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.

How to Rebalance International Law – Time oped

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.

How Trump Could Pull Out of Treaties and What it Would Mean

How easy would it be for a President Trump to reverse trade liberalization? Pretty easy, as a new Peterson Institute report argues, and as I argued to Justin Wolfers in today’s New York Times.

As the study show, tariff commitments can be reversed for national security purposes. Trade deals decades old could be exited by summer. Advocates of trade expansion have long advocated shifting power over trade from Congress to the executive. It would be the height of irony for a President Trump to use those powers to undo their agenda.

But Simon Lester posed this argument on Twitter: “I agree w/ that Pres Trump could do damage on trade; but Cong. would have say on leaving WTO/NAFTA”.

This raises an interesting point. Treaties used to be deals struck by the executive, with two-thirds advice and consent of the Senate. But modern so-called “treaties” often take the form of congressional-executive agreements, where the president strikes the deal, and both chambers of Congress have to pass implementing legislation by a majority vote.

This quirk means that – while the WTO and NAFTA have provisions that would allow Trump to withdraw on six months’ notice – the laws implementing how WTO and NAFTA commitments are codified in national law are not so easy to reverse.

The law around these questions is very unsettled, as Oona Hathaway writes:

Though it specifies the process for making treaties, [the Constitution] is silent on the question of withdrawal. Some have argued that because the President has the power not to ratify a treaty even after the Senate’s consent has been given, the President must have the parallel authority to withdraw that ratification regardless of the Senate’s position on withdrawal. The Restatement endorses this view, stating that “[u]nder the law of the United States, the President has the power. . . to suspend or terminate an agreement in accordance with its terms.”   This view has never been formally upheld by the courts and remains controversial. The courts have twice refused to settle the issue, declining to intervene to prevent unilateral withdrawal from a treaty by the President on the grounds that the challenge to the President’s authority posed a political question, among other reasons.

The Senate, perhaps not surprisingly, opposes the idea that the President can unilaterally withdraw from a ratified treaty. The Senate Foreign Relations Committee has repeatedly contended that the termination of treaties requires the participation of the Senate or Congress.  A Report prepared in 2001 by the Senate Foreign Relations Committee concluded that whether termination of a treaty “requires conjoint action o f the political branches remains. . . a live issue which the Supreme Court has sidestepped in the past .”   Yet it admitted that “[a]s a practical matter. . . the President may exercise this power since the courts have held that they are conclusively bound by an executive determination with regard to whether a treaty is still in effect.”…

[In contrast] Congress cannot prevent the President from communicating with foreign governments about the termination of a congressional-executive agreement (as long as the termination is consistent with the terms of the statute that created the agreement).  Hence the President could unilaterally withdraw the United States from a congressional-executive agreement by communicating the withdrawal to the foreign parties.  Yet the act of withdrawing from the international agreement does not undo the statute on which the agreement rests—which cannot be undone without the cooperation of Congress.  Even though the President may be able to “unmake” the international commitment created by a congressional-executive agreement as a matter of international law, the President cannot unmake the legislation on which the agreement rests. … The President is not able to terminate a statute unilaterally, and hence cannot terminate the statutory enactment that gives rise to a congressional-executive agreement.  And insofar as the statute specifies a course of action by the United States, the President is required to execute it unless and until the underlying statute is repealed or superseded.

This poses an interesting quandary. In the UK, voters demanded Brexit to regain control of immigration. But the deals the UK will have to make to retain access to European markets will likely require open immigration access. Similarly, in the US, Trump could deliver on threats to exit NAFTA, but may be stuck with NAFTA rules, thanks to the nature of congressional-executive pacts.

It’s a bit of a distinction without a difference, as Wolfers and the Peterson study make clear. Trump would not have to erase the “NAFTA tariff statute” in order to raise barriers to Mexican goods. He has plenty of statutory authority to restrict trade (see here, here, and here).

That’s the U.S. side of the equation. What about other countries?

Continue reading “How Trump Could Pull Out of Treaties and What it Would Mean”

Will TPP Stop China’s Rise?

A major thrust of President Obama’s pitch for the Trans-Pacific Partnership agreement, or TPP, is geopolitical. As the president himself put it last year,

The world has changed. The rules are changing with it. The United States, not countries like China, should write them. Let’s seize this opportunity, pass the Trans-Pacific Partnership and make sure America isn’t holding the bag, but holding the pen.

In other words: there’s a race for influence in the Asia-Pacific between the U.S. and China. Only one can win. Either China sets the rules, or the U.S. does. If China gets there first, their rules will prevail.

This story seems to assume that the rules the countries would set are different. Is this true?

