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Simon Lester
Florida
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I was just trying to bring a little levity to these trying times. ;)
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Ross said: "THE PROBLEM WITH REGIONAL TRADE AGREEMENTS IS YOU GET PICKED APART BY THE FIRST COUNTRY. THEN YOU NEGOTIATE WITH THE SECOND YOU GET PICKED APART. AND YOU GO WITH THE THIRD ONE. YOU GET PICKED APART AGAIN." http://www.cnbc.com/2016/11/30/cnbc-transcript-steven-mnuchin-and-wilbur-ross-speak-with-cnbcs-squawk-box-today.html Doesn't seem consistent with the reality of trade negotiations as I understand them, but the Trump folks are all buying into it. It would be great to hear from some people with trade negotiating experience, to see what they say about this.
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Mark, Thanks, this is very interesting! Simon
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Brett, Maybe. But I think the broader context of 15(a) muddies the waters a bit.
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I will be very interested to see what the parties, and also the Appellate Body, say about that Appellate Body statement in Fasteners.
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I'm curious about your position on BITs/ISDS as a general matter, beyond tobacco. Do you think BITs/ISDS serve a useful purpose, or should we get rid of them?
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Just to add to my earlier comment, in this case the alleged harm has been done to the German subsidiary, so I don't see why it is a problem that the subsidiary has to bring the lawsuit.
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I've heard something along these lines before, but I'm not sure why having to sue in German court through a subsidiary is considered an impediment to filing a lawsuit in German court.
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Oh, sure, there's no question the subsidy is a measure. I'm just wondering specifically about the phone call in which he tried to convince them to stay.
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But keep in mind, Trump is not the President yet. Does that change the analysis?
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The U.S. would be able to bring enforceable complaints against Mexico's labor practices under TPP, whereas it could not do so under NAFTA. I don't know what the best word to describe that change is, but "renegotiation" seems pretty close. At the least, it renegotiates the trade rules that apply as between the U.S. and Mexico.
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I'm a skeptic about much USTR marketing, but this one I can buy. Under NAFTA, there are no enforceable labor/environment protections with Canada and Mexico. Under TPP, there are. Hence, a renegotiation.
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If the issue is what is fair and equitable to the investor, as opposed to what is fair and equitable to the home state government, why does it matter if the home state agreed to it?
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I prefer exceptions, but I suppose an exemption could work as well. I'm not convinced this distinction has much impact on the result. An exception might take a little longer, but it would get us to the same place. The more important issue is the particular language used (e.g., "necessary" or "related to.") To the extent there is regulatory chill, a well-written general exception is the most balanced approach. By contrast, with the exemption used here, it seems like they are saying that tobacco control measures can be used to favor domestic tobacco companies over foreign ones, which is a strange approach. As for regulatory chill and industries abusing a privilege, I don't think it's correct to say the tobacco industry is acting differently than any other industry (I don't have the figures, but I doubt they are in the top 10 of industries using ISDS), and I don't see anyone abusing anything. When companies feel their rights are being violated, they threaten to bring cases, and sometimes actually bring cases. That's how the system is designed to work. Now, as I've said, I don't think the international investment system makes a lot of sense, and I think we should get rid of it. But as long as we have the system, I don't see why we get mad at particular companies who use it.
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Christian, But isn't it likely the Canadian company would set up a German subsidiary (or operate through some similar arrangement), and this subsidiary would be a domestic juridical person?
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Australia and NZ have already established a precedent in the TPP for excluding ISDS: http://worldtradelaw.typepad.com/ielpblog/2015/11/no-isds-as-between-australia-and-new-zealand.html
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Rob, This is a clever proposal! I suspect the Obama administration will be reluctant to go along with it, but it's worth a try. Also, I wonder how other TPP parties will react. Some of them may say, if the U.S. isn't going to be bound by this, we don't want to be bound either. I've suggested something along the same lines, although going further: If Hillary Clinton is elected President, and TPP doesn't pass in the lame duck session, she should try to pass a revised version of TPP with ISDS taken out entirely. http://nationalinterest.org/feature/how-president-hillary-could-reverse-course-tpp-17476
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That survey compares national courts across countries (although the rankings seem suspect in a number of cases). What I'd want to see is a comparison of treaty arbitration to specific national courts.
