International Economic Law and Policy Blog

The U.S. Changes Its Mind in the WTO E-Commerce Negotiations

The U.S. made headlines last week by withdrawing some proposals it had previously made on specific aspects of the WTO Joint Statement Initiative on E-commerce negotiations. Many pro-trade people were upset by this decision, but for reasons I will explain below, I wasn't as bothered. 

My first question here was, what exactly did USTR do and say? Here's the statement from the WTO e-commerce meeting that USTR sent me when I asked them:

Turning to the JSI, the United States continues to support a commercially meaningful agreement that provides benefits to workers, consumers, and small businesses participating in the digital economy, and that supports inclusivity by participation of developing WTO members.

It is essential that our approach to digital trade policy is grounded in how it affects our people, both as workers and consumers. We also must ensure that our policy takes into account these regulatory objectives, balancing the right to regulate in the public interest and the need to address anticompetitive behavior in the digital economy.

As we take these realities into account, the United States is mindful of ongoing global and domestic discourse on these important issues.  We are currently conducting internal consultations on the U.S. approach to digital trade rules in sensitive areas such as data and source code.  As these consultations proceed, we have had to take a pause on active engagement in these small group discussions.

Therefore, the United States is withdrawing our proposals and attributions on data flows, data localization, and source code. We understand these issues remain a priority for many in the negotiations. 

The United States emphasizes our continued support for the JSI.  We believe that many important issues have been and can be addressed, and would encourage JSI participants to focus on what can be achieved by the end of the year, and to drop proposals that have not achieved a sufficient amount of support. In that spirit, the United States will withdraw our proposal on non-discriminatory treatment of digital products.

We also remain committed to working with all Members to find a path forward on development provisions that provide targeted flexibility tailored to individual developing Members that allow them to take on board the JSI trade commitments. 

I wish it were easier to find the details of what has been "proposed and attributed" previously on the issues in question (data flows, data localization, source code, and non-discriminatory treatment of digital products). If I'm using the WTO's DocsOnline database properly, the full list of documents from this negotiation is here, but only some of those documents are public. The only public communication I see from the U.S. is this one. A leaked consolidated text from December 2020 also has some details of individual country proposals, including from the U.S. (For comparison, you can see what the U.S. agreed to as part of the USMCA digital trade chapter here.)

Based on all of that, you can piece together a bit of what the U.S. proposed in terms of specific language and what it generally had in mind on these issues. When you do that, what I see is that you end up with a combination of obligations, exceptions that are specific to those obligations, and general exceptions, and I think it's fair to say that the precise mix of these that would have come out of the WTO JSI e-commerce discussions is uncertain, as is the impact these rules would have on domestic policy-making.

Let me illustrate this through an example from the USMCA. The main data flows obligation in Chapter 19 looks quite broad (although it's hard to say just how broad), going beyond nationality-based non-discrimination:

Article 19.11: Cross-Border Transfer of Information by Electronic Means

1. No Party shall prohibit or restrict the cross-border transfer of information, including personal information, by electronic means if this activity is for the conduct of the business of a covered person.

But there there's a specific exception:

2. This Article does not prevent a Party from adopting or maintaining a measure inconsistent with paragraph 1 that is necessary to achieve a legitimate public policy objective, provided that the measure:

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

(b) does not impose restrictions on transfers of information greater than are necessary to achieve the objective.⁵

^{5 A measure does not meet the conditions of this paragraph if it accords different treatment to data transfers solely on the basis that they are cross-border in a manner that modifies the conditions of competition to the detriment of service suppliers of another Party.}

And then on top of that specific exception, Chapter 32 includes the following general exception:

Article 32.1: General Exceptions

...

2. For the purposes of Chapter 15 (Cross-Border Trade in Services), Chapter 16 (Temporary Entry for Business Persons), Chapter 18 (Telecommunications), Chapter 19 (Digital Trade),² and Chapter 22 (State-Owned Enterprises and Designated Monopolies), paragraphs (a), (b), and (c) of Article XIV of GATS are incorporated into and made part of this Agreement, mutatis mutandis.³

How do the obligation, the specific exception, and the general exception fit together? And how would they apply to actual regulations in this area? It's very hard to answer these questions, and I'm not sure anyone has a good sense of this.

That leads me to why I'm not more worked up about the change in the U.S. position. One thing I worry about with international e-commerce/digital rules is that we may carry over to digital trade some of the drafting and interpretive messes that exist in the GATT/WTO (and elsewhere) with (1) non-discrimination obligations, (2) obligations that go beyond non-discrimination, and (3) exceptions. Crafting rules for digital trade is a big deal, and it's worth spending some time thinking about the core principles of trade law and how we want them to apply here. How do we formulate non-discrimination obligations? When obligations go beyond non-discrimination, how much do they intrude into domestic policy-making? What do we think of necessity tests? These are conversations worth having, both as a general matter and in the digital trade context specifically. (I wrote about a couple aspects of the wording of the non-discriminatory treatment of digital products provision here and here.)

While I said I'm not as upset about these change in the U.S. position as others are, what I'd really like to see here are some U.S. proposals related to the questions I just asked. They may need some time to come to a view on this, but at some point these are the conversations that should take place. What would be great is some proposed text that comes with an explanation of the balance they think the specific language strikes between international regulation and domestic policy-making, and how and why the chosen language achieves the right balance.

ISDS Event at Georgetown Law Tomorrow

This is from Georgetown Law's Center on Inclusive Trade and Development:

Please join Senator Elizabeth Warren and Nobel laureate Joe Stiglitz on Wednesday, October 25, 1:30-2:30 PM ET for a special event on the Investor-State Dispute Settlement (ISDS) regime. Georgetown Law’s Center on Inclusive Trade and Development and Center for the Advancement of the Rule of Law in the Americas, along with Rethink Trade and the Columbia Center on Sustainable Investment have partnered up to release a comprehensive guidebook on how to withdraw from ISDS in the Americas and end its threats to climate resilience, public health, and democratic governance.

REGISTER TO WATCH THE LIVE EVENT HERE

President Joe Biden has invited leaders from Western Hemisphere countries to Washington on November 3rd. This Summit provides a great opportunity to launch an Americas-wide ISDS exit. The Summit’s goals – creating a green economy transition and resilient public health systems and furthering the rule of law – demand elimination of ISDS.
 
Our paper, "Turning the Tide: How to Harness the Americas Partnership for Economic Prosperity to Deliver an ISDS-Free Americas,” provides the roadmap. You don’t want to miss this conversation, which will explore the legal pathways for using President Biden's Americas Partnership for Economic Prosperity (APEP) process to dismantle ISDS within the region. 
 

WEDNESDAY, OCTOBER 25t, 2023
1:30 PM ET, followed by Q&A

REGISTER TO WATCH THE LIVE EVENT HERE
 

FEATURING:

Joseph Stiglitz, Professor of Economics, Columbia University in conversation with
Alvaro Santos, Faculty Director, Center for the Advancement of the Rule of Law in the Americas, Georgetown University Law Center
Daniel Rangel, Research Director, Rethink Trade
Mario Osorio, Senior Fellow, Center on Inclusive Trade and Development, Georgetown University Law Center
Ladan Mehranvar, Senior Legal Researcher, Columbia Center on Sustainable Investment
Lori Wallach, Director, Rethink Trade
Sen. Elizabeth Warren (D-Mass.)

Political Compromise and Reducing Carbon Emissions

In a new paper, law prof Tim Meyer offers a defense of combining (1) discriminatory regulations such as local content requirements with (2) subsidies to reduce carbon emissions. In the abstract of the paper, he says:

Second, like all policies, green trade policies usually pursue multiple objectives. The fact that green trade policies often have mixed motives means that assessing their effects through a Puritan lens is a fool’s errand. The quest nations are on today is not for trade policies that promote sustainability in the least trade restrictive way possible. Instead, they are looking for policies that can generate the political support to address urgent environmental crises while still promoting economic growth.

