I hadn't heard anything about the case recently and had been wondering what was going.  Well, here's an interesting development: An Antiguan company claims that, based on the WTO ruling, it is allowed to violate U.S. intellectual property rights as part of a music and movie download service it has set up!  Specifically, it is selling these downloads at very low prices, presumably possible because it is not paying for the rights.

I don't mean to encourage this sort of thing by linking to the site, but it's here if you want to check it out.  On its About page, the company says:

ZookZ operates under the parameters of the 2007 WTO ruling between Antigua and the United States, and is the only website that can legally offer members unlimited digital entertainment.

I read about this first at TechDirt, which had this to say:

... it doesn't seem like the WTO ruling gave random private companies carte blanche to offer up music and movies. In fact, the Zookz interpretation gets even odder, where it interprets the $21 million to mean how much it can make, rather than the value "lost" to the industry. In fact, because of this Zookz claims that if it gets too close to selling $21 million (or if others enter the market, and combined they approach $21 million), they'll just have to start giving music and movies away for free to avoid going over the limit. While the WTO did want to give Antigua a weapon against the US, it's hard to believe that was what it meant. So, while this may be amusing to watch, the likelihood of Zookz lasting very long seems slim, at best.

TechDirt got the story from the LA Times, which had some interesting back and forth between the parties involved:

Copyright holders say the WTO ruling doesn't give companies in Antigua a free pass to violate the copyright laws of Antigua or any other nation, or other international copyright treaties that Antigua has agreed to. The Office of the U.S. Trade Representative contended in an e-mail, “There is no website anywhere in the world that has WTO authorization to engage in copyright piracy. Any representation to the contrary is false, and should be dealt with by the appropriate domestic authorities.”

It's not clear what, in fact, the ruling would let Antiguan firms do. According to Neil Turkewitz, an executive vice president at the RIAA who specializes in international issues, the first step would be for the government of Antigua to seek the WTO's approval for a method to impose the $21 million worth of sanctions. "There’s been no request, and there’s been no consent granted to proceed in this manner," Turkewitz said. And even if the WTO did permit a downloading service, he said, it would have to be confined to Antigua and limited to U.S. intellectual property. No Beatles songs, in other words.

That's a total misreading of the WTO's ruling, argued William Pepper, the company's legal counsel. "There is no burden on Antigua to go back and do anything with anyone," he said in an interview. He claimed that the ruling is much more expansive than the USTR or Turkewitz acknowledge, trumping all other intellectual property laws and agreements and imposing no limits on where Antiguan firms can do business online. The only restriction set by the WTO, he said, is that companies in Antigua can take in no more than $21 million a year through the sale of copyrighted material. Zookz is the only one so far, he said, but if others launch, they'll have to work together to observe that limit. And if Zookz nears the $21-million threshold on its own, Pepper said, it may have to start giving away movies and music.

...

Naturally, the MPAA doesn't see Zookz as a modern-day Robin Hood. Said spokeswoman Elizabeth Kaltman in an e-mail, "The suspension of intellectual property rights is not an action this pirate Website can undertake on its own. It is, pure and simple, another example of a movie pirate, stealing movies from creators, and attempting to profit from its theft."

All in all, this has been one of the most interesting WTO disputes ever, and it seems there is still more excitement to come!

ADDED:  Now that I think about it, here was a better title for this post:  "Taking WTO Law Into Your Own Hands!"

From the EC press release:

EC regulatory procedures on genetically modified organisms are working normally, as evidenced by 21 authorisations since the date of establishment of the WTO panel. The European Commission has held regular discussions on biotech-related issues with the three complainants in this case – Canada, Argentina and the United States - since the adoption of the WTO panel report in 2006.

The settlement reached with Canada provides for bi-annual meetings between competent services of the European Commission and Canadian authorities on agricultural biotechnology market access issues of mutual interest, including:

• GM product approvals in the territory of Canada or the EU as well as, where appropriate, forthcoming applications of commercial interest to either side.

• The commercial and economic outlook for future approvals of genetically modified products.

• Any trade impact related to asynchronous approvals of genetically modified products or the accidental release of unauthorised products, and any appropriate measures in this respect.

• Any biotech-related measures that may affect trade between Canada and the EU, including measures of EU Member States.

• Any new legislation in the field of agriculture biotechnology.

• Best practices in the implementation of legislation on biotechnology

From the Canadian press release:

"Today’s resolution on GMOs shows that the WTO dispute settlement process works,” said Minister Day. “Canadian canola producers now have greater access to European markets. In ending this long-standing dispute, the European Communities has committed to an ongoing dialogue with Canada on biotechnology that will continue to help improve market access and avoid unnecessary obstacles to trade. This is positive news for Canadian producers of all agricultural GMO products.”

“Canadian farmers are the best in the world at producing healthy, high-quality canola,” said the Honourable Gerry Ritz, Minister of Agriculture and Agri-Food. “Our government always stands up for Canadian farm families, and it is good to see that the European Communities is implementing the WTO panel’s ruling. Reopened access to the European Communities means Canadian farm families will have more buyers bidding on their canola.”

