have really dug into the policy implications. And let me say this, in terms of our announcement of support for waiving intellectual property rights at the WTO, support for the goals of the proponents at the WTO, what we are committing to is starting a process at the WTO, to find a solution at the WTO that is going to have to, through these negotiations, take into account, concerns from all sides, so that we can have something that is effective and practical in saving lives.

Congressman Nunes:

So, we're obviously, we're very proud that, another one of our staff longtime staff, Ms. Ellard, is going to be going to the WTO, but WTO has really been a beacon of of light and freedom. They've had tremendous issues, as you're well aware, and I know we're always trying to work and fix and make the WTO function better, but you did mention the manufacturers, and that to me is the is the key here, manufacturers who develop this, who developed these vaccines, they're US companies. And just to turn over that intellectual property to these other nations, especially China who we still don't have a full understanding of the origins of this virus at this time and what their involvement was. Do you know, I mean, when you met with the US manufacturers, did they explain to you, express to you, their concern about China being able to utilize this and be the only one that could really make the vaccine?

Ambassador Tai:

Well, I want to be a little bit circumspect about exactly what the manufacturers told me and how they told me, but let me offer you a couple observations and insights from my conversations with the individual manufacturers and also with their trade associations, which is that the manufacturers, there are quite a number of them. They're not a monolithic group. They're, actually, their technologies are different, their leadership personalities are different, and their corporate philosophies are actually quite different as well. And some of these manufacturers do think of themselves, not just as businesses with obligations to shareholders, some of them do see themselves as important actors in the public health ecosystem in the world.

Congressman Nunes:

So let me just get to a specific question, so how long would it take a country to build the facilities that it would take to produce these vaccines, did you look at that?

Ambassador Tai:

Sure, yes.

Congressman Nunes:

So, how long would it take them to build them.

Ambassador Tai:

Well, let me put it this way, in order to for you to have access to the best information, I am probably not the best source for the answers that you're looking for. But let me just assure you, yes, we are looking at the full picture, we are looking at the IP piece in the WTO, but also in the context of how this and other actions will work together to translate into increased manufacturing, more equitable distribution.

Over the last two days of Senate/House hearings on the Biden administration's trade policy agenda, there has been a lot of talk about the TRIPS waiver, with many of the comments from members of Congress essentially being "waiver good" or "waiver bad." The Nunes questions at least got closer to some of the underlying issues. I'm not sure how Ambassador Tai could answer many of them, though. Even if she knew the answer, this wasn't necessarily a forum where she could or should tell everyone what her strategy is. The last question is particularly important, and I assume someone in the Biden administration has a sense of this, and that we will hear some details at some point.

The China issue seems like a red herring to me, if this all goes the way it should. If we end up with a blanket waiver of certain patents under various countries' domestic law, then yes, China and Russia and others would have access to the technology. But if, instead, the pharmaceutical companies agree to license the technology to specific companies/factories, which is the sensible direction to go here, that shouldn't be an issue.

As a final point, her characterization of the differences between the pharmaceutical companies was interesting. Kind of feels like it was sending a message.

Katherine Tai on China's Place in the Global Trading System and the U.S. Response

Here are two questions/answers related to China's place in the global trading system and how the United States should deal with China, from today's House Ways and Means committee hearing on the Biden administration's trade agenda:

Chairman Neal:

Ambassador, when China joined the WTO in 2001, the expectation was that WTO membership would lead China to become more democratic, embrace a greater respect for human rights and develop a market based economy. China clearly has not met that expectation. Do you think the global trading system itself needs to develop new tools to address the challenges posed by China, and how would you envision working with our allies to help confront some of these acute challenges in China, namely forced labor, and human rights abuses?

Ambassador Tai:

Chairman Neal, I agree with you that when China joined the WTO, there was a lot of hope and expectation that membership in the WTO would really lead to China internalizing a lot of the norms, economically and politically, that are represented by the members of the WTO. Over time we have seen that we all make choices, countries make choices, governments make choices, and along the way we see that the choices that China has made has not led it to the results that many of those supportive of its accession to the WTO had hoped for.

So, let me take your question in a couple parts. One is, it is critical to work with others to confront, to work on, to communicate with China in all the ways where its policies are really powerfully impactful on the rest of the world, that are not impactful in a positive way. At the WTO, yes, we need new rules, but I also want to emphasize that some of the foundational rules at the WTO need to be reshored and reformed in order for the WTO to become relevant to address the challenges that we have, given the changes in the global economy, and the changes in the relationships between WTO members that have happened in the past 25 years.

...

Congressman Blumenauer:

... Would you like to comment for a moment on your thoughts about going forward, dealing with China, intellectual property, and the trade disruptions that we've had in the course of the last four years?

Ambassador Tai:

Absolutely, thank you Mr. Blumenauer. In terms of the China challenge, I think this is probably one of the most consequential, if not the most consequential, issue that we have to confront as we are looking at the future of the US economy in the global marketplace. The China challenge is large, China moves fast. China has a very clear vision of where it wants to go. We need to match the competition that we are getting from China by having a clear vision about what kind of economy we want to have, what kind of strengths we have, that we are going to build on, what kind of strengths we have that we still need to build on, and how we are going to relate to China. First, if China can make changes; second, if China cannot make changes. On the question that you've asked regarding forced labor, and the anti- competitive practices from China, whether it's subsidies or other types of practices that really create global market domination that drives out competition in economies like ours.

What I would say is this, that the US-China Trade and Economic Agreement, this Phase One agreement that we have, is the agreement that we have right now, and it does have certain mechanisms that we will need to test out, but in terms of building on, building out where we need to be with respect to China, I am looking forward to working with you, the members of this committee, in the Senate, and across the Administration on how we best position the US economy to be strong, to run fast, and to really come out ahead, after we come out of this pandemic and into the future.

Schweikert-Tai Exchange on WTO Dispute Settlement

At today's House Ways and Means Committee hearing on the Biden administration's trade policy agenda, Congressman Schweikert and U.S. Trade Rep. Katherine Tai had the following exchange on WTO dispute settlement:

Congressman Schweikert:

I owe you a thank you for all your work in helping Mr Kind and those of us who are interested in the WTO, we'll call it resolution. But this becomes one of those moments now that you're behind that dais. If you were redrafting it again today, would you draft it differently?

