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Simon Lester
Florida
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Krzysztof, I agree that politics is a problem, but I think you and I may disagree on the nature of that problem. Some people seem to imply a widespread, citizen-led movement against trade liberalization. I don't see that. Instead, what I see as the source of the current political stalemate on trade is a combination of special interests, an expanded trade governance regime, vague anti-capitalism, and generalized xenophobia (focusing more on immigration, but including trade). That's a hard thing to fight, I know. But I don't think redistribution (more/reformed TAA) will help generate support for trade liberalization, because TAA won't help with any of these issues. In terms of how to approach the politics, it's true that standing up to special interests is hard, but that doesn't mean we shouldn't try. It's a never-ending series of political battles. If we think trade liberalization is good policy, we have to keep pushing for it. Same goes for xenophobia. History is full of periods of intolerance. We just have to keep speaking out for openness. As for the core issue of free trade versus protectionism, I don't think there is much opposition to trade liberalization itself. People embrace it through their purchasing behavior. It's true that many people are against "NAFTA" in the abstract, but my sense is that is more likely to mean they are against corporations or Mexicans than they are against free trade. Again, I go back to ethanol subsidies. The fact that interest groups want them should not be the end of the debate. Similarly, the fact that the steel industry wants tariffs doesn't mean we should give in. Politics is never going to be easy, but if a policy is a good one, we should keep arguing for it.
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Also, when we talk about distributional consequences, we should take into account the positive impact of liberalization on poor people in other countries.
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Thanks, Krzysztof. One of the things that I think is missing from the debate is a discussion of the distributional consequences of protectionism. The studies I have seen show that U.S. tariffs tend to be imposed at higher rates on products bought by low income people. So, we impose taxes on all the poor, for the benefit of a handful of people in the middle class (and the wealthy people who run certain industries). It seems to me that a simple way to increase "fairness" in the area of trade policy is to stop redistributing money upwards in this way. Maybe the question of whether to liberalize trade can be analogized to the debate over whether to stop providing ethanol subsidies. Yes, it will be disruptive to stop protecting domestic industries or to stop subsidizing ethanol, and there will be adjustment costs. But these are economically harmful policies, and we should try to find a way out sooner rather than later.
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Steve, Just to be clear, I was only describing the U.S. argument about GATT Article XXI, not offering my support for it. Article XXVIII is interesting, because I think this is the route the U.S. should have taken if it wanted to raise steel/aluminum tariffs. But it did not invoke that provision. Perhaps the best political response against the U.S. would be for other countries to come up with a flimsy national security justification of their own, and impose tariffs on the basis of GATT Article XXI as well. None of this is ideal, of course. It's just a question of how best to deal with an unpleasant situation.
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I would say yes.
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My sense is, yes, a non-violation nullification or impairment claim would be heard even if GATT Article XXI is invoked.
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Tom, Opinions vary on exactly how it should be used, but Article 32 of the Vienna Convention on the Law of Treaties says: "Supplementary means of interpretation Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: (a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable." http://www.worldtradelaw.net/misc/viennaconvention.pdf
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Andrew, Thank you for mentioning those three magic words: "design", "structure", and "architecture"! I should have used those when I talked about an "objective" examination of the measure. That's what I had in mind. Thanks also for bringing up the Indonesia case. I thought about that case as I was writing this, but couldn't figure out how to integrate it, and gave up. There's some language in that panel's reasoning that may be important here: "one of the defining features of a safeguard measure ... ." As you noted, that panel was dealing with a particular set of facts. In that case, a measure that was carried out under domestic safeguards law might not, in fact, be a safeguard measure, for the reasons you described -- Indonesia did not have a tariff binding with respect to the product at issue, and thus there was no suspension, withdrawal, or modification of a GATT obligation or concession. Thus, in its analysis of whether that measure was a safeguard measure, the panel focused on that particular feature of a safeguard measure. Here, by contrast, we have a measure not taken under domestic safeguards law. In this situation, other defining features of a safeguard measure might come into play. One such feature is the purpose of the underlying statute and measure. As noted, these measures were not taken pursuant to a Member's domestic safeguards law, but rather a law that has national security as a basis (however badly these tariffs fulfill that purpose). With that in mind, it seems to me that the "design", "structure", and "architecture" of the Section 232 measures at issue guide us in the direction of these measures not being a safeguard measure.
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No. Safeguards Agreement Article 11.1(b) prohibits them.
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Ah, I had missed that you were talking about XXI(c) only, and not the other sub-provisions of XXI. But on what basis would a XXI(c) notification prevent self-help, whereas notifications under other XXI sub-provisions would not?
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Wait, in your view, if the US notifies this under GATT Article XXI(c), the EU could not impose the Article 8 rebalancing measure? Isn't that a pretty easy option for the US to take advantage of here?
