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.

Monday, April 26, 2021

What next for the negotiating agenda?

The future of the WTO's role in the present trade and investment norm setting has often been a subkect of intense debate amongst trade law aficionados. Will it be relevant n the context of 21st century business realities? Can it match up to the pace of change in global value chains and technology? Can the 160-odd members strike a consensus at all. Will there be more multilateral trade deals in this era of nationalist, populist policies? What would come out of the Appellate Body impasse and the politicozation of the crown jewel of the WTO?

Petros C. Mavroidis seeks to answer some of these challenging questions in an interesting article in the The Journal of World Investment and Trade titled "Who's Minding the Store?" referring to the collapse of the decision making function of the WTO and what needs to be done.

On the need to revitalise the negotiating function in the WTO to ensure rule-making is brought back to track, he states:

One thing is clear: unless the legislative function of the WTO has been revitalized, any improvements in the judiciary risk being of marginal value. We risk rearranging the furniture on the deck of the Titanic, doing nothing to divert the ship from its course and the consequential direct collision with the iceberg.

What is striking is perhaps, there is no longer "two to tango" in the context of the US and EU setting the agenda at the WTO. In a multipolar world, emerging economies have begun seeking a voice tempered by domestic pressures and constituencies.Rule takers are seeking to be rule shapers if not rule makers.

Up to the Uruguay round, the old two-step would do: as long as the European Union and the United States shared a worldview, and were dancing in the same direction, the world trading community would follow. It is not the case anymore. We have now moved to a multi-polar world. Voices are multiplying, and worse diversifying. We are experiencing a cacophony when a single tune is required. This is no cakewalk, but one key piece of the jigsaw puzzle seems to be abandoning its previous centrifugal tendency and moving towards the orbit in a centripetal manner this time...

So what should the agenda for reform at the WTO be? Low-hanging fruit to set negotiations rolling or deep, festering issues that require closure? Who sets the agenda to be taken forward? What coalitions will emerge and what power play will set the agenda? How do members see the WTO in terms of their national interest as well as the global community.

The question is not whether WTO requires a negotiating agenda and rule making back on track - the question rather is what that agenda would be and who would be the one's pushing for it. 

Sunday, April 11, 2021

Joint Interpretative statements - another tool in the ISDS saga?

Several years ago I had read the book by Lauge Skovgaard titled "Bounded Rationality and Economic Diplomacy" where he highlights how developing country governments underestimated the risks of bilateral investment treaties in the 1960s and 70s.I would recommend the book to all those on either side of the ISDS debate to read.

Much water has flown since then and there has been a major churning in the investment arbitration regime worldwide - both developing and developed countries are having a relook at their fundamental approaches to investment treaties as well as ISDS. Most of the approaches have tended to focus on how new treaties should be crafted and how state regulatory power must be balanced with investor rights. Some approaches like the Brazilian model have rejected ISDS completely. The EU approach is to soften the ISDS blow with an appellate mechanism. However, all these have a common trait - new treaty negotiations.

Lauge Skovgaard and George Gertz in this succinct paper titled "Reforming the investment treaty regime - A backward looking approach" ask the inevitable question - the new treaty approach does not take away the survival clauses in most of the existing treaties - which means the flaws in the current system is still available for investment claims for years to come. So while new approaches (like the model Indian BIT or the Brazilian CIFAs) chart out a path for the future, claims under existing treaties continue to be a threat.

They then suggest that the best way to tackle this threat is through the concept of join interpretative statements by treaty parties as to the scope and intent of the existing provision. This could clarify some of the existing ambiguity as well as provide some succour against unfair ISDS claims.

