WTO Cases & the Trump Era — U.S. becoming more active?

Here’s a quick review of WTO litigation concerning the U.S. (as either a complainant or respondent) during Trump’s presidency so far. 
The U.S. has been the respondent in 12 cases and the complainant in only 3 cases. 
Countries that brought actions against the U.S. have been India (1), Korea (3), China (2), Vietnam (2), Canada (3) and Turkey (1). Cases against the U.S. have involved §232 duties on steel and aluminum, §201 duties on washers and solar panels, §301 measures concerning intellectual property rights, among others. 
The Trump administration has brought only three cases in the WTO. One case has been brought against each China, India, and Canada. They have involved intellectual property rights, among others. 
What can be said so far at this point? 
Most of the cases brought against the U.S. have been by our allies or friendly states. Only two were brought by China. The cases the U.S. brought involved all but one against an ally or a friendly country. (The other was against China.) 
The U.S. is defending all the cases brought against it during the short Trump administration and has only belated filed a major case against China (in which China has responded by its own case). So despite the U.S. pronounce opposition to the WTO and its dispute resolution system the U.S. continues to use it. Becoming more active most recently. That’s good.
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Trump and New WTO Litigation, Finally.

What passes as conventional knowledge and received wisdom in the Trump administration (better known as ‘Trump Think’ in Trumpland) concerning U.S.-China trade relations and the WTO (and particularly its dispute resolution system)?

Simply put it is two-fold – China has taken advantage of its WTO membership since its accession in 2001 and, in particular, it is useless to rely upon the WTO’s dispute resolution process to resolve disputes. This is because, according to Trump Think, everyone knows — China never observes the rules of global trade nor decisions of the WTO.  

Well, let’s look at “Just the facts” as my favorite detective Sgt. Joe Friday said in the long-ago TV detective show “Dragnet.”

What the facts are concerning China and litigation in the WTO with a focus on the U.S.

I want to start and end with the very short history of WTO litigation during the Trump administration. Three salient facts jump out.

One. The Trump administration never filed a case during its first year. It only belatedly filed one against China (concerning intellectual property rights) as part of its onslaught in spring 2018 to force China’s capitulation to its broad trade and investment demands.

Two. China responded to Trump’s trade demands by filing its own two cases against the United States. The first concerning the U.S. reliance on §301 unilateral retaliation to impose restrictions on a range of Chinese products because of alleged China’s violations of intellectual property rights. The second concerning U.S. reliance on §232 national security to impose restrictions on steel and aluminum imports from China.

Three. The recent action by the United States in the dispute resolution system is in the broader context of the Trump administration’s public disdain of the WTO and, in particular, its dispute resolution system. The Trump administration argues that system is a gravely flawed legal process that works against U.S. national interests.

One additional intervening event occurred and should be noted. The WTO issued a compliance report concerning a prior case brought by China against the United States. It found that the United States was not incompliance with prior recommendations concerning state owned enterprises are not necessarily a ‘public body’ for the determination of government subsidies. The U.S. is appealing this panel compliance decisions.

     What can be surmised from the above?

Despite the Trump administrations’ disdain for the WTO’s dispute resolution systems it is now participating somewhat in it, finally. This is a good development.

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Constitutional and International Legal Issues — Trump’s Foreign Policy.

The interrelationship of public international law and U.S. constitutional issues is of paramount concern today. However, it’s unfortunate that neither universities nor public policy communities have fully grasped this in connection with the Trump administration actions.  

This is especially the case in light of unprecedented challenges to both the international and the constitutional legal systems that current United States policy presents. It is the Trump administration that has more than any other administration forced these issues to the forefront. They need to be addressed, now. 

To illustrate the above here are some issues that need to be examined by law professors and foreign policy experts…………. 

What is the President’s authority to terminate a treaty unilaterally when not complying with the withdrawal provisions of the treaty? (Keep in mind that there is nothing in the Constitution about terminating a treaty.) What if there is implementing legislation? Can the President still terminate a validly negotiated and implemented treaty? 

Since customary international law is deemed by the Supreme Court to be the supreme law of the land is the President bound by it? Can he ignore it? For example, by negotiating terms of international agreements that have been deemed unlawful? (Think about the voluntary export restraints in the new U.S.-Korea agreement.) Can the President violate customary international law (Article 52 of the Vienna Convention in the Law of Treaties) and threaten the use of military force in order to coerce another country to enter into an agreement? 

Think about the current Iranian and North Korea situations today and even U.S. trade negotiations with China. The Article 52 rule that voids agreements brought about by the threat or use of armed force was adopted to not give juridical recognition to the type of military threat by Nazi Germany in bringing about the Munich Agreement in the 1930’s. (And older ones with China.) 

What should be the role of U.S. domestic courts in the international legal system?  

