Tag Archives: international trade

A Response To Susan’s Cotton Questions

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I got abnormally excited when I saw Susan’s post about the Brazillian cotton case, as it relates to both my undergraduate thesis and my student note.  So, I felt the need to note a few quick things for the fellow WTO nerds out there.

Brazil can’t get countermeasures when the U.S. has already complied.  My undergraduate thesis tried to determine why the United States (seemingly against its own interests) complied with a WTO decision ruling U.S. “Step 2″ cotton subsidies illegal.  So, I was surprised to see that Brazil recently sought countermeasures from the U.S. because they didn’t comply with the Step 2 decision.  Huh?  Was my thesis all wrong?!  As it turns out, Brazil admitted that the U.S. repealed the Step 2 program a few years ago.  Nevertheless, they tried to ignore one of the basic principles of WTO law: there’s no such thing as retroactive countermeasures.  Essentially, Brazil argued that the U.S. did not repeal its Step 2 program fast enough and should be punished.  But the arbitrators reminded Brazil that countermeasures are meant to induce compliance, not punish others.  Since the U.S. had already complied (even though it was tardy compliance), Brazil couldn’t be awarded any goodies.

Brazil can probably force the United States to cough up GSM-102 numbers.  Susan asked what sort of powers Brazil has to make the U.S. cough up numbers about its export subsidies.  I’m guessing its powers are substantial, as the WTO arbitrator specifically included in its report a demand that the U.S. provide such figures:

The United States shall provide the most recent fiscal year data on GSM 102 transactions.  The data on GSM 102 transactions by commodity and by obligor shall be supplied in the exact format (and software) as Exhibit US-78. Should the United States not be able to provide the most recent fiscal year data on GSM 102 transactions, Brazil shall use the data from the last available fiscal year.

I’m not aware of any specific sanction for failing to comply with a WTO arbitrator’s decision.  Article 25.4 of the DSU says that Articles 21 and 22 (which are the important sections about compliance) apply mutatis mutandis to arbitration.  Maybe this means that you can impose sanctions when a member doesn’t comply with an arbitrator’s demand?  Nevertheless, I am sure that the WTO (as a body) would take action if the U.S. does not fork over the numbers requested by Brazil. 

TRIPS-based sanctions remain a secondary remedy, but it’s not taboo.  Although my student law review advocates note otherwise, the cotton decision emphasized that countries cannot simply jump straight to TRIPS-suspension whenever a country fails to comply with a WTO decision.  TRIPS is the WTO’s intellectual property agreement; allowing a country to suspend that agreement essentially permits legal piracy (pirated copies of I Know Who Killed Me for everyone!)  Although legal piracy sounds like the ulitmate punishment, you can’t engage in legal piracy anytime there’s an argument over grapes or cotton or undershirts. 

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Recovery, Orange Juice, and Cotton

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Global trade sees fastest rise for five years: Well, here’s some moderately hopeful news.

Global trade rose at its fastest rate in more than five years in July, suggesting the economic recovery is feeding through into commerce.

An index compiled by the Bureau for Economic Policy Analysis, a Dutch research institute, showed the volume of world trade rising 3.5 per cent in July after a revised increase of 1.6 per cent in June.

The numbers suggest the fall in trade over the past year, steeper than during the 1930s, was mainly caused by lack of demand rather than a breakdown in the trading system.

Brazil-US Relations and the WTO: Minor new updates from Friday on ongoing trade disputes with Brazil. A panel’s been established to look into Brazil’s latest complaints about U.S. antidumping duties on Brazilian orange juice. It’s another zeroing case, which sort of just bores me to tears, so here’s something more interesting: How Brazil Became the Saudi Arabia of Orange Juide.

The fall out from cotton subsidies case is going to be much more fun, thanks to the possibility of Brazil engaging in IP cross-retaliation against the United States. The cotton war has been going on forever, but recently Brazil won a key victory. However, the WTO decision didn’t much clarify things in the way of hard numbers:

While Brazil had sought $2.5 billion in annual retaliatory trade sanctions, the US, after delaying compliance with a WTO ruling decision that found it had violated trade rules, had claimed that a figure of $20-30 million would meet the case. Last fortnight’s ruling does specify annual sanctions that can be imposed by Brazil but the ruling allows wide differences of interpretation as a result of which the two sides have come up with their own estimates of what the sanctions should cost.

