International Economic Law and Policy Blog

Sanctions and Boycotts as "Engines for Worldmaking"

In a paper called "The Possible Worlds of Economic Sanctions" that takes a brief look at the history of economic sanctions and speculates about their future, law prof Ben Heath writes the following:

Any attempt to understand the future of economic statecraft is a bit like gazing into a kaleidoscope of fractured worlds, of possible futures bleeding and refracting into each other. In this symposium contribution, I reflect on what it might mean to think of today’s economic warriors as the makers of those future worlds. “Worldmaking” projects, in the sense used by political theorist Adom Getachew, are those which resist the “legal and material manifestations” of the existing world order, and instead posit and work toward alternative “juridical, political, and economic institutions in the international realm.” The “sanctionists” of interwar Europe and America, as Nicolas Mulder shows, certainly understood their project as remaking world order. So too, in their own ways, did the organizers, strikers, and industrial warriors of the early twentieth century’s labor movements, as well as the boycotters and economic warriors of the Chinese diaspora during the same period. By understanding sanctions and boycotts as engines for worldmaking, I want to suggest, we can access important descriptive and normative insights that otherwise would be obscured. But to look forward, sometimes it first helps to go back.

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The foregoing ... also demonstrate that thinking of sanctions as engines for worldmaking has descriptive and normative benefits. As a descriptive matter, worldmaking focuses our attention on whom sanctions empower, rather than the discrete policy goals they seek to accomplish or the values they express. This turns our attention away from specific sanctions programs to the global legal, political, and economic architecture that supports them, and that shapes and is shaped by them. In a similar way, our normative evaluation of a given sanctions program is not limited to the (still very important) question of the program will “work” and the (far less important) question of whether it expresses the “right” values. We are invited instead to ask who is empowered by the order that sanctions create, and whether a change in sanctions practice implies a positive change in the distribution of global power. In other words, worldmaking invites us to apply a “power lens” to the problem of economic sanctions.

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This redistributive vision of sanctions suggests an alternative vision of economic power that is turned to the aim of global economic justice. I cannot think of any cause more worthy of serious reflection, organization, and action. It is a world worth making.

As I understand it, Ben is not arguing that this is where the sanctions regime should go. Rather, he is looking at current trends and thinking about where it might go. I see his point about these trends, which makes me feel compelled to push back against the speculative future he is laying out. In that regard, I have several questions about the idea of sanctions as "engines for worldmaking," with a focus on when states are doing the sanctioning (as they are the main actors doing it).

• Is such a policy fundamentally unequal and unfair?

How many states have the power to do worldmaking? Not many. The U.S., the EU, China, a few others. What that means in practical terms is that sanctions are likely to be a tool of the powerful to push the less powerful around. The powerful are free to do what they want, while the less powerful may be subject to punishments for the very same behavior that more powerful governments are engaging in. Is this approach fair to the people in less powerful countries? It feels like such a system would reinforce existing inequalities, and in some ways would be a return to the world of empire. (Arguably, this is what we have now, but Ben seems to be anticipating an intensification).

• Is anyone really qualified to do worldmaking?

I think most of us have moments when it feels like our policy views are the correct ones, and if everyone just followed them, things would be so much better. The "everyone" could be just your country, but also could be the whole world. But while people in democracies do get a say in "countrymaking", perhaps "worldmaking" is too much. Do we really know enough about the rest of world to say for sure that our preferences should apply there as well? No matter how smart and genuinely good you think you are, maybe humility should lead us to avoid most activities that could be characterized as "worldmaking." There could be some exceptions, such as trying to prevent wars or egregious human rights abuses, but when it comes to most policies, perhaps it would be better to learn to live with differences or to just lead by example.

• How would other countries respond?

If some other government were trying to "worldmake" the United States, how would America respond? Negatively, I would think. So how would people in other countries respond if the U.S. or other powerful governments try to do this to them? I think that, on balance, the answer is negatively as well. Now, there may be instances where particular people in another country want the U.S. to support their cause. But I think the instinct of the majority is usually going to be to oppose this sort of foreign intervention in their domestic affairs.

• Who else would use this power in the future?

