I can't figure out what to make of Twitter. Is this really the next big thing? In case it is, a little while ago I went ahead and used the RSS feeds for our news service and this blog to create a Twitter feed. (I think this is "cheating," in a sense -- I don't really "tweet" anything, but rather just pass along outside items which then get tweeted). The result is here: http://twitter.com/worldtradelaw
I wasn't really sure what to expect from doing this, but to my great surprise, we now have 216 "followers"! However, this figure may not be as impressive as it sounds. I've noticed that a decent number of these are either 1) porn sites hoping to get themselves noticed, or 2) people who give advice about how to get more twitter followers.
Having said that, there is some good trade law-related twittering going on, with some actual postings rather than just feeding from other sources like we do. For those trade lawyers who want to check out twitter for the first time, I recommend the following as a good starting point:
John Boscariol of McCarthy Tetrault, twittering as tradelawyer
Lawrence Friedman of Barnes Richardson, twittering as customslawblog
Martha Harrison of Heenan Blaikie, twittering as intltradelawyer
Doug Jacobson of Sandler, Travis and Rosenberg, twittering as tradelawnews
And Inside U.S. trade, twittering as insidetrade
(Apologies if I missed anyone -- feel free to add other trade law twitterers in the comments to this post).
Over at the Kluwer Arbitration Blog, Luke Peterson talks about the investment aspects of the Chinese PC filtering issue. He notes:
One critical question in any claims arising out of this internet-filtering software dispute would be the expectations that investors had upon entering the Chinese market. For instance, it has been widely reported that Google, the search company, which has had its own ups and downs in China, operates under the terms of a highly-detailed license. I’m guessing that the terms of such licenses make it crystal clear that foreign technology companies are no longer in the highly-permissive State of California.
While I will leave it to others to handicap the chances of any investment treaty claims, it seems to me that the investment treaty route could be the “sleeper” option in this whole controversy.
From a NY Times interview:
Q. One of the provisions that got added very late to this bill that senators had expressed some reservations about was the one that puts tariffs on goods imported from countries that don't have these sort of restrictions. What do you think of that revision and would you like to see the Senate strip it out?
President Obama: At a time when the economy worldwide is still deep in recession and we've seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out there. There were a number of provisions that were already in place, prior to this last provision you talked about, to provide transitional assistance to heavy manufacturers. A lot of the offsets were outdated to those industries. I think we're going to have to do a careful analysis to determine whether the prospects of tariffs are necessary, given all the other stuff that was done and had been negotiated on behalf of energy-intensive industries.So certainly it is a legitimate concern on the part of American businesses that they are not disadvantaged vis-a-vis their global competitors. Now, keep in mind, European industries are looking at an even more ambitious approach than we are. And they obviously have confidence that they can compete internationally under a regime that controls carbons. I think the Chinese are starting to move in the direction of recognizing that the future requires them to take a clean energy approach. In fact, in some ways they're already ahead of us -- on fuel efficiency standards, for example, they've moved beyond where we've moved on this.
There are going to be a series of negotiations around this and I am very mindful of wanting to make sure that there's a level playing field internationally. I think there may be other ways of doing it than with a tariff approach.
The article accompanying the interview is entited, "Obama Opposes Trade Sanctions in Climate Bill." The article begins as follows: "President Obama on Sunday praised the energy bill passed by the House late last week as an “extraordinary first step,” but he spoke out against a provision that would impose trade penalties on countries that do not accept limits on global warming pollution." I suppose it depends on what specific actions the measure would take, but I'm not sure I agree with the language used. Are the trade measures envisioned here "trade sanctions" or "trade penalties"? If I were one of the proponents of this bill, I would try hard to characterize any charges on importers/imported products as simply a non-discriminatory imposition of the costs of the measure. (Also, I would try to make sure the costs actually are non-discriminatory!)
