International Economic Law and Policy Blog

The EU-Singapore Digital Trade Agreement: Experimentation with Data Flows Obligations and Exceptions Continues

Over the past couple years, I've been looking at how digital trade agreements set out data flows obligations and exceptions. I've got a new one to examine, as the EU has published a pre-legal scrub version of its digital trade agreement with Singapore, building on their previously signed FTA. In prior posts, I've looked at the EU-Japan trade agreement and the EU-NZ trade agreement provisions in this area, so I'll throw in some comparisons to those agreements.

First off, I'll just note quickly the appearance of the right to regulate in Article 3 of the EU-Singapore digital trade agreement:

The Parties reaffirm their right to regulate within their territories to achieve legitimate policy objectives, such as the protection of public health, social services, public education, safety, environment or public morals, social or consumer protection, privacy and data protection, and the promotion and protection of cultural diversity.

I'm skeptical that these provisions have much impact, but someone seems to like putting them in there (the EU-NZ agreement has one too).

Now we get to the core data flows obligations:

ARTICLE 5 - Cross-border data flows

1. The Parties are committed to ensuring the cross-border transfer of data by electronic means where this activity is for the conduct of the business of a covered person.

2. To that end, a Party shall not adopt or maintain measures which prohibit or restrict the cross-border transfer of data set out in paragraph 1 by:

a. requiring the use of computing facilities or network elements in the Party's territory for processing of data, including by imposing the use of computing facilities or network elements that are certified or approved in the territory of the Party;
b. requiring the localisation of data in the Party's territory for storage or processing;
c. prohibiting storage or processing of data in the territory of the other Party;
d. making the cross-border transfer of data contingent upon use of computing facilities or network elements in the Party’s territory or upon localisation requirements in the Party’s territory; or
e. prohibiting the transfer of data into the territory of the Party.

In the same Article, we then get an exception for "legitimate public policy objectives":

4. Nothing in this Article shall prevent a Party from adopting or maintaining a measure inconsistent with paragraph 2 to achieve a legitimate public policy objective FN1, 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. FN2

FN1: For the purpose of this Article, “legitimate public policy objective” shall be interpreted in an objective manner and shall enable the pursuit of objectives such as to protect public security, public morals, or human, animal or plant life or health, to maintain public order, to protect other fundamental interests of society such as social cohesion, online safety, cybersecurity, safe and trustworthy artificial intelligence, or protecting against the dissemination of disinformation, or other comparable objectives of public interest, taking into account the evolving nature of digital technologies and related challenges.

FN2: For greater certainty, this provision does not affect the interpretation of other exceptions in this Agreement and their application to this Article and the right of a Party to invoke any of them.

The structure of data flows obligations and exceptions here looks a little more like the EU-Japan version than the EU-NZ one, with standalone public policy exceptions embedded directly within the data flows obligations Article.

One thing that was noteworthy about the EU-NZ digital chapter was the separate Article on "Protection of personal data and privacy" that seems to be a broad exception-like provision, of a scope that is a bit uncertain to me. The EU-Singapore agreement also has something that is perhaps along these lines:

ARTICLE 6 – Personal data protection

1. Parties recognise that individuals have a right to privacy and the protection of personal data and that high and enforceable standards in this regard contribute to trust in the digital economy and to the development of trade.

2. Each Party shall adopt or maintain a legal framework that provides for the protection of the personal data of individuals.

...

4. Each Party shall ensure that its legal framework under paragraph 2 provides non-discriminatory protection of personal data for natural persons.

...

11. Nothing in this Agreement shall prevent a Party from adopting or maintaining measures under its respective legal frameworks referred to in Paragraph 2 that it deems appropriate, including through the adoption and application of rules for the cross-border transfer of personal data, provided that the law of the Party provides for instruments enabling transfers under conditions of general application for the protection of the data transferred.

12. Each Party shall inform the other Party about any measure it adopts or maintains according to paragraph 11.

The wording here is different from the EU-NZ one, with the EU-Singapore version reading more like a traditional trade agreement exception ("Nothing in this Agreement shall prevent ..."), but the "deems appropriate" language in para. 11 perhaps gives it a similar scope to what we saw in EU-NZ, with a broad exception for privacy and personal data protection.

And then finally, in case the various exceptions and exception-like provisions set out above don't give the respondent what it wants, some of the exceptions set out in the EU-Singapore FTA apply to these digital trade agreement obligations as well, so you can try them too:

ARTICLE 29 – General exceptions

Articles 2.14 and 8.62 of the Free Trade Agreement shall apply mutatis mutandis to this Agreement.

ARTICLE 30 – Security exceptions

Article 16.11 of the Free Trade Agreement shall apply mutatis mutandis to this Agreement.

I have no idea whether we are ever going to see litigation under any of the digital trade texts that are proliferating these days, but if we do, making sense of the provisions of any particular agreement, given the context of all the textual variations in other digital agreements, is going to be a challenge.

Will USMCA Be Renewed in 2026?

At a Baker Institute event last week, C.J. Mahoney, who was a Deputy U.S. Trade Representative during the Trump administration, argued that renewal of the USMCA under the Article 34.7 review clause was unlikely to happen in 2026. He first provided some background on the provision:

... USMCA is up for renewal in the summer of 2026. Unlike prior trade agreements, USMCA has a fixed term of 16 years. But at the six year anniversary mark, the parties have the opportunity to extend the agreement for another 16 years. If they fail to do so by July of 2026, a 10 year clock will start to run for the eventual termination of the agreement.

The idea behind this provision, which I maintain was a sound one, was to create an incentive for policymakers to continue to upgrade the agreement periodically, so that we never find ourselves again in a situation like we were in 2017, with an agreement that was badly outdated and politically unpopular.

And then here is his argument about why it is unlikely USMCA will be renewed in 2026:

[Regardless of who is elected president,] next year will be dominated by domestic issues, mainly taxing and spending. I therefore expect that a year from today, the negotiating agenda for the United States will be unsettled and the fate of USMCA uncertain. My best guess is that the chances for an immediate renewal are quite low.

Mexico and Canada, which are heavily dependent on trade with the United States, would renew the agreement tomorrow, preferably with no changes. But from the US perspective, the costs of not renewing the agreement at the six year anniversary mark are relatively low. The agreement would still have 10 years to run. US leverage in the negotiations arguably would increase rather than decrease during that period. Yet for both a president Harris and a President Trump, the political costs of renewal would be non-trivial.

The passage of USMCA was, in my view, one of the great political hat tricks of recent years. ... name the last time that the AFL-CIO, the Teamsters, steelworkers, the Business Roundtable, Chamber of Commerce, the Farm Bureau, Nancy Pelosi, Mitch McConnell, Joe Biden and Donald Trump agreed on something. It was USMCA. Unfortunately, I don't see that same political constellation of stars aligning anytime soon.

...

So if I'm right, we are headed towards an anti-climax in the summer of 2026. The parties will miss the renewal date, at which point the slow clock towards the theoretical termination of the agreement will start to run.

Finally, he put forward some things that might change this assessment:

Now what could change the dynamics? I can think of a couple things.

One is the attitude that Mexico and Canada take to the negotiations. ... the typical [negotiating] playbook is for the parties to take very extreme positions at the beginning and hold all concessions to the end. I would suggest to my friends in Mexico and Canada that that would be an unwise strategy in this instance. The biggest challenge that Mexico and Canada will face in urging a swift renewal will be getting the attention of the next administration. An indication to move in the US direction early on, on issues like energy, labor, dairy, auto rules of origin, just might grab the attention of White House. This is an unusual approach, but unique times call for novel strategies.

The second way to break the impasse would be if the next administration sees USMCA as a way to reset US trade policy generally. That could be done by expanding the scope of the agreement to strengthen the critical minerals supply chain in North America, adding new disciplines on AI governance, export controls and inbound investment restrictions, and, perhaps most intriguingly, opening the door to new members of USMCA. The two most promising candidates, in my view, would be Australia and the United Kingdom. Think of it as a merger of USMCA and AUKUS. ... it would allow the United States to bring its closest security and economic partners together under a common umbrella. In time, this bloc might use its combined leverage to negotiate with other techno democracies, like Japan, India and the EU. One might see this perhaps as the start of a new global trading system, at least one for the US and its allies, that could eventually take over, or at least supplant, the WTO. This vision might strike one as farfetched, but I think that outside of the box thinking will be necessary if we have any hope of an immediate or even near term renewal of USMCA.

