International Economic Law and Policy Blog

Obama on Prying Open Foreign Markets

At a recent town hall meeting:

Democratic presidential hopeful Barack Obama urged Japan and South Korea on Friday to scrap all their controls on U.S. beef imports and fully open their beef markets.

"You can't get beef into Japan and Korea, even though, obviously, we have the highest safety standards of anybody," he told a town hall meeting in Watertown, South Dakota. "They don't want to have that competition from U.S. producers."

"So we've got to have a president who's a tougher negotiator and, when we have tougher negotiations, that means that other countries are going to have to allow us to sell into their markets," he said.

Trade in Everything: French Fries

OK, technically speaking it is trade in potatoes, but french fries made for a better title:

Anyone who has been to a soccer game in Europe knows that fries and burgers are among the most popular food items on sale at football grounds. So, it must have come as a shock when Switzerland's potato industry association warned supplies of the lowly spud were running low -- just weeks before Euro 2008, the continent's biggest soccer tournament, gets underway.

But fans heading to Switzerland for next month's tournament can rest assured they will not have to do without fries. The Swiss government has taken measures to ease the potato shortage. A spokesman for the country's Department of Agriculture told Swiss radio station RadioDRS Wednesday that the government would allow an extra 5,000 tons of potatoes to be imported.

Obama and McCain on Farm Subsidies

The U.S. Senate approved the farm bill today.  The bill is now off to the President for an expected veto, but there appear to be enough Congressional votes to override the veto.

What do the candidates think of it?  Well, neither McCain nor Obama was there for today's vote, but here is what they have said on the issue:

-- From McCain:

"I have to give you a little straight talk about the farm bill that is wending its way through Congress," McCain said Thursday at the Polk County Convention Center in Des Moines. "I do not support it. I would veto it," he said. "I would do that because I believe that the subsidies are unnecessary."

-- As for Obama, I haven't found anything specific he said recently, but late last year he was supportive of the overall package as it stood at the time.  See here and here.  Here's an excerpt:

I was disappointed to see that important improvements and solutions for our family farmers in this bill fell victim to partisan politics and obstructionism. Those who stood in the way of this bill stood against our farmers and a clean energy future. While the bill that passed committee didn't include everything I would have liked, including specific reforms to help family farmers instead of big agribusiness, it did take much-needed steps to invest in conservation, nutrition, specialty crops and rural development. It provided funding for renewable energy and recognized farmers who are working to reduce our dependence on foreign oil. And it included a packer ban, which is so important for market transparency.

More on what's in the bill here: http://ap.google.com/article/ALeqM5hKiCUGVmDQJYT51475bq5PwW3aXwD90LMH2G0

ADDED:  I spoke too soon.  Here is an Obama press release from today:

"I applaud the Senate's passage today of the Farm Bill, which will provide America's hard-working farmers and ranchers with more support and more predictability."

"The bill places greater resources into renewable energy and conservation. And, during this time of rising food prices, the Farm Bill provides an additional $10 billion for critical nutrition programs. I am also pleased that the bill includes my proposal to help thousands of African-American farmers get their discrimination claims reviewed under the Pigford settlement."

"This bill is far from perfect. I believe in tighter payment limits and a ban on packer ownership of livestock. As president, I will continue to fight for the interests of America's family farmers and ranchers and ensure that assistance is geared towards those producers who truly need them, instead of large agribusinesses. But with so much at stake, we cannot make the perfect the enemy of the good."

"By opposing the bill, President Bush and John McCain are saying no to America's farmers and ranchers, no to energy independence, no to the environment, and no to millions of hungry people."

ADDED #2:  And more from McCain:

“The American taxpayer has been told before that Farm Bills and their thirst for subsidies were a necessary evil to provide our county—and the world—with affordable, abundant food. Today, as food prices reach historic highs, they’re being told the same thing. We must challenge that notion as grocery bills soar, food banks go bare, and food rationing occurs on a global scale. We must question policies that divert over 25 percent of corn out of the food supply and into subsidized ethanol production. Do Americans really want a support system that costs consumers $2 billion annually in higher sugar prices? Will we truly reduce our dependency on foreign oil by extending tariffs that make it too expensive to invest in sugar ethanol production? Can we honestly demand fair and free trade at Doha while domestic cotton growers dump subsidized cotton on the world market?

“The Farm Bill conference report is expected to cost taxpayers around $289 billion dollars. According to the Congressional Budget Office, this bill will exceed the government’s budget by $10 billion. But the Administration points out that with clever accounting made famous by Congressional budget dodgers, the real cost of the bill will exceed the government’s budget by about $18 billion. And even though Democrats and Republicans in both chambers have promised to rein in pork barrel spending, this bill betrays that promise. Buried within its hundreds of pages are special favors like:

§ $170 million dollar bailout for the West Coast salmon industry included at the insistence of the Speaker of the House.

§ $93 million in special tax treatment for race horses.
$260 million in tax cuts for the timber industry.

§ $15 million for asparagus growers. During debate on the Senate farm bill last year, my colleague Senator Gregg offered an amendment, which failed, to strike this provision. This is a crop that has never before received farm subsidies.

§ $175 million would be transferred to Bureau of Reclamation for activities at three Nevada lakes.

§ $500,000 to the Walker River Paiute Tribe for legal and professional services in support of settling tribal water claims. Other tribes have dealt with water rights without a half million dollar earmark.

§ $5 million for joint planning and development activities for water, wastewater, and sewer facilities by the city of Fernley, Nevada, and the Pyramid Lake Paiute Tribe.

§ The bill authorizes a myriad of grant programs including grants for research into pig genetics, grants for the preservation of historic barns, and $300 million for the Sun Grant Program, which provides grants to 6 universities and science centers that conduct bioenergy research.

§ $20 million goes to the collection and storage of seeds for research purposes.

§ $75 million for a crop research facility in El Reno, Oklahoma.

§ $35 million to promote the production of “hard white wheat.”