Brazil says that it is entitled to about $800 million in sanctions, including $340 million of cross-retaliation against IPR or services. The US, for its part, believes the sanctions should amount to no more than $300 million, and that any retaliation on the patents front is unlikely in the near future.

I’m not even going to try to talk about the IP cross-retaliation aspect — that’s more Michael’s gig — but Brazil is now asking the U.S. to cough up information on exactly how much subsidizing its been doing, and I’m more interested in seeing how or if the U.S. is complying with the request. All I’ve seen so far is that in response to Brazil’s requests for numbers on cotton subsidies for 2009 (from first link),

Washington did not address the question in its statement at the closed-doors meeting, but said it would be open to discussing a possible out-of-court settlement with Brazil.

What sort of powers or diplomatic strategies does Brazil have to force the U.S. to give up the info? I think I might spend some time looking that up tomorrow, but for now I don’t really have a clue.

-Susan

China Appealing . . . On Public Morals Grounds

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China is appealing the recent WTO decision that came down against them recently, ruling that they can’t force U.S. media producers to go through Chinese state-run enterprises.   Interesting, China is citing the “public morals” exception that has only been cited in one other case: Antigua’s claim against the U.S.’s disallowance of online gambling.  It was a tough defense for the United States; and it’s sure to be a tough one for China as well. 

(I’m primarily interested in this defense because the U.S.–Gambling case spurred by student note. So, humor me.)

-Michael

The Celebrities-for-Aid Program

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Over at Aid Watch:

I’m going to propose a theory of international trade between Africa and celebrities. Africa exports stereotypical images of misery in return for celebrities’ advocacy for more Africa funds. The theory of trade says that trade only happens when both parties gain. Celebrities gain some combination of altruistic satisfaction, a good PR image, and a boost for their acting or singing career. Africa gains aid funds.

Unfortunately for Bono, foreign aid no longer provides an easy way to distinguish yourself among the crowd of C-listers. For a star out there looking for a cause, maybe its time to pull a Bob Barker and go back to promoting spay/neuter clinics instead?

The current celebrity advocacy market indeed seems to have abundant supply. At least that was the impression I got from a web site announcing an Oscar-like Awards show for Celebrity Humanitarians. The celebrities being honored including some that I’d never heard of, like Brett Ratner. Even after I looked him up on the Internet, I still can’t remember what he is not famous for. So with the upcoming Noble Humanitarian Awards at which Brett is a headliner, the celebrities are barely trading above the price of used books at this point.

So maybe celebrity advocacy has finally saturated the market, and we could now give advocacy back to people who know something about their causes.

-Susan

p.s. Happy ODST day!

A “Tired” Argument…

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Yuk yuk. Oh god, that one was really bad. Okay, I promise, there will be no more puns in the future.

But I’ve only just come across this article, “Obama can help free trade with tariffs,” and it’s managed to sufficiently irritate me enough that I can’t let it pass by without comment. We know now that Obama did, in fact, agree to the 35% increase in tariffs on Chinese tires. It was a poor decision, and I have my fingers crossed that this was an ugly unicorn of a decision that won’t be seen again.

But Prestowitz’s article is full of WTF.

The orthodox free-trade view of most pundits holds that if Mr Obama accepts the recommendation he will fail the free-trade test. In fact, the truth is just the opposite. Not to accept the tariff recommendation would be a severe blow to open trade and globalisation as well as to America’s future economic health.

The phrase “extraordinary claims call for extraordinary proof” comes to mind, but Prestowitz sure doesn’t deliver it. On why not imposing barriers to trade is not desirable, he writes:

This kind of trade is not win-win. Rather it is a classic zero-sum game. It is well-known to game theorists that in such situations a tit-for-tat response is the optimal strategy.

Horsedroppings. The ‘optimal strategy’ in any given trade situation is going to depend on what sort of strategy the other 190-odd players on the world market are going with. I seriously doubt that there’s any game theorist anywhere that has declared “in a classic zero sum game, always go with tit-for-tat.” (And for that matter, he’s not even come close to actually showing this is a “classic zero sum game” in the first place!)

But even if Prestowitz were right about the above, game theory alone is completely inadequate for making the sort of decision Obama just made. There are going to be serious political and diplomatic repercussions from the imposition of the tire tariff, and the last thing the U.S. wants to be doing right now is to be setting a precedent for the rest of the world that hard economic times justifies the enactment of short sighted and petty trade restrictions.

-Susan

Update: An economist responds to Prestowitz’s argument.