He then lays out his argument on this point as follows:

The second comparison often drawn is between a green trade barrier that contains a discriminatory or coercive component and an identical policy without the discriminatory or coercive component. The argument is that reducing discrimination or coercion will improve the measure’s ability to achieve its green objectives. Discrimination, the argument goes, is inefficient. Introducing inefficiencies into government policies designed to promote the growth of a green economy, and in particular a green industrial sector, will only slow the growth of the field, distort innovation, and artificially prolong the business life of inefficient import-competing producers.

The problem with this comparison is that it ignores politics. Discriminatory conditions like local content requirements (LCRs) or measures that contain some degree of protection for domestic producers ... make it easier to build political coalitions for green policies. Environmental policies, after all, are often public goods—pursuing them imposes concentrated costs while creating diffuse benefits. Because the benefits are diffuse, political support for the policies does not match the benefit created. As a result, the policy is undersupplied relative to the benefits it creates.

For example, decarbonizing the steel sector creates significant environmental benefits, as steel production is highly energy intensive and still involves the burning of coal—the dirtiest fossil fuel—in some places. But decarbonization also imposes costs for producers that invest in decarbonization and their consumers who may face higher prices. Consumers and producers thus may lobby the government to continue to allow the burning of coal to produce steel. These groups typically consist of companies that are well-organized, have access to government, and thus have the ability to influence policy outcomes. Citizens that benefit from cleaner air and tackling climate change, on the other hand, are likely to be poorly organized and less well-resourced in terms of obtaining political influence. Because climate change is not their business, in other words, it does not incentivize organization and investment by those who benefit from regulating it on the same scale as businesses that oppose regulation. Nevertheless, the diffuse benefits of decarbonizing the steel sector for these citizens outweigh the costs to participants in the steel industry itself.

Scholars of political economy have long understood that the solution to this problem is to provide private benefits to those who support public goods.59 Some degree of protection for domestic production serves this function. It creates advocates for green policies by providing concrete economic benefits to those that support, for example, the consumption of biofuels or subsidies for renewable energy.60 Absent these benefits, green policies might not exist at all. In the context of the steel example above, using recycled steel and electricity drawn from renewable sources can significantly cut carbon emissions. ...

LCRs attached to subsidies, such as those in the US Inflation Reduction Act, are another common method to achieve this conversion. In the case of environmental law, LCRs provide financial benefits to industries that both reduce their environmental impact and also provide political lobbying and support for government subsidization of a green economy. Recent fights over the implementation of the local content rules in the Inflation Reduction Act, with US Senators arguing that watering down those rules is inconsistent with their support for the legislation in the first place, indicate just how important this political support was to the passage of the measure.61 Moreover, recent research into the effectiveness of LCRs in generating local economic benefits has refuted the argument—often made in the context of trade disputes—that LCRs cannot achieve their objectives. Instead, studies find that LCRs can effectively promote local economic growth when certain preconditions are satisfied.62 Put differently, the realistic counterfactual comparison is almost never between a policy with a discriminatory or coercive condition and the identical policy without such a condition. The comparison is much more often going to be between a government policy with a discriminatory or coercive condition and a watered-down policy that might even then fail to obtain sufficient political support to pass. Mixed motive policies are, in other words, hardier political policies than are pure policies that seek to achieve only a single goal.63

Of course, the reality that some degree of protection may be necessary to ensure political support for green trade policies does not mean that any trade barrier should be ok. The key is to find—either through negotiation or the development of case law—an approach that allows governments the space to engage in politics that advance ambitious and politically realistic green trade policies, while at the same time preventing protectionism from becoming the sole objective. The leadership of the US and the EU, in their different ways, have created multiple fora in which nations can attempt to develop one or more approaches to address this problem. The answer(s), though, will not be technical ones, even if they are presented as such by specialists making argument about legal texts. Rather, they will be political comprises that attract sufficient support to provide a stable balance between nations’ environmental, economic, and political objectives.

For me, a key issue with political compromise is the level of contribution you are hoping to make towards solving the problem at hand. If you compromise too much, your actions might not make much of a contribution. There has never been a question that you can make political compromises to help ensure that the government takes some action, but if that action falls far short of being a solution to the problem, it may not be worth doing.

And I think that's the issue we are dealing with in the context of reducing carbon emissions. In the case of the IRA, proponents of the measure often point to this study, which found: "Our preliminary estimate is that the IRA can cut US net greenhouse gas emissions down to 31% to 44% below 2005 levels in 2030—with a central estimate of 40% below 2005 levels—compared to 24% to 35% under current policy."

I have three reactions here: (1) these sorts of estimates tend to be a bit uncertain, so I wouldn't count on a 40% reduction in US carbon emissions from 2005 levels; (2) given the scale of the problem, the 7-9% extra from the baseline doesn't sound like that much; and (3) lots of carbon emissions are outside the US, so we need to think carefully about how to work with others on these issues, and LCRs are likely to have a negative impact here.

Having said all this, I do understand the political difficulties with taking action on reducing carbon emissions, and it's worth thinking about ways to deal with it. If compromise with protectionist interest groups is not the answer, then what is? One obvious possibility is for political leaders to make the issue more of a priority than it currently is, and to talk about the issue bluntly and honestly. What we often see instead are politicians claiming that action to address climate change will create 20 million jobs. From what I can tell, most people look at those claims pretty skeptically. It would really help to have someone who could articulate the problem and convince people to take it more seriously. (Maybe that's true for all issues, but it's particularly true here!)

Another possibility would be to offer direct subsidies to people who might be hurt by the actions that are necessary to reduce carbon emissions. I think this approach would be better for the economy than Tim's plan for combining the carbon reducing action with protectionist measures that harm the economy broadly speaking and create international conflict.

Finally, it is also worth noting that it is possible to adopt the protectionism Tim thinks is necessary to reach a political compromise, but do it within the rules. For example, instead of local content requirements that are difficult to monitor and evaluate, and which clearly violate WTO rules, governments could just use tariffs that are negotiated and incorporated into their WTO Schedules.

The Fifth USMCA Panel

Yesterday, there was a notice posted here about panel composition in the Mexico - GE Corn (USMCA) case, with the following panelists having been appointed:

• Christian Häberli, Chair of the panel
• Hugo Perezcano Díaz, panelist
• Jean E. Kalicki, panelist

Kalicki is American and Perezcano Díaz is Mexican, so even though the notice doesn't tell us this explicitly, we can figure out based on the unique panel composition procedures of the USMCA (carried over from NAFTA) -- parties must appoint a national of the other party -- that Mexico picked Kalicki and the U.S. picked Perezcano Díaz.

This is the fifth panel composed under USMCA Chapter 31 state-state dispute settlement. Here are the other panels:

Canada - Dairy I

• Elbio Oscar Rosselli Frieri, Chair
• Julie Bédard, appointed by the United States
• Mark C. Hansen, appointed by Canada

U.S. - Solar Safeguards:

• Mario Matus, Chair
• Jennifer Hillman, appointed by Canada
• Donald M. McRae, appointed by the United States

U.S. - Autos ROO:

• Mr. Elbio Rosselli, Chair;
• Ms. Kathleen Claussen, appointed by Canada;
• Ms. Ann Ryan Robertson, appointed by Mexico;
• Mr. Jorge Miranda, appointed by the United States;
• Mr. Donald McRae, appointed by the United States.