...

In the early 1990’s, before European countries began restricting imports of genetically modified products, Canadian canola exports to the EC showed increasingly strong potential, peaking at $425 million in 1994.

From Canada's perspective, the resolution seems to be all about canola.  I assume there was some approval for GMO canola that satisfied Canada, although I did not see anything about it when doing some quick web searches.

ADDED:  The NY Times answers the canola point:

Trish Jordan, a spokeswoman for Monsanto Canada, which produced genetically modified canola seed, said Europe approved the last modified seed used by Canadian farmers in March.

“All issues for Canadian biotech farmers have essentially been approved,” she said. “That should allow the marketing of Canadian canola to Europe. “

The food aid initiative, agreed upon at the Group of 8 summit meeting, is intended to transform traditional aid to poorer countries beyond simply donated produce, grains and meats to assistance building infrastructure and training farmers to grow their own food and get it to market more efficiently.

More on this from Obama's news conference:

 we have committed to investing $20 billion in food security — agricultural development programs to help fight world hunger. This is in addition to the emergency humanitarian aid that we provide. And I should just note that going into the meeting we had agreed to $15 billion; we exceeded that mark and obtained an additional $5 billion of hard commitments. We do not view this assistance as an end in itself. We believe that the purpose of aid must be to create the conditions where it's no longer needed — to help people become self-sufficient, provide for their families and lift their standards of living. And that's why I proposed a new approach to this issue — one endorsed by all the leaders here — a coordinated effort to support comprehensive plans created by the countries themselves, with help from multilateral institutions like the World Bank when appropriate, along with significant and sustained financial commitments from our nations.

...

There is no reason why Africa cannot be self-sufficient when it comes to food. It has sufficient arable land. What's lacking is the right seeds, the right irrigation, but also the kinds of institutional mechanisms that ensure that a farmer is going to be able to grow crops, get them to market, get a fair price. And so all these things have to be part of a comprehensive plan, and that's what I was trying to underscore during the meeting today.

It sounds like food aid will now be less about giving food to poor countries, and more about helping them grow their own food.  Generally speaking, I think this is a good development, although I am curious about the details.  Specifically:

-- What percentage of food aid will be devoted to giving food, and what percentage will be for encouraging self-sufficiency in food production?

-- What forms will the self-sufficiency promotion take?  Will money now be given to pay for purchases of locally produced food?  And what would "local purchases" mean exactly, that is, how "local" does the food have to be?  Also, what will the other efforts to help African famers grow their own food look like?

It will be interesting to see how these pledges are implemented.

when my father traveled to the United States from Kenya to study, at that time the per capita income and gross domestic product of Kenya was higher than South Korea's. Today obviously South Korea is a highly developed and relatively wealthy country, and Kenya is still struggling with deep poverty in much of the country. And the question I asked in the meeting was, why is that? There had been some talk about the legacies of colonialism and other policies by wealthier nations, and without in any way diminishing that history, the point I made was that the South Korean government, working with the private sector and civil society, was able to create a set of institutions that provided transparency and accountability and efficiency that allowed for extraordinary economic progress, and that there was no reason why African countries could not do the same. And yet, in many African countries, if you want to start a business or get a job you still have to pay a bribe; that there remains too much — there remains a lack of transparency.

The comparison of South Korea (and, similarly, Taiwan, Hong Kong and Singapore) to various African countries is well-known to those who have studied economic development.  Why did the East Asian "Tigers" develop and industrialize while others did not?  Obama's answer stresses "efficient" governance as a key factor (although many people might quibble with the "transparency and accountability" he refers to, especially in the period from 1961-1979).  There are other possible explanations for South Korea's growth as well, including:

-- significant amounts of aid from the United States, provided because South Korea was a strategic ally

-- openness to trade, in the sense of stressing the importance of export markets

-- protection from foreign competition, through import substitution

Obviously, the last two are somewhat contradictory, although perhaps they could both be true:  A country could encourage exports at the same time that it discourages imports.  But they are contradictory in the sense that there is a general split among those who use Korea as a model for how to achieve development.  One side argues that openness to foreign trade was the cause of Korea's amazing growth, while the other side says it's the protection from imports that did it. 

Sweden is developing standards to help consumers make conscious choices about the impact of their decisions on global warming. Products with at least 25% greenhouse gas savings will be marked in each food category, starting with plant production, dairy and fish products.

Big developing countries have been reluctant to reduce tariff ceilings, allowing themselves the option to increase their tariffs at any moment. They have been unwilling to open service sectors, like accounting or electricity generation, to foreign competition. They insist on being able to increase their barriers to protect farmers against sharp increases in food imports from cheaper producers abroad. They must be willing to make concessions on these points.

The rich West will also have to give more. The United States and Europe must slash agricultural subsidies more aggressively and refrain from adding more. The United States will have to reduce its own agricultural barriers — such as the one against Brazilian ethanol. It might have to offer more visas to professionals from countries like India.

It all sounds so simple when you see it written up this way, but it's easier said than done!

