Rethinking Trade - Season 1 Episode 37: Hyperglobalization, COVID and Failed Supply Chains: Now What?

In our very first episode, we looked at how corporate-led globalization has fueled shortages in our medical supply-chains and limited our ability to fight COVID-19 Today, we catch everyone up on the latest, discussing two Biden-Harris Administration initiatives aimed at addressing this mess -- a targeted supply chain-review and an executive order on Buy American procurement rules. We also make sense of the latest U.S. trade data, which suggests a record trade deficit in 2021. Yup, that's probably another COVID symptom…

Music: Groove Grove by Kevin MacLeod.

Link: https://incompetech.filmmusic.io/song/3831-groove-grove.

License: http://creativecommons.org/licenses/by/4.0/

Transcribed by Sally King

Ryan 

Welcome back to rethinking trade where we don't just talk about trade policy, we fight to change it. I'm Ryan, and I'm joined once again by our in-house trade expert, Lori Wallach. Lori, and one of our very first episodes, we talked about how decades of hyperglobalisation have undermined our resilience against the COVID-19 crisis, and how the government has to actively intervene in the economy to rebuild a domestic manufacturing base. Today, we wanted to update listeners on what has been and hasn't been happening since that time. Let's start with an overview of the big picture. What does the pandemic look like today from a trade policy perspective?

Lori Wallach 
So, on the one hand, the expected shift towards more domestic supply chains in response to what proved from COVID, to be enormous vulnerabilities in this country, but around the world created by hyperglobalisation. And these very thin, brittle globalized supply chains. This has not happened as quickly as one might hope and expect. In part, the corporations, the big multinationals, the Amazons and other mega retailers, who've made a lot of money on that race to the bottom hyperglobalized system of sweat labor, supply chains, and just-in-time production, are very keen to maintain that system, which prioritizes their profits, and what they will consider efficiencies, no redundancy, over reliance, reliability of supply and deliverability of critical goods. And so they're pushing back. And also, we've had that system being pushed for the last 25 years of the World Trade Organization, the NAFTA Free Trade Agreement model. So it's a steamline are heading in the wrong direction, it takes a long time to turn. The evidence of that is that we have seen increased imports from China into the US, of the medical supplies we've needed from personal protective equipment, PPE to different kinds of medicines that we've needed to deal with the COVID crisis. We have seen a lot of spending domestically, as people are stuck at home and not spending more on restaurants and travel on kitchen goods, you know, fancy ovens and other things, a bunch of which are imported. So our trade deficit has gone up. Interestingly, the WTO has reported that's contrary to the cheerleaders of the corporate globalization model, there haven't been a lot of enduring trade barriers. So countries didn't use emergency tools to shut down trade and force domestic sourcing. The WTO just issued a report that many of the trade restrictions that emergency restrictions that have been put in place during the height of COVID, have been lifted. And that actually, if anything, there's been more removal of trade barriers and attempt to get the important goods that the production of which is over-concentrated in a few locations. And on the other hand, there have been some very inspiring moves by the Biden administration, which include a supply chain review in some key sectors and also a Buy American executive order. Now, we also saw during the Trump administration, some similar announcements and executive orders. And the proof is always in the pudding. The Trump administration didn't follow through, they had a lot of power and opportunities to do things just unilaterally without Congress. They didn't take them. The bind administration has taken some specific steps, and we're gonna have to watch carefully to see if they actually follow through on all of it.

Ryan 
Those specific steps are what my questions are based on the first big item I wanted to tackle you just mentioned, which is the supply chain review being conducted by the administration. What does this review entail? Like what is it what's its purpose? And what is the status of it?

Lori Wallach 
In the spring, the body Harris administration announced they would do 100 Day Review to figure out the weaknesses in and plans to strengthen certain critical supply chains. And they pick three sectors. And they pick three important sectors: critical medicines, critical minerals, the production and processing of, so for instance, the minerals used in making cell phones and the communications equipment, and then also semiconductors, and then also the supply chain for batteries, electric batteries, which is to say, the sort of advanced batteries that are used for electric cars. And then June 8, they published a report, it was perhaps the first time since Alexander Hamilton, that the US laid out a detailed industrial policy in writing. And I'm only slightly exaggerating, the report itself was incredibly inspiring. It's laid bare, the deep flaws in the current system, in a way that I would say, as someone who's observed these issues for 30 years, one could hardly have ever predicted would come out of the US government, and was quite smart in laying out the ways in which the old regime failed. And I know that wasn't easy, because some of the agencies and for that matter, even President Biden had supported the past policies that led to these problems. So in that regard, it was incredibly impressive and helpful because the only way you get a different outcome is when you start to admit that the status quo didn't work. And it takes you know, it takes bravery if you were part of hoping those old policies would work and pushing them. And some of the proposed changes of how to fix the problem, were also really inspiring and were spot on. And were things you would never expect to come out of any US administration. And by the way, weren't the kind of things that the Trump administration dug into not neither in detail of thinking it through and figuring out the solutions as compared to a bunch of superficial rhetoric that also are not compatible with the status quo big business model. So now the proof is going to be in the pudding about whether those kind of changes actually get made. And if they were changes proposed across the board, using existing authorities, things that the executive branch could do in their own capacity with respect to strengthening the Buy America policies, and Buy American policies, which has to do with the government using government procurement resources to shape the market. It included changes in the tax code, it included uses of the defense production act, for the government to create demand and incentives for changes. And it's really if implemented, could make some big differences. And now we need to see if it gets implemented.

Ryan
Another big item and you just mentioned this is the modifications the administration is made to Buy American rules. We've covered this at length in previous episodes. So listeners can go back and get even deeper into this topic. But maybe you could give us a quick introduction to what these policies are, and then talk more about what is being done and what hasn't yet been done in relation to the Buy American rules in the context of the pandemic especially.

Lori Wallach 
So again, here, the good news is the administration's executive order on Buy American and Buy America was quite broad. It covered all the programs, it covered a lot of the needed territory, and proposes to increase the domestic content rule for what qualifies is Buy American, which right now is just 55% of the value of a good needs to be American made, which is pretty pathetic. But unfortunately, it didn't really close the biggest loophole. And that is even that 55% rule is waived entirely with respect to any government procurement over a certain threshold value. That's about $180,000, which for the federal government means most of the contracts, most of them are bigger than $180,000. Because under our trade agreements Buy American is waived for 60 countries that have trade agreement, procurement agreements that basically guarantee that these foreign countries, companies and products get treated as if they were made in the US for Buy American is called the Trade Agreements Act waiver. And it is the exception that eats the rule. And the way that works is not only to goods from Hong Kong, which now is China and from Mexico and Japan and Korea in all of Europe, not only are those treated, Taiwan, treated as if they were from the US, and the government gives equal credit, equal purchasing priority to those goods, but almost worse, any good over that threshold, the domestic content rule is waived whether or not that country has a trade agreement. So that means that all that has to happen is the last step in processing has to happen in America. And there are companies have gotten that so skilled in doing this, that they basically like can construct the better part of a whole building, with all of its walls poured the plumbing in there, the electrical in there, different pieces of you know, built-in furniture in there, they ship those on barges. And then as long as like the whole building is put together all that content, all that value, that is considered meeting the Buy American rule for all of those goods that are in that building or with respect to Buy America. That is the final assembly is happening here now Buy America is stricter than Buy American. So I don't want to simplify this. I want everyone who wants to know the details to go to a website at tradewatch.org and go to the procurement section, and we have a memo that lays out all of these issues and where the gaps and flaws are. But the thing to know is that the executive order like Trump's executive order, I'm Buy American doesn't close this huge loophole. And that's a problem. The President did say that they would as a candidate, that they would be closing these loopholes. And in some of his initial statements, they said that they would and now the executive order doesn't. What the executive order does do is ask for a bunch of data. And there's a hearing this very week about what the flaws are and the current data keeping, because it's so sloppy, we don't really know what is really domestic versus what is just assembled here without domestic content versus what is from one of the 60 countries versus what is domestic content and assembled here. So it's really hard to know what's really going on. And as a result, the data makes it look like there's less of a problem than we know that there is. So with respect to the Buy American and Buy America rules, that executive order is one big piece. The other big piece is the infrastructure bill. So the house infrastructure bill explicitly didn't prioritize that trade agreement waiver, but the Senate version does. And now there's a lot of pressure to just use the Senate version, because the vote was so narrow there, and it almost didn't pass at all, the Senate version does expand Buy America. That's the construction money, and it has it go to a lot more programs and my going down to the states. And that's great. And it strengthens the rules with respect to us made iron and steel. And that's great. But it doesn't really fix the Buy America problem. And it doesn't fix the waiver there. So there's a lot more work to be done there. And there is, you know, enormous opportunity in the existing statute where the President just like President Biden can do this. Now President Trump could have and didn't, can use existing authority to simply waive that trade agreement exception, the President can just take that away. And that would certainly be something that would be smart. And if you again, go to our website, tradewatch.org, you can see letters from very senior members of the House and Senate urging him to do that very thing, President Biden.

Ryan
So my final question also involves reports and data and things you can find on the Public Citizen website, which is the fact that, so a lot of these measures that we've been discussing haven't been fully enacted yet. And so the trade data, the deficit report still shows a rising US trade deficit in manufactured goods. So the reason analysis on the website on the Public Citizen website, suggested 2021, could actually be a record high. Can you talk about the Census Bureau's trade data report? And some of the things you found those meaningful in it what's in the analysis that we published?

Lori Wallach 
Here's the thing for folks to know, it looks like the 2021 annual trade deficit could top $1 trillion for the first time in US history. And that's just horrific and astonishing. However, that says something different than what you'd normally expect, which is to say what that says most and this is where our analysis points out, is that the US has had an economic recovery from the COVID recession that is faster and broader than most other countries. So we're actually our consumers have started to buy stuff, our demand has increased. At the same time, Ryan, as you just pointed out, these initiatives by the Biden administration, which is you know, been in office for seven months now have not had an opportunity to go into effect. So to the extent that the US has had an economic recovery and people want to buy stuff, the supply chains still are largely those old ones. So there aren't, you know, yet great opportunities. If the supply chain review brings those names supply chains home, if the Buy American and Buy America improvements actually happened with a waiver closed, and as a result, there's more domestic government demand for goods. And as a result, there's more investment. And as a result, there more opportunities for folks to be able to buy American made everything, then that change hasn't happened yet, even though the demand is picked up. So as a result, what we see is our imports are way up, because we want to buy stuff, but we don't have it domestically made yet. And you know, please at the Biden administration falls through so that in a couple of years, that data doesn't look like that. At the same time in the rest of the world, there still is much more of a recession going on. So our exports stayed down, there isn't demand for our stuff. And because we have demand here, our imports go up. And so we have a pretty whopping trade deficit. The COVID phenomenon, and the economic implications of it really are overshadowing what otherwise we could see in the trade data. Because for instance, there's another indicator about manufacturing, it's a study that is done that, you know, every month looks at sort of the projections for supply chain and manufacturing. And that and domestically, and that is that that number is up that's that's doing fairly well. So normally, you wouldn't see that number go up in the trade deficit go up at the same time. But that is that is the COVID effect. I think we're all incredibly impatient to see the horrors of the COVID lessons about hyperglobalisation quickly translate into more domestic investment, more domestic manufacturing, more resilience, more reliability. For all of us more good manufacturing jobs, the proof is going to be in the pudding over time, and the Biden administration is going to have a fight in its hands with all these corporations that want to do the same old, same old, you know, "China's too expensive, let's make it in Vietnam," kind of agenda of manufacturing. And I think they're going to stick to their guns only if we really all are pushing to make that happen. Because the counter push is going to be enormous. And there is a lot of inertia of this old system. But I think what we see in what the Biden administration's supply chain reviews and what they Buy America order is showing, is there a lot of people in there now, unlike any pastime, high level Biden administration officials, who deeply understand the problem, and really do you want to change and as frustrating as it may be, that's not going as fast as we want, are there parts of it that aren't done. It behooves us all to basically make common cause with those allies, and really push hard to try and help those folks in the inside who want to make these changes because it's a unique opportunity. It's the first time in 30 years of my doing this work that that possibility even exists, and so we need to make it work for us.

Ryan 
You can check the description of this podcast for links to both of the reports that we discussed in the episode. Rethinking Trade is produced by Public Citizen's Global Trade Watch. To learn more you can visit rethinktrade.org. You can also visit tradewatch.org. Stay tuned for more and thank you for listening.

Victory: Pres. Biden and USTR Tai Announce that U.S. Will Support Emergency COVID-19 WTO Waiver of Big Pharma Monopolies to Boost Vaccine Access

By: Mariana Lopez

On May 5, President Biden and U.S. Trade Representative (USTR) Katherine Tai announced U.S. support for an initiative by 100 countries at the World Trade Organization (WTO) to temporarily waive intellectual property (IP) barriers to facilitate more production of COVID-19 vaccines globally.

“This is a global health crisis, and the extraordinary circumstances of the COVID-19 pandemic call for extraordinary measures,” USTR Tai announced. 

Under Trump, the United States and a handful of other WTO members blocked negotiations on this waiver from even starting last fall. The Biden administration was handed the opportunity to reverse Trump’s self-defeating blockage. Big Pharma lobbied (and will continue to lobby) heavily against the waiver, while a mighty civil society coalition, that Public Citizen helped to build and lead, waged an intensive campaign. On May 5, the administration sided with the people over Big Pharma.

This was an enormous victory that sends a powerful signal to the world by breaking decades of U.S. trade officials’ active promotion of Big Pharma interests over public health. In collaboration with Public Citizen’s Access to Medicines division, Oxfam, Partners in Health, the Association of Flight Attendants-CWA, Doctors Without Borders, Health GAP, Human Rights Watch, Amnesty International and the nurses and teachers unions, Global Trade Watch campaigned to counter Big Pharma’s team of over 100 lobbyists trolling Capitol Hill and pressuring the U.S. to remain on the wrong side of this issue.

Now, it is critical that U.S. engagement in WTO negotiations leads to the fastest possible agreement on a waiver text that encompasses all health technologies needed to end the pandemic, including vaccines, test kits, treatments, medical equipment and PPE. The pharmaceutical corporations want to protect their monopoly control of supply, in part, because as Pfizer briefed investors in March, they see great profit opportunities in producing annual boosters for sale at much higher prices in rich countries. Activists will continue to fight both domestically and globally to ensure that the scope of the negotiated waiver text does not only cover vaccines.

Background:

The WTO requires its 159 member nations to provide pharmaceutical firms certain monopoly rights in a text called the WTO’s Agreement on Trade-Related Aspects of Intellectual Property or “TRIPS.” These monopoly protections mean that pharmaceutical corporations control how much and where vaccines, tests and treatments are made.

This is significant because current production capacity can’t supply nearly enough vaccines, treatments or diagnostic tests to meet global needs. Most in low- and middle-income countries will not get vaccinated until at least 2022, and those in the world’s poorest countries may have to wait until 2024 for mass immunization, if it happens at all.

As we end the first third of the year, global vaccine production has not reached 1.5 billion doses, while 10–15 billion doses are needed. Creating greater supply capacity is critical, especially because COVID-19 vaccines may be like flu vaccines that must be given regularly, not a one-time shot.

While Public Citizen’s Access to Medicine program has been campaigning for the U.S. government to invest $25 billion in expanding U.S. and international production capacity, the Global Trade Watch program promoted another important part of the solution to these issues of capacity and global access. A temporary COVID-19 emergency waiver of some WTO TRIPS monopoly rights would help Global South producers, governments and researchers gain access to the formulas and technology to make vaccines, medicines and tests to prevent, treat and control COVID-19. The waiver was proposed by South Africa and India and supported by more than 100 WTO member countries, now including the United States. The scope of the waiver (whether it will cover more than vaccines) is to be negotiated, but the United State’s support of a waiver is a critical first step.

In every region of the world, there are firms with the capacity to produce vaccines, treatments and tests and greatly increase supply if the formulas and technology are shared. By refusing to voluntarily contract with these firms or issue voluntary licenses to qualified firms so they invest in creating new production capacity, vaccine originators like Moderna and Pfizer are effectively blocking sufficient supply from being made. Johnson and Johnson (J&J) did arrange a contract with South Africa firm Aspen to make their vaccine, but for months required that 91% of the shots be sent for sale in Europe to fulfil J&J contracts there. 

Beginning in January, GTW has built escalating pressure on the Biden administration to support the TRIPS Waiver:

• We spearheaded an organizational sign-on letter, which garnered the support of over 400 U.S. civil society groups from Democratic base groups like MoveOn and Indivisible to scores of unions, faith groups and more.
• We raised awareness among members of Congress, securing 11 U.S. senators and 110 U.S. members of the House in favor of the waiver.
• We have organized press conferences and webinars with Sens. Bernie Sanders (I-Vt.) and Tammy Baldwin (D-Wis.), U.S. representatives, and leaders in the global access to medicines fight.
• We have performed extensive research and produced fact sheets, backgrounders, memos and podcast episodes to ensure that activists, civil society leaders and congressional decision makers are empowered with the information to counter ludicrous Big Pharma talking points.
• We circulated a petition addressed to President Biden that, with the help of partners, gained over 2 million signers.
• In collaboration with partners, we successfully pitched the TRIPS story to Democracy Now! and The Daily Show with Trevor Noah.

Global vaccine apartheid could cost millions of lives, push tens of millions more into poverty and spawn mutated virus variants that evade vaccines. There can be no end to the public health disaster or economic crises anywhere if people in developing nations are not vaccinated. The announcement from the United States is something to celebrate, but the work does not stop here.

Hundreds of Prominent US Civil Society Organizations Call on Pres. Biden to Stop Blocking COVID-19 WTO Waiver to Boost Vaccines, Treatments Worldwide

MSF, Oxfam, Partners In Health, Human Rights Watch, Public Citizen, MoveOn, Indivisible, Unions, Faith Groups, Citizens Trade Campaign, Health GAP, and More Urge U.S. Support for Waiver at March 1-2 WTO General Council

FOR IMMEDIATE RELEASE: February 26, 2021

CONTACT:  Matt Groch [email protected] (202) 454-5111

WASHINGTON, D.C. – Today, U.S. consumer, faith, health, labor, human rights, development and other civil society groups urged the White House to support an emergency COVID-19 waiver of World Trade Organization (WTO) intellectual property rules, so that greater supplies of vaccines, treatments, and diagnostic tests can be produced in as many places as possible as quickly as possible. The pandemic cannot be stopped anywhere unless vaccines, tests, and treatments are available everywhere, so variants that evade current vaccines do not develop.

At a press conference joined by Reps. Rosa DeLauro, (D-Conn.), Earl Blumenauer (D-Ore.) and Jan Schakowsky (D-Ill.), U.S. civil society leaders released a letter signed by hundreds of prominent U.S. organizations calling on the Biden administration to join more than 100 nations in support of the waiver. The Trump administration led a handful of countries opposed to the waiver at the WTO. At two recent WTO committee meetings, the new administration has not reversed the Trump era obstruction of the waiver.

The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) requires countries to provide lengthy monopoly protections for medicines, tests, and technologies used to produce them. While there is production capacity in every region, WTO rules block the timely and unfettered access to the formulas and technology needed to boost manufacturing. Unless much greater volumes are made, many people in developing nations may not get COVID-19 vaccines until 2024. The unnecessary loss of life will be compounded by the loss of livelihoods for millions. According to an International Chamber of Commerce study, the world could face economic losses of more than $9 trillion under the scenario of wealthy nations being fully vaccinated by mid-2021, but poor countries largely shut out.

Statements from Participants:

 

U.S. Representative Rosa DeLauro (D-Conn.), Appropriations Committee chair

“The COVID-19 pandemic knows no borders and the need for vaccine development and dissemination across the globe is critically important. The TRIPS waiver raised by India and South Africa at the WTO would help the global community move forward in defeating the scourge of COVID-19 by making diagnostics, treatments, and vaccines available in developing countries. We must make vaccines available everywhere if we are going to defeat this virus anywhere. The U.S. has a moral imperative to act and support this waiver at the WTO, and I am hopeful that the Biden Administration will support this waiver to help our allies around the globe bring an end to this pandemic.”

 

U.S. Representative Earl Blumenauer (D-Ore.), Ways and Means Subcommittee on Trade chair

“As a global community, we must come together and use every tool at our disposal to stop this pandemic,” Blumenauer said. “Unfortunately, we have seen intellectual property rules and corporate greed have disastrous impacts for public health during past epidemics, and we need to ensure that this doesn’t happen again. Working to ensure that trade rules do not stunt the developing world’s access to vaccines, treatments, and diagnostic tests is a clear step. It’s the right thing to do not only for our country, but for the entire world.”

U.S. Representative Jan Schakowsky (D-Ill.), Senior Chief Deputy Whip and Energy and Commerce Consumer Protection and Commerce Subcommittee chair

“I support the proposed TRIPS waiver because I support equitable vaccine distribution worldwide, because if vaccines aren’t available everywhere, we won’t be able to crush the virus anywhere. The new COVID-19 variants, which show more resistance to vaccines, prove that further delay in immunity around the world will lead to faster and stronger mutations. Equitable access is essential. Our globalized economy cannot recover if only parts of the world are vaccinated and have protection against the virus. We must make vaccines available everywhere if we are going to crush the virus anywhere.”

Paul Farmer, Co-Founder, Partners In Health

“If we want to stop COVID-19 here, we have to stop it everywhere. The world does not have time to wait for the usual, slow, and unequal distribution of treatments, diagnostics, and vaccines. We can take a lesson from the global AIDS movements and make sure patent laws don’t block access to lifesaving therapies for the poor. It’s a similar story for vaccines, which in the case of covid19 we’re so lucky to have and in such short order. Moderna has waived these rights and others should follow suit as we deploy one of the mainstays required to end this pandemic.”

