Friday, May 7, 2021

Heterodox approaches to Big Tech's problems?

Big Tech has been in the global news for a variety of reasons - but for those who follow international economic law, they have been in the news on two critical counts - anti-trust and digital services tax. I have blogged about the digital services tax issue here, here and here.

On the anti-trust/anti-competition front there has been a long battle between the State and the large tech firms across jurisdictions - whether it is the US (traditionally), or the EU and more recently China. 

A set of articles in the Project Syndicate addresses the varyng approaches of the US, EU and China in addressing the issue of the monopolistic or anti-competitive tendensies of the big tech firms like Google, Facebook, Amazon and Apple. Who is setting the rules on this engagement? How different are they? Are they enough to address the issues of privacy, antitrust and taxes?

Anu Bradford argues that the US is losing out to the EU in setting the ruls of the game. The EU is working aggressively on it and two new laws - the Digital Services Act and the Digital Markets Act are intended to make it easier to make these large tech companies accountable for their action in the EU market. Will these two approaches become the gold standard for other countries to follow?

The US approach of anti-trust is analysed by Eric Posner in this piece but he argues that thsi approach may not be enough to challenge monopolistic tendencies. he raisesan important point of consumer benefit. Even though there may be concentration and large monopolistic profits, arent consumers benefitted immensely? Don't we all benefit from gmail, online shopping on Amazon and some great movies on Netflix? Well, the cost is our data being used - but the benefit far outweighs the cost of privacy? he contends:

Back then, monopolists like Standard Oil were widely loathed, depicted by cartoonists as malevolent octopuses. Now, the tech monopolists are among America’s most admired companies. Especially in the context of the pandemic, millions of Americans have depended on Amazon for household goods, and used Facebook to maintain contact with family and friends. Pretty much everyone is now addicted to Netflix, YouTube, and their smartphones.

Some of these people will serve as jurors in antitrust cases, others as judges – and all of them are voters. Legal and regulatory changes are overdue, but the hard work of transforming public opinion remains.

China has been a late entrant to the challenge to big tech - its action against Ant Corp. Angela Huyue Zhang argues that it is just following a larger global trend:

To be sure, the Chinese government has legitimate reasons to be vigilant toward the country’s highly concentrated internet sector. By targeting superstar firms like Alibaba, China is following a global regulatory trend, with US and European Union policymakers similarly vowing to impose tougher sanctions against monopolistic internet giants.

Minxin Pie has a totally different take pn the approach of China on antitrust.  He argues that the anti-trust is actually pro-monoploy in a poltical sense.

It s interesting to see varying approaches to big tech around the world. How significant are the differences in approaches of the US, EU and China in tackling the alleged challenge of big tech? Where is the consumer in this debate? Who will set the agenda on this issue in the coming years? Will there be implications for international economic law in terms of non-discrimination principles? Will there continue to be heteredox approaches to address the anti-trust issue around the world - are the socio-political milieus too divergent for a global standard?



Thursday, May 6, 2021

The Waiver

News about the possibility and implications of waiver of intellectual property rights to fight the covid pandemic is found here, here and here today.

The USTR announcement that the US will be willing to consider an IP waiver but form it will take is unclear.It specifically mentions:

We will actively participate in text-based negotiations at the World Trade Organization (WTO) needed to make that happen. Those negotiations will take time given the consensus-based nature of the institution and the complexity of the issues involved.  

The proposal of South Africa and India in the WTO to waive IP rights for Covid related measures which was placed in October 2020 is found here with a draft text. 

"...12. In these exceptional circumstances, we request that the Council for TRIPS recommends, as early as possible, to the General Council a waiver from the implementation, application and enforcement of Sections 1, 4, 5, and 7 of Part II of the TRIPS Agreement in relation to prevention, containment or treatment of COVID-19. 

13. The waiver should continue until widespread vaccination is in place globally, and the majority of the world's population has developed immunity hence we propose an initial duration of [x] years from the date of the adoption of the waiver. 

..."

Al Jazeera has reported that a revisd treaty text and negotiation would be on the cards.

Questions about capacity to produce despite the waiver, quality of vaccines and incentive to innovate in future have been the underlying narratives in this debate. 

An interesting space to watch in these trying times. 

Sunday, May 2, 2021

If you are not on the negotiating table, you will be part of the menu!

With the next Ministerial Conference of the WTO in the pipelines, calls for a clear negotiating agenda for the WTO is coming in.

Inu Manak from CATO suggests in this piece that the negotiating agenda being a key component of one of its functions (including adjudicatory and monitoring), a clear negotiating framework is required:

The next crucial area for reform is in the WTO’s negotiating function. The WTO has not concluded any major negotiating ‘rounds’ since its founding, though it has completed other important negotiations such as the Trade Facilitation Agreement (TFA). These stalled negotiations stem, in part, from disagreements over the level of commitment that developing countries should undertake.

Recent negotiations to eliminate subsidies that contribute to illegal, unreported and unregulated fishing, as well as subsidies that lead to overcapacity and overfishing, are a case in point. China leads the top five providers of subsidies, followed by the European Union, the United States, South Korea and Japan. Together they make up 58 per cent of all global fisheries subsidies. And while nine out of fifteen of the largest marine capture fish producers are developing members, many continue to request special and differential treatment (SDT).

The fisheries talks are important because the subject best illustrates modern challenges to trade. This is not just about subsidies, but environmental sustainability and development as well. How we navigate the intersection of these issues will test the WTO’s ability to adapt to new circumstances.

Karl Sauvant argues that Investment facilitation should be on the agenda and it's importance should not be underestimated. A set of WTO members are pursuing the investment facilitation framework with these Ministerial declarations here and here. If you are not on the negotiating table, you will be part of the menu he warns! he also offers a number of additions to the investment facilitation agenda.