"Man walking along a road in the countryside comes across a shepherd and a huge flock of sheep. Tells the shepherd, 'I will bet you $100 against one of your sheep that I can tell you the exact number in this flock.' The shepherd thinks it over; it's a big flock so he takes the bet. '973,' says the man. The shepherd is astonished, because that is exactly right. Says 'OK, I'm a man of my word, take an animal.' Man picks one up and begins to walk away. 'Wait,' cries the shepherd, 'Let me have a chance to get even. Double or nothing that I can guess your exact occupation.' Man says sure. 'You are an economist for a government think tank,' says the shepherd. 'Amazing!' responds the man, 'You are exactly right! But tell me, how did you deduce that?' 'Well,' says the shepherd, 'put down my dog and I will tell you.'

[from http://netec.mcc.ac.uk/JokEc.html, where there are plenty more]. 

Now back to work.

In another neat use of plagiarism software, Brian Calvin, Paul Collins, and Pamela Corley have had a look at the percentage of Supreme Court opinions that are lifted from the lower court decision being reviewed.  The insight is that language borrowed from the lower courts might show what influences the Supreme Court and goes to the question that apparently animates the entirety of law and courts literature - does law matter?

The basic idea, as I understand it, is to use software designed to catch plagiarism to determine the extent to which the higher court's reasoning overlaps with the lower court's.

A previous post of David's talks about a similar study of whether courts lift language from the winning party's brief:

As you might imagine for a very unbusy Court overloaded with law clerks, time, and amici, the Court didn't borrow too much from the party briefs when it writes its decision, at least for the opinions issued in the 2002, 2003, and 2004 terms.  The average overlap between opinion and winning party brief then was roughly 10%.  I bet the percentages are higher in the appellate courts, and especially in the district courts. 

Sometimes, however, the Court found winning briefs to be, shall we say, highly persuasive.  In one case, Justice O'Connor used 41% of a respondents' brief in her opinion, and in another, she used 33% of an appellant's brief.  Rehnquist and O'Connor were the justices most likely to borrow from the briefs (they comprised 14% WJR/11.5% SDO of the content of the justices' majority opinions authored during those three years, depending on respondent/appellant), Souter the least (7% either way).

The reason I bring all this up is that I wonder what this kind of analysis would show when applied to the Appellate Body.  My instinct is that the Appellate Body relies on briefs and panel reports for its reasoning less than many other courts, but I have no empirical evidence to support this.  If any professors/grad students -- or anyone, really -- are looking for a project, this could be an interesting one.

The methodology of doing this with WTO decisions may be tricky.  There is a good deal of summarizing of the parties' arguments, even in the parts of the report that appear at first glance to be the reasoning.  So, you'd really have to be careful to identify the actual reasoning of the Appellate Body and then compare that to the briefs/panel reasoning.

Before we adopt any measures in our legislation, would we like it if other countries adopted the same measures?

...

do we want similar import taxes or permit requirements imposed on our exports. Do we want each country finding a separate basis for imposing border restrictions? Do we want countries with stricter emissions standards than our factory emissions standards blocking our exports? As President Obama pointed out, India and China have lower per capita emissions than we do. Do we want developing countries, including not only China and India, but indeed most countries in the world, blocking our exports on the grounds that our per capita greenhouse gas emissions are greater than theirs?

...

So far the United States has resisted efforts in Europe and elsewhere to limit our market access for our products because of how they are produced – from biotech means. But if we re-interpret WTO rules to allow trade barriers based on how things are made, we open up a can of worms – and might permit other countries to block our biotech exports, including major items such as corn, soybeans, and other crops.

...

A VAT-style tax, imposed identically on domestic and imported goods, should past muster, but after that, it gets very difficult to design a border tax which would pass muster, as we have seen with prior GATT and WTO litigation.

...

In practice, it seems that import restrictions are much more likely to be challenged in the WTO than is financial assistance to producers, such as offsetting costs or giving away permits. Thousands of pages of non-export subsidies are reported to the WTO, but only a handful have been challenged in the WTO, while literally hundreds of border measures have been challenged in the WTO and its predecessor GATT.

...

Perhaps the biggest international trade challenge -- and one on which a lot more work needs to be done -- is how the mechanics of international trade will work if each of the hundred and ninety countries (or even 10-15 regional groupings) has its own individual climate change implementation. What if some of them have border taxes, some require permits for imports, and others instead offset the costs for their domestic industry. Or each country has a cap-and-trade system with different limitations on the permits?

-- are there any drafts that we have missed?

-- for those drafts we have listed, are there names that go along with the some of the unnamed drafts we have included?

-- are the names that we have assigned correct?

-- are some of the drafts we have listed duplicates that should be removed?

Any thoughts on these questions, or anything else you can think of to make this page more accurate and helpful, would be greatly appreciated.  You can comment on this post or email me at administrator@worldtradelaw.net

1.  From the R-CALF (a group which represents U.S. cattle producers) submission to USTR related to the Canadian/Mexican complaints on the U.S. country of origin labelling law (COOL) dispute (DS384 and DS386):

R-CALF USA believes it is fundamentally contrary to our U.S. Constitution for the United States Trade Representative (“USTR”) to agree that foreign governments – specifically Canada and Mexico – have any standing whatsoever to bring a complaint against our constitutionally passed mandatory country-of-labeling (“COOL”) law.

