International Economic Law and Policy Blog

Done with TPA; on to TPP

As you have all have probably heard by now, at long last we are done with the tedious TPA debate:

President Barack Obama signed into law on Monday legislation that gives him "fast-track" power to negotiate trade deals and speed them through Congress, ... 

I will leave commentary on how the TPA process worked this time to political scientists and others.  I'm just happy we can move on to the TPP debate, which, for me at least, will be a lot more interesting.  

Two important questions now are: (1) what is the timing of wrapping up TPP negotiations and holding a Congressional vote? and (2) what are the chances TPP will be approved by Congress?

On the timing, some people seem to expect the TPP to be done quickly ("one week").  But others are more cautious:  

Economic and Fiscal Policy Minister Akira Amari said Wednesday the 12 countries negotiating a Pacific Rim free trade initiative can reach a broad agreement by the end of July, as U.S. Congress has neared passage of a bill that is crucial to concluding the pact.

“I think a ministerial meeting will be held in July,” Amari told reporters in Tokyo. “We need to reach a broad agreement in July. I think that is possible,” he said.

And here is Inside U.S. Trade, which, as usual, has good insights from insiders: 

Foreign ambassadors from countries engaged in talks to complete the Trans-Pacific Partnership (TPP) are casting doubt that negotiators will be able to quickly conclude their talks immediately after Congress passes Trade Promotion Authority (TPA).

Ambassadors from Chile, Singapore and Peru each warned that passing TPA does not mean that concluding TPP is imminent because countries have outstanding issues that will still require negotiations at the highest political level. Among the outstanding issues they highlighted were intellectual property rights, the data exclusivity period for medicines and the length of tariff phaseouts.

“There is sometimes a tendency to indicate that near approval of the TPA has solved all the matters pending in the discussion and negotiation, and this is simply not true,” Chilean Ambassador to the United States Juan Gabriel Valdes said at a panel hosted by the Atlantic Council on Tuesday (June 23). His comments were echoed by Peruvian Ambassador Luis Miguel Castilla and Singaporean Ambassador Ashok Kumer Mirpuri.

Their assessment was more cautious than that of Australian Trade Minister Andrew Robb, who said last week that TPP countries are “one week of negotiation” away from striking a deal.

It would seem odd to have TPP wrapped up so quickly after TPA is authorized.  I don't really know what to expect, but the longer time-frames seem more believable to me.

Then there's the timing for the Congressional vote, where there is also a difference of opinion.  Here is Gary Hufbauer:

it seems more likely than not that ... Congressional ratification of TPP will probably happen just prior to the APEC Summit in the Philippines in November 2015.

But here is Phil Levy:

In a rush of optimism, let us further suppose that the final TPP talks begin within days and conclude within a week. Imagine they wrap up by the end of June. Now we come to the procedural requirements of TPA. Sixty days must pass between the public release of the agreement and the date when the president signs. Then, 105 days after that, the U.S. International Trade Commission needs to release a report on the economic effects of the agreement. It is only at that point that the agreement would move to Congress, which has a maximum of 90 days to consider the implementing bill. Note, those are 90 legislative days, not calendar days; the House has averaged 137 legislative days per calendar year since 2001.

So, things may take a while! 

And finally, there's the question of whether Congress will approve TPP.  I see both critics and supporters suggesting it will pass.  Here's Gary Hufbauer again:

However, it seems more likely than not that TPP talks will roll to a conclusion within six to eight weeks, and Congressional ratification of TPP will probably happen just prior to the APEC Summit in the Philippines in November 2015.

And here's a TPP critic:

Once the full text finally becomes public, I expect a full-court press from anti-TPP forces in both parties. I'd give it a 90 percent chance of passage at this point, but there's still a glimmer of hope for opponents.

As for me, I'm not sure TPP's chances are so good.  It is true that the TPP will be largely the same, in terms of its substance, as prior FTAs that Congress approved, but I think the circumstances have changed due to the size of the agreement (that is, the amount of trade covered).  People are taking notice of the TPP in a way they did not for smaller FTAs passed in recent years.  As a result, there will likely be a vigorous debate on issues that have been mostly obscure and unnoticed in the past.

For example, many people -- mainly, but not only, liberals -- have been raising concerns about IP and ISDS provisions.  And on the other side, conservatives are more aware of sovereignty and free market issues in trade agreements than they used to be (think of labor and environmental regulation).  What I think this will mean is a nuanced and interesting debate, with uncertain results.  

(Of course, 80% of the debate will likely be the usual nonsense.  But if we get 20% insightful commentary, I will consider it a success!)

Benefit analysis in Canada-FIT

A few weeks ago, Simon marked the anniversary of the controversial Canada-FIT decision, here.  His helpful post – which recalled an interesting discussion we had on this at the 2014 BIICL WTO conference – prompts me now to reflect a little further on why I have always found a lot more to like in that decision than many others. 

I should state at the start that what I am interested in is the benchmark analysis under Article 1.1(b) of the SCM Agreement. There is much more in the decision to discuss, of course, but this is what I am focussing on. Remember that  for a subsidy to exist under the SCM Agreement, a ‘benefit’ needs to be shown. And a benefit is provided by a measure if the measure makes the recipient better off in comparison with the position it would have been in ‘the market’.

 Of course everything hangs on how the benchmark market is defined. Here, I want to distinguish between two issues. First, there is the question of defining the product scope of the market. This was probably the most controversial aspect of the FIT decision, but I want to leave it to one side. Second, there is the question of defining the institutional conditions of the benchmark market. This is what I want to focus on.

 It is easiest to explain the term ‘institutional conditions’ with some examples. What are the relevant ‘institutional conditions’ in the context of energy markets? Obviously, there are a rather huge number, but some are very easy to point to. One is whether or not there are secondary carbon markets: does carbon have a price in the imagined benchmark market, or not? Another is the structure of competition: do consumers have a choice between energy suppliers, or is competition only at the wholesale level? A third might be the market structure: have the functions of production, distribution,  management etc between unbundled, or are some of these functions performed by vertically integrated firms? A fourth might be the broader policy environment defining goals as regards the sustainability of the energy supply over the long term (eg, a government-defined supply mix), or the ability of suppliers to disconnect non-paying consumers.

 There are many many more, of course. The point is that all of these factors can, in the right circumstances, dramatically affect the energy price which ‘the market’ produces. So the choices one makes in defining the institutional conditions of the benchmark makes a huge difference to the analysis.  The question for panels and the AB is on what basis does one make this choice?

 One of the main difficulties that I have with much of the criticism of the AB in the Canada-FIT decision, especially in the context of informal conversations, is that such criticism disagrees with the AB about the choices it makes in this respect, but never justifies its own (different) choices. Very often, one sees in such criticism a whole raft of assumptions being made about the institutional conditions of the benchmark energy market, without any explicit justification for those assumptions. (For example, the argument that the FIT programme was self-evidently a subsidy, because the whole point of the programme was that ‘the market’ would not provide an economic return to renewable energy clearly smuggles a whole load of unstated assumptions about that market’s institutional conditions – the most obvious one being that in this imagined benchmark market there is no price for carbon.) For lawyers, it is clearly not good enough to rely on an intuitive, commonsense understanding of what a competitive electricity market looks like.

 In fact, the problem of how to choose the institutional conditions of the energy market used in the benchmark analysis is a very difficult question to resolve satisfactorily. Why is this? First, because the text of the SCM Agreement does not provide a great deal of assistance. (There is some help in Article 14, but hardly definitive – the subject for another post). Second, because it is just a fact that there are many many different kinds of (energy) markets in place around the world, in different WTO Members, characterized by different institutional conditions. There is no chance that WTO Members can agree on a single set of ‘proper’ institutional conditions for energy markets, even if that were desirable. How then is the AB to make this kind of choice? Third, because this is an inescapably normative question, since the choice of institutional conditions for the benchmark market determines whether or not a measure is subject to justification under the SCM agreement.

 What I really like about this decision is that the AB seems to get this problem in a pretty profound way, and in a way what many of its critics don’t give it credit for.  And while the AB has been criticized for the famous distinction it draws between market-distorting and market-creating measures, I read that distinction in light of this problem. The AB seems to me to be saying: ‘We cannot make a choice about the ‘proper’ institutional foundations of energy markets. It is not our role, nor the purpose of the SCM Agreement, to restructure domestic energy markets in fundamental ways. The institutional conditions for energy markets reflect in many cases core public policy objectives of sovereign governments, and even sometimes are the historical product of domestic constitutional arrangements around state-markets arrangements. We must leave them in place as far as possible and appropriate within the confines of the SCM Agreement. And we certainly cannot reshape them by arbitrarily re-imagining some or other aspect of these institutional conditions as a ‘subsidy’.’

