A new kind of trade police?

Came across this extensively researched piece in the HILJ on "Trade Policing" by Kathleen Claussen. At first, the title seemed familiar. International trade aficionados view the multilateral system as a trade police, albeit, in a benign way, nothwithstanding its binding dispute settlement mechanism.

But wait, this article had a totally different take which got me curious. "Trade Policing" in this article meant a set of trade tool kits that governments use to target companies/firms/corporations where they perceive the country's trade interests or other interests are being impacted. So while the WTO's rule book is focussed on state to state engagement and "measures" by the State that can violate treaty obligations, actions of countries towards foreign firms is a kind of alternate route.

So what kinds of actions are being referred to here. Kathleen refers to four types of action:

1. Mechanisms to detain goods at teh border on environmental and labour grounds - under the USMCA

2. Prohibiting goods from entering the country on the grounds of human rights violation involved in producing those goods

3. Export controls in various areas of military technology

4. Data gathering from individual firms on various aspects of their supply chain including due diligence checks.

Now these measures are specific and corporation specific. It is not targeted against a specific State or country. Whether these toolkits can be challenged under international trade law rules is another question. However, the author does allude to the fact that these toolkits weaken an already beleaguered multilateral system:

"...The implications surrounding this move are not limited to U.S. actors. For international trade organizations, the shift in trade policing is one of concern. The foundations of the World Trade Organization (“WTO”) and its supporting organizations rest on state-to-state engagement and rules developed and shared by those states. States’ increasing reliance on these statutory instruments upsets the dominance of the state role at the WTO and displaces the WTO’s Dispute Settlement System. The new trade policing typically substitutes unilateral action or sometimes domestic courts in these spaces, risking international de-judicialization. ..."

A very detailed article with multifarious dimensions. Requires a re-read sometime. But for now, just thought the idea of a Trade Police is quite an interesting thought - albeit, a domestic one with international ramifications!

Paradigms of investment protection in international rule making

How dispute settlement is treated vis a vis investment in international rule making has been a subject matter of great debate over the years. Should foreign investment be protected through a investor state dispute mechanism or should it be restricted to state to state fora? Should local courts be preferred or arbitral tribunals have a say? Should investment facilitation be the remit of investment treaties or chapters rather than full fledged investment protection?

Approaches to these questions have been varied from merely co-operation and facilitation agreements to full fledged protection agreements with strong investor state dispute settlement mechanisms in place. 

A recent piece titled "The India-EFTA Deal: A New Model for Developing Countries" by South Centre commenting on India's approach in the India-EFTA Trade and Economic Partnership Agreement outlines the approach of not going in for ISDS as being a refreshing approach in investment law rule making. This is a contract to an earlier piece which views investment protection as a necessary ingredient of investment chapters.

Investment rule making in the international sphere has seen divergent approaches to investor protection. While ISDS has been a dominant theme across, international arbitral claims have raised the issue of alternate paths. Strong upholders of the investment protection regime have moved away from it, or are selectively using it. Some countries like Brazil have chalked out a totally divergent path of state to state resolution.

With foreign investments becoming a critical path to a country's economic growth model, the need for protecting foreign investments also becomes a focus. Investment facilitation is another aspect that has gained currency now with the Investment Facilitation initiative at the multilateral level.

The questions and debates around investment protection will continue to engage policy makers. Does investment protection really encourage foreign investment? What is the evidence to this effect? What is the ideal model for investment protection and facilitation? Is it more of sound domestic regulatory policies or strong international  rules? Is it redress in local courts or international arbitral tribunals? Is it private arbitral claims or other dispute resolution strategies like Joint Committees of States? Does it benefit foreign investors unfairly or is required against arbitrary state action?

How should we tread this path? 

Some random readings

 Weekend readings:

1. India and the EFTA have recently signed an FTA which has an investment chapter. I had blogged about it here. A piece by Prabhash Ranjan titled 'The Investment Chapter in the India-European Free Trade Association Free Trade Agreement:Much Ado about "Something" 'on what the investment chapter could mean and how it could be interpreted. Throws open the question on what should really be in an investment chapter of an FTA - opinions can oscillate from "there should be no chapter at all" to "bring in investment protection along with facilitation." The debate over ISDS, whether BITs really encourage foreign investment, what is the ideal BIT chapter and what one should avoid - all live and kicking questions as the world addresses the question of international investment law rule-making.

2. Ecuador's experience in arbitration and the lack of Bilateral Investment Treaties impacting foreign investment is addressed here by Valeria Arroyo in this piece in the HILJ. Throws open the fundamental question - do strong BITs foster foreign investment? Is there a strong co-relation between the two?

