Author: Todd Tucker

Adam Liptak has a nice profile of Supreme Court Justice Ruth Bader Ginsburg in Sunday’s NYT.

One quote in particular grabbed me:

With the departure of Justice John Paul Stevens in 2010, Justice Ginsburg became the leader of the court’s four-member liberal wing, a role she seems to enjoy. “I am now the most senior justice when we divide 5-4 with the usual suspects,” she said.

Three things are notable about this rare insight into judicial temperament.

First, there’s the egoism on display. A judge enjoying being the most senior. Fine. Not a shocking insight, and probably a confirmation of what you might expect motivates elites.

Second, this egoism is engaged even when one is on the losing side! (One could fill a football stadium with the number of activists that this describes.)

Third, that there is often a 5-4 divide “with the usual suspects.” This probably surprises no one with a newspaper – the court is polarized into two camps, with a swing vote of Anthony Kennedy in the middle.

But the frank acknowledgment of this math by a sitting justice jarred me a bit. It’s something more than a ratio: it’s a concession that something other than finding the correct interpretation of the law motivates justices, and they cop to it.

Is it ideology, or something else? Ginsburg doesn’t say. But there’s something about “usual suspects” that announces a regularity of perspective that is at odds with the mythology of the judge out there “discovering the law.”

Liptak provides another quote gave a bit more color to this discussion: Continue reading “We shall not defer” →

Simon Lester makes the libertarian case against investment treaties in a recent Cato Institute briefing paper entitled “Liberalization or Litigation?”

Simon begins by offering a review of the history of these treaties, going back to the 1950s – a history I also touch on here.

In the standard libertarian telling, governments don’t do much right and more government functions should be left to the private sector. Investment treaties allow private companies to sue governments to rein them in and may even chill regulation. Why wouldn’t a libertarian like this?

Simon indeed likes the national treatment rules in investment treaties that can limit anti-foreign discrimination, and suggests that this is the main problem encountered by businesses operating abroad.

But he does outline a case against investment treaties.

First, he argues that the treaty regime creates unjustified distinctions between classes of investors. Foreign firms get (at least) procedural rights not enjoyed by domestic firms, and foreign firms from countries with treaties get better than those from other countries. In an era where capital from many countries is piled into diverse holding structures, investment treaties and their definitions of corporate nationality seem quaint. Thus, instead of encouraging investment generally, Simon believes these nation-to-nation specific rules creates incentives only to investment flows between certain countries.

The treaties may also be socializing risk that should be privately borne. As he notes,

“there is no market failure in the area of foreign investment that needs government action. Investors can buy insurance if they want to mitigate risk, or they can sign specific arbitration contracts when they make their investment.”

His third argument is that the treaty regime has vague rules on expropriation and fair and equitable treatment (FET), which are sometimes interpreted in expansive ways. At their worst, they undermine national sovereignty, or at least create that impression.

Finally, investors can launch frivolous cases, instead of having their home governments filter them – as traditionally happened in international law.

It is a good piece. There probably aren’t many Cato Institute publications worrying that international treaties might undermine sovereignty and regulation. Likewise for the argument that diplomatic corps perform a useful filtering role. Many libertarians would not particularly care about or agree with these (reasonable) points. Apparently when we bleed the government dry, the State Department’s investment dispute filtering arm is one agency we’ll keep. I want to know more about how certain government functions get the libertarian stamp of approval.

Since Simon argued “against type” to some extent, let me do the same… just for fun. Why might investment treaties not be as bad as Simon says?

Continue reading “Libertarians against investment treaties” →

The US lost a WTO case against its flavored cigarette ban, which made people unhappy.

Now, the US is not changing its laws, which has made Indonesia (the winner in the case) unhappy.

What does it mean to have international dispute settlement where ain’t no one happy?

I explore that question in an update (soon to be published in a book by Edward Elgar) to a paper published last year.

Here’s the admittedly not too punchy punchline, which synthesizes some thinking from my recent research:

The ‘legalisation’ of international affairs has attracted significant scholarly attention over the last several decades. According to this research, international regimes are more ‘legalised’ when states delegate to third parties the ability to determine compliance.  By this dimension, the World Trade Organization’s (‘WTO’) Dispute Settlement Body (‘DSB’) — where states whose measures are challenged cannot veto the outcome of third party adjudication — represents ‘legalisation’ par excellence.

Regimes are also more ‘legalised’ when more binding and more precise.  Here, the status of the WTO is more uncertain. On the one hand, WTO rulings — with the threat of commercial sanctions for non-compliance — are reasonably binding by the lax standards of international legal regimes.  On the other hand, powerful nations have flouted rulings for years, apparently assured of their ability to weather the diplomatic and commercial storms.  And many key WTO obligations are imprecise and appear to regularly confound respondent governments.