Once the power to do worldmaking has been formalized, its future use could go in many different directions. For anyone who thinks their own political views are about to become accepted by the masses and embark on a long and glorious reign, I have a disappointing spoiler for you: They are not. Your political opponents will take power at some point. And they will now have the tools you created. You may want to use U.S. power to encourage other countries to protect gay rights; your opponents may want to use that power to encourage them to protect gun rights. As a result, it's very hard to predict how such power will be used in the future.

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The skepticism I set out above does not mean I would never support government-led sanctions. However, I am wary of using them unless a significant majority of the world agrees that the behavior of a particular government or a non-state actor justifies a response.

Some Questions about the Biden Administration's Plans for Industrial Subsidies

This is from a speech last week by White House NEC Director Brian Deese on "Executing a Modern American Industrial Strategy":

Some have raised a valid concern that countries may keep one-upping each other on ever-larger industrial subsidies, reducing their efficiency.  But the investments we’re making will pay enormous global dividends in expanding supply, speeding adoption, and driving down costs.  And for industries like semiconductors and clean energy, we’re nowhere near the global saturation point of needed investments.  We should welcome actions by most countries if they’re structured fairly and scaled appropriately.

This passage raises several question for me.

First, I agree that the concern about a subsidy war ("countries may keep one-upping each other on ever-larger industrial subsidies") is valid. This sort of thing has been common for a long-time with location incentives provided by national and local governments. Governments compete for investment with subsidies in a way that doesn't lead to much, if any, additional investment, but rather just better deals for companies who were planning to invest anyway. So what's the plan to deal with this potential problem here? The last sentence of the passage says: "We should welcome actions by most countries if they’re structured fairly and scaled appropriately." Does "scaled appropriately" mean some sort of limit on the amounts involved? Does "structured fairly" mean some forms of subsidies are allowed while others are not? Would this be like the Agriculture Agreement subsidy limits, but applied to industrial subsidies, with the result being some sort of WTO agreement with specific maximums on these subsidies? That's one possibility, and I think I recall that some people have suggested this approach recently. If that's not what Deese has in mind though, what is the plan exactly?

Second, what does he mean by "[w]e should welcome actions by most countries"? The obvious answer here is that Chinese actions would not be welcomed, but what does that mean? Does it mean they think China shouldn't be giving these subsidies, and we won't "welcome" it if China does? How exactly would the Biden administration react to Chinese subsidies of this sort? A Section 301 investigation and tariffs?

Third, he says that with "semiconductors and clean energy, we’re nowhere near the global saturation point of needed investments." But how do we know what the saturation point is? If we get to a moment when most of the companies in one of these industries are losing money because there is overcapacity, are we at the saturation point then? And do we change course at that point, or do we just keep the subsidies coming and maybe even increase them?

And finally, domestic countervailing duty law allows for tariffs to be imposed on subsidized imports. With all these new subsidies, is the Biden administration anticipating that other countries will impose tariffs on subsidized U.S. goods that are exported? Are they expecting U.S. industries to ask for tariffs against subsidized foreign goods? How do they see CVDs playing out here? With the level of subsidies they seem to have in mind, I'm not sure how long we can go before these CVD cases start coming.

Conference on the European Parliament's Committee on International Trade

This is from the University of Göttingen:

On 8 and 9 November 2022, the ESIL Interest Group on International Economic Law together with Universities of Göttingen, Innsbruck and Bologna will be holding a hybrid conference on the European Parliament's Committee on International Trade (INTA Committee). The Conference will bring together academic and practical perspectives and address the INTA Committee's achievements, challenges and prospects. The Conference will take place in a hybrid format, with the in-person event being hosted by the Representation of Lower Saxony to the EU, in Brussels. For the programme and to register follow the link here.

Katherine Tai on Market Access, Trade and Peace, and Trade and Prosperity/Inequality

At an event last week, U.S. Trade Rep. Katherine Tai was asked the following question:

How would you respond to allies' concerns that trade policy is now more focused on standards rather than market access?

Here was Tai's response:

So to translate this, for those of you who are not familiar with trade lingo, everything that we do is about access to markets, access to our markets, our access to other markets. In fact, I had a conversation with one of our new ambassadors, who comes from the business role and has been a CEO of some very big companies. And I was describing to her what we were doing in the IPEF. And I said, well, but you know, we've designed the IPEF not to address market access, and I really try not to slip into trade lingo because I think that is very confusing. And so she stopped me and she said, but everything you've just described is about access to markets. And I said, No, no, that's right. That's right. When I say market access in trade language, that's tariff liberalization.

