International Economic Law and Policy Blog

USTR's NTE Report is Out

Here's the full report.  Here's a brief summary by USTR:

Kirk said today that the report will help to inform an enforcement strategy for the trade policy of the

United States, and that USTR is moving forward as follows:  

·         USTR is beginning a review of the implementation of our existing trade agreements, including the enforcement of the labor and environment provisions;

·         USTR is initiating a process to prioritize trade barriers enumerated in the National Trade Estimate Report and to address the most significant;

·         USTR is identifying new cases where market access for U.S. goods and services is in jeopardy because of disregard for the rule of law, costing our workers and businesses  export opportunities and jobs;

·         USTR is planning to prosecute those cases through multilateral and bilateral dispute resolution, so that American workers can trust that their trading system yields results; and

·         USTR is working with Congress to improve trade enforcement.

... 

The review and other actions launched by Ambassador Kirk today will use the information collected in the National Trade Estimate Report to, as the President said in his Trade Policy Agenda, “aggressively defend our rights and benefits under the rules-based trading system.” Examples of trade barriers maintained by foreign governments that are outlined in this year’s National Trade Estimate Report and that USTR will seek to reduce include:

·         onerous testing and certification requirements on more than 1,200 consumer goods;

·         new requirements to register and inspect a broad range of imports;

·         ineffective enforcement against trademark counterfeiting and copyright piracy;

·         burdensome import requirements or bans that are not based in science and not compliant with international standards, affecting beef and other animal products, horticulture, grains and processed products, and fruits and vegetables;

·         cumbersome and non-transparent approval processes for biotech products;

·         discriminatory excise taxes requiring imported products to pay rates 10 to 43 times higher than before;

·         prohibited export subsidies (e.g., for "national" brands) that are highly trade distorting; and

·         limitations to foreign participation in telecom markets, both basic and value added, through a multiplicity of barriers, including high basic capital requirements, and non-transparent and lengthy investment approvals.

In working to reduce these barriers, USTR will determine when moving to a dispute settlement phase under our trade agreements is the right course of action, with a focus on new and necessary cases that will provide maximum benefit for American workers producing goods and services for export markets.

The National Trade Estimate Report can also advance social accountability and fair competition - another major element of the President’s Trade Policy Agenda.  As the Administration monitors and enforces market-opening commitments in our trade and investment agreements, USTR will begin to monitor and enforce labor and environment provisions of our agreements to ensure that these obligations are being met on both sides.  USTR will consult with Congress in assessing how this type of surveillance could be included in future NTE exercises.

 

Trade in Everything: Haircuts

More trade in everything, via Greg Mankiw:

The financial crisis has hit Eastern Europe particularly hard, leading to strong depreciation pressure on exchange rates. As a result, traditional non-tradable goods have suddenly become tradable. The Polish village of Osinow Dolny at the Polish-German border has approx. 200 inhabitants, 100 of which are active hairdressers. Germans come from as far as Berlin (70 km) to take advantage of the zloty exchange rate, which went from 3.30 per euro in the summer of 2008 to well over 4 now. "Salon Teresa" at the end of main street charges 9 euros for ladies and 4 for men.

Trade in Everything: Surrogacy

Seema Sapra's excellent "India in the WTO" blog points me to this Journal of World Trade article that makes for a good "trade in everything" post:

Christina Stephenson, 'Reproductive Outsourcing to India: WTO Obligations in the Absence of US National Legislation' (2009) 43 Journal of World Trade pp. 189-208

Summary:

This article examines the World Trade Organization (WTO) obligations that inhere from US persons or couples contracting with Indian women for gestational surrogacy. Surrogacy contracts are considered in the context of the General Agreement on Tariffs and Trade (GATT) and the differing laws on surrogacy of different US states. By exploring WTO Appellate Body (AB), Panel and GATT Panel decisions, this article endeavors to determine what WTO obligations bind the US in circumstance of cross–border surrogacy contract. This article addresses how the varying state laws on surrogacy affect the WTO obligations of the US in market access, national treatment and most–favoured–nation (MFN) treatment. The article concludes that there are a variety of ways in which the different state laws have the capacity to violate US trade commitments in relation to international surrogacy contracts. In addition, the analysis serves to illuminate the process under which US trade obligations can be scrutinized to determine what commitments are relevant to a service not contemplated in the US Schedule.