ADDED: Paul Krugman says something similar here:
It has long been accepted that a VAT is essentially a sales tax — a tax on consumers — which for administrative reasons is collected from producers. Because it’s essentially a tax on consumers, it’s legal, and also economically efficient, to collect it on imported goods as well as domestic production; it’s a matter of leveling the playing field, not protectionism.
And the same would be true of carbon tariffs.
There was some question about how the WTO would handle cap-and-trade — whether it would accept the need for carbon tariffs, if some countries (cough China cough) drag their feet, or whether it would adopt a purist free-trade rule. The answer seems to be in — the WTO is going to treat cap-and-trade the same way it treats VATs, with border taxes allowed if they can be seen as reducing distortions.
I suppose one way to define the "purist free-trade" position is that no import tariffs/charges of any sort are allowed. So, in this sense, he is correct that accepting the need for carbon tariffs goes against the purist view.
Another way to think about the "purist free-trade" position, though, is to say that any such tariffs/charges must not be imposed in a discriminatory manner, that is, they must be equivalent to a domestic counterpart. If that definition is used, than the WTO report is completely consistent with a "purist free-trade" stance.
The Economist mentions an interesting new detail about China's efforts to have all personal computers sold in China come with filtering software called Green Dam Youth Escort:
An American firm, Solid Oak Software, claims Green Dam includes stolen copyrighted code from one of its products, and has launched legal action.
I hadn't heard much about this Green Dam software before. This certainly complicates things!
I wish I had more to say about the general issue of the requirement to install filterating software as a potential WTO case. The trouble is, I'm a little fuzzy on the facts and the legal claims, which makes it difficult to say much.
The WTO recently released a very nice interactive map of WTO DSB litigation. The map shows total numbers of cases filed for each country - as complainant or as respondent, and who are the parties. The map is at http://www.wto.org/english/tratop_e/dispu_e/dispu_maps_e.htm?country_selected=ARM&sense=e. The map would be a useful addition in the classroom.
Additionally, the map reminds me of an article I wrote a bit back where I did a little bit of rough and dirty comparisons between Canada and the United States (see Reputational Fallacies in International Law: A Comparative Review of United States and Canadian Trade Actions, 30 Brooklyn J. Int’l L. 67 (2004), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=970087). In that article, and a related book chapter, I found that that when one took the size of the states’ economies and participations in the international economy into account, the numbers of complaints filed by each (for whatever that means – though I offered my views of what it means), and the numbers of times they were a respondent (for whatever that means, and once again, I offered my views) - the results were comparable, despite the different reputations of the two countries. A quick glance at this map suggests to me that a similar analysis of other countries would might show such a phenomenon.
Take for example a comparison
between the Untied States, Australia, and New Zealand
But the real fun, for me anyway, is
when one compares countries that are neighbors – with all the psychological
baggage that goes with that (as I did for the US
Just some thoughts sparked by this new cool map.
At the same time that we are about to have a ruling on the legality of various subsidies to the aircraft industry, subsidies are proliferating in many other industries, in large part due to the impact of the financial crisis. The question then arises, if everyone is subsidizing, will any new WTO complaints be brought in this area? Perhaps only if there is an imbalance in the subsidies, with certain governments giving more to particular industries than other governments are. Otherwise, everyone is equally guilty, and a kind of subsidy equilibrium has been reached.
Here's a recent example, with a twist:
Ford Motor Co will receive nearly $5.9 billion in U.S. government loans to build fuel-efficient vehicles as the Obama administration deepened its commitment to reshaping the cash-strapped auto industry.
Japan's Nissan Motor Co Ltd will receive $1.6 billion and start-up Tesla Motors Inc will receive $465 million in low-cost loans to build all-electric cars in the first wave of financing from an Energy Department program intended to offset the cost meeting sharply higher new fuel economy standards.
So here we have the U.S. government subsidizing the efforts of several companies (including a foreign one, although only for its U.S. factory) to produce cars that use less gasoline, which, at long last, brings me to the question I was trying to get to: Do WTO rules need to be modified so that subsidies to promote a cleaner environment are explicitly permitted? I don't mean to make the Doha negotiations any more difficult than they already are, but it's possible that without some clarification, we could see some disputes in this area. (As noted, if everyone is doing it, perhaps there will be no challenges. But if one country does more of it than others, there is a chance of a complaint being filed.)