Canada - Dairy II:

• Mr. Mateo Diego Fernández, Chair;
• Ms. Kathleen Claussen, appointed by Canada;
• Mr. Serge Fréchette, appointed by the United States.

 

The roster of panelists is here.

The Meaning of Economic (In)Security.

I posted a new working paper drawn from years of archival research that disrupts contentions that Cold War-era trade institutions fail to offer stability or predictability in the global economy due to advanced economies’ economic security strategies. The history is rich and exciting, and a future post may offer a summation of my redescription of the making of the postwar global economic order and its early tests with the elevated tensions between the Soviet bloc and Western free-market countries. Such historical analyses show a delicate sensitivity to state insecurities with trade multilateralism and reveal how such interferences were core to this system, not acts of violation or evidence of its impotence.

But I want to stick to the present. The WTO need not face its death just because governments are reimagining global economic integration. Instead, policymakers should move away from questions about the reviewability of the security exceptions and break down questions of self-sufficiency, conservation, and defeating foreign economic competitors within the multilateral trading system.

Economic security may be the paper that covers rock. It is far broader, abandoning any notion that economics and security are antinomies. Nor does it demand governments dwell on legal assessments between what is a rule and what is an exception in WTO terms. In the face of rising unilateral trade actions, the WTO defined ‘economic security’ as ‘resilience’ and ‘the ability of a system, including households, firms, and governments, to prevent and prepare for, cope with, and recover from shocks.’ The emphasis on prevention and preparation collapses notions of wartime, peacetime, or the transition period in between. No longer compartmentalised by ‘exceptional’ times, economic security stretches how security interacts with trade policy. States that refer to economic security emphasise ongoing evaluation and management of economic action in the highly integrated global economy, whether it is firms’ market power, technology transfers through foreign investments, or even classic efficiency gains from trade. The legal consequences of sustained economic security trade actions for the multilateral trading system remain unknown. However, any member may challenge the legality of ongoing strategies based on benefits being ‘nullified or impaired.’

I have developed a conceptual framework for economic security based on my historical assessment. I divide economic security into four buckets: two short-term and two long-term categories.

Short-term (ST): urgent, temporary responses to known threats that do not seek to alter existing markets.	Long-term (LT): preparedness and potential of unforeseen contingency; responses suggest governments do not take market structure as given.
ST1: Re-arming Trade restrictions related to ‘hardcore’ military interests, such as arms, ammunition, and implements of war.	LT1: Self-sufficiency Trade restrictions to develop the resiliency of a domestic economy. Lt1A: Domestic productivity (inward) Lt1B: Trade diversification; Multiple supply sources (outward)
ST2: Insecure Supply Trade restrictions related to an urgent event that demands a temporary workaround to address essential short-supply issues.	LT2: Breaking and Re-making Markets. Trade restrictions to weaken/slow economic opponents or to prevent a state (or its firms) from dominating the design, production, distribution, or trade of critical materials. LT2 measures aim to break and structure global markets, requiring future planning that can engage LT1 and ST2 measures to rebuild market structures or supply chains.

Some buckets fit neatly within existing institutional structures and rules. However, one bucket does not. Long-term economic security strategies of members that resolve to break and remake global markets are – at the roots – about members reacting to another member’s success within the globalised economy. Rather than complain to reverse restrictions, amend arbitrary or unjustifiably discriminatory practices, or countervail unfair trade practices, this long-term strategy focuses on powerful members remaking the markets that drastically reduce that member’s capacity. Underlying this bucket is the idea that long-standing economic competitiveness justifies severing supply chains – a deliberate, permanent choice to eliminate MFN treatment to another member. Members further pull these long-term actions outside the conventional ‘legal’ world into ‘non-law’ purgatory to escape an MFN violation. I use the word choice of purgatory deliberately, signalling a gap in WTO institutions. Within the paper, I identify these actions as LT2.

Members need not respond to a present threat when invoking economic security within this LT2 bucket. Governments emphasise the potential for unforeseen contingencies and speak to government anticipation of circumstances giving rise to economic security concerns. It speaks to state intervention for broad preparedness and potential, tethered to states’ dynamic views of economic security. Some explanations are the monopolisation of strategic markets or their contribution to excess global capacity, which impairs other states’ markets. Governments may push this further to assert that another state has a monopoly on production due to the exploitative activities of a dominant firm. As an example, the United States’ sweeping measures to bolster its competitiveness with China follow a political logic that views China as a ‘challenge to the international order’ and a significant threat to international rights and the goal of advancing democracy globally. Beyond the obligation to invoke security according to a member’s good faith obligations, there is nothing within WTO rules and institutions to effectively manage actions that thrust WTO commitments into purgatory. As LT2 strains the MFN principle, its crucial WTO members supplement the gap with other norms and principles to structure their actions and coordinate trade within the global economy. In other words, simply raising security exceptions leaves too much government policy as ‘untouchable.’

Within the paper, I detail an early experiment with international government coordination on the short supply of critical materials. Within the bounds of infant institutions for the multilateral trading system, the ‘free world’ economies used the Korean invasion in 1950 to drive what one official described as a temporary, urgent ‘super-government cartel’ for critical supply chains. Inbuilt into the newly established global economic order was an inherent contradiction regarding the permissiveness of state interferences in producing and trading goods. Rather than break the MFN norm and exist in violation of the GATT, the US-led ‘free world’ controlled the supply of materials informally, collectively, and under the principle of equitable allocation. A shared interest in critical materials for defence facilitated this contradiction, giving states a temporary legal foothold in the loosely held-together rules-based trading system. Equitable allocation would develop a double meaning for “free world” economic policymaking: it promised these countries a voice on distribution and interlocked production to US military preparedness. Although the GATT would reconstitute a global economy rooted in international legal structures, informal structures embedded within US military demands divided the global economy, too.

Where does this leave us? For one, WTO members can reimagine the idea of equitable allocation as the contrary force to equality of treatment (already captured within the existing WTO agreements). One pathway I found convincing was the work of green economy collaboration by Emma Aisbett and her co-authors that emphasise mutuality and conservation to dictate the contours of state intervention – a dramatic reorientation from US militarism.

At first glance, it might seem the notion of equitable allocation is alarmingly unhelpful (and if one looks over the bridge to the investment law world, there are many precedents to support issues with equitable treatment). However, I argue that international norms ground institutions and there is an apparent absence of norms settling relations when one speaks of LT2. Consider it this way: current dispute settlement reports where one member has invoked GATT Article XXI reveal only one key finding – the relations between the members must be near or at complete breakdown. There is, thus, nothing to help members come back from deterioration. Ungoverned, LT2 actions may only encourage governments to act alone and deny economic globalisation.  If WTO members reimagine globalisation, as perhaps towards global public goods and mitigating climate change, they must have the legal infrastructure to do so.

I’ll be brief here, but another potential pathway is to evolve the economic underpinnings of the multilateral trading system and establish dynamic, collective governance on materials that speak to the global challenges many members need to prioritise (in addition to their domestic interests!). To shift LT2 actions away from unilateral actions focusing on abuse and coercive practices, members may coordinate on select materials or goods they conclude no single member may dominate global capacities. An involved new form of governance entails negotiating new schedules and submitting to warning mechanisms that effectively let WTO members prepare for and manage supply chain dominance (as they define it). This entails significant reimagining of transparency and notification requirements and greater demands for providing reasons for, among other things, domestic capacity targets and purchasing powers on a rolling basis.