Ambassador Tai:

Well that's a great question, Mr Schweikert, and I could probably write you an essay about this but I know we've just got a little time. So, let me say this. We can't go back in time, but today where we are in 2021, yes, I think that the fundamentals of the WTO itself needs reform and needs to reflect the realities of today.

Congressman Schweikert:

... for many of us here, and Representive Kind and his staff, we've had this running conversation. It's both the adjudicatory body ... but for many of us in particular, it's speed. I actually, truly believe in the coming decade, the disputes are going to be on things from synthetic biology, to things that are truly cutting edge but very disruptive to the economy. But speed will be crucial, and you can't have a decade of the games going back and forth, and by the time you actually come to a decision, the economics of the dispute are gone.

... What can we as members of Congress do to help the argument that the reforms of the WTO also have to be about the timelines, these timelines can't be a decade anymore.

Ambassador Tai:

Congressman, I think that the number one thing that you can do is what you're doing right now which is to be deeply engaged, it matters so much for US leadership and US participation at the WTO, for the WTO and its members to know that the United States cares, that it's not just USTR, it's not just the executive, but that US participation and leadership is backed up by Congressional interest and Congressional requirements.

With respect to the dispute settlement system, I hear you on speed. The large civil aircraft cases, Boeing - Airbus, that we've had, were first launched in the mid 2000s. That is part of what is motivating me in really putting the nose to the grindstone with the European Union to try to resolve these cases now. It's in part to show that all of this time has led to something, that this hasn't been just a colossal waste of time.

I think that there are other aspects to dispute settlement that we really need to think about and we really need to think holistically about dispute settlement, not just as one part of the WTO, but one key component, that is important for itself, but that also directly impacts the other part, which is the negotiating function. As strong as the dispute settlement system has become, it has taken a long time, it has become very active, we have also seen an atrophying of the negotiating function. These two things are connected.

Congressman Schweikert:

But is there a way, I mean there's some articles out there that talk about everything from a a quick ruling and escrow, then continued dispute, something it forces more pressure, more value for actually the negotiations to come to a close, and do we need to produce some mechanism that creates almost a leverage that you will negotiate in good faith to a final decision, instead of the game that appears to be going on now, where make it take forever, and at that point, if it's an IP type case ... , the value of it has already faded away.

Ambassador Tai:

I like the way you're thinking about it, and I would really like to continue to work with you and others on this committee on some of these ideas. 

I have a couple comments here.

First, I sometimes hear people say that WTO dispute settlement has undermined WTO negotiations. I haven't seen evidence of that, though, and WTO negotiators I have asked about this have been skeptical. It seems to me that the main reason for the failure of WTO negotiations in recent years has been the growing number of assertive Members, and the unwillingness of many key governments to compromise, and the difficulty this creates for reaching agreement.

And second, some suggestions for speeding up WTO dispute settlement from Jim Bacchus and me are here.

Katherine Tai on the USMCA Rapid Response Labor Mechanism Developments

U.S. Trade Rep. Katherine Tai testified in front of the Senate Finance Committee today on the Biden administration's trade agenda. She was asked about the USMCA rapid response labor cases I noted in my previous post:

Senator Brown:

Let me talk about what you would expect me to ask about, the Brown-Wyden rapid response mechanism. During your confirmation hearing, you committed to fully enforcing the USMCA agreement with Brown-Wyden. Today under your leadership, for the first time, self initiated an enforcement case under that mechanism. Thank you for that. We have now two Brown-Wyden cases, as you know. I'd like to ask you two or three questions, I'll ask them together and just get you talking a little more about Brown-Wyden, to explain it to people, how it's working, a sense of how many cases we might expect under this mechanism, some sort of ballpark estimate, talk to me about how the hotline works if you would, how do workers file complaints, do you take tips and come in through the hotline seriously, and tell me what does full use of the Brown-Wyden mechanism look like to you in the months and years ahead.

Ambassador Tai:

... On the Brown-Wyden rapid response labor enforcement mechanism, let me just distinguish a little bit between the two announcements this week.

The first one was a petition that was filed by the AFL CIO in partnership with several other labor organizations. That is the very very beginning of a petition process, and as constructed, there is a 30 day period during which USTR, working with the Department of Labor, will review that petition for whether follow up is needed, and whether USTR should then request Mexico to review whether a denial of rights has happened.

In the second case that has been initiated today, that was self initiated, and as you've noted, that is USTR initiating the request to Mexico today that will start the next timeline under the mechanism that's been created.

In terms of the tips and hotline and taking in information from people with experience of what's happening on the ground at some of these facilities, absolutely we take that information extremely seriously. 

 

USMCA Labor Complaints Are Heating Up

On Monday, the AFL-CIO and some other groups announced the filing of a petition under the USMCA rapid response labor mechanism (for background on this procedure, see Kathleen's post here). Now today, USTR announced that it has initiated a request for review under that mechanism on a different matter:

United States Trade Representative Katherine Tai today announced that the United States has asked Mexico to review whether workers at a General Motors (GM) facility are being denied the right of free association and collective bargaining.  The request is the first time any country has used the novel Rapid Response Labor Mechanism in the United States-Mexico-Canada Agreement (USMCA). USTR and the Department of Labor received information appearing to indicate serious violations of these workers’ rights in Silao, State of Guanajuato in connection with a recent worker vote, organized by the existing union, to approve their collective bargaining agreement. 

We'll be covering these issues on WorldTradeLaw.net. (For DSC subscribers, our list of USMCA labor petitions is here). I don't see the U.S. request for review in the GM case yet, but hopefully the relevant documents will be made public at some point.

UPDATE: The request for review is here.

Call for papers for ESIL-supported colloquium on ‘International Investment Law & New Technologies’

This is from the Tilburg Law and Economics Center (TILEC):

The Tilburg Law and Economics Center (TILEC) at Tilburg University (the Netherlands) is hosting a Colloquium on ‘International Investment Law & New Technologies’ which will take place on 9 and 10 December 2021 in Tilburg, the Netherlands.