Our domestic COOL law imposes no duty or restrictions on any foreign government; it does not impose any limits on the volume or type of commodities that a foreign country may export to the United States; foreign countries are not obligated, in any way, to export to the United States any of the commodities that would be subject to our COOL law – hence, a foreign country’s decision to market their products in the U.S. market and under the rules of the U.S. market is purely voluntary; and, COOL jurisdiction is exclusively limited to United States retailers, as defined exclusively by U.S. law, and subjects all covered commodities marketed by U.S. retailers to identical information requirements, regardless of where the commodities originate. Thus, our domestic COOL law does not affect international trade agreements and it is fundamentally inappropriate for the World Trade Organization (“WTO”) to even entertain a foreign country’s complaint against our domestic COOL law. Further, and for the foregoing reasons, the USTR should not consent to WTO jurisdiction over our domestic COOL law.

Assuming, but only hypothetically, that United States officials had inadvertently surrendered the right of its sovereign U.S. citizens to govern themselves – as guaranteed by our U.S. Constitution – to the WTO, the complaints by Canada and Mexico against our domestic COOL law would still be baseless and wholly without legitimacy. ...

I'm not completely sure I follow this, but I think they are saying that because of the nature of the COOL law (for example, that it is not a border measure), it should not be covered by WTO rules.  Thus, the WTO has no jurisdiction over it.  In addition, they seem to argue that, as a matter of domestic law, allowing the WTO to have jurisdiction over such a measure violates the U.S. Constitution.

Speaking very generally, it seems to me that the R-CALF position is in line with those of other groups who want to narrow the scope of international trade agreements.  Such arguments are not likely to have much impact with a WTO panel, but I wonder whether they plan to pursue this argument in a domestic forum.  Do they have some type of constitutional challenge in mind?  I'm not sure if submitting this kind of argument to USTR is pretty standard and never goes anywhere, or if there is some significance to R-CALF including it here.

2.  And from Europe, there was this:

 A Bosnian court said on Saturday it had temporarily suspended a recently adopted law on protection of domestic production seen as violating a regional trade pact and the Balkan country's commitments toward the EU.

The Constitutional Court of Bosnia-Herzegovina decided to suspend the law on the request of the chairman of the upper house of the country's parliament Ilija Filipovic, it said in a statement.

The law will be suspended until the court reaches a final decision on Filipovic's motion at one of its coming sessions.

The controversial law imposing higher customs duties on nearly 1,000 items was passed by parliament earlier this month despite strong opposition from the European Union and Bosnia's neighbours.

The EU said the law violated the Central European Free Trade Association accord (CEFTA) reached by the Balkan countries in 2006 with the aim of boosting regional trade and preparing members for the EU single market.

I looked for the decision online, but could not find it.  I am curious to hear more about the court's reasoning.  Did they have much to say about the role of international law in domestic law?  Maybe not in this decision, but perhaps there will be something in the final decision.

... American firms that pay in order to comply with mandatory limits on carbon emissions would be at a disadvantage competing against foreign outfits whose leaders aren't as environmentally conscious.

But this measure is redundant. The bill already provides ample compensation to "trade-vulnerable industries" through at least 2026, devoting as much as a whopping 15 percent of allowances -- valuable pollution rights created under the bill's cap-and-trade regime -- to shelter firms from foreign competition.

The details of this rebate scheme leave ample room for overpayment. And because rebates are based on firms' historical output, argues Michael Levi of the Council on Foreign Relations, manufacturers might have even an incentive to scale back or close down and simply collect the cash. Better to head off these problems, Mr. Levi argues, by aiming to compensate U.S. firms for 75 percent of their compliance costs instead.

The tariffs, meanwhile, are meant to kick in if the rebates don't level the playing field enough. But they are questionably designed. The bill instructs regulators to apply tariffs to foreign exporters if the emissions per unit of their industrial sector back home are greater than that of the same sector in America. That makes no distinction between the carbon footprint of the goods countries export and those they consume domestically. More efficient exporters could get punished.

Some trade lawyers point out that past WTO decisions have permitted governments to restrict trade in order to protect natural resources. But others say the case law is patchy, and it is hard to prove that such measures are being applied in a fair and consistent manner – a necessary condition for meeting WTO rules.

In sum, if carefully calibrated along the lines suggested above, carbon equalization measures at the border, imposed on certain imports, can be modeled in compliance with WTO non-discrimination rules and/or the WTO’s environmental exception.

Krugman then says:

So the economics are right; it’s WTO-legal; and it would neutralize a major political argument against controlling greenhouse gases. Why, oh, why, would Obama say “Ni”?

I think Krugman is overstating things when he draw the conclusion "it's WTO-legal" (that is, carbon tariffs are WTO-legal) from Joost's statement.  Joost was careful to say that such tariffs "can be" legal "if" designed in the right way.  Whether this condition will be met is far from clear.