 

More on the Crisis Round

Over at Vox, economists Aaditya Mattoo and Arvind Subramanian offer more details on their proposed "crisis round," as compared to the Doha agenda:

Table 1. Commitments under the Doha Round and the proposed Crisis Round

Sector / Area	Doha Agenda's likely outcome	Crisis round agenda
Agricultural tariffs (developing)	Some liberalisation, but bound tariff rates above current applied levels	No liberalisation, but bound tariff rates at current applied levels
Manufacturing tariffs (developing)	Some liberalisation, but bound tariff rates above current applied levels	No liberalisation, but bound tariff rates at current applied levels
Agricultural tariffs (industrial)	Some liberalisation, but bound tariff rates above current applied levels	No liberalisation, but bound tariff rates at current applied levels
Manufacturing tariffs (industrial)	Some liberalisation	No liberalisation
Services	Limited increase in scope of bound tariff rates	All countries bound at current access
Anti-dumping	Limited changes to rules; may even lead to permissiveness	Raise de minimis dumping margin and de minimis volume of dumped imports
Government procurement	No change	All countries to bind existing procurement regime on MFN basis
State aid in manufacturing	No change	Bind at current levels
Environment-related trade measures	No change	No trade-related actions pending conclusions of global climate change negotiations

 

I have one nit-picky question.  They say:  "First, the agenda would be confined to the key protectionist measures. These include trade restrictions and subsidies in agriculture, manufacturing and services, anti-dumping actions, preferential government procurement, and environmentally motivated trade interventions."  With regard to the last one, if the trade restrictions are "environmentally motivated," are they really "protectionist"?  Is what they really mean that there is an effect on trade, even though there is no protectionist intent?

"Free Trade is Ubiquitous"

Economist Don Boudreaux puts the burden on those who oppose free trade to explain why trade restrictions between nations will make people better off, given that free trade is the general rule within nations:

Karol, Thomas, and I live in Burke, Virginia.  We are free to trade not only with cabbage growers in Culpeper, Virginia, but with cabbage growers in California.  We trade freely with residents of any state, from the Atlantic to the Pacific, from the U.S. border with Canada to the U.S. border with Mexico.  That is, whatever taxes and burdens Uncle Sam might impose (however wisely or foolishly) on economic activity within the U.S., those burdens are nation-wide.  No special space-specific burdens are placed on my and my family's ability to trade with other Americans; no extra tariff or restriction applies to our exchanges with an Alaskan or with a Floridian simply because we do not live in those states.

Practically speaking, therefore, there is free trade throughout the United States.  My family and I routinely buy wine from California and Oregon, oranges and lemons from Florida, computer software from Washington state, maple syrup from Vermont, peaches from South Carolina, television newscasts from New York and Atlanta, lumber from Alabama, spicy sauces from Louisiana, crabs from Maryland.  The list is long.

And yet no one, not even Lou Dobbs, insists that the Boudreaux family would be richer if only the government in Richmond could fine a successful way around the U.S. Constitution and managed to slap stiff tariffs on California wine, Florida citrus fruits, cajun seasoning from Louisiana, and you name it.

...

Anyone skeptical of free trade must explain why political borders are economically relevant.  With the exception of pointing to (mostly rather vague and poorly considered) national-defense issues, protectionists have never managed -- and I dare say never will manage -- to impart genuine economic relevance to political borders.

Obama on Incentives to Buy, New Cleaner Cars

One aspect of President Obama's plan for the automakers, from his remarks today:

... several members of Congress have proposed an even more ambitious incentive program to increase car sales while modernizing our auto fleet. And such fleet modernization programs, which provide a generous credit to consumers who turn in old, less fuel-efficient cars and purchase cleaner cars, have been successful in boosting auto sales in a number of European countries. I want to work with Congress to identify parts of the Recovery Act that could be trimmed to fund such a program, and make it retroactive starting today.

Some of these propsals have involved discriminating in favor of domestic (or North American) cars, so it will be interesting to see what comes of this.

The Economist on Rising Protectionism

Some nuggets from a recent Economist article, followed by my brief comments.

The effectiveness of trade rules on non-tariff issues:

Multilateral agreements provide little insurance against domestic subsidies, fiercer use of anti-dumping or the other forms of creeping protection.

I'm not sure I agree with this one.  Perhaps the agreements do not provide "total insurance," but I do think they provide more than "little insurance."

Creative protectionism that has been used in recent months:

Indonesia has specified that certain categories of goods, such as clothes, shoes and toys, may be imported through only five ports. Argentina has imposed discretionary licensing requirements on car parts, textiles, televisions, toys, shoes and leather goods; licences for all these used to be granted automatically. Some countries have imposed outright import bans, often justified by a tightening of safety rules or by environmental concerns. For example, China has stopped imports of a wide range of European food and drink, including Irish pork, Italian brandy and Spanish dairy products. The Indian government has banned Chinese toys.

This is the first I've heard of the Indonesian port issue.  I'm curious to hear more about it because the legal issues should be quite interesting.

The problem of challenging subsidies:

However, WTO action against subsidies is not straightforward. To complain successfully, a country has to show that a subsidy meets several criteria. Then there is a pots-and-kettles problem: having subsidies of your own does not stop you from challenging someone else’s, but if you pick a fight they may have a go at yours. This uncertainty and ambiguity only adds to subsidies’ attraction. Governments can aid their carmakers and at the same time criticise others for their protectionist ways.