§ A $4 billion dollar disaster assistance package on top of an existing crop insurance program that’s subsidized by the federal government.

John McCain's Trade Vision for 2013

In a speech today, John McCain took "a little time to describe what [he] would hope to have achieved at the end of [his] first term as President."  Here's the trade part:

New free trade agreements have been ratified and led to substantial increases in both exports and imports. The resulting growth in prosperity in countries from South America to Asia to Africa has greatly strengthened America's security and the global progress of our political ideals. U.S. tariffs on agricultural imports have been eliminated and unneeded farm subsidies are being phased out. The world food crisis has ended, inflation is low, and the quality of life not only in our country, but in some of the most impoverished countries around the world is much improved.

Americans, who through no fault of their own, lost jobs in the global economy they once believed were theirs for life, are assisted by reformed unemployment insurance and worker retraining programs. Older workers who accept lower paying jobs while they acquire new skills are provided assistance to make up a good part of the income they have lost. Community colleges and technical schools all over the country have developed worker retraining programs suited to the specific economic opportunities available in their communities and are helping millions of workers who have lost a job that won't come back find a new one that won't go away.

Expropriation Standards in Investment Rules

From the previously mentioned Norwegian draft model BIT (MS Word document) that reader Perry Bechky pointed me to:

ARTICLE [6]: EXPROPRIATION

1. A Party shall not expropriate or nationalise an investment of an investor of the other Party except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

...

What's noticeably absent is the "measures equivalent to expropriation or nationalization" or "measures tantamount to nationalization or expropriation" language.

I'm not sure how much detail we will get during the campaign about the specifics of trade agreement rules, but I wonder if this meets the goal of Senator Obama, mentioned here, that "... With regards to provisions in several FTAs that give foreign investors the right to sue governments directly in foreign tribunals, I will ensure that foreign investor rights are strictly limited and will fully exempt any law or regulation written to protect public safety or promote the public interest."

ACP-EU Relations Conference

Arbitration and Mediation in the ACP-EU Relations Conference
ACP House 451 Avenue Georges Henri, 1200 Brussels, Belgium.
May 21st 2008, Brussels

The Association for International Arbitration (AIA) is organising this conference to promote and create awareness of the Arbitration and Mediation in the ACP (African, Caribbean and Pacific Group of countries) – EU Relations. Our goal is to promote arbitration and mediation as an alternative dispute resolution mechanism, ultimately in benefit of business development and creation of tighter bounds between the ACP states and the EU states.

This conference will not only serve to raise awareness and create stability for future business development, but also it will also lead to a working group in this area.

The 1 day conference will take place in the city of Brussels at the secretariat of the ACP, from 9:30h - 18:30h, coffee breaks, lunch as well as a cocktail after the conference will be part of the event.

More details here: http://www.arbitration-adr.org/activities/upcoming_conf.html

Obama and McCain on Cap-and-Trade

Via Peter Gallagher, I came across the following from Obama adviser Jason Grumet:

To be unequivocally clear, Sen. Obama believes that the United States must and will act to put a mandatory limit on our domestic greenhouse-gas emissions. That is a predicate for us leading the world to enact a truly equitable and global program in which China and India and Brazil and all the major emitting countries also put legal limits on their emissions. The story of this country has not been waiting to be led by others to address global challenges.

...

Ultimately the solution to global climate change is going to be mediated through the lens of global trade. Sen. Obama has been supportive of mechanisms that have the U.S. take a first step, and if after a period of years other nations are not acting in what is deemed to be a commensurate responsible manner, look to our trade laws to try to ensure that there's no inequity or competitive disadvantage imposed on U.S. businesses. The idea that was initiated by the International Brotherhood of Electrical Workers, in which importers of energy-intensive products would be required to purchase permits for the carbon embedded in those products -- the details need to be fleshed out, but that seems to be a reasonable approach to level the playing field, if we get there.

But Sen. Obama also has faith in the intellect of others. While he believes the United States has a vital role to play in leading this discussion, he does not believe we are going to have to bludgeon other countries into appreciating their own self-interest. Climate change is a real problem. The Chinese are going to suffer the impacts of it much more harshly and immediately than we will. The Chinese and the Brazilians and the Mexican government and others read the same scientific reports as we do. They recognize that the exacerbating cycles of flood and drought will be devastating for countries trying to support billions of people on smaller amounts of arable land, who don't have the same kind of water-handling and -treatment systems. It is the wealthy nations who are in many ways the most hedged and capable of adapting early on.

Here's how I interpret Obama's views based on these statements.   As President, Obama would first take action to limit U.S. carbon emissions through a cap-and-trade program.  Then, he would try hard for an international agreement on the issue, with the goal of including the developing countries which so far have been reluctant to sign on.  But if it becomes clear that some countries cannot be brought into an international agreement, he is willing to act unilaterally to impose equivalent burdens on imports from these countries.

As for McCain, here's something from his recent speech on climate change:

If the efforts to negotiate an international solution that includes China and India do not succeed, we still have an obligation to act.

In my approach to global climate-control efforts, we will apply the principle of equal treatment. We will apply the same environmental standards to industries in China, India, and elsewhere that we apply to our own industries. And if industrializing countries seek an economic advantage by evading those standards, I would work with the European Union and other like-minded governments that plan to address the global warming problem to develop a cost equalization mechanism to apply to those countries that decline to enact a similar cap.

This wasn't quite as specific, but that's to be expected given that it was the candidate's own speech rather than a Q & A with an adviser, as with Obama.  Nonetheless, it seems that McCain's views are similar to Obama's:  International rules are preferred, but we will act unilaterally, if necessary, to impose similar burdens on countries that do not act.

Of course, within those broad principles, there is a lot of room for disagreement, both on cap-and-trade generally and the international trade component specifically.  No doubt these disagreements will get fleshed out a bit more in the coming months.

(Notice that I've created an Obama vs. McCain '08 category for this post.  I may be jumping the gun a bit here, but this matchup has begun to look inevitable.)