The purpose is to arrive at a binding multilateral agreement to facilitate FDI flows for development. The focus is entirely on concrete, technical investment facilitation measures, leaving aside the controversial issues of market access, investment protection and investor-state dispute settlement. Provisions for special and differential treatment of developing countries are being built in to assist implementation and capacity building, responsible business conduct and anti-corruption efforts.

The negotiations centre on raising the transparency of investment measures, streamlining and speeding up administrative procedures, creating focal points for investors, increasing domestic regulatory coherence and strengthening cross-border cooperation on investment facilitation.

These are measures that will make it easier for investors to establish themselves in host countries and operate within them, helping to increase FDI flows and advancing growth and development.

Any more agenda items? An amendment to the TRIPS Agreement for enabling waivers during a pandemic?

Thursday, April 29, 2021

The ideation of currency manipulation

A paper that goes beyond the roles of the WTO, IMF and determination fo what constitutes currency manipualton is Caitlin Conyers "The Ideational Dimension of Currency Manipulation" which charts the boundaries of the roles of the WTO and IMF, the complexity of defining what currency msalignment really is and what are the underlying motivations for the debate to come to the foreground as a trade barrier.

The paper touches upon the jurisdictional limits of the IMF, WTO to address currency manipulation, the attempts so far to address teh issue and what is in store in terms of international norm setting with mega trade deals. 

The paper would need to be revisited in the context of the countervailing steps being taken now, the strengthening of the Treasury Reports on currency manipulation as well as formalisation of legal rules in mega-regionals as a standard for the debate.

Interesting read nevertheless.

Wednesday, April 28, 2021

Countervailing action and currency manipulation - Has the dice been rolled?

Just when I thought currency manipulation was off the radar, this PIIE opinion by Joseph Gagnon re-emphasizes the danger of currency manipulation and how little the world is doing to address the probelm.The strong view that countries are manipulating currencies to encourage exports and disincentivize imports seems to be derived from foreign exchange interventions.

When countries have more than adequate levels of foreign exchange reserves, the only purpose of acquiring further reserves is to hold down the exchange value of the domestic currency. The reason to do that is to maintain competitive prices for one's exports and prevent a flood of imports. For countries that already have an excessive trade surplus, such behavior constitutes currency manipulation. The US current account deficit widened by $166 billion in 2020; a significant fraction of that widening is likely attributable to the increase in foreign currency manipulation last year.

Fred Bergsten and Gagnon have written an entire book on it titled "Currency Conflict and Trade Policy: A New Strategy for the United States" which argues for more decisive action against currency manipulation. In conclusion, apart from a series of strategies recommended, the authors suggested the countervailing of currency manipulation.

The recent countervailing action against Vietnam on the grounds that it's currency is undervalued and is subsidizing exports has been reported here and here. A more detailed Congressional Reserach Study report on countervailing duties and currency manipulation is found here.

Has the dice been rolled?


Currency manipulation - warning bells ringing?

Currency manipulation and trade law have often crossed paths but have never created a huge storm in terms of being n the agenda either in the ngotiating space or in the judicial fora of a panel proceedings or now defunct Appellate Body.

I have blogged about the issue pretty often over the years - here, here, here and here. My more detailed paper on the issue (has to be updated I admit) is here.

hat caught my attention this time was a piece in the The Mint by Daniel Moss stating that one must not underestimate the threat of currency undervaluation and the impending action against it. However, the piece does admit that the present steps against currency manipulation hardly proves to be a disincentive for currency manipulators.

Why is this? That is because there is still no clarity on what constitutes currency manipulaton for benefiting once exports or to take advantage in trade. A recent Congressional Research Study paper in 2020 on currency manipulation has asked some of the right questions fo rwhich there are no eay answers:

The United States has deep and liquid foreign exchange and capital markets, and trillions of dollars are exchanged for foreign currencies daily. To what extent can other countries successfully lower the value of their currency relative to the dollar? 

Many economic policies can impact exchange rate levels. Is it possible to differentiate currency manipulation from “legitimate” economic policies? 

Even though U.S. producers generally find it harder to compete when other countries have weak currencies, U.S. consumers generally benefit from less expensive imports. What are the net effects of currency manipulation on the U.S. economy? 

In addition to U.S. commitments on currency at the IMF and the G-7/G-20, U.S. laws and regulations contain multiple definitions of currency manipulation. Is the United States sending a clear signal to its trading partners about what constitutes currency manipulation and what the consequences are? 

Does a unilateral approach help the United States gain traction on currency issues? What are the retaliatory risks? Should the IMF play a stronger role in resolving currency disputes? 

 Are trade agreements an effective tool for addressing currency issues? Should currency manipulation be addressed if Congress renews TPA in 2021?

These questions have been at the heart of the debate of the intersection between currency manipulation and international trade law. The issue of currency manipulation and the consequences of it keeps arising due to the semi-annual US Treasury report on macro-economic and foreign exchange policies of its major trading partners. The Report is a detailed analysis of whether a trading partner who satisfies the three conditions (significant bilateral trade surplus, material current account surplus and persistent one-sided intervention in the foreign exchange market) is manipulating currency for trade. Another interesting aspect of the report was the varying degrees countries employ in publishing data on their foreign exchange interventions - some are open about it while for others it is shrouded in secrecy. Some of the recent trade agreements have tried to address this issue with the transparency clause on foreign exchange interventions.

The debate would perhaps continue - but was is evident that there is more scrutiny and discussion on this issue. Though multilaterally we have not seen any appeal for this issue to be taken up as a negotiating agenda, it may be sooner than later when CVD are imposed and the measure challened at the WTO. Who would bite the bait first is the issue.