 There are some ways we might want to modify this approach, and balance it against other priorities, but it seems to me a good starting point. And while it is true that the distinctions between market-creating, market-correcting and market-distorting measures may need some further elaboration and rethinking, the alternative – of not drawing any such distinction at all – can’t be right. Normatively, it must matter eg whether or not a subsidy is correcting an existing market distortion.

 Now, the most obvious pragmatic ‘solution’ to the problem of defining the market benchmark is to define it simply as: ‘the market as it is, absent solely the impugned measure’. This is implicitly the benchmark which the AB has adopted in many other cases, and in fact in most of the easy cases it will actually perform pretty well, by a variety of different measures. But in the hard cases (of which Canada – FIT was one), this sort of benchmark will not be inappropriate. Most of the reasons for this have already been elaborated extremely well by others (I am looking at you, Alan and Luca). Eg, the market might in fact change in many unpredictable ways in the absence of the impugned measure. Or the market might be otherwise distorted in myriad ways (does it matter, eg, whether or not existing energy prices are the result of subsidies to fossil fuel producers?). And so on. What the AB merely recognized in Canada-FIT was that this ‘market as is, minus the measure in question’ benchmark is inappropriate in another specific case – namely, where the impugned measure constitutes part of the fundamental institutional conditions in which the market operates, as opposed to a ‘distorting intervention’ into it.

 All this will explain my reaction to the solution proposed by Simon in his thoughtful post. To some extent I guess we disagree on the question of whether or not it is useful to talk about ‘creating a market’. What I have taken from people as diverse as Polanyi, North, Callon, Harcourt, Pistor and others is that in practice there is a great deal of work that has to happen in order to construct modern functioning markets, and that includes a lot of legal work by the state. But actually for the purposes of this conversation, it may not make a huge difference if we imagine a market always already existing, as per Simon’s thought experiment. What matters more is the use of actually existing markets as the benchmark (in the particular context of renewable energy). Simon, the way I read your post I think this is the benchmark you are using to define a subsidy – and for the reasons given above, I am not convinced that it works in the hard cases. I guess the main reason in this context is that wholesale energy markets are so incredibly distorted right now, that it is hard to see why they should be taken as the benchmark for determining benefit. It’s also true that there are so many different ways of establishing competitive energy markets, and we see so many different kinds in different parts of the world, that it is hard to know which of the many existing models to use as the benchmark.

 

 

 

 

 

 

 

 

 

 

WTO@20 Conference in Beijing

A major WTO law conference will take place at Tsinghua University, Beijing, later this week. Notably, a number of current and former members of the Appellate Body will be there. Here is the information from the conference website:

WTO at 20：Multilateral Trading System, Dispute Settlement and Developing Countries

Tsinghua University, Beijing, China

July 3-4, 2015

To commemorate the twentieth anniversary of and in collaboration with the WTO, Tsinghua University is organizing a conference in July 2015 entitled “WTO at 20: The Multilateral Trading System, Dispute Settlement and Developing Countries”.

The conference will take place from 3 July to 4 July 2015 at Tsinghua University in Beijing, China. It will address extensively on a wide range of topics about the WTO, including the past, present, and future of the WTO; evolution of dispute settlement from GATT/WTO; functioning and authority of the Appellate Body; challenges ahead; and China and the WTO. Panel discussions will cover ten topics, including encompassing DSU reform; treaty interpretation; enforcement; trade remedies; trade related intellectual property; trade in services; FTA and the WTO; trade and environment; trade and investment; and developing countries and the WTO.

High level speakers such as the DDG of WTO, the former Ambassador Sun Zhenyu are being invited to speak at the conference. We warmly welcome all the experts and professors in this area to join this great conference. Looking forward to seeing you at Tsinghua University. 

The conference program can be downloaded at:  http://www.tsinghua.edu.cn/publish/lawen/8425/20150629/46941435566100059.pdf

 

The Right to Regulate for Multiple Purposes and the Standard of Review

In an earlier post, Simon referred to the recent ASIL Unbound discussion on the Seal case.  Indeed, I found the discussion very helpful and suggest everyone visit the site.  There are so many issues there, but let me focus on one particular issue, that is whether the Appellate Body (AB) had to (explicitly) address multiple purposes (protecting seal and protecting the indigenous communities) enshrined in the EU Seal Regime.

 Prof. Regan argues that:

 “Responsible regulation often involves taking account of different, and conflicting, purposes. That means making trade-offs, often by a regulation in the form of a ban with exceptions. And discrimination introduced by an exception is not rendered “arbitrary,” or “unjustifiable,” or a “disguised restriction” just because the purpose of the exception is different from the purpose of the ban. The only shadow of a reason for saying an exception cannot be justified by a different purpose from the ban is the suggestion that multiple purposes are evidence of disguised discrimination.”

 Likewise, Prof. Qin views that:

 “The apparent incoherence in the AB’s findings under the chapeau stems directly from its failure to declare that the IC exception has a justifiable purpose independent of the policy objective of seal welfare. Moreover, its decision not to recognize explicitly the legitimacy of the purpose of the IC exception may have led the AB to omit any reference to the UN Declaration and ILO Convention, which had been invoked by the European Union and cited by the Panel as evidence for the rationale of the IC exception.”

 Incidentally, the AB seems to have recognized the legitimacy of second purpose (the IC exception), at least implicitly.  The AB ruled that:

 5.41 (…) [U]nder the EU Seal Regime, in particular, Article 3 of the Basic Regulation, the prohibition on the products containing seal seems to be derivative of the three (IC/MRM/Travellers) market access conditions, that is, the permissive component of the measure.

 Suppose that the AB does consider the second purpose, explicitly or implicitly, the next, perhaps more critical, issue would be the “standard of review,” that is how much deference should be given to regulators.  Here, Prof. Regan submits that:

 “[W]hat is required in principle is not that the alternative should achieve at least as much of every goal as the actual measure. What is required in principle is that the alternative should leave the regulator at least as well off as the actual measure, by the regulator’s own lights, in view of the trade-offs it would make.” (emphasis original)

 Likewise, Prof. Qin concludes that:

 “[S]hould the WTO be involved in judging the proper balance between two nontrade values, here animal welfare and the welfare of indigenous peoples, under the laws of its Members? Thus far, no one seems to have posted this highly relevant question. In the view of this author, the AB should have refrained from making such a judgment as a matter of policy. And the AB could have done so by making a legally sound finding that the EU Seal Regime is not discriminatory within the meaning of GATT Article XX chapeau, because the prevailing conditions relevant to the policy objective of the IC exception are not the same between Greenland and Canada.”

 One might say that such a deferential hermeneutic would have the EU’s trading partner (such as Canada and Norway) tolerate any negative externalities flowing from the EU Seal Regime, which might be considered merely incidental or fortuitous effects. 

 Yet, the current AB’s position seems to have taken these negative externalities more seriously in its own interpretation of the chapeau test.  Based on the Gasoline and Shrimp-Turtle case law, the AB criticized the ambiguous structure of the EU measure (which the AB viewed would invite abuses of the IC exception) as well as the lack of the EU’s due process-type efforts toward the Canadian Inuit communities.

 Interestingly, this very issue is reminiscent of the “aim and effect” test under GATT Article III.  This test also concerns whether to tolerate any (incidental) negative externalities in the face of legitimate public policies.  Perhaps this interpretive dilemma is inevitable in any type of adjudication (in the absence of harmonization). 

EC - Seal Products Unbound

Over at AJIL Unbound, they are talking about the EC - Seal Products case, with contributions from Joel Trachtman, Don Regan, Julia Qin, Alexia Herwig, William J. Moon/Alec Stone Sweet, and Michael Fakhri.  No doubt all of the contributions are very interesting, but I confess to being bogged down with TPA/TPP issues (more on that soon), so I haven't had a chance to read through them.  But take a look and comment there or here!

A Different Take on ChAFTA ISDS

Last week, I wrote in praise of the China - Australia FTA (ChAFTA) ISDS provisions, suggesting that they were narrower in scope than typical ISDS provisions, in a good way.  I liked the fact that they left open whether to incorporate expropriation and minimum standard of treatment provisions, leaving that to a "future work program."

In the comments to that post, Elizabeth Sheargold raised the point that perhaps an existing China - Australia BIT explained this openness, as these provisions were already in effect under that BIT.  I took a quick look at the BIT, and it was a little unclear to me just how enforceable it was, but she may be right.

Now I see this from Kyla Tienhaara and Gus Van Harten:

In a bizarre move, the Abbott Government has signed a treaty before it has finished negotiating key aspects of it. The investment chapter of the China-Australia Free Trade Agreement, signed in Canberra on Wednesday, is missing many provisions that have created controversy in other FTAs. Instead, the Government has agreed to set up a committee that will, in the future, negotiate these provisions.

What does it mean? It seems the ChAFTA may eventually contain problematic clauses on "indirect expropriation" and the "minimum standard of treatment" – which are frequently used by investors to challenge public health and environmental measures – but Parliament will not be able to scrutinise them before ratifying the deal. 