The Colloquium on ‘International Investment Law & New Technologies’ is jointly organized by TILEC; Athens Public International Law Center (Athens PIL) of the National and Kapodistrian University of Athens School of Law; and Hamad Bin Khalifa University (HBKU) College of Law (Qatar).

The call for Papers can be found HERE. Deadline for submissions: 28 May 2021 

Call for Papers: 2021 CELIS Forum on Investment Security 1-3 December 2021

This is from Prof. Dr. Steffen Hindelang and Mr. Jens Hillebrand Pohl, inviting contribution from followers of this blog:

 

Call for Papers: 2021 CELIS Forum on Investment Security

1-3 December 2021

 

The 2021 CELIS Forum on Investment Security will be held in Warsaw from Wednesday 1 December until Friday 3 December 2021.

 

The 2021 CELIS Forum will address:

 

“The Emerging Law of Investment Control in Europe: Screening, Sanctions and Subsidies”.

 

“…Overhauling existing, introducing new investment control regimes…”

2020 was a watershed moment in the history of European investment control. The entry into full effect of Regulation 2019/452 not only elevated investment screening to a top priority in the EU’s common commercial policy, but it also set in motion a process of reform at the national level. Some Member States overhauled their existing, in part antiquated, laws on investment screening. Others introduced new investment control legislation. On the eve of its first anniversary, what are the early lessons of Regulation 2019/452 and the new EU investment screening framework it established?

 

“…From the New Industrial Strategy for Europe to Strategic Autonomy…”

Meanwhile, the new self-proclaimed “geopolitical” European Commission of Ursula von der Leyen came to office. It launched the ambitious twin policy agenda of the green and digital transitions, coming together in the “New Industrial Strategy for Europe”.  Rather than throwing this new policy agenda off course, the Covid-19 pandemic led to many of the policy initiatives being fast-tracked. At the same time, the pandemic highlighted the role of public health as a paramount societal interest and critical health infrastructures, critical medical supplies and critical health technology as essential strategic interests. “Strategic autonomy” became the catchphrase that encapsulated Europe’s desire to remain resilient against threats to European security and public order, whether man-made or of natural origin. Can we detect an expanded “soft security” concept as a “new grand narrative” to link climate change and sustainability with public health and perhaps other matters of ordre public, such as public morality, public order and public security? Is the Covid-19 trauma giving rise to a new doctrine of “Europe qui protège”?

 

“…Foreign take-over of EU companies financed with third-country subsidies…”

In a parallel development, in July 2020, the Commission presented the White Paper on Foreign Subsidies, which outlined a comprehensive approach to ensuring that the EU would no longer be on the receiving end of alleged unfair practices in the area of trade and investment. The White Paper envisioned a policy blueprint addressing distortions of competition caused by foreign subsidies facilitating the acquisition of EU companies. The White Paper seeks to ensure that foreign subsidies do not confer an unfair benefit on their recipients when acquiring (stakes in) EU companies, either directly by linking a subsidy to a given acquisition or indirectly by de facto increasing the financial strength of the acquirer. Under this initiative, the Commission would review acquisitions of EU companies by third-country companies benefitting from financial support of a non-EU government, above a given threshold. If the acquisition is facilitated by the foreign subsidy and distorts the EU Internal Market, the Commission could either accept commitments by the notifying party that effectively remedy the distortion or, as a last resort, prohibit the acquisition. Are we moving towards using investment control as a means to address global economic distortions and can this be linked to the concepts of resilience, strategic autonomy and economic security?

 

“…Economic sanctions in geoeconomic conflicts…”

Throughout the past year, the use and importance of EU restrictive measures (sanctions) as a foreign policy tool continued to grow. With geopolitical tensions rising and unresolved geoeconomic conflicts growing ever more infected, particularly as between the United States and China, economic sanctions retained their central role in foreign and security policy. Europe too came under the threat of sanctions by its longstanding and closest partner, the United States, with attention focusing on the EU’s relationships with Iran and Russia. The effect, including the chilling effect, on foreign investments of the ever more widespread use of economic sanctions added yet another dimension to the increasingly complex investment environment. Is the regulatory and legal asymmetry between various forms of investment, payment and capital mobility restrictions necessary and desirable? What parallels and lessons can be drawn from sanctions caselaw in the area of investment screening?

 

*          *          *

 

These broad strands of development raise the prospect of re-cast notion of the law of investment control, spanning not only general and sector-specific FDI screening in a strict sense on grounds of security or public order, but also “subsidies-screening” as proposed in the Commission White Paper on grounds of equality of competitive opportunities in international economic relations and, furthermore, investment control by way of economic sanctions. Can the outlines of such a composite conception of investment control regulation be defined?

 

To address the main theme of the CELIS Warsaw Forum, three sub-themes will be further explored:

 

• New European Security: Health Security, Climate Security, Digital Security. The concept of “security” lies at the heart of investment screening. The Covid-19 pandemic, the European Green Deal, and the EU’s digital strategy parallel notions that have been analysed in the area of security studies. At its core, security denotes the ability to prevent, withstand, and recover from (i.e. resilience against) harmful potential behaviour of others. As such, security goes beyond the traditional notion of military security to other areas of societal vulnerability and threats to the orderly functioning of a state, including economic security, food security, cybersecurity, health security, climate security or environmental security, to name a few. Europe’s current core priorities should focus attention on the particularities applicable to the security dimension of those priorities.

 

• Promoting Investments and Strategic Autonomy: Essential Resources and Critical Capabilities. The developments of 2020, notably the Covid-19 pandemic, has highlighted Europe’s potential and actual supply-side vulnerabilities and the importance of supply-chain resilience and access to critical resources and capabilities, as exemplified by the early experiences of personal protective equipment supply disruptions and the problems associated with vaccine delivery. While reshoring of supply chains may in some cases be warranted for reasons of political risk management and strategic operational resilience, taking such factors into consideration may come at an economic cost. This raises the question of how to facilitate strategic investments and whether some offsetting benefits may be required in that regard.

