International Economic Law and Policy Blog

More on the Obama Campaign's Contact with Canada

As mentioned yesterday, there have been allegations that the Obama campaign told the Canadian government that the NAFTA threats were just campaign talk.  Initial reports suggested no such communication occurred, but there were new developments today:

Despite repeated requests, Barack Obama's campaign is still neither verifying nor denying a CTV report that a senior member of the team made contact with the Canadian government -- via the Chicago consulate general -- regarding comments Obama made about NAFTA.

...

The Obama campaign told CTV late Thursday night that no message was passed to the Canadian government that suggests that Obama does not mean what he says about opting out of NAFTA if it is not renegotiated.

However, the Obama camp did not respond to repeated questions from CTV on reports that a conversation on this matter was held between Obama's senior economic adviser -- Austan Goolsbee -- and the Canadian Consulate General in Chicago.

Earlier Thursday, the Obama campaign insisted that no conversations have taken place with any of its senior ranks and representatives of the Canadian government on the NAFTA issue. On Thursday night, CTV spoke with Goolsbee, but he refused to say whether he had such a conversation with the Canadian government office in Chicago. He also said he has been told to direct any questions to the campaign headquarters.

More here, here and here.  This explanation of the events makes sense to me:

To the best I can gather, here is what most likely happened to set off CTV's reporting that the Obama campaign is fudging the truth about its NAFTA intentions. Someone from the Canadian consul general's office in Chicago got to talking with Dr. Austan Goolsbee, he the principle economic adviser to Sen. Obama, and NAFTA came up. Mr. Goolsbee may have warned him that the rhetoric about NAFTA might be amped up and that the policy follow through might not be as drastic as the volume of the rhetoric would indicate. By no means, though, does that mean that Obama isn't serious about renegotiating the labor and environmental provisions of NAFTA -- just that, Goolsbee may well have said, Obama recognizes that the normative case for NAFTA is not as one-sided as general campaign trail bromides make it out to be.

I have no idea if this is, in fact, what happened, but it sounds plausible.

UPDATE:

Here is Austan Goolsbee's explanation:  "Barack Obama's senior economic policy adviser said Sunday that Canadian government officials wrote an inaccurate portrayal of his private discussion on the campaign's trade policy in a memo obtained by The Associated Press."

Trade and Censorship: The EU View

I've mentioned before some suggestions in the U.S. that internet censorship be treated as a trade barrier (see here and here).  Now the EU is getting into the act as well:

The European Parliament recently passed a proposal to treat Internet censorship by repressive regimes as a trade barrier. The proposal, submitted by Jules Maaten of the rightist Dutch VVD party, passed on a 571-38 vote. Maaten describes it as an "unusual, but effective way" to promote freedom of expression on the Internet.

The initiative targets countries that have enacted heavy restrictions what their citizens can do and see online. First and foremost on the list is China and its "great firewall." The Chinese government is well known for blocking certain phrases and web sites from view within its borders, and has also turned its attention to RSS feeds. The country also "encourages" bloggers to register with the government.

"The 'Great Chinese Firewall' should be seen as an international trade barrier," Maaten said according to Livre. "In addition to American companies like Google, Yahoo, and Microsoft, European Internet companies like Wanadoo, Telecom Italia, and France Telecom have to unwillingly censor their services in authoritarian states."

...

If adopted, Maaten's proposal would require the EU to classify any Internet censorship as a barrier to trade, and would require that the issue be raised in any trade negotiations. Economic sanctions and trade restrictions have been used in the past as means of getting countries to change their policies, but this is one of the first proposals to tie trade to 'Net censorship.

The measure will now go to the European Council for consideration. The Council can either adopt the proposal as passed by Parliament or send it back with further amendments. 

Is the NAFTA Rhetoric Just for the Election?

Yes, according to one report:

Did Sen. Barack Obama say one thing privately to the Canadian government about NAFTA -- and something very different during Tuesday night's debate? The answer is yes, according to CTV, a Canadian television network.

The network reported Wednesday night that a "senior member" of the Obama campaign called Michael Wilson, the Canadian ambassador to the U.S., "within the last month," warning Wilson that Obama would "take some heavy swings" at the North American Free Trade Agreement (NAFTA) as part of his campaign.

The Obama insider reportedly told the ambassador, "Don't worry -- it's just campaign rhetoric, it's not serious," CTV reported.

CTV reported that the Obama campaign's message to Wilson was taken as "completely authentic" by the Canadian government.

What does the Obama campaign have to say about this:

Obama has not directly responded to questions about his differing private and public stands on NAFTA. A spokesperson for the Obama campaign told CTV that the Obama staffer's conversation with Ambassador Wilson sounded implausible. But the spokesperson did not deny that the Obama campaign had contacted Wilson.

"Senator Obama does not make promises he doesn't intend to keep," the spokesperson told CTV.

My sense is that both Obama and Clinton are very serious about opening up NAFTA for re-negotiation.  However, in terms of the changes they hope to make, they are probably willing to settle for something less than the demands they are making now.