My assumption was that leaving these issues to a "future work program" would likely mean they would disappear into bureaucratic oblivion.  By contrast, Tienhaara and Van Harten fear they will be concluded in the future, with no oversight from anyone.  Would that be possible?  Could you have a trade or investment treaty where you sign off in advance on future provisions?  Dispute settlement is sort of like that:  You agree to be bound by future "clarifications."  It could also apply to interpretations by the parties. But applying this concept to negotiated provisions that are brand new seems very different.

Is the WTO Passé?

The answer is NO according to an interesting paper (Is the WTO Passé?, World Bank Policy Research Working Paper (WPS 7304), June 2015) co-written by Kyle Bagwell, Chad Bown and Robert Staiger.  This paper sheds new light on the relevancy of the WTO as an engine of trade liberalization.  It is a survey of economic literature addressing various trade agreements (WTO and Preferential Trade Agreements (PTAs)) and their relative role in trade liberalization from the “terms-of-trade” theory perspective. 

 Here is the main conclusion of the paper:

 “The WTO is not passé. Subject to some caveats, it receives strong support from economic principles. (…) However, creative adaptations to the GATT/WTO’s historically successful principles of reciprocity and nondiscrimination could seemingly be re-deployed - albeit in a more guided and targeted way - to address these challenges.” (p 96)

 “[I]important differences may make PAs [Plurilateral Agreements] more appealing than PTAs from the perspective of the multilateral system. First, PAs are “open” (…), whereas PTAs do not typically have an open accession process for potentially interested trading partners. (…) Third, problems arising between PA signatories would be addressed through litigation taking place under the WTO, thus more likely completing the contract in a coherent way, as opposed to the potential fragmentation of international jurisprudence that might otherwise arise under PTA dispute settlement provisions. (…) (p 98)

 Here are other interesting findings:

 “[E]ven where positive preference margins exist, exporters may not utilize available preferences because of both the resource costs (to sourcing inputs from less efficient suppliers in PTA markets) and bureaucratic costs (to proving legal compliance) due to rules of origin and local value-added requirements needed to gain access to the lower preferential rates.” (p 10)

 “Despite the explosive increase in PTA adoption, the WTO estimates that overall, excluding (including) intra-EU trade, 84 percent (70 percent) of world merchandise trade still takes place on an MFN basis.” (p 10)

 “[W]hen the home government imposes an anti-dumping duty, a link is forged to a future retaliatory anti-dumping duty of the foreign country.” (p 42)

 “Staiger and Sykes show that governments of large countries indeed have incentive to impose discriminatory tax and regulatory policies against foreign imported products once import tariffs are bound. The model thus provides an interpretation of the national treatment principle as a guard against such opportunistic behavior.” (p 55)

 “In total, our survey of research in this section provides support for the shallow integration approach of the GATT/WTO when externalities are pecuniary and travel through the terms of trade. (…), we also note that the case for shallow integration can be weakened when governments possess private information, and arguments for deeper integration may also emerge in settings where international externalities travel through other channels.” (p 56)

 “[W]hen there are bargaining frictions (as in McCalman, 2002, and McLaren, 2002) so that a building block role for PTAs is possible, no such building block role has been found, but a stumbling block role has again been shown to be possible.” (p 67)

 “[T]he literature surveyed above establishes that the potential for third-country externalities is there, and suggests that the problem could become more substantial with the increasing focus of new PTAs on deep integration. Maintaining a cautious view of PTAs in light of this potential seems warranted.” (p 70)

Guest Post on Applying GATT Disciplines to TRIPS-plus Provisions

This is a guest post from Henning Grosse Ruse - Khan 

For a paper I have been working on (http://ssrn.com/abstract=2610576), I am looking for comments on applying GATT disciplines (such as Art.I, III, V and XI) as well as the General Exception rule in Art.XX d) to national IP protection and enforcement measures that go beyond the multilateral standards in TRIPS. Here is a brief explanation what it is about:

The role of IP rights for global trade is somewhat ambiguous. A lot would see international minimum standards in IP protection and enforcement as necessary element for cross-border trade in IP protected goods and services. That’s why we have TRIPS as a core pillar of the multilateral trading system. Traditionally however, GATT has perceived the territorially limited monopolies IP rights grant as a potential barrier to international trade which necessitated a carve-out in the General Exception rule Art.XX d). Similar concerns about the impact of national IP rights for the free movement of goods in the (then) EC led the ECJ to demand EC-wide parallel trade (regional exhaustion) and triggered an on-going harmonization of national IP laws in the EC. Globally, TRIPS has set core minimum standards for IP protection – but also contains important safeguards preventing barriers to legitimate trade.

Today’s reality of international IP protection and enforcement however is increasingly framed by unilateral, bilateral and regional standards of IP rule-making that go beyond the multilateral norms found in TRIPS and create a fragmented system of “TRIPS-plus” protection and enforcement of IP rights around the globe. My core argument is that the uncoordinated expansion of TRIPS-plus rules increasingly serves as a barrier to global trade. A case in point is the EC’s push for stronger protection of geographical indications (GIs, i.e. names such as Feta or Gorgonzola) in third countries with the effect that competitors from ‘new world countries’ (such as the US dairy industry) may find themselves prevented using these or similar terms when serving those markets (such as South Korea, Singapore, and some Latin American Countries with whom the EU signed FTAs). Other cases concern IP protection for news snippets, challenging the business models of search engines (such as Google News in Spain) – or IP enforcement at the border that does not offer a full range of defenses (such as proceedings at the US ITC where Apple faced exclusion orders although the patents it allegedly infringed had to be licensed on fair, reasonable and non-discriminatory terms).

Since a lot of business models and related international trade in goods and services relies on limits to or the absence of IP protection, the question is whether the WTO rules on IP (TRIPS) and those on trade in goods (GATT) are still fit to operate in such a changed environment. I would argue that TRIPS and GATT have to be applied in a way which facilitates harmonized, global maximum standards or ceilings for IP protection and enforcement as a necessary counterpart to the familiar minimum standards. These ceilings do exist in GATT and TRIPS, but have been under-used in the first 20 years of the WTO. There are good reasons for relying on them more extensively in an effort to mitigate the trade barriers resulting from uncoordinated expansion of TRIPS-plus rules in the last 15 or so years. In addition, in an ideal world, we would be aiming to introduce multilaterally agreed, more specific ceilings ensuring that reasonable limits to IP rights are available on a global scale.

Chinese Medicines in the China-Australia FTA

I came across one of the more interesting yet small details swirling around international trade today when I read a story (here) by the online news part of the ABC (that is the Australian Broadcasting Corporation - not the other ABC) that:

"Chinese medicine was the subject of a side letter from Australia's Trade Minister Andrew Robb to the Chinese government, which outlined plans to strengthen cooperation on traditional medicine and could open the door for hundreds of contractual service providers from China to be officially registered to work [in Australia]".  

Not surprisingly the story is largely focused on the ligitimation that may or may not come with the inclusion of Chinese medicines in such deals and the possible impact on Australian health (the same health protected by Plain Packaging).

But the story also includes a suggestion that "the Chinese government has set globalisation of traditional Chinese medicine as a major priority and they've invested a lot of funding into this process."

Its all very interesting across a whole range of trade law issues (subsidies, TBT, SPS, and even environmental issues to extent the medicines are derived from endangered species).

(De)politicizing Investment Disputes

Remember the Yukos investment arbitration award?  Here is Reuters from last year discussing the award:

An international arbitration court ruled on Monday that Russia must pay $50 billion for expropriating the assets of Yukos, the former oil giant whose ex-owner Mikhail Khodorkovsky fell foul of the Kremlin.

Now here is the AP from today discussing attempts to enforce the award:

The Russian government on Thursday strongly condemned the freezing of Russian accounts in France and Belgium as part of an effort to enforce a $50 billion judgment for the destruction of the Yukos oil company.

An arbitration court in The Hague, Netherlands, ruled last year that Russia must compensate the former shareholders of Yukos, which was destroyed in a politically driven legal onslaught that also sent its chief executive, Mikhail Khodorkovsky, to prison for 10 years.

The Foreign Ministry on Thursday summoned Belgium's ambassador and warned that Moscow would consider taking similar action against Belgian accounts and property in Russia if the accounts of the Russian companies and diplomatic missions in Belgium were not released.

Russian Economic Development Minister Alexei Ulyukayev said his government would challenge the seizures, considering them illegal, but he also acknowledged that Russia must be prepared for similar action elsewhere. He repeated that Russia had no intention of paying the $50 billion.

Tim Osborne, director of GML, a holding company created for Yukos' five major shareholders, said the judgment was "rolling out" in France and Belgium, with the expectation that it would continue in Britain and the United States.

One of the selling points for ISDS is that it helps depoliticize -- in terms of international relations -- foreign investment disputes.  In this case, it is possible that it has politicized what is mostly a domestic investment dispute?