Just a couple quick thoughts on his suggestions for how to get USMCA renewed in 2026. First, I'm not sure it makes sense for Canada and Mexico to give up so much to get a renewal of USMCA in 2026. It's true that they rely heavily on trade with the U.S., but if the deal starts to look unbalanced, the Canadian and Mexican governments will have a hard time defending it to their own citizens, and that puts them in a bad political position domestically.

On the expansion of USMCA, I can imagine some new rules being added, although that could be tricky because there is disagreement within the U.S. on what the rules on issues such as AI governance should look like, so it might be hard to negotiate them internationally. On the possibility of adding new USMCA members, I hear a fair amount of talk about some sort of trade club of allied democracies, but it's hard to see Trump getting on board with that because it would involve liberalization. I suppose Harris might consider it though.

Meredith Lilly of Carleton University later weighed in to agree with Mahoney on the prospects for renewal in 2026:

C.J. set this up very well, talking about the review clause. We didn't have one of those in NAFTA. It was an ongoing agreement that would last forever. And so this review clause actually is less than a page of text in the overall agreement, yet it actually stands to potentially really, really jeopardize it, frankly. And so, as C.J. outlined, if all three countries don't agree to renew the agreement in 2026, then we go into this period of annual reviews. I agree with him, that I don't think we're going to see a renewal in 2026. There are absolutely zero reasons for politicians to do that. And so I do think we're going to be in a world of annual reviews every year for 10 years.

Tony Payan of the Baker Institute then expressed some surprise about these assessments and also some reluctant acceptance:

This is the first time ... that I hear that the renewal of the USMCA is not a given. I thought it was 99%, but now I'm beginning to think, oh-oh, there's a lot of political interests underneath that, and there's a lot of different dates that don't make it politically convenient for renewal.

I was where Tony was on all this. I thought renewal in 2026 was very likely under a Harris administration (less so under Trump, as he would try to extract more concessions), and I was surprised to hear this skepticism. But the more I thought about it, the more I thought the skeptics may very well be right. At the same time, it's hard to say anything with much certainty until we see the results of the 2024 U.S. elections, the 2025 Canadian elections, and how new Mexican President Claudia Sheinbaum governs.

And just to restate my (politically unrealistic) position on all this, I would use the 2026 review process to remove the existing Article 34.7 and replace it with one that involves more frequent reviews (maybe every two years rather than no reviews for the first 6 years) but no automatic termination mechanism (there are separate provisions under which the parties are able to amend the agreement and to withdraw, so there is no need for this termination provision). In addition, on the U.S. domestic side of things, I would make the withdrawal decision a joint one by Congress and the President, with U.S. withdrawal contingent on support from both branches.

New Discussions of Appeal/Review in the DS Reform Process

In July, I mentioned that the the WTO Dispute Settlement Reform Process is underway, and that people can follow it a few weeks behind the actual developments, as meeting minutes are derestricted.  The Minutes of the Heads of Delegation meeting from July 18 are now available.

Focusing on the Appeal/Review aspects of the discussions, here are some excerpts from the report by Jessica Dickerson (Australia), on behalf of the Co-Convenors, on the technical work under the DS reform process:

I will turn now to our recent discussions on Appeal/Review. Since our last update, experts have discussed the following sub-topics:

a. Reducing or changing incentives to appeal,
b. Clarifying Members' expectations of adjudicators,
c. Form of the mechanism, and
d. Access to the mechanism.

At each of the meetings, Mr. Joel Richards (Saint Vincent and the Grenadines) and I – as the responsible Co-Convenors – provided a summary of the previous discussions and ideas from the informal process under each of these sub-topics, noting the direction from our Ministers and the Facilitator, to build on the progress already made.

In the discussion on reducing or changing incentives to appeal, many Members underscored their interest in preserving the right of appeal so as to correct legal errors. This notwithstanding, several Members also emphasized the importance of establishing guardrails to reduce tactical or frivolous appeals. Further, it was noted by some Members that there needed to be a degree of caution and some balance in not reducing legitimate incentives to appeal. Against this backdrop, there appeared to be some shared interest in exploring how Members could address incentives to appeal through:

a. making better use of interim review at the panel stage;
b. a political commitment to reduce appeals;
c. adjusting the reasonable period of time (RPT) for compliance; and
d. establishing parameters for the scope and standard of review.

With respect to clarifying Members' expectations of adjudicators, several Members agreed that it was important to clarify expectations with respect to timeframes, word limits, as well as the output expected from adjudicators. In this regard, several Members expressed the view that it was important to ensure that timelines were met, and that adjudicators' reports focused only on what was being argued by the appellants. Furthermore, several Members thought that it would be beneficial to build on the work from the informal process such as with respect to issues of precedent and judicial economy, which can be applied to appeal/review adjudicators.

In the discussion on the form of the mechanism, Mr. Joel Richards and I encouraged Members to focus on interests and solutions, rather than on whether there should be a two-tier or single-tier dispute settlement system. Many Members underscored that a standing adjudicative body met their interests, which included correctness of decisions, legitimacy, efficiency, predictability, and consistency. However, another perspective expressed was that a standing body did not guarantee correct decisions, and created a perception that the body had greater authority and legitimacy than other adjudicators such as panellists. It was suggested that it could be fruitful to consider the different features of the institutional design of the appeal/review mechanism, with a view to identifying potential reforms. To give an example of one such feature, experts could consider the appointment process for appeal/review adjudicators.

Regarding access to the mechanism, we again encouraged Members to focus on their interests by responding to some discussion questions. Many Members said that automatic, compulsory access was essential to meet their interests. It was noted by several Members that such access protected them against power dynamics and was particularly important for developing Members. Some Members observed that compulsory jurisdiction was vital for the system's legitimacy and for Members' trust in the system. An alternative view expressed was that automatic access to an appeal/review mechanism was not essential to have a system that supported parties to resolve their disputes. Under this view, the parties could decide the features of the system would be useful to them, which would go towards addressing a concern about the perceived superiority of the second tier and the consequences flowing from that perception. In view of the difficulty of finding a middle ground on this sub-topic, it was suggested by some Members that it may be more beneficial to focus on other ideas, including those that would reduce incentives to appeal/review, and by establishing guardrails with respect to the scope and standard of review. In this connection, some Members also considered it important to assess the overall package of reforms and not view the issue of access to the mechanism in isolation.

This is a useful summary, but it leaves me wondering about the prospects for success here. The report mentions "another perspective" and an "alternative view," and presumably that is the United States. So what are the chances that a solution can be found here? Can this question only be answered after we know the results of the U.S. presidential election?

ANZSIL International Economic Law Interest Group: Call for Papers

This is from the ANZSIL International Economic Law Interest Group (IELIG):

2024 Workshop

The 2024 IELIG Workshop will be held via Zoom on Friday 29 November 2024. Its aim is to provide an informal setting for discussion of topical issues and works in progress.

We are honoured to have Prof Em Thomas Cottier as this year’s keynote speaker.

Thomas will speak on ‘The Impact of the Multi-Party Interim Appeal Arbitration Arrangement’. We invite paper proposals from ANZSIL members, practitioners in the field as well as staff from MFAT, DFAT, and the Attorney-General’s Department. We encourage PhD students and early career practitioners and academics to submit a proposal. Paper proposals may be on any topic within the work of the IELIG. All speakers are invited to submit their paper following the workshop to the Australian Year Book of International Law or the New Zealand Yearbook of International Law for possible publication. We also invite ANZSIL members and MFAT/DFAT/AGD staff to attend the workshop even if not presenting a paper.

Submission of proposals

If you wish to submit a paper proposal, please submit an abstract of 300 words by email to [email protected] by 10 November 2024. Please include the heading on your email message ‘ANZSIL Conference IELIG Workshop Proposal: [Your Name]’.

Best wishes,

Prof Chris Riffel (University of Canterbury) and Mr Jose-Miguel Bello Villarino (University of Sydney)
IELIG Co-Chairs

Designing an Economic Security Safeguards Mechanism to Reform the WTO Security Exception

During the WTO Public Forum, the TradeExperettes published a report entitled, Ten Quick Wins for: Re-globalization and Resilience in Trade. The report captures a collection of terrific trade analysts (who happen to be women) short, policy briefs that capture ideas and potential solutions for urgent issues for the multilateral trading system – from investment facilitation, AI, and climate adaptation. Please do check them all out!

