International Economic Law and Policy Blog

David Gantz: UK, Texas and Other US States Should Proceed Carefully, but Not Abandon, Trade Deals

This is a post by law professor David Gantz:

I. Introduction: Economic and Political Motivations

The United Kingdom, presumably frustrated by the reluctance of the Biden administration to conclude the free trade agreement negotiations begun by the Trump administration, or even to seek the essential congressional authorization to do so,  has announced through its trade policy/international development minister Penny Mordaunt that it will pursue commercial arrangements with up to 20 individual US states, including Texas, Indiana and California. (Farouq Suleiman, William James, and Chris Gallagher, “Britain Targets First State-by-State U.S. Trade Deals Next Month,” Reuters, April 21, 2022, https://www.reuters.com/world/uk/britain-targets-first-state-by-state-us-trade-deals-next-month-2022-04-21/) An arrangement could be concluded with Texas by October 2022. Other states, such as Indiana, have moved more quickly; Indiana and the UK signed an MOU on May 27, 2022. (https://www.gov.uk/government/publications/uk-and-indiana-trade-and-economic-memorandum-of-understanding/memorandum-of-understanding-on-economic-cooperation-and-trade-relations-between-indiana-and-the-united-kingdom.) More will likely follow. The eight states currently targeted combined account for 20% of the US economy, and based on recent events, the Texas state government among others evidently sees few downsides to moving forward.

It is no surprise that UK officials have included  Texas among the initial targets for a trade MOU.  If Texas were a sovereign nation, it would be the ninth largest economy in the world, just ahead of Brazil, and California’s GDP is even larger.

The UK is still suffering from an economic downturn largely caused by its withdrawal from the European Union at the end of 2020, making enhanced international commercial relationships, however circumscribed, attractive. According to UK data, Texas (in 2001) exported $9.4 billion worth of goods to the UK (including oil and gas, aerospace products, petroleum and coal products, basic chemicals, and computer equipment) and $5.5 billion worth of services (including business management and consulting, travel and tourism, passenger fares, equipment installation, maintenance and repair, and industrial royalties). This made the UK one of Texas’ largest export markets, partly as a result of excellent air transportation to the UK, the absence of corporate and personal income taxes, and high economic security, along with the expanding Port of Houston and Texas’ excellent rail and road infrastructure. Moreover, UK subsidiaries in Texas reportedly accounted for nearly 120,000 jobs, and exports to the UK supported more than 63,000 jobs.

Texas and other targeted US states are well aware that the UK despite its withdrawal from the European Union is the fifth largest economy in the world. For the UK, it is economically difficult to reject the idea of agreements with selected US states, particularly when the Biden administration has effectively taken itself out of the business of negotiating trade agreements. (Although the concept of the “Indo-Pacific Economic Partnership” was formally unveiled by  President Biden recently, it would explicitly not include any market-opening measures on the part of the United States, which, in the opinion of many observers, could doom it to failure.)

Thus, even if no political considerations were motivating either the UK or Texas or Indiana, the prospect of enhancing an already robust commercial relationship is attractive (even to blue states such as California).  

II. US Legal and Constitutional Constraints

In an interesting historical footnote, in 1838 England and the then-independent Republic of Texas concluded three treaties, one of which was a “treaty of commerce and navigation” that entered into force in 1842. (https://tarlton.law.utexas.edu/treaty) Unfortunately for the UK and Texas, today’s legal and constitutional issues are much more complicated than 180 years ago. Most significantly, the Commerce Clause of the Constitution (Article I, sec. 8, clause 3) gives Congress the exclusive power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” With regard to agreements with foreign nations, Article I, sec. 10, clauses 1 and 2 of the Constitution are also restrictive:

No state shall enter into any treaty, alliance, or confederation ...

No state shall, without the consent of Congress ... enter into any agreement or compact with another state, or with a foreign power.

Still, there have been multiple instances where US states have entered into less formal arrangements, often termed “memoranda of understanding” (MOUs), with foreign states or governments that appear to have been generally accepted if they are considered non-binding. For example, after the Trump administration withdrew from the Paris climate accord, California, among other US states, concluded widely publicized MOUs with other nations, e.g., with China in November 2018 and April 2022, effectively promising to follow the requirements of the Paris accord. (https://www.gov.ca.gov/wp-content/uploads/2022/04/4.18.22-China-CA-MOU.pdf) Both the 2018 and the 2022 MOUs specifically note that they are voluntary, not legally binding, as was the Paris accord, and must comply with “all applicable laws.”)

Some eyebrows were raised in mid-April 2022 when Texas Governor Greg Abbott concluded MOUs with each of the four Mexican states bordering Texas, including Nuevo Leon, with the alleged intention of reducing illegal immigration, drug trafficking on their highways, and potential terrorism. (https://gov.texas.gov/uploads/files/press/EL_GOBIERNO_DEL.pdf) Still, the governor’s office, if pressed, could have reasonably argued  that they are only MOUs and not international agreements (suggesting form is more important than substance) and are not legally binding. Most of the criticism of these actions—including from the White House and many Republicans as well as Democrats in Texas—focused on the enormous disruption of cross-border trade that cost businesses hundreds of millions of dollars and further encouraged inflation. Critics also pointed to the fact that immigration law and policy is the exclusive province of the US federal government but chose not to mention the alleged constitutional violations of such agreements.

Less controversial arrangements have been concluded as MOUs between adjacent border states in the past. For example, the states of Arizona and Sonora (which have cooperated on a variety of issues of mutual interest since the Arizona-Mexico Commission was founded in the 1950s) have concluded a series of non-binding MOUs. For example, the Arizona Department of Commerce and the Secretariat of the Economy of the State of Sonora formed a partnership in  2018 to “drive innovation, entrepreneurship and technological advances in the region.” (https://www.azmc.org/media/1432/economic-development-mou.pdf) That agreement is also termed an MOU and specifically states that “it is non-binding and does not create any legal or binding obligations between the states.” The MOU also states that “Nothing in this Memorandum of Understanding should be read to conflict with the laws and regulations of the United States of America or the United Mexico States (or any state or local jurisdiction), or with any relevant international agreements.”

III. What Could a UK-Texas (or Indiana or California) MOU Lawfully Address?

It seems likely that the UK and the US state governments are well aware of the legal constraints and will seek to conclude MOUs that do not violate any US federal constitutional or legal regulations, particularly those relating to tariffs and dealing with standards that are currently addressed at the federal level in the United States, but they could inter alia treat areas such as the mutual recognition of professional qualifications and the elimination of existing barriers to doing business in each other’s territories.

One approach that could be considered would be to draw on the failed negotiations between the United States and the European Union aimed at a mammoth free trade agreement in 2014-2016, the “Transatlantic Trade and Investment Partnership” (TTIP), and certain provisions of the USMCA, limiting the discussion in each case to areas that are not reserved for the US federal government. While the majority of the chapters of both accords are related to matters within the exclusive control of the US federal government—such as customs and competition policy—many other areas are ripe for closer cooperation.

As the first of the MOUs (with Indiana) is now public one can reasonably assume that an MOU with Texas and other US states will contain many similar provisions, with a similarly wide range of objectives and issues to be addressed. In this first MOU, the Participants endorse sustainable growth and the importance of research, technology and innovation, mentioning in passing an effective recovery from COVID-19. Substantive section headings include enhancing cooperation; accelerating development of low emissions technology; removing barriers to trade and investment; cooperation in economic development, investment, workforce development, innovation and regulatory cooperation; and academic cooperation. Priority is to be given to advanced manufacturing and materials, aerospace and aviation, life sciences, agriculture and agbioscience, the automotive industry including low emissions technology, energy and infrastructure. Interestingly, after the the UK reaffirms its obligations under the WTO’s Government Procurement Agreement, Indiana commits to MFN treatment of UK suppliers (other than with states bordering Indiana), with both agreeing to maintain an open dialogue and to prioritize bilateral opportunities in government procurement.

In the key Section 5, “forms of cooperation,” elements include the expected development missions and public sector visits, information sharing, promoting cooperative research, joint symposia and seminars along with other consortia and summits.  Participation from municipalities, research institutions, universities and NGOs is to be encouraged. Another key section (6) focuses on implementation, with the commitment to form a joint working group, a tracking mechanism, information sharing and confidentiality. Intellectual property rights arising out of the MOU are be protected in accordance with national law.