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I commented on the Buffett plan on this blog a while back: http://worldtradelaw.typepad.com/ielpblog/2009/01/buffett-on-the-trade-deficit.html Here's an excerpt: As Buffett himself notes: "There is no free lunch in the IC plan: It would have certain serious negative consequences for U.S. citizens. Prices of most imported products would increase, and so would the prices of certain competitive products manufactured domestically. The cost of the ICs, either in whole or in part, would therefore typically act as a tax on consumers."
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Hmm, yes, maybe that means the situation wouldn't be as absurd as what was happening in Argentina.
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Also, the Stiglitz plan sounds like what was used in Argentina, with results that seem pretty inefficient: "BMW AG's subsidiary in Argentina worked out an agreement to export leather, a type of grape juice, and tons of rice so it could import BMWs, minis and motorcycles to sell. "Rice is not the BMW business, but we had to come up with a solution," said Dan Christian Menges, a BMW Argentina spokesman. ... " http://www.wsj.com/articles/SB10001424127887324595904578117370506750116
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If people want to solve the trade deficit problem, there is an easy solution: a recession. This is from the NY Times a few years back: "AFTER years of being told by Asians and Europeans that it had to find a way to reduce its trade deficit, the United States did find a way in 2009. A global recession did the trick, producing the largest decline ever in the deficit." http://www.nytimes.com/2010/02/13/business/economy/13charts.html But snark aside, the solutions I've seen for the trade deficit all seem much worse than the alleged problem, whatever it is. Former Cato trade policy director Dan Griswold had a good piece on this in the 1990s. Here's an excerpt: "Misunderstanding of the trade deficit threatens to undermine the freedom to trade by encouraging faulty and damaging “solutions” to a problem that does not exist. Any attempt to fix the trade deficit through protectionism, export subsidies, or currency manipulation is bound to fail because none of those tools of intervention addresses the underlying causes of the trade deficit. The trade deficit will respond only to changes in a nation’s net flow of foreign investment, which in turn is determined by its underlying rates of savings and investment." http://www.cato.org/publications/congressional-testimony/americas-misunderstood-trade-deficit As long as U.S. consumers spend so much more than consumers in our trading partners, there will be a trade deficit. It's not clear why governments should try to "fix" this, on either side of the equation.
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OK, one more. He is generally critical of global economic governance, but says he favors more limited forms, such as: "Subsidy rules can be improved by requiring economic cost-benefit analyses that incorporate potential consequences for both static and dynamic efficiency." That might be a more intrusive form of global economic governance than anything else mentioned in the piece!
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Joel, I agree with your post, but I feel obligated to take on something Rodrik says: "Sometimes domestic economic advantage comes at the expense of other countries. This is the case of so-called beggar-thy-neighbor policies. The purest illustration occurs when a dominant supplier of a natural resource, such as oil, restricts supply on world markets to drive up world prices. The exporter’s gain is the rest of the world’s loss. A similar mechanism underpins “optimum tariffs,” whereby a large country manipulates its terms of trade by placing restrictions on its imports. In such instances, there is a clear argument for global rules that limit or prohibit the use of such policies." I just want to point out there is almost never a "domestic economic advantage" from these policies. Maybe the oil example works, but in the real world, there are almost no examples of success here. Rather, attempts to do what he suggests will almost certainly result in a domestic economic disadvantage. He also offers this false dichotomy: "Problems rooted in failures of domestic deliberation can be solved only through improved democratic decision-making. Global governance can make only a very limited contribution here – and only if it focuses on enhancing domestic decision-making rather than constraining it." But all the enhancements he offers are actually constraints! That's enough Rodrik-bashing for the day, but it was nice to have the opportunity to do so again. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1873995
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Life is never easy, but there is always some fun for lawyers! ;)
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