My contribution (reproduced below) carries forward my work on economic security and is a (very) short snapshot of a working paper of mine on reimagining safeguards (though consistent feedback I receive is to not call these safeguards, for it folds in WTO safeguards jurisprudence). A consistent theme of the WTO Public Forum was how to think about rules reform in light of members' industrial policies, which may or may not have to do with defence concerns. This mechanism focuses on how to preempt economic security problems; before risks turn to damage. The solutions governments take need not be limited to production subsidies. A goal is for open, inter-connected cross-border cooperation to sift security out - and to enable members to design and evaluate their policies in light of spillovers.

*    *    *

Responding to the perception that aspects of international trade create economic security risks, some WTO members have implemented unilateral, trade-inhibiting measures that lack clear endpoints. Members may justify violations of trade rules by invoking the WTO security exceptions, provided all requirements are met. However, security exceptions are not a long-term solution for persistent, unpredictable challenges and may even preclude multilateral approaches to anticipate and mitigate economic security risks. It is time to view security as more than an exception to WTO rules and principles. Members should build a new mechanism for economic security issues using the WTO’s safeguards procedures as a model.

A new Economic Security Safeguards (ESS) mechanism could create ‘breathing space’ for protecting domestic industries that are strategic to economic security objectives while setting limits on the duration and the extent of remedy. When designing such a mechanism, members should decide how to characterize economic security safeguards and deliberate on a framework for evaluating risks. Members may agree that traditional wartime interests do not characterize economic security or that the assessment of economic security should strictly control how a product could indirectly contribute to a member’s defense capabilities .

While existing WTO safeguard rules require a demonstration of injury to industries caused by increased imports, the ESS could instead target industry risks associated with economic security. ESS implementation would thus depend upon improved information sharing concerning economic security risks rather than strict causation analysis. Practically speaking, knowledge of risk may be hard-to-observe for applying the ESS, as supporting evidence establishing chains of cause and effect may be difficult to show.

To resolve this tension, Members could coordinate their strategic foresight practices that examine future government planning and contingencies and weigh their implications. As part of this, members could the short-term and long-term risks for economic security. They would need to agree on an approach that assesses how imports create supply dependencies and related risks in relation to domestic manufacturing capacity and consumption. Finally, the WTO could work with the OECD’s risk likelihood and impact framework to design an ESS impact assessment based on different risk levels. Domestic authorities would rely on this risk assessment to evaluate the relevant factors for the right to impose trade restrictions. For example, to reduce uncertainty or early mitigation of risks, members could prioritize source diversification and set a high standard for imposing limited trade restrictions. In contrast, for vital products at high risk of severe impacts, members could set a deferential standard for evaluating the situation of the domestic industry. On this basis, there may be scope for members to choose between ESS that apply universally to all imports or moderate risk exposure from specific sources.  Members could carefully circumscribe ESS usage by conditioning the duration of ESS implementation with a ‘corrective action’ plan.

WTO security exceptions for extraordinary circumstances may still be required. However, to address ongoing concerns with economic interdependence, the ESS could allow members to advance economic security goals as part of, and not exceptional to, members’ long-term commitments to work together.

Guest Post: A Tribute to Frieder Roessler from Petros Mavroidis

This is a guest post by Petros Mavroidis of Columbia Law School. The piece will be published in a forthcoming issue of the World Trade Review.

An Uncommon Mind: Frieder Roessler’s Legacy

Petros C. Mavroidis*

*Columbia Law School

1. Doubts, Persistent Doubts

“U-huh”. This is what I recall being Frieder’s routine reaction whenever he was exposed to an argument. He rejected nothing, but at the same time he agreed to nothing right away. He needed his time to process, and would reach his conclusions only at a later stage. He applied this standard to his own, spontaneous thinking which might have sounded entirely convincing to me when we were working together, but not to him. “Let us think this issue through” he would say to me, a literal translation of the German “durchdenken” that we on occasion spoke together.

The scope of his intellectual endeavors was breathtaking. With his often interlocutor, Bob Hudec, he shared the urge to transcend the ostensible. Nothing was taken for granted irrespective who the source of information was. “Nullius in verba”, as the motto of the Royal Society dictates. I recall numerous discussions about what some might have considered obvious. Frieder was never shy to confront well-established dicta, and bring to light inconsistencies and errors. He was irreverent towards the past, but in an honest, intellectually challenging manner.

Nothing in my view exemplifies his strive for improving on past knowledge than his contributions to the understanding of non-discrimination in the GATT (General Agreement on Tariffs and Trade).

2. Likeness in GATT: the House That Frieder Built

GATT case law did not seriously delve into the question of “like products”, the foundational element in understanding non-discrimination, until the end of the 1970s. For reasons eminently explained in Baldwin (1970), and Jackson (1969), the “bite” of behind-the-border policies was hard to assess (and anyway a concern of secondary order) in presence of high import duties. Japan-Alcoholic Beverages I emerges as the first panel report that provided a comprehensive discussion on this score adopting what later became known as the “marketplace” test: consumers would define “likeness”.

The theoretical underpinning of this interpretation was the construction of Article III of GATT (where the term “like products” appears) as an instrument to avoid concession diversion. Were it left to governments to decide on likeness, they might be led (for political economy reasons) to adopt an understanding of the term that would reduce the value of tariff concessions. Trading nations, so the thinking goes, would not sit idle. For what is the purpose of reciprocally reducing the level of tariffs if protection can reemerge through the back door under the guise of unilateral regulatory distinctions? Consumers’ choices on the other hand, are heavily guided by scarcity of economic resources, hence buying national is definitely not the cardinal preference for the critical mass of the citizenry.

There you go. A sound rational basis for substantiating a plausible outcome. Who would disagree with this construction?

At that time (1978), Frieder was not dealing with panels. Indeed, there was no GATT Legal Office back then to start with.[1] But he understood only too well the importance of the question, as well as the potential shortcomings of the approach adopted in the aforementioned case. In his subsequent writings, namely Roessler (1996), (2003), after he had left the GATT/WTO, Frieder left no doubt that he was siding with the approach developed in the two reports I discuss next.

2.1 Change (the House that Frieder Help to Build)

US-Malt Beverages[2] was an odd case. A tax distinction favoring a variety that only seldom appears and was present in the territory of the regulating state, was challenged for violating non-discrimination. The outcome is irrelevant for the purposes of our discussion. What matters is §5.25 of the report:

The purpose of Article III is thus not to prevent contracting parties from using their fiscal and regulatory powers for purposes other than to afford protection to domestic production. Specifically, the purpose of Article III is not to prevent contracting parties from differentiating between different product categories for policy purposes unrelated to the protection of domestic production. The Panel considered that the limited purpose of Article III has to be taken into account in interpreting the term "like products" in this Article. … While the analysis of "like products" in terms of Article III:2 must take into consideration this objective of Article III, the Panel wished to emphasize that such an analysis would be without prejudice to the "like product" concepts in other provisions of the General Agreement, which might have different objectives and which might therefore also require different interpretations.[3]

This paragraph provided the impetus for what became known as the “aims and effect” test to define likeness. The advent of this test did not wait for long. In US-Taxes on Automobiles,[4] the panel held in §5.10:

The Panel then proceeded to examine more closely the meaning of the phrase "so as to afford protection." The Panel noted that the term "so as to" suggested both aim and effect. Thus the phrase "so as to afford protection" called for an analysis of elements including the aim of the measure and the resulting effects. A measure could be said to have the aim of affording protection if an analysis of the circumstances in which it was adopted, in particular an analysis of the instruments available to the contracting party to achieve the declared domestic policy goal, demonstrated that a change in competitive opportunities in favour of domestic products was a desired outcome and not merely an incidental consequence of the pursuit of a legitimate policy goal. A measure could be said to have the effect of affording protection to domestic production if it accorded greater competitive opportunities to domestic products than to imported products. The effect of a measure in terms of trade flows was not relevant for the purposes of Article III, since a change in the volume or proportion of imports could be due to many factors other than government measures.

