Tuesday, April 7, 2020

Covid, trade and what is in store

I have been contemplating a post in these challenging times. There is no news other than Covid. Considering this blog is on international trade, what better than a post on Covid and trade.

I found this illuminative trade talk on Covid and trade in the Peterson Institute for International Economics blog. Chris Rogers explains with data the various consequences on Covid on trade with this conversation with Soumaya Keynes and Chad Brown

Some learnings, obvious and some educative:

1. Covid will have a lasting impact on supply chains. Countries will begin thinking of diversifying their supply chain geographies so that they are not impacted by such eventualities 
2. Air freights have increased and a shift to air cargo supplies
3. 1/3rd of ventilators to the US comes from the EU
4. Global trade has collapsed and there is probability that in some economies reliant on exports this will fall by 40%
5.Major interruptions in supply chains especially in automative and electronic sectors
6. Inadequacy of services trade data - estimated at best as compared to goods trade. Services trade is very flat in these times.

Plenty more on data, trade and impact of Covid. Do hear their entire conversation.

Wednesday, March 11, 2020

Currency manipulation rule making - creeping in slowly

Currency manipulation has always been on the sidelines of trade policy though not formally entering the multilateral trade agenda (yet!) nor leading to any WTO dispute. However, things may be slowly changing now.

A simplest way of defining currency manipulation is explained in this blogpost in the the Peterson Institute blog thus:
Currency manipulation is a widely cited but imperfectly understood concept. In brief, it occurs when a country intervenes in foreign exchange markets to artificially suppress the value of its currency in order to boost exports and curb imports. 
This blogpost outlines the internal dynamics of currency manipulation policy in the United States and how it plays out in framing appropriate policy tools to address perceived unfair trade practises. The United States Mexico Canada Agreement already provides for provisions related to currency manipulation though not of gold standards. A reference to disputes on currency manipulation to the dispute settlement mechanism or referral to the IMF in Chapter 5 of the US-China Trade Deal is also a significant development.

Are things hotting up for formalisation of currency manipulation rules in international trade negotiations or is this a one-off exception?

Thursday, February 13, 2020

RCEP, ISDS and a non-gold standard

I have blogged about RCEP and ISDS in the past few posts. Well, that is the flavour of the season. Now this one is on RCEP and ISDS!

Julien Chaisse in this post records that RCEP has been disappointing in terms of not setting a gold standard in investment rule making, especially in the context of ISDS.

Malaysia’s trade minister publicly stated that all countries involved had agreed to exclude ISDS provisions from RCEP.[3] India’s strict position on ISDS and numerous other trade-related issues caused a lowest common denominator approach, explained by its own BITs renegotiations. Both India and Indonesia were opposed, as matter of principle, to ISDS. Despite India’s decision not to join the consensus, the investment chapter should remain untouched, partly because there is still hope that India will sign RCEP in 2020. Capital exporting countries (especially the Republic of Korea, Japan and Australia) agreed to the exclusion of ISDS. Japan could compromise on ISDS (as it did in the ASEAN-Japan FTA which has no investment chapter) as Japanese investors can still rely on BITs (containing ISDS) with ASEAN countries. This means that the noodle bowl of IIAs remains largely unaddressed. In terms of substantive protections, RCEP resembles a slightly enhanced ASEAN Comprehensive Investment Agreement (ACIA). In particular, RCEP further clarifies—and limits—provisions regarding fair and equitable treatment, denial of benefits and performance requirements (which were provisions repeatedly re-assed by ASEAN negotiators in the context of the ACIA implementation).   
The results on ISDS don't seem to be quite striking considering the positions most members held on the issue. ISDS continues to be a contentious issues across forums and trade negotiations - from UNCITRAL to RCEP! 

Wednesday, February 12, 2020

This one is for the ISDS!

In all the criticism of the ISDS system and the need to search alternatives like state to state mechanisms or domestic fora, this blogpost argues that ISDS is important for access to justice. 

It argues that inter-state mechanisms or domestic courts do not provide a viable alternative. It also argues that ISDS is not relevant only to less developed legal systems but also highly evolved ones since international investors are treated differently by domestic law.