Very well-stated, I think.

Proposals for next steps in trade negotiations:

Whatever they think about Doha or about the idea of a crisis round, most economists will agree that a simple promise to resist protectionism will not suffice. Some thing more specific is needed. A good start would be for governments, beginning with the leaders of the G20, to draw up a comprehensive list of protectionist measures that goes beyond tariffs and export subsidies. They could then agree to go no further with these than they have already.

Next, an agreement on co-ordinating fiscal policy would go a long way towards making such a standstill commitment credible, because it would alleviate worries about leakages abroad. Finally, empowering the WTO to name those who break the standstill would help to underpin it. The threat of embarrassment may make some countries think twice.

With regard to the "comprehensive list," I think that many such measures will be in violation of WTO rules, which are quite broad.  And when you include the non-violation remedy, perhaps virtually all of these are covered.

Advice for the G-20, from Brookings

The G-20 London Summit 2009: Recommendations for Global Policy Coordination, from Brookings:

Leaders of the Group of 20 (G-20), representing 85 percent of the global economy’s output, face a long list of agenda items when they gather on April 2 in London for their second summit. As the world combats a “great recession,” the leaders must address how to help stabilize financial markets and re-start economic growth, reform the global financial system, and aid developing and emerging economies.

 

Amidst this background of critical issues, Brookings’ global economic and development experts explore a range of recommendations for global policy coordination in advance of the summit and note which issues the leaders should address at the table—and beyond—in order to stem the crisis and avoid future ones.

Food Law and Trade Issues

If you were going to start a program on food law and policy, where would you do it?  There are a lot of good choices, but Italy would certainly be at or near the top of the list.  Check out the following Summer Academy in Food Law & Policy, in "the beautiful XVII century Masseria Chiancone, a farmhouse immersed in an oasis of natural beauty, typically Mediterranean, along the cost of Puglia, Italy."  Here's the program description:

After refreshing the participants’ knowledge of the main principles of European Food law, the programme will start off by contextualising food law & policy within the broader context of the WTO Agreements. It will provide an in-depth analysis of the scientific dimension of food safety by focusing on the main food safety risk assessment methodologies and their differences on the two sides of the Atlantic. Two sessions will then be devoted to labelling rules and decision-making procedures (comitology) as applied to food law in Europe. At the end of the week, all participants will be invited to prepare a moot court dealing with a fascinating and actual case study devoted to one of the most controversial food trade issue.

Rebuilding Global Trade - From ICTSD and GEG

A new publication from the ICTSD and the Global Economic Governance Programme at University College, Oxford (more here):

Dear Colleagues,

We are pleased to announce the publication of the e-book:

Rebuilding Global Trade: Proposals for a Fairer, More Sustainable Future

Short Essays on Trade and Global Economic Governance

Edited by Carolyn Deere Birkbeck and Ricardo Meléndez-Ortiz

The publication is a joint initiative of the International Centre for Trade and Sustainable Development (ICTSD) and the Global Economic Governance Programme (GEG), University College, Oxford. It gathers short essays from a broad range of scholars and experts around the world to provide proposals on:  

1. immediate trade priorities in the context of the economic crisis, and

 2. a forward-looking agenda for global trade governance.   

Contributing authors were asked to: 

• Propose concrete trade-related actions that G20 leaders should take at their April 2009 London Summit and subsequent meetings 

• Consider challenges the multilateral trading system will face in the in the longer term (i.e. 2015) and propose reforms these will demand of global trade governance 

• Focus special attention on the needs of developing countries and sustainable development considerations such as poverty reduction, environmental sustainability, and social justice 

Importantly, while this compilation is published in the lead up to the G20 leaders’ London Summit, it has a broader audience and purpose: to feed into ongoing debates on the governance of the multilateral trading system and the future of the Doha Round, and to reinforce the case for a full, broad-ranging WTO Ministerial Conference this year.

To download an electronic copy of Rebuilding Global Trade: Proposals for a Fairer, More Sustainable Future, please visit http://ictsd.net/downloads/2009/03/g20-web.pdf or http://www.globaleconomicgovernance.org/rebuilding-global-trade-after-the-crisis, where individual contributions are also available through the GEG blog. 

"Arbitrary" Trade Retaliation

From a letter by Rep. Peter DeFazio to President Obama related to the NAFTA trucks case:

Mexico has made it clear that it chose products for retaliatory tariffs that would harm the districts or states of Members of Congress who led the charge to rid this program. For example, Oregon exports were specifically targeted including Christmas trees, wine, potatoes, pears, onions, and cherries. In essence, the government of Mexico is targeting U.S. elected officials who stand up for the safety of Americans. As you well know, such arbitrary tariffs are prohibited under the terms of WTO and NAFTA.

I thought this was pretty standard practice in coming up with trade retaliation.  I wonder what his basis is for saying it violates WTO/NAFTA rules.