Perhaps significantly, “This MOU is not legally binding and does not create any legal, equitable, or financial rights, obligations, or liabilities for the Participants.” There is no dispute settlement mechanism other than consultations and negotiations, with third party mechanisms barred; the Participants are “committed to acting in good faith.” The UK-Indiana MOU became effective when signed on May 27.

IV. Conclusion

One obvious question is whether UK MOUs with Texas, Indiana, California and ultimately many other states  along these lines would have economic significance. The answer may be probably “not a great deal” but ultimately depends on the effectiveness of implementation in each case. Inevitably, some provisions might be useful to individual stakeholders. In an era when the US federal government is unwilling or unable to conclude trade agreements, US state-to-foreign-government arrangements, if structured to avoid  violating the US Constitution and US. law, are worth considering. After all, for many government officials  and other stakeholders, some freer trade is better than none.

11th Conference of the Postgraduate and Early Professionals/Academics Network of the Society of International Economic Law (PEPA/SIEL)

More details at this link:

Birmingham Law School is pleased to be hosting the 2022 Conference of the Society of International Law (SIEL) Postgraduate and Early Professionals/Academics Network (PEPA/SIEL) on June 8-10, 2022.

This long-established conference aims at fostering collaboration and mentoring opportunities for emerging academics and professionals in International Economic Law. SIEL fulfils these goals through various activities, including organising conferences at which emerging academics and professionals in the field of international economic law can present and discuss their research in a supportive and welcoming environment.

This conference offers graduate students (students enrolled in Masters’ or PhD programmes) and Early Career professionals and academics, studying or working in the field of IEL, an opportunity to present and discuss their ongoing research. It also provides a welcoming platform where participants can critically discuss and test ideas about broader issues relating to IEL. Every panel will include on average three papers. One or more senior practitioners and academics will comment on each paper, which will then be followed by a general discussion.

This hybrid conference will take place both online and in-person at the University of Birmingham over three days. Papers to be presented during the conference will be made available to panellists and discussants one week prior to the conference to facilitate maximum engagement with presentations. The attending audience will also be provided with access to the abstracts in due course.

1st edition of the Baetens-Caiado Prize

We are also pleased to announce that this year’s conference will launch the 1^st  edition of the Baetens-Caiado Prize. This essay prize, sponsored by Dr. Suresh Nanwani, Professor of Practice at Durham University (UK), will be awarded to the best essay submitted at the 2022 PEPA/SIEL conference on any topic in the field of international economic law. The winning essay will be submitted to the African Journal of International Economic Law (AfJIEL) for publication, subject to its standard peer-review and decision procedures. The Prize also entails a £100 for the best essay (distributed accordingly in the event of more than one author), and it will be awarded by SIEL on the recommendation of a prize committee drawn from the host organizer of the 2022 PEPA/SIEL and two members from the SIEL Executive Council Committee. The prize award will be announced in the SIEL Newsletter.

Interested accepted presenters are encouraged to submit an essay to Dr Mariela de Amstalden and Dr Henok Asmelash (co-chairs from Birmingham Law School, UK) by July 10, 2022 (5pm UK time) to [email protected]. Please note the following guidelines:

• Length of essay: between 8,000 and 9,000 words (excluding footnotes)
• Citations: Citations in the manuscript must conform to the Twenty-First Edition of The Bluebook: A Uniform System of Citation. For example, see the Inaugural Issue of the AfJIEL.
• Abstract: Please include a short abstract with your submission (150 words maximum).

Conference Co-Chairs

• Mariela de Amstalden
• Henok Asmelash
• Freya Baetens
• Ilaria Espa
• Suresh Nanwani

Registration

Registration is now available.

Registration costs £60 for non-SIEL Members, and £40 for SIEL Members. The registration fee for non-SIEL Members includes a one-year SIEL Membership fee. SIEL Membership details may be found at the SIEL website. The registration fee covers conference materials, coffee breaks and lunch on both days.

Registration of participants not presenting a paper are also welcome. The regular fee will be applied. 

Compliance with USMCA Chapter 31 Panel Rulings

Recently, as I heard the U.S. express concerns that Canada has not complied with last December's USMCA Dairy TRQs panel ruling, I wondered how compliance proceedings worked under USMCA Chapter 31. The relevant provision states:

Article 31.19: Non-Implementation – Suspension of Benefits

1. If the disputing Parties are unable to agree on a resolution to the dispute under Article 31.18 (Implementation of Final Report) within 45 days from receipt of the final report, the complaining Party may suspend the application to the responding Party of benefits of equivalent effect to the non-conformity or the nullification or impairment until the disputing Parties agree on a resolution to the dispute.

2. In considering what benefits to suspend pursuant to paragraph 1:

(a) a complaining Party should first seek to suspend benefits in the same sector as that affected by the measure or other matter that was the subject of the dispute; and

(b) a complaining Party that considers it is not practicable or effective to suspend benefits in the same sector, may suspend benefits in other sectors unless otherwise provided for elsewhere in this Agreement.

3. If the responding Party considers that:

(a) the level of benefits proposed to be suspended is manifestly excessive; or 

(b) it has eliminated the non-conformity or the nullification or impairment that the panel has determined to exist,

it may request that the panel be reconvened to consider the matter. The responding Party shall deliver its request in writing to the complaining Party. The panel shall reconvene as soon as possible after the date of delivery of the request and shall present its determination to the disputing Parties no later than 90 days after it reconvenes to review a request under subparagraph (a) or (b), or 120 days after it reconvenes for a request under both subparagraphs (a) and (b). If the panel considers that the level of benefits the complaining Party proposes to suspend is manifestly excessive, it shall provide its views as to the level of benefits it considers to be of equivalent effect.

4. If the panel’s views are that the responding Party has not eliminated the non-conformity or the nullification or impairment, the complaining Party may suspend benefits up to the level the panel has determined under paragraph 3.

I read all this to say that if the U.S. had a concern about Canada's implementation of the Dairy panel report, it could undertake tariff retaliation 46 days after the panel report is issued, without a compliance panel ruling (although domestic procedures probably would mean that it takes longer than 46 days). In addition, though, if Canada thought its new measures had brought it into compliance, it could request a panel to examine those measures and try to get a ruling to that effect.

I wasn't totally sure what would happen if the panel couldn't rule before the tariffs were ready to go into effect. Can a complainant impose tariffs before there is a ruling that the new measures are not in compliance? I'm not sure I like that idea, and these procedures seem a bit odd to me.

But regardless, USTR has now taken a new action in the case, and I'm trying to figure out what it means. Today it requested consultations on the Canadian Dairy measures that exist right now, alleging that they violate USMCA obligations. The request states:

The United States has previously raised concerns about Canada’s then-extant dairy TRQ allocation measures, and in December 2021, a USMCA dispute settlement panel found those measures to be inconsistent with Canada’s USMCA obligations.1 Subsequently, Canada introduced changes to those measures in response to those adverse findings,2 but, as discussed below, it appears that Canada’s current dairy TRQ allocation measures are inconsistent with Canada’s obligations under the USMCA.3

Footnote 3 says: "This request for consultations is without prejudice to U.S. rights under the USMCA relating to the prior USMCA dispute settlement proceeding or the Final Report of the Panel, dated December 20, 2021."

So, instead of moving forward with tariff retaliation now pursuant to the earlier panel ruling, as it seems like the rules permit, USTR is bringing a complaint against the new measures. 

Why is USTR taking this approach? I speculated on Twitter that maybe in this economic climate, with all the concerns about inflation, and the calls to scale back the Section 301 tariffs to help bring down prices, USTR is wary of proposing new tariffs, even ones taken pursuant to enforcing compliance with a trade agreement. However, at the Georgetown Law International Trade Update today, a USTR official's answer when asked about their strategy here, if I understood it correctly, seemed to emphasize the fact that the USMCA panel ruling focused on one particular issue and the panel had exercised judicial economy on other issues, and also there were some other policy changes of concern in the new Canadian measures. Therefore, USTR filed a new complaint. Nonetheless, I still wonder whether, under the USMCA rules, USTR could just argue that the parties have been "unable to agree on a resolution to the dispute" here and therefore they are going to impose the retaliation now. (To be clear, I'm not saying I think they should approach it that way. Maybe I'm just used to everything being ratcheted up to 11.)

