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Guest Post: Transnational subsidies II (continued) – WTO concerns over the EU’s Foreign Subsidies White Paper.

This is a guest post is from Victor Crochet and Marcus Gustafsson, trade lawyers with Van Bael & Bellis.

Cross-border subsidies have become a growing source of concern as states increasingly ‘globalize’ the use of subsidies for their commercial or wider strategic advantage. On 17 June 2020, the European Commission ( Commission ) made its intention to rein in China’s Going Global Strategy clear when, as previously discussed on this blog, it published a White Paper aimed at levelling the playing field in the European Union internal market as regards ‘foreign subsidies’ (i.e. a financial contribution by a government or any public body of a non-EU country or a private body entrusted and directed by a non-EU country government, which confers a benefit to a recipient and is limited to an industry, individual company or group of companies). The Commission notes that ‘foreign subsidies appear to have facilitated the acquisition of EU undertakings, influenced other investment decisions or have distorted the market behaviour of their beneficiaries’. It also adds that, ‘[m]any foreign subsidies would be problematic if they were granted by EU Member States and assessed under EU State aid. EU State aid rules however apply only to public support granted by EU Member States. In contrast, subsidies granted by non-EU authorities fall outside EU State aid control.’ To remedy this imbalance, the Commission proposes three ‘Modules’ to tackle foreign subsidies. Module 1 envisages a general instrument to capture distortive effects caused from foreign subsidies. Module 2 focuses on distortions caused by foreign subsidies facilitating the acquisition of EU companies, while Module 3 concentrates on harmful effects caused from foreign subsidies on EU public procurement procedures. The scope of these Modules would be very broad as they would tackle subsidies benefitting the production of goods and the provision of services as well as subsidies granted to entities established within the EU and abroad.

In this regard, we identify two main concerns with the WTO conformity of these modules.

First, with regard to foreign production subsidies, the Modules may run afoul of Article 32.1 of the SCM Agreement, which prohibit WTO Members from taking any specific action against a subsidy of another Member not provided for under the SCM Agreement and the GATT. The interesting question in this respect is whether the SCM Agreement covers a situation in which a subsidy is granted by a foreign government to a production entity located in the EU. The White Paper appears to suggest that the SCM Agreement would not apply in this situation since no goods are crossing a border. In this regard, the panel in Canada – Aircraft suggested that the SCM Agreement only regulate subsidies that ‘distort or may distort international trade’ (at para. 9.119). However, this would seem to add a requirement to Article 1.1 of the SCM Agreement that, as compared to Article 1.1 of the SPS Agreement, was not included in the text. Furthermore, the Appellate Body in US – Offset Act (Byrd Amendment) , explained that the SCM Agreement regulates subsidization of production, and not only the importation of subsidized products. This was confirmed ‘by the contextual consideration that the SCM Agreement authorizes multilaterally-sanctioned countermeasures “against” a subsidy’ (at para. 251). In this sense, Article 1.1 of the SCM Agreement does not impose any territorial limitation on the location of the recipient of the financial contribution, or the benefit. In other words, the recipient does not have to be in the territory of the subsidizing Member for a measure to constitute a subsidy under the SCM Agreement. Therefore, insofar as these Modules would allow the EU to take unilateral action against production subsidies, it seems that they may violate Article 32.1 of the SCM Agreement.

Second, with regard to foreign subsidies granted for the provision of services and for the participation in government procurement bids, the main question is whether these measures could lead to a national treatment discrimination under the GATS or the GPA. Under the GATS, since the proposed Modules target subsidies granted by foreign governments, they are likely to constitute a de facto national treatment discrimination, as foreign-owned or foreign companies will presumably be more affected than EU companies. The Modules may also violate the EU’s market access commitments under the GATS. In response, the EU could claim, under Article XIV(c) of the GATS, that the proposed measures are justified because they are necessary to secure compliance with EU competition law, state aid law and the functioning of the internal market under the Treaty of the Functioning of the EU (TFEU). Furthermore, they would not be a means of arbitrary or unjustifiable discrimination as the EU has in place similar rules for subsidies granted by its own Member States. Under the GPA, there are no general exceptions to a violation of the national treatment obligations. However, such an exception could possibly be read into the GPA, similar to the “legitimate regulatory distinction” test that has been read into Article 2.1 of the TBT.

At this stage, we have two principal concerns with this type of defence. First, there appears to be possible discrepancies between the EU’s State Aid regime and the foreign subsidies Modules. For example, the block exemptions, under which certain forms of State Aid are allowed, are not mentioned in the White Paper. Similarly, the net cast by the Modules would appear to catch more forms of subsidies than that of the State Aid regime (for example, by including actions by private bodies, or potential raw material distortions). Second, there would be differences in the administration of the State Aid regime and the foreign subsidies regime, which could render the latter much more burdensome to foreign companies. In particular, the State Aid regime is mostly ex ante and focuses on the Member State government, which has to notify and obtain approval from the Commission before any state aid may be granted. Illegal state aid must be repaid to the subsidising government. In contrast, the foreign subsidy Modules would in many instances entail a two-stage ex post investigation and will focus on the recipient of the subsidy. Similar to countervailing duty investigations, this could impose a significant burden on recipient companies. Furthermore, because it may be difficult ‘to establish that the foreign subsidy has been actually and irreversibly paid back’, the White Paper foresees that structural or behavioural remedies may be necessary.

On this basis, we have doubts that these Modules, if adopted as currently proposed, would be in line with WTO rules. Although the White Paper raises many pertinent questions concerning how the rules on WTO subsidies may have to be reformed, and how the EU can ensure a level playing field in its own market in light of its strict State Aid regime, the significant extra-territorial effects of the envisaged measures raise legitimate concerns and are likely to spark tit-for-tat retaliation from other WTO Members.

Posted by Simon Lester on July 05, 2020 at 03:21 PM | Permalink | Comments (1)

The USMCA Chapter 31 Dispute Settlement Roster Is Set.

The roster of panelists for USMCA Chapter 31 state-state dispute settlement is out (the list of rapid response labor panelists for the Canada-Mexico mechanism is here, and for the U.S.-Mexico mechanism is here). Recall that the absence of a roster under NAFTA appears to have been a cause of the blocked panel in a NAFTA Chapter 20 dispute, and that ensuring the composition of panels under the USMCA was a big concern during the negotiations. Now that there is a roster, and also that certain other provisions of the dispute settlement chapter have been changed, there shouldn’t be a problem with panel blocking under USMCA.

Disputes under Chapter 31 may be coming soon, but in the meantime let’s talk about the roster creation process for the USMCA. Unfortunately, there is very little public information on the roster creation process for trade agreements in general. This is something governments do behind the scenes and it’s hard to get a sense of it, and therefore hard to write about it. But there is something about NAFTA/USMCA panelist selection in the context of composing specific panels that is unique and interesting, and I’m going to do a little speculating here about what impact it may have had on roster creation under the USMCA.

Under USMCA Article 31.8.1, each party can designate up to 10 people for the roster. The Parties “shall endeavor to achieve consensus on the appointments,” but “[i]If the Parties are unable to achieve consensus by one month after the date of entry into force of this Agreement, the roster shall be comprised of the designated individuals.”

From what I can see at the moment, we have the full list of 30 people on the Chapter 31 roster (the parties were able to reach consensus), and we also have the 10 individuals designated by the U.S., but we don’t know for sure who Canada and Mexico put forward.

As for the U.S. list, it is weighted towards people from the field of arbitration, which is interesting. I wonder what these folks will make of trade adjudication on issues such as TRQs. (For what it’s worth, based on the relevant USTR Regulations.gov page on this, it looks like there were 63 applications (“comments received”) for the roster, but the number posted there may not give us an exact count.)

Subtracting the 10 from the U.S. from the total, we have 20 names on the roster that were submitted by Canada/Mexico. Out of these 20, I count 5 former AB Members/Secretariat folks. That’s a lot!

Turning to my promised speculation, when thinking about the roster creation process under USMCA, it’s worth noting a particular feature of NAFTA/USMCA panel selection (perhaps there are other agreements that have this, but it’s certainly rare). After selecting the chair of a particular panel, when the parties are choosing panelists to serve on the panel, they each select panelists who are citizens of the other party . Here is Article 31.9.1(d):

(d) Within 15 days of selection of the chair, each disputing Party shall select two panelists who are citizens of the other disputing Party.

What that means is, parties have a stronger than normal interest in which citizens of other parties are on the roster, because they will be making their panelist picks from among the other party’s citizens. If governments were picking panelists from the pool of their own citizens on the roster (or from the list of individuals they put forward anyway), they might think differently about who the citizens of other parties on the roster are, because they have less of a say in which of them gets chosen as panelists. They just want to make sure there is no one terribly biased against them on the roster, whom the other party could then select for the panel. But if, as here, governments are picking from the citizens of the other party when they choose panelists, they will want to make sure there are some good options from the other party for them to choose. One thing that means is, when governments are designating their 10 individuals under Article 31.8.1, they may want to include some people who are citizens of the other parties who they think would be good, rather than only put forward their own citizens.

In the USMCA situation, then, the parties were confronted with this question when creating the roster: How many people should they choose from each party (or from non-parties)? The specific breakdown they put forward will probably depend in part on who the other parties are putting forward. How worried is a party about the people put forward by the other parties? That will affect how they approach the decision to put non-citizens forward themselves.

It looks like the U.S. put one Canadian on its list: Julie Bédard (who also has French citizenship). It also had one non-USMCA-citizen on there: Koji Saito.