Banning Trans Fat (And Trade Therein)

From the NY Times earlier this week:

The Food and Drug Administration on Tuesday gave the food industry three years to eliminate artery-clogging artificial trans fats from the food supply, a long-awaited step that capped years of effort by consumer groups and is expected to save thousands of lives a year.

 Are there trans fat trade disputes in our future?  This is from the most recent U.S. Trade Policy Review:

Question 14. Indonesia also asks U.S. to review their policy on restrictions on trans-fat so that had no negative impacts to the market access on export of Indonesia food products to US.

RESPONSE: On 8 November 2013, the U.S. Food and Drug Administration (FDA) issued a tentative determination that partially hydrogenated oils (PHOs), which are the primary dietary source of industrially-produced trans fatty acids (or trans fat) are not generally recognized as safe for any use in food based on current scientific evidence, and therefore are subject to regulation as food additives. This tentative determination was based on new scientific evidence and the findings of expert scientific panels regarding the health risks associated with the consumption of trans fat.

The comment period for that determination closed on 8 March 2014. FDA is currently evaluating the comments received and will implement any final determination regarding the regulatory status of trans fat in a manner consistent with our WTO obligations.

Diversity in International Arbitration

From Transnational Dispute Management:

ArbitralWomen, Transnational Dispute Management and Ashurst would be delighted if you would join us for the launch of "Dealing with Diversity in International Arbitration" followed by a drinks reception.

This Special Issue will analyse discrimination and diversity in international arbitration. It will examine new trends, developments, and challenges in the use of practitioners from different geographical, ethnic/racial, religious backgrounds as well as of different genders in international arbitration, whether as counsel or tribunal members. The launch of the Special Issue will be followed by the launch of the AW New Website.

Date: 2 July 2015. London, UK

Download the brochure here.

Banning Cloned Animals and Their Meat/Milk in the EU

The Committee on the Environment, Public Health and Food Safety and the Committee on Agriculture and Rural Development of the European Parliament proposed to ban the sale and import of cloned animals and their products (meat and milk).  In 2013, the European Commission advanced a similar proposal.

 Some languages of the proposal by two committees of the European Parliament (the “proposal”) are noteworthy.  For example, Amendment 42 reads that:

 “If cloning causes unnecessary pain, suffering or injury, Member States have to act at national level to avoid it. Moreover, a large majority of European consumers have no desire to eat food derived from animal clones. Different national approaches to animal cloning could lead to market distortion. It is thus necessary to ensure that the same conditions apply to all involved in the production and distribution of live animals throughout the Union.”

 Here, animal welfare and other cultural/ethical concerns appear to inform the EU’s alleged rejection of cloned animals and their products.  This language reminds us of another legislative resolution by the European Parliament that bans GMOs for cultural or moral reasons.  (See my earlier blog on this.) 

 Regarding food safety concerns, Amendment 49 reads that:

 “As regards food safety, EFSA [European Food Safety Authority] stresses the importance of acknowledging that the data base is limited, and concludes: 'Uncertainties in the risk assessment arise due to the limited number of studies available, the small sample sizes investigated and, in general, the absence of a uniform approach that would allow all the issues relevant to this opinion to be more satisfactorily addressed.' As an example, EFSA states that information is limited on the immunological competence of clones and recommends that, should evidence become available of reduced immunocompetence of clones, the question should be investigated as to 'whether, and if so, to what extent, consumption of meat and milk derived from clones or their offspring may lead to an increased human exposure to transmissible agents.”

 This language seems to imply that risk assessment under SPS Article 5.1 is premature and therefore a provisional ban under SPS Article 5.7 can be justified.

 Note that the U.S. FDA concluded that meat and milk from cloned animals are “as safe as food we eat every day.”  A phantom menace for a future clone (trade, if not star) war?

ISDS Innovations in the ChAFTA

The full text of the China - Australia FTA is out.  The investment chapter is here.  It is really interesting what they have done.  They include the usual national treatment and MFN provisions, but then that's about it for obligations, at least for now.  For everything else, there is a "future work program":

ARTICLE 9.9: FUTURE WORK PROGRAM

1. Unless the Parties otherwise agree, the Parties shall conduct a review of the investment legal framework between them no later than three years after the date of entry into force of this Agreement.

2. The review shall include consideration of this Chapter and the Agreement between the Government of Australia and the Government of the People’s Republic of China on the Reciprocal Encouragement and Protection of Investments.

3. Unless the Parties otherwise agree, the Parties shall commence negotiations on a comprehensive Investment Chapter, reflecting outcomes of the review referred to in paragraphs 1 and 2, immediately after such review is completed. The negotiations shall include, but are not limited to, the following:

(a) amendments to Articles included in this Chapter;

(b) the inclusion of additional Articles in this Chapter, including Articles addressing:

(i) Minimum Standard of Treatment;

(ii) Expropriation;

(iii) Transfers;

(iv) Performance Requirements;

(v) Senior Management and Board of Directors;

(vi) Investment-specific State to State Dispute Settlement; and

(vii) The application of investment protections and ISDS to services supplied through commercial presence; and

(c) scheduling of investment commitments by China on a negative list basis

Also worth noting is that there is a general exceptions provisions.

From my perspective, this is a huge improvement over the scope of typical investment obligations.  Non-discrimination provisions are -- or should be, if interpreted properly -- useful and safe; the rest is causing most of the controversy and needs some re-thinking.

Could this approach spread to some of the other countries who are agonizing about ISDS right now?

Hillary Clinton on ISDS

Hillary Clinton was talking trade in New Hampshire today, in response to questions from reporters.  I don't see the full video or transcript anywhere on the internet yet (I suspect it will be up there soon), but Ted Alden of CFR sent me something he had (this is an unofficial transcript, but it sounds pretty much like what I heard live on the radio).  A lot of her remarks are on the nuances of TPA/TPP, but I'll let others parse her statements on that issue in the coming days.  I'm going to focus on ISDS, where she said this:

I believe that you take whatever happens to you in a negotiation and you try to leverage it in this case I believe that one of the ways the president could get fast-track authority is to deal with the legitimate concerns of those democrats who are potential yes voters to see what’s in the negotiation or even what’s in the existing framework agreement that is being drafted, could be modified or changed.

I’ll give you an example. When I was … I sounded a bit of alarm in my book hard choices about the investor-state dispute settlement process. I did so because it’s fundamentally an anti democratic process. And it really depends first whether it’s in there and if it’s going to be in there, what the terms will be and who is in the room. If it’s only those parties, those corporations predominately, who have a stake in the outcome and you’re not hearing from local or state governments, you’re not hearing from nongovernmental organizations like environmental groups or health groups, then I’m not sure that’s a fair way to resolve a dispute. That’s just one example I would give you.

So what exactly is she saying here?  As she starts off, it sounds like it is going be an Elizabeth Warren-style assault on ISDS, as she "sounds the alarm" on this "anti democratic process."  Seems very critical!  But then she takes it in a softer direction, noting that if it's in there, it depends on "what the terms are and who is in the room."  She then pulls back even further, and focuses only on that last part, "who is in the room" (the courtroom?).  She is concerned that only corporations are in the room, with local and state governments and NGOs excluded.

Now, I'm not actually sure what the rules are for who gets to be in the room for the hearings.  It may depend on which investment treaty/chapter we're talking about. Do NGOs ever get in there?  I would have thought no.  How about local and state governments?  Are they ever part of the defending government's delegation?  Regardless of whether they get in the room, though, I would have thought that these actors can make their views known through amicus submissions or direct contact with the national government officials who defend the case.

But putting that aside, there's a much larger point, which is that these criticisms are somewhat marginal ones.  I kind of get the feeling her advisers are telling her to call for minor changes, declare that ISDS has been "reformed," and then get on board with it.  If all it would take to make Clinton happy on ISDS is to tweak some of the procedures to let more parties participate in the proceedings, that should be an easy one for the business community to agree to.  

On the other hand, maybe there is more.  She does raise the issue of "what the terms are."  But she doesn't elaborate.  I can only hope she is thinking about removing the minimum standard of treatment provision, but that may be just wishful thinking!

There's still a lot for her to say on this, but it is helpful that she weighed in on the substance a bit.  Any reporters out there should follow-up!  (For example:  Do you think ISDS should ever be in trade agreements?  If so, how would you change the terms of existing ISDS provisions to make them acceptable?)

Closed vs. Open Worldviews in the U.S. Trade Debate

This is from The Economist:

A FEW years ago a wise pollster—pondering how labels like left-wing and right-wing have been scrambled by globalisation—came up with a different way to sort voters in Western democracies. Electorates, he suggested, broadly divide into two groups, one of which sees change and the outside world as a threat, and a second which takes a more optimistic view, looking for opportunities to harness global forces and turn them to good ends. The pollster, Stefan Shakespeare of YouGov, calls these two camps “Drawbridge Up” and “Drawbridge Down” people.