The Purpose of SCM Agreement Countermeasures - A Do-Over

A little while ago, I did a post on the purpose of SCM Agreement countermeasures.  I don't really like how the post came out, though.  So, I'm going to take a do-over and try it again.

The basic issue is whether "countermeasures" under the SCM Agreement (in particular under Article 4.10, but also Article 7.9, which uses slightly different language) are for the purpose of rebalancing concessions or for the purpose of inducing compliance.  I had suggested it could be "either/or," that is, it could be either for one purpose or the other.  But having thought about it some more, what I really meant was that it could be a little of both.  That is, any countermeasures will serve to rebalance concessions to some extent and induce compliance to some extent.

However, even if that statement is more accurate than my first one, it still doesn't get at the fundamental issue, which is how to identify the limits that are placed on the use of these countermeasures.  If rebalancing concessions is the primary objective, then perhaps countermeasures are strictly limited to the amount needed to rebalance.  Thus, even though countermeasures may have the effect of encouraging compliance, they are capped at the rebalancing level.  By contrast, if inducing compliance is the primary objective, then countermeasures could exceed the rebalancing amount to some degree.  Thus, even though the countermeasures do contribute to rebalancing, they are not capped at that amount.

The arbitration in the Canada - Aircraft II (DS222) case, which dealt with Article 4.10, is interesting in this regard.  There, the arbitrator came up with an initial figure for countermeasures that was based on the subsidy amounts, but then tacked on a bit more "to take into account the fact that Canada, until now, has stated that it does not intend to withdraw the subsidy at issue and the need to reach a level of countermeasures which can reasonably contribute to induce compliance."  See para. 3.119: http://www.worldtradelaw.net/reports/226awards/canada-aircraftII(226).pdf  Basically, this approach seems to be to start with rebalancing, and then add on some more for inducing compliance if necessary based on the facts of the case.

Is the Aircraft approach the right place to draw the line between rebalancing and inducing compliance?  If not, what is?

Trade and Climate Change Advice from Jim Bacchus

In Forbes.  First, there's this:

Those who assume that WTO rulings will be "anti-environment" have evidently not read previous rulings, or not realized their positive implications for global environmental protection.

I think that's right.  It is no longer a GATT Tuna/Dolphin world (and hopefully the new WTO Tuna/Dolphin case will prove it).

Then we get to the more complicated part, how to design climate change legislation consistently with WTO rules:

... any unilateral U.S. actions on climate change that included trade restrictions would unquestionably be challenged by one or more of our trading partners in the WTO. So it makes sense also to craft legislation in ways that would survive scrutiny in WTO dispute settlement.

For example, the additional carbon price imposed on domestic products can be imposed also under WTO law on like imported products as an offsetting "border tax adjustment." But any such adjustment will be legal under the WTO only if imposed on products, and not on producers.

Likewise, any discrimination in the legislation will run afoul of WTO law if it discriminates in favor of domestic producers over foreign producers of like products, or if it discriminates in favor of some foreign producers of like products over others.

Furthermore, tax rebates on exported products, emission allowances, and other contributions by government to assist domestic industries affected by new carbon restrictions will need to comply with WTO rules on subsidies.

ADDED:  I should clarify the part about the new Tuna/Dolphin case.  I haven't looked at the facts and law closely enough to decide what I think the outcome of the case should be.  So when I talk about my hope for the case, what I mean is that I hope the panel's findings convince all sides that their views have been taken seriously.

Mattoo and Subramanian Propose a "Crisis Round"

From the WSJ:

Our suggestion is to launch a Crisis Round of trade talks at the G-20 London summit meeting next month. This round would aim to hold the line on protectionism and prevent the deterioration of current levels of global trade openness. For this round to have timely effect, it must be concluded within a year. Here's how it would work:

First, the round would have realistic goals. It would be confined to the key protectionist pressures and would not seek new liberalization given the current political climate. Instead, countries would legally commit in the WTO to freeze, for a fixed period of time -- say three years -- their current trade policies across the board.

Second, the agenda would address today's new protectionism. On antidumping action, the threshold for taking such actions would be raised. On government procurement -- which has acquired additional significance because of fiscal stimulus plans and the expansion of government ownership -- industrial countries would promise not to discriminate against developing countries, in return for the latter agreeing to make procurement practices more transparent. On environmentally motivated trade restrictions, all countries would agree to do nothing until an international agreement on climate change is negotiated.

This agenda must be complemented by new legal rules that support expeditious enforcement. One way to do that is through an accelerated WTO dispute settlement procedure. The object of preserving the status quo would be defeated if prolonged violations were tolerated simply because of a slow-moving dispute-settlement process.

Third, the Crisis Round would focus on the major economies only, given that the biggest threats to free trade come from the largest trading partners. Having all 153 WTO members participate would delay an agreement. The interests of all members would be helped, not hindered, by the large countries desisting from protectionist measures.

