International Economic Law and Policy Blog

EU posts first submission in Seal Products dispute

The submission can be found here:

http://trade.ec.europa.eu/wtodispute/show.cfm?id=475&code=2#_eu-submissions

 

Canada appears to be still hiding its submission from the public.  The submission has been leaked to various individuals, however, and I have seen a copy.  Reading the EU submission gives a pretty good idea of what Canada is arguing.

One of the most unusual of Canada's arguments is that it is simply impermissible under the WTO rules to draw distinctions between aboriginal and non-aboriginal products or economic activity.  But aboriginal rights in Canada's own constitution, as interpreted by the Canadian Supreme Court, require differential treatment in certain cases. exempting aboriginal production from general regulatory restrictions, where traditional practices central to aboriginal culture are concerned. Is the Canadian government using the Seal Products case to make the WTO a basis for weakening aboriginal rights?

Yet More WTO Complaints?

Now that Russia is in. From Reuters:

Assuming WTO relations are set up quickly, the United States and Russia could file complaints against each other in the coming months.

Earlier in December, Russia banned imports of meat containing any trace of ractopamine, a feed additive widely used in the United States to make meat leaner.

Kirk and U.S. Agriculture Secretary Tom Vilsack have pushed Russia to lift the ban because they say it appears to violate Russia's WTO commitments.

The United Nation's food agency in July said ractopamine "had no impact on human health" if residues stay within recommended levels.

Meanwhile, Edward Verona, president of the U.S.-Russia Business Council, warned in the group's latest newsletter that Russia could file a WTO complaint against U.S. anti-dumping and countervailing duties on Russian steel.

"Benefit" in the Canada - Renewable Energy Case

As I said yesterday, it's not easy to summarize the "benefit" issue in the Canada - Renewable Energy panel report.  But just quickly, the dissenter puts the two sides succinctly.  The majority view (as desribed by the dissenter):

9.1 ... In essence, the Panel majority has found that the circumstances of ensuring a reliable supply of electricity that achieves certain objectives sought by the Government of Ontario justifies the rejection of the competitive wholesale electricity market as the relevant focus of the benefit analysis. The Panel majority has furthermore suggested that, in these circumstances, the existence of benefit could be determined by focusing upon the rate of return associated with the FIT and microFIT Contracts and comparing this with the average cost of capital in Canada for projects having a comparable risk profile.

Basically, electricity markets are so distorted that you can't examine benefit using those markets alone -- you have to look to other markets (but there wasn't enough evidence here to reach a conclusion).

The dissent view:

9.23 ... by contracting to purchase electricity produced from solar PV and windpower technologies under the FIT Programme at a price intended to provide for a reasonable return on the investment associated with a "typical" project, the Government of Ontario ensures that qualifying generators are remunerated at a level that allows them to recoup the entirety of their "very high" capital costs. As the complainants argue and Canada accepts, such levels of remuneration would never be achieved through the unconstrained forces of supply and demand in a competitive wholesale electricity market in Ontario. Nor could they be achieved within the constrained forces of supply and demand which actually do operate within the wholesale electricity market in Ontario, without an intervention which remunerates the facilities which generate power from solar PV and windpower technologies at a higher rate than is paid in respect of electricity generated by the other technologies663. It follows that by bringing these high cost and less efficient electricity producers into the wholesale electricity market, when they would otherwise not be present, the Government of Ontario's purchases of electricity from solar PV and windpower generators under the FIT Programme clearly confer a benefit upon the relevant FIT generators, within the meaning of Article 1.1(b) of the SCM Agreement.

Basically, buying energy from wind and solar producers at prices they could not have otherwise obtained in the market confers a benefit. End of story.

That leaves out a lot of nuance, of course, but it's a little taste of the issue.

More on those WTO Dispute Settlement Jobs

Amy Porges points me to more details on the WTO hiring in dispute settlement:

Vacancy Notice No.: EXT/T/12-07    Title: Dispute Settlement Lawyer    Grade: To be confirmed    Contract Type: Temporary appointment    Issued On: 14 November 2012    Original published date: 14 November 2012  (42 day(s) until closing date)    Republished (Currently accepting applications)    Application Deadline (CET): 31 January 2013    Division:   Legal Affairs, Rules Duration:  Maximum of two years, non-extendable

The Secretariat of the WTO is seeking to fill potential multiple positions of Dispute Settlement Lawyer to work in the Rules Division or Legal Affairs Division. The salary will be determined based on experience and qualifications.

General Functions  1. Deliver substantive legal advice and assistance to WTO panellists and assist other Secretariat lawyers working with dispute settlement panels. More experienced dispute settlement lawyers may serve as team leader or co-leader in disputes and supervise the work of other lawyers, paralegals and support staff. 2. Conduct research on legal issues including case law, prepare analyses of factual and legal issues in the context of disputes, and prepare legal opinions. More experienced dispute settlement lawyers will be assigned more complex legal issues and may direct or guide the research and/or analyses of legal issues conducted by more junior staff. Day to day supervision of junior lawyers and other staff may be required.

 

Note that it's a short-term appointment -- two years max.  But of course, you'd have the opportunity to get to know people and impress them, which could lead to something more.