Speaking of the environment, the FT has the following story on a report to be issued tommorrow:
The letter points out that the proposed new rule raises fundamental questions regarding regulatory transparency and notes concerns about compliance with World Trade Organization (WTO) rules, such as notification obligations. Locke and Kirk also listed for MIIT Minister Li Yizhong and MOFCOM Minister Chen Deming numerous concerns raised by global technology companies, Chinese citizens, and the worldwide media about the stability of the software, the scope and extent of the filtering activities and its security weaknesses. All of these problems have serious implications for consumers and businesses
"China is putting companies in an untenable position by requiring them, with virtually no public notice, to pre-install software that appears to have broad-based censorship implications and network security issues," Locke said.
"Protecting children from inappropriate content is a legitimate objective, but this is an inappropriate means and is likely to have a broader scope. Mandating technically flawed Green Dam software and denying manufacturers and consumers freedom to select filtering software is an unnecessary and unjustified means to achieve that objective, and poses a serious barrier to trade," Kirk said.
Both U.S. government officials offered China an opportunity to exchange views with U.S. and Chinese government and industry officials on ways in which parental control software can be promoted in the market consistent with the goals of user choice, system reliability, freedom of expression, and the free flow of information.
The USTR press release doesn't say much about the legal theory, and the letter that is mentioned has not, as far as I know, been made public. So what is the legal claim? The WSJ explains it as follows:
More from Bloomberg here.
From Congressman Mike Michaud, one of the sponsors of the “Trade Reform, Accountability, Development and Employment (TRADE) Act,” introduced in the House:
What Must and Must Not Be in All Agreements: The bill contains a detailed description of the key provisions that must be included in all future U.S. trade agreements and what aspects of the current model must never again be replicated to ensure that trade pacts provide broader benefits. It sets forth the environmental and labor, food and product safety, agriculture, trade remedy, human rights, federalism safeguard and currency anti-manipulation rules and national security exceptions that must be included in all U.S. trade pacts. This section also lists what aspects of the NAFTA-WTO model cannot be included in future deals, including bans on Buy American and anti-sweat shop or environmental procurement policies; new rights and privileges for foreign investors to promote offshoring and expose domestic health and environmental laws to attacks in foreign tribunals; service sector privatization and deregulation requirements; and special protections for Big Pharma to limit affordable access to drugs. This section comprises over half of the bill, given that today trade pacts extend far beyond traditional trade matters to cover so many different essential policy topics that are the crux of Congress’ domestic agenda - from access to essential services such as health care and education to regulation of financial services to medicine patents to investment, procurement and local development policy to procurement and food and product safety policy.
I don't agree with all of these conclusions about what should be in trade agreements, but I think it's one of the most important trade issues out there, and I hope this bill triggers some serious debate. More from The Hill.
Some links related to today's announcement of the EC/U.S. complaint against Chinese export restrictions:
The U.S. and the European Union on June 23 formally accused China of illegally hampering exports of raw materials in order to benefit its own manufacturers. The move comes during a period of heightened concern over protectionism amid the global economic crisis. It also coincides with resistance in Congress to an attempt by the Obama Administration to advance a bilateral trade agreement with Panama.
NEW YORK, June 23 (Reuters) - China's move to cut export taxes for its steelmakers will increase its steel exports at the expense of other producers around the world, undermining the industry, said U.S. Steel (X.N) Chairman and Chief Executive Officer John Surma.
The US raised the stakes in a growing trade dispute with China on Tuesday, lodging a case at the World Trade Organisation over export quotas and duties of raw materials.
The United States and European Union accused China of unfair trade practices on Tuesday, saying the Chinese government was restricting exports of raw materials to give manufacturers in that country a competitive advantage.