And so you know, this is an important point to me. The IPEF is designed not to include tariff liberalization, and I'm not embarrassed by that, I'm not on the defensive about it. This is a feature and not a bug.

Let me explain a little bit more. In a speech that I gave last week at the Roosevelt Institute, I did say, we have not sworn off market liberalisation and tariff reduction. But importantly, the way we have done it in the past has been in service of a theory of the case around globalization, peace and prosperity, that I think that we have discovered the limits to. And that theory of the case has been that the more you trade with each other, the more liberalization you can bring, the more trade that there is necessarily, the more peace and prosperity you will have. One of the things that we have seen is, with respect to the more prosperity, yes, I think that if you look at the past several decades, the overall pie has grown. But who has access to that pie? I think that the growing inequality concerns in many of our economies goes to the point that, we've got to rethink the way that we grow this pie.

The other aspect of this is, the assumption that countries that trade with each other do not go to war with each other. Nothing could be clearer than Russia's invasion of Ukraine, that that was not a market based, economically rational decision. And that even countries that trade together -- and this has probably always been the case, go back to World War I and further -- even countries that rely on each other for their prosperity are at some points motivated to ignore all of that and nevertheless to go to war. Russia's invasion, Vladimir Putin's decision to invade Ukraine, shrank the pie for Russia, shrank the pie for Ukraine. And I think that not being a business economist like the rest of you, I feel pretty confident in saying that that decision is shrinking the pie for everyone.

So in this context, I think that, you know, what we're trying to rethink is, how do you do tariff liberalization and tariff reduction and market liberalization in service of a greater good, that tariff reduction and market liberalization are not goals in and of themselves? How can you do this to serve the goal of resiliency, sustainability, and more inclusiveness in the prosperity that you're creating? And until we come up with that formula, we're not going to do the thing that I feel very strongly has brought us to the point where we are right now. Again, in terms of responsible policymaking, in terms of focusing on building confidence, I think you need to have a proper diagnosis of what's going on right now in order to have a chance, in order to have the credibility of building something that is going to be stronger, better, more durable, and more fair.

And I think that there are also examples of those who are doubling down on the earlier formula, who I think are running into the challenge of not seeing success, from not evolving and adapting, not taking the lessons that are very painful right now. And truly, I think that, if in this very painful period that we're still in, if we cannot learn the lessons, then I think that we really undermine the ability to build that confidence to demonstrate that what we are building towards, what we have adapted to, is going to withstand the kinds of shocks that we have just experienced.

Let me make a couple points here.

First, as I've said before, I think the term "market access" is problematic in trade discussions because it means different things to different people. But there's probably no ridding the trade dictionary of it at this point, so we're stuck with it and just need to explain what we mean when we use it. To me, it covers both tariff liberalization and rules on domestic regulation, including regulations that act as trade barriers even though they are not protectionist. But it's probably best to specify in each case what you have in mind, which Tai does above.

Second, with regard to standards and their connection to access to markets, this has been a priority of trade negotiations for at least 50 years, and we can even find it playing an important role back in the 1930s League of Nations economic discussions. At this point, with all that has happened already with standards in trade agreements, I'd be surprised if there were any big "market access" breakthroughs coming in the IPEF or elsewhere, but I'd have to see the language that comes out of those talks before I say anything definitive. I'm guessing they will focus their efforts on digital standards, but it's hard to see much progress on regulatory coordination in that area until everyone figures out their preferred domestic standards (which could take a while!).

Third, with regard to trade and peace, I don't think anyone is saying that trade will, always and everywhere, bring peace between countries who trade. However, there are circumstances where the right trade arrangement can almost certainly make a big contribution to peaceful relations. For example, European economic integration after WWII was, I think everyone will agree, a big success in this regard. Does that mean adopting the euro in 1999 was the right policy? Or that the EU should have expanded to the East? The answers to these technical questions are never simple. Nevertheless, generally speaking, I think it's fair to say that trade between countries usually contributes to better relations, whereas closing yourself off to trade with countries usually leads to worse relations. That seems like such an obvious thing to say that everyone will probably agree with me, but people can contest this in the comments if they want to. (I think it's also worth noting here that trade by itself cannot bring peace. The focus of any effort towards peaceful international relations should be on constructing a sensible foreign policy.)

