U.S. Sovereignty and the WTO Dispute System — Misleading USTR Report? — Most Certainly.



      By omitting this language, provided in the covered agreements,” the report suggests that nothing can be decided against the United States since the United States had never been committed to anything. Therefore, whatever was decided or may be decided concerning the United States was per se in violation of U.S. rights and sovereignty. This is grossly misleading and incorrect.

    Simply put, Article 3 and Article 19 recognize that the United States contracted, in agreeing to the whole range of WTO agreements, to a broad range of rights and obligations. “Covered agreements” refer to the family of WTO agreements that all members adopted.

      Article 3 states that the purpose of the DSU is to bring about a “prompt settlement of situations” and “the maintenance of a proper balance between rights and obligations of Members.” The principal purpose of the dispute resolution system is not to deter future actions but to lift trade restrictions not consistent with WTO agreements.

      As part of these agreements, the dispute settlement system is authorized to interpret such rights and obligations assumed under the WTO agreements and then recommend to the United States to bring inconsistent actions into conformity with those agreements. It does not award money judgments. The jurisdiction of the WTO is indeed compulsory. A member cannot opt out of it. This is the crux of developing a global trading system based on the rule of law and its adjudication.

    By the way, the DSU does not invalidate national legislation nor declare illegal any contested action. Article 19 merely recommends bringing them “into conformity” with WTO obligations and leaves it up to the United States to best determine how to do this.

      This process is simply the core basis of the rules-based system that benefits everyone and promotes global trade. It provides for the peaceful settlement of concrete trade disputes. It provides a mechanism for applying trade rules already negotiated by the parties. What’s the sense of negotiating trade rules if they are not enforceable? The WTO provides a neutral forum for the interpretation of such rules. The WTO has proven to be the primary enforcement mechanism of trade obligations.

      The United States was the primary architect of this system. It, along with the global community, is the beneficiary of putting global trade relations on a consensual basis that rejects power politics. The DSU has proven to be the most successful part of the WTO, especially after the failure of the DOHA Round. In fact, from 2001-2014, the United States won all seven cases filed against China. The DSU is in the global trade and national security interests of the United States.

      One last point: It’s not good policy for lawyers to draft misleading legal arguments by misstating the law, by omission of key statutory or treaty language. This is never a good idea. It’s also sanctionable by state bars.


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TRUMP — SLOW ON TRADE — The Wait Should be Over Soon.


    The new administration has been slow on keeping specific campaign promise about trade policy. Nothing yet on China, no renegotiation on NAFTA, and no new WTO cases. Why?

     Probably because the Senate hasn’t yet acted on the proposed Secretary of Commerce Wilbur Ross nor on the proposed USTR Robert Lighthizer. But his team should be completed soon.

     We should see soon enough.

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‘Deference’ doesn’t mean ‘unreviewable’ even as to national security claims, Mr. President. Really very basic civics.

 The lead editorial in today’s Wall Street Journal is wrong. S.Ct. cases, Youngstown and Boumediene, fully support the 9th Cir decision against Trump. This is really basic judicial review to ensure compliance with the U.S. Constitution, both as to separation of powers and individual rights. This includes review of presidential actions involving foreign policy & national security. Even the Commander-in-Chief power is limited by the Constitution. The conservative Bush Supreme Court upheld the rights of non-American detainees being held in Guantanamo after 9-11. This is the hallmark of American ‘exceptionalism.’
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TRUMP & WTO — The Coming Litigation, Sooner than Later.


On President Trump’s first full workday at the White House he signed an executive memorandum requesting the United States Trade Representative to formally withdraw the United States from the Trans-Pacific Partnership and its negotiations. This was primarily a symbolic move, since the TPP had no chance of Congressional approval.

     Trump’s actions and pronouncements raise the question what is the future of U.S. trade relations? It is difficult to say precisely, but we have a good idea: It is not good! Just get ready for some rocky times.

       The president has broad delegated authority from Congress to take a range of actions. He will most certainly attempt to enforce some of his views through the WTO especially concerning China.

       The former WTO Appellate Body member from the US declared: “The real battle would come in Geneva, in international lawsuits before the judges of the World Trade Organization.”

   Whether he will be successful is another story, and whether he will accept adverse decisions is also another matter. Failure to do so would certainly upend the global trading order.

      The trade battle within the administration will not be a simple one; it will undoubtedly be messy.

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TRUMP TRADE POLICY — The Upcoming U.S. – China Trade Fight in the WTO ……


     China and U.S. litigation in the WTO will almost immediately be ground zero for the new Trump administration’s aggressive global trade policy. This is clearly evidenced by the appointment of his new trade team. These appointments include a harsh China trade critic and a leading protectionist trade lawyer.

     Trade has clearly been elevated by Trump to a top issue in the new White House, reflecting the critical role of trade in the presidential election in which millions of those who felt marginalized by globalization and resented it, particularly in the Rust Belt, supported him. This resentment is a central aspect of a wave of populist nationalism sweeping a number of countries.

     What’s the future of trade relations with China under the new Trump administration? It is difficult to say precisely, but we have a good idea. It is not good. Just get ready for some rocky times.