Call for Papers: Midyear Meeting of the American Society of International Law

This is from the ASIL:

The American Society of International Law calls for submissions of scholarly paper proposals for the 2022 ASIL Research Forum. The Research Forum, a Society initiative introduced in 2011 which takes place during the Midyear Meeting, aims to provide a setting for the presentation and focused discussion of scholarly papers related to international law. All ASIL members are invited and encouraged to attend the Forum, whether or not presenting a paper. Graduate students and early career scholars and professionals are especially encouraged to submit proposals for the Forum and the David D. Caron Prize.

 The 2022 Research Forum will take place at the University of Miami School of Law. Given the intent to create active engagement around the presented papers, the focus will be on fully returning the Midyear Meeting to an in-person event. Accepted authors should plan to present their scholarship in person (barring a public health emergency). All authors, discussants, and attendees will be required to be vaccinated with booster, if eligible, to attend. 

Papers may be on any topic related to international and transnational law and must be unpublished (for purposes of the call, publication to an electronic database such as SSRN is not considered publication). Interdisciplinary projects, empirical studies, and jointly authored papers are welcome and encouraged.

Deadline: 5:00 PM EDT on Monday, May 30, 2022. Abstracts should be submitted online at www.asil.org/MYM and will be anonymized and considered via a blind review process.

For the full call and information: https://www.asil.org/midyear-meeting

Amicus Submission in EU - Palm Oil (DS600)

I'm posting here a long excerpt from an amicus submission in the EU - Palm Oil (DS600) case, co-authored by trade lawyers Stéphanie Noël and Clémentine Baldon. In my view, this submission sets out the correct way to think about GATT Article III, and I'm glad to see these arguments put before a WTO panel. I don't know what various governments believe these days about the proper approach to Article III, but I hope they will seriously consider the arguments that follow. (I haven't thought enough yet about how these arguments apply to the DS600 measures, but I support the arguments in the abstract):

B. Preliminary remarks on the ultimate purpose of GATT Article III

17. At the outset, the Applicant would like to recall the object of the whole Article III of the GATT (“National Treatment on Internal Taxation and Regulation”) as set out in Article III:1. In the Applicant’s view, it must inform any legal analysis relating to Article III – and in particular the concept of “treatment no less favourable”.

1. The object and purpose of GATT Article III

18. GATT Article III:1 reads as follows:

“The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.” (emphasis added)

19. The purpose of the national treatment obligation is to avoid internal measures being applied “so as to afford protection to domestic production”.

20. The Applicant submits that it is clear from this wording that what is prohibited is the application of measures whose intended result is protection of domestic production.

21. The Applicant considers that the terms of Article III:1 are neither obscure nor ambiguous. But in order to be systematic and precise, the Applicant will demonstrate that a textual interpretation in accordance with the customary rules of interpretation of public international law, codified in Article 31, and to the extent appropriate, Article 32 of the Vienna Convention on the Law of Treaties (hereinafter the “Vienna Convention”) supports its view.

22. Article 31(1) of the Vienna Convention provides:

“A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose”

23. Even if the ordinary meaning of a treaty text shall be ascertained by considering the context and object and purpose, its identification may start with the dictionary definitions of the terms to be interpreted.

24. According to the Oxford Dictionary of English (Third Edition), the phrase “so as to do something” means “in order to do something”. This clearly implies that the action to which the phrase refers (in the case at hand, applying a measure) is taken with a view to achieving an objective. This suggests the intention.

25. Had the drafters wanted to refer to a broader scope of measures, so as to include any measure having the effect – actual or potential – of protecting domestic production, they would have drafted Article III:1 so as to reflect this. For example, they could have used “such that it affords protection” “in a way that protects”, “which results in protection” or “which may have the effect of protecting”, etc. There are plenty of ways to indicate the mere consequences, regardless of the intention.

26. The general definition “protection” supplied by the Oxford Dictionary of English (Third Edition) is “the action of protecting”. The same dictionary provides several definitions of the verb “protect”. Obviously, the economic definition is the most relevant. It reads “shield (a domestic industry) from competition by imposing import duties on foreign goods”. Although the definition refers to the imposition of import duties, admittedly, shielding the domestic industry can be achieved by other means.

27. Context, object and purpose just serve to elucidate the meaning of existing treaty words and terms. In this case, they are clear. In any event, we will examine the immediate context, and the general object and purpose of the GATT.

28. Let us turn to the immediate context of Article III:1. It immediately follows Article II on Schedules of Concessions. This indicates the rationale behind Article III of the GATT, which aims at ensuring that Members’ internal charges and regulations do not frustrate the effect of their tariff concessions under Article II. Therefore, the main goal of Article III of the GATT is to prevent Members from resorting to internal measures in order to indirectly protect their domestic productions from competition boosted by their trade liberalization commitments.

29. In addition, Article III and the GATT in general must be read in conjunction with the WTO Agreement, as its Annexes (which include The Multilateral Agreements on Trade in Goods) are integral parts of the WTO Agreement. As such, the Preamble of the WTO Agreement informs the provisions of the GATT. And as the Appellate Body recognized in US – Shrimp, the Preamble “shows that the signatories to that Agreement were, in 1994, fully aware of the importance and legitimacy of environmental protection as a goal of national and international policy” (emphasis added). Therefore, even though the Appellate Body said that the sheltering scope of GATT Article III is not limited to products bound under Article II, the interpretation of GATT provisions should show deference to the policy space of WTO Members as long as their measures do not aim at shielding domestic production but have legitimate goals (especially environmental protection).

30. This interpretation is consistent with the Appellate Body’s reference to “protectionism”. As it has recognized in Japan – Alcoholic Beverages:

“The broad and fundamental purpose of Article III is to avoid protectionism in the application of internal tax and regulatory measures”. (emphasis added)

31. It is clear from the above that the purpose of Article III of the GATT is to strike down internal measures that are protectionist and shield internal measures that pursue a legitimate objective in good faith.

2. Determinations under GATT Article III

32. This entails that a determination under any of the provisions of Article III should be a determination about the application of the challenged measures so as to afford protection to domestic production.

33. The logical consequence of the above is that the starting point for making such a determination should be the domestic production that the country in question intends to protect through the application of this measure. It is all about protection of domestic production, not about merely disfavouring or even targeting certain products or products from certain countries (the latter case being dealt with by Article I:1).

34. Therefore, the claimant must identify the “domestic production” that the respondent seeks to protect. In the case at hand, Malaysia has identified two distinct types of domestic productions: i) “certain biofuel feedstocks, such as rapeseed, sunflower, and soybeans” and ii) “biofuels produced therefrom”.

35. The Applicant submits that the legal tests to be applied under the provisions of Article III and any legal interpretation thereof should be performed to determine whether the measures challenged in this dispute aim at protecting “certain biofuel feedstocks, such as rapeseed, sunflower, and soybeans” produced in the EU or “biofuels produced therefrom” in the EU, as the case may be.

36. This should be so if the Panel were to give full effect to the terms of Article III:1.

3. The terms of Article III:1 should be given full effect

37. The Applicant submits that the terms of Article III:1 should be given full effect. The Applicant would like to respectfully recall the principle of effective treaty interpretation “according to which all terms of a treaty must be given a meaning”. It involves that a treaty interpreter:

“… must give meaning and effect to all the terms of the treaty. An interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility.”

38. It follows that all the provisions of Article III should be interpreted in light of its fundamental purpose, which is to avoid protectionism in the application of internal measures.