 

 

The Renewable Energy / Feed-In Tariff Panel Report

From today's WTO panel report in Canada - Renewable Energy/Feed-In Tariff:

7.7 Throughout these proceedings, however, the complainants have emphasized that in contesting the WTO-consistency of the challenged measures, they do not question the legitimacy of the objectives pursued by the Government of Ontario through the FIT Programme of reducing carbon emissions and promoting the generation of electricity from renewable energy sources. In particular, Japan has explained that "Japan does not take issue with Ontario's stated goal of enhancing renewable energy generation"39 or "the government's intervention as such to internalize the positive externalities of renewable energy generation technologies"40. Likewise, the European Union does not "contest the general purpose of the FIT Program, as helping to promote electricity supply from renewable energy sources", highlighting that "[s]uch a purpose is legitimately valid and … WTO Members can and should actively support it"41 . What the complainants call into question is limited to the alleged trade-distortive element of the challenged measures, which they identify to be the "Minimum Required Domestic Content Level" given effect through  the FIT Programme and the FIT and microFIT Contracts. According to the complainants, this aspect of the challenged measures affords a form of WTO-inconsistent protection to producers of certain types of equipment used to generate electricity from solar and wind energy ("renewable energy generation equipment") that are based in Ontario to the detriment of competing industries in other WTO Members, and should therefore be eliminated42. Thus, as Japan has declared 43, these disputes cannot be properly characterized as "trade and environment" disputes, but rather, they should be thought of as "trade and investment" disputes.

I agree that this is not a "trade and environment" dispute.  But is it a "trade and investment" dispute?  Isn't it just a "protectionism" dispute?  Granted, there is some impact on investment, but doesn't protectionism always or often have that effect?

But the real highlight of the report is the discussion of "benefit," which led to a dissent. No quick summary of the issues at this point -- still trying to digest it. 

Flavoring Issues in the Proposed EU Tobacco Products Directive

From the proposed revision to the EU's tobacco products directive, mentioned in the last post:

(15) The likelihood of diverging regulation is further increased by concerns over tobacco products, including smokeless tobacco products, having a characterising flavour other than tobacco, which may facilitate uptake of tobacco consumption or affect consumption patterns. For example, in many countries, sales of mentholated products gradually increased even as smoking prevalence overall declined. A number of studies indicated that mentholated tobacco products can facilitate inhalation as well as smoking uptake among young people. Measures introducing unjustified differences of treatment between flavoured cigarettes (e.g. menthol and clove cigarettes) should be avoided ³⁶.

36  WTO Appellate Body, AB-2012-1, United States – Measures Affecting the Production and Sale of Clove Cigarettes (DS406).

Would this take care of claims about discrimination?  Seems likely that it would.  How about claims relating to such measures being "more trade restrictive than necessary"?

ADDED: That quote is from the Preamble. Article 6, paragraph 1 then sets out the following requirement: "Member States shall prohibit the placing on the market of tobacco products with a characterising flavour."

Plain Packaging and Flavored Cigarettes in the EU

From Reuters:

The European Union's executive Commission is to propose larger health warnings on cigarette packets and a total ban on flavorings such as menthol, a draft revision of EU tobacco rules seen by Reuters showed on Monday.

The proposals stop short of forcing all cigarettes to be sold in plain packets carrying graphic health warnings, as required in Australia from the start of this month. But individual EU governments will be free to insist on such packaging if they choose to do so.

...

Due be published on Wednesday, the proposals must be jointly approved by EU governments and the European Parliament before they can become law, a process that could take up to two years.

If this becomes law in the EU, will they face complaints related to both plain packaging and flavoring bans?  Will banning all flavors, including menthol, mean that the EU can succesfully defend a claim like the one Indonesia brought against the U.S. flavored cigarette ban (which exempted menthols)?

Can the WTO Handle All These Disputes?

A few months ago, I mentioned the surge in WTO disputes this year.  Well, they keep coming, and it may be starting to strain the WTO's resources.  Reuters reports:

A surge in trade disputes has forced the World Trade Organization to reallocate staff to cope with a flood of litigation in the pipeline for 2013, according to diplomats and documents at the global trade body in Geneva.

The WTO's 157 members have launched 26 trade disputes so far in 2012, the most since 2003 and three times more than the eight new complaints filed in 2011.

According to an internal WTO document seen by Reuters, the WTO decided to reallocate staff to the disputes team to deal with the increasing number and complexity of legal cases.

"We are seeking to reallocate resources from other divisions. It's happening already," said one WTO source.

As well as moving staff, the trade body also advertised for a senior dispute settlement lawyer, at a starting salary of around 161,900 Swiss francs ($175,300), and is seeking short term candidates to help deal with the caseload.

Investor-State Polling in New Zealand

A recent poll in New Zealand asked the following:

New Zealand is currently negotiating a free trade and investment treaty with ten other countries called the Trans Pacific Partnership. As part of the negotiations, there is a proposal to allow foreign investors to sue governments in private offshore tribunals if government actions threaten their future profits. The US advocates it while Australia says it would not sign a deal with this in it. Which one of the following statements do you most agree with:

Here were the possible responses, along with the percentages who chose each:

1 New Zealand should reject trade and investment treaties that would allow the government to be sued by foreign investors in private offshore tribunals - 64%

2 New Zealand should accept terms that would allow investors to sue the government in this way if that is what is required to get a Trans Pacific Partnership deal - 13%

3 No opinion / Can’t choose - 24%

So was that a fair poll question?  Is "private offshore tribunals" the best description?  Why not just "international tribunals"?  And is "government actions threaten their future profits" the best way to describe the litigation possibilities?