President Obama should be audacious enough to proclaim the following: In a free enterprise economic system, domestic producers have no inherent claim on the funds of consumers. The only ethical way of obtaining the funds of consumers is through voluntary trade. Using the force of the government to obtain the funds (by prohibiting foreign suppliers from competing) puts domestic producers in the role of the aggressor, and in fact makes consumers the real victims. That is exactly what happens when a domestic producer appeals to the government to request an anti-dumping investigation against some foreign producer that is merely taking business away. Therefore, all anti-dumping laws and policies should be abrogated to promote freer trade.

In DS246, India complained because the European Communities gave preferences designed to help out countries experiencing drug problems, and included 11 Latin American countries and Pakistan in its proference program.  India thought Pakistan's inclusion was unjustified (and was worried about the advantages Pakistani exports would have over Indian exports), so it brought a WTO complaint, which it won.

The Bolivia issue has parallels, but is slightly different.  Here, the United States is excluding Bolivia from the Andean trade preference program on the basis that Bolivia is not doing enough to address its drug problems.

Bolivian President Evo Morales is not happy about the U.S. action:

"I'm disappointed ... because the Obama administration has used slander, lies and false accusations to suspend the preferential tariffs," said Morales, who threw out the U.S. ambassador to La Paz and American anti-drug agents last year.

"They said I shouldn't trust Obama ... I want to thank those people for giving me that advice," the former coca farmer told reporters.

I talked about the legal issues a (little) bit back here in relation to the possibility of excluding Ecuador from the program and also here in relation to Bolivia.

Proposals to impose "carbon tariffs" on imported products will violate the rules of the World Trade Organization as well as the spirit of the Kyoto Protocol, China's Ministry of Commerce said.

In a statement posted on its website, the ministry said collecting carbon duties from foreign products would enable developed countries to "protect trade in the name of protecting the environment."

"This will not help strengthen confidence that the international community can cooperate to handle the (economic) crisis, it also will not help any country's endeavors during the climate change negotiations, and China is strongly opposed to it," the statement said.

I looked for the statement on the Ministry of Commerce site, but could not find it.  What I wonder is the following:  Is China opposed to any and all carbon tariffs, or just those implemented in a way that imposes an unfair burden on foreign companies?  That is, if a WTO Member could write a carbon emission measure in a way that imposed equal costs on foreign and domestic companies (using tariffs for foreign companies), would China be OK with it?  Based on the quote above, my guess is they would not, but I wasn't completely sure.

U.S. farmers ... want the Vietnamese imports [to] be covered by a new inspections regime that they pushed through Congress last year.

...

The inspections requirement could be the U.S. producers' silver bullet, stopping imports in their tracks. Applying to all catfish sold in the U.S., it would require Vietnam to establish a complicated inspection system and demonstrate that it is equivalent to U.S. inspections, a process that could take years.

...

Seafood typically is regulated by the Food and Drug Administration, which administers spot inspections that are relatively easy for foreign countries to participate in. Cochran's provision singles out catfish as the only seafood to be regulated by the Agriculture Department, which traditionally oversees only beef, pork and poultry products.

... in various forums, the industry has argued that the new inspections would prevent scares like those involving lead-tainted toys or poisonous dog food that could damage the image of their product. The industry has pointed out that the FDA inspects only around 2 percent of seafood imports and that a better system is needed to keep banned chemicals out of the U.S. They also point to cases in which importers have been caught selling pangasius under false names and avoiding tariffs.

Food safety is clearly an important domestic policy.   And ensuring the safety of imported foods is particularly difficult, so some sort of inspection regime for foreign-produced food seems reasonable to me.  However, getting the right balance between effective regulation and burdens on foreign companies could be difficult and contentious.

China postponed tomorrow’s deadline for personal-computer makers to include a state-backed anti- pornography software on new PCs after U.S. officials and business groups urged it to scrap the rule

I wasn't really sure what to expect from doing this, but to my great surprise, we now have 216 "followers"!   However, this figure may not be as impressive as it sounds.  I've noticed that a decent number of these are either 1) porn sites hoping to get themselves noticed, or 2) people who give advice about how to get more twitter followers.

Having said that, there is some good trade law-related twittering going on, with some actual postings rather than just feeding from other sources like we do.  For those trade lawyers who want to check out twitter for the first time, I recommend the following as a good starting point:

John Boscariol of McCarthy Tetrault, twittering as tradelawyer

Lawrence Friedman of Barnes Richardson, twittering as customslawblog

Martha Harrison of Heenan Blaikie, twittering as intltradelawyer

Doug Jacobson of Sandler, Travis and Rosenberg, twittering as tradelawnews

And Inside U.S. trade, twittering as insidetrade

(Apologies if I missed anyone -- feel free to add other trade law twitterers in the comments to this post).