Finally, on trade and inequality/prosperity, there is clearly a push going on right now to call into question the current status quo of the global trading system, a system which reflects a particular mix of liberalization and protectionism. The concern of the people doing this pushing seems to be that we moved too far towards liberalization, and while that might have increased overall prosperity, it also led to increased inequality. But given how protectionist measures shift financial resources from society as a whole to specific companies and industries, I'm not sure I see how a move towards more protectionism will reduce inequality.

Call for Abstracts: SAIELN 3rd Biennial Conference on Food Security and International Law

This is from the South Asian International Economic Law Network (SAIELN):

SAIELN is a collaborative network of academics, practitioners and officials in the field of International Economic Law, articulating their views, brainstorming ideas, and importantly, nurturing and developing the field of international economic law especially in the South Asia region.

SAIELN organises biennial conferences on key and emerging issues in international economic law. Following the successful conclusion of two conferences, SAIELN is set to host the third biennial conference on Food Security and International Law: Critical and Interdisciplinary Perspectives on 16th – 17th December 2022 in Kochi, Kerala. The conference aims to provide a platform for experts, policymakers, lawyers, academics, economists, and civil society partners to exchange views on the multifaceted challenges of food security and offer innovative legal and policy solutions to address them.

An abstract of 500 words should be submitted to southasiaiel@gmail.com by 5 November 2022. Further details regarding the conference are available here.  

How could China respond to recent US export controls?

On October 3, 2022, the United States provided its latest notification list for all quantitative restrictions (the previous notification was in 2020). The notice does not include the recent export restrictions on AI and semiconductors to China, as part of a broader strategy for U.S. technology competition, formally announced days later. Actions were swift, but the Biden Administration strove to keep its actions transparent so that U.S. firms can understand (as much as practical) the ramifications of the changes.  We do not know if the United States may notify the WTO membership, or whether China will raise concerns about potential violations of the WTO rules.

How could China respond to the United States’ restrictions, described as ‘semiconductor policy chokeholds’?

In a committee on market access meeting on May 28, 2019, China raised ‘other business’ at the conclusion of the meeting. Its focus was the United States’ Executive Order on Securing the Information and Communications Technology and Services Supply Chain. China asserted that the EO ‘barred’ US companies from buying or using telecommunications equipment and services provided by enterprises deemed ‘national security’ threats. On May 16, 2019, the Commerce Department added Huawei and 68 affiliates to the ‘Entity List’ on security concerns.

China asked the United States representatives whether it would ‘notify subsequent administrative rules to the WTO without delay’ and to ‘respect’ WTO rules when ‘formulating’ regulations. (19.1) Moreover, China asserted that these ‘unilateral sanctioning measures’ violated Articles I and XI of the GATT and failed to comply with Article XXI of the GATT, the security exceptions.

China used its time to challenge the United States’ assessment of Article XXI. The Chinese representatives stated that the United States engaged in ‘repeated over-generalization’ of the concept of essential security and often ‘abuse[d]’ the exceptions, which ‘already caused great concern to the Membership.’ (19.2) In this case, the United States’ repeat emphasis on ‘strengthening the economy’ and ‘preserving innovation and technology was vital to its national defence.’ China’s evidence to dispute the United States' concerns with the health of the US economy was the 2019 US President’s Trade Policy Agenda, along with data that showed a ‘boom in jobs.’ Moreover, China pointed out the Agenda’s revealing logic that tariffs were ‘forms of leverage to persuade other countries to take our concerns seriously’ further challenged the idea that US trade restrictions were meant to protect national security. Speaking to the broader membership, China reminded the committee of other Article XXI invocations, namely the invocation of s. 232 to impose tariffs on steel and aluminium.  Invocation of Article XXI, China argued, without objective evidence, constituted abuse and threatened the multilateral trading system. Just for good measure, China stressed that the origins of the exceptions stemmed from U.S. remarks in 1947 regarding the ‘danger’ of too broad an exception. The United States representative failed to address China’s concerns, only observing that China should put the concern on the agenda.