I've always been curious how investor-state would do in a poll.  I'm not sure this poll does the job perfectly, but it's interesting nonetheless.

Antigua Retaliates

You are forgiven if you have forgotten about the WTO Gambling dispute.  It has been a while since anything happened.  But apparently it is at long last on to the next stage, as Antigua announces (Word doc) that retaliation is coming:

On 21 December 2007, the Arbitrators determined in document WT/DS285/ARB (the "Award") that Antigua and Barbuda could request authorization from the DSB to suspend the obligations under Sections 1, 2, 4, 5 and 7 of Part II of the TRIPS at a level not exceeding US$21.0 million annually. During the course of the arbitration Antigua and Barbuda had withdrawn its request to suspend concessions or obligations under the GATS, as on further evaluation this was considered to be impractical, a conclusion with which the Arbitrators agreed.

 Since the release of Award, Antigua and Barbuda has been working in good faith to obtain a fair negotiated settlement to DS285 with the United States, but all efforts have proven fruitless. Article 22.7 of the DSU provides that "the DSB shall be informed promptly of the decision of the arbitrator and shall upon request, grant authorization to suspend concessions or other obligations where the request is consistent with the decision of the arbitrator, unless the DSB decides by consensus to reject the request". Accordingly, on the basis of and consistent with the conclusions and determinations of the Arbitrators in the Award and in accordance with Article 22.7 of the DSU, Antigua and Barbuda requests authorization from the DSB to suspend concessions or other obligations under the TRIPS, and in particular Sections 1 (Copyright and Related Rights), 2 (Trademarks), 4 (Industrial Designs), 5 (Patents) and 7 (Protection of Undisclosed Information) of Part II thereof at a level not exceeding US$21.0 million annually.

 Until such time as the United States brings its measures into compliance with the rulings and recommendations of the DSB in DS285, every year Antigua and Barbuda will notify the DSB of the suspension of concessions or obligations it intends to adopt and actions it intends to take with respect thereto prior to bringing those suspensions into force or taking those actions. The notice will also specify how Antigua and Barbuda proposes to ensure that, in applying the suspension of concessions and obligations, they will not exceed US$21.0 million per annum.

How will it proceed with the TRIPS retaliation?  This should be interesting.

Cheer Up, USTR!

This is from a Washington Post article on a recent survey of federal workers:

The Office of the U.S. Trade Representative ranks as the worst small agency, [with only 32.7 percent of employees saying they are satisfied]. Former employees said its sense of mission was eroded by an ambivalent attitude toward free trade early in the Obama administration and during the economic crisis. Views of the agency’s leaders plummeted 18.9 percentage points over 2011.

Maybe next year will be better for the folks at USTR, with the TPP progressing, and perhaps the US-EU FTA starting negotiations?

New Chairs and Vice Chairs of the ASIL-IEcLIG

From the ASIL-IEcLIG:

Elizabeth Trujillo from Suffolk University Law School and Jason Yackee from University of Wisconsin School of Law have been elected to be Co-Chairs of the International Economic Law Interest Group for ASIL.   Jason and Elizabeth are stepping in after 2 years as being Co-Vice Chairs under the wonderful leadership of Sungjoon Cho and Claire Kelly.  New Co-Vice-Chairs are David Zaring and Sonia Rolland.  The election took place at the ASIL-IEcLIG Biennial conference held at George Washington Law School in Washington DC on Nov. 29-Dec. 1, 2012.  The new leadership will be assuming their positions at the ASIL 2013 Annual Meeting in April.  The ASIL-IEcLIG Biennial, in cooperation with George Washington University School of Law and the Federal Trade Commission, was on "Re-Conceptualizing International Economic Law: Bridging the Public/Private Divide."  Keynote speakers included Professor Ralph Steinhardt from GW Law School, the Honorable Donald C. Pogue, Chief Judge United States Court of International Trade, and Amelia Porges from the Law Offices of Amelia Porges.  There were over 100 registered participants from all over the world including the U.S., Europe, Latin America, New Zealand, and Asia.

Eli Lilly NAFTA Chapter 11 Claim - Part 3

One last post on the Eli Lilly NAFTA Chapter 11 complaint (unless someone else has something they want to add).  Eli Lilly's national treatment argument is as follows:

106.  The  measures  in  issue  de  facto  discriminate  against  Lilly,  a  U.S.  investor,  when compared to domestic investors, by requiring the Strattera patent (which was filed on the basis of an international application) to meet elevated and additional standards for utility and  disclosure  that  are  not required  by  the  laws  of the United  States  of America,  the European  Union,  or  the  harmonized  PCT rules.  The  measures  in  issue  disadvantage foreign nationals and render their patents  especially vulnerable to  attack by insisting on proof of utility and disclosure of evidence that is  not required by the foreign applicants' own national jurisdictions or international rules.

107.  The  measures  in  issue  also  de  facto  result  in  less  favourable  treatment  to  Lilly  as compared  to  domestic  generic  competitors,  who  by  virtue  of the  application  of the measures are able to reap the economic benefits associated with Lilly's investments, thus destroying Lilly's market share and associated profits.

Do either of these arguments demonstrate less favorable treatment?  The first compares Eli Lilly's treatment in Canada with that given to Eli Lilly under U.S. or international law.  The second compares Eli Lilly's treatment with that given to domestic generic competitors.  But is the comparison between Eli LIlly and similarly situated Canadian patent holders (i.e., non-generic companies) the real key?