Just after lunch on June 12th President Barack Obama was mugged by the Drawbridge Up bit of America, or at least by its elected representatives. A large majority of Democrats in the House of Representatives, joined by hard-right Republicans, voted to stall (and potentially kill) his hopes of reaching a big new free-trade pact between America and 11 other Pacific Rim nations, the Trans-Pacific Partnership (TPP). The Senate has already passed a bill that would allow Mr Obama to press ahead with TPP, and the House may return to the question as early as Tuesday.

I love the Economist, but I think this piece gives a very incomplete picture of what's going on.  I'm skeptical that this “Drawbridge Up” and “Drawbridge Down” distinction is all that important for explaining the U.S. trade debate.  

Don't get me wrong, these categories do exist.  There are people in America, on the left and the right,  who wish the rest of the world would just go away, and that we didn't have to be bothered by the effects of trade, and interaction more generally, with non-Americans.  On the left, this describes some union members; on the right, it's the sovereignty crowd.  

On the other side of the issue, there are people who would like to see more economic integration between the U.S. and the rest of the world (I'm in this camp).

But I'm not convinced that either of these groups is more than a minority on the anti-trade agreement or pro-trade agreement sides, and I don't think they are the main groups driving the debate.

Among trade agreement critics, while there are some isolationists, my sense is there are more people -- for example, here -- who have a specific concern about trade governance as it exists now.  They think there is too much intellectual property protection, or not enough enforcement on labor/environment, or something along these lines.  In one way or another, they don't think we have the right balance of policies in the international economic sphere.  But they are not against international economic agreements per se -- they just want these agreements to do different things.

And among trade agreement supporters, I don't get the sense that most of them care all that much about real economic integration.  The constant focus on how "exports create jobs" is more of a mercantilist argument.  For these people, the drawbridge is one way only.  Everyone else should open up; the U.S. shouldn't have to do anything (such as reduce farm subsidies).

In addition, other trade agreement supporters are just looking to create strategic political alliances, which, it seems to me, means building drawbridges for some but not for others.

And finally, many trade agreement supporters see trade as an opportunity to export U.S. "values."  It turns out that one of these core "values" is ever stronger intellectual property protection, which -- conveniently! -- helps U.S. exports. Using U.S. economic power to coerce others to adopt a carefully selected handful of what have been declared to be our  "values" is not, in my view, consistent with the spirit of "Drawbridge Down."

Modern trade agreements are complex legal instruments.  It's hard to get across, in the mainstream public debate, all the issues they cover.  You can blog it, or write longer journal articles, but that doesn't attract much attention.  It's rare for the big media outlets to think through all the nuances of trade governance (with some exceptions, such as this).  The media seems to prefer black and white, good vs. evil.  This approach may sell more advertising, but I'm just not sure the world is that simple.

What the Heck Happened with TPA Today?

This is from my Cato colleague Bill Watson:

A very unexpected outcome during a series of votes on trade policy in the House of Representatives has managed to confuse pretty much everyone today. 

The most important and controversial bill in the package was Trade Promotion Authority, which narrowly passed the House 219-211 with 28 Democrats in favor and 54 Republicans opposed.  Trade Promotion Authority (TPA) will enable the President to conclude the Trans-Pacific Partnership (and other) trade negotiations and submit a final agreement to Congress for an up-or-down vote. 

But in order for TPA to go to the President’s desk, the House must also pass Trade Adjustment Assistance.  That’s because TAA was included together with TPA in the bill the Senate passed last month. 

Normally, Democrats support TAA, which is an entitlement program for people whose jobs are displaced due to import competition.  Many Republicans oppose TAA as a useless, big-government entitlement program.  House leadership chose to hold two separate votes on TAA and TPA to prevent Republicans from voting no on the package out of opposition to TAA. 

That strategy may have backfired.  Because advancing TPA required passage of TAA, Democrats were able to scuttle the whole thing by voting no on TAA.

But it’s not over yet.  Republican leadership is planning a do-over on the TAA vote in order to salvage TPA.  So there’s likely going to be another vote on TAA early next week.  In the meantime, Republican leadership and President Obama will be madly lobbying their respective party members to muster enough support.

For practical purposes, this result means that Congress has kicked the can down the road for a few more days.  Today’s vote was definitely not a win for the President or GOP leadership, but they haven’t been defeated either.  They can still pull out a victory if they can win enough votes next week to pass TAA—a bill that was defeated today by a solid 126-302.

Next week is going to be interesting!

Overstating the Potential of Trade Agreements

This is from the White House Blog:

America's LGBT Ambassadors: Global Trade Will Lift Up LGBT Lives

Eight of the nation's most powerful LGBT leaders explain how proposed trade agreements will export our values of equality and tolerance. This letter was first posted on the Advocate.com. You can read the original post here. 

---

As Ambassadors, we are on the front lines representing the United States. We know firsthand that U.S. interests are best served when we pursue policies that also advance our values.

That’s why trade policy is among our most promising tools.

Through the President’s trade agenda, we will not only support more American jobs, but we can also promote greater justice beyond our borders.

Done right, trade policy is a strong complement to our broader bilateral efforts to urge partner countries to defend and protect the human rights of all individuals. In many ways, the two issues go together: open markets promote development, raise wages, and increase living standards, which in turn goes hand-in-hand with more open and engaged societies that demand a higher standard of protection for civil rights.

Many of us are currently working in our host countries to promote new trade initiatives, including the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP). In speaking about these agreements, we often use the word "values." We promote transparency, public participation, accountability and the rule of law, and we advocate for our host countries to join us in setting the global standard.

As the seven openly lesbian, gay, bisexual, transgender, and intersex U.S. Ambassadors and the Special Envoy for the Human Rights of LGBTI Persons, this approach is particularly important to us.

After all, an export is more than just an item we are shipping overseas. It is also a product of the values of the people who created it, which it represents.

And while the United States has made important progress in promoting and protecting the human rights of all of its residents, we are constantly reminded of the challenges LGBTI persons continue to face in countries around the world.

A while back, I expressed skepticism about exporting U.S. "values" through trade agreements, and I stand by what I said there.

Beyond that, I think there's a danger that if you push a particular argument too far, you run the risk of reducing the credibility of your other arguments.  I feel like an argument that trade agreements are a way to promote LGBT rights gets pretty close.

Prison Labor for U.S. Solar Panel Production

I'm puzzled by this:

One of the largest companies to manufacture solar panels in the United States uses a surprising resource to keep costs low and compete against producers from China: prison labor.

Suniva Inc, a Georgia-based solar cell and panel maker that is backed by Goldman Sachs Group Inc, farms out a small portion of its manufacturing to federal inmates as part of a longstanding government program intended to prepare them for life after prison.

Suniva does not actively publicize its work with the prisons, saying it prefers to talk about its in-house factories in Georgia and Michigan, which handle most of its production and employ more than 350 people.

But the company's arrangement with Federal Prison Industries, known as Unicor, has helped Suniva move all of its solar panel assembly to the United States from Asia over the last 18 months, said Matt Card, vice president of global sales and manufacturing. The company says prison labor accounts for less than 10 percent of its panel manufacturing.

By making panels in the United States, Suniva has been able to capture lucrative federal contracts, avoid U.S. government tariffs on Chinese-made panels, and appeal to private sector customers who want American-made products. The company is the third-biggest producer of solar modules that are made in the United States, according to GTM Research.

"As a U.S. company you have to be very, very smart about where you manufacture," Card said.

Inmates working for Unicor, which has existed since the 1930s, have long made things like license plates and goods for the military. Solar panels were added to its list of products so that inmates could acquire skills in a new and growing industry and help government efforts to use more renewable energy.

The vast majority of Unicor's 12,000 inmate workers make products for the federal government, but as federal budgets have shrunk in recent years the company has been trying to attract more contract work from private businesses. About 10 percent of its inmate workers are now engaged in such work.

About 200 inmates make solar panels working in factories at prisons in Sheridan, Oregon and Otisville, New York. A request by Reuters to visit a prison solar factory was denied by prison officials.

...

Suniva would not give any details on its financial arrangement with Unicor, citing government restrictions on the disclosure of contract terms. Unicor also declined to offer details on how individual contract manufacturing agreements are structured.

The average wage for inmate workers in the Unicor programs is 92 cents an hour, though employers pay a significantly higher amount to Unicor for overhead and other costs. Inmates responsible for court-ordered fines, victim restitution or child support payments are required to use half their earnings to meet those financial obligations.

Suniva has "no visibility" into how much inmates are paid, Card said.

"It costs us more to manufacture through Unicor than it does in China," he added.

Is this really happening? This is the first I've heard of it. What do U.S. trading partners think of it?

The E-Cigarettes Trade Disputes are Coming

First there's this:

The [Indonesian] government will soon ban sales of electronic cigarettes (e-cigarettes) nationwide amid growing concerns over the product’s negative impact on people’s health. 