And we can also see that Americans Jennifer Hillman and Kathleen Claussen are on the roster. They were not on the U.S. list, so they must have been submitted by either Canada or Mexico.

There are also a few citizens of other countries: Saito (noted above), and Christian Haberli, Ujal Sihgh Bhatia, and Elbio Oscar Rosselli Frieri. These folks could play a role under Article 31.9.1(b):

(b) The disputing Parties shall endeavor to decide on the chair of the panel within 15 days of the delivery of the request for the establishment of the panel. If the disputing Parties are unable to decide on the chair within this period, the disputing Party chosen by lot shall select within five days as chair an individual who is not a citizen of that Party.

Under this provision, a party might want some non-citizen options to choose from, but they aren’t restricted to choosing from the other party’s citizens as they are with the non-chair panelists.

With all that in mind, can we or can we not assume that Canada submitted all the Canadians (aside from Julie Bédard) on the list, and Mexico submitted all the Mexicans? Despite what I said earlier about the strategy in this situation, based on the names I see there, I don’t have any reason to think the Canadians submitted a Mexican name or the Mexicans submitted a Canadian name. And I don’t see any way to determine who put forward Hillman, Claussen, Haberli, Bhatia, or Frieri. (Aside from asking insiders, of course! But I’m not going to speculate about that here. If it becomes public some other way, I’ll come back to it).

There has been lots of talk recently about disputes coming under the USMCA. Perhaps some actual panelist selection will play out soon, and we will see who gets chosen. Here’s one thing I wonder. In disputes involving the U.S., where Canada and Mexico are choosing American panelists, will these countries ever pick the Americans put forward by the U.S.? Or will the Americans picked by Canada/Mexico for the roster serve on just about all the cases that involve the U.S.?

More from the U.S. on DSU Article 11.

At the June 29 DSB meeting, in the context of discussing the Australia – Plain Packaging AB report, the U.S. made the following comment on DSU Article 11 appeals:

As the United States has explained, and Members know well, Article 17.6 of the DSU limits an appeal “to issues of law covered in the panel report and legal interpretations developed by the panel.” Attempts by appellants to re-litigate unfavorable factual determinations by panels are not encompassed by the right of appeal set out in Article 17.6. 9.

Neither is appeal of unfavorable factual determinations supported by the text of Article 11 of the DSU. This provision does not impose an obligation on a panel. Rather, it recognizes that the “function of panels” is that a panel “should make an objective assessment” of the matter before it. By describing this function using “should”, rather than creating an obligation using “shall”, WTO Members further established in the DSU that an alleged failure to make an objective assessment would not be subject of an appeal.

Furthermore, Article 11 of the DSU does not include the term “due process”. Nevertheless, the complainants in this dispute brought numerous claims of error, including for “due process” violations, under Article 11.

Such erroneous and unfounded claims of error under Article 11 resulted in significant expenditures of time and resources. The parties and third parties met with the Division for two oral hearings in June and November 2019, spanning a total of eight days of hearings.

We disagree with the majority’s decision in the appellate report to entertain these claims and, remarkably, even accept a claim of error. Even aside from there not being a basis to appeal under DSU Article 11, the United States agrees with the separate opinion’s conclusion that it was not “necessary to examine in detail the appellants’ claims that the Panel erred” and that, in any event, the panel did not act inconsistently with the original, high standard an Appellate Body report set out for Article 11 of the DSU. 10.

This appeal presented a missed opportunity to reconsider the scope of appellate review permitted under the DSU. As we have explained in the USTR Report on the Appellate Body, 11 the DSU lacks any textual basis for appellate review of factual findings, irrespective of the standard of review to be applied.

The Appellate Body’s decision to review the “objective assessment” of a panel has been seized by appellants to cover practically all factual determinations by a panel, as illustrated by this monstrous appeal.

Our extensive experience as a litigant shows that panels take seriously their task to make an objective assessment. In fact, many current or former WTO delegates serve as panelists, and no doubt take their responsibilities very seriously.

Here’s the provision:

Article 11: Function of Panels.

The function of panels is to assist the DSB in discharging its responsibilities under this Understanding and the covered agreements. Accordingly, a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements. Panels should consult regularly with the parties to the dispute and give them adequate opportunity to develop a mutually satisfactory solution.

The second sentence sets out several things a panel “should” do: “make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements.”

Thus, under this provision, there is the “objective assessment” generally, and there is also the “objective assessment” in the specific context of the facts of the case. When the U.S. talks about Article 11, it often seems to focus on appeals of factual issues. At one point in the passage quoted above, however, the U.S. seems to be saying that none of these instructions to the panel are things the Appellate Body should be reviewing on appeal:

By describing this function using “should”, rather than creating an obligation using “shall”, WTO Members further established in the DSU that an alleged failure to make an objective assessment would not be subject of an appeal.

Prior to this statement to the DSB, I was under the impression that the U.S. was narrowly focused on “appellate review of factual findings” in the context of Article 11 (maybe they said something broader and I missed it). Now, though, they appear to be saying there should be no appeals at all related to “objective assessment” under Article 11, although it’s worth noting that even in this passage they spend a lot of time on factual issues.

If they do have in mind the elimination of Article 11 appeals, my suggestion is to make the case for why that should be. Clearly, many other Members see value in Article 11 appeals, given how often they make these appeals. They are going to need to be talked out of doing this. One argument, of course, is that the text does not provide for it and the drafters did not intend it. Beyond that, though, it’s worth thinking through the policy arguments. Now that we have years of experience with Article 11 appeals, what are the costs and benefits?

Case Studies in Chinese Economic Pressure.

Recently, a trade economist asked me if I had come across a list of instances where the Chinese government had put economic pressure on another government in relation to a non-trade issue. I hadn’t seen anything, but it seemed worth digging into, so I put an excellent Cato intern named Ashley Hitchings, a University of Chicago undergrad, on it. I thought she did a great job gathering information from publicly available sources, but I know that for this kind of research, there is behind the scenes information that only an insider would know. What I thought I would do is post her work here, Case Studies in Chinese Economic Pressure , and see if anyone had any additional insights about the cases she discusses or has any additional cases to add.

Posted by Simon Lester on June 28, 2020 at 05:39 PM | Permalink | Comments (5)

Insights on Vanadium and US Trade Policy.

Here is my submission to the US Department of Commerce, Section 232 Vanadium Investigation, Docket No. BIS­–2020–0002.

Prof. Steve Charnovitz George Washington University 26 June 2020.

In Section 232 of the Trade Expansion Act of 1962, the US Congress delegated authority to the President to require Trade Contraction when, in the President’s judgment, imports threaten to impair national security. Because the Act defines “national security” broadly to encompass the “economic welfare” of the United States as well as the “economic welfare of individual domestic industries,” no limits exist under the Act on the President’s power to rewrite tariffs and to flout America’s international trade agreements. In effect, the Congress gives the President carte blanche to determine how closed to imports the US economy shall be. The President’s broad mandate with regard to US imports under Section 232 is paralleled by the President’s and Secretary’s broad mandates under the Export Controls Act of 2018. Because of the Administration’s unlimited authority to constrain both imports and exports, US trade policymaking has shifted more from the Legislative to the Executive Branch than at any previous time in US history.

The President’s tariff-making authority is triggered whenever the Secretary of Commerce makes a finding that “an article is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.” On 28 May 2020, the Department of Commerce opened a Section 232 investigation of vanadium imports, and this Comment by an interested party is submitted in response to the Department’s Federal Register Notice. The Department is asking for comments on, inter alia, (1) “the effects on the national security from imports of vanadium” and (2) “relevant factors that are causing or will cause a weakening of our national economy.” Because an affirmative finding by the Secretary of Commerce is essential to empowering the President to impose more US protectionism, the Secretary should carefully investigate how vanadium production and trade affects US national security and should carefully consider any recommendations for tariffs or quotas under Section 232.

The frequent use of Section 232 by the Trump Administration has led some analysts to propose a reconceptualization of US trade policy. Although the tools of trade policy remain what they were a century ago, a restatement of US trade policy provides context for the vanadium investigation. The challenge of restating trade policy is to find coherence in a mix of market opening and market closing measures.

US trade policy has two components: first, as part of an industrial policy to promote (or impede) the welfare of particular US industries; and second, as part of a foreign policy to influence the behavior of other countries. The two components, industrial and foreign policy, can be mutually-supporting or mutually-impeding depending on the particular policies being pursued. The industrial policy component of US trade policy gives rise to US measures that protect domestic producers, such as most-favoured-nation tariffs and trade remedy tariffs. Industrial policy also gives rise to US measures that thwart foreign consumers, such as export controls. The foreign policy component gives rise to US measures that use trade as a stick or as a carrot to influence foreign governments on trade and non-trade issues.

In restating trade policy, I omit purposes that others might view as one of the basic goals. For example, I omit the original purpose of tariffs which was to generate federal revenue to finance the government. Nowadays, the federal government acquires its funding mainly from income taxes, employment taxes, and borrowing. Some analysts portray “national security” as a central objective of US trade policy. To be sure, national security can be aided (or hindered) by industrial policy and foreign policy actions. But the term “national security” in Section 232 is too amorphous to delineate a discrete set of policies. Other analysts postulate trade fairness to be a fundamental principle. But so-called “fairness” in trade boils down to an industrial policy of protecting domestic producers from various kinds of foreign competition.

Strengthening the institutions of the international trading system was for many decades an important US goal. Those efforts culminated in the creation of the World Trade Organization (WTO) in 1994 to expand international trade law. Enabling trade without regard to industry or trading partner would be a sound way to carry out a pro-competitive national economic strategy. But such a neutral approach is alien to US trade policy.

