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Trachtman
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Thank you, Diane. I enjoyed your presentation at SIEL!
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Thanks, Rob. The "deal" between developing country right to regulate for development and developed country right to regulate for social policy, or any permutation thereof is intriguing, but what Dani refuses to consider is the extent to which states might be willing to trade this autonomy in exchange for other states doing so, in order to achieve market access abroad. Once you accept that idea, it can't be carte blanche for development or carte blanche for social policy. Also, development and social policy can be pretextual, or partially pretextual. Better to speak of what states may negotiate, instead of ruling out compromises or right to regulate altogether.
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Wish I had written this, or at least read it before I posted mine. Yes, nice point by Henry that there is bad heterodoxy, as well as good.
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Understandable, certainly, but I suppose it was a difficult ethical dilemma, to allow your counterparty to believe that they had obtained something substantial, knowing that they were in error. I wonder if that decision has come back to haunt us in the anger of those who accepted this language in error.
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If the practice is conditioning permission to invest (for production of goods) on transfer of technology, then there is no obvious WTO violation. Perhaps there is a services claim, such as nullification or impairment, if China made a relevant commercial presence commitment. Next step, if there is no WTO nexus, then DSU 23 doesn't prevent unilateral action.
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See Dani's response, and my reply, here. http://rodrik.typepad.com/dani_rodriks_weblog/2017/04/trade-redistribution-and-social-dumping.html
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Thanks, Dani, for this response. I see now that your main point was not about compensation at all, but about insulation from certain types of competition. You distinguish trade winners and losers from others on the basis of the normative or political attractiveness of allowing people to “lose” due to what you, provocatively, call “social dumping.” Of course, one person’s social dumping is another’s legitimate diversity of social contract. When you say that some trade “violates norms embodied in our institutional arrangements,” you seem to be suggesting that, for trade to take place, others must accept our institutional arrangements. My first question is the empirical one: does trade from low regulation countries cause reduction of our regulation? I have not looked at the regulatory competition literature for years, but last time I looked there was little evidence of a race to the bottom in labor rights or environmental protection. If that is still true, what is the problem with social dumping? In other words, is it true, as you suggest, that domestic social bargains are being undermined “through the back door?” Second, I am unsure why political will should not be deployed to protect the social bargains directly, rather than to try to do so indirectly through trade barriers, and with inevitable substantial errors if our experience with dumping, subsidies, and safeguards is any guide. But the main question, which would be important to answer even if there is a significant race to the bottom, is whether insulation from competition is the right response at all to institutional diversity. Within the U.S. federal system, we in theory and practice address interstate diversity that has excessive externalities not by blocking interstate commerce, but by legislating at the federal level. Of course, the international system has markedly less legislative capacity than most countries, but in important areas it has had some success. And it is a system that, with all its limits and opportunities for exercise of power does not in theory insist on imposing our institutional arrangements on others. Best, Joel
Yes, have you seen any explanation of the preference for bilaterals over plurilaterals?
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Thanks, Marc. Yes, it's anybody's guess exactly how this will be effected. But I'm not sure new legislation can target offshoring while complying with WTO law. The closest thing, as I mention in my post, would be the business cash flow tax proposed, and that does raise some WTO issues.
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My post addressed NAFTA and the WTO. The White & Case paper is in broad agreement: "The power of the President to terminate a US trade agreement or modify tariffs appears to be weakest for the WTO Agreements, broader but ambiguous for regional FTAs (NAFTA and the United-States-Dominican Republic-Central America FTA (CAFTA-DR)), and strongest for bilateral FTAs such as those with Australia, Chile, Colombia, Korea, Panama, Peru, and Singapore."
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Thanks, Simon, and that links up nicely with your post of John Jackson's views, both leading us to the idea that the legal categories now contained in WTO law do not necessarily reflect economic substance.
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Hello, Dani. It is difficult for scholars to observe national democratic processes from some Archimedean point and argue that there is a failure of democratic legitimacy. For the U.S., we approve trade agreements through a constitutionally-acceptable process that has been enacted by our democratically-elected legislature. While we might argue about whether fast track allows sufficient democratic input, the democratically-elected legislature has determined that it is acceptable. The making of international agreements is a two-level game that requires some adjustments to permit international cooperation. There can be errors of conservatism. For example, the ability of little Wallonia to hold up the entire EU and Canada’s otherwise approved policy—a type of tyranny of the minority—seems inconsistent, at least at some level, with democratic legitimacy. In addition, as Donald Trump has emphasized, it is possible for future governments to withdraw from trade agreements, so there may be less binding of future governments than you fear. But I would hasten to add that states, like firms, need a way to make binding agreements to constrain—to exchange—policy autonomy. While everyone can make mistakes and enter into welfare-reducing agreements, the overall effect of contract seems to be importantly positive. I am not sure why you believe that the overall effect of international law would be different. Best, Joel
If the treatment is specified by the treaty, then it is strange to think that the treatment violates another provision of the treaty. So my point is an interpretative one. I think states party to an investment agreement retain the authority to modify investors' rights under those agreements. They can modify the meaning of FET explicitly or implicitly by virtue of something like the tobacco carveout. This reminds me a bit of the debate about the NAFTA FTC interpretation.
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One important feature of a treaty provision is that it is agreed by both parties, and is not simply an act of the host state. It is tough for an investor to argue that it is not fair and equitable if the investor's home state agreed to that treatment. Second, and related, it may be arguable that the fair and equitable treatment standard has to be interpreted by reference to the carveout, or it may be arguable that the carveout as lex specialis overrides the FET standard.
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Thanks for this, Simon. This issue has indeed been around for a long time. One basic response is that US firms often successfully avoid US taxes on foreign source income--as both candidates emphasized. So, often, there is no double taxation. Second, the VAT cannot be applied in a discriminatory manner. If US firms selling in Mexico are subject to it, so are Mexican firms. The US tried to rebalance some of the implicit subsidy with the DISC and then the FSC laws. Third is your twitter colloquy: negotiating does not mean getting.
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Thanks, Simon. Yes, I think that the solutions Rodrik proposes might well be more intrusive then the existing rules.
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Well, it's a conundrum and the logic of the response is not as airtight as "we never every apply non-WTO international law", but I think it is reasonable to say that the AB has consistently refused to apply substantive non-WTO international law, and (in this case) has rejected the argument that WTO law can be modified inter se through non-WTO procedures. The division might be understood as substantive/procedural, or it might be understood as "as necessary to comply with its mandate to apply the covered agreements."
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Good question, Lorand. Not sure I have an answer. I suppose one might conjecture that the AB was not applying a lex specialis rule at all, but merely observing that the WTO specific provisions apply here, while Art. 41 does not, and so the WTO specific provisions "prevail." Otherwise, it is a conundrum, which could be resolved by saying they applied it as a customary interpretive rule. Perhaps the more responsible solution is that the AB must apply the covered agreements and must do whatever is necessary, including examining other international law, for the limited purpose of determining what the covered agreements are. This is why it might use lex specialis, and indeed why it might have applied Art. 41 if it were not precluded. Not sure what I think is the best answer.
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Thanks, Jim. It has been pointed out to me that the AB might have avoided engaging in the narrower VCLT Art. 41 analysis because the AB wished to avoid applying non-WTO law in the form of Art. 41 itself.
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Rob, while I don't claim any expertise in this area, I tend to agree with you that 10 years of better than status quo overshadows whatever comes later.
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