Trade Minister Rachmat Gobel said on Monday that sales of e-cigarettes would be banned in line with the concerns recently voiced by the Health Ministry. 

“It has been deemed that e-cigarettes pose health risks and that’s why we need to impose a ban,” he said. 

There are no domestic e-cigarette producers. Consumers rely on imports from China, the inventor of the device that can stimulate the sensation of smoking.

When the domestic ban took effect, it would automatically halt the import of e-cigarettes, Rachmat further said. 

...

“E-cigarettes also often turn a beginner smoker into an active smoker,” Roy said in a text message.

The Trade Ministry’s director general for standards and consumer protection, Widodo, shared a similar view, saying that a ban on sales of e-cigarettes would be necessary to protect the health of consumers from a number of dangerous substances added to the products. He further said that his office was finalizing a ministerial regulation to ensure the ban was effective.

Indonesia is famous for its clove cigarette industry, and it's not hard to see how a ban on e-cigarettes -- which are not produced domestically -- would be seen as protectionist.

Then there's this:

Sen. Ron Wyden, D-Ore., sent a letter to U.S. International Trade Commission Chairman Meredith Broadbent on Monday, requesting the government adopt statistical reporting numbers for imports of electronic cigarettes.

The Senate Finance Committee ranking member made the request in response to a new report from the Government Accountability Office, which looked at the e-cigarette market and rise in imports over the past year. 

Wyden said new reporting data would provide insights into the source, value, and volume of e-cigarette imports into the U.S. and tariff revenue collected on these products.

“E-cigarettes represent a fast growing, multi-billion dollar market and yet we know very little about how much is coming into our country, who is manufacturing the product, or the ultimate public health implications of these unregulated products,” Wyden said.

“With use among middle and high school students tripling in the past year alone, it’s time we collect baseline information on e-cigarette imports that will help us most effectively consider and propose regulatory options.”

The report highlights how.the U.S. market for e-cigarettes was roughly $2.5 billion in 2014, with approximately 90% of these products coming from China

The GAO report is here.  It says:

Although there are no definitive data to assess the relative proportions of imported and domestically manufactured e-cigarettes, industry experts and researchers told us that the majority of e-cigarettes sold in the United States are imported. Some estimates from industry experts we interviewed suggest that up to 90 percent of e-cigarette devices and closed-system e-cigarettes are imported from China. In addition, industry experts and researchers estimated that most e-cigarette liquid on the U.S. market is either imported or mixed in the United States with at least some ingredients from other countries, such as China, France, India, and Switzerland.

I'm not sure where they are going with this, but with such a high percentage of the product coming from China, it's not hard to see how protectionist sentiment might creep in to policy-making.

CALL FOR PAPERS - Joint ASIL-ESIL-Max Planck Scholarship Workshop, "The Future of Transatlantic Economic Governance in the Age of the BRICS"

From the ASIL/ESIL/Max Planck:

The International Economic Law Interest Groups of the American and European Societies of International Law together with the Max Planck Institute for Comparative Public Law and International Law are pleased to announce a joint 2015 Works-in-Progress Workshop on:

The Future of Transatlantic Economic Governance in the Age of the BRICS 11-12 December 2015 to be held at the Max Planck Institute Heidelberg, Germany

Workshop theme: As the Transatlantic Trade and Investment Partnership negotiations have revealed, in some ways the developed economies of North America and Europe have never been more interested in creating a cooperative system of economic governance. In other ways, however, the relationship between these countries has never faced more challenges, as new economies disinclined to accept the trade rules and regulatory cooperation efforts of the developed world have ascended to new economic rights and have asserted new legal authority. Moreover, some of the traditional strengths of incumbency, such as a powerful currency and traditionally strong representation in international organizations, have come to look more like liabilities. This emerging economic order has presented challenges for Transatlantic cooperation efforts in trade law, investment law, financial regulation, monetary policy, and law and development – to say nothing of the longstanding conundrums raised by differences in competition law, complexities inherent in the supervision of multinational corporations and financial institutions, and problems posed by the need for sustained regulatory cooperation.

The International Economic Law Interest Groups of the American Society of International Law and the European Society of International Law, in cooperation with the Max Planck Institute for Comparative Public Law and International Law, will hold a joint workshop in which progress in new research on these issues may be made. The working language of the workshop will be English.

Call for previously unpublished papers: We encourage IEL scholars, practitioners, and advanced doctoral students to submit proposals for paper presentations on any topic related to the workshop’s theme, broadly conceived. Proposals should be no more than one single-spaced page in length and should include the paper’s working title and an abstract describing its main thesis, methods, and contribution. All papers should be works-in-progress, that is unpublished at the time of the workshop. Authors should also submit a separate, one-page bio or short curriculum vitae (CV) (max two pages) along with the abstract. Proposals should be emailed to: ASIL.ESIL.IntEcLIG.Work[email protected] and must be received no later than June 30, 2015.

More details here.

Will the Fear of Cheap Foreign Labor be Replaced by the Fear of Robots?

From the Economist:

HUMAN hands are extremely good at making clothes. While many manufacturing processes have been automated, stitching together garments remains a job for millions of people around the world. As with most labour-intensive tasks, much of the work has migrated to low-wage countries, especially in Asia. Factory conditions can be gruelling. As nations develop and wages rise, the trade moves on to the next cheapest location: from China, to Bangladesh and, now that it is opening up, Myanmar. Could that migration be about to end with the development of a robotic sewing machine?

There have been many attempts to automate sewing. Some processes can now be carried out autonomously: the cutting of fabric, for instance, and sometimes sewing buttons or pockets. But it is devilishly difficult to make a machine in which fabric goes in one end and finished garments, such as jeans and T-shirts, come out the other. The particularly tricky bit is stitching two pieces of material together. This involves aligning the material correctly to the sewing head, feeding it through and constantly adjusting the fabric to prevent it slipping and buckling, while all the time keeping the stitches neat and the thread at the right tension. Nimble fingers invariably prove better at this than cogs, wheels and servo motors.

“The distortion of the fabric is no longer an issue. That’s what prevented automatic sewing in the past,” says Steve Dickerson, the founder of SoftWear Automation, a textile-equipment manufacturer based in Atlanta, where Dr Dickerson was a professor at the Georgia Institute of Technology.

The company is developing machines which tackle the problems of automated sewing in a number of ways. They use cameras linked to a computer to track the stitching. Researchers have tried using machine vision before, for instance by having cameras detect the edge of a piece of fabric to work out where to stitch.

More from the WSJ here.

If this all really happens, how will it change the trade debate?  If much of industry is done by robots, rather than people, the wage differential in poor and rich countries will be less important.  Will anyone still be worried about competition from foreigners?  Or will the focus be on how robots are stealing everyone's jobs?

Symposium on the Present and Future Role of Investment Treaty Arbitration in Adjudicating Environmental Disputes

From PluriCourts

The Present and Future Role of Investment Treaty Arbitration in Adjudicating Environmental Disputes (Oslo, 5-6 November 2015) – Call for Papers, Deadline: 15 July 2015. 

The interaction between international investment law and (inter)national environmental law has been of interest to scholars and practitioners for quite some time. Most of the discourse and analysis has focused on issues of fragmentation, conflict, and the balancing of obligations between legal regimes as they arise in the context of disputes before investment treaty tribunals. Many of these cases call upon arbitrators to decide whether a change to a state’s environmental regime is justified even where such changes might violate the state’s obligations under an international investment agreement (eg a fracking moratorium, changes in zoning regulations, or a nuclear phase-out program).

However, there are also other potential interactions between these regimes. There is an emerging strand of scholarship and reform-minded practice focusing on the ways in which international investment law and environmental law can be mutually supportive and complimentary. These approaches could be investigated from a number of angles: 1) how, when, and to what extent can future international investment agreement practice – as informed by existing treaty practice and jurisprudence – integrate environmental sustainability and protection components (eg GATT-like general exceptions, inclusion of elements to promote and facilitate sustainable investment, etc.) while still protecting legitimate foreign investments; 2) how, when, and to what extent could environmental agreements (especially those relating to the funding of climate change mitigation and adaptation) incorporate ‘green’ investment protections that are subject to dispute settlement provisions; and 3) how might investment treaty tribunals help promote a state’s compliance with environmental obligations where such compliance is the basis of the foreign investor’s claim (eg the pending Allard v Barbados claim). This symposium will focus on investment treaty arbitration from a forward-looking perspective on how future practice might be shaped or reformed in a way that can both promote environmental sustainability and protect responsible and legitimate foreign investments. In light of this focus, the symposium will engage participants in discussions on specific reform proposals and practical policy and treaty practice responses to issues dealing with how international investment law and environmental law might become more mutually supportive and complimentary especially in the context of the adjudication of foreign investment disputes concerning environmental issues. The symposium is arranged by the PluriCourts Center of Excellence at the University of Oslo, Department of Public and International Law. PluriCourts studies the legitimate roles of international courts and tribunals in the global order: http://www.jus.uio.no/pluricourts/english/

The call for papers is here.

