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Simon Lester
Florida
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If USTR doesn't come forward with some proposals soon, the rest of the membership may have no choice but to look for a way to keep WTO DS functioning, with or without the US. There are a lot of cases in the pipeline and it's frustrating for the parties to see them delayed. I have no idea how this ends!
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Peter, I understand where you are coming from, and Jennifer probably has similar reservations. The question is, what do we do to save the WTO DS process? If not this, which option do you think is best?
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In a previous post on this, I suggested that the sole order of business at the first 6 year review should be to delete the sunset clause. That would solve the interpretive dilemma here. ;)
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Jean, That's interesting, thanks. I considered that possibility at one point, and then talked myself out of it, but maybe you are right that this is what they meant. Congress really needs to clarify what the Trump administration has in mind for the sunset clause -- on this and other issues -- before they sign on to it.
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Hi Julia, I have no objection to a non-violation case, but the remedy is pretty weak (see DSU Article 26), so even if you win (and it wouldn't necessarily be easy to win), I'm not sure exactly what you would get. I would certainly be interested to see how China would react to such a ruling, though. But I would make sure to bring all the violation claims as well. Simon
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That's an interesting point. I didn't really compare and contrast the two obligations. It was just that when I saw the case law language about "systematically offsetting," I thought it would apply very well to this situation. But yes, a threat of serious prejudice under Article 5(c) could also be good here! This helps illustrate my point above that there are "many other possible complaints as well."
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I blogged about the AB report in Indonesia — Iron or Steel Products here: https://worldtradelaw.typepad.com/ielpblog/2018/08/how-to-determine-if-a-measure-constitutes-a-safeguard-measure.html I also discussed it in the comments here: https://worldtradelaw.typepad.com/ielpblog/2018/08/implications-of-indonesiasafeguards-for-us-232-challenges.html It seems to me that the first and third factors described by the panel in India - Iron and Steel Products and the AB in Indonesia — Safeguard on Certain Iron or Steel Products are pretty similar. I wasn't sure what the AB had in mind with its second factor, so we'll have to see what it thinks of the panel's approach in the event of an appeal in India - Iron and Steel Products.
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I was using chilling effect to refer to an impact on future regulation. As for a remedy for the Section 232 tariffs, I'm skeptical it will have much impact, and anyway a number of governments have already done their rebalancing. But Nicolas can weigh in here if he wants.
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A few thoughts: 1. You don't actually "have to" rebalance. By design, non-violation is a pretty soft remedy (DSU 26: compensation "may" be part of a mutually satisfactory adjustment as final settlement of the dispute). 2. I have a hard time believing there would be a chilling effect here. There are few such cases brought; almost all of them lose; I doubt many people in government are aware of the remedy and would take it into account when regulating; and as noted, it's a soft remedy. 3. The purpose of the non-violation remedy is "to protect the balance of concessions." There's a good argument that the remedy made sense in 1933 when it originated because there were no general principles to supplement the tariff commitments, but that it is no longer needed because we have detailed obligations that prevent governments from taking actions to undermine their tariff concessions. But if you think that we need to keep this remedy around in order to maintain the balance of concessions, then I would think you would want to apply it to situations where governments have undermined the balance of concessions. 4. I don't feel that strongly about this. It would be a pretty limited carve-out from the non-violation remedy, as the number of instances where the situation might arise in practice is close to zero.
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I don't think I am restricted to that situation. Let's go back to your asbestos ban, and assume it is justified under Article XX. If there is a violation claim, the Article XX defense would mean that you could maintain the measure despite the violation. If there was a tariff concession on asbestos, there might be a non-violation claim as well. In this situation, you can maintain the measure, but you might face a finding of nullification or impairment which encourages you to do some rebalancing (it is not enforceable in the same way a violation finding would be). Whether such a finding is made depends on a number of factors that are part of the reasonable anticipation analysis. For example, if the concession was made back when most people thought asbestos was safe, it would be harder to find reasonable anticipation. But if at the time of the concession, some evidence of the harm from asbestos had surfaced, it will be easier to find reasonable anticipation. If so, you might be encouraged to rebalance. (It's a pretty soft remedy.)
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But under the approach I argued for, I don't think trade interests "override" other policies. All that would happen is that if a government takes a measure that could not reasonably be anticipated, it must offer compensation or accept the other government doing some rebalancing, e.g. through higher tariffs. In the case of measures justified under Article XX, I think that in practice most of them could be anticipated, so this situation will probably not come up much. I should qualify all this by saying that my approach is based on the assumption that the non-violation remedy is actually useful. I'm not sure that it is. But if we are going to have it, I think my approach offers a good balance. I don't think there should be an irrebuttable presumption that all measures justified under an exception should have been anticipated.
