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Julia Qin
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It seems analogous to export subsidy in the form of export credit - SCM Annex I(k).
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What does economic theory have to say on the pricing of publicly owned water?
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Simon and Andrew, I think this line of discussion should take into account the AB benefit jurisprudence in the context of government and SOE prices. The AB used to define the market under SCM 14 as "undistorted market", which was based on the simple/artificial dichotomy of government v. market. Significantly, the AB changed its approach in DS436 (US-CVD (India) and DS437 (US-CVD (China)) when it began to mention market competition, recognizing that government and government-related (SOE) prices may form part of market benchmarks, depending on the market conditions in a given case. At least in this context, it seems clear that how to define benefit/market is not a neutral matter, but necessarily determines the balance under SCM.
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As Simon mentioned, each EU member is a WTO member in its own right. So, Scotland's WTO membership does not depend on its EU membership.
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I assume it would depend on whether the treaty obligations of the UK are honored by Scotland. It is my understanding that when Czechoslovakia broke up, neither Czech nor Slovakia claimed to be its successor, but both agreed to honor its treaty obligations. So soon after the breakup, both Czech and Slovakia became GATT contracting parties (in 1993) without having to go through the accession process. The situation with countries breaking out from the former Yugoslavia, however, is completely different. Each of them has to negotiate accession anew.
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Thanks for the further explanation, very interesting. But I don't seem to be able to find information about "the Vienna conventions on plenipotentiary diplomatic conferences". Any suggestions?
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raghavan, could you explain a bit more about the approved "history of UR" at Marrakesh meeting?
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According to Lee Buchheit, one of the top experts in sovereign debt issues, "the purpose of the pari passu is to ensure that the borrower does not have, nor will it subsequently create, a class of creditors whose claims against the borrower will rank legally senior to the indebtedness represented by the loan agreement." So it is supposed to be about ranking of the loan vis-a-vis other debts of the borrower, not about the repayment to each lenders within the same rank. Of course it all depends on how the pari passu clause is drafted in Argentina's loan agreements. I have not followed the case closely. Does the clause interpreted by the judge explicitly cover repayment to lenders in the same rank?
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@Jari, thanks for making the excellent point re political consequences. This is certainly a major factor to consider in formulating a judicial policy on self-correcting. Back to this particular case however, there was no such risk - making GATT XX available to the accession commitment does not mean China would pass the test of GATT XX. And China only appealed on the issue of availability of Art. XX, and not the application of Art. XX to its accession commitment. So from a practical standpoint, this would be a perfect case to set the precedent of self-correction. @Marc, Hudec was right of course. But many years have passed since Hudec's comment. Today's AB should feel much more secure about its authority. And it has since indicated many times including in this very report that it endorses a holistic interpretive approach, rather than the narrow textualist one. So I am a bit more optimistic about the possibility of changing the policy. @Cathryn, while my observation may sound stereotypical, I do believe that many Chinese intuitively consider face-saving to be of real value in litigation. At the minimum, they don't want to offend the judges, even when their conflict-avoidance tactic might lead to their own side's defeat. Perhaps the next generation of Chinese will be different, given their increasing exposure to Western litigation culture.
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As already pointed out before, there is a fundamental difference between China's appeal in DS449 and the US appeal in Rare Earths. The US tactic is merely a litigation tactic because it is not a sincere appeal, as the US notice of appeal admits itself. One would not expect a party that has won all substantive claims would file an appeal on minor procedural issues with the sole purpose of "preempting" the losing party's appeal. In contrast, China's appeal is a genuine one, because it has lost on a substantive claim on which there is even a dissenting opinion supporting China's position. The US should have anticipated such an appeal and be prepared for it well in advance. What you have pointed out is exactly what we need to be worried about - the potential poisonous effect of the US tactic. By recognizing the US tactic as it is, hopefully other members would not be encouraged to follow suit.
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The prevailing of the US tactic shows "a victory of the rule of lawyers", as opposed to the rule of law, in WTO dispute settlement, a situation warned by Prof. Weiler more than a decade ago. Ironically, China's acceptance of the situation demonstrates "the ethos of diplomats". See J.H.H. Weiler, The Rule of Lawyers and the Ethos of Diplomats, 35(2) JWT 191 (2001).
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BNA WTO Reporter also reported the extensions for appeal in the two cases. So it appears the two cases are related after all, but for procedural reasons. There is, however, a key difference between the two appeals. China's appeal is on the Panel ruling on a substantive issue, whereas the US appeal is, shall we say, frivolous. As the US notice of appeals says, in the event China were not to appeal, AB would not need to consider its appeal. Further, as Atul helpfully pointed out, under Rule 23(5), a party does not have to join the appeal as other appellant, and instead has the right to appeal separately within 60 days. However, if the issues in two separate appeals are related, how should the AB deal with the situation? Consolidation?
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A good reason for DSU reform.
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Thanks very much, Atul. Rule 23(5) makes perfect sense, as AB working procedures are not supposed to diminish the rights provided by DSU.