Eli Lilly NAFTA Chapter 11 Claim - Part 2

In the last post, Henning provided an excellent summary of the key substantive parts of the Eli Lilly NAFTA Chapter 11 complaint as it relates to IP law.  Let me just make a more general point here (and another more specific point in the next post).

In Eli Lilly's view, Canada has done something outrageous in its patent law.  I'm not enough of a patent law expert to know whether that's true, but I see the argument.  But stipulating for the moment that Canada has done someting outrageous, let me ask this:  Does it make sense to have a system where foreign investors can try to get compensation for outrageous patent treatment, but domestic investors get nothing?  If a country's law is deficient in some way, should we focus on trying to get that law fixed, rather than create an international rule that gives only foreign investors compensation for the deficiency?

Guest Post by Henning Grosse Ruse - Khan: Investor–State Arbitration to Challenge Host State Compliance with International IP Treaties?

A Guest Post by Henning Grosse Ruse - Khan:

Last week, Luke Peterson reported that the U.S. based pharma corporation Eli Lilly has put Canada on notice of its intent to submit a claim to arbitration under NAFTA Chapter 11 following the invalidation of some of its patents by Canadian courts (http://www.iareporter.com/articles/20121203_2). The Notice of 7 November 2012 is now available on Andrew Newcombe’s website (http://italaw.com/cases/1625). It reveals an interesting new interface between international IP and investment law.

In Eli Lilly and Company v. The Government of Canada, the US pharmaceutical complains about too strict
patentability requirements as applied by the Canadian Courts since 2005. In a nutshell, Eli Lilly alleges that the courts interpret the utility (or industrial applicability) standard for patent protection – one of three
criteria an invention must meet to be patentable – and the requirement to disclose the invention so that it can put into practice in a way that leads to frequent invalidation of pharmaceutical or bio-pharma patents in Canada. As for the utility criterion, the notice alleges that since 2005, federal Canadian courts have created a so called promise doctrine ‘whereby utility is assessed not by reference to the requirement in the Patent Act that an invention be “useful”, but rather against the “promise” that the courts derive from the patent specification’ (p.10). Eli Lilly argues that this doctrine has led to ‘a dramatic increase in the number of patents invalidated for the lack of utility’ – 17 in the last 7 years (all in the area of bio-pharma patents), as compared to 2 in the 15 years before (p.15). The US company also complains about ‘a new, non-statutory disclosure obligation’ imposed by Canadian courts which interacts with the enhanced utility standard ‘in a manner that is fatal to valid pharmaceutical and biopharmaceutical patents’ (p.16, 18), such as those for its drugs ‘Strattera’ (for treating attention-decifict hyperactivity disorder, ADHD), Zyprexa and Evista.

For me, the most interesting aspect is that Eli Lilly claims expropriation and a breach of the fair and equitable treatment (FET) standard because the Canadian court decisions which invalidate its patents ‘are contrary to Canada’s international treaty obligations’ (p.24); in particular those deriving from the WTO TRIPS Agreement, NAFTA Chapter 17 on IP rights and the Patent Cooperation Treaty. In essence, the company argues that (1) the “promise doctrine” imposes an utility standard which violates Art.27:1 TRIPS to make available patents for inventions which are new, non-obvious and useful; (2) the judicial decisions amount to a de facto discrimination of biopharma patents contrary to the Art.27:1 TRIPS obligation not to discriminate among different fields of technology; and (3) infringe the Patent Cooperation Treaty (PCT) by imposing additional form and content requirements relating to international patent applications. These breaches on international IP treaties are argued to violate investment protection standards because Eli Lilly claims to have a reasonable expectation that Canada complies with these IP treaties (pp.25-26).

Leaving aside the merits of the claims of inconsistencies with international IP treaties (especially the absence of any further definition of the patentability criteria in TRIPS is generally understood as conferring flexibility on WTO Members to define these criteria in their national laws), there are systemic implications: Should investor – state arbitration function as a new venue to litigate compliance with international IP treaties? Can it serve as an alternative forum for rightholders to challenge TRIPS consistency (instead of lobbying their governments to bring a WTO dispute)? And if we end up with parallel proceedings (as in the challenges to Australia’s plain packaging measures where Phillip Morris equally claims a BIT violation based on alleged inconsistencies with TRIPS and the Paris Convention), will investment arbitration come up with its own assessment or wait for a WTO decision?

Unilateralism vs. Multilateralism in Currency Disputes

Brazil has put forward a conceptual note (Word doc) on the issue of exchange-rate misalignment.  Its focus is on developing trade remedy procedures to deal with the perceived problem:

IV. IS THERE A NEED TO CRAFT TRADE REMEDIES THAT SPECIFICALLY ADDRESS CURRENCY MISALIGNMENTS?

Existing provisions related to exchange-rate movements in the WTO agreements as well as the three Agreements providing for trade remedies at the WTO were created to deal with situations unrelated to the dynamics of exchange-rate movements in today's volatile international monetary system. The WTO seems to be systemically ill-equipped to cope with the challenges posed by the macro and microeconomic effects of exchange rates on trade. 

Members may wish, against this background, to consider the need for exchange-rate trade remedies and to start some analytical work to that effect. A non-exhaustive list of key elements that will necessarily have to be considered in this analytical work is provided below:

(a) Measuring currency misalignment

It will be necessary to define methodologies to assess currency misalignments and to establish triggers/benchmarks for specific action. Cooperation with the IMF could be explored. The purpose would not be to establish optimal or equilibrium exchange rates for particular currencies, but rather to detect significant departures from historical or reasonable levels. Issues such as the basis for comparison - against other individual currencies; basket of currencies; both - and time-frames would be part of this evaluation.