Many developing countries understand economic integration as vital to their economic security because of the role of trade in reducing extreme poverty and inequality. Even if the economic security strategies do not threaten the foundations of the system, efforts to shift multilateral trade governance to a new agenda set by industrialised economy members’ economic security strategies fail to address what Sylvia Ostry described as developing countries' ‘unfinished business of past negotiations.’ Just as there is a concern among advanced economies that existing legal structures are blind to the risks of economic integration, unilateral actions in response to these risks threaten developing countries’ growth capabilities, with risks of fractured global value chains and increased trade costs, particularly in agriculture and services. In this sense, the normative power of economic security strategies chokes the deliberative functions of the WTO.

The WTO remains an important forum for all governments to connect and deliberate on the supply of goods and services. Yet, WTO members must take great care in recommending ‘better’ management as the solution without a robust and clear articulation of the problem. Focusing on a solution to chase a problem fails to match the institutional form to the problem institutions are meant to address. Members must first articulate what domestic economic security policies aim to do, what (and whom) they protect, and what international coordination should achieve.

Katherine Tai on Industrial Policy, the Global Steel and Aluminum Arrangement, and EU Digital Regulation

Last week, U.S. Trade Rep. Katherine Tai spoke at the Center for American Progress. You can watch the whole event here. As I try to do whenever I have time and she says something in the Q & A that intrigues me, I'm going to quote a few things she said and comment on them. The three topics from this event that I'm commenting on are: industrial policy, the global steel and aluminum arrangement, and EU digital regulation

First up is industrial policy. Here's what she said:

Question:

I want to start if I can with the 30,000 foot elevation of what this new industrial policy means. We know that this administration across the board, from the president, all the cabinet agencies, have worked furiously to actualize this historic commitment to renew ... industrial policy in the country, that has reinvigorated industries across the board, and has made a significant contribution to the states that you mentioned before that have been hollowed out. Can you kind of ground us in what that means for ensuing 21st century trade policy through your vision? ...

Tai:

That's a great question and a really important foundation and foundational place to start from. You know, I think one of the really important aspects of what we're doing now is that nothing ... in what we're doing is really a traditional approach. And I think that it's really important to recognize this, because I think that it gets lost in the conversation sometimes, that if it's not the thing that you've been doing over and over again, then ... what could you possibly be doing? But if you just look at the world around us, from the economy, to geopolitics, to supply chains, and sort of the clockwork of ... how we are interconnected to each other across all areas, you just see significant amount of change that's happening. And so from our perspective, in order to be responsible, and responsive, the trade policies that we pursue have to reflect the changes. And, moreover, it's not just change for change sake, but that we're pursuing a really positive affirmative vision for the kind of economy that we want to have, for the kind of economy that we want to lead in partnering with the rest of the world, to push towards a version of America, America in the world, and the rest of the world that is bright, where you can see a long future ahead of you, and that you see a sustainable path. And one where we feel like opportunities are rife, and that they're not shallow.

So bringing that back to where we are now, one is the recognition that there's change all around us, and we have to respond. We have to be positive about where we're driving towards. The other is to recognize that we're not writing on a blank slate, that the current economy that we have reflects decades of trade policies, but also economic policies, that have led us to a certain set of outcomes. So if you look at overall US GDP, we are still the largest economy in the world, we are extremely vibrant. But you also have to recognize that sectorally there's a significant unevenness. And while parts of our economy are incredibly strong, powerful, growing rapidly, that other parts of our economy are eroded from maybe where we have been in the past, but also where we would like to be. And certainly in terms of our industrial capacity, we do still make things here, don't get me wrong. But I think that we have a recognition that unless we start to do things differently, we will continue to see this trend of erosion in areas that we cannot afford to have erosion. And I think that goes to this focus on a reinvigoration of the American economy, of American manufacturing, this embrace of what I will call a very unique type of American industrial policy.

And I'm really glad you have asked me about this because I think that in the trade community for a very long time industrial policy was something that you used to, to accuse people of doing a bad thing. Industrial policy was a bad thing. And I think that, the traditional way we have talked about and thought about industrial policy is it's a thing that you did for yourself, to enrich yourself, to empower yourself at the expense of others. I think that the major change that we're introducing into this conversation is yes, there are things that we need to do for ourselves. There is a correction that we have to accomplish through reshoring for instance, bringing back online a critical level of manufacturing activity, for example, but at the same time, we are interconnected with the rest of the world, that this is in a way, part of what we are aiming for, but we want to be interconnected in a way that is positive. And so from a trade policy perspective, the question is, can you pursue industrial policy in a way where you can do it in a complementary fashion with other economies? So whether that's through supply chains, through coordinating defenses against unfair policies, we are looking for better ways of acknowledging the challenges that we have encountered to ensure that we can safeguard the the freedoms that we so value in our economic market based situation.

Is current U.S. industrial policy as Tai describes it different from what came before? She seems to distinguish between two types of industrial policy: (1) reshoring for ourselves, and (2) coordination of certain policies with others. 

On the reshoring, if I understand her correctly, I think she would accept that this part of current U.S. industrial policy is the same as what came before. Using protectionism and industrial policy to keep more manufacturing in the U.S. in the hopes of enriching ourselves at the expense of others has been a standard feature of U.S. trade policy for decades. As with anything, you can ratchet it up of course, but this isn't something new.

On the coordination point, based on things she has said in the past, the supply chain coordination that is under consideration now seems to mean, at least in part, that developing countries will supply natural resources for manufacturing to be done in the U.S. To me, that seems more like a traditional approach to industrial policy than something new.

And on unfair trade defenses, these have been heavily used for a long time. Is the coordination something new? I'm not sure. Perhaps someone who has worked on trade remedies might have a better sense. Regardless, given the level of recent usage of trade remedies around the world, I have doubts that efforts to coordinate trade remedies will have a noticeable impact. They already have a significant effect on trade, even though they don't get much coverage in the media and people outside the trade policy field don't understand them very well.

Next was the global steel and aluminum arrangement:

Question:

I wanted to ask about the global arrangement on steel. You said I'm hoping, or I'm expecting, to be able to share progress in the next weeks. Do you think it's possible that there'll have to be a partial solution at this point, and then a commitment to continue to work on the full ambition of both countering the non-market production and the green production and how that interplays with trade?

Tai:

So let me take a step back on what we're trying to do with the US - EU global arrangement. I talked about it in my remarks. But I also want to acknowledge how fundamentally paradigm shifting the vision is that we are pursuing, and actually how difficult a task it is that we have set out to accomplish with the Europeans. It really is a paradigm flip, right, from race to the bottom to race to the top, US and the EU coming together, putting our market forces together to drive, through trade, cleaner production, cleaner trade, in these carbon intensive industries, but then also to defend against non-market excess capacity, and then to drive incentives for fair trade and fair production. So it's a really big remit that we have.

The second thing I'll just talk about is that it's really a very technically challenging thing that we are proposing to do, although on that I will say that there are probably as many if not more trade lawyers in Brussels as there are in Washington. So if there are two partners that could come together to solve a really difficult task, it should be the two of us.

The third thing that I'll note is, I think that what we are asking the EU to do on this, I feel confident that they are committed to doing it and they recognize the need to do it. But I think that on some level it is also very, very difficult for Brussels on an emotional level. Because what we are doing is quite different. And as I note all the time, change is really hard. And on this I've also had the opportunity to reflect with my team on the record of US-EU trade negotiations and engagements. And I think that despite our best efforts, that our record has been, I would say sometimes we seem like star crossed lovers. It seems like we should be able to get the thing across the line and, maybe the most obvious recent point is on the Transatlantic Trade and Investment Partnership (TTIP), that despite the high level political commitment, that that was something that ultimately we weren't able to get across the line. So from my perspective, you never give up. Trade and economic collaboration is something you necessarily have to do with your partners. So this is a long way of saying, let's see, hang with us for I guess we've got exactly three weeks to get to our deadline. And I think that I will just say, as of right now, as hard a task as this has been, I'm extremely proud of our US negotiators. And I will say that we remain extremely committed to our partners and working with them.

