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Simon Lester
Florida
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Absolutely, and feel free to explain why. I couldn't cover everything!
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One final point here. With these kinds of cases, often the facts lead to a violation whichever standard is applied. As a result, panels/tribunals may be comfortable leaving the standard vague, because they don't have to settle it in order to decide the case.
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Arwel, Thanks very much for your comments and clarifications. I had started reading your piece, but had not fully digested it yet, so wasn't able to integrate your thoughts with the Bilcon tribunal's findings. I'm glad you weighed in here. You make a good point about the absence, in Bilcon, of a domestic comparator that had faced bad treatment. Perhaps, then, even if a group comparison had been undertaken, a detrimental effect would have been found. At the same time, I've always thought the degree of effect was an important consideration. In this regard, note the following from the MFN section: "727. Bilcon cites a series of projects in which the proponent was a foreign company or a Canadian subsidiary of a foreign company. All of them involved activities in which some form of landbased project (such as a refinery or mine) was involved as well as a marine terminal. The alleged better treatment in every case includes being subjected to a review of smaller scope (such as terminal only) at the federal level and using a screening or comprehensive study rather than a review panel. ..." I read this to say that there were other foreign companies who were treated well. Thus, a full comparison of foreign and domestic companies might have shown only a small detrimental effect (on one company). That could have had an impact on the overall national treatment conclusions, if the tribunal followed such an approach.
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On the other hand, perhaps BITs are about politics, not investment flows: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2576330
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Jari, You are clearly right, that is the main objective (not that the evidence shows investment treaties have an impact on attracting foreign investment!). The problem is, whatever the objective of investment treaties, the result is that locals are stuck with the "unfair" local courts, and foreign investors now have an alternative. When you look at the larger context, rather than focusing on investment treaties in isolation, that seems like a strange result. Taking the example of expropriation: Wouldn't it be better to protect property rights for all, rather than only for foreign investors?
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Andrew, All of your points are excellent ones, and that's part of what I was trying to do: Use this particular narrow debate to highlight the broader discussion we should be having.
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Joel, I did download the documents you linked to, but an example did not jump out at me. It seems like it will take some time to sort through what they have done, and may require an economist. I'll see if I can find one who is willing to help me! But again, it's not difficult to find examples of protectionism. (Every anti-dumping tariff ever!) The fact that it's so hard to find one for terms of trade manipulation says something, I think. Also, I don't think "terms of trade power causes the pattern of tariffs" is the same as "governments are motivated by terms of trade concerns." Maybe that's just semantics, but I think it's kind of important.
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I'm not sure that simply saying "the data is consistent with my hypothesis", without more, tells us that much. Obviously, you want the data to be consistent. If the data were inconsistent, that would undermine the hypothesis! But I think you need more than consistency, especially in this situation. As far as I can tell, government officials are pretty clear about what their motivation is. Most people who advocate for tariffs, Buy America provisions, etc., believe that giving an advantage to domestic producers through protectionist measures makes us better off by preserving jobs and increasing domestic wages and profits, which then circulates through the domestic economy, or something like that. I reject that, and most economists reject that, but that's what they seem to believe. In this way, they think protectionism itself increases economic welfare. I don't think they are aware of the terms of trade argument at all. So, in a world where people are actually motivated by protectionism, and make that very clear, I think you need more than data consistent with an alternative hypothesis of what motivates people. (Relatedly, when arguing that terms of trade manipulation is the motivation, there also needs to be some discussion and clarification of how "protectionism" relates to "terms of trade manipulation". I think most people assume "terms of trade manipulation" is just a fancy economist word for "protectionism." How do these two concepts relate? Where do they overlap? Where do they diverge?) It also seems to me that someone should be able to come up with at least one concrete example of terms of trade manipulation. Aggregate data are great, but you should be able to produce an actual measure of some sort. (I've got about a million examples of protectionism I can show you!) If no one can do that, it leaves me pretty skeptical. One additional point: In the context of FTAs, where most tariffs are phased out completely, doesn't their whole argument just fall apart? Governments are eliminating the entire protectionist aspect of almost all tariffs, and don't seem focused at all on eliminating only the terms of trade manipulation component. (I admit, though, that perhaps I've misunderstood their argument here).
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Also, I don't see any specific examples of optimal tariffs in there. I just want to have a concrete example in front of me so that I can evaluate it. Boris' measures is a concrete example -- but it doesn't seem like it was motivated by terms of trade considerations.
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The proponents seem to say that governments are "motivated" by terms of trade considerations. I'd like to see evidence and data on that.
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I think we both agree that Argentina was trying to increase demand for local products. They wanted domestic producers to increase sales. What I'm unclear about is the suggestion that they were trying to "improve the price ratio between Argentine and foreign goods". What makes you think they had this in mind? My guess -- and I admit that I'm not completely sure -- is that they thought simple protectionism would improve their balance of payments, by lowering imports.