There is, however, a third option available to states, which could be a cheaper and quicker alternative – or at least a complement – to termination and renegotiation: the use of interpretative statements by governments. Under international law, states have the right to constrain how international adjudicators interpret treaties, including after the treaties have been ratified. The Vienna Convention on the Law of Treaties requires tribunals to take such statements into account, and in recent years a number of domestic courts have affirmed the status of interpretative statements as well. The effects are greatest when statements are made by both (or all) treaty parties. State interpretative statements provide a viable way for governments to bring their concerns, already clearly expressed when discussing new investment treaties, to the far more important world of existing treaties without going through the pains of terminations or renegotiations.

However, the road to joint interpretative statements are not easy for many reasons. First, there is not much experience in doing so post the treaty signing.Developing countries do not have much capacity to engage in treaty management - they do manage to sign of treaties but to engage as per the treaty terms on a continual basis is a serious capacity issue. Second, agreeing on a joint statement on FET or scope of investment or the right to regulate is not an easy affair. Third, what if joint statements "amend" the scope of the existing provisions - how wuld arbitral tribunals react?

However, the paper does bring out an important point - the need to explore this avenue, chart out a roadmap to engage on tthese lines as well as prepare a set of join interpretative statements that could see the light of the day.

Wednesday, March 31, 2021

Globalisation, a global compact and who writes the rules - familiar terrain

Some recent readings bring out interesting perspectives on globalisation, who sets the rules, what should the global order look like and why developmental economics is ignored!

The Economist has a piece on the importance of globalization and supply chains inspite of nationalistic rhetoric and going local in most large economies. Diversification of supply chains rather than closing down on them is what "Message in a bottleneck" tries to convey:

Such a lurch towards autarky would not be justified. One reason is that government-administered, domestic supply chains are even less resilient than global ones. For all its drama, the saga of the Ever Given will be only a blip in the trade statistics. As demand surged in the pandemic, China’s mask output rose by ten times. After the panic buying of beans and pasta, the $8trn global food supply-chain rapidly adapted, keeping most supermarkets stocked. While arguments rage over how to allocate doses, global networks stand to supply 10bn shots of brand new vaccines this year. Self-reliance sounds safe, but politicians and voters must remember that their meals, phones, clothes and jabs are all the product of global supply chains.

Stephen M.Walt has this forceful piece on who writes the global rules. The issue of who sets the international agenda and how rule takers are now challengng status quo is depicted by the present geopolitical rivalries that are playing out:

The differences between the American and Chinese conceptions are relatively straightforward. The United States (generally) prefers a multilateral system (albeit one with special privileges for some states, especially itself) that is at least somewhat mindful of individual rights and certain core liberal values (democratic rule, individual freedom, rule of law, market-based economies, and so on). These ideals may be applied imperfectly at home and pursued inconsistently abroad, but the U.S. commitment to them is not just empty rhetoric. Among other things, it underpins U.S. efforts to persuade or compel other states to alter their own domestic arrangements. Not surprisingly, the United States also likes many existing institutions (the IMF, NATO, the World Bank, the reserve role of the dollar, to name a few) because they give the United States greater influence.

By contrast, China favors a more Westphalian conception of order, one where state sovereignty and noninterference are paramount and liberal notions of individual rights are downplayed if not entirely dismissed. This vision is no less “rules-based” than the United States’, insofar as it draws on parts of the United Nations charter, and it would not preclude many current forms of international cooperation, including extensive trade, investment, collaboration on vital transnational issues such as climate change. China is also a vocal defender of multilateralism, even if its actual behavior sometimes violates existing multilateral norms. Nonetheless, a world in which China’s preferences prevailed would be different than one in which the U.S. vision proved to be more influential.

The next question perhaps is how other larger economies fit into this divergent dynamic.That brings us to the question of allies and coalitions. What should the basis be for the superpowers to form coalitions - democracy, common values or the end goal of a common enemy? Jana Ganesh summarises it in this piece in the Financial Times where he emphasies that the battle is not easily one by stressing on common values.