I've been wondering for some time now if some enterprising environmental NGO would find a way to make a claim that a government's failure to take action against climate change violates one of the vague and amorphous principles in international investment agreements.  Perhaps such a claim would be a little far-fetched, but I'm not sure it would be more far-fetched than many of the other claims out there.

Identifying the Appropriate Level of Protection (SPS)

A new Appellate Body report has upheld a panel report that had struck down an Indian ban on the U.S. agricultural products due to concerns related to the Avian flu.  One of issues appealed regarded SPS Article 5.6 (“…Members shall ensure that such measures are not more trade-restrictive than required to achieve their appropriate level of sanitary or phytosanitary protection …”).  India’s appeal on this provision centred on the “appropriate level of protection (ALOP).”  The AB raised two issues in this regard: first, is the United States required to identify India’s ALOP based on India’s SPS measure at issue (not on domestic measures) to meet its burden of proof under Article 5.6?; second, can the United States meet its burden of proof only when the panel accepts the U.S.’ articulation of India’s ALOP? (para. 5.219)

 Based on India’s domestic measures, the United States claimed that India’s ALOP was “quite low” (para. 5.217).  Yet, according to India, the United States failed to fulfil its burden of proof under SPS Article 5.6 because it identified India’s ALOP based on India’s domestic control measures, not on the SPS measure (ban) at issue (para. 5.214).  Upon a review of India’s submissions, the panel decided that India’s ALOP was indeed “very high or very conservative” (para. 5.217).  

 The AB viewed that the panel must substantiate not the complainant’s articulation of ALOP (5.220) but the respondent’s ALOP based on the totality of arguments and evidence (5.221).  Notably, the AB emphasized that articulating ALOP is “both a privilege and an obligation of then responding Member” (emphasis added, 5.221).  Likewise, the AB opined that the panel should not defer completely to the responding Member’s own characterization of ALOP (5.222).  Nonetheless, the AB remains ambiguous as to whether a panel must identify the responding Member’s ALOP based on the SPS measure at issue (5.226).

 The AB’s stance on ALOP in this case might not dovetail with its previous ruling on the same issue.  One may recall that the AB was more deferential to the responding Member (the EU) in identifying ALOP in the Hormones dispute.  In that case, the AB seemed to agree with the panel in inferring the EU’s ALOP (such as the “level of protection in respect of natural hormones when used for growth promotion”) directly from the SPS measures at issue (the import ban on hormone-treated beef) (para. 218). 

 In conclusion, according to the new AB report, the burden of proof on ALOP under SPS Article 5.6 seems quite low; the responding Member must also articulate its own ALOP; finally, the panel must identify (substantiate) ALOP based on the totality of arguments and evidence, not exclusively from the SPS measures at issue. 

Why Ukraine Dropped its WTO Plain Packaging Complaint

I'm not sure what to make of their changing views, but here's what they said:

"First, now we have restricted resources and we would like to send them to the direct trade interest of Ukraine. Second, economic logic is absent in this dispute, and third, the dispute has negative consequences for our country," Economic Development and Trade Minister of Ukraine Aivaras Abromavicius said at a press conference with the Cabinet of Ministers on Thursday.

Previously, Ukrainian Prime Minister Arseniy Yatseniuk said he doubted the appropriateness of a trade dispute with Australia regarding cigarette packaging, which Kyiv has been involved in at the WTO since 2012, and instructed the Ministry of Economic Development and Trade to deal with the matter. Yatseniuk said Ukraine allegedly joined this dispute at the request of the American Chamber of Commerce.

More here and here.

More Leaks from Wikileaks

This time on TISA.  I thought Edward Alden of CFR had a good take:

I love Wikileaks. While I recognize that secrecy has its place, I strongly believe that the affairs of the people should, to the greatest extent possible, be conducted with the full knowledge of the people. Secrecy breeds distrust, and feeds claims that governments are only serving narrow corporate interests. Thus I was delighted to see in my inbox this morning that Wikileaks has yet again purloined and published a series of trade negotiating texts, this time for the pending Trade in Services Agreement (TISA).

But here’s the problem. The organizations that work with Wikileaks to publicize the documents too often know nothing about what they actually mean, and have a vested interest in not learning so they can continue making outlandish claims. And so rather than illuminating the public debate, which is the goal of transparency, it ends up more distorted than it was when the documents were still secret. 

...

The opponents of TISA claim that the deal would make it impossible for countries to regulate in the public interest. Again, the texts are helpful. The regulatory pieces are almost all about two things – transparency and non-discrimination. That means governments need to open up their regulatory process for input, much like U.S. notice-and-comment procedures, and cannot discriminate against foreign-owned companies (though even here many exceptions will be permitted). The text on “domestic regulation” states quite flatly that “Parties recognize the right to regulate, and to introduce new regulations on the supply of services within their territories in order to meet public/national policy objectives.”

Don’t get me wrong – there are real competitive implications in such an agreement, and countries with strong vested interests will resist even non-discriminatory treatment. The texts – which include the identities of countries proposing certain measures and those opposing them – are filled, for example, with objections from China. Many countries will object to this sort of opening because it has the potential to hurt the profits of private monopolists or state-owned companies.

I understand this. What I don’t understand is when organizations claiming to speak for the developing countries and for worker interests in advanced countries go to bat for the monopolists. The CEPR/OWINFS press release, for example, warns that “The leaked telecommunications annex, among others, demonstrate potentially grave impacts for deregulation of state owned enterprises like … national telephone company[ies].” Really? Mexico, for example, has historically had among the highest costs for telephone and internet services in the world. That’s because service is dominated by a monopoly company, American Movil, which is the successor to the government-owned Telmex. The biggest shareholder of American Movil, Carlos Slim, is either the richest or second richest man in the world behind Bill Gates, depending on how their portfolios are doing. The Mexican government, to its credit, has been trying to break up Slim’s monopoly, and the TISA negotiations should help. But the opponents of TISA would rather go to bat for the world’s richest man.

My only substantive comment for now is on the draft financial services chapter, where I wanted to take this opportunity to reiterate my criticism of the language of the prudential exception.  The draft uses what is basically the traditional text:

Article X.17: Prudential Measures⁵

CH: Propose for Article X.17 the title of “Domestic Prudential Regulation”. Considering the title of X.18.

1. Notwithstanding any other provision of the Agreement, a Party shall not be prevented from [CH propose: taking][US/AU/MX/CO/PE/PA/CL/CR/CA/EU/NZ/JP/NO/IS/HK/LI/TR/IL/KR/TW/UY propose: adopting or maintaining] measures for prudential reasons, including for:

(a) the protection of investors, depositors, policy-holders or persons to whom a fiduciary duty is owed by a financial service supplier; or

(b) to ensure the integrity and stability of a Party's financial system.

2. Where such measures do not conform with the provisions of this Agreement, they shall not be used as a means of avoiding the Party’s commitments or obligations under the Agreement.

5 [PE/CR/CL propose; MX consider; EU/AU/CH/JP/NO/IL oppose: It is understood that the term “prudential reasons” includes the maintenance of the safety, soundness, integrity, or financial responsibility of individual financial service suppliers as well as the safety and financial and operational integrity of payment and clearing systems.]

It seems to me the drafters should use TISA to fix the problems with some of the language, making it more like this:

Notwithstanding any other provisions of the agreement, and subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, a Member shall not be prevented from taking measures for prudential reasons, including for the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier, or to ensure the integrity and stability of the financial system.

Alternatives to Plain Packaging: Public Shaming?

Under the TBT Agreement Article 2.2 claim in the WTO plain packaging dispute, one issue will be whether there are alternative anti-smoking measures that could achieve the same purpose. As the Appellate Body put it in the recent COOL Article 21.5 report:

5.199. A complainant may seek to identify a possible alternative measure that is less trade restrictive, makes an equivalent contribution to the relevant objective, and is reasonably available, as part of making its prima facie case that a technical regulation is more trade restrictive than necessary.

So how would public shaming of smokers be evaluated as an alternative measure:

On Monday, the capital city of Beijing launched a tough ban that prohibits smoking in indoor public places and workplaces. As part of the campaign, it unfurled giant stop smoking banners over the iconic Bird's Nest sports stadium, advised people to use an elaborate set of hand signals to tell those in their proximity to stop smoking, and raised fines for those caught smoking.

With more than 300 million smokers -- nearly the size of the U.S. population -- China is the world's largest tobacco consumer. The government estimates that another 740 million of its citizens are exposed to second-hand smoke and more than one million people in the country die from smoking-related diseases each year. In 2008, as part of its clean up campaign for the Olympics, the capital of Beijing for the first time  required public places like restaurants, bars and hotels to provide smoke-free areas or rooms.

