Wednesday, April 16, 2014

Domestic policy space, GVCs and some questions

I have often written on  the issue of domestic policy space and international trade law obligations in this blog piece. The issue essentially is whether countries, especially developing and least developed countries,  have sufficient domestic policy space (flexibility) to undertake industrial or other policies and still not fall foul of the international trade regime? Do trade rules restrict countries sovereign right to undertake certain policies that they see as essential to promote national socio-economic development? Is there a uniform prescription for development or do trade rules provide for that space to couner the "one-size-fits all" answer.

To find this debate resonate in a piece on Global Value Chains (GVCs) caught my attention. A piece in the VoxEU titled "Industrial Policy and developmental space: The missing piece in the GVCs debate" highlighted the possibility of exercising this domestic policy space in engaging with GVCs. We all know the critique of the narrative of GVCs being good for all and requiring liberalisation of goods and services sectors as a pre-requisite. All countries may not benefit equally from GVCs. This piece touched on what could be an alternative narrative. 
GVCs seem to be seen as a far-reaching analytical tool and as a mandatory topic in the debates that will be held in the different international economic fora in the next years. However, efforts made so far from the southern hemisphere and, in particular, from Latin America, appear to be insufficient to carry out a critical analysis of the contributions that international think tanks and academics are making. 
If we are willing to reject the linear proposal stating that the path to successfully integrate into GVCs depends almost exclusively on trade and investment liberalisation, then we should map the concrete examples of public policies that have been proposed to create the right incentives for national companies to upgrade and determine how accessible these proposals are for developing countries, which usually have budget and normative constraints that limit their room for manoeuvre.
However, is there a clear alternative? Do we have workable models of selective engagement with GVCs as per national needs? How does this play by WTO rules? How can domestic policy space be exercised? What are the limits? Apart from domestic constraints what are the international law constraints?

Saturday, April 12, 2014

Investor State Dispute Settlement - Things heating up?

I usually do not write about investment issues. That is not my forte. However, have been coming across a lot of pieces on the issue of Investor State Dispute Settlement (ISDS) that caught my attention. The ISDS provision in an investment agreement essentially permits private investors to initiate a dispute against the State where it has invested in cases of alleged violations of the State's obligations under the investment treaty.

The IELP blog carried this piece on the latest Australian FTA with Japan that apparently does not have an ISDS provision. The recent example of this FTA establishes that the issue is not resolved and will continue to arise in international negotiations. The pros and cons of having ISDS provisions have been debated ad naseum. Two pieces on varying positions are an interesting read.

This piece called "Profiting from Injustice" essentially argues against having provisions of ISDS due a variety of reason including that it is fuelled by law firms, arbitrators and financiers and is essentially not neutral. 

Countering the above premise, a detailed piece in the Harvard Journal of International Law argues against the "re-statification" of investment state disputes essentially arguing in favour of the existing ISDS provisions.

A whole lot of literature, interests and impacts. Issues about what constitutes "neutrality" itself? is there a pro-investor or pro-state bias? What trend would coming bilateral, plurilateral agreements follow? Is there a middle ground?

Thursday, March 27, 2014

China Rare Earth Panel report out

The China Rare Earth panel report is out and is found here. I had blogged about it in 2012 when the panel was set up here.  
"In respect of findings concerning export duties and export quotas on various forms of rare earths, tungsten, and molybdenum, and restrictions on the trading rights of enterprises exporting rare earths and molybdenum, the Panel has found that the series of measures have operated to impose export duties and export quotas on various forms of rare earths, tungsten, and molybdenum, and restrictions on the trading rights of enterprises exporting rare earths and molybdenum (i.e. the prior export experience requirement, the export performance requirement, and the minimum registered capital requirement), that are inconsistent with China's WTO obligations. The Panel, therefore, recommends that the Dispute Settlement Body requests China to bring its measures into conformity with its WTO obligations such that the series of measures does not operate to bring about a WTO-inconsistent result."
Haven't read the voluminous Panel report of more than 200 pages. Many interesting questions including on the applicability of General Exceptions to obligations under the Accession Protocol of China. WHat impact would this have on other similar measures?

Will this lead to an appeal, compliance or status quo? We will have to wait and see...

Friday, March 21, 2014

More Appeals in the WTO

As per the annual report of the Appellate Body of the WTO, there is more work in store for the Appellate Body in 2014. 