Sara Nelson, President, Association of Flight Attendants-CWA

"COVID does not have borders and neither should vaccine access. Flight Attendants know our jobs depend on a strong global network. We must work to ensure that people around the world have access to the vaccine in order to eradicate this virus. We cannot succeed as a global community without taking care of all people."

 

Sister Simone Campbell, Executive Director, NETWORK Lobby for Catholic Social Justice

“We have learned over the past year that pandemics are communal struggles. We are all vulnerable, and we all can help control the virus. In our nation, over 500,000 people have died and millions have been infected. The U.S. government has invested over $13 billion in taxpayer funds to create vaccines, and other developed nations have invested as well. Now, we in these rich nations have an obligation to share with the global community. That is the only way to protect the vulnerable here and abroad. Both faith and pragmatics demand it. When we faithfully care for our neighbors, we pragmatically care for ourselves.”

Yuanqiong Hu, Policy Co-coordinator, Doctors Without Borders (MSF) Access Campaign

“Governments must not squander this historic opportunity and avoid repeating the painful lessons of the early years of the HIV/AIDS response. This proposal would give countries more ways to tackle the legal barriers to maximizing production and supply of medical products needed for COVID-19 treatment and prevention. Defending monopoly protection is the antithesis to the current call for COVID-19 medicines and vaccines to be treated as global public goods. In these unprecedented times, governments should act together in the interest of all people everywhere.”

Akshaya Kumar, Director of Crisis Advocacy and Special Projects, Human Rights Watch 

"Sharing the recipe for vaccines by pooling intellectual property and issuing global, open, and non-exclusive licenses could help scale up manufacturing and expand the number of vaccine doses made. This means instead of arguing about how to ration better we could be rationing less."

Brook Baker, Health GAP Senior Policy Analyst & Northeastern University Professor of Law

"As an expert in intellectual property law and access to life-saving medicines, I can assure the Biden administration that IP barriers are real, and they're blocking millions of people around the world from accessing life-saving COVID-19 vaccines. By obstructing the TRIPS waiver proposal, President Biden is breaking his promise to share COVID-19 vaccine technologies with the world. His administration must support the TRIPS waiver and send a message to big pharma that it's unacceptable to write off the lives of 90% of people in low- and middle-income countries."

Arthur Stamoulis, Executive Director, Citizens Trade Campaign

“Supporting this waiver is an easy way for the Biden administration to start reestablishing the United States’ standing within the international community, while also benefiting public health and economic recovery here at home. Trade rules cannot be a cudgel used to force countries into putting pharmaceutical company profits ahead of human life.”

Lori Wallach, Director, Public Citizen’s Global Trade Watch

“What is the possible upside of the U.S. blocking this WTO waiver supported by most countries given there is manufacturing capacity around the globe to greatly increase supplies of vaccines, tests, and treatments if formulas and technologies are shared? We are in a race against time with a pandemic that cannot be stopped unless vaccines, tests, and treatments are available everywhere because outbreaks anywhere spawn variants that can evade vaccines and/or are more infectious.”

Link to Recording of Full Press Conference

G-20 Ministers Say COVID-19 Emergency Responses Trigger WTO Exceptions: Most Press Reports Got Meaning of G-20 Trade Ministers’ Statement Wrong

By Lori Wallach

Many press reports are describing yesterday’s G-20 trade ministers’ statement as a commitment NOT to violate World Trade Organization (WTO) rules with emergency COVID-19 responses.

The actual statement says something quite different: The G-20 countries deem actions countries take to battle the crisis as subject to WTO exceptions, and thus permissible even if they do violate the WTO’s rules.

Those fluent in GATTese, the arcane technical language of trade wonkery, will have noticed the key words in yesterday’s G-20 Trade Ministers’ statement:

We agree that emergency measures designed to tackle COVID-19, if deemed necessary, must be targeted, proportionate, transparent, and temporary, and that they do not create unnecessary barriers to trade or disruption to global supply chains, and are consistent with WTO rules. [Emphasis added]

The statement says that G-20 countries agreed that COVID-19 emergency actions meet the requirements to trigger the WTO’s general exceptions, which are found in GATT Article XX.

These terms provide countries a justification for having policies that would otherwise violate WTO rules. As we’ve previously noted, WTO tribunals rarely allow countries to apply the exceptions. Usually, the tribunals rule that a domestic policy fails because it cannot meet the “chapeau” (the overarching initial paragraph) of the exceptions or that a policy is not “necessary” in a narrow WTO-required meaning that has been fabricated by tribunalists over decades of WTO rulings. Here are the relevant parts of GATT Art. XX:

Article XX (General Exceptions): Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: …
(b) necessary to protect human, animal or plant life or health;…
(j) essential to the acquisition or distribution of products in general or local short supply; Provided that any such measures shall be consistent with the principle that all contracting parties are entitled to an equitable share of the international supply of such products, and that any such measures, which are inconsistent with the other provisions of the Agreement shall be discontinued as soon as the conditions giving rise to them have ceased to exist.

The G-20 trade ministers statement provides a bridge over all three quicksand pits that normally sink the use of these exceptions.

As far as the chapeau language, the statement makes clear that COVID-19 emergency measures “do not create unnecessary barriers to trade.” To deal with clarifying what is “necessary” to satisfy GATT Art. XX(b), the statement makes clear that is a matter for countries to self-designate. And with respect to the principle of countries having equal shares of international supply in GATT Art. XX(j), the statement notes that emergency measures are not deemed to be a “disruption to global supply chains.”

And in case a reader is not fluent in GATTese and does not have “ah ha, Art. XX is in the house” bells going off in their heads, the last clause explicitly states that emergency measures “are consistent with WTO rules.” Understanding that requires only attentiveness to the grammar – that clause is attached with an “and” – separating it from the list of specific GATT Article XX satisfiers connected by “ors.”

Regardless, some press reports got it totally wrong – by taking part of the relevant G-20 ministers’ text as a quote, and then supplying their own meaning:

The trade ministers included additional language, promising any emergency measures would "not create unnecessary barriers to trade or disruption to global supply chains, and are consistent with WTO rules. -Politico (You can see a summary outside the paywall in “G-20 calls for open trade, sort of,” Politico Pro-Morning Trade, March 31, 2020 or full story at “G-20 trade ministers pledge to help medical goods trade,” Politico, Doug Palmer, March 30, 2020.)

Trade ministers from G20 countries on Monday said any “emergency measures” to address the coronavirus pandemic must be temporary and consistent with World Trade Organization rules. - Inside U.S. Trade (“G20 trade leaders commit to WTO-consistent measures in response to COVID-19,” IUST, Isabelle Icso, March 30, 2020.)

Some news media got it right though. They understood what the statement actually meant and quoted the relevant sentence in context:

In their joint statement, the G-20 trade chiefs appeared to offer scope for such moves by saying they can be compatible with World Trade Organization rules. “We agree that emergency measures designed to tackle Covid-19, if deemed necessary, must be targeted, proportionate, transparent, and temporary, and that they do not create unnecessary barriers to trade or disruption to global supply chains, and are consistent with WTO rules,” the ministers said. – Bloomberg  (“G-20 Trade Chiefs Defend Open Supply Chains Amid Virus Fight, Bloomberg, Jonathan Stearns and Bryce Baschuk, March 30, 2020, updated March 31, 2020.)

Unlike much trade-related misreporting and spin, this instance does no favors to team trade-status-quo. It does not take great imagination to envision the thought bubble over the heads of most people who saw the wrong stories: ‘Meeting trade rules is a priority over saving lives? !@#$%^&* trade…’

Friday’s WTO Development: Did They Think No One Would Notice?

By Lori Wallach

With everyone’s attention focused on the COVID-19 crisis, it’s understandable that a Friday trade announcement could be missed. You can find it filed under “throw fuel on the fire,” and it’s worth a look.

On March 27, a group of 16 World Trade Organization (WTO) members announced a new agreement to evade the U.S. shutdown of the WTO’s enforcement regime.

Sure, countries may be interested in mechanisms to finalize the settlement of trade disputes among themselves with the WTO’s system beached. And some may be looking for ways to try to poke the United States in response to its effective shutdown of the WTO’s enforcement regime.

The hitch is that this new “Multi-Party Interim, Appeal Arbitration Arrangement” presumes to use WTO staff and funding to do so. And, implementation of its terms effectively would alter various WTO legal authorities without recourse to the WTO’s amendment procedures and required approvals by the WTO’s signatory countries.

You can be a supporter of the WTO and still wonder: What were they thinking?!

Effectively, the proposed workaround doubles down on the sort of concerns that led the United States to finally say “enough” last year and block approval of new “judges” for the WTO’s highest review body, the Appellate Body (AB). That U.S. move shut down the WTO enforcement system; Rulings on disputes could no longer be finalized because the AB no longer had a quorum.

Starting with the second Bush administration through the Obama era and until today, U.S. officials have protested that the AB was operating outside the mandate actually agreed by member countries and making up new WTO obligations to be imposed on countries that never agreed to such terms. With the United States being the largest contributor to the WTO budget, GOP and Democratic administrations alike also have protested that U.S. funds were being squandered to support such malpractice.

Some other WTO member nations less well situated to lodge public criticisms share concerns about WTO dispute bodies stretching the actual rules, self-designating what should be one-off decisions on specific disputes as binding precedent and deciding issues not raised by the disputing parties.

For those of us who oppose the many WTO rules unrelated to trade – from new monopoly protections for pharmaceutical firms to limits on countries’ domestic food safety and financial regulation – having the WTO’s enforcement system out of business is not necessarily bad news.  WTO members are required to “ensure the conformity of their laws, regulations and administrative procedures” with WTO rules that impose limits on countries’ environmental, consumer and other protections while obliging countries to provide special protections for various privileged business sectors. When the WTO’s enforcement system is in full operation, it can authorize millions in trade sanctions against countries that do not comply with these dictates.

So, countries tend to roll back the laws attacked at the WTO. Developing countries sometimes do so at the mere threat of a challenge, so as to avoid allocating limited government resources to an expensive legal defense. The United States weakened Clean Air Act rules, dolphin protection laws and Endangered Species Act regulations after successful WTO attacks. As well, the country-of-origin labels on meat that consumers relied on in American grocery stores were gutted after the WTO classified them as “illegal trade barriers” and authorized $1 billion in sanctions.

Recently, WTO enforcement action have facilitated a circular firing squad over climate change efforts. The European Union and Japan successfully challenged Canadian incentives on renewable energy. The United States won a case against a solar power program in India. Then India successfully attacked renewable energy programs in several American states. Then China filed a case in 2018 against additional American renewable energy measures.

Clearly there are problems with the WTO. If you join me in believing that there should be good global trade rules and that those rules should be enforced in a fair and transparent way, then this latest enforcement workaround agreement – signed by the European Union, China, Brazil, Mexico, Canada, Australia, Singapore, Chile, Colombia, Costa Rica, Guatemala, Hong Kong, New Zealand, Norway, Switzerland and Uruguay – is deeply counterproductive.

Under this agreement, some WTO countries simply decide to alter the authority and roles of the WTO’s Director General, Secretariat and various bodies. And, the new agreement presumes that WTO funds will cover the costs of operating and providing arbitrators for the new system. The new agreement’s text is quite clear:

Article. 7:  The participating Members envisage that appeal arbitrators will be provided with appropriate administrative and legal support, which will offer the necessary guarantees of quality and independence, given the nature of the responsibilities involved. The participating Members envisage that the support structure will be entirely separate from the WTO Secretariat staff and its divisions supporting the panels and be answerable, regarding the substance of their work, only to appeal arbitrators. The participating Members request the WTO Director General to ensure the availability of a support structure meeting these criteria.  (Emphasis added.)

The WTO’s Director General and Secretariat also are assigned additional roles in screening the “judges” for the new system and providing various notices to countries and WTO bodies.

Annex 2, Article. 3: …this pre-selection process will be carried out by a pre-selection committee composed of the WTO Director General, and the Chairperson of the DSB, the Chairpersons of the Goods, Services, TRIPS and General Councils…

Article 6: …The WTO Director General will notify the parties and third parties of the results of the selection…  

Annex 1, Art. 5: The arbitration shall be initiated by filing of a Notice of Appeal with the WTO Secretariat…

Plus, the new text provides no mechanism for funding the new appellate arbitration system nor imposes any financial obligation on countries that opt in. But it does read in WTO provisions that require dispute settlement expenses be met from the WTO budget. For instance:

Article. 3: The appeal arbitration procedure will be based on the substantive and procedural aspects of Appellate Review pursuant to Article 17 of the DSU…; Annex 1, Art. 11: …the arbitration shall be governed, mutatis mutandis, by the provisions of the DSU and other rules and procedures applicable to Appellate Review; and Annex 2, footnote 12: … current or former Appellate Body members may be nominated as candidates.

Notably, the WTO Dispute Settlement Understanding’s provision most relevant to this funding question, namely DSU Article 17.8, ostensibly requires approval by the WTO’s General Council, i.e., the WTO member countries. Hum…

Ironically, the new agreement includes rhetoric about the countries’ commitment to finding a solution to problems with the WTO’s dispute settlement regime. It hardly seems like a winning strategy for an ad hoc group of 16 WTO members, following no rules whatsoever (not even WTO rules for plurilateral agreements) and without approval by most WTO member nations, to presume to create new authorities and roles for the WTO staff and new obligations for the expenditure of the funds other nations contribute to operate the WTO. 

With Trade Commission TPP Review Due Next Week, New Study Shows Past Pacts’ Actual Outcomes Were Opposite of Agency’s Rosy Projections

Administration Expected to Tout Imminent USITC Study in New Push for TPP Passage Despite Agency’s Systematic Failure to Accurately Assess NAFTA, China and Korea Pacts

WASHINGTON, D.C. – The reliability or usefulness of an imminent government assessment of the Trans-Pacific Partnership (TPP) was called into question by a study released today that shows that past U.S. International Trade Commission (USITC) projections of trade agreements’ benefits were systematically contradicted by the pacts’ actual outcomes.

The new study reviews USITC trade balance, job and economic sector projections in the statutorily required reports for the three most economically significant trade pacts prior to the TPP and finds the government study on each pact proved dramatically inaccurate – not only in degree, but in direction.

“Past government studies have systematically projected positive outcomes that were contradicted by the actual results, which is why members of Congress requested, without success, that the agency alter its approach to assessing the TPP,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

The USITC predicted improved trade balances, gains for specific sectors and more benefits from the 1993 North American Free Trade Agreement (NAFTA) and 2007 U.S.-Korea Free Trade Agreement (FTA) in reports on those pacts. The agency projected only a small deficit increase from China’s 1999 World Trade Organization (WTO) entry deal and the granting to China of Permanent Normal Trade Relations status.

Instead, the U.S. trade deficits with the trade partners increased dramatically and, as detailed in the text of the new study, manufacturing industries from autos to steel and farm sectors such as beef that were projected to “win” saw major losses. A government program to help Americans who lose jobs to trade certified 845,000 NAFTA jobs losses alone and econometric studies concluded that millions of jobs were lost from the China deal, in contrast to gains projected by the USITC reports.

The new report also reviews how the USITC’s use of a computable general equilibrium (CGE) model leads to projections entirely unrelated to actual outcomes by simply assuming away the very results that have often occurred under past pacts: long-term job loss, trade deficit increases and currency devaluations.

Under the model, the USITC collects information on current exports, imports, gross domestic product (GDP), tariff rates, investment flows and more. It creates equations to calculate how trade flows would change if a pact’s terms were fully implemented. The model looks to an endpoint, not the process of getting there. It does not consider whether there may be increases in trade deficits along the way, or whether other nations may not fully implement or enforce a pact’s terms. Rather it projects a final outcome assuming full implementation. Running this simulation generates data on potential changes in exports and imports. By design, it assumes the trade balance does not change and that employment levels remain consistent – that workers who lose jobs simply obtain new jobs in other sectors where wages are presumed to increase.

A growing body of academic criticism of the CGE model employed by the USITC has focused on the numerous assumptions researchers make, including what economic factors are included and excluded, and what included factors are assumed to remain constant. For instance, implicit in the assumption that the trade balance does not change is the assumption of flexible exchange rates. But in reality, currency manipulation is a significant problem among some of the TPP countries. The U.S. Department of Treasury just recently included TPP nation Japan on its new Monitoring List in its semi-annual report on “Foreign Exchange Policies of Major Trading Partners of the United States.”

The assumptions baked into the model can contribute to gaps between projections about import and export levels and actual outcomes. Also, given that the results of the trade flow simulations are then used to project broader outcomes (such as on U.S. economic growth), assumptions piled on assumption can cause results that are incorrect, not only in degree, but in direction.

Different assumptions can result in diametrically opposed outcomes, as demonstrated by the recent Peterson Institute for International Economics and Tufts University studies on the TPP. The Peterson Institute used a CGE model with assumptions similar to those employed by the USITC in past studies and found the TPP would result in a modest increase in U.S. GDP, but not impact overall U.S. employment. Using an economic model that allows for the possibility of less than full employment and rising income inequality, called the United Nations Global Policy Model, Tufts University economists concluded that the TPP would reduce U.S. growth rates and lead to 448,000 American jobs lost.

The Tufts findings spotlight just how drastically the assumptions baked into a model affect the outcomes; the Tufts economists actually employed the Peterson Institute trade flow simulation data. They plugged the Peterson findings on import and export levels at full TPP implementation derived from one set of unrealistic assumptions into a model that applies more realistic assumptions about how trade flow changes affect growth and employment – and got the opposite results on growth and jobs.

Finally, the output of any model also is greatly affected by the data put into it. Issues to watch for in this regard for the USITC’s TPP study include:

• How will the USITC TPP study treat “non-tariff barriers” (NTB)? What an international bank may consider an NTB may be what a policymaker or consumer considers an important safeguard to avoid costly financial crises. But recent trade pact projection studies have included guesstimates of gains resulting from the elimination of NTBs.

• Will the USITC TPP study consider how TPP investment rules could affect decisions about where to invest in production and whether the TPP will alter foreign direct investment trends?

• How will the USITC TPP study assess intellectual property provisions, given that longer monopolies may increase some U.S. firms’ profitability but also may cost governments and consumers more for medicines and access to information?

Under the Fast Track authority passed last year, the USITC is required to release a report projecting the economic effects of the TPP no later than May 18, 2016.

 

 

Lori Wallach on HuffPo: “WTO Orders Sanctions Unless US Cuts Consumer Labels, Disproving Obama TPP Claims”

 

“Yesterday's World Trade Organization (WTO) ruling against the country-of-origin meat labels (COOL) that Americans rely on to make informed choices about their food provides a glaring example of how trade agreements can undermine U.S. public interest policies. The WTO authorized over $1 billion annually in trade sanctions against the United States unless and until the popular consumer policy is weakened or eliminated.

The ruling is a nightmare for the Obama administration's uphill battle to build support for the controversial Trans-Pacific Partnership (TPP)."

 

Read the entire piece at the Huffington Post to find out how the WTO’s ruling spells trouble for the TPP.

WTO Orders U.S. to Gut U.S. Consumer Country-of-Origin Meat Labeling Policy, Further Complicating Obama Fast Track Push

Final WTO Ruling Spotlights How Trade Pacts Can Undermine U.S. Consumer, Environmental Policies, Orders Rollback of Popular Consumer Law; Vilsack Says Congress Must Act

Today’s final ruling by the World Trade Organization (WTO) Appellate Body against popular U.S. country-of-origin meat labeling (COOL) policy spotlights how trade agreements can undermine domestic public interest policies, Public Citizen said today. The WTO decision is likely to further fuel opposition to Fast Track authority for controversial “trade” pacts that would expose U.S. consumer and environmental protections to more such challenges. (A list of some of the past public interest policies undermined by trade pacts is below.)

COOL requires labeling of pork and beef sold in the United States to inform consumers the country in which the animals were born, raised and slaughtered.

“The president says ‘we’re making stuff up,’ about trade deals undermining our consumer and environmental policies but today, we have the latest WTO ruling against a popular U.S. consumer policy. Last week, Canadian officials announced that our financial regulations violate trade rules, and earlier this year, the Obama administration, in response to another trade agreement ruling, opened all U.S. roads to Mexico-domiciled trucks that threaten highway safety and the environment," said Lori Wallach, director of Public Citizen’s Global Trade Watch.

In a May 1, 2015, letter, Agriculture Secretary Tom Vilsack informed Congress that it will need to repeal the COOL law or else change it if the final WTO ruling were to go against the United States. In contrast, in his recent speech at Nike, President Barack Obama said, “Critics warn that parts of this deal would undermine American regulation – food safety, worker safety, even financial regulations. They’re making this stuff up. This is just not true. No trade agreement is going to force us to change our laws.”

“Today’s WTO ruling, which effectively orders the U.S. government to stop providing consumers basic information about where their food comes from, offers a clear example of why so many Americans and members of Congress oppose the Fast Tracking of more so-called ‘trade’ pacts that threaten commonsense consumer safeguards,” said Wallach. “The corporations lobbying to Fast Track the TPP must be groaning right now, as this ruling against a popular consumer protection in the name of ‘free trade’ spotlights exactly why there is unprecedented opposition to more of these deals.”

