Dani Rodrik's advice to experts!

"One thing that experts know, and that non-experts do not, is that they know less than non-experts think they do."

Dani Rodrik has a very interesting piece of advice for "experts" in his blog a few days ago quoting Kaushik Basu above.I just have to quote it to re-emphasize the relevance:

"Economists would be so much more honest (with themselves and the world) if they acted accordingly – letting their audience know that their results and prescriptions come with a large margin of uncertainty.  Public intellectuals would do so much less damage if they did likewise.  And if experts are not aware of the limits of their knowledge – well, they do not deserve to be called experts or intellectuals. 

The real point, though, is that the other side – journalists, politicians, the general public -- always has a tendency to attribute greater authority and precision to what the experts say than the experts should really feel comfortable with.  That is what calls for compensating action on the part of the experts."

This applies to all fields of expertise I guess. Any trade law experts listening?

It is Brazil vs. Mexico

It is official. It will be Brazil vs. Mexico for the WTO DG's position. The WTO website announced the last lap here.

"Therefore, we will begin the third and final round of consultations based on a revised slate of two candidates, again in the order in which their nominations were received, as follows: 

— Mr Herminio Blanco (Mexico)
— Mr Roberto Carvalho de Azevêdo (Brazil)"

One is tempted to compare the football record of the two countries - though that may not have any bearing on the result here.

Inching towards it

90k it is. 

I am inching towards that magical figure of 1 lakh page views  with a few more posts. Some would argue that this obsession with viewership is trivial (considering I have marked the 10k, 20k, 30k, 40k, 50k, 60k, 70k, 80k events), but for a blogger  it is quintessential! I assure you the 1 lakh mark will be the last time I celebrate it. It is both trivial and essential!

Thank you all once again.

Chinese citizen sues the US Fed over devaluation!

Currency devaluation is often seen by countries as a tool to boost one's exports by undervaluing one's own currency. While this has not yet reached the doorsteps of the dispute settlement mechanism of the WTO as some have suggested it should, an abnormal case of a Chinese intending to sue the US Federal Reserve (the US Central Bank) for the fall in the value of the US dollar due to monetary easing made for some interesting reading!

The case was reported here and here.

Currency undervaluation does have it's challenges!

Airbus subsidies - it goes on!

For those following the epic Airbus dispute (DS 316) at the WTO it seems to be a never ending case. From the Panel to an Appellate body decision and now to a lengthy compliance proceedings - the dispute has seen it all. The recent move of Airbus to locate a plant in the US does not seem to have cooled down tempers. Many have argued that only a political settlement between the two countries can end this long standing dispute.Apart from the legal intricacies involved, the case reiterates the role subsidies play in boosting industries - and subsidies are not limited to the developing world. it cuts across economies and geographies.

(http://www.airbus.com/company/americas/us/locations/)

The latest oral submission of the US in the case at the WTO gives an overview of what the US feels are the subsidies Airbus receives. The submission made in the compliance proceedings is rather hard hitting so had to quote some of it here:

"1. What is most remarkable about this dispute is how little has changed in the last eight years. In spite of the longest, most complex WTO dispute ever, and the largest-ever findings of subsidization and serious prejudice, the EU has done nothing to change its WTO-inconsistent behavior. It has withdrawn only a few tiny subsidies, and has taken no meaningful steps to remove the adverse effects of the $15 billion in subsidized financing that it left untouched. And then, just as the original panel was completing its work, the EU granted Airbus more than $4 billion in subsidized financing for the A350 XWB with the same core terms as LA/MSF for earlier aircraft, and once again with a massive benefit. 

2. The market situation has not changed in a meaningful way, either. Where subsidies caused Airbus’s market share to skyrocket in the years leading up to 2006, they have allowed Airbus to retain that market share today. Thanks to subsidies, Airbus overcame major setbacks, including the A380 production and design flaws, the failure of its initial proposal for the A350, and the failure and premature end of the A340 program in 2011. Thanks to the EU’s relentless subsidies, the U.S. large civil aircraft industry continues to lose billions of dollars’ worth of sales and market share to Airbus every year.