June 23 (Reuters) - The European Union and the United States are taking action against China at the World Trade Organisation over export restrictions on a number of industrial raw materials used in steel, cars, microchips, planes and other products. [ID:nLN887624]
Whatever Austan Goolsbee may have told Candadian officials during the Ohio primary, and whatever NAFTA trashing Obama the candidate thought he needed to do to win it (before he lost it to Hillary Clinton), the evidence is in: Obama the president has shown no inclination to undo NAFTA.
Now more than ever, trade is essential to keeping America's economy afloat.
WASHINGTON -- U.S. Trade Representative Ron Kirk on Tuesday said the U.S. has filed a World Trade Organization case against China over export restraints on raw materials, calling those policies a "giant thumb on the scale" in favor of Chinese producers.
June 23 (Bloomberg) -- The U.S. said it filed a World Trade Organization complaint accusing China of curbing exports of raw materials to benefit its domestic manufacturers.
President Obama's administration on Tuesday announced it will bring its first trade case against China in the World Trade Organization unless consultations solve the dispute.
WASHINGTON, DC - U.S. Trade Representative Ron Kirk announced today that the United States has requested World Trade Organization (WTO) dispute settlement consultations with the People's Republic of China regarding China's export restraints on numerous important raw materials. China's measures appear to be part of a troubling industrial policy aimed at providing substantial competitive advantages for the Chinese industries using these inputs. The materials at issue are: bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus, and zinc. These are key inputs for numerous downstream products in the steel, aluminum, and chemical sectors across the globe. China ranks as a top global producer of these materials. The European Union also requested formal WTO consultations with China on this matter today.
As is fairly well-known, WTO and other trade rules permit a good deal of protectionism. For example, when certain conditions are met, "safeguard" measures may be imposed to keep out imports. With these kinds of measures, governments have some discretion as to how much protection for domestic industry to pursue. They don't have to impose such measures at all. However, most governments establish a set of domestic regulations under which they can do so.
One way to evaluate a particular government's degree of protectionism, then, is how it uses the discretion it has under these regulations. It looks like the Obama administration will soon have a decision to make in this regard. As The Hill reports:
A U.S. trade body ruled Thursday that imports of Chinese tires are hurting U.S. manufacturers, teeing up a difficult decision for President Obama.
The U.S. International Trade Commission voted Thursday in favor of a petition brought by U.S. Steelworkers, which said a huge increase in Chinese tire imports had forced plant shutdowns and the loss of jobs in six states over the past five years.
The Steelworkers group wants a quota to be imposed on Chinese tires to limit imports, and the ITC will meet later this month to recommend a remedy, which could be a quota, tariff on imports or some combination.
A final decision by September on whether to impose any curbs on Chinese tires will be left to Obama, who may also decide it is not in the best national interests of the country to limit Chinese tires.
If Obama does not provide relief, he’ll disappoint unions and leading Democrats such as Senate Majority Whip Dick Durbin (Ill.).
“We're hopeful the Obama administration will enforce the ITC's wise ruling,” said Scott Paul, executive director of the Alliance for American Manufacturing, which includes steelworkers. He said China’s tire industry benefits from government subsidies, labor exploitation and currency manipulation, all of which make it impossible for U.S. producers to compete.
If Obama imposes a quota or tariffs on Chinese tires, he’ll alienate China, which the administration is asking to help with the global recovery. China also owns about $763 billion in U.S. bonds, leading U.S. officials to offer Beijing assurances they will adopt policies to ensure the viability of the U.S. dollar.
It could also lead China to impose restrictions on U.S. exports at a time when world trade is already being crushed by the global recession.
Steelworkers filed the petition under the Section 421 trade law, which applies only to Chinese exports to the United States. Many lawmakers voted in favor of China’s joining the World Trade Organization in 2000 only after China agreed to the 421 law.
President Bush rejected every petition for relief under the law that reached his desk. No petition for relief has ever been granted.
For those who have been waiting to see how Obama will approach trade policy, this could be an important indicator.
