• Three Forces of the World Trading System

    by  • November 29, 2021 • 0 Comments

    Cho_Sungjoon thumbBy Sungjoon Cho [originally posted on the International Economic Law and Policy Blog on November 29, 2021]

    On November 26, the World Trade Organization (WTO) General Council decided to indefinitely postpone the 12th Ministerial Meeting (MC12), which was scheduled to convene from November 30 to December 3 this year, due to “an outbreak of a particularly transmissible strain of the COVID-19 virus.” The prospect of the MC12 now appears to be as uncertain as that of the current pandemic. The bigger question, however, is: Quo Vadis the WTO? Today, I would like to introduce one way to approach this complex question. To answer this question, one needs to understand what kinds of forces may exist around the WTO. Three forces may stand out: political, legal and sociological. (more…)

    “Resistance Is Futile”: Debunking the Myth of De-Globalization

    by  • November 17, 2021 • 0 Comments

    Cho_Sungjoon thumbBy Sungjoon Cho [originally posted on the International Economic Law and Policy Blog on November 17, 2021]

    The World Trade Organization (WTO) released the World Trade Report today. Here are some excerpts:

    [E]ven a crisis as devastating and unprecedented as COVID-19 has not resulted in the wholesale unravelling of trade and integration.

     [W]hat became clear over subsequent months was not only how quickly supply chains adapted and new producers emerged, but how the key to greater diversification lay in expanding and facilitating trade with other partners, not restricting or reshoring it.

     According to the WTO’s monitoring reports, a majority of COVID-19-related trade measures recorded since the outbreak of the pandemic were trade-facilitating. Even in the heavily impacted services sector, most COVID-19-related measures were trade-facilitating.

     Developed economies have been able to respond to the COVID-19 crisis with massive fiscal stimuli and far-reaching income support. (…) However, these same shock absorbers and safety nets are simply unavailable to most poorer countries.

     Its core conclusion is that no country is an island in today’s hyper-interconnected world, that global crises require global responses, and that strengthening resilience requires more global trade and economic cooperation, not less.

    This is by far the loudest (empirical) riposte to recent inward-looking political narratives along the lines of de-globalization, reshoring and decoupling. Even in the middle of the pandemic, trade has turned out to be a solution, not a problem. Indeed, tariffs have recently been inflationary within the U.S. economy, hurting both domestic manufacturers and consumers.

    The WTO report leaves us with two main takeaways. First, this may be another reason why trading nations must reinstate the WTO’s dispute settlement mechanism so as to monitor and discipline oft-destructive domestic trade politics. The WTO may want to proactively coalesce with businesses and the civil society to make this cause heard and accepted more broadly. Second, the world and the WTO must address “development” concerns, not through typical lip services but through actually workable solutions. The Doha “Development” Round still remains unfinished, while more than three quarters of the WTO membership is comprised of developing countries. That’s scandalous!

    Is Weakening the Antidumping Jurisprudence an Essential Condition to Recuperate the WTO?

    by  • November 8, 2021 • 0 Comments

    Cho_Sungjoon thumbBy Sungjoon Cho [originally posted on the International Economic Law and Policy Blog on November 6, 2021]

    Former Deputy Director-General Alan Wm. Wolff appears to think so.  In his remarks (“Defining Success for MC12”) delivered at Harvard JFK School on October 29, 2021, Wolff spelled out several candid, and controversial, prescriptions to revive the currently languishing WTO enterprise of both negotiation and dispute resolution. (more…)

    The George Floyd Case and Section 1983: A Police Officer’s Constitutional Duty to Intervene

    by  • June 26, 2020 • 0 Comments

    Sheldon Nahmod (headshot)By Sheldon Nahmod [originally posted on the Nahmod Law blog on June 25, 2020]

    The Intervention Question

    Suppose a police officer continues to use life-endangering force even after it is obvious that a misdemeanor arrestee (who has no weapon) is under control and not a danger to others, including police officers. As a result of this use of excessive force, the arrestee dies. This is a violation of clearly settled Fourth Amendment law in every circuit and exposes that officer to potential section 1983 damages liability. If these turn out to be the facts in the George Floyd case, as appears likely at the time of this writing, the result would be the same.

    Suppose further that other police officers are present, witness this behavior, have a realistic opportunity to stop the first officer’s unconstitutional use of force but do not act to prevent it. Are they also potentially liable for section 1983 damages for the death of the arrestee because they failed to intervene when they could have, and thus failed to prevent what happened?