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Note also the following passage from the Nicaragua Embargo case: "4.9 The United States recognized that a measure not conflicting with obligations under the General Agreement could be found to cause nullification and impairment and that an invocation of Article XXI did not prevent recourse to the procedure of Article XXIII. ..." http://www.worldtradelaw.net/reports/gattpanels/nicembargo.pdf
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Nicolas, The Japan - Film panel said the following: "10.76 As suggested by the 1961 report, in order for expectations of a benefit to be legitimate, the challenged measures must not have been reasonably anticipated at the time the tariff concession was negotiated. If the measures were anticipated, a Member could not have had a legitimate expectation of improved market access to the extent of the impairment caused by these measures. 10.77 Thus, under Article XXIII:1(b), the United States may only claim impairment of benefits related to improved market access conditions flowing from relevant tariff concessions by Japan to the extent that the United States could not have reasonably anticipated that such benefits would be offset by the subsequent application of a measure by the Government of Japan. ... " http://worldtradelaw.net/reports/wtopanels/japan-film(panel).pdf Given that Section 232 has been in place since 1962, what do you think of a US defense that the Section 232 measures should have been anticipated at the time of the relevant tariff concessions?
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Appendix 3 refers to allegations of "breach of an obligation under this Chapter in proceedings before a court or administrative tribunal of Mexico." Is this the key narrowing language? How often do complainants allege violation of the FTA investment chapter, rather than of domestic law, before the domestic tribunal?
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Peter, Canada has been talking about an FTA with China, but it seems that Canada wants a "progressive" agreement with certain elements in it, and China does not want those elements in it. That struck me as challenging, even without the recent US push to isolate China. But I would be happy to be proven wrong!
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Perhaps I wasn't clear enough in my explanation, but one thing I had in mind was that rebalancing might still be a good idea even if a panel accepted a defense under XXI.
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Thanks, Tania! I'm glad I can always count on you and Andrew to join me in exploring the most obscure issues!
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If they meet the criteria, it is zero. This discussion is about the tariff if they don't meet the criteria.
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Steve, Article 4.1(a) of the Safeguards Agreement defines "serious injury" as: "a significant overall impairment in the position of a domestic industry." Section 232 does not apply this standard (although it does apply a similar one). In your view, how can the Section 232 measures be a safeguard measure if they do not consider serious injury as defined by the Safeguards Agreement?
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The XXI/XIX relationship is kind of fascinating. I think the "Nothing in this Agreement shall be construed" language probably controls here, but this is a tricky one. But regardless, let me just reiterate that this is not a safeguard measure, so XIX does not apply.
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We should probably leave this for the night, but I just want to clarify one thing. I don't think there is any tension between 5.60 and 5.64. They are mutually supporting and reinforcing.
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I'm saying that, under a design, structure, operation analysis, 232 and 201 measures are different on both substance and procedure. You could, in theory, do an exact replica of a safeguards analysis under something other than your domestic safeguards law, and maybe the resulting measure would be deemed a safeguard measure. But that's not what happened here.
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But 11.1(c) only applies if XXI applies, and if XXI applies, it takes precedence over XIX. Now, obviously there is a question as to whether XXI applies here, but I'm just saying that if it does apply, the rebalancing won't be justified.
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To clarify, the last sentence of para. 5.64 sets out in very general terms what panels should do: "ascertain whether the suspension, withdrawal, or modification of a GATT obligation or concession entailed by the measure at issue is designed to prevent or remedy serious injury." The previous sentence of 5.64 makes that more concrete: "in order to determine whether a measure constitutes a safeguard measure within the meaning of Article 1 of the Agreement of Safeguards, a panel must objectively assess the design, structure, and expected operation of the measure as a whole, identify all the aspects of the measure that may have a bearing on its legal characterization, and recognize which aspects are the most central to the measure." The first two sentences of 5.60 mirror this language. The last two sentences of 5.60 then offer the most specific guidance, with a reference to the three factors. Put all of that together in a big holistic package, and the folks at USTR are celebrating tonight.
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Here is 5.64: "5.64. We recall that, in order to determine whether a measure constitutes a safeguard measure within the meaning of Article 1 of the Agreement of Safeguards, a panel must objectively assess the design, structure, and expected operation of the measure as a whole, identify all the aspects of the measure that may have a bearing on its legal characterization, and recognize which aspects are the most central to the measure. In the present case, the Panel was required to ascertain whether the suspension, withdrawal, or modification of a GATT obligation or concession entailed by the measure at issue is designed to prevent or remedy serious injury." The language of the first sentence here closely mirrors the language in 5.60 that precedes the sentence with the identified factors. So 5.60 and 5.64 together set out a holistic exercise, under which the "design, structure, and expected operation" are considered, with the factors identified by the AB in para. 5.60 playing a prominent role.
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