We don’t have to guess. Wolfgang Alschner and Dmitriy Skougarevskiy are the brains behind the website Mapping Investment Treaties. The site allows text-as-data comparisons between thousands of ratified and proposed international treaties. In an article published earlier this year, Wolfgang and Dmitriy concluded:

China is likely to be most sympathetic to a multilateralization of investment disciplines around TPP. The country is among the states that have concluded most investment agreements. Moreover, its recent BIT with Canada overlaps textually to 50% with the TPP and converges in substance in some areas. When it comes to MFN, for instance, the China–Canada BIT is the closest treaty to TPP in our database.

That said, they go on to note several differences between the U.S. and Chinese templates.

I wanted to know just how different the two pacts where, so I asked this legal power duo to create a special feature on their website to allow the rest of us to compare Obama’s TPP with the Canada-China bilateral investment treaty, or BIT, which was signed in 2012 and entered into force in 2014. Thankfully, they agreed.


Crossposted from Roosevelt Forward. To see the full article, go to the Roosevelt Institute‘s site; produced in collaboration with Mapping Investment Treaties website.


What would be the consequences of pulling out of the WTO?

Donald Trump recently made headlines for threatening to pull out of the World Trade Organization, or WTO.

The proposal by the Republican presidential candidate would be a major break with the past. The 163-country pact has structured trading relations for over two decades, and a predecessor agreement goes back to roots in the 1940s.

What would the impact be of such an unprecedented move? While the future is unknowable, there are a few things to consider.

First, when people refer to “the WTO,” they can mean a few different things.

  • The WTO is an actual It has a building in Geneva, Switzerland, and a full-time Secretariat staff that helps keep the lights on.
  • The WTO is also an intergovernmental body. The Secretariat helps provide a forum for governments to negotiate and talk to one another about policies affecting trade in goods and services. The U.S. delegation is led by the Deputy U.S. Trade Representative Michael Punke, who serves under USTR head Mike Froman. Like Froman, Punke has ambassador status; unlike Froman, he wrote The Revenant – remade as a movie starring Leo DiCaprio. But trade negotiations have stalled since the late 1990s, so the importance of the inter-governmental part of the WTO has been downgraded to mostly routine bureaucratic meetings.
  • Finally, the WTO is a set of treaties and a court that adjudicates disputes under them. The WTO consists of 17 treaties, each of which lay out commitments and obligations for the organization’s members. Under the Dispute Settlement Body, governments and the Secretariat supervise adjudicators hired by the case to decide on challenges by WTO members against one another. If disputing governments do not like the outcomes of these lower panels, they can appeal the decision up to an Appellate Body staffed of tenured adjudicators. If a respondent country loses a case, they are supposed to (in theory) change the policy so that it complies with WTO rules. In practice, countries often drag their heels or outright refuse to change the offending policy. There is then a further set of procedures for fixing an amount of permissible trade retaliation. There have been over 500 intergovernmental challenges launched since the WTO opened its doors in 1995.

The pact’s multi-faceted nature makes it tricky to know what exactly a WTO critic is criticizing.

Second, the WTO should not be confused with a specific content of national policy. It is a legal-diplomatic construct that is distinguishable from national economic policy choices.

The debate around the UK’s vote to leave the European Union illustrates the distinction I am trying to make. Now that UK leaders are going forward with Brexit (unnecessarily, IMHO), they must decide if and how to restructure their relationship with the EU. The models that are often mentioned are Norway and Switzerland, who are not voting members of the EU but have nonetheless committed to follow EU rules on trade and immigration. So, not a member of the EU, but having national laws that are nonetheless consistent. A bitter pill for many Brexit supporters no doubt.

Put bluntly, the WTO doesn’t diminish national sovereignty, at least not in the first instance. It simply creates a series of potential legal and financial consequences for stepping out of line. This means that a country can leave the WTO and still have national policies consistent with WTO rules. It means also that a country can be in the WTO with national policies that are not consistent with the rules, and still face no consequences (either because other countries don’t notice or aren’t willing or able to mount a legal challenge).*

To follow this through to the present context, Trump would not need to leave the WTO to jack up tariffs on Chinese goods.** He would, however, almost assuredly face a challenge at the dispute settlement body if he tried to do so, as it is a blatant violation of most-favored nation rules. (For this reason, the policy would also probably be ineffective and likely lead to more imports from third countries.) He could also leave the WTO, but not jack up tariffs.

So, what are observers worried about when they question Trump’s WTO threats? On the one hand, they’re worried about jeopardizing some of the gains from trade under the WTO – which economists estimate at a few percentage points of global income. But such models are really capturing the autonomous national policy changes that each WTO member enacted. It is at least conceivable that they could have happened without the WTO, although many political economists consider the system indispensable for helping countries trust one another to make the baby steps needed to liberalize.