The regulatory aim pursued emerged the centerpiece of the analysis of “likeness”. As Frieder used to say, governments may very well make legitimate distinctions across goods that consumers treat as “like products”. What is wrong with that?

Indeed, what is wrong with that? And yet, this understanding of “like products” flies against the previous understanding of “likeness”, does not it? Can they both be right?

It defies the purposes of this short paper to analyze in more detail Frieder’s thinking. The house that he built, like all ideas that he was consistently willing to discuss and debate, was not meant to be a permanent edifice. Frieder wants to bring in a platform, a more complete background that would host new ideas so as to build a better house than the one before. And so he did. 

2.2 Onto the WTO

WTO case law rejected the aims and effect analysis as practice in the first likeness dispute. But it did not dismiss the relevance of regulatory aim in deciding on likeness out of hand. Few have observed that in Japan-Alcoholic Beverages II, the panel conspicuously added that Japan had advanced no regulatory justification for its tax differential between sochu (a predominantly Japanese drink) and a series of predominantly Western drinks. This report then, adopted the marketplace-test when dealing with a domestic tax differential for which no (plausible) justification had been advanced.

And of course, the Agreement on Technical Barriers to Trade (TBT) explicitly endorsed the legitimacy of distinctions based on the process of production of competing goods.[5]

I would not be far off from the truth stating that the basic intuition of Frieder (the relevance of regulatory aim in likeness-analysis) has gained pace over the years. The manner in which it has been practiced has been rightfully (in my view) criticized.

3 Frieder and Me

It is hard to over-estimate Frieder’s influence on my thinking. He hired me in the GATT Legal Office in 1992, and did not lose time to realize that he had seen too much in me. But he gave me the time and space necessary for me to understand the basic logic of the system, by asking me to continue the excellent work of Friedl Weiss in updating the GATT Analytical Index. He then threw me to panel work, and involved me in a various of his discussions with luminaries in the field: Bob Hudec, John Jackson, David Palmeter, and Ernst-Ulrich Petersmann were his preferred “Stammtisch” and he generously offered a seat at that people to the “Nachwuchsgeneration” including me. My years next to him were the best complement I could have hoped for to add to my years in various schools.

In my eyes, he did everything right. He even picked the most able and suitable successor in Bill Davey who headed the Legal Office during the first years of the WTO, and picked up from where Frieder had left.

As years passed by and I started forming my own opinions on the issues we had discussed in the early nineties, I came to realize that he was secretly proud of all of us as we developed through time. And it is not the case that we all agreed.[6] What mattered to him most I discovered, was the internal coherence of the argument. The external validation could wait. For Frieder was a legitimate intellectual. 

I never managed to pay him back. I did (and continue to do) try to pay forward. I know that this is the way he would have liked it anyway.

Frieder lived during good times, or maybe times back then were good because people like Frieder made them good. While preparing this short note, I turned back to a re-reading of the reports I mention above (and a few other where Frieder was involved as legal advisor to panels). At the risk of waxing lyrical here, I was overwhelmed with nostalgia. I would kindly ask the reader to focus on the choice of words in the cited passages. And then take a step back and reflect on the logical construction permeating the quoted paragraphs.

These passages reflect a deep thinking about the most fundamental issues circumscribing trade integration. They also embed a coherent approach when expressing these ideas: how understand agreed contractual terms in context? What is the most plausible across competing interpretations? Why is it the case? In a few pages, a solution to a dispute is provided, and its intellectual underpinning is explained as well. I dread the moment when a new report is issued these days, as I know I am in for a repetition of platitudes, a concatenation of empty sentences and lengthy citations the usefulness of which is hard to discern.

When thinking about Frieder and his generation, I am reminiscent of Benjamin Franklin, the American polymath and Founding Father. When asked during the negotiations that led to the enactment of the US Constitution about the choice of regime that he and the others had made, he replied (almost stoically):

    - A Republic, if you can keep it.

Frieder and his generation bequeathed us with a Republic. I am afraid this is not what we will leave to those who come next.

References

Baldwin, Robert E. 1970. Non-Tariff Distortions in International Trade, The Brookings Institution: Washington, D.C. 

Charnovitz, Steve. 2002. The Law of Environmental PPMs in the WTO: Debunking the Myth of Illegality, Yale Journal of International Law 27: 59–109.

Grossman, Gene M., Henrik Horn, and Petros C. Mavroidis. 2013. Domestic Instruments, pp. 205-345 in Henrik Horn and Petros C. Mavroidis (eds.), Legal and Economic Principles of World Trade Law, ALI, The American Law Institute Reporters’ Studies on WTO Law, Cambridge University Press: New York City.

Hudec, Robert E. 1998. GATT Constraints on National Regulation: Requiem for an Aims and Effect Test, International Lawyer, 32: 619-649.

Hudec, Robert E. 2000. “Like Product”: The Differences in Meaning in GATT Articles I and III pp. 101-123 in Thomas Cottier and Petros C. Mavroidis (eds.), Regulatory Barriers and the Principle of Non-discrimination in World Trade Law, 101–123, University of Michigan Press: Ann Arbor, Michigan. 

Jackson, John H. 1969. World Trade and the Law of the GATT. Bobbs-Merrill: Indianapolis, Indiana.

Marceau, Gabrielle (ed.) 2015. A History of Law and Lawyers in the GATT/WTO, Cambridge University Press & the WTO: Geneva, Switzerland.

Mavroidis, Petros C. 2019. Last Mile for Tuna (to a Safe Harbour): What is the TBT Agreement All About? European Journal of International Law, 30: 279–301.

Petersmann, Ernst-Ulrich. 2000. International Trade Law and International Environmental Law: Environmental Taxes and Border Tax Adjustment in WTO Law and EC Law, pp. 127-165 in R. Revesz, P. Sands, and R. Stewart, (eds.), Environmental Law, The Economy and Sustainable Development, 127–165, Cambridge University Press: Cambridge, United Kingdom.

Roessler, Frieder. 1996. Diverging Domestic Policies and Multilateral Trade Integration, pp. 21-64 in Jagdish Bhagwati, and Robert E. Hudec (eds.), Fair Trade and Harmonization, vol. 2: Legal Analysis, 21–64, Cambridge University Press, Cambridge, United Kingdom.

Roessler, Frieder. 2003. Beyond the Ostensible: A Tribute to Professor Robert Hudec’s Insights on the Determination of the Likeness of Products under the National Treatment Provisions of the GATT, Journal of World Trade, 37: 771–781.

 

[1] Marceau (2015) edited an excellent volume tracing the history of the Legal Office of the GATT/WTO.

[2] https://www.wto.org/english/tratop_e/dispu_e/gatt_e/91alcohm.pdf

[3] On this last issue, see Hudec (2000).

[4] https://www.wto.org/english/tratop_e/dispu_e/gatt_e/93autos.pdf

[5] Even though case law has turned the logic behind Arts. 2.1 and 2.2 TBT to its head, as I have argued in Mavroidis (2019). See also Charnovitz (2002), and Petersmann (2000).

[6] In Grossman et al. (2013), for example, while we see the relevance of regulatory aim, we take distance from the “aims and effect” test as practiced.

Trump the China Trade Deficit Hawk and China Security Dove?

Trade policy came up at last week's presidential debate, with a somewhat traditional discussion of tariffs at the start, and then a shift at the end to security-related issues.

Kamala Harris started it off by referring to Trump's proposed universal baseline tariffs as a sales tax:

... My opponent has a plan that I call the Trump sales tax, which would be a 20% tax on everyday goods that you rely on to get through the month. Economists have said that Trump's sales tax would actually result for middle-class families in about $4,000 more a year because of his policies and his ideas about what should be the backs of middle-class people paying for tax cuts for billionaires.

She has been consistent in criticizing his tariffs, going all the way back to when she was running for president in 2019.

Trump then responded as follows:

First of all, I have no sales tax. That's an incorrect statement. She knows that. We're doing tariffs on other countries. Other countries are going to finally, after 75 years, pay us back for all that we've done for the world. And the tariff will be substantial in some cases. I took in billions and billions of dollars, as you know, from China. In fact, they never took the tariff off because it was so much money, they can't. It would totally destroy everything that they've set out to do. They've taken in billions of dollars from China and other places. They've left the tariffs on. When I had it, I had tariffs and yet I had no inflation. 