On the issue of the EU state of mind, I would say the EU folks are mostly detached and analytical about all this, as evidenced by this quote from the FT:

The EU is planning to announce anti-subsidy investigations against Chinese steelmakers at a summit with the US this month as they further develop a common front against Beijing.

Brussels had agreed to join Washington’s efforts to shield industries from cheap competition, two officials with knowledge of the move told the Financial Times. Washington had asked Brussels to move against Chinese steel producers in return for avoiding the reimposition of tariffs on EU steel imposed by president Donald Trump in 2018, the officials said.

...

The EU officials said they understood the need for president Joe Biden to protect steelworker jobs in swing states such as Pennsylvania and Ohio to prevent Trump winning an election rematch next year.

We'll have to wait and see how the political calculations turn out of course. Ohio seems like a stretch for any Democratic presidential candidate these days, and Pennsylvania is looking tougher than I expected it to be for Biden.

More generally, on the issue of taking joint action with the EU to address carbon emissions and Chinese non-market practices, I think there are things that can be done on both, although I'm not sure what I've seen so far in the leaks about the global steel and aluminum arrangement will achieve much. On the non-market practices issue, based on the reporting so far, the arrangement will involve a club that excludes non-market economies, and therefore excludes China. Then the idea seems to be that the US will impose tariffs on non-club members in a way that will almost certainly violate WTO rules, and the EU will try to impose tariffs on them consistently with WTO rules by using AD/CVDs. But regardless of the WTO-consistency of the measures, these types of unilateral actions seem, based on past experience anyway, unlikely to change China's policies and practices. I think the better way to do that would be through WTO complaints (such as a complaint focusing on the behavior of China's state-owned enterprises). I've heard people offer up explanations for why those cases haven't been brought, but the explanations don't seem convincing to me as a matter of strategy.

Finally, there was something about digital trade:

Question:

There's a question from Robert Kuttner from the American Prospect about pressure coming from big tech companies in the US to define the European Union's pro-consumer regulations as trade discrimination. He asked, do you have a position on this and might we expect some news about this any time soon?

Tai:

Let me just start out by stating a couple of facts. One is that the European Union has an incredible superpower as a political entity, and they're very good at regulating, in this sense, that they're able to get regulations going through very, very complex processes. You know, I think that my partners in Brussels have some of the hardest jobs in terms of navigating between 27 member states, but their regulations often have extraterritorial reach that cause all of us to sit up and have to respond.

On their regulations in the digital arena, I recognize, and this is through a lot of engagement with our partners in Brussels, that they are very, very concerned about the rights of European citizens with respect to privacy, for instance, the opportunity and the economic vibrancy in this arena of the economy to allow for opportunities for new entrants, and for new entrants to grow, startups to grow into small and medium sized, and to compete with the very largest.

I also recognize that in terms of this industry, the largest players, and they're really large, are almost all American companies. And so I think that ... that's where the tension comes up, which is in the trade policy conversation, our guiding disciplines are around discrimination. Are you treating foreign companies the same way you're treating your own? Are you treating this foreign company the same way that you are treating that foreign company? Right? That's the traditional trade conversation. I think that as it then crosses over into regulatory efforts that impact these big technology companies, we have to really be cognizant that measures that may look like they have a discriminatory effect may or may not be advanced with a discriminatory intent. And so I think from a trade perspective, that is the additional nuance that we have to bring to our engagement with our partners around their intentions, and then also around the impacts.

Last thing I'll say on this as well is, in this area, and I'll bring it back to climate as well, in these two areas, digital and also climate, what we are able to do in trade negotiations and trade policy is limited by where the American policy consensus is represented. And I want to really put a fine point, and this is truly out of deference and respect, on the US Congress, that in areas where the US Congress continues to debate and has not settled regulatory questions, in digital and also on climate, that there is going to be a limit to what we can do in trade in the international sphere. So I know that my partners in Congress love having us lead in all things, especially in trade. And I would just say that, in some areas, that we cannot lead until Congress speaks and acts. And I would just say on digital and on climate, those are two incredibly important areas where we cannot afford to sit on the sidelines, where I will be very, very eager to work with our Congress.

She's definitely right about the last point. When there isn't a clear U.S. domestic policy, as there is not on digital, how is the U.S. supposed to create and shape international consensus and agreements?

Finally, I may be reading too much into this, but I found it noteworthy to hear the way she talked about the issue of digital trade and discrimination. It came across to me as though she is getting pressure from Congress and interest groups to pursue this with the Europeans, but she doesn't feel like this is necessarily the right priority for U.S. trade policy. To some extent, she is trying to arbitrate between the big tech companies/Congress, on the one hand, and the Europeans on the other, to get them all to recognize the nuances of discriminatory effect and intent (which I agree that everyone should do!) and how they apply here. But again, maybe I'm reading too much into her language and tone.

A Veritable Worker-Centered Trade Policy

Comments by Steve Charnovitz

Docket Number USTR-2023-0004-0003 (Advancing Inclusive, Worker-Centered Trade Policy)

15 June 2023

National trade policy is used to undertake both industrial and foreign policy objectives. Often those objectives will be in tension. In shaping and rebalancing trade policy, governments may consider the impact of trade policy decisions on three main domestic private sector interests: (1) exporters and imports, (2) consumers, and (3) workers. None of these three interests are more virtuous than the others.

US trade policy has long given short shrift to the labor force, both domestically and in foreign lands. Over the decades, I have called attention to these deficiencies. See, for example, Steve Charnovitz, "Worker Adjustment: The Missing Ingredient in U.S. Trade Policy," California Management Review, Winter 1986; The Human Rights of Foreign Labor," Worldview, January 1985. But I have also consistently pointed out that nostrums of US protectionism are counterproductive toward improving employment conditions in any country. For example, see "Resist US Protectionism: The Top Trade Priority for the G20" in Rebuilding Global Trade: Proposals for a Fairer, More Sustainable Future, (ICTSD, 2009).

Although trade policy can be one piece of better US policies toward workers, labor policy is far more efficacious for improving worker conditions. Weak US labor policies are unlikely to be correctable by tangential instruments such as trade policies or investment policies.

Used properly, US trade policy leverage can help to negotiate foreign commitments to improving working conditions. For example, see Steve Charnovitz, "Caribbean Basin Initiative: Setting Labor Standards," Monthly Labor Review, November 1984. Yet when US leverage is used improperly, the costs to US foreign policy goals and to US consumers and producers can exceed whatever benefits redound to foreign workers.

Based on the normative orientation in the introduction above, this paper provides responses to USTR's request for comments on "Advancing Inclusive, Worker-Centered Trade Policy" as indicated below.

 

• What meaningful and substantive trade policies, actions, or provisions should policy and decision makers consider that would advance racial and gender equity, equality, and empowerment in U.S. trade and investment policy?

1. One longtime US inaction is failing to ratify the most relevant International Labour Organization (ILO) Conventions such as the Freedom of Association Convention, 1948 (No. 87), the Equal Remuneration Convention, 1951 (No. 100), the Discrimination Convention, 1958 (No. 111), and the Social Policy Convention, 1962 (No. 117). Ratifying these Conventions would improve their effectiveness and would legally commit the US to fulfilling the terms of these ILO conventions so important to a worker-centered economic policy.  The US failure to ratify these Conventions is just one indicator of how the US has long missed the opportunity to offer constructive leadership in the ILO. The US should ratify those Conventions and seek to better use the ILO to achieve its unique international mission of promoting social justice in the world economy.