3. Instead of taking meaningful compliance action, the EU seeks to convince the Panel that the same arguments it raised before the original Panel now justify inaction in the face of the DSB recommendations and rulings rejecting those arguments. Its arguments are certainly lengthy, but that does not mask their fundamental lack of substance. ..."

This case is not only a landmark case to understand the concept of subsidization under the Agreement on Subsidies and Countervailing Measures but is also a reminder of the fact that a dispute settlement proceeding need not necessarily offer immediate remedies of removal of subsidies that may be adversely impact one's industry.

  

         

Multi-stakeholder Panel submits report

I had earlier blogged about a multi-stakeholder panel that was constituted by the DG WTO to recommend measures for the future of the multilateral trading system. 

The Stakeholder Panel has submitted its report and it is found here.

	Future of Trade
	> The Future of Trade: The Challenges of ConvergenceReport of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy

The summary of the recommendations - The need for:

• convergence of the trade regimes of the WTO members, reflective of the evolution of their progressive economic and social development

• convergence of the non-multilateral regimes with the multilateral trading system

• convergence between trade and other public policies, i.e. greater coherence in non-tariff measures

• convergence of trade and other domestic policies, such as education, innovation and social safety nets.

Peterson Institute discussion on currency exchange rate manipulation

For those interested in the currency exchange rate manipulation issue and its relation to trade rules, Peterson Institute held a conference in April 2013. Leading scholars who have contributed  in this field were present. The economic and legal aspects of the currency debate were prominently discussed.

The video links of the Panel discussions are found here, here and here.  

Made in China compass?

Pascal Lamy, head of the WTO recently commented on the need for a good compass for Europe to sail through the crisis.

"To conclude, the best way to sail through the crisis is to use a good compass."

A "Made in China" compass perhaps? 

Rough weather and the selection of the next chief

I have been faithfully following the WTO DG's selection process as evident here, here and here. Those following it will realise that it has run into some rough weather with allegations of procedural irregularities.

To understand the issues at hand the IELP blog has some interesting discussion here, here, here and here.

Interesting to see the interpretation of "shall" and "may" playing out in a totally different context here. 

What next?

Targeting exchange rates for competitive purposes

While currency undervaluation has not yet caught the imagination of WTO members grappling with multilateral negotiations and it's next chief's selection, the issue continues to simmer in the background. Reports from China and Japan continue to trickle in of concerns and relevance of the debate.

The recent G 20 communique  of April 2013 reaffirms the concern with this statement:

" We reiterate our commitments to move more rapidly toward more market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, and avoid persistent exchange rate misalignments. We will refrain from competitive devaluation and will not target our exchange rates for competitive purposes, and we will resist all forms of protectionism and keep our markets open. We reiterate that excess volatility of financial flows and disorderly movements in exchange rates have adverse implications for economic and financial stability. Monetary policy should be directed toward domestic price stability and continuing to support economic recovery according to the respective mandates of central banks. We will be mindful of unintended negative side effects stemming from extended periods of monetary easing."

Targeting exchange rates for competitive purposes - that is what is the issue here. Does it promote exports unfairly? No WTO dispute in sight yet but the kernel is still boiling.

Globalization here to stay

For those interested in physics, globalization and how globalized we are here is an interesting article by Charles Davi in the The Atlantic titled "How Globalization went Pop and what it means for workers."

"The diffusion of economic power unleashed by globalized supply chains and modern communication is already having profound and unexpected effects on the global economy. As I wrote last month for The Atlantic, income disparities are growing in developed nations as the premiums for high-skill labor grow, while accessible low-skill labor becomes more plentiful and less valuable. The returns on capital are growing to dominate the returns on labor in developed nations as industries increase their use of technology and automation. Only time will tell whether the trend of increasing economic diffusion persists, but the enormous volumes of time, money, and labor invested in the infrastructure of global trade suggest that many people are convinced that globalization is here to stay, likely causing economic activity to become more diffuse over time."

Globalization is here to stay - the question perhaps is how does one engage with it?