And, thus, we get to the real issue. Pulling out of the WTO should not be feared for any necessary economic fallout. The U.S. and world could get by just fine. Rather, what observers should be worried about is the potential diplomatic signal it sends. This could lead to a chain reaction of tit-for-tat retaliation by nervous politicians who seek to shield their population from the externalities of Trump’s effort to protect U.S. workers.

So, the WTO is not so much a global government as it is a framework for structuring retaliation. Trump’s comments envision a return to a world where retaliation is not so structured. Where that takes us is any one’s guess.




* A trickier problem is that there may be no consensus about what a WTO obligation actually means in practice. In such cases, panelists and appellate body members get to moonlight as rule writers – taking over for gaps left by actual government negotiators.


** Depending on how exactly he took the action, he could take an action under executive branch powers. Alternatively, he might need Congress to modify U.S. tariff rules or the Uruguay Round Agreements Act that greenlit U.S. membership in the WTO. This was a bill supported by the Bill Clinton administration – passed by a lame duck Congress full of Democrats that just lost their seats, most of whom had not read the legislation. (Interestingly, the Obama administration is suggesting doing something similar with the Trans-Pacific Partnership after the November elections.)


Final Dem Platform Lays Out Trade Reform Agenda

The Democratic Platform was recently posted, and it includes a lot of discussion of trade and global economic governance.

The language was extensively debated, including an internecine fight at the platform drafting committee over how explicitly to oppose the Trans-Pacific Partnership, or TPP. Bernie Sanders’ delegates to the convention warned that Democrats should not cede that ground to the GOP and Trump campaign, and that anti-TPP themes would be part of the GOP platform. (Which they are, kinda but not really.)

Here’s the section on trade policy:

Promoting Trade That is Fair and Benefits American Workers

Democrats acknowledge that for millions of Americans, global trade has failed to live up to its  promise — with too many countries breaking the rules and too many corporations outsourcing  jobs at the expense of American workers and communities. Over the past three decades, America has signed too many trade deals that have not lived up to  the hype. Trade deals often boosted the profits of large corporations, while at the same time  failing to protect workers’  rights, labor standards, the environment, and public health. We need  to end the race to the bottom and develop trade policies that support jobs in America. That is  why Democrats believe we should review agreements negotiated years ago to update them to  reflect these principles. Any future trade agreements must make sure  our trading partners  cannot undercut American workers by taking shortcuts on labor policy or the environment. They  must not undermine democratic decision – making through special privileges and private courts  for corporations, and trade negotiations must be transparent and inclusive.

Democrats’ priority is to significantly strengthen enforcement of existing trade rules and the  tools we have, including by holding countries accountable on currency manipulation and  significantly expanding enforcement resources. China and other countries are using unfair trade  practices to tilt the playing field against American workers and businesses. When they dump   cheap products into our markets, subsidize state – owned enterprises, devalue currencies, and  discriminate against American companies, our middle class pays the price. That has to stop. Democrats will use all our trade enforcement tools to hold China and other trading partners  accountable — because no country should be able to manipulate their currencies to gain a  competitive advantage.

While we believe that openness to the world economy is an important source of American  leadership and dynamism, we will oppose trade agreements that do not support good American  jobs, raise wages, and improve our national security. We believe any new trade agreements must  include strong and enforceable labor and environmental standards in their core text with  streamlined and effective enforcement mechanisms. Trade agreements should crack down on the  unfair and illegal subsidies other countries grant their businesses at the expense of ours. It should  promote innovation of and access to lifesaving medicines. And it should protect a free and open  internet. We should never enter  into a trade agreement that prevents our government, or other  governments, from putting in place rules that protect the environment, food safety, or the health  of American citizens or others around the world.

These are the standards Democrats believe must be applied to all trade agreements, including the  Trans – Pacific Partnership (TPP).

The platform again comes back to the themes in the section on labor…

International Labor

Democrats believe that a key element of American leadership is growing our economy and protecting American jobs. We also believe that the world will be safer when there is greater prosperity. That is why we will prioritize and strongly enforce provisions on decent work and worker’s rights in all American diplomatic, trade, and programmatic efforts. We think it is wrong for workers in the United States to have to compete against poverty – wage, child, or slave labor.

Democrats will fight to end child labor. We will promote broad – based economic growth across the world, pursuing a global economic agenda that promotes rising wages and invests in quality  public services, workers’ rights, and environmental protections. We believe that we need to coordinate our economic actions with other countries to address economic insecurity, specifically youth un- and underemployment, gender inequality, the digital transformation, and the transition towards green jobs.

In the foreign policy section, trade also gets a mention in the section on the Western Hemisphere.


The Americas are a region of singular strategic, economic, and cultural importance and  opportunity for the United States. Democrats reject Donald Trump’s proposal to build a wall on  our southern border and alienate Mexico, a valuable partner. We will instead embrace our  neighbors and pursue strong, fruitful partnerships across the region, from Canada to Latin  America and the Caribbean. We will bolster democratic institutions, promote economic  opportunity and prosperity, and tackle the rise of drugs, transnational crime, and corruption.