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Note Japan's argument at p. B-48: "5. The imposition of trade-restrictive requirements reflects a broader protectionist turn in Argentine economic policy since the mid-2000s." http://worldtradelaw.net/reports/wtopanelsfull/argentina-importmeasures(panel)(full).pdf
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Boris, I can definitely see how the measures at issue there were protectionist, e.g., the local content requirement favors domestic goods over imported. In what sense do you think the measures are not protectionist, but rather about terms of trade manipulation? Or are you not making a distinction between the two?
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It sounds like there are two key points here: 1) some governments have terms of trade power 2) those governments have greater tariffs Assuming that’s true, I’m not sure how much it helps with an argument that these governments are using their terms of trade power without recognizing it, and that trade agreements are a solution to this problem. For one thing, I question whether terms of trade power can be used. That is, even if in theory you could increase national income with an optimal tariff, I’m not sure it could be done in practice. How would you calculate an optimal tariff? How would you get one through the political process? Has anyone ever seen one in the wild? For another, when you look at how trade negotiations work, they do not seem calibrated to targeting optimal tariffs. Might they, incidentally, address the problem of optimal tariffs as part of the process of agreeing on tariff reductions? I guess it’s imaginable that this could happen, but probably only by accident, and on rare occasions. On the point about outsiders bearing a significant share of the costs, I’m not sure I follow. Don’t outsiders always bear a significant share (assuming there are imports)? Can you give me an example of a situation you have in mind?
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I understand the theory of how you could use a tariff to manipulate the terms of trade and increase national income. But I'd want to see an example of this actually happening in practice -- both a government intending to do it, and it actually working. My sense is that Regan is not disputing that it could happen. He's just saying it isn't happening, that is, governments are not pursuing this as a policy.
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Marc, I'm planning a follow-up post to explain why I think this is important.
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If the agreements focus on protectionism, I'm not sure how there is any regulatory chill. Also, in that situation, I'm not sure there is much scope for bullying. Of course, if you have investment rules that require "fair and equitable treatment", there is a great opportunity for creative litigation. But that's not a tobacco issue; it applies to all sectors. For WTO disputes that are about protectionism, see: DS227, 300/302, 371, 411, and, arguably, 406.
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I don't think the tobacco industry is abusing the process, any more so than any other industry pursuing complaints is abusing the process. They are using the language that was given to them. If that language is a problem, we should deal with the problem directly, instead of leaving the problematic language and excluding tobacco. And I do think some of the language is a problem. For me, the focus of trade agreements should be on protectionism, in which case there is no need to carve tobacco out.
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To be clear, I'm saying WTO rules are enforceable (through the DSU), whereas WHO/FCTC rules are not.
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Could you clarify? Is this about promoting settlements, or about imposing a check on the power of the AB?
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I can't speak for any of the law profs in question, but I read a bit of Posner's stuff, and I'm not sure there is an "assault" going on here. It's more of a "critical discussion." My sense is that he is saying something along the lines of, there's lots of international law that most people don't take too seriously, and we should recognize that. We shouldn't consider all areas of international law to have equivalent force, and we shouldn't think of international law in the same way we think of domestic law. As Jari says, there is a "complex reality". With regard to governments, I'm not sure there is much difference in terms of how much respect there is for international law. Most governments generally try to comply, but also try to avoid it, at least on occasion, when it applies to them! Not unlike how individuals behave with regard to domestic law. (Are the attempts to avoid WTO compliance much different than efforts to get out of a speeding ticket?) As for legal academics in different parts of the world, I don't know why there are differences. I think a carefully written survey asking legal academics from different areas their views on specific issues in international law would be interesting and might help explain this.
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Joost, I read that decision and thought, oh well, it's just about preemption. No way to get a trade law blog post out of this. I was impressed that you found a way to do it! The whole product-process distinction under III:4 still puzzles me. If a measure has an impact on products in any way, I would have said it's product related. But there has been a surprising (to me) amount of difficulty in convincing people to interpret the provision so broadly.
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Joel, Thanks very much for your thoughts. Let me offer a few counters to your counters: -- The field is often referred to as investor-state "arbitration," but I'm not sure that's the right way to describe it. Treaty-based ISDS isn't like arbitration over a contract, where either side can file a claim. Isn't ISDS really just an alternative kind of litigation? In the U.S., for example, when a company brings a lawsuit alleging a taking, that's litigation, not arbitration. I'm not sure how ISDS is any different from that. -- I didn't mean to suggest that senior domestic judges were always the perfect people to do this. I was more focused on the idea of moving away from the current system. In selecting a permanent body of tribunal members, you would certainly want to look for people with experience in international law or with similar domestic law (e.g. takings). -- You are correct that there are lots of questions about how judges should be selected. But these questions need to be considered, and the current system raises all the same issues. There is no perfect way to do it, but the flaws in the current system seem pretty glaring.
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fixed it, thanks.
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Marc, I think you have a good point about the distinction between Article 11 cases involving the meaning of municipal law, on the one hand, and other Article 11 cases, on the other. Maybe that's the only reason for the different approach. At the same time, I was a little surprised by the AB's approach to this issue in the context of cross-cumulation in DS436. It seemed like a very active review of the issue, and left me with a lot of questions.
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