International Economic Law and Policy Blog

Why the US Failed to Prevent the Climate Challenge from Turning into the Climate Crisis

Why the US Failed to Prevent the Climate Challenge from Turning into the Climate Crisis

Steve Charnovitz @SteveCharnovitz

31 October 2021

Human-induced climate change poses a threat to planetary life and health.  When the United Nations (UN) spearheaded the UN Framework Convention on Climate Change (UNFCCC) in 1992, the world community cheered the inauguration of a climate regime and was optimistic that climate change would be controlled through international cooperation and global law. 

With the launch today of UNFCCC COP26 negotiations in Glasgow, optimism has dimmed.  Recently, the UN reported that “Climate change is widespread, rapid, and intensifying, and some trends are now irreversible.”

How is it possible that 29 years after the Rio Conference, the value-added from official intergovernmental climate cooperation has been so inadequate?  Why did politicians squander the years and decades during which appropriate economic instruments, especially a carbon tax, could have jumpstarted decarbonization much earlier?  How could successive American Presidents and Congresses blundered through so much policy failure?  How much worse off would the Planet have been if the global business and financial communities had not voluntarily enlisted themselves into transforming the market?

As my personal intellectual contribution to COP 26 meetings in Glasgow, I posted a 20-part series on Twitter noting the high and low points in the much-watched US government role to press for global solutions to climate change.

As my posts make clear, the biggest missed opportunities were the defective non-reciprocal design of both the Kyoto Accord (1997) and the Paris Agreement (2015).  The US was a major player in both negotiations.  For both Kyoto and Paris, the White House made the same mistake of choosing a pathway of zealous partisan end runs around Congress.  Of the two treaties, Paris is the more lamentable because in the 18 years since Kyoto, the climate problem had slowly worsened.  Nevertheless, even though the Paris Agreement was hollow, politicians adopted the overconfident stance of awarding themselves high grades for agreeing to the Paris Agreement.

The media too has been part of the problem of false reassurances by so vigorously applauding the substantively empty Paris Agreement as if it were itself a viable solution.  I still remember my surprise when the venerable newspaper The Guardian (of London) heralded the 2015 Paris Agreement as "the world's greatest diplomatic success." Such over-the-top puffery about the Paris Agreement became counterproductive because of the false assurances given in 2015 that Paris had brought the climate challenge under control. 

Here I collect and memorialize in chronological order my 21 Tweets posted over the past 10 days (including typos that I failed to avoid).  This analysis presents my own perspective and takes note of some of my own law-related scholarship on the climate debate.  Much of my scholarship focuses on the role of international trade law in the formulation of climate policy. 

Although I continue to be disappointed that US and global policymakers have not done more to reduce greenhouse gas emissions, I remain optimistic that even the ongoing too-little, too-late policies will be sufficient to prevent the low probability, highly ecosystem-destructive scenarios. 

 

Why has the US been so unsuccessful over 30 years in leading and participating in an effective #globalclimateregime to prevent a climate change calamity? Let me count the ways. In a series of future Tweets, I will point to the major US missteps.

7:15 PM · Oct 21, 2021

 

Climate1 In the beginning, US got it right. @POTUS GHW Bush 41 and EPA's Bill Reilly work creatively to achieve

@UNFCCC which makes control of greenhouse gasses a global goal. US Senate approves treaty in a 2/3 ratification vote.

@LeaderMcConnell votes for the climate treaty.

9:35 AM · Oct 22, 2021

 

Climate 2. 1992-97. After EarthSummit (1992) which achieves

@UNFCCC, two US Presidents fail to request and US Congress fails to write domestic climate implementing legislation. The @WTO treaty of 1994 is implemented by Congress, but

@UNFCC treaty of 1992 is not implemented.

10:42 AM · Oct 22, 2021

 

Climate.3. 1995. Debate blossoms among climate specialists as to relationship between @UNFCC and @WTO. I contribute this analysis in a conference organized by

@aspenglobal

2:57 PM · Oct 22, 2021

https://charnovitz.org/publications/Aspen_Linkage_of_Trade.pdf

 

Climate.4 1997 The

@UNFCCC climate regime negotiates a @UNFCCC

Protocol to set quantitative emission reduction goals based on science. US Senate adopts a resolution 95-0 signaling Executive Branch not to sign on to an asymmetric treaty that harms US economy.

10:19 AM · Oct 23, 2021

 

Climate.5. 1997 In defiance of bipartisan US Senate advice, and with @AlGore in driver’s seat, US champions @UNFCCC Kyoto Protocol which assigns emissions reduction targets to US, Europe and Japan, but not to China, India, Indonesia, Russia, Saudi Arabia, etc.

12:57 PM · Oct 23, 2021

 

Climate.6 2001. Pres. George W. Bush makes clear that US will not join Kyoto Protocol. But Bush fails in any efforts to work with Congress to craft a domestic climate policy responsive to transborder competitiveness concerns. Climate mitigation devolves to subnational level.

10:08 AM · Oct 24, 2021

 

Climate.7 2003. Pew Center on Global Climate Change publishes cutting-edge interdisciplinary analysis to promote feasible paths forward. I contribute the chapter “Trade and Climate: Potential Conflicts and Synergies.

6:56 PM · Oct 24, 2021

https://www.researchgate.net/publication/316352840_Beyond_Kyoto_-_Advancing_the_international_effort_against_climate_change_Enter_title

 

Climate.8 2004. Fruitlessly, I propose that Congress empower the President to negotiate a global climate deal with other countries.

8:45 AM · Oct 25, 2021

https://www.cambridge.org/core/journals/american-journal-of-international-law/article/abs/using-framework-statutes-to-facilitate-us-treaty-making/A20FB45F7D05E1D3DFBA851CD2ACBE0C

 

Climate.9 2009

@PIIE publishes “Global Warming and the Trading System” by Gary Hufbauer, Jisun Kim & Steve Charnovitz. The study recommends negotiation of a “Trade and Climate Code.” Unfortunately, governments do not undertake such negotiation.

10:03 AM · Oct 25, 2021

https://www.piie.com/bookstore/global-warming-and-world-trading-system

 

Climate.10 2009

@SpeakerPelosi rushes thru House passage of Amer. Clean Energy & Security Act with 219-212 vote. This complicated bill is enacted before its text is publicly available. As it turns out, the haste is unwarranted because the Act is not taken up by US Senate.

12:15 PM · Oct 25, 2021

 

Climate.11 2010

@UNFCCC adopts Green Climate Fund & Technology Mechanism. These programs spur important progress in private climate finance and climate-related technological innovation. For climate, the vision of bottom-up environmentalism in 1992 Agenda 21 is succeeding.

3:00 PM · Oct 25, 2021

 

Climate.12 2012. In @HarvardBiz, Dan Esty & I propose a US carbon charge contingent on major economies, such as China and India, adopting comparable policies. Our contingent carbon tax proposal fails to attract support in Congress or Obama WhiteHouse.

7:15 PM · Oct 25, 2021

https://hbr.org/2012/03/green-rules-to-drive-innovation

 

Climate.13 2015

@JohnKerry leads negotiations fto reach #ParisAgreement. Rather than ambitious deal that gains bipartisan Congressional approval, @BarackObama seeks hollow

@UNFCCC accord without substantive obligations. Goal is to avoid democratic accountability in Congress.

7:37 AM · Oct 26, 2021

 

Climate.14 2015 #ParisAgreement assumes countries will make high unilateral GHG reduction commitments without mutuality, and without knowing whether aggregate commitments will restrain global warming. Another design defect is inattention to state responsibility for traded goods

5:50 PM · Oct 26, 2021

 

Climate.15 2015-17 Obama joins and implements shallow Paris Agreement via Executive branch action. Bipartisan US Congressional approval is neither sought nor achieved. Meanwhile, Paris Agreement experiment plays out with innovation and growing transnational business support

6:01 PM · Oct 27, 2021

 

Climate.16 2017 Donald Trump announces that US will withdraw from Paris Climate Accord, but begin negotiations to reenter the Accord “on terms that are fair to the United States.” Trump effectuates the withdrawal, but forgets to undertake any Paris Accord improvement talks.