39. Having recognized that the principle of effective treaty interpretation mandated such an approach, the Appellate Body said that the principles set forth in this paragraph shall inform the rest of Article III (including provisions on “treatment no less favourable”):

“Article III:1 articulates a general principle that internal measures should not be applied so as to afford protection to domestic production. This general principle informs the rest of Article III. The purpose of Article III:1 is to establish this general principle as a guide to understanding and interpreting the specific obligations contained in Article III:2 and in the other paragraphs of Article III, while respecting, and not diminishing in any way, the meaning of the words actually used in the texts of those other paragraphs. In short, Article III:1 constitutes part of the context of Article III:2, in the same way that it constitutes part of the context of each of the other paragraphs in Article III. Any other reading of Article III would have the effect of rendering the words of Article III:1 meaningless, thereby violating the fundamental principle of effectiveness in treaty interpretation.”

40. In practice, this entails that, as the Appellate Body ruled in EC – Bananas, in relation to Article III:4 (but it applies to all the provisions of Article III):

“In short, there must be consonance between the objective pursued by Article III, as enunciated in the “general principle” articulated in Article III:1, and the interpretation of the specific expression of this principle in the text of Article III:4”.

41. With these essential considerations in mind, we now turn to Malaysia’s claims and the correct tests and interpretations that, in the Applicant’s view, should be applied.

(footnotes omitted)

The amicus submission then applies this reasoning to Article III:2, first and second sentences, and Article III:4, concluding that the measures at issue do not violate these obligations. Pasting all of that reasoning here would be too much for one blog post, but here's a key part of the Article III:4 reasoning:

92. In our view, nothing prevents a panel from interpreting the term “treatment no less favourable” so as to take into account the protectionist purpose (or lack thereof). All the above indicates that such an interpretation is even mandated by the principle of effective treaty interpretation and necessary to render a ruling on Article III:4 consistent with the spirit of the GATT and the WTO Agreement. The Appellate Body itself ruled that panels could do so in interpreting the term “treatment no less favourable” in the context of Article 2.1 of the Agreement on Technical Barriers to Trade: where the measure at issue results in a de facto detrimental impact on competitive opportunities for imported products, it can still be found non-discriminatory if such a detrimental impact “stems exclusively from a legitimate regulatory distinction”. We do not see any reason why panels could not consider the regulatory purpose in making determinations of “treatment no less favourable”.

93. Moreover, the Applicant submits that the test applied to determine the presence of a “protective application” in the context of Article III:2, second sentence could be relevant in determining in determining “less favourable treatment” under Article III:4. If a disparate impact is observed, a panel could examine the design, architecture and structure of the measure at issue in relation to its declared objectives. This would allow the panel to determine whether the measure has been deliberately designed to protect the domestic production identified by the complainant.

In essence, I take this submission to argue that Article III:2, first and second sentences, and Article III:4 may have slightly different wording, but nevertheless they should all reflect in some way Article III:1 and its clear reference to protectionist intent. And a key part of the way to do that is to consider the "design, architecture and structure of the measure at issue in relation to its declared objectives."

ASIL Looking for Executive Director

The listing is here:

Summary:
The American Society of International Law ("ASIL" or "the Society") seeks an accomplished leader with vision, proficiency in international law, and proven management skills to serve as its next Executive Director starting (ideally) in mid-September 2022.

Responsibilities:
The Executive Director leads a diverse and accomplished 10-12 person staff, who facilitate the Society's programming, development, finance, fundraising, and membership activities, including by: 

1. convening the prestigious ASIL Annual Meeting in Washington, which attracts more than 1,300 participants each year;
2. organizing and sponsoring other meetings, conferences, and symposia;
3. publishing the leading journals American Journal of International Law, its open-access companion AJIL Unbound, International Legal Materials, and Proceedings of the ASIL Annual Meeting, as well as online publications;
4. maintaining a robust virtual presence through social media, an extensive website, and podcasting;
5. supporting over 30 ASIL member Interest Groups;
6. providing other educational and information resources, including career development opportunities in international law;
7. engaging in fundraising events to support the Society's goals;
8. conducting impactful policy-oriented discussion and research; and
9. engaging in outreach to non-members in the U.S. Government, the judiciary, the diplomatic community, international organizations, the media, and the public to promote a broader understanding of international law.

Apart from directing the Society's regular work, the Executive Director contributes to shaping the Society's vision and responses to the ever-more challenging global order.  In this regard, the Executive Director works closely with ASIL's President (elected every two years) and Executive Council (serving three-year terms), who govern the Society and determine its direction. 

The Executive Director also has an important outward-facing role as an ambassador for the Society and meets with important constituencies, including the judiciary; the White House and executive agencies such as the Departments of State, Defense and Justice; the U.S. Congress; international organizations and diplomats; local and international media; think tanks; academia; private practitioners; bar associations; professional organizations in law and other disciplines; and national and regional international law societies outside the United States.

Qualifications: 
The successful candidate for Executive Director will:

1. be proficient in international law;
2. possess strong managerial, administrative, and organizational ability and experience, overseeing ASIL's staff and an annual budget in excess of $3 million;
3. have effective fundraising skills, including through pursuit of grants, sponsorships, partnerships, and individual giving;
4. be adept at promoting ASIL's programing and advancing its mission through social media, the ASIL website, and other outlets;
5. be able to engage effectively with ASIL's diverse international membership;
6. be capable of facilitating dissemination of scholarly and informational output in print, electronic, and conference settings; and
7. be able to design and implement outreach programs and represent ASIL publicly before its many U.S. and foreign constituencies.

Terms: 
ASIL's Executive Council will appoint the new Executive Director to an initial term of three years, with the possibility of reappointment to a second term of up to five years, and a competitive reappointment to a final term up to a combined 12-year term limit, as prescribed by ASIL's constitutive documents.  The position is full-time and requires residence in the Washington, D.C. area and authorization to work in the United States.  ASIL offers a competitive salary and benefits package commensurate with experience and comparable to management-level public sector and NGO positions.  The Society is an Equal Opportunity Employer and does not discriminate on the basis of race, color, religion, gender, sexual orientation, gender identity or expression, age, national origin, marital status, citizenship, disability, veteran status, or any other basis prohibited by law.  The Society values a diverse and inclusive workforce and encourages all qualified individuals to apply.

How to apply: 
Please send a CV and cover letter to [email protected] with the following subject line: "Attention: Lucy Reed, Chair, ASIL Executive Director Search Committee".  The cover letter should explain why you are interested in being ASIL's Executive Director, your compensation expectations, and your availability to start work as a Washington area resident, ideally by mid-September 2022.  To receive appropriate consideration, your application should be received by Monday, June 20, 2022.  All applications received will be acknowledged, but only finalists will be contacted further.  The identities of all applicants will be kept strictly confidential.

KU Leuven Looking for PhD candidate in International Economic Law

This is from KU Leuven:

Leuven Centre for Global Governance Studies, KU Leuven is looking for a doctoral researcher in international economic law. The position enables you to enrich your research skills and provides opportunities in pedagogy through teaching, coaching for moot courts, and supervising master theses at the University. Interested candidates may apply through this link: https://www.kuleuven.be/personeel/jobsite/jobs/60110891?hl=en&lang=en

Call for Applicants 2022/23 Edition of Master of Laws in International Trade in Turin

This is from the Master of Laws in International Trade Law | ITCILO programme in Turin:

A one-year, intensive post-graduate programme including a distance learning phase and a face-to-face phase at the UN/ITC-ILO Campus in Italy. A cross-disciplinary curriculum in international trade law covering contracts, institutions and dispute settlement. Focus on the latest research developments and on the frontiers of international trade law, including technology and sustainability. Teaching and guidance from leading scholars, trade experts, lawyers, legal counsels, officers of international organizations. A unique partnership between academia (University of Turin) and international organizations (ITC-ILO, Uncitral Unidroit). The opportunity to join a vibrant Alumni Network with over 1000 members worldwide.

The First CPTPP Dispute: New Zealand vs. Canada on Dairy

New Zealand has just filed the first ever CPTPP consultations request, relating to Canadian measures "concerning the allocation of dairy tariff rate quotas (TRQs) under CPTPP (dairy TRQ allocation measures)." The request states:

2. Canada’s dairy TRQ allocation measures encourage chronic underfill of its dairy TRQs, reduce their commercial value for exporting CPTPP Parties, and undermine the market access that was negotiated under CPTPP.