With that backdrop, the Department’s first question regarding the effects on national security of imports of vanadium is easy to answer. Because vanadium is a useful element that is not sufficient in US land or waters, the US economy needs unimpeded access to imports of vanadium from other countries. Therefore, the importation of vanadium enhances US economic security and should not be impaired by government policy. Vanadium is available in many countries including two countries with US trade agreements, Canada and Australia.

US access to non-living natural resources was carefully studied by the President’s Materials Policy Commission (1952). Even 68 years later, the Paley Commission’s Report, Resources for Freedom, remains the most thoughtful study on US resources ever produced by a national commission. The Commission examined vanadium as an “additive metal” and, as with all such metals, called attention to the need for more production, conservation, and stockpiling. The Commission promoted the “least cost principle” for the acquisition of materials and argued against “restriction on imports” and against interference with the “normal channels of trade.” Indeed, the Commission urged the US government to “remove restrictions on the entry into this country of material from abroad” and to “join with other producing and consuming nations” to reduce impediments to trade, such as tariffs, import and export quotas, and cartel agreements. The Commission did not rule out protective tariffs, but stated that in the Commission’s judgment, “there would be few cases where a protective tariff would be the best device for satisfying security needs.”

Vanadium is not one of those cases. In its study, the Commerce Department should focus on whether the United States should stockpile vanadium and whether there should be some domestic capacity for processing and refining vanadium. Should the market not deliver a requisite minimum level of domestic productive capacity, then the Commerce Department should subsidize the needed commerce in a manner consistent with international trade law.

The second question is the identification of relevant factors that are causing or will cause a weakening of the US economy. The most relevant factor is the danger of a new round of unwise findings by the President that suppressing demand for imports can enhance the economic welfare of American workers or consumers. Another factor that could weaken the US national economy would be a finding by the Secretary of Commerce that imports of vanadium are impairing or could impair US national security. So, the two factors with the greatest risk are more irrational trade policy decisions by the President and Secretary such as the protectionist decisions taken on steel and aluminum. The use of Sections 232 and 301 by the Trump Administration demonstrate an ever more powerful US Presidency employing non-market interventions to achieve the President’s domestic and international objectives.

In addition to considering my comments, I urge the Commerce Department to follow federal law which requires the Secretary’s Section 232 Vanadium Report to be published in the Federal Register (except for classified or proprietary information), see 19 USC § 1862(b)(3). The Department violated federal law in its Automobiles Proceeding by failing to publish its report to the President. That misstep may be tiny itself, but when added to other missteps and multiplied every day, the aggregate effect of a scofflaw Administration is further weakening of US national security.

Posted by Charnovitz on June 26, 2020 at 04:01 PM | Permalink | Comments (0)

“Personal Dignity” as a Non-Trade Value in Trade Policy?

I was struck by the notion of “personal dignity” in USTR Lighthizer’s recent article “How to Make Trade Work for Workers.” He framed the article by asking the question: “What should the objective of trade policy be?” Instead of the goals of promoting world peace and economic efficiency, Lighthizer argued that the objective of trade policy should be to ensure that most citizens in the society have “stable and well-paying jobs”. The “jobs v. trade” dichotomy is well known. What is new to me is his explanation of why jobs are so important:

Those obsessed with efficiency tend to see employment simply as a means of allocating resources and ensuring production. In so doing, they greatly undervalue the personal dignity that individuals derive from meaningful work. Commentators from Pope Leo XIII in the nineteenth century to Arthur Brooks and Oren Cass today have written eloquently about the central role of work in a well-ordered society. Doing honest work for a decent wage instills feelings of self-worth that come from being needed and contributing to society . Stable, remunerative employment reinforces good habits and discourages bad ones. That makes human beings better spouses, parents, neighbors, and citizens. By contrast, the loss of personal dignity that comes from the absence of stable, well-paying employment is not something that can be compensated for either by increased consumption of low-cost imported goods or by welfare checks . …

When it comes to taxes, health care, environmental regulation, and other issues, policymakers routinely balance efficiency with other competing goals. They should do the same for trade.

Thus, what Lighthizer is calling for amounts to treating the “personal dignity” associated with decent jobs as a non-trade value, which, like public health and environmental protection, should be balanced against the value of economic efficiency in trade policy. Considering that mental health is a serious health problem in modern societies and that it has become unrealistic to expect the large number of workers displaced by foreign competition to be retrained for new jobs in the post-industrial era (which is one of Lighthizer’s points), the issue of personal dignity associated with jobs does merit our attention. The fact that this issue is mostly one of developed countries rather than developing countries should not detract from its importance.

In this regard, I was reminded that trade and employment are two equal values enshrined in the Havana Charter. The employment provisions appear in Chapter II of the Charter, whereas the commercial policy provisions – most of which were adopted by the GATT – were set out in Chapter IV. Although the term “full employment” also appears in the preambles of the GATT and the WTO Agreement, in reality the notion remains merely a lofty slogan. In a similar vein, the right to work is recognized as one of the human rights under the International Covenant on Economic, Social and Cultural Rights (article 6).

At this particular juncture in history, however, recognizing the “personal dignity” of work as a distinct value would have profound implications for trade law. It seems to me that two major questions need to be discussed. First, the normative question: should the personal dignity associated with jobs be recognized as a non-trade value? If so, then the operational question: how can the existing trade agreements accommodate such a value? In practice, almost all the “protectionist” tools can be used to protect jobs, such as tariffs, subsidies, and trade remedies. Hence, it seems all we need to do is to rebalance trade liberalization against job protection. But how should the proper balance be drawn? Can WTO law accommodate the value of personal dignity without amending its rules or major adjustments in its jurisprudence? These difficult issues might arise, for instance, if Lighthizer initiates renegotiation of US tariffs en masse, presumably under GATT Article XXVIII. I would be interested in hearing your opinions.

Posted by Julia Qin on June 24, 2020 at 02:30 PM | Permalink | Comments (17)

Transnational subsidies – Part II.

Over the past few weeks, various posts have appeared on this blog relating to the issue of transnational subsidization. These posts have focused on one specific aspect of the problem – the extent to which the EU could countervail imports from one country (Egypt), where they are subsidized by a third country (China). This conversation has been taking place in the broader context of China’s Belt and Road initiative, which includes support for Chinese enterprises operating in third countries.

The EU, in a 17 June White Paper, (https://ec.europa.eu/competition/international/overview/foreign_subsidies_white_paper.pdf), has now moved to address another aspect of this issue: where foreign subsidies provided directly or indirectly to an entity established in the EU (presumably, EU subsidiaries of a foreign company) distort competition within the EU market. The concerns identified by the White Paper relate principally to situations where subsidies are used to acquire EU firms or to compete unfairly in EU public procurements. The White paper points out that the EU state aids regime does not cover foreign subsidies to EU-established entities, and that anti-subsidy actions only apply where there are subsidized imports of goods.

The White Paper is only the first step in a process that might or might not ultimately result in legislation. Indeed, it launches a public consultation of the topic. That said, the proposals being floated are significant. For example, entities intending to acquire EU companies or participate in EU public procurements would be required to notify a “competent supervisory authority” ex ante if they had received foreign financial contributions in the past three years. If the authority finds that the subsidies have distorted the EU market (whether by facilitating the acquisition or distorting the procurement), the consequences could be severe, including prohibiting the acquisition, requiring asset divestment or excluding the entity from current and future procurements. More generally, the EU could require “redressive payments” to the EU or member States.

This White Paper moves the subsidy issue far beyond the traditional focus on trade distortions and into the arenas of investment and public procurement. In this respect, it reflects an increasingly complex global reality, as multinational entities challenge one another on each others’ home turf. The EU initiative will likely resonate in the United States, where complaints that Chinese companies are buying up US companies and unfairly winning procurements in areas from telecoms to transport equipment are widespread. It will be interesting to watch this issue unfold.

Posted by Jesse Kreier on June 24, 2020 at 02:23 PM | Permalink | Comments (6)

India, South Africa and the MPIA.

We hear much of the WTO Members who are pushing the MPIA, and much also of US opposition, but less about the views of many other Members, such as India, South Africa and ACP countries, who have not signed on. So it was with some curiosity that I attended a Webinar organized by the Sridath Rampal Centre at the University of the West Indies, which sought to explore views in these Members (https://shridathramphalcentre.com/webinar-series-exploring-the-multiparty-interim-appeal-arbitration-agreement-mpia/).

What came across clearly is skepticism, and in the case of South Africa, outright hostility, to the MPIA. What is somewhat less clear to me is why. The primary point raised was concern about the plurilateral nature of the MPIA, mirroring these countries’ preoccupations about a two-speed WTO and efforts to negotiate in new areas, such as investment facilitation and e-commerce, without consensus support. More generally, there was concern that the MPIA failed to address or resolve developing Member issues in the WTO.

Still, the Webinar did not fully resolve my questions. US motivations are transparent – MPIA stands in for, and to a great extent mirrors, an Appellate Body process that the US deems profoundly flawed, and seeks to reform (or abolish). Yet I did not hear such criticisms from others in the Webinar. Is theirs a principled opposition to plurilateralism? A tactical position by Members who want a broader renegotiation of WTO rights and obligations in favor of developing countries? Or an unspoken willingness to move towards a less binding WTO dispute settlement system? I remain unsure.

Perhaps we will hear reports from the next DSB meeting, which has the MPIA on the agenda, but in the meanwhile I would welcome hearing views from readers in these countries.

Posted by Jesse Kreier on June 23, 2020 at 09:55 AM | Permalink | Comments (8)

Food Regulation, Science, Protectionism, and Regulatory Autonomy/Sovereignty.