    The president has broad delegated authority from the Congress to take a range of actions. He will most certainly attempt to enforce some of his views through the WTO. Whether he will be successful is another story. Whether he will accept adverse decisions is also another matter. The trade battle within the administration will not be a simple one. It will undoubtedly be messy. There are many players involved.

     On top of all this, we have a changing global environment in terms of declining support for global engagement and the rise of new trading powers. Whether Trump decides to terminate agreements unilaterally will depend on whether he transcends his narrow view of trade and grows in office.


                               (From a forthcoming article of mine in China and WTO Review).



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TRUMP & TRADE — Does his business background lead to bad trade policy?




    Trade is about the only international issue Trump has really cared about consistently since his Japan bashing of the 1980s. His business school background at Wharton and then his experience running the Trump Organization have informed his view of trade as a zero-sum transaction. There are only winners and losers.

     Now Trump has appointed the little-known business school professor Peter Navarro as his alt- ego on China bashing. What is this all about? How do these two seminal events, the Wharton School and his real estate experience, lead to this devastating appointment and Trump’s mindset?

     Once you pose the question like this the answer is simple.

     Business schools then and now rarely teach much about global trade. What they do is discuss international business. And this is discussed as transactions from the corporate perspective. That is the bottom line. Do you make money or don’t you.

     Business school courses may be called multinational business, corporate strategy or the like. But business schools do not teach trade in a contextual situation. This is not within their core agenda. They never discuss trade in the context of foreign policy, national interest, national security, or geopolitics.

     What about Trump’s global business experience?

    Well that just enforces his worldview of trade as being a bottom line business transaction. Do you make money or not. How do you negotiate? Well, there is simply no real difference between real  estate negotiations from diplomatic negotiations. Just bluster and bully. That’s all you need to do. Well that just won’t work very well in a multipolar world where there are a world of variables at work and many powerful players.

     So what’s the bottom line for US trade relations under Trump? Not good.

    China, the EU, Japan, Korea, India or even Russia are not buying or selling real estate, cross-licensing trademarks or refinancing hotels and casinos. These countries have long histories with many interests and great deal of experience over many years. The world of power politics is different from the world of New York real estate deals.

     My conclusion. The immediate future is not going to be pretty. We’ll see. Just buckle up.


Krugman. “And the Trade War Came.” New York Times (December 26, 2016).Donald Trump Really Might Start a Trade War.” Washington Post (December 24, 2016).

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     Trump threatens a great upheaval in foreign policy and global trade relations. Especially in U.S. trade relations with China. But is it somewhat consistent with the Obama’s tough enforcement policy against China in the WTO’s dispute resolution system.
   Over the last 15 years, since China’s accession to the WTO, U.S-China trade relations have largely been conducted within a framework of international law rather than open trade warfare. One of the great achievements of the past 15 years has been the role of multilateral rules in containing arguments. China, whose leaders initially seemed to regard being sued in the WTO as a personal affront, has come to recognise international litigation as a routine way of doing business.
   Then what happened recently since Trump’s election?  
   On December 10th the day before the 15th anniversary of China’s accession to the WTO, the Obama administration decided it was not going to grant China ‘market-economy status.’ Most legal experts believe this was intended to be automatic on December 11th, 2016. Fifteen years from the date of the Accession Protocol of 2001 under Article 15(d).  
     Two days later, one day after the 15th anniversary, Beijing marked the anniversary by filing a new WTO case against the United States and Europe. China alleged that they failed to treat it as a market economy and therefore not utilizing a more favorable calculation of anti-dumping duties on Chinese goods. Since they would continue to use third-country cost (and not China’s lower actual costs). Of course, which allows for a finding of a larger margin of dumping and consequently a larger antidumping duty.
     The Obama administration two days later filed a new case against China contesting its agricultural duties relying on ‘tariff rate quotas’ mechanism’ (TRQ). This continues a hardline approach by the Obama administration against China in the WTO dispute resolution system in which it has filed 15 cases. This has been a very tough enforcement approach since his inauguration. More aggressive than an also tough Bush administrations.
    But now the question arises why China’s immediate response to this case and not all the other times during the Bush – Obama years?
      My take ………….. It was probably Trump’s consistent threats (trade, tariffs, TPP, Taiwan, South China Sea) against China. If it wasn’t for them China probably would have waited until dumping or subsidy cases were actually determined and then ask for WTO review. That has been the general practice.
     But of course China has the option to go directly to the WTO when a country has restrictive legislation or other practices or policies in place. It doesn’t have to wait until a case is actually decided. It’s China’s option. And China decided to take a rather unusual and aggressive step.
      My guess is to send a broader message to the U.S. ‘Don’t mess with us. If you want confrontation then you get confrontation.’ This is unfortunate for both countries. A new administration allows a natural inflection point to allow for new diplomatic initiative to allow peaceful resolution of disputes. Not more aggressive actions. At least not usually.
     We’ll see how this plays out.
     But this is not a good beginning to U.S. – China trade or diplomatic relations in the Trump era.


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