3. Canada maintains 16 dairy TRQs under CPTPP.1 Canada’s dairy TRQ allocation measures allocate the entire quota available under each TRQ into up to three ‘pools’. These ‘pools’ can only be accessed by specific importer groups, in accordance with rules set out in Canada’s dairy TRQ allocation measures. Each importer group is defined under Canada’s dairy TRQ allocation measures, and importers that do not fall within a relevant pool are not eligible to apply for, or be allocated, quota. In addition, under Canada’s dairy TRQ allocation measures, retailers are not eligible to apply for an allocation under Canada’s dairy TRQs.

The claims of violation are as follows:

5. Canada’s measures appear to be inconsistent with several provisions of CPTPP, including Canada’s obligation to:

a. ‘progressively eliminate its customs duties on originating goods in accordance with its schedule to Annex 2D’ under Article 2.4(2), and Appendix A of Canada’s Schedule to Annex 2-D;

b. ‘ensure that its procedures for administering its TRQs … are fair and equitable’ under Article 2.28(2);

c. ‘ensure that its procedures for administering its TRQs … are no more administratively burdensome than absolutely necessary’ under Article 2.28(2);

d. ‘administer its TRQs in a manner that allows importers the opportunity to utilise TRQ quantities fully’ under Article 2.29(1);

e. not ‘introduce a new or additional condition, limit or eligibility requirement on the utilisation of a TRQ for importation of a good, including in relation to specification or grade, permissible end-use of the imported product or package size, beyond those set out in its Schedule to Annex 2-D (Tariff Commitments)’ under Article 2.29(2)(a);

f. ‘ensure that … any person of a Party that fulfils [Canada’s] eligibility requirements is able to apply and be considered for a quota allocation under the TRQ’ under Article 2.30(1)(a) and paragraph 3(c) of Appendix A of Canada’s Schedule to Annex 2-D;

g. ‘ensure that … it does not allocate any portion of the quota to a producer group’ under Article 2.30(1)(b);

h. ‘ensure that … it does not ... condition access to an allocation on the purchase of domestic production’ under Article 2.30(1)(b);

i. ‘ensure that … it does not ... limit access to an allocation to processors’ under Article 2.30(1)(b);

j. ‘ensure that … each allocation is made in commercially viable shipping quantities and, to the maximum extent possible, in the amounts that importers request’ under Article 2.30(1)(c); and

k. ‘ensure that … if the aggregate TRQ quantity requested by applicants exceeds the quota size, allocation to eligible applicants shall be conducted by equitable and transparent methods’ under Article 2.30(1)(e).

The official CPTPP text, with all of the relevant provisions noted above, is here.

We are tracking FTA disputes on WorldTradeLaw.net (still a work in progress, but see here and here -- the New Zealand complaint is not up there yet). There's an obvious parallel between this New Zealand complaint and the U.S. dairy complaint against Canada under the USMCA (that consultations request is here). The  U.S. complaint starts off this way:

Canada’s dairy TRQ allocation measures set limits on the quantity of certain dairy products1 that may be imported at a lower (within access) rate of duty. Furthermore, through the dairy TRQ allocation measures, Canada, sets aside and reserves a percentage of those within access quantities for particular importer groups. For all of its dairy TRQs, Canada sets aside and reserves a percentage of the quota for processors, and for ten of the TRQs2 an additional percentage is reserved for so-called “further processors.”3

And of course the USMCA panel found a violation. As I understand it, Canada and the U.S. are currently trying to work out a resolution, and I'm just going to speculate a bit here and note the possibility that New Zealand perhaps wants to put some pressure on Canada so as to make sure that the resolution does not hurt New Zealand exporters.

Alan Wolff Working Paper on "Restoring Binding Dispute Settlement"

Long-time U.S. trade lawyer, government official, and former WTO DDG Alan Wolff has a recent Peterson Institute working paper entitled "Restoring Binding Dispute Settlement." Here's the abstract:

Binding dispute settlement, meaning the ability to obtain a final judgment of whether a Member of the World Trade Organization (WTO) has acted inconsistently with its obligations, was the defining attribute of the WTO as created in 1995. Global commerce thrived on having the certainty provided by its taking place within this system. For well over a decade, the United States had complained that the dispute settlement system was undermining the trade remedies—antidumping, countervailing duties against subsidies, and safeguard actions against injurious imports—that were allowed under the WTO’s rules. When a populist US administration assumed office in 2017, it blocked appointments to the WTO’s Appellate Body. Today, the WTO dispute settlement system has become balkanized. The European Union and a number of other countries have banded together to put into place an alternative mechanism. Outside this system are the other two-thirds of the WTO Members, including the United States. For most WTO Members, no definitive result can be reached as to whether WTO obligations have been violated, as there is no assurance that WTO dispute settlement will be binding for them. The question addressed in this paper is how to reconstruct a system that the United States could join that would be broadly acceptable to others. The paper sets out a wide range of elements for negotiators to consider to rebuild the WTO dispute settlement system and make WTO agreements enforceable once again.

The paper has a good overview of the origins of the WTO DS crisis and the various issues that have been discussed as part of it. I thought Alan's table at the end of the paper with "a menu of elements for a possible negotiation leading to restoring an appellate stage to which all WTO Members might ultimately agree" was useful. The elements listed, he explains, are from the Walker Principles; his discussions with colleagues at the WTO, Ambassadors, members of their delegations, officials in capitals, past AB members and staff, and expert observers; and the current literature on this subject. 

I did want to clarify one point though. In footnote 54, he says:

Simon Lester suggested an alternative to the DSB addressing overreach. He would have the General Council or a Ministerial Conference vote (three-quarters of Members required to carry an issue) on whether the reasoning (not the result of an individual report) was in error, thus making law. The problem with voting is the difficulty or ease of getting enough votes—that is, an unpopular position might not carry, while a popular but erroneous position might do so. Nevertheless, this is a recognition that the Members have to rediscover their legislative (rulemaking) power and reassert it. The question is how best to do it. This approach could be combined with the DS Review Committee recommended above.

To be clear, I didn't really expect to see voting here. In the blog post of mine that he links to, I said:

Rather than have partial adoption of a panel or Appellate Body ruling, as suggested by the United States and Chile, parties to the dispute could identify reasoning in a report that they found problematic. Identifying this reasoning would not have any impact on adoption or implementation of the findings in the particular case. Instead, it would trigger a process of discussion for an Article IX:2 interpretation. Achieving such an interpretation would be a challenge, and cannot be expected to happen easily. However, in the meantime, the amended DSU would state explicitly that the particular reasoning that was identified as being of concern would not serve as persuasive authority for future disputes.

I don't object to voting in these circumstances, but I agree with Alan that it will be a challenge to take a vote of this sort. What I had in mind with this suggestion is that we allow adoption to take place, while notifying the membership that there is a disagreement on the interpretation, and put that disagreement up for discussion. If an interpretation can resolve that disagreement, that's great, but even if it cannot, the dispute itself has been passed to the next stage and the discussion of the disagreement is valuable (and flagging it as not persuasive in future cases could help alleviate concerns related to "overreach," "activism," etc.).

Alan also had some follow-up thoughts on all this here.

Arbitrators Selected in DSU Article 25 Arbitration Appeal

The WTO has announced that the Arbitrator in the DS583 arbitration appeal under DSU Article 25 was composed on April 28. 2022 "through a random selection from a list of candidates prepared and agreed upon by the parties." Here are the arbitrators in the case (with an indication of the basis for their inclusion in the selection process):

• Mr Seung Wha Chang (former Appellate Body Member)
• Mr Mateo Diego-Fernandez Andrade (MPIA list)
• Mr Guohua Yang (MPIA list)

Not that I think this will tell us much about how the arbitration appeal will be handled, but here's a little WTO adjudication history for each one.