The Problem of Food Aid and Local Production

A proposal from President Bush on food aid:

As America increases its food assistance, it's really important that we transform the way that food aid is delivered. In my State of the Union address this year, I called on Congress to support a proposal to purchase up to nearly 25 percent of food assistance directly from farmers in the developing world. And the reason you do that is, in order to break the cycle of famine that we're having to deal with too often in a modern era, it's important to help build up local agriculture. I ask Congress to approve this measure as soon as possible. It's a common sense way to help deal with food emergencies around the world.

The criticism of food aid that this plan addesses is that food aid can harm farmers in the countries to whom the aid is given, by displacing demand for their products.  It's a very difficult issue, and I think the Administration deserves some credit for recognizing the problem (harm to poor country farmers) and trying to come up with a solution (purchases from those farmers).

Here's a question, though.  Would it perhaps be better to allocate some kind of "food credit" to allow for the purchase of food, rather than give food directly?  This is not something I've thought through in detail, and it may have been discussed already by experts in the field. But it seems like a good approach to me.

For a recent article on the WTO food aid negotiations, click here.

ASIL Event - ASEAN's Evolving Legal and Institutional Framework

Please note the following event:

The American Society of International Law in conjunction with its International Organizations, International Economic Law, and Law in the Pacific Rim Region Interest Groups as well as The Asian Society of International Law presents

ASEAN’s Evolving Legal and Institutional Framework

Panelists:

Ms. Amelia Porges
Counsel, Sidley Austin LLP

Mr. Sungjoon Cho
Assistant Professor of Law, Chicago-Kent College of Law

Mr. Edmund W. Sim
Partner, Hunton & Williams LLP-Singapore

Mr. Michael Ewing-Chow
Associate Professor, National University of Singapore

Moderator:

Dr. Pek Koon Heng
Course Chair for the Insular Southeast Asia Advanced Area Studies program at the Foreign Studies Institute, United States Department of State; Assistant Professor at the School of International Service at American University


When: Wednesday, May 21, 2008
8:30 a.m.-10:00 a.m.

Where: The American Society of International Law
2223 Massachusetts Avenue, NW, Washington, DC 20008
Metro: Dupont Circle map*

This panel discussion will consider, within the context of international law, the Association of Southeast Asian Nations' (ASEAN) legal personality as an international organization as well as what impact this personality has on the legal nature of regional free trade agreements.

Key areas that will be examined include:

• What is the significance of the ASEAN Charter?
• ASEAN as an integrated entity is bound by both Regional Dispute mechanisms (ASEAN Protocol on Enhanced Dispute Settlement Mechanism, 2004) and WTO dispute settlement mechanisms (DSU). Will these mechanisms conflict with each other, or will they compliment one another? Which mechanism is better for solving disputes amongst ASEAN members?
• How can the legal regime of ASEAN be improved to enhance the integrated economic development of its members?
• What enforcement mechanisms does ASEAN need to make sure it can implement the ASEAN Single Window Program?

To register for this session, please click here.

Regulating Online Gambling, er, Predicting

From the AP:

The rising popularity of markets where guesses are wagered on the outcome of everything from presidential elections to celebrity marriages has led to a situation that, well, many had predicted.

The Commodity Futures Trading Commission on Thursday said it is considering whether these markets should be regulated, and how.

"Event markets are rapidly evolving, and growing, presenting a host of difficult policy and legal questions," Walt Lukken, the commission's acting chairman, said in a release. "What public purpose is served in the oversight of these markets and what differentiates these markets from pure gambling outside the CFTC's jurisdiction?"

...

[Iowa Electronic Markets' director, Joyce Berg] said some guidance is definitely needed to make a distinction between these markets and gambling, but doesn't want to see such markets regulated out of existence.

Two things interest me about this.  First, there is the "international" component:  Are they going to try to regulate "event markets" hosted outside of the U.S. or run by non-U.S. companies?  Will their actions in this regard lead to complaints about "trade barriers"?

Second, somewhat relatedly (and hinted at in the last part of the above quote), how do event markets differ from the online gambling at issue in the WTO Gambling dispute?  If event markets are legal (subject to regulation), can online gambling be prohibited?  And if they are not gambling services (and I think there is a good case that they are not), what exactly are they?

What's Going on with Fast Track?

Claude Barfield explains the recent fast track battle and rule changes resulting from the Colombia FTA fight:

The Showdown

Tellingly, the planning of the coup against the fast-track process came, not from the House Ways and Means Committee, which has jurisdiction over trade, but rather from the Rules Committee. According to reporters Patrick O’Connor and Martin Kady of The Politico, Rules Committee chairwoman Louise Slaughter (D-NY) and Rep. James McGovern (D-MA) had discussed the option of stripping time requirements from the fast-track process since January. When the administration signaled that it would forward the agreement even without a sign-off by congressional Democratic leaders, Slaughter and McGovern seized the opportunity. On Tuesday, April 8, the president formally sent up the agreement and supporting documents; that same evening, Slaughter and McGovern presented the deadline-stripping plan to Speaker Pelosi, who, after meeting with other members of her leadership team, the next day backed the changes in a larger Democratic caucus. And on Thursday, as noted above, the House Democratic majority rammed through the amendments to House rules, effectively gutting the fast-track process for the Colombia FTA.

The entire episode transpired over a 48-hour period, and it left the White House and pro-FTA business lobbyists stunned and disarmed. In defense of their action, Pelosi and other House Democratic leaders argued that the administration had broken faith with the spirit of the rules by sending the agreement up without gaining the speaker’s consent. The White House, in turn, mounted a furious verbal counterattack. On April 14, President Bush stated that the agreement was “dead” unless Pelosi intervened, and he condemned the Democrats for having “stiffed” a key U.S. ally. Meanwhile, USTR Schwab argued that it was House Democrats who had broken faith on fast track: for more than 16 months, Schwab said, Democrats had refused to give consent to advance the process and had refused to provide the criteria for judging Colombia’s human rights progress.

