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Simon Lester
Florida
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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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Another point. It's interesting to note where international law steps in, and where it does not. In theory, it could step in for lots of different people, on a wide range of rights-type issues. In practice, though, it steps in -- in an effective way -- for foreign investors on expropriation/due process-type, but rarely steps in for anyone else on any other issue.
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Let's say that, due to the absence of effective remedies for expropriation in Canada, the province of Alberta is having trouble finding companies to invest in its oil sector. A comprehensive expropriation law reform would be the ideal solution to this problem, but the citizens of Alberta are skeptical. However, they do like oil investment, so Alberta is able to get support for a law that provides a remedy for expropriation for companies investing in the oil sector. Is that situation similar to what international investment law does for foreign investors?
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Julia, Just to be clear, I'm not convinced there's a problem here that needs to be dealt with. But if someone did think there was a problem, then yes, I was thinking of an amendment to the DSU (which, as you note, is not very realistic politically!). In theory, you could use the "authoritative interpretation" approach that you mention. I'm not sure what provision of the DSU you would be interpreting, though, and what the specific interpretation would say.
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Just to clarify, the Livemint article incorrectly cites me for this quote: “How exactly was the US able to figure out what Seung Wha Chang’s line of thinking was since appellate body rulings are authored by the division as a whole and not individual rulings on the issues? Was it inference? Or inside information?” In fact, it was an anonymous commenter who said this: http://worldtradelaw.typepad.com/ielpblog/2016/05/appellate-body-drama.html#comments
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Thanks, Chris. I get the argument in theory. However, I'd like to see some evidence in practice of how prices change in this way. Also, I'd want to see any such prices increases compare to price decreases for other products.
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Here's what some economists who looked at this issue found: "Over the past two decades, the European Commission has negotiated a number of Free Trade Agreements (FTAs) which contain both traditional elements of bilateral tariff reductions, as well as additional liberalisation measures like non-tariff barriers. According to economic theory, FTAs lower trade barriers on imported goods, leading to consumer welfare gains from increase in product variety, better quality products and lower prices for existing products. We estimate the variety, quality and price effects of EU FTAs, drawing on recent developments in the quality literature and using detailed import price and expenditure data. On average, trade agreements the EU has entered into over the past two decades increased the quality of UK imports from its FTA partners by 26 per cent and lowered the quality-adjusted price of imports by 19 percent. We find that consumer prices fell by 0.5 per cent for UK consumers as a result of FTAs with trade partners that are not members of the European Community. Price reductions for UK consumers are greater than those for EU12 consumers, whose prices fell by 0.3 per cent from non-EC FTAs. Using the set of nonEC FTA estimates to predict the effects of future FTAs, we find a projected decline in consumer prices for UK consumers of 0.4 per cent from an FTA with the United States (TTIP) and 0.2 per cent an FTA with Japan (EPA). For EU12 consumers, the TTIP and EPA are predicted to reduce consumer prices by 0.3 per cent and 0.1 per cent." http://cep.lse.ac.uk/pubs/download/dp1417.pdf
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Even assuming that is true, wouldn't that particular price effect likely be outweighed by other factors, such as tariff reductions on imported goods, so that overall prices would go down?
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Sounds good, but that means I'll have to cancel my plans to get a Trump-style hair weave.
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