11:49 AM · Oct 28, 2021

 

Climate.17 2018 My essay “American Rejectionism” analyzes flaws of #ParisAgreement and proposes US re-engagement with International law. Empty Paris Agreement meets political need of many countries for low-cost virtue signal. Governments continue to fiddle while Earth burns.

3:29 PM · Oct 28, 2021

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3357030

 

Climate.18 2020 Congress passes 2124-page legislation containing Environment and Energy programs. Public Law 116-260 is so complicated that nearly a year later, it remains unpublished in US Public Law series. This law lacks any climate negotiating authority or any carbon tax.

5:09 PM · Oct 29, 2021

 

Climate.19 2021 @POTUS rejoins #ParisAgreement with no strategy for fixing defects. @POTUS refuses to propose carbon tax. Congressional Dems seek unilateral subsidy and regulatory schemes that violate @WTO law. US persists in #TrumpBiden attacks on @WTO appellate tribunal.

1:19 PM · Oct 30, 2021

 

Climate.20 US underperforms on climate due to: (1) excessive partisanship, (2) relying on Executive versus Congressional actions, (3) refusing to enact a carbon tax, and (4) overlooking need to harmonize US mitigation reciprocally with other major economies, especially China.

7:48 PM · Oct 30, 2021

Is it time to bring back the AB?

Greg Shaffer and I think so in our new op-ed in the Hill, but not everyone seems to agree with us, as illustrated in this lively Twitter exchange with Dan Ikenson, Rob Howse and Simon Lester.

However, I think there might be some movement on this issue in the WTO based on new US WTO Ambassador Maria Pagan's recent statement that she "will spend a lot of time having these conversations with our counterparts at the WTO to make sure that we can restore the Appellate Body and the system to the way that we envisioned it at the beginning" and the recent statement by Chinese WTO Ambassador Li Chenggang that the issue needs to be considered "not only in the framework of Sino-US game, but from perspective of multilateral trading system, & perspective of a membership structure with increasingly divergent interests."

So maybe we will finally have a meeting of minds?

Can the Biden Administration's Push for More "Made in America" Be Challenged under the GPA?

Long-time trade lawyer Jean Heilman Grier has a great blog focusing on procurement issues.  Her latest post is about a new Biden administration website on Made in America:

The Biden administration has inaugurated a new Made in America website with information on waivers of the Buy American Act and other “Made in America” laws. This website lists current waivers that the newly established Made in America office has reviewed. It also provides detailed information on “historical waivers” issued over the past five years. This post examines the new website, particularly the more than 100,000 historical waivers, which reveals that China is the leading beneficiary of the waivers and that non-availability of domestic products is the primary basis for them. 

President Biden, in a January 2021 “Made in America” order, set curtailing the use of waivers of “Made in America” laws as one of his central aims. He created a new Made in America office with the charge of reviewing every proposed waiver and its justification. To increase transparency of waivers, he directed the General Services Administration (GSA) to develop a public website for posting all proposed waivers and indicating whether they have been granted. 

The Made in America website states the following prominently:

When the U.S. government spends your tax dollars on American goods, we ensure our future is made in America.

“Made in America” policies are designed to increase reliance on domestic supply chains and ultimately reduce the need to spend taxpayer dollars on foreign-made goods. The Made in America Office (MIAO) will ensure that any waivers from Made in America laws are applied clearly, consistently, and transparently across federal agencies. The MIAO will analyze the information it gathers from waivers to support U.S. manufacturing and more resilient supply chains. This site will provide relevant market intelligence to those interested in doing business with the U.S. government. By centralizing information on past and pending waivers, we aim to maximize opportunities for U.S. producers to supply goods and services to the federal government.

One aspect of the site is providing data on these kinds of waivers, which seems like a useful exercise. My sense is that many people have had trouble evaluating both the impact of government procurement commitments in trade agreements and the application of Buy National policies in practice. This data could help.

At the same time, based on the language used on the site, it seems like one purpose of the Biden administration's actions here may be to steer government purchases away from foreigners and towards domestic companies. That makes me wonder whether there is a potential claim under the GPA, which allows for non-violation claims in Article XX(2)(b):

Article XX Consultations and Dispute Settlement

...

2. Where any Party considers that any benefit accruing to it, directly or indirectly, under this Agreement is being nullified or impaired, or that the attainment of any objective of this Agreement is being impeded as the result of:

(a) the failure of another Party or Parties to carry out its obligations under this Agreement; or

(b) the application by another Party or Parties of any measure, whether or not it conflicts with the provisions of this Agreement,

it may, with a view to reaching a mutually satisfactory solution to the matter, have recourse to the provisions of the Understanding on Rules and Procedures Governing the Settlement of Disputes (hereinafter referred to as "the Dispute Settlement Understanding")

The possibility of a claim here may depend on the actual impact of the measures: What will happen to U.S. government purchases of foreign goods or services as a result of the Biden administration's actions?

Maria Pagan on Reforming WTO Dispute Settlement and the Appellate Body

This exchange is from today's Senate Finance Committee hearing to consider the nomination of Maria Pagan for Deputy USTR in Geneva (Ambassador to the WTO):

Senator Carper:

I would like to start off with a question ... for Ms. Pagan, dealing with WTO reform. Ms. Pagan, I've always felt it's something imperfect, we ought to work to make it better. And there's been a great deal of conversation, really on both sides of the aisle, and across the globe, about the need for reforms in the WTO. And that we know that the WTO has an important role to play in combating unfair trade practices that persist in non market economies like China. Unfortunately, the organization continues to face challenges with its dispute settlement system, including the lack of quorum on the Appellate Body that weakened the WTO's enforcement. The question is this, in your opinion, what strategy should our country take, the US take, to reforming the WTO and addressing the operability of the WTO's Appellate Body?

Maria Pagan:

Thank you, Senator Carper. The good thing is that we all agree, I think there's consensus that the WTO, and particularly the Appellate Body, need to be reformed. I guess on the other hand, we all have different views of what reform means, and particularly with respect to the Appellate Body. What we want, and if confirmed what I will work hard to do, is to have conversations so that we can restore the Appellate Body and the dispute settlement system to what we thought we had agreed to. We never intended the Appellate Body to be a rulemaking body. We believe that rules have to be enforced, but it has to be the rules as they were negotiated and agreed by the Members. So we need to, USTR has been having, these conversations, and we will continue to have these conversations. And I suspect that I will spend a lot of time having these conversations with our counterparts at the WTO to make sure that we can restore the Appellate Body and the system to the way that we envisioned it at the beginning. And I don't think it's going to be an easy conversation but it's something that I look forward to doing while I'm there.

Restoring the Appellate Body sounds positive, and perhaps more positive than other things we have heard from U.S. trade officials for a while. At the same time, restoring "the system to the way that we envisioned it at the beginning" is going to be tricky, because there may be different views on what was envisioned at the beginning, as well as different views on what is appropriate and necessary now.