One critical question in any claims arising out of this internet-filtering software dispute would be the expectations that investors had upon entering the Chinese market. For instance, it has been widely reported that Google, the search company, which has had its own ups and downs in China, operates under the terms of a highly-detailed license. I’m guessing that the terms of such licenses make it crystal clear that foreign technology companies are no longer in the highly-permissive State of California.

While I will leave it to others to handicap the chances of any investment treaty claims, it seems to me that the investment treaty route could be the “sleeper” option in this whole controversy.

Q. One of the provisions that got added very late to this bill that senators had expressed some reservations about was the one that puts tariffs on goods imported from countries that don't have these sort of restrictions. What do you think of that revision and would you like to see the Senate strip it out?

President Obama: At a time when the economy worldwide is still deep in recession and we've seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out there. There were a number of provisions that were already in place, prior to this last provision you talked about, to provide transitional assistance to heavy manufacturers. A lot of the offsets were outdated to those industries. I think we're going to have to do a careful analysis to determine whether the prospects of tariffs are necessary, given all the other stuff that was done and had been negotiated on behalf of energy-intensive industries.

So certainly it is a legitimate concern on the part of American businesses that they are not disadvantaged vis-a-vis their global competitors. Now, keep in mind, European industries are looking at an even more ambitious approach than we are. And they obviously have confidence that they can compete internationally under a regime that controls carbons. I think the Chinese are starting to move in the direction of recognizing that the future requires them to take a clean energy approach. In fact, in some ways they're already ahead of us -- on fuel efficiency standards, for example, they've moved beyond where we've moved on this.

There are going to be a series of negotiations around this and I am very mindful of wanting to make sure that there's a level playing field internationally. I think there may be other ways of doing it than with a tariff approach.

The article accompanying the interview is entited, "Obama Opposes Trade Sanctions in Climate Bill."  The article begins as follows:  "President Obama on Sunday praised the energy bill passed by the House late last week as an “extraordinary first step,” but he spoke out against a provision that would impose trade penalties on countries that do not accept limits on global warming pollution." I suppose it depends on what specific actions the measure would take, but I'm not sure I agree with the language used.  Are the trade measures envisioned here "trade sanctions" or "trade penalties"?  If I were one of the proponents of this bill, I would try hard to characterize any charges on importers/imported products as simply a non-discriminatory imposition of the costs of the measure.  (Also, I would try to make sure the costs actually are non-discriminatory!)

ADDED:  Paul Krugman says something similar here:

It has long been accepted that a VAT is essentially a sales tax — a tax on consumers — which for administrative reasons is collected from producers. Because it’s essentially a tax on consumers, it’s legal, and also economically efficient, to collect it on imported goods as well as domestic production; it’s a matter of leveling the playing field, not protectionism.

And the same would be true of carbon tariffs.

There was some question about how the WTO would handle cap-and-trade — whether it would accept the need for carbon tariffs, if some countries (cough China cough) drag their feet, or whether it would adopt a purist free-trade rule. The answer seems to be in — the WTO is going to treat cap-and-trade the same way it treats VATs, with border taxes allowed if they can be seen as reducing distortions.

I suppose one way to define the "purist free-trade" position is that no import tariffs/charges of any sort are allowed.  So, in this sense, he is correct that accepting the need for carbon tariffs goes against the purist view.

Another way to think about the "purist free-trade" position, though, is to say that any such tariffs/charges must not be imposed in a discriminatory manner, that is, they must be equivalent to a domestic counterpart.  If that definition is used, than the WTO report is completely consistent with a "purist free-trade" stance.

An American firm, Solid Oak Software, claims Green Dam includes stolen copyrighted code from one of its products, and has launched legal action.

I hadn't heard much about this Green Dam software before.  This certainly complicates things!

I wish I had more to say about the general issue of the requirement to install filterating software as a potential WTO case.  The trouble is, I'm a little fuzzy on the facts and the legal claims, which makes it difficult to say much.

The WTO recently released a very nice interactive map of WTO DSB litigation.  The map shows total numbers of cases filed for each country  - as complainant or as respondent, and who are the parties.  The map is at http://www.wto.org/english/tratop_e/dispu_e/dispu_maps_e.htm?country_selected=ARM&sense=e.  The map would be a useful addition in the classroom. 

Additionally, the map reminds me of an article I wrote a bit back where I did a little bit of rough and dirty comparisons between Canada and the United States (see Reputational Fallacies in International Law:  A Comparative Review of United States and Canadian Trade Actions, 30 Brooklyn J. Int’l L. 67 (2004), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=970087).  In that article, and a related book chapter, I found that that when one took the size of the states’ economies and participations in the international economy into account, the numbers of complaints filed by each (for whatever that means – though I offered my views of what it means), and the numbers of times they were a respondent (for whatever that means, and once again, I offered my views)  - the results were comparable, despite the different reputations of the two countries.  A quick glance at this map suggests to me that a similar analysis of other countries would might show such a phenomenon. 

