Month: November 2016

The NYT reports that:

India’s Supreme Court on Friday banned the sale of firecrackers in the capital region, reflecting a growing sense of urgency after a thick smog engulfed Delhi for 10 days early this month, trapping its population of 20 million in dangerous concentrations of polluted air…

For generations in India, fireworks have been set off to mark Hindu festivals, and their manufacture is a vast industry. Last year, the court refused to issue a blanket ban on fireworks, arguing that it would infringe on citizens’ rights.

This year, however, the hearing came on the heels of an episode that rattled the capital. After acrid smoke from fireworks set off late last month for Diwali, the Hindu festival of lights, merged with emissions from other sources, levels of the most dangerous particles of air pollution rose to more than 16 times the level that the Indian government considers safe.

At first glance, this seems like an open-and-shut case of public health protection.

However, as an opinion piece last year in Asia Times reports, there is also a significant economic dimension.

Chinese goods — often produced with cheap labour in their sweat factories — have begun to have an edge over Indian fireworks.  An important reason is the killing pricing, which Sivakasi factories are unable to match. The Chinese prices are so low that they are naturally tempting for a consumer — and this “unhealthy competition”, as some aver, is smoking out the livelihood of thousands in Sivakasi — a town that virtually survives on the fireworks industry.

The 750-odd fireworks units in Sivakasi have had to cut their output by a third — and this means that this commercial enterprise cannot run on the fifth gear during the festival season, as has been the case traditionally…

Chinese goods began their unlawful journey into India in 2013. That year, says G. Abiruben, president of the Tamil Nadu Fireworks Manufacturers’ Association, only ten kinds of fireworks came into India from across the Himalayas. This year, the number is a whopping 215 — the increase is incredible, but painfully true.

The best part of this whole clandestine business is that these Chinese products are smuggled along with other legal imports — which may be toys or electronics. And most of these fireworks are sold in small unauthorised shops and even by pavement vendors.

Some estimates place the figure of smuggled Chinese stuff at Rs 5,000 million (US$76 million), and given the low pricing, the actual quantity of fireworks sold may well be huge.

More recently, Indian trade officials have been stepping up their scrutiny of Chinese imports, as India Today reports.

So is the Indian Supreme Court motivated by public health or protecting Indian fireworks manufacturers from Chinese competition? Unclear, and the motivation won’t matter as much as the effect on competition if China decides to raise the issue with the World Trade Organization (WTO).

As a WTO member, India has agreed to not apply charges or restrictions to imports above what it imposes on domestic production, and to not impose “prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures… on the importation of any product of the territory of any other contracting party.”

If China launches a case, would India have any defenses? It wouldn’t be a defense that this week’s action was undertaken by courts rather than regulators. As I show here in the context of a case brought by Mexico against the U.S., international adjudicators will treat all branches as a single entity when it comes to state responsibility in international law.

And it could be difficult to argue that a sales ban is excused under environmental defenses baked into the GATT. Why? Arguably, the Supreme Court decision will hit Chinese exports disproportionately. The sale ban (a quantitative restriction) goes into place immediately, while the NYT reports that the a ban on Indian manufacture of fireworks will be punted to down the road. This discrepancy could make it harder to argue that India is making the environmentally-motivated trade restriction in conjunction with restrictions on domestic production – something required under WTO defense provisions.

On the other hand, the Supreme Court might have set the measure on less protectionist footing. Earlier this year, Asia News Network reports that India banned the sale of foreign fireworks only.

Stay tuned to see if China requests consultations with India at the WTO.

European politicians are threatening a trade war tariffs if the U.S. backtracks on its Paris Agreement commitment. As French presidential candidate Nicholas Sarkozy has said,

“I will demand that Europe put in place a carbon tax at its border, a tax of 1 to 3 percent, for all products coming from the United States, if the United States doesn’t apply environmental rules that we are imposing on our companies,” he said.

The proposal would violate WTO rules on most-favored nation rules – specifically, Article I of the General Agreement on Tariffs and Trade, or GATT.  By treating, say, goods from (Paris Agreement obeyer) Canada better than (Paris Agreement defector) US – it would be a per se violation of the equal playing field all countries extend to one another.*

Given Trump’s promises to push hard on WTO enforcement, we can expect him to challenge such a move.

For obvious reasons of history moving in a linear direction, the 2016 Paris Agreement was not included as a specific exception to GATT commitments made over 1947-1993.