UPDATE:

The Canadian Embassy denies the story:

A spokesman for the Canadian Embassy to the United States, Tristan Landry, flatly denied the CTV report that a senior Obama aide had told the Canadian ambassador not to take seriously Obama's denunciations of Nafta.

"None of the presidential campaigns have called either the Ambassador or any of the officials here to raise Nafta," Landry said.

He said there had been no conversations at all on the subject.

"We didn't make any calls, they didn't call us," Landry said.

"There is no story as far as we’re concerned," he said.

Trade in Everything: Patriots 19-0 Shirts and Hats

From the AP, what happened to the shirts and hats printed up with the expectation that the Patriots would win the Super Bowl:

The New England Patriots won the Super Bowl and ended the season with a perfect 19-0 record - at least it looks that way in Nicaragua.

The NFL donated 290 Patriots hats and an equal number of team jerseys trumpeting the slogans "Super Bowl Champions, 19-0" to impoverished children from two small communities in southern Nicaragua.

Thursday's gifts could not change history - the Patriots lost the Feb. 3 game to the New York Giants 17-14 - but they made a lot of youngsters in the communities of San Gregorio and Buena Vista very happy, said Miriam Diaz, spokeswoman for the humanitarian organization World Vision, which arranged the donation with the NFL.

Of course, one might object to calling this "trade," as the shirts and hats are given away.  Perhaps, then, we should refer to it as "clothing aid."  (And, of course, negotiate some WTO rules on it, just for fun!)

Re-negotiating NAFTA: Some Reaction from Canada

In my post yesterday, I asked for some Canadian and Mexican reaction to the Obama/Clinton calls to "re-negotiate" NAFTA.  Debra Steger offered some views in a comment.  Here are some reactions in the press from Canadian government officals:

Trade Minister David Emerson suggested the United States has a sweet deal over access to Canada's oil under the North American Free Trade Agreement, saying the two Democratic presidential candidates calling for renegotiations may not know just how good the U.S. has it under the deal.

http://canadianpress.google.com/article/ALeqM5iAnllHOZKWHSuOSWtGnSfK2lgSGg

``If you reopen Nafta, you re-open it for all three parties,'' Emerson said. ``If you reopen it for one or two issues, you cannot avoid reopening across the range of issues. If Nafta were reopened, we would have our list of priorities.''

http://www.bloomberg.com/apps/news?pid=20601082&sid=aYCVzDarOock&refer=canada

"I've been very concerned for a couple of years now. The rhetoric of protectionism has been creeping, it's been getting more strident, it's permeating Congress, protectionist groups are flexing their muscle," Canadian International Trade Minister David Emerson told a crush of reporters.

"And it's not just the heat of the election campaign that's causing concern."

Emerson said that if the United States left NAFTA, which also includes Mexico, he did not envisage it suddenly erecting large tariff barriers.

...

The Conservative minister, a former lumber company executive, predicted the United States will not pull out of NAFTA.

"I think sound, wise judgment will prevail at the end of the day," he said.

Liberal Member of Parliament John McCallum, a former bank economist, said he was concerned about protectionist sentiment among some Democrats. "If the U.S. were to pull out of NAFTA it would be a catastrophe for Canada," he said.

However, he dismissed the idea that this would actually happen.

"That's the political rhetoric you get in a political race where the stakes are high and it's close. You have to remember that while it would be disastrous to Canada it would also be disastrous to many millions of Americans who trade with Canada," he said.

"So at the end of the day I don't think it will happen."

http://www.reuters.com/article/latestCrisis/idUSN27455425

Federal Finance Minister Jim Flaherty says there needs to be a recognition by Americans that NAFTA benefits the United States tremendously.

http://www.theglobeandmail.com/servlet/story/RTGAM.20080227.wflahertnaft0227/BNStory/International

Is Trade In Food Products Always Bad for the Environment?

From the New Yorker:

It is a logical and widely held assumption that the ecological impacts of transporting food—particularly on airplanes over great distances—are far more significant than if that food were grown locally.

For example:

according to one recent study, factories throughout the world are burning eighteen million barrels of oil and consuming forty-one billion gallons of fresh water every day, solely to make bottled water that most people in the U.S. don’t need.

I had not previously thought about the issue much, but when I did come across it on occasion, I bought into the logic that transporting foods for consumption is bad for the environment.  However, as the article explains, the issue can often be more complicated.  Some examples:

Last year, a study of the carbon cost of the global wine trade found that it is actually more “green” for New Yorkers to drink wine from Bordeaux, which is shipped by sea, than wine from California, sent by truck.

...

The environmental burden imposed by importing apples from New Zealand to Northern Europe or New York can be lower than if the apples were raised fifty miles away. “In New Zealand, they have more sunshine than in the U.K., which helps productivity,” Williams explained. That means the yield of New Zealand apples far exceeds the yield of those grown in northern climates, so the energy required for farmers to grow the crop is correspondingly lower. It also helps that the electricity in New Zealand is mostly generated by renewable sources, none of which emit large amounts of CO₂.

...