Take for example a comparison between the Untied States, Australia, and New Zealand.  According to this map, the United States has been a complainant in 92 cases, a respondent in 106 cases, and a third party in 73.  The numbers for Australia are respectively 7, 10, and 47 and for New Zealand respectively 7, 0, and 27.  Interesting.  Of course, any real analysis should include many more factors (and my article does include more).  But if one were just to play with the numbers, if the universe was just those three countries, and using the figures the Economist has provided for 2008 for their exports and imports of goods (as a measure of their international economy, I did not have the numbers for services – sorry), we find that the size of those economies are (in billion US dollars) for the US, Australia and NZ: 2639, 224.5 and 47.9 or ratios of roughly 90.6 to 7.7 to 1.6  - respectively.  And yet, their ratios for acting as a complainant in the WTO are 86 to 6.6 to 6.6 (raw numbers are at the map).  Their ratios for being a respondent are 91.4 to 8.6 to 0.  As a third party participant they are 49.6 to 32 to 18.4.  Do these numbers suggest some sort of similarity in their trade behaviors?  Perhaps. 

But the real fun, for me anyway, is when one compares countries that are neighbors – with all the psychological baggage that goes with that (as I did for the US and Canada).  As I am off to Australia next week (to be a visiting fellow at University of New South Wales, and then will later present a paper in Wellington, NZ) I though it might be entertaining to compare those two countries – admittedly in this very rough method.  So, just using those two countries, the relative sizes of their international economies are 82.4 to 17.6.  And yet for the ratio of the number of complaints filed at the WTO, they are 50 to 50, though for being a respondent 100 to 0, and as third party participants 63.5 to 26.5.   True, the numbers are small – but do these ratios suggest anything with respect to their respective reputations (such as they may be determined) or with their self images?  Anyway, a real analysis would involve plenty more factors, but would likely be just as entertaining. 

Just some thoughts sparked by this new cool map.

Here's a recent example, with a twist:

Ford Motor Co will receive nearly $5.9 billion in U.S. government loans to build fuel-efficient vehicles as the Obama administration deepened its commitment to reshaping the cash-strapped auto industry.

Japan's Nissan Motor Co Ltd will receive $1.6 billion and start-up Tesla Motors Inc will receive $465 million in low-cost loans to build all-electric cars in the first wave of financing from an Energy Department program intended to offset the cost meeting sharply higher new fuel economy standards.

So here we have the U.S. government subsidizing the efforts of several companies (including a foreign one, although only for its U.S. factory) to produce cars that use less gasoline, which, at long last, brings me to the question I was trying to get to:  Do WTO rules need to be modified so that subsidies to promote a cleaner environment are explicitly permitted?  I don't mean to make the Doha negotiations any more difficult than they already are, but it's possible that without some clarification, we could see some disputes in this area.  (As noted, if everyone is doing it, perhaps there will be no challenges.  But if one country does more of it than others, there is a chance of a complaint being filed.)

Speaking of the environment, the FT has the following story on a report to be issued tommorrow:

Countries implementing cap-and-trade systems for greenhouse gases may be able to use border taxes to protect domestic industries, after the World Trade Organisation gave a cautious nod to such measures.

In a report to be published on Friday, written jointly with the United Nations Environment Programme, the WTO said it was possible to implement border measures for environmental reasons under its rules.

“Rules permit, under certain conditions, the use of border tax adjustments on imported and exported products,” said the WTO. “The objective of a border tax adjustment is to level the playing field between taxed domestic industries and untaxed foreign competition by ensuring that internal taxes on products are trade neutral.”

Today U.S. Secretary of Commerce Gary Locke and U.S. Trade Representative Ron Kirk sent a joint letter to their counterparts in China's Ministry of Industry and Information Technology (MIIT) and Ministry of Commerce (MOFCOM) urging China to revoke a proposed rule (Circular 226) that would mandate that all computers produced and sold in China pre-install a widely-criticized Chinese Internet filtering program called Green Dam. This proposed measure is scheduled to take effect on July 1, 2009.

The letter points out that the proposed new rule raises fundamental questions regarding regulatory transparency and notes concerns about compliance with World Trade Organization (WTO) rules, such as notification obligations. Locke and Kirk also listed for MIIT Minister Li Yizhong and MOFCOM Minister Chen Deming numerous concerns raised by global technology companies, Chinese citizens, and the worldwide media about the stability of the software, the scope and extent of the filtering activities and its security weaknesses. All of these problems have serious implications for consumers and businesses

"China is putting companies in an untenable position by requiring them, with virtually no public notice, to pre-install software that appears to have broad-based censorship implications and network security issues," Locke said.

"Protecting children from inappropriate content is a legitimate objective, but this is an inappropriate means and is likely to have a broader scope. Mandating technically flawed Green Dam software and denying manufacturers and consumers freedom to select filtering software is an unnecessary and unjustified means to achieve that objective, and poses a serious barrier to trade," Kirk said.

Both U.S. government officials offered China an opportunity to exchange views with U.S. and Chinese government and industry officials on ways in which parental control software can be promoted in the market consistent with the goals of user choice, system reliability, freedom of expression, and the free flow of information.