More at the link.

Aircraft Subsidy Wars

No, not Airbus versus Boeing.  This time it's Missouri versus Quebec, fighting over an assembly plant for a Bombardier airplane:

Bombardier's preferred site is Mirabel, near Montreal. In 2005, Ottawa offered $350 million in refundable assistance and seems to be sticking to this. Quebec promised a $118-million loan, refundable through royalties, but has stated it is open to upping its stake. The aircraft maker said it is looking for several hundred million dollars more in public funds.

...

On May 1st, the Missouri Senate passed a bill that would give Bombardier up to $40 million a year in tax credits for eight years if it assembled the CSeries in Kansas City. The legislation also includes a repayment with interest of all tax credits issued, probably as a royalty on each plane sold.

Regular readers probably recall that I've raised the issue of "location subsidies" before.  I think that it is an important one, and I hope that WTO Members will some day pick up on it and try to work out some disciplines.  So what should be done?  The author of the piece, Paul Daniel Muller of the Montreal Economic Institute, has some suggestions:

What can be done, then? If unilateral disarmament is not an option, governments can still agree to limit the subsidy race. Currently, Canada's Agreement on Internal Trade enjoins provincial governments to "refrain from engaging in bidding wars to attract prospective investors seeking the most beneficial incentive package." At a bilateral level, British Columbia and Alberta have agreed, as part of their TILMA deal, to not directly or indirectly provide business subsidies that distort investment decisions.

These examples could inspire bilateral deals between other sub-national jurisdictions that are close economic partners, such as a Canadian province and a U.S. state. Some agreements between sovereign states already limit subsidy bidding wars, but much work needs to be done at the sub-national level: states, provinces and local governments. The lowering of tariff and non-tariff barriers to international trade was not achieved overnight.

Each round of the GATT and then the WTO added a stone to the edifice. In the case of business subsidies, our leaders would also benefit from engaging their counterparts in other jurisdictions in disarmament talks. In other states too, clear-eyed politicians may feel they are being dragged into a bidding war against their better instincts.

Obama on Ethanol

With Obama's fairly good showing last night, I thought it worth looking at some of his trade positions again.  Back in Iowa, he firmly supported ethanol subsidies.  But will the ongoing food price crisis change his views?  Maybe so, based on his recent statements in an appearance on Meet the Press with Tim Russert:

MR. RUSSERT:  Would you be willing to change ethanol subsidies or suspend some of these requirements so that people are not using corn for ethanol, but using corn for food and lowering food prices.

SEN. OBAMA:  Well, look, we, we've got a serious food problem around the world.  We, we've got rising food prices here in the United States.  In other countries we're seeing riots because of, because of the lack of food supplies. So this is something that we're going to have to deal with.  There are a number of factors that go into this.  Changes in climate are contributing. The, the fact that in a lot of countries, you know, we've had problems getting food supplies to poor countries because the wealthier countries have reduced their stockpiles in, in serious ways.  And so there're a whole host of reasons why we're seeing problems with food supply.  There's no doubt that biofuels may be contributing to it.  And what I've said is, my top priority is making sure that people are able to get enough to eat.  And if it turns out that we've got to make changes in our ethanol policy to help people get something to eat, then that's got to be the step we take.

OPEC WTO Legislation Introduced

From a press release by Senator Frank Lautenberg:

Late last week, U.S. Sen. Frank R. Lautenberg (D-NJ) introduced legislation to force action against the Organization of the Petroleum Exporting Countries (OPEC) for its anti-competitive practices and illegal export quotas on oil, which ultimately lead to higher gas prices here at home.

    “While OPEC and the oil companies have seen record profits, American families are paying record gas prices at the pump,” Sen. Lautenberg said.  “The illegal actions of OPEC nations have gone on for too long, and it is time to stand up to this cartel and protect the interests of the American people.”

    Sen. Lautenberg’s bill would require the United States Trade Representative to initiate consultations with countries that are members of both OPEC and the World Trade Organization (WTO).  If consultations failed, the U.S. would request that the WTO convene a dispute settlement panel to judge the case.  If the case were decided in the U.S.'s favor, OPEC would be required to cease its illegal operations or the U.S. would be able to impose trade remedies.

    ...

    Under WTO rules, countries are prohibited from placing restrictions on exports.  Yet despite this prohibition, by negotiating among themselves, OPEC sets export quotas for each of its member nations, and is able to exercise a great deal of control over the international price of oil.

...

    The bill, the OPEC Accountability Act of 2008 (S. 2964), is co-sponsored by Sens. Carl Levin (D-MI), Byron Dorgan (D-ND), Bob Casey (D-PA) and Bernie Sanders (I-VT).  It is based on similar legislation Sen. Lautenberg first introduced in 2004.

Note the statement that "OPEC sets export quotas for each of its member nations."  If they can prove that, maybe they have a case.

Here is the bill: http://www.govtrack.us/congress/billtext.xpd?bill=s110-2964  From the Congressional "Findings" in the bill: "The agreement among OPEC member nations to limit oil exports is an illegal prohibition or restriction on the exportation or sale for export of a product under article XI of the GATT 1994."  Obviously, converting these Congressional findings into WTO panel findings is going to be their challenge. 

The specific actions they complain about are somewhat broader than I expected:

(1) IN GENERAL- Notwithstanding any other provision of law, the President shall, not later than 15 days after the date of enactment of this Act, initiate consultations with the countries described in paragraph (2) to seek the elimination by those countries of any action that--

(A) limits the production or distribution of oil, natural gas, or any other petroleum product;

(B) sets or maintains the price of oil, natural gas, or any petroleum product; or

(C) otherwise is an action in restraint of trade with respect to oil, natural gas, or any petroleum product, when such action constitutes an act, policy, or practice that is unjustifiable and burdens and restricts United States commerce.