How to choose your trading partner

An interesting piece in Vox Eu on how EU should choose its Preferential Trade Agreement partners is found here titled "The much needed EU-pivot to East Asia". A good ready reckoner for the present status of EU and PTAs is found here. The Vox Eu piece essentially highlights the following pre-requisites that the EU should be looking for in its PTA partner:

They should be big enough to generate economies of scale and scope capable of having a substantial impact on the EU’s relative prices – changes in relative prices are the source of welfare gains.  

They should also be well regulated because modern economies are intensive in norms and dominated by services, the efficiency of which depend largely on the quality of the regulatory schemes in place.  

Finally, they should have a wide network of good-quality preferential trade agreements, capable of offering EU firms opportunities to access the economies already covered by those preferential trade agreements (the ‘hub’ quality) without waiting for longish negotiations with the EU.

Lessons for other countries to choose their PTA/FTA trading partners? 

Trade remedies - Are they protectionist measures?

Trade remedies like anti-dumping, safeguard measures or countervailing duties are often the subject matter of intense debate in the context of being protectionist and hindering the growth of trade. Are they a legitimate tool to balance national policy objectives with excessive free trade? Should they be construed positively?

Stewart and Stewart carried this piece on how to view trade remedies in the context of the overal multilateral system. View in the overall context, it suggested that trade remedies are not bad after all and need not be construed as being protectionist as suggested by many.

"Resort to internationally agreed trade remedies is not a sign of protectionism in the sense of something that undermines the international trading system. Rather, trade remedies are an integral part of the trading system and can help member nations expand their liberalization. Of course, trade remedies should be pursued in a manner consistent with international obligations and should be challenged when they are not. While there are learning curve issues for new users, technical assistance from established users and challenges where appropriate will help new users bring their systems into conformance. A more serious problem exists where any member, whether on a one-off basis or as a matter of practice uses trade remedies for purposes of retaliation against a trading partner’s use of WTO rights. There should be a zero tolerance approach for such actions."

I had blogged about this aspect in an earlier post commenting on Mark Wu's article in the Harvard International Law Journal on the use of anti-dumping by India and China. Another piece about which I had blogged here considered antidumping co-operation rather than a protectionist measure.

Process as important as the result - The race for the WTO

For those of us who are following the selection of the next chief of the WTO, the process itself is fascinating. An open contest between 9 candidates from the member countries with a majority of them from the developing world. Out of the 9, 4 have been eliminated from the race and five remain in the fray. Apart from the rhetoric, agenda and forces at play for the selection of the next WTO DG, I found the process adopted and the stress on transparency of the process appealing. Does it happen in case of all multilateral international institutions?

Just to those interested in following the process so far, the statement of the Chairman of the General Council of the WTO is found here. It details out the process out so far and the emphasis that it is a "member-driven" process indicating the will of the members of the organisation.

"We are gratified by the 100 per cent participation of the membership in the first round, and the overall respect for and adherence to the Procedures shown. We look forward to the same high level of engagement in this next round. Let me reiterate that this process is your process: the decision to appoint the new Director-General is yours to make. 

Before I end my statement, I would like to say a few words with regard to the four candidates who are not listed on the slate for the next round of consultations. On behalf of the entire membership, I would like to express gratitude for their participation in this selection process. As I said earlier, they are all highly qualified and respected individuals. I would also like to pay tribute to the fair and dignified manner in which they, their delegations, and their Governments have conducted themselves in this process."

Let Round 2 begin. 

Latest work on the EU Seal trade case

For those following WTO cases, the EU seal trade ban has been an interesting case. It essentially relates to an EU ban on trade in seal products which has been challenged by Canada. In December 2011 I had blogged under the title "Fate of Seal trade "sealed"? essentially outlining the dispute.

Those interested in the subject may like to see Tamara Perisin's latest article titled "IS THE EU SEAL PRODUCTS REGULATION A SEALED DEAL? EU AND WTO CHALLENGES" here.

"In both the EU and the WTO there are currently pending cases on the legality of EU Regulation 1007/2009 on trade in seal products and its Implementing Regulation 737/2010. While seals seem to be very attractive to the public so that raising arguments against these EU measures are not popular, the Regulations do raise concerns about competences, subsidiarity and proportionality which are relevant for compliance with EU primary law. They also raise concerns about possible protectionism, the use of public morals, coherence and necessity with regard to compatibility with WTO law. This paper seeks to examine all these issues."