ACWL 20 Year Anniversary Event

From the ACWL:

The ACWL is celebrating its 20th anniversary this year. To celebrate this occasion, we are hosting a webinar on 28 October from 15:00 to 16:30 CET on the “ACWL: Achievements for Developing Countries and LDCs and Challenges Ahead”.  We are delighted to have Professor Peter van den Bossche, former Chair of the Appellate Body and Director of Studies at WTI in Bern, Ms. Anabel Gonzalez, Deputy Director-General, WTO, Ambassador Usha Dwarka- Canabady, Permanent Representative of Mauritius to the United Nations Office in Geneva, Ambassador Gothami Silva, Permanent Representative of Sri Lanka to the WTO, Mr. Norman Harris, Representative in Panama of the Secretariat for Central American Economic Integration (SIECA), and Ms Patricia Holmes, Chair of the ACWL General Assembly and Deputy Permanent Representative of Australia to the WTO make presentations at the webinar.

Registration link: https://lnkd.in/dpeVeX7Y

Tai: "A Lot of Potential" for Coordinating U.S./EU approaches to China

This is from a two part interview by CNN's Julia Chatterley with U.S. Trade Rep. Katherine Tai:

Chatterley: Another, and it's been described as a pivot point actually, in the relationship between the EU and the United States, when we spoke to the French finance minister this week, and he said, it's on China. and there's a difference of opinions and approach, that the perception in Europe is that America wants to confront and challenge China, whereas Europe wants to engage. Do you agree that China effectively wins if the US and the EU are at odds with this relationship, and how to tackle the issues with China?

Tai: Well, let me take a step back, I think that a lot of this talk has come from comments that Minister Le Maire made, and I wanted to give the Minister the fair shake that he deserves, and I went back and looked at his comments. And I don't think that they're as pointed or as sharp as the reporting seems to make it. And let me say I think that we are very much aligned, from the US and EU perspective, and also from my own conversations with the Minister, the US and French perspectives, in terms of the fact that we share really considerable competitive challenges right now, but also in terms of the values that we share as societies, as economies, in terms of our political philosophies. So what I would say is that we have so much potential here for aligning the US/EU, and in terms of our approaches to China, actually in the conversations that I've been having, and I assure you, I have been having a lot of these conversations, I don't feel that there are gaps. I think that there is just a lot of potential for how we coordinate our approaches.

"Confronting and challenging" is a form of "engaging," and I'm not sure the differences between the two sides are as great as some people think. Tai's response here, along with the progress on putting aside disputes such as Boeing-Airbus, digital services taxes, and perhaps soon the Section 232 steel and aluminum tariffs (which also came up in the interview), gives me some hope that U.S.-EU cooperation on China could actually emerge some time soon.

SIEL October Conversation: ‘Institutions and Dispute Settlement under WTO’

From the SIEL:

SIEL October Conversation

The Society of International Economic Law (SIEL) is pleased to invite you to its February Conversation entitled ‘Institutions and Dispute Settlement under WTO’, with Geraldo Vidigal (University of Amsterdam),  Tommaso Soave (Central European University; Former WTO Appellate Body Secretariat), Marcus Gustafsson (Legal Service of the European Commission), Pınar Artıran (Istanbul Bilgi University; WTO Chair), chaired and moderated by Kathleen Claussen (University of Miami School of Law) 

28th October 2021 at 3 pm CET time. Registration is available here. 

More information can be found here.

Webinar-- The modernisation of the Energy Charter Treaty: Substantial and procedural implications for the IIA regime

This is from the University ‘Parthenope’ of Naples and the Asia Pacific FDI Network:

On 5 November, 14.00-17:30 CET; 08:00-11.30 (NY) we will host a webinar on "The modernisation of the Energy Charter Treaty: Substantial and procedural implications for the IIA regime."

The modernization process of the ECT is in full swing. So far, seven rounds of negotiations have been conducted, with the eight round yet to come in November 2021. This webinar provides the unique opportunity to hear the various perspectives on the modernisation process of the ECT that will be addressed by the representatives of states and international organizations, e.g., the EU Commission and UNCTAD. Also, the academic experts will address the key jurisdictional and substantive issues arising out of the interpretation the ECT in energy disputes.

The webinar is organised by University ‘Parthenope’ of Naples, the Asia Pacific FDI Network and Nyenrode University.

The programme and the registration form can be accessed here.

The webinar is free, but registration is required.

The organizers:
Dr. Yulia Levashova and Dr. Sara Pugliese

The speakers and the moderators:
Keynote address: Mr. Lukas Stifter (Chair of the Modernisation Group, ECT)

Prof. Hans van Houtte (KU Leuven)
Mr. Carlo Pettinato (European Commission)
Ms. Dorieke Overduin (Dutch Ministry of Economic Affairs and Climate Policy)
Ms. Diana Rosert (UNCTAD)
Prof. Paolo Davide Farah (West Virginia University /gLAWcal)
Prof. Julien Chaisse (City University of Hong Kong/Asia Pacific FDI Network)
Dr. Ottavio Quirico (Australian National University, University of New England and European University Institute)
Dr. Yulia Levashova (Nyenrode University/Asia Pacific FDI Network)
Dr. Sara Pugliese (University ‘Parthenope’ of Naples)

What Does the Biden Administration Think About a Power-Based vs. a Rules-Based Trading System?

I wanted to elaborate on a point I made in my post from last week, where I discussed U.S. Trade Representative Katherine Tai's response to my question about ways to improve the WTO panel process. As a reminder, here's what she was asked and how she replied:

Question: ... And then a related question from Simon Lester, I think is, moving away from the Appellate Body, you worked on panels here in Geneva, ... and you mentioned that some of these cases take a long time and aren't working, so he was wondering if there is anything you can suggest, anything you saw to make panels work faster and work better in the US estimation.

Tai: ...

So, with respect to the panel question, the only thing I would add there is that the panel process does take a while. It's very laborious, it can be quite expensive, if you've got outside lawyers working for you. And I think that the issue is not how to make it faster, but how to create more opportunities for the Members to come together and be incentivized to solve the problem, because in every dispute settlement case, when you play it out to the end, you've gone through every appeal and you've gone to the arbitration for your suspension of concessions. The point is not to punish each other. The point at the end of all of this is to create the conditions for the two Members to come together to find an accommodation, because we are all WTO members. And so, if there are ways that we can incentivize those political moments of conversation sooner, I think that that would be a worthy goal.

And here was my blog comment in response:

In terms of my question on the panel process, what I would say is that I completely agree that we should make settlement a priority, but from what I can see, the existing rules already do this. It's really up to the Members whether they want to settle, and sometimes they are able to do so. It's worth noting that most WTO complaints don't go through the whole litigation process. But sometimes Members just can't agree, and when they don't, we end up in litigation. Where that's the situation, there are important issues related to how the litigation process works that are worth improving on. (And I would note that the option for litigation may be particularly important for smaller and developing countries that have less leverage in settlement negotiations).

As I said, settlements are great, and governments should always be thinking of them as the best option. What worries me, though, is that if we don't have a litigation process that works when settlements can't be achieved, we will shift away from a system that emphasizes rules and towards one that gives primacy to power, and that leaves us worse off overall (although some countries might think they benefit from a power-based system). 

To be clear, the trading system will always have some mix of power and rules, so this is not an all or nothing proposition. But my question here is, does the Biden administration want to to shift a bit away from rules and towards power?

I hinted at this issue when I said, "[a]nd I would note that the option for litigation may be particularly important for smaller and developing countries that have less leverage in settlement negotiations." To elaborate a bit, what I meant here is that with the economic power imbalances that exist among different countries, a functioning international trade litigation system that relies on rules can give at least a little more leverage to smaller and developing countries when they raise concerns with larger powers. In particular, the moral force of a neutral ruling, combined with a monitoring system, can help them fight against the bad behavior of more powerful countries. In this way, the existence of rules helps to moderate the role of power.

My concern is that the Biden administration might prefer a more power-based system because it thinks the U.S., as the leading economic power, will get better outcomes under such a system. I don't know if it actually could get better outcomes, especially over the long-term, but my sense is that there are some people who think it could. To take an obvious example, I think that's what the Trump administration believed, and that's where it wanted the system to go. Instead of filing WTO or FTA complaints, the U.S. would just use access to its large domestic market as a way to extract concessions from trading partners. GSP reviews would be one way to do this, but there are plenty of other avenues as well.