Researchers at Lincoln University, in Christchurch, found that lamb raised in New Zealand and shipped eleven thousand miles by boat to England produced six hundred and eighty-eight kilograms of carbon-dioxide emissions per ton, about a fourth the amount produced by British lamb. In part, that is because pastures in New Zealand need far less fertilizer than most grazing land in Britain (or in many parts of the United States). Similarly, importing beans from Uganda or Kenya—where the farms are small, tractor use is limited, and the fertilizer is almost always manure—tends to be more efficient than growing beans in Europe, with its reliance on energy-dependent irrigation systems.

Williams and his colleagues recently completed a study that examined the environmental costs of buying roses shipped to England from Holland and of those exported (and sent by air) from Kenya. In each case, the team made a complete life-cycle analysis of twelve thousand rose stems for sale in February—in which all the variables, from seeds to store, were taken into consideration. They even multiplied the CO₂ emissions for the air-freighted Kenyan roses by a factor of nearly three, to account for the increased effect of burning fuel at a high altitude. Nonetheless, the carbon footprint of the roses from Holland—which are almost always grown in a heated greenhouse—was six times the footprint of those shipped from Kenya.

All of this makes clear that coming up with carbon labels for food and other products, indicating their carbon footprint, is a very difficult proposition.

How Should I Feel About "Tariff Earmarks"?

I'm not a big fan of earmarks generally.  Even if specific projects are defensible, the process just seems fundamentally flawed.  But what if the "earmark" is a suspension of a tariff duty?  As a free trader, shouldn't I support that?  According to this story, both Hillary Clinton and Barack Obama have engaged in the practice, taking money from companies who want a tariff reduction for specific products.  John McCain, on the other hand, does not:

John McCain, the likely Republican nominee, does not introduce tariff suspension bills under "a longstanding policy — no private relief bills or any bills for one person," spokeswoman Jill Hazelbaker said in an e-mail.

It's good to cut tariffs, right?  But is it good to cut tariffs as a special favor to well-connected lobbyists?  Tough call, but at least the process seems to be more transparent these days.

How Important Are Labor/Environmental Standards in Trade Agreements?

As noted many times on this blog, Barack Obama and Hillary Clinton have been making a big deal of the absence of enforceable labor/environmental standards in certain trade agreements, such as NAFTA.  But how important would these really be?  Dan Drezner gives the following answer:

Repeat after me: attaching labor and environmental standards to trade agreements will have no appeciable effect on trade flows. Anyone who tells you differently is selling you something.

I'm sympathetic to that view, with one caveat:  Demanding that labor and environmental provisions be included could scuttle some trade deals, and that would have an impact on trade flows.

Obama/Clinton: "Opt Out Of" Or "Re-negotiate" NAFTA

I was just watching the Obama-Clinton debate in Ohio.  Most of the trade stuff was boilerplate, but one point jumped out at me.  Both Obama and Clinton stated explicitly that they will "opt out" of NAFTA unless the governments of Canada and Mexico agree to re-negotiate the agreement.  In particular, they want labor and environmental standards to be a core part of the agreement, enforceable through dispute settlement.  (Senator Clinton also mentioned something about preventing foreign investors from challenging our laws designed to protect workers, but I forget whether that was said in the same context).

Here's my question for any Canadian or Mexican readers (or any others who might have some insights):  What would the reaction of the Canadian and Mexican governments be to this proposal?

UPDATE:  Here's the part where Clinton talks about foreign investors:

But let's talk about what we're going to do. It is not enough just to criticize NAFTA, which I have, and for some years now. I have put forward a very specific plan about what I would do, and it does include telling Canada and Mexico that we will opt out unless we renegotiate the core labor and environmental standards -- not side agreements, but core agreements; that we will enhance the enforcement mechanism; and that we will have a very clear view of how we're going to review NAFTA going forward to make sure it works, and we're going to take out the ability of foreign companies to sue us because of what we do to protect our workers.  (emphasis added)

So I think it's clear that modifying the investment provisions is part of her general re-negotiation plan.  What's not clear to me is whether the investment re-negotiation will be limited to laws "to protect our workers."  That's the only part she mentions, but it seems strange to single that area out.

The Patriot Employers Act under WTO Rules

There has been a lot of criticism of the Patriot Employers Act proposed by Barack Obama and several others (see, e.g., here).  A few days ago, I was asked in a comment whether the Act would be consistent with the SCM Agreement.  My short answer was that there was no clear cut violation.  But that assessment was based merely on a summary of the Act, so I thought it would be worth tracking down the actual text.

The key portions for trade purposes seem to be the following conditions (there are others) for receiving a tax credit of 1% of taxable income: 

• the company must "maintain[] its headquarters in the United States if the taxpayer has ever been headquartered in the United States"
• and if the company employs at least 50 employees on average during the taxable year, it must "maintain[] or increase[] the number of full-time workers in the United States relative to the number of full-time workers outside of the United States"

So do these conditions violate WTO rules?  Very quickly, the SCM Agreement is an obvious place to start.  It's clear that there is a subsidy.  It's also pretty clear that this is not an export subsidy under Article 3.1(a).  Could it be a subsidy that is contingent on the use of domestic over imported goods under Article 3.1(b)?  There's an argument that providing an incentive to maintain headquarters and high U.S. employment levels leads indirectly to the use of domestic goods, but it's kind of a stretch.  Because the prohibited subsidies claims would likely fail, that puts the subsidy in the "actionable" category, and thus we need to see if it is "specific."  My sense is that it would be found specific under Article 2.1(a) and that 2.1(b) would not get it off the hook (in particular because of footnote 2).  However, even if specificity is demonstrated, there is the difficult matter of proving "adverse effects."  That won't be easy.