Seung Wha Chang is a Korean academic who was on the Appellate Body for one term, from June 1, 2012 - May 31, 2016 (the U.S. objected to his reappointment to a second term). Copying and pasting from our WorldTradeLaw.net tables, here are the appeals he worked on (the dates are circulation and adoption):

India - Solar Cells (AB)	Sep 16, 2016	Oct 14, 2016	GATT	Van den Bossche, Chang, Graham
Argentina - Financial Services (AB)	Apr 14, 2016	May 09, 2016	GATS	Chang, Bhatia, Zhang
India - Agricultural Products (AB)	Jun 04, 2015	Jun 19, 2015	DSU, SPS	Zhang, Chang, Servansing
U.S. - COOL, Article 21.5 (AB)	May 18, 2015	May 29, 2015	GATT, TBT	Ramírez-Hernández, Chang, Van den Bossche
Argentina - Import Measures (AB)	Jan 15, 2015	Jan 26, 2015	DSU, GATT	Chang, Bhatia, Ramírez-Hernández
U.S. - Countervailing Measures (China) (AB)	Dec 18, 2014	Jan 16, 2015	DSU, SCM	Van den Bossche, Bhatia, Chang
China - Rare Earths (AB)	Aug 07, 2014	Aug 29, 2014	DSU, GATT, Accession	Chang, Ramírez-Hernández, Zhang
U.S. - Countervailing and Anti-Dumping Measures (China) (AB)	Jul 07, 2014	Jul 22, 2014	DSU, GATT	Bhatia, Chang, Zhang
EC - Seal Products (AB)	May 22, 2014	Jun 18, 2014	DSU, GATT, TBT	Graham, Chang, Zhang

Prior to his appointment to the Appellate Body, he served on the following WTO panels:

U.S. - FSC, Article 21.5 II (Panel)	108	European Communities	Sep 30, 2005	Mar 14, 2006	Agriculture, DSU, GATT, SCM	Denis, Chambovey, Seung Wha Chang
EC - Trademarks / GIs (Panel)(Australia)	290	Australia	Mar 15, 2005	Apr 20, 2005	GATT, TBT, TRIPS	Mendoza, Seung Wha Chang, Cheung
EC - Trademarks / GIs (Panel)(U.S.)	174	United States	Mar 15, 2005	Apr 20, 2005	GATT, TRIPS	Mendoza, Seung Wha Chang, Cheung
Canada - Aircraft II (Panel)	222	Brazil	Jan 28, 2002	Feb 19, 2002	SCM	Davey, Seung Wha Chang, Dwarka-Canabady
U.S. - FSC, Article 21.5 (Panel)	108	European Communities	Aug 20, 2001	Jan 29, 2002	Agriculture, GATT, SCM	C. Falconer, Chambovey, Seung Wha Chang
U.S. - FSC (Panel)	108	European Communities	Oct 08, 1999	Mar 20, 2000	Agriculture, SCM	C. Falconer, Chambovey, Seung Wha Chang

 

Mateo Diego-Fernandez Andrade is a Mexican government official who has served on the following WTO panels:

China - TRQs (Panel)	517	United States	Apr 18, 2019	May 28, 2019	Accession, GATT	Diego-Fernández, Jóhannesson, Conejos
Korea - Pneumatic Valves (Panel)	504	Japan	Apr 12, 2018	Sep 30, 2019	AD	Diego-Fernández, Blumberg, Francis
EU - Fatty Alcohols (Indonesia) (Panel)	442	Indonesia	Dec 16, 2016	Sep 29, 2017	AD	O'Connor, Tereposky, Diego-Fernandez
India - Additional Duties (Panel)	360	United States	Jun 09, 2008	Nov 17, 2008	GATT	Wasescha, Diego-Fernandez, B. McRae
EC - Customs Matters (Panel)	315	United States	Jun 16, 2006	Dec 11, 2006	GATT	Benjelloun-Touimi, Diego-Fernandez, Tschaeni
Argentina - Peach Safeguards (Panel)	238	Chile	Feb 14, 2003	Apr 15, 2003	GATT, Safeguards	Feldman, Castro Bernieri, Diego-Fernandez

 

Finally, according to his bio at the 2017 WTO public forum, Guohua Yang "is a professor at China Tsinghua University Law School. Prof. Yang participated in the negotiations on China WTO accession and drafting the Accession Protocol and Working Party Report; he led a group of experts checking Chinese laws and regulations against the WTO rules and China commitments; he was the first Director and later Deputy Director General for WTO Legal Affairs within the Ministry responsible for WTO cases related to China. Prof. Yang strongly advocated for the multilateral trading system represented by the WTO. He also has a rich background on trade policy making and international cooperation. He is Executive Vice Chairman, WTO Law Research Society of China Law Society; Member, Indicative List for dispute settlement panels, the WTO Secretariat; Associate Editor, Journal of World Trade. He was also IP attaché at Chinese Embassy in the United States, Washington, DC (2006.1-2008.9) and WTO Appellate Body member candidate (2016)." You can read his piece entitled "China in the WTO Dispute Settlement: A Memoir" here.

Petros Mavroidis on the Indo-Pacific Economic Framework

This is a post by law professor Petros Mavroidis

 

Is IPEF an Avatar of Things to Come (Or Just a Digression)?

Petros C. Mavroidis

1. What is IPEF?

The IPEF (Indo-Pacific Economic Framework) sounds like the APEC, three adjectives and a noun that denotes moderate commitment. It covers labor-, environmental- (including clean energy and de-carbonization) and digital standards; supply-chain resilience; tax and anti-corruption provisions.

Sometimes, mistakenly, IPEF is portrayed as a request by US to its Pacific partners to adhere to its standards, with no market access guarantees offered in return. This is wrong. Adhering to the IPEF standards is insurance policy against market exclusion: the US, by today’s WTO legal framework, can lawfully exclude from its market in the name of non-discrimination anyone who does not meet say its labor and/or environmental standards.

What matters though, is not what IPEF does, as much as it is what the IPEF signals.

2. IPEF like TPP (Biden like Obama)

IPEF conforms Obama’s policy in two ways: pivot to Asia, and excluding China. One might legitimately wonder why not simply re-join the CPTPP, the successor to TPP. The response lies probably in what follows.

3. IPEF unlike TPP

Mutz (2021) provided additional confirmation that the pre-existing fault lines across political parties in the US regarding trade policy, have been fading: Destler (2005), Irwin (2017), Nelson (2019) had reached similar conclusions. Romney and Obama in 2012 engaged in China bashing; Clinton and Trump dwelled on who dislikes trade most. In light of the prevailing agreement in US society that trade should be viewed in terms of competition and not cooperation (as per Mutz’s terminology), then the president who reduces the potential bite of trade agreements scores big with the US voters. Trade talk after all, is disruptive.

IPEF is not expressed in terms of legally binding language. It is one more expression of the various initiatives of USTR Katherine Tai, framed in terms of “engagement instead of dispute adjudication”. But maybe it is too early to sound definitive on this score. The IPEF opts for variable geometry, the inner circle (IPEF+) being reserved for those who can and are willing to integrate further, faster (maybe the three ‘Five Eyes’ of the Pacific region, Australia, Canada, New Zealand, and the likes of Japan and Korea), while the outer circle (IPEF) will be reserved to the remaining invitees. The conditions for moving from the outer to the inner circle have yet to be detailed. It could be that binding language combined with dispute adjudication is reserved for the inner circle.

4. IPEF, the World, and the World Trade Organization

Irwin et al. (2008) and Steil (2013) made a persuasive case to the effect that those defending national security interests were holding the pen in the last stages of the GATT negotiation. Even though the GATT did not serve the “containment” objective that Kennan (1951) had advocated towards the Soviet Union as it opened up to Soviet bloc countries, it did so in measured manner. The underlying thinking for opening the door to some small Soviet satellites was, as Hoekman and Kostecki (2009), and Zeiler (1999) have noted that, by realizing gains from participation, they would adhere to liberal markets and weaken the Soviet alliance. For a moment, when history ended briefly with the fall of the Berlin wall, this seemed to be the winning strategy. But history returned, and the WTO looks less and less sustainable as is. It is in urgent need for reform.