As many of you probably have heard already, the WTO has established a WTO Chairs Program to support WTO-related research and teaching activities in developing countries. While the deadline for the first round of call for proposals has expired on May 29th, similar opportunities might be offered in the future. Interested readers can find out more about the background of the program, application guidelines and members of the Advisory Board of the program here.
Sweden's Koenigsegg, a niche manufacturer of some of the world's fastest and most expensive sports cars, has struck a deal to buy loss-making Saab Automobile from General Motors, the companies said on Tuesday.
In one of the most unlikely pairings in automotive history, the tiny sports car firm of 45 staff is expected to take over a company that employs around 3,400, a cherished Swedish brand that became a national icon for stability and reliability.
So a Swedish company is buying a Swedish brand from a U.S. parent company. Is this "reverse" foreign investment? I suppose it is just undoing a previous foreign investment.
It is not stated explicitly, but I assume that the Byrd Amendment is at work here:
Despite a 22.7% drop in sales, La-Z-Boy recorded a profit of $5.3 million in the quarter ended April 25.
The third quarter also included $8.1 million in added revenue from U.S. antidumping duties on Chinese-made bedroom furniture.
So, there would have been a loss, but Byrd Amendment revenues of $8.1 million led to a profit of $5.3 million!
Following-up on the last post, it looks like the Indonesian clove cigarette makers have at least one defender in Congress. Congresswoman Virginia Foxx gave the following speech in the context of the discussion of the tobacco regulation bill (begins at bottom right of page and continues to next page):
Mr. Speaker, ‘‘The Family Smoking Prevention and Tobacco Control Act,’’ which is before us today, contains a socalled ‘‘special rule for cigarettes’’ in Section 907 of the bill that would ban flavored cigarettes—with the exception of menthol flavored cigarettes.
Since the legislation allows the sale of menthol cigarettes, which are produced in the United States and in my home State, while banning clove cigarettes, which are imported primarily from Indonesia, the Indonesian Government has made it clear that it considers this provision an attempt to discriminate against imported clove cigarette products in favor of a competing U.S. product—and thus section 907 in the bill runs contrary to the free-trade commitments the United States has made as part of the WTO.
According to WTO rules Mr. Speaker, an imported ‘‘good’’ (clove cigarettes) should receive treatment that is ‘‘no less favorable than that provided to a domestic good.’’ Adhering to this principle would appear to require that clove cigarettes be treated no less favorably than menthol cigarettes and thus under this bill both should be exempt from the prohibition on flavored cigarettes or both should be banned in order to ensure there is no unfair discrimination in the treatment of the two products. The latter option is not an option at all in my opinion but neither is ignoring the concerns of our ally Indonesia, a country well known to our President.
For years now, senior officials of the Indonesian Government have repeatedly and doggedly attempted to communicate their country’s concerns to U.S. legislators and executive branch policy-makers alike—to no avail. The communique from the Indonesian Ambassador to Chairman WAXMAN, as well as the Indonesian Trade Minister’s dispatch to former Ambassador Schwab clearly articulate the imperative the Indonesian Government places on the trade violation contained in ‘‘The Family Smoking Prevention and Tobacco Control Act.’’
Last year, the HHS Secretary sent a letter to Congress expressing various concerns about Mr. WAXMAN’s bill on behalf of the Administration. Among his concerns he included the following statement about the bill’s prohibition on imported clove cigarettes that reflects the concerns expressed by the Indonesian Government:
There is a further issue regarding the bill that I would like to bring to your attention. Our trading partners believe that by banning the sale of clove cigarettes but not prohibiting the sale of menthol cigarettes, the bill raises questions under U.S. international trade obligations. The government of Indonesia has repeatedly objected to the bill on the ground that this disparate treatment is unjustified and incompatible with WTO trade rules. Accordingly, I would recommend that the Committee further review the relevant language in this light to ensure the bill is consistent with U.S. trade obligations.