Trade in Everything: [See Below]

I didn't want to put the word "condom" in the post title because of all the undesirable search traffic (and resulting spam comments) it might bring in, but apparently USAID will be buying cheaper, foreign condoms:

At a time when the federal government is spending billions of stimulus dollars to stem the tide of U.S. layoffs, should that same government put even more Americans out of work by buying cheaper foreign products?

In this case, Chinese condoms.

That’s the dilemma for the folks at the U.S. Agency for International Development, which has distributed an estimated 10 billion U.S.-made AIDS-preventing condoms in poor countries around the world.

But not anymore.

In a move expected to cost 300 American jobs, the government is switching to cheaper off-shore condoms, including some made in China.

There are many puns to be made here, but all are in questionable taste so I'll avoid them.  HT to Eyes on Trade.

The Latest from the Grand River Case

I've been blogging a bit about NAFTA Chapter 11 non-discrimination standards (see here and here) by following the parties' submissions in the Grand River Enterprises case.  The claimants' reply memorial is now available here.  There's not too much for me to discuss in this latest brief.  There's some talk about the role of intent and which investors are comparable, but not much on whether a "discriminatory effect" on foreign investors is required and how the existence of such an effect should be determined.  We'll see if the U.S. has anything more to say in its next brief.  See pages 53-67 for all the details.

Library of Congress Job: Research Manager-International Trade and Finance

This looks like it could be an interesting job for someone:

The Congressional Research Service (CRS) seeks a Research Manager for the International Trade and Finance Section within the Foreign Affairs, Defense, and Trade Division. CRS provides confidential, nonpartisan, and authoritative legislative research analysis and information service to the U.S. Congress. Working directly with Members of Congress and congressional committees on public policy issues, CRS staff contribute to an informed national legislature as it considers policy issues of importance to the American people.

The Research Manager leads the International Trade and Finance Section in the development of approaches to research and policy analysis relevant to congressional needs. Duties include ensuring that the work results in objective, authoritative analysis with which the Congress can assess the consequences of legislative/policy options; monitoring congressional requests, concerns and needs in policy areas within the research management responsibility of the section; collaborating with other managers to ensure an integrative approach to the work by fully identifying significant policy problems facing the Congress, developing analytical approaches to address these problems and applying appropriate resources; and performing special assignments as directed by the Assistant/Deputy Assistant Director.

 

Call for Papers: Sovereign Wealth Funds

From the The National University of Singapore (NUS) and the Asian Society of International Law (AsianSIL):

The National University of Singapore (NUS) and the Asian Society of International Law (AsianSIL) are pleased to invite applications to attend the NUS Law School-AsianSIL Conference on Sovereign Wealth Funds: Governance and Regulation. This will be held at the NUS Law School in Singapore from Wednesday to Friday, 9-11 September 2009. Paper-givers who are selected through a competitive process will have their reasonable expenses covered.

Sovereign wealth funds (SWFs) played an important role in the economic crisis of 2007-2009, incidentally acquiring large stakes in some financial giants. Yet that role has also raised questions about the influence of these state-owned investment vehicles. The United States and the European Union have expressed concerns that SWFs — coming largely from developing nations such as China, Russia and the Gulf states — have more than commercial aims. In particular, there are concerns that SWFs seek political and strategic leverage on top of financial gain. Such anxieties have been exacerbated by the relative opacity of these large investors.

Current discussion about these issues tends to concentrate on policy and economic matters rather than law. The aim of this conference — Sovereign Wealth Funds: Governance and Regulation — is to clarify the role that norms and law may play in future governance and regulation, including analysis of the governance potential of self-regulation and voluntary regimes.

A variety of processes have been initiated by both investor and investee countries, as well as the International Monetary Fund (IMF) and the World Bank, intended to bring a measure of clarity to the situation. In particular, the International Working Group of Sovereign Wealth Funds (IWG-SWF) has drafted a set of Generally Accepted Principles and Practices (GAPP) — the “Santiago Principles” — in the hope that this voluntary regime will help maintain the free flow of cross-border investment and open and stable financial systems.

The Santiago Principles define SWFs as “special purpose investment funds” owned and created by the general government for macroeconomic purposes. Generally established from the balance of payments surpluses, official foreign currency operations, proceeds of privatizations, fiscal surpluses, and/or receipts resulting from commodity exports, SWFs invest largely in foreign financial assets to achieve financial objectives.

Abstracts for new and unpublished papers are invited on these and related issues. All conference papers will be published as "working papers" on the AsianSIL website. A select number of accepted papers will subsequently be considered for formal publication in a special section of the Singapore Year Book of International Law.