Any WTO member is free to assert its own assessment of security. Post-pandemic and in a warming world, governments seem hyper-attuned to the resiliency of supply chains. While we do not yet know essential details about this new restriction ecosystem, we do know from the recent Biden National Security Strategy 2022 that the United States is taking a much broader understanding of national security than that imagined by a traditional military sense of security, as contemplated by the architects of the exceptions. This new understanding of security takes in global climate and food security concerns. Positive outcomes may be possible, even from unilateral actions.

Yet, what does it mean when one member cites its ‘economic heft’ to drive the membership’s understanding? What are the legal consequences of a blending of ‘national’ focused security and global concerns? For example, if a measure aims to deliver jobs and take action to diversify supply chains for the ‘security of the American people and [their] allies and partners’ while explicitly seeking to ‘impose costs’ on another WTO member? Earlier this summer, USTR Tai observed that U.S. tariffs on Chinese goods maintain ‘leverage’ too. Due to its relative market strength, can the United States forge a new status quo for all WTO members, requiring the latter to conform? 

A key unanswered question is whether both China and the United States can continue to ‘talk’ and negotiate with each other and the broader membership on essential multilateral and plurilateral initiatives. Even if the United States takes a broader assessment of security, this does not (yet) equate to a commitment to disengage from the multilateral trading system. 

Neoliberalism vs. Post-Neoliberalism vs. Plain Old Mixed Economies

I recently went to an event on industrial policy hosted by the Roosevelt Institute, and on one panel Rana Foroohar of the FT said the following about neoliberalism and post-neoliberalism:

So let me scene set a little bit about where we've been, and in particular, the neoliberal paradigm, and where we're headed into this post-neoliberal world, this world of Biden-omics, this world of industrial policy that we're hearing about.

...

I think that we are moving into a post-neoliberal, post-globalized world. Not that globalization is going away, but we're gonna see much more of a focus, not just in the US, but globally on regionalization, localization and re-mooring wealth and place, because that's really what's been lost in the last 40 years. So, Heather and Felicia, I want to kind of sketch my paradigm of neoliberalism and see if you agree with it, and then get your sense of where we're going.

When I think about neoliberalism, I think about the Reagan-Thatcher revolution, you know, taxes were slashed, markets were deregulated, global capital was unleashed. And the assumption was that capital, goods and people were all going to be able to cross borders seamlessly, and, guess what, land where it was most productive for them to do so.

The problem with this paradigm is the global capital moved much faster and sort of began to float 35,000 feet above the challenges of the nation state, and that has become an issue that we're all grappling with. So while you saw more global growth than ever before, particularly in the years leading up to the financial crisis, you also saw increasing and dramatic growth in global inequity in almost every country around the world, not just the US. That of course has economic and political ramifications. And so that's where we are now. To me, the financial crisis, COVID, the pandemic, war in Ukraine, all have been sort of like a scrim that's been pulled up and shown us the fragility of the old world. From the debt crisis, the financialization, the imbalances in trade, you know, the rise of an asset based economy in the US versus one on actual income growth and good jobs.

I hear a lot these days about neoliberalism dying and post-neoliberalism emerging, generally from people who don't like neoliberalism. It's not always clear what they mean by neoliberalism, and what they don't like specifically, but in some general sense they want more government involvement in the economy and more regulation of markets.

One issue I have with these suggestions of the death of neoliberalism is that it makes it sound like we have gone through radical shifts in the economy over the years. The critics of neoliberalism seem to view the neoliberal period as an extreme journey into free markets, and the post-neoliberal world as -- they hope -- a return to heavier government regulation, industrial policy, and, for some people at least, economic nationalism.

But I don't think this view of how the U.S. economy has been run is correct. My sense is that the U.S. economy was, is, and in all likelihood will be a mixed one, with some market-oriented parts and plenty of government intervention. There are changes to the mix now and then, but they are fairly small shifts along the continuum. Reagan did push for a bigger role for markets; and then Bill Clinton pushed back. We saw this pattern repeated with Bush and Obama. But neither side's vision made very much progress in the direction they were pushing, and no matter which party has been in power, or if they were sharing power as they often were, there was always a mix of government-led and market-oriented economic policies. Our economy is a mixed one and the changes that occur now and then are mostly just tinkering at the margins of this mix.