Indeed, subsequent scholarship has questioned the coherence of the ‘legalisation’ concept,  noting that high imprecision and high delegation appear to go together.  Moreover, in the absence of a supranational entity with a monopoly of legitimate force, some scholars have suggested that regimes that regularly rule against the preferences of powerful governments will not be able to elicit compliance.

I call this the ‘counter-legalisation’ problem: delegated authority plus textual imprecision empowers international regimes to fill in textual gaps in ways that states did not intend and do not control. Over time, these regimes increasingly refer to their own case law and logic,  but as a consequence may create resistance to compliance. But this does not make ‘legalised’ entities irrelevant. Their formal determinations continue to exist, serving as a justificatory resource for domestic groups interested in aligning local policy with global determinations. The result is a potential ‘legalisation pendulum’. Put differently, state behaviour in response to international legal decisions may be determined by political and structural factors exogenous to the law, but international rulings provide discursive resources that can be used to influence subsequent interactions with states.

It seems that public interest advocacy (such as efforts to regulate tobacco) is particularly susceptible to being curtailed by these pendulum effects. Unlike industry, it does not control jobs or campaign donations that put clear ‘costs’ and ‘benefits’ in the minds of policymakers that might justify deviance from international law norms.  It is also not the province of the military, where states appear particularly willing to go against international legal determinations.  Instead, public interest law may have two strengths: its reliance on empirical evidence and the domestic legitimacy that comes from weighing and balancing different interests. International adjudicatory regimes — which often have their own approach to evidence and balancing — seem well positioned to mimic the strengths of public interest law.

This chapter explores a case study of a potential ‘legalisation pendulum’ problem. In 2011 and 2012, a WTO Panel and the Appellate Body (‘AB’) ruled against aspects of the US Family Smoking Prevention and Tobacco Control Act (‘FSPTCA’).  Indonesia successfully argued before the WTO  that the US policy of banning clove (mostly imported from Indonesia) as a characterising cigarette flavour — while allowing (mostly US-produced) menthol flavourings — constituted discrimination under Article 2.1 of the WTO’s Agreement on Technical Barriers to Trade (‘TBT’). Commentators have noted that two compliance options would be either to weaken the FSPTCA by allowing cloves or to eliminate differential treatment by banning menthols. Many observers and US policymakers — who appeared to engage in a prolonged balancing act of competing interests to pass and implement the legislation — have responded by criticising the WTO decisions for being out of step with health and regulatory prerogatives.  As a consequence, the prospect for near-term US compliance to Indonesia’s satisfaction appears to be remote.

I argue that these outcomes should not be surprising. The lack of strong principal-agent controls by states on WTO adjudicators leads to overreaching decisions. As a result, powerful states simply cannot comply when they lose to weaker states and do not wish to change challenged policies. However, tobacco regulations — public interest regulations with a weak and dispersed base of domestic support — are the type of policy that we might expect to be vulnerable to legalised regimes like the WTO over the longer term.

Read the full piece here.

Laura Poitras, one of the journalists who broke the Edward Snowden story, is portrayed in the NYT Magazine this week. It’s a long read, but one passing comment toward the end grabbed me:

Poitras… disagrees with the suggestion that their work amounts to advocacy by partisan reporters. “Yes, I have opinions,” she told me. “Do I think the surveillance state is out of control? Yes, I do. This is scary, and people should be scared. A shadow and secret government has grown and grown, all in the name of national security and without the oversight or national debate that one would think a democracy would have. It’s not advocacy. We have documents that substantiate it.”

As I read it, Poitras sees the difference between her brand of journalism and outright advocacy is documentary support in the former.

This distinction didn’t ring true for me. I spent a long time in the advocacy racket, processing documents every day to substantiate an agenda. Advocates that didn’t do the same would not have much success.

How did my work differ from journalism, if at all?

On the one hand, my advocacy had a clear point of view – whereas most journalists did not have an explicit point of view. However, any systematic content analysis of reporting (as I attempted to conduct here) would show that reporters tended to favor certain points of view. So not too much difference in practice.

In fact, I see the differences between advocacy and journalism (at least as they are practiced in 2013) as exactly the opposite of those suggested by Poitras. The difference between my work and the work of most journalists that I came into contact with was a much deeper reliance on documentation on my part. Especially in DC, journalists make selective use of spin from various sources to weave together a story – rarely pushing beyond that. This was probably due to some combination of lack of will and lack of time.

Maybe the major distinction is not between advocacy and journalism, but between “web aggregator” journalism and deep investigative reporting a la Poitras and Glenn Greenwald. Advocates can – depending on their rigor – fall on this spectrum as well.