What about the GATT?  The same sorts of arguments can be raised under GATT Article III:4 as would be made in the context of subsidies contingent on the use of domestic over imported goods.  I think this would be a hard claim to make.

Finally, a wild card: the Agriculture Agreement.  If these subsidies were used by companies involved in agriculture, any subsidies paid out in excess of commitments might violate WTO rules.

That was a pretty quick and rough analysis!  If anyone has any criticisms or additional insights, feel free to offer them.

(Also, let me offer the usual disclaimer that none of this constitutes legal advice!)

Here's the full text of the Act:

What the Candidates Should Be Talking About in Ohio

Much of the political debate between Hillary Clinton and Barack Obama in Ohio has been about which of them dislikes NAFTA more.  But perhaps when addressing trade issues in their debate in Cleveland on Tuesday, they should be talking a bit more about stories like this:

The Cleveland Clinic has taken on many of the traits of a hospitality group. Its main campus served almost 3m patients in 2006, bending over backwards for them. A posh international centre offers translators, coffee and foreign newspapers. The clinic owns three hotels and lets the InterContinental hotel group manage them. The most expensive hotel, built in 2003, has space for conferences and plush suites, popular among royal patients from the Middle East.

In addition to importing visitors, each hospital has turned its city into an exporter of sorts. Each is spinning off technologies and start-ups. Mayo has hospitals in Florida and Arizona. The Cleveland Clinic has begun to offer management expertise, for a fee, to a handful of hospitals around the country. It already has facilities in Florida, a “wellness centre” in Toronto and projects under way in Abu Dhabi and Vienna. Cleveland's manufacturing base may have declined, but its main commodity in future may be cardiac expertise.

With this growth has come a steady increase in staff. Cleveland's 37,350 employees make it Ohio's second-largest private employer, after Wal-Mart. ... “One thing to note”, says the Cleveland Clinic's chief executive, Delos Cosgrove, “is that health-care jobs are good jobs.” (emphasis added)

There is no doubt that trade can be disruptive to the economy, as the loss of manufacturing jobs in Ohio and other places makes clear.  But as this story shows, these disruptions do not necessarily mean that a city or region will be permanently run-down economically as a result.

India Considers a Compulsory Licenses for Nepal: Is there an Ulterior Motive?

Although ignored by most media outlets (but not IP Watch), the India Patent Controller is considering an application from Indian generic pharmaceutical company Natco to produce two drugs for export to Nepal under compulsory licence. If approved and implemented, this would be the second compulsory licence issued for export under the TRIPS ‘waiver’ granted in 2003 (Canada issued one last year for the export of an AIDS drug to Rwanda).

The important (and interesting) aspect of the application is not the use of TRIPS to issue a compulsory licence for export, but more so the ease (or difficulty) with which the Indian Patent Controller will issue compulsory licences to Indian manufacturers.

Section 84(1) of the Indian Patent Act prevents compulsory licences from being issued for the domestic market for the first three years of a patent. Given that three years has now passed since India has had to provide protection for pharmaceutical patents, the generic industry is keenly interested in exploiting the provision for the domestic market. Generally speaking, India’s patent act allows a wide range of avenues for compulsory license, including if a drug is not available in adequate quantities, not reasonably priced, or (in a possible violation of TRIPS) not manufactured in India.

If approved, the Patent Controller may have to deal with a lot more applications in the months and years to come. Watch this space!

Obama's Economics Adviser on Obama on Trade

Here's how Austan Goolsbee, a University of Chicago economics professor who is Obama's leading economic adviser, describes Obama's views on trade:

"I don't think he views himself as a protectionist," Goolsbee said. He said Obama favored expanding access to global markets through trade deals such as the World Trade Organization's Doha round so long as labor and environmental standards were in place.

Obama has won labor support for his criticisms of the North American Free Trade Agreement, NAFTA, which he says he wants to amend.

Goolsbee criticized the Bush administration for not enforcing existing trade agreements and bringing too few cases before for the WTO. Such cases would likely rise significantly in an Obama administration, he indicated. China, he said, was one example where a host of violations had been overlooked.

The senator is also "very concerned" about the country's current account deficit with China and other nations.

"We have major imbalances with many parts of the world," he said. "This is naturally what happens when you're running huge deficits and the country doesn't have a lot of savings. You have to borrow the money from abroad. He's very concerned about that."

BYOM: Bring Your Own Meat

From Reuters:

China expressed regret on Thursday at reports the U.S. Olympic team would bring its own meat for the Beijing Games over concerns of drugs tainted food, and said it could guarantee safe supplies.

The New York Times has reported that the U.S. Olympic Committee has arranged with sponsors to ship 25,000 pounds of lean protein to Beijing for the Games, in response to concerns about the potential impact of veterinary drugs and insecticides on athletes.