    The Short Answer (more…)

    The WTO Force Is Everywhere!

    by  • June 19, 2020 • 0 Comments

    Cho_Sungjoon thumbBy Sungjoon Cho [originally posted on the International Economic Law and Policy Blog on June 18, 2020]

    This is what Alan Beattie seems to argue (“WTO Still Has Ability to Affect Rulings and Regulation Elsewhere”). He stated that:

    “WTO laws and rulings are regularly cited in investment tribunals, bilateral trade disputes and even the European Court of Justice. Despite its reservations about WTO dispute settlement, for example, the US referred to WTO rulings in its groundbreaking action against Guatemala for labour rights violations under the Central America Free Trade Agreement.”

    True, the WTO case law may not be “binding” to parties other than immediate disputants in a given case. However, such legal technicality does not exhaust the description of the normative gravitational force field from the WTO law. For another example, in formulating a recent AD/CVD measure against China over certain fibre glass fabrics from a “Chinese subsidiary located in Egypt,” the European Commission relied heavily on the WTO trade remedy law. This incorporation, by reference, of the WTO norms into the domestic law seems to have settled in a pattern beyond a mere dimension of isolated anecdotes. In this regard, Joost was nicely quoted in Beattie’s article. (“If WTO dispute settlement becomes more difficult to use, you could see more of what the EU is doing at the moment against what it perceives as Chinese subsidies in Egypt — using WTO subsidies rules in EU anti-subsidy investigations, leading to EU tariffs, rather than filing a WTO complaint.”)

    Finally, who could have ever imagined that a senior U.S. politician would praise the WTO law? In a recent Bloomberg op-ed, Senator Chuck Glassley stated that “the WTO’s expansion of global trade has actually enabled the U.S. to respond to the pandemic” as “global value chains, facilitated by WTO rules” empowered the U.S. automakers to globally source components necessary to manufacture ventilators.

    After all, the WTO law may be “stickier” than many would believe.

    Another Economic Defense for the Multilateral Trading System

    by  • January 8, 2020 • 0 Comments

    Cho_Sungjoon thumbBy Sungjoon Cho [originally posted on the International Economic Law and Policy Blog on January 7, 2020]

    Stephen Roach (Yale) has recently published a must-read (“US, China and the Myth of Global Decoupling”), which refutes the logic of trade wars.  Here are main observations.

    Today’s global economy is far more integrated than ever before. (…) The tighter that trade is woven into the fabric of global commerce, the tougher it will be to disentangle those linkages (…). —and the lower the odds of a more pervasive and disruptive decoupling. (…)

    This diffusion of bilateral trade through multi-country supply chains would dampen the effects of a bilateral decoupling of any two economies, no matter how large.

    Without addressing the US saving shortfall, raising tariffs and other barriers on China will simply divert trade away from Chinese sourcing toward America’s other trading partners. Bilateral decoupling does not mean global decoupling; it means trade diversion.

    The trade diversion arising from bilateral decoupling would mean that US sourcing would migrate from low-cost Chinese production platforms to a broad constellation of foreign producers. (…) The bottom line is a likely shift to higher-cost production platforms. Ironically, that would be the functional equivalent of a tax hike on US companies, workers, and households.

    These observations offer yet another powerful defense for “an integrated, more viable and durable multilateral trading system,” as stipulated in the WTO Charter.  As the WTO panel report on Section 301 highlighted, any unilateralist policy, such as a trade war, has “indirect effect (…) on individuals and the market-place, the protection of which is one of the principal objects and purposes of the WTO.” (para. 7.86).

    Is the European Union Outsourcing Public International Law to Save the WTO Dispute Settlement System?

    by  • December 13, 2019 • 0 Comments

    Cho_Sungjoon thumbBy Sungjoon Cho [originally posted on the International Economic Law and Policy Blog on December 12, 2019]

    Upon the Appellate Body having being paralyzed, the European Commission has promptly moved to secure its trade interests by arming itself with the retaliatory power, also creating the position of “Chief Trade Enforcement Officer.”  The Commission’s proposal is reminiscent of Nicolas Lamp’s earlier post on the threat of unilateral retaliation to keep the WTO dispute settlement system alive.

    As far as the WTO is concerned, the proposal allows the Commission to impose penalty tariffs on a WTO member that lost at a panel stage but refuses to comply with the appellate arbitration mechanism under DSU Article 25 and instead appeal “into the void” to prevent the panel report from being adopted.  Interestingly, the Commission justifies (pdf) such unilateral retaliation as a “countermeasure” under the “Draft Articles on Responsibility of States for Internationally Wrongful Acts.”  This is what the Commission argues in this regard:

    [W]here the responsible party fails to cooperate in good faith in the dispute settlement procedures, thereby preventing the injured party from completing such procedures, the possibility to resort to countermeasures in accordance with the requirements of general public international law necessarily revives. The International Law Commission notes that the revival of that possibility arises when one Party “fails to implement the dispute settlement procedures in good faith” or “where a State party fails to cooperate in the establishment of the relevant tribunal”.