Mr. Speaker, Congress is increasingly—and rightly—calling on our United States Trade Representative and the Administration to more strenuously enforce the WTO and other trade agreements to ensure that our trade partners are playing by the rules and not discriminating against our products and services. I think that it is only right that we abide by the same standards that we expect of our trade partners when the question is as clear as this situation. It would have been my hope that the minor changes needed to correct this avoidable trade complication in the bill could have be made before the legislation was brought to the floor for consideration, but that was not the case. Section 907 affects a de facto ban on the importation of clove cigarettes from Indonesia. It is another troublesome example of serious flaws overlooked by Mr. WAXMAN in his bill.
Remember Indonesia's concern that clove cigarettes (kreteks), which they produce a lot of, would be banned under U.S. tobacco legislation? (See here and here). Well, Congress has passed this legislation and it looks like the clove cigarette ban will soon be upon us.
The problem is not the clove ban by itself. Rather, it is that the law does not ban certain other, arguably similar, tobacco products. As Bloomberg reports:
While other flavors including cloves and strawberry would be banned from the market, menthol would remain unless the FDA later determined it to be a health risk.
So, clove cigarettes are banned, but menthol cigarettes are allowed (at least for now).
Paul Smalera explains the clove/menthol issue as follows:
This passage hints at some of the issues that will come up in the context of examining the measure under WTO rules, such as: "less favorable treatment" (it appears that Indonesia is the predominant supplier of clove cigarettes); "likeness" (menthol and clove cigarettes have similar characteristics and health effects); and "necessity" exceptions in relation to health (same as previous).
Will Indonesia file a complaint? That seems quite possible:
In a related matter, from the Department of "What Comes Around Goes Around," apparently U.S. producers have similar concerns about a Canadian tobacco regulation bill:
Tobacco growers in Kentucky have launched a protest against the Harper government over a new anti-smoking bill they argue will lead to a ban on the vast majority of U.S. cigarette exports to Canada.
Two U.S. congressmen have taken up the cause of 8,100 Kentucky farmers who grow burley tobacco — used in popular American-style cigarettes like Camel and Winston — and have warned International Trade Minister Stockwell Day that Canada's legislation violates NAFTA and other trade agreements.
The U.S. grievance was sparked by the introduction last month of Bill C-32, an amendment to the Tobacco Act which would ban the addition of certain flavours and additives to cigarettes and cigarillos that Ottawa said are marketed primarily at children and teenagers.
Health Canada said the legislation will prohibit the tobacco industry from adding fruit and candy flavours such as chocolate, grape, banana and peach to make their product more appealing to youth. Menthol cigarettes are exempt from the ban.
But Kentucky tobacco growers contend the legislation has been written so broadly it could also bar American-blend cigarettes that include burley tobacco, which they say has flavouring added during normal processing to mitigate its naturally harsh taste.
Thus, the proposed Canadian ban may target U.S. "burley" tobacco in the same way that the U.S. law targets clove cigarettes (the Canadian bill also has the menthol exemption).
As a final point, I hate to sound defensive here, but I just want to emphasize to trade skeptics out there that this issue does not mean that countries can't regulate tobacco. It just means that they can't insert protectionist components into their tobacco regulation measures. 99.9% of these measures are fine under trade rules. The main problem area is the part about (possibly) treating foreign products less favorably than domestic ones.
The legitimacy of investment treaty arbitration is a matter of heated debate. Asserting that arbitration is unfairly tilted toward the developed world, some countries have withdrawn from World Bank dispute resolution bodies or are taking steps to eliminate arbitration. In order to assess whether investment arbitration is the equivalent of tossing a two-headed coin to resolve investment disputes, this article explores the role of development status in arbitration outcome. It first presents descriptive, quantitative research about the developmental background of the presiding arbitrators who exert particular control over the arbitration process. The article then assesses how (1) the development status of the respondent state, (2) the development status of the presiding arbitrator, and (3) the interaction of these variables affect the outcome of investment arbitration. The results demonstrate that, at the macro level, development status does not have a statistically significant relationship with outcome. This suggests that the investment treaty arbitration system, as a whole, functions fairly and that the eradication or radical overhaul of the arbitration process is unnecessary. The existence of two statistically significant simple effects – namely that tribunals with presiding arbitrators from the developing world made smaller awards against developed states in particular circumstances – suggests that particularized reform could enhance the procedural integrity of arbitration. Irrespective of whether future research replicates the results, reforms targeted to redress possible imbalance in the system have the potential to enhance procedural justice and the perceived legitimacy of arbitration in an area with profound political and economic implications.