 

• Defence Against Investments Made in Pursuit of Geoeconomic Statecraft and Organized Crime.  Viewed holistically, the rules restricting third-country investments into the EU and their enforcement are highly uncoordinated and incoherent, both at the EU and national levels. This leaves the EU and its Member States ineffective and vulnerable to regulatory arbitrage. Assuming that this state of affairs is not intentional, how can loopholes and inconsistencies in EU investment control regulation be tackled? How can investment control be made more efficient, transparent, swift and predictable, so that unproblematic investments are not negatively impacted, while effectively addressing problematic investments? How can enforcement of investment control be made more effective and consistent?

 

The Organizing Committee welcomes original contributions in the form of submission of proposals for papers addressing the theme and sub-themes above. In addition, submissions are invited on any of the following topics:

 

1. Multiplying instruments for investment control: screening, sanctions and subsidies
2. Sustainability screening: climate change and investment control
3. Digital sovereignty and investment screening: data, media and freedom of speech
4. Health security: Covid-19 implications for screening mechanisms in the Member States
5. Threat analysis and the concept of security in practice, including the nature of threats to security and public order, subjects and objects of threat and approaches to threat analysis
6. Administrative process in connection with investment screening, anti-subsidies enforcement and sanctions, including the application and limitations of fundamental principles of administrative process and the role of mitigation
7. Investment screening in the context of state-owned enterprises (SOEs) 
8. Interaction between investment screening and financial supervision
9. Investment screening and dispute resolution, including the nature and availability of recourse against screening decisions, and the scope and standard of review
10. Investment screening, investor-state dispute settlement (ISDS), and security exceptions
11. Conformity of screening mechanism with international law / EU law / OECD codes.
12. Are Member State screening mechanism converging, because of Regulation 2019/452 or for any other reasons?

 

Submission Procedure and Instructions

Paper proposals, including abstracts of no more than 500 words and the speaker’s contact details and bio-note or CV (including current main affiliation, relevant experience, and pertinent publications, as well as date of affiliation with the CELIS Institute, if applicable), must be submitted by

 

Monday, 31 May 2021 (midnight CEST) via the dedicated web-form, available at www.celis.institute.

 

Every proposal will be reviewed on a double-blind and confidential basis. In evaluating proposals, please note that priority will be given to unpublished papers and works in progress. The Organizing Committee anticipates announcing the results of this call for paper proposals by Tuesday, 15 June 2021.

 

Applicants whose paper proposals are selected should be prepared to submit draft papers (no more than 5,000, including footnotes) by Friday, 1 October 2021.

 

Conference papers will be made available to conference participants prior to the conference. The conference proceedings and the papers presented at the conference, will be summarized in the conference report, the CELIS Investment Security Report, to be published shortly after the conference. In addition, the organizers consider publishing papers presented at the conference either as a special issue in a leading journal or as an edited volume published by a leading academic publisher. In the selection of proposals, preference will be given to those interested in publication. Willingness to submit a paper should be indicated in the response to this Call for Papers. Speakers whose paper proposals are selected should be prepared to submit draft papers (between 5,000 and 10,000 words, including footnotes) by Monday, 31 January 2022. All proposals and finalized papers must be written in English.

 

Conference Fees

Speakers whose paper proposals are selected are expected to register for the conference. The applicable registration fee is EUR 120 (CELIS Fellows receive a waiver).

 

Hybrid Format

The conference will be held in a hybrid format, with speakers and some participants joining a live on-site meeting and other participants and some speakers joining virtually. The number of on-site conference participants will be restricted in accordance with applicable health regulations in force at the time of the conference. Participants who wish to keep an option to join on-site should indicate this on the registration form. Option requests will be queued on a first-come, first-served basis. The conference organizers will be in touch regularly regarding the availability and relevant number of live seats.

 

Contact

Please submit enquiries to [email protected].

 

The Organizing Committee: Konrad Czech Steffen Hindelang, Marek Jaśkowski, Szymon Pawłowski, Jens Hillebrand Pohl

 

About the CELIS Institute

The CELIS Institute is an independent non-profit, non-partisan research enterprise. It is dedicated to promoting better regulation of foreign investments in the context of security, public order, and competitiveness. We produce expert analysis and foster a continuous trusting dialogue between policymakers, the investment community, and academics. The CELIS Institute is the leading forum for studying and debating investment screening policy.

The CELIS Institute’s activities focus on policy-oriented analysis through its publications and events organised around the flagship CELIS Forum on Investment Security and conference publication CELIS Investment Security Report. The CELIS Knowledge and Research Hub hosted on the CELIS Institute website www.celis.institute is the most comprehensive and up to date online tool available for foreign investment screening. Through its network of Country Reporters, the Institute provides full coverage of EU and global screening regimes, including legislation, guidance, court judgments, summaries, academic articles, policy briefs, and is updated up to several times a day. The Hub provides news updates in this rapidly developing area, a target search tool, an FDI screening map, and other resources including podcasts.

Biden Makes Another Good Trade Appointment in Thea Lee

The Biden Administration has appointed Thea Lee to be the Deputy Under Secretary for International Labor Affairs.  This is a thoughtful appointment to an agency that has had an important trade role for at least six decades.  I wish her good luck in having the labor voice heard in the policy arena. I worked in that Bureau for about nine years in the 1970s and early 1980s and I often found it difficult to get DOL's position heard at USTR, State, and Commerce. I hope that the Biden Administration gives Thea Lee ambassadorial rank in her work with the ILO as the Reagan Administration did with Bob Searby.  

 

https://www.foxbusiness.com/politics/biden-administration-to-name-thea-lee-to-top-labor-department-slot  

I commend the new essay in Barron's by my colleague Susan Aarsonon "How Nations Can Build Online Trust Through Trade". Her scholarly contributions to the development of effective trade policy are always enlightening.

https://www.barrons.com/articles/how-nations-can-build-online-trust-through-trade-51620139281?mod=hp_COMMENTARY_4

My Take on the Vaccine/TRIPS Waiver Issue: Buyout Pharma Now, Rebalance the IP System Later, and Meh on the Waiver

After almost two days of intense discussion on Twitter and elsewhere, here's where I am now on the issue of vaccine production and the TRIPS waiver. The most important point here is whether additional factories around the world could produce vaccines. In order to do so, they would need to have licensing deals with the pharmaceutical companies who have the patents and the know how to make the vaccines (obviously, the situation of the mRNA vaccines and the more traditional ones is a bit different). There seems to be a factual debate on whether, or to what extent, other factories would actually have the capability to do this production. I haven't seen anything definitive about what's possible here, but if it can be done at all, we need to make it happen as soon as possible. 