So to sum up: Neoliberalism is not dead (if it ever existed!) and post-neoliberalism is not on its way in. We have a mixed economy, pretty much like the one we have always had.

That's kind of a boring story of the economy, and therefore may not get much attention. If I could think of a clever-sounding name for this state of affairs, maybe I could convince more people.

The Colombia - Frozen Fries MPIA Appeal

The first MPIA appeal (and second DSU Article 25 arbitration appeal) is now underway as Colombia has appealed the Colombia - Frozen Fries (DS591) dispute. The WTO announced today that the following arbitrators will hear the case:

• Mr José Alfredo GRAÇA LIMA (Chairperson)
• Mr Alejandro JARA
• Mr Joost PAUWELYN

With regard to the substance of the appeal, my sense is that most of the issues are pretty basic anti-dumping ones, but there is a possibility of an important systemic issue coming up. The panel report gets into the issue of the AD Agreement Article 17.6(ii) legal standard of review a bit:

7.285. Colombia argues that MINCIT's interpretation of the term "dumped imports" as including de minimis margin imports is a "permissible" interpretation within the meaning of the second sentence of Article 17.6(ii) of the Anti-Dumping Agreement.529 The second sentence of Article 17.6(ii) concerns situations "[w]here the panel finds that a relevant provision of the Agreement admits of more than one permissible interpretation". The first sentence of Article 17.6(ii) requires that panels "shall interpret the relevant provisions of the Agreement in accordance with customary rules of interpretation of public international law".

7.286. The question of whether a relevant provision admits of more than one "permissible" interpretation – the situation contemplated under the second sentence – thus depends on whether more than one such interpretation emerges when the Panel examines the provision in accordance with the "customary rules of interpretation of public international law" – that is, when the Panel applies the first sentence of Article 17.6(ii). As the starting point of our interpretative analysis, we must therefore interpret the term "dumped imports" in Articles 3.1, 3.2, 3.4, and 3.5 in accordance with the customary rules of interpretation of public international law, as reflected in Articles 31 and 32 of the Vienna Convention.5

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7.303. We therefore disagree with Colombia that an interpretation of the term "dumped imports" as including de minimis margin imports is "permissible" within the meaning of the second sentence of Article 17.6(ii) of the Anti-Dumping Agreement. ...

This legal standard is important for the level of deference WTO adjudicators show towards domestic anti-dumping authorities, an issue that has been of importance to many people in the U.S. in particular. I wondered if there was a possibility that the U.S. would use this case as an opportunity to push for a broad approach to what constitutes a "permissible" interpretation. However, in the U.S. responses to questions from the panel, it did not seem very sympathetic to Colombia's position here:

4.2 To the third parties: To what extent does Article 17.6(ii) of the Anti-Dumping Agreement inform the interpretation of the term “dumped imports” in Article 3? In particular, does the Article 3 term “dumped imports” admit “of more than one permissible interpretation” within the meaning of Article 17.6(ii)? And, if so, is the interpretation advanced by Colombia in paragraphs 13.16-13.28 of its first written submission one such “permissible interpretation”?

24. Colombia argues that the term “dumped imports” as it appears in Article 3, concerning the determination of injury, can be interpreted as encompassing “all imports originating from origins for which a margin of dumping above zero (a positive margin of dumping) has been calculated, which includes de minimis dumping margins.”39 Colombia also argues that Article 9.1 of the Agreement on Safeguards,40 Article 11.9 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement),41 and the negotiations of the Kennedy Round Antidumping Code,42 support its interpretation.

25. Article 17.6(ii) expressly acknowledges that the provisions of the Anti-Dumping Agreement may “admit[] of more than one permissible interpretation.”43 Article 17.6(ii) further requires that a panel find a measure “to be in conformity with the [Anti-Dumping] Agreement if it rests upon one of those permissible interpretations.”44

26. Colombia’s interpretation, however, would not appear to be supported by the text of Article 3. Article 3.1 refers to “the” dumped imports, which suggests something less than the total imports from the origins found to be dumping. Article 3.1 also speaks to the impact of “these imports,” referring back to “the” dumped imports and not to imports more generally. Article 3.3 also addresses the cumulative assessment of the effects of imports if “the margin of dumping … is more than de minimis,” not “the dumped imports” as defined by Colombia. Finally, Article 3.5 refers to injury caused by “the dumped imports … through the effects of dumping,” which cannot be said to include imports for which there is not sufficient evidence of dumping under Article 5.8.