I feel like the role of science in trade agreements doesn’t get enough attention, and I’m always excited to see someone trying to raise the profile of this issue. Here is a question from Congressman Earl Blumenauer at last week’s House Ways and Means trade policy hearing with Ambassador Lighthizer (starts at 1:09:53):

Blumenauer: . Let me say, I have a particular interest in dealing with food and agricultural policy, to make it more visionary and equitable. Currently, the United States spends too much money subsidizing large corporations and doesn’t adequately help the majority of small and mid-sized farmers, and it subsidizes manufactured food at the expense of fresh, healthy food. We have entered into a phase two of our agreements with the United Kingdom. I hope that our negotiators can focus on tearing down protections and barriers to trade, like quotas and price control measures, and spend less political capital on areas where our two countries may simply have reasonable policy differences. I think too often we hide behind requiring science-based justification for other nations’ sanitary or phytosanitary measures without allowing flexibility on values and public input. Many large agricultural interests focus on scientific studies on pathogen rinses for poultry. Maybe we should be asking about our production process that requires us to wash chickens in chlorine in the first place. Can’t reasonable people have concerns about slaughterhouses in the United States. My goodness. Anyone who has looked at the news recently understands American policy on slaughterhouses needs a much closer review. With pesticides, our regulations do not set a high enough standard for determining their effects on our environment and how those environmental effects impact our health. Should we really export our weak standards to another country who has legitimate public policy concerns and may provide better protections? For genetically modified meat or meat altered by growth hormones, is it possible that a democracy where consumers have input might choose to restrict these practices for reasons other than interfering with American commerce? As with all negotiations, there are some priorities you will push harder than others, but I would hope that you could focus your attention and that of your team on protectionist hurdles to our farmers rather than areas of legitimate policy differences. American families need national and international agricultural policies that address our common welfare and allow for targeted regulations that promote health, address climate change, and put people ahead of corporate interests. I would hope that you and your staff would be willing to help us explore these differences to determine where there are some legitimate policy differences rather than simply protectionist impacts. Would it be possible for us to work with your team to explore this?

It’s not surprising that some American politicians on the left would favor an approach to food regulation that is more consistent with what the Europeans do. I agree with some (but not all) of what he is saying here. I agree with the sentiment that we should focus on “protectionist hurdles to our farmers rather than areas of legitimate policy differences.” And I worry about obligations that food safety regulations be based on science, because I’m not sure that obligations of this sort can be applied in a way that gives regulators sufficient flexibility. A non-discrimination obligation is narrow and targeted, catching only a handful of measures. By contrast, a requirement that regulations be based on science puts a lot of regulations at risk. I think people overestimate the extent to which food regulations are actually based on science, and also overestimate the ability of international law to enforce such a standard.

Here was Lighthizer’s response:

Lighthizer: . On this issue of agriculture, I’ll just repeat what I have said before. Number one, agriculture policy is set by the United States Congress, not by the U.S. Trade Representative. So the issues that you raised I know are difficult issues, and they’re being fought out in Congress and Congress will come to some conclusion and I’ll be guided by what Congress says. For right now, the reality is that what we want and what we insist from our trading partners is equal access, fair access based on science. The difference between big and small farmers and corporate farmers, I don’t know much about that. I would say the United States has the best agriculture in the world. It has the safest, highest standards. And I think we shouldn’t confuse science with consumer preference. If consumers have a preference of one thing or another, they should certainly exercise their preference, but it’s not the role of the United States Trade Representative to change agriculture policy. I’m dictated that by the Agriculture Department, but mostly by the United States Congress. So what I’m going to do is try to insist on science-based restrictions and to the extent they have restrictions that are not science-based, we will object.

A similar conversation happened at the Senate Finance Committee hearing later the same day. Here is an exchange between Senator Thune and Lighthizer (starts at 00:55:15):

Thune: Thank you, Mr. Chairman. Ambassador, thank you for all you’re doing to promote U.S. trade around the world and I know that in testimony earlier today you said that the United States wouldn’t agree to a trade deal with the United Kingdom unless the UK lowered barriers and provided fair access for U.S. agriculture products including U.S. meat imports. We’ve talked time and time again about how much our ag. producers are hurting and how we should be doing more to help them. One way we can do more is by making sure that our trade agreements require our allies and trading partners to rely on sound science. Do you agree that many food standards are actually disguised protectionism, and a follow-up question is, what is the best way to stop that practice?

Lighthizer: So, Senator, I completely agree with you. I made this statement this morning that the European Union has raised this practice of using standards really as protectionism to a high art and I believe they have. They now in terms of some residue — maximum residue levels, they actually have — if there’s any detection at all, the product is unacceptable. To me, that is just plain protectionism. And making every regulation science-based is the equivalent of getting rid of protectionism. It’s the equivalent of getting rid of any other non-tariff trade barrier. I would say Europe is going in the wrong direction, not in the right direction. They’re being controlled by protectionist interests and — well, let me just leave it at that. Protectionist interests. In my judgment, we have to insist on science-based standards for our farmers. And I would say this standards thing is not just an ag. issue. They’re using standards in industry too. It’s not just — it’s a higher art in ag., but they use it in industry too. We have to insist on it. And to the extent people deny us access, we shouldn’t give them a trade agreement. And if we don’t have a trade agreement, then in my judgement we ought to be taking trade actions against them. And I’m looking right now at whether or not some of these actions, I want to consult with you and your staff, whether or not right now we shouldn’t be looking at a 301 on some of these things. It’s getting so far out of control, where they say literally if there’s any detectable residue, the product is unacceptable. That’s just, there’s nothing to do with science.

Based on these responses, Lighthizer seems very comfortable using the absence of a scientific basis as a proxy for rooting out disguised protectionism. If it’s not based on science, in his view, we can assume it is protectionist.

I have doubts about this. I think the absence of scientific justification for a regulation can exist for many reasons. To take an extreme example, think about all the people who don’t want to get vaccines these days. Ignoring science may overlap with protectionism on occasion, but it’s really a separate and much broader issue. The practical reality is that sometimes people’s feelings about an issue take precedence over the science, and those popular sentiments are reflected in the work of legislators and regulators. (Democracies are imperfect, but often people’s views do make their way through to government officials.)

In addition, sometimes the science is not completely clear, and there is a debate about what the science tells us to do. And in some cases, there are policy issues other than science (e.g. animal welfare) that underlie the regulatory decision in question.

In my view, then, science can play a role in food (and other) regulation, and should be taken into account, but a “based on” science requirement, as we have seen it applied, may go too far, and is not necessarily an appropriate proxy for identifying protectionist regulation.

I also want to raise the issue of regulatory autonomy/sovereignty here, because that seems to be a big point for many people who call themselves economic nationalists. I would say that a narrow and targeted obligation that tries to root out protectionism doesn’t (or shouldn’t at least) interfere much with regulatory autonomy and sovereignty. In contrast, requiring that all food safety regulations be based on science would be pretty intrusive in this regard, including for U.S. policy-making.

Finally, there’s the issue of which branch of the U.S. government should be in charge here. Lighthizer suggests that he is deferring to Congress on all this. But I suspect that many people at USTR have given these issues a lot of thought, and I think that USTR should lead the way a bit more here. Members of Congress will be focused on their particular constituencies, whereas USTR can see the big picture. Currently, U.S. trade policy strikes a certain balance between opening foreign markets and preserving regulatory autonomy. Is it the right balance? Have we been able to use the rules to open foreign markets? Are we risking challenges to non-discriminatory domestic regulations? I’d like to hear more from USTR on these issues.

If Biden wins the presidential election, I’d be curious to see what kind of response Blumenauer would get from Biden’s trade policy team on this same question. I have talked to some people on the left — perhaps those same people have been talking to Blumenauer — who really want to revisit issues like this one, and who might be more eager to work on this. From the perspective of U.S. domestic politics, it might be risky to take such an approach, because some influential agricultural groups will be annoyed. However, I think there is a case to be made that while trade rules have done a good job dealing with protectionist food regulations, using trade negotiations and enforcement to address food regulations that are unscientific but not clearly protectionist hasn’t worked all that well, and that perhaps the industry should try a different approach to pushing for regulatory changes in foreign markets.

How to Game the MPIA, or, How to Avoid Being Taken Advantage of in the MPIA.

The newly-established Multiparty Interim Appeal Arbitration Arrangement (“MPIA”) contains an interesting provision in para 18 of its “Agreed Procedures”:

“ At any time during the arbitration, the appellant, or other appellant, may withdraw its appeal, or other appeal, by notifying the arbitrators. This notification shall also be notified to the panel and third parties, at the same time as the notification to the arbitrators. If no other appeal or appeal remains, the notification shall be deemed to constitute a joint request by the parties to resume panel proceedings under Article 12.12 of the DSU. If an other appeal or appeal remains at the time an appeal or other appeal is withdrawn, the arbitration shall continue.”

According to this provision, only “the appellant, or other appellant”, may “withdraw its appeal” “at any time during the arbitration”. I take this to mean even until the arbitration award is out, or at least the last minute before the award is out, when the parties already have some pretty good guess/idea about the result of arbitration.

In my view, this provision is rather problematic as it gives too much control to the party filing the appeal. Let me explain using this table, which simulates the situation where the Appellant files the appeal, but the other party doesn’t :

Result of arbitration.

Appellant’s action.

Appellee’s action.

Outcome.

(Wishes to withdraw) but can’t.

MPIA panel decision stands.

(Wishes to continue) but can’t.