So what kind of compact should a global order be? This Project Syndicate piece calls for a a concert of powers for a global era with a grand vision of informal negotiation amongst old and emerging powers to ensure coherence and progress.Richard Haass and Charles A Kupchan argue that it is possible to bring about such a concert and would be aboon for global governance:

A global concert offers the best vehicle for managing a world no longer dominated by the United States and the West. The members would be China, the European Union, India, Japan, Russia, and the US, collectively representing roughly 70% of world GDP and global military spending. Including these six heavyweights would give a global concert geopolitical clout while protecting it from becoming an unwieldy talking shop.


          Establishing a global concert would be no panacea, however. Convening the world’s heavyweights hardly ensures a consensus among them, and success would often mean managing, not eliminating, threats to regional and global order. The proposed steering group would accept both liberal and illiberal governments as legitimate and authoritative, implying abandonment of the West’s longstanding vision of a global order made in its image. And restricting membership to the most important and influential actors would sacrifice representation in favor of efficacy, reinforcing hierarchy and inequity in the international system. 

Grand thoughts for a weekend read?

To end it all, Arvind Subramanian and Devesh Kapur are critical of the dominance of the north in opinion making institutions of economics. They argue, unsurprisingly, that many of these institutions underrepresent the interests and voices of the south. Fair enough, but how are the alternative voices to be heard - only in increasing representation in the institutions of the north or by building an alternative institutional ecosystem? Their comments on RCT, I will leave for another day, for I am no expert on it!

Development economics focuses on improving the well-being of billions of people in low-income countries, but the Global South is severely underrepresented in the field. Unfortunately, a small number of rich-country institutions have appropriated it, with serious consequences. And the problem appears to be getting worse.

All in all, an interesting amalgam of scattered thoughts.But this sure is familiar terrain with the no easy answers.

Tuesday, February 23, 2021

Negotiating changes in investment treaties

Negotiating the right kind of international investment treaties has always been a complex task for countries with insufficient capacity. Building State capacity is critical to achieve that balance. However, repeatedly, States are taken to international arbitration - some could have been avoided by craftier language or anicipating changes in economic conditions.

Karl Sauvant and Louis T Wells bring out the complexity in anticipating changes in economic conditions while negotiating international investment treaties. Stability clauses that bind the State to a particular position without providing avenues for legislative change could restrict States from initiating reasonable reform. They stress on the importance of taking into account changes that may occur due to windfall profits or due to the need to amend existing regulations.

One lesson for governments is clear: mistakes, vague terms and failures to account for future conditions and concerns can no longer easily be corrected later. Governments must get contracts right from the beginning. Resource contracts need mechanisms to cover the prospects of future windfalls: progressive royalties or income taxes, or production-sharing formulas that adjust government take. They also need working provisions, so investors lose mining rights for failure to meet deadlines for production and target production rates. Agreements should anticipate potential problems with transfer pricing, debt financing, etc. The scope and duration of any stability clauses must be limited, anticipating that taxes and environmental and social concerns might be subjects of future legislation. Ideally, contract terms should be subject to occasional review.

The ability to anticipate changes and incorporate suitable language in treaties to address unforeseen trajectories is a question of State capacity and intent. It also ensures treaties that are balanced. For this State capacity needs to be built - by involving multisectoral experts, legal expertise and administrative, public sector experts. That is easier said than done!

Sunday, February 21, 2021

Digital Trade - Perspective for growth

Digital trade has captivated debate domestically as well as in international trade circles for many years now. the growth of digital technologies and digital trade is undeniable. It is also a fact that a large number of developing countries are using digital technologies to further social inclusion and growth. Issues of digital divide, data flows, data privacy, big tech and digital divide dominate the discussions.

What role do trade rules have in fostering digital trade growth and opportunities? Is there a single way of charting out trade rules? Do all players benefit equally from strong, digital trade rules? Like goods and other services, are there predominant digital trade providers and receivers?