(Let me interject a couple points here: 1) Trump continues to misrepresent who pays tariffs; 2) I would like to hear what Harris has to say about keeping some of Trump's tariffs in place; and (3) saying there was "no inflation" is a distraction from that fact that prices rose for the goods on which the tariffs were imposed.)

Moderator David Muir then asked this follow-up:

Mr. President, I do want to drill down on something you both brought up. The vice president brought up your tariffs, you responded, and let's drill down on this because your plan is what she calls ... essentially a national sales tax. Your proposal calls for tariffs as you pointed out here, on foreign imports across the board. You recently said that you might double your plan, imposing tariffs up to 20% on goods coming into this country. As you know many economists say that with tariffs at that level costs are then passed onto the consumer. Vice President Harris has argued it'll mean higher prices on gas, food, clothing medication arguing it costs the typical family nearly four thousand dollars a year. Do you believe Americans can afford higher prices because of tariffs?

Trump responded with more of the same:

They aren't gonna have higher prices, what's gonna have and who's gonna have higher prices is China and all of the countries that have been ripping us off for years. ... I was the only president ever, China was paying us hundreds of billions of dollars and so were other countries and you know if she doesn't like 'em they should have gone out and they should have immediately cut the tariffs but those tariffs are there three and a half years now under their administration. We are gonna take in billions of dollars, hundreds of billions of dollars. I had no inflation, virtually no inflation, they had the highest inflation, perhaps in the history of our country because I've never seen a worse period of time. ...

Muir then asked Harris the question I had in mind about Biden keeping some of the tariffs: 

Vice President Harris, I do want to ask for your response and you heard what the president said there because the Biden administration did keep a number of the Trump tariffs in place, so how do you respond?

In response, Harris criticized Trump's tariffs in general terms, and then, interestingly, turned this into more of a China security issue:

Well, let's be clear that the Trump administration resulted in a trade deficit, one of the highest we've ever seen in the history of America. He invited trade wars, you wanna talk about his deal with China, what he ended up doing is under Donald Trump's presidency he ended up selling American chips to China to help them improve and modernize their military, basically sold us out when a policy about China should be in making sure the United States of America wins the competition for the 21st century. Which means focusing on the details of what that requires, focusing on relationships with our allies, focusing on investing in American based technology so that we win the race on A.I. and quantum computing, focusing on what we need to do to support America's workforce, so that we don't end up having the, on the short end of the stick in terms of workers' rights. ...

Trying to figure out what Trump thinks can be a challenge, but it seems to me that his big concern on trade is the trade deficit, and the fix he wants to use is tariffs. (He misunderstands both of these issues, but let's put that aside). By contrast, he does not appear to be particularly concerned about the security issues related to China that most Republicans and many Democrats in Washington are worked up about these days. For example, Trump has said several times that if Chinese companies want to sell autos in the U.S., they should produce them here. But I'm not sure many other national Republican politicians would want to let such investments happen. And while a lot of people in Washington are focused on winning the technology race with China, Trump seems to envision the economic contest as one over older industries such as steel and traditional autos, rather than advanced tech. I don't think I've ever heard him talk about the Chinese accessing Americans' data, which many other people in Washington worry about and which is why there are concerns with Americans driving Chinese autos full of software that can gather data.

More broadly, I'm not sure Trump thinks of China as much of a security threat. The main threat that he sees -- from China, the EU, and others -- is a trade threat. He thinks their trade policies and our trade policies, working together, have cost American jobs. His analysis is all wrong here, but that seems to be what he thinks.

Having said all that, I wouldn't say this means a Trump administration would not have a security focus. In all likelihood, Trump will hire a lot of people who share the security concerns that most Washington policymakers have.

Tariff History Emerges as a Key Issue in the U.S. Presidential Contest (Just Kidding!)

As the culture wars have dominated the political debate in recent years, it feels as though the quality of the economic policy discussion has suffered. Some of the economic topics that keep coming up are of little interest to most voters, and are being talked about in a way that is disconnected from reality. Here's an illustration from a recent speech by former president Trump, in which he makes reference to some events in U.S. tariff and economic history:

Under my leadership, America will encourage domestic production instead of punishing it. As you know, our country's vast manufacturing wealth was created at a time with very little domestic taxation, few regulations, and most revenue came from tariffs from other countries. That was when we were at the wealthiest ever. Proportionately, we were the wealthiest country ever during those days. That was before income tax came along. Now we foolishly do the opposite. We impose lower tariffs and no tariffs on foreign producers. We have the lowest tariffs of any nation in the world, and we relentlessly punish our own companies for doing business in America. You do business in America, you're punished tremendously. I had many, many companies come to me, sir, I can't compete. They're sending kitchen cabinets, washers and dryers, everything ... motorcycles, they're sending them here, sir, we can't compete. And I made it so they could compete and thrive. Every one of those people, we should get them up and talk to you one day, because every one of those people comes up to me, and every time I see them, they hug me, they kiss me, they love me, because I saved their businesses.

I intend to reverse this model and once again turn America into the manufacturing superpower of the world. We can do that just with being intelligent. The key to this effort will be a pro-American trade policy that uses tariffs to encourage production here and bring trillions and trillions of dollars back home. ... My plan is that if you open your factory in Wisconsin, Pennsylvania, Michigan, Minnesota, anywhere else in our country, you don't pay a tariff tax, you don't pay a tax. You make the product here. But if you move your production outside of the United States and send it back here, which people are doing now, and I stopped it, stopped it cold. But they've changed that already. Then you'll have to pay a very substantial tariff to get your product back into the country. The result will be that everybody in the world will want to be here, and they'll want to produce here. They're going to want to produce their product in America. It's going to say made in the USA. We will be able to build ships again. We will be able to build planes again. We will be able to build our military again from within, all from within. We will create the biggest, greatest and strongest middle class in the history of our country. We will have 10s of millions of high paying jobs in manufacturing, transportation, defense, as well as all of the sales and support of export jobs. Our auto industry will be the biggest beneficiary.

In short, it will be a national economic renaissance just by using our heads, by being smart, by not letting other countries take advantage of us. They've been doing it for so long. It's so sad to see, and I know them all, and they laugh at us behind our back. They can't believe how stupid our leadership has been for so many years.

We will ensure that the United States has a giant steel industry, and aluminum industry, a manufacturing base and a defense base. We want a industrial base that can take care of our defense needs 100%.

And you can call it what you want. Some might say it's economic nationalism. I call it common sense. I call it America first. This is the policy that built this country, and this is the policy that will save our country. In the words of a great but highly underrated president, William McKinley, highly underrated, the protective tariff policy of the Republicans has ... made the lives of our countrymen sweeter and brighter. It's the best for our citizenship and our civilization, and it opens up a higher and better destiny for our people. We have to take care of our own nation and her industries first, in other words, take care of our country first. This is when we had our greatest wealth. He was assassinated, and he left his group of people that followed him. Teddy Roosevelt became a great president spending the money that was made by McKinley. So McKinley got a bad deal on that one. He built tremendous wealth.

They had the Tariff Act of 1887, and they had a committee that studied, what are we going to do? They had a big problem, a problem like I hope to have with this country someday, so much money was coming in from foreign countries that they didn't know how to spend it. They had no idea. So they set up a committee. We'll set one up with the people in this room. How do we distribute the wealth that we have? And Roosevelt built dams and built railroads and did national parks, but he did it with the money that was made with tariffs from McKinley. So you have to remember that very highly underrated, a very underrated president, let's give them both credit. Smart tariffs will not create inflation. They will combat inflation. I had almost no inflation, and I had the highest tariffs that anyone seen. They were going a lot higher. Foreign nations will pay us hundreds of billions of dollars, reducing the deficit and driving inflation down to largely reduce our deficit. In my first term, we imposed historic tariffs with no effect on consumer prices or inflation.

The anti-tariff people, many of them, I believe, honestly, work for these other countries in some form, get tremendous amounts of lobbying money and other money, because it doesn't make sense what they're saying.