(b) Product-specific/sector-specific or economy-wide scope

Should corrective measures be applicable only to a specific product or sector in the country affected or to its entire economy? What are the implications of either choice? The three agreements on trade remedies do not contain any provision on sector specific or economy wide corrective measures. A sector-specific approach would need a definition of and/or a classification of sectors.

(c) Time-frame

An appropriate time-frame for the application of corrective measures. The argument could be made that sustained long-term misalignments would no longer be a misalignment; rather, they would become a new structural point of equilibrium. The discussion on time-frames would equally touch on review and extension/termination of corrective measures.

(d) Origin of covered products

Should corrective measures be applied on an MFN basis or specifically for currencies against which the misalignment is found? As exchange rate misalignments may not necessarily occur against a large number of key trading partners and may have a focus on bilateral trade (or on a wider volume of world trade representing in any case the sum of a certain number of bilateral trade flows), it may be the case to consider a non-MFN approach.

(e) Injurious effects

Corrective measures could be crafted to be triggered automatically or, alternatively, following the finding of injury or threat of injury to the domestic industry. The automatic format would probably demand more stringent requirements.

(f) Investigation procedures

The need for investigation procedures would depend largely on the automaticity of the mechanism adopted. The more automatic, the less need for such procedures. In case these procedures are necessary, work could be inspired by the parameters found in the ADA, ASCM and AS.

With trade remedies, a government acts on its own, but subject to WTO rules. In a sense, the government action is unilateral in nature, but still subject to multilateral oversight.  Is this the best model for actions against currency measures? Or would a pure multilateral model work better, with explicit WTO rules developed (e.g., on "measuring currency misalignment"), and any concerns brought directly to the DSU?

Is It Time to Regulate U.S. State Subsidies?

I've talked about sub-federal state subsidies before on this blog. The issue is suddenly in the news, due to a long NY Times article today. CFR's Edward Alden proposes reining them in as follows:

... There are three basic requirements: a legislative framework, an adjudication body, and penalties.

Legislation:  The U.S. Congress should pass legislation that puts in place domestically many of the rules of the WTO’s “Agreement on Subsidies and Countervailing Measures.”The bill would distinguish between prohibited “specific” state subsidies to companies – such as tax refunds or reductions, cash grants, loans or loan guarantees – and permitted government expenditures such as infrastructure, job training, or across-the-board corporate tax reductions that are broadly beneficial to business.

Adjudication:  The federal government should establish dispute settlement panels, under the authority of the Federal Trade Commission. States would be allowed to bring complaints in cases where they believe they have been harmed by prohibited subsidies offered by other states. Much as in the WTO, panel decisions would be binding, though an appeal mechanism to domestic U.S. courts would need to be created.

Penalties:  The most obvious remedy is that the tax break or other prohibited subsidy would need to be withdrawn immediately. In the EU system, there is also a provision that can require the companies to pay back the subsidies. Another possibility could be a cash penalty that the offending state must pay to other states that were harmed by its actions.

Is there a chance of success here?  I wasn't aware of any momentum for action.  Will the NY Times piece get people thinking about the issue?  Is Alden's approach a good one?  Does Canada's Agreement on Internal Trade offer any guidance?

Incorporating (Some) Unilateral Free Trade into the Trading System

That's the title of a short essay of mine in the Virginia Journal of International Law's online edition.  Here's the main proposal:

... I thus propose an approach that I call "unilateral reciprocal binding trade liberalization." The basic idea is that unilateral liberalization by one member would lead to reciprocal liberalization from other members. The initial liberalization is undertaken unilaterally, and would then be part of the country's binding free trade promises. Other countries would then be required to reciprocate with new free trade commitments of their own. In other words, WTO Members would agree to cut their tariffs and other designated trade restrictions whenever another Member makes unilateral cuts.

I will briefly sketch out the contours of this approach here, but clearly further development is required if this proposal were to be put into practice. In order to administer this system, a neutral review mechanism, along the lines of the WTO's Trade Policy Review Mechanism, would be set up to evaluate the extent of the unilateral cuts and quantify the matching cuts that would be required in response. This mechanism would review existing protection and government support, in order to determine the corresponding liberalization to be offered in response to the initial liberalization. The mechanism would be overseen by a group of outside (i.e., non-governmental) experts.

In terms of the specific responding cuts to be made, only those who benefit from the unilateral cuts would be required to make their own cuts. When a government makes its initial unilateral cuts, it could request which cuts it would like other governments to make in response. Ultimately, however, the corresponding liberalization is each government’s choice. Its decision would be made in conjunction with the neutral oversight mechanism.

"Unilateral reciprocal binding trade liberalization" is an unwieldy term, I know.  Feel free to suggest alternatives!

More generally, I don't expect governments to adopt this approach any time soon, or ever for that matter.  But the current "bargaining for concessions" approach bothers me, and I'd love to find some way to change that mindset.  I thought this might help.