The dispute at the WTO (DS400) is at the panel stage. We will be hearing a lot about this case in the coming days.

Domestic policy space and TRIPS

The tension between domestic policy space or the ability to carve out public policies based on domestic political will and intrnational trade rules has been a recurrent theme of this blog. There are no easy answers and neither is the debate in black and white. It is not whether countries have domestic policy space - it is how much of space they have and how do they exercise it? A parallel theme is can the claim of domestic space be misused for blatant, discriminatory protectionism?

I have highlighted the debate around domestic space and TRIPS in this blogpost and this one regarding compulsory licensing a few months ago. Joseph Stiglitz and Arjun Jayadev in their Project Syndicate piece interestingly highlighted the importance of domestic policy space in the context of the recent decisions around patentability and TRIPS.

"According to the Indian Supreme Court, the country’s amended patent law still places greater weight on social objectives than in the US and elsewhere: the standards of non-obviousness and novelty required to obtain a patent are stricter (especially as they pertain to medicines), and no “evergreening” of existing patents – or patent protection for incremental follow-up innovations – is allowed. The court thus reaffirmed India’s primary commitment to protecting its citizens’ lives and health. 

The decision also highlighted an important fact: Despite its severe limitations, the TRIPS agreement does have some (rarely used) safeguards that give developing countries a certain degree of flexibility to limit patent protection. That is why the pharmaceutical industry, the US, and others have pushed since its inception for a wider and stronger set of standards through add-on agreements. 

Such agreements would, for example, limit opposition to patent applications; prohibit national regulatory authorities from approving generic medicines until patents have expired; maintain data exclusivity, thereby delaying the approval of biogeneric drugs; and require new forms of protection, such as anti-counterfeiting measures. 

There is a curious incoherence in the argument that the Indian decision undermines property rights. A critical institutional foundation for well-functioning property rights is an independent judiciary to enforce them. India’s Supreme Court has shown that it is independent, interprets the law faithfully, and does not easily succumb to global corporate interests. It is now up to the Indian government to use the TRIPS agreement’s safeguards to ensure that the country’s intellectual-property regime advances both innovation and public health."

Of course, the debate whether TRIPS provides policy space depends on the area of applicability one is talking about as well as the view one holds on the extent to which international rules should impact domestic policy making. However, it is interesting to see the debate shifting from whether TRIPs provides that flexibility to how one can use the flexibility to pursue national interests. And what applies to TRIPS applies to all other WTO agreements. The questions is whether developing countries can unearth and effectively engage with these flexibilities.

Airbus-Boeing battle takes a new turn

While the Airbus-Boeing dispute continues at the WTO between Europe and the US, news of Airbus assembling it's new aircrafts in Alabama, US provided an interesting insight. Airbus has just walked into Boeing's territory. With both the US and EU alleging that the other has given huge subsidies to its respective airline manufacturers, is Airbus's move the beginning of the end of the dispute?

What next? A Boeing assembly plant in Germany?

Trade and international growth

A crisp analysis of how international trade impacts growth is in this brief summary on the relationship in Investopedia titled "The Effect of Trade on International growth".It analyses the interdependency of international trade especially in the context of global supply chain - an interdependency that can make or mar a country's economy.

The greatest risk to global trade is the interconnectivity that trade creates. Businesses and economies are increasingly connected, making scenarios in which supply or financial shocks can quickly spread from one region to another more likely. The factor precipitating the bank crisis in Cyprus was the exposure of Cypriot banks to Greek sovereign debt, but that same exposure had caused a financial contagion long before Cyprus looked for a bailout. The disaster at Japan’s Fukushima Daiichi nuclear reactors not only caused a disruption to the global supply chain, but also caused trade to and from the world’s third largest economy to hiccup.

However what I found interesting is that many a times the majority of trade is conducted within the region itself - the example of Europe a classic case with 71% of its international trade being within Europe.

Religion and international trade - Are they linked?

Came across this rather interesting analysis of the possible relationship of religion and international trade. Do similarities in religion and other cultural characteristics promote trade? One would never have thought about the possible co-relation between a religious orientation of a country and its trading relations. Trade after all was propelled by business interests. 