• What new and innovative tools, structures, and capacity should the U.S. Government adopt to advance inclusive trade and investment policy

2. As I pointed out in 1984, US adjustment assistance for workers has been carried out dismally.   See Steve Charnovitz, "Trade Adjustment Assistance: What Went Wrong," The Journal of the Institute of Socioeconomic Studies, Spring 1984. Unfortunately, the last 39 years has seen little improvement to give workers confidence that they will be included in the beneficiaries of trade liberalization.  Last July 2022, the Congress made US trade policy even less inclusive by allowing trade adjustment assistance programs expire. The Biden Administration should be lobbying hard in Congress for improving and renewing worker training programs.

• How can trade and investment policy address multiple, intersecting barriers to advancing equity for underserved persons (e.g., rural communities, race/ethnicity, gender, and persons with disabilities)?

3. The US should ratify the ILO Right to Organise and Collective Bargaining Convention, 1949 (No. 98), the ILO Rural Workers' Organisations Convention, 1975 (No. 141), and the UN Convention on the Rights of Persons with Disabilities, 2006. 19 USC §4201(a)(6) makes the pursuit of worker rights a US trade negotiating objective.

• What best practices should USTR consider to ensure that advancing equity, equality, and economic empowerment is standardized in community and stakeholder engagement regardingthe development and implementation of U.S. trade and investment policy?

4. Poor USTR practices on advisory committees should be corrected. One example is the distorted membership of the USTR Labor Advisory That Committee represents only labor unions. Given that the unionization rate in the US economy is only about ten percent, the membership on the committee is grossly out of proportion to economic realities of contemporary US employment and self-employment. Thus, most workplace stakeholders are unrepresented on that Committee or on other USTR committees. In pointing out how the Committee represents only a narrow swath of special interests, I should state that the quality of the reports from the Labor Advisory Committee has been well above average for USTR public advisory committees.

• Are there specific engagement and consultation considerations and/or processes that policymakers should consider in incorporating equity into U.S. trade and investment policy?

5. The USTR posting is unclear as to whether the term "equity" includes the condition of individuals in other countries who suffer US trade policy discrimination. If so, I would recommend that foreign governments and nongovernmental organizations be given more opportunity for consultation and engagement before the US issues trade policy edicts that hurt workers in other countries.
   
   

• What key actions should the US Government pursue with trade partners and allies to ensure that the benefits from trade and investment policy reach underserved communities?

6. When US trade policy means open and free trade, then the benefits of such policies will serve the entire economy. By contrast, protectionist US trade policy will disproportionately hurt underserved communities by raising prices and reducing sources of supply.  The original WTO rules had a provision attentive to the needs of underserved communities (SCM Art. 8.2(b)). But the lack of a WTO consensus (reportedly objections by the US government) caused that provision to expire. Still, there is much that the WTO can do to extend the benefits of trade to underserved communities, especially in a worker-centered context. Back in 1995, I urged the WTO to establish a Committee on Trade and Employment. See Steve Charnovitz, "Strengthening the International Employment Regime," Intereconomics, September/October 1995. If the WTO had taken that step 28 years ago, perhaps the WTO might not have gotten so unpopular in the 2009-2021 period.  Happily, WTO Director-General Ngozi Okonjo-Iweala has improved the WTO's reputation in the world community.
   
   

• Are there trade policies, provisions, or actions which are detrimental to advancing racial and gender equity, equality, and economic empowerment?

7. Yes, Gender equity is abridged when US tariffs discriminate on the basis of gender (e.g., HTS 6102.20.05).  

The Evidence on Trade and Peace

I see a few people questioning the idea that trade promotes peace, and I'm not quite sure what to make of this. Here are two recent examples from ex-Twitter:

• This is from Paul Krugman:

"Not just strategic relations. People underestimate the role of geopolitical ideas in economic policy — the push for freer trade since World War II had a lot to do with the belief that trade promotes peace, which is increasingly hard to defend."

• He was quoting Phillips O'Brien, who had said:

"This story points out one of the great fallacies of strategic relations over the last 150 years. There has been a notion that if states establish mutually beneficial economic relations it will make war less likely between then. Doesn’t seem to work."

I offered a quick snarky response to Krugman, which was:

These two things can both be true:

1. Trade promotes peace

2. Trade doesn't prevent all war

Other people then weighed in with actual evidence. Here is economist Chris Auld:

The claim is not that trade eliminates the possibility of conflict, but rather greatly reduces it, and that claim cannot be overturned by anecdotes. The statistical evidence strongly supports the idea that trade reduces propensity for conflict.

He cited to an article entitled "Does Trade Integration Contribute to Peace?" Here is the abstract:

We investigate the effect of trade integration on interstate military conflict. Our empirical analysis, based on a large panel data set of 243,225 country-pair observations from 1950 to 2000, confirms that an increase in bilateral trade interdependence significantly promotes peace. It also suggests that the peace-promotion effect of bilateral trade integration is significantly higher for contiguous countries that are likely to experience more conflict. More importantly, we find that not only bilateral trade but global trade openness also significantly promotes peace. It shows, however, that an increase in global trade openness reduces the probability of interstate conflict more for countries far apart from each other than it does for countries sharing borders. The main finding of the peace-promotion effect of bilateral and global trade integration holds robust when controlling for the simultaneous determination of trade and peace.

Also providing evidence was Per Altenberg of Sweden's National Board of Trade, who said: 

Yes, as we @sweboardoftrade describe it here "economic interdependence has a moderating influence on great power relations". It does not mean that interdependence always dominates other factors (structural or unit-level) that determine war and peace.

And Scott Lincicome pointed to a Cato piece which cites a number of studies on this issue, including this one:

In a 2016 Review of Development Economics paper, Jong‐​Wha Lee and Ju Hyun Pyun examined 243,225 country pairs from 1950 to 2000 and found that “an increase in bilateral trade interdependence significantly promotes peace,” with this effect strongest for contiguous countries (e.g., the United States and Canada). They also showed that peace is separately promoted by a nation’s openness to global trade and that “an increase in global trade openness reduces the probability of interstate conflict more for countries far apart from each other than it does for countries sharing borders.” Finally, they found that “states more dependent on the world economy tend to have fewer conflicts than those less dependent,” thus providing a strong “security motive” for nations’ efforts to increase other countries’ global economic integration.

Finally, as I was preparing this blog post, I came across a speech from Alan Wolff from last week entitled "Trade for peace: Can trade be an effective tool to support peace? Lessons from history." Here's a passage from it:

Studies have found that WTO Membership does not guarantee the reduction of militarized inter-state disputes and major inter-state wars between pairs of Member states. However, they also found that states were less likely to do so when they were WTO Members and benefited from increased trade.

As I see it, on one side of the trade and peace debate, there is logic and lots of evidence, and on the other side there are a couple of anecdotes that simply show that trade does not guarantee peace in all circumstances. Yes, Russia and Ukraine both joining the WTO did not prevent war, but as I said, trade does not prevent all war, and I'm pretty sure no one ever argued that it would.

Virtual Event: The Economic Implications of Recent United Kingdom Trade Agreements for the US, Texas and Mexico

David Gantz passed along the following:

The United Kingdom is in the midst of negotiating several international agreements that are likely to have direct economic impact on the United States, Mexico and Texas. These include an accession agreement to the Comprehensive and Progressive Trans-Pacific Partnership (to which Mexico is an original party); a free trade agreement with Mexico to replace the previous agreement, which no longer applies post Brexit; and a series of non-binding but significant memorandums of understanding between the U.K. and Texas, as well as some between the U.K. and several other U.S. states. Once these agreements are concluded and enter into force, they could significantly expand the U.K.’s trading relationships with the U.S., Mexico and Texas. This panel discussion will explore the reasons why the various parties choose to enter into such accords, as well the constitutional issues raised by U.S. states concluding international agreements.