Well-done advocacy and well-done investigative journalism are not that different in terms of their acknowledgement of perspective and use of documentation. The major difference seems to be that advocates are always in a debate about the costs and benefits of their means relative to their ends. From the lengths that Poitras and company go to to hide their own tracks, I’m guessing that they see the means as an end in themselves. The privately waged war for privacy, whatever inconvenience it may entail to try to keep one’s own communications private.

Continue reading “Methodvocacy” →

Uruguay has to continue to fight a lawsuit brought by tobacco giant Philip Morris over its cigarette warning labels, according to a decision by a three-person panel released a few weeks ago.

The  so-called jurisdictional decision means that the dispute – Philip Morris Brands Sarl v. Uruguay – will continue to the merits stage at the World Bank’s center for resolving investment differences (ICSID).

The case has attracted a lot of attention from the public health community, given that it could open up developing nations to substantial liability if they try to restrict multinational company’s tobacco operations in certain ways. For instance, Mayor Michael Bloomberg (a major anti-obesity and -tobacco campaigner)has pledged to help Uruguay with its legal expenses at ICSID. For its part, the multinational giant is also suing Australia over its tobacco regulations, that case under the Australia-Hong Kong investment treaty (using a Hong Kong affiliate).

The Uruguay particular case was brought by Philip Morris using a Swiss affiliate. The company is alleging that Uruguay’s requirements to have plain packaging and graphic anti-tobacco labels on 80% of the surface of the tobacco packets violate provisions of the 1988 Switzerland-Uruguay investment treaty. The arbitrators hearing the case include Gary Born (from the US) and James Crawford (from Australia), and are led by Piero Bernardini (from Italy).

Confused yet? The case is complex, so I’ll just comment on one aspect of it.

In this latest phase of the case, Uruguay objected that the text of the Swiss-Uruguay treaty allowed it to exclude public health measures from international lawsuits. The relevant part of the text reads: “The Contracting Parties recognize each other’s right not to allow economic activities for reasons of public security and order, public health or morality, as well as activities which by law are reserved to their own investors”. (paras. 151-155)

But Philip Morris and the tribunal disagreed.

Continue reading “Inadmissible politics” →

The US’ policies on Zoloft anti-anxiety medication do not violate international law, according to an award released yesterday of a three-person tribunal constituted under NAFTA.

This is the US’ ninth and tenth triumph in an investor-state case, just in time for Independence Day. These wins top off an incredible winning streak for the US and its defense team at the State Department: they have never lost a case. You can read the whole case here.

The latest claims were brought against the US by Apotex, a Canadian generics pharmaceutical producer that hoped to introduce competitors to Zoloft (the anti-anxiety medication) and Pravachol (an anti-cholesterol drug). The company had maintained that  a series of US court decisions had damaged its rights under NAFTA. There was real money on the line with this case: Zoloft is one of the most popular prescription drugs in the US, and the US is the world’s leading market for anti-depression medication.

A bit of background: in the US, regulatory approval for the marketing of drugs takes a long time to get. A series of amendments to the FDA approval process in the last few decades (one of them known as Hatch-Waxman, after its congressional sponsors) was intended to speed up this process, so generics could come to market sooner after the brand-name patent actually expired.

US courts play a significant role in Hatch-Waxman, in that they decide whether the first generics company to file for marketing approval will get exclusive “generic” marketing rights for an 180 period. This and related provisions were put in the bill to give an extra incentive for the introduction of generic competition. Apotex alleged that the courts’ conduct with respect to the two drugs violated NAFTA.

The three-person tribunal did not rule on the merits of the case, but argued that Apotex didn’t qualify for protection under NAFTA. In sum, it did most of its work in Canada and then hoped to service the US market as an exporter, who are not typically protected by NAFTA’s investment provisions.

Continue reading “USA: Unbeatable States of Anxiety” →

Read Acemoglu too quickly, and it sounds like a libertarian rant. State bad, let property rip. They don’t help matters by embracing the moniker “libertarian.”

But one of the major rhetorical shifts one notes in Why Nations Fail is his how AceRob put the need for strong states at the center of their analysis. Check out their definition of “inclusive states”:

We will refer to political institutions that are sufficiently centralized and pluralistic as inclusive political institutions. When either of these conditions fails, we will refer to the institutions as extractive political institutions. (p. 85)

As far as I can tell, the book’s major innovation relative to their past work (besides its non-mathematical style) is that they substitute the word “inclusion” for what they used to call “institutions of private property.” This definitely changes the ideological resonance of the book, for the better.