The following subject areas are intended to be illustrative of possible topics that might be considered, but other approaches are welcome: 

1.  Regulation at home (for example, transparency and accountability requirements for SWFs; processes for determining appropriate allocation of assets)

2.  Regulation abroad (for example, restriction on foreign SWF investment in “sensitive yet capital-intensive” industries)

3.  Self-regulation and voluntary regimes (for example, the likely impact of the GAPP on SWF investment practices, corporate social responsibility)

4.  SWFs and international trade (for example, the relationship between bilateral investment treaties and SWF capital investments, and the possibility of including regulatory clauses in future treaties)

5.  Best practices in corporate governance (for example, emerging standards for risk management and rates of return on investment)

6.  Avoiding conflicts of interest (for example, a government taking stakes in an entity that it is regulating)

7.  Stakeholders and the lines of accountability (for example, who the stakeholders in such a fund are and to whom accountability for its activities should be directed)

8.  The impact of the financial crisis on prospects for regulation of SWFs.

9.  What is “sovereign wealth” anyway? 

Proposals should be submitted on the attached Abstract Submission Form available here.

Please ensure that you include an abstract of not more than 250 words, indicating the relationship of the proposed paper to the conference theme and identifying one or more of the subject areas listed above to which the paper relates.

Completed forms must be emailed to [email protected] by Friday, 24 April 2009. Those selected to participate in the conference will be notified by Friday, 1 May 2009. Further details about the conference will be made available at that time. Participation will be dependent on producing a draft of the paper (in the order of 8,000 words) by Friday, 31 July 2009.

For more details on the Conference, please refer to our conference website at http://law.nus.edu.sg/asiansil/conference/sovereignwealth.  

Trade in Everything: Shamrocks

Via Marginal Revolution, I have a belated St. Patrick's Day edition of trade in everything: 

The shamrock (three-leaf clover) is one of Ireland's most recognizable symbols. But demand for "Irish" shamrocks is now so great that the small island nation must import clover seeds from countries like New Zealand, India, and Germany. In 2007, Ireland imported nearly 200 metric tonnes of clover seeds worth $677,864.

Personal Protectionism

From a recent Economist article:

REGGIE CHARLES, the chief executive of High Society Freeride, a maker of skis and snowboards based in Colorado, is keen to wrap his firm’s products in the Stars and Stripes. He is convinced that American customers will be more willing to buy the company’s relatively costly gear when they discover that it is made in America with largely local materials.

Bryan Aldridge is betting that the recession will encourage more bosses to think like Mr Charles. He and a partner have just kicked off a new venture, My American Jobs, which plans to create a certification process to help customers identify products in which most of the materials and labour were sourced in America. The firm’s website will list the goods that it certifies, their manufacturers and the retailers that stock them.

My first reaction to the piece is that I'm surprised we don't see more of this, in the U.S. and elsewhere.  Perhaps there just aren't that many products that can benefit, as so many are now made with some foreign content.

Second, I must admit that I'm a little torn about the practice.  As a general matter, I don't think promoting economic nationalism is such a great idea.  On the other hand, perhaps by leaving open the possibility for individuals to practice their own personal protectionism, we make it politically possible to reduce the level of government-sponsored protectionism.

Tuna Panel Establishment Blocked

From the U.S. statement at today's DSB meeting:

•             Mr. Chairman, the United States is disappointed that Mexico has chosen to move forward with a request for panel establishment.

•             The United States considers its dolphin-safe labeling regime central to the protection of the dolphin population in the Eastern Tropical Pacific ocean.

•             We are confident that, if this dispute were to proceed to a panel, the U.S. dolphin safe labeling measures that Mexico has challenged would be found to be consistent with U.S. WTO obligations.

•             For all of these reasons, the United States strongly urges Mexico to reconsider its decision to pursue a panel in this dispute, and we are not in a position to agree to the establishment of a panel at this time.

Joe Biden Swears in Ron Kirk

I'm not sure this is the analogy I would have gone with:

Ron is going to have the responsibility of working toward opening markets throughout the world to create new opportunities and higher living standards for our families, our farmers, our manufacturers, our workers, our consumers, our businesses.  That old joke they used to tell about Willie Sutton.  They said, "Why do you rob banks?"  He said, "Because that's where the money is."  Why do we need trade?  That's where the customers are.

The Real Purpose of Trade Agreements?

From a free trade petition put out by the the Atlas Global Initiative for Free Trade, Peace, and Prosperity:

But the fact that protectionism destroys wealth is not its worst consequence.  Protectionism destroys peace.  That is justification enough for all people of good will, all friends of civilization, to speak out loudly and forcefully against economic nationalism, an ideology of conflict, based on ignorance and carried into practice by protectionism.

Two hundred and fifty years ago, Montesquieu observed that “Peace is the natural effect of trade. Two nations who differ with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and thus their union is founded on their mutual necessities.”

Trade’s most valuable product is peace.  Trade promotes peace, in part, by uniting different peoples in a common culture of commerce – a daily process of learning others’ languages, social norms, laws, expectations, wants, and talents.