So how to make it happen? It seems to me the quickest way is to pay Pharma a lot of money to get them to go along with it. People keep throwing out $100 billion as a figure, and that's a nice round number I can get behind, but the precise number doesn't matter too much. Whatever it takes.

I suggested this Pharma buyout plan to a progressive friend of mine, and this person seemed reluctant. I understand that Pharma already has made a lot of money here, and that there may be options that involve something more along the lines of governments taking the technology from Pharma. There are a number of problems with this approach, however, one of which is that it will be slower than a buyout. People are dying and we need to act fast.

I think people are aware that I'm a skeptic on IP protection. In my view, it goes too far in many ways at the moment (e.g. this). However, while rethinking the balance of the IP system is important, we can't do it right now. Again, people are dying and we need to act fast. When the pandemic is over, I'm all for a reconsideration of patent policies in general and how they relate to medicines in particular. (Bryan Mercurio and I tried to raise these issues a year ago, but didn't get much traction.)

What about the TRIPS waiver? I don't object, but I'm not sure it adds much to the existing exceptions and flexibilities. Does a TRIPS waiver give a bit more leeway to governments who want to do something that might not be in accordance with TRIPS? I guess it does. But WTO dispute settlement probably isn't a practical option for preventing governments from acting here anyway (even putting the Appellate Body crisis aside), and I'm not convinced that WTO rules are a real barrier to action. The key issue is the positions of the U.S. and other wealthy governments. If they will push for more licensing, we are in good shape, regardless of what is happening at the WTO.

Now, if the waiver is more of a negotiating tool for the talks governments are having with Pharma, it makes a little more sense to me. If that's what the big shift in the U.S. position on the waiver was designed for, I get it and I hope it helps get us to some more licensing arrangements. But it would be crazy, in my view, to wait for the waiver to be signed before pushing Pharma to do more licensing, as some news articles today seemed to imply would be the case. The talks with Pharma should be the priority. The WTO is a great place to discuss the big picture policies, but what's needed now is for governments, who are the ones with the power, to act.

SIEL Conversation on Indirect Expropriation in International Investment Law

From the SIEL:

SIEL May Conversation

The Society of International Economic Law (SIEL) is pleased to invite you to its May Conversation entitled ‘Book Launch: Sondra Faccio, Indirect Expropriation in International Investment Law. Between State Regulatory Powers and Investor Protection (Editoriale Scientifica, 2020), with Sondra Faccio (University of Trento), Prof. Giuseppe Nesi (University of Trento), Prof. Tarcisio Gazzini (University of East Anglia), Prof. Catharine Titi (University Paris II Panthéon-Assas), moderated by Prof. Eric De Brabandere (Leiden University Law School).

11 May 2021 at 11 am CET time. Zoom registration available here.

More information can be found here.

What if the US can't create consensus around a WTO vaccine waiver? A review of the options

Angela Merkel's Kriegserklärung  against America in its effort to to build consensus for a WTO vaccine waiver will come as no shock to those familiar with Germany's punitive moralism  and gratuitous cruelty in the Greek debt crisis a few years back.   But the chancellor's salvo raises an obvious question: what if the US loses the battle for agreement in Geneva?   

One possibility: the US can step back, its global reputation enhanced by having fought the good fight, and focus on other issues.  The WTO will have failed the test of "relevance" or "doing good" in today's world (expressions of USTR Katherine Tai).  While keeping an open mind about efforts of others, the Administration never was that invested in making big changes to revitalize the WTO, at least of the kind that the EU, for instance, has been proposing-such as the ill-timed demand for tighter disciplines on subsidies at a moment when governments are spending flat out to prevent economic collapse from the pandemic. (On subidies reform, the US is supposedly in agreement with the EU in principle but is much more focused now on doing industrial policy as opposed to curbing it).

On the vaccine front, the Biden Administration would have a range of options, some more unilateral while others would focus on cooperation mechanisms such COVAX.  Senator  Elizabeth Warren, former professor at Harvard Law School, has long argued that the federal US government has sufficient legal authority to break patents where overriding public health concerns are at issue.     She is probably referring to "march in" rights in the Bayh Dole Act, which allow the government to engage in compulsory licensing where federal funding has been involved in a patented innovation; one of the criteria is that "action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees." The pandemic seems to be the test case for these provisions, which have so far not been applied, as I far as I can learn. I'm not an IP lawyer but I'm sure that any effort of the Administration to move in this direction for purposes of alleviating global needs would be heavily debated and litigated. As a non-expert on US IP law, I offer no view of who would win the court case, but I'm pretty sure that pharma won't prevail in the moral debate. Mobility of people is a major part of the spread of the virus, and so American "health and safety needs" are compromised if the rest of the world can't get reasonable access to vaccines.  Once it has the intellectual property, the Administration can ensure it is freely available to any country or manufacturer that wants to move into production, and can do so safely and reliably.   This solution isn't as comprehensive as a waiver, as it could only apply to those vaccines invented with US federal funding in the picture.  Still, combined with US technical assistance, and help on ingredients, it could go fairly far.  

But there is another choice-disruptive in its own way.  The US could decide to push the WTO beyond its current consensus-based approach. Ambassador Tai has made it crystal clear that the US will try first for consensus in Geneva.  But this pronouncement also sets the scene for the US if need be declaring at some point that a consensus "cannot" be reached and therefore that, in accordance with the terms of the WTO Agreement (Article IX:1), the matter at issue "shall" be decided by voting.  Yes, "shall", not might or should. In this case (a waiver) a supermajority of 3/4 would be required. If there were any situation that could push the WTO beyond consensus decisionmaking , it would be the exceptional challenge of the pandemic, one shared by the peoples of all WTO Members. Since the consensus practice gives a veto that de facto will be most easily exercised by the major powers, breaking the practice almost certainly needs to be supported by a major power like the US (here India might be on board too).   The nice thing about moving in this direction in the specific circumstances of the pandemic is that it could be presented as a truly unique recourse to unused but totally valid treaty provisions, thus as a limited & fully legal departure from custom, but also serving as a first tentative step in an institutional shift that might lead to faster, more successful negotiations at the WTO and increasing global relevance.   