"I personally feel rather regretful," Kang Yi, head of the Catering Division at the Beijing Organising Committee for the Olympic Games, told a news conference.

I can't figure out where exactly this falls in the non-discrimination framework.  Normally, non-discrimination occurs in relation to products imported into the market of the country doing the discriminating.  But here, the discrimination is against foreign products when nationals of a country consume those products abroad. The whole thing has kind of a GATS feel to it.  Perhaps that's it:  It's discrimination against foreign catering services under the consumption abroad mode.

ZEROING POLL

This poll is highly unscientific, but nevertheless I'm curious to see what people think!  I'm going to keep it at the top for a few days to give people a chance to vote.

ADDED: I realize now that I should have made more clear that I was after people's views on whether zeroing should be found legal or illegal under WTO rules, not their views on what the prevailing AB jurisprudence says.

THE RESULTS ARE IN:

As of 7:17 pm EST on Sunday, we have had 70 votes.  There are probably more that will come in, but I think the trend is pretty clear so I'm going summarize things now (in part so that I can make room at the top of the page for other posts).

There were two basic questions involved in this poll.  The first was whether "zeroing" is "good policy" or "bad policy."  There was a pretty clear answer to this question:  5 voters thought it was good policy and 65 thought it was bad policy.  Obviously, the poll ignores many nuances.  For example, there are a number of kinds of zeroing.  But as a general matter, the fact that 65 out of 70 people say that zeroing is bad policy is a pretty strong statement.

The second question was whether zeroing should be found legal or illegal under WTO rules.  9 out of 70 (13%) thought it should always be legal under WTO rules.   This choice had the fewest votes, but it's a percentage that is not insubstantial.  By contrast, 42 (60%) thought zeroing should always be illegal under WTO rules.  This was the clear majority position.  Finally, 19 (27%) thought that zeroing should be found legal in some situations, but illegal in others.

The split on the second question seems to be a pretty good reflection of the split among panelists and the Appellate Body that we have seen in the various cases over the past few years, with 40% of poll voters saying zeroing should be legal some or all of the time and 60% saying it should be illegal all of the time. 

Investment Protection for Whom?

Aren't investment protection rules designed to protect investments by Western companies in developing countries?  That may have been the original idea, but now the situation seems more complicated:

With Indian firms investing aggressively in the US, India has put on fast track negotiations on signing an investment protection agreement with the [United] States.

While both the US and India have signed the investment protection agreements with a number of countries, the one between them has to be unique because it is a different type of relationship, commerce and industry minister Kamal Nath said.

The two countries would try and conclude the investment protection agreement by the end of this year, he said, adding that Indian investments were not made in the American stock market but in the backyard of the US Economy.

Here's more:

In a measure of the growing US-India trade engagement, Nath spoke about the investment protection agreement between the two countries. "The investment protection agreement between US and India, it turns out, is going to be more for India than US," Nath said in a lighter vein. "It is a different kind of agreement compared to the other countries because investments on both sides are so substantial. We hope to conclude it by end of the year."

He said even 10 years ago not many could have imagined that Indian companies would be investing in the US. At best, he said, one could think in terms of investments in Dubai, Singapore, Sri Lanka or Bangladesh.

Indian companies with a strong US presence being showcased during the two days include Bharat Forge, Essar Group, HCL America, ITC Kitchens of India, Jet Airways, Mahindra USA, Ranbaxy, Tata Group, Thermax and Wockhardt USA.

Together these companies are in industries as diverse as steel, airlines, pharmaceuticals, auto parts, healthcare, hotels, chemicals and information technology. According to one study Indian companies have created 30,000 new jobs in the US.

ICJ Job

Amy Porges points me to this vacancy notice for a Senior Legal Officer/First Secretary of the Court at the International Court of Justice: http://www.asil.org/pdfs/vacancy.pdf

Update on the Seals Dispute

It has been a while since we talked about the Canada-EU seals dispute at the WTO (see here, here and here).  It's not clear to me where this is all going, but here is the latest:

The European Commission's ambassador to Canada says efforts are being made to inject scientific fact into the emotionally-charged seal hunt debate, but he says the issue is shrouded in sentimentality.

Dorian Prince said Tuesday the European Commission will soon make a final recommendation about a possible Europe-wide ban on seal products - a decision that could strike a devastating blow to Canada's annual East Coast seal hunt.

...

Prince said it is very difficult to eliminate emotion from the seal hunt debate in Europe.

He said the European Commission, the executive branch of the European Union, is awaiting a second report on seal hunts before making its recommendation to the European Parliament.

...

Belgium and the Netherlands have already approved legislation prohibiting the sale of seal products. Germany, Italy and Austria are drafting similar legislation, putting pressure on the European Commission to recommend a union-wide ban.

Can Unilateral Carbon Measures Be Consistent with WTO Rules?

My good friends over at the law firm Sidley Austin have done an analysis of whether certain cap-and-trade greenhouse gas legislation under consideration in the U.S. is consistent with WTO rules.  They argue that unilateral legislation can be written in a way that complies with WTO rules, and that the specific proposal they analyze is WTO-consistent.  See Appendix A of the following document for all the details:  http://www.finance.senate.gov/hearings/testimony/2008test/021408abtest.pdf

Hillary Clinton's "Pro-America Trade Agenda"

Yesterday was Barack Obama day here on this blog.  Today is Hillary Clinton day.