Should courts limit the defense of sovereign immunity in actions concerning terrorism and torture? Should courts apply constitutional protections to actions by the U.S. military and intelligence agencies outside of the U.S.? Should courts be required to look to international law and foreign law in interpreting U.S. laws? To what extent should foreign plaintiffs (individuals and corporation) have standing to utilize U.S. court to enforce their international legal claims? (Think about international human rights violations.)

Constitutional and international law are most often taught as discreet courses and often dealing with esoteric and philosophical perspectives. It is necessary today to focus on the inter-relationship of these courses in the context of foreign policy issues. Both in a professional and real world context. This is the critical challenge today — for both these subject areas — in order to stay relevant.

 

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TRADE AND NATIONAL SECURITY. TRUMP’S DANGEROUS STATUTORY RELIANCE — FOR US, WTO AND GLOBAL TRADE.

 

 

Trump (WTO) 3

Newly completed article putting Trump’s trade remedy actions and perhaps foreign investment actions under rarely used national security, national emergency and foreign investment legislation. See ….. Malawer, TRUMP AND NATIONAL SECURITY (March 2018).

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§232 + Art. XXI = WTO Blowup?

 

     The reliance of the Trump administration on Section 232, the national security provision under the Trade Expansion Act of 1962, to impose trade restrictions on import of steel and aluminum, would certainly run into very serious WTO challenges.  This defense by the U.S. in the WTO most likely would lead to blowing up the WTO.

  The possibility of this has been heightened by the recent determination by the Dept. of Commerce recommending to President Trump to take a range of retaliatory trade actions based on this provision concerning steel and aluminum imports.

      In the WTO’s dispute resolution procedure the United States would have to rely upon the almost never-used defense of the “security exception” provided under Article XXI of the GATT agreement.  The U.S. did offer this defense in the older GATT case, never finalized by an adopted panel report, brought by Nicaragua in the 1980s.  Bahrain has recently stated its intention to rely upon this same defense in the new case brought by Qatar against Bahrain over its trade embargo.

   No matter what the outcome would be over the U.S. defense of national security, if either it is upheld or rejected, the outcome would not be pretty. In fact, it would be an unmitigated disaster.

     Why?

     If upheld the WTO decision would allow other countries to potentially take trade actions under Gatt Article XXI. For example, China could argue its Internet rules and various export controls of minerals are for the protection of its national security. The Russian Federation could argue that it could impose restrictions on trade with the EU because of its trade sanctions over the Ukraine and this would be a valid exercise of Russia’s rights of the national security exception.  

      If the U.S. loses this major case undoubtedly the Trump administration would never honor its obligation to comply with the decision.

     Here you would have the major architect of the WTO and its dispute resolution system rejecting the core aspects of today’s global system. That’s certainly not good. 

     By the way Article XXI has requirements that the U.S. most likely could not meet in its defense. For example, trade restrictions such as higher tariffs or trade sanctions, need to be in protection of “essential security interests …. or taken in time of war or other emergency in international relations.” There is a global glut of steel and aluminum. The U.S. is not in a time of war or other international relations emergency.

     Added to this the Trump’s administration’s public contemplation of declaring a “national emergency” under the International  Emergency Economic Powers Act of 1977, concerning China’s restrictions on intellectual property right, the situation becomes even more bizarre. There is simply no national emergency concerning intellectual property rights. U.S. firms are free to enter into joint ventures in China or not to enter into such business relationships that involves licensing of technology. This is really a matter of global corporate strategy.

     That law provides the President to regulate commerce after declaring a “national emergency” in response to any unusual and extraordinary threat to the United States which has a foreign source. While administrations have relied upon this, often in cases involving foreign military actions, no administration considered violation of intellectual property rights as a national emergency. This would most certainly also be rejected by the WTO.

     In addition, the U.S. Supreme Court in  the seminal cases of Curtis Wright (1936), Youngstown (1952), and Dames & Moore (1981)  make it clear that the President has no inherent authority as commander-in-chief to  impose embargoes or to take other actions relating to commerce. Authorizing these actions are within the exclusive authority of the Congress. The President can only act pursuant to a delegation of authority in these areas. Thus, the Presidents determination of “national security” under Section 232 or “national emergency” under the IEEPA is  reviewable by the federal courts.

     Federal courts have consistently upheld their right to review executive actions in light of the executive’s claims of foreign policy and national security. Just look at the recent wave of decisions concerning review of President Trump’s immigration decisions. Just recall the Supreme Court’s review of post-9/11 cases concerning detainees rights and the right of habeas corpus.

     This entire scenario of possible reliance on national security or a national emergency to impose U.S. trade restrictions because of concerns over steel and aluminum imports or transfer of intellectual property rights, foreshadows a potential trade disaster of the first order. One that U.S. economic history and trade diplomacy have not seen since the founding of the post-war international economic order.