Tomas Rees writing in Epiphenom analysed the study of Chong Wha Lee titled "Does religion affect international trade in services more than trade in goods?" Do countries following similar religious traditions have a greater possibility of enhanced trade in goods and more so for services? the study indicated thus:

The results indicate that religion creates positive institutional and network effects, increasing international trade in goods and services; these effects enhance trade in services more than trade in goods; institutional effects exert a greater trade-creating effect than deliberately designed institutional regimes, but a lesser effect than historically established cultural regimes, such as common language and colonial ties; network effects on trade in services, although less significant than common language and colonial ties, promote trade to nearly the same degree as regional trade agreements and shared legal systems. Religion establishes co-religious networks that positively affect interpersonal trust, thereby reducing institutional distances between countries. This effect is similar to that of trading diaspora.

Another interesting tool to analyse the growth of trade in modern societies. It is not always about trade barriers, is it? 

Yes!

80000 pageviews since inception it is. Had marked my earlier journey thus - 10k, 20k, 30k, 40k, 50k, 60k and 70k. 

Value the readership!

Airbus-Boeing dispute - public screening

For those interested in the Airbus Boeing subsidy case, the WTO panel hearing the compliance proceedings in DS316 is making parts of the proceeding public by showing a video recording of the proceedings as announced here. Another step in moving towards transparency? The next step could perhaps be an online video of the proceeding for those who cannot reach Geneva?

I have blogged about the Airbus Boeing dispute earlier here, here, here and here.

Commentaries on the contest for the next WTO chief

As the contest for the next chief of the WTO gathers momentum several commentaries on the vision, goals and strategies of the potential contenders are hitting the shelves. Vox EU recently carried a piece on the importance of the context to multilateralism. Bernard Hoekman and Petros Mavroidis called for paying more attention to the contest since, according to them it, had great significance to the future of the trading system.

"The Director-General of the WTO does not have a magic wand that can be used to remove the fundamental constraints and factors that have impeded the successful conclusion of an ambitious Doha Round outcome. But he or she does have a critical role to play in helping the membership to identify and pursue options that will promote growth in ways that do not undermine the multilateral trading system."

Commenting on the importance of the "crown jewel" of the multilateral trading system - the dispute settlement process they had this to say:

"It is little known outside trade circles but it has become the busiest state-to-state international court extant, with WTO members having brought over 450 cases since the WTO was created in 1995. These dimensions of the WTO tend to be neglected in terms of public attention but they are critically important in maintaining international cooperation on trade matters and providing traders with the certainty they need to invest and engage in international trade."

This commentary has been followed up by a brilliant e-book by the above authors on the positions and views of 7 of the 9 candidates. The IELP blog commented on it here. 

One distinguishing feature of the selection process of the WTO as compared to perhaps other international institutions is the transparency of the process in terms of the candidature, their positions and selection procedure. Though the ultimate selection may hinge on many factors, the public discussion and debate in international circles as compared to a closed room selection process is a positive sign for the multilateral institution.

Great BRICS Graphic

Found this great graphic in the China Daily on the profiles of the BRICS economies which I thought I would share:

Law Schools and the logic of the market!

Came across this an engaging read titled "The Real Problem With Law Schools" about the proliferation of law school graduates in the US and the economic analysis of law school education by Eric Posner:

"The only realistic way to help lawyers today is to increase the demand for legal services—somehow convincing governments, for example, to pay for adequate representation of indigent defendants—but in the long term, greater demand will create the expectation of yet more job growth, and that could lead to another bust. The critics seem to think the legal profession can escape the logic of the market. It can’t."

Law and Economics are so inextricably linked - even law school graduates are not spared the vagaries of the market!

Multilateral action and currency manipulation

A recent op-ed carried in the Peterson Institute for International Economics website by Robert Zoellick in the context of the next WTO chief raises 5 agenda items for the new DG to address. While I am not dwelling into all of them, the last one struck me as particularly interesting:

"Finally, will you agree to launch a discussion with the International Monetary Fund (IMF) about the application of the existing WTO and IMF rules requiring that exchange rates shall not be manipulated to gain unfair trade advantage? Given the extraordinary monetary policies spawned by the financial crisis—and the risks of competitive devaluations of currencies—multilateral bodies should not abdicate responsibility on these questions. If multilateralism fails, unilateralism may prevail. Brazil has already urged the WTO to discuss these questions."