A 2021 WTO publications on digital trade is an interesting read. Titled "Adapting to the Digital Trade Era:Challenges and opportunities", it gives a birds eye view of digital trade agendas, progress and challenges from across the world.

What trade strategy should countries adopt with respect to digital trade? An open, free, non-interventionist stance to benefit from digital technologies and products from across the world? Or an "industrial strategy" of developing national players? Have the great powers in digital trade today always invested in open policies towards digital trade or have they had a graded policy?

As the conclusion of the report (p.346) states:

There also is a convergence on the view that while digital trade offers opportunities, there is a risk as it can also exacerbate inequality and limit inclusiveness. Developed-country policymakers tend to stress the importance of the free transmission of data across borders, while some developing-country policymakers have advocated for a digital industrialization strategy to limit competition from the large technology firms to encourage the growth of local digital capabilities. Developing countries that lack the tools to compete in the new digital environment are in danger of being left even further behind. The challenge is to achieve inclusive growth to the benefit of all, with no member being left out and not deepening the economic divide. What to regulate, how to regulate and at what level? Multilaterally, regionally or bilaterally? 

Will there be a consensus that digital rules multilaterally are the way forward for digital trade growth? Are national regulatory and business environments more important and strategic than international engagement? Or is it a strategic mix of both? What is the mix and who decides? Are there minimum standards that one needs to adhere to?

Thursday, February 18, 2021

Proactive implementation of trade agreements?

ASIL Insights has an interesting review of a case of the Court of Justice of the European Union (CJEU) relating to Hungary. The CJEU in Commission vs.Hungary held that a Hungarian law which mandated an international agreement to be entered into by a foreign university (Central European University) violated the national treatment obligations of Hungary under the General Agreement on Services (GATS) under WTO.

Two interesting analysis on the judgement concerning the applicability of GATS by CJEU and the domains of the European Commission and Member States with respective to their competencies is found here and here.

What I found striking about this judgement is that the European Commission challenging one of the Member State's (Hungary) action as being WTO inconsistent. In normal circumstances, a WTO member where the foreign university originates or is registered (in this case the United States) could have filed a case in the WTO against the European Union. However, here the Commission brought a case against Hungary in the CJEU.

Proactive implementation of trade agreements? Imagine a large federal country where the cetral/federal government brings a case against one of its states/provinces for a measure which is apparently inconsistent with WTO law? Pre-empting WTO dispute settlement may be?

Tuesday, February 16, 2021

Enforcement of trade rules

The EU has come out with new rules reated to enforcement of WTO provisions in the context of the non-functioning Appellate Body at the WTO. The guidelines that came into force on 13th February 2021 permit the EU to initiate counter-measures against other WTO members whose measures are perceived to be inconsistent with WTO rules even if an appeal is filed before the Appellate Body.

The preamble to the amended rule, inter-alia, states:

(3). The WTO Dispute Settlement Body has been unable to fill the outstanding vacancies on the WTO Appellate Body (the ‘WTO Appellate Body’). The WTO Appellate Body is no longer able to fulfil its function from the moment when there are fewer than three WTO Appellate Body Members left. Until that situation is resolved and in order to preserve the essential principles and features of the WTO dispute settlement system and the Union’s procedural rights in ongoing and future disputes, the Union has sought to agree interim arrangements for appeal arbitration pursuant to Article 25 of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (the ‘WTO Dispute Settlement Understanding’). That approach was endorsed by the Council on 27 May 2019, 15 July 2019 and 15 April 2020 and supported in the European Parliament resolution of 28 November 2019 on the crisis of the WTO Appellate Body. If a WTO Member refuses to enter into such an arrangement, and files an appeal to a non-functioning WTO Appellate Body, the resolution of the dispute is effectively blocked.

(4) A similar situation might arise under other international trade agreements, including regional or bilateral agreements, where a third country does not cooperate in the manner necessary for dispute settlement to function, for example by failing to appoint an arbitrator and where there is no mechanism provided to secure the functioning of dispute settlement in such a situation.