Original panel decision stands.

To summarize, if the MPIA arbitration panel rules for the Appellant, the Appellant will not withdraw from the arbitration but choose to continue. As it loses the arbitration, the most rational action for the Appellee is to withdraw from the arbitration, but it won’t be able to do so as such right is not provided under the MPIA. Thus, the process continues and the MPIA panel decision stands, which means the Appellant wins the arbitration.

On the other hand, if the MPIA arbitration panel rules against the Appellant, the most rational action for the Appellant is to withdraw from the arbitration. Now the Appellee would want to continue the arbitration but it won’t be able to do so, again as such right is not provided under the MPIA. It would not be able to file a separate appeal either as the 10 day time limit under para 4 has already expired. Thus, the arbitration is terminated and the original panel decision stands, which means the Appellant still wins!

In other words, if the other party does not file an appeal, we’d have a bizarre situation that the Appellant always wins!

Of course, as anyone familiar with the Socratic Method would know, the professor would not throw out a question unless he already has some answers ready. So here is my proposed solution: the other party shall also file an appeal. Again I’d illustrate my point in another table:

Appellant files the appeal, and the other party also appeals :

Result of arbitration.

Appellant’s action.

Appellee / Other appellant’s action.

Outcome.

MPIA panel decision stands.

Continue the other appeal.

MPIA panel decision stands.

To summarize, if the MPIA arbitration panel rules for the Appellant, the Appellant will not withdraw from the arbitration but choose to continue. As it loses the arbitration, the Appellee/Other appellant would withdraw from the arbitration, but this does not terminate the arbitration as the original appeal still remains. Thus, the process continues and the MPIA panel decision stands, which means the Appellant wins the arbitration. Same outcome as the first scenario.

On the other hand, if the MPIA arbitration panel rules against the Appellant, the most rational action for the Appellant is to withdraw from the arbitration. Now the Appellee/Other appellant would want to continue the arbitration and it will be able to do so this time, as “the other appeal” still remains open. Thus, the arbitration will continue and the MPIA panel decision stands, which means the Appellee/Other appellant wins this time!

Of course, I understand that in real WTO disputes, the issue of winning and losing is more complicated and it is not unusual for each party to win on some points but lose on others. But even in such cases, we can speak of the MPIA panel decision as being better/worse than the original panel decision and my argument still stands.

The most important thing is that I’ve identified a potential loophole in the procedure, especially for the party which doesn’t rush to file an appeal when the panel report is out, and the action that such party should take to remedy the situation.

Now you know what to do.

The WTO Force Is Everywhere!

“WTO laws and rulings are regularly cited in investment tribunals, bilateral trade disputes and even the European Court of Justice. Despite its reservations about WTO dispute settlement, for example, the US referred to WTO rulings in its groundbreaking action against Guatemala for labour rights violations under the Central America Free Trade Agreement.”

True, the WTO case law may not be “binding” to parties other than immediate disputants in a given case. However, such legal technicality does not exhaust the description of the normative gravitational force field from the WTO law. For another example, in formulating a recent AD/CVD measure against China over certain fibre glass fabrics from a “Chinese subsidiary located in Egypt,” the European Commission relied heavily on the WTO trade remedy law. This incorporation, by reference, of the WTO norms into the domestic law seems to have settled in a pattern beyond a mere dimension of isolated anecdotes. In this regard, Joost was nicely quoted in Beattie’s article. (“If WTO dispute settlement becomes more difficult to use, you could see more of what the EU is doing at the moment against what it perceives as Chinese subsidies in Egypt — using WTO subsidies rules in EU anti-subsidy investigations, leading to EU tariffs, rather than filing a WTO complaint.”)

Finally, who could have ever imagined that a senior U.S. politician would praise the WTO law? In a recent Bloomberg op-ed, Senator Chuck Glassley stated that “the WTO’s expansion of global trade has actually enabled the U.S. to respond to the pandemic” as “global value chains, facilitated by WTO rules” empowered the U.S. automakers to globally source components necessary to manufacture ventilators.

After all, the WTO law may be “stickier” than many would believe.

Posted by Sungjoon Cho on June 18, 2020 at 02:50 PM | Permalink | Comments (8)

Enforcement in the China Phase One Deal.

In today’s Senate Finance Committee hearing on trade policy, Senator Wyden and Ambassador Lighthizer had this exchange (27:42):

Wyden: Let’s go on then to another key enforcement issue, and that’s China Phase One. The first stage of dispute resolution, there is basically an escalating set of meetings. They get more and more urgent with influential officials. And my understanding is the agreement specifies that this whole process is confidential. So my question here is does this confidentiality arrangement in the China deal phase one mean that nobody including members of this committee will know if the United States is taking enforcement action against China?

Lighthizer: No, it does not mean that.

Wyden: Tell me how there is transparency then, because as I read it, it just looks to me like there isn’t, and I think it would be helpful for you to be very specific there.

Ligthhizer: Okay. Absolutely. I’ll be happy to do that, Senator. So here’s the situation we’re faced with. For the first time we have a written agreement, for the first time we have a really, really good enforcement mechanism. One which escalates and then the United States can take an action if we don’t get a satisfactory resolution. And we won’t be retaliated against. So this is like a historic thing and I want to point that out. Then you have the problem what do you do with a company that comes and says, for example, somebody from — from Oregon will come and say, listen, I have this problem, USTR I want you to raise it. But don’t use my name because if you do, I may be retaliated against, right? I’m giving you a) confidential information but b) I may be retaliated. So what do you do in a situation like that? We agreed to confidentiality. If you said is it confidential from you in that case, no, of course not. But it — but we are going to bring these — some of these complaints, depending on the circumstances, as generic complaints rather than individual ones to protect specific American companies. That’s the nature of why we put that in there. And that does not mean, other than business confidential information, which we wouldn’t share, that does not mean we would keep the — the appropriate members of the Congress in the dark. We wouldn’t do that at all.

Wyden: … I’d like to see in writing how we’re actually going to have transparency in a provision that sounds to me like there isn’t transparency. .

I’m skeptical of the enforceability of the China Phase one deal (see here and here), but I am interested in hearing more about how the enforcement mechanism works and I agree with Senator Wyden that transparency would be very useful. Based on what Lighthizer said in his response, it sounds to me like certain members of Congress would get the details, but perhaps the general public would not. I think transparency should go further than this, so we can evaluate how this enforcement mechanism is working.

Posted by Simon Lester on June 17, 2020 at 04:19 PM | Permalink | Comments (0)

No ISDS in U.S. – UK FTA?

Here’s a question from Congressman Lloyd Doggett to Ambassador Lighthizer at today’s Ways and Means Committee hearing:

Doggett: Do you envision in the agreements that you’re currently negotiating to maintain the progress that we made in the USMCA with regard to dispute resolution so that when we’re dealing with a developed country like the United Kingdom we rely on a mature legal system rather than a closed dispute resolution system following the precedent that you set in Canada and which is applied successfully in Australia?

I take this to mean that the U.S. does not want ISDS in a U.S.-UK FTA. Let me know if anyone reads it differently.

Posted by Simon Lester on June 17, 2020 at 12:37 PM | Permalink | Comments (1)

Guest Post: The European Commission attempts to rein in BRI subsidies.

This is a guest post from trade lawyer Victor Crochet:

On 15 June 2020, in Regulation 2020/776, the European Commission decided to countervail financial contributions granted to an Egyptian entity by Chinese public bodies. To reach this conclusion, the Commission explained that the government of the exporting country, in this case the Government of Egypt can be “accountable under the SCM Agreement for having actively sought, acknowledged and adopted” subsidies granted by another government. The Commission reasoned as follows:

(685) As the Appellate Body (‘AB’) held in the US-Gasoline case (159), WTO law cannot be read in clinical isolation from general international law. In particular, general international law principles thus form part of the WTO legal order, which is not a self-contained regime (160). In line with Article 3.2 DSU and Article 31(3) (c) of the Vienna Convention on the Law of Treaties (VCLT), “[a]ny relevant rules of international law applicable in the relations between the parties” must be taken into account in the assessment of the context of the terms of a treaty.

(686) These “rules” include customary international law (161), which are by definition binding on all WTO members, including Egypt, China and the European Union. An important branch of customary international law is the rules on State responsibility, which have been codified by the International Law Commission (ILC Articles on the Responsibility of States for Internationally Wrongful Acts) (162) in accordance with its mandate under Article 13(1) (a) of the UN-Charter.

(687) The rules in the ICL Articles are also “relevant” within the meaning of Article 31(3) (c) VCLT because they provide guidance for the interpretation of the notion of attribution, i.e. when certain acts or omission can be attributed to one State, even when those acts or omissions do not emanate from that State directly. In this respect, the notion of attribution becomes relevant to interpret the terms “by the government” in the chapeau of Article 1.1(a)(1) of the SCM Agreement, and more in particular, to determine the correct attribution of a conduct in a situation of cooperation between two States with respect to subsidies, as in the case at hand (163).

(688) The ILC Articles can thus be used to interpret the terms “by the government” in the chapeau of Article 1.1(a)(1)of the SCM Agreement in order to attribute the conduct (granting of a subsidy) to the GOE, even in cases where the financial contribution has not been made directly by the GOE.

(689) In this respect, the Commission noted that Article 11 of the ILC Articles provides, in particular, that “conduct which is not attributable to a State under the preceding articles shall nevertheless be considered an act of that State under international law if and to the extent that the State acknowledges and adopts the conduct in question as its own”. The commentary of the ILC to Article 11 explains that “instances of the application of the principle [of State attribution through acknowledgement and adoption of behavior] can be found in judicial decisions and State practice” (164). As recalled in recital 6 of the same commentary, it is required that a State “identifies the conduct in question and makes it its own”.