Tai's response makes me worry that the Biden administration sees things in a similar way: Rulings by international trade courts are to be avoided, and instead U.S. economic leverage will be the primary basis for inducing changes in foreign government policies.

Now, maybe I'm overstating the importance of one response to one question. And a counterpoint to my concern is the Biden administration's willingness to pursue a USMCA complaint. However, in WTO dispute settlement, there aren't many signs yet that the Biden administration wants to preserve the rule of law. I can see how the Appellate Body crisis is a political challenge for the administration. But in terms of the basics of WTO dispute settlement, there are constructive things that could be done in the meantime to signal general support for a process that relies on rules.

USTR Requests ITC Investigation on Distributional Effects of Goods and Services Trade and Trade Policy

USTR has just requested that the ITC carry out the following two-part investigation of distributional effects of goods and services trade and trade policy:

under authority delegated by the President to the United States Trade Representative and pursuant to Section 332(g) of the Tariff Act of 1930 (19 U.S.C. 1332(g)), I request that the Commission conduct a two-part investigation on the potential distributional effects of goods and services trade and trade policy on U.S. workers by skill, wage and salary level, gender, race/ethnicity, age, and income level, especially as they affect underrepresented and underserved communities.

Here's part one:

For part one of this investigation, I request that the Commission prepare a public report that catalogues information on the distributional effects on under-represented and under-served communities of trade and trade policy. In identifying these effects, and to the extent practicable, the Commission should gather information through:

(1) roundtable discussions among representatives of under-represented and under-served communities that have been identified in the Executive Order On Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, as well as think tanks, academics and researchers, unions, State and local governments, non-Federal governmental entities, civil society experts, community-based stakeholders, such as minority-owned businesses, business incubators, Historically Black Colleges and Universities (HBCUs), Hispanic Serving Institutions (HSIs), Tribal Colleges and Universities (TCUs), other minority serving institutions (MSIs), and local and national civil rights organizations;

(2) a symposium focused on academic or similar research on the distributional effects on under-represented and under-served communities of trade and trade policy, including results of existing analysis, evaluation of methodologies, the use of public and restricted data in current analysis, identifying gaps in data and/or in the economic literature, and proposed analysis that could be done with restricted data; and

(3) a critical review of the economic literature on the distributional effects on underrepresented and under-served communities of trade and trade policy including, among other things, the data limitations raised in these analyses.

To the degree practicable, the investigation should report on the information provided through roundtables separately from that gathered through the symposium and literature review. It should identify information on effects on U.S. workers by group (as specified in the previous paragraph) identifying their specific U.S. region, and make recommendations on future research. I request that the report on part one of this investigation be delivered twelve months after receipt of this letter. As we intend to make the Commission's report on part one of this investigation available to the public, it should not include confidential business or national security classified information.

And here's part two:

For part two of this investigation, I request that the Commission expand its research and analysis capabilities so that future probable economic effects advice includes estimates of the potential distributional effects of trade and trade policy, including goods and services imports, on U.S. workers. This capacity building should include the further development of models capable of analyzing the potential distributional effects of trade and trade policy, including with respect to goods and services imports, on U.S. workers. The models should also be capable of analyzing the effect of expanded market access for U.S. goods and services products abroad on affected U.S. exporting industries, and to the extent practicable, the “indirect” effect on U.S. exports of intermediate inputs when final goods receive preferential access to the U.S. market. Through this capacity building, the Commission should also identify any data limitations that, if removed, could substantially speed the time to complete the analysis or allow for improved analysis.

I request that the Commission expand its research and analysis capabilities as indicated in the previous paragraph as soon as possible but no later than twelve months after receipt of this letter. During this time, I also request the Commission provide a briefing to USTR to present the results of its capacity building on these issues.

If I were still at a think tank, I would make this a priority project, and dive in to trying to study the negative distributional effects of tariffs, Buy America procurement, the Jones Act and other protectionist policies in general, and the negative effects on under-represented and under-served communities in particular.

Guest Post: ‘The crown and the jewel’ The rise and fall of the WTO Appellate Body: a critical analysis

This is a guest post from law professor Luca Rubini:

In yesterday’s speech in Geneva, Ambassador Katherine Tai, the current USTR, said:

“Reforming dispute settlement is not about restoring the Appellate Body for its own sake, or going back to the way it used to be.  

It is about revitalizing the agency of Members to secure acceptable resolutions.  

A functioning dispute settlement system, however structured, would provide confidence that the system is fair.  Members would be more motivated to negotiate new rules.

Let’s not prejudge what a reformed system would look like. While we have already started working with some members, I want to hear from others about how we can move forward.”

This brief piece, initially written a few weeks ago, is a somewhat basic reflection on the rise and fall of the Appellate Body of the World Trade Organization (‘WTO’), long considered as a very successful – if not the most successful – example of international court. To many its track-record was impressive and spotless. While criticism of some of its jurisprudence, and more generally of some of the features of the whole dispute settlement mechanism, were raised, the Geneva-based “court” continued in its day-to-day work - relentlessly. In 2015 the criticism erupted into a full-fledged crisis with the United States (Obama administration) vetoing the replacement of a retiring member. The main claim, a long-standing one for the US, was that the Appellate Body was systematically ‘creating law’. This veto lasted from through the Trump administration with the result that, one by one, the 7 members were reduced to less than 3 on 10^th December 2019 – the minimum number for the body to adjudicate. In effect this meant killing the Appellate Body.

In this brief note I explore the historical origin of dispute settlement in the trade context and attempt to analyse the causes of this demise, while looking at the future.

The GATT era

At the very beginning, the General Agreement on Tariffs and Trade (‘GATT’) did not have a dispute settlement system. This birth defect depended on the fact that the GATT was designed to be a simple part of a bigger regulatory framework with at its centre a fully-fledged organization, the International Trade Organization. With the US Congress, however, jettisoning the ITO because of its perceived intrusion to American sovereignty, the only part of the deal that remained standing was the GATT which only included two very general provisions on disputes. No mention was made of the adjudicating bodies that should solve them, no reference to their composition or procedures.

What then happened is a miracle of diplomatic pragmatism. The closely-knit community of GATT and government officials created step by step a functioning dispute settlement system. For many years, it operated more as a mediation or conciliation system with working parties which included representatives of the litigating parties, aiming at finding a positive settlement between them. Through the years, with the constitution of ad hoc independent panels, there was a shift from a diplomatic to a more legalistic approach – where litigants argue on the basis of legal points and a winner (and a loser) necessarily emerge from the process.

The miracle is that the system worked and served the world trading system reasonably well for more than 45 years. Importantly, unlike judicial decisions in a domestic system, the reports produced by the Panels were not automatically law but had to be adopted by all Contracting Parties. Although the incentive for the losing party simply to object the adoption was clear, 80% of the Panel reports were adopted (only 8 reports remaining toothless printed paper). The Contracting Parties certainly had the perception that today’s loss could turn in tomorrow’s win. More importantly, however, they valued the system and played by the rules of the game.

If the GATT dispute resolution system is often tagged as an example of a diplomatic means to solve international disputes, it increasingly became more legalised. Perhaps, this had to do with the fact that lawyers were recruited in the mid-1970s for the first time (see Marceau, 2015). With the increasing legalization and judicialization of the system, the birth defects showed that it had reached its full potential, and reform was necessary. (For a masterful history of the GATT dispute settlement the works of Robert Hudec are still unsurpassed; see for example the volume Enforcing International Trade Law, 1993.)