In her recent Economic Blueprint for the 21st Century, Hillary Clinton sets out a "Pro-America Trade Agenda."  (As an aside, do politicians in other countries use similar phrases?  For example, do Koreans running for President set out a "Pro-Korea Trade Agenda"?  Or is this just an American phenomenon?)  She makes a number of points, as follows.

Peter Gallagher on the New Agriculture Text

Peter Gallagher looks at the latest WTO agriculture text and finds that it comes up short in many ways.  I enjoyed his closing part:

The zombie vampire award in this catalog of half-way-measures goes to the “Commodities” section of the text. Here we find a proposal that the WTO’s Aid For Trade initiative should encourage funding for ‘commodity agreements’—including producer-only commodity agreements—designed to “stabilize prices”. Good grief! Is there any reason to think that such proposals are now more feasible in globalized markets than they were in the quasi-cartelized commodity trades of the 1970s? Is there no-one in Geneva who remembers that ‘stabilization’ plans for coffee, cocoa, rubber, tin, iron ore etc. were all expensive (and frequently corrupt) attempts to fix markets that ended in complete failure?

More at the link.

Obama's Trade Views in the Blogosphere

A number of bloggers and others have been talking about Barack Obama's views on trade recently.  Many seem to feel that he is moving towards a "populist" view on trade (some make this point approvingly, others disapprovingly).

Examples of those in favor of a populist approach include David Sirota, who cites some of Obama's recent statements and says that Obama's rhetoric is "encouraging" and that "it's good politics for Obama to put our lobbyist-written trade policy on trial in states like Wisconsin, Ohio, Texas and Pennsylvania."

Examples of those opposed include Greg Mankiw, who wonders "whether Barack Obama is going to align himself with the economic centrists in the Democratic party or with the populists on the far left of the party," and concludes that "so far it does not look good."  He also notes that Obama (and Clinton) have made remarks that "dis" NAFTA.  And the Washington Post complains, "On economics, Mr. Obama goes populist."

Others point to mailers the Obama campaign have sent out which state that "[o]nly Barack Obama consistently opposed NAFTA." 

Trying to sort through statements made in a political campaign can be challenging, to put it mildly, but given that Obama has become the betting favorite to be the next President, I thought it might be worth spending some time on this.

Green Rubber

Not a question of public morals, as you might have thought, but of exhaustible natural resources etc..

This corporation claims to hold the "holy grail" of the rubber industry, the ability to de-vulcanize rubber, permitting its recycling. There was no escaping their four-page, up-front advert in the latest FP today. Evidently it's a Malaysian company.

In para. 7.207 of its Report, the Brazil-Tyres Panel noted that

"as regards devulcanization, which according to Brazil is the only true recycling method with respect to Tyres, Brazil claims that it is cost-prohibitive, results in pollution, and produces poor-quality rubber with limited demand and applications.  Therefore, according to Brazil, tyre rubber devulcanization is not a feasible alternative for the disposal of huge volumes of tyre wastes. Although we do not find evidence showing that devulcanization or other forms of chemical or thermal transformation such as pyrolisis pose substantial health or environmental risks, most of the evidence indicates, as submitted by Brazil, that under current market conditions, the economic viability of these options has yet to be demonstrated."

Hence, de-vulcanization was not considered a reasonably available alternative to Brazil's measures by the Panel. This was essentially upheld by the AB in para. 175 of its report ("Material recycling applications are costly, and hence capable of disposing of only a limited number of waste tyres. We also note that some of them might require advanced technologies and know-how that are not readily available on a large scale. Accordingly, we are of the view that the Panel did not err in concluding that material recycling is not a reasonably available alternative to the Import Ban").

It would be wonderful if de-vulcanization would turn into a reality, and become a true "reasonably available alternative". But the reports are that Mel Gibson has invested in the venture, casting some doubt on the prospect...

T.

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.

China's Firt Defeat in the WTO

The Panel in the China - Auto Parts case has just issued the interim report. According to several sources, China lost the case. This is rather unsurprising as the legal issues involved in the case are relatively simple. The more interesting question, however, is how China would react to its first defeat. Initially highly reluctant to solve trade disputes using the WTO dispute settlement system, China has gradually overcome such phobia over the past two years (see e.g., Taming the Dragon: China's Experience in the WTO Dispute Settlement System, Legal Issues of Economic Integration 34(4): 369–392, 2007). With immediate relevance to this case, the question is whether China will refuse to implement Panel or AB recommendations? In the long term, the question is whether the loss in this case will push China back to its secretive approach of solving trade disputes through private settlements? My answers to both would be a qualified “no”. I would be very interested in getting the views from fellow contributors and readers of the blog on these questions.