I have blogged about the issue of currency manipulation and WTO rules compatibility here, here, here and here. Is this gradually finding its way to the centre stage in the discourse in international trade law and policy? What are the implications of this for monetary policy domestic space, interpretation of international trade rules and jurisdiction of international institutions? Complex questions with no easy answers.

Security exception and the question of interpretation

For those following the issue of cybersecurity, cyber warfare and international remedies an interesing debate on the use of the security exception of the GATT to address the issue is found in an Opinio Juris debate here. The IELP blog has a commentary here. I have blogged about the security exception earlier here and here.

Article XXI of the GATT which deals with the Security Exception states:

          "Nothing in this Agreement shall be construed

(a)      to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or
 

(b)      to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests
 

(i)       relating to fissionable materials or the materials from which they are derived;

(ii)      relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;
 

(iii)     taken in time of war or other emergency in international relations; or
 

(c)      to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security."

The issue of the cybersecurity knocking at the doors of WTO has been discussed in trade circles for sometime now. However, will it find a way through the security exception? Is a self-judging security exception without interpretative limits? Can it be interpreted to suit any national need? Are there inherent limits ot the application of the principle? The dispute settlement proceeding of the WTO has not had an opportunity to interpret the security exception clause yet.Increased use and an eventual challenge may provide it an opportunity to set the contours of the exception like it has int he case of Article XX of the GATT which deals with general exceptions. Till then it is upto the individual members to interpret the provisions. However, the self-judging nature of the clause "which it consider necessary" may not be entirely over-expansive considering the context of the exception itself. 

The race heats up

I have written about the interesting race for the selection of the next chief of the WTO here, here and here.

Found this piece by Kimberly Ann Elliot that summarized the contest and issues so far in the selection of the next DG of the WTO. While the contest is heating up and innumerable parleys would be underway to reach a consensus candidate, it would be interesting to analyze how consensus really works in practice.As she put it:

"So where is consensus likely to take us in the WTO ‘tournament’? The consensus rule has its strengths and weaknesses—it often makes agreements more difficult to reach, but it also makes them more credible and sustainable. And the reality is that the consensus rule is not going away. But the WTO does need to find a DG who is willing to shake up the status quo and find more effective ways of managing the institution with its  large and diverse membership. In this situation, will the consensus rule produce a leader with the skills to accomplish that, or one that offends the fewest people?"

The Washington Post has this overall analysis of the candidates, there pros and cons, odds as well as their most interesting positions here.

Over to the political process to offer the results.

Law, economics and international law

I have often highlighted the inextricable link between Law and Economics in the study and interpretation of international trade law here and here. The interplay is so obvious in the Panel and Appellate Body decisions of the WTO. Use of complex econometric models, economic analysis and an economic understanding of international law in the context of trade regulations underlies this approach.

A new book by Eric Posner and Alan Sykes titled "Economic Foundations of International Law" should be another masterpiece to this growing field of scholarship.

Opinio Juris has an interesting book symposium on it.

Journal rankings in international law

For those interested in journal ranking of international law journals Opinio Juris had an assessment of the best international law journals. Here goes one of those assessments with AJIL right on top.

The complete list:

1. American Journal of International Law
2. Human Rights Quarterly
3. European Journal of International Law
4. American Journal of Comparative Law
5. Virginia Journal of International Law
6. European Law Journal
7. Chicago Journal of International Law
8. Journal of International Economic Law
9. Global Governance: A Review of Multilateralism and International Organizations
10. Common market law review
11. Journal of International Criminal Justice
12. International Journal of Constitutional Law
13. Fordham International Law Journal
14. International Journal of Transitional Justice
15. German Law Journal
16. Vanderbilt Journal of Transnational Law
17. Human Rights Law Review
18. Cornell International Law Journal
19. Michigan Journal of International Law
20. New York University Journal of International Law & Policy

Some would argue that it is not reflective of the reality - but one can really never agree on this one right?