This virtual event is sponsored by the Baker Institute Center for the U.S. and Mexico and the International Economics Program.

Follow @BakerInstitute on Twitter, and join the conversation with #BakerLive.

Agenda

11:00 am	Welcome and Introduction of Panelists Tony Payan, Ph.D. Françoise and Edward Djerejian Fellow for Mexico Studies; Director, Center for the United States and Mexico
11:10 am	Panel Conversation Moderator: Tony Payan, Ph.D. Lorand Bartels, MBE, Ph.D. Professor of International Law, Faculty of Law, Cambridge University and adviser to the UK government on the negotiations Meredith Lilly, Ph.D. Associate Professor at Carleton University’s Norman Paterson School of International Affairs and Simon Reisman Chair in International Economic Policy David A. Gantz, J.D. Will Clayton Fellow in Trade and International Economics
11:45 am	Q&A Session
12:15 pm	Adjourn

Registration

This virtual event is free, but registration is required. Click here to attend this event virtually via Zoom.

First Rapid Response Labor Panel Begins Work under USMCA

Many readers will know that the United States called for the very first panel under the USMCA Rapid Response Labor Mechanism (RRM) at the end of August.  One month in, the panel has been busy.  This post briefly summarizes the panel’s work so far and makes a few preliminary observations.

As a reminder, the situation before the panel involves a mine owned by Grupo México in Zacatecas, Mexico.  On May 15, the AFL-CIO, the United Steelworkers, and a Mexican union filed a petition with the United States alleging a denial of workers’ rights at the mine.  Following an investigation, the United States requested that Mexico review the situation.

On July 31, Mexico reported to the United States that it had determined that no denial of rights existed at the mine.  According to Mexico, the situation was not covered by the USMCA because (1) the alleged denial of rights occurred prior to entry into force of the USMCA and did not implicate legislation that complies with Annex 23-A of the USMCA, and (2) the San Martín mine is not a “Covered Facility” within the meaning of Article 31-A.15 of the USMCA.

As required by the USMCA, the Mexican Section of the Secretariat selected the panel members by lot and the following panel members began their work on August 30: Gary Cwitco (chair), Kevin Kolben, and Lorenzo Roel.  Cwitco is a union representative from Canada; Kolben is a business school professor in New Jersey; and Roel is the president of the National Labor Commission of the Business Coordinating Council in Mexico.

The USMCA requires that a panel within five business days of its constitution “confirm that the petition: (a) identifies a Covered Facility; (b) identifies the respondent Party’s laws relevant to the alleged Denial of Rights; and (c) states the basis for the complainant Party’s good faith belief that there is a Denial of Rights.”

Let’s just acknowledge how quick of a turnaround that is for a panel facing a very complex – let alone novel – set of proceedings.  And those are not insignificant determinations.  Those are, in fact, the fundamental points of dispute between Mexico and the United States. 

The panel, faced with very short submissions from both sides, and this very short deadline, adopted a “prima facie”-styled decision in which it “confirmed” the petition.  [“Confirmation” is an unusual concept in this space, styled somewhat as a jurisdictional stage of the proceedings but again with very little to work with, something the panel acknowledged.]  On September 6, the panel stated:

• The panel finds that the petition . . . meets the prima facie requirements of Article 31-A.6 and the petition is hereby confirmed.
• The panel also notes that nothing in this confirmation prejudges arguments that the Parties may make with respect to any issue before the panel including but not limited to: Whether or not the San Matín [sic] mine is a covered facility within the meaning of Article 31-A.15; (2) Whether or not the alleged Denial of Rights is covered by the USMCA; and (3) The substance of the allegations.

On September 12, the panel met with the parties via Zoom. On September 14, the panel announced a schedule in which it required Mexico to submit a document describing Mexico’s investigation by September 28.  (No document is yet available on the Secretariat website.)  The panel has given the United States seven days to reply to that document following its translation into English.  There will be further written replies from both sides.

Most importantly, the panel has indicated that it will hold an in-person “verification hearing in Mexico City”. The panel will allocate two days for oral arguments and the hearing will be open to the public.  No date is set yet.  We’ll see if the panel adopts the same practice as many of the Chapter 31 panels with a public livestream of some sort.

There is a particularly contentious labor and political history surrounding the San Martín mine that this blog post does not have space to address.  Suffice it to say that this situation is complicated – which is why making it the first to go to a panel surprised some observers.  But there may be advantages to sending this situation, raised by organized labor in the United States, to a panel following Mexico’s rejection.  Doing so lets the panel make the final call on further action.

Now, back in 2019 when the RRM was first announced, it appeared the text left many unanswered questions about just how the panel process would or could work.  This first panel is now facing these questions.  For example:

1. What rules apply to the RRM proceedings? The panel so far has adopted the Chapter 31 Rules of Procedure, at least in part (notably Articles 26 and 27 of those Rules deal expressly with RRM proceedings, while others of the Rules sometimes make reference to the RRM and sometimes do not).  Most of those are designed for more traditional state-to-state disputes, but likewise could apply to the RRM, which is an annex to Chapter 31, to fill in gaps as they arise in the proceedings.  The match is not a perfect one though, and we’ve already seen the panel depart as necessary.
2. How do workers groups – or others – participate, if at all? Interestingly, the panel has invited non-governmental entities that are directly involved in the dispute to submit briefs.
3. What does “verification” mean? Does it mean panels will go to facilities?  Under what authority and with what protection?  The U.S. government decided the San Martín mine was in too dangerous a location for it to allow its staff to visit.  It appears the panel has dispensed with the possibility that it could get there at least in this instance, although Mexico has asked the panel for clarification. In a communication on September 18, Mexico asked the panel to indicate whether it will visit the mine, and also whether it will engage in some form of discovery.

As this panel gets underway, there may be others in the wings.  One especially challenging RRM situation to watch is that involving Mas Air, which tests the application of the RRM to the services sector.  Without the threat of higher tariffs or the immediate suspension of liquidation, what power does the U.S. government have to exert over Mas Air?  Those are questions that I would expect the government agencies involved have asked and answered as they go down this road.  We’ll have to wait and see what sources of authority they have selected.

Katherine Tai on Rising Inequality, Competition, and Environmental Leadership

U.S. Trade Rep. Katherine Tai spoke at an event at the University of North Carolina last week. I thought her remarks offered some of the most clear and emphatic explanations of her philosophy on U.S. trade policy and trade politics. I suppose she has said all these things before, but somehow it just seemed to me that at this event she articulated it with particular clarity and passion. She covered a lot of ground, and I'm just going to pick out a few points to comment on, with two areas of disagreement and one area of agreement.

First up, she offers the following critique of the traditional U.S. approach to trade agreements:

For too long, our policies prioritized aggressive liberalization and tariff elimination. This approach did have benefits. We saw increases in economic activity and historic reductions in poverty in some regions. But the focus on maximizing efficiency also had significant costs and side effects: rising inequality and wealth concentration; good jobs lost overseas, decimating manufacturing communities.

I agree that efficiency was an important factor motivating U.S. trade negotiators, but there are plenty of exceptions. Was IP protection focused on maximizing efficiency? Arguably it often does the opposite. And how about carveouts for U.S. agriculture subsidies? Overall, I would say U.S. trade policy prior to Trump becoming president pursued a wide range of objectives, and efficiency was one of a number of things in a broad mix.