Update on the Gambling GATS XXI Arbitration

I had been hoping that the GATS Article XXI arbitration in the Gambling dispute would be as transparent as regular WTO disputes.  I'm not sure that will be the case, though, as the arbitration requests have not yet been made public on the WTO's web site (as far as I can tell, anyway).  So, the best I can do is follow the reports in the Antigua Sun:

[Antigua's attorney Mark] Mendel told the SUN that the new arbitration process is likely to take a month or two to get going and several additional months of briefings and hearings before a decision is reached.

Trade in Everything: Valentine's Day Edition

From The Economist:

IF YOU live in Europe and are lucky enough to be given roses by your Valentine, there is a good chance that they were grown in Kenya—specifically, in one of the colossal greenhouses that blot out the once wild shores of Lake Naivasha, 90km (56 miles) north-west of Nairobi. Some 25% of Europe's cut flowers come from Kenya.

...

Roses need labour-intensive watering, pruning and treating before they can be clipped and flown daily to buyers in Amsterdam and London. The best are sold through (Dutch) auctions to florists; the less good end up in European supermarkets. Kenya emerged as a flower power when Israel scaled down its own industry. It has since lost business to neighbouring Ethiopia, which offers tax breaks and better security, but Naivasha's perfect intensity of sunlight and days of near-constant length should keep it on top. In any case, the owners are stoical. “We're committed privateers,” says one. “We'll just pick up and move somewhere else in Africa.”

Not to ruin everyone's Valentine's Day, but there is sad side to this story:

In a country strangled by anger and fear, it is taking armed escorts and emergency airlifts to make sure that Kenya's most warmhearted export - the rose - arrives in time for Valentine's Day.

Kenyan flowers - mostly roses - account for a quarter of Europe's cut flower imports, and Kenyan growers have been pushing to keep exports up for the holiday despite ethnic violence that has paralyzed the East African country.

Finally, the "trade in everything" description does not apply everywhere:

The sale of red roses and red gifts has been banned by Saudi Arabia's religious police in the run-up to Valentine's Day, reports a local newspaper.

Officials from the Commission for the Promotion of Virtue and Prevention of Vice warned flower and gift shops to remove all red items, including roses and wrapping paper, from their shelves.

"They visited us last night," an unidentified florist told the Saudi Gazette. "They gave us warnings and this morning we packed up all the red items."

In Riyadh, the ban came into force on Sunday and will remain until after February 14.

The authorities believe celebrating Valentine's Day is un-Islamic and encourages relations out of wedlock, which are strictly forbidden.

The crackdown has pushed up the price of the flowers on the black market, with some florists making deliveries in the middle of the night, the paper said.

Couples defying the ban placed orders for red roses weeks before the deadline. Some were sending online Valentine's cards, and others were planning to celebrate the day in neighbouring countries, such as Bahrain, which has a more liberal approach to Islamic law

Thailand - Cigarettes II?

Many of this blog's readers are probably familiar with the old GATT Thailand - Cigarettes dispute.  It looks like we might be headed for a (somewhat) similar dispute at the WTO.  From an article published just in advance of the WTO complaint:

The Philippine government plans to elevate the trade complaint of Philip Morris Philippines Manufacturing Inc. (PMPMI) with Thailand to the World Trade Organization (WTO) after talks with Asean trade officials in Baguio this week.

Trade and Industry Undersecretary Thomas Aquino said the Philippine government is bent on supporting the trade issue of Philip Morris over a policy in Thailand that would increase the tariff on imported cigarettes.

And here's the complaint.  There are a lot of claims in there, but this one struck me as being an interesting one:

25. Thailand requires that tobacco and/or cigarette retailers hold separate licenses to sell domestic and imported cigarettes, respectively. The Philippines understands that the measure in which these discriminatory requirements are contained include the Excise Department Announcement by the Director-General of Excise, dated 12 September 1991, issued pursuant to Article 4, Ministerial Regulation No. 17 B.E. 2534 (1991) under the Tobacco Act B.E. 2509 (1966) , and any amendments, implementing measures or other related measures.

26. The Philippines considers that this dual license requirement, based purely on the origin of the products sold, is inconsistent with Article III:4 of the GATT 1994, because it provides less favourable treatment for imported products than for like domestic products.

This reminds me of the Korea - Beef dual retail requirment claim.  I'm curious to see the arguments as to how this dual licensing requirement leads to less favorable treatment.

Obama on Economics and Trade

Barack Obama is following-up his recent primary victories with some new thoughts on economics, to be offered today at a speech at a GM factory.  Here is an excerpt of what he will say about trade:

It’s also time to look to the future and figure out how to make trade work for American workers. I won’t stand here and tell you that we can – or should – stop free trade. We can’t stop every job from going overseas. But I also won’t stand here and accept an America where we do nothing to help American workers who have lost jobs and opportunities because of these trade agreements. And that’s a position of mine that doesn’t change based on who I’m talking to or the election I’m running in.

You know, in the years after her husband signed NAFTA, Senator Clinton would go around talking about how great it was and how many benefits it would bring. Now that she’s running for President, she says we need a time-out on trade. No one knows when this time-out will end. Maybe after the election.

I don’t know about a time-out, but I do know this – when I am President, I will not sign another trade agreement unless it has protections for our environment and protections for American workers. And I’ll pass the Patriot Employer Act that I’ve been fighting for ever since I ran for the Senate – we will end the tax breaks for companies who ship our jobs overseas, and we will give those breaks to companies who create good jobs with decent wages right here in America.