Inter-governmental or inter-state mechanisms, such as diplomatic protection, or formal inter-state dispute settlement, in turn, do not provide an adequate substitute for an ISDS mechanism. Affected investors regularly do not have a right vis-à-vis their government to have their claim espoused against a foreign sovereign, making investors dependent on the goodwill of their home country and likely prejudicing smaller compared to larger investors. Giving investors access to an international forum is the most effective means to enforce the substantive rights granted under IIAs.
The critique that investor obligations are not as important as their rights in IIAs and BITs is sought to be answered by a caveat that the asymmetry should be addressed by providing access to ISDS for claims against foreign investors and not just for them

An appropriate solution to the asymmetry problem could then consist in creating investment dispute settlement mechanisms, for example as part of the current UNCITRAL process, that are sufficiently open, so that its jurisdiction can cover not only claims by, but also claims against, foreign investors. This could constitute an important step in addressing gaps in investor accountability and provide comprehensive access to justice in respect of international investment projects for all actors affected.
Well, some food for thought?

Monday, February 10, 2020

BITs and ISDS reform discussions

For an account of new BITs and the influence of provisions relating to human rights and corporate social responsibility, this blog post is a useful reminder of the evolving nature of the legal framework of international investment arbitration.
Human rights considerations increasingly arise in discussions around the evolution of international investment law. IIAs continue to play a foundational role in this trend, as noticeably progressed by newly signed IIAs in 2019. The extent to which disputes arise under the abovementioned IIAs in the coming years, and whether such disputes include human rights considerations, will crucially bear on the trajectory of efforts to gradually align human rights and investment interests.
And for those following the ISDS debates at UNCITRAL, this is an update in the IELP blog regarding the dynamics of the multilateral discussions on ISDS reform:

Flexibility was another core theme arising from the January session. Continuing on the Working Group’s discussions in October, some delegates emphasized the need for an “open architecture”, and a “flexible approach”, that would enable states to pick and choose, via opt-ins or out-outs, from the reform outputs developed through the process. This approach has undoubted appeal in that, under it, no state would be required to accept a reform solution it does not wish to adopt. This can help maximize buy-in for the multilateral instrument, and potentially for a standing body, by allowing states to only opt into certain aspects, such as an appellate mechanism.   

Sunday, February 9, 2020

Trade deals, investment arbitration, underdogs - some weekend readings

Two good weekend readings on international trade and investment issues:

1. What is in store for trade in the context of the US-China trade deal - smaller countries will be the losers. Edward Alden writes in the East Asia Forum:

The real danger of the new agreement, however, is that it replaces a trading system based largely on agreed rules with one based purely on negotiating muscle. The United States long championed a rules-based system, but is now discarding it in favour of a power-based system where the strong do what they can and the weak suffer what they must.
2. ISDS and a new framework in RCEP - Prabhash Ranjan speaks about the underdog in international investment arbitration in the context of the backlash against ISDS provisions.
For the sustainability of the liberal internationalism project to advance international rule of law, it has to be embedded in the social order. This compromise is critical to stem the rise of populism where populist leaders increasingly seek to break free from international institutional controls. A BIT and ISDS framework based on normativity of international rule of law and embedded liberalism will ensure that the interests of the underdogs – hapless investor subjected to whimsical State behaviour and States failing to protect their interests before over-powered foreign investors – shall be protected. This embedded liberal internationalism on foreign investment will be like a new social compact between the market and the State and civil society consistent with Joseph Stiglitz’s template of progressive capitalism to replace neoliberalism.    

Thursday, December 12, 2019

Business views on policy choices - ISDS and policy uncertainty

Investor State Dispute Settlement (ISDS) has normally been seen through the prism of State and governments. The study of bilateral investment treaties and the impact they have on countries policy space has been one of the driving narratives of the debate. The debate at UNCITRAL on creating the right international legal framework for ISDS seeks to address the legitimacy crisis that States have raised.

What about actual businesses? How do they view investment treaties? How much does ISDS figure in their business strategies?

This survey being sought from businesses on ISDS caught my attention.
So far, the discussion has been limited to the perspectives of states and investors’ voice risks not being heard. As investors are users of the ISDS system as well as states, and the system was established to incentivise and protect foreign investment, QMUL and CCIAG’s survey is seeking their input to facilitate the discussion on reform proposals. We are looking to hear in-house counsel and management representatives and hear how the current system works (or does not work) for them and which reforms to the current system may help resolve disputes and promote foreign investment.
 The World Economic Forum has an annual CEO survey. This also gives a good account of what CEOs are thinking on what affects their businesses globally. Over-regulation, policy uncertainty and trade conflicts are in the top 5 threats that CEOs see related to the ese of doing business.

Image result for Annual Global survey 2019, image
I am not sure if substantive provisions of bilateral investment treaties and ISDS provisions are part of the policy uncertainty paradigm?