Reading up on Feed-In Tariffs

There have been a number of news reports about the WTO panel report in the Ontario feed-in tariffs case, brought by Japan and the EU.  The report has been issued to the parties, and may be circulated to the public some time in the next month or so.  If you want to read up on the issues in the case, some of the EU submissions are here: http://trade.ec.europa.eu/wtodispute/show.cfm?id=530&code=1#_eu-submissions  In addition, blogger -- and frequent commenter here -- M.S. Srikar has a long paper on renewable energy programs, available here: http://wtocentre.iift.ac.in/workingpaper/Renewable%20Energy%20Programmes_WTO%20Compatibility.pdf

"Impediments to Attainment of Objectives" Complaints

GATT Article XXIII:1 sets out the following types of complaints:

If any contracting party should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded as the result of 

  (a) the failure of another contracting party to carry out its obligations under this Agreement, or

  (b) the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement, or

  (c) the existence of any other situation,

We all know about the "nullified or impaired" language.  But what about the "attainment of any objective of the Agreement is being impeded" language?  Is that ever going to be used in a WTO complaint? What would such a complaint look like?  The terms are pretty vague, which could give rise to some creative legal arguments, such as this one by Alexia Herwig:

 I argue that the WTO’s non-violation and situation complaints for impediments to the attainment of treaty objectives (hereafter collectively referred to as impediments-to-attainment-of-objectives complaint or IAOC) require members to account for extraterritorial impacts on standards of living created through trade in goods. 

...

As the objective of the WTO and GATT is to improve access to food, clothing, shelter and possibly other relevant items through means of trade, a situation where trade in goods durably worsens standards of living of any individual, is one in which the attainment of the objective of the GATT is impeded because it is in direct opposition to the goal stipulated in the preamble. The ICESCR [International Covenant on Economic, Social and Cultural Rights] could also be used as context to interpret the IAOC to encompass situations where trade results in individuals falling below an adequate standard of living. We could consider WTO law to be an effort at cooperation aimed at respecting, protecting and fulfilling the right to an adequate standard of living as in Article 11.1 ICESCR, so that its interpretation should be maximally compliant with the ICESCR. The Maastricht Principles also affirm that there is an obligation of states to elaborate, apply and interpret international trade agreements consistently with their human rights obligations.

More details at the link.

To be clear, I'm not saying I think the provision should be used this way; just highlighting a creative argument.  More generally, it's worth emphasizing that the provision in question is just sitting out there, waiting to be invoked some day.  What are the circumstances under which this might happen?

Border Carbon Adjustments

I don't hear much talk in the U.S. (or around the world for that matter) these days about climate change in general, much less taking any action to deal with it.  But some day the world economy might pick up, and perhaps then we will get back into issues related to how government measures in this area can be taken consistently with international trade rules.  If and when that happens, here is a helpful new publication entitled "A Guide for the Concerned: Guidance on the elaboration and implementation of border carbon adjustment." An excerpt:

BCA AND WTO LAW

There are two key aspects of WTO law that are most relevant to border carbon adjustment: non-discrimination under the General Agreement on Tariffs and Trade (GATT) and subsidy law under the Agreement on Subsidies and Countervailing Measures (SCM). 

The former dictates that imported goods must be treated no worse than “like” domestic goods (national treatment: Article III:2), and that there should be no discrimination among “like” goods on the basis of country of origin (MFN: Article I:1). GATT also contains a carve out from these requirements in Article XX (General Exceptions), which allows discrimination for a number of agreed purposes, including one that is particularly relevant for climate change protection: the conservation of exhaustible natural resources. However, Article XX also includes (in its chapeau) some general requirements for policy that must be met regardless of the validity of the exemptions, including the requirement that a measure does not represent “arbitrary or unjustifiable discrimination between countries where the same conditions prevail” or a “disguised restriction on international trade.” The chapeau tries to ensure that Article XX is available for legitimate environmental measures, but not for protection against competitiveness impacts. 

With respect to import adjustment, the implications are that BCA cannot discriminate on the basis of country of origin; it cannot have, for example, exemptions based on national policies or practice. And it cannot discriminate between foreign and domestic goods that are “like,” with carbon-intense and low-carbon goods almost certainly being considered “like.” Any permutation of BCA will fail the latter test, so the legal questions would then centre on whether the regime passed the strictures of Article XX. The details of the scheme in question would be key, and while definitive guidance is impossible, case law gives us some strong indications: 

• The regime would have to focus only on preventing leakage (i.e., an environmental goal), and not on preserving competitiveness.

• It would very likely have to be preceded by bona fide attempts at negotiating a multilateral solution.

• It would probably have to allow individual foreign producers to produce their own actual data, to challenge any benchmarks imposed.

• And it might have to allow exemptions to countries that had taken climate action comparable in effectiveness to domestic action.

Subsidy law in the WTO outright prohibits certain types of subsidies (e.g., those that are linked to export promotion) and allows challenges to other subsidies, focused on determining whether they cause harm to foreign producers. Border carbon adjustment applied to exports would be a prohibited export subsidy if the rebate were in excess of the costs borne by goods destined for domestic consumption. But there is no legal consensus (or even strong opinion one way or the other) on whether all export adjustment would constitute prohibited subsidies under SCM rules; it depends on whether the domestic scheme (whether a tax, a cap and trade or some other regulations) is considered legally an indirect tax. Such taxes, of which VAT is an example, can be legally adjusted for at the point of export, but direct taxes (such as payroll taxes) cannot, and carbon taxes fall into a legal grey zone in between.

The State of Canada-EU Trade Negotiations

Canadian journalist Paul Wells provides a link to a leaked memo written by the European Commission, and offers some commentary here.