According to the Commission, as the Government of Egypt welcomed Chinese investments, it made the Chinese preferential measures its own so that financial contributions by Chinese public bodies were attributable to the Government of Egypt. As a result, the “financial contributions in the form of preferential financing from Chinese public bodies to Jushi and Hengshi Egypt can be attributed to the GOE as the government of the country of origin or export under Article 3.1(a) of the basic Regulation.”

In light of the recent announcements made by European Member States and by the Commission to rein in Chinese subsidies, and in particular “to address the distortive effects of foreign subsidies in the internal market, as foreseen in the EU-China strategy”, this decision seems rather political.

However, I am not convinced by the Commission’s reasoning that Article 11 of the ILC Articles could constitute a “relevant” rule of international law to interpret the term “government” in Article 1.1(a)(1) of the SCM Agreement in the sense of Article 31(3)(c) of the VCLT. First, in US – Anti-Dumping and Countervailing Duties (China) , the Appellate Body ruled that Articles 4, 5 and 8 of the ILC Articles constituted a “relevant” rule of international law in the sense of Article 31(3)(c) of the VCLT to interpret the SCM Agreement insofar as Articles 4, 5 and 8 of the ILC Articles reflect the three types of entities whose conduct could be attributed to a government under the SCM Agreement. These entities are organs of the State which are similar to “a government” under Article 1.1(a)(1) of the SCM Agreement (Article 4), entities exercising elements of governmental authority which are similar to “a public body” under Article 1.1(a)(1) of the SCM Agreement (Article 5), and persons directed or controlled by a State which are similar to “a private body” entrusted or directed by the government under Article 1.1(a)(1)(iv) of the SCM Agreement (Article 8). In other words, the Appellate Body did not state in US – Anti-Dumping and Countervailing Duties (China) that Article 11 of the ILC Articles constitutes a “relevant” rule of international law in the sense of Article 31(3)(c) of the VCLT. This is so because Article 1.1(a)(1) of the SCM Agreement does not contain rules with regard to acknowledgment and adoption of a conduct by a State which would be similar to the rules contained in Article 11 of the ILC Articles.

I also have doubts that Article 11 of the ILC Articles is envisaged to be relied upon for attributing actions of a sovereign State to another still existing sovereign State in light of the General Commentary to the ILC Articles and because the attribution of actions of a sovereign State to another sovereign State is expressly envisaged by Articles 16 to 18 of the ILC Articles under Chapter IV which is clearly titled “RESPONSIBILITY OF A STATE IN CONNECTION WITH THE ACT OF ANOTHER STATE”.

Second, as Vineet Hegde and I discussed in a working paper, the term “government” in Article 1.1(a)(1) may well refer to the government of a country which is not the country of export without having recourse to interpretation (unlike under EU law where the Basic Anti-Subsidy Regulation refers to a “government within the territory of the country of origin or export”). The main hurdle under the SCM Agreement to countervail transnational subsidies rather appears to be Article 2.1 which indicates that a subsidy is specific if it is granted to certain enterprises “within the jurisdiction of the granting authority”.

From a policy standpoint, I am also unsure whether the Commission’s approach is warranted. I am afraid that Egyptian workers might end up paying the price of countervailing these subsidies as the Chinese-owned producers under investigation might simply decide to move shop somewhere else along the Belt and Road.

For more on this, you can find our working paper (which received the SIEL/JIEL/OUP Essay Prize) here.

Posted by Simon Lester on June 16, 2020 at 06:46 AM | Permalink | Comments (6)

Who’s Going To Pay For Supporting The MPIA?

The participating Members envisage that appeal arbitrators will be provided with appropriate administrative and legal support, which will offer the necessary guarantees of quality and independence, given the nature of the responsibilities involved. The participating Members envisage that the support structure will be entirely separate from the WTO Secretariat staff and its divisions supporting the panels and be answerable, regarding the substance of their work, only to appeal arbitrators. The participating Members request the WTO Director General to ensure the availability of a support structure meeting these criteria.

I’m not sure what that means exactly. The WTO DG is supposed to “ensure” that a “support structure” is available, but there are a range of possibilities within that general guidance. When the text says, “the support structure will be entirely separate from the WTO Secretariat staff and its divisions supporting the panels,” does that mean separate only from the particular Secretariat staff that supports the panels, so that other Secretariat staff can help out with the MPIA? Or does it mean separate from the Secretariat staff and also separate from its divisions supporting the panels? I feel like it can’t be the latter, because the Secretariat staff includes the divisions supporting the panels, so it would be redundant to say it that way.

Regardless, or perhaps as a result, the U.S. seems to have concerns. In a letter to the DG (posted on Inside US Trade here and by Bryce Baschuk here), the U.S. has now made clear what it does not want:

. the proposal would expend WTO resources to seek to recreate the Appellate Body, its erroneous practices, and the Appellate Body Secretariat through a plurilateral arrangement. Article 25 provides no basis for the use of WTO resources to support functions that are not part of the arbitration, such as for a “pool of arbitrators” to “stay abreast of WTO dispute settlement activities” or to enable the arbitrators to “discuss among themselves matters of interpretation, practice[,] and procedure.” .

Nor does Article 25 provide a basis for a Member to direct the WTO Director-General to provide WTO Secretariat support to an arbitrator, nor the terms of such support. . The arrangement “envisages that the support structure will be entirely separate from the WTO Secretariat staff’ and the WTO divisions that support panels. If Members desire a separate support staff for their dispute resolutions, those Members (and not the WTO membership as a whole) should finance it. Members should not be allowed to create their own support structure within the WTO that is separate from the WTO Secretariat and expect other Members to pay.

Accordingly, the United States opposes both the establishment of what appears to be a new WTO Division for the benefit of participants in the . arrangement and the allocation of staff for the exclusive use of those participants. .

Given the power of individual Members over the WTO budget, this means a special new WTO division for the MPIA is certainly out of the question.

What about just sending over WTO Secretariat staff (from divisions other than those who support panels) to work on MPIA cases as needed? Would the U.S. agree to that?

How about hiring people on an ad hoc basis when disputes arise? It would be a short-term contract that was solely for the duration of a specific case.

If the U.S. objects to WTO Secretariat participation and funding in any of these ways, the MPIA parties may have to hire people out of their own funds. I don’t know that it would be all that expensive. If you have arbitrators who have experience (and the two names we have heard so far do), they may not need that much support. And given the low number of disputes between the 21 current parties, there may not be too many cases to support.

Webinar — USMCA’s Entry into Force: Prospects and Challenges for North American Trade.

This is from the Baker Institute for Public Policy (link here):

Although most observers agree that the renegotiation process of the North American Free Trade Agreement (NAFTA) was more complicated than it had to be and that the final text is less than perfect, at the end of the day NAFTA’s replacement, the United States-Mexico-Canada Agreement (USMCA), does represent an important modernization of the framework under which trade will take place in North America in the coming decades. The USMCA enters into force on July 1. Its implementation poses important challenges for corporations, investors and other key actors, who will have to interpret the agreement, wait for rules and regulations to be rolled out, retool their business models to conform to it and understand the new general incentives landscape for trade and investment. This webinar explores the prospects for success and the challenges of implementing the new USMCA through the analysis of experts on commerce and economic integration in North America.

This event is sponsored by the Center for the United States and Mexico. Follow @BakerCtrUSMEX on Twitter and join the conversation online with #BakerMexico.

AGENDA.

11:00 a.m. — Presentation 11:30 a.m. — Q&A.

REGISTRATION.

This webinar is free, but registration is required. Please click here to register.

FEATURED SPEAKERS.

C.J. Mahoney, J.D. Deputy United States Trade Representative for Investment, Services, Labor, Environment, Africa, China, and the Western Hemisphere.

Charles “Chip” Roh Former Assistant U.S. Trade Representative for North America; Former Deputy Chief Negotiator, North American Free Trade Agreement for the United States; Former Associate General Counsel, Office of the United States Trade Representative.

Kenneth Smith-Ramos Partner and International Trade Consultant, Agon International Trade Consultants; Former Chief Negotiator for the modernization of the North American Free Trade Agreement for Mexico.

Colin Robertson Vice President and Fellow, Canadian Global Affairs Institute; Former Member, Deputy Minister of International Trade’s NAFTA Advisory Council and the North American Forum; Former Member, Negotiation Team for the Canada-US FTA and NAFTA.

Posted by Simon Lester on June 09, 2020 at 02:49 PM | Permalink | Comments (0)

The Last Appellate Body Report (For Now)

The Appellate Body circulated its report in the Australia – Plain Packaging case today. I’ve only just started reading, but this passage jumped out at me:

6.48. The sheer volume of the appellants’ claims under Article 11 of the DSU in these appellate proceedings is unprecedented. We recall that a claim that a panel has failed to conduct an objective assessment of the matter before it is “a very serious allegation”.225 Not every error by a panel amounts to a failure by the panel to comply with its duties under Article 11, only those which, taken together or singly, undermine the objectivity of the panel’s assessment of the matter before it.226 Indeed, as an example of the grave implications of claims brought under Article 11, the Appellate Body has considered that a panel’s “[d]isregard”, “distortion”, and “misrepresentation” of evidence, “in their ordinary signification in judicial and quasi-judicial processes, imply not simply an error of judgment in the appreciation of evidence but rather an egregious error that calls into question the good faith of a panel”.227 For these reasons, the Appellate Body has urged Members to consider carefully “when and to what extent to challenge a panel’s assessment of a matter pursuant to Article 11”.228 This is in keeping with the objective of the prompt settlement of disputes, and the requirement in Article 3.7 of the DSU that Members “exercise judgement in deciding whether action under the WTO dispute settlement procedures would be fruitful”.229.

