Trump’s Chinese Currency Punt Shows Breakdown in Norm of Cooperation

I have a new post for the Roosevelt Institute on Trump’s latest currency moves. Here’s a teaser:

The Trump administration’s decision last week to punt on labeling China a currency manipulator disappointed some of his supporters, but should not have surprised anyone paying attention to the policy details. Indeed, it’s a culmination of decades of a hyper-legalistic approach to economic strategy.

In the post, I do a mad dash through some of the political and social explanations for the policy move, which complements the macroeconomic story that many commentators are focusing on.

Click here for the full thing.

A busy month of writing

I’ve had a busy month publishing a number of pieces, many of which I’ve forgotten to reference in this space.

First, the Roosevelt Institute published a report I’ve been working on for many months “The Sustainable Equitable Trade Doctrine.” It attempts to move the trade policy conversation out of the stalemate it is often in, and looks to new frontiers for international cooperation. Foreign policy geeks may enjoy the deep dive on the history of judicialization of international economic relations: Wilson! Taft! Truman! The gang’s all there.

Second, I’ve written some follow on pieces for Roosevelt Institute’s blog, including one last week that looks at how NAFTA renegotiation might actually work, and another today that looks at some of the quandaries around how and when to use tariffs.

Finally, I guest blogged at the Duck of Minerva site on Monday. I tried to connect some common threads I saw between three recent legal decisions: the U.S. decision on Trump’s second travel ban, an ISDS decision on patents (Eli Lilly v. Canada), and a WTO decision against Washington State’s Boeing subsidies.


On trade, is it Trump vs. the deep state?

My latest column in Politico is up today, on the obstacles Trump’s trade agenda will face within the bureaucracies.

Here’s a teaser:

Last week the Trump administration released its first formal marker of how it plans to shake up trade policy. The vehicle was an unwieldy annual document that rarely makes much news: the Office of the U.S. Trade Representative’s statutorily mandated report to Congress.

At 336 pages, the report is normally a cut-and-paste affair. From Clinton to Bush to Obama, US trade policy objectives haven’t changed much, and neither has the annual report. The agency dutifully ticks off the year’s accomplishments, from celebrating the job-boosting promise of new trade and investment agreements to broad statements of policy. So Obama’s 2012 report reads a lot like Bush’s 2008 report.

Enter Donald J. Trump. He moved onto Democrats’ historic electoral base in the Midwest with an unrelenting critique of that same Clinton-Bush-Obama legacy trade policy. In the first general election debate, he savaged Hillary Clinton for being part of a political dynasty that used trade deals to subject U.S. workers to grinding competition with Chinese and Mexicans. He promised to walk away from these deals, or upgrade them, and put America first.

The tension between past and future is everywhere apparent in this report, which is divided between seven pages of Trumpist rhetoric and more than 300 pages of celebration of the older approach.

For the full bit, head on over to Politico. (And for why Geoff Gertz prefers “bureaucratic capture”to “deep state,” follow his Twitter feed @geoffreygertz.)

How Putin’s Election Interference Could Lead to a Revote

Written with Steven J. Mulroy, an associate dean and professor of law at the University of Memphis.

In the wake of the election, any number of long-shot strategies has been floated for avoiding the likely outcome of the Electoral College designating Donald Trump as the next U.S. president. From costly recounting of ballots in Midwestern states to “faithless electors” that vote against their state’s winner when the college convenes on December 19, these have ranged from the legally routine to the unprecedented.

This past week, ex-intelligence operative Robert Baer put a new possibility on the table: a revote. The trigger was revelations that U.S. government officials knew but did not fully disclose the extent of Russian hacking and selective leaking of information to damage Hillary Clinton’s prospects. As Baer told CNN, “Having worked in the CIA, if we had been caught interfering in European elections or Asian elections or anywhere in the world, those countries would call for new elections. Any democracy would.” And on Wednesday, news reports disclosed that Vladimir Putin may have personally directed the hacking.

Could a U.S.-wide or multi-state revote happen? Some legal scholars were quick to dismiss the notion, but there’s greater precedent than one might think.

In the disputed 2000 election, butterfly ballots, hanging chads, and other quirks for Floridian election practice left the U.S. without a clear winner of the electoral college for weeks after the election. An initial concern was that of the “butterfly ballot” used in Palm Beach County, a punchcard ballot which opened like a book and had voters punch holes down the center. Ballot misalignments apparently caused at least some ballots to be cast for candidates other than those intended by the voter, caused by a ballot design unique in Florida to Palm Beach County and arguably in violation of state law. One option that was briefly litigated in public and court was a revote, to determine if older liberal Jewish voters really meant to cast votes for the arch-conservative Pat Buchanan, as they accidentally did.

In an unreviewed opinion, the state court held in Fladell v. Election Canvassing Commission that a revote was constitutionally impermissible. This went unchallenged, and the famous Bush v. Gore Supreme Court case did not address the revote issue. As Gore campaign chairman William Daley pithily put it, “people get screwed every day… They don’t have a remedy. Ask black people. They get screwed every day. They don’t have a remedy. There’s no way to solve this problem.”

But as one of us wrote in a law review article at the time, the Fladell decision seriously misread the (admittedly spare) applicable precedent. Prior to the Fladell case, only one court had ever addressed the question of a court-ordered special election relief in the context of a presidential election. In Donohue v. Board Of Elections, plaintiffs brought an action alleging that New York state officials committed fraudulent acts to both disallow qualified voters from registering and voting, and also to allow thousands of unqualified voters to cast ballots in the 1976 presidential election. In a thorough memorandum opinion, the district court ruled that it had the authority to order a special election remedy if the plaintiffs prevailed. As a general matter, the trial judge noted that “federal courts… have not hesitated” to order new elections where necessary. The court acknowledged the potential “serious consequences” of granting such relief, including possible disruption of the presidential transition and allowing the election to be decided by the House of Representatives. The court then concluded: “The point, however, is not that ordering a new Presidential election in New York State is beyond the equity jurisdiction of the federal courts. Protecting the integrity of elections, particularly Presidential contests, is essential to a free and democratic society.” In short, courts can and have ruled that revotes are permissible.

