International Economic Law and Policy Blog

Competing IEL Visions of Football/Soccer

From Marcus Cole:

To the true football fan, the World Cup itself is part of an ideological struggle between two competing corporate goliaths, the Fédération Internationale de Football Association (“FIFA”) and the Union of European Football Associations (“UEFA”). Even the names of the two organizations are themselves indicative of the ideological divide. The stakes are high – in the hundreds of billions of the currency of your choice. The goal is nothing short of world domination. And the time for choosing sides is closing in upon us.

FIFA represents the distinctly twentieth century notion that nationhood is the most important and powerful bond between humans. While nations are free to define themselves, individuals, for the most part, are not. FIFA insists upon a competition between nations qua nations, but FIFA does not demand that nations define themselves in a particular way. There is no requirement that “a national,” or what we Americans commonly refer to as “a citizen,” be defined in same way that Germany, Serbia, Italy, or Spain choose to define those terms, namely, by ethnicity. Nationality, under these ethnic conceptions of it, is “closed” to those born outside the required genetic boundaries. As in race-horses, it is a matter of breeding.

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UEFA, on the other hand, represents a distinctly different ideal, one that is timeless. It is also one with which Americans ought to sympathize, namely, freedom of contract. To be sure, UEFA also satisfies some of the thirst for nationalism, sponsoring its own competition between national teams every four years, the European Cup, in the interstices of the World Cup. But UEFA’s real claim to fame is its sponsorship of club competitions, the UEFA Champions League and the UEFA Europa Cup. These two competitions are between club teams, not nations. These clubs are organized, for the most part, on free association and freedom of contract.

...

... UEFA understands what FIFA does not, namely, that freedom works. National teams will never be as good, as entertaining, or as compelling as teams composed of free individuals willingly and contractually cooperating toward one common purpose. Open systems of nationality come closer to the ideal of freedom than closed systems, and the national teams themselves recognize this. Germany, for example, is a successful national team drawn from a “closed” conception of nationhood. But Germany fields players born outside the formal genetic constraints applied to mere mortal would-be citizens. The German national team boasts Cacau (a native of Brazil) and Jerome Boateng, one of the two Boateng brothers playing in the 2010 World Cup; the other is a member of the starting line-up for their native Ghana. In other words, if you are good enough, even closed nationalities can be open to you.

FIFA and its World Cup, like nationalism, will persist as long as we have nations and nationalists, ethnic pride and prejudice, to perpetuate them. These ideas that destroyed so many lives on so many occasions throughout the twentieth century are the not-so-beautiful underside of the beautiful game. The game is unquestionably more beautiful without them.

Protectionism for English Footballers

From the Economist:

The [English] Premier League's main source of strength is its financial clout. Since the early 1990s, when stadiums were upgraded and lucrative broadcasting deals agreed upon, the league has become a money-spinner. Foreign investors have poured in (Liverpool and Manchester United are owned by Americans, Chelsea by a Russian). England's big four clubs are among the world's ten richest, according to Deloitte, an accounting firm. This allows the clubs to hire the best players, which in turn draws crowds and increases revenues.

In most industries such a virtuous circle would be a cause for celebration. But Sepp Blatter, the president of FIFA, football's governing body, cites English dominance of the Champions League as proof of the need to restrict how many foreigners a team may field. Michel Platini, the head of UEFA, the European wing of FIFA, concurs. Some old-style hoof-it English managers claim that import restrictions would somehow help the coaching of young British talent.

This is the sort of protectionist tosh that most industries have not dared utter in public since the 1970s. How could a sport get better by limiting competition or lowering standards? English children are bad at football mainly because their training is bad (something other places have fixed). The league football in Britain is unimaginably better than it was. With luck EU labour law will stop Mr Blatter and keep it that way.