    Would this kind of “threat” from a big trading bloc induce other WTO members into buying the proposed appellate arbitration mechanism?  What about the United States?  Obviously, a retaliatory measure may invite another one, and that’s what a trade war is all about.

    Two Faces of (De-) Globalization

    by  • October 23, 2019 • 0 Comments

    Cho_Sungjoon thumbBy Sungjoon Cho [originally posted on the International Economic Law and Policy Blog on October 23, 2019]

    Two very different observations on (de-) globalization have caught our eyes lately.

    First of all, according to the most recent statistics provided by the Global Trade Alert (composed by Prof. Simon Evenett at St. Gallen), pro-trade and investment measures across borders have shown the biggest decline ever for the past seven years, while a sharp increase of protectionist measures have continued. (more…)

    A $7.5 Billion Ammunition from the WTO?

    by  • October 2, 2019 • 0 Comments

    Cho_Sungjoon thumbBy Sungjoon Cho [originally posted on the International Economic Law and Policy Blog on October 2, 2019]

    At long last, the Article 22.6 Report (PDF) of the Arbitrator on the Boeing-Airbus dispute is out.  Note that this dispute concerns an original dispute in which the United States (on behalf of Boeing) sued the European Union for the latter’s subsidies on Airbus. Another report in a parallel case in which the EU (on behalf of Airbus) sued the United States for the latter’s subsidies on Boeing will be released in the near future.

    This report reads like an accounting paper full of numbers and formulas. Obviously, the Arbitrator took great pains in computing the reasonable volume of Boeing’s lost sales (counterfactual deliveries).  Note that Boeing and Airbus constitute a near duopoly in the global market when it comes to a large civilian aircraft, which is the subject of this dispute. (more…)

    Collateral Damages of the Trade War

    by  • August 12, 2019 • 0 Comments

    Cho_Sungjoon thumbBy Sungjoon Cho [originally posted on the International Economic Law and Policy Blog on August 12, 2019]

    Two researchers from the Kiel Center for Globalization (Haiou Mao and Holger Görg) have just published a working paper (PDF) entitled “Friends like This: The Impact of the US – China Trade War on Global Value Chains.”  Based on the notion of “cumulative and indirect tariffs” in global value chains (GVCs), the paper demonstrates that higher tariffs on Chinese intermediate products (parts and components) imposed by the United States incur an additional tariff cost to third countries (such as the EU, Canada and Mexico) when they are assembled into final products and re-exported to those third countries.  Any initial tariffs imposed by the United States will continue to hurt multiple trading partners further downstream in GVCs.

    This study highlights collateral damages of the U.S. – China trade war.  One might speculate that it calls for a strong “normative” response from the world trade community.  Could, or should, third parties challenge those tariffs imposed by the United States, and retaliatory tariffs imposed by China, before the WTO?

    Business Reactions to Trade Wars

    by  • April 15, 2019 • 0 Comments

    Cho_Sungjoon thumbBy Sungjoon Cho [originally posted on the International Economic Law and Policy Blog on April 14, 2019]

    There is a Chinese saying that “when there is a policy from the above, there is a reaction from the below” (“上有政策, 下有对策”).  This is exactly what has happened since the inception of trade wars.  Both domestic and international businesses have attempted to avoid the punitive tariffs through various means, such as the exclusion application, transshipment and tariff engineering.  As you can imagine, some have been successful; others not.

    The Financial Times has recently offered an excellent simulation game (“Dodging Trump’s Tariffs”) in which readers can educate themselves about intriguing consequences of trade wars.  The simulation game is based on real examples.  Highly recommendable!

    A WTO’s “Kompetenz-Kompetenz” Moment

    by  • April 9, 2019 • 0 Comments

    Cho_Sungjoon thumbBy Sungjoon Cho [originally posted on the International Economic Law and Policy Blog on April 5, 2019]

    This is a supplemental post to Simon’s earlier one that provides an excellent summary of the Russia – Traffic in Transit panel report. Here are some aspects of the panel report that I found interesting and worth further reflection.

    First, one might say that this landmark decision is characteristic of a “constitutional” moment to the WTO. I understand that the use of “c” word here might be frowned upon in some circles, both legal and political. However, GATT Article XXI is not just a mundane, technical interpretive issue to the WTO. It is a matter of allocating power between the WTO as an autonomous institution and its member. If I exaggerate a little bit, this particular dispute echoes potential existential angst from the WTO. What if the panel had accepted Russia’s original claim and declared Article XXI as a “self-judging” provision? Constitutional consequences would have been dire. The WTO would have opened the jurisdictional Pandora’s Box, invited massive abuses and therefore undermined its own rationale (and identity). (more…)