Proponents of a carbon tariff, however, would try to argue that it is excused under Article XX of the GATT, which reads in part:

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;…

(g)      relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption;

Would this work as a defense?

The argument “against” is that it’s a multi hurdle rope course.

1. The measure is “necessary” for protection of life and health. This is in itself a three-hurdle test that has been difficult to make use of, requiring a consideration of
   • (a) how much it contributes to the goal;
   • (b) the importance of the goal; and
   • (c) how trade restrictive it is in light of alternative policies that might contribute more to the goal. In the alternative could argue that it is “relating to” conservation, a lesser test.
2. The measures are not applied in a manner which would constitute a means of arbitrary…
3. or unjustifiable discrimination…
4. between countries where like conditions prevail,
5. or a disguised restriction on trade in services.

These defenses are hard to use and almost never work.

The argument “for” is essentially a political one, that the trade negotiators that deal with the WTO knows that it should be rowing in the same direction as their environmental policy colleagues back home (who, after all – are from the same government). Under this line of thinking, the WTO’s Appellate Body and lower panels would find a way to make the exception apply.

The argument in the middle of these two positions are that – governments change. As former WTO director general Pascal Lamy said back in 2008, the WTO is still waiting for a a consensus on climate. While the Paris Agreement is an example of agreement, it’s also an agreement that by design wasn’t highly enforceable, as David Victor writes. That’s checkmark 1 against a consensus around using highly enforceable trade rules to tackle backsliding. Checkmark 2 is of course the votes of an electoral college majority in the US against even these lightly enforceable rules before they take full effect in 2020. Given this lack of uniformity in opinion on the environment, WTO adjudicators might slink back to promoting trade flows – an area they know best.

NOTES

* Indeed, my former colleague Mary Bottari and I once argued that much less aggressive carbon reduction policies could pose WTO problems. See here also.

Many of us in the U.S. are still reeling from Tuesday’s election results, and probably will be for some time.

Since we are on course to have a President Trump, I tried to think through a version of Trexit that would avoid economic damage.

Here’s the teaser from my new piece at the Roosevelt Institute.

From climate change to immigration reform, many progressive priorities are dead on arrival with the coming of President-elect Donald J. Trump. However, there’s at least one Trump priority that overlaps in part with progressive concerns: trade policy. As Michael Moore argued in July, Trump’s successful cooptation of labor unions’ talking points on trade catapulted him to victory in the Upper Midwest.

Trade is a complicated policy area, and trade agreements implicate a wide range of topics. But the aspect of trade deals that most politicians and grassroots organizations now seem to agree is problematic is investor-state dispute settlement, or ISDS. This system allows multinational corporations to sue host governments over environmental and other policies. It has come under fire from the Tea Party and Progressive Caucus, and even from former trade deal proponents like Hillary Clinton and Tim Kaine.

While Trump has focused primarily on older-fashioned aspects of trade deals (like tariffs), his campaign has noted, “The Trump Trade Doctrine also opposes any provisions in any trade deals that interfere with the sovereignty of the United States government… and ISDS clauses raise sovereignty issues.” Language similar in spirit if not letter made its way into the Republican platform…

If Trump is genuine on this point, there could be room to forge a bipartisan and international consensus on ISDS.

To read the full thing, click here.

I have a piece in Time Magazine. Here’s a preview:

It’s been a bad month for international law. From continent to continent, governments have been shredding, rejecting or abandoning the postwar international legal order.

Last Wednesday, Gambia joined South Africa and Burundi in a growing exodus of African countries from the International Criminal Court.

The week before, Filipino leader Rodrigo Duterte agreed to drop his country’s hard-fought legal victory at The Hague’s Permanent Court of Arbitration, which found that Chinese naval encroachments in the South China Sea violated the Philippines’ rights under the U.N. law of the sea.

Even Europe, the birthplace of international law, has not been immune. Case Study A was the U.K.’s decision earlier this year to exit the E.U. (“Brexit”). More recently, Wallonia—a Belgian region of three million people—blocked a Canada-E.U. trade agreement. The deal took years to negotiate and promised to bring a population of 500 million on both sides of the Atlantic under a more unified market.

What is driving this retreat to national borders?

For one, rising inequality in many countries has led to a sense of anxiety and distrust of the wealthy.

To read the rest, go over to Time’s site.