Seal Products: Russia a Third Party and other Developments

Russia's participation as a third party in the seal products dispute between Canada and the EU will be an early opportunity to see how it approaches WTO litigation.  As I have noted in previous posts, Russia has banned imports of seal fur and its market is understood to be of much greater importance to the Canadian industry than that of the EU.  

In other developments, the parties have (apparently) agreed to public hearings--my guess is that the first  sometime from late Jan to late Feb. Canada is said to have filed its first submission, but true to its inability to kick the cloak and dagger habit has not made the submission public and perhaps will not do so until after the first hearing.   The EU submission is due around Christmas-they are supposed to make it public when filed-we'll see.

In the last few months, new scientific research has come out that strongly supports the EU position that a humane seal hunt in Canada is not a realistic possibility.

It is perhaps time to start thinking about amicus briefs.  I am definitely in and very open to working with others.

 

 

Counsel Position at the ACWL

From the ACWL:

The Advisory Centre on WTO Law (ACWL) is a public international organisation, independent of the WTO, which was established in 2001 to provide legal advice on WTO law, support in WTO dispute settlement proceedings and training in WTO law to developing countries and least developed countries.

The ACWL is seeking to fill a vacancy for one of its positions of Counsel.

Under the supervision of the Executive Director and the Deputy Directors, the Counsel provides legal opinions on WTO matters, prepares submissions and presents the positions of parties in dispute settlement proceedings before panels and the Appellate Body, delivers lectures to participants in the ACWL's training programmes and performs other functions assigned by the Executive Director.

Applicants should have an advanced university degree in law; practical experience in WTO law (ideally two to six years), a good understanding of the economic issues underlying WTO law; excellent drafting, communication and presentation skills; ability to manage, organise, plan and deliver work assignments in a timely manner and the ability to work independently and cooperate with others in a diverse international setting. Applicants should also have a commitment to international public service and an interest in the advancement of developing countries. Applicants must be fluent in English. Experience in representing parties in international dispute settlement proceedings and the ability to work in French or Spanish would be distinct advantages.

An internationally competitive salary and benefits package will be offered commensurate with the successful candidate's experience and qualifications and in accordance with the ACWL's staff regulations, which are similar to those of the WTO.

All candidates are requested to provide a detailed CV and to complete a personal history form.  The form can be downloaded at the link below. If you have problems downloading it, you may request it by contacting secretariat@acwl.ch.

The final date for the submission of applications is 14 December 2012.

India and the World Economic Order: Call for Submissions

From the Trade, Law and Development editors:

Founded in 2009, the philosophy of Trade, Law and Development has been to generate and sustain constructive and democratic debate on emergent issues in International Economic Law and to serve as a forum for the discussion and distribution of ideas – with a specific focus on the development perspective of International Economic Law. In keeping with these ideals and to commemorate the fifth year of the Journal, the Board of Editors is pleased to announce the theme for its next Special Issue (Vol. V, No. 1, Summer 2013): India and the World Economic Order. 

More than two decades ago, India abandoned its quasi-isolationist position and began implementing radical policy changes in order to fully integrate itself into the world trading system. Through the years India has attempted to strike a balance between its welfare agenda and the compliance necessitated by the prevalent international legal order, by shifting from a quasi-isolationist position in the world economic system, to achieving a considerable amount of trade and investment activity.

Inspired by the role of India in the continuing evolution of the world economic system, the Board of Editors invites original, unpublished submissions for the Special Issue on India and the World Economic Order for publication as ‘Articles’, ‘Notes’, ‘Comments’ and/or ‘Book Reviews’. Submissions can deal with any aspect of India’s role or policies in the world economic system. Manuscripts may be submitted via email, ExpressO, or the TL&D website. For further information and submission guidelines, please visit the journal website at www.tradelawdevelopment.com

For further queries, contact the editors at: editors[at]tradelawdevelopment.com

LAST DATE FOR SUBMISSIONS: FEBRUARY 15, 2013

The Media's Take on Whether WTO DS Reports are Binding

There is some famous scholarly debate on whether WTO dispute settlement rulings are binding.  Here's a media take on it, from the CBC news (in the context of the Ontario feed-in-tariff case):

The World Trade Organization appears to have upheld a complaint against the Province of Ontario’s green energy program.

The complaint was made by the EU and Japan, which claim the province's "feed-in tariff" program for its energy grid discriminates against foreign component manufacturers by declaring a minimum percentage of renewable energy goods and services be provided by Ontario-based companies.

...

Although the WTO has yet to acknowledge any decision publicly, reports Monday suggest the affected parties have been notified of the organization's decision to side with the complainants.

...

The WTO ruling is non-binding, meaning Ontario could simply ignore it and not face any monetary punishment. But such a move would likely be met with the implementation of tariffs against any Ontario-made goods in Japan and the EU.

So, as they put it, a WTO ruling is "non-binding," but tariffs could be imposed as part of the enforcement.

I tend to think that the word "binding" does not tell us that much in this context. Rather, the key question is how effective the enforcement mechanism is.

The TLD Symposium

Let me just wrap up the TLD Symposium by saying thanks to everyone who participated, and hopefully readers enjoyed it.  We've never done one of those before, and I was glad the TLD folks proposed it, set it all up, and did much of the work. I think I learned a bit from the process, and I'd be happy to do it again if there is an appropriate law journal issue at some point!

Is Government Provision of Public Goods a Financial Contribution?