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Good question. The subject matters of the two cases are not related at all. China seemed ambivalent about appeal in the Rare Earths case. The official Xinhua news reported on March 26 that according to MOFCOM, "China was currently assessing the panel report and would follow the WTO dispute settlement procedures to settle this dispute." Note that "appeal" was not mentioned. http://news.xinhuanet.com/english/business/2014-03/26/c_126320535.htm
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Anon2014, Thanks very much for your insightful comments. It seems the US tactic may bring a change to the current practice (the average period between the circulation of panel report and the notice of appeal has been 49 days, according to Simon's data). Parties should all adopt the "best practice" and be fully prepared for appeal from Day One after the panel report is circulated. And the AB should also expect the same. One additional question: Why was the period between the interim report and the circulation of the Panel report in this case so drawn-out?
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Well, it look like China would need to go back to central planning so that the government can dictate what should or should not be done in the economy. It is just difficult to understand why the U.S. should not do its part - saving more and living within its own means. I think your arguments might be more persuasive if you can make a more balanced analysis. BTW, spending out of this crisis can only be a short term solution. (China did make the second largest stimulus package, more than EU and Japan, over $500 billion). In the long run, however, the U.S. just has to save more and reduce borrowing - I believe there is a consensus among the economists on this one.
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AG, If you exclude "investment", then the only way China can "spend" forex is to import foreign goods and services (plus tourism abroad which has serious practical limitations such as visa requirements). Are you suggesting that nations have a moral obligation to balance imports and exports? That however would be against the whole idea of free trade. Separately, what about the adverse impact of consumerism, over-consumption of material things, on the environment? The U.S. consumes way more than its fair share of the natural resources in the world. Do we really want to see a nation of 1.3 billion people acquiring the American way of consumption? This is all without taking into account the reasons why Chinese citizens save - prominent among which is the lack of a social welfare system. People need to save for medical costs, retirement, children's education, housing, because there is no effective social security system. Furthermore, frugality has been considered a virtue in the Chinese culture, which by the way has nothing to do with generosity. To see how amazingly generous Chinese people are, just to look at how most people donated after the Sichuan earthquake last year.
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Just to add: The Chinese government (through its sovereign wealth fund) has managed to lose a substantial chunk of its equity investment in U.S. financial firms - Blackstone, Morgan Stanley, most notably - thanks in no small part to the financial crisis. So the net result is this: billions of dollars hard earned by Chinese workers, arguably at the expense of lost jobs for many U.S. workers, simply evaporated. Well, that is not really true. The money did not simply evaporate. Instead, must of it went to enrich the bear raiders in the financial markets. So, what really happened is a massive transfer of wealth from the working people in China and the U.S. to those hedge funds and money managers who profited tremendously by taking advantage of the failing regulatory regime in the United States and elsewhere. The causes of the current financial crisis may be many. But what is the fundamental one? Unless we begin to reflect on the fundamentals, there will be no real solution.
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Two quick questions based on this post (without reading the paper itself): 1. How can China spend US dollars to employ Chinese? Dollars (forex) can only be used to buy foreign products and services. Dollars invested as equity in China will have to be exchanged into RMB before it can pay workers. In short, using dollars to invest in China will not change the amount of dollars held by China (unless it is used to import foreign products). 2. Why is China's lending Dollars to the United States not "investment" in the U.S. economy? The funds go to the U.S. government (in exchange for T-bills), and U.S. firms (in exchange for corp. debt securities), which may result in more employment depending on how the government and the U.S. firms use the money. Also, it is important to note that the Chinese government, the holder of most dollar assets, cannot invest in the equity of U.S. firms freely, because the U.S. restricts the scope of investment by foreign sovereign wealth funds.
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Luca, thank you very much for the detailed response. The item of "rescue and restructuring" caught my eye, since it may have something in common with the current bailout situation. Also, it is very interesting that market failure is identified as a legitimate reason for state aid.
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I am so glad that Luca Rubini mentioned the EC internal system, which I was only vaguely aware of. Can you or someone else provide a bit more detail about the EC regulations?
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The only other Member officially subject to NME treatment is Vietnam, which is limited to AD, if I recall correctly. I don't remember the details of the provision, which should be fairly easy to locate though.
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Simon, On your original question on MFN issues, do you mean China is the beneficiary of Section 15 of the Accession Protocol? It is important to note that the MFN problem is the other way around. The purpose of Section 15 is to allow WTO members to apply nonmarket economy methodologies to China. In AD, the NME treatment almost always results in higher dumping margins since the importing Member can discard the lower domestic market price in China and substitute it with prices in another country. The adverse effect of NME treatment on China exports is well documented. Similarly in CVD, the importing Member can discard China prices in determining the benefits conferred by a government subsidy. Hence, Section 15 is designed to allow WTO members to treat China less favorably than other Members. As Anon pointed out, if it were not for Section 15, there would have been no legal basis for the importing Member to use NME methodologies against China. As for the conditions set out in Section 15, they are merely some limits on the right of importing members to discriminate against China. It remains to be seen how much teeth these conditions have.
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Fassolt, thank you for the information, which is indeed very interesting!
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