But who will invest in the reform? Kindleberger (1973), and Keohane (1980) would argue that only a hegemon, the undisputed hegemon that is. There is not much empirical basis for that, but there is even less of a reason to believe that a cartel of heterogenous players would agree to similar down-payment. IPEF, if at all, confirms this view. The US, one of the two modern superpowers, has recently undertaken two major initiatives in the trade sphere, both regional (TPP, IPEF), and none of them multilateral (revive the WTO). The superpower that put together the GATT and its successor the WTO, has turned its back to it. The most recent US initiative (IPEF) is antithetical to the spirit of binding language and compulsory third-party adjudication permeating the WTO. If TPP could be seen as correction for the negotiation with China that never happened, as we argued in Mavroidis and Sapir (2021), the IPEF is a signal to the world as it is to the US domestic constituency that the identity of trading partners matters. It remains to be seen whether we are headed towards IPEF-type initiatives next to, or in lieu of the WTO. This is probably why it should be taken with the seriousness that it deserves.

References

Destler, I. M. 2005. American Trade Politics, 4th Edition, Institute of International Economics:

Washington, D.C.

Hoekman, Bernard M., and Michel Kostecki. 2009. The Political Economy of the World Trading System, Oxford University Press: Oxford, United Kingdom.

Irwin, Douglas A. 2017. Clashing Over Commerce, Chicago University Press: Chicago, Illinois.

Irwin, Douglas A, Petros C. Mavroidis, and Alan O. Sykes. 2008. The Genesis of the GATT: Cambridge University Press: New York City, New York.

Kennan, George F. 1951. American Diplomacy, 1900–1950, University of Chicago Press: Chicago,

Illinois.

Keohane, Robert O. 1980. The Theory of Hegemonic Stability and Changes in International Economic Regimes, 1967-1977, pp. 124-156 in Ole R. Holsti, Randolph M. Siverson, and Alexander ae. George (eds.) Change in the International System, Westview Press: Boulder, Colorado.

Kindleberger, Charles P. 1973. The World in Depression: 1929-1939, University of California Press: Berkeley, California.

Mavroidis, Petros C. and André Sapir. 2021. China and the WTO, Why Multilateralism Still Matters, Princeton University Press: Princeton, New Jersey.  

Mutz, Diana C. 2021. Winners and Losers, Princeton University Press: Princeton, New Jersey. 

Nelson, Douglas. 2019. Facing Up to Trump Administration Mercantilism: the 2018 WTO Trade Policy Review of the United States, The World Economy, 42: 3430-3437.

Steil, Benn. 2013. The Battle of Bretton Woods, Princeton University Press: Princeton, New Jersey.

Zeiler, Thomas W. 1999. Free Trade, Free World, The University of North Carolina: Chapel Hill, North

Carolina.

 

The EUI Workshop on Sociological Perspectives on International Economic Law and Human Rights Law (May 13-14, 2022)

The European University Institute (EUI) Workshop on Sociological Perspectives on International Economic Law and Human Rights Law will take place on 13 - 14 May 2022 in the Robert Schuman Centre, Conference Room - Villa La Fonte, Via delle Fontanelle 18 - San Domenico di Fiesole (Fiesole, Florence).  This fifth workshop on the sociology of international law will focus on various sociological aspects pertaining to international economic law and human rights law, as well as to interrelationships between these two major legal fields.  Participants will explore diverse interactions between sociological concepts and broad range of legal rules and institutions in these spheres.  See the full program here.  Those interested in attending the workshop, please send email to Mia Saugman.

Katherine Tai on Protectionism, Environmental Goals, Peace, and U.S. Trade Policy

Speaking at an event hosted by the Technical University of Munich last week, U.S. Trade Representative Katherine Tai was asked a question about trade and the environment that prompted a broad response which touched on a number of important trade issues. Here was the exchange:

Question:

This has to do with the bipartisan support for US trade, and the rising problems of protectionism and export controls that we're seeing in various parts of the world, perhaps because of COVID and the war in Ukraine, even pressures to move more in the direction of protectionism. The question is, how can we assure that climate change doesn't become a pretext for even further protectionism? The title of your talk was economics versus the environment, and here I think the question is, how do we integrate environment and trade?

Tai:

This is certainly a provocative question, posed in a thought provocative way. Let me first engage on some of the premises baked into the question, and then let me come to your specific question and point on economics and environmental objectives.

So I am very, very careful, and generally, I do not use the term protectionism. The reason why is, I think that the way we talk about trade also needs to evolve, and the way we think about trade. For many, many years, I think in the post World War II era, we have thought about trade as something that needs to be liberalized maximally. And the premise to this is that the more that we trade with each other the more peace and prosperity will result. And in fact I do think that this is largely the premise that underlies the WTO and the multilateral trading system, as it has existed for the past many, many years. And I think that there was every reason to believe during those decades that we were right, that all we needed to do was just to trade a lot, trade more, and trade freely, in as unfettered a way as possible. And the more of these connections were generated, the more we would rely on each other, and the better off we would all be. That this was the path to a better, more secure world.

I think a number of things have happened, just say in the past five to seven, let's say even 10 years, that cause me to wonder whether this vision for globalization leading us to a better, more secure world has run its course, and if we don't need a course correction, to move us towards and take lessons from these past years, to move us towards a sense of more security, and more optimism and hope.

So a couple of the disruptions that I'd like to highlight. In 2016, for example, the first disruption will be a backlash against this version of globalization that we've started to see. One happened with respect to the European Union in 2016. In the United Kingdom, we saw the Brexit referendum vote that was very surprising to many people, including those of us in the United States watching the vote. I think that we expected, watching the polls, that it would be close, but I don't know that we expected that that referendum would succeed. And that has led to the multi year process for Brexit, which I know has been really affecting of the entire European Union. The process of losing one of the members, a little bit like a divorce, which here from London, and when I visit Brussels, I know actually continues to go on. Not all the issues are settled and the European Union and the United Kingdom continue to have to negotiate some parts of what it means for Brexit to happen.

Of course, in the United States in 2016, we also had a very consequential vote, and that was the election of President Donald Trump. Now, I work in trade policy, so I'm only going to address the implications of President Trump's election through American trade policy. But as all of us have seen, over the course of the Trump administration in those four years, President Trump took a very very different approach to trade. And in fact his trade policies were a hallmark of his campaign and his political brand. And that America First energy is something that we are also extremely mindful of in the Biden administration and having gone through those four years, in terms of being a lesson that we feel we need to learn from. We cannot just go back to the world in 2015 and pretend like these things didn't happen. We feel strongly that we have to take history as it's happened and we have to adapt.

The ... second set of disruptions around COVID, the pandemic and our supply chain disruptions. And the third set are more recent, and Russia's invasion of Ukraine, which according to our earlier theory about more trade leads to more peace and prosperity is something that simply should not have happened. One WTO member, on this basis, on this theory, should never have been incentivized to aggressively act out and invade another WTO Member.

But here we are, in a version of this globalized world, where I think we've got to think about things differently, and therefore, this "free trade equals good, protectionism equals bad" dichotomy is one that I think we need to revisit. So you know, on export controls, I think you have to examine the objectives of the policies we're talking about. Export controls are about controls on technology, it is a national security tool.

Let me move this over into the use of economic policy to advance environmental goals. The way our global economic system has been structured, based on the premises I just talked about, has allowed for the free flow of capital across borders to chase the lowest cost and what that has rewarded, the incentives of the system, are to reward lax environmental protections, and frankly, lax worker protections. Protecting and having high standards for workers and the environment mean higher costs, but they're critical to resilience and sustainability. So in this era that we're in, in refashioning globalization to a globalization 2.0, what we really need to think through is how can we adapt the rules of trade to incentivize firm behavior to take into account more than just efficiency, but to promote and reward decisions that are made to pursue sustainability for our people and for our planet.

Here are a few thoughts in response.

First, it's interesting that Tai is skeptical of the term protectionism, because later she talks about export controls as being a national security tool, which I take as a statement that they are not, in fact, protectionism. I feel like there may be some confusion and differences of opinion out there about what exactly protectionism means. Is it just about the effect of the measure, or is it also about the intent? Some people seem to take it as referring to any measure that has a negative impact on trade, regardless of the intent, and I can see how there would be a problem with the term if used that way. But I prefer a usage that includes intent as well, and it may be the case that under this definition, Tai would be OK with the term. (Next time I have the opportunity at one of her events, I'll try to put this question to her!) For me, the main purpose of the trading system is to adopt mutually agreed constraints on protectionism, by which I mean measures whose primary objective is to give domestic producers an advantage over their foreign competitors for commercial reasons. If, on the other hand, protectionism is not the target here, then I'm a little lost about what the trade regime is supposed to be doing. There are various possibilities, but I have doubts that any of them could provide the basis for a stable trading system.