Today’s decision on the final U.S. appeal of a 2012 initial ruling against the COOL policy paves the way for Canada and Mexico, which challenged COOL at the WTO, to impose indefinite trade sanctions against the United States unless or until it weakens or eliminates COOL, which is supported by nine in 10 Americans. Last year, consumer groups wrote to the administration requesting it use the ongoing Trans-Pacific Partnership (TPP) negotiations as leverage to demand that Canada and Mexico drop the case instead of rolling back the policy. But they received no response.

Today, the WTO Appellate Body upheld a 2014 compliance panel ruling, which said that changes made in May 2013 to the original U.S. COOL policy, in an effort to make it comply with a 2012 WTO ruling against the law, were not acceptable. The Appellate Body decided that the modified U.S. COOL policy still constitutes a “technical barrier to trade.” It  decided that the strengthened COOL policy afforded less favorable treatment to cattle and hog imports from Canada and Mexico, despite a 53 percent increase in U.S. imports of cattle from Canada under the modified policy. The Appellate Body upheld the earlier panel ruling that the alleged difference in treatment did not “stem exclusively from legitimate regulatory distinctions.”

Today’s ruling is not subject to further appeal. The decision initiates a WTO process to determine the level of trade sanctions that Canada and Mexico are authorized to impose on the United States as retaliation for COOL.

Today’s ruling follows a string of recent WTO rulings against popular U.S. consumer and environmental policies. In May 2012, the WTO ruled against voluntary “dolphin-safe” tuna labels that, by allowing consumers to choose to buy tuna caught without dolphin-killing fishing practices, have helped to dramatically reduce dolphin deaths.

Changes made last year to comply with the WTO’s decision are now being challenged in WTO compliance proceedings. This comes after the U.S. revoked a long-standing ban on tuna caught using dolphin-deadly nets following an earlier WTO ruling. In January 2015, the Obama administration announced it would allow Mexico-domiciled long haul trucks on all U.S. highways after losing a North American Free Trade Agreement challenge and being threatened with sanctions on more than two billion in U.S. trade flows.Consumer groups warn that the trucks pose significant safety threats, while environmental groups warn that they do not meet U.S. emissions standards.

In response to previous WTO rulings, the United States has rolled back U.S. Clean Air Act regulations on gasoline cleanliness standards successfully challenged by Venezuela and Mexico; Endangered Species Act rules relating to shrimping techniques that kill sea turtles after a successful challenge by Malaysia and other nations; and altered auto fuel efficiency (Corporate Average Fuel Economy) standards that were successfully challenged by the European Union.

The Fast Tracked legislation that implemented the WTO enacted a patent extension sought by pharmaceutical interests that consumer groups had successfully defeated for decades. The Uruguay Round Agreements Act amended the U.S. patent law to provide a 20-year monopoly – replacing the 17-year term in U.S. law and increasing medicine prices by billions by extending the period during which generic competition would be prohibited. The bill also watered down the Federal Meat Inspection Act and the Poultry Products Inspection Act both of which  required only poultry and meat that actually met U.S. safety and inspection standards could be imported and sold here and allowed imports that meet “equivalent” standards with foreign nations certify their own plants for export.

Background

The COOL policy was created when Congress enacted mandatory country-of-origin labeling for meat – supported by 92 percent of the U.S. public in a recent poll – in the 2008 farm bill. This occurred after 50 years of U.S. government experimentation with voluntary labeling and efforts by U.S. consumer groups to institute a mandatory program.

In their successful challenge of COOL at the WTO, Canada and Mexico claimed that the program violated WTO limits on what sorts of product-related “technical regulations” signatory countries are permitted to enact. The initial WTO ruling was issued in November 2011. Canada and Mexico demanded that the United States drop its mandatory labels in favor of a return to a voluntary program or standards set by an international food standards body in which numerous international food companies play a central role. Neither option would offer U.S. consumers the same level of information as the current labels. The United States appealed.

In a June 2012 ruling against COOL, the WTO Appellate Body sided with Mexico and Canada. The U.S. government responded to the final WTO ruling by altering the policy in a way that fixed the problems identified by the WTO tribunal. However, instead of watering down the popular program as Mexico and Canada sought, the U.S. Department of Agriculture responded with a rule change in May 2013 that strengthened the labeling regime. The new policy provided more country-of-origin information to consumers, which satisfied the issues raised in the WTO’s ruling. However, Mexico and Canada then challenged the new U.S. policy. With today’s ruling, the WTO has announced its support for the Mexican and Canadian contention that the U.S. law is still not consistent with the WTO rules.

Defending Foreign Corporations' Privileges Is Hard, Especially When Looking At The Facts

Forbes just published this response from Lori Wallach and Ben Beachy (GTW director and research director) to a counterfactual Forbes opinion piece by John Brinkley in support of investor-state dispute settlement.  

Defending Foreign Corporations' Privileges Is Hard, Especially When Looking At The Facts

By Lori Wallach & Ben Beachy

 

Even those who support the controversial idea of a parallel legal system for foreign corporations, known as investor-state dispute settlement or ISDS, likely cringed at John Brinkley’s recent attempt to defend that system. (“Trade Dispute Settlement: Much Ado About Nothing,” October 16.)

In trying to justify trade agreement provisions that provide special rights and privileges to foreign firms to the disadvantage of their domestic competitors, Brinkley wrote 24 sentences with factual assertions. Seventeen of them were factually wrong.

To his credit, it is no easy task to defend a system that empowers foreign corporations to bypass domestic courts and laws to demand taxpayer compensation for domestic policies that apply equally to their local competitors, but that they claim frustrate special privileges granted to them as foreign investors. The cases are heard by extrajudicial tribunals not bound by precedent. Decisions are not subject to substantive appeal.

Brinkley’s mission was particularly difficult given how unpopular the ISDS system has become. Indeed, one reason that the CATO Institute has come out against ISDS is the realistic concern that its inclusion in the proposed trans-Pacific and transatlantic free trade pacts could derail those negotiations.

ISDS is risky to include in a transatlantic deal

In Europe, the incoming European Commission President and the Economic Minister of Germany have both indicated that they oppose including ISDS in the U.S.-EU deal. Whether one focuses on the threat to solvency or fair competition, it’s especially risky to include ISDS in a transatlantic deal. Doing so would newly empower more than 70,000 U.S. and EU subsidiaries of cross-registered firms to demand compensation based on special foreign investor privileges—an unprecedented increase in liability for both the United States and the EU.

Around the world, governments from Australia to South Africa have started to rebuke ISDS as studies have shown countries have failed to attract more FDI by enacting ISDS agreements, while governments—and their treasuries—have come under increasing ISDS attacks by foreign firms.

Only 50 cases were launched in the first three decades of ISDS pacts. But in each of the past three years more than 50 cases have been filed annually. The current stock of 568 ISDS cases includes demands for compensation over land use policies, tobacco controls, energy and financial regulations, pollution cleanup requirements, patent standards and other policies that apply equally to domestic firms, and that often have been approved by domestic high courts.

This trend and its threat to the rule of law have led esteemed jurists from free-trade-minded nations such as Singapore, New Zealand and Australia to join the U.S. National Conference of State Legislatures (which represents our states’ majority GOP-controlled legislatures) in opposing ISDS.

Reviewing the facts

In his quixotic effort to defend the ISDS system, Brinkley made a real mess of the facts. There’s not space to go through all 17 factual errors, but it’s important to correct his biggest blunders.

For instance, Brinkley argued, “What matters is not whether [the foreign corporations] can sue, but whether they can win.” He then proceeded to misstate the win record.

In fact, the United Nations figures on ISDS case outcomes, which Brinkley cited, show that foreign corporations have gained favorable rulings or settlements in 57 percent of the ISDS cases launched to date.

Foreign corporations have “won” against Canada’s ban on hazardous waste exports, the Czech Republic’s decision to not bail out a bank, a Mexican municipality’s decision to not allow the expansion of a contaminated toxic waste facility, and a Canadian requirement for any and all firms obtaining oil concessions to contribute to research and development in the affected province.

Foreign firms and the success of their ISDS cases

Foreign firms have also proven successful in using the threat of an ISDS case to extract favorable settlements, which often oblige governments to pay large sums to the foreign firms. A government paid $900 million to a firm in one recent ISDS settlement.

ISDS settlements have also led governments to alter policies challenged by foreign corporations. An ISDS case that a U.S. chemical company launched against Canada’s ban on a toxic gasoline additive – one currently also banned in the United States – resulted in Canada overturning the ban. In another ISDS settlement, the German city of Hamburg was obliged to roll back environmental requirements on a Swedish corporation’s coal-fired power plant.

Without explanation, Brinkley chose simply to ignore all of the ISDS cases that were settled in favor of the foreign firm, distorting his “scoreboard” of ISDS case outcomes. And he did not mention that even when governments “win,” they are still on the hook for high legal costs and tribunal fees associated with defending these cases – an average of $8 million per case.

Investor-state disputes vs. state-state disputes

Brinkley’s accounting became even more confused when he conflated investor-state disputes withstate-state disputes – and similarly made a mish-mash of our critique. Brinkley appears not to realize the difference between the ISDS system, in which any covered foreign corporation claiming to have an investment in a country can drag a government to an extrajudicial tribunal to challenge its policies, and trade agreement dispute settlement in which cases may only be brought by government signatories to pacts.

He stated, for example, that “the aggrieved foreign investor can turn to a dispute settlement body at the…WTO [World Trade Organization].” False. The WTO only allows governments – not foreign corporations – to bring cases against governments.

Brinkley then picked one state-state dispute that the United States lost at the WTO and wondered why the UN did not include it in its list of investor-state cases against the United States. He added the lost WTO state-state case to his tally of investor-statechallenges that the United States has faced to date, and summarized his hodgepodge U.S. win-loss record as, “we’ll say 13-1.”

Brinkley seems unaware that in fact the United States has lost 61 out of 67state-state cases brought against it at the WTO – a 91 percent loss rate.

As for investor-state cases brought against the United States, few such cases exist thanks to the reality that 52 of the 54 countries with which the United States has an ISDS-enforced pact are not major FDI exporters. Brinkley appears strangely unconcerned that the U.S. government plans to dramatically expand its investor-state liability under the U.S.-EU deal, which would open the door to foreign investor claims from 11 of the world’s 20 largest FDI exporters.

The Loewen fluke

Brinkley also cited an ISDS case that Loewen, a Canadian funeral home conglomerate, launched against the U.S. government over Mississippi’s jury trial system and the standard common-law requirement to post bond before pursuing an appeal. (Loewen had lost a state court case battle against a rival funeral home operator.)

Brinkley argued that because the tribunal dismissed Loewen’s ISDS claim, there is no cause for concern. But the tribunal actually supported a number of Loewen’s claims on the merits. It only dismissed the case without imposing a penalty on the U.S. government thanks to a remarkable fluke: Loewen’s lawyers reincorporated the firm as a U.S. company, thus destroying its ability to obtain compensation as a “foreign” investor.

Such luck should not be expected to continue, particularly if, under the U.S.-EU deal, foreign investor privileges are granted to thousands of European firms operating here.

Before we subject our national treasury, our domestic firms or our laws to an unprecedented expansion of ISDS liability, we should take a cold, hard look at the legacy to date of this extraordinary system. It would help to start with actual facts.

Ms. Wallach and Mr. Beachy are the director and research director, respectively, of Public Citizen’s Global Trade Watch.

World Trade Organization Rules Against Popular U.S. Country-of-Origin Meat Labels on Which Consumers Rely

Compliance Panel Says U.S. Policy Still Violates WTO Despite Changes Made to Comply With 2012 WTO Order; U.S. Should Not Change COOL Policy

Today’s ruling by a World Trade Organization (WTO) compliance panel against U.S. country-of-origin meat labeling (COOL) policies sets up a no-win dynamic, and the Obama administration should appeal the ruling, Public Citizen said.

If the administration were to weaken COOL, U.S. consumers would lose access to critical information about where their meat comes from at a time when consumer interest in such information is at an all-time high and opposition would only grow to the administration’s beleaguered trade agenda. If the administration again were to seek to comply with the WTO by strengthening COOL, then Mexico and Canada – the two countries that challenged the policy – likely would continue their case, even though cattle imports from Canada have increased since the 2013 strengthening of the policy. 

The ruling further complicates the Obama administration’s stalled efforts to obtain Fast Track trade authority for two major agreements, the Trans-Pacific Partnership and the Trans-Atlantic Free Trade Agreement. Both of these pacts would expose the United States to more such challenges against U.S. consumer, environmental and other policies.

“Many Americans will be shocked that the WTO can order our government to deny U.S. consumers the basic information about where their food comes from and that if the information policy is not gutted, we could face millions in sanctions every year,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Today’s ruling spotlights how these so called ‘trade’ deals are packed with non-trade provisions that threaten our most basic rights, such as even knowing the source and safety of what’s on our dinner plate.”

The WTO compliance panel decided that changes made in May 2013 to the original U.S. COOL policy in an effort to make it comply with a 2012 WTO ruling against the law are not acceptable and that the modified U.S. COOL policy still constitutes a “technical barrier to trade.” The panel decided that the strengthened COOL policy afforded less favorable treatment to cattle and hog imports from Canada and Mexico, despite a 52 percent increase in U.S. imports of cattle from Canada under the modified policy. The panel stated that the alleged difference in treatment did not “stem exclusively from legitimate regulatory distinctions.”

The United States has one chance to appeal this decision before the WTO issues a final, binding ruling. Under WTO rules, if the U.S. appeal fails, Canada and Mexico would be authorized to impose indefinite trade sanctions against the United States unless or until the U.S. government changes or eliminates the popular labeling policy.

Today’s ruling follows a string of recent WTO rulings against popular U.S. consumer and environmental policies. In May 2012, the WTO ruled against voluntary “dolphin-safe” tuna labels that, by allowing consumers to choose to buy tuna caught without dolphin-killing fishing practices, have helped to dramatically reduce dolphin deaths. In April 2012, the WTO ruled against a U.S. ban on clove-, candy- and chocolate-flavored cigarettes, enacted to curb youth smoking. In each of those cases, U.S. policy changes made to comply with the WTO’s decisions also have been challenged before WTO panels similar to the one that issued today’s ruling.

“The WTO again ruling against a popular U.S. consumer protection will just spur the growing public and congressional concerns about the big Pacific and European trade deals the administration is now pushing and the Fast Track authority to railroad through Congress more agreements that undermine basic consumer rights,” said Wallach.

Background

The COOL policy was created when Congress enacted mandatory country-of-origin labeling for meat – supported by 92 percent of the U.S. public in a recent poll – in the 2008 farm bill. This occurred after 50 years of U.S. government experimentation with voluntary labeling and efforts by U.S. consumer groups to institute a mandatory program.

In their successful challenge of COOL at the WTO, Canada and Mexico claimed that the program violated WTO limits on what sorts of product-related “technical regulations” signatory countries are permitted to enact. The initial WTO ruling was issued in November 2011. Canada and Mexico demanded that the United States drop its mandatory labels in favor of a return to a voluntary program or standards set by an international food standards body in which numerous international food companies play a central role. Neither option would offer U.S. consumers the same level of information as the current labels. The United States appealed.

The WTO Appellate Body sided with Mexico and Canada in a June 2012 ruling against COOL. The U.S. government responded to the final WTO ruling by altering the policy in a way that fixed the problems identified by the WTO tribunal. However, instead of watering down the popular program as Mexico and Canada sought, the U.S. Department of Agriculture responded with a rule change in May 2013 that strengthened the labeling regime. The new policy provided more country-of-origin information to consumers, which satisfied the issues raised in the WTO’s ruling. However, Mexico and Canada then challenged the new U.S. policy. With today’s ruling, the WTO has announced its support for the Mexican and Canadian contention that the U.S. law is still not consistent with the WTO rules.

WTO Final Ruling: European Ban on Products from Inhumane Seal Harvest Violates WTO Rules

Statement of Lori Wallach, Director of Public Citizen’s Global Trade Watch

The WTO today added fuzzy white baby seals clubbed to death on bloody ice flows to dolphins and sea turtles as animals that the WTO has declared cannot be protected by domestic laws because they  violate “trade” rules, which will just fuel public and policymaker skepticism about these so-called trade deals. 

As a technical matter, today’s ruling confirms the uselessness of the WTO exceptions, allegedly designed to protect countries’ domestic public interest laws, that are now being touted as the way to safeguard environmental, health and safety policies in proposed pacts such as the Trans-Pacific Partnership (TPP). This is the 39^th time out of 40 attempted uses that the exception has been rejected by WTO tribunals when raised to safeguard a domestic public interest law.

BACKGROUND: In this final ruling, the WTO Appellate Body acknowledged that the European Union’s ban on the importation and sale of seal products resulted from concerns about “inhumane” hunts with “inherent animal welfare risks,” but concluded the EU failed to satisfy the litany of conditions required to defend public interest policies under the WTO’s “general exception” provisions. Specifically, the Appellate Body ruled against use of the WTO exception for policies “necessary” to protect public morals. Only one out of 40 government attempts to use the the WTO General Exceptionse, found in Article XX of the WTO’s General Agreement on Tariffs and Trade (GATT) and Article XIV of the General Agreement on Trade in Services (GATS), has ever succeeded.

In its ruling today, the Appellate Body also rebuffed arguments made by the U.S. government as a third party observer to the case demanding that the WTO evaluate whether policies that appear to have a discriminatory effect stem from a “legitimate regulatory distinction.” The Appellate Body ruled against this U.S. government position, concluding that WTO panels do not need to consider under GATT whether a challenged domestic policy stems from a legitimate policy objective.

Today’s ruling follows a string of WTO rulings against popular U.S. environmental and consumer policies. In May 2012, for example, the WTO ruled against voluntary “dolphin-safe” tuna labels that, by allowing consumers to choose to buy tuna caught without dolphin-killing fishing practices, have helped to dramatically reduce dolphin deaths. Today’s decision will again spur public ire over WTO rules that extend beyond “trade” to target domestic environmental and consumer safeguards.

WTO’s Legitimacy So Weak that Ability to Agree on Anything Is Touted as Success

11pm: Statement of Lori Wallach, Director, Public Citizen’s Global Trade Watch on Conclusion of Bali WTO Ministerial

Hype about this outcome ‘saving’ the WTO reveals just how dire the WTO’s crisis of legitimacy has become. The actual deliverables were a rollback of existing WTO agricultural rules, a commitment that countries will update their customs procedures and implementation of trade benefits for least developed countries that had been agreed to years ago.

It is perverse to declare that this outcome restores the WTO’s credibility when the biggest ‘breakthrough’ was simply that yet another WTO meeting did not melt down altogether. 

Consider the context of this deal: the Doha Round WTO expansion agenda remains deadlocked after more than a decade.  The most apt headline to describe today’s outcome comes from Monty Python: I’m not dead yet!

Except for formal adoption of new duty free access for least developing countries that had been agreed years ago, this deal includes no new trade market access. Ironically, another WTO Ministerial meltdown only because the United States agreed to a waiver for existing WTO agricultural rules that developing countries had demanded to help ensure food security for their populations.

The other texts issued from the meeting merely “affirm” past agreements. Notably, agreement could not even be reached to force compliance with a 2005 WTO decision that all countries must eliminate agricultural export subsidies by 2013, which has not occurred.

The fundamental principle of the WTO – that 160 countries should conform their domestic food,  financial, health, energy, patent, procurement and other policies to terms favored by the world’s largest corporations – faces growing opposition worldwide.

It’s not surprising that the core ‘Doha Round’ proposals that would have expanded the WTO’s power have been rejected, given the damage WTO has caused so many people around the world, and that developing countries have instead insisted on rolling back of some of the existing WTO rules.

 

4pm: Breaking News -- The face-saving deal that WTO members desperately tried to conclude today, meager as it was (see below), has now taken a face-plant.  Four Latin American countries have "firmly rejected" the deal's last-minute text as "unbalanced" in favor of developed countries at the expense of developing countries.  It's unclear what will happen next.  A spokesperson for the WTO Secretariat stated today, "We don't know when the next meetings will be. We don't know when the next press conference will be. I can't tell you anything."  WTO members might still scramble to eke out a deal similar to that described below, in which case WTO proponents will have to try to sell a deal that waives WTO rules as a success of the WTO.  Or talks may break down entirely, marking another in a long string of WTO negotiations that have collapsed due to the WTO's stubborn adherence to an unpopular agenda. 

 

11am: As Doha Round WTO Expansion Agenda Remains Deadlocked for More than a Decade, Today's “Big Breakthrough” Amounts to: Developing Nations Force Waiver of Existing WTO Ag Rules, Nations Agree to Finish Deal by July to Update Customs Procedures, Previously-Agreed Trade Benefits for Least Developed Nations Adopted

After nearly two decades of futile efforts to expand the authority and scope of the World Trade Organization (WTO), another WTO Ministerial meltdown was averted in Bali today when the United States agreed to a waiver for existing WTO agricultural rules that developing countries had demanded to help ensure food security for their populations.

Countries also are poised to agree to finalize a “trade facilitation” deal by July 2014 that would require countries to update customs procedures, and to formally adopt a package of trade benefits for the poorest nations that was agreed to years ago. The other texts issued from the meeting merely “affirm” past agreements. Notably, agreement could not even be reached to force compliance with a 2005 WTO decision that all countries must eliminate agricultural export subsidies by 2013, which has not occurred.

Live from Bali: WTO to Blame for WTO's Failures (not India)

Protests supporting India's position outside (above) and inside (below) the 9th WTO Ministerial in Bali, Indonesia.