Trade in Everything: Crime

I'm going to rip-off Simon's regular series title to seek comments on an upcoming article of mine co-authored with my colleague, Dr. Doron Teichman, an expert on crime displacement. Entitled "Outsourcing and Insourcing International Crime: The Political Economy of Globalized Criminal Activity" (forthcoming in the Vanderbilt Law Review) the article draws a broad comparison between legitimate economic activity and criminalized profit-oriented activity such as money-laundering, the drug trade, sex tourism and, yes, gambling. We try to answer three questions: (From the abstract) -

"First, why does crime travel across national borders? The Article demonstrates that in the globalized economy, profit-driven crime (e.g., money laundering, drug trafficking, gaming and the sex trade) responds - much like legitimate economic activity - to local regulation, by shifting to the territorial jurisdictions in which it incurs lower expected sanctions, making it most profitable for criminals. Second, how do governments react to the international mobility of criminal activity? The Article argues that the crime control policies adopted by individual states influence the global distribution of transnational crime, and that they subsequently impact upon the crime control policies adopted by other states. More specifically, it demonstrates how in a dynamic setting states engage in two types of regulatory crime control races, depending on differential national attitudes towards the activity involved. The first is the outsourcing race, in which increasingly strict policies cause crime to shift to other states. The second is the insourcing race, in which increasingly lenient policies attract crime to the state. In each of these races, states impose externalities upon each other, and inefficient levels of both enforcement and crime arise, in what may be seen as a global collective action problem. Finally, how should global crime control be designed to enhance global welfare? Building on theories of public choice and international relations, the Article offers a critique of existing policies in the area, and explores innovative crime control policies."

It would be particularly interesting to hear what people who focus on "legitimate" international economic activity think of this theory of regulatory competition. My own sentiment is that you/they would find it quite natural, but perhaps I am mistaken.

T.

Possible New Investment Treaty Rules for Non-Discrimination

From a Norwegian draft model BIT (MS Word document) that reader Perry Bechky pointed me to:

Article 3: NATIONAL TREATMENT

1. Each Party shall accord to investors of the other Party and to their investments, treatment no less favourable than the treatment it accords in like circumstances[FN2] to its own investors and their investments, in relation to the establishment, acquisition, expansion, management, conduct, operation and disposal of investments.

[FN2] The Parties agree/ are of the understanding that a measure applied by a government in pursuance of legitimate policy objectives of public interest such as the protection of public health, safety and the environment, although having a different effect on an investment or investor of another Party, is not inconsistent with national treatment ... when justified by showing that it bears a reasonable relationship to rational policies not motivated by preference of domestic over foreign owned investment.

Here are a few initial thoughts on this provision.

First, my sense is that perhaps the footnote would only apply to situations involving de facto discrimination.  De jure discrimination (i.e., explicit distinctions between foreign and domestic investors/investments) would be governed by the main text alone.  But I'm not absolutely sure about this.

Second, the substance of the footnote indicates that disparate impact/discriminatory effect on foreign investment/investors will not lead to a violation of national treatment rules in all instances.  Specifically, there will be no violation if the following conditions are met: (1) The measure pursues "legitimate policy objectives of public interest"; (2) the measure "bears a reasonable relationship to rational policies"; and (3) the "policies" at issue are "not motivated by preference of domestic over foreign owned investment."  The first two elements seem to overlap; I'm not sure exactly how they relate to one another.  The last element, the "motivation" behind the measure, involves intent.  However, it's not clear what kind of intent the drafters had in mind, subjective or objective.

Third, what happens if there is no discriminatory effect on foreign investors/investments as a whole?  Does that mean there cannot be a violation?  There are WTO cases that have found a violation where one individual foreign product is treated unfavorably even though there is no overall discriminatory effect against foreign products.  I wonder how the quoted provision would deal with the equivalent situation in the investment context.  The reference to "an investment or investor" makes me think the "individual" test might be applied.

Fourth, it sounds like the burden is on the defending party to show that the measure "bears a reasonable relationship to rational policies not motivated by preference of domestic over foreign owned investment."  So, the complainant first makes its claim of less favorable treatment, but the defending party can then respond with a defense of this kind.

Finally, I thought it was interesting that they put the footnote after "like circumstances."  There is some disagreement over which part of the national treatment provision is the key, with some emphasizing the "less favorable treatment" part and others focusing on the "like"-ness part.  By putting the footnote where they did, it seems that perhaps these drafters thought "like"-ness was the key.

Clinton and Obama on Currency

From the campaign trail, Hillary Clinton takes on the China currency issue:

The China Currency Coalition ("CCC") today greeted enthusiastically the announcement by Senator Hillary Clinton (D-NY) that she has become a co-sponsor of S. 796, the Fair Currency Act of 2007, also known as the Bunning-Stabenow-Bayh bill after Senators Jim Bunning (R-KY), Debbie Stabenow (D-MI), and Evan Bayh (D-IN).

...

The Fair Currency Act of 2007 and its counterpart, H.R. 2942 in the House, recognize exchange-rate misalignment - whether by China or by any other country - as an export subsidy.  Under this bill U.S. companies and workers will finally be able to take corrective action under U.S. trade laws.

And Obama is on board, too:

Democratic presidential candidate Barack Obama said on Thursday he supported a Senate bill to offset China's "currency manipulation," one day after his rival Hillary Clinton added her name to the list of legislation's co-sponsors.

...

The Stabenow-Bunning bill would define currency manipulation as a subsidy under U.S. trade laws, opening the door for the Commerce Department to impose countervailing duties on a broad array of Chinese goods. Individual companies or industries would still have to petition for the relief before duties are imposed.