As you might expect, I have some reactions. It's hard to know where to start with this, but maybe let's go with McKinley's tariffs, which Trump has been talking about for many years. One thing to note here is that the McKinley Tariff took effect in October of 1890 while McKinley was in Congress, whereas during McKinley's presidency the big tariff increase was implemented through the Dingley Act in 1897. It's not clear whether Trump realizes this. Anyway,  some people have studied these issues in great depth. In Clashing over Commerce, Doug Irwin points out that Teddy Roosevelt, who Trump mentions, was not happy about the impact the McKinley Tariff had on the tariff-supporting Republican party in the 1890 midterm elections, saying: "The overwhelming nature of the disaster is due entirely to the McKinley bill." (Irwin also notes that "[t]he perception that high tariffs protected monopolistic big businesses and trusts also contributed to the unpopularity of the McKinley Act.")

With regard to Trump's references to the relative wealth of the U.S. during that period, for anyone who has this sort of nostalgia, there are some things you may want to consider because they complicate the more simplistic hot takes. For those on the right who are anti-immigration as well as being protectionist, keep in mind that this was a period of very open immigration, which helped drive economic growth. And for anyone who likes Social Security and Medicare, note that those programs didn't exist at the time, which is why the relatively low amount of revenue brought in by tariffs could fund the much smaller level of government spending from this period. If Trump wants the tax system to rely on tariffs for revenue rather than on income taxes, that would almost certainly mean the end of those programs.

Turning to the impact of Trump's first term tariffs on U.S. prices, Trump says they had no impact, but numerous economic studies show otherwise. (And obviously "foreign nations" don't pay tariffs, but rather importers do.)

As to whether the U.S. has the "lowest tariffs in the world," the WTO tracks this data. I would first note that New Zealand, Australia and a few others actually have lower MFN applied average tariffs. In addition, it's worth noting here that trade remedy tariffs don't get tracked as part of this calculation, and with the U.S. being such an active user, I'm not sure the U.S. tariffs would look as low in relative terms if trade remedy tariffs were included, although I haven't seen a calculation that takes this into account (it would be great if someone did one!)

On the issue of the role of lobbyists in trade policy, just about all policies have lobbyists on both sides, but I don't think there is much doubt that it is lobbyists (corporate and union) that are the driving force pushing for tariffs. It's nice for them that Trump believes in their cause, and may save them some lobbying money, but it's pretty clear that lobbying is and has always been the main source of support for tariffs.

And finally, there's the matter of retaliation by other countries, which happened before with Trump's tariffs and will happen again. Trump seems to think the U.S. could start exporting more manufactured goods such as autos (which does not seem particularly likely at the moment), but regardless of whether the U.S. production and export mix shifts away from agriculture, natural resources, and services and towards manufacturing, U.S. trading partners will have plenty of possible targets for retaliation.

There was also this:

China was built on doing exactly what we're going to be doing, and what I started doing four years ago.  What we're putting forward is the most pro-American manufacturing and jobs policy in modern history for any country. This plan will bring jobs and growth into our country at levels never seen before. Every business on earth will flock to America, from Europe, Asia, the Middle East and all over the world. By contrast, comrade Kamala Harris wants to sacrifice our wealth, kill the economy and drive jobs overseas to punish businesses, more businesses will leave.

So on the one hand, Trump admires what he thinks are the tariff policies of the Chinese Communist Party and wants to emulate them (although in reality, China actually reduced its tariffs considerably as part of its accession to the WTO), but on the other hand he is suggesting that "comrade Kamala" is a communist. That's a hard one to get my head around.

Why the US Should Respond Honestly to China's WTO Complaint

Why the US Should Respond Honestly to China's WTO Complaint

Comments by Steve Charnovitz

Federal Register m0n-2px7-nq3f

3 September 2024

China has properly lodged a lawsuit (DS623) against the United States (US) at the World Trade Organization (WTO) regarding the domestic content conditions of US subsidies granted in 2022 in US Public Law 117-169.  Such unfair, discriminatory regulations are a blatant violation of the law of the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement).  SCM Article 3.1(b) prohibits "subsidies contingent, whether solely or as one of several other conditions, upon the use of domestic over imported goods."  During the Biden-Harris Administration, the US has increased its reliance on nonmarket economic nationalism to the detriment of the US economy and the broader interests of all WTO Members.

Environmental instruments need not be, and should not be, protectionist.  In 1992, Rio Declaration reiterated the norm that governments should use economic instruments "without distorting international trade and investment" (Principle 16).  For the climate regime, the United Nations Framework Convention on Climate Change (UNFCCC) articulated the climate law principle that "Measures taken to combat climate change, including unilateral ones, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade" (Article 3.5). Thus, the discriminatory US measures detailed in China's complaint are anathema to both world trade law and global climate law. 

Although subsidies can be appropriate policies to lessen climate change, subsidies are much less likely to reduce emissions than first-based policies of carbon taxes.  Unilateral subsidies are also inferior policies because climate change is a global problem that necessitates multilateral solutions. Without effective transborder environmental solutions, trade disputes can ensue.

The US overcapacity in dollars allows the US to engage in excessive subsidization. Most other countries with their budget constraints cannot afford to bestow subsidies on the same scale that the US does.  Yet because the effectiveness of any US climate measure depends on the measures being taken by the rest of the world, the US overreliance on subsidization sets a bad example for other countries, particularly developing countries.  This dysfunction could be corrected in part by more generous US government funding of climate investments in developing countries, but those US programs are pathetically small. 

Whatever unilateral US climate subsidies could accomplish will be further diminished when US subsidies are conditioned on import substitution policies.  Such a beggar-thy-neighbor scheme raises the costs of clean energy domestically while making it more difficult for many other countries to grow their clean energy input sectors through exports.  Supply chain resiliency — even for the largest economies — is more likely achievable through economic integration than through dogmas of autarky. 

Although the Office of the US Trade Representative (USTR) has falsely claimed that China's lawsuit "seeks to undermine US efforts to address the global climate crisis...", the truth is that the protectionist US efforts in dispute make it harder for the US and other countries to address the global climate crisis.  China seeks to challenge the lack of cooperation by the US to use nondiscriminatory measures in addressing the worsening global climate crisis. China is right to seek to hold the US accountable to respect both international trade law and international climate law.  China recognizes that the effectiveness of US climate efforts (and indeed the efforts of all countries) is impeded by unjustified US trade discrimination.  While WTO law does not prohibit a government from lavishing financial benefits on politically favored beneficiaries, WTO law does prohibit granting subsidies in a manner that externalizes costs on other countries. 

In lodging this WTO case against the US, China seeks to encourage US policymakers to respect the rule-based international order.  China (but not the US) appears to understand that governments need not violate international trade law to achieve multilateral environmental objectives.   Thus, China's cause of action against the US functions as a public good in the international legal system. China's bold lawsuit should be applauded by everyone who supports the transnational rule of law

With China's overdue litigation against the US now going forward, the Biden-Harris Administration should stop undermining the WTO judicial system by blocking the appointment of WTO appellators.  If the US is unwilling to stop despoiling the Appellate Body —even though the lack of effective judicial review continues to imbalance the WTO — USTR should pledge to the WTO Dispute Settlement Body that the US will (join China to) support immediate adoption of the panel report.  During its time in office, the Biden-Harris Administration has shown bad faith in appealing four (!) WTO cases that the US has properly lost knowing full well that the appeal cannot be heard because of the US sabotage of the WTO appellate tribunal (see DS 539, 544, 552, 556, 562, 564, 597).

Because China's SCM Art. 3.1 claim against the US is correct in WTO law, the US should not engage in facetious (and time-wasting) defenses as USTR frequently does.  Since the SCM Agreement does not contain an environmental exception, USTR should not assert an environmental defense which, in any event, would be unjustified because the UNFCCC makes clear that discriminatory trade measures must not be used.  Since the SCM Agreement does not contain a national security exception, the US should not assert a national security defense as the US did unsuccessfully in the Steel and Aluminum Products case.  (That bogus US claim was rightly dismissed by the WTO panel.)  Since the SCM Agreement does not provide for reverse SCM Article 29 defenses, the US should not assert that it needs to discriminate against China because the US is in the process of transformation from a market, free enterprise economy into a centrally planned economy. 

Because China is acting responsibly to uphold the multilateral trading system and to challenge US illegality in a peaceful way, the US should cooperate by facilitating the rapid response mechanism envisioned in the DSU for the adjudication of trade complaints.  Let the panel do its job to call out the US for engaging in a cadence of protectionism that flagrantly violates WTO law.  