(Postscript: an important forthcoming article reconsidering consensus decisonmaking at the WTO is Claerwen O’Hara, ‘Consensus Decision-Making and Democratic Discourse in the General Agreement on Tariffs and Trade 1947 and World Trade Organisation’ (2021) 9(1) London Review of International Law.)

TRIPping the light fantastic-fathoming the Biden Administration's support for a vaccine waiver at the WTO

"Come, and trip it as ye go, On the light fantastick toe"- John Milton, "Allegro"

Yesterday's statement by USTR Ambassador Katherine Tai that the US will support efforts in the WTO for a vaccine waiver is a big deal.  "Massive", "huge", "immense" are  adjectives being used.  Even progressives often skeptical that President Biden has really shed his centrist Democrat roots are hailing the move as a sea shift.  Today in the Financial Times' "Trade Secrets" Alan Beattie offers one of the best quick takes on what's really significant here.   (Beattie has been following this issue closely, early on digging beneath the slogans and posturing). 

First of all, as Beattie notes, Tai's statement suggests the US is actively backing only a waiver for vaccines, not the full range of medical products that can be used in treating COVID-19. Thus, the US position will likely be narrower than the original proposal by India and South Africa. But as Beattie shrewdly observes:

[The original draft] was always a tactical position designed to start a debate, idenitfy possible support and flush out possible opponents rather than a likely outcome. To this end, it seems to have worked rather well. Pretoria and New Delhi are in any case in the process of reworking and narrowing their text, with progress likely in a few days. Our supposition is that the US will come up with its own tightly drawn proposal and negotiations will start.

As Beattie further notes, the US position liberates countries to use existing TRIPs flexibilities more boldy (and thus potentially has a positive effect even before any waiver is concluded):

In practice, the US government looking more kindly on overriding IP will probably make other governments more confident that they won't face a lot of political pressure or potential litigation on the issue. If you are an emerging market minister thnking of issuing a compulsory licence, it's going to be a lot easier facing down a multialteral pharma company lobbying against you if you can simply tap the framed printout of Tai's Trips waiver tweet you have prominently displayed on your desk and smile knowingly.

And this is not a case of the US grudgingly accepting to stay on the sidelines and let a properly drafted waiver pass. As Ambassador Tai made clear in interviews yesterday, as reported by Bloomberg, the US is "for the waiver" and will use what Tai calls America's "convening power" in the WTO to assure a positive solution that lifts patent protection for vaccines.  As Beattie puts it succinctly, "the US is leading the debate inside the WTO again."  Tai hinted that the US will be judging the WTO on whether what she calls "the consensus-based nature of the institution" can generate a successful outcome in real time on the crucial challenge of the day.  This is a matter, as she puts it, of seeing "what the WTO is capable of" and of trying to make the WTO "relevant" and "a force for good." 

The US aligning at the WTO with South Africa and India (as well as the rest of the devleoping world  & global civil society) points to a new era of American leadership on trade and the global economy.   Perhaps the only kind of leadership that can really  match China and halt its growing dominance in multilateral institutions.  Supporting the waiver, as many (including Beattie himelf) have said, packs a huge symbolic punch.  Or, as I might prefer to put it, this can change perceptions of America in much of the globe.   Most of the world's population, and certainly its rising generations, have not seen much of the idealistic side of America's global footprint.  Barack Obama talked idealistically but delivered drones and  defended investor-state dispute settlement, special tribunals for corporations largely to attack the regulatory state in the developing world  (something Biden has categorically repudiated, by the way). That now the US Administration is staring down some of its most powerful commercial interests to protect lives around the world is a message that will not be lost on global public opinion.

So much for  aspirations of Europhiles that it is EU's external policies that might enable a global "EUtopia."  Beattie observes: "Katherine Tai's announcement evidently wasn't coordinated with prominent waiver scetpics such as the EU, Switzerland, the UK and Brazil, which are now scrambling to determine their positions."  If Brussels obstructs US efforts at consensus on a waiver, whatever is still left of the EU credibility as an agent of global justice and human rights in its external economic policies will be gone.  Perhaps this matters less to the Commission than serving its big corporate clients and their interests in intellectual property protection.  But the Commission has put itself forward as determined to achieve the renewal and reform of the WTO with a common purpose for sustainable development, a supposed top priority.  Good luck selling that if the EU is the dealbreaker in Geneva on a vaccine waiver that would save untold numbers of lives globally. 

 

 

 

 

 

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Guest Post: European Commission puts forth legislative proposal to tackle “foreign subsidies”

This is a guest post by Victor Crochet of Van Bael & Bellis

The European Commission puts forth its legislative proposal to tackle “foreign subsidies” in the European Union. The text of the proposal can be found here.

There has been lots of discussions on this blog over the Commission’s White Paper on foreign subsidies published by the European Commission last summer (see here, here and even here).

The European Commission’s proposal more or less follows the structure of the White Paper by addressing foreign subsidies ‘actually or potentially negatively affects competition on the internal market’. The proposal focuses on corporate acquisitions, public procurement bids, as well as any undertaking ‘engaging in an economic activity in the internal market’. The potential scope is thus very broad.

In terms of determining what constitutes a ‘distortion on the internal market’, the proposal contains a list of factors to take into account and also an illustrative list of subsidies ‘most likely to distort the internal market’ (e.g. direct facilitation of corporate acquisition, unlimited guarantees). Financial contributions of less than €5 million over the past three years are generally not considered distortive. This substantially raises the much criticised de minimis threshold of €200,000 proposed in the White Paper. In addition, a rather vague ‘balancing’ test is provided for, giving the EU important discretion to exempt subsidies it considers will have ‘positive effects on the development of the relevant economic activity’.  