Despite the generally good news about the lack of connection between arbitrators' backgrounds and the decisions, she suggests a number of ways to improve the arbitration process, all of which seem sensible to me.
Would these improvements satisfy countries who have threatened to withdraw from investment treaties that use ICSID arbitration? That's hard to say. It may be that the perceived bias of arbitrators is only part of the reason they want out. It's possible that these developing countries just don't want to be involved in such treaties with Western countries who are the source of a lot of foreign investment, as this will almost inevitably lead to lawsuits against them.
From Neena Shenai of AEI:
Fundamentally, the Obama administration doesn't really get free trade and entirely misses its importance to U.S. national security. Free trade isn't just about economic gains--it is also about reinforcing strategic political and security ties with key allies.
As is occasionally the case, I feel like I'm being nit-picky here, but I have to disagree with this statement. It may be true that trade policy is about "reinforcing strategic political and security ties with key allies," or about supporting any number of policies with only a tenuous connection to trade. But free trade, I would argue, is a specific economic policy, with no inherent connection to these other policies.
There have been quite a few news articles in the past several days about Canadian concerns that Canadian companies are shut out of many U.S. state and local government procurement conracts, but U.S. companies have access to similar Canadian contracts. Some have suggested keeping U.S. companies out of these Canadian contracts as retaliation, although others disagree, some preferring a push for new trade liberalization in this area.
The point made by the Canadians seems to be, we give you access to our local procurement contracts, so you should give us access to yours. Not an unreasonable view, although which of the two appropriate responses is best can be debated.
Today, a spokesperson for USTR addressed the issue as follows (via Reuters):
Chad Bown on U.S.-China WTO disputes:
From the paper:
... it would not be surprising to see China turn to a strategy that has been employed by other developing countries at the conclusion of their WTO cases. For example, Ecuador, after winning its parallel Bananas dispute against the European Community, did not follow the U.S. lead by also seeking permission from the WTO to retaliate with tariffs against Louis Vuitton handbags or pecorino cheese. Instead, Ecuador threatened to stop enforcing European firms’ intellectual property rights and requested WTO authorization to legally violate its obligations under the TRIPs Agreement. It is worth noting that the United States currently faces two other disputes for failing to comply with WTO legal rulings in which the developing country plaintiff has received or is ready to receive WTO authorization to retaliate by failing to enforce the intellectual property of American firms—the tiny island nation of Antigua and Barbuda in the Internet Gambling case, and the major emerging economy of Brazil in the Cotton Subsidies dispute.
Under its Trade Barriers Regulation, the European Commission published a report today concluding that U.S. measures affecting foreign suppliers of Internet gambling services "constitute an obstacle to trade that is inconsistent with WTO rules." The full report is here. The legal analysis is on pages 53-77 and is quite interesting. Here are a few highlights.
Relevance of Withdrawal of GATS Commitments
Even if the US would no longer be bound by its GATS obligations in respect of gambling and betting trade that takes place after the withdrawal of commitments (which are still in the process of being formally changed through the Article XXI procedure), the US would still continue to be bound by its GATS obligations which are derived from its (former) commitments in respect of any gambling and betting trade which took place before the withdrawal of its GATS commitments had taken place. As long as there are US enforcement actions relating to trade that took place when the US still had GATS gambling and betting commitments, there would be a "situation which has not ceased to exist – that is…that arose in the past, but continues to exist…",131 which could also be described as a "continuing measure". This is referring to the enforcement of the US prohibition against EU suppliers in respect of gambling and betting trade that took place while the US GATS commitments were still in place, which could thus be scrutinised by a WTO panel. This scrutiny would have to be based on the GATS commitments in place at the time of the relevant trade flows.