During this week’s 9^th World Trade Organization (WTO) Ministerial in Bali, activists, largely led by Indian farmers' groups, have been gathering in the halls, chanting “food sovereignty now!” and carrying signs reading “USA – Hands off our food!” and “Support the right to food.”  Farmers, fisherman, and other members of civil society have also been protesting in large numbers against the Ministerial.

These actions are juxtaposed against finger-pointing by the U.S., other developed countries, and the mainstream media, which have been blaming India for the possible collapse of the talks in Bali (see: BBC, Financial Times, Washington Post, for example). Some are going so far as to imply that it is India’s stance that would be responsible for a resulting loss of legitimacy for the WTO and the entire multilateral trading system.

India’s transgression? Wanting to protect an ambitious and innovative law designed to address hunger and poverty in a nation that, according to the UN, is home to 25% of the world’s hungry poor. That law, the National Food Security Act, requires the Indian government to help pull the poorest farmers out of poverty by purchasing staple goods at a fixed price, and to feed the hungriest families by providing food at subsidized, below-market prices. 

India's not alone.  Latin American and African countries, not wanting to face WTO challenges for their own programs to increase access to food, have indicated support for India's defense of its food security initiative. 

The U.S. has labeled such programs as “trade-distorting.” But the hypocrisy of the U.S., which grants some of the highest levels of subsidies to its own farmers, totaling more than $14 billion in 2012 alone, remains an elephant in the room. That elephant has been largely unreported by the media and unmentioned in the speeches of U.S. officials that have criticized India’s refusal to subject food security to WTO rules.

Perhaps the real culprit of the WTO’s failure to produce a deal for nearly 19 years (a track record unlikely to be broken this week) is the WTO itself. The world's most powerful commerce agency continues to push an old model of globalization favored by corporate interests.  Despite opposition on a global scale, it has not proven willing to accept innovative approaches to address development concerns.  The breakdown of discussions in Bali (and before that in Seattle, Geneva, Cancun, Hong Kong...) is an unsurprising result of the WTO’s obstinate refusal to change –- not the result of a country’s decision to defend food security.

Will U.S. Face Trade Sanctions for Anti-Smoking Law?

As Deadline Passes for U.S. to Alter Law Curbing Teen Smoking, Ruled Against by WTO, Final Decision on Administration’s Anti-Smoking Policy Could Shift Back to WTO

As the World Trade Organization (WTO) deadline passes today for the United States to comply with a WTO ruling against a U.S. ban on sweet-flavored cigarettes targeting youth, the spotlight shifts back to the WTO, which could now authorize trade sanctions if requested by Indonesia, the country that won the WTO challenge.

“We now have to wait and see whether the World Trade Organization will slam us with trade sanctions because the United States wants to maintain a policy to keep tobacco companies away from our children,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “After last year’s rulings against U.S. dolphin protections and popular consumer labels letting Americans know where their food comes, will the WTO depart from its anti-consumer legacy or choose to punish the United States for a common sense public health law?” 

Yesterday, the Food and Drug Administration (FDA) requested public comment on an issue related to the WTO ruling: the health implications of menthol cigarettes. The Obama administration stated that FDA’s action constitutes compliance with a 2012 World Trade Organization order to alter a key component of the Obama administration’s landmark Family Smoking Prevention and Tobacco Control Act of 2009 (FSPTCA).

That law bans sweet-flavored cigarettes that entice youth to smoke. It shut down the sales of chocolate, strawberry and other sweet-flavored cigarettes sold only by U.S. firms as well as the sale of clove-flavored cigarettes that both U.S. and foreign tobacco companies were marketing. The WTO’s April 2012 final ruling against the FSPTCA concluded that the United States could only ban sweet-flavored cigarettes marketed to youth if it banned all flavored cigarettes, including menthols. The FDA will receive comments for 60 days on potential regulation of menthol cigarettes, after which the administration will decide what, if any, action will be taken.

It remains to be seen whether Indonesia will accept the FDA announcement or appeal to the WTO to enact trade sanctions against the United States. Indonesia convinced the WTO that the ban on its U.S. sale of clove-flavored cigarettes violated WTO anti-discrimination rules. U.S. consumer and health groups were outraged by the ruling, which effectively forbade incremental policies designed to target anti-smoking efforts at key populations – in this case, children.

The WTO’s April 2012 ruling against the anti-smoking FSPTCA law was soon followed by WTO rulings against two other popular U.S. consumer policies. In May 2012, the WTO ruled against voluntary “dolphin-safe” tuna labels that, by allowing consumers to choose to buy tuna caught without dolphin-killing fishing practices, have helped to dramatically reduce dolphin deaths. In June 2012, the WTO ruled against the popular U.S. country-of-origin labeling (COOL) meat labeling program that informs U.S. consumers where their meat comes from and assists regulators in tracking food-borne illness outbreaks.

The administration recently announced solutions to both cases that strengthen rather than weaken consumer and environmental safeguards. Mexico and Canada have threatened to challenge the new U.S. meat labeling policy at the WTO, which would issue a final decision about whether the new labels meet WTO rules. Mexico has also vowed to challenge the enhanced dolphin-safe labeling program, which would place that policy before the WTO as well. If the WTO does not rule that the strengthened U.S. safeguards satisfy WTO requirements, Mexico and Canada could impose trade sanctions against the United States unless and until the U.S. policies are changed to the satisfaction of the WTO.

Obama Administration Stands Firm on ‘Dolphin-Safe’ Tuna Labels; Will the WTO Authorize Trade Sanctions?

In Round 3 of Epic WTO v. Flipper Case, Mexico Hints That It Will Seek Trade Sanctions Against U.S. Over Response to Latest WTO Ruling Against Popular Dolphin-Safe Labels

In a creative response to a 2012 World Trade Organization (WTO) ruling, the National Oceanic and Atmospheric Administration (NOAA) has issued a new regulation supported by Public Citizen that strengthens the criteria for dolphin-safe labeling. Mexico, which challenged the policy, sought a rollback of the labeling program and has indicated that it may challenge the new regulation and seek WTO authorization to impose trade sanctions against the United States.

NOAA’s welcome announcement puts the spotlight back on the WTO, which must decide if it will accept the policy as meeting WTO rules or continue its legacy of undermining dolphin protection.

A U.S. ban on the sale of tuna caught with dolphin-deadly purse seine nets was gutted in 1997 after 1991 and 1994 trade challenges by Mexico and other nations. The ban was enacted after six million dolphins were killed by the nets. Outrage over the rollback triggered a new era of trade activism. Mexico’s latest challenge targeted the voluntary labeling policy that replaced the ban on dolphin-deadly tuna. This market-oriented approach provides consumers with information so they can decide if they prefer dolphin-safe tuna.

“Public Citizen applauds NOAA’s approach, which breaks with years of the U.S. government weakening consumer and environmental policies attacked at the WTO,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “We are now left to wait and wonder if the WTO will continue its anti-environmental, anti-consumer rights legacy or finally side with Flipper and consumers’ right to make informed decisions about the food we purchase.”

In a controversial move, the WTO ruled in 2012 that the U.S. labeling program, for which many countries’ tuna qualifies, violated WTO non-discrimination rules because tuna caught in the Eastern Tropical Pacific (ETP) had to meet additional criteria to qualify for the label. The ETP is the only region where dolphins are known to congregate above schools of tuna. Thus, dolphin-safe criteria for that region are set by the Inter-American Tropical Tuna Commission (IATTC), an international body that includes Mexico, and apply to all fishers operating there.

The U.S. labeling regime is voluntary. If U.S. or Mexican fishers choose to use the dolphin-safe methods stipulated by the regime, their tuna qualifies for U.S. dolphin-safe labels. Tuna not meeting the standard can be sold in the United States without the label. U.S., Ecuadorean and other tuna fleets chose to meet the dolphin-safe standard. After decades of refusing to transition to more dolphin-safe fishing methods, Mexico challenged the labeling program at the WTO. The WTO ruled against the policy even though the same standards applied to U.S. fishers, though the alleged discrimination resulted from Mexican fishers’ decision not to meet the standard, and though Mexican tuna could be sold in the United States without the dolphin-safe label.

NOAA’s new policy, supported by Public Citizen and other consumer and environmental groups, addresses the discrimination claim by strengthening the criteria used to assure that tuna caught in other regions and sold under the dolphin-safe label is caught without injuring or killing dolphins. Even before this improvement, the labels contributed to a more than 97 percent reduction in tuna-fishing-related dolphin deaths in the past 25 years. The labels allow consumers to “vote with their dollars” for dolphin-safe methods.

Mexico has stated that it is “analyzing all the available legal mechanisms” to push the United States to alter its response, which includes requesting WTO authorization to impose trade sanctions against the United States. WTO approval of such sanctions would continue the saga of WTO interference with countries’ environmental policies and reinforce the anti-WTO public sentiment spurred by last year’s spate of anti-consumer WTO rulings. In April 2012, the WTO ruled against the Obama administration’s flavored cigarettes ban used to curb youth smoking, and in June 2012 it ruled against the popular U.S. country-of-origin labeling (COOL) program used to inform consumers where their meat comes from.

If the WTO decides that the new policy does not meet its requirements, Mexico can impose trade sanctions against the United States until the policy is altered to the WTO’s satisfaction. If sanctions are authorized, the administration may find the best response to be maintaining the new regulation and negotiating a settlement with Mexico. This was the European Union’s approach after a WTO ruling against its ban on artificial beef hormones that is widely popular with consumers. U.S. environmentalists have won repeated court cases stopping attempts by the George W. Bush and Clinton administrations to weaken the regulations defining the criteria for obtaining a dolphin-safe label under the current law. Thus, absent a negotiated settlement, the administration would face the prospect of having to seek a congressional rollback of a widely popular law, effectively asking Congress to feed Flipper to the WTO.

“The troubling trend of repeated successful WTO attacks against America’s dolphin protection and consumer information policies shows how the terms of our current ‘trade’ agreements can undermine core environmental and consumer safeguards,” said Wallach. “As the Obama administration now seeks to expand the same sort of rules in new Trans-Atlantic and Trans-Pacific pacts it is negotiating, the public is taking note.”

Verizon Sees “Trade” Deal as the Next “Share Everything” Plan

We’ve often reported on the surprising array of “non-trade” issues tucked away in so-called “trade” deals.  Today’s “trade” agreements implicate daily facets of life from medicine prices to Internet freedom to food safety standards.  This week Verizon added another sensitive area to that “trade”-implicated list: personal privacy. 

Corporate events in Washington have been abuzz with talk of two new “trade” agreements: the Trans-Atlantic Free Trade Agreement (TAFTA) between the U.S. and EU, and the Trade in Services Agreement (TISA) involving the U.S., EU and 20 other countries.  Both deals aim to use World Trade Organization rules hatched in the deregulation-happy 1990s as the blueprint for restricting the regulation of service sectors such as telecommunications.

Why should we care about “trade” rules impacting telecommunications policies?  In a word: privacy.  Last week’s landmark leak from Edward Snowden revealed that the U.S. National Security Agency is indiscriminately spying on Verizon customers’ telephone records. This week, a Verizon representative speaking on a pro-TISA panel expressed the company’s hope that the “trade” deal can be used to keep privacy policies in check.  (It was perhaps not the most couth timing for Verizon-produced criticism of privacy protections.) 

The Verizon rep was probably most disgruntled about privacy policies in the EU, a negotiating member of TISA and TAFTA.  The EU’s data privacy protections are significantly more rigorous than those in the U.S. in ensuring that private data can be kept private.  And EU law requires U.S. corporations to meet seven privacy criteria before transferring Europeans’ phone, health, and financial records to the United States, in part due to (now confirmed) fears that the U.S. government could access the private data under the broad provisions of the Patriot Act.  But it appears that Verizon would now like to place these EU cross-border data privacy protections in TISA’s crosshairs.  During the TISA event, the Verizon rep stated that the deal should be used to “make sure that privacy rules do not undermine these seamless data flows” between other TISA countries and the U.S. 

As much of the country criticizes the NSA for secretly collecting private phone records from everyone with a Verizon phone, Verizon itself is taking a different tack: naming “privacy rules” as excessive and “seamless data flows” as insufficient.  They seem to have the diagnosis backwards. 

But through TISA and TAFTA, Verizon clearly hopes to advance that diagnosis, using the deals as a second "Share Everything" plan: an opportunity to impose a ceiling on data privacy protections for the company’s convenience. 

The NSA-Verizon scandal will not help their cause.  U.S. trade officials acknowledged this week that the Verizon data handover, along with NSA’s PRISM spying program, is fueling criticism in Europe of the proposed “trade” deals.  It turns out that the Europeans aren’t too anxious to “seamlessly” transfer their personal information to servers falling under blanket government surveillance.  Having already unwittingly handed over our own information, that's a position those of us in the U.S. should understand. 

USDA Stands Firm on Consumer Meat Labels, but Will the WTO Continue its Anti-Consumer Legacy and Authorize Trade Sanctions?

Today, on the deadline for the United States to comply with the World Trade Organization’s (WTO) 2012 ruling against the popular U.S. country-of-origin labeling (COOL) meat labeling program, the U.S. Department of Agriculture (USDA) announced it will strengthen rather than eliminate or weaken the consumer label. The welcome decision raises the critical question: will the WTO accept the change supported by 87 percent of the U.S. public or continue its legacy of undermining consumer safeguards?

Mexico and Canada, the countries that won a final June 2012 WTO ruling against COOL, stated that they opposed the proposed U.S. resolution to the case released in March, which closely aligns with today’s final rule, and would challenge it as a WTO violation. Under WTO rules, if the countries contest the new U.S. regulations, the WTO will decide whether the new U.S. policy complies with WTO requirements, or whether Mexico and Canada may impose trade sanctions against the United States.

Consumer groups have applauded the USDA approach, which stands in stark contrast to past U.S. responses to WTO rulings, which have involved weakening public interest safeguards ruled against by the WTO. The new USDA rule eliminates the WTO violations identified in this case and complies with the WTO ruling, but does so by strengthening the consumer labels.

The WTO ruling against the COOL meat labels, which inform U.S. consumers where their meat comes from and assist regulators in tracking food-borne illness outbreaks, followed WTO rulings against two other popular U.S. consumer policies. In May 2012 the WTO ruled against voluntary “dolphin-safe” tuna labels that, by allowing consumers to choose to buy tuna caught without dolphin-killing fishing practices, have helped to dramatically reduce dolphin deaths. In April 2012, the WTO ruled against a U.S. ban on clove-, candy- and cola-flavored cigarettes, enacted to curb youth smoking.

For the COOL case, USDA found a way to rectify the specific WTO rule violations identified in the WTO’s final ruling by giving consumers even more information about the country of origin of the beef and pork they consume. The WTO ruling had identified ambiguities in the labels that limited consumer information as a reason why the policy violated WTO rules. In filing the case, Mexico and Canada had sought an elimination of mandatory U.S. country-of-origin labeling. 

If the WTO accepts the strengthening of COOL as compliance with its final ruling, it will mark a stark departure from precedent. WTO lawyers are accustomed to seeing governments scuttle constituent interests and roll back domestic policies in an attempt to comply with WTO directives. If the WTO does not accept USDA’s new policy and instead authorizes trade sanctions against the United States, it will reinforce the anti-WTO public sentiment spurred by last year’s spate of anti-consumer rulings.

Mexico and Canada Openly Threaten Retaliation

The question of the WTO’s determination of U.S. compliance is relevant because Mexico and Canada may well challenge USDA’s final rule, shifting the decision back to a WTO panel. When USDA released its rule change proposal in March, Canada’s Agriculture Minister Gerry Ritz minced no words in stating: “Our Government is extremely disappointed with the proposed regulatory changes put forward by the United States today with respect to Country of Origin Labeling. We do not believe that the proposed changes will bring the United States into compliance with its WTO obligations.” A letter from the Mexican Embassy identically stated that the regulatory change “will not bring the United States into compliance with its WTO obligations.”

Both Canada and Mexico have already threatened retaliatory action, which the WTO will authorize if it deems that USDA’s new rule to provide consumers with further information about their food does not satisfy WTO rules. The list of punishments that the WTO could impose on the United States for maintenance of country-of-origin meat labels include U.S. taxpayer compensation to Mexico and Canada, or authorization of trade sanctions by those countries against the United States. Mexico has already voiced its support for the latter, stating in March that if USDA would not abandon its proposed strengthening of COOL, “Mexico would be forced to pursue the available mechanisms for withdrawing trade benefits from the United States.”   

The open threats of retaliation from Mexico and Canada come while both countries are engaged in negotiations with the United States on the Trans-Pacific Partnership (TPP), the sweeping “free trade” agreement (FTA) that the Obama administration is currently negotiating with 10 Pacific Rim countries. The hard line that Mexico and Canada appear ready to take against the United States on COOL will at least significantly complicate the TPP negotiations. Most observers, including TPP proponents, have already given up hope that the negotiating governments will meet their goal of concluding negotiations by this October’s Asia-Pacific Economic Cooperation summit. Fresh tension from the COOL dispute will only further encumber TPP negotiations.

Background on COOL, the WTO Dispute and the USDA Rule

After 50 years of U.S. government experimentation with voluntary country-of-origin meat labeling and efforts by U.S. consumer groups to institute a mandatory program, Congress enacted mandatory labeling for meat in the 2008 farm bill. The policy requires American retailers to label certain foods with the country (or countries) in which animals were born, raised and slaughtered. Polls indicate that 90 percent of the U.S. public approves of COOL.

In their successful WTO challenge, Mexico and Canada argued that the mandatory program violated the limits that the WTO sets on what sorts of product-related “technical regulations” WTO countries are permitted to apply. Canada and Mexico suggested that the United States should eliminate mandatory labeling and return to voluntary COOL, or to standards suggested by the Codex Alimentarius, which is an international food standards body at which numerous international food firms play a central role. Neither option would provide U.S. consumers with the same level of information as the current U.S. labels.

Instead of pursuing such a watering down of the popular program, USDA proposed a COOL rule change in March 2013 that would strengthen the labeling regime to address the problems identified in the WTO’s ruling. Today’s final rule from USDA maintains that approach. The WTO’s Appellate Body ruled that the program’s requirement that meat producers gather a greater amount of information about meat origins than is ultimately conveyed to consumers downstream violated WTO requirements. To address this concern, USDA’s new rule will offer consumers more precise labels that specify the country in which each step in the meat production process occurred. The change will better fulfill COOL’s policy objective and consumers’ rising demand for greater transparency regarding the production of their food, while also satisfying the issues raised in the WTO’s final ruling. 

Public Citizen and Sierra Club Denounce World Trade Organization Attack on Successful Clean Energy Program

In Final Appeals Ruling, WTO Orders Canada to Roll Back Green Jobs Program

A World Trade Organization (WTO) final ruling against Ontario’s successful renewable energy incentives program, which has reduced carbon emissions and created clean energy jobs, underscores the threat the WTO poses to a clean energy future, Public Citizen and Sierra Club said today.

In November 2012, the WTO ruled that Ontario’s incentives program for renewable energy companies at home – or “feed-in tariff” program – violates WTO rules that forbid treating local or domestic firms and products differently from foreign firms and products. On Monday, the WTO struck down Canada’s appeal of that initial ruling in a decision that went even further to condemn the green jobs program as a violation of WTO rules.

“By ordering the rollback of a successful program that is reducing carbon pollution and creating green jobs after recently sacking three popular U.S. consumer protection policies, the WTO is destroying whatever shred of legitimacy it still had after years of imposing its anti-consumer, anti-environment dictates,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Just like the WTO rulings ordering the U.S. to gut popular laws on country-of-origin meat labels, dolphin-safe tuna labels and limits on candy-flavored cigarettes marketed to kids, this latest attack against an initiative promoting renewable energy, localization and green job creation is simply unacceptable.”

Ontario’s renewable energy incentives program was established under the Green Energy and Green Economy Act of 2009. It increases incentives to develop clean and safe renewable energy by guaranteeing that the provincial public electricity utility, Ontario Power Authority, will pay a preferential price for 20 years to companies for the wind, solar and other clean energies they produce. Although the program is new, it already has achieved significant success, including contracts for an estimated 4,600 megawatts worth of clean energy and the creation of more than 20,000 jobs in just two years.

“As people around the world grapple with consequences of the climate crisis, their governments should and must use every tool available to reduce dangerous carbon pollution and create new clean energy jobs,” said Ilana Solomon, Sierra Club trade representative. “To avoid climate chaos, the WTO needs to get out of the way of innovative and successful climate solutions and job creators.”

The Sierra Club and Public Citizen support calls of Canadian allies, including the Council of Canadians, to keep Ontario’s renewable energy incentives program in place.

Global Civil Society Expresses Rejection of the Report, “The Future of Trade: The Challenges of Convergence”

The following media release was issued by the global Our World is Not for Sale (OWINFS) network rejecting a panel report released yesterday at the World Trade Organization (WTO). Public Citizen's Global Trade Watch is a participating member of OWINFS.

April 24, 2013 -- Global Civil Society Expresses Rejection of the Report, “The Future of Trade: The Challenges of Convergence”

Contact: Deborah James +41 (0) 76 652 6813

Civil society experts from the global Our World Is Not for Sale (OWINFS) network expressed rejection of the panel report “The Future of Trade: The Challenges of Convergence,” released today at the World Trade Organization (WTO), both in terms of its content and process.

Last year, at the time of the launching of the panel, OWINFS sent a letter to Pascal Lamy objecting to the formation of the panel, in terms of its lack of diversity, such as its exclusion of LDCs, its inclusion of only one Latin American and one African, its exclusion of the United Nations Conference on Trade and Development (UNCTAD), and its paucity of participation by civil society beyond the private business sector.