ADDED:  More on the same point at vox.

Is WTO Adjudication Biased?

From the abstract of a "A Theory of WTO Adjudication: From Empirical Analysis to Biased Rule Development," by Juscelino Colares:

The positive theory of litigation predicts that, under certain conditions, plaintiffs and defendants achieve an unremarkable and roughly equivalent share of litigation success. This Article, grounded in an empirical analysis of WTO adjudication from 1995 through 2007, reveals a high disparity between Complainant and Respondent success rates: Complainants win roughly ninety percent of the disputes. This disparity transcends case type, party identity, income level, and other litigant-specific characteristics. After analyzing and discarding standard empirical and theoretical alternative explanations for the systematic disparity in success rates, this study demonstrates, through an examination of patterns in WTO adjudicators' notorious decisions, that biased rule development explains this disparity. This Article then discusses the effect of biased rule development on perceptions of the WTO dispute settlement system's democratic legitimacy and legality.

And from the conclusion:

The cases discussed in Parts VI.A and VI.B show how WTO adjudicators have consistently deployed interpretive methods that produce a consistent outcome: restricting Respondent discretion to adopt otherwise trade-restrictive measures, and thus furthering the promotion of an unfettered version of trade. While free trade itself is the noble goal on which the entire WTO edifice is erected—a goal that is not controverted by this Article—its pursuit is disciplined by a set of agreements that demarcate what constitutes permissible conduct under a self-contained system of laws. As described above and as the overall asymmetric pattern of Complainant and Respondent Success Rates suggests, WTO litigators have adopted a pro-trade adjudicatory philosophy that sacrifices Respondents’ jurisdictional competencies. This adjudicatory philosophy has manifested itself in two major types of case dispositions: reducing Respondents’ rights under the agreements (e.g., nullifying the Respondent-deferential AD standard by capriciously interpreting its terms, applying the DSU standard where the more deferential AD standard controls, conflating the two standards into an amorphous de novo standard, and giving no effect to declarations that would presumably favor Respondents) and creating Respondent obligations where none previously existed (e.g., creating extraneous, non-contemporaneous tests to gauge Respondents’ conduct during investigations, finding an obligation to engage in multilateral negotiations before instituting regulations, and using non-WTO obligations to test a Respondent’s good faith). As the Appellate Body has acted in a manner that consistently reduces Respondents’ regulatory discretion, it has produced a jurisprudence that privileges trade liberalization at the expense of the reservations members made through the negotiating process. By producing a jurisprudence that “clarif[ies] the existing provisions of [the] agreements” consistently in one direction, WTO adjudicators have failed to “preserve the rights and obligations of Members under the covered agreements.”

Foreign Investment Fears Go Both Ways

The AP reports:

China denied Coca-Cola Co.'s closely watched $2.5 billion bid to buy a major Chinese juice producer Wednesday, highlighting Beijing's rejection of foreign control over its top companies even as they step up acquisitions abroad.

...

Coca-Cola's acquisition of Huiyuan Juice Group Ltd. was rejected because it would reduce competition and raise prices, the Commerce Ministry said. But the bid also provoked an outcry from nationalists who opposed letting a successful Chinese brand fall into foreign hands.

Catherine Ashton Speech

European Trade Commissioner Ashton gave an excellent speech today at the Carnegie Endowment in Washington in defense of free trade.  The speech was titled, "The Transatlantic Challenge: Promoting Open Trade." It is posted at http://www.eurunion.org/eu/index.php?option=com_content&task=view&id=3351&Itemid=152.

In her speech, she showed why open trade is so important, explained how the WTO should remain the center of international trade governance, and discussed the future of the EU-US economic relationship.

"Congress Doesn't Respect NAFTA"

So says Mexico's Ambassador to the US in a WSJ opinion column today. Trade wars are messy, and even though Mexico's retaliation will injure US industries (twice - because some of these industries would likely benefit from liberalization of the trucking sector) and Mexican consumers, in the current environment I think it is great that Mexico is reacting so quickly. This effectively sends a signal to Congress and to Obama that they are not free to pursue protectionist policy without bearing consequences. 

Regarding our ongoing discussion of the legality of Mexican retaliation, the Ambassador notes Mexico's current unilateral exposure program, implying that perhaps Mexico's retaliatory tariffs will play on the gap between NAFTA rates and WTO MFN rates. This gap will diminish over time, if applied MFN rates go down, reducing the space for WTO-consistent retaliation.  

NAFTA Chapter 20 Suspension in the Trucking Case

News reports indicate that Mexico is going ahead with retaliation in the NAFTA Trucking Services case:

Mexico slapped tariffs on 90 American agricultural and manufactured exports on Monday in retaliation for Washington's move to block Mexican trucks from using U.S. highways.