Does Free Trade Favor Rich Countries?

Tyler Cowen of George Mason interviews Ha-Joon Chang of the University of Cambridge regarding his critical book on free trade: http://chronicle.com/media/audio/v54/i23/chang_cowen/

Beyond "Trade Policy," Towards "Integration Policy"

In the Financial Post, some well known trade experts argue for deeper Canada - U.S. integration:

That a big idea on Canada-U.S. trade is needed there is little doubt.

...

"We reached the high point in the year 2000 in volume in terms of trucks and human traffic," Mr. Hart says.

While security concerns since Sept. 11, 2001, have led to a thickening of the border between Canada and the United States, raising costs and creating delays for both goods and people, the main problem is neither country has accepted it needs to move beyond "trade policy" toward a new "integration policy," the experts argue.

From a common security perimeter to common regulation, it is time Canada-U.S. trade grew up. As Europe embraces the concept of mutual recognition of regulations and Asia speeds toward freer trade, the biggest trading relationship in the world is increasingly bogged down.

"Canada and the United States don't really trade with each other any more; they build things together," Mr. Hart says.

The point really hit home during the BSE crisis, Mr. Hart says. A calf may be born in Alberta, but it is sent to Montana to eat grass, back to an Alberta feedlot to get fattened up and on to Chicago to get butchered. That is why tracing the infected meat was so important.

That is also why one North American food standard would make sense.

Mr. Hufbauer argues Canada would benefit from simply adopting large swathes of U.S. regulation.

Mr. Hart points out as the gold standard in drug regulation, U.S. Food and Drug Administration employs 10,000 people and spend billions of dollars vetting drugs. Yet Canada feels it has to employ another 985 people to second-guess the FDA. The result? Drug approval can take years longer, denying Canadians potentially life-saving drugs.

He adds two-thirds of Canadian regulatory standards are not as tough as U.S. standards and carry far lower liability costs. Mr. Hufbauer says common Canadian and U.S. standards could cover at least 90% of the trade in food products.

"After all, 30 million Canadians and Americans eat in the other country during their annual travels," he says.

A new trade integration campaign is badly needed. "This needs political momentum, this needs political leadership, this needs to be put of the top of the Canada-U.S. agenda," Mr. Hart says.

More at the link.  I'm not sure what the reaction to these proposals will be.  There could be a good deal of concern on both sides of the border.  Whether such proposals are at all feasible could depend on the form they take (e.g., binding rules or simple cooperation).

Trade in Everything: Swiss Army Knives

The title of the post is a bit mis-leading, as it appears there are some things that are not to be traded:

Swiss soldiers will continue to pack knives made in Switzerland, after the defence ministry decided not to have them produced them abroad.

The NZZ am Sonntag and Sonntag newspapers revealed on Sunday that Victorinox in canton Schwyz would supply 65,000 silver knives, worth around SFr1.2 million ($1.1 million).

The defence ministry's procurement agency caused an uproar when it announced that it was calling for tenders from abroad last summer, claiming that under World Trade Organization (WTO) rules it had no choice given the size of the contract.

According to Sonntag, the army chose though to demand a blade that could be locked into position, effectively making it a weapon and no longer subject to WTO standards.

While foreign offers were still considered, the procurement services allegedly decided though that Swiss quality standards were still the best for the army.

More here.

Job Losses from Trade vs. Non-Trade

We've talked before on this blog about whether job losses from trade deserve greater compensation than job losses from other things.  Here is a real world example of the latter that I came across:

Polaroid Corp. is dropping the technology it pioneered long before digital photography rendered instant film obsolete to all but a few nostalgia buffs.

Polaroid is closing factories in Massachusetts, Mexico and the Netherlands and cutting 450 jobs as the brand synonymous with instant images focuses on ventures such as a portable printer for images from cell phones and Polaroid-branded digital cameras, televisions and DVD players.

My question is, how are these Polaroid workers any less deserving of assistance than the Maytag workers discussed during the Presidential campaign?  This story make me wonder whether we need to re-think the idea of "trade adjustment assistance," replacing it with a broader program of "adjustment assistance."

Anti-Dumping Reform

From a post about anti-dumping over at VoxEU:

Even leaving aside legal details, our recent work and other studies suggest some obvious starting points for any reform of the EU antidumping system. Antidumping instruments that are simply another form of protection leave too much discretion in the hands of the administrating authorities. Duties are thus used in a retaliatory fashion or to compensate for lost tariff protection resulting from trade liberalisation. The solution is relatively simple: prescribe (and enforce) tighter economic criteria identifying dumping, injury, and the causal link between the two. Here, the extensive economic literature and legal doctrine on competition policy can be of great help.

I can understand the suggestion to look at competition policy for guidance in administering anti-dumping.  However, if we're going down that route, why not propose using competition policy directly to deal with allegations of unfair pricing by foreign companies?  That is, why not propose replacing anti-dumping with competition policy?  It's possible that the authors have this in mind, but prefer not to say it explicitly, keeping a formally separate anti-dumping regime.