(5) If dispute settlement is blocked, the Union is unable to enforce international trade agreements. Therefore, it is appropriate to extend the scope of Regulation (EU) No 654/2014 to cover such situations.

 (6) To that end, the Union should be able to expeditiously suspend concessions or other obligations under international trade agreements, including regional or bilateral agreements, if effective recourse to binding dispute settlement is not possible because the third country does not cooperate in making such recourse possible. 


In effect, does this amended rule make it mandatory for other WTO members to either agree to an interim arrangement for appeal or not file a WTO appeal? Is the WTO's recourse to appeal, albeit non-functioning, effectively curtailed by this resolution? Is it WTO consistent? Can the non-resolution of the Appellate Body impasse in terms of appointing AB members give the right to WTO members to pursue trade remedial measures before the completion fo the mandated process of appeal? It would be interesting to see the reaction of Members who have active trade dispute with the EU on this amended measure - the EU is currently engaged in 45 active WTO cases in which they are complainants in 29 of them.

Another pieceof news, though slightly outdated, is the creation of the role of a Chief Trade Enforcement Officer in the EU to effectively implement and enforce trade agreements that the EU is a party to. Detailed procedures on how the CTEO will act as a single point of contact for trade compliances are useful guides to other countries that face similar issues of trade barriers and enforcement. One has to step up internal institutional mechanisms to enforce agreements that one enters into. As it was rightly said: "any legislation is only as good as its implementation"! This is applicable to both domestic and international law.

Friday, February 12, 2021

Grassroot Globalisation

An interesting discussion on "Grassroot globalisation" from Project Syndicate.

Who are the rulemakers and rule takers? Is that changing now or has nothing really changed? Have emerging economies titled the balance or is it just a theoretical debate? Is capital controlling rulemaking across the north and the south?

Wednesday, February 10, 2021

An appeal in investor-state disputes at last?

The lack of an appellate mechanism in the international investment arbitration regime, unlike the WTO (albeit dysfunctional now) has been a major source of criticism as well as a challenge to the legitimacy of the ISDS system. The EU has attempted to correct this notion by proposing an investment court system as well as an appellate mechanism. It has incorporated this idea in the Canada-EU Comprehensive Economic and Trade Agreement. The idea of the arbitral tribunal and the appellate mechanism was also subject to challenge as violating EU law. The European Court of Justice in this decision seems to have laid that to rest.

The rules and finer print of the mechanism have been worked out now and are publicly available (page 62 of this larger large multilingual document) here. The Appellate Tribunal is what the appellate mechansm will be now called. It would be a six member tribunal. The term of office would be for 9 years. A division to hear a particular appeal will consist of 3 members - similar to the WTo Appellate Body. In terms of the Secretariat servicing the Appellate Tribunal, the ICSID Secretariat would be performing that role.

I was trying to compare the ambit and timelines of the Appellate Tribunal with that of the WTO's Appellate Body - 2 significant departures ( I am sure there may be more)

1. Power to remand the matter back to the original tribunal 

Under the DSU, the Appellate Body has no power to remand the matter to the panel that had originall decided the case. As per Article 17, paragraph 13 the "Appellate Body may uphold, modify or reverse the legal findings and conclusions of the panel." There is no scope for remand.

The Appellate Tribunal under the Canada-EU CETA has the power to remand the matter. Article 3(3) of the decision setting out the administrative and organisational matters regarding the functioning of the Appellate Tribunal states as follows:

"If the facts established by the Tribunal so permit, the Appellate Tribunal shall apply its own legal findings and conclusions to such factsand render a final award. If that is not possible, it shall issue a decision referring the matter back to the Tribunal to render an award in accordance with the findings and conclusions of the Appellate Tribunal..."