Today, at the launching of the panel’s report, we reiterate our criticism that we “find the process of the composition of the panel to have been autocratic and not in keeping with the rhetoric of a member-driven organization.” It was clear that even despite the best efforts of representative organizations such as the International Trade Union Confederation (ITUC), which participated in the panel, to include issues such as “to have the dominant context of inequality and unemployment recognised and the trade regime located in the context of a failed model of globalization,” such concerns were not included in the final text.

Two representatives of the OWINFS network intervened in the public discussion of the report at the WTO. Deborah James told the audience that based on this lack of representation, “it is thus no surprise that even though the report alleges to be focused on not immediate issues but the future, the report them makes specific recommendation to accept Trade Facilitation – which is the current demand of developed countries – for the proposed Bali package!

“At the same time, the report does not call for approval of the LDC (Least Developed Country) package demanded by the LDCs. And it does not deal with emergence of the Food Crisis and need for more policy space for developing countries to feed their poor including increasing livelihood of their poor farmers, which we all know is the emphasis of the G33 proposal. These – along with a fundamental re-taking up of the Implementation agenda issues – are the first steps of the changes needed to be made towards the transformation of the global trading system, to address historical inequities and asymmetries between developed and developing countries, and between benefits for corporations, and the negative impacts on workers and farmers. And I am quite aghast that the report even goes so far as to endorse the long-term developed country proposals that were explicitly rejected by developing countries in Cancun, of course I’m talking about the Singapore issues of competition policy and investment.

“So this report does not have any legitimacy; because it does not reflect the membership of the WTO, and therefore, with all due respect to the hard work of the participants, it must be said that it has no role in the future of the negotiations. This is a point that has already been made by several members at the last General Council meeting. But I also fail to see any way that this report reflects any future pathway of using trade for development, which is not even appear to be its goal, but rather I’m afraid that we must conclude that it is more reflection of the Secretariat’s continued emphasis on helping developed countries achieve their negotiating goals of simply expanding liberalization for the benefit of their corporations, rather than addressing the serious challenges facing the multinational trading system in terms of fundamental transformation needed to achieve trade for the true benefit of development and job creation.

Another member of the OWINFS network, Sanya Reid Smith of the Third World Network, said:

“I would like to thank the panelists for their work. I’ve just been speed-reading, so I haven’t finished reading it thought yet. From what I’ve read so far: in addition to concerns raised by OWINFS, I would repeat that at the beginning, the report says that trade is a means, not and end. Presumably for developing countries, development is the end goal. So it is interesting then that the report is about convergence of trade regimes, not convergence of levels of development. Usually in development, we talk about developing countries reaching desired levels of development, ie a convergence of development levels. So report seems to be about a convergence of trade regimes regardless of the levels of development as fixed time specific goals based on actual levels of development. (And as have seen, because of the financial crisis or HIV/AIDS etc, countries can actually go backwards in objective development indicators like life expectancy). This is despite the fact that there is a commitment to Special and Differential Treatment (SDT) throughout the WTO's rules. I recognize that the comments of some panelists who said that they personally don't believe in convergence at any cost, but the report itself appears to recommend violating or amending current WTO rules on SDT including for LDC status which is set objectively by UN.

Also I am shocked to see that proposal by one developed WTO Member to multilateralise the FTAs appears taken up as recommendation.

So as to future of this report, this panel was established by the Director General, Lamy, on his own responsibility. WTO Members did not choose panel members and did not set terms of reference or review the report before it came out, or agree to the text. So as raised by WTO Members in the past, the report does not seem to be grounds for basis for ministerial conference or any further work."

 

OWINFS is a global network of NGOs and social movements working for a sustainable, socially just, and democratic multilateral trading system. www.ourworldisnotforsale.org.

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The Obama Administration Wants to Sell You a Used Trade Policy

The Office of the U.S. Trade Representative (USTR) just released the 2012 annual trade report and 2013 trade agenda of the President.  It reads a bit like a used car salesman trying to do his best with a lemon.  The report/car’s well-polished sheen looks pretty… until you take a peek under the hood. 

Take the first sentence: “Trade is helping to drive the success of President Obama’s strategy to grow the U.S. economy and support jobs for more Americans.”  Almost makes you forget that last year’s non-oil trade deficit rose to a five-year high, implying the loss of millions of jobs, doesn’t it?  How about the second sentence: “The Obama Administration’s trade policy helps U.S. exporters gain access to billions of customers beyond our borders to support economic growth in the United States and in markets worldwide.”  That’s an interesting way to frame a year whose sluggish two percent export growth rate put us 18 years behind schedule in achieving Obama’s export-doubling goal.  The report continues on with its pitch, trying its darndest to pretty up what amounts to a year of ugly trade policy impacts for workers and consumers, and what appears to be more of the same planned for the 2013 trade agenda. 

Before you buy this “certified pre-owned” trade policy, let us help interpret some of the report's glossy claims:

Fast Track

The report’s first page features these two sentences: “To facilitate the conclusion, approval, and implementation of market-opening negotiating efforts, we will also work with Congress on Trade Promotion Authority. Such authority will guide current and future negotiations, and will thus support a jobs-focused trade agenda moving forward.”  Those lines have prompted a frenzy of press speculation that the Obama administration could ask Congress for Fast Track, the controversial tool that presidents from Nixon to Bush II have used to seize Congress' constitutional prerogative to set trade policy.  Fast Track has been newly euphemized as "Trade Promotion Authority." (It's not a "clunker," it's a "mechanic's dream.")  Much of the press hubbub has been over whether or not Congress would or should revive the "politically contentious" Fast Track authority for Obama. But that's not the right question. We should be asking: what kind of trade negotiating system should replace Fast Track?  It's time for a modern, democratic trade negotiating process to replace an autocratic Fast Track system that predates disco. 

It's interesting that the administration decided to devote two lone sentences to Fast Track in a 382-page report. Why not be more forthright in heralding a new push for Fast Track?  Because when asking for something unpopular, it makes sense to whisper.  And Fast Track is vastly unpopular.  Before being allowed to die in 2007, Fast Track was a Nixon-conceived attempt to sidestep checks, balances and other pesky features of a democratic republic by taking from Congress its Constitution-granted prerogative to determine trade policy. In one fell swoop, Fast Track 1) delegated away Congress’ authority to choose trade partners and set the substantive rules for “trade” pacts that have deep ramifications for broad swaths of non-trade domestic policy, 2) permitted the executive branch to sign and enter into FTAs before Congress voted on them, 3) forced a congressional vote on FTAs, and 4) suspended amendments and truncated debate when that vote occurred.  It was under this legislative luge run that we got NAFTA, CAFTA, the Korea FTA, etc.  Fast Track's extreme approach has created many an opponent (right, left, and center), spurring politically costly battles for past presidents that have attempted to wrest the unpopular authority from Congress.  

If Fast Track carries such political liability, why is the Obama administration pursuing it?  Well, according to today's report, it's to “facilitate” the passage of FTAs like the TPP (see below).  But if the TPP is such a “high-standard” agreement, what’s the harm in letting Congress get a good look at it, rather than handcuffing their involvement with Fast Track?  Doing so would save Obama the political grief of a Fast Track fight.  Or maybe there’s something even more objectionable about the TPP itself that requires Fast Track’s unparalleled sequestration of congressional power to get the deal enacted?  

Again, the choice is not Fast Track or no Fast Track.  It's Fast Track or a sensible model of trade policymaking for a modern democracy.  A new model of delegated authority would respect Congress' responsibility to play the lead role in determining the outcome of “trade” deals that intend to rewrite policies regarding financial regulation, immigration, climate and energy policy, healthcare, food safety, etc.  

Trans-Pacific Partnership

USTR reiterates throughout the report its standard definition of the Trans-Pacific Partnership (TPP) as “a high-standard regional trade agreement that will link the United States to dynamic economies throughout the rapidly growing Asia-Pacific region.” (italics added)  The primary problem with this pitch is that we’re already quite linked with these economies -- as in, 90 percent linked.  The United States already has trade deals with six of the seven largest TPP negotiating economies, which constitute 90 percent of the combined GDP of the negotiating bloc.  The TPP “dynamic economies” with which we don’t already have liberalized trade include Vietnam, where annual income per person is $1,374, and Brunei, which has a population smaller than Huntsville, Alabama.  As we’ve said time and again, this deal is not primarily about trade. 

What is it about?  It's about banning Buy American policies that support U.S. jobs; discreetly enacting provisions of the congressionally-defeated, Internet-freedom-threatening Stop Online Piracy Act; restricting safety standards for imported food; empowering foreign investors to directly challenge governments’ public health and environmental policies while demanding taxpayer compensation for “expected future profits;” counteracting efforts to reregulate Wall Street; giving pharmaceutical corporations better tools to undermine drug cost containment policies; and more.  USTR appears to have omitted such details in today's report.   

Under a section entitled “Inclusion of stakeholders at Trans-Pacific Partnership negotiations,” USTR boasts that “Stakeholder engagements and briefings provided an opportunity for the public to interact with negotiators from all of the participating countries and provide presentations on various trade issues, including public health, textiles, investment, labor and the environment.”  We have indeed given such presentations…while TPP negotiators were simultaneously scheduled to be on the other side of the negotiating venue.  It’s hard to engage trade negotiators who are supposed to be in two places at once.  We do appreciate the attempt at engagement, but would appreciate a more concerted effort. 

After patting its back for being “open” and having “unprecedented direct engagement with stakeholders,” USTR includes this: “At the same time, the Administration will vigorously defend and work to preserve the integrity of confidential negotiations, because they present the greatest opportunity to achieve agreements that fulfill U.S. trade negotiation objectives.”  Here USTR is trying to explain the equivalent of a used car's missing motor: an unbending commitment to not release the TPP negotiating text.  While claiming “unprecedented” engagement with stakeholders, USTR’s decision to keep the TPP negotiating text secret from the public, the press, and even congressional offices is “unprecedented” among 21st-Century trade deals of this scope.  The World Trade Organization (WTO), hardly a paragon of transparency, posts key texts online for public review. In addition, when the last major regional “trade” agreement (the Free Trade Area of the Americas) was at the same stage as the TPP is now, the text was formally released by the U.S. and other negotiating governments (in 2001). It’s hard to claim genuine engagement with stakeholders when those stakeholders cannot see the thing in which they hold such a stake. 

Trans-Atlantic FTA

The report reiterates President Obama’s State of the Union surprise: that the United States intends to not just negotiate a NAFTA-style pact spanning the Pacific (the TPP), but also one spanning the Atlantic. In brief discussion of the Trans-Atlantic FTA (TAFTA), the report says, “Such a partnership would include ambitious reciprocal market opening in goods, services, and investment, and would offer additional opportunities for modernizing trade rules and identifying new means of reducing the non-tariff barriers that now constitute the most significant obstacle to increased transatlantic trade.”  But this deal, even more than most, is not about trade.  Says who?  USTR itself.  U.S. Trade Representative Ron Kirk, in a briefing on the deal said that the administration has resisted including the word “trade” in the name of the deal “because it is so much broader than trade.” 

With tariff levels already quite low between Europe and the United States, this FTA appears to be primarily about those “non-tariff barriers” standing in the way of “regulatory coherence.”  What might such opaque terms mean?  In the past, they have been code for a lowest-common-denominator approach to reducing all those safety, environmental, health, financial stability and other domestic regulations that corporations have not been able to roll back via domestic pressure.  “Trade” deals provide a handy forum in which to write binding rules that contravene such regulations.  What regulations in particular might be on the hoped-for chopping block?  European firms have already taken aim at U.S. financial regulations, while U.S. corporations have long been annoyed by Europe’s tougher policies against unsafe food, GMOs, and carbon emissions.  Big agribusiness, oil and gas, chemical, and financial firms on both sides of the Atlantic may be hoping to undermine such policies in a new TAFTA, to the detriment of, well, just about everyone else. 

Exports and Jobs

The report informs the reader that “Data from 2012 showed that every $1 billion in U.S. goods exports supported an estimated nearly 5,400 American jobs...”  Good to know.  What about an additional $1 billion in imports?  As per usual, USTR trumpets the gains of exports without looking at the other side of the trade equation.  In the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically occurred last year.  The non-oil U.S. deficit in goods rose six percent in 2012 to $628 billion, the largest non-oil U.S. trade deficit in the last five years.  According to the Obama administration’s own math, that degree of negative net exports implies the loss of 3.4 million jobs.  That data from 2012 didn’t make it into the report. 

Readers of Eyes on Trade know that U.S. exports to Korea under the Korea FTA have been faring particularly poorly: they fell 10 percent in 2012 after the deal took effect (compared to the same months for 2011).  How did USTR deal with this inconvenient truth in its annual report?  It didn’t.  With respect to the three FTAs implemented in 2012, the report states “…in 2013 we will work with Korea, Colombia, and Panama to ensure that the bilateral trade agreements that went into effect last year continue to operate smoothly…”  A ten percent fall in exports for a deal that was sold under the unrelenting promise of “More Exports. More Jobs?”  Real smooth.  It seems that these are not the things one mentions in an annual report when one’s accompanying agenda for the next year includes more of the same FTAs (e.g. TPP), sold under the same “More exports. More jobs” pitch.   

Buy American and Green Procurement Policies

Wonder why our exports and job growth has been so sub-par recently?  USTR thinks it has found the answer—that scourge of our economic woes called “localization.”  Here’s what the report has to say on the topic: “We are also actively combating “localization barriers to trade” – i.e., measures designed to protect, favor, or stimulate domestic industries, service providers, and/or intellectual property (IP) at the expense of goods, services, or IP from other countries…Localization barriers to trade that present significant market access obstacles and block or inhibit U.S. exports in many key markets and industries include: requiring goods to be produced locally; providing preferences for the purchase of domestically manufactured or produced goods and services; and requiring firms to transfer technology in order to trade in a foreign market…Building on progress made in 2012, the localization taskforce will coordinate an Administration-wide, all-hands-on-deck approach to tackle this growing challenge in bilateral, regional, and multilateral forums…” 

Before the USTR dedicates the few hands it has on deck to scour the globe for pernicious localization policies, it might want to check out a few of our own.  Namely, Buy American.  This program, widely-supported among Republicans, Democrats and independents, provides a textbook example of USTR’s definition of a “localization barrier.” Buy American explicitly “provides preferences for the purchase of domestically manufactured or produced goods,” by requiring that U.S. tax dollars be spent on domestic firms when the U.S. government purchases construction equipment, vehicles, office supplies, etc.  Did USTR have in mind the elimination of this job-supporting program? Their trade agenda would certainly indicate so –- the TPP and other FTAs ban the Buy American treatment for any foreign firms operating in new FTA partner countries. 

“Localization” also implicates Buy Local and other green procurement policies that governments are increasingly using to transition to a greener economy.  Ontario, for example, has employed a renewable energy program that requires energy generators to source solar cells and wind turbines from local businesses so as to cultivate a robust supply of green goods, services, and jobs.  The program has earned acclaim for its early success in generating 4,600 megawatts of renewable energy and 20,000 green jobs.  But one group hasn’t had much acclaim to offer: the WTO.  In a ruling at the end of last year, the WTO decided that the successful program’s local requirements violate WTO rules.  Today's report confirms indications that USTR now also intends to take on such climate-stabilizing “barriers to trade." Last month, the United States initiated a WTO case against India, attacking buy-local components of its solar energy policy.  A refurbished trade agenda that undermines an urgently-needed clean-energy agenda?  Sounds like a lemon. 

New Legal Analysis Shows How Obama Administration Can Avoid Trade Sanctions by Strengthening Popular Consumer Country-of-Origin Meat Labels Ruled Against by WTO

As May 2013 Deadline Looms, WTO Compliance Process Begins; USDA Sends Draft COOL Regulations to OMB

WASHINGTON, D.C. – The United States can avoid trade sanctions by strengthening consumer labeling rather than gutting the popular county-of-origin labeling (COOL) meat labeling program against which the World Trade Organization (WTO) ruled in 2012, said Public Citizen as it released a new legal analysis prepared for several consumer and farm groups by the trade law firm Stewart and Stewart.

“Ensuring American consumers’ right to know where their meat comes from must be the Obama administration’s priority,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The American public’s antipathy toward our current trade policies would be greatly intensified if a WTO ruling empowered big agribusiness corporations to sell mystery meat here, despite U.S. consumers and Congress demanding these labels on which we all rely in grocery stores nationwide.”

By July 2013, the United States must respond to three 2012 WTO rulings against popular consumer policies, including the country-of-origin meat labels, “dolphin-safe” tuna labels and a U.S. ban on clove-, candy- and cola-flavored cigarettes that was aimed to curb youth smoking. As of May 23, 2013, Mexico and Canada, which attacked the U.S. meat labels at the WTO, can obtain authorization to impose trade sanctions against the United States that would remain in effect until the policy is altered.

The new legal analysis shows how the United States can meet WTO rules by strengthening existing regulations to provide more information and more accurate details to consumers. The U.S. Department of Agriculture sent new draft COOL rules to the Office of Budget and Management on Friday.

Background:  After 50 years of U.S. government experimentation with voluntary labeling and efforts by U.S. consumer groups to institute a mandatory program, Congress enacted mandatory country-of-origin labeling for meat in the 2008 farm bill. The policy requires American retailers to label certain foods with the country (or countries) in which animals were born, raised or slaughtered. In their successful WTO challenge, Mexico and Canada argued that the mandatory program violated the limits that the WTO sets on what sorts of product-related “technical regulations” WTO countries are permitted to apply. Canada and Mexico suggested that the United States should eliminate mandatory labeling and return to voluntary COOL, or to standards suggested by the Codex Alimentarius, which is an international food standards body at which numerous international food firms play a central role. Neither option would provide U.S. consumers with the same level of information as the current U.S. labels.

View the report here.

Latest WTO Lunacy: Poker and Piracy Together at Last

Op-ed by Global Trade Watch Director Lori Wallach, published in The Huffington Post:

On Monday the World Trade Organization (WTO) officially authorized Caribbean nation Antigua to sell $21 million in "pirated" U.S.-copyrighted music, films and computer programs in retaliation for the United States failing to comply with a 2005 WTO order to allow online gambling here.

Say what? (And, no, this news was not sourced from a parody in The Onion.)

The case is an illustrated guide to much of what is wrong with the WTO. And, it should spotlight the lunacy of Obama administration plans to expand this dangerous "trade" agreement model via the Trans-Pacific Partnership (TPP) "free trade"agreement. More on that later. Let's tour what is now a full coop of WTO chickens that have come home to roost on this WTO case.

First, the backstory: in 2003, Antigua filed a case at the WTO claiming that U.S. laws banning Internet gambling violated WTO rules. The case, which some say was in fact the brainchild of an American attorney, Mark Mandel, who is handling the WTO litigation for Antigua, was joined by the European Union and other countries with major gambling industries. Antigua won a final ruling in 2005 and Monday's "sanctions" announcement was retaliation for the United States failing to change its domestic laws to comply with the WTO.

Why does the WTO have anything to say as to whether or not the U.S. Congress can ban Internet gambling, especially when the ban applies to domestic and foreign firms alike? Unlike past trade agreements, which focused on cutting tariffs, the WTO imposes expansive constraints on signatory governments' non-trade policies and establishes new corporate rights. The WTO's General Agreement on Trade in Services (GATS) limits how the U.S. government may regulate foreign service firms operating here and cross-border "trade" in services too. The WTO's Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement requires countries to provide expanded monopoly patent and copyright terms. (That's how U.S. drug patent monopolies got expanded from 17 to 20 years in 1994 when Congress OK'd U.S. WTO accession, overruling decades of congressional opposition to such patent extensions and costing us billions in higher drug prices, pocketed by WTO booster Big PhRMA.)

Yup, the appealing "free trade" brand was used to sell worldwide a Trojan horse delivery mechanism for a comprehensive set of policies that deeply invade domestic non-trade policymaking space. And, this horse has a kick. Unlike other international agreements, the WTO is strongly enforced.

Countries are required to conform their domestic policies to its rules and can be challenged in WTO tribunals if they don't. WTO tribunals rule against domestic laws 92 percent of the time. And if a country does not change its laws as ordered by the WTO, sanctions are authorized.

But wait, didn't WTO just authorize Antigua to violate U.S. copyrights? Welcome to the world of WTO "cross-retaliation." That is a WTO feature that the United States demanded. It wanted to be able to slap tariffs on developing countries' commodity exports (i.e. real trade) if these countries did not comply with the WTO's invasive drug patent, financial service deregulation and other one-size-fits-all dictates.

The delicious and tsunami-scale irony is that now Antigua (population 88,000 and GDP $1 billion) is being "borrowed" by gambling interests to cross-retaliate against the United States - by removing intellectual property rights from U.S. products in the first use of such a sanction. Except, wait, didn't Ralph Nader warn against just this scenario of some commercial interest finding a tiny country to attack U.S. public interest policies back when the WTO was being debated?

And, if you are looking for a silver lining, it is not that the WTO is that rare international organization where small, developing countries get a fair shake. Indeed, this case is Exhibit #1 that they do not. Rather, Antigua's move comes after seven years of the United States ignoring its initial WTO win. And, now that Antigua is trying to enforce, using a mechanism created by the United States itself, the comments from the U.S. Trade Representative's Office are ominous: "To be clear, the United States will not tolerate theft of intellectual property and will take whatever steps are most efficient and effective to prevent this from happening."