The WTO era

The Uruguay Round negotiations, launched in the mid-1980s, eventually led to the creation of the WTO. The legal package included also a specific agreement on dispute settlement which thus filled the gap of the GATT period. It is, however, clear from the negotiations record that the idea of the Appellate Body was an after-thought, it came late in the negotiations and was not really carefully discussed and pondered. It was the first example in history of an appellate level in international judicature. The literature (Mavroidis, 2016) has recently explained the main political focus of the negotiations on dispute settlement: it was necessary to buy the US in the idea itself of an international dispute settlement and thus constrain their unilateralism.

For many years, the system has been applauded for its success. Since the beginning Members made use of the system. At the time of writing, 606 disputes have been registered. At the same time, many have consistently appreciated its compliance record. The mantra has been that losing parties do comply with the rulings and recommendations of the Dispute Settlement Body and that only in a handful of cases retaliation (the last resort in remedies) had been authorised and in very few of these instances applied. Though one may legitimately question this mantra (what does compliance really mean? See Mavroidis, 2016), we will not deal with this point.

The Dispute Settlement Mechanism of the WTO, with the permanent Appellate Body at its top, was frequently referred to as the ‘jewel in the crown’ of the WTO system.

The problems

Since the beginning, the literature has given large space to the decisions of the Panels and especially the Appellate Body, with analysis which increasingly matched the sophistication of the legal issues raised by disputes. In the early 2000s, the American Law Institute even set up a project where all decisions of the Appellate Body (and many of the Panels) were annually commented by a team constituted of one lawyer and one economist (the reports can be found here). As in any ‘public law’ system, big jurisprudential questions about sovereign prerogatives and their limits were continuously raised. One increasingly common theme in the literature was, however, the dissatisfaction with the attitude and quality of the Appellate Body’s decisions, especially concerning the interpretation of certain key agreements (for example, whether the anti-dumping agreement permits the practice of ‘zeroing’) or the asserted precedential nature of previous Appellate Body’s decisions (for few examples of this literature see, e.g., Mavroidis, 2013; Mavroidis, 2016; Rubini, 2016; for different assessment of 20 years of WTO Appellate Body jurisprudence see Howse, 2016).

This scholarly criticism found its political counterpart in the monthly meetings of the Dispute Settlement Body, the political organ of government representatives called to discuss and adopt the Appellate Body’s reports. Consistently, one of the strongest voices of criticism came from the United States – and this irrespective of the colour of the administration.

An old and rooted conviction of the Americans was that the Appellate Body was undoing the promises and commitments of the parties, it was, using jargon, “adding to the rights and to the obligations” of the parties. In a word, it was an activist body, indulging in creating law. All this, clearly, to the detriment of US’ interests (see Stewart, 2018; Condon, 2018).

Facts followed words. Jennifer Hillman, initially appointed by President George W. Bush, was not re-appointed by President Obama in 2011. Allegedly, she had not sufficiently defended US’ interests in the cases she was involved too. This was clearly a ‘bad omen’ for the trading system (Hufbauer, 2011). Hillman’s farewell speech in December 2011 was a measured defence to the importance of judicial independence. In May 2016 the US blocked the re-appointment of another member of the Appellate Body, this time Seung Wha Chang from South Korea. The reason was the disagreement “with the jurisprudence articulated in four Appellate Body decisions on which Chang was one of the three appellators on the division deciding the case” (Charnovitz, 2016). President Trump continued with the blockage, vetoing all new appointments to come, with the effect that the Appellate Body was doomed. The drama concluded with the fiery farewell speech by Thomas Graham, the last US Appellate Body Member, that seemed to fully back the long-standing US accusations and even escalated them by finger-pointing the Appellate Body Staff leadership (NB: the Appellate Body members used to be assisted by a special unit of the Secretariat).

But is the US the only complainer? According to a recent (2020) empirical study by the EUI, “the data reveal strong support for the basic design of the dispute settlement system but also that the United States is not alone in perceiving that the [Appellate Body] went beyond its mandate. There are substantive questions that need to be addressed if the Appellate Body impasse is to be resolved.” 

Analysis

It is now time for a bit of analysis. Those conversant with the system know that the WTO dispute settlement system has essentially been a two-level court in the shadow of the secretariat. It is highly likely that the helping hand of the officials in charge has often gone too far. This is not limited to the appellate level. Panellists are often not qualified enough. The quality of Appellate Body Members has arguably been decreasing appointment after appointment (I witnessed myself one former Member, excusing himself at a conference celebrating the twenty year anniversary of the Appellate Body, because he admitted not to have sufficient legal expertise to contribute to the debate). In a word, the endemic lack of professional and experienced lawyers on the bench has inevitably led to the Secretariat supplementing. This, in a sense, can also be seen as the lingering impact of the diplomatic GATT dimension within a system which has now the mission of being legalistic.

To be sure, the system has become more legalised in the WTO but the room for judicial gap-filling (and potentially policy-making) is very significant. Partly this was inevitable, and goes to the nature of WTO law which is in large respects an uncomplete contract. Many provisions are more akin to standards rather than rules (see Kaplow, 1992). The cost of negotiating specific rules was simply too high – mostly because agreement could not be found – and the parties concluded vague legal language, sometimes called ‘creative ambiguity’. In a word, it is the Members’ choice and responsibility to have opted for broad and vague language. This has, however, meant that, sooner or later, the standard had to be translated into a rule, it had to be construed. Gap-filling becomes almost inevitable, especially in a context where Members cannot find ways to update a rule-book negotiated in the 1980s/early 1990s (another element of governments’ responsibility). But, here comes the duty, responsibility and pressure of the adjudicators, who can perform their duty in different ways – being more deferential or indeed more creative. Arguably, there have been many instances where their constructions of the law seem to depart from what the parties agreed or, better, could not agree. See Rubini, 2016. Some of the most salient examples can be found in the sensitive jurisprudence on trade remedies (anti-dumping, safeguards, countervailing duties). See Rubini, 2014.

At the same time, jurisprudence has also been growing in complexity. Certainly, this has partly depended on the complexity of claims and facts (the epitome is Large Civil Aircraft litigation on financial support to Boeing and Airbus, the dispute that the system was not ready to handle – but the fault here is for those Members that escalated it into a legal dispute, not the dispute settlement system that was then obliged to deal with the “hot potato”; eventually reason came to town and a settlement was concluded; see Hufbauer, Rubini, Yee, 2009). But, rather than attempting to reduce this complexity to an efficient style of analysis and clear drafting, the judicial style seems to have remained entangled in it, at times even indulging in it. The quality of drafting suffered from it. More than this, this attitude has unduly led to tackling issues not strictly necessary to solve the dispute, to unnecessary obiter dicta, to excessively completing the analysis. The bigger picture emerging from this scenario is one where the Appellate Body was perhaps too much strongly aware of being the guardian of the system. This contrasts with what prevailed in the first years, mostly characterised by caution and self-restraint (see Ehlermann, 2003; Abi-Saab, 2006). In its 25 years of history, what is clear to the observer is an evolution in judicial leadership and strategy. See Rubini, 2016.

And now? Back to the past?

Two reactions have come out from the demise of the Appellate Body. On the one hand, those that have bitterly lamented the loss of the ‘jewel’, its unprecedented track-record in international dispute settlement, its good example as guardian of the rule-based system. On the other hand, others have asked themselves whether exploring the causes that led to this demise would have been a more fruitful exercise – we belong to this quarter. Quite inevitably, even the attitude on what to do with the dispute settlement system has been opposite between the two groups, with the former cohort suggesting that the veto – impasse should be tackled as a matter of urgency and the Appellate Body be reinstated in all its functions, and the latter group suggesting a period of reflection and possibly reform. Various proposals have been tabled (see the ‘Walker Principles’) and an interim appeal system has been signed to by several Members.