2. Duration

The WTO Appellate Body has a 90 day rule for completing its reports - 

"As a general rule, the proceedings shall not exceed 60 days from the date a party to the dispute formally notifies its decision to appeal to the date the Appellate Body circulates its report. In fixing its timetable the Appellate Body shall take into account the provisions of paragraph 9 of Article 4, if relevant. When the Appellate Body considers that it cannot provide its report within 60 days, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report. In no case shall the proceedings exceed 90 days."

The period and the inability of the Appellate Body to complete the proceedings and submit its report within 90 days has been a cause of considerable tension at the WTO.

The Appellate Tribunal under the Canada-EU CETA seems to have been given more time! In fact, there is an opportunity to extend the period through a specified process.Article 3, paragraph 5 of the decision states:

"As a general rule, the appeal proceedings shall not exceed 180 days from the date a disputing party formally notifies its decision to appeal to the date the Appellate Tribunal issues its decision or award..."

Further, the Appellate Tribunal can inform the parties if it requires more time than the 180 days with the reasons for the delay. Further, every effort (a best endeavour again?) to complete the proceedings by 270 days must be done. Has the EU-Canada CETA provisions formalised what used to happen in Appellate Body practice in reality at the WTO?

I am sure there are more nuances that the two processes can be compared with. One needs to see how the Appellate Tribunal will function under the CETA, would it face similar challenges as the Appellate Body of the WTO and would it prove to be a model for investment norm setting multilaterally?

Tuesday, February 9, 2021

Emerging powers and rule makers

A recent online symposium on emerging powers and international economic law caught my attention in the Opinio Juris Blog. Andreas Buser's book "Emerging Powers, Global Justice and International Economic Law" was being reviewed. 

Is the international trade and investment law arena being rescripted by the emergence of new power realities? Have Brazil, India, China and Russia redefined the way international law in economic activty is perceived and drafted? Have the rule takers become rule makers? Or has the change been incremental and not substantial? Has global rule making shifted from a Euro-centric, western perspective to a more fragmented, global edifice?

My thoughts on emerging powers and the global economic order are as follows:

1. Emerging powers have had varying approaches to many issues being negotiated in the trade and investment arena. These approaches have been propelled by national interest and growing influence in international economic engagement. For example, China has been open to the investor state dispute settlement mechanism partly because of the increasing trend of outward capital flow to other countries. It has become a capital exporting country now.

2. There is no unified position from these players on what the international economic rulebook should transform itself into. In fact, while there are strong coalitions of interest in negotiations amongst these groupings, there is also opposition when it comes to certain areas. Notice the divergent views on agriculture negotiations between Brazil and India in the WTO or the contrasting positions of China and India on participation in investment facilitation discussions.

3. Most of the emerging powers reiterate their faith in the multilateral, rule based system. Being engaged in one rather than radicalising and uprooting it is the mainstay of all powers.

4. While international economic law has seen coalitions of interests coalesce, geostrategic interests have thrown up new coalition partners. What influence do new geo-strategic coalitions have on a unified stand of emerging countries int he international economic order would be an interesting area of research.

5. And finally, all attempts today are of shaping international law from within. Many emerging powers seek to engage with international law for national interest as western powers did when the rules were framed. 

The issue of rule-makers and rule takers has been a long standing one in international economc law. How much of this change in power dynamics will change the nature of international economic law is the key question.

Monday, February 8, 2021

Low ambition "comprehensive" deal?

I had blogged about the investment agreement between the Eu and China a few days ago here. The text of the Comprehensive Agreement on Investment (CAI) is available in the public domain here.

Daniel Gros, in this Project Syndicate piece, did not have much hopes on the promise of the CAI in terms of liberalising investment between the two partners. An important point he makes on the ability of legal instruments to make a difference when one's internal economy is already "liberalised' is interestng. Therefore, when one's regulations are less of a barrier, international instruments do not add as much value as intended.