The chief argument against this conclusion is that, pursuant to the authority expressly granted Congress by the Constitution’s Article II, Section 1, Congress has provided by law [3 U.S.C. Sec 1] that the presidential election take place on a particular Tuesday in early November; thus, one can’t do it any later than that. But that language doesn’t apply to court-ordered special elections held to remedy some legal problem in the election, like fraud or machine malfunction. Indeed, courts routinely order such special remedial elections in congressional elections, which are subject to identical congressional provisions about a uniform national date of election. Other objections — that some different voters may vote the second time around, for example, or that the political parties have the advantage of focusing turnout based on 20/20 hindsight — apply in all revotes; we often decide that the need for a free, fair, and un-tampered-with election outweigh those concerns.

Of course, both the New York and Florida cases differ from the current situation, where the problem is not localized but systemic manipulation on the whole. But if anything, that strengthens the case for review. If a perhaps inadvertent ballot design flaw tainting a few thousand votes in Florida merited the attention of the Supreme Court, surely a foreign intervention affecting all 136.4 million votes cast nationally in 2016 would do the same. And a revote would allow voters to make their judgment based on full information, information which their government knew but withheld from them — i.e., that a foreign adversary was acting deliberately to sway the outcome in a particular direction.

The legal case for such a revote is obviously stronger if the foreign intervention is shown to have actually tampered with votes, corrupted the integrity of voting machine systems, or otherwise called the accuracy of the vote totals into question. Merely manipulating public opinion with misleading fake news stories would likely not suffice. If such actual tampering were shown in particular states with a narrow Trump margin of victory, such that it could change the outcome of the election, the case for a revote could be compelling.

Nor should the so-called “political question” doctrine apply. Under this theory, courts should let the elected branches of government hold each other accountable (or have voters hold them jointly accountable) for certain constitutional questions that the courts feel ill-positioned to resolve. But whatever pull this doctrine once had, it was largely eviscerated by Bush v. Gore, when the conservative justices essentially selected who would be president. Moreover, unlike classical political question cases, the dispute in 2016 election is not between Congress and the executive, but between the country as a whole and a force from outside.

Is a revote at all likely? The chances would seem small. But the Republican leadership in Congress has defied Trump on the Russia question, calling for an investigation into election interference and questioning his diplomatic appointees’ close connections to Putin. A federal district court judge faced with significant evidence of foreign tampering could conceivably order such a revote, either in a particular state or even nationwide. (Single conservative judges recently have not been shy to order nationwide injunctions affecting millions of Americans, in cases involving Obama executive orders on immigration and overtime rules.) With a four-four split between the Court’s conservative and liberal wings, a tie would uphold such a decision.

The global context provides support for a revote. In 2004–05, allies of Viktor Yanukovych were accused of rigging the election and literally poisoning his opponent Viktor Yushchenko. Yushchenko mobilized his supporters and sued for a second runoff election. The Ukrainian supreme court agreed, and he went on to win. Yushchenko’s efforts were aided by widespread concerns that Vladimir Putin had intervened in the race in support of Yanukovych. It would be ironic if Russia — notorious for its courts’ lack of judicial independence — would twice provoke foreign countries’ top courts to redo presidential elections. (Another more lowbrow but undeniable coincidence: Ukraine’s uprising was labeled the Orange Revolution, a label Trump’s critics would no doubt enjoy.) And earlier this year, Slate reported that Austrian courts ordered a revote in a presidential election after procedural irregularities raised concerns about balloting there.

Indeed, undue foreign influence regarding the selection of our president was one of the very concerns animating the Founders in allowing presidential electors to decide against the initial result of the election. In Federalist Paper №68, Alexander Hamilton worried about the “desire in foreign powers” to gain influence “by raising a creature of their own” to the presidency. A similar concern underlies the Constitution’s Emoluments Clause of Article I, Section 9, which forbids the president from receiving any financial benefit from a foreign power.

A court-ordered revote would raise all manner of logistical difficulties, and there are serious legal questions about how quickly it would have to take place. It might need to occur before the Electoral College meets on Monday (December 19), for example; or before Congress announces the vote on January 6 pursuant to federal law; or by the inauguration on January 20. We would confront those questions if the right kind of evidence emerged. But lest a conventional wisdom too quickly emerge, people should note: A revote is eminently thinkable.


Why Carrier Jobs Can Be Saved, But Boeing’s Can’t

I had a column go up on Roosevelt Forward last week on Trump’s scuffles with major manufacturing firms. Here’s a teaser.

Last week saw the spectacle of a president-elect effectively using his bully pulpit to keep a single company from offshoring jobs. Simultaneously, another U.S. company was told by a Geneva trading group that job preservation efforts there were illegal under international law.

Why was the first case (Donald Trump’s promising of tax breaks to keep Carrier jobs in Indiana) okay, and the second (Washington state’s tax breaks to do the same for Boeing jobs) a violation of World Trade Organization rules?

The answer lies in how generations of policymakers have put one vision of globalization on a pedestal, while sidelining others.

Read the whole thing here.

Public Health or Protectionism, Chinese Fireworks Ed.

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.

It May Not Be Trump That Starts the Trade War – Climate ed.

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.


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

#Trexit without Trade Wars

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.