The literature is tackling various issues. Arguably, there is a need to go back to the fundamental questions. What type of dispute settlement do we want? Do we really need an appellate level? To do what? In the context of an international organization with no real legislative function, how can ‘wrong’ judicial decisions be remedied? Surely, the elephant in the room is that, not only do we need dispute settlement but, before that, we also need a properly functioning rule-making activity. One without the other will not work. That was partly what happened in the WTO: no rules, too many rulings.

Dispute settlement is necessary for any legal system, but the type of dispute settlement is dictated by the nature of legal system. Legally and politically, the discussion boils down to the following questions:  Is WTO law constitutional? Was the Appellate Body (supposed to be) a constitutional court? Or was the nature of the system and its laws more transactional and contractual? Using an economic language, who was the principal and who was the agent? Did the regulatory framework duly reflect these roles and introduce the necessary safeguards?

It is exactly in times of crisis, like the ones we currently live, that we need to go back to the fundamentals.

Katherine Tai on WTO Dispute Settlement

U.S. Trade Representative Katherine Tai gave a speech on WTO issues in Geneva today at the Graduate Institute's Geneva Trade Platform. Here is the section on WTO dispute settlement:

Over the past quarter century, WTO members have discovered that they can get around the hard part of diplomacy and negotiation by securing new rules through litigation.    

Dispute settlement was never intended to supplant negotiations.  The reform of these two core WTO functions is intimately linked.  

The objective of the dispute settlement system is to facilitate mutually agreed solutions between Members.  Over time, “dispute settlement” has become synonymous with litigation – litigation that is prolonged, expensive, and contentious.  

Consider the history of this system.  

It started as a quasi-diplomatic, quasi-legal proceeding for presenting arguments over differing interpretations of WTO rules.  A typical panel or Appellate Body report in the early days was 20 or 30 pages.  Twenty years later, reports for some of the largest cases have exceeded 1,000 pages.  They symbolize what the system has become: unwieldy and bureaucratic. 

The United States is familiar with large and bitterly fought WTO cases.  Earlier this year, we negotiated frameworks with the European Union and the United Kingdom to settle the Large Civil Aircraft cases that started in 2004.  

We invoked and exhausted every procedure available.  And along the way, we created strains and pressures that distorted the development of the dispute settlement system.

With the benefit of hindsight, we can now ask: is a system that requires 16 years to find a solution “fully functioning?”

This process is so complicated and expensive that it is out of reach for many – perhaps the majority – of Members. 

Reforming dispute settlement is not about restoring the Appellate Body for its own sake, or going back to the way it used to be.  

It is about revitalizing the agency of Members to secure acceptable resolutions.  

A functioning dispute settlement system, however structured, would provide confidence that the system is fair. Members would be more motivated to negotiate new rules.

Let me address a couple of her points. Starting with the length of the reports, let's take a look at the earliest Appellate Body reports and the last Appellate Body reports in terms of the page length of the reasoning sections:

First 5 AB reports page length:

US - Shirts and Blouses: 9 pages

Brazil - Coconut: 12 pages

US - Underwear: 12 pages

Japan - Alcohol: 24 pages

US - Gasoline: 19 pages

Last 5 AB reports page length:

Australia - Plain Packaging: 204 pages

US - Supercalendered Paper: 25 pages

Russia - Railway Equipment: 71 pages

Ukraine - Ammonium Nitrate: 42 pages

Korea - Pneumatic Valves: 132 pages

These were rough calculations based on a quick glance, so feel free to check my math! But the figures should be approximately accurate. Clearly, Appellate Body reports got longer as the years went on. There are a number of possibilities for why that happened, including the following:

• Some of the difference has to do with the WTO Members themselves, of course. What kinds of issues, and how many issues, did they raise on appeal? Clearly, the appropriate scope of appeals expanded in the minds of the Members over the years.
• As the jurisprudence grew in volume, the AB had more past cases to cite to, and that added to the length. (I remember working on early SCM Agreement cases, and the provisions had never been interpreted before, which made it possible to keep things relatively short.)
• The Appellate Body itself may have seen its role as more expansive, and that led it to try to provide more clarity, which of course took up more pages.

In addition, it is true that 16 years to resolve a case is quite long, but it's worth noting that this is not the norm for these cases. If a case is complex enough that it is likely to take 5 years or more to litigate, it may be worth considering whether it is even worth bringing.

In the Q & A, two issues (one from me) related to WTO dispute settlement came up. The first question was about bringing the Appellate Body back, and the second was about making the panel process faster and more effective:

Question: So we've received a number of questions asking whether the US plans to move on the Appellate Body, on the conditions required to end the ban on new Appellate Body judges, justices. And so that was one strand of questions. And then a related question from Simon Lester, I think is, moving away from the Appellate Body, you worked on panels here in Geneva, ... and you mentioned that some of these cases take a long time and aren't working, so he was wondering if there is anything you can suggest, anything you saw to make panels work faster and work better in the US estimation.

Tai: So it's two questions. The first one specifically on the Appellate Body, the second one a little bit broader about the dispute settlement system and how to make it more efficient.

So on the first question, let me just say this. It is my hope that, as part of this reform effort, we can bring a different energy to our negotiations, and instead of my slapping down a full on proposal that I've dialed up to about 250, because I know that over the course of working through 164 members, ... it's going to get moved quite a bit from where we're starting. Instead of starting out that way, what I would like to do is start with the conversations, the talking to and the listening to each other, in terms of how the dispute settlement system, the whole thing, can serve the interests of Members better. And I've given you some examples in the speech today in terms of where the dispute settlement system has fallen flat in our estimation, but I can also point you to, and I don't think anybody wants me to do this, ... reams of documentation, papers, statements that the United States has made over the course of 15 years and three different administrations where we were saying to the Members of the WTO, we have concerns with the way the dispute settlement system is functioning, and we think that there needs to be a course correction, and frankly I think that over the course of those 15 years, not enough members listened. And so I want to take that lesson in this moment of reform to say, if you will listen to us, we will listen to you, and let's start the reform process from there.

So, with respect to the panel question, the only thing I would add there is that the panel process does take a while. It's very laborious, it can be quite expensive, if you've got outside lawyers working for you. And I think that the issue is not how to make it faster, but how to create more opportunities for the Members to come together and be incentivized to solve the problem, because in every dispute settlement case, when you play it out to the end, you've gone through every appeal and you've gone to the arbitration for your suspension of concessions. The point is not to punish each other. The point at the end of all of this is to create the conditions for the two Members to come together to find an accommodation, because we are all WTO members. And so, if there are ways that we can incentivize those political moments of conversation sooner, I think that that would be a worthy goal.

On the part about the Appellate Body, my comment here, and I'm sure I've said this before on this blog, is the following. I've read the U.S. criticisms of WTO dispute settlement and the Appellate Body over the years, and I understand the various issues the U.S. has concerns about. What I don't understand, though, is what the U.S. wants to see instead. For example, what should the scope of the appeals process be? Should there be DSU Article 11 appeals, and if so what should they look like? What should the GATT Article III non-discrimination standard be? The U.S. has criticized all of these areas and others, but it has not offered up much in the way of proposals. I'd really like to see some concrete proposals here, which could serve as the basis for a discussion. Tai seemed reluctant to put forward a "full on proposal," but I'm not sure there is any other way to move forward. Without this, I think it's likely we'll end up with the MPIA coming into operation as the appeals mechanism for those who want to use it. I do welcome the conversations, and maybe something can come out of them. However, based on what has been made public (I don't know what has been said in private), I have very little idea of what the U.S. vision for appellate review and broader dispute settlement reform is, and I think it's a big problem what we don't have a sense of this.