I think there are two points here.  First, there is the notion that "import restrictions would somehow help the coaching of young British talent."  This seems like the classic "infant industry" argument for import protection for goods, but applied to athletes:  we need to keep out foreign athletes, so as to nurture domestic athletes and allow them to catch up to the level of foreign competition.  I don't follow European sports leagues that closely (most of the articles I read on the subject are in the Economist!), but I've seen stories like this before.  What I always wonder is, why I have never heard these issues come up in relation to American sports leagues?  Maybe it's because the level of foreign participation is still fairly low, especially in sports like basketball and football (it is rising in basketball, though).  In baseball, however, my sense is that foreign participation is significant, and I've never heard concerns expressed.

Hockey is a particularly interesting example in this context.  NHL hockey teams, including the many American-based ones, used to be dominated by Canadians.  Now, by contrast, there is a significant American (and also European) presence, probably in part because Americans were exposed to high quality hockey over the years (probably also in part due to improved hockey facilities in the somewhat warmer U.S. over the years).  Maybe there's a good lesson for the English leagues there.

The second point is a bit different: "English dominance of the Champions League as proof of the need to restrict how many foreigners a team may field."  The argument here appears to be that, in the absence of restrictions on labor mobility, rich leagues can buy up all the good players.  In my view, this is a very different issue.  Fundamentally, the issue is competition between teams with vastly different levels of financial resources.  However, I'm not sure that restrictions on signing foreigners is the best way to deal with problem.

ADDED:  More here from Oxonomics (via Trade Diversion)

Play Ball: MLB and the WTO

With the U.S. professional baseball season under way this week, I was happy to come across a reason for a blog post about baseball.  A Time magazine article reports that Japan's professional baseball league is complaining about the trade impact of Major League Baseball (MLB), after MLB opened its season with two games in Japan: 

While Japanese fans cheered the lightning series, the country's baseball organization, the Nippon Professional Baseball league (NPB) grumbled. Its best players are migrating to the States. American games are cutting into the Japanese pastime's TV ratings. And now this latest spit in its eye just as NPB opening week commenced. Complained Yomiuri Giants pitching star Koji Uehara, "We're just starting our season. So why does the MLB have to come to play here. There's nothing to be gained from this." Added a Japanese professional baseball official, who wished to remain anonymous, "Every time the MLB holds one of their openers in Japan, sales of our opening week tickets go down.... We see more and more empty seats. It's not necessary for the big leaguers to come here."

As the article explains, it's not just the competition that annoys the Japanese, it's the alleged unfair nature of the competition:

NPB teams lack what might be called the "trade advantages" of their North American counterparts, namely, stadium subsidies, salary depreciation allowances and the anti-trust exemption which helps free up millions upon millions of dollars for MLB teams to spend on raiding Japan's top stars. Most MLB teams use stadiums for little or nothing, having strenuously convinced the cities they play in to build new facilities for them. By contrast the Tokyo Giants pay $250,000 a game to use the Tokyo Dome, while the Softbank Hawks pay $40 million dollars a year to use a similar facility in Fukuoka. Says one longtime observer of the situation, "The NPB should file a grievance with the WTO [the World Trade Organization]."

There are a couple points here.  First, stadium subsidies.  This one is well known.  Many professional U.S. sports teams are able to convince local governments to fund most, if not all, of the cost of their fancy, new stadiums.  There are plenty of complaints about this practice on the merits of the policy (e.g., wouldn't the money be better spent on education?), but there is also a trade impact.  This impact is most directly felt by the other cities that are competing for a franchise, but in addition, according to Japan at least, there is an international impact on competing leagues as well.

Second, salary depreciation.  I'm not really sure about the specifics of this one, although I assume it involves special tax treatment of player salaries.  In essence, another subsidy.

Third, baseball's antitrust exemption, which is also well-known.  On this one, I'm in the minority who take the view that MLB should be treated as a single entity, and thus allegations of antitrust violations involving horizontal restraints (such as team owners acting jointly to prevent another franchise from moving) should be rejected.  As a result, I don't view this exemption as all that significant.  For those who take a different view (most people), the antitrust exemption can lead to a significant advantage for MLB.

So is there a WTO complaint in there somewhere?  I don't really see it, especially given that GATS rules don't have an effective remedy for subsidies that are given to services.  There are the GATS Article XV:2 consultations provisions, but those don't seem to go anywhere concrete.