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TRUMP AND TRADE — Waiting for the Other Shoe to Drop?

 

Here’s some passages from my upcoming article in the China and WTO Review (Spring 2018) on Trump’s trade policies ………………

………………………………………………………..

     The recently concluded WTO Ministerial Conference in Buenos Aires, in December, achieved no significant accomplishments. During the conference, the United States Trade Representative (“USTR”) Robert Lighthizer made unsettling and acrimonious statements.

 The WTO is losing its essential focus on negotiation, and is becoming a litigation-centered organization …. Too often members seem to believe they can gain concessions through lawsuits they could never get at the negotiating table .… It’s impossible to negotiate new rules when many of the current ones are not being followed.

     Ominously, a few weeks after the Buenos Aires ministerial conference on the first anniversary of President Trump’s inauguration the administration submitted to Congress its report on China’s WTO compliance. It stunningly stated:         

It seems clear that the United States erred in supporting China’s entry into the WTO on terms that have proven to be ineffective …. [T]his mechanism (the WTO dispute resolution system) is not designed to address a situation in which a WTO member has opted for a state-led trade regime …

      Most recently, in his first State of the Union Address President Trump directly addressed global trade but only in five surprisingly short sentences. He neither announced any new trade actions, nor lambasted the global trading system or its institutions or specific countries. Interestingly, President Trump seemingly narrowed his concerns primarily to protecting American intellectual property rights through trade enforcement. President Trump simply stated:

The era of economic surrender is totally over ….We will work to fix bad trade deals and negotiate new ones …. And we will protect American workers and American intellectual property through strong enforcement of our trade rules.

     From 1995 to 2017, the US has been a complainant in 115 cases and a respondent in 130 cases at the WTO. It has won a huge majority of them as complainant and a majority of all cases. The US has been involved in nearly half of all WTO cases. Clearly, it is the greatest user of the dispute-resolution system.

     There was a 16-year high on private corporate actions (79 new investigations by the Department of Commerce) in 2017, undoubtedly inspired by the administration’s anti-trade rhetoric. The Trump administration during its first year conducted 82 major antidumping and countervailing investigations, a 58 percent increase over 2016. 

          The grave decline in cases brought to the WTO compared to other presidential administrations is historic. (None have been brought by the Trump administration.)

         The administration’s noise and tone are quite unsettling. Failure by the administration to act more forcefully so far is undoubtedly a result of the clash of domestic interests. But the rhetoric and posturing (over national sovereignty, unilateral measures, bilateral trade deals, sanctions, and trade deficits) are already impacting trade flows and diminishing the American standing in the global system. This is occurring even as domestic and global economies and public markets are rebounding significantly.

      Hopefully, these trade noises and recent actions are not an overture to really harmful policies. We’ll see pretty soon ……………

 

 

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Trump’s Attack on the Trade System and Rules — Main Show About to Start?

Malawer, “One Year In — Trump’s Trade Legacy,Richmond Times-Dispatch (January 7, 2018).  

 

The following is an excerpt from my op-ed in this weekend’s Richmond-Times Dispatch …………..

U.S. leadership in developing newer rules for global trade and in litigating existing concrete and complex cases cannot be abrogated. It should be one of the primary aims in current U.S. trade policy.

******

President Trump’s well-known disregard of rules, stemming in part from his years of unrelenting real estate litigation, undoubtedly colors his administration’s disdain for multilateral rules and institutions and its espousal of unilateral actions in global affairs.

The impact on the role of the U.S. in the postwar order seems most worrisome. China, Japan, and the European Union are the ones moving to fill the leadership gap. Most recently, Japan and the EU signed a huge bilateral trade agreement.

The U.S. is increasingly isolationist and parochial, reminding one of the 1930s in terms of the pre-Cordell Hull days of the Great Depression. Trump’s revisionist view of U.S. national interests is different from other presidents since World War II. These views are moving away from active engagement and moving toward being more isolationist and more nationalist.

It abandons the American architecture of the postwar world and its leadership. It creates more uncertainty and promotes disorder. That’s not good.

The administration’s recently released national security strategy merely restates President Trump’s belligerent trade rhetoric. It moves trade to the center of national security policy. But this strategy otherwise breaks no new ground. There are the same trade complaints: unfair trade, violations of U.S. sovereignty, disparagement of multilateral institutions, and a need for greater trade enforcement.

President Trump’s nihilistic efforts are those of an international cowboy, rebranding, unfortunately, the earlier stereotype of the Ugly American. Reflecting the views of his tribal and nativist base in the U.S., the traditional Republicans and their support of international trade have inexplicably fallen away and are complicit in the humiliation of America’s historical leadership and greatness.

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