Of course, a close read of their past work shows that they have long been concerned for state capacity. As Daron put it in a 2005 paper,

when both the state and the citizens make productive investments, it is no longer true that limiting the rents that accrue to the state is always good for economic performance. Instead, there needs to be a certain degree of balance of powers between the state and the citizens. When self-interested rulers expect too few rents in the future, they have no incentive to invest in public goods. Consequently, excessively weak states are likely to be as disastrous for economic development as the unchecked power and expropriation by excessively strong states…

there is [also] an optimal level of the political power of the state. Intuitively, when… the state is excessively powerful, citizens expect high taxes and choose very low levels of investment (effort). [When] the state is excessively weak and there is the reverse holdup problem; high taxes will encourage citizens to replace the ruler, and anticipating this, the ruler has little incentive to invest in public goods, because he will not be able to recoup the costs with future revenues…

[A] ‘‘consensually strong state’’ equilibrium… can emerge when citizens accept high taxes as long as there is a credible promise that a sufficient fraction of these will be invested in public goods. This equilibrium is made possible by the fact that the state is politically weak, so the elites can be replaced easily if the ruler deviates from the prescribed behavior.

This is Government by Goldilocks: not too big, not too small…. just right.

Continue reading “Government by Goldilocks” →

To revolt or not to revolt? That is the question that Acemoglu’s work doesn’t help us answer.

On the one hand, we have powerful elites that we must do our best to coddle, as I noted in my last post. This is in part so they don’t take away our tech toys (block innovation that unseats their political power), but in other cases – like a fairly glowing description of the coddling of Pinochet in Chile – coddling elites doesn’t seem to have any economic rationale.

Looking at the US South after the Civil War, AceRob conclude that de jure political changes will simply encourage elites to invest in de facto power. AceRob’s

book Why Nations Fail  sneeringly references the Mexican, Bolivian, Cuban, Nicaraguan and other Latin American revolutions, when “expropriation or the threat of expropriation of assets continued apace…” (page 48) Indeed, in an earlier paper on Latin America, they conclude that progressive governments tax too much, so sow the seeds of their own defeat by coup. Lula’s government in Brazil is praised for not undertaking radical revolution, while Peron’s Argentina is faulted for populism. The only praise the authors can manage for Hugo Chavez was that he was so incompetent that he couldn’t institutionalize his rule.

On the other hand, revolutions can be great. Acemoglu and company look at the parts of modern day Germany that were conquered by Napoleon (and had relatively modern legal systems imposed on them), and find that they experienced more rapid economic growth (as proxied by urbanization) than those regions that did not. A quick scan through Why Nations Fail will shows around a hundred mentions of the word “revolution,” a few condemning Great Leaps Forward, but mostly celebrating (mere) great leaps forward like the Glorious Revolution (rocked it), Neolithic Revolution (planted it) and the Industrial Revolution (built it on a steam ship). Deng’s “political revolution” in China gets a favorable nod. Even the South Korean land redistribution gets a positive nod in earlier work – although the authors fail to note the land was redistributed by the North Korean government when it temporarily occupied the South in 1950 (so much for the capitalist origins of the South Korean miracle!)

These revolution-hellyes-waithellno tendencies are on display in Acemoglu’s paper on Botswana’s development experience.

Continue reading “Rock the Kgotla?” →

The need to defer to the presently powerful is a troubling thread throughout Daron Acemoglu and company’s work.

For instance, Acemoglu and company describe US elites as being willing to let the country democratize and develop because they were assured that they wouldn’t be subject to income tax (until 1913). In Britain, agricultural elites were assured that the Industrial Revolution wouldn’t upset their interests, because they were given the House of Lords and Parliament only expanded the franchise gradually. In present day Germany after the 1850s, the landed Junker class stopped blocking industrialization when they were assured future influence within a ruling coalition with the rising bourgeoisie (sometimes called “Iron & Rye”).

It is difficult to not see this as taking sides. Why should it be inherently desirable to keep reactionary losers in power?

I think Daron and colleagues would argue that this is not a normative but a positive stance. In the countries that they study, coddling political losers seemed to pre-date positive economic transformations.

Continue reading “Leave it to losers” →

Daron Acemoglu doesn’t just want to explain democracy. He also wants to explain economic development.

In a major contribution from 2001, Acemoglu and coauthors Simon Johnson and James Robinson (AceJohnRob) argue that good institutions lead to economic growth.

While the AceRob work on democracy proceeded from game theory peppered with stylized interpretation of a few countries’ history, the AceJohnRob utilizes regression techniques. Indeed,what sets the AceRobJohn work apart from the long-line of “institutions causing growth” literature is an empirical strategy governed by the requirements of state-of-the-art regression work. In contrast, previous institutional research by Douglass North, Jack Knight and others seems motivated largely by positioning the author in relationship to the canon of Western historians and social theorists.
Almost as soon as the new institutional economics emerged on the scene, development scholars were arguing that – rather than institutions causing growth – growth might lead to good institutions. As countries get richer, their values or incomes orient them towards things like inclusive institutions and property rights protections.

The AceJohnRob work attempts to resolve this potential endogeneity / reverse causation problem.

Continue reading “Regressing to Colonial Times” →