27. Therefore, Colombia’s interpretation cannot be considered a permissible interpretation of the term “dumped imports” within the meaning of Article 17.6(ii) of the Anti-Dumping Agreement. 

Nevertheless, it's worth keeping an eye on this issue as the dispute is argued and when the award is issued.

Katherine Tai on Enforcing Trade Agreements

This is a question on the enforcement of trade agreements from an event at which U.S. Trade Rep. Tai spoke today:

I've always been struck at the priority you place on enforcement of trade agreements. It's always a tricky task for any administration. There have been several cases that have been brought up in the last few years since USMCA was finalized. How would you say the enforcement mechanisms and dispute settlement mechanisms have held up and are they setting any kind of precedent for trade outside of North America as well?

And here was Tai's response:

So I think that the credibility of a trading system, whether it's regional or multilateral, really goes to whether or not the rules are enforceable. Otherwise, the rules are just words on a page. And certainly in the renewal and the creation of the USMCA, at the late stage of the renegotiation, after the renegotiation with the parties, renegotiation between congressional Democrats and the Trump administration, there is a really strong focus on the enforceability of these rules. And no matter how high you dial the standards, no matter how modern the rules that you've brought in, if you can't enforce them, then really it's not worth very much. It's really not worth very much to the members of Congress and their constituents.

So that's been a particular focus. USMCA passing on the significantly large margins, 89% of the House and the Senate voting in favor, for us means that one of our highest priorities is making sure that the spirit and the letter of the USMCA are preserved and that we are investing in ensuring that the USMCA is meaningful.

That goes across the board. We have, in some of the more traditional trade areas, initiated, we are now on our second go round of enforcement proceedings with Canada on dairy market access. With Mexico, we have initiated a case on their energy market policies.

But in environment and labor, which if you follow the NAFTA story, you will know that these were particular criticisms of the original NAFTA, that they might have had labor and environment rules, which was a good thing, but they turned out that they were unenforceable and there were no teeth. And in fact, no case was ever able to be advanced from beginning to end under the NAFTA. And we have now initiated our first enforcement proceeding under the environment focused on conservation efforts for the Vaquita porpoise. And then also we have at this point initiated and concluded five rapid response mechanism cases. One that we self initiated, the other four in response to petitions, where by virtue of our using this mechanism in partnership with the Mexican government, which had finished its own labor justice reform as we were negotiating the USMCA, have actually enabled unions of five different facilities in Mexico, independent unions to represent the workers who elected them, resulting in real wage benefits, real benefits for real people.

And the labor and environment pieces are especially important to us because of the need for our trade practices, and frankly for the global trading system, to rebuild trust and confidence with our people, and with those who know the most and advocate for our planet. And I think that the implications are that this is an important innovation, if you will, for a correction for the direction of US trade policy that we are bringing to our other trading partners outside of North America and that we are trying also to bring to the multilateral system based in Geneva around the WTO.

For anyone who supports the rules-based trading system, this will probably be reassuring, but at the same time it doesn't tell us where the U.S. is right now on WTO dispute settlement reform in the midst of the Appellate Body crisis.

The Origins of Trade Law's Rules on Domestic Regulation

Until now, research into the League of Nations economic discussions was a serious challenge. You needed to be an archives master like Mona Paulsen to make much progress.

But things have changed with a new digitization efforts by the UN folks, which includes most -- and eventually all, I think -- League of Nations documents related to economics and trade. It will still take some effort to navigate the searching of the very large PDF files of the scanned archive documents, but it is so much easier now to dig into the League of Nations work on the earliest multilateral trade talks than it was before this resource was available.

With these documents more accessible, here's a question that I am interested in, for anyone who is looking for a project to work on: What exactly was the thinking behind the move to go beyond tariff reductions as the core of trade agreements, and to shift towards the development of constitution-like principles such as non-discrimination?

Here's my very brief overview of how I think this played out, based on past research I've done.

Originally, trade negotiations focused on tariffs and quotas, which are the most obvious trade barriers, as they are imposed at the border. But the negotiators soon realized that domestic regulations and taxes could also be used for protectionist purposes, so bringing down tariffs wouldn't solve all the problems they were dealing with.