SCM Agreement Article 1.1(a)(1)(iii) identifies the following as a "financial contribution":

a government provides goods or services other than general infrastructure, ...

I was helping out as a panelist in a WTO dispute settlement simulation in Amy Porges' WTO law class, and I came across an argument I had not thought of before:  Goverment provision of "public goods" is covered by this provision.  Now, as it turns out, this was not the argument being made, and I had misunderstood.  But regardless, it got me thinking, are public goods covered by this language?  I had always assumed that "goods" meant physical, tangible goods (although electronic goods are probably covered too).  But what about a public good like, say, national defense?  What does the text, context, object and purpose, etc. tell us about whether government provision of public goods is covered by this provision?

Congrats to the Honorable Claire Kelly!

Many readers probably know Claire Kelly, a trade law prof at Brooklyn Law School.  Well, she will now be moving from judging students to judging litigants at the Court of International Trade.  Here is yesterday's White House press release:

 Today, President Obama nominated Claire R. Kelly to serve on the United States Court of International Trade.

“I am honored to put forward this highly qualified candidate for the federal bench,” President Obama said.  “Ms. Kelly will be a distinguished public servant and valuable addition to the Court of International Trade.”

Congrats to Claire!

TLD Symposium: Author's Reply on "Considering Development in the Implementation of Panel and Appellate Body Reports"

Article:  Considering Development in the Implementation of Panel and Appellate Body Reports, 4(1) TRADE L. & DEV. 150 (2012) [available here]

Reply by Sonia E. Rolland

I will first take this opportunity to sincerely thank the Editors of Trade Law & Development and Simon Lester of the International Economic Law and Policy blog for presenting this symposium and supporting
this unique opportunity for a global exchange on dispute settlement at the WTO. I also wish to thank particularly Professor Yogesh Pai for his kind introduction and Ms. Cherise M. Valles for her insightful and thought-provoking comments. Her experience as a practitioner is precious to help inform the debate.

While my paper focuses on the narrow issue of development in implementation procedures, the issues must be viewed in the broader context of the debate regarding development considerations under the DSU and, ultimately, under the WTO agreements as a whole. As such, many of the critiques of Special and Differential Treatment (SDT), and some proposed alternatives are also relevant here. In particular, the debate on whether to treat development as a marginal consideration, typically through SDT, or to reconsider the rules and their interpretation to “mainstream” the interests of many WTO developing members comes into play at the implementation stage of dispute settlement. My paper examined the value and limitations of SDT as it currently exists under Articles 21 and 22 of the DSU, and offered some alternatives.

My analysis on Article 22 suggests that the requirement to take into consideration broader economic conditions may be creating such an opportunity for taking into account development constraints much like what some commentators and practitioners have called “mainstreaming”. Article 22.3(d) is facially neutral (it does not distinguish between developing, developed or LDC members) but allows the particular circumstances of members to influence the legal determination, presumably including development constraints of developing and LDC members. I must re-emphasize here that the analysis must be taken with great caution, as there is only a very limited record of arbitrations to examine.

As Ms. Valles rightly points out, a risk with SDT is to create tiered obligations between developed and developing countries. While some members advocate precisely that, others have withdrawn from their SDT demands. The WTO agreements and the DSU, in as much as they make special allowances for
developing and LDC members, do seem to create different rights and obligations for different members. Whether this differentiation is helpful or desirable is very much up for debate amongst members.

Where both Ms. Valles and I agree is that arbitrariness and lack of consistency in the interpretation of SDT and development arguments is a real problem. Arbitrations regarding the time-period for implementation and the suspension of concessions are not immune from critique on that point.

The issue then is to propose avenues for improving the consistency and predictability of arbitrators’ decisions when they face development arguments made under SDT provisions. As I discuss in the paper and more broadly in my book Development at the WTO (Oxford University Press, 2012), the lack of precision in many SDT provisions regarding the nature of the obligation and the type of obligor has made it all too easy to brush them aside as merely hortatory. I argue that obligations can take other forms than bright line prohibitions and mandates. Recent evolutions in international environmental law and human rights, for instance, have resulted in the interpretation, adjudication and implementation of treaty provisions previously seen as simply aspirational to now comprise a legal obligation of conduct or means.

Similarly, in the WTO context, consider provisions such as Article 21.7: “If the matter is one which has been raised by a developing country Member, the DSB shall consider what further action it might take which could be appropriate to the circumstances.” It is unclear as to exactly what the DSB should do in order to meet its burden: there is no guidance on what range of actions are to be considered, nor on what circumstances must be taken into account. Is that to say that the clause is devoid of any legal meaning and can be ignored as merely hortatory? The drafters certainly chose the language of legal obligation (“shall”) and not the softer “should” used in some SDT provisions. The clause also makes it clear that the DSB must consider the issues and the possible responses. I suggest that compliance could be evidenced by some discussion, in the DSB minutes, of any development considerations
raised by members involved in the dispute and possible responses to the particular problems brought to the DSB’s attention. The DSB does that in part, for instance, when it allows developing members a longer time for submitting their written arguments in proceedings, acknowledging their capacity constraints. I used the term “best efforts” to describe the type of obligation where the treaty provision does not mandate a particular result but appears to require a process for dealing with development issues. While Ms. Valles doubts that such a framing would be helpful to reinforce the value of SDT provisions, I suggest that it could be a step forward, by no means exclusive of other canons of interpretation or even stronger enforcement processes.