As I’ve said many times now, I think the Appellate Body’s approach to DSU Article 11 was its biggest mistake over the years. The Article 11 standard seemed kind of broad at times, and that encouraged parties to bring more Article 11 appeals.

So that’s it for the Appellate Body, at least for now. No more reports are coming. (I’m not sure what will be done with the 11 panel reports that have been appealed).

What happens now? The establishment of the MPIA is moving along, with 21 parties and a pool of arbitrators likely to be coming soon. Will the MPIA work as a way for those 21 to maintain an appeals process? Will it work so well that others will sign on to it? Will it move from being interim to being permanent? Could it become the basis for a revived Appellate Body? It’s hard to predict any of this at the moment.

ADDED: On the issue of DSU Article 11, I agree generally with the separate opinion at paras. 6.523-543.

Posted by Simon Lester on June 09, 2020 at 12:12 PM | Permalink | Comments (0)

What Would a Joe Biden Trade Policy Look Like?

It’s hard to know when we will get back to the policy (or, at the least, political) debates that are part of U.S. presidential campaigns. We were distracted by a pandemic, and then by protests against systemic racism and related behavior by police, so there hasn’t been much in the way of policy talk. At some point, though, we’ll get back to it, and trade policy is sure to come up. In anticipation of this, I have a short paper on the trade policy challenges Joe Biden would face if he were to be elected president. Here is the introduction:

The past several years have been tumultuous ones for U.S. trade policy. After strident rhetoric from Donald Trump during his presidential campaign, his administration followed up with a wide range of aggressive actions. Congress, U.S. trading partners, businesses, and consumers have all been pushed to their limits by an administration that has taken U.S. policy in a protectionist and unilateral direction.

If Democratic presidential candidate Joe Biden wins the 2020 election, he will face the challenge of developing a coherent U.S. trade policy that provides stability and certainty. This paper presents an overview of the trade issues a President Joe Biden would likely face, with some suggestions on possible approaches his administration might take. It covers seven major topics, with some overlap among them:

1. Trade agreements: What should U.S. trade agreements say, and with whom should the United States negotiate them?

2. The World Trade Organization (WTO): How should a Biden administration deal with the many challenges faced by the multilateral trade institution that is the foundation of the trading system?

3. China: How should a Biden administration approach China’s controversial and difficult integration into the trading system?

4. The United States‐​Mexico‐​Canada Agreement (USMCA): Can some of the USMCA’s flaws be fixed during implementation?

5. Executive trade actions: How should a Biden administration use executive branch discretion over trade policy?

6. The role of Congress: Is it time to recalibrate the legislative/​executive balance of power over trade?

7. Personnel: Who should be in charge of U.S. trade policy?

The First MPIA Appeals?

The WTO has just posted three sets of agreed procedures for arbitration under DSU Article 25, that is to say, procedures for appeals through the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). The cases involved are Canada – Sale of Wine (DS537), Costa Rica – Avocados (DS524), and Canada – Aircraft (DS522). The latest info I see is that in DS537, issuance of the final report to the parties is scheduled for June 4, 2020 (WT/DS537/11/Add.3); in DS524, the panel expects to issue its final report to the parties by the second half of 2020 (WT/DS524/4); and in DS522, the panel’s work was suspended effective November 25, 2019 until November 4, 2020 under DSU Article 12.12 (WT/DS522/19).

Is the Trump Administration Just Being Legal Realist?

I was intrigued by something former USTR general counsel Stephen Vaughn said in his Trade Talks podcast last November:

there’s an old school of law that goes back to the 20s at Yale called Legal Realism, and the Legal Realists were people who believed that what matters is not what’s on the piece of paper, what matters is who the decision makers are, and the law is whatever they tell you it is. And to some extent, this is part of what we’re wrestling with here. It’s not just a question of what gets written down, it’s a question of what’s going to actually happen at the other end of that process.

I was supposed to be part of a conference Joost was organizing, and I decided to write about how legal realism, in the sense described above, may be guiding the administration’s thinking on dispute settlement in trade agreements. The conference was delayed due to social distancing, but I had already started writing, so I posted a draft on SSRN of where I am now:

The Trump Administration Gets (Legal) Real(ist) On Trade Enforcement and Adjudication.

This article examines briefly the views of the legal realists, and considers the Trump administration’s approach to international trade dispute settlement in that context. What may at times leave trade observers puzzled may just be a practical approach to tilting the scales in the favor of the United States. The substantive rules matter and the procedural rules matter, but the judges also matter. The Trump administration recognizes the importance of the last one, and it is willing to fight to get the judges it wants.

Posted by Simon Lester on June 03, 2020 at 09:15 AM | Permalink | Comments (2)

Another MPIA Arbitrator Nomination.

The New Zealand Ministry of Foreign Affairs and Trade today announced Dr Penelope Ridings as New Zealand’s nomination for the pool of arbitrators established under the WTO interim appeals arrangement.

The Ministry welcomes the Cabinet decision to nominate Dr Ridings for the pool of arbitrators. Dr Ridings is a person of recognised standing in the international legal community, and brings with her extensive experience in trade law.

Dr Ridings was formerly the New Zealand Government’s Chief International Legal Adviser, and acted as Counsel in a range of disputes before panels and the Appellate Body at the WTO. Dr Ridings has also served as an independent first-stage panellist in a number of WTO disputes. She has also appeared as Counsel before the International Court of Justice and the International Tribunal for the Law of the Sea.

The deadline set by the MPIA in Annex 2, para. 2 for these nominations was yesterday. So far only two names are public.

What happens next? Here’s what the MPIA tells us:

3. The candidates will undergo a pre-selection process in order to ensure that the pool of arbitrators comprises only persons of recognised authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally.

The participating Members envisage that this pre-selection process will be carried out by a preselection committee composed of the WTO Director General, and the Chairperson of the DSB, the Chairpersons of the Goods, Services, TRIPS and General Councils. The pre-selection committee will, after appropriate consultations, recommend to the participating Members the candidates who meet the above criteria.

The participating Members envisage the completion of this pre-selection process within one month following the expiry of the deadline to nominate candidates.

4. The participating Members will compose the pool of arbitrators by consensus. The participating Members will endeavour to compose the pool of arbitrators within three months following the date of this communication. They will notify the pool of arbitrators to the DSB, as addendum to this communication. The composition of the pool of arbitrators will ensure an appropriate overall balance.

Is International Trade Law the Problem?

The formidable Todd Tucker says that “The Green New Deal Has an International Law Problem.” I don’t think that the “green” aspects of a GND–meaning carbon taxes or permits and border tax adjustments–would have much of a problem. I’ll focus on the trade issues, and leave the investment law issues (which Tucker does not describe in detail and which I also think don’t raise great problems for the green aspects of the GND) for others.

The core of Tucker’s argument is that in order to make carbon reduction politically feasible, discrimination in favor of local producers is politically necessary. We might reverse his argument, and say that the problem is not with the international law, but with the politics of climate, which cannot imagine a way to compensate domestic losers from the carbon transition without discrimination.

Tucker also argues that origin-neutral policies can violate WTO law. As I pointed out here, this is true in theory, and I agree with Tucker that there is a defect in the WTO Appellate Body’s discrimination jurisprudence, but it has not caused significant environmental problems, and, as I argue here, there are good reasons to think that non-discriminatory carbon taxes and border tax adjustments would survive WTO scrutiny.

I also think that Tucker is excessively pessimistic about the availability of GATT Art. XX or GATS Art. XIV defenses, arguing that these provisions are applied in a way that is biased against the non-trade values they protect. This may be a difference in judgment, but I think the WTO’s Article XX jurisprudence is reasonably well-designed to discern between domestic regulation that is designed with environmental protection in mind, and domestic regulation that is a false front for crony capitalism.

From all this, I expected Tucker to recommend some tweaking of the discrimination and environmental exception provisions of WTO law. I was surprised instead to find a leap from this somewhat technical jurisprudential critique to an argument that during the first 10 years of “the mobilization” of GND, there should be a waiver of international trade treaty obligations. Tucker seems to ignore all the provisions, like the anti-discrimination provisions, that are designed to limit defection from liberalization commitments. He would replace the existing tariff obligations with what looks like a “climate club” a la William Nordhaus. Tariff reduction to zero would be confined to carbon-compliant states. Tucker concedes that his bold plan “seems utopian,” and it does carry a whiff of unicorns and cotton candy. While Tucker highlights domestic realpolitik in his critique, he seems to ignore the realities of international politics. But perhaps his proposal will provoke a useful discussion of linkages between trade and carbon that will allow for more leverage over climate free riders.

I do worry that trade law is made a scapegoat for the lack of political will to agree a GND. The trade law system is by no means perfect, but there is no doubt in my mind that if states can achieve a GND, they can iron out any kinks in the trade law system. Trade law is not the problem.

Posted by Trachtman on May 29, 2020 at 08:10 AM | Permalink | Comments (2)

International Economic Law Virtual Book Talk Series.

The American Society of International Law (ASIL) International Economic Law Interest Group is hosting a series of four virtual book workshops this summer showcasing recent publications by scholars in the field. Each workshop will be roughly an hour in length and will include commentary from the author and a discussant and then open conversation among participants.