Here's the part that interests me.  The original violation was related to services and investment, but the retaliation will be on goods, a different sector.  What are the rules governing NAFTA Parties' ability to suspend in a different sector?  Article 2019 states:

2. In considering what benefits to suspend pursuant to paragraph 1:

(a) a complaining Party should first seek to suspend benefits in the same sector or sectors as that affected by the measure or other matter that the panel has found to be inconsistent with the obligations of this Agreement or to have caused nullification or impairment in the sense of Annex 2004; and

(b) a complaining Party that considers it is not practicable or effective to suspend benefits in the same sector or sectors may suspend benefits in other sectors.

So, first try to suspend in the same sector, but if "it is not practicable or effective" to do so, you may suspend in other sectors.  What are the standards for when suspension "is not practicable or effective"?  There is no NAFTA case law on thie issue.  One obvious place to look for guidance would be the WTO's DSU Article 22 jurisprudence.  I would not be surprised at all if a NAFTA panel addressing this issue did just that.  What I'm curious about is the reasons the panel would give for doing so.  Would they just do it with no explanation?  Or would they have some interesting things to say about the relationship of different international trade agreements?

We may never get to that point, of course, but if we do this is one of the things I'll be watching for.

Obama and Lula on Trade in Biofuels

From their recent joint press conference:

Question:  President Lula said that during their meeting they talked about energy, President Obama talked about a possible partnership for energy within the hemisphere. The question I have is can't this partnership get off-balance? Because there's a lot of interest in the future of Brazilian oil. Brazilians do not understand today how come that a fuel -- that a clean fuel that is renewable fuel can't reach U.S. market because of duties, whereas the same product, essential clean fuel in the United States gets incentives. Where would be the balance between these two issues?

PRESIDENT OBAMA: Is that directed at me? Well, look, I think Brazil has shown extraordinary leadership when it comes to biofuels. And I've been a great admirer of the steps that have been taken by President Lula's government in pursuing biofuels and developing them. And this is an investment that Brazil has made for a very long time.

My policies coming into this administration have been to redouble efforts here in the United States to pursue a similar path of clean energy development. And I think we have a lot to learn from Brazil.

As I mentioned to President Lula, I think we have the potential to exchange ideas, technology to build on the biodiesel cooperation structure that we've already established. I know that the issue of Brazilian ethanol coming into the United States has been a source of tension between the two countries. It's not going to change overnight, but I do think that as we continue to build exchanges of ideas, commerce, trade around the issue of biodiesel, that over time this source of tension can get resolved.

PRESIDENT LULA: This is the very first meeting that we have between the Brazilian administration and President Obama's administration to discuss this issue. Actually, my answer is built in your question. I can't also understand while the world is concerned with climate change and with carbon emissions that bring greenhouse effect, (inaudible) fuel gets tariffs, and clean fuel also gets tariffs. I have discussed this with Angela Merkel, with Tony Blair when he was Prime Minister, with President of France, Sarkozy, with former President Bush.

I never expect an immediate answer. This is a process. As time goes by, Brazil is proving that biofuel is an extraordinary alternative. And slowly the countries will be convinced. And slowly other countries will join the biofuel effort. That's what I believe.

A seminar will be held in New York City on Monday, where I will attend, and this will be a strong issue that will be discussed there. I talked with President Obama about the possibility for us to build partnerships with third-party countries, especially a joint project with the African continent. And things will move forward as people start changing. No one can change overnight, in terms of their energy matrix. Thank God for 30 years Brazil has already control -- technological control and know-how on this issue.

And when President Obama comes to visit Brazil I'm going to ask him to get inside a car that is run by a flex-fuel engine and he will feel very comfortable.

Dani Rodrik Prefers the GATT to the WTO

In the context of writing about what is needed in the field of financial regulation, Dani Rodrik says:

In short, global financial regulation is neither feasible, nor prudent, nor desirable. What finance needs instead are some sensible traffic rules that will allow nations (and in some cases regions) to implement their own regulations while preventing adverse spillovers. If you want an analogy, think of a General Agreement on Tariffs and Trade for world finance rather than a World Trade Organisation. The genius of the GATT regime was that it left room for governments to craft their own social and economic policies as long as they did not follow blatantly protectionist policies and did not discriminate among their trade partners.

I wish I understood a little better what he meant.  I've read some of his work, but I don't think I've ever seen a full explanation.  Based on the limited statement here, I think it's safe to assume that he does not like the TRIPS Agreement.  But the rest is harder to figure out.  He identifies protectionism and discrimination as subjects that should be part of the trade regime.  It could be argued that this covers everything outside the TRIPS Agreement, which would mean that there is not much about the WTO he does not like.  On the other hand, there are a number of areas that could, depending on how they are interpreted, fall outside his discrimination framework, for example:  GATS market access rules, some of the SPS/TBT rules, perhaps some subsidies rules, and maybe some specific dispute settlement rulings.  If anyone has seen a detailed explanation by Rodrik of what he has in mind, I'd love to hear about it.