"Likeness across modes"
Still, even this interpretation of US laws could be challenged under Article XVII of the GATS. The claim would based on the fact that US laws permit the supply of off-line, "bricks and mortar" gambling and betting services to US suppliers, but not cross-border services supplied over the Internet. The key argument to be made would be that Internetbased services are "like" off-line gambling and betting services. In fact, Antigua argued along these lines in US-Gambling,164 maintaining that "the fact that services of Antiguan gaming operators are supplied via a different "mode of supply" than services of suppliers of United States origin (cross-border as opposed to commercial presence) does not make these "unlike."165
This is of course true, and in fact WTO jurisprudence has in Canada-Autos indeed accepted166 the possibility of "likeness across modes". The main argument in favour of "likeness across modes" is that the text of GATS Article XVII does not suggest that the mode of supply is relevant for defining likeness. However, this has to be weighed against the logic and structure of the GATS, because of the implication that "[I]n its most extreme form, it would mean that, in a given sector, a Member would not be able to undertake different levels of national treatment commitments for the different modes; or that, by virtue of a commitment under a certain mode (mode 3, for instance), suppliers under other modes could claim national treatment, irrespective of whether there is a relevant commitment. This approach would be hard to reconcile with Members' agreed practice to schedule commitments mode by mode."167 This calls for a cautious, case-bycase approach.
"Practice" of discriminatory enforcement
If US law did not, as such, contain any discrimination against foreign remote suppliers, the possibility would still exist that the DOJ would be enforcing the general ban on remote supply selectively against foreign suppliers, and that this selective enforcement could rise to the level of discrimination in the sense of Article XVII of the GATS. In this respect, the ongoing enforcement actions by the DOJ could theoretically, as indicated in section C.4.1 above, be challenged in and of themselves as a discriminatory "practice".
There are, however, sufficient reasons not to further develop an Article XVII claim based on a "practice" of discriminatory enforcement in this case:
– First, the Appellate Body has not so far pronounced on the matter of whether a "practice" can be considered as an autonomous measure. Although this does not rule out the possibility that a practice could be challenged as such, it does imply that the threshold required to make a prima facie case would be relatively high.
Less favourable treatment
In the present case, foreign services provided remotely that are the same as domestic services also provided remotely are not allowed into the US market, whereas significant "like" domestic services, provided both instrastate and interstate, are allowed. In line with what the Panel found in Canada-Autos,189 this is bound to have discriminatory effects and is therefore incompatible with Article XVII GATS.
In terms of U.S. domestic politics, health care seems to be trumping trade policy these days. I'd rather talk about trade policy than health care, so I'm going to try to sneak trade policy into the health care discussion by proposing the following: If we want to bring down health care costs, as just about everybody does, wouldn't it be a good idea to allow more foreign competition in the health insurance industry?
Do you have a new instance of protectionism to report? Here's a place to do it:
Global Trade Alert provides real-time information on state measures taken during the current global downturn that are likely to affect foreign commerce. It goes beyond other monitoring initiatives by identifying the trading partners likely to be harmed by these measures.
Global Trade Alert encourages third parties to submit measures for scrutiny.
More from Reuters here:
Britain launched a website on Monday that will give live updates on global protectionism to foster free trade and help the world economy recover from the worst recession since the 1930s.
British Business Secretary Peter Mandelson said the Global Trade Alert site would act as a watchdog to deter governments from protectionist measures that he warned would only make the recession "longer and more painful."
"Everyone is watching everyone else and there is a lot to be said for peer pressure," he said. "(The) trading system faces a huge crisis of demand and of credit, but the real long-term risk to its health lies in protectionism."
The website, run by a London-based economic thinktank, will gather evidence of new tariffs, as well as non-tariff barriers and emergency steps taken in response to the downturn, he added.