The first workshop will take place on Thursday, June 4 at 1pm ET. The two books that will be discussed are Global Banks on Trial: U.S. Prosecutions and the Remaking of International Finance by Pierre-Hugues Verdier and The Globalized Governance of Finance by David Zaring.

Registration for this first event in the series is now open on the ASIL events page. Once registered, participants will receive the Zoom link and access to excerpts from each book.

The book series will continue in the coming weeks with works by Anu Bradford, Kevin Davis, and Sonia Rolland and David Trubek. Dates and additional information for those workshops will be available shortly also on the ASIL event page.

Theorizing Precedent in International Law.

In light of the discussions of precedent in the previous two posts, I thought it might be worth posting something from a piece by law professor Harlan Cohen entitled Theorizing Precedent in International Law (I think he has more coming on this issue):

The ingredients discussed in Part III—sources, features, actors—can be combined to tell three intertwined stories about the emergence of international precedent, one rationalist, one jurisprudential, and one sociological.

A Rationalist Account.

Under this account, interpretations should be invoked or treated as precedent when doing so helps achieve various actors’ broader goals. Such an account largely tracks existing explanations for precedent described earlier.70 For a state actor, this may mean citing a precedent that supports a position a state wants to take or that a court might predictably favor (for example, one of that court’s own prior decisions). For the judge, it might mean citing a precedent from a court it is trying to convince or citing its own decisions to solidify its control over interpretation.

But such a rationalist story could also explain why states might support a broader system of precedent, even when doing so may not always favor their desired positions. To the extent states are invested in a particular regime, predictability may be valuable enough for them to support precedent-based arguments generally. This is true whether the potential precedents are found in state actions or in judicial opinions. To the extent third-party decision-making is capable of resolving difficult coordination problems, states may give a court or tribunal’s decision precedential force in order to preserve that court or tribunal’s authority in the regime.71 (Questioning that body’s decisions too often might undermine that body’s authority.) Moreover, treating prior decisions as precedential might add desirable clarity to the rules. To the extent states value general clarity more highly than winning the cases precedent might cost them, states should support precedent.72.

Of course, few (if any) regimes explicitly provide for precedential effect. This suggests that for the states designing those regimes, the optimal level of clarity and predictability is greater than a system of de novo review but less than one of stare decisis. Denying the force of precedent, while nonetheless arguing from it, may be a way of calibrating precedent’s exact weight. Assuming that arguments from precedent will have some natural force (see the next story), this strategy could allow states to take advantage of the predictability of precedent, while still retaining some room to argue against a precedent’s relevance in a particular case. The danger of this strategy, as demonstrated by the precedent-creep in the WTO, ECJ, and ECHR, is that if every state uses this strategy, precedent-based arguments are likely to predominate. Even if one state has an interest in flexibility in a given case, states, in the aggregate, are likely to favor predictability over flexibility, and a de facto doctrine of precedent will likely emerge.73 This is reinforced by the normative power of oft-cited precedent (discussed below), which may make erasing the prior interpretation nearly impossible.

A Jurisprudential Account.

But all of this assumes that when an argument is made that a prior interpretation dictates a current one, that argument carries some independent additional weight and has some authority beyond the reasoning attached to it. Under the rationalist account, this extra weight may just reflect an implicit understanding of the system-value of precedents for achieving the relevant actor’s goal. But from a jurisprudential standpoint, it might be that the authority of precedents inheres in legal argumentation.

Precedents carry whatever weight or authority they have within a legal argument. As noted above, precedent might best be seen as the burden a prior interpretation of a rule places on future arguments about that rule. In the absence of any prior interpretation, an interpreter has a lot of latitude to choose a particular interpretation of a rule. Evidence of a prior interpretation seems to change that equation. As a matter of reasoned legal argument, such an interpretation cannot be ignored. Depending on a variety of factors that might give the prior interpretation greater legal authority—the prestige of the prior interpreter, the quality of the legal reasoning behind it, its perceived adherence to other prior interpretations or coherence within the system—that decision might be brushed aside, distinguished, narrowed, adopted, or extended, but it must be dealt with. Failing to do so might be seen as arbitrary and a violation of rule of law norms.74 This effect is compounded the more the particular prior decision is considered and cited.75 The greater the frequency of citation, the harder it is to ignore the decision, and the greater the burden on current interpretation.76.

Moreover, the discursive power of precedent may have normative force. Common to many theories of law is a view that one of law’s core principles or qualities is that it treat like situations alike. Lon Fuller describes consistency as part of the internal morality of law,77 Ronald Dworkin’s law as integrity denies the legitimacy of checkerboard laws that treat like cases differently,78 and Tom Franck describes coherence and adherence as key factors in the perceived legitimacy of laws.79 From this standpoint, precedent’s pull can be seen as a direct articulation of rule of law norms. If like cases must be treated alike, future decisions must at least make reference to prior ones.80.

A related jurisprudential argument often made in support of precedent is reliance, that law must protect the reasonable expectations of the governed.81 It might seem bizarre to suggest that states have a reliance interest in the decisions of international tribunals that they have so deliberately denied precedential effect, but such arguments are sometimes made.82 (States are more likely to argue that they relied on the precedent set by prior state acts than a prior tribunal decision.83) More often, the argument about reliance on prior decisions is made on behalf of individuals rather than states, either in the human rights or investment protection context. It is essentially an argument against state prerogative. Invocation of the legality principle in the international criminal context may contain a version of this argument. Some notion that individuals should be able to rely on the prior decisions of international criminal courts may explain why the International Criminal Court is the sole international court authorized by treaty to look to its prior decisions as a source of law.84.

Whether the argument is about treating like cases alike or concerns about reasonable reliance, these jurisprudential arguments suggest that it is the most proximate and similar decisions—from the same body or actors or on the same issue—that will carry the most weight. The easier it is to distinguish the context, the less weight an interpretation will carry. It also suggests that the less clear the precedent and the more ad hoc the interpretation appears to be, the easier it will be to distinguish. This helps explain why judicial interpretations, which are usually clearer and nested within a body of jurisprudence, seem to become precedents so much more rapidly than interpretations derived from state practice, which are often purposely ambiguous.85.

A Sociological Account.

But for this jurisprudential account to have force, someone must actually believe in it or have some other incentive to abide by it.86 Nor can the jurisprudential account on its own choose between different sources of precedent. Prior interpretations might have weight, but which ones: judicial opinions, state practice, expert reports? It is here that a sociological account of the actors who invoke and respond to arguments from precedent becomes essential. This sociological account has so far been neglected in the literature on international precedent, but it is this account that provides the key to understanding the operation and effectiveness of the other two. It explains why invoking precedent self-interestedly may get a response and why the jurisprudential account may exert some independent pull. In essence, the sociological account provides the context of the game in which precedent-based moves will either succeed or fail.

Specific actors may be trained to see certain sources an authoritative. Lawyers, particularly those trained in a common law tradition, are trained to seek out, read, and argue from judicial decisions.87 Members of the military may be trained to look to historical combat actions for lessons. Specific actors may also belong to professional communities that respond to those sources or expect reference those sources. Lawyers, for example, might experience professional opprobrium or sanction for failing to cite relevant precedents. And different actors may face a range of social and political incentives to cite particular sources. Politicians, for example, will have incentives to cite precedents that will help sway voters in their favor.88.

Take the example of lawyers very generally. Lawyers are indoctrinated with rule of law principles, principles which, in turn, are embodied in legal professional ethics. To the extent they work with other lawyers, particularly domestic lawyers, they may be expected to argue from judicial precedent. Within a legal organization, arguments that follow the professional script and reference judicial precedents will be rewarded. Arguments that seek to be overly creative or iconoclastic might not. Given their skill sets, judicial precedents may be more readily available to them than other sources.

Most of all, when working with non-lawyers, arguments from judicial precedent may enhance the lawyer’s stature. Lawyers as a professional group have specific sources of political and social capital that they can use to maintain their importance and relevance in relation to other societal actors.89 Among these is lawyers’ purported expertise in interpreting and applying complex legal sources. Lawyers, seeking to maximize their own power and authority vis-à-vis other international actors, will want to emphasize the value of precedents and their unique ability to understand them.

In other words, lawyers at the U.S. State Department or Defense Department may argue that precedents need to be followed (a) because they believe that rule of law requires it, (b) because they fear formal or informal professional or group sanction (i.e., shunning) if they fail to adhere to it, or (c) because arguing for precedent reinforces their authority within decision-making circles.90 One need not choose between these reasons; they reinforce one another.

Of course, the actual story is much more complicated. Lawyers are not all the same. Hailing from different parts of the world, they may have been trained differently. They may belong to different organizations with different organizational cultures, priorities, and scripts. A lawyer in a foreign ministry may see the world differently from a military lawyer or a lawyer at the ICRC. 91 Or they may belong to different epistemic communities.92 The results of these differences, including how lawyers interact with other actors in a community of practice, may go a long way towards explaining different patterns of precedent or different ways of arguing from precedent in different areas of international law.93 Scholars have only begun to study the sociology of these actors.94 Much more work needs to be done.

Along these same lines, when the issue of past AB rulings as precedent came up over on Twitter, Harlan offered the following:

“Something I’ve written about and am writing about now – the problem is that the formal terms are red herrings. How much weight precedent has in any system is really cultural. In that sense, what everyone is really fighting about is how constrained to *feel* about prior opinion.”

He also said this: “Arguing against terms like precedent and cogent reasons can have the effect of freeing others from a prior decision’s burden, but perhaps paradoxically, changing the terms to something looser might change nothing at all.”

Posted by Simon Lester on May 25, 2020 at 08:13 AM | Permalink | Comments (3)

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