Critics of the CAI neglect to mention that the EU had little leverage because investment in Europe is already mostly liberalized. The EU therefore could not offer meaningful improvements for Chinese investors. And you if you have little to offer in a negotiation, you cannot expect much from the other side. Under these circumstances, we should not have expected an agreement that addresses every social or human-rights problem Europeans see in China.

I was taking a cursory glance at the dispute settlement provisions of the CAI. 

No ISDS, no appeal mechanism. Is State to State arbitration back in business?

Thursday, February 4, 2021

Will the Airbus-Boeing saga really end?

One of the longest fought disputes at the WTO, at all stages of the dispute settlement process, involving two of the world's largest corporates is the Airbus (European Union) and Boeing (United States) dispute. I have blogged about the progress of this dispute at varyng intervals here, here, here, here and here. Books have been written about this and the dispute has ensured a lot of jurisprudential wisdom in the arena of industrial subsidies under the WTO's Agreement on Subsidies and Countervailing Measures.

This recent Peterson Institute's piece has called for a political settlement - now that it has been established that both Airbus and Boeing have been subsidized by their respectve governments. The rationale for a political settlement, apart from employment and reducing the carbon foot print ( the need to collaborate on reducing emission), seems to be China:

Large aircraft production is essentially a global duopoly between Boeing and Airbus. An accord would thus facilitate new global rules for airplane manufacturing subsidies generally, sending a signal to China, which is the most likely third global producer of large wide-body aircrafts under the direction of the Chinese state-owned Commercial Aircraft Corporation of China  (Comac). The degree to which Comac enjoys direct subsidies from the Chinese government is unknown, but they are likely to be lavish. In fact, Comac has so far produced only two relatively small aircrafts—the 90-seat ARJ21 and the 168-seat C919. The ARJ21 is generally considered inferior to competitors from Brazil’s Embraer and Canada’s Bombardier, and the soon-to-be-available-commercially C919 has not attracted orders from non-Chinese airlines. Comac is also working with Russian partners on the CR929, a wide-body long-range airplane seating up to 280 passengers.

Therefore, one of the primary motivators is a stiff competitor in the making and the need for a united front. This also throws open the question - will subsidies int he aviation sector really come down? is it an exception that the WTO rules should cater to or should they be disciplined like any other product under the trading regime?

Saturday, January 30, 2021

More free trade, lesser the threat to national security?

Came across this exhaustive piece by Scott Lincicome on the importance of free markets, more trade and less national security nationalism!

Writing in Cato's blog, Scott in Manufactured Crisis:Deindustrialization, Free Markets, and National Security argues against being insular, inward looking and anti-free trade.He decries the use of the "national security" exception as an industrial strategy.

An interesting part of the study is the reference to increased trade between countries leading to reduced wars.

An interesting study overall on the position that freer trade, openness on trade, lower tariffs and more engagement in world trade will boost national security and not undermine it.

Thursday, January 7, 2021

Big international investment deals and their implications - the EU and China cosy up

My first blogpost of 2021 and its on a relatively less discussed subject - the EU-China Investment agreement being negotiatied.

News that there is in-principle approval to the deal is coming out. The strategic implications of the deal are discussed here.

Found this short video on the subject by Taylor Wessing.

Highlights of the video:

1. The Agreement will replace all the existing BITs between China and EU Member States

2. It has been negotiated for a long, long time.

3. May require ratification from EU Member States depending on the content.

4. Further market access to EU firms in China based on the removal of restrictions and conditions in the negative list of China

5. More stability and predictablity if commitments in blateral treaty than domestic law - so though domestic may have liberalised conditions for business already and this is reassuring, ofreign businesses look at their inscription in clear term sin international agreements - for on ebasic reason - yes, dispute resolution

6. Not clear if the EU multilateral investment court is part of the draft agreement

    Would be interesting to see the finer detals of the agreement once it is public - what standards it sets for substantive provisions, what remains out of the ambit of the agreemenst, how self-judging will the national security exception be?