The platform also explicitly takes on Trumpian unilateralism in its closing paragraphs:

Global Economy and Institutions

Democrats will protect and grow the global economy. While Donald Trump wants to default on our debt, which would lead to a disastrous global economic crisis, we believe we must be responsible stewards and work with our partners to prevent another worldwide financial crisis.

Democrats believe that global institutions — most prominently the United Nations — and multilateral organizations have a powerful role to play and are an important amplifier of American strength and influence. Many of these organizations need reform and updating, but it would be reckless to follow Donald Trump and turn our back on the international system that our country built. It has provided decades of stability and economic growth for the world and for America.

To sum up, it seems like the following are the elements of the Party’s new agenda:

  1. Blue-Green: Use trade deals to raise labor and environmental standards abroad.
  2. Reducing role of private actors: No investor-state dispute settlement.*
  3. Transparency: Greater transparency in trade negotiations.
  4. Enforcement: greater use of existing trade enforcement tools.
  5. Economy and security test: trade deals must somehow “support good American jobs, raise wages, and improve our national security,” although these elements are not defined.
  6. Anti-subsidy: Trade deals must crack down on foreign subsidies.
  7. New intellectual property rules? Trade deals should promote innovation, health, and the open Internet.
  8. Reform – not abolition – of existing and proposed treaties to meet these standards.

Compared to the 2008 Democratic Platform, this is more specific on benchmarks. While that platform committed to a vague amendment of NAFTA, this platform envisions reform of all past agreements to meet these standards.**



* Actually, it doesn’t say that, although I don’t think there’d be any way to argue that the system was not a “special privilege” for investors. It’s more arguable whether the system is a “private court”: many public international lawyers would disagree, and many arbitrations take place at inter-governmental institutions like the World Bank. The platform’s language about trade deals not preventing government from “putting in place rules” about environment, food safety, and health seems superfluous.No trade deal preempts regulation in the first instance. Many allow corporations to later sue over regulation once it is put in place, however.

** Here’s the trade section from that platform:

Smart, Strong, and Fair Trade Policies

We believe that trade should strengthen the American economy and create more American jobs, while also laying a foundation for democratic, equitable, and sustainable growth around the world. Trade has been a cornerstone of our growth and global development, but we will not be able to sustain this growth if it favors the few rather than the many. We must build on the wealth that open markets have created, and share its benefits more equitably.

Trade policy must be an integral part of an overall national economic strategy that delivers on the promise of good jobs at home and shared prosperity abroad. We will enforce trade laws and safeguard our workers, businesses, and farmers from unfair trade practices–including currency manipulation, lax consumer standards, illegal subsidies, and violations of workers’ rights and environmental standards. We must also show leadership at the World Trade Organization to improve transparency and accountability, and to ensure it acts effectively to stop countries from continuing unfair government subsidies to foreign exporters and non-tariff barriers on U.S. exports.

We need tougher negotiators on our side of the table–to strike bargains that are good not just for Wall Street, but also for Main Street. We will negotiate bilateral trade agreements that open markets to U.S. exports and include enforceable international labor and environmental standards; we pledge to enforce those standards consistently and fairly. We will not negotiate bilateral trade agreements that stop the government from protecting the environment, food safety, or the health of its citizens; give greater rights to foreign investors than to U.S. investors; require the privatization of our vital public services; or prevent developing country governments from adopting humanitarian licensing policies to improve access to life-saving medications. We will stand firm against bilateral agreements that fail to live up to these important benchmarks, and will strive to achieve them in the multilateral framework. We will work with Canada and Mexico to amend the North American Free Trade Agreement so that it works better for all three North American countries. We will work together with other countries to achieve a successful completion of the Doha Round Agreement that would increase U.S. exports, support good jobs in America, protect worker rights and the environment, benefit our businesses and our farms, strengthen the rules-based multilateral system, and advance development of the world’s poorest countries.

Just as important, we will invest in a world-class infrastructure, skilled workforce, and cutting-edge technology so that we can compete successfully on high-value-added products, not sweatshop wages and conditions. We will end tax breaks for companies that ship American jobs overseas, and provide incentives for companies that keep and maintain good jobs here in the United States. We will also provide access to affordable health insurance and enhance retirement security, and we will update and expand Trade Adjustment Assistance to help workers in industries vulnerable to international competition, as well as service sector and public sector workers impacted by trade, and we will improve TAA’s health care benefits. The United States should renew its own commitment to respect for workers’ fundamental human rights, and at the same time strengthen the ILO’s ability to promote workers’ rights abroad through technical assistance and capacity building.