U.S. trade negotiators have threatened that Antigua will be harming its own interests if it follows through with enforcement. Hum...wonder if we'll soon hear about the threats to the students at Antigua's offshore American medical school of access to super-cheap on-line music and more... In all seriousness, Antigua will certainly face liabilities for enforcement actions, no matter how totally legal they are under WTO rules.

Which brings us back to the core point - the damaging WTO rules. By now you might be wondering about these vaunted benefits of the WTO that were promised by politicians and corporations alike back when the WTO was being considered by Congress.

Would those benefits include the 5 million U.S. manufacturing jobs that we have lost since the WTO went into effect? The exploding U.S. trade deficit that has slowed U.S. growth? Would the benefit be that the United States could face more trade sanctions unless it guts the country-of-origin meat labels we all rely on in the grocery store, the highly popular dolphin protections that we all know from the dolphin-safe labels on our tuna cans or our ban on the U.S. sale of sweet-flavored cigarettes used to hook kids on smoking? Yup, the WTO has ruled against all three popular policies and ordered the United States to gut them by this summer.

The vast gulf between promised WTO benefits and reality is especially worth considering now, as the Obama administration and the same exact corporate interests are trotting out the very same myths to try to sell Americans on the TPP negotiations.

In which the WTO Beats a Dead Horse with another Dead Horse

The World Trade Organization (WTO) has two dead horses on its hands: Doha – the deceased WTO round that has long awaited a proper burial – and the paternalist development model.  The latter is epitomized by WTO and International Monetary Fund (IMF) policy impositions on developing countries that crescendoed in the 1990’s, but have taken a global battering ever since.  The WTO seems to think that using one dead horse, the we-know-what’s-best-for-you development approach, to beat the other, Doha, will reanimate both. Call me crazy, but beating one dead horse with another doesn’t seem like a winning strategy.

The WTO disagrees, WTO Director-General Pascal Lamy particularly disagrees, and some developed countries of the WTO aggressively disagree.  They have picked a new name for the dead horse embodying the paternalist development model: “trade facilitation.”  This euphemistic WTO proposal would have developing countries spend their own limited funds to improve their import infrastructure, i.e. customs and port facilities. WTO adherents are pegging their hopes of Doha resuscitation to this new scheme.  In Friday’s issue of The Guardian, Pascal Lamy singles out the trade facilitation agenda as the best hope this year for reviving the much-chagrined Doha round. EU Ambassador to the WTO Angelos Pangratis argues that “most delegations” realize the “vast benefits” that trade facilitation brings “both in terms of intrinsic economic value, as well as systematically.”

Really?  If there’s such widespread agreement on the benefits of trade facilitation, why does the Doha trade facilitation negotiating text have about 650 square brackets, each one indicating disagreed-upon text (according to Washington Trade Daily)?

The significance of that number of edits is being downplayed by the trade facilitation negotiations chair Eduardo Ernesto.  Meanwhile Pascal Lamy is hard at work selling trade facilitation as “essentially about making trade, both imports and exports, easier and less costly.”

Less costly for who, Mr. Lamy? For developing countries whose strained budgets must now make room for outsider-requested line items of bigger ports and more customs personnel?  Less costly for farmers in those same developing countries who would be outcompeted in their local markets by increasing flows of subsidized imports?  

Let’s look at that again: the World Trade Organization would have developing countries paying the cost of importing more goods, including agricultural products that would, and have, put their own small farmers out of business, bringing increases in unemployment, immigration, and food insecurity.  Even more, the added budgetary cost of refurbishing imports infrastructure would place greater pressure on developing country governments to cut education/training programs that might help those displaced farmers.  So “trade facilitation” could cost the livelihood of farmers, and the ability of the government to support that sizeable population.

Mr. Lamy, your belief that “trade facilitation” makes trade “less costly” is measuring “costs” in the wrong way.  

New Year's Resolution for the WTO: Let Countries Regulate Finance

Here's a new year's resolution for the World Trade Organization (WTO): make sure prevailing trade law does not prevent countries from enacting policies to prevent a next financial crisis.   

Back in October, civil society organizations across the globe urged the World Trade Organization’s Committee on Trade in Financial Services (CTFS) to hold a clarifying discussion about countries’ ability under WTO rules to employ crucial capital controls and other measures to avoid and mitigate financial crises.  To that end, more than 100 organizations from across the globe participated in weeks of advocacy in support of a discussion proposal submitted by WTO member state Ecuador, releasing an impressive statement, penning op-eds, sending letters to officials, arranging meetings with ministries, and reaching out to the press.

Civil society’s persistence paid off when, at the December 5, 2012 CTFS meeting, the Committee agreed by consensus to approve the framework of Ecuador’s proposed “dedicated and focused discussion” on the experiences of WTO Members in introducing prudential measures, including macroprudential regulations or policy measures.  The discussion will be held at the first quarterly meeting of the CTFS in March 2013, with the possibility of continued discussion at the following quarterly meeting in June of the same year.

Such a clarifying discussion is timely and important because more than 100 countries (including 40 developing nations) have financial services commitments under WTO’s General Agreement on Trade in Services (GATS).  Countries that have made such commitments now face the danger that GATS rules could prohibit the usage of policy tools needed to ensure financial  stability (such as capital controls).  Given this potential contradiction between GATS and financial stability, countries face three options: (1) implement financial regulation and risk facing a WTO challenge, (2) choose not to institute a needed regulatory tool to avoid a threatened challenge, or (3) alter their GATS commitments and comply with WTO-mandated compensation to affected member states--an option that may be particularly infeasible for developing countries.

While the Committee’s agreement to simply hold a discussion on this topic may seem like a minor step, it is important to note that in 2011, the U.S., EU and Canada rejected the possibility of a review of the WTO rules in light of the financial crisis and then continued to block even a discussion in the Committee two additional times in 2012.  But pressure for such a discussion continued to mount.  In addition to the increased advocacy by consumer, labor and development organizations and growing support for a discussion by major developing countries, institutions such as the IMF have now officially shifted their position on the use of capital controls, endorsing them as a legitimate tool for financial stability.

The fact that a dedicated discussion will take place at the WTO signals that, thanks to Ecuador’s proposal and civil society’s call for action, these developed countries have been forced to acknowledge that it is necessary to address concerns about the compatibility of WTO rules with financial regulation priorities. We will be eager to see the outcome of this dedicated discussion this year.

World Trade Organization Attacks Successful Canadian Clean Energy Program

Sierra Club and Public Citizen Express Disappointment

Geneva – The World Trade Organization (WTO) has just announced a ruling against Ontario’s successful renewable energy incentives program that is designed to reduce carbon emissions and create clean energy jobs. This highlights the threat posed by the WTO to a clean energy future. The WTO ruled that Ontario’s renewable energy incentives – or “feed-in tariff” – program violated the WTO rules that forbid treating local or domestic firms and products differently from foreign firms and products.

"As countries take steps to address the climate crisis, the last thing we need is the WTO interfering with innovative climate programs. Ontario’s solar and wind incentives program seeks to reduce dangerous carbon pollution and create clean energy jobs, and it should serve as a model for other countries, not a punching bag," said Ilana Solomon, Sierra Club Trade Representative.

Ontario’s renewable energy incentives program was established under the Green Energy and Green Economy Act of 2009. It increases incentives to develop clean and safe renewable energy by guaranteeing the provincial public electricity utility, Ontario Power Authority, will pay a competitive price for 20 years to companies for the wind, solar, and other clean energies they produce. Although the program is new, it has already achieved significant success, including contracts for an estimated 4,600 megawatts worth of clean energy and the creation of more than 20,000 jobs.

"Only an attack on this sort of job-creating, climate-chaos-combating policy could put the WTO in worse repute than last year’s string of WTO rulings ordering us to gut popular U.S. laws on country-of-origin meat labels, dolphin-safe tuna labels and limits on candy-flavored cigarettes marketed to kids," said Lori Wallach, Public Citizen Global Trade Watch Director. "Combating the climate crisis and transitioning to a clean-energy economy must include relocalizing production and creating green jobs, so having the WTO declare that governments cannot do this is simply intolerable."

The Sierra Club and Public Citizen are particularly disappointed that the U.S. decided to weigh in on this case by submitting a third-party brief pointing out how Ontario’s program violated WTO rules.

"Instead of attacking another countries’ clean energy program, the U.S. government should focus on how we will build on our own solutions to tackle the climate crisis and create clean energy jobs," Solomon said.

This case follows an alarming trend of anti-environment and anti-consumer rulings at the WTO.   In May 2012, the WTO ruled against U.S. dolphin-safe tuna labels, which they said discriminated against Mexican tuna fishers. And in June 2012, the WTO ruled against the highly popular country-of-origin labeling (COOL) for meat, which shows American consumers where their food is coming from and helps health regulators track food safety issues. In April 2012, the WTO ruled against the Family Smoking Prevention and Tobacco Control Act of 2009, which bans the sale of candy and sweet-flavored cigarettes that attract youth to smoking.

What went down at the WTO Public Forum in Geneva?

In addition to building support for Ecuador's proposal to discuss financial regulation policy space at the World Trade Organization (WTO), members of the Our World Is Not for Sale Network (OWINFS) spent the week before the Oct. 1 discussion of Ecuador's proposal attending the annual WTO Public Forum in Geneva. Public Citizen joined an array of OWINFS partner organizations in seizing the opportunity to impress upon WTO member states that civil society stands behind countries' right to regulate finance.  

Opening Session:

Our own Melinda St. Louis asked the following question at the WTO Public Forum opening session (which was attended by over 700 government officials and stakeholders): 

“Rules governing trade in financial services were negotiated in the 1990s when financial deregulation was in vogue.  We believe that, to succeed, the multilateral trading system must make sure that it learns lessons from the global financial crisis.  The global consensus has now shifted toward the need for more regulation of the financial sector to ensure stability.  Therefore the WTO must ensure its coherence with that consensus toward more macroprudential financial regulation.  Many trade and finance experts have noted possible conflicts between WTO / FTA rules and some common-sense macroprudential regulations.  Recently labor, consumer and development organizations representing hundreds of millions of citizens around the globe signed a statement supporting a discussion at the WTO to ensure all members have confidence that WTO rules governing financial services could not hinder or chill macroprudential financial regulation. I hope this week will provide an opportunity for members and stakeholders to reflect on these lessons to ensure that the financial sector supports the real economy instead of spinning out of control and leading to instability.”

Director-General Pascal Lamy answered (paraphrasing):

“I’ve been debating this with Public Citizen for 10 years. Let me repeat as clearly as possible so that we don’t have a nightmare about something that has no chance of happening.  Especially in the financial services agreement – always and until today – a government can take regulatory action.  There has never been a case where a government was willing to take regulation that was challenged at the WTO.  Many topics deserve a lot of attention, but this one is already settled and any competent lawyer would tell you so.”

Globe-Spanning Civil Society Groups Push Forward Critical Discussion on WTO Rules and Financial Regulation

Last week, we blogged about a statement signed by over 100 civil society groups from around the globe who are campaigning and putting pressure on their respective governments to support Ecuador’s proposal for a conversation to take place at a meeting of the World Trade Organization's Committee on Trade in Financial Services (CTFS).  The objective of the discussion is to clarify whether WTO rules provide sufficient policy space for the financial reregulation necessary to avoid another global crisis.  

Many of the signatory organizations engaged in national and regional level media outreach and advocacy, and were able to get articles placed in key publications and engage with important government officials in their respective countries.

On Monday, October 1, Ecuador’s proposal was discussed at the CTFS. While minutes to the meeting will not be available for quite some time, it appears that no country blocked Ecuador’s proposal. Below, find a summary of the great work that has helped push toward a discussion of this critical issue at the CTFS.

Media:

• Center of Concern’s Aldo Caliari wrote a Spanish language piece that ran in Agenda Global in Peru and Uruguay.
• Professor Kevin Gallagher’s op-ed, “Trade rules should not constrain fixing global finance,” appeared in Al Jazeera.
• An article that appeared on October 1 in the Wall Street Journal noted that WTO Director General Lamy was forced to respond to questions raised about WTO rules and financial regulation.
• Inside US Trade’s “This Week in Trade” linked to the sign on statement and Public Citizen’s press release.
• The Brazilian Network for Peoples' Integration (REBRIP) translated and adapted the press release and sent it out to press in Brazil.
• Trade and Gender Initiative worked to place an op-ed in the Nigerian press.

Outreach/Advocacy:

• The European Consumers' Organization (BEUC), Centre for Research on Multinational Corporations (SOMO), Finance Watch, Financial Services User Group, and the European Federation of Financial Services Users (EuroFinuse) sent an open letter to EU Commissioners Barnier and DeGucht, calling on the European Union to support Ecuador’s Proposal, and did media outreach.  
• South African Labour organizations presented the sign-on statement and a specific request from labour to the South African government's Department of Trade and Industry (DTI), asking them to officially support the Ecuador proposal at a high-level meeting of the Technical Sectoral Liaison Committee (Teselico).  Teselico is a tripartite consultative forum to discuss matters relating to trade negotiations, under the Trade and Industry Chamber of Nedlac, the social dialogue structure in South Africa.
• The Federation of German Consumer Organizations (VZBZ) engaged on the topic with Ms. Micong Klimes, a German representative to the WTO who serves as the current Chair of the WTO’s Committee on Trade in Financial Services.
• The Argentine Federation of Commercial and Service Employees (FAECYS) engaged in direct advocacy with Argentina’s trade ministry, speaking specifically with Maria Ines Rodriguez, a ministry official representing Argentina in Geneva. The Citizen Forum for Justice and Human Rights (FOCO) forwarded a translation of the sign-on statement to other Argentine civil society organizations.
• Initiatives for Dialogue and Empowerment through Alternative Legal Services (IDEALS) reached out to Walden Bello, a representative from the Philippines, and members of CSOs
• REBRIP sent letters to the Brazilian Foreign Affairs Ministry and Finance Ministry calling on them to support Ecuador’s proposal.
• The Council of Canadians forwarded  the statement to Mark Carney, head of the Bank of Canada, as well as Canadian representatives in Geneva, the trade minister, and opposition critics.
• The Marcus Garvey Peoples' Political Party (MGPPP) worked to get the statement to relevant ministries in Jamaica and the Bank of Jamaica.
• The Consumers Protection Association engaged in direct advocacy with relevant ministries in Lesotho, which chairs the influential African group negotiating bloc at the WTO.
• Public Citizen circulated the sign-on statement to trade-focused media in the United States, as well as to Representative Barney Frank, co-author of the Dodd-Frank financial reform law.
• Tufts University’s Global Development and Environment Institute (GDAE) released a policy brief with analysis of the potential conflict between GATS / FTA financial services rules and capital controls.  GDAE sent the summary to its list of 15,000 academics, advocates and government officials.
• The International Trade Union Confederation reached out to national affiliates in target countries to encourage them to sign on to the statement.
• Consumers International circulated the statement to its member organizations around the world.
• A network of organizations pushing for a financial transactions tax also circulated the statement.

On Eve of Major WTO Meeting, 112 Civil Society Groups Tell U.S., EU: Stop Blocking Discussion of Strong Financial Regulation

On Monday, October 1^st, the World Trade Organization (WTO) will make a decision on Ecuador's proposal to set up a process to discuss whether WTO rules leave policy space for robust financial regulations, including capital controls. This week, 112 major global consumer, labor, environmental and development organizations issued a strong statement urging their governments to support Ecuador’s proposal and ensure that global “trade” rules do not undermine countries’ ability to strengthen their own financial regulations to avoid future crises.

The 112 civil society organizations comprising the impressive list of signatories represent hundreds of millions of members from 160 nations. This includes the International Trade Union Confederation (ITUC), which represents 175 million workers globally, and Consumers International, an umbrella organization of 240 consumer organizations operating in more than 120 countries.

A powerful bloc of countries supported a proposal for a formal review of these WTO rules in late 2011, but some WTO members, including the United States and the European Union, blocked it. Now, the same countries have indicated their intent to quash this proposal to even discuss the issue of policy space for crucial financial regulations, much less consider updates to the old rules.

More than 100 countries, including many developing nations, have commitments under the WTO financial services rules. Countries that seek to re-regulate the financial sectors that they previously bound to comply with the WTO’s regulatory limits could face a WTO challenge and trade sanctions. To avoid such liability, they would need to avoid sensible post-crisis policies, such as banning risky financial services, limiting the size of financial institutions, imposing firewalls between commercial and investment banking, and using capital controls. 

A clarifying discussion on the importance of capital controls, which even the IMF has accepted as a crucial policy, would be particularly timely.  The statement from the globe-spanning organizations notes that "we cannot afford to wait until the next financial crisis to ensure that countries’ WTO commitments do not interfere with or chill financial regulation.”

Victory for Public Health in Australia, But Big Tobacco Threatens Counterattack through Trade Pacts

Last week, public health advocates rejoiced when Australia’s High Court (its Supreme Court equivalent) upheld the country’s landmark tobacco control “plain packaging” laws against a legal attack from Big Tobacco.  Phillip Morris, British American Tobacco, Imperial Tobacco, and Japan Tobacco had sued the government, arguing that the new requirement to sell cigarettes packages with large health warnings rather than brand trademarks would constitute an uncompensated taking of their intellectual property rights. Ultimately, the court ruled that the public health law did not violate the constitution of Australia, where smoking kills 15,000 people each year. Starting on December 1^st, all cigarettes and tobacco products will be sold in plain, brand-free packages with graphic health warnings. 

Australian Attorney-General Nicolos Roxon welcomed the ruling as “a watershed moment for tobacco control around the world.”

Despite this legal victory for public health at Australia’s highest court, unfortunate provisions in trade and investment pacts provide Big Tobacco with additional avenues to attack Australia’s plain packaging policies in foreign tribunals. Internationally, the law already faces attack at both the World Trade Organization (WTO) and through an obscure investment treaty.

Only hours after the ruling, Ukraine filed a formal complaint against the law at the WTO, arguing that the plain packaging law violates Australia’s commitment under the WTO and requesting the establishment of a formal disputes panel. Honduras and the Dominican Republic have also filed complaints. When asked if he thought the big tobacco companies were behind Ukraine's decision to launch its WTO case, Australia’s Trade Minister Craig Emerson said that he was "not aware of tobacco being a big industry in Ukraine, so one would wonder why it would have a big interest in this".

Australia’s plain packaging is also being challenged by tobacco company Philip Morris under the Hong-Kong-Australia bilateral investment treaty (BIT). The U.S. company incorporated a subsidiary in Hong Kong in order to launch the attack through this obscure treaty. A tribunal of three private sector lawyers constituted under the United Nations Commission on International Trade Law (UNCITRAL) will conduct the arbitration to decide whether the laws have had a significant negative impact on Philip Morris’ investment in Australia.

The extreme investor rights contained in the BIT pose particular threats to the case for plain packaging policies. According to Dr. Kyla Tienhaara, a trade law expert at Australian National University (ANU), “The investor-state dispute under the Hong Kong treaty is particularly concerning for supporters of the legislation. Unlike the WTO, there’s no exception under the treaty for public health measures. And unlike in the Australian Constitution, 'expropriation' (the act of a government taking private property) is defined very broadly.”

These cases, which demonstrate the danger of allowing investors a supranational avenue to attack public interest laws, have strengthened Australia’s commitment to not allow foreign investors to sue its government before panels of international trade arbitrators. Australia has refused to be subjected to investor-state dispute settlement in the Trans-Pacific Partnership (TPP), which is being pushed by multinational companies including Philip Morris.  (The TPP's leaked investment chapter, meanwhile, reveals that the pact would require all other countries, including the US, to allow foreign investors to sue their national governments).  

Australia is facing pressure domestically in response to this rejection of investor-state suits in TPP. The Australian Chamber of Commerce and Industry (ACCI) has launched a “Right to Sue” campaign, and has sent a letter to the Prime Minister urging the government to consider including ISDS (Investor-State Dispute Settlement) in future FTAs. (You can find a good analysis of the misleading claims of the campaign and letter here.)

Through progressive tobacco regulation policies, Australia has set an important precedent in placing a higher value on domestic public health policies over foreign investor rights. Unfortunately, trade and investment pacts provide Big Tobacco with second and third avenues to subvert the will of the Australian people and its highest court. The good news is that other countries will inevitably follow Australia’s lead on tobacco control policies.  Hopefully they will also follow Australia's prudent decision to reject extreme foreign investor rights in trade pacts like the TPP.  

Senators Defend Dolphin Protections Threatened by WTO Ruling

On Tuesday, Sen. Barbara Boxer (D-CA) led a bipartisan group of 14 Senators in sending a letter to Rebecca Blank (Acting Secretary of the U.S. Department of Commerce) and Ron Kirk (U.S. Trade Representative) expressing concern over last year's WTO tuna-dolphin ruling. The statement noted that while "cruel and lethal" tuna-fishing methods have killed over 6.5 million dolphins in the past six decades, the U.S. "Dolphin-Safe" tuna label has contributed to an amazing 98% decrease in such dolphin deaths since 1990.  As such, the Senators made clear that, despite the WTO's determination that "Dolphin-Safe" constitutes a trade violation, Congress intends to stand by current dolphin protection laws:

“We are deeply disappointed by the WTO’s final ruling, but we stand firmly committed to preserving the Dolphin-Safe label. Let us be clear--Congress has no intention of repealing or weakening the current law applying to this label.”

The Senators also sent a letter to Arturo Sarukhan Casamitjana, the Ambassador of Mexico to the U.S., requesting that Mexico comply with the U.S.’s request to hear the case under NAFTA. The letter expresses the Senators’ disappointment that “Mexico has continued to stall consideration of this issue under the North American Free Trade Agreement (NAFTA),” and urges Mexico to proceed with selection of NAFTA dispute resolution panelists so that the case can be resolved in a more timely manner.