Enforcement is partly modelled on the EU’s existing competition and State aid frameworks, although the Commission will be in the driver’s seat with Member States having an advisory role only (similar to trade defence). Investigations will follow a two-step model with a ‘preliminary review’, followed by an ‘in-depth investigation’, if justified. There is also the possibility to take ‘interim measures’. Importantly, there is no formal complaints mechanism. The review is thus ex-officio and ex-post for general subsidies. In contrast, for public tenders and corporate acquisitions, there is an obligation of pre-notification. This applies to public tenders with a value above €250 million, and to corporate acquirers with a turnover of €500 million having received a foreign financial contribution of at least €50 million in the past three years.

At the end of the in-depth investigation, if distortive subsidies are identified, the investigated entity may either offer binding commitments or have ‘redressive measures’ imposed on it. These can include divestments; licensing of technology; providing access to infrastructure; or reductions in capacity or market presence. Notably, fines of up to 1% of annual turnover can be imposed on companies which ‘intentionally or negligently’ provide incorrect or misleading information, and fines of no less than 10% of annual turnover can be imposed for failure to comply with a redress decision or agreed commitments. Failure to promptly comply can also lead to additional ‘periodic penalties’ of up to 5% of daily turnover. The incentives to cooperate in the investigations will thus be high and calls for a robust implementation of the brief article on rights of defence (for instance, there is no mention of an independent Hearing Officer as exists in both EU competition and trade defence proceedings).

The proposal is now out of the hands of the European Commission. It is the European Parliament’s turn to debate and amend the European Commission’s proposal before sending it to the Council. The Council can then make further amendments, which in turn would have to be agreed by the European Parliament and so on. It is thus likely that it will take some time, possibly a couple of years, until the legislation is finalised.

For those interested in the potential WTO implications of this proposal, Marcus Gustafsson and I recently published a paper highlighting how to ensure that the final instruments are in line with WTO rules (accessible here). Most of the concerns we expressed with regard to the instruments put forth in the White Paper are equally applicable to the legislative proposal.

Putting aside the procedural differences between State aid rules and foreign subsidies rules or the different remedies available to tackle them, one of our main concerns lies with the raison d’être of the two instruments.

The goal of State aid rules is not to prevent State aid/subsidisation in the European Union altogether but rather to avoid a race to the bottom between EU Member States by centralizing the granting of aid with the European Union’s institutions. Indeed, there is no prohibition on aid being granted by the European Union and its related agencies. On the other hand, the proposed foreign subsidies rules put forth by the European Commission targets all forms of governmental assistance without distinction as to whether this assistance is granted by a central government (as the European Union) or by regional governments (as EU Member States). Such a difference in treatment would be difficult to justify under WTO rules.

Book Launch of “The Protection of Intellectual Property Rights under International Investment Law”

Event Details

Date & Time:

• May 27, 2021
• 11:00 AM - 1:00 PM

Location

• Virtual Event

Contact Information:

• Jennifer Karnakis
• [email protected]

Registration:

• Register now

Event Description

Please join us for a virtual webinar celebrating the launch of “The Protection of Intellectual Property Rights under International Investment Law” by Simon Klopschinski, Christopher S. Gibson, Henning Grosse Ruse-Khan.

This comprehensive monograph provides detailed analysis and treatment for the complex interplay between the protection of intellectual property rights and international investment law, bringing insight to these two dynamic and evolving fields of law.

A flyer for this event is available to download [PDF].

Introduction by:

• Joseph Straus (Max Planck Institute for Innovation and Competition)

Presentations by the authors:

• Simon Klopschinski (rospatt osten pross)
• Christopher S. Gibson (Suffolk University Law School)
• Henning Grosse Ruse-Khan (University of Cambridge, King's College)

With commentators:

• Rochelle Dreyfuss (NYU School of Law)
• Peter Yu (Texas A&M University School of Law)
• Christophe Bondy (Steptoe & Johnson LLP)

Agenda:

11:00 AM ET

• Introduction by Joseph Straus

11:10 AM ET

• Simon Klopschinski on “International Investment Arbitration as an Alternative Forum for Litigating Intellectual Property Rights: The Example of beIN Corporation v Saudi Arabia”
• Commentator: Christophe Bondy

11:40 AM ET

• Henning Grosse Ruse-Khan on “Investor Tribunals Judging Domestic IP Developments against ‘Dramatic’ Changes? How Not to Read the Eli Lilly vs Canada Award”
• Commentator: Rochelle Dreyfuss

12:10 PM ET

• Christopher S. Gibson: “IP Rights as Assets Comprising an Investment, Indirect Expropriation, and State’s Right to Regulate”
• Commentator: Peter Yu

12:40 PM ET

• Discussion, Question & Answer, Concluding Remarks by Joseph Straus

Mini-Deals: A First Look at the World of Trade Executive Agreements

With the deadlines now having passed for moving the UK and Kenya agreements through the 2015 Trade Promotion Authority (TPA) process, there has been some talk about pursuing instead more “skinny” or “mini”-deals especially given that the prospects of renewing TPA remain in doubt.  Even apart from TPA, additional executive-driven trade deals have been in vogue in U.S. trade law over recent years.  Readers of this blog will be well aware of conversations to negotiate these sorts of deals with Brazil, Japan, India, and China, just to name a few. 

Call these deals what you like – and, to be sure, what they are to be called has been a matter of debate – they all have one major quality in common apart from their governance of foreign commerce: they are not subject to congressional review following their negotiation.  Some of that is by design, but for the lawyers among us, that ought to create some question about their legal authority seeing that not all appear to be the product of a congressional delegation. (We’ve heard ripples of that concern before: recall the Anti-Counterfeiting Trade Agreement debates of a decade ago.)  But I want to pause on that question for a moment to talk more about the details of these trade executive agreements (TEAs).