If the US stopped treating China unfairly in trade — including for example, cancelling the WTO-illegal US Sections 301 and 232 tariffs — China might become more willing to act cooperatively to address the most pressing global problems. 

Guest Post: A Tribute to Frieder Roessler from Ernst-Ulrich Petersmann

This is a guest post by Ernst-Ulrich Petersmann, emeritus Professor at the European University Institute, Florence (Italy), and legal consultant at the World Trade Organization (Geneva); former professor of European law at Geneva University, and of international economic law at Geneva’s Graduate Institute of International Studies

Frieder Rössler (1939-2024): International civil servant, academic teacher, and Socratic explorer

Frieder and I met in 1981 in the GATT Secretariat following my appointment as first ‘assistant legal officer’ ever employed by the GATT Secretariat, and Frieder’s return to his GATT office (as Secretary of GATT’s Balance-of-Payments-Committee) from an academic leave at Washington University. We realized commonalities in our careers: both of us had studied law and economics at Freiburg University and at Geneva’s Graduate Institute of International Studies; we admired the ‘Austrian school of economics’ (like G.Haberler, F.A.Hayek) and ‘constitutional economics’ (like J.Buchanan, J.Tumlir); we had both published on international monetary, trade and economic development law using our professional experiences in international organizations like the World Bank. As both of us were sailors (notwithstanding my lack of ambition to emulate Frieder’s repeated crossings of the Atlantic and the Mediterranean Seas in his own yacht together with his family) and enjoyed our GATT offices overlooking Lake Geneva, we started a tradition (lasting more than four decades) of joint ‘philosopher walks’ along the Lake of Geneva discussing our shared belief in the need for transforming the ‘anti-legal pragmatism’ cultivated among GATT diplomats into a rules-based multilateral trading, legal and dispute settlement system. Yet, our two worldviews often differed, which transformed our regular discussions into mutual learning processes: both of us admired Hayek’s theory of knowledge (e.g. using markets and competition as decentralized information, coordination, sanctioning and ‘cybernetic steering mechanisms’) and Hayek’s arguments for ‘evolutionary constitutionalism’ (e.g. in his books on The Constitution of Liberty and his three volumes on Law, Legislation and Liberty); but Frieder had been less engaged than myself in the successful ‘construction’ of European integration law and of its ‘ordoliberal foundations’ justifying systemic legal limitations of ‘market failures’ (e.,g. through competition, environmental and social rules and institutions), ‘governance failures’ (e.g. to protect human rights, democratic input-legitimacy and republican output-legitimacy of multilevel governance of public goods), and ‘constitutional failures’ (e.g. justifying Europe’s multilevel democratic, republican and cosmopolitan constitutionalism protecting transnational public goods like Europe’s common market, ‘social market economy’ and ‘democratic peace’).

Frieder as an international civil servant

Frieder belonged to the post-1945 generation of young Germans traumatized by two World Wars and committed to public service protecting human rights, constitutional democracy and transnational rule-of-law among ‘open societies’. As his professional work inside the World Bank at Washington had not satisfied these ambitions, he returned to Geneva’s Graduate Institute of International Studies and accepted an offer by Professor O.Long to work inside the GATT Secretariat. Like the first GATT Director-General W.White, the second GATT Director-General Long had been a lawyer emphasizing the ‘limits of GATT law’ and the need for ‘pragmatic dispute settlements’ in view of the only ‘provisional application’ of the General Agreement on Tariffs and Trade (GATT 1947). After the US Congress had refused ratifying the 1948 Havana Charter for an International Trade Organization (including GATT 1947), the 1947 Protocol on the Provisional Application of GATT 1947 continued to include ‘grandfather clauses’ exempting legally binding ‘existing legislation’ from the GATT disciplines, thus creating only a legally weak framework for reciprocal trade liberalization and politicized ‘trade diplomacy’ subject to GATT-inconsistent trade legislation and power politics (like ‘voluntary export restraints’ for cotton, textiles, agricultural and steel products). When the parliamentary ratification and entry into force of the 1979 Tokyo Round Agreements transformed this ‘soft law’ into a ‘hard law’ trade regime with increasing criticism of its ‘pragmatic diplomat’s jurisprudence’ and legally inconsistent GATT dispute settlement findings, the third GATT Director-General A.Dunkel succeeded in persuading the major trading countries to consent to the establishment of a GATT Office of Legal Affairs in 1983. An experienced GATT diplomat (A.Lindén) was nominated director, and Frieder and myself offered legal advice as legal counsellors in GATT dispute settlement panels (e.g. in the drafting of their legal findings) and, since 1987, in the Uruguay Round Negotiating Groups mandated to elaborate the new WTO agreements, the WTO Dispute Settlement Understanding, and the transition from the old GATT to the new WTO legal system. As the first Director of the new GATT Legal Division established in 1989 as well as of the new WTO Legal Division since 1995, Frieder was rightly credited as one of the intellectual founding fathers of the successful GATT and WTO dispute settlement systems and related jurisprudence of GATT and WTO dispute settlement panels.

Cooperating with Frieder inside GATT’s Legal Office and Legal Division remained an intellectual adventure based on mutual trust, frank criticism and decentralized, independent work of the small group of GATT lawyers assisting GATT dispute settlement panels, other GATT institutions and negotiating groups. The dozens of GATT and WTO agreements include numerous rules with indeterminate terms and principles (like GATT Article XXIII:1 differentiating between ‘violation complaints’, ‘non-violation complaints’ and ‘situation complaints’ with diverse state responsibilities and dispute settlement procedures). Interpreting and clarifying indeterminate trade rules and the more than 60’000 pages of WTO law coherently required good knowledge of general international law (like the customary rules of treaty interpretation and state responsibility), which most GATT/WTO diplomats lacked. The political pressures leading to the establishment of a new ‘Rules Division’ in 1991 (notably for administering anti-dumping, subsidy and countervailing duty rules and disputes) curtailed the jurisdiction – and politicization - of the GATT Legal Division; the establishment of the WTO Appellate Body in 1995 and its ‘appellate jurisprudence’ changed the dynamics of the WTO dispute settlement system and promoted its progressive ‘judicialization’. Frieder’s independent and self-assured leadership and cooperation with both the Rules Division and the Appellate Body ensured mutual synergies promoting the transformation of the GATT/WTO dispute settlement system into the world’s most frequently used, worldwide dispute settlement system. When Frieder retired from the WTO and accepted to serve as Executive Director of the Advisory Center on WTO Law at Geneva (2001-2015), he enjoyed serving the WTO legal and dispute settlement system from a different perspective enabling Frieder to devote also more time to teaching WTO law and policies to trade diplomats from all over the world.

Frieder as an academic teacher and professor of law

Frieder regularly combined his practical work as international legal advisor with academic teaching of students, for instance as visiting professor at the University of Lyon and during repeated ‘academic leaves’ at George Washington University and Georgetown Law School in Washington. As director of the GATT and WTO legal divisions, he cultivated close contacts with all academic researchers in the field of international trade law and policies, notably with his friends Professors Robert Hudec and John Jackson from the USA. During his work in the World Bank, as secretary of GATT’s Balance-of-Payments Committee, and as director of the GATT and WTO Legal Services, Frieder published a large number of articles and book contributions criticizing problematic legal practices and ideologies (e.g. for a ‘New International Economic Order’). His close cooperation with GATT Director-General Arthur Dunkel and with the successive directors of GATT’s Economic Research Division (like J.Tumlir, R.Blackhurst) prompted Frieder to emphasize the ‘Constitutional Functions of International Economic Law’ for improving domestic policy-making, as illustrated by the legal ranking of ‘optimal policy instruments’ in some GATT/WTO agreements, or by the ‘domestic policy functions’ of international legal guarantees of equal freedoms, non-discriminatory conditions of competition, transnational rule-of-law and national sovereignty for promoting transparent policy-making, non-discrimination, legal accountability, welfare-enhancing policies and rule-of-law protecting general consumer welfare.[1] During his studies of law at Freiburg University, Frieder had not attended the economics lectures of Professor F.A.Hayek; he never perceived himself as a disciple of the ordoliberal Freiburg school of law and economics. His views on the need for protecting democratic input-legitimacy and republican output-legitimacy in trade policies (e.g. by judicial protection of rule-of-law in conformity with the WTO agreements ratified by parliaments) were rather informed by insights from ‘constitutional economics’ and ‘public choice’ explanations of the risks of welfare-reducing interest group politics redistributing domestic income through discriminatory import restrictions undermining democratically ratified trade agreements.[2]