The USTR press release doesn't say much about the legal theory, and the letter that is mentioned has not, as far as I know, been made public.  So what is the legal claim?  The WSJ explains it as follows:

U.S. officials argue the tight deadline for implementing the software requirement constitutes an unfair trade barrier. PC makers have expressed concerns about being able to meet the July 1 start date.

Foreign and domestic PC makers in China are required to begin shipping computers with the software on July 1, so the U.S. would have to show Chinese manufacturers had more notice or information to meet that deadline for a WTO complaint to succeed.

More from Bloomberg here. 

What Must and Must Not Be in All Agreements: The bill contains a detailed description of the key provisions that must be included in all future U.S. trade agreements and what aspects of the current model must never again be replicated to ensure that trade pacts provide broader benefits. It sets forth the environmental and labor, food and product safety, agriculture, trade remedy, human rights, federalism safeguard and currency anti-manipulation rules and national security exceptions that must be included in all U.S. trade pacts. This section also lists what aspects of the NAFTA-WTO model cannot be included in future deals, including bans on Buy American and anti-sweat shop or environmental procurement policies; new rights and privileges for foreign investors to promote offshoring and expose domestic health and environmental laws to attacks in foreign tribunals; service sector privatization and deregulation requirements; and special protections for Big Pharma to limit affordable access to drugs. This section comprises over half of the bill, given that today trade pacts extend far beyond traditional trade matters to cover so many different essential policy topics that are the crux of Congress’ domestic agenda - from access to essential services such as health care and education to regulation of financial services to medicine patents to investment, procurement and local development policy to procurement and food and product safety policy.

I don't agree with all of these conclusions about what should be in trade agreements, but I think it's one of the most important trade issues out there, and I hope this bill triggers some serious debate.  More from The Hill.

U.S. Slams China on Exports - BusinessWeek

The U.S. and the European Union on June 23 formally accused China of illegally hampering exports of raw materials in order to benefit its own manufacturers. The move comes during a period of heightened concern over protectionism amid the global economic crisis. It also coincides with resistance in Congress to an attempt by the Obama Administration to advance a bilateral trade agreement with Panama.

China's export rebates hurt steel industry-US Steel|| Reuters

NEW YORK, June 23 (Reuters) - China's move to cut export taxes for its steelmakers will increase its steel exports at the expense of other producers around the world, undermining the industry, said U.S. Steel (X.N) Chairman and Chief Executive Officer John Surma.

FT.com - US launches WTO case against China

The US raised the stakes in a growing trade dispute with China on Tuesday, lodging a case at the World Trade Organisation over export quotas and duties of raw materials.

Europe and U.S. Accuse China of Unfair Trade Practices - NYTimes.com

The United States and European Union accused China of unfair trade practices on Tuesday, saying the Chinese government was restricting exports of raw materials to give manufacturers in that country a competitive advantage.

FACTBOX-Materials targeted by EU, U.S. in China WTO case | Reuters

June 23 (Reuters) - The European Union and the United States are taking action against China at the World Trade Organisation over export restrictions on a number of industrial raw materials used in steel, cars, microchips, planes and other products. [ID:nLN887624]

SFGate: Politics Blog : Obama strikes at China

Whatever Austan Goolsbee may have told Candadian officials during the Ohio primary, and whatever NAFTA trashing Obama the candidate thought he needed to do to win it (before he lost it to Hillary Clinton), the evidence is in: Obama the president has shown no inclination to undo NAFTA.

Ambassador Kirk Announces WTO Case Against China Over Export Restraints on Raw Materials | Office of the United States Trade Representative

Now more than ever, trade is essential to keeping America's economy afloat.

Factsheet - FACTSHEET: EU requests WTO consultations on Chinese export restrictions on raw materials

European Commission - EU requests WTO consultations with China over export restrictions on raw materials

U.S., Europe File Trade Complaint Against China - WSJ.com

WASHINGTON -- U.S. Trade Representative Ron Kirk on Tuesday said the U.S. has filed a World Trade Organization case against China over export restraints on raw materials, calling those policies a "giant thumb on the scale" in favor of Chinese producers.

U.S. Files WTO Complaint Against China Over Export Restraints - Bloomberg.com

June 23 (Bloomberg) -- The U.S. said it filed a World Trade Organization complaint accusing China of curbing exports of raw materials to benefit its domestic manufacturers.

TheHill.com - Obama starts first trade case against China

President Obama's administration on Tuesday announced it will bring its first trade case against China in the World Trade Organization unless consultations solve the dispute.

United States Files WTO Case Against China Over Export Restraints on Raw Materials | Office of the United States Trade Representative

WASHINGTON, DC - U.S. Trade Representative Ron Kirk announced today that the United States has requested World Trade Organization (WTO) dispute settlement consultations with the People's Republic of China regarding China's export restraints on numerous important raw materials.  China's measures appear to be part of a troubling industrial policy aimed at providing substantial competitive advantages for the Chinese industries using these inputs.  The materials at issue are: bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus, and zinc.  These are key inputs for numerous downstream products in the steel, aluminum, and chemical sectors across the globe.  China ranks as a top global producer of these materials.  The European Union also requested formal WTO consultations with China on this matter today.