These letters follow an impressive House letter, sent in May, urging the Obama administration to push back on the tuna-dolphin ruling.

For a more detailed analysis of the tuna-dolphin case, click here.  For the press release from Senator Boxer's office, click here.  

WTO takes on credit card regulations

The WTO issued its first ever ruling on a dispute over financial services earlier this morning. The case was brought in 2010 by the Obama administration against China's credit card policies.

This sprawling case - which alleged that a myriad of diverse Chinese policies operated collectively to violate WTO rules - failed on most counts.

But even the partial U.S. success raises more questions than in answers. U.S. credit card companies were reportedly less than enthusiastic about the case, and even the most optimistic U.S. job impact of China's credit card policies represent only a drop in the bucket relative to the considerable job displacement caused by Chinese industrial policies in U.S. manufacturing.

The greater significance of the ruling is in the precedent that it sets of a WTO member being willing to tackle another member's financial policies. Those of us who have raised the alarm about the conflict of the WTO's services agreement with financial regulation have often been told not to worry... that diplomatic restraint would keep a case from ever being launched. Even if launched, the WTO's institutional interests would keep it, the argument went, from ruling against a nation's policies.

Today's ruling totally undermines both aspects of this argument.

So what did the ruling - authored by Virachai Plasai (Thailand), Elaine Feldman (Canada) and Martin Redrado (Argentina) - say?

America, meet your meat master

Happy Fourth of July! As our fearless leader Rob Weissman articulates in this note here, your holiday meat could be much more mysterious come next Fourth of July:

If you’re looking forward to grilling up some hamburgers and hot dogs, think about this: Where does the food you’re eating come from?

That simple question is going to be a lot harder to answer after a ruling from the World Trade Organization (WTO), which decreed last week that such basic consumer information as country-of-origin labels on meat are “unfair trade barriers” to multinational corporate profits.

If you don’t eat meat, know that the WTO ruling could be extended to country-of-origin labels for produce. So maybe next summer it’s the potato salad and corn on the cob, too.

Like me, you might find this hard to swallow. If you’ll excuse a mixed metaphor, mystery meat (and lettuce) is not my cup of tea.

But it’s standard operating practice for the WTO, which in recent months has proclaimed that U.S. “dolphin-safe” tuna labels and a U.S. ban on clove-, candy- and cola-flavored cigarettes both violate WTO trade rules.

Last November, I shared some of my thoughts about the WTO's lower panel ruling against the country-of-origin labels (COOL) for beef and pork that were created by the 2008 U.S. Farm Bill. Canada and Mexico had challenged the U.S. law, claiming that it violated their rights under the WTO's Agreement on Technical Barriers to Trade (TBT). (See here also.)

Last Friday, that ruling was upheld by the WTO's Appellate Body - specifically, by an AB division composed of Ujal Singh Bhatia of India, Ricardo Ramirez Hernandez of Mexico and Peter Van den Bossche of Belgium. In fact, it's the third consecutive WTO attack on a popular U.S. consumer protection or information policy to go down this year. (See the attacks on dolphin-safe labels and cancer prevention through cigarette controls.)

Like in those other cases, the Appellate Body doubled down on key aspects of the lower panels' rulings. And like those other cases, the implications go far beyond the specific measure at issue. Indeed, many other country of origin labels and consumer information policies are now at greater risk of challenge in the future.

We'll go through some of the specifics after the jump.

WTO Rules Against Yet Another U.S. Consumer Protection Policy

WTO Rules Against Yet Another U.S. Consumer Protection Policy

 Final WTO Appeal Ruling Goes Against U.S. Country-of-Origin Meat Labeling Law that Applies to Domestic and Imported Meat

 WASHINGTON, D.C. – The World Trade Organization’s (WTO) final ruling today against a highly popular U.S. consumer policy – the country-of-origin labeling (COOL) for meat found in every grocery store – will only intensify public opposition to trade pacts, such as the Trans-Pacific Partnership (TPP), a nine-nation pact now under negotiation that is slated to include anti-consumer rules similar to those in the WTO, Public Citizen said. Last week, U.S. officials agreed to allow Mexico and Canada to enter TPP negotiations despite failing to obtain a settlement in the WTO meat labeling case.

 The WTO appellate ruling released today, which is final and not subject to further appeal, means that Mexico and Canada have succeeded in their WTO attack on the U.S. meat labeling policy. Under WTO rules, Mexico and Canada may soon be able to impose trade sanctions against the United States if it does not water down or eliminate the labels to comply with the WTO ruling. If the law is weakened, American families may not be able to know where there food is coming from, and health regulators may have a harder time tracking food borne bacteria to its point of origin. Public Citizen urged the administration not to weaken the law.

 “Today’s ruling makes very clear that these so-called ‘trade’ pacts have little to do with trade between countries, but rather impose outrageous limits on the most basic consumer safety policies on which we all rely,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The WTO announcing that big agribusiness corporations must be allowed to sell mystery meat here, despite U.S. consumers and Congress demanding these labels, is yet another example of outsourcing our legal system to international commercial bodies that push corporate interests.”

 Earlier this month, leaked text from the TPP revealed that the agreement, if completed, would subject U.S. laws to challenges by private business interests before secretive foreign tribunals and authorize the payout of unlimited funds, in compensation to businesses, from the U.S. Treasury.  

 Today’s decision narrowed the number of specific WTO provisions that the U.S. meat labeling policy was found to violate, but still reaffirmed the previous WTO ruling that the law must be altered or eliminated. This ruling  follows WTO rulings this year against U.S. “dolphin-safe” tuna labels and a U.S. ban on clove-, candy- and cola-flavored cigarettes.

 “These three rulings – with the WTO slapping down safe hamburgers, Flipper and children’s smoking prevention policy – make it increasingly clear to the public that the WTO is leading a race to the bottom in consumer protection,” said Todd Tucker, research director of Public Citizen’s Global Trade Watch.

 After 50 years of state efforts to institute country-of-origin labeling for meat cuts and products, and federal experimentation with voluntary COOL for meat, Congress passed a mandatory COOL program as part of the 2008 farm bill. In their successful WTO challenge, Mexico and Canada argued that the mandatory program violated the limits that the WTO sets on what sorts of product-related “technical regulations” WTO signatory countries are permitted to apply. In their filings to the WTO, Canada and Mexico suggested that the U.S. should drop its mandatory labels in favor of a return to voluntary COOL or to standards suggested by the Codex Alimentarius, an international food standards body in which numerous international food companies play a central role. Neither option would ensure that U.S. consumers are guaranteed the same level of information as the current U.S. labels. In an initial ruling in November 2011, the WTO sided with Mexico and Canada against the U.S. law, but the U.S. appealed the decision in January of this year.

 The Obama administration is in the process of negotiating the secretive TPP trade deal, an expansive deal that expands on the North American Free Trade Agreement (NAFTA), which currently includes  11 Asian and Western Hemisphere countries. The pact is expected to include limits on domestic consumer safety and labeling policy.

 “The only thing worse than NAFTA-on-steroids with any old country is NAFTA-on-steroids with NAFTA countries,” said Wallach. “What’s worse, the administration appears to have abandoned its leverage and greenlit Mexico and Canada joining the TPP without an agreement to drop their WTO attack on consumer labels. The American public is desperately waiting for President Barack Obama to show some negotiating savvy, and to start fulfilling his campaign pledges and reconsider the so-called ‘trade’ model that his administration is pushing with the TPP.”

                                                            ###

Just Relax, Canada. U.S. Pharma Will Handle It

Dear Fellow Canadians:

Welcome to the Trans-Pacific Partnership (TPP) negotiations! Since you are fresh off a bruising fight getting provisions that protect Internet freedom and privacy into Canada’s copyright Bill C-11, I’m sure that you are exhausted with defending your rights. Take heart. With the TPP, you will not have much of a say on laws or policies threatening your privacy, rights on the Internet or access to affordable medicines. Instead, lobbyists from major American industries and some 600 “corporate trade advisers” have helped lay out some of what the Office of the United States Trade Representative (USTR) expects from you.

These are the same industries that forced major concessions on C-11’s approach to digital locks despite near-universal criticism. Hundreds of pages of new non-trade policy contained in the most sweeping “free trade agreement” could face a mere up or down vote in the House of Commons. And the USTR proposes intellectual property provisions that cover dramatically more than copyright law. They touch a wide range of IP issues.

You thought NAFTA was a pill? Sure, Big PhRMA used NAFTA to attack our drug formulary system and all of those compulsory licenses for affordable meds. But back then, our government drew a line. Despite some considerable hysteria from the U.S. drug industry giants, you did not give away all of our policy space. This time, however, the TPP gives Prime Minister Stephen Harper a way to write all of us a real prescription for high drug prices and cement his view of Canada as an extended playground for corporate America.

Here are some of the highlights of the U.S. proposed IP chapter:

• Expand patent evergreening and create new pharmaceutical monopolies, raising medicine costs;

• Dramatically increase the life of a copyright term from 50 years in most cases under C-11 to 95 years;

• Increase penalties for circumvention and reduce the exceptions for individuals; and

• Establish an American-style notice-and-take down system for online copyright infringement.

This seems like a lot. If you were worried, however, that we had some duty to at least read the proposals for the law and voice our democratic concern, fear not. Negotiators act in secret. The only glimpse of the actual agreement so far has come from leaked copies of the text from the IP, Investment and other chapters. Remember in the good old days of ACTA when the University of Ottawa filed an access-to-information request but received a blacked out document with only the title visible? Expect similar treatment during TPP negotiations. While lobbyists and corporate liaisons are granted electronic access to the agreement, your parliamentary representative might have to walk down to the Department of Foreign Affairs and International Trade to speak personally with The Honourable Ed Fast P.C. , M.P., Minister of International Trade.

Moreover, if you are distressed by the fact that our respectable Department of Trade will have lots of work reviewing all the work done so far once Canada’s negotiators get hold of these secret drafts, you will be relieved to hear that Canada has a lesser role in the negotiations. By coming late to the table, Canada has achieved a second-tier position. This status requires Canada to agree to all the settled chapters, which its officials have not even read, and Canada cannot veto current provisions. Thus, not even lobbyists or the trade minister need concern themselves with settled provisions. The TPP negotiations shut individual citizens and even members of parliament and ministers out of the process.

The public response to C-11 proved that civil engagement has made a difference on intellectual property issues in Canada. The people—frustrated, fearful and bedraggled—woke up to the oppressive measures of industry groups and fought hard. But this is far from the end. In upcoming years, we might still witness the implementation of a multinational corporations’ wish list, which seeks to criminalize copyright infringement, implement ACTA-plus provisions and restrict Canadians’ access to affordable medicines. Through the TPP, the USTR seeks to achieve all these goals and more—without too much of a voice from us. Will we allow American industry to dictate to the Canadian people our rights—or stand up and demand that Canada step down from these negotiations?

Follow Public Citizen's Global Access to Medicines Program: https://twitter.com/#!/PCMedsAccess

James Cormie is a legal intern at Global Access to Medicines Program.  Originally from Edmonton, Alberta, James blogs on issues of trade, IP, and international law.

Congress Stands up for Dolphins, Pushes Back on WTO

Rep. Ed Markey (D-Mass.), the ranking member on the House Natural Resources Committee, joined 42 colleagues in sending a strong letter to President Obama urging him to push back on the recent WTO ruling against dolphin-safe tuna labels.

In a press release, Markey said “The American people deserve to know whether or not the fish they eat was caught by killing Flipper... Dolphin-safe labeling of canned tuna has been successful in protecting the species and giving consumers informed choices.”

The letters calls the WTO decision "misguided," and says that "the U.S. intends to maintain the strong dolphin-safe standards, and not to water them down." The letter goes on:

The implication of the recent WTO ruling ... is that the U.S. should expend significant regulatory resources around the globe in an untargeted fashion, or alternatively, that imports from Mexico could utilize the dolphin-safe labels without having to meet the same requirements as tuna caught by U.S. or other nations' fleets. Neither result is acceptable, and 'complying' in either way simply invites further WTO litigation from other nations, not to mention serious disruption of the canned tuna market in the US and loss of consumer confidence in environmental laws and labels.

The letter included some notable signatories, including:

• Ranking Members: Berman (Foreign Affairs), Frank (Financial Services), Markey (Natural Resources), and Miller (Ed and Labor)
• Ways & Means Committee Members: Blumenauer, Doggett, Pascrell, Stark, and Van Hollen.
• Oceans Subcommittee of Natural Resources Committee: Faleomavaega, Pallone, Bordallo and Pierluisi.
• Voted for the Uruguay Round Implementation Act (implementing the WTO): Berman, Corrine Brown, Maloney, Markey, Moran, and Waters. Reps. Meeks and Towns - along with Moran, members of the so-called CAFTA 15 for their vote for that trade deal - also signed the letter.

See press release here, and letter here (PDF). See our further discussion of this ruling here.

Analysis: today's WTO ruling bad for dolphins, consumers... and even the WTO

We’ve waded our way through today's 165-page, 771-footnote WTO ruling against dolphin-safe labels. Here’s a quick guide to what it says and means.

What it means for dolphins

From the 1950s through the 1990s, an estimated seven million dolphins were killed in the Eastern Tropical Pacific from the practice of chasing, encircling and netting them to catch the tuna underneath. This was profitable because, unlike in other fisheries and regions, dolphin and tuna swim together.

Beginning in the late 1980s and early 1990s, something changed: consumers got organized. First, they instituted a ban on dolphin-unsafe tuna, which the WTO’s predecessor organization ruled against in 1991 and 1994 and which was subsequently repealed. Around the same time, dolphin-safe labels were put on tuna, in order to allow consumers to “vote with their dollars” for dolphin-safe methods. These measures have been successful in reducing dolphin deaths to near-negligible numbers.

Countries like Ecuador were the success stories, in adapting to the dolphin-safe methods, and therefore tapping into consumers’ demand for dolphin-safe tuna. The U.S. and nearly all other nations’ fleets also adapted. Mexico, on the other hand, is almost alone as a hold-out – using litigation rather than adaptation, and in the process branding its fish in the minds of consumers as dolphin-unsafe. Not a real forward looking strategy, to say the least. This WTO case, brought by Mexico in 2008, is just the latest indication of this – after pushing unsuccessfully for a decade to get the Clinton and Bush administration and the U.S. courts to water down the labels.

It is vital for the ongoing health of dolphin herds that the U.S. not bow to this pressure from the WTO.

What it means for consumers

If the U.S. gives in on this WTO threat, consumers will have lower quality or less information on which to base their tuna purchasing practices. For families with kids (including of the grown-up variety) who love animals like dolphins, this will be deeply troubling on its own.

But think of the precedent this sets. The WTO has now said that even voluntary labeling schemes are open to WTO attacks if not all countries (regardless of their production practices) equally benefit from them. This is going to be especially the case whenever there are complementary governmental efforts to ensure the accuracy of the claims on the label.

Labels like organic, cruelty-free, fair trade, Buy Local, Buy America, green, natural, worker-friendly, gluten free and everything else could be next.

What happens next

After today’s ruling, Mexico will begin pushing for elimination of the dolphin-safe labels, or to be allowed to use the label without meeting the U.S. standards.

Depending on how the compliance proceedings progress, the U.S. will have a matter of weeks or months to begin complying. After an extreme outer bound of about 15-18 months, Mexico may be able to begin instituting trade sanctions on U.S. goods or services. In the past, such sanctions have helped to create a domestic constituency in industry and Congress crying out for elimination of the “offending measure.”

It is vital that the U.S. communicate clearly to Mexico and other WTO members that the labeling standards will not be eliminated or watered down. The U.S. can talk to Mexico if need be about other options for compliance, and make the point that it is really long overdue for Mexico to bring its fishing practices into line with international norms.

What the ruling says

Maybe I’m losing my cynical edge, but I was shocked by today’s WTO Appellate Body (AB) ruling. There were a variety of ways that the AB could have worked itself out of the mess left by the September lower panel ruling, and instead, the AB chose to deepen the knot.

Public Citizen Condemns WTO Attack on U.S. Dolphin Protection Efforts

In Final Appeals Ruling, Global Commerce Agency Orders U.S. to Drop, Change Dolphin-Safe Tuna Labels

WASHINGTON, D.C. – The World Trade Organization’s (WTO) final ruling today against U.S. dolphin-safe labels on tuna cans deals a major blow to consumers’ ability to make free and informed decisions about how our food was caught and processed, Public Citizen said. This is the third time the WTO and its predecessor General Agreement on Tariffs and Trade have ruled against America’s dolphin protection policies.
 
“Today’s ruling makes very real the threats these overreaching pacts pose, which have little to do with traditional trade issues. The first round of this case in 1991 became known to environmental activists as ‘GATTzilla Kills Flipper’ and ignited U.S. public opposition to what would become the WTO,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Until that first ruling, and then a second one several years later, all we could do was point out worrisome negotiating text that we thought could undermine vital domestic environmental and other public interest policies – and then, suddenly, we had the proverbial smoking dolphin.”
 
Dolphin-safe tuna labels are strictly voluntary. If Mexican fleets chose to use dolphin-safe tuna-fishing methods, they would have access to the label, just like fish caught by U.S., Ecuadorean and other nations’ fleets. Mexico wanted access to the label without meeting the standards.
 
“This latest ruling makes truth-in-labeling the latest casualty of so-called ‘trade’ pacts, which are more about pushing deregulation than actual trade,” said Todd Tucker, research director for Public Citizen’s Global Trade Watch. “Members of Congress and the public will be very concerned that even voluntary standards can be deemed trade barriers.”
 
The Obama administration is considering expanding some of these anti-consumer rules in the first trade deal it is negotiating – the nine-nation Trans-Pacific Partnership.
 
“This case underscores why countries must insist that WTO rules be altered and that no new agreements use the same corporate backdoor deregulation model,” said Wallach. “The Obama administration must stand with the thousands of Americans who have signed a Consumer Rights Pledge calling on the U.S. to not comply with these illegitimate trade pact rulings and to stop the Trans-Pacific Partnership trade negotiations that would greatly intensify this problem.”
 
This latest WTO ruling, along with two others in the past year against U.S. country-of-origin labels on meat and flavored cigarette bans, shows that a new approach to trade policy is needed – one that puts consumers, the environment and communities first, said Public Citizen.
 
Background
 
In September 2011, a WTO panel of three lawyers and diplomats from Chile, Singapore and Switzerland ruled that the U.S. dolphin-safe tuna labeling law violates WTO rules. The labels have been enormously successful in reducing dolphin deaths by tuna fishers – a major problem in the past, when tuna fleets set upon dolphins to catch tuna, since the two species associate with one another in the Eastern Pacific Ocean. The label allows consumers to “vote with their dollars” for dolphin-safe methods. Mexico successfully challenged the U.S. standard after decades of refusing to transition its fishing fleet to more dolphin-safe fishing methods.
 
Because Mexico prevailed on some counts but lost on others, both Mexico and the U.S. appealed the lower panel decision. 
 
Today’s Appellate Body ruling flipped the findings of the lower panel ruling. The lower panel found that the dolphin-safe labels were “more trade-restrictive than necessary to fulfil a legitimate objective.” While this finding was problematic, the lower panel at least acknowledged that the U.S. objectives of consumer information and dolphin protection were legitimate.

“The Appellate Body went in an even more anti-environment, anti-consumer direction by claiming that these labels – which regulate imported and domestic tuna alike, and for which many foreign nations’ tuna qualifies – were discriminatory against Mexico,” said Tucker.

This follows on a deeply troubling ruling from last month that found that a U.S. ban on sweet flavored cigarettes that applies to imported and domestic cigarettes also is somehow “discriminatory.”

“In essence, the WTO has found that voluntary is the new mandatory, and non-discriminatory is the new discriminatory,” added Tucker.

The ruling’s implications are dire, especially in the context of a decades-long battle to save dolphins. This struggle has been beset by countless trade-related obstacles: 1991 and 1994 rulings under the WTO’s predecessor organization led to the U.S. eliminating the more potent import ban of dolphin-unsafe tuna, and environmentalists fighting successfully in U.S. court to block the Clinton and Bush administrations from also watering down the voluntary labeling policy. These groups narrowly blocked this executive branch effort, which U.S. courts deemed “Orwellian” and “a compelling portrait of political meddling.”

The magic of government and the legitimacy of international legal orders

In the comments section, Scott Lincicome refers to Lori Wallach’s piece in the HuffPo and apparently is ruffled by the tone.

If only you could see what Public Citizen’s membership and our allied organizations wanted us to publish! We were pretty restrained, and actually understating the political damage this ruling will have on the WTO’s long-term legitimacy.

The fact of the matter is that Public Citizen expended a decent amount of energy trying to lay out for the Appellate Body a way through this morass. We thought that (as a legal matter) there was a way that the lower panel ruling could be overturned and allow the institution to save face. In retrospect, I’m not exactly sure why we did this, because the tone deafness of the Appellate Body ruling is startling.

Scott also dislikes our characterization of the WTO ruling as an “order.”

The relevant passage of the HuffPo piece is: “The ruling, issued Wednesday, was on the final U.S. appeal which means that now the U.S. has 60 days to begin to implement the WTO's orders or face trade sanctions.” Some version of that formulation has appeared consistently in our publications throughout the years.

I could “order” Scott to take down his blog, but he would not need to comply with that “order.” At the other end of the spectrum is an “order” delivered at the barrel of a gun or by a vengeful Norse god, with which compliance is strongly advised.