At the League of Nations, they spent a few years -- starting in 1927, but possibly a bit before that as well -- trying to categorize all of this "indirect" or "administrative" protectionism.

At the 1933 League of Nations economic conference in London, they went more deeply into this issue and came up with two solutions.

First, there was a suggestion to rely on the national treatment principle so as to prohibit most domestic regulations and taxes used for protectionist purposes.

And second, there was a suggestion for an "equitable treatment" clause that would require governments to act in good faith and not use domestic measures to undermine tariff concessions.

When there is a debate about which of two approaches to take, the final decision is often to use both, and that's what happened here: We got national treatment obligations and an equitable treatment clause (which was rewritten with the famous "nullification or impairment" language by the American delegate).

The national treatment obligation proved to be one of the core principles of the GATT/WTO. We can debate the proper interpretation (which we will no doubt do until the end of time!), but just about everyone agrees we need some version of this obligation.

The non-violation nullification or impairment remedy, by contrast, has only rarely been used, and its purpose and scope are very uncertain.

For anyone intrigued by all of this, a great place to start is the discussions of "indirect protectionism" (which the archives folks have separated out into a number of specific sub-series). From what I can tell, that was the primary way these issues were described at the time.

Where Did "Scientific Basis" Come From in Trade Rules?

At a Congressional hearing recently to confirm Alexis Taylor as Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs, Taylor offered the following comments on "science-based" regulation as an international trade law principle:

I think from the question of new trade deals, what I'm very interested in is a couple of fundamentals to bring to the conversations within the administration around what is meaningful market access for a cross-section and diversity of US agricultural products that we are producing and exporting. How do we address non-tariff barriers and ensure that science-based regulatory processes and decision-making is being implemented within those various trading partners. And then having enforceable standards within those trade commitments. And then the final step is ensuring that when commitments are not being made or lived up to, that will have been made to US producers, that we are then enforcing those standards that we have negotiated. And that is the kind of fundamental approach that I want to bring to the conversations around the trade policy for the administration. And then finally, as you mentioned, with the reorganization the Codex office has moved under the TFAA [Trade and Foreign Agricultural Affairs’] mission area, and fundamentally, that body has helped bring science-based clarity for food products, for the international export market, and keeping that science-based decision-making and conversations that are rooted in science is absolutely paramount and something I am very committed to should I be confirmed.

The idea that scientific basis is an appropriate trade law principle to guide food safety regulation seems to have widespread support. Even trade skeptic Bob Lighthizer agrees with it. As I noted a couple years ago, "Lighthizer seems very comfortable using the absence of a scientific basis as a proxy for rooting out disguised protectionism. If it's not based on science, in his view, we can assume it is protectionist." Here's one thing Lighthizer said in this regard: "making every regulation science-based is the equivalent of getting rid of protectionism." (It's interesting that Lighthizer supports getting rid of this kind of protectionism, but wants to ratchet up other kinds of protectionism. Presumably that has something to do with who he thinks is engaging in the protectionism.)

But how close is the correlation between regulation that has no scientific basis, on the one hand, and protectionism, on the other? I'm sure there is some degree of overlap, but overall it seems like a fairly weak connection to me. I would guess that most non-science-based regulation is not protectionist in the sense that most people use that term. While such regulation may be ineffective and can distort markets and trade (see, e.g., here), that ineffectiveness and those distortions are not generally the result of protectionist goals, as far as I can tell.

To be clear, I can see how the issue of whether there is a scientific basis for a measure could be a factor to consider in determining whether a measure is discriminatory under various trade obligations. But I'm not sure scientific basis should be a free standing obligation. If it is, it could catch a lot of measures that are not protectionist.

But obviously, other people have a different view, and today, despite all the disagreements over trade policy that we are seeing, this principle appears to have bipartisan support.

What this all makes me wonder is, how did scientific basis take off as a principle in trade obligations in the first place? At some point a while back, I tried to look into this and answer questions such as: Who wanted it in there? And what did they think it meant? But I am now distracted with other things for the foreseeable future, so I'll just put these questions out there for anyone else who is interested. It seemed to me that the early to mid-1980s work of the Cairns Group and various agriculture organizations might hold the answers, if someone wants to dig around.