Second, there may be a handful of people out there who believe that trade liberalization should be "liberalized maximally," but for the most part they have been kept far from the levers of power over the past few decades. During that time, U.S. trade policy has maintained a careful balance of liberalization and protectionism, with plenty of protectionism still allowed. We do have something referred to as "free trade agreements," but we have never been close to having free trade. In addition, a lot of the maximizing we have done under trade agreements is about intellectual property, which some people -- and I am sympathetic to this view -- believe is more akin to protectionism.

On trade and peace, I don't think anyone believes that trade can prevent all war, but I also think it's clear that trade can and does reduce the possibility for war. This can be difficult to prove empirically, but it's hard to imagine that it's not true to some extent. So, while having both Russia and Ukraine in the WTO won't prevent Russia from invading Ukraine, there are plenty of countries whose relationships have improved greatly due to closer economic ties (Western Europe is perhaps the best example of this).

As to the impact of the 2016 votes, I'll focus on the election of Trump. It is true that Trump used a lot of protectionist rhetoric during his campaign, which most presidential candidates do, of course, but his rhetoric was even more extreme than that of others. After all the protectionist talk, however, he lost the 2016 popular vote handily, 48% to 45.9%, to an extremely unpopular candidate, so I'm not sure the lesson we should draw is that protectionism is popular. And of course, he famously used other rhetoric during that campaign, and it's hard to say which one played a bigger role in him either getting the votes that he did or in losing the popular vote. My instinct is -- and public polling seems to show -- that trade doesn't play a big role in people's presidential choices, but it's hard to prove this definitively. Now, we do have the electoral college, so Trump became president despite losing the popular vote, which gave him the opportunity to implement protectionist policies for 4 years, after which he lost the popular vote even more handily, 51.3% to 46.8% (while also continuing to use that other rhetoric). Again, it's hard to know what role the protectionism played in his losing these votes, but the results call into question the potency of protectionism as a successful electoral strategy. (For what it's worth, I think there is a version of trade liberalization that can still work politically in the U.S., and my prediction is that the U.S. will eventually get back on board with trade liberalization after it falls behind the rest of the world far enough).

Finally, as to environmental goals, if we take these objectives seriously, and I don't think we often do in U.S. policymaking, there shouldn't be much of a conflict between trade and the environment. If you ratchet up domestic environmental standards and apply those standards equally to imported and domestic goods, it is unlikely that you will violate trade rules. (There are a couple obligations and dispute settlement decisions that call that principle into question, but even at their strongest, trade rules can't force countries to change course. See, e.g., EC - Hormones). And while the "race to the bottom" theory is popular in certain circles, I'm not sure the evidence supports it. To me, the issue of lax environmental standards is mostly about domestic politics. The United States (and other countries) could adopt taxes and regulations that promote a cleaner environment, but politicians have had a hard time making that happen. I don't know whether the problem is more on the political leadership side or on the voter side, but regardless, trade rules are not playing much of a role here. And of course, one way trade rules could play a role in a positive sense is through an agreement to lower tariffs on environmental goods, which would be a nice win-win for both trade and the environment. However, there is strong opposition from corporations/labor unions who don't want a broad win for everyone on either issue because of the losses they think they will suffer, which makes it hard to get this done.

Follow-Up on the First DSU Article 25 Appeal

Following up on my last post, the panel report in DS595, EU - Steel Safeguards, was circulated on Friday, which, by the terms of the Article 25 Agreed Procedures in the dispute, means that the parties will not appeal, either through the normal method or the Article 25 alternative. That leaves us with just the one Article 25 appeal for now, in DS583, which I have the following questions about.

1. How will the arbitrator selection process go and who will be the first Article 25 arbitrators? 

The DS583 Article 25 agreed procedures say this:

The arbitrators shall be three persons randomly selected, in the physical presence of representatives of the parties, from a combined list of former Appellate Body Members and appeal arbitrators.4 The random selection will be conducted at the same time as the random selection in DS595 European Union — Safeguard Measures on Certain Steel Products, so as to ensure that one randomly selected appeal is heard by two former Appellate Body Members and one MPIA appeal arbitrator whilst the appeal in the other dispute is heard by one former Appellate Body Member and two MPIA appeal arbitrators. If there is only one appeal it will be heard by one former Appellate Body Member, one MPIA appeal arbitrator, and the third person shall be drawn at random from the remaining persons on the combined list. The random selection shall be made immediately after the filing of any notice of appeal and the arbitrators informed immediately.

DS595 was not appealed, so there is only one appeal here and the DS583 appeal "will be heard by one former Appellate Body Member, one MPIA appeal arbitrator, and the third person shall be drawn at random from the remaining persons on the combined list." The random selection is to be made "immediately after the filing of any notice of appeal." That means it should happen soon, if it hasn't happened already. The MPIA list is here; I'm not sure which of the former Appellate Body Members are available to work on this appeal. 

2. What kind of award will the arbitrators write?

Different people are likely to have different approaches to appellate review, and what this first group does will set a precedent -- with apologies to those who don't like that word -- and will shape everyone's views of this alternative approach to appeals. How much summarizing of parties' arguments and past cases will the arbitrators do? How extensive will their reasoning be? What will they do with the DSU Article 11 allegation? How will they handle the substantive issues, which deal with some core GATT principles?

Related to this is the issue of how long they will take. The agreed procedures say:

12. The parties request the arbitrators to issue the award within 90 days following the filing of the Notice of Appeal. To that end, the arbitrators may take appropriate organizational measures to streamline the proceedings, without prejudice to the procedural rights and obligations of the parties and due process. Such measures may include decisions on page limits, time limits and deadlines as well as on the length and number of hearings required.

13. If necessary in order to issue the award within the 90 day time-period, the arbitrators may also propose substantive measures to the parties, such as an exclusion of claims based on the alleged lack of an objective assessment of the facts pursuant to Article 11 of the DSU.⁵

14. On a proposal from the arbitrators, the parties may agree to extend the 90 day time-period for the issuance of the award.

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⁵ For greater certainty, the proposal of the arbitrators is not legally binding and it will be up to the party concerned to agree with the proposed substantive measures. The fact that the party concerned does not agree with the proposed substantive measures shall not prejudice the consideration of the case or the rights of the parties.

As a general matter, I think arbitrators can finish their reports in Article 25 appeals in 90 days. However, given the circumstances here (i.e., the first such appeal ever) it could be a challenge, and it will require taking a particular approach on the questions I raised above, and not everyone wants to take an approach that can support a 90 day period. What will this group of arbitrators do here?

3. What kind of assistance will the arbitrators receive?

In WTO dispute settlement, the panelists, arbitrators, and Appellate Body Members are assisted by lawyers (and others) from the Secretariat. In the context of the MPIA, during the Trump administration, the U.S. sent a letter objecting to some aspects of Secretariat assistance to the MPIA (e.g., the U.S. argued: "Article 25 provides no basis for the use of WTO resources to support functions that are not part of the arbitration, such as for a 'pool of arbitrators' to 'stay abreast of WTO dispute settlement activities' or to enable the arbitrators to 'discuss among themselves matters of interpretation, practice[,] and procedure.'"). But that was a different administration, and this case is not under the MPIA, so perhaps the U.S. will not have concerns with the Secretariat providing assistance related to this arbitration.

If the Secretariat is going to provide assistance, who exactly would do it? Having former Appellate Body Secretariat staff, who are now in other divisions, play a role could generate U.S. objections (the U.S. letter noted that "the [MPIA] proposal would expend WTO resources to seek to recreate the Appellate Body"), so maybe everyone will try to avoid that. And the Legal Affairs division -- I assume, given the subject matter of the dispute -- assisted on the panel report, so perhaps those folks will be excluded as well. But there are other people in the building with experience in these matters, so it should not be too much of a challenge to find good people. (Thanks to Geraldo Vidigal for conversations about this issue).