In 2020 alone, 32 of these trade-related executive agreements entered into force.  You hear about them from time to time from different executive branch agencies.  In fact, the total numbers are staggering: my team and I have catalogued a total of 1228 TEAs (with another 500 or so pending our review) concluded by various executive branch agencies.  Most were negotiated in the last forty or so years (i.e., they are not new) and most are still in force today.  They cover a range of topics.  Some are engagement-building agreements such as the several dozen Trade and Investment Framework Agreements that “provide strategic frameworks and principles for dialogue on trade and investment issues”.  Others go far beyond such expressions of cooperation and include binding commitments such as protections for specific intellectual property rights, changes to regulatory processes for U.S. goods, new requirements for foreign products to enter the U.S. market, and more. 

In a series of forthcoming and recent articles, my team and I have tried (and continue trying) to get to the bottom of what is happening with TEAs – the ways through which they are made (including engagement with Congress or lack thereof), their management and monitoring, their transparency and publication, their functions and utility, their termination or replacement, and much more.  We have sought to create a taxonomy of these TEAs to figure out precisely how the trade world might understand them as compared to the traditional free trade agreement (FTA).  Only a small percentage of TEAs are merely cooperative and even those that do not create robust binding commitments have served as the foundation for later binding arrangements.  They cover the waterfront of topics including customs arrangements, food safety, insurance, tax, and autos, to name a few.  In total, the United States has TEAs with 130 countries.    

Bringing the full landscape of TEAs into focus yields several lessons – some of which will already be familiar to trade practitioners.  The most practical and undernoticed realization is that these TEAs are doing a lot of work in our trade law, especially where FTAs are not possible.  We have more than 100 with Japan and near that number with the EU and with China, but we also have several dozen with existing FTA partners.  In some instances, TEAs build out FTAs, elaborate on them, clarify them, and update them.  They are useful in expanding our trade agreements above and beyond the objectives set out in TPA and in resolving market access dilemmas where there is no FTA upon which to draw.  As former USTR Robert Lighthizer told members of Congress at a 2020 hearing, these deals often solve narrow and immediate problems for U.S. industries, farmers, and ranchers.

Second, TEAs, like some other executive agreements, also have a significant and underestimated regulatory impact.  They substitute for regulations despite that Congress has delegated this task to agencies to do through notice-and-comment rulemaking.  A good example is the way agreements are used to protect foreign distinctive alcoholic beverages in U.S. law.  Although there is a traditional rulemaking process outlined for U.S. protection and recognition of those spirits, TEAs have sometimes taken on that role themselves. The many ways through which TEAs are deployed to identify and protect distinctive foreign alcoholic products in turn creates questions about judicial review and international obligations that require further unearthing, which leads to my next point.

Third, TEAs need to be better conceptualized by scholars and by practitioners, including lawmakers themselves.  These deals are doing valuable work to facilitate to U.S. trade but very little is known about them.  To name just a few puzzles that emerge from the data: Why does the United States make trade law in such small pieces?  What does this mean for their administrative review processes?  What impact do they have on international trade law?  How do we measure their economic force?  And, how are they made part of U.S. law?  Recognizing this data set and the momentous shift they have advanced is only a starting point.  Completing the long list of interdisciplinary analysis that recognition demands comes next.

Fourth, and ironic given their ubiquity, is that TEAs are excessively difficult to track down.  Given trade’s special place in our constitutional framework, these deals don’t always get captured by the usual executive agreement review processes.  Instead, one has to go looking for them in a variety of places such as the USTR Annual Report, Federal Register notices and press releases, subscription services, and in some instances, from foreign governments.  Such a search may yield a list of agreements but not necessarily their texts.  Far more could be done on the government side to make these available for the public and for Congress.  In fact, given the difficulties of locating them, these 1228 may just be the tip of the iceberg.

At the end of the day, we need TEAs to serve at least some of the functions that they presently do and have done.  There are arguments to be made for and against codifying TEAs and adding congressional consultations along the way in at least some instances.  It may be that the increasing constraints in TPA have pushed more executive branch agencies toward TEAs.  Our next trade agreement delegation legislation may not look like the old TPA model given present interests.  Regardless of its central focus or aim, it ought to take these no-longer-skinny deals into account.  I’ll lay out more about what that might look like in a future post.  For now, this much is clear: TEAs are unlikely to disappear anytime soon as they have become critical tools in our trade law toolkit. 

Talking Trade Policy on Clubhouse and Twitter

You may have heard about the "drop in audio" craze going on right now. The Clubhouse app was the first, and Twitter got in on the action with Spaces. The basic idea is that it's sort of like a call-in radio show, with a couple hosts kicking off the chat, and then listeners can weigh in when they request to speak and the hosts give them the microphone. This seemed like an interesting idea, so Inu and I are going to give both a try this week, talking about "What to expect from trade policy in the Biden administration." We'll be on Clubhouse on Wednesday May 5 at 9 pm ET (that's Thursday May 6, 3 am CET and 10 am in Tokyo); and we’ll be on Spaces on Thursday May 6 at 2 pm ET (that's Thursday at 8 pm CET, and Friday at 3 am in Tokyo).

The bad news is that both platforms are still sort of in beta, with Clubhouse only available on Apple products (and requiring an invitation to join) and the ability to start a Space only available to some Twitter users at the moment, although I think anyone can join a Space (look for the purple bubble at the top of your home timeline, where you see Fleets). If you have access to either one, please drop by and chat with us!

Call for abstracts: PluriCourts Research Conference on Compliance Mechanisms

This is from PluriCourts:

PluriCourts issues this call for abstracts on the topic of “International Courts versus Compliance Mechanisms: Comparative advantages of non-compliance mechanisms and complaint procedures.”

In this project, we ask:

• Whether and why in some circumstances the use of more informal NCMs might be more effective to bring states into compliance with their treaty obligations or address situations of non-compliance than the recourse to ICTs for breach of a treaty;
• How NCMs and other means of dispute resolution, such as international courts, relate to each other; and
• What their comparative advantages and disadvantages are.

Contributions will be published in an edited volume by Cambridge University Press (tbc) or a special edition of a legal journal (tbc). This project is administered by Prof. Dr. Christina Voigt.

The deadline for submission of abstracts is June 30, 2021.

To learn more and apply, go to:

https://www.jus.uio.no/pluricourts/english/news-and-events/news/2021/290421-cfp-courts-versus-compliance-mechanisms.html