As to the issue of "rising inequality and wealth concentration," trade critics like to argue that free trade leads to this outcome, but it's worth noting that the view from the free trade side is that one of the harms of protectionism is that it contributes to, yes, inequality and wealth concentration. Obviously, one critique of protectionism is that it reduces overall economic welfare, but in addition to that, it also channels financial benefits to specific companies and industries, which, I would say, can contribute to greater inequality and wealth concentration. (In my view, one thing that has been missing from the Biden administration's analysis of past U.S. trade policy is taking a hard look at protectionism with this in mind.)

Here's another point from Tai:

A lot of people think that [a] traditional FTA is a gift that you bestow upon a partner. And ... it means that you're going to tie your economies together, and it's going to be this really great relationship. And very few people actually understand how the rules work. And then ... what happens is, the goal of a trade agreement, the way that we have traditionally negotiated them, is to take down all tariffs between your two countries. Which means really exposing your economies to each other.

It's worth noting here that most FTAs don't actually get rid of all ordinary tariffs; and with a handful of exceptions, trade remedy tariffs can still be imposed even where a trade agreement is in place. But putting that aside, yes, it's certainly true that trade agreements reduce tariffs. One of the main benefits of doing tariff reductions is that this increases competition in the marketplace ("exposing your economies to each other"). When governments protect their domestic industries from foreign competition, by contrast, they contribute to the emergence of domestic monopolies and oligopolies. So, at a time when there is an active effort by the Biden administration to, as they see it, make U.S. markets more competitive, I think trade liberalization could be a key part of this. Domestic industries lobby hard to avoid this competition, but society is better off as a whole if more competition exists. (Interestingly, Tai was just appointed to the White House Competition Council. The USTR press release notes that "[i]n July 2021, President Biden signed an Executive Order on Promoting Competition in the American Economy, which created the Competition Council and instructed federal agencies to identify ways to promote competition in all aspects of the U.S. economy." Trade liberalization would be a great way to achieve this.)

Having done my usual criticizing of things Tai said, let me express support for one point she made:

I just want to say one more thing on climate and trade. I think that, especially with my partners in Congress, they really like to talk about, and the foreign policy establishment, they like to talk about American leadership, right? And America needs to lead and ... we shouldn't fall behind in the competition. One of the issues is, and I want to be really honest about this, on climate, on climate and trade, I can't lead. I can't lead because America doesn't have a broad base of bipartisan support around climate policy. And until we do, I don't have the tools to engage with the other countries that we need to, to work on solutions. And I think that goes also a bit for digital in terms of privacy policy, in terms of liability policy. Until the United States is able to articulate our own policies in this area, I got nothing to bring to the table in the international conversation, because I'm just a trade negotiator. If I do something through our trade policies that either forces domestic action at home, or that makes our domestic political actors feel like I'm tying their hands, that's the end of our trade policy, and that's the end of my job.

I think her statements are particularly relevant on climate policy. I'm not sure what will have to happen for various actors in the U.S. government to take climate change more seriously. At the moment, the economic nationalist right is pushing for policies that would increase carbon emissions, e.g., this: "The [J.D. Vance] bill also aims to create the first 'America First Vehicle Credit' for cars powered by fossil fuel and that are American-made." In this context, I think that criticism of trade policy officials on this issue is an unhelpful distraction.

Investment Arbitration Reporter Seeking Contributors

My friend Luke Peterson, the founder of Investment Arbitration Reporter, passed this along:

Investment Arbitration Reporter is looking for one or more persons to join our team of freelance contributors.

IAReporter offers specialized reporting and analysis of developments in the field of international investment law, and when relevant it focuses on public international law and international commercial arbitration (primarily cases involving state entities).

We are seeking contributors who can review and write about legal and policy developments with a high level of technical accuracy, and in the existing style of IAReporter.

Any work for IAReporter would be on a remote consultant basis (i.e., contributors would work from wherever they are legal residents and authorized to work).

Ideally, in their initial months working with us, contributors should have at least 25 hours per month to devote on a flexible basis. Talented contributors will be invited to work more intensively over time, and there may be eventual scope for employment on a part-time or full-time basis. However, it is important to note that we are unable to offer full-time or even half-time hours at the outset of your relationship with us.

Our dream candidate is someone who is pursuing a PhD, raising a family, writing a novel, or who is otherwise somewhat busy with other pursuits – but who still has sufficient time and flexibility to work with us in a meaningful fashion.

Who Should Apply?

Desired qualities include:

• Fluency in English and preferably at least one other language.
• Advanced background in international law and arbitration, or a related field.
• Exceptionally strong writing skills in English, preferably journalistic in nature.
• Prior familiarity with IAReporter and its style of writing.
• Humility and lack of ego when it comes to having your work edited or revised.
• Flexible work-life schedule, because assignments arise at various times and contributors may need to cover them on short notice. We don’t expect you to always say “yes” to new assignments that have same-day or next-day deadlines, but we want you to have the flexibility to take on some work of this type on a regular basis.

Who Should Not Apply?

• For conflict-of-interest purposes, we ask our contributors to not practice in the field of investor-state arbitration while they work with us. Thus, if you aim to be practising or clerking for an arbitrator within the next 2-3 years, we politely discourage you from applying. If you are currently practising, please explain in your application letter when you are planning to discontinue such work. Otherwise, your application is likely to be filtered out before deeper review.
• If you lack strong familiarity with IAReporter, it is not likely that your application will meet with success.
• If you are presently enrolled in a first law degree (i.e. BA or LLB), we also discourage you from applying at this juncture. Past experience indicates that such candidates typically lack sufficient experience necessary to be successful contributors.
• Since much of our daily news/editorial activity takes place during Western European/US East Coast working hours, candidates in Asia-Pacific locations might find it difficult to find a footing in our workflow – unless they are extreme night-owls.

What Do We Pay?

For a 6-month probationary period, any successful applicant will be paid a rate of $60 (US) per hour for assignments. For the next 6 months, contributors will be paid a rate of $70 (US) per hour. (Further rate increases are anticipated.)

Trial Assignment

Interested candidates must complete a trial assignment: a summary of the Perenco v. Ecuador Jurisdictional Decision in the style of IAReporter. (We covered this decision in a cursory fashion back in 2011, but we are now seeking a more detailed review of the decision.)

Your draft should offer a concise account of the essential facts, a description of the key legal holdings and reasoning, as well as a small amount of analysis that contextualizes any of the holdings against the backdrop of other international jurisprudence.

The trial assignment should be less than 2000 words and take less than 8 hours to complete. Please do not ask a friend or colleague to review or edit your draft. We want to see your work only, as it is you who will be doing subsequent assignments for IAReporter – and your performance should match the quality of your initial application.

We also request a CV and a short cover letter (less than 500 words, please).  The cover letter should clarify your plans and aspirations for the next several years, so that we can understand how your part-time work with IAReporter would fit into the larger picture. Your application package should be submitted to [email protected]. We prefer all materials to be shared as MS Word files or Google Docs that are unlocked and editable.

Deadline/Next Steps

The deadline for applications is 9 PM Eastern Standard Time on Sunday October 8, 2023.

All trial assignments (i.e. reviews of the Perenco v Ecuador decision) will be reviewed on a blind basis by our team, so that the strength of the applicant’s work (rather than their CV or cover letter) determines whether they are short-listed. In mid October, we will contact short-listed applicants whom we wish to interview.

Please note that we are unable to honour requests for temporary access to IAReporter’s website in order that potential applicants can familiarize themselves with our work. If you are a student and your institution does not subscribe, we may be able to offer a free trial to your library. Ask your library to email us at [email protected]. However it is unlikely that this trial would be activated fast enough for you to participate in this year’s contributor competition.