Upcoming WTO Scholars' Forum Events

Some upcoming events in London:

The Directors of the WTO Scholars' Forum would like to invite you to a series of events organized in May:

1. Talk by Professor Don Regan on 'What Are Trade Agreements For?'
Thursday 15 May 2008, 2-4pm, Moot Court, UCL Laws, London (map: http://www.ucl.ac.uk/laws/faculty/index.shtml?laws_map)
Chair: Dr Fiona Smith, Faculty of Laws UCL, Co-Director WTO Scholars' Forum

Speaker: Professor Don Regan, William W. Bishop Jr. Collegiate Professor of Law, University of Michigan

More information available at: http://www.ucl.ac.uk/laws/wto-forum/index.shtml?events_new

2. Roundtable Discussion with Professor John H. Jackson on 'The Changing Nature of Sovereignty'

Tuesday 20 May 2008, 3-5.30pm, Moot Court, UCL Laws, London (map: http://www.ucl.ac.uk/laws/faculty/index.shtml?laws_map)

Chair: Professor Dan Sarooshi, Queen's College, University of Oxford

Speaker: Professor John H. Jackson, Georgetown University Law Center, Director Institute of International Economic Law, and Editor-in-Chief of the Journal of International Economic Law

More information available at: http://www.ucl.ac.uk/laws/wto-forum/index.shtml?events_new

All events organized by the WTO Scholars' Forum are free of charge and all are welcome (http://www.ucl.ac.uk/laws/wto-forum/index.shtml).  If you would like to be added to our email-list or confirm your attendance of both events, please contact Ms Ann Tucker, the Forum's administrator at UCL on ann.tucker@ucl.ac.uk.

We look forward to seeing you at both events.

Best wishes,

Dr. Fiona Smith and Dr. Isabelle Van Damme

Directors of the WTO Scholars' Forum

New Book Release: International Economic Law - The State and Future of the Discipline

Just a heads up that the book derived from the papers presented at the ASIL-IELG 2006 conference in Bretton Woods, NH (yes, that Bretton Woods!) is now out.  

Many of the contributions are from familiar names to this Blog (such as Douglas Arner, Andrea Bjorklund, Karen Bravo, Tomer Broude, Isabella Bunn, Sara Dillon, Tracey Epps, David Gantz, Franklin Gevurtz, Andrew Lang, Andreas Lowenfeld, Rose Ann MacGillivray, Federico Ortino, Matteo Ortino, Colin Picker, Amy Porges, Seema Sapra, Rumu Sarkar, Gregory Shaffer, Joel Trachtman, Elizabeth Trujillo, Emmanuel Voyiakis, Constance Wagner, and Chen-Yu Wang). 

Thanks to my co-editors Isabella Bunn and Douglas Arner, and of course to Hart, a wonderfully supportive publisher. 

Hart has provided the following details for those wishing to buy the book:

International Economic Law: The State and Future of the Discipline
Edited by Colin B Picker, Isabella D Bunn and Douglas W Arner

The volume is organised into three sections, each covering one of the three pillars in the discipline of international economic law: research and scholarship; teaching; and practice/service. It begins with an assessment of the state and future of research in the field, including chapters on questions such as: what is international economic law? Is it a branch of international law or of economic law? How do fields outside of law, such as economics and international relations, relate to international economic law? How do research methodologies influence policy outcomes? The next section looks at the state and future of teaching in the subject. Chapters cover topics such as: how should international economic law be taught, and when and to whom? Should it be taught in different ways in different places? Is the training provided in the law schools suitable for future academics, government officials, or practitioners? How might regional shortcomings in academic resources be addressed? The final section of the book focuses on the state and future of international economic law practice in the Bretton Woods era, including institutional reform. The contributors consider issues such as: what is the nature of international economic law practice? What are the needs of practitioners in government, private practice, international and non-governmental organisations? How can pro-bono service in the field be encouraged? Finally, how have the Bretton Woods institutions adapted to these and other challenges - and how might they better respond in the future? 

This book will be of interest to lawyers, economists and other professionals throughout the world- whether in the private, public, academic or non-governmental sectors - seeking both fresh insights and expert assessments in this expanding field. Indeed, the book itself promises to play a role in the next phase of the development of international economic law.

April 08 344pp 9781841137551 £35 US$60 

For US orders please contact our distributors in America:

ISBS, (International Specialised Book Services),

920 NE 58th Avenue, Suite 300, Portland, OR 97213-3786, USA

Tel No: +1 503 287 3093; Fax No: +1 503 280 8832; E-mail: orders@isbs.com

http://www.hartpublishingusa.com/books/details.asp?isbn=9781841137551

For UK, Europe and Rest of World orders please contact Hart Publishing directly or click on the link below:

Hart Publishing Ltd, 16C, Worcester Place,  Oxford, OX1 2JW, UK

Tel No: 01865 517530; Fax No: 01865 510710; E-mail: mail@hartpub.co.uk

http://www.hartpub.co.uk/books/details.asp?isbn=9781841137551

 

 

 

 

Panels versus the Appellate Body: The DS344 Appeal

Some of you may recall the recent panel ruling in U.S. - Stainless Steel (Mexico) (DS344), where a panel decided not to follow the Appellate Body's "zeroing" jurisprudence, saying the following in this regard:

7.115 We respectfully disagree with the Appellate Body's reasoning. We recognize that our analysis inevitably resembles that of the panels in the last two cases that dealt with simple zeroing in periodic reviews, US – Zeroing (EC) and US – Zeroing (Japan), and that the Appellate Body reversed those panels' findings that simple zeroing is not inconsistent with Article 9.3 of the Anti-Dumping Agreement. We would like to underline, however, that our analysis is not simply an unthinking repetition of these past panel decisions. Rather, it reflects our own appreciation of the facts and the legal arguments presented by the parties in these proceedings, as is required by our obligation under Article 11 of the DSU to carry out an objective examination of the matter before us.

...