And this is why...
"According to the Legal Affairs Division and the Rules Division, a large number of panels will continue to be active for the foreseeable future. Twenty-seven requests for consultations were received in 2012, the highest number since 2002. This led to the establishment of 11 panels in 2012, the highest number in five years. There are currently seven panels in composition, and six more panel requests are pending before the DSB.Third party participation continues to be high.Four new requests for consultations have been received in 2013, and four panels have already been established this year covering five disputes. Significantly, the compliance proceedings in the aircraft subsidy disputes between the United States and the European Union are also presently under way. Thus, a large number of panel proceedings are currently in progress or about to begin. Assuming: (1) that panel proceedings take, on average, one year from the time of 
establishment of the panel; (2) that the compliance panel proceedings in the aircraft subsidy disputes will take 1.5-2 years; and (3) that, based on the consistent practice of WTO Members involved in disputes since 1996, roughly two-thirds of all panel reports circulated will be appealed the Appellate Body can expect to receive up to a dozen appeals towards the end of 2013 and in 2014. Such an increase in the number of appeals, on top of the increased complexity and size of the average appeal, is likely to exacerbate the challenges confronting the WTO dispute settlement system in the near future."
More disputes at the WTO, more appeals, more international rule making, more predictability and more compliance? 

Tuesday, March 18, 2014

It's the question of national interest again...

Krugman recently wrote about the TPP being no big deal in the NYT. An interesting aspect of that piece was relating to what constitutes "national interest" that I allude to in this blog. Talking about intellectual property rights rules in the trade agreement, it said:

"Now, the corporations benefiting from enhanced control over intellectual property would often be American. But this doesn’t mean that the T.P.P. is in our national interest. What’s good for Big Pharma is by no means always good for America."
What is "national interest" then? What is good for business can sometimes be not good for the country of the business corporation. National interest could well be larger public interest? Consumer interest? Or just plain "public interest"?

Countering Krugman's analysis generally and also specifically on the "national interest" plank, a VoxEU piece argues:
"After dismissing the case for stronger intellectual property protection in the TPP, Krugman writes with a flourish, “What’s good for Big Pharma is by no means always good for America.” Not even the Pharmaceutical Manufacturers Association would claim that its interests always coincide with US interests. 
But what about the general coincidence of interests? America’s competitive strength resides in innovation. Innovation costs lots of money; not surprisingly, some 60% of the value of US shares – or about $14 trillion in 2013 – represents the capital value of ideas, not tangible property.1 With this amount at stake, protection of intellectual property is clearly in the US national interest. From a global perspective, it’s worth asking how future innovation will be financed if good ideas – embodied in software, entertainment, electronics, and yes, pharmaceuticals – can be freely appropriated by rival firms based in foreign countries?"
An interesting debate on what constitutes "national interest" - what constitutes it, who are it's recipients and how should it be protected? I guess all trade deals will face this question. The issue is how the interests are balanced, who balances them and whose interests ultimately prevail. 

Wednesday, March 12, 2014

Dispute settlement - Contrasting yet similar experiences

A recent blogpost in the IELP blog got me thinking - Two contrasting yet similarly placed experiences with dispute settlement in the WTO

- Switzerland's role in dispute settlement 

- African countries role in dispute settlement

While the motivations and reasons for non-participation may be varied, it is interesting to see contrasting profiles having a similar engagement with the WTO's crown jewel.

Monday, March 3, 2014

Taking disputes to their logical end - Seeking retaliation in WTO disputes

This piece on "retaliation" in trade disputes in the WTO is found in the VoxEU. The piece talks about a pattern of how countries have sought compliance of WTO decisions. It also indicates the various types, strategies and means of seeking retaliation which includes cross retaliation to more commonly used retaliation methods.
"The purpose of this investigation was to identify key trends in the WTO dispute settlement system, in particular in the design of retaliation requests. Practice has demonstrated that additional effort is also put into the implementation of these measures once they are authorised. Nonetheless, the original retaliation request – the first opportunity for an offended member country to induce compensation or compliance – is an important tool, and analysing it helps understand countries’ behaviour and goals when pursuing WTO disputes."
It only shows that at times merely initiating a dispute and getting a decision is not the end of the game in WTO disputes. I had earlier blogged about cross retaliation hereCompliance and seeking retaliation is the next big battle.