Back then, the consequences for businesses could be harsh, with fines of up to $725, but for individuals the consequences seemed to be almost an afterthought. Officials said at the time that if they were caught but tobacco control supervisors they could "try to dissuade" them and they don't comply, they could fine them about 10 renminbi, about $1.40 then or $1.60 today.

That changed as of Monday, when the government announced it would increase the fine to 200 yuan and take more dramatic measures by posting the names of those breaking the law three times on a Web site in order to shame them.  (emphasis added)

The Ukraine Plain Packaging WTO Dispute Has Been Suspended

This is from the Chair of the DS434 Plain Packaging WTO panel:

On 28 May 2015, the Panel received a request from Ukraine to suspend the proceedings in Australia – Certain Measures concerning Trademarks and other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (WT/DS434) pursuant to Article 12.12 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). In a letter dated 29 May 2015, Australia indicated that it "supports the request by Ukraine to suspend proceedings, on the basis that, as Ukraine has said in its letter, the suspension will be 'with a view to finding a mutually agreed solution'".

Article 12.12 of the DSU provides that the Panel may suspend its work at any time at the request of the complaining party for a period not exceeding 12 months. This provision also indicates that if the work of the Panel has been suspended for more than 12 months, the authority for establishment of the Panel shall lapse.

The Panel hereby informs the Dispute Settlement Body of its decision of 29 May 2015 to grant Ukraine's request and suspend its work and requests that this communication be circulated to Members.

That's all I know. More details as they emerge.

Guest Post on the US - COOL AB 21.5 Report

This is a guest post from Geneva-based trade lawyer Adarsh Ramanujan

“Risks non-fulfilment would create”

I wanted to follow-up from Simon’s post last week on the Article 2.2, TBT jurisprudence arising from the Article 21.5 AB Report in US – COOL.  I believe there are some important clarifications from the AB on what is meant by taking into account “risks non-fulfilment would create”. In my opinion, below are the significant points of clarification:

1. Non-fulfilment of what?

The AB makes a clear distinction between the “legitimate objective” behind the technical regulation and “other potential legitimate objectives” – it is only the former that is relevant and not the latter.

“In addressing the question at hand, we turn first to the text of Article 2.2 of the TBT Agreement, namely, the phrase "taking account of the risks non-fulfilment would create". In our interpretation of Article 2.2 above, we have noted that, textually, the "risks" to be "tak[en] account of" under Article 2.2 are those that would be created by the "non-fulfilment" of the "legitimate objective" of the technical regulation at issue. In this regard, the risks that would be created by the non-fulfilment of legitimate objectives other than the particular legitimate objective at issue are not referred to in the text of Article 2.2. In other words, because the objective of the amended COOL measure is the "provision of consumer information on origin", the risks referred to in Article 2.2 are those that would be created by the non-fulfilment of the "provision of consumer information on origin", rather than the risks related to other potential legitimate objectives, such as the protection of public health or the environment. In that regard, we do not view the phrase "taking account of the risks non-fulfilment would create" as providing a direct textual basis for taking into account the relative importance of the objective pursued, i.e. the importance of the objective pursued as compared to the importance of other objectives.”

          (Para 5.277)

As we know, the characterisation of the “legitimate objective” by a Member in a dispute is not definitive. For instance, in the US – COOL case (Article 21.5), the US argued the “legitimate objective” to be providing specific information to consumers of information on where livestock were born, raised and slaughtered. The Panel rejected this argument and found the “legitimate objective” as providing consumer information on origin.

2. Importance of the “legitimate objective”?

The AB here makes a distinction between the “relative importance” between various objectives versus the “importance to the Member implementing the regulation” – the former is irrelevant, but the latter is relevant. One may have noticed the earlier quote from para 5.277 mentions this and here is the next relevant passage in this respect:

“However, we consider it useful to distinguish between the relative importance of an objective, on the one hand, and the importance of the objective to the Member implementing the technical regulation at issue, on the other hand. As we see it, the importance of the objective to the Member implementing the technical regulation at issue could inform the analysis under Article 2.2 in some capacity, to the extent it is reflected in the level considered appropriate by the Member to pursue the relevant objective, or the actual degree of contribution made by the technical regulation to its objective. For instance, where a Member chooses a high level of fulfilment for a technical regulation to contribute to its objective, this may be indicative of the importance this Member places on the fulfilment of that objective, and evidence pertaining to the importance a Member places on an objective might inform an assessment of the degree of contribution made by the technical regulation to its objective.  Thus, we would ordinarily expect the gravity of the consequences arising from the non-fulfilment of the technical regulation's legitimate objective to correlate, at least to some extent, to the importance of the objective to the Member concerned. However, this does not mean that the relative importance of an objective, as determined against other potential objectives that a Member might pursue, is a factor directly pertinent to "taking account of the risks non-fulfilment would create" under Article 2.2.”

(Para 5.279)

 The above approach, therefore, distinguishes itself from the approach one takes under Article XX, GATT. The threshold to be applied under Article 2.2, TBT does not change simply because the objective being pursued (e.g. human life / health) is relatively more important than other objectives (e.g. providing consumer information). Nonetheless, the AB was careful in suggesting that if a Member considers a certain “legitimate objective” to be important within its regulatory space, this must be accounted for as part of the holistic analysis. I believe this may be a significant bone of contention in cases to come.

• 3. Source of assessing “risks non-fulfilment would create”?
• I think the following passages bring out the point clearly enough:

“5.284 In this regard, we recall the interpretation of the phrase "taking account of the risks non-fulfilment would create" set out above, namely, that "taking account" calls for an active and meaningful consideration of "the risks non-fulfilment would create" in the weighing and balancing under Article 2.2. At the same time, this requirement is also sufficiently flexible so as to be adaptable to the particularities of a given case. Thus, certain aspects of a technical regulation may be salient to "taking account of the risks non-fulfilment would create" in a given case. A technical regulation itself, or its related instruments, might contain elements pertaining to the nature of the risks it seeks to address and the gravity of the consequences arising from the non-fulfilment of its objective.

5.286. …As we have stated above, a technical regulation itself, or its associated instruments, may reveal elements relevant to the nature and gravity of the risks addressed. However, the Panel did not consider the evidence and argumentation presented by Canada and Mexico to substantiate the connection between specific aspects of the design, architecture, and structure of the amended COOL measure, on the one hand, and the nature of the risks of the non-fulfilment of its objective or the gravity of the consequences arising from its non-fulfilment, on the other hand.”

4. The final point, of course, is what Simon mentioned in his earlier post – the fact that “risk of non-fulfilment” must be assessed in all cases; the Panel cannot cite any inability and choose not to assess this fully. (Paras 5.295-296)

I tend to agree with Simon that there always seem to be lingering issues when it comes to the TBT and this is especially so in the context of points (2) and (4) above. In addition, the AB has gone to great lengths to reiterate that the analysis required is “holistic”, even when it comes to the factor, “risks non-fulfilment would create”. These are fact-heavy assessments and from the way I read the AB Report, I believe Panel assessments of these issues are going to get more fluid and open-ended and at the same time, it will also get harder to successfully appeal a Panel Report on Article 2.2, TBT issues.     

The above, of course, is just limited to the factor “risks non-fulfilment would create”. As I understand, there seem to be other interesting aspects in the AB Report, but they will be more appropriately dealt with in other pieces.

QRs Notified with a GATT Article XXI Defense

The WTO Secretariat has issued an interesting report on notified quantitative restrictions:

1.1. This report has been prepared at request of the Chairperson of the Committee on Market Access with a view to providing Members with factual information on the notifications of quantitative restrictions (QRs), which have been received as of 19 May 2015 pursuant to the "Decision on Notification Procedures for Quantitative Restrictions" (hereinafter the QR Decision). ...

...

2.2. In May 2014, and as mandated by paragraph 4 of the QR Decision, the WTO launched a database on Quantitative Restrictions (hereinafter the QR database), which compiles all notifications submitted by Members under the QR Decision. ...

...

3.10. Paragraph 2(v) of the QR Decision requires Members to provide "an indication of the grounds and WTO justification for the measures maintained […] and the precise WTO provisions". Although Members have invoked one WTO provision in 87.9% of the QRs notified, they have mentioned more than one justification in 5.3% of them, whereas nine Members did not provide any information for 53 QRs (6.8%).

3.11. The GATT 1994 has been the most frequently cited Agreement (more than 90% of the QRs), and in particular Article XX (General exceptions), which has been referred to in 593 QRs. Particularly relevant is the reference to paragraph b of Article XX (measures "necessary to protect human, animal or plant life or health"), which accounts for 311 citations. Article XXI:b, concerning exceptions necessary for the protection of a Member's national security interests, has also been included as justification in 89 cases.

What are all these measures for which Members are citing GATT Article XXI?  Some enterprising grad student should take a look!