In terms of my question on the panel process, what I would say is that I completely agree that we should make settlement a priority, but from what I can see, the existing rules already do this. It's really up to the Members whether they want to settle, and sometimes they are able to do so. It's worth noting that most WTO complaints don't go through the whole litigation process. But sometimes Members just can't agree, and when they don't, we end up in litigation. Where that's the situation, there are important issues related to how the litigation process works that are worth improving on. (And I would note that the option for litigation may be particularly important for smaller and developing countries that have less leverage in settlement negotiations).

Birmingham Law School International Economic Law and Policy Working Group Events

This is from law prof Luca Rubini:

We are glad to present the first events in the 2021/2022 academic year of the International Economic Law and Policy Working Group (IELPWG), set up in 2019 at Birmingham Law School.

The IELPWG is a highly-focused discussion group for those numerous scholars (staff and PhD students, as well as alumni!) in Birmingham Law School with a core expertise and interest in trade, investment, antitrust and competition, finance and monetary affairs, EU internal and external trade, and other areas which can be defined as both ‘economic’ and ‘international’. It works as an interest group with regular meetings where research is presented and topical developments discussed. While the core focus of the group is on the law, it is open to scholars coming from other disciplines (mostly economics and political science) and will also benefit from the contribution of invited speakers.

You can find details on the IELPWG, its members and forthcoming events here.

The inaugural event of the 2021/2022 academic year, scheduled for October 18, Monday (5-7pm UK time) features one of our alumni, Dr Ben Czapnik, currently post-doc at the Chinese University in Hong Kong, presenting a paper on “Moral Determinations in International Law: Lessons from the Seals Dispute”. Professor Lorand Bartels, from the University of Cambridge, will act as discussant.

You have an abstract of Ben’s paper here:

While GATT Article XX(a) permits WTO Members to implement trade-restrictive measures for moral purposes, it also permits dispute tribunals to review the consistency of those measures with WTO law. In the moral disputes to date, WTO tribunals have managed a delicate balancing act by pragmatically addressing the parties' concerns while avoiding perceptions that they are second-guessing the moral choices of sovereign Members. However, this pragmatic approach has left some critical questions unanswered:

• What does the concept of "public morals" entail? 
• What analytical methods are available to establish the existence of public morals?
• Are non-rationalist measures covered by the moral exception?

In this session, Dr Czapnik argues that WTO law has failed to clearly resolve these issues and that the WTO's public morals jurisprudence is ambiguous and equivocal. These issues came to the fore in the Seals dispute where there are competing academic views about the EU's underlying policy objective: was the seal products ban a rationalist animal welfare measure inspired by welfarist philosophy or did the EU offer special protection to seals because of their "cuteness" and the "moral feelings" they invoke among EU citizens? 

We hope to see many of you joining this and all our events!

Luca Rubini and Henok Asmelash

Soumaya Keynes' Great Special Report on World Trade (and Two Quibbles)

Soumaya Keynes of the Economist has a great six part Special Report on World Trade. I really enjoyed it and highly recommend it! (Unfortunately, Soumaya is apparently leaving the trade beat, but this was a nice way to go out).

There were two small bits in the environment part that I have quibbles with, though, and I'll mention them here.

First, she says:

"In theory, the wto should be an ideal forum in which to consider environmental issues. Global problems of the commons require global solutions."

I completely agree with the second sentence, but I completely disagree with the first. In my view, there is no reason to think the WTO would be an "ideal" forum for environmental issues, or even a good forum. Certainly there is an overlap between trade and the environment, and WTO Members will have to come up with ways to address this. For example, an agreement to lower tariffs on environmentally-friendly goods could be useful; and we need clarity on how domestic environmental measures will be judged in WTO dispute settlement. But for the fundamental aspects of environmental issues (e.g. reducing carbon emissions), I don't see why the WTO would be the right place.

One reason I say this is that I don't think it's a good idea to deal with multiple global problems in one institution. That creates fears about some sort of "global government," and gets more than a few people riled up. People are riled up enough as it is -- let's not give them another reason!

Now, if the WTO were particularly effective at handling international rules on the environment, maybe it would be worth that risk. But the WTO is not particularly good at international rules on anything these days, so I don't see why it would be particularly effective here.

Overall, I don't see any advantages in doing this sort of global coordination at the WTO. It can be done anywhere, either in a permanent institution or through an ad hoc mechanism. Governments have certainly had trouble doing it, but the reason they are having trouble is unrelated to institutions or mechanisms. Rather, in my view, it's that most of them have simply been reluctant to take action in certain areas, such as climate change. If they wanted to take global action on climate change, they could. But they are all torn about it for one reason or another, so they haven't.

Second, she says:

"... the wto’s lawyers tend not to approve of discrimination based on how products are made, which is crucial if carbon-intensive products are to be treated differently from cleaner ones."

It is true that there is an approach to GATT/WTO non-discrimination obligations that goes something like this: If you have two products that are "like" in terms of their physical characteristics, but are treated differently pursuant to a regulation on the basis of how they were made, that will inherently treat at least one foreign product less favorably than one like domestic product, and that in and of itself leads to a finding of violation of GATT Article III or Article I with no further analysis needed. (There may be some variations on this view -- that was just a quick off the top of my head explanation).

However, I would say that while this approach used to be the dominant one, it is now an increasingly minority one, and it would probably not be applied by a WTO panel (or the Appellate Body or the MPIA) today. In my view, the existence of discrimination based on how different products are made is not directly relevant to the WTO's non-discrimination standards (in either the obligations or the exceptions), which instead should focus on issues such as the "design and structure" of the measure and should be centered around the concept of nationality-based discrimination rather than discrimination against particular products. A regulation that treats products differently depending on how they were made could certainly be challenged under these provisions, just as any regulation could. But you would still have to go through the full analysis under provisions such as GATT Articles III and I and the Article XX exceptions, rather than just assuming that a measure which treats carbon-intensive products differently from low-carbon ones leads to a violation. There's no doubt in my mind that a carbon regulation could be designed in a way that either does not violate or is upheld under the exceptions, although in practice governments tend to slip in some nationality-based discrimination, which is what often leads to problems.

New GATT Dispute Database from the WTO

The WTO Secretariat has just put out a cool new database on GATT disputes. The official press release is here: 

The database allows users to search for information relating to the 317 GATT disputes brought by contracting parties from 1948 to 1995. The information provided includes documents such as consultation requests and reports, serving adjudicators, the disputing parties, claims and defences of the parties, the procedural legal basis cited by the complainants, and products at issue in the proceedings.

If you want a less formal introduction to the database, check out this video on the linkedin page of the WTO's Roy Santana.

The Role of Women in U.S.-China Trade Negotiations

I found this question and answer from CNBC's Kayla Tausche to U.S. Trade Rep. Katherine Tai interesting:

Tausche: In the direct talks that took place during the prior administration, the only women that were at the table were the translators. Do you fear that because of Chinese cultural norms that you won't be taken seriously as a woman leading the negotiations for the administration?

Tai: So much to unpack there Kayla. You know what, I look forward to these conversations. And I would say with respect to Chinese cultural norms, you don't have a Chinese mother. I would say that I don't fear Chinese cultural norms. In fact, I'm really looking forward to these engagements because they are so important to how successful the United States will be in the coming years.

As Tai said, there is a lot to unpack here. As the question started, I was thinking that the focus was going to be on the lack of women on the American side of the table last time. But then it turned out that the focus was on the Chinese side.

In terms of Chinese cultural norms here, I have no idea, so I asked Julia Qin for her thoughts. Here's what she said:

As for the “Chinese cultural norms”, I expect the Chinese negotiators (esp. if MOFCOM is involved) will be smart enough to take her very seriously. Some of the MOFCOM folks met her during WTO litigation. The fact that she speaks Chinese and understands Chinese mentality is all the more reason for the China side to take her seriously. As for being a woman, recall that Charlene Barshefsky was the one that negotiated China’s WTO accession. And the two former Chinese AB members are both women. 