Finally, there are some practical limits to the competition from MLB:

And so what's next for the American invaders? Might the MLB be contemplating a Japan division to field teams against its National League and American League in the U.S.? The rumors to that effect exist because the Yomiuri Shimbun, the huge newspaper that also owns its own baseball team, was a major sponsor of the Boston-Oakland series and was responsible for the timing of the games to coincide with the local leagues' opening week — which the NPB found so obnoxious. Could Japan be further drawn into the American baseball empire? Well, maybe not. Says Masaki Nagino, planning director of the NPB's Central League: "Not just yet, if you consider the logistics. It still takes 11 hours to fly across the Pacific and as long as that holds, that's our protection."

So perhaps Japan does not have that much to worry about.  Actually, I think the competition could go the other direction.  Remember, there used to be three New York baseball teams.  Now, with a substantially bigger market, there are only two.  Maybe Japan's baseball league could set up a couple franchises over here, in New York and other big cities.  (If the Japanese league were not given an antitrust exemption of its own, that could be a WTO violation, of course.)

Trade in Everything: International Basketball

From Sports Illustrated (via CNN):

American basketball is planning to create up to five new European franchises who would compete for the NBA Championship, according to a report by Sports Illustrated.

The astonishing claims come hard on the heels of plans by the football's English Premier League to play matches overseas and underline the growing trend of globalization in major sports leagues.

...

The plans are understood to include the formation of a European division with five new teams in major markets.

The teams would play a full 82-game schedule and compete for the NBA championship.

I still think hockey has the best chance at international expansion, but I'll be interested to see how this goes.

Trade in Everything: Football (Soccer) Playing and Watching

The Economist reports:

As in Somalia, so it is across the rest of Africa. Every week, far from England's freezing winter drizzle, tens of millions of Africans settle down in video shacks, bars and homes to watch the latest matches between England's top 20 football clubs. Julian McIntyre, head of GTV, an African satellite broadcaster, says that most of his customers sign up to watch sport; 95% follow football. So he decided to buy the rights to English football, then build an African television network around it.

...

Africans tend to support either Arsenal, Chelsea, Liverpool or Manchester United. Arsenal is probably Africa's most popular club, Man Utd dominates in southern Africa, Chelsea is gaining ground in west Africa, while Liverpool is the team most Googled.

Why are the English matches more popular than Spain's and Italy's, which are just as skilful? Perhaps England's pedigree as the home of football helps. So does the hectic pace and larger input of foreign, especially African, talent; at least 50 footballers from the continent play in the premiership. Indeed, some Africans say their footballers have been plundered much as Africa's raw materials have been. The premiership has certainly harmed the popularity of Africa's own leagues. Some, such as Kenya's, have all but collapsed.

So, you have African citizens going to England to play football (soccer).  I think this would be services provided through GATS Mode 4, movement of natural persons, and could fall under CPC Ver. 1.1 category 96610 - Services of athletes ("services provided by individual own-account sportsmen and athletes").

Then you have the English Premier League selling the rights to broadcast the games to an African company, so that Africans in Africa can watch Africans in England play in England.  (I suppose that sale could be a good or a service, depending on how the contract was written.)

And just like with trade in goods, there have been suggestions that there are losers from this trade:  Africa's football leagues are struggling to compete with the Premier League for viewers.  Who are all the winners and losers from the trade?  I don't know if this is all, but here are some.

English consumers are better off through being able to view higher quality football.  And the English Premier League is better off through the increased revenue from selling to Africa.  On the other hand, some English football players lose due to the lower number of slots for them on Premier League teams.

As for Africans, the players who go to England are better off based on the high salaries they get, and some of this money is presumably repatriated.  In addition, African consumers get to watch high quality football on TV.  But, as noted, the African football leagues will suffer in the face of TV competition from the English leagues.

Globalization of NASCAR

This is likely to be my first and only post about NASCAR.

Reading my local paper today (the Palm Beach Post), I was struck by an article entitled "Toyota facing chilly reception in some NASCAR circles."  Apparently, Toyota has now entered some cars (they are a version of the Camry model) in the NASCAR racing series for the first time.  One of the biggest races of the year, the Daytona 500, was today, and it was Toyota's debut. 