Somewhere in between is that magical thing we call modern government. The Supreme Court doesn’t have an army, but non-acquiescence with its decisions is rare, because elites believe that the benefits in social order (the other kind of "order") outweigh the costs to complying with disagreeable decisions. The Court in turn exercises (typically) great deference to the political bodies, or it becomes politicized and sees its legitimacy damaged.

Likewise, a WTO “order” backed by the threat of trade sanctions is as close to forced compliance as it gets in international law at peacetime. (The Bank of International Settlements or UN human rights agencies don’t have powers like this.) On the spectrum of meaningfulness of “orders,” the WTO is substantially closer on the spectrum to what modern governments do than my order to Scott to abort his blog. Indeed, by triggering political economic consequences, the WTO agreements create automatic constituencies for compliance, in addition to those that think complying with WTO panels is good per se.

The WTO Appellate Body, just like our own domestic Supreme Court discovered in the New Deal era, cannot be blind to how its rulings actually play out in the real world if it hopes to retain its authority.

In this case, I think we’ve laid out pretty well the politics behind the FSPTCA – a menthol ban is unlikely to happen (not because California Democrats want to protect tobacco industry jobs but because of reasonable regulatory distinctions). However, a roll back of a ban on cloves might happen if the administration doesn't stick to its guns.

Those politics are unlikely to change, and the WTO doesn’t require them to in order to begin compliance proceedings.

If, as a practical matter, the only way that U.S. could comply would be exempting imports from incremental regulatory schemes (and thus, yes, leading to more teenage experimentation with cigarettes than would be true with the FSPTCA whole and intact), then the TBT Article 2.1 ruling becomes the same as an order backed by trade sanctions to eliminate or water down the flavored cigarette ban now in place. Presumably, when some U.S. industries are hit by trade sanctions, the demands for watering down the FSPTCA will grow, increasing the likelihood of that outcome over time.

If the AB is going to get in the habit of putting countries’ backs against the wall on sensitive matters of public health, you’re going to see a lot more demands for non-compliance and non-payment of compensation. My question for the WTO’s supporters is how that state of affairs advances your goals.

Again, we were genuinely surprised by the AB’s ruling. We thought that the public interest stakes were very clear (as they were in EC-Asbestos), and that the AB would find some grounds for overturning the lower panel ruling (say on likeness) and thus allowing the institution to save face.

The fact that they were unable to act in self-preservation (and made a political decision that now is having predictable political consequences) is a bad sign for those that hope to see the WTO remain a legitimate force in global affairs.

Will DIOCOSEFLRD save tobacco rules from the WTO?

The WTO ruling against U.S. measures to reduce teen smoking continues to make waves, with folks like Daniel Ikenson, Scott Lincicome, and my old trade professor Steve Suranovic weighing in - mostly with straw man arguments or the straight libertarian push for less regulation. These are probably not the folks that have a lot invested in maintaining the Family Smoking Prevention and Tobacco Control Act (FSPTCA) to begin with.

We've laid out the essential timeline issues with compliance here. One of the more novel arguments for compliance comes from trade lawyer Rob Howse, who has commented on the issue at IELP here, here and here. In addition to recommending an extention of the FSPTCA's ban to menthol (which I've said is likely to be politically difficult if not impossible), Rob has suggested that the U.S. could comply by making a better case that the exclusion of menthol from the ban is justified. Towards this end, Rob advanced a novel interpretation of Article 21.5 of the WTO's Dispute Settlement Understanding (DSU), which reads:

“Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel. The panel shall circulate its report within 90 days after the date of referral of the matter to it.  When the panel considers that it cannot provide its report within this time frame, it shall inform the DSB [Dispute Settlement Body] in writing of the reasons for the delay together with an estimate of the period within which it will submit its report.”

Rob seems to be saying that, while an Article 21.5 compliance panel could not overturn the AB’s ruling, it might be able to deem that the U.S. is acting consistently with the ruling if it had more data and studies justifying the U.S. approach.

There is a debate as to the legal merits of this argument, but it seems unlikely that the same panel that ruled against the FSPTCA once would think differently a second time around.

Betting against Obama? The WTO may have something to say about that.

Ben Protess wrote in the NYT a few weeks ago about a new effort following from the Dodd-Frank financial overhaul legislation:

The Commodity Futures Trading Commission is poised this week to reject plans for so-called political event contracts, a lucrative derivative deal that would allow firms to wager on Congressional races as well as the presidential battle, the people briefed on the matter said...

[the The North American Derivatives Exchange,] which currently is a marketplace for derivative contracts tied to commodities and stock market indexes, wanted to offer five basic contracts. One contract allows traders to wager that President Obama will win another four years in the White House. Other contracts say that either Democrats or Republicans will control the Senate or House...

Some states explicitly outlaw gambling on elections. Even in Las Vegas, the epicenter of gambling, betting on elections is off limits, regulators say.

Intrade is the most prominent player in the world of trading political event contracts, but it is based in Ireland. It is unclear whether American law applies to Intrade.

Only academics have escaped the strict rule. For two decades, United States regulators have allowed business students at the University of Iowa to operate an electronic exchange for trading political contracts.

The basis for the CFTC decision can be found in this CFTC order, which details the statutes and regulations that lead it to rule that NADEX is against the public interest. it's also worth pointing out that Nadex - despite the homegrown sounding name - is a subsidiary of a European financial services group.

The question we like to ask often at EOT is how might the under-studied, underappreciated rules of the World Trade Organization (WTO) and other trade rules relate to this legitimate political event regulation?

Brazil's flavored cigarette ban now targeted

Unless you're an avid reader of Spanish and Portuguese language news wires, you probably missed Brazil's announcement last month of a ban on all flavored cigarettes: cloves, chocolates, and even menthols. Both importers and domestic firms are subject to the same limits.

Here's the announcement in Portuguese, and some of the earlier history from February, including the draft. The text of the final Brazilian measure reads (rough tranaslation courtesy of Google translate):

Sweet surrender?

Over the last few posts (see here and here), we’ve explained the two major findings in the recent WTO ruling against U.S. efforts to reduce teen smoking.

The question inevitably becomes: what happens next?

There is a strong presumption under the WTO’s Dispute Settlement Understanding (DSU) that the U.S. will begin to remove the ban on clove cigarettes in 60 days, i.e. early June 2012. In this particular case, I wouldn’t be surprised if the WTO urged compliance by August 2012, right in the middle of the U.S. election season. But the outer bound for compliance is likely to be July 2013, or 15 months from the date of adoption of the Appellate Body report.

More details after the jump.

Cancer prevention three months too soon

Welcome to Week Two following the WTO’s cancerous decision to rule against the U.S. measures to reduce teen smoking. As Rep. Henry Waxman (D-Calif.) said:

I am deeply disappointed in the WTO’s decision in the clove cigarette case, which has serious public health implications for United States efforts to reduce youth smoking.

The Family Smoking Prevention and Tobacco Control Act gave the FDA broad authority to protect the public’s health. It also directed immediate action to reduce youth tobacco use, including a ban on clove and candied-flavored cigarettes. Importantly, the law made no distinction in where a cigarette is manufactured because a cigarette -- no matter where it is made -- is addictive and deadly. I believe the WTO’s interpretation is wrong on the merits and wrong in its interference with our efforts to protect the American public from tobacco’s devastating effects.

I am committed to working with the Administration to advance our shared goal of ending the tobacco epidemic among our young people and ensuring that the U.S. ban on clove and candied-flavored cigarettes remains in place.

This is an encouraging sign that legislators may be heeding the call of thousands of Americans who have taken action under the Consumer Pledge urging principled non-compliance with the ruling.

We went over the main part of the decision – rendered by the Appellate Body’s three-person panel of Peter Van den Bossche (Belgium), Ricardo Ramirez-Hernandez (Mexico) and Shotaro Oshima (Japan) – in last week’s post. As we noted, this is the first time that the WTO has found a violation of the Agreement on Technical Barriers to Trade (TBT) Article 2.1.

But there was one major aspect of the ruling that we didn’t get to discuss: the finding that the U.S. violated TBT rules by having the sweet tobacco ban (enacted in July 2009) go into place on September 2009 rather than December 2009. In other words, the WTO found that the U.S. began fighting cancer three months too soon.

Lori Wallach in the Huffington Post: WTO Orders U.S. to Dump Landmark Obama Youth Anti-Smoking Law

A landmark U.S. health policy already was being struck down even as protestors surrounded the Supreme Court over the attack on President Obama's healthcare law. Behind closed doors in Geneva, a World Trade Organization (WTO) tribunal issued a final ruling ordering the U.S. to dump a landmark 2009 youth anti-smoking law.

The Obama administration's key health care achievement slammed by the WTO was the Family Smoking Prevention and Tobacco Control Act (FSPTCA), sponsored by Rep. Henry Waxman (D-Calif.). The ruling, issued Wednesday, was on the final U.S. appeal which means that now the U.S. has 60 days to begin to implement the WTO's orders or face trade sanctions.

This outrageous WTO ruling should be a wake up call. Increasingly "trade" agreements are being used to undo important domestic consumer, environmental and health policies. Instead, the Obama administration has intensified its efforts to expand these very rules in a massive Trans-Pacific Partnership (TPP) "free trade" agreement.

The WTO's ruling against banning the sale of flavored cigarettes isn't the only example of its attack on consumer protection and health laws. The U.S. has filed WTO appeals on two other U.S. consumer laws -- U.S. country-of-origin meat labels and the U.S. dolphin-safe tuna label -- both were slammed by lower WTO tribunals in the past six months. Yup, in short order we could see the WTO hating on Flipper, feeding us mystery meat and getting our kids addicted to smoking.

Read the rest here.

On Tobacco Appeal Ruling, WTO Shows its Anti-Health Stripes

We’ve done a quick read through of today’s World Trade Organization (WTO) Appellate Body ruling against the U.S. measures to reduce teen smoking. (For our statement, see here, and for a more detailed background into the lower panel ruling, see our analysis here.)

This is a landmark ruling against one of the few policy achievements of the Obama administration: Rep. Henry Waxman’s (C-Calif.) Family Smoking Prevention and Tobacco Control Act (FSPTCA), which included a targeted measure to reduce teen smoking by targeting “starter flavorings” in cigarettes – like cola, chocolate, strawberry and clove.

The FSPTCA also contemplated an eventual ban on menthol cigarettes, but deferred this for further study. The reason? Not protectionism, nor arbitrary decision making. The reason was because – as we learned with the Prohibition Era with alcohol – banning products consumed by large numbers of adults can create a black market and upsurge in crime if not handled appropriately. Oh, and lest we think that the consumer protection lion Waxman went soft, it was also because the U.S. Supreme Court struck down previous federal tobacco legislation for exactly this reason.

So, wisely, the Waxman bill took a targeted and incremental approach.

But as we pointed out on the blog last September, the key flaw in the WTO’s analysis on whether the FSPTCA discriminated against Indonesian clove cigarettes was that it compared the treatment the FSPCTA gave to cloves and menthol, rather than comparing cloves to cola and other flavors. One of these things – menthol – is not like the other, as Big Bird from Sesame Street might have said. (See killer Big Bird video "app" here.)

The Appellate Body not only did not overturn this aspect of the September 2011 lower panel ruling – it doubled down. Indeed, it seems that the Appellate Body was almost determined to show how poorly suited the WTO is to considering matters of public health. In several key respects, the Appellate Body ruling was even more anti-health than the lower panel ruling.

Public Citizen Condemns WTO Attack on U.S. Efforts to Reduce Teen Smoking

 In Final Appeals Ruling, Global Commerce Agency Orders U.S. to Drop, Change Landmark Obama Youth Anti-Smoking Law

WASHINGTON D.C. – The World Trade Organization’s (WTO) final ruling today against U.S. efforts to reduce teen smoking shows that our current trade regime is simply incompatible with basic public health regulation, Public Citizen said. With today’s ruling, the WTO Appellate Body has now ordered the U.S. to water down or get rid of a key plank of its landmark Family Smoking Prevention and Tobacco Control Act of 2009 (FSPTCA), one of the few policy achievements of the Obama administration’s first term. The act banned sale of candy and other sweet-flavored cigarettes used to attract children to smoking.

“The Obama administration and Congress must not bow to yet another ruling from a so-called trade agreement tribunal demanding that the U.S. get rid of yet another important health or environmental policy,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The Obama administration must stand with the thousands of Americans who have signed a Consumer Rights Pledge calling on the U.S. to not comply with these illegitimate trade pact rulings and to stop the Trans-Pacific Partnership (TPP) trade negotiations that would greatly intensify this problem.

“Countries should not be weakening their public health laws to comply with the anti-health, anti-environmental WTO rules. This case underscores why countries must insist that WTO rules be altered and that no new agreements use the same corporate backdoor deregulation model,” said Wallach. “If there is any silver lining to today’s ruling, it is that it will confirm the views of growing numbers of consumers, citizens and governments that the WTO must be shrunk or sunk.”

The Obama administration is considering expanding some of these anti-consumer rules in the first trade deal it is negotiating – the nine-nation TPP. This latest WTO ruling, along with two others in 2011 against country-of-origin labels on meat and dolphin-safe labels on tuna, show that a new approach to trade policy is needed – one that puts consumers, the environment and communities first, said Public Citizen.

 

Background

The WTO Appellate Body’s decision today upheld the major conclusions of a September 2011 WTO ruling from a panel of three diplomats from Costa Rica, Japan and Uruguay, who ruled that the U.S. ban on sweet-flavored cigarettes (which are used to entice teenagers into smoking) violated a never-before interpreted provision of the WTO’s Agreement on Technical Barriers to Trade (TBT). Public health experts have concluded that these narrowly targeted bans help stop smoking before it starts.

But the panel reasoned that the ban discriminated against Indonesian clove cigarettes, even though both U.S. and foreign tobacco companies were prohibited from selling clove cigarettes in the U.S., and even though other sweet flavors like chocolate and cola also were banned. In its WTO attack on the FSPTCA, Indonesia successfully argued that the ban as it applied to clove cigarettes violated the WTO TBT rules because the U.S. did not ban all flavored cigarettes (menthol-flavored cigarettes were exempted from the ban).  

While the FSPTCA actually does contemplate extending the ban to menthol cigarettes, U.S. lawmakers advocated for a gradual approach to menthols, which are smoked (unlike other sweet cigarettes) primarily by adults. Policymakers had concerns that banning cigarettes primarily smoked by adults would have created dangerous black market activities and would not target teenage smoking. The WTO panel and Appellate Body gave little weight to these science-backed arguments and effectively concluded that imports have to be carved out from nations’ regulatory schemes.

Of nearly 200 rulings in 16 years, this was the first time that the WTO ever found a violation under this WTO provision, which has long been of concern to consumer advocates, given the threat that it could be interpreted in the all-encompassing way that it was in this final ruling. Today’s was one of the first rulings under the TBT, which is one of 17 agreements administered by the WTO.

 

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Public Citizen Applauds President Obama's Decision to Finally Release Draft Trans-Pacific Partnership (TPP) Trade Agreement Text Over Objections Of U.S. Trade Representative Vlad von Dracula

 WASHINGTON:  Today President Obama removed a mortifying blot from his claim of having the most transparent administration ever by releasing the draft text of a massive regional trade agreement now in its third year of negotiations that will affect wide swaths of U.S. federal and state non-trade policy, said Public Citizen.

"We thought the secrecy could not get worse than when the previous U.S. Trade Representative (USTR) Ron Kirk actually admitted under Senate Finance Committee questioning in March that he would not release the TPP text because doing so would ensure he could never complete the deal," said Public Citizen's Sunshine Isthebest. “Then the new USTR, Vlad von Dracula, announced that not only would the text never be made public until the deal was set in stone and unchangeable, but that negotiations could no longer be conducted during daylight hours to minimize the chance that those who will live with the results could get a peek.”

Although draft trade agreements have been made public by negotiating governments in the past, including the last major regional trade deal the Free Trade Area of the Americas, and the World Trade Organization posts draft negotiating texts, the TPP text has been kept secret. Indeed, in a special TPP secrecy agreement signed in 2010, the Obama administration agreed for the first time in trade pact history to keep negotiating texts secret for four year after a deal was signed or abandoned. Only 600 corporate representatives serving as officials U.S. trade advisors and officials of the 8 other TPP governments have had access to the texts, which is to say everyone but the U.S. public, press and most in Congress.

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WTO still denying its Wall Street ties

Last week, we pointed out an interesting piece by the New York Times' Gretchen Morgenson, who wrote about the WTO conflict with financial re-regulation.

In this Sunday's NYT, the WTO's Keith Rockwell responds. Here's a highlight:

The most important elements of the W.T.O. commitments on financial services pertain to nondiscrimination and national treatment, meaning that if you accept opening your market, you may not apply different regulations to banks from different foreign countries or to your local banks.

We've been following this issue on the blog for years, and I'm a little underwhelmed by the WTO talking points. As far back as 2009, Pascal Lamy (the WTO head) made the same argument that Rockwell now makes: that the WTO's GATS only requires non-discrimination. And as we wrote then:

...the WTO's own Appellate Body ruled that non-discriminatory bans on the supply of services, in sectors where full market access commitments have been undertaken, are quantitative limitations covered by GATS Article XVI(2) - and thus must be removed.

This article, as it happens, was the focus of Morgenson's piece. She wrote on Article XVI or Market Access rules, while Lamy and Rockwell seem to want to only talk about Article XVII or National Treatment rules. (Their conversation on National Treatment doesn't really draw the right lessons from the case history: even policies that don't have discriminatory aims or effects can be found to violate the so-called "anti-discrimination" rules.)

Both articles are major planks of the GATS architecture: for the WTO to pretend that the former doesn't  exist is disingenous and inconsistent with the organization's own case law.

Rockwell is also off point when he writes:

As members of the European Union, Britain and Sweden provide the same degree of market access to foreign providers of financial services. Yet the crisis did not hit Swedish banks, while British banks suffered greatly. Why? Their regulatory systems differ.

The real pertinent question is whether either nation attempted to ban a dangerous financial product, cap the size of financial service providers, or restrict capital flows. If they attempted to, and they had deep financial services commitments under Article XVI, they could face dispute settlement and ultimately trade sanctions.

So, it's not ALL regulations that are banned by the GATS, but some very important ones are.

To recap: the WTO rules are enforceable and ban some very important financial regulations, while there is no international body (not BIS, not IMF, etc.) that can compel any positive financial regulation. To paraphrase Morgenson, this is an unfortunate paradox, and isn't about doing the right thing.

Public Citizen Applauds Obama Administration’s Efforts to Defend Consumer Country of Origin Meat Labeling; Appeal of WTO Ruling Necessary First Step

Statement of Todd Tucker, Research Director, Public Citizen’s Global Trade Watch

 

Public Citizen commends the Obama administration for taking the necessary step of appealing the harmful World Trade Organization (WTO) ruling against U.S. consumer labeling. In November 2011, a WTO panel ruled that the U.S. country of origin labels on meats (COOL) violated the organization’s rules.

The implications for this ruling are dire, especially in the context of a decades- long battle to ensure that consumers know the source of their meat. After overcoming countless obstacles, from presidential vetoes to adverse Supreme Court rulings in cases brought by food processors, it was only in 2009 that a meaningful country of origin labeling regime was finally implemented.

The legitimacy of the WTO is likely to be further undermined if the organization’s Appellate Body upholds the lower panel ruling. Such an outcome would provide evidence to consumer groups that the WTO allows anti-consumer forces a second (or third) bite at the apple, even when these interests do not succeed in their efforts to undermine consumer safeguards through purely domestic legal and political means.”

The Obama administration is considering expanding some of these anti-consumer rules in the first trade deal it is negotiating – the nine-nation Trans-Pacific Partnership trade agreement. The WTO ruling (and two others in 2011 against dolphin-safe labels on tuna and anti-smoking measures) shows that a new approach to trade agreements is needed – one that puts consumers, the environment and communities first.

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Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, please visit www.citizen.org.

Two interesting reads on WTO conflict with financial re-regulation

In yesterday's New York Times, columnist Gretchen Morgenson sums up where we are at on avoiding another Wall Street melt-down:

Financial institutions, eager to maintain their profitable status quo, have lobbied hard against change. As a result, too-big-to-fail institutions have become even bigger and more powerful.  

In addition to lobbying, big financial players have another potential weapon in their battle against safety and soundness. This one is more hidden from view and comes from, of all places, the World Trade Organization in Geneva.

Back in the 1990s, when many in Washington — and virtually everyone on Wall Street — embraced the deregulation that helped lead to the recent crisis, a vast majority of W.T.O. nations made varying commitments to what’s called the financial services agreement, which loosens rules governing banks and other such institutions...

All this represents yet another paradox of our financial world: Even as our regulators try to devise a safer financial system, our trade representatives thwart efforts to reduce risks these operations pose to taxpayers.

Obama's trade team apparently had no comment for the article, which you can read here.

And over on the IDEAS web-page, veteran economist and policy analyst Andrew Cornford also discusses the conflict between the WTO services agreement and re-regulation, writing...

The introduction of the post‐crisis regulatory architecture for the financial sector reflects far‐reaching shifts in thinking concerning the appropriate scope and practice of financial regulation in comparison with that prevalent at the time of the drafting of the GATS rules on international trade in banking. These shifts have provided a further fillip to the debate among GATS commentators as to how far the rules accommodate prudential measures and reforms likely to constitute key elements of this new architecture.

He reviews the major interventions in the debate since the financial crisis.

Both Morgenson and Cornford's pieces are useful additions to the ongoing debate about ensuring that our trade rules don't get in the way of reining in Wall Street.