3. The CATO Institute has an interesting series on globalization and its prospects here. How do the theories of globalization transcend into international rule making? How have approaches of the major powers towards globalization and opening up influenced the interest in multilateralism and growth in trade?

Some statistics

 Two useful infographs from the piece in the Project Syndicate "The Indian Giant Has Arrived"

Any lessons for trade negotiations? 

The New Kid on the Block - a treaty on intellectual property and genetic resources

For those interested in intellectual property and international rule making, a new kid is on the block! 

There is a new international treaty on intellectual property, Genetic Resources and Traditional Knowledge associated with genetic resources. Each of these terms have a special meaning and the WIPO website describes the thrust of the treaty as follows:

"The Treaty, once it enters into force with 15 contracting parties, will establish in international law a new disclosure requirement for patent applicants whose inventions are based on genetic resources and/or associated traditional knowledge."

The new treaty can be found here. 

Essentially pertaining to disclosure requirements for patents connected to genetic resources of traditional knowledge associated with genetic resources, the treaty has been heralded as a successful multilateral effort at making international law.

What a labour dispute brought out in an international trade arena!

This is a post about a dispute adjudicated under the USMCA related to violation of labour rights between the United States and Mexico. A state to state dispute settlement, it involved the question whether certain certain labour rights were denied in Mexico which led to violation of Mexico's obligations under the USMCA.

International news about the high profile, labour related dispute that got Mexico to the dispute panel is found here.

The USTR statement on the dispute is here.

The panel findings under the USMCA is here. Fascinating discussion on what a covered facility is, how jurisdiction of the panel is determined and how labour disputes can end up in international trade dispute settlement.

The panel ultimately found that Mexico was not in violation of its obligations under the USMCA but the findings was not on the merits of the case. Though the Mines were decided to be "Covered Facility" under the USMCA, the panel found that it had no jurisdiction since the acts were not covered under the present laws of Mexico and hence Mexico had not violated its obligations under the free trade agreement.

Some observations:

1. For those free trade agreements which have labour related obligations linked to dispute settlement, a flavour of things to come. Measures that impact labour rights, labour disputes, issues of freedom of association and collective bargaining can be a subject of intense international questioning.

2. The panel decision had a fascinating discussion on whether all facilities that produce goods and services irrespective of whether they are exported to the other Party are covered by the agreement. The US did canvas this expansive definition. The panel linked it to benefits under the free trade agreement. In para 46, the panel stated that if parties are seeking special preferential tariffs, the parties are expected to follow rules - and hence there has to be a trade nexus. Either the facility should export to the other Party or the goods or services of the respondent party must compete with the goods of the other Party.

3. Another interesting discussion was on what amounts to "competition" in the trade agreement. What is the burden of proof required? Does it involve direct marketing campaigns against each other or is it sufficient to be like and substitutable goods bought and sold in the same market?

4. What is the learning for countries crafting their FTAs with different templates? Countries should be aware and fully equipped with dealing with the varied interpretations and likely consequences of having provisions that can make domestic action susceptible to international dispute settlement legal scrutiny. Some would argue that it is a good thing - in the interests of consumers and other stakeholders within the country. Some would argue it is against domestic, national business interest impacting competition.

For now, something to chew on in terms of what labour provisions can bring to the table in international trade!

DEPA has an addition

In 2020, I had blogged here and here about the Digital Economy Partnership Agreement (DEPA) entered into between Singapore, New Zealand and Chile in 2020. The Agreement itself has some pathbreaking provisions on digital trade in the realm of international rule making.

They have an addition now. The Republic of Korea has acceded to the DEPA recently. The press release is here.

What struck me was the time period it took to complete the accession - Chile, New Zealand and Singapore signed the DEPA in June 2020. Korea formally applied to join the DEPA in September 2021. And it was completed in 2024.

The World Economic Forum has this to say about these digital agreements here.

"It is clear that the future of trade is digital. Digital economy agreements have already pushed the boundaries of traditional trade agreements, and more governments are eager to join this new frontier. Ultimately, the goal is not just to sign more trade agreements or DEAs, but to advance global trade and inclusive economic growth in the digital age. The World Economic Forum welcomes further public-private cooperation to maximize the benefits of this new trade tool and, more broadly, advance digital transformation and innovation around the world."

I was just trying to extrapolate bilateral and smaller regional agreements to multilateral negotiations. Trade negotiations do have a life of their own - known to move at glacial speed.