I feel like some other people out there who know more about all this than I do might want to weigh in as well, either on the general topic, the question, or the response, so have at it in the comments if you so desire.

The Biden Administration's China Trade Policy

I wrote a piece over at China Trade Monitor (still free for now!) on Katherine Tai's speech from yesterday and the Biden administration's developing China trade policy. Here's the intro and conclusions:

After months of saying that they are reviewing their China trade policy, the Biden administration has, through a speech by U.S. Trade Representative Katherine Tai at CSIS, an interview with Tai on CNBC, and remarks made on background by senior administration officials, offered some details on the direction they plan to go. Four key aspects of their agenda are: 1) Enforcement of the U.S.-China Phase One trade agreement; 2) restarting the Section 301 tariff exclusions process; 3) reengaging with senior Chinese trade officials; and 4) working with allies on the trading system in general and on an approach to China. To some extent, the Biden administration's statements seem like a continuation of the existing U.S. trade policy towards China (although Biden administration officials emphasized that they view the Trump administration's approach as flawed and their approach would be different in important ways). However, they could be taken as a tentative, though belated, first step towards a post-Trump U.S. trade policy towards China.

...

The Biden administration's announcements on its China trade policy probably could have come a lot sooner. However, the administration was caught up with various domestic policy issues; it is still in the process of getting its full USTR team in place; and it has a difficult task in formulating a coherent and effective policy in this area. The pressure from various sources to do or say something may have pushed them to offer the general outlines of the policy described above. What we heard from Katherine Tai and other officials are the first tentative steps towards a policy that will continue to be fleshed out over the coming months and years. The immediate step appears to be that the Biden administration will raise these issues with China, and see how China reacts. It is that reaction that may determine the next steps the Biden administration takes in this area.

Basically, they will raise a bunch of concerns with China (mostly through the Phase One agreement, but perhaps elsewhere as well) and see what China has to say. I think there will be problems with doing this under the Phase One agreement (lack of transparency, a flawed enforcement mechanism), but that's what they want to use and we'll see how it goes.

What Would Happen if WTO Members Voted on AB Appointments?

Henry Gao has been making the case that WTO Members should have a vote on appointing AB Members, as a way to get around the U.S. block. I don't think that's likely to happen, but just for fun, I ran a totally unscientific Twitter poll to see how people thought the U.S. would react to such a vote:

 

What I had in mind for each one, but didn't have the space to explain on Twitter, was:

• "Withdraw from WTO" -- Congress either repeals the URAA or votes to withdraw during one of those five year periodic vote opportunities set out in the URAA.
• "Not engage with WTO work" -- The Biden administration simply decides not to show up at any WTO meetings.
• "Accept the result" -- The U.S. basically says "OK fine we accept the new AB Members and we'll participate in WTO DS again."
• "Something else" -- Dmitry Grozoubinski offered a good example here under which the U.S. blocks the WTO budget.

Again, I don't expect a vote to happen, but for whatever it's worth, I voted for "not engage with WTO work."

U.S. Trade Rep. Katherine Tai will be giving a big speech on U.S.-China trade relations on Monday. I hope that someone at USTR gives us some hints soon about U.S. ideas to get WTO dispute settlement working again.

Guest Post: Eco Oro Minerals Corp. v. Republic of Colombia: some thoughts on an investor’s due diligence

This is a guest post from law professor Yulia Levashova:

The investor’s due diligence has become a significant factor in determining whether the legitimate expectations based on the stability of a regulatory framework of an investor give rise to protection under the FET standard. According to numerous recent decisions (Charanne v. Spain, Isolux v. Spain, Stadtwerke München and others v. Spain, Antaris v. Czech Republic,  Belenergia v. Italy, Hydro Energy v. Spain), the evidence of a due diligence process is a requirement for the protection of legitimate expectations arising out of a stability claim. The threshold for a violation of legitimate expectations is whether the state’s contested regulatory changes were unforeseeable for a prudent investor. To determine whether this is the case,  a tribunal usually consider: (1) the form and the content of due diligence and (2) the extent of the foreseeability of regulatory changes that can be determined by the efforts undertaken by an investor to assess the risks of change (see the analysis here: https://link.springer.com/article/10.1007/s40802-020-00170-7).

Currently, the requirements for the form and content of due diligence are not clearly defined and vary from case to case. Furthermore, the execution of a due diligence process itself is not always accepted as a requirement for the protection of the legitimate expectations by tribunals.  The recent decision on jurisdiction, liability and quantum in Eco Oro Minerals Corp. v. Republic of Colombia, (9 September 2021) is a good illustration of that. In this decision, the tribunal found that Colombia violated the fair and equitable treatment standard under Article 805 of the Free Trade Agreement between Canada and Colombia. The majority found that Colombia frustrated the legitimate expectations of Eco Oro (the investor) by refusing to proceed with mining exploitation activities in the entire area of Concession because of the environmental reasons.   

In its assessment of legitimate expectations, the majority emphasizes the significance of an investor’s due diligence in protection of the legitimate expectations. The tribunal concludes that no due diligence has been performed by the investor, providing ‘whilst there is no evidence on the record of the due diligence actually undertaken by Eco Oro, it cannot be disputed that proper due diligence would have notified Eco Oro of the presence of páramo within the area of the Concession. Equally, due diligence would have alerted Eco Oro to the fact that páramo presence had been known to Colombia since 1851 and Eco Oro would also have been alerted to the fact that Colombia had had the duty to protect páramo ecosystems since Law 373 of 1997 but had not taken any action. Eco Oro should also have been aware that given the terms of Constitutional Court Judgment C-293 of 2002, its rights pursuant to Concession 3452 were subject to the overriding interests of the State to protect the environment. (..)’ (para. 768).

The majority acknowledges that even ‘the most cursory due diligence even before Concession 3452 was granted would have revealed (i) the potential existence of a páramo ecosystem within the boundaries of Concession 3452; (ii) the Government’s commitment and obligation to protect these ecosystems; and (iii) that such protection could be achieved by the imposition of a mining’ (para. 682). This being said, the tribunal still found a breach of the legitimate expectations, essentially disregarding the absence of the investor’s due diligence. As prof. Sands underlined in his dissenting opinion, ‘the majority nevertheless concludes that Eco Oro had a legitimate expectation in relation to MST, on which it could rely notwithstanding the total absence of any exercise of due diligence. In reaching its conclusion (at paras. 804 and 805 of the Decision), the majority passes in silence on due diligence.’ (Dissenting opinion, para. 18).

What is interesting in this decision is the tribunal’s disregard of its own conclusions in the final determination of the legitimate expectations, namely the acknowledgement that the process of due diligence is a relevant factor in the assessment of legitimate expectations and the recognition of the fact that the investor has not undertaken any due diligence. Earlier tribunals that do not place a significance on an investor’s due diligence usually consider any limited efforts on the part of an investor to assess the risks to constitute sufficient due diligence. Or, some tribunals determined that a due diligence would not have changed anything in the appraisal of the regulatory framework. For example, in Novenergia v. Spain, the tribunal was of a view that the state’s assurances that originated from Royal Decree 661/2007 and which stated that the original rate of returns would remain were so ‘adamantly clear’ that it did not require a ‘particularly sophisticated analysis’, such as legal due diligence. Also, in the tribunal’s view no formal due diligence would have been capable of revealing the regulatory changes that were later enforced by the state. (para. 679).

Although an investor’s due diligence has clearly become a factor in assessment of the protection of the legitimate expectations. There is no consistency concerning the scope of an investor’s due diligence in investment decisions, as well as its role in the final determination.