7.119 We are troubled by the fact that the principal basis of the Appellate Body's reasoning in the zeroing cases seems to be premised on an interpretation that does not have a solid textual basis in the relevant treaty provisions. We recall the rules on treaty interpretation (supra, paras. 7.3-7.5) which we have to follow in these proceedings. We are of the view that a good faith interpretation of the ordinary meaning of the texts of Articles VI:1 and VI:2 of the GATT 1994 and Article 2.1 of the Anti-Dumping Agreement, read in their context and in light of the object and purpose of the mentioned agreements, does not exclude an interpretation that allows the concept of dumping to exist on a transaction-specific basis. We recall that according to the standard of review that we have to follow in these proceedings (supra, paras. 7.1-7.2), we are precluded from excluding an interpretation which we find permissible, even if there may be other permissible interpretations.

Well, the Appellate Body has now circulated its decision in the appeal of that case, and had the following to say:

162. We are deeply concerned about the Panel's decision to depart from well-established Appellate Body jurisprudence clarifying the interpretation of the same legal issues. The Panel's approach has serious implications for the proper functioning of the WTO dispute settlement system, as explained above. Nevertheless, we consider that the Panel's failure flowed, in essence, from its misguided understanding of the legal provisions at issue. Since we have corrected the Panel's erroneous legal interpretation and have reversed all of the Panel's findings and conclusions that have been appealed, we do not, in this case, make an additional finding that the Panel also failed to discharge its duties under Article 11 of the DSU.

In the context of doing so, the Appellate Body offered some helpful clarifications of the role of precedent in the WTO dispute settlement system, including the following: "Ensuring 'security and predictability' in the dispute settlement system, as contemplated in Article 3.2 of the DSU, implies that, absent cogent reasons, an adjudicatory body will resolve the same legal question in the same way in a subsequent case."  The "absent cogent reasons" language appears to be the new standard for following precedent:  You must follow precedent unless you have "cogent reasons" for doing otherwise.

Global Food Crisis and the Doha Negotiation

It seems all of sudden, the world is facing a food crisis. Food prices are rising and food shortages growing in different parts of the world. According to news reports, many food producing countries have recently imposed ban, quota or taxes on the export of rice, wheat, barley, and soybeans, including Brazil, Argentina,Thailand, Vietnam, China, India, Egypt, Indonesia, Russia, and Kazakhstan. The situation has prompted the United Nations, World Bank, IMF and WTO to issue a joint call for countries to lift export restrictions on agricultural products.

WTO members may impose temporary export restrictions on foodstuffs under GATT XI:2(a) and, if the member is a developed country, in compliance with the notification requirement under the Agricultural Agreement, art. 12. It appears, therefore, that the above identified countries are within their rights to impose the export restrictions.

The question I have is: if the food shortages are not temporary but structural in nature, as indicated by some experts, then how would this situation affect the Doha negotiations on agriculture? Indeed, here is an interesting article from AFP: "Food crisis sparks role reversal in WTO".

A Gambling "Appeal"?

This would be a novel development, although I must say I'm not sure exactly what Mr. Mendel has in mind:

Mark Mendel, Antigua and Barbuda’s attorney in the Internet gambling trade dispute with the United States, has indicated that the decision by a World Trade Organisation (WTO) arbitrator to limit Antigua and Barbuda’s claim against the US to US$21 million per year may not be final.

Speaking during a visit to Antigua last week, Mendel said there is a method through which the December arbitration decision could be reviewed. Though there is not an automatic appeals process for such decisions, Mendel indicated that the decision was thought to be such a bad one that Antigua and Barbuda might be in a position to take the matter before the General Council of the WTO. Antigua and Barbuda sought to claim US$3.4 billion per year in compensation from the US, but the arbitration panel limited that claim to losses related to bets on horse racing – a tiny portion of the gaming industry.

“Going to the General Council of the WTO (is) an action that has never been taken before. As I have mentioned, we seem to be groundbreakers over there in Geneva because a lot of what’s happened had never happened before. But we could do this and I’ve heard from other delegations in Geneva that there’s a lot of unhappiness with the financial end of the December decision. A lot of countries think, as I do, that it was not a very good decision so we could pursue that,” Mendel said.

High Gas Prices, OPEC and the WTO

It has been a while since we talked about the possibility of a WTO complaint against OPEC.  Given the recent increase in gas prices, I was a bit surprised that it took the U.S. Presidential campaigns so long to raise the issue, but at long last here is something from Hillary Clinton:

Take more aggressive action to pressure OPEC to increase production - OPEC recently reiterated that it will not even consider increasing crude output until September 2008, even though limited supplies are contributing to record oil prices. Hillary believes we should be taking more aggressive action to address OPEC’s control over global production levels and hold OPEC accountable for its decisions. President Bush’s efforts to pressure OPEC over the past seven years have been inconsistent and unsuccessful. Hillary supports sending a strong signal to OPEC that the era of complacency has ended. Hillary will:

• Use the WTO to Challenge OPEC’s Production Quotas - With nine of the thirteen OPEC member countries also being members of the WTO, Hillary believes we should use the tools available at the WTO to address OPEC’s refusal to increase production. WTO rules currently prohibit member countries from imposing export quotas. Yet OPEC member countries are actively and explicitly banding together to restrict oil production and affect global prices. Hillary is calling on the President to engage in immediate negotiations with OPEC members and, if no progress is made, file a formal complaint against OPEC countries at the WTO. Filing a complaint at the WTO will send a clear signal to OPEC countries that the U.S. is committed to an open, transparent global oil market. Such a step will give OPEC members an incentive to increase production as well.

Some of the legal issues involved were discussed at the links provided above.

For good measure, she also wants to take antitrust action:

Allow OPEC Production Decisions to Be Challenged Under U.S. Anti-Trust Law - Currently, OPEC countries cannot be challenged under U.S. anti-trust laws, even when they are engaged in coordinated, commercial activity to control the global oil market. Hillary supports amending the Foreign Sovereignty Immunities Act so that the Justice Department can bring suits against OPEC countries in U.S. courts for price fixing. Changing the rules would help hold OPEC countries accountable for their decisions.