I haven't followed NASCAR in a long time (I watched occasionally as a kid), so this was the first I heard of Toyota joining and the mild controversy that came with it. (There's a NY Times op-ed about it here.)  It's a bit reminiscent of last year's Dubai Ports controversy, although without the national security implications.

According to the Palm Beach Post article:

In Central Florida, an auto-parts store owner was so angry about [the driver] Dale Jarrett signing with a Toyota team (and taking his sponsor, UPS, with him), he vowed no UPS truck would ever again deliver parts to his store.

The driver in question, Dale Jarrett, had a pretty good response, though:

"Sure, the parent company is foreign," Jarrett says. "We could get into the argument about where the Ford Fusion is built - every one of them is built in Mexico. The (Chevrolet) Monte Carlos are built in Canada.

"We could go through all that stuff and see who is right and who is wrong, but there are a lot of Toyotas that are built in the United States. They employ a lot of people. But you're not going to get that across to some people, and I'm not going to try to."

Along the same lines, another article points out:  "officials and drivers have not-so-subtly noted that while the passenger-car version of the Toyota Camry is made in the United States, the street-going version of the model Ford races, the Fusion, is made in Mexico. The Chevrolet Monte Carlo and the Dodge Charger are made in Canada."  And one article notes:  "Toyota has been manufacturing vehicles in North America for 20 years, and last year built its 15 millionth vehicle here. It has 14 plants in North America, 13 in the U.S. It recently opened a new factory in San Antonio, where it will build the Tundra truck. In 2006, Toyota produced more than 1.55 million vehicles in North America. By 2008, it projects nearly 2 million."  (Of course, all the vehicles in the actual race will have been built from scratch in fabrication shops in the vicinity of Charlotte, N.C.)

Not everyone is convinced, though:

But even some longtime drivers don't buy Toyota's made-in-America argument.

"I don't know," Sterling Marlin said. "They make a lot of them over here now, but they're still a foreign company. And you never would have thought 15, 10 or even five years ago that they'd be in this sport."

So is Toyota "foreign"? One of my first thoughts on reading all this was, hey, this reminds me of GATS Article XXVIII(m) and the Canada - Autos case, which also dealt with foreign ownership in the car industry.  There, the panel found that the Canadian subsidiaries of DaimlerChrysler and Volvo were "juridical persons" of the United States because they were controlled by a U.S. parent (DaimlerChrysler Corporation and Ford Motor Co., respectively)  (The panel considered it irrelevant that DaimlerChrysler Corporation may in turn be controlled by another person).  See paras. 10.257, 10.259.

It's interesting to compare the GATS approach with the issues discussed in the newspaper articles quoted above.  In the newspaper articles, it was often mentioned that Toyota makes a lot of cars in the U.S. (and that Ford and Chevy make some abroad).  In the GATS, by contrast, issues of legal incorporation and control are key. There is some appeal to the less formalistic approach, though (focusing on questions like, where does the company operate?  Where are its employees?  Where are its sales?)

So who won the race? Kevin Harvick driving a Chevy.  Dale Jarrett drove the highest finishing Toyota, in 23rd place.

IEL of the World Cup

As the world's most exciting sports event begins, I was hoping to conjure up a link to IEL.  How about this.  National teams are limited to nationals.  The team administrators obviously discriminate in the national treatment sense against foreign players.  Would this violate a GATS commitment in the relevant sector, assuming for a moment that the players are service providers under Mode 4?  The first answer is, "it's not a measure," at least to the extent that the teams are private.  But would it be a measure to decline to enforce otherwise applicable national laws against employment discrimination on the basis of nationality?  Would it be a measure to carve out an exception to those laws?  The second answer is that it does not violate national treatment, or that it is not "less favourable," if there is a a non-protectionist type of reason for the differential treatment. 

I don't want to be a spoil-sport (so to speak), but just thought the blog should get it on the World Cup hype.  For some international relations-soccer links, see this Council on Foreign Relations site.