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Steve, My starting point here is that the Section 232 measures involve tariffs. I think we would all agree on that. And because they are tariffs, Article II applies, and, putting aside other provisions for now, these particular tariffs would violate Article II. I think we would all agree on that too. Now, with some tariffs that violate Article II, there might be a claimed justification under another provision. For example, an anti-dumping duty above the bound rate would normally violate Article II, but Article VI and the AD Agreement can take the analysis out of Article II. Similarly, a safeguard duty above the bound rate would normally violate Article II, but Article XIX and the Safeguards Agreement can take the analysis out of Article II. So, there are a variety of tariffs out there, and they fall into various categories: Ordinary customs duties, other duties and charges, anti-dumping duties, countervailing duties, safeguard duties, etc. How do we identify which category a particular duty belongs in? Its basis in domestic law seems like a good starting point. How does the implementing Member identify the measure, for internal purposes and at the WTO? You could also look objectively at the measure. What are its characteristics? Regardless of what the implementing Member called it, what category does it fall into based on an objective analysis? Let's apply those factors here. First, under U.S. law, the steel/aluminum tariffs are not a safeguard measure. They were not undertaken pursuant to Section 201, and none of the Section 201 procedures were followed. And the U.S. has not notified it to the WTO as a safeguard measure. Second, objectively speaking, does this measure have characteristics that make it look like a safeguard measure? Without going into great detail here, I would say it has a few such characteristics, but there are alternative explanations for their appearance. Those characteristics are only cited in the context of the broader national security argument. Despite the sloppiness of the analysis, it is clear that, at their core, these measures are about national security (however unreasonably and arbitrarily that may be). Any reference to safeguards-type analysis is only made in the context of the issue of national security. Overall, then, I can see how someone might argue that these tariffs are kind of like a safeguard measure, or have some characteristics in common with a safeguard measure. But I don't think they are safeguard measures.
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Thanks!
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Every country has its issues, but taking into account the overall picture for both goods and services, would you say that Australia's regulatory measures are more protectionist than U.S. regulatory measures?
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To clarify, I didn't mean to suggest that China wouldn't care at all. When I asked "how much" it would care, I meant, would it care enough to liberalize its own investment regime. But why do you refer to the US-China BIT negotiations as "ongoing"? I was not aware of anything happening there.
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Just to clarify a bit, I didn't mean seek out the intent whatever it may be. Rather, I meant try to pin down whether there was a protectionist intent. I'm less concerned with where/when we do that kind of analysis and what we call it. I just want something like what was done in Chile - Alcohol, at some point in the process, as a way to identify whether there is a protectionist intent.
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Lorand, Thanks for this. Let me ask you a follow-up question. One thing that I see lacking in many reports is a thorough analysis of what precisely the purpose of the measure is, in an objective sense. As an example of what I have in mind, see paras. 63-66 of Chile - Alcohol. http://worldtradelaw.net/reports/wtoab/chile-alcohol(ab).pdf I think that some cases try to get at this issue, but then get so bogged down in the details of the measure that they lose sight of the big picture. What do you think of that Chile - Alcohol analysis, and how does it fit into your framework?
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Thanks for this comment, which provides a good elaboration of what I meant when I said, "I take the U.S. argument here to be that everyone is making too much of Section 15." In other words, many people seem to think that Section 15, on its own, means that China must now be granted market economy status, and surrogate values no longer used, whereas the U.S. disagrees and argues that other GATT/WTO provisions and practice are relevant to this issue. The larger issue here, in my view, is what actions can be taken to encourage China to make its economy more market-oriented. I don't get the sense that surrogate value calculations in anti-dumping cases were intended to do that, and clearly they have not had that effect. So what other actions could the U.S. try? There is plenty of potential for WTO complaints (e.g., on Chinese subsidies or forced technology transfer), and negotiations might work as well. It will be interesting to see if any WTO Members decide to pursue this. It would probably work better if they acted in concert.
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Thanks for the comment, Julia. I have a different view on this. To me, a least trade-restrictive alternative standard is vague and confusing, whereas the chapeau is pretty good (although I would change the wording a bit). But it's a complicated issue, and I'll make a note to come back and explain my view in more detail at some point!
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This blog is a safe space. No heckling. Feel free to express any view you would like. ;)
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It all depends on what exactly you do with the chapeau. I think we should be cautious about bringing the LRM analysis in there (maybe it could be a factor, but it should not be determinative). But yes, some people might overdo it and replicate the "necessary" test in the chapeau. This raises another important systemic point: What do we mean by non-discrimination? Let's save that one for a separate post!
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Thanks, Brett. What do you think of the US arguments on Article 2.2.1.1 on pp. 29-32?
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Ted, Thanks for your comment. Some quick responses below. It's true that there is not always a contractual relationship, but note that I say it would be "even better" to improve domestic legal protections. That's where I think the main focus of policy-making should be. But I do think companies who are worried about expropriation or bad treatment could insist on signing contracts that address those concerns. On the specific nature of state-state dispute settlement, I don't have strong feelings on this. I'd want to hear some arguments for both approaches. As to enforcement, this also sounds like an area where improvements to domestic legal systems would be useful. I would prefer to make that the focus, rather than creating a work-around that is only accessible to foreign investors.
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As a point of further clarification, my sense is that most people (including me) who criticize "ISDS" are criticizing both the procedure and the substance. I've come across some supporters who take criticism of "ISDS" to mean that only the procedures are at issue, but I think critics have both in mind, and use "ISDS" as shorthand for both.
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