New World Trade Law Textbook/Casebook

Apologies in advance for the shameless self-promotion, but I wanted to let everyone know that "World Trade Law: Text, Materials and Commentary" (co-authored with Bryan Mercurio, and also featuring Arwel Davies and Kara Leitner) has been published by Hart Publishing.

For more information on the book, see http://www.hartpub.co.uk/books/details.asp?isbn=9781841136608

To view the Table of Contents, see http://www.hartpub.co.uk/pdf/1841136603.pdf

For those of you who teach in the area, please feel free to order an inspection copy and consider prescribing the book in your class. An inspection copy can be ordered by emailing mail@hartpub.co.uk

Finally, I wanted to highlight two things we have done that differentiate this book from other law textbooks/casebooks.

First, we have taken a "hybrid" approach that combines the textbook model (which emphasizes narrative descriptions of the law) and casebook model (which emphasizes excerpts of cases).  In this regard, we provide detailed descriptions of the legal and policy issues, but also offer extracts of cases to help illustrate the issues further and give a flavor of the judicial reasoning used by trade tribunals.

Second, we have taken a "global" approach to the issues, in the sense that we do not focus on just one jurisdiction.  While many international trade rules, such as the WTO Agreement and NAFTA, are international in nature, trade law issues often arise in the domestic context (most prominently with trade remedies and customs rules).  When discussing these issues, we provide cases from various countries, in order to give readers a sense of how trade law is applied around the world and to make the book useful and accessible to students everywhere (well, the English speaking world, anyway).

Biodiesel Tit-for-Tat

From the EU:

In a move which could trigger a new transatlantic trade row, the European Biodiesel Board (EBB) said it was formally requsting the EU's executive Commission to hit U.S. imports with anti-dumping and anti-subsidy duties due to unfair subsidies.

"Since 2007, as a result of these measures, there has been a dramatic surge in U.S. biodiesel exports to the EU, thus creating a severe injury to the EU biodiesel industry," the EBB said in a statement.

...

The European industry has long complained that U.S. subisidies for "B99" biodiesel, which is blended with small amounts of mineral diesel, break World Trade Organisation rules.

And right back at you from the U.S.:

"It is hypocritical for the European Biodiesel Board to cry foul while they benefit from a blatant trade barrier," said Manning Feraci, vice president of federal affairs at the National Biodiesel Board.

He said EU biodiesel fuel specifications were discriminatory and inconsistent with WTO rules.

"Our industry will be asking the U.S. Trade Representative to take action where appropriate on this and any other EU member state biofuel policy that is meant to confer special protection or treatment to European biodiesel producers," he said.

Development Aid for Education

Development aid can be very controversial.  Are we giving enough?  Is it for the right projects?  Is it effective?  Does it harm specific groups?  Despite these tough issues, here is an example of a program with long-term benefits that I think just about everyone can get behind:

Japan will build about 1,000 elementary schools in Africa over five years, Foreign Minister Masahiko Komura said Wednesday.

Komura announced the African assistance plan at an international forum on education held here.

To build the schools, Japan will offer some 30 billion yen under the official development assistance program, he said.

...

The world's challenge to improve accessibility, quality and fairness of education is only half done, Komura said, underscoring the importance of educational support.

Komura also said Japan will help improve the abilities of some 300,000 science and mathematics teachers in Africa and other nations.

Specialized knowledge and technical capabilities are necessary for economic growth in developing countries, he noted.

Food Prices and Export Restrictions

The recent rise in food prices seems to be causing some people to take a closer look at export restrictions:

From Japan:

Japanese Agriculture Minister Masatoshi Wakabayashi said on Tuesday that Japan will propose that the World Trade Organisation set clear rules for food export restrictions imposed by producing countries.

Wakabayashi said Japan will urge that the WTO create a mechanism for food importers, such as Japan, to give an opinion when notified about restrictions by an exporting country.

"In order to exercise export controls, rules have to be clearer," Wakabayashi told a news conference, the text of which was published on the ministry's website.

From the EU:

In Tokyo, EU Trade Commissioner Peter Mandelson said the World Trade Organization should pressure food-producing countries to maintain exports. Some nations have banned exports in an attempt to avert domestic shortages.

"If we restrict trade, we're simply going to add food scarcity to the already large problems of food shortages that exist in different countries," Mandelson said in an interview.

"The WTO stands for free trade. It's also got to stand up against export restrictions, export taxes, which too will stop the free flow of trade in foodstuffs and agricultural produce."

I found the reference to "export taxes" interesting.  Perhaps the food price issue will generate some support for bringing export taxes more clearly within the WTO framework.

Unsure about Offshoring

There's a lot of talk these days about the "offshoring" of jobs.  For example, here is a recent press release from Global Trade Watch:

“Offshoring” is the term businesses coined to describe their practice of sending work now performed in the United States to other countries.

“For many years, white-collar workers have watched as blue-collar workers’ jobs have been shipped to China and Mexico,” said Leo Gerard, president of the United Steelworkers. “Now it is white-collar workers whose jobs are being targeted for offshoring. Pennsylvania workers need to wake up and join together to demand concrete solutions from our presidential candidates before their only option is a job at Wal-Mart.”

...

A surprising array of jobs are at risk of offshoring, not just computer programmers and call centers, but actuaries and accountants, editors and writers, drafters and graphic designers, underwriters and financial analysts, even scientists and mathematicians. Most jobs done in front of a computer are vulnerable to offshoring.

Global Trade Watch has more about its offshoring concerns here.  The core of the issue seems to be that when the U.S. trades with other countries, some jobs done by Americans are shifted abroad to be done by non-Americans.  (Countries other than the U.S. also have these same concerns about their own jobs, of course.)

Now, there may be situations here and there in which foreign competition is not a concern (e.g., if a small country that does not produce cars imposes a tariff on car imports, it will not be protecting domestic jobs from going overseas because there is no domestic industry).  But for a large economy like the United States, which produces just about everything, it seems likely that there will almost always be both a domestic industry and foreign competition.  This leads me to some questions.  How far would groups like Global Tra