In his recent book on Vienna – How the City of Ideas Created the Modern World (2024), the historian R.Cockett acknowledged the historical contribution of Frieder to the transformation of the ideas of G.Haberler and F.A.Hayek for a liberal trading system into GATT/WTO law. Contrary to Q.Slobodian’s description of Frieder (in his 2018 book on Globalists – The End of Empire and the Birth of Neoliberalism), Frieder was never a ‘neoliberal advocate’ for a self-regulatory market order but shared the ordoliberal belief in the need for legally limiting the ubiquity of market failures, governance failures and constitutional failures so as to better protect citizens and their human rights. Many international trade lawyers and trade diplomats openly acknowledge their intellectual debt to Frieder’s deep insights into the economic, political and legal logic underlying world trade law. As the WTO’s Centre William Rappard and Geneva’s Graduate Institute of International Studies are located only a few hundred meters apart, Swiss trade diplomats (like W.Rappard, O.Long, A.Dunkel, F.Blankart) and GATT/WTO officials (like Frieder) promoted a vibrant ‘Geneva school of ordoliberalism’. The history of this close intellectual cooperation in creating the post-war world trading system remains to be written. After Frieder’s death, finding an informed author will become more difficult.[3]

Frieder as a ‘Socratic explorer’

Most people having discussed with Frieder recall his Socratic method of explaining problems by asking pertinent questions and demonstrating why the arguments of his interlocutors may not be fully convincing. Similarly, when Frieder was informed of his illness, he practiced Socrates’ Stoic approach by accepting what he could not change; and by detaching from other life projects (like his hope to follow the example of his father who died at the biblical age of 99). As a sailor, Frieder loved his personal freedom to cross the Mediterranean Seas with his family on his sailing boat. The family went ashore also on the island of Ithaca, the home of the legendary Greek king Odysseus; Frieder’s eldest daughter Tina called her son ‘Ulysse’, and Frieder undertook his last sailing trip together with Tina laying to rest some of their earlier family disputes. Homer’s epic poem ‘The Odyssey’ – describing the conflict between Odysseus’ desire to return to a happy family life and the forces impeding him to realize this goal during many years – symbolizes also Frieder’s heartbreak following his divorces from his first and second spouses; marrying Kristina Schellinski enabled Frieder to enjoy a happy family life during his last two and a half decades in their wonderful home at Perroy. In April 2024, in the vineyard in front of their home, Frieder and I continued our last discussions on a little wooden bench. Breathing the fresh wind, overlooking the Alps and the Lake of Geneva, and ‘reconnecting’ with this uniquely beautiful landscape reflecting all building elements of life helped us understand the Latin term ‘re-ligio’ underlying the word religion. Frieder felt privileged by the beauty and harmony surrounding his family home at Perroy, and by his decades of exploring and promoting sustainable development in the near-by Centre William Rappard. He was an intellectually inspiring friend and engaged advocate for international rule-of-law and more social justice, albeit fully aware of our human weaknesses and disagreements in constructing a liberal rules-based international order. Frieder’s kindness, intellectual curiosity and courage to defend his views for making this world a better place will be missed by all of us. My last personal advice to Frieder was to listen to, and reflect on, the wise ‘Anthem’ sung by Leonard Cohen a few years before his death: 

            ‘The birds they sang at the break of day. Start again I heard them say. Don't dwell on what has passed away or what is yet to be. Ah, the wars they will be fought again. The holy dove, she will be caught again. Bought and sold and bought again. The dove is never free. Ring the bells that still can ring. Forget your perfect offering. There is a crack, a crack in everything. That's how the light gets in.’

Frieder had the courage to ring many bells; he enjoyed seeing the light entering through the many cracks in our imperfect human lives.

[1] Cf Frieder’s seminal contribution on The Constitutional Function of the Multilateral Trade Order to: M.Hilf/ E.U.Petersmann (eds), National Constitutions and International Economic Law (1993), 53-62 (based on a joint publication by A.Dunkel and F.Rössler in French language and citing publications by GATT’s former chief economist J.Tumlir explaining the economic theory of ‘optimal intervention’ justifying the legal ranking of policy instruments in GATT law). As market failures and governance failures can be corrected most effectively by non-discriminatory domestic regulation, GATT and WTO legal restraints on non-transparent, discriminatory trade policy instruments tend to strengthen democratic constitutionalism rather than to circumvent democracy; nor does GATT law impose laissez faire policies and free trade, or prevent social policies redistributing income. As GATT rules regulate primarily conflicts of interests within - not among – nations, their ‘constitutional functions’ can be rendered more effective by making precise and unconditional GATT rules legally and judicially enforceable inside domestic legal systems.

[2] Rössler’s conception of GATT/WTO law was strongly influenced by GATT’s chief economist J.Tumlir, who explained the need for protecting non-discriminatory trade and market competition through democratic constitutionalism and multilateral trade and economic integration rules limiting market failures, governance failures and constitutional failures. For a summary of Tumlir’s work on ‘economic policy as a multilevel constitutional problem’ see the contributions by H.Hauser and E.U.Petersmann to: ORDO Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft 39 (1988), 219-255 (in German with English summaries).

[3] On the ‘Geneva school of ordoliberalism’ promoting an interdisciplinary ‘Geneva consensus’ for political, legal and economic cooperation among the UN and GATT/WTO institutions at Geneva see E.U.Petersmann,  Transforming World Trade and Investment Law for Sustainable Development (2022, chapters 4-5); P.Lamy, The Geneva Consensus. Making Trade Work for All (2013). William Rappard’s initiatives for founding Geneva’s Graduate Institute of International Studies (IHEI, 1927), for inviting Austrian economists and lawyers (like von Mises, Haberler, Hayek, Kelsen), German ordoliberals (like Röpke), British liberals (like Gerard and Victoria Curzon) and other members of the Mount Pèlerin Society to teach at the IHEI on the need for promoting liberal international trade, human rights and labor laws and policies (e.g. as explained in Rappard’s book on The Future of Peace according to Cordell Hull, 1944) were continued since the 1960s by the Swiss GATT Directors-General O.Long and A.Dunkel, and by other Swiss politicians (like F.Blankart) and lawyers (like T.Cottier), for instance by promoting the teaching of GATT economists (like J.Tumlir, R.Blackhurst) and GATT lawyers (like E.U.Petersmann) at the IHEI. The ‘Geneva ordoliberals’ cooperated closely with other Swiss institutions like the University of Geneva, the World Trade Institute at the University of Bern, and the Institute for International Economic Relations at the University of St. Gallen.

Call for Papers: Geoeconomics, Trade and Investment: What role for Latin American countries?

This is from the Latin American Network of International Economic Law:

Third Edition of the Global Jurist Award

Call for Papers (CfP) - Deadline extension

Geoeconomics, Trade and Investment: What role for Latin American countries?

The Law Faculties of Universidad Externado (Colombia) and the Federal University of São Paulo, along with the Latin American Network of International Economic Law (Red LATDEI), with the support of the World Trade Institute at the University of Bern, are pleased to present the 3rd Edition of the Global Jurist Award under the title Geoeconomics, Trade, and Investment: What Role for Latin American Countries?

...

The 3rd edition of the Global Jurist Award seeks to receive papers contributing to developing International Economic Law (IEL) and exploring its response to current world dynamics. With a temporal perspective spanning a decade, the award aims to acknowledge authors providing precise assessments of the current institutional status of IEL and offering compelling proposals on the role of Latin American countries in this new geopolitical landscape.

The deadline for submissions is September 6. More details here: https://redlatdei.blogspot.com/2024/04/third-edition-of-global-jurist-award.html 

Call for Submissions: Trade, Law and Development

The journal Trade, Law and Development has issued a call for submissions for its Winter 2024 issue (Vol. 16, no. 1). The theme is: "Navigating